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Insolvency threatens US starting October 17

US Treasury Secretary Jack Lew has warned that Washington may not have enough cash left in mid-October to pay its bills. In a letter to Congress, he’s urged US lawmakers to strike a deal on the nation’s debt ceiling.

ARCHIV - ILLUSTRATION - US-Geldscheine liegen am 14.07.2011 in Dresden auf einer US-Flagge. US-Präsident Obama startet derzeit einen verzweifelten Versuch, den Etatstreit in letzter Minute zu lösen. Sollte es keine Einigung mit den Republikanern geben, drohen massive Kürzungen. Maßnahmen des Sparpaketes sind unter anderem das Anheben der Lohnsteuer um zwei Prozent oder das Streichen von bestimmten Hilfen für Arbeitslose. Foto: Arno Burgi dpa (Zu dpa «Obama greift in Etatstreit ein - Chancen auf Einigung schwinden» vom 27.12.2012) +++(c) dpa - Bildfunk+++

Symbolbild - Etatstreit in den USA

The United States would exhaust its borrowing capacity no later than October 17, at which point it would have only about $30 billion (22.2 billion euros) in cash left, US Treasury Secretary Jack Lew revealed Wednesday.

In a letter to the US Congress, he urged lawmakers to swiftly increase the country's $16.7 trillion debt ceiling to avoid defaulting on its obligations.

"If the government should ultimately become unable to pay all of its bills, the results could be catastrophic," Lew warned.

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Spending cuts take hold in US

The US administration is expected to reach its debt ceiling by October 1st unless congressional leaders agree on hiking the debt limit. However, the Republicans demand that any increase must result in spending cuts of an equal amount. President Barack Obama's Democrats want the debt ceiling increased without any conditions attached.

Lew warned Republicans that their plan to prioritize certain government payments over others would be simply default by another name.

In his letter, the US Treasury Secretary updated a previous estimate which had expected US borrowing capacity to exhaust later and with more cash left on hand for the government. The revision came after lower quarterly tax receipts and more information from government trust funds.

The last debt ceiling showdown in 2011 pushed the United States to within days of missing payments and led ratings agency Standard & Poor's to strip Washington of its triple-A credit rating.

uhe/mz (Reuters, AFP, AP)

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