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G-8 leaders to marshal support for Arab nations; President Barack Obama and the other leaders will seek to marshal their combined economic might behind …


G-8 leaders to marshal support for Arab nations
May 25, 2011, 9:57 a.m. EDT
Associated Press

Journal By Calvin Lee Ledsome Sr.,

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PARIS (AP) — Arab uprisings are pushing aside deficits and austerity as the biggest worry of the leaders of the Group of Eight industrialized nations this year.

President Barack Obama and the other leaders will seek to marshal their combined economic might behind the grass-roots democracy movements that have swept the Arab world — and driven away tourists and investors.

Egypt and Tunisia, where popular revolts this year overthrew authoritarian regimes, want to show G-8 leaders and international financiers that they are still sound investment destinations — which might be a tall order as the future shape and policies of their governments remains unclear.

The discussions starting Thursday in the chic Normandy resort of Deauville will see the host, French President Nicolas Sarkozy, bring together the heads of wealthy nations for what one of Sarkozy’s top advisers describes as “the founding moment” of a partnership between the G-8 and the Arab countries.

That partnership may be strained, however, by tensions over how to handle Libya’s rebel movement and entrenched leader Moammar Gadhafi. NATO appears to have no exit strategy, and efforts to oust Gadhafi remain elusive.

The leaders of the U.S., Canada, Britain, Germany, France, Japan, Italy and Russia will greet counterparts from Tunisia, Egypt and the head of the Arab League to hash out details of what some are calling a new “Marshall Plan” for these countries, similar to the massive U.S. aid to Europe after World War II that helped the continent rebuild and stave off communism.

The historic parallel is fitting, as Deauville is just a short drive along the English Channel from the D-Day landing beaches where the U.S. and its allies began to roll back the Third Reich in 1944.

A top Sarkozy official drew another historical analogy, saying the aid and investment to be promised to the Arab nations would resemble that which the G-8 offered to Eastern and Central European nations after the collapse of communism in 1989.

Last week President Barack Obama said the U.S. has asked the World Bank and the International Monetary Fund to present a plan at the G-8 summit that sets a path to stabilize and modernize the economies of Tunisia and Egypt.

The U.S. will forgive up to $1 billion in Egyptian debt and guarantee another $1 billion to finance infrastructure and new jobs. Obama said he will ask Congress to finance enterprise funds that will provide money for investment in both countries — a request that comes as Congress seeks to cut spending.

Tunisia, followed by Egypt, kicked off change around the Arab world, as broad-based popular movements took to the streets demanding greater rights and political representation from their authoritarian governments.

But the street demonstrations in Cairo and Tunis that thrilled and inspired the Arab world also drove away the tourists and investors on which these economies are heavily dependent.

“The first thing they will be looking for is direct financial aid,” said Said Hirsh, a Middle East economist with Capital Economics consultancy in London. “Both countries need quite a lot of money considering the hit to their economies and their revenues.”

While U.S. officials say G-8 countries will discuss their role in the process, they say it is too soon to reach a deal on dollar amounts for assistance.

The European Bank for Reconstruction and Development, a London-based institution set up in 1991 to foster transition to market economies in post-communist Europe, could be “repurposed” to focus its expertise on the southern Mediterranean region, a top official in Sarkozy’s office said, speaking on condition of anonymity because of protocol.

The heads of the World Bank and the United Nations will also be present and add their signatures to the partnership declaration. Former IMF chief Dominique Strauss-Kahn, under house arrest in New York following his indictment for sexual assault, will be replaced for the event by the institution’s acting managing director John Lipsky.

Finding a permanent replacement for Strauss-Kahn is likely to take up a good part of the summiteers’ small talk.

Nuclear safety will be another topic, with Japanese Prime Minister Naoto Kan scheduled to provide leaders with an update on the continuing crisis at the Fukushima Dai-ichi nuclear power plant.

The future of the Internet will also figure in the G-8 leaders’ talks. Mark Zuckerberg of Facebook and Eric Schmidt of Google and other Internet executives took part in two days of debates focused broadly on the Internet’s impact on the global economy. Several of the Internet conference’s speakers will then take policy recommendations to Deauville in talks with the G-8 leaders.

Police have established one security cordon around the conference center where the leaders are meeting, and another perimeter encompassing all of Deauville. Local ports, train stations and the airport will be shut from Wednesday to Friday, and a no-fly zone enforced over the town.

The show of force may have discouraged radicals and other protesters from attempting to organize demonstrations close to the summit. Anti-G8 protesters plan symbolic demonstrations in the neighboring towns of Caen and Le Havre, but they do not plan to try to disrupt the event in Deauville itself, according to a statement circulated by radical groups online.

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Associated Press writers Julie Pace in Washington, D.C., Geir Moulson in Berlin, Charmaine Noronha in Toronto, David Stringer in London and Paul Schemm in Rabat, Morocco contributed to this report.

Greg Keller can be reached at http://twitter.com/Greg_Keller

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Poll: US economy improving despite global events


Poll: US economy improving despite global events
Posted by Calvin Lee Ledsome Sr.,
Owner and Founder of:  https://economicnewsblog.wordpress.com

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WASHINGTON (AP)Economists say the U.S. economy is gaining strength despite political unrest in North Africa and the Middle East and last month’s devastating earthquake and tsunami in Japan.

A survey from the National Association for Business Economics finds that economists are hopeful that the broader economy is substantially improving, with rising employment reported for the fifth quarter in a row. The survey found that “companies appear to be positioning themselves for a firming economic environment,” said Shawn DuBravac, an economist with the Consumer Electronics Association, who analyzed the findings.

The outlook for employment rose slightly, reaching a 12-year high. No firms reported significant layoffs, with the only reductions coming from already planned cuts.

Sales increased for the third consecutive quarter, profit margins continued to improve and the number of economists whose firms increased spending over the previous quarter held steady. Nearly all of the 72 economists surveyed, about 94 percent, now expect the economy to grow at least 2 percent in 2011.

The quarterly survey includes the views of economists for private companies and trade groups who are NABE members. The data are reported by broad industry groupings. Many results in the survey are expressed through the Net Rising Index, or NRI — the percentage of panelists reporting better outlooks minus the percentage whose outlook is bleaker.

The survey looked at two new questions for its April survey, gauging the financial impact of anti-government unrest in the Arab world and the deadly Japanese earthquake and tsunami.

Nearly 60 percent of those polled said they expected higher costs because of political turmoil in Bahrain, Egypt, Tunisia, Libya and Syria and about 52 percent said they expected economic growth to be weaker in 2011 because of the protests and fighting.

The March 11 earthquake and tsunami, which left nearly 28,000 people dead or missing and sparked a crisis at a nuclear plant, had less of an impact on the economic forecasts. About 31 percent said costs would be higher and 40 percent said it would weaken the broader economic recovery.

In the first quarter of this year, 63 percent of economists said sales rose from the previous quarter — the highest percentage since 1994. The NRI rating for sales rose 11 points from the previous quarter to 54, and the improvement was across all industry sectors: goods, utilities, information and communications, finance, insurance and real estate, and services.

Profit margins rose to an NRI figure of 31 — the highest rating since 1983. The number of economists reporting rising profits has almost doubled over the past year, to 45 percent from 25 percent.

Prices rose, with about one third of those surveyed saying their firms had made increases over the past three months. Two-thirds of the goods-producing industry, which includes farming, mining, construction and manufacturing, reported their firms had raised prices. Similarly, the costs paid for materials rose for the third quarter in a row and wages and salaries jumped to the highest reading since a survey in October 2007.

The survey was conducted between March 16 and 31.

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The world’s major economies are pledging to provide support for the regime changes


Major economies pledge support for regime changes

Posted by Calvin Lee Ledsome Sr.,
Owner and Founder of: http://www.LedSomeBioMetrics.com
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WASHINGTON (AP) — The world’s major economies are pledging to provide support for the regime changes that are occurring in the Middle East and North Africa. An Obama administration official is comparing what is occurring now to the fall of the Berlin Wall more than two decades ago.

The United States and France issued a joint statement after talks on Thursday saying major nations stood ready with international lending institutions to provide economic support for the new governments in Egypt and Tunisia.

U.S. Treasury Undersecretary Lael Brainard wrote in an opinion piece that the transformations that were occurring in the region could be as successful in unlocking economic prosperity as events after the fall of the Berlin Wall in 1989.

U.S. Treasury Secretary Timothy Geithner and French Finance Minister Christine Lagarde said in their statement summarizing the talks that the group would put together a joint action plan with early recommendations coming in May to support “inclusive and sustained growth, transparency and improved governance.”

Brainard wrote in an article for Foreign Policy magazine‘s website that “across the Middle East and North Africa, unprecedented upheavals are creating historic opportunities to expand the circle of democratic societies.”

Brainard cautioned that the reforms and efforts to provide greater economic growth for the region’s young people would take a number of years, with many challenges ahead. “We must be prepared to work through the setbacks and scale up successes,” she wrote.

The discussions on the Middle East occurred at the start of three days of finance talks designed to deal with various challenges facing the global economy, from soaring food and energy prices to continued tensions between the United States and China, the world’s two largest economies, over currencies and trade.

The United States was being represented at the talks by Geithner and Federal Reserve Chairman Ben Bernanke. The discussions Friday were taking place among the Group of 20, which includes traditional economic powers such as the United States and European nations and major developing powers such as Brazil, China and India.

Lagarde was leading the talks because France is this year’s head of the G-20, the group that since the financial crisis in 2008 has become the major steering body for the global economy.

The G-20 talks were scheduled to conclude Friday afternoon with a joint statement of goals and news conferences by Lagarde and other finance officials.

The finance talks will wrap up on Saturday with meetings of the policy-setting panels of the 187-nation International Monetary Fund and the World Bank.

World Bank President Robert Zoellick said Thursday that a major goal for his institution will be to win support from the rich countries for more assistance to poor nations that are facing food crises. A 36 percent surge in food prices over the past year has pushed an additional 44 million people into poverty.

“We have to put food first and protect the poor and vulnerable, who spend most of their money on food,” Zoellick told reporters Thursday.

The G-20 talks will be focused on making more progress on a set of economic indicators that the group can use to gauge whether countries are pursuing the correct policies to prevent the growth of dangerous imbalances in trade and government debt, which contributed to the last financial crisis.

The United States is pushing for the indicators to be set up, hoping they can be used to bring more pressure on China to allow its currency to rise in value against the dollar as a way to narrow the huge trade gap that exists between China and the U.S.

However, Chinese officials do not want the rebalancing process to be used as a way to attack China’s currency policies, and it was unclear whether any progress will be made during the Washington talks.

“There are lots of things to worry about, and we want to make sure we don’t fall back into another crisis as we did not that long ago,” Canadian Finance Minister James Flaherty told reporters.

IMF Managing Director Dominique Strauss-Kahn said that while the global economy began growing again last year after the most severe downturn since World War II, there still were multiple risks to the recovery.

“The recovery is getting stronger but … it is not the recovery we want because it is still imbalanced,” Strauss-Kahn said. “We must be aware of complacency, and we need urgent action.”

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Associated Press writer Harry Dunphy contributed to this report.

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German business confidence slips as outlook clouds


German business confidence slips as outlook clouds
Associated Press
Posted by Calvin Lee Ledsome Sr., Owner and Founder of: https://economicnewsblog.wordpress.com and http://www.LedSomeBioMetrics.com

BERLIN (AP) — German business confidence has slipped off a two-decade high as managers’ outlook for the next six months was tempered by a slight decline in optimism on exports, a closely watched survey showed Friday.

The Ifo institute said its confidence index was down slightly to 111.1 points for March from 111.3 in February. The slip followed nine consecutive months of increases, and Ifo stressed that the “traffic lights still signal ‘green.'”

Managers’ assessment of the current situation improved and the overall decline was due entirely to a less optimistic six-month outlook. The subindex measuring expectations sank to 106.5 points from 107.9 in February.

Ifo said that manufacturing firms plan to increase staff numbers even though “future export business is no longer assessed quite so optimistically.” Friday’s survey showed that retailers, wholesalers and construction firms also were less optimistic for the next half-year.

Export strength has been central to Germany‘s powerful economic recovery over the past year, although it has been accompanied by signs of improving domestic demand.

Slightly less than half of this month’s Ifo survey responses arrived after problems started at Japan’s earthquake-damaged Fukushima Dai-ichi nuclear complex.

There was little evidence, however, that events in Japan pose a direct, immediate economic threat to Germany. Problems with delivery of Japanese products to German carmakers, for example, “could only delay but not stop production,” ING economist Carsten Brzeski said.

“The only serious and substantial threat for the German economy from recent global developments is linked to energy prices,” which could rise on spreading political unrest in the Arab world or as a results of consequences of the Japanese nuclear plant accident, he added.

The Ifo decline “is no reason to get petrified,” Brzeski said. “The economy is slipping on oil but is not tumbling. The fundamentals of the German economy are strong enough to withstand some setbacks.”

IHS Global Insight economist Timo Klein noted that “Germany’s increasing domestic strength continues to be boosted by interest rates that are much too low for its own economic conditions” — even though the European Central Bank is expected to raise rates from a record-low 1 percent next month.

“The German economy will stay very robust during 2011,” assuming global growth isn’t hobbled by much wider Middle East troubles, a major escalation of Japan’s nuclear crisis or fast-growing China slamming on the brakes to combat inflation, he added.

The monthly Ifo survey is based on responses from about 7,000 companies.

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Stocks plunge on economic news, oil price swings


Stocks plunge on economic news, oil price swings

Article Posted Here by Calvin Lee Ledsome Sr,

NEW YORK (AP) — Just when Americans put aside their fears and started buying stocks again, here come a host of reminders of why they left.

Ominous news from around the world caused stocks to plummet on Thursday, sending the Dow Jones industrial average to the worst one-day drop in seven months.

Claims for unemployment insurance rose unexpectedly. A credit rating agency lowered Spain’s credit grade, amplifying worries that Europe’s debt crisis will worsen. China’s economy showed a surprising sign of weakness — a trade deficit brought on in part by surging oil prices.

And just when markets started bouncing back, Saudi police opened fire on protesters in the eastern city of Qatif, raising concerns about the stability of the oil-rich kingdom. Oil prices swung wildly, and the Dow again dipped below the 12,000 mark.

Major stock indexes had been plodding steadily higher month after month, luring investors back in with gains of 24 percent since August. But Thursday’s steep drop, following a recent roller coaster of market dives, could cause some of them to return to their hiding spots.

“You’ve had people plowing into this market,” said Nicholas Colas, ConvergEx Group chief market strategist. “And nothing makes you take your foot off the accelerator like seeing an accident.”

The Dow Jones industrial average fell 228.48 points, or 1.9 percent, to close at 11,984.61. McDonald’s Corp. was the only stock in the Dow 30 that rose.

The Standard & Poor’s 500 index fell 24.91, or 1.9 percent, to 1,295.11. The Dow and S&P 500 are still up 3 percent since the start of the year. The Nasdaq composite fell 50.70, or 1.8 percent, to 2,701.02.

Thursday’s drop in the Dow was the biggest since Aug. 11. The S&P had a larger fall recently, dropping 27.57 points on Feb. 22 as the uprising against Libyan leader Moammar Gadhafi gained strength.

The stock market has become much more turbulent in the past three weeks. Blame it on oil.

Crude oil prices have jumped $20 a barrel since protests spread through North Africa and the Middle East, raising concerns that the flow of crude oil will be disrupted. Federal Reserve Chairman Ben Bernanke warned last week that consistently high oil prices could undermine the U.S. economic recovery.

Since the uprising in Libya started and oil prices began rising in mid-February, the Dow Jones industrial average has lost 100 points or more on four days. Twice it gained 100 or more points.

By contrast, the Dow had just two such swings in January and two in December. And only one of those was a loss.

“The tone of the market has clearly changed,” said Quincy Krosby, chief market strategist at Prudential Financial. “The market trend had been to buy rather than sell and that bad news doesn’t matter.”

The sharp swings come shortly after individual investors, long wary of the stock market, started returning. Investors put $36.1 billion into U.S. stock mutual funds in January and February, according to the research firm Strategic Insight. Over the previous eight months, they had withdrawn $66.1 billion.

But the little guy has notoriously bad timing. When average investors pile in or out of stocks, it’s often a sign the market is about to reverse course.

Large investors like Bill Gross and Carl Icahn have recently been warning that the market rally could soon hit a wall. Icahn said this week he would return $1.76 billion to investors in his hedge funds because he doesn’t want to be responsible to them for “another possible market crisis.” Icahn also said he was concerned about the economic outlook and trouble in the Middle East.

Oil prices exceed $100 a barrel. They had declined significantly Thursday on weak economic news, but recouped most of those losses after the police shootings in Saudi Arabia.

Oil traders will be closely watching the kingdom again Friday, when activists demanding democratic reforms have called for more protests. Government officials have warned they will take strong action if activists take to the streets.

Saudi Arabia is the world’s largest oil exporter and among only a handful that can increase production by sizable levels to meet demand increases.

Investors moved money into relatively stable investments as stock prices fell. Treasury prices rose, sending the yield on the 10-year note down to 3.37 percent from 3.47 percent late Wednesday.

Five stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume was 4.8 billion shares.

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AP Business Writers Francesca Levy, David K. Randall and Chris Kahn contributed to this story.

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Tax cut has little impact on economy in January


Tax cut has little impact on economy in January
Feb. 28, 2011, 4:09 p.m. EST
Associated Press
Posted by Calvin Lee Ledsome Sr.,

WASHINGTON (AP) — A Social Security tax cut that economists say should help the economy this year is off to a slow start. Consumers increased their spending last month at the weakest pace since June, even with the extra money in their paychecks.

Some people may be using the additional money to pay down holiday credit card bills or higher gas prices, analysts said. And harsh weather may have deterred some people from shopping in January.

Personal finance experts say the real test of the tax cuts impact will come this spring, when the Easter holiday sales begin.

Still, consumers increased spending by only 0.2 percent in January, the smallest gain since June, the Commerce Department said Monday. At the same time, their incomes rose 1 percent — the biggest jump in nearly two years and a reflection of the tax cut.

The increased income is part of an additional $110 billion that economists say workers will receive this year from the cut in their Social Security taxes. Most families will see about $1,000 to $2,000 in extra income. Households with two high-income earners could receive up to $4,000 more.

In December, when President Barack Obama signed the tax cut as part of a broader tax package, economists predicted Americans would spend about two-thirds of the extra money and save the remaining one-third. Higher-income taxpayers were expected to save a little more; lower-income households would spend a bit more.

Economists said the extra spending would help boost growth and could lead businesses to hire more. Still, all that was before tensions in the Middle East sent oil prices spiking. And a surge in global commodity prices is now expected to push U.S. food prices up slightly this year, too.

Many analysts say such inflation could siphon off most of the benefit of the tax cut. Several scaled back expectations for growth Monday after seeing January’s disappointing report.

“It doesn’t look like the economy is going to get any strong net boost from the Social Security tax cut,” said Paul Dales, senior economist at Capital Economics. “It will just go to pay higher prices on food and energy.”

Consumer spending was growing at the fastest pace in four years in the final three months of 2010, helping to support the overall economy. The weak showing in January raised questions about how strong consumer spending, which accounts for 70 percent of economic activity, will be this year.

The modest 0.2 percent rise in spending was even weaker when inflation was taken into account. After adjusting for price changes — particularly a steep rise in energy costs — spending actually dipped 0.1 percent in January. That was the poorest showing since September 2009.

One factor that the report doesn’t take into account is how much was spent on reducing debt. Households may have boosted their spending in December — after hearing about the pending tax cut — and spent the extra money in January to pay credit card bills.

Marshal Cohen, chief industry analyst for a N.Y.-based consumer market research firm, cautioned that most people might not have spent a lot because they didn’t see much change in their income after only one month.

“One or two percent in your paycheck is not going to change the way you live,” said Cohen, of the NPD Group Inc. in Port Washington. “It’ll make living easier. What it will do is keep you spending the way you’ve been spending, so it will keep the status quo.”

Over time, however, as consumers have the opportunity to pay down credit card and other debt, they’ll feel more like spending again, Cohen said.

That could bode well for retailers, who are now looking for shoppers to open up for spring.

“I think the next big event we need to watch for is Easter sales,” said Arun Jain, professor of marketing research at the University at Buffalo School of Management. “That will reflect what they want to buy for spring. That to me will tell us how confident they are.”

An early sign of that would be an increase in clothing sales at discount department stores such as Sears, J.C. Penney, and Target, Jain said.

J.C. Penney launched its spring advertising during Sunday night’s Academy Awards show, buying seven 30-second commercials focusing on its “We make it affordable, you make it yours” clothing campaign.

“When people get these types of paycheck boosts from the government, typically the first area people will spend on is essentials for the family,” Jain said.

Job growth would also boost spending.

Sal Guatieri, senior economist at BMO Capital Markets, predicted the government will report Friday that the economy added around 200,000 jobs in February, much better than the 36,000 jobs created in January.

Still, the weak January spending data caused him to trim his forecast for overall economic growth for the current quarter from a rate of 3.5 percent down to 3.2 percent.

He said the January numbers suggest many families are still stretched financially.

“The key going forward will be job growth,” he said. “If we start to see jobs growing in a stronger fashion, that will support the consumer in the face of rising gasoline and food costs.”
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Presidential Press Conference on Tax Cuts and Unemployment Extension

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Thousands of mourners called for the downfall of Bahrain’s ruling monarchy


Bahrain mourners call for toppling of monarchy
Feb. 18, 2011, 5:59 a.m. EST
Article Published by Associated Press Writers
Article Posted by Public Blog News Posting Service Group

Bahrain mourners call for toppling of monarchy

MANAMA, Bahrain (AP) — Thousands of mourners called for the downfall of Bahrain’s ruling monarchy and worshippers at Friday prayers chanted against the king as anger shifted toward the nation’s highest authorities after a deadly assault on pro-reform protesters that has brought army tanks into the streets of one of the most strategic Western allies in the Gulf.

The cries against the king and his inner circle — at a main Shiite mosque and at burials for those killed in Thursday’s crushing attack — reflect an important escalation of the political uprising, which began with calls to weaken the Sunni monarchy’s power and address claims of discrimination against the Shiite majority in the tiny island nation.

The mood, however, appears to have turned toward defiance of the entire ruling system after the brutal crackdown on a protest encampment in Bahrain’s capital, Manama, which left at least five dead, more than 230 injured and put the nation under emergency-style footing with military forces in key areas and checkpoints on main roads.

“The regime has broken something inside of me. … All of these people gathered today have had something broken in them,” said Ahmed Makki Abu Taki at the funeral for his 23-year-old brother, Mahmoud, who was killed in the pre-dawn sweep through the protest camp in Manama’s Pearl Square. “We used to demand for the prime minister to step down, but now our demand is for the ruling family to get out.”

The White House has expressed “strong displeasure” about the rising tensions in Bahrain, which is home to the U.S. Navy’s 5th Fleet and the centerpiece of the Pentagon’s efforts to confront growing Iranian military ambitions in the region.

At a Shiite mosque in the village of Diraz, an anti-government hotbed, imam Isa Qassim called the Pearl Square assault a “massacre” and thousands of worshippers chanted: “The regime must go.”

In a sign of Bahrain’s deep divisions, government loyalists filled Manama’s Grand Mosque to hear words of support for the monarchy and take part in a post-sermon march protected by security forces. Many arrived with Bahraini flags draped over the traditional white robes worn by Gulf men. Portraits of King Hamad bin Isa Al Khalifa were distributed.

“We must protect our country,” said Adnan al-Qattan, the cleric leading prayers. “We are living in dangerous times.”

He also denounced attempts to “open the doors to evil and foreign influences” — an apparent reference to suspicions that Shiite powerhouse Iran could take advantages of any gains by Bahrain’s Shiites, who account for about 70 percent of the population.

The pro-government gathering had many nonnative Bahrainis, including South Asians and Sunni Arabs from around the region. Shiite have long complained of policies to give Sunnis citizenship and jobs, including posts in security forces, to offset the Shiite majority.

Outside a Shiite village mosque, several thousand mourners gathered to bury three of the men killed in the crackdown. The first body, covered in black velvet, was passed hand to hand toward a grave as it was being dug.

Amid the Shiite funeral rites, many chanted for the removal of king and the entire Sunni dynasty that has ruled for more than two centuries in Bahrain — the first nation in the Gulf to feel the pressure for changes sweeping the Arab world.

“The government has shaken something inside us all and we have lost all trust in it,” Mohamed Ali, 40, a civil servant, said as he choked back tears. “Our demands were peaceful and simple at first. We wanted the prime minister to step down. Now the demands are harsher and have reached the pinnacle of the pyramid. We want the whole government to fall.”

There were no security forces near the mosque on the island of Sitra, where three of those killed had lived.

But in Manama, soldiers guarded the capital’s main areas and placed roadblocks and barbed wire around Pearl Square and other potential gathering sites. Work crews were busy trying to cover up the protest graffiti.

In another funeral in the Shiite village of Karzkan, opposition leaders urged protesters to keep up their fight but not to seek revenge.

“We know they have weapons and they are trying to drag us into violence,” said Sheik Ali Salman, the leader of the largest Shiite party, Al Wefaq, whose 18 lawmakers have resigned in protest from the 40-seat parliament to deepen the political crisis.

On Thursday, Bahrain’s leaders banned public gatherings to try to keep the protest movement from re-igniting. But the underlying tensions in Bahrain run even deeper than the rebellions for democracy that began two months ago in Tunisia and later swept away Hosni Mubarak in Egypt and is challenging old-guard regimes in Libya and Yemen.

In the government’s first public comment on the crackdown, Foreign Minister Khalid Al Khalifa said Thursday it was necessary because the demonstrators were “polarizing the country” and pushing it to the “brink of the sectarian abyss.”

Speaking to reporters after an emergency meeting with his Gulf counterparts in Manama to discuss the unrest, he called the violence “regrettable,” said the deaths would be investigated and added that authorities chose to clear the square by force at 3 a.m. — when the fewest number of people would be in the square — “to minimize any possibility of casualties.”

Many of the protesters were sleeping and said they received little warning of the assault. More than 230 people were injured, some seriously.

U.S. Defense Secretary Robert Gates said Washington must expand efforts for political and economic reforms in places such as Bahrain. “There is an urgency to this,” he told the Senate Armed Services Committee.

In the midst of the protests, WikiLeaks has released new State Department cables detailing basic Bahraini foreign policy and concerns about regional powerhouse Iran. One intriguing cable also consists of questions sent by U.S. Secretary of State Hillary Rodham Clinton asking the embassy to evaluate the leadership potential of the country’s top princes.

The cable includes questions about relationships between the princes, their influence on government, views of the United States and whether any of them have histories of drug or alcohol use. There is no record of any answers.

Elsewhere, the European Union and Human Rights Watch urged Bahraini authorities to order security forces to stop attacks on peaceful protesters.

The protesters had called for the monarchy to give up its control over top government posts and all critical decisions and address deep grievances by Shiites, who claim they face systematic discrimination and poverty and are effectively blocked from key roles in public service and the military.

Shiites have clashed with police before in protests over their complaints, including serious confrontations in the 1990s. But the growing numbers of Sunnis joining the latest demonstrations have come as a surprise to authorities, said Simon Henderson, a Gulf specialist at the Washington Institute for Near East Policy.

“The Sunnis seem to increasingly dislike what is a very paternalistic government,” he said, adding that the crackdown was “symptomatic” of Gulf nations’ response to crises. “As far as the Gulf rulers are concerned, there’s only one proper way with this and that is: be tough and be tough early.”

The Bahrain violence forced the cancellation of a lower-tier open-wheel race in Bahrain for Friday and Saturday, and leaves in doubt the March 13 season-opening Formula One race at the same track.

Formula One chief Bernie Ecclestone said he will wait until next week to decide whether to proceed with the race. He spoke Thursday to Crown Prince Sheik Salman bin Hamad Al Khalifa about the situation.

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Barbara Surk in Manama and Brian Murphy in Dubai, United Arab Emirates, contributed to this report.
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