NEWS,24.07.2013

US bill threatens government shutdown

The US senate on Tuesday advanced a $54bn measure that increases funding for transportation and housing projects, setting up a spending clash with Republicans in the House of Representatives that threatens a government shutdown on October 1.
The senate voted 73-26 to clear a procedural hurdle that allows for consideration of amendments and a simple majority vote on the funding bill, drawing the support of 19 Republican senators.
The funding measure for basic infrastructure projects, block grants for cities and public housing draws a sharp contrast between the spending paths laid out by Senate Democrats and House Republicans, who are considering a $44bn measure.
The House Republicans are passing their 12 appropriations bills for the new fiscal year under a discretionary spending cap of $967bn in an effort to keep savings from the automatic "sequester" spending cuts in place.
They want to divert a larger share of that reduced spending pie to defence and security agencies, subjecting domestic programmes to bigger cuts.
Senate Democrats, meanwhile, assume that the sequester cuts will be replaced by tax hikes and savings elsewhere and are applying a $1.058trn cap to their bills - $91bn more than the House.
There is little chance of that difference being resolved as the September 30 fiscal year-end approaches, so Congress would need to pass a stop-gap funding measure to avoid a government shutdown on October 1.
The senate measure would mark an increase of $2.3bn in spending on transportation and housing  mostly urban  over the 2013 level. The House measure would cut it by $7.7bn.
Democrats argued that delaying needed work on airports, roads and public housing will simply cost more in the future, and say such projects help the economy.
"Steel rusts, asphalt wears out, buildings need to be repaired and maintained," said Senate Appropriations Committee Chairperson Barbara Mikulski, a Maryland Democrat. "It's not politics, it's physics. We have to make investments today so that our nation can grow."
Both Tuesday's procedural vote and an Appropriations Committee vote drew significant Republican support, indicating that the party's appetite for continuing the deep spending cuts may be waning in the Senate.
But top senate Republican Mitch McConnell said any spending deal must maintain savings from the sequester about $1.2trn over 10 years  which were set in motion by a budget deal two years ago. He dismissed Democratic demands for additional revenue.
"I have no interest in reopening the subject of additional taxes. The government in my view doesn't need more revenue," McConnell told reporters after the senate procedural vote.

US opens probe into steel pipe imports

The US commerce department on Tuesday launched one of its biggest trade investigations in years into charges that manufacturers in South Korea, India and seven other countries are selling steel pipe used by oil and natural gas producers at unfairly low prices in the United States.
Imports of oil country tubular goods (OCTG) from the nine countries totalled nearly $1.8bn in 2012, more than double their total in 2010, as rising US oil and natural gas production have increased demand for the pipe.
In 2010, the United States slapped duties on imports of OCTG from China after they hit about $2.8bn in 2008. The duties slapped on imports from China created an opening for the other foreign suppliers.
The latest case targets South Korea, which exported about $831m worth of the pipe to the United States last year, as well as India, Vietnam, the Philippines, Saudi Arabia, Taiwan, Thailand, Turkey and Ukraine.
US producers are asking for anti-dumping duties as high as 240% on India, 158%t on South Korea, 118% on Thailand and 111% on Vietnam to offset what they say is below market pricing, and lesser but still hefty duties on the other five countries.
For two countries, Turkey and India, US producers are seeking additional countervailing duties to offset alleged government subsidies.

3G lack hampers West Bank smartphones

Like many young Palestinians, Amir was excited to get his first smartphone, despite the heavy price tag. But he did not keep it long after realising the lack of 3G network meant its applications were largely unusable.
"I sold my iPhone because I just couldn't use it when I was out and about," said the internet cafe worker, who asked to be given a pseudonym.
"It's expensive to buy a smartphone, so without the full benefits there's no point having one," he added.
With the latest Samsung Galaxy or iPhone costing $400 (€300) it is a considerable investment, but for those keeping pace with developments on Twitter and Facebook, a smartphone has become the tool of choice.
As telecom companies in the Middle East prepare to launch the next generation of high-speed mobile phone internet services, commonly known as 4G, the Palestinian territories still have no access to 3G, meaning they are unable to fully use their smartphones on the go.
As a result, most mobile phone owners simply do not use 3G. And many feel the cost of a smartphone is hardly worthwhile.
"I can't get 3G with a Palestinian provider, so I have to have two contracts, one Palestinian and one Israeli, which is cumbersome and expensive," said 27-year-old Jeryes, who runs a bookshop in Ramallah.
Israel's refusal to give Palestinian mobile companies access to the necessary frequencies for 3G means West Bank residents must sign up with an Israeli company to get mobile internet, but calling rates are more expensive in the territories.
Palestinian mobile operators do not include the price of a phone in their monthly packages, adding to the expense.
Sabri Saidam, telecommunications adviser to Palestinian president Mahmud Abbas, said Israel had repeatedly refused to grant 3G access to Palestinian phone companies for "security" reasons.
"Over the past few years several requests have been made and have been denied" to import the technology and get access to the frequencies needed for 3G, he said.
"Israel persistently refuses the application for 3G on the basis of security," Saidam told AFP.
"This is even though there are Israeli companies illegally operating in the Palestinian territories providing 3G for their customers," he said, referring to the more than 500 000 Israeli settlers living in the West Bank and annexed east Jerusalem.
'If you're disconnected you're half dead'
But despite being a nuisance for those who want to use 3G, the issue for most Palestinians is primarily political.
Mobile phone shop worker Alaa Qawasmi, 27, said he was more angry about what the Israeli stranglehold on 3G represented.
"The main reason we don't have 3G is because of the occupation," he said. "Meanwhile, the technology Israeli phone users have is far better, and there are so many services we can't use."
But the obstacle can be overcome, thanks to wireless technology.
"It doesn't affect me much," said Omar, an IT worker in hospitals who did not wish to give his real name.
"Almost everywhere has wireless internet."
Mobile users can sit in cafes or at home, using connections there to have full access to their smartphone features - though some such as digital maps are not updated for West Bank residents, meaning the usefulness of the smartphone is limited, said Omar.
3G "would be nice to have, but we have more important problems here", he said.
A campaign launched by an IT expert during a visit by US President Barack Obama in March to draw attention to the lack of 3G in Ramallah was dismissed by some commentators as potentially overshadowing more crucial political issues.
Ruba Abu Roqqti, visiting her local phone shop, said what was more important was having internet access at all, let alone on the move.
"If you're disconnected from the Web it means you're half dead," she jested - before asking what 3G actually was.
"If it were available, that would be good," she said, "but it's not a big problem, I hadn't even heard of it."
Hamdi Awad, a teenage student, said it could be "good for flirting with girls" in real time.
"You could add them on Facebook and go from there," he laughed.
Though the 3G issue looks far from being sorted, the Palestinians did celebrate a more significant Web-based victory in May, as internet giant Google recognised their upgraded United Nations status, placing the name "Palestine" on its search engine instead of "Palestinian Territories".
Posters on the way into Ramallah from the Israeli-controlled Qalandia checkpoint in the West Bank urged internet users to "log on" to Google.ps and support the Palestinian cause of achieving full independent statehood.

FDA tightening rules on menthol smokes

Shares of US tobacco companies fell on Tuesday after the US Food and Drug Administration (FDA) said it is considering tightening regulations on menthol cigarettes following a scientific review that showed the products are likely to be more addictive than regular cigarettes.
Shares of Lorillard, which makes the Newport brand of menthol cigarettes, fell as much as much as 5% while shares of Altria Group, which makes a menthol version of its Marlboro brand, fell as much as 3%.
The FDA published preliminary results from a study it conducted that suggest "menthol cigarettes pose a public health risk above that seen with non-menthol cigarettes."
The report found that while menthol cigarettes are no more or less toxic than regular cigarettes, menthol's cooling and anesthetic properties can reduce the harshness of cigarette smoke, increasing their appeal to new smokers.
Still, at least some tobacco company analysts see the tone of the report as positive for the industry in so far as it did not recommend an outright ban.
"We believe it's unlikely that menthol will be banned," said Bonnie Herzog, an analyst at Wells Fargo Securities, in a research report.
"We see this as a buying opportunity as we expect the stock to recover as investors digest this report," she said, referring to Lorillard shares.
The FDA's move comes during a trade dispute in which Indonesia charges that the United States illegally allowed menthol cigarettes to remain on the market while banning the import of clove-flavored cigarettes from Indonesia.
In 2012, the World Trade Organization ruled that the United States should either end its ban on Indonesia's imports or impose a ban on US menthol cigarettes. So far the United States has stopped short of a ban.
"The United States has been clear that it would comply with the WTO findings in a way that is appropriate for the public health," said a statement from Andrea Mead, a spokesperson for the Office of the United States Trade Representative, which negotiates with foreign governments to create trade agreements and resolve disputes.
The FDA is seeking public comment on whether a limit could be set on the amount of menthol in cigarettes. It is also seeking information on how menthol cigarettes are marketed to the young and minority communities.
Lorillard Chief Executive Murray Kessler said in a statement that the company is "encouraged" by the FDA's "science-based approach."
"It is Lorillard's long-held belief that the best available science demonstrates that menthol cigarettes have the same health effects as non-menthol cigarettes and should be treated no differently," he said.
A spokesman for Altria, David Sylvia, said the company had only just received the FDA's report and was reviewing the information.
Lorillard's shares were trading down 4.2% at $44.23 in afternoon trading on the New York Stock Exchange. Earlier they fell as low as $43.77. Altria's shares were down 2.5% to $35.94, after dropping as low as $35.73.

Is China ripe for unrest?

RECENTLY, it seems no developing country is safe from sudden, unexpected protests.

In Brazil and Turkey, empowered middle classes pushed back against perceived governmental injustice; protests erupted, and leaders’ approval ratings dropped precipitously.

In Egypt, the economic picture was as ugly as the political one, and the military’s ouster of president Mursi has fomented conflict and instability.

China may look like a candidate for the type of protests currently sweeping the developing world. Not only is a newly empowered middle class demanding better services and more accountability from government, growth has also tapered off in recent quarters.

Don’t hold your breath. At least for the time being, China is well-positioned to navigate such challenges far better than its emerging market competitors.

Let’s start with the economy. For years pundits, and many Chinese government officials, thought that if China’s gross domestic product growth rate ever fell below 8%, it would set off an unemployment crisis that would raise the risk of social and political instability in the country.

Well, China’s finance minister was in Washington last week and said that the Chinese economy could handle 7% or even 6.5% growth a lower rate than China has experienced in 23 years.

But unlike many other emerging markets, China views slower growth as a manageable challenge. The government actually recognises that a slowdown is necessary to meet its reform and rebalancing goals, and is working now to score political points among the population by arguing that it’s doing so.

In particular, Beijing hopes that the slowdown will force industrial consolidation and less resource consumption, which could slow environmental degradation which has been a major point of political vulnerability for the government.

Slower growth should also calm the real estate sector, where rising prices have been a major sore point for urban Chinese. China’s new leadership is betting that progress on these fronts will outweigh the downside risks they’ll face as job losses tick up in the face of slower growth.

From a global perspective, there is a strong case to be made that China’s slowing growth rate is actually a good sign.

Bubbles allowed to shrink

The fact that Beijing hasn’t just reflexively pumped capital into the system to keep growth rates up shows that it is willing to begin undertaking modest economic reforms; it is, in effect, letting bubbles shrink rather than grow until they pop.

This approach is characteristic of the new leadership that took charge in March of this year: they are less risk averse and they have a more long-sighted handle on the necessary economic changes that China will have to undertake.

The new president himself is a cause for optimism. Xi Jinping has a more assertive, off-the-cuff style; he is a more spontaneous, charismatic leader than his predecessors, and early reviews in China’s blogosphere suggest a favourable first impression.

Xi is using this boldness to work to consolidate his support within the Communist Party. And the extent to which he is successful will mean even more capacity for even more reform over time.

All of this doesn’t mean that China’s stability should be taken for granted, or that there aren’t looming problems on the horizon. The very fact that China doesn’t face significant near-term instability could lead to complacency and give it wiggle room to delay necessary reforms.

China still needs long-term and significant economic and political transformations to get it from “developing” to “developed.” It has too many changes coming to its demographics, manufacturing costs, and environmental needs to get away with ignoring them in perpetuity. (The US can sympathise.)

While it’s a good sign that the current leadership is allowing lower growth rates in order to implement some economic reform, thus far, all changes are happening inside the system, not to the system itself. Easy growth was the low-hanging fruit for China over the past thirty years.

Now the government is reaching a bit further up the tree. But they still have a very long way to go to get to the upper branches.

China’s other major threat is the stratification that any developing country has to navigate. As I’ve written about in the past, the growth of the Chinese economy has created a new middle class that has different demands from the largely rural population that China is still trying to lift out of poverty.

In the near term the new government’s tolerance for slower growth is actually positive for helping to address some of these concerns. But eventually, Beijing will have to reconcile two increasingly divergent populations.

This, again, is a long-term issue. But as these issues go unaddressed, and as more Chinese become rich enough to prioritise new sorts of rights and privileges, the chances of unrest will rise.

Don’t believe the idea that China is a ripe victim for this wave of developing world protests, or that China’s slowing growth rate is a sign of an imminent hard landing. China’s near-term picture looks surprisingly bright.

But after that, the larger question still looms: can Xi Jinping and his government handle the looming storm clouds while they are still a good way off?

NEWS,20.06.2013

Japan's female labour goals hit backlash

Days after Kaoru Shimada and other Japanese mothers rallied in Tokyo this year to press for more public daycare, she was shocked to read a local politician's blog blasting their "shameless" demands and asserting kids should be raised at home.
Prime Minister Shinzo Abe has vowed to take steps, including expanding daycare, to help mobilise women power as part of his "Abenomics" plan to end economic stagnation and engineer growth in a country beset by an ageing, shrinking population.
But that economic imperative is colliding with a conservative worldview, shared by many ruling party politicians as well as top business executives, that sees women's proper place as in the home, not in offices, factories or boardrooms.
"My first impression was that he was mocking us," said Shimada, a 29-year-old system engineer with a toddler son, referring to the comments by blogster Yutaro Tanaka, a local assembly member from Abe's Liberal Democratic Party (LDP).
"He has no idea of the reality," Shimada - who found a daycare spot about a week before she had to resume work in April - told Reuters at a gathering of young parents exchanging information on daycare options and related headaches.
Opposition lawmakers, experts and even some from Abe's own party say such conservative views are common inside the LDP.
"Their view of women is basically as tools to boost the birth rate, reduce social security spending and increase growth. Women have a role because they are key to solving these three problems," said Mari Miura, a political science professor at Sophia University in Tokyo.
"But they have a strong idea of the traditional family as a core ideology of conservatives. That ideology and reasonable solutions do not match, so the policy is always schizophrenic at best."
Hidden message?
Experts and working women laud Abe's goal of mobilising women power even as they note the moves are long overdue in a country where female board members account for only about 1% of the total and women's employment rate of 60% is among the lowest in developed nations.
Abe has pledged to eliminate daycare wait lists - which official data put at 25 000 nationwide and private experts much higher - in five years. The plan is to provide fiscal support for non-government facilities and ease regulations to give private operators more scope.
He has set a target of having women in 30% of leadership posts in all sectors of society by 2020 and also urged Japan Inc to put more women on corporate boards. His initial goal: one woman director per firm.
"At the end of the day, it's the first administration that I can think of that even mentioned women's participation. So that's a step forward," said Kathy Matsui, chief Japan strategist at Goldman Sachs.
She estimates that raising female labour participation rates to the same 80% seen for males could boost Japan's gross domestic product by as much as 14%.
"Obviously, this is going up against a tidal wave of potential opposition, but at the end of the day, what other choice do they have?"
Critics, however, say parts of Abe's agenda send a different message and would have the opposite effect to his stated goal.
Among the moves critics question is Abe's request for firms to increase childcare leave from a maximum of one-and -a-half years to three and an LDP proposal to make private nursery schools, which hold only morning sessions, free for pre-schoolers.
"They are saying: 'Stay home until the child is three, then put the child in nursery school and take care of him or her yourself in the afternoon,'" said opposition Democratic Party lawmaker Renho, a former TV announcer and mother of teenage twins, who goes by one name.
"The message is: 'Don't think about working full-time'."
While some women might welcome the prospect of three years' childcare leave, many say the notion is unrealistic given the need for double incomes and the likely damage to careers from a three-year gap. Currently, those taking childcare leave get a government allowance equal to half their salary.
"Practically speaking, three years would be tough," system engineer Shimada said. "I took off 18 months and there was a gap that made me feel like a rookie employee when I returned."
Silver democracy
Japanese firm Benesse Corp, where one-third of managerial staff are women, found that a three-year childcare leave programme introduced in 1990 had the opposite effect to that intended: fewer female employees returned to their jobs.
"Some did return and what they said was that it was really difficult to catch up," said a company spokesperson, Yuko Onizawa. Five years later, Benesse shortened the leave system to one year and has since found that more women return to work.
Corporate attitudes also need to change for Abe's pitch to work. Although some major firms are taking diversity policies seriously as one key to boosting profits, business lobby Keidanren is blocking a proposal to require listed firms to disclose their gender statistics.
"Keidanren is greatly opposed  I think because it would be obvious how few women they have," Yuriko Koike, a former defence minister who heads the LDP's PR department and advocates bolder steps than those favoured by many in her party, told Reuters.
With public debt already twice Japan's $5trn economy, finding government funds to subsidise programmes to promote daycare and advance women in the workforce could also be tough.
The metropolis of Yokohama near Tokyo last month announced it had eliminated its daycare wait list three years ago the worst in the country through deregulation and bigger spending.
Abe has touted Yokohama as a model case others should follow, but the national government and other municipalities may be reluctant to follow through with similar spending rises.
"It's a kind of 'Silver Democracy' dilemma," said Hiroki Komazaki, founder of non-profit daycare provider Florence who sits on one of Abe's advisory panels.
"They have to cut spending on the elderly and invest in the future. But young people only vote at half the rate of the elderly."
A basic lack of understanding of the issues among many politicians remains, the LDP's Koike says, a big barrier to change.
Recalling a session of an LDP panel on policies concerning women, she said ruefully: "I explained the notion of 'diversity' and one of the men asked me 'Where is that?' He thought we were talking about a place called 'Diver City'."

Brazil backs down on transport hikes

Bowing to mass protests, authorities of Brazil's two biggest cities Sao Paulo and Rio de Janeiro on Wednesday decided to roll back transport fare hikes that had triggered widespread unrest.
Sao Paulo state governor Geraldo Alckmin told reporters that metro, train and bus fares would revert to $1.35 from $1.44 from next Monday, according to the current exchange rate, while Rio mayor Eduardo Paes said bus fares would go back to $1.24 from $1.33.
The decisions marked a major victory for the tens of thousands of citizens who have taken to the streets of both cities to vent their anger at the fare increases.
Several other Brazilian cities, including Porto Alegre and Recife, had already cancelled the fare hikes.
The current wave of unrest began nearly two weeks ago in Sao Paulo and rapidly spread to other cities just as the country on Saturday kicked off the Confederations Cup, a dry run for next year's World Cup.
The nationwide anger also focused on the $15bn the government has earmarked for the Confederations Cup and the World Cup, which many Brazilians feel would have been better spent on health and education.
The fare increases may appear modest but they were seen by many as a major burden in a country where the minimum monthly wage is currently only $306.

Bernanke: Fed likely to ease bond buying

Federal Reserve chairperson Ben Bernanke said on Wednesday the US economy is expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.

Bernanke's confirmation that the Fed is getting closer to pulling back on its $85bn in monthly asset purchases confirmed investor fears, sending stocks and bonds sharply lower and pushing benchmark Treasury yields to a 15-month high.

Moderate growth should lead to a further healing in the job market as headwinds facing the economy ease, Bernanke said. He also said policymakers expect inflation to move back up toward their long-term 2% goal.

The Fed's willingness to dial back on the amount of stimulus it is pumping into the economy reflects growing confidence in the sustainability and strength of the recovery. Since cutting interest rates to near zero in late 2008, the central bank has more than tripled its balance sheet to about $3.3trn to drive borrowing costs down and spur hiring.

"The committee currently anticipates that it will be appropriate to moderate the monthly pace of purchases later this year, and if the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year," Bernanke said.

He added that the jobless rate should have declined to near 7% from its current rate of 7.6% by the time bond purchases are halted. If its forecasts proved too optimistic, the Fed could stop reducing its bond purchases or even raise them again, Bernanke said.

In a change of policy, Bernanke also said a majority of Fed policymakers believe the central bank should hang onto the mortgage assets it acquired through its unconventional monetary stimulus when it decides to tighten monetary policy.

He made the statements at a news conference on the Fed's decision to continue buying $40bn in mortgage-backed securities and $45bn in longer-term US government securities each month.

After a two-day meeting, the Fed's policy-setting panel offered a more upbeat assessment of the risks facing the economy than it have given after the last meeting in May. "The committee sees the downside risks to the outlook for the economy and the labour market as having diminished since the fall," it said.

A Reuters poll of 17 top Wall Street bond dealers found that 16 expect a reduction in the Fed's asset purchases by year-end, with a plurality pegging the central bank's September meeting as the starting point. These dealers saw the Fed slowing its bond purchases by $10bn to $28bn on that first pass, with a median response of $20bn.

Rate rise not seen until 2015

Bernanke stressed that a slower pace of bond buying would still be adding support to the economy, and that any decision to begin removing stimulus remained a long ways off. Any eventual increases in interest rates would also be gradual, he added.

"They do indeed plan to taper purchases later this year and hope to be done by next summer. Bernanke wants to communicate that this is not necessarily tightening, but the market may not see it that way," said Axel Merk, president and chief investment officer of Merk Investments in Palo Alto, California.

Esther George, the president of the Kansas City Fed, again dissented against the Fed's expansion of its support for the economy, expressing concern it could fuel financial imbalances and hurt the central bank's goal of keeping inflation contained. She has dissented at every policy meeting since January.

But in a surprise, the St. Louis Fed chief, James Bullard, also dissented, though in the opposite direction, arguing the Fed should have signalled more strongly its willingness to keep its stimulus in place to defend its 2% goal for inflation.

In its statement, the Fed repeated that it would not raise rates until unemployment hits 6.5% or lower, provided that the outlook for inflation stays under 2.5%.

Bernanke made clear that threshold was merely for considering a rate hike, not a trigger for necessarily making one. In fresh quarterly projections, 14 of the 19 members of the Fed's policy panel said they did not think it would be appropriate to raise rates until some time in 2015.

In a sharp downgrade, the Fed forecast the PCE price index, its preferred gauge of the price pressures facing consumers, would rise just 0.8% to 1.2% this year. However, it saw inflation heading back to 1.4% to 2.0% in 2014 and 1.6% to 2.0% in 2015.

A low inflation rate could allow the Fed to keep interest rates lower for longer and could even force additional monetary easing if low inflation persists or inflation falls further.

In a slight upgrade to their economic projections, officials forecast unemployment to average 6.5% to 6.8% in the fourth quarter of next year, and 5.8% to 6.2% in the final three months of 2015.

They forecast US economic growth of between 3.0% and 3.5% next year and 2.9% to 3.6% in 2015.

Analysts think US growth slowed a bit in the second quarter of this year in the face of fiscal drag from government spending cuts and higher taxes; recent readings from the economy have been mixed.

The labour market, a central focus of Fed efforts to boost growth, has notched steady improvement with 175 000 new jobs added in May. But US manufacturers have been hurt by softer overseas demand, and inflation has fallen even further beneath the Fed's goal.

The consumer price index was up 1.4% in May from a year ago. But the PCE price index rose just 0.7% in the 12 months through April, the most recent reading.

Outgoing BoE chief calls for bank reform

Britain's economic recovery is not yet secure and more needs to be done to ensure the country's banks no longer pose a threat to taxpayers, Bank of England (BoE) governor Mervyn King said in his final speech on Wednesday.
King steps down at the end of this month after more than 20 years at the bank, to be replaced by former Canadian central bank chief Mark Carney, and the 65-year-old stuck to familiar themes in an annual address to London's financial elite.
"There is a powerful case for more stimulus in the short run," said King, who has spent the last five months at the helm of the BoE's monetary policy committee as part of a dissenting minority calling for a new round of asset purchases.
"A recovery in the UK, albeit modest, is under way ... (but) growth is not yet strong enough to reduce the considerable margin of spare capacity in the economy. Nor is recovery at an adequate rate fully assured."
While Carney has been hired by Finance Minister George Osborne with a brief to find new ways for the BoE to boost Britain's economy, his appetite for asset purchases is less clear, and economists think there may be no more this year.
But King said unnecessarily high unemployment was now a bigger threat to Britons' well-being than inflation  which has exceeded the BoE's 2% target for most of the past five years and that eurozone weakness and a troubled banking system remained the main obstacles to growth.
While global market interest rates had risen in recent weeks due to uncertainty about the US Federal Reserve's future bond purchases, the world economy was too unhealthy to talk of rates returning to normal pre-crisis levels anytime soon, King added.
"Bond yields have risen. But such market moves should not be confused with a return to normality," he said.
Banking on reform
King was speaking just after Osborne told the same audience at Mansion House, the Lord Mayor of London's ornate official residence, about his plans to shake up Britain's two state-controlled banks.
King said he welcomed Osborne's plans to sell the government's 39% stake in Lloyds Banking Group and consider restructuring Royal Bank of Scotland - a step he has previously said should have been taken years ago.
But more needed to be done. On Thursday the central bank's regulatory arm will publish details of how much new capital Britain's banks need to raise, with media reports suggesting that Lloyds, RBS and Barclays will bear the brunt.
"There is clearly some way to go before we can claim to have a really well-capitalised banking system," King said, rejecting some banks' view that higher capital requirements are acting as a brake on their ability to support the economy.
A longer-term problem was the size of some British banks, which are still too large and complex to be able to collapse without causing financial chaos, King said.
"We must restore trust in our banking system," he said. "It is not in our national interest to have banks that are too big to fail, too big to jail, or simply too big. Solving these problems is the work of a generation."
Earlier on Wednesday, British legislators called for laws to imprison "reckless" bankers in a report welcomed by King, who has often criticised the culture in banking.
King's speech focused on future challenges, and not the main criticism laid against him: that he paid insufficient attention to bank stability before the financial crisis.
He also wished his successor well. "The Bank of England is in safe hands, and the country will be the better for it."

NEWS,12.06.2013

Swiss upper chamber approves US tax deal

The Swiss upper house of parliament backed on Wednesday a bill that would let Swiss banks hand over information to the US authorities to help settle a dispute on tax evasion.
After US action over tax evasion led to the closure of the country's oldest private bank earlier this year, and with formal investigations under way into some of its biggest institutions, the Swiss government urgently wants a compromise to end threats of criminal charges that have hurt a vital national industry.
The bill, which is set to go to the lower chamber next week, would allow banks to sidestep secrecy laws to strike settlements with US prosecutors, expected to include heavy fines which might amount to $10bn for the whole industry.
Though opposition to the draft law has been vocal from left to right as lawmakers chafe at what some call US blackmail, 24 lawmakers voted in favour of the bill and only 15 opposed. The draft law is likely to face tougher debate in the lower house.
The country's biggest bank UBS was forced in 2009 to pay a fine of $780m and deliver the names of more than 4 000 clients to avoid indictment, giving the US authorities information that allowed them to then pursue other Swiss banks.

Iraq to get $6trn from new energy plan

Iraq on Wednesday unveiled an ambitious energy strategy that aims to see it raise $6 trillion from oil and gas sales by 2030 and massively increase local power generation, a major domestic complaint.
The plan, dubbed the Integrated National Energy Strategy, would see Iraq invest some $620bn in the sector over nearly two decades, in a bid to substantially increase living standards and employment levels in a country badly hit by decades of conflict and sanctions.
"The strategic goals of the plan are to meet local energy needs, maximise government revenues, encourage economic diversification and improve the standard of living and create jobs," said Thamir Ghadhban, a former oil minister and the head of Prime Minister Nuri al-Maliki's advisory committee.
In all, Iraq aims to increase oil production to 4.5 million barrels per day by 2014, and about double that by 2020 in its "medium" scenario, with all domestic energy requirements met by 2022.
The country projects it will raise about $6trn in revenues by 2030, about 85% of which will come from oil exports.
It also aims to diversify its oil-dependent economy and add 10 million new jobs, with planners arguing that by 2020, non-energy sectors of the economy will grow faster than oil and gas.
Iraq has sought in recent years to dramatically increase its oil production in order to fund reconstruction of its battered economy and dilapidated infrastructure.
But while output has increased, unemployment remains high and Iraqis frequently complain about a lack of improvement in daily living standards.
Tempers run particularly high during the country's boiling summer, when most residents receive only a few hours of government-supplied power per day.

Electricity market shake-up looms in UK

Britain's energy watchdog on Wednesday proposed changes to prise open the grip of big suppliers on the wholesale electricity market and increase choice for consumers.
The objective was to create "a more level playing field", over concerns about the pricing power of eight companies.
The driving idea behind the change is to increase competition and improve opportunities for small suppliers.
Ofgem said that under its proposals the big six suppliers British Gas Centrica, EDF Energy, EON, RWE Npower, Scottish Power and SSE will have to post the prices at which they buy and sell wholesale electricity on power trading platforms up to two years in advance.
The changes were aimed also at putting pressure on Britain's two biggest independent power generators Drax Power and GDF Suez Energy UK while the eight indentified companies must together trade fairly with small suppliers or face financial penalties.
"Ofgem's proposals would mean that the big six and the two largest independent power generators cannot refuse any reasonable requests by small suppliers to buy electricity," the regulator said in a statement.
"They must also ensure that they sell power to small suppliers at a fair price and negotiate fairly with them at all times."
Andrew Wright, senior partner for markets at Ofgem, said the regulator wanted also "to improve consumer confidence and choice by putting strong pressure on prices through increased competition in the energy market.
"Ofgem's proposals will break the stranglehold of the big six in the retail market and create a more level playing field for independent suppliers, who will get a fair deal when they want to buy and sell power up to two years ahead," he added in the statement.
Wright said greater price transparency would also assist investors seeking to build new generation plants and help secure supplies for consumers, "who are also set to benefit from a simpler, clearer and fairer energy market".
Edward Davey, Secretary of State for Energy and Climate Change called on companies "to work with Ofgem to implement these proposals as swiftly as possible", adding that the government stood ready "to take necessary measures to improve energy market liquidity should Ofgem's proposals be delayed or frustrated".

Broader bank data swap in tax dodge fight

The European Commission proposed to expand the kind of customer information that banks must surrender to authorities around the European Union, as political momentum grows to clamp down on tax dodging.
Algirdas Semeta, the EU official in charge of tax policy, outlined proposals on Wednesday for banks to disclose account balances, dividends and capital gains, to catch sophisticated schemes not covered by the simpler EU rules now in place.
But the Commission's suggestion will likely face opposition from Luxembourg, which does not want to be forced to lift its veil of banking secrecy higher than that of neighbouring Switzerland, its chief rival as a financial centre.
"Member states will be better equipped to assess and collect the taxes they are due," Semeta said. "It will be another powerful weapon in our arsenal to lead a strong attack against tax evasion."
Banking secrecy is high on the political agenda ahead of German elections later this year and following the resignation of a French budget minister over a secret Swiss account.
Luxembourg has signed up to exchanging information about the bank accounts of EU citizens from 2015, but its officials have been rowing back in private on the type of data they are willing to hand over.
Luxembourg does not want to agree to a revised version of the EU savings tax regime that would extend beyond simple interest payments on saving accounts, which are little used to hide income, to include foundations and trusts.
The tiny but wealthy state has an important banking sector and a lot to lose, particularly if customers were lured away by a Swiss financial sector subject to laxer rules.
Switzerland is the world's biggest home for offshore assets, totalling $2 trillion and four times the size of those held in Luxembourg.
Luxembourg is awaiting the outcome of talks between Brussels and Switzerland on a similar agreement to swap information. Semeta will kick-start those talks next week on a trip to meet Swiss Finance Minister Eveline Widmer-Schlumpf.

NEWS,06.06.2013

Walmart offers everything - even love

They came for the low prices and stayed for the lifetime commitment.

A couple that met in a North Carolina Walmart returned to the same store to hold their wedding ceremony.

Wayne Brandenburg said he would casually browse through the store a few times a week and that was where he met his future wife, Susan, who was working there as a cashier.

“I’d ask her how she was that day and tell her she looked very nice,” he said.

He was a widower and Susan was working at the store after her divorce.

Wayne built up the courage to ask her on a date and began taking Susan’s favourite lunch to Walmart each day.

“He was very much a gentleman and I looked forward to seeing him,” she said.

A year later, Wayne proposed.

Susan accepted but the couple was not officially married until six years later.

When they were trying to decide where to hold the reception, Wayne came up with the idea of getting married in the same store where they had met.

The wedding cake even came from the store’s bakery and the couple was reportedly joined by family, friends and even some store customers who stopped in to observe the ceremony.

While the story may sound a bit unusual, it’s actually somewhat common, according to one study.

In fact, Psychology Today says Walmart is the most popular place for Americans to fall in love at first sight.

Greek March unemployment rises

Greece's jobless rate rose again in March, reflecting the pain of a crippling recession after years of austerity under the country's international bailout.

Record joblessness is a major angst for Greece's coalition government as it scrambles to hit fiscal targets and show there is light at the end of the tunnel after years of unpopular tax rises and cuts to wages and pensions.

Unemployment rose to 26.8% from a downwardly revised 26.7% in February, according to statistics service data released on Thursday and is more than twice the average rate in the euro zone which hit 12.2% in April.

"It's long-term unemployment that is the most worrisome as the percentage is higher than 60%," said economist Angelos Tsakanikas at think tank IOBE, adding that the proportion of jobless people out of work for more than a year had been around 45% in 2008.

Those aged between 15 and 24 remain the hardest-hit, even though the jobless rate for that age group eased to 58.3% in March from 64.2% in February.

As the economy shrinks for a sixth straight year and with 1.3 million people officially without jobs - more than the population of neighbouring Cyprus - the pain is felt across the board.

Borrowers have fallen behind on loans and fewer workers are paying into pension funds.

Since the crisis erupted in 2009, Greece's jobless rate has tripled as hundreds of thousands lost their jobs or businesses and about 700 to 1 000 Greeks have been losing their jobs daily, according to estimates.

Once rare in a country where family ties are strong, rising numbers of homeless people, some of them old and sick, have also become a common sight across Athens.

Six out of 10 people on the street lost their home in the past two years and 47% of those have children, according to a study by Klimaka, a nongovernmental organisation.

In the capital's most rundown areas, ordinary Greeks who lost their jobs as a result of the country's economic crisis sleep outdoors side by side with Aids patients, drug addicts and others on the fringes of society.

Scrambling for ways to ease the pain for Greeks, Athens wants to tap about €170m of EU regional development funds to launch job programmes and has asked the European Commission to approve the move.

A turnaround will take time to be felt in the labour market even if recovery sets in next year as authorities predict.

The central bank projects unemployment will peak at 28% before it starts to decline in 2015.

India hikes gold duty to stem demand

India, the world's top gold consumer, on Wednesday hiked import duty on the precious metal to stem surging demand and reduce the country's ballooning current account deficit.
Gold purchases are one of the biggest contributors to India's current account deficit - the broadest measure of trade - which widened to just under five percent from 4.2% the previous year as imports outpaced exports.
The import duty on gold had been raised from six percent to eight percent, Revenue Secretary Sumit Bose told the Press Trust of India news agency.
The import duty hike was the second since the start of the year. Last year the government doubled the duty on gold to four percent.
Indians bought 162 tonnes of gold last month, twice the customary amount, as they sought to exploit a slide in global prices.
The hike is part of a wider set of measures to improve the finances of Asia's third-largest economy, which faces stubbornly high inflation, a sharp slowdown in growth as well as the hefty current and fiscal account deficits.
Ratings agencies have threatened to downgrade India's sovereign investment rating to junk status unless the government takes steps to clean up the nation's finances.
India has long been the world's biggest buyer of gold with purchases strongest during the religious festival and wedding seasons.
Last year's rise in the import duty on gold dampened demand temporarily but purchases soon picked up again.
Many Indians - especially in rural areas where there are few banks - buy gold in the form of jewellery, bars and coins as a hedge against inflation.
Finance Minister P. Chidambaram has said that gold imports must be curtailed, leading the Reserve Bank of India to take separate steps to curb imports.
Gold has fallen 16% since the start of the year as investors bet that the US Federal Reserve may soon start unwinding its financial stimulus as the US economy shows signs of recovery.

 

China to cut coal use amid protests

China is considering plans to cut coal consumption in some major industrial regions, people familiar with the policy said, as part of measures to reduce air pollution - an issue that has triggered a surge in public protests.
In a plan to be released this month, China may set a target to reduce coal use in a heavily polluted region in the north spanning Beijing, Hebei and Tianjin by a combined 100 million tonnes a year by 2015, said a person who has been involved in the policy discussions.
That region consumed an estimated 375 million tonnes of coal last year, around a tenth of the national total, with Hebei province, China's main steel producer, alone responsible for about 300 million tonnes.
Tackling a dependence on coal a major cause of smog and acid rain though, will test China's resolve to clean up its air, water and soil after decades of rapid industrial growth.
Previous attempts by Beijing to rein in its industrial polluters have not always succeeded, with growth-obsessed local governments often turning a blind eye to violations. Fierce lobbying by powerful state-owned utilities also appears to have put paid to a recent plan to raise national coal standards and ban low-grade imports.
Jiang Kejun, a senior researcher at the Energy Research Institute, a think-tank run by the National Development and Reform Commission, said precise targets were still being debated, but a decision was expected soon.
"These targets should be included in the plan, but we are actually still in the process of setting the precise numbers it isn't a particularly easy thing to do," said Jiang, who is involved in drawing up the policies.
China was previously committed to slowing the rate of coal consumption growth, but recent pollution scares appear to have increased its resolve to tackle problems caused by excessive coal combustion.
In January, thick, hazardous smog shrouded Beijing and other industrialised northern Chinese cities for more than a week, with many blaming excessive coal-burning by power plants, steel mills and other industrial facilities.
Steel capacity curbs
The new pollution plan is also expected to ban capacity expansions in steel and other polluting industries in major cities, and force firms to run emissions control equipment. Companies that fail to comply face higher power prices and the threat of having their power and water supplies cut off, officials familiar with the policy told Reuters last week.
China has sought to use the growing public clamour against air pollution to get tough on high-polluting, high-energy consuming industries like steel, cement and aluminium, which have been sapped by crippling levels of overcapacity.
Local industry is responsible for 49% of Beijing's pollutant emissions, vehicles 22 percent, and drift from surrounding provinces, including Hebei, 24.5%, according to a 2011 study. Coal-burning makes up more than 90 percent of sulphur dioxide emissions.
National Targets
China is also looking to reduce coal consumption in the big manufacturing regions of the Pearl River and Yangtze River deltas by 50 million tonnes each though analysts say those figures are unlikely to be enough to change China's overall energy consumption patterns.
"Those are relatively small numbers in the grand scheme of things," said Bill Durbin, analyst at consultancy Wood Mackenzie in Beijing.
"We're looking at total coal consumption of nearly 4 billion tonnes and expect to see that rise, simply because there is a lack of alternatives for baseload power generation, particularly as you move to the central and western regions."
Last October, in its 5-year plan on air pollution, China identified the Beijing-Tianjin-Hebei region and the Pearl and Yangtze river deltas as "pilot zones" to control coal consumption.
It also said China would seek to reduce the share of coal in the national energy mix by promoting renewables and building new gas storage facilities in key cities. Around half of China's total energy comes from coal, far more than anywhere else in the world.
China has already said it aims to keep national coal production capacity to within 4.1 billion tonnes by 2015, up from 3.24 billion tonnes in 2010.
According to the China Coal Industry Association, China's total consumption is still likely to hit 5 billion tonnes by 2020. Wood Mackenzie, in a report published on Tuesday, said China's coal demand would double to 7 billion tonnes by 2030.
"If they cap coal consumption then they will have to raise investment in natural gas, but we're not seeing enough investment that would allow gas to displace coal," said Durbin.
The lack of reliable data is likely to make coal cuts difficult. In Hebei, unregulated private steel mills with a history of underreporting output use large amounts of coal. Monitoring nationally will be an even bigger challenge.
Last year's 5-year plan said special emissions restrictions would be imposed in 47 big cities, banning capacity growth in thermal power, steel, construction materials, coking, non-ferrous metals and chemicals.

US companies add more jobs

Hiring by US firms was sluggish in May while a sharp rise in mortgage interest rates last week weighed on what had been a buoyant housing market, adding to signs the economy had lost some momentum in the second quarter.

A separate report from the Federal Reserve characterised the pace of the economic expansion as "modest to moderate" since mid-April as hiring remained relatively subdued.

The Fed's Beige Book of economic conditions is prepared as research for policymakers to use at their next meeting on June 18-19, a meeting that will be watched for any indications as to when the Fed may pull back on its stimulus programme.

Private employers added 135 000 jobs in May, the ADP national employment report showed, an acceleration from April but missing forecasts for a gain of 165 000.

April's private payrolls were revised to an increase of 113 000 from the previously reported 119 000 gains.

"The number was weak," said Mark Zandi, chief economist at Moody's Analytics, which jointly developed the report.

"The data is suggesting that instead of job growth stepping up, it's actually stepping down as we move into the summer months," Zandi told reporters.

"It's not like we're falling off a cliff...it just feels like we're throttling back a little bit."

The ADP report showed manufacturers had shed payrolls in May and a separate report indicated jobs growth in the vast services sector was weak last month, with a gauge of employment at services firms falling to its lowest in close to a year.

Expansion

Economic growth is expected to cool in the current quarter from the 2.4% rate in the first three months of the year, partly due to fiscal belt-tightening in Washington.

Economists still largely expect the recovery should regain traction in the second half of the year.

The goods producing sector cut 3 000 jobs in May, with a drop of 6 000 positions at manufacturing firms, which could be partially due to defence spending cutbacks, Zandi said.

Wall Street was down over 1% by mid-afternoon, while the weak data helped push Treasury debt prices higher.

The dollar was weaker against a basket of currencies.

Activity in the US services sector picked up slightly in May, with the institute for supply management's services index edging up to 53.7 last month from 53.1 in April and that topped economists' expectations for 53.5.

A reading above 50 indicates expansion in the sector.

The May figure was still off this year's peak of 56.0, which was hit in February.

The forward-looking new orders component rose, but the employment measure slipped to the lowest level since last July at 50.1 from 52.0.

Even with the lacklustre growth, the services industry held up better than its manufacturing counterpart, which contracted in May, according to data from ISM released earlier in the week.

Data on Wednesday added to signs of a slowdown in manufacturing as new orders for factory goods rose in April but not enough to reverse the prior month's plunge.

In a busy day for economic releases, yet another report showed unit labour costs fell in the first quarter by 4.3%, the most in four years, although the reading appeared to be distorted by a shift in employee compensation at the end of last year to avoid a tax hike.

Nervousness the Fed may taper bond purchases sooner than had been expected, sent fixed 30-year mortgage rates up 17 basis points to average 4.07% in the week ended May 31, the Mortgage Bankers Association said.

Last week's interest rate was the highest since April 2012 and the first time rates have been above 4% since early May last year.

Demand for refinancing was hit hardest by the acceleration in rates, with applications slumping 15.0%.

The gauge of loan requests for home purchases - a leading indicator of home sales - held up relatively better, falling just 1.6%.

$200m credit card hacking ring busted

Eleven people in the United States, the UK and Vietnam have been arrested and accused of running a $200m worldwide credit card fraud ring, US and UK law enforcement officials said on Wednesday.
Federal prosecutors in New Jersey said they had filed charges against a 23-year-old man from Vietnam.
They said in a statement that authorities in Vietnam had arrested Duy Hai Truong on May 29 in an effort to break up a ring he is accused of running with co-conspirators, who were not named in the statement.
"One of the world's major facilitation networks for online card fraud has been dismantled by this operation, and those engaged in this type of crime should know that they are neither anonymous, nor beyond the reach of law enforcement agencies," Andy Archibald, interim deputy director of the National Cyber Crime Unit, said in a statement on the British government's Serious Organized Crime Agency website.
The arrests were coordinated by the three countries, the statement said.
The arrests come as law enforcement officials around the world are cracking down on Internet-related heists.
Two weeks ago, authorities raided Liberty Reserve, a Costa Rica-based company that provided a virtual currency system used frequently by criminals to move money around the world without using the traditional banking system.
Earlier last month, authorities arrested seven people involved in a $45m heist in which hackers removed limits on prepaid debit cards and used ATM withdrawals to drain cash from two Middle Eastern banks.
"It's rare that you find actual human beings behind these things," said Mark Rasch, a former cyber crimes prosecutor and now a lawyer in private practice in Bethesda, Maryland. "Usually you can tie them to organizations or hacker handles, but it's harder to find individual people."
Rebekah Carmichael, a spokeswoman for New Jersey US Attorney Paul Fishman, said the charges were filed in New Jersey's federal court because some of the victims of the scheme are residents of the state.
Prosecutors claim Truong and accomplices stole information related to more than a million credit cards and resold it to criminal customers through the websites www.matteuter.biz and www.mattfeuter.com, according to a criminal complaint filed in federal court in New Jersey.
According to the complaint, Truong hacked into websites that sold goods and services over the Internet and collected personal credit card information from the sites' customers. "The victims' credit cards incurred, cumulatively, more than $200m in fraudulent charges," the complaint said. The scheme began in 2007.
"Like many 'carder' cases, this is an international conspiracy," Rasch said, adding that a recently passed computer crime law in Vietnam had made it possible for Vietnamese authorities to participate in the multinational sting.
Although Truong has been charged in the United States, he does not have a US-based lawyer because he is being held in Vietnam, Carmichael said.