WASHINGTON, Aug 2 (Reuters) - U.S. Treasury Secretary Timothy Geithner said he is not sure whether the bitterly fought debt agreement to be considered on Tuesday by the U.S. Senate will avoid a downgrade of the U.S. top-tier credit rating.
Geithner, in an interview with ABC News aired on Tuesday, also said he thought the risk of the U.S. economy slipping into a double-dip recession was low, but added that the battle over the debt limit and the threat of default had damaged confidence in the economy.
“I don’t think that that risk right now is very significant,” he said of a double-dip recession, in the interview which was recorded on Monday afternoon.
Geithner said the ratings agencies were “going to take a careful look” at whether Washington politicians have the will to act to bring deficits under control.
“It’s not my judgement to make” whether the deal is enough to avoid a downgrade, saying that was up to the ratings agencies.
“You know this is in some ways a judgment on the capacity of Congress to act. And what this deal does is put us in a much better position to make those tough choices because the down payment’s pretty strong and this special committee, this mechanism for the reforms is a much more powerful device than we’ve had in the past.”
The plan approved by the House on Monday would raise the borrowing limit by enough to last into 2013 and creates a congressional committee to recommend a deficit-reduction package by late November.
Ratings agencies are still analyzing the deal, and Standard & Poor’s had said previously that $4 trillion in deficit reduction over a decade would likely allow it to confirm the U.S. AAA rating.
The bill passed by the House of Representatives on Monday offers $2.4 trillion in budget savings, so many analysts believe a downgrade to AA from AAA by S&P is still likely.
Asked by interviewer George Stephanopoulos whether Congress’ gridlock over the debt limit made a downgrade more likely, Geithner said, “I don’t know. It’s hard to tell.”
“I think this is a good result but a terrible process. And ... I think as the world watched Congress step up to the edge of the abyss, it made them really wonder whether this place can work. But this is a good deal. It’s a good agreement,” he said.
Stephanopoulos also asked Geithner whether he would be leaving the Treasury soon after the deficit reduction deal is signed by President Barack Obama. Geithner had previously signaled to White House officials he was considering a possible exit once a debt deal was completed.
Geithner said he has not “had a ton of time to think about that.”
“I mean, I haven’t made that decision yet,” he added. “And you know, we’ve got a lot of challenges, the president’s got a lot of challenges, and you know, I’ve got other pressures on me, too. But I’ll make that decision at the right moment.” (Reporting by David Lawder; Editing by James Dalgleish)