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ECB rate unchanged, focus on crisis measures

LONDON – The European Central Bank kept its benchmark interest rate unchanged at 1 percent Thursday as markets awaited word on whether the bank will keep its special measures to flood banks with cash and step up purchases of government bonds to help contain Europe's debt crisis.

All eyes will be on ECB president Jean-Claude Trichet when he holds his monthly post-meeting press conference shortly.

Expectations are that the bank will increase its level of support, one sign of how quickly the debt crisis has sharpened worries that a financially weak member of the eurozone such as Portugal might join Greece and Ireland in needing a bailout — and, even more dangerous, that larger countries such as Spain might run into trouble as well.

More support would be a turnaround for the bank. After last month's policy meeting, Trichet gave every indication that the central bank was looking at calling time on several props for the financial system introduced since the crisis took hold in August 2007.

But since Trichet's last post-meeting press conference on Nov. 4, the markets have dealt the 16-country eurozone a series of blows that have once again called into question the future of the euro currency itself.

The market pressure grew more and more acute on Ireland, eventually forcing its embattled government to follow Greece and request a multibillion bailout from its partners in Europe and the International Monetary Fund.

The response to its euro67 billion ($89 billion) bailout has been lukewarm at best as investors fret about the possibility that other countries will get dragged into the bond market mire and find themselves unable to borrow in the money markets. Portugal is most people's candidate to be the next potential bailout recipient. Its borrowing rates have risen sharply in recent weeks, though a bond sale on Wednesday went better than expected, easing some immediate pressure on the country's markets.

The real fear in the markets is that larger countries like Spain could become destabilized.

Most analysts think European authorities can handle bailing out the relative minnows of Greece, Ireland and Portugal, but Spain — at around 12 percent of the euro-zone economy — would be different matter altogether.

The hope, at least among those who think that the markets are currently massively overreacting by selling off government bonds, is that the ECB can instill some confidence, or at least some sense of balance. The ECB effort to buy bonds would support prices, and drive down yields — the borrowing costs that governments would face next time they tap the bond market to roll over their debt loads. Excessive yields can effectively cut off a country from borrowing, leaving it staring default in the face unless it gets a bailout.

"The hope would be that the ECB will fill the role of air-traffic controller, talking the market down to a soft landing," said Daragh Maher, an analyst at Credit Agricole.

As a result, there are expectations that the ECB will refrain from discontinuing special liquidity measures for banks and may actually announce additional liquidity support over a longer period.

Specifically, markets will be looking to see if the ECB will act even more boldly and indicate that it will step up its purchases of government bonds begun in May under its Securities Markets Program to at least stop bond prices from falling and yields from rising. So far, it has splashed out around euro65 billion in direct bond purchases.

Though the ECB may announce its broad intention, few analysts think it will be as explicit as the Federal Reserve, which last month announced its second major foray into the bond markets. It revealed that it was spending o$600 billion over eight months in an attempt to get market yields down.

Brady-led Patriots edge Manning's Colts on late pickoff

WASHINGTON (AFP) – Tom Brady outshined Peyton Manning in a showdown of American football star quarterbacks and New England held off Indianapolis 31-28, giving their Patriots their eighth victory in 10 games.

Brady won his 25th consecutive home game on Sunday, completing 19-of-25 passes for 186 yards and two touchdowns as New England kept pace with the New York Jets and Atlanta for the best record in the National Football League at 8-2.

Manning completed 38-of-52 passes for 396 yards and four touchdowns but also threw three interceptions, the last of them by James Stephens in the dying seconds to deny the Colts a chance to level or win the game.

"I'm just sick about it," Manning said. "I didn't get everything on the throw I wanted. A bad throw. I made a poor decision.

"New England was really moving the coverages. They were mixing it up and moving it around. I had a couple of misreads."

The Colts had beaten the Patriots in five of their past six meetings but trailed 31-14 before Manning threw touchdown passes of 5 and 18 yards to Blair White in the fourth quarter and had Indianapolis on the march again late.

"We're happy we won but it means we have to do a better job," Brady said. "When we have a chance to end the game that's what we have to do. Our defense made a big play."

Mark Sanchez flipped a six-yard touchdown pass to Santonio Holmes with 10 seconds remaining to give the Jets a 30-27 home victory over Houston and their best start since 1986, the year Sanchez was born.

New York squandered a 16-point lead but won to keep pace with AFC East rival New England.

"We have a team of guys who step up and we win in the crunch time," Sanchez said. "We cut it awfully close."

Matt Ryan threw for 253 yards and two touchdowns to spark Atlanta past St. Louis 34-17 as the Falcons won their fourth game in a row and kept their share of the NFL's best record.

Drew Brees completed 29-of-42 passes for 382 yards and four touchdowns to lead reigning Super Bowl champion New Orleans past Seattle 34-16, completing his 1,850th pass for the Saints to pass Archie Manning, Peyton's father, as the team's all-time completions leader.

Josh Freeman threw for 136 yards and two touchdown passes and Tampa Bay downed San Francisco 21-0 to stay level with the Saints at 7-3, one game behind Atlanta in the NFC South.

David Garrard threw two touchdown passes and Maurice Jones-Drew scored the winning touchdown on a one-yard run with 76 seconds remaining in Jacksonville's 24-20 victory over Cleveland, pulling the Jaguars level with the Colts atop the AFC South.

Dwayne Bowe and Thomas Jones each scored two touchdowns to lead Kansas City past Arizona 31-13, improving the Chiefs to 5-0 at home and putting them alone atop the AFC West division after Oakland was routed 35-3 at Pittsburgh.

Ben Roethlisberger threw for three touchdowns and ran 16 yards for another in Pittsburgh's romp as the Steelers rose to 7-3.

Staying level with Pittsburgh atop the AFC North was Baltimore, a 37-13 winner Carolina, which fell to a league-worst 1-9.

Joe Flacco threw for 301 yards and a touchdown for the Ravens, who also had interception return touchdowns of 24 yards by Ray Lewis and 23 yards by Dawan Landry off a lateral after an Ed Reed pickoff.

Aaron Rodgers threw for 301 yards and three touchdown passes to lead the Green Bay Packers past host Minnesota 31-3 as Brett Favre's former club pounded his new one, all-but dooming the 41-year-old legend's dream of a playoff spot.

"This one has got me at a loss for words," Favre said. "Disappointing would be an understatement. It's tough."

The Packers improved to 7-3 to match Chicago atop the NFC North division while the Vikings slid to 3-7.

Washington's Graham Gano kicked his fourth field goal, a 48-yarder with 8:17 to play in over-time, to give the Redskins a 19-16 victory at Tennessee.

But the Redskins, 5-5, lost seven players to injuries, including star rusher Clinton Portis, and the Titans lost quarterback Vince Young to a torn thumb tendon.

Dallas interim coach Jason Garrett won for the second time since taking over the Cowboys in a 35-19 victory over Detroit. The Cowboys improved to 3-7 while the Lions fell to 2-8 with an NFL record-stretching 26th consecutive road loss.

Ryan Fitzpatrick threw four touchdown passes, three to Steve Johnson, and Buffalo rallied from a 21-point deficit for the biggest Bills comeback triumph in 13 years, beating Cincinnati 49-31 to leave both clubs at 2-8.

Hariri murder indictments "in months": U.N. envoy

UNITED NATIONS (Reuters) – A senior U.N. official said on Thursday he expected a court probing the assassination of former Lebanese Prime Minister Rafik al-Hariri to issue indictments "in the coming months."

Diplomats and Lebanese officials have been predicting privately that the potentially explosive indictments could come late this year or early next. Thursday's comments by Michael Williams, U.N. special coordinator for Lebanon, were among the few public statements on the timing.

"I, like others, expect to see indictments from the special tribunal in the coming months," Williams told reporters after briefing the U.N. Security Council on Lebanon. "I don't know whether that's next week or next year."

Hariri, a Sunni Muslim, died along with 22 other people in a Beirut car bomb explosion in 2005. A U.N.-backed tribunal, based in the Netherlands, was set up by the Security Council two years later to try suspects in the killings.

The Lebanese Shi'ite militant group Hezbollah has said it expects its members to be indicted and has warned against cooperation with the court.

Lebanese politicians fear a major crisis, and possible relapse into violence, if that proves to be the case, but Williams said he did not expect tribunal action to be delayed by political considerations.

Williams also welcomed a decision by the Israeli cabinet on Wednesday to withdraw troops from part of a village on the Lebanese border that has long inflamed tensions with Hezbollah.

The United Nations has ruled that the northern part of Ghajar village is located in Lebanon and has long urged Israel to pull out.

Williams said he and Major-General Alberto Asarta, commander of the UNIFIL U.N. peacekeeping force in Lebanon, planned to visit Israel early next week to discuss future arrangements for Ghajar.

Williams said a September 3 explosion in the southern Lebanese village of Shihabiya was "presumably caused by ordnance" but he stopped short of blaming Hezbollah for an incident that could show violation of a U.N. resolution.

Under a Security Council resolution that ended a 2006 war between Israel and Hezbollah, southern Lebanon should be free of all weapons other than those carried by the Lebanese army or UNIFIL forces.

The latest report on Lebanon by U.N. Secretary-General Ban Ki-moon, considered by the council on Thursday, says UNIFIL and the Lebanese army were blocked by "local people" from reaching the blast site while evidence "was tampered with or removed." But it too avoids saying Hezbollah was responsible.

Israel says a Hezbollah weapons dump blew up and wants the United Nations to name the group. But Ban's report says UNIFIL "has neither been provided with, nor found, evidence of the unauthorized transfer of arms into its area of operations."

(Reporting by Patrick Worsnip; Editing by Cynthia Osterman)

U.S. Army court asked to unseal photos in murder case

SEATTLE (Reuters) – Lawyers for one of five U.S. soldiers accused of murdering unarmed Afghan civilians for sport petitioned a military appeals court on Thursday to open grisly photographic evidence in the case to public scrutiny.

They also asked the U.S. Army Court of Criminal Appeals outside Washington, D.C., to order a halt to the so-called Article 32 investigative proceedings against Private First Class Andrew Holmes until a decision on the photos is reached.

Holmes, 20, from Boise, Idaho, is the youngest of five soldiers charged with premeditated murder as part of an investigation of what military prosecutors describe as a rogue infantry platoon run amok earlier this year in the Afghan province of Kandahar, a Taliban stronghold.

Seven others in their unit, part of what was then the 5th Striker Brigade, 2nd Infantry Division, face lesser charges in the case, which began as a probe of hashish use by the soldiers.

The inquiry has grown into the most serious prosecution of alleged atrocities by U.S. troops in nearly nine years of conflict in Afghanistan and a case Pentagon officials have acknowledged could undermine the American war effort there.

Several of the defendants, including Holmes, are alleged to have collected fingers and other body parts removed from dead Afghans as war trophies.

But the most potentially explosive elements of the case are dozens of ghoulish photos Holmes and others are accused of having taken of Afghan war dead, some said to be showing U.S. troops posing with the bodies.

GHOULISH PHOTOS

The inflammatory nature of the images, vaguely described in court proceedings, has drawn comparisons to pictures of Iraqi prisoners taken by U.S. military personnel at the Abu Ghraib prison that sparked worldwide outrage in 2004 against U.S. conduct in Iraq.

A U.S. Army colonel who was overseeing the investigation ordered all photographic evidence in the case to remain under lock and key, exclusively in the possession of military investigators and their offices.

The appeals court petition says that order is effectively denying Holmes his constitutional right to a public trial because defense attorneys cannot cross-examine military investigators in open court about photographs they believe would show his innocence.

The defense maintains that the five to 10 photos in question are unclassified and would exonerate Holmes by demonstrating the victim was not killed by the kind of automatic weapon Holmes was armed with at the time.

His lawyers also denied the government had demonstrated any legitimate national security interest in excluding the photos from public view.

"There are only two choices in my mind -- give us the pictures or dismiss the charges," defense lawyer Gary Myers told Reuters by telephone.

The most serious charge against Holmes, which could result in life in prison, is premeditated murder in connection with the death of an Afghan villager investigators say was killed in January by a grenade blast and machine-gun fire.

That killing marked the first of three unjustified slayings soldiers in Holmes' platoon allegedly staged to look like legitimate war casualties from January through May.

At an evidentiary hearing earlier on Monday, Holmes declared in military court that he was innocent of murder. He is confined in a military brig at Joint Base Lewis-McChord near Tacoma, Washington.

A decision on whether he should face a court-martial for murder and other charges is not expected for several weeks.

(Writing and additional reporting by Steve Gorman; Editing by Jerry Norton and Peter Bohan)

Israel and U.S. struggle to conclude settlement pact

JERUSALEM (Reuters) – Talks between Israeli and U.S. officials aimed at reviving Middle East peace talks have hit snags over incentives promised by Washington to persuade Israel to resume a freeze of Jewish settlement building.

Israeli Prime Minister Benjamin Netanyahu unveiled the U.S. inducements to his cabinet last weekend and appeared hopeful the ministers would back plans for a temporary halt to building in the occupied West Bank to overcome a hurdle to the peace talks.

But an Israeli official said on Friday the United States had not yet provided the guarantees that Israel wanted, with Washington reluctant to commit to paper all the promises Netanyahu says he was offered verbally last week.

The latest snag concerned a pledge that Israel says U.S. Secretary of State Hillary Clinton made to provide the country free of charge 20 F-35 stealth warplanes worth $3 billion.

Politicians said Washington was backtracking and now wanted some sort of payment for the coveted fighter aircraft.

"It looks like the free stealth fighters have slipped," said Benny Begin, a minister from Netanyahu's Likud party who is opposed to the proposed U.S. deal, warning that Washington was setting a trap to extract major concessions later down the line.

"One may wonder if you cannot agree to understandings from one week to the next, what could happen over three months," he told the Army Radio on Friday.

The U.S. State Department said on Friday it would be willing to put the guarantees in writing but declined to discuss specifics of what they might be.

"We continue our discussions with the Israelis. If there is a need to put certain understandings in writing, we will be prepared to do that," State Department spokesman P.J. Crowley told a news briefing.

Netanyahu has said "intensive" discussions continued to get the necessary "understandings."

"If I receive such a proposal from the American government, I will bring it before the security cabinet and I have no doubt that my colleagues will accept it," he said late Thursday.

FOCUS ON BORDERS

U.S. President Barack Obama invested substantial political capital in persuading the Palestinians to resume direct talks with Israel in early September, after months of mediation.

But, true to their warnings, the Palestinians halted negotiations when Netanyahu refused to extend a 10-month partial settlement moratorium when it expired at the end of September.

Washington hoped its diplomatic and defense enticements would persuade Israel to renew the freeze for 90 days, opening the way for three months of intense negotiations that would focus on the future border of a Palestinian state.

However, Netanyahu's coalition allies demanded a written pledge from the United States to make clear the building freeze did not include occupied land in East Jerusalem and to spell out there would be no U.S. pressure for any subsequent moratoria.

The Palestinians themselves have expressed outrage in private over reports of the U.S. offer, saying it was a bribe to get Israel to fulfill basic international obligations.

The Israeli official said there appeared to be a disconnect between the White House and State Department with Obama unhappy that Clinton had offered so much for such a minimal concession.

However, he added that Netanyahu's office thought a deal could be reached in the coming hours and that the prime minister would get the necessary backing from his cabinet at the weekend.

Political sources say seven ministers are ready to support the plan, while six were firmly opposed, leaving two ministers from the ultra-Orthodox Shas Party holding the balance of power.

Newspapers say they are likely to abstain, but they are facing growing pressure from the pro-settler lobby to vote against and prevent any halt to settlement building.

(Additional reporting by Allyn Fisher-Ilan and Andrew Quinn in Washington; Editing by Ralph Boulton and Eric Beech)