Obama announces debt deal to end US debt crisis

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Obama announces debt deal to end US debt crisis

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The agreement will cut about $1 trillion over 10 years and cuts would not happen quickly.

01 August,2011 06:53 am

President Barack Obama said that Democrat and Republican leaders have reached an agreement to reduce the US deficit and avoid default, but it was not clear if the spending cuts were deep enough to stave off a credit rating downgrade.Obama said the agreement will cut about $1 trillion over 10 years and cuts would not happen so quickly that they would drag on the fragile USeconomy. Another $1.2 trillion would be cut if a joint committee fails to find at least that much in budget savings.The deal would still have to be passed in the House and the Senate.US Standard & Poor 500 stock futures bounced 1.4 percent and US Treasuries futures slid on news of the deal. Gold and then yen also fell.Standard & Poors and Moodys rating agencies indicated earlier that deficit-cutting measures of around $4 trillion would be enough for the USto avoid losing its prized AAA rating.S&P had warned on July 14 that there was a one-in-two chance it could cut the UScredit rating in the next three months if talks on raising the debt ceiling and cutting spending remained stalemated.Moodys and Fitch had also said they will downgrade the UScredit rating if failure to raise the nations $14.3 trillion debt ceiling left the Treasury without cash to service its debt obligations.The USTreasury warned that it could not guarantee payment of all of the governments bills after Aug 2 without an increase in the federal borrowing limit. But it never specified a date for when the government would actually start to miss payments on its debt or other bills.