The world's top economic powers urged the United States to break its stalemate over the nation's debt ceiling and budget, calling the standoff one of the world's chief immediate economic risks.
During a meeting in Washington on Friday, members of the Group of 20 grilled Treasury Secretary Jack Lew and Federal Reserve Chairman Ben Bernanke about U.S. economic policy, with Lew breaking from the session early to continue negotiations with Congress.
Although the world financial leaders said they remain confident that the government shutdown will end soon, that the U.S. debt ceiling will be raised and that a debt default will be avoided, they also went on record with their concerns.
"The U.S. needs to take urgent action," the group said in a communique that pointed to these "short-term fiscal uncertainties" and the coming shift of Fed stimulus policy as "downside risks" facing a slow global recovery.
Products of careful diplomatic wording, G20 statements are never overly harsh. But the decision this time to cite a particular country and issue shows that the U.S. budget stalemate is considered to be of global significance. Recent communiques have pushed euro-zone countries on their financial problems and pressured China to loosen controls on its currency.
In this case, however, the Obama administration was eager for just such a statement, which adds a dose of international pressure as the White House and Congress continue negotiations.
Still, others echoed the point. "No one benefits from delay," said Russian Finance Minister Anton Siluanov, who chaired the session of major nations, including China, Japan, much of Europe and others. "It is making a negative impact on all the countries involved. So we are hoping that the U.S. administration and the U.S. Congress will resolve this situation, and the uncertainty we have today will disappear."
Siluanov said that U.S. officials in the meeting left other nations with the belief that there would be a resolution by Thursday, when the Treasury estimates the country will hit its debt limit and not be able to borrow money to pay its bills, possibly including payments on U.S. Treasury bonds.
An American official familiar with the deliberations said Lew told the group that there was still a "bumpy, noisy path" ahead before any deal is reached.
The uncertain direction of U.S. policy has become an unexpected focus at the meetings in Washington this week of the International Monetary Fund and World Bank. The heads of both organizations also urged the United States to fix its problems and said the prospect of the Fed tightening monetary policy was already being felt around the world in the form of higher interest rates that developing countries can ill afford.
There is broad acknowledgment that the stimulus policy will have to shift as the U.S. economy strengthens. But the G20 urged its biggest member nation to be careful as it changes gears. The Fed's loose money policies have led to record investments in bonds and stocks in developing nations — which could be withdrawn if the Fed tapers its bond-buying and could upend local markets.
The group said that decisions about monetary policy need "to be carefully calibrated and clearly communicated" in an effort limit the "spillovers" around the world. -- The Washington Post
The Washington Post
Sat Oct 12 2013
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