Republicans in the US Congress are opposed to raising the debt ceiling. In the worst case, the country faces a default. The minister warns of consequences.
In the dispute over a possible US default, US Treasury Secretary Janet Yellen has urgently appealed to the US Congress to raise the debt ceiling “as soon as possible”. Ahead of the three-day meeting of finance ministers from the G7 group of leading western industrialized countries in Niigata, Japan, Yellen warned of an “economic and financial catastrophe” if the US defaulted on June 1. It would trigger a “global downturn” that would set the world back a long way, Yellen said at a news conference.
Even “reckless handling” of the possibility has serious economic costs, Yellen said, referring to opposition from Republicans in Congress. “Frankly, default is unthinkable,” Yellen said. “America must never default.” It would severely undermine the US and the global economy. The budget dispute between Democrats and Republicans in the USA is overshadowing the G7 deliberations, to which Finance Minister Christian Lindner (FDP) is also expected in Japan.
In the United States, Parliament sets a debt ceiling and determines how much money the state can borrow. The limit is currently around 31.4 trillion US dollars (about 28.6 trillion euros). This debt ceiling has now been reached, and the US Treasury must tap into the capital reserves – because the US is now no longer allowed to take on any new debt to pay its bills. US President Joe Biden needs the Republicans to raise the lid. However, they are opposed to an increase without significant savings in certain government spending.
If there is no solution, Biden is even considering not going to Japan next week for the May 19-21 G7 summit. “It’s possible, but not likely,” said the US President. He will remain in Washington until “the matter is settled”.
Source: Stern
