Asia & Pacific

G7 Finance Leaders Gear Up for Talks Amid US Debt Ceiling Standoff

People walk down stairs displaying the logo of the upcoming G7 Finance Ministers and Central Bank Governors’ Meeting at Niigata railway station in Niigata on May 10, 2023InternationalIndiaAfricaOleg BurunovThe Democrats and the Republicans continue to lock horns over the US debt ceiling, with Treasury Secretary Janet Yellen warning of a potential default by June 1. A meeting of the Group of Seven (G7) finance ministers and central bank governors has kicked off in Niigata, Japan on Thursday, in an event that will most likely be overshadowed by US debt ceiling brinkmanship.The G7 includes Japan, the United States, Germany, Britain, France, Canada, Italy and the European UnionThe three-day Niigata talks are expected to focus on a spate of pressing issues related to global financial stability in light of banking uncertainty and US debt default-related concerns.Citing the recent bank runs in the US, Japanese Finance Minister Shunichi Suzuki, who will chair the gathering, stressed that “the environment surrounding finance has changed dramatically with the emergence of social media and internet banking,” and that responding to these challenges will top the agenda of the Niigata negotiations.Madhavi Bokil, senior vice-president of Moody’s Investors Service, in turn, told a US news outlet that “Enhancing economic resilience against future shocks (and) strengthening collaboration” will be on the table during the talks.

John Kirton, director of the G7 Research Group at the University of Toronto, for his part suggested that in Niigata "G7 members can agree on a strong, unified message to reassure and convince customers and counterparties to stop their assaults" on major lenders, as three regional US banks have collapsed since early March.

The crisis over the US debt ceiling is also expected to be discussed, amid growing speculation about a possible default in America, which President Biden earlier warned would be fraught with global repercussions.

The G7 financial meeting comes after POTUS met Congressional leaders to discuss the debt ceiling deadlock. He pressed Republican lawmakers to increase the limit on the government's permitted borrowing from the current $31.4 trillion or risk throwing the US economy into recession.

Earlier this month, the Treasury Department said the US government would likely begin defaulting on its debt by June 1 if the congressional limit on the country’s debt servicing is not raised by then. Sputnik ExplainsWhat Should Americans Brace For on the Brink of Default?8 May, 12:30 GMTThis was preceded by House Republicans passing legislation to raise the debt ceiling in exchange for cuts in federal spending and other measures to reduce the deficit. However, Senate Democrats and Biden rejected the proposal, saying it had no chance of becoming law.


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