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US Warns Europe Against Relying Much on Exports
World Economy

US Warns Europe Against Relying Much on Exports

The United States warned Europe  against relying too much on exports for growth and urged officials to make more use of fiscal policy, saying stronger demand in Germany was essential.
In a report to Congress, the US Treasury Department gave a preview of the positions it will press on foreign policymakers during next week’s International Monetary Fund meetings in Washington, RTRS reported.
For one, America is wary of the eurozone’s rising current account surplus, a broad measure of cross-border flows of goods and capital. The Treasury noted the European Central Bank was taking forceful measures to help the region’s economy, policies that depress the value of the euro and make exports from the currency bloc more competitive.
Adding taxpayer money and more economic reforms to Europe’s policy mix “would avoid the risk that growth becomes excessively reliant on the external sector,” the Treasury said.
While growth in Europe has shown some recent signs of picking up, the region remains the sick man of the global economy.
Germany’s export-driven economy has powered much of the increase in the region’s current account surplus. The Treasury said stronger demand in Germany, which includes spending consumer goods and investments, was “absolutely essential.”

  Interventions
Washington also called China’s currency “significantly undervalued,” but said Beijing appeared to be less heavy-handed in currency interventions than in the past, and had recently sold foreign currency to prop up the yuan’s value.
The semiannual report examines the economic and foreign exchange policies of major US trading partners.
It did not formally label any country a currency manipulator, and has not done so in any report since 1994.
The Treasury did have some harsh words for South Korea, calling on it to minimize currency interventions. The Treasury said it has “intensified” its engagement with Seoul on currency issues.
The United States also appeared more concerned about prospects for Japan, warning officials to avoid overdoing fiscal consolidation and relying too much on monetary policy as the government continues radical measures to shock the economy out of decades of deflation.
“Over-reliance on monetary policy ... will put Japan’s recovery and escape from deflation at risk and could generate negative spillovers,” the Treasury said.

 

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