WASHINGTON, July 28 (Reuters) - Urgent efforts to avoid an unprecedented U.S. debt default suffered a new blow on Thursday when some fiscally hardline Republicans blocked a budget deficit plan proposed by their own congressional leaders.
After hours of trying to get enough votes, the Republicans who control the House of Representatives put off action for the night and scheduled an emergency meeting for Friday morning.
The Republican infighting further delays any compromise with Democrats to stop the countdown toward Tuesday when the government says it will run out of money to pay all its bills.
Lawmakers must lift the government's $14.3 trillion borrowing limit by Aug. 2 or risk a devastating default and downgrade of the top-notch credit rating that helps make U.S. debt a pillar of the global financial system.
There was speculation House Speaker John Boehner, the top Republican in Congress, may revise his plan to attract more votes from rebels who want bigger cuts in spending than the roughly $900 billion over 10 years he has proposed.
"Republicans have taken us to the brink of economic chaos," House Democratic Leader Nancy Pelosi said. "The delay must end now so we can focus on the American people's top priority: creating jobs and growing the economy."
Even if it passes, the Boehner bill is certain to be killed in the Democratic-controlled Senate but could still feature in any possible compromise. Boehner's difficulties in securing votes weakens his bargaining position, Democrats said.
Investors, unnerved by the risk of a U.S. default or downgrade, are watching anxiously.
The dollar sank to a fresh four-month low against the yen and Asian stocks struggled after the announcement that the House would not vote on Thursday evening.
In U.S. trading earlier on Thursday, the stock market's broad S&P 500 index fell for a fourth day and interest rates soared on some Treasury bills that mature in August.
In a strongly worded commentary, China's state-run news agency Xinhua criticised U.S. lawmakers for flirting with a disastrous default, saying the world's largest economy has been "kidnapped" by "dangerously irresponsible" politics.
No policymakers in China, the largest foreign creditor to the United States, have commented on the crisis but Xinhua said "the ugliest part of the saga is that the well-being of many other countries is also in the impact zone." [ID:nL3E7IT0JC]
International Monetary Fund chief Christine Lagarde warned of the risks if Congress fails to act.
"One of the consequences could be a decline of the dollar as a reserve currency and a dent in people's confidence in the dollar," Lagarde told PBS NewsHour in an interview.
U.S. financial executives added their voices to calls from the business community for Congress to strike a deal.