April 10, 2019 / 5:15 PM / 4 months ago

UPDATE 1-Germany's Scholz: Must avoid escalation in EU-U.S. trade dispute

* German Finance Minister sees political risks as biggest threat

* Trade disputes, Brexit to dominate talks in Washington

* Scholz wants progress on global corporate taxation (Adds Scholz quotes)

By Michael Nienaber and Christian Kraemer

BERLIN, April 10 (Reuters) - German Finance Minister Olaf Scholz has said financial leaders must use talks in Washington this week to avoid any escalation in trade disputes as political risks pose the biggest threat to a slowing world economy.

U.S. President Donald Trump's threat this week to impose tariffs on $11 billion worth of European Union products, including commercial aircraft, has opened a new front in his global trade war and deepened a long-running transatlantic subsidy dispute surrounding Boeing and Airbus.

"All parties must do their part to avoid an escalation of trade disputes," Scholz told Reuters in an interview on Wednesday, ahead of the April 12-14 International Monetary Fund and World Bank Spring Meetings.

Scholz, also vice chancellor in Chancellor Angela Merkel's governing coalition, said the global economy was losing steam, but there was still growth in Europe and Germany, and that political problems such as the U.S. trade disputes and Brexit could be solved.

"That's why the talks in Washington are so important," Scholz said.

He also said the EU should help Britain reach an agreement for an orderly departure from the bloc.

"Everyone in Europe hopes that there will be an agreement between the government and opposition about the way to get an agreed Brexit," Scholz said.

"It's the task of the European Union to be helpful in a process in the United Kingdom like this," Scholz said. "I hope that the risk of a 'no-deal' Brexit is decreasing."

German Chancellor Angela Merkel had said she wanted EU leaders meeting later on Wednesday to grant Britain a delay in its divorce from the bloc, but also to make sure that, once agreement on the divorce was reached in London, Brexit could take place quickly.

FAIR TAXATION

Scholz also wants to use the talks in Washington to achieve progress for a minimum level of corporate taxation globally.

"For me, a very important topic for the IMF meeting is the fight for fair taxation," Scholz said. "We want to prevent large global corporations escaping their responsibility to pay taxes."

Financial leaders will discuss proposals to introduce a minimum level of corporate taxation. "The ambitious goal is to reach an international agreement by the summer of next year," Scholz said.

The German finance minister said he did not expect the meetings in Washington to discuss foreign exchange rate manipulation, or Germany's large current account surplus.

However, Scholz said Germany would use parts of its budget surplus to boost fiscal stimulus and support corporate research and development with incentives worth 1.25 billion euros ($1.41 billion) annually, without a time limit.

On euro zone reform, Scholz said he was "very optimistic" that finance ministers would agree on the structure of a new euro zone budget by summer.

Asked about any political support or influence in merger talks between Deutsche Bank and Commerzbank , Scholz played down the government's role. "This is a corporate decision that must be worked out by the two banks," Scholz said. (Reporting by Michael Nienaber Editing by Madeline Chambers)

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