Obama will talk to Republicans, once they stop using ‘extortion’

US president Barack Obama turned up the political pressure on Republicans yesterday, saying he would be willing to negotiate on budget issues only after they agree to reopen the federal government and raise the debt limit with no conditions.

At a news conference, an unbending Mr Obama said he would not hold talks on ways to end the fiscal impasse under threat from “more extreme parts of the Republican Party”.

"If reasonable Republicans want to talk about these things again, I'm ready to head up to the Hill and try," Mr Obama said. "But I'm not gonna do it until the more extreme parts of the Republican Party stop forcing [House speaker] John Boehner to issue threats about our economy. We can't make extortion routine as part of our democracy."

Mr Obama’s comments followed an earlier phone call to Mr Boehner, who had adopted a slightly more conciliatory tone in comments to reporters after a meeting with House Republicans.

“There are no boundaries here. There’s nothing on the table, there’s nothing off the table,” Mr Boehner said, making no mention of his recent demands to delay parts of Mr Obama’s healthcare law in return for approving funds to end the government shutdown.

House Republicans emerged from their meeting saying they would insist on deficit-reduction talks with Mr Obama as a condition for raising the federal debt limit, but some signalled they might pass short-term legislation to avert a default in exchange for immediate talks.

"If we have a negotiation and a framework set up, we can probably reach a way to raise the debt ceiling while the negotiation is in progress. But nobody is going to raise it before there is a negotiation," said Republican representative Tom Cole.

The bitter fiscal stalemate has shut down the federal government for eight days and threatens to prevent the raising of the country's $16.7 trillion (€12.3 trillion) borrowing limit before an October 17th deadline identified by Treasury secretary Jack Lew.

Economic fears
The possibility the government could default on its debt sparked fears of potential global economic havoc, with foreign creditors and the IMF's chief economist warning of the potential consequences.

"I think what could be said is if there was a problem lifting the debt ceiling, it could well be that what is now a recovery would turn into a recession or even worse," IMF chief economist Olivier Blanchard said.

Mr Obama said he did not think the crisis would create lasting international damage. “As I said, if we deal with this the way we should, then, you know, folks around the world will attribute this to the usual messy process of American democracy but it doesn’t do lasting damage.”

Investors remain sceptical the parties are ready to resolve the standoff and are exhibiting increasing anxiety as the deadline for raising the debt ceiling approaches.

Japanese finance minister Taro Aso said a failure by the US to quickly resolve its political deadlock could damage the global economy. His remarks were the latest sign that Japan and China, the biggest foreign creditors to the US, are worried the crisis could harm their trillions of dollars of investments in US Treasury bonds.

Polls show growing public concern over the impasse. A Reuters/Ipsos poll yesterday found the percentage of Americans concerned about the shutdown rose to 75 per cent from 66 per cent last week. Blame for Republicans grew to 30 per cent from 26 per cent, with the level of blame for Mr Obama and Democrats at 19 per cent, up from 18 percent. – (Reuters)