US keenly watching Greek 'soap opera'

The Greek crisis has had an impact on the value of US companies which export goods to Europe and risk a drop in demand due to the "financial shock," he explained. Greek-related turmoil on the international bond markets "affects the cost of capital globally," he added.

Mr Kennard said President Barack Obama telephoned Germany's Angela Merkel last week to "encourage action on the situation" after Berlin hesitated on whether or not to co-fund the Greek bail-out.

The diplomat said nobody in Washington had asked him about the possibility of Greece leaving the euro, as mooted by some economists such as Nobel Prize-winner Paul Krugman. But he predicted the crisis will lead to EU institutional change.

"There's a lot of game theory going on now - the 'what ifs.' My own personal view is that ... it's more likely than not that the EU puts some governance structures in place to make sure that this doesn't happen again. It's probably easier for them to do that than to deal with a eurozone country leaving the eurozone, which would be quite cataclysmic."

Mr Kennard said the White House is at the same time trying to keep up with the EU's post-Lisbon Treaty reshuffle.

"There's a hunger for information about the EU, a lot of interest in what's happening with the post-Lisbon changes. Everybody I talked to was asking me about that," he said on his Washington visit.

The diplomat said the US has recognised the new law-making powers of the European Parliament, with US vice-president Joe Biden set to give a speech at the assembly in Brussels on Thursday in a mark of respect the same week that MEPs vote on whether or not to let US counter-terrorism agents access EU bank data.

'Cathy' has friends

The ambassador also lavished praise on EU foreign relations chief Catherine Ashton: "She's a terrific interlocutor ... She has a lot of friends in Washington working hard to make sure she's successful."

He downplayed the importance of the recent fall of the Belgian government, which is likely to see Belgium take over the EU presidency in July under a caretaker administration.

"With [former Belgian prime minister] Van Rompuy being head of the European Council it makes that issue easier because he has such a wonderful understanding and pulse on where the Belgian government is," Mr Kennard said. "The Belgian diplomatic corps is one of the finest in the world. It has some wonderful career diplomats, including in particular [Belgium's EU ambassador] Jean de Ruyt. He's a real pro ... They'll work this out."

The recent US decision to cancel a regular summit with the EU in Madrid in May has prompted soul-searching in Brussels on whether Washington still sees it as an important power.

But despite his warm words, Mr Kennard was unable to confirm whether President Obama will make it to the next scheduled US-EU summit, due in November. "At this point, the White House is not able to commit to the president's travel schedule later in the year," he said.