WASHINGTON (AP) — The European debt crisis is likely to have only a "modest" impact on the US economic recovery as long as Wall Street stabilises, Federal Reserve chairman Ben Bernanke told Congress yesterday.

Testifying before the House Budget Committee, Bernanke struck a more confident tone that the recovery will remain intact despite problems in Europe as well stubbornly high unemployment and a fragile housing market here at home.

"The economy ... appears to be on track to continue to expand through this year and next," Bernanke said.

However, the pace of the expansion — 3.5 percent this year by the Fed's estimate — won't be strong enough to quickly bring relief to the 15 million Americans who are unemployed. The unemployment rate now at 9.7 percent would likely see only a "slow reduction", Bernanke warned.

Fears have grown in recent weeks that the recovery could be derailed.

One worry is if Europe's debt crisis turns into a broader financial contagion, crimping lending in the United States and around the globe. The situation has spooked investors, sending Wall Street into periodic nosedives.

Another worry is that hiring in the United States by private companies could stall. That fear was stoked by a government report last Friday, showing that job creation at private companies in May slowed sharply, with businesses adding only 41,000 new jobs, the fewest since the start of the year.

However, Bernanke said signals suggest that the economy will keep on plodding ahead as massive government stimulus fades. Consumers and businesses have picked up the baton from the government and are spending sufficiently to keep the recovery on track, he said. Still, spending by consumers is much more subdued than in the early stages of past economic recoveries. That's why economic growth is expected to be only modest this year, rather than blistering.

"It appears ... that the recovery has made an important transition," Bernanke told lawmakers. While it can't be entirely ruled out that the country could slide back into a "double dip" recession, Bernanke predicted that the "economy will continue to recover at a moderate pace".

Discussing the European crisis, Bernanke also struck a confident tone that the United States would get through the fallout without much damage.

"If markets continue to stabilise, then the effects of the crisis on economic growth in the United States seem likely to be modest," Bernanke said.

Stock portfolios are taking a hit from a rattled Wall Street and weaker economic prospects in Europe probably will sap demand for US exports.

Although such negative forces "will leave some imprint on the US economy," Bernanke said there are other more positive forces that will help out the United States. They include low mortgage rates as investors flock to the safety of US Treasurys, and lower prices for oil and other globally traded commodities, Bernanke said.