Though considered a key engine for worldwide economic growth, the European Union lags behind the U.S. in its influence on global economic policy, Guenter Burghardt, head of the European Commission delegation in Washington, admitted in an address, Nov. 20, at the Federal Reserve Bank of Atlanta.
He added, however, that he expects the EU to take on “a larger role in the global economic engine in the future,” citing cautious structural reform in the region that has already led to a small rise in growth rates.
He said France and Germany are working to create a more flexible labor force and find solutions to the cripplingly expensive social security nets currently in place. And with the enlargement of the EU in May, including small, developing countries with growth rates as high as 5-6 percent, the overall EU growth will experience a slight improvement, he added.
“On the EU side, it often looks to the U.S. as though we do not like structural changes, but it’s really that it takes more time to reach agreement in the EU on such issues,” Dr. Burghardt said.
He explained that the EU remains more preoccupied with sustainability issues and the social costs of certain economic policies, which makes its political and economic leadership more hesitant than their U.S. counterparts to institute structural economic reform.
The U.S., for its part, has been aggressive in its efforts to stimulate its economy, and by extension the world economy. But he noted that the Bush administration’s tax cuts and continued growth of the country’s trade and budget deficits have serious “flip-sides,” including the weakening of the dollar.
He also addressed the issues trade disputes between the U.S. and Europe, noting that disagreements over such products as steel and bananas – and the resulting retaliatory measure – were good for neither economy.
Dr. Burghardt encouraged both sides to abide by World Trade Organization arbitration decisions in settling such disputes.
For more information, contact Jean Tate at the Federal Reserve Bank public affairs office at (404) 498-8035.