WASHINGTON The United States reprimanded Germany on Wednesday, saying its exporting prowess was hampering economic stability in Europe and also hurting the global economy.
The U.S. Treasury Department said Germany should focus more on boosting domestic growth in order to make the European economy more stable.
"Germany's anemic pace of domestic demand growth and dependence on exports have hampered rebalancing (of the euro zone economy)," the Treasury said in a congressionally mandated semi-annual report.
"The net result has been a deflationary bias for the euro area, as well as for the world economy," it said in the report.
Deflation is one of the most worrisome forces in economics and refers to persistent drops in wages and prices.
For years, the currency report has been an occasion for the U.S. government to publicly criticize China's foreign exchange practices, but this time Germany appeared to eclipse the Asian giant in terms of prominence within the report.
The Treasury noted, for example, that Germany's net exports of goods, services and capital exceeded those of China in 2012. The policy recommendations for Germany also topped the list of actions Washington feels are necessary to make the global economy more stable.
As has been customary for over a decade, the Treasury stopped short of formally labeling China as a currency manipulator. It retained its description of the yuan currency as "significantly undervalued" - a perennial complaint among U.S. politicians and companies because a weak yuan makes Chinese exports cheaper in the United States at the expense of American factories.
However, the Treasury also noted that the recent appreciation of the yuan was "good for the U.S. economy," and called on China to allow the yuan to appreciate more quickly.
The Treasury also said it was closely following Japanese economic policies to determine whether they are geared toward boosting domestic demand.
(Reporting by Jason Lange; Editing by Sandra Maler and Ken Wills)
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