U.S. Treasury Secretary Timothy F. Geithner said today that the European debt crisis has made the global economy worse and “no country’s immune to it.”
“The slowdown in growth you saw at the early part of this year -- in part because it was precipitated by what happened to oil prices and the disaster in Japan -- was a synchronized global slowdown in manufacturing but also just in spending,” Geithner said in an interview with the British Broadcasting Corp. “Europe made that worse.”
He also said where the damage is most acute in Europe he expects to see “sustained political support for the core set of reforms that we think are most essential.” He said those changes include stronger capital cushions; strengthening banks against funding pressures and crisis; uniform derivatives oversight; and global margin rules.
The European Commission said Nov. 10 it is cutting its euro-region growth forecast for next year by more than half and said it sees the risk of a recession as leaders struggle to contain the fiscal crisis. The International Monetary Fund said in September the world economy will expand 4 percent this year and next, compared with June forecasts of 4.3 percent in 2011 and of 4.5 percent in 2012.
German Chancellor Angela Merkel’s Christian Democratic Union party voted to allow euro states to quit the currency area, endorsing the prospect of a move not permitted under euro rules. The resolution, which requires the assent of Merkel’s two coalition partners before becoming policy, is part of Merkel’s push for closer political ties and tighter budget rules in the European Union, with euro countries setting the pace.