The U.S. economy is growing between 2% and 3% – but still faces big challenges to repair damage wrought by the financial crisis – while Europe is making progress, said Treasury Secretary, Timothy Geithner, on January 27.
Geithner told a session at the World Economic Forum in Davos:
“I think it’s probably worth recognizing that we still face tremendous challenges as a country. We’re still repairing the damage caused by the devastating financial crisis that has huge lasting impact on the basic fortunes of most Americans.”
He also praised a series of steps the eurozone was taking to overcome the crisis, but warned that austerity will fuel a recessionary spiral and said Europe needed a bigger firewall to avert future crises.
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“Europe is making some progress, though, and I think over the last two months in particular, they’re laying the foundations for a more credible framework. They’re making progress on reforms, they’re changing the institutions of Europe to put better discipline on fiscal policy. You have three new governments doing some very tough things, you have an ECB doing what central banks have to do. You see them move to try to strengthen, stand by the financial sector, but I think Europeans recognize that a sort of unfinished piece of that framework is building a stronger, more credible firewall because without that you’ll be caught in that trap that you referred to.”
The United States, China and other major non-European economies have said that the eurozone should commit more of its own money to crisis management before any increase in the IMF’s firefighting resources.
If European countries committed to a more effective firewall, Geithner said he expected other economies in the IMF to support those efforts.
Geithner was probably attending the annual WEF meeting for the last time as a sitting treasury secretary. He reiterated this week that he would only serve for one term under President Obama. He was asked whether that was his choice or the President’s.
“That’s an excellent way to pose that question. Generally, anybody who takes these jobs serves at the pleasure of the president. At a time when we face so much challenge, so much pressure, if the president asks you to do these things, you have to do them. And when he asked me to stay, when I thought it was the right time to leave, I agreed I would stay. I agreed I would stay to the balance of his term and he accepted that aspiration of mine. And that’s where it’s going to come out I think.”