A weary-looking President Obama told reporters late Sunday that a deal had been reached between the leaders of the White House, Senate and House of Representatives to raise the federal debt ceiling and avoid the first U.S. default, although a series of votes by all members in Congress is needed to make the ceiling raise a reality.
The marathon talks had intensified in recent weeks, as a two-stage mechanism for making budget cuts and raising the debt ceiling were negotiated just ahead of an Aug. 2 deadline set by the Treasury.
Asian markets opening for the week responded positively after the deal, with the Nikkei 225 rising 1.9 percent, the Hang Seng up 1.6 percent, and the S&P/ASX 200 index up two percent.
"There are still some very important votes to be taken by members of Congress, but I want to announce that the leaders of both parties, in both chambers, have reached an agreement that will reduce the deficit and avoid default -- a default that would have had a devastating effect on our economy," he said.
The deal in principle comes een as formal votes must still be taken in the House and Senate to pass the bill and send the final bill to Obama for his signature for the bill to become law.
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The first part of the deal calls for $1 trillion in cuts to federal spending over the next decade.
The second part of the deal calls for the establishment of a bipartisan committee in Congress to give another proposal in November to continue to reduce the deficit that will be voted on by full Congress in an up or down vote, according to Obama.
"To hold us all accountable for making these reforms, tough cuts that both parties would find objectionable would automatically go into effect if we don't act," he said.
He said the deal "will allow us to avoid default and end the crisis that Washington imposed on the rest of America."
The deal ensures the U.S. won't face the same kind of crisis at least through the next year.
"And it will begin to lift the cloud of uncertainty that hangs over our economy," he said.
"We're not done yet," he said, as he urged members of both parties to vote for the deal in the "next few days."
Path to a Deal
Earlier, Senate Majority Leader Harry Reid, D-Nev., said he had "signed-off" on a debt-raising deal that could be voted on as early as Sunday night, while the Senate's Republican leadership had previously indicated that no compromise had been reached.
"Senator Reid has signed off on the debt-ceiling agreement pending caucus approval," a spokesman for the senator said Sunday afternoon.
Reid, who was in high level talks with Republicans Senate Leaders and the White House was conferring with fellow Democrats prior to giving the go-ahead for the deal.
He said he hoped a vote happened Sunday evening ahead of the deadline when the U.S. will begin to default on some of its obligations.
Reid's support for a bill that is expected to cut more than $2 trillion from the federal budget over the next 10 years needed his fellow Democrats' approval.
Top Republican Sen. Mitch McConnell had not "signed of on anything" earlier in the evening, according to a report by ABC News. However, he told CNN's "State of the Union" that a deal was "very close."
Meanwhile in the House, House Speaker John Boehner had scheduled a meeting with his caucus.
House Minority Leader Rep. Nancy Pelosi, D-CA had also scheduled a separate meeting with her caucus.
Top level negotiations were continuing on Sunday after an early afternoon attempt by Reid to see if one of his proposals would have enough votes to clear the Senate. It fell short of the 60 "ayes" needed to overcome a Republican Party filibuster. It could only manage a 50-49 vote in favor.
The deal negotiated by McConnell and Vice President Joe Biden included a rise in the federal debt limit in two stages, for a total of $2.2 trillion. The increase would be large enough not to need another raise beyond the 2012 general election.
On Friday, the Senate blocked a bill passed by the House handily, setting the stage for further negotiations.
Republicans and Democrats had been in discussions for months regarding the debt limit as the deadline has approached.