Via Sky News:
http://news.sky.com/story/1154162/us-shutdown-lagarde-issues-recession-warningThe head of the International Monetary Fund has warned that a political failure to break the stalemate over raising the US debt ceiling risks tipping the world into recession.
Christine Lagarde was speaking as there were few signs in Washington that solutions were close in either the row over the budget - which has left government in a partial shutdown for two weeks - or the debt ceiling dispute.
However, Harry Reid - the Democratic Leader in the Senate - painted an optimistic picture of the dialogue with Republicans late on Sunday, though nothing concrete was disclosed.
Failure to lift the debt limit by Thursday would leave the US government unable to pay its bills or service its debts, leading to a devastating default that analysts warn will devastate market values and tip the global economy back into recession.
In an interview on NBC Sunday talk show "Meet the Press," Lagarde said the US economy was already showing "real improvement," evident from indicators including those from the housing sector to household spending.
But she said it was crucial the government work out a deal to re-open the government and continue borrowing so it does not default on its debt - and not just for a few weeks.
Lagarde warned of serious consequences from "a combination of the government shutdown for a period of time and, more seriously, more damaging, if the debt ceiling was not lifted with a degree of certainty and enough time so that people could, you know, sort of have the assurance that the economy was in good standing."
She said: "If there is that degree of disruption, that lack of certainty, that lack of trust in the US signature, it would mean massive disruption the world over. And we would be at risk of tipping, yet again, into recession."
She called on politicians to address spending on social programmes like Medicare and Social Security but cautioned that spending cuts must not be too drastic.
I thought the servicing the debt talking point was total BS? Someone put up the figures in another thread - to service the debt is 18 billion per month out of a monthly revenue of 220 billion, and servicing the debt is the first obligation of the government. Is that correct?
