* Republican abandonment of bigger effort looms over talks
* White House says Obama still hopes for ambitious deal
* LaGarde warns of global fallout if deal not reached
(New throughout with more details, end of meeting)
By Caren Bohan and Laura MacInnis
WASHINGTON (Reuters) - President Barack Obama
sought Sunday to break an impasse with Republicans on
deficit reduction and avert a potentially catastrophic debt
default that could reverberate globally.
The gathering at the White House, which included leaders of
both parties, lasted less than 90 minutes, a much shorter
session than the four or five hours congressional aides had
predicted late last week.
The meeting came a day after Republicans shied away from a
broad $4 trillion deficit-reduction deal and urged a focus
instead on a $2 trillion plan.
The U.S. Treasury has said it will exhaust its borrowing
capacity by Aug. 2, meaning it will run out of money to pay all
its debts. Republicans have balked at raising the
congressional-set $14.3 trillion debt ceiling without steep
Failure to seal a deal by Aug. 2 could put the United
States at risk of another recession, Treasury officials and
private economists have warned.
Obama made clear at the start of the talks that they were
racing the clock. Asked whether a deficit-reduction deal could
be agreed to within the next 10 days, he told reporters: "We
Uncertainty about the outcome of the debt negotiations has
contributed to a lack of confidence among U.S. businesses over
taxation levels and growth prospects.
Investor worries about the debt ceiling were expected this
week to put pressure on the U.S. dollar, which fell on Friday
after a grim jobs report. In early Asian trading on Monday, the
New Zealand dollar was near a 30-year high against the U.S.
dollar and the Australian dollar dipped.
REVOLT OVER TAXES
House Speaker John Boehner, facing a revolt from fellow
Republicans over the prospect of higher taxes in a large-scale
$4 trillion budget deal, told Obama Saturday he would only
pursue a smaller $2 trillion package.
The move threatened to throw Sunday's meeting into
disarray. It followed Democratic complaints to Obama -- whose
2012 re-election prospects are tightly linked to U.S. economic
health -- that he should not agree to any reforms of popular
entitlement programs that would lead to benefit cuts.
Calling it a "grave moment for the country," Treasury
Secretary Timothy Geithner told NBC's "Meet the Press" that
Obama and the Democrats would try to get the "biggest deal
In a separate appearance on CBS's "Face the Nation,"
Geithner warned of the need to reach a deal soon.
"I do believe that this week, and certainly by the end of
next week, we have to have agreement on the outlines of a
package," he said.
Christine Lagarde, the new head of the International
Monetary Fund, said a U.S. default would have global
"If you draw out the entire scenario of a default, yes, of
course, you have all of that, you know, interest hikes, stock
markets taking a huge hit and real nasty consequences," the
former French finance minister told ABC's "This Week."
(Additional reporting by Steven Holland, Tabassum Zakaria,
Jim Wolf, Thomas Ferraro, Andy Sullivan and Matt Spetalnick;
Editing by Bill Trott)
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