Party rivals in talks to avert US debt default

REPUBLICANS and Democrats rushed to rework rival deficit reduction plans yesterday, but, with the fate of both proposals heavily in doubt, top lawmakers pursued a behind-the-scenes compromise to avert a crippling US debt default.

With the deadline less than a week away, global stock markets fell sharply on growing fears that the two sides will fail to break the stalemate. That would mean the United States would not be able to borrow more money after August 2 and could run out of cash to pay all of its bills.

Even if a deal is reached to raise the $14.3 trillion US debt ceiling, a budget plan that flinches from hefty cuts in the deficit may result in a downgrade of America’s top-notch credit rating, which could sow financial chaos worldwide.