US Treasury Secretary Urges EU to Focus on Growth, Not Austerity
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The United States Treasury Secretary Jacob Lew on Monday urged European officials to adopt more growth-friendly policies to counter the region’s debt crisis, as well as to enact stronger and more unified defenses against financial panics.
Lew, on his first official trip since being installed as Treasury Secretary, also reminded his European counterparts of the “immense stake” the United States has in the eurozone’s recovery and reform efforts.
The United States Treasury Secretary Jacob Lew on Monday urged European officials to adopt more growth-friendly policies to counter the region’s debt crisis, as well as to enact stronger and more unified defenses against financial panics.
Lew, on his first official trip since being installed as Treasury Secretary, also reminded his European counterparts of the “immense stake” the United States has in the eurozone’s recovery and reform efforts.
“As we address our long-term challenges … our economy’s strength remains sensitive to events beyond our shores and we have an immense stake in Europe’s health and stability,” he told reporters after talks with European Union leaders including European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy.
“The U.S. has no bigger economic relationship than with Europe,” he added.
The eurozone is the United State’s largest trading partner and is currently into the fourth year of its spiralling debt crisis, where many of the bloc’s 17 eurozone economies have been thrown into recession.
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Citing 14 consecutive quarters of U.S. economic expansion and 37 months of job creation at a time of receding government support, Lew urged his European counterparts to relent in its focus on debt reduction, which has been hurting growth through budget cuts and tax increases.
In particular, the Obama administration has regularly called on countries with stronger economies, like Germany, to slow their pace of fiscal retrenchment and ease off on demands for tougher cutbacks in hard-hit countries like Greece, Spain and Portugal. In the last few years, the appeals have often fallen on deaf ears, given the political constraints in Europe and many officials’ belief in budget balance as a prerequisite to growth.
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Plans to bring Europe’s banks under unified oversight and to push forward with the so-called banking union were a key part of Lew’s discussions with EU Commissioner Barroso. “They discussed the banking union a bit more than other things – the Americans are keen for the process to move forward,” one senior EU official said.
Speaking at the same press conference, Van Rompuy said that the recent flare-up of the eurozone crisis following botched bailout attempts in Cyprus highlighted the need for a European Union plan on how to wind down unviable banks, a crucial step in Europe’s quest for a harmonised and shared system of dealing with ailing banks.
In the discussions, the EU leaders talked about the next steps in building the banking union, including work on a facility to allow the eurozone bailout fund, the European Stability Mechanism, to directly recapitalise ailing banks without having to go through national governments.
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