By Steven K. Beckner
WASHINGTON (MNI) – Treasury Secretary Timothy Geithner said
Saturday that more needs to be done to perpetuate global economic
recovery and financial healing as the Spring meetings of the
International Monetary Fund and World Bank got underway in earnest.
Geithner said countries with large surpluses need to spur domestic
demand and rely less on exports. And, in an obvious reference to China’s
rigid currency regime, he repeated his calls for “market oriented
exchange rates.”
Geithner, in remarks to the IMF’s policymaking International
Monetary and Financial Committee, said the United States is doing its
part to “rebalance” the global economy by increasing savings and
investment. He vowed that the Obama administration will slash record
budget deficits in coming years.
The Treasury Secretary also reaffirmed the need for global reform
of financial regulation, saying that rules on financial firms need to be
evenly enforced.
His comments were similar to those he made Friday evening following
a meeting of Group of 20 finance ministers and central bankers, in which
Federal Reserve Chairman Ben Bernanke participated.
Geithner began by contrasting the current economic picture to that
of a year ago, when he recalled “trade was plunging by more than a
third, global output was contracting at an annual rate of 6%, financial
markets were frozen, and people were losing their jobs at an alarming
rate.”
“A year ago, we acted with unprecedented force and speed to pull
the global economy back from the abyss,” he said. “Together, we injected
$5 trillion of global fiscal stimulus and mobilized an additional $1
trillion for international financial institutions to raise global
output, support growth, and restart international trade.”
Geithner credited the $787 billion stimulus package and the bank
“stress testes” with having helped spur recovery.
“Because of our decisive and coordinated measures at home and
across the G-20, the world economy is growing and the financial system
is healing,” he said, noting that the IMF has upgraded its forecast of
2010 global growth from 1.9% last April to 4.2% now.
“Trade has risen more than 25 percent, and finance is flowing again
to emerging markets,” he added.
However, “much remains to be done,” said Geithner. “Although the
economic recovery is gathering momentum, the pace of expansion still
remains uneven across countries and regions and unemployment is still
unacceptably high.”
“As we work to reinforce a recovery led by private demand, we need
to rebalance the global economy,” Geithner continued.
He said the U.S. is “moving to stimulate private investment and job
creation and to strengthen the foundation for future growth. Private
savings have increased significantly.”
And he said, “President Obama has outlined a series of proposals
that will reduce the deficit from more than 10% of GDP in FY 2010 to
just below 4% in FY 2014.” He also noted that the U.S. current account
deficit, as a share of the economy, has fallen by more than 3 percentage
points since its peak in 2005.
Other countries need to do their part as well, Geithner suggested.
“For countries with large external surpluses and high savings rates
that are lagging the recovery, there is a strong case for policy reforms
that will strengthen domestic demand, promote consumption growth, and
reduce the reliance on exports for growth,” he said.
“In large emerging economies, we have seen encouraging signs of a
shift toward more rapid consumption growth that needs to be sustained
and reinforced by a return to market-oriented exchange rates, where
appropriate,” Geithner added, in an apparent reference to China.
Beyond measures to stimulate balanced world growth, Geithner said
there is a “need for a strong global framework of financial reforms to
provide for a more stable global financial system, with consistent rules
enforced more evenly across countries.”
He said that “achieving such a framework will require both
continued international coordination and bold efforts at the national
level.”
He noted that next week, the U.S. Senate “will begin consideration
of strong and comprehensive financial reform legislation.”
“That legislation, consistent with the reforms put forward by the
Administration and passed by the House of Representatives, imposes
strong constraints on risk taking; limits the size of institutions;
brings transparency and robust oversight to the derivatives market;
provides strong protections for consumers and investors; and gives us
the tools to wind down large, failing financial firms without putting
the rest of the financial system or the taxpayers at risk.”
“Taken together, these reforms will lay the foundation for a more
stable, resilient financial system, less prone to panic and collapse,”
said Geithner.
** Market News International Washington Bureau: 202-371-2121 **
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