–Says Now Not Time For Repeat Of 2009 Global Policy Coordination
–None Of World’s Major Central Banks Are Out Of Ammunition
–Says World Faces Risk Of Prolonged Weak Growth – G7 Should Act
–Calls For Faster Appreciation Of China FX

LONDON (MNI) – US Treasury Secretary Timothy Geither has said that
US President Barack Obama will push for a large fiscal stimulus package
in a speech later today.

Writing in the Financial Times, Geithner also said that the
President will announce reforms to ensure medium-term fiscal
sustainability.

“President Barack Obama will push for the very substantial package
of public investments, tax incentives and targeted jobs measures he
will put forward tonight, combined with a carefully balanced mix of
fiscal reforms designed to restore fiscal sustainability over the medium
term,” Geithner wrote.

Geithner also said that although another globally coordinated
policy response, similar to that seen in 2009 was “unrealistic”, Central
Banks can still take policy action to stimulate growth.

“The challenges now are different and cannot realistically be
confronted by a repeat of that coordinated global response of financial
stabilisation and fiscal and monetary stimulus,” Geithner wrote.

“With growth slower and oil prices lower, inflation risks are on
average, though not everywhere, less acute. This means some central
banks will continue to ease policy, while some will keep rates lower
longer and slow the pace of expected tightening. None of the major
central banks are out of ammunition,” he wrote.

Geither also made an explicit call for China to allow the Renimbi
to appreciate.

“We need more progress in rebalancing global demand, with broader
and faster appreciation of the renminbi and the other policies necessary
to strengthen domestic consumption in China and other emerging economies
with large external surpluses,” Geithner wrote.

Geithner also warned that “political paralysis” was getting in the
way of effective action to bolster recovery.

“The biggest constraints on action in the major developed economies
now have less to do with those economic realities and more to do with
political paralysis, misplaced fears about inflation and moral hazard,
and unwarranted disaffection with the efficacy of the traditional fiscal
tools of tax cuts and investment to encourage growth,” Geithner wrote.

The Treasury Secretary also called on Europe to take more forceful
action to generate confidence to resolve its sovereign debt crisis.

“This requires governments working together and alongside the
European Central Bank in an unequivocal commitment to support Europe’s
financial system and ensure governments can borrow at sustainable
interest rates as they reform,” he wrote.

But Geithner also said the global economy is not all doom and
gloom.

“The outlook is not all dark. Oil prices have eased somewhat,
relieving pressures on consumers and businesses. Growth in emerging
markets remains quite strong. Most private forecasters expect U.S.
growth to be stronger in the quarters ahead than during the first half
of this year. The IMF expects the world economy as a whole to continue
to expand at a moderate pace,” he wrote.

–London bureau: +4420 862 7499; email: ukeditorial@marketnews.com

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