Treasury Secretary Timothy Geithner on Saturday stressed the necessity of keeping global economic stimulus in place until recovery is assured and opposed the utility of a tax on financial transactions as a way to dampen risky bank behavior.
Speaking at the conclusion of a two-day meeting of Group of 20 finance minister and central bankers, Geithner said there was broad agreement that growth remains the dominant policy imperative across our economies.
He said high U.S. unemployment, which hit a 26-1/2-year high at 10.2 percent of the civilian workforce in October, highlighted a very tough economic environment that will a period of sustained growth to correct.
Earlier, British Prime Minister Gordon Brown had suggested that the G20 should levy on banks -- blamed for the excessive risk-taking that led the world into a now-easing financial crisis -- and used the proceeds to fund future bailouts.
Geithner played down that idea, noting that the Obama administration was already pushing an overhaul of financial market rules in Congress that would ensure that banks pay the costs of their failures in future from their own pocket.
A day-by-day financial transaction tax is not something we are prepared to support, Geithner said in an interview with Sky News. In his concluding press conference, Geithner was asked repeatedly to say why he opposed such a tax on banks and indicated he doubted its effectiveness.
This idea (of a bank transaction tax) has been around for a long time...I think frankly the experiences are mixed, he said, expressing an American view that there was no widespread backing for such a tax.
Canadian Finance Minister Jim Flaherty was similarly skeptical.
It's one of the ideas that's on the table, but is not particularly attractive to me as finance minister of Canada. We have been a government that has been reducing taxes, Flaherty said.
ON DANGEROUS GROUND
Geithner's key message was that recovery still remains on perilous ground and that it was too soon to discuss the timing for removing the massive fiscal and monetary stimulus that countries around the world have poured into their economies.
Government policy has to provide a bridge to growth led by the private sector, he said. We're now in the middle span of that bridge.
That meant policymakers must move cautiously in trying to bring down huge budget deficits without choking off chances for growth led by consumer spending and business investment.
If we put the brakes on too quickly we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater, Geithner said.
It's too early to start to lean against recovery.
The G20 includes key emerging-market countries like China, Brazil and South Korea as well as rich industrial nations and Geithner was asked about complaints among some members that China's policy of managing its yuan currency's value narrowly was hurting efforts to rebalance global growth.
He conceded a more flexible Chinese currency would be helpful but continued the Obama administration's practice of cooling the rhetoric toward Beijing over its currency.
The U.S. Treasury chief returned to Washington on Saturday night but leaves again on Monday for a visit to Tokyo next Tuesday and Wednesday followed by a stop in Singapore where he will attend a session of the Asia Pacific Economic Cooperation forum for one day next Thursday.
(Reporting by Glenn Somerville and Sujata Rao; editing by Patrick Graham.)