Greenspan delivers bleak message on US economy

Federal Reserve chief Alan Greenspan has warned that September 11 and volatile stock markets are still affecting the US economy.

He also raised concerns about America's surging government budget deficit in a testimony to Congress.

Mr Greenspan said Congress must ensure that it doesn't allow a slowing economy to prolong a period of budget deficits that might push interest rates higher.

He added: "To date, the economy appears to have withstood the set of blows well, although the depressing effects still linger and continue to influence, in particular, the federal budget outlook."

Mr Greenspan also warned that the ageing of the US population presented the country with "a daunting long-term fiscal challenge".

"Indeed, the extent of the challenge is not adequately reflected in conventional measures of the federal budget."

The best way to manage the burden was to strengthen the US economy, a process threatened by overspending, Mr Greenspan said.

He noted that while the US budget last year had been expected to show a "large and mounting" surplus for at least a decade, deficits were now expected for every year until 2005.