Banking union a priority for Lew in Europe

Mon Apr 8, 2013 11:51am EDT
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By Anna Yukhananov

BRUSSELS (Reuters) - Europe's economic weakness and financial turmoil affect the U.S. economy, U.S. Treasury Secretary Jack Lew told EU leaders on Monday, stressing the need to boost demand and move ahead with a euro zone banking union.

"Our economy's strength remains sensitive to events beyond our shores and we have an immense stake in Europe's health and stability," Lew told reporters after talks with European Union leaders including European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy.

"In this context I was particularly interested in our European partners' plans to strengthen sources of demand at a time of rising unemployment," Lew said. EU forecasts indicate the biggest trading partner of the United States will remain in recession for the second year in a row this year.

Lew's visit also comes shortly after messy negotiations between the euro zone, the International Monetary Fund and Cyprus on a bailout for the Mediterranean island, which in the end forced losses on large Cypriot bank depositors.

In his talks with Barroso and Van Rompuy, Lew underscored the importance of the euro zone moving ahead with plans for a banking union which will involve handing over supervision to the European Central Bank and drafting bank resolution laws.

This would allow the 17-nation bloc to handle problems like the resolution of banks in Cyprus more efficiently.

"They discussed the banking union a bit more than other things - the Americans are keen for the process to move forward," one senior EU official said.

The surprise levy on bank deposits above 100,000 euros in Cyprus agreed as part of the country's bailout has dented confidence that Europe will be united in tackling bank problems rather than leaving countries to struggle alone.   Continued...

U.S. Treasury Secretary Jack Lew addresses a news conference after meeting European Council President Herman Van Rompuy (not pictured) in Brussels April 8, 2013. REUTERS/Francois Lenoir