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Special Coverage of the Government Shutdown; U.S. Averts Default Risk; Iran Nuclear Talks; View from Europe and China; Washington Blame Game

Aired October 17, 2013 - 02:00   ET


JOHN VAUSE, CNN INTERNATIONAL ANCHOR: The plan would also extend the debt ceiling until February 7th. And in the end it made only a very small change to Obamacare, what sparked this crisis in the first place, including a provision for income verification.

Hundreds of thousands of federal workers off the job now for more than two weeks have been told to expect to return to work later this morning.

Erin McPike has been following developments since last night. She joins us now live from our bureau in Washington, D.C.

Erin, I guess the question here, though, is this a deal or a delay? Do we go through all of this again? Because after all, it is all just being put off for 90 days.

ERIN MCPIKE, CNN CORRESPONDENT: Yes, John, it is somewhere in between, it is a deal, because, of course, Democrats have gotten largely what they wanted. And we are going to see the government reopen and we will avoid defaulting on the debt. But it is a delay in that it's only 90 days away until Congress will have to revisit the debt ceiling.

Now this is a routine vote, as we've heard President Obama say for the past few weeks now. This is the 13th time that Congress has voted to raise the debt ceiling since 2001. I would point out that after the financial crisis in 2008, it happened three times within the next year. But we're seeing it in greater frequency right now that Congress has to vote to raise the debt ceiling.

So, you know, this has become a bit of bigger problem. And Republicans have said that they want to use the debt ceiling as leverage for Democrats to give them more concessions. But Republicans are saying loud and clear now that it hasn't worked, this strategy of using the debt ceiling as leverage.

VAUSE: I think the best comment was that they took the plane hostage or they hijacked the plane and knowing how to land it. Sixteen days, this went on for, and it was all over Obamacare, they wanted to defund it. That didn't happen. What did the Republicans get?

MCPIKE: Very little. They didn't delay Obamacare. They didn't defund Obamacare. They also didn't repeal a small tax that would pay for a portion of Obamacare. They got one small fraud protection measure, and that was about it.

Now in terms of funding the government, they're funding it at a slightly lower level than Democrats wanted. So Republicans got closer to the spending level than they wanted, but by and large Republicans got almost nothing in this deal -- John.

VAUSE: Yes. In the House, what was interesting is that the Democrats voted pretty much as a block when they did. Republicans, though, voted almost 2-1 no. It was a very wide margin there. So what does it actually mean for the Republican speaker of the House, John Boehner, because there's been a lot of pressure on him, a lot of speculation that his job may be in danger after all of this.

MCPIKE: That's true. There has been a lot of speculation about that. But I would tell you today that -- earlier today, I guess yesterday at this point, the House speaker did get a standing ovation from House Republicans when they had a big meeting earlier. And a number of conservatives, who've wanted him to fight the good fight, as they say, have said that he is safe.

But I would say just in general, both House Republicans and really the American government at large looks bad. Listen to what President Obama said earlier tonight about this very thing.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I've got some thoughts about how we can move forward in the remainder of the year and stay focused on the job at hand. Because there is a lot of work ahead of us, including our need to earn back the trust of the American people that's been lost over the last few weeks.


MCPIKE: Obviously, the president is saying there that both Democrats and Republicans look terrible after this shutdown fight -- John.

VAUSE: Yes, that is true. You got that bit right.

Erin, it is 2:00 there in the morning in Washington, we appreciate you staying up with us.

Erin McPike, there live in Washington. Thanks so much.

Let's take a look at the markets today in the Asia Pacific region, see how they're reacting to this eleventh hour Washington compromise. There we have it. Positive territory across the board but not a gleeful bounce you like on this compromise. Hong Kong barely in positive territory, Shanghai Asia is also just off a touch. Sidney, the ASX 200 up by about a third of I percent.

Wall Street, though, rallied on Wednesday on the news that a deal had been reached. The Dow closed up more than 200 points, nearly 1.4 percent. The NASDAQ gained nearly 1 and a quarter percent, the S&P 500 more than 1 and a third percent.

GORANI: So how is this latest episode of Washington gridlock affecting America's image around the world?

Jeff McAllister is a former London bureau chief of "TIME" magazine.

We heard from -- Jeff, thanks for being with us. And we've heard from China. We even heard from Russia. We heard from other European countries. We heard from heads of global financial organizations saying Washington essentially get your House in order.

JEFF MCALLISTER, FORMER LONDON BUREAU CHIEF, TIME: Well, they're certainly right. This is not an edifying spectacle for anybody. This reminds me of that old Churchill quote, "America can always be counted to do the right thing after it's exhausted all the other alternatives."

And so what is the message that people take away from this? That in the end, sanity prevails and that the right thing was done? And there was no default? And it's still a good place for investors? Or that the American system is in a bad way and it's not really a world super power behaving the way it ought to?

GORANI: And so these countries were telling the U.S. essentially to try to find a way to manage its economy and its government. Not from crisis to crisis but in a smooth way that won't rattle the world. Those countries, perhaps less likely to be willing to take advice from the United States in the future.

MCALLISTER: I think that is right. I mean, this is a fundamentally -- what is American power in the modern era when China is rising and other countries are becoming richer. Soft power, the power of attraction is very important. Obviously, the United States has huge assets, economically, culturally, and they don't go away because of one fight in Congress. After all, there was a shutdown in Washington in 1995, followed by the Monica Lewinsky scandal, which I covered both of those things.

And, you know, people don't remember that anymore. And the U.S. is still a prosperous important, leading country. But if we can't get our act together, if the president who couldn't go to an Asian summit and sort of preach what he wants to preach about, the pivot to Asia, because -- all this squabbling at home, it really does not send the kind of message that is in American long-term interest.

And I think both sides recognize that in Washington. The question is, how do you get out of this ditch?

GORANI: Right, but it is a blip, though, right, because you talked about America's power, its economic power, and how much richer it is. And even the next three countries' GDP combined after it, China included in that list? So it's going to take a long time for things to change. I mean, is this more sort of symbolic than it is substantive?

MCALLISTER: I think it -- you know, the answer is -- it's the right question. And the answer is, it depends on whether it happens again and again and again. This is just a 90-day postponement of the underlying legislative gridlock. Now the Republicans take from this as they seem to, that this tactic of trying to hold the government hostage to get their way isn't going to work.

The Republican Party is now favored -- has a favorable rating from 28 percent of Americans, certainly they don't want to do this again. But all the dynamics that put this in place, the gerrymandered congressional districts where 90 percent of Republicans win each time and have to fear primary challenges on the right much more than they have to fear a challenge from a Democrat.

The money in politics now being raised by making a big noise on cable television rather than coming from the center. The Rush Limbaugh/FOX News kind of echo chamber where conservatives think that they're doing the right thing, that everybody supports them, when in fact it turns out in this case that it's not the case.

Those factors are still there. Will there be change in -- in congressional set-up in the elections next year? Will Republicans lose? And that's the kind of thing that has to happen to really change the political dynamic in a -- in a structural way. But right now the president did get what he wanted. He didn't cave. He looked stronger. I think there's -- it would be hard for the Republicans to go back to this same tactic.

GORANI: How does this change the U.S.' relationship with its allies? And I'm talking about Western Europe where I'm talking in big summits like the G-20 or the G-8, or APEC. That kind of thing. Does it -- does it have an impact?

MCALLISTER: I think in the long run, you know, it's not a proud place to be if you're an America like this. You just don't have as much clout. People do detect these things about soft power or image, and whether you look like you're on the ascendant or on a decline. On the other hand, the U.S. is still what used to be called the indispensable nation, the chair of the community, the one with the big military power, the biggest economy. All those people wanting still to go Yale and Harvard business schools and go to Silicon Valley --

GORANI: And the biggest cultural footprint as well. Yes.

MCALLISTER: Exactly. I mean these are the -- you know, you can say in 50 years maybe, if you're writing the book, this is when you can see the American empire was on decline. This is a pivotal moment, on the other hand, it may just turn out to be just a blip, as you say.

GORANI: All right, Jeff McAllister, former London bureau chief of "TIME" magazine. Always appreciate your time. Thanks for being with us, Jeff, early in the morning in London.

VAUSE: Yes. He was up early.

We'll have more global reaction when we come back.

GORANI: Not a proud place to be if you're an American, he says.

VAUSE: So straight ahead, why one CEO says the world is laughing at Washington. It's only going to get worse.

GORANI: Plus, we'll hear from one of the richest men in the world on the U.S. debt crisis.


WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: It never should be used again. I think both parties should say this is ridiculous.



VAUSE: Well, there you have it. The first official tweet from one of NASA's account since the beginning of the shutdown. The U.S. space agency had been forced to stop many of its services since the first of the month. What does it say? "We're back."

GORANI: "We're back."


VAUSE: Good to know.

GORANI: There you have it. Now one --

VAUSE: Good luck, humans.

GORANI: Absolutely.

One of the richest men in the world is expressing his frustration with the way Washington has been handling its financial affairs.

VAUSE: Yes. He's not the only way. Warren Buffett is the CEO of Berkshire Hathaway. And he spoke on Wednesday with our Poppy Harlow.


BUFFETT: People play brinksmanship games sometimes, but it is totally asinine to have a debt ceiling at all and to use it as a means to try and get your way on anything else, whether it's abortion, gun control, Obamacare, you name it. It's a political weapon of mass destruction that shouldn't be used.


VAUSE: OK. That's the perspective there from Warren Buffett. And of course we could see a repeat of all of this in about three months from now because Washington really has not solved the problem. It's just bought a little time until early next year.

Let's go to Richard Quest. He's still live for us in CNN New York, 13 minutes past 2:00 in the morning.

Richard, this all ended with a whimper, but the problem really is Congress is treating the symptoms here, not the disease.

RICHARD QUEST, CNN'S QUEST MEANS BUSINESS HOST: I'm not sure I agree with you that it ended with a whimper. We didn't go over the cliff. But the amount of rhetoric and hot air, and that last -- those last two votes, and right away down as I heard earlier you're saying the stenographer who took a funny turn and had to be carried out of the chamber or escorted out of the chamber.

It really just makes the whole thing complete in many ways. Because no matter what anyone said, whether it was the IMF managing director, CEOs, finance ministers, they had no influence over this debate, which is why Howard Lutnick, the chief -- the chairman and chief exec of Cantor Fitzgerald's view, he joined me earlier on "QUEST MEANS BUSINESS." And his view on the deal is perhaps so prescient.


QUEST: Do you welcome the deal that was done and -- what are you worried about because of it?

HOWARD LUTNICK, CHAIRMAN AND CEO, CANTOR FITZGERALD: Yes, so this deal had to happen because the U.S. doesn't want to default, doesn't want to get into the whole nonsense and what happens when the richest country in the world, with the printing press, they could just turn around and print them up, decides to cross their arms and not do it.

But all we've done is kick the can down the road. You put it up there, February 7th -- January 15th, the government will shut again and February 7th we're going to be talking about this again.

QUEST: So you don't think that there is a possibility for this -- this compromise committee to reach any form of significant budget negotiations?

LUTNICK: No way. Because you elected a very strong left president on the same day you elected a strong right Congress, and the strong left and the strong right, all they're going to do is wrestle. You hear John Boehner go out and say we lost. Do you think he thinks he lost? He lost today. He will be back, his crowd will be back, and they will slug it out again some other day.


QUEST: And there you have it. There is the proverbial can. It is battered, it is bruised and it's still got some road to travel. But we've been here so many times before that the markets -- and I think this is perhaps one of the most telling points. The markets held throughout. With a bit more volatility and one or two hiccups on the way. But by and large, they held their nose, because what Washington did, John and Hala, was reinforce the perception that eventually they do come to a deal. What worries everybody is the time when they don't.

VAUSE: Sure, and the president was asked about that at the briefing and he was asked, do we go through all this again in 90 day's time, he was very firm. He stopped, he looked back, he said no.

OK, so what's the secret source? What's the fairy dust, the unicorn magic that will make the next debt ceiling disaster a little different than this one? QUEST: I think that they're probably a bit chagrin at just how close they came to disaster and how much noise. But that won't make much difference, to be frank. As Howard Lutnick said it's a political battle.

The only thing that is really going to weigh heavily is that by the time we get to February of next year, there are the midterms in the middle of next year -- late next year. And the Republicans have already taken a really bad bruising down in the 20s on their popularity in the polls. If there is a perception that you are going to get clobbered even further, that could be the telling point.

But here's what worries most people, the far right don't care. The far right would have held John Boehner's feet to the fire even longer.


QUEST: It's just that they knew there was nowhere to go after the Senate did the deal.

VAUSE: Yes, we saw that the way the vote played out in the House of Representatives in the last couple of hours. Just very quickly, Richard, we know that Fitch put the U.S. on a negative rating watch. S&P has been -- weighing in on this.

QUEST: I'm going to jump in. I can't even anticipate your question but I'm going to answer the question I think you were going to ask anyway.

VAUSE: Go for it.


QUEST: The negative watch lasts until the end of Q1 next year. My guess is, if we get to December the 13th, and this committee that's being put together hasn't made any form of progress, then the U.S. -- then Fitch takes the AAA away.

VAUSE: You're clairvoyant.


VAUSE: Exactly what I was going to ask.

QUEST: No. I'm just --


I see. No, it's a hazardous guess. I may be wrong. Somebody will play the tape again to me.

VAUSE: Sure.

GORANI: December 13th?

(CROSSTALK) QUEST: I think it's December 13th when the committee has to report back.

GORANI: The conference committee. Yes.

VAUSE: It's definitely mid-December, and it sounds a lot like that super committee, which they set up after the 2011 debt ceiling.

GORANI: Debt ceiling.

VAUSE: And that didn't work out either.

GORANI: Debacle.

VAUSE: So not exactly going out on a ledge there, Richard, but we appreciate you being with us.

QUEST: Good night.

VAUSE: Where has he gone? There he is.

GORANI: There he is.

All right. Well, Fitch takes away that AAA after S&P did a couple of years ago.


GORANI: So that's going to be also in terms of the reputation of the United States, something to look out for.

Straight ahead, what investors think about Washington's debt deal.

VAUSE: And John Defterios is in Hong Kong with his eye on the markets.

GORANI: Plus, in international news, what a difference after years of dead end, the Iranian nuclear talks. Tehran and West strike a new tone in Geneva.

We'll be right back.


VAUSE: The lights are still on there in Capitol Hill after a very, very dramatic 24 hours. No surprises, global markets had been reacting swiftly to the news of the U.S. debt deal.

GORANI: Well, the first reaction came from Asian markets, of course. They opened right after, pretty much right after the announcement that President Obama had signed that bill into law to raise the debt ceiling and reopen the government. And the reaction is positive, although it's -- let's just say it's not --

VAUSE: Not overwhelming.

GORANI: Right.

John Defterios is in Hong Kong. He's our emerging markets editor.

Now it was a solid rally when it started the session, but it fizzled out, John, why is that?

JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Yes, in fact we had a good rally right after the deal was signed in the Senate and then they carried over with the House passage, Hala. But that quickly faded in the first 90 minutes of trading here in the Asian markets.

Let's take a look and you'll see that we're off with the highs from the day. The Nikkei index was up better than 1 percent on this session. You can see now it's bounced back a little bit, up eight- tenths of 1 percent. But look at Hong Kong, Shanghai and Seoul, Seoul up just over a quarter of 1 percent.

The other kind of trend here, the dollar based assets, oil and gold and the dollar itself rallied after the deal was done, but again, Hala, this quickly faded away. So what does it tell us? Number one, nobody really thought that the U.S. congressional vote would never happen, they thought that the deal would get done. Number two, they don't have a lot of the confidence going forward that this would be solved. So we're back in the same position mid-January through February. Can they get a deal done?

And number three, we're in a region right now with great assets into U.S. treasury bonds, the Chinese hold it by $1.25 trillion, the Japanese, $1.1 trillion, and the question marks being raised, do the U.S. lawmakers really care whether we hold these assets or not? The U.S. is the reserve currency but will it be able to hold onto that?

I'm not talking about four or five years. But is this a longer term trend where the U.S. doesn't really care whether it gets that investment or not. We already see the Chinese buy more European bonds to balance out their portfolio -- Hala.

GORANI: Now we were talking earlier about how S&P was projecting potentially an economic loss of 24 billion U.S. dollars because of this shutdown. What is the biggest economic casualty here?

DEFTERIOS: I think the $24 billion is a drop on the bucket for a $13 trillion economy. It's not terrific and it's coming at a time when the world economy can least afford it. The developed world is growing the slowest level right now in the last decades. They're trailing around 1 percent. If it wasn't for the emerging markets, that figure would be much, much worse.

I think the biggest casualty, of course, is the U.S. reputation. I came to Hong Kong via South Korea. I was at the World Energy Congress. I spoke to a couple of major players. One was the minister of energy for Russia, Alexander Novak, interesting quotes coming out of him, saying, this is a quote from the minister of energy of Russia.

Unimpressive lack of unity from the U.S. Congress. And the congressional moves provide fractured confidence in American leadership. And I wanted to find out if it was just the Russian position, so I spoke to a CEO of a South African power company, again another major player from Africa. His quote, "A lack of unity stands in the way of business in the United States. And the U.S. is not acting like the leader of the world's reserved currency."

Richard touched upon this before. But even Christine Lagarde thought she has to weigh in as the managing director of the International Monetary Fund. She is suggesting, I'm glad the deal is done but can we change the system so every three or four months they don't have to go back to the bargaining table again, rattle global confidence?

It's worth taking a step back, back in May, the Federal Reserve suggested they would pull back on this quantitative easing, it rattled the markets around the world, especially the emerging markets like China, and India, Brazil and Russia. Then they backed off the pedal in September.

If there is a silver lining right now, Hala, I would suggest that the Federal Reserve can't do anything on quantitative easing because of the uncertainty in January and February. So the Federal Reserve has to stay there. The markets know there'll be liquidity. And they hope -- they hope big time that in February this deal doesn't unravel yet again, the acrimony between the White House in Pennsylvania Avenue and Capitol Hill, which has been pretty poor.

GORANI: Pretty poor the understatement for the day. Thanks very much, John Defterios. He's live in Hong Kong with more international market reaction and really how to quantify how much damage this has done to the U.S. economy and the world economy as well -- John.

VAUSE: OK, Hala, much more on the crisis and the deal in Washington a little later but now an update on some other stories which we are following.

Iranian and Western diplomats meeting in Switzerland have agreed to return to the negotiating table next month. Both sides striking an optimistic turn, some in Tehran, even said a deal might just be reached in a few months.

More now from Jim Sciutto.


JIM SCIUTTO, CNN CHIEF NATIONAL SECURITY CORRESPONDENT: After two days of meetings here in Geneva a clear sense that these talks were unlike any other between Iran and the West in recent memory. A senior U.S. official saying that this official had never seen such intense detailed straightforward and candid conversations with the Iranian side, the Iranians also expressing hope and satisfaction.

The Iranian foreign minister Javad Sharif saying that these talks could usher in, quote, "a new beginning in our relations with the West." Even the timeframe that they're talking about for a final agreement here, the Iranians saying they believe they could come to a final agreement within a year. The deputy foreign minister moving that up a bit, saying, possibly even within three to six months. Other U.S. officials and European officials expressing reservations, but it gives a sense of a new hope here in how these things could proceed and how quickly.

And they've already planned the next round of talks. They're going to meet again here in Geneva November 7th and 8th, and in the meantime experts from both sides are going to be meeting to discuss to discuss the details of Iran's plan. There are still, though, substantive disagreements. U.S. officials saying that there are differences, for instance, over how quickly and how substantively the sanctions against Iran's economy would be eased.

Also saying that Iran has to provide much more detail still on its plan for reining in its nuclear program. As one U.S. official said, the work is hard. An agreement not guaranteed but clearly the start here in Geneva, very hopeful.

Jim Sciutto, CNN, Geneva.


VAUSE: Officials believe no one survived a plane crash in southern Laos on Wednesday. Forty-nine people were killed when the turboprop went down in the Mekong River. Passengers from France, Australia and Thailand were believed to be on board. Search and rescue teams at the site. State-run media reports the plane was about to land when it hit bad weather, and then crashed.

Well, earlier this week, typhoon Nari had made landfall in Vietnam.

Pedram Javaheri joins us now from the International Weather Center with all the details.

This has been such an active season.


VAUSE: It seems there had been one after the other after the other.

JAVAHERI: Yes. And John -- and you know very well, John, too, when it becomes a tropical storm and also typhoons, they haven't had to halt air travel. We had just about a year ago right now we had Superstorm Sandy halted some 18,000 flights in the peak of that storm system. Just in the last 24 hours, across Tokyo, 500 cancellations with typhoon Ipa in that region and we had 122,000 people taken out of the storm's path, as it initialized right there towards portions of Luzon earlier in the week.

Nari made landfall near Danang in Vietnam. There is Laos and the area of concern where this plane occurred, right there, just west of them, across southern Laos, the town of Pakse, an area where the crash occurred. And you see some isolated thunderstorms indicated here in the reds and oranges, some of them do pop up in the area of interest. We do know where the plane went down. There were active thunderstorms in the region a lot of times. Of course this occurs when we have a lot of destabilized atmosphere. The wind shear that occurs in the atmosphere, we have the winds that become -- rise and drop within a matter of few seconds and can really force planes to lose control. Potentially what happened here with the thunderstorms in that region, well, you know, the secondary impact of storms also taking place over in India, where we talked about a category 5 equivalent typhoon there, cyclone there making landfall in Aileen, just a couple of days ago.

Devastation left in place. But I want to share with you some video just coming out of areas around Mt. Everest on the Base Camp region because that moisture from the cyclone producing a significant amount of snowfall there. We know now. Four people have lost their lives across this region in Australia. And tourists being one of them. Some 154 people were rescued off of Mt. Everest and its vicinity because of the tremendous amount of snowfall catching some of the tourist off guard across this region, John and Hala. And the moisture again associated with Phailin, the cyclone we talked about last weekend.

VAUSE: OK. It is unsettled across the region there.


VAUSE: OK. Pedram, thank you for that.

Now the controversial owner of the U.S. pro-basketball, the Dallas Mavericks, has dodged a major legal bullet. A jury in federal court ruled that Mark Cuban was not liable for civil insider trading charges filed by the Securities and Exchange Commission.

Cuban had dumped his entire stake in in 2004 after firm's CEO told him about plans for a stock offering. The details were announced publicly a little later. Cuban's move saved him three quarter of a million dollars in losses.

Well. just ahead on CNN NEWSROOM, there is a deal to reopen the U.S. government.

GORANI: Well, what did it cost? We'll look at the numbers.

Also Chinese state media didn't hold back as the U.S. flirted with the possible debt default. So what is the largest foreign holder of U.S. debt saying now? We'll go live to Beijing, straight ahead. Don't go anywhere. We'll be right back.



SEN. HARRY REID (D), MAJORITY LEADER: Let's be honest, this is pain inflicted on our nation for no good reason and cannot make -- we cannot, cannot make the same mistake again.


GORANI: Welcome back to CNN NEWSROOM, as we continue our live coverage of the debt ceiling and government shutdown crisis in Washington. Well, the government is open again now.

I'm Hala Gorani.

VAUSE: I'm John Vause. We would like to welcome our viewers in the United States and around the world.

Well, U.S. lawmakers have finally struck a deal to reopen the government and also to raise the debt limit.

GORANI: Well, that means federal workers that were furloughed more than two weeks ago head back to their jobs today Thursday.

VAUSE: President Barack Obama signed the bill just a few hours ago. The White House says he'll have more to say about the agreement in a statement later today.

GORANI: Now the deal, as it stands, funds the government through January 15th, and raises the debt ceiling through February 7th. But despite Republican efforts it leaves Obamacare largely untouched. And that's what started this whole thing off in the first place.

VAUSE: Absolutely, the Republicans were trying to derail Obamacare but it was resolved through a bipartisan effort in the Senate under the weight of today's deadline for a debt ceiling increase.

Now this is what Mr. Obama had to say about that.


OBAMA: I want to thank the leadership for coming together and getting this done. Hopefully, next time it won't be in the 11th hour. One of the things that I said throughout this process is we've got to get out of habit of governing by crisis.


GORANI: Well, how much did the partial government shutdown cost the U.S. economy? It depends what organization is making the estimate. The global information company IHS says the numbers $3.1 billion in lost government services. Meanwhile, the financial rating agency, Standard & Poor's, says the shutdown cost the U.S. economy about U.S. $24 billion, about $1.5 billion per each day of the shutdown.

VAUSE: It's a big chunk of change and here's what that wasted money could have actually bought.

The World Food Program says you could feed 66 million hungry school age children for more than seven years. It's enough to fund Doctors Without Borders for all of Africa for 42 years. And it's bout equal to El Salvador's annual GDP.

GORANI: The 11th hour deal that saved the U.S. from default also spares the world's economy from untold harm.

Diana Magnay has reaction to all that from Berlin and David McKenzie from Beijing. First the perspective from Germany and the wider Eurozone. The largest economy in the Eurozone, Diana Magnay, Germany, have we heard any reaction there? And what do we expects to be? Because in Asia, the rally fizzled out.

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Well, the -- if we start with markets, the DAX reached a record high last night, despite the little on the news just before it closed that a deal looked as though it would be struck. But the markets have really taken this in their stride here in Europe.

Investors are pretty clear, or say the markets seem to have shown that a deal would be struck in the end. You know, they've had a very strong rally in the second half of 2013, and it wasn't really impacted by this talk of possible global economic damage, if the debt ceiling, and if the talks came to nothing.

So the markets have taken it in their stride. I'm sure you can see -- you'll probably see a rally in the morning, but don't expect much from that. I think the view in Europe to this whole discussion of what's going on over in the states has been a battlement that this could happen in the U.S. Huge damage in terms of America's credibility as a global financial super power, just as much as it's damaged its credit worthiness as we saw from Fitch.

So when you read the editorials in the newspapers this morning, that's really what they're talking about. Obama may have come out the winner, but he is not a winner as such. He's been very badly damaged at least in the eyes of the world from this spectacle that the world has been witnessing in Washington.

GORANI: But is this just sort of Europeans shaking their heads and saying, I can't believe this is happening in Washington, in the world's largest economy? Or could it have a concrete impact with regard to the U.S.' relationships with some of its allies there?

MAGNAY: Well, I think you haven't seen any kind of concrete impact. In the reverse situation if you think about the European debt crisis, for example, that hasn't impacted the relationship that the U.S. has with Europe. And I think this is the same in reverse, to a certain extent. The Europeans have watched and waited, but for the time being they don't feel that this is going to change relations right now.

GORANI: OK. Diana Magnay, live in Berlin. Thanks very much -- John.

VAUSE: Well, Hala, China has been very vocal about this showdown -- shutdown showdown in D.C. Beijing has urged lawmakers to get a resolution to this and not default. The stakes are very high, about $5.6 trillion, or about a third of U.S. debt is foreign held so let's look at the numbers here.

The biggest chunk of that is owned by China, nearly $1.3 trillion. So let's go to Beijing now, live, David McKenzie standing by once again.

And, David, the Chinese must be breathing a little easier right now. There is a deal in the works. There's going to be another crisis 90 days from now. But the Chinese have much bigger long-term concerns.

DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT: Well, I think their long-term concern is that the mess in Washington could affect the bottom line in Beijing. Certainly the technocrats and the leaders here are breathing a sigh of relief, John, at this point. Most people believed that they wouldn't cross that debt threshold, and the U.S. would be able to pay its debt.

A large amount of the debt, and the interest on that debts obviously here in China, $1.3 trillion in U.S. treasuries, owned by China as you said. More than doubled that just in U.S. dollar assets. So China is very heavily invested in the U.S. debt. They've used it over the years, over the decades, in fact, to help park the trillions of dollars in foreign reserve that China builds up because of its largely export-driven economy.

So they were watching this debacle as it were go on very closely and yes, today, definitely a sigh of relief here in Beijing for the end result.

VAUSE: When Beijing talks about a de-Americanized world, what exactly do they mean? What would they like to see?

MCKENZIE: Well, it's really a PR push by China to try and focus the world's attention on China as an alternate economy in the future. There is no way that the world could de-Americanize at this point. The U.S. dollar is the standard-bearer and it has been for many, many years.

I think what they're trying to do is throw pie at the face of the U.S., its big rival, though a very close economic bilateral ally. So China is using this opportunity of the wrangling in Washington to say that it's time to look elsewhere for leadership in the fiscal world.

As I said, no way right now that that could be taken over by China. It's Yuan, Renminbi, the currency here, isn't international enough. The markets here aren't big enough for -- or liquid enough for the world to kind of make China its standard bearer. But certainly from a soft power perspective, then have been reveling in this mess in Washington, and showing that the future may be here in China.

But many people say that's deeply hypocritical because of the way that the communist party runs this economy. It's not really a free market economy like the U.S. And certainly there wouldn't be the room for discussion like they would be here. That might be looking bad right now in the U.S. but led to a great deal of innovation in the U.S. economy, according to most economists.

VAUSE: Yes, I once heard it described as a corporate Leninist economy there in China, whatever that may mean.

David McKenzie there on a relatively good day in downtown Beijing. Thanks, David.

GORANI: Corporate Leninist. Interesting. Let's take a quick break. When we come back, could the West be only months away from striking a nuclear deal with Iran? We'll tell you about the diplomatic discussions in Geneva.

Also straight ahead, with the bill now passed and signed by the president, the Washington blame game in underway.


SEN. JOHN MCCAIN (R), ARIZONA: It's one of the more shameful charters that I have seen in the years that I've spent here in the Senate.




SEN. MITCH MCCONNELL (R), MINORITY LEADER: And Republicans remain have the term to repeal is terrible law. But for today, for today, the relief we hope for is to reopen the government, avoid default, and protect the historic cuts we achieved under the Budget Control Act. This is far less than many of us had hoped for, frankly. But it is far better than what some had sought.


GORANI: Well, in the end, it came down to the senators from both parties, Senate Republican leaders who you just heard there, Mitch McConnell. He lived up to his reputation as a deal closer in this case, even though he expressed disappointment.

VAUSE: It was all smiles and hugs, wasn't it, in the Senate.

GORANI: They have actually sort of patted each other on the backs -- the hi-five, applause --

VAUSE: Someone wrote the 100 most deluded people in the United States right now.

GORANI: Well, if you congratulate yourself for solving a problem you created I suppose --

VAUSE: You created. Exactly.

GORANI: Yes. They spoke some truth to that.

VAUSE: And actually managed to overcome what has been a really nasty and bitter conflict here between both the Republicans and the Democrats. So I guess the question now is after so much bitterness over the past couple of weeks, what will happen as we move forward? What will happen with the Republicans and the Democrats? How difficult will all of this be?


MCCAIN: I hope that we can move on. I hope that we can move on to other things because what we've done, not just so harmful not just to Republicans, the president's numbers went down. The Democrats' numbers went down. Ours just went down further and faster.

The American people have no confidence in their government. And can you blame them?


GORANI: John McCain there, one of the old-school Republicans and a senator who has been around, who knows what it's like to strike these bipartisan deals unlike some of the newer --

VAUSE: Exactly.

GORANI: -- members of the House of Representatives.

VAUSE: two weeks ago I said this tactic will not work.

GORANI: Right. There -- and he was right.


GORANI: And as Brian Todd reports, McCain and other Republicans are now essentially blaming some of their own members in Congress.


BRIAN TODD, CNN CORRESPONDENT: On the Senate floor, John McCain slammed the partisanship on both sides during this shutdown.

MCCAIN: It's one of the most shameful chapters than I have seen.

TODD: But in print, he was much tougher on his own caucus, telling "The New York Times," Republicans have to understand we lost have this battle as I predicted weeks ago that we would not be able to win. McCain's Republican ally Lindsey Graham says the GOP really did go too far. We screwed up.

Former Republicans Congressman Mickey Edwards says, while he believes President Obama was too inflexible this stand-off if the Republicans who overreached by hammering on Obamacare.

MICKEY EDWARDS, THE ASPEN INSTITUTE: The public is not going to believe that the president is responsible especially when they're trying to undo a law that's already been enacted. So -- and when you tie it in with also the threats about the debt ceiling and possibly reneging on the money the American people largely spent and owe, you know, I don't think it's a message Republicans can win.

TODD: Senator Ted Cruz has been skewered from within the party and by his hometown newspaper which had endorsed him. Comparing him to his predecessor Kay Bailey Hutchinson, the "Houston Chronicles" editorial page says, "Cruz has been part of the problem in specific situations, where Hutchinson would have been part of the solution."

(On camera): Another conservative group whose tactics are now under fire, Heritage Action for America. It pressured wavering Republicans to keep fighting against Obamacare, keeping tabs on those who didn't by blasting out score cards.

(Voice-over): Their leader dismissed McCain's criticism that this was a losing battle.

MICHAEL NEEDHAM, CEO, HERITAGE ACTION FOR AMERICA: I think that the Senate Republicans should spend their energy focusing on Obamacare and the way it's ruining millions of American people's lives, and not trying to settle scores about policy tactical differences that disagree with.

TODD: But analysts say the party will still question the tactics of its own hard liners.

RON BROWNSTEIN, CNN SENIOR POLITICAL ANALYST: Has that line of argument, that political strategy been discredited by this defeat? There is no other word for it. And does that then allow other voices in the caucus to argue for a different direction.

TODD: Another big question coming out of this? Does John Boehner keep his speakership? GOP strategists we spoke to say he likely will, that he's got the votes to stay in. And who would want the job anyway, especially after this.

Brian Todd, CNN, Washington.


GORANI: All right, we'll have a lot more of course on the crisis in Washington and the eventual deal to reopen the government and raise the debt ceiling but now some of the other news stories we're following.

Talks on Iran's nuclear program in Geneva have taken a new more hopeful tone.

VAUSE: Yes, after two days of negotiations, Tehran says a deal might just be reached within six months.

GORANI: Now a joint statement described the talks as substantive and forward looking. No details were released. Iran's foreign minister spoke about the optimistic tone of the talks. Listen.


JAVAD ZARIF, IRANIAN FOREIGN MINISTER: As far as the United States is concerned, we have an open mind. We are prepared to allow the United States to show its good intentions and goodwill. Of course, we need to witness good faith. Good faith would require you to move in the same direction, not to move in different directions.

We want to see the actions of the United States be commensurate with the word that have been uttered by the highest officials of the United States, in that they want to deal with Iran based on mutual respect and interest and equal footing, and in fact to move towards a resolution of this issue.


GORANI: The former minister of Iran. Now as a U.S. diplomat in Geneva also noted the improved relations with Tehran.

VAUSE: Well they do warned this is going to be a long road and these are just the very first steps.


WENDY R. SHERMAN, U.S. UNDERSECRETARY OF STATE: What I think was different this time is that this Iranian government was elected by the people with a mandate for moderation, a mandate for economic change, sanctions relief and to address the concerns of the international community, to ensure a better economic future for the Iranian people.

And so the foreign minister, Zarif, and his delegation came prepared for detailed substantive discussion with a candor that I certainly have not heard in the two years I've been meeting with Iranians and my P5 Plus 1 colleagues. Some of whom have been doing this for quite some time, found quite new and different.

All of that said, we are at the very beginning of a process. President Obama said that there are many years of mistrust. But there is also a very important objective. And that is to make sure that Iran does not acquire a nuclear weapon. And that the rights of the Iranian people to access peaceful nuclear energy are recognized, if all of the concerns of the international community are addressed.


VAUSE: So these talking on Iran's nuclear program set to resume early next month.

GORANI: And political fight that close the U.S. government for two weeks. It may be over for now.

VAUSE: But the ugly moments, the harsh words may not be easy to forgive, let alone forget. That's coming up next.



REP. JOHN BOEHNER (R), HOUSE SPEAKER: So we've been locked in a fight over here, trying to bring government down to size, trying to do our best to stop Obamacare, and we fought the good fight, we just didn't win.


VAUSE: OK, so what was the good fight actually over? You may not remember this, but it actually began with a demand by Republicans to defund Obamacare. But when the Democrats refused to budge, Republicans came out with new demands. It seems they had a new demand each day.

According to some reports there were as many as 21 new demands which are put forth by Republicans. Let's take a look at some of them.

When they couldn't get it defunded, well, they tried for a one-year delay of Obamacare. Democrats said no. Then they asked for big tax cuts, headlined by the Paul-Ryan budget. He the vice presidential nominee at the last election. Democrats said no. So the Republicans said can we have an expansion of offshore drilling? The Democrats said no, so then they take -- can we spot the new regulations, the carbon dioxide emissions, and all of you calling natural gas powerful. So it's not with the EPA. The Democrats said no.

Well, then can they maybe eliminate funding for Planned Parenthood? No, no, no. Allowing employees to eliminate insurance coverage, birth control? Again, the Democrats stood firmed and said no. The Republicans said, can we repeal the tax on medical devices? No one likes that. That was in fact their bipartisan issue, but they didn't, the Democrats said no.

Finally, they came back with this one, tougher income verification for anybody who's looking for a federal subsidy to buy Obamacare under this new health care insurance scheme. That they got. But the interesting thing about this, it was already part of the law -- Hala.

GORANI: Right. Hardly a huge concession by the Democrats in this case.

So the Democrats largely got what they wanted. What did the Republicans get? A small Obamacare concession. The government must confirm the eligibility of people receiving federal subsidies under the health care program. The U.S. senator who was really a big part of wanting to associate defunding Obamacare with passing any deal. We're talking about Ted Cruz here, he led the shutdown fight and he told CNN's Dana Bash that despite the fact that it didn't work out for him or for his party, those members of his party who wanted to defund Obamacare. He doesn't regret doing any of it. Listen.


DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: As you well know, you have a lot of fellow Republicans really downright angry at you. Because here we are, almost three weeks later. The strategy that you started out on to defund Obamacare as part of funding the government they never thought was going to work because the votes aren't there. And here we are, reopening the government after a lot of bruising political warfare, internally, and you got nothing for it.

SEN. TED CRUZ (R), TEXAS: Well, Dana, respectfully, I disagree with the premise of that. I think we have seen a remarkable thing happened. We saw the House of Representatives take a courageous stand listening to the American people. That everyone in official Washington just weeks earlier said would never happen.

That was a remarkable victory to see the House engage in a profile on courage. Unfortunately, the Senate chose not to follow the House. And in particular, we saw real division among Senate Republicans. That was unfortunate.


VAUSE: Yes, Republican Senator Ted Cruz of Texas said he was claiming victory, kind of? It was interesting, he held the news conference just as the Republican leader of the Senate was on the floor. That's considered to be a bit of a poke in the eye to the Republican senator, Mitch McConnell.

GORANI: And perhaps part of the reason he might not see this as big defeat for him is he's a household name now.


GORANI: And you're sort of the flag bearer of that portion of the Republican Party that essentially wanted Obamacare defunded and is on the right wing of the Republican Party now.

Tensions rose during the two weeks the government was shut down, there were some pretty harsh words and it got pretty brutal.

VAUSE: Yes. Carol Costello has more details on that.


CRUZ: Hello, America.

CAROL COSTELLO, CNN ANCHOR (voice-over): Let's begin with perhaps the ugliest, politicians capitalizing on World War II vets trying to visit their memorial. They were met with barricades. So protesters tore them down and pile them up in front of the White House.

CRUZ: This is the people's memorial. Why is the federal government spending money to erect barricades to keep veterans out of this memorial? Our veterans should be above politics. Enough games.

COSTELLO: But Senator Cruz did not address what came after. Confederate flags and hate.

LARRY KLAYMAN, FREEDOM WATCH: I call upon all of you to wage a second American non-violent revolution. To use civil disobedience, and to demand that this president leave town. To get out. To put the -- to put the Quran down, to get up off his knees and to figuratively come up with his hands out.

COSTELLO: Actually there were a lot of ugly moments surrounding the nation's monument to our heroes. Park rangers who were following orders to close the monument. Experienced the nastiness themselves.

REP. RANDY NEUGEBAUER (R), TEXAS: Park Service should be ashamed of these things.


NEUGEBAUER: Well, you should be.

COSTELLO: Never mind that it was Congress that caused the government to shut down, and that the park ranger was working for free because technically she had been furloughed. Which sets us nicely for Congressman Steve Pierce's idea. He writes on his Facebook page, quote, "If you are a furloughed government employee we encourage you to reach out to your financial institution as soon as you worry you may miss a paycheck. Financial institutions offer short-term loans and other resources. Don't wait until you're behind on a bill, call now and explore your options."

Things got even uglier when lawmakers blamed one another for not funding NIH clinical trial for children. A message delivered in, yes, white lab coats.

REP. TODD ROKITA (R), INDIANA: Let us help people. Let us help children. Please.

COSTELLO: Democrats said they were outraged by all of this ugliness, but not angry enough to stop them from using it to raise money. The Democratic National Committee raised $850,000 the first day of the shutdown at a fundraiser for Charlie Rangel of New York. That's according to "The Hill."

But at least our elected leaders get to work out.

As Democrat Bruce Braley pointed out, quote, "There's hardly anybody working down there. There's no towel service. We're doing our own laundry down there. And we pay a fee that belong to the House gym. So this is no different than if you're working for an employer that offers a wellness program." Maybe he forgot taxpayers pay for his extracurricular crunches.

Carol Costello, CNN, Atlanta.


VAUSE: Such a mystery why people don't like them.

GORANI: I know.

VAUSE: The approval rating is in the gutter.

GORANI: I don't -- I don't understand, single digits in some cases. We're back after the break with more of our special coverage.

VAUSE: CNN coverage in the U.S. and around the world, standing by with more on the events in Washington, please stay with us.