NEWS,10.11.2012

Obama 'open to compromise' to avoid cuts

Newly re-elected President Barack Obama has offered to deal with Republicans to avert a looming US fiscal calamity but insisted a tax increase for the very rich must be part of the bargain.Obama reminded Republicans that his approach to avoiding steep tax hikes and spending cuts due in January, which could trigger another recession, had just won the backing of Americans at the polls.He spoke just hours after John Boehner, the Republican Speaker of the House of Representatives, had repeated his party's commitment not to raise anyone's tax rates as part of a deal to address the fiscal crisis.In his first event at the White House since beating Republican Mitt Romney in Tuesday's election, Obama called on Congress to work with him to produce a plan and invited congressional leaders to meet with him next week."I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas," he said.The "fiscal cliff" of steep government spending cuts and tax increases due to be implemented under existing law in early 2013 is Obama's most pressing challenge after winning a second term.Aimed at cutting the federal budget deficit, the planned measures could take an estimated $600 billion out of the economy and severely hinder economic growth.While striking a conciliatory tone toward the Republican House majority, Obama said voters supported his ideas, including raising taxes on the wealthiest Americans."I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night we found out that the majority of Americans agree with my approach," he said.Earlier, Boehner called on Obama to play a more active role in addressing the issue and urged the president to take the lead in negotiations."This is an opportunity for the president to lead. This is his moment to engage the Congress and work towards a solution that can pass both chambers," Boehner told a news conference.While disagreeing on immediate measures to avert the looming crisis, Obama and Republicans may find common ground in calls for enactment over the next six months of a larger package of deficit reduction measures, including a rewrite of US tax laws.The non-partisan Congressional Budget Office reiterated on Thursday that if left unaddressed, the abrupt fiscal tightening would knock the economy back into recession, with unemployment rates soaring back to about 9%. The rate is now 7.9%.But it also warned of a crisis ahead if the United States does not stem the growth of its exploding deficit.Partisan squabbling over the budget crisis will also harm the US economy, according to a strong majority of economists polled after Tuesday's presidential election.

Chavez On Obama Reelection: President Should Forget Global Wars, Fix Domestic Problems

 

The U.S. government's chief antagonist in Latin America, Hugo Chavez of Venezuela, has advised newly re-elected U.S. President Barack Obama to avoid further entanglement in international conflicts and concentrate on fixing internal problems."He should reflect first on his own nation, which has a lot of economic and social problems. It's a divided, socially fractured country with a super-elite exploiting the people," the socialist president said late on Thursday in his first reaction to Obama's victory this week.The maverick Chavez, who has inherited Fidel Castro's mantle as Latin America's most voluble challenger of U.S. power and policy, said it was time Obama pulled back from global affairs."He should dedicate himself to governing his country and forget dividing and invading other nations," added Chavez, who has constantly criticized U.S. involvement in Iraq, Afghanistan and other hot spots around the world.To the disappointment of the U.S. government, Chavez was re-elected for another six-year term in October, providing a continued platform to implement his self-styled socialist revolution and keep railing against Washington.The 58-year-old Chavez, a quieter figure these days after a year of debilitating treatment for two bouts of cancer, had backed Obama over Republican challenger Mitt Romney in the White House.Nevertheless, he does not disguise his disappointment in Obama, accusing him of perpetuating the same aggressive foreign policies as his predecessor, George W. Bush.Since his Oct. 7 presidential election victory over opposition challenge Henrique Capriles, Chavez has been relatively subdued, only popping up on state television once or twice a week in meetings with ministers.He has made no major new policy announcements, beyond promising more efficiency in government and a widening of socialist "communes" across Venezuelan society.Many Venezuelans expect a devaluation of the bolivar currency in coming months the black market rate is three times the official one and perhaps more nationalizations in an economy where Chavez has radically increased state ownership.Speaking at a Cabinet meeting, Chavez made light of nationalization concerns, urging businesses not to fear him."Come and invest! Don't believe the fairy tale that we're going to expropriate you," he said in comments on state TV.Earlier in the week, Chavez plied the same line, espousing a supposed new moderation toward private business that critics scoff at as hypocritical and barely believable."It's totally false that I have a plan to expropriate everyone," he said then. "Don't be deceived by that tale of 'here comes the wolf.' Lies. I'm urging you to come and work."He was less conciliatory in his view of Venezuela's upcoming state elections on Dec. 16, casting them in his Thursday appearance as a continuation of the state's battle against "counter-revolutionary" candidates of "the bourgeoisie.""We have to keep fighting this ideological confrontation," he urged his candidates for governorships in the 23 states.The most closely watched vote is in Miranda state, where incumbent governor Capriles aims to hold off a challenge from Elias Jaua, a heavyweight Chavez ally and former vice president.Should Capriles lose, it would dent his status as Venezuela's main opposition leader and deal another blow to the coalition of anti-Chavez parties already demoralized by their failure to oust him from the presidency.However, pollster IVAD put Capriles way ahead this week, with 55 percent of voter intentions versus 34 percent for Jaua. The opposition currently holds seven states.

A Trade Policy for President Obama's Second Term

 

President Obama's trade policy in his first term included working with Congress to pass free trade agreements with South Korea, Colombia and Panama, continuing negotiations on the Trans-Pacific Partnership and expanding it to include Canada and Mexico. Moreover, Obama set a goal of doubling exports by 2014, established a trade enforcement council and increased WTO dispute settlement to enforce existing international trade laws. He also effectively managed the complex U.S.China economic relationship, getting China to more effectively protect US intellectual property rights and ending China's so-called indigenous innovation policies. During the next four years the president should build on this progress and develop a comprehensive trade policy that does three things: 1) builds greater cooperation with China 2) pursues comprehensive and high quality free trade agreements; and 3) articulates a vision for moving the WTO Doha Round forward.The size of U.S.-China trade makes building this bilateral relationship key to achieving Obama's goal of doubling exports and for making progress on broader U.S. goals on an international level. But the size and growing trade deficit - which in 2011 was $295 billion and is on track to be even larger in 2012 - feeds concerns about unfair Chinese business practices and American economic and manufacturing decline, which ultimately makes advancing the economic relationship with China rather difficult.The challenge for Obama is that the size of trade deficit is unlikely going to change much in the next four years because of China's role in global supply chains as the major assembly point for goods made from components sourced from South East Asia, Europe, the U.S. and Japan. In this light, the U.S.-China trade deficit is the accumulation of declining U.S. trade deficits with countries like Japan, South Korea and Malaysia as businesses in these countries have shifted production to China. This shift to more efficient and cost-effective production conditions has led to significant decreases in the prices of these imported goods to American businesses and consumers. One way to reduce the bilateral trade deficit would be to address China's undervalued currency. An undervalued renminbi (RMB) has the effect of making Chinese imports cheaper and American exports to China more expensive. Therefore a revaluation would reduce the deficit by increasing U.S. exports to China and reducing imports from China. The dispute about China's undervalued currency has also negatively affected broader U.S. trade goals, such as concluding the WTO Doha Round since the undervalued RMB caused developing country to resist further reductions in tariffs due to concerns about competition from cheap Chinese imports. That said, the net economic impacts of China's undervalued currency for the U.S. are unclear as a lower RMB also leads to cheaper goods for American consumers and businesses. While an appreciating RMB will likely lead businesses to relocate to lower cost countries and thereby reduce the U.S.China trade deficit, it will not lead to a decrease in the overall U.S. trade deficit.But reducing these US concerns about the RMB and the trade deficit, other areas for cooperation with China like clean energy should open up. President Obama supports developing green energy in the U.S. and China's 12th Five Year Plan includes ambitious domestic renewable energy goals. These goals could be complimentary with the U.S. specializing in high-end green technologies and services and China manufacturing components like solar photovoltaic cells. A liberalized trading regime in green energy would underpin this outcome, leading to the most efficient allocation of resources and reducing the costs of renewable energy in both countries. But concerns in the U.S. about Chinese subsidies for renewable energy and a U.S. focus on developing green manufacturing capacity has already led to WTO litigation. Both countries should instead use the trading system to support this common goal and build on the recent agreement in APEC to reduce tariffs on a range of environmental goods by expanding the list of environmental goods and addressing other trade barriers affecting green energy goods and services.Currently, the Trans-Pacific Partnership is the only significant free trade agreement (FTA) the U.S. is pursuing and completing the negotiations should certainly be a priority for the next Obama administration. The main outstanding issue is whether Japan will join the current negotiations. While Japan's participation would slow down the talks, it would secure Japan's support for the trade and investment rules that the U.S. wants for the Asia-Pacific region and provide economic heft to the TPP. All this would increase the incentive for other countries to join the TPP and create further momentum toward an Asia-Pacific FTA, reinforcing Obama's broader strategic "pivot" towards Asia.A big potential new FTA is with the EU the US's largest bilateral trading partner. Most tariffs between the US and the EU are already low, so improving market access will require addressing so-called behind the border regulatory measures such as on genetically modified organisms, vehicle safety standards and pharmaceutical health and safety laws. Prior experience addressing trade barriers in the Transatlantic Economic Council suggests that making progress on these issues will not be easy. However a US-EU FTA would certainly deliver economic benefits for the U.S. and European Union.President Obama can be expected to continue to efforts to conclude parts of the WTO Doha Round, focusing on a services agreement, expansion of the international technology agreement and trade facilitation. However, only multilateral trade liberalization will deliver the largest economic benefits for the U.S. and globally, and the U.S. as the necessary leader and largest beneficiary of the multilateral trading system should develop a strategy for concluding the WTO Doha Round during the next four years.

NEWS,07.11.2012

How Obama won

US President Barack Obama confounded political logic by triumphing over a sluggish economy to win a second term in office.A gruelling and often unpleasant campaign yielded, in the end, a decisive victory, built on the strong foundations laid down months ago by his crack campaign team.Here are some of the keys to Obama's win over Republican Mitt Romney.The economy, despite tepid growth rates and high unemployment, was not bad enough to doom Obama, and he appears to have finally received belated credit for halting the slide into a second Great Depression.When he took office in January 2009, the economy was losing 700 000 jobs a month, and while Americans are still dissatisfied with the economy, exit polls suggest they still blame ex-president George W Bush as much as Obama.Obama endured months of grisly monthly unemployment numbers, which told a tale of an economy struggling to gain steam.He got a break over the last few months, as the unemployment rate dipped below the psychological barrier of eight percent.Consumer confidence and optimism began to rise along with the stock market, and Americans began to feel a bit more optimistic as house prices finally began a slow rise, despite a lingering foreclosure crisis.Often criticised as aloof and professorial, Obama, in the final days of his campaign, his voice hoarse, finally seemed to strike a chord with blue collar workers who enrich the Democratic coalition in the rustbelt.In a twist of political history, Obama was helped by the embrace of his former Democratic antagonist, ex-president Bill Clinton, who buried the hatchet after Obama's defeat of his wife Hillary in the 2008 Democratic primary.Clinton, remembered for leading an era of economic prosperity, often made the case for Obama better than the president himself.The two Democratic giants will now stand together in history as the only two Democrats to win a second term since World War II.The Obama campaign made a gamble soon after Romney captured the Republican primary to go negative.Searing Obama ads and rhetoric branded the former investment manager a corporate vulture, who bought and sold firms for his own profit and heartlessly put good Americans out of work or shipped their jobs overseas.The plan was to define Romney in a harsh light before he had the chance to introduce himself to Americans with a multi-million dollar blitz of television advertising in the swing states, like Ohio, which would decide the election.Romney's limp defence of his record as head of Bain Capital, and his missteps - including a refusal to divulge his complicated offshore tax arrangements and a video in which he was seen decrying 47% of Americans as freeloaders who paid no income taxes played into the stereotype.By the time of Romney's stellar performance in the first presidential debate in October, the damage had been done.The killing of al-Qaeda chief Osama bin Laden in a daring Navy SEAL raid in 2011 did not win Obama re-election.But it bolstered the image of the president as a steely commander-in-chief who kept Americans safe and defused the classic Republican attack that Democrats are weak and cannot be trusted on national security.Kudos Obama won with the Bin Laden raid, not to mention a ruthless drone war against terror suspects abroad, may have also insulated the president against a late-election furore over the killing of the US ambassador to Libya in Benghazi.For the second election running, Obama's campaign team has reinvented the way presidential elections are won.In 2008, Obama's political brain trust, led by the intense David Plouffe, outwitted the political machine of Bill and Hillary Clinton with a delegate collection strategy that redefined the way primary campaigns are won.This time around, they defied the strong headwinds of a slowly growing economy and re-elected their president in the face of ferocious Republican opposition.The path to victory lay in the most sophisticated voter targeting and turnout machine in history, which reached all the way down to neighbourhoods and was constructed over several years.Way back in October 2011, Obama's political high command insisted to sceptical journalists that the president, smarting from a drubbing in mid-term congressional elections, could and would win re-election.The strategy: position Obama as a populist warrior for the middle class, and brand his opponent as a rich plutocrat oblivious to the suffering of regular Americans.Obama's team insisted all along that his coalition of young voters, Hispanics and African Americans, as well as the educated white middle class, would show up for him in 2012, just as they did in 2008.Republicans scoffed, but they were proven wrong.According to exit polls, 93% of African Americans backed Obama, along with 69% of Latinos and 70% of Jewish voters, and he was able to limit his losses among white voters.Obama also won an important victory among unmarried women voters, 68% of whom backed him.

 

Obama has little time to savour election triumph

Fresh from a decisive re-election win, President Barack Obama returns from the campaign trail today with little time to savour victory, facing urgent economic challenges, a looming fiscal showdown and a still-divided Congress able to block his every move.Obama defeated Republican challenger Mitt Romney last night in a gruelling presidential race and used his acceptance speech in front of a huge cheering crowd in Chicago to strike a conciliatory note toward his political opponents.But in the cold light of the 2012 election's morning-after, it was clear that even though voters have endorsed a second Obama term, the president will have a hard time translating that into a mandate to push forward with his agenda.Obama need to get back to work straight away "because he's got major problems with the economy".The "fiscal cliff" a combination of expiring tax cuts and automatic across-the-board reductions in federal spending due to come in at the end of the year could take out over half a trillion dollars from the US economy.The fact that Obama won the popular vote as well as getting more than 300 Electoral College votes meant "he's got that mandate I guess that power a little bit behind him - where he can push on."However, Americans chose to preserve the status quo of divided government in Washington.Obama's fellow Democrats retained control of the Senate and Republicans kept their majority in the House of Representatives, giving them power to curb the president's legislative ambitions on everything from taxes to immigration reform.This is the political reality that Obama - who won a far narrower victory over Romney than his historic election as the country's first black president in 2008 - faces when he returns to Washington later on Wednesday.But that did not stop him from basking in the glow of re-election together with thousands of elated supporters in his hometown of Chicago early yesterday."You voted for action, not politics as usual," Obama said, calling for compromise and pledging to work with leaders of both parties to reduce the deficit, to reform the tax code and immigration laws, and to cut dependence on foreign oil.Obama told the crowd he hoped to sit down with Romney in the coming weeks and examine ways to meet the challenges ahead though the president may be more in need of mending fences with Republican congressional leaders who wield clout in Washington.The problems that dogged Obama in his first term, which cast a long shadow over his 2008 campaign message of hope and change, still confront him. He must tackle the $US1 trillion annual deficits, rein in the $US16 trillion national debt, overhaul expensive social programs and deal with the split Congress.The immediate focus for Obama and US lawmakers will be to deal with the "fiscal cliff," a mix of tax increases and spending cuts due to extract some $US600 billion from the economy at the end of the year barring a deal with Congress. Economists warn it could push the United States back into recession.House Majority Leader John Boehner moved swiftly on the fiscal cliff issue, saying he would issue a statement on it today citing "the need for both parties to find common ground and take steps together to help our economy grow and create jobs, which is critical to solving our debt."Concern about US fiscal problems after Obama's re-election contributed to a decline in global financial markets.World shares turned lower and Wall Street stocks, which had been expected to rise on relief over the clear election outcome, opened lower partly due to fears over economic weakness in Europe.Obama also faces international challenges like the West's nuclear standoff with Iran, the civil war in Syria, the winding down of the war in Afghanistan and dealing with an increasingly assertive China.Romney, a multimillionaire former private equity executive, came back from a series of campaign stumbles to fight a close battle after besting Obama in the first of three presidential debates.But the former Massachusetts governor failed to convince voters of his argument that his business experience made him the best candidate to repair a weak US economy.The nationwide popular vote remained extremely close with Obama taking about 50% to 49% for Romney after a campaign in which the candidates and their party allies spent a combined $US2 billion. But in the state-by-state system of electoral votes that decides the White House, Obama notched up a comfortable victory.Yesterday, Obama had 303 electoral votes, well over the 270 needed to win, to Romney's 206. Florida's close race was not yet declared, leaving its 29 electoral votes still to be claimed.Romney, 65, conceded in a speech delivered to disappointed supporters at the Boston convention centre. "This is a time of great challenge for our nation," he told the crowd. "I pray that the president will be successful in guiding our nation."He warned against partisan bickering and urged politicians on both sides to "put the people before the politics."In Boston there would be "plenty of soul-searching for the Republicans over the next few weeks to find out exactly what when wrong".The party is expected to look particularly closely at how it has alienated Hispanic voters, an important constituency in Obama's victory."The fact is Republicans are going to have to do a lot of rethinking at the presidential level," Newt Gingrich, a former House speaker who lost the Republican nominating race to Romney. In the election aftermath, there were indications that partisan gridlock would persist in Washington.Senate Republican leader Mitch McConnell gave no sign that he was willing to concede his conservative principles, signalling potential confrontations ahead."The voters have not endorsed the failures or excesses of the president's first term, they have simply given him more time to finish the job they asked him to do together with a Congress that restored balance to Washington after two years of one-party control," McConnell said.Obama's win puts to rest the prospect of wholesale repeal of his 2010 healthcare reform law, which aims to widen the availability of health insurance coverage to Americans, but it still leaves questions about how much of his signature domestic policy achievement will be implemented.Obama, who took office in 2009 as the ravages of the financial crisis were hitting the US economy, must continue his efforts to ignite strong growth and recover from the worst downturn since the Great Depression of the 1930s. An uneven recovery has been showing some signs of strength but the country's jobless rate, currently at 7.9%, remains stubbornly high.Obama's re-election puts him in the company of three of his past four predecessors whom voters granted a second term. He now faces the need to reshuffle his cabinet, Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton planning to step down soon.In keeping control of the 100-member Senate, Democrats seized Republican-held seats in Massachusetts and Indiana while retaining most of those they already had, including in Virginia and Missouri.The Republican majority in the 435-member House means that Congress still faces a deep partisan divide as it turns to the fiscal cliff and other issues."That means the same dynamic. That means the same people who couldn't figure out how to cut deals for the past three years," said Ethan Siegel, an analyst who tracks Washington politics for institutional investors.British Prime Minister David Cameron also said Britain and the United States should make finding a way to solve the Syrian crisis a priority following Obama's re-election.

What to expect in Obama's second term

US President Barack Obama is expected to pursue an active trade agenda during his second term, centred on tough final negotiations of a new free trade pact in the Asia-Pacific region and continued challenges posed by China.

Here is a glimpse of what's ahead:

Trans-Pacific partnership agreement

Talks on the proposed Trans-Pacific Partnership pact date back to the administration of Republican George W. Bush, but the Obama administration relaunched negotiations in March 2010 and has overseen their expansion to 11 countries: the United States, Australia, New Zealand, Vietnam, Malaysia, Singapore, Chile, Peru, Brunei, Canada and Mexico.A final deal could come in 2013, with negotiators just now beginning to grapple with the most politically sensitive issues. For the United States, the pact could require opening up protected sectors like dairy, sugar and textiles in exchange for new US export opportunities.Other countries such as Japan and South Korea could join the talks.

US-EU trade agreement

The United States and the 27-nation European Union are expected to announce a decision by the end of this year to negotiate a comprehensive trade agreement.US Trade Representative Ron Kirk, who is a member of the president's Cabinet, and EU Trade Commissioner Karel De Gucht have led an effort over the past year to explore how to expand the already huge US-EU bilateral trade and investment relationship to create new jobs and economic growth.They are expected to release recommendations in December. Negotiations on the landmark agreement would likely start in early 2013 and take one to two years to complete.

China

Trade with China is expected to remain contentious during Obama's second term, with US manufacturers irritating Beijing by filing additional petitions for anti-dumping and countervailing duties on Chinese products.The Obama administration is likely to file more cases against China at the World Trade Organization, and will likely face continued pressure from US companies to confront growing competition from China's state-owned and state-supported enterprises.Early this year, Obama created a trade enforcement unit to bring together resources from across the executive branch to make sure China and other countries follow the rules.The Obama administration has filed eight WTO cases against China since January 2009, compared with seven by Bush in the previous five years.Obama is likely to continue to put pressure on China to allow its currency to rise more rapidly in value, but stop short of taking any provocative move like declaring China a currency manipulator or authorizing the use of countervailing duties against undervalued currencies.

Trade promotion authority

Trade Promotion Authority, also known as "fast-track" trade legislation, allows the White House to negotiate trade agreements it can submit to Congress for straight up-or-down votes within 90 days and with no amendments.The Bush administration used fast-track authority to negotiate trade deals with 16 countries in Latin America, the Middle East and the Asia-Pacific region before it expired in June 2007.Obama has not sought to renew the legislation, which is generally considered essential to encouraging other countries to make their best offers in trade talks with the United States.For four years, administration officials have said they would seek the authority "at the appropriate time." While the business community would like Obama to make an early push to renew the legislation, union groups oppose it and the White House has yet to signal when it might move forward.

Obama’s plans to fix US economy

President Barack Obama, who has convinced Americans to give him another four years in office, now faces the tough task of getting the US economy to grow more quickly.Gross domestic product has struggled to expand by more than 2% a year since the 2007-09 recession and unemployment remains high at 7.9%. About 23 million Americans are either unemployed, working part-time because they can’t find full-time work, or want a job but havegiven up the search.Here are Obama’s key plans for the economy:Obama has said his jobs plan would strengthen manufacturing, help small businesses, improve the quality of education and make the country less dependent on foreign oil.He envisions 1 million new manufacturing jobs by 2016 and more than 600 000 jobs in the natural gas sector, as well as the recruitment of 100 000 math and science teachers.Repairing and replacing old roads, bridges, airport runways and schools are part of his plan to put Americans back to work. Half of the money saved from ending the wars in Iraq and Afghanistan would be used to fund infrastructure projects.Unlike at the start of his first term, when a Democrat-run Congress approved Obama’s $840bn in stimulus, the president will struggle to get any new major spending plans approved by the House, which remains under Republican control.Obama has proposed cutting the government budget deficit by more than $4 trillion over the next decade by allowing tax cuts for upper-income Americans enacted during the George W Bush administration to expire, and by eliminating loopholes. The goal is to balance the budget down the road.Obama backs cutting the top corporate income tax rate to 28% from 35%. He has offered a long list of corporate tax breaks to end, ranging from inventory accounting to interest on overseas profits and tax provisions benefiting oil and gas companies. He wants to eliminate tax breaks for companies that send jobs and profits overseas.Half of the money saved from ending the wars in Iraq and Afghanistan would be used to reduce the deficit.Obama may want to offer Ben Bernanke a third term in charge of the central bank but Fed watchers say the former Princeton professor has probably had enough after eight grueling years in the job. Bernanke’s term as chairperson expires on January 31, 2014.Fed vice-chairperson Janet Yellen is viewed as a leading candidate to succeed Bernanke and would be at least as ready to keep monetary policy ultra-stimulative until the labour market has improved substantially. Obama is likely to stick to the path he laid out in his first term, which included a broad reform of Wall Street in response to the financial crisis that blew up in 2008. Regulators are due to put in place the small print of the so-called Dodd-Frank financial reform law. Obama has promoted efforts to help troubled borrowers refinance their mortgages and benefit from record low interest rates but far fewer American homeowners have been helped than originally planned.Obama has locked horns with the regulator of government-controlled Fannie Mae and Freddie Mac, Edward DeMarco, failing to convince him to allow the mortgage finance firms to reduce principal for borrowers who owe more than their homes are worth. Resolution of the standoff is unlikely any time soon.Democrats and Republicans agree that the government’s outsized presence in the US mortgage market through Fannie Mae and Freddie Mac needs to be curtailed. Fannie and Freddie account for about 60% of the mortgage market.

 

Re-elected Obama faces fiscal cliff

 

Barack Obama won re-election on Tuesday night, but the US president faces a fresh challenge confronting the "fiscal cliff," a mix of tax increases and spending cuts due to extract some $600bn from the economy barring a deal with Congress. At stake are two separate issues  individual tax cuts due to expire at year's end and tens of billions of dollars in across-the board federal spending cuts due to kick in the day after New Year's Day. Failure to prevent a dive off the cliff could rattle US markets, and push the US economy into a recession, which could have global implications. How Obama fares with a familiar set of challenges most notably a Republican-controlled House of Representatives could colour his second term.Obama, who defeated Republican challenger Mitt Romney based on television projections, will want to strike a deal with Washington lawmakers before December 31 or risk a recession in the first half of 2013, budget experts and Democratic aides say.His backers say his win gives him a mandate for an elusive "grand bargain" he sought in his first four-year term. Such a pact would raise new revenue, make changes to popular programs like the Medicare health program for the elderly and pare the federal deficit. "They have signalled that they want a big deal and I think Obama will be aggressive about getting it," said Steve Elmendorf, a former House Democratic senior adviser and now a lobbyist.Obama and most Democrats are at odds with Republicans in Congress over the stickiest issue  whether to let low tax rates for the wealthiest Americans expire on December 31.The president and most Democrats want to raise taxes on income earned above $250 000; Republicans want to extend the current low rates for all income levels. Financial markets and the business community crave long-term certainty and that is what a major deal envisioned by Obama is intended to tackle.A big X-factor is how congressional Republicans will respond to an Obama win. The hard line against raising revenue taken by many Republicans in the House may not abate after the election.House Speaker John Boehner said this week that his Republicans would stand firm on their position opposing any tax increases, even for millionaires, though he was speaking before the election results.Republicans kept control of the House, as expected, and Democrats were projected to maintain control of the Senate.An Obama victory "takes a lot of air out of the room for Republicans", Jim Walsh, a former Republican representative, who retired in 2009, predicted before the election. The odds of a grander deal with increased revenue though not in the form of higher tax rates goes up with an Obama victory, he said.Former Democratic representative Bart Gordon was unsure whether more conservative elements of the party, associated with the Tea Party movement, would go along so easily. "Those folks don't need much of a reason to fight," Gordon said.

Violence erupts in Athens over austerity measures

Greek police fired teargas and water cannons to disperse thousands of protesters who flooded into the main square before parliament today in a massive show of anger against lawmakers due to narrowly pass an austerity package.The violence erupted as a handful of protesters tried to break through a barricade to enter parliament, where Prime Minister Antonis Samaras is expected to barely eke out a win for the belt-tightening law despite opposition from a coalition partner.But the parliamentary session was briefly interrupted when parliament workers went on strike and opposition lawmakers walked out of the chamber in protest. Outside parliament, loud booms rang out as protesters hurled petrol bombs and police responded with teargas and stun grenades. Smoke and small fires could be seen on a street next to parliament.That came after a sea of Greeks braved a steady downpour holding flags and banners saying "It's them or us!" and "End this disaster!" stood before riot police guarding parliament.In all, nearly 100,000 protesters - some chanting "Fight! They're drinking our blood" - packed the square and side streets in one of the largest rallies seen in months, police said.Protesters held aloft Italian, Portuguese and Spanish flags in solidarity with other southern European nations enduring austerity."These measures are killing us little by little and lawmakers in there don't give a damn," said Maria Aliferopoulou, a 52-year-old mother of two living on 1000 euros a month."They are rich, they have everything and we have nothing and are fighting for crumbs, for survival."Public transport was halted, schools, banks and government offices were shut and garbage was piling up on streets on the second day of a two-day nationwide strike, called to protest against the vote.Backed by the leftist opposition, unions say the measures will hit the poor and spare the wealthy, while deepening a five-year recession that has wiped out a fifth of the country's output and driven unemployment to a record 25%.