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Outside US, ripple effects of budget battle feared

Wednesday - 10/2/2013, 2:09pm  ET

PARIS (AP) -- Top European officials are keeping a worried eye on the U.S. government shutdown, saying it could pose a risk for the continent's fledgling recovery.

The U.S. has the world's largest economy and close business ties with Europe. So the shutdown, which has seen some 800,000 federal employees put on furlough, could hurt growth around the world if Congress does not agree on a new budget deal within days.

The president of the European Central Bank, Mario Draghi, said Wednesday that the shutdown "is a risk if protracted," though he added that the "the impression is that it won't be."

Earlier, France's top officials expressed similar concerns.

"If this situation lasts, it could slow down the ongoing economic recovery," Pierre Moscovici, the finance minister, said at the government's weekly Cabinet meeting.

France is just emerging from a double-dip recession and, like much of Europe, its economy remains fragile. Najat Vallaud- Belkacem, the government spokeswoman, said the situation was troubling.

"It seems that every day, the shutdown has a financial cost to the U.S., and so has consequences for its partners," she said.

The U.S. Congress also needs to find a deal on raising the country's debt ceiling later this month. If it doesn't, the U.S. would face a potential default, a development that could inflict massive damage on the global economy.

Draghi, however, was not worried about that prospect. Asked if he thought the U.S. could default on some of its debt obligations, he said: "I don't."


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