Washington (AFP) - A chorus of global finance chiefs on Thursday called for the US to quickly resolve the political stalemate over the budget and debt ceiling to avoid damaging the world economy.
Top finance officials from China, Europe and Latin America joined International Monetary Fund Managing Director Christine Lagarde and World Bank President Jim Yong Kim in warning of the potential catastrophe looming if Washington is forced to slash spending because Congress does not increase the statutory borrowing cap.
"They should have the wisdom to solve this problem as soon as possible," Gang Yi, deputy governor of the People's Bank of China, said during the World Bank-IMF annual meetings in Washington.
"We certainly need a very stable global economy," he said.
In New York, European Central Bank chief Mario Draghi said a standoff between the Democrats and Republicans that lasts several weeks or months could "cause severe damage to the US economy and to the world."
"The world still doesn't believe that the US will not find a way out of this," Draghi said.
Lagarde and Kim, launching the annual meetings of the two global banks, both highlighted the dangers as Republicans offered a short-term fix to the impasse that was not sure to be accepted by President Barack Obama.
"It is not helping the US economy to have this uncertainty and this protracted way of dealing with fiscal issues and debt issues," Lagarde said.
"There will be very, very negative consequences for the US economy, and there will be very negative consequences outside of the US economy."
If the US is forced to default on its obligations, especially its debts, said Kim, developing countries will be deeply affected.
"The impacts are going to be severe," he said.
In a similar Washington budget fight that went to the wire in 2011, Kim reminded, developing countries paid in terms of higher borrowing costs for months afterward, despite it having been resolved without a US default.
"It's an issue that concerns all of us,"said Chilean Minister of Finance Felipe Larrain.
"It is a US problem but ultimately it can kill the recovery of this economy and have a strong impact on the rest of the world."
US Treasury Secretary Jacob Lew told the Senate Finance Committee Thursday that leaving the government unable to borrow more to finance the $60 billion a month deficit would have potentially disastrous effects.
"If Congress fails to meet its responsibility, it could be deeply damaging to the financial markets, the ongoing economic recovery, and the jobs and savings of millions of Americans," Lew said .
The Treasury estimates it will run out of room to move under the $16.7 trillion borrowing limit as soon as October 17, putting it in a position of choosing obligations for default.
China's worries, the largest foreign holder of US debt, echoed in several forums. At an Asian summit in Brunei, Premier Li Keqiang expressed his "concern" about the debt cap problem to US Secretary of State John Kerry.
And in Beijing, the state-run China Daily blasted "the astonishing failure" of the US Congress.
Lagarde backed away from telling Washington's politicians how to resolve their fight, though she has been clear that quickly increasing the debt limit is crucial for US and global stability.
"The IMF does not take a stand, and does not make a recommendation, as to how politically this matter can be resolved," Lagarde said.
But she stressed "that the fiscal house of the US be put in order."
Some were more sanguine about the problem.
"I don't expect a US default," Haruhiko Kuroda, governor of the Bank of Japan, said in New York.
"There's this belief that an agreement will be found," said Draghi.
Lagarde, too, stressed that the IMF does not expect that worst case to take place."I hope that in a few weeks time, we will look back and say, 'what a waste of time that was,'" she said of the Washington fight.