U.S. urges Europe to do more to avoid economic slump

U.S. Treasury Secretary Jack Lew pauses during remarks at the Peterson Institute for International Economics in Washington

The United States on Wednesday called on European policymakers to do more to avoid a "lost decade" of low growth, saying steps taken by the European Central Bank may not be sufficient on their own.
Speaking ahead of the summit of leaders from the Group of 20 nations later this week in Australia, U.S. Treasury Secretary Jack Lew said euro zone countries should pursue a combination of fiscal, monetary and structural policies to support growth.
His comments suggested the euro zone's sluggish recovery will come under the G20 spotlight, as it has during their last two sessions.
"Resolute action by national authorities and other European bodies is needed to reduce the risk that the region could fall into a deeper slump," Lew said in remarks prepared for delivery at the World Affairs Council in Seattle.
The 18-nation euro zone is skirting close to recession, growing just 0.1 percent in the second quarter. Economists expect a report on Friday to show a similar advance in the third quarter.
The currency bloc is also not far from outright deflation, with prices up just 0.4 percent over the past year.
To prop up the economy and move inflation higher, the ECB has started to pump more money into the region's banking system, and has said it is ready to take further action if needed.
In contrast, the U.S. economy is growing solidly. Lew warned, however, that the world could not rely on strong U.S. growth alone to support demand. He urged countries to use fiscal policies to boost demand if they could afford to do so.
Germany, Europe's biggest economy, has been under particular pressure to increase government stimulus to support demand in the currency bloc.
Lew also said countries should pursue structural reforms in the longer term, but cautioned it was still unclear whether such reforms will be enough in the case of Japan.
Japan has launched a broad program of monetary easing, spending and reform to generate economic growth and pull out of damaging deflation. But growth remains weak, and officials are considering delaying a planned tax hike that is key to reining in huge public debt.
"The test will be whether the third arrow (of structural reform) is sufficient to transform Japan's economy, and the jury is still out," Lew said.