Geithner talks U.S. debt in Davos
TEXT OF STORY
JEREMY HOBSON: As the World Economic Forum continues in Davos, Switzerland, a note of optimism from the U.S. treasury secretary. But also a warning about the ballooning national budget deficit.
Here’s Secretary Geithner speaking just moments ago.
SECRETARY TIMOTHY GEITHNER: Americans understand that our fiscal position is sustainable over the long run. And it’s going to require a substantial set of changes to the balance between our resources and commitments to bring down the control.
Marketplace’s Europe correspondent Stephen Beard joins us now live with more. Good morning, Stephen.
STEPHEN BEARD: Hello Jeremy.
HOBSON: Why is Secretary Geithner talking about the U.S. debt right now in Davos?
BEARD: Well, austerity seems to have taken center stage. The Brits, of course, have already embarked on deep spending cuts, and the British Prime Minister David Cameron in Davos this morning was justifying that policy. Which is controversial. George Soros, the fund manager, earlier this week in Davos said that the U.K. risked tipping its economy back into recession with these cuts.
HOBSON: Right, that’s an argument we’ve heard from a few economists over here as well. If that’s the case though, that budget cutting could tip the global recovery backwards, why are country’s doing it right now?
BEARD: It’s all to do with credit rating. I mean when you get a powerful economy like Japan with its credit rating downgraded because of its debts, it could certainly happen to the likes of the U.K. And a downgrade would not only push up the cost of government borrowing for Britain, it would drive down the pound, making it more expensive to buy goods from abroad, and increasing inflation. Now the U.S. of course is in a very different position. It has a reserve currency. Foreigners are still rushing to put money into the dollar, but it certainly could suffer a downgrade.
HOBSON: Well, we’ll see what happens. Marketplace’s Stephen Beard in London, thanks Stephen.
BEARD: OK Jeremy.
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