In an “agreement in principle” to avert the risk of the US declaring a default, Democratic President Joe Biden and Republican House Speaker Kevin McCarthy reached, some 24 hours before the deadline, as they announced Saturday night (on early morning today Greek time). The deal remains to be approved by Congress.

The House of Representatives, narrowly controlled by Republicans, will vote on Wednesday, its leader announced. The Senate, in which the Democrats have a majority, will follow.

In brief statements, Mr. McCarthy said that the fiscal compromise reached by the parties, the details of which have not yet been made public, is “worthy of the American people.”

The leader of the American right expressed satisfaction with the “historic reductions” in public spending provided for in the agreement, which he said was a key demand of the Republicans.

“This agreement is a compromise, which means that each side does not secure everything that it wanted,” said Joe Biden, according to which the text will “reduce the [δημόσιες] spending’, but ‘protecting key public programmes’.

The octogenarian president considered that the agreement with the conservative faction is “good news”, since it prevents “the declaration of a catastrophic default.”

Two years

Mr. McCarthy said that he will speak again today with Mr. Biden and will release the text, the fruit of difficult and bitter negotiations, on the same day.

According to information from American media, the agreement concluded by the government and the opposition will increase for two years, or in other words until the period after the presidential elections of 2024, the debt limit of the federal state.

Without increasing this limit, the world’s largest economy was in danger of falling into default on June 5, of not being able to fulfill its obligations: the payment of salaries, pensions, interest payments to its creditors.

Like all major economies in the world, or nearly so, the US lives on credit.

But unlike other developed countries, America regularly faces a legal hurdle: the debt ceiling, the maximum amount that government borrowing can reach, must be raised by Congress.

This – until a few years ago – formal procedure was turned by the Republicans, who since January have the majority in the House of Representatives, into a tool for exerting political pressure.

Refusing to give a supposed “blank check” to the Democratic president, they made raising the debt ceiling — a world record $31.4 trillion — conditional on drastic spending cuts.

Mr. Biden, a candidate for re-election, initially insisted that he was not going to negotiate “with a gun to his temple” under the threat of bankruptcy of the federal state, accusing Republicans of holding the American economy “hostage” by demanding cuts.

“Under surveillance”

After meetings between the two men at the White House, the teams of the president and the speaker of the House eventually began endless negotiations, which were much commented on in Washington.

The agreement in principle will give a breather to the markets, where there has never been panic, but the paralysis has caused irritation and impatience.

However, in reality, last-minute compromises on these kinds of issues are rather common in the US capital.

The rating agency Fitch on Thursday placed the credit rating of the US government “under watch” (placing it at the AAA level, the highest), judging that the inability of the political forces to reach an agreement was a “negative indication for governance in general”.

The global economy, which is already faced with “intense uncertainty”, had an absolute need to complete the tense negotiations, IMF Director General Kristalina Georgieva said a few days ago.

The issue is not yet closed, as the deal remains to be approved in the Senate, where the Democrats have a narrow majority, and in the House of Representatives, where the Republicans have a fragile majority.

Some members of the progressive wing of the Democrats, as well as some elected Republicans, are threatening not to approve it, or to delay as long as they can any text that they judge to make too many concessions to the opposing side.

Bob Goode, a Republican congressman, argued yesterday that given that this is a compromise, “no elected official who says he belongs to the conservative camp could justify a positive vote.”