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Global Economy Counts on U.S. European Cooperation

Snow: Global Economy Counting on U.S.-European Cooperation

U.S. Treasury Secretary statement at conclusion of visit to UK, Germany

Achieving "strong and vibrant" global economic growth is one of the world's most pressing priorities, and the global economy is counting on the United States and Europe for leadership in this area, U.S. Treasury Secretary John Snow said in Frankfurt July 18 at the conclusion of a week-long trip to Germany and Britain.

"My visits this week have served to confirm my view that economic cooperation between the United States and Europe is vital for improving living standards -- not just in our regions, but also in the emerging and developing economies as well," Snow said.

He acknowledged that the economic recovery in the United States "to date has not been as strong as we would like," but said that he believes America "is poised for stronger growth" and Europe "is committed to taking steps that will lead to stronger growth in the future."

Snow mentioned several factors that could spur growth in the United States including an "accommodative" monetary policy, President Bush's jobs and growth package, low inflation, low interest rates, and "necessary adjustments" by American businesses. He also said that while "no one is happy about increased [fiscal] deficits," the level is "manageable" and should decline with a combination of economic growth and spending restraint.

In Germany, according to Snow, the government's three-part strategy to support growth and achieve structural reforms is necessary to restore vibrant long-term growth, and he urged continued public support for and government attention to these measures. In the United Kingdom, he said, the government is implementing "sound policies and ... reforms" that are keeping the British economy competitive and growing. And in France, he said, the government is moving ahead with important tax and pension reforms.

Following is the text of Snow's statement:

U.S. Department of the Treasury
Washington, D.C.


Amerika Haus
Frankfurt, Germany
July 18, 2003

Achieving strong and vibrant global growth is one of the world's most pressing priorities. We live in an interdependent world economy where our fortunes are inextricably linked. My visits this week have served to confirm my view that economic cooperation between the United States and Europe is vital for improving living standards -- not just in our regions, but also in the emerging and developing economies as well. The European economy depends on the United States. The U.S. economy depends on Europe. And the global economy is counting on our leadership.

This week I visited London -- Europe's primary financial center, and Germany -- Europe's largest economy -- to learn about European economic prospects and what we in the United States can do to help promote strengthened growth in Europe and throughout the globe.

The United States has been doing its part to spur economic growth. The combined impact of accommodative monetary policy, President Bush's Jobs and Growth package, low inflation, low interest rates, and necessary adjustments by U.S. businesses cause me to believe that the United States is poised for stronger growth.

Over the past 30 months the U.S. economy has proven to be remarkably resilient and flexible -- weathering the storms of a recession, terrorist attacks, upheaval in the corporate world, and the winding down of the "millennium bubble." While our economic recovery to date has not been as strong as we would like, growth reached 2.9% in 2002, despite a very weak first half of the year.

This year I expect growth to exceed 3% in the third and fourth quarters of this year, and 4% next year -- expectations echoed by private Blue Chip forecasts.

The fiscal deficit in the United States will be larger this year. While this is to be expected, no one is happy about increased deficits. But our deficit level is manageable and I expect a growing economy combined with spending restraint will put U.S. fiscal deficits on a declining path.

The United States is returning to growth, but the world economy needs multiple engines of growth. I am encouraged that important developments underway in Europe can help this market return to growth as well. Restoring economic growth requires more than sound macroeconomic policy; it also requires appropriate structural reforms that promote strong domestic demand led growth.

Here in Germany, Chancellor Schröeder and Finance Minister Eichel have put together a three-part strategy to support growth and achieve vitally needed structural reforms. This strategy focuses on the Agenda 2010 labor market, health and pension reforms, budget consolidation and tax reform. While the returns from these reforms may not be immediately evident, these efforts are vital for Germany to restore vibrant long-term growth. Importantly, in all of my conversations this week I learned that public opinion is supportive of reforms and that the German people recognize the need for change. This is very positive and I applaud and encourage continued attention to these reforms.

In the United Kingdom I met with Gordon Brown, Chancellor of the Exchequer, and Mervyn King, Governor of the Bank of England. Prime Minister Blair and his economic team are implementing sound policies and continue to make reforms to keep their nation competitive and growing. They never fail to inspire thoughtful analysis and creative solutions to our shared economic challenges.

While I did not visit France on this trip, I should also note that I am pleased with developments in that country as well. President Chirac and Finance Minister Mer are moving ahead with important tax and pension reforms, which should help to improve France's ability to become more productive and contribute to growth. I took note that President Chirac also raised the question of how the Stability and Growth Pact can contribute to growth.

Yesterday, I met with Otmar Issing at the European Central Bank, and this morning with Jean Claude Trichet, the incoming President of ECB. They each discussed with me ECB's commitment to price stability and prospects for growth in the Euro area for this year and next.

Throughout this trip I was very pleased to discuss a number of trans-Atlantic issues -- issues that rarely earn headlines, but nonetheless, are being resolved in a spirit of cooperation that will greatly benefit our economies. Both in London and Frankfurt we had detailed discussions [of] capital market issues, regulation of accounting practices and financial services, and importantly, the contributions that strengthened corporate governance can make to improving investor sentiment. We also discussed the significant impact that Europe's efforts to create an integrated financial system would make to European growth.

My colleagues and I also agreed on the need to work together to ensure a successful Doha trade round. The world is awaiting our leadership so that all nations can share in the benefits of free and open trade.

As I conclude this visit I am reinforced in my belief that the global economy depends on Europe and the United States working in partnership to clear away inefficiencies and put in place policies that will lead to robust growth. And I come away encouraged that Europe is committed to taking steps that will lead to stronger growth in the future.

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