DAVOS, Switzerland — Leading finance chiefs sought to reassure anxious global business leaders on Friday that Europe is on track to solve its crippling debt crisis before it drags the world's economies down.
The finance chiefs said the picture in Europe has changed over the past two months as the European Central Bank has loaned billions of euros to fragile banks, indebted countries have pushed through convincing reforms and EU leaders have come near to building a closer fiscal union that would make their common currency stronger.
Several also signaled Friday that Greece was close to clinching a crucial debt-reduction deal with private bondholders — a key element in Europe's efforts to stem a two-year debt crisis that is causing ripples around the globe. The crisis is a central topic at the World Economic Forum, a gathering of government and business leaders at the Swiss ski resort of Davos.
"They're making progress on reforms, they're changing the institutions of Europe to put better discipline on fiscal policy," said U.S. Treasury Secretary Timothy Geithner. "You have three new governments doing some very tough things. You have an ECB doing what central banks have to do. You see them move to try to strengthen the financial sector."
Geithner said the fate of the U.S. economy — and by extension of the rest of the world — hinges on Europe's debt crisis, along with potential tensions with Iran. He said the main piece of unfinished business for Europe is building a bigger fund to help troubled economies survive.
But while French Finance Minister Francois Baroin said that fund needs to be increased to calm markets, his German counterpart, Wolfgang Schaeuble, indicated that his government is not prepared to do so. Germany, as Europe's biggest economy, would face the biggest bill.
"We must not give the wrong incentives," Schaeuble said. "You can make any figure. It will not work if the real problems will not be solved."
Both, together with Spanish Economy Minister Luis de Guindos Jurado and European Monetary Affairs Commissioner Olli Rehn, agreed that the idea of issuing "eurobonds" backed jointly by all eurozone governments is a non-starter for now. They didn't rule out the possibility that such bonds could be introduced once confidence in Europe's public finances is restored, with Guindos calling that a "final target."
Schaeuble said eurobonds would provide bad incentives by allowing debt-ridden countries to "spend money you don't have on the bill of others."
Many economists have said eurobonds are needed to solve the crisis as they could reduce the borrowing costs of heavily indebted countries by pooling them with bonds of stronger economies like Germany's.
European leaders have been especially concerned about Greece, whose borrowing costs are so high that it needs a second European bailout just to pay its interest, but the finance chiefs signaled Friday that a deal is at hand.
Greece has been negotiating with the a group representing banks and other lenders in the hopes that they will forgive half of Greece's debt in exchange for Greek assurances that it will pay back the other half without defaulting on its loans. The deal would also let Greece repay over a longer period at a lower interest rate — negotiators have been trying to agree on what that rate will be.
Schaeuble said he is "quite optimistic" about a deal, while Rehn said he hopes a deal can be reached "if not today, maybe by the weekend."
Agreement between Greece and its creditors is needed before Europe and the International Monetary Fund agree to a second multibillion-euro bailout package.
Another key missing element is a plan for closer fiscal union among the 17 countries that use the euro, plus nine of the other 10 countries in the European Union — the United Kingdom has refused to participate. On Monday, leaders meet in Brussels to work out the details of that new compact.
Schaeuble and Baroin noted that even the agreement in principle to forge closer ties has calmed markets since a December summit, as borrowing rates have dropped and stock markets have risen. Part of the reason is also the ECB's more aggressive offerings of super-cheap, long-term loans to Europe's shaky banks.
The crisis threatens more than Europe: the U.N.'s refugee chief warned Friday that it is fueling conflicts around the world. Antonio Guterres told The Associated Press that rising food prices and growing unemployment are hitting those already at the bottom hardest, sparking conflict in places like South Sudan and exacerbating hotspots including Afghanistan, Iraq and Somalia.
- Hundreds of new evacuations across West as...
- SKorea military: NKorea fires 2 suspected...
- North Korea makes apparent progress with...
- In speech, Trump to ramp up critique of...
- Nearly 1 in 3 on Medicare got commonly abused...
- Obama administration decries judge's fracking...
- Dems stage election-year sit-in on guns, GOP...
- House Democrats cheer Clinton in first...
- Immigration ruling called hurtful, a... 75
- Mormon youth leader dies on trek outing... 73
- Nearly 70 percent of Utahns say Donald... 62
- Dems stage election-year sit-in on... 46
- Poll: Trump up over Clinton in Utah,... 43
- Democrats end 25-hour plus protest to... 30
- Love won't go to GOP national convention 28
- In need of help, Trump finds few... 27