People pass by the Treasury Building on Pennsylvania Avenue in Washington, DC, on Friday. AFP

Talks to avoid a US debt default were on a knife edge Saturday as President Joe Biden warned he would not accept "extreme" Republican demands but suggested there remained a path to success.

With the Treasury Department warning that the US government could run out of money as early as June 1 — triggering massive economic disruption in the world's biggest economy and likely around the globe — the political battle in Washington see-sawed without any sign of imminent resolution.

READ MORE

Biden to discuss Ukraine with India's Modi, Brazil's Lula: White House

Arab League Summit concludes in Saudi Arabia, adopts Jeddah Declaration

President Joe Biden expressed optimism on Saturday that a resolution will be found to the US debt ceiling crisis to avoid plunging the world's biggest economy into default.

"I still believe we'll be able to avoid a default," he told reporters at the G7 summit in Hiroshima, Japan.

US President Joe Biden speaks during a meeting. File photo

Republicans, who control the House of Representatives, are demanding steep budget cuts as a price for allowing an extension of the government's borrowing authority. The White House is seeking to whittle down Republican demands, while arguing that the traditionally uncontroversial annual debt ceiling increase is being weaponized for political gain.

Hopes for a settlement took a blow Friday when Republicans walked out of negotiations, declaring a "pause."

However, the talks restarted later, leading White House Press Secretary Karine Jean-Pierre to say "we are indeed optimistic."

Biden, on the other side of the world at a G7 summit in Hiroshima, was briefed on the situation early Saturday, which was still Friday night in Washington, the White House said.

A digital display board at a bus shelter showing the national debt is seen in Washington, DC, on Friday. AFP

While Biden will not accept "extreme" Republican policies, "there remains a path forward to arrive at a reasonable bipartisan agreement if Republicans come back to the table to negotiate in good faith," LaBolt said.