UK Chancellor of the Exchequer Jeremy Hunt warned the US debt ceiling impasse poses a serious risk for the global economy.
(Bloomberg) — UK Chancellor of the Exchequer Jeremy Hunt warned the US debt ceiling impasse poses a serious risk for the global economy.
“It would be absolutely devastating if America, which is one of the biggest motors of the global economy, was to have its GDP knocked off track by failure to reach agreement,” Hunt said after the Group of Seven meeting of finance ministers and central bank governors wrapped up in Niigata, Japan, on Saturday.
“It’s not for us to say how that issue should be resolved,” Hunt said. “But we very strongly hope that the administration and Congress are able to resolve their differences.”
Hunt was speaking after the G-7 finance chiefs issued a communique following three days of talks that offered more support for Ukraine, a plan for diversifying supply chains and a vow to fill gaps in financial regulation. The meeting has been overshadowed by the ongoing stalemate over the US’s debt ceiling.
Hunt met US Treasury Secretary Janet Yellen on Saturday, who herself has warned of an economic and financial “catastrophe” if Congress doesn’t raise the debt limit to allow the federal government to meet its obligations.
Asked whether the US debt ceiling issue could prevent the government from hitting its target of growing the British economy this year, Hunt said “there are lots of risks to growth.” The biggest concern for he and Prime Minister Rishi Sunak is persistent high inflation and reducing it remains the number one priority, he said.
Hunt is trying to revive Britain’s growth prospects — it’s been at the bottom of G-7 nations since the pandemic. Data this week showed the UK economy unexpectedly shrank in March due to cautious household spending and the impact of strikes.
After the Bank of England hiked interest rates again this week in a bid to cut inflation, Hunt said the best thing he can do is keep borrowing under control, which curbs the amount of money in the economy, while supporting households with cost-of-living help.
“We are doing everything we can to try and reduce the pressure on wages,” Hunt said. “It’s very important that what the governor and I do are closely aligned.”
Hunt and Yellen also discussed issues including the enforcement of sanctions against Russia after a surge in shipments to the country of goods such as semiconductors, integrated circuits and other technologies from states including Kazakhstan, the United Arab Emirates, Turkey and China.
Hunt said it was “disappointing” that the G-7-led grouping has been unable to create a global coalition to put united pressure on Russia over its war in Ukraine.
“We need to do some thinking about that, even some soul searching,” he said.
–With assistance from Christopher Condon.
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