WITH DEMOCRATS and Republicans still at loggerheads on a deal to raise debt ceiling, the US is heading closer to debt crisis. After weeks of talking and finger pointing at each other, the two parties are still working on separate budget plans, which are unlikely to win majority support in the Congress. Concerned about possible downgrade of US credit, International Monetary Fund (IMF) Chief Christine Lagarde urged the two sides to settle their differences soon, adding that any further delay could lead to serious consequences for the world economy.

A decision needs to be reached this week, so that the Congress can lift the debt ceiling by August 2.

Earlier, on Monday, US President Barack Obama tried to win public support for his Senate Democrats’ proposal. In his address on the national television, the president said that if the $14.3 trillion US borrowing limit was not raised, the country would have to suffer. However, the president added that he was optimistic about the deal.

With talks running into a deadlock, markets are suffering big losses. Investors have lost faith in the market and have become defensive. Also, the dollar dropped to record low against Swiss franc, as Obama ensured that a deal was likely soon.