U.S. Treasury wants both stimulus, reforms at G20
WASHINGTON (Reuters) - The Obama administration will emphasize the need for fiscal stimulus and other measures to fight recession at upcoming global leaders meetings but also wants to pursue financial reforms to prevent future crises, a U.S. Treasury official said on Monday.
The official said there was "a sense of urgency" for the Group of 20 wealthy and developing nations to boost their crisis response efforts. These include stimulus spending, repairing the financial sector and aiding emerging economies made vulnerable by the global downturn.
But these efforts should not come at the expense of efforts to prevent future crises when G20 finance ministers meet on Saturday and leaders meet on April 2 in Britain.
"It's not either-or. It's both," the Treasury official said, referring to the Obama administration's desire for both crisis response and prevention efforts.
The prevention efforts will include financial regulatory reforms, changes to accounting standards, and efforts to improve market integrity and transparency said the official, who spoke on condition of anonymity.
Top White House economic adviser Larry Summers earlier said in an interview with the Financial Times that there was an urgent need for more public spending and that kick-starting growth should take precedence over ironing out other problems.
"The right macroeconomic focus for the G20 is on global demand and the world needs more global demand," he said.
This call was dismissed by Jean-Claude Juncker, chairman of a European finance ministers forum, who said they were not prepared to go any further in their recovery packages. A document they are expected to approve made clear that Europe feels it has announced sufficient stimulus for now and the focus should be on rolling those efforts out in a coordinated manner, according to a copy seen by Reuters.
Simon Johnson, a former International Monetary Fund chief economist who is now a senior fellow at the Washington-based Peterson Institute for International Economics, labeled the call for more fiscal stimulus a "red herring" because most European budgets are already too tapped out.
He said effectively, it was a call for more monetary easing by expanding the money supply and lending like the U.S. Federal Reserve is doing.
"You can't go to the G20 and ask them to do monetary stimulus, because central banks are meant to be independent. So instead you go in and talk fiscal stimulus and hope that you can transfer that to the European Central Bank."
(Reporting by David Lawder; Editing by Kenneth Barry)
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