To Reassure Markets, Europe Needs Bigger Bailout Fund, Says Geithner

By IAN TALLEY And ALAN ZIBEL

WASHINGTON—U.S. Treasury Secretary Timothy Geithner said Europe needs to boost the size of its emergency bailout facility to stem a sovereign-debt crisis threatening to engulf two of its largest economies and push the global economy back into a recession.

The Treasury secretary, in an interview with CNBC television on Sunday, said that Europe needs an "unequivocal financial backstop...so there is no doubt in anyone's mind that those countries across Europe have the ability and the will to meet their obligations."

Mr. Geithner said he is confident that European officials will "step up and provide more forceful support for the countries under so much pressure," according to a transcript of the CNBC interview.

In a flurry of conference calls over the weekend, world financial leaders have scrambled to figure out how best to solve Europe's debt crisis.

As the European Central Bank moved to provide liquidity to Italian and Spanish banks, some of Europe's leaders have called for expanding the size of the €500 billion bailout ($714 billion) facility to at least €1 trillion, and possibly more.

Germany, however, has been reluctant to endorse such a plan. Its domestic politics are already presenting a hurdle to approving existing plans to make the fund more flexible.

Mr. Geithner said that European "governments are getting their fiscal house in order."

In particular, U.S. officials are concerned that if Italy and Spain don't cut their bloated budgets faster and encourage growth more quickly, they could push the debt crisis into a more damaging stage.

—Ian Talley

and Alan Zibel

Write to Ian Talley a