WARNING OF GLOBAL RISK, LEADERS URGE U.S. TO SOLVE ITS DEBT LIMIT CRISIS / THE NEW YORK TIMES

October 13, 2013

Warning of Global Risk, Leaders Urge U.S. to Solve Its Debt Limit Crisis

By ANNIE LOWREY

WASHINGTON — Global leaders at the World Bank and International Monetary Fund’s annual meetings here on Sunday pleaded, warned and cajoled: the United States must raise its debt ceiling and reopen its government or risk “massive disruption the world over,” as Christine Lagarde, the fund’s managing director, put it.

The United States’ fiscal problems unexpectedly overshadowed the meetings’ official agenda, with representatives from dozens of countries — including two of Washington’s most important economic partners, Saudi Arabia and China — publicly expressing their worries about what was happening on Capitol Hill and in the White House.

The leaders came to Washington to talk about the international recovery, Ms. Lagarde said in an interview on NBC’s “Meet the Press.” “Then, they found out that the debt ceiling was the issue,” she added. “They found out that the government had shut down and that there was no remedy in sight.”

“So it really completely transformed the meeting in the last few days,” Ms. Lagarde said.

“One thing we’re certain around the table, it was that if there is that degree of disruption, that lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over,” she added. “And we would be at risk of tipping yet again into a recession. That was the impression around that big table.”

Many leaders at the meetings said they believed that the impasse would be resolved before Thursday, when the government would be at severe risk of not having enough money to pay all its bills on any given day going forward. But they pressed Treasury Secretary Jacob J. Lew and the Federal Reserve chairman, Ben S. Bernanke, on the issue, predicting that a default by the United States would lead to higher borrowing costs and a slowdown of the global economy.

Those warnings included sharp lines in official documents. “The United States needs to take urgent action to address short-term fiscal uncertainties,” said a communiqué by the fund’s International Monetary and Financial Committee.

A senior Treasury official said that American officials went into the meetings acknowledging how critical it would be to reopen the government and raise the debt limit.