28 Dec 2012

US Treasury action to delay reaching debt limit

8:12 am on 28 December 2012

The US Treasury is to begin taking extraordinary measures to delay reaching a 31 December borrowing limit.

Treasury Secretary Timothy Geithner said it would take accounting measures to save about $US200 billion to prevent reaching the $US16.4 trillion borrowing limit, the BBC reports.

Democrats and Republicans are stalled over the so-called fiscal cliff - a round of tax increases and huge Government spending cuts due to come into force on 1 January.

In a letter to Congress, Mr Geithner said the $US200 billion would prevent the government from reaching the borrowing limit for about another two months.

Mr Geithner said the extraordinary measures were needed to "temporarily postpone the date that the United States would otherwise default on its legal obligations".

President Barack Obama is expected to meet Republican leaders again to try to negotiate a solution, although no new date has been announced.

Analysts say failure to do so could damage the US and global markets, and threatens to send the US economy back into recession.

The two sides remain far apart on the fiscal cliff's $US600 billion in tax rises and spending cuts but analysts say a short-term deal may be agreed that will postpone the cuts until spring.