Leaders in plan to lift debt ceiling and stop the threat of default
WASHINGTON // US Senate leaders have taken a giant step towards averting a global fiscal shock by unveiling a plan to raise the nation’s debt ceiling and end the government shutdown.
The US president, Barack Obama, quickly hailed yesterday’s agreement and urged Congress to act swiftly to ensure the government reopened after a 16-day shutdown, and that the threat of default was removed.
The Senate majority leader, Harry Reid, announced a deal that calls for reopening the federal government with a temporary budget until January 15, and extending US borrowing authority until February 7.
As of late last night, the 11th-hour compromise still needed to pass both chambers of Congress – including the unpredictable House of Representatives – before it reached Mr Obama’s desk.
“The compromise we reached will provide our economy with the stability it desperately needs,” Senator Reid said, after working behind closed doors with his Republican rival, Senator Mitch McConnell.
Without a deal the US economy would sail in to uncharted waters, where the Treasury would no longer be able to borrow to meet its obligations and avert a debt default.
The only way to avert this peril, which could send global markets into turmoil and threaten another recession, would be for Congress to agree to raise the US government’s $16.7 trillion (Dh61.33tn) debt ceiling.
Republican senators who had previously opposed striking a deal said they would not try to delay it further.
The Dow Jones industrial average soared on the news that the threat of default was fading, flirting with a 200-point gain in morning trade.
* Agence France-Presse, with additional reporting by the Associated Press