1. FED

1) Bernanke to Testify to Congressional Panel Oct. 4, Aide Says

Federal Reserve Chairman Ben S. Bernanke is scheduled to testify before the Joint Economic Committee of Congress on October 4, according to Al Felzenberg, the committee’s Republican press secretary.

2. Euro zone Crises

1) Italy Debt Rating Lowered by S&P on Weaker Growth Outlook

Italy’s credit rating was cut by Standard & Poor’s on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden.

The rating was lowered to A from A+, with a negative outlook, S&P said in a statement. S&P said Italy’s net general government debt is the highest among A-rated sovereigns, and the company now expects it to peak later and at a higher level than it previously anticipated.

Analyst Comment: It’s a reminder that we’ve had the market in control but policy makers have been slow to think in any forward-looking context. Policy makers across the euro-zone have been well and truly asleep at the wheel for quite a while now and are only taking measures when the market pushes them to it.

2) Greece Loan Talks Will Continue After ‘Productive’ Meeting

Prime Minister George Papandreou’s government will hold another call with its main creditors after a “productive” round of talks aimed at staving off default.

As Papandreou fights investor doubts and domestic opposition, European leaders are squabbling over the terms of the July agreement and the prospect that they will be forced to channel more money to keep Greece in the currency union. U.S. Treasury Secretary Timothy F. Geithner said in an interview yesterday that Europe will eventually adopt some of the same measures the U.S. took after the 2008 financial crisis.

3) Merkel Signals She’ll Dodge German Coalition Breakup ‘Disaster’

German Chancellor Angela Merkel said she’ll hold the government together even after her coalition partner defied a call to stop talking down Greece and was flattened in a state election.

Open conflict in Merkel’s three-party alliance has erupted over the euro’s future and financial aid to Greece, stoking speculation that she may end the coalition midway through her second term. As 82 percent of respondents to a poll in this week’s Spiegel magazine said the government’s crisis management is “bad,” the FDP, or liberals, bore the brunt of voter anger.

Analyst Comment: Merkel is still unlikely to call elections before they are scheduled in 2013 or accept the Social Democrats’ offer to switch coalition partners.

4) Ireland Recovers as Greece Sinks in Debt Market Affirming Kenny

The International Monetary Fund, which contributed to Ireland’s 85 billion-euro ($116 billion) rescue package last November, said Sept. 7 that it’s “very impressed” with Kenny’s government efforts to implement its austerity program.

Analyst Comment: Somehow, through luck or brilliant strategy, or some combination of both, Ireland has put clear blue water between it and Greece, primarily by being seen to deliver. I would give the government a minimum of a B-plus grade.

3. ECO

1) Japan Keeps Economic Assessment, Says Economy Is ‘Picking Up’

“The Japanese economy is picking up while difficulties continue to prevail due to the Great East Japan Earthquake, a further slowdown of already less resilient overseas economies in addition to foreign exchange-rate swings are among risks to the outlook”, the government said.

The Cabinet Office cut its evaluation of corporate profits today for the first time since May, saying that earnings have deteriorated. The government upgraded its assessment of housing investment for a second month.

2) Obama ‘Buffett Rule’ for Millionaires Easier Said Than Done

Writing the new “Buffett rule” proposed by President Barack Obama to snare more tax revenue from millionaires will prove to be logistically and mathematically difficult.

Such a rule would be problematical to craft or ineffectual because higher earners aren’t the only taxpayers benefiting from breaks; many middle-income families take advantage of deductions and credits that drive their rates below the 17.4 percent that Buffett pays.