Treasury Secretary Timothy Geithner urged Europe on Tuesday to strike a balance between tough fiscal reforms and financial support for troubled member states ahead of two crucial EU summits to resolve the bloc's debt crisis.

Geithner was on an unusual one-day visit to Germany which was announced only late last week, fuelling speculation Washington is concerned about Europe's ability to seal a robust new package of anti-crisis measures at the summits on March 11 and March 24-25.

Germany is resisting pressure from some of its euro zone partners, the European Commission and the European Central Bank to give the bloc's rescue fund new powers and alleviate the cost for Greece and Ireland of their bailouts.

Geithner told a news conference after talks with German Finance Minister Wolfgang Schaeuble that he was convinced European authorities understand what it's going to take to deal with the crisis.

But he also stressed several times that they should strike the right balance between tough austerity programs being implemented across Europe's southern periphery and the financial support these countries need to make the reforms work.

Geithner described the reforms being implemented by Greece, Ireland and other euro zone states as incredibly difficult and said that in order for them to succeed, they needed to be supported by carefully designed conditional financial assistance.

On Monday, ratings agency Moody's slashed its credit rating for Greece on fears the country's efforts to cut its debt will be insufficient, raising pressure on EU leaders to ease the repayment terms on loans to Athens to avert a default.

Ireland's incoming government has also pleaded with its euro zone partners for an easing of the terms on the bailout Dublin sealed in late 2010, but has been told there will be no free lunches.

The head of sovereign credit ratings for Europe at Standard & Poor's said on Tuesday that those expecting a great leap forward at the upcoming EU summits were likely to be disappointed given political realities in Europe.

ACTIVE LOBBYING

Both Geithner and U.S. President Barack Obama lobbied European leaders vigorously last year in the run-up to a landmark summit at which they agreed to set up a new rescue mechanism for troubled euro states, known as the European Financial Stability Fund (EFSF).

Washington may be doing the same thing now, worried that efforts to improve the fund, ease the burden on stricken states and calm jittery markets may fall short, setting off more turbulence which could eventually ensnare the United States.

In a telephone conversation between Obama and Angela Merkel late last month, the U.S. president raised the issue of Europe's debt crisis, pressing the German chancellor on whether the bloc would unite behind a strong plan, German officials have acknowledged.

Geithner said he and Schaeuble had discussed a wide range of issues, including the outlook for the global economy, high oil prices, sanctions against Libya and Iran.

Earlier in the day, Geithner met with senior members of the European Central Bank, which signaled last week it could raise interest rates as soon as next month -- in stark contrast to the U.S. Federal Reserve which is expected to keep policy ultra-loose for some time yet to support growth.

Geithner declined to comment on monetary policy when asked whether he was concerned about higher interest rates in Europe.

(Reporting by Noah Barkin, Annika Breidthardt and Gernot Heller; editing by Janet McBride and Susan Fenton)

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