NEWS,29.12.2012

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US fiscal cliff battle heats up

US President Barack Obama will host top congressional leaders including his bitter Republican rivals on Friday in a last-ditch bid to halt America's slide over the so-called "fiscal cliff."A White House official said he will meet his Republican foes House Speaker John Boehner and Senate Minority Leader Mitch McConnell and Democratic allies Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi.McConnell and Boehner's office also confirmed the meeting, which comes amid heightened political tensions and mounting pessimism in Washington over whether a convincing deal can be struck before a year-end deadline."We'll see what the president has to propose. Members on both sides of the aisle will review it, and then we'll decide how best to proceed," McConnell said on the Senate floor."Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis."Senate rivals Reid and McConnell spent Thursday's public appearances blaming one another for the looming failure, with Reid warning that the US economy was more likely than not heading into 2013 without a deal on the books."I have to be very honest," Reid said on the Senate floor during a rare holiday week session. "I don't know time-wise how it can happen now."On Wednesday, the president called the congressional quartet - McConnell, Reid, Boehner and Pelosi - hoping to inch forward on a deal, but lawmakers and their aides have stressed there was little to no progress over the holidays.Obama cut short his Christmas vacation in Hawaii to return to the White House, where he ignored reporters' shouted questions about the crisis, four days before a deadline to agree a deal on tax and spending.He came back to a sharply divided Washington, where the mood has soured on a possible plan to prevent hundreds of billions of dollars in tax hikes and deep automatic spending cuts from kicking in from January 1.McConnell told the Senate he was "happy" to look at any Obama proposal, warning: "But the truth is we're coming up against a hard deadline here."The lawmaker insisted the Senate Democratic majority had yet to offer a viable solution and that if they did "members on both sides of the aisle will review it, and then we'll decide how best to proceed.Despite reports from some quarters that Obama had drawn up his own plan to offer lawmakers, there was no sign that the White House was ready to intervene.Lawmakers have refused to compromise and Reid blamed Republicans for the breakdown.Reid said Boehner was running a "dictatorship" in the House by refusing to put to a vote a Senate-passed bill which would prevent taxes from rising on all households making less than $250 000 per year.He also took Boehner to task for keeping his members on vacation while the Senate was hard at work.Without McConnell and Boehner "nothing can happen on the fiscal cliff - and so far they are radio silent," Reid said, urging them to "put the economic fate of the nation ahead of your own fate as speaker of the House."Boehner's office shot back with a curt message."Senator Reid should talk less and legislate more," Boehner spokesperson Michael Steel said, arguing the House has passed bills that would extend tax breaks for all Americans and replace the indiscriminate spending cuts."Senate Democrats have not," he added.House leaders eventually ordered members to return for a session on Sunday, warning that the House "may be in session through Wednesday, January 2."A new Congress convenes on January 3.The deadlock has spooked markets, left Americans wondering whether they will pay thousands more in taxes next year, and worried the Pentagon, which fears defense cuts could undermine the military.Complicating efforts to avoid disaster, Treasury Secretary Timothy Geithner has warned the nation will reach its $16.39 trillion debt limit on December 31 and his department take "extraordinary measures" to avoid a US default.Experts say a failure to strike a cliff compromise by New Year's Eve could plunge the world's biggest economy into recession, and wrangling over the debt ceiling will only exacerbate fiscal uncertainty.

US gun lobby to fight arms treaty

The leading US pro-gun group, the National Rifle Association, has vowed to fight a draft international treaty to regulate the $70bn global arms trade and dismissed suggestions that a recent US school shooting bolstered the case for such a pact. The UN General Assembly voted on Monday to restart negotiations in mid-March on the first international treaty to regulate conventional arms trade after a drafting conference in July collapsed because the US and other nations wanted more time. Washington supported Monday's UN vote.US President Barack Obama has come under intense pressure to tighten domestic gun control laws after the December 14 shooting massacre of 20 children and six educators at an elementary school in Newtown, Connecticut. His administration has since reiterated its support for a global arms treaty that does not curtail US citizens' rights to own weapons.Arms control campaigners say one person every minute dies as a result of armed violence and a convention is needed to prevent illicitly traded guns from pouring into conflict zones and fueling wars and atrocitiesIn an interview with Reuters, NRA president David Keene said the Newtown massacre has not changed the powerful gun lobby's position on the treaty. He also made clear that the Obama administration would have a fight on its hands if it brought the treaty to the senate for ratification. "We're as opposed to it today as we were when it first appeared," he said on Thursday. "We do not see anything in terms of the language and the preamble as being any kind of guarantee of the American people's rights under the Second Amendment. "The Second Amendment of the US Constitution protects the right to bear arms. Keene said the pact could require the government to enact legislation to implement it, which the NRA fears could lead to tighter restrictions on gun ownership.He added that such a treaty was unlikely to win the two-thirds majority in the senate necessary for approval."This treaty is as problematic today in terms of ratification in the senate as it was six months ago or a year ago," Keene said. Earlier this year a majority of senators wrote to Obama urging him to oppose the treaty.UN delegates and gun-control activists say the July treaty negotiations fell apart largely because Obama, fearing attacks from Republican rival Mitt Romney before the November 6 election if his administration was seen as supporting the pact, sought to kick the issue past the US vote. US officials have denied those allegation The NRA claimed credit for the July failure, calling it at the time "a big victory for American gun owners."NRA is "telling lies"The main reason the arms trade talks are taking place at all is that the US - the world's biggest arms trader, which accounts for more than 40% of global transfers in conventional arms reversed US policy on the issue after Obama was first elected and decided in 2009 to support a treaty.Supporters of the treaty accuse the NRA of deceiving the American public about the pact, which they say will have no impact on domestic gun ownership and would apply only to exports. Last week, Amnesty International launched a campaign to counter what it said were NRA distortions about the treaty."The NRA is telling lies about the arms treaty to try to block US government support," Michelle Ringuette of Amnesty International USA said about the campaign. "The NRA's leadership must stop interfering in US foreign policy on behalf of the arms industry."Jeff Abramson of Control Arms said that as March approaches, "the NRA is going to be challenged in ways it never has before and that can affect the way things go" with the government.The draft treaty under discussion specifically excludes arms-related "matters which are essentially within the domestic jurisdiction of any State".Among its key provisions is a requirement that governments make compliance with human rights norms a condition for foreign arms sales. It would also have states ban arms transfers when there is reason to believe weapons or ammunition might be diverted to problematic recipients or end up on illicit markets.Keene said the biggest problem with the treaty is that it regulates civilian arms, not just military weapons.According to the Small Arms Survey, roughly 650 million of the 875 million weapons in the world are in the hands of civilians. That, arms control advocates say, is why any arms trade treaty must regulate both military and civilian weapons.Keene said the NRA would actively participate in the fight against the arms trade treaty in the run-up to the March negotiations. "We will be involved," he warned, adding that it was not clear if the NRA would address UN delegates directly as the group did in July.The NRA has successfully lobbied members of Congress to stop major new gun restrictions in the United States since the 1994 assault weapons ban, which expired in 2004. It also gives financial backing to pro-gun candidates.Explosive issueEuropean and other UN delegates who support the arms trade treaty told Reuters on condition of anonymity they hoped Newtown would boost support for the convention in the US, where gun control is an explosive political issue"Newtown has opened the debate within the US on weapons controls in ways that it has not been opened in the past," Abramson said, adding that "the conversation within the US will give the (Obama) administration more leeway."Keene rejected the idea of bringing the Newtown tragedy into the discussion of an arms trade treaty"I find it interesting that some of the folks that advocate the treaty say it would have no impact whatever within the United States but that it needs to be passed to prevent another occurrence of a school shooting such as took place in Newtown," he said. "Both of those positions can't be correct."Obama administration officials have tried to explain to US opponents of the arms trade pact that the treaty under discussion would not affect domestic gun sales and ownership."Our objectives for the ATT (arms trade treaty) have not changed," a US official told Reuters. "We seek a treaty that fights illicit arms trafficking and proliferation, protects the sovereign right of states to conduct legitimate arms trade, and meets the concerns that we have articulated throughout." "In particular, we will not accept any treaty that infringes on the constitutional rights of US citizens to bear arms," the official added.Supporters of the treaty also worry that major arms producers like Russia, China, Iran, India, Pakistan and others could seek to render the treaty toothless by including loopholes and making key provisions voluntary, rather than mandatory.The US, like all other UN member states, can effectively veto the treaty since the negotiations will be conducted on the basis of consensus. That means the treaty must receive unanimous support in order to be approved in March.But if it fails in March, UN delegations can put it to a vote in the 193-nation General Assembly, where diplomats say it would likely secure the required two-thirds majority.

Recession batters Spain as protests grow

Battered by high unemployment and a banking crisis, Spain remains stuck in recession in the final quarter of 2012, the central bank said Friday.The eurozone's fourth-largest economy has been shrinking since mid-2011, pushing unemployment above 25%, and the outlook remains grim with a further contraction expected next year."The most recent data for the final quarter of the year, although still incomplete, points to a continuation of the fall in economic activity as a result of the contraction in domestic demand," the Bank of Spain said in a monthly report.The central bank pointed to indicators showing weak consumer confidence and retail sales, mixed fortunes in industry and a construction sector still reeling four years after a spectacular property market crash.Spain's gross domestic product, its total economic output, fell by 0.3% in the third quarter of the year, according to official data.The government is tipping an economic slump of 1.5% this year.It also forecasts a 0.5% contraction in 2013, but this is widely viewed as being optimistic. The European Commission and OECD, for example, say they expect Spanish economic output to tumble 1.4 percent next year.Protests are growing in Spain as people decry the economic slump, unemployment and a series of austerity measures adopted by Prime Minister Mariano Rajoy's right-leaning government. Massive aid to a bad-loan ridden and widely scorned banking sector has stirred further anger.

 

Italy keeps debt costs in check

 

Italy's debt costs rose only slightly at its last auction of long-term debt in 2012, drawing a solid response from investors yet to be unnerved by the risks surrounding February elections and the exit of its trusted technocrat government.The treasury sold €3bn of its 10-year bond paying a yield of 4.48%, up from 4.45% at a similar sale one month ago.It also placed €2.87bn of five-year bonds paying 3.26%, up from 3.23% at end-November sale.In very thin market conditions Rome was able to find decent demand for its bonds among investors searching for high returns, reflecting the easing of at least some concerns in the eurozone's debt crisis since August."It seems that the result was better than expected, with the yield on the 10-year lower than in the secondary market," said Emile Cardon, market economist at Rabobank in Utrecht. Markets are starting to focus on an uncertain Italian election campaign as the country approaches elections scheduled on 24-25 February.Investors, however, seem to be willingly to buy Italian debt while waiting for more clarity on domestic politics."The biggest fear for the market is that political turmoil in Italy will return. But this outcome shows (investors) still have confidence that Italy will do the right thing and I think this has something to do with the comeback of (outgoing Prime Minister Mario) Monti."The technocrat premier announced on Sunday he would consider seeking a second term as Italian prime minister if approached by allies committed to backing his austere brand of reforms. Monti resigned last week, just over a year after being appointed at the helm of an unelected government to save Italy from financial crisis. While it is still unclear which parties will support the outgoing premier, his commitment may bring economic reforms at the center of the political debate.Italy had planned to sell up to €6bn of both issues after having placed €11.75bn of short-dated debt on Thursday. 

China launches rival GPS satellite system

China has launched commercial and public services across the Asia-Pacific region on its domestic satellite navigation network built to rival the US global positioning system. The Beidou, or compass, system started providing services to civilians in the region on Thursday and is expected to provide global coverage by 2020, state media reported. Ran Chengqi, spokesperson for the China Satellite Navigation Office said the system's performance was "comparable" to GPS, the China Daily said."Signals from Beidou can be received in countries such as Australia," he said.It is the latest accomplishment in space technology for China, which aims to build a space station by the end of the decade and eventually send a manned mission to the moon.China sees the multi-billion-dollar programme as a symbol of its rising global stature, growing technical expertise, and the Communist Party's success in turning around the fortunes of the once poverty-stricken nation.The Beidou system comprises 16 navigation satellites and four experimental satellites, the paper said. Ran added that the system would ultimately provide global navigation, positioning and timing services.The start of commercial services comes a year after Beidou began a limited positioning service for China and adjacent areas.China began building the network in 2000 to avoid relying on GPS. "Having a satellite navigation system is of great strategic significance," the Global Times newspaper, which has links to the Communist Party, said in an editorial."China has a large market, where the Beidou system can benefit both the military and civilians," the paper said."With increases in profit, the Beidou system will be able to eventually develop into a global navigation satellite system which can compete with GPS."In a separate report, the paper said satellite navigation was seen as one of China's "strategic emerging industries".Sun Jiadong, the system's chief engineer, told the 21st century Business Herald newspaper that as Beidou matures it will erode GPS's current 95% market share in China, the Global Times said.Morris Jones, an independent space analyst based in Sydney, Australia, said that making significant inroads into that dominance anywhere outside China is unlikely."GPS is freely available, highly accessed and is well-known and trusted by the world at large," he said. "It has brand recognition and has successfully fought off other challenges."Morris described any commercial benefits China gains as "icing on the cake" and that the main reason for developing Beidou is to protect its own national security given the possibility US-controlled GPS could be cut off."It's that possibility, that they could be denied access to GPS, that inspires other nations to develop their own system that would be free of control by the United States," he said."At a time of war you do not want to be denied" access, he said.The Global Times editorial, while trumpeting Beidou as "not a second-class product or a carbon-copy of GPS" still appeared to recognise its limitations, at least in the early stages."Some problems may be found in its operation because Beidou is a new system. Chinese consumers should ... show tolerance toward the Beidou system," it said.

Weak Japan data points to stimulus

Poor Japanese manufacturing data on Friday gave new Prime Minister Shinzo Abe more ammunition to push for big spending and easy money to salvage the world's third largest economy from decades of deflation and its fourth recession since 2000.Japanese voters and the financial markets have welcomed the Abe government's aggressive stance on pumping cash into the economy, pushing the benchmark Nikkei share average on Friday to its highest level since the March 2011 tsunami, despite the worse than expected drop in factory output.Opinion polls published by major newspapers on Friday showed half to two-thirds of the public supported Abe's conservative government, with the stagnant economy the top priority.Top officials of the new government, sworn in just two days ago after a landslide election victory, say Abe's administration is under pressure to achieve quick results."(Public support) will drop if speculation mounts that we are unable to deliver," Akira Amari, the minister in charge of reviving the economy, told a news conference after a Friday morning cabinet meeting.But many economists warn Abe's emphasis on stimulus, rather than underlying structural reforms to boost competitiveness, may have only short-term effects and could worsen bloated public debt, the worst among the industrial nations. The government is keeping up pressure on the Bank of Japan (BOJ) to step up its monetary stimulus, even after it loosened policy in December for the third time in four months.Finance Minister Taro Aso said he was paid a courtesy visit by BOJ Governor Masaaki Shirakawa on Friday in which the two agreed to hold talks on issues including coordinating policy.Abe has threatened to change the law which guarantees the central bank's independence if it does not pursue more aggressive easing.Potentially adding more pressure on the BOJ was Japanese factory output data on Friday that fell a steeper than expected 1.7% in November, more than triple the median market forecast for a 0.5% drop. That followed a 1.6% gain in October, the first rise in four months.Japanese manufacturing activity also put in a bleak performance in Friday's Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) for December, which declined at its fastest pace in more than three years.Japan's economy has slipped into a mild recession, hurt by weak global demand and slumping sales to China after a diplomatic row over disputed isles.Analysts expect growth to pick up early next year, although any recovery will likely be slow and modest.The industrial output data from the Ministry of Economy, Trade and Industry included a survey showing that manufacturers expect output to rise 6.7% in December and increase 2.4% in January."Today's data confirmed that the economy remained on a downward trend and this could be a reason for the government to adopt an expansionary fiscal policy," said Takeshi Minami, chief economist at Norinchukin Research Institute."But if you look at data closely, there are also signs the economy will probably be bottoming out, so the data could simply offer the government a pretext to use its stimulus plan to support the recovery."Under pressure from Abe, the central bank has also signalled it may set a higher inflation target at its January 21-22 meeting than the current 1% goal, although market participants doubt it will have the means to achieve it.Separate data released on Friday showed Japan's core consumer prices, which exclude volatile fresh food prices, edged down 0.1% in November from a year earlier, in line with the median market forecast.The markets have been focusing on the prospects for further monetary easing and its impact on the yen, which has backed off from its long-running strength against the dollar and slipped to its weakest in more than two years. The yen dropped to 86.64 to the dollar on Friday, its lowest since August 2010.This has helped to fuel a rally in the shares of Japanese exporters, which were hurt by the yen's strength. The Nikkei benchmark has risen more than 20% since mid-November and is on track for its best year since 2005.Bond yields have also perked up after being depressed, with the benchmark 10-year Japanese government bond yield capped at 0.8 percent since the start of the quarter.