Mr. Lew pointed to evidence that increased government spending and looser monetary policy had helped the United States recover at a much faster pace than the Continent has. But even as some European leaders expressed concern about rising unemployment and deepening recession, it was clear that Europe’s political constraints — and Germany’s insistence that bringing down deficits and reassuring lenders is the best route to sustained growth — was preventing a more expansionary approach from taking hold.
“Nobody in Europe sees this contradiction between fiscal consolidation and growth,” said Wolfgang Schäuble, the German finance minister, sitting alongside Mr. Lew at a joint news conference in Berlin on Tuesday. “We have the common position of a growth-friendly process of consolidation, or sustainable growth.”
Consumed by the problems of the American economy and its efforts to hold off deep budget-cutting proposals from Republicans in the United States, the Obama administration has hardly been in a position in recent years to lecture other nations on good policy.
But Mr. Lew’s trip to Brussels, Frankfurt, Berlin and Paris — his first swing through Europe since becoming Treasury secretary — gave the administration an opportunity to highlight the diverging economic fortunes of the United States and Europe and to make the case that more expansionary policies could actually help with budget deficits.
The United States has pointed out that its quick rescue of the financial system, front-loaded stimulus measures and delayed budget-cutting have helped foster 14 straight quarters of growth and a falling unemployment rate — even if the recovery has proved sluggish by historical standards.
In contrast, Europe has lurched from one crisis to another, hobbled by a complicated political structure and skittish financial markets. It continues to suffer through rising joblessness and economic stagnation. Greece, Spain and Portugal all remain mired in deep recessions, and even the large economies of Germany, Italy and France were contracting as well at the end of 2012.
A Treasury official, speaking on condition of anonymity to discuss the sensitive diplomatic conversations, said that while the Americans did not endeavor to lecture the Europeans, they did focus on the profound need for growth on the Continent, for the good of Europe as well as the world.
As Mr. Lew said in Berlin, “The driver for economic growth will be consumer demand and policies that would help to encourage consumer demand in countries that have the capacity would be helpful.”
But some of the biggest levers that governments employ to bolster their economies during a downturn are seemingly out of the question in Europe, given its political constraints and some countries’ heavy debt burdens. Any calls for more stimulus spending, less austerity or looser monetary policy face entrenched resistance in powerful Germany. The view there, shared in other Northern European countries like Austria and Finland, is that the European Central Bank has already gone far out on a limb with measures to prevent a collapse of the 17-nation euro zone.
Michael Heise, chief economist of the German insurance giant Allianz, said Tuesday that the central bank should already be thinking about how to reabsorb some of the money it has pumped into euro zone banks by issuing unlimited cheap loans. Otherwise, he said, easy money policies could feed new asset bubbles and remove pressure for economic reforms.
Looking on the bright side, the Treasury official said the European representatives all recognized the urgent need to focus on employment and growth. The official also said that there seemed to be growing pragmatism in Europe, with more officials willing to allow budget flexibility in certain economies, for instance.
Jack Ewing contributed reporting from Frankfurt and Steven Erlanger from Paris.
Article source: http://www.nytimes.com/2013/04/10/business/global/us-advice-to-europe-gets-polite-refusal.html?partner=rss&emc=rss
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