US Congress raises debt ceiling at the 11th hour, avoiding default; commentators call a victory for the Republicans, but stock markets fall regardless; Syrian forces shell Hama for a third day; Somali refugees starve as rebels block escape; Chinese police shoot Uighurs accused of attacks; Trilateral AfPak talks; and more

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

The US 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 later passed the bill, and President Barack Obama signed it into law (NYT), narrowly meeting a deadline that could have seen the United States default on its financial obligations for the first time in history.

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 US 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 US 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 US debt rating because of doubts about deficit-reduction plans. The fallout could include higher borrowing costs, a weaker dollar, and market turbulence.

A US 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.

 

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.

 

ELSEWHERE:

- Syrian Forces Assault Hama
- Trilateral AfPak Talks
- Somali Islamists Block Refugees' Escape

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.