Europe News

Lew flies in to Germany export storm

Germany's reliance on export-driven growth was a hot topic when U.S. Treasury Secretary Jack Lew arrived in Berlin on Wednesday, after figures showed the country's exports rose for a fourth consecutive month.

(Read more: US's Lew calls for European 'growth agenda')

At a press conference with German Finance Minister Wolfgang Schaeuble, Lew reiterated concerns that Germany's dependence on exports rather than domestic demand was unbalancing European and global trade and capital flows.

"We think more domestic demand and investment would be a good thing (for Germany)," Lew told reporters on Wednesday.

"We have raised concerns about the positive balances in surplus economies generally. I know that it is a difficult balance in Germany, as it is in any country, to get it right and we continue to believe that policies that would promote more domestic demand and investment would be good for the German economy and the global economy," he said.

Cranes and containers in the port of Hamburg, Germany
Joern Pollex | Getty Images News | Getty Images

Lew's remarks followed complaints last year from both the European Union (EU) and the U.S. Treasury that Germany's export-led growth and current account surplus was unbalancing the regional and global economy, and creating deflationary pressures.

Germany, which is the euro zone's largest economy, ran a trade surplus for an eighth consecutive year in 2013. The latest figures show Germany's net exports (the amount by which its exports exceeds its imports) widened to 17.8 billion euros ($24.2 billion).

Is Germany's trade surplus hurting the euro zone?

Meanwhile, data out on Tuesday showed euro zone inflation fell to 0.8 percent in December from 0.9 percent in November, adding fuel to deflationary fears.

(Read more: Deflation fears return as euro zone inflation slips)

Schaeuble was defiant in response to Lew's comments on Wednesday, and said the U.S. politician should consider the single currency zone and EU as a whole, rather than singling out Germany.

"What you must see is that we do not meet in order to give each other lessons; we meet to improve our mutual understanding. And the situation in the U.S., is completely different to what we have here in Europe," Schaeuble said.

"We have 28 member states now in the European Union and 18 sovereign nation states in the euro zone… This is a completely different situation to what you have in the U.S... If you take the euro zone as a whole, the surplus is very low. And if you look at it without Germany, the euro zone would not have any surplus at all but would have a deficit, which does make things better," he continued.

(Read more: German business: Europe should copy, not criticize surplus)

Europe needs more structural reforms: Wolin

Schaeuble's strong response seems unlikely to deter international pressure on Germany however.

"The widening surplus is likely to put increasing political pressure on Germany to rebalance its economy away from export-oriented growth towards domestic consumption," Chris Williamson, chief economist at market analysis firm Markit, said in a research note on Wednesday.

"(This is a) policy some other euro zone member states hope will help fuel faster export-driven growth in their own economies. However, the flip-side is that stronger German export gains, especially to non-euro countries, helps boost business activity at companies within the euro area that are suppliers to German firms."

Former U.S. Deputy Treasury Secretary Neal Wolin also joined the debate on Wednesday, telling CNBC that Germany should increase internal demand in order to generate more growth throughout the euro zone.

"Countries like Germany which can stimulate additional demand and therefore additional growth in Europe…would be well advised to do more of it," Wolin said.

By CNBC's Holly Ellyatt and Katy Barnato