ECONOMY

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12 March 2009
Treasury Chief Says Deepening Global Woes Require Global Response

By Merle David Kellerhals, Jr.
Staff Writer

Related:
 • Economy Seen as Overarching Issue for Americas Summit

Washington — The global recession is deepening and recovery requires a coordinated global response, says U.S. Treasury Secretary Tim Geithner.

"As the crisis has spread from advanced economies, emerging-market and developing countries are experiencing a severe economic slowdown and sharp declines in capital inflows and exports," Geithner said in advance of the G20 finance ministers and central bank governors meeting March 14–15 in London. The G20 is composed of developed and emerging economies.

"Unemployment is rising and world trade is likely to decline by at least 3 percent and probably more in 2009."

One of those measures to aid ailing economies is a tenfold increase — to $500 billion — for an emergency fund the International Monetary Fund (IMF) uses to assist troubled national economies. To do that, Geithner said, the emergency fund could be enlarged to include more G20 countries.

Currently, the United States contributes 20 percent of the $50 billion emergency fund — known as the New Arrangements to Borrow — maintained by the IMF.

President Obama and Geithner discussed at a recent White House briefing U.S. goals for the G20 summit that is scheduled for April 2, also in London. The meeting March 14 is to set the common agenda for addressing the widely deepening recession that G20 leaders will take up in April.

"We’re moving forward in stabilizing the financial system through a whole host of steps that have already taken place and a number of steps that we intend to take in the future to make sure that the financial system is solvent, that our banks are strong, and that we start lending again to businesses and consumers," Obama said.

The G20 was established in 1999 to bring together industrialized and developing economies to discuss critical issues in the global economy. The informal forum promotes talks between industrial and emerging economies related to economic stability.

As the finance ministers and central bank governors convene in London, new economic forecasts point to a deepening of the recession.

World Bank President Robert Zoellick has forecast that the world economy will likely shrink 1 percent to 2 percent this year as sharp declines continue in demand, production and employment.

The United States is asking the other members of the G20 to support expanded stimulus programs as it has done in the past several weeks for the domestic economy.

"We’ve got two goals in the G20," Obama said at the White House briefing with Geithner. "The first is to make sure that there is concerted action around the globe to jump-start the economy."

"The second goal is to make sure that we are moving forward on a regulatory reform agenda that ensures that we don’t see these same kinds of systemic risks and the potential for this kind of crisis again in the future."

Geithner said it is critical that G20 nations also reaffirm their commitment to open trade and investment policies, which he called essential to maintaining global economic growth. In addition to temporarily raising resources for the IMF, Geithner said, the United States is prepared to explore additional actions to provide support for the poorest countries because of the impact of the crisis and the need for global liquidity.

"The World Bank and other multilateral development banks must more effectively leverage existing resources by flexible use of their balance sheets to help meet financing needs," Geithner said.

And Geithner said the United States will encourage other G20 nations to adopt an IMF recommendation of implementing stimulus measures equal to 2 percent of each nation's gross domestic product for 2009 and 2010. The IMF has reported that so far the United States is the only one of the seven richest industrialized nations, known as the Group of Seven, that is on track to meet that goal.

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