The International Monetary Fund (IMF) has warned of the consequences of defaulting on US debt. “This will have a very serious impact not only on the US but also on the global economy,” IMF communications chief Julie Kozak told reporters on Thursday. There were threats of high interest rates and economic “destabilization”. Kozak called on US President Joe Biden’s government and opposition Republicans to “resolve this problem urgently”.
The Biden administration and Republicans have been arguing for months about raising the debt ceiling to avoid impending debt. Time is of the essence: Without a compromise, the US risks bankruptcy as early as June, with devastating economic and financial consequences for the US and the global economy.
In January, the US had already reached its debt ceiling of $31.4 trillion (about 28.6 trillion euros). Since then, the U.S. government has used “extraordinary measures” to stave off bankruptcy, but has quickly run out of options to do so.
Republicans, who hold the majority in the House of Representatives, want to approve raising the debt ceiling in exchange for billions in cuts in government spending. They want to roll back key elements of Biden’s reform policies.
A high-level meeting at the White House on Tuesday produced no compromise. The next meeting is scheduled for Friday.
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