Brief relief

President Barack Obama's deal to raise the US borrowing limit and avert an unprecedented debt default of the world's biggest economy on Monday triggered sighs of relief around the world and a widespread rally on stock markets.

Asian and European markets soared at the start of trading Monday as investors welcomed news of the last-minute deal. Crude oil prices rebounded, the dollar strengthened against the yen, and Japan's Chief Cabinet Secretary Yukio Edano said he hoped financial markets would now stabilize.

Weak figures on manufacturing in the US, the eurozone and China spoiled the party later in the day though, with many share indices turning negative and oil prices coming off their highs from earlier in the day.

Deal welcomed

Germany welcomed news of the US debt deal, saying the government had always believed there would be a solution. "We assumed there would be such a compromise in the end," said deputy government spokesman Christoph Steegmans in Berlin.

French Finance Minister Francois Baroin noted that the latest developments - the eurozone agreement on Greece and the deal in Washington - were moves "in the right direction ... of reinforcing global growth."

The deal would be an important first step, Australia's Treasurer Wayne Swan said and urged Congress to endorse the proposal. "It will be a long and painful adjustment for the United States," he said.

The deal comes just in time to avoid a catastrophic default, but Washington and investors will be closely watching to see if it goes far enough to convince credit rating agencies to let the United States keep its top-level triple-A credit rating.

Staring into the abyss

European editorials were wary of the compromise.

Monday's headline in Die Welt newspaper read "US spares financial markets a new shock". But daily Bild, Germany's highest-circulation newspaper, called the deal a fishy financial compromise: "The US is pushing the problem into the future."

The debt crisis may be solved for now, commented nationwide daily Süddeutsche Zeitung, - but what hasn't been settled is "the US's eternal conflict concerning the division of labor between the state and its citizens, concerning the significance of the social security system and the government's power."

Salzburger Nachrichten from Austria concluded that power that is built mainly on debt "starts to crumble at some point."

Norway's Aftenposten wrote that agreement was imperative to preserve the image of a country that can be fully trusted. "It is surprising how close to the abyss the negotiating parties came," the paper wrote."

Attention will now be on whether lawmakers will be able to approve the deal before midnight Tuesday (0400 GMT Wednesday) to prevent the default.

Author: Dagmar Breitenbach (Reuters, AFP, dpa)
Editor: Nicole Goebel