By Marjorie Olster and Martin Crutsinger
WASHINGTON -- World finance officials pledged on Saturday to deal with new risks to the global recovery while they kept up pressure on the United States to address the biggest threat of all -- a market-rattling default on U.S. debt.
The International Monetary Fund's policy committee said the United States needed to take "urgent action" to address the budget impasse that has blocked approval of legislation to increase the government's borrowing limit before a fast-approaching Thursday deadline.
U.S. Treasury Secretary Jacob Lew, who shuttled between the global finance talks and negotiations with Congress over the debt ceiling, has warned that he will exhaust his borrowing authority Thursday and the government will face the prospect of defaulting on its debt unless Congress raises the current $16.7 trillion borrowing limit.
Across town from the global finance meetings Saturday, an effort at the Capitol to pass a one-year extension of the borrowing limit failed to get sufficient votes. But in a more hopeful sign, negotiations to end a partial government shutdown, now in its 12th day, and raise the debt ceiling began between Democratic and Republican Senate leaders.
Global finance officials were nervously monitoring those talks during their three days of discussions, held around the annual meetings of the 188-nation IMF and its sister lending agency, the World Bank.
"I think it is unthinkable that an agreement won't be found," Mario Draghi, head of the European Central Bank, told reporters Saturday, expressing the hope that a resolution could be found soon.
"If this situation were to last a long time, it would be very negative for the U.S. economy and the world economy and could certain harm the recovery," he said.
Asked what might happen if the U.S. budget debate were not resolved for six months or more, Singapore Finance Minister Tharman Shanmugaratnam, the chairman of the IMF committee, said it would be harmful to the entire would because it would be a blow to the confidence that is needed for businesses to make investment decisions.
"If we don't clear resolution of the U.S. debt issue, it is hard to see how that confidence will come back so it is a critical issue for all of us," he said.