|
June 16, 2005
js-2497 Treasury Secretary John Snow
Remarks at Conclusion of Europe Trip
Amerkia Haus, Frankfurt, Germany
June 16, 2004 As you know, I have been traveling throughout Europe for the past week – starting with meetings in London for the G8 pre-Summit Finance Ministers meetings, then in the Netherlands, Brussels, Paris, and today in Frankfurt.
In London last weekend we had the great pleasure to announce a landmark agreement to eliminate the debt stock that highly indebted poor countries owe to the IMF, IDA and African Development Fund. This historic agreement – which built upon the discussions between President Bush and Prime Minister Blair last week, will eliminate the debts of the poorest indebted countries. It had been more than a year since we at the U.S. Treasury had developed the proposal for 100% debt cancellation, so I was very pleased that the G8 agreed to support our plan. It is also important that the agreement preserves the financial integrity of the institutions. Going forward, we must all work together to provide these countries with grants and ensure that they do not again build up unsustainable debts.
Today, I would like to focus on my visits this week in The Hague, Brussels, Paris and Frankfurt to discuss European economic performance and the contribution that US-EU cooperation on financial markets and regulation can make to global growth. My message on this trip is clear: America wants our economic partnership to results in an economically dynamic and vibrant Europe that contributes to the global expansion. This is not a zero-sum game.
I was able to report this week that the US is doing its part to contribute to the global expansion with real GDP rising 4.4 percent last year, first quarter growth this year at 3.5%, and an outlook for continued robust expansion. Our strong growth is also working to boost revenues and the fiscal deficit is contracting sharply. Private forecasters now project that the U.S. deficit this year will come in under 3% of GDP -- even on a consolidated basis that includes federal, state and local fiscal budgets. I am confident that in the coming years, we will bring our federal deficit much further down to below 2 % of GDP. Reducing our fiscal deficit, along with efforts to increase domestic savings, are integral to limiting US current account imbalances. The best contribution the United States can make to the world economy is to keep our house in order, to sustain strong growth, and to continue to maintain our openness and the flexibility of our markets.
Unfortunately, economic growth in key continental European countries has been persistently weak for too long. We discussed this topic at the G8 meetings, and I was able to discuss it in further detail with European economic leaders this week. On Tuesday I met with President Barroso and Commisioner Almunia in Brussels to emphasize the need for Europe to implement vigorous structural reforms to boost its potential growth, jobs and incomes. It is clear that adjustments of global imbalances will be difficult when US rates of growth are substantially higher than those in Europe. And it is in nobody's interest to see US growth decline, even though this would be a quick way to cut global imbalances.
I know that European leaders know what is needed to get the job done so I came to Europe to listen, not to lecture. How Europe chooses to reform is for Europe to decide, and the plan outlined in the Lisbon Agenda is an appropriate roadmap. I am encouraged that many good reforms steps are already being put in place throughout the continent – pension reform in France, labor reform in Germany, and tax reforms in Italy. But I do urge Europe to move steadily on its reform path.
Throughout my trip, I have focused my talks on one area of the European reform program -- financial market and regulatory issues. We know that financial liberalization is one of the most critical drivers of our countries' economic vitality. Our Trans-Atlantic relationship is the nexus for the lion's share of the world's financial market participation, so we have a unique and shared responsibility to ensure for the efficient performance of markets and smooth adjustments in global accounts. Europe is now working to converge twenty-five different financial systems into one single market. This is an enormous challenge, and the topic was a focal point in my talks with EU Commissioner Charlie McCreevy and financial leaders across the continent this week. I believe that this is an area where Europe is demonstrating that it is up to the challenge.
The Financial Services Action Plan is a major step forward in creating an integrated European financial market, which the United States supports and welcomes. The Treasury Department has worked closely with Europe on financial markets through the US-EU Financial Markets Regulatory Dialogue. This will be good for global growth, for anchoring European financial legislation in the evolving global financial architecture and for furthering the globalization of markets. The challenge now facing Europe is not new financial market legislation, but implementation.
I learned a great deal about these challenges at my meetings in Brussels, as well with the Committee of European Banking Supervisors in London, and the Committee for European Securities Regulators in Paris.
We know that when Europe puts forward financial measures such as the Financial Conglomerates Directive, it affects US markets and firms. Similarly, when the US puts implements legislation such as Sarbanes-Oxley, it can affect Europe. So we have a wide range of issues to discuss between the US and Europe, and we are doing so in an effective way and with a sincere spirit of cooperation.
In the last days, I also had the opportunity to exchange views with my counterparts on important issues such as accounting convergence and the recent roadmap agreed between the SEC and the EU, hedge funds, Basle II, and reinsurance. These issues do not often find their way to the front-page of newspapers, but progress on them is vital to our economic and financial relationship.
Our dialogue is working and it aims to look forward, identify issues, and build a basis for the convergence of financial markets on both sides of the Atlantic on the highest quality standards.
Financial markets in particular have gone global. But regulation has always been an inherently national activity. It is too costly when increasingly global firms face multiple, overlapping sets of national regulations. Policy-makers and regulators need to provide their citizens with proper investor protection. In doing so, the realities of the global financial marketplace dictate that they work together to transcend national borders. This requires that we rely on markets and market disciplines, and a regulatory light touch.
I leave Europe heartened by what I have learned and seen. I believe that Europe is on the right track in its efforts to bring 25 financial markets into one, and that the US and EU – working together through our Dialogue – can and will converge on best global practices.
The benefits to all of us will be enormous. Various studies indicate that the integration of European capital markets alone will boost European GDP by one percentage point per year. Further, a recent OECD study concluded that deregulating European economies would raise EU GDP per capita by 2.8%. This means an average worker would get a year's extra wages over a working life.
The gains from US-European cooperation on growth and financial markets are potentially enormous. The US and Europe, as the world's two largest economies, must seize this opportunity and lead.
|
