The whole world is on the hook if the Americans don’t sort out their internal strife

If the problem is not resolved in the next few days, and there seems to be little chance of that happening at the moment, the dilemma regarding raising the US debt ceiling could leave its mark on the Hiroshima summit of the leaders of the G7 countries, writes the Reuters.

The event will take place between May 19 and 21.

This week, American President Joe Biden already discussed the issue of the debt ceiling with Kevin McCarthy, the Republican speaker of the United States House of Representatives, but they did not get much further. After the trial, it was stated that for further discussions will be needed.

With the debt ceiling reached, the US government has no authority to borrow, and Congress must suspend or modify the limit, which is currently 31.4 trillion dollars. The United States reached this value in January.

By the way, this is not such a rare phenomenon in the USA that since 1960 the BBC according to a total of 78 times, the debt ceiling was raised, expanded or revised.

Now, in any case, the situation is somewhat complicated by the tense standing war between the Democrats and the Republicans, which

it may even push the United States into technical bankruptcy for the first time in its history.

The Republican Party insists that they will agree to raise the debt ceiling only if the Democratic Party agrees to cut government spending over the next decade. However, according to US President Joe Biden should not be washed together raising the debt ceiling with budgetary issues. “These are two completely separate matters, they are independent of each other, let’s make this clear now,” he emphasized.

The world is pushing from the sidelines

Even before the three-day series of talks in Niigata, which started on Thursday, in preparation for the summit, in addition to the finance ministers and central bank heads of the G7 countries, for example, Eurogroup President Paschal Donohoe too, Janet Yellen was forced to explain.

Insolvency would jeopardize the gains we have worked so hard to achieve in recent years during the recovery from the pandemic. Moreover, it would trigger a global recession that would set us back even further

He told the US Treasury Secretary at a press conference in Niigata before the start of the talks.

The debt ceiling dilemma is a particularly vexing issue for this year’s summit host, Japan, as the Asian country is the United States’ largest creditor.

The Japanese finance minister, Shunichi Suzuki, nevertheless said that they will not go into the details during the G7 negotiations. Instead, they discuss how to better manage the risks of the financial system, and jointly draw lessons from the recent American bank failures.

“The G7 countries cannot come up with a solution to a purely American domestic policy matter, although the leaders can strengthen their determination to cooperate in order to stabilize the markets even in the worst case” – he stated Takahide Kiuchi, analyst at Nomura Research Institute.

Washington alone is responsible for a solution. But if things don’t go well, all the other countries bear the brunt

– added the expert.

Ukraine remained an unavoidable topic

The Japanese Finance Minister revealed even before the start of the Niigata negotiations that a plan would be presented, in the framework of which a trillion dollars would be mobilized to help the countries neighboring Ukraine that accept refugees from the attacked state.

Financing would be provided through the state-owned Japan Bank for International Cooperation (JBIC), which typically provides assistance in the form of loans, guarantees and equity investments, depending on the financing needs of individual projects.

Shunichi Suzuki added that, through the new financing, they also want to encourage investments by Japanese companies in the affected countries.

“We want to accelerate the international cooperation that is needed to overcome the difficulties of the global economy,” he said.

The question of supporting Ukraine is expected to be a defining topic at the Hiroshima summit as well, where the leaders of the G7 countries will discuss

  • about possible further arms shipments,
  • about political support, including, for example, sanctions, although there was no mention of new ones so far, the question may be more effective enforcement of the previously introduced ones
  • and they can also negotiate financial aid for the war-torn country.

Source: by

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