US government shutdown ends as Senate strikes deal to avert debt crisis

The Democratic and Republican leaders of the Senate struck a deal to end the 16-day US government shutdown and avert a looming historic debt default as they agreed to raise America's borrowing limit.

Less than a day before the US treasury started running out of cash, Republican leaders conceded defeat in a bitterly fought battle to topple US president Barack Obama’s three-year-old healthcare legislation.

The White House and Senate Democrats emerged victorious over Republicans in the House of Representatives who tried to derail the biggest legislative achievement of Mr Obama's presidency by shutting down the government on October 1st and refusing to raise the debt limit, threatening a default.

The Senate deal reopens and funds the government until January 15th, and lifts the so-called debt ceiling until February 7th, ending a political stand-off that sent more than 700,000 workers home on unpaid leave, closed national parks and museums, and suspended government services.

Formal budget talks
The agreement forces Republicans and Democrats to sit down for formal talks on a longer-term funding deal by December 13th, pushing both sides to agree a budget for the first time in more than four years.

Republican House speaker John Boehner signalled that he would accept the Senate deal, allowing moderate Republicans to vote with Democrats to pass the Bill and Mr Obama to sign it into law.

Mr Boehner urged fellow Republicans to vote for the Senate deal. “We fought the good fight; we just didn’t win,” he said, referring to the party’s failure to topple Mr Obama’s Affordable Care Act.

The president praised Senate leaders on the deal and urged Congress to act quickly to approve the legislation.

The White House declined to say whether the deal represented a win for Mr Obama, describing the latest budget fight in a deeply polarised Congress as “wholly unnecessary”.

"There were no winners here," said Mr Obama's press secretary Jay Carney. "The American people have paid a price for this."

The shutdown is estimated to have taken $24 billion (€18 billion) out of the US economy, according to ratings agency Standard & Poor’s.

While the deal led to recriminations among Republicans, the Senate's Democratic leader, Harry Reid, refused to prolong the blame game that has dominated Washington politics for more than two weeks.

“This is not a time to point fingers,” said Mr Reid. “This is a time of reconciliation.”

The only concession offered by Democrats in the Senate’s cross-party deal is an agreement to vet the incomes of applicants under Mr Obama’s law, which extends health insurance to those without cover.

Mitch McConnell, Republican leader in the Democrat-led Senate, accepted defeat, saying that the deal was “far less than many of us had hoped for, but it is far better than some had thought.” He called on Republicans to “unite behind other crucial goals”.

Catastrophic consequences
The US treasury had warned that it would exhaust its capacity to borrow by October 17th unless Congress agreed to raise the debt ceiling.

World leaders, senior business figures and economists had warned of the catastrophic consequences of a US default to the global economy.

The Senate deal was reached hours after the political impasse forced credit rating agency Fitch to push the US closer to a downgrade of its creditworthiness, risking an increase in borrowing costs.

Cash reserves and tax revenues are expected to provide Congress with some flexibility on the timing of votes to allow the deal to be passed before the US is unable to pay its bills.

The third-longest US shutdown in almost four decades, and the first since 1996, marked the worst budget row between Democrats and Republicans in a series of recent disputes.

Republicans, driven by the far-right Tea Party faction in the House of Representatives intent on destroying Mr Obama’s legislation, took the brunt of the public blame for this shutdown.