US urges Europeans to cut austerity measures
US TREASURY secretary Jack Lew yesterday urged countries with a trade surplus to introduce policies to help domestic consumption, in what appeared to be a prod at Germany.
Mr Lew was in Berlin for talks with his German counterpart. Germany has the eurozone’s biggest trade surplus and has in the past rebuffed pressure to shift policy to bring about a rebalancing of commercial flows in Europe.
“The driver for economic growth has got to be consumer demand … policies to help to encourage consumer demand in countries that have the capacity would be helpful,” Mr Lew said at a news conference with German Finance Minister Wolfgang Schaeuble.
The US Treasury chief has pressed European officials to moderate austerity measures in order to boost growth, and called on surplus countries such as Germany to boost their consumption to help pull the continent out of the doldrums.
A US Treasury official told reporters travelling with Mr Lew from Berlin to his next stop in Paris that the US and Germany disagreed on the extent to which budget austerity can slow economic growth. But the official, speaking on condition of anonymity, said Europe was aware of the need to boost demand and combat persistent unemployment, adding that Germany was thinking about how best to spur growth and that talks between the two officials had focused on areas of agreement.
For their part, Mr Schaeuble and Mr Lew played down any differences in their views, with the German arguing that growth and budget consolidation were not mutually exclusive.
“Nobody, including in Europe, sees this contrast between fiscal consolidation and growth. Our common position is of growth friendly consolidation or of sustainable growth, however you want to call it,” Mr Schaeuble told reporters.
Germany, Europe’s biggest economy, argues that budgetary rigour is compatible with growth, and is necessary to convince markets governments are sticking to their spending diets in order to avoid another sovereign debt crisis.
Mr Lew said that the US wanted a strong Europe.
“As we continue to address many of our long-term challenges, our economy’s strength remains sensitive to events beyond our shores. We have an immense stake in a prosperous Europe,” he said.
Later, the US Treasury official told reporters there was a pragmatic shift under way in Europe that put less emphasis on budget austerity and more on structural economic reforms.
Mr Lew said in an interview with National Public Radio: “We have made the case that, as much as we have in the US responded to the economic cycle and what it takes to keep growth going, Europeans need to look as well at what they can do to generate more demand in their economy.”
At his news conference with Mr Schaeuble, the US Treasury chief said there was a common interest in ensuring that tax havens did not skew a level playing field.
On his first official visit to Europe, Mr Lew met European Union officials in Brussels and European Central Bank president Mario Draghi on Monday. In Paris, he was due to meet French Finance Minister Pierre Moscovici. Mr Lew is a budget expert, and close confidant to US President Barack Obama. Reuters