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ST. CHARLES

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Katia has weakened to a tropical storm as it moves across the Atlantic but forecasters say they expect it to strengthen again over the next two days.

Katia (KAH’-tee-yah) was about 930 miles (1497 kilometers) east of the Leeward Islands and moving west near 18 mph (30 kph) with maximum sustained winds late Thursday afternoon near 70 mph (113 kph), a 5 mph drop. It could become a major hurricane this weekend.

The U.S. National Hurricane Center said it’s too early to tell if Katia will hit the U no faxing pay day loans.S. It is expected to pass north of the Caribbean.

Meanwhile two other storm systems were developing over open water, in the Gulf of Mexico and in the Atlantic well north of Bermuda. But forecasters said it was too soon to tell if either might hit land.

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The past month wasn’t exactly a confidence-booster for would-be home buyers and sellers.

They’ve witnessed a turbulent stock market, a downgrade of U.S. credit, a spreading European debt crisis and a U.S. economy that seems to be running in place.

And now many say they’re even more hesitant _ a retreat that could further delay a rebound in housing. It could hold back the overall economy, too.

“I have people who are just waiting and waiting, who just haven’t pulled the trigger even though they have the down payment,” said John Stearns, senior mortgage banker at American Fidelity Mortgage outside Milwaukee. “There’s a lot of kicking tires. A lot of people saying they just won’t do it.”

Their unease explains why applications for home mortgages sank last week to a nearly 15-year low. What’s more, sales of new homes fell more than expected in July _ and analysts think the financial turmoil may be accelerating that slide this month.

“Buyers just don’t want to commit to anything right now,” said Joel Naroff of Pennsylvania-based Naroff Economic Advisors.

Interviews with more than three dozen agents, brokers and would-be buyers and sellers indicate that the heightened uncertainty in the financial markets and the economy has made people even more cautious than before.

Consider:

_ Eric Younan, a marketing professional at an accounting firm who was about to buy a home in July in Farmington Hills, Mich. Then along came August. “What really scared me is that I’m a single guy, and I don’t want to have a mortgage by myself,” Younan says. “The economy is taking a pounding, and my friends who are getting laid off are leaving the state. Prices are still falling. So I’d rather have money in the bank than money in a house.”

_ Fernando Maza, a security system programmer in Broward County, Fla., who was about to buy a second home, right before the stream of unnerving developments on the economy and the stock market. Now, he’s less sure. “House prices could go down,” he says. “There’s so much inventory and not a lot of qualified buyers.”

_ Kurt Winiecki, a financial planner in Chicago who has been counseling a young couple on whether to buy or continue to rent. August made Winiecki’s decision easier: He’s telling them to rent. “What if they lose 20 percent of their equity and they can’t sell the house? It’s just too big a risk.”

Even before the recent financial upheavals, the home market was being depressed by the economy’s many problems: High unemployment. Stagnant pay. Rising health care expenses. High debt loads pay day loans. A wave of foreclosures. Shrunken home equity.

And real estate agents were saying that more buyers were walking away at the last minute. In June, the latest month for which figures are available, about 16 percent of closings were canceled. That was the highest figure since record keeping started more than a year ago.

This year is on pace to be the worst for home sales in 14 years. Nationally, prices are at 2002 levels, and even lower in areas like Phoenix, Las Vegas and Tampa, Fla.

But the past few weeks’ turmoil may be making everything worse. Homebuilder stocks, for instance, have been battered _ even more than the stock market as a whole. As a group, they’ve shed nearly 23 percent, according to a Standard & Poor’s analysis, compared with about 12 percent for the Dow Jones industrial average.

In normal times, today’s record-low mortgage rates would energize buying. Yet while more people are refinancing, applications for new mortgages are stuck at 10-year lows, according to Inside Mortgage Finance.

Part of the problem is that many people can’t buy even if they want to. More than 23 percent of homeowners owe more on their homes than they’re worth. An additional 25 percent have less than 20 percent equity in their homes, according to Capital Economics.

That means that nearly half of homeowners couldn’t qualify for a new mortgage because they couldn’t produce a big enough down payment.

Add to that a chaotic stock market and a weak economy, and the belief is taking hold among many that now isn’t the time to invest in the biggest purchase in most people’s lives.

“There’s a reassessment of risk across the planet,” says Jonathan Miller of New York-based real estate consultancy Miller Samuel. “Volatility breeds uncertainty, and this is intimidating for consumers.”

Consider the lack of interest in Eric Johannson’s home. A pilot for cargo hauler Atlas Air, Johannson put his lakefront Houston home on the market in July 2010. He planned to upgrade to a home in Orlando, where his wife took a new job.

Yet despite the house’s excellent condition, it has drawn not a single offer, even after the price was slashed to $249,000 _ $100,000 less than what Johannson and his wife paid in 2008.

“If this economic situation drags out much longer, my wife just may have to quit her job and career” and move back to Houston, Johansson says.

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President Barack Obama played golf and enjoyed some beach time with his family Sunday on Martha’s Vineyard, though not before getting briefed on developments in Libya.

Under sunny skies, Obama, wife Michelle, and daughters Malia and Sasha spent the morning on a private beach in Edgartown. The outing came on the third full day of Obama’s 10-day summer vacation and was his first excursion with his full family in tow. The president then parted ways with his family to play a round of golf at the Vineyard Golf Club.

First, though, Obama was briefed by national security aides on developments in Libya, where rebels advanced on Tripoli, threatening Moammar Gadhafi’s hold on power. White House aides have been at pains to show Obama is carrying out his duties as president even while on vacation amid international unrest, a shaky economy and high joblessness.

Obama also appeared on CBS News in an interview taped during his bus tour of the Midwest last week instant payday loans. He said he understood his low standing in the polls of late given public dissatisfaction with Washington and the poor economy. And he said he expected to be judged on the economy in next year’s presidential election.

“You’ve got an unemployment rate that is still too high, an economy that’s not growing fast enough,” he said. “And for me to argue, look, we’ve actually made the right decisions, things would have been much worse has we not made those decisions _ that’s not that satisfying if you don’t have a job right now. And I understand that and I expect to be judged a year from now on whether or not things have continued to get better.”

The president is scheduled to return to Washington next Saturday.

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Acknowledging the severity of the global economic storm, the Bank of Canada signalled no likely increases in interest rates any time soon while Finance Minister Jim Flaherty said Ottawa might need to step in with another round of stimulus spending if conditions get worse.

Mark Carney, governor of the central bank, told a Commons committee Canada’s economy may show little growth or negative growth when the statistics are finalized for the April-through-June period because of the economic troubles in the United States and Europe. But he said growth will pick up a bit in the second half of 2011.

As expected, given the gloomy state of financial markets and world business conditions, Carney made it clear that the Bank of Canada would be hesitant to increase its trend-setting interest rate above the current 1 per cent in the near future. Lower rates spur business and consumer borrowing and add momentum to the economy.

“Since the crisis erupted, the Bank has demonstrated its flexibility and nimbleness in the conduct of monetary policy,” he told a special session of the Commons finance committee studying the economic crisis. “As the Canadian recovery has progressed, we have emphasized that we would be prudent with respect to the possible withdrawal of any degree of monetary stimulus,” he said.

Under questioning from opposition MPs, Flaherty said for the first time that the Conservative government would move in with another round of stimulus spending if the world economy suffers a double-dip recession.

“We would obviously do what is needed” if there was a “dramatic deterioration” in the economies of the United States and Europe, he told the committee.

But for now, Flaherty said, the government is not changing its budget plan despite the turmoil on financial markets and debt crises in the United States and Europe. The plan calls for spending cuts of $4 billion a year to eliminate the annual federal budget deficit — now $32-billion annually — in a few years.

Pressed by opposition MPs about how Ottawa would react to a renewed global slowdown, Flaherty said he would change course and develop a pro-growth spending plan as the Conservatives did during the recent recession.

There is no need yet to move away from the government’s deficit-reduction strategy, however, he told MPs. Canada’s economy is still growing, if modestly, Flaherty said.

NDP finance critic Peggy Nash said later that she was disappointed that Flaherty didn’t show more flexibility. Her party would like to see the government embark on a round of infrastructure spending to spur economic growth, improve job-creation and prepare Canada for the future. Liberal MP Scott Brison said Flaherty failed to offer Canadians the assurances needed at a time of extreme economic uncertainty.

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The idea that Japan would ever dump its $900 billion holdings of U.S. Treasurys, the second largest foreign ownership after China, has long been just that _ an idea never seriously entertained.

The long-standing argument paints a horrific picture of the consequences: The dollar would crash, world markets would be sent into a tailspin and the post-World War II military and political alliance between the U.S. and Japan would be shaken.

But after Washington’s credit rating was downgraded for the first time ever earlier this month _ from AAA to AA+ by Standard & Poor’s _ some daring advocates are voicing that taboo idea: Why not sell Treasurys?

Those playing devil’s advocate aren’t Japan’s mainstream policymakers by any means. But they aren’t totally fringe either.

“The holdings translate to 1 million yen ($13,000) per Japanese taking this risk in shouldering U.S. debt, all without their fully being aware of it,” said Kenji Nakanishi, a lawmaker in a new opposition party that made significant gains in the last election.

Nakanishi told The Associated Press that Japan shouldn’t sell all its holdings at once, but should reduce them by about 10 trillion yen ($130 billion) each year, and earmark some of that money for recovery spending in northeastern Japan, which was devastated by the March 11 earthquake and tsunami.

A simple explanation to Washington that the move won’t change the U.S.-Japan political and defense alliance should be enough, according to Nakanishi. It alarms Nakanishi that the government is trying to raise taxes to fix its deficit and finance the earthquake recovery, a move he fears would further squeeze the Japanese economy.

Views like Nakanishi’s may be winning some acceptance. No one expects them to be acted upon immediately.

The Japanese government and ruling party officials have repeatedly said Japan won’t sell U.S. bonds, and instead will keep buying them.

The common wisdom is that a weak dollar would prove devastating to the Japanese economy by making it more difficult for Toyota Motor Corp., Sony Corp. and other pillars of corporate Japan to sell their goods overseas.

Peter Schiff, chief executive of Euro Pacific Capital, a New York-based investment company, said the current accumulation of debt by the U.S. government is unsustainable.

“The more money the world lends to America today, the more money they’re going to have to lend tomorrow,” he said in a telephone interview. “It’s a giant Ponzi scheme. Nobody is ever going to get their money back.”

Japan would be venturing into untested territory if it decided to reduce Treasury holdings.

In 1997, mere musing by then Prime Minister Ryutaro Hashimoto about selling Treasurys set off a Wall Street plunge until Japanese officials quickly jumped in for damage control and promised Japan had no such plans.

But Naoto Amaki, a writer and former government bureaucrat, thinks the time is ripe to start thinking the unthinkable.

Amaki has long advocated reducing Treasury holdings, but is only recently growing optimistic that others may finally see how his view may be good for Japan.

Japan, with its towering public debt, is in no position to help finance America’s deficit, especially after the March 11 earthquake and tsunami, he said in a recent blog.

“Japan’s finances were already in serious trouble. Now, we are literally being backed into a crisis of no return,” Amaki said.

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Libyan authorities on Saturday accused NATO of killing 15 people in an airstrike that hit a restaurant and bakery in the east, though the alliance said there were no indications that civilians had died.

It was the latest outcry from Libyan leader Moammar Gadhafi’s government blaming NATO for killing civilians amid a four-month uprising that has sparked a civil war. NATO insists it does all it can to avoid such casualties.

Meanwhile, rebel representatives said their fighters were coordinating around the country for the “zero hour” when their forces would reach the capital of Tripoli.

The rebels said they have been working to cut fuel supplies from Tunisian borders in an attempt to paralyze Gadhafi’s forces. Rebels also are making homemade bombs and trying to ferry other weapons to their comrades in Tripoli, a spokesman for an underground guerrilla group there said.

Libya’s state news agency quoted a military official in Gadhafi’s forces as saying that NATO warplanes hit a number of civilian sites Saturday in the oil town of Brega, including a restaurant and a bakery.

The official said 15 civilians were killed and 20 wounded in the strike. The JANA news agency also claimed five civilians were killed Friday in Brega as well.

A NATO official said alliance warplanes had hit several targets in the vicinity of Brega, but dismissed claims that the attacks had resulted in civilian casualties.

“We have no indications of any civilian casualties in connection with these strikes,” said the official, who spoke on condition on anonymity because he was not authorized to speak to the media on the record. “What we know is that the buildings we hit were occupied and used by pro-Gadhafi forces to direct attacks against civilians around Ajdabiya.”

NATO has acknowledged carrying out two raids near the strategic oil town. The alliance said Friday it hit multiple military command sites near Brega, which has been a frequent flashpoint between rebels and Gadhafi’s forces.

The alliance said Friday that government forces had moved into buildings in an abandoned area of Brega and started using them as military compounds to launch strikes on civilians, putting rebel-held cities such as Ajdabiya and Benghazi at risk.

Reports of civilian casualties have provoked intense anger among many Libyans in the west of the country under Gadhafi’s control.

Images of dead civilians, including young children, described by the government as “martyrs” can be seen frequently at pro-government rallies and on state-controlled television.

NATO is investigating whether one of its airstrikes may have slammed into a civilian neighborhood in Tripoli on June 19, killing several civilians.

A day later, alliance warplanes struck a family compound belonging to a close Gadhafi aide, killing what the Libyan government says was 19 people, including at least three children. NATO called the site was a “command and control” center, and said it regrets any civilian deaths that resulted from the strike.

Meanwhile, at least two explosions could be heard in the capital of Tripoli on Saturday, though it was not immediately clear what the NATO airstrikes may have hit.

The Libyan rebels began their uprising in February against Gadhafi, who has been in power since 1969. The conflict has turned into a civil war, and Gadhafi’s forces are accused of orchestrating deadly attacks on civilians.

The rebels have taken over much of the eastern half of Libya. They also control pockets in the west, including the vital port city of Misrata, about 125 miles (200 kilometers) from the capital.

A coalition including France, Britain and the United States began striking Gadhafi’s forces under a United Nations resolution to protect civilians on March 19. NATO assumed control of the air campaign over Libya on March 31 and is joined by a number of Arab allies.

On Saturday, the spokesman of the rebels’ western mountain military council confirmed that rebels are coordinating with individual cells and with an underground rebel guerrilla group known as the Tripoli Council. The main goals are to cut the fuel from Gadhafi forces, Gomaa Ibrahim said.

Meanwhile, a spokesman for the Tripoli Council said that their fighters have been carrying selective attacks on Gadhafi forces in the capital.

The spokesman, who requested anonymity for fear of reprisals, said that the rebels are coordinating for “the zero hour, when rebels from liberated cities enter Tripoli.”

“It will be a tremendous mission. The city is now besieged by 13 different security brigades, well armed and well equipped. Gadhafi has always said that his loyalists will sabotage the city if he falls. So this will be our mission: to mob it and clean it of mercenaries.”

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A near month-long inspection of Greek finances by the European Union, European Central Bank and International Monetary Fund concluded “positively” on Friday, the country’s Finance Ministry said.

The inspection is crucial to whether Greece will receive the next batch of loans from a euro110 billion bailout fund from the EU and IMF agreed last year and could well inform discussions over an extension to the current financial rescue package.

The prevailing view in the markets is that Greece, which is effectively locked out of raising money through the sale of its bonds because of prohibitively high interest rates, will need another bailout.

The negotiations with the debt inspectors, known collectively as the troika, dealt with both the steps Greece has been taking to reform its economy in line with last year’s package of loans, and a program of additional measures for the years 2012-2015.

A privatization program that seeks to raise funds for the cash-strapped country, further measures to be taken this year to meet deficit reduction targets and structural reforms to the Greek economy were all discussed, the ministry said in a statement.

The Greek government is seeking to narrow its deficit to 7.5 percent of gross domestic product by the end of this year, from the 10.5 percent it stood at in 2010. To achieve that, Finance Minister George Papaconstantinou last month announced remedial austerity measures worth about euro6.4 billion for this year.

The texts detailing the measures are to be finalized “in the coming days” and will be submitted to Parliament after being approved by the Cabinet, the ministry said.

The euro pushed up to day highs of $1.4585 after the statement, while anticipating the news, Greece’s borrowing costs eased during the day, with yields on 10-year Greek bonds dropping some 60 basis points to 16.2 percent. Shares on the Athens Stock Market closed up 4.4 percent at 1,333.66.

The troika was expected to issue its own announcement later Friday.

The ministry statement came as Prime Minister George Papandreou held emergency talks in Luxembourg with Jean-Claude Juncker, who heads the group of 17 eurozone finance ministers business card.

The original bailout plan, from which Greece began drawing funds in May last year, envisaged the country being able to tap bond investors in 2012, but with the interest rates on Greek bonds remaining exceptionally high, that appears increasingly unlikely.

Those funding gaps are likely to have to be filled by a second bailout being negotiated by other eurozone countries.

The austerity measures taken so far have led to frequent strikes and demonstrations.

The latest saw about 200 protesters from the communist party-backed PAME union take over the Finance Ministry building at dawn Friday They unfurled a giant banner from the roof calling for a general strike.

Other protests and demonstrations were planned for later Friday evening.

The new cutbacks are expected to be submitted to parliament in coming days, where the governing Socialists have a six-seat majority. But several Socialist backbenchers have voiced strong criticism, and the government this week canceled two planned briefings of its deputies to avoid a showdown.

Sixteen Socialist lawmakers have signed a letter calling for an extensive debate on the proposed new cutbacks before their ratification, with one of the signatories threatening on Friday not to vote for the reforms.

“If the draft legislation is brought to Parliament without prior discussion, I will not vote for it,” Thomas Robopoulos told state NET television.

Greece’s woes have been compounded by repeated downgrades of its credit ratings _ Moody’s warned Wednesday that the country had a 50-50 chance of defaulting on its debts.

On Friday, Moody’s also cut the ratings of eight Greek banks _ National Bank of Greece, Eurobank, Alpha, Piraeus, Agricultural Bank of Greece, Attica, Emporiki and General Bank of Greece.

____

Derek Gatopoulos and Nicholas Paphitis in Athens contributed.

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Spanish financial markets slumped Monday after voters angry about austerity measures dealt the governing Socialist party a painful loss in local and regional elections, raising doubts over the country’s ability to enforce debt cuts.

Investors worried that the government of Prime Minister Jose Luis Rodriguez Zapatero had lost support in its drive to heal public finances and faced a period of political uncertainty. Daily protests against both the Socialists and the opposition conservatives, meanwhile, were spreading to cities across the country and expected to last for days.

The Ibex 35 index on the Madrid stock market closed down 1.4 percent and the yield on Spanish 10-year bonds on the secondary market was up to 5.5 percent. That indicates investors are more cautious about the country’s ability to repay its debts.

The spread, or difference in yield between that bond and the equivalent benchmark German one, stood at about 250 basis points in the afternoon, up from 240 on Friday. A basis point is one-one hundredth of a percent.

The governor of the Bank of Spain said the country cannot sustain spreads of more than 200 basis points for a long period because this will raise government borrowing costs and leave less money available for providing financing for companies and getting stagnant credit flowing again.

Miguel Angel Fernandez Ordonez also said in a speech that the government needs to press ahead quickly with labor market reforms to create jobs and reassure investors. He called for more flexibility in how collective bargaining agreements are negotiated. Economists say the current system is too rigid because in a given sector it treats money losing and profitable companies with the same terms when it comes to giving workers raises.

Investor appetite for Spanish bonds will be tested Tuesday with a treasury auction of 3- and 6-month bills.

Alejandro Varela of brokerage Renta 4 in Madrid said that besides debt worries spilling over from other troubled countries such as Greece, investors feared that conservatives taking over town halls and regional governments might discover bigger debt piles than had been previously disclosed.

That’s what happened late last year when the wealthy and powerful Catalonia region held similar elections. The center-right Catalan nationalists took over from a Socialist-led coalition and recently announced the region’s deficit was much bigger than previously known. Catalonia did not vote on Sunday.

In 13 other regions that were up for grabs Sunday, the conservative opposition Popular Party won virtually all of them from the Socialists, causing new debt concerns to sprout, Varela said.

“There had been speculation to this effect for a week and now that melon will be sliced open,” Varela said.

The Popular Party also cleaned up at municipal elections by winning 2 million more votes than the Socialists with a margin of victory of about 10 percentage points. The party said those numbers show Spain is hungry for change.

Varela said he expects Zapatero to call early elections and that it would be good for the country, although the prime minister said Sunday night as he acknowledged defeat by his party that he would not and plans to serve out his term. General elections must be held by next March. Zapatero has said he will not seek a third term.

Varela said, “Spain is in a very weakened situation and this transitory period is particularly dangerous.”

The Popular Party favors early elections but on Monday refrained from calling for them outright.

“Spain can’t wait another year,” said party Secretary General Maria Delores de Cospedal. “No more time should be lost.”

She ruled out, however, trying to push a no-confidence vote through Parliament where the Socialists still have enough allies to reject it.

The elections were local and regional, but many Spaniards said they had the national picture in mind as they voted. The country is saddled with a eurozone-high jobless rate of 21.3 percent and is struggling to recover from nearly two years of recession triggered by the collapse of a real estate bubble and the end of an overzealous period of free-flowing credit.

For the past week, central Madrid’s Puerta del Sol plaza has been home to a makeshift protest camp to mainly young Spaniards angry over their bleak economic prospects _ the youth jobless rate exceeds 40 percent. The protesters dismiss both Socialist and conservative politicians as inept, corrupt and distant from the plight of everyday people and said the elections result made little difference to them.

“It’s not that important because this protest never had an electoral goal,” said Javier Perez, one of the Madrid camp’s spokespersons. “In the end, the results are another example of Spain’s two-party system and how it fails to resolve the anger, the indignation and our problems.”

United behind the slogan “Real Democracy Now”, the Madrid protest has drawn tens of thousands of people of all ages and spread to dozens of other cities. On Monday, the activists debated how to proceed with their campaign after voting Sunday to stay on for at least another week. They discussed gradually dismantling the camps and taking the protests to city neighborhoods to get more people involved.

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