The Democratic Unionist Party, Northern Ireland's main Protestant party and one of its biggest political forces, said on Tuesday it was ready to return to power-sharing after a nearly two-year boycott paralyzed decision-making in the region.

After an internal meeting that stretched into the early morning, Jeffrey Donaldson, leader of the party known as the DUP, said at a news conference that he had been given the mandate to back a new deal to be negotiated with the British government had been negotiated, under which his party would return to the Northern Ireland Assembly.

“Over the coming period we will work with others to build a thriving Northern Ireland, firmly within the union, for this and generations to come,” Mr Donaldson said. However, he added that the return to power-sharing was dependent on the British government's legislation to establish a new set of measures that had not yet been made public.

The decision by the DUP, which represents those who want Northern Ireland to remain part of the United Kingdom, will be welcomed by many voters frustrated by the political impasse, as well as by the British and Irish governments, both of which have applied pressure on the government. party to break the deadlock.

But it could also herald a seismic shift in the area's history, opening the door for Sinn Fein, the Irish nationalist party, to fill the top political role of “prime minister” for the first time, rather than ” deputy prime minister'.

Sinn Fein favors the idea of ​​a united Ireland, in which Northern Ireland would join the Republic of Ireland, rather than remain part of the United Kingdom.

The announcement on Tuesday was welcomed by Northern Ireland Secretary Chris Heaton-Harris, who thanked Mr Donaldson and his colleagues and said he would deliver on his part of the agreement.

“I now believe that all conditions are in place for the return of the meeting. The parties that have the right to form an executive branch are meeting today to discuss these matters, and I hope to finalize this deal with the political parties as soon as possible. ” Mr Heaton-Harris wrote in a social media post.

Mary Lou McDonald, president of Sinn Fein, said that after hearing Mr Donaldson's public statement, she was “optimistic” that the meeting would be up and running again soon.

The breakthrough followed months of tense discussions between the DUP and the British government, aimed at returning unionists to Stormont, the Northern Ireland assembly in Belfast that was launched as part of the Good Friday Agreement that ended the decades of sectarian violence in the region. the problems.

Stormont cannot operate without the participation of the area's two leading parties, representing unionists, who are mainly Protestant, and nationalists, who are largely Roman Catholic.

The DUP resigned in February 2022 in protest at post-Brexit trade rules, and civil servants have kept the basic functions of government running ever since.

But bigger decisions require Stormont's approval, and Mr Donaldson is under increasing pressure to end the boycott, not only from the British and Irish governments, but also from voters in Northern Ireland, where services including health care are under acute be busy. .

This month, tens of thousands of people took part in Northern Ireland's biggest strike in recent memory, as public sector workers walked out in protest over their wages, which lagged behind those of colleagues in the rest of the UK due to the political stalemate.

In December, the British government offered a further £3.3 billion for Northern Ireland on the condition that the DUP returned to Stormont.

However, Mr Donaldson has also been pressured by hardliners in his own party to remain firm, and the decision to return to government could put him on a collision course with them.

In May 2022, Sinn Fein overtook the DUP in the parliamentary elections to become Northern Ireland's largest party. A few months earlier, the DUP had withdrawn from power-sharing in protest at post-Brexit trade rules, which imposed checks on some British goods entering Northern Ireland.

Unionists said these restrictions, set out in an agreement called the Northern Ireland Protocol, would drive a wedge between the territory and the rest of the United Kingdom, and called on the British government to all but reverse them.

In 2023, Rishi Sunak, the British Prime Minister, struck a new deal with the European Union, known as the Windsor Framework Agreement, forcing some concessions from Brussels. But they were not enough for the DUP

The party's concerns now appear to have been dispelled.

While many will welcome the prospect of restoring power-sharing, the deal will still pose a risk to Mr Donaldson as hardline unionist critics oppose compromise.

One of them, Jim Allister, leader of the Traditional Unionist Voice party, said in a social media post on Tuesday that “the DUP, in betrayal of their own solemn commitments, has caved” to Irish Sea trade rules. It appeared that “not a single word has been removed from the union dismantling protocol,” he added.

The United States narrowly avoided a default when President Biden signed a bill on Saturday authorizing the Treasury Department, which was dangerously close to running out of cash, to borrow more money to pay the country’s bills.

Now the Treasury is starting to build up its reserves and the coming credit crunch could bring complications that will shake the economy.

According to estimates from multiple banks, the government is expected to borrow about $1 trillion by the end of September. That steady state of borrowing will pull cash from banks and other lenders into Treasury bills, drawing money out of the financial system and adding pressure to already stressed regional lenders.

To entice investors to lend such huge amounts to the government, the Treasury faces rising interest charges. Given the number of other financial assets tied to government bond yields, higher borrowing costs for the government also increase costs for banks, businesses and other borrowers, and could have a similar effect to roughly one or two quarter-point increases from the federal government . Reserve, analysts warn.

“The root cause is still the deadlock on the entire debt ceiling,” said Gennadiy Goldberg, interest rate strategist at TD Securities.

Some policymakers have indicated they may choose to take a break from raising rates when the central bank meets next week to assess how policies have affected the economy so far. Treasury rebuilding could undermine that decision because it would drive up borrowing costs anyway.

That, in turn, could exacerbate concerns among investors and savers that flared in the spring about how higher interest rates had eroded asset values ​​at small and medium-sized banks.

The deluge of sovereign debt is also amplifying the effects of another of the Fed’s priorities: balance sheet contraction. The Fed has limited the amount of new government bonds and other debt it buys, slowly paying off old debt and already leaving private investors with more debt to digest.

“The potential blow to the economy once Treasury hits the market and sells so much debt could be extraordinary,” said Christopher Campbell, who served as assistant treasury secretary for financial institutions from 2017 to 2018. could be $1 trillion in bonds and have no impact on borrowing costs.

The treasury’s general account balance fell below $40 billion last week as lawmakers scrambled to agree on raising the country’s borrowing ceiling. Mr Biden signed legislation on Saturday suspending the $31.4 trillion debt limit until January 2025.

For months Treasury Secretary Janet L. Yellen used accounting maneuvers known as extraordinary measures to delay a default. These include suspending new investments in pension funds for postmen and civil servants.

Recovering those investments is essentially a simple accounting solution, but replenishing the government’s coffers is more complicated. The Treasury Department said Wednesday it hopes to borrow enough to rebuild its cash account to $425 billion by the end of June. It will need to borrow much more to account for planned spending, analysts said.

“The floodgates are now open,” said Mark Cabana, interest rate strategist at Bank of America.

A Treasury Department spokesman said the department carefully considered investor demand and market capacity when making debt issuance decisions. In April, Treasury officials began questioning key market players about how much they believed the market could absorb after the debt limit deadlock was resolved. The Federal Reserve Bank of New York this month asked major banks about their estimates of what they expected to happen to bank reserves and loans from certain Fed facilities in the coming months.

The spokesperson added that the department had previously managed similar situations. In particular, after a period of squabbles over the debt limit in 2019, the Treasury Department rebuilt its cash pile in the summer, contributing to factors draining reserves from the banking system and upending the market’s plumbing, causing the Fed prompted to intervene to prevent a worse situation. crisis.

One of the things the Fed did was create a repurchase agreement program, a form of financing backed by Treasury debt. That backstop could provide a safety net for banks running out of money on loans to the government, although its use was widely seen in the industry as a last resort.

A similar but opposing program, which hands out government bonds in exchange for cash, is now holding more than $2 trillion, mostly from money market funds that have struggled to find attractive, safe investments. This is seen by some analysts as money on the sidelines that could flow into the Treasury’s account as it offers more attractive interest rates on its debt, mitigating the impact of the loan boom.

But the mechanism by which the government sells its debt, whereby the Fed’s bank reserves are written off in exchange for the new bills and bonds, may still test the resilience of some smaller institutions. As their reserves dwindle, some banks may run short of cash, while investors and others may be unwilling to lend to institutions they see as trouble given recent concerns about some corners of the industry.

That could leave some banks dependent on another Fed facility, set up at the height of this year’s banking turmoil, to provide emergency funding to depository institutions at a relatively high cost.

“You may see one or two or three banks that get caught unprepared and suffer the consequences, creating a chain of fear that can permeate the system and cause problems,” said Mr. Goldberg of TD Securities.

As negotiators for the White House and Republican House leaders struggle to reach an agreement on how to raise the country’s debt limit, a solution that harks back to old budget battles has re-emerged as a possible way forward: spending ceilings .

Placing limits on future spending in exchange for raising the $31.4 trillion borrowing ceiling could be key to striking a deal that would allow Republicans to claim big concessions from Democrats. It could also allow President Biden to claim his administration is fiscally responsible while not giving in to Republican demands to reverse one of his most significant legislative achievements.

The Biden administration and House Republican leaders have broadly agreed on some kind of ceiling on discretionary federal spending for at least the next two years. But they’re hanging on to the details of those limits, including how much to spend on discretionary programs in fiscal year 2024 and beyond, and how to distribute that spending among the government’s many financial obligations, including the military, veterans’ affairs, education. , health and agriculture.

What could a deal with a spending cap look like?

The White House’s latest bid would keep military and other spending — including education, scientific research and environmental protection — constant from the current fiscal year of 2023 to the next fiscal year, according to a person familiar with both sides’ proposals. That move would not reduce so-called nominal spending, which simply means the level of spending before adjusting for inflation. Republicans push for first-year nominal spending cuts.

One of the reasons the White House is willing to hold spending has to do with politics. Given that Republicans control the House, it would have been nearly impossible to get more money for discretionary programs outside the military. Congress would not have approved increases through the appropriations process, the normal way Congress allocates money to government programs and agencies.

Republicans have repeatedly said they will not accept a deal unless it leads the government to spend less money than it did last fiscal year. They have said that simply freezing spending at current levels, as the White House has proposed, will not lead to the kind of meaningful cuts that many in their party have long called for.

But Republican negotiators have shown some flexibility on how long they would need those spending limits. House GOP leaders now want to set spending ceilings for six years instead of 10 years. Still, that’s longer than the White House is proposing, with Democrats offering to cut spending for two years.

“The numbers are fundamental here,” Rep. Garret Graves, a Louisiana Republican and one of Chairman Kevin McCarthy’s chief negotiators, said Sunday. “The speaker has been very clear: one red line is spend less money and unless and until we get there, the rest is really irrelevant.”

The approach evokes a déjà vu of the debt limit.

If spending limits sound familiar to you, it’s because they were used during the last major debt limit battle in 2011.

During that period of crisis, lawmakers agreed to impose limits on both military and non-military spending between 2012 and 2021. The Budget Control Act caps were somewhat successful in controlling spending, but not entirely.

A Congressional Research Service report released this year noted that during the decade the limits have been in place, Congress and the president have repeatedly enacted laws that have increased spending limits. Certain types of spending — for emergencies and military assignments — were exempt from the limits, and the federal government spent $2 trillion over 10 years on those programs. And spending on so-called mandatory programs like Social Security was not capped, and they make up about 70 percent of total government spending.

Still, the Congressional Research Service pointed out that spending every year from 2012 to 2019 was lower than predicted before the caps were put in place.

The strategy is not a fiscal panacea.

Caps that limit spending around current levels will help slow government debt growth, but will not cure the government’s reliance on borrowed money.

The Congressional Budget Office said this month that annual deficits — the gap between what America spends and what it earns — are projected to nearly double over the next decade, totaling more than $20 trillion through 2033. That deficit will Forcing the United States to continue to rely heavily on borrowed money.

Marc Goldwein, the senior policy director of the Committee for a Responsible Federal Budget, estimated that $8 trillion in savings would be needed over 10 years to keep the national debt at current levels. However, he said that doesn’t mean introducing spending caps wouldn’t be worth it.

“We’re not going to solve this all at once,” said Mr. Goldwein. “So we have to do as much as we can, as often as we can.”

The group has called for spending caps accompanied by spending cuts or tax increases as a plan to reduce the national debt.

Spending ceilings are not the only problem.

Reaching agreement on the size and duration of spending limits will be a critical part of closing a deal.

But negotiators are still working to resolve several other issues, including whether to introduce stricter work requirements for social safety net programs, including food stamps, temporary assistance to needy families and Medicaid, and whether to accelerate permitting rules for energy projects, two key issues. Republican priorities for which White House negotiators have shown some openness.

Jim Tankersley reporting contributed.

President Biden on Wednesday tried to drive a wedge between Republicans in their escalating dispute over spending and debt, effectively reaching out to moderates in hopes of convincing them to disengage from Speaker Kevin McCarthy rather than risk a national bankruptcy that could jeopardize the economy. a downward spiral.

Appearing in a competitive suburb with a vulnerable Republican in the House in his sights, Mr Biden accused Mr McCarthy of pursuing a radical strategy at the behest of his party’s “extreme” wing loyal to former President Donald J. Trump, putting the country in economic jeopardy in a way that he said reasonable Republicans of his own time in the Senate would not have done.

“They have taken control of the house,” Mr. Biden said of this wing to a friendly audience at SUNY Westchester Community College in New York’s Hudson Valley. “They have a speaker who has his job because he gave in to the, I quote, MAGA element of the party,” he added.

Those far-right Republicans, Biden said, are “literally, not figuratively, holding the economy hostage by threatening to default on our nation’s debt, debt that we’ve already incurred, that we’ve already incurred for the past few hundred years. unless we give in to their threats and demands.”

The trip, at least in part, seemed designed to peel off even a few House Republicans to force the speaker’s hand. Legislation that Mr. McCarthy pushed through the House last month, which tied a debt ceiling increase to significant spending cuts, passed with just one vote to spare, so even a relatively minor mutiny would undermine Mr. make McCarthy difficult.

Mr. Biden singled out Representative Mike Lawler, a local Republican congressman who sat in the front row of the audience on Wednesday, praising him as a more rational member of his party. “Mike is on the other team,” Mr. Biden said, “but you know what? Mike is the kind of guy that when I was in Congress, I was sort of a Republican that I was used to hanging out with. He is not one of these MAGA Republicans.”

The president’s trip came a day after he hosted Mr. McCarthy and other congressional leaders at the White House to discuss the crisis. The session produced no breakthroughs, but leaders agreed to have their staffs meet every day and reconvene on Friday.

The federal government has hit its $31.4 trillion statutory debt ceiling, and the Treasury Department estimates there will be no more ways to avoid default by June 1. Unless Congress does something by then, the country will default on its obligations for the first time in history, with potentially devastating consequences for an already fragile economy. Mr. McCarthy insists that any increase in the debt ceiling be linked to spending cuts, while Mr. Biden rejects any link between the two; he has agreed to negotiate deficit controls separately.

The annual deficit reached $1.375 trillion last year, up from $983 billion in 2019, the last year before the Covid-19 pandemic led to massive aid spending, and is expected to double in the next decade. Even aside from the debt ceiling linkage, the two sides differ drastically on how to handle the red ink. Mr Biden has proposed a budget that would reduce projected deficits by nearly $3 trillion in 10 years by raising taxes on corporations and the wealthy, while Mr McCarthy’s plan would reduce deficits by $4.8 trillion in a decade would decrease, largely due to cuts in discretionary programs.

Speaking to a swing-voting New York suburb, Mr. Biden seemed to have two audiences: voters outside the capitol who may not pay as much attention to the debate and Mr. Lawler. Lawler, a 36-year-old former political operative and first-term Republican, is a clear target for the White House to try to influence. He ousted Representative Sean Patrick Maloney, then the chairman of the House Democrats’ campaign operation, in a district that Mr. Biden won by 10 percentage points.

In Washington, Mr. Lawler has positioned himself as a serious moderate, breaking with his party over a number of cultural issues while supporting Mr. McCarthy’s debt ceiling and spending proposal. Both parties consider him one of the most vulnerable Republicans in 2024, and the Democrats are already lining up millions of dollars and potential candidates to defeat him.

Right now, Mr. Lawler seems to be walking a careful line between his party’s leaders and the president. When the White House reached out with an invitation to the event that many in the GOP would have shunned, he promptly accepted. In media interviews before and after the speech, Mr. Lawler that he would not support a default. But he also chastised Mr Biden for not reaching out to Mr McCarthy sooner and pushed for broad cuts.

At this community college, just a few hundred yards from the border of his congressional district, Mr. Lawler nodded politely when the president mentioned him as he took the podium Wednesday. “I don’t want to get him in trouble by saying something nice about him — or negative about him,” Mr Biden said jokingly. “But thanks for coming, Mike. Thank you for being here. That’s how we used to do it.”

Speaking to reporters after the speech, Mr Lawler said he and Mr Biden had a “very cordial” and “very candid” behind-the-scenes conversation ahead of the event. “He told me he wants me to know he didn’t come here to put pressure on me in any way,” said Mr. Lawler, who seemed to welcome the president’s comments on stage that he was not a MAGA Republican. . “You heard his comments today. I don’t think he put too much pressure on me.”

Mr. Lawler reaffirmed his vote for Mr. McCarthy’s legislation. “We need to get our fiscal house in order,” he said. “And so yes, spending should be linked to the debt ceiling. And that is the message I conveyed to the president.” But he repeatedly called for a bipartisan solution.

Local Democrats were frustrated that the president was courting Mr. Lawler instead of attacking him. Mondaire Jones, a former congressman who is positioning himself to challenge Mr. Lawler next year, said after the speech that Mr. Lawler had done nothing to justify being described as “not a MAGA Republican.” Mr Jones added: “He has voted for everything that Kevin McCarthy has asked him to vote for at the request of the MAGA extremists.”

Indeed, Republicans seized on Mr. Biden’s remarks to counter the Democratic Congressional Campaign Committee’s attacks on the GOP congressman. “Despite the DCCC’s repeated lies regarding Congressman Lawler’s positions,” the National Republican Congressional Committee said in a statement, “Lawler is a pragmatic member of Congress seeking to negotiate and avoid a government default.”