Credit ratings agencies threaten to downgrade US from AAA status; Republicans clash with Obama and each other over debt ceiling (+ analysis); China overtaking US as superpower; Italy plans US$67 billion in cuts to calm debt worries; At least 21 killed in more Mumbai bombings; Singapore's economy shrinks; and more
Top of the Agenda: Raters Threaten US Downgrade
With President Barack Obama and Republican congressional leaders locked in a stalemate over a deficit-reduction plan necessary to raise the nation's $14.29 trillion debt ceiling ahead of an August 2 deadline, two of the "Big Three" global credit rating agencies--Moody's and Standard and Poor's--said they were considering downgrading the United States (WSJ) from its top AAA status. Moody's cited the "rising possibility" that the US debt limit will not be raised in time to avoid default.
The talks have been marked by clashes between Obama and Republican House Majority Leader Eric Cantor, who also sparred with fellow Republican, Senate Minority Leader Mitch McConnell. McConnell proposed authorizing the president (WashPost) to raise the debt limit without the requirement of prior spending cuts so that the United States does not miss any credit payments.
Federal Reserve Chairman Benjamin S. Bernanke warned of a "huge financial calamity" (NYT) on par with that of 2008 if the White House and Congress do not agree on a deal to raise the debt ceiling.
As the United States approaches the deadline to raise its debt limit, the White House and top lawmakers are attempting to set a course for the nation's long-term fiscal health. The talks have profound national security implications, as this CFR Issue Guide explains.
An agreement on raising the debt ceiling will not come from winning a spin war. If talks collapse, both sides will be blamed and whatever they're saying now won't matter much in the face of economic disaster. The only solution at this point is to bite the bullet and draft a deal everyone is unhappy with, writes TIME's Jay Newton-Small.
McConnell's plan is not bold, but it may be the most responsible way forward, says the Economist.
PACIFIC RIM: US Responds to Malaysia Crackdown
The US State Department voiced concern yesterday over the Malaysian government's crackdown against thousands who protested in Kuala Lumpur for electoral reform (BBC), resulting in the arrests of around 1,650 people.
Singapore: The country's economy contracted significantly (FT) in the second quarter of this year, by 7.8 percent, a result of weaker global demand and the fallout from Japan's March earthquake.