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Politics

Obama signs legislation to avoid 'fiscal cliff'

US President Barack Obama has signed a bill into law that allows the country to avoid a "fiscal cliff." The move came just days after both houses of Congress approved the legislation.

The president is reported to have signed the bill late on Wednesday, while on vacation in Hawaii.

"We received the bill late this afternoon, and it was immediately processed. A copy was delivered to the president for review. He then directed the bill be signed by autopen," a White House official said.

An "autopen" is a device that automatically applies the president's signatures to official documents.

Among other things, the legislation raises taxes on wages and investment earnings from 35 percent to almost 40 percent for single Americans earning more than $400,000 (340,960 euros) annually. The benchmark for married couples is $450,000.

The deal has been criticized for delaying spending cuts for two months, which are to await the 113th Congress -to be sworn in on Thursday.

The end of a two-year drama

Vice President Joe Biden and the top Republican in the Senate, Mitch McConnell, struck the bipartisan deal late on Monday, just hours before Congress' two-year deadline to solve the country's debt problem expired.

Less than two hours after the US had officially reached its borrowing limit of $16.4 trillion on January 1st, the Senate, where the Democrats hold a majority, passed the bill by a vote of 89-8. The Republican-led House of Representatives approved the measure by a vote of 257-167 later the same day.

The term "fiscal cliff" refers to the effect that economists fear would have come into play, had US politicians failed to reach the compromise. Economists argued that the across-the-board tax hikes and spending cuts that would have automatically come into force without a deal, would have likely plunged the US economy back into recession. 

On Wednesday, major stock markets reacted to the deal with a global share rally. European shares were up by an average of 2.1 percent on the day. In early trading on Thursday, however, that rally petered out, with European stocks falling back slightly. 

pfd/kms (Reuters, AP, dpa)