From jail to Jets, Burress finds a new NFL home (AP)

NEW YORK – Plaxico Burress is back in the Big Apple — with the New York Jets.

The former Super Bowl star with the Giants, recently released from prison after serving 20 months on a gun charge, reached an agreement in principle Sunday on a one-year deal with the Jets, the team said.

Burress, who turns 34 on Aug. 12, caught the game-winning touchdown in the Giants' upset of the unbeaten New England Patriots in the 2008 Super Bowl, before his career derailed after he accidentally shot himself in a New York nightclub later that year.

His second chance at the NFL comes with a team that was interested in him a few years ago before he went to prison. Now, he'll likely join the recently re-signed Santonio Holmes as Mark Sanchez's top receivers.

Burress wrote on his Twitter page: "East Coast here I come!" Sanchez retweeted his new receiver and added: "Paperwork in hand??? Haha welcome to the squad."

Burress met with the Pittsburgh Steelers, where he spent his first five seasons, on Saturday after sitting down with Giants coach Tom Coughlin on Friday. Burress mentioned he would be interested in playing for several teams, including the Jets — and didn't even need to meet with general manager Mike Tannenbaum and coach Rex Ryan to make his decision.

ESPN first reported the deal, saying it is for more than $3 million fully guaranteed. Burress was in Los Angeles on his way to a meeting with the San Francisco 49ers, ESPN reported, but canceled that trip when the Jets contacted him.

Because of the NFL post-lockout rules, Burress can't practice with the team until Thursday. But clearly, the Jets are confident the former Pro Bowl receiver has a lot left as they try for a Super Bowl run even though he hasn't played in the NFL since 2008.

Burress gives Sanchez a big receiver — he's 6-foot-5 — with sure hands and a red-zone presence to complement Holmes, Jerricho Cotchery, Dustin Keller and a solid running game with Shonn Greene and LaDainian Tomlinson.

The Jets are hoping Burress can revive his career the way Michael Vick did with the Eagles after serving 21 months in prison for his involvement in a dogfighting ring.

Burress pleaded guilty in August 2009 to attempted criminal possession of a weapon after accidentally shooting himself in the thigh at a Manhattan nightclub in November 2008, accepting a two-year prison term. He was released about three months early for good behavior, but will be on parole for two years.

He was told to get and keep a job, undergo substance abuse testing, obey any curfew established by his Florida parole officer, support his family and undergo any anger counseling or other conditions required by his parole officer.

Burress has 505 catches for 7,845 yards and 55 touchdowns in his NFL career with the Steelers and Giants.

He caught 35 passes for 698 yards and five touchdowns in his final year with Pittsburgh in 2004 as the Steelers slowly broke in Ben Roethlisberger, a rookie at the time. Burress moved on to New York, where he thrived catching balls from Eli Manning, but often ran into trouble with Coughlin.

The move softens the blow for the Jets after losing out on cornerback Nnamdi Asomugha, who was New York's top priority after re-signing Holmes. But Asomugha surprisingly signed with Philadelphia, and the Jets were forced to turn their attention elsewhere.

The addition of Burress likely means Braylon Edwards will not be back after nearly two seasons in New York. Edwards, a free agent, repeatedly said he was interested in returning, but it was believed the Jets wouldn't be able to keep both him and Holmes.

So, the Jets took a chance on Burress, hoping he'll be able to help the passing game. Ryan, in a voice message to Jets fans after the lockout ended, said the team planned to have Sanchez "let it fly a little more than we have in the past."

Burress appeared to have a good visit with the Steelers on Saturday. He caught up with former teammates — including Roethlisberger and Hines Ward — and met with owner Art Rooney, director of football operations Kevin Colbert and coach Mike Tomlin.

Tomlin called the sit-down "good," while Colbert was decidedly open when talking about the nature of the discussion, saying: "Obviously he's interested. Drew (Rosenhaus), his agent, is interested, and we're certainly interested."

That came a day after Burress spent 90 minutes talking with Coughlin. Despite not meeting with him during his visit, Manning said he would be happy to have Burress back with the Giants, but added that he wasn't going to lobby management to re-sign him.

Manning and Burress combined for 33 touchdown receptions from 2005-08, with none more important than the winning TD in the Super Bowl victory over New England in February 2008, when Manning won the MVP.

Burress was drafted eighth overall by Pittsburgh in 2000 out of Michigan State and quickly emerged as a game-changing receiver. He had 66 catches for 1,008 yards in his second season and followed that up with a career-high 78 catches and 1,325 yards receiving.

He left Pittsburgh after the 2004 season, and signed a six-year, $25 million deal with the Giants. Burress made an immediate impact, catching 76 passes for 1,214 yards in his first season in New York.

He caught 10 touchdown passes the following season, and 12 the next year — but the biggest came in the Super Bowl in Arizona. After saying he thought the Giants would beat the previously undefeated Patriots, Burress went out and caught the winning touchdown pass from Manning in the closing minutes — despite playing with a knee problem.

Burress said he was upset with his contract the following offseason and showed up for minicamp, but didn't practice. He threatened to hold out of training camp, but joined the team and signed a five-year extension. He was suspended for a game in 2008, when he didn't show up at the team's facility and the Giants couldn't reach him for a few days.

But the real troubles were only beginning.

He left the Giants' game against Arizona on Nov. 23, 2008, with a hamstring injury and didn't return. Five days later, Burress accidentally shot himself. That was the last straw for the Giants, who released him in April 2009 — a few months before Burress began serving his prison sentence.

While in prison, Burress insisted he would play in the NFL again despite such a long layoff, and the Jets were willing to let him prove he can still be a productive playmaker.

___

AP Sports Writers Tom Canavan in East Rutherford, N.J., and Will Graves in Pittsburgh contributed to this report.

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Britain, Japan warn of disaster if no U.S. debt deal (Reuters)

LONDON/TOKYO (Reuters) – British and Japanese officials warned Sunday of disastrous consequences for the global economy if last-minute talks among lawmakers in Washington failed to agree on raising the U.S. borrowing limit and averting a debt default.

Governments across the world fear that because of the key role of the U.S. dollar in global banking and trading systems, there could be severe instability when Asian financial markets reopen Monday if a U.S. debt deal is not in sight by then.

In Washington, Senate Minority Leader Mitch McConnell, the top Senate Republican who is playing a key role in the debt talks, said "we're very close" to a $3 trillion deal that would raise the debt ceiling while cutting the U.S. budget deficit.

But a senior White House official warned that an agreement was "not there yet."

"If they get this one wrong and there's a default -- we don't expect that, we think that they will sort this out -- but if that were to happen, it has consequences for every family and every business in this country and all across the world," said Danny Alexander, Chief Secretary to the British Treasury.

"I think in the end the politicians on Capitol Hill can see that the precipice they are looking over is one that they are going to step back from," Alexander told BBC television.

"But it is something that would have a big effect on the global financial system and on the global economy, where the United States is one of our major trading partners, that could have really big implications for the United Kingdom."

In Tokyo, sources familiar with Japan's international and monetary affairs said they were increasingly concerned that markets might be too optimistic about prospects for a lasting solution to the crisis.

Japanese officials still hope Washington can strike a deal and if that proves impossible, will give priority to interest payments to international holders of U.S. Treasury debt to limit the immediate market impact, the sources said.

But Tokyo's concern is that if the crisis drags on without a clear and long-term solution, markets may be thrown into turmoil in the same way that they suffered when U.S. investment bank Lehman Brothers collapsed in September 2008.

"If there is a default, the impact on global markets will be huge," said one of the sources, who declined to be named because of the sensitivity of the matter.

Another Japanese source said, "Nobody thought Washington would let Lehman collapse. But look what happened."

U.S. lawmakers have set themselves a Tuesday deadline to reach agreement and the U.S. Treasury has said it will run out of borrowing room on that day, although analysts think the government may have enough cash to keep servicing its debt and paying its bills through the middle of this month.

CHINA

Britain is the third largest foreign holder of U.S. Treasury debt and Japan is the second largest. China is the biggest with well over $1 trillion invested in U.S. Treasuries; about two-thirds of its $3.2 trillion of foreign exchange reserves are estimated to be held in dollar assets.

Saturday the official People's Daily newspaper, the mouthpiece of the Chinese Communist Party, castigated the U.S. handling of the debt crisis in an editorial as "irresponsible" and "immoral."

It said the U.S. democratic system was to blame for the "farce," claiming that "not a single representative has considered the world, and even U.S. national interests are being banished from the mind."

Friday a senior economic policymaker in the euro zone, who declined to be named, told Reuters he was optimistic Washington would solve the problem but expressed surprise and anger that U.S. politicians were "playing chicken" with an issue of such importance for the global economy.

Euro zone leaders are struggling to control sovereign debt crises in several countries in their region, and the U.S. debt problem is making this more difficult by adding to upward pressure on the yields of government bonds in those weak states.

If there is no U.S. debt deal by Monday morning, central banks around the world are expected to stand ready to provide emergency supplies of money to commercial banks in case the banks become too nervous to lend to each other.

Japan's first defense will be to ensure that Japanese financial institutions have a sufficient supply of dollars, the sources in Tokyo indicated.

The Bank of Japan believes Japanese commercial banks have sufficient dollar cushions but will use its dollar swap arrangement with other central banks to prevent a dollar squeeze in case of market turmoil.

In late June, the U.S. Federal Reserve agreed to extend liquidity swap arrangements with other major central banks until August 1, 2012.

The Japanese central bank is also prepared to flood markets with yen through its open market operations in case interbank borrowing costs spike, BOJ officials say.

In Europe, there were minor signs of strain in the money markets last week with some banks becoming unable to take out longer-term dollar loans, but the effect was small since banks still expected Washington would reach a deal.

The European Central Bank already offers unlimited euro loans to banks in some of its money market operations as part of its response to past crises, and it could use that policy to cope with any market problems this week.

A spokesman for the Swiss central bank said, "The Swiss National Bank is ready to react appropriately at any time to market disruptions."

(Writing by Andrew Torchia; Editing by David Cowell)

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Verdict for 2 Americans in Iran within a week (AP)

TEHRAN, Iran – The lawyer for two Americans jailed in Iran on charges of espionage said Sunday the court will announce its verdict within a week, dashing hopes for their immediate release after a final hearing in the case.

Shane Bauer and Josh Fattal, both 29, have been held in Iran's Evin Prison since shortly after their arrest along the border with Iraq exactly two years ago on Sunday. The case has added to tensions between the United States and Iran that were already high over issues like Tehran's disputed nuclear program.

The Americans' lawyer, Masoud Shafiei, had hoped that Sunday's final court session would result in their immediate release because it coincided with the two-year anniversary of their arrest and came near the start this week of the holy Muslim month of Ramadan, when pardons are traditionally handed down.

Shafiei said he and the two Americans presented closing arguments in their defense and the court announced the end of its hearings.

"The judge said the court will announce its verdict about my clients within one week," Shafiei told The Associated Press.

He said he was still hopeful that, if found guilty, they would be sentenced to time already served and released.

Bauer's fiancee, Sarah Shourd, was arrested with them on July 31, 2009, but was released in September of last year on $500,000 bail. She did not return to Iran for the rest of the trial, but Shafiei said he delivered a defense for her as well on Sunday.

The Americans deny the charges and say they were only hiking in a scenic and largely peaceful area of northern Iraq near the Iranian border. While other parts of Iraq remain troubled by violence, the semiautonomous Kurdistan region has drawn tourists in recent years, including foreign visitors, to its scenic mountains.

A spokeswoman for the Americans' families did not immediately return a phone message left for comment Sunday.

In a telephone interview on Saturday, Shafiei had expressed hope that Bauer and Fattal could be swiftly freed. One positive sign, he said, was that Shourd had not been summoned to appear for the final session as she had been for a previous hearing.

Shafiei suggested the court could convict the two but then sentence them to time served.

"They've spent two years of their life in jail in Iran, which will serve as their sentence," he said on Saturday.

Shafiei insisted the authorities have no evidence to prove espionage, and he pointed out the area where they were detained has a porous border.

"The espionage charge is irrelevant, and the charge of illegal entry is inconsistent with the facts. There was no clear border line and my clients are not guilty. I've provided a sufficient defense," he said.

The U.S. government has appealed for the two men to be released, insisting that they have done nothing wrong. The two countries have no direct diplomatic relations, so Washington has been relying on an interests section at the Swiss Embassy in Tehran to follow the case.

U.S. State Department spokesman Mark Toner, speaking to reporters in Washington on Friday, said that two years after their arrest, the Americans' case remains a point of serious concern.

"We are in regular contact with the family, we are in regular contact with our Swiss protecting power there," Toner said. "And their situation remains a matter of utmost concern for the United States and we hope that it reaches a positive conclusion."

The three Americans are friends from their student days at the University of California-Berkeley.

Shourd, now 32, and Bauer got engaged in prison before she was released on what Iranian President Mahmoud Ahmadinejad said were humanitarian grounds following health issues.

They say they were vacationing in Iraqi Kurdistan when they went hiking near a scenic waterfall.

Shourd told the New York Times last November that they stepped off an unmarked dirt road, inadvertently crossing from Iraq into Iran only because a border guard of unknown nationality gestured for them to approach. She said they had no idea they were so close to the border.

Shourd is back living in Oakland, Calif. Bauer grew up in Onamia, Minn., and Fattal is from suburban Philadelphia.

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Rebels clash with Gaddafi loyalists in rebel-held east (Reuters)

BENGHAZI (Reuters) – Rebel forces fought gunmen loyal to Muammar Gaddafi in eastern Libya on Sunday in the latest incident to undermine the insurgents' grip in territory they hold.

The clashes renewed opposition fears that Gaddafi's agents had infiltrated the area, days after the mysterious killing of the rebel military commander.

The assassination of General Abdel Fattah Younes, apparently by gunmen on his own side, has hurt the opposition just as it was winning broader international recognition and making gains against Gaddafi's forces in the Western Mountains and elsewhere.

Rebel spokesman Mahmoud Shammam said clashes had broken out when rebel forces attacked a militia that had helped some 300 Gaddafi loyalists break out of jail near Benghazi on Friday.

At least six rebels were killed in the fighting with the militia, whose members appeared to be experienced and armed with machineguns, rocket-propelled grenades and explosives.

Inside the barracks where they were holed up, rebels found more than 400 weapons, Libya's green flag and photos of Gaddafi.

"At 8 a.m., the barracks was brought under control. Thirty men surrendered and we took their weapons," Shammam told reporters. "We consider them members of the Fifth Column."

The clashes reflect growing fears within the opposition that Gaddafi loyalists are exploiting the lawlessness that prevails in the east, which is awash with weapons and armed gangs, some secular or Islamist rebels, some vigilantes and some criminals.

The fighting took place as speculation swirls over the murky circumstances of Younes' death. The 67-year-old general's record as Gaddafi's interior minister before his defection in February, made him the target of suspicion among many in the opposition.

Some Libyans suspect his execution was ordered by rebel leaders for treason, many say he was killed by Gaddafi spies, and others suggest a rebel splinter group had acted alone.

In an apparent effort to avert a feud, rebels named Suleiman al-Obeidi, a member of Younes' tribe, as acting military chief.

Whatever the truth, the infighting among militias in Libya's east deepens concerns among the rebels' Western backers, keen to see them prevail in a five-month-old civil war but frustrated by their lack of unity and worried over Islamist influence.

Keeping up diplomatic pressure on Gaddafi, Britain said on Sunday it would take part in the NATO air campaign for as long as it took and Germany expelled a Libyan diplomat.

REBELS TARGET GADDAFI STRONGHOLDS

The rebels, who rose up against Gaddafi in February, have seized swathes of the country but are poorly equipped and still far from ousting him, despite support from NATO airstrikes.

On Sunday, rebel tanks pounded Gaddafi troops in Tiji, some 200 km (125 miles) southwest of Tripoli, inching one km closer to the last government stronghold in the Western Mountains.

"We are going to take Tiji, I know it. And that will clear the way for us to head to Tripoli eventually," said fighter Naji Shayboukh, who was holding a home-made rocket-launcher.

About 14 rebels were killed and more than 20 wounded, hospital sources said, in a second day of heavy fighting on the front near Zlitan, some 160 km (100 miles) east of Tripoli and the largest town between rebel-held Misrata and the capital.

In the past 48 hours, rebels have advanced about 3 km toward Zlitan but have yet to solidify their gains.

Television footage obtained by Reuters showed what appeared to be buildings in Zlitan's eastern suburb of Zdou. The footage also showed heavy fighting, with rebels using machine guns against Gaddafi's troops.

"We have advanced well and God willing we will be in Zlitan soon," said Ibrahim Buwathi, 24, who had a shrapnel wound in his shoulder and was awaiting treatment at the hospital.

About 20 explosions rocked the nearby rebel-held city of Misrata overnight in an apparent attack by Gaddafi loyalists.

Libyan rebels also said they had moved closer to Brega, and were now positioned 5 to 7 km from the east of the oil town.

Fighting at Brega had slowed over the past two weeks as the rebels struggled to defuse hundreds of thousands of mines planted by Gaddafi's forces.

Rebels said they planned to advance soon on Brega, where some 3,000 heavily armed government troops remain positioned.

LIBYA'S WILD EAST

The longer the war drags on, the further eastern Libya appears to slip into lawlessness, raising questions about what kind of Libya could emerge if Gaddafi goes.

Many rebels had been uncomfortable working under Younes, a man who had been so close to Gaddafi for 41 years, and rebel sources said on Thursday he had been recalled over suspicions he or his family were secretly in contact with Gaddafi.

Government spokesman Moussa Ibrahim said Younes had been killed by Fawzi Bu Kitf, head of the Union of Revolutionary Forces, a federation of armed rebel groups that works with the Benghazi-based Transitional National Council.

Moussa also accused Ismail al-Sallabi, head of the Feb 17 Brigade, an armed group that falls under the Union umbrella, of involvement in the assassination.

Both have said the had no knowledge of plans to assassinate Younes and that his killers had acted alone.

Rebel sources told Reuters that a field commander called Mustafa al-Rubh, from an armed group called the Okbah Ibn Nafih Brigade, had been sent to the front at Brega to arrest Younes and bring him back to Benghazi for questioning by three judges.

Rubh, who is not under arrest but is being questioned over Younes' death, said he had taken the military leader to a location outside of Benghazi, where he was due to hand him over.

From here, no one appears able to explain what happened.

Some rebel sources said another militia, called Obaida Ibn Jarrah, intervened, took Younes by force and killed him.

(Additional reporting by Michael Georgy in Hawamid; Mussab Al-Khairalla and Ayman al-Sahili in Misrata; Missy Ryan in Tripoli; Joseph Nasr in Berlin; Souhail Karam in Rabat; writing by Lin Noueihed; Editing by Angus MacSwan)

(This story has been corrected in paragraph 17 to show number of rebels killed and wounded is about 14 and 20, respectively)

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Syrian army kills 80 people storming Hama (Reuters)

AMMAN (Reuters) – Syrian tanks firing shells and machineguns stormed the city of Hama Sunday, killing at least 80 civilians in a move to crush demonstrations against President Bashar al-Assad's rule, rights activists and residents said.

Assad's forces began their assault on the city, scene of a 1982 massacre, at dawn after besieging it for nearly a month. The state news agency said the military entered Hama to purge armed groups "shooting intensively to terrorize citizens."

A U.S. embassy official dismissed the official account, saying Syrian authorities had begun a war against their own people by attacking Hama. Britain and France, which had led European overtures toward Assad, also condemned the assault.

"It is desperate. The authorities think that somehow they can prolong their existence by engaging in full armed warfare on their own citizens," U.S. Press Attache J.J. Harder told Reuters by telephone from Damascus. He described the official Syrian description of the violence as "nonsense."

The Syrian human rights organization Sawasiah said the civilian death toll in Hama had risen to 80. The independent group cited medical officials and witnesses in its report.

Syrian authorities have expelled most independent journalists since the unrest began in March, making it difficult to verify reports of violence and casualties.

Hama has particular significance for the anti-Assad movement since Assad's father, the late President Hafez al-Assad, sent in troops to smash an Islamist-led uprising there in 1982, razing entire neighborhoods and killing up to 30,000 people in the bloodiest episode of Syria's modern history.

The current unrest has pitted primarily demonstrators from the Sunni Muslim majority against Assad's minority Alawite sect, which dominates the security services and ultra-loyalist army divisions commanded by Assad's feared brother Maher.

BID TO CRUSH PROTESTS BEFORE RAMADAN?

Some critics said Assad's assault on Hama suggested an attempt to stamp out unrest before Ramadan, the Muslim fasting month where people refrain from food and drink between dawn and dusk, begins Monday.

"Assad is trying to resolve the matter before Ramadan when every daily fasting prayer threatens to become another Friday (of post-prayer protests). But he is pouring oil on a burning fire and now the Hama countryside is rising in revolt," said Yasser Saadeldine, a Syrian Islamist living in exile in Qatar.

He said the attack on Hama marks a significant escalation in Assad's reliance on the military to stifle dissent.

"Assad has chosen to dig deeper into the security option, especially with a retreat in the tough international and regional stances against the regime," Saadedine told Reuters.

European Union governments planned to extend sanctions against Assad's government Monday by slapping asset freezes and travel bans on five more people. The EU has already imposed sanctions on Assad and at least two dozen officials and targeted military-linked companies in Syria.

A spokesman for European Union foreign policy chief Catherine Ashton said reports of violence inflicted on peaceful protesters were "appalling," calling on Assad to desist from attacks now and pursue meaningful democratic change.

The U.S. ambassador to Syria, Robert Ford, visited Hama earlier this month in a gesture of international support for what he described as peaceful pro-democracy demonstrations.

Hama residents said tanks and snipers were firing Sunday at unarmed residential districts where inhabitants had set up makeshift roadblocks to try and stop their advance.

They said that irregular Alawite "shabbiha" militia accompanied the invading forces in buses.

Citing hospital officials, the Syrian Observatory for Human Rights said earlier that the death toll in Hama was likely to rise, mentioning that dozens were badly wounded in the attack.

A doctor, who did not want to be further identified for fear of arrest, told Reuters that most bodies were taken to the city's Badr, al-Horani and Hikmeh hospitals.

Scores of people were wounded and blood for transfusions was in short supply, he said by telephone from the city, which has a population of around 700,000.

"Tanks are attacking from four directions. They are firing their heavy machineguns randomly and overrunning makeshift road blocks erected by the inhabitants," the doctor said, the sound of machinegun fire crackling in the background.

The state news agency said military units were fighting gunmen armed with rocket-propelled grenades and machineguns.

Another resident said that in Sunday's assault, bodies were lying uncollected in the streets and so the death toll would rise. Army snipers had climbed onto the roofs of the state-owned electricity company and the main prison, he said.

Tank shells were falling at the rate of four a minute in and around north Hama, residents said. Electricity and water supplies to the main neighborhoods had been cut, a tactic used regularly by the military when sweeping into restive towns.

The Alawites have dominated Syria, a majority Sunni Muslim country, since the Baath Party took power in a 1963 coup.

In 2000, Assad succeeded his late father, keeping the autocratic political system he inherited intact, while expanding the Assad family's share of the economy through monopolies awarded to relatives and friends.

Opposition sources said Sunday that secret police personnel had arrested Sheikh Nawaf al-Bashir, head of the main Baqqara tribe in the rebellious province of Deir al-Zor.

Bashir, who commands the allegiance of an estimated 1.2 million Baqqara, was abducted in the Ein Qirsh district of Damascus Saturday afternoon, they added.

Hours before his arrest Bashir told Reuters he was striving to stop armed resistance to a military assault on the provincial capital of Deir al-Zor and convince inhabitants to stick to peaceful methods, despite killings by security forces.

INSPIRATION: ARAB SPRING

Assad is trying to choke off an uprising that broke out in March, inspired by the Arab Spring revolutions in Tunisia and Egypt, and has spread across many areas of Syria.

Unlike in Egypt and Tunisia, however, there has been no swift downfall of Syria's autocratic elite because of a much harsher security crackdown on protesters and the fears of a significant number of Syrians who have not joined the unrest about possible sectarian anarchy if Assad is driven out.

In southern Syria, rights campaigners said security forces killed three civilians when they stormed houses in the town of al-Hirak, 35 km (20 miles) northeast of the city of Deraa.

Local activists and the Syrian Observatory for Human Rights added dozens of people, including three women, were arrested.

The Observatory said troops also arrested more than 100 people in the Damascus suburb of Mouadamiyah. A Western diplomat said he saw several tanks enter the suburb.

"The regime thinks it can scare people before Ramadan and make them stay home. But especially the people of Hama have shown themselves to be resilient," the diplomat said.

Turkish Prime Minister Tayyip Erdogan, once one of Assad's main allies, said in May "we do not want to see another Hama massacre," and warned the 45-year-old president that it would be hard to contain the consequences if it were repeated.

The Syrian leadership blames "armed terrorist groups" for most killings during the revolt, saying that more than 500 soldiers and security personnel have been killed.

An activist group, Avaaz, said in a report last week that Syrian security forces had killed 1,634 people in the course of their crackdown, while at least 2,918 had disappeared. A further

26,000 had been arrested, many of whom were beaten and tortured, and 12,617 remained in detention, it said.

In the east of the country, Syrian forces began an assault two days ago in a tribal oil-producing province on the border with Iraq's Sunni heartland.

Residents said at least 11 civilians were killed in Deir al-Zor Saturday and Sunday. "There are army tanks in the streets, but most of the deaths have been at the hands of Military Intelligence," one of the residents told Reuters.

The Syrian Revolution Coordination Union said 57 soldiers in Deir al-Zor, including two lieutenants and a captain, had defected to the demonstrators. It said residents had formed local committees and erected makeshift barriers to try to halt the advance of tanks and armoured vehicles inside the city.

Syrian television said an army colonel and two soldiers have been killed by armed groups in Deir al-Zor.

(Additional reporting by Suleiman al-Khalidi and Oliver Holmes; Editing by Mark Heinrich)

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Analysis: Kurds serve warning as U.S. withdrawal nears (Reuters)

KIRKUK, Iraq (Reuters) – When Iraq's northern Kurdish region sent a division of troops to surround Kirkuk in February, it may have been a signal of the delicate balancing act to come when U.S. forces leave the disputed oil city.

Officially, the 10,000 or so peshmerga fighters were there to protect Kirkukis from any violence associated with nationwide protests. But their presence sparked a furious diplomatic offensive by the United States to calm tensions between the central government in Baghdad and Arbil, the Kurdish capital.

The deployment may have been a trial balloon, analysts said, to test Prime Minister Nuri al-Maliki and to warn Baghdad and Washington that U.S. troops are needed as a buffer in the disputed northern territories claimed by both capitals.

"The Kurdish military maneuver in Kirkuk in February was both a message to the U.S. to keep its troops on the ground beyond 2011 - which is a Kurdish interest - and a way of testing the resolve of the Baghdad government," said Joost Hiltermann, an analyst with International Crisis Group.

It took a month to persuade semi-autonomous Kurdistan, comprised of three northern provinces, to withdraw the unit.

"It was a lot of diplomacy in saying 'look this isn't right. It's upsetting the area. It doesn't lead to stability,'" said Colonel Michael Pappal, commander of the U.S. Devil Brigade in Kirkuk. "It showed to me that a third party was necessary for that to happen."

Eight years after the United States ousted Saddam Hussein, Iraq is still building its police and army to battle a lethal Sunni Islamist insurgency and Shi'ite militias within, as well as defending against external threats.

As violence ebbs, Kirkuk and other disputed northern areas are considered potential flashpoints for future conflict in a country hobbled by ethnic, religious and political strife.

The late February incursion was no spur-of-the-moment decision and prompted a quick response from the Americans, who told Kurdish commanders their soldiers would not be allowed into Kirkuk, U.S. military officials said.

"You don't send a division across a border without a lot of planning and preparation ... it takes a while to put an army on the road and that's what they did," said Lieutenant Colonel Joe Holland, a U.S. commander in Kirkuk.

The unit was 12,000 strong, a Kurdish official told Reuters, while the U.S. military estimated it at 8,000-9,000. Sources said the Kurds had AK-47s, artillery and armored vehicles.

CLOSE TO BLOWS

Holland said it was the third time in 20 years the Kurds had moved into the Kirkuk area; the first in 1991 after the invasion of Kuwait and the second in 2003 when Saddam was ousted.

Maliki's government demanded the peshmerga withdraw and the Kurdistan Regional Government at first refused, escalating tensions. Iraqi and Kurdish troops have come close to blows in the past two years as Baghdad tightened its grip on Kirkuk.

Iraqi officials said the incursion was illegal. Officially, the city -- which by some estimates sits atop 4 percent of the world's oil reserves -- is secured by central government forces.

"The effect was a significant schism in the relationship between us and the Kurds," Holland said.

Kirkuk has suffered huge population upheavals in recent decades, from Saddam's "Arabization" campaigns to more recent moves by Kurds to reclaim parts of the city.

"They were sending a message to the central government, saying 'we can enter Kirkuk any time and you cannot stop us,'" a senior Iraqi Defense Ministry official told Reuters.

The official said the KRG would not invade Kirkuk after the U.S. leaves but would seek to displace Arabs. He said the Kurd population had soared from 150,000 to 350,000 since 2003.

The peshmerga, however, represent a formidable challenge to the Iraqi army. The Kurds have 100,000 troops, better weaponry and experienced leaders, the official said.

"After 2003, they captured the former Iraqi army tanks. About 4,000 tanks left by the former Iraqi army in the streets and cities disappeared, and our investigations indicate that the Kurds have most of them and Iran got the rest," he said.

The peshmerga deployment served notice that without the neutral buffer of U.S. forces, the Kurdish region might "feel compelled to use military muscle to defend its interests," said Wayne White, an analyst with the Middle East Institute.

"So, while a signal that the KRG will not tolerate any perceived trampling of its interests in Kirkuk, this deployment also was meant as a reminder to both Washington and Baghdad that greater consideration should be given to the prolongation of a more meaningful U.S. presence," he said.

But because Maliki, perhaps calculating that the Americans would pressure their Kurdish allies to withdraw, did not offer a serious challenge, the deployment was not an effective trial run for securing Kurdish control of Kirkuk, Hiltermann said.

"This will have to wait till the time when U.S. troops will no longer be there," he said. "At that point, all bets are off and tensions could easily escalate, intentionally or inadvertently, to a bigger conflict, at least as long as the dispute between Baghdad and Arbil remains unsettled."

(Additional reporting by Suadad al-Salhy; Editing by Jon Hemming)

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Obama adviser Sperling sees no "double dip" recession (Reuters)

WASHINGTON (Reuters) – White House economic adviser Gene Sperling said on "Fox News Sunday" he was "not worried the U.S. will have a double-dip recession" and urged Congress to approve an increase in the debt limit as a way to give certainty to financial markets.

Sperling said the debt uncertainty was "a self-inflicted wound" that contributed to lower U.S. economic growth as did external events including higher gasoline prices and the downturn in the U.S. auto industry in the first half of 2011.

(Reporting by Jackie Frank)

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'Cowboys & Aliens,' 'Smurfs' tie for No. 1 spot (AP)

LOS ANGELES – Little blue Smurfs and not-so-little green men from space are in a photo finish for the No. 1 spot at the weekend box office.

According to studio estimates Sunday, Daniel Craig and Harrison Ford's sci-fi Western "Cowboys & Aliens" and the animated family adventure "The Smurfs" both opened with $36.2 million.

That leaves Sony's "Smurfs" and Universal's "Cowboys & Aliens" tied for the top spot. Actual weekend rankings won't be sorted out until final numbers are counted Monday.

The previous weekend's top movie, "Captain America: The First Avenger," slipped to No. 3 with $24.9 million and raised its domestic total to $116.8 million.

"Harry Potter and the Deathly Hallows: Part 2" pulled in $21.9 million to become the franchise's top-grossing chapter at $318.5 million domestically.

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Businesses play critical role in thwarting terror (AP)

KILLEEN, Texas – Ultimately, it was the keen eye of a Texas gun shop clerk that helped authorities find an AWOL soldier who'd stashed bomb-making material in his nearby motel room for a planned attack on Fort Hood soldiers.

The tip that led Killeen police to Pfc. Naser Abdo on Wednesday prevented what could have been the second terrorist attack on the Army post, following a 2009 shooting rampage in which an Army psychiatrist is charged with killing 13 people. Earlier this year in Texas, a shipping company that told the FBI about a suspicious order for a chemical explosive foiled an alleged plot to blow up former President George W. Bush's Dallas home.

The enduring lesson for a post-9/11 world: America's work force plays a crucial role in preventing potential terror attacks.

"A vigilant public and informed local law enforcement make it much more complicated for people wishing to carry out attacks to do so," said John Cohen, principal deputy counterterrorism adviser at the Homeland Security Department.

Federal and local law enforcement agencies have established programs over the past decade that encourage the public to report suspicious activity, and tips from businesses have led to multiple high-profile arrests.

Abdo, 21, who went absent without leave from Fort Campbell, Ky., early this month, was arrested Wednesday at a motel outside Fort Hood and charged with possession of an unregistered destructive device. Police say he was perhaps only a day away from unleashing bombs in a restaurant frequented by soldiers and attacking the Army post.

Abdo's alleged plan was cut short when Guns Galore employee Greg Ebert became suspicious after the soldier acted oddly while purchasing smokeless gunpowder, shotgun ammunition and a semi-automatic pistol magazine. Ebert's call to police and the soldier's subsequent arrest was a proud moment for employees of the store — the same place Maj. Nidal Hasan bought a pistol used in the Fort Hood shooting spree two years ago.

Store clerk Dave Newby said Hasan's purchase, while legal, devastated store workers and put everyone on higher alert.

"I think we all changed," he said. "It was terrible. We thought about coulda, shoulda, woulda."

Ebert noted this week that although there was "nothing extraordinary" about Abdo, he saw just enough to make him suspicious.

The retired police officer said Abdo arrived at the Killeen gun shop in a taxi — unusual for the Central Texas town — and proceeded to buy 6 pounds of smokeless gunpowder, while asking what it was. Abdo didn't say much as he paid in cash, and he didn't bother to collect his change or a receipt before returning to the waiting taxi.

"Now, he hasn't done anything unlawful — it doesn't prevent me from being curious," said Ebert, who retired from the police force last year.

Federal authorities say actions like Ebert's can keep America safe.

"The willingness of an individual to contact law enforcement about an event or incident that may be indicative of a possible threat is vital to our mission," FBI spokesman Paul Bresson said. "It may turn out not to be a threat but at least we have the opportunity to check it out."

Other business tips have been credited with preventing disaster.

A clerk at a Circuit City store in New Jersey told police in 2006 that customers had asked him to make a DVD out of video footage of them firing assault weapons and screaming about jihad. The FBI later tracked six men, now known as the Fort Dix Six, who plotted to kill soldiers in a raid at the Fort Dix military base in New Jersey.

Earlier this year, two companies — Carolina Biological Supply Co. in North Carolina and Con-way Freight in Lubbock — contacted federal and local authorities about suspicions each had surrounding a purchase by Khalid Ali-M Aldawsari, who has been charged with attempted use of a weapon of mass destruction and schedule for trial later this year.

Federal authorities said Aldawsari bought explosive materials online and planned to hide them inside dolls and baby carriages to blow up dams, nuclear plants and Bush's home. A former Texas Tech University chemical engineering student from Saudia Arabia, Aldawsari was arrested after the North Carolina company reported $435 in suspicious purchases to the FBI.

The freight company notified Lubbock police and the FBI with similar suspicions because it appeared the order wasn't intended for commercial use. Con-way Freight spokesman Gary Frantz said since Sept. 11, 2001, the company has worked with local, state and federal authorities to develop training programs employees participate in at least once a year.

"I think we can be a force multiplied, which is a term often used by law enforcement, where private industry serves as additional eyes and ears to help authorities to uncover these activities to protect the public," Frantz said.

Carolina Biological Supply spokesman Keith Barker said his company has procedures to closely monitor orders involving "chemicals of a high degree of hazard."

"We've taken it upon ourselves to be vigilant," Barker said.

Meanwhile, "Operation Tripwire" is an FBI effort that asks certain businesses and industries — such as airlines and cruise ships — to look for and report suspicious behavior. The Department of Homeland Security has a national "If You See Something, Say Something" public awareness campaign that works with businesses and groups, such as the National Basketball Association, to promote public vigilance.

Some local law enforcement agencies also have partnered with businesses. New York Police Department detectives have asked thousands of companies to be on the lookout as part of "Operation Nexus."

"In a sense we don't know what we deter," because people don't commit crimes and get arrested, said Paul Browne, spokesman for the nation's largest police department. "But by making these things harder, and by educating people who may become unwitting players in terrorist plots, we hope to have that deterrent impact."

The Los Angeles Police Department created "iWatch," which uses brochures, public service announcements and meetings with community groups to provide advice on how to detect and report suspicious behavior.

LAPD Cmdr. Blake Chow said the program is augmented by a web-based system that lets private businesses and security firms exchange information about suspicious activities. The intelligence gleaned with these systems, along with phone tips, has helped disrupt the financing of suspected overseas terrorist organizations, he said.

"The general public is the ones that go to the same place every day to work, they know their neighbors," Chow said. "We rely on them to tell us if they see something or an individual's activities that seem out of place."

___

Associated Press writers Betsy Blaney in Lubbock, Colleen Long in New York City, Eileen Sullivan in Washington and Thomas Watkins in Los Angeles contributed to this report.

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Tropical system leaves little rain in dry Texas (AP)

By CHRISTOPHER SHERMAN, Associated Press Christopher Sherman, Associated Press – Sat?Jul?30, 9:52?am?ET

McALLEN, Texas – The storm that many had hoped would bring some relief to parched areas of South Texas passed Saturday after dropping less than an inch of rain — good news only for the cotton farmers who were ready to resume their harvest.

The National Hurricane Center said its 4 a.m. CDT advisory on what was once known as Tropical Storm Don would be its last as the remnants passed into northern Mexico. Don had failed to live up to even low expectations by tropical storm standards and was downgraded earlier to a tropical depression.

"There's really not much left of it," said Barry Goldsmith, a meteorologist with the National Weather Service in Brownsville. "It's a done deal."

With dry air falling in behind Don, a hot and sunny weekend was forecast with only a chance of showers. "That great beach weather we had last week is coming right back," Goldsmith said.

Most of Texas has been suffering an extreme drought, and Don was seen as South Texas' best hope for widespread rain in months. But totals from various sites in the Rio Grande Valley and coastal Willacy County failed to rise to even an inch.

The storm was a disappointment for ranchers who have been selling off cattle at a rapid clip because their pastures are barren.

But it was a huge relief for cotton growers, who are in the middle of their harvest. Double the amount of cotton was planted this year in the state's four southernmost counties, and the fields along many rural roads are still dotted with white bolls. The area got the most rain from Don, but it still wasn't much.

"I think it was pretty much a non-event," said Sally Ross at the Ross Gin Company in Mercedes on Saturday morning. They received less than one-half inch of rain at the gin. Some of their truckers reported showers as they brought the fluffy white bales to the gin Friday, but nothing intense.

"The wind blows, and the sun's out, they may be able to get back in the field in a day or two," Ross said.

Don was never predicted to be a punishing storm, but by the time it neared the Texas coast Friday evening the little anxiousness there had been, evaporated.

The National Hurricane Center downgraded Don to a depression at 10 p.m. as what remained of it came ashore over sparsely populated ranch lands near Baffin Bay. That advisory also ended all tropical storm warnings along the Texas coast.

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Libyan rebel commander killed by allied militia (Reuters)

BENGHAZI, Libya (Reuters) – Libyan rebels say the gunmen who shot dead their military chief were fighters allied in their struggle to overthrow Muammar Gaddafi, raising questions over divisions and lawlessness within rebel ranks.

The assassination of Abdel Fattah Younes, apparently by his own side, has hurt the opposition just as it was winning broader international recognition and launching an offensive against Gaddafi's forces in the west of the country.

After 24 hours of confusion, rebel minister Ali Tarhouni said Younes had been killed by fighters who went to fetch him from the front and that his bullet-riddled and partially burned body was found at ranch near the rebel capital of Benghazi.

Tarhouni said a militia leader had been arrested and had confessed that his subordinates had carried out the killing.

"It was not him. His lieutenants did it," Tarhouni told reporters late on Friday, adding that the killers were at large.

Younes had been part of Gaddafi's inner circle since the 1969 coup that brought the Libyan colonel to power and was interior minister before defecting to the rebels in February.

Many rebels had been uncomfortable working under a man who had been so close to Gaddafi for 41 years, and rebel sources said on Thursday Younes had been recalled over suspicions that he or his family were secretly in contact with Gaddafi.

Rebels were divided over who had killed Younes, some suspecting his execution was ordered by rebel leaders for treason, many believing he was killed by Gaddafi supporters who had infiltrated rebel ranks and still others suggesting a rebel splinter group had acted alone.

Whatever the truth, the killing deepens concerns among the rebels' Western backers, keen to see them prevail in a five-month-old civil war but frustrated by their lack of unity and nervous about the influence of Islamists.

The United States, which like some 30 other nations has formally recognized the opposition, called for solidarity.

"What's important is that they work both diligently and transparently to ensure the unity of the Libyan opposition," State Department spokesman Mark Toner said in Washington.

REBELS TARGET GADDAFI STRONGHOLD

Rebels who rose up against Gaddafi in February have seized swathes of the country but remain poorly equipped and are still far from ousting him, despite support from NATO airstrikes.

Anti-Gaddafi forces said on Saturday they had encircled the Libyan leader's last stronghold in the Western Mountain region and hoped to seize it soon.

Rebel tanks fired at Tiji, where an estimated 500 government troops are stationed, and said the blasts could be heard from the nearby town of Hawamid, which was captured on Thursday.

"We have Tiji surrounded and we hope to take it by the end of the day," rebel commander Nasir al Hamdi, a former colonel in Gaddafi's police force, told Reuters as gunfire crackled in the distance and he surveyed a battleground scattered with tankshell casings and government anti-aircraft bullets.

NATO airstrikes continued in western Libya overnight. NATO said it had bombed three satellite dishes in Tripoli to stop "terror broadcasting", but Libyan state TV remained on the air.

In the east, confusion reigned over who had killed Younes.

Rebel fighters said members of the February 17 Martyrs' Brigade, a rebel group that fights on the front and helps enforce security in the rebel-held east, had collected Younes from the frontline near the oil town of Brega on Thursday.

Younes knew and trusted the men who came to fetch him and went without a struggle when they explained they had a judge's order to take him to Benghazi for questioning, the rebels said.

The February 17 Martyrs Brigade is made up largely of civilian volunteers led by military commanders and is widely used by the Transitional National Council for some policing duties.

However, Tarhouni, the rebel minister, said it was not this group but another militia, the Obaida Ibn Jarrah Brigade, who had killed Younes.

Locals said the Obaida Ibn Jarrah Brigade was mainly comprised of former prisoners of Gaddafi's notorious Abu Salim prison in the capital Tripoli, who had always distrusted Younes.

Named after one of the companions of Islam's Prophet Mohammed, the group is likely to have Islamist leanings.

One rebel commander, who asked not to be named, said Islamists whom Younes had targeted as interior minister may have killed him in retaliation.

"Some of those Islamists are now fighting with the rebels and they have always refused to fight under Younes's command and have always viewed him with suspicion," he said.

"I don't think the investigation will lead anywhere. They don't dare to touch the Islamists."

The government in Tripoli, which has always warned of Islamist influence in the east, said al Qaeda was to blame.

Further complicating an already murky situation, some Libyans said they feared that Younes' death would trigger a bloody tribal feud. At the funeral on Friday, his Obeidi tribe pledged allegiance to the rebel cause.

But in an apparent effort to calm nerves among Younes' relatives, a rebel source said that he could be replaced by Suleiman Mahmoud al-Obeidi, a member of the same tribe.

Another leading candidate to take over as military chief was Khalifa Heftar, who lost an early contest with Younes over leadership of the rebels' military campaign, the source said.

The longer the war drags on, the further eastern Libya appears to slip into lawlessness, raising questions about what kind of Libya could emerge if and when Gaddafi goes.

Tarhouni told reporters on Friday night that an armed gang had attacked a prison, helping about 300 former Gaddafi soldiers and loyalists to escape.

(Additional reporting by Michael Georgy in Hawamid; Mussab Al-Khairalla in Misrata; Missy Ryan in Tripoli; Joseph Nasr in Berlin; Hamid Ould Ahmed in Algiers; writing by Lin Noueihed; editing by Alistair Lyon)

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Turkey's Gul says no crisis as top generals quit (Reuters)

ISTANBUL (Reuters) – President Abdullah Gul denied on Saturday that Turkey faced a crisis after the resignation of the country's four most senior military commanders, but acknowledged this had created an "extraordinary" situation.

The departure of the generals has caused turmoil in the military, giving Prime Minister Tayyip Erdogan an opportunity to extend his authority over the once-dominant armed forces, the second biggest in NATO.

Chief of General Staff General Isik Kosaner stepped down on Friday evening along with the army, navy and air force commanders in protest over the detention of 250 officers on charges of conspiring against Erdogan's government.

In a farewell message to "brothers in arms," Kosaner said it was impossible to continue in his job as he could not defend the rights of men who had been detained as a consequence of a flawed judicial process.

Relations between the secularist military and Erdogan's socially conservative Justice and Development Party (AK) have been fraught since it first won power in 2002, due to mistrust of the AK's Islamist roots.

While the departures are embarrassing, they could give Erdogan a decisive victory over a military that sees itself as guardian of the secularist state envisioned by the soldier statesman and founder of modern Turkey, Mustafa Kemal Ataturk.

Analysts perceive little political threat to Erdogan's supremacy. AK won a third consecutive term, taking 50 percent of the vote, in a parliamentary election in June.

"Nobody should view this as any sort of crisis or continuing problem in Turkey," Gul, a former top AK member, told reporters on Saturday. "Undoubtedly events yesterday were an extraordinary situation in themselves, but everything is on course."

Erdogan designated Kosaner's successor on Friday, as his office put out a statement naming paramilitary Gendarmerie commander General Necdet Ozel as new head of land forces and acting deputy chief of general staff, effectively making him next in line when Kosaner handed over the baton.

In years gone by, Turkey's generals were more likely to seize power than quit. They have staged three coups since 1960 and pushed an Islamist-led government from power in 1997.

Some founders of AK, including Erdogan, were members of the Welfare Party, an Islamist party whose coalition was forced out 14 years ago. But as prime minister, Erdogan has ended the military's dominance through a series of reforms aimed at advancing Turkey's chances of joining the European Union.

FOUR-STAR EARTHQUAKE

"Four-star earthquake," a headline in Sabah newspaper said of the generals' decision, while papers also highlighted Kosaner's criticism of media reporting on the military.

"They tried to create the impression that the Turkish Armed Forces were a criminal organization and ... the biased media encouraged this with all kinds of false stories, smears and allegations," Kosaner's statement said.

On Istanbul's streets, views of the issue reflected Turkey's polarization between government supporters and opponents.

"This is a move to place AK Party supporters in the army. There was only the army to protect secularism but they took that as well," said retired 54-year-old Perihan Guclu.

"This has been a good development. We have got one of the biggest numbers of generals in the world but we are becoming a democracy slowly," said a 52-year-old who gave his name only as

Dursun.

The latter-day subordination of the generals was starkly demonstrated last year when police began detaining scores of officers over "Operation Sledgehammer," an alleged plot against Erdogan's government discussed at a military seminar in 2003.

The officers say Sledgehammer was just a war game exercise and the evidence against them has been fabricated. About 250 military personnel are in jail, including 173 serving and 77 retired staff. Most are charged in relation to Sledgehammer.

MILITARY MORALE SAPPED

A court accepted on Friday an indictment over another alleged military plot, known as the "Internet Memorandum" case, and prosecutors asked for the arrest of 22 people including the Aegean army commander and six other serving generals and admirals.

Aksam newspaper described this as "the indictment which triggered a crisis" in a case where the military is accused of setting up anti-government websites. Papers said disagreements over senior appointments also prompted the generals to quit.

The detentions have sapped morale and spread mistrust and suspicion among the officer corps, and many had been looking for Kosaner to take a stand since his appointment last August.

More than 40 serving generals, almost a tenth of Turkey's commanders, are under arrest, accused of a various plots to bring down the AKP.

The main opposition CHP said the army should stay out of politics but warned against the AKP exploiting its power.

"It is not right to draw soldiers into politics but there is no benefit in vilifying, smearing or undermining their dignity day and night," senior CHP deputy Emine Tarhan told a news conference.

The government statement said the four commanders had retired and made no mention of the reasons why. It said a meeting of the Supreme Military Council, which meets twice-yearly to make top appointments, would go ahead as planned on Monday, showing Erdogan is in a hurry to restore the chain of command and present an image of business as usual.

The announcement dampened sentiment on Turkey's financial markets on Friday, weakening the lira and pushing bond yields higher over concerns about increased political risk.

(Additional reporting by Daren Butler and Seda Sezer; Editing by Mark Heinrich)

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Bush to be in NYC to mark 10th anniversary of 9/11 (AP)

NEW YORK – The ceremony at the World Trade Center site marking the 10th anniversary of the terrorist attacks will be a solemn but stately event that will include former President George W. Bush and a chance for victims' families to view the names of loved ones etched into the memorial, Mayor Michael Bloomberg said.

President Barack Obama and Bloomberg will be joined by the leaders in charge during the 2001 attacks, including Bush, former Mayor Rudolph Giuliani and former New York Gov. George Pataki. Current New York Gov. Andrew Cuomo and New Jersey Gov. Chris Christie will also be there, he said.

Speaking on his weekly radio show Friday on WOR-AM, Bloomberg said the lawmakers will read short poems or quotes. No speeches will be given.

"This cannot be political," he said. "So that's why there's a poem or a quote or something that each of the readers will read. No speeches whatsoever. That's not an appropriate thing."

The mayor also revealed a few more details for the ceremony on Sunday, Sept. 11. It will be held on the highway to the west of the site, and only relatives will be allowed inside the memorial to look for the names of their loved ones, etched into the railings at two huge waterfalls built in the footprint of the World Trade Center. The falls descend from street level down into a void.

The names of the nearly 3,000 victims — including those who died at the Pentagon and aboard United Flight 93 that went down in Shanksville, Pa., — will be read aloud for the first time.

The public will be allowed into the space, still a major construction site, the day after the ceremony but only with tickets. Bloomberg said limiting the number of people is a safety precaution as the work continues on 1 World Trade Center, the PATH station and museum.

He said there have been a couple hundred thousand reservations already, and a few days are already booked solid. He estimated that a million people annually will visit the site.

The museum is still under construction and is scheduled to open next year. Artifacts from the terrorist attacks are slowly being accumulated for the space, including a steel T-beam shaped like a cross that was discovered by a construction worker in the smoldering rubble. A national atheist group sued over the inclusion of the cross in the museum. It says all beliefs should be included, or none.

Bloomberg said on his radio show that the group had a right to sue, but the cross had a right to be there.

"This clearly influenced people," he said. "It gave them strength. In a museum you want to show things that impacted people's behavior back then, even if you don't think it was right. It's history. Museums are for history."

Bloomberg said other religious relics would be in the museum — a star of David cut from World Trade Center steel, a Bible found during the recovery effort and a Jewish prayer shawl.

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NY Post reporters told to preserve documents: memos (Reuters)

NEW YORK (Reuters) – Rupert Murdoch's New York Post has ordered newsroom staff to keep all documents related to questionable reporting methods involving phone hacking or unlawful payments to government officials in light of the fire storm in the UK engulfing the newspaper's owner, News Corp.

The company's legal department said in a memo on Friday: "As you have undoubtedly seen, there have been press accounts of inquiries into whether employees or agents of News Corporation or its subsidiaries have (a) accessed telephone and/or other personal data of third-parties without authorization, and/or (b) made unlawful payments to government officials in order to obtain information.

"As you also know, these stem from the actions at The News of the World in London, as well as unsourced, unsubstantiated reports in one London tabloid.

"Starting today, all employees must preserve and maintain all documents and information that are related in any way to the above mentioned issues.

"Please know we are sending this notice not because any recipient has done anything improper or unlawful. However, given what has taken place in London, we believe that taking this step will help to underscore how seriously we are taking this matter."

A copy of the memo was obtained by Reuters.

NEWS EDITOR REASSURES STAFF

In a separate memo on Friday, the New York Post's Editor-in-Chief, Colin Allan, told the staff they had been asked to save documents "in light of what has gone on in London at News of the World, and not because any recipient has done anything improper or unlawful."

The memo, a copy of which was obtained by Reuters, went on to say: "As we watched the news in the UK over the last few weeks, we knew that as a News Corp tabloid, we would be looked at more closely. So this is not unexpected.

"I want to stress that your full and absolute cooperation is necessary and you are expected to comply with this direction from our legal department.

"At the same time, please know we understand and take very seriously your concerns over the protection of legitimate journalistic sources. While we have instituted this hold, we do intend to protect from disclosure all legitimate and lawful journalistic sources in accordance with the law."

News Corp declined to comment on the memos.

News Corp's now defunct U.K. tabloid News of the World is at the center of a bitter scandal in which the newspaper has been accused of hacking individual's phones, including that of a teenage girl who was murdered.

The scandal has embroiled some of News Corp's most senior executives, including Rupert Murdoch and his son James, and British politicians and police.

It has grown increasingly more serious since the beginning of July and has caused News Corp to drop its bid for the stake of British pay TV company BSkyB it does not already own.

Murdoch and his son James, News Corp's deputy chief operating officer, have testified before a parliamentary committee regarding the phone hacking.

John Rockefeller, chairman of the U.S. Senate commerce committee, has called for an investigation to determine if News Corp has broken any U.S. laws and the FBI is investigating allegations News Corp might have hacked the phones of victims of the September 11 attacks in the United States.

Les Hinton, who was the chief executive of Dow Jones & Co, which publishes the Wall Street Journal, resigned his post on July 15. Hinton was head of News Corp's British newspaper unit, News International, when phone hacking was said to have occurred.

Last week, Robert Thomson, managing editor of the Wall Street Journal, sent a memo to staff reminding them that the newsroom had set up a confidential hotline for any employee who was concerned about journalistic practices at Dow Jones.

(Reporting by Jennifer Saba; editing by Andre Grenon)

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Moody's expects to affirm U.S. rating, negative outlook (Reuters)

NEW YORK (Reuters) – The United States will likely keep its top-notch credit rating from Moody's for now, despite the "limited magnitude" of the deficit reduction plans being discussed in Washington, the ratings agency said on Friday.

But Moody's warned in a report that the confirmation of the Aaa credit will likely come with a negative outlook, meaning there is a risk of a downgrade in the medium term.

That decision will depend on the U.S. economic performance in 2012 and prospects for future deficit-reduction measures, Moody's analyst Steven Hess said.

"If we're convinced that the economy takes off in 2012 and shows very strong growth, that makes the whole process of fiscal consolidation somewhat easier," Hess told Reuters in an interview.

The report from Moody's came four days before the United States says it will run out of cash to pay all of its bills.

In Washington, the House passed a deficit plan that likely will die in the Senate, and President Barack Obama told lawmakers before the vote to stop wasting time and find a way "out of this mess."

Moody's issued the report to clarify its position on the U.S. debt situation, its Chief Risk Officer Richard Cantor said in the same interview.

"Sometimes there is confusion and all the ratings agencies are grouped together," he said.

Standard & Poor's has threatened to cut U.S. ratings in the next few months if the lawmakers fail to come up with a meaningful plan to cut the nation's deficit.

Both agencies seem to agree that deficit-reduction measures of around $4 trillion would be enough for the United States to avoid a rating downgrade.

The difference is that, while S&P has indicated it may downgrade the United States by mid-October if it doesn't see a meaningful deficit-reduction plan in place now, Moody's is willing to give the government more time before making that decision.

PRIORITIZING DEBT PAYMENTS

Moody's expects the government will continue to honor bond payments even if lawmakers fail to raise the debt ceiling before August 2.

"If the debt limit is not raised before August 2, we believe that the Treasury would give priority to debt service payments and could thus postpone a potential debt default for a number of days," Moody's said in its report.

"Revenues would be more than adequate for some period of time to meet those payments, although other outlays would be severely reduced as a result."

The ratings agency warned, however, that a debt default would likely lead to a rating downgrade even if it was "swiftly cured and investors suffered no permanent losses."

Lawmakers in Washington were set to work through the weekend, with a recently-passed plan by Republican House of Representatives Speaker John Boehner expected to die in the Democratic-controlled Senate on Friday night.

Wall Street on Friday ended its worst week in a year, and one equity strategist said the stock market's direction on Monday will rely on the weekend's outcome.

"It exclusively is a function of what does Congress do over the next 48 hours," said Phil Orlando, chief equity market strategist at Federated Investors. "If Speaker Boehner is able to get a deal through over the next two days, we trade higher. If we get nothing constructive and a series of more dueling press conferences we probably open lower."

Moody's noted that the first interest payment of $31 billion on U.S. Treasury debt is not due until August 15.

"This is the first date that a default on bonds could occur," the report said, highlighting that, this year, August is the month when the ratio of interest payments to incoming revenues is the highest.

The agency sees less chance of a default on August 4, when T-bills worth $59 billion mature because it is unlikely that the Treasury would not be able to find buyers to refinance them.

"Should the Treasury be unable to find buyers for an equivalent amount, a default might occur. This scenario seems extremely unlikely, given the role of the T-bill market in both domestic and global financial markets," Moody's said.

(Editing by Carol Bishopric)

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Tense mood as lawmakers struggle for debt deal (Reuters)

WASHINGTON (Reuters) – A bitter mood prevailed on Capitol Hill as lawmakers struggled on Saturday to find a compromise measure to lift the nation's $14.3 trillion debt limit three days before a deadline to avert a ruinous default.

A day after the Republican-led House of Representatives passed a bill to cut the deficit and raise the cap on government borrowing, the debt saga shifted to the Democratic-led Senate.

Democrats there pushed ahead with their own plan and sought to attract bipartisan support by adding some elements of a plan offered by Senate Republican leader Mitch McConnell.

But 43 Senate Republicans signed a letter rejecting the plan, a sign the measure does not have the support it needs to advance in Congress.

"What will they vote for? Do they have any ideas? Let me know," Senate Democratic leader Harry Reid said on the Senate floor.

Back-channel talks held the best hope for a compromise. Unless Congress raises the debt ceiling, the government would be barred from further borrowing after Tuesday, according to the Treasury, and could quickly run out of money to pay all its bills.

The world has watched with growing alarm as political gridlock in Washington has brought the world's largest economy close to an unprecedented default, threatening to plunge financial markets and economies around the globe into turmoil.

McConnell called on Reid to move up a vote that had been set for 1 a.m. EDT on Sunday so the two sides could begin talks with the White House.

"We can't do it by ourselves, it has to have the only person in America who can sign something into law," McConnell said.

President Barack Obama urged lawmakers to strike a deal and head off what he has said would be an "inexcusable" default.

"There are multiple ways to resolve this problem," Obama, a Democrat, said in his weekly radio address. "Congress must find common ground on a plan that can get support from both parties in the House. And it's got to be a plan that I can sign by Tuesday."

The House was set to vote at around 2:30 p.m. EDT on the plan crafted by Reid, and Republicans said they expected to defeat that bill because it did not contain enough spending cuts.

"The Senate is burning up precious time by working all weekend on a doomed Reid bill that can't pass the House," a House Republican leadership aide said. "Congressional talks are essentially motionless until Senator Reid provides specifics to the Hill on what the president will sign."

Democratic Representative Sander Levin said it was "disgraceful" that Republicans had scheduled their vote on the Reid plan before the Senate even had a chance to take it up.

CRUCIAL WEEKEND

With its back against the wall, the Treasury could be forced to detail plans on Sunday before Asian markets open on which bills it would pay if a compromise does not appear to be in the works. Analysts believe it will stop other government spending to ensure bondholders are paid to avert a wide-scale financial crisis.

The drawn-out standoff has put the United States at risk of losing its top-notch AAA credit rating. A ratings downgrade could prompt global investor flight from U.S. bonds and the dollar, raising borrowing costs for Americans when the economy is already frail, growing at an anemic rate of 1.3 percent in second quarter, according to government data.

U.S. stocks endured their worst week in a year as the uncertainty made investors shy away from riskier assets and the dollar slumped to a record low against the safe-haven Swiss franc. Much worse could be in store if a debt deal doesn't appear to be on track by the time markets open on Monday.

Senate Democrats' debt-limit proposal, which would cut deficits by $2.2 trillion over 10 years, was revised by Reid to incorporate parts of a "backup plan" first proposed by McConnell. Under that version, Obama would be given the authority to raise the debt ceiling in three stages to cover U.S. borrowing needs through the 2012 elections when he is running for a second term.

The biggest sticking point in the effort to get a deal is House Republicans' insistence on a two-stage strategy for raising the debt limit that could set up another showdown over the issue within a few months. Obama says that would be unacceptable because it would lead to economic uncertainty, putting a damper on jobs and growth.

With Republicans pushing to have the White House join the talks, Vice President Joe Biden, who has a rapport with McConnell from his years in the Senate, could emerge as a key player in final negotiations.

(Additional reporting by Dave Clarke, Alister Bull and Laura MacInnis in Washington and Michael Erman and David Gaffen in New York; Writing by Caren Bohan; Editing by Vicki Allen)

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US lawmakers hunt for debt deal as deadline looms (AFP)

WASHINGTON (AFP) – Three days before a critical deadline, US President Barack Obama pressed polarized lawmakers Saturday to reach an urgent deal to avert a US debt default that could plunge the world economy into chaos.

With cash-strapped Washington facing a midnight Tuesday deadline when it runs out of cash to pay its bills, Obama said in his weekly address that "there are plenty of ways out of this mess. But there is very little time."

Obama noted that a stalemate could lead ratings agencies to downgrade the sterling US debt rating of Triple-A, causing a spike in interest rates that would throw a wrench into the gears of the already sputtering US economy.

"That would be inexcusable, and entirely self-inflicted by Washington. The power to solve this is in our hands," he said, as senators made a beat-the-clock push to hack a path to compromise through a jungle of partisan politics.

Number-two Senate Republican Jon Kyl accused Obama's Democrats of being unserious about making deep spending cuts and warned that the United States could soon face a Greece-style "debt crisis" of its own.

"With debt crises rolling across Europe, we know it is only a matter of time before people start to question whether America can sustain its huge and growing debt," he said in the weekly Republican rejoinder to Obama.

The rival appeals with the Republican-led House of Representatives due to kill a proposal from Democratic Senate Majority Leader Harry Reid, a tit-for-tat strike after the Senate beat back a House-passed Republican bill late Friday.

The Democratic-held Senate, meanwhile, was on course for a 1:00 am (0500 GMT) Sunday procedural vote on Reid's proposal to end the angry stalemate.

Behind closed doors, lawmakers tussled over the contours of a compromise expected to call for spending cuts roughly equal to Obama's request for a $2.4 debt limit increase, no tax hikes, and the creation of a special committee of lawmakers tasked with finding savings in the social safety net.

The US economy hit its $14.3 trillion debt ceiling on May 16 and has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally -- but can only do so through Tuesday.

Business and finance leaders have warned that default would send crippling aftershocks through the fragile US economy, still wrestling with stubbornly high unemployment of 9.2 percent in the wake of the 2008 global meltdown.

Absent a deal, the US government will have to cut an estimated 40 cents out of every dollar it spends, forcing grim choices between paying its debt or cutting back on programs like those that help the poor, disabled, and elderly.

In a grim warning of what may come if there is no breakthrough by Tuesday, US markets fell for a fifth straight day on Friday -- a month of gains wiped out in a week of losses due to poor US growth and the political stalemate.

The House late Friday passed Speaker John Boehner's bill to avert a default, with 22 Republicans joining all 188 Democrats who voted in opposition to the plan, while 218 Republicans backed it -- eking out the 216 votes needed.

Within two hours, the Senate had rejected it in a 59-41 vote, with all of the White House's allies voting against the plan, joined by six Republicans who rejected it as insufficiently stringent.

Reid said he hoped Republican Senate Minority Leader Mitch McConnell would now help work out a final deal.

A key sticking point was the duration of any debt limit increase: Boehner's plan set the stage for another high-stakes showdown in a few months, while Reid's approach met Obama's goal of putting off another politically fraught debt battle until after the November 2012 elections in which he seeks a second term.

Boehner's bill had sought to pair raising the debt ceiling by $900 billion with spending cuts of some $917 billion over 10 years, while requiring later debt limit increases to be tied to congressional passage of a balanced budget amendment to the US Constitution for ratification by the 50 states.

Reid, whose Democrats oppose tying the debt limit to such an amendment, has offered a blueprint that would raise the debt ceiling by $2.4 trillion while cutting spending by some $2.4 trillion over 10 years.

And he grafted onto his bill a two-week-old "backup plan" mechanism by McConnell that would effectively allow Obama to raise the debt limit by that amount in three steps with only Democratic votes.

Neel Kashkari, who served as an assistant Treasury secretary during the George W. Bush administration and managed the fallout from the 2008 collapse of investment giant Lehman Brothers, said the global economic context in September 2008 was probably worse than today, but the US economy remains vulnerable.

"These factors suggest that a US downgrade has the potential to be as bad or perhaps worse than the Lehman shock," Kashkari wrote in The Washington Post.

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Mystery surrounds killing of Libyan rebel army head (Reuters)

BENGHAZI, Libya (Reuters) – Libya's rebel military commander was shot dead in an incident shrouded in mystery, dealing a blow to the Western-backed forces struggling to topple Muammar Gaddafi.

Rebels said Abdel Fattah Younes, long a member of the veteran leader's inner circle before defecting in February, was shot by assailants on Thursday after he had been summoned from the battlefield for unspecified talks with other rebel leaders.

The killing of such a senior figure is an embarrassment and a setback for the rebels regardless of who was responsible -- Gaddafi agents apparently able to strike deep in rebel inner circles, or his own side. There are known to be stark divisions between Gaddafi defectors and those who never worked with him.

The rebels did not say who killed Younes or where. His death coincided with a new rebel offensive in the west and further international recognition for rebels, which they hope will help unfreeze billions of dollars in Libyan state funds.

On Friday, weeping relatives and supporters brought his coffin into the main square of the rebel stronghold of Benghazi to mourn him.

"We got the body yesterday here (in Benghazi), he had been shot with bullets and burned," Younes's nephew, Abdul Hakim, said, crying as he followed the coffin through the square.

"He had called us at 10 o'clock (on Thursday morning) to say he was on his way here."

RUMOURS OF SECRET TALKS

Officials would not give details of why Younes had been recalled to Benghazi from the front line near the oil port of Brega for questioning. Rumors had circulated in Benghazi that he had held secret talks with the Gaddafi government.

"If the Rumors that General Younes was feeding information to Gaddafi were there then it would make sense that some rogue elements might attempt to assassinate him," said Alan Fraser, an analyst with London-based risk consultancy AKE.

Rebel defense minister Omar Hariri told Reuters his death was still being investigated and the loss would be great.

In Benghazi relatives vowed allegiance to the rebels' political leader.

"A message to Mustafa Abdel Jalil: We will walk with you all the way," nephew Mohammed Younes told hundreds of mourners in the main square.

But at the funeral later, worried mourners expressed fears he may have died at the hands of other rebels.

Seraj, a soldier who described himself as a relative, said he had heard that Younes and two other army officials killed with him had gone without a fight with men who had summoned them to Benghazi. "Later we heard that he was killed," he said.

Nephew Hakim said another coffin brought into the square by a crowd of men, some in military fatigues and some with rifles, held the body of one of the other men killed with Younes.

"It seems this was an assassination operation organized by Gaddafi's men," said London-based Libyan activist Shamis Ashour. "There certainly was treason, a sleeping cell among the rebels."

"The alternative, which is equally possible," said another analyst, Shashank Joshi, "is summary execution by rebels, an internal act of decapitation by the rebels themselves."

Joshi, of London's Royal United Services Institute, said this explanation would highlight divisions in rebel ranks already known to exist, and put a question mark over the rebels' reliability as partners for Western states.

"All these things would humiliate governments that have supported the rebels. Particularly Britain, which came late to the fray, partly for reasons like this," he said.

One rebel commander said Islamists may have been to blame.

Libyan state TV named a rebel it said had killed Younes.

Younes, from eastern Libya where the rebels are strongest, was Gaddafi's interior minister but swapped sides to become the military chief in the rebel Transitional National Council, whose political leader Jalil announced his death.

Jalil said the killers were still at large but added:

"The head of the armed cell, to which the accusing finger points and a member of which carried out this individual cowardly crime, has been arrested." He gave no details.

Younes, who was involved in the 1969 coup that brought Gaddafi to power, was not trusted by all rebel leaders due to his previous role in cracking down on dissidents.

CAMPAIGN BLOW

His death is likely to be a severe setback to a movement that has won the backing of some 30 nations -- most recently Britain and Portugal -- but is laboring on the battlefield.

Hariri, the rebel defense minister, visited the front line in western Libya on Friday. At a nearby checkpoint he told Reuters Younes's death was still being investigated.

"Of course this will have an impact on the rebels, after all we have lost a key leader," he said. "But they will recover, and there will be other leaders."

Analyst David Hartwell of IHS in London said:

"He was one of the few credible senior opposition military commanders and he has been a key figure in helping stabilize and re-organize rebel fighters."

Fighters on the front line near the town of Misrata said they viewed Younes as a martyr and would avenge his death.

"It will be an extra motive for us in the fight against the tyrant," said Khaled al-Uwayyib.

Rebels took swathes of Libya early on after rising up in February to end Gaddafi's 41 years of domination of the oil-producing North African state but have made few recent advances despite the support of NATO air strikes.

They said they had seized several towns in the Western Mountains on Thursday but are yet to make a major breakthrough.

A rebel commander near Ghezaia told Reuters on Friday that around 100 insurgents had taken control of the town, from which Gaddafi forces had dominated plains below the mountains.

Reuters could not go there to confirm the report as rebels said the area could be mined. But looking through binoculars from a rebel-held ridge near Nalut, reporters could see no sign of Gaddafi's forces in Ghezaia.

Another rebel commander said the settlements of Takut and Um al Far had also been seized.

With prospects fading for a negotiated settlement, the five-month-old civil war will grind on into the Muslim holy month of Ramadan in August.

Nick Witney, analyst at the European Council on Foreign Relations in Paris, said the West had hoped for a "nice simple conflict" with right prevailing, but this had ignored Libya's nuanced tribal-based politics.

"It was a brave and right thing to do," he said. "But I feel we've lost the moral high ground a bit and wandered into something that will be prolonged and messy, but we're not in a position to sort out."

(Additional reporting by Michael Georgy near Ghezaia; Mussab Al-Khairalla in Misrata; Alexandria Sage in Paris; Samia Nakhoul, Avril Ormsby and Clare Kane in London and Missy Ryan in Tripoli; writing by Richard Meares; editing by Andrew Roche)

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Obama tells Congress to find way out of debt "mess" (Reuters)

WASHINGTON (Reuters) – With four days left before the United States hits its debt limit, Republicans pressed ahead with a deficit plan that cannot pass Congress and President Barack Obama told lawmakers to stop wasting time and find a way "out of this mess."

Republicans in the House of Representatives said they expected to vote on Friday on a retooled deficit-reduction measure that would raise the debt ceiling.

The bill is opposed by Democrats and the White House, but Republicans insist it clear the House before they will start talks toward a compromise measure.

Obama called the Republican bill a waste of time but said the parties were not that far apart on spending cuts and they needed to strike a deal soon.

"There are plenty of ways out of this mess but we are almost out of time," he said, warning that the country's top-notch triple-A credit was at risk.

The United States will be unable to borrow money to pay its bills if Congress does not raise the debt limit by August 2. That could result in an unprecedented default that could push the already fragile economy back into recession.

Fears about the health of America's economy multiplied after a government report showed weaker-than-expected growth from April through June, raising the risk of recession.

Republican leaders have rushed to revise their debt plan with changes that can win enough rebellious conservatives to pass the House of Representatives. That hurdle must be cleared before work on a compromise with Democrats is started in earnest, lawmakers and the White House say.

World leaders have been stunned by the dysfunction in Washington that has led the United States to the brink of default. World Bank President Robert Zoellick said on Friday that the United States was playing with fire.

America's largest foreign creditor, China, has repeatedly urged Washington to protect its dollar investments and its state-run news agency on Friday said the United States had been "kidnapped" by "dangerously irresponsible" politics.

PERILS FOR OBAMA

The debt standoff carries perils for Obama, who is already grappling with slumping approval ratings because of frustrations over the economy and a 9.2 percent unemployment rate.

His re-election prospects would be battered by a severe market downturn or a potentially historic downgrade of the U.S. credit rating, which would drive borrowing costs up for the government and consumers.

With time running out to avert default, Obama called on the American people to intervene directly by calling, emailing or posting messages on Twitter to their lawmakers. Within minutes, telephone circuits in the House were overwhelmed by a high volume of external calls, resulting in busy signals or difficulty getting through on phone lines, House aides said.

Financial markets were rattled and driven by headlines as traders and investors struggled to guess how debt talks would unfold. That drove many of them to hold cash rather than take any position in the market heading into the weekend.

U.S. stock prices dropped and the U.S. dollar plunged to all-time lows against the safe haven Swiss franc due to debt worries and poor economic growth.

The U.S. Treasury will unveil an emergency plan explaining how the government would function and pay its obligations if Congress does not agree to raise its borrowing limit beyond $14.3 trillion. Treasury's announcement will not come on Friday, but it is expected before Tuesday if there is no deal, according to a source familiar with the matter.

House Speaker John Boehner's failure on Thursday to quell a rebellion among conservatives in his party and bring his proposal to a vote exposed a rift in the Republican Party that complicates efforts to reach a compromise.

The revised Republican plan being considered on Friday includes tougher requirements on Congress to pass a balanced budget amendment to the Constitution and send it to the states for ratification, a long-time core demand of conservative Republicans who say it is the only way to control spending.

While the measure may pass the Republican-controlled House, it is expected to be rejected by the Democratic-led Senate.

At that point, efforts would shift to a compromise plan. For Boehner, that could mean drafting a deal that can win enough votes from Democrats in the House to offset the inevitable loss of support from Tea Party-affiliated Republicans. (Additional reporting by Kim Dixon, Rachelle Youglai, Donna Smith, Lily Kuo, Richard Cowan and Andy Sullivan; Writing by Caren Bohan; Editing by Vicki Allen)

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US 'almost out of time' for debt deal: Obama (AFP)

WASHINGTON (AFP) – US President Barack Obama warned Friday that polarized lawmakers were "almost out of time" to forge a deal averting a disastrous debt default that could send shockwaves though the world economy.

Casting himself as above the angry fray in Congress, Obama urged a compromise blending rival approaches in the Democratic-held Senate and Republican-led House of Representatives for raising the $14.3 trillion debt ceiling.

"There are plenty of ways out of this mess. But we are almost out of time. We need to reach a compromise by Tuesday so that our country will have the ability to pay its bills on time, as we always have," he said.

With global markets rattled by the see-saw political battle in Washington, White House spokesman Jay Carney told reporters the fragile US economy "has suffered because of the uncertainty" and warned "some damage has been done."

Lawmakers still warred over how much to raise the limit, with Republican House Speaker John Boehner pushing for a short-term increase that would set the stage for another high-stakes showdown over spending in a few months.

"We just can't do that," said Democratic Senate Majority Leader Harry Reid, whose plan would spare Obama another politically fraught debt battle before the November 2012 elections. "We cannot be in this battle all the time."

After two embarrassing abortive efforts, Boehner was to bring his plan for a vote in the House, having again re-written his bill in a bid to satisfy the most conservative members in his restless majority in the face of lockstep opposition from House Democrats.

Senate Democrats warned the measure was dead on arrival in the upper chamber even as Reid took steps setting up procedural votes on his plan by 1:00 am (0500 GMT) Sunday and 7:30 am Monday with a final vote sometime on D-Day, Tuesday.

That would leave it up to the divided House to take the final step, a down-to-the-wire endgame with unprecedented financial stakes as the US economy still struggled to recover from the global meltdown of 2008.

Obama insisted both sides were "in rough agreement" on how much spending can be cut "responsibly," and on the steps to take in the coming months on tax reforms as well as some kind of enforcement mechanism.

But when a well-wisher at the White House told Obama that he owed him a poker game, the president responded: "I got some high stakes poker going on right now."

Chinese media attacked the United States over the debt wrangling, warning it could plunge the world into another recession.

China is the top foreign holder of US debt with holdings at $1.16 trillion in May, according to US data, and has raised concerns about its investments.

Raising the debt ceiling could hurt the US dollar and trigger a "torrential flood" of liquidity into the global economy, fueling inflation in emerging economies such as China, the Communist Party mouthpiece People's Daily said.

China's official Xinhua news agency also accused US lawmakers of being "dangerously irresponsible" and warned they risked "strangling the still fragile economic recovery."

But in more bad news for the US economy, struggling to recover from the 2008 financial crisis, government data released Friday showed economic growth had nearly stalled in the first half.

The US economy grew at a dead-pace 0.4 percent in the first quarter and only 1.3 percent in the second quarter of 2011, the Commerce Department said.

Markets around the world remained on edge as Asian stocks fell amid fears that US lawmakers will not break the deadlock.

The Dow Jones Industrial Average plunged 99.07 points (0.81 percent) to 12,141.04 in the first half-hour of trading.

European stocks markets also slid as the US debt crisis deepened, with London's FTSE 100 index of top shares dropping 0.59 percent to 5,838.65 points and Frankfurt's DAX 30 shedding 0.80 percent to 7,132.45 points.

The US economy hit its debt ceiling on May 16 but has used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally.

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