Rein in Debt or European Crisis Looms: Starwood CEO

Javier E. David | Special to CNBC.com
Monday, 10 Dec 2012 | 12:38 PM ET

Cutting entitlement spending is central to resolving the long-term fiscal challenges of the U.S., Starwoods CEO Frits von Paasschen told CNBC on Monday, which may end up consigned to a European style debt crisis if not reined in.

As the impasse over the "fiscal cliff" lumbers toward its year-end deadline, von Paasschen told CNBC's "Squawk Box" that "everybody has to give somewhere" in the debate over taxes and spending. He suggested that the recent downturn in U.S. economic data may reflect how the uncertainty is starting to register with the broader population. (Read more: A '40% Chance' of Cliff Deal Before Year End: Bowles.)

"From a business perspective, uncertainty is very costly. The longer we go without understanding what's going on the worse we get," he said.

Starwood CEO on Fiscal Cliff Negotiations
Discussing how going over the fiscal cliff might impact the hotel industry, with Frits van Paasschen, Starwood Hotels & Resorts CEO. "In terms of being fixated on tax increases, the proposed tax increases are actually pretty small in the scope of the overall program," he says.

The CEO compared the U.S's $16 trillion debt load to Europe's ongoing struggle to corral its debt crisis.

"We could see the same thing here if we don't get a sustainable, clear, credible solution to America's fiscal problems," von Paasschen said, adding that a mix of tax hikes and spending cuts would be the most feasible solution.

Still, paramount to a solution would be emphasis on big ticket social safety net programs. "You have to make sure entitlements don't runaway in future years," von Paasschen added.

"As we cross that 100% [of GDP] mark, we're starting to look more and more like countries in Europe. We've got to avoid that," the Starwood chief said. "The issue is there's nowhere to put capital to work around the world that is as attractive as the US. So if we don't solve this, it's our own fault." (Read more: Euro Zone Crisis Is Back as Italy Loses Its 'Savior'.)

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