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Defaulting on US debt would be detrimental to Canada

(WASHINGTON) The Canadian government held its breath on Tuesday as a race against time began across the border as the global economy tipped the scales.

US President Joe Biden met with representatives in Congress, including Republican Speaker of the House of Commons Kevin McCarthy, to negotiate a possible increase in the debt ceiling, which would limit the government’s borrowing power.

Treasury Secretary Janet Yellen warned last week that the cap could be exceeded as soon as 1any June.

Republicans, who have a majority in the House of Representatives, say they will not agree to raise the cap until the Biden administration cuts government spending.

“McCarthy is grappling with a very narrow majority and the very real possibility that the right wing of his party could (again) turn against him as Speaker of the House,” said John Aldrich, a Duke University politics professor.

“Everyone around the table understands the dangers of default: Our economy is going to fall into a deep recession,” President Biden said. Nearly eight million Americans will lose their jobs and our international reputation will suffer. »

If Canada is careful not to speak publicly about the situation, its consequences could be felt in the country.

“In many ways we are like 51H said Professor Andreas Schutter, international trade specialist at Western University. He said that companies and institutions that sell products or services or lend money to the US government will feel the impact of default almost immediately, also noting the impact it will have on stock markets and interest rates, which are already rising, which will rise.

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He does not believe that the matter will come to that point, but he expects that in light of the current political situation, a possible agreement may be reached at the last moment.

“The consequences of a US debt default will 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 closely. »

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

With information from David Fraser, Ottawa.