August 14, 2020

Stocks and Bonds: Stocks Finish Flat as Investors Await a Greek Debt Deal

Markets ended flat on Monday as few developments affected stocks except investor hopes that Greece would eventually reach a deal with private creditors on lowering its debt.

Greece’s private creditors are being asked to accept longer maturities and lower interest rates on new bonds swapped for their existing ones.

The major Wall Street stock indexes wavered little all day. The Standard Poor’s 500-stock index ended up 0.05 percent, or 0.62 points, to 1,316. The Dow Jones industrial average fell 0.09 percent, or 11.66 points, to 12,708.82. The Nasdaq composite index also lost 0.09 percent, or 2.53 points, to close at 2,784.17.

Greece, which is negotiating alongside fellow members of the euro zone and the International Monetary Fund, wants interest rates as low as 3 percent on the new bonds. But the private creditors believe that is too low, and are aiming for about 4.5 percent.

Both sides said a deal was nevertheless close, heartening investors. The euro was the main beneficiary, climbing 1.3 percent to $1.3033.

Greek officials say negotiations on the private debt write-down are continuing by phone, with no appointment yet for new face-to-face talks.

Greece was to be the main topic of discussion at Monday’s meeting in Brussels of the finance ministers for the 17 European Union members that use the euro.

In Europe, the FTSE 100 index of leading British shares closed up 0.9 percent, while the DAX in Germany rose 0.5 percent. The CAC 40 in France was also 0.5 percent higher.

Optimism that Greece would clinch a deal has brightened market sentiment this year, along with a run of successful European bond auctions and solid economic and corporate news, not least from the United States and China. Many stock indexes have risen to five-month highs, while the euro has headed back toward the $1.30 mark.

Though the Federal Reserve is expected to keep its loose monetary policy unchanged, there will be great interest in the outcome of this week’s rate-setting meeting. It will be the first time the Fed will publish its interest rate forecasts out to 2016, part of a strategy to enhance communication with financial markets.

Investors will be particularly interested to see how long policy makers expect interest rates to remain low. Previously, the Fed said it expected to keep them low until the middle of 2013.

“Most, ourselves included, expect the projections to suggest the Fed sees rates on hold well into 2014,” said Adam Cole, an analyst at RBC Capital Markets.

In the oil markets, traders were watching developments in the Persian Gulf. Iran has threatened to close the Strait of Hormuz if the United States and other countries impose more sanctions on it because of its nuclear program. Many analysts doubt that Iran could set up a blockade for long, but any supply shortages would cause supplies to tighten. Benchmark crude was up $1.25 to $99.58 a barrel on the New York Mercantile Exchange.

The Treasury’s 10-year note fell 9/32, to 99 16/32. The yield was 2.06 percent, up from 2.03 percent late Friday.

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Slow Pace of Greek Talks Fuels Anxieties

But negotiations were proceeding slowly, and a statement released by the government cast doubt on whether the parties would be able to agree on a new leader before Tuesday.

The statement, in its entirety, read: “There was a positive approach in talks between Prime Minister George Papandreou and the leader of the main opposition, Antonis Samaras, regarding who should be the new prime minister.”

Mr. Papandreou’s office said that a cabinet meeting was scheduled for noon Tuesday. It remained unclear when a new prime minister and government would be announced.

The wrangling has fueled fresh fears about Greece’s acceptance of a debt-relief deal struck on Oct. 26 that is seen as crucial to containing the crisis and insulating Italy, a much larger economy whose political leaders have also struggled to cut budgets and deal with heavy debt.

Deepening doubts on that score, finance ministers from the euro zone on Monday demanded a letter from the two leading Greek political parties confirming their commitment to the loan deal before releasing the $11 billion Athens says it needs to avert default on its debts next month.

Reflecting the confusion in Rome and Athens, yields on Italian bonds — the price Italy must pay to borrow money on international markets — rose on Monday to more than 6.6 percent, the highest since the introduction of the euro more than a decade ago, news reports said.

The debt deal requires that the Greek Parliament pass a new round of austerity measures, including layoffs of government workers, in a climate of growing social unrest. It also calls for permanent foreign monitoring to ensure that Greece keeps its pledges of structural changes to its economy, a requirement that many Greeks see as an affront to national sovereignty.

The new unity government, in which the major Greek parties would share power, is widely expected to be led by a nonpolitician and to govern for several months, long enough to implement the debt deal and pass a budget for 2012.

In a statement early Monday, the Greek Finance Ministry said that delegations from Mr. Papandreou’s Socialist Party and Mr. Samaras’s New Democracy Party regarded Feb. 19 as “the most appropriate date for elections.”

Mr. Samaras is not expected to play a role in the unity government, but would be a candidate for prime minister in the general election.

In many ways, a new interim government buys time for European leaders to put together a stronger bailout mechanism that would protect larger economies from the risk of default, chief among them Italy.

“The decision is very positive, because it will appease the markets and because it shows that Greek authorities are doing what foreign leaders want them to do — to get on with implementing the conditions for the E.U. debt deal,” said Athanassios Papandropoulos, an economist and a commentator for the conservative Greek newspaper Estia.

Still, Mr. Papandropoulos said he saw little chance that a unity government could get Greece on the road to recovery. “It will last three months,” he said. “then we’ll have elections, and then we’ll have the same problems all over again.”

One person being mentioned as a possible leader of the new unity government is Lucas Papademos, a former governor of the Bank of Greece. Mr. Papademos is a former vice president of the European Central Bank and has been teaching at Harvard since his retirement in 2010.

 The Greek debt crisis flared during Mr. Papademos’s last year at the European Central Bank, and he became known for supporting a hard-line policy that Greece should never default.

 Now, if he were to head the new government, Mr. Papademos would have to support the 50 percent debt reduction proposal that is the heart of the deal.

Landon Thomas Jr. contributed reporting.

Article source: http://www.nytimes.com/2011/11/08/world/europe/greek-leaders-reach-deal-to-form-a-new-government.html?partner=rss&emc=rss

Greek Leaders Agree on New Government

ATHENS — After crisis talks on Sunday night, Prime Minister George Papandreou and his main rival agreed to create a new unity government in Greece that will not be led by Mr. Papandreou, according to a statement released Sunday night by the Greek president, who mediated the talks.

Mr. Papandreou and the opposition leader Antonis Samaras agreed to meet again on Monday to hammer out the details. The name of the new prime minister is not expected until then.

The new government is intended to govern for several months to put in place a debt agreement with the European Union, a step European leaders consider crucial to shoring up the euro. Then it is to hold a general election and dissolve.

 Mr. Papandreou has faced mounting pressure to resign, including from within his own party, the Socialists.

Before the meeting with the president, Mr. Samaras said he would enter talks on a unity government only if Mr. Papandreou resigned. Mr. Papandreou himself had repeatedly said that he would be willing to step aside for the deal to go through.

But after meeting with his cabinet in the afternoon, Mr. Papandreou said Mr. Samaras would first have to agree to a seven-point plan of priorities that would essentially commit the new government to the terms of the debt deal. The priorities include securing the release of European rescue funds, meeting fiscal targets imposed by foreign creditors, and passing the 2012 budget by the end of the year.

Mr. Samaras’s conservative New Democracy party has in the past voted against many of the unpopular austerity measures Europe has demanded in exchange for its help, leaving the Socialist government to shoulder the political burden alone.

Mr. Papandreou also insisted that the two sides agree on the composition of a unity government before he steps down.

“It’s clear this government is prepared to hand over the baton, but it can’t hand it over into a vacuum,” he said, according to a transcript of the cabinet meeting that was released to the news media. “It will hand over to the next government, if we agree and decide on it.”

It was not clear on Sunday night whether the opposition had agreed to the sevenpoints during the meeting with President Karolos Papoulias; nor was it clear when Mr. Papandreou would step down. Discussion of the composition of the unity government was left for Monday.

In one scenario discussed in the Greek media on Sunday, Mr. Papandreou might cede power to a unity govermnet including politicians from the Socialist and New Democracy parties but led by a nonpolitical figure. One name being mentioned as a possible leader for such a government is Lukas Papademos, a former vice president of the European Central Bank.

That scenario could set the stage for a power battle between Mr. Papademos and the current finance minister, Evangelos Venizelos, who has reportedly been trying to rally support for a government that he could lead.

Mr. Papandreou survived a crucial confidence vote in Parliament in the early hours of Saturday, a vote seen as an endorsement for the debt agreement with the European Union, but which was predicated on the expectation that he would immediately resign.

His failure to do so appeared to leave Greek politically deadlocked, with the opposition calling for early elections and the government insisting that holding elections now would be too destabilizing.

European leaders want the Greek Parliament to pass the new debt deal worked out in Brussels on Oct. 26. They have urged Greek leaders to forge a broader consensus, since the governing Socialist party did not seem to be able to unify and pass the law on its own.

The deal calls for banks that hold some Greek debt to write down 50 percent of its face value, to help reduce the country’s public indebtedness to 120 percent of its gross domestic product by 2020. But the deal also requires the Greek government to adopt a series of deeply unpopular austerity measures, and it imposes a permanent foreign monitoring presence, a development that many Greeks see as a loss of sovereignty.

In an effort to allow Greeks to have their say, and to strongarm Mr. Samaras into backing the debt deal, Mr. Papandreou proposed a popular referendum on the agreement last week. After the referendum idea drew the ire of European leaders and threw international markets into turmoil, Mr. Papandreou withdrew it.

Though the about-face may have appeared to be a defeat for Mr. Papandreou, he won support for the debt deal from the opposition.

Opinion polls published in Greek newspapers on Sunday drew different conclusions about whether Greeks preferred a national unity government or immediate elections.

A poll for the centrist weekly Proto Thema found that 52 percent of Greeks favored a unity government that would rule for several months and be chosen by Mr. Papandreou, while 36 percent preferred immediate elections to choose a new government, as proposed by the New Democracy party.

Another poll, for the center-left Ethnos newspaper, found less difference in support for the two scenarios, with 45 percent supporting a unity government and 42 percent backing snap elections.

A third survey, for the center-right Kathimerini, found that 66 percent of Greeks supported early elections, but in that poll the alternative choice offered was not a unity government, it was a referendum, which only 14 percent of respondents supported.

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Greek Leader, Papandreou, Wins Vote in Push to Save Debt Deal

Mr. Papandreou pledged to form a unity government with a broader consensus, regardless of whether he would lead it.

The moves ended a frenetic week that began with Mr. Papandreou’s surprise call for a referendum on Greece’s new debt agreement with the European Union, which threw financial markets into disarray and even threatened to spread the financial contagion to Italy. He was then forced to back away in a humiliating about-face and saw his domestic support crumble rapidly, even within his own party.

In the 300-member Parliament, Mr. Papandreou received 153 votes. His total included the support of all members of his Socialist Party, known as Pasok, and an independent; several members who had said they would oppose the prime minister ultimately rallied to support him. Mr. Papandreou had widely been expected to step down after the confidence vote, but he said early Saturday that he would explore the composition of a transitional unity government in a meeting with President Karolos Papoulias later in the day. Finance Minister Evangelos Venizelos said the interim government would govern until the end of February, with early elections expected in March.

The confidence vote was essentially cast as a vote on the debt agreement reached with European leaders in Brussels last week, and its passage suggested that Parliament was likely to formally approve the deal. It also appeared to clear the way for Greece to receive the next installment of aid, $11 billion, next month; Greek officials have said that without the additional funds, the country would run out of money to cover expenses by mid-December.

Had Mr. Papandreou lost the vote, his government would have been brought down, throwing the debt agreement into jeopardy and possibly leading to a Greek default and its departure from the euro zone, the 17 nations in the European Union that use the currency. The prime minister’s volatile moves during the week appear to have succeeded in averting those events, at least for now.

But the vote did not resolve the continuing political drama in Greece, including what will be the composition of the next government. Amid growing social unrest in a country whose economy has been decimated by the debt crisis and austerity measures, a new government will have the difficult task of getting formal approval of the debt deal and carrying out the structural changes to which Greece has already pledged itself, including dismissing government workers.

A few hours before the vote, Mr. Papandreou offered a final appeal to Greek lawmakers, declaring his willingness to open immediate talks on a coalition government and to step aside for the good of the country. “The last thing that interests me is my seat,” he said. While the prospect of Greece’s leaving the euro zone, however remote, has been set aside for now, the country is likely to face a caretaker government increasingly seen as beholden to the European Union and the International Monetary Fund, Greece’s foreign lenders.

Mr. Papandreou told the lawmakers that he had viewed a referendum as a form of “direct democracy,” a nod to protesters who have been calling for a greater say in their country’s future amid a growing sense that Greece was no longer in control of its own affairs. 

The idea of a referendum not only caused market turmoil, but it also infuriated European leaders, who gave Mr. Papandreou a serious dressing down in Cannes, France, on Wednesday. It also provided political leverage for the prime minister; Mr. Papandreou dropped the idea only after the conservative opposition, the New Democracy Party, altered its position and said it would support the debt deal.

The New Democracy leader, Antonis Samaras, who has said he would not join a coalition government if it was led by Mr. Panapndreou, repeated his demand for early elections after the confidence vote. On Thursday, he accused Mr. Papandreou of deception and “blackmailing” the Greek people by proposing a referendum.

Niki Kitsantonis contributed reporting from Athens.

Article source: http://www.nytimes.com/2011/11/05/world/europe/greek-vote-european-debt.html?partner=rss&emc=rss

Worried Eyes on Greece Ahead of Confidence

A day after calling off a highly contentious plan for a referendum on Greece’s latest debt deal that had jolted markets and shaken Europe, Mr. Papandreou was under intense pressure from his own Socialist party and the center-right opposition to step aside if his government survived the confidence vote, to pave the way for a unity government or early elections. His position on stepping down had appeared to waver throughout the day Thursday, infuriating the leader of the opposition New Democracy Party, whose hard-won support for the debt deal was crucial to averting the referendum.

Even if the socialists win the vote, Mr. Papandreou is under so much pressure from within his own party that he would most likely have to step aside and make way for a new leader — or for a coalition government with the center-right opposition.

They have refused to consider such an option unless Mr. Papandreou resigns.

The political instability comes at a crucial time. The Greek Parliament must still approve the new debt deal with Europe, which was hammered out in Brussels on Oct. 26 as part of a broader deal to shore up the euro. If not, it might jeopardize not receive the next installment of foreign aid, money it needs to meet basic expenses and prevent a default whose worst-case outcome would have banks beginning to topple throughout Europe and other sovereign governments.

The confidence voted is expected after midnight, in the early hours of Saturday local Greece time. To survive, Mr. Papandreou needs to win a majority of those present. There are 300 seats in Parliament, of which he normally commands slightly more than half. But with his own party in disarray, he cannot count on the usual number. On the other hand, if some lawmakers stay away, the number of votes that would constitute a majority drops.

On Friday, Mr. Papandreou was trying to solidify his support among dissenters in his own Socialist party, many of whose members believe he lost credibility with the referendum plan.

When Mr. Papandreou called off the plan, he cited the center-right New Democracy party’s shift on the debt deal and called for greater consensus to push through the debt deal and the new austerity measures it requires.

But the two parties’ definitions of consensus diverged.

In a climate of intense political maneuvering ahead of the vote on Friday, New Democracy held fast to its refusal to enter talks for a coalition government as long as Mr. Papandreou remained prime minister. Instead, it seeks a transitional government led by technocrats ahead of early elections.

The pressures on Mr. Papandreou from within his party were high.

On Friday, his finance minister, Evangelos Venizelos — seen as a political rival as much as an ally — spoke on the telephone with some of the key players behind the debt deal, which calls for private banks to take a 50 percent writedown on the face value of some of their Greek debt. Among them were the chairman of the euro zone finance group, Jean-Claude Juncker; the European Economic and Monetary Affairs Commissioner Olli Rehn and German Finance Minister Wolfgang Schaueble. Mr. Venizelos reassured them that the Greek government would be able to unite behind the debt deal after the confidence vote.

Mr. Venizelos told the European Union officials that the government “aimed to win the vote of confidence tonight, not to continue alone with the support only of members of Parliament from the governing Pasok party but to achieve the greatest possible consensus and cooperation for the benefit of the country and subsequently form a government reflecting this consensus,” the Finance Ministry said in a statement. Pasok is the Greek name for the Socialist party.

Aimed at reassuring markets and Europe, Mr. Venizelos’ statement was also seen as a sign of his exerting his own authority. A Socialist stalwart, he lost to Mr. Papandreou in elections for Socialist party leadership in 2007.

A more reform-minded wing of Pasok, including Health Minister Andreas Loverdos and Education Minister Anna Diamantopoulou, wrote an open letter to Mr. Papandreou earlier this month criticizing him for not carrying out structural changes fast enough.

In a statement issued on Friday, Mr. Loverdos said that he would support Mr. Papandreou in Friday’s confidence vote but that unless talks began immediately for a unity government, “I will have no involvement in the political process that follows.”

Steven Erlanger contributed reporting from Cannes, France, and Alan Cowell from London.

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In Debt Deal, Merkel Seizes Initiative and Confounds Critics

Early on Thursday morning, Chancellor Merkel appeared to defy her detractors as she helped lead the nations of the euro currency zone to the most comprehensive deal yet to prop up the ailing shared currency, defend heavily indebted member states and protect the Continent’s shaky financial system.

“She is not the kind of person who leads Europe because she believes that she is meant to lead like some of her predecessors,” said Kurt Kister, editor in chief of the daily Süddeutsche Zeitung. “She takes responsibility when she sees that the others are not in a position and she believes that she has to.”

Throughout the slow-moving financial crisis it is safe to say that no one has been more fascinating, and more vexing, than Mrs. Merkel, who has frequently come under fire on both sides of the Atlantic for what critics assailed as her plodding, reactive, inadequate style of leadership. But something changed in the weeks ahead of Wednesday’s critical meeting.

The treacherous sands of German politics firmed up, giving Mrs. Merkel the base of support at home to push for a more comprehensive rescue plan.

Mrs. Merkel may not always move quickly, said Mr. Kister, “but at the decisive moments she doesn’t hesitate.”

Though markets rallied Thursday, Europeans understand the debt crisis has not been solved once and for all by the latest steps. But given the relative success of the latest agreement, supporters offer an alternate narrative of the chancellor, portraying her as a consummate poker player using the pressure of the market to extract previously inconceivable cutbacks and reforms from the Greek government even in the face of rioting Athenians, while at the same time forcing banks to accept 50 percent losses on their holdings of Greek debt.

Mrs. Merkel has persevered through a difficult year that saw her party, the Christian Democrats, suffer one setback after another in key German state elections, while her coalition partners, the pro-business Free Democrats, saw their support among voters nearly collapse. But she managed to turn weakness into strength, reminding her coalition that a break in the ranks could spell new elections and defeat.

Two days before the crucial vote last month to expand the size of the bailout fund, Mrs. Merkel flashed the wit she keeps largely under wraps, warning lawmakers from her conservative bloc that she could not have “an orgy of abstentions.”

“I’m too fond of you,” she told the parliamentarians, “and have many too many plans for you anyway.”

A September vote to expand the bailout fund passed the Bundestag by a wide margin, as did a second vote on Wednesday that helped empower Mrs. Merkel as she entered the grueling but ultimately successful night of negotiations in Brussels.

Political analysts describe a sharp learning curve for Mrs. Merkel on economic and monetary issues since the very beginning of the financial crisis. The slightly patronizing view had been that she had difficulty understanding the financial markets. Rather, those close to her say, if she had any trouble understanding, it was because as a trained physicist — a rational scientist — she was initially perplexed by the emotional and at times irrational nature of market swings.

“She didn’t quite understand why 10 small steps didn’t have the impact on the market that one big step did, even if the little steps actually added up to more,” said a senior lawmaker from Mrs. Merkel’s Christian Democratic Union, who requested anonymity in order to speak candidly about the chancellor.

Mrs. Merkel has come a long way since those days before the September vote, when the German capital was abuzz with speculation that her parliamentary coalition would crack and her government might fall.

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Stocks Slump More Than 2% Despite Debt Vote

Stocks had slumped since the morning opening as investors weighed recent data that drove home the challenges the economy faced. Their next step: assessing the debt limit agreement’s impact on the economy and whether it could slow growth.

“As the macro data comes out, it seems like we may have more on our hands than just getting the debt ceiling raised,” said Myles Zyblock, chief institutional strategist and managing director of capital markets research at RBC Capital Markets.

“We get no default, but the bad news is there is a growth trade-off,” he said. “They had to agree on fiscal contraction that would weigh on growth.”

At the close of trading, the Standard Poor’s 500-stock index was down 32.89, or 2.56 percent, erasing all of the gains it had made this year. The Dow Jones industrial average was off 265.87 points, or 2.19 percent, to 11,866.62, recording its eighth consecutive day of declines. And the Nasdaq index fell 75.37 points, or 2.75 percent.

Uri Landesman, the president of Platinum Partners, said that investors were discounting the debt deal and, with such poor economic data, starting to question the viability of corporate earnings for rest of the year.

“Economic data has been a disaster,” he said. “It’s clunker after clunker. If the economy is desultory, how are the earnings going to excel?”

Stanley Nabi, the chief strategist for Silvercrest Asset Management Group, said he was starting to hear the word “recession” in questions from clients over the last few days.

Referring to the debt deal, he said: “That was yesterday’s story. Today’s story is what is going to happen on the economy.”

The most recent indicators were released Tuesday, when the Commerce Department said personal spending fell 0.2 percent in June, the first time it had declined since September 2009. Nominal personal income inched up by 0.1 percent in June, and wage and salary income, central to the ability of consumers to open their wallets, was unchanged in June from 0.2 percent in May, its smallest rise this year.

“With consumers still facing serious headwinds from a deteriorating housing sector, considerable debt burdens, and high costs for food and energy, the income generated by labor market recovery is absolutely critical,” said Joshua Shapiro, the chief United States economist for MFR, in a research note. “Without significant improvement in the labor market, consumer spending and hence overall real G.D.P. growth will prove disappointing in coming quarters.”

The price of Treasuries soared. The yield on the benchmark 10-year bond collapsed to 2.61 percent, compared with 2.75 percent late on Monday. For the month of July, the note was down 37 basis points to 2.80 percent, versus 3.17 percent in June.

“The challenges that we are facing economically are that the hits just keep coming,” said Lawrence Creatura, portfolio manager at Federated Investors. “We do have somewhat of a resolution to our budgetary impasse, but that does not overwhelm the fact that economically speaking that the data continues to deteriorate.”

Already, some investors were bracing for Friday, when the Labor Department releases its national report on jobs, with estimates that the economy added 85,000 nonfarm payrolls in July, according to a Bloomberg News survey, compared with the 18,000 tacked on to payrolls in June.

“This is a single-variable economy,” said Mr. Creatura. “And that dominant statistic is the jobs data. That is the number that matters, the single number that matters.”

Still, one bright spot might be the corporate sector. Second-quarter earnings are on the verge of setting a record, and records are also expected for the remaining two quarters of this year, according to a recent survey by Howard Silverblatt, S.P.’s index analyst.

“Repairing our balance sheets as a corporation and as a nation: that process of repair and healing is occurring,” said Mr. Creatura. “The nature of it is that it is slow, and we are all impatient for a full return to a robust economy, but it takes time.”

European and Asian markets were lower on Tuesday.

The FTSE 100 in London was down 0.90 percent, the CAC 40 in Paris lost 1.56 percent, and the DAX in Frankfurt was off 2.10 percent.

In Asia, the Hang Seng index in Hong Kong, which added 1 percent on Monday after the framework for the debt deal was announced by President Obama in Washington, closed down 1.07 percent on Tuesday, and the Nikkei 225 was down 1.21 percent.

Article source: http://www.nytimes.com/2011/08/03/business/daily-stock-market-activity.html?partner=rss&emc=rss

Boehner Says G.O.P. Is Ready to Act Alone on Debt Deal

Leaders of both parties continued to negotiate over the telephone, hoping to settle the matter before the opening of the Asian markets later on Sunday. That opening is widely feared to be the first real test of the tangible financial market fallout from the debt limit impasse. It was far from clear that such a deal would or could be reached in time.

As the Aug. 2 deadline for lifting the debt ceiling nears, warnings are growing that the nation’s economy may be damaged because of the protracted political stalemate. A downgrade of the nation’s credit rating, which could raise the cost of borrowing, seemed more likely, deal or no deal.

The impasse has further set the tone for the 2012 presidential race, with the debate growing rancorous and the two parties’ visions for the country at odds. The enormous deficit challenges have been clearly articulated to voters, as the parties seek unified control of Congress, where the Republicans are the majority in the House and the Democrats in the Senate.

“My last offer is still out there. I’ve never taken my last offer off the table,” Mr. Boehner said on “Fox News Sunday.” He said that plan included about $800 billion in new tax revenue as well as significant spending cuts.

“The preferable path would be a bipartisan plan that involves all the leaders, but it is too early to decide whether that’s possible,” Mr. Boehner added. “If that’s not possible, I and my Republican colleagues in the House are prepared to move on our own.”

The contours of such a plan were far from clear at midday Sunday. But it seemed likely to take the form of a two-step process, with a short-term increase in the debt limit along with about $1 trillion in cuts, an amount the Republicans said was sufficient to clear the way for a debt limit increase through year’s end. That would be followed by future cuts guided by a new legislative commission that would consider a broader range of trims, program overhauls and revenue increases.

Both sides would also be given another chance to vote on a balanced budget amendment that would set stringent guidelines for future debt ceiling increases.

While the White House remains adamantly opposed to a two-step deal that does not extend the debt ceiling beyond next year’s elections, administration officials expect that the Senate would modify Mr. Boehner’s proposal.

At the moment, the White House is a spectator to the 11th-hour game plan, after Mr. Boehner’s abrupt abandonment of negotiations on Friday night.

While a modified plan might fail to gain the support of the more right-leaning and Tea Party-influenced House members, it could win enough Democratic votes to pass if it is blessed by the Senate majority leader, Harry Reid. However, if Mr. Boehner were to reject Senate modifications and go with a deal that would pass muster with his Republican conference, the Senate would have to offer a rebuttal, as the clock ticks.

Such a plan has been rejected out of hand by the White House and Senate Democrats as unacceptable; they prefer one that would clear the way for roughly $2.5 trillion in extra borrowing needed to get through 2012, just beyond the presidential election.

Indeed, the so-called grand bargain between Mr. Boehner and Mr. Obama has not been left for dead — as have plans crafted by Mr. Boehner; the Republican minority leader, Mitch McConnell; and others — because, at the end of the day, the $800 billion in tax revenues and trillions of dollars in cuts amount to perhaps the best deal either party can get, even if it is unacceptable to the base of each.

Mr. Obama has said he will veto any debt legislation unless it extends the ability of the nation to borrow into 2013, the White House chief of staff, William M. Daley, said on Sunday.

Mr. Daley, appearing on the NBC News program “Meet the Press,” said that world markets and the American economy could not continue with the doubts brought on by periodic fights over the debt ceiling. “The president believes that we must get this uncertainty out of the system,” Mr. Daley said.

Minutes after Mr. Daley promised a veto, Senator Tom Coburn, Republican of Oklahoma, said on the same program that Mr. Daley’s remarks were “a ridiculous position, because that’s what he’s going to get presented with.”

Meanwhile, Treasury Secretary Timothy F. Geithner suggested there was still hope for a grand bargain. “They are talking again,” Mr. Geithner said in an appearance on “This Week” on ABC. “They’ve been in touch throughout this time.”

Both Mr. Geithner and Mr. Daley said they believed Congress would figure out a way to avoid default. “The leaders of Congress have said unequivocally that we will meet our obligations,” Mr. Geithner said.

Mr. Daley acknowledged, however, that both sides were still at the brink. “We are now getting to a point where markets around the world will question whether the political system can come together and compromise for the good of the country,” Mr. Daley said.

On Saturday, Congressional leaders clashed as they tried to reach a new deficit reduction agreement that Mr. Boehner told colleagues could cut $3 trillion to $4 trillion in spending over 10 years.

“We are working, and I’m confident there will be resolution,” Mr. Boehner told his fellow House Republicans in an afternoon conference call, according to participants. “There has to be.”

Maria Newman contributed reporting from New York.

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