Debt ceiling talks go down to wire
Negotiators and president 'very close' to achieving deal
Published 01/08/2011 | 05:00
FINANCIAL markets and the global economy looked likely to side-step the chaos that would follow a US default as President Barack Obama and Congress edged closer and closer to a last-minute deal yesterday.
As the talks went to the wire, most political leaders said a deal would probably have to wait until today -- something that will leave investors everywhere following events in Washington for another 24 hours.
Markets in Dublin will be open today despite the bank holiday and shares are likely to track movements elsewhere in Europe, Asia and the US.
"There's so much bad news in the market, that I think any sign of good news will be taken well," said Simon Denham, managing director of Capital Spreads. "It wouldn't be a surprise to see the FTSE rise."
British and Japanese officials warned yesterday of disastrous consequences for the global economy if the last-minute talks failed to agree on raising the US borrowing limit and averting a debt default.
"If they get this one wrong and there's a default -- we don't expect that, we think that they will sort this out -- but if that were to happen, it has consequences for every family and every business in this country and all across the world," said Danny Alexander, the chief secretary to the British Treasury.
White House and Republican and Democratic leaders delivered the outline of a deal yesterday to raise the country's $14.3 trillion (€9.3tn) debt ceiling before tomorrow's midnight deadline.
Senate Republican leader Mitch McConnell said congressional negotiators and Mr Obama were "very close" to a deal.
As negotiations continued, a Democratic plan backed by Senate majority leader Harry Reid fell short of the 60 votes needed to overcome a Republican effort to stop it in the senate.
Republicans and the White House were nearing agreement on another plan that would raise the $14.3tn debt limit while cutting $1tn in spending and charging a special committee with proposing additional savings of up to $1.8tn, according to sources.
Republicans and the White House were reportedly weighing an accord that would prompt automatic spending cuts to all areas of government, including defence and Medicare, should a debt-cutting law fail to be enacted by Christmas.
Senator Chuck Schumer said such an approach "might work", yet Democrats were still "fighting for revenues", or tax increases, to kick in along with spending cuts if the debt savings aren't achieved.
White House spokesman Dan Pfeiffer said in a Twitter message that the two sides have "important issues to work out".
Mr McConnell said on television that he was "sure there will be both Democrats and Republicans who in the end find the agreement wanting in one way or another, but I believe there will be a strong bipartisan support for this."
David Plouffe, a special adviser to Mr Obama, cautioned that no final agreement had been reached and negotiations were continuing. Democrats "have not yet signed off" on the framework, said Mr Schumer, the third-ranking Democrat.
The framework under discussion yesterday also calls for Congress to vote on a balanced budget amendment to the constitution, sources said.
Amendments require two-thirds majorities for passage; if enough Democrats oppose the measure, it would have little chance of winning approval.
The prospective agreement wouldn't guarantee increased net revenue, a sticking point for Republicans who have been adamant that any deal with tax increases couldn't pass the Republican-run House.