Schaeuble raises fears over US debt

Germany has long been the major European advocate of austerity and debt reduction, but has rarely publicly questioned the financial security of its big brother across the Atlantic.

In a speech on his 2013 budget, Mr Schaeuble said that US debt was a burden for the global economy.

"Ahead of the election in the US there is great uncertainty about the course US politics will take in dealing with the government's debts, which are much too high," he said.

And credit raters Moody's appeared to agree, warning separately that it is likely to cut its "AAA" rating on US government debt if federal budget negotiations fail.

If the brutally divided US Congress does not reach a budget deal, more than $600 billion (£370bn) in spending cuts and tax increases will kick in next year, a scenario that's been called the "fiscal cliff" because it is likely to drive the US economy back into recession and send unemployment soaring.

Moody's says that it is difficult to predict when Congress will reach a deal and it will keep its current rating and "negative" outlook until the outcome of talks is clear.

The ratings agency says that is also watching talks on increasing the US debt limit.

A weak economy and political gridlock in Washington have prevented meaningful debt reduction in the US, which has run budget deficits topping $1 trillion (£623 billion) for three straight years.

The issue has become a central theme of the US election campaign with Republican candidate Mitt Romney accusing President Barack Obama of fiscal mismanagement and the White House slamming Republicans in Congress for blocking government efforts to get the US fiscal house in order.

Last year, US politicians reached an 11th hour deal to increase the Treasury Department's borrowing authority, which had bumped up against a legal limit, averting a default.

But Treasury Secretary Timothy Geithner has said the US is likely to hit the $16.4 trillion (£10.2trn) borrowing limit by the end of the year.

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