Nov. 2, 2011, Fairfax, VA—Americans for Limited Government President Bill Wilson today urged members of Congress to resist any U.S. role in providing financial assistance to Europe to alleviate the sovereign debt crisis.
"The fact is, we are already bailing out Europe," Wilson warned, citing a recent Congressional Research Service (CRS) report published in September.
The report states, "After extended negotiations, European leaders and the International Monetary Fund (IMF) agreed in May 2010 to provide funding for a €110 billion (about $158 billion) loan facility for Greece and a broader stabilization fund for other euro area countries should they require loans. Both loan packages were backstopped by various forms of assistance from the U.S. Federal Reserve Board (FRB) and the IMF."
The broader stabilization fund totals €440 billion, called the European Financial Stability Facility (EFSF). "It's not up to the American people to bail out European banks that bet poorly on the sovereign debt of socialist governments that could not afford to be paid back," Wilson said.
The U.S. provides 17.72 percent of the IMF's finances. To date, the IMF has dispensed €78.5 billion to Greece, Portugal, and Ireland, or the Sept. equivalent of $112 billion, according to the report. "The U.S. taxpayers' tab is already almost $20 billion so far that the IMF has put at risk," Wilson noted.
Wilson's call comes as House Speaker John Boehner and U.S. Treasury Secretary Timothy Geithner met to discuss Europe on Capitol Hill. Geithner reportedly briefed Boehner "on the European debt crisis and the potential impact on America," according to the Speaker's spokesman.
The CRS report found U.S. financial institutions to be on the hook for as much as $641 billion more in exposure to Portugal, Ireland, Italy, Greece, and Spain (PIIGS).
"The bailout of European banks is already taking place under the noses of members of Congress and is putting U.S. taxpayer resources at risk, whether through the IMF or the Federal Reserve," Wilson said.
"It's not enough just to stop the IMF. It's got to be comprehensive," Wilson warned. He recently sent a letter urging members of Congress to adopt legislation that would prohibit a U.S. bailout of European banks, whether through the International Monetary Fund, the Federal Reserve, or any other institution.
"Key EU leaders like Germany are unwilling to heap the bad debts of Portugal, Italy, Ireland, Greece, and Spain (PIIGS) on the backs of their own taxpayers via the European Central Bank (ECB), and so wish to pass the buck along to the IMF, of which the U.S. funds a significant portion," Wilson's letter explained.
In Europe, member states are voting to leverage the €440 billion European Financial Stability Fund (EFSF) to at least €1.4 trillion, with the IMF being considered as the primary vehicle for the leverage, Wilson warned.
"If the bailout financing comes from the IMF, U.S. taxpayers could be on the hook for more than 17 percent of the bailout: at least €170 billion, or $235 billion," he wrote.
Wilson emphasized that the plan would make the U.S. responsible for Europe's debts when it is already the world's largest debtor with a debt of over $14.9 trillion.
Wilson concluded, "The sad truth is American taxpayers, by financing the IMF, are underwriting the destruction of representative government in Europe that their fathers and grandfathers fought and sacrificed their lives to defend."
"The Future of the Eurozone and U.S. Interests," Congressional Research Service, Sept. 2011 at www.getliberty.org/files/R41411.pdf .
"The United States and Europe: Current Issues," Congressional Research Service, June 2011 at www.getliberty.org/files/167961.pdf .
Letter to Members of Congress Against European Bank Bailout, Americans for Limited Government President Bill Wilson, Oct. 26, 2011 at www.getliberty.org/files/EuropeanBailoutLe