Europe tell US to tackle the real causes of market turmoil

BRUSSELS, Jan 22, 2008 (AFP) – The European Commission’s top economic official, Joaquin Almunia, called Tuesday on the United States to tackle its deficits, which he said were the root cause of financial market turmoil.

Amid concern in Europe that a US government recovery plan would not avert a recession, EU Economic and Monetary Affairs Commissioner Joaquin Almunia urged Washington to take action on its huge current account and public deficits.

“The current account deficit and the public deficit are the root cause of the turbulence,” Almunia told reporters on a second day of roller-coaster trading on stock markets. “That’s not the only reason but I think it’s the basic cause.”

Many stock exchanges have chalked up the biggest losses since the 2001 terror attacks in the United States amid growing doubts that a US recovery package can avert a recession in the world’s biggest economy.

But a surprise cut in the US Federal Reserve’s interest rates, by an unprecedented three quarters of a point, initially helped investors cut their losses on Tuesday.

While the US administration’s plans focus on tax relief, Almunia advised Washington to take action to cut the US twin deficits, which have long been a sou