Treasury Secretary Stresses the Need for Worldwide Effort to Cure Economy
Treasury Secretary Timothy Geithner said Wednesday that the US is largely responsible for the poor state of the world economy but it will take worldwide effort to repair it. In a speech to the Economic Club of Washington, he said that in order for the world’s economies to recover from their worst recession in years, it’s vital to find a model for world economic growth in which US consumers are relied upon less.
The Treasury Secretary’s comments are part of an attempt by the Obama administration to encourage developing countries to rely less on exports for economic growth. President Obama spoke in London earlier this month at a meeting of the Group of 20 rich and emerging world economies(G20) with essentially the same message. Geithner is slated to reiterate the theme at a meeting of the G20 after a regularly scheduled meeting of banking officials and finance ministers from the Group of Seven major industrial nations (the United States, Britain, Canada, France, Germany, Italy, and Japan).
Geithner went on to say that the government is prepared to suffer budget deficits to incite economic activity but after the crisis subsides the Fed will get control of spending. Officials from the International Monetary Fund said Wednesday it expects the world economy to decline by 1.3% this year, the biggest hit it’s taken since World War Two.
Geithner also said that governments should continue economy stimulation measures even after their economies show signs of stabilizing to solidify the economic recovery. The US has been very vocal on the world stage in support of fiscal stimulus packages to aid economic recovery, while some European nations lean more towards stricter financial regulation.
Germany announced Tuesday it would not implement a third economic stimulus package even though their recession continues to worsen. G7 officials have said that at meetings to be held in Washington this weekend, European finance ministers will draw attention to shallow indicators of the economy stabilizing, even though none of them really expects a recovery to come this year. In contrast to Geithner’s comments that the US shoulders a large portion of the blame for the economic crisis, the IMF indicated in a report on Tuesday that the US is far ahead of European nations in cleaning up the balance sheets of its banks. Representatives present at the April 2 G20 meeting decided to boost the IMF’s funding and raise trade financing by more than $1 trillion. A tightening of restrictions on tax-dodgers was also agreed upon.
G7 finance ministers will try to expand on these proposals this Friday and will reveal their suggestions by late afternoon. The subsequent G20 meeting will focus on countries like India, Brazil, China, and Russia playing a more prominent role in financing the IMF as well as other global financial institutions. Geithner stressed the importance of other nations to provide markets for American goods and services in order to reverse our steep decline in exports. When Geithner was asked to comment on accusations that China has been manipulating its currency to obtain an unfair trade advantage, he only repeated the findings of a Treasury report that excused China from wrongdoing.