FRANKFURT (AFX) - U.S. treasury secretary Paul O'Neill said that is is not certain whether the U.S. economy is on the verge of recovery or will continue to endure growth rates close to null for some time yet.
"I am not completely clear whether we will soon see the first signs of an economic recovery or whether we will have to cope with growth rates close to null for some time", he said in an interview with the Frankfurter Allgemeiner Zeitung.
He expressed hope that the U.S. economy is now in the "soft corrective phase of the economic cycle", and will be helped by the 100 basis points interest rate cuts made by the Fed so far this year as well as planned tax cuts.
O'Neill said he is theoretically not in favour of interventions in the foreign exchange markets, but did not entirely rule out such actions.
"Fundementally the process of the market must not be tampered with. But there can be exceptions", he said.
On the future of the World Bank and IMF, O'Neill reiterated it must be made clear to countries that run into financial difficulties that the rest of the world will not rush to their help. He said that with respect to aid packages its has to be understood that capitalism carries with it an inherent risk. "If you take away risks then it no longer has anything to do with capitalism", O'Neill said. "Anyone who makes a free investment decision earns the right to fail", he added. He said the IMF has now realised this process and it and the World Bank are starting to change.