Berlin: US treasury secretary Timothy Geithner played down talk here on Thursday of differences with Europe on spending cuts but stressed that US consumers could no longer support the global economy alone.
“We all understand and we all agree that part of global recovery, part of making sure our economies are growing ... is to commit to clear objectives for reducing our fiscal positions to sustainable levels over the medium term,” Geithner said
“That is absolutely essential, we all agree on that,” he said in Berlin after talks with German finance minister Wolfgang Schaeuble.
“We are going to get there at somewhat different paces, the magnitude of adjustment will differ, as we all come to this from different positions, with different underlying growth rates, different overall debt burdens.”
Alongside Greece, Portugal and Spain -- all of whom have seen their borrowing costs rise sharply in recent months as investors fret over their solvency -- other EU members like Italy and Britain have also announced austerity measures.
Germany, Europe’s biggest economy, is also set to follow suit, reportedly leading to concerns in Washington that the 27-nation European Union (EU) is jeopardizing economic growth.
Geithner said the world economy could not rely in the future on US consumer spending as it has done in the past.
“US consumers are going to be less of a source of demand for the world in the future ... You can see China recognizing that imperative and putting in place a very strong programme of reforms to make sure that growth is coming more from domestic demand in the future,” he said.
“That broad challenge of making sure that global growth in the future is more balanced and more sustainable is important and something leaders all agreed to” at previous Group of 20 meetings, he said.
Geithner met Jean-Claude Trichet, president of the European Central Bank in Frankfurt late Wednesday before talks with Axel Weber, head of Germany’s central bank the Bundesbank, on Thursday.
On Wednesday, he was in London for talks with George Osborne, Britain’s new finance minister.
The talks were in preparation for a meeting of finance ministers and central bank chiefs from the G-20 top world economies in Busan, South Korea on 4-5 June and a G-20 leaders’ summit in Toronto, Canada on 26-27 June.
Geithner said the chances of agreement on tighter financial regulation had grown.
“I think we in a very good position to put in place a much better system than we had going into this crisis,” he said.