June 24 (Bloomberg) -- U.S. Treasury Secretary Timothy F. Geithner said he “absolutely” expects an agreement to be reached on increasing the $14.3 trillion federal debt limit.
“We are going to avoid a default crisis because we are a country that meets its obligations,” Geithner told reporters today in Manchester, New Hampshire. “We have no alternative. That’s recognized by the leadership in both houses, by both parties, but we are also going to reach an agreement to try to bring down long-term deficits.”
Geithner, 49, was in New Hampshire to meet with local business leaders in Manchester. Later in the day, he will participate in a lecture at Dartmouth College, the secretary’s alma mater.
President Barack Obama will meet with Senate Democratic leader Harry Reid and Republican leader Mitch McConnell next week in an effort to revive talks on the budget and deficit, the administration announced today. House Majority Leader Eric Cantor and second-ranking Senate Republican Jon Kyl yesterday walked away from a seven-week-long negotiating effort led by Vice President Joe Biden.
“Longer term, the only way you can do this is to do it with balance,” Geithner said. “We need to have some very substantial savings across the government, across all parts of the U.S. government. You need to have some modest changes to revenues to find balance. There is no way to do it without that.”
House Speaker John Boehner today set out conditions for raising the debt ceiling, including no tax increases, dramatic spending cuts and a government spending overhaul. Democrats want to eliminate tax breaks for corporations including oil and gas companies, according to Maryland Representative Chris Van Hollen, a Democratic participant in the Biden group.
The Treasury Department has said the U.S. risks defaulting on its debts starting Aug. 2 without an increase in the ceiling. Moody’s Investors Service this month said it will put the U.S. government’s Aaa credit rating under review for a downgrade unless there’s progress on increasing the limit by mid-July.
Standard & Poor’s in April put the U.S. government on notice that it risks losing its top credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.
So far, the concern about the deficit hasn’t driven U.S. borrowing costs to above-average levels. The yield on the benchmark 10-year Treasury note was 2.89 percent late yesterday in New York. That’s below the average of 7 percent since 1980 and the average of 5.48 percent in the 1998 through 2001 period, according to Bloomberg Bond Trader.
Geithner, in his remarks today, also said “any feasible solution for Greece is going to have to combine some very tough economic reforms with some temporary financial assistance as a backstop to let those reforms work.”
European Union leaders vowed today to stave off a Greek default as long as Prime Minister George Papandreou pushes through a package of budget cuts next week, pledging to do whatever it takes to stabilize the euro economy.
“We have agreed that there will be a new program for Greece,” German Chancellor Angela Merkel told reporters at an EU summit in Brussels. “This is an important decision that says once again we will do everything to stabilize the euro overall.”
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