Debt deal in sight, now a battle over public perceptions

WASHINGTON — President Barack Obama and congressional leaders have stitched together an agreement to prevent a national default, provided that their 11th-hour deal does not fracture today, but the epic budget battle has failed to resolve another question: Which party can be better trusted to govern?

The president, with his re-election on the horizon, emerges from the showdown in a diminished state after giving considerable ground and struggling to rise above a deep partisan intransigence that has engulfed Washington.

And Republican leaders, especially House Speaker John Boehner, are bruised after navigating the intractable sentiment of the tea party movement.

A full victory lap was not expected — or, perhaps, deserved — by those on either side of the debate, which has consumed the capital, unnerved the financial markets and infuriated the American public. Yet even as a compromise was announced Sunday evening, both parties were prepared to try to define the deal as staying true to their respective principles.

How well each of them does in shaping perceptions of the outcome could have a substantial effect on the presidential race and the balance of power in Washington as the ideological fight over the size and role of government grinds on.

Boehner faces an immediate test today, needing to bring along enough Republicans to push the deal through the House. The Republican presidential field will have to decide how to navigate between the compromise reached by congressional leaders and the passions of the tea party movement.

Obama’s challenge is to reassert himself as a leader and use the outcome to position himself on the campaign trail as the voice of reason and moderation in a bitterly polarized capital.

“Is this the deal I would have preferred? No,” Obama said, speaking from the White House. He added, “This process has been messy; it’s taken far too long.”

For Obama, the most imminent blessings are avoiding a default and delaying the next fight over raising the debt limit until after the 2012 election. (House Republicans wanted to have another debate early next year.) He also can present himself as a deficit-cutting president, even though a fair share of the $2.4 trillion in cuts is unpopular with his core followers.

But the fine print of the agreement makes clear that Republicans received more of what they demanded than did Obama, who acquiesced in his initial call for a balanced mix of spending cuts and new revenues, despite repeatedly trying to seize the bully pulpit to build support for his argument.

For many liberals, this concession — and the president’s unwillingness to make a more full-throated case for greater action to address joblessness and protect other Democratic priorities — could undermine legislative support for the deal and increase the challenge of motivating voters in 2012.

The White House and Senate may be controlled by Democrats, but the debate unfolded squarely on Republican turf. It is yet another sign of how the country’s politics have changed since Obama’s term began, and of the new climate facing Republicans who are jockeying for the chance to challenge the president next year.

As Boehner has witnessed throughout the budget debate, the newly empowered voices in the Republican Party can be difficult to control. He faces the near-certainty of large numbers of defections from his ranks today as he tries to win support for the compromise with the Senate, support he needs to avoid sinking the deal and owning the political fallout.

“This isn’t the greatest deal in the world,” Boehner told House Republicans in a conference call on Sunday evening. He added, “It shows how much we’ve changed the terms of the debate in this town.” 

While the White House has taken a measure of comfort from the displays of dysfunction in the Republican ranks, there has not been a shortage of discord among Democrats. The liberal group MoveOn.org said Sunday that it was “extremely troubling that it now appears that some Democrats are willing to give in to Republican demands to make this already disastrous plan worse for working families.”

The outcome, perhaps, was better for Obama as a presidential candidate than as a president. His ability to face down House Republicans over the next 18 months is in question, but when he faces voters next year, his advisers believe that the debt-ceiling fight will have created a clear contrast between his priorities and that of a Republican party that he and his allies will no doubt portray as extreme.

The president can no longer make the argument that he has changed the way Washington works — Obama’s Washington, in fact, has looked even worse than previous eras — but his advisers hope he will still come across as the more reasonable alternative, and the only way to put a check on a conservative movement seeking a wholesale redefinition of the proper role of government.

The president offered a preview of that message in his brief remarks Sunday evening, declaring that it was time to “end the crisis that Washington imposed on the rest of America.”

But the country has also watched as Obama has struggled to make his case.

A daily series of meetings with legislative leaders in which the president smiled as he trumpeted a “grand bargain” that he hoped to reach with Boehner gave way to the president delivering a scathing denouncement of Republicans. In recent days, advisers made the decision to keep Obama out of public view, reaching out to legislators by telephone instead.

The drawn-out debt debate may well be recorded as one of the lower points of his presidency. From the outset, Obama had the most to lose if the negotiations failed and the least to gain if they succeeded. But he confined his arguments largely to televised appearances inside the White House — from the Cabinet Room to the East Room to the press briefing room — rarely venturing outside Washington to take the debate directly to the public.

By late last week, when the irritation was alive in his voice, Obama was urging his supporters to call or send messages via Twitter. Democrats complained that his voice was too quiet during the debate, but in the president’s brief statement from the White House on Sunday evening, he dismissed those suggestions.

“I want to thank the American people,” Obama said. “It’s been your voices, your letters, your e-mails and your tweets that have compelled Washington to act in the final days.”

Syria’s security forces

DAMASCUS — Here is a breakdown of Syria’s armed forces, after President Bashar al-Assad praised troops for “foiling the enemies”, a day after security forces reportedly killed nearly 140 in a crackdown on protests.

According to the latest edition of the Military Balance, published by the International Institute for Strategic Studies in London, the country’s defence budget in 2009 was at $1.87 billion/1.29 billion euros for a gross domestic product of $53.3 billion.

·         Troops: The Syrian army consists of 325,000 troops, of which 220,000 are in the army, 5,000 in the navy, 40,000 in the air force and 60,000 in air defences.

Paramilitary forces are estimated at 108,000, of which 8,000 are in the gendarmerie, under the authority of the interior ministry, and 100,000 in the popular militia of the Baath party, which has been in power since 1963.

As regards reservists Syria’s army has 314,000 troops, while there are 4,000 in the navy, 10,000 in the air force and 20,000 in the air defences.

·         Structure: The ground army has seven armoured divisions, three mechanised infantry divisions, a special forces division and a Republican Guard, created in 1976 and charged with state security.

The efficiency of the special forces and the Republican Guard is considered to be superior to that of the army in general.

·         Equipment: the army is equipped with mainly Russian-made material, and includes 4,950 tanks. It has a large arsenal of missiles, whose command is based in the northern city of Aleppo.

The navy has two frigates. The air force has 555, mainly Soviet-built, fighter planes.

Even if its material is globally considered obsolete since the disappearance of the Soviet Union, its main ally and supplier, Syria’s military is one of the biggest in the Arab world

After Aiding Republicans, Business Groups Press Them on Debt Ceiling

WASHINGTON — The U.S. Chamber of Commerce, which spent millions of dollars last year helping elect Republicans to Congressional seats, is struggling to convince the House it helped to build that the debt ceiling must be increased.

The chamber and other business groups have pressed with increasing urgency for Congress to raise the maximum amount that the government can borrow. They have cataloged the consequences of default at meetings, parties and dinners and over drinks.

On Tuesday, the chamber threw its weight behind the proposal of the House speaker, John A. Boehner, telling recalcitrant Republicans that a pending vote on the plan was a with-us-or-against-us moment that would be remembered during the next election campaign.

But as the government runs out of money, those efforts have not produced the desired result. The freshman class of House Republicans, along with longer-serving members, is balking at Mr. Boehner’s plan, let alone anything that Senate Democrats and the White House might be willing to accept.

The tension highlights the distance between the pro-business stalwarts of the traditional Republican Party and the populism of its newer representatives, many of whom seem to view Wall Street and Washington with equal suspicion.

“I think they’re very pleased with the antigovernment inclinations of the Tea Party Republicans when it comes to taxes and regulation,” said David Axelrod, one of the president’s chief political advisers. “But now we have a situation where the integrity of the economy and the U.S. financial system is at stake, and they’re being hoisted on their own petards.”

The chamber and its allies say that they remain confident that Congress will act to raise the debt ceiling, and moreover that they have supported the demands of House Republicans that the government should be allowed to borrow more only if it starts spending less.

“There’s nothing more important for financial stability than getting the debt ceiling raised and putting our nation on a prudent financial path, a message we have been delivering to lawmakers for weeks,” said Rob Nichols, president of the Financial Services Forum, which has joined with the chamber and the National Association of Manufacturers to press the issue.

The manufacturers’ association joined the chamber on Tuesday in endorsing the Boehner plan, which the White House has described as unacceptable because it allows only enough borrowing room to pay the government’s bills until early next year, when a new agreement would be required.

The chamber made a big splash during the midterm elections with advertisements that attacked Democratic incumbents, particularly those who supported the president’s health care legislation, for being antibusiness. It issued endorsements describing their Republican opponents as “invaluable” leaders on business issues who would support economic growth.

Among the beneficiaries was Daniel Webster, a Florida Republican. The chamber spent $250,000 on ads blasting the Democratic incumbent, Representative Alan Grayson. Mr. Webster won.

In July, Mr. Webster introduced legislation instructing the Treasury to prioritize interest payments, then military spending, then Social Security checks, then Medicare payments, “in the event the debt ceiling is reached.” Experts regard the idea as unworkable.

The chamber spent $436,953 helping to elect Steve Pearce, a New Mexico Republican, almost 20 percent of the total that he was able to raise and spend on his own.

This month, Mr. Pearce told the radio program “News New Mexico” that cutting federal spending was just as important as increasing the debt ceiling.

“We have talked a lot about Armageddon if we don’t pass the debt ceiling,” he said. “There’s an equal Armageddon on the other side if we don’t start curing the spending problems.”

In May, the chamber gave $2,000 to Representative Patrick Meehan, a Pennsylvania Republican already building up a war chest for the 2012 campaign.

A few weeks later, Mr. Meehan said he was “hopeful that we will reach an agreement that stops our massive borrowing and reckless spending without risking a default."

It has been clear since last fall that the government would hit the debt ceiling, the legal maximum that it can borrow, at some point during 2011. In May, the Treasury said that it had reached the legal limit and that it would begin to cancel obligations to other parts of the government, allowing it to borrow enough money to pay all of the government’s bills until early August.

The president asked Congress to increase the limit. House Republicans refused unanimously, insisting that Democrats first agree to cut spending by the same amount.

Business groups stayed mostly on the sidelines for months. The chamber orchestrated a May letter from business groups to political leaders calling for an agreement. In July, the groups sent a second letter, this time signed by several hundred chief executives. It was nothing in comparison with the efforts the same groups have made in recent years to oppose legislation on health care and financial regulation, or their recent advocacy in support of free trade agreements with South Korea, Colombia and Panama.

One reason for the relative silence was the assumption that the ceiling would be raised. Even now, there is widespread confidence that the parties will strike a deal — a state of affairs most clearly reflected in the ease with which the government continues to borrow money from investors.

“Also you don’t want to be on the wrong side,” said Tom Block, the longtime head of government relations for JPMorgan Chase and now a private consultant. “They had the confidence that this is going to be resolved without their participation, so why participate?”

Another difference has been the absence of a piece of legislation to hail or hammer.

Mr. Axelrod said business groups were constrained by their desire to win the support of House freshmen on other issues, including the trade agreements and efforts to roll back regulation.

“I just think that there was, at least on the part of the chamber, a reluctance to tangle with, or pressure, the same group in the House that they’re depending on to gut financial reform and undo environmental regulation and so on,” he said. “But I think the gravity of the situation is now clear.”

Business groups disputed that characterization, but agreed with the conclusion.

“We’ve worked with the broader business community over the last month,” said Aric Newhouse, senior vice president for government relations at the National Association of Manufacturers. “It’s the right thing to do to provide certainty for the country and the economy.”

J. P. Fielder, a spokesman for the chamber, said it the group was encouraging members to address the debt ceiling so they could return to other issues.

Purported manifesto from Norway suspect plots European 'civil war'

Oslo, Norway (CNN) -- A rambling, 1,500-page manifesto purportedly written by the suspect in Friday's bloody terror attacks in Norway lays out right-wing extremist views and vows that a "European civil war" will lead to the execution of "cultural Marxists" and the banishing of Muslims.

While the title page of the document says "By Andrew Berwick," the writer goes on to later to identify himself as Anders Behring Breivik, the suspect in the Norwegian terrorist attacks.

The document, which is part political diatribe, part confessional and part action plan, details Breivik's background and his plans to commit Friday's attacks. It also contains various photos of him.

"If you are concerned about the future of Western Europe you will definitely find the information both interesting and highly relevant," the author writes, adding later that the work took him nine years to complete.

CNN has not been able to independently verify that the document was written by Breivik. But police told the Norwegian newspaper VG that the document is "linked" to Friday's attacks.

Breivik is charged in an Oslo bombing and mass shooting on Utoya Island that left at least 92 people dead.

Geir Lippestad, who identified himself as the suspect's lawyer, told Norwegian broadcaster TV2 that Breivik believed the attacks were "horrible" but "necessary," and would explain himself in court Monday.

The manifesto includes photos that appear to match those of the suspect, some of which had been posted on his Facebook page and several never-before-seen images of the same man. The author leaves clues about his family and background, and also indicates that English is his "secondary language."

The document is titled "2083: A European Declaration of Independence," a date that the author later explains is the year he believes an European civil war will end with the execution of cultural Marxists and the deportation of Muslims.

This "civil war" would come in three phases, he predicts. The first runs through 2030 and includes "open source warfare, military shock attacks by clandestine cell systems (and) further consolidation of conservative forces."

Between 2030 and 2070, he calls for "more advanced forms of resistance groups (and the) preparation of pan-European coup d'etats." The final stage features the deposition of Europe's leaders and "implementation of a cultural conservative political agenda."

The author states that he was moved to action dating to "my government's involvement" in NATO's 1999 strikes during the Kosovo campaign, claiming this wrongly targeted "our Serbian brothers (who) wanted to drive Islam out by deporting the Albanian Muslims back to Albania."

He also criticizes "my government's cowardly handling of the Muhammad cartoon issue" -- a reference to the Norwegian government's apology for the nation's private newspapers having repeatedly published the controversial cartoon. Another reference blasts Norway, home of the Nobel awards, for awarding a peace prize to former Palestinian leader Yasser Arafat.

"The situation is just chaotic," he writes, noting that "thousands of Muslims" are coming into his country annually. "These suicidal traitors must be stopped."

The author delves into great detail about his bomb-making experiments, including a theory that one should purchase a farm so that purchase of large amounts of fertilizer -- which can be used to make bombs -- is less likely to be noticed.

Oddmy Estenstad, an employee at a Norwegian agricultural cooperative, told CNN that Breivik bought six tons of fertilizer from her company in May.

"Be extra careful when researching for bomb schematics (fertilizer bombs), as many terms will trigger electronic alerts," he writes, one of several tips that include using an "anonymous laptop and browse free to your local McDonalds" in order to "avoid ending up on any watch list."

Besides hands-on instructions, the document also functions as a running diary. It also includes references to his relatives' sexual indiscretions, entries on some of his friends' personal lives, and his own off-and-on steroid use.

From July 2 on, though, the author becomes more business-like and complains that going off his testosterone supplements had ramped up his "aggressiveness." He then digs up his guns and prepares the bombs. It all leads up to July 22, the date of the Norway terror attacks.

"The old saying 'if you want something done, then do it yourself' is as relevant now as it was then," he writes. "In many cases; you could do it all yourself, it will just take a little more time. AND, without taking unacceptable risks. The conclusion is undeniable.

WRAPUP 1-US debt talks begin critical phase

WASHINGTON, July 22 (Reuters) - Efforts to avoid an unprecedented U.S. default enter crunch time on Friday, with President Barack Obama and top lawmakers engaged in a sometimes chaotic drive to strike a sweeping deficit-reduction deal.

With the clock ticking toward an Aug. 2 deadline to raise the U.S. debt ceiling, Obama and the senior Republican in Congress, House Speaker John Boehner, worked toward a plan that could include up to $3 trillion in spending cuts but might leave tax reform for later, congressional aides said.

The main obstacle remained the issue of tax increases that Obama's Democrats demand and Republicans vehemently oppose. There were conflicting accounts of how and when higher revenue might kick in, and the White House vowed there would be no deal without this.

Negotiations have whipsawed between competing and even conflicting options, and leaders on both sides face resistance within their own ranks to some ideas now gaining traction.

"There will be plenty of haggling over the details of all these plans in the days ahead," Obama said in an appeal for compromise in a USA Today opinion piece. "But right now, we have the opportunity to do something big and meaningful."

The focus is on what congressional sources say is shaping up as a wide-ranging package of deficit cuts over 10 years, something many in Washington hope will help save America's triple-A credit rating. Rating agencies have threatened a U.S. bond downgrade without a comprehensive deficit-cutting deal.

Negotiators have struggled to break their impasse and winnow options for raising the government's $14.3 trillion debt ceiling. Failure to reach a deal to increase U.S. borrowing authority would render the world's biggesteconomy unable to pay all of its bills. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Full coverage of U.S. budget and debt [ID:nUSBUDGET]

Possible outcomes for U.S. debt talks [ID:nN1E76I10Y]

Anything possible if U.S. downgraded [ID:nN1E76I1M8]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

But confusion has grown amid a patchwork of proposals aimed at finding what a senior Democratic aide called the "magic formula" for resolving the crisis, which has dominated Washington's agenda for weeks.

BIPARTISAN RESISTANCE

"Frankly, we've looked at a half a dozen fallback plans, none of which are all that appetizing," Boehner -- struggling with Tea Party lawmakers largely opposed to any compromise with Obama -- told conservative talk-show host Rush Limbaugh.

Some Democrats have complained about what they see as Obama too willing to make concessions on social spending cuts and unhappy if he agrees to no immediate tax increases.

A gathering of Democratic congressional leaders at the White House late on Thursday was meant to not only inform them of developments but to possibly placate their concerns.

Friday is essentially the start of crunch time. The White House initially set a July 22 target for a deal that would leave enough time to get it through the legislative process. But it has backed off that timeframe in recent days with both sides still far apart on the issues.

If Congress fails to raise the debt ceiling in time, the United States would default on its obligations, possibly plunging the country back into recession and sparking a crisis in financial marketsworldwide.

White House spokesman Jay Carney said earlier there had been momentum toward a "balanced" deficit agreement, but he insisted: "We are not close to a deal."

Despite the gulf between the two sides, reports that negotiators were starting to close in a debt deal helped fuel a rally in U.S. and world stocks on Thursday.

What remained clear was that both sides at still at odds over the thorniest issue on the table -- taxes.

Obama told National Public Radio any deal must include some tax increases alongside defense and other spending cuts. Many Republicans vow to oppose any tax hikes, while most Democrats insist on higher taxes for wealthier Americans.

While they could leave comprehensive tax reform for later, Obama and Congress could agree to revenue increases that would end some select tax breaks, such as special breaks enjoyed by ethanol blenders, some Wall Street investors and companies that operate corporate jets, congressional sources said.

Finance ministry refuses to pay Rs 105cr to Air India

NEW DELHI: Debt-ridden Air India does not seem to be getting life-saving money in a hurry. The finance ministry has turned down aviation ministry's request to release Rs 105 crore to the Maharaja. The home and defence ministries owe this money to Air India for the VVIP flights operated by the airline. The finance ministry had earlier asked aviation authorities to work out a long-term cash requirement for AI based on some reliable plan to turn around the airline.

"AI had taken Rs 200 crore last month from a bank for 15 days to pay salaries. We had hoped payment of Rs 105 crore dues of VVIP flights would help us repay that loan. But that request has been turned down," said sources. Now a group of ministers on AI will meet next week to discuss how to keep the airline alive. With Tuesday's Cabinet reshuffle ending the uncertainty over Vayalar Ravi (who got additional charge of the ministry this January) continuing as aviation minister, AI employees are looking forward to firm steps from the veteran Congress leader.

"No amount of money pumped in the airline or plans made for AI can work without the right management in place. In the past also we have seen plans like merger and buying planes going horribly wrong and AI is now on death bed. The minister must do something about the serious mismanagement," said a union leader on condition of anonymity.

Thanks to questionable decisions like mega plane deals and AI-IA merger taken during UPA-1, AI is facing an uncertain future with the airline now not able to pay salaries or bank loans on time. A turnaround plan worked out for the airline has pegged AI's cash requirement at over Rs 44,000 crore over the next decade along with over 100 more planes for the airline to survive.

But given its gross mismanagement, whether the government does pump that kind of money remains to be seen. Long time employees including senior pilots feel a board of governance should be formed for AI so that no one individual is able to hold sway over the dying airline. "AI needs money but it also needs the right people at top to ensure that money does not go into a black hole," said a senior pilot who has seen the airline's change of fortunes in past few years.

Europe banks hit as Italy stokes contagion fears

(Reuters) - European banks were battered by mounting fears Greece is heading for a disorderly default and the debt crisis could spread to Italy, sending shares skidding more than 3 percent Tuesday to a two-year low.

Early losses were pared after Italy successfully sold short-term bonds and the panic eased. But bank stocks were still on the defensive and down over 10 percent in the last seven trading days as politicians have failed to find a fix for Greece and as investors fear this week's health check on 91 banks could show up more holes in the industry.

Euro zone finance ministers Tuesday said a flexible rescue fund to help Greece could buy back its debt, but they set no deadline to act and failed to calm investor nerves. They also declined to rule out the possibility of a selective default by Greece to make its debt mountain more sustainable.

"Things are clearly going from bad to worse. It took too long to stabilize Greece and now the contagion is spreading. There is certainly a fundamental element in the worries about Italy. The debt load is high and growth is lackluster," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

By 0923 GMT the STOXX Europe 600 bank index .SX7P was down 1.1 percent at 172.6, after falling as low as 168.02, its lowest level since May 2009.

Italian bank Unicredit (CRDI.MI) fell over 7 percent and Intesa Sanpaolo (ISP.MI) lost 4 percent, before turning higher aided by a short-selling ban by Italy's regulator and news Italy

had sold its targeted 6.75 billion euros of 12-month bills in a bond auction. By 0955 GMT Unicredit and Intesa were each up 2 percent.

Unicredit shares are still down by a fifth since July 1 as borrowing costs for Italy have soared on fears about the scale of the country's debt.

Alessandro Frigerio, fund manager at Milan's RMJ Sgr, said the recovery was helped after Economy Minister Giulio Tremonti said he would wrap up an austerity package.

"Finding a solution is tough, but the markets are saying in a tough situation you have to take the devil by the horns... Right now we're in a phase that is not manageable anymore because Italy right now, when it goes to the market, has to pay 6 percent (in 10-year bonds) and that's a very, very difficult level," Frigerio said.

Andrew Lim, analyst at Espirito Santo in London, added. "Italy and Spain have been thrown into the mix and they are far bigger in magnitude than Greece, Ireland and Portugal. This could be a true systemic crisis. This is a very real threat and the panic feeds on itself."

As borrowing costs rise, the repayment of debt becomes more costly to maintain and could lead to an economic slowdown and more losses for banks.

Barclays (BARC.L), BNP Paribas (BNPP.PA), Deutsche Bank (DBKGn.DE), Lloyds (LLOY.L), UBS (UBSN.VX) and Credit Agricole (CAGR.PA) all fell over 2 percent.

In Portugal banks also reversed steep early losses and were up over 1 percent in volatile trade. Shares in the country's largest listed bank Millennium bcp (BCP.LS) were up 1.2 percent on the day at 0.33 euros after a near 6 percent slump in early trade down to record lows of 0.305 euros.

Euro zone finance ministers Monday promised cheaper loans, longer maturities and a more flexible rescue fund to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain, but there are fears the rescue effort is unraveling. They will continue their meeting Tuesday.

"They could have taken care of this a year ago, a month ago or a week ago. They didn't and now it's spreading to other markets," said Oon-Marc Valahu, a fund manager at Geneva-based firm ClairInvest.

The market fall could continue as long as uncertainty remained over how Europe's politicians would deal with the debt crisis, he said. "The market hates instability and you can't stop the market from going down on fear."

The Institute of International Finance, which is leading talks on a private sector contribution to Greece's rescue, wants the EU to pledge to buy back debt to provide a longer term solution to Greece's mountain of debt, rather than just a quick fix.

The release of the result of a stress test on European banks is another worry. It could show holes in the capital position of some banks and analysts said another fear is that a weak test could fail to restore confidence.

"We've got the solvency tests being released Friday, which is why everyone's a bit nervous. The market is short the banks, which has been an easy trade," said Andrew King, head of equities at BNP Paribas Asset Management, which has 551 billion euros in assets under management.

SPANISH FAILURES?

Some Spanish banks could fail the stress tests, Spain's Economy Minister Elena Salgado said Monday, backtracking from earlier comments that all Spanish banks would pass. This year's test will not include generic provisions -- funds set aside during good times to provide a buffer in bad times -- which will hurt Spanish lenders as they had 27 billion euros of generic provisioning at the end of March.

Six Spanish banks have failed the European stress tests, including five savings banks and one medium-sized bank, ABC newspaper said Tuesday, citing unnamed sources. The Bank of Spain declined to comment.

"It depends who has failed -- it would have to be one of the medium-sized listed banks to have a big shake on the sector. Smaller savings banks failing would have less of an impact," said Tania Gold, analyst at UniCredit.

The impact of problems in Italy would be felt more widely. Overseas banks had $1.1 trillion of exposure to Italy at the end of December, with France's banks accounted for $389 billion of that, or 35 percent, according to data from the Bank for International Settlements.

RBI favours ED probe into US-based financial institution DE Shaw deals

NEW DELHI: The Reserve Bank of India has suggest ED that the Enforcement Directorate looks into the allegations of dubious funds routed by US-based financial institution DE Shaw into various entities in India. ED is responsible for investigation into cases of foreign exchange violations and money laundering . 

RBI has further complained to the government that a letter supposedly sent by the Commerce Ministry's Department of Industrial Policy and Promotion, or DIPP, requesting enquiry into allegations against DE Shaw was forged and asked the finance ministry to investigate the same. 

"The banking regulator has clarified that it does not maintain minute details of foreign investments in the country as the onus is on the Indian company (which seeks FDI) to comply with the FDI policy," said a senior official with the finance ministry. 

The RBI has said that it maintains the foreign direct investment data for post-investment reporting for balance of payment (BoP) statistics and it has only basic details of non-resident investors, mainly the know-your-customer (KYC) details and overseas bank account particulars. The finance ministry official clarified that the government has not ordered any investigation into investments made by DE Shaw in India. 

"We are looking into the matter and will soon take a decision," he said, adding that in a particular investment the matter is already pending in the Delhi high court. The Delhi High Court has issued notices to the global investment firm in May this year in the ongoing case between DE Shaw Group and the Hindi print media company Amar Ujala Publications. 

The court had also sought clarifications from RBI, the government's foreign investment clearance body FIPB and Ministry of Corporate Affairs to explain their stand on the Rs 117 crore deal in 2007 where DE Shaw had acquired 18% stake in the Amar Ujala Publications. 

The court asked DE Shaw to file its reply within two weeks and asked RBI, FIPB and others to submit their replies by July 14, the next date of hearing.

OIL FUTURES: Crude Falls As Concerns Over China, EU Weigh

LONDON (Dow Jones)--Crude futures fell more than $1.00 Monday as signs the global economic recovery may be stalling fuelled concerns over oil demand.

Oil prices extended losses made on Friday after data released by China Sunday showed oil imports to China, the world's largest energy consumer, fell to their lowest level in eight months in June and concerns over euro-zone contagion dented risk appetite.

At 1034 GMT, the front-month August Brent contract on London's ICE futures exchange was down $1.26, or 1.1%, at $117.07 a barrel.

The front-month August contract on the New York Mercantile Exchange ...

GLOBAL MARKETS: European Stocks Drop; Italy In Focus

- European stocks fall on fears that debt contagion may spread to Italy

- Investors dump equities, in particular banks, and favor bonds

- Euro falls against the dollar as debt worries escalate

- Attention on the EU group meeting in Brussels

By Michele Maatouk & Ishaq Siddiqi

Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--European stock markets fell Monday, along with the euro, with investors worried that Italy may be the next domino to fall as the euro-zone debt crisis continues to unfold. As a result, investors flocked to the dollar and core European government bonds.

Planning Commission members demand grant of Rs 1 crore to employ consultants

NEW DELHI: Every member of the planning commission might get an annual grant of Rs 1 crore to employ consultants to further research projects taken by the commission. Some members of the planning commission have forwarded the proposal to the deputy chairman Montek Singh Ahluwalia as part of the exercise to restructure and reform the commission. 

"There is a proposal but it is still in the works and no decision has been taken," a planning commission member told ET. The current Planning Commission, which was constituted in 2009, had started with the aim of carrying out internal structural reform to make the commission more relevant. 

The exercise had been undertaken by planning commission member Arun Maira who was inducted into the commission from the Boston Consulting Group. "The move has been proposed to give members the flexibility to get qualified people for the work we do at the commission if the need arises," added the member. Primarily three members - Arun Maira, Syeeda Hameed and Abhijit Sen, are backing the proposal. 

However, given the monetary requirement, which will be around Rs 8 crore excluding ministerial members of the commission, the proposal is likely to be shelved for the time being. "The quantum of the grant is quite big for the purpose and it is unlikely to be passed in the current scenario," said another official at the planning commission. 

The Planning Commission has been criticised often as being monolithic, stagnant and hierarchical with lack of expert domain knowledge...