By Ian McKendry

WASHINGTON (MNI) – U.S. Treasury Secretary Timothy Geithner Friday
said there is “no alternative to a deal” on raising the debt ceiling
before the August 2 deadline, adding that the U.S. needs to bring the
federal deficit down to around 3% of GDP and keep it there.

The U.S. needs to address its deficit problems and can no longer
defer its fiscal responsibility, he told students at Dartmouth
University.

Geithner said while he anticipates the political wrangling in
Washington over the U.S. budget to continue — the leadership in
Congress understand the U.S. cannot default.

He also said while the debate on a plan will be ongoing, the most
important part of fiscal reform is its composition, as opposed to how it
is done.

“The composition will effect the ultimate incentives for
investment,” Geithner said.

Geithner also said the U.S. needs to reform the tax system, saying
it needs to be less “distorted and more fair.”

The Treasury Secretary said there are too many loopholes and
distortions, adding that the administration plans on proposing “broader
reforms” that will bring down the statutory rate in a more revenue
neutral way.

When asked about the Administration’s decision to release 30
million barrels of oil from the U.S’s Strategic Petroleum Reserve, he
said it was because of supply disruptions in Libya and was not motivated
by politics.

He said the reserve is there to act as a bridge during times of
supply disruptions and the situation in Libya was an “identifiable
disruption.”

More optimistic on the economy, Geithner said the U.S. is
two-thirds of the way through the housing adjustment caused by the
crises and that Americans now have less debt and are saving more.

“Most of weakness you see is caused by the aftershocks of the
crisis,” Geithner said, adding that outside of the areas most effected
by the crisis the economy is improving.

Geithner added that he thinks the slowdown in economic growth seen
during the first part of 2011 was mostly due to externalities, namely
the disastrous earthquake in Japan that caused supply disruptions and
unusually bad weather.

He said he expects growth in the first half of the year to
ultimately be around 2%, but expects the second half to be stronger.

Geithner also said he expects an announcement this weekend on
global capital requirements.

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

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