The Treasury is asking Congress to raise the contribution limit and paralyzes the two pension funds
The level of indebtedness of the U.S. federal government reached the legal limit yesterday, 14.2 billion dollars (about 10 billion euros), so that the country should be declared immediately in bankruptcy, as reported in a letter to Congress Treasury Secretary Timothy Geithner, letter in which he also claims to increase that limit.
To get by, the Treasury will stop investing in two pension funds. The situation is critical, but Geithner also said in its letter to Congress has decided to establish a period of suspension of debt issuance would be extended from Monday, May 16 until August 2. At that time, the Treasury would have to resort to the default of its obligations. During this period, the Treasury Department will suspend additional investment and redeem a portion of investment in a fund, measures that would give Washington eleven weeks of extra time. Then it should have reached a political agreement between Democrats and Republicans that expand the level of indebtedness.
catastrophic consequences Therefore, the Treasury secretary recalled “the importance of taking timely action to increase the debt ceiling, to protect the credibility of the United States and to avoid catastrophic consequences economic “for citizens.
However, it will be easy. The agreement between Republicans and Democrats in Congress still seems remote, since members of both parties have conditioned the approval of debt ceiling increase to concrete plans to tackle the country’s growing budget deficit.
The White House hoped that approving the extension, as occurred in 1995 and 1996 under President Bill Clinton, when a Republican majority in the House of Representatives finally agreed to avoid bankruptcy. On 18 April, the financial rating agency Standard & Poor’s has downgraded to ‘negative’ outlook on the rating of U.S. debt, though he kept the notes ‘AAA’ sovereign bonds on the world’s largest economy .