Spectre of US default looms after Republicans close door

PRESIDENT Obama met congressional leaders at the White House yesterday for fresh talks on raising the US debt limit after the sudden collapse of negotiations with the Republicans on Friday.

Crunch talks that began last week ended when House Speaker John Boehner refused to support the president's deal to avert a threatened government default by making major cuts in federal spending.

The move sparked fears of a deeper financial crisis.

Within minutes of Boehner's announcement, an obviously peeved Obama virtually ordered congressional leaders to the White House. "We've got to get it done. It is not an option not to do it," he said.

If Congress does not raise the nation's $14.3 trillion debt limit before the 2 August deadline, the US Treasury will be unable to pay all its bills. Officials say a default could destabilise the already-weakened US economy and send major ripple effects across the globe.

Even by the standards of divided government, Boehner's decision triggered an extraordinary evening as the president and Republican speaker jockeyed for position.

For the first time since talks began, Obama declined to offer assurances, when asked, that default would be avoided. Moments later, however, he said he was confident of that outcome.

Boehner, at a rebuttal news conference of his own a short while later, said, "I want to be entirely clear, no-one wants default on the full faith and credit of the United States government, and I'm convinced that we will not."

Unspoken, yet unmistakable, in all the brinkmanship is the 2012 election campaign, still 18 months away, with the White House and both houses of Congress at stake.

In a letter circulated earlier to the House Republican rank and file, Boehner said he had withdrawn because the president wanted to raise taxes and was reluctant to agree to cuts in benefit programmes.

The disagreement was "not because of different personalities but because of different visions for our country," he said, claiming he would seek accord with the Democratic-controlled Senate.

Obama, however, announced instead a morning White House meeting where he said he expected to hear proposed solutions from the leaders of both parties in both houses.

"One of the questions the Republican Party is going to have to ask itself is, 'Can they say yes to anything?"' Obama asked.

The president avoided direct criticism of Boehner, although he did mention that his phone calls to the speaker had not been returned. An administration official said the president had tried to reach Boehner four times. Asked about the spurned calls, Boehner said he didn't think his relationship with Obama had been "irreparably damaged".