Bloomberg News

Brainard Says European Debt Poses Most Serious Risk to Recovery

October 20, 2011

Oct. 20 (Bloomberg) -- The European sovereign debt crisis presents “the most serious risk” to the global economic recovery while the U.S. financial system has moderate direct exposure to the hardest-hit euro-area countries, the U.S. Treasury Department’s top international official said.

“Europe’s financial crisis poses the most serious risk today to the global recovery,” Lael Brainard, the Treasury’s undersecretary for international affairs, said in prepared remarks to a Senate subcommittee. “While the direct exposure of the United States’ financial system to the most vulnerable countries in Europe is moderate, we have substantial trade and investment ties to Europe.

“European financial stability matters greatly for consumer and investor confidence,” Brainard told the Senate Banking Committee’s security, international trade and finance subcommittee.

Her comments come after the Group of 20 nations’ finance ministers meeting on Oct. 14-15 and before the G-20 leaders meeting in Cannes in November. She encouraged Europe to have a substantial financial firewall, sufficient liquidity and capital cushions for banks, a sustainable program in Greece, and governance changes.

The European Union announced today that an Oct. 23 summit will now be followed by another three days later. European governments may unleash as much as 940 billion euros ($1.3 trillion) to fight the debt crisis by combining the temporary and planned permanent rescue funds, two people familiar with the discussions said.

The 440 billion-euro European Financial Stability Facility has already spent or committed about 160 billion euros, including loans to Greece which will run for up to 30 years.

--Editors: Kevin Costelloe, Gail DeGeorge

To contact the reporters on this story: Cheyenne Hopkins at;

To contact the editor responsible for this story: Christopher Wellisz at

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