World stock markets continued their downward slide as U.S. politicians let another day go by without making visible progress on a compromise that would allow the U.S.Treasury to borrow money before the world’s largest economy starts to run short of cash early next month.
The markets are signalling that investors are losing confidence in politicians’ ability to deal with a debt that is about 70 per cent of gross domestic product and growing. Standard & Poor’s threatened earlier this month that it would downgrade the U.S.’s credit worthiness if Washington fails to convince that it can come to grips with its debt problem.
Investors have found little to offset fears that the debt deadlock could spoil the global economic recovery. Even if the worst is avoided, US finances are still a mess. Total debt is approaching 100 percent of gross domestic product, putting it in the same league as Italy, Portugal and Ireland, three of the euro-zone’s famous PIIGS states. America’s budget deficit is well over a trillion dollars — more than 10 percent of GDP. Were Washington to apply to become a member of the European common currency zone, it would be rejected out of hand.
There were some indications on Wednesday that the Republicans might finally be moving towards a deal. Republican Speaker of the House John Boehner, who has repeatedly been hobbled by the rank-and-file in his efforts to reach agreement with Obama, told lawmakers from his party to “get your ass in line.”