Geithner Says Global Economy Still Needs Stimulus
September 2, 2009Treasury Secretary Timothy Geithner said Wednesday that efforts by the United States and other nations to fight a worldwide economic crisis have been able to pull the global economy "back from the abyss."
But countries must continue to provide sizable amounts of support until there are clearer signs of recovery to avoid a classic mistake countries have made in past recessions, he said.
Geithner said he would stress that point in meetings of financial ministers in London that start Friday. Those discussions will allow officials to assess the state of the global economy for growth and decide what steps are needed to prevent a recurrence of last year's crisis.
"We have come a long way, but we have got a long way to go," Geithner said at a briefing for reporters to preview the meetings of finance ministers from the Group of 20 nations. "We need to make sure we are confident we have a strong recovery in place."
A proposed global framework to bolster requirements for the amount of capital reserves that banks need to hold to guard against losses also will be among Geithner's talking points. Many experts believe last year's crisis occurred because current bank regulations do not impose strict enough requirements on the reserves a bank has to cover its losses on loans.
The administration is hoping to get broad agreement among major countries on raising capital standards so that financial institutions in the U.S. would not be put at a disadvantage if capital standards here are raised to higher levels than their competitors face in other nations.
Specific numbers won't be discussed at the weekend meeting but a broad framework and timetable for implementing new standards would be reviewed, Geithner said.
The G-20 includes the world's wealthiest nations and big developing countries such as China, Brazil and India. Finance ministers are meeting to prepare the agenda for a Sept. 24-25 summit in Pittsburgh that will be attended by President Barack Obama and other world leaders.
Those discussions will be a follow-up to a leader's summit in early April in London and an initial G-20 summit in Washington last November when the financial crisis was still gaining force.
Geithner said the U.S. will be stressing the need to move quickly to implement financial sector reforms. The administration has put forward a sweeping overhaul package but Congress has yet to act on it.
German Chancellor Angela Merkel said this week that "no bank must be allowed to get so big that it can get into a situation where it could blackmail governments," while French President Nicolas Sarkozy urged tough rules restricting executive compensation.
Geithner wants to hear the views of other officials at the meetings, and he sought to play down differences, saying there was a broad agreement on the types of financial reforms that are needed.
In terms of repairing the global economy, Geithner said that the U.S. would continue to make the point that the world needs more balanced growth going forward.
As U.S. consumers boost their savings rates, other countries will need to look to domestic demand to push growth rather than export-led expansion. Geithner and other officials have made this point in their discussions with China in hopes of getting the Chinese government to boost domestic demand, a move that U.S. officials hope would lower America's huge trade deficit with China.
The G-20 finance discussions are expected to wrap up on Saturday with a joint statement.
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