Obama warns of recession unless US debt ceiling raised
US PRESIDENT Barack Obama warned Republican leaders last night that they risked tipping the world back into a recession and throwing "millions more people out of work" unless they could reach a deal with him on increasing the US's debt ceiling.
Mr Obama raised the stakes on negotiations to raise the US government's $14.3 trillion (€10 trillion) debt ceiling by declaring he would not accept stop-gap measures involving a short-term increase in the borrowing limit.
"That is not an acceptable approach," he told a press conference before talks resumed. "So we might as well do it now. Pull off the Band-Aid. Eat our peas. Now is the time to do it. If not now, when?"
He added: "This is the United States of America. We don't manage our affairs in three-month increments."
With an August 2 deadline for a deal over the debt ceiling -- the legal spending limit decided by Congress -- to be reached, negotiations have become a battle of wills between Mr Obama and his Republican opponents.
Mr Obama is demanding a "balanced" approach of tax increases in return for spending being slashed. Republicans say tax increases are beyond the pale and would cost more jobs.
Mr Obama hopes that the spectre of a disastrous default will persuade Republicans to accept some tax increases. With fundamental approaches to government pitted against each other, Mr Obama's political future, as well as the American and global economies, could be in the balance.
The gathering pace of the 2012 election campaign is also complicating negotiations. Some Republicans say privately that failing to reach a deal would damage Mr Obama and help bring about their aim of defeating him next November.
Mr Obama said a deal had to be done now because positions would only harden as election day got closer. By being seen to take the high ground, Democrats believe that Mr Obama could benefit politically if Republicans do not cut a deal.
With unemployment now at 9.2pc, up from the 7.3pc when Mr Obama took office in January 2009, and the US economy looking increasingly fragile, the repercussions of failing to reach a deal and triggering the first US default could be huge.
Talks ended in deadlock on Sunday night after just 75 minutes. Mr Obama has said he will meet congressional leaders every day until August 2 if necessary. (© Daily Telegraph, London)