US Republican and Democratic leaders have reached an agreement to raise the government's debt ceiling and avoid a default, US President Barack Obama said.
"I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy," Obama said in a televised address from the White House.
More than $2 trillion in spending cuts would be imposed gradually so they don't create a drag on the economy, he said.
The spending cuts would reduce government spending to the lowest level it has been since when Dwight Eisenhower was president in the 1950s.
He also said there would be no initial cuts to entitlement programmes like Social Security and Medicare. But he said both could be on the table along with changes in tax law as part of future cuts.
"I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days," Obama said.
Details of the framework will be presented to the congress Monday morning in the hopes of avoiding default before the Tuesday deadline, congressional leaders said.
House Speaker John Boehner said the pact "isn't the greatest deal" but lives up to the GOP's principles on taxes and spending.
The agreement pairs spending cuts demanded by Republicans with an immediate increase in the government's borrowing cap that's needed to avoid a first-ever default after Tuesday.
The annoucement had an immediate positive impact on Asian markets.
US corn wheat and soybeans futures rose in early Asian trading on Monday after Obama said a deal had been reached.
"There is a collective sigh of relief across markets in Asia," our correspondent Aela Callan, reporting from Tokyo stock exchange, said.
In the Global Market, Equities rose while gold and the yen dropped on Monday, with investors cutting safety trades after Washington reached a last minute deal to escape default, though the top US credit rating could still be downgraded.