Post by Sparky on Apr 13, 2007 21:40:15 GMT -8
news.yahoo.com/s/ap/us_eu_economy;_ylt=AnFfL0CJbtvg.ANIAOSMtCEDW7oF
Low savings rate in U.S. seen as danger Fri Apr 13, 5:54 PM ET
The European Union's monetary chief said Friday that the United States' low savings rate and large budget deficit pose a risk to the global economy.
In comments after making a speech in Washington, EU Economic and Monetary Affairs Commissioner Joaquin Almunia, from Spain, said that while the economy of the euro currency zone has been strengthened by reform, global economic imbalances could undermine it.
"We are living in a global economy with big imbalances not created by the euro area," he said.
Thirteen of the 27 EU member countries currently use the euro currency.
During his speech at the German Marshall Fund, Almunia said the world's largest economic powers should take advantage of current prosperity to reform their economic policies. He said that while Europe was changing its policies, others were not.
"All countries have a joint interest as well as a joint responsibility to use the favorable global economic conditions to contribute to an orderly resolution of imbalances," he said. "Europe is playing its part by implementing structural reforms. Others must step up to the plate."
While he did not specifically name the United States at that point in his speech, he later said that without change, the U.S. budget deficit would worsen and pose a risk for the global economy.
The Treasury Department said this month that the deficit from October through March totaled $258.4 billion, down 14.7 percent from the corresponding period a year ago.
But Almunia said that cyclical factors, including economic growth, accounted for the recent improvement and predicted that the deficit would grow again without policy changes. With a growing deficit, the U.S. savings rate is unsustainable, he said.
The savings rate in the United States has been negative for almost two years.
"Nobody, not even the biggest economy in the world, can live forever with this savings rate unless all the other economies in the world are ready to finance the deficit," he said.
Low savings rate in U.S. seen as danger Fri Apr 13, 5:54 PM ET
The European Union's monetary chief said Friday that the United States' low savings rate and large budget deficit pose a risk to the global economy.
In comments after making a speech in Washington, EU Economic and Monetary Affairs Commissioner Joaquin Almunia, from Spain, said that while the economy of the euro currency zone has been strengthened by reform, global economic imbalances could undermine it.
"We are living in a global economy with big imbalances not created by the euro area," he said.
Thirteen of the 27 EU member countries currently use the euro currency.
During his speech at the German Marshall Fund, Almunia said the world's largest economic powers should take advantage of current prosperity to reform their economic policies. He said that while Europe was changing its policies, others were not.
"All countries have a joint interest as well as a joint responsibility to use the favorable global economic conditions to contribute to an orderly resolution of imbalances," he said. "Europe is playing its part by implementing structural reforms. Others must step up to the plate."
While he did not specifically name the United States at that point in his speech, he later said that without change, the U.S. budget deficit would worsen and pose a risk for the global economy.
The Treasury Department said this month that the deficit from October through March totaled $258.4 billion, down 14.7 percent from the corresponding period a year ago.
But Almunia said that cyclical factors, including economic growth, accounted for the recent improvement and predicted that the deficit would grow again without policy changes. With a growing deficit, the U.S. savings rate is unsustainable, he said.
The savings rate in the United States has been negative for almost two years.
"Nobody, not even the biggest economy in the world, can live forever with this savings rate unless all the other economies in the world are ready to finance the deficit," he said.