US debt default will rock global system: PM

US debt default will rock global system: PM
(From left) Papua New Guinea's Prime Minister Peter O'Neill, Singapore's Prime Minister Lee Hsien Loong, Peru's Foreign Minister Eda Rivas and US Secretary of State John Kerry preparing to take the Apec family photo in Nusa Dua.

A United States debt default will shake a fundamental element of the global financial system and cause it to enter uncharted waters, Prime Minister Lee Hsien Loong warned on Tuesday.

"If that fundamental element is shaken - even the US government can default - I don't know what will happen to your spreads or the rest of the complicated system of financial markets. You're going into unchartered waters," he said.

The US government and lawmakers have until Thursday next week to reach an agreement and avoid a first-ever default on US Treasury bonds - a scenario that economists are warning could throw the world economy into a tailspin.

Mr Lee was speaking to reporters at the end of the Asia-Pacific Economic Cooperation (Apec) summit here on Tuesday.

He referred to the political brinkmanship as an experiment that should be avoided, saying "nobody knows what the impact will be", as it would be the first time such a US default happened.

The buying of US Treasury bills has been to date a "risk-free solution" for governments and institutions with surpluses.

In a CNN interview aired yesterday, Mr Lee said if a solution could not be reached, it would send a negative signal to the world that the US could not resolve its own practical problems.

"I mean, these are problems which you have created for yourself in a game of chicken," he said.

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