HONOLULU?? Treasury Secretary Timothy Geithner has demanded rapid action by Europe to restore financial stability, warning that the region's economic crisis is "the central challenge to global growth."
"We are all directly affected by the crisis in Europe," Geithner said after a meeting of finance ministers of the 21-member Asia-Pacific Economic Cooperation forum late on Thursday. "It is crucial that Europe move quickly to put in place a strong plan to restore financial stability. They're moving ahead, but we just need them to move ahead more quickly and with more force behind it."
Asia-Pacific finance chiefs agreed to do whatever it takes to prevent the malaise from Europe's debt crisis spreading as a possible European recession threatens the global economy.
Wall Street rallies amid progress in EuropePresident Barack Obama spoke with German Chancellor Angela Merkel and French President Nicolas Sarkozy late on Thursday and also called Italian President Giorgio Napolitano.
Turmoil
Italy's upper parliament voted on Friday to pass a package of spending cuts, after being pushed to the brink by bond markets. In Athens, a new interim government was sworn in as Greece attempted to calm the political turmoil that has threatened to bankrupt it and force it out of the euro zone.
European shares edged higher on Friday on hopes that Italy would make political progress that will enable it to quickly cut a debt mountain, easing investors' worst fears about the euro zone debt crisis.
The European Union warned on Thursday that the 17 countries using the euro common currency could slip back into recession next year as the debt crisis that has already engulfed Ireland, Portugal and Greece has shown alarming signs of spinning out of control.
Video: Inside Italy?s financial crisis (on this page)The spillover from the European crisis is adding to the pressure in the Asia-Pacific ? now the strongest driver of world growth ? for more effective trade regimes to help spur job creation and for reforms to ensure financial resiliency.
Geithner said the Asia-Pacific's economies were "in a better position than most to take steps to strengthen growth in the face of these pressures."
Story: EU warns of possible recession in eurozoneA European recession would be felt sharply in the U.S., where growth is already anemic, and in Asia, which relies on Europe as a big market for its cars, clothing, consumer electronics and other exports.
In Rome, months of dithering and delay ended when the Italian upper house voted to pass an austerity package Friday. The law should in the lower house on Saturday, triggering the resignation of prime minister Silvio Berlusconi, who pledged to quit once has promised to resign after the financial stability law was endorsed by both houses of parliament.
Goodbye 'bunga bunga', hello prison for Berlusconi?Mario Monti, a former European Commissioner who has emerged as favorite to replace Silvio Berlusconi as prime minister.
If the second vote passes smoothly as expected, Napolitano may accept Berlusconi's resignation as early as Saturday night and formally mandate Monti to try to form a new government soon afterwards.
If Rome burns, US will feel the heat
At first, Berlusconi had insisted that early elections were the only option. But he has since softened his stand and is said by sources to be open to a new government.
Greece's new interim Cabinet was sworn in Friday, with former European Central Bank Vice President Lucas Papademos at its helm as prime minister and the key position of finance minister unchanged.
The new government of Papademos, who also spent time as Greece's central bank governor, must now implement the terms of Greece's latest debt deal ? a ?130 billion ($177 billion) agreement reached by the European Union on Oct. 27. It includes provisions for private bondholders to forgive 50 percent ? or some ?100 billion ? of their Greek debt holdings.
Leave Germany? Live in Germany? It's all Greek to them
With European leaders struggling to agree on how to tackle the deepening crisis, pressure has mounted on the European Central Bank to act more forcefully.
The president of the European Commission warned that the collapse of the eurozone would cause a crash that would instantly wipe out half of the value of Europe?s economy, plunging the continent into a depression as deep as the 1930s slump, according to a report in Britain's Daily Telegraph.
Jos? Manuel Barroso said that if the euro area broke apart, the estimated initial cost would be up to 50 per cent of European gross domestic product. "It would jeopardize the future prosperity of the next generation. That is the threat that hangs over us," he said.
The Associated Press, Reuters and msnbc.com staff contributed to this report
Source: http://www.msnbc.msn.com/id/45252403/ns/business-world_business/
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