U.S. Treasury Secretary Timothy Geithner said Tuesday aggressive efforts to counter a global financial crisis were starting to work and acknowledged the United States had a special duty to help spur a recovery.
Given the dollar's role in the international financial system and the significant impact of the U.S. economy on global economic conditions, we fully recognize that the United States has a special responsibility to play, he said in prepared remarks for delivery to the Jeddah Chamber of Commerce.
Geithner, who arrived in Saudi Arabia overnight from London, is aiming to reassure Gulf Arab states that the United States wants their investments and that their U.S. dollar assets are safe. He travels to Abu Dhabi in the United Arab Emirates on Wednesday and will also make a stop in Paris Thursday.
As he did in London, Geithner said the global economy faced severe challenges but sounded a reassuring note about future prospects if steady, forceful and sustained support continues until private investment and spending lead a recovery.
The force of the global recession is receding, Geithner said. For the first time in several quarters, the IMF (International Monetary Fund) and a range of private analysts are starting to revise up their forecasts for growth in the second half of this year and next.
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He said it was vital to stabilize and repair a damaged U.S. financial system and outlined efforts to do so. No recovery is possible without repairing the institutions and markets that are critical to the supply of credit, Geithner said.
He said a $787 billion U.S. economic stimulus program, designed to boost demand over a two-year period, will have its largest impact on the spending side over the next six months.
Geithner made no mention of calls from some U.S. lawmakers to consider another stimulus package, instead emphasizing the need for patience with the current one.
He said the United States on its own, and in cooperation with the rest of the world, had mounted the most aggressive response to a crisis in the past 50 years and acted more decisively than during crises in prior decades.
The combined effect of these actions has substantially reduced the risk of much deeper and more prolonged global recession, Geithner said.
In the United States, he said there was some pickup in business and consumer confidence and that the cost and availability of needed credit was improving.
These improvements have been more substantial and have come more quickly than many of us expected when we were designing these programs in December and January, he said.
He praised Saudi Arabia for having put in place one of the largest stimulus packages of any G20 country and noted that the G20 itself -- which groups industrial nations and key emerging economies -- will take on a growing role in shaping the architecture of the global financial system.
Geithner cautioned that it would take considerably more time to get the global economy back onto a path of sustained growth. He noted the IMF recently upgraded its global forecast, predicting 2.5 percent growth for 2010.
That is slower than typical for recoveries, but recovery nonetheless, Geithner said.
When recovery is established, he said the United States would quickly unwind the exceptional measures it has put in place and get its budget deficits under control.
Soaring U.S. deficits, which require mounting borrowing to pay for government's day-to-day operations, are fostering concern about the dollar's value.
The United States was on an unsustainable fiscal path before this crisis, and we will not succeed in establishing sustainable recovery without a credible commitment to address our long-term deficits, Geithner said.
The U.S. Treasury chief was scheduled to fly from Jeddah to Yanbu Thursday afternoon to meet Saudi King Abdullah and his advisers including Finance Minister Ibrahim al-Assaf, then depart in the evening for Abu Dhabi.
(Editing by Mike Peacock)