UPDATE 1-Europe needs "years and years" to fix economy-Geithner

(Recasts, adds details)

NEW DELHI, Oct 9 (Reuters) - The steps Europe has taken tocure its economic ills will take years to bear fruit and it willbe a long time before the continent returns as a major driver ofeconomic growth, U.S. Treasury Secretary Timothy Geithner saidon Tuesday.

"Europe has a very hard road ahead of them," Geithner told ameeting with business leaders during a visit to New Delhi.

"And the reforms and the strategies they've put in placewill take years and years to bear fruit. Even if one isoptimistic about the will and capacity to manage through this,you are still likely to see a very, very challenging growthenvironment in Europe for a long period of time."

Euro zone finance ministers on Monday unveiled the EuropeanStability Mechanism (ESM), a 500 billion euro rescue mechanismfor lending to distressed economies in the 17-country bloc.

Perhaps the biggest contagion risk for the region is Spain.The euro zone has already set aside 100 billion euros for Madrid

to recapitalise its banks but financial markets believe agovernment bailout will follow in coming weeks or months.

Geithner said Europe's leaders had laid out "a morepromising framework", but much would depend on how they acted ona politically difficult strategy.

The International Monetary Fund said this week the eurozone's economic crisis and looming fiscal tightening in theUnited States were the two biggest risks facing the worldeconomy.

However, Geithner said he was "relatively confident" thatWashington could manage the challenges presented by tax risesand mandatory government spending cuts - the so-called "fiscalcliff" - due to hit early next year unless the U.S. Congressagrees to cancel or delay them.

"We have a series of fiscal policy decisions to make at theend of this year that are going to be important to designcarefully to avoid adding to the pressures on the U.S. economy.I am relatively confident that we will manage those carefully,"he said.

He sounded a cautiously upbeat note on the U.S. economy,saying it was growing at close to potential and was in astronger position than any other major developed economy.

(Reporting by Manoj Kumar and Rajesh Kumar Singh; Editing byJohn Chalmers)

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