Dispute over debt ceiling: According to the US Treasury Secretary, default is not imminent until June 5 at the earliest

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U.S. Treasury Secretary Yellen

Photo: KAZUHIRO NOGI / AFP

If there is no agreement in the dispute over the debt ceiling, the US is threatened with a default on June 5 at the earliest, not on June 1, as previously expected. This is stated in a letter from US Treasury Secretary Janet Yellen to the Speaker of the House of Representatives.

Yellen called on Congress to protect confidence in the U.S. and the country's creditworthiness and to act as soon as possible.

For weeks, Democrats and Republicans have been arguing in tough rounds of negotiations about raising the debt ceiling. In the United States, parliament decides the maximum amount of money the state can borrow.

Without an agreement, the U.S. faces default in early June, with potentially devastating economic and financial consequences far beyond the country. Treasury Secretary Janet Yellen warned on Friday, citing the "latest data," that Parliament must raise the debt ceiling by June 5 for the administration to meet its commitments.

Previously, the finance minister had repeatedly mentioned June 1 as a possible "Day X". It would be the first time in the history of the United States that the country would become insolvent. Meanwhile, there were signs of a looming compromise on Friday. Opposition leader Kevin McCarthy of the Republican Party spoke of "progress" in talks with the White House.

Compromise in sight?

Earlier, several US media reported that President Joe Biden's administration and the Republicans would converge in the dispute. According to this, the debt ceiling could be raised for two years and thus beyond the presidential election of November 2024.

In return, there will be cuts in certain government spending. This is demanded by the Republicans, who make up the majority in the House of Representatives and can thus block an increase in the debt limit. According to the New York Times, the negotiators of Democrats and Republicans seem to be close to an agreement.

But even with an agreement between the White House and McCarthy, a crisis would not be off the table: The Biden-controlled Senate and the Republican-controlled House of Representatives would still have to approve a deal. There could be resistance to a compromise in both parties, which is why majorities in both chambers of Congress do not seem certain.

dam/dpa/AFP