UPDATE 1-US’s Geithner to press Europe for unity, transparency

* Geithner to seek united front in face of crisis

* Germany’s unilateral move set for criticism

* Markets tumble, safe haven assets sought

* Bank stress tests to be in spotlight
(Updates with details, US Treasury not commenting on stress
test)

By Sumeet Desai

LONDON, May 25 (BestGrowthStock) – U.S. Treasury Secretary Timothy
Geithner is heading to Europe this week to press for a united
front against tackling the unfolding euro zone fiscal crisis
that has sent stock markets tumbling around the world.

U.S. and European officials have so far given no indication
if Geithner will be proposing a new series of measures to
stabilise the region after investors have apparently lost faith
with this month’s 750 billion euro ($916.5 billion) rescue.
[ID:nSGE64O00O]

But Washington is clearly unhappy with Germany’s decision
to go it alone in banning some types of speculative trading as
it considers the measures counterproductive.

Geithner flies into London from Beijing on Wednesday
morning for his first face-to-face meeting with George Osborne
since Britain’s new finance minister took office 2 weeks ago.

They plan a joint press conference in the afternoon.
Geithner also will meet with Bank of England Governor Mervyn
King, the U.S. Treasury Department said.

The next stop is Frankfurt for a meeting with European
Central Bank President Jean-Claude Trichet. He then goes to
Berlin on Thursday where no doubt German finance minister
Wolfgang Schaeuble will get a stern dressing down for his
government’s unilateral restrictions on speculative trading.

Osborne refused to be drawn on whether Geithner was
attempting to stitch together some kind of second stabilisation
package to bring confidence back to markets. Asked the question
on Monday, he said that he had not had the meeting yet

“He is coming to talk about the situation in the euro zone,
the situation in European banking, the G20 agenda for the
finance ministers meeting in South Korea and the G20 leaders’
summit in Canada,” he said.

QUICK ACTION NEEDED

Washington has been dismayed by how far the Greek crisis
has spread to the rest of the euro zone and once again put the
entire world banking system under threat by what it thinks was
a lack of decisive and early action.

It was the U.S. Treasury that initiated this month’s G7
emergency conference calls that led to the massive rescue fund
for the euro zone but there is rising concern that this may not
have been enough and markets are still falling sharply.

A senior U.S. Treasury official said that Europe has now
put in place a substantial framework of policy measures aimed
at preventing the risk that problems originating in Greece will
spill over into other countries.

But Washington is unhappy with Germany’s move to ban naked
short selling — the practice of selling securities that are
neither owned nor borrowed.

The official said such actions were more likely
counter-productive and tended to cause more damage to public
confidence.

STRESS TESTS

Geithner will urge European officials this week to conduct
some form of banking system stress tests, CNBC reported on
Tuesday, citing an Obama administration official.

A Treasury spokesman decline to comment on the report.

The stress tests, however, would have to differ from those
conducted by U.S. regulators in the spring of 2009, because
Europe lacks a huge bailout fund like the $700 billion Troubled
Asset Relief Program to plug any capital deficiencies found,
CNBC said.

Geithner and other Treasury officials routinely cite the
U.S. stress tests, which helped open the door for private
capital to return to the banking sector, as calming intense
market turmoil caused by the financial crisis.

In October EU finance ministers unveiled the results of
stress tests on the region’s lenders, saying European banks
would be able to withstand a harsh recession in spite of
further heavy losses.

Investors are nervous that banks could see their capital
cushion evaporate if loans go unpaid in a recession, forcing
them to turn to the state for further help.

In a worst-case scenario, not one of the region’s 22 most
important banks would see its capital buffer slip into perilous
territory, the minister said.

However, the European stress tests were widely perceived by
the financial markets as less strenuous, less extensive and
less transparent than the U.S. tests.

LONDON SUPPORT

Geithner will find some backing for a broader position in
London where the new Conservative-Liberal Democrat government
has said greater cooperation in policymaking is essential and
officials have privately derided Berlin’s actions as mad.

The U.S. Treasury official said the talks with Osborne were
partly to meet a new colleague but also to discuss European
issues ahead of a busy round of international diplomacy with
G20 finance ministers meeting in Korea and leaders in Canada in
June.

Washington may also want to sound the new British
administration out on how quickly fiscal policy will be
tightened.

Former U.K. Labour Prime Minister Gordon Brown’s government
had been a big supporter of keeping fiscal stimulus in place
until recovery was more assured. Its demise might mean that the
U.S. has less cover for its own fiscal laxity when markets are
getting increasingly focused on public debt.

Settling things down in Europe is also essential for
Washington’s other big policy aim. Geithner has been in Beijing
this week for two days of talks which ended with the U.S.
Treasury Secretary saying when and how to go ahead with reform
of its yuan currency was a matter for the Chinese authorities.

But analysts say Washington’s hopes of China moving toward
letting its yuan currency float more freely against the dollar
and thus make U.S. firms more competitive have taken a body
blow from the problems in the euro zone as Beijing is less
likely to move when markets are so volatile.

Investment Research

(additional reporting by Glenn Somerville in Beijing; David
Lawder in Washington, Editing by Ron Askew)

UPDATE 1-US’s Geithner to press Europe for unity, transparency