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Summers urges savings
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January 29, 2000: 6:55 a.m. ET
Treasury secretary says economy now well-protected against 'shocks'
By Staff Writer Tom Johnson
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DAVOS, Switzerland (CNNfn) - U.S. Treasury Secretary Lawrence Summers said Saturday he believes the U.S. economy is now well-protected against economic "shocks" that would quickly plunge the country into a recession, but said a heightened level of national savings was needed to further prolong the current expansion.
Speaking to a standing-room only audience at the World Economic Forum in Davos, Summers said he believes the U.S. now has the economic and market protections in place to withstand a sudden downturn in the financial markets or the economy.
"One of the things that we have been very conscious of in managing economic policy...is the need for taking advantage of this moment to increase the resilience of the economy," he said. "We have reloaded the fiscal cannon...we have increased the credibility of fiscal policy."
However, Summers -- echoing several priorities spelled out by President Clinton in his State of the Union address Thursday night -- said the nation must be more conscious of increasing its savings level and devising policies that reduce the disparity between the have and have-nots to protect itself even further.
"Our national savings rate is still far too low, driven by a personal savings rate that is not where it should be," Summers said, agreeing with a theme echoed by several economists here at Davos this week.
But Summers did not share the concern of economists that the rising U.S. trade deficit might eventually extinguish its long-running economic expansion, calling the deficit "a very different economic phenomenon than [what we experienced] in the 1980s" because it is now driven by economic growth rather than a recession.
Summers said the Clinton administration's continuing attempts to open up new trade markets should eventually help reduce the trade imbalance.
"Trade adjustment better takes place through more exports rather than fewer imports," he said.
Bright future seen for euro
Christian Sautter, France's minister of economy, finance and industry who addressed the Davos audience with Summers, said he remains confident in the euro's prospects despite the currency's recent decline versus the dollar.
"The euro is a young currency and it has very good fundamentals," Sautter said.
Sautter blamed the recent decline in value on the lack of publicity given to Europe's recent economic resurgence.
"Maybe there is a lack of visibility of our macroeconomic policies," he said. "What we are doing to promote macroeconomic policies is not yet viewed sufficiently.
"We are on the path of strong and sustainable economic growth. The world of Europe is moving forward and sooner or later, I hope sooner, it will be recognized by the market."
Both Summers and Sautter acknowledged the world has entered a so-called "new economy" driven by the digital revolution. But they cautioned that sound economic policies based in past lessons and a lack on complacency would be needed to sustain growth around the world.
"It's very important that each of the countries, the U.S. included, recognize that we each have problems to solve," Sautter said. 
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