The U.S. and Europe broadly agree on the need for reform of the financial system, but global cooperation is needed, Treasury Secretary Timothy Geithner said Thursday. He also said countries are working together to balance cutting back their deficits with supporting economic growth.
Geithner met German Finance Minister Wolfgang Schaeuble at the end of a two-day visit to Europe that also took him to Britain and to the European Central Bank in Frankfurt.
The trip comes amid ongoing market volatility following European nations' agreement earlier this month on a euro750 billion (nearly $1 trillion) loan backstop for governments in danger of defaulting on debt — coupled with efforts to cut budget deficits.
Germany, the eurozone's biggest economy, pushed that deal through parliament last week. Geithner welcomed Berlin's "leadership role" in putting together "this very strong framework," as well as its speedy action to implement it.
He deflected worries that austerity measures could lead to a setback to the economy. He underlined the need to reduce debt "to sustainable levels over the medium term" and added that "we're going to get there at somewhat different paces."
"We are working very closely together to try to make sure that we are strengthening and reinforcing this global recovery," he said.
Schaeuble noted that the rules governing the euro are titled the "stability and growth pact" and said countries would try to do justice to both elements.
The eurozone rescue package — preceded by an unpopular rescue for Greece — has been accompanied by renewed determination in Europe to move forward regulatory reform of the financial system. Many on the continent contend that speculative market practices exacerbated the debt crisis.
Last week, European Union governments overrode British objections and U.S. worries to tighten rules for hedge funds, and Germany unilaterally announced curbs on traders of government debt and bank stocks — a move that rattled markets.
Geithner accentuated areas of trans-Atlantic agreement but stressed the U.S. commitment to a "a cooperative global approach" leading up to next month's summit of the Group of 20, which combines rich countries with emerging nations such as China and India.
"The United States and Europe are in broad agreement on the importance of putting in place more conservative constraints on risk-taking, more conservative capital requirements, bringing transparency and disclosure to derivatives markets, making sure that the regulators and supervisors can do their job," Geithner said.
He acknowledged that "we're going to have slightly different approaches because we have different systems."
But "we all agree on the need for a common framework," he added. "These are global markets, you need common standards — you don't want to just let risk move outside the scope of regulation."
He didn't comment directly on the German ban on so-called naked short-selling and planned legislation to cement it in law. Schaeuble renewed his defense of the move, saying that it could be superseded by future European regulation.
One area of agreement is the need for a levy on major banks to ensure that they cover the costs of any future banking crisis.
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