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Europeans Could Balk at Geithner's Call for More Spending

Treasury Secretary Timothy Geithner testifies on Capitol Hill Thursday before the Senate Budget Committee. (AP Photo)

The U.S. mantra of spend, spend, spend is starting to wear thin on the other side of the pond. 

European countries appear to be at odds with Treasury Secretary Timothy Geithner's fresh calls to unleash more stimulus money and free up a half-trillion dollars to lend to struggling countries. 

It could lead to a tense discussion as Geithner heads to Britain to meet with finance officials from the Group of 20 nations Friday and Saturday. Those meetings come ahead of an April 2 summit of the G-20 in London. 

As the U.S. calls for more spending, more Eastern European countries also are coming to the table hat in hand, looking for financial help from the International Monetary Fund and other groups -- but does the rest of the world have the money to give? 

"We're just getting into the worst of the crisis in a global sense," said Ralph Bryant, a senior fellow at the Brookings Institution who specializes in international economic issues. "Many developing countries ... are just beginning to feel the really bad effects." 

But European Union leaders recently rejected a request from Hungary for $241 billion in bailout money for the region. 

"I think they're on a different page," Bryant said of U.S. and European financial officials. He said the calls by the U.S. for more stimulus money and international aid likely will stir controversy at the upcoming meetings. 

Geithner on Wednesday called for a tenfold increase in the size of an emergency fund the IMF uses to help countries in trouble -- to as much as $500 billion. He also endorsed the IMF's call for countries to enact stimulus packages worth, on average, 2 percent of their GDP. 

But in a report last week, the IMF said the U.S. was the only one of the world's seven rich industrial nations -- the Group of Seven -- on track to meet that goal. 

"I think that the United States has actually taken a significant lead on a number of these steps that are required," President Obama said Wednesday, calling for "concerted action around the global to jumpstart the economy" at the G-20 meeting. 

Some European nations are reticent to take on the kind of national debt the United States has been accumulating in recent months. European critics have charged that the United States' demand for increased stimulus spending was an effort to divert a European call for a major overhaul of regulations governing the financial system to curb the types of excesses in the U.S. that spawned the crisis. At a meeting this week of finance ministers of the 27-nation European Union, officials said they were doing enough already to support the world economy. 

"Recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis were not to our liking," Luxembourg Finance Minister Jean-Claude Juncker was quoted as saying after the meeting. 

German Finance Minister Peer Steinbrueck recently said finance ministers from the EU's 27 nations were not pleased at U.S. suggestions that Europe has not done enough to stimulate the global economy. 

Germany has been criticized for its reluctance to spend and stimulate its economy, Europe's largest. Their stimulus package was about 1.5 percent of its GDP this fiscal year, according to the IMF report. France's was about half that. (Meanwhile, countries like China and Saudi Arabia met or exceeded the United States' level of stimulus spending.) 

However, European nations apparently are preparing to sign on to at least a partial version of the calls by the U.S. for more IMF funding. 

The Times of London reported Thursday that the European Union was considering lending between $75 billion and $100 billion to the IMF to boost its lending ability. The Union also reportedly is calling for countries to help double IMF resources from $250 billion to $500 billion. 

That $250 billion includes the $50 billion fund that the United States is talking about increasing. Calls to boost the fund have mounted as developing countries hit hard by the global downturn, particularly in Eastern Europe, have so far tapped about $50 billion from the IMF since November. 

It's unclear whether European nations will go as far as Geithner is suggesting in helping the IMF, however. Bryant said a number of European countries favor raising some of the money from powerhouses like China, rather than shouldering so much of the cost. 

The IMF reacted favorably to Geithner's announcement. 

"We welcome the proposal from the U.S. Treasury. It's a very positive step toward assuring the global financial system that the IMF has the appropriate level of resources to meet the needs of its members," IMF spokesman William Murray said. He said the IMF is "optimistic" it can at least double its resources in the way the EU is suggesting. 

Japan already has committed to lending an additional $100 billion. 

Obama and Geithner kept high hopes about the upcoming meetings. 

"I'm actually optimistic about the prospects," Obama said Wednesday, citing recent meetings he had with British Prime Minister Gordon Brown and Japanese Prime Minister Taro Aso

"Everybody understands that we're in this together. I think the G-20 countries are going to be seeking a lot of cooperation." 

Geithner said he would seek to build a "new consensus" in London on how to establish a "substantial and sustained program of support for recovery and growth."

The Associated Press contributed to this report.