U.S. Senate leaders hold talks in effort to end shutdown

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House bid rejected, Senate Democrats and Republicans now negotiating

House bid rejected, Senate Democrats and Republicans now negotiating

U.S. Senate majority leader Harry Reid, who is holding talks with the top Senate Republican Mitch McConnell on Sunday, said he is confident the Republicans will allow government to reopen and also extend the U.S. government's borrowing capacity.

Reid's disclosures comes in the wake of the World Bank's warning of serious consequences for the global economy if politicians in the U.S. fail to increase their government's borrowing limit.

The bank's president, Jim Yong Kim, said there is a danger of rising interest rates and slower growth.

Speaking Saturday at the end of the annual meeting of the World Bank and the International Monetary Fund in Washington, Kim said there is a danger of rising interest rates and slower growth.

Kim warned the repercussions for developed and developing economies would be "disastrous."

"We are now five days away from a very dangerous moment," he said. "I urge U.S. policymakers to quickly come to a resolution before they reach the debt ceiling deadline [on Thursday].

"The closer we get to the deadline, the greater the impact will be for the developing world. Inaction could result in interest rates rising, confidence falling, and growth slowing.

"If this comes to pass, it could be a disastrous event for the developing world, and that in turn will greatly hurt the developed economies as well. I urge U.S. policymakers to avert this potential crisis," Kim said at the end of three days of talks involving the World Bank and its sister lending agency, the 188-nation International Monetary Fund.

The weekend meeting of global financial leaders ended with some hope over signs that the U.S. and European economies are pulling out of long economic slumps.

However, that optimism was overshadowed by the U.S. political standoff, which has blocked approval of legislation to increase Washington's borrowing limit before a fast-approaching deadline this week.

U.S. Treasury Secretary Jacob Lew warns he'll exhaust his borrowing authority on Thursday and the government will face the prospect of defaulting on its debt unless Congress increases the $16.7 trillion borrowing limit.

Patrick Young, executive director of the financial advisory firm D.V. Advisors, on Sunday said the U.S. government is "probably not going to default" come Thursday because tax dollars have been flowing into federal coffers this month.

"If actually we get a default it would be catastrophic, but to be fair, the chances of seeing the United States of America not paying their debt in the next month or two are low. To a degree, we have political theatre happening here," he told CBC News.

Young said the uncertainty can spook markets, but so far investment firms have been "quite mature," describing reaction leading up to the deadline as "mute."

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