Biden tells China not to count out U.S. strength (Reuters)

CHENGDU, China (Reuters) – U.S. Vice President Joe Biden on Sunday rejected views that American power is waning and said Washington would never default, wrapping up a China visit that has played down tensions between the world's two biggest economies.

"We are still the single best bet in the world, in terms of where to invest," Biden told a university audience in Chengdu, the provincial capital of Sichuan, the southwest province that is the second and last stop of his visit to China.

"Please understand that no one cares more about this than we do, since Americans own 87 percent of all our financial assets and 69 percent of all our treasury bonds," Biden said, answering a question about U.S. debt.

"So our interest is not just to protect Chinese investment. We have an overarching interest in protecting the investment, while the United States has never defaulted and never will default."

"You're safe," he added.

Biden also used his speech to renew U.S. calls for Beijing to do more to rein in North Korea and Iran, whose nuclear ambitions have alarmed the West.

"The fact is, China and the United States face many of the same threats and share many of the same objectives and responsibilities," he said.

But his key theme was, as it has been throughout his five-day visit to China, economic: that the United States can reverse its high debt and low growth, and that China should play a part by buying more American-made goods and services.

"I also know that some of you are skeptical about America's future prospects. With that in view, I would like to suggest that I respectfully disagree with that view and will allay your concerns," said Biden.

He told the audience to remember that the United States was by far the largest economy in the world, about two and a half times as large as China's.

Biden and President Barack Obama, both Democrats, face re-election next year. Biden said the debate with Republicans over how to tackle U.S. fiscal problems would be at the heart of the 2012 presidential election.

Chinese Vice President Xi Jinping, who is virtually certain to succeed Hu Jintao as Chinese President in early 2013, has hosted Biden during this visit. Obama administration officials have said they want to build trust with Xi ahead of the transition that begins in late 2012, when Hu gives up his post as general secretary of the ruling Communist Party.

Next year would need careful political footwork from both governments, said Biden.

"Both our countries are going through a political transition in 2012. It is very important, in my view, that we both are aware of the political sensitivities in each of the countries as they go through that," he said.

"NOTHING TO WORRY ABOUT"

Sichuan province is a fast-growing example of the inland development that Beijing hopes will power the Chinese economy in coming decades -- and also a slice of the rising consumer power that Washington hopes will buy more U.S. goods and reduce a huge trade deficit with China.

With 80 million people, Sichuan enjoyed economic growth of 15.1 percent last year, according to government statistics.

Such economic concerns have dominated Biden's visit to China, which began on Wednesday, and has featured a succession of unusually vocal declarations of Beijing's confidence in the U.S. economy, despite Standard & Poor's recent downgrade of the sovereign credit rating of the United States.

China has quarreled with the United States on trade, Internet censorship, human rights and U.S. arms sales to Taiwan. While those thorny disputes have not disappeared, they appear to have been overtaken by a shared desire to show confidence and cooperation to a jittery global economy.

In Sichuan, Biden raised human rights in general terms.

"Liberty unlocks a people's full potential, and in its absence, unrest festers," he told the university audience.

Biden told Premier Wen Jiabao on Friday that China had "nothing to worry about" over the safety of its holdings of Treasury debt, and Wen voiced confidence in the resilience of the U.S. economy, troubled by debt worries and sluggish growth.

Analysts estimate two thirds of China's $3.2 trillion in foreign exchange reserves, the world's largest, are in dollar holdings, making it the biggest U.S. foreign creditor.

Biden will fly to Mongolia on Monday morning for a day before heading onto Japan.

(Writing and additional reporting by Chris Buckley and Michael Martina in Beijing; Editing by Yoko Nishikawa)

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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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Norway killer tells judge "two more cells" exist (Reuters)

By Johan Ahlander and Aasa Christine Stoltz Johan Ahlander And Aasa Christine Stoltz – Mon?Jul?25, 12:15?pm?ET

OSLO (Reuters) – Anders Behring Breivik told a Norwegian judge on Monday his bombing and shooting rampage that killed scores aimed to save Europe from a Muslim takeover, and said that "two more cells" existed in his organization.

Breivik's remarks at the closed-door custody hearing were relayed by the judge, Kim Heger, at a news conference.

The killer has previously said he acted alone and police had earlier said they were trying to confirm this.

But after Breivik's claim about other cells, police attorney Christian Hatlo said "we cannot completely rule out" the possibility that others were involved in Friday's attacks.

Police revised the death toll downwards to 76 from 93, saying eight people were now known to have died in the bomb blast in central Oslo, and 68 on the island of Utoeya.

It was not clear whether Breivik is in fact part of an organization, although he has written about a revival of the Knights Templar, a medieval order of crusading monks.

After the hearing, Heger said he had ordered Breivik detained in solitary confinement for eight weeks, with no letters, newspapers or visits, except from a lawyer.

The detention, in line with a request from prosecutors, will allow them to investigate the case against Breivik.

Jeering crowds awaited Breivik at Oslo District Court.

"Get out, get out!" shouted Alexander Roeine, 24, banging on a police car he wrongly believed contained the mass killer. In fact police brought Breivik through a side entrance.

"Everyone here wants him dead," Roeine said, adding that he knew one of the dead and three survivors of the attacks.

Breivik had wanted to explain in public why he perpetrated modern-day Norway's worst peace-time massacre. He was denied a public platform, but the judge, in his news conference, gave an account of what the accused 32-year-old had said.

"MASS IMPORTS OF MUSLIMS"

Heger said Breivik had accused the ruling Labour Party of betraying Norway with "mass imports of Muslims."

He said his bombing of government buildings in Oslo and massacre at a summer camp for Labour's youth wing was aimed at deterring future recruitment to the party.

"The goal of the attack was to give a strong signal to the people," the judge quoted Breivik as saying.

Breivik's custody can be extended before his trial on terrorism charges. Police say the trial could be a year away.

"We want to see him really hurt for what he did," said Zezo Hasab, 32, among a crowd who gave Breivik a furious reception.

After the hearing, a police jeep drove away carrying an unshaven Breivik, with close-cropped blond hair and wearing a red jumper with a lighter red shirt underneath.

Norwegians held a minute's silence for Breivik's victims.

"In remembrance of the victims ... I declare one minute's national silence," Prime Minister Jens Stoltenberg said on the steps of Oslo University, flanked by Norway's king and queen.

The silence stretched to five minutes as thousands more stood around a carpet of flowers outside nearby Oslo cathedral. Only squawking seagulls and a barking dog broke the silence.

"This is a tragic event to see all these young people dying due to one man's craziness. It is important to have this minute of silence so that all the victims and the parents of the families know that people are thinking about them," said mechanic Sven-Erik Fredheim, 36, shortly before the silence.

Breivik planted a bomb on Friday outside Stoltenberg's Oslo office which killed eight, then drove to the wooded island of Utoeya and shot dead 68 at the Labour Party youth camp.

In a rambling 1,500-page tract posted online just before the massacre, Breivik explained how violence was needed to rescue Europe from Islam, immigration and multi-culturalism.

If he survived his assault and was arrested, this would "mark the initiation of the propaganda phase," he wrote.

His lawyer, Geir Lippestad, said: "He has been politically active and found out himself that he did not succeed with usual political tools and so resorted to violence."

The judge's decision to close the hearing to the public followed an outcry from Norwegians enraged at the possibility that Breivik would be allowed a public platform for his views.

A Facebook group called "Boycott Anders Behring Breivik" carried the message: "He has planned this stage, to get propaganda. Do NOT let him get that freedom ... Boycott all media describing the Norwegian terrorist and his beliefs."

The maximum jail term in Norway is 21 years, although that can be extended if there is a risk of repeat offences. "In theory he can be in jail for the rest of his life," said Staale Eskeland, professor of criminal law at the University of Oslo.

QUESTIONS FOR POLICE

Police handling of the crisis may come under more scrutiny after the revision to the death toll, which a police spokesman attributed to difficulties in gathering information at Utoeya.

Daily Dagsavisen asked "Why didn't you come earlier?" citing screams by youth as police arrived on the island -- an hour after they were notified of the shooting.

Earlier police efforts to reach the island stalled after one boat, overloaded with officers and equipment, was forced to stop when it began to take on water.

Police had believed Breivik acted alone after losing faith in mainstream parties, even those that have gained popularity and parliamentary seats on anti-immigration platforms in otherwise liberal, tolerant European nations, including affluent Norway.

The judge said Breivik's statements required investigation, including his remark about the existence of two more cells.

The attack was likely to tone down the immigration debate ahead of September local elections, analysts said, as parties try to distance themselves from Breivik's beliefs and reinforce Norwegians' self-image as an open, peaceful people.

Party leaders have agreed to delay the start of campaigning for the polls until mid-August, Norwegian news agency NTB said.

Norway's immigrant numbers nearly tripled between 1995 and 2010 to almost half a million. Arguments that many were drawn by generous welfare handouts spurred the growth of the Progress Party which became Norway's second biggest in parliament after the 2009 election on a largely anti-immigration platform.

Breivik once belonged to the party, but left saying it was too politically correct. He then began scheming to "resist," burying ammunition, weight-lifting, storing credit cards and researching bomb-making while playing online war games.

After three months of making explosives on a remote farm, Breivik drove a hire car packed with the device to Oslo, detonating it outside government offices.

He then drove to Utoeya, 45 km (28 miles) away. Dressed as a policeman, he calmly shot down Labour Party youngsters at the summer camp. His terrified victims tried to hide under beds or in the woods. Some leapt into the lake to escape.

"This is going to be an all-or-nothing scenario," Breivik wrote in his English-language online journal. "First coming costume party this autumn, dress up as a police officer. Arrive with insignias:-) Will be awesome as people will be very astonished:-)."

(Additional reporting by Walter Gibbs, Anna Ringstrom, Henrik Stoelen, Terje Solsvik, Patrick Lannin, Johan Ahlander, Wojciech Moskwa, Alister Doyle, John Acher and Ole Petter Skonnord in Oslo, Writing by Alistair Lyon)

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'We are sorry' Murdoch tells UK in full-page ad (AP)

LONDON – "We are sorry" the full-page ad began Saturday, as Rupert Murdoch tried to halt a phone-hacking scandal that has claimed two of his top executives with a gesture of atonement and promises to right the wrongs committed by his now-shuttered tabloid, News of the World.

Prime Minister David Cameron's Conservative-led government and the London police, meanwhile, faced increasing questions over their close relationship with Murdoch's media empire.

Cameron was feeling the heat Saturday after government records showed that Murdoch executives held 26 meetings with him in since he was elected in May 2010 and were invited to his country retreat. Senior police officers also had close ties to Murdoch executives, even hiring one as a consultant who has since been arrested in the phone hacking and police bribery scandal rocking Murdoch's News Corp.

Murdoch is struggling to contain the crisis, which has already forced him to shut down the 168-year-old News of the World, scuttled his bid for lucrative TV broadcaster BSkyB, knocked billions off the value of News Corp. and claimed the jobs of two key aides: Rebekah Brooks, CEO of his British unit News International, and Wall Street Journal publisher Les Hinton.

On Saturday, News Corp. ran an ad in seven British national newspapers with the headline "We are sorry." Signed by Murdoch, it apologized "for the serious wrongdoing that occurred."

"We are deeply sorry for the hurt suffered by the individuals affected. We regret not acting faster to sort things out," it said.

A front-page headline in another Murdoch paper, The Times, called it a "Day of atonement."

The company plans to take out more ads in the coming days outlining its next steps — part of a brand new strategy by the once all-powerful mogul.

The public displays of contrition came after News Corp. last week hired PR firm Edelman Communications, whose clients include Starbucks and Burger King, to help with public relations and lobbying. The hiring coincided with an abrupt change in tone — as recently as Thursday Murdoch was quoted by the Wall Street Journal as saying the company had handled the crisis "extremely well in every way possible" and complaining he was "getting annoyed" at all the negative headlines.

Cameron has appointed a judge to conduct a sweeping inquiry into criminal activity at the News of the World and in the British media as he tries to distance the government from the scandal.

But Rupert Murdoch's son James, Brooks and ex-News of the World editor Andy Coulson were all guests at the prime minister's country house, Chequers.

Coulson's stay in March came only two months after he resigned as Cameron's communications chief amid the spiraling scandal — an invitation that critics said showed poor judgment on Cameron's part and revealed the cozy relationship between political leaders and Murdoch's powerful media empire.

Coulson is one of nine people arrested and questioned by police over what they knew about phone hacking at the News of the World. No one has yet been charged.

Foreign Secretary William Hague defended the government Saturday, saying "it's not surprising that in a democratic country there is some contact between leaders" and media chiefs.

"I'm not embarrassed by it in any way, but there is something wrong here in this country and it must be put right," Hague told the BBC. "It's been acknowledged by the prime minister and I think that's the right attitude to take."

Hague said Cameron had invited Coulson to Chequers "to thank him for his work, he's worked for him for several years, that is a normal, human thing to do."

Cameron said last week that the relationship between politicians, the media and the police in Britain had grown too close and must be changed.

Murdoch began his apologies Friday as he met with the family of murdered schoolgirl Milly Dowler, whose phone was hacked by the News of the World in 2002. The revelation that journalists had accessed her phone in search of scoops while police were looking for the missing 13-year-old fueled an explosion of interest in the long-simmering scandal. The 80-year-old mogul said "as founder of the company I was appalled to find out what had happened and I apologized."

The phones of celebrities, royal aides, politicians and top athletes are also alleged to have been hacked, and police are investigating whether victims of London's 2005 terrorist bombings and the families of dead British soldiers were among the tabloid's targets.

The scandal claimed its first casualty among Murdoch's U.S. executives Friday when Hinton announced he was stepping down immediately as publisher of the Wall Street Journal and chief executive of Dow Jones & Co.

In New York, Tom Bray, chairman of a Dow Jones special committee formed to monitor editorial integrity, called the matters "deeply concerning."

"To date, nothing has come to our attention that causes us to believe that the resignation of Les Hinton as publisher of the Journal is in any way related to activities at the Wall Street Journal or Dow Jones or that any of the London offenses or anything like them have taken place at Dow Jones. We will continue to monitor the situation closely."

The 67-year old Hinton, a staunch ally who has worked for Murdoch for more than half a century, was chairman of Murdoch's British newspaper arm during some of the years its staffers are alleged to have hacked into cell phones. Still, he had testified to a parliamentary committee in 2007 and 2009 that he had seen no evidence that abuses had spread beyond a single jailed reporter, Clive Goodman.

Hinton said Friday that "the pain caused to innocent people is unimaginable."

"That I was ignorant of what apparently happened is irrelevant," he said.

Murdoch's British lieutenant, Brooks, also stepped down Friday, saying her status as "a focal point of the debate" was interfering with "our honest endeavors to fix the problems of the past." Tom Mockridge, the head of Sky Italia, was installed to replace Brooks.

The departure of Brooks and Hinton also increases pressure on 38-year-old James Murdoch, chairman of BSkyB and chief executive of News Corp.'s European and Asian operations. James Murdoch, his father Rupert and Brooks all face questioning Tuesday by a U.K. parliamentary committee investigating phone hacking and police bribery.

Lawmakers want to quiz James Murdoch about what he knew when he approved the News of The World's 2008 payment of 700,000 pounds ($1.1 million) to halt legal action by one hacking victim, Professional Footballers' Association chief Gordon Taylor. Several other hacking targets, including actress Sienna Miller, also received payments from the tabloid.

James Murdoch said last week that he "did not have a complete picture" when he approved the payouts.

British police are also under pressure to explain why their original hacking investigation failed to find enough evidence to prosecute anyone other than Goodman and private investigator Glenn Mulcaire. Detectives reopened the investigation earlier this year and now say they have the names of 3,700 potential victims.

Records show that senior officers — including Paul Stephenson, the current chief of London's Metropolitan Police — have had numerous meals and meetings with News International executives in the past few years.

The Guardian newspaper, which broke news of the Dowler hacking, said Saturday that senior police officers including Stephenson tried to persuade its editors in 2009 and 2010 to tone down the paper's coverage of the scandal, saying their stories were inaccurate and exaggerated the scale of the wrongdoing.

Neil Wallis, a former News of the World executive editor arrested and questioned this week about phone hacking, was employed as a part-time PR consultant by the London police force at the time.

The government says the judge-led inquiry will look into the police decision to hire Wallis, which occurred on Stephenson's watch.

Former Deputy Prime Minister John Prescott, who claims his own phone was hacked, said hiring Wallis showed bad judgment and urged Stephenson to resign.

"You're answerable for your actions and if he's the commissioner of the Met Police under attack at the time for its inadequacies, of course he should go," Prescott told Channel 4 News on Saturday.

Murdoch is eager to stop the crisis from further spreading to the United States, where the FBI has opened an inquiry into whether 9/11 victims or their families were also hacking targets of News Corp. journalists.

Newspaper analyst Ken Doctor said the departures of Brooks and Hinton show Murdoch is "trying to build a firewall between the past and the future of News Corp."

Now that News of the World has been shut down, Murdoch's global media empire includes Fox News, the 20th Century Fox movie studio, the Wall Street Journal, the New York Post and three British newspapers — The Sun, The Times and The Sunday Times.

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