Geithner Leaves G7 Satisfied About Resolve To Tackle Crisis

ROME -(Dow Jones)- U.S. Treasury Secretary Timothy Geithner returns from his first official Group of Seven meeting with a sense that his call for more aggressive action to address the economic crisis is being heard.

Geithner arrived urging bolder action from his counterparts, using the U.S. stimulus package now awaiting President Barack Obama’s signature and a revamped plan to revive the banking system to back up his argument.


At the conclusion of the two-day meetings, he expressed satisfaction that everyone is getting on the same page, citing Germany’s new EUR50 billion stimulus plan in particular.

“You do hear around the world a much greater sense of urgency and commitment now,” Geithner said at a press conference, adding that many other countries are also coming up with plans to spur growth.

“I think we all recognize that the power of what we do individually would be much more effective if we’re moving together,” he said.

Noting in opening remarks that world governments are “acting with greater force and urgency” to both boost demand and unfreeze credit markets, Geithner said the measures “need to be sustained on a scale commensurate with the severity of the crisis.”

A senior Treasury official told reporters after the briefing that “policy has been a bit behind” in other countries, but the debate over whether or not there is a crisis appears settled.

“From people who were saying this is not going to be necessary, you’re seeing them do things that they were not prepared to do,” the official said.

Obama has moved quickly in less than a month’s time in office to get the $787 billion stimulus bill passed and ramp up the effort to shore up banks and get credit flowing.

The financial stability plan was panned by markets due to its lack of details, but more details will emerge in coming weeks, the Treasury official said.

Meanwhile, Geithner was dogged at every turn this weekend about a “Buy American” provision in the stimulus bill that has raised concerns about protectionism.

He was asked about the measure - which requires that virtually all manufactured goods used in public works projects funded by the stimulus plan come from U.S. companies - in each of the bilateral meetings he held with finance ministers, according to the Treasury official. And they each seemed reassured by Obama’s quick action to address international concerns about the measure, the official said.

Geithner met individually with finance ministers from the U.K., Germany, Japan, Canada, Italy and Russia, which is a member of the G8 but participated in the meetings. He didn’t meet with Christine Lagarde of France.

Following international outcry, a clause was added to the bill this week to ensure compliance with World Trade Organization rules, and Geithner said Obama has ordered that the measures “be implemented in a way that are consistent with our international obligations.”

Meanwhile, there was a palpable sense of relief at the meeting about the change in administration in the U.S., especially since Geithner is well-known to many world leaders as a former New York Federal Reserve president and Treasury official.

“He doesn’t need a long entree,” said German Finance Minister Peer Steinbrueck said. “This is all very professional, very much on a personal level, very relaxed.”

U.K. Chancellor of the Exchequer Alistair Darling praised Geithner and said the new administration was clearly “getting into its stride.”

“It’s good to have him on board,” agreed Lagarde.

Geithner also appears to be trying to improve ties with China following an early rough patch, when he said during his confirmation hearings that Obama believes China is manipulating its currency.

When asked about a softer tone in the G7 communique toward China, Geithner said the U.S. is committed to working closely with China.

“We very much welcome the steps they’ve taken to stimulate domestic demand, and we welcome their commitment to continue further evolution of their exchange-rate system,” he said.

Asked about the shift later, the senior Treasury official said, “a lot’s changed in the last few months, and we’re in a delicate moment.”

The G7 statement suggests a growing recognition that getting China’s help in reviving world growth is more important than pressuring the country on the currency policy.

Dominique Strauss-Kahn, managing director of the International Monetary Fund, said last month that supporting growth is more important than dealing with the causes of longer-term imbalances, like the undervalued yuan.