AmCham Germany Parliamentary Reception
Remarks by Chargé d'Affaires John M. Koenig
Berlin, February 10, 2009

Market movements over the past few months have made everybody nervous, so let’s start tonight off with a very safe wager.  Tonight we have more than 50 parliamentarians, numerous senior policymakers and many of the most influential businesspeople in Germany gathered here.  What do you think is on everyone’s mind?

The answer, of course, is the  economic crisis in the United States, Germany, and around the world, which I think we can all agree requires urgent action and profound international cooperation. 
 
The crisis in our economies has very broad implications.  This past weekend I had the privilege to participate in the Munich Security Conference.  Vice President Joe Biden led a very distinguished delegation from the Obama Administration that also included National Security Advisor Jim Jones, Deputy Secretary of State Jim Steinberg, and Ambassador Richard Holbrooke, our new special representative for Afghanistan and Pakistan.  In speeches to the Conference and in numerous meetings with Chancellor Merkel, Foreign Minister Steinmeier and other leaders, the Vice President articulated our new commitment to consultation and common action to address the challenges that we face.  Although issues like Afghanistan and Iran took center stage in Munich, there was also a great deal of discussion about the economic crisis.  Based on those discussions, I believe our approach to the global economic crisis will be guided by the same spirit of openness, serious consultation and coordinated action we intend to apply to foreign and security policy.

Although it is early in this administration, I will briefly sketch what the United States will do – both short-term and long-term -- to improve the economic situation. 

The President’s pro-active approach is clear in the high-caliber bipartisan team he assembled to tackle this crisis.  In Secretary of the Treasury Timothy Geithner, the President chose an experienced crisis manager who not only helped manage the U.S. response to the Asian financial crisis a decade ago, but more recently acted as the Federal Reserve’s main liaison to the financial industry.  He is joined by former Treasury Secretary Lawrence Summers as head of the National Economic Council, and former Federal Reserve Chairman Paul Volcker, a senior economic stateman who faced down double digit inflation and unemployment during the last great recession in the U.S. a quarter century ago.  Republican Senator Judd Gregg, who met with top economic officials at the Ministry of Foreign Affairs here in Berlin in September, has been nominated to lead the Commerce Department. 
 
From this team, Germany can expect a well-considered approach based on the best available advice and steady hands to steer us back to prosperity – an approach that is not too timid to take bold strides, yet not so overreaching as to crowd out market dynamism.  We are convinced that a turnaround is possible and continue to believe in the resilience of our market-based economy.  But what will it take?   The short answer is decisive action and greater accountability.  

Interestingly, on the recovery package, legislators in the United States and Germany are facing the same tough questions: 
• How many resources should be focused on tax cuts to consumers and businesses versus direct government spending?
• Which measures will most quickly stimulate the economy?
• Will certain measures favor the wealthy or the poor? 
• Is the total package the right size?
Too small a package could leave the economy staggering while too much indebtedness could weigh down the government with burdensome obligations.

The Administration’s Economic Recovery Plan – the largest in our nation’s history – is that decisive action.  This initiative represents the largest investment in the backbone of our economy since the interstate highway system of the 1950s.  The bulk of the money — about $550 billion — would support spending on infrastructure, renewable energy, health care and educational projects, as well as on the social safety net.  The rest of the money would cover tax cuts that would offer relief for businesses and middle-class taxpayers.  The plan is intended to stimulate the economy quickly.  Withholdings from pay checks would occur within just weeks.   It will save or create over 3.5 million jobs.  As we have seen on the Buy America clauses, the President is also opposed to any measures that could trigger a trade war during a time of falling world trade.

We cannot say precisely what the plan will include when Congress completes its work. President Obama has asked for final legislation to reach his desk by Monday, February 16.  But we can predict with confidence that we will see a massive stimulus program that will combine elements of tax cuts, business incentives, and infrastructure spending.

Meanwhile, to restore health to our financial and banking system, Treasury Secretary Geithner is expected to announce today a joint Treasury and Federal Reserve program to create a market for up to $500 billion mortgage-related assets and broader measures worth up to $1 trillion to unfreeze the credit markets for commercial, student, auto and credit card loans. 

A companion to this decisive action is greater accountability.  Paul Volcker will lead efforts to eliminate the gaps in our financial regulatory system that enabled this crisis to occur in the first place.  Potential measures include stricter federal rules for hedge funds, credit ratings agencies and mortgage brokers, and greater oversight of derivatives.  Many of the measures proposed by Finance Minister Steinbrueck are in line with our proposals, and we anticipate much fruitful cooperation with Germany and other partners to restore confidence to the global financial system at the G-20 Summit in London this April, and thereafter.  In the long run, we also need to address the chronic worldwide imbalances that contributed to this crisis. 

The Administration further recognizes that fiscal restraints are necessary to reduce the United States’ public debt both within this framework and going forward.  President Obama has said he would convene a “fiscal responsibility summit” to focus on solving long-term problems with the economy, including the rising costs of Social Security and Medicare.  This is essential, not least because continuing confidence in the U.S. government’s ability to repay its debt is in part responsible for the dollar’s status as the world’s principal reserve currency.  Secretary Geithner has consistently supported a strong dollar, and the Fed will fight inflation when conditions warrant it.

That is how we plan to get the American economic engine running again and face our long term budget challenges.  Amid this historic crisis, however, we also should not forget that there are enormous opportunities if we reach out to grasp them.  President Obama believes that energy is fundamental to our future.   The President has set ambitious goals for reduction of CO2 emissions and is planning to invest $150 billion over 10 years in alternative energies – a plan that should create or save up to 5 million jobs.   The stimulus package legislation calls for billions in tax cuts for alternate energy including a multiyear extension of the production tax credit for wind, geothermal, hydro power and bioenergy.  The plan would double the nation’s supply of renewable energy within three years. 

Tax credits also would be available for research and development concentrated on energy conservation and efficiency. 

The plan also calls for billions of dollars to update the nation’s electric transmission grid, developing carbon capture technology, retrofitting public housing for energy efficiency, and weatherizing modest-income homes. 

America and Europe are in this crisis together, and we will get through it more quickly and more sustainably if we coordinate and work together in formulating and implementing our responses.  The support of Germany and other partners is a source of hope and strength.  The deep interdependence between the United States and the European Union is vital to global security and prosperity.  Many of you have seen our study on the depth of U.S./German integration.  For those who have not, please help yourself to copies which I have brought with me tonight. 

Ladies and Gentlemen, Germany and America face tremendous risks and challenges in the current economic environment, but times of crises are also a time to renew and reform the market-based system that has made us so strong and prosperous. 

Together, we can work to ensure that transatlantic economic ties stay vibrant and remain the well-spring of the world’s prosperity.  And together, we will succeed.