NEWS,10.01.2013

Greek unemployment rate tripples

Greece's unemployment rate climbed to a record 26.8% in October as the debt-laden country remained sunk in recession, data showed on Thursday.Greece's jobless rate has almost tripled since it started rising in September 2009 as the country's debt crisis became apparent, and is more than double the average rate in the 17-nation eurozone, which stood at 11.8% in November.Unemployment among youth aged 15-24 also touched a new record of 56.6% in October, compared with 22.1 percent in the same month four years ago, statistics service ELSTAT said.A record 1.34 million Greeks were without work in October, up 38% from the same month in 2011, it said.After months of uncertainty over its future in the eurozone, Greece has managed to avoid bankruptcy but its economy is still sinking under austerity policies imposed by foreign lenders as the price for continued aid. The influential IOBE think tank on Thursday projected the economy would shrink 4.6% this year, taking a slightly more pessimistic view than the government, which expects the contraction at 4.5%, and the country's foreign lenders, who see it at 4.2%.IOBE also predicted unemployment would rise further to 27.3% this year, which is set to be the sixth consecutive year of recession.However, spending cuts helped narrow the country's central government budget gap by 30% in 2012 to €15.91bn ($20.75 billion), the finance ministry said. The central government budget figure excludes key elements of the general government budget, which is the figure used by the European Union to assess Greece's fiscal performance under its latest EU/IMF bailout programme.

Up to half of world's food wasted

Up to half of all the food produced worldwide ends up going to waste due to poor harvesting, storage and transport methods as well as irresponsible retailer and consumer behaviour, a report said on Thursday.The world produces about four billion metric tonnes of food a year but 1.2 to 2 billion tonnes is not eaten, the study by the London-based Institution of Mechanical Engineers said."This level of wastage is a tragedy that cannot continue if we are to succeed in the challenge of sustainably meeting our future food demands," said.In developed countries, like Britain, efficient farming methods, transport and storage mean that most of the wastage occurs through retail and customer behaviour.Retailers produce 1.6 million tonnes of food waste a year because they reject crops of edible fruit and vegetables because they do not meet exacting size and appearance criteria, the report by the engineering society said."Thirty percent of what is harvested from the field never actually reaches the marketplace (primarily the supermarket) due to trimming, quality selection and failure to conform to purely cosmetic criteria," it said.Of the food which does reach supermarket shelves, 30-50% of what is bought in developed countries is thrown away by customers, often due to poor understanding of "best before" and "use by" dates.A "use by" date is when there is a health risk associated with using food after that date. A "best before" date is more about quality - when it expires it does not necessarily mean food is harmful but it may lose some flavour and texture.However, many consumers do not know the difference between the labels and bin food after "best before" dates.Promotional offers and bulk discounts also encourage shoppers to buy large quantities in excess of their needs.In Britain, about £10.2bn ($16.3bn) worth of food is thrown away from homes every year, with £1bn worth being perfectly edible, the report found.By contrast, in less developed countries, such as in sub-Saharan Africa or South East Asia, wastage mostly happens due to inefficient harvesting and poor handling and storage.In South-East Asian countries, for example, losses of rice range from 37-80% of their entire production, totalling about 180 million tonnes per year, the report said.The United Nations predicts global population will peak at around 9.5 billion people by 2075, meaning there will be an additional 2.5 billion people to feed.The rising population, together with improved nutrition and shifting diets will put pressure for increases in global food supply over the coming decades.Rising food and commodity prices will drive the need to reduce waste, making the practice of discarding edible fruit and vegetables on cosmetic grounds less economically viable.However, governments should not wait for food pricing to trigger action on this wasteful practice, but produce policies that change consumer behaviour and dissuade retailers from operating in this way, the study said.Rapidly developing countries like China and Brazil have developed infrastructure to transport crops, gain access to export markets and improve storage facilities but they need to avoid the mistakes made by developed nations and make sure they are efficient and well-maintained.Poorer countries require significant investment to improve their infrastructure, the report said. For example, Ethiopia is considering developing a national network of grain storage facilities which is expected to cost at least $1bn."This scale of investment will be required for multiple commodities and in numerous countries, and co-ordinated efforts are going to be essential," the report said.

US pumps record high into govt coffers

The Federal Reserve pumped a record $88.9bn into the US Treasury last year, the spoils of big profits made on its vast holdings of securities, the US central bank said on Thursday.The Fed said the money was earned primarily from interest payments on the securities in its multi-trillion dollar portfolio of US government debt and bonds related to the housing industry.Each year, the central bank sends its earnings, minus operating costs and other expenses, to the Treasury.The 2012 figure eclipsed the prior record of $79.3bn deposited into government coffers in 2010.The Fed estimated its net income for last year at $91 billion.

US jobless claims rise

The number of Americans filing new claims for unemployment benefits rose last week, but seasonal volatility makes it difficult to get a clear picture of the labour market's health.Initial claims for state unemployment benefits increased 4 000 to a seasonally adjusted 371 000, the Labor Department said on Thursday. The prior week's figure was revised to show 5 000 fewer applications than previously reported. Claims tend to be very volatile around this time of the year because of the holidays and seasonal layoffs. While they increased last week, there was nothing in the data to suggest a deterioration in labor market conditions. The four-week moving average for new claims, a better measure of labor market trends, increased 6 750 to 365 750, still at a level consistent with steady job gains.A Labour Department official said there was nothing unusual in state level data and that no states had been estimated. He noted, however, that jobless claims on an unadjusted basis tend to peak in the second week of January and the rise in the week ended Jan. 5 was a build-up to that.The labor market has been gradually improving, with job gains last year averaging 153 000 per month, little changed from 2011. That has not been enough to significantly cut the unemployment rate which ended the year at 7.8%.The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid tumbled 127 000 to 3.11m in the week ended Dec 29, the lowest level since July 2008.The weekly decline was the largest since January 2011.The insured unemployment rate fell to 2.4%, its lowest since July 2008.

Gold worsens global health

High gold prices are driving up the use of toxic mercury in small-scale mining in developing nations, spreading a poison that can cause brain damage in children thousands of miles away, a UN study showed on Thursday. Negotiators from 120 nations will meet in Geneva next week for a final round of talks meant to agree a treaty to reduce the use of mercury. It is mainly emitted by gold mining, where it helps separate gold from ore, and by coal-fired power plants. A leap in gold prices to almost $1 700 an ounce from $400 less than a decade ago has spurred a surge in small-scale gold mining in South America, Africa and Asia which employs up to 15 million people, the UN Environment Programme (UNEP) said. Workers risk acute poisoning and, released to the air or washed into rivers and the oceans, mercury emissions spread worldwide. Mercury, a liquid metal also known as quicksilver, can cause harm especially to the brains of foetuses and infants. "Exposing infants and mothers to mercury is a cruel and increasingly unnecessary risk," Achim Steiner, head of UNEP, told Reuters by telephone from Nairobi, adding that there were cleaner alternatives to mercury in mining. "A Chinese baby born today, just like an American or a Japanese or a Brazilian one, really shouldn't be condemned to have neurological damage as a result of mercury," Steiner said."The very high gold price has ... brought more people, especially at the poorest end of society, into the gold mining sector," Steiner said. UNEP said damage to health and the environment was increasing as a result. Emissions of mercury from artisanal and small-scale gold mines more than doubled to 727 tonnes in 2010 from 2005 levels and now made up 35% of the global total, UNEP said. Part of the surge reflected better data - some mines in operation for years had been unknown, such as in West Africa.Eating fish is the main way mercury builds up in humans. It enters rivers and the oceans and accumulates as methylmercury in the bodies of fish, especially big predators such as swordfish, shark, king mackerel, tuna and sea bass.The report estimated that human emissions of mercury totalled almost 2 000 tonnes in 2010, mostly from Asian nations led by China. It said that level had been roughly stable for the past 20 years despite efforts for deeper cuts after a peak in the 1970s. Mercury also comes from natural sources such as volcanoes.The UN plan is to hold an international conference in late 2013 in Minamata, Japan, the site of one of the worst industrial releases in the 1950s, to approve a new convention to restrict mercury based on texts to be agreed in Geneva. Steiner expressed hopes that a UN convention would spur innovation by companies to cut mercury use. Technologies include filters for coal-fired power plants or substitutes in products such as thermometers, light bulbs and dental fillings. Many nations have tightened laws - the United States barred exports of mercury from January 1, 2013. The European Union, until 2008 the main global exporter, barred exports in 2011.UNEP's study did not provide an estimate for the overall health and environmental damage caused by mercury. UNEP spokesperson Nick Nuttall said that limiting dangerous metals such as mercury could have huge benefits. He noted that one study in 2011 put the benefits from phasing out another poison - lead in gasoline - at more than $2 trillion a year by reducing pollution linked to heart disease, diminished intelligence and even high crime rates.

ECB holds rates at record low of 0.75%

The European Central Bank held interest rates at a record low of 0.75% on Thursday, refraining from a cut following fledgling signs of life in the eurozone economy and with inflation still above target.The 17-country eurozone is in recession but recent data points to some stabilisation. Last month, ECB President Mario Draghi said there was "a wide discussion" on reducing rates - a comment that fed expectations a cut could soon follow. But hawkish remarks from a clutch of senior policymakers since have dampened that talk."This is not a surprise given some of the recent comments from the board, which did seem to play down the recent focus on interest rates," Nomura economist Nick Matthews said of Thursday's rate decision.The euro rose against the US dollar after the decision to $1.3115 from $1.3096 beforehand.New ECB Executive Board member Yves Mersch said last month he did not see the logic of a debate about the ECB cutting its main rate and Peter Praet said there was little room to cut.Stronger survey data appeared to have strengthened the resolve of those at the ECB against a rate cut, Matthews said.An improvement in eurozone business morale in December, when a survey also pointed to a slowing service sector contraction, suggests a modest turnaround in the bloc after a grim fourth quarter.Another cut of the refinancing rate would raise the question of whether the ECB would also lower its deposit rate - already at zero - by the same amount, which would push it into negative territory, essentially charging a fee for banks to park money with it, for the first time.Even though Draghi has said the bank was "operationally ready" for such a step, it has grown increasingly wary of the idea, a source with knowledge of the ECB's thinking said.Negative deposit rates could deal a hefty blow to money market funds, which have already seen cash outflows since the ECB cut the deposit rate to zero in July. The rate is a peg for short-dated money market rates and it is already almost impossible for funds to generate a return for their investors.Executive Board member Joerg Asmussen said last month he would be "very reluctant" about the ECB cutting the deposit rate any further. ECB staff projections published last month saw inflation at about 1.4% in 2014, which would usually justify another interest rate cut. The central bank also sees inflation falling below 2% this year with underlying price pressures remaining moderate.But inflation has eased more slowly than the ECB initially expected and as long as it misses the target - it has been above 2% for more than 2 years - a rate cut could be difficult to justify. In addition to gauging whether the ECB is entertaining another cut or not, Draghi will be pressed on other policy options, particularly to improve lacklustre bank lending. ECB data showed last week that bank lending to the private sector fell at an annual rate of 0.8% in November.At his December news conference, Draghi attributed the drop mainly to demand factors, but added that in a number of countries, credit supply is restricted.A move by global regulators to give banks more time and flexibility to build up cash reserves is expected to do little to support a recovery in Europe, where recession-hit firms and households have scant appetite for more debt. "One thing the ECB needs to engineer is recovery in lending," Rabobank economist Elwin de Groot said.A further question for Draghi will be how close he believes Ireland is to achieving the normalised market funding that would make it eligible for the ECB's new bond-buying programme."I would make the case but I'm not sure that the ECB would accept that case, but it's very close to it," John Corrigan, chief of Ireland's National Treasury Management Agency (NTMA) said on Wednesday.Meanwhile, the Bank of England also left its monetary policy settings unchanged on Thursday while it awaits clearer signals on the state of Britain's economy and more news on the progress of a key scheme to boost lending.After a two-day meeting, the BoE's nine-member Monetary Policy Committee (MPC) said its main interest rate would stay at a record-low 0.5% and it would not buy any government bonds on top of the £375bn purchased so far.

Global food prices drop 7% in 2012

Global food prices fell by 7% in 2012 from the level the previous year, the UN's Food and Agriculture Organisation said on Thursday, assuaging worries a few months ago that the world could be heading for a food crisis. The FAO added that prices had fallen in December for the third month in a row. The Rome-based FAO's Food Price Index averaged 212 points in 2012, a drop of 7% owing largely to falls in the prices of sugar, dairy products and oil.According to the FAO's index, a monthly measure of changes in a basket of food commodities, prices dropped in December by 1.1% to 209 points, down for the third month from the 263 points registered in August."The result marks a reversal from the situation last July, when sharply rising prices prompted fears of a new food crisis," said Jomo Sundaram from FAO's Economic and Social Development Department."But international coordination...as well as flagging demand in a stagnant international economy, helped ensure the price spike was short-lived and calmed markets so that 2012 prices ended up below the previous year’s levels," he said.The sharpest declines registered in 2012 were sugar (17.1%), dairy products (14.5%) and oils (10.7%), while price declines were much more modest for cereals (2.4%) and meat (1.1%).

French labour reform talks deadlock

French employers will consider some concessions in labour reform talks on Thursday but remain opposed to a key union demand to raise welfare charges on short-term contracts, their chief said as negotiations entered a final stretch.President Francois Hollande has called on business leaders and worker groups to strike a "historic deal" to overhaul France's labour market, helping firms to adjust their wage burden in a downturn and giving workers more job security.His Socialist government is pressing the parties to conclude a deal by January 15 as talks restart. A previous round broke up without an accord, with both sides accusing each other of making unacceptable demands.Hollande will introduce a draft law in the first quarter of 2013 regardless of whether a deal is struck. But without support from unions and employers, any law may face street protests and unions may push left-wing lawmakers to water it down."Tonight, we can reach a deal that puts France on par with the highest international standards in terms of flexi-security," Laurence Parisot, head of the Medef employers union, said on Europe 1 radio. "Anything less, there will be no deal."Flexi-security refers to a cooperative approach to labour relations widely used in northern Europe in which employees accept a degree of flexibility in working arrangements in return for employer commitments on job security.France wants to emulate that to address high unemployment and to eradicate the split in its jobs market between unflexible permanent contracts and short-term contracts increasingly used by employers but which offer workers little or no job security.Parisot said the Medef and its negotiating partner, the CGPME small- and medium-sized business group, would consider giving unions a voice and votes on company boards, and favoured making complementary health benefits automatic for workers.Unions say they could accept in-house deals allowing firms to temporarily cut work-hours during downturns, similar to arrangements in Germany. They may also accept the creation of new long-term job contracts with less iron-clad terms.However, union demands to impose higher welfare charges on short-term contracts remained a sticking point. Parisot said Medef was not prepared to extend talks beyond this week.Bernard Thibault, head of the hardline CGT union, said his group would not sign any deal in favour of de-regulation."What I can tell you is there is no way the CGT will approve the spirit of proposals from management's camp," he said.

Call for laws to protect domestic workers

Laws are "urgently" needed to give greater protection to domestic workers, the International Labour Organisation (ILO) said in its latest report on the state of domestic workers worldwide.In the report Domestic Workers Across the World, the ILO said the very nature of their work in private homes makes domestic workers less visible than other workers, and therefore more vulnerable to abusive practices.The report released on Wednesday showed significant growth in the sector in the 15 years from 1995 to 2010, with the number of people employed increasing by almost 20 million to 52.6 million.In 2010 domestic workers, 80% of whom are women, accounted for 1.7% of global employment.Despite this, many domestic workers are still not protected by laws that regulate working time, grant a minimum income or provide maternity protection, according to the report.It estimates that only about 10% of all domestic workers, about 5.3 million people, are covered by labour laws to the same degree as other workers.About 30% have no legal protection at all, the report said.The report however acknowledges that many countries in Africa, Latin America, the Caribbean and the industrialised world have already extended the same minimum protection which applies to workers generally to domestic workers. South Africa, for example, already regulates working times and respective hourly, weekly and monthly minimum wage rates, the report noted.The South African government last year announced a pay rise for all domestic workers with effect from December 1 2012. However, the SA Domestic Service and Allied Workers' Union accused the state of letting down domestic workers by not ratifying Convention 189 of the ILO. The convention advocates standardised working conditions, including minimum wages, rest hours, and leave for domestic workers. The report said the right to maternity protection is a key area of concern. “Women domestic workers are not entitled to maternity leave and associated maternity cash benefits. This poses a substantial obstacle for women domestic workers who wish to combine work with their own family responsibilities,” said the ILO.In addition to the lack of maternity benefits, the report highlights that there are no legal limits on weekly working hours for over half of the world's domestic workers, 45% are not guaranteed any weekly rest period and almost 50% have no minimum wage. South Africa, with more than 1.1 million domestic workers working for private households in 2010, is the biggest employer of domestic workers in southern Africa. The majority of workers are concentrated in Gauteng and KwaZulu-Natal, according to the report. The sector was also the third-largest employer for women in 2010, employing about 15.5% of all women workers.Employers from all races hire domestic workers. Although the government sets minimum wages and working hours, employers should also ensure they pay their workers a fair wage, said Dennis George, general secretary of the Federation of Unions of SA.George said employers should discuss realistic increases linked to the rising cost of living with their workers, as the minimum wage set by the government was only a guideline.Yendor Felgate, CEO of Emergence Growth Services, said the company's research into why so many employers fail to legalise their domestic service arrangements shows this is due to ignorance. “While most employers are keen to do the right thing, few are aware that that their two-day-a-week domestic worker qualifies as an employee," said Felgate.“Ultimately, it will be joint actions taken at the national level by governments, trade unions and employers that will bring decent work to the millions of domestic workers across the world,” said the ILO.

NEWS,26.10.2012

If Obama Wins, Clinton Will Stay At His Side: Countdown Day 11

Presidents Barack Obama and Bill Clinton are turning into the most watchable buddy-buddy road show since "Starsky and Hutch." All they're missing are platform shoes and a Gran Torino Next week they will travel together to Florida, Ohio and Virginia, as Clinton tries to infuse his explanatory magic into Obama's campaign-trail pitch in the final days of a grueling 2012 race.But as attention turns even before Election Day to the dreaded "fiscal cliff" looming at year's end, it's becoming clear that Clinton's sidekick duties will not be over on November 6 if Obama wins.If the current president gets the chance to try to fashion a post-election deal, he'll need Clinton's help in selling it to fellow Democrats.White House staffers are already working overtime on the details of various potential deals; corporate America is begging for demanding prompt action to avoid massive tax increases and draconian "sequestered" spending cuts on January 2.Administration officials argue that they will be in a better position to make a deal with the post-election Congress than a Romney proto-presidency would be.Obama long ago signaled willingness to take on his own party by countenancing entitlement cuts. Romney and his running mate, Rep. Paul Ryan (R-Wis.), are irrevocably committed to not raising income tax rates on anyone, and not raising the overall tax burden.Since the essence of any deal would be concession on both sides of the ledger, Romney's first act as president-elect would require picking a tax fight with the Tea Party and perhaps Ryan.Meanwhile, Obama's staff and advisers inside and outside the White House many of them former staffers for Bill Clinton are looking at options. If their boss wins, talks will begin immediately."I don't see Clinton sitting in on the negotiations," said a source who is very close to both men. "Budget talks are incredibly detailed and exhausting. You have to be totally immersed, and the president has to take the lead. I don't see Clinton in that process."But if we get a tentative agreement, I expect that the former president will be asked to help sell it, and I am sure that he will," said the source, who asked for anonymity to frankly discuss both men. "Nobody could do it better."Clinton has done it before. In December 2010, Obama was forced to accept an extension of the Bush-era tax cuts in exchange for a deal to extend unemployment insurance, an extension of the payroll tax cut and other items on the Democrats' agenda.As it happened, a meeting with Clinton was already on the president's schedule that day. After the two met privately in the Oval Office, Clinton suggested off-the-cuff that they both go to the briefing room, where Clinton gave a ringing defense of the deal.A planned and elaborate version of the same thing could happen this December, if the president is reelected and can fashion a tentative agreement.Obama would need the help. He is not on good terms with members of Congress in general even, if not especially, with members of his own party, some of whom regard him as aloof to the point of condescension. There are some key Democrats in the House with whom he has never had a serious and extended conversation.The president has already indicated and indicated again recently in his interview with the Des Moines Register editorial board hat he is open to a deal that would include substantial new cuts to entitlement programs, an idea that is anathema to much of his party.Selling that part of the deal to constituencies such as labor, the Congressional Black Caucus and teachers groups, to name a few, would be Clinton's brief. As for family self-interest, there would be plenty. Most economists and business experts think that a real, substantive budget deal one that, for example, would save the $4 trillion suggested by the Simpson-Bowles Plan would boost both the psychology and reality of the American, and thus the global, economy.Four good years of Democratic-led U.S. economic growth would set things up nicely for current Secretary of State Hillary Rodham Clinton in 2016.There's never been a TV show like it, but "The Good Husband" might sell.

 

Powell endorsed Obama

An outspoken surrogate for Mitt Romney's White House campaign suggested late on Thursday that race was a factor in former secretary of state Colin Powell's endorsement of President Barack Obama.Former New Hampshire governor John Sununu told CNN that the re-endorsement of Obama by Powell - a Republican who served in both Bush presidencies but backed Obama in 2008 - was possibly due to both men being African-Americans."Frankly, when you take a look at Colin Powell you have to wonder whether that's an endorsement based on issues or whether he's got a slightly different reason for preferring President Obama," Sununu told CNN host Piers Morgan."When you have somebody of your own race that you're proud of being president of the United States, I applaud Colin for standing with him."The remarks by Sununu, a prominent and often flamboyant supporter of Romney, could inject race into a campaign the Republican challenger has tried to keep focused on the sluggish US economy.The remarks came just two days after Republican Senate candidate Richard Mourdock, explaining his anti-abortion stance, sparked controversy by saying that pregnancies caused by rape are "something God intended to happen".Distracting from Republican argumentThose remarks threatened to slow Romney's progress in winning over vital women voters in key swing states and gave Obama an opening to brand Republicans as extremists when it comes to women's rights.Sununu's remarks could prove less damaging as Obama already enjoys overwhelming support among African-American voters but may further distract from Republicans' central argument against the president's economic policies.The two presidential candidates are locked in a virtual tie less than two weeks ahead of the 6 November election, with Romney enjoying a slight lead in national polls but Obama holding a narrow edge in vital battleground states.Powell, who served as chairperson of the Joint Chiefs of Staff under President George H W Bush and secretary of state under President George W Bush, is a moderate Republican once seen as a promising presidential prospect.In his re-endorsement of Obama on Thursday, Powell credited the president with recent improvements in the economy and praised him as a steely commander-in-chief who had wound down the wars in Iraq and Afghanistan.

 

US consumers boost economic growth

US economic growth picked up in the third quarter as a late burst in consumer spending offset the first cutbacks in investment in more than a year by cautious businesses.The stronger pace of expansion, however, fell short of what is needed to make much of a dent in unemployment, and offers little cheer for the White House ahead of the closely contested November 6 presidential election.Gross domestic product expanded at a 2% annual rate, the Commerce Department said on Friday, accelerating from the second quarter's 1.3% pace. A pace in excess of 2.5% is needed over several quarters to make substantial headway cutting the jobless rate.Economists polled by Reuters had expected a 1.9% growth pace in the third quarter. The report comes a little more than a week before the election in which President Barack Obama is trying to fend off Republican challenger Mitt Romney.Since climbing out of the 2007-09 recession, the economy has faced a series of headwinds from high gasoline prices to the debt turmoil in Europe and, lately, fears of US government austerity. It has struggled to exceed a 2% growth pace and remains about 4.5 million jobs short of where it stood when the downturn started. Consumers, however, largely shrugged off the impending sharp cuts in government spending and higher taxes, which are due at the start of the year absent congressional action. Indeed, they went on a bit of a shopping spree as the quarter wound down, buying a range of goods - including automobiles and Apple's iPhone 5.Consumer spending, which accounts for about 70% of US economic activity, grew at a 2% rate after increasing 1.5% in the prior period.Spending despite income squeezeHigh stock prices and firming house values have made households a bit more willing to take on new debt, supporting consumer spending. However, incomes were squeezed in the last quarter, causing households to save less to fund their purchases.The amount of income available to households after accounting for inflation and taxes rose at a tepid 0.8% rate in the third quarter, slowing for a brisk 3.1% pace the prior period. The saving rate slowed to a 3.7% rate after increasing 4% in the second quarter.The faster pace of spending was achieved despite a spike in inflation pressures as gasoline prices rose. A price index for personal spending rose at a 1.8% rate, accelerating from the second quarter's 0.7% pace. But a core inflation measure that strips out food and energy costs slowed to a 1.3% rate after rising 1.7% in the prior quarter, suggesting the increase in overall price pressures will be temporary. With about 23 million Americans either out of work or underemployed, there are fears the current pace of spending will not be sustained, especially if gasoline prices maintain their recent upward march and families get a higher tax bill in 2013.The automatic tax hikes and government spending cuts, known as the "fiscal cliff," will drain about $600bn out of the economy next year absent congressional action.Fiscal cliff fears have already hammered business spending, which dropped at a 1.3% pace in the third quarter, falling for the first time since the first three months of 2011.Part of the drag in business investment, which had been a source of strength for the economy, came from equipment and software, where outlays were the weakest since the second quarter of 2009.Spending on nonresidential structures contracted after five straight quarters of growth.In contrast, home building surged at a 14.4% rate, thanks in large part to the Federal Reserve's ultra accommodative monetary policy stance, which has driven mortgage rates to record lows.Inventories were a drag on growth because of a drought in the country's Midwest, which has decimated crops. Farm inventories cut 0.42 percentage point from GDP growth. In addition, slowing global demand, particularly weakness in Europe and China, caused US exports to contract for the first time since the first quarter of 2009. That left a trade deficit that weighed on GDP growth.But there was surprisingly good news on government spending, which snapped eight straight quarters of declines on a strong rebound in defense outlays.

China: $4 Trillion in Dirty Money Should Worry Us All

Global Financial Integrity's new report on illicit financial flows from China showed some of the worst numbers that we've ever estimated. Crime, corruption, and tax evasion cost the world's largest country and second-largest economy $3.79 trillion from 2000-2011. To make matters even darker, illicit capital flight is intensifying. In 2011 alone, China lost over $600 billion more than any other single country lost over a ten year period when Global Financial Integrity estimated illicit financial flows from 2000-2009.At first glance, these numbers are so big that it can be difficult to wrap your head around them. Even for a country the size of China, $3.79 trillion is a lot of money. What does this look like in the concrete example? A story in The New York Times this morning reported that close family members of Wen Jiabao, the outgoing Premier of China, have accumulated $2.7 billion in wealth much of it housed offshore. His immediate family was awarded tremendous amounts of money in government contracts. This comes not long after The Wall Street Journal exposed that the wife of Bo Xilai, a rising star governor who was on the verge of being promoted to China's powerful Politburo, was responsible for the murder of a British citizen who helped her family smuggle as much as $1 billion to offshore tax havens and secrecy jurisdictions.Illicit financial flows on a massive scale as captured in the GFI study are how these corrupt billionaires hoard their money. Global Financial Integrity's new report found that in 2010 alone, $213.7 billion of foreign direct investment flowing into China was officially reported to come from the British Virgin Islands population 28,000. This is likely the result of round tripping where Chinese elites launder money through secrecy jurisdictions and back into China in order to disguise its source and is what you would expect wealthy Chinese elites to do if their wealth was earned illegally. However, massive amounts of money are indeed leaving China and not returning. Our report found that of the $2.83 trillion that flowed out of China since 2005, almost $600 billion wound up as deposits or liquid assets in tax havens.This has tremendous implications for the Chinese economy. Our report found that illicit financial flows are increasingly driving inequality in China, and may reflect recent concerns about Chinese elites wishing to leave the country. At some point, something has to give. Crime, corruption, and tax evasion will threaten China's economy, and as a result, the global economy if this trend continues. In the words of our Lead Economist, Dev Kar, "[China's] social, political, and economic order is not sustainable in the long-run given such massive illicit outflows."China has seen massive, world-changing, economic growth over the past three decades. However, corruption is undermining much of this growth. The infrastructure that China is building right now should drive growth, and therefore raise living standards for the Chinese people for a century to come. However, many of the brand new bridges, roads, and modern buildings in China have been plagued by shoddy quality and massive amounts of corruption. Our research suggests that much of this money is flowing out of China.I spent most of my professional life as an entrepreneur in Nigeria, and lived there for 15 years. Despite massive oil wealth and a vibrant, young population, 45% of the population lives below the poverty line. Per-capita GDP has barely risen since I first set foot there in the 1960s. I know far too many people living worse off today than they did decades ago. This is not because the Nigerian economy lacks promise it has huge oil exports, and the country is filled with good, ambitious,entrepreneurial people but because crime, corruption, and tax evasion have torn the country apart.When China is growing at close to 10% every year, China's median citizen sees their life improving despite endemic corruption and illicit outflows. However, there are serious questions for the political and social stability of China's economy if growth slows. Will the median citizen continue to tolerate obvious and tragic corruption on the scale that we are seeing when more modest growth is not improving their living standards? When we say that illicit flows drive inequality, it is because money moved illegally out of the economy hurts your average person. That money can't be spent on schools, infrastructure or basic services. To make matters worse, our prior research finds that illicit flows drive underground economies, resulting in more organized crime, smuggling, and other factors that undermine the Chinese economy.A recent Pew poll suggests the average citizen may be getting restless.  The study released last week found that roughly half of the Chinese public now see corruption and inequality as "very big problems" in their country, a significant spike from 2008 when the poll was last conducted.Still, the world needs to do something about this. Potential political unrest in China affects us all. We make it far too easy for wealthy elites all over the world to stash their money in tax havens, including the United States. The world cannot afford to let China collapse into a pit of corruption and civil unrest.  The result would be a disaster.

NEWS,20.06.2012

Greek coalition takes power

A conservative-led government took power in Greece today promising to negotiate softer terms on its harsh international bailout, help the people regain their dignity and steer the country through its biggest crisis for four decades.The swearing-in of Antonis Samaras as prime minister after elections last Sunday ended weeks of uncertainty that rattled financial markets and threatened to push near-bankrupt Greece out of the euro zone.Samaras, a Harvard-educated economist from a prominent Greek family, will head an alliance of his New Democracy party and Socialist PASOK rivals - the same discredited establishment parties which have dominated politics since 1974."I am fully aware how critical this time is for our nation," Samaras said after he was sworn in at a ceremony conducted by robed Orthodox priests at the presidential mansion."I know very well that Greek people are hurt and need to regain their dignity. I know that the economy must quickly recover to re-establish social justice and cohesion."The coalition parties are in a race to overcome public disgust with their records, face down an emboldened leftist opposition that narrowly failed to win the election, and persuade reluctant euro zone partners to ease the terms of a bailout that has caused deep economic suffering.The cabinet has yet to be named, although a technocrat banker is expected to become finance minister.Party leaders said a team would be formed to renegotiate the terms of the hated 130 billion euro rescue plan with the European Union and IMF, setting up a showdown with the lenders led by paymaster Germany who say they will adjust but not re-write the document.New Democracy and PASOK have little history of cooperation, having alternated in office from the fall of military rule in 1974 until last year, when the economic crisis forced them to share power in a short-lived national unity government.Their coalition will be the first in Greece in decades with an unrestricted mandate - last year's unity government and a coalition that took power in 1989 both had limited powers.The alliance will also be backed by the small Democratic Left party, whose leader Fotis Kouvelis called on the government "to gradually disengage from the terms of the bailout that has bled society".An official from one of the three parties in the coalition said that they had agreed to name National Bank Chairman Vassilis Rapanos as finance minister.Rapanos is an economics professor who worked closely on reforming the economy with a previous Socialist government.Other ministers were expected to be named later.Humiliated People Greece's crisis has left its people not only poorer but feeling humiliated.As the political leaders wrapped up talks on a government, hundreds of Greeks - many until recently members of the prosperous middle classes - gathered under the scorching sun in a big park in Athens for free vegetables offered by a farmers' association from the island of Crete."Not even in my worst nightmares could I imagine that I would end up like this - waiting in line for food," said Eleni Moshidou, 56, a mother of three unemployed sons who was fired from a law firm when the crisis broke out in 2010."I feel humiliated. Our politicians brought us here."Just over a month after an inconclusive election raised fears that Greek would have to leave the euro zone, New Democracy narrowly beat the radical leftist Syriza bloc that wants to scrap the bailout deal which most Greeks blame for worsening a recession which is in its fifth year.Syriza promised yesterday to be a "combative" opposition force that fights on behalf of Greeks struggling through wage cuts and spending cuts that have sent unemployment to record highs.But the new government's first battle is likely to be with foreign lenders as it tries to convince them to sign off on the next instalment of aid and allow more leeway on the austerity pledges.PASOK leader Evangelos Venizelos warned of a "big battle" in Brussels to craft a new bailout deal that would promote growth and contain unemployment."The most critical issue is the formation of the national negotiation team and ensuring that it is successful," he told reporters.Both PASOK and Democratic Left have refused to place senior politicians in the cabinet and could nominate technocrats instead, a move which potentially weakens their commitment to the new government."This government will have a very short life-span. It will disappoint expectations and its support will erode quickly," said independent political analyst John Loulis."It will be a government entirely run by New Democracy; its two smaller partners have already weaseled their way out of it".

Climate law could raise gas prices, lobbyists say

California regulations designed to fight global warming could force half of the state's refineries to close, trigger fuel shortages and add $2.70 per gallon to the cost of gasoline, according to a study released Tuesday by an oil industry lobbying group. The study, issued by the Western States Petroleum Association, argues that California's upcoming cap-and-trade system to cut carbon dioxide emissions could wreak havoc with fuel supplies as early as 2015. So could the state's low carbon fuel standard, a policy requiring refiners to lower the carbon intensity of the fuel they sell in California.Oil companies have a history of resisting California's climate change rules. But Catherine Reheis-Boyd, president of the petroleum association, said Tuesday that her group isn't trying to overturn the state's global warming law, known as AB32. Instead, the association wants to change how the state implements the law. If gasoline prices jump due to the fuel standard and cap and trade, she warned, Californians would probably demand that the entire law be scrapped."People could revolt, and if that happens, that's the end of it," Reheis-Boyd said. "If this goes the way we think it will, you won't have a program in 2015."2006 legislationPassed in 2006, AB32 requires California to bring its greenhouse gas emissions back to 1990 levels by 2020. Both the low carbon fuel standard and the cap-and-trade program, which starts this fall, were created to implement that law. Several oil companies that belong to the petroleum association tried to block AB32 in 2010 with a statewide ballot measure, but voters rejected it.Some environmentalists called Tuesday's report a scare tactic aimed at California legislators who are nervous about the state's fragile economy. The state has already endured two gas price spikes this year, with the statewide average for a gallon of regular finally falling below $4 last weekend for the first time since February."One thing I don't understand is, the electric utilities have stepped up, with renewable power and energy efficiency, the car companies have stepped up, with increased fuel efficiency - the oil companies seem to be the only ones who have no way to comply with AB32," said Adrienne Alvord, the California and western states director for the Union of Concerned Scientists. Complex, unpleasantTuesday's report was researched and written by the Boston Consulting Group and focuses on how California's 14 refineries will respond to both the fuel standard and cap and trade. The scenario is both complex and unpleasant.To comply with the low carbon fuel standard, refiners will need to blend more ethanol into their gasoline. But not just any ethanol will do.The process used by most American ethanol producers - distilling fuel from corn - releases too many greenhouse gases, according to California air pollution regulators. So the refiners would need to buy cellulosic ethanol, which is made from woody plants and has a smaller greenhouse gas footprint.Unfortunately, cellulosic ethanol has not yet been mass-produced. So the refineries would most likely buy Brazilian ethanol, made from sugar cane, and ship it here. Even with transportation factored in, Brazilian ethanol has a smaller greenhouse gas footprint than American corn ethanol, according to California's standards.Importing Brazilian ethanol would cost the California refineries money. In order to make a profit, they would most likely start shipping larger amounts of their gasoline to customers in other states or countries, where they wouldn't have to comply with the low carbon fuel standard. That would raise gas prices here.At the same time, the refineries would face an added expense due to the cap-and-trade system. The system will set an overall limit on the carbon dioxide emissions and create a market in which companies buy and sell the right to produce set amounts of greenhouse gases. That could cost refineries dearly, especially if carbon prices in the new market rise much higher than the state expects.Refineries threatenedAs a result, as many as seven California refineries would no longer be profitable, said Brad VanTassel, senior partner of the Boston Consulting Group.Should they close, the state could lose between 28,000 and 51,000 jobs, with the losses occurring not just at the refineries but at businesses frequented by refinery workers. California also could lose $3.1 billion to $3.4 billion in tax revenue. "Even if you lose just 30,000 jobs, that's a big deal to a state that's got 11 percent unemployment," VanTassel said.California has lost oil refineries before. In 1996, the state ordered oil companies to change the formula of fuel sold here in an effort to cut air pollution. It worked, but some refineries closed rather than pay for the necessary upgrades. At the same time, oil companies had been closing smaller California refineries to reduce the state's oversupply of gasoline and boost profits at remaining refineries.

NEWS,24.01.2012

U.S. lauds EU for embargo on Iranian crude oil

Move could spur rise in gas prices

U.S. leaders praised the European Union’s embargo on Iranian oil Monday, even though it triggered a jump of more than $1 per barrel in global oil prices and signaled the potential for a rise in U.S. gasoline prices in the weeks ahead. Iranian officials called the embargo an act of “psychological warfare,” and lawmakers renewed threats to block the Persian Gulf’s Strait of Hormuz, through which one-fifth of the world’s crude oil is transported. The EU’s move showed significant widening of international support for the U.S.-led effort to choke off the Iranian economy to pressure Iranian leaders to abandon a nuclear program that the Islamic republic claims is peaceful. Western nations and Israel fear Iran is trying to make an atomic weapon. By agreeing to the oil embargo, the EU’s 27 foreign ministers delivered “another strong step in the international effort to dramatically increase the pressure on Iran,” 

Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy F. Geithner said in a joint statement. With EU nations buying about 25 percent of the 2.5 million barrels exported by Iran daily, analysts say the embargo’s impact will be felt on both sides, especially among EU members already struggling under austerity measures tied to the Continent’s economic crisis. Iran remains the second-largest producer in the Organization of Petroleum Exporting Countries (OPEC), and the embargo’s ultimate impact on global oil prices remains to be seen. President Obama authorized new sanctions on Iran’s oil sector and the central bank when he signed the Defense Authorization Act on Dec. 31. However, implementation of those sanctions was delayed for six months to prevent a sudden increase in global oil prices. News of the EU’s move Monday sent the New York stock market price of crude oil to $99.58 per barrel, an increase of $1.25 from Friday. A joint statement issued by the leaders of the EU’s most powerful nations said that while “the door is open to Iran to engage in serious and meaningful negotiations,” Iranian leaders have “failed to restore international confidence in the exclusively peaceful nature of its nuclear program.” Until Iran comes to the table, we will be united behind strong measures,” said the statement by British 

Prime Minister David Cameron, German Chancellor Angela Merkel and French President Nicolas Sarkozy.Mrs. Clinton and Mr. Geithner noted that the EU embargo bolsters the new U.S. sanctions with the goal of “targeting transactions with the Central Bank of Iran and by providing strong incentives to reduce Iran’s ability to earn revenue from its oil exports.” The stakes are high for such measures because a further jump in oil prices could threaten the EU’s delicate economic recovery.In the U.S.,average gasoline prices have hovered at $3.85 per gallon this month. Analysts say that gradual increases in the cost of crude take about a week to impact prices at the pump. The oil embargo’s overall impact on global crude prices may be more difficult to calculate.” At this point, there’s at least some short-term confidence that there’s an excess in the market to absorb any disruptions in Iranian supply, but there’s a lot of uncertainty and ultimately the key player will be China,” said Suzanne Maloney, a senior foreign policy fellow focused on Persian Gulf and Middle East energy policy at the Brookings Institution.