Barroso says Italy vote must not stop reform drive

ROME (Reuters) - Early elections in Italy must not hinder the economic reforms of Prime Minister Mario Monti, the head of the European Commission was quoted as saying on Sunday, in a sign of growing international concern over the political crisis in Rome.

Monti's surprise announcement on Saturday that he intended to resign early once next year's budget is approved has opened the prospect of an election in February, a few weeks before the natural end of his term in April.

Former Prime Minister Silvio Berlusconi, whose withdrawal of support for the technocrat government in parliament last week triggered the crisis, has already announced he will be running on a platform attacking Monti's economic policies.

Speaking to business daily Il Sole 24 Ore, European Commission President Jose Manuel Barroso said Italy, the euro zone's third largest economy, remained at risk of a renewed bout of financial crisis, despite months of improving market confidence.

"The next elections must not serve as a pretext for putting in doubt how indispensable these measures are," he said.

"The relative calm on the markets does not mean we are out of the crisis," he said.

Barroso's comments underlined the uncertainty created by the sudden acceleration of Italy's political crisis following Berlusconi's decision to turn his back on Monti, whose government his People of Freedom (PDL) party had backed in parliament for more than a year.

According to the daily Corriere della Sera, Monti himself said he had been besieged with questions on the crisis while attending a conference in Cannes in the south of France on Saturday.

"I did not reply all day to the many questions which I received, especially from foreigners. I noticed their amazement about the Italian situation," he was quoted as saying by the newspaper.

Italian 10 year bond yields, the main barometer of market opinion, rose last week as the crisis broke, reversing weeks of steady falls although they remain well short of the levels reached during last year's crisis.

The yield on the 10 year BTP stood at 4.5 percent at the end of last week, 323 basis points higher than the yield on lower risk German 10 year Bunds but much lower than the level of 7.3 percent seen last year.

The former European Commissioner came to power at the height of the financial crisis a year ago and was widely credited with restoring Italy's credibility on financial markets and with European partners after the scandal-plagued Berlusconi era.

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Bangladesh police fire tear gas at election protest

DHAKA (Reuters) - Police fired rubber bullets and tear gas to disperse armed protesters staging blockades across Bangladesh on Sunday as part of an opposition push to get an independent administration to oversee next year's general election.

Activists from the country's two main political parties hurled homemade bombs and threatened to use guns and other weapons, Reuters witnesses and local television said.

Police and witnesses said supporters of the Bangladesh Nationalist Party (BNP), led by former prime minister Begum Khaleda Zia, and its allies set ablaze about 30 buses, trucks and cars in the capital Dhaka and other parts of the country.

"We are trying to contain the battles between activists and police, which has prevented movement of vehicles and forced residents from the streets," a police officer said.

Witnesses said the highway from Dhaka to the main port of Chittagong was deserted after the road had been barricaded. Other roads around the country were also blocked.

At least two people were killed and about 100 injured, police said. Dozens of activists were detained across the country.

The political scene in Bangladesh has been dominated for decades by bitter rivals Khaleda Zia and current Prime Minister Sheikh Hasina, whose electoral campaigns have sparked violent clashes and on occasions prompted military intervention.

The two women, both in their mid 60s and who have served two terms each as the country's leader, are likely to face each other again in the next election due by end of 2013.

The BNP called for Sunday's blockade to force Sheikh Hasina to restore a system of holding parliamentary elections under a non-party caretaker administration, instead of it being supervised by the party in power.

Hasina's government over-ruled the caretaker provision in a constitutional amendment last year.

The BNP and allies including Jamaat-e-Islami, the country's largest Islamic party, want the caretaker system to be re-instated to guard against what they say would be an attempt by Hasina's Awami League party to steal the election results.

In 2007, the army was forced to intervene amid an election standoff between the two main parties.

It formed a caretaker administration after the then BNP-led government failed to hold fresh elections by the end of its parliamentary mandate. A military-led interim government organised fresh elections in 2008.

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Obama: Republicans blocking middle-class tax cuts

WASHINGTON (AP) — President Barack Obama said Saturday that Republicans in the House are blocking a bill that would prevent a tax increase on the first $250,000 of income earned by all Americans.

The Democratic-controlled Senate has approved the measure, but Obama said House Republicans have "put forward an unbalanced plan that actually lowers rates for the wealthiest Americans." Obama supports a plan to raise taxes on families earning more than $250,000.

In his weekly radio and Internet address, Obama said "the math just doesn't work" on the GOP plan.

Obama's comments mark the fourth time since his re-election that he has used the radio address to push for middle-class tax cuts as part of a plan to avert a looming fiscal cliff — and his most sharply partisan tone.

Obama said his plan to raise taxes on the wealthiest Americans should come as no surprise to Republicans or anyone else.

"After all, this was a central question in the election. A clear majority of Americans — Democrats, Republicans and independents — agreed with a balanced approach that asks something from everyone, but a little more from those who can most afford it," Obama said.

His plan is "the only way to put our economy on a sustainable path without asking even more from the middle class," Obama said. It also is the only plan he is willing to sign, the president said.

Obama's comments came as House Speaker John Boehner said Friday there has been no progress in negotiations to avert the "fiscal cliff," a combination of automatic tax increases and spending cuts set to take effect in January.

Boehner said the White House has wasted another week and has failed to respond to a GOP offer to raise tax revenues and cut spending. Obama and Boehner spoke privately by phone on Wednesday. Boehner described the conversation as pleasant, "but just more of the same."

Obama said in his address that he stands ready to work with Republicans on a plan that spurs economic growth, creates jobs and reduces the national deficit. He said he wants to find ways to bring down health care costs without hurting seniors and is willing to make more cuts in entitlement programs such as Medicare.

Florida Sen. Marco Rubio said in the Republican response Saturday that tax increases will not solve the nation's $16 trillion debt. Only economic growth and reform of entitlement programs will help control the debt, Rubio said.

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Democrats want jobless benefits in 'cliff' deal

WASHINGTON (AP) — Hovering in the background of the "fiscal cliff" debate is the prospect of 2 million people losing their unemployment benefits four days after Christmas.

"This is the real cliff," said Sen. Jack Reed, D-R.I. He's been leading the effort to include another extension of benefits for the long-term unemployed in any deal to avert looming tax increases and massive spending cuts in January.

"Many of these people are struggling to pay mortgages, to provide education for their children," Reed said this past week as President Barack Obama and House Speaker John Boehner, R-Ohio, rejected each other's opening offers for a deficit deal.

Emergency jobless benefits for about 2.1 million people out of work more than six months will cease Dec. 29, and 1 million more will lose them over the next three months if Congress doesn't extend the assistance again.

Since the collapse of the economy in 2008, the government has poured $520 billion — an amount equal to about half its annual deficit in recent years — into unemployment benefit extensions.

White House officials have assured Democrats that Obama is committed to extending them another year, at a cost of about $30 billion, as part of an agreement for sidestepping the fiscal cliff and reducing the size of annual increases in the federal debt.

"The White House has made it clear that it wants an extension," said Michigan Rep. Sander Levin, the top Democrat on the House Ways and Means Committee.

Republicans have been relatively quiet on the issue lately. They demanded and won savings elsewhere to offset the cost of this year's extension, requiring the government to sell some of its broadcasting airwaves and making newly hired federal workers contribute more toward their pensions.

Boehner did not include jobless benefits in his counteroffer response this past week to Obama's call for $1.6 trillion in new taxes over the next decade, including raising the top marginal rates for the highest-paid 2 percent.

Long-term unemployment remains a persistent problem. About 5 million people have been out of work for six months or more, according to the Bureau of labor Statistics. That's about 40 percent of all unemployed workers.

The Labor Department said Friday that the unemployment rate fell to 7.7 percent from 7.9 percent, the lowest in nearly four years. But much of the decline was due to people so discouraged about finding a job that they quit looking for one.

Democrats have tried to keep a flame burning under the issue. Ending the extended benefits would "deal a devastating blow to our economy," 42 Democratic senators wrote Senate Majority Leader Harry Reid, D-Nev., this past week.

The Congressional Budget Office said in a study last month that extending the current level of long-term unemployment benefits another year would add 300,000 jobs to the economy. The average benefit of about $300 a week tends to get spent quickly for food, rent and other basic necessities, the report said, stimulating the economy.

The liberal-leaning Economic Policy Institute found that extended unemployment benefits lifted 2.3 million Americans out of poverty last year, including 600,000 children.

States provide the first 20 weeks to 26 weeks of unemployment benefits for eligible workers who are seeking jobs. When those are exhausted, federal benefits kick in for up to 47 more weeks, depending on the state's unemployment rate.

The higher a state's unemployment rate, the longer state residents can qualify for additional weeks of federal unemployment benefits. Only seven states with jobless rates of 9 percent or more now qualify for all 47 weeks.

Congress already cut back federal jobless benefits this year. Taken together with what states offer, the benefits could last up to 99 weeks. Cutting the maximum to 73 weeks has already cut off benefits to about 500,000 people.

Opponents of benefit extensions argue that they can be a disincentive for taking a job.

"Prolonged benefits lead some unemployed workers to spend too much time looking for jobs that they would prefer to find, rather than focusing on jobs that they are more likely to find," said James Sherk, a labor policy analyst at the conservative Heritage Foundation.

But Sen. Tom Harkin, D-Iowa, noted that unemployment checks add up to about $15,000 a year. "That's poverty level," he said. "This is not something people just want to continue on, they want to get jobs."

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Boustany trounces Landry for La congressional seat

BATON ROUGE, La. (AP) — Louisiana Congressman Charles Boustany, a veteran Republican allied with House Speaker John Boehner, has trounced freshman GOP incumbent Jeff Landry in an attack-heavy runoff race.

The two incumbents were forced into the same district when Louisiana lost a congressional seat because of anemic population growth in the latest federal census. The state will have six U.S. House seats in the new term that begins in January.

A four-term congressman who had gone into Saturday's balloting favored by the new district design, Boustany will represent the 3rd District covering southwest Louisana and nearby Acadiana.

With nearly all precincts reporting, Boustany led Landry by about a 3-2 margin. About one-fifth of district voters cast ballots on Saturday.

"This looks like a very solid victory. We had a very strong ground game, which was a key element in the runoff. We reached out to a lot of voters with a solid message backed by the results I've gotten in Congress," said Boustany, a retired doctor.

Landry, the tea party favorite, was unable to build enough grassroots support in his bid to oust Boustany. The race had been marked by sharp attacks since both men ran as conservative Republicans opposed to the policies of President Barack Obama and had little philosophical ground in which to distinguish themselves.

Pearson Cross, chairman of the political science department at the University of Louisiana-Lafayette, said Boustany was the "de-facto incumbent" throughout the race.

"Most voters in the district have voted for Charles Boustany, think he's done a good job, are comfortable with him," Cross said.

Landry said it was difficult to overcome Boustany's advantage in the district design. Boustany had represented more than two-thirds of the parishes in the configuration of the new 3rd District.

Though they had three other challengers in the November election, the two congressmen had campaigned as though it were a two-man race for months.

Boustany cast his GOP opponent as a good ol' boy politician who would say anything to get elected, habitually skipped votes in Congress and spread distortions about Boustany's record to distract voters from his own lack of accomplishments.

Landry criticized Boustany as lacking the courage to make tough votes for his district and instead following in lockstep with Republican leaders even if south Louisiana voters didn't support the policy.

The race was one of Louisiana's most expensive congressional contests, with nearly $6 million spent between the two and even more from outside groups. Boustany had a significant edge in fundraising, raising nearly $2 million more than Landry, according to campaign finance reports filed with the Federal Election Commission.

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