“The deeper crisis now facing Europe is a significant risk to the U.S. outlook as our recovery remains vulnerable to events abroad,” the Treasury said in a semi-annual report to Congress. “A tightening of financial markets in Europe can adversely impact the willingness of U.S. banks to lend and invest. Our trade connections with Europe are broad and deep.”

The Treasury said recent actions by European leaders -- including measures to restrain budgets -- and steps by the European Central Bank “helped reduce financial stress, and lay the foundations for greater stability.”

“The success of the next phase of the crisis response will hinge on Europe’s willingness and ability, together with the ECB, to encourage stability and growth by applying its tools and processes creatively, flexibly, and aggressively, to support countries as they implement reforms and strengthen their banking sectors,” the Treasury said.