Cuts deal avoids US government shutdown

US President Barak Obama has agreed cuts worth 38.5 billion dollars (29.5 billion euros) in a last-minute deal with his Republican opponents which avoided a government shutdown.

Reuters//Kevin Lamarque

The deal emerged after intense consultations with Obama, government aides and the Democratic leader of the Senate Harry Reid, an hour before a midnight deadline

The shutdown would have meant a temporary closure of all “non-essential” government agencies, including the environmental protection agency, passport services and tax offices, and government employees and troops unpaid.

The deal was announced by Republican House of Representatives Speaker John Boehner who said his party had secured big cuts in government spending. But it fell short of the 61 billion dollars (42 billion euros) that Republicans passed through the House in February, although above the original proposal they advanced in January.

The short-term measure cuts nearly two billion dollars (1.3 billion euros) in spending from transport and housing programmes.

The longer-term agreement will cut spending in the current 2011 fiscal year by about 38 billion dollars, including 17.8 billion dollars (12.2 billion euros) from benefit programmes, or "entitlements," lawmakers said.

The rest would come from so-called discretionary spending, including a cut of three billion dollars (two billion euros) from defence, according to House Appropriations Committee Chairman Mike Rogers.

Both Republicans and Democrats have also agreed to sign a short-term continuing resolution to give the government six more days to fine-tune the budget and agree where the cuts should be made. An official budget announcement is expected at the end of next week.