October 3, 2011
Austan Goolsbee was President Barack Obama's most important economic adviser until August. He told SPIEGEL that Europe must recapitalize its banks immediately to avoid the risk of a financial collapse. He says that Europe has been far too hesitant in combatting the ongoing debt crisis.
SPIEGEL: Many US economists now say that Europe's currency crisis could destroy the US economy. Do you agree?
Goolsbee: It is a very serious threat. Though since US banks underwent extensive stress tests in 2009, markets have a good idea of what the capital positions are of the financial institutions here. Also, central banks would step in to try to prevent financial contagion.
SPIEGEL: But that doesn't protect the US economy from renewed difficulties.
Goolsbee: Certainly people in Washington are very concerned about what is going on in Europe. If the crisis there devolved into banks failing and a run on financial institutions, we saw in 2008 that such a situation could be highly contagious and lead to runs on all sorts of financial institutions worldwide. Also, it seems pretty likely that Europe is going to have a significant economic slowdown from dealing with these issues. If such a large segment of the world economy slows down that much, exports from the United States are going to go down. There would be negative ramifications in America -- which is still trying to recover from the last crisis -- but also globally.
SPIEGEL: Is Chancellor Angela Merkel up to the task of managing the crisis?
Goolsbee: Her leadership at this moment is very important for managing the crisis that is looming in Europe.
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