Republicans' arch-enemy Pelosi issues rallying cry as Congress prepares to fight

Nancy Pelosi is likely to resist cuts to social programmes (Getty Images)

The stage was set for hard-slogging negotiations on avoiding the so-called "fiscal cliff" after Nancy Pelosi announced last night that she would run to remain minority leader in the House of Representatives, ending speculation that she might step aside.

Ms Pelosi will thus be front and centre in the talks between Congress and the White House on a package of measures that must be agreed before the end of the year to avert a series of swingeing spending cuts and tax increases from being automatically triggered. A staunch liberal, she may make an agreement harder to reach.

Achieving a pact is the top priority of President Barack Obama following his re-election last week. He has invited top congressional leaders, including the House Speaker John Boehner and Ms Pelosi, to the White House for a first effort to reach a compromise tomorrow. The automatic measures that will apply in the absence of a deal could drain $500bn (£315bn) or more from the US economy and trigger a new recession.

No one among top Democrats is likely to challenge Ms Pelosi even though last week's election saw the Republicans retain control of the House of Representatives. With some House race results still outstanding, the Democrats are likely to have eroded the Republican majority by only about seven seats.

Vilified by conservatives, Ms Pelosi, who took the helm of House Democrats 10 years ago, is the standard-bearer of the liberal wing of her party. She is likely to hold Mr Obama's feet to the fire on resisting Republican demands that any fiscal-cliff deal include steep cuts on social-programme spending.

With Ms Pelosi, 72, staying put, almost nothing changes post election at either end of Pennsylvania Avenue. While the Democrats made a modest gain in the Senate, in all other respects the status quo survives.

In the House, it will still be Ms Pelosi vs Mr Boehner. In the upper chamber, Senator Harry Reid will lead majority Democrats and Senator Mitch McConnell will stand up for minority Republicans. "We do not have the gavel, we do not have the majority, but we have unity," Ms Pelosi said, announcing her decision. She chose the role of women as the theme of her address. "We must have the further empowerment of women."

The fiscal talks might prove toughest for Mr Boehner, who is likely to face a unified front from Mr Obama and Ms Pelosi on protecting social programmes and raising tax revenue, while Tea Party members of his own party will expect him to push back.