A United States debt default will shake the fundamental element of the global financial system and cause it to enter uncharted waters, Singapore Prime Minister Lee Hsien Loong has warned.
"If that fundamental element is shaken -- even the U.S. 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," local daily Straits Times on Wednesday quoted Lee as saying in Bali, Indonesia at the end of Asia-Pacific Economic Cooperation (APEC) summit.
The United States government and lawmakers have until Thursday next week to reach an agreement and avoid a first-ever default on U.S. Treasury bonds -- a scenario that economists are warning could throw the world economy into a tailspin.
Lee said that the political brinkmanship was an experiment that should be avoided.
"Nobody knows what the impact will be," he said.
The buying of U.S. Treasury bills has been to date a "risk-free solution" for governments and institutions with surpluses.
Lee said if a solution could not be reached, it would send a negative signal to the world that the United States 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.
On the impact on the Asia Pacific, Lee said that the concern is whether the United States will be able to sustain the consensus and the direction of its efforts in the region even though it has the intentions.
"We have to hope the Americans will be able to overcome these problems and maintain that direction despite their domestic difficulties," he said.
U.S. President Barack Obama canceled a week-long trip to the region and his attendance at both the APEC and the East Asia Summits. In Bali, the United States had hoped to make significant strides towards sealing an ambitious trade pact by the end of the year. A statement from the 12 countries involved in negotiations for the Trans-Pacific Partnership said talks are still "on track."