US and Germany seek common ground in recovery (1st Lead)

May 27, 2010, 12:39 GMT

Berlin - Germany and the US sought for common ground in their moves toward economic recovery on Thursday, as US Treasury Secretary Timothy Geithner stressed commitment to a 'cooperative global approach' at Berlin talks with his German counterpart.

Finance Minister Wolfgang Schaeuble emphasised the importance of reducing Germany's deficit, as the country's 'declining and ageing population' meant there was 'less room for manouevre' than in the US.

But Geithner said it was crucial to make sure countries did not 'create a risk of financial headwinds to the recovery' by driving down deficits and regulating markets so fiercely that it strangled economic recovery.

The US has previously called upon EU member states to do more to stimulate economic growth. China, too, had recognised that in future the country had to rely more on domestic demand to drive economic growth, Geithner said.

The US treasury chief praised Germany's 'leadership role' in pressing for strong financial market reforms, and said the US and Europe were in broad agreement on the need for 'more conservative constrains on risk taking.'

Schaeuble added that Germany and the US were cooperating 'far more closely than it appears,' on financial market regulation, despite the traditional differences in their approaches.

Geithner has welcomed plans for a Europe-wide tax on banks outlined by the European Commission, but said the design of a levy and its exact use could vary from country to country.

The US treasury chief would not be drawn on whether his country would support a financial transaction tax as proposed by Germany, but said a levy on banks would serve a similar purpose.

'We want to make a clearer commitment that we are going to cover the cost of this crisis and of future crises by imposing a fee on the largest financial institutions,' Geithner said.

Geithner also met European Central Bank President Jean-Claude Trichet in Frankfurt late Wednesday, after talks with his new British counterpart, Chancellor of the Exchequer George Osborne.

The talks come ahead of a meeting of Group of 20 (G20) finance ministers in South Korea next week, to prepare next month's G20 summit in Toronto, Canada, where coordinated financial market regulation and economic recovery are set to be key topics.