US President Barack Obama appeared on national television on Sunday evening to indicate that Congress was close to reaching a deal that would avert a default on national debt.

The deal would raise Washington's $14.3-trillion (10-trilllion-euro) debt ceiling by about $2.4 trillion in two steps.

"I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy," said Obama.

"This compromise does make a serious down payment on the deficit reduction we need," said Obama, adding that the proposed deal would end "the crisis Washington imposed on the rest of America."

The terms would initially cut at least $900 billion in spending over 10 years, paving the way for an initial elevation of the national debt ceiling. Further cuts, of up to another $1.5 trillion, would be decided upon by a special congressional committee before the end of the year.

Without an agreement, the US would default on its debt before Wednesday.

Obama paid tribute to party leaders for reaching an agreement in negotiations at the White House, as well as the American people for making their concerns clear to lawmakers.

No 'done deal' yet

However, the terms of the deal must still be passed by both the House of Representatives and the Senate. "We’re not done yet," said Obama.

The wrangling has largely been over disagreement between Republicans and Democrats about the balance between spending cuts and tax increases. Some Republicans have insisted on deep spending cuts without raising revenue, while Democrats favor a combination of tax hikes and saving measures.

House of Representatives Speaker John Boehner, a Republican, has said the agreement is "not the greatest deal in the world."

Some Republicans - including those from the ultra-conservative Tea Party - have already said they will not support the proposals.

House of Representatives Democratic leader Nancy Pelosi said that concessions to right wingers might prove too difficult to sell to some members of her party.

Any failure of Washington to pay its debts would be expected to trigger a downgrade of US credit ratings and have a wider impact on the world economy - prompting fears of a new economic crisis.

Author: Richard Connor (AFP, Reuters)
Editor: Matt Zuvela