America must take a “substantial share” of the blame for the continuing financial crisis, US Treasury Secretary Tim Geithner admitted as he warned that the rest of the world cannot be reliant on the US for its recovery.
Mr Geithner, commenting on America’s part in the global recovery in a speech in Washington DC, said that although the world needs the US to recover quickly, the opposite is also true.
“The rest of the world needs the US economy and financial system to recover in order for it to revive,” said Mr Geithner. “Just as importantly, we need the rest of the world to recover if we are to prosper again here at home.”
His comments came as the IMF’s World Economic Outlook forecast the US economy would contract by 2.8pc this year and witness flat growth next year.
Mr Geithner’s admission that the US must bear significant responsibility for the recession comes ahead of this weekend’s important Spring meeting of the International Monetary Fund in Washington DC, and will go some way to pacify relations with a number of developing countries which continue to blame the US for the world’s current problems.
However Mr Geithner added that for the global recovery to be balanced, other countries can no longer be “dependent on the US consumer,” reiterating the view that the global growth seen earlier this decade reached unsustainable levels
Assessing what he referred to as the “most severe crisis in generations,” the embattled Treasury Secretary said that the current downturn is “an abrupt correction of financial excesses” which required “extraordinary policy responses.”
He went on to say that recent actions taken by the US and other members of the G20 have paved the way for a sustainable recovery, amid signs of some easing in the financial markets.
Turning to more domestic affairs, Mr Geithner disclosed that financial regulators – led by the Securities and Exchange Commission and the Federal Reserve – are working on terms by which major banks can repay money received from the Treasury’s $700bn (£482bn) bail-out fund.
The 19 banks to have received bail-out funds will on Friday be given the result of stress tests on their balance sheets, crucial in deciding their ability to repay those funds.