June 25, 2017

Perdasdefogu Journal: Celebrating the Elderly With a Nervous Eye on Italy’s Future

In 2012, the Melis family entered the Guinness World Records for having the highest combined age of any nine living siblings on earth — today more than 825 years. Sustained by good genes, fresh air, healthy food, physical exercise, quick wit and powerful family bonds, the Melises have become elderly symbols of a Mediterranean way of life that is the envy of the world.

But scroll down through the generations and another pattern emerges. Few of the nine Melis siblings have formal education beyond fifth grade. (Claudina and Consolata stopped at the second.) Many of their children have high school or university degrees and are now retired from public or private sector jobs. And their children, the ones born after 1970, generally have university degrees — and are struggling to find work.

With older people in the Mediterranean living longer and longer lives — and with fertility rates low and youth unemployment soaring in Italy, Greece, Spain and Portugal — experts warn that Europe’s debt crisis is exacerbating a growing demographic crisis. In the coming years, they warn, there will be fewer workers paying into the social security system to support the pensions of older generations.

As he stood outside the Church of St. Peter’s after the birthday Mass, wearing a red, green and white tricolor sash, the mayor of Perdasdefogu, Mariano Carta, 44, acknowledged the issue. “Absolutely, we’re in big trouble,” he said. “We may have good air, but without work, we can’t survive.”

High up in the mountains of eastern Sardinia, Perdasdefogu, whose economy revolves around an Italian military base now under scrutiny for possible uranium contamination, has lost 500 inhabitants in the past 20 years, its population dropping to 2,000 people. Today it has two pensioners for every worker, an average age of 47 and an unemployment rate of about 25 percent. “If we go on like this, the system won’t hold up for long,” Mr. Carta said.

Between 2001 and 2011, the number of centenarians in Italy rose 138 percent, and that of nonagenarians, or people in their 90s, rose 78 percent. In 2011, the most recent year in the official statistics, 20 percent of Italians were over the age of 65.

The Melis siblings were all born in Perdasdefogu to Francesco Melis and Eleonora Mameli, who had a general store. Consolata, 105, is the oldest; then Claudina, 100; Maria, 98; Antonino, 94; Concetta, 92; Adolfo, 90; Vitalio, 87; Fida Vitalia, 81; and Mafalda, the baby at 79. Their descendants now account for about a third of the village.

The siblings remember when malaria was rampant in Sardinia before it was eradicated with the help of the United States after the Second World War. They remember the time before Perdasdefogu got electricity in the 1950s, and before it had running water. “We used to have to carry a bucket to the well,” said Claudina, sitting at home among family members a day before her birthday.

“Young people today don’t know what it is to work,” she said. She meant that they had not known hard physical labor. But the remark could just as easily apply to Italy’s youth unemployment rate, which is 38 percent. Many qualified Italians leave for better jobs abroad in a brain drain that weighs on the country’s mood and economy.

Stefano Lai, 27, one of Claudina’s many grandchildren, grew up in Cagliari, the capital of Sardinia, and is now doing a postdoctoral fellowship in biomedical engineering at the prestigious Scuola Superiore Sant’Anna in Pisa. He would like to stay in Sardinia, or even in Italy, but does not have his hopes up.

“Leaving Sardinia was hard for me,” Mr. Lai said. “To leave Italy would be hard, but maybe it’s inescapable,” he added. “The opportunities are few, at least in my field.”

Standing outside the church after the Mass, Stefano’s parents, Italo Lai, 77, who retired from a job in public health, and Marina Caria, 68, were saddened at the prospect. “It’s a brain drain,” Ms. Caria said. “We hope that maybe they can find something to keep them,” she added, referring to the three-month-old coalition government of Prime Minister Enrico Letta, who has said that tackling youth unemployment is a priority.

“Living your life near the ones you love is priceless compared to having to leave, even for work,” Stefano Lai said. His cousin Alberto, 19, who lives in Perdasdefogu, agreed.

Article source: http://www.nytimes.com/2013/07/18/world/europe/celebrating-the-elderly-with-a-nervous-eye-on-the-future.html?partner=rss&emc=rss

As U.S. Trade Deficit Grows, Some Growth Forecasts Drop

The trade deficit rose to $45 billion in May, up 12.1 percent from $40.1 billion in April, the Commerce Department said on Wednesday. It was the largest trade gap since November.

Exports slipped 0.3 percent to $187.1 billion. Sales of American farm products dropped to their lowest point in more than two years. American exports have been hurt by recessions in many European countries.

Imports rose 1.9 percent to $232.1 billion. Imports of autos and other nonpetroleum products rose widely.

The trade deficit is running at an annual rate of $501.2 billion, 6.3 percent lower than last year’s deficit.

Paul Dales, senior United States economist at Capital Economics, said the larger trade deficit for May indicated that economic growth in the second quarter could be even weaker than the sluggish 1.5 percent annual rate that he had forecast.

Economists at Barclays said the higher deficit led them to downgrade their growth forecast for the second quarter to 1 percent, from 1.6 percent.

The American economy expanded at an annual rate of only 1.8 percent in the first three months of the year.

For May, exports to the European Union were up 6.4 percent. But over the last five months, exports to this region have declined 6.3 percent from the same period in 2012. Europe has been hurt by a prolonged debt crisis, which has led to recessions across the Continent.

The United States trade deficit with China jumped 15.6 percent to $27.9 billion in May. That is close to the monthly high set in November. So far this year, the trade deficit with China, the largest with any country, is running 3 percent higher than last year.

Article source: http://www.nytimes.com/2013/07/04/business/economy/us-trade-deficit-grew-in-may-analysts-downgrade-forecasts.html?partner=rss&emc=rss

Durable Goods Orders Up More Than Expected

New orders for durable goods, which range from toasters to aircraft, increased 3.3 percent last month, the Commerce Department said on Friday.

The data was the latest to show the U.S. economy exhibiting surprising resilience in the face of harsh fiscal austerity measures enacted this year.

“(It’s) another sign that growth is holding up quite well,” said Paul Ashworth, an economist at Capital Economics in Toronto.

While Washington hiked taxes in January and sweeping budget cuts began in March, consumer spending has looked relatively robust and many economists think the U.S. Federal Reserve could begin tapering a monetary stimulus program by the end of the year.

Economists polled by Reuters had expected new orders for durable goods, which are meant to last three years or more, to rise 1.5 percent last month. The Commerce Department also revised prior readings for orders to show a smaller decline in March than previously estimated.

The better-than-expected news helped contain losses on Wall Street, where stocks slipped for a third straight day. Investors fear that less monetary stimulus could crimp the supply of money for investing. Yields on U.S. government debt also declined.

NOT RIP-ROARING

Data earlier this month showed U.S. factory output fell in April for the second straight month, hurt by the European debt crisis which has weighed on demand at factories from Los Angeles to Shanghai.

Friday’s report showed a measure of underlying demand in the factory sector, which strips out aircraft and military goods and is an indicator of future business spending, advanced 1.2 percent. That was a faster clip than analysts had expected.

Even if that signals a return to growth in the factory sector, economists expect government austerity will nevertheless sap strength from the economy as the year progresses.

“While (Friday’s data) was definitely better than expected, I would not mistake this for rip-roaring strength,” said Stephen Stanley, an economist at Pierpont Securities in Stamford, Connecticut.

Shipments of core capital goods, which go into calculations of equipment and software spending in the gross domestic product report, fell 1.5 percent.

That suggests that while there were signs businesses could spend more in coming months, actual transactions got off to a weak start in the second quarter, reinforcing the view that economic growth has slowed.

Economists polled by Reuters earlier this month expect GDP to grow at a 1.5 percent annual rate in the second quarter, down from a 2.5 percent pace in the January-March period.

Shipments of capital goods in the defense sector, which is shouldering a large share of Washington’s austerity drive, fell 5.6 percent in April.

And while the strength in overall new orders was broad based, it received a boost from a rise in demand for aircraft, which is often volatile. The increase in aircraft orders was expected; plane-maker Boeing received orders for 51 aircraft, up from 39 in March, according to information posted on its website.

(Editing by Andrea Ricci)

Article source: http://www.nytimes.com/reuters/2013/05/24/business/24reuters-durable-goods.html?partner=rss&emc=rss

Wall Street Weakens

Wall Street opened weakly on Friday, pulling back from record levels, after reports showed an unexpected drop in retail sales and unimpressive earnings from major banks.

The Standard Poor’s 500-stock index lost 0.2 percent in morning trading, the Dow Jones industrial average fell 0.1 percent and the Nasdaq composite index dropped 0.1 percent.

Data showed retail sales fell 0.4 percent in March, while February’s strong gain was revised down slightly. Consumer spending plays a key role in the American economy, accounting for two-thirds of activity.

Investors have been watching indications that economic growth could be softening, particularly after last week’s disappointing jobs number, but they have not derailed the market rally so far.

“It shows that the economy continues to weaken and consumers are cautious,” Peter Cardillo, chief market economist at Rockwell Global Capital in New York, said about the retail numbers.

The advance in equities in recent months has been partly because of the Federal Reserve’s economic stimulus efforts, and analysts are viewing the first-quarter earnings season as a test for whether those gains are justified by corporate performance.

“I haven’t seen good enough news to warrant this huge rise in the market,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

JPMorgan Chase reported higher first-quarter profit, though revenue declined. Its stock was 0.2 percent lower. Wells Fargo was also lower, falling 0.8 percent. The bank’s profit was better than expected, but it made fewer home loans.

Earnings for S.P. 500 companies are expected to grow at a modest 1.2 percent in the first quarter, according to Thomson Reuters data.

Analysts said concerns over the euro zone debt crisis set a negative tone in the market Friday, with European Union finance ministers meeting during the day and Saturday and Cyprus’s bailout expected to be discussed. Euro zone stock markets were down more than 1 percent, while the FTSE 100 in London was off only 0.4 percent, in afternoon trading.

Article source: http://www.nytimes.com/2013/04/13/business/economy/daily-stock-market-activity.html?partner=rss&emc=rss

Ruling in Portugal Poses Question Elsewhere: Can Courts Upend Austerity Pacts?

MADRID — Portugal was once seen as a role model in the euro debt crisis as its conservative government stuck to the stringent terms of a 78 billion euro bailout negotiated with international creditors two years ago. But it has now earned a very different distinction as the test case of the limits of the austerity plans that have been prescribed across Southern Europe.

Last Friday, Portugal’s constitutional court struck down four of nine contested austerity measures that the government had introduced as part of its 2013 budget. The measures rejected by the court represented about 1.4 billion euros, or $1.8 billion — more than a fifth — of the 5 billion euro austerity package of spending cuts and tax increases. Among its rulings, the court drew a line on cuts aimed specifically at civil servants, who it said were being singled out for punishment and therefore discriminated against.

The decision has now called into question how the government can meet its budgetary goals in the near term and raised the broader issue of just how much austerity will be tolerated, not only by disgruntled citizens but also by justices who often act as the guardians of the Continent’s cherished social welfare system.

“The ruling could be interpreted as saying that all public spending cuts that affect civil servants are unconstitutional,” Fitch, the credit rating agency, wrote on Monday. “If that interpretation is correct, the ruling represents a setback to future fiscal adjustment efforts in Portugal.”

It added, “This is a greater concern than its immediate impact.”

On Sunday, Prime Minister Pedro Passos Coelho warned his citizens to prepare for more hardship as his government would impose deeper spending cuts in areas like health and education to compensate for some austerity measures struck down by the country’s constitutional court.

While Mr. Passos Coelho’s determination to stick to the austerity script won immediate praise from Brussels, creditors are due back in Lisbon in coming weeks to assess just how far Portugal’s budgetary planning has been derailed by the court ruling.

The creditors may well find that Portugal has been left “between a rock and a hard place” — the headline given of Barclays Capital report issued Monday, in which analysts warned that “negative growth, rising unemployment and delayed fiscal targets could even push Portugal to require additional official funding in 2014.”

Portugal’s constitutional court — made up of 13 judges, most of whom are elected by lawmakers — can rule on the conformity of all legal statutes and as such has taken issue with provisions in the state budget in the past. In fact, Diogo Ortigão Ramos, a partner at the law firm Cuatrecasas, Gonçalves Pereira in Lisbon, said the court’s latest arguments against possible fiscal discrimination between public and private sector employees were “not surprising” and in line with a similar ruling by the court last year.

But Luis Cabral, a Portuguese economist and professor at New York University, said the court still went beyond a legal ruling and delivered what amounted to “a significant political statement,” which means that “effectively, government expenditure cannot be reduced.” In terms of Portugal’s budgetary commitments, Mr. Cabral added, “when you put it all together, it’s clear that things do not add up.”

Politicians in some other ailing euro economies are watching the latest upheaval in Lisbon closely, aware that they, too, might soon be forced to revise their fiscal calculations, as their country’s financing problems grind on, their economies remain in recession and their own courts review some of their recent economic measures.

In Spain, for instance, the constitutional court agreed last November to consider a complaint filed by left-wing Spanish politicians against the government’s labor market reform, which loosened collective bargaining agreements and made it easier and less costly for employers to lay off workers. The plaintiffs want the court to strike down the overhaul as an unconstitutional breach of the “democratic model of labor relations.”

Article source: http://www.nytimes.com/2013/04/09/business/global/09iht-euportugal09.html?partner=rss&emc=rss

Trade Deficit Narrows as Exports Increase

The gap between exports and imports shrank to $43 billion in February, down 3.4 percent from a revised $44.5 billion in January, the Commerce Department said on Friday. It was the smallest trade imbalance since December, when the gap had declined to $38.1 billion, the lowest point in nearly three years.

Exports rose 0.8 percent, to $186 billion, close to the record set in December. Stronger exports of energy products and autos offset declines in sales of airplanes and farm equipment.

Imports were flat at $228.9 billion, with the volume of crude oil falling to the lowest point since March 1996.

The deficit with China shrank to $23.4 billion, the lowest point in 11 months. Exports to the European Union were down 0.9 percent in February, compared with January.

Through the first two months of this year, the United States deficit is running at an annual rate of $524.5 billion, down slightly from the $539.5 billion imbalance last year.

Economists expect the deficit this year will narrow slightly, in part because of continued gains in energy exports. A narrower trade gap lifts growth because it means American companies are earning more from overseas sales while domestic consumers and businesses are spending less on foreign products.

The economy as measured by the gross domestic product grew at an annual rate of 0.4 percent in the October-December quarter. Economists say they believe economic growth strengthened in the January-March quarter to around 3 percent.

In addition to increases in energy exports, economists are hopeful that exports of other products will rise this year as well, helped by stronger growth in some major export markets.

That forecast is based on an assumption that the European debt crisis will stabilize, helping lift exports to that region, and that growth in Asia will rebound further. The outlook for Europe has been clouded recently by problems in Cyprus and new worries that the debt troubles could destabilize more countries.

Article source: http://www.nytimes.com/2013/04/06/business/economy/trade-deficit-narrows-as-exports-increase.html?partner=rss&emc=rss

Facing Bailout Tax, Cypriots Try to Get Cash Out of Banks

The move — a first in the three-year-old European financial crisis — raised questions over whether bank runs could be set off elsewhere in the euro zone. Jeroen Dijsselbloem, the president of the group of euro area ministers, early Saturday declined to rule out taxes on depositors in countries beyond Cyprus, although he said such a measure was not currently being considered.

People crowding cash machines around Cyprus were stunned and angry at the decision. A crowd of around 150 demonstrators massed in front of the presidential palace late in the afternoon after calls went out on social media to protest the abrupt decision, which came with almost no warning at the beginning of a three-day religious holiday on the island.

Under an emergency deal reached early Saturday in Brussels, a one-time tax of 9.9 percent is to be levied on Cypriot bank deposits of more than 100,000 euros effective Tuesday, hitting wealthy depositors — mostly Russians who have put vast sums into Cyprus banks in recent years. But even deposits under that amount would be taxed at 6.75 percent, meaning that Cyprus’s creditors will be taking money directly from pensioners, workers and regulator depositors to pay off the bailout tab.

Sharon Bowles, a British member of the European Parliament who is the head of the body’s influential Economic and Monetary Affairs Committee, said the accord amounted to a “grabbing of ordinary depositors’ money,” billed as a tax.

“What the deal reflects is that being an unsecured or even secured depositor in euro-area banks is not as safe as it used to be,” said Jacob Kirkegaard, an economist and European specialist at the Peterson Institute for International Economics in Washington. “We are in a new world.”

Cyprus has been a blip on the radar screen of Europe’s long-running debt crisis — until now.

Hobbled by a devastating banking crisis linked to a slump in the economy of neighboring Greece, Cyprus on Saturday became the fifth country in the euro union to receive a financial lifeline since Europe’s debt crisis broke out. As the euro zone’s smallest economy, Cyprus had hardly been considered the risk for the euro union that Greece, Ireland, Portugal or Spain were.

But the surprise tax by the International Monetary Fund, the European Central Bank and the European Commission is the first to take money directly from ordinary savers. In the bailout of Greece, holders of Greek bonds were forced to take losses — but depositors’ funds were not touched.

President Nicos Anastasiades, who was elected into office just a few weeks ago, said he would address the nation on Sunday. In a statement, he called the decision “painful” but said it would lead to “the historic and definitive rescue of our economy.” He said the consequences of rejecting the deal would be the collapse of at least one of Cyprus’s major banks, amid widespread weakness in the Cyprus banking system.

Cypriot banks are loaded up on bad loans made to Greek companies and individuals, which have turned sour at an alarming rate as Greece deals with the fourth year of a devastating economic and financial crisis.

“I’m not surprised that people are trying to get their money out in Cyprus; that is entirely to be expected,” Mr. Kirkegaard said. “They wake up Saturday morning and are told on the radio their bank deposits are at risk.”

The deposit tax — which is expected to raise 5.8 billion euros — appeared aimed at gleaning large amounts of cash from the bank accounts of wealthy Russians, who have poured deposits into Cypriot banks in the past several years. Chancellor Angela Merkel of Germany, who is facing a pivotal election in September, has been particularly concerned that most of the bailout money could wind up in the hands of Russian gangsters and oligarchs, a fear backed by a recent report by Germany’s intelligence agency. Officials in Cyprus have maintained there is no proof that the Russian cash is of questionable origin. They insist they cracked down on money laundering before joining the European Union.

Because Russian depositors would have to share the burden, it would ultimately relieve Cyprus from its debt load, by allowing a one-time payment upfront rather than deeper cuts to salaries and pensions or additional privatizations in the future.

Still, Mr. Kirkegaard said that he was surprised that Cyprus’s creditors had decided to go after smaller depositors, but that part of the rationale might have been avoiding putting too much pressure on businesses, which hold a large share of the higher-value accounts.

The Cyprus Parliament still must vote the measure into effect, and was planning to meet in an emergency session on Monday, a nationwide holiday. Given the stunned reaction, though, it was not certain to pass. Nicholas Papadopoulos, the head of Parliament’s financial affairs committee, said the decision was “much worse than what we expected and contrary to what the government was assuring us, right up until last night,” Reuters reported.

Nicholas Kulish contributed reporting from Berlin, Landon Thomas Jr. from London, James Kanter from Brussels and Andreas Riris from Nicosia.

Article source: http://www.nytimes.com/2013/03/17/business/global/facing-bailout-tax-cypriots-try-to-get-cash-out-of-banks.html?partner=rss&emc=rss

Inside Europe: Jolt From Italy’s Elections May Not Be Enough

BRUSSELS — European policy makers should be asking themselves, “Who lost Italy?” after a grass-roots revolt against austerity, unemployment and the political elite caused an electoral earthquake in the country, the third-largest economy in the euro zone.

Instead, most still insist that their policy mix for fighting the currency area’s debt crisis is right, even though the latest E.U. forecasts have pushed any prospect of meaningful economic recovery in southern Europe back into the middle distance.

A surge in support for the anti-euro populist Beppe Grillo and the surprise resurrection of the former prime minister Silvio Berlusconi on an anti-austerity platform in the election last week have forced Rome into political deadlock.

Italy, which had been governed by the respected technocrat Mario Monti for the 15 months since Mr. Berlusconi’s last government fell, is hardly the country worst affected by the 3-year-old debt crisis. Unemployment there stands at 11.7 percent, less than half the rate of Greece and Spain, where one of every two young people is without a job.

If a milder recession and less-severe spending cuts and tax increases can cause such a social and electoral revolt in Italy, the risks of an explosion in Greece and Spain ought to be greater. Yet the official reaction from Brussels and Frankfurt is to act as if nothing — or almost nothing — has happened.

“The crisis is not yet over and efforts must not be relaxed,” the European Commission president, José Manuel Barroso, said in a joint statement with Mr. Monti two days after the election.

At a Reuters forum on the future of the euro zone, Mr. Barroso appealed to European leaders to stay the course and “not give in to populism.” Despite bleak economic forecasts, structural overhauls were starting to bear fruit, he said.

Mr. Barroso reeled off figures showing that current account deficits in Portugal, Spain, Italy and Greece were shrinking and Ireland was back in surplus. Exports from Spain and Portugal were rising, and the labor competitiveness gap between Northern and Southern Europe was narrowing.

Those numbers have another side, however. Payment imbalances are down mostly because those countries’ imports have shrunk because of sinking demand. The labor cost gap has declined largely because of mass layoffs in southern states, rather than productivity gains. Exports account for less than 20 percent of output in Spain and Portugal, less than half the German ratio and too little to offer a fast track to recovery.

While the European Central Bank removed the danger of a financial meltdown of the euro zone with its bond-buying plan, there is now a growing risk of a social crisis that could lead to the departure of one or more southern countries from the currency group.

“I absolutely think it can get a lot worse,” said Clemens Fuest, the incoming president of the ZEW economic research institute in Germany.

“There is really the current plausible scenario for a breakup of the currency union,”’ he said at the same forum. “It may very well be that in these countries at some point the population will say, ‘We don’t believe things will get better.”’

The degree of despair would have to be high to risk leaving the euro group, “but if things continue, if unemployment goes up to 30 percent,” he added, “in Spain, there certainly is a danger that might happen.”

Zsolt Darvas of Bruegel, a study group in Brussels, said South European countries would be trapped in a downward spiral of economic contraction and rising debt for some time to come but had no alternative to fiscal consolidation.

The only way out was to alter Europe’s fiscal policy mix by stimulating demand in Northern Europe, notably with tax cuts in Germany, and giving the European Investment Bank a huge capital increase to lend to companies in Southern Europe, he said.

Article source: http://www.nytimes.com/2013/03/05/business/global/jolt-from-italys-elections-may-not-be-enough.html?partner=rss&emc=rss

House Votes to Temporarily End Debt Ceiling

The 285-144 vote staved off an impasse that could have put the full faith and credit of the United States government into doubt and potentially set off an economic disaster. Instead, the next Republican showdown with the president will come in March, when the subject will be across-the-board spending cuts first and a possible government shutdown by the end of the month.

“We know with certainty that a debt crisis is coming to America. It’s not a question of if. It’s a question of when,” Representative Paul D. Ryan of Wisconsin, the Republicans’ vice-presidential nominee last year and current Budget Committee chairman, said as he vowed to press ahead with deep spending cuts.

To give House Republicans a rationale for giving in on the debt ceiling after dropping demands for offsetting cuts, the House legislation included a provision that would withhold the pay of lawmakers in a chamber of Congress that fails to pass a budget blueprint by April 15.

That allowed House Republicans to turn a spotlight on Senate Democrats, who have not passed a detailed budget blueprint since 2009.

“It took one week in which their paychecks were on the line, and now the Senate is going to step up and do the right thing,” Representative Eric Cantor of Virginia, the House majority leader, said after the vote.

Senate Democratic leaders shrugged off the dictate as an insignificant gimmick and claimed victory.

“The president stared down the Republicans. They blinked,” said Senator Charles E. Schumer, Democrat of New York.

Senator Harry Reid of Nevada, the majority leader, thanked Speaker John A. Boehner for reversing course and said he would take up and pass the House bill without changes as soon as next week, possibly by unanimous consent. He said he would then move quickly on a budget plan for the first time since 2009.

“Democrats are eager to contrast our pro-growth, pro-middle-class budget priorities with the House Republicans’ Ryan budget that would end Medicare as we know it, gut investments in jobs and programs middle-class families depend on, and cut taxes for the wealthiest Americans and biggest corporations,” said Senator Patty Murray of Washington, the chairwoman of the Senate Budget Committee.

House Republicans appeared eager for that fight. For two years, the House has passed detailed but nonbinding budget plans that would cut domestic programs to levels not seen since World War II, enact changes to Medicare that would offer older people fixed subsidies to buy private health insurance, and mandate a much-simplified tax code. Democrats have criticized those plans, declined to produce an alternative, and instead demanded what they called a “balanced approach” to deficit reduction.

Now, Republicans said, the debate will be over numbers.

“We have a budget that’s described as draconian, that decimates this program or that. They have a phrase, ‘balanced approach,’ ” said Representative Trey Gowdy, Republican of South Carolina. “I’m tired of debating against a phrase.”

The debt ceiling legislation — devised with awareness of the constitutional hurdles imposed by the 27th Amendment on Congressional pay — would impound lawmaker salaries until a budget is passed or the 113th Congress ends, whichever comes first. And it would not require the House and the Senate to come to a compromise on the two spending and tax blueprints, which are likely to be very different. That will be the really difficult task.

House Democratic leaders tried to persuade their members to vote against the deal, so as to force as many Republicans as possible to vote to do something most said they would never do: lift the debt ceiling. But 86 Democrats voted yes, more than enough to let 33 Republicans vote no without bringing the bill down and handing Republican leaders an embarrassing defeat.

House Republicans say punting the debt ceiling to May 18 is not so much a retreat as a “re-sequencing” of the coming budget showdowns. House Republicans now take for granted that the first deadline, March 1, will come and go, and $110 billion in across-the-board spending cuts to military and domestic programs — known as a sequester — will go into force.

“The sequester is going to go into effect on March 1 unless there are cuts and reforms that get us on a plan to balance the budget over the next 10 years. It’s as simple as that,” Mr. Boehner said.

The next real showdown will come by March 27, when the stopgap measure financing the government expires. Republicans have made clear that they are willing to let the government shut down at that time to force deep spending cuts or changes to Medicare and Social Security that would bring down deficits in the long run.

Such continuing brinkmanship brought a rebuke from Ms. Murray, who said Republicans were trying to have it both ways, forcing Senate Democrats to move forward in an orderly way with a budget plan by mid-April, but threatening the next budget crisis weeks before that.

The pay provision brought its own protests. Representative Jerrold Nadler, Democrat of New York, called it “institutionalized bribery,” since it effectively says, do what Republicans want or do not get paid. That was why the nation passed the 27th Amendment, which says Congressional pay cannot be varied within a single Congress.

Article source: http://www.nytimes.com/2013/01/24/us/politics/house-passes-3-month-extension-of-debt-limit.html?partner=rss&emc=rss

I.M.F. Director Says Global Recovery Is Not Yet Secure

Christine Lagarde, the I.M.F.’s managing director, said the euro zone debt crisis and the budget dispute in the United States could have brought growth to a halt, an outcome only avoided by decisions often made at the last minute.

In particular, she urged the United States to raise its borrowing limit and pressed Europe to follow through with commitments to tackle its debt crisis.

“Clearly, the collapse has been avoided in many corners of the world,” Ms. Lagarde told reporters, even as she expressed concern that policy makers’ resolve could weaken just because there is a “bit” of recovery in sight and financial stresses have eased.

“It’s important to follow through on policies to put uncertainty to rest,” she said. “There is still a lot of work to be done.”

In her first news conference of 2013, Ms. Lagarde focused on political battles over the budget in the United States and the risks the euro zone’s debt crisis still presents. That focus is not new, but Ms. Lagarde made clear she worried that complacency could set in.

Ms. Lagarde warned that a fight in the United States over raising the nation’s $16.4 trillion borrowing limit could be “catastrophic” for the global economy if it is not raised in time.

“I very, very strongly hope that all parties, all views will converge in the national interest of the U.S. economy and in the international interest of the global economy,” she said. “To imagine that the U.S. economy would be in default, would not honor the payments that it owes, is just unthinkable.”

In Europe, she said, progress was made last year to tackle the debt crisis. Unfinished business included the need to press forward with plans for a banking union.

She also said that while a financial firewall against the debt crisis had been erected, it had not yet been made “operational,” a reference to a European Central Bank program to buy bonds from debt-laden euro zone countries that seek a rescue.

Further, she said, the central bank needed to keep monetary policy loose and perhaps try to lower borrowing costs further to help struggling member states.

“We recognize there has been progress, but the process has been very time consuming and continues to contribute to uncertainty,” Ms. Lagarde said. “We sense a sign of waning commitment. There is still momentum, but it is probably not as crucial as it was, and we regret it.”

Article source: http://www.nytimes.com/2013/01/18/business/global/imf-director-says-global-recovery-is-not-yet-secure.html?partner=rss&emc=rss