Europe to Washington: Hurry it up already

Europeans know a thing or two about down-to-the-wire debt deals, but with time running out in Washington to reach an agreement before a catastrophic default that could have devastating spillover effects around the globe, European leaders are sweating.  On Tuesday, Christine Lagarde, the managing director of the International Monetary Fund and former finance minister of France, warned the United States that the issue needed to be "resolved immediately."  Today, she told the PBS NewsHour that there would be dire consequences for the world economy if there wasn't resolution.

There's quite a lot of concern out there. The global economy is clearly highly dependent on the U.S. economy, because the U.S. economy is the first in the world and it's a major power in many respects. So to have the lead economy uncertain about its debt ceiling is quite worrisome.

In a separate interview with Fareed Zakaria on CNN, she said the solution would be to raise the debt ceiling now and address fiscal consolidation issues in the medium term.

Today, the German Finance Minister Wolfgang Schäuble also warned Washington to act.

Everyone in the US should be aware of their responsibility for the global financial markets.

He added, "The core of [the U.S.'s] difficulties is exorbitant debt and the economic prospects. Americans have to find long-term solutions to create solid fiscal and growth policies."

Schäuble and Lagarde were downright tame compared to Vince Cable, Britain's secretary of state for business, who told the BBC earlier this week that "the biggest threat to the world financial system comes from a few rightwing nutters in the American Congress rather than the euro zone."

Perhaps, the most sobering analysis of all comes from Germany's Der Spiegel:

Even if the worst is avoided, US finances are still a mess. Total debt is approaching 100 percent of gross domestic product, putting it in the same league as Italy, Portugal and Ireland, three of the euro-zone's famous PIIGS states. America's budget deficit is well over a trillion dollars -- more than 10 percent of GDP. Were Washington to apply to become a member of the European common currency zone, it would be rejected out of hand.

We'd be rejected by the euro zone? This euro zone?

AFP/Getty Images


Rumor Mill on the Nile

Only six months ago in Egypt, speculating about President Mubarak's health could land you in prison. Now it is a national pastime. Ever since the 83-year-old was hospitalized in April after complaining of chest pains, the Egyptian rumor mill has been spinning double-time, churning out reports that Mubarak suffered a heart attack or stroke, slipped into a coma, endured a gallbladder cancer relapse, developed new cancer in his stomach, is "in-between" life and death, or even that he has already expired.

After months of conflicting reports on the ex-president's health, Egyptian health minister Amr Hilmy finally announced that Mubarak is in good enough condition to be transferred to Cairo from his hospital bed in the sunny resort town of Sharm el-Sheikh.

"Mubarak's health is in an appropriate condition to be tried in Cairo," said Hilmy, noting that Cairo's Conference Center could be the venue for the court proceedings scheduled for August 3. The aging dictator stands charged with corruption and ordering the deaths of nearly 900 protesters during Egypt's 18 day revolution in January. If convicted, he could face the death penalty, typically meted out by hanging in Egypt.

The announcement was likely an attempt to placate demonstrators, who have grown increasingly cynical about SCAF's willingness to hold the old regime accountable. But questions remain about whether or not the Supreme Council of the Armed Forces (SCAF) is really willing to humiliate their former boss by putting him on trial. According to Reuters, "Officers privately admit the military has no appetite for trying the decorated veteran who led Egypt's air force in the 1973 war against Israel."

If public opinion in Egypt remains strongly in favor of trying Mubarak, however, analysts say the military brass will likely lose the loyalty act and protect what little legitimacy they enjoy as Egypt's interim rulers. As Shadi Hamid, director of the Brookings Doha Center, said in a Reuters interview, "They will not go down protecting Mubarak because the preservation of their own organization and the institution of the military is more important to them. If that means throwing Mubarak under the bus, then I think that is something they are willing to do."

But SCAF must weigh its reputation against other concerns -- namely rankling Saudi Arabia and other Gulf states that are lobbying hard to keep Mubarak out of court, as well as the possibility that a trial could expose SCAF's own corrupt financial dealings.

According to an unnamed SCAF official quoted in Ahram Online, a state owned news source, some rich Arab countries "offered to give Egypt a lot of economic assistance, in billions of dollars, in exchange of granting Mubarak immunity from trial."

The most immediate problem posed by court proceedings, however, is that they could contravene a longstanding tradition of shielding the military from public (or parliamentary) scrutiny. As the Los Angeles Times reports, "The proceedings are certain to offer a glimpse into the financial dealings and political alliances that allowed Mubarak to control the country." With between 5 and 40 percent of Egypt's GDP under military control (no one knows the exact amount) SCAF has a great deal to lose if its finances come under the limelight.

News of Mubarak's resilience, therefore, probably isn't ringing in that much cheer at SCAF headquarters today - assuming the generals haven't lost all faith in punditry about their former skipper's health.