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The budget plan the bipartisan Gang of Six ultimately devises will include $3 of spending cuts for every dollar it raises in additional tax revenues, Mark Warner tells Bloomberg , promising cuts in health care, defense, agriculture, and other domestic programs, along with changes to Medicare, Medicaid, and Social Security. The…

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No surprises from the Fed today: Rates are staying low, and its $600 billion bond-buying program remains on track to end in June, reports MarketWatch . The Fed sees the economic recovery moving at a “moderate pace” and downplayed the risks of inflation. Far more interesting will be Ben Bernanke’s first-ever…

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Bernanke: US deficit ‘not sustainable’

Obama must address debt quickly, warns Federal Reserve chief, while interest rates will stay low to protect recovery Federal Reserve chairman Ben Bernanke used his historic first conference to warn that the US deficit is “not sustainable” and tell political leaders they must address it “as quickly and effectively as they can”. Speaking at what was the first ever press conference on interest rate policy to be given by a Fed chairman, Bernanke confirmed that the US will keep interest rates low and continue its huge programme of buying back government bonds in order to keep the fragile economic recovery on track. The conference followed a statement from the federal open market committee, which stated that the US recovery was “proceeding at a moderate pace, and overall conditions in the labour market are improving gradually”. Household spending and business investment were picking up, but construction and the housing sector remained depressed, said the committee. The committee’s report was backed by government figures showing that orders for durable goods rose in March for a third consecutive month, demonstating that businesses are spending to update equipment. With the recovery still fragile, the committee said it would continue with a policy that has seen short-term interest rates driven down to near zero, but finish its controversial $600bn (£360bn) bond-buying programme designed to pump cash into the US economy. At the press conference, Bernanke acknowledged fears that inflation could be a threat, but said interest rates were unlikely to change in the next few months. The committee played down inflationary fears in its statement. “Commodity prices have risen significantly since last summer, and concerns about global supplies of crude oil have contributed to a further increase in oil prices since the committee met in March. Inflation has picked up in recent months, but longer-term inflation expectations have remained stable and measures of underlying inflation are still subdued.” As the Fed winds down its stimulus programme, attention is shifting to when and how it should start raising interest rates to prevent inflation from getting out of control. Two weeks ago, the European Central Bank raised its key policy rate to 1.25% in response to inflationary fears. But Bernanke seemed more concerned about the size of the US deficit. Last week credit rating agency Standard & Poor’s threatened to cut the US’s top-tier credit rating. Asked about S&P’s move, Bernanke said: “I’m hopeful this event will provide one more incentive for Congress and the political leaders to take action … it’s the most important economic problem in the long term that the US faces,” said Bernanke. If the S&P’s warning “goads” action by political leaders, he said, “that’s constructive”. Paul Davies, at Capital Economics, said that having a press conference was a step in the right direction: “The more information out there, the better.” He believed it would attract more attention than the short statement the Fed traditionally gave out. “It gives the Fed a chance to correct any misconceptions it thinks have found their way into the markets. This is a great soapbox from which to do that,” he said. But Davies warned that the press conference was likely to put more emphasis on Bernanke, and detract from the fact that that decisions are made by a committee and not an individual. Putting the Fed chairman in front of the cameras would put more pressure on whoever held the job to be media-savvy, he said. “I think that is the direction that things have been travelling in for some time. We see that with Mervyn King in the UK, who has become very adept at press conferences.” Ben Bernanke US economy Economics United States Dominic Rushe guardian.co.uk

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Hamas and Fatah on verge of deal

The two sides say an interim national unity government will be established, with elections within a year Rival Palestinian factions Hamas and Fatah are on the verge of a historic reconciliation which will put them on a collision course with Israel. A deal between the two organisations, bitter adversaries for four years, was agreed in Cairo on Wednesday after a series of secret meetings brokered by Egypt. The two sides said “all points of differences have been overcome”, and an interim national unity government would be established, leading to Palestine-wide presidential and parliamentary elections within a year. The Israeli government immediately sounded the alarm over the prospect of having to deal with Hamas. “The Palestinian Authority must choose either peace with Israel or peace with Hamas. There is no possibility for peace with both,” said prime minister Binyamin Netanyahu. The US, which hopes to facilitate a peace deal between Israel and the Palestinians this year, reacted cautiously to the news. “The United States supports Palestinian reconciliation on terms which promote the cause of peace. Hamas, however, is a terrorist organisation which targets civilians,” said a spokesman. Any Palestinian government must renounce violence and recognise Israel’s right to exist if it is to play a constructive role, he added. The details of the deal, expected to be formally signed in Cairo next week, were not spelled out. But Hamas said it included a combined security force and the release of prisoners held by both sides, as well as a unity government and elections. The unexpected accord follows mounting pressure in Gaza and the West Bank, driven by non-affiliated youth groups, for reconciliation between the factions. Large demonstrations calling for unity were held in March, with more planned for May. The youth groups were inspired by pro-democracy movements in the region, principally in Egypt, which has close ties to Gaza. The strength of mood alarmed the factions’ leaders, who sought to co-opt the protests in an attempt to contain them. The deal is likely to be viewed with suspicion by extreme hardline Islamist groups in Gaza, who have accused Hamas of abandoning armed resistance against Israel under its de facto ceasefire agreement. Such groups may try to sabotage the agreement by launching violent attacks on Hamas and Fatah as well as Israel. Fatah, the largest group of the Palestinian Liberation Organisation, and Hamas have failed to find a way of working together since Hamas won legislative elections in 2006. Disagreement escalated into a violent confrontation in which Hamas defeated forces of the Fatah-dominated Palestinian Authority in 2007. Hanan Ashwari, a veteran Palestinian legislator, said: “Every Palestinian will be delighted by this agreement which will signal a new phase in internal Palestinian relations. It’s good for peace and stability and it’s good for the region and democracy. This will help us heal the rifts and empower all Palestinians to end the occupation and embody statehood.” Hassan Zomlot, a senior Fatah official, said the deal was “great news for Palestinians”. He added: “I hope the international community will react positively because political unity, combined with the institutional reform that we have been working hard at, will bring about the establishment of a Palestinian state.” Netanyahu warned that the deal could lead to a Hamas takeover of the West Bank. “Hamas aspires to destroy the state of Israel and says so explicitly. The idea of reconciliation with Hamas demonstrates the weakness of the Palestinian Authority and makes one wonder whether Hamas will seize control of [the West Bank] the way it seized control of the Gaza Strip,” the Israeli prime minister said. The US and EU both view Hamas as a terrorist organisation although both have had informal contacts with representatives of its government. When Hamas took over the government in 2006, the EU and the US refused to fund the Palestinian Authority, which resulted in staff not being paid for almost a year. However, Hamas’s continued hold on the Gaza Strip and its successful imposition of law and order have persuaded many international diplomats and commentators that peace between Israel and Palestinians is impossible without its involvement. Hamas has taken over governmental roles in the Gaza Strip but it also maintains armed forces, in regular conflict with Israel. In recent months scores of Palestinians have been killed in Israeli artillery and air strikes. Fatah is seen as the more secular organisation, which has supported the Oslo Accords which led to the formation of the Palestinian Authority in 1994. Hamas, an Islamic group, opposed the Oslo Accords and continues to refuse to honour past agreements with Israel. The accord agreed on Wednesday was first reported by Egypt’s intelligence service, which brokered the talks. In a statement carried by the Egyptian state news agency Mena, the intelligence service said the deal was negotiated by a Hamas delegation led by Moussa Abu Marzouk, deputy head of the group’s political bureau, and Fatah Central Committee member Azzam al-Ahmad. “The consultations resulted in full understandings on all points of discussions, including setting up an interim agreement with specific tasks and to set a date for election,” the statement said. Hamas Palestinian territories Fatah Israel Middle East Conal Urquhart Harriet Sherwood guardian.co.uk

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The Defense Department doctors and psychologists who tended to Guantanamo Bay detainees were complicit in covering up their torture, according to a new study released yesterday. Medical records and legal files reveal that the doctors saw evidence of bone fractures, contusions, and lacerations; heard stories of rape; and saw signs…

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Gabrielle Giffords is indeed on her way to Florida to see husband Mark Kelly lift off Friday aboard the shuttle Endeavour. Video shot from a distance shows Giffords boarding a plane in Houston, slowly but on her own two feet, reports KHOU-TV . It’s the first public image of Giffords since…

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Need a passport? Better find your birth certificate, because the State Department is considering a new, and nearly impossible to complete, form that would be required for those who can’t produce one. In addition to “easy” questions like listing every residence and job you’ve had since birth and, of course,…

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Apple finally responded to the accusations that it was tracking iPhone users’ locations today, saying it “has never done so and has no plans to ever do so.” In a statement, which you can read on TechCrunch , the company explained that it was actually keeping a log not of the…

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Fighting over money and property is par for the course in a celebrity divorce. But these five couples, compiled by the Huffington Post , took things a step further: Stephanie Seymour and Peter Brant : The nude bust they fought over was in Seymour’s image, but it was commissioned by Brant. Fortunately,…

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America is supposed to be a place where everyone is equal—so why are so many of us glued to coverage of the royal wedding? Have we forgotten, Mark Oppenheimer wonders, that we “fought a bloody war for the privilege to ignore the king of England”? Now, many of us…

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