WB Chief: US Default Would be Global Disaster
The global economy is under great threat over the US fiscal and political crisis, says the President of the World Bank, Jim Yong Kim.
Kim has warned that the United States is just "days away from a very dangerous moment" because of the government's debt ceiling crisis and has urged US policymakers to reach a deal to raise the government's borrowing cap before the October 17 deadline.
The BBC reminds Sunday that the US Treasury will start to run short of funds if no agreement is reached for it to borrow on financial markets.
The World Bank President is quoted in saying this could be a "disastrous event" for the world.
"The closer we get to the deadline, the greater the impact will be for the developing world. 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 will in turn greatly hurt the developed economies as well," said Kim, speaking at the World Bank's annual meeting in Washington.
Republicans and Democrats failed to come to an agreement on Saturday, but Senator Dick Durbin, a Democrat, said the aim was to reach a deal on extending the debt limit before markets reopen on Monday.
President Barack Obama rejected a Republican deal for a short-term rise to the borrowing limit.
The impasse over the debt limit has already rattled markets and increased the interest rate for one-month US Treasury bills.
Meanwhile, hundreds of thousands of federal employees have been out of work since the shutdown began, and private firms, from arms makers to motels, have begun to lay off workers.
Republicans refused to approve the new budget unless President Obama agreed to delay or eliminate the funding of the healthcare reform law of 2010.
The stalemate has harmed the approval ratings of both Democrats and Republicans, but the Republicans' popularity has taken the worst hit and is now at a record low of 28%, according to a Gallup poll cited by The BBC.
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