Hope Remains for Global Recovery Beyond U.S. Impasse
By Marjorie Olster and Martin Crutsinger
WASHINGTON -- Worries about a possible U.S. debt default cast a pall over weekend meetings of global financial leaders in Washington. But they ended with some hope over signs that the U.S. and European economies are pulling out of long slumps.
During three days of talks revolving around meetings of the 188-nation International Monetary Fund and its sister lending agency, the World Bank, top officials pressed the U.S. to resolve the political impasse over the debt ceiling. The standoff has blocked approval of legislation to increase the government's borrowing limit before a fast-approaching Thursday deadline.
U.S. Treasury Secretary Jacob Lew 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 $16.7 trillion borrowing limit."We are now five days away from a very dangerous moment," World Bank President Jim Yong Kim warned at the closing news conference on Saturday. "I urge U.S. policymakers to quickly come to a resolution before they reach the debt ceiling deadline. The closer we get to the deadline, the greater the impact will be for the developing world." Kim said a default would be a "disastrous event" for poorer countries. It would also be certain to derail the already fragile global economic recovery. "We know there are problems," Tharman Shanmugaratnam, the head of the IMF's policy-steering committee and Singapore's finance minister, told a news conference at the end of the IMF meeting. "We know there are near-term risks, the most obvious one being what's going on in the U.S. with regard to the fiscal deficit." But one of the big near-term concerns, the expectation that the U.S. Federal Reserve will start scaling back its massive stimulus program for the economy, is actually pointing to a positive development, Tharman said. It means that the U.S. economy is strong enough to withstand a reduction of the stimulus. IMF officials have been forecasting that the strengthening U.S. economy will be a main driver of the global economy in the coming year. At the same time, developing country economies are slowing and their markets have been unsettled since May by anticipation that the Fed will soon begin tapering its $85 billion-a-month bond purchases, which poured cash into the economy to stimulate growth.
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