Sunday

3rd Jul 2022

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

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe 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.

Opinion

Nato's Madrid summit — key takeaways

For the most part Nato and its 30 leaders rose to the occasion — but it wasn't without room for improvement. The lesson remains that Nato still doesn't know how or want to hold allies accountable for disruptive behaviour.

Opinion

Nato's Madrid summit — key takeaways

For the most part Nato and its 30 leaders rose to the occasion — but it wasn't without room for improvement. The lesson remains that Nato still doesn't know how or want to hold allies accountable for disruptive behaviour.

MEPs boycott awards over controversial sponsorship

Two MEPs have withdrawn their nominations from the MEPs Awards over the Swiss pharmaceutical company Novartis's participation as a sponsor — currently involved in an alleged bribery scandal in Greece.

News in Brief

  1. EU Parliament 'photographs protesting interpreters'
  2. Poland still failing to meet EU judicial criteria
  3. Report: Polish president fishing for UN job
  4. Auditors raise alarm on EU Commission use of consultants
  5. Kaliningrad talks needed with Russia, says Polish PM
  6. Report: EU to curb state-backed foreign takeovers
  7. EU announces trade deal with New Zealand
  8. Russia threatens Norway over goods transit

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. Nato's Madrid summit — key takeaways
  2. Czech presidency to fortify EU embrace of Ukraine
  3. Covid-profiting super rich should fight hunger, says UN food chief
  4. EU pollution and cancer — it doesn't have to be this way
  5. Israel smeared Palestinian activists, EU admits
  6. MEPs boycott awards over controversial sponsorship
  7. If Russia collapses — which states will break away?
  8. EU Parliament interpreters stage strike

Join EUobserver

Support quality EU news

Join us