'Europe threatens US economic recovery'

The US Federal Reserve building in Washington DC.

Source: Press TV
http://www.presstv.ir/detail/158692.html


The US Federal Reserve says the worsening of the brewing sovereign debt crisis and the banking failures across Europe could pose a setback for America's economic recovery as well.

According to minutes obtained on Tuesday from a meeting of the Fed's policy-setting panel, the Federal Reserve is keeping a wary eye on financial difficulties facing much of Europe, spelling concerns over the slow pace of the US economic recovery partly due to the debt crisis in Europe, combined with America's own devastated housing market, AFP reported.

"The recovery remained subject to some downside risks," members of the Federal Open Market Committee stated during their meeting on December 14.

The panel stated that the likelihood of weakening activity in the US market, lower house prices and the risk of potential fall-outs from worsening European debt crisis were among the risks threatening the economic recovery in the United States.

However, the committee members stated that the overall outlook for the US economy signals "a gradual pickup in growth with slow progress toward maximum employment."

Members of the panel also threw their weight behind the Federal Reserve's economic plan, devised in early November, to inject yet another 600-billion-dollar stimulus to spur the country's sluggish economic recovery.

Participants further outlined that 9.8 percent unemployment in the US and the dire state of the housing market were regarded as major setbacks for the economic recovery.

The Fed's policy-setting panel also expressed optimisms that European authorities would ultimately rise to the challenge of the gloomy economic conditions in the eurozone.

The euro zone, comprising of 16 European Union member states that use euro as their official legal tender, entered its first recession in the third quarter of 2008, following the global financial meltdown that broke out in early 2007.

The financial crisis wreaked havoc in Greece, forcing the EU and the IMF to supply the debt-laden country with a 110-billion-euro bailout in an effort to salvage its economy.

The contagious crisis has threatened to unleash a domino effect that could jeopardize other vulnerable economies in Europe and other banking systems across the world.