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PM Gillard, who promises a surplus in May, says a tax cut for small business is in the offing. It’ stimulative so it could push the RBA away from cutting rates.

From the New York Times. The key is the ECB.

As recently as a week ago, the ECB said it was not a party to the negotiations and has said in the past it cannot take a loss on the bonds as that would be seen as indirectly aiding Greece, a violation of its treaty.

Some influential Senators are introducing a bill that would phase out paper $1 bills in favor of coins. For some reason, coins are like the metric system in the US, it will just never fly.

Or maybe this is what Geithner/Paulson meant by a “strong dollar” all along.

• Basque Country and Navarre downgraded to AA-, outlook negative
• Bizkaia cut to AA-, outlook negative

These regions maintain stronger credit characteristics than Spain itself, the agency reports.

• Stocks are back in positive territory.
• EUR, CAD and AUD all near or at afternoon highs versus USD.
• Some broad USD selling as well with USD/JPY near the lows and gold edging higher.

The Guardian is reporting.

The headlines read as if there is a problem at the PSI talks but that’s not the case. The snag is between Greece and the Troika, who want further austerity measures.

Greek MPs have objected to demands by the troika for further wage cuts and reductions in the minimum wage.

–Senate Minority Leader McConnell: Still Many ‘Moving Parts’ To Talks
–Sen. McConnell: All Want One Year Deal; Dispute Over Offsets

By John Shaw

WASHINGTON (MNI) – Senate Minority Leader Mitch McConnell said
Tuesday he’s “confident and optimistic” that ongoing negotiations will
lead to an agreement on a payroll tax cut extension.

Speaking after a Senate Republican party lunch, McConnell said
there are still a lot of “moving parts” to the talks, but added that
there is “broad bipartisan agreement” for a one year extension of the
payroll tax cut package.

He said there continues to be a dispute over paying for the
package, jabbing Democrats because “they don’t want to cut very much.”

McConnell said it’s important to reach an agreement by the end of
February when a temporary package expires.

The House-Senate conference committee to draft a payroll tax cut
package will hold their second meeting Wednesday.

The talks are focused on a $160 billion package to extend the
payroll tax cut for a year, renew unemployment insurance benefits, and
prevent a deep cut in Medicare reimbursements for doctors.

Congress in December passed a two month extensions of these
programs which will expire at the end of February. Both President Obama
and congressional leaders say they want to pass a one year extension of
these programs, but there are scores of policy details to resolve as
well as a budget offset package of at least $160 billion.

House Republicans recommend paying for the package by extending a
federal employee pay freeze, increasing Medicare premiums for upper
income beneficiaries, and cutting funds from the new health care law.

Senate Democrats prefer to pay for the package by imposing a surtax
on those with incomes over $1 million.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

US DATA: US farm prices rise 3.9% in Jan vs Dec.

• Deficit seen at $1.1 trln
• Unemployment seen rising to 8.9% in 2012. up to 9.2% in 2013
• GDP seen at 2% this year and lower in 2013

Grim reading, and one reason why US 10-year notes trade with a 1.79% handle…

The state’s comptroller says it will run out of cash in March, not July as lawmakers expected.

Spending was $2.6B higher than expected, tax revenues $2.6B lower.

Layoffs at state and local governments will be a headwind for years.

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