Clinton plans shutdown as budget crisis deepens

Washington - The budget impasse between Congress and the White House deepened last night as President Clinton held a Cabinet meeting last night to finalise plans for a partial shutdown of the government next Tuesday, and his aides warned that a US debt default next week was "increasingly likely", writes Rupert Cornwell.

The showdown, which f sent bond prices sharply lower yesterday, follows the refusal of the Republican Congress to drop conditions to bills lifting the federal debt ceiling, and providing for temporary spending until a 1995/96 budget is agreed. Mr Clinton says he will veto both measures in their present form.

As matters stand, 800,000 federal employees will be laid off when the current stopgap bill expires on Monday. Debt default could come two days later, when a $25bn interest payment is due. The White House warned that default would damage US financial prestige, push up interest rates, and increase the federal budget deficit.