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Institute of International Finance Managing Director Charles Dallara in Jackson Hole, Wyo., on the European debt crisis and its impact on the U.S.
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They tradition at a Charles to Laura -- managing director of the institute for international finance.
Thank you for joining us -- should let my audience know that you've been the managing director from nineteen years and -- you going to be leaving in a few months.
But you were instrumental in negotiating the deal with the Greek government and the ECB in the private investors.
On the hair -- several months ago now as we look forward there's a lot of concern about Europe and the question I keep hearing in the United States.
What kind of dollar exposure can put it into a figure we can understand.
Do US investors US financial institutions whether they be pension funds money markets.
If something happens in Europe what's the dollar figure exposure in the United States.
Well -- -- good afternoon is a pleasure to be with you.
I'm not gonna try to put a precise figure on that exposure what I do know.
Is it it is much less and it was only half a dozen months ago and that a lot of the exposure which remains is hedged.
It's -- because investors are uncertain.
There is not a floor of confidence surrounding the outlook for Europe at this stage and I think September's a crucial month.
Market expectations have grown.
Around ECB action dealing with continued problems of Greece and Spain.
And I think there right now investors are waiting hoping that the ECB will follow through.
But not at all certain.
All right well let's talk about the ECB because as our vacation begins for a long holiday Europeans are coming off holiday already you reports.
That the ECB is being pushed to do more in terms of regulating that thousands of banks in Europe maybe even buying Spanish Italian debt.
What do you see coming down the -- either from the ECB -- the Euro zone.
That gets -- -- this continuing crisis that keeps rearing its head every few months.
Well I think the ECB.
Is likely to announce but a fairly well articulated.
Plan.
Next week for buying sovereigns under certain conditions and I think that the the eyes -- on Spain if Spain signs up.
For memorandum of understanding about his program with Brussels and I think it's likely to do so even though there continues to be political reluctance.
Then I think this will enable the ECB.
To move behind that and begin a program of buying Spanish bonds this is likely to have a positive spin off -- On the other sovereigns there some of the broader issues surrounding Europe though -- remain on resolved and I think until those broader structural issues are resolved.
A lot of what is happening now in Europe will be temper rising.
Well let me ask you about those issues very quickly we've got on the -- Merkel calling for a new.
Constitutional.
I guess could convention before the end of the year to deal with the -- fundamental problem there.
You have a common currency but independent fiscal policy.
And you yourself have called for.
Greece to get more time from the Europeans to implement -- Austerity measures but you got German parliamentary members and leaders saying we can do without Greece.
It seems as if things are unraveling in Europe not -- Well German parliamentary authorization opposition to supporting Greece remains quite strong.
But chancellor Merkel has stared at down in the past in my expectation.
Is is quite.
A solid visual -- down again and that Europe will come around to giving Greece a bit more time I think rolling the dice on a Greek exit at this point.
In the Euro zone is a highly risky proposition and I doubt seriously.
Whether chancellor Merkel other European leaders for the ECB want to roll that that -- dice at this point I do think however.
That it does point towards.
Constitutional referendum.
I think we're gonna have to see a game plan for fiscal convergence.
Fiscal unification in Europe it's not gonna happen for many years but without a clear game plan.
Continued uncertainty wall hanging over the European market.
And as -- wrap up Sarah I -- so called experts repeatedly say we can let Greece go out of Europe -- -- not an issue and yet I think was in May you told another program an interview.
That day to let Greece go is unmanageable itself over a trillion dollar trillion Euro exposure.
To Europe that just can't be fathom is that accurate.
I I think that's right in fact I think the exposure to -- -- Has grown in in the official sector since then certainly private sector exposures down.
Because of the huge debt reduction we we executed earlier this spring.
But if you think about the basic fact that the ECB itself.
Is exposed to Greece public -- to the tune of twice the level of its capital.
If you think about the potential contagion to can sweep through Spain Portugal even Italy and Ireland.
Did you see that the -- potential implications of this and the cost to Europe.
Will be much much greater.
Then the paltry twenty or thirty additional billion which is needed to allow Greece a bit more time to get back on its feet we're talking.
Upwards of one trillion probably close to two trillion in additional expenses.
And let's remember even if Greece leaves the Euro.
It remains a member of the European Union.
And therefore the European Union will still have to help stabilize what could be.
An extremely unstable situation.
Charles a -- thank you very much for joining us here on Fox Business network's money you have a good evening -- Pleasure to -- --
