March 19, 2024

In Florida, Facing the Political Implications of Housing Crisis

He offered no new policy prescriptions to help people whose homes are worth less than they owe, and suggested that the best remedy was a stronger economy. But in contrast to earlier statements he and other Republican candidates have made about letting the market correct itself by first hitting bottom, Mr. Romney, a former governor of Massachusetts, instead offered a reassuring if vague message: “People in Florida have seen home values go down,” he said, striking an empathetic tone. “It’s time to turn that around.”

Among those cheering for Mr. Romney was Eric Brandon, 41, a nurse who paid close to half a million dollars for his two-story, four-bedroom home in Palm Coast, Fla., in 2005. Now it is worth only about $130,000, he said. And he felt that Mr. Romney, as a successful businessman, was best poised to confront the problem.

“As long as people have jobs, they will be able to buy houses,” he said “The economy is my issue, and I know Romney is strong on that.”

The Republican presidential campaign is now moving into a state consumed by the housing crisis, perhaps the most enduring legacy of the economic downturn, and the primary battle is the first serious test of how it plays out as a political issue in the race. For Republicans, it is an especially tricky topic, forcing them to balance their free-market instincts against intense demand among homeowners for more to be done.

The candidates have not offered detailed plans of how to respond to the crisis, although Mr. Romney has opposed giving help to homeowners facing the loss of their homes, while Mr. Gingrich has faulted banks for being too quick to foreclose.

But seeing an opening to win over Florida voters on an issue that hits home, Mr. Romney on Monday attacked Newt Gingrich’s ties to the giant mortgage lender Freddie Mac, saying Mr. Gingrich had profited while homeowners suffered.

In interviews across Florida over the last several days, likely Republican primary voters echoed sentiments similar to Mr. Brandon’s, indicating that in a state where one in every 360 housing units is in foreclosure, and where the economy is lagging behind much of the rest of the nation, Mr. Romney’s business background could serve him well because of perceptions that he might have a better sense of how the economy works than his Republican rivals.

But his past statements about allowing market forces to address the problem continue to be a challenge for Mr. Romney. Since arriving in Florida on Sunday, Mr. Romney has been slightly moderating his tone on foreclosures, telling people in Tampa Bay on Monday that “the idea that somehow this is going to cure itself all by itself is unreal” and, “There’s going to have to be a much more concerted effort to work with the lending institutions and help them take action.”

That is a shift in emphasis from an interview in October with the editorial board of the Las Vegas Review-Journal, he said, “Don’t try and stop the foreclosure process,” adding, “let it run its course and hit the bottom.”

Mr. Gingrich has criticized banks as profiting from foreclosures, and has said he would like to repeal policies stemming from the Dodd-Frank financial overhaul, which he says are keeping small banks from making loans. He wants to change the rules to encourage banks to do more short sales of so-called underwater properties.

Some of the anger over the foreclosure crisis is directed at President Obama, who many say has not done enough to address the issue.

In parts of Florida such as Homestead and Florida City, the anger driving some of the Republican vote is visible on the street. For several hours Saturday, Carols Castellano Triana, the owner of a painting business, held a hand-painted sign saying, “Vote Republican” at the busy intersection of Palm Avenue and Dixie Highway in Florida City, an area that has been ravaged by the housing implosion.

Mr. Triana is a renter with aspirations of owning a home. He is an undecided voter, but said he would most likely vote for Mr. Romney.

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Europe’s Economic Powerhouse Drifts East

With large parts of Europe still in an economic rut and struggling to cope with a debt crisis, Germany is increasingly deploying its money and energy outside the euro zone to fuel its robust growth.

The shift in focus, while still in its early stages, could have profound economic and political implications because it comes at a critical time when the rest of Europe is counting on Germany to continue its traditional role as the locomotive of the Continent’s economy.

German companies, instead of concentrating their investment overwhelmingly on countries like France and Italy, are sending a growing proportion of their euros to places like Poland, Russia, Brazil and especially China, which is already the largest market for Volkswagen and could soon be for Mercedes and BMW.

The German government is following suit, committing more diplomatic resources to its growing trade partners, particularly China, whose prime minister, Wen Jiabao, brought an entourage of 13 ministers and 300 managers when he visited Chancellor Angela Merkel of Germany last month.

President Dmitri A. Medvedev of Russia brought a similar entourage with him Monday to Hanover for annual German-Russian consultations, including Alexander Medvedev, deputy chief executive of Gazprom.

The economic shift is already having profound consequences inside Europe. As Germany becomes less dependent on euro zone markets, there are signs that it is becoming stricter with its ailing partners, like Greece, Italy and Portugal, adding to the pressures already straining European unity.

“It reinforces a shift that we have seen in recent years for Germany to become rather more focused on its own national interests rather than sacrificing for some defined European interest,” said Kevin Featherstone, an expert on E.U. politics at the London School of Economics. “Germany is not giving up on Europe, but it is certainly frustrated.”

German politics are in line with the interests of German businesses like Fresenius, a health care company in Bad Homburg, near Frankfurt. Last year, Fresenius recorded a sales increase in Asia of 20 percent, to €1.3 billion, or $1.8 billion. That compared with its sales in Europe of €6.5 billion, up 8 percent.

Fresenius’s chief executive, Mark Schneider, said he expected the trend to continue, noting that China was trying to create a universal health care system that would ensure its people access to kidney dialysis and infusion therapies — the sort of products that Fresenius provides.

Germany, of course, remains deeply entwined with the euro zone, which is still its largest source of trade by far. But Western Europe’s share in the German pie is shrinking as companies focus new investment on more vibrant markets.

“I’m not sure I would call Germany the locomotive” for Europe anymore, said Marc Lhermitte, a partner at the consulting firm Ernst Young. “It’s an engine.”

Mr. Lhermitte was one of the directors of a study in May by the firm that looked at trends in cross-border investment around the world.

Last year, the euro area’s share of German exports fell to 41 percent from 43 percent in 2008, while Asia’s share rose to 16 percent from 12 percent, according to Bundesbank figures. During the same period, exports to Asia rose by €28 billion, while exports to the euro area fell by the same amount.

Fresenius is one of many companies that reflect the trend. Corporate investment in Western Europe is still rising in absolute terms, said Mr. Schneider, but “capital spending and employment is not rising as much as we are seeing in emerging markets.”

There are also signs that Germany’s prosperity is no longer helping the rest of Europe the way it did a few years ago. On the contrary, the rest of Europe, particularly its southern half, is falling further behind as the European Union struggles to deal with the sovereign debt crisis.

The Italian economy, for example, is no longer cruising in Germany’s slipsteam.

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Administration Defends Effort on Debt After Credit Warning

Mr. Obama made his remarks at the start of a campaign to promote his ideas for reducing the deficit, while Mr. Geithner made the rounds of business television programs.

The appearances came a day after the S.P. revised its outlook on the country’s Triple AAA rating — the highest level — to negative from stable, an announcement loaded with political implications because it cited the need for Republicans and Democrats to agree on a plan to reduce the deficit.

As Mr. Geithner took the lead for the administration in responding to the S.P. warning, President Obama focused on the deficit. In his first stop, at a town hall meeting in Virginia, Mr. Obama said there was “general agreement” between Democrats and Republicans on the need to cut spending by about $4 trillion over the medium term.

But “it won’t be easy. There are going to be some fierce disagreements,” said Mr. Obama, who is also planning stops this week in California and Nevada.

Both President Obama and Republican lawmakers have suggested plans to cut the federal deficit by at least $4 trillion over the next 10 to 12 years, but disagree on methods.

In his comments, Mr. Geithner tried to reassure investors that the Democrats and Republicans would reach a deal, a concern at the heart of the S.P.’s reasoning for lowering its outlook.

He said there was “no risk” that the United States would lose its AAA credit rating and that investors were still confident in government bonds, strongly disagreeing with the negative assessment of the nation’s outlook by the Standard Poor’s ratings agency.

“Again, if you look — if you listen carefully now, you see the leadership of the United States of America, the president, the Republican leadership in both houses and the Democrats recognizing now that this is the right thing to do for the economy,” Mr. Geithner said according to a transcript of the Fox Business News interview.

Representative Eric Cantor, Republican of Virginia and House majority leader, who on Monday called the S.P. decision a “wake-up call,” said on Tuesday that the government was a “fiscal train wreck” with more than $14 trillion in debt.

“House Republicans have taken an honest, responsible approach to confront the debt crisis facing our nation,” he wrote in an opinion article published by The Culpeper Star Exponent in Virginia.

In its warning, the S.P. questioned whether government leaders would be able to agree on how to address the medium- and long-term budget challenges by 2013.

But Mr. Geithner said that a long-term deficit reduction plan can be in place before the 2012 election: “Absolutely,” he replied in response to a question. “We have a chance to make progress on that just in the next couple of months.”

“Our challenge now is to lock that in, in terms of reforms that Congress passes, so that people around the world will look at the United States and know that we’re not going to get behind the problem, we’re going to get ahead of it,” Mr. Geithner said in an interview on CNBC.

Mr. Geithner also said that he did not think the S.P. decision accelerated the need for a vote on the debt ceiling.

“There is a lot of confidence in the capacity of this economy to grow to make sure that we can meet our commitments or obligations,” Mr. Geithner told Bloomberg Television. “You can see that in that price at which we borrow every day, but we have to earn that confidence.”

When asked whether foreign buyers of United States debt had to be reassured, he added: ”Absolutely not. Look at the price at which we borrow.”

Anthony G. Valeri, a senior vice president and market strategist for LPL Financial, said there was little movement in the bond market on Tuesday, with the 10-year yield at 3.32 percent in the early afternoon and narrower credit default swaps, suggesting that the market does not see the default risk changing for United States Treasuries.

As such, he said that Mr. Geithner’s appearances seemed intended to ease political concerns rather than financial ones.

“I think he is trying to do potential damage control in Treasuries,” Mr. Valeri said. “Not that he needed to. The bond market saw right through the S..P move.”

“I think the market has moved on, and we have also got the Easter and Passover holidays this week,” he said.

The Dow Jones industrial average was up 0.50 percent, after a decline of more than 1 percent the previous day, less than two hours before the close of trading. The broader S. P. 500-stock index was up 0.46 percent, and the technology-heavy Nasdaq gained 0.14 percent. The three indexes posted their largest one-day drop in more than a month on Monday after the announcement.

In the Asia-Pacific region, stocks fell broadly but shares rebounded in Europe, after a sharp decline on Monday.

The S.P. announcement reverberated in global economies.

China’s foreign ministry said in a statement on its Web site on Tuesday that the United States must take “responsible” measures to protect investors in its debt.

It said that United States debt “reflects the credibility” of the government, and said China hoped the United States takes “responsible” measures to safeguard the interests of investors.

Government officials in Japan voiced their support of the United States.

“The United States is tackling fiscal issues in various ways, so I still think U.S. Treasuries are basically an attractive product for us,” Japan’s finance minister, Yoshihiko Noda , said, according to Reuters.

Bettina Wassener contributed reporting.

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