–Will Remain Treasury Secretary ‘For The Foreseeable Future’

By Yali N’Diaye

WASHINGTON (MNI) – It is in the interest of the global economy that
Europe acts to prevent an escalation of the ongoing sovereign debt
crisis, Treasury Secretary Timothy Geithner said Monday.

As for rumors that he plans to leave the Treasury Department,
Geithner only indicated he would keep his position for “the foreseeable
future,” declining to elaborate.

In other comments during an interview on CNBC, Geithner reaffirmed
the administration’s view on the statutory debt ceiling, sticking to the
August 2 deadline by which he expects an agreement to be reached because
there is no other alternative.

“We have no other option to give Congress more time,” he said,
expecting that the Republicans “won’t play around this” and warning
again of the “catastrophic” implications of a default.

Asked about the European situation, Geithner said European
authorities need “to act more forcefully to contain the risk of an
escalating crisis in Europe.”

“They have the capacity to manage this in a way that doesn’t add to
the broader burdens of the global economy,” he said.

Geithner noted there has been progress in this direction over the
past few weeks, through changes considered to the “firewalls” of the
terms of financial assistance to Greece, efforts to take the risk of a
disorderly default entirely off the table, and the commitment to stand
behind the banking system.

While those steps are “constructive,” Geithner said “the world
needs to see European leaders” actually put in place the changes that
“would help contain the risk of a broader crisis.”

In the U.S., Geithner stressed the need to reach an agreement on
the debt ceiling increase, accompanied by a long-term balanced deficit
reduction plan that still allows the administration “to do things that
are useful for the economy in the short term” such as extending the
payroll tax cut.

In fact, he has no doubt an agreement will be reached to raise the
debt ceiling, noting that “people are getting closer together,” with the
GOP leadership “definitely taking default off the table.”

Negotiators have all said separately that default was not an
option, Geithner noted, and Senate Minority Leader Mitch McConnell’s
proposal to increase the debt ceiling does just that.

McConnell’s proposal would allow the debt ceiling to be increased
in three tranches of $700 billion, $900 billion and $900 billion.

To get these increases in the debt ceiling, the president would
have to introduce spending cut packages of the same size — and
Democrats would have to defeat Republican motions to disapprove of the
debt hike.

But that only addresses default, Geithner said, repeating the
president’s comments last week, calling for a long-term deficit
reduction plan.

The final package will require savings as well as a “modest tax
reforms” and will have to be “balanced,” Geithner repeated.

Still, “We’re not going to dismantle Medicare and social security,”
he said. Nor is the administration is going to change the tax burden of
the majority of Americans.

Geithner reiterated that default is not an option.

“There is no plausible way to run a country in a situation for an
extended period of time” during which the government is not paying its
obligations, which is why even the Republican party has taken the option
of default off the table, he said.

He repeated the administration’s position that there is no backup
plan in case the debt ceiling is not raised by August 2. The only plan
“is for Congress to raise the debt limit.”

A default would be “catastrophic for the American economy, for the
American financial system, for the average American people,” he
repeated, adding it would be a “substantial unfair tax on all Americans
and it would bring the world economy again … to the edge of
recession.”

** Market News International Washington Bureau: 202-371-2121 **

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