International Monetary Fund's Managing Director Dominique Strauss-Kahn (l) talks with US Secreatary of Treasury Tim Geithner (r) prior to the start of their G-7 meeting at the Istanbul Congress Centre October 3, 2009 in Istanbul, Turkey. The Annual IMF/World Bank meetings are being held this year in Istanbul, Turkey. IMF Staff Photo/Stephen Jaffe

Americans will have to save more in the future, transforming the global economy, and Europeans and Japanese must work to increase domestic demand, US Treasury Secretary Timothy Geithner was reported as saying on Wednesday.

"Everyone is going to have to come to terms with the fact that we are going to save more in the United States," Geithner said in an interview with German weekly Die Zeit, which was done last Sunday in Istanbul, and is due to appear on Thursday.

"If the US starts saving more, that changes the whole world's economic reality," he said,

Geithner acknowledged that China was already doing a lot to consider how to put growth on a more sustainable path.

"In China, the government is at the forefront of thinking about new ways to reduce the dependence of the economy on export and investments," he said.

"But it is not just about the US and China. Europe and Japan make up 40 percent of the global economy."

Geithner said the U.S. could not force Europe to boost domestic demand to adapt to the new economic reality, but he saw it as the only viable strategy to guarantee lasting growth.

"They have to decide themselves how to adapt. I am not aware of any other strategy that promises success."

The Treasury secretary also said that the recovery was in a very early phase, and there were many risks ahead.

"If you look at past crises, politicians mostly made the mistake of tightening the purse strings too early,"he said.

"The private sector needs to start growing on its own for a sustainable recovery to take place."

The US personal saving as a percent of disposable income was 3.0 percent in August down from 4 percent in July and a 12-month average of 3.9 percent.

The rate was below zero in 2005.

SEE Finfacts article May 01, 2009: US personal savings rate rises to 4.2 percent in March from below zero in 2005; Eurozone rises to 15 percent; Irish rate jumps from 3 percent in 2007 to 10 percent in 2009

In the Financial Times today, Stephen Roach, chairman of Morgan Stanley Asia and one of the few financial services economists who sailed against the wind of easy options, writes: "US authorities cannot resist opting for another dose of excess consumption – despite the fact that the consumption share of real gross domestic product remains at a record high of 71 per cent.

Nor can the Chinese wean themselves off investment-led growth – even though the fixed investment share of their GDP appears to have surged beyond the already unprecedented reading of 45 per cent in mid-2009. Far from rebalancing, an unbalanced world once again appears to be compounding existing imbalances.

Notwithstanding the new mantra of “sustained and balanced growth” adopted at the recent Pittsburgh Summit, the world continues to have local biases for solving global problems. As such, it continues to operate under the presumption that the best global policies are the arithmetic sum of the best national policies.

This underscores the most glaring inconsistency of the new G20 framework: It lacks an enforcement mechanism to make rebalancing actually occur. Until – or unless – the world is willing to empower a new architecture with effective and robust policy tools, it is hard to believe that the days of global rebalancing are finally at hand."