Greek default would roil financial markets: US official

June 23rd, 2011 - 12:18 pm ICT by IANS  

Washington, June 23 (IANS/EFE) Federal Reserve Chairman Ben Bernanke said Wednesday that a Greek sovereign debt default would “roil” financial markets and that the US is closely following the situation in the debt-ridden European country.

Direct exposure by US banks to bad debts in Greece is small, the Fed chief said in a press conference, although he added that a “disorderly default” would still have “quite significant” adverse effects on the US and the rest of the world.

Governments in the 17-nation euro zone are currently in talks on a possible second bailout package for Greece, which is facing a lingering debt crisis and social unrest over austerity measures demanded by the European Union and the International Monetary Fund.

The Federal Reserve Wednesday left interest rates unchanged at record low levels of between 0 and 0.25 percent after a two-day policy meeting and downwardly revised its US economic growth forecast for 2011 to between 2.7 percent and 2.9 percent, compared with April’s forecast of an expansion of between 3.1 percent and 3.3 percent.

Bernanke told reporters that the problems hindering growth in the world’s biggest economy could persist during 2012.

The Fed chairman said the slowdown is attributable in part to the problems in the real-estate sector and other adverse factors that may continue during 2012.

“Maybe some of the headwinds that have been concerning us - like weakness in the financial sector, problems in the housing sector, balance sheets and deleveraging issues - some of these headwinds may be stronger, more persistent than we thought,” Bernanke said.

The Fed confirmed Wednesday that it will not extend its $600 billion Treasury bond-purchase programme, which is set to expire by the end of June.


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