G20 finance ministers urge U.S. to end budget stalemate

World finance officials said Friday the United States needs to take urgent action to address the budget problems that are creating economic uncertainties for the global economy.

Ministers, central bank officials in Washington ahead of IMF-World Bank meetings

Minister of Finance Jim Flaherty, right, and Bank of Canada governor Stephen Poloz attended a meeting of a G20 finance ministers and central bank governors in Washington Friday. (Jonathan Ernst/Reuters)

World finance officials said Friday the United States needs to take urgent action to address the budget problems that are creating economic uncertainties for the global economy.

Finance ministers and central bank leaders for the Group of 20 major economies wrapped up two days of discussions in Washington with a joint statement expressing concern about the ongoing budget stalemate between Congress and the Obama administration.

Russian Finance Minister Anton Siluanov told reporters at a news conference that issues of the partial government shutdown, and the need to raise America's borrowing limit before an Oct. 17 deadline, were addressed by Treasury Secretary Jacob Lew. Federal Reserve Chairman Ben Bernanke also participated in the talks.

Siluanov said all the G20 participants are hoping for a speedy resolution. He noted that about 45 per cent of Russian's foreign exchange reserves are invested in U.S. Treasury securities. America will run out of borrowing authority for new debt on Oct. 17.

Lew has warned that with only $30 billion US expected cash on hand at that time, the country will soon not have the ability to meet all of its bills, including paying interest on the $16.7 trillion federal debt. That would trigger an unprecedented default on U.S. debt.

Underscoring the urgency of the situation, Lew left the G20 discussions before they had wrapped up Friday to get to the White House for a meeting with President Barack Obama and Senate Republicans.

No contingency plans discussed

There have been various proposals in recent days to resolve the impasse and get at least a short-term increase in the borrowing limit approved before next week's deadline. Obama has insisted he will not negotiate with Republicans over spending issues until the government is reopened and the borrowing limit is raised.

Siluanov said the G20 officials did not discuss contingency plans if the U.S. borrowing ceiling is not increased by the Oct. 17 deadline.

"There are no emergency or extraordinary plans," Siluanov said. "In the course of today's meeting, no plans were drawn up. No worst-case scenario was discussed. We trust the U.S. authorities will find a way out of this complex situation."

Other finance officials expressed similar optimism, some noting that this would not be the first time the United States has come to the brink of a default crisis and a solution has been found at the last minute.

The G20 discussions were being held in advance of Saturday meetings of the 188-nation International Monetary Fund and its sister lending organization, the World Bank.

The talks were something of a farewell for Bernanke, who was attending his last G20 meeting, and a coming out for Janet Yellen, who was tapped this week by Obama to succeed Bernanke as head of the Fed. Yellen was expected to participate in some of the Saturday discussions.

IMF warns of global consequences

The G20 represents around 85 per cent of the global economy. It includes established industrial nations such as the United States, Germany and France and rapidly growing emerging market economies such as China, Brazil and India.

The finance meetings are being held at a time growth in emerging market economies has cooled and some of them have struggled to contain the fallout from worries over rising interest rates if the Federal Reserve begins trimming its bond purchases.

IMF managing director Christine Lagarde warned on Thursday that a failure by the United States to increase its borrowing limit could do deep damage to both the American and global economies.

"Obviously, we know, and you know by now, that failure to raise the debt ceiling would cause not only serious damage to the U.S. economy but also to the global economy as a result of the spillover effects," Lagarde told reporters at a news conference. "It is not helping the U.S. economy to have this uncertainty and this protracted way of dealing with fiscal issues and debt issues."


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