Top US general worries about euro, potential unrest

US Chairman of the Joint Chiefs of Staff
Gen. Martin Dempsey
© AFP/Getty Images Alex Wong

WASHINGTON (AFP) – Top US military officer General Martin Dempsey admitted he was “extraordinarily concerned” about the euro’s survival Friday, pointing to potential civil unrest and the breakup of the European Union.

“The eurozone is at great risk,” the chairman of the Joint Chiefs of Staff told reporters, giving the strongest indication yet about the depth of Washington’s concerns over Europe’s financial tumult.

“We are extraordinarily concerned by the health and viability of the euro because in some ways we’re exposed literally to contracts but also because of the potential of civil unrest and breakup of the union that has been forged over there,” Dempsey said.

The unusually frank comments came hours after EU leaders banded together to back tighter budget enforcement, with 26 of the 27 members signaling their willingness to join a “new fiscal compact” to resolve the crisis.

But a Franco-German drive to enshrine new budget rules in a modified EU treaty failed, when non-euro Britain refused to go along, raising the prospect of a two-speed Europe or fully fledged EU breakup.

Dempsey said it was still unclear whether measures taken so far “will be the glue that holds it together.”

His remarks echo those of some economists, who have warned the collapse of the eurozone would reverberate well beyond the financial sector.

Prominent Citigroup economist and former central banker Willem Buiter warned Thursday that a fully blown breakup of the eurozone could spell a global depression and “pandemonium.”

Defaults and eurozone exits by Portugal, Italy, Ireland, Greece and Spain “would drag down not just the European banking system, but the north Atlantic financial system and the internationally exposed parts of the rest of the global banking system as well.”

The former Bank of England official said the result would be “a global depression that would last for years” with gross domestic product falling by more than 10 percent and unemployment in the West reaching 20 percent or more.

“The case for keeping the Euro Area show on the road would seem to be a strong one: financially, economically, and politically, including geopolitically,” he concluded.

US President Barack Obama and his Treasury Secretary Tim Geithner — who returned from Europe this week — have repeatedly urged Europe to move quickly to solve the crisis.

But both the White House and Treasury Department have been careful to preface their concern with expressions of confidence in Europe’s ability to pull through in the end.

“Look, Europe is wealthy enough that there’s no reason why they can’t solve this problem,” Obama said on Thursday.

Yet Dempsey’s comments are not the first time US security officials have waded into economic waters.

In 2009 Dennis Blair, then America’s top spy, warned Congress that the global economic crisis could eclipse terrorism as the greatest threat to US national security.