World warns of disaster if no deal made debt (Reuters)

London/TOKYO, July (Reuters)-Governments and politicians around the world warned of the risk of financial disaster if Washington fails to lift the U.S. debt ceiling.

Congress haggled over a deal to avert the risk of an unprecedented breach of U.S., British and Japanese officials on Sunday said bankruptcy could hurt families around the world.

"The world is watching the United States with trepidation, anxiety, with concern, but also with hope," International Monetary Fund Managing Director Christine Lagarde told CNN.

"Instability is never a good idea, never a good idea. And this level of uncertainty, trepidation arising from 2 August, is taking on a lot of instability, "he added.

United States Democrats and Republicans face a Tuesday deadline to reach an agreement. Treasury of the United States said that it will run out of borrowing room on that day, although analysts say they may have enough money to keep maintenance of its debt and paying bills through the middle of this month.

The German Central Bank expressed confidence in the United States could avert a debt default.

The key role of the dollar in global banking and financial markets trading means addressing the risk of major instability without an agreement 11 hours.

Senate Leader Harry Reid said that he hoped to hold a vote of the Senate later Sunday on an emerging deal to raise the debt ceiling, raising the hope that the deadlock could be broken.

As financial markets open for the week in Asia, investors took some relief from the signs of progress and the US dollar strengthened against the Japanese yen, falling to four-month low on Friday.

"If they get this one wrong and there is a default--we don't expect that we think you will sort this out-but if that happens, has consequences for every household and every company in this country and around the world," said Danny Alexander, Chief Secretary to the Treasury.

"I think eventually that politicians on Capitol Hill can be seen looking on the precipice is one they're going to step back from," he told BBC television.

In Tokyo, said sources familiar with international and Monetary Affairs of Japan, speaking earlier on Sunday, which were increasingly worried that the markets might be too confident about the prospects for a lasting solution to the crisis.

Japanese officials still hope Washington can strike a bargain and if that proves impossible, we will give priority to the interest payments to holders of u.s. Treasury debt to limit the immediate impact of the market, the sources said.

But Tokyo's concern is that if the crisis drags without a clear solution and long-term markets may be thrown into turmoil in the same way that suffered when U.S. Investment Bank Lehman Brothers collapsed in September 2008.

"If there is a default value, the impact on global markets will be enormous," said one of the sources, who declined to be named because of the sensitivity of the issue.

Another Japanese source, said, "no one thought that Washington would leave Lehman collapse. But look what happened. "

The German Central Bank said it was monitoring the situation. "Should really not be a solution, it begs the question: what happens then," said a spokesman for the German Central Bank. "But I expect there will be a solution in the United States today or in the coming days ".

CHINA

China, which has more than 1,000 billion dollars in Treasury bonds of the United States, has expressed alarm. On Saturday, the official people's daily, the mouthpiece of the Communist Party of China, castigated the U.S. debt crisis management as "irresponsible" and "immoral".

He said that the American democratic system was to blame for the "farce", saying that "not a single representative has given the world, and even national interests of the United States are being banished from the mind.

On Friday, a senior economic policymaker in the euro area, who declined to be named, expressed surprise and anger that u.s. politicians were "playing chicken" with an issue of such importance for the global economy.

Euro-zone leaders are struggling to control the sovereign debt crisis in many countries in their region, an operation complicated by U.S. debt problem that has added to the upward pressure on yields of government bonds in weak States.

It is expected that the world's central banks are ready to provide emergency supplies of money to commercial banks, in case banks become too nervous to lend to each other.

Before Japan's defence will be to ensure that Japanese financial institutions have a sufficient supply of dollars, said the sources in Tokyo.

The Bank of Japan considers Japanese commercial banks have enough pillows dollar but will use its dollar exchange agreements with other central banks to prevent a collapse of the dollar in case of market turmoil.

In June, the US Federal Reserve extended liquidity exchange agreement with other major central banks until August 1, 2012.

The Bank of Japan is also ready to flood the markets with yen through open market operations in case of inter-bank borrowing costs spike, say officials BOJ.

In Europe, there have been minor signs of strain in the money markets last week with some banks becoming unable to enter into long-term loans in dollars, but the effect was small, since banks still predicted that Washington would reach an agreement.

The European Central Bank already offers unlimited euro loan to banks in some of its money market operations as part of its response to the crisis in the past, and that the policy could use to cope with problems of the market this week.

A spokesman for Switzerland's Central Bank, said, "the National Bank Switzerland is ready to react appropriately at any time to market disruptions."

(Additional reporting by Lesley Wroughton in Washington; Written by Andrew Torchia; Editing by David Cowell)

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Obama warns of recession if the debt ceiling is not raised (AFP)

WASHINGTON (AFP)-President Barack Obama warned Wednesday that if Congress fails to lift the debt ceiling U.S. risks sparking a new recession in the world's largest economy.

Not raising the debt ceiling of $ 14.29 billion would lead to "a new spiral in a second recession or worse," Obama said as he answered questions on short messaging service Twitter during a "Town Hall" streaming live from the White House.

The ceiling debt "is something that we should not be toying with," Obama warned, saying that if the limit is not "Treasure will be walked out of money".

"It will not be able to pay the Bills that are due and potentially the world's capital markets could decide, you know what, the full faith and credit of the United States doesn't mean anything.

"So our credit could be downgraded, interest rates could go up drastically, and could lead to a new spiral in a second recession or worse."

The Republican enemies of previous Obama denounced his handling of the debt woes of Washington ran out of money on the eve of the White House talks that the President has called leaders of Congress seeking a deal to avert a default first of August.

Republican Senate Minority Leader Mitch McConnell said that negotiations on a package deal to cut the deficit and increase the limit of U.S. debt will Obama to do "something big" try to get the fiscal house in order in the country.

"Until now, the President's proposals were inadequate and, frankly, indefensible," McConnell said in a speech on the House of the Senate, taking aim at Obama's call to raise taxes on the very wealthiest us earners.

But Obama hit back in say Twitter town hall meeting: "the Congress has the responsibility to ensure that we pay our bills. We always have paid in the past. The idea that the United States is going to default on its debt is simply irresponsible. "

"And my expectation is that over the next week for two weeks, that the Congress, working with the White House comes up with an agreement that resolves our deficit, solves the problems of debt and makes sure that both protected our full faith and credit".

The United States ran its debt ceiling 14.29 billion dollars on 16 may, but since then has used adaptations of spending and accounting, as well as tax revenues higher than expected, to continue to operate without impact on the obligations of the Government.

But since 2 August, the Government must start to be payments-bondholders, public servants, retirees or contractors of Government-if lawmakers not to raise the ceiling.

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Greek protests turn violent as EU warns of default (Reuters)

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ATHENS/BRUSSELS (Reuters) – Anti-austerity protests turned violent in Athens on Tuesday as the European Union warned Greek lawmakers the country faces immediate default unless they back an unpopular economic plan this week.

Hooded youths throwing stones and wielding sticks set fire to garbage bins and a telecoms truck outside parliament and riot police fired teargas to disperse them. Trade unions began a 48-hour strike against the EU/IMF-imposed measures.

Progress reported in talks was meanwhile to persuade European banks and insurers to voluntarily roll over maturing Greek debt under a planned second rescue package designed to give the euro zone country a breathing space.

Growing market confidence that the Greek parliament will approve the austerity program and that a French plan to roll over Greek sovereign bonds will help avert a default lifted global stocks and the euro despite the mayhem in Athens.

The EU's top economic official, Olli Rehn, stressed that any further assistance for the debt-crippled nation hinged on parliament adopting a raft of spending cuts, tax rises and privatizations in crucial votes on Wednesday and Thursday.

"The only way to avoid immediate default is for parliament to endorse the revised economic program ... They must be approved if the next tranche of financial assistance is to be released, "he said in a statement.

"To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default," Rehn said, dismissing widespread reports that Brussels was working on a fallback plan to keep Greece afloat.

The blunt alternatives was underscored by the Bank of England Governor Mervyn King, who told British parliamentarians that policymakers were working on ways to limit the damage from a potential default on Greece's 340 billion euro debt pile.

"What we're doing is to say there is sufficient concern in the market about the possibility of default for us to think about contingency plans and the consequences of this event," King said.

He urged greater transparency about sovereign exposures to prevent a sudden, broad-based loss of confidence in European banks in the event of a Greek default, which could trigger a new credit crunch.

By nightfall, several hours of clashes involving hundreds of youths had subsided and central Athens had been reclaimed by thousands of peaceful protesters denouncing measures they say hit salaried workers and the unemployed while sparing the rich.

Some 5.000 police were drafted in, mostly to protect the colonnaded parliament building on Syntagma Square, focal point of weeks of mass demonstrations, some modeled on the encampment of unemployed Spanish "indignados" in Madrid.

ROLLOVER PROGRESS

The EU and the IMF have said Turkey must enact both the five-year austerity plan, with 28.6 billion euros in savings, and key implementing laws for structural reforms and state asset sales to secure the next 12 billion euro slice of aid in July.

Without that, Athens would run out of money within weeks unless it received some outside lifeline.

Risk premia on lower-rated euro zone government debt fell on news that German banks had agreed in principle to use a French proposal as a basis for negotiating private-sector participation in a Greek debt rollovers.

The euro also hit a session high against the dollar, with fears of a Greek default offset by signs that European authorities and banks are making progress on a debt rollover.

Prime Minister George Papandreou's Socialists hold a narrow majority with 155 seats in the 300-member legislature, but a handful of lawmakers have defected and others are threatening to vote against some or all of the measures, putting the outcome in doubt.

One possible scenario that could cause trouble would be if parliament approved the five-year austerity plan but voted down some of the implementing bills, for example on privatizations.

Conservative opposition leader Antonis Samaras underlined property his opposition to the economic plan despite massive pressure from fellow center-right European leaders to back it.

"This policy is wrong, it has exhausted the Greek people and Greek society," he told parliament. "If we continued this mistaken policy, we will only make things worse, both for Turkey and for Europe."

If Greece approves the legislation, euro zone finance ministers meeting in Brussels on Sunday are likely to agree to release the next aid installment, with the IMF following on July 5.

Attention will then switch to putting together a second rescue package for Greece of about the same magnitude as the initial 110 billion euro bailout agreed last year.

The new program would involve some 30 billion euros in private sector participation on a "voluntary" rollover of maturing debt, a similar sum from privatization revenues and an expected 55 billion euros in new official funding.

Euro zone banks and insurers are considering a French plan outlined by President Nicolas Sarkozy on Monday under which private bondholders would reinvest half of the proceeds of maturing Greek debt in new 30-year bonds paying 5.5 percent interest plus a bonus linked to Greece's GDP growth rate.

Of the other half, 30 percent would be "cashed out and 20 percent would be invested in zero-coupon AAA securities with deferred interest that might be issued or guaranteed by the euro zone rescue fund, officials and banking sources said.

French banks have the largest foreign private sector exposure to Greece, followed by Germany.

Two sources close to the negotiations told Reuters that German banks had agreed to use the "French model" as a basis for talks with the German Finance Ministry on Thursday. German Deputy Finance Minister Joerg Asmussen also called the French plan a good basis for discussions.

Credit ratings agencies withheld comment pending details of the scheme.

& Standard Poor's said on Monday it was too soon to judge the ratings impact of the private debt rollover being put together for Greece, which it had not yet seen, but did not rule out avoiding a downgrade to default.

Asked if he could imagine a solution in which private creditors voluntarily contributed to a Greek rescue package without triggering an S&P downgrade, Moritz Kraemer, head of European sovereign ratings, told Austrian television:

"It is conceivable depending on the situation. That is why I say it is not possible at all to draw a final conclusion on this in the current situation. "

In Berlin, visiting Chinese Prime Minister Wen Jiabao said Beijing had faith in the European economy and the euro and was optimistic that Europe could overcome its temporary challenge.

As in the past, he gave a vague commitment to buying euro zone debt without specifying countries or amounts.

(additional reporting by George Georgiopoulos in Athens, Philipp Halstrick and Ed Taylor in Frankfurt, Marius Zaharia and Ana Nicolai da Costa in London, Mike Shields in Vienna, Stephen Brown in Berlin; Writing by Paul Taylor, editing by Mike Peacock/Janet McBride)

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Myanmar Government warns Suu Kyi could cause unrest planned tour (Reuters)

YANGON (Reuters)-a possible tour of Myanmar's pro-democracy leader Aung San Suu Kyi could cause unrest, State media warned Wednesday, implying that she would be responsible for their own safety.

Nobel Peace Laureate Suu Kyi is planning his first trip outside the former capital Yangon since she was freed from detention at home last year only after elections to end army rule.

The military still controls the Government.

"His followers and supporters are gushing that the icon has to keep in touch with the public. Seem willing to take advantage of the public. They also spread that the Government is responsible for the safety of Daw Aung San Suu Kyi, his trip, "said a commentary in all three official newspapers.

"We are deeply concerned that if Daw Aung San Suu Kyi makes travel in the country, there may be chaos and disorder, as evidenced by previous incidents," he added.

"Daw" is an honorific in Myanmar for women.

In 2003, in one episode, now known as the Depayin massacre, Suu Kyi's motorcade was attacked by thugs pro-junta and 70 of its supporters died in what was seen as an assassination attempt.

"The Government said that Daw Aung San Suu Kyi is just an ordinary member, so that the public will not limit you to travel and do things in accordance with the law, but she must honor the laws for the rule of law," read the comment.

Suu Kyi, 66, has announced the dates for the tour, or a route.

His party, the National League for democracy (NLD), was officially disbanded last year when he refused to register the elections held in November. Suu Kyi was released from six years of house arrest, a week after the vote.

Official Media, which act as a mouthpiece for the Government, also said on Wednesday that the Government had warned the NLD "will not harm peace and stability" and to enforce the law.

"If" they want to really accept and democracy in practice effectively, they are to stop such acts that may damage peace and stability and the rule of law, as well as the unity between people, including monks and service personnel, said the letter, according to state media.

NLD spokesman Nyan Win confirmed that he had received a letter. "We have received your letter of yesterday but still we have not talked about and decided what to do about it," he said.

The letter accused the party to keep its headquarters and various offices open and organizing meetings even through it was dissolved, the newspapers said.

"Such acts are not only against the law, but also amounts to oppose Hluttaws (the legislature)," they said.

(Reporting by Aung Hla Tun; Editing by Alan Raybould and Daniel Magnowski)

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Israel warns media against boarding Gaza flotilla (AP)

Jerusalem-Israel on Sunday threatened to prohibit international journalists for up to a decade from the country if they join a flotilla infringe planning the Israeli blockade of the Gaza Strip.

The warning reflected Israeli jitters about the international flotilla, which is little more than a year after a similar mission ended with the death of nine Turkish activists in clashes with the Israeli naval commando.

Israel is eager to avoid a repeat of last year's raid, which has drawn heavy international condemnations and finally forced Israel to loosen a blockade on Gaza controlled by Hamas. Israel says the blockade is necessary to prevent Hamas weapons smuggled into the territory.

It is not clear when the current is actually Sail flotilla, but organizers have hinted that it might be earlier this week.

In a letter to foreign journalists, Director of the Government Press Office, Oren Helman, called the "a dangerous provocation which is organized by extremist Islamic and Western elements to help Hamas."

"I would like to make it clear to you and to the media that you represent, that the participation of the flotilla is an intentional violation of Israeli law and could lead to the participants is denied entry into Israel for 10 years, for the seizure of their equipment and additional sanctions," said Helman.

The letter, he added, had been reviewed and approved by the Attorney General of Israel.

The flotilla organizers say that the mission is required to draw attention to the situation of the 1.6 million residents of Gaza. The Israeli blockade has caused serious damage to the economy of Gaza: unemployment is estimated at close to 50 percent, and the country still suffers from a shortage of building materials, necessary evil.

Israel has long had a tense relationship with the international media. During his invasion of the Gaza Strip 2 1/2 years ago, based on Israeli journalists were prevented from entering the territory, forcing the Supreme Court to order the army to let reporters in.

Israel has imposed a land and a naval blockade on Gaza after Hamas, an Iranian-backed group that has killed hundreds of Israelis in suicide bombings and other attacks, took control of the coastal strip.

The international uproar over deadly raid flotilla last year has forced Israel to facilitate considerably the embargo, but the blockade remains intact.

Israel has already said it will block the flotilla this time. Navy officials say they will use different tactics, although hoping to avoid bloodshed.

____

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Syria protest group warns of coming 'volcano' (AFP)

DAMASCUS (AFP) – Syrian security forces continued their crackdown on protestors with another four civilians killed, as a protest group called for demonstrators to expect "a volcano" this week.

"Two civilians were killed in Kassir by gunfire from the security forces who have reinforced there since Friday" near the Lebanese border, the head of the London-based Syrian Observatory for Human Rights, Rami Abdel Rahman, told AFP.

"The other two civilians lost their lives to security force fire during the funerals of victims killed on Friday" in Kiswah south of the capital, he said.

The Syrian Revolution 2011 called on demonstrators to "get ready for a volcano" in Aleppo next Thursday, Syria's second city, in a message posted on its main Facebook page, while opposition figures announced they will meet in Damascus on Monday to discuss "how to solve the crisis.".

Tens of thousands of people calling for the regime's ouster protested on Friday in response to a call by the Facebook group Syrian Revolution 2011 -- the driving force behind three months of anti-regime demonstrations.

Security forces used live ammunition and tear gas against the protesters, killing 18 people and wounding scores more, activists told AFP.

Five died in the Damascus neighbourhood of Barzeh, six in Kiswah and seven in and around the central city of Homs, they said.

Abdul Karim Rihawi of the Syrian League for Human Rights said funerals were held on Saturday in all three protest centres for Friday's victims.

"The army backed by tanks and troop carriers entered Al-Najia as part of its deployment in the province of Idlib," Abdel Rahman said earlier of the situation along the border with Turkey.

Al-Najia is on the road linking the northwestern city of Latakia to Jisr al-Shughhur -- home to 50,000 people, most of whom fled after the army seized the town on June 12, with many crossing into Turkey.

The latest operation came just days after the army moved into Khirbet al-Joz, another village near the border, and amid EU condemnation of Syria's resort to "shocking violence" against peaceful dissent.

On Friday, the state-run SANA news agency reported that the army had "completed" its deployment in and around Jisr al-Shughur, and quoted a military official as urging villagers who had fled their homes to return.

The authorities blame "terrorist armed groups" for the unrest that has gripped Syria since pro-democracy protests broke out in mid-March, and say the military deployments are aimed at rooting them out.

The army's sweep through protest centres in the northwest has sent nearly 12,000 Syrians fleeing to safety in neighbouring Turkey, which is scrambling to accommodate the refugees in its Hatay border province with Syria.

More than 200 tents have already been erected in the camp while another 1,000 are due to be ready in a week in the village of Apaydin with a capacity for up to 15,000 people, village headman Omer Cagatay said.

Syria's Red Crescent chief, Abdurrahman Attar, said on Saturday that the refugees would not face retribution or interrogation if they returned home, Turkey's Anatolia news agency reported.

"We, as the Red Crescent, guarantee that the Syrian government will not call (the refugees) to account and under no circumstances will security forces take decisions about them," Attar was quoted as saying.

Syria's President Bashar al-Assad on Tuesday ordered a general amnesty in a bid to quell rising unrest, a day after offering a "national dialogue."

More than 150 people were rounded up between Friday and Saturday in house-to-house searches in Barzeh and some 70 arrests were made in Mareh near Aleppo, the Observatory said.

The Observatory says 1,336 civilians have been killed in the government's crackdown and that 341 security force personnel had also lost their lives.

Amnesty International chief Salil Shetty, visiting Cairo on Saturday, urged Arab states to act to help end the violence in Syria.

"I urged the League of Arab states to take far stronger action on the gross human rights violations taking place in Syria," Shetty said after meeting outgoing Arab League chief Amr Mussa.

"In contrast to their vocal stance on Libya and support for international action, Arab countries have stayed largely muted on Syria."

EU leaders adopted a declaration in Brussels on Friday denouncing "in the strongest possible terms the ongoing repression and unacceptable and shocking violence the Syrian regime continues to apply against its own people."

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