Mon, Aug 01, 2011 - Page 10 News List

South Americans eye possible fallout of US credit crunch

AFP, QUITO

South American nations fretting over potential fallout from a financial crisis in the US have called an emergency meeting to assess how to fend off spillover economic woes.

Ecuadorian President Rafael Correa said on Saturday that an emergency Union of South American Nations (UNASUR) meeting would be held at Colombia’s request, without indicating the date and venue.

Correa, who studied economics in Belgium and the US, said there was a serious risk that the US would default on government obligations, though he expressed confidence the US economy was not headed for collapse.

“I do not think that is going to happen. The world, the ruling class in the United States, is not going to let it happen,” he added.

Correa, whose country uses the greenback as its currency, said South American nations should move to a new financial structure that depends less on the US dollar.

“Not that we can become independent from the dollar economy, but in fact we can minimize its influence very significantly,” he said.

“Why should we depend on the IMF or the World Bank if we have enough savings to create a Bank of the South and fund our own development?” Correa asked. “That can go a long way toward reducing our societies’ vulnerability to the dollar.”

US President Barack Obama held an urgent White House summit with key Democratic allies on Saturday as his Republican foes said fever-pitch efforts to avert a disastrous debt default would soon pay off.

With three days to go before tomorrow’s midnight deadline, Obama warned in his weekly address that “very little time” remains to reach a deal to raise the US$14.3 trillion debt ceiling.

The US economy hit that limit on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally.

Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 percent.

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