Geithner says too soon to withdraw economic stimulus

By David Lawder

LECCE, Italy (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Saturday it was too early to start withdrawing stimulus for the world's top economies, but governments should pledge a return to more sustainable fiscal policies in the future.

"Growth should remain the principal focus of policy among the G8 and broader G20 economies," Geithner told a news conference after finance ministers from the Group of Eight economies finished a two-day meeting here.

He said recovery has not yet arrived, and governments need to keep reinforcing recent improvements in global demand.

"It is too early to shift towards policy restraint," Geithner said. "Economic and financial recovery, however, will be stronger and more sustainable if we make clear today how we get back to fiscal sustainability when the storm has fully passed."

For that reason, he said the United States was committed to bringing down its fiscal deficits quickly to a sustainable level, starting in 2011, and would work to reduce long-term health care costs that are adding to deficits.

Geithner's remarks partly echoed the G8 finance ministers' communique issued after the meeting, which mentioned the need to prepare appropriate "exit strategies" for efforts to boost growth, and tasked the International Monetary Fund with analysis work to asid the process.

While Geithner said the "force of the economic storm is receding" he told the BBC in Lecce that he wanted recovery firmly in place before withdrawing stimulus.

"We don't have a world economy that's growing anywhere close to potential yet. We want to see recovery firmly established before we start to get on to the next challenge," he said in the interview.