U.S. urges political action to raise market confidence in Europe
German Chancellor Angela Merkel worked to assuage worries over a Greek debt default on Tuesday as the euro zone debt crisis continues to fuel market volatility. Investor confidence took a hit when Italy was forced to pay its highest yield to sell 5-year government bonds since adopting the euro in 1999. The possibility of a Greek default is raising concerns over the health of larger euro zone economies, such as Spain and Italy. Speaking with the media, Merkel called the challenge “historic,” saying that if Greece were to default on its debt, “we would see domino effects very quickly.” She also urged European policymakers to choose words carefully to avoid further propagating investor fears. Meanwhile, U.S. President Barack Obama told a group of Spanish journalists that European leaders must show the political will to confront the debt crisis in order to stabilize the markets. American Treasury Secretary Timothy Geithner, in an unprecedented move, will attend a meeting of EU finance ministers in Poland later this week. Greece has indicated that it will run out of money in October, and needs the next 8 billion euro tranche of bailout money to pay for pensions and wages.