Treasury confirms deadline for raising debt limit (AP)

By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer – 1?hr?23?mins?ago

WASHINGTON – Congress has one month to raise the nation's borrowing limit or the government will default on its debt, the Treasury Department said Friday.

Treasury officials confirmed the Aug. 2 deadline in a monthly update that assesses the nation's borrowing situation. The United States reached the $14.3 trillion limit in May. Higher revenue and accounting maneuvers have allowed the government to keep paying its bills in the interim.

Treasury Secretary Timothy Geithner urged Congress to raise the limit and "avoid the catastrophic economic and market consequences of a default crisis."

President Barack Obama and Congressional Republicans are engaged in tough negotiations over resolving the issue. Republicans are demanding deep spending cuts as a condition of increasing the limit. But Republicans will not support tax increases, which Democrats say must be part of any deal.

A Democratic official said Thursday that the real deadline for reaching agreement is mid-July. That's because congressional leaders need a week or two to finalize the details and line up votes.

The U.S. government will continue to take in revenue after the Aug. 2 deadline passes. But it won't be enough to meet its obligations. The government borrows 40 cents for every dollar that it spends and that adds up to an average deficit of about $125 billion each month, the Treasury says.

In May, the government took in $175 billion in revenue and spent almost $233 billion.

The government faces several payments in August that will necessitate a higher borrowing limit, Treasury officials say. About $23 billion in Social Security payments must be made on Aug. 3. And a $30 billion interest payment is due Aug. 15.

A default would likely raise interest rates and threaten the economic recovery, analysts say. But some congressional Republicans are skeptical of such scenarios. Administration officials worry that it could take a financial calamity before Congress acts.

The Senate has canceled its planned July Fourth recess and will work on reaching a deal next week. But partisan divisions remain wide.

Obama has said that Republican and Democratic negotiators have found more than $1 trillion in potential spending cuts over the coming decade.

The White House is also proposing about $400 billion in higher tax revenues. Republicans want no tax increases and deeper spending cuts than Democrats have proposed. The overall goal would be to cut at least $2 trillion over 10 years.

An increase in the borrowing limit of about $2.4 trillion would carry the government through the end of 2012. That would enable Congress to avoid another vote on the issue until after the presidential election.

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AP Writer Alan Fram contributed to this article.

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French military confirms arms drops to Libyan rebels (AFP)

PARIS (AFP) – The French military confirmed on Wednesday that earlier this month it had air dropped arms shipments to Libyan rebels fighting Moamer Kadhafi's forces in the highlands south of Tripoli.

The NATO military operation in Libya was launched under a UN Security Council resolution authorising world powers to take action to "protect civilians" and this was the first time France has admitted arming rebels.

The news came as a surprise even to France's closest allies, and Britain -- which has joined Paris in spearheading the air campaign against Kadhafi -- distanced itself from the move and said it would not follow suit.

The Le Figaro newspaper and a well-placed non-government source said that France had dropped several tonnes of arms including Milan anti-tank rockets and light armoured vehicles to the revolt.

But Colonel Thierry Burkhard, spokesman for the French general staff, told AFP that the shipments were essentially of "light arms" such as assault rifles to help civilian communities protect themselves from regime troops.

Mahmud Shamman, a spokesman for the rebel National Transitional Council, the revolutionary high command, visiting Paris, told reporters he could not comment on the reported arms shipments.

The British foreign ministry was also cautious, telling reporters: "Our position is clear: there is an arms embargo on Libya.

"But at the same time UN Security Council Resolution 1973 allows all necessary measures to protect civilians and civilian populated areas under threat of attack," it said in a statement.

"We do think the United Nations resolutions allow, in certain limited circumstances, defensive weapons to be provided but the UK is not engaged in that. Other countries will interpret the resolution in their own way."

In New York, a UN diplomat speaking on condition on anonymity, told AFP that while there is an arms embargo a "close reading of the resolution would suggest air drops of arms are not illegal if they are to protect civilians."

Burkhard said France had become aware in early June that rebel-held Berber villages in the Djebel Nafusa highland region south of the capital had come under pressure from the Libyan strongman's loyalist forces.

"We began by dropping humanitarian aid: food, water and medical supplies," he said. "During the operation, the situation for the civilians on the ground worsened. We dropped arms and means of self-defence, mainly ammunition."

Burkhard described the arms as "light infantry weapons of the rifle type" and said the drops were carried out over several days "so that civilians would not be massacred".

According to Le Figaro, which said it had seen a secret intelligence memo and talked to senior officials, the drops were designed to help rebel fighters encircle Tripoli and encourage a popular revolt in the city itself.

"If the rebels can get to the outskirts of Tripoli, the capital will take the chance to rise against Kadhafi," said an official quoted in the report.

"The regime's mercenaries are no longer getting paid and are scarcely getting fed. There's a severe fuel shortage, the population has had enough."

A well-placed non-government source told AFP that 40 tonnes of weapons including "light armoured cars" had been delivered to rebels in western Libya.

According to Le Figaro the French arms shipments were dropped from planes across the Djebel Nafusa region, where Berber tribes have risen to join the revolt against Kadhafi's rule and seized several provincial towns.

The crates hold assault rifles, machine guns and rocket-propelled grenades, it said, and also European-made Milan anti-tank missiles, a powerful addition to the rebel arsenal that can destroy a tank or a bunker.

Qatar has also reportedly been involved in sending weapons to the rebels, and the Figaro report said that opposition fighters control two small desert air strips south of Djebel Nafusa where its planes have landed.

France has taken a leading role in organising international support for the uprising against Kadhafi's four-decade old rule, and French and British jets are spearheading a NATO-led air campaign targeting his forces.

Rebel forces are based in Benghazi in the east of the country, and hold a besieged enclave supplied by sea in the western coastal town of Misrata, but have been unable to mount a convincing advance on the capital.

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