Daily News Brief

August 2, 2011

EXECUTIVE SUMMARY

- House Passes Debt Plan; Senate to Vote
- Syrian Forces Assault Hama
- Trilateral AfPak Talks
- Somali Islamists Block Refugees' Escape

Top of the Agenda: House Passes Debt Plan; Senate Votes Today

The U.S. House of Representatives passed legislation Monday night to raise the nation's $14.3 trillion debt ceiling by $2.4 trillion (WSJ) in three steps. The Senate is expected to pass the bill today, after which President Barack Obama will sign it into law, narrowly meeting a deadline that could have seen the United States default on its financial obligations for the first time in history.

If enacted, the plan will create a bipartisan congressional committee (NYT) to make recommendations on cutting the deficit--through spending cuts and a possible revision of the tax code--by at least $2.1 trillion over ten years.

Global markets and international leaders initially responded positively (DeutscheWelle) to news of the deal, with French Finance Minister Francois Baroin saying the move would "reinforce global growth." But stock markets dropped by the end of Monday as international investors responded to weak U.S. manufacturing figures for June and continued speculation that the United States may lose its AAA credit rating (Guardian), despite an agreement on the debt ceiling.

Analysis:

A tentative agreement on raising the debt ceiling falls far short of the deep reforms needed to improve U.S. spending patterns and the country's global standing, writes CFR's Sebastian Mallaby.

Whatever the outcome of the debt ceiling debate, many analysts expect a downgrade in the U.S. debt rating because of doubts about deficit-reduction plans. The fallout could include higher borrowing costs, a weaker dollar, and market turbulence.

A U.S. downgrade is justified, and rating agencies are likely to make good on their threat, write Carmen Reinhart and Vincent Reinhart in this Financial Times op-ed.

MIDDLE EAST: Syrian Forces Continue Hama Assault

Syrian President Bashar al-Assad's security forces attacked the city of Hama for a third day (Bloomberg) Tuesday, after two days of attacks that killed over ninety in that city and surrounding towns. The onslaught fueled solidarity demonstrations in other Syrian cities and international condemnation.

Egypt: The Egyptian army deployed tanks (al-Jazeera) and soldiers on Cairo's Tahrir Square to clear out pro-democracy protesters Monday, two days before former Egyptian president Hosni Mubarak is to go on trial for his role in killing protesters during this winter's revolution.

Many Egyptian military officers and some civilian politicians are interested in replicating the so-called Turkish model for Egypt, in which the military would play a leading role in guiding society and politics. But such a strategy is a poor fit for the country, writes CFR's Steven A. Cook in Foreign Affairs.

PACIFIC RIM: Chinese Police Kill Xinjiang 'Extremists'

Chinese police shot dead two Muslim Uighur men who were suspected of deadly attacks (BBC) in the city of Kashgar in western Xinjiang province, a site of ongoing inter-ethnic conflict.

South Korea: The country denied entry to three Japanese parliamentarians in a diplomatic row over disputed islands (FT) claimed by South Korea and Japan.

SOUTH AND CENTRAL ASIA: Trilateral Talks in Islamabad

A fourth round of trilateral talks between Pakistan, Afghanistan, and the United States will be held today in Islamabad, with a focus on stabilizing the AfPak border (ExpressTribune). Earlier, Pakistani President Asif Ali Zardari met U.S. Ambassador to Pakistan Marc Grossman to discuss bilateral efforts to fight terrorism.

Pakistan has emerged as a terrorist sanctuary for some of the world's most violent groups, including al-Qaeda, the Taliban, and homegrown militants, which threaten the stability of Pakistan and the region, says this CFR Backgrounder.

Afghanistan: Three suicide bombers attacked a guest house (al-Jazeera) often used by foreigners in northern Kunduz province, killing four security guards and wounding at least ten people. The Taliban claimed responsibility for the attack.

AFRICA: Somali Islamists Block Refugees' Escape

Al-Shabaab Islamist insurgents, responsible for keeping Western aid organizations out of famine-stricken southern Somalia, are now blocking starving refugees (NYT) from fleeing the country, imprisoning those who try to escape territory controlled by the group.

South Africa: Susan Shabangu, South Africa's mines minister, said Tuesday that the debate within the ruling African National Congress over nationalizing the mining industry was hurting investment (Reuters)and job creation, but also blamed industry leaders for failing to implement the country's "Black Economic Empowerment" policy.

AMERICAS: Cuba Approves Economic Reforms

Cuba's National Assembly officially backed President Raul Castro's plans to reform the country's idling economy (RTT), easing restrictions for entrepreneurs and small businesses.

EUROPE: Asylum Seekers Clash with Italian Police

Immigrants clashed with police in the southern Italian city of Bari (France24) over delays in obtaining asylum. The incident, in which at least thirty people were injured, occurred the same day that twenty-five immigrants on a Libyan refugee boat bound for the island of Lampedusa were found dead.

Western Europe's burgeoning Islamic population continues to spark concerns about Muslim assimilation and a cultural divide, says this CFR Backgrounder.

Greece: In the wake of the country's ongoing financial crisis, many panicked Greeks have been withdrawing their life savings (Guardian) from banks in what analysts have called a "silent bank run."