Lew Cites U.S. Economy in Call for Europe to Spur Growth
Treasury Secretary Jacob J. Lew said he will press his European counterparts at a Group of 20 meeting to spur growth, citing the U.S. economy as an example of a successful recovery.
“Europe does need to look at what it can do to get the engine of growth moving again,” Lew said in an interview yesterday in Washington with Bloomberg Television’s Peter Cook. “The world needs Europe to grow.”
Lew is to arrive in Moscow for a two-day meeting of G-20 finance ministers and central bank governors starting today. He will also visit Athens on July 21 for meetings with Greek Prime Minister Antonis Samaras and Finance Minister Yannis Stournaras.
Lew, making his second trip to Europe since taking office in February, called U.S. fiscal policy “decisive” and the Federal Reserve’s measures “effective” in pulling the world’s largest economy out of a recession.
The Standard & Poor’s 500 Index is up about 18 percent this year, more than double the 7 percent gain of the Stoxx Europe 600 Index. The U.S. unemployment rate last month was 7.6 percent, compared with 8.2 percent a year earlier, while the euro-area’s jobless rate climbed to a record 12.2 percent in May.
The World Bank last month reduced its forecast for the euro-area’s economy, predicting a 0.6 percent contraction this year following a 0.5 percent fall in gross domestic product in 2012. The U.S. economy will advance 2 percent this year, according to the Washington-based lender.
“If you look at Europe, 2 percent is far beyond their expectations,” Lew said. On the U.S. economy, he said “we still have more work to do, but I think we’re in a place now where the example of the United States is actually a good one.” He called the Federal Reserve’s monetary policy “effective” during the recovery period.
“Greece has moved in a very important direction in making reforms that they needed to make,” Lew said. “They’ve got difficult decisions ahead of them.”
Greek lawmakers this week passed a law that puts thousands of state workers on notice for possible dismissal, a victory for Samaras. Passage was needed for euro-area officials and the International Monetary Fund to sign off on the next disbursements from a 240 billion-euro ($315 billion) bailout.
On domestic financial issues, Lew said the Treasury Department has been weighing in on Senate efforts to write legislation that would retain a government backstop for mortgages during financial catastrophes.
Portions of the Bloomberg Television interview will air July 21 on the “Capitol Gains” program.
Lew’s comments mark the first time the Treasury has publicly discussed its role in congressional efforts to overhaul the nation’s housing finance system. The Obama administration has declined to put forth its own plan for fear that it would be subject to a partisan fight.
Government-sponsored enterprises Fannie Mae and Freddie Mac have been posting record profits after drawing a total of $187.5 billion in aid to stay afloat after the housing crisis brought them to the brink of bankruptcy in 2008.
Lew, 57, also reiterated the administration’s position that it won’t negotiate on raising the federal debt ceiling.
“The president has been clear we will not and cannot negotiate over this question of whether or not there should be the option of defaulting,” he said. “Congress just has to raise the debt limit because all that does is pays the bills that we’ve committed to.”
Congress and the White House negotiated for months in 2011 before reaching an 11th-hour agreement to raise the limit.
In May, Lew said the U.S. can use special accounting measures to stay under the $16.7 trillion ceiling at least until September. The Bipartisan Policy Center said this week that the Treasury’s cash on hand will be exhausted between mid-October and mid-November.
Lew said he thinks regulatory agencies will meet a deadline he has set “for getting the major pieces in place” of the Dodd-Frank financial regulatory overhaul by the end of this year.
He also praised an increase in U.S. bank capital standards at the biggest U.S. lenders as a “sensible” policy signal to banks that they “have to bear the burden of their own risk.” U.S. officials on July 9 proposed capital levels that go beyond rules approved by international regulators.
Asked whether he would use his Moscow trip to raise U.S. concerns over fugitive former security contractor Edward Snowden, Lew said “the administration has spoken clearly to this issue.”
“It’s a matter that is very important and it’s being handled through law-enforcement channels, and I’m going to leave it there,” he said.
Snowden is seeking asylum while holed up in a Moscow airport.
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