Geithner says Europe needs to do more to prevent default
U.S. Treasury Secretary Timothy Geithner said Monday financial markets need to see further concrete action by European leaders to prevent the continental debt crisis from spreading to more countries.
Speaking to CNBC, Geithner said governments across the Atlantic are working hard to stop the growing financial crisis from spreading beyond those countries already infected by debt uncertainty, namely Greece and Italy.
"The world has to see European leaders taking measures to contain the risks of a broader crisis," Geithner told the American business channel.
His comments, however, did little to stem the uncertainty that roiled stock markets in Asia and Europe on Monday.
The three major European markets — France, Germany and the United Kingdom — all dropped more than one per cent, a relatively large slump, in the first session of the week.
The CAC 40 in Paris posted the biggest losses in the day so far, down 55 points, or 1.5 per cent. Next on this downward parade was the German market, down 1.2 per cent with London bringing up the rear, down nearly 1.1 per cent.
European traders had been buffeted by worries on the American and European debt fronts.
Despite meeting over the weekend, U.S. Congressional leaders and President Barack Obama failed to reach an agreement on whether to raise the U.S. debt ceiling of $14.3 trillion US. Washington has until Aug. 2 to reach a debt deal or face the prospect of the first financial default in American history.
Stressed about stress tests
In Europe, last week's bank stress test results — financial benchmarks which highlight the bankruptcy risk of particular financial institutions — showed only eight banks on the continent in serious commercial trouble. That led a number of observers to argue the tests do not reflect the poor shape of these banks.
The European Banking Authority estimated that its banks needed approximately $3.5 billion US on capital injections to ensure the solvency of the system.
Other groups, however, calculate that Europe's banks might need as much as $64 billion US to achieve the same purpose.
As a result, traders faced renewed concerns over the true financial shape of Europe's banks.
Asia fared better in Monday's trading. Japan's Nikkei was up 0.4 per cent while Hong Kong's stock market was off but by only 0.4 per cent.