Pushing U.S. debt negotiations to their limits "can result in significant economic costs," Treasury Secretary Janet Yellen warned Thursday, as former President Donald Trump urged Republicans to walk a tightrope approach. A prolonged stalemate in negotiations on raising the debt ceiling could lead to an unprecedented default by the United States, which would produce an "economic and financial catastrophe" with global repercussions, Janet Yellen said on the sidelines of a G7 ministerial meeting in Japan.
See alsoThe White House fears an economic disaster in the event of a prolonged default
Democrats and Republicans in Congress cannot yet agree on raising the US debt ceiling, and a prolonged impasse could lead to a US default as early as this summer, which would be unprecedented. The mere fact of flirting with such a situation "can also entail significant economic costs," warned Janet Yellen at a press conference in Niigata (central Japan) where a meeting of G7 finance ministers and central bankers is being held from Thursday to Saturday.
Avoiding economic disaster at all costs
As we already learned in 2011, the mere threat of default can lead to a downgrade of our financial rating and a weakening of consumer confidence," with increases in interest rates on loans, she added. A default would produce an "economic and financial catastrophe" in the United States, with global repercussions, she also recalled, echoing similar statements by her and the White House in recent days.
A few hours before Janet Yellen's remarks in Japan, Donald Trump, who is seeking re-election to the presidency of the United States in 2024, urged Republican elected officials to cause a default unless they get the Democrats to make "massive" budget cuts. US President Joe Biden has so far ruled out negotiating budget cuts and accused Republicans of holding the economy "hostage". "There is no good reason to generate a crisis ourselves," Janet Yellen insisted Thursday, recalling that the US Congress had already raised or suspended about 80 times the debt ceiling since 1960.