Tags: GM | Euro | Crisis | US

GM CEO: Euro Debt Crisis Could Still Infect US

By    |   Monday, 31 Oct 2011 12:31 PM

General Motors Chief Executive Daniel Akerson says the European debt crisis has not yet passed and could still spread to the U.S.

The crisis might spread to exposed U.S. banks, Akerson told reporters at a conference in Shanghai, according to The Wall Street Journal.

The debt contagion, he said, may spread if American financial institutions are holding assets such as bank obligations in Europe, even though U.S banks have less leverage now.
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MF Global probably became the largest U.S. financial institution so far to fall victim to the euro zone crisis because of its best it made on European sovereign debt, according to the Financial Post.

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Dan Akerson
(Getty Images photo)
The Federal Reserve Bank of New York has suspended the company from doing new business with the New York Fed, and MF Global's holding company filed for bankruptcy protection.

Although U.S. exports to Europe are small compared to the overall economy, large U.S. banks hold a substantial amount of European debt, said Bernard Baumohl, an economist with the Economic Outlook Group, according to USA Today. That will cause uncertainty that will weigh down economic recovery, he said, predicting that the crisis could cut U.S. economic growth by 0.25 percent next year.

Most economists participating in a USA Today survey said that, despite the euro zone agreement last week, the euro zone debt crisis will remain a threat to the global economy next year and will hurt U.S. economic growth. Most of the economists believe the debt crisis will prompt a recession in Europe that will hurt the American economy.

Last week European leaders agreed to increase the size of the euro rescue fund, require banks to increase their capital, and reduce Greek sovereign debt in an attempt to control the crisis.

The euro zone rescue plan, Baumohl told USA Today, lacks details and does not guarantee that investors will buy bonds of struggling countries like Greece and Italy.

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General Motors Chief Executive Daniel Akerson says the European debt crisis has not yet passed and could still spread to the U.S. The crisis might spread to exposed U.S. banks, Akerson told reporters at a conference in Shanghai, according to The Wall Street Journal. The...
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Monday, 31 Oct 2011 12:31 PM
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