US House Majority Leader Eric Cantor of Virginia lost to a Tea Party challenger in a stunning Republican primary upset that sent shockwaves through Congress and gave the conservative movement a landmark victory.

The bitter partisanship gripping Washington blocked a deal among members of a special congressional panel that struggled and eventually failed in its mission to cut more than a trillion dollars from America’s crippling and expanding debt.

The Obama administration extended the $700bn (€475bn) bailout programme until October, setting the scene for a Congress battle.