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US shutdown causes global bewilderment

By AFP | Oct. 03, 2013 at 09:02pm
From Chinese bloggers to European central bankers, the world is watching the US government shutdown with a mixture of bewilderment and growing nervousness that any debt default could hit struggling economies.

The effects of the dramatic spending freeze have rippled around the globe, paralysing a leading earthquake alert system, forcing American scientists to pull out of international conferences and leading an embarrassed President Barack Obama to postpone visits to two Asian countries.

In emerging superpower China, a one-party state where legislative deadlock holds little fear for the Communist rulers, the official Xinhua news agency said the situation had once again brought to the fore “the ugly side of partisan politics in Washington”.

“Though its immediate impact looks limited, the damage will multiply if the drama drags on for days or even weeks, arousing concerns over its spillover effect,” it said in a commentary, referring to the US economy.

Chinese social media users took a largely mocking tone in response to the first US government shutdown in 17 years.

“Shutdown! What about the money China put in there?” posted one user on Sina Weibo, a Chinese version of Twitter, a reference to Beijing’s massive purchases of US Treasury debt.

While global markets have so far been relatively resilient, there are growing jitters about the impact on the US economy at a time of heightened uncertainty over a possible winding-down of the Federal Reserve’s massive stimulus measures.

Apart from reaching a budget deal to end the shutdown, Congress must agree within two weeks to raise the $16.7 trillion US debt ceiling -- or risk a default on government debt.

“If the US actually defaults on its debt, that might send a signal to markets that the United States is no longer a credible borrower, and given how much debt there is sloshing around in the American system, that could be catastrophic,” said David Smith, a lecturer at the University of Sydney’s United States Studies Centre.
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