U.S. Treasury Secretary Timothy F. Geithner said “very important reforms” are under way in Europe to fight the region’s debt crisis, adding a recent overhaul of economic policy in India offers great potential.
“There are very important reforms under way in Spain and Italy, across Europe to lay for a foundation for better growth,” Geithner said in New Delhi today after talks with Indian Finance Minister Palaniappan Chidambaram. “That mix toward policies and commitments offers a more promising path to the eventual resolution to this crisis than we have seen to date.”
Geithner’s visit for the annual meeting of the U.S.-India Economic and Financial Partnership follows a recent Indian policy revamp to open up to more foreign investment and revive expansion. Chidambaram said the South Asian nation has a “deep interest” in the resolution of the woes in the euro area, whose turmoil has affected exports and capital inflows.
Europe’s governments have set up a 500 billion-euro ($647 billion) fund to aid debt-swamped countries, while European Central Bank President Mario Draghi last month announced details of an unlimited bond-purchase program designed to regain control of interest rates in the euro area and fight speculation of a currency breakup.
The purchases hinge on struggling countries requesting aid from Europe’s rescue funds. Spain and Italy, which had pushed for ECB intervention to bring down borrowing costs, are now reluctant to ask for support because of the conditions attached.
India’s policy changes point to a “promising path” toward improving investment and expansion, Geithner said at today’s briefing.
“The recent reforms advanced by Prime Minister Singh and by the finance minister will help provide a foundation for stronger economic growth, stronger growth in private investments, and more widespread gains in income,” Geithner said.
Prime Minister Manmohan Singh’s government began the wave of changes on Sept. 13 by unveiling a rise in subsidized diesel prices to contain a fiscal deficit.
The next day, Singh opened industries including retail to overseas businesses, giving companies such as Bentonville, Arkansas-based Wal-Mart Stores Inc. the opportunity to own as much as 51 percent in supermarket ventures.
Last week, the cabinet approved proposals to permit more foreign participation in the pensions and insurance industries, steps that need parliamentary approval.