June 30, 2015 / 5:02 PM / 4 years ago

Obama says Greece won't be 'major shock' to U.S. financial system

WASHINGTON (Reuters) - President Barack Obama said on Tuesday the financial crisis in Greece should not create a major shock for the U.S. economy, but warned that its fallout could dampen global growth and encouraged both sides to reach a deal.

“In layman’s terms for the American people, this is not something that we believe will have a major shock to the system,” Obama said during a news conference with Brazilian President Dilma Rousseff at the White House.

“But obviously it’s very painful for the Greek people, and it can have a significant effect on growth rates in Europe.”

If a deal is not reached between Greece and its creditors in the coming hours, Athens would default on a loan to the International Monetary Fund, a move that could trigger an exit from the euro zone and knock the European economy.

Obama said if Europe’s economies are affected, that would tarnish the rest of the world.

“If Europe’s not growing the way it needs to grow, that has an impact on us. ... That can have a dampening effect on the entire world economy,” Obama said.

Greece needs to find a pathway toward economic growth and to stay in the euro zone, Obama said. He noted Greece had faced an “ongoing crisis” since 2009.

Obama also tried to play down the potential effects on financial markets.

“It is an issue primarily of concern to Europe,” Obama said. “It’s something that we take seriously, but it’s not something that I think should prompt over-reactions. And so far I think the markets have properly factored in the risks involved.”

U.S. President Barack Obama smiles during a joint news conference with Brazil President Dilma Rousseff in the East Room of the White House in Washington June 30, 2015. REUTERS/Kevin Lamarque

Obama said Washington has encouraged the Greek government and its creditors to keep negotiating. German Chancellor Angela Merkel, with whom Obama spoke on Sunday, ruled out new negotiations with Greece until after it votes on a proposal from creditors.

Obama hinted at preparations in case a resolution is not reached.

“It is also important for us to make sure that we plan for any contingency, and that we work with the European Central Bank and other ... international institutions to make sure that some of the bumps that may occur in the financial markets, that have already occurred, are smoothed out,” Obama said.

Additional reporting by Roberta Rampton and Emily Stephenson

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