NEW YORK (AP) — Fear of a protracted U.S. government shutdown is making global investors increasingly nervous.
U.S. and European stock markets fell Wednesday as investors and world leaders worried about the threat to the global economy. Europe’s top central banker called the partial shutdown “a risk if protracted.” Boston’s Federal Reserve Bank president cited the budget battle as a reason the Fed refused to pull back its economic stimulus last month, and President Barack Obama appeared on financial network CNBC to urge Congress to pass a budget and avoid derailing the nation’s economic recovery.
After shrugging off the first day of the shutdown Tuesday, Wall Street made it clear on the second day that it was more and more nervous that the budget fight could turn into something worse, a failure to raise the nation’s borrowing limit. The looming crisis has been growing for weeks. Republicans in the House of Representatives are insisting that Democrats negotiate over a new health care law as part of the budget talks. Senate Democrats, led by Majority Leader Harry Reid of Nevada, insist that Republicans pass a straightforward temporary funding bill with no strings attached.
The political gridlock could prevent the U.S. government from borrowing more money to cover its bills and pay back creditors later this month. The financial market sees that as a disastrous move that could send the U.S. into recession.