U.S., Europe Disagree On Stimulus Ideas

Treasury Secretary Geithner leaves Thursday for Great Britain, where he'll attend a meeting of the Group of 20 finance ministers and central bank governors. Those countries account for 90 percent of the global economy, and the purpose of the meeting is to come up with a coordinated plan for dealing with the international economic crisis.

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LINDA WERTHEIMER, host:

It's MORNING EDITION from NPR News. I'm Linda Wertheimer.

STEVE INSKEEP, host:

And I'm Steve Inskeep. Good morning. Finance ministers who meet this weekend outside London oversee the overwhelming majority of the world's wealth. Their job is to keep it all from slipping away. They will discuss the world economic crisis. This is the meeting of the so-called the Group of 20, the largest economies in the world. And, of course, the largest of all is the United States, whose Treasury Secretary Timothy Geithner leaves today. NPR's Tom Gjelten joins us now for a preview. Tom, good morning.

TOM GJELTEN: Good morning, Steve.

INSKEEP: Is this group going to be looking for American leadership or looking to blame America for causing this crisis?

GJELTEN: Well, there's still some resentment, I think, that this all happened because the United States didn't properly supervise it banks, that the US model of capitalism is too unregulated and so some governments - some European governments in particular - are saying that the most important thing to do right now is to institute new international regulation of the whole financial system. But the United States has a different point of view. The United States thinks that the most urgent thing to right now is simply to get the world economy out of crisis.

President Obama yesterday said that for all that has been done here in the United States to revive the economy, it could be all for a naught if other countries don't implement similar economic stimulus programs.

So Treasury Secretary Tim Geithner is going to press these governments to boost their stimulus spending up to 2 percent of their gross domestic product. Right now, only the United States and China are meeting that target, Steve.

INSKEEP: Well, how many other countries are eager to borrow a lot of money and spend it like that?

GJELTEN: The European governments in particular, it just seems like they don't want to be told what to spend their money on. They're feeling that, for example, that their unemployment compensation programs already put them up higher than is commonly recognized. So they're going to be resisting, I think, that message.

INSKEEP: Well, that's part of the answer there. But if the argument from the United States is that you have consumers that simply cannot buy enough, that people are overloaded with debt and it has to be the government's responsibility to get some money moving, why would they argue against that?

GJELTEN: Again, I think they feel that that argument avoids the issue of regulation, and they really want to push the issue of regulatory reform higher on the agenda. And they simply don't think that the United States should be dictating to them what their budget should be.

INSKEEP: Okay, given that, are these finance ministers likely to agree on anything?

GJELTEN: They'll agree, Steve, on general principles. They'll say in general we think it's a good thing to spend more, and they'll agree that protectionism is a bad thing. They'll agree that there should be some discussion of more regulation. But I think the biggest agreement, the biggest development to come out of this meeting may be a decision by all these countries to put more money into the International Monetary Fund so that the fund will be in a stronger position to loan money to the neediest countries in Eastern Europe, in Africa, Latin America and Asia.

Those countries are really in a desperate situation because they can't borrow money to support any kind of stimulus program. So we're likely to see the G-20 finance ministers agree this weekend to put in as much as $500 billion in additional lending resources to the International Monetary Fund.

INSKEEP: Tom, thanks very much.

GJELTEN: Thank you, Steve.

INSKEEP: NPR's Tom Gjelten covers the international economy.

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G-20 Meeting To Test U.S. Economic Leadership

The Obama administration has set out on what could be an economic policy collision course with some of its closest allies. Treasury Secretary Timothy Geithner is heading to a weekend meeting of Group of 20 finance ministers and central bank governors with this message: The United States thinks other governments should be spending more on economic stimulus programs.

The message may not go down well with European leaders, however, many of whom have different ideas about what needs to be done to get the world economy back on track.

The Treasury Department announced Wednesday that Geithner will urge the G-20 governments to implement stimulus-spending programs worth at least 2 percent of their gross domestic products this year and next.

"We need to bring the world together to put in place a very substantial, sustained program of support for recovery and growth," Geithner said after a White House meeting with President Obama.

According to data compiled by the International Monetary Fund, the United States and China are the only large countries committed to spending 2 percent of their GDP on stimulus programs over the next two years.

For the Obama administration, the G-20 meeting this weekend is an early opportunity to assert some global leadership in economic policy.

"We can do a really good job here at home with a whole host of policies, but if you continue to see deterioration in the world economy, that's going to set us back," Obama said Wednesday at the White House. "And I think it's very important for the American people to understand that as aggressive as the actions we are taking have been so far, it's very important to make sure that other countries are moving in the same direction because the global economy is all tied together."

Some Europeans Bristle

The U.S. stimulus-spending challenge has been welcomed by Britain, which is hosting the G-20 meeting, but it could meet some resistance from other European governments. The prime minister of Luxembourg, Jean-Claude Juncker, speaking on behalf of those countries that use the euro as their currency, said earlier this week that U.S. statements urging more stimulus spending in Europe "were not to our liking."

Many Europeans say a U.S. failure to oversee and regulate its financial system more carefully was the factor that led to the global economic crisis, and they now bristle at being told what policies their governments should follow.

"Basically policymakers on both sides of the Atlantic are proceeding on their own domestic agendas," says Daniel Gros, director of the Center for European Policy Studies in Brussels. "Neither takes much notice of what the other is doing, and the agendas are different."

For that reason, Gros says, the G-20 meeting in Horsham, England, is unlikely to produce any concrete actions.

Preferring Regulation

For the Europeans, the top priority for this weekend's meeting is to agree on the need for new rules to govern the international financial system and prevent future banking crises.

Arvind Subramanian of the Peterson Institute for International Economics in Washington says European leaders focus on more regulation rather than more stimulus spending because the banking sector occupies a bigger role in their economies, and because they think U.S. free-market ideology needs to be reconsidered.

"They've always been a bit dismissive of the Anglo-Saxon model of financial capitalism," Subramanian says.

Obama said Wednesday that the U.S. agrees a goal for the G-20 meetings is "to make sure that we are moving forward on a regulatory reform agenda that ensures that we don't see these same kinds of systemic risks and the potential for this kind of crisis again in the future." But he said the first goal is "to make sure that there is concerted action around the globe to jump-start the economy."

Helping Needy Governments

The G-20 finance ministers are likely to agree on the need to help countries in Eastern Europe, Africa, Latin America and Asia. The United States is urging the group to help the IMF increase the amount of money it can loan needy governments, boosting the total to as much as $500 billion.

Kevin Nealer of the Scowcroft Group in Washington says a big down payment on that program has already come from Japan, which desperately wants to help its export markets.

"We've now got some pretty strong indications that Saudi Arabia, China and the Europeans are going to make up the rest of the difference," Nealer said. "That kind of a vote of confidence in the fund and in putting a floor underneath risk for emerging markets could be the most important artifact of these meetings."

While this weekend's meeting will bring together only the G-20 finance ministers and central bank governors, it will be followed three weeks later by a G-20 summit, where Obama will make his debut on the world stage.

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