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Published On: Mon, Oct 20th, 2014

US state that ECB actions might be insufficient to stop the euro zone from repeatedly sinking into a recession

The US issued another warning regarding the struggling European economy, pointing out that Germany can help by boosting consumer spending, and said further ECB actions may be warranted.

The US issued yet another warning regarding the European economy. The euro zone risks slumping into a downward spiral of wages and prices alike, and according to the US, the European Central Bank’s actions may not suffice to prevent deflation. The US Treasury Department’s semiannual report for Congress also pointed out Germany can make a large difference by boosting its demand. The German economy is the largest in Europe.

Recently the ECB cut interest rates to record lows, made offers of long-term loans to banks and stated it was planning to purchase private sector assets. Those are all measures aimed at supporting the European economy, which is on the brink of another recession.

Europe is important as a major trading partner to both the US and China, and its predicaments have been in the focus worldwide. The Treasury Department’s report indicated that ECB’s measures should be helpful in dealing with deflation risks, but there should be more policy accommodation.

The US regards Germany as a key element for the whole European recovery from what looks like an economic depression.

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