Group of 20 nations must agree to put public finances back on a sustainable path but in a way that doesn't choke off global recovery, Treasury Secretary Timothy Geithner said on Wednesday.
That is a shared imperative. We all recognize it, Geithner told reporters before departing for a G20 meeting in Busan, Korea. As the IMF says, we want those fiscal reforms to happen in a way that's growth friendly.
Geithner joins fellow finance ministers and central bankers for the June 4-5 meetings where he said topics will include the importance of greater bank disclosure and the necessity for a consistent framework for regulating derivatives markets.
Geithner, who only returned to Washington last Thursday from a trip to China, Britain and Germany, said the recovery does have momentum, and it is vital G20 members agree to do everything possible to reinforce it.
The meeting occurs against a complicated backdrop as debt-stricken members of the 16-nation Eurozone move to implement austerity measures to rein in their budgets. Europe's debt crisis has triggered fears about the health of the region's banking system, which could suffer if the value of the debt they hold plummets.
The G20 includes leading industrialized countries and emerging-market nations like China, India, Brazil and Korea.
The U.S. has debt problems of its own, which the Obama administration pledges it will tackle in due time while emphasizing that it must first ensure economic expansion is durable -- an approach it wants others to follow as well.
The IMF warned in May that if government debt was not reduced, potential growth in rich countries could decline by more than 0.5 percent annually. The Fund said it was sensitive to concerns that focusing on public finance repairs too soon could undermine recovery but said planning could be done now.
Washington also wants export powerhouses like China to help rebalance growth by consuming more at home and is urging Europe to move ahead with financial and banking reforms.
Geithner said broad areas of agreement were emerging about the need to strengthen capital requirements for the banking system and told a questioner that remaining differences were narrowing.
However, he suggested he would like to see more disclosure about the health of Europe's banking system. European nations are still conducting bank stress tests but, unlike the United states, have not made results public.
There's a very good case for trying to bring more transparency and disclosure to these markets and the major institutions, Geithner said. I think there is broad support in Europe for doing that, again because it reflects a basic reality, which is that uncertainty has a price, and you can reduce uncertainty if you increase transparency and disclosure.
U.S. officials believe public disclosure of U.S. bank stress tests results last year not only galvanized banks into taking steps to raise needed capital but also helped restore market confidence in their solvency.
DERIVATIVES IN FOCUS AGAIN
It would similarly help soothe markets if there was greater disclosure about trades in multi-trillion-dollar derivatives markets, he added.
There have been calls for some type of tax to be levied on banks to make them pay for having been bailed out and reduce chances it will happen again by making them realize they are not too big to fail and can't rely on taxpayer handouts.
There is no G20 unanimity on how to design and impose a tax, however, and some countries like Canada fiercely oppose it on grounds their more regulated banks had no problems.
I don't think we're on the verge of a global consensus on a bank levy yet, Geithner said. I do think there is still very broad support in Europe, particularly in the U.K., for putting in place a financial fee,
But he said there was no broad consensus on a fee and I don't think that's going to change in Korea.
In response to a question, Geithner said he had not seen evidence that some countries might be withdrawing economic stimulus programs too soon. But he noted G20 countries agreed in Pittsburgh last year that they needed to do everything necessary to spur growth, I think we all have a stake in reaffirming that basic strategy.
The G20 finance chiefs are meeting this week partly to set an agenda for their countries' political leaders who hold a G20 summit in Canada later this month.
(Additional reporting by David Lawder; Editing by Andrew Hay)