EU ministers sign off on tougher budget rules (AP)

WROCLAW, Poland – Poland's finance minister says that after a yearlong dispute his European Union counterparts have signed off on tougher budget rules that punish overspending governments.

Jacek Rostowski said Friday that the 27 ministers approved a compromise that Polish officials had worked out with the European Parliament earlier this week.

Under the new rules, it will be easier to put sanctions on governments that breach the EU's limits on debts and deficits. Governments who ignore warnings that they risk breaking debt rules can also be punished.

Rampant overspending has come into focus during the eurozone debt crisis, which has already pushed three states into multibillion euro bailouts.

The parliament succeeded in centralizing the sanctions rules that states had tried to water down.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WROCLAW, Poland (AP) — U.S. Treasury Chief Timothy Geithner suggested his European counterparts give their bailout fund more firing power by allowing it to draw on money from the European Central Bank, Ireland's finance minister said Friday.

Geithner addressed a meeting of eurozone finance ministers in Wroclaw, Poland, amid growing concerns that Europe's crippling debt crisis is hitting the U.S. and global economies.

The U.S. Treasury Chief "talked about a system of the EFSF fund leveraging additional resources in combination with the European Central Bank," said Michael Noonan, adding that he was keen to learn more about the scheme.

Leveraging the euro440 billion ($605 billion) European Financial Stability Facility could mean using eurozone states' guarantees for the fund to also back loans from the ECB, which would give the eurozone more crisis money without further commitments from governments.

However, a European official said there was opposition to such a scheme from Germany, the largest eurozone economy. The official was speaking on condition of anonymity because of the sensitivity of the discussions.

Germany has traditionally been skeptical of heaving more credit risk onto the ECB and has seen itself as a defender of the bank's independence from political quarrels.

Geithner's suggestion comes after the president of the European Commission, the EU's executive, as well as other high-raking European officials have called for a significant expansion of the EFSF.

In a summit in July, eurozone leaders equipped the fund with several new powers, such as giving pre-emptive credit lines to struggling countries and buying government bonds to support their prices during a market selloff. But economists say that, at its current size, the fund, which is already being depleted by rescue loans to Ireland, Portugal and an agreed second bailout for Greece, cannot effectively use the new tools.

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Greek PM Papandreou rules out snap elections (Reuters)

ATHENS (Reuters) – Greek Prime Minister George Papandreou Saturday ruled out snap elections and said his government would succeed in bringing Greece out of the crisis by the end of his term in 2013.

Papandreou's socialist PASOK party is trailing in opinion polls and the government is facing a tough autumn as it tries to implement unpopular austerity measures to secure more EU/IMF funds.

"Citizens will judge us in 2013," Papandreou told members of his party at a conference marking its 37th anniversary.

"By then, we will have achieved bringing Greece out of the crisis and will have completed so many and important reforms," he said.

Political analysts see snap elections in the horizon and say the next few months are critical for the government as Greeks return from summer holidays to tougher austerity measures.

The government must also convince disgruntled lawmakers and an angry public that belt-tightening will pay off.

The government's failure to meet the fiscal targets set by its international lenders is also complicating Papandreou's task.

An official close to the inspectors said late Thursday that the 2011 budget deficit will be at least 8.6 percent of GDP, compared to a target of 7.6 percent.

Friday, Greece and an inspection EU/IMF team interrupted talks on a new aid tranche after disagreeing over why Athens has fallen behind schedule in cutting its budget deficit. Discussions are due to resume on Sept 14.

(Reporting by Angeliki Koutantou; Editing by Karolina Tagaris)

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Appeals court rules against Obama healthcare law (Reuters)

WASHINGTON (Reuters) – An appeals court ruled Friday that President Barack Obama's healthcare law requiring Americans to buy healthcare insurance or face a penalty was unconstitutional, a blow to the White House.

The Appeals Court for the 11th Circuit, based in Atlanta, found that Congress exceeded its authority by requiring Americans to buy coverage, but also ruled that the rest of the wide-ranging law could remain in effect.

The legality of the so-called individual mandate, a cornerstone of the 2010 healthcare law, is widely expected to be decided by the Supreme Court. The Obama administration has defended the provision as constitutional.

The case stems from a challenge by 26 U.S. states which had argued the individual mandate, set to go into effect in 2014, was unconstitutional because Congress could not force Americans to buy health insurance or face the prospect of a penalty.

"This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives," a divided three-judge panel said.

Obama and his administration had pressed for the law to help halt the steep increases in healthcare costs and expand insurance coverage to the more than 30 million Americans who are without it.

It argued that the requirement was legal under the Commerce Clause of the Constitution. One of the three judges of the appeals court panel, Stanley Marcus, agreed with the administration in dissenting from the majority opinion.

The majority "has ignored the undeniable fact that Congress' commerce power has grown exponentially over the past two centuries and is now generally accepted as having afforded Congress the authority to create rules regulating large areas of our national economy," Marcus wrote.

Many other provisions of the healthcare law are already being implemented.

The decision contrasts with one by the U.S. Appeals Court for the 6th Circuit, based in Cincinnati, which had upheld the individual mandate as constitutional. That case has already been appealed to the Supreme Court.

The Court of Appeals for the 4th Circuit, based in Richmond, has yet to rule on a separate challenge by the state of Virginia.

(Reporting by Jeremy Pelofsky and James Vicini; Editing by Eric Beech)

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SEC proposes conduct rules for swap dealers (Reuters)

By Sarah N. Lynch Sarah N. Lynch – 19?mins?ago

WASHINGTON (Reuters) – Swap dealers would need to disclose more information to customers and provide added protection to clients like pension funds and municipalities under new rules proposed by securities regulators on Wednesday.

The Securities and Exchange Commission proposal aims to deter abusive practices, help swap users manage risk, and to provide more clarity to dealers on what constitutes advice and the limits that advice places on their role.

The swap dealer behavior rules are required by the Dodd-Frank Wall Street overhaul law that split responsibility between the SEC and Commodity Futures Trading Commission for the nearly $600 trillion over-the-counter derivatives market.

A parallel CFTC proposal has been criticized by the swap industry for its definition of "advice," possibly preventing them from serving some clients.

The 200-page-plus SEC proposal would apply to security-based swap traders and dealers such as Goldman Sachs, Morgan Stanley and JPMorgan Chase that deal in products like credit-default swaps and equity derivatives.

The SEC voted 5-0 to issue the proposal and take public comments until the end of August.

Swaps are financial products that allow parties to protect themselves from risky exposures, such as interest-rate fluctuations or a default on a company's bonds.

In dealing with customers broadly, the SEC's proposed rule would require dealers to disclose information about material risks, incentives and conflicts of interest. They would also need to supply information about regulations governing central clearing, communicate fairly, establish a compliance structure and hire a chief compliance officer.

If a dealer makes a recommendation to a customer about a trade, the dealer will also need to ensure the suggestion is suitable for the client, similar to a rule the Financial Industry Regulatory Authority imposes on brokers.

In addition to establishing rules for customer dealings broadly, the SEC's proposal also contains extra requirements for dealers who act as either counterparties or advisers to "special entities," including municipalities, endowments and pension plans, which may be less sophisticated and at greater risk.

SPECIAL ENTITIES

The law requires dealers who advise special entities to act in their clients' best interests. Dealers who act as counterparties to the trades, meanwhile, have to make sure the special entities have an independent representative to act in their best interest.

"The rules we are proposing today would level the playing field in the security-based swap market by bringing needed transparency to this market and by seeking to ensure that customers in these transactions are treated fairly," SEC Chairman Mary Schapiro said.

The SEC estimates that about 1,200 pension funds, endowments and government entities use some type of credit-default swap. The vast majority of these already use advisers to help them make investment decisions on derivative transactions.

How the term "adviser" is defined has become a major source of controversy in the CFTC's plan, which was proposed late last year.

The swaps industry has said the CFTC's plan takes a sweeping view on what constitutes providing "advice" to special entities. Swap dealers fear they could suddenly be dubbed advisers and be required to act in their clients' best interest.

This in turn would effectively preclude them from selling swaps to customers, because it would be impossible to act in their clients' best interest and simultaneously trade with them for their own financial gain.

The SEC's plan aims to tackle that concern by providing more clarity on what constitutes giving advice and allowing dealers to choose between acting as advisers or as trading partners with pension funds and other special entities.

It is not known exactly how many "special entities" may fall under the SEC's plan. Many municipalities use interest-rate derivatives, a product under the CFTC's jurisdiction.

(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn, Dave Zimmerman)

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