Europe must be creative, aggressive in crisis: Geithner
Calls World Bank an 'indispensable partner' for the US
US Treasury Secretary Timothy F Geithner said the global economic recovery is fragile and Europe’s effort to prevent the spread of its debt crisis depends on the willingness and ability of the region’s leaders to act aggressively and creatively.
“The recovery remains fragile, with continued risks from the euro area and higher oil prices,” Geithner said in a statement today in Washington to the International Monetary Fund’s policy steering committee. The US economy “continues to gather strength,” he said.
“The success of the next phase of the crisis response will hinge on Europe’s willingness and ability, together with the European Central Bank, to apply its tools and processes creatively, flexibly and aggressively to support countries as they implement reforms and stay ahead of markets,” Geithner said.
While cautioning Europe to stay vigilant, Geithner was less pessimistic than when he warned the IMF in September to intensify its efforts to avoid the “threat of cascading default, bank runs and catastrophic risk.”
The global recovery “remains fragile, with continued risks from the euro area and higher oil prices,” Geithner said in today’s statement.
Higher oil prices “strain household budgets and weigh against private-sector demand growth,” he said. Global efforts to assure an adequate supply of oil “are beginning to show some positive effects -- over the past few weeks crude oil prices have fallen and global oil inventories are rising. It is important that we remain vigilant to the risks of supply disruptions and their effect on economic growth.”
Global oil prices have fallen more than six per cent in the past seven weeks as US oil inventories climbed to a 10-month high. Geithner said he welcomed China’s actions toward making its currency more flexible, though “the process of correcting the misalignment of China’s exchange rate remains incomplete and further appreciation is necessary, and in China’s interest.”
China said April 14 it will increase the yuan’s trading band to 1 per cent from 0.5 per cent, the first widening since 2007. Regulators had raised the quotas for foreigners to buy stocks and bonds to $80 billion from $30 billion on April 3.
The Treasury secretary said he also welcomed the more than $430 billion in fresh money pledged to the IMF to help prevent the spread of Europe’s crisis.
“The IMF can and should play a complementary role in a comprehensive and well-designed European response,” he said. It has “substantial capacity to play its systemic role in the global economy.”
In a separate statement today, Geithner called the World Bank an “indispensable partner” for the US and said the Washington-based lender is “the most effective tool we have for combating global development challenges.”
Geithner also praised the work of the Financial Action Task Force, an inter-governmental group that pushes nations to fight terrorism and money laundering. He made those comments in a third statement released today by the Treasury Department.