SEOUL / WASHINGTON – The financial markets have largely taken a few perks on Tuesday, investors betting on a compromise in trading on the U.S. debt, even as Barack Obama put the Republican opposition guard against the risk of default of his country, the world’s largest economy.
The United States have until Aug. 2 to reach an agreement in Congress on raising the debt ceiling, currently set at 14,300 billion (about 9.882 billion euros), and avoid a potential financial disaster for the national economy still recovering from the crisis, and that may have an impact abroad.
The credit rating agencies threaten to degrade the rating of U.S. debt, now rated AAA. A default would include the delay in Social Security pensions, payments to providers of government and other federal spending.
The U.S. Treasury would pay but most likely the interest on its debt, said the bank Credit Agricole CIB in a report. “Most investors think (Democrats and Republicans in the U.S.) can find a last-minute compromise,” said Peter Lai, director at DBS Vickers in Hong Kong.
The Democrats want Barack Obama dosing spending cuts and revenue increases to resolve this political crisis of debt, while Republicans rule out any tax increases.
The Head of State and President of the Republican House of Representatives, John Boehner, have both sent to the Americans on Monday night. Barack Obama said a compromise was necessary to avoid an issue “reckless and irresponsible.”
It took the Americans to witness in a televised speech, calling on them to be heard and to inform their elected officials that they wanted “a balanced approach to deficit reduction.” “The only reason” he said of the blocking is in fact “a significant number of Republicans in Congress insist on an approach based solely on cuts, an approach that requires absolutely no contribution to the wealthiest Americans or larger companies.”
A few minutes later, John Boehner spoke in turn into the top corner to accuse the president to seek a “blank check” “this is not going to be this way”, he let go. “The president often says that we must approach a ‘balanced’, which means Washington: we spend more, you pay more,” he accused.
The negotiation was therefore still deadlocked despite new proposals by the Republican majority in the Lower House and the Senate Democratic majority led by Harry Reid.
Obama has held that the new Republican plan paved the way for a new crisis in six months, because it provides a second increase in the debt ceiling in 2012, which would depend on an agreement on further cuts in full year election, and that this probably not prevent degradation of the note of the United States.
The Head of State wishes the debt ceiling be raised to at least 2400 billion in a single vote. “The Americans may have voted for a divided government but they did not vote for a dysfunctional government,” he said.
Barack Obama supports a new project, however, the Senate, although it has no tax increase. It raises the ceiling of 2,400 billion, which should be sufficient until 2013, after its eventual re-election. It also provides 2,700 billion savings in federal spending; including 1,000 billion would come from the end of the wars in Iraq and Afghanistan.
John Boehner for his part assured that there was “no lock in the Congress,” saying that the latest Republican plan would be adopted by the House of Representatives and the Senate could be well before being subjected to ratification of the President.
Failing agreement between the two camps, one appears headed for vote in both houses of the two projects by Wednesday.