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Bernanke tells lawmakers 'no euro bailout'

Dec 15 2011 08:08 AFP

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Washington - US Federal Reserve chief Ben Bernanke told Republican lawmakers on Wednesday that he cannot and will not bail out struggling European economies, one senator present at the meeting said.

Amid suspicions that Fed funds may be used to help debt-ridden eurozone countries, leading Republican Lindsay Graham said Bernanke assured senators "he doesn't have the intention or the authority to do that".

But Bernanke also warned President Barack Obama's foes in the Senate that if European leaders cannot solve the eurozone debt crisis, it would damage the US economy.

"He's very concerned," Republican Senator Orrin Hatch told reporters after the Fed chief briefed the lawmakers. "The collapse over there would be detrimental to us."

Republican Senator Lamar Alexander, one of the party's leaders in the chamber, had invited Bernanke to deliver the briefing amid rising fears that Europe's troubles may stifle the fragile US economic recovery.

After the meeting Senator Bob Corker said the United States' main focus should be to "right our own ship", adding that "the best thing we can do as a country is to deal with our own issues as quickly as possible".

The European crisis "affects us in a very big way... and even though our banks don't have direct exposure to the actual governments, they have a lot of exposure to European banks".

Investors have grown increasingly nervous about the outcome of last Friday's EU summit, which agreed tighter fiscal rules for the eurozone but which many feel did not go far enough.

Twenty-six of the European Union's 27 members backed a new "fiscal compact".

But Berlin's hopes for a treaty revision were dashed when Britain opted out, leading investors to grow nervous over tighter fiscal rules which many feel did not go far enough.



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