Washington (AFP) – President Barack Obama called top congressional leaders to the White House Monday, stepping up efforts to stave off the rising threat of a historic U.S. debt default that would rock the global economy.
Obama will meet top Republican and Democratic Party chieftains at the White House at 1900 GMT — and demand that Congress raises America’s borrowing authority before Thursday deadline.
The government itself meanwhile hit the two week mark of a partial shutdown which has damaged US prestige and will soon begin to have an increasingly onerous impact on economic output.
Despite massive stakes for Washington and the world, there was still no clear path to resolving potentially the most serious impasse yet between Obama and his Republican foes on Capitol Hill.
Initiatives in both the House of Representatives and the Senate stalled over the weekend, leaving the warring parties were still at odds with less than three days to run before the deadline.
Obama will meet Republicans House Speaker John Boehner and Senate minority boss Mitch McConnell and Senate Democratic leader Harry Reid and the party’s House minority leader Nancy Pelosi.
“The president will also reiterate our principles to the leaders: we will not pay a ransom for Congress reopening the government and raising the debt limit,” the White House official said. “The president continues to urge Congress to pass a bill that raises the debt ceiling and lends the certainty our businesses and the economy needs.”
Only three days before the October 17 deadline to lift the debt ceiling, Washington appeared to be in strange and uncharted political waters.
“This environment is different than any that I have seen around an arrangement like this,” Republican Senator Bob Corker told NBC’s Today Show.
The uncertainty was mirrored on Wall Street, where increasing concern over the fiscal showdown pulled the Dow Jones Industrial Average down 57 points or 0.3 percent in mid morning trade.
Yet there was little panic, but a sense that the wrangle over raising the debt ceiling would be eventually be solved at the eleventh hour — like many other recent political imbroglios.
Many eyes are now turning to veteran dealmakers Reid and McConnell as they seek to piece together a face-saving deal.
“I’m optimistic about the prospect for a positive conclusion,” Reid said on Sunday.
The most likely scenario appears to be some kind of short-term deal to raise the debt ceiling for a number of weeks, and possibly to return thousands of federal furloughed workers to their jobs.
Republican Senator Roger Wicker told MSNBC he was hopeful of seeing “something meaningful by the end of the day.”
“There are sweet spots that Republicans and Democrats agree on,” he said.
Around the world, however, signs of alarm were mounting.
China and Japan — which between them hold more than $2.4 trillion of U.S. debt — have urged Washington to get its house in order.
China’s foreign ministry spokeswoman Hua Chunying took a chance in Beijing to wag its finger at Washington.
“The United States is the largest economy in the world and we hope that it can show its responsibility,” Hua told reporters.
Bank of France Governor Christian Noyer warned of dire consequences if there was no solution.
A default would be “a thunderbolt on the financial markets” that would set off “extremely violent and profound turbulence worldwide,” he told the daily Le Figaro.
In Asia, markets in Sydney, Seoul and Singapore were down in part over the deadlocked talks. Tokyo, Hong Kong and Jakarta were closed for public holidays.
On Asian currency markets the dollar weakened, buying 98.25 yen against 98.59 yen in New York late Friday.
“So far, markets have not panicked because both parties have come out to reassure that they are working towards a compromise after every failed vote, keeping alive hopes for a last-minute deal,” Singapore-based DBS Bank said in a note.
U.S. Treasury Secretary Jacob Lew earlier told the International Monetary Fund that Washington understood its reputation as a safe harbor was at risk.
Last week, Obama rebuffed an offer by Republicans in the House of Representatives to lift the debt ceiling for six weeks while negotiations continue on reopening the government.
Following talks with Pelosi, the president said they were not budging from their position.
Obama and Pelosi “reinforced that there must be a clean debt limit increase that allows us to pay the bills we have incurred and avoid default,” the White House said in a statement.
Senate leader Reid had on Saturday turned down a second compromise proposal, offered by moderate Republican Senator Susan Collins, that would lift the debt limit for up to a year, reopen the government and repeal a tax on medical devices under Obama’s signature health care law.
Collins said her proposal could still become the basis of a deal, telling CNN’s State of the Union she had support from a growing, bipartisan group of senators.