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bernanke
on the euro chaos
21st March 2012
“Although progress has been made, more needs
to be done. Full resolution of the crisis will require
a further strengthening of the European banking system;
a significant expansion of financial backstops, or "firewalls,"
to guard against contagion in sovereign debt markets;
and, critically, continued efforts to increase economic
growth and competitiveness and to reduce external imbalances
in the troubled countries.
“Actions Taken by the Federal Reserve
The Federal Reserve has followed developments in Europe
closely, and we are in frequent contact with key European
policymakers. We are particularly focused on protecting
U.S. financial institutions, businesses, and consumers
from adverse financial and economic developments in
Europe.”
In English, don’t lend to PIIGS.
"As part of this exercise, bank capital positions
were evaluated under a hypothetical stress scenario
that involved a deep recession in the United States
(with unemployment reaching 13 percent) and a notable
decline in activity abroad, combined with sharp decreases
in both domestic and global asset prices. This exercise
was designed to capture both the direct and indirect
exposures and vulnerabilities of U.S. financial institutions
to the economic and financial stresses that might arise
from a severe crisis in Europe. The results show that
a significant majority of the largest U.S. banks would
continue to meet supervisory expectations for capital
adequacy despite large projected losses in an extremely
adverse hypothetical scenario.”
In English, US bank stress tests are much
stronger than those in the EUSSR.
“Third and finally, leaders of most of the members
of the European Union have approved a new fiscal compact
treaty that strengthens fiscal rules and their enforcement.
This treaty represents a positive step toward resolving
the fundamental tension inherent in having a monetary
union without a fiscal union, and thus should help bolster
the viability of the euro-area economy in the longer
term.”
In English, the EU is removing powers
from previously sovereign nations.
end note
- PIIGS
- The countries in the European Union with weak economies:
Portugal, Italy, Ireland, Greece and Spain.
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the web address for this article is
http://www.abelard.org/news/economics022012.php#bernanke_euro_crisis_240312
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