Europe’s woes to have small global impact: U.S. official

By Glenn Somerville

BEIJING (BestGrowthStock) – Europe’s financial crisis should have only minimal impact on the global recovery as governments put in place necessary policy counter-measures, a senior U.S. Treasury Department official said Sunday.

The U.S. official spoke to reporters in Beijing on condition of anonymity ahead of two days of high-level talks with Chinese officials where Europe’s financial woes are expected to be discussed, if only to highlight the need for continued efforts to rebalance global growth.

There has been speculation that China may delay letting its yuan currency rise in value — as Washington has urged — out of concern that its exports to Europe will suffer.

The U.S. official repeated that it was China’s choice to decide what to do about its currency peg but expressed hope that Beijing would keep boosting domestic consumption and rely less on exports for growth.

U.S. Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton are leading a delegation of nearly 200 U.S. officials in the Strategic and Economic Dialogue that opens on Monday.

When it wraps up on Tuesday, Geithner heads for Britain and Germany for talks with officials in London, Frankfurt and Berlin about efforts to stabilize turbulent markets that have led investors to flee and driven the euro’s value down.

The U.S. Treasury official offered praise for Europe’s commitment to battle the crisis by agreeing on a $1 trillion safety net and expressed confidence that policymakers will be able to manage the risks to the region’s economy.

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The Beijing talks will cover a wide range of economic issues, with a greater emphasis by the U.S. side on resolving trade irritants than on its longstanding bid to get China to let the yuan’s value be more influenced by market forces.

Beijing has kept the yuan pegged to the dollar since mid-2008, partly to keep its growth stable in the wake of the financial crisis that struck the United States at that time.

The U.S. official noted that China’s growth was increasingly being fueled by more consumer spending at home, rather than reliance on exports, and said Washington wants to see that trend continue and be reinforced.

A higher-valued yuan generally would make U.S. imports cheaper for Chinese buyers and have the effect of sustaining more consumption within China.

The U.S. Treasury delayed issuing a report due at mid-April on trade practices of key partners that potentially could have labeled China a currency manipulator.

The U.S. official noted that the Treasury said at the time it pointed to the importance of the meeting of Group of 20 political leaders that takes place in Canada in late June.

The G20 is an important forum for demonstrating member countries’ ability to cooperate on key issues, the official added.

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(Reporting by Glenn Somerville; Editing by Jeremy Laurence)

Europe’s woes to have small global impact: U.S. official