Obama: Europe must 'act fast' on debt

[1]

US President Barack Obama warned on Thursday that Europe must ‘act fast’ to conquer its debt crisis, after saying the continent's troubles posed a serious threat to the fragile US economy.

"They have got to act fast," Obama told a White House press conference. "We have got a G20 meeting coming up in November. My strong hope is that by the time of that G20 meeting, that they have a very clear concrete plan of action that is sufficient to the task."

The debt crisis that began in Greece, snaring Ireland and Portugal on the way and now threatening Italy and Spain, is putting at risk the whole eurozone and its currency as banks exposed to sovereign debt find it impossible to raise funding.

The resulting "credit crunch" has sparked warnings of a possible replay of 2008 when US investment bank Lehman Brothers collapsed, almost taking the global financial system down with it, but for massive government support.

"Uncertainty around Greece and their ability to pay their debts runs on in the capital markets... on the debt that many of these southern European countries have been facing as well as Ireland and Portugal," Obama said.

"All that's put severe strain on the world financial system," he said, adding that "the big headwind (facing) the American economy" is the uncertainty about Europe.

Obama stressed he was confident that European leaders "want to act to prevent a sovereign debt crisis from spinning out of control or seeing the potential breakup of the euro."

But he pointed to the ‘tough’ politics in Europe, where leaders must forge agreement with more than two dozen parliaments. "Engineering that kind of coordinated action is very difficult," he said.

And he insisted that Europe could not, as many nations have for decades, rely on the United States being "the purchasers of last resort" with Americans snapping up the world's goods.

With US families and businesses cutting back and seeking to reduce debt, "what that means is Europe is not going to be able to export its way out of this problem," Obama said.

"We can't just be, you know, running up our debt in order to help other folks' economies," said.