CANADA - United States Treasury Secretary Timothy Geithner has urged Group of 20 leaders to commit to policies that ensure the global economic recovery won't be derailed.
Speaking at a summit in Canada over the weekend Geithner said countries, particularly Japan and others in Europe, needed to do more to boost domestic demand instead of just looking for ways to slash their budgets.
China had already adopted such growth-oriented policies, while the US was doing its part to rebalance the global economy by boosting national savings and investment, he said.
Other big economies were not doing enough to encourage growth after the worst financial crisis since the Great Depression, Geithner said.
He said only a few countries, such as Greece and Spain, must reassure markets by cutting spending now, and he said growth would be a central focus of G20 meetings over the next few days.
Japan and other European countries hadn't yet produced "a set of policies that will again give everyone confidence that you're going to see stronger domestic demand growth in those countries going forward", Geithner said.
"That's a very important debate. That's a much more complicated debate than the simple question of how fast people move to restrain on the fiscal side."
European leaders continue to press for more emphasis on government spending.
German Chancellor Angela Merkel said her view that German consumers would spend more if they felt their nation's finances were in order received "very broad understanding", in an interview with ZDF television.
US President Barack Obama is urging world leaders to maintain stimulus measures, putting him at odds with European leaders who are emphasising reducing their budget deficits.
The US also is pushing to increase capital standards for banks around the world, while European leaders want all of the G20 nations to commit to some kind of bank levy.
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Geithner said the world needed simple and objective standards for banks to rein in risk, adding that US efforts to forge a global consensus had been strengthened by the financial overhaul approved last week by congressional negotiators.
He said the Obama Administration also supported European efforts to increase derivatives oversight, while admitting that some parts of the US legislation would not gain support overseas. "The US and Europe are very, very close on the core elements of it."
Geithner said Obama was working toward reducing the US deficit "to a sustainable position", and said all G20 nations agreed on the need to maintain a united front in getting the global economy back on track. He said the G20 must remain vigilant against acting too soon to withdraw emergency assistance.
"We're going to avoid that mistake by making sure that we recognise that it's only been a year since the world economy stopped collapsing," Geithner said.
"What we share is a recognition that if the world economy is to expand at its potential, if growth is going to be sustainable in the future, then we need to act together to strengthen the recovery and finish the job of repairing the damage of the crisis," the Treasury chief said. "And we agree on the need to restore balance to a world economy that got dangerously out of whack."
- BLOOMBERG
