US S&P suit points to ratings industry's role in crisis

NEW YORK: The US government's $5 billion lawsuit against Standard & Poor's for exaggerating mortgage bond ratings in 2007 has cast a pall over the ratings industry and exposed its role in the financial crisis.

S&P competitors Moody's and Fitch find themselves potentially facing penalties after the Justice Department alleged S&P knowingly kept ratings on high-risk mortgage securities high in order to win revenues from issuers.

The Justice Department has not said whether it has the other two ratings agencies in its sights, but Moody's spent much of the week fending off questions about whether it faces similar action following the S&P suit.

The New York Attorney General has meanwhile launched an investigation into all three companies over their ratings prior to the 2008 crisis, sources close to the matter told AFP.

S&P parent McGraw-Hill's shares plunged 27 percent after the suit was filed, and Moody's dropped 22 percent for the week, underscoring the market's worry that the crackdown on S&P may be just the tip of the iceberg.

"Investors have been selling those stocks aggressively this week and keep doing so out of fear that the situation with the Department of Justice could get a lot worse in the future," said Wedbush Securities analyst Michael James.

"They think there is probably more bad news to come."

The government's case argues that S&P knowingly placed triple-A ratings on billions of dollars worth of mortgage-based financial securities even as the US housing market collapsed, misrepresenting their true credit risk.

Many of the top-rated issues cited in the suit were in default within one year or less.

S&P exaggerated the ratings in part to please clients and keep issuer revenues high, the suit alleges.

US Attorney General Eric Holder called S&P's conduct "egregious", saying "it goes to the very heart of the recent financial crisis".

S&P has dismissed the lawsuit as "meritless" and said it plans to vigorously contest the claims.

The litigation, which reportedly came after settlement talks failed, poses a huge financial challenge to S&P and McGraw-Hill.

Justice Department officials said they intend to press for at least $5 billion in civil penalties to match the losses suffered by investors on the securities.

S&P is also being sued by 13 states, adding to the potential damages.

The attorney general of California cited two large institutional investors, the California Public Employees Retirement System and the California State Teachers Retirement System, which lost approximately $1 billion on the high-rated mortgage bonds.

A California statement said the suit claims triple damages.

To put those figures in context, McGraw-Hill earned $911 million in all of 2011.

Many were wondering if or when the government will take action against Moody's. A multi-billion dollar suit could devastate that company as well: on Friday, Moody's reported 2012 earnings of $690 million.

Jacob Frenkel, a former federal criminal prosecutor now in private practice with Shulman Rogers, said S&P could possibly settle the case in the range of "hundreds of millions of dollars".

But he said that the terms of a settlement -- what the company admits to, in addition to paying fines -- are crucial.

A key question concerns whether the government insists on S&P admitting liability, which could expose the firm to additional suits by investors in the securities it rated, Frenkel said.

Charles Elson, director of the John L. Weinberg Center for Corporate Governance, thinks the government could have a hard time proving its case against S&P.

"Unless you can show the opinion was reached in an intentionally reckless way, it's pretty hard to prove," Elson said.

Frenkel said the language in the complaint suggests the government could have pursued a criminal case against S&P.

That would raise the stakes: the 2002 US criminal conviction of former accounting giant Arthur Andersen in the aftermath of the Enron scandal eventually led to the firm's demise.

But Frenkel said the government is mainly focused on "integrity in the ratings process".

"The government would prefer to win a civil case than lose a criminal case," he said, "particularly where there is a concern about vaporizing the company."

- AFP/al

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LA Microsoft Store not mobbed, but Surface has a following

The Surface Pro

(Credit:
Brooke Crothers)

LOS ANGELES -- The launch of the Surface Pro at the Microsoft Store in LA's Century City was a relatively low-key affair compared with the debut of the Surface RT.

When I arrived just after 10 a.m. there was a small line (see photo). That said, both versions -- 64GB and 128GB -- of the
Surface Pro had sold out immediately.

Of course, no one would say how many units were set aside for first-day sales, and the lines didn't exactly snake around the Westfield Century City mall. So, it wasn't like a Depression-era run on a bank.

And back in October the lines were longer and the atmosphere a bit more frenzied when the Surface RT launched.

On Saturday, there was a small line outside the Century City Microsoft Store near Beverly Hills. The Surface Pro sold out immediately at the store.

(Credit:
Brooke Crothers)

But like the RT rollout, there was a fixation on and interest in the product not unlike what's found at an Apple event. I saw more than a few customers glued to the device for 30 minutes or even an hour.

In other words, Surface has a following. An analogy I would use is the Chevy Volt. Recently in LA, the Chevy Volt is gaining ground, driven by a small but growing (and fervent) customer base.

And Microsoft Store sales reps know what they're talking about. A patient, focused rep gave me a long, hands-on explanation of the
Windows 8 touch interface and demonstrated a new touch-enabled paint app, among other apps.

Finally, note that there are other enticing touch-screen Windows 8 devices at the store, including the 2.3-pound Acer Aspire S7 and the HP Spectre XT TouchSmart. And that's good for Windows 8 overall.

Looking at the line from inside the store.

(Credit:
Brooke Crothers)

The Surface Pro isn't the only cool Windows 8 device on sale at the Microsoft Store. The 11.6-inch Acer Aspire S7 touch-screen laptop is a tempting alternative to the Pro.

(Credit:
Brooke Crothers)

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Slain Texas prosecutor remembered at memorial service

TERRELL, Texas A Texas prosecutor gunned down outside his courthouse office last month was remembered Saturday for his zealousness in pursuing tough cases, love of flying and ability to tell stories.

Hundreds turned out in a school auditorium to celebrate the life of Kaufman County Assistant District Attorney Mark Hasse during a 90-minute memorial service that included stories about the veteran prosecutor's tough and softer sides as well as vows to catch his killer.

Hasse, 57, was shot multiple times the morning of Jan. 31 while walking from his car in a parking lot about a block from the courthouse. The brazen crime has sparked an investigation that includes both local and federal authorities, many of whom attended the Saturday ceremony.

Kaufman County District Attorney Mike McLelland described how Hasse, who wasn't married and had no children, never backed away from anything while often telling stories that brought laughter heard throughout the courthouse.

McLelland then turned to the effort to find Hasse's killer.

"He knows and I know there will be a reckoning," the DA said. "Too many people are focusing on that. That's not going to be a problem."

The slain prosecutor's brother, Paul Hasse, also mentioned the search for the gunman.

"You honor him by the massive effort you are making to find out who did this," he said.

Several speakers traced Hasse's career from his time as an assistant district attorney in Dallas in the 1980s to his decision three years ago to join the DA's office in Kaufman, 33 miles southeast of Dallas.

Dallas attorney Marcus Busch, who worked with Hasse in the Dallas DA's office, called Hasse "the consummate prosecutor," describing how he rose from handling cases in misdemeanor courts to being the chief of the unit charged with prosecuting organized crime. In one well-known instance, Hasse's "wicked and clever intellect" prompted him to take on a case of murder by arson that had previously been rejected, and he was able to gain a conviction, Busch said.

Busch also spoke of Hasse's love of flying and how he recovered from severe head injuries after the vintage World War II aircraft he was flying crashed in Virginia. Busch said he began taking flying lessons himself because of Hasse's passion for it.

Hasse left private practice to work as a prosecutor in Kaufman because "that's what his passion was," Busch said.

"I'd rather be in court trying a case with Mark than being in this room today," he said, stopping to gain his composure.

Cooke County DA Janice Warder, another former colleague from Hasse's Dallas days, recalled working with the prosecutor before computers put information at their fingertips. When questions would emerge from complicated autopsy reports or engineering documents, Hasse would have the answers, she said.

"Before there was Google, there was `Ask Mark,"' Warder said.

Above all else, Hasse was "ruthless when it came to fighting evil," she said.

Justin Lewis, an officer with the sheriff's department in Kaufman County who previously served as an investigator in the county DA's office, also spoke of how Hasse "enjoyed putting criminals in jail." Fighting to control his emotions, Lewis ended his remarks by saying the killer will be caught.

"Answers will eventually come," he said. "We must remain vigilant."

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After Blizzard, Northeast Begins to Dig Out

The Northeast began the arduous process of cleaning up after a fierce storm swept through the region leaving behind up to three feet of snow in some areas.

By early this morning, 650,000 homes and businesses were without power and at least five deaths were being blamed on the storm: three in Canada, one in New York and one in Connecticut, The Associated Press reported.

The storm dumped snow from New Jersey to Maine, affecting more than 25 million people, with more than two feet falling in areas of Massachusetts, Rhode Island and New Hampshire. The Postal Service closed post offices and suspended mail delivery today in New England.

As the storm waned, officials in the hardest hit areas cautioned residents to remain indoors and off the roads to ease the clean-up.

Massachusetts was hard hit by the storm, with more than two feet of snow in Boston and even more in coastal areas. State police and national guard troops helped rescue more than 50 stranded motorists and even helped deliver a baby girl, according to Massachusetts Gov. Deval Patrick.

Patrick enacted the first statewide driving ban since the 1978 blizzard, which left 27 inches of snow and killed dozens. The ban was to be lifted at 4 p.m. today, the governor said.

However, Patrick cautioned residents to act with extreme caution even after the ban is over.

"Stay inside and be patient," Patrick said.

In Massachusetts a boy reportedly died of carbon monoxide poisoning as he helped his father shovel snow on Saturday, according to ABCNews.com affiliate WCVB-TV in Boston.

For residents along the coast, the waning snowfall didn't mean the end of the storm. Storm surges along the Massachusetts coastline forced some residents out of their homes Saturday morning.

"We've got 20-foot waves crashing and flooding some homes," Bob Connors on Plum Island told WCVB. "We have power and heat and all that. We just have a very angry ocean. In my 33 years, I've never seen the seas this high."

Darren McCollester/Getty Images

Blizzard Shuts Down Parts of Connecticut, Massachusetts Watch Video

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FULL COVERAGE: Blizzard of 2013

In Connecticut, Gov. Dannel Malloy declared a state of emergency and closed all roads in the state. The state police responded to more than 1,600 calls over the last 24 hours and the governor called up an additional 270 National Guard members.

"If you're not an emergency personnel that's required to be somewhere, stay home," Malloy said.

Overnight, snow fell at a rate of up to five to six inches per hour in parts of Connecticut. In Milford, more than 38 inches of snow had fallen by this morning.

In Fairfield, Conn. firefighters and police officers on the day shift were unable to make it to work, so the overnight shift remained on duty.

PHOTOS: Blizzard Hits Northeast

The wind and snow started affecting the region during the Friday night commute.

In Cumberland, Maine, the conditions led to a 19-car pile-up and in New York, hundreds of commuters were stranded on the snowy Long Island Expressway. Police and firefighters were still working to free motorists early this morning.

"The biggest problem that we're having is that people are not staying on the main portion or the middle section of the roadway and veering to the shoulders, which are not plowed," said Lt. Daniel Meyer from the Suffolk County Police Highway Patrol.

In New York, authorities are digging out hundreds of cars that got stuck overnight on the Long Island Expressway.

Bob Griffith of Syosset, N.Y., said he tried leave early to escape the storm, but instead ended up stuck in the snow by the side of the road.

"I tried to play it smart in that I started early in the day, when it was raining," said Griffith. "But the weather beat us to the punch."

Suffolk County Executive Steven Bellone said the snow had wreaked havoc on the roadways.

"I saw state plows stuck on the side of the road. I've never seen anything like this before," Bellone said.

However, some New York residents, who survived the wrath of Hurricane Sandy, were rattled by having to face another large and potentially dangerous storm system with hurricane force winds and flooding.

"How many storms of the century can you have in six months?" said Larry Racioppo, a resident of the hard hit Rockaway neighborhood in Queens, New York.

READ: Weather NYC: Blizzard Threatens Rockaways, Ravaged by Sandy

Snowfall Totals

In New York, a little more than 11 inches fell in the city.

By this morning, New York Mayor Michael Bloomberg said nearly all of the primary roads had been plowed and the department of sanitation anticipated that all roads would be plowed by the end of the day.

"It looks like we dodged a bullet, but keep in mind winter is not over," said Bloomberg.

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Japan may release data proving Chinese radar incident: media

TOKYO (Reuters) - Japan may release data it says will prove a Chinese naval vessel directed its fire control radar at a Japanese destroyer near disputed islands in the East China Sea, local media reported.

Japan has said a Chinese frigate on January 30 locked its targeting radar on a Japanese destroyer - a step that usually precedes the firing of weapons - but China insists that its vessel used only ordinary surveillance radar.

The incident has added to tensions between the two nations over the disputed islands.

Japan will consider how much normally classified data it can release, the media reports said, citing comments by Japan Defence Minister Itsunori Onodera on local television.

"The government is considering the extent of what can be disclosed," Kyodo news agency quoted Onodera as saying.

China has accused Japan of smearing its name with the accusations, and on Saturday, the official Xinhua news agency continued the war of words.

"By spreading false accusations and posing as a poor victim, Japan had intended to tarnish China's image so as to gain sympathy and support, but a lie does not help," it said in an English language commentary.

"China has been exercising maximum restraint and stayed committed to solving the dispute through dialogue and consultation."

Japan and China have been involved in a series of incidents in recent months in the East China Sea where Chinese and Japanese naval vessels regularly shadow each others movements.

Both countries claim a small clusters of islands, known as Diaoyu in China and Senkaku in Japan, believed to be rich in oil and gas. Controlled by Japan, possession of the uninhabited outcrops and the sea surrounding them would provide China with easier access to the Pacific.

Hopes had been rising for an easing in tensions, including a possible summit between Japanese Prime Minister Shinzo Abe and Chinese Communist Party chief Xi Jinping. But the radar issue has seen China and Japan engage in a fresh round of invective.

China's Defence Ministry on Thursday said Japan's complaints did not "match the facts". The Chinese ship's radar, it said, had maintained regular alerting and surveillance operations and the ship "did not use fire control radar".

Japan's position against China has hardened since Abe led his conservative party to a landslide election victory in December, promising to beef up the military and stand tough in territorial disputes.

The commander of U.S. forces in the Asia-Pacific said the squabble between Japan and China underlined the need for rules to prevent such incidents turning into serious conflict.

China also has ongoing territorial disputes with other Asian nations including Vietnam and the Philippines over islands in the South China Sea.

(Reporting by Tim Kelly; Additional reporting by Ben Blanchard in BEIJING; Editing by Michael Perry)

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Japan mulls disclosing evidence on China radar lock

TOKYO: Japan said on Saturday it was considering disclosing evidence to bolster its claim that a Chinese frigate locked its weapon-targeting radar on a Japanese ship, after Beijing rejected the charge.

The incident, which Japan said happened last week, marked the first time the two nations' navies have locked horns in a territorial dispute that has some commentators warning about possible armed conflict.

The neighbours -- also the world's second and third-largest economies -- have seen ties sour over uninhabited Japanese-controlled islands in the East China Sea known as Senkaku in Tokyo and Diaoyu by Beijing, which claims them.

"The government is considering the extent of what can be disclosed," Japan's Defence Minister Itsunori Onodera said on a television programme Saturday.

The comment came a day after Prime Minister Shinzo Abe demanded that Beijing apologise and admit the incident had happened.

Tokyo also charges that in the middle of last month a Chinese frigate's radar locked on to a helicopter, in a procedure known as "painting" that is a precursor to firing weaponry.

On both January 19 and January 30, China's defence ministry said in a statement faxed to AFP, the Chinese ship-board radar maintained normal operations and "fire-control radar was not used".

Japan hit back, with Foreign Minister Fumio Kishida saying he "cannot accept" the explanation and Prime Minister Abe demanding an apology from Beijing.

The Japanese premier on Thursday called the radar incident "extremely regrettable", "dangerous" and "provocative" but also said that dialogue must remain an option.

- AFP/xq

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iPhone users, U.K. carrier report bugs after iOS 6.1 upgrade

If you haven't yet, you might want to hold off on upgrading your iPhone to iOS 6.1 for a bit.

We're seeing reports from a number of users who've upgraded their iPhones and then suddenly had them start to behave like Boeing's troubled 787 Dreamliner, suffering from battery issues that include overheating and shorter charge life.

Numerous reports of sudden and significant battery drain and at least one case of an overheating battery have popped up on the Apple Support Communities since the iOS upgrade first became available on January 28.

One possible cause (among multiple possibilities) is an excessive logging issue issue between Apple Mail and Microsoft Exchange, as our sister site ZDnet reports.

Until the bug is fixed, corporate users are advised to not upgrade to iOS 6.1. For users who have already upgraded, though, there is no way to revert to the previous version. IT administrators have no control over when their BYOD users upgrade, so many of them have resorted to blocking iOS 6.1 from accessing Exchange as a temporary mitigation to prevent server outages for everybody else.

This is apparently not the only issue with the update however. In Europe, the carrier Vodaphone sent a message to subscribers asking them to hold off on upgrading to
iOS 6.1:

We're aware of an issue caused by Apple iPhone 4s handsets that have been upgraded to iOS 6.1 which impacts performance on 3G.

Some customers may occasionally experience difficulty in connecting to the network to make or receive calls or texts or to connect to the Internet. Apple is working on a solution to their software issue. These connection problems are intermittent.

If you're having any of these issues with iOS, help may be on the horizon -- the beta of iOS 6.1.1 is already in the hands of developers, although I haven't been able to ascertain if it addresses the above problems. Then again, Apple hasn't yet acknowledged that those problems exist.

I've reached out to the company and will update this post if I hear back.

(Via The Next Web)

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Clamping down on prescription painkiller abuse

(CBS News) The Food and Drug Administration has called the abuse of prescription painkillers a "major public health challenge." On Friday, the FDA wrapped up a hearing on the drugs including oxycodone, Vicodin and Percocet. These painkillers do their job well -- but come with a big risk.

"My liver started shutting down," said 28-year-old Kimberly, who asked that we not use her last name. "My kidneys started shutting down. My thyroid level was through the roof."

Video: Health experts: Painkillers may cause headaches
Commonly used NSAID painkillers may be deadly for first-time heart attack sufferers

Kimberly nearly died from narcotic painkillers prescribed after a car accident. At first, she only needed one or two pills a day. But eventually she became addicted to the high.

"My tolerance started growing," she said, "and I started taking two at a time or three at a time. It grew to 15 at a time."

Kimberly is not alone. In 1999, there were about 4,000 opiate-related overdose deaths in the U.S. That figure more than quadrupled to 16,500 deaths in 2010.

"I knew that I needed to stop," Kimberly said. "I knew I did, but I couldn't bring myself to do it."

William Cope Moyers, a vice-president of the Hazelden Foundation, a drug treatment facility, said: "We are the most overly-prescribed nation in the world."

He said doctors need better education on the risks of addiction and non-narcotic options for pain treatment. Asked whether doctors are trained well enough in the management of chronic pain, Moyers said: "Clearly, doctors know the scourge of chronic pain, its legitimacy. But what they often don't know is how to deal with it with something other than writing a script."

Kimberly is in treatment at Phoenix House and has been drug-free for eight months.

"Who knows what's going to happen tomorrow? But I'll deal with that then," she said. "But today, I'm not getting high. And then tomorrow comes and I'll try the same thing."

So what are the possible solutions to the problem? The focus is on education. Patients think, 'This is a safe drug. After all, my doctor prescribed it, it's FDA-approved.' The FDA is trying to reverse that misconception. Then the White House is working to try to enact legislation so when doctors apply for that DEA registration that allows them to write the narcotics prescription, first they have to take a course that teaches them how to correctly use it.

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'Stay Home': Northeast Shuts Down as Blizzard Hits

A blizzard of possibly historic proportions is set to strike the Northeast, starting today and could bring more than two feet of snow and strong winds that could shut down densely populated cities such as Boston and New York City.

A storm from the west will join forces with one from the south to form a nor'easter that will sit and spin just off the East Coast, affecting more than 43 million Americans. Wind gusts will reach 50 to 60 mph from Philadelphia to Boston.

"[It] could definitely be a historic winter storm for the Northeast," Adrienne Leptich of the National Weather Service in Upton, N.Y., said. "We're looking at very strong wind and heavy snow and we're also looking for some coastal flooding."

The snow began falling in New York City shortly before 7 a.m. ET. The snow is expected to mix with some sleet and then turn back into snow after 3 p.m.

Airlines have started shutting down operations between 2 p.m. and 5 p.m. at major airports in the New York area as well as in Boston, Portland, Maine, Providence, and other Northeastern airports. More than 4,000 flights have been cancelled on Friday and Saturday, according to FlightAware. Airlines hope to resume flights by Saturday afternoon.

New York City is expecting up to 14 inches, which is expected to start this morning with the heaviest amounts falling at night and into Saturday. Wind gusts of 55 mph are expected in New York City and Cape Cod, Mass., could possibly see 75 mph gusts.

PHOTOS: Northeast Braces for Snowstorm

Weather Forecast: Northeast Braces for Monster Blizzard Watch Video

Winter Storm to Hit Northeast With Winds and Snow Watch Video

Boston, Providence, R.I., Hartford, Conn., and other New England cities canceled school today. Boston and other parts of New England could see more than 2 feet of snow by Saturday.

Massachusetts Governor Deval Patrick declared a state of emergency Friday afternoon and announced a ban on all traffic from roads after 4 p.m. It is believed that the last time the state enacted such a ban was during the blizzard of 1978.

Beach erosion and coastal flooding is possible from New Jersey to Long Island, N.Y., and into New England coastal areas. Some waves off the coast could reach more than 20 feet.

"Stay off the streets of our city. Basically, stay home," Boston Mayor Tom Menino warned Thursday.

Blizzard warnings were posted for parts of New Jersey and New York's Long Island, as well as portions of Massachusetts, Rhode Island and Connecticut, including Hartford, New Haven, Conn., and Providence. The warnings extended into New Hampshire and Maine.

To the south, Philadelphia was looking at a possible 4 to 6 inches of snow.

Thousands of flights have already been canceled in anticipation of the storm. Amtrak said its Northeast trains will stop running this afternoon.

Bruce Sullivan of the National Weather Service says travel conditions will deteriorate fairly rapidly Friday night.

"The real concern here is there's going to be a lot of strong winds with this system and it's going to cause considerable blowing and drifting of snow," he said.

Parts of New York, still reeling from October's Superstorm Sandy, are still using tents and are worried how they will deal with the nor'easter.

"Hopefully, we can supply them with enough hot food to get them through before the storm starts," Staten Island hub coordinator Donna Graziano said.

New York City Mayor Michael Bloomberg said plows and 250,000 tons of salt were being put on standby.

"We hope forecasts are exaggerating the amount of snow, but you never can tell," Bloomberg said Thursday.

Residents of the Northeast have already begun to hit stores for groceries and tools to fight the mounting snow totals.

The fire department was called in to a grocery store in Salem, Mass., because there were too many people in the store Thursday afternoon trying to load up their carts with essential items.

"I'm going to try this roof melt stuff for the first time," Ian Watson of Belmont, Mass., said. "Just to prevent the ice dam. ... It's going be ugly on that roof."

ABC News' Max Golembo and The Associated Press contributed to this report.

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Opposition leader's funeral brings day of reckoning for Tunisia

TUNIS (Reuters) - Tunisia's political crisis looked likely to deepen on Friday with strikes and protests planned around the funeral of assassinated opposition politician Chokri Belaid.

Belaid's killing on Wednesday has brought thousands of people onto the streets of the capital Tunis and other cities in violence-marred protests.

Unions have called a general strike for Friday, setting the stage for further confrontation two years on from the pro-democracy revolution that inspired the Arab Spring.

Tunisia is riven by tensions between the dominant Islamists and their secular opponents, and by disillusionment over the lack of social progress since the overthrow of dictator Zine al-Abidine Ben Ali in January 2011.

In response to Belaid's assassination, Prime Minister Hamdi Jebali, an Islamist, said on Wednesday he would dissolve the government, name a non-partisan cabinet of technocrats and hold early elections. But his partners opposed the move and it is yet to be approved by parliament.

No one has claimed responsibility for the killing of Belaid, a lawyer and secular political figure, who was shot by a gunman as he left home for work on Wednesday.

But a crowd set fire to the headquarters of Ennahda, the Islamist party of Prime Minister Jebali, who leads a coalition with two junior secularist parties. Ennahda denies any involvement.

While Belaid had only a modest political following, his criticism of Ennahda policies spoke for many Tunisians who fear religious radicals are bent on snuffing out freedoms won in the first of the revolts that rippled through the Arab world.

"Criminals assassinated Chokri's body, but will not assassinate Chokri's struggle," his widow Besma said on Thursday.

"My sadness ended when I saw thousands flocking to the streets...at that moment I knew that the country is fine and men and women in my country are defending democracy, freedom and life."

All three ruling parties and sections of the opposition rebuffed Jebali's plan to create a small, technocrat government to take over day-to-day matters until elections could be held, demanding they be consulted before any such move.

"In the likely event that there is no agreement, civil unrest will increase, reaching a level that cannot be contained by the police," said Firas Abi Ali of the London-based Exclusive Analysis think-tank.

"If unrest continued for more than two weeks, the army would probably reluctantly step in and back a technocrat government, as well as fresh elections for a new Constituent Assembly."

The economic effect of political uncertainty and street unrest could be serious in a country which has yet to draft a post-revolutionary constitution and which relies heavily on the tourist trade.

The cost of insuring Tunisian government bonds against default rose to its highest level in more than four years on Thursday and ratings agency Fitch said it could further downgrade Tunisia if political instability continues or worsens.

(Writing by Robin Pomeroy; Editing by Angus MacSwan)

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