If Greece's debt crisis sparks renewed financial turmoil, it could hamper the U.S. economic recovery, a top Federal Reserve official said on Friday.
Philadelphia Federal Reserve Bank President Charles Plosser told the Delaware Chamber of Commerce that he believes a sustainable U.S. recovery is under way, with growth of around 3.5 percent this year and next.
"A risk to the forecast is the recent developments in Greece, where concerns over unsustainable fiscal deficits have led to downgrades of Greek sovereign debt and potential contagion to other countries with similar deficit problems, such as Portugal, Spain, and perhaps others," Plosser said according to prepared remarks.
"Renewed financial market turmoil could retard the recovery in the U.S., and we are following developments in Europe closely."
Governments around the world sought to calm markets on Friday after fears about Greece's debt crisis went global, with investors seeing it as an omen of turmoil in other European economies. Group of Seven finance ministers discussed the debt crisis in a conference call on Friday.
Plosser briefly addressed the plunge in stock markets on Thursday, which saw the Dow suffer its biggest-ever intraday point drop.
"Notwithstanding yesterday's volatility, financial markets are working again, there have been encouraging developments in the labor market, and the recovery is becoming more broad-based," he said.
Plosser said that a full U.S. economic recovery will take time.
"Given the depth of the hole we are trying to climb out of, full recovery will take time. On balance, I believe the recovery is on a sustainable path and will continue even as the effects of fiscal and monetary stimulus wane," he said.
© 2013 Thomson/Reuters. All rights reserved.