Treasury Secretary Timothy Geithner on Thursday called on global finance chiefs to boost growth but said a repeat of the massive coordinated fiscal stimulus efforts of 2009 was no longer possible.
In an opinion piece written for the Financial Times, Geithner said the United States must strengthen employment, Europe must act more forcefully to quell its debt crisis and China and other emerging markets should strengthen domestic demand and allow their currencies to rise more rapidly.
The imperative remains to strengthen economic growth. Fiscal policy everywhere has to be guided by the imperatives of growth, Geithner wrote a day before finance ministers from the Group of Seven wealthy economies are due to meet in Marseilles, France.
Geithner acknowledged that some governments with high deficits and high borrowing costs have no choice but to consolidate their fiscal positions, while others have room to take more action to support growth or at least slow their fiscal consolidation.
In early 2009, the world showed remarkable unity and deployed remarkable financial force in rescuing the global economy, Geithner wrote. The challenges now are different and cannot realistically be confronted by a repeat of that coordinated global response of financial stabilization and fiscal and monetary stimulus.
Geithner said President Barack Obama on Thursday evening will push for a very substantial package of public investments, tax incentives and targeted jobs measures, which will be combined with reforms to restore medium-term fiscal responsibility. He did not provide any specifics.
The U.S. Treasury chief is due to depart for the Marseilles meeting after Obama's speech to the U.S. Congress.
Geithner said governments in Europe must take more forceful action to generate confidence that it can and will resolve its crisis.
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.
Geithner added in the op-ed piece that he believes none of the major global central banks are out of ammunition and some will continue to ease monetary policy. Countries also should force more capital into their banking systems.
He cited some signs of optimism, such as easing oil prices, but said that the risks of a longer period of relatively weak growth are significant, and it makes sense for policy makers to reduce the risk of that outcome.
This was a terrible crisis. Recovery was always going to be slow, fragile and take time. We have more work to do. We are better off doing it together, Geithner wrote.
(Reporting by David Lawder; Editing by James Dalgleish)