The US Congress has reached agreement on President Barack Obama’s economic stimulus plan.

A $789bn economic stimulus package has been agreed

Negotiators settled upon a $789bn package which would mix tax cuts with new government spending in an effort to save the failing US economy.

The deal “bridged differences” between the two versions of the package passed by the House of Representatives and the Senate, according to Democratic Senate majority leader Harry Reid.

The House voted for an $820bn plan, while the Senate approved a separate $838bn version.

Votes on the final stimulus bill could come as early as Thursday, which would meet Mr Obama’s goal of a conclusion by the weekend.

The legislation should create 3.5 million jobs once the President signs it into law and it takes effect, Senator Reid said.

It includes money for victims of the recession, money for cash-strapped states and tax cuts for individuals and businesses.

Mr Obama has warned the US faces a possible economic “catastrophe” without the economic stimulus bill.

Republicans criticised his plans, saying they contain wasteful spending that will not stimulate the economy.

But he has promised: “We’re going to do more than has ever been done before to make certain that every tax dollar is spent wisely and on its intended purposes.”

It is thought that the stimulus package alone is not enough to rescue the recession-hit American economy, because it does not address problems in the financial sector.

Mr Obama’s administration hopes that will be dealt with through the bank rescue programme announced by Treasury Secretary Timothy Geithner on Tuesday.

More to follow…