Work Bank President and IMF chief comment on world economy and US debt

The International Monetary Fund chief warned the U.S. on Thursday that failure to raise the debt ceiling could do serious damage to both the American and global economies. Speaking at a news conference during the annual Washington meetings of the IMF and she said it was critical that that the "fiscal house of the United States of America be put in order," referring to the deadlock over passing spending and debt limit bills. The U.S. political impasse has so far dominated the discussion at the Washington meetings. It comes at a time when the IMF and other economic experts are counting on an improving U.S. economy to help carry the fragile global economic recovery. "We know and you know by now that failure to raise the debt ceiling would cause serious damage to the U.S. economy but also to the global economy as a result of the spillover effects," Lagarde said. Still, she said it is not for the IMF to say how the U.S. should resolve it's political differences. Lagarde said the global economy is in a slow and unbalanced recovery and urged Europe to clean up its banking problems and forge ahead with a banking union. "Concerning the Euro area which is finally climbing out of recession, we believe that it needs to finish cleaning up its banks, forge ahead with a banking union and break down some of the barriers that are still an obstacle to growth and job creation," she said. The mounting worries about the U.S. mark a shift for the Washington-based IMF. After years fretting about the deep economic crisis in Europe, the focus of most concern is now in the IMF's own backyard. The U.S. government partially shut down last week after lawmakers in the House and Senate failed to agree on a spending bill to fund the government at the start of the new fiscal year. Separately, Democrats and Republicans are also clashing over the approaching deadline to boost the government's 16.7 trillion US dollar borrowing limit. Republicans are demanding spending cuts to reduce the budget deficit as the price for supporting an increase in the debt ceiling. Obama and fellow Democrats insist that Congress first end the shutdown and extend the debt limit before any negotiations. They say spending and debt ceiling bills are vital and should not come with conditions attached. If political infighting does real damage, such as forcing a debt default, experts fear it could imperil the global recovery. Meanwhile, as he delivered his report on the developing world, World Bank President Jim Yong Kim said Thursday the Bank has set a new goal of reducing extreme poverty to 9 percent by 2020. "Just six months ago, we established two goals: to end extreme poverty by 2030 and to boost shared prosperity of the bottom 40 percent of the population of all developing countries. And yesterday, we announced an interim target to reduce extreme poverty to nine percent by 2020. Achieving these goals has become the central purpose of our institution," said Kim. He said the World Bank's strategy is bold because the "challenge is immense: Over one billion people live in extreme poverty, earning a dollar 25 a day or less." He said 400 million of the world's extreme poor in 2010 were children. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/bda1795ae49035e1bc9d154d9887ab56 Find out more about AP Archive: http://www.aparchive.com/HowWeWork