(Reuters) - As the clock ticks toward a January 1 deadline, efforts to avert a sharp rise in taxes and deep spending cuts have stalled, worrying world financial markets.
Obama and congressional lawmakers left Washington on Friday for the Christmas holidays with talks to avert the fiscal disaster in limbo.
When Obama arrives back in Washington early on Thursday, the focus will shift to the U.S. Senate after Republicans in the House of Representatives failed to pass their own budget measures last week.
Obama is expected to turn to a trusted Democratic ally, Senate Majority Leader Harry Reid, to help craft a quick deal.
White House aides began discussing details of the year-end budget measure with Senate Democratic counterparts early this week, a senior administration official said on Monday
The president will also need at least tacit approval from Senate Minority Leader Mitch McConnell to insure Republicans will permit passage of what is likely to be a stripped down bill that prevents taxes from rising on all Americans.
The measure may not, however, contain difficult spending cuts both parties had sought to speed deficit reduction. It is unclear how the president will seek to address the draconian across-the-board government spending reductions set to go into effect early in the year without a deal.
McConnell, who is up for re-election in 2014, has been a cautious participant in the process. His spokesman has said it was now up to Democrats in the Senate to make the next move.
Once clear of the Senate, the fiscal cliff legislation must also win enough bipartisan support to pass the House of Representatives, which failed last week to approve Speaker John Boehner's proposal to extend tax breaks for all Americans earning less than $1 million a year.
Conservative Republicans balked at any tax increases at all and withdrew support for the measure, which never came to a vote. Some Republican votes will be needed to pass any Senate bill.
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