Democratic and Republican Senate leaders have announced a deal to raise the U.S. debt limit and avoid a debt default just hours before a deadline on October 17.
The deal would also reopen the federal government, which has been partially shut down since October 1.
Senate Majority Leader Harry Reid (Democrat-Nevada) said the agreement would fund the U.S. government through January 15 and avert a debt default through February 7, 2014.
He said that, in the meantime, U.S. lawmakers can work toward reaching a long-term budget agreement that prevents the crisis from erupting again early next year.
Reid described the plan as a "historic, bipartisan agreement to reopen the government and avert a default on the nation's bills."
"[The] compromise we reached will provide our economy with the stability it desperately needs. It's never easy for two sides to reach consensus. It's really hard. Sometimes harder than others. This time was really hard," Reid said.
"But after weeks spent facing off across a partisan divide that often seemed too wide to cross, our country came to the brink of a disaster. But in the end, political adversaries set aside their differences and disagreements to prevent that disaster."
Other U.S. lawmakers say the agreement includes a provision to prevent fraud by applicants seeking subsidies under U.S. President Barack Obama’s so-called "Obamacare" health-care legislation.
Senate Minority Leader Mitch McConnell (Republican-Kentucky) said he was confident that the agreement will be passed by both the Senate and the Republican-controlled House of Representatives later on October 16.
He called on House Republicans who have been seeking concessions from Obama, including a delay implementing Obamacare, to instead unite behind "other crucial goals."
"Republicans remain determined to repeal this terrible law [Obamacare]. But for today -- for today -- the relieve we hope for is to reopen the government, avoid default, and protect the historic cuts we achieved under the Budget Control Act," McConnell said.
"This is far less than many of us had hoped for, frankly, but it's far better than what some had sought."
Obama reacted to the news of the Senate leaders' agreement by urging Congress to move swiftly to approve the deal.
White House spokesman Jay Carney said Obama was grateful to the Senate leaders for working together and wanted lawmakers now to ensure "the government reopens and the threat of default is removed."
To be passed into law, the measure must be approved by the Democratic-controlled Senate and the Republican-controlled House, where Tea Party Republicans have so far refused a compromise without concessions on their demands on Obamacare.
Political analysts say all Democrats in the House would need to support the bill along with some 20 to 30 Republicans. With Senate approval virtually assured, President Obama would then be able to sign the legislation into law.
In New York on October 16, the stock market surged in late-morning trading upon reports of the deal. The Dow Jones industrial average jumped 200 points, or about 1.3 percent.
Market analysts said the exuberance of the market reflected relief that an economically catastrophic debt default has been avoided by raising the U.S. government's $16.7 trillion debt ceiling so it can continue to pay off its debt obligations.
The U.S. Treasury has said a deal to fund the government and raise the debt ceiling was needed before October 17.
With reporting by AP, Reuters, AFP, and dpa