NEWS,10.10.2012

US sends military troops to Jordan

The United States has sent military troops to the Jordan-Syria border to help build a headquarters in Jordan and bolster that country's military capabilities in the event that violence escalates along its border with Syria, Defence Secretary Leon Panetta said on Wednesday.Speaking at a Nato conference of defence ministers in Brussels, Panetta said the US has been working with Jordan to monitor chemical and biological weapons sites in Syria and also to help Jordan deal with refugees pouring over the border from Syria.But the revelation of US military personnel so close to the 19-month-old Syrian conflict suggests an escalation in the US military involvement in the conflict, even as Washington pushes back on any suggestion of a direct intervention in Syria.It also follows several days of shelling between Turkey and Syria, an indication that the civil war could spill across Syria's borders and become a regional conflict.Strong relationship"We have a group of our forces there working to help build a headquarters there and to ensure that we make the relationship between the United States and Jordan a strong one so that we can deal with all the possible consequences of what's happening in Syria," Panetta said.The development comes with the US presidential election less than a month away, and at a time when Mitt Romney, the Republican nominee, has been criticising President Barack Obama's foreign policy, accusing the administration of embracing too passive a stance in the convulsive Mideast region.The defence secretary and other administration officials have expressed concern about Syrian President Bashar Assad's arsenal of chemical weapons. Panetta said last week that the United States believes that while the weapons are still secure, intelligence suggests the regime might have moved the weapons to protect them. The Obama administration has said that Assad's use of chemical weapons would be a "red line" that would change the US policy of providing only non-lethal aid to the rebels seeking to topple him.Increased co-operationPentagon press secretary George Little, travelling with Panetta, said the US and Jordan agreed that "increased co-operation and more detailed planning are necessary in order to respond to the severe consequences of the Assad regime's brutality".He said the US has provided medical kits, water tanks, and other forms of humanitarian aid to help Jordanians assist Syrian refugees fleeing into their country.Little said the military personnel were there to help Jordan with the flood of Syrian refugees over its borders and the security of Syria's stockpiles of chemical and biological weapons."As we've said before, we have been planning for various contingencies, both unilaterally and with our regional partners," Little said in a written statement. "There are various scenarios in which the Assad regime's reprehensible actions could affect our partners in the region. For this reason and many others, we are always working on our contingency planning, for which we consult with our friends."A US defence official in Washington said the forces are made up of 100 military planners and other personnel who stayed on in Jordan after attending an annual exercise in May, and several dozen more have flown in since, operating from a joint US-Jordanian military centre north of Amman that Americans have used for years.He spoke on condition of anonymity because he was not authorised to talk about the mission on the record.Syrian refugeesIn Jordan, the biggest problem for now seems to be the strain put on the country's meagre resources by the estimated 200 000 Syrian refugees who have flooded across the border - the largest fleeing to any country.Several dozen refugees in Jordan rioted in their desert border camp of Zaatari early this month, destroying tents and medicine and leaving scores of refugee families out in the night cold.Jordanian men also are moving the other way across the border - joining what intelligence officials have estimated to be around 2 000 foreigners fighting alongside Syrian rebels trying to topple Assad. A Jordanian border guard was wounded after armed men - believed trying to go fight - exchanged gunfire at the northern frontier.Turkey has reinforced its border with artillery guns and deployed more fighter jets to an air base close to the border region after an errant Syrian mortar shell killed five people in a Turkish border town last week and Turkey retaliated with artillery strikes.Turkey's military chief General Necdet Ozel vowed on Wednesday to respond with more force to any further shelling from Syria, keeping up the pressure on its southern neighbor a day after Nato said it stood ready to defend Turkey.

 

IMF: Europe must restore confidence

Europe must do more to tackle its fiscal crisis, which is heaping extra pressure on an already-strained global financial system, the International Monetary Fund warned in a new report on Wednesday.Despite some new policy measures, among them a bond-buying programme aimed at helping debt-riddled nations tame their borrowing costs, the risks of a world credit crunch and recession loom, the IMF said."(European) policymakers need to take additional measures to restore confidence," said the Fund's Global Financial Stability Report ahead of its annual meeting this week in Tokyo and a day after cutting its global growth forecasts."Risks to global financial stability have increased and financial markets have been volatile as European policymakers grapple with the ongoing crisis," it added.The report comes a week after IMF head Christine Lagarde urged eurozone leaders to move fast to resolve the bloc's debt crisis. "No one has the luxury of time, this is really urgent," she told the French daily Le Figaro."The cost of solutions increases as time passes," she added.The European Central Bank last month announced a programme to buy the government bonds of debt-ridden eurozone nations under strict conditions but it remains unclear whether troubled countries, notably Spain, will accept the offer."If there is no demand and if this is related to domestic political considerations, that would be unfortunate," Jose Vinals, director of the IMF's monetary and capital markets department, told a news briefing in Tokyo as the report was released Wednesday.The eurozone launched Monday its much-awaited €500bn European Stability Mechanism rescue fund, which is seen as a major step in the bloc's defences against a debt crisis that has pushed it back into recession."(It) gives a lot of comfort that the size of the firewall has become sufficiently flexible and that makes a big difference," Vinals said.The report's recommendations include cutting public debt and deficits "in a way that supports growth" and a "clean-up of the banking sector, including recapitalising or restructuring viable banks and resolving nonviable ones".It also warned that a "further deterioration in the euro area crisis is the biggest risk to global financial stability, but rising imbalances elsewhere are also a cause for concern".The United States and Japan both face looming fiscal hurdles, which, if not cleared, could upset the world financial system, the report said."Both countries require medium-term deficit reduction plans that protect growth and reassure financial markets," it said.Emerging economies have fared relatively well through the several tumultuous years of global economic uncertainty, but they "need to guard against potential shockwaves from the euro area crisis, while managing slowing growth in their own economies".On Tuesday, the IMF's added to concerns about the health of the global economy, warning of a possible recession and cutting back its growth forecast for this year to 3.3%, from July's estimate of 3.5%.Growth will only hit 3.6% next year - lower than the 3.9% predicted in July - as even powerful emerging economies like China, India and Brazil hit the brakes, the Fund said.But those assumptions are based on Europe's leaders tackling the debt crisis and US politicians backing off harsh spending cuts and tax hikes slated for January 2013."Failure to act on either issue would make growth prospects far worse," the Fund said in the World Economic Outlook report.

IMF chides EU for 'critically incomplete' crisis response

The International Monetary Fund has urged European policymakers to deepen the financial and fiscal ties within the euro area with some urgency to restore sagging confidence in the global financial system.The IMF's stark tone on the euro area debt crisis in its semi-annual checkup of the world's financial health was in marked contrast to the mood in Europe, where a European Central Bank decision to buy bonds of countries that accept an assistance programme has removed immediate concerns about the survival of the euro."Despite many important steps already taken by policymakers, this agenda remains critically incomplete, exposing the euro area to a downward spiral of capital flight, breakup fears and economic decline," the IMF said in its Global Financial Stability Report (GFSR) released today.It said the euro area's debt crisis was the main threat to global financial stability, which had weakened in the last six months to leave confidence "very fragile".The euro area's plodding progress means European banks are likely to offload $2.8 trillion in assets over two years to cut their risk exposure, an increase of $200 billion from a prediction six months ago, the IMF estimated. That could shrink credit supply in the periphery by 9% by the end of 2013, crimping economic growth.The report adds to a gloomy backdrop ahead of the IMF's semi-annual meeting to be held in Tokyo later this week, which will gather the world's financial leaders.On Tuesday, the Fund said the global economic slowdown was worsening as it cut its growth forecasts for the second time since April and warned US and European policymakers that failure to fix their economic ills would prolong the slump.A scenario where Europe muddles through, addressing haphazardly each new flare-up in the protracted crisis rather than adopting a comprehensive plan, would prove costly, Jose Vinals, director of the IMF's monetary and capital markets department and the main author of the financial stability report, said."The more time that goes by without a complete solution, the more are the eventual costs for everybody of resolving the crisis," he told  in an interview.Europe's troubles should also serve as a lesson to the heavily indebted United States and Japan that delaying the necessary policy adjustments until markets force their hands would lead to "harsher economic outcomes", Vinals told a briefing."We should not let the current market conditions, which have improved, lead to a false sense of security," he said.Still, ECB Vice-President Vitor Constancio said his message to the IMF and World Bank gatherings is that Europe has made much progress in recent months."That should be encouraging for the world economy," he told Reuters in Tokyo.Measures carried out by Europe included an unprecedented strengthening of economic governance and deep structural reforms, said Simon O'Connor, the European Commission's spokesman on economic and monetary affairs."No one should underestimate how far Europe has come since the start of the crisis," he said in reaction to the IMF report.Shrinking balance sheets A German finance ministry source said in Berlin that the EU's most powerful member would strive to ensure that the debt crisis was not the sole focus of the IMF meeting.Last week, Canada's Finance Minister Jim Flaherty expressed his latest sign of frustration over progress in resolving the crisis by saying it represented a "clear and present danger".US Treasury Secretary Timothy Geithner said on Tuesday that resolving the euro area's debt problems would take time."Even if one is optimistic about the will and capacity to manage through this, you are still likely to see a very, very challenging growth environment in Europe for a long period of time," Geithner said during a visit to New Delhi.On Tuesday, ECB President Mario Draghi said the bond buying programme, although not yet in operation, provided a "fully effective backstop" for the euro zone to avoid destructive scenarios and had already helped calm market fears.The IMF acknowledged that the ECB's bond buying agreement had restored some market confidence and narrowed the spread between core and peripheral debt in the region.But private investors still lacked confidence in peripheral European markets and the difference between the yields on peripheral and core debt from banks and companies remained high, threatening any recovery, it said.Under current policies, the IMF estimated European banks will shed $2.8 trillion in assets between the third quarter of 2011 and the end of 2013, higher than the $2.6 trillion it had predicted in April, further squeezing credit availability.

Wall Street stocks fall

US stocks fell on Wednesday, a day after earnings season opened with Dow component Alcoa posting a quarterly net loss.Shares of Alcoa dropped 4.5% after the company predicted China's slowing growth will weaken worldwide demand for aluminium.Shares of Chevron shed 4.4% after it said third-quarter earnings will be "substantially" lower than in the previous quarter.In afternoon trading in New York, the Dow Jones Industrial Average shed 0.79%, the Standard & Poor's 500 declined 0.55%, while the Nasdaq Composite Index fell 0.48%."The fear is that this is going to be a really bad earnings season," Hank Smith, chief investment officer at Haverford Trust in Radnor, Pennsylvania, told Bloomberg News. "If S&P 500 earnings come in better than expectations, the markets are going to view that positively. We're off to a good start but we've got a long way to go," he said.Investors are nervous about the recent rally in equity markets."The temptation to sell is out there," John Brady, managing director of RJ O'Brien & Associates in Chicago, told Reuters."Equities have had a tremendous year, and the outlook is very unclear. So why not reduce risk? It's hard to imagine an additional 20% rally from here in the next three or four months," said Brady.Indeed, the American economy "generally expanded modestly since the last report," the Federal Reserve said in its latest Beige Book business survey based on reports from 12 district Fed banks."Consumer spending was generally reported to be flat to up slightly since the last report," according to the Fed. "Vehicle sales were also generally characterised as stable but up from a year earlier and generally at favourable levels," while "residential real estate conditions improved since the last report."However, "employment conditions were little changed since the last report."In Europe, the Stoxx 600 Index finished the day with a 0.6% slump from the previous close. Benchmark indexes dropped also in Germany, the UK and France.Some investors are concerned that the current valuations are not justified by the outlook for earnings.The Stoxx 600 is trading at 11.9 times the estimated earnings of its companies, higher than its five-year average of 11.5, data compiled by Bloomberg show. The gauge last month reached a price multiple of 12.3, the highest since 2010.Among other sombre notes was a surprise slump in China's car sales, the latest sign that the pace of growth in the world's second-largest economy is flagging.The concern about earnings and equity valuations helped the US Treasury's auction of US$21 billion in 10-year debt draw solid demand."The 10-year note auction was very stellar-coming in better than expected-and equities are weak, giving support to Treasuries," Larry Milstein, managing director in New York of government-debt trading at RW Pressprich & Co, a fixed- income broker and dealer for institutional investors, told Bloomberg."There is still pretty significant demand out there still for yields and safety," he said.To be sure, it was not all bad news.Shares of Wal-Mart climbed to a record US$76.8. The world's largest retailer said it is seeing growth in both large and small US stores and has had a strong start to layaway sales ahead of the holiday season, according to Reuters.Costco, meanwhile, also provided investors with a good reason to buy the stock, last up 2.7%, as the company posted better-than-expected quarterly earnings.