With the October 17 deadline just four days away and no deal in sight yet to avert the US debt default, the World Bank and the International Monetary Fund have warned Washington that any failure to get its fiscal act together would have grave global consequences, notably for developing countries.
Democratic and Republicans leaders of the Senate began holding talks on Saturday, after President Barack Obama rejected a House Republican plan offering a six-week respite in return for negotiations on spending cuts, but there was no immediate indication if the two sides were close to any breakthrough.
Senators Harry Reid and Mitch McConnell, leaders of the Democratic and Republican caucuses in the Senate, said they would continue negotiating on Sunday to find a way to end the Government shutdown and raise the debt ceiling.
The ongoing political drama cast its shadow on the IMF-World Bank annual meetings, being attended by Finance Ministers from across the world, many of whom have voiced their concern over the US inability to resolve the protracted fiscal impasse.
World Bank president Jim Yong Kim told the gathering on Saturday: “We are now five days away from a very dangerous moment. I urge US 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,” said Kim, adding: “Inaction could result in interest rates rising, confidence falling, and growth slowing. If this comes to pass, it could be a disastrous event for the developing world, and that in turn will greatly hurt the developed economies as well. I urge US policymakers to avert this potential crisis.”
IMF Managing Director Christine lagarde, in an interview with NBC News, said the combination of a US Government shutdown coupled with a default on the country’s debt would bring “massive disruption the world over”.
“When you are the largest economy in the world, when you are the safe haven in all circumstances, as has been the case, you can’t go into that creative accounting business,” lagarde said.
In a sad commentary on the state of relations between the country’s two political parties and their endless bickering, Senator Reid remarked: “I hope that our talking is some solace to the American people and the world.”
“Senator McConnell and I have been in this body a long time. We’ve done things for a long time together,” he said, adding: “We don’t agree on everything, and that’s, as you know, an understatement.”
A proposal put forth by Republican Senator Susan Collins, which was in the spotlight for a while after the rejection of the one presented by House Republicans, failed to advance much.
Collins had proposed extending the debt ceiling till end of January and reopening the Government for at least six months as part of an alternative plan, but Reid rejected it, asserting it did not meet the requirements of a balanced deal.
“Despite Senator Harry Reid’s unfortunate dismissal of the 6-point plan…, it continues to attract bipartisan support,” Collins said, adding six Republican Senators and six Democratic Senators met twice on Saturday to discuss how her plan or some version of it could be moved forward.