BRUSSELS (Reuters)- The U.S. economy is facing a tough second quarter and Europe will notbe immune to the impact, U.S Treasury Secretary Henry Paulson wasquoted as saying on Wednesday.
"There’s no doubt that the second quarter will be a tough quarter,"Paulson told the International Herald Tribune in an interview. "There’sno doubt in any of our minds that the high oil prices are going to havean impact."
Paulson is on a trip to Europe and Russia to explain how Washingtonis working to resolve the U.S. economic problems, just as signs emergeof a sharper slowdown in Europe than had been previously detected.
Denmark said on Tuesday its economy was in recession, the first EUstate to report that its output shrank for two quarters in a row.
U.S. data also on Tuesday added to concerns that the United States is facing weak growth combined with high inflation.
Paulson told the IHT that the U.S. woes would have an impact on Europe.
"I’ve never been one to accept the decoupling theory," he told the newspaper. "In a global world, we’re all interrelated."
A weaker Europe could also hurt the U.S. economy due to a lowerdemand for U.S. exports, Paulson said, adding emerging economies wouldnow give the biggest lift to global output.
Paulson has used his trip to reinforce the message from Washingtonthat the U.S. administration believes in a strong U.S. dollar.
But he declined to comment on the divergence in interest ratepolicies of the U.S. Federal Reserve, which has cut rates, and theEuropean Central Bank, which is expected to raise them on Thursday.
? Thomson Reuters 2008 All rights reserved.
