With less than two hours to spare, the White House and congressional leaders reached a short-term deal late Friday to cut billions in spending and avert a midnight shutdown of the U.S. government.

The last-minute deal keeps the government running until next Thursday — time enough, all sides hope, to flesh out a more permanent measure that would keep federal operations functioning for another six months.

The agreement, which calls for more than $37 billion US in federal spending cuts through Sept. 30, prevented the first partial closure of the U.S. government in 15 years. That closure lasted 21 days.

If the deal had not been reached, hundreds of thousands of federal workers would have been furloughed and services from national parks to tax-season help centres would have been shuttered.

Cuts 'painful': Obama

The agreement was possible because "Americans of different beliefs came together," President Barack Obama said in a late night television address.

He said the cuts would be "painful" but said the White House had managed to protect its priority spending programs from Republicans who had wanted deeper cuts. But he acknowledged that "both sides had to make tough decisions."

The result, said Obama, was "the biggest annual spending cut in history."

The key Republican in the talks, House Speaker John Boehner, said the budget deal would "cut spending and leave our government open." Republican Speaker of the House John Boehner had said his party wanted big budgetary concessions. (Kevin Lamarque/Reuters)

"This is historic, what we've done," said the other key man in the talks, the Senate Majority Leader, Democrat Harry Reid.

The House and Senate were to rush through a stopgap bill until a broader bill could be finalized.

The feverish, last-minute negotiations came following a day in which Obama and senior government leaders worked feverishly behind the scenes to get past a budget impasse — even as they traded public barbs blaming each other for the divide.

The two sides spent the day trying to cobble together a deal on how much federal spending to slash, where to cut it and what caveats to attach as part of a bill to fund the government through the fall. A temporary federal spending measure had been set to expire at midnight Friday. If that deadline had been allowed to come and go, the U.S. government would have closed all non-essential federal programs.

The Senate Majority Leader, Harry Reid, led the negotiations for the Democrats. (Kevin Lamarque/Reuters)

For a nation eager to trim to federal spending but also weary of Washington bickering, the spending showdown had real implications.

Critics said an unpaid temporary vacation for 800,000 federal workers would have inconvenienced millions of people and damaged a fragile economy.

Face the American people

Both sides will have to answer to their own base if they are perceived to have conceded too much.

Republicans had wanted deeper spending cuts than the Democrats, and had wanted provisions to cut off federal funds to Planned Parenthood and a stop to the Environmental Protection Agency's issuing of many anti-pollution regulations.

In the end, Democrats and the White House were successful in rebuffing Republican attempts to curtail the EPA's reach and they were able to sidetrack Republican demands to deny federal funds to Planned Parenthood.

But anti-abortion lawmakers did succeed in winning a provision to ban the use of federal or local government funds to pay for abortions in the District of Columbia.

With files from The Associated Press