This is a debate that is currently shaking the United States but worrying far beyond. Without an agreement to raise the American debt ceiling, and therefore in the event of a default by the world’s largest economy, “there would be very serious repercussions not only for the United States but also for the world economy”, has warned the communications director of the International Monetary Fund, Julie Kozack, during a telephone press conference. Among the repercussions, Julie Kozack cited “higher interest rates, broader instability and economic repercussions”.
Democrats and Republicans are engaged in a tussle over raising the US debt ceiling, a necessary legislative maneuver so that the world’s largest economy can continue to borrow and pay its bills, officials and creditors. Without an agreement, the United States would find itself, potentially from June 1, in default of payment, an unprecedented situation.
Donald Trump’s dangerous grain of salt
Former Republican President Donald Trump, candidate for the 2024 election, urged Republican elected officials on Wednesday to “cause a default” if Democrats do not concede “massive cuts”. He, however, felt the default would likely be averted, predicting that Democrats would “give in” on the matter.
But Joe Biden’s Minister of Economy and Finance, US Treasury Secretary Janet Yellen, then issued a warning. She felt that only flirting with default, pushing negotiations to their limits “can lead to significant economic costs”.