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Congress comes home for recess without a deal

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Kevin McCarthy leads the Republicans in the House of Representatives

Lawmakers in Washington prepare to leave town this weekend as time runs out for a deal on raising the debt ceiling.

The US Treasury has warned that the country will not have enough money to pay all its bills by June 1.

Analysts say that the failure of the United States to live up to its commitments could have dire economic consequences.

Investor concerns have grown, despite assurances from negotiators that talks are progressing.

Republicans are seeking to cut spending on government programmes, in return for raising a $31.4 billion (£25 billion) cap on government borrowing.

“Neither side will get exactly what they want,” said White House press secretary Karen Jean-Pierre, who called the latest negotiations “productive.”

She added that all the executives involved agreed that default was “not an option”.

House Speaker Kevin McCarthy, who leads House Republicans and has been the most prominent public face in the talks for his party, said earlier that Democrats and Republicans were working after midnight Wednesday and would continue negotiating.

“There are still two outstanding issues that we have to settle,” he said. “We will work 24/7 to try to make that happen.”

Another senior Republican said he believed a deal to raise the national debt ceiling would be “likely” by Friday afternoon.

“We’re getting closer and closer to a deal,” Representative Kevin Hearn told Reuters. “I think these are some of the hardest things they’re working on right now.” You’ll probably see a deal by noon tomorrow. »

The S&P 500 and Nasdaq were trading higher Thursday at midday, buoyed by positive earnings updates from some companies, while the Dow Jones Industrial Average was down about 0.6%.

This came after several days of looking back.

Fitch Ratings, one of the big three rating agencies, said on Wednesday it had placed the United States on “negative watch” — the first step toward downgrading the country’s credit rating.

He cited “increased political partisanship” and poor governance compared to other countries, which he ranked highly.

The company said: “The tightrope policy regarding the debt ceiling, and the failure of the US authorities to meaningfully address the fiscal challenges in the medium term that will lead to an increase in the budget deficit and a growing debt burden, indicate negative risks to the US solvency. .

McCarthy promised to give lawmakers 72 hours to review the law, and at least 24 hours’ notice if they need to return to Washington sooner. If an agreement is reached this week, the vote could take place as early as next week.

There is not much room for maneuver to raise objections, as the Senate would also have to vote on the bill, which would then go to the White House for signature.

Lawmakers could also temporarily raise the debt ceiling to buy more time for talks.

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