The financial markets worldwide felt relieved after the US Congress reached an agreement shortly before the deadline was to expire on Wednesday. A debt default would have raised the cost of borrowings for the US. The 16-day government shutdown over a budget fight between the Democrats and the Republicans caused losses not just to the domestic economy but to all those countries dependent on US exports for growth. Many such countries were relying on a US demand pick-up to compensate for the sluggish economic conditions at home. There is one positive outcome that should cheer the emerging economies like India and China. There is hope that the US Federal Reserve will not rush to roll back its $85 billion a month bond-buying program, giving more time to the Asian countries to stabilize their economies and currencies, which had been shaken by dollar outflows in recent months.

The Republicans had brought the US government to a halt, demanding that President Barack Obama‘s favorite health care program should be either delayed or defunded and the existing taxes should be cut. Two years ago when there was a similar confrontation over raising the debt ceiling, President Obama had retreated, agreeing to a staggered slashing of domestic spending. This time Obama was firm and assertive, and called the Republicans’ bluff. The deal that was signed at the last minute indicated a complete Republican surrender. There was a minor concession on health care which required the administration to audit incomes of those seeking insurance subsidies. But the damage the Republicans have caused to the US reputation is incalculable. Americans dependent on government programs and Federal employees were the main sufferers. A fringe group in the Republican Party took the entire nation to ransom and ended up hurting its own leadership. The approval ratings of the Republicans are at the rock-bottom. But the relief is for a limited period. “Our drive to stop the train wreck that is the President’s health care law will continue”, said the Republican leader, Speaker John Boehner. Early next year the battle is expected to resume.