ATHENS, Greece — U.S. Treasury Secretary Timothy Geithner insisted Wednesday that European leaders are ready to do more to support the euro from the debt crisis that is crippling Greece and shaking global markets.
Ahead of a teleconference between the leaders of Greece, France and Germany on Wednesday evening, Geithner sought to convince markets that European governments understood the severity of the crisis and that more would need to be done.
Geithner, who is to join eurozone finance ministers this weekend in a meeting in Poland, stressed that European governments have to make it clear they "stand behind" the financial system so that it can fund and finance the economic recovery.
"I think they recognize that they're going to have to do more to earn the confidence of the world," Geithner said in an interview with American news channel on CNBC.
As Treasury chief and previously in his role as head of the New York Federal Reserve, Geithner has been central in the U.S. response to the financial crisis that flared up after the collapse of Lehman Brothers investment bank in 2008.
He said Europe's leaders, including German Chancellor Angela Merkel, know they've "been behind the curve" and have the financial capacity "to do what it takes to hold this thing together." He dismissed suggestions Europe was about to have its own Lehman moment.
"Europe has a tradition of much more indulgence, support for their institutions.....there is no chance that the major countries of Europe will let their institutions be at risk," Geithner said.
Fears in recent days that Greece was heading rapidly towards a chaotic default have sent the interest rates on 10-year government bonds soaring to new record highs. On Wednesday, they stood at the alarming level of 25.3 percent, more than 23 points higher than the German equivalent, suggesting investors have all but given up on Greece being able to fix its public finances.
German Chancellor Angela Merkel sought to calm fears this week and distanced herself from comments by her vice chancellor and others who suggested a Greek bankruptcy was possible.
Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou were to discuss the situation Wednesday evening, after a government meeting Papandreou called to address urgent fiscal reforms. The finance ministers from the wider 17-nation eurozone will meet on Friday in Poland.
Hours before the teleconference, Sarkozy and his prime minister "with a single voice reaffirmed France's determination to put everything in place to save Greece," French government spokeswoman Valerie Pecresse said of a Cabinet meeting in Paris.
Sarkozy wants the call to focus on "the need for efforts in return and commitment from Greece," she said.
Traders nevertheless hoped that some form of new support would emerge and pushed Greek shares higher. The main Athens index outperformed its counterparts in Europe, rising 1.6 percent in afternoon trading.
Some analysts saw it more as an exercise in damage control after the flurry of recent — and often contradictory — statements coming from Europe.
"Today's teleconference, I could only see it having a damage-limitation objective because there have been too many rumors ... as to what Germany or what our European partners are thinking about Greece," said economist Vangelis Agapitos. "Right now what Greece does not need is to be pulled at different ends. ... The Greek government needs to focus its efforts on delivering what it has promised and at the same time Europe has to deliver what it has promised."
The main fear of a Greek bankruptcy is that it could destabilize other financially troubled European countries, potentially causing a defaults in Portugal, Ireland, Spain or Italy. It would also have a knock-on effect on banks, many of which are which are large holders of Greek government bonds.
Moody's rating agency on Wednesday downgraded the credit ratings of two French banks, Societe Generale and Credit Agricole, after a period of huge volatility in the markets as investors fret about exposure to Greek debt.
"We are confronted with the most serious challenge of a generation. This is a fight for the jobs and prosperity of families in all our member states," European Union Commission President Jose Manuel Barroso told the European Parliament in Strasbourg, France. "This is a fight for the economic and political future of Europe. This is a fight for what Europe represents in the world. This is a fight for European integration itself."
Greece relies on funds from last year's €110 billion ($150 billion) international bailout to continue servicing its debt and pay salaries and pensions. But the lifeline could be cut if the country continues to miss strict fiscal and reform targets set as a condition of receiving the rescue loans.
The quarterly payout of the funds depends on reviews by Greece's international debt inspectors — the European Commission, European Central Bank and International Monetary Fund, known as the troika.
The next batch, worth €8 billion, is due in late September, but there were fears the troika would not approve its disbursement after the debt inspectors suspended their review earlier this month. They are due to resume their review in coming days. Without the next installment, the country has enough cash to keep it going only until mid-October.Comment on this story
Greece's government spokesman, Elias Mossialos, said Monday he believed the country would receive the funds.
In July, Greece was granted a second, €109 billion rescue package, but the terms of that deal have yet to be finalized, with Finland asking for extra collateral guarantees. Solving those requests will be a key topic at this weekend's meeting of eurozone financial chiefs.
Pan Pylas in London, Gabriele Steinhauser in Brussels, Sylvie Corbet in Paris and Theodora Tongas in Athens contributed.