NEWS,30.09.2012

Wall Street: Spain, central bankers, US jobs

Wall Street will open October with a busy week, highlighted by low expectations for global manufacturing data and the US jobs report. Any positive surprises may help lift the market.Spain is the wild card. And if it's played well, then the bulls might dance.The S&P 500 finished its third positive quarter in the last four on Friday, despite suffering its largest weekly percentage decline since June. For the past three months, the S&P 500 gained 5.9% - its best third quarter since 2010. In contrast, the index was down 1.3% for the week.The benchmark S&P 500 earlier this month reached its highest level since late 2007. Yet uncertainty remains over whether stocks can hold their gains against the headwinds of a struggling economy. That explains, in part, the retreat over the last several days.The S&P 500 hit a high of 1474.51 in mid-September before pulling back by a bit more than 2%. A run at 1500 seems possible, but the flurry of economic and world events ahead probably will prevent a major advance in the coming week.Bulls are betting that last week's Spanish budget proposals will be a preamble to a bailout request by Mariano Rajoy's government. The move would be seen as a first step to get the finances of the euro zone's fourth-largest economy in order and would clear some of the market uncertainty regarding the euro zone crisis.Monetary policy is also on the list of market catalysts this week. Federal Reserve Chairman Ben Bernanke is scheduled to speak today and the minutes of the latest FOMC meeting are set for release on Thursday. The week's agenda includes meetings of the European Central Bank, the Bank of England and the Bank of Japan.Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin, said he believes "we could see a rebound" this week "if we get some of the stars aligning and have Spain ask for a bailout, the ECB announcing favourable terms for that bailout, and if we see the Bank of Japan announce further monetary intervention."If Spain and the ECB don't deliver, we could set ourselves up for a further lateral move in the markets," Jacobsen added. "A negative would be if Rajoy flat-out denies that they need a bailout."The ECB and BOJ are set to meet on Thursday, with the Bank of Japan's meeting extending until Friday.Factories, jobs and the US election Chinese factory and business conditions data will kick off a numbers-heavy calendar for markets. Manufacturing PMI, due on Monday, is expected to show a second straight month of contraction.A snapshot of US manufacturing activity will be provided today when the Institute for Supply Management releases its September index. The September ISM reading is expected to show another month of contraction, but at a slightly slower pace than in August. On Wednesday, the ISM will release its US services-sector Purchasing Managers' Index, which could show a slight deceleration in the pace of growth in the non-manufacturing sector."We have Chinese economic data over the weekend, and we'll see how markets react on Monday," said Wasif Latif, vice president of equity investments at San Antonio, Texas-based USAA Investment Management."It seems like the market is bracing for bad numbers, meaning if they're not as bad, it could be market-positive," Latif said.Non-farm payrolls for September, due on Friday, are forecast to gain 115,000, while the US unemployment rate is seen ticking up 0.1% from August to 8.2% in September.The jobs data will come on the heels of the first of three US presidential debates, scheduled for Wednesday night.With just one month to go before election day on November 6, Wall Street will watch the economic data more closely than it usually does. In a year when the incumbent president is campaigning for a second term, the country's economic numbers tend to become more positive as election day approaches.The US stock market also tends to gain in years when incumbents are re-elected, according to the Stock Trader's Almanac.For the year, the Dow Jones industrial average is up 10%, while the Standard & Poor's 500 Index is up 14.6% and the Nasdaq Composite Index is up 19.6%.Recent poll numbers point to a strengthening lead by President Barack Obama, but a weak payrolls reading could give some hope to Republican challenger Mitt Romney."If Romney doesn't turn the ship with a very strong (debate) performance, the president is going to win," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.He said the trend in the polls has taken away some of the market uncertainty regarding the presidential election. He added that an ECB- or Spain-related headline out of Europe on Thursday could overcome almost anything that would happen Wednesday night during the debate."I think the market is coming to terms with the fact the president is ahead, and unless something significant changes, (he) will prevail.

France's Hollande faces protests over EU fiscal pact

Thousands have marched through Paris to protest against a European fiscal pact, the first major display of public anger to face President Francois Hollande since his May election.The march organised by the Left Front coalition drew trade unionists, far-left sympathisers and other opponents of the EU accord, two days before lawmakers start to debate a draft law of the budget pact in the lower house of parliament.The budget discipline pact, which Hollande supports, is expected to pass in both houses of parliament thanks to support from Socialist lawmakers helped by advocates of fiscal discipline in the centre-right opposition.But the vote has exposed rifts in Hollande's ruling coalition, with far-left allies and Greens planning to vote against it in a challenge to the increasingly unpopular Socialist leader's authority.If Hollande has to rely on opponents to pass the pact, the vote could deepen the rift in his alliance and embolden left-wing allies seeking a change of course from strict adherence to European deficit targets."To him (Hollande), this vote was a formality that simply needed to be rushed through," said Jean-Luc Melenchon, a fiery leftist orator who ranked fourth in an April presidential vote."Now he will understand this is not the case, that in France and in the rest of Europe there is an organised opposition to this pact and to all austerity policies."Wearing his signature red scarf, Melenchon marched at the head of protesters among giant banners bearing slogans such as "Francois Hollande, We Don't Want Your Treaty" and "In Greece and in France, Let's Fight Against Finance".It was the latest in a series of protests across southern Europe this week as tens of thousands took to streets in Spain, Italy, Greece and Portugal to voice their anger over hardship imposed by austerity policies.For Hollande, the outcry from many people who voted him into power highlights the difficulty of pleasing a largely left-wing support base even as he shuns painful cuts to welfare programmes.A 2013 budget unveiled on Friday shaves 30 billion euros off the public deficit, largely through tax increases on big businesses and the wealthy. But it avoids the type of painful austerity measures imposed elsewhere in Europe.Efforts to preserve the generous public safety net have done little to preserve Hollande's approval rating, which has plummeted since his election, hitting a low of 43 percent in one poll last week."This treaty will considerably worsen the situation in the European Union and in France," said one protester, Pierre Khalfa. "We can already see that austerity policies in Europe are leading to recession, so we need to start a movement against these policies, which will lead our country into a wall."Left Front organisers said some 40,000 people joined the Paris protest. Police declined to provide an estimate.

Economic protests in Spain, Portugal

Tens of thousands of Spaniards and Portuguese rallied in the streets of their countries' capitals on Saturday to protest enduring deep economic pain from austerity measure, and the demonstration in Madrid turned violent after Spaniards enraged over a long-lasting recession and sky-high unemployment clashed with riot police for the third time in less than a week near Parliament.The latest violence came after thousands of Spaniards who had marched close to the Parliament building in downtown Madrid protested peacefully for hours. Police with batons later moved in just before midnight to clear out those who remained late because no permission had been obtained from authorities to hold the demonstration.Some protesters responded by throwing bottles and rocks. An Associated Press photographer saw police severely beat one protester who was taken away in an ambulance.Spain's state TV said early on Sunday that two people were hurt and 12 detained near the barricades erected in downtown Madrid to shield the Parliament building. Television images showed police charging protesters and hitting them with their batons, but the violence did not appear as severe as a protest on Tuesday when 38 people were arrested and 64 injured.Earlier, the boisterous crowds let off ear-splitting whistles and yelled "Fire them, fire them!" referring to the conservative government of Prime Minister Mariano Rajoy, and venting their anger against tax hikes, government spending cuts and the highest unemployment rate among the 17 nations that use the euro currency.Freezing salariesOn Friday, Rajoy's administration presented a 2013 draft budget that will cut overall spending by $51.7bn, freezing the salaries of public workers, cutting spending for unemployment benefits and even reducing spending for Spain's royal family next year by 4%.Pablo Rodriguez, a 24-year-old student doing a master's in agricultural development in Denmark, said the austerity measures and bad economy mean most of his friends in Spain are unemployed or doing work they didn't train for.He doubts he will put his education to use in Spain until he is 35 or 40, if ever, will probably get job abroad and stay."I would love to work here, but there is nothing for me here," Rodriguez said. "By the time the economy improves it will be too late. I will be settled somewhere else with a family. One of the disasters in Spain is they spent so much to educate me and so many others and they will lose us."Madrid authorities put the number of protesters at 4 500 though demonstrators said the crowd was larger. In neighbouring Portugal, tens of thousands took to the streets of Lisbon on Saturday afternoon to peacefully protest against even deeper austerity cutbacks than Spain has imposed.Retired banker Antonio Trinidade said the budget cuts Portugal is locked into in return for the nation's $101bn bailout are making the country's economy the worst he has seen in his lifetime. His pension has been cut, and he said countless young Portuguese are increasingly heading abroad because they can't make a living at home.Robbing the people"The government and the troika controlling what we do because of the bailout just want to cut more and more and rob from us," Trinidade said, referring to the troika of creditors -the European Commission, the European Central Bank and the International Monetary Fund. "The young don't have any future, and the country is on the edge of an abyss. I'm getting toward the end of my life, but these people in their 20s or 30s don't have jobs, or a future."In Spain, Rajoy has an absolute majority and has pushed through waves of austerity measures over the last nine months - trying to prevent Spain from being forced into the same kind of bailouts taken by Portugal, Ireland and Greece. But the country has an unemployment rate of nearly 25%, and the jobless rate is more than 50% for those under age 25.Investors worried about Spain's economic viability have forced up the interest rate they are willing to pay to buy Spanish bonds.Finance Minister Cristobal Montoro said on Saturday that the budget cuts for next year were necessary to ease market tensions and try to bring down high interest rates Spain must pay to get investors to buy its bonds.

NEWS,29.09.2012

US embassy warning: Philippines on alert

Philippine security forces were on stepped-up alert on Saturday after the US embassy issued an emergency advisory about an alleged threat against Americans in the capital."As a matter of precaution, we have augmented security," deputy presidential spokesperson Abigail Valte said. "Police visibility has been heightened."The US embassy said in its advisory that the "threat against American citizens in metropolitan Manila ... has been detected by reliable security forces" but it did not give details on the nature of a possible attack."This threat remains in effect until October 10," the embassy said in the advisory posted on its website on Friday.Britain, Australia and Canada also issued warnings to their citizens, citing the US advisory."Any attack could be indiscriminate, and we advise British nationals to exercise particular caution and extra vigilance in places frequented by expatriates and foreign nations," Britain's advisory said.Australia stressed the need for its citizens to avoid travelling to the conflict-wracked southern region of Mindanao, and Canada urged its citizens to be "extremely vigilant and increase their personal security awareness"."Bomb attacks could occur at any time in Manila and other key cities," Canada said in its advisory. "Targets could include places frequented by foreigners, such as large shopping malls and convention centres."Philippine police earlier stepped up security at the US embassy in Manila after violent protests in several countries over a US amateur film considered insulting to Islam.

Last Western detainee leaves Gitmo

The last Western detainee held at the Guantanamo Bay US military prison has returned to Canada after a decade in custody and has been transferred to a maximum security prison in Canada where he awaits parole, Canada's public safety minister said on Saturday.Vic Toews said that 26-year-old Omar Khadr arrived at a Canadian military base on a US government plane early on Saturday and was transferred to the Millhaven maximum security prison in Bath, Ontario.Khadr pleaded guilty in 2010 to killing a US soldier in Afghanistan and was eligible to return to Canada from Guantanamo Bay last October under terms of a plea deal. Khadr was 15 when he was captured in 2002 in Afghanistan, and has spent a decade at the Guantanamo prison set up on the US naval base in Cuba to hold suspected terrorists after the September 11, 2001 attacks. He received an eight-year sentence in 2010 after being convicted of throwing a grenade that killed Army Sergeant 1st Class Christopher Speer during a 2002 firefight.Toews noted that the US government initiated the transfer and suggested that Canada had little choice but to accept him under Canadian law."Omar Khadr is a known supporter of the al-Qaeda terrorist network and a convicted terrorist," Toews said. "Omar Khadr was born in Canada and is a Canadian citizen. As a Canadian citizen, he has a right to enter Canada after the completion of his sentence."John Norris, Khadr's Canadian lawyer, has said Khadr would be eligible for parole as early as the spring of 2013. It will be up to Canada's national parole board to release him, Toews said."I am satisfied the Correctional Service of Canada can administer Omar Khadr's sentence in a manner which recognises the serious nature of the crimes that he has committed and ensure the safety of Canadians is protected during incarceration," Toews said.

Iran condemns US for taking group off terror list

Maryam Rajavi, President-elect of Iranian opposition party National Council of Resistance of Iran, smiles as she attends an international conference on Iran policy in Brussels. Maryam Rajavi, the Paris-based head of the exiled opposition group, said in an interview that she hopes the organization can now have the ear of the world's diplomats to help bolster its bid to overthrow Iran's clerical regime. She stressed that its goal was to replace the Islamic Republic with a democratic government Iran condemned on Saturday the Obama administration for taking an Iranian militant group formerly allied with Hussein off the U.S. terrorism list, saying it shows Washington's "double standards."The Mujahedeen-e-Khalq (MEK), which began as a guerrilla movement fighting Shah Mohammed Reza Pahlavi, helped overthrow the monarch in 1979 then quickly fell out with the Islamic Republic's first leader, Khomeini. It fought in the 1980s alongside Saddam's forces in the eight-year Iran-Iraq war but disarmed after the U.S. invasion of Iraq in 2003.The State Department delisted the group on Friday, meaning that any assets the MEK has in the United States are unblocked and Americans can do business with the organization. On Saturday, at their Paris headquarters, MEK members gathered to celebrate, tossing flower petals and displaying photos of members killed in the past 15 years."We call on the international community to respect the will of the Iranian people for a regime change in Iran," Maryam Rajavi, the Paris-based head of the exiled opposition group, said Saturday.Iranian State TV criticized the decision, saying that the U.S. considered the MEK "good terrorists" and claims Washington is using the group to work against Tehran. State radio said the move highlights President Barack Obama's anti-Iranian sentiments."There is much evidence of the group being involved in terrorist activities. Delisting them shows America's double standard policy on terrorism," state TV said. The U.S. distinguishes between "good and bad terrorists" and the MEK are now "good terrorists because the U.S. is using them against Iran," the report also said, adding that Washington and Israel use the group to spy on Iran's nuclear program.The U.S. and its allies accuse Iran of using its civilian nuclear program as a cover to develop nuclear weapons. Iran has denied the claims, saying the program is peaceful and is intended for electricity generation and scientific research.The State Department said the MEK hasn't committed terror for more than a decade. The group has also complied with demands that over 3,000 of its once-armed members abandon their base in Iraq near the Iranian border for a camp outside Baghdad, an essential step to ending their decades-long presence in Iraq.The group claims it is seeking regime change through peaceful means, aiming to replace Tehran's clerical system with a secular government.However, a senior State Department official suggested that removing MEK from the U.S. terrorist list does not translate into a shared common front against the Islamic Republic. The official said Washington does not view MEK as an opposition movement that can promote democratic values in Iran. The official on Friday briefed reporters on condition of anonymity because he wasn't authorized to speak publicly on the matter.In a rare interview on Friday, Rajavi said "the most important impact ... will be seen inside Iran.""The balance of power is going to change. For example, the first message for the Iranian people will be they won't fear increasing their activity and increasing their demonstrations," she said. The fear "will evaporate ... and that will lead to the expansion of anti-regime activities within Iran."Iran says MEK is responsible for the deaths of more than 12,000 Iranians over the past three decades, including senior government officials.The MEK spent huge sums of money over years lobbying for removal from the U.S. terror list, holding rallies in European capitals and elsewhere that featured luminaries like former Homeland Security Secretary Tom Ridge from the administration of George W. Bush. Former House Speaker and presidential candidate Newt Gingrich was among those recently welcomed by the MEK to Paris.The group was protected in Iraq under Saddam Hussein, but its members are disliked by the new Iraqi government, dominated by Shiite Muslims like those in Iran.The United States had insisted the MEK's members leave Camp Ashraf, their home in Iraq, as a condition for removal from the terrorist list. All but several hundred militants are now located in Camp Liberty, a former U.S. base outside Baghdad, looking for placement in third countries.The MEK was removed from the European Union's terrorist list in 2009.

NEWS,28.09.2012

Netanyahu speech dampens war speculation

Prime Minister Benjamin Netanyahu's UN speech about Iranian nuclear advances has dampened speculation in Israel that he could order a war this year.Analysing Thursday's address in which Netanyahu literally drew a "red line" on a cartoon bomb to show how close Iran was to building nuclear weaponry, commentators saw his deadline for any military action falling in early or mid-2013, well after US elections in November and a possible snap Israeli poll."The 'decisive year' of 2012 will pass without decisiveness," wrote Ofer Shelah of Maariv newspaper on Friday.Without explicitly saying so, Netanyahu implied Israel would attack Iran's uranium enrichment facilities if they were allowed to process potential weapons-grade material beyond his red line.Maariv and another mass-circulation Israeli daily, Yedioth Ahronoth, said spring (northern hemisphere) 2013 now looked like Netanyahu's target date, given his prediction that by then Iran may have amassed enough 20%-enriched uranium for a first bomb, if purified further.But the front pages of the liberal Haaretz and pro-government Israel Hayom newspapers cited mid-2013 - Netanyahu's outside estimate for when the Iranians would be ready to embark on the last stage of building such a weapon, which could take only "a few months, possibly a few weeks".Reluctant to eleborateIran, which denies it is seeking nuclear arms, said Netanyahu's speech made "baseless and absurd allegations" and that the Islamic Republic "reserves its full right to retaliate with full force against any attack". Israel is widely assumed to have the Middle East's only atomic arsenal.Israeli diplomats were reluctant to elaborate on Netanyahu's speech, saying its main aim was to illustrate the threat from Tehran.Asked on Israel's Army Radio whether Netanyahu had signalled he would strike in the spring if US and European Union sanctions fail to curb Iran's nuclear work, Foreign Minister Avigdor Lieberman said: "No, no, I would not go that far.""The prime minister clarified a message to the international community [that] if they want to prevent the next war, they must prevent a nuclear Iran," Lieberman added.Netanyahu's increasingly hawkish words on Iran in recent weeks and months strained relations with US President Barack Obama, who has resisted the calls to set Tehran an ultimatum while fending off charges by his Republican rival, Mitt Romney, that he is soft on Israel's security.Netanyahu praised Obama's resolve in his UN address, which the prime minister described as advancing their "common goal" - a strong signal that Israel would not blindside Washington with a unilateral attack on Iran.Netanyahu's political worriesIsrael Hayom pundit Dan Margalit said the speech constituted "an almost explicit acknowledgment that he [Netanyahu] is declaring a truce in the public argument between him and the president. At least, until after the [US] election".Netanyahu has political worries too, given deadlock in his coalition government over the 2013 budget which, if not ratified by December, could trigger an early Israeli election next year.In a broadcast editorial, Army Radio depicted war with Iran as no longer an imminent dilemma troubling the prime minister.Instead, the station said, Netanyahu would have to decide "whether he is going to elections sooner, in January, February, or maybe March, or whether he will be able to pass the budget, take care of the Iranian issue and then go to elections in October [2013] as scheduled".US Defence Secretary Leon Panetta said this month that Washington would have "about a year" to stop Iran should it decide to cross the threshold of producing nuclear weaponry - a more expansive timeline than that put forward by Israel.That could spell fresh clashes between the allies over Tehran's continued 20% uranium enrichment, a process the Iranians say they need for medical isotopes but that also brings the fissile material much closer to weapons grade.An Israeli official briefed on the government's Iran strategy cautioned against interpreting dates Netanyahu gave at the United Nations as deadlines, saying the preparations had already been made for military strikes."When he says Iran will have a bomb by this-or-that point in time, that in no way means the war option must wait until then," the official said. "There are other considerations to the timing - operational and strategic."

Spain unveils price of banking rescue

Spain unveils on Friday the full cost of rescuing its stricken banks, seen by investors as one of the final steps before a looming sovereign bailout.An independent audit, to be released after markets close, will serve as the basis for the release of up to €100bn from a eurozone rescue loan agreed in June.It comes a day after Spain announced a tight-fisted budget for 2013, which squeezes out €39bn in austerity measures, sparing only retirement pensions, to rein in the public deficit.Broad, savage cuts including in education and health have sparked fierce protests, leading to clashes outside parliament this week between police and anti-austerity demonstrators.Analysts say Prime Minister Mariano Rajoy is hoping the budget and banking audit will satisfy the conditions of any sovereign bailout, saving it the political humiliation of bowing to outside demands."The suspicion is that Rajoy is hoping these new measures will be enough to prevent the imposition of even tougher terms when Spain applies for its bailout," said a report by London-based foreign exchange firm Moneycorp."Whatever his citizens might have thought, investors were impressed by the prime minister's policy. They saw it as a step closer to the bailout which, they still believe, will solve the problems of Spain and the eurozone."The banking audit, led by US financial consultants Oliver Wyman, examines each of Spain's 14 major banking groups making up 90 percent of the struggling financial system.A huge swathe of the system is bogged down with bad loans from a 2008 property market collapse. Only a few, such as Santander, the eurozone's biggest in terms of market value, have solid balance sheets.The audit will also help to determine the price of toxic assets held by the banks, government sources said.A first group of banks, which have already been nationalised and whose capital requirements are expected to be confirmed by the audit, are to receive rescue money from November.Among them is state-rescued lender Bankia, the country's fourth biggest bank, whose request for more than €23bn in capital forced Madrid into the arms of its eurozone partners.Whatever the price tag placed on the rescue, Rajoy's right-leaning Popular Party government has stressed that not all the cash need come from the rescue loan; some may be able to find private financing.But signs are mounting that Madrid, despite all its manoeuvring, may end up picking up the tab for the financial sector rescue, boosting its overall debt level and heightening the urgency of a sovereign bailout.The rescue loan is to be funnelled through Spains's state-backed Fund for Orderly Bank Restructuring (FROB).But Spain's government had hoped that a new European Stability Mechanism would eventually be empowered by Brussels to inject the loan directly, keeping the debt off Madrid's books.A June summit of European leaders had in fact agreed to set up a European banking union with a single supervisor by the year's end, allowing the ESM to take such action.On Tuesday, however, Germany, the Netherlands and Finland laid down a series of new conditions, and said the ESM should only act on new problem loans, not "legacy assets" such as those being dealt with in Spain.If Spain does formally request a broader sovereign bailout, it would become eligible to benefit from a bond-buying programme for troubled states that was outlined by the European Central Bank on September 6.Such a programme would curb Spain's borrowing costs but to qualify Madrid would have to formally apply for help from the ESM and submit to its conditions.As Spain's borrowing costs remain high, with the yield on 10-year bonds only just below six percent on Friday morning, the odds on a sovereign bailout seemed to be shortening daily.Political tensions are rising between Madrid and the northeastern Spanish region of Catalonia, an economically powerful state that has called snap elections on November 25 in a drive for more independence.The debt-struck region's parliament Thursday voted for referendum on Catalonia's "collective future". Spain's central government has vowed to thwart any attempt to hold a poll on Catalan independence. Investors fear these tensions could make it harder for Madrid to rein in deficits in the regions, which account for half of Spanish expenditure with responsibilities for health and education.The regions' debt situation is perilous, forcing many to apply for help from an €18bn central government liquidity fund. Castilla-La Mancha asked for €848m on Thursday, adding to earlier requests from Catalonia, Valencia, Andalusia and Murcia that already amount to a total of about €15bn.

NEWS,27.09.2012

Spain announces tough economic reforms

Spain announced a detailed timetable for economic reforms and a tough 2013 budget based mostly on spending cuts today in what many see as an effort to pre-empt the likely conditions of an international bailout.Government ministries saw their budgets slashed by 8.9% for next year, as Prime Minister Mariano Rajoy's battle to reduce one of the euro zone's biggest deficits was made harder by weak tax revenues in a prolonged recession.However, the conservative government said tax revenue would be higher in 2012 than it had been originally budgeted for and would grow 3.8% next year from this year.Spending cuts would be worth 0.77% of gross domestic product in 2013, while adjustment in revenue would be worth 0.56% of GDP."This is a crisis budget aimed at emerging from the crisis ... In this budget there is a larger adjustment of spending than revenue," Deputy Prime Minister Soraya Saenz de Santamaria told a news conference after a marathon six-hour cabinet meeting.Spain, the euro zone's fourth largest economy, is at the centre of the crisis. Investors fear that Madrid cannot control its finances and that Rajoy does not have the political will to take all the necessary but unpopular measures.Madrid is talking to Brussels about the terms of a possible European aid package that would trigger a European Central Bank bond-buying programme and ease Madrid's unsustainable borrowing costs.Economy Minister Luis de Guindos reiterated that the government was still analysing potential conditions for aid.Uncertainty over Spain's ability to control its economy, and especially the regional governments which make up around half of total spending, has been further rattled by rising demands for independence in the wealthy northeastern state of Catalonia.The deputy prime minister said today the region was not permitted to hold a referendum on independence before consulting with the rest of the country.Economic reform timetable Saenz de Santamaria said the government would detail 43 new laws to reform the economy over the next six months, including a reform of the pension system, one of the state's most expensive costs, before the end of the year.Spain's detailed timetable for economic reforms goes beyond what the European Commission has asked of Spain and is an ambitious step forward, the EU's top economic official said on Thursday in response to the government announcements."The reforms are clearly targeted at some of the most pressing policy challenges," EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement.Market reaction was cautious."The first impression (of the announcements) are good, heading towards a major adjustment in spending rather than in revenues," said Jose Luis Martinez of Citigroup, in Madrid."However, we see as too optimistic the macroeconomic assumption of 0.5% recession for the next year. We see a scenario with a deeper recession and if this were the case, further spending cuts will be needed".De Guindos' statement that the 2012 budget deficit target would be met this year due to a solid increase in revenues will also be viewed with suspicion with many economists expecting the government to miss its deficit target of 6.3 percent of GDP.The measures continue to heap pressure on the crisis-weary population and are likely to fuel further street protests, which have become increasingly violent as tensions rise and police are given the green light to use force to disperse crowds.

EU wants $12bn US sanctions in Boeing row

The European Union has asked the World Trade Organisation (WTO) for the right to impose annual trade sanctions worth up to $12bn on the United States in retaliation for illegal US subsidies to planemaker Boeing.The EU request is the latest legal move in the world’s biggest trade dispute. The wrangling over subsidies given to Boeing and its European rival Airbus stretches back more than seven years.“This follows the EU’s assessment that the United States had not lived up to its obligation to remove its illegal subsidies in the aircraft sector, as required by the WTO rulings that clearly condemned US subsidies to Boeing,” the EU said in a statement.The figure of $12bn was “based on estimates of the damage suffered by the EU due to unfair and biased competition from the US industry”, it added. Airbus, which is owned by aerospace group EADS, said the figure was justified by the WTO’s finding that the effect of the “particularly pervasive” subsidies was significantly larger than their face value. It also said that the launch of Boeing’s 787 aircraft would not have been possible without illegal subsidies.“It is the largest WTO penalty ever requested and it follows the worst loss a party has seen in the history of the WTO,” Airbus said in a statement.In two parallel legal disputes, the WTO has ruled that both companies have received billions of dollars in illegal subsidies to support their large civil aircraft programmes. In Boeing’s case, the deadline for the United States to comply with the WTO ruling was last Sunday, but the EU has rejected US assurances that the handouts have stopped.  The European demand for sanctions mirrors a US claim to the right to impose up to $10bn of sanctions on the EU.  Both claims are effectively frozen until other legal avenues have been exhausted, and many experts expect the two sides will settle the dispute outside the courtroom rather than let the tit-for-tat litigation drag on for years.“We regret that Boeing continues a legal battle that should have long been resolved by a mutual agreement. We made offers time and again but are ready to fight it through if the other side wishes to do so,” Airbus spokesperson Maggie Bergsma said.There was no immediate reaction from the US Trade Representative’s office. However, US ambassador to the WTO Michael Punke, speaking to reporters in Geneva on Wednesday, said the EU was much more at fault than the United States.“Here is the key figure to keep in mind, for those who are keeping score at home on the Boeing-Airbus discussion: through the WTO dispute resolution process there have been identified $19bn of illegal financing by Airbus. The equivalent number that has been identified for Boeing is $3bn to $4bn. So that’s the starting point for our discussion,” Punke said.“Beyond that, it is very much our contention that many of the types of subsidies that have been identified in the European context are very much still at play, including, for example, in the launch of the (Airbus) A350 and the A380.” 

EU plans airline industry shake-up

The EU will get tougher rules to ensure fair competition and protect its airline companies as it seeks to boost an industry vital to the wider economy, the European Commission said on Thursday."Archaic ownership and control restrictions" must also go as part of an international effort so as to ensure airlines get easier access to needed new capital, EU Transport Commissioner Siim Kallas said in a statement.The European Union would negotiate "new and more effective EU instruments to protect European interests against unfair practices," he said.Standard "fair competition clauses" would be included in current bilateral air services agreements between EU and non-EU countries, he added.Most countries apply control restrictions - foreign ownership in US airlines is limited to 25% and in the EU 49% - but these deny carriers access to new capital and prevent consolidation, Kallas said, adding: "It is now time to address this issue more vigorously."Kallas said European aviation had suffered badly in the economic downturn and it needed a shake-up to make it more competitive given the rise of fast growing airlines in Asia and the Middle East targetting a global market."We urgently need a step change. Faced with the dramatic changes in global aviation, Europe must respond and adapt rapidly or be left behind," he said.To help carriers access to new markets, the commissioner said he wanted to negotiate EU-level air service agreements with countries such as China, Russia, the Gulf States, Japan, India and southeast Asian countries.In addition, accords were needed with neighbouring countries such as Ukraine, Azerbaijan, Tunisia, Turkey and Egypt, Kallas said, claiming the agreements would produce annual benefits of €12bn.

NEWS,26.909.2012

Clashes erupt as thousands of Greeks protest austerity

Greek police clashed with hooded rioters hurling petrol bombs as tens of thousands took to the streets of Athens on Wednesday in Greece's biggest anti-austerity protest in more than a year.Violence erupted after nearly 70,000 people marched to parliament chanting "We won't submit to the troika (of lenders)" and "EU, IMF Out!" on the day of a general strike against a new round of cuts demanded by foreign lenders.As the rally ended, dozens of black-clad youths threw stones, petrol bombs and bottles at riot police, who responded with several rounds of teargas. Police chased the protesters through Syntagma square in front of parliament as helicopters clattered overhead. Smoke rose from small blazes in the streets.About 120 people were detained after angry protesters smashed bus stop kiosks and set fire to garbage cans."We can't take it anymore - we are bleeding. We can't raise our children like this," said Dina Kokou, a 54-year-old teacher and mother of four who lives on 1,000 euros a month."These tax hikes and wage cuts are killing us."The 24-hour nationwide strike, called by the country's two biggest unions representing half the four-million-strong work force, is shaping up to be the first test of whether Prime Minister Antonis Samaras can stand his ground.Police officials estimated the demonstration was the largest since a May 2011 protest, and among the biggest since near-bankrupt Greece first resorted to aid from international lenders in 2010 - which has come at the price of painful austerity cuts.The traditional summer break has allowed the fragile conservative-led coalition to enjoy relative calm on the streets since narrowly coming to power on a pro-euro, pro-bailout platform, but unions say the lull is over."Yesterday the Spaniards took to the streets, today it's us, tomorrow the Italians and the day after - all the people of Europe," Yiorgos Harisis, a unionist from the ADEDY p u blic sector group told demonstrators."With this strike we are sending a strong message to the government and the troika that the measures will not pass even if voted in parliament, because the government's days are numbered."About 3000 police - twice the number usually deployed - stood guard in the centre of Athens, which last saw serious violence in February when protesters set shops and banks ablaze as parliament approved an austerity bill.Police formed a barricade outside parliament, and officers blocked a pensioner who tried to move towards Samaras's office holding a banner with pictures of Greek prime ministers under the title: "The biggest traitors in Greek history".Ships stayed docked, museums and monuments were shut to visitors and air traffic controllers walked off the job for a three-hour stoppage. Train service and flights were suspended, public offices and shops were shut, and hospitals worked on skeletal staff as part of the general strike."Destroying our lives" Much of the union anger is directed at spending cuts worth nearly 12 billion euros over the next two years that Greece has promised the European Union and International Monetary Fund in an effort to secure its next tranche of aid.The bulk of those cuts is expected from cutting wages, pensions and welfare benefits, heaping a new wave of misery on Greeks who say repeated rounds of austerity have pushed them to the brink and failed to transform the country for the better."We can't just sit by idly and do nothing while the troika and the government destroy our lives," said Dimitra Kontouli, a 49-year-old local government employee whose salary was cut to 1100 euros a month from 1600 euros previously."My husband has lost his job, we just can't make ends meet."A survey by the MRB polling agency last week showed that more than 90% of Greeks believe the planned cuts are unfair and burden the poor, with the vast majority expecting more austerity in coming years.Unions argue that Greece should remain in the euro but default on part of its debt and ditch the current recipe of austerity cuts in favour of higher taxes on the rich and efforts to nab wealthy tax evaders.But with Greece facing certain bankruptcy and a potential euro zone exit without further aid, Samaras's government has little choice but to push through the measures, which have also exposed fissures in his coalition.With Greece in its fifth year of recession and nearly one out of four jobless, analysts say patience is wearing thin and a strong public backlash could tear apart the weak government."What people want to tell Samaras is that they are hurt and Samaras could use this to demand concessions from the troika," MRB polling director Dimitris Mavros said."The people are willing to give the government time, but on certain conditions like cracking down on tax evasion and securing a bailout extension. If the government succeeds in that, its life will also be extended."

Greek protests cast shadow over the euro

Protests in Spain and Greece put the European sovereign debt crisis centre stage, renewing investors' worries about the risk the euro zone's problems pose to global growth and corporate profits.Those concerns are underpinning demand for fixed-income securities including US Treasuries, and helped fuel appetite for today's auction of US$35 billion of five-year bonds. "It was a good auction," Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, which as a primary dealer is obliged to bid in US debt offerings, told Bloomberg News. "It is suggesting more and more fear - that things could spiral out of control in Europe. The demand for dollars and Treasuries continues to rise."All eyes are on Spain, which is scheduled to announce its budget tomorrow. And on Friday, Moody's will publish its latest review of the nation's credit rating. In contrast to rising demand for US government bonds, the yield on Spain's 10-year bond surged more than 30 basis points back through the 6% mark.Figures released on Tuesday suggested Spain will miss its public deficit target of 6.3% of gross domestic product this year, and on Wednesday the Bank of Spain said the economy continued to shrink markedly in the third quarter, according to Reuters.Spain's prime minister, Mariano Rajoy, has so far resisted the calls to ask for an EU financial bailout but may not be able to hold out much longer. In a speech in New York earlier today, Rajoy said all Spaniards were going to have to make sacrifices.Europe's Stoxx 600 Index ended the session with a 1.8% slide. National benchmark indexes in Germany, France and the UK dropped. So did Spain's IBEX 35 Index, closing 3.9% lower. In late afternoon trading in New York, the Dow Jones Industrial Average shed 0.16%, the Standard & Poor's 500 declined 0.38%, while the Nasdaq Composite Index fell 0.62%. Meanwhile, the latest indicator on the US housing market continued to underwrite the view that at least this part of the economy is gaining forward momentum.Sales of new homes eased 0.3% to a 373,000 annual pace in August after a revised 374,000 rate in July that was better than previously estimated and the strongest since April 2010, according to Commerce Department data. And the average price of a home in the US has now risen to its highest since March 2007."There are increased signs that the housing recovery is now on a more sustainable path, though its impact on overall economic activity will remain relatively modest at best over the near-term.

Spain unveils austerity budget

Squeezed by financial markets and denounced in the streets, Spain's government will adopt on Thursday a 2013 austerity budget which could be a precursor to a full-blown bailout.The final step before a rescue is likely to come a day later, analysts say, when Madrid unveils an independent audit of its limping banks to determine how much capital they need.Spain's eurozone partners have agreed to provide a rescue loan of up to €100bn to help the banks recover from bad loans built up after a 2008 property crash.But Madrid insists €60bn will be enough.Once that matter is dealt with, the eurozone's fourth-largest economy will have all the data it requires to seek a broader, sovereign rescue from the eurzone's bailout funds.If Spain bends to the will of the markets and some of its eurozone partners by formally requesting the bailout, it would trigger a bond-buying programme for troubled states outlined by the European Central Bank on September 6.That would have the effect of curbing Spain's borrowing costs.Before making the leap, however, Prime Minister Mariano Rajoy wants to know what the conditions would be.The conservative leader likely wanted to make progress on the budget for next year, also, before making the request.The basic outline for the budget has been known since July: the plan to be adopted by the cabinet on Thursday is expected to enact spending cuts and tax increases worth a combined €39bn.The government aims to claw back a total of more than €150bn between 2012 and 2014: €62bn this year, €39bn next year and €50bn in 2014.On the austerity menu for 2013: an increase in sales tax and other taxes is expected to rake in €15bn and nearly seven billion euros will be found from cuts in the regions, which manage health and education.Other savings come from lowering unemployment benefits and social assistance, as well as a freeze in public sector hiring.But Spain will probably have to go further, said Juan Ignacio Conde Ruiz, deputy director of the Foundation of Applied Economic Studies (FEDEA)."To be credible with the markets, which is the government's ultimate goal, it would seem hard to avoid touching retirement pensions, which account for 25 percent of total spending," he said.Rajoy's election campaign promise to maintain pensions by inflation would cost €3bn - €3.5bn, Conde Ruiz said."There won't be the means to do it"That, he said, would make it impossible for Spain to meet its commitment to slash the public deficit to 6.3% of gross domestic product this year from a runaway 8.9% last year."There won't be the means to do it," added Jesus Castillo, southern European specialist at French bank Natixis. "So we should not be surprised by a freeze in pensions," he said, or even a cut so as to stay on track with the 2013 target of a deficit equal to 4.5%.Despite the analysts' doubts, Spain's Popular Party government insists pensions are going up, not down, as it faces growing protests to the austerity measures including hundreds taking to Madrid's streets Tuesday.Deputy Prime Minister Soraya Saenz de Santamaria said the new level for pensions would be decided in November."Will pensions go up? Yes, pensions are going to go up. Pensions will obviously be adjusted for the cost of living," she said.At the Spanish investment bank Inversis, analysts predict the public deficit forecasts will be revised higher for 2012 and 2013 in line with a deeper than expected recession.On Thursday, a new package of reforms negotiated with Brussels to stimulate business activity and exports also will be announced, "which could be the stage prior to a bailout request", said a report by Spanish brokerage Renta4.If Spain fails to take convincing action, the verdict could come quickly.Moody's Investors Service has until Sunday to decide whether to downgrade Spain's debt after a review. If it does so, it could be the first agency to rate the nation's debt at the equivalent of a junk bond.Spain's hesitation before seeking a rescue could be "highly risky", European Competition Commissioner Joaquin Almunia warned on Monday in an interview with AFP.The country's budget and economic reform announcements on Thursday are aimed at addressing just those concerns, said Conde Ruiz."The idea is to anticipate the conditions the aid would impose, and thus to introduce them now in the budget," he said, adding that this would ease the political sting.

NEWS,25.09.2012

Spain prepares further austerity measures

Protesters clashed with police in Spain's capital today as the government prepares a new round of unpopular austerity measures for the 2013 budget that will be announced tomorrow. Thousands gathered in Neptune plaza where they planned to form a human chain around parliament, surrounded by barricades, police trucks and more than 1500 police in riot gear.Television images showed the police beating some protesters with truncheons, in a brief, tense stand-off one block from parliament as police trucks tried to divide the crowd in two.The protest, promoted over the Internet by different activist groups, was younger and more rowdy than recent marches called by labour unions. Protesters said they were fed up with cuts to public salaries and health and education."My annual salary has dropped by 8000 euros and if it falls much further I won't be able to make ends meet," said Luis Rodriguez, 36, a firefighter who joined the protest. He said he is considering leaving Spain to find a better quality of life.With this year's budget deficit target looking untenable, the conservative government is now looking at such things as cuts in inflation-linked pensions, taxes on stock transactions, "green taxes" on emissions or eliminating tax breaks.The 2013 budget is the second one conservative Prime Minister Mariano Rajoy has had to pass since he took office in December. Spain must persuade its European partners that it can cut the budget shortfall by more than 60 billion euros by 2014.Rajoy has already passed spending cuts and tax hikes worth slightly more than that over the next two years, but half-year figures show the 2012 deficit target slipping from view as tax income forecasts will not be hit due to economic contraction.Spain is at the centre of the euro zone debt crisis on concerns the government cannot control its finances and those of highly indebted regions, bitten by a second recession since 2009 which has put one in four workers out of a job.Running out of options Half-year deficit data indicate national accounts are already on a slope that will drive Spain into a bailout. The deficit to end-June stands at over 4.3% of gross domestic product, including transfers to bailed out banks, making meeting the 6.3 percent target by the end of the year almost impossible.Yesterday, the treasury ministry said the central government deficit to end-August had reached 4.77% of GDP, already above its year-end target of 4.5% of GDP."Its going to be difficult keeping the deficit to around 2% in the second half, when the first half was closer to 4%, especially since traditionally, the second half deficit is higher than the first," said Juan Ignacio Conde-Ruiz, economist at Madrid's Complutense University.For 2012, the measures aim to reap savings of over 13 billion euros, but economists see the deficit missing the target by almost 1 percentage points implies further saving needs of up to 10 billion euros for this year alone.Rajoy has been careful to highlight the importance of next year's deficit target of 4.5% of GDP though any shortfall this year will weigh on 2013's accounts.After slashing civil servants' wages, raising value added tax by 3 percentage points - the main VAT has gone from 16% to 21% since 2010 - and cutting health and education spending, Rajoy is running out of options.More than 60% of government spending goes to pensions, unemployment benefits and servicing debt, making further cuts on the revenue side difficult without hitting 6 million jobless people.

Spain's parliament on protest alert

Spain's parliament took on the appearance of a heavily guarded fortress on Tuesday, hours ahead of a protest against the conservative government's handling of the economic crisis.The demonstration, organised behind the slogan "Occupy Congress", is expected to draw thousands of people from around Spain and was due to start around 17:30 GMT.Madrid's regional interior ministry delegation said some 1 300 police would be deployed though protesters say they have no intention of storming the chamber, only of marching around it.They are calling for fresh elections, claiming the government's austerity measures show the ruling Popular Party misled voters to get elected last November.The protest comes as Spain struggles in its second recession in three years and with unemployment near 25%.Spain has introduced austerity measures and economic reforms in a bid to convince its euro partners and investors that it is serious about reducing its bloated deficit to 6.3% of gross domestic product in 2012 to 4.5% next year.Concerns over the country's public finances was evident earlier when the Treasury sold €3.98bn in short-term debt but at a higher cost.It sold €1.39bn in three-month bills at an average interest rate of 1.2%, up from 0.95% in the last such auction on August 28, and €2.58bn in six-month bills on a yield of 2.21%, up from 2.03%.The government is expected to present a new batch of reforms on Thursday as it unveils a draft budget for 2013. A day later the results of bank stress tests carried out by an international auditing company are to be released.Spain has already been granted a €100bn loan by its 16 partner nations using the euro currency to help bail out those of its banks worst hit by the collapse of the country's real estate sector in 2008.Spain has yet to tap the fund and initial estimates say the banks will need some €60bn.

China and Japan (and U.S.) Island Dispute: It's All About Oil

The dispute over the territory known as the Senkaku Islands in Japan (and the U.S.) and as the Diaoyu Islands in China has all the makings of a Tom Clancy thriller. The 73-year-old Japanese Finance Minister, Tadahiro Matsushita was found hanged  not death by seppuku  in his home on suicide prevention day. The newly appointed Ambassador to China for Japan was found dead on a street in Japan at age 60 before he could take up his duties in China. The wife of Bo Xilai, a top contender for the top seat in the Chinese Politboro, is in prison facing a death sentence for the murder of a British businessman. The murder was revealed when one of his top aides, now sentenced to 15 years in prison, tried to defect to the United States and revealed his role in the cover-up. Governor of Tokyo, Shintaro Ishihara (79) and author of the controversial late 1980s book The Japan That Can Say No: Why Japan Will Be the First Among Equals (irreverently known as "get lost America, we can covertly rearm, develop nuclear capabilities, close U.S. bases, and handle our own defense") inflamed relations between China and Japan by engineering the government's purchase of the Senkaku Islands from a private Japanese citizen. Isihara's son Nobuteru (55) is the one of the candidates for leadership of Japan's Liberal Democratic Party, and if the party wins the election, he could possibly become Prime Minister of Japan if he can win out over Ishiba and Abe, the former Prime Minister of Japan.The car of the U.S. Ambassador to China was swarmed by protesters, and the melee was quickly broken up by Chinese security forces.U.S. Presidential candidates are silent on Asian tensions, seemingly engrossed in an adolescent battle of embarrassing sound bites.Riots have broken out in China over the disputed Islands, even though the islands were never under Chinese rule. The Japanese believe the islands belong to Japan. The Japanese Defense Minister takes comfort from U.S. Assistant Secretary of State Kurt Campbell's acknowledgement that the islands fall under the umbrella of the U.S.'s security pact with Japan.All this is happening when there's a power vacuum in China (between elections), a power vacuum in Japan (same reason), and a power vacuum in the U.S. (our elections are in November).Oil Islands As it happens, it appears that the dispute is really all about the right to explore for potential oil reserves around the islands' waters. The Japanese Finance Minister had prostate cancer and was investigating insider trading. He may or may not have had a say in whether the government should buy the islands. But his alleged suicide seemed to stem from an extra-marital affair he had with a 70 year-old Ginza bar hostess. She was retired, asked him for money, and when he refused, she sold her story to the tabloids.The death of the newly appointed ambassador to China for Japan appears for now to be just a sad coincidence of timing.China's Bo Xilai scandal is a tawdry story of corruption and greed.Sentiment within Japan's business community seems to be (based on my limited and unscientific sampling) that provoking war with China is insane, and the purchase of the islands was an unnecessary irritant. Yet the Japanese government provoked tensions with the purchase of the Islands, and the political spin in China is that this is about national integrity rather than oil exploration rights. If the Chinese invade the islands, Japan will likely fight for them, and the U.S. would be dragged into the conflict.If there is a conflict, it won't matter whether you call them the Senkaku Islands or the Diaoyo Islands. The important thing to remember is that everyone hopes they are the Oil islands.

NEWS,24.09.2012

Putin could go 'overnight' without reforms, says economist

Russian President Vladimir Putin, who faces the biggest protests of his 12-year rule, could lose power overnight if the oil price sinks and he fails to reduce corruption, a leading Russian economist said today.Sergei Guriev, Rector of the New Economic School in Moscow, said the former KGB spy was in little danger in the near future if the price of oil, Russia's main export commodity and a vital revenue source, remained over US$100 per barrel.But he said political upheaval could follow swiftly if the oil price sank and Putin, back in the Kremlin since May, failed to improve the investment climate or tame the corruption and bureaucracy that have plagued Russia for centuries."We all lived through the Soviet Union - which was forever until it was no more... These systems change very quickly," Guriev told the Reuters Russia Investment Summit, recalling that few predicted the Soviet empire's sudden demise two decades ago."The regime may fall apart overnight, and in a way that we don't know. It may be in a peaceful way, it may be in a bloody way," said Guriev.Putin, 59, has dominated Russia since he was first elected president in 2000 and an oil-fuelled economic boom helped keep him popular during his first two four-year terms.He remained Russia's paramount leader when he stepped aside to become prime minister in 2008 because of constitutional term limits, and won almost two-thirds of the votes in a presidential election in March despite the protests in big cities.Guriev is an active player in an "open government" initiative set up by Prime Minister Dmitry Medvedev that is pushing a business-friendly reform agenda, but also has ties to one protest leader, lawyer and blogger Alexei Navalny.He said he thought Putin would heed the warnings before it was too late but must urgently improve the investment climate to keep credibility with the business community.Corruption fight is key Large capital outflows, which reached US$80 billion last year, highlighted Russian investors' pessimism and the protests showed the dissatisfaction of the emerging middle class, he said.Opinion pollsters say Putin's traditional support is holding up in the provinces but Guriev said: "I think (Putin) has already written off the Moscow middle class ... But the general public outside Moscow is also losing patience.""If he didn't care, we wouldn't see all this repression," he said, referring to new laws that increase potential fines for protesters, tighten controls on the Internet and force lobby groups that receive funding from abroad to register with the authorities as foreign agents and undergo additional checks.An anti-corruption drive would be a more effective way for Putin to disarm the opposition, which has made fighting graft a top demand, and help shore up his own popularity, Guriev said."If Putin fights corruption successfully, the opposition is gone," he said. "If Putin doesn't fight corruption, he's gone, and a new government will fight corruption."Underlining the importance of economic growth to Putin's political fortunes, he forecast growth of 3% in 2013 - a relatively low level compared with recent years - but said that even this rate would depend on the oil price. Were the price to fall to $60 per barrel, fiscal reserves would run out in two years, causing a crisis in the government's finances, he said.The oil price at which Russia's budget balances has risen to above $100 per barrel, from $50-55 per barrel five years ago."The government is popular (with ordinary Russians) because it spends more and more and more," he said. "If the oil price were $55, and the government could spend only what it can afford at $55, I think Putin would be gone."

World powers call for new Iran sanctions

Britain, France and Germany have officially called for new European Union sanctions against Iran over its nuclear programme, diplomats said Sunday.The foreign ministers of the three countries wrote to EU foreign policy chief Catherine Ashton last week calling for tougher measures as the showdown with Tehran becomes more tense, a European diplomat said on condition of anonymity.The EU is working on more sanctions as President Mahmoud Ahmadinejad seeks to counter the pressure on his country at this week's UN General Assembly in New York.Ahmadinejad met UN leader Ban Ki-moon on Sunday as the EU foreign policy chief held talks on Iran and other topics with US Secretary of State Hillary Clinton in New York.Details of the new EU measures are still being worked on but foreign ministers from the 27-nation bloc will discuss the move at a meeting in Brussels on October 15.The United States and its European allies say that Iran is working toward a nuclear bomb. Iran says its research is for peaceful energy purposes. There has been mounting speculation in recent months that Israel is planning a military strike on Iran's bunkered nuclear facilities.The United States, Britain and France warned at the UN Security Council last week that time is running out for a negotiated solution with Iran."It is necessary that we sharpen the sanctions," said a second western official, confirming the request by foreign ministers William Hague of Britain, Laurent Fabius of France and Guido Westerwelle of Germany."We think there is still time for a political solution, a diplomatic solution, and this is what we are working for. But we cannot accept nuclear weapons in the hands of Iran," said the official, also speaking on condition of anonymity.Ashton is to chair a meeting in New York on Thursday of the six nations - the EU three, plus the United States, Russia and China - who have been seeking to negotiate a solution with Iran.The international community has pursued a dual track of pressure through sanctions while seeking to negotiate. But the US and European nations say Iran is refusing to talk.UN chief Ban "urged Iran to take the measures necessary to build international confidence in the exclusively peaceful nature of its nuclear program," said a UN spokesperson, Vannina Maestracci.Ban and Ahmadinejad also discussed the war in Syria and the protests in the Muslim world against a US-made film that mocks Islam.The showdown with Iran is one of the key topics at the UN assembly where Israel's Prime Minister Benjamin Netanyahu is also scheduled to speak.Ahmadinejad, who will address world leaders on Wednesday, is probably making his last appearance at the UN assembly where he has become a controversial figure.Western nations regularly walk out of his speeches in protest at his anti-Israeli comments.

German business mood worsens for fifth straight month

German business sentiment dropped for a fifth straight month in September, raising fears of recession as companies struggled with what they said was the worst economic outlook since mid-2009.Germany's relative resilience to the euro zone debt crisis has been steadily fraying as its firms see falling demand for their products from European partners and signs of a slowdown in other markets.The European Central Bank's plan for potentially unlimited government bond-buying has raised hopes on financial markets of an end to the most acute phase of the crisis, but that optimism has not spread to company boardrooms.The Munich-based Ifo institute's monthly sentiment index reached its lowest since early 2010 and Ifo economist Klaus Wohlrabe told Reuters the outlook was the worst since May 2009."Today's Ifo index shows that German companies remain sceptical about the economic impact of (ECB president) Mario Draghi's magic," ING Bank economist Carsten Brzeski said."Despite fears of a looming Eurozone break-up clearly fading away, German businesses are downscaling their expectations. The German economy could see a contraction in the third quarter."Ifo said its business climate index, based on a monthly survey of some 7000 firms, fell to 101.4 in September from 102.3 in August.In its monthly report, the Bundesbank said the domestic economy was robust, but added it saw signs of "weaker dynamics" and "great uncertainty".Foreign trade could be hit more strongly than before by developments in the euro area, the central bank added, also pointed to the labour market, where the rise in employment is slowing as companies become less willing to hire.Dutch business confidence also fell in September to -6.7 points from -4.6 in August, other data showed on Monday, adding to signs that the euro zone's stronger "core" economies are succumbing to the downturn.While they have not been punished by debt markets like much of the euro's southern half, both Germany and the Netherlands have slashed public spending to secure the future of public finances."The drop in Ifo business confidence is a potent reminder that the outlook for the German and Eurozone economies still hangs in the balance," said Holger Schmieding, German economist at investment bank Berenberg."Further policy steps to contain the Euro crisis may be needed for the Eurozone to turn the corner."Tough cuts While the German economy steamed ahead in the first three months of the year, saving the euro zone from recession by growing 0.5%, it lost momentum in the second quarter, with growth slowing to 0.3%.Dragging on the Ifo index in September was a sharp decline in sentiment among manufacturers, although companies in retailing and wholesaling reported a slightly brighter mood. Last week's ZEW survey also showed German analyst and investor morale picked up in September.Industrial group Bosch and steelmaker ThyssenKrupp , have announced plans to introduce "Kurzarbeit" or government-subsidised short-time work at German plants.The index would have fallen further had it not been for a ruling by Germany's constitutional court on Sept 12 in favour of the ratification of Europe's permanent bailout fund.Half of the responses in the survey came after the ruling.The Finance Ministry warned in its monthly report last Friday that data pointed to weaker growth in the remainder of the year. Many economists are now predicting a contraction for the third and possibly the fourth quarters.Another forward-looking indicator, the Purchasing Managers Index (PMI), last week showed Germany's private sector shrank for a fifth month, and a separate index for the euro zone showed that the ECB's bond-buying plan had so far failed to inspire any major improvement in business at ailing euro zone companies.However, economist Gerd Hassel said he believed news of the ECB's bond-buying plan had yet to fully sink in."I'm optimistic that the Ifo climate index will rise again in the coming months," he said.