Fed’s Dudley Says Europe Doesn’t Face Fiscal Insolvency Over Debt Crisis

Federal Reserve Bank of New York President William C. Dudley said Europe has the “fiscal capacity” to solve its issues and that its problem is “really a political one.”

“I do not see Europe as having a fiscal insolvency problem,” Dudley, 58, said at a hearing of a House Oversight and Government Reform subcommittee in Washington. “Their situation fiscally is very comparable to ours” and that of other nations.

Dudley said some European banks face “greater difficulty” than others, and that the stress tests being undertaken by regulators are “a very important step” in bolstering confidence in the financial system.

“You really have to solve two problems,” Dudley said. Regulators need to “make sure the banks have enough capital,” and “you also have to get each country on a sustainable fiscal path so that people are comfortable that the sovereign debt they hold is going to be money good.”

To contact the reporter on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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