The U.S. is leading the way in a global economic recovery and there should be little question about its ability to fulfill its debt obligations, Treasury Secretary Jack Lew told CNBC Asia in an exclusive interview on Wednesday.
A political crisis in Washington last month took the world's biggest economy to the brink of a debt default, unnerving global financial markets and sparking consternation from major economies such as China and Japan, the biggest foreign holders of U.S. government bonds.
"We went through a period of some political turmoil, but I have to be clear it was a political, not economic crisis," Lew said, referring to the wrangling over the debt ceiling and federal budget.
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"What we learned a few weeks ago is that it [the budget battle] did get to the 11th hour, but at the 11th hour, there was a broad bipartisan consensus to be where the U.S. has always been. We stand by our obligations and the full faith and credit of the U.S. cannot be called into question," he added.
Lew said the U.S. economy had proved resilient and was bouncing back.
"The United States is recovering from the worst recession since the Great Depression and we're leading the developed world in the quality of our recovery," Lew added.
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Lew, in Asia for a five-nation trip, emphasized the importance of demand-led growth in Asia, adding that the region cannot rely on the U.S. to support the global economy.
"The message that we are bringing in my conversation is you have to look at how sustainable growth is going to be achieved and it is a similar message here [in Asia] and in Europe. Demand growth is critical. U.S. growth cannot make up for a lack of demand growth," he said.
Lew said he expected talks on implementing the controversial Volcker rule to be concluded by the end of the year. Regulators have been working to agree on the final wording of the rule.
The rule, required by the 2010 Dodd-Frank law, was proposed two years ago and would block banks from proprietary trading or making risky trades with a company's own money.
"What I've said to a lot of business people is: We have to get this done, and when we get it done, our goal is not to be as tough as possible, or as lenient as possible. It's to get as close to right as possible," said Lew.
"Inevitably, we might err a little, in one way or the other. If I had to choose, I would err on just being a little bit on the tough side," he added.
Fire that third arrow
A day after visiting Japan, Lew said he had urged Japan's Prime Minister Shinzo Abe to press ahead with the "third arrow" of a three-pronged strategy to revive the Japanese economy. The third arrow focuses on long-term structural reforms.
"What they responded is that they are going to use the fact that they've consolidated their positions through elections to have a debate on specific proposals to make reforms in the labor market," Lew said, referring to meetings with Japan's prime minister and finance minister. "They are moving ahead and what I know is that it is important that they succeed."
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He said that he also made a "strong case" for a need to reach an agreement on the Trans Pacific Partnership, a free-trade agreement, before the end of the year.
Lew added that he hoped to learn more about China's plans for economic reform when he meets with leaders from the world's second biggest economy later in the week.
China's Communist Party on Tuesday concluded a key four-day policy meeting or plenum, with a pledge to allow markets to play a "decisive" role in allocating resources.
"The communique coming out of the plenum is at a very general level," Lew said. "It doesn't spell out all the policies. So in the coming discussions, I hope to learn more about some of the specific polices."
-By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC
image: © Rennett Stowe