Senate Leaders 'Reach Deal' To Avert Default

Senate leaders have reached a last-minute agreement to avert a threatened US default and reopen the government, according to a Republican senator.

Senator Kelly Ayotte said congressional leaders would push for passage as soon as possible.

"I understand they've come to an agreement but I'm going to let the leader announce that," Sen Ayotte said as she walked into a meeting of Senate Republicans called to review details of the emerging deal.

The deal was struck by Senate Majority Leader Harry Reid and GOP Leader Mitch McConnell.

Sen Ayotte said she understood the legislation would first receive a vote in the Republican-controlled House, an arrangement that would speed its way through Congress to President Barack Obama's desk.

Speaker John Boehner and the House Republican leadership met in a different part of the Capitol to plan their next move.

House Speaker John Boehner has failed to rally Republicans behind a deal

A spokesman, Michael Steel, said afterward that no decision had been made "about how or when a potential Senate agreement could be voted on in the House".

A top Democratic aide told Reuters that aides to Speaker Boehner called senior Senate staff earlier in the day to say the House would vote first on the measure.

The aide added that the deal appears certain to be approved with mostly Democratic votes.

The New York Stock Exchange soared on the news that the threat of default was easing in, rising roughly 200 points by late morning.

Officials said the proposal called for the Treasury to have authority to continue borrowing through February 7, and the government would reopen through January 15.

The president's health care law is at the heart of the dispute

With borrowing authority set to run out on Thursday, leaders worked through the night to craft an agreement that could win bipartisan support in the deeply polarised Congress.

President Barack Obama has warned of the consequences of a default and leading economists have said it could hurt the global economy.

Warren Buffett, one of the the world's most influential investors, said the threat not to raise the debt limit is a "political weapon of mass destruction" comparable to poison gas.

Mr Buffett, who leads the Berkshire Hathaway conglomerate, told CNBC that he does not think the federal government will fail to pay its bills.

"If it does happen, it's a pure act of idiocy," he added.

Uncertainty over Washington's ability to avert a default led Fitch Ratings to warn it could cut the sovereign credit rating of the United States from AAA, citing the political brinkmanship on Capitol Hill.

The renewed push in the Senate came after a day of chaotic developments in the House that saw two separate GOP plans buried when it became apparent they failed to rally enough support among Republican rank-and-file.

Politically, neither party is faring well, but polls indicate Republicans are bearing the brunt of public unhappiness as survey after survey shows their approval ratings plunging.

A Washington Post/ABC News poll released on Monday found that 74% of Americans disapprove of the way congressional Republicans have handled the standoff, compared with a 53% disapproval rating for Obama.

The shutdown has already furloughed hundreds of thousands of federal workers and forced national parks and monuments to close down in high season.

Some tourist attractions such as the Grand Canyon and the Statue of Liberty have now reopened, as states agreed to fund their running.

However, many communities have lamented the economic damage they have had to incur.

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