Europe Must ‘Boost Demand’ To Revive Economy, US Warns

The US Treasury Secretary has urged eurozone countries to “boost demand” in order to reduce unemployment and avoid deflation.Jack Lew was speaking at a meeting of the G20 group, which includes several of the world’s largest economies.

Earlier this month, the European Central Bank introduced new measures to stimulate the area’s flagging economy.

However it has stopped short of adopting the policies favoured by its US counterpart, the Federal Reserve.

As well as launching an asset purchase programme, through which it will buy debt products from banks, the ECB cut its benchmark interest rate to 0.05%.

The bank has been under pressure to kick-start the eurozone economy, as manufacturing output has slowed and inflation has fallen to just 0.3%.

“Europe is going to need to solve its problems and resolve differences it has internally,” Mr Lew told reporters at the meeting in Australia, “but what’s clear from the US experience is that the combination of taking action to boost demand in the short run and make structural changes for the long run is an important combination, and it shouldn’t become a choice between the two.

“You really need to pursue both.”

Mr Lew also expressed concern about the political tensions between European countries, and the effect this may have on pushing through urgent policies.

“The concern that I have is that if the efforts to boost demand are deferred for too long, there is a risk that the headwinds get stronger, and what I think Europe needs is more tailwinds in the economy,” he cautioned.

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