–$1.2 Trln Deficit Reduction Target Will Happen Regardless
–New Greece,Italy,Spain Govts Makes EMU Action Even More Critical

By Brai Odion-Esene

WASHINGTON (MNI) – The White House says Congress still has time to
reach an agreement to cut the nation’s ballooning deficit, despite the
expectation that the panel created for just that purpose will throw in
the towel later Monday.

In a regular briefing with reporters, White House Press Secretary
Jay Carney also said the new leadership in struggling Eurozone countries
makes it even more important that the monetary union moves forward
rapidly with measures to contain the crisis.

The Joint Select Committee on Deficit Reduction, created by the
Budget Control Act, is expected to announce later Monday that it has
failed to reach an agreement that would reduce the deficit by at least
$1.2 trillion over the next decade.

Asked about the possibility that the U.S. could face another
downgrade, Carney noted that the Budget Control Act contains a mechanism
to ensure the deficit panel’s $1.2 trillion deficit reduction target
will happen regardless.

“The $1.2 trillion, as a minimum, will happen as prescribed by
law,” he said.

A failure by the panel to agree on a spending cut package would
trigger a budget enforcement action, known as a ‘sequester’, that
secures $1.2 trillion in budget savings through across-the-board cuts.

While the White House will wait for an official statement from the
Committee before commenting, Carney said Congress still has time to act
and fulfill its responsibility.

He noted the sequester was designed “specifically to be onerous, to
hold Congress’ feet to the fire. It was designed so that it never came
to pass.”

The cuts would be equally divided between defense and non-defense
programs but would exempt Social Security, Medicaid and low-income
programs. These cuts, however, “are not the best approach,” Carney said.

The sequester does not take effect for a year, meaning lawmakers
still have “plenty of time” to act, Carney reiterated.

There has been speculation that Congress could pass legislation
eliminating the sequester, but Carney said Congress should hold itself
to account and not attempt to “undo the consequences of their own
failure, the consequences that they themselves passed into law.”

He added, however, that this will require a willingness by
Republicans to accept a balanced approach to deficit reduction — one
that includes both spending cuts and tax increases.

As for the sovereign debt crisis in Europe, Carney told reporters
at the start of the briefing that President Obama spoke with Italian
Prime Minster Mario Monti Monday and expressed “his full confidence in
Italy’s strength and vibrancy and underscored America’s support for the
steps that Italy is taking to advance its economic reform program.”

Carney said the U.S. continues to urge Europe’s authorities to
“rapidly” implement plans already agreed at the Oct. 27 EU Leaders
Summit, with an “urgent need” for an enhanced firewall to contain the
crisis.

With new governments in place in Greece, Italy and Spain, Carney
said this makes it “even more critical that Europe move forward with
that implementation.”

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

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