Barack Obama has warned that the US economy could head into a “double-dip recession” unless urgent steps were taken to rein back America’s mounting levels of public debt.

With the US unemployment rate now running at 10.2 per cent, the President said his administration faced a delicate balance of trying to boost the economy and spur job creation while bringing the rising deficit and debt under control.

“I think it is important though to recognise that if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the US economy in a way that could actually lead to a double-dip recession.”

“One of the trickiest things we’re doing right now, is to on the one hand make sure the recovery is supported and not withdraw a lot of money either with tax increases or big spending ... at the same time, making sure that we’re setting up a pathway long term for deficit reduction,” he said. “It’s about as hard of a play as there is.”

The President’s remarks in an interview with Fox News in Beijing during an eight day tour of Asia, signal a new determination in Washington to reign in the national debt. This week he told the Asia Pacific Economic Cooperation summit that “debt-driven growth cannot fuel America's long-term prosperity".

Mr Obama said that his administration is weighing tax breaks that could encourage businesses to begin hiring again.

“There may be some tax provisions that can encourage businesses to hire sooner rather than sitting on the sidelines. So we’re taking a look at those,” he said.

A key priority was accelerating job growth. “Nobody’s been more disappointed than I have to see how high the unemployment rate has gotten. And I spend every waking hour, when I’m talking to my economic team, about how we are going to put people back to work,” he said.

The National Debt has increased about $1.6 trillion on Mr. Obama's watch, and has now topped the $12 trillion mark, bringing it dangerous close to the $12.1 trillion statutory limit.

The White House is now seeking an increase of $1 to $1.5 trillion, according to Bloomberg, to help get the government through the November 2010 midterm congressional elections without needing another increase.

To rein in the 2010 deficit, the administration will save as much as it can from unused portions of the $700 billion Troubled Asset Relief Program. Treasury data show that the administration has more than $200 billion in uncommitted TARP funds.

President Obama’s latest comments on the national debt came as Société Générale, the French Bank, warned in a report entitled Worst-case debt scenario that current debt national levels, run up as a direct result of state stimulus packages, risked creating another crisis.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon.

Under the French bank's "bear case" scenario, the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 a barrel in 2010.

Even without fresh spending, public debt would explode within two years to 105 per cent of GDP in the UK, 125 per cent in the US and the eurozone, and 270 per cent in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade, the report warns.

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

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