A downward spiral of weakening confidence and faltering economic growth in the eurozone could bring the rest of the global economy down with it, the US Treasury Secretary warned last night.
In another nudge to European countries to act decisively to resolve their sovereign debt problems, Tim Geithner said that the direct exposure of US banks to the eurozone was limited but that the country could not escape the wider consequences of Europe's economic and financial difficulties.
"The European financial crisis has placed significant pressure on its financial institutions and slowed growth significantly in Europe and around the world," he told a session of the Senate Banking Committee, which was holding a hearing on financial stability.
"US financial institutions, including our major banks and money market funds have substantially reduced their exposure to the economies of Europe that are under the most pressure. Our direct financial exposure to those governments and their financial institutions is quite small, but Europe is so large and so closely integrated with the US and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand."
Mr Geithner and the Obama administration have been increasingly vocal in their admonishments to the European Union for so far failing to demonstrate it can prevent the debt crisis in Greece from hitting other countries.
Mr Geithner also had harsh words for Congress, too, which the administration is trying to persuade to pass a new economic stimulus bill. "The US economy in general, in most times is much stronger than Washington and it can withstand prolonged periods of Washington doing nothing. We are not in one of those moments now because the things that are burdening the economy and making growth weaker are things that only Congress can solve."