US Treasury Secretary Timothy Geithner has urged European leaders not to rest on the recent progress they've made in tackling a crisis that remains "deeply consequential" to the prospects of a global economic recovery.
"It´s important to give Europe´s leaders credit in terms of a more credible response over the last four months," Mr Geithner said in Mexico City on Saturday, where G20 finance ministers are gathering for a summit. "It´s important not to rest on that progress because that progress is there in part on expectations there will be more."
The White House remains deeply worried about the possibility that any escalation of Europe´s debt woes will derail signs of a strengthening recovery in the US. However, the US is resisting calls from European leaders that it and others hand over more cash to the IMF (Berlin: MXG1.BE - news) to bolster the financial muscle the Washington-based fund has to help Europe (Chicago Options: ^REURUSD - news) resolve its crisis.
Britain, China and Japan (EUREX: FMJP.EX - news) have all called on European leaders to combine the two existing bail-out funds already established as a pre-condition for up to $600bn more funding for the IMF.
"Europe is making quite a bit of progress in convincing the world that they´re not going to allow a catastrophic financial failure," Mr Geithner told an audience of bankers and policymakers in the Mexican capital. He contrasted the mood now with the fear gripping financial markets as recently as October.
"I hope we´re going to see, and expect we´ll see, continued efforts by Europeans to put in place a stronger and more credible firewall," Mr Geithner said.
December saw the European Central Bank inject a blitz of cheap, three-year loans into the continent´s financial system, which has helped pull back borrowing costs for Spain and Italy that were approaching levels in which bail-outs would be required.
The last week has seen European leaders agree on a second, 130bn euro bail-out for Greece, and the start of a Greek debt swap that - if taken up by investors - will see private bondholders take a loss of more than 50pc on their holdings. The measure are designed to prevent Greece defaulting on a bond repayment next month.
However, analysts say that huge challenges remain in solving a crisis that has dominated the world economy for the last two years. National parliaments need to approve the second Greek bail-out, with German politicians voting on it this week. There are also growing doubts over whether the latest bout of austerity required of Greece is both politically feasible and economically sensible.
Mr Geithner said that European leaders have to "commit to do more than is necessary" to solve the crisis.
The US Treasury Secretary also said that run of improving data from the US, including a drop in the unemployment rate to 8.3pc, shows that the US economy is "more resilient than many people feared."
Mr Geithner, who is expected to step down should President Obama win a second term in November´s election, said that he expects the US politicians will pull together to make a "downpayment" on tackling its own debt next year. That optimism is at odds with many in Washington who fear more gridlock whatever the outcome of this year´s presidential and Congressional elections.