Thursday

21st Mar 2019

Europe needs new stimulus to ward off crisis, US treasury warns

European governments need to "boost demand" in order to reduce unemployment and avoid deflation, the US Treasury secretary has told the G20 group.

Speaking after the meeting of G20 finance ministers and central bank governors in Australia on Sunday (21 September), Treasury secretary Jack Lew said that there was "an intensified call for boosting domestic demand in Europe".

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • EU needs new economic stimulus measures, says US treasury secretary Jack Lew (r) (Photo: Joerg Rueger/German ministry of finance)

He added that EU governments needed to combine short-term stimulus measures with structural reforms to their economies.

"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," he said.

The US has made it clear throughout the eurozone crisis that the main priority of European governments should be boosting demand in their fragile economies.

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

Earlier this month, the European Central Bank voted to cut interest rates to a historic low of 0.05 percent and unveiled a raft of bond-buying programmes in a bid to stimulate lending to businesses.

However, it has so far fallen short of launching a quantitative easing programme of government bond-buying similar to that introduced by the US Federal Reserve in the wake of the financial crisis.

The eurozone economy flat-lined in the second three months of this year and this, combined with an inflation rate that hit a new low of 0.3 percent in August, has increased fears of prolonged economic stagnation. The eurozone economy is now forecast to expand by a mere 0.9 percent this year.

But governments remain divided. A group of ministers led by Germany's Wolfgang Schuaeble maintain that governments should focus on cutting budget deficits, while the centre-left governments in France and Italy want to be given more leeway for public investment programmes.

For his part, European Central Bank president Mario Draghi has insisted that governments should not rely on the bank to provide all the stimulus measures needed to drive economic demand.

Earlier on Sunday, G20 ministers agreed on new measures to tackle corporate tax avoidance. Joe Hockey, Australia's treasury minister, who hosted the meeting, said that governments had agreed to automatic exchange of information using a Common Reporting Standard.

EU needs to invest, IMF warns on eve of jobs summit

The eurozone and Japanese are the economies most vulnerable to a protracted period of stagnation and need to increase public investment, the International Monetary Fund (IMF) has warned.

May tosses Brexit spanner into EU machinery

The UK is seeking a three-month delay to leave in the European Union. But its 30 June deadline is a major headache given the European elections in May. The European Commission is demanding EU summit leaders reject May's proposal.

Centre-right EPP faces showdown with Orban

The EU's largest political alliance, the EPP, will try to put the 'Orban issue' behind it going into the European election campaign. Hungary's ruling party, Fidesz, could be expelled or suspended from the political family.

News in Brief

  1. EPP proposes suspension for Orban's Fidesz
  2. May asks for Brexit extension until 30 June
  3. Juncker: Brexit decision unlikely this week
  4. North Macedonia EU-membership talks set for June
  5. EU ups benefits rights for mobile workers
  6. Chinese leader visits Italy, France as Rome joins 'Silk Road'
  7. EU agrees to sanction political parties breaching data rules
  8. EPP votes Wednesday on future of Orban's party

Magazine

The changing of the guards in the EU in 2019

The four most powerful EU institutions - Commission, Parliament, Council and Central Bank will all have new leaders in the coming ten months. Here is an overview.

Magazine

All about the European Parliament elections 2019

EUobserver's new magazine is meant to help readers prepare for the European Parliament elections, no matter their level of knowledge. You can download and read the entire magazine now.

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Latest News

  1. May tosses Brexit spanner into EU machinery
  2. Centre-right EPP faces showdown with Orban
  3. A compromise proposal for the Article 50 extension
  4. US glyphosate verdict gives ammunition to EU activists
  5. Have a good reason for Brexit extension, Barnier tells UK
  6. EU countries push for new rule of law surveillance
  7. EU rolls out €525m for military projects, but bars illegal tech
  8. May to seek Brexit extension amid UK 'constitutional crisis'

Join EUobserver

Support quality EU news

Join us