ECB President Lagarde Warns of ‘Major Disaster’ if US Defaults on Debt

Last Updated: October 12, 2023

• Christine Lagarde, the president of the European Central Bank (ECB), warned that if the U.S. were to default on its debts, it would be a “major disaster.”
• The U.S government has accumulated more than $31 trillion in debt held by the government and intragovernmental holding entities.
• In a recent interview, Lagarde expressed her confidence in the U.S. managing its finances and said she cannot believe they would allow such a major disaster to occur with defaulting on its debt.

U.S Government’s Debt Obligations

The United States of America is an economic superpower, but it has accumulated more than $31 trillion in debt held by the government and intragovernmental holding entities over the last 20 years. There has been much discussion lately about whether Congress will act before defaulting, as Janet Yellen, U.S Secretary of Treasury, explained how they need to enact “extraordinary measures” to pay its debts which will be exhausted before early June unless there are changes made within Congress’ approach to these issues.

ECB President Lagarde’s Warning

In a recent interview with CBS News’ “Face the Nation” on Sunday, Christine Lagarde, President of ECB warned that if the US were to default on its debts it would be disastrous for not only this country but around the world too, saying “it would have a very negative impact not only in this country where confidence would be challenged but also around the world”. She added that despite politics being involved in this issue there is still time for “the higher interest of nation” to prevail over any other interests or agendas at play here.

Lagarde’s Confidence in US Debt Management

Despite all predictions of possible default crisis for US government coming up in August or September due to lack of funds available Christine Lagarde is confident that US can maintain its debt obligations expressing her faith into US financial management: “I have enormous confidence in United States.. I simply cannot believe that they would allow such major major disaster to occur with United States defaulting on their debt” she stated during her interview showing her trust into Washington’s ability and willingness to act accordingly when needed and avoid potential risks like this one from happening eventually.

Extraordinary Measures Needed To Pay Debts

The extraordinary measures provided by Yellen gave US roughly $800 billion which gives them enough funds until June at least while significantly depending on taxpayers money when it comes to covering those expenses fully and avoiding any defaults however even though amount of funds available may be enough so far until then there is no guarantee that same situation won’t happen again soon after if nothing changes regarding government’s approach towards funding itself without having risk of running out money eventually and going into bankruptcy situation as result from lack thereof .

Conclusion

Overall although certain steps have been taken so far towards resolving these debt problems by introducing extraordinary measures which gave US some extra time until June for example predicting any possible outcomes remains difficult so far especially given current circumstances surrounding Covid-19 pandemic however despite all uncertainties Christine Lagarde expressed her confidence into USA’s ability manage their financial issues properly ultimately making sure anyone does not reach point where actual defaults will occur leading potentially lead into catastrophic consequences for entire world economy not just American one due to how powerful nation like USA actually is economically speaking .

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