FROM THE OFFICE OF PUBLIC AFFAIRS

Good morning. The G-7 meeting in Palermo on Saturday will be my first, and I look forward to meeting and engaging with my colleagues on a number of important issues. The occasion of these meetings provides a key opportunity to frame the Administration's priorities on international economic and financial policy.

I want to underscore that on economic and financial policy, as in other areas, the United States will remain fully engaged internationally. Our vision is of a world in which people have the opportunity to achieve their full potential. Prudent national policies, active cooperation and discussion with other governments, and effective international institutions are essential to achieve this goal. Three particular priorities have stood out during my early days as Treasury Secretary.

Sustaining economic growth must be at the heart of our efforts. As the world economy begins to slow somewhat, policies focused on sustaining growth are more important than ever. The United States in particular has experienced an extraordinary period - leading expansion in the world economy and the innovations that have helped improve potential. We remain committed to the goal of achieving healthy economic growth while preserving low inflation. Nonetheless, the world must not rely on the United States as the engine of global growth. Others must also grow at their true potential rate. Europe and Japan must tackle challenges in their economies to help contribute to global expansion and a reduction in external imbalances.

At the same time, we must protect against financial crises that have the potential to disrupt growth - as they did in emerging Asia, for instance, in the late 1990s. Crisis prevention needs re-invigoration. Crises strike when there is a failure to detect them early, or a failure to identify and implement the measures needed to avert them. With the knowledge and understanding available today, the international community should be able to do a better job of anticipating weaknesses and undertaking necessary steps to keep crises from taking full form. IMF surveillance of member economies provides a key tool for foreseeing and correcting potential problems. Implementation of international standards and codes should be pursued with energy, and countries' performance monitored closely - by investors as well as the international community. We need a common understanding of macroeconomic, real and financial variables that are key indicators of potential trouble, and the IMF and others should help make the information available.

And as we address the macroeconomic priorities of growth and financial stability, we must also attend to the critical task of building the policy, regulatory and legal infrastructure necessary to permit market economies to work. This is a particularly fundamental challenge in a number of countries still making the transition from command economies to market-based economies - and it needs to be given top priority along with macroeconomic stabilization. Identifying the key measures that need to be pursued is admittedly easier than implementing them. Highest priority should be given to the elements of market infrastructure that support the engines of growth - small and medium enterprises, foreign direct investment, and exports. Macroeconomic stability is fundamental.

But tax, regulatory and judicial systems that are simple, fair, and credible are equally essential. This means, among other things, ensuring that contracts are enforceable and enforced, private property is respected, and corruption is avoided. We hope that by identifying successes among transition economies, and helping those still struggling to begin to put the basic elements in place, even in microcosm if necessary, we can pave the way for these countries to achieve lasting recovery and contribute productively to the world economy as a whole.

Effective and accountable international institutions are a cornerstone of effective work in all of these areas. In Palermo, I look forward to engaging with my colleagues on ways to continue reforms in this area. I attach particular priority to a transparent and accountable IMF. I also look forward to further progress on the principles laid out by the G-7 for reform of the multilateral development banks through more efficient allocation of and better accountability for their resources. And finally, I want to emphasize the important role that the United States and the G-7 believe both the IMF and World Bank need to play in the ongoing international effort to fight financial abuse.