Europe's debt crisis remains the biggest drag on the global economy, but the region is in a much better situation today than it was, U.S. Treasury Secretary Timothy Geithner said on Tuesday.
"For the first time they have in place a plausibly powerful set of financial tools to support a strategy," Geithner said.
The European Central Bank said earlier this month it stands at the ready to buy unlimited amounts of bonds issued by euro zone member states if they put in a formal request for aid and fulfilled strict domestic policy conditions.
Speaking at the Clinton Global Initiative conference in New York, Geithner noted the long, difficult road ahead for the euro zone region, saying it will be tested "every month, every week for the next several years."
"There is not going to be a week or a specific date in the future where you are going to know with total confidence how they are going to handle this," Geithner said.
On the U.S. domestic front, Geithner said a balanced mix of reforms is needed for dealing with the so-called "fiscal cliff" of spending cuts and tax rises of about $500 billion that are set to come into effect at the beginning of next year.
Geithner said that although the fiscal cliff is looked at with unease, it is a good opportunity for the United States to address tax and entitlements reform, and that the 2008-2009 financial crisis had been a much harder challenge that what Washington is facing today.
But political gridlock is still a hurdle for the economy.
"You still have a level of political paralysis and uncertainty about whether our political system can find a way to govern again, to govern in ways that would be good for the economy and make growth stronger," said Geithner.
Geithner said there was a lot of "promise" in the U.S. economic recovery, pointing to tentative strength in the housing market and consumers paying down their debt. But he called the drought in the U.S. Midwest "a pretty significant drag on growth."