The world will not see the kind of coordinated response policymakers organized during the global financial crisis in 2009 but the United States and the European Union must work closely together to overcome the current economic challenges, Treasury Secretary Timothy Geithner said on Friday.
Geithner also told European officials and bankers during a visit to the Polish city of Wroclaw he believed Europe had the capacity to contain its sovereign debt crisis but it must choose to do so and it must avoid loose talk about the euro.
Although the challenges are different now and we are not at a moment where you are going to see the same kind of generalized coordination deployed that was necessary in the first part of 09, there is a huge imperative to get emerging economies and major economies working a little more together and that is what we are trying to do, he said.
Geithner's presence in Wroclaw, where he earlier held talks with euro zone finance ministers, underlines the seriousness of U.S. concerns about the debt crisis within the 17-nation single currency area and its impact on the broader global recovery.
He repeated previous calls for greater unity among EU policymakers and central bankers.
What is very damaging from the outside is not the divisiveness about the broader debate, about strategy, but about the ongoing conflict between governments and the central bank, he said.
You both need to work together to do what is essential to the resolution of any crisis. Governments and central banks have to take out the catastrophic risks from markets... (and avoid) loose talk about dismantling the institutions of the euro.
Geithner said the U.S. economy was expected to grow at below its potential over the coming year and a half, adding that President Barack Obama's newly announced $447 billion plan to generate jobs was crucial.
We have an economy now that is growing about 2 percent and if we look at the next 18 months it is about 2 percent, which is below potential ... weaker than it needs to be, he said.
Because of the risks, we thought it prudent to legislate some additional tax incentives and investments to help boost growth in the short-term tied to long-run fiscal savings.
(Reporting by Robin Emmott, writing by Gareth Jones; editing by Patrick Graham)