Geithner warns global recovery could stall because of imbalances

Geithner said countries intervening in their currencies to drive exports risk undermining progress made since the global recession.

Geither offered the view at a meeting of economic leaders attending the International Monetary Fund and World Bank annual meetings in Washington.

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The meetings are expected to be dominated by a discussion of currency intervention, particularly China’s intervention in the yuan that has increased tensions with the U.S. and sparked fears of an international currency war.

The House approved legislation last week that would allow the Commerce Department to include currency manipulation in calculating anti-subisdy duties on imports from China and other countries. Geithner did not criticize China directly with his remarks, but underlined a grave situation if more balance is not brought to global trade flows.

“Our initial achievements are at risk of being undermined by the limited extent of progress toward more domestic demand-led growth in countries running export surpluses and by the extent of foreign exchange intervention as countries with undervalued currencies lean against appreciation.”

This is the second time this week that Geithner has implicitly criticized China’s policies. Earlier this week, the Treasury secretary said it was important for emerging countries to move to market-driven exchange rates.

For more than a year, the Obama administration has argued that export-driven countries such as China, Germany and Japan must do more to increase their domestic demand.

President Obama argues this would relieve some pressure on the U.S., making it easier to lower trade and budget deficits by increasing U.S. exports and helping the economy.