WASHINGTON (AP) — Treasury Secretary Jacob Lew called on European leaders to pursue pro-growth policies in the short term rather than trim their budget deficits, noting that the U.S. economy is "inextricably tied" to the health of its global partners.
Lew's comments were delivered Wednesday in a speech at Johns Hopkins University School of Advanced International Studies previewing this week's global finance meetings in Washington.
Earlier this week, the International Monetary Fund lowered its outlook for the world economy this year, predicting that government spending cuts will slow U.S. growth and keep the euro currency alliance in recession.
Lew said European leaders need to emphasize growth over austerity at a time when unemployment is approaching record highs in several countries. He also said that the Obama administration would keep working to persuade Congress to mitigate the adverse effects of the $85 billion in federal spending cuts that began on March 1.
"The current debate in Europe on its economic future is critical," Lew said. "They must decide how to better support demand ... how to better balance the pace of fiscal consolidation with the need for growth."
Lew also addressed currency policies that can be used for gaining trade advantages. The comments underscored U.S. concerns about China and Japan devaluing their currency to make their products cheaper overseas and U.S. and other foreign goods more expensive in their markets.
The Treasury Department last week said China needed to boost the value of its currency, the renminbi, against the dollar. The semi-annual currency report also warned Japan, saying such policies should be used to boost Japan's domestic economy and not to lower the value of the yen for trade advantages.
Such currency policies will be among the key discussion topics at this week's meetings in Washington. The meetings of the Group of 20 major economies begin Thursday, while the spring meetings of the International Monetary Fund and the World Bank commence Friday.
Since taking office in February, Lew has traveled to both China and Europe to discuss the economic conditions with his global counterparts.
During his speech Wednesday, Lew said he was encouraged by a change of tone in both regions.
Many European leaders said they would be willing to consider reducing austerity measures, he noted.
"We have no disagreement that many countries need to get their fiscal house in order," Lew said in response to a question. "The difference we have is in timing and balance."
Lew said he also heard more flexibility from Chinese leaders last month.
"We raised some pretty tough subjects," Lew said. "There was a frankness and a willingness to engage on tough subjects."
Lew said the two nations would discuss disagreements on economic issues in greater depth when Chinese officials come to Washington in July for high-level meetings.