The United States will press Europe at the G20-IMF meetings this week to act to increase demand as the EU recession continues to hold back world economic growth, a senior Treasury official said Tuesday.
Economic demand will be the top issue at the International Monetary Fund-World Bank-G20 spring meetings of top finance and central bank officials beginning Thursday in Washington, the official told reporters in a briefing.
“With the forecast for global growth seeing a very marginal improvement over last year, a central focus of these discussions is to be on supporting demand,” the official said.
“Protracted anemic demand in Europe is a growing concern. The world has an immense stake in growth resuming in the euro area.”
Demand in Europe is shrinking by 2 percent a year, the official said, “with no sign that the pace of contraction is slowing.”
The euro area has a “rich tool kit” and “ample capacity” to marshal more demand.
“There is also scope for surplus economies to support demand in such a way that it eases adjustment in periphery countries.”
The official did not name any country, but last week US Treasury Secretary Jacob Lew pressed the same issue on a visit to Germany.
On Monday German Chancellor Angela Merkel sought to fend off such pressure, also mounting from some eurozone colleagues.
After Germany boosted its crisis-hit economy in 2009 with large-scale spending to increase employment, now, Merkel said, “we do not have the strength for a second economic package without losing international confidence.”
The US official said a second key issue at the talks would be the threat of competitive currency devaluations as countries seek to reflate their economies by pumping out money.
Both China and Japan are in the US focus, China for what the US says is its longstanding effort to keep the yuan undervalued, and Japan for its new aggressive stimulus efforts that have pushed the yen down.
“It’s vital that all G20 countries adhere to the commitment they made in Moscow not to target currencies and not to engage in competitive devaluation,” the official said, referring to February’s meeting of finance chiefs of the Group of 20 economic powers in Russia.
“Fiscal and monetary policies should be oriented to domestic objectives, recognizing that this is the best way to ensure the pursuit of growth in each country advances growth in every country,” the official said.
The US looks forward to China’s new leadership moving toward a more market-determined rate for the yuan, or renminbi, the official said.
“We will closely monitor Japan’s new policy initiatives to the extent of which they support the growth of domestic demand,” the official added.
US to press Europe to boost demand at IMF-G20 meet
