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Dec 29, 2012 02:11 PM IST | Source: ft.com

Hopes for fiscal cliff deal fade

Barack Obama will meet congressional leaders on Friday afternoon in an effort to kick start stalled budget negotiations ahead of an end-of-year deadline when substantial spending cuts and tax rises take effect.

Hopes for fiscal cliff deal fade

Barack Obama will meet congressional leaders on Friday afternoon in an effort to kick start stalled budget negotiations ahead of an end-of-year deadline when substantial spending cuts and tax rises take effect.

Hopes for a budget deal faded on Thursday, with congressional leaders pre-emptively issuing statements attempting to shift the blame to each other, a sign that neither Republican nor Democratic leaders saw an agreement on the horizon.

Mr Obama phoned congressional leaders on Wednesday from Hawaii before cutting short his Christmas break to fly back to Washington.

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John Boehner, the Republican House Speaker, also announced that his members would return to the capital on Sunday, setting the scene for a frenzied closing two days of the year.

Mr Obama's initial intervention had little immediate impact, with Harry Reid, the Democratic Senate majority leader, taking to the Senate floor to criticise Republicans for failing to consider a Democratic plan to raise taxes on households earning more than $250,000.

"The way to avoid the fiscal cliff has been right in the face of Republican leaders for days and days and days," Mr Reid said. "I say to the Speaker: Take the escape hatch we left you. It's not too late."

Mitch McConnell, the Republican Senate minority leader, rejected the criticism, saying his party was not "about to write a blank cheque for anything Senate Democrats put forward just because we find ourselves at the edge of the cliff".

But Mr McConnell left the way open for fresh talks and said he was hopeful "there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis".

Mr Obama is expected to table a new scaled-back budget proposal at the Friday meeting but until then, negotiations are in abeyance.

Automatic tax rises and spending cuts worth $600bn, a set of measures that threaten to tip the world's largest economy back into recession, start on January 1 unless the White House and Congress can reach a deal before then.

Despite the prospect of new talks, Mr Reid's acerbic comments confirmed what many in the White House and Congress had already concluded: Democrats and Republicans are too far apart on taxes and spending to make a deal in time.

The talks between the White House and Congress over the budget have been stalled since a Republican rebellion against the party's leadership in the House last week and a subsequently scaled-back offer from Mr Obama.

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