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American and European leaders traded blows last night over the handling of the debt crisis in the single currency bloc.The euro slumped against the pound and the dollar as finance ministers on both sides of the Atlantic failed to break the deadlock during talks in Poland.Greek bonds also tumbled, pushing up borrowing costs in the country, after the decision on whether to hand Athens the next instalment of its bailout was pushed back to October.



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Stalemate: Talks between Tim Geithner and Euro leaders ended in deadlock

Rumours that Italy was about to have
its credit rating downgraded added to the gloom – although European
shares rose for a fourth day.
Peter Dixon, an economist at
Commerzbank in London, said a solution to the European debt woes was
becoming increasingly hard to find.
‘At this point in the ongoing eurozone
crisis, it is hard to see what the opportunities are – but the danger
is all too readily apparent,’ he said.
 



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US Treasury Secretary Timothy
Geithner, whose presence at the European meeting highlighted the level
of concern in the White House, urged countries to unite behind the
single currency.
He said in-fighting posed a
‘catastrophic risk’ to the global economy, and called on the eurozone to
use the €440bn (£385bn) European Financial Stability Facility bailout
fund to raise extra cash to prop up fragile countries.
But Geithner’s proposals were rejected
during tense meetings in Wroclaw, which also saw the US and Europe
clash over the idea of a financial transaction tax.
German finance minister Wolfgang
Schäuble told Geithner that taxpayers in the region’s strongest
countries were reluctant to stump up yet more cash to bail out stricken
economies in the Mediterranean. ‘In these countries, there is a desire
for a transaction tax,’ said Austrian finance minister Maria Fekter.
‘He [Geithner] ruled that out. I
found it peculiar that the Americans tell us what we should do. and when
we make a suggestion they say no straight away. I had expected that he
would listen to what we have to say.’
Luxembourg prime minister Jean-Claude
Juncker, pictured, who chairs eurozone finance meetings, added he was
not prepared to discuss euro issues with non-euro countries. ‘We are not
discussing the expansion or increase of the EFSF with a non-member of
the euro area,’ he said.
Meanwhile, Italy insisted it will balance its budget by 2013 – even if economic growth disappoints.
The European Commission had cut its
2011 growth forecasts for Italy from 1 per cent to 0.7 per cent, 
compared with the 1.1 per cent expected in Rome.