BRUSSELS (Reuters) - Treasury Secretary Timothy Geithner is likely to urge euro zone finance ministers on Friday to speed up ratification of changes to their bailout fund and consider boosting its size, an EU source said on Tuesday.
The official said Washington was worried that the euro zone was not acting fast enough to enhance the EFSF fund and that the stability of the global financial system was at stake.
Euro zone leaders agreed in July to give the 440 billion euro ($601 billion) European Financial Stability Facility (EFSF) the right to intervene on bond markets, extend credit lines to governments and fund the recapitalization of banks.
Geithner will take part in an informal meeting of EU finance ministers on a one-day trip to the Polish city of Wroclaw on Friday, amid growing U.S. concern over the single currency bloc’s inability to put an end to the sovereign debt crisis.
He is likely to tell the ministers that they should consider increasing the size of the EFSF to equip it better for the needs of potential bank recapitalization.
“He will probably tell Germany to give up its resistance to an increase in the size of the EFSF,” the source said.
A well connected fund source told Reuters Geithner had been pushing for a solution for European banks along the lines of the TARP program in the United States, but had not made much headway.
The new EFSF powers will only kick in once ratified by euro zone countries. In some, like Germany, Finland, the Netherlands or Slovakia, public opposition to bailouts is making parliaments reluctant to commit more money and power to the fund.
“He would point out to countries like Finland, the Netherlands or Slovakia how important it is to overcome their domestic obstacles for the sake of the rest of the world,” the official said.
“Also, he would tap the Greek finance minister on the shoulder to make him recognize the responsibility of Greece,” the official said, amid growing irritation with Athens among international lenders for its repeated failure to fully implement agreed reforms and austerity measures.
The ministers will also discuss ways to sustain growth as the euro zone sovereign debt crisis and high oil prices sap global economic progress.
The official said that at the latest G7 meeting of finance ministers in Marseille, Geithner put pressure on the Europeans to use their fiscal room for maneuver, especially Germany, when it came to helping the economy.
Berlin pushed back, sources at the meeting said.
“The demand would not be new stimulus packages but less restrictive budgetary tightening or cut deficits only over a longer time period than foreseen so far,” the official said.
(Additional reporting by Stella Dawson in Washington)
Reporting by Ilona Wissenbach, editing by Rex Merrifield