WRAPUP 6-Obama, Lawmakers Meet for 1 1/2 Hours on Debt Impasse

* Republican abandonment of bigger effort looms over talks

* White House says Obama still hopes for ambitious deal

* LaGarde warns of global fallout if deal not reached

(New throughout with more details, end of meeting)

By Caren Bohan and Laura MacInnis

WASHINGTON (Reuters) - President Barack Obama sought Sunday to break an impasse with Republicans on deficit reduction and avert a potentially catastrophic debt default that could reverberate globally.

The gathering at the White House, which included leaders of both parties, lasted less than 90 minutes, a much shorter session than the four or five hours congressional aides had predicted late last week.

The meeting came a day after Republicans shied away from a broad $4 trillion deficit-reduction deal and urged a focus instead on a $2 trillion plan.

The U.S. Treasury has said it will exhaust its borrowing capacity by Aug. 2, meaning it will run out of money to pay all its debts. Republicans have balked at raising the congressional-set $14.3 trillion debt ceiling without steep spending cuts.

Failure to seal a deal by Aug. 2 could put the United States at risk of another recession, Treasury officials and private economists have warned.

Obama made clear at the start of the talks that they were racing the clock. Asked whether a deficit-reduction deal could be agreed to within the next 10 days, he told reporters: "We need to."

Uncertainty about the outcome of the debt negotiations has contributed to a lack of confidence among U.S. businesses over taxation levels and growth prospects.

Investor worries about the debt ceiling were expected this week to put pressure on the U.S. dollar, which fell on Friday after a grim jobs report. In early Asian trading on Monday, the New Zealand dollar was near a 30-year high against the U.S. dollar and the Australian dollar dipped.

REVOLT OVER TAXES

House Speaker John Boehner, facing a revolt from fellow Republicans over the prospect of higher taxes in a large-scale $4 trillion budget deal, told Obama Saturday he would only pursue a smaller $2 trillion package.

The move threatened to throw Sunday's meeting into disarray. It followed Democratic complaints to Obama -- whose 2012 re-election prospects are tightly linked to U.S. economic health -- that he should not agree to any reforms of popular entitlement programs that would lead to benefit cuts.

Calling it a "grave moment for the country," Treasury Secretary Timothy Geithner told NBC's "Meet the Press" that Obama and the Democrats would try to get the "biggest deal possible."

In a separate appearance on CBS's "Face the Nation," Geithner warned of the need to reach a deal soon.

"I do believe that this week, and certainly by the end of next week, we have to have agreement on the outlines of a package," he said.

Christine Lagarde, the new head of the International Monetary Fund, said a U.S. default would have global repercussions.

"If you draw out the entire scenario of a default, yes, of course, you have all of that, you know, interest hikes, stock markets taking a huge hit and real nasty consequences," the former French finance minister told ABC's "This Week."

(Additional reporting by Steven Holland, Tabassum Zakaria, Jim Wolf, Thomas Ferraro, Andy Sullivan and Matt Spetalnick; Editing by Bill Trott)