VIDEO:Obama calls for compromise as US debt default looms
European stocks slumped today as uncertainty about a US default grew amidst growing concerns that Spain will be downgraded by a ratings agency.
US president Barack Obama has called for compromise as the country’s economy hurtles towards a possible default.
He added that a Republican proposal put forward by House of Representatives speaker Joe Boehner will not solve the US problems.
"What's clear now is that any solution to avoid default must be bipartisan," he said today at the White House.
House Republican leaders have just scrapped a vote on the debt ceiling putting further pressure on markets.
US debt stands at $13.4 trillion and the fear is that unless the ceiling is raised the country will not be able to pay its doctors, teachers and police.
However, Republicans believe the country is burdened with too much debt and wants other ways to fix its economic problems.
The delays have fuelled concerns that a compromise won’t be reached before the August 2 deadline for a possible US default.
Ratings agencies are waiting in the wings to see the outcome and if a deal is not reached this could mean the US losing its triple A rating.
Any such move would have dire effects on economies worldwide including Ireland.
The little bit of growth in the economy is being fuelled by exports – the bulk of which comes from US multinationals with a presence here.
Meanwhile, new figures released today show the US economy grew by less than hand been expected in the second quarter as consumers refused to spend.
In addition, the 2007-2009 recession in the US was more severe than had been anticipated.
Earlier today share prices slumped as the uncertainty about a US default grew amidst growing concerns that Spain will be downgraded by a ratings agency.
Moody’s warned it could downgrade Spanish bonds a notch on fears of funding problems as the risk of contagion from the sovereign debts of countries like Ireland and Greece continued unabated.
Currencies like the Swiss franc and the yen also gained ground as the cost of insuring against a US default rose to the highest level since 2009 but the euro was also down.
Oil prices also fell by 0.5pc to $96.94 (€67.88) a barrel.
The FTSE index of top European stocks was off 0.5pc while many other indices extended three days of losses.
The mood was also dampened after some big firms reported disappointing results including French water and waste giant Veolia Environment.