US Senate leaders Wednesday noon announced an 11th-hour bipartisan deal to reopen the government and avert a historic lapse in the government's borrowing ability and a potentially damaging debt default before a Thursday deadline.
Exact details of the Senate plan were not immediately known as of press time. But CNN quoted sources as saying that the deal would extend US borrowing authority until February 7, although the US Treasury Department would have tools to temporarily extend its borrowing capacity beyond that date if Congress failed to act early next year.
The agreement envisioned funding government agencies until January 15, ending a partial government shutdown that began with the new fiscal year on October 1.
It also would set up budget negotiations between the House and Senate for a long-term spending plan, and would include a provision to strengthen verification measures for people seeking government subsidies under Obama's signature health care reforms, CNN reported.
The Republican-led House of Representatives will vote first on the proposal, which is expected to pass with mostly Democratic votes, Reuters quoted a senior aide as saying. The measure would then go to the Senate for final congressional approval, which would clear the way for President Barack Obama to sign into law.
The deal came after House Republicans Tuesday canceled a vote to extend the debt ceiling and reopen the federal government, which brings further uncertainty over the prospect of a possible default.
Ratings agency Fitch warned Tuesday that it may downgrade sovereign credit rating of the US from AAA to AA+, saying political brinkmanship and reduced financing flexibility could increase the risk of a default.
"Although the [US] Treasury would still have limited capacity to make payments after October 17, it would be exposed to volatile revenue and expenditure flows," it said.
The partial shutdown of the US government has already hurt Washington's reputation and image in the international community and brought a huge impact on the country's social and economic functioning, so any downgrading of its credit rating would deal another heavy blow to the US, Shen Jiru, a research fellow with the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, told the Global Times.
Global rating agency Standard & Poor's cut the US triple-A credit rating in August 2011 amid that debt ceiling crisis.
"That could make it more difficult for the US to seek other countries' purchase of its government bonds and even if there are nations to buy, the debt interest would definitely be higher compared to now," Shen said.
If a potential US default does happen, that would very likely result in a huge "economic earthquake" and financial crisis across the world that would be even worse than the situation in 2008, Shen warned. "That would shatter people's confidence in the world's reserve currency system."
Obama called on Tuesday for House Republicans to "do what's right" by reopening government and ensuring the US can pay its bills, CNN reported. "We don't have a lot of time," he said.
The fiscal impasse in the US and a possible US default also placed a great deal of attention on China, which is the largest foreign owner of US government debt.
In an editorial over the weekend, the Xinhua News Agency said, "it is perhaps a good time for the befuddled world to start considering building a de-Americanized world."
Jin Canrong, a deputy dean of the School of International Studies at the Renmin University of China, told the Global Times that the call for "de-Americanization" by some countries originated from their dissatisfaction with Washington.
The call underlines their "love-hate emotions" toward the US, Jin said. "While they benefit from the order maintained by the US, they are averse to its selfishness and misdoings."
Agencies contributed to this story