Budget row: G20 seeks ‘urgent action’ from US

WASHINGTON: Finance chiefs of the G20 called for Washington to quickly resolve the political paralysis over its budget and debt ceiling as hopes grew that Washington could soon clinch a stop-gap deal to ensure it can keep paying its bills.
“The US needs to take urgent action to address short term fiscal uncertainties,” the group of leading economies said in a statement.
Officials from across the Group of 20 nations had earlier warned that a failure by the US Congress to raise the nation’s $16.7 trillion debt ceiling would wreak havoc on the global economy.
The US Treasury has said it could quickly run out of cash if the cap is not raised by Oct. 17. A failure to lift it, officials warned, could spark a financial crisis and tip the world’s largest economy into recession with damaging repercussions that would be felt worldwide.
But that risk receded this week as Republicans presented a plan to extend the nation’s borrowing authority, opening a door for talks with the White House.
Republicans have sought to use the need to raise the debt limit as leverage to force the White House to agree on budget cuts or to force changes in Obama’s signature health care law.
US Treasury Secretary Jack Lew and US Federal Reserve Chairman Ben Bernanke assured their G20 counterparts at a dinner that a resolution would be reached in time.
“They said that the problem will be solved by the 17th,” Anton Siluanov, finance minister of this year’s G20 host Russia, said. “Both Lew and Bernanke believe that these difficulties can be overcome soon.”
Talks between the White House and Republican lawmakers pushed late into the night, but signs of progress earlier had already fueled the biggest Wall Street rally since Jan. 2.
“It is quite clear that America has been pulled back from the brink, as sensible people expected,” Australian Treasurer Joe Hockey told reporters ahead of the dinner of top finance officials from the G20 developed and emerging economies.
“This is an important step forward,” he said.
After a second round of talks on Friday, the G20 was due to issue a communique offering its views on the world economy and steps that could be taken to strengthen it.
Siluanov said the communique would refer to the G20’s shared worries about what a US debt impasse could mean for the world economy.
“There will be a general wish for a fast solution of the problem. There will be a couple of propositions — that we are of course concerned and that we wish for a speedy resolution of the situation,” he said.
Siluanov said the statement would be just two pages, with most of the phrasing taken from a document adopted by G20 leaders at a summit in St. Petersburg in September.
“Very little time has passed since,” he said.
Officials from around the world had expressed confidence the US would break through the political logjam that had already led to a partial shutdown of the US government.
The risk of a US default, which G20 officials had always considered remote but which had appeared on the rise in recent days, had clouded an already soft outlook for the world economy.
The IMF this week cut its forecasts for global growth, saying an expected pickup in rich nations, including the US, would likely not be enough to offset slower growth in emerging markets. It warned that forecast would be thrown off badly were the US to default.
Some of the sternest warnings to Washington came from the biggest holders of US government debt.
“They should have the wisdom to solve this problem as soon as possible,” said Yi Gang, the No. 2 at China’s central bank.
China is the United States’ top foreign creditor with more than $1.2 trillion of US Treasuries; Japan is a close second.
“The problem needs to be cleared quickly because US is in a position where it is pulling the rest of the world economy,” said Bank of Japan Governor Haruhiko Kuroda.