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U.S. military chief eyes euro zone fallout risks
December 9, 2011 / 10:46 PM / 6 years ago

U.S. military chief eyes euro zone fallout risks

* Severe euro zone crisis could impact F-35 program

* Dempsey eyes potential for civil unrest

* “The euro zone is at great risk” - Dempsey

By Phil Stewart

WASHINGTON, Dec 9 (Reuters) - The top U.S. military officer said on Friday he believed the euro zone was at great risk and warned that any breakup could have consequences for the Pentagon, even threatening its top weapons program.

General Martin Dempsey, chairman of the U.S. military’s Joint Chiefs of Staff, said he met U.S. Federal Reserve Chairman Ben Bernanke for two hours last week following a half-day visit to the Fed in New York last month.

His comments appeared to partly reflect what he learned in those sessions, part of an effort by Dempsey to get up to speed on global economic issues likely to shape his decisions as chairman - a post he assumed in September.

“The euro zone is at great risk,” Dempsey told an event hosted by the Atlantic Council, a Washington-based think tank.

“I know that they’ve taken some measures here with the 17 members of the euro zone to try to better align - and I guess that’s the right phrase - monetary and fiscal policy. But it’s unclear, to me at least, that that will be the glue that actually holds it together.”

Global stocks rebounded and the euro rose on Friday after nearly all European Union leaders agreed to build a closer fiscal union to address the region’s debilitating debt crisis. It was unclear if Dempsey was aware of the accord when he made his remarks.

A four-star general with a master’s degree in English, Dempsey acknowledged he was no expert on economics and it is rare for a chairman of the Joint Chiefs of Staff to comment so extensively on economic issues.

But Dempsey suggested part of his concern was that the U.S. military could be exposed to any unraveling of the euro zone. “I mean (exposed) literally, through contracts and programmatics, but also because of the potential for civil unrest and the breakup of the union that has been forged over there,” he said.

He did not elaborate on concerns about civil unrest but experts cite the potential for riots, shortages and bank runs in the event of a euro zone breakup. The United States’ militaryhas more than 80,000 troops in Europe and more than 20,000 civilian employees.

Dempsey pointed to the F-35 Joint Strike Fighter, the Pentagon’s costliest weapons program, which the United States is developing together with partners including Britain and Italy. A crisis in Europe, if it were serious enough, could force allies to re-allocate spending which had been earmarked for the F-35, he said.

That, in turn, could drive up the cost of individual U.S. aircraft at a time when U.S. defense budgets are squeezed.

“It will clearly put them at risk if all the economic predictions about a potential collapse were to occur - inflation, devaluation,” Dempsey said.

“Obviously they’d have to make some national decisions about reallocation of resources that would, could potentially affect the JSF.” (Editing by Todd Eastham)

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