Debt Ceiling Decision Must be Made, New IMF Chief Says

Christine Lagarde, the first female leader of the International Monetary Fund, cautioned the U.S. about the repercussions that could ensue if no debt ceiling solution is found by Aug 2.

In an interview with CNN due to be broadcast on Sunday night, Lagarde expressed her concerns about the U.S. debt ceiling deal.

“I am worried because this debt ceiling issue has not been cracked. The issue is being addressed from multiple angles but the debt ceiling is still on the table,” Lagarde said. “The U.S. is the largest economy in the world, one that matters, one that has spillover effects, not just around the borders but on a complete basis, globally.”

In the CNN interview, the IMF chief said the U.S. had to look beyond political aims to solve its issues.

“The states should not be only focused on strictly political objectives. It has to be a mixture of political feasibility but based on solid economic rationale,” Lagarde said.

“And today the economic rationale is about cracking the debt ceiling and making sure that in the medium term the USA - like many other nations - addresses the fiscal consolidation issues that have to be addressed.”

If the U.S. is unable to agree upon a debt ceiling deal, the country could shift from an AAA credit rating to AA.

The Congressional Republicans and Barack Obama’s administration are having issues agreeing on budget cuts that will allow them to agree to raise the current $14.3 trillion borrowing limit.

In a meeting with the Council on Foreign Relations in New York on Tuesday, Lagarde stressed the importance of a debt ceiling deal being agreed upon immediately.

"They don't have the luxury of time,” Lagarde said. “I think there is an expectation that things now have to happen and have to be delivered."