March 16, 2010 / 4:20 PM / 9 years ago

UPDATE 1-U.S. debt at no risk of downgrade-Geithner

* Geithner says U.S. sovereign debt rating secure

* Downplays significance of Moody’s cautionary report

* Lawmakers urged to cooperate in deficit reduction drive (Adds details, background, byline)

By Glenn Somerville

WASHINGTON, March 16 (Reuters) - U.S. Treasury Secretary Timothy Geithner insisted on Tuesday there is “no way” major credit rating agencies will cut the gilt-edged rating they assign to U.S. debt offerings.

His comments followed a report on Monday in which Moody’s Investors Service said risks had grown to the credit ratings of the United States and other large Triple-A sovereign debt issuers. See [ID:nLDE62B1T5].

“What people who look at our country — credit rating agencies, investors, Americans, what they look at is whether we have the political will to restore gravity to our fiscal position,” Geithner said in response to questions at a U.S. House of Representatives Appropriations Committee hearing.

Geithner said measures proposed by the Obama administration will “dramatically” lower deficits over the next four to five years as a percentage of total economic output and said Congress should help in controlling spending.

Geithner conceded that if the country’s credit rating was lowered, it would cost more to borrow but insisted it won’t happen.

He played down reports saying that Moody’s Investors Service was warning countries like the United States and Britain that their levels of indebtedness heightened risks of a downgrade.

“There’s no way that’s going to happen,” Geithner said, casting some of the responsibility for making sure it doesn’t happen back onto lawmakers.

“There’s not a chance that that’s going to happen to this country but it’s very important for people to recognize that ... this recovery will be weaker if we don’t do a better job together over time of demonstrating that we’re going to have the political will to make tough choices.”

Moody’s said on Monday that Triple A-rated governments face increasing challenges to maintain their ratings as the recovery remains sluggish and they prepare to exit stimulus programs.

The United States and Britain, though they have borrowed more than many other top-rated countries, have greater flexibility in reversing debt dynamics — repairing balance sheets following a major shock.

Credit ratings help investors and lenders decide what the chances are a borrower might fail to repay. A top-rated Triple A rating means there is little or nothing to worry about but a lower rating signals more risk and therefore a higher premium, in the form of interest rates, will be levied.

“On balance, we believe that the ratings of all large Aaa governments remain well positioned - although their ‘distance-to-downgrade’ has in all cases substantially diminished, and tail risk has widened,” the agency said in a report. (Additional reporting by David Lawder and Emily Kaiser; Editing by Andrew Hay)

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