Washington: US Treasury Secretary Timothy Geithner said on Saturday that a decision to double the International Monetary Fund’s crisis-fighting war chest was welcome but urged Europe to press on with needed reforms.
Speaking to the IMF’s governing committee a day after Group of 20 nations pledged more than $430 billion in new funds for the global lender, Geithner praised steps that Europe already has taken to rebuild regional stability.
“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 … flexibly and aggressively to support countries as they implement reforms,” Geithner said.
The United States was not among those pledging more money for the IMF this week but Geithner said Washington was doing its part to keep order in markets.
“The United States continues to support the smooth functioning of international financial markets, including through the central bank swap lines with the ECB,” he said, referring to the Federal Reserve’s extension of dollar swap lines to reduce risks of a liquidity squeeze in Europe’s banking system.
Geithner kept the onus for dealing with its debt crisis on Europe itself.
“The IMF can and should play a complementary role in a comprehensive and well-designed European response,” he said.
Geithner maintained a longstanding position that key emerging-market countries, especially China, also have a responsibility to step up to help reduce trade imbalances that slow a global recovery.
“As current account countries have worked to raise domestic savings, the global economy and job creation are being hindered by insufficient aggregate demand growth,” he said.
Geithner added that China should allow “stronger acceleration of growth in domestic demand … as well as greater exchange rate flexibility.”
“The process of correcting the misalignment of China’s exchange rate remains incomplete and further appreciation is necessary, and in China’s interest,” he added.
Geithner and Secretary of State Hillary Clinton are due to visit Beijing next month for annual Strategic and Economic Dialogue talks so his remarks may preview a key topic that he intends to raise there.
He repeated that rising oil prices present a risk to global growth and said the United States was working with others to ensure supplies remain adequate. Global oil inventories are rising so that signals some success in efforts to ward off disruptions, he added.
In the United States, economic growth continues to gain strength and progress is being made in curbing the types of excesses that caused the 2007-2009 financial crisis, Geithner said.
He cited declining household debt loads and noted U.S. banks were strongly capitalized relative to their peers in other regions so that credit availability has not been restricted.
Still, he said, the US economy was put into such a deep hole by the severity of the financial crisis that it will take some time to fully recover.