EU Debt Crisis Called Serious Risk to US Capitalism

Workers have taken to the streets in Portugal against austerity measures being imposed by the government and the European Union to address the capitalist economic crisis. The crisis is acute in Greece, Spain, Ireland and Britain., a photo by Pan-African News Wire File Photos on Flickr.

EU Debt Crisis Called Serious Risk To US

WASHINGTON -- The evolving euro-zone debt crisis is a "serious risk" to the U.S. economy and Europe must quickly move forcefully to build a credible firewall against contagion spreading in the region and around the globe, a U.S. Treasury official warned Congressional lawmakers Friday.

Deputy Assistant Secretary Mark Sobel told a House committee that the administration is not seeking additional funding for the International Monetary Fund and that the European Union has the capacity and resources to tame its crisis. There's growing concern by Republican lawmakers that taxpayer funds will be used to bail out Europe through the IMF, and some are backing legislation to defund $100 billion worth of U.S. contributions to the IMF.

While Sobel advocated a role of the IMF as helping give beleaguered countries "breathing space" to get their fiscal houses in order, he said the IMF shouldn't be a substitute for European action.

Europe's debt crisis risks harming the U.S. economy through both its trade channels and financial sector, he said.

"A decline in exports to Europe will inevitably adversely impact America," Sobel told a House financial services oversight subcommittee in the text of prepared remarks.

While Sobel said Europe has taken significant steps forward in recent weeks and months to respond to their crisis, "More work remains to be done."

"Europe must also continue mobilizing the requisite resources to put in place a strong and credible firewall commensurate with the scale of the challenge. It must do so quickly, with force and determination," Sobel said.

Europe is considering adding EUR200 billion in resources to the IMF as seed money to attract matching funds around the world. The IMF, euro-zone officials believe, could help lend into the region, supplementing the EUR400 billion bailout fund.

"The IMF cannot substitute for a strong and credible European firewall and response," Sobel said.

-By Ian Talley, Dow Jones Newswires; 202-862-9285; ian.talley@dowjones.com