Under fire, Europe works to bolster debt crisis fund

Sun Sep 25, 2011 6:30pm EDT
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By Dina Kyriakidou and Dan Flynn

WASHINGTON (Reuters) - European policymakers, stung by criticism for failing to stem the euro zone debt crisis, began working on new ways to stop fallout from Greece's near-bankruptcy from inflicting more damage on the world economy.

After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion-euro rescue fund.

Deep differences remained over whether the European Central Bank should commit more of its massive resources to shoring up Europe's banks and help struggling euro zone member countries.

Financial markets have plunged on concerns about the ability of Europe to get a grip on the crisis.

U.S. Treasury chief Timothy Geithner, in unusually blunt comments, said the risks from Europe were enormous.

"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table," he said in speech to the International Monetary Fund on Saturday.

Europe came under more pressure on Sunday when a top IMF official said the ECB was the only player big enough to "scare" financial markets which have punished many euro zone members.

"The ECB is the only agent that can really scare the markets," Antonio Borges, the IMF's top official for Europe, told top economic policymakers from around the world.   Continued...

<p>U.S. Treasury Secretary Timothy Geithner (R) talks to European Central Bank President Jean-Claude Trichet during a family photo before the International Monetary and Financial Committee (IMFC) meeting during the annual IMF-World Bank meetings in Washington September 24, 2011. REUTERS/Yuri Gripas</p>