US Debt Limit Negotiations Prove Inconclusive, Risk of Default Remains High

After two new rounds of negotiations between Republicans and the Biden government, talks about raising the debt limit in the United States are proving difficult

Still no Agreement in US Debt Dispute

After two new rounds of negotiations between Republicans and the Biden government, talks about raising the debt limit in the United States are proving difficult. According to the White House, both discussions ended without a resolution.

Talks End Without Agreement

In Washington, another negotiation round between US Republicans and President Joe Biden’s government on the debt dispute ended without an agreement. “We had a very, very open conversation about where we stand and where we need to go,” Republican Representative Garret Graves said after the meeting to reporters. However, he clarified that it was not a negotiation round.

Hopeful Signs Misleading

Yesterday, both sides sent out encouraging signals. However, according to US media, Republican negotiators left the table after only about an hour of the first meeting on Friday. Although they returned to the negotiating table in the evening (local time), this meeting also ended without any result. Steve Ricchetti, the White House’s senior advisor, then left the meeting room and declined to comment on the talks.

Serious Differences

“We have serious disagreements,” said Karine Jean-Pierre, the spokesperson for the US government center, on the sidelines of the G7 summit in Hiroshima, Japan. President Joe Biden remains confident that there is a way forward and a solution is possible. Biden is actively involved in the negotiations during his participation in the G7 summit.

Debt Dispute Comes Up at G7 Summit

According to Jake Sullivan, Biden’s national security advisor, the debt dispute was also discussed during the President’s talks in Hiroshima. “It is definitely a matter of interest here at the G7 summit,” Sullivan said. Other countries want to know how the negotiations are going, and “the President expressed his confidence that he believes there will be a result that avoids default.” However, he also emphasized that the issue is not particularly alarming at the G7 summit.

Stakes are High

The background to this ongoing situation is that starting in early June, there is a risk of the US government defaulting on its payments. The dispute is about raising the federal debt ceiling of $31.4 trillion. If no agreement is reached, the government may be unable to pay its bills starting in early June. In the US, it is up to the parliament to set such a limit at irregular intervals and determine how much money the state can borrow.

This procedure has escalated into a bitter partisan struggle that is dangerous for the United States and beyond. A default on payments by the world’s largest economy could trigger a global financial crisis and an economic downturn. Due to the domestic conflict, Biden’s participation in the G7 summit in Japan was even in doubt for a time. He finally cancelled the second part of his trip, a visit to Papua New Guinea and Australia, to return to Washington directly after the talks in Hiroshima on Sunday.