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BBC World Service

Europe minds the U.S. government shutdown

Rebecca Singer Apr 7, 2011
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BBC World Service

Europe minds the U.S. government shutdown

Rebecca Singer Apr 7, 2011
HTML EMBED:
COPY

STEVE CHIOTAKIS: As we said, the budget issues here at home are coming to a head and other countries have taken an interest in the U.S.’s ongoing saga.

The BBC’s Rebecca Singer reports.


REBECCA SINGER: The European press is intrigued by the political theatrics of the past week. But the European financial sector isn’t really concerned just yet about the U.S. budget woes.

Gabriel Stein is the director of Lombard Street Research which looks at Macroeconomics forecasting. He says there’s no reason to worry in the short term because the U.S. government isn’t at risk of defaulting.

GABRIEL STEIN: But of course it is a problem that the U.S. does have a very dysfunctional budget process and over the long term the U.S. needs to deal with the inexorable rise of the entitlements — Medicare, Medicaid, Social Security.

Stein says if it doesn’t do that, then there will eventually be a real problem with the U.S. government and the value of its debt.

STEIN: If people fear that the U.S. can’t service all its debt, they will demand a higher interest rate in order to hold that debt.

If that happens, the U.S. would either be forced to balance its books or the country could face the risk of inflation.

In London, I’m the BBC’s Rebecca Singer, for Marketplace.

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