Prudence Still a Watchword For Sweden Finance Minister

As Sweden's finance minister, Anders Borg has received much of the kudos for his country's relatively easy passage through the financial storms following the 2008 crisis. But now as things seem to be looking up, Mr. Borg—with a reputation for fiscal prudence—isn't going to loosen the purse strings. Rather, he is preparing for the next crisis.

"I have a very strong ambition to keep Sweden on the safe side," Mr. Borg says. "I have never in my life seen anyone taking damage from having too large safety margins."

Mr. Borg says his cautious approach stems from hard lessons learned during ...

Obama Challenges Republicans for Debt-Plan Details

President Barack Obama is challenging Republican lawmakers to present a plan for a smaller-scale deficit reduction program as he attempts to steer them toward his $4 trillion goal, a Democratic aide said.

Obama plans to hold a press conference at 11 a.m. in Washington today, his fifth public remarks on the debt in a week, as he presses lawmakers to reach an agreement to raise the $14.3 trillion U.S. borrowing ceiling before an Aug. 2 deadline. The president and bipartisan congressional negotiators agreed to meet every day until they reach a deal, said one legislative aide on condition of anonymity.

They are divided over taxes and entitlements. Republicans reject Democrats’ call for more tax revenue and instead are pressing to cut entitlement programs such as Medicare and Social Security. Democrats insist even the Republicans’ proposal for a smaller deficit-cutting plan must include more taxes from higher-income Americans. Obama has said he is willing to cut entitlements in exchange for a Republican agreement to increase taxes.

Democrats want to “enact an agreement that ensures America pays its bills and reduces the deficit in a balanced way without putting all of the burden on seniors and the middle class,” Representative Steny Hoyer of Maryland, the second-ranking House Democrat, said in a statement after a 75-minute negotiating session yesterday at the White House.

Don Stewart, spokesman for Senate Minority Leader Mitch McConnellof Kentucky, underscored Republicans’ opposition to any tax increases.

‘It’s Baffling’

“It’s baffling that the president and his party continue to insist on massive tax hikes in the middle of a jobs crisis while refusing to take significant action on spending reductions at a time of record deficits,” Stewart said after the meeting.

U.S. stock futures declined, indicating that the benchmark Standard & Poor’s 500 Index will fall for a second day. Futures on the S&P 500expiring in September fell 0.9 percent to 1,329.3 at 10:59 a.m. inLondon.

Futures on the Dow Jones Industrial Average declined 87 points, or 0.7 percent, to 12,528. The Stoxx Europe 600 Index fell 0.5 percent to a one-week low.

Obama and congressional leaders are seeking a deal to pave the way for a vote in Congress to increase the debt limit, a move the Treasury Department says is needed by Aug. 2 to avert a default on the nation’s financial obligations.

‘Catastrophic Consequences’

Treasury Secretary Tim Geithner said on “Face the Nation” yesterday that the administration wants the most comprehensive deficit-cutting deal possible. He reiterated that failing to raise the debt limit could have “catastrophic” consequences for the economy.

On July 9, House Speaker John Boehner, an Ohio Republican, said following a phone conversation with Obama that, amid the stalemate over taxes, all sides must settle for a smaller plan than the president seeks. Before yesterday’s White House meeting, Obama said “we need to” reach an agreement within the next 10 days.

During the meeting, Obama said he believed a bigger deal might be politically easier, with both sides making philosophically difficult concessions, said a Democrat familiar with the discussions. The president asked Republicans to return today with details of their proposal, including numbers, the person said.

‘Huge Hit’

Christine Lagarde, managing director of the International Monetary Fund, said on ABC’s “This Week” yesterday that the unresolved situation with the debt ceiling could mean higher interest rates, a higher burden on U.S. taxpayers and “stock markets taking a huge hit and real nasty consequences not just for the United States but for the entire global economy.”

Boehner and the president had both been aiming for a larger compromise that would extend the debt ceiling through the next election in 2012. House and Senate Republicans are insisting that spending cuts exceed any increase in the debt ceiling.

Republicans including Majority Leader Eric Cantor of Virginia, a participant in previous bipartisan debt talks led by Vice President Joe Biden, say that group had identified between $2 trillion and $2.5 trillion in spending cuts that could serve as a framework for an agreement between Obama and congressional leaders.

Democrats, including Maryland Representative Chris Van Hollen, who participated in the Biden effort, say Democrats never agreed to that amount without new revenue in the mix.

Doesn’t Get Easier

The conflicting accounts underscore the difficulty of reaching a speedy resolution, said Robert Bixby, executive director of the Arlington, Virginia-based Concord Coalition.

“It’s not a simple matter of going back to what everybody agreed to in the Biden talks because everybody didn’t agree to it,” said Bixby. “It doesn’t get any easier just to get a short-term deal.”

McConnell said yesterday on “Fox News Sunday” that he also favors “the biggest deal possible. We’re just not going to raise taxes in the middle of this horrible situation.”

The Labor Department reported July 8 that the unemployment rate in June unexpectedly climbed to 9.2 percent, the highest this year. Employers added 18,000 jobs, the weakest growth since September 2010. Payroll growth for May also was revised downward, to 25,000.

Senate Majority Leader Harry Reid, a Nevada Democrat, expressed frustration yesterday that Republicans had repeatedly walked away from the table, according to one congressional aide. Cantor left the Biden negotiations in a similar stalemate on taxes.

Dismal jobs report raises doubts about economic recovery

Reporting from Washington— 

With unemployment taking a gut-wrenching turn for the worse, political leaders and economic policymakers are being forced to confront the very real possibility that the tepid recovery has stalled out — and with no easy fix in sight.

U.S. employers added almost no new jobs in June, the government reported Friday. That pushed the nation's jobless rate higher for the third straight month — to 9.2% — and left the number of idled workers at 14 million, almost half of them jobless for six months or more.



The near-paralysis in hiring, only 18,000 net new jobs last month, extended across almost the whole economy, encompassing both the public and the private sectors.

Manufacturing, which many analysts had counted on to help improve the picture, was essentially flat. State, local and federal governments shed thousands of jobs, largely in response to lost tax revenues and budget pressures.

"It's an abysmally weak report. All of the distress indicators are flashing red," said Patrick O'Keefe, economic research director at accounting and advisory firm J.H. Cohn.

The latest report cast more doubts about the underlying strength of the economy and whether models for predicting job growth that were developed in past decades are reliable guides in the new economy.

The pressure on policymakers was intensified by the fact that high levels of unemployment not only inflict pain on the jobless but also impose heavier burdens on working Americans.

While attention is usually focused on the problems of the unemployed and the accompanying rise in the cost of government safety-net programs, the continuing high level of joblessness also means that working Americans must shoulder the full burden of pulling the economy forward.

Instead of helping pull the wagon — by paying taxes and spending wages to help boost consumption — the unemployed are on the sidelines. Government reports show that workers who lost jobs between 2007 and 2009 had median weekly earnings of $602.

"They're not generating goods and services and the incomes which would cause the economy to expand and make all of us better off," O'Keefe said, estimating that the lost output and income from the millions of unemployed amount to trillions of dollars. "For the rest of us, it means we'll work harder and longer, and be less demanding of income and benefits."

Major stock indexes fell sharply on the unemployment report Friday, though they recovered much of the lost ground by the end of the trading day. And economists began ratcheting down projections for the second half of the year from what many had expected would be a relatively healthy uptick in growth.

The lack of hiring in June was all the more dismaying because it flew in the face of most economists' predictions.

In recent days, many had raised their job-growth forecasts into the 100,000 range. Though job creation in May also had been disappointing, that was widely attributed to temporary factors, including a spike in oil prices and manufacturing disruptions stemming from the earthquake and tsunami in Japan.

May was not a blip, however. In fact, the 54,000 new jobs originally reported for that month were revised down to just 25,000 on Friday.

By contrast, from February through April, employers added an average of 215,000 jobs a month. That was a solid, if less than spectacular, improvement from previous months, and had raised hopes that the long-awaited rebound in the job market was taking hold.

The setback came at a time when President Obama and congressional Republicans were locked in a struggle over the federal deficit and intent on cutting federal spending, which in the short term, at least, would probably bleed steam out of the economy and further diminish hiring prospects.

The focus on budget cuts makes it highly unlikely that Washington will approve another round of fiscal-stimulus programs to juice up the economy. Nor does the Federal Reserve have a lot of options to spur lending and growth, already having taken interest rates as low as possible.

Austan Goolsbee, Obama's chief economist, said the near-halt in hiring over the last two months reflects the sharp slowdown in economic growth in the first half of the year.

June also brought more income erosion for many workers. The average weekly work hours, an important indicator of employment activity, declined by 0.1 to 34.3.

And, at a time when high oil, food and healthcare costs are diminishing people's spending power, the average hourly earnings for all private-sector employees dropped by 1 cent last month to $22.99. Over the last 12 months, average hourly earnings have increased by 1.9%, less than the overall rate of inflation.

"It's just an across-the-board retreat," said Heidi Shierholz, an economist at the Economic Policy Institute. "This is really scary."

The recession was officially declared to have ended in June 2009, but though company earnings and stocks have rebounded sharply, the job market has not. As of last month, the nation's total payrolls remained 7 million shy of what they were at the end of 2007, when the recession began.

Many economists say the economy needs to create 125,000 net new jobs a month just to keep pace with the growing population of working-age people.

O'Keefe believes that even more jobs, perhaps as many as 175,000 a month, are needed to hold the unemployment rate steady because many more older workers, their wealth stunted by the recession, have delayed retirement.

The Labor Department's survey of households showed that the so-called participation rate — those who are working or looking for work — fell back to 64.1% of the working-age population. That is the lowest since March 1984 and reflects, in part, the despair among many workers who doubt that they'll be able to gain meaningful employment.

Mali Griffen, 44, of Los Angeles, dropped out of the labor force after two years of fruitless searching. Griffen, who has a master's degree from UCLA in library science, is now taking courses online at Santa Barbara City College, hoping that an associate's degree in health-information technology will yield better results.

The latest employment report could further delay the Federal Reserve in raising interest rates. But even that wouldn't help the housing market or the economy much, said Greg McBride, senior financial analyst at Bankrate.com, a personal finance website.

"Until we see job growth kick into higher gear, there will be lingering uncertainty about the sustainability of the recovery," he said.

Rupert Murdoch backs Rebekah Brooks over phone-hacking allegations

Rupert Murdoch has issued an official public statement backing Rebekah Brooks. Photograph: Eddie Keogh/Reuters

Rupert Murdoch has taken the highly unusual step of issuing an official public statement backing Rebekah Brooks over the phone-hacking scandal engulfing his UK newspaper business.

The News Corporation boss described the recent allegations aboutphone hacking and payments to police officers by the News of the World"deplorable and unacceptable".

"I have made clear that our company must fully and proactively co-operate with the police in all investigations and that is exactly what News International has been doing and will continue to do under Rebekah Brooks' leadership," the News Corp chairman and chief executive added, in a statement issued from the annual Allen & Co media business conference he is attending in Sun Valley, Idaho.

Murdoch also said he had asked Joel Klein, who heads News Corp's recently created education unit, "to provide important oversight and guidance". Viet Dinh, a non-executive director, is keeping the News Corp board informed along with Klein, he said.

Murdoch's backing came on a day of mounting pressure on Brooks and News International, with prime minister David Cameron bowing to calls for public inquiries into phone hacking by the News of the World and the Labour leader, Ed Miliband, saying the chief executive should "consider her position".

News Corp also faced criticism from MPs during an emergency debate on phone hacking in the Commons on Wednesday afternoon, with Labour's Tom Watson alleging there was "further evidence" that Brooks "knew about the unlawful tactics of News of the World as early as 2002, despite all her denials yesterday".

Watson also called for Rupert's son James Murdoch, who as deputy chief operating officer oversees the company's European and Asian businesses including News International, to be suspended while the Metropolitan police investigate "what I believe is his personal authorisation of the coverup of this scandal".

Shares in News Corp and BSkyB fell as the News of the World phone-hacking scandal put Murdoch and his bid to take control of the satellite broadcaster under fresh scrutiny.

News Corp shares fell on Wednesday by 5% at one stage on Wall Street, to $17.17, as US investors reacted to the latest developments. BSkyB shares fell as low as 818p at one point in London, a fall of more than 3%, and closed 2.1% lower at 827p.

Sky shares came under pressure after Miliband called during prime minister's questions in the Commons for News Corp's takeover offer to be referred to the Competition Commission, a move that could potentially thwart Murdoch's ambitions. However, Cameron rejected Miliband's call for a Competition Commission review, insisting that the government was following the correct legal processes.

Advertisers including Halifax, Co-op, Vauxhall and Butlins joined Ford in pulling ads from this weekend's News of the World following the latest phone-hacking allegations.

Murdoch's statement came after it emerged on Wednesday that News International will claim Brooks, the News of the World publisher's chief executive, was on holiday when a mobile phone belonging to missing teenager Milly Dowler was hacked into in 2002 when Brooks was editing the Sunday tabloid.

The Guardian understands that the company has established that Brooks, News of the World editor from May 2000 until January 2003, was on holiday in Italy when the paper ran a story that referred to a message that had been left on the teenager's phone. The article, which was about a message left by an employment agency on the murdered schoolgirl's mobile, was published on 14 April 2002.

News International also believes Brooks was away in the two weeks following the murder of Holly Wells and Jessica Chapman in Soham. It is thought that mobile phones belonging to the parents of the two girls were targeted in the days following their death.

That is likely to focus attention on Andy Coulson, who was Brooks's deputy at the time, and would normally have edited the paper in her absence.

Coulson replaced Brooks as editor in early 2003 and has always maintained that he was unaware of any phone-hacking activity by the News of the World. He resigned in January 2007 after the royal reporter, Clive Goodman, and private investigator Glenn Mulcaire were jailed for intercepting the voicemail messages of members of the royal household, saying he accepted responsibility for what had happened but knew nothing about it.

Earlier, in a dramatic prime minister's question time dominated by the hacking scandal, Miliband also accused Cameron of being out of touch with public opinion on the issue of BSkyB and of a "failure of leadership" in the biggest press scandal in modern times.

Cameron told the Commons the inquiries could not be started immediately because of the major police investigation currently under way, though he conceded it "may be possible" to start some of the work earlier.

"We do need to have an inquiry, possibly inquiries, into what has happened," Cameron said. "We are no longer talking here about politicians and celebrities, we are talking about murder victims, potentially terrorist victims, having their phones hacked into.

"It is absolutely disgusting, what has taken place, and I think everyone in this house and indeed this country will be revolted by what they have heard and what they have seen on their television screens."

He said there were two "vital areas" that needed to be considered: why the original police inquiry failed to "get to the bottom of what happened", and the behaviour, practices and ethics of journalists and media organisations.

Cameron said it was important that lessons were learned from "what has become a disgraceful episode".

The Labour leader called on Cameron to appoint a senior figure, possibly a judge, to lead the inquiry, which he said should have the power to call witnesses under oath.

Miliband said the investigation should cover "the culture and practices of the industry, the nature of regulation ... and also the relationship between the police and the media".

Cameron said he did not think it would be possible to investigate the original police inquiry until the new one had concluded.

"Clearly, we can't start all that sort of inquiry immediately because you must not jeopardise the police investigation, but it may be possible to start some of that work earlier," he said.

He offered to hold talks on the matter with other party leaders, the attorney general, Dominic Grieve, and the cabinet secretary, Sir Gus O'Donnell.

But he resisted separate calls by Miliband for the bid by News International to take over BSkyB to be referred to the Competition Commission, saying to do so would be illegal.

Miliband said the public would react "with disbelief" if the deal went ahead in the next few days when News International was the subject of a major criminal investigation.

However, Cameron said the government had followed the correct legal processes, with Jeremy Hunt, the secretary of state for media, culture and sport, handling the matter in a quasi-judicial role. Cameron said: "On the issue of BSkyB, what we have done here is followed absolutely to the letter, the correct legal processes. That is what the government has to do."

The prime minister refused to be drawn on whether Brooks should stand down. Confronted by claims by Miliband that he had made a "catastrophic error of judgment" by taking on Coulson as his director of communications after he resigned from the News of the World, the prime minister said he took "full responsibility" for everyone he employed and appointed to work for him.

While News International issued a statement welcoming MPs' calls for a wide-ranging public inquiry into standards in the media industry to address public concerns, the broadcasting regulator Ofcom said it was monitoring the situation "and in particular the investigations by the relevant authorities into the alleged unlawful activities".

Ofcom said: "In the light of the current public debate about phone hacking and other allegations, Ofcom confirms that it has a duty to be satisfied on an ongoing basis that the holder of a broadcasting licence is 'fit and proper'."

The Metropolitan police commissioner, Paul Stephenson, also revealed that members of his force faced investigation after it was reported on Tuesday night that News International had handed over details of payments made by the News of the World to police officers. He said the documents appeared to "include information relating to alleged inappropriate payments to a small number of [Met] officers".

Stephenson said the matter would be investigated by the deputy commissioner Sue Akers in conjunction with the Met's Directorate of Professional Standards. He added that no senior officer had been implicated. Given that the reports relate to police payments allegedly made between 2003 and 2007, when Coulson was editor, many commentators have suggested they are an attempt to relieve the pressure on Brooks.

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