News of the Day From Across the Globe
1 Premier
ousted: Slovenia's Parliament ousted Prime Minister Janez Jansa and his conservative
government Wednesday, designating a financial expert from the opposition to try
to form a new administration. The moves come amid corruption allegations
against Jansa and growing public anger over the struggling economy and
austerity measures that have seen living standards fall and unemployment rise.
The 55-33 no-confidence vote named Alenka Bratusek as prime minister-designate.
Bratusek, 42, would be the first woman to lead Slovenia's government since its secession from Yugoslavia in 1991.
2 Iraq warning: Iraqi Prime Minister Nouri al-Maliki warned Wednesday that
a victory for rebels in the Syrian civil war would create a new extremist haven
and destabilize the wider Middle East, sparking sectarian wars in his own country and in Lebanon. The prime minister's remarks reflect fears by many Shiite Muslims in Iraq and elsewhere that
Sunni Muslims would come to dominate Syria should President Bashar Assad be toppled.
3 Corruption case: Vassilis Papageorgopoulos, the former mayor of Greece's second city, Thessaloniki, and two of his top
aides were sentenced to life in jail Wednesday after being found guilty of
embezzling almost $23.5 million in state funds. It's a rare conviction in a
country where political corruption has contributed to Greece's dysfunction and
economic decline.
4 Swiss
shooting: A longtime employee opened fire at
a wood-processing company in central Switzerland on Wednesday, leaving three people dead, including the assailant, in
the country's second multiple-fatality shooting in two months, police said.
Seven other people were wounded, six of them seriously, in the shooting at the
premises of the company Kronospan, in the small town of Menznau. The incident
occurred as the Swiss Parliament prepares to consider
tightening some aspects of the country's famously lax gun legislation.
5 Shark attack:
About 150 friends and family of 46-year-old Adam Strange wrote messages to him
in the sand and stepped into the water Thursday at a New Zealand beach to say goodbye after he was killed Wednesday by a large shark.
Strange, an award-winning television and short film director, was swimming near
popular Muriwai Beach Wednesday when he was attacked by a shark that may have
been 14 feet long. The fatal attack is one of only about a dozen in New Zealand in the past 180 years.
6 Lethal
fire: A fire broke out at an illegal six-story plastics market in the Indian
city of Kolkata on Wednesday, killing at least 19 people, police said. The blaze was
likely caused by a short circuit, police said.
7 Lion gangster:
Authorities have removed four lions and two bears from the Bucharest estate of a notorious
Romanian gangster. Ian Balint, who reportedly used
the animals to threaten his victims, was arrested Feb. 22 with dozens of others
on charges of attempted murder, kidnapping, blackmail and possessing illegal
weapons. Environmental authorities tranquilized the animals Wednesday and
transported them to a zoo.
8 Tallest hotel: The JW Marriott's Marquis Dubai formally opened this
week after gaining the title of tallest hotel from Guinness World Records. At 1,099 feet, the 72-story hotel towers over the skylines of most cities.
US economy shows strength
Even with automatic spending cuts
looming, the outlook for the US economy brightened a bit Tuesday after reports
showed that Americans are more confident and are buying more new homes.Home
prices are also rising steadily, and banks are lending more. Such improvements
suggest that the economy is resilient enough to withstand the deep government
cuts that will kick in Friday.That's especially encouraging because uncertainty
over the federal budget could persist for months."The stars are lining up
for stronger private sector growth this year," said Craig Alexander, chief
economist at TD Bank.Sales of new homes jumped nearly 16% in January to their
highest level in 4 years, adding momentum to the housing recovery. Consumer
confidence rose in February after three months of declines. And home prices
increased in December from the same month in 2011 by the largest amount in more
than six years.The upbeat economic news contributed to a rally on Wall Street.
The Dow Jones industrial average jumped more than 100 points.Consumers still
face numerous burdens. Among them is a sharp increase in gas prices. The
national average for a gallon, $3.78 ($1 a litre), has surged 44 cents in a
month.And Social Security taxes rose 2 percentage points beginning January 1.
This year, the increase will cost a typical household that earns $50 000 about
$1 000. Income taxes for the highest-earning Americans also rose.Both factors
could reduce overall spending.On Friday, about $85 billion in automatic
spending cuts are to kick in, and there's little sign that the White House and
Congress will reach a budget deal to avoid them. The cuts will cause furloughs
and temporary layoffs of government workers and contractors and sharply reduce
spending on defense and domestic programs.For about 2 million long-term
unemployed, benefits now averaging $300 a week could shrink by about $30.
Payments that subsidize clean energy, school construction and state and local
public works projects could be cut. Low-income Americans seeking heating or
housing aid might face longer waits.Overall, the tax increases and spending
cuts could shave up to 1.2 percentage points from growth this year, economists
estimate. Alexander estimates that without the spending cuts or tax increases,
the economy would expand more than 3 percent this year. Instead, he predicts
growth of only 2%.But growth should accelerate later this year as the effects
of the government cutbacks ease, he and other economists say. And several
reports on Tuesday suggest that the economy's underlying health is improving
despite the prospect of lower government spending and further budget
stalemates:
- The Standard & Poor's/Case-Shiller 20-city home price index rose 6.8% in December from a year earlier. That was the biggest year-over-year increase since July 2006. Rising home prices tend to make homeowners feel wealthier and encourage more spending. They also cause more people to buy before prices rise further. And banks are more likely to provide mortgages if they foresee higher home prices.
- Consumer confidence rose after three months of declines, according to the Conference Board, a business research group. Confidence had plunged in January after higher taxes cut most Americans' take-home pay. The rebound, though, suggests that some consumers have begun to adjust to smaller paychecks. The consumer confidence index rose to 69.6 in February from 58.4 in January. That's higher than last year's average of 67.1.
- Bank lending rose 1.7% in the October-December quarter, the Federal Deposit Insurance said. It was the sixth rise in seven quarters. Banks made more commercial and industrial loans to businesses and auto loans to consumers. More lending means the Federal Reserve's policy of keeping interest rates at record lows will benefit more people. Chairman Ben Bernanke reiterated to Congress on Tuesday that the Fed's efforts are helping the economy and signaled that they will continue.
- Sales of new homes rose to a seasonally adjusted annual rate of 437 000, the Commerce Department said. That's the highest level since July 2008. The gain will likely encourage more construction. Higher sales are keeping the supply of new homes low, even as builders have tried to keep up. At the current sales pace, it would take only 4.1 months to exhaust the supply of new homes for sale. That's the lowest such figure in nearly eight years.
Will Italian Politics Be a Threat for International Financial Stability?
Mr. Grillo and the Five Star
movement is part of a trend across the developed world, as electorates become
disenchanted with established parties and vote for a protest party. From Occupy Wall Street to the Tea Party to the EU's Pirate Party, an increasing number of
transatlantic voters tire of the options presented by established two party
systems. This may be driven by the failure of governing parties to adapt to
societal tensions raised by the current economic crisis. In that light, the
strong protest vote in Italy should not be seen as an outlier.Despite the
current uncertainty in the composition of the next government, Italy remains an
important ally for the United States, and a key strategic partner in all future
discussions about Europe and transatlantic relations. For this reasons America should follow carefully what happens in Italy. The demand for
renewal and change that is the real message of recent elections is something
too important to be considered just a local case. Understanding the political
process of how Italian governments are formed is therefore key.On February 25th
the results of the political elections in Italy stunned all commentators by
presenting a country apparently deeply divided and a parliament that seems not
to allow any reasonably stable coalition for leading the country.The polls gave
a limited majority to the leftwing coalition (29.5% in the lower house) leading
on Silvio Berlusconi's rightwing coalition (29.1%). But the surprise was the
significant result of the "Five Stars movement" of Mr Beppe Grillo
(25.5%) and the relatively low result achieved by current Prime Minister Mario
Monti (10.5%).The new electoral law (approved late in 2012, just few months
ahead of the elections), allows the left to gain a solid majority in the lower
house (with 55% of the legislature, although they led the right-wing coalition
by only 0.4% of the vote), but in the upper house, there is an apparent
stalemate, as the left elected 123 senators, the right 117, Five Stars 54 and
Monti 18. A coalition government must include two of the first three parties
mentioned, as a government requires a majority in both houses.The problem is
that, at the moment, there is not much appetite for an agreement. The left-wing
coalition does not seem interested in a deal with Berlusconi and the Five Stars
leader, Mr Beppe Grillo, suggested that he would not make any deal with anyone
at all. It now appears that Mr Bersani would like to open a bridge to Mr Grillo
rather than trying a grand coalition with Mr Berlusconi. It is unclear if he
will succeed, but in any case it will be hard to imagine that Italy will have a strong
government in this situation.As the new parliament assumes office on March
15th, there is time for negotiations and compromise. But in the meantime, talks
need to be held also in order to designate the new leadership of the lower
house and Senate and its constituent committees and to elect the new president
of the Republic, as the incumbent's mandate is expiring in May.Who will govern
Italy in the meantime? Currently, there is still a caretaker government in
office, which is the existing cabinet of Prime Minister Monti. It is
nevertheless expected that after the new parliament is fully operational, the
president of the republic, Mr Giorgio Napolitano, will try to facilitate the
forming of a government and is likely to give a mandate to a designate Prime
Minister. As Bersani's leftwing coalition has the majority in the lower house,
unless the coalition otherwise indicates, Bersani remains the likely next Prime
Minister. But with no agreements for a majority, he will be rather unlikely to
succeed.The Italian system is a parliamentary democracy, and the new
government, that formally takes office at the moment the ministers are sworn
in, needs to win a vote of confidence from both houses of the parliament
immediately after taking office. In the past, the tradition has been that, if
the designated Prime Minister, after having made his consultations, realizes
that there is no support for his government, he will indicate so to the
President and resign his post. That meant that the previous government remained
as caretaker until a new Prime Minister was selected and then formed the government,
or, if no solution was available, the president of the republic called for new
elections and dissolved the government.Currently, Monti stays in office as
Prime Minister until an alternative is selected, and the need for stability
would suggest that until a solution is found the best is for him to stay.
However, things are so uncertain, no one can predict when or if a new
government would be formed.
Wall Street gains despite IMF warning
Wall Street advanced, with gains
tempered by expectations that Congress will not act to stop automatic federal
spending cuts that are widely expected to put the brakes on the pace of
expansion in the world's largest economy.The International Monetary Fund warned
it will downgrade its economic forecast for the US if US$85 billion of schedule
federal spending cuts take effect on March 1.If all cuts go ahead, the IMF
would lower its current estimate for a 2% expansion for US gross domestic
product this year by at least 0.5%, IMF spokesman William Murray told reporters
at a news briefing. Global growth also would be hit.In afternoon trading in New
York, the Dow Jones Industrial Average rose 0.14%, the Standard & Poor's
500 Index gained 0.18%, while the Nasdaq Composite Index climbed
0.37%.Expectations of a slowdown in the pace of growth buoyed US
Treasuries.Commerce Department data released today showed GDP expanded at an
annual rate of 0.1% in the final three months of 2012, compared with a
previously estimated 0.1% contraction. That was below the 0.5% growth forecast
by economists polled by Reuters."It's pretty well baked into the cake that
no action is likely to be taken on the sequestration tomorrow," Thomas
Simons, a government debt economist in New York at Jefferies Group, one of 21
primary dealers that trade with the Fed, told Bloomberg. "GDP was weaker
than expected. It's nice to see the negative sign go away, but it's still
pretty weak."The negative sentiment was offset by the latest news on the
labour market. Applications for jobless benefits surprisingly dropped 22,000
last week to 344,000. Economists polled by Reuters had expected first-time
applications to fall to 360,000.Shares of JC Penney sank, last down 14%, after
the company reported a net loss of US$552 million in the quarter ended February
2, compared with US$87 million a year earlier.In Europe, the Stoxx 600 Index
finished the day with a 1% gain from the previous close. The index has advanced
for the ninth straight month and is up 3.7% so far this year, according to
Bloomberg.Good news on Europe's largest economy helped as German unemployment
posted a surprise drop February.Benchmark stock indexes rose in Frankfurt and
Paris, both advancing 0.6%, while the UK's FTSE 100 added 0.6%.The political
impasse in Italy remains a concern for all of Europe. In Berlin, Italian President
Giorgio Napolitano said the formation of a new government would take time and
that it's important to keep in mind that the Monti government remains in office
for now.
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