Geithner says Europe must do more to boost economy

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US Treasury Secretary Timothy Geithner played down talk of differences with Europe on spending cuts here Thursday but stressed that US consumers could no longer support the global economy alone.

"We all understand and we all agree that part of global recovery, part of making sure our economies are growing ... is to commit to clear objectives for reducing our fiscal positions to sustainable levels over the medium term," Geithner said.

"That is absolutely essential, we all agree on that," he said in Berlin after talks with German Finance Minister Wolfgang Schaeuble.

"We are going to get there at somewhat different paces, the magnitude of adjustment will differ, as we all come to this from different positions, with different underlying growth rates, different overall debt burdens."

Alongside Greece, Portugal and Spain -- all of whom have seen their borrowing costs rise sharply in recent months as investors fret over their solvency -- other EU members like Italy and Britain have also announced austerity measures to reduce their deficits.

Germany, Europe's biggest economy, is also set to follow suit, leading to concerns in Washington that the 27-nation European Union is jeopardising economic growth.

"US consumers are going to be less of a source of demand for the world in the future ... The broad challenge of making sure that global growth in the future is more balanced and more sustainable is important and something leaders all agreed to," he said.

He pointedly praised China for "recognising that imperative and putting in place a very strong programme of reforms to make sure that growth is coming more from domestic demand."

Geithner met Jean-Claude Trichet, president of the European Central Bank in Frankfurt late Wednesday and Bundesbank head Axel Weber on Thursday. On Wednesday he held talks in London with George Osborne, Britain's new finance minister.

The flurry of talks was in preparation for a meeting of finance ministers and central bank chiefs from the G20 top world economies in Busan, South Korea on June 4-5 and a G20 leaders' summit in Toronto, Canada on June 26-27.

The main aim is to agree on tighter and better coordinated financial regulation in the wake of the financial crisis, with the focus on a possible levy on banks, tougher capital requirements for lenders and more transparency on financial products.

Geither said that preparations were proceeding well and that the world was "in a very good position to put in place a much better system than we had going into this crisis."

But he added that some countries had "slightly different approaches" and that there remained some areas where further talks were needed.

"I don't think we will know yet what separates us until we get to the next stage of discussions ... I think we all agree we want to have more conservative restraints on capital and leverage," he said.

"We want to design them carefully in a way that makes the system more stable in the future but doesn't create a risk of financial headwinds to the recovery we are seeing happening."

© 2010 AFP

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