European leaders are committed to ensuring the survival of the euro and have enough money to meet obligations of heavily indebted member countries, US’s Federal Reserve Chairman Ben Bernanke said on Monday.
In remarks to the Woodrow Wilson Center in Washington, Bernanke said a euro stabilization package of nearly $1 trillion was “a lot of money” and enough to protect Greece, Portugal and Spain from volatile credit markets for a number of years.
But he acknowledged that investors were not yet convinced Europe's debt problems would be resolved, and said more European rescue money may be needed.
“European leadership is strongly committed to doing whatever is necessary to preserve the euro, preserve the euro zone, preserve the European project, and avoid financial problems that would certainly arise,” Bernanke said.
In a wide-ranging question-and-answer session, Bernanke said a regulatory reform bill which Congress is finalizing contained strong measures to address the problem of financial firms being “too big to fail.”
“The acid test of the reform will be, will it control 'too big to fail?” he said, pointing to measures including tougher bank capital rules, resolution authority to safely close failing firms, and “living wills” that require companies to plan for their own unwinding.
When asked whether he thought the bill was more helpful than harmful, Bernanke replied, “Oh yes, I do.”
He also said the US economy appeared to have enough momentum to avoid a “double-dip” recession, citing strengthening consumer and business spending.
“There are some signs the private sector is picking up the baton,” he said.
However, Bernanke noted that the pace of recovery was moderate considering the depth of the recession, and unemployment would probably decline only slowly.
On China, Bernanke said he was probably the only US official who had attended every Strategic and Economic Dialogue since the enhanced program was started by former Treasury Secretary Henry Paulson during the financial crisis.
He said the new format was particularly useful because it broadened discussions beyond traditional sticking points such as the value of China's currency.
He said China recognized that it has a “codependency” with the United States. China is the largest foreign buyer of US government debt, while the United States is a vital trading partner for China.
“There is a real desire on both sides to engage,” Bernanke said. “For me, that is a very important achievement to have those lines of communication be open.” (Reuters)