US Senate Approves Emergency Debt Bill

The US Senate has approved an emergency bill to avert a first-ever government default with just hours to spare.

The strong bipartisan vote was 74-26 with less than 12 hours to go before the deadline, and US President Barack Obama signed the measure shortly afterwards.

Mr Obama said that the US must live within its means and said the next steps include reforming the tax code.

"Everyone's gonna have to chip in," Mr Obama, who cited the inequality of billionaires being able to pay a lower tax rate than teachers and nurses, said.

"That's only fair. That's the principle I'll be fighting for in the next phase of this process."

International Monetary Fund chief Christine Lagarde welcomed political agreement to raise the debt ceiling and cut spending, saying it reduced a major uncertainty in the markets and bolstered US fiscal credibility.

Ms Lagarde said in a statement that given the frail US economic recovery, the planned spending cuts were "appropriately phased and not overly frontloaded so as not to undermine growth."

On Monday, the legislation to stop America defaulting on its loans was pushed through the House of Representatives - in a vote of 269 to 161 - just hours before Washington was due to run out of cash.

After months of sometimes bitter political wrangling, the leadership of both the Democratic and Republican parties moved behind the bill which was finally hammered out in last-minute negotiations over the weekend.

The deal cuts government spending by at least $2.1trillion (£1.3trn) over a decade and does not increase taxes.

The debt limit would rise by at least $2.1trn (£1.3trn) seeing the Treasury through the 2012 Presidential election.

As the vote got under way on Monday in the House of Representatives, Gabrielle Giffords made a surprise appearance - her first since being shot in the head earlier this year.

Members on all sides stood and applauded the Arizona Congresswoman who arrived unannounced and cast her vote in favour of the bill.

It was a rare moment of unity in a Congress that has seen little of that lately.

During the hour-long debate ahead of Monday's vote, not one member expressed satisfaction with the bill.

But all seemed to recognise it was the least bad option with the prospect of economic calamity on the horizon.

Democrat Chris Van Hollen said: "We shouldn't have our troops in Afghanistan asking whether they are going to be paid. It is a scandal."

House Minority leader Nancy Pelosi recognised the frustrations of her caucus. She (SNP: ^SHEY - news) said "I am not happy with it... but I am voting for it... I urge you to consider voting yes but I respect the hesitations you have about this."

Republican Ron Kind, from Wisconsin, said it is "a lousy way to run a country."

Congresswoman Michele Bachmann, Republican 2012 Presidential candidate and leader of the Tea Party caucus said she was voting no: "People are saying please stop this insane spending... so I cannot give my vote."

Without legislation in place by the end of Tuesday, the US had been in danger of losing its AAA credit rating.