US Crisis Watch: Debt Impasses Continues, Obama/Boehner Clash

Author: Market News International | Category: News

WASHINGTON (MNI) – The following is a roundup of key developments
and events Tuesday on the ongoing stand-off over the U.S. debt ceiling:

* President Obama Monday night repeated his call for a balanced
approach to deficit reduction that “asks everyone to give a little
without requiring anyone to sacrifice too much.” It would reduce the
deficit by around $4 trillion and put the U.S. on a path to pay down its
debt, he said, without being a drag on the economy. Not raising the debt
ceiling, Obama warned, “would risk sparking a deep economic crisis.”

* In a nationally televised response to President Obama’s
address Monday evening, House Speaker John Boehner said the dispute
surrounding the debt ceiling can end if Obama accepts the new House
Republican fiscal plan. In a stern, uncompromising speech, Boehner
touted the House-passed “Cut, Cap and Balance” plan which was approved
by the House last week but rejected by the Senate.

* Despite the sharply partisan rhetoric enveloping the debt
ceiling debate and the emergence Monday of two very different plans by
House Speaker John Boehner and Senate Majority Leader Harry Reid, it is
possible to see the vague outlines of an agreement on the debt ceiling
and deficit reduction. This accord is possible mostly due to critical
Democratic concessions, but also because of a significant concession
made by Boehner Monday.

* The head of the International Monetary Fund Tuesday again
urged U.S. political leaders to find a solution to the U.S. debt limit
debate “immediately” and avoid serious consequence for the world
economy. “On the debt ceiling, the clock is ticking, and clearly the
issue needs to be resolved immediately,” IMF Managing Director Christine
Lagarde said. But she also cautioned, as the IMF staff did in its
recently-published analysis of the U.S. economy, that since the U.S.
economy is facing a jobless recovery, “we’ve advised against fiscal
consolidation that is unduly hasty.”

* The ongoing U.S. debt ceiling impasse, further highlighted by
the conficting comments from President Obama and House Speak Boehner
overnight, saw euro-dollar extend its recent rally in Asia, with early
Europe taking the rate on to take out option barrier interest at
$1.4500, extending recent recovery highs to $1.4514 before settling back
between $1.4460/80.

* The U.S. dollar held a weak tone through the Asian afternoon
Tuesday, after falling to multi-week lows against the euro and the
Australian dollar and to a record low versus the New Zealand dollar amid
ongoing concerns about U.S. debt ceiling talks. “The focus remains on
the U.S., as markets await the outcome of the country’s efforts to avoid
default,” said analysts at United Overseas Bank. “With the focus on the
U.S. debt ceiling, the U.S. dollar is likely to stay under selling
pressure.”

–Editor: Brai Odion-Esene; besene@marketnews.com

** Market News International Washington Bureau: 202-371-2121 **

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