American President Joe Biden has canceled planned visits to Australia and Papua New Guinea due to a looming budget crisis in the United States. The White House said on Tuesday that Biden would return to the United States on Sunday after the conclusion of the G-7 summit in Japan to attend meetings with congressional leaders. He wants to ensure that Congress takes timely action to avert default.
Biden spoke with Australian Prime Minister Anthony Albanese on Tuesday to tell him that he would postpone his trip to Australia, the White House said. In addition, Biden had invited him to an official state visit at a later date. The White House has also contacted the office of the Prime Minister of Papua New Guinea, James Marape, to inform him of the changes.
Positive tones after meetings of Democrats and Republicans
The background to this is that the US government is threatened with a default in a few days if Biden's administration does not agree with the Republicans in the US Congress to raise the debt ceiling. The dispute has been dragging on for months. After a high-level meeting at the White House on Tuesday, however, there had been signs of rapprochement. Biden had instructed his staff to "continue to meet daily" to discuss outstanding issues.
Republican Kevin McCarthy hinted at a positive outcome of the negotiations: "America is the number one economy in the world. And when we're done with these negotiations, America's economy will be even stronger," McCarthy said. The leader of Biden's Democrats in the House of Representatives, Hakeem Jeffries, who was also present at the meeting, spoke of a "positive meeting" in which everyone agreed that there should be no default under any circumstances. Senate Majority Leader Chuck Schumer spoke of a "respectful" conversation.
Republicans set conditions
In the U.S., the parliament sets a debt ceiling at irregular intervals and determines how much money the government can borrow. The debt limit is currently around 31.4 trillion US dollars (about 28.6 trillion euros). In the meantime, this debt ceiling has been reached and the Treasury has to tap into the capital reserves – because the US is now no longer allowed to take on new debt to pay its bills. For an increase in the debt ceiling, Biden and his Democrats need the Republicans in Congress. However, they are resisting an increase without significant savings in certain government spending.
U.S. Treasury Secretary Janet Yellen warned that a possible government default could occur as early as June 1. A default by the world's largest economy could trigger a global financial crisis and a sharp economic downturn. The U.S. would then no longer be able to pay a large part of its bills. Millions of people could lose their jobs as a result. In 2011, when a newly elected Republican majority in Congress delayed raising the debt ceiling, the U.S. credit rating was downgraded for the only time in history.
In recent weeks, Biden has tried to find a solution to the dispute in various rounds of negotiations – so far without success. Both he and Yellen warned of a "catastrophe" if the government actually defaulted.
In addition to the United States, the G-7 countries also include Germany, France, Italy, Great Britain, Japan and Canada, as well as representatives of the European Union. The leaders of the G7 group will meet in Hiroshima from Friday to Sunday (19-21 May) for this year's summit. In addition to the Russian war of aggression in Ukraine and the problems of the global economy, the summit is also likely to focus on the role of China.
Subsequently, Biden had actually planned visits to the island state of Papua New Guinea and Australia. In Sydney on 24 May, he had planned to take part in the meeting of the so-called Quad alliance together with the heads of government of Japan, India and Australia.