By Matthew Rusling
WASHINGTON, Oct. 12 (Xinhua) -- The International Monetary Fund (IMF) and World Bank wrapped up its annual meetings Saturday amid gridlock in the U.S. Congress that threatens to plunge large chunks of the world into recession.
Next Thursday stands as a crucial deadline -- the last day the federal government is certain to have enough money to pay its bills, and failure to pay up could have devastating ripple effects across the globe.
Speaking on the annual meetings' main theme, IMFC Chair Tharman Shanmugaratnam told reporters Saturday the debt ceiling and chronic U.S. budget crisis is a "critical issue for all of us."
The current U.S. political gridlock and ongoing budget impasse impacts confidence, and failure to instill confidence could impact private investment needed in the next phase of the recovery, he said.
"Private investment hinges on confidence," he said. "And if we don't get a clear resolution ... it's going to be hard to see how that confidence is going to come back."
Desmond Lachman, resident fellow at the American Enterprise Institute, told Xinhua a U.S. debt default would amount to a massive economic shock both in the United States and worldwide.
"It would lead to major market disruption and would require major cuts in U.S. public spending that would certainly tip the U.S. into a deep recession," he said.
Brookings Institution Senior Fellow Barry Bosworth told Xinhua he does not believe there will be a debt default but that there will be delays in other payments.
Still, recent days have seen positive signs, with U.S. President Barack Obama talking with Congressional Republicans Thursday and Friday. But there remain a number of obstacles in the road before a deal is cut.
Douglas Rediker, a visiting fellow at the Peterson Institute, who recently represented the United States on the IMF Executive Board, told Xinhua the U.S. political system is built to be representative and fair, and at times coming to an agreement is messy. But after nearly 250 years in existence, the world's longest running democracy has remained stable overall, despite what he called occasional political "hiccups."
Many analysts believe this game of political brinkmanship will end in a last-minute deal, just as on several other occasions over the last few years.
Bosworth said Congressional gridlock stems from divisions among the general public. Indeed, the United States stands at an ideological fork in the road, with passions running high over which direction the country should take. Many Americans are calling for a European-style government with safety nets and higher taxes, while many others prefer a smaller government, lower taxes and less of what they bill as government overreach.