Lagarde on debt limit: US default would be catastrophic

“I can’t believe they would allow such a huge, massive catastrophe that the United States would not be able to pay its debt,” Lagarde said on US television on Sunday (local time). You have faith in the United States. “But if it comes to that, it will have very negative effects, not only on this country (…) but on the entire world.” The United States, as the largest economy, should not allow default. “I understand politics, I’ve been in politics myself,” she added. But there are moments when the interests of the state must take precedence.

In the United States, Congress sets debt ceilings at irregular intervals, thus limiting the amount of money the country can borrow. The cap to date is around 31.4 trillion US dollars (about 29 trillion euros). Meanwhile, the current debt ceiling has been reached and the Treasury Department has to draw on the reserves – because the United States is no longer allowed to take on any more debt to pay its bills.

However, among House Republicans, some hardliners are blocking the issue, and there is no sign of agreement with Democrats for President Joe Biden. The independent US Congressional Budget Office recently predicted that there would be a default between July and September.