Geithner sees more confidence in U.S. expansion

U.S. Treasury Secretary Timothy Geithner said confidence was growing that the U.S. economy was heading for a sustainable expansion but the cut in unemployment would still be tragically moderate.

U.S. gross domestic product expanded 3.2% in the fourth quarter.

"There is more confidence now that the most acute part of the crisis is over, absolutely in the U.S. but even true globally," Geithner told a panel at the World Economic Forum in Davos.

"I think there is much more confidence now that we've got a sustainable expansion. It is not a boom. It's not going to offer the prospect of a rapid decline in the unemployment rate."

The U.S., along with Japan, on Friday faced new pressure to confront its swollen budget deficit as ratings agency Moody's said the risk that it would lose its AAA credit rating, although small, was rising.

Geithner said there was a growing recognition that the United States' fiscal position is unsustainable and increasing political will to put it back on track.

"Political will is not fully manifest at the moment but it's coming, there's no alternative to it. We can't grow our way out of it," he said.

But he added the country should avoid cutting spending too deeply in order not to hurt the recovery.

"I know there are people who would like to make very deep cuts that would undermine the recovery," he said.

Geithner said he would not put inflation at the very top of a list of global concerns but said it was a serious challenge for developing markets.

He said the United States was in good position to benefit from a rapid expansion of emerging economies.

"I think we are at a beginning, I still think at a very early stage of what's going to be a long period of exceptional growth in emerging markets around the world," he said

He said it would be easier for emerging economies, especially China, to manage those challenges if they softened their link to the dollar.