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Republicans to offer Obama short-term increase of US debt ceiling

Republicans in the US lower house have proposed a short-term increase to the debt ceiling. President Barack Obama has indicated willingness to sign a temporary measure into law, signaling a potential compromise.

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Progress in talks with Congress

Talks in Congress over the budget impasse reportedly continued into early Friday morning in Washington. Signs of hope, however, emerged after a 90-minute discussion between President Barack Obama and Republican leaders at the White House. For the first time during the two-week standoff, both sides appeared positive about reaching a deal before the impending October 17 deadline to raise the debt ceiling.

Republican House Majority Leader Eric Cantor described the talks as "constructive" and "useful," adding that he hoped both sides could "see a way forward."

The White House confirmed that "no specific determination" had yet been made in a statement issued late on Thursday.

"The president looks forward to making continued progress with members on both sides of the aisle," the statement added.

Earlier on Thursday, House Speaker John Boehner (pictured above) announced the Republicans' plans to propose a temporary increase in the US debt limit, but only if the president agreed to negotiate over the ongoing government shutdown.

"What we have discussed as a conference is a temporary extension of the debt ceiling - in exchange for a real commitment by this president and the Senate majority leader to sit down and talk about the pressing problems that are facing all American people," Boehner said.

The current US debt ceiling of $16.7 trillion is fixed until October 17. If Congress fails to raise the ceiling before then, the US will be unable to borrow additional money to pay down past debts. That would put the federal government in a state of default for the first time in its history.

While raising the debt ceiling was standard procedure in the past, House Republicans - influenced by its conservative Tea Party caucus - have threatened not to raise the ceiling in order to gain negotiating leverage with the president.

'Financial heart attack'

Treasury Secretary Jack Lew warned lawmakers on Thursday that failing to raise the ceiling could hurt America's economic recovery.

"If Congress fails to meet its responsibility, it could be deeply damaging to the financial markets, the ongoing economic recovery, and the jobs and savings of millions of Americans," Lew told the Senate Finance Committee.

"While the government shutdown has been disruptive, a default would be a financial heart attack," he told the hearing.

Meanwhile, International Monetary Fund (IMF) chief Christine Lagarde said that a failure to raise the debt ceiling would have "very negative consequences outside of the US economy."

Impasse on government shutdown

According to Democratic Representative Peter Welch, President Obama told party loyalists in the House on Wednesday that while he preferred a long-term increase of the debt ceiling, he was willing to agree to a short-term solution for now.

But the president has refused to negotiate over the government shutdown, calling on House Republicans to approve a spending bill with no strings attached.

House Republicans had attached an amendment to the original spending bill, which would have defunded key provisions of Obama's signature health care reform law. The Democrat-controlled Senate axed the amendment, sending a "clean" version of the bill back to the House.

So far, the Senate spending has stalled in the Republican-controlled House. With the political parties unable to agree on a compromise, the federal government - with the exception of some key agencies - has been shut down since October 1.

slk/ccp (AP, AFP)

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