President Barack Obama and his Republican foes came under mounting pressure Thursday to forge a compromise to avert an early August debt default, with China and Wall Street sounding the alarm.

Obama was to host top Republicans and his fellow Democrats for a fifth straight day of White House talks to craft a deal to narrow the yawning US budget deficit while allowing cash-strapped Washington to borrow past August 2.

Economists and finance and business leaders have warned that failure to raise the US debt ceiling above the current $14.3 trillion would send shockwaves through the fragile world economy as it digs out from the 2008 collapse.

With the contentious talks at a standstill, Democratic Senate Majority Leader Harry Reid and Republican Senate Minority Leader Mitch McConnell were trying to craft an complex legislative escape hatch to avert a default, push spending cuts, but forego tax hikes, aides said.

"I have no idea," if it can pass the House, Republican House Speaker John Boehner told reporters.

And Republicans pressed ahead with calls for a balanced budget amendment to the US Constitution -- though it was unlikely to pass the Democratic-held Senate.

With time running short, polarized US politicians drew ever-sharper rebukes from Beijing, the largest US creditor, as well as Wall Street giant JPMorgan Chase and US central bank chief Ben Bernanke.

"We hope the US government adopts responsible policy and measures to ensure the interests of investors," Chinese foreign ministry spokesman Hong Lei told reporters.

And China's Dagong credit ratings agency echoed Moody's ratings agency by putting US sovereign debt on downgrade watch, citing weak US economic growth and the likelihood that fiscal deficits would remain high.

JPMorgan Chase chief Jamie Dimon warned that the "irresponsible" failure to avert a default could be a "catastrophe" with grim consequences "not just for the health of the United States, but the financial health of the world."

"It's not possible that someone can say with a straight face that the default of the United States wouldn't damage the United States and the global economy. Why take that chance? I would never take that chance," he scolded.

And Bernanke warned key lawmakers in a hearing that a default "would be a self-inflicted wound" that would provoke a major economic crisis and risk a second recession.

US Treasury Secretary Timothy Geithner piled on the pressure after a midday meeting with Senate Democrats, warning "we looked at all available options and we have no way to give Congress more time to solve this problem."

"The eyes of the country are on us, and the eyes of the world are on us, and we need to make sure we stand together and send a definitive signal," he said in a brief public appearance, stressing: "We are running out of time."

Republicans, meanwhile, redoubled their calls for a balanced budget amendment that would force deep cuts in spending while tightening restrictions on Washington's ability to raise taxes.

McConnell complained that Democrats "want to simply borrow and spend our nation into oblivion" and declared "if the president and Democrats in Congress won't agree to cut back, let's force them."

Republicans embraced calls for fiscal discipline when Obama took office in January 2009, after years of playing down swelling US deficits, approving massive tax cuts, and rejecting calls to pay for the Iraq and Afghanistan wars.

But a new opinion poll by Quinnipiac University found the US public more ready to blame Republicans than Obama by a 48 percent to 34 percent in the event the talks collapse.

The survey found 56 percent percent of Americans disapproved of Obama's handling of the economy against 38 percent who approved, but also that more trusted him on the issue than trust Republicans, by a 45-38 percent margin.

Obama, who is seeking a second term in the November 2012 elections, garnered a 47 percent overall job approval rating, while 46 percent said they disapprove -- putting him below the 50-percent mark deemed crucial for incumbents.

The US hit its debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating without impact on government obligations, but can only do so to August 2.

In a sign of sluggish progress, Obama floated to top lawmakers that the talks could continue at the Camp David retreat over the weekend, a step swiftly rejected as unnecessary by Republican House Speaker John Boehner.

earlier related report
China welcomes Zhu Min's IMF appointment
Beijing (AFP) July 14, 2011 - Beijing on Thursday welcomed the appointment of Chinese economist Zhu Min to a new deputy managing director's position with the International Monetary Fund and called for more such reforms.

China's foreign ministry said Zhu's hiring showed the IMF had taken big strides to better represent emerging markets among the IMF's board and management.

"We think this has demonstrated the major progress made by the IMF in increasing the representativeness of emerging market economies and developing countries," said foreign ministry spokesman Hong Lei.

"We hope the IMF will further push ahead with reforms so as to make bigger progress."

Zhu, 58, was one of the first appointments made by new IMF managing director Christine Lagarde, who last week promised a greater role for the world's large emerging economies at the top of the organisation.

While the new deputy managing director position was created with an emerging economy representative in mind, it was widely expected that someone from China, the world's second-largest economy, would fill the post.

His hiring is likely to assuage complaints that the IMF's management team is overly dominated by the old and mature economies -- the United States, Europe and Japan.

The IMF is already implementing a plan to increase the influence of the largest emerging economies on the board -- particularly China, India, Brazil, Russia, and South Africa.

Lagarde has pledged to follow through with that plan, even though it will mean a reduction of the powerful voting power held by her European backers.

Announcing Zhu's appointment, Lagarde said the former Chinese central banker "brings a wealth of experience in government, international policy making and financial markets, strong managerial and communication skills."

"He will play an important role in working with me and the rest of my management team in meeting the challenges facing our global membership in the period ahead, and in strengthening the Fund's understanding of Asia and emerging markets more generally," she added.

Zhu had been a special adviser to the IMF managing director since 2010. Before that he was a deputy governor of the People's Bank of China, and previously served in various positions at the Bank of China.

The economist also worked six years at the World Bank, and has taught at Fudan University in China and Johns Hopkins in the United States.

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