WASHINGTON - U.S. Treasury Secretary John Snow says the world economy is in its best shape in 20 years but more needs to be done in Europe to boost global growth.
Mr. Snow told an audience at Washington's National Press Club that to grow faster, Germany has to reduce rigidities in its labor market and France needs to reform its pension system. Mr. Snow said that even though the U.S. economy is growing rapidly, Washington must reduce deficit spending and control the damaging legal actions (malpractice law suits) that have driven up employee health care premiums paid by corporations.
The U.S. economy, said Mr. Snow, has been exceedingly resilient, having endured several economic shocks over the past four years. These included the unwinding of the high-tech stock market bubble that erased seven trillion dollars of wealth, the September 2001 terrorist attacks, recession, the Afghanistan and Iraq wars, and a wave of corporate scandals.
"Perhaps those wretched corporate scandals were as damaging as anything else, which breached trust with the American people on the part of our corporate leaders, our accounting industry leaders," he said. "Boards of directors were shown to be not as faithful to their duties as they should have been. CEO's and CFO's were shown to be not as faithful as they should have been to shareholders."
With the independent U.S. central bank (Tuesday) set to again raise short-term interest rates, Mr. Snow lauded the Federal Reserve for successfully promoting economic growth.
"I'd also say the Fed gets a lot of credit. The Fed has pursued a set of policies that have promoted non-inflationary growth. We continue to live in an environment of benign inflation," he said. "Inflation is well in check. That helps the economy and helps people plan their futures."
Mr. Snow called on China and other nations to allow their currencies' exchange rate to float, to be determined by market forces of supply and demand.
In a separate speech, International Monetary Fund Managing Director Rodrigo Rato said the leading economies should take advantage of the positive economic outlook to strengthen their domestic policies. The United States, he said, should reduce its fiscal and trade deficits while Europe and Japan make structural reforms.