NEWS,21.01.2013

Terrorism in Africa set to top G8 agenda

Britain will use its chairmanship of the Group of Eight richest nations to focus on the threat of terrorism following developments in Algeria and Mali, Prime Minister David Cameron said Monday.Cameron said North Africa was becoming a "magnet" for jihadists from other countries, adding that the threat there now outweighed that from Islamist hotbeds in Afghanistan and Pakistan."I will use our chairmanship of the G8 this year to make sure this issue of terrorism and how we respond to it is right at the top of the agenda where it belongs," he said in a statement to parliament on the Algeria hostage crisis.Britain took over the rotating presidency of the Group of Eight richest nations in January and it hosts the summit of G8 leaders at Lough Erne, Northern Ireland, on June 17-18.Cameron said Britain would contribute intelligence and counter-terrorism assets to an "international effort to find and dismantle the network that planned and ordered the brutal assault" on the In Amenas gas field in Algeria.It will also work closely with the Algerian government to learn lessons from the attack, in which three British nationals were confirmed killed and a further three were believed to have died.Cameron said Britain was also looking at whether to provide "transport and surveillance assets" to help the French military mission in Mali in addition to the two transport planes it has already contributed.He said that Britain could send "tens not hundreds" of troops to a new EU training mission for Mali.But Cameron also painted a picture of a "generational struggle" against the "terrorist scourge", saying that it needed both a political and security response."We must frustrate the terrorists with our security, we must beat them militarily, we must address the poisonous narrative they feed on, we must close down the ungoverned space in which they thrive, and we must deal with the grievances they use to garner support," he said."This is the work that our generation faces and we must demonstrate the same resolve and sense of purpose as previous generations have with the challenges that they faced."

Winter chill batters UK businesses

A wintry burst of weather has hit businesses and travellers across Britain for a fourth day on Monday, threatening an unprecedented "triple-dip" recession that could knock the government's economic plans further off track.Commuters fought to get to work as airlines and train operators struggled to deal with a blanket of snow and ice, while some 3 000 schools were closed, forcing parents to stay at home to look after children. Figures this week look set to show the economy shrank again in the fourth quarter of 2012. The snow-induced a loss of working days for manufacturers and builders, allied to falls in business for shops, pubs and restaurants, could now push the first quarter of 2013 into the red also.Even if the economy does turn around later, it would leave the government seeking to dispel fears of slow growth well into next year - with an election due the year after."At a time when retailers are already under pressure, bad weather which keeps people from going shopping is very bad news," said Richard Dodd from the British Retail Consortium body representing the country's major chains."That said, it would have been much worse had it happened over Christmas." Shop owners and workers on a deserted Oxford Street, central London's main shopping destination, said trade had been hit heavily since Friday.Jay Gordon, manager of a hairdresser just off the main thoroughfare said half of his customers had cancelled over the weekend, at a cost of £30-100 per head. "On Saturday, we had 15 no-shows. It's a loss of revenue," he said. Economists said that while retailers may be able to make up the lost sales as customers come back to buy later what they would have bought anyway, the impact on construction and manufacturing is harder to smooth over quickly."Assuming the fourth quarter is as substantially negative as we now fear, we will almost certainly be heading back into recession," Peter Spencer, chief economic adviser to business think tank the Ernst and Young Item Club, told Reuters."When the economy is bouncing along the bottom anyway, a bout of bad weather can easily tip it into negative territory. "OutrageThere was a familiar hum of national outrage at train stations and airports about the struggle to run normal services more than 12 hours after the last snowfall in many areas on Sunday evening. Commuter operators across southern England were operating reduced services and only six of every 10 of those were running on time. British Airways had cancelled 350 flights since Friday, largely at the request of London's Heathrow airport, which has little room to reschedule delayed flights. That reflects a shortfall in infrastructure investment over past years which has fallen behind the country's eurozone neighbours. Operators note, however, the UK has less snow than much of the rest of Europe and less on average now than it did 20 years ago. That was no consolation for 24-year-old Georgina Kourousiakli and Fay Sakellariou from Athens, who missed their flight home by minutes due to train delays on Monday morning. "They don't care about us, we told them we need somewhere to live until tomorrow and they just looked at us and said 'oh'," Georgina said. "We don't have any money to eat ... we can't call home and the internet is 10 pence per minute. "Heathrow has come under heavy criticism before for not handling inclement weather well. PainThe Conservative-led coalition government had lauded numbers for the third quarter of last year which saw Britain emerging from its second recession since the 2008 financial crisis.But that always looked at risk from the gloom amongst consumers who account for two thirds of the economy. They have seen wages fall consistently compared with inflation while also struggling to reduce debts built up in a decade of booming credit growth.A survey on Monday showed the state of most households' finances continued to worsen in January, even if the rate of decline was slightly less pronounced than a month earlier."Concern remains that consumers will be restrained in their spending over the coming months which will limit growth," said IHS Global Insight economist Howard Archer.He noted that snow had helped spur contractions in the first quarter of last year and fourth quarters of 2010 and 2011."With the bad weather looking set to continue well into this week and possibly beyond, the risk of a triple dip recession is growing by the day," he said. The Conservative-Liberal Democrat coalition's central promise after gaining power in 2010 was to eliminate Britain's underlying budget deficit by the end of a five-year term.But that target was reliant on the private sector taking up the slack for some of the harshest cuts in public sector spending since World War Two. So far this year, government borrowing is up 10% due to falling revenues.

Cash crisis affects EU farm policy reform

European Union politicians will scale back or ditch reforms to the farm subsidy system as they seek to mollify powerful farmers' lobbies who are angry at subsidy cuts forced on them by the bloc's debt crisis. With EU leaders likely to agree on a 10% reduction in farm spending from next year, governments and lawmakers want to water down plans to reform the 50-year-old common agricultural policy (CAP). The debate centres on European Commission proposals to impose new environmental requirements on farmers and share out the subsidies more fairly across the 27-country bloc. Member governments and the European Parliament must approve the plans before they become law. Critics of the Commission's reform proposals say dilution is essential to avoid damaging Europe's agricultural productivity. "The proposals would increase unemployment in rural areas and risk deepening the EU's current economic crisis," said Pekka Pesonen, head of EU farm lobby COPA-COGECA. German farm minister Ilse Aigner described the Commission's bid to boost environmental standards by forcing farmers to leave 7% of their cropland fallow as "absurd". Farmers are counting on Aigner and her colleagues to intervene on their behalf. "I believe ministers will go for a lower rate than 7%," Pesonen told Reuters. But reform advocates say farmers' fears are overblown and that they should do more to justify the billions of euros in public subsidies they receive each year. "What I hear from the parliament and member states is dilution, dilution, dilution," said EU Climate Commissioner Connie Hedegaard, who supports plans to make the CAP greener by also requiring more crop rotation and permanent grassland. "Normally farmers are rather proud people. Would it not be better, instead of being on subsidies, to be paid for doing something for the common good?" she said at a conference in Brussels this month. Talks on the European Union's long-term budget for 2014-2020, which began in November and will continue in early February, have already whittled down the total for agriculture to about €360bn ($480 billion). That compares with about €400bn in the current seven-year budget when measured in 2011 prices. While most attention has focused on the overall CAP budget and new green rules, the biggest impact on individual farmers would come from proposals to reduce the inequality in payments. Producers in Italy, Belgium and the Netherlands currently receive more than €400 in direct subsidies per hectare on average, compared with less than €150 per hectare in the EU's Baltic states. And in major beneficiary countries such as France, Italy and Spain, the most productive farms currently receive far more EU cash than the rest, thanks to a link between subsidies and 200-2002 production levels. Proposals in the reform to shift payments towards a flatter, per-hectare rate could cut up to 40 percent of the subsidies going to Europe's biggest grain and livestock producers, officials say. "The rate of direct payments in major producing areas such as the Paris Basin will be significantly reduced," said a Commission source who spoke on condition of anonymity. Larger EU governments, with the support of farm groups and MEPs, are aiming to reduce the extent and pace of redistribution proposed by the EU farm commissioner, Dacian Ciolos. On Wednesday, the European Parliament's agriculture committee - traditionally sympathetic to farming interests - will vote on amendments that would delay the introduction of flat-rate payments beyond the Commission's 2019 deadline. The committee could also delay proposals to liberalise the EU's heavily regulated sugar sector by pushing back the planned phase-out of strict production quotas from 2015 to 2020. "There's no doubt that this is a reform without friends," said Alan Matthews, professor of European agricultural policy at Trinity College Dublin. "There really isn't anyone pushing it apart from Ciolos himself, and the longer it goes on the weaker it gets." Despite the efforts of governments and lawmakers to dilute the CAP reform, however, Matthews said future trends in EU farm output will be determined by factors other than public policy. "I would say the market price environment, biofuel and energy prices and things like climate change are probably more important than what is happening in terms of CAP reform," he said.

Investors to shun tax evading firms

Growing anger at aggressive tax avoidance by big business has prompted ethical investors to consider shunning shares in companies that don't pay their fair share of tax.As governments struggle to balance massive budget deficits caused by the financial crisis, reports that big companies like Apple, Google and Vodafone pay minimal taxes in some big markets have sparked public protests in Europe and the United States. All the companies criticised say they follow the law, and some argue they owe it to investors to pay as little tax as legally possible. But politicians on both sides of the Atlantic have argued such avoidance is immoral and hauled executives into public hearings to explain their tax affairs. Tax authorities in France, Germany and Italy have even launched raids on some high-profile companies' offices. Many investors with a 'socially responsible' mandate say they have long taken account of companies' tax practices when deciding where to invest, but few if any funds have made a point of screening out companies over tax issues, according to more than a dozen industry professionals contacted by Reuters. That may be about to change. FTSE Group, which compiles the share indexes that fund managers in the UK, United States and Asia use to build investment portfolios, said it was looking into excluding companies with what it called overly aggressive tax reduction policies from its ethical index group, FTSE4Good. "Tax is one of the areas which the independent FTSE4Good Policy Committee are considering, among other criteria priorities," a spokesperson said. FTSE did not say when it would reach its decision. The FTSE4Good indexes are one of the benchmarks most commonly used by ethical funds to build their portfolios. European funds invested in socially responsible investments totalled €7 trillion at the end of 2011, according to European Sustainable Investment Forum, an ethical investment industry association. Eleven percent of the $33.3 trillion in assets under professional management in the United States is invested in funds that screen for environmental and ethical factors, according to a 2012 report from the US Forum for Sustainable and Responsible Investment. Jacky Prudhomme and Helena Vines-Fiesta, co-heads of Environmental, Social & Governance research at BNP Paribas Investment Partners, said they were working on a system for screening out companies with inappropriate tax practices. The Paris-based asset manager had €513bn in assets under management as of March 2012. "We are not at this stage in a position to assess tax strategies in a systematic manner due to lack of underlying data. However, we are starting to examine how we can do this in some sectors," Prudhomme said, but did not say which sectors. Charity ActionAid, which has campaigned against multinationals shifting profits beyond the reach of tax authorities in developing countries, said it had been working over the past nine months with fund managers who wanted advice on how to encourage companies to pay their fair share of tax. Tax policy adviser Michael Lewis said the charity planned to publish a guide for investors next month outlining how they could pressure companies on tax. This could, in time, help funds develop a framework. "It could be quite challenging" to come up with criteria, explain them and apply them consistently, said Ryan Smith, head of corporate governance at Kames Capital, which manages the Kames Ethical Equity and Kames Ethical Cautious Managed funds. Lewis said ActionAid had been approached by mainstream funds saying aggressive tax planning may point to risky practices elsewhere. Some investors also consider how far increases in net profit are due to operational improvements, which can be maintained, or to tax management. A robust tax audit could rapidly reverse that kind of profit. "We always make sure we know what taxes the firms we invest in are paying. If they are paying a low tax rate, chances are it's unsustainable," said Charles Heenan, investment director at British fund management firm Kennox. In New York, where fund manager Domini Social Investments said it was looking for ways to rank companies on the basis of their tax policies, General Counsel Adam M. Kanzer said there were difficulties. For one, it could be hard to find stocks to invest in. "Unfortunately, tax avoidance practices are so widespread it is virtually impossible to exclude companies based on this issue," he said.