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Clocks tick on the fiscal cliff

The clock is ticking for a last minute deal over the fiscal cliff. US Congress met for a rare Sunday session as the pressure mounted on both sides to agree a budget and tax deal.

U.S. Senate Majority Leader Harry Reid said that Democrats and Republicans still
had key differences in talks to avert a looming year-end "fiscal cliff," and he had not been able to make a counteroffer to the latest Republican proposal.

President Barack Obama is challenging his Republican opponents in Congress to accept a deal and avoid billions of dollars of spending cuts.

Reid and his Republican counterpart Mitch McConnell have been in talks all weekend. But a 3pm, Washington local time, Sunday afternoon target for them to present a framework agreement to colleagues passed with no hint of a deal forthcoming.

Speaking on television on Sunday morning, President Barack Obama set out the situation:

"One of two things is going to happen when it comes to the fiscal cliff," he said. "Number one, we're going to see an agreement in the next 48 hours, in which case, middle-class taxes will not go up. If that doesn't happen, then Democrats in the Senate will put a bill on the floor of the Senate, and Republicans will have to decide if they're going to block it, which will mean that middle class taxes do go up. I don't think they would want to do that politically, but they may end up doing it."

Obama criticised the Republicans for their focus on tax issues. "The way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected," he said. "That seems to be their only overriding, unifying theme."

If leaders fail to find an agreement, Obama has demanded a vote on his fallback plan that would preserve lower tax rates for families on less than $250,000 a year and extend unemployment insurance for two million people.

If nothing is agreed by midnight on Monday, then a package of sweeping tax rises and spending cuts will be automatically triggered, costing the economy hundreds of millions of dollars.

jm/rg (Reuters, AP)