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US Senate convenes as Democrats and Republicans work on debt ceiling

The US Senate continues efforts to avoid a default as the country reaches its borrowing limit. On Saturday, the Senate rejected a Democratic plan to raise the debt ceiling through 2014.

The Senate plans to convene Sunday in an attempt to bring an end to the impasse that has kept the government shut for nearly two weeks. With the US projected to hit its borrowing limit on October 17, leaders from both major parties have little to show so far.

"I'm cautiously hopeful, optimistic, that we can come to an agreement and open up the government and avoid default based on the bipartisan meetings that are going on," Democratic Senator Charles Schumer told the news program "Face the Nation" on Sunday. "With the president, with Senate Democrats, with Senate Republicans, there's a will," he added. "We now have to find a way. We know the House won't find that way, so all of it rests on our shoulders."

A plan to raise the debt ceiling failed Saturday, receiving fewer than the required 60 votes. Every Republican in the 100-member Democrat-controlled upper chamber voted against the measure.

'Wouldn't be wise'

The debt ceiling of $16.7 trillion (12.36 trillion euros) is fixed until October 17. If Congress fails to increase the limit, the US would be unable to borrow additional money to pay down past debts, putting the federal government in a state of default for the first time in its history.

To gain leverage over President Barack Obama and his signature health care reform law, the Affordable Care Act, Republicans attached an amendement to the original spending bill that would defund key provisions to the law. On Saturday, Obama rejected their offer to lift the ceiling for just six weeks.

"It wouldn't be wise, as some suggest, to just kick the debt ceiling can down the road for a couple of months, and flirting with a first-ever intentional default right in the middle of the holiday shopping season," Obama said in his weekly radio and video address on Saturday.

International repercussions

Fears have arisen that a default would have a negative impact on the world economy.

"If this comes to pass, it could be a disastrous event for the developing world, and that in turn will greatly hurt the developed economies as well," World Bank chief Jim Yong Kim said at the close of the annual World Bank-International Monetary Fund meetings in Washington on Saturday.

IMF chief Christine Lagarde compared the effects of failing to raise the debt ceiling and reopen the government to the 2008 global financial meltdown.

"The standing of the US economy would, again, be at risk," Lagarde said on the Sunday news show "Meet the Press."

European Central Bank chief Mario Draghi called default "unthinkable." And German Finance Minister Wolfgang Schäuble called a solution to the US political crisis simply a "must."

mkg/hc (Reuters, AFP, dpa, AP)