US President Barack Obama re-reads his statement from the Blue Room about the budget at the White House in Washington April 8, 2011. The US Senate hurriedly passed a stopgap spending bill on Friday to fund the federal government for one week to avert a government shutdown at midnight. [Photo/Agencies]

WASHINGTON - A last minute budget deal, forged amid bluster and tough bargaining, averted an embarrassing federal shutdown and cut billions in spending - the first major test of the divided government voters ushered in five months ago.

Working late into the evening Friday, congressional and White House negotiators struck an agreement to pay for government operations through the end of September while trimming $38.5 billion in spending. Lawmakers then approved a days-long stopgap measure to keep the government running while the details of the new spending plan were written into legislation.

Actual approval of the deal would come in mid-week.

"Today Americans of different beliefs came together again," President Barack Obama said from the White House Blue Room, a setting chosen to offer a clear view of the Washington Monument over his right shoulder.

The agreement - negotiated by the new Republican speaker of the House, John Boehner, the president and the Senate Democratic leader, Harry Reid - came as the administration was poised to shutter federal services, from national parks to tax-season help centers, and to send furlough notices to hundreds of thousands of federal workers. It was a prospect that all sides insisted they wanted to avoid but that at times seemed all but inevitable.

Shortly after midnight, White House budget director Jacob Lew issued a memo instructing the government's departments and agencies to continue their normal operations.

Boehner said the agreement came after "a lot of discussion and a long fight," and he won an ovation from his rank and file, including the new tea party adherents whose victories last November shifted control of the House to the GOP.

Reid declared the deal "historic."

The deal marked the end of a three-way clash of wills, but it also set the tone for coming confrontations over raising the government's borrowing limit, the 2012 budget and long-term deficit reduction.

At the end of the day, all sides claimed victory - Republicans for the sheer size of the spending cuts and Obama and Reid for jettisoning Republican policy initiatives that would have blocked certain environmental regulations and made changes in a federal program that provides family planning services.

Not all policy "riders" were struck. One provision in the final deal would ban the use of federal or local government funds to pay for abortions in the District of Columbia. A program dear to Boehner that lets District of Columbia students use federally funded vouchers to attend private schools also survived.

Republicans had also included language to deny federal funding to implement the year-old health care law. The deal only requires such a proposal to be voted on by the Senate where it is certain to fall short of the required 60 votes.

The deal came together after six grueling weeks as negotiators virtually dared each other to shut the government down. Boehner faced pressure from his rank and file to hew as closely to the $61 billion in cuts and the conservative policy positions that the House had approved earlier in the year.

At one point, Democrats announced negotiators had locked into a spending cut figure - $33 billion. But Boehner pushed back, publicly declaring there was no agreement. This week, during a meeting at the White House, Boehner said he wanted $40 billion. The final number fell just short of that.

In one dramatic moment, Obama called Boehner on Friday morning after learning that the outline of a deal they had reached with Reid in the Oval Office the night before was not reflected in the pre-dawn staff negotiations. The whole package was in peril.

According to a senior administration official, Obama told Boehner that they were the two most consequential leaders in the United States government and that if they had any hope of keeping the government open, their bargain had to be honored and could not be altered by staff. The official described the scene on condition of anonymity to reveal behind-the-scenes negotiations.

The accomplishment set the stage for even tougher confrontations. Republicans intend to pass a 2012 budget through the House next week that calls for sweeping changes in Medicare and Medicaid and would cut domestic programs deeply in an attempt to gain control over soaring deficits.

In the Saturday Republican radio address, House Budget Committee Chairman Paul Ryan, R-Wis., warns of a coming crisis. "Unless we act soon, government spending on health and retirement programs will crowd out spending on everything else, including national security. It will literally take every cent of every federal tax dollar just to pay for these programs."

That debate could come soon. The Treasury has told Congress it must vote to raise the debt limit by summer - a request that Republicans hope to use to force Obama to accept long-term deficit-reduction measures.