June 19, 2024

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An in-principle agreement has been reached on raising the debt ceiling

An in-principle agreement has been reached on raising the debt ceiling

A last-minute compromise was finally found. US President Joe Biden and Republican Party Chairman Kevin McCarthy reached an agreement in principle on the debt issue on Saturday, May 27. An important step towards avoiding a payment default by the world’s leading economic power.

Mr. The compromise announced by McCarthy must be urgently ratified by Congress. The U.S. can be found in default by June 5, meaning they have been unable to honor their financial obligations, whether it be salaries, pensions or repayments to their creditors.

No details were provided on the content of the agreement, but the Republican leader in a short speech estimated that a budget compromise had been found. “Most worthy of the American people”. Kevin McCarthy was the only one to welcome “Historical Reduction” The deal, he said, anticipates public spending cuts that have been a key demand of Republicans.

After all, he indicated that he will have a new interview with Joe Biden on Sunday and that he intends to organize a vote on the deal on Wednesday in the House of Representatives with a Republican majority. Next comes the Senate with a Democratic majority.

“Blank Check” Refusal

This Agreement excludes “Default [de paiement] Catastrophe », Joe Biden responded in a press release on Saturday. He added that“A compromise means that not everyone can have everything they want.”But the text was confirmed “Cost reduction while protecting essential public programs”.

The U.S. continues to come up against a legal hurdle: the debt ceiling, the maximum amount of the nation’s debt, must be properly raised by Congress. From this routine legislative practice, Republicans, with a majority in the House of Representatives since January, have developed an instrument of political pressure.

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read more: America Faces Default Threat: Five Questions About the “Debt Ceiling”

Refuses to pretend “blank check” They have conditioned any increase on the Democratic president’s cap on budget cuts, currently set at $31,400 billion (29,260 billion euros). The task of negotiating with the US president has been entrusted to Kevin McCarthy, who presents himself as a staunch defender of budget austerity.

His re-election candidate, Joe Biden, has refused to come to the negotiating table, accusing the opposition of storming the US economy. “Hostage” By claiming such cuts. After several meetings between the two men at the White House, the president and the Republican speaker’s teams descended into endless negotiating sessions.

A restricted parliamentary calendar

The agreement in principle reached on Saturday evening gives some breathing space to US markets, which had begun to take a dim view of the shutdown. Ratings agency Fitch put on Thursday “under observation” America’s AAA Rating believes it has failed to find an agreement “Would be a negative sign in terms of governance.”.

read more: The article is reserved for our subscribers United States: Fitch puts US debt on negative watch, with potential default within days

The global economy, already a “High Uncertainty”May be “happens” The tense talks also drew criticism from IMF director Kristalina Georgieva.

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However, the compromise must now be vetted by the Senate, narrowly controlled by Democrats, and the House of Representatives, where conservatives hold a weak majority. The parliamentary calendar is tight: Many elected officials have returned home to the four corners of the United States for several days of rest, during the extended Memorial Day weekend. They are advised to be ready to return to Washington immediately.

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Additionally, some progressives in the Democratic Party and elected representatives of the Republican Party have threatened not to approve or delay as long as possible a text that would make many concessions to the opposition camp. Rep. Bob Goode, a Republican elected to the House of Representatives, credited Saturday with giving what he knew about the compromise. “No elected official from the conservative camp can justify a positive vote.”.

read more: United States: Ending the Myth of the Public Debt Ceiling

The world with AFP