Top congressional Republicans have said that they were in serious talks with President Barack Obama to break a US debt limit deadlock and were confident the risk of default by the world's largest economy could be avoided.
Offering a flicker of hope after a week of acrimonious political stalemate, Senate Republican leader Mitch McConnell and House Speaker John Boehner expressed confidence they would be able to work out a compromise deal to raise the government's $14.3 trillion borrowing limit before a Tuesday deadline.
Mr McConnell said he had spoken with Mr Obama and Vice President Joe Biden.
Nevertheless, political wrangling around details of a final compromise was expected to go into the night.
Senate Majority Leader Harry Reid, a Democrat, was asked following talks at the White House whether an agreement was closer. 'The answer is no.'
Unless Congress raises the debt ceiling by Tuesday's deadline, the government would be barred from further borrowing after then, according to the US Treasury, and could quickly run out of money to pay all its bills.
The optimism expressed by the Republican leaders contrasted with the sour mood that had prevailed on Capitol Hill earlier, as lawmakers struggled to find a compromise measure to avert a default.
A day after the Republican-controlled House of Representatives passed a bill to cut the deficit and raise the debt limit, the saga shifted to the Democratic-led Senate where lawmakers scrambled for a deal.
Earlier, Mr McConnell called on Mr Reid to move up a vote on his Democratic deficit reduction plan that had been set for (6am Irish time) tomorrow so the two sides could begin talks with the White House.
Senate Democrats' debt-limit proposal, which would cut the budget deficit by $2.2 trillion over 10 years, was revised by Senator Reid to incorporate parts of a 'backup plan' first proposed by Mr McConnell.
President Obama would be given authority to raise the debt ceiling in three stages to cover borrowing needs through the 2012 elections when he is running for a second term.
