ECB tells banks to lend, Geithner hopes for growth

By Sakari Suoninen and Glenn Somerville

MUNICH/LONDON (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Monday he was optimistic some leading economies could grow this year, but the European Central Bank urged banks to resume lending to secure a recovery.

ECB President Jean-Claude Trichet criticised banks for simply returning much of the vast sums it has supplied to them, instead of lending the money on to firms and households to secure a recovery from Europe's worst recession in decades.

"We remind banks of their responsibility to continue to lend to firms and households at appropriate rates and in suitable volumes," he said in Munich. "It may take some time, however, for the extra liquidity to be transformed into credit."

Last month the ECB injected 442 billion euros (382 billion pounds) of 12-month funds into the banking system to encourage them to finance the real economy. But, worried about their own health, the banks parked much of that money in the safest place they could find -- back at the ECB -- potentially delaying recovery.

Evidence began emerging around late March that the global recession was starting to bottom out, driving a second-quarter rally in share markets. But weak data in recent weeks has boosted fears that stock prices had run ahead of the prospects of a solid recovery in the second half of this year.

Such doubts hit Asian and European markets. Shares fell as investors fretted about a coming wave of company earning reports, and oil dipped briefly below $59 a barrel on fears that demand will tail off if the economy stutters.

JAPAN, CHINA GIVE HOPE

Despite fears that the worst may not be over, Geithner said there was a good chance the United States and other leading economies would resume growth, though uncertainty remained.