(by Ameli Berksman)

To avoid painful economic consequences the U.S. must cut its budget deficit, Federal Reserve Chairman said Friday.

Alan Greenspan pointed at the necessity to cut the U.S. budget deficit on recently worsening in dollar data. "Alternative approaches to reducing our current account imbalance by reducing domestic investment or inducing recession to suppress consumption obviously are not constructive long-term proposals," Greenspan said.

He also warned: "This situation suggests that international investors will eventually adjust their accumulation of dollar assets or, alternatively, seek higher dollar returns to offset concentration risk, elevating the cost of financing of the U.S. current account deficit and rendering it increasingly less tenable."