Daily News Brief

July 1, 2011

EXECUTIVE SUMMARY

- U.S. Debt Limit Deadline Looms
- Hezbollah Arrests Prepared
- Chavez Receives Cancer Treatment
- Strauss-Kahn Case Shift Stirs France

Top of the Agenda: U.S. Debt Limit Deadline Looms

The White House wants to close a deal with leaders in Congress on debt reduction by July 22 to give the government enough time to raise its borrowing limit to avoid a default early next month (WSJ). The Senate has cancelled its holiday recess to try to reach agreement. There have been new reports of a possible short-term deal (Politico) to prevent a default that includes about $1 trillion in spending cuts. The Obama administration denied this, saying it was seeking a long-term deficit-cutting deal.

Meanwhile, Treasury Secretary Timothy Geithner has reportedly announced he will step down after a debt deal is reached (Bloomberg).

Analysis:

The political gridlock in Washington over the debt limit could heavily damage the U.S. economy and standing in the world, writes CFR's Sebastian Mallaby in a new analysis.

Despite what it calls "incalculable damage" that could be caused by a U.S. default on its debt, the Economist's Lexington column says Republicans are trying to capitalize on the deadline by "their own radical vision of how to reform America."

But the Republicans' stress on trying to use the debt talks to reduce long-term deficits is "hardly irresponsible," writes Robert J. Samuelson in the Washington Post. It is longstanding Democratic failure to curb social spending that is at fault in the current impasse, he writes.

Andrew Stiles writes of a "palpable tension" on Capitol Hill (NRO) and the gulf between Democratic and Republican positions.

This CFR Backgrounder examines the issues involved in raising the debt ceiling and the consequences if it does not happen.

MIDDLE EAST: Lebanon Prepares Hezbollah Arrests

Lebanese authorities said today they had begun taking steps to comply with an international tribunal's warrants for four Hezbollah figures (DailyStar) accused of killing former President Rafik Hariri.

William Harris writes on ForeignAffairs.com that failure by the tribunal to punish those responsible for the Hariri assassination would set back Lebanese politics and be a blow against international justice.

Syria: The UN Security Council extended the peacekeeping mission in the Golan Heights but pulled back from criticizing Syria of human rights abuses (AP) due to resistance from Russia and China.

U.S. Secretary of State Hillary Clinton said the Syrian government "is running out of time" and will see increasingly organized domestic resistance (Telegraph) unless it moves swiftly on a reform path.

PACIFIC RIM: China's President Warns on Corruption

President Hu Jintao marked the ninetieth anniversary of China's Communist Party (BBC) with a speech extolling the achievements of the party. But he warned that corruption could "cost the party the support and trust of the people."

Thailand: The two main parties--the governing Democrats and opposition Pheu Thai--conclude their campaigns ahead of Sunday's general elections (BangkokPost) in which Thais hope to overcome deep divisions that erupted in violence last year.

The elections could accelerate Thailand's political meltdown, "causing more unrest in what was once one of the most stable countries in Asia," writes CFR's Joshua Kurlantzick.

SOUTH AND CENTRAL ASIA: Kabul Bank Fraud Probe

A widening probe into the two top Kabul Bank officials (WashPost) shows a plan they devised to divert hundreds of millions of dollars to shareholders and top Afghan officials, including the Afghan president's brother.

India: Merchandise exports rose nearly 57 percent in May to $26 billion, compared to the same month last year, continuing an export surge (WSJ). But India's trade deficit rose 50 percent over the same period.

AFRICA: AU Summit Focused on Libya

Leaders at an African Union summit in Equatorial Guinea are expected to present a plan for an end to the Libyan crisis (VOA), but it is not clear whether they will call for Muammar al-Qaddafi to step down.

Morocco: Voters took part in a referendum on a revised constitution (al-Jazeera) that would turn some of King Mohammed's powers over to the government, a response to "Arab Spring" protests.

AMERICAS: Chavez Receives Cancer Treatment

President Hugo Chavez said he has had a cancerous tumor removed (MercoPress) and is continuing to undergo treatment in Cuba. Chavez, speaking on state TV for the first time in three weeks, did not say when he would return to Venezuela, where rumors have been mounting about his condition.

The latest news about the longtime president could set off a political struggle among Chavez supporters (CNN) and also embolden Venezuela's opposition, reports CNN.

EUROPE: Strauss-Kahn Case Shift Stirs France

Prosecutors in New York have signaled the sexual assault case against former IMF chief and one-time French presidential candidate Dominique Strauss-Kahn is on the verge of collapse (NYT) because of questions about his accuser.  The news has stirred discussions in France about Strauss-Kahn's political prospects (AP).

Poland: Poland takes over the rotating presidency of the European Union (DeutscheWelle) for the next six months and has vowed to try to tighten the bloc's unity while also strengthening ties with countries on its periphery.

EDITOR'S NOTE: There will be no Daily News Brief on July 4 due to the U.S. holiday.