U.S. Treasury Secretary Jacob J. Lew said global economic demand “is not where it needs to be,” singling out Europe as a laggard and calling on leaders around the world to make job creation a priority.
“Growth in Europe remains weak, with domestic demand particularly anemic,” Lew said at an investment conference held by the Commerce Department in Washington today. “It is critical that surplus countries contribute more to demand as deficit countries undergo adjustment.”
As nations such as Spain battle through recessions and unemployment exceeding 25 percent, Lew is pressuring stronger euro-area economies to do more to pull the bloc out of a downturn he said is “slowly fading.” The Treasury Department yesterday criticized Germany, the fifth-biggest U.S. trading partner, in a twice-yearly report for running large current- account surpluses, which it said contributed to a “deflationary bias” for the global economy.
In his remarks today, Lew also said China “needs to increase the flexibility of its exchange-rate regime and permit more market-determined access to capital and more open access to markets.” In yesterday’s report on global currencies and economic policies, the Treasury said China’s yuan is “significantly undervalued.”
China’s Outlook
China’s growth “continues to remain relatively robust, but there is the question of how to sustain robust rates of growth over the medium term as the Chinese economy rebalances toward domestic consumption and away from domestic investment and exports,” Lew said.
Growth worldwide will be 2.9 percent this year and 3.6 percent next year, the International Monetary Fund said in an Oct. 8 report. The IMF forecasts growth of 1.6 percent this year and 2.6 percent in 2014 for the U.S.; 0.5 percent this year and 1.4 percent in 2014 for Germany; and 2 percent in 2013 and 1.2 percent next year in Japan. China’s economy is expected to expand 7.6 percent this year and 7.3 percent in 2014, according to the IMF.
Japan “appears to be turning an economic corner” even as the government will need “a careful balancing of fiscal policy and advancing reforms that increase domestic demand,” Lew said.
On the U.S. economy, Lew said the across-the-board spending cuts known as sequestration should be replaced “with fair and balanced deficit-reduction policies.” The Obama administration isn’t satisfied with the current pace of job creation and economic growth, he said.
The unemployment rate fell to an almost five-year low of 7.2 percent in September, the Labor Department reported last week. U.S. payrolls have grown by 1.6 million workers this year.
President Barack Obama “is committed to business tax reform’” to establish a simpler, fairer and more competitive tax system, Lew said. Democrats and Republicans in Congress should work together on the parts of tax policy changes on which they agree, he said.
--Editors: Brendan Murray, Kevin Costelloe
To contact the reporters on this story: Kasia Klimasinska in Washington at kklimasinska@bloomberg.net Ian Katz in Washington at ikatz2@bloomberg.net;
To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net
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