WASHINGTON - President Barack Obama warned Tuesday that world leaders were nervous Republicans would "blow up" the US economy, and vowed not to budge on his demand for the debt ceiling to be lifted without conditions.
But House Speaker John Boehner insisted there would be no "unconditional surrender" from Republicans and said Congress would only allow more US borrowing if Obama agrees to cut spending.
There was, however, one glimmer of hope for progress in the bitter showdown that has closed the US government for more than a week and sparked fears that Washington could default on its commitments if the debt ceiling is not raised by October 17.
Obama said that, if necessary, he would accept a short-term deal to raise borrowing and reopen the government - a move that would effectively postpone the crisis for a number of weeks.
But the president was adamant that he would not compromise on his refusal to cede ideological concessions to Republicans in return for receiving more authority to borrow money to finance US obligations.
"What you haven't seen before, I think, from the vantage point of a lot of world leaders, is the notion that one party in Congress might blow the whole thing up if they don't get their way," Obama said at a White House news conference designed to hike pressure on Republicans.
"They've never seen that before. And that does make them nervous." Obama spoke a day after China, which is sitting on a vast pile of US Treasury bonds, warned that the time was running out for the United States to prove its credit worthiness and the credibility of the world's reserve currency.
Stocks in New York dipped for another day Tuesday, with investors increasingly concerned that the government will not get its act together in time.
The Dow Jones Industrial Average fell 159.71 points (1.07 per cent) to 14,776.53 and the tech-rich Nasdaq Composite Index plummeted 75.54 (2.00 per cent) to 3,694.83.
Investors also sold off short-term bonds, sending the yield on the one-month Treasury note to 0.31 per cent, its highest level since the crisis year of 2008, up from 0.15 per cent Monday.