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Obama seeks a further $1.2 trillion

US President Barack Obama has requested Congress to approve a further £1.2 trillion rise in borrowing to meet existing spending commitments. The move is likely to spark another row with Republicans, who will claim that the President is failing on deficit reduction.

The proposal would raise the US debt ceiling to a staggering $16.4 trillion. Last year the government came close to default in a row over the debt ceiling but a fragile truce was agreed, dependent on long-term plans to reduce the nation’s deficit.

President Obama was keen to increase the limit before the end of last year but was blocked until the House and the Senate were back in session, meaning that the administration had to dip into its Exchange Stabilization Fund, a fund normally used to maintain currency stability. Other measures may be required until the debt limit has been agreed.

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