Geithner says force of global recession receding

[July 14, 2009]  RIYADH, Saudi Arabia (AP) -- U.S. Treasury Secretary Timothy Geithner said Tuesday his country had a "special responsibility" to help guide the world through its worst recession in decades, and stressed that while a recovery was ongoing, setbacks were likely.

The prediction came as Geithner kicked off his first official visit to the Middle East, courting leaders of a Gulf Arab region that has seen its global financial muscle grow on the back of petrodollar fueled investments.

"The force of the global recession is receding," Geithner told Saudi business leaders in the commercial hub of Jiddah, noting that the International Monetary Fund has revised up growth forecasts in the second half of 2009 and into 2010. "Global trade is just starting to expand again," he said.

But the "process of repair and recovery is going to take considerably more time," Geithner said, adding that given the damage the meltdown inflicted globally, "it seems realistic to expect a gradual recovery, with more than the usual ups and down and temporary reversals."

Geithner, who was in London Monday, said the Obama administration is committed to preserving the openness of the U.S. economy and recognizes the country's role in spurring global recovery efforts. He said the U.S. realizes it has "a special responsibility to play" when it comes to protecting the value of the dollar.

While offering a broad takeout on the economic crisis, Geithner's stop in Saudi Arabia, followed meetings Wednesday with officials in the United Arab Emirates, is seen by analysts as a key push by the Obama administration to secure continued backing from a region that has morphed from one synonymous with oil into a rising financial force. From the UAE, he heads to Paris

Saudi Arabia, the Arab world's largest economy and OPEC's de facto leader, recycles significant petrodollars into U.S. Treasury bonds. And government-run investment funds in the United Arab Emirates -- Geithner's second Arab stop -- have poured billions of dollars into U.S. banks and other companies.

As a group,the six-nation Gulf Cooperation Council -- which includes Saudi Arabia, the UAE, Kuwait, Qatar, Bahrain and Oman -- is now the U.S.'s second biggest creditor after China.

Tarik Yousef, dean of the Harvard-affiliated Dubai School of Government, said the United States views the region as an important source of funding and as a balancing force in the world's financial system.

"A reinforcing message about their role in the global economy ... is an important message to convey," he said.

Geithner, who is expected to hold talks with King Abdullah and his top financial advisers later Tuesday, said the meetings in Saudi aim to highlight the importance of the two countries working together to resolve the economic global crisis.

He laid out a four-point strategy that he said is essential for economic recovery. It includes stabilizing and repairing the U.S. financial system, helping offset the dramatic contraction in demand, working with the major economies of the world on a coordinated program of macroeconomic stimulus and financial stabilization and focus on the future by building a stronger and more productive economy.

"In the United States, we need to make sure that as we rebuild, we build a stronger and more productive economy, less prone to crisis, with the gains of growth more broadly shared," he said, adding that the government was determined to work to bringing the deficit down once officials were sure the global crisis was over.

America, he said, "was on an unsustainable fiscal path before this crisis, and we will not succeed in establishing sustainable recovery without a credible commitment to address our long term deficits."

Reaching out specifically to Gulf investors, he sought to allay concerns that the investment climate had changed in the U.S.

Geithner said that since the controversy surrounding the Dubai Ports deal in early 2006, the U.S. has put into place a series of reforms designed to safeguard national security, while providing more clarity, predictability and transparency to investors.

Public furor over the deal ended up blocking the efforts of Dubai-owned DP World to manage six of the largest ports in the United States.

"These reforms have not infringed on our open investment policy," he said.

[Associated Press; By DONNA ABU-NASR]

AP Business Writers Adam Schreck and Tarek El-Tablawy contributed reporting from Dubai, United Arab Emirates and Cairo.

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