Exclusive: EU calls emergency meeting as crisis stalks Italy (Reuters)

BRUSSELS (Reuters) – European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region's third largest economy.

European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region's finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.

Van Rompuy's spokesman Dirk De Backer said: "It's a coordination, not a crisis meeting." He added that Italy would not be on the agenda and declined to say what would be discussed.

However, two official sources told Reuters that the situation in Italy would be discussed. The talks were organized after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed, the sources said.

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy's finances.

Shares in Italy's biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.

The market pressure is due partly to Italy's high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.

"We can't go on for many more days like Friday," a senior ECB official said. "We're very worried about Italy."

Monday's emergency meeting will precede a previously scheduled gathering of the euro zone's 17 finance ministers to discuss how to secure a contribution of private sector investors to the second bailout of Greece, as well as the results of the stress tests of 91 European banks.

GREECE

Greece is already receiving 110 billion euros ($157 billion) of international loans under a rescue scheme launched in May last year but this has failed to change market expectations that it will eventually default on its debt.

Senior euro zone officials worry that progress toward a second Greek bailout, which would also total around 110 billion euros, is not being made quickly enough and that the delay is poisoning investors' confidence in weak economies around the region.

"We need to move on this in the next couple of weeks. It's not a case of waiting until late August or early September as Germany is saying. That's too late and markets will make us pay for it," a top euro zone official told Reuters on Saturday.

German officials insist they too want to put together the second Greek bailout as quickly as possible, but the private sector's contribution is proving to be a major sticking point.

Germany, the Netherlands, Austria and Finland are determined that banks, insurers and other private holders of Greek government bonds should bear some of the costs of helping Athens. But more than two weeks of negotiations with bankers represented by the Institute of International Finance (IIF), a lobby group, have made next to no progress on agreeing a formula acceptable to all sides.

Initially talks focused on a complex French plan for private creditors to roll over up to 30 billion euros of Greek debt, buying new bonds as their existing ones matured. Around half of proceeds from Greek bonds maturing before the end of 2014 would be rolled over into very long-term debt while 20 percent would be put into a "guarantee fund" of AAA-rated securities.

But as that plan has floundered, Berlin has revived a proposal to swap Greek bonds for longer-dated debt that would extend maturities by seven years. Proposals to buy back Greek bonds and retire them have also been floated.

In a buy-back, the euro zone's bailout fund, the European Financial Stability Facility, might buy Greek bonds from the market, or the EFSF might lend Greece money to buy bonds. However, these schemes would require further changes to the EFSF's rules and would therefore have to go through national parliaments, an official source said.

SQUARE ONE

A senior euro zone official told Reuters on Friday that rather than progress being made in the talks with the IIF, as IIF managing director Charles Dallara has said, all sides were close to being "back to square one."

Dallara will attend the meeting of euro zone finance ministers in Brussels on Monday.

Since the euro zone's debt crisis erupted last year, the region's rich governments have aimed to limit it to Greece, Ireland and Portugal, which have signed up to bailouts totaling 273 billion euros -- a sum that is small compared to the financial resources of the zone as a whole.

Spain, commonly seen as the next potential domino in the crisis, has managed to retain its access to market funding through fiscal reforms. But because of the large sizes of the Spain and Italy, pressure on the euro zone would increase dramatically if those countries eventually needed financial assistance.

(Additional reporting by Francesca Landini in Milan and Gernot Heller in Berlin; Editing by Andrew Torchia)

View the original article here

Mediator sets NFL meeting on July 19 (AP)

MINNEAPOLIS – The federal magistrate judge who is mediating the labor dispute between NFL owners and players has scheduled another session for July 19 in Minneapolis.

Judge Arthur J. Boylan set the meeting on Saturday, just before starting his vacation. But he also made clear that both sides should continue their own sessions in the interim as they work toward a new collective bargaining agreement.

The principals in the fight over how to split up over $9 billion in revenue met all week in New York, but still have not reached a new deal as the lockout has dragged on for more than four months.

The urgency, it appears, is starting to heat up. Several teams have already canceled their traditional out-of-town portions of training camp and the Hall of Fame game between Chicago and St. Louis is less than a month away.

Boylan ordered both sides to continue mediation without him "in an effort to define and narrow the differences between their respective settlement positions." He also ordered attorneys from both sides to be ready to meet with him on the evening of July 18 "for an in-person agenda- setting session" that presumably would set the stage for meaningful, fruitful talks the following day.

After putting in two days in New York this week, NFL Commissioner Roger Goodell and NFL Players' Association chief DeMaurice Smith announced that they were taking the weekend off. They plan to resume negotiations on Monday in what will be the first mediation sessions with owners and players present that does not include Boylan.

If the league and players have not reached a deal by the time they are scheduled to meet with Boylan in Minneapolis, it could be bad news for training camps and perhaps even preseason games. The Giants, Jets and Ravens have already announced that, no matter when an agreement is reached, they will conduct all of their preseason work at their primary facilities rather than leave for various college campuses, a time-honored tradition that coaches embrace as a team-building exercise and small towns across the country depend upon for tourism revenue.

The Vikings have already said that if an agreement is not reached by July 18, they will have to cancel training camp at Minnesota State University in Mankato, where they have held two-a-days every summer since 1966.

And the Rams and Bears are scheduled to kick off the preseason with a game in Canton, Ohio on Aug. 7, just two and a half weeks after Boylan's scheduled meeting on the 19th.

View the original article here

Obama calls meeting with leaders 'constructive' (AP)

By ANDREW TAYLOR and JIM KUHNHENN, Associated Press Andrew Taylor And Jim Kuhnhenn, Associated Press – 25?mins?ago

WASHINGTON – President Barack Obama described a debt-crisis session Thursday with congressional leaders as "very constructive" but said the parties were still far apart on deficit reduction proposals. He said he would reconvene the negotiators on Sunday.

Thursday's meeting came amid signals that the White House was willing to reduce costs for major benefit programs including Social Security and Medicare, while Republicans indicated they might consider new steps to raise government revenue.

"People were frank," Obama said, just moments after adjourning the one-and-a-half hour meeting with the eight lawmakers who make up the bipartisan leadership of Congress.

Obama acknowledged that the ultimate agreement will not satisfy partisans on both sides, but he said the deal would require both Republican and Democratic votes to pass Congress.

"Everyone acknowledged that pain will be involved politically on all sides," he said.

Obama met with the leaders of both parties around a table in the White House Cabinet Room as they struggled to reach a deal on raising the government's debt limit with less than four weeks remaining before a possible first-ever default on U.S. financial obligations. The Obama administration says the government needs to raise the current $14.3 trillion debt limit by Aug. 2.

Returning to the Capitol after the meeting, House Speaker said: "We had a conversation. It was productive."

While discussions on trimming the costs of entitlement programs had centered on Medicare, the health care program for older Americans, the White House is revisiting a proposal raised earlier in the negotiations to change the inflation measurement used to calculate Social Security cost-of-living adjustments, thus reducing annual increases, officials said Thursday.

The White House has also said the president is aiming for deficit reduction closer to $4 trillion over 10 years — an ambitious number that would nearly double the roughly $2 trillion that had been at the center of negotiations.

Democratic and Republican officials familiar with the discussions said Thursday that Social Security was in the mix for potential cost savings. Reintroducing the retirement program to the talks is likely to cause anxiety among congressional Democrats who have insisted that Social Security does not contribute to the nation's deficit problems. White House spokesman Jay Carney said the same after Obama spoke.

The officials spoke on the condition of anonymity because of the sensitivity of the talks. They stressed that no aspect of the deal had been accepted by either side.

Obama ignored a question about Social Security during a photo session at the beginning of the meeting. Carney also declined to discuss options before the negotiators.

One official said that an option under discussion would allow Republicans to make a commitment to overhaul and simplify the tax system, an effort that would lower individual and corporate tax rates while closing loopholes, ending some deductions and limiting other tax subsidies. Those changes could generate tax revenue and were a central element of a deficit reduction plan proposed by a bipartisan commission early this year.

Some Republicans argue that a simplified tax system would increase economic activity and that in itself would result in increased tax revenue.

Amid media reports Thursday of Social Security's inclusion in the debt-cutting talks, Obama spokesman Carney pushed back.

"There is no news here — the president has always said that while Social Security is not a major driver of the deficit, we do need to strengthen the program," Carney said, providing that any such effort "doesn't slash benefits." His statement did not directly address the possibility of reducing annual Social Security increases by changing the inflation adjustments.

Later, while briefing reporters, Carney added: "We have not put restrictions on what is brought into the room or put on the table."

Two Democratic officials allied with Obama said the president believes it would be easier to win bipartisan support in the House and Senate for a deal that embraces larger deficit cuts closer to the $4 trillion over 12 years that Obama proposed in April.

The officials, speaking on the condition of anonymity to discuss the private negotiations more freely, said the precise number was still in flux, but they said Obama would be making the case for more rather than less deficit reduction in his discussions with congressional leaders Thursday. The negotiations were the first official sit-down since last month, when House Majority Leader Eric Cantor, R-Va., left talks that had been led by Vice President Joe Biden, citing an insistence by Democrats on raising taxes.

View the original article here

Republicans firm on taxes ahead of Obama meeting (Reuters)

WASHINGTON (Reuters) – The Senate's top two Republicans on Sunday stood firm against including tax increases in any deal to raise the debt limit and shrink budget deficits one day before a meeting with President Barack Obama, but said the showdown need not go down to the "11th hour."

Obama is to meet separately with Senate Democratic and Republican leaders on Monday to try to revive negotiations that collapsed on Thursday when Republicans walked out over Democrats' demands for tax increases.

Sending a message to Obama in appearances on Sunday news interview shows, Senate Republican leader Mitch McConnell and Jon Kyl, his deputy in the leadership, presented a unified front demanding spending cuts and opposing tax hikes.

"We have a spending problem. We don't have a problem because we tax too little," McConnell said on the ABC program "This Week."

"We need to quit borrowing, quit spending, and get us our trajectory heading in the right direction. Throwing more tax revenue into the mix is simply not going to produce a desirable result, and it won't pass," McConnell added.

Obama said on Saturday he remained committed to working with Congress to solve the government's debt problem, but the focus could not be only on spending cuts, as Republicans demand.

The $14.3 trillion U.S. debt ceiling must be raised before August 2 or the Treasury Department will run out of money to pay the nation's bills. A default on debt payments could send markets plunging globally and raise the risk of another U.S. recession.

"One of the reasons we are meeting tomorrow (Monday) is that I think both the Democrats and the Republicans would like to come together and finish this negotiation and finish it sometime soon. It need not necessarily go to the 11th hour," McConnell said.

"We need to put something together that will actually pass and make a difference, impress Standard & Poor's and Moody's and the rating agencies that are about to downgrade the U.S. credit rating for the first time in our history," he added.

'KILL THE ECONOMY'

The U.S. federal deficit stands at $1.4 trillion, among the highest levels relative to the economy since World War Two.

Speaking on "Fox News Sunday," Kyl said "we have to try" to get a deal by August 2.

"I think the president has to make a decision -- which is more important to him: solving this problem, reducing spending somewhat, or making sure that we raise taxes on American economy?" Kyl said.

"If you want to kill the economy, raise taxes. Are we going to vote to absolutely put another anchor around the neck of the economy, which is struggling to try to recover here? Absolutely not. It's terrible policy," Kyl added.

Democrats have eased back from their insistence that personal income tax rates need to rise on the wealthiest Americans to focus instead on ending a wide range of tax breaks on everything from corporate jets to oil and gas subsidies.

They have also proposed closing tax breaks that benefit the wealthy, such as limiting the deductions for households making more than $500,000 a year.

Republicans control the House of Representatives while the Democrats control the Senate.

Appearing on CNN's "State of the Union" program, House Minority Leader Nancy Pelosi said Democrats must have a say in crafting an agreement, especially if Republicans in the chamber cannot generate enough support on their own to pass a final plan.

Pelosi said any package that only cuts spending is unworkable, suggesting that closing what she and other Democrats call corporate "tax subsidies" for oil companies and other businesses should be included in any deal.

"You cannot achieve what you set out to do if you say it's just about cutting. It has to be about increasing the revenue stream as well. There are many things you can do in terms of special interest loopholes," Pelosi said.

Republican Senator Jim DeMint, a favorite of the conservative Tea Party movement advocating deep spending cuts, said he believes the United States would not default on its obligations if Congress fails to raise the debt ceiling.

"If we add another $2 trillion to our debt without taking control of it, I think you're going to see the markets respond in a much worse way," DeMint said on CNN.

(Reporting by John Crawley, Paul Simao, Paul Eckert and Lucia Mutikani; Writing by Will Dunham; Editing by Vicki Allen)

View the original article here