Federal staff return to work as US Congress agrees fiscal deal

But the deal only pushed the unsolved and bitter ideological battle a few months into the future.

The legislation passed both houses of Congress late on Wednesday and was signed into law by President Barack Obama just after midnight.

The deal was welcomed around the world, but anxiety persisted about America’s long-term stability. The fiscal feud could resume as new deadlines in January and February near, though Republicans might not be so eager for another fight after seeing the party’s approval plummet to record lows.

The impasse, fought over government spending in general and Mr Obama’s new health care programme in particular, had shuttered national parks and monuments, and mostly closed down agencies Nasa and the Environmental Protection Agency. Critical functions of government went on as usual, but the closure and potential default weighed on the economy and spooked the financial markets. Standard & Poor’s estimated the shutdown has taken $24bn (£15bn) out of the economy.

Mr Obama hailed the legislation – which adhered strictly to the terms he laid down when the twin crises erupted more than three weeks ago. “We’ll begin reopening our government immediately and we can begin to lift this cloud of uncertainty from our businesses and the American people,” he said.

Republican House of Representatives Speaker John Boehner said: “We fought the good fight. We just didn’t win.”

As the deal came together earlier on Wednesday, the stock market surged on the prospect of an end to the crisis that had threatened to shake confidence in the economy both at home and abroad.

IMF managing director Christine Lagarde welcomed the deal but said the shaky American economy needs more stable long-term finances.

“It will be essential to reduce uncertainty surrounding the conduct of fiscal policy by raising the debt limit in a more durable manner,” Ms Lagarde said in a statement.

The Republican-controlled House of Representatives voted 285-144 in favour of the bill, even though most Republicans voted against it. In the Democrat-controlled Senate, approval was even more lopsided, 81-18.

House Republicans sparked the crisis on October 1 when they refused to fund the government unless Mr Obama agreed to defund or delay his health care law, known as Obamacare.

The government shutdown was soon overshadowed when House Republicans also refused to up the government’s borrowing authority so the US could pay its bills, raising the spectre of a catastrophic default.

Mr Obama refused to budge, proclaiming repeatedly that he would not to pay a “ransom” to get Congress to pass normally routine legislation.

Conservative Senator Ted Cruz of Texas championed the Republican strategy of using both deadlines as weapons that could be used to gut Mr Obama’s Affordable Care Act, which launched its online exchanges for millions of uninsured Americans on October 1.

The Democrats fended off every challenge to ‘Obamacare’, while Republicans in the House failed to collect enough votes to pass their own plan to end the bitter stand-off.

The agreement gives the parties some time to cool off and negotiate a broader spending plan. The government will remain open until January 15 and the deadline for default on debts is now February 7.