Saturday, July 16, 2011

'The US Is Holding the Whole World Hostage'

Here's an article from Berlin, Germany with their view of our current political crisis. - Reggie

With no solution to the US debt crisis in sight, the rest of the world is starting to get nervous. German commentators urge congressional leaders to get their act together. A US default would have catastrophic consequences, they warn.

Both Moody's and Standard & Poor's are threatening to downgrade the country's debt amid fears of a national insolvency. But for once it is not a debt-stricken euro-zone member that has come into the crosshairs of the powerful rating agencies. This time it is the United States, the world's largest economy, that is at risk of going bust.

The US needs to raise its debt ceiling, currently set at $14.3 trillion (€10.1 trillion), by Aug. 2, otherwise the country will run out of money. But negotiations between President Barack Obama and top Republicans and Democrats have so far failed to make progress.

Obama has now given congressional leaders until Saturday morning to reconsider their positions. "It's decision time. We need concrete plans to move this forward," Obama said on Thursday, the fifth day of talks, following an inconclusive negotiating session.

Financial markets, which have previously viewed the negotiations with calm, are beginning to get nervous amid fears that Republicans and Democrats may be unable to reach an agreement by Aug. 2. Any default on the part of the US could have incalculable effects on global financial markets and could hurt the fragile recovery in the US. Moody's and Standard & Poor's have warned they may cut the country's top AAA credit rating if a solution isn't reached.

Republicans want any increase in the debt ceiling to be met by spending cuts equal to the same amount, as well as more serious efforts by the government to address the debt problem. Democrats are open to certain cuts but want tax increases in return. With presidential elections coming up in 2012, neither side wants to be seen as ceding ground.

On Friday, German commentators react with concern to the ongoing stalemate.

The center-right Frankfurter Allgemeine Zeitung writes:

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