IMF head warns US debt crisis threatens world economy
International Monetary Fund chief Christine Lagarde speaks about the upcoming IMF and World Bank meetings, at George Washington University in Washington, October 3, 2013.The head of the International Monetary Fund is warning that if Congress fails to raise the debt ceiling the consequences could be severe not just for the U.S. economy but for the global economy as well.
The IMF\’s managing director, Christine Lagarde, told a Washington audience Thursday that the three-day-old partial shutdown of the U.S. government is worrisome, but that failure to raise the country\’s $16.7 trillion debt ceiling would be worse.
"The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but also the entire global economy."
The shutdown has left more than 700,000 employees on unpaid leave and closed national parks, tourist sites, government websites, office buildings, and more.
For US economic watchers, a widely tracked indicator – the monthly US jobs report – has been delayed due to the shutdown, it was announced on Thursday.
However, while this budget crisis rages in Washington DC, another, more dangerous, one looms in the coming weeks.
On 17 October, the US government will run out of cash to pay its bills – unless the debt ceiling is raised.
The U.S. says it expects to reach its borrowing limit by October 17, and would need to increase the debt ceiling by then so it can borrow more money to pay its bills, including interest on government bonds held by overseas investors.
In a separate statement, the U.S. Treasury said there could be "catastrophic" economic effects throughout the world without an increase in the borrowing limit.
U.S. President Barack Obama, a Democrat, and his Republican opponents in Congress are locked in a stalemate over government spending policies and implementation of massive health care reforms that are now taking effect.
Source: Agencies
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