European officials are delaying a decision to offer more bailout funds to debt-strapped Greece, as they address a spreading financial crisis. The announcement came as U.S. Treasury Secretary Timothy Geithner made an unprecedented appearance at a European Union finance ministers' meeting in Poland.
European Union officials say they will decide in October about whether to pay another $11-billion installment of bailout funds to Greece pending a clear plan from Athens about how it will tackle its enormous debt.
At a press conference in Worclaw, Poland, Jean-Claude Juncker, who heads the group of 17 eurozone finance ministers, says whether Greece meets its promises is critical. "The continued full implementation of the adjustment program remains crucial to ensure fiscal sustainability, safeguard financial stability and boost competitiveness of the Greek economy," he said.
The finance meeting comes amid mounting international alarm that Europe's debt crisis -- which began with Greece, Portugal and Ireland -- is spreading. Underscoring Washington's concern, U.S. Treasury Secretary Timothy Geithner joined his European partners at Friday's meeting. The Reuters news agency reports that Geithner urged the Europeans to work in a coordinated manner to tackle the crisis.
Europe was hit with more bad news this week, when Moody's credit agency downgraded the rating of two major French banks that are highly exposed to the Greek debt. In a bid to ease the pressure, five of the world's major central banks agreed Thursday to inject dollars into Europe's struggling banking system.
At the same time, European Economic Commissioner Olli Rehn noted a new EU report showing a significant slowdown in European growth. "In a nutshell, uncertainty and stress in the financial markets is now having negative ramifications in the real economy, and it is hampering our growth prospects," Rehn said.
European finance officials have called on governments to swiftly ratify a deal reached in July to expand the scope of their bailout fund and on a new bailout package for Greece. But governments disagree over the details, and only a handful of nations have ratified the agreement to date.
Thomas Klau, who heads the European Council on Foreign Relations' Paris office, says European officials are right to press Greece's prime minister, George Papandreou, on reforms.
"Any indication from the partners in Europe and across the Atlantic that they would be satisfied with a glass half, three-quarters or even three-fifths full might really be quite fatal in terms of enabling Mr. Papandreou to really change the way the Greek state performs," Klau said.
But Klau joins many analysts in faulting European governments for being slow to address the crisis, which is spreading alarm in the markets. Beyond quick action, Simon Tilford, chief economist for the London-based Center for European Reform, says European governments need to fundamentally change the way they handle the crisis.
"Despite mounting evidence that the current strategy is not working, instead of reassessing the strategy, eurozone policymakers are essentially digging their feet in and just persisting with a strategy that isn't working. And that is very worrisome," Tilford said.
Analysts fear that Europe's financial crisis could erupt into the kind of full-blown international catastrophe witnessed in 2008 -- except this time, it would cross the Atlantic from Europe to the United States.