Usa, debt ceiling: agreement found to remove a historic default

The stalemate in the United States Congress is released: an agreement has in fact been reached to raise the public debt ceiling until the end of the year and avoid the dramatic scenario of a default. The leader of the Democratic Senators Chuck Schumer said, hoping that the proposal will be approved in the next few hours.

The crisis on the American debt, which threatened to plunge the markets and the economy into a serious crisis within two weeks, therefore seems to have been avoided, at least for now. The specter of a historic and imminent US default, as early as October 18, has been dispelled by a compromise that took shape overnight between Democrats and Republicans and that intends to raise the debt ceiling enough to cover the needs of the next two. months.

A short-term compromise

Republican Senate leader Mitch McConnell softened his opposition, offering Democrats not to stonewall a vote to raise the federal debt limit to a new set high to allow Joe Biden’s administration to meet obligations. of the government until December. Barring surprises, the details and a vote in the Senate, with a simple democratic majority instead of a qualified 60% consensus for the Republican decision to renounce obstruction, are expected as of today.

McConnell’s tweet

“We will allow Democrats to use normal procedures to approve an emergency debt ceiling extension to a fixed dollar amount to cover what is needed until December,” McConnell said via Twitter. Numerous Democratic senators, including left-wing leader Bernie Sanders, have called the breakthrough as welcome and said opponents have caved.

The pressure of the CEOs

The pressure on the Republicans had grown as the hours passed. Biden met with a number of Corporate America chief executives yesterday afternoon, starting with executives from large banks such as JP Morgan, Citigroup and Bank of America, to reinforce his call not to play with the country’s debt and credit rating. Jane Fraser, CEO of Citi, had denounced that “the economy is already suffering damage” for the specter of a default. JP Morgan’s Jamie Dimon stressed that “we also recommend that children pay off their debts.” Adena Friedman of the Nasdaq had denounced the risks for “hundreds of millions of investors” in the world, saying that the reaction of the markets would be “very, very negative”.

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