Tuesday, August 2, 2011

Geithner unsure if US debt to be downgraded, but debt battle damaged confidence

US Treasury Secretary Timothy Geithner said he is not sure whether the bitterly fought debt agreement to be considered by the US Senate will avoid a downgrade of the U.S. top-tier credit rating.

Geithner, in an interview with ABC News aired today, also said he thought the risk of the US economy slipping into a double-dip recession was low, but added that the battle over the debt limit and the threat of default had damaged confidence in the economy.

"I don't think that that risk right now is very significant," he said of a double-dip recession, in the interview which was recorded on Monday afternoon.

Geithner said the ratings agencies were "going to take a careful look" at whether Washington politicians have the will to act to bring deficits under control.

"It's not my judgement to make" whether the deal is enough to avoid a downgrade, saying that was up to the ratings agencies.

"You know this is in some ways a judgment on the capacity of Congress to act. And what this deal does is put us in a much better position to make those tough choices because the down payment's pretty strong and this special committee, this mechanism for the reforms is a much more powerful device than we've had in the past."

Asked by interviewer George Stephanopoulos whether Congress' gridlock over the debt limit made a downgrade more likely, Geithner said, "I don't know. It's hard to tell."

"I think this is a good result but a terrible process. And ... I think as the world watched Congress step up to the edge of the abyss, it made them really wonder whether this place can work. But this is a good deal. It's a good agreement," he said.