Tim Geithner has experience flying around the world to address finance ministers and instructing them on how to solve their problems. He was a senior executive at the IMF from 2011 to 2003, after all — a period which coincided with major sovereign crises in South America.
So it may or may not be surprising that his latest attempt at such activity, in sunny Wroclaw, fell spectacularly flat. He waltzed into a meeting of eurozone finance ministers (he took a private car, they shared a bus), and informed them that they should follow his lead and leverage the money in the EFSF. In unison, the finance ministers responded by saying “why, Mr Geithner, that’s a simply spectacular idea, we’re shamefaced to admit that we didn’t think of it ourselves. Thanks for your advice, we’ll follow it, to the letter, forthwith!”
Or, not so much:
Mr. Juncker said, pointedly, that the euro group was not discussing “an increase or expansion” of its bailout fund “with a nonmember of the euro area.”
That’s Jean-Claude Juncker, president of the group of euro area finance ministers, and he was being diplomatic.
“I found it peculiar that even though the Americans have significantly worse fundamental data than the euro zone that they tell us what we should do and when we make a suggestion … that they say no straight away,” Maria Fekter told reporters afterwards…
“We can always discuss with our American colleagues. I’d like to hear how the United States will reduce its deficits … and its debts,” Belgian Finance Minister Didier Reynders said somewhat tartly.
It’s pretty clear, here, that in the wake of the debt-ceiling debacle Geithner has lost a significant amount of international heft. And it’s also clear that the eurozone has absolutely no cohesion, nor any real ability to do anything at all to resolve the current crisis.
Clashing with U.S. Treasury Secretary Timothy Geithner, finance chiefs from the euro region said the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation.
I’m not sure that Geithner was the right person to send to Poland to try to knock European heads together. As the biggest shareholder of the IMF, he would probably have been better off conferring with Christine Lagarde and getting her to make his point for him. The Europeans were never likely to take well to the Americans telling them what to do, especially when their gentle attempts to ask something of Geithner (maybe you might consider getting on board with a financial transactions tax?) were unceremoniously dismissed out of hand by the Treasury secretary.
In any case, Geithner seems to have failed in whatever it was that he was trying to achieve: the only unanimity he managed to foster was in the belief that he had no business telling the eurozone what to do.
This is really bad news: Europe’s private sector seems incapable of acting in unison, with the public sector being just as bad. This crisis exists on a pan-European level, and can only be solved at that level. But so long as Europe’s finance ministers just keep on talking and don’t actually do anything, this crisis is going to get bigger and bigger — and more and more expensive to address. This crisis has been a long time coming. But it could accelerate violently and devastatingly at any time. And right now the eurozone has no idea what it might do if and when that happens.
