Merkel expects breakthrough on euro zone crisis Wednesday (Reuters)

BRUSSELS (Reuters) – German Chancellor Angela Merkel said she expected a breakthrough in efforts to come up with a comprehensive response to the euro zone debt crisis on Wednesday, after EU finance ministers made progress in talks on recapitalizing banks.

"We have to take far-reaching decisions. These have to be prepared properly, I believe that the finance ministers made progress, so that we can achieve our ambitious targets by Wednesday," Merkel told reporters.

Euro zone countries are working on a plan that involves leveraging the euro zone bailout fund, recapitalizing European banks and putting together a second financing package for Greece that entails deeper losses for private investors.

Euro zone leaders hope the measures will ease market anxiety over euro zone sovereign debt and put an end to the two-year-old crisis that now threatens the global economy.

Euro zone leaders meet on Sunday to discuss the package but real decisions will only come at the next summit on Wednesday.

"The breakthrough... will be on Wednesday," Merkel said.

(Reporting By Ilona Wisenbach, writing by Jan Strupczewski)

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Obama says expects jobs bill vote by end of October (Reuters)

WASHINGTON (Reuters) – President Barack Obama said on Monday he expects the Congress to vote on his $447 billion jobs package by the end of October.

"It's been several weeks now since I sent up the American Jobs Act, and as I have been saying on the road, I want it back. I am ready to sign it," he told reporters.

"My expectation is that now that we are in the month of October, that we will schedule a vote before the end of this month," he said, adding he would be talking with congressional leaders "and insisting that we have a vote on this bill."

Obama unveiled the jobs plan in early September as a mix of measures he said both parties could accept, but then promptly recommended that it be paid for with higher taxes on wealthier Americans that Republicans and some of his fellow Democrats oppose.

He said at the start of a Cabinet meeting on Monday that he wanted to hear from Capitol Hill on what parts of the jobs bill were most palatable to move the debate forward.

"We have been hearing from Republicans that there are some proposals that they are interested in. That is not surprising, because the contents of the American Jobs Act includes proposals that in the past have been supported by Republicans and Democrats alike," Obama said.

"If there are aspects of the bill that they don't like they should tell us what it is they are not willing to go for, they should tell us what it is they are prepared to see move forward," he said, adding he believed most Americans supported his plan to put more construction workers back to work, hire more teachers and help small businesses.

"I am very much looking forward to seeing Congress debate this bill, pass it, get it to my desk," he said, stressing he would also "put as much pressure as I can bring to bear" on his administration and its agencies to do everything possible to create jobs and help businesses aside from what Congress does.

(Reporting by Laura MacInnis, Editing by Sandra Maler and Eric Beech)

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Obama campaign expects lower summer fundraising (AP)

WASHINGTON – President Barack Obama's re-election campaign expects to raise tens of millions of dollars less this summer than it did in the spring because negotiations over the nation's debt limit forced Obama to cancel several fundraisers.

Obama's campaign said Wednesday it canceled or postponed 10 fundraisers involving the president, Vice President Joe Biden and White House chief of staff Bill Daley in the past month because of the debt talks, scrubbing events in California, New York and elsewhere.

Only weeks after the president's campaign reported collecting a combined $86 million with the Democratic National Committee, Obama's team is trying to lower expectations about its fundraising juggernaut while signaling to its army of volunteers and activists that they need to fill the void. Obama is coming off a bruising battle with congressional Republicans over raising the government's debt ceiling and is expected to face a formidable challenge from Republicans in 2012 against the backdrop of a weakened economy.

"We're going to raise significantly less in the third quarter than we did in the second quarter," said Jim Messina, Obama's campaign manager. "We will not be able to replace all of these events just because of his busy schedule. We always knew that he had his job and we had to do this around his schedule, and the truth is we just have to deal with canceling a month's worth of events."

Obama holds a large fundraising advantage over his Republican rivals and was raising money later Wednesday in his hometown of Chicago on the eve of his 50th birthday. Former Massachusetts Gov. Mitt Romney hauled in more than $18 million through the end of June, while all of his GOP primary opponents were in the single-digits.

Democrats said the slow fundraising pace during the summer was expected because many donors are on vacation and high-dollar events don't typically resume until after Labor Day. Obama, meanwhile, was taking a jobs-oriented bus tour of the Midwest in mid-August and was not scheduled to hold many donor events during the month. The fundraising quarter was expected to feature smaller gatherings headlined by Obama "surrogates," or high-profile supporters such as governors and lawmakers.

"This is not an easy time to raise money," said former Rep. Martin Frost, D-Texas, who led the House Democrats' fundraising arm. Frost said many donors may not feel compelled to give money yet because the campaign is still in its early stages and no clear Republican rival has emerged.

Obama has experienced a summer lag in fundraising before. During his first presidential campaign, Obama raised about $21 million in the summer of 2007, compared with about $33 million in the spring of that year.

Messina said the campaign had not yet set a revised goal for the current fundraising period ending Sept. 30 but would urge "grass-roots fundraisers" to step up their efforts in the weeks ahead. The campaign has emphasized its large donor base — more than 550,000 people gave money during the spring — and it plans to lean heavily on small donors in August and September.

"We're going to be very aggressive in trying to find ways to engage the grass roots," Messina said. "We always said ... they're the biggest piece of this and they own the campaign and we're about to give them an even tougher assignment."

Obama signed legislation on Tuesday to raise the debt limit and avoid a government default, but the negotiations kept him in the Washington area for the past month. Obama's last fundraiser was in Philadelphia on June 30.

The campaign said the debt talks required Obama to cancel two fundraisers in Southern California and events in Northern California, Seattle, New York and Washington, D.C.

Biden had to skip fundraisers in Atlanta, Nashville, Tenn., and Dallas, while Daley canceled an event in the nation's capital. Obama's fundraiser in New York at the home of film mogul Harvey Weinstein is expected to be rescheduled for this month, while Biden's events are being rescheduled for the fall.

Obama is keeping his schedule on Wednesday, attending fundraisers in Chicago to celebrate his birthday, including a concert with Chicago natives Herbie Hancock and Jennifer Hudson and the Chicago rock band OK Go. Obama turns 50 on Thursday.

Republicans have accused the president of emphasizing campaign money over governing, criticizing plans for the lavish birthday party.

"With 9.2 percent unemployment, he could work on creating jobs, but I suppose the White House is thinking he should stick to the part of his job he really likes," Republican National Committee spokeswoman Kirsten Kukowski said.

As part of Obama's birthday events, Democratic officials and campaign aides are fanning out across the country for fundraisers: former White House press secretary Robert Gibbs and deputy campaign manager Jen O'Malley Dillon will be in Boston, White House adviser David Plouffe will be in Tampa, Fla., New York Gov. Andrew Cuomo will headline a New York City event and Obama campaign adviser David Axelrod will be in Los Angeles. Other events with Democratic surrogates will be held in Austin, Texas; Oakland, Calif.; and Washington, D.C.

Besides the birthday fundraisers, the campaign is planning hundreds of house parties around the country and has asked supporters to recruit 50 new supporters for the president's birthday.

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Ken Thomas can be reached at http://twitter.com/AP_Ken_Thomas

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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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