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sequester deal

President Barack Obama has signed into effect a wave of steep spending cuts which he has warned could damage the US economy.

The cuts – known as the sequester and drawn up two years ago – will take $85 billion from the US federal budget this year.

Last-ditch talks at the White House to avert the reductions before Friday’s deadline broke up without agreement.

The IMF has warned the cuts could slow global economic growth.

The cuts were designed to be so brutally painful that politicians would be forced to agree on a better way of balancing the books.

However, as the midnight deadline loomed on Friday, Barack Obama and Republican congressional leaders still failed to agree on a way to avoid them.

The two sides are at odds over Barack Obama’s insistence on raising taxes as part of any plan for tackling the country’s $16.6 trillion debt.

After the White House talks broke up, Barack Obama blamed Republicans for the impasse.

“They’ve allowed these cuts to happen because they refuse to budge on closing a single wasteful loophole to help reduce the deficit,” he said.

Barack Obama warned the cuts – if fully realized – would slow US economic growth by half of 1% and cost 750,000 jobs.

“We shouldn’t be making a series of dumb, arbitrary cuts to things that businesses depend on and workers depend on,” he said.

The sequester was drawn up in mid-2011 as Congress and the White House feuded over raising the debt ceiling and how to slash the huge US deficit.

Republicans wanted deep cuts in spending while Democrats insisted on raising taxes.

At the end of 2012 Congress and the White House struck a dramatic deal to avoid what was dubbed the “fiscal cliff”, that included expiring tax breaks and the sequester.

Republicans agreed to Barack Obama’s demand to raise taxes for the rich and Congress postponed the deadline for the budget cuts until March 1.

President Barack Obama has signed into effect a wave of steep spending cuts which he has warned could damage the US economy

President Barack Obama has signed into effect a wave of steep spending cuts which he has warned could damage the US economy

About half the cuts will come from the defence budget. Incoming defence secretary Chuck Hagel has warned of “significant impacts” on the military.

Chuck Hagel said the cuts “will cause pain, particularly among our civilian workforce and their families”.

“Let me make it clear that this uncertainty puts at risk our ability to effectively fulfill all of our missions,” Chuck Hagel said.

“Later this month, we intend to issue preliminary notifications to thousands of civilian employees who will be furloughed [put on unpaid leave].”

Defence officials say 800,000 civilian employees will have their working week reduced. They say they will also have to scale back flight hours for warplanes and postpone some equipment maintenance.

The deployment of a second aircraft carrier to the Gulf has also been cancelled.

On Friday, Republican House Speaker John Boehner reiterated his party’s refusal to allow taxes to rise and challenged the gridlocked US Senate to pass a bill first before the House acted on a plan.

“Let’s make it clear that the president got his tax hikes on 1 January,” he said as he left the White House.

“The discussion about revenue, in my view, is over. It’s about taking on the spending problem.”

Correspondents say attention will now turn to the next congressional challenge – a possible shutdown of the US government if no funding bill is passed in the next month.

On March 27 a temporary federal budget that has kept the federal government running since 2012 is due to expire.

House Republicans have said they will vote on a bill next week to fund the government through the end of the fiscal year, on September 30, but keep in place some automatic cuts taking effect on Friday.

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