World appalled at US recklessness on debt ceiling

29th July 2011

The world is waiting to see if America's politicians amid grim warnings about what may happen if it fails. Here Mindful Money takes a look at world opinion plus one closer to home.

Germany's Speigel magazine rounds up the German newspapers. Right and left are united in their condemnation.

Right wing Frankfurter Allgemeine Zeitung writes: "We can only hope that the top politicians in Washington take Moody's warning seriously, despite the relaxed response from the financial markets so far. A US default and a lower credit rating would … send stock prices through the floor and could choke off America's economic recovery — with global repercussions. The politicians in Washington are playing with fire. A swift compromise is needed. Nobody needs a US default."

Centre Left Süddeutsche Zeitung writes:"The Republicans are playing with fire. Nobody can imagine what the repercussions might be if the unthinkable happens and the US is suddenly no longer a safe haven for investors. Anything is possible, from a small, barely perceptible amount of turbulence in the financial markets to a global panic. Congress should think carefully about what it is doing."

The Chinese are not amused either.

Bloomberg reports the views of JP Morgan Asia non-executive chairman Stephen Roach who says Chinese officials are appalled by the situation coming as it does on the back of the sub-prime failure.

Roach cited an unnamed Chinese policy maker as saying in mid-July that "we understand politics, but your government's continued recklessness is astonishing."

Here CNN reports the Chinese State News Agency Xinhua's statement "Such political brinkmanship in Washington is dangerously irresponsible."

Japan may have to intervene to stop its own currency rising and wrecking its export prospects as it recovers from the earthquake.

The Washington Post reports that investors are viewing the Yen as a safe haven and quotes finance minister Yoshihiko Noda saying: "Our stance is clear. We will take decisive action against excessive exchange rate volatility. I'd like to carefully examine how long we can leave current moves [of the yen] unattended."

The Daily Telegraph reports the views of the newly installed French head of the IMF who this morning warned that without a deal America could lose its status as a reserve currency.

She said: "It would probably entail a decline of the dollar relative to other currencies, and probably puts doubts in the mind of those people who reserve currencies as to whether the dollar is effectively the ultimate and prime currency of reserve."

In the UK, the most quoted condemnation came from Business Secretary Vince Cable who described the Republicans as right wing nutters. The video from the Andrew Marr show is hosted here on political blog Left Foot Forward. But the pro Labour party site also suggests that the UK right including some Conservatives support the Republican stance.

But there are people putting pressure on the Republicans closer to home. The Washington Post reports the former Republican Presidential candidate Senator John McCain telling the Senate

 "What is really amazing about this is that some, some members are believing that we can pass a balanced-budget amendment to the Constitution in this body with its present representation, and that is foolish. That is worse than foolish – that is deceiving. That is not fair to the American people, to hold out and say we won't agree to raising the debt limit until we pass a balanced-budget amendment to the Constitution. It's unfair, it's bizarro. And maybe some people who've only been in this body for six or seven months or so really believe that. Others know better. Others know better."

America has until next Tuesday to resolve this bizarro situation.

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