Europe should increase efforts to rectify the current debt crisis as it has the potential to damage the US and global recovery was the consensus of senior Obama administration today.
The topic of conversation at the Senate Banking Committee was the European debt crisis.
“As we speak, events are unfolding that will determine the future of Greece, its neighbours, and the European monetary union.
“As our largest trading partner and a vital strategic partner, events within the European Union also have an impact on the United States,” said Chairman Tim Johnson in his statement.
Today the Senate Banking Committee heard from the Treasury Department, the State Department, and the Federal Reserve. Mr Johnson asked the respective entities to “continue to monitor the situation in Europe closely to ensure that any potential spillover effects in the US are minimised.”
Mr Johnson noted that because of the Wall Street Reform Act and other actions by the US financial regulators, he believes that the US is better equipped today to deal with potential fallout from the eurozone’s debt issues.
“The challenge Europe faces is within the capacity of the Europeans to manage and the administration has been clear with our international partners that we are not seeking additional funding for the IMF (International Monetary Fund),” Under Secretary for International Affairs US Department of the Treasury, Lael Brainard said in testimony prepared for the Senate Banking Committee.
Chairman of the Federal Reserve, Ben Bernanke noted in testimony, “US banks have made progress in protecting themselves against problems in European sovereign or bank debt.” Mr Bernanke believes that US banks have built thicker capital cushions and better liquidity buffers since the crisis.
He did, however, note that the US banking system still has “material exposure to the core of Europe and to the broader banking system, which could be impacted if financial stress were to broaden in Europe.”
Progress was made in Europe today when finance ministers praised progress in contentious negotiations on a new rescue pact, however tension flared up as the Greek president Karolos Papoulias reacted to what he claimed were taunts from Germany.