U.S. President Donald Trump is applauded by Republican members of Congress and other attendees as he says he will not answer questions from reporters about an impending U.S. Government shutdown during a bill signing ceremony for the “First Step Act” and the “Juvenile Justice Reform Act” in the Oval Office of the White House in Washington, U.S., December 21, 2018. REUTERS/Joshua Roberts
Donald Trump is applauded by Republican members of Congress and other guests in the Oval Office as he refuses to answer questions from reporters about a US government shutdown © Reuters

The US government will remain partially shut until at least Thursday after Donald Trump failed to resolve an impasse with Congress over his demand that spending bills to fund the government include $5bn towards building his US-Mexico border wall.

Mitch McConnell, the Republican Senate majority leader, said the chamber would remain in recess until Thursday, meaning there is almost no chance that Congress can vote on bills that are needed to enable hundreds of thousands of employees to return to work.

Mr Trump cancelled plans to spend the holidays at his Palm Beach resort, and the White House said his wife Melania would return to Washington from Florida to spend Christmas with her husband. “I will not be going to Florida because of the Shutdown — Staying in the White House! #MAGA,” Mr Trump tweeted on Saturday evening.

Mr McConnell said talks between Democrats, who have little incentive to compromise with Mr Trump, continued and that “anything can happen”. 

In an extraordinary Oval Office meeting that was televised two weeks ago, Mr Trump said he would be “proud” to shut down the government over the border issue. But the president and Republicans are now trying to blame the Democrats who they accuse of being unwilling to spend money on border security.

Earlier this week, Mr Trump signalled that he would sign a bipartisan bill to keep the government open that had been agreed by both houses of Congress. But he reversed course after coming under heavy fire from conservative TV and radio commentators.

His reversal came amid huge criticism, including from Republicans, for his snap move to remove US troops from Syria — a decision that led to the resignation of Jim Mattis as defence secretary. Brett McGurk, the top state department official responsible for tackling Isis, also resigned in protest over the withdrawal.

Speaking to reporters on a call on Saturday afternoon, an administration official said that the president was adamant that any agreement to fund the government must include $5bn towards funding the wall on the US border with Mexico.

Later on Saturday, Mr Trump linked the shutdown with his Syria decision. “I won an election, said to be one of the greatest of all time, based on getting out of endless & costly foreign wars & also based on Strong Borders which will keep our Country safe. We fight for the borders of other countries, but we won’t fight for the borders of our own!” he tweeted.

At midnight Friday nine federal agencies shut down, including the homeland security department, the state department and the justice department. National parks and museums run by the interior department also closed.

It is the third US government shutdown of this calendar year — a four-decade record. Some 420,000 federal employees will work without pay for the duration of the shutdown, while 380,000 federal workers will be put on unpaid leave.

Congressional leaders had initially attempted to avoid the shutdown, but Mr Trump suddenly announced he would not back a Republican-sponsored Senate bill to keep the government funded at current levels.

On Friday night, Mr McConnell and Chuck Schumer, his Democratic counterpart, announced that they would attempt to renegotiate a new deal with the White House. But they provided no details about what a compromise between Mr Trump and Democrats might look like, with both sides dug into their positions.

Democrats have been adamant that they would not allow spending bills through the Senate with the billions of dollars Mr Trump has requested for the wall. Mr Trump, meanwhile, warned that he was willing to hold out for “a very long time” on a deal, unless Democrats agreed to pass funding for his border wall.

Although a government shutdown would have little broader economic impact, it has contributed to a sense of Washington being adrift at a time of mounting fears over the US economy.

The stand-off between the White House and Senate Democrats came at the end of Wall Street’s worst week since August 2011, with the benchmark S&P 500 off 7.1 per cent overall. The tech-heavy Nasdaq lost 8.4 per cent to end in bear market territory — defined as a drop of 20 per cent from the most recent high.

Mr Trump has pointed to Wall Street as a barometer of his success in managing the economy, and the end-of-year swoon has undermined the narrative he has driven since signing a sweeping tax cut bill a year ago this week. 

Barring a sharp reversal next week, 2018 will go down as only the second year Wall Street has lost ground since the height of the financial crisis.

The week’s rout was sparked by the Federal Reserve’s decision to raise interest rates on Wednesday and maintain a policy of gradually continuing to tighten through the new year. Bloomberg and Reuters on Saturday reported that Mr Trump had vented about Jay Powell, the Fed chairman, and raised the possibility of trying to fire him.

Steven Mnuchin, the US Treasury secretary, denied the claims in tweets Saturday: “I have spoken with the President ‪@realDonaldTrump‬ and he said “I totally disagree with Fed policy. I think the increasing of interest rates and the shrinking of the Fed portfolio is an absolute terrible thing to do at this time especially in light of my major trade negotiations which are ongoing, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.”

John Williams, the New York Fed president, attempted to calm investor nerves on Friday, telling CNBC that the central bank would go into next year with its eyes “wide open” and willing to reassess its outlook if the economy’s performance deteriorates.

But a relief rally that followed was shortlived, with equity markets falling sharply in afternoon trading as Wall Street headed towards its worst December since the Great Depression.

The sell-off has been worldwide and across asset classes. Brent crude briefly fell below $53 a barrel for a new 15-month low, with the international benchmark ending the day down almost 40 per cent since October highs. The European Stoxx 600 remained on course for its worst year since 2008, while the CSI 300, a broad-based index of shares on mainland China, closed down 1.2 per cent on Friday.  

Additional reporting by Peter Wells, Mamta Badkar, Nicole Bullock and Joe Rennison

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