World heaves sigh of relief as US barely averts debt default
Political leaders, investors and ordinary people Thursday welcomed the end of a U.S. government shutdown but already were looking ahead to the next round of a budget battle that brought the world’s biggest economy close to default and threatens Washington’s international standing.
The deal approved late Wednesday by Congress, with hours to go before the government reached its $16.7 trillion debt limit, only permits the Treasury to borrow through Feb. 7 and fund government through Jan. 15. The International Monetary Fund appealed to Washington for more stable long-term management of the nation’s finances.
The standoff rattled global markets and threatened the image of U.S. Treasury debt as a risk-free place for governments and investors to store trillions of dollars in reserve.
Few expected a default but some investors sold Treasurys over concern about possible payment delays and put off buying stocks that might be exposed to an American economic downturn.
IMF managing director Christine Lagarde welcomed the deal but said the shaky American economy needs more stable long-term finances.
“It will be essential to reduce uncertainty surrounding the conduct of fiscal policy by raising the debt limit in a more durable manner,” Lagarde said in a statement.
The Tokyo stock market, Asia’s heavyweight, gained 0.8 percent Thursday. Markets in South Korea, Australia and Southeast Asia also rose.
Such relief might be only temporary without a long-term settlement, said Standard Chartered economist Samiran Chakraborty in Mumbai. (Source: Associated Press)