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US demands Germany boost EU economy

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US demands Germany boost EU economy
Photo: DPA
17:40 CEST+02:00
US Treasury Secretary Timothy Geithner told German officials in talks in Berlin on Thursday that Europe could no longer expect US consumers to support the global economy alone.

Geithner also said ahead of a summit of the G20 group of leading economies in Canada in late June that the United States and Europe were in "broad agreement" over the need to put into place tighter lending rules for banks.

"If the world is going to grow at its potential then we are going to have a more balanced pattern of growth globally," Geithner said after talks with German Finance Minister Wolfgang Schäuble.

"In the United States we are trying to make sure that growth ... comes with more savings, more private investment. US consumers are going to be less of a source of demand for the world in the future."

He pointedly drew the contrast between Europe and China.

"You can see China recognising that imperative and putting in place a very strong programme of reforms to make sure that growth is coming more from domestic demand ... Already consumption is growing much more rapidly." he said. "The broad challenge of making sure that global growth in the future is more balanced and more sustainable is important and something leaders all agreed and committed to."

Alongside Greece, Portugal and Spain - all of whom have seen their borrowing costs rise sharply in recent months as investors fret over their solvency - other EU members like Italy and Britain have also announced austerity measures to reduce their deficits.

Germany, Europe's biggest economy, is also set to follow suit, leading to concerns in Washington that the 27-nation European Union is jeopardising economic growth.

Geithner met Jean-Claude Trichet, president of the European Central Bank in Frankfurt late Wednesday and Bundesbank head Axel Weber on Thursday. On Wednesday he held talks in London with George Osborne, Britain's new finance minister.

The flurry of talks was in preparation for a meeting of finance ministers and central bank chiefs from the G20 top world economies in Busan, South Korea on June 4-5 and a G20 leaders' summit in Toronto, Canada on June 26-27.

The main aim is to agree on tighter and better coordinated financial regulation in the wake of the financial crisis, with the focus on a possible levy on banks, tougher capital requirements for lenders and more transparency on financial products.

Geither said that preparations were proceeding well and that the world was "in a very good position to put in place a much better system than we had going into this crisis."

But he added that some countries had "slightly different approaches" and that there remained some areas where further talks were needed.

"I don't think we will know yet what separates us until we get to the next stage of discussions ... I think we all agree we want to have more conservative restraints on capital and leverage," he said.

"We want to design them carefully in a way that makes the system more stable in the future but doesn't create a risk of financial headwinds to the recovery we are seeing happening."

Earlier this month, German Chancellor Merkel said she and Schäuble would push for stricter financial market regulation at the G20 meeting.

Addressing ministers, central bankers and officials from bodies such as the International Monetary Fund, Merkel also backed an extra surcharge on the markets in the wake of the global financial crisis.

"We have now stated that we will campaign for a tax on the financial markets and we will campaign for that at our (G20) summit in Canada," she said.

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