While hailing recent progress in Europe’s financial mess, Federal Reserve Board chairman Ben Bernanke warned that the “situation remains difficult,” and the Fed will be prepared if U.S. markets need stabilization due to any contagion.

“The recent reduction in financial stresses in Europe is a welcome development for the United States, given the important trade and financial linkages connecting our economies,” Bernanke told a House committee Wednesday, according to prepared text of his remarks released by the Fed.

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