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Mandel Ngan  /  AFP - Getty Images
US Treasury Secretary Timothy Geithner testifies before the Senate Banking Committee on October 6, 2011.
msnbc.com news services
updated 10/6/2011 2:35:35 PM ET 2011-10-06T18:35:35

The Obama administration is urging European leaders to deal more forcefully with a debt crisis that could significantly damage the U.S. and global economy.

Treasury Secretary Timothy Geithner told a congressional panel Thursday that the debt crisis has already slowed growth significantly in Europe and around the world. European leaders must move quickly to contain it.

"The crisis in Europe presents a very significant risk to global recovery," Geithner said during a hearing of the Senate Banking Committee. "Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand."

Geithner was echoing remarks by his boss, President Barack Obama, who said during a White House news conference Thursday that Europe needed to "act fast" on the debt crisis.

"The biggest head-wind the American economy is facing right now is uncertainty about Europe because it's affecting global markets," Obama said.

"They've got to act fast," he added.

Geithner told the panel that major U.S. banks and money market funds have moved to substantially reduce their exposure to the countries facing the most pressure. He called their direct exposure "very modest." But he said the crisis was slowing economic growth in Europe, which he said did represent a threat to the U.S. economy.

"We want Europe to move and we want to make sure they move more aggressively," Geithner told the committee.

Geithner said a key difference between the current European crisis and the 2008 financial crisis is that U.S. banks have greater capital reserves to hold against losses.

European leaders are moving to have their banks boost capital reserves, too. That would help them cover losses should Greece or another heavily indebted nation default on its debt.

On Wednesday, German Chancellor Angela Merkel, the head of Europe's biggest economy, backed the effort to recapitalize banks.

The Associated Press and Reuters contributed to this report.

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