Sequestration: Surrender is in the Air

The budget ax is about to fall, and there's little lawmakers in Washington are doing to stop it.

Despite a parade of dire warnings from the White House, an $85 billion package of deep automatic spending cuts appears poised to take effect at the stroke of midnight on Friday.

The cuts – known in Washington-speak as the sequester – will hit every federal budget, from defense to education, and even the president's own staff.

On Capitol Hill, Senate Democrats and Republicans each staged votes Thursday aimed at substituting the indiscriminate across-the-board cuts with more sensible ones. Democrats also called for including new tax revenue in the mix. Both measures failed.

Lleaders on both sides publicly conceded that the effort was largely for show, with little chance the opposing chamber would embrace the other's plan. They will discuss their differences with President Obama at the White House on Friday.

"It isn't a plan at all, it's a gimmick," Senate Minority Leader Mitch McConnell, R-Ky., said today of the Democrats' legislation.

"Republicans call the plan flexibility" in how the cuts are made, said Senate Majority Leader Harry Reid. "Let's call it what it is. It is a punt."

The budget crisis is the product of a longstanding failure of Congress and the White House to compromise on plans for deficit reduction. The sequester itself, enacted in late 2011, was intended to be so unpalatable as to help force a deal.

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Republicans and Democrats, however, remain gridlocked over the issue of taxes.

Obama has mandated that any steps to offset the automatic cuts must include new tax revenue through the elimination of loopholes and deductions. House Speaker John Boehner and the GOP insist the approach should be spending cuts-only, modifying the package to make it more reasonable.

"Do we want to close loopholes? We sure do. But if we are going to do tax reform, it should focus on creating jobs, not funding more government," House Speaker John Boehner said, explaining his opposition to Obama's plan.

Boehner, McConnell, Reid and House Minority Leader Nancy Pelosi will huddle with Obama at the White House on Friday for the first face-to-face meeting of the group this year.

"There are no preconditions to a meeting like this," White House spokesman Jay Carney said today. "The immediate purpose of the meeting is to discuss the imminent sequester deadline and to avert it."

Even if the leaders reach a deal, there's almost no chance a compromise could be enacted before the deadline. Lawmakers are expected to recess later today for a long weekend in their districts.

What will be the short-term impact of the automatic cuts?

Officials say it will be a gradual, "rolling impact" with limited visible impact across the country in the first few weeks that the cuts are allowed to stand.

Over the long term, however, the Congressional Budget Office and independent economic analysts have warned sequester could lead to economic contraction and possibly a recession.

"This is going to be a big hit on the economy," Obama said Wednesday night.

"It means that you have fewer customers with money in their pockets ready to buy your goods and services. It means that the global economy will be weaker," he said. "And the worst part of it is, it's entirely unnecessary."

Both sides say that if the cuts take effect, the next best chance for a resolution could come next month when the parties need to enact a new federal budget. Government funding runs out on March 27, raising the specter of a federal shutdown if they still can't reach a deal.

"As we anticipate an across-the-board budget cuts across our land, we still expect to see your goodness prevail, O God, " Senate Chaplain Barry Black prayed on the Senate floor this morning, "and save us from ourselves."

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Low-key departure as pope steps down and hides away

VATICAN CITY (Reuters) - Pope Benedict slips quietly from the world stage on Thursday after a private last goodbye to his cardinals and a short flight to a country palace to enter the final phase of his life "hidden from the world".

In keeping with his shy and modest ways, there will be no public ceremony to mark the first papal resignation in six centuries and no solemn declaration ending his nearly eight-year reign at the head of the world's largest church.

His last public appearance will be a short greeting to residents and well-wishers at Castel Gandolfo, the papal summer residence south of Rome, in the late afternoon after his 15-minute helicopter hop from the Vatican.

When the resignation becomes official at 8 p.m. Rome time (02.00 p.m. EST), Benedict will be relaxing inside the 17th century palace. Swiss Guards on duty at the main gate to indicate the pope's presence within will simply quit their posts and return to Rome to await their next pontiff.

Avoiding any special ceremony, Benedict used his weekly general audience on Wednesday to bid an emotional farewell to more than 150,000 people who packed St Peter's Square to cheer for him and wave signs of support.

With a slight smile, his often stern-looking face seemed content and relaxed as he acknowledged the loud applause from the crowd.

"Thank you, I am very moved," he said in Italian. His unusually personal remarks included an admission that "there were moments ... when the seas were rough and the wind blew against us and it seemed that the Lord was sleeping".

CARDINALS PREPARE THE FUTURE

Once the chair of St Peter is vacant, cardinals who have assembled from around the world for Benedict's farewell will begin planning the closed-door conclave that will elect his successor.

One of the first questions facing these "princes of the Church" is when the 115 cardinal electors should enter the Sistine Chapel for the voting. They will hold a first meeting on Friday but a decision may not come until next week.

The Vatican seems to be aiming for an election by mid-March so the new pope can be installed in office before Palm Sunday on March 24 and lead the Holy Week services that culminate in Easter on the following Sunday.

In the meantime, the cardinals will hold daily consultations at the Vatican at which they discuss issues facing the Church, get to know each other better and size up potential candidates for the 2,000-year-old post of pope.

There are no official candidates, no open campaigning and no clear front runner for the job. Cardinals tipped as favorites by Vatican watchers include Brazil's Odilo Scherer, Canadian Marc Ouellet, Ghanaian Peter Turkson, Italy's Angelo Scola and Timothy Dolan of the United States.

BENEDICT'S PLANS

Benedict, a bookish man who did not seek the papacy and did not enjoy the global glare it brought, proved to be an energetic teacher of Catholic doctrine but a poor manager of the Curia, the Vatican bureaucracy that became mired in scandal during his reign.

He leaves his successor a top secret report on rivalries and scandals within the Curia, prompted by leaks of internal files last year that documented the problems hidden behind the Vatican's thick walls and the Church's traditional secrecy.

After about two months at Castel Gandolfo, Benedict plans to move into a refurbished convent in the Vatican Gardens, where he will live out his life in prayer and study, "hidden to the world", as he put it.

Having both a retired and a serving pope at the same time proved such a novelty that the Vatican took nearly two weeks to decide his title and form of clerical dress.

He will be known as the "pope emeritus," wear a simple white cassock rather than his white papal clothes and retire his famous red "shoes of the fisherman," a symbol of the blood of the early Christian martyrs, for more pedestrian brown ones.

(Reporting By Tom Heneghan; editing by Philip Pullella and Giles Elgood)

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Japan scrambles fighters to meet China plane

TOKYO: Japan scrambled fighter jets on Thursday to head off a Chinese government plane flying towards disputed islands in the East China Sea, the defence ministry said.

It said the Y-12 propeller plane did not enter airspace around the Tokyo-controlled islands known as the Senkakus, which Beijing claims as the Diaoyus.

The aircraft headed back towards China after Japan's military planes became airborne, defence officials said, declining to give further details.

The incident came as three Chinese government ships sailed into territorial waters around the islands, Japan's coastguard said.

The three marine surveillance ships entered the 12-nautical-mile territorial zone off Uotsuri island shortly after 7:00 am (2200 GMT Wednesday), the coastguard said in a statement.

It said the trio left the zone after just over two hours.

Thursday's moves were the latest in a series by Chinese government ships since Tokyo nationalised three islands in the chain last September, reigniting the dispute.

They also came the day Japanese Prime Minister Shinzo Abe, speaking about the islands dispute, cited British former premier Margaret Thatcher and her thoughts on a 1982 war with Argentina over the Falkland Islands.

-AFP/fl

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Left retains Tripura,ruling parties ahead in Meghalaya, Nagaland

AGARTALA: The Left Front retained its bastion Tripura while the Naga People's Front in Nagaland and Congress in Meghalaya are set to return to power in the northeast states where counting of votes was taken up today.

The Left Front government in Tripura is poised for a fifth straight term since 1993, securing absolute majority by winning 31 seats in the 60-member Assembly (CPI-M 30 and CPI-1) and leading in 16 other seats while it is headed for a two thirds majority.

TRIPURA

PARTY	LEADS	WINS
CONGRESS	3	7
CPM	4	45
CPI	0	1

Prominent winners of the Left Front are jail minister Manindra Reang, finance minister Badal Chowdhury, agriculture minister Aghore Debbarma and industries minister Jitendra Chowdhury.

Chief minister Manik Sarkar is leading from Dhanpur. The Congress has won five seats, but its allies INPT and NCT have failed to open their accounts.

NAGALAND

PARTY	LEADS	WINS
CONGRESS	3	4
Janata Dal(United)	1	0
NPF	10	24
NCP	0	4
Rashtriya Janata Dal	1	0
Others	2	7

Among Congress candidates, former speaker who switched over to the Congress from the CPM Jitendra Sarkar won from Barjala, leader of the Opposition Ratan Lal Nath from Mohanpur and Dilip Sarkar from Badarghat.

In Nagaland, where there is no alliance among ruling Democratic Alliance of Nagaland partners, the Naga People's Front won 22 of the 59 seats and is leading in nine. Election to Tuensang Sadar 1 has been countermanded following the death of a Congress candidate.

Chief Minister Neiphu Rio won from Northern Angami-II by 12,671 votes over his nearest Congress rival Kevise Sogotsu.

Speaker Kiyanilie Peseyie won from Western Angami defeating Congress rival Asu Keyho by 1000 votes.NPCC president, S I Jamir won from the Dimapur-II defeating Independent Savi Liegise by 1615 votes.

In Meghalaya, the Congress won 12 seats and is leading in 17 in the 60-member Assembly.

MEGHALAYA

PARTY	LEADS	WINS
CONGRESS	20	11
UDP	3	5
NCP	1	1
National People's Party	1	1
Hill state People's Democratic party	4	0
Others	12	2

Among Congress winners are cabinet minister H D R Lyngdoh and Prestone Tynsong. Both retained their seats.

Former alliance partners UDP won four seats and the HSPDP three.

Chief minister D D Lapang is leading by 7000 votes over his NPP rival Clement G Momin from the Ampati seat.

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Medicare paid $5.1B for poor nursing home care

SAN FRANCISCO (AP) — Medicare paid billions in taxpayer dollars to nursing homes nationwide that were not meeting basic requirements to look after their residents, government investigators have found.

The report, released Thursday by the Department of Health and Human Services' inspector general, said Medicare paid about $5.1 billion for patients to stay in skilled nursing facilities that failed to meet federal quality of care rules in 2009, in some cases resulting in dangerous and neglectful conditions.

One out of every three times patients wound up in nursing homes that year, they landed in facilities that failed to follow basic care requirements laid out by the federal agency that administers Medicare, investigators estimated.

By law, nursing homes need to write up care plans specially tailored for each resident, so doctors, nurses, therapists and all other caregivers are on the same page about how to help residents reach the highest possible levels of physical, mental and psychological well-being.

Not only are residents often going without the crucial help they need, but the government could be spending taxpayer money on facilities that could endanger people's health, the report concluded. The findings come as concerns about health care quality and cost are garnering heightened attention as the Obama administration implements the nation's sweeping health care overhaul.

"These findings raise concerns about what Medicare is paying for," the report said.

Investigators estimate that in one out of five stays, patients' health problems weren't addressed in the care plans, falling far short of government directives. For example, one home made no plans to monitor a patient's use of two anti-psychotic drugs and one depression medication, even though the drugs could have serious side effects.

In other cases, residents got therapy they didn't need, which the report said was in the nursing homes' financial interest because they would be reimbursed at a higher rate by Medicare.

In one example, a patient kept getting physical and occupational therapy even though the care plan said all the health goals had been met, the report said.

The Office of Inspector General's report was based on medical records from 190 patient visits to nursing homes in 42 states that lasted at least three weeks, which investigators said gave them a statistically valid sample of Medicare beneficiaries' experiences in skilled nursing facilities.

That sample represents about 1.1 million patient visits to nursing homes nationwide in 2009, the most recent year for which data was available, according to the review.

Overall, the review raises questions about whether the system is allowing homes to get paid for poor quality services that may be harming residents, investigators said, and recommended that the Centers for Medicare & Medicaid Services tie payments to homes' abilities to meet basic care requirements. The report also recommended that the agency strengthen its regulations and ramp up its oversight. The review did not name individual homes, nor did it estimate the number of patients who had been mistreated, but instead looked at the overall number of stays in which problems arose.

In response, the agency agreed that it should consider tying Medicare reimbursements to homes' provision of good care. CMS also said in written comments that it is reviewing its own regulations to improve enforcement at the homes.

"Medicare has made significant changes to the way we pay providers thanks to the health care law, to reward better quality care," Medicare spokesman Brian Cook said in a statement to AP. "We are taking steps to make sure these facilities have the resources to improve the quality of their care, and make sure Medicare is paying for the quality of care that beneficiaries are entitled to."

CMS hires state-level agencies to survey the homes and make sure they are complying with federal law, and can require correction plans, deny payment or end a contract with a home if major deficiencies come to light. The agency also said it would follow up on potential enforcement at the homes featured in the report.

Greg Crist, a Washington-based spokeswoman for the American Health Care Association, which represents the largest share of skilled nursing facilities nationwide, said overall nursing home operators are well regulated and follow federal guidelines but added that he could not fully comment on the report's conclusions without having had the chance to read it.

"Our members begin every treatment with the individual's personal health needs at the forefront. This is a hands-on process, involving doctors and even family members in an effort to enhance the health outcome of the patient," Crist said.

Virginia Fichera, who has relatives in two nursing homes in New York, said she would welcome a greater push for accountability at skilled nursing facilities.

"Once you're in a nursing home, if things don't go right, you're really a prisoner," said Fichera, a retired professor in Sterling, NY. "As a concerned relative, you just want to know the care is good, and if there are problems, why they are happening and when they'll be fixed."

Once residents are ready to go back home or transfer to another facility, federal law also requires that the homes write special plans to make sure patients are safely discharged.

Investigators found the homes didn't always do what was needed to ensure a smooth transition.

In nearly one-third of cases, facilities also did not provide enough information when the patient moved to another setting, the report found.

___

On the Web:

The OIG report: http://1.usa.gov/VaztQm

The Medicare nursing home database: http://www.medicare.gov/NursingHomeCompare/search.aspx?bhcp=1&AspxAutoDetectCookieSupport=1

___

Follow Garance Burke on Twitter at —http://twitter.com/garanceburke.

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Benedict XVI Begins Final Day as Pope

Pope Benedict XVI, the first pontiff to resign in 600 years, will step down today to lead a secluded life of prayer, far from the grueling demands of the papacy and the scandals that have recently plagued the church.

Benedict, 85, will spend a quiet final day as pope bidding farewell to his colleagues that have gathered in Vatican City to see him depart. His first order of business this morning is a meeting with the College of Cardinals in the Clementine Hall, a room in the Apostolic Palace, where Angelo Sodano, the dean of the College of Cardinals, is set to speak, but not Benedict.

Pope Benedict XVI Delivers Farewell Address

Despite the historical nature of Benedict's resignation, not all cardinals are expected to attend the event. With their first working meeting not until Monday, only around 100 cardinals are set to be in Vatican City Thursday, the Vatican press office said. Those who are there for Benedict's departure will be greeted by seniority.

In the evening, at 5:00 p.m. local time, Benedict will leave the Vatican palace for the last time to head to Castel Gandolfo, the papal summer residence outside of Rome. Before his departure the German-born theologian will say some goodbyes in the Courtyard of San Damaso, inside the Vatican, first to his Secretary of State Cardinal Tarcisio Bertone and then to the Swiss Guards who have protected him as pontiff.

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From there it is a short drive to a heliport for the 15-minute flight via helicopter to Castel Gandolfo, just south of the city. Benedict will not be alone on his journey, accompanied by members of the Pontifical Household such as two private secretaries, the head of protocol, his personal physician and his butler.

Once Benedict lands in the gardens at Castel Gandolfo, a group of dignitaries, such as the governor of the Vatican City state Giovanni Bertello, two bishops, the director of the pontifical villas, and the mayor and parish priest. Off the helicopter and into a car, Benedict will head to the palace that he will call home for the coming months. From a window of the palace, Benedict will make one final wave to the crowd at the papal retreat.

It is there, at 8:00 p.m., that Benedict's resignation will take effect once and for all. Once the gates to the residence close, the Swiss Guards will leave Benedict's side for the last time, their time protecting the pontiff completed.

Pope Benedict's Last Sunday Prayer Service

For some American Catholics in Rome for the historic occasion, Benedict's departure is bittersweet. Christopher Kerzich, a Chicago resident studying at the Pontifical North American College of Rome, said Wednesday he is sad to see Benedict leave, but excited to see what comes next.

"Many Catholics have come to love this pontiff, this very humble man," Kerzich said. "He is a man who's really fought this and prayed this through and has peace in his heart. I take comfort in that and I think a lot of Catholics should take comfort in that."

In his final address to the faithful as leader of the Roman Catholic Church, Benedict on Wednesday said his decision to resign was "the fruit of a serene trust in God's will and a deep love of Christ's Church." Before a crowd of hundreds of thousands of people in St. Peter's Square, Benedict said he was "deeply grateful for the understanding, support, and prayers of so many of you, not only here in Rome, but also throughout the world."

The date of the conclave to determine Benedict's successor has yet to be determined. In one of his last moves as pope, Benedict issued a decree permitting the cardinals to convene the conclave before the March 15 date that would have been required under the old rules.

Benedict is eventually planning to move to a monastery inside Vatican City once work there is finished, but until then he will call home the palace at Castel Gandolfo. He will be known as "pope emeritus" and don brown shoes given to him on his trip to Mexico, rather than the red ones he wore as pontiff.

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Hong Kong unveils budget, warns on global risks

HONG KONG: Hong Kong's finance chief on Wednesday unveiled a budget to kickstart growth in the city and temper property prices but warned the world economy could face headwinds from possible trade and currency battles.

During a speech interrupted by protests, Financial Secretary John Tsang also set out a series of measures to support the middle class and alleviate poverty in the first budget under an increasingly unpopular leader Leung Chun-ying.

The announcement came as data showed the southern Chinese financial hub saw growth of just 1.4 per cent in 2012 and was tipped to expand only 1.5-3.5 per cent this year.

In unveiling measures to boost the city's financial sector and private equity industry he warned: "The whole world will have to face wars on three fronts, namely 'currency', 'trade' and 'geopolitics'.

"As a highly open and small economy, Hong Kong will be impacted by the development of these wars to a certain extent."

His comment come after a sharp drop in the value of the yen sparked accusations of government meddling and concerns about a possible global war in which nations weaken their currencies to gains give a jolt to softening exports.

Tsang outlined plans to boost the city's financial sector, including extending profits tax exemption for offshore private equity funds, with an eye on regional rival Singapore.

He also unveiled a string of populist measures aimed at supporting the middle class and poor, while looking to address the city's chronically high property prices, which have doubled since 2009, squeezing average citizens.

Tsang vowed to increase land-supply to allow the building of more houses while quarterly rates amounting to HK$11.6 billion and covering 75 per cent of properties will be waived. That follows Friday's decision to double stamp duty on second homes to 8.5 per cent.

Also on Wednesday, Tsang said there will be a 75-per cent cut in salaries tax to a ceiling of HK$10,000.

However analysts said the budget would do little to improve the lot of the middle-class or poor or give a lift to the popularity of Leung, whose government has been rocked by a series of protests since he came to power in July.

Leung, who was chosen by a committee dominated by pro-Beijing elites, has seen his support rating drop after scandals involving illegal structures at his home, and last year came close to facing impeachment proceedings.

"For the middle class there is very minimal. If the middle class is renting property -- those rates are nothing to do with him," said Philip Hung, President of the The Taxation Institute of Hong Kong.

Hung added the level of some of one off measures, such as the salary-tax cut, was lower than last year.

Despite announcing a budget surplus of HK$64.9 billion ($8.4 billion) this year -- which swelled reserves to HK$734 billion -- the new measures totalled only HK$33 billion, down from the HK$80 billion-worth introduced last year.

In a sign of the dissatisfaction with the administration, dozens of people, some dressed as the Chinese "wealth god", waved banners and shouted slogans outside government headquarters demanding handouts of HK$10,000 and more welfare spending.

"The government should give money directly to the general public so that they can make ends meet," activist Tam Kwok-kiu told AFP, adding that the government is sitting on a fiscal surplus.

Two lawmakers including radical Leung Kwok-hung were escorted out of the chambers after interrupting Tsang's speech and calling him a "liar".

Tsang said he had had been listening to the concerns of the middle class, who are faced with rising bills for rent, medical care, and supporting their parents and children.

"I agree that middle-class families should be given some support. However, as one may appreciate, it is impracticable for the government to respond to each and every demand," he said.

- AFP/xq

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Ruckus in Rajya Sabha over alleged tapping of Arun Jaitley's phone

NEW DELHI: The issue of the alleged tapping of the phone of Rajya Sabha leader of opposition Arun Jaitley created a ruckus in the upper House on Wednesday morning.

Rajya Sabha chairman M Hamid Ansari was forced to adjourn the House briefly.

As soon as the House met for the day, Samajwadi Party leader Naresh Agarwal stood up and raised the issue.

"It is a matter of concern that the leader of opposition's phone is being tapped, we need an answer from the home minister," Agarwal said.

He was joined by members of the Bharatiya Janata Party (BJP), Bahujan Samaj Party (BSP), Janata Dal (United) and AIADMK.

Ravishankar Prasad of BJP, Satish Chandra Misra of BSP, AIADMK's V Maitreyan, and Shivanand Tiwari of JD(U) were among those who stood up demanding a clarification from the government on the issue.

Minister of state for parliamentary affairs Rajiv Shukla then assured them that the home minister would inform the house on the issue. The agitated members, however, were not pacified by this and sought a timeframe for the government's response.

Members sought to know if the government was involved in the phone tapping, to which Shukla responded: "The government does not do such things."

This led to uproar from the opposition benches which forced the chairman to order a brief adjournment.

When the House reassembled after the five-minute adjournment, home minister Sushilkumar Shinde said he would collect information on the matter and place it before the House soon.

"Government is bound to make a statement on this," Shinde said.

With that, the proceedings of the House continued smoothly and question hour was taken up.

The Delhi Police has arrested Anurag Singh, a doctor-turned-private detective, who runs V-Detect Private Detective Agency in New Delhi. He is believed to be the brain behind the move to acquire Jaitley's phone call details.

Anurag Singh is also one of the main accused in the tapping of the phone of former Samajwadi Party leader Amar Singh.

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What's Next for Pope Benedict XVI?

The party for the world's most prominent soon-to-be retiree began today when Pope Benedict XVI hosted his final audience as pontiff in St. Peter's Square.

More than 50,000 tickets were requested for the event, according to the Vatican, while the city of Rome planned for 250,000 people to flood the streets.

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With his belongings packed up, Pope Benedict XVI will spend the night, his final one as pope, in the Apostolic Palace.

The pontiff, 85, who is an avid writer, will be able to take his personal notes with him. However, all official documents relating to his papacy will be sent to the Vatican archives.

On Thursday, Pope Benedict XVI will take his last meeting as pontiff with various dignitaries and the cardinals, said the Rev. Federico Lombardi, director of the Vatican Press Office.

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While not all of the cardinals are in Rome, it is possible that among the princes of the church saying farewell to the pope could be the man who will succeed him.

"I think the overall tone is going to be gratitude. From the cardinals' perspective, it'll be like the retirement party for your favorite professor," said Christopher Bellitto, a professor at Kean University in New Jersey who has written nine books on the history of the church.

AP Photo/Andrew Medichini

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Pope Benedict XVI will depart the Vatican walls in the afternoon, taking a 15-minute helicopter ride to Castel Gandolfo, the papal retreat just outside of Rome, where he will live while his new Vatican quarters undergo a renovation.

Around sunset, the pontiff is expected to greet the public from his window in the palace, which overlooks the small town square, for the last time as pope.

At 8 p.m. local time, the papal throne will be vacated. The man known as Pope Benedict XVI for the past eight years will take on a new title: Pope Emeritus.

What Lies Ahead for the Pope Emeritus

The announcement that Benedict XVI would be the first pope to resign in 600 years shocked the world and left the Vatican with the task of creating new rules for an event that was unprecedented in the modern church.

"Even for the historical life of the church, some of this is brand new territory," said Matthew Bunson, general editor of the "Catholic Almanac" and author of "We Have a Pope! Benedict XVI."

"The Vatican took a great deal of care in sorting through this," he said. "This is establishing a precedent."

Along with Benedict's new title, he will still be allowed to wear white, a color traditionally reserved for the pope.

He'll still be called Your Holiness. However, the Swiss Guards, who are tasked with protecting the pope, will symbolically leave his side at 8 p.m. Thursday.

His Ring of the Fisherman, kissed by thousands of the faithful over the years, will be crushed, according to tradition.

Not much is known about the pope's health.

In his resignation statement, the pontiff said his physical strength has deteriorated in the past few months because of "an advanced age."

He also mentioned the "strength of mind and body" necessary to lead the more-than-1-billion Catholics worldwide.

If he is able to, Bellitto believes the pope will keep writing, perhaps on the Holy Trinity, a topic of great interest to him.

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As the pope emeritus settles into the final chapter of his life, experts have said it is likely he will stay out of the public realm.

"[Pope Benedict XVI] has moved very deliberately in this process," Bunson said, "with an eye toward making the transition as smooth, as regal, as careful as possible for the election of his successor."

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Italy faces post-vote stalemate, spooking investors

ROME (Reuters) - The Italian stock market fell and state borrowing costs rose on Tuesday as investors took fright at political deadlock after a stunning election that saw a protest party lead the poll and no group had a clear majority in parliament.

"The winner is: Ingovernability" ran the headline in Rome newspaper Il Messaggero, reflecting the stalemate the country would have to confront in the next few weeks as sworn enemies would be forced to work together to form a government.

In a sign of where that might lead, former prime minister Silvio Berlusconi indicated his center-right might be open to a grand coalition with the center-left bloc of Pier Luigi Bersani, which will have a majority in the lower house thanks to a premium of seats given to the largest bloc in the chamber.

Results in the upper house, the Senate, where seats are awarded on a region-by-region basis, indicated the center-left would end up with about 119 seats, compared with 117 for the center-right. But 158 are needed for a majority to govern.

Any coalition government that may be formed must have a working majority in both houses in order to pass legislation.

World financial markets reacted nervously to the prospect of a stalemate in the euro zone's third-largest economy with memories still fresh of the crisis that took the 17-member currency bloc to the brink of collapse in 2011.

The Milan bourse was down more than four percent at its opening and the spread between yields on 10-year Italian and German government bonds widened to 338.7 basis points, the highest since December 10. An ally of conservative German Chancellor Angela Merkel urged Italy to stick with reforms pursued by the outgoing technocratic emergency government of Mario Monti.

However, the poor showing by Prime Minister Monti's centrist bloc reflected a weariness with austerity that was exploited by both Berlusconi and comic Beppe Grillo; his anti-establishment 5-Star Movement won more votes than any other single party, taking 25 percent nationally. Bersani's allies helped his center-left bloc win the lower house by just 125,000 votes.

Berlusconi, a media magnate whose campaigning all but eroded Bersani's once commanding lead, said he was not worried about market reaction and played down the significance of the spread.

In a telephone call to a morning television show, he said: "Italy must be governed." He ruled out a deal with Monti but said he "must reflect" on a possible deal with the center left: "Every (political side) must be prepared to make sacrifices."

The euro skidded to an almost seven-week low against the dollar in Asia on fears about the euro zone's debt crisis. It fell as far as $1.3042, its lowest since January 10.

Another indication of investors' reaction to the results will come later on Tuesday when the Treasury auctions 8.75 billion euros in 6-month bonds.

Bersani claimed victory in the lower house and said it was obvious that Italy was in "a very delicate situation".

Grillo, however, showed no immediate willingness to negotiate. Commentators said all his adversaries underestimated the appeal of a grassroots movement that called itself a "non-party", particularly its allure among young Italians who find themselves without jobs and the prospect of a decent future.

"NON-PARTY" SURGES TO THE TOP

The 5-star Movement's score of 25.5 percent in the lower house was just ahead of the 25.4 percent for Bersani's Democratic Party, which ran in a coalition with the leftist SEL party, and it won almost 8.7 million votes overall - more than any other single party.

"The 'non-party' has become the largest party in the country," said Massimo Giannini, commentator for the Rome newspaper La Repubblica about Grillo, who mixes fierce attacks on corruption with policies ranging from clean energy to free Internet.

Grillo's surge in the final weeks of the campaign threw the race open, with hundreds of thousands turning up at his rallies to hear him lay into targets ranging from corrupt politicians and bankers to German Chancellor Angela Merkel.

In just three years, his 5-Star Movement, heavily backed by a frustrated generation of young Italians increasingly shut out from permanent full-time jobs, has grown from a marginal group to one of the most talked about political forces in Europe.

RECESSION

"It's a classic result. Typically Italian," said Roberta Federica, a 36-year-old office worker in Rome. "It means the country is not united. It is an expression of a country that does not work. I knew this would happen."

Italy's borrowing costs have come down in recent months, helped by the promise of European Central Bank support but the election result confirmed fears of many European countries that it would not produce a government strong enough to implement effective reforms.

A long recession and growing disillusionment with mainstream parties fed a bitter public mood that saw more than half of Italian voters back parties that rejected the austerity policies pursued by Monti with the backing of Italy's European partners.

Monti suffered a major setback. His centrist grouping won only 10.6 percent and two of his key centrist allies, Pier Ferdinando Casini and lower house speaker Gianfranco Fini, both of parliamentarians for decades, were booted out.

"It's not that surprising if you consider how much people were let down by politics in its traditional forms," Monti said.

Berlusconi's campaign, mixing sweeping tax cut pledges with relentless attacks on Monti and Merkel, echoed many of the themes pushed by Grillo and underlined the increasingly angry mood of the Italian electorate.

Stefano Zamagni, an economics professor at Bologna University said the result showed that a significant share of Italians "are fed up with following the austerity line of Germany and its northern allies".

"These people voted to stick one up to Merkel and austerity," he said.

Even if the next government turns away from the tax hikes and spending cuts brought in by Monti, it will struggle to revive an economy that has scarcely grown in two decades.

Monti was widely credited with tightening Italy's public finances and restoring its international credibility after the scandal-plagued Berlusconi, whom he replaced as the 2011 financial crisis threatened to spin out of control.

But he struggled to pass the kind of structural reforms needed to improve competitiveness and lay the foundations for a return to economic growth, and a weak center-left government may not find it any easier.

(Additional reporting by Barry Moody, Gavin Jones, Catherine Hornby, Lisa Jucca, Steven Jewkes, Steve Scherer and Naomi O'Leary; Writing by Philip Pullella and James Mackenzie; Editing by Pravin Char and Alastair Macdonald)

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