US calls for European 'firewall' against contagion

The United States on Saturday urged Europe to create a firewall against further contagion from its public debt crisis and banking strains, saying they threatened the global economy. "Sovereign and banking stresses in Europe are the most serious risk now confronting the world economy," US Treasury Secretary Timothy Geithner said in a speech at the IMF and World Bank meetings, according to the prepared text. While commitments from eurozone member nations made to each other in the past 18 months have been "impressive," more needs to be done, he said. "Further action to expand the effective capacity of these commitments is still necessary to create a firewall against further contagion," Geithner said. "While it is crucial that countries in the periphery undertake real reforms and demonstrate fiscal discipline, these efforts will take time." Geithner called for European governments to work alongside the European Central Bank to show an "unequivocal commitment" to prevent the debt problems of Greece, Ireland and Portugal from causing a global meltdown. They must work to "ensure nations with sound fiscal policies have affordable financing, and to ensure that European banks have recourse to adequate capital and funding to win the full confidence of their depositors and creditors," he said. "The threat of cascading default, bank runs, and catastrophic risk must be taken off the table, as otherwise it will undermine all other efforts, both within Europe and globally. Geithner expressed frustration with the pace of Europe's approach to the debt crises. "Decisions as to how to conclusively address the region's problems cannot wait until the crisis gets more severe," he said.