U.S., UK see growth resuming but big risks ahead

There is a strong chance the United States and other leading economies will start growing again over the next few quarters, but big risks to the outlook remain, U.S. Treasury Secretary Timothy Geithner said on Monday.

Geithner, speaking after talks with British policymakers including Prime Minister Gordon Brown and finance minister Alistair Darling, said support measures were starting to take effect and establish a better basis for recovery.

In my view, there are still significant risks and challenges ahead, Geithner said at a press conference with Darling when asked if he was concerned about the possibility of a double-dip recession.

We have a very powerful set of policies in place, coming on stream. I think there is a very good chance we will see the U.S. economy and the world economy get back to recovery, get growing again, over the next few quarters.

Darling reiterated his Budget forecast for a return to growth in Britain by the end of the year, but was also cautious and eager to look forward to the next round of G20 meetings as a chance to agree on measures to consolidate recovery.

We are making progress, we are coming through, he said. But there's a lot of uncertainty in the world and part of the G20 process will be in dealing with that.

G20 PROCESS

Policymakers from the world's most prominent developed and developing nations will meet in the next few months to check on the progress of, and build on, agreements made at the last G20 summit in London in April.

That process will culminate at a G20 summit in Pittsburgh in September.

As well as supporting economic activity through fiscal stimulus, monetary policy and shoring up the banking system, changes to the way the financial system is governed are required to stave off the risks of a repeat of the credit crisis.

Geithner said the world's major economies were largely in agreement on the steps needed to boost economic activity and policies taken so far had helped provide a base for recovery.

Leaders from the Group of Eight leading industrialized nations agreed last week that the world economy was stabilising but was still frail and support measures should only be withdrawn when a recovery was assured.

I think we have remarkably strong consensus in place on core elements, he said.

I think the policies have been very effective in arresting, in mitigating the forces of the storm and we're starting to see a better basis for recovery starting to be made in the U.S.

Darling said the world now needed to agree on ways to regulate financial institutions.

You'll see that progress is being made but there's a recognition that, because the banking system is global, the measures we need to deal with the various issues that have been raised also need to be dealt with in the global area, he said.

Getting banks lending again at more normal levels is seen as crucial to any sustained recovery, but there are also lingering problems within the sector.

Geithner said the U.S. government was closely monitoring ailing financial company CIT Group, which provides financing to many small and medium-sized firms.

I am actually pretty confident in that context that we have the authority and the ability to make sensible choices, he said.

(Editing by Mike Peacock)