Delay in raising the US debt ceiling could reverse the fledgling recovery and trigger a new economic meltdown, US President Barack Obama said in an interview broadcast yesterday.

“We could actually have a reprise of a financial crisis, if we play this too close to the line,” Mr Obama told NBC television’s Today Show programme.

“We’re going be working hard over the next month. My expectation is we’re going get it done in a sensible way. That’s what the American people expect.”

Mr Obama and congressional Republicans have been engaged in heated wrangling over raising the debt ceiling, with the GOP demanding deep cuts in exchange for any deal to raise the spending limit.

The United States government is edging perilously close to an August 2nd date by which the federal government must increase its debt limit to borrow the money it needs to pay its bills.

If no agreement between the two sides is reached, the government risks defaulting on its obligations, an outcome that economists have said could have dire consequences.

Treasury Secretary Timothy Geithner says that he has found stopgap ways to continue government operation for another couple of months before the government defaults on its obligations.

“I take the Republican leadership at their word when they say it would be disastrous for us to not increase the debt limit,” Mr Obama said.

“I do not want to see the United States default on our obligations.”

The President added: “The full faith and credit of the United States is the underpinning not only of our way of life, it’s also the underpinning of a global financial system,” Mr Obama told NBC.

The current debt ceiling, reached last month, stands at some $14.3 trillion.