The United States urged European leaders on Monday to put "more flesh on the bone" for their ideas to tackle the euro zone's debt crisis as they prepare for a crucial EU summit this week.
In an interview with Reuters, U.S. Treasury Under Secretary Lael Brainard said that while euro-zone leaders were moving with a greater sense of urgency to deal with the crisis, more details were needed on how they would achieve this.
She said the summit of European leaders in Brussels on Thursday and Friday needed to spell out short-term actions to deal with immediate financial stresses enveloping some EU states and sketch out a roadmap towards greater economic union.
"We're all hoping to see them put some flesh on the bones in the days ahead," Brainard said, referring to commitments European leaders made at a Group of 20 meeting in Mexico a week ago to do whatever it takes to preserve the integrity and stability of the 17-nation euro area.
In particular, Brainard said, it was important that the summit spell out how leaders planned to boost market confidence, strengthen banks, ensure that embattled Spain and Italy can raise capital at more affordable rates, and boost growth and jobs.
Global share prices and the euro slid on Monday as investors bet that European leaders would fail to come up with measures to back weak countries. Cyprus on Monday became the fifth euro zone country to turn to Brussels for emergency funding, joining Spain, Portugal, Greece and Ireland.
Brainard said the United States had consistently supported EU efforts to strengthen the euro zone's financial firewall to shore up bank balance sheets, but avoided saying how they should do that.
The International Monetary Fund has urged the euro zone to channel aid directly into struggling banks rather than via governments.
"The particulars on how they go forward and how they design their firewall, how they design their policies, those are things that at the end of the day sit with those European leaders," she said, "We're all looking forward to seeing some of the specifics."
Brainard said the United States supported an ambitious plan by Spain to recapitalize its struggling banks with the help of a 100-billion-euro EU loan. Such steps showed that the Spanish authorities were trying to "get out ahead of market expectations," she added.
But Brainard said it was important that Spain release details on the mechanism its European partners would use to inject capital into the banks.
"We would like to see the euro area coming together around a plan as to how they will finance that in a way that really boosts confidence," she added.
GREEK REFORMS NECESSARY
Brainard, who earlier on Monday said Greece's economic challenges were manageable if it moved swiftly to address its problems, said it was in Athens' own interest to complete tough economic reforms under an international bailout.
The United States, the largest economy in the IMF, has signaled it will support a review of the timelines of the 130-billion euro IMF-EU bailout for Greece, but not the terms of the rescue package, which includes tough fiscal and structural measures.
"In order to move forward under any circumstance, Greece is really going to have to take those tough structural reforms," Brainard added.
Talks scheduled for Monday between the new Greek government and a "troika" of international lenders, including the IMF, EU and the European Central Bank, were postponed at the weekend after new Greek Prime Minister Antonis Samaras underwent eye surgery on Saturday and his Finance Minister Vassilis Rapanos resigned.
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Samaras's coalition government, sworn in last week, has called for the renegotiation of the austerity measures of the financial bailout, which is keeping Greece from bankruptcy.
The White House said on Monday that U.S. President Barack Obama had spoken with Samaras and urged him to work closely with the European Union and other bodies as it pursues reforms.
Meanwhile, Jim O'Neill, chairman of Goldman Sachs Asset Management, told Reuters the euro zone crisis was more about politics than economics.
"The euro crisis is in some ways mind-bogglingly simple to solve ... because it isn't economics, it's politics," he said in an interview.
"The euro area actually has no current account deficit, doesn't need anybody else's financing, it has a lower debt-and-deficit-to-GDP ratio than the U.S. and Japan, and yet we have this almighty mess.
"If Angela Merkel and her colleagues stood there together with the rest of the euro area ... and if they behaved as a true union this crisis would be finished this weekend," he added.
