Eurozone debt crisis puts US at risk, warns Bernanke

FED chairman Ben Bernanke said the US economy is at risk from Europe's debt crisis and the prospect of fiscal tightening back home, but did not discuss the steps his central bank might take to protect the expansion.

"The situation in Europe poses significant risks to the US financial system and economy and must be monitored closely," Mr Bernanke said yesterday, in testimony to the Joint Economic Committee in Washington.

"As always, the Federal Reserve remains prepared to take action as needed to protect the US financial system and economy in the event that financial stresses escalate."

Mr Bernanke also warned that "a severe tightening of fiscal policy at the beginning of next year that is built into current law, the so-called fiscal cliff, would, if allowed to occur, pose a significant threat to the recovery".

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US stocks pared gains after Mr Bernanke failed to give any indication that he was considering another round of money printing or quantitative easing.

Mr Bernanke also elaborated on his views about the crisis in Europe, saying it was "acting as a drag on our exports, weighing on business and consumer confidence, and pressuring US financial markets and institutions".

Meanwhile, Ireland's reliance on US investment is at risk if proposed reforms to Washington's tax code on overseas profits become law, it was warned yesterday.

Heinz chief executive William Johnson said the changes put forward to the US tax laws, which will allow the country to tax profits made by American firms overseas, will make it more difficult for his firm to move businesses to this country and elsewhere.

Addressing the US Embassy's annual conference in Dublin, Mr Johnson said US President Barack Obama's plans to impose the tax should concern everyone.

"All of us should be concerned by any legislation in America that would increase taxes on profits from the international operations of US-based companies," he said.

Taoiseach Enda Kenny, however, played down the concerns.

"I raised this with President Obama on a number of occasions.

"Obviously this is an election year there and this always raises its head and was raised during the American election process," he said. (Bloomberg)

- Joshua Zumbrun and Jeff Kearns

Irish Independent

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