NEW YORK – The euro popped higher Wednesday after a report that the U.S. would support a larger aid package for Europe through the International Monetary Fund, even though U.S. and European officials denied the substance of the report.
In late trading in New York, the euro rose to $1.3132 from $1.3011 late Tuesday. It rose by more than one cent immediately after the report came out. The euro has fallen about 10 percent from a nine-month high in early November as Ireland's debt crisis deepened. Investors now worry Portugal may be next, or even Spain, may be next to require a bailout after Greece and now Ireland.
Reuters reported at midday that an unnamed U.S. official said the U.S. would be willing to have the IMF give more money to support the European Financial Stability Facility. The U.S. is the IMF's biggest stakeholder.
The EFSF is a 440 billion euro fund the Europeans put together as part of a broader 750 billion euros rescue package in May during the Greek debt crisis. The IMF has already pledged up to 250 billion euros.
A U.S. official, who would speak only on condition of anonymity because discussions were still ongoing, said that an addition to the IMF support package was not something that was being discussed currently.
Treasury Secretary Timothy Geithner did dispatch Treasury Undersecretary Lael Brainard, Treasury's top official on international matters, for talks with European officials. Brainard had meetings in Madrid with economic officials on Wednesday and was scheduled to be in Berlin on Thursday and Paris on Friday.
The U.S. "can't afford to let Europe implode," said David Gilmore of Foreign Exchange Analytics. But the reported statement by the U.S. official does not necessarily mean that the U.S. has already agreed to a deal allowing the IMF to contribute more money or that it will pony up more money for Europe itself.
Investors were relieved by the implication that the EU and the IMF might be assembling a larger bailout fund, Gilmore said, because of the threat of there not being enough funds for Spain, should it need a rescue.
A spokesman for the EU's monetary affairs chief Olli Rehn said he had not heard of talks about extending the EFSF fund.
There are also expectations that the European Central Bank, which meets Thursday, may take additional steps to stabilize the debt crisis. The ECB could increase its purchases of sovereign debt in an effort to calm bond markets, which might in turn help support the euro, said currency analysts from Brown Brothers Harriman in a research note.
In other trading Wednesday, the dollar rose to 84.20 Japanese yen from 83.63 yen, but the British pound rose to $1.5618 from $1.5570. The U.S. currency dropped to 1.0158 Canadian dollars from 1.0257 Canadian dollars, and was almost unchanged at 1.0036 Swiss francs from 1.0032 Swiss francs.
AP Business Writers Martin Crutsinger in Washington and Gabriele Steinhauser in Brussels contributed to this report.
WASHINGTON (Reuters) – A presidential commission trying to balance the budget on Wednesday softened a proposed tax overhaul to win broader support for its bold plan to slash the $1.3 trillion federal deficit.
The plan faced an uphill struggle to win sufficient backing to trigger a congressional vote. Even if that happens, analysts predict Congress won't take substantive steps to reduce the deficit this year.
Changes made to the plan included dropping a proposal to kill the popular mortgage interest tax deduction, as had been recommended on November 10. The revised version proposed a limited, 12 percent mortgage interest tax credit.
In an attempt to attract backing from elected lawmakers on the 18-member commission, the revised plan also backed off a proposal to tax capital gains and dividends as ordinary income and suggested a 20 percent investment income exclusion.
Two key senators -- Democrat Kent Conrad and Republican Judd Gregg -- said they would support the plan at a meeting on Wednesday. A final commission vote is set for Friday.
The panel's co-chairmen need 14 "yes" votes to trigger a congressional vote on the proposal. President Barack Obama set up the commission in February.
The panel's revised plan envisages reducing the budget deficit to 2.3 percent of gross domestic product by 2015, from 8.9 percent in the last fiscal year -- a figure bloated by efforts to lift the U.S. economy out of its deepest recession since the 1930s, Bush-era tax cuts and two costly wars.
To accomplish that goal, the plan urges deep cuts in military and domestic programs starting in 2012, a 15 cent per gallon hike in the gas tax and requiring Medicare participants to pay more costs themselves. It also recommends raising the age for receiving Social Security benefits.
SEVEN VOTES FOR PLAN
At Wednesday's meeting, seven commission members, including co-chairmen Erskine Bowles and Alan Simpson, expressed support for the plan; one member voiced opposition; and the remainder expressed concerns without committing one way or the other.
Bowles was chief of staff for former Democratic President Bill Clinton. Simpson is a former Republican senator.
Bowles vowed not to retreat from the hardest-hitting aspects of the plan, a result of months of debate. "Al and I are not going to wimp out. For us, it's go big or go home ... We're not interested in 14 votes for a whitewash," Bowles said.
Democratic Representative Jan Schakowsky, a commission member, said "I can't support it and will be voting no."
Republican Representative Paul Ryan said: "I don't believe this sufficiently fixes the healthcare problem."
AARP, which represents millions of older Americans, said the plan would cut Social Security too deeply and raise Medicare costs for beneficiaries.
"The latest report on deficit reduction would actually increase the health and economic insecurity of millions of Americans," AARP Executive Vice President John Rother said.
The commission's work came to a head amid an escalating debt crisis in Europe that offered a reminder of the value of fiscal restraint. But fears that the contagion could spread has driven investors into U.S. Treasury bonds, holding down the government's borrowing costs.
A fierce debate also was under way on Capitol Hill over Bush-era tax cuts that played a key role in boosting the deficit close to levels not seen since World War Two.
Extending the Bush tax cuts would drive the deficit higher. Obama has argued for letting them lapse for families earning more than $250,000 a year. Republicans, who take control of the House of Representatives in January after November's Democratic election defeats, say any lapse would harm the economy.
PLAN CUTS DEFICIT
As in the draft, which was widely criticized, the commission's revised plan calls for lower corporate tax rates and targets $4 trillion in deficit reduction through 2020.
It freezes 2012 discretionary spending at 2011 levels and returns it to pre-crisis 2008 levels in 2013, while capping its growth beyond 2013 at half the projected inflation rate.
In a largely symbolic gesture, it recommends cutting the budgets of the White House and Congress by 15 percent and immediately freezing the salaries of members of Congress, along with a three-year freeze on non-military federal worker pay and a reduction of 200,000 jobs from the federal workforce.
Instead of ending the charitable gift tax deduction, as the draft proposed, the revision calls for a 12 percent credit.
The revision also calls for a payroll tax holiday of $50 billion to $100 billion in 2011; reducing the number of income tax brackets to three from six; eliminating congressional budget earmarks; and creating new budget categories for overseas military operations and disaster relief.
(Additional reporting by Andy Sullivan, Alister Bull and Kim Dixon; Editing by Stacey Joyce)
HARRISBURG, Pa. – State public utility regulators have been advised to reject an effort by a natural gas pipeline firm that could subject its unregulated pipelines to safety standards, but also help it secure the power of eminent domain on private property.
An administrative law judge, in a decision posted online Wednesday, recommended that Laser Northeast Gathering Company LLC not be given status as a public utility. The decision is preliminary, and the state Public Utility Commission has the final say in the matter.
"The service offered is not offered 'to or for the public,' as the Public Utility Code requires, but is simply the commercial process used to carry natural gas from the producers to market," administrative law judge Susan D. Colwell wrote in her 96-page decision.
A commission decision will not come until next year, after parties in the case have an opportunity to submit comments on the judge's decision.
The case has been closely watched and stirred concern from some private landowners in northeastern Pennsylvania, as well as other pipeline firms that worry a precedent-setting decision could subject all gas-gathering lines to the utility commission's standards on safety, usage costs and consumer complaints.
Thomas F. Karam, president and CEO of Laser's owner, Delphi Midstream Partners LLC, said he disagreed with the decision, and that his firm will carry on with the project.
Laser Northeast plans to build a $55 million pipeline to ferry gas from the brisk Marcellus Shale drilling operations in Susquehanna County to the Millennium Pipeline that runs across New York's southern tier. Karam expects construction to begin soon and for it to be complete by summer.
The company's application coincides with the Marcellus Shale gas-drilling boom in Pennsylvania, as companies and investors from around the world pour billions of dollars into the United States' largest natural gas reservoir.
If regulated as a utility, Laser Northeast could seek court approval to try to take private property to build its pipeline, although it had pledged to do so only as a last resort and not if it requires the abandonment or destruction of homes, lakes or ponds.
Karam said any eminent domain case would be extremely rare and, in any case, it wasn't among Laser's primary reasons for applying. Rather, Laser wants to be able to lay its pipelines along public roads and rights of way, without having to satisfy each individual municipality's zoning rules, he said.
Gas-gathering lines that link wells to transmission lines are currently unregulated in Pennsylvania, although the utility commission has asked the Legislature to grant it the power to enforce safety standards.