Geithner calls for 'more forceful action' from Europe

US Treasury Secretary Timothy Geithner
© AFP Saul Loeb

WASHINGTON (AFP) – US Treasury Secretary Timothy Geithner called Thursday for Europe to take stronger action to generate confidence that it can resolve its spreading debt and deficits problems.

“Europe needs to take more forceful action to generate confidence that it can and will resolve its crisis,” Geithner said one day ahead of the G-7 meeting of finance ministers and central bankers in Marseille.

“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 said in an op-ed piece published the Financial Times and released by the Treasury.

Geithner also said that, for the world economy to regain momentum, the United States needs to strengthen growth and generate jobs, and China and other emerging economies have to expand domestic demand and float exchange rates.

“The world economy is in the midst of the second slowdown of this recovery from the financial crisis of 2008 and 2009,” he said.

“The question is not whether we have the economic or financial capacity to act to strengthen growth, but whether we have the political ability to do the right things,” he said.

Geithner was writing as worries about Europe’s ability to keep the eurozone together amid deep problems in Greece, and ahead of a key speech Thursday evening by US President Barack Obama on how his administration will try to boost the jobs market.

He stressed the “remarkable unity” of the world in confronting the financial crisis of 2009 through financial stabilization and fiscal and monetary stimulus.

Today, however, “The challenges now are different and cannot realistically be confronted by a repeat of that coordinated global response.”

He said that although major central banks still have some tools to work with, “there are limits” on the policy choices of governments.

“The imperative remains to strengthen economic growth. Fiscal policy everywhere has to be guided by the imperatives of growth,” he said.

“The risks of a longer period of relatively weak growth are significant, and it makes sense for policy makers to act to reduce the risk of that outcome.”