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US owes Luxembourg 150 billion dollars
Economics

US owes Luxembourg 150 billion dollars

14.10.2013 From our online archive
Democrats and Republicans in the US are still deadlocked over budget talks, with a default deadline looming later this week and Luxembourg standing to lose some 150 billion USD.

(CS/CBu) Democrats and Republicans in the US are still deadlocked over budget talks, with a default deadline looming later this week and Luxembourg standing to lose some 150 billion USD.

Financial experts around the globe have been ringing alarm bells about the pending default. On Saturday, Deutsche Bank chief executive Anshu Jain said at an international finance conference that default would be “utterly catastrophic” and his remarks have been echoed by various other top bankers.

In an interview with the CNN US investor Warren Buffett recently commented that fighting about the debt ceiling should be “banned as a weapon,” adding: “It should be like nuclear bombs: too horrible to use.”

During his campaign trail in Luxembourg, Prime Minister Jean-Claude Juncker also said that US bankruptcy would have “devastating consequences worldwide,” which would by far surpass the effects of the 2008 financial crisis.

Currently, the US runs a debt of more than 16.9 trillion USD. To put it in numbers, that is more than 16,900,000,000,000 – a number that keep rising, as the country's debt clock shows.

Luxembourg among top ten lenders

But who does the government owe the money to? Around two thirds of the sum come from the country's own Federal Reserve and private US investors, as well as banks, insurance companies, pension funds, but also federal states and municipalities.

More than 5.7 trillion are owed to foreign creditors, with China ranking at the top (1.27 trillion USD), followed by Japan (1.1 trillion USD) and Brazil (250 billion USD).

Also listed in the top ten, however, is Luxembourg, which, as of July 2013, is owed 146.8 billion USD by the US government. Per capita, however, that makes the Grand Duchy the biggest lender.

The sum owed compares to three times Luxembourg's GDP. However, these bonds are held by banks and investment funds, not the Luxembourg state. Still, a default could have a significant impact on the Grand Duchy's financial centre and, by extension, the country.

Until Thursday, Democrats and Republicans have time to negotiate, with one of the world's biggest economies facing bankruptcy. Should the country become insolvent, trillions of dollar owed abroad, including those in Luxembourg, would be nothing more than thin air.