Agreement in debt dispute “very close”

Joe Biden (r) and Kevin McCarthy, Speaker of the House

Biden’s Democrats need the support of Republicans to reach an agreement.

(Photo: dpa)

Washington An agreement to solve the crisis is “very close,” said Biden on Friday evening (local time). “There’s a negotiation going on. I am hopeful that tonight we will know if we will be able to reach an agreement.”

A number of MPs had actually left the capital Washington for a long holiday weekend. Biden also wanted to spend the next few days at his country estate in Camp David and in his hometown of Wilmington. When he left, he was hopeful: “It’s very close and I’m optimistic.”

Earlier, US media reported that negotiators had “made progress” in negotiations to raise the US debt ceiling. But there is still work to be done, Republican House Speaker Kevin McCarthy told reporters in the Capitol on Friday morning (local time). Both sides are working toward a two-year deal that would limit federal spending and raise the debt ceiling.

If the two sides do not reach an agreement before the debt ceiling of currently around $31 trillion is reached, the US is threatened with default, which could have serious consequences for the global economy. This could happen as early as June. Treasury Secretary Janet Yellen wrote to Congress on Friday that the federal government could default by June 5 without an agreement on a higher debt ceiling. So far she had given June 1st as the earliest date for this.

According to an insider, the administration of President Joe Biden and the Republican representatives in the House of Representatives have recently come closer to an agreement. This was reported by the Reuters news agency. The New York Times also reported on a possible agreement.

It became apparent that a possible agreement provides for spending cuts for 2024 and that spending in 2025 may not increase by more than one percent. However, details are still disputed. The White House had offered a 2024 spending freeze at current levels and a 2025 spending cap, but McCarthy said that was not enough.

Republican right wing: “Let’s hold the fort”

The Democratic administration and Republican opposition are seeking a compromise that would allow Republicans to agree to a debt ceiling hike in exchange for fiscal 2024 cuts. Weeks of negotiations have so far gone without a breakthrough. On Thursday, McCarthy said “every hour” counts in discussions with President Joe Biden’s team.

Apparently breakthrough in negotiations on US debt ceiling

Both McCarthy and Biden, meanwhile, expressed optimism that the gap between positions will eventually be bridged. “We’ve been talking to the White House all day,” McCarthy said Thursday. “We’re working hard to make it work.” Biden declared in the White House: “It’s about competing versions of America.”

The White House said once again that talks with Republicans had been productive. But there are still serious disagreements, the President is fighting for his priorities. “The only way forward is with a bipartisan agreement,” Biden said. “And I believe we will come to an agreement that will allow us to move forward and protect the hard working Americans of this country.”

Right-wing Republicans are pressuring McCarthy not to back down, even if that means no deal by June 1. “Let’s hold the fort,” said Congressman Chip Roy from Texas. According to preliminary planning, lawmakers are not expected back in Washington until Tuesday, just two days before the deadline.

In the financial markets, every day without a compromise brings more uncertainty. “As long as the agreement is not reached, the situation in the USA is like riding on a razor blade,” said Jürgen Molnar, capital markets strategist at RoboMarkets. On Friday, however, the hope of an early agreement apparently prevailed. The German leading index Dax flipped the switch at its daily low. In the further course of trading, it continued to rise with the strong US stock exchanges and closed 1.20 percent more firmly at 15,984 points.

More: ‘Time is running out’ – Yellen scrutinizes Congress over debt ceiling

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