US Treasury Secretary Janet Yellen has warned Congress against an “unprecedented and risky default” as she urges them to raise the $31.4tn federal debt ceiling. Speaking ahead of the G7 meetings, Yellen argued that a debt default would not only jeopardize the US economy but also harm national security and undermine the country’s leadership in the global economy. She warned that the Republican brinkmanship on the matter amounted to a “self-inflicted crisis” and that the threat of default alone could lead to a downgrade of the US rating on government credit ratings. The US normally caps how much it can borrow and needs to raise the ceiling regularly.
Yellen outlined priorities for the G7 meeting, including individual and joint measures to strengthen the global economy, curb inflation, and supporting Ukraine’s defense. She said that despite downside risks, the global economy remained in better shape than expected six months ago, with annual headline inflation falling in most G7 countries. Yellen also accused China, the world’s largest sovereign creditor, of obstructing debt settlements for countries in debt crisis.
Furthermore, she suggested ways of making the global economy more resilient in the long run by promoting “timely and comprehensive” debt settlements for countries in debt crisis. This involves supporting developing countries that are moving away from extractive-only industries to activities that strongly support their domestic economy and employment. Yellen declined to provide details, but she said that these efforts would evolve. She also mentioned the ongoing $600bn investment through the G7’s Global Infrastructure Investment Partnership, which intends to mobilize private capital for infrastructure projects in developing countries. The G7 comprises the US, Japan, Germany, the UK, France, Italy, and Canada.