WASHINGTON, D.C.: US Treasury Secretary Jacob Lew warned Congress on Wednesday (Thursday in Manila) that foreign turmoil, such as Greece’s debt crisis, could destabilize the US financial system.
“In today’s globally integrated financial markets, foreign shocks have the potential to disrupt financial stability in the United States,” Lew said in testimony to the House of Representatives financial services committee.
Lew cited political uncertainty in Greece that has added to concerns about stability in the 19-nation eurozone. Greece’s negotiations with its creditors, the European Union and the International Monetary Fund (IMF), have bogged down as payment deadlines loom and the risks grow of a debt default and exit from the currency bloc.
“Although there has been some progress during Greece’s ongoing discussions with Europe and the IMF, the negotiations and the path to securing agreement are challenging and complex,” Lew told lawmakers.
“We continue to urge a timely resolution so that Greece is able to continue to meet its obligations,” he said.
Lew, in a phone call on Tuesday with Greek Prime Minister Alexis Tsipras, warned Athens that a failure to reach a deal on financing would immediately create hardship for Greece and “broad uncertainties for Europe and the global economy.”
Talks between Greece and the creditors over the release of 7.2 billion euros ($8.1 billion) of bailout funds to Athens have ground to a halt this week over the conditions for the funding. Greece needs the money to make a debt payment of around 1.5 billion euros to the IMF at the end of June.
Lew, presenting an annual report to Congress on the Financial Stability Oversight Council, highlighted that the current ultra-low interest rate environment was encouraging increased risk-taking that could threaten the financial system.