LONDON – The euro rebounded from a 10-month low on Friday but European stocks dropped, as markets gave a cautious welcome to the eurozone's bailout program for Greece, which would extend loans only as a last resort and involve the International Monetary Fund.
Investors' reaction was mixed because while the program does provide a backstop, it rules out any immediate loans to Greece and lays bare the structural problems in Europe's economic union. Furthermore, while the crisis may be averted, several EU countries face years of slow growth as they try to balance their budgets.
The euro was up at $1.3377 in morning trade in Europe compared with $1.3291 in New York late Thursday.
Stocks, however, showed less enthusiasm. Britain's FTSE 100 benchmark stock index was down 0.3 percent at 5,709.90 while Germany's DAX was down 0.4 percent at 6,110.30. France's CAC-40 was 0.3 percent lower at 3,988.84.
"The agreement last night of a rescue package for Greece clearly improves the country's financial outlook and could also ease some of the near-term pressure on the euro," said Jonathan Loynes, chief European economist at Capital Economics in London. "But it would be wrong to think that the crisis is over."
He noted Greece will continue to have to pay a heavy price to borrow money. The spread between Greek 10-year bonds and equivalent German issues — a key indicator of market trust — narrowed to 305 basis points Friday, down from about 330 on Thursday morning. But the level remains high, translating to roughly twice Germany's borrowing rate.
Loynes also pointed out that Greece faces an extremely serious economic crisis, and that it isn't alone — governments in Ireland and Portugal are also inflicting painful austerity programs that will keep growth subdued.
"Against that background, we suspect that any relief for the euro will be short-lived," said Loynes.
The joint eurozone and IMF bailout program comes with strict conditions, making no money available to Greece right now. It could be tapped only if Greece — or other financially troubled eurozone members — cannot raise funds from financial markets and would require the unanimous agreement of the 16 eurozone countries to release the loan funds.
Moody's credit ratings agency highlighted the uncertainty created by the political wrangling to come up with a deal.
"The key credit question is whether, over the coming weeks and months, market confidence will be strengthened by the support package or whether it will be weakened by contentious conditions under which this package was agreed," said Pierre Cailleteau, managing director for sovereign risk at Moody's in London.
In Asia, stocks were mixed in early trade before turning higher later in the day. Japan's benchmark Nikkei 225 stock average gained 167.52 points, or 1.6 percent, to 10,996.37.
Hong Kong's Hang Seng index rose 252.02, or 1.2 percent, to 21,030.57 and South Korea's Kospi added 9.33 points, or 0.6 percent, to 1,697.72. Markets in Australia, Indian and Taiwan also gained.
The dollar fell to 92.50 yen versus 92.66 yen.
The benchmark crude oil contract for May delivery was up 37 cents at $80.90.
Wall Street futures pointed to a stronger open in the U.S. Dow industrial futures were up 0.2 percent at 10,817.00 while Standard & Poor's 500 futures were up 0.3 percent at 1,166.00.
In New York on Thursday, the Dow rose just 0.1 percent, to 10,841.21, after hitting a 2010 high earlier in the day.
WASHINGTON – Congressional Democrats sent the final piece of landmark health care legislation to President Barack Obama before heading home to face a skeptical — and sometimes even threatening — electorate.
The last legislative chapter in the wrenching national debate over Obama's health overhaul plan came Thursday night in the House, as Democrats approved — for the second time — a package of fixes to the sweeping health bill Obama signed two days earlier. The measure includes better benefits for seniors and low-income and middle-class families.
In the hours ahead of the vote lawmakers reported isolated threats of violence from a volatile public.
The vote was 220-207, as majority Democrats prevailed despite 32 defections and no Republican support. The same bill had passed the Senate earlier in the day 56-43, with all voting Republicans and three Democrats voting "no."
Obama was expected to sign the measure early next week.
The fix-it bill was slightly changed by the Senate from a version that passed the House last weekend, necessitating Thursday night's second vote by the House because both chambers must approve identical legislation before the president can sign it.
"This is the last step we must take to make health reform a reality for millions of Americans," said Rep. Frank Pallone, D-N.J.
Republicans were bitterly opposed to the end.
"We need to repeal Obamacare and replace it with policy that will create more access, create jobs, which will lower the cost of health care and not be a government takeover of the health care system," said Rep. Paul Broun, R-Ga.
In Iowa on Thursday to trumpet the benefits of the legislation, Obama said, "We made a promise. That promise has been kept."
"From this day forward, all of the cynics, all the naysayers — they're going to have to confront the reality of what this reform is and what it isn't," the president said. "They'll have to finally acknowledge this isn't a government takeover of our health care system."
Taken together, the two bills extend coverage to 32 million uninsured Americans and aim to crack down on unpopular insurance industry practices, such as denying coverage for people with pre-existing medical conditions, and to reduce federal deficits by an estimated $143 billion over a decade.
Most Americans would be required to buy insurance for the first time or face penalties if they refuse.
The second of the two bills also presented Obama with another victory, stripping banks and other private lenders of their ability to originate student loans in favor of a system of direct government lending.
After a monthslong battle in Congress, the political struggle was morphing into a new phase in which public debate was tinged with violence — and politicians accused one another of seeking to exploit it for their own advantage. It added up to a charged atmosphere for lawmakers about to head back to their home districts for the two-week Easter and Passover recess.
More than 10 lawmakers in the House said they had received threats or worse as a consequence of the health care debate, most of them Democrats who voted in favor of the legislation. There were reports of bricks through windows, a cut propane line to a grill and numerous obscene and threatening phone calls, letters and faxes. An undisclosed number of lawmakers were under increased police protection.
Speaker Nancy Pelosi, D-Calif., and the GOP leader, Rep. John Boehner of Ohio, both denounced the threats and incidents of violence. But Democrats said Republicans had been too slow to respond, drawing an outraged response in return.
Thursday's votes marked the final stages of a rescue mission that Obama and Democratic leaders mounted more than two months ago, after Republicans unexpectedly won a Massachusetts Senate seat, and with it, the ability to slow final action on health care legislation.
Under a revised strategy, the House agreed to approve a Senate-passed bill despite numerous objections, on the condition that both houses would follow quickly with a fix-it measure. The one finally brought to a vote on Thursday added more than $20 billion to subsidies for lower- and middle-income individuals and families who will be required to purchase insurance, and about $8 billion over a decade for states that already provide more generous than average Medicaid benefits.
Associated Press writers David Espo, Alan Fram, Ricardo Alonso-Zaldivar, Jim Abrams and Laurie Kellman contributed to this report.
The health care overhaul will cost U.S. companies as much as $14 billion this year and make them more likely to drop prescription drug coverage for retirees because of a change in how the government subsidizes those benefits.
In the first two days after the law was signed, three major companies — Deere & Co., Caterpillar Inc. and Valero Energy — said they expect to take a total hit of $265 million to account for smaller tax deductions in the future.
With more than 3,500 companies now getting the tax break as an incentive to keep providing coverage, others are almost certain to announce similar cost increases in the weeks ahead as they sort out the impact of the change.
Figuring out what it will mean for retirees will take longer, but analysts said as many as 2 million could lose the prescription drug coverage provided by their former employers, leaving them to enroll in Medicare's program.
For the government, the tax changes are expected to raise roughly $4.5 billion over the next decade to help pay for the health overhaul. Some of the savings would be negated by retirees enrolling in the Medicare plans.
"You're increasing the incentive for companies to say 'We don't want to be in the health care business any more,'" said James Gelfand, senior manager of health policy for the U.S. Chamber of Commerce, which fought the overhaul.
American industrial companies that are struggling to compete globally against companies with much lower labor costs are particularly likely to eventually drop retiree coverage, said Gene Imhoff, an accounting professor at the University of Michigan.
"Anything that they can use to justify pushing something away from the employees, pushing it back on the employees or the government, they're going to do it," Imhoff said. "I'm not sure you can really blame them for trying to do this."
Caterpillar spokesman Jim Dugan said the company is still studying the health care law and doesn't yet know what the full impact will be. But he acknowledged that benefit changes are possible.
"Obviously, there's greater cost pressures on us that could drive changes to plans, but we haven't made any decisions on that," Dugan said.
Spokesmen for Deere and Valero said it was to soon to say how the change would affect the benefits they offer retirees.
White House spokesman Robert Gibbs defended the tax law change Thursday, saying the original law allowing companies to write off the subsidies was a "loophole" that will be closed by the health care overhaul.
When Congress approved the Medicare prescription drug program in 2003, it included government incentives for employers to provide drug benefits to retirees so the public system wouldn't be overwhelmed. Employers that provide prescription drug benefits for retirees can receive subsidies covering 28 percent of eligible costs.
Under the 2003 law, companies could deduct the entire amount they spent on the drug benefits from their taxable income — including the government subsidy, an average of $665 per retiree.
The health care law signed by President Barack Obama on Tuesday prohibits companies from writing off the subsidies starting in 2011, meaning they will no longer be able to deduct them from their taxable income.
For example, if a company spent $100 on benefits, including a $28 government subsidy, it could write off the full $100 on its taxes under the old rules. The new rules would allow the same company to write off only $72.
The follow-up health care bill to reshape parts of the overhaul would delay the changes until 2013.
As many as 1.5 million to 2 million retirees could lose the drug benefits provided by their former employer because of the tax changes, according to a study by the Moran Company, a health care consulting firm.
James Klein, president of the American Benefits Council, said between 6 million and 7 million retirees currently get the benefits. But the number of companies offering them has been dwindling for years.
Generally, retirees would prefer to stay with prescription drug coverage provided by their companies as opposed to enrolling in a Medicare Part D plan, said Marilyn Moon, a health care economist with the nonpartisan American Institutes for Research.
She said most of the company-sponsored plans are more generous and almost none have the coverage gap that comes with Part D plans.
"That's particularly painful and problematic for people who have substantial expenses at any one point in time," she said.
Industry groups say they lobbied hard against the change in the tax rules before it was added to the health care law over the winter.
"It was in all of our letters and communications that went up to the Hill, and the companies were heavily involved in that," said Dena Battle, a tax specialist with the National Association of Manufacturers.
Nationwide, companies would take a $14 billion hit on their financial statements if all of the roughly 3,500 companies receiving the subsidies continued to do so, according to a study by Towers Watson, a human resources consulting firm.
That financial hit will be a one-time cost as companies report a new cost estimate for the benefits over the lifespan of all retirees.
Deere and Caterpillar were among a group of 10 companies that sent a letter to congressional leaders in December warning of the cost increases. The others were Boeing Co., Con-Way Inc., Exelon Corp., Navistar Inc., Verizon, Xerox Corp., Public Service Enterprise Group Inc. and MetLife Inc.
Most of the other companies that signed the letter said Thursday that it was too soon to estimate their costs. A number of other major U.S. companies also said they did not know how much the tax change would cost them. Some companies might wait until they release their earnings reports next quarter to address the costs so they have time to review the entire law.
The companies that signed the December letter warned that changing the way retiree drug benefits are subsidized would have a broad impact on the economy, and there are already indications that the effects will trickle down to individuals.
Consumers Energy, a Michigan gas and electric company with 2.9 million customers, said it will not take a big first-quarter charge because, like most utility companies, it can try to recover the added costs from its customers through rate hikes.
AP Business Writers Daniel Wagner in Washington, Tom Murphy in Indianapolis and Tom Krisher in Detroit and Associated Press Writers Stephen Ohlemacher and Ricardo Alonso-Zaldivar in Washington contributed to this report.