NEWS,23.11.2012

US can't afford Obamacare - Boehner

New comments from top Republican lawmaker John Boehner slamming healthcare reforms illustrate how hard it will be for Washington to reach a deficit reduction deal when talks resume next week, analysts say.President Barack Obama and the US Congress will begin negotiating next week on a plan that could avert tax hikes and spending cuts due to begin in January that economists worry could push the US economy over the "fiscal cliff" and into recession.Boehner did not explicitly mention the "fiscal cliff" talks in an opinion piece published in the Cincinnati Enquirer this week. But he argued the nation cannot afford the costs of Obama's 2010 healthcare reform law, given America's sluggish economy and massive $16 trillion (NZ$19.6 trillion) debt."That's why I've been clear that the law has to stay on the table as both parties discuss ways to solve our nation's massive debt challenge," said Boehner, who is a key player in the talks.Boehner's comments show it won't be easy to reach a deal on the thorny tax and spending issues, said Greg Valliere, chief political strategist at Potomac Research Group in Washington."There's an enormous gulf between the two parties on the details," he said, noting it is still possible that Obama and Congress may agree by January to broad spending and tax measures, and then take months afterwards to iron out details."Plunging off the cliff, then passing a tax cut in January that excludes the rich  is still a very live option," Valliere said. Analysts said Boehner's renewed critique of the healthcare law is designed to appeal to Republicans in the House of Representatives who have voted more than 30 times to repeal it.The law aims to extend health coverage to more than 30 million uninsured Americans starting in 2014. It also contains measures designed to contain the costs of America's $2.6 trillion (NZ$3.18 trillion) healthcare system, the most expensive in the world.Republicans promised to repeal the law, which they call "Obamacare", if they won the November presidential elections.But Obama's victory meant the Democrats kept their majority in the Senate. Last June, the US Supreme Court upheld the reforms.Boehner's comments were "not constructive" for the fiscal talks ahead because there is little chance negotiations will lead to changes in the healthcare law, said Jim Kessler, senior vice president for policy at centrist think-tank Third Way."This is a complete non-starter and a clumsy starting point for negotiations," Kessler said.Larry Sabato, political scientist at the University of Virginia, said he thought Boehner's comments seemed like a "bargaining chip" for the talks ahead."Just as President Obama is insisting that taxes must go up for everyone making $250,000 or more, the Republicans are saying that Obamacare is on the table," he said, noting he expects the income trigger for tax increases will end up being much higher and that the healthcare law will stay untouched.After the election, Boehner acknowledged in an ABC News interview that "Obamacare is the law of the land", although he also said the law had to be "on the table" as legislators work toward balancing the nation's budget.Julie Barnes, director of healthcare policy at the Bipartisan Policy Center, said the costs associated with getting the new health reforms in place pale in comparison to the much-larger costs of tax and spending issues before lawmakers."Small businesses and large businesses are not going to view Obamacare as what's really causing the problem for their competitiveness. The problem is healthcare costs," Barnes said.

German business sentiment surprises

German business morale surprised with its first rise in seven months in November as exports outside the euro zone and the prospect of strong Christmas sales offered hope Europe's largest economy can regain some momentum.The Munich-based Ifo think tank said on Friday its business climate index, based on a monthly survey of some 7 000 firms, rose to 101.4 from 100.0 in October, far surpassing even the highest estimate in a Reuters poll.Germany proved largely immune to the first two years of the European debt crisis but recent data has suggested its resilience is wearing thin, with growth slowing to 0.2% in the third quarter.Yet while economists expect the economy to contract in the fourth quarter, they had already expected the first quarter to be better and the IFO numbers added to hopes that it could stave off the recession plaguing euro zone members further south."That was a positive surprise," said Ralph Solveen of Commerzbank. "The brightening climate raises hopes that the economy will stabilise after what will likely be a weak fourth quarter. (One) increase now is nevertheless not a sign of a turnaround."He pointed to reduced fears of a euro-zone break-up as well as positive signals from Asia and the United States, where Germany's strength in high-added value exports like cars, electronics and machinery make it well-placed to take advantage of any economic improvement.The euro rose to a three-week high against the dollar and European stocks trimmed losses after the IFO numbers.Asia-basedFirms were more upbeat about their business outlook, with an IFO sub-index rising to 108.1 from a revised 107.2 in October. They were also less pessimistic about current business, with the current conditions index up to 95.2 from 93.2.That came as a surprise after data this month showed the private sector shrinking, unemployment up, industrial orders and output down and exports falling at their fastest pace since late last year.IFO economist Klaus Wohlrabe said exporters' outlook had improved but firms were still delaying investment due to the uncertainty caused by the unresolved euro zone crisis."Export expectations rose strongly and are back in the positive area now. The orders situation and demand are stabilising. Exports to the United States and Asia seem to be going well,". "The uncertainty (on investment) is still present. ... There has been no turnaround yet. "Seasonally-adjusted GDP data showed gross capital investment made no contribution to growth while investment in plant and equipment fell by 2.0%.Chipmaker Infineon has already said it will cut planned investments. "Businesses are investing less in machines and other equipment. The only explanation for that is a crisis of confidence - which means the German economy will lose more speed," said economist Holger Schmieding of Berenberg Bank.Europe has been unable to contain the euro zone crisis with no agreement yet on how to get Greece's debt down to sustainable levels. France, Germany's single largest trading partner, lost a second AAA credit rating on Monday on concerns over its fiscal outlook and deteriorating economy.

Greece says lenders closer to compromise

 

The International Monetary Fund has relaxed its debt-cutting target for Greece and only a €10bn gap remains to be filled for a vital aid tranche to be paid, Greece's finance minister said on Friday.But other sources involved in the talks cautioned that the funding gap was far bigger than that suggested by Greece and that the two sides were not on the verge of striking a deal to resolve the euro zone's most intractable problem.Greece's finance minister signalled that a compromise was near by saying the International Monetary Fund had agreed to deem the country's debt viable if it falls to 124% of GDP in 2020, giving ground on its earlier target of 120%.The Eurogroup has already agreed on measures to reduce Greek debt to 130% of GDP in 2020, Yannis Stournaras said."That leaves a gap of 5-6 percentage points of GDP to be covered  about €10bn," he told reporters in Brussels.The EU and IMF are considering bringing the debt down through a combination of interest rate cuts and extension of maturities on the country's loans, a debt buyback and having the ECB forego profits on its Greek bond holdings, a Greek finance ministry official told Reuters.Teetering on the verge of bankruptcy, Greece is increasingly frustrated that its lenders are still squabbling over a deal to unlock fresh aid despite the country pushing through unpopular austerity cuts that brought thousands on to the streets.Athens says time is running out and that it needs its next tranches of almost €44bn in aid to recapitalise banks and stabilize its recession-hit economy. Its next big debt repayment falls due in mid-December.It expects the aid to be paid out in one installment, Greece's government spokesman told Greek radio, playing down recent speculation that it could be dribbled out in bits.The euro hit a three-week high against the dollar on growing optimism that Greece's lenders were close to an agreement."Too optimistic"Euro zone finance ministers, the IMF and European Central Bank failed earlier this week to agree how to get the country's debt down to a sustainable level and will have a third go at resolving the issue on Monday.A senior source involved in the negotiations confirmed that the IMF would now accept 124% as a target but was dismissive of the gap amounting to only €10bn."There are still things missing to an agreement," the source said. "The 10 billion is too optimistic."A Greek finance ministry official said the ECB could relinquish €9bn of profits on the Greek bonds it holds, as part of the measures to bring debt in 2020 down from a previous estimate of 144% of GDP.Other options include saving €8bn from cutting the interest rate, extending maturities on Greek debt and spending €10bn to buy back around €30bn of debt.Greece has already begun preparations for the debt buyback, which could be completed by the end of the year if euro zone finance ministers approve the move, the official said.According to current government projections, Greek debt is seen at €340.6bn, or 175.6% of GDP at the end of 2012. It is expected to peak at €357.7bn, almost 191%, in 2015.According to a document circulated at the Eurogroup meeting, Greece's debt cannot be cut to 120% of GDP by 2020 unless euro zone member states write off a portion of their loans to Greece, which Germany has said would be illegal.The document prepared for the meeting of euro zone finance ministers and seen by Reuters spelled out several options now cited by Greek officials - including using about 10 billion euros to buy back bonds at between 30 and 35 cents in the euro.Many Greek retail bondholders are still angry from a debt restructuring earlier this year that imposed heavy losses on private holders of Greek debt.About 40 retail bondholders pushed past security at the co-ruling conservative New Democracy party's offices in Athens on Friday, defaced a portrait of party founder Constantinos Karamanlis and scuffled with guards.

EU budget summit edges towards collapse

EU leaders looked set to throw in the towel Friday as talks on a trillion euro budget for the 27-member bloc faltered over tensions between rich and poor states and Britain's "virulent" demands for austerity.British Prime Minister David Cameron kept up his defiant stance as he arrived for a second day of bitter negotiations on the European Union budget for the seven years from 2014-2020."There really is a problem that there hasn't been the progress in cutting back proposals for additional spending," Cameron, who back home has to pander to the powerful eurosceptic wing of his Conservative party, told reporters.Britain, like many countries across Europe, is responding to economic crisis with major public spending cuts and Cameron argues that at a time of austerity at home the EU must also make deep cuts.His bleak assessment of the state of the budget talks was shared by other EU leaders, who arrived one by one at European Council building in Brussels for bilateral meetings before the summit proper resumed at midday."I believe that also in this round, we won't be where have to get to, which is a unanimous decision," said German Chancellor Angela Merkel, repeating a line she had taken even before arriving in the Belgian capital."If we need a second round, then we will take the time necessary for it," se added, referring to the prospect of a second summit in the coming months to nail down a deal.Nearly a year after he angered his European counterparts by vetoing a pact to resolve the eurozone crisis, Cameron was again at odds with them by demanding cuts to the perks enjoyed by so-called "eurocrats" the well-paid EU civil servants who are frequently targeted by the British press. British officials insisted that other countries including Sweden, the Netherlands and Germany largely backed Cameron's position for a reduction in the planned trillion dollar budget for the seven years from 2014-2020.But an EU diplomat said the main obstacle was Cameron's demand for cuts adding: "The most virulent were the British, the Swedish and the Dutch."Cameron had vowed to bring down the budget from a proposed €1.047 trillion to €886bn.The summit was scheduled to resume at 11:00 on Friday once delegates from the 27 member nations have had time to examine new proposals on the budget submitted by EU President Herman Van Rompuy.The proposals reintroduce his own earlier figure of €972bn in spending, which comes to just over one percent of the EU's total economic output, the usual benchmark used in Brussels budget talks.The latest blueprint which negotiators will work from Friday spreads the funds more generously to sensitive envelopes like the "cohesion" funds for regional development, and the Common Agricultural Policy, the farm subsidy programme cherished by France that is the budget's biggest single item."We will not accept the unacceptable," warned Prime Minister Mario of Italy, which like France defends farm subsidies, but also backs cohesion funds which have vastly aided Italy's less developed south.Italy is among the countries that contribute more to the EU budget than they get back, known as the "net contributors", while once mighty Spain, rocked by the eurozone debt crisis, rejoined the camp of those who get more cash than they put in.Cohesion funds billions of euros outlayed each year to the EU's poorer members so they can catch up with richer neighbours are being defended tooth and nail by the 15 "Friends of Cohesion" nations, led by Poland and Portugal."Cohesion is an issue of competitiveness and growth for the whole European Union, not just for the countries with the greatest needs," argued Prime Minister Antonis Samaras of debt-stricken Greece.

Volkswagen to invest €14bn in China

Volkswagen AG plans to invest €14bn in China over the next four years, its China chief was quoted by the China Daily newspaper as saying, as it speeds up its expansion in the world's largest autos market. Volkswagen, which produces cars in China in partnership with SAIC Motor Corp and FAW Group, is building four plants in the country, the newspaper said, citing the German automaker's China chief Jochem Heizmann. Volkswagen sold 2 million cars in China in January-September, up 18.3% and more than double the overall industry growth.By 2018, Volkswagen's China annual capacity will reach at least 4 million vehicles, Heizmann told the China Daily, adding the group's workforce, including those at joint ventures, would rise to 85 000 within 3-5 years from 50 000 now. Heizmann was at the Guangzhou autoshow on Thursday.The German automaker will also build plug-in hybrid cars in China within 2-3 years and make plug-in hybrid powertrains, he added. Encouraged by Beijing's initiative to put 5 million electric and plug-in hybrids on the road by 2020, foreign automakers are gearing up to tap the potential for green cars in China.General Motors Co, which already sells its plug-in hybrid Chevrolet Volt in China, this week rolled out its first China-developed electric car, the Sail Springo EV. Nissan Motor Co Ltd is also promoting its Leaf electric car with local governments and will expand the effort to include its Venucia e30 China-only electric car  made at its joint venture with Dongfeng Automobile Co Ltd - next year.Globally, Volkswagen, jostling with Toyota Motor Corp as the world's number-one automaker, is expected to increase spending by 12% to as much as €70bn for its 12 brands over the next five years, compared with €62.4bn for 2012-16 agreed a year ago, analysts have said.That would be a record, but also represent a slowdown. The €62.4bn target was more than a fifth higher than over the 2011-15 period.

Brits top the whisteblowers list

 

More than one in ten tip-offs about corporate wrongdoing received by the US Securities and Exchange Commission (SEC) came from overseas, with British whistleblowers topping the list, said a global investigations firm on Thursday.Nearly one in four of the 324 overseas tip-offs came from Britain with Canada second and India third, according to Kroll's analysis of the annual report from the US body responsible for regulating the securities market.Under new US regulation introduced in 2010, the SEC starting paying whistleblowers, both at home and abroad, for coming forward with information that results in successful prosecutions."The bounties offered to whistleblowers by the SEC are likely to have huge repercussions for companies, particularly international ones, as they mean whistleblowers based anywhere in the world are more likely to go to the regulator rather than their company," said Kroll Managing Director, Benedict Hamilton.Britain's 74 tip-offs were well above second-placed Canada which had 46, according to data from the fiscal year 2012.Regulators in Britain do not offer similar rewards at the moment but Kroll said Britain's Parliamentary commission on banking standards has asked the Financial Services Authority regulator to consider the move.Data released last month showed the number of whistleblowing cases reported to the FSA were up 276% in four years.The SEC received nearly 1 000 calls to its helpline from June 2007 to May 2008 compared to 3 733 in the same 2011 to 2012 period.