Euro Drops After Sarkozy, Merkel Reject Joint

PARIS — The leaders of France and Germany on Tuesday promised to take concrete steps toward a closer political and economic union of the 17 countries that use the euro, but it was unclear whether their proposals would be sufficient, or come quickly enough, to satisfy markets anxious over Europe’s debts and listless economies.

They also pledged to push for a new tax on financial transactions, and for regular summit meetings of the zone’s members under the leadership of Herman Van Rompuy, who heads the council of all 27 European nations.

“We are certainly heading for greater economic integration of the euro zone,” Mr. Sarkozy said.

The much-anticipated meeting at the Élysée Palace here produced little that would seem to quell the nerves of bond traders, who are becoming increasingly worried that the economic slowdown in both Germany and France will make it harder to overcome Europe’s debt crisis.

Both leaders ruled out issuing collective bonds, known as eurobonds, to share responsibility for government debt across member states, and they opposed a further increase in a bailout fund that will not be put into place until late September at the earliest.

Mrs. Merkel repeated that there was “no magic wand” to solve all the problems of the euro, arguing that they must be met over time with improved fiscal discipline, competitiveness and economic growth among weaker states.

Even the stronger members of the euro zone have stalled. Official figures released on Tuesday showed that growth in the zone fell to its lowest rate in two years during the second quarter, and that Germany — considered the Continent’s locomotive — came almost to a standstill, growing 0.1 percent.

The German figures followed data showing that the French economy was flat in the second quarter, leaving Europe’s two largest economies stagnant. That means the two pillars of the European economy may be less willing and able to prop up their weaker counterparts, analysts warned.

Across the euro zone, gross domestic product rose only 0.2 percent in the second quarter from the first, when growth had advanced by 0.8 percent, according to Eurostat, the European Union’s statistics agency.

The joint French-German proposals were as modest as German officials had forecast. And the most ambitious idea — that all euro zone states legally bind themselves to working toward balanced budgets and reduced sovereign debt — is unlikely to be accepted by all member states. It may not even get through the French constitutional process, since Mr. Sarkozy does not have a constitutional majority in Parliament.

The proposal calling for twice-yearly meetings and increased integration could formalize the “two-speed Europe” — of those in the euro zone and those outside it — that many warned of when the European Union expanded so rapidly after the collapse of the Soviet Union in the early 1990s.

Both leaders said that France and Germany must set an example, citing their agreement to propose jointly a financial-transaction tax by 2013 as “an example of convergence” needed in the entire euro zone. But such a tax is unlikely in the larger European Union, especially if Britain, which is outside the euro zone and contains Europe’s biggest financial center, continues to resist the idea.

They also said they would work to harmonize French and German economic assessments and, in the future, corporate tax rates.

“France and Germany are committed to strengthen the euro,” Mrs. Merkel said. “To that end we need to better integrate our economies” and “to see that the stability pact will be acted on.”

The stability pact, a central element of the treaty that established the euro zone, commits members to keep fiscal deficits to 3 percent of gross domestic product a year and total sovereign debt under 60 percent of G.D.P. Both benchmarks are regularly missed.

The Sarkozy-Merkel meeting came after a dizzying week in the markets and a general gloom about the lack of European leadership on the euro. Economists said the weak data could simply reflect a pause after two years of brisk expansion. But the numbers could also signal that the sovereign debt crisis is undercutting growth outside the countries like Spain that are most directly affected.

“The longer the sovereign debt market remains stressed, the greater will be the damage to the wider economy,” Lloyd Barton, an economist, said in a note Tuesday.

If there was any silver lining, it was the hope that slower growth would lead to less inflation, giving the European Central Bank more leeway to keep interest rates low and intervene in bond markets. Since last week, the bank has been buying Italian and Spanish debt on the open market to hold down yields so the two countries do not face ruinous borrowing costs.

The euro dropped to $1.4362 at 10:19 a.m. in Tokyo from $1.4407 in New York yesterday. The shared currency weakened to 110.19 yen after slipping 0.3 percent to 110.65 yesterday. The dollar bought 76.72 yen, compared with 76.80 yen yesterday.

German Chancellor Angela Merkel and French President Nicolas Sarkozy also rejected an expansion of the 440 billion- euro ($632 billion) rescue fund .

Transaction Tax, Inflation

The leaders of Europe’s two biggest economies agreed to press for closer euro-area cooperation, tougher deficit rules and a harmonization of their corporate tax rates. A plan to resubmit a proposal for a financial-transaction tax, which the European Union rejected in 2010, sent stocks lower in the U.S. and Asia.

The MSCI Asia Pacific Index of regional shares lost 0.3 percent. The Standard & Poor’s 500 Index sank 1 percent yesterday.

The rejection of euro bonds coupled with the announcement of a financial transaction tax “could weigh on European equity and bond markets on Wednesday,” BNP Paribas SA strategists including Ray Attrill in New York wrote in a note to clients today. The tax plan “could fall flat, but the uncertainty factor will likely linger and weigh on the euro.”

European consumer prices fell 0.6 percent in July after flat readings for May and June, the European Union’s statistics office in Luxembourg is forecast to say, according to the median estimate in a Bloomberg News survey. Annual inflation in the euro region slowed to 2.5 percent from June’s 2.7 percent reading and in line with a July 29 initial estimate, the survey predicted. That still exceeds the European Central Bank’s 2 percent ceiling for an eight month.

Kiwi Declines

The New Zealand dollar weakened against all of its 16 major counterparts after Fonterra said milk powder fell at auction to its lowest level since Aug. 3 last year. Milk powder for October delivery declined to $3,359 a metric ton from $3,477 two weeks earlier.

The so-called kiwi also declined along with the Australian dollar as concern that the global economic recovery is losing momentum curbed demand for higher-yielding assets.

“There are all sorts of hurdles around in global markets,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “That will hurt risk appetite and that would hurt Aussie and kiwi in particular.”

New Zealand’s dollar fell to 83.20 U.S. cents from 83.61 cents and slipped to 63.84 yen from 64.21 yen. The so-called Aussie decreased to $1.0448 from $1.0486.

Michele Bachmann skipping Florida straw poll

Houston - Republican Presidential Candidate Ron Paul did very well in the recent Iowa Straw Poll.

He came in right behind Michelle Bachman, so why is most of the media ignoring him?

Results of the poll came out this past Saturday.

Candidates were doing 1-on-1 interviews with all of the big news organizations and networks, but not Ron Paul. No interviews for him, no mention of his name. Even one of the nation’s most popular political comedians found it quite obvious.

Leave it to Jon Stewart to turn something very serious into something very funny, and that's the way Ron Paul sees it too. I sat down with him in his small office in Clute where he was all smiles.

“Jon Stewart is not really in our political camp but he likes to pick out those things that deserve to be made fun of and he did a pretty good job,” Paul said.

After getting pretty much zero recognition for a job well done in the Iowa Straw Poll, all Paul can do is laugh about the matter and move on.

“It’s great being ignored. You get a lot of attention, from all the attention, I’m being cynical now, you know we were ignored and people want to know why and I said well, you have to ask the people that ignored me,” Paul said.

Even though he thinks he deserved some media attention, he's not about to complain and pick a fight.

Instead, he thinks the media just doesn't understand his philosophy.

“I give them a pass and say they do not understand it and they don’t want to be bothered with it, it’s a threat to them because they don’t want to deal with it, so maybe if we just pretend like he doesn’t exist…but believe me, it’s not going to work,” he said.

And She was the winner in Iowa's straw poll, but a spokeswoman confirms Michele Bachmann won't be taking part in Florida's Presidency Five straw poll, which falls just after the GOP candidate's debate being held in the state.

Organizing for a straw poll is pricey and logistically rigorous, although the Bachmann campaign did it once already. And the state is shaping up as crucial given the current dynamics of the primary, with Rick Perry and Bachmann playing aggressively for Iowa and Mitt Romney still the heavily-favored prospect in New Hampshire, and it could be an opportunity for her to prove she can play in a more moderate swath of the map.

Responding to a heckler rarely worth trouble for politicians

Not knowing who the eventual Republican presidential nominee will be in the 2012 election, President Obama's supporters are taking the opportunity to blast all of the GOP candidates, using aggressive language to argue that the crop of contenders is either uninterested or incapable of helping Americans.

Much of the criticism is focused on describing the candidates as lackeys to the Tea Party, which establishment Democrats have classified as right-wing zealots bent on destroying the U.S.

"While protecting tax breaks for the wealthy and big oil while proposing to end Medicare, slash Social Security and pile additional burdens on the middle class might win plaudits with the Tea Party, it's not remotely what the American people are looking for," Democratic National Committee Communications Director Brad Woodhouse said in a statement Sunday after Tim Pawlenty dropped out of the race.

"In a Republican field that has already pledged allegiance to the Tea Party and failed to present any plan that will benefit the middle class or create the jobs America needs to win the future, Governor Perry offers more of the same," Obama campaign spokesman Ban LaBolt said Saturday after Texas Gov. Rick Perry jumped into the race.

Democratic National Committee Chairwoman Debbie Wasserman Schultz noted that Obama asked for compromise on a debt reduction plan but all the presidential candidates at the Fox News-Washington Examiner debate on Thursday night agreed that they would not back a deal that would be 10-1 cuts to revenue.

"That's how strangled by the Tea Party that they are, and that's not what Americans are looking for. They're looking for solutions," she said.

"If anyone is in trouble, it's the Republican Party," continued Wasserman Schultz, who was appearing on CBS' "Face the Nation." "Right now, they have a collection of candidates for president who are busy out -- trying to out-right-wing each other. Essentially, they are all so similar that they might as well be Legos; they're that interchangeable."

Often the speaker will try to talk over or ignore the heckler — but sometimes they just can’t resist mixing it up.

That’s almost always a mistake.

The latest incident occurred last Monday night in Iowa, when one Ryan Rhodes stood up and shouted a question during a Town Hall meeting, and afterward confronted the president as Obama was shaking hands and signing autographs, asking the president how he could call for more civility “when your vice president is calling people like me, a Tea Party member, a terrorist.”

Rhodes was referring to reports that Joe Biden used the word “terrorist” in a closed-door meeting. Biden has denied using the word.

Obama responded to Rhodes by noting he’s “been called a socialist who wasn’t born in this country, who is destroying America and taking away its freedoms,” so he’s all for toning down the rhetoric. A woman in the crowd joined the fun, yammering at Obama, “You do realize that 90 percent of domestic terrorist attacks are done by left-wing, environmental radicals and not people like me!” (Where does she get her figure? Also, does she really believe Biden was saying Tea Party activists are domestic terrorists?)

“You don’t seem to be interested in listening,” Obama said to Rhodes as their little tiff ended.

“Neither do you,” said Rhodes, as casually as if he were debating with his next-door neighbor and not the president of these United States.

Bachmann turns on overdrive

Michele Bachmann has emerged as a rising superstar with the GOP — Sarah Palin without the commitment issues. She’s fresh off a straw poll victory and she was on five — count-’em, five — Sunday morning political talk shows.

But rebel or traditional candidate, there are certain rituals you have to participate in on the campaign trail, including the time-honored practice of eating the local food in diners and at country fairs, and pretending there’s nothing you’d rather wolf down than some barbecue in Kansas City, a cheese steak in Philly — or a corn dog in the Midwest.

So there was Bachmann at the Iowa State Fair in Des Moines the other day, downing a corn dog with gusto and inspiring a thousand Google Images and countless easy jokes on Twitter, Facebook and on the comedy shows.

In the meantime, Bachmann continues to deal with the “submissive” question. A few days after the topic was raised at the Iowa debates, Bachmann was asked on “Face the Nation” about saying, “[T]he Lord says, be submissive. Wives, you are to be submissive to your husbands.”

When asked if submissive meant subservient, Bachmann said, “You know, I guess it depends on what word people are used to, but respect is really what it means. We respect each other, we listen to each other, we love each other, and that is what it means.”

Of course, that is not what it means. The dictionaries tell us “submissive” means, “inclined or willing to submit to orders or wishes of others,” and that suitable synonyms include “meek, passive, obedient, yielding, docile, dutiful, deferential,” etc.

One can argue about the biblical context, but it’s hard to get away from such quotes as, “Wives, submit yourselves unto your own husbands . . . for the husband is the head of the wife.” That seems pretty clear-cut.

Not that it’s going to matter in the end. Bachmann’s chances of actually becoming the next president? I’d say it’s 30-1 against. Iowa straw poll aside, Rick Perry has the best chance of making a serious run at Mitt Romney. (When did the Iowa straw poll become such a national event, anyway, and how do we put an end to that?) A new Rasmussen Poll of likely GOP primary voters has Perry leading with 29 percent, with Bachmann a distant fourth with just 13 percent.

Like Sarah Palin, Bachmann loves needling the mainstream press and playing the part of the rock star who refuses to do things the traditional way. Yet it’s that very attitude — and yes, the fact that both are attractive women — that makes them such intriguing subject matter for the very “lamestream” media for which they have such supposed disdain. It just might be that both Palin and Bachmann are bigger stars and bigger players in the media than they are on the Republican depth chart.