US Treasury Secretary Janet Yellen has warned of an impending US government default. In a letter to the US Congress yesterday, she urged lawmakers to either raise the debt limit or suspend it entirely. Otherwise, the applicable debt ceiling will already be reached on Jan. 19, Yellen wrote.
After that, the Ministry of Finance would have to take “extraordinary measures” in order to continue to guarantee the Government’s solvency.
Specifically, investments in certain public pension funds are affected. As a result, payment defaults may be delayed until early June, the letter said. The debt limit so far is around 31.4 trillion US dollars (about 29 trillion – i.e. 29,000 billion – euros).
2011 incident resulted in credit downgrade
Yellen said that a default would irreparably damage the US economy, the livelihoods of American citizens and the stability of the global financial system. In the past, the prospect of imminent default had real consequences.
In 2011, a newly elected Republican majority in Congress delayed raising the debt ceiling. As a result, the US credit rating was downgraded for the only time in history.