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Summary Credit downgrade in the US can affect the whole world, says IMF Chief Christine Lagarde.
Lagarde said that a default or significant credit downgrade in the US would be a very serious event, warning it could have far-reaching consequences for the world.The leader warned about the consequences of the US deadlocked talks on raising the US debt ceiling by August 2. “The clock is irremediably ticking and people have to really try to find the appropriate solution. I am not going to comment on one plan or the other, it’s not for me to say. But there has to be sufficient plans in order to address the issue of the sovereign debt, of the debt ceiling, because frankly to have a default or to have a significant downgrading of the United States signature would be a very, very, very serious event,” she told the Council on Foreign Relations.Lagarde called on the United States to develop a credible fiscal adjustment plan to address its public debt but cautioned that near-term budget cuts could undercut an already sluggish economy. Her warning on the dangers of not raising the $14.3 trillion debt ceiling by next week came as the dollar fell across the board after US President Barack Obama gave no sign of a breakthrough in deadlocked talks.The Obama administration has warned that next Tuesday (August 2) the government will run out of cash to pay all its bills, raising the prospect that it could default on its debts.An IMF report on the US economy on Monday warned that if the debate over the debt ceiling dragged on it could further slow the US economy and tip it into another recession.
