NEWS,18.12.2012

Global jobs crisis recovery to 'take five years' - UN

Global economic growth is expected to remain sluggish in the coming year and will be insufficient to pull countries out the unemployment crisis many are facing, the United Nations said in a report released today.It said under policies now in place it may take at least five years to recover from the job losses in Europe and the United States in the 2008-2009 recession."A worsening of the euro area crisis, the 'fiscal cliff' in the United States and a hard landing in China could cause a new global recession," said Rob Vos, head of the UN Development Policy and Analysis Division. "Each of these risks could cause global output losses of between 1% and 3%," he said. US President Barack Obama, a Democrat, is working with Republicans to avert steep tax hikes and deep spending cuts duet to take effect next month. Known as the "fiscal cliff," the measures could trigger another recession.The global economy is expected to grow at 2.2% in 2012, 2.4% in 2013 and 3.2% in 2014, the United Nations said in a report titled World Economic Situation and Prospects 2013.It said that 2.4% "world gross product" growth in 2013 would be "well below potential.""This pace of growth will be far from sufficient to overcome the continued jobs crisis that many countries are still facing," the United Nations said."With existing policies and growth trends, it may take at least another five years for Europe and the United States to make up for the job losses caused by the Great Recession of 2008-2009," it added.

Hopes rise for US fiscal cliff deal

The differences over how to resolve the fiscal cliff narrowed significantly on Monday night as President Barack Obama made a counter-offer to Republicans that included a major change in position on tax hikes for the wealthy, according to a source familiar with the talks.The move, which the source stressed was not Obama's final offer, was welcomed, albeit withreservations, by a spokesman for Republican House of Representatives Speaker John Boehner, who met earlier in the day with Obama as the two hammered out a way to avert steep tax hikes and indiscriminate spending reductions set for the beginning of 2013.Considerable work remains as both sides now try to bridge the gaps between them and then sell a package to their respective allies in the US Congress.In its most dramatic change in position yet, the White House proposed leaving lower tax rates in place for everyone except those earning $400 000 and above, the source said on condition of anonymity. That's up from the $250 000 threshold the president has been demanding for months, but still far from Boehner's preference of $1m. Obama also moved closer to Boehner on the proportion of a ten-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his previous $1.4 trillion proposal.Boehner's latest proposal calls for $1 trillion in new tax revenue, which would come from raising rates and limiting deductions that the wealthiest can take. Some of the savings in spending proposed by Obama would come from reducing the size of cost-of-living increases for all but the most "vulnerable" recipients of the Social Security retirement program, the source said, through the use of a different formula to calculate the regular raises called "chained Consumer Price Index." Obama and Boehner remained apart on the politically explosive issue of how and when to raise the government debt ceiling to permit the government to borrow more money.Boehner has proposed a one-year boost in the debt ceiling, tied to spending cuts. Obama, as of Monday night, was pushing for a two-year increase, potentially a major concession that many congressional conservatives may find hard to swallow since they have used it to extract spending cuts from the White House.Missing entirely from Obama's offer was an extension of the so-called "payroll tax holiday," which comes to an end on January 1 with an immediate negative impact on wage earners. Introduced by Obama two years ago as an economic stimulus, the tax holiday reduced an employee's share of the payroll tax from 6.2% to 4.2%. Because the tax supports the Social Security programme, however, there have been divisions in both parties over continuing the holiday.Because the details were incomplete and specifics vague, particularly on such issues as cutting the Medicare, the government health insurance program for seniors, it was uncertain how much resistance might come from Congress.But the source stressed that Monday's offer was by no means the final one from the White House.The response from Boehner's spokesman was also a positive signal. "Any movement away from the unrealistic offers the president has made previously is a step in the right direction," the spokesperson said, emphasising that differences remain on spending levels in particular."We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problem." The rapid developments on Monday evening put a deal realistically within reach.Obama and Boehner held talks at the White House earlier on Monday, and aides from both parties said they were optimistic an agreement was shaping up. Rank-and-file Republicans, however, could have trouble with the tax increases on the wealthiest Americans that are likely to be part of any deal, while Obama could have a tough time selling spending cuts to his fellow Democrats. Investors were cheered earlier on Monday, before news broke of Obama's counter-offer, by signs of progress and the Standard & Poor's 500 index of US stocks rose 1.19%. Economists warn that going over the fiscal cliff could push the economy into recession. Senate Democratic leader Harry Reid said his chamber will wrap up work on the issue after Christmas." It appears that we're going to be coming back the day after Christmas to complete work on the 'fiscal cliff,'" he said on the Senate floor.Boehner faces a crucial test on Tuesday morning when he is expected to brief his party's lawmakers in the Republican-controlled House. He is not expected to bring any deal up for a vote unless a majority of the 241 House Republicans support it. Republicans have campaigned for decades on a promise to keep taxes low, but Boehner in recent days has edged closer to Obama's demand to raise tax rates on top earners. In return, Obama could back a measure that would slow the rate of growth of Social Security benefits by changing the way they are measured against inflation, according to a Senate Democratic aide.If there are no strong objections, he could try to finalise the deal with Obama on Wednesday, a Republican aide said.Both sides declined to say what Boehner and Obama discussed at the meeting, which was also attended by Treasury Secretary Timothy Geithner.The White House said Boehner's latest proposal does not meet its standards."Thus far, the president's proposal is the only proposal that we have seen that achieves the balance that is so necessary," White House spokesperson Jay Carney said at a news briefing.Republicans understand that the clock is ticking and they are confident that Boehner will get a deal they can support in the coming days, a senior House Republican aide said.Republicans want substantial spending cuts in return for increased tax revenue, but any proposal to trim popular benefit programs like Medicare will face fierce resistance from liberal Democrats, whose votes will be needed to get a deal passed. Obama could also face strong opposition from Democrats if he agrees to Boehner's proposal to slow the growth of Social Security benefits by changing the way the cost-of-living increases are measured against inflation, an approach that could save $200bn over 10 years. Obama also wants to head off another confrontation over the US debt limit, which will need to be raised in the coming months. Republicans insist that any increase in the government's $16.4 trillion borrowing authority must be paired with an equal reduction in spending.

Coal set to overtake oil as top fuel

Oil prices rose on Tuesday as hopes grew of a US deal to avert a "fiscal cliff" of tax hikes and spending cuts in the United States, the world's biggest consumer of crude, analysts said.New York's main contract, light sweet crude for delivery in January, increased by 49 cents to $87.69 a barrel.Brent North Sea crude for February advanced 58 cents to $108.22 per barrel in London midday deals."Crude oil prices rebounded on Tuesday amid hopes about the US budget details after the meeting between US President (Barack) Obama and House Speaker John Boehner provided some optimistic signs about the US economy, showing potential for a rebound in the US oil demand," said Sucden brokers analyst Myrto Sokou.Obama hosted top Republican lawmaker John Boehner in the White House for 45 minutes on Monday in the latest effort to keep the US economy from going over the fiscal cliff.The meeting follows news that Boehner had changed his position on not allowing any more taxes, saying at the weekend that he would agree to some hikes for people earning more than $1m.Originally Obama insisted higher taxes kick in for households earning more than $250 000, but has since offered to increase the threshold to $400 000.Analysts say the development shows the outline of a tentative deal is being formed.Elsewhere on Tuesday, a report said coal was set to surpass oil as the world's top fuel within a decade, driven by growth in emerging market giants China and India, with even Europe finding it hard to cut use despite pollution concerns."Thanks to abundant supplies and insatiable demand for power from emerging markets, coal met nearly half of the rise in global energy demand during the first decade of the 21st century," said Maria van der Hoeven, head of the International Energy Agency.Economic growth is expected to push up further coal's share of the global energy mix, "and if no changes are made to current policies, coal will catch oil within a decade", she said in a statement.The latest IEA projections see coal consumption nearly matching oil consumption in four years time, rising to 4.32 billion tonnes of oil equivalent in 2017 against 4.4 billion tonnes for oil.That has consequences for climate change as coal produces far more carbon emissions responsible for global warming than other fuels.

Indian central bank holds rates

India's central bank kept interest rates on hold on Tuesday, ignoring government pressure to reduce borrowing costs, but said it was shifting its focus towards boosting a flagging economy, raising the odds of a rate cut as early as January.The Reserve Bank of India (RBI) reiterated guidance from its last policy meeting in October that it was likely to resume monetary policy easing in the January-March quarter, as inflation pressures are expected to ease in the next few months.Wary of stubbornly high inflation, the RBI has kept its key policy rates on hold since a 50 basis point cut in April, in contrast to other big emerging market central banks in China, Brazil and South Korea that have been more aggressive in easing policy to support growth.On Tuesday, the central held the repo rate at 8% and also kept its cash reserve ratio (CRR) for banks steady at 4.25%, its lowest level since 1974. The CRR is the share of deposits that lenders must keep with the central bank."In view of inflation pressures ebbing, monetary policy has to increasingly shift focus and respond to the threats to growth from this point onwards," the central bank wrote in its mid-quarter monetary policy review.A Reuters poll last week showed 37 of 41 economists had expected the RBI to hold the policy repo rate steady, while respondents were roughly evenly split over the likelihood of a cut in the CRR.A lower-than-expected headline inflation reading in data released on Friday, after the polling was completed, had been seen in some quarters as raising the chances of a rate cut."Whatever the RBI spelt out in October seems to have got support from the inflation trajectory," said Abheek Barua, chief economist at HDFC Bank, in New Delhi. "Net of the base effect, we see the current trend continuing and a case for a rate cut strengthening, which they could do in January."The central bank has repeatedly resisted pressure from the finance ministry to cut rates to prop up an economy that has posted GDP growth below 6% for the past three quarters and is on track for its weakest annual performance in a decade in the fiscal year ending March.Whilst such a growth rate is still robust by the standards of developed economies, it is worryingly sluggish for a country that aspires to annual expansion of at least 8.5% to provide jobs for it burgeoning population."I think it is good that RBI sees there is room to ease and clearly they are taking a decision, keeping in mind their main job is combating inflation," said Raghuram Rajan, chief economic adviser to the finance ministry. "But they also have some incentive to seek growth in the country." The 10-year bond yield fell 3 basis points to 8.14% from levels before the decision, reflecting somewhat heightened expectations of a rate cut early in 2013. The benchmark stock index was flat."Liquidity conditions will be managed with a view to supporting growth ... thereby preparing the ground for further shifting the policy stance to support growth," the RBI said.The Congress-led minority government, faced with threats of sovereign rating downgrades due to a widening fiscal deficit, is trying to pass key reform bills allowing greater access to foreign investors in the retail, banking and insurance sectors.Appreciating the government's recent policy initiatives, the central bank said such moves along with further reforms should boost business activity and investment climate.Standard & Poor's last week issued another warning to India's credit rating, saying a wide fiscal deficit and a heavy debt burden were the most significant rating constraints. The wholesale price index (WPI), India's main gauge for inflation, softened to a 10-month low of 7.24% in November. It has remained above 7% for the past three years."Signs in softening RBI guidance is apparent as focus has shifted to growth, and odds for a rate cut in the January-March quarter are likely to gather considerable momentum here on," said Radhika Rao, an economist at Forecast Pte in Singapore."Barring a sharp acceleration in December WPI, we look for a 50 basis points reduction in Q1 2013, possibly front-loaded in the January meeting."

Saudi follows SA ban on Brazil beef

Saudi Arabia has suspended imports of Brazilian beef, Brazil's agriculture ministry said on Tuesday, and became the largest country to stop purchases after confirmation of a 2010 case of atypical mad cow disease.The decision, confirmed by a ministry press official in Brasilia, follows Egypt's ban of beef on Monday from Parana state, where a cow that died two years ago had developed atypical bovine spongiform encephalopathy (BSE), or mad cow disease. Egypt will continue to import from other states. Between January and October, Saudi Arabia imported 31,300 tonnes of beef, putting it among the top 10 largest importers from Brazil, the world's largest beef exporter. But top buyers Russia, Hong Kong and Egypt - which took more than half of the 896,000 tonnes of beef that Brazil has exported this year through September continue to import its beef, suggesting the impact could be limited. Prior to Saudi Arabia, only Japan, China and South Africa had halted imports of all Brazilian beef since Brazil announced on Dec. 7 that a 13-year-old cow that died in 2010 in Parana tested positive for the protein linked to the development of BSE.The countries are all minor importers of Brazilian beef.The cow, which was kept for breeding purposes, never developed BSE and died of other causes. But it tested positive for the causal agent for BSE, a protein called a prion, which can arise spontaneously in elderly cattle.A similar case of atypical BSE occurred in the United States in April. Like the Brazilian cow, that animal never entered the food chain and there was no major effect on U.S. beef exports.Brazilian companies like JBS SA, the world's biggest meats producer, as well as rival Minerva SA and food processor Marfrig Alimentos SA have played down the impact of the case on their operations.After it confirmed the case of atypical BSE, the World Animal Health Organization issued a statement maintaining Brazil's status as a low-risk country for mad cow disease."This classification has been followed by important countries, blocks and consumers," Minerva said in a statement on Tuesday, adding that sales to Saudi Arabia accounted for approximately 2.5% of gross sales so far this year.