Washington US Secretary of the Treasury Janet Yellen has warned of an impending insolvency of the US government. In a letter to the US Congress on Friday, she called on MPs to raise or completely suspend the debt limit. Otherwise, the applicable debt ceiling will already be reached on January 19, wrote Yellen.
After that, the Ministry of Finance would have to take “extraordinary measures” in order to be able to continue to guarantee the government’s solvency, it said. Specifically, investments in certain public pension funds are affected. As a result, a payment default can be delayed until the beginning of June, the letter said. The debt limit so far is around 31.4 trillion US dollars (around 29 trillion euros).
Yellen warned that a default would irreparably damage the US economy, the livelihoods of US citizens and the stability of the global financial system. In the past, the prospect of an impending payment default had had real consequences.
In 2011, a newly elected Republican majority in Congress delayed raising the debt ceiling. As a result, the creditworthiness of the USA downgraded for the only time in history.
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Statements leading republican in the US House of Representatives had fueled concern that such a showdown could happen again. “We need to change the wasteful way money is spent in this country and we will make sure that happens,” newly-elected House Speaker Kevin McCarthy said on Thursday. Since the beginning of January they have republican a wafer-thin majority in the House of Representatives with which they could prevent the debt limit from being raised.