NEW YORK, DEC. 8 -- Federal Reserve Board Chairman Alan Greenspan said yesterday that a balanced budget is essential for economic stability and that a surplus eventually may be needed to funnel more savings to the private sector.

"The importance of credible deficit reduction cannot be overemphasized," Greenspan said. "Financial markets around the world will continue to be subject to shocks so long as there has not been a reasonably complete resolution of these problems.

"Indeed, we should consider whether our nation's long-term interests and those of the rest of the world might be best served by a budget policy aimed at augmenting private saving through budget surpluses," Greenspan told a conference of savings and loan executives.

By creating a surplus, the government would pay off outstanding debt more quickly than it incurred new debt. That would give investers fewer government securities to buy and greater incentive to put their money in banks, savings and loans and other private vehicles for saving.

That, in turn, would make more cash available for private sector borrowers. "Our inability to raise the nation's private savings rate in recent years has necessitated large borrowings of other nations' savings," Greenspan said.

He warned that "there is a limit to what foreign savers can be expected to finance of the gap" between the amount of money U.S. companies need to be competitive in the world economy and the amount of money Americans save.

Greenspan also said that finding solutions to the financial troubles of about a third of the nation's 3,200 savings and loans was contributing to a vast restructuring of the nation's financial system.

"Despite many {S&L} success stories that can be reported, there can be little doubt that much remains to be done by your industry and by those of us in Washington," he told the members of the National Council of Savings Institutions.

He said that the industry's problems were taking place "against a background of a rapidly shifting financial system" being reshaped by increasingly sophisticated technology and competition worldwide.

S&Ls historically have taken in long-term consumer savings and lent the money out for home mortgages. Since the mid-1970s, however, computers and deregulation have allowed banks, insurance companies, retailers and securities firms to invade the S&Ls' turf.

"Even in a world of price stability, the {S&L} industry of tomorrow will not be the same as that of yesterday," Greenspan said.

He said that one of the government's jobs during deregulation is to make sure that a "federal safety net protects against ... risk" to institutions that hold federally insured deposits."

But he cautioned against misuse of the safety net. "The benefits of competition can best be achieved in a world in which the safety net is not used to protect individual institutions or particular types of deposit institutions," he said.

Federal Home Loan Bank Board Chairman M. Danny Wall, who also spoke at the meeting, said the board has not decided whether to seek a congressional extension of the law that until August prevents S&Ls from leaving the Federal Savings and Loan Insurance Corp. (FSLIC), which insures S&L deposits.

The bank board is the federal agency that regulates S&Ls. Many healthy S&Ls want to leave the FSLIC, a bank board subsidiary, to avoid extra fees the government has imposed on them to pay for closing hundreds of failed S&Ls.

The institutions want to switch membership to the healthier Federal Deposit Insurance Corp., the federal fund that insures deposits at commercial banks and many savings banks.

CAPTION:Alan Greenspan