WASHINGTON — The United States will press its allies over the weekend to adopt aggressive, coordinated economic stimulus programs and a range of other measures to reverse a global slowdown, Treasury Secretary Timothy Geithner said Wednesday.
Addressing financial reporters, Geithner also said that the United States will support a World Bank effort to make financing available for international trade and will propose an expansion of emergency lending to poorer nations through the International Monetary Fund.
"What we're seeing happen around the world now is really without recent precedent," Geithner said in a briefing before he travels to London for a meeting of finance chiefs from 20 industrialized nations — called the G-20.
Global economic growth, he said, is now projected to be negative in 2009. If this projection proves true, it would mark the first such global economic shrinkage among industrialized nations since World War II.
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In response to deteriorating economic conditions, the Treasury secretary announced that the United States will seek to increase funding significantly to an IMF program called New Agreements to Borrow. This program is used for short-term credit agreements to provide emergency funding that is repaid. Geithner wants to see it upped from $50 billion to $500 billion.
U.S. funds account for one-fifth of this program, so the U.S. commitment could reach $100 billion. Under IMF funding arrangements this extra aid would not be scored in the U.S. budget as new spending, and thus not add to the taxpayer debt burden.
Geithner also threw support to "creative ways" of addressing slumping trade voiced by World Bank President Robert Zoellick, a former U.S. trade representative. Zoellick has suggested that nations find ways to finance international trade to help reverse a dangerous global slowdown that could spark countries to protect their own markets and lead to trade wars.
"Trade will probably fall the greatest amount in 80 years," Zoellick told Britain's Daily Mail, in an interview published Wednesday. "My guess is that growth will probably fall about 1 percent to 2 percent."
There could be grave political consequences if this pattern isn't soon reversed, he said.
"We haven't seen numbers like that since World War II, which really means since the Thirties. So these are serious and dangerous times," Zoellick told the newspaper.
There are growing concerns about unrest in Eastern Europe and even in parts of Western Europe, including Spain and Greece, where unemployment is soaring. Much of the added aid for the IMF is designed to help nations in Eastern Europe and former Soviet republics, emerging economies that aren't strong enough to weather the worsening economic storm.
These issues will get close attention this weekend when finance chiefs meet in London. The United States and its European allies have been at odds over what should come first, a big coordinated economic stimulus plan or global regulatory reforms of financial markets, according to reports in financial publications.
Asked about these reports, Geithner said that "it's not what I hear from my counterparts," adding that the goals can be worked on simultaneously. "They're both important. We need to move together on them."
The Obama administration worries that a steep drop in economies across the globe may further delay a U.S. recovery. It wants other developed nations to follow the lead of the United States and China and embrace public spending programs that amount to 2 percent or more of each nation's total economic activity. That's also a suggestion from the IMF.
"We're moving forward in stabilizing the financial system through a whole host of steps that have already been taken, and a number of steps that we intend to take in the future to make sure that the financial system is solvent, that our banks are strong, and that we start lending again to businesses and consumers," President Barack Obama said Wednesday. He made the remarks on-camera with Geithner, hours before the Treasury secretary met the international financial media.
The Obama administration also worries that budget concerns in many countries may cause them to pull back on spending early next year, threatening to nip a rebound in global economic activity just as it is starting.
In a lecture on Monday, the head of the White House Council of Economic Advisers warned that one of the mistakes made during the Great Depression was a pullback in spending just as economic activity was starting to resume.
"Policymakers soon reversed course and strong recovery resumed, but taking the wrong turn in 1937 effectively added two years to the Depression," said Christina Romer, who before taking the White House job was a professor who wrote extensively on the Depression era. "The 1937 episode is an important cautionary tale for modern policymakers."
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