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By Andrea Shalal
NIIGATA, Japan, May 13 (Reuters) - British finance
minister Jeremy Hunt said on Saturday it would be "absolutely
devastating" if the United States failed to reach agreement to
raise its debt ceiling and had its gross domestic product
"knocked off track".
Hunt told reporters that Group of Seven (G7) finance chiefs
in Japan had "very frank and open discussions" about the
challenges they face, including banking regulation and the
impact of Russia's war in Ukraine on the global economy.
A standoff between President Joe Biden and the
Republican-controlled House of Representatives, which has raised
the prospect of a first-ever U.S. debt default, posed a "very
serious threat to the global economy," Hunt said.
"It would be absolutely devastating if America, which is one
of the biggest motors of the global economy, was to have its GDP
knocked off track by not reaching agreement," he said. He said
he hoped that Biden and Congress would be able to resolve their
differences.
Hunt said G7 officials also discussed the impact of Western
sanctions on Russia over its invasion of Ukraine, and talked at
length about the need to stop sanctions evasion, or leakage.
He said it was clear that economic sanctions on the Russian
economy had not been as effective as military support for Kyiv,
but were generating more of "a slow burn" and there would be a
point when Western pressure "starts to bite".
Hunt said it was very important that non-G7 members invited
to the meeting by Japan - India, Indonesia, Brazil, Singapore
and Comoros - took part in the discussion about Russia.
One key area of agreement was that G7 rich countries want to
"de-risk" relations with China, rather than to decouple from all
trade, Hunt said, noting that Britain's "strong view" was the
need to avoid an approach that inadvertently returned the world
to "protectionism".
"No one's talking about not trading with China, not
exporting to China, not importing from China, but we do need to
make sure that we don't have dependencies that can make us
vulnerable," he said, adding that the difficult part was working
out the concrete steps needed to accomplish that.
G7 members also agreed that any country that engages in
economic coercion should expect a united response from advanced
democracies, but gave no details on what that would entail.
Hunt, who spoke before meeting U.S. Treasury Secretary Janet
Yellen, said one disappointing thing had been the inability of
G7 members to convince more developing countries - or the Global
South - to support the West's unified response to Russia's
invasion, and more soul-searching was needed on that front.
(Reporting by Andrea Shalal; Writing by Kantaro Komiya; Editing
by William Mallard, Kirsten Donovan)
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