Republican leader says deal on debt is 'very close'

Latest update : 2011-07-31

US Senate minority leader Mitch McConnell (centre) said on Sunday that his Republican Party was "very close" to a deal with the Democrats on raising the debt ceiling ahead of an August 2 deadline. A key test vote is planned for Sunday afternoon.

REUTERS - U.S. lawmakers were close to a last-minute $3 trillion deal on Sunday to raise the U.S. borrowing limit and assure financial markets that the United States will avoid a potentially catastrophic default.

"We're very close," said Senate Minority Leader Mitch McConnell, the top Senate Republican who is playing a key role in the debt ceiling negotiations

US Debt Crisis

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Prospects improved for a significant package to cut the U.S. deficit after Republican and Democratic leaders reopened stalled talks with the White House.

A senior White House official cautioned that a deal was "not there yet."

McConnell, speaking on CNN's "State of the Union," said he hoped Senate Majority Leader Harry Reid, a Democrat, would be able to present an agreement soon that he can recommend to Republican senators. Asked if a deal would emerge on Sunday, he said, "Soon."

Democratic Senator. Charles Schumer said it seemed clear that the emerging deal would raise the debt ceiling enough "so we don't have to come back to this until 2013." A key demand of Obama was to not take up the issue in 2012, an election year.

Reid pushed back a key procedural vote on a debt limit plan by 12 hours to 1 p.m. EDT (1700 GM) on Sunday, buying time for both sides to hammer out details before Asia markets open in a few hours' time.

Major holders of US debt

"There are negotiations going on at the White House now on a solution that will avert a catastrophic default on the nation's debt," Reid said late on Saturday.

"There is still a distance to go," he said.

The political gridlock over how to reduce the U.S. deficit and raise the debt ceiling has put the United States at risk of losing its top-notch AAA credit rating.

Japan, the second largest holder of U.S. debt, was increasingly alarmed that the United States would miss the Tuesday deadline, sources familiar with Japan's fiscal affairs said.

Date created : 2011-07-31