Germany, U.S. seek balance on regulation, recovery

12:22, May 28, 2010      

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Visiting U.S. Treasury Secretary Timothy Geithner said here Thursday that his country and Germany shared "broad agreement" on the necessity of tightening regulation, but the reform should be balanced to boost the global economic recovery.

Meeting with his German counterpart Wolfgang Schaeuble in Berlin, Geithner said the United States and Germany agreed to put in place "more conservative constraints on risk taking, more conservative capital requirements and bringing transparency to derivatives markets."

Both countries also want to work closely to commit to "clear objectives for reducing our fiscal positions to sustainable levels over the medium term," he said in a joint press conference after the meeting.

The talks came one week before a meeting of Group 20 (G20) finance ministers and central bank heads in Busan, South Korea, which is seen as a preparation for a G20 leaders' summit in Toronto, Canada on June 26-27.

The Toronto summit is seeking to reach agreement on tougher and better-coordinated financial regulation among G20 countries, as world leaders would discuss several regulating proposals, such as levying taxes on banks and making stricter requirement for lenders.

"We're in a very good position to reach agreement on a global framework that works," Geithner said

The U.S. finance chief also expressed his "enormous respect" for Germany's leading role in promoting European financial reforms and stabilizing the European economy.

Although Geithner stressed the United States and Germany shared common interests and positions on the global economy in basic principles, the two nations, one of which is the largest economy in the world and the other the biggest in Europe, differ considerably on how to prevent another financial crisis.

Germany unilaterally imposed a ban on naked short-selling and naked-short selling of credit default swaps on May 19 as another tough measure for combating speculation. The global markets were greatly shocked by the move. Some European countries and observers criticized the action as "fierce and reckless" and refused to follow Berlin's example.

Some U.S. officials said earlier that the German ban would ruin investor confidence and probably fail to achieve the goal of maintaining a stable economy.

Washington also feared that the large-scale austerity measures taken or to be taken by many European nations, including Germany and Britain, would hinder the global recovery. However, Berlin is a strong supporter for budget cuts, constantly urging Greece, Spain and other debt-laden European partners to take swift steps on saving money.

On Thursday, Geithner warned that any financial reform should be "designed carefully in a way that makes the system more stable in the future but doesn't create financial headwinds to recovery."

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