Ahead of G-20, Geithner Warns of Deepening Global Recession

From Treasury Sectretary Tim Geithner's remarks yesterday in advance of the G20 Summit in London:

The global recession is deepening. The International Monetary Fund (IMF) has estimated that the global economy is likely to contract by 0.5 percent in 2009. Unemployment is rising and world trade is likely to decline by at least 3 percent and probably more in 2009. Last week's jobs report showed that unemployment in the United States rose to 8.1 percent in February. In the fourth quarter of 2008 we saw the biggest quarterly decline in real U.S. exports since 1971. Our economy needs a revival of global growth to complement the stimulus we are injecting at home. U.S. exports, U.S. jobs and the health of the U.S. economy are inextricably linked to the health and stability of the global economy.

The G-20 countries must take strong macroeconomic and financial sector measures. In the United States, we moved quickly to pass the American Recovery and Reinvestment Act, which lays a foundation for economic recovery through a powerful mix of investments and tax cuts to create jobs and strengthen our long term growth potential. The G-20 countries have also put into place fiscal stimulus. We believe it is important for G-20 nations to commit to substantial and sustained actions for a period that matches the likely duration of the crisis. The IMF has called for countries to put in place fiscal stimulus of 2 percent of aggregate GDP each year for 2009-2010. This is a reasonable benchmark to guide each of our individual efforts. We think the G-20 should ask the IMF to report quarterly on countries' stimulus efforts scaled against the relative shortfall in growth rates.

Forceful financial sector actions are critical to rebuild confidence, restore market functioning, get credit flowing and bring stability to the global financial system. In the United States, we are implementing a series of aggressive initiatives to stabilize and strengthen our financial system to support economic recovery, and we look for complementary actions around the world.

It is important, as well, for each of us to reaffirm commitment to open trade and investment policies, which are essential to global economic growth and prosperity.

As Dr. Robert Shapiro wrote earlier today, only three countries - China, Spain, and the United States - have passed stimulus measures. As Geithner says, global action to stave off economic disaster couldn't be more important right now.