US Treasury Chief Urges Strong EU Countries to Spur Growth

US Treasury Chief Urges Strong EU Countries to Spur Growth

"I aired our view of the importance of strengthening demand in Europe, especially in light of rising unemployment," U.S. Treasury Secretary Jacob Lew said. 

BERLIN — U.S. Treasury Secretary Jacob Lew urged Europe's strongest economies to help spur growth after talks Tuesday in Germany and France, as Portugal and Cyprus provided the latest headaches.

Stressing that the United States had an "immense stake" in a prosperous Europe, Lew told reporters in Germany, the bloc's biggest economy, that consumer demand was the driver of economic growth.

"Policies that would help to encourage consumer demand in countries that have the capacity would be helpful," he said at a joint press conference with German Finance Minister Wolfgang Schaeuble.

The treasury chief, on a tour of eurozone capitals for his first European trip since taking over from Tim Geithner in February, repeated his call after talks in Paris with French Finance Minister Pierre Moscovici.

"I aired our view of the importance of strengthening demand in Europe, especially in light of rising unemployment," Lew told a joint press conference with Moscovici.

Lew also called for an even approach between austerity measures and efforts to promote growth.

"It's clear is that there needs to be a balanced approach between growth and fiscal consolidation," he said.

In both countries, he stressed Washington's strong desire to see a "strong and prosperous Europe."

The U.S. official's maiden European tour comes as Portugal scrambles to find new spending cuts after the Constitutional Court rejected a number of austerity measures, and hard on the heels of an emergency bailout for cash-strapped Cyprus.

Auditors from Portugal's international creditors are to make an extra visit to the country in the coming weeks after the court ruling, which has complicated its efforts to qualify for funds under its 78-million-euro (US $102 million) rescue.

Balancing Austerity and Investment

EU leaders have struggled to chart a consistent path marrying German-led demands for austerity with calls to invest for growth, a subject set to feature when G20 leaders gather in Russia later this year.

Schaeuble told reporters that "nobody, also in Europe, sees this contradiction between fiscal consolidation and growth."

"We have a common position, growth-friendly consolidation or sustainable growth, whatever one calls it," he added.

France has been among those pushing for more efforts for growth and Moscovici said he agreed on the need for balance.

"I want to note my agreement with what the treasury secretary said," Moscovici said, adding that balance was needed between "the recovery of public finances, which remains a necessity, and policies in support of growth, which are indispensable."

Ahead of Lew's trip, a top U.S. Treasury official, who spoke on condition of anonymity, had said it was "vital" to see rebalancing within the euro area.

The official called for surplus economies to contribute more to demand in order to ease adjustment in the periphery, "avoid austerity fatigue and renew Europe's economic vibrancy."

During his talks in Brussels with top EU officials, including EU President Herman Van Rompuy and European Commission head Jose Manuel Barroso, Lew had stressed the U.S.'s major interest in Europe's recovery and reform efforts.

Washington is taking a keen interest in EU plans to develop an integrated banking union across the 17-state eurozone, to parry the risk of a bigger crisis than the one in Cyprus where banks went into lockdown amid fears of international capital flight.

A banking union is "critical to ensuring the long-term stability of the euro area," Lew told reporters in Berlin.

Kate Millar, AFP

Copyright Agence France-Presse, 2013

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