WASHINGTON (MNI) – U.S. Treasury Secretary Timothy Geithner told
CNBC Friday that the weekend G20 meeting takes place with less chance
now of a “catastrophic mistake” in Europe while global efforts to
pressure Iran against acquiring a nuclear weapon capability continues to
widen.

Europe’s problems could still damage the U.S. economic recovery
“but it seems much less likely now because Europe has made a lot of
progress in trying to convince investors around the world and in Europe
that they are going to do what’s necessary to reduce the risk of a
catastrophic financial failure in Europe,” Geithner said.

The combination of reforms in Italy, Spain and Greece, ECB action
and improvement in confidence in the banks “together have had a
significant impact in reassuring the world Europe is not going to make a
catastrophic mistake in allowing a financial crisis to engulf the
continent of Europe,” he added.

Geithner again warned that Europe needs to do more, build a larger
financial “firewall,” which he said must be “bigger than they have
today and it needs to be big enough to make credible the commitment that
you’ve heard from leaders of Europe that they’re going to hold this
together.”

He repeated the U.S. and, he said, many other countries are not
going to contribute funds to the International Monetary Fund for Europe
if Europe does not do more on its own. “What we don’t want to see is the
IMF substitute — and it really cannot substitute — for a stronger
European response.”

On oil price spikes, Geithner repeated what President Obama said
Thursday about the lack of short-term silver bullet solutions and he
added that aside from Iran saber rattling, a resumption of growth in the
U.S. and elsewhere is also contributing to higher prices.

Geithner said there is no credible argument, as made in the morning
Wall Street Journal editorial page, that the Obama administration is
slow on every metric measuring drilling and exploration.

“Growth is gradually getting stronger” outside of Europe, he said,
and “Iran is doing some saber rattling.”

He said, “There is a case for the use of the (Strategic Petroleum)
reserve in some circumstances” to lower oil prices “and we’ll continue
to look at those and evaluate that carefully but again the right thing
for the country is to make sure we are focused on long-term investments
in energy.”

The effort to pressure Iran to stop nuclear weapons development is
not costing more in oil price hikes than its worth because “what’s at
stake for — not just for the United States but the entire region and
the global economy — is a terrible risk if Iran is successful in its
nuclear ambitions the world, and oil markets and the global economy and
stability in the region would be in jeopardy,” he said.

He again urged Congress to do more to reduce foreclosures and add
to relief for distressed mortgage holders, saying the administration
will continue to do what it can. If Congress does not act, the housing
recovery will take longer, he said.

He recounted the administration’s arguments for the Obama budget
proposals that provides for $3 trillion in deficit reduction over 10
years along with spending programs. Long-term deficit reduction depends
on fundamental tax reform, he said.

He said “things can happen, even in election years,” and so perhaps
as big budget questions need to be decided at the end of the year, the
chances of tax reform will improve.

On the Volcker Rule, Geithner said early comment drafts that raised
some much concern worldwide are being modified by regulators and that he
is “very confident” a workable rule will be the result.

** Market News International Washington Bureau: 202-371-2121 **

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