Europe's Crisis Is a Global Issue
United States is at far greater risk than Americans are being led to believe
November 7, 2011
The leaders of the G20 meet in France Thursday and Friday. Undoubtedly, the European Financial Crisis dominates the discussion. It is my hope the summit participants redefine the crisis as a global issue, whose scope and final impact resonates well beyond Europe. This burgeoning threat has been framed as a uniquely European problem; one Europeans should ultimately solve. However, this perceived European problem now poses a threat to the economic stability of the entire world.
For months now, both European and American government officials have over promised and underdelivered in their efforts to reach consensus and bring some semblance of stability to the world markets. As chairman of the House Subcommittee on Europe and Eurasia, I have pointedly asked officials from both camps to determine the U.S. risk and exposure to the European Financial Crisis, as well as to define measures they are taking to curb the destructive effects of the crisis. In response, I have been given tepid assurances that U.S. risk is low and the governments of Greece, Italy, and others are all actively working toward meeting the austerity measures set forth. Unfortunately, these assurances have failed to come to fruition. The numbers presented by many of these government officials seem to change daily and, more importantly, they do not account for potential exposures and risks evolving from money market accounts.(Approximately 40 percent of U.S. money market funds' total assets are invested in Europe). This shows a complete lack of understanding of how the volatility of the euro affects the U.S. export market. Additionally, the Greek Austerity Referendum has been scrapped, and Prime Minister Papandreou is being pressured to resign, only further fueling the damaging effects of the crisis.
In my opinion, the United States Congress and the American people have been left in the dark with regard to the gravity of this dire predicament. In stark reality to many of the reports disseminated, the United States' direct exposure to Greece, Ireland, Italy, Portugal, and Spain is upward of $180 billion with an additional sum of potential exposure reaching $600 billion. If one includes U.S. exposure to Germany and France, total exposure reaches an estimated $2 trillion. It is my hope that President Obama, Secretary Geithner, and other U.S. officials treat a figure equal to 7 percent of U.S. GDP with the attention such a figure deserves. When the American people are struggling with a sluggish economy and dismal employment opportunities, idle promises without action from government bureaucrats are not acceptable.