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Chile central bank head: U.S. debt-limit showdown is "significant" concern

SANTIAGO, Oct 8 (Reuters) - The possibility that the United States might default on its debt, especially as a shutdown of federal agencies entered its eighth day, is a very significant concern, Chile's central bank president Rodrigo Vergara said on Tuesday.

"It's even more unthinkable that the United States has problems with its debt, so much so that ratings agencies have basically said that this can't happen," Vergara said.

"But the truth is that it is happening and it is a very significant concern."

With the two-week old partial government shutdown and an impending Oct. 17 debt ceiling deadline in the U.S. as his backdrop, Vergara told an audience of Chilean business leaders that he believed lawmakers would come to an agreement.

"What could happen is so complex, the damage so great from the government shutdown, that the truth is one has no choice but to believe a solution will be reached," Vergara said.

If the U.S. government defaults on debt because it lacks further borrowing authority, the results could be "devastating" for the world economy, Olivier Blanchard, the IMF's chief economist, said on Tuesday.

Republicans offered a new approach on Tuesday to resolve the fiscal standoff, proposing creation of a bipartisan panel to work on deficit reduction and find ways to end the government shutdown and make recommendations on a debt-limit increase.