People's Daily urges US to avoid debt default

09:14, August 01, 2011      

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The most important newspaper in China, the People's Daily, has urged politicians in the United States to put aside politics and avoid a debt crisis from developing into another financial disaster for the world.

Racing the clock to avoid a government default, US President Barack Obama and Republican congressional leaders closed in Sunday night on a compromise deal to permit vital U.S. borrowing by the Treasury Department, in exchange for more than $2 trillion in long-term spending cuts.

Republican leaders in the Senate and Congress told reporters that they and the White House are now "really, really close” to an 11-hour deal to avoid the country from a debt default.

China is the biggest foreign holder of US government debt with well over US$1.1 trillion invested. More than one half of its US$3.2 trillion of foreign exchange reserves are estimated to be held in dollar assets.

The People's Daily commented that the handling of the debt crisis was "irresponsible" and even "immoral." It blamed the US two-party democratic but partisan political system for the fiscal "farce," saying "not a single senator or representative has considered the world, and even US' own national interests are being banished from their mind."

No votes seemed likely in either house of Congress until Monday at the earliest, just one day before the deadline to raise the debt ceiling of 14.3 trillion dollars, and enable the government to keep paying its bills.

And as Sunday evening neared, Senate Majority Leader Harry Reid issued a statement saying he had signed off on a pending agreement, subject to approval by the Democratic rank and file. But that was met by conspicuous silence from the White House and House Speaker John Boehner.

US officials said a final sticking point between the Democrats and Republicans concerned spending cuts in the nation's huge defense budget in the next two years. Republicans wanted less reduction. Democrats pressed for more in an attempt to shield domestic projects, including Social Security and medical care from greater reductions.

As contemplated in talks that McConnell and Vice President Joe Biden were negotiating, the federal debt limit would rise in two stages by more than $2.2 trillion, enough to tide the Treasury over until after the 2012 general elections.

Any agreement would have to be passed by the Democratic-controlled Senate and Republican-controlled House before going to the White House for Obama's signature.

Without legislation in place by Tuesday, the Treasury will not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on US economy and the global economy, too.

Source: People's Daily Online
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