- The Washington Times - Friday, February 13, 2009


Treasury Secretary Timothy F. Geithner’s bank plan was so poorly received by investors that the foreign ministers of the Group of Seven will need to deliver “a message of confidence” to calm world markets when they meet this weekend, Italy’s ambassador to the United States said.

“For us, it was a setback when Wall Street reacted to Secretary Geithner’s plan,” Ambassador Giovanni Castellaneta told reporters and editors at The Washington Times. The Dow Jones average fell more than 400 points on Tuesday’s announcement before rebounding slightly.

“The markets must understand” as the result of Mr. Geithner’s meetings with his G-7 counterparts in Italy on Friday and Saturday “that we will do the utmost to face the situation,” the ambassador added.

Earlier Thursday, an Italian newspaper published a scathing essay by Italian finance minister Giulio Tremonti, who will serve as Mr. Geithner’s host at the G-7 meetings.

“If the problem is an excess of debt, the cure is not adding more debt, whether that debt is public or private,” wrote Mr. Tremonti, who criticized Bush administration policies and the Obama administration’s economic-stimulus package in a broad critique of “the American way” of dealing with the crisis.

“Without new rules, the way out of this crisis, whether by the various rescue plans or with a ‘bad bank,’ will only be sowing the seeds of the next one,” he wrote.

The ambassador said Mr. Tremonti’s remarks should be construed as “a provocative approach to open the discussion.”

Mr. Geithner will arrive in Rome on Friday and will brief the G-7 finance ministers and central bankers on details of Treasury’s efforts to revise the U.S. financial-bailout plan, a senior Treasury official said.

The other G-7 members are Japan, Germany, France, Britain, Italy and Canada. When Russia attends meetings, the group becomes the Group of Eight, or G-8.

“The success of our financial stability plan is going to require an unprecedented level of cooperation here in the United States and around the world,” Mr. Geithner said when he announced the plan Tuesday.

Trade will also be high on the agenda in Rome.

As the economic-stimulus bills were working their way through Congress in recent weeks, America’s trading partners, including Italy, expressed great concern over the “Buy American” provisions in the Senate and House packages. They said they feared the provisions could spark a trade war.

Protectionism would be “the worst way” to help the U.S. economy, Mr. Castellaneta said.

The Senate adopted an amendment mandating that any “Buy American” provision be implemented in way that does not violate U.S. obligations under international trade agreements.

“We have no intention of violating or acting inconsistently with our [World Trade Organization] obligations,” the senior Treasury official said at a pre-G-7 briefing Wednesday. House Majority Leader Steny H. Hoyer, Maryland Democrat, told reporters Thursday that the final stimulus bill modified the “Buy American” provision “pretty much along the Senate lines.”

America’s G-7 partners will want to know the details of the “Buy American” provision included in the final $789 billion economic-stimulus package.

In Rome, Mr. Geithner also will encourage his counterparts to “take bold measures to help sustain the global economy,” the senior official said at the briefing. “It will be a focus of the weekend’s meetings to encourage others to take bold and vigorous action.”

Italy, which holds the G-8 presidency throughout 2009, considers this weekend’s meeting in Rome to be an important warm-up session for the much larger Group of 20 economic summit to be held in April in London, Mr. Castellaneta said.

The London summit will include Brazil, China, India and other emerging-market nations. The ambassador said a “turning point” in the global financial crisis could be achieved when the G-8 heads of state attend a separate summit that Italy will host in July.

Italian Prime Minister Silvio Berlusconi and President Obama discussed the global economy during a telephone conversation Wednesday. “Recovery is the first priority,” Mr. Castellaneta said. “When the house is burning, you must put out the fire.”

Despite the harsh comments from Italy’s finance minister, Mr. Castellaneta said there was no “ideological problem” between Mr. Berlusconi and Mr. Obama.

The ambassador acknowledged that “there is some resentment and disappointment” among America’s G-7 colleagues over the projected $1 trillion in losses from U.S. mortgage-related toxic assets that were sold to foreign banks and investors.

While Italian banks suffered few losses from toxic American assets, the Italian economy has been hammered by the worldwide recession, which was precipitated by the implosion of U.S. financial markets.

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