WASHINGTON — The United States on Thursday called on Europe to act decisively to boost its economy and counter the risk of a protracted stagnation that would undermine economic growth in America.
“Decisive action is needed now to restart demand and avoid the risk of protracted stagnation,” U.S. Treasury Under Secretary Lael Brainard told U.S. lawmakers.
Speaking for the administration of President Barack Obama, Brainard said Europe should rethink a broad push toward fiscal austerity, saying some countries should be given more time to get their budgets in order. She said countries with more “fiscal space” should shift toward boosting growth in their economies.
“The focus of the policy debate in Europe must now shift from restoring financial stability to developing a plan to boost demand and employment,” Brainard told the Senate Foreign Relations Committee.
Brainard said Europe's strongest exporters had a special role to play in stimulating demand, and called on countries running current account surpluses in excess of 6 percent of their economic output to quicken wage growth and encourage greater homeownership.
Current account balances are a broad measure of the flows goods, services and capital across borders.
Brainard added that Europe was depending too much on exports as a way of supporting its economy. “That is not sustainable,” she said.