Washington (AFP) – U.S. lawmakers embarked on another day of high-stakes political brinkmanship Wednesday, battling to scrape together an eleventh hour deal to protect Washington’s battered financial standing.
At midnight (0400 GMT), the U.S. economy will sail into uncharted waters and the Treasury will no longer be able to guarantee it will be able to meet its obligations and avert a devastating 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 U.S. government’s $16.7 trillion debt ceiling.
The Senate was to reconvene to try once again to hammer out a compromise, but a parallel effort in the Republican-led House of Representatives collapsed in chaos on Tuesday.
“I think right now it’s going to be the Senate because last night it fell apart in the House,” Republican Senator Kelly Ayotte told CNN, warning it would be “unacceptable” to miss the midnight deadline.
Conservative members from the Tea Party movement in the House have thwarted votes on the debt ceiling and on passing a budget, demanding concessions from President Barack Obama.
Obama’s Democrats have refused to allow Republicans to hold the budget and debt ceiling votes to “ransom” with attempts to defund or delay the president’s landmark Obamacare health insurance reform.
The stand-off has forced the U.S. federal government into a partial shutdown, and if it continues past midnight it would put the United States in a position where it might not be able to pay its debts.
Markets have been watching the mess carefully, but have not panicked, most traders assuming that Washington will scrape together a deal before triggering global financial calamity.
The Fitch ratings agency underlined the seriousness of the situation by putting the U.S. government’s AAA credit rating on a downgrade warning, and European markets slid in morning trade.
Hopes for an exit strategy rest with talks between Senate majority leader Harry Reid and Republican minority leader Mitch McConnell.
The Senate was not due to go into session before midday (1600 GMT), but Capitol Hill was awash with rumors of an early announcement of a compromise deal to raise the debt cap.