(Adds background on Europe's travails)
By Jason Lange
WASHINGTON, April 9 The United States on
Wednesday urged Germany and other European countries to take
seriously the risk that Europe could slip into a dangerous
spiral of falling wages and prices.
"The risk of deflation is something that they need to be
very alert to," Treasury Secretary Jack Lew told U.S.
Lew was speaking on the eve of the spring meetings of the
International Monetary Fund, which brings top financial
officials from around the world to Washington.
Europe's depressed economy promises to be a central theme of
the meetings, and the IMF's chief last week called on the
European Central Bank to lower borrowing costs in the euro zone.
The United States has been pressing Europe to act more
decisively to fix its banking sector, which has been reticent to
lend. Lew has also regularly called on the region's stronger
economies, including export powerhouse Germany, to try harder to
boost demand in their economies to lift up the region as a
While Europe has recently shown a few hints of stronger
growth, the pace of inflation has slowed to worrisome levels.
Should prices start to fall, wages could as well, triggering a
vicious deflationary loop that could hurt the economies of major
trading partners like the United States and Asia.
"The risk of deflation is something that has a lot of people
concerned," Lew said.
Lew welcomed German politicians' recent commitment to spend
more on infrastructure and urged them to put more gusto into
their stimulus efforts.
"They need to take a little more (action), not a little
less," he said.
Lew also repeated America's regular warning to China that
the Asian giant should be more convincing in its policy shift
toward allowing financial markets to determine the value of its
He also said the United States has encouraged Japan on many
occasions to consider policies that would offset the drag on the
economy expected from a tax hike enacted this month.
(Reporting by Jason Lange; Editing by Bernadette Baum, James
Dalgleish and Nick Zieminski)