Treasury Secretary Timothy Geithner said Wednesday the United States bears a substantial share of responsibility for a global economic crisis that could cost the world up to $4 trillion in lost output this year alone.
While the crisis started in the U.S., Geithner said its damage has spread widely with serious challenges facing much of the globe.
“Never before in modern times has so much of the world been simultaneously hit by a confluence of economic and financial turmoil such as we are now living through,” Geithner said in remarks to the Economic Club of Washington.
Geithner cited the International Monetary Fund’s new economic forecast Wednesday that projected global economic output will fall 1.3 percent this year, the first decline in more than six decades. Compared with a normal global growth rate of 4 percent, the lost output could total $3 trillion to $4 trillion, he said.
The Group of 20 major industrial countries and developing nations earlier this month pledged to boost the resources of the IMF and other international lending institutions by $1.1 trillion, while supporting sizable stimulus programs of tax cuts and spending increases in their own countries.
Geithner called the G-20 proposals made in London on April 2 an “unprecedented, cooperative program,” citing estimates that the action could provide a $5 trillion fiscal boost to the global economy through 2010.
Geithner did not mention any further commitments the U.S. would seek this weekend when finance ministers meet in Washington, but outside analysts say it’s unlikely those discussions will produce any further major proposals.
President Barack Obama this week sent Congress a request for approval of a tenfold increase in U.S. commitments to an emergency IMF loan fund to $100 billion.
That would represent the U.S. share of the $500 billion pledge for the borrowing fund. While the European Union, China and Japan also have made pledges, more donors will be needed to reach the $500 billion goal.
Following his speech, Geithner avoided directly answering a question about the chances the government will be able to recoup the $182 billion in support it has provided to troubled insurance giant American International Group Inc.
Geithner called AIG an “extraordinary challenge,” but said that the government-installed managers were working hard to “help improve the odds that the taxpayer is repaid.”
There are tentative signs the severity of the downturn was beginning to moderate. Some measures of consumer spending and industrial output had started to stabilize and financial conditions had improved “modestly,” Geithner said.
It also was encouraging that the U.S. and other countries had responded with unprecedented speed and force to deal with the crisis, but going forward it will be critical for countries not to relent in their efforts to boost economic growth and stabilize their financial systems, he said.
“The actions now in place and in the pipeline offer the strongest basis for confidence that we will begin to lay the foundation for global recovery,” Geithner said.
Copyright 2009 The Associated Press.