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Obama announces 11th hour US deficit deal

Barack Obama
Barack Obama Reuters/Jonathan Ernst

US President Barack Obama said late Sunday that Republican and Democratic leaders have reached an 11th hour compromise on raising the US debt limit and avoiding default. 

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Under the proposed deal, the US debt ceiling would rise by up to 2.4bn USD (1.7bn euros).

"I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy," Obama told a hastily convened press conference.

Congress still has to approve the deal. Votes in both houses are expected later on Monday.

The US faces a Tuesday deadline to raise its 14.3tn USD (9.9tn euros) debt limit or risk the first default in its history.

US politicians had been deadlocked over finding a way to cut spending and raise the debt limit as the deadline approached.

House Speaker John Boehner called the plan a remedy to avert "a job-killing
national default that none of us wanted".

The deal will make more than 2.4tn USD (1.7tn euros) in spending cuts, but has not explicitly called for raising tax revenues - at least in the first wave of cuts - despite Obama's repeated calls for increasing revenues from the rich and wealthy corporations.

The package would cut military spending by at least 350bn USD (243bn euros) at a time that the United States is looking to exit Iraq and Afghanistan.

It was unclear whether the accord would be enough to placate ratings agencies that have warned Washington's sterling Triple-A debt rating was in jeopardy - a downgrade that would lead to a significant spike in interest rates.

 

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