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Outside U.S., ripple effects of budget battle feared

Posted: October 2, 2013 10:13 a.m.
Updated: October 2, 2013 10:13 a.m.
 

PARIS (AP) — Top European officials are keeping a worried eye on the U.S. government shutdown, saying it could pose a risk for the continent's fledgling recovery.

The U.S. has the world's largest economy and close business ties with Europe. So the shutdown, which has seen some 800,000 federal employees put on furlough, could hurt growth in the region if Congress does not agree on a new budget deal within days.

The president of the European Central Bank, Mario Draghi, said Wednesday that the shutdown "is a risk if protracted," though he added that the "the impression is that it won't be."

Top officials in France, the second-largest economy in the 17-member eurozone, expressed similar concerns.

France is just emerging from a double-dip recession. Like much of the region, its economy remains fragile. Companies are still wary of investing and hiring — and could become even more so if they fear business in the U.S. could be hurt by the government shutdown.

"If this situation lasts, it could slow down the ongoing economic recovery," Pierre Moscovici, the finance minister, said at the government's weekly Cabinet meeting.

The U.S. Congress also needs to find a deal on raising the country's debt ceiling later this month. If it doesn't, the U.S. would face a potential default, a development that could inflict massive damage on the global economy.

Draghi, however, was not worried about that prospect. Asked if he thought the U.S. could default on some of its debt obligations, he said: "I don't."

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

 

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