U.S. officials scramble for debt deal, markets on edge Sun Jul 24, 2011 2:12pm EDT

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    (Reuters) - White House officials and Republican leaders scrambled on Sunday to reassure global markets the United States would avert a debt default, but the two sides gave no sign they were moving closer to a deal.

    White House Chief of Staff Bill Daley warned that there would be a "few stressful days" ahead for financial markets, with the deadline to lift the $14.3 trillion U.S. borrowing limit now only nine days away.

    Daley, appearing on the CBS television program "Face the Nation, quickly added: "In the end there's no question in my mind the government of America will not default."

    But the path forward toward a deal was murky.

    With Asian markets set to open in a few hours, Democrats and Republicans traded blame for the inability to strike an agreement. The two sides are deadlocked over Republicans demands for a short-term debt-limit increase that would force President Barack Obama to request further borrowing authority in early 2012.

    Obama and congressional Democrats insist on a longer-term extension of the borrowing limit that would carry the country through the presidential election in November 2012.

    "We're kind of at an impasse," a Senate Democratic aide told reporters.

    Financial markets are growing more worried about the possibility of a debt default that could drive up interest rates, sink the dollar and send shockwaves through economies around the world.

    The start of the Asian trading session will give investors their first chance to react to the dramatic events in the U.S. debt-limit talks over the weekend.

    On Friday, House of Representatives Speaker John Boehner walked away from private talks with the White House on long-term deficit reduction, casting doubt on whether an August 2 deadline for raising the debt limit can be met.

    "I'm not sure we're looking at total mayhem yet with the Asian open, but it's possible," warned Christian Cooper, head of U.S. dollar rates derivatives at Jefferies & Co. "The next 12 hours are going to be critical."

    Rating agencies say they will cut America's Triple-A credit rating if the United States fails to meet debt payments, likely triggering global market turmoil. Even if a default is avoided, the credit rating will be under pressure if Congress and the president fail to tackle long-term deficit reduction.

    Global investors are still reeling from the euro zone crisis that was contained only a few days ago with the unveiling of a fresh rescue package for Greece.

    Republican leaders want to show progress by 4 p.m. EDT on Sunday and have legislation to unveil on Monday.

    Boehner told "Fox News Sunday" he would unveil a bipartisan deal to raise the debt ceiling.

    "The preferable path would be a bipartisan plan that involves all the leaders, but it is too early to decide whether that's possible," Boehner said.

    "If that's not possible, I and my Republican colleagues in the House are prepared to move on our own."

    read more U.S. officials scramble for debt deal, markets on edge | Reuters
     

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