Tim Geithner, the US Treasury secretary, believes European Union leaders are now well aware of the magnitude of the problems facing the euro zone and believes the crisis in Europe needs an “unequivocal financial backstop.”
His comments followed the European Central Bank’s decision to step into the market and indicate its readiness to support the Italian and Spanish bond markets by buying government bonds of both countries in the secondary market.
Speaking in an exclusive interview with CNBC, Geithner said he plans to spend the next two days talking to EU finance ministers and policy makers.
“They need to make sure that there's stronger economic growth, that those governments are getting their fiscal house in order,” Geithner said. “And they're undertaking some very, very tough, very difficult—politically tough reforms. But they need some help through it.”
Geithner said the time had come for Europe to make sure it could backstop its financial system.
“So what Europe needs to do is to make sure that there's an unequivocal financial backstop, so there is no doubt in anyone's mind that those countries across Europe have the ability and the will to meet their obligations," the US Treasury secretary told CNBC.
“That's essential to managing crises—the confidence. As I said earlier, I'm confident you're going to see them... step up and provide more forceful support for the countries under so much pressure,” said Geithner
Asked if Germany had a key role to play in this, Geithner said the euro zone’s largest economy will play a central role but that the problem is a European problem.
“It's going to have to be a European approach—European-wide consensus on this. The ECB has a central role and they've been playing a very constructive role.”
“I think they have a sense of the magnitude of the problem now and--and they know the world's watching. (It) wants to see them—wants to see them move now,” said Geithner.