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US debt, shutdown crisis nearly over

world Updated: Oct 17, 2013 01:55 IST
Yashwant Raj
Yashwant Raj
Hindustan Times
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US senate leaders on Wednesday agreed to a deal to avoid a debt default and reopen the partially shutdown government, ending an impasse that has had the world on edge.

But for the impasse to end decisively, the House of Representatives must fall in line. And it is has, with Speaker John Boehner saying his party won't block the deal.

The agreement pushes the debt default deadline to February 7, funds government till January 15, requires a broad budget deal by mid-December and tweaks the healthcare law by a bit.

The bipartisan deal was announced in the senate by majority leader Harry Reid, a Democrat, and minority leader Mitch Mcconnell, a Republican, Wednesday morning.

"Our country came to the brink of disaster, but in the end political adversaries set aside ... their differences," said Reid, adding the US will live up to its obligations.

The focus now shifts to the House, where the speaker has struggled to keep his troops in line, specially the more conservative among them.

But the speaker seems to have prevailed, finally.

"The House has fought with everything it has to convince the president of the United States to engage in bipartisan negotiations aimed at addressing our country's debt and providing fairness for the American people under Obamacare," said Boehner in a statement.

"That fight will continue. But blocking the bipartisan agreement reached today by the members of the Senate will not be a tactic for us."

Both houses are expected to vote on the deal later in the day, to meet an October 17 midnight deadline to prevent the US from defaulting on its debt.

If the limit isn't raised by Thursday midnight, the US would default on its debt for the first time, with catastrophic consequences for the rest of the world, including India.

Fitch, a credit rating agency, put the US on a "negative rating watch" on Tuesday saying "political brinkmanship and reduced financing flexibility could increase the risk of a US default".

The country's sterling AAA rating is intact, for now.