IMF sees U.S. default as unlikely, but could be 'devastating'

WASHINGTON Tue Oct 8, 2013 9:16am EDT

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WASHINGTON Oct 8 (Reuters) - A U.S. debt default is an unlikely event, but one that could have catastrophic consequences for the world, the International Monetary Fund said on Tuesday.

"The effects of any failure to repay the debt would be felt right away, leading to potentially major disruptions in financial markets, both in the United States and abroad," said Olivier Blanchard, the IMF's chief economist. "We see this as a tail risk, a low probability risk, but were it to happen it would have major consequences."

He added that the U.S. government shutdown, which is currently in its second week, would have limited consequences if it is not prolonged, but could derail the U.S. recovery if it lasts for longer.

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