THE WEEK

By LINA LOFARO, ALICE PARK, MICHAEL QUINN, ALAIN L. SANDERS AND SIDNEY URQUHART

NATION

Clinton Rescues the Peso

President Clinton used his emergency powers to craft an economic rescue package for Mexico intended to avert the possibility of loan defaults that could ignite financial panic throughout the hemisphere. The President thus neatly bypassed congressional opposition to his original proposal of $40 billion in loan guarantees. Despite some grumbling on Capitol Hill, the President's move received support from both the Republican and Democratic leadership (and a sigh of relief from many members happy to be freed from having to vote on a controversial aid package). For the most part, Mexican financial markets reacted favorably to the President's announcement.

Trade Skirmish with China

Washington announced punitive tariffs on $1 billion worth of Chinese products, ranging from plastics to cellular phones, in retaliation for Beijing's failure to resolve a dispute over the piracy of American patents and copyrights. China, which sells about 40% of its exports to the U.S., swiftly counterpunched, saying it would then impose retaliatory tariffs on American compact discs, cigarettes and other items.

Congress's Week

The House overwhelmingly approved-by a bipartisan vote of 360 to 74-a G.O.P.-sponsored bill that would restrict Congress's ability to impose new unfunded mandates upon the states. The majority ignored objections from some Democrats that the measure would weaken federal protections for the poor and the environment. Minor differences need to be ironed out with the Senate before the legislation goes to President Clinton, who has said he supports it. In the Senate, positions hardened over a balanced-budget amendment, as key Democrats sought to protect Social Security from future cuts and pin down Republicans on precisely how they would erase the deficit. Senate majority leader Bob Dole admitted he did not yet command the two-thirds vote needed for passage.

Clinton's Week

After bandying about the idea for weeks, President Clinton finally proposed a specific increase in the minimum wage: 90-c- over the next two years, to $5.15. The proposal, if not already moot, is certain to ignite a major fight with congressional Republicans. A spat is also sure to erupt when the President formally unveils his $1.6 trillion budget this week. While promising to eliminate or consolidate hundreds of programs and slash $144 billion in spending over the next five years, the President's plans do not cut deeply enough to balance the budget by 2002, which Republicans vow they will do-though how remains to be determined.

New Top Doc

As a replacement for the controversial Joycelyn Elders, President Clinton nominated Henry Foster Jr., a Nashville, Tennessee, obstetrician-gynecologist and acting head of Meharry Medical College, to become the nation's new Surgeon General. The President said he wanted Foster, the founder of a Nashville program aimed at delaying teen sexual activity through counseling, job training and medical services, to focus on battling the nation's "epidemic of teen pregnancies and unmarried pregnancies." Conservative groups immediately labeled Foster "Elders Lite," because he supports the use of condoms. He has admitted performing "fewer than a dozen'' abortions, but most congressional Republicans withheld their fire pending further study of his record.

Pressler Pulls Back

Daunted, perhaps, by critics brandishing the words witch-hunt and McCarthyism, Senate Commerce Committee chairman Larry Pressler withdrew portions of a questionnaire he had sent to National Public Radio asking, among other things, about the ethnicity and possible political leanings of employees. Pressler, a foe of federal financing of public broadcasting, said he had merely wanted to get a fuller picture of the organization.

The Simpson Case

The prosecution opened its murder case against O.J. Simpson by presenting witnesses and evidence intended to undermine his public image as a genial ex-jock with a portrait of a jealous wife abuser.

The Sheik Goes on Trial

The nation's biggest terrorism trial opened in a Manhattan courtroom as prosecutors began making their case against Sheik Omar Abdel Rahman and 11 other Muslim men who are accused of having plotted to blow up key New York City landmarks in 1993 as part of an alleged holy war against the U.S.

A Euthanasia Acquittal

In yet another case testing the murky limits of both parents' rights and a patient's right to die, Gregory Messenger-the Michigan father charged with manslaughter for having unhooked his severely ill, premature baby from a respirator-was acquitted by a jury. Messenger said he was forced to act after doctors refused to heed the family's wishes. "We did what was best for our baby," said his wife.

The Other Washington

Facing an estimated shortfall of $722 million, the equivalent of 22% of the city's budget, Washington Mayor Marion Barry announced his response: a severe diet of job cutbacks and reductions in city services. Potentially most painful, however, was his request that the Federal Government take on $267 million in city Medicaid costs, and consider paying for even more services in the future. The appeal could reopen the question of how much home rule Congress should accord the District.

Smithsonian Nukes Exhibit

Yielding to critics, the Smithsonian Institution agreed to scale back-to the point of minimalism-its forthcoming exhibit marking the 50th anniversary of the atom bombing of Hiroshima. Angry veterans groups and members of Congress had charged that the exhibit incorrectly and inappropriately questioned the necessity of dropping the Bomb.

WORLD

Flooding in Europe

After days of freezing rain, the rivers of northwestern Europe surged over their banks to engulf towns and cities in Germany, France, Belgium and-worst hit-the Netherlands. Thirty deaths were reported across Europe, with total damages estimated at more than $2 billion.

More Terror in Algeria

It was the worst bombing in three years of bloody insurgency. An explosives-filled car blew up in a busy Algiers street, killing 42 people and wounding 286. No one claimed responsibility for the action, but Algerian authorities blamed Muslim extremists who have been fighting to establish an Islamic state. An estimated 30,000 people, including 80 foreigners, have been killed since the fighting between militants and government security forces began.

Mideast Summit

In an effort to revive the flagging peace process, the leaders of Egypt, Israel, Jordan and the p.l.o. met in Cairo. At the top of their agenda: a rash of terrorist attacks by radical Palestinian groups against Israeli soldiers and civilians, and the continuing expansion of Jewish settlements in occupied territory.

China Flunks Human Rights

In yet another setback for U.S.-China relations, a State Department report claimed that China made no progress on human rights in 1994. The sharply critical report called China an "authoritarian" state and pointedly detailed such abuses as mistreatment of dissidents, denial of fair trials, harassment of journalists and forced labor.

BUSINESS

Mixed Messages

Trying to head-off strong inflation and an overactive economy, the Federal Reserve raised short-term interest rates for the seventh time in a year. But in a defiant sign of economic weakness, unemployment rose to 5.7% in January from 5.4% in December-the first real increase since June 1992

SCIENCE

New AIDS Therapy

Several new studies were released indicating that giving HIV-positive patients a combination of powerful drugs may be the best way to combat AIDS. The double wallop of AZT and an experimental new drug, 3TC, effectively put off the appearance of drug-resistant strains of the AIDS virus in infected individuals by as much as one year (patients treated with AZT alone encounter resistance within a few months). Together, the drugs also kept the extent of the infection in check while allowing the body to boost its complement of virus-fighting immune cells. More studies are needed to determine whether these results will actually translate into a healthier and longer life for AIDS patients.

-By Lina Lofaro, Alice Park, Michael Quinn, Alain L. Sanders and Sidney Urquhart