By Siobhan Hughes
WASHINGTON (Dow Jones) -- U.S. Treasury Secretary Timothy Geithner on Tuesday said the U.S. was gradually pulling out of its economic woes and said America's ability to deal with budget problems was stronger than Europe's, even as the U.S. still must face its own fiscal issues.
"We are in a much stronger position to manage those challenges than is true for any other major economy in the world," Geithner said at a conference on the budget. "Europe is in a fundamentally different situation from the United States and so it's hard to compare the challenges they face...ours are so much more modest and manageable than theirs."
His comments come as European nations are struggling with how to manage a perilous combination of weak or no growth and budget deficits. The crisis has caused political change in Europe, driven by a backlash against fiscal austerity, most recently with an election in France and with news that Greece needs to hold new elections after the country's president failed to form a coalition government. A public debate is now being waged over the limits of austerity and whether spending cuts risk going too far and undermining growth.
"You're seeing them talk about a better balance between growth and austerity," Geithner said. He said that "we should welcome this debate about growth in Europe." He also indicated that Germans were starting to recognize that German wages might need to rise more rapidly than in other European countries so that Germany's neighbors could become more competitive.
Asked about the possibility that Greece might leave the European monetary union amid political upheaval, Geithner said that "the Greeks have a particularly unique set of challenges." He said that the Greek government "is going to have to decide what strategy they can support going forward, but Europe as a whole has a very strong incentive in doing what it is going to take to make monetary union work," Geithner said.
The U.S. is facing its own budget challenges, including the year-end expiration of the 2001 and 2003 tax cuts. The U.S. also is projected to reach its borrowing limit by year's end, though Geithner said that the U.S. Treasury Department had tools to keep operating a bit beyond that and into early 2013. Geithner said that both Democrats and Republicans had a "powerful incentive" to produce "a balanced package." He said "it's not that complicated--we can do it without asking Americans to bear an unacceptable burden."
-By Siobhan Hughes, Dow Jones Newswires;
(202) 862-6654; [email protected]