WASHINGTON — The Obama administration is urging European leaders to deal more forcefully with a debt crisis that could significantly damage the U.S. and global economy.
President Barack Obama on Thursday said he has pressed both German Chancellor Angela Merkel and French President Nicolas Sarkozy to act quickly to control the crisis.
Obama said the uncertainly it has caused in financial markets is the “biggest headwind” affecting the U.S. economy.
Treasury Secretary Timothy Geithner made similar remarks during two congressional hearings. He said the crisis could undermine U.S. growth if it spread.
Obama and other leaders of the Group of 20 major world economies are scheduled to hold a summit meeting Nov. 3-4 in Cannes, France.
In his congressional testimony, Geithner said the debt crisis had already slowed growth significantly in Europe and around the world.
“Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand,” Geithner said during a hearing of the Senate Banking Committee.
Geithner told the panel that major U.S. banks and money-market funds have moved to substantially reduce their exposure to the countries facing the most pressure. He called their direct exposure “very modest.” But he said the crisis was slowing economic growth in Europe, which he said did represent a threat to the U.S. economy.
“We want Europe to move, and we want to make sure they move more aggressively,” Geithner told the committee.
Geithner said a key difference between the current European crisis and the 2008 financial crisis is that U.S. banks have greater capital reserves to hold against losses.
