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U.S. to press Europe on rebalancing economic demand: official

By Anna Yukhananov

WASHINGTON (Reuters) - U.S. Treasury Secretary Jack Lew will discuss ways Europe can rebalance its demand to help grow the economy during a trip to the continent next week, a senior U.S. official said on Friday.

"What is very clear is that overall we're seeing very weak demand in Europe and rising levels of unemployment," a senior U.S. Treasury official said on a call briefing reporters about the trip.

"There is clearly some capacity for demand rebalancing in the euro area. ... Of course there is greater room for the surplus countries to make a contribution."

Lew will go to France, Belgium and Germany on his first official visit as treasury secretary, meeting with top European officials, finance ministers and the head of the European Central bank to discuss the recent slowdown in European growth and prospects for boosting it.

The euro zone crisis flared up again recently after a bailout of Cyprus' banks hit depositors for the first time since the crisis started, raising fears of contagion and possible bank runs.

Germany is one of the European countries that has a trade surplus, and some officials have pressed it to contribute more to consumption in order to boost overall growth in the euro zone.

So far, 'periphery' countries like Portugal, Spain and Ireland have borne the brunt of fiscal adjustment by cutting back on demand for imports, the U.S. official said.

During his trip, Lew will also discuss a planned free trade agreement between the United States and the 27-nation European Union. The White House in March notified Congress of its plans to formally begin the talks.

The official also said the pace of job growth in the United States is not as fast as would be desired, and "blunt" government spending cuts could hurt the economy further.

American employers hired at the slowest pace in nine months in March, data showed on Friday, a sign that Washington's austerity drive could be stealing momentum from the economy.

(Reporting by Anna Yukhananov and Lucia Mutikani; Editing by Leslie Adler and Andrew Hay)

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