US Shutdown: Lagarde Issues Recession Warning
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US Shutdown: Lagarde Issues Recession Warning

US Shutdown: Lagarde Issues Recession Warning

Thursday’s deadline to raise the US debt ceiling has prompted the head of the IMF to warn of dire consequences if no deal is done.

14 October 2013

 

IMF-WORLD BANK-ECONOMY Christine Lagarde

Christine Lagarde wants politicians to put the national interest first

The head of the International Monetary Fund has warned failure to break the political stalemate over raising the US debt ceiling risks tipping the world into recession.

Christine Lagarde was speaking as there were few signs in Washington that solutions were close in either the row over the budget – which has left government in a partial shutdown for two weeks – or the debt ceiling dispute.

However, Harry Reid – the Democratic Leader in the Senate – painted an optimistic picture of the dialogue with Republicans late on Sunday, though nothing concrete was disclosed.

Failure to lift the debt limit by Thursday would leave the US government unable to pay its bills or service its debts, leading to a default that analysts warn will devastate market values and tip the global economy back into recession.

In an interview on NBC Sunday talk show “Meet the Press,” Lagarde said the US economy was already showing “real improvement,” evident from indicators including those from the housing sector to household spending.

But she said it was crucial politicians work out a deal to re-open the government and continue borrowing so it does not default on its debt – and not just for a few weeks.

Lagarde warned of serious consequences from “a combination of the government shutdown for a period of time and, more seriously, more damaging, if the debt ceiling was not lifted with a degree of certainty and enough time so that people could, you know, sort of have the assurance that the economy was in good standing.”

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