*EPF120 11/22/2004
Text: Treasury Secretary Vows to Halve U.S. Budget Deficit by 2009
(Treasury's Snow calls global economic imbalances a shared challenge) (1280)

Treasury Secretary John Snow says the Bush administration is committed to cutting the U.S. budget deficit in half by 2009 to help address global economic imbalances that may threaten world growth.

Repeating November 21 a vow made previously by President Bush, Snow said that the administration plans to reduce the budget gap over the next four years through spending restraints and growth policies.

On November 19, the head of the U.S. central bank, Alan Greenspan, called reducing the U.S. budget deficit the most effective policy initiative that could be taken to reinforce the mechanisms that promote orderly adjustments to current account imbalances among major trading countries.

The United States' large current account deficit exceeds 5 percent of its gross domestic product (GDP), while many other countries, particularly China, have sizable current account surpluses.

The current account balance is the broadest measure of a country's trade and financial transactions with the outside world.

In a statement issued after a meeting in Berlin of finance ministers and central bank governors from the Group of 20 (G-20) industrial and emerging economies, Snow said that addressing global economic imbalances is a shared challenge. He called for the removal of structural barriers to growth in Europe as well as for flexible exchange rates in Asia "in countries that do not have such flexibility."

The United States and other developed countries have repeatedly pressed China, which pegs its currency to the U.S. dollar at a fixed rate, to move in that direction.

Snow's statement reflected to a large degree views on global economic imbalances and China's currency expressed by G-20 leaders in a November 21 communiqué issued at the conclusion of their meeting. Missing from the communiqué were any references to the decline of the U.S. dollar that has created concerns in Europe and Asia. Some private economists and policymakers in those regions believe that the U.S. trade and current account deficits are to blame for the falling value of the U.S. dollar.

G-20 leaders said that, with high growth and low inflation rates, the 2005 global economic outlook remains positive although they cited oil prices, economic imbalances and geopolitical concerns as major risks.

They also approved the G-20 Accord for Sustained Growth, fashioned after a similar plan adopted by the Group of Seven (G7) industrialized countries, and the related reform agenda with specific policy recommendations for each country.

The G7 comprises Canada, France, Germany, Italy, Japan, the United States and the United Kingdom. G-20 members are the G7 countries plus Argentina, Australia, Brazil, China, the European Union, India, Indonesia, Mexico, Korea, Russia, Saudi Arabia, South Africa and Turkey.

The texts of the G-20 communiqué and related documents can be viewed at http://www.g20.org/download/public/20041121_communique_final.pdf

Following is the text of Snow's statement:

(begin text)

The Department of the Treasury

November 21, 2004

The Honorable John W. Snow

Conclusion of Meeting of G-20 Finance Ministers

and Central Bank Governors

Berlin, Germany

Sunday, November 21, 2004

I am very pleased to be here in Berlin and to have participated in such a productive discussion with my fellow Finance Ministers, as well as Central Bank Governors from the industrial and emerging market economies of the Group of 20. I want to thank Minister Eichel and Governor Weber for hosting us and for leading the G-20 over the course of this year. I also want to thank Minister Eichel for our work together to reduce substantially Iraq's debt. This will ensure that the Iraqi people will have the opportunity to rebuild their economy.

This meeting caps a full week that I have spent in Europe, discussing the importance of economic growth with leaders of government, finance and academia. Growth was also a major theme of our meeting here. The world economy is growing faster than it has in nearly thirty years. With interest rates and inflation still low, conditions are ripe for strong growth to continue. In emerging market and developing countries, economic growth is expected to top six percent this year.

The United States is leading the global growth surge. Thanks to President Bush's pro-growth policies and sound monetary policy by the Fed, the economy is on a solid expansion path. GDP growth is strong. In 2004 alone our economy has created 2 million new jobs. Sustaining this strong global growth requires all of us to act. Addressing global imbalances in particular is a shared challenge. The United States needs to do its part by raising national saving and reducing its budget deficit. President Bush is committed to cutting the budget deficit in half over the next four years. We will do this with spending restraint and continued growth -- encouraged by pro-growth policies -- in our economy.

Growth among our trading partners -- including those here in Europe -- also needs to increase and that requires addressing structural barriers that stand in the way of better performance. In Asia, more flexible exchange rates are needed in countries that do not have such flexibility.

We released today a G-20 Accord for Sustainable Growth, which describes our shared understanding of the economic policies needed for economic growth. This Accord reflects broad agreement that the world economy is best served by open, competitive markets, free capital flows and free trade. As part of the G-20 Accord we issued a Reform Agenda for Sustained Growth to set out specific policies being implemented in each of our countries. The G-20 Accord and Reform Agenda for Sustained Growth build on the path breaking G-7 Agenda for Growth initiative. I am gratified to see broad endorsement of a stronger focus on the policies that lead to economic growth.

The G-20 also reviewed the role of strong domestic financial sectors in supporting economic growth and reducing vulnerabilities. The review highlighted the importance of promoting financial intermediation and competition, implementing international standards and codes, and effective financial sector supervision and regulation. I also want to underscore the vital role remittances play as well in both sending and receiving countries.

Looking beyond our own domestic policies, we all recognize the importance of robust and effective international institutions to advance growth. In recognition of the 60th anniversary of the Bretton Woods institutions, we discussed today the recent progress made in modernizing these institutions and the need for further reforms. I was pleased to share with the G-20 some of the conclusions of the G-7 Strategic Review that was conducted under the U.S. chairmanship this year. I believe that it is particularly worthwhile for members of the G-20, with their diverse perspectives, to reflect together on how these institutions are working and how they can do better.

For the international financial system to operate effectively, it is important to have clarity and predictability. I welcome the results achieved by emerging market issuers and creditors in their "Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets." We hope that issuers and creditors will find the principles useful, and we encourage continued dialogue.

Finally, I want to note that the G-20 has played an important role in the financial fight against terror. We look forward to this work continuing. We all welcomed the new FATF {Financial Action Task Force] standard calling on countries to take measures to prevent terrorists from transferring cash across borders. We are also delighted by the stepped up role that the IMF [International Monetary Fund] and World Bank have begun playing this year in assessments of the FATF standards. Thank you.

(end text)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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