Tim Geithner wasn’t mincing words last week.
Before a two-day meeting of Group of 20 finance ministers, the U.S. Treasury Secretary sent a private letter to his counterparts warning that they can no longer count on the American consumer to lift the global economy by buying exports from the rest of the world.
"Given the broader shifts under way in the U.S. economy towards higher domestic savings, without further progress on rebalancing global demand, global growth rates will fall short of potential," Geithner wrote, according to a copy of the letter viewed by the Wall Street Journal.
"In this context, we are concerned by the projected weakness in domestic demand in Europe and Japan."
Concerns about European economies — and the nearly $1 trillion fund created by the International Monetary Union to keep troubled nations from financial ruin — have weighed on markets and turned up the heat on G-20 officials.
Data provided by the European Union's statistics office at the meeting’s outset suggest that the 16-nation currency bloc is emerging from recession very gradually, with first-quarter growth mostly driven by inventory rebuilding.
During the meeting, Geithner also urged China, Japan and Germany to boost domestic demand.
“We discussed how the ongoing shift toward higher saving in the United States needs to be complemented by stronger domestic demand growth in Japan and in the European surplus countries, and by sustained growth in private demand, together with a more flexible exchange rate policy in China,” Geithner told the New York Times.
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