Shutdown, Debt, What The Rest Of The World Thinks

  • Fears remain about another possible shutdown – and, even worse, a possible default – early next year.
  • Experts and foreign officials warned that Washington’s credibility had been damaged – a point President Barack Obama echoed.
  • The short-term nature of the deal makes many uneasy.
  • International Monetary Fund managing director Christine Lagarde said the shaky American economy needs more stable long-term solutions.
  • “In three months’ time, this could be back again,” said Chakraborty. “If this kind of pushing it back happens several times, then this comfort that the markets had over the last 20 days that a deal will be reached, that comfort may now be dead.”
  • The congressional cliffhanger might dent longer-term confidence in American government debt, a cornerstone of global credit markets, prompting creditors to demand higher interest.
  • Xenia Dormandy, director of the Americas program at London’s Chatham House, said the U.S. image had suffered a double blow, with both its economic and political credentials called into question. “There is a sense that the U.S. as a reliable ally is not necessarily the case anymore,” she said, warning that both American allies and adversaries have reached this conclusion.
  • In Brazil, a large holder of U.S. debt, there was certainly relief, but also concerns that it’s just a temporary fix and more turbulence is ahead. Finance Minister Guido Mantega said the U.S. must come to a lasting answer to the “temporary solution” that was found. He added that as long as the threat of another shutdown exists, there will be “a sensation of insecurity, distrust and therefore damage to business in general.”

Link: World welcomes US budget deal but fears remain

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