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EU sees US default risk for world economy

His warning followed remarks in a similar vein by the governor of the French central bank, Christian Noyer, in the French newspaper Le Figaro on Monday.

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(SAUL LOEB/AFP/Getty Images)

A possible US debt default would have "dramatic consequences" for the global economy, EU Economic Affairs Commissioner Olli Rehn warned on Monday.

"It is very important that the US overcomes its fiscal gridlock," Rehn said as he arrived for a meeting of eurozone finance ministers.

"Otherwise it could have potentially dramatic consequences on the world economy and on the still nascent recovery in Europe," he said.

His warning followed remarks in a similar vein by the governor of the French central bank, Christian Noyer, in the French newspaper Le Figaro on Monday.

Noyer, a former vice president of the European Central Bank who sits on the ECB's policy-making body, said: "If we were to have ... an accident over the American debt it would be, as the IMF has said, a thunderbolt for the financial markets."

Noyer said that such an event would generate "extremely violent and profound" turbulence around the world.

An EU official speaking last week had warned too about the possible huge impact of a US debt default, saying there was very little that could be done to prepare for such an eventuality.

The United States faces the prospect of a first ever sovereign debt default on Thursday if no accord is found in Washington.

Republicans and President Barack Obama's Democrats have been at war over the country's finances, with some government services already shut down for want of funding.

Often acrimonious talks between the two sides have so far failed to make progress, despite some hope last week that an accord was possible.

If the US debt ceiling is not raised by October 17, the Treasury would run out of money and could begin defaulting on its obligations for the first time in US history.

http://www.globalpost.com/dispatch/news/afp/131014/eu-sees-us-default-risk-world-economy