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News ID: 5120
Publish Date: 10:58 - 21 September 2014
CAIRNS, Australia, Sept 21, 2014 (AFP) - US Treasury Secretary Jack Lew on Sunday called on the eurozone to do more to strengthen demand and make the structural changes needed to kick-start a moribund economy that is hampering world growth.
Last week the OECD said the sickly eurozone recovery -- a combination of feeble growth, high unemployment and super-low inflation -- was acting as drag on the outlook for the global economy.
It cut by a third its 2014 growth forecast to 0.8 percent, from the 1.2 percent expansion it had projected in May for the 18-nation single currency bloc.
"The discussions over the weekend have shown a growing recognition that Europe is going to need to do more to get its economy to where it should be," Lew said in Cairns after a Group of 20 meeting of finance ministers.
"What is clear from the US experience is that the combination of taking action to boost demand in the short run and making structural changes for the long run is a important combination and it shouldn't be a choice between the two.
"You really need to pursue both."
The Organisation for Economic Cooperation and Development said the eurozone's recovery from its debt crisis had run out of steam, with growth stagnating in the second quarter.
It also warned of the risk from increased tension over conflicts in Ukraine and the Middle East.
Lew, speaking at a press conference, pointed to unemployment in Europe at near record highs and inflation at "dangerously low levels".
The treasury secretary said the principle of both increasing demand and making structural reforms was "actually consistent with many of the ideas that are being discussed in Europe".
"The challenge in Europe is to get an agreement on how to bring those pieces together," he said.
"The concern I have is that if the efforts to boost demand are deferred for too long, there are risks that headwinds get stronger.
"And what I think Europe needs is more tailwinds in the economy. That's what boosting demand in the short run would do," he added.
"At the same time it is clear of the great need for structural reform in Europe. It is a question of finding the right balance."
Lew said that while there were "philosophical differences" with some European countries on how to drive growth, "I think the notion that there needs to be a balance between the two, there is a growing consensus".
- 'Growth is too small' -
Asked about Lew's remarks, European Commission vice president for economic and monetary affairs Jyrki Katainen said: "Everybody can see that our growth is too small.
"We have recognised the problem and it is now a question of decision-making and implementation at the national and European level," he added.
In contrast to Europe, the US economy is accelerating, although the Federal Reserve last week said it expected growth next year at just 2.6-3.0 percent, slower than the 3.0-3.2 percent it forecast three months ago.
Lew said the US economy "continues to be a source of strength in the global economy".
"Over the past four years, we have improved our nation's fiscal position markedly and cut our federal budget deficit by more than half," he said.
"Even as we continue to work to ensure that we build on these gains and ensure they are felt more broadly, it is clear how far we have come since the global financial crisis."
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