1 of 4. Labour party candidates Itzik Shmuli (R) and Stav Shaffir attend a mock election at a high school in Ramat Gan near Tel Aviv December 6, 2012.

TEL AVIV | Thu Jan 3, 2013 7:31am EST

TEL AVIV (Reuters) - They are young and they are driven. They got half a million Israelis out on the streets demanding social justice. Now they want their votes.

The leaders of a grassroots social protest movement that swept Israel in 2011 have shot to the top of a rejuvenated Labour party that polls say will at least double its power in a January 22 general election that Prime Minister Benjamin Netanyahu's right-wing Likud is forecast to win.

"The next stage is to continue what started in the streets, to bring that to the ballot ... so that we can translate it into achievements in budgets, laws and a change of policy," said 32-year-old Itzik Shmuli, who as head of the student union was one of the most prominent leaders of the protest movement.

It began with a handful of youngsters who pitched tents along Tel Aviv's luxurious Rothschild Avenue to protest against high housing costs. Eventually, hundreds of thousands of Israelis demonstrated weekly across the country.

Inspired also by the Arab Spring that swept the region, the protesters, chanting "the people demand social justice", dominated headlines in Israel in the summer of 2011, and posed a new challenge to the government.

Political parties soon saw potential vote magnets in the movement's leaders, who were often portrayed in the media as idealists with just the right mix of innocence and savvy to promote a message of hope and change.

Shmuli quit the student union this year to win the number 11 spot on Labour's list of parliamentary candidates, running a distant second to Likud in the upcoming election.

"The answer the government gave was a thin, cosmetic and cynical one. They did not want to truly deal with the problems raised by the protest," Shmuli said.

Israel has a relatively low unemployment rate of 6.7 percent and a growing economy, but business cartels and wage disparities have kept many from feeling the benefit.

In parliament, Shmuli and his allies hope to push affordable housing, reform the education, welfare and health systems and to narrow the gap between rich and poor in Israel, which the Organisation for Economic Cooperation and Development (OECD) has said is among the highest in developed countries.

In response to the protest, Netanyahu, a free market champion and fiscal conservative, vowed to revamp the economy and lower living costs. Some of the government's steps have eased the pain for the middle and lower classes.

But other measures are moving slowly or have had no major effect. With rising food and fuel prices, few feel significant change in the cost of living since the protest.

"It means that we were mistaken when, as a young generation, we thought we could avoid sitting in the places where we make the most important decisions," said Stav Shaffir, 27, another of the movement's leaders.

Shaffir is now eighth on Labour's list. Polls show that like Shmuli, she will be a member of Israel's next parliament, with her party winning about 16 to 20 of the 120 Knesset seats.

"There is something pure and beautiful about a popular protest," Shaffir told a group of students in December. "But the change it brings comes only after generations ... and we don't have that time if we want to change policy."

UNDER THE TANKS

Shaffir lives with four roommates in a Jaffa apartment. Shmuli moved to the run-down town of Lod last year to set up a student community outreach program. Both say they have no intention of changing their dwellings after becoming lawmakers.

At the protest's peak, Shmuli addressed about half a million people at one of the biggest rallies ever held in Israel. He spoke to the cheering crowd about "The New Israelis", who will fight for a better future and social equality.

But that was in September 2011. The question now is whether the "New Israelis" who cheered for Shmuli will turn up to vote for him.

The summer of 2011 marked one of the only times that social-economic issues consistently topped the agenda in a country whose population of 7.8 million is usually preoccupied with matters of war and peace.

Yariv Ben-Eliezer, a media expert at the Interdisciplinary Center Herzliya, a college near Tel Aviv, says those issues have once more taken a back seat.

In November, Israel carried out an eight-day offensive in Gaza with the declared aim of ending Palestinian rocket fire into its territory. The same month the Palestinians relaunched their statehood bid at the United Nations and won great support.

"Before the (Gaza) operation, Labour was rising in the polls and Likud was sliding. There was a feeling that the social protest should be moved into politics. But the main issue has gone back to being defense," Ben-Eliezer said.

Shmuli disagrees. Called up to the Gaza border for reserve duty during the offensive, he took shelter with fellow soldiers under their tank when rockets from Gaza hailed down.

"While all these missiles were flying over us, we had to find a way to pass those 10 minutes under the tank - and what did we talk about? About housing and about the high living costs."

Many of the protesters came from the middle class, which bears a heavy tax burden and sustains the conscript military.

"We will always be there for our country - whenever it needs us, but the big question is, when we are out of our uniforms, will the state be there for us?" Shmuli said.

Tamar Hermann at The Israel Democracy Institute, a Jerusalem think tank, said a Netanyahu election win would not spell defeat for the social protest movement.

"Now we see the social-economic issues taking a much more significant role in the discussion over the future of the country," Hermann said. "All the parties feel obliged to relate to the issues that were raised by the protest movement."

MAKING POLITICS SEXY

Israel's election had been set for late 2013 but the government failed to agree on a state budget, which it said would require harsh austerity steps.

Netanyahu called an early vote in what commentators said was an attempt by the prime minister and partners in his governing coalition to avoid the risk of going to the polls after imposing unpopular cuts.

Labour has focused its campaign almost entirely on social and economic issues, and its projected gains in parliament are largely attributed to the protest movement.

If Netanyahu, against the odds, chooses to include Labour in his next government, some of the movement's demands will undoubtedly be part of that deal, said Yossi Yonah, a Labour candidate who has advised social protest leaders.

Labour chief Shelly Yachimovich, an advocate of a welfare state, has not ruled out serving in a Netanyahu administration. But the option seems remote given their opposing economic views.

Looking ahead to likely budget cuts after the election, Yonah predicted such steps could revive and bolster the protest movement, if it combines civil action on the streets with a combative parliamentary opposition to Netanyahu.

"The protest's impact cannot be judged after only one year," Yonah said. "Eventually something must give."

Both Shaffir and Shmuli hope to draw young people who are disillusioned with politics to come vote.

"Our parents brought us up to believe that if we work hard, study and try then everything will be okay, we will succeed. But when we grew up, when we were released from the army, we looked around and this society we were told about was gone," Shaffir said.

Instead, she said, they found corrupt politicians who were not looking out for young people's interests.

The tents that Shaffir helped pitch are long gone and life has returned to normal on Rothschild Avenue, which is lined with banks, shops and cafes.

"We need to make politics sexy again," Shaffir said, sitting on a bench on the trendy avenue filled with people walking their dogs and riding bicycles.

(Writing by Maayan Lubell; Editing by Jeffrey Heller and Janet McBride)

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Residents run along a street after an air strike by a fighter jet loyal to Syrian President Bashar al-Assad in Aleppo's al-Marja district December 31, 2012.

AZAZ, Syria | Thu Jan 3, 2013 8:50am EST

AZAZ, Syria (Reuters) - Rebels battled on Thursday to seize an air base in northern Syria, part of a campaign to fight back against the air power that has given President Bashar al-Assad's forces free rein to bomb rebel-held towns.

More than 60,000 people have been killed in the 21-month-old uprising and civil war, the United Nations said this week, sharply raising the death toll estimate in a conflict that shows no sign of ending.

After dramatic advances over the second half of 2012, the rebels now hold wide swathes of territory in the north and east, but are limited in exerting control because they cannot protect towns and villages from Assad's helicopters and jets.

Hundreds of fighters from rebel groups were attempting to storm the Taftanaz air base, near the northern highway that links Syria's two main cities, Aleppo and the capital Damascus.

Rebels have been besieging air bases across the north in recent weeks, in the hope this will reduce the government's power to carry out air strikes and resupply loyalist-held areas.

A rebel fighter speaking from near the Taftanaz base overnight said the base's main sections were still in loyalist hands but insurgents had managed to infiltrate and destroy a helicopter and a fighter jet on the ground.

The northern rebel Idlib Coordination Committee said the rebels had detonated a car bomb inside the base.

The government's SANA news agency said the base had not fallen and that the military had "strongly confronted an attempt by the terrorists to attack the airport from several axes, inflicting heavy losses among them and destroying their weapons and munitions".

Rami Abdulrahman, head of the opposition-aligned Syrian Observatory for Human Rights which monitors the conflict from Britain, said as many as 800 fighters were involved in the assault, including Islamists from Jabhat al-Nusra, a powerful group that Washington considers terrorists.

Taftanaz is mainly a helicopter base, used for missions to resupply army positions in the north, many of which are cut off by road because of rebel gains, as well as for dropping crude "barrel bombs" of explosives on rebel-controlled areas.

"WHAT IS THE FAULT OF THE CHILDREN?"

Near Minakh, another northern air base that rebels have surrounded, government forces have retaliated by regularly shelling and bombing nearby towns.

In the town of Azaz, where the bombardment has become a near nightly occurrence, shells hit a family house overnight. Zeinab Hammadi said her two wounded daughters, aged 10 and 12, had been rushed across the border to Turkey, one with her brain exposed.

"We were sleeping and it just landed on us in the blink of an eye," she said, weeping as she surveyed the damage.

Family members tried to salvage possessions from the wreckage, men lifting out furniture and children carrying out their belongings in tubs.

"He (Assad) wants revenge against the people," said Abu Hassan, 33, working at a garage near the destroyed house. "What is the fault of the children? Are they the ones fighting?"

Opposition activists said warplanes struck a residential building in another rebel-held northern town, Hayyan, killing at least eight civilians.

Video footage showed men carrying dismembered bodies of children and dozens of people searching for victims in the rubble of the destroyed building, shouting "God is greatest". The provenance of the video could not be independently confirmed.

In addition to their tenuous grip on the north, the rebels also hold a crescent of suburbs on the edge of Damascus, which have come under bombardment by government forces that control the center of the capital.

On Wednesday, according to opposition activists, dozens of people were incinerated in an inferno caused by an air strike on a petrol station in a Damascus suburb where residents were lining up for precious fuel.

The civil war in Syria has become the longest and bloodiest of the conflicts that rose out of uprisings across the Arab world in the past two years.

Assad's family has ruled for 42 years since his father seized power in a coup. The war pits rebels, mainly from the Sunni Muslim majority, against a government supported by members of Assad's Shi'ite-derived Alawite minority sect and some members of other minorities who fear revenge if he falls.

The West, most Sunni-ruled Arab states and Turkey have called for Assad to leave power. He is supported by Russia and Shi'ite Iran.

(Additional reporting by Khaled Yacoub Oweis in Amman and Dominic Evans in Beirut; Writing by Peter Graff; Editing by Ruth Pitchford)

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Smoke is seen rising from a mountain in Kachin state in this still image taken from a video dated December 27, 2012.

YANGON | Thu Jan 3, 2013 6:38am EST

YANGON (Reuters) - Myanmar's military has used jets to attacks rebel fighters in northern Kachin state, the government said on Thursday, its first admission of an intensification of a conflict that has raised doubts about its reformist credentials.

Rebel sources have reported aerial bombings, shelling and even the use of chemical weapons since December 28 after the Kachin Independence Army (KIA) ignored an ultimatum to stop blocking an army supply route in the hilly, resource-rich state where more than 50,000 people have been displaced.

Official newspapers said that air support was used on December 30 to thwart KIA fighters who had occupied a hill and were attacking logistics units of the Tatmadaw, as Myanmar's military is known.

"The Tatmadaw troops cleared Point-771 hill and its surrounding areas where the KIA troops were attacking the Tatmadaw logistic troops," the New Light of Myanmar, a government mouthpiece, said. "The air cover was used in the attack."

U.N. Secretary-General Ban Ki-moon voiced concern on Wednesday over reports of helicopters and fighter jets being used in the state bordering China. The KIA said the attacks were intended to clear the path for an assault on its headquarters in Laisa.

Ban called on Myanmar's government to "desist from any action that could endanger the lives of civilians" and reiterated demands for humanitarian aid groups to be granted access, U.N. spokesman Martin Nesirky said in a statement.

President Thein Sein's quasi-civilian administration insists it wants a ceasefire and political dialogue. It says troops have acted only in self-defense and on Thursday denied having plans to seize the KIA's stronghold.

DOMINANT MILITARY

The escalation of fighting has raised doubts about the sincerity of the reformist ex-generals running the government and the extent of their power in a country the size of Britain and France plagued by decades of internal conflict.

Some analysts and diplomats say central government is either not fully committed to peace with the KIA or unable to assert control over the military, which still dominates politics and the economy despite formally ceding power in March 2011.

Colonel James Lum Dau, a Thai-based spokesman for the KIA's political wing, said Kachin officials on the ground had reported up to 300 people killed in air strikes.

"We are in a defensive position. Right now more people are suffering not only bombings, but shelling and spraying of chemical weapons with helicopter gunships and jets," he said. "Only god knows what to do. We are praying."

It is difficult for journalists to independently verify accounts from the two sides.

Fighting erupted in Kachin in June 2010, ending a 17-year truce, and has continued even as government negotiators have agreed ceasefires elsewhere with ethnic Shan, Chin, Mon and Karen militias after decades of fighting in border areas.

Mistrust runs deep between the military and the KIA, which was once backed by China, and multiple rounds of talks aimed at reaching a ceasefire have gone nowhere. Analysts say a history of bad blood and a battle for control of resources, including highly lucrative jade, could be stoking the unrest.

Zaw Htay, a senior official in Thein Sein's office, told Reuters no air strikes had taken place but K-8 trainer jets had provided cover fire to protect ground troops from rebel attacks. The military, he said, had no intention of seizing the KIA's headquarters.

"The president has said this and at the same time he has invited KIA leaders to come and talk with him in Naypyitaw, but they still haven't responded," Zaw Htay said.

(Additional reporting by Paul Carsten in Bangkok; Writing by Martin Petty; Editing by Alan Raybould)

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JERUSALEM | Thu Jan 3, 2013 8:44am EST

JERUSALEM (Reuters) - Israeli forces raided the West Bank city of Jenin on Thursday in search of a suspected Palestinian militant, touching off clashes with residents who threw rocks and petrol bombs at them, an Israeli security source said.

It was the second time this week that Israeli forces had entered the Jenin area to detain suspects.

On Tuesday, Israeli soldiers disguised as Palestinians raided the village of Tamoun, arresting a member of the Islamic Jihad group. Several dozen Palestinians were injured in ensuing clashes, medical officials said.

In the latest raid, the soldiers clashed with some 500 Palestinians, forcing them out of Jenin, the security source said. An elderly Palestinian woman was slightly injured by a dog used by Israeli forces during the operation.

The city is under the control of the Palestinian Authority, which exercises limited self-rule in the West Bank under interim peace accords with Israel.

Israel has reserved the right to carry out its own operations against militants in the West Bank.

(Reporting by Ari Rabinovitch; Editing by Louise Ireland and Jeffrey Heller)

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House Speaker John Boehner (R-OH) arrives to speak to the media on the ''fiscal cliff'' on Capitol Hill in Washington, December 21, 2012.

WASHINGTON | Wed Jan 2, 2013 11:13pm EST

WASHINGTON (Reuters) - In the wake of bruising fights in their own ranks over the "fiscal cliff" and aid for victims of superstorm Sandy - Republicans in the U.S. House of Representatives open a new Congress on Thursday more divided than ever.

While their leader, Speaker John Boehner, seems in no danger of losing his position because of the divisions, his ability to speak for his membership in the House appears greatly diminished.

That could not come at a worse time for Republicans as they prepare for their next attempt to get more spending cuts out of President Barack Obama. They will try to use the debt ceiling - and Obama's request to raise it - as leverage, as they did in 2011.

But if the final days of this Congress were indicative of things to come, Republicans will have a rough time effectively using their majority in the House against Obama, who even Republicans acknowledge is at the top of his game following the Democrat's re-election in November.

The fiscal cliff battle to avert steep tax hikes and spending cuts that were due to kick in at the start of this year proved gut-wrenching for Republicans.

Obama's demand for a tax hike on the rich challenged a core principle that has guided Republicans for decades: No new taxes. Ever.

Yet, late on New Year's night, 85 Republicans in the House did just that, voting to raise income taxes on household income of more than $450,000 a year.

Some of the Republican Party's biggest stars were among the 85 - including Boehner and Paul Ryan, the 2012 Republican vice presidential candidate, who is seen as a conservative anchor.

But 151 House Republicans stood in defiance, leaving Boehner in the unenviable position of having to rely on opposition Democrats to pass major legislation.

Earlier in the fiscal cliff fight, Boehner suffered a humiliating defeat when his "Plan B" solution - which would have limited the tax hikes to income of $1 million a year or more, got so little support he had to cancel the vote.

No sooner had the fiscal cliff battle ended than Boehner found himself in trouble with other Republicans over aid for victims of Sandy, the second costliest storm in U.S. history, which smashed New York and New Jersey coastal communities in late October.

Legislation providing disaster relief to New York, New Jersey and other East Coast states was delayed. A House Republican aide said that given Republicans' frustration with the fiscal cliff bill and its lack of significant spending cuts, "it was not a good time to immediately vote on $60 billion in new spending."

"I don't enjoy saying this. I consider myself a personal friend of John Boehner's," said Republican Representative Peter King of New York. "It pains me to say this, but the fact is that the dismissive attitude that was shown ... toward New York, New Jersey and Connecticut typifies, I believe, a strain in the Republican Party."

Earlier, King had condemned House inaction on Sandy as a "knife in the back."

Republican Representative Michael Grimm, also of New York, said of Boehner's refusal to bring the disaster bill to a vote: "There was a betrayal. There was an arrogant judgment that is going to cost I think the trust of the American people."

Ironically, Grimm first won his seat in Congress in 2010 with the help of conservative Tea Party activists who sometimes show displeasure with disaster aid spending.

By midday on Wednesday, Boehner had changed course, promising a House vote by week's end on a $9 billion down payment in storm assistance, with a second bill providing $51 billion to be voted on January 15.

TEA PARTY EFFECT

Paul Light, a New York University professor and a specialist on Congress, said the vote on the fiscal cliff bill could mark the start of a "major realignment" in the run-up to the 2014 congressional elections and the 2016 presidential race.

Republicans who voted for the legislation "are going to have to find a home. They're not going to find it with the Tea Party," Light said.

He said that Republicans who were uncomfortable with the Tea Party could begin aligning themselves more closely with a dwindling band of centrist Democrats.

Congressional Republicans, especially in the House, have been buffeted for two years by the Tea Party, which helped them win control of the House in 2010.

Boehner had to navigate Tea Party demands throughout the 2011 fight over raising U.S. borrowing authority or risking a historic government default.

In rapid succession, Tea Party-fueled battles were waged over infrastructure investments, farm subsidies, payroll tax cuts and the fiscal cliff.

At the core of the disputes was whether the government should be made smaller, forcing Boehner to balance that demand with the need to govern and keep the federal government operating in an orderly way.

For all the heartache over the past several weeks as Republicans fought with one another over whether to let taxes on the rich go up, many see better days ahead.

"By and large, people are probably happy to have it behind them. This was obviously the worst part of the fiscal debate," said one House Republican staffer, referring to the tax hikes.

The staffer added, "Republicans get to point out that we still have a $1 trillion deficit and ask Democrats what kind of spending cuts, entitlement reforms they are willing to do to fix it."

Republicans feel that will be an easier lift for them - one that they can sell to the American public as they move on to the fight over the debt ceiling.

(Editing by Fred Barbash and Peter Cooney)

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A man walks past the U.S. Capitol Building in Washington December 17, 2012.

WASHINGTON | Wed Jan 2, 2013 4:52pm EST

WASHINGTON (Reuters) - Washington has steered clear of severe austerity measures for now, reducing the risk of recession, but a clutch of U.S. tax hikes will nevertheless be a drag on economic growth this year.

The U.S. Congress approved a deal late on Tuesday to scale back some $600 billion in scheduled tax hikes and government spending cuts known as the "fiscal cliff."

Analysts said the package at least marked a temporary reprieve for the economy, and investors charged into U.S. stocks, pushing the Standard & Poor's 500 up 2.5 percent on Wednesday.

However, the legislation, which is expected to be signed into law soon by President Barack Obama, will raise taxes on most Americans through a hike in the payroll tax used to fund Social Security pensions for the elderly.

Economists say the U.S. economy would likely grow much more quickly if the government was not raising taxes.

The payroll tax hike alone - which comes from the expiration of stimulus measures enacted to fight the 2007-09 recession - could push the average household tax bill up by about $700 this year, according to estimates from the Tax Policy Center, a Washington think tank.

That will likely reduce consumer spending and subtract about three quarters of a percentage point from economic growth, said Joseph LaVorgna, an economist at Deutsche Bank in New York.

The package will also raise income tax rates for households making over $450,000 a year, although rates will remain at 2012 levels for everyone else.

The other modest tax hikes, including a tax on wealthy households to help pay for Obama's 2010 healthcare reform law, could shave another quarter of a point from growth.

"We are still getting some fiscal drag this year," LaVorgna said.

Even so, the tenor of the deal was widely anticipated by economists in financial centers like Wall Street, and appears to support forecasts for economic growth of around 2 percent this year.

Barclays Capital said it was holding its growth forecast for this year at 2.1 percent.

A Reuters poll of analysts in December produced a median forecast for 1.9 percent U.S. economic growth in 2013.

"There seems to be a collective sigh of relief," strategists at Brown Brothers Harriman wrote in a note to clients. "The full force of the U.S. fiscal cliff - (which) could have dragged the world's largest economy into a recession - has been averted."

The Congressional Budget Office had estimated that completely running over the fiscal cliff would have caused the economy to contract 0.5 percent this year. The full brunt of the cliff would have hit the average U.S. household with about an additional $3,500 in taxes this year, according to the Tax Policy Center.

Still, U.S. lawmakers only agreed to delay scheduled cuts on government spending on the military, education and other areas for another two months.

Many economists think ongoing talks in Congress will eventually lead these spending cuts to be put off until next year, presumably once lawmakers reach a deal to reduce spending over the longer term while granting the government authority to increase the national debt.

Then again, they might not reach a deal, and the planned spending cuts would then cut deeply into economic growth in the second half of the year.

"While we retain our 2013 GDP forecast, we also retain the view that fiscal policy presents downside risks to growth," analysts at Barclays said in a research note.

Some economists noted that tax policy now looks more stable for the majority of Americans, removing some of the uncertainty that may have held back spending by consumers and business in recent months.

At the same time, with an axe still hanging above billions of dollars in government spending, many businesses are likely to remain cautious.

Analysts say financial markets are likely to remain on tenterhooks until Congress raises the nation's $16.4 trillion debt ceiling, which the U.S. Treasury confirmed had been reached on Monday.

The government likely will need to raise the debt ceiling by February or March to remove the risk albeit remote, of the country defaulting on its debt. Such an extreme scenario would likely make it more expensive for governments and companies alike to borrow money, hurting the economy.

"We have some more certainty, but there are still quite a few questions left to be resolved," said Dana Saporta, an economist at Credit Suisse.

(Additional reporting by Jonathan Spicer in New York; Editing by Leslie Adler)

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Screenwriter Mark Boal and Director Kathryn Bigelow pose for photos for their new film 'Zero Dark Thirty' in New York December 4, 2012.

WASHINGTON | Wed Jan 2, 2013 7:13pm EST

WASHINGTON (Reuters) - After the Senate Intelligence Committee's chairwoman expressed outrage over scenes that imply "enhanced interrogations" of CIA detainees produced a breakthrough in the hunt for Osama bin Laden, the panel has begun a review of contacts between the makers of the film "Zero Dark Thirty" and CIA officials.

In the latest controversy surrounding the film, Reuters has learned that the committee will examine records charting contacts between intelligence officials and the film's director Kathryn Bigelow and screenwriter Mark Boal.

Investigators will examine whether the spy agency gave the filmmakers "inappropriate" access to secret material, said a person familiar with the matter. They will also probe whether CIA personnel are responsible for the portrayal of harsh interrogation practices, and in particular the suggestion that they were effective, the person said.

The intelligence committee's Democrats contend that is factually incorrect.

Zero Dark Thirty is a dramatized account of the hunt for al Qaeda leader bin Laden and the May 2011 U.S. Navy SEAL raid in which he was killed. Government e-mails and memoranda released to the conservative group Judicial Watch show that both the CIA and Pentagon gave the filmmakers extensive access.

But the film has also produced a series of awkward political headaches for President Barack Obama. Early on, Obama's Republican critics suggested it was a gimmick to boost his re-election campaign. But now, some of Obama's liberal supporters are attacking the film and officials who cooperated with its creators for allegedly promoting the effectiveness of torture.

The CIA had no comment on the latest congressional inquiry regarding the film.

One of the intelligence officials whom the documents show as having met with the filmmakers is Michael Morell, the CIA's deputy director at the time and now the agency's acting chief.

Current and former national security officials have said Morell, a highly regarded agency veteran, is a favorite to succeed retired Gen. David Petraeus as the agency's director.

CLOUD OVER MORELL?

But some of the same officials now say the controversy over the film's content has cast a cloud over Morell's prospects.

Last month, Intelligence Committee chairwoman Sen. Dianne Feinstein joined Michigan Sen. Carl Levin, chairman of the Senate Armed Services Committee, and former Republican Presidential candidate Sen. John McCain in sharply condemning what they described as "particularly graphic scenes of CIA officers torturing detainees" in Zero Dark Thirty.

The film has been screened in New York and Los Angeles but does not premiere nationwide until January 11.

In a December 19 letter to the chairman and CEO of Sony Pictures Entertainment, which produced the film, the senators alleged it was "grossly inaccurate and misleading in its suggestion that torture resulted in information that led to the location" of bin Laden.

The three senators claim Zero Dark Thirty "clearly implies that the CIA's coercive interrogation techniques were effective in eliciting important information related to a courier" for bin Laden, who would unknowingly lead the agency to his compound in Abbottabad, Pakistan.

The senators assert, however, that their own review of CIA records proves that the story told in the film is "incorrect" and "the CIA learned of the existence of the courier, his true name and location through means unrelated to the CIA detention and interrogation program."

Sony, in response, released a statement from Bigelow and Boal, which said in part: "We depicted a variety of controversial practices and intelligence methods that were used in the name of finding bin Laden.

"The film shows that no single method was necessarily responsible for solving the manhunt, nor can any single scene taken in isolation fairly capture the totality of efforts the film dramatizes."

Boal said in an email that he was unaware of the Senate committee's interest and had had no contact with the panel.

The person familiar with the committee's plan to review administration dealings with the filmmakers said initially this would involve reviewing uncensored copies of CIA records regarding the film. The committee presently does not plan to contact the filmmakers directly, the source said.

A 'DRAMATIZATION'

Last year, the CIA and Pentagon, in response to a freedom of information request from Judicial Watch, released hundreds of pages of internal documents discussing the agencies' arrangements for dealing with Bigelow and Boal.

The documents, many heavily redacted, show that top CIA and Pentagon officials, including Morell and Michael Vickers, now the Pentagon's intelligence chief, talked to the filmmakers.

One Pentagon email exchange with Ben Rhodes, a senior White House national security aide, said Boal had been briefed by CIA officials "with the full knowledge and full approval/support" of Leon Panetta, who served as CIA director and then Secretary of Defense while the film was being prepared.

A second person familiar with the matter said the committee had acquired copies of the CIA records last year.

The committee originally obtained the uncensored records at the request of Republicans, who were looking for evidence that intelligence or Pentagon personnel inappropriately shared classified information with the filmmakers, this source said.

Other Congressional Republicans, most notably Representative Peter King, outgoing chairman of the House Committee on Homeland Security, complained loudly about dealings between the Obama administration and the filmmakers following reports it would be released shortly before the 2012 Presidential election. Ultimately, the film was not released until after the election.

Two days after the Senators made public their letter to Sony, the CIA released a statement by Morell, who said that Zero Dark Thirty was a "dramatization, not a realistic portrayal of the facts," and that while the agency had "interacted" with the filmmakers, it did not "control the final product."

Morell's statement was equivocal on whether "enhanced interrogations" had produced information critical to finding bin Laden.

"Whether enhanced interrogation techniques were the only timely and effective way to obtain information from those detainees, as the film suggests, is a matter of debate that cannot and never will be definitively resolved," Morell added.

(Editing by Warren Strobel and Todd Eastham)

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1 of 12. Speaker of the House John Boehner (R-OH) walks with House Majority Leader Rep. Eric Cantor (R-VA) to a meeting with House Republicans on the ''fiscal cliff'' budget deal on Capitol Hill in Washington on January 1, 2013. Washington's last-minute scramble to step back from a ''fiscal cliff'' ran into trouble on Tuesday as Republicans in the House of Representatives balked at a deal to avert a budget crisis.

WASHINGTON | Thu Jan 3, 2013 12:44am EST

WASHINGTON (Reuters) - President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after a hard-fought "fiscal cliff" deal narrowly averted devastating tax increases and spending cuts.

The agreement, approved late on Tuesday by the Republican-led House of Representatives and signed by Obama on Wednesday, was a victory for the president, who had won re-election in November on a promise to address budget woes, partly by raising taxes on the wealthiest Americans.

But it set up potentially bruising showdowns over the next two months on spending cuts and an increase in the nation's limit on borrowing. Republicans, angry the fiscal cliff deal did little to curb the federal deficit, promised to use the debt-ceiling debate to win deep spending cuts next time.

Republicans believe they will have greater leverage over Democrat Obama when they must consider raising the borrowing limit in February because failure to close a deal could mean a default on U.S. debt or another downgrade in the U.S. credit rating. A similar showdown in 2011 led to a credit downgrade.

"Our opportunity here is on the debt ceiling," Republican Senator Pat Toomey of Pennsylvania said on MSNBC. "We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean."

But Obama and congressional Democrats may be emboldened by winning the first round of fiscal fights when dozens of House Republicans buckled and voted for major tax hikes for the first time in two decades.

"We believe that passing this legislation greatly strengthens the president's hand in negotiations that come next," House Minority Leader Nancy Pelosi told NBC in an interview to air on Thursday.

Obama, who is vacationing in Hawaii, signed the legislation late on Wednesday, the White House said.

"We received the bill late this afternoon, and it was immediately processed. A copy was delivered to the president for review. He then directed the bill be signed by autopen," a senior administration official said. An autopen is an automatic pen with the president's signature.

Deteriorating relations between leaders in the two parties do not bode well for the more difficult fights ahead. Vice President Joe Biden and Republican Senate leader Mitch McConnell had to step in to work out the final deal as the relationship between House Speaker John Boehner and Obama unraveled.

Senate Majority Leader Harry Reid also drew the ire of Boehner, who told Reid in the White House to "Go fuck yourself" after a tense meeting last week, aides said. His remark came after the Democrat accused Boehner of running a "dictatorship" in the House.

Bemoaning the intensity of the fiscal cliff fight, Obama urged "a little less drama" when the Congress and White House next address budget issues like the government's rapidly mounting $16 trillion debt load. He vowed to avoid another divisive debt-ceiling fight before the late-February deadline for raising the limit.

"While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up," Obama said before he headed to Hawaii to resume an interrupted vacation.

NOT TIME TO CELEBRATE

Analysts warned that might not be so easy. "While the markets and most taxpayers may breathe a sigh of relief for a few days, excuse us for not celebrating," said Greg Valliere, chief political strategist at Potomac Research Group.

"We have consistently warned that the next brawl represents a far greater threat to the markets - talk of default will grow by February, accompanied by concerns over a credit rating downgrade," he said.

Rating agencies Moody's Investors Service and Standard & Poor's said the "fiscal cliff" measure did not put the budget on a more sustainable path. The International Monetary Fund said raising the debt ceiling would be a critical move.

"More remains to be done to put U.S. public finances back on a sustainable path without harming the still fragile recovery," said Gerry Rice, a spokesman for the IMF.

Financial markets that had been worried about the fiscal cliff showdown welcomed the deal, with U.S. stocks recording their best day in more than a year. The S&P 500 achieved its biggest one-day gain since December 20, 2011, pushing the benchmark index to its highest close since September 14.

The debate over "entitlement" programs is also bound to be difficult. Republicans will be pushing for significant cuts in government healthcare programs like Medicare and Medicaid for retirees and the poor, which are the biggest drivers of federal debt. Democrats have opposed cuts in those popular programs.

"This is going to be much uglier to me than the tax issue ... this is going to be about entitlement reform," Republican Senator Bob Corker of Tennessee said on CNBC.

"Now that we have this other piece behind us - hopefully - we'll deal in a real way with the kinds of things our nation needs to face," he said.

The fiscal cliff crisis ended when dozens of Republicans in the House relented and backed a bill passed by the Democratic-controlled Senate that hiked taxes on household income above $450,000 a year. Spending cuts of $109 billion in military and domestic programs were delayed for two months.

Economists had warned that the fiscal cliff of across-the-board tax hikes and spending cuts would have punched a $600 billion hole in the economy this year and threatened to send the country back into recession.

Dozens of House Republicans reluctantly approved the Senate bill, which passed by a bipartisan vote of 257-167 and sent it to Obama to sign into law.

Peter Huntsman, chief executive of chemical producer Huntsman Corp, said the vote did little to reduce the U.S. budget deficit and would hinder growth.

"We haven't even begun to address the basic issues behind this," Huntsman told Reuters. "We haven't fixed anything. All we've done is addressed the short-term pain.

The vote underlined the precarious position of Boehner, who will ask his Republicans to re-elect him as speaker on Thursday when a new Congress is sworn in. Boehner backed the bill, but most House Republicans, including his top lieutenants, voted against it.

The Ohio congressman also drew criticism on Wednesday from his fellow Republicans for failing to schedule a House vote on a bill passed by the Senate that would provide federal aid to Northeastern states hit by the storm Sandy.

(Additional reporting by Susan Heavey, Richard Cowan in Washington and Gabriel Debenedetti and Ernest Scheyder in New York, Editing by Alistair Bell, Peter Cooney and Mohammad Zargham)

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1 of 7. U.S. Secretary of State Hillary Clinton (L) leaves New York Presbyterian Hospital with husband, Bill (TOP), and daughter, Chelsea (C), in New York, January 2, 2013. The secretary of state, who has not been seen in public since Dec. 7, was revealed on Sunday evening to be in a New York hospital under treatment for a blood clot that stemmed from a concussion she suffered in mid-December.

WASHINGTON | Wed Jan 2, 2013 7:58pm EST

WASHINGTON (Reuters) - Secretary of State Hillary Clinton was discharged from a New York hospital on Wednesday after being treated for a blood clot near her brain and her doctors expect her to make a full recovery, the State Department said.

Clinton, who has not been seen in public since December 7, was at New York-Presbyterian Hospital under treatment for a blood clot behind her right ear that stemmed from a concussion she suffered in mid-December, the department said on Sunday.

The concussion was the result of an earlier illness, described by the State Department as a stomach virus she had picked up during a trip to Europe that led to dehydration and a fainting spell after she returned to the United States.

"Secretary Clinton was discharged from the hospital this evening. Her medical team advised her that she is making good progress on all fronts, and they are confident she will make a full recovery," Philippe Reines, a deputy assistant secretary of state, said in a statement.

Reines said Clinton was "eager to get back to the office."

Earlier, State Department spokeswoman Victoria Nuland told reporters at her daily briefing Clinton had been talking with her staff by telephone and receiving memos.

Clinton also spoke to two foreign officials - the U.N. envoy on Syria and the prime minister of Qatar - on Saturday, the day before the State Department disclosed the blood clot and her stay at the hospital.

In a statement released by the State Department on Monday, Clinton's doctors said she was being treated with blood thinners and would be released from the hospital once the correct dosage had been determined.

(Reporting by Arshad Mohammed; Editing by Sandra Maler and Todd Eastham)

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A statue of the United States first President, George Washington, is seen under the Capitol dome in Washington January 2, 2013.

WASHINGTON | Thu Jan 3, 2013 1:11am EST

WASHINGTON (Reuters) - The new 113th U.S. Congress, which convenes on Thursday, is set to take a fresh crack at a number of old, and highly contentious, issues, such as gun control, immigration, the record debt, tax reform and the farm bill.

Here's a look:

GUN CONTROL

President Barack Obama vows to crack down on gun violence in the wake of the school massacre last month in Newtown, Connecticut, the latest in a series of shooting rampages over the past decade.

According to a USA Today/Gallup Poll, 58 percent of Americans now back tougher gun laws, but 51 percent oppose Obama's call to outlaw so-called assault weapons.

A sharply divided Congress is awaiting a broad review of gun violence headed by Vice President Joe Biden.

IMMIGRATION

Hispanic voters last year helped Obama win a second term and Democrats to increase their clout in Congress.

Republicans took notice and want to win Hispanic support in the 2014 elections. One step toward that goal would be for Republicans to become more open to immigration reform.

The big question is how far Republicans would go to provide a path toward citizenship for illegal immigrants, estimated to number up to 12 million in the United States.

SEQUESTRATION

The White House and Congress managed to cut a deal on the "fiscal cliff" by agreeing to a two-month delay to sequestration - automatic spending cuts that were set to take effect on January 1.

Obama and lawmakers now have until March 1 to reach agreement on about $85 billion in spending reductions. If they do not, they will see across-the-board ones kick in, about evenly split between military and domestic programs.

DEBT LIMIT

Obama and Congress likely have until the end of February to raise the U.S. debt limit, now at $16.4 trillion.

Failure to do so would result in an unprecedented U.S. default, a move likely to rattle financial markets worldwide.

Obama says he will refuse to allow the debt limit to become a political bargaining tool again.

But Republicans do not seem be willing to raise it without extracting major spending cuts, mostly from government programs such as Social Security and Medicare.

FARM BILL

Congress gave itself a new deadline, September 30, to complete an overdue five-year, $500 billion farm bill that withered in election-year acrimony in 2012.

The House version proposed the deepest cuts in a generation for food stamps for the poor. But fiscal conservatives want more cuts in food stamps as well as farm subsidies.

The bills produced last year by the House and Senate agriculture committees would have cut between $23 billion and $35 billion. They will dig deeper in the months ahead.

It will be the first time Congress began work on a farm bill in one session and had to refile it in the new session.

HURRICANE SANDY RELIEF

Under pressure from fellow Republicans inside and outside of Congress, including New Jersey Governor Chris Christie, the Republican-led House is expected to move quickly in coming weeks to approve a long-delayed relief package for victims of superstorm Sandy in New York, New Jersey and Connecticut.

SENATE FILIBUSTER

Senate Majority Leader Harry Reid is fed up with Republican procedural roadblocks commonly known as filibusters.

So Reid, to the outrage of Republicans, vows to try to change the rules - unless both sides enter some sort of an agreement to make the chamber work more efficiently.

VIOLENCE AGAINST WOMEN

Obama's fellow Democrats will take another crack at trying to renew the 1994 Violence Against Women Act, which was championed nearly two decades ago by Biden, then a senator.

The measure is designed to combat domestic abuse, but became a legislative vehicle in Congress last year for Democrats and Republicans to jockey for political position.

(Reporting By Thomas Ferraro; Editing by Marilyn W. Thompson and Peter Cooney)

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