Turmoil's spread across the world was unprecedented
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(WASHINGTON) US Treasury Secretary Timothy Geithner said yesterday that the United States bears a substantial share of responsibility for a global economic crisis that could cost the world up to US$4 trillion in lost output this year alone.
While the crisis started in the US, its damage has spread widely with serious challenges facing much of the globe, Mr Geithner said.
'Never before in modern times has so much of the world been simultaneously hit by a confluence of economic and financial turmoil such as we are now living through,' he said in remarks to the Economic Club of Washington.
He cited the International Monetary Fund's (IMF) new economic forecast yesterday which projected that global economic output will fall 1.3 per cent this year, the first decline in more than six decades.
The IMF estimates 'mask grave damage to economies around the world,' he said. Compared with a normal global growth rate of 4 per cent, the lost output could amount to as much as US$3-4 trillion, he said.
Still, there are tentative signs that the severity of the downturn was beginning to moderate. Some measures of consumer spending and industrial output had started to stabilise and financial conditions had improved 'modestly', he said.
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It also was encouraging that the US and other countries had responded with unprecedented speed and force to deal with the crisis; but going forward, it will be critical for countries not to relent in their efforts to boost economic growth and stabilise their financial systems, he said.
'The actions now in place and in the pipeline offer the strongest basis for confidence that we will begin to lay the foundation for global recovery,' Mr Geithner said.
The plan put forward by the Group of 20 major industrial countries and developing nations in London on April 2 offered a solid basis for support, and finance ministers meeting this weekend would be seeking to build on those commitments, he said.
Answering audience questions after his remarks, Mr Geithner predicted that unemployment will remain high for some time and said that the government must not 'ease up' on its recovery efforts.
'Even when you start to see some signs of traction and stabilisation', it's important that 'governments keep providing support for demand,' Mr Geithner said.
He said that global policymakers may need to alter their strategies to combat the financial crisis as conditions 'evolve'.
'We may have to adapt our policies further as conditions evolve, and we need to make sure we provide a scale of support that matches the intensity of the challenge,' he said.
'Collectively we are weathering this storm, but we must build a better global system,' he said. 'Progress is going to take time.'
He also said that the Treasury will support banks repaying aid from the US$700 billion Troubled Asset Relief Program (TARP). Regulators must sign off on requests, and will take into account the health of the banks and whether the financial system as a whole can sustain lending, he added. -- AP, Bloomberg
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