A default on the US debt would be harmful for Canada

2023-05-10 01:00:53

(Washington) The Canadian government held its breath Tuesday as across the border began a race once morest time, with the global economy weighing in the balance.

Posted yesterday at 9:00 p.m.

James McCarten

The Canadian Press

US President Joe Biden has met with congressional representatives, including Republican Speaker of the House of Commons Kevin McCarthy, to negotiate a possible increase in the debt ceiling, which limits the borrowing power of the government.

Treasury Secretary Janet Yellen warned last week that the cap might be hit as soon as 1^is June.

Republicans, who have a majority in the House, say they won’t agree to raising the limit until the Biden administration cuts government spending.

“McCarthy is grappling with a very slim majority and the very real possibility that his party’s right wing might ( once more) turn once morest him as Speaker of the House,” said politics professor John Aldrich, of the Duke University.

“Everyone around the table understands the risks of a default: our economy would fall into a deep recession,” President Biden said. Nearly eight million Americans would lose their jobs and our international reputation would be damaged. »

If Canada is careful not to speak out on the situation, its consequences might be felt in the country.

“In many ways we are like a 51^e state,” said Professor Andreas Schotter, an international trade specialist at Western University. Companies and institutions that sell products or services or lend money to the U.S. government will feel the impact of a default almost instantly, he said, also citing the effect it would have on stock markets and interest rates, already rising, which would soar.

He does not think it will come to that, but predicts that with the current political situation, the possible agreement risks being made at the last minute.

“The consequences of a US debt default would be global and discussions are ongoing between the president, the executive branch and Congress,” the Canadian embassy said in a statement. “Canada is following this situation very closely. »

Deputy Finance Minister Randy Boissonnault said Tuesday that this is an internal issue that the United States must resolve on its own. However, he noted that the G7 finance ministers will meet this week in Japan.

With information from David Fraser, Ottawa.

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