Greenspan: US must cut deficit or face bond crisis

Former Federal Reserve Chairman Alan Greenspan believes the US must look to rein in its massive budget deficit or face the risk of a bond market crisis.

Speaking to NBC's Meet the Press, Greenspan says the US must "resolve this issue" before it spooks the bond markets.

If the budget deficit, which is set to hit $1.3tn this year, is not addressed, Greenspan believes it could drive up long-term interest rates and may lead to a double-dip recession.

A panel, chaired by former White House chief of staff Erskine Bowles and former Senator Alan Simpson, is due to deliver a report on US debt and deficits by December 1.

A draft report, which hopes to reduce the debt by $4trn by 2020 through tough tax and spending decisions, was bluntly rejected in many circles, with Speaker of the House Nancy Pelosi labelling the ideas "simply unacceptable".

Greenspan says: "Something equivalent to what Bowles and Simpson put out is going to be approved by Congress. But the only question is whether it is before or after a crisis in the bond market."