The International Monetary Fund chief warned the US today that failure to raise the debt ceiling could do deep damage to both the American and global economies.
Christine Lagarde, speaking at a news conference to kick off an IMF/World Bank meeting of global financial leaders, told the US to "get its fiscal house in order," a reference to the deadlock over passing spending and debt limit bills.
She said the global economy is in a slow and unbalanced recovery and urged Europe to clean up its banking problems and forge ahead with a banking union.
The US political deadlock has so far dominated the discussion at the Washington meetings. The big concern is that if it goes on for much longer, it could derail a fragile global economic recovery.
These new concerns are layered on top of anxiety over an expected reduction in the central bank's bond-buying program to stimulate the economy. The prospect of that reduction has put significant pressure on emerging markets even before it has actually begun.
This is especially worrying at a time when the IMF and other economic experts are counting on a strengthening US economy to help carry a still-fragile global economic recovery.
The mounting worries about the US mark a shift for the Washington-based IMF. After years fretting about the deep economic crisis in Europe, the focus of most concern is now in the backyard.
The US government partially shut down last week after lawmakers in the House and Senate failed to agree on a spending bill to fund government at the start of the new fiscal year.
