UPDATE 1-U.S. urges Europe to take more action on bank backstops
* Lew steers clear of criticism of Germany on growth
* Says more bank capital would support European economy (Adds details on growth, Moscovici)
By Jason Lange
PARIS, Jan 7 (Reuters) - The United States would like to see Europe do more to build up its backstops and bank capital, U.S. Treasury Secretary Jack Lew said on Tuesday in Paris, insisting it would be good for the European economy.
The European Union agreed a blueprint last month to close failing banks. But most economists say the plan does not go far enough to shield governments from the huge costs of winding down dud lenders.
"We've made no secret over the years that we think having backstops in place is very important and we would like to see more action taken," Lew said after meeting with French Finance Minister Pierre Moscovici.
Lew welcomed the progress Europe has made over the last 18 months building its banking union of jointly managed supervision and resolution of lenders, but there was more to gain by being bolder.
"It will continue to be our view that the more capital that there is in European banks, and the stronger the backstops are, the better it is for the European economy, the U.S. economy and the world economy," he told a joint news conference with Moscovici.
Under the plans agreed last month, banks will gradually pay into a single resolution fund over the next 10 years, eventually providing it with roughly 55 billion euros ($75 billion).
Until then, individual governments will be left to pay the bill for any bank failures.
Along with joint banking supervision and a deposit guarantee scheme, the resolution fund is one of the key pillars of a banking union designed to keep bank failures from pushing governments to the brink of bankruptcy.
While some doubt the measures will be sufficient in the event of a big bank failure, Moscovici defended Europe's banking union plans.
"We now have a solid and safe banking union that can ensure the stability of our financial system and put an end to the fragmentation of our financial system, allowing all of our citizens and companies to benefit fairly from having a shared currency," he said.
Turning to economic growth, Lew said countries generally needed to take action to boost demand. But he steered clear of specifically citing Germany, after Washington angered Berlin in October by accusing it of doing too little to support the rest of the European economy.
"It's obvious that some countries have more capacity to stimulate growth in demand than others do," Lew said.
Washington had said Germany was fueling deflationary pressures in the euro zone and the broader world economy through its export-driven economic model and weak domestic demand.
The U.S. bilateral trade deficit with Germany has more than doubled in the last three years, accounting for a growing share of the U.S overall trade gap.
For his part, Moscovici said France and the United States shared the view that countries need to strike a balance between restoring their public finances to health and supporting growth. (Reporting by Jason Lange and Leigh Thomas; editing by Mark John)
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