House Democratic Caucus Chairman Rep John Larson addresses the press in the US Capitol on December 30, 2012 in Washington, DC.

Washington -

Last-minute negotiations on averting the so-called fiscal cliff headed into the last hours of the year Monday, after failing to produce a compromise during weekend meetings, telephone calls and a special session of Congress.

Eleventh-hour talks involved Vice President Joe Biden and his former Senate colleague, Republican Mitch McConnell, the chamber's minority leader. The two spoke on Sunday night and again on Monday morning, according to news reports.

“The leader and the VP continued their discussion late into the evening and will continue to work toward a solution,” Don Stewart, McConnell's spokesman, said. Stewart expressed some hope of reaching a deal, the Washington Post reported.

Senator Harry Reid, the Democratic majority leader, reconvened the Senate and members of the House of Representatives were told to stay close to the Capitol because a vote could come soon.

Lawmakers were seeking a deal to avoid the so-called fiscal cliff, the combined expiration of Bush-era tax cuts on every working American and the implementation of mandatory across-the-board government spending cuts.

There has been ongoing concern over the effect that a tax increase would have on the economy. Some economists say letting tax cuts expire could drive the United States back into recession, causing unemployment, turmoil on stock exchanges and possibly also adversely affecting the world economy.

As negotiations entered their final stages, President Barack Obama restated his determination to see that tax cuts implemented by President George W. Bush expire only on the wealthiest 2 per cent of Americans.

Obama has set the threshold for tax increases at 250 000 dollars per year. But opposition Republicans want that threshold to be higher and insist more be done to reduce government debt.

Democrats reportedly have offered to raise income tax rates only on earnings over 450 000 dollars a year for individuals and 550 000 dollars for couples.

Democrats and Republicans were also at odds over automatic spending cuts set to take effect in January. Democrats were seeking to delay the cuts until 2015 and extend unemployment benefits, The New York Times reported.

Representative Chris Van Hollen, the top Democrat on the House Budget Committee, expressed some optimism Monday.

“I think there is some good news,” he said on CNN. “I think now there's a better than 50-50 chance that we will avoid the fiscal cliff by midnight tonight.”

But officials also cautioned that optimism had risen in past days only to burst hours later. Just one senator could derail a deal until Thursday, when the next Congress convenes. - Sapa-dpa