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UPDATE 2-US' Geithner to visit Germany ahead of EU summit

Published 03/04/2011, 03:29 PM

* Visit comes days ahead of key Brussels EU meeting

* Libya, Iran on agenda for quick trip

* Oil prices not troubling for recovery yet in U.S. view (Recasts first paragraph, adds background)

By Glenn Somerville

WASHINGTON, March 4 (Reuters) - U.S. Treasury Secretary Timothy Geithner will make a quick trip to Germany on Tuesday for economic talks, days ahead of a key European Union summit about beefing up a rescue fund for debt-strapped bloc members.

Treasury said the one-day trip was "to discuss the global economic outlook and progress on international financial reform" as well as events in Libya and Iran. The department would not provide any further details.

Geithner told Congress on Thursday that European growth was trailing that of emerging-market countries and the United States, and he said the region needed to do whatever was necessary to help its most indebted members.

"It is important that European leaders continue to make clear that they will do whatever is necessary to make sure that the affected countries and their banks have the financing they need to enable these programs to succeed," he said.

Berlin, with Paris' backing, wants euro-zone countries to agree to a competitiveness pact at a March 11 meeting in Brussels in exchange for boosting the scope and capacity of an emergency fund for bailing out countries cut off from the markets.

Berlin wants other members to pass legislation like its own limiting the size of their debts before the so-called Emergency Financial Stability Facility is expanded, an idea that some, like debt-laden Greece, oppose.

Financial markets are watching the EU drama closely, particularly Germany's reluctance to pour more money into a fund and the surprise announcement this week by the European Central Bank that it may raise interest rates this spring. That has heightened anxiety about Europe's ability to contribute to the global recovery.

Geithner estimated on Thursday that growth in Europe and Japan this year would be only about 1.5 percent, compared with 6.5 percent in emerging-market countries and with U.S. growth somewhere between those two ranges.

Geithner will make stops in Frankfurt -- the home of the European Central Bank -- as well as in Berlin where he is expected to hold talks with his counterpart, Finance Minister Wolfgang Schaeuble.

There is plenty for the two finance chiefs to talk about, including the potential impact of soaring oil prices stemming from spreading fighting in Libya as well as unrest elsewhere in Northern Africa and the Middle East.

The Treasury said Geithner would discuss global efforts to impose sanctions applying maximum pressure on the Gaddafi government in Libya as well as a long-standing sanctions program against Iran.

The Obama administration has played down the potential impact of soaring oil prices on the global recovery, saying that production capacity is ample and that rich nations have strategic reserves of oil they can tap if necessary.

Geithner's visit to Germany came as a surprise. He was in Europe only two weeks ago attending a Feb. 18-19 Group of 20 meeting in Paris with German officials among others. (Reporting by Glenn Somerville, Editing by Kenneth Barry)

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