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Washington (AFP) – A U.S. debt default would have dramatic economic repercussions and be “deeply damaging” to financial markets, Treasury Secretary Jack Lew warned lawmakers Thursday a week before a deadline to raise the nation’s borrowing limit.

With the clock ticking toward a default that would see the United States fail to pay all its bills for the first time in its history, President Barack Obama was to meet with congressional Republicans at the White House in a high stakes bid to forge a path out of the crisis.

House Speaker John Boehner and other Republican leaders were to attend, with neither side apparently ready yet to concede ground in the standoff.

Various scenarios for overcoming the impasse — including a short-term government funding bill and a temporary debt ceiling rise — are being floated in Washington, but a workable exit strategy has yet to emerge.

Meanwhile all eyes were on Lew, who trooped up to Capitol Hill to deliver a stark message to Congress: end the political impasse and act immediately to avoid “self-inflicted wounds” and potential financial disaster.

“If Congress fails to meet its responsibility, it could be deeply damaging to the financial markets, the ongoing economic recovery, and the jobs and savings of millions of Americans,” Lew told the Senate Finance Committee.

Failure to agree on a budget led to the first government shutdown in 17 years on October 1, the beginning of fiscal year 2014. Now the nation careens toward another potential hammer blow, and Lew warned it would be a “grave mistake” if the U.S. Treasury is not provided with new borrowing authority to pay its bills.

Committee chairman Senator Max Baucus framed it in near-apocalyptic terms.

“While the government shutdown has been disruptive, a default would be a financial heart attack,” he told the hearing. “It would have widespread, long-term economic consequences.”

The most pressing issue was raising the U.S. government’s statutory borrowing limit of $16.7 trillion.

Other countries were closely watching the unfolding crisis, fearful of reverberations in their economies.

Premier Li Keqiang of China, the largest foreign holder of U.S. government debt, reiterated his country’s “concern about Washington’s debt-ceiling problem” when he spoke with US Secretary of State John Kerry at an Asian summit Thursday in Brunei, according to China’s official Xinhua news agency.

The state-run China Daily newspaper in Beijing blasted “the astonishing failure” of the U.S. Congress.

“It is pitiful that the U.S. is now putting the fragile world recovery under renewed threat with its mind-boggling political infighting,” it said.

The Organization for Economic Cooperation and Development warned Wednesday that a default could throw most of the world’s major economies “back into recession next year” and badly damage emerging nations.

Lew said the “potentially catastrophic impacts of default” included credit market disruptions, a significant loss in the value of the dollar, elevated U.S. interest rates, negative spillover effects to the global economy, “and real risk of a financial crisis and recession that could echo the events of 2008 or worse.”

Social Security and Medicare payments could be frozen, contracts with private suppliers could dry up, mortgage costs could soar, he said.

But many Republicans are insisting that any deal be coupled with measures to rein in spending.

“We need to avoid a debt limit crisis. But we also need to avoid a debt crisis,” said Republican Senator Rob Portman.

Senator Mike Enzi dismissed the idea that “the sky is falling.”

“You’ve got a problem with outgo, not income,” he told Lew.

But Democrats warned that failure to act would send devastating waves through the U.S. economy.

“Dominoes are going to fall fast and hard,” Senator Ron Wyden said.

Warning he would not be held to ransom, Obama has said he will refuse to negotiate with Republicans on long-term budget issues until the debt limit is lifted and the government reopened.

“You can’t threaten to shut down the government as a means of getting leverage in negotiations,” Obama told CBS television Wednesday.

Boehner has been unwilling to rely on Democratic votes to build a majority in the House, apparently fearing a backlash from conservative Tea Party members who could put him out of a job.

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