NEWS,07.08.2013

BoE looks forward to help UK recovery

The Bank of England overhauled its policy strategy on Wednesday, saying it planned to keep interest rates at a record low until unemployment falls to 7% or below, something unlikely for another three years.
Barely a month after Canadian Mark Carney took over as governor, the central bank said it would keep interest rates at 0.5 percent unless inflation threatened to get out of control or there was a danger to financial stability.
Carney said a recovery in Britain's fragile economy was underway and it appeared to be broadening but he warned that it had a long way to go before it was on solid ground.
"This remains the slowest recovery in output on record," he told his first news conference since taking over at the Bank. "We're not at escape velocity right now."
The pound rallied after an initial fall on the announcement and British government bond prices were lower as the BoE's commitment on interest rates fell short of some expectations of a more aggressive plan to revive growth.
"It looks like rates are not going to rise in the next three years, though they could, as Carney has stressed they are not pre-committed, so again this is a rather valueless bit of 'forward guidance' as is the case with the ECB," said Mark Ostwald at Monument Securities.
The Bank of England followed the US Federal Reserve's approach by setting an unemployment target rather than committing to keeping rates low for a set period of time but included get-out clauses.
BoE policymakers said they stood ready to buy more government bonds if additional stimulus was needed and would not reverse existing purchases while unemployment was too high.
The central bank said inflation was forecast to stay above its 2% target until the second half of 2015 based on market rate expectations.
"Attempting to return inflation to the target too quickly risks prolonging the period over which the nation's resources are underutilised," it said.
A growing number of major central banks are providing so-called forward guidance to help nurse their economies back to health after the damage of the financial crisis.
For the BoE, the challenge is to hold off a premature rise in British borrowing costs at a time when signs of economic recovery at home and the US Federal Reserve's decision to phase out stimulus are pushing up market interest rates.
Last month its Monetary Policy Committee took a step towards guidance by saying that a rise in British market rates was not justified by economic fundamentals, and it reiterated that point on Wednesday.
Markets already did not expect the BoE to start to raise interest rates until late 2015 at the earliest.
Three years' grace?
The BoE said Britain's economy had strengthened over the past three months. But output still remains more than 3 percent below its pre-crisis peak, a much weaker recovery than in the United States or Germany.
It now forecasts the economy will grow 0.6% during the current quarter  the same as between April and June, and that growth will reach an annual rate of 2.6% in two years' time, compared with 2.2% forecast three months ago, assuming interest rates stay on hold.
Unemployment is forecast to fall only slowly from its current level of 7.8% of the workforce, with the central bank expecting it to average 7.1% in the third quarter of 2016, the end of its forecast horizon.
This implies that the BoE expects to keep interest rates unchanged until at least that time, unless one of three conditions is breached before then.
The BoE will consider raising interest rates if their low level poses a threat to financial stability, if the public's medium-term inflation expectations rise dangerously high or if it forecasts that inflation in 18-24 months will be at 2.5% or higher.
It said that if those thresholds or the 7% unemployment rate are reached, the MPC would consider the case for interest rate rises on a month-by-month basis.
"There is therefore no presumption that breaching any of these knockouts would lead to an immediate increase in Bank Rate or sale of assets," it said.
Inflation is forecast to average 2.9% in the last three months of this year  close to its current level and a lower peak than previously thought  and then to fall roughly as predicted three months ago.
Finance minister George Osborne named Carney in November to succeed King, impressed by the Canadian's reputation for innovative thinking and applying forward guidance while he led Canada's central bank.
Osborne welcomed the plan and said it was consistent with the government's "absolute commitment" to Britain's 2% inflation target.
Carney has previously stressed the importance of reassuring ordinary people and businesses that their debt costs are not going to rise any time soon in order to give them more confidence about spending which would help the economy.
The new governor also signalled he was not concerned about signs of a fast recovery in the housing market in some parts of Britain, especially London.
"The housing market is starting to recover and actually the overall level of housing activity relative to GDP is a couple of percentage points lower than where it was prior to the crisis," Carney said at the news conference.

China fines baby formula makers $110m

China fined six companies including Mead Johnson Nutrition, Danone  and New Zealand dairy giant Fonterra a total of $110m following an investigation into price fixing and anti-competitive practices by foreign baby formula makers.

The other three penalised were Abbott Laboratories, Dutch dairy cooperative FrieslandCampina and Hong Kong-listed Biostime International Holdings, the National Development and Reform Commission (NDRC) said on Wednesday.

The fines, announced just over a month after the NDRC said it was conducting the antitrust review, coincide with separate pricing investigations into foreign and local pharmaceutical firms as well as companies involved in gold trading. Those probes have yet to conclude.

The official Xinhua news agency said the fines were a record for China, although it did not elaborate.

Foreign infant formula is coveted in China, where public trust was damaged by a 2008 scandal in which six infants died and thousands of others were sickened after drinking milk tainted with the toxic industrial compound melamine. 

Foreign brands account for about half of total sales and can sell for more than double the price of local formula. The infant milk market in the world's second biggest economy is set to grow to $25bn by 2017.

The NDRC said in a statement the fines were for restricting competition, setting curbs on minimum prices for distributors and for using a variety of methods to disrupt market order. 

Swiss giant Nestle, Japan's Meiji Holdings  and Zhejiang Beingmate Scientific Technology Industry and Trade Co were not punished because "they cooperated with the investigation, provided important evidence and carried out active self-rectification", Xinhua said, citing the NDRC.

The commission fined Mead Johnson 203.8m yuan ($33.29m); Danone 172m yuan; Biostime 162.9m yuan; Abbott 77m yuan; FrieslandCampina 48m yuan and Fonterra m yuan.

Mead Johnson, Biostime, Abbott and Fonterra said they would not contest the penalties. Officials at French food group Danone and FrieslandCampina were not immediately available to comment. 

After the NDRC probe was announced, a number of companies including Mead Johnson, Danone and Nestle cut prices on their baby formula in China by up to 20%.

Analysts said the probe was possibly part of a broader Chinese plan to boost consumption of local infant milk products.

But they said the fines were unlikely to damage the reputation of the affected companies. If anything, foreign infant formula makers might increase their market share because of the price cuts.

"It will have an impact on domestic brands over the long term as the prices of high-end premium brands come down. Customers will tend to buy the foreign brands as the price gap between domestic and foreign brands narrows," said Jacqueline Ko, an analyst at Maybank Kim Eng Research.

Fonterra, the world's biggest dairy exporter, said it would give additional training to sales staff and review its distributor contracts in the wake of its fine. 

"We believe the investigation leaves us with a much clearer understanding of expectations around implementing pricing policies," Kelvin Wickham, president of Fonterra Greater China and India, said in a statement.

Fonterra is embroiled in a separate milk powder contamination scare that has led to product recalls in China, Hong Kong and elsewhere in Asia. 

    

Powerful commission

A source with direct knowledge of the China investigation said the NDRC was concerned with manufacturers suggesting retail prices to distributors and then offering incentives if these were met, believing this was tantamount to dictating retail prices.

The agency also told the firms they had inhibited fair competition by setting up regional distributors and discouraging them from selling outside their territories, said the source, who spoke on condition of anonymity because he was not allowed to speak to the media.

The commission is one of China's most powerful government bodies, with a role in overseeing prices as well as broad economic policies.

The milk sector is still relatively young in China, with consumption of dairy products growing at an annual compound rate of 20%, a contrast to US and European markets where demand has been shrinking in the past decade.

Some analysts also said the pricing investigation could result in tougher rules governing imports.

Indeed, the China Food and Drug Administration is proposing tightening conditions for the granting of licences for milk powder production, including requiring producers to have their own controlled milk sources and research and development capabilities. 

In a statement late on Tuesday, the regulator said it was seeking public comment on the proposals, which also include requirements for license holders to strengthen hygiene practices and management standards.

Mead Johnson said its fine would reduce its full-year earnings by about 12 cents per share, but it reiterated its 2013 earnings forecast for profit, excluding one-time items, of $3.22 to $3.30 per share. 

Shares of Biostime, which has a market value of $3.3bn, were up 5.3% at midday, beating a 0.3% drop in the benchmark index. It shares resumed trading after being suspended the day before. 

Obama cancels Putin meeting over Snowden

US President Barack Obama is cancelling a meeting with Russian President Vladimir Putin scheduled for next month in Moscow, the White House said on Wednesday.
The Obama administration has repeatedly expressed disappointment after Moscow granted temporary asylum to former US spy agency contractor Edward Snowden, rejecting US pleas to hand him over to face criminal charges including espionage.
The White House, in a statement, said it valued "achievements made" between Russia and the United States, but cited a "lack of progress" on a host of other issues "such as missile defence and arms control, trade and commercial relations, global security issues, and human rights and civil society."
"Russia's disappointing decision to grant Edward Snowden temporary asylum was also a factor that we considered in assessing the current state of our bilateral relationship," the statements said.
Obama plans to add a stop in Sweden as part of this travels to the G20 summit in early September, a White House official said.
On Tuesday, Obama confirmed that he would go to Russia this autumn for a G20 summit in St Petersburg, Russia, but said he was "disappointed" with Moscow's decision on Snowden.
Senator Charles Schumer praised Obama's decision to cancel the bilateral summit with Putin.
"The President clearly made the right decision. President Putin is acting like a school-yard bully and doesn't deserve the respect a bilateral summit would have accorded him," the New York Democrat said in a statement.

NKorea lifts ban on joint factory ops

North Korea said Wednesday it is lifting a ban on operations at a jointly run factory park shuttered since Pyongyang pulled out its 53,000 workers in April amid tensions with South Korea, and the rivals agreed to meet next week for talks meant to restart the complex.
The agreement revives hope for the resumption of production at the Kaesong complex, the last remaining symbol of inter-Korean cooperation from an earlier period of detente.
The industrial park combined South Korean initiative, capital and technology with cheap North Korean labour.
It was also a rare source of hard currency for North Korea, though the economically depressed country chafed at suggestions that it needed the money Kaesong generated.
North Korea said it will lift its ban on operations at the complex, including restrictions on the entry of South Korean managers.
But the two countries must reach a formal accord on their differences before production can resume, and six past meetings on the park's fate remained deadlocked.
The statement by the North's Committee for the Peaceful Reunification of Korea, which is responsible for dealings with Seoul, appeared to accept a demand that South Korean negotiators had made in the deadlocked sessions: That North Korea won't unilaterally close the industrial complex, just north of the heavily armed border, should tensions between the rivals rise again.
The fate of Kaesong
Ahead of Wednesday's statement, which North Korea described as "bold and magnanimous", there was unease in Seoul about the fate of Kaesong. The statement came after 10 days of silence from Pyongyang on a South Korean demand for "final talks."
It also came about an hour after Seoul said it would begin insurance payments to 109 South Korean businesses shut out of Kaesong, which some saw as a step toward closing the park.
South Korea's Unification Ministry, which handles relations with North Korea, accepted the North's proposal for talks on 14 August, a day before a holiday in both Koreas that celebrates independence from Japan's 1910-1945 colonial rule.
Seoul expressed hope the meeting would resolve differences on Kaesong.
South Korean businesses with operations at Kaesong welcomed the development. The park had survived previous periods of tension between the rivals, including attacks blamed on Pyongyang that killed 50 South Koreans in 2010, and the shutdown of other big cooperation projects.
North Korea banned South Korean managers from crossing the border to their jobs in Kaesong and then withdrew its workers from the park during a torrent of warlike threats it made in March and April, including vows of nuclear strikes on Washington and Seoul.
Military drills
Pyongyang said it was angry over annual US-South Korean military drills and UN sanctions over North Korea's February nuclear test - the country's third such test since 2006.
There have been recent attempts at tentative diplomacy by the Koreas, but tensions could rise again this month as South Korea and the United States are scheduled to begin a joint military exercise on 19 August.
Starting on Thursday, South Korean companies that had signed up for insurance were to receive payments to help cover investments in constructing production lines and buildings at Kaesong.
Both countries should ensure that operations at the complex continue normally regardless of external matters, the North's statement said.
North Korea also said it will guarantee the safety of the South Korean managers and property at Kaesong, and start sending North Korean workers to the park once South Korean businesses are ready to resume operations.
After breaking ground in 2003, earlier South Korean governments paved roads and erected buildings at Kaesong, which lies in a guarded, gated complex on the outskirts of North Korea's third-largest city.
By the end of 2012, South Korean companies had produced a total $2bn worth of goods during the previous eight years.
Pyongyang needs to reach out to Seoul and resume operations at Kaesong to resolve its huge economic problems, said Yoo Ho-yeol, a North Korea studies professor at Korea University in Seoul.
North Korea is estimated to have received $80m in workers' salaries in 2012, an average of $127 a month per person, paid in US dollars, according to the Unification Ministry.
For South Korea, Asia's fourth-largest economy, the complex was more than a business opportunity and a source of cheap labour it was a symbol representing the possibility of eventual unification.
Before April, the Kaesong industrial complex was the only place for South Korean entrepreneurs to collaborate with North Korean workers.

Talks will fail, say most Israeli Jews

Israel's Jewish population is overwhelmingly of the opinion that negotiations with the Palestinians will fail to achieve peace, according to a poll published on Wednesday.

About 80% of Israeli Jews said the chances of success of US-brokered talks, which resumed on 29 July after a three-year hiatus, were "low", against only 18% who said they were "high".

The survey, conducted by Tel Aviv University, interviewed 602 Israelis between 28 and 30 July and has an error margin of 4.5%.

Most of those interviewed  64%  believed Palestinian leaders were not genuine in wanting to resume talks, but 63% believed the Israeli government did want peace.

They were mostly unwilling, however, for the government to concede on issues deemed crucial to achieving an agreement.

Almost 63% opposed a return to the 1967 lines that existed before Israel occupied the West Bank - a key Palestinian demand  and 58% opposed the evacuation of Jewish settlements in the Palestinian territory, even if the largest settlements were allowed to remain.

Arab population more optimistic

The previous round of talks in September 2010 collapsed when Israeli refused to stop its settlement building.

About 77% on those interviewed also opposed the right of return for Palestinian refugees exiled after the Jewish state's creation in 1948 and the 1967 Six Day War.

And half the Jewish respondents opposed the partition of Jerusalem, which the Palestinians want as capital of their future state.

Israel's Arab population were more optimistic about the chances of peace.

Around 47% of Israeli Arabs thought talks were likely to achieve a peace agreement, against 41% who said the chances were low.

A vast majority 85%  believed the Palestinians genuinely wanted talks to succeed.

NEWS,27.07.2013

Obama marks Korean war truce

US President Barack Obama is marking the 60th anniversary of the end of the Korean War.

Obama is delivering remarks on Saturday at a commemorative ceremony at the Korean War Veterans Memorial on the National Mall.

The 1950 - 1953 Korean war pitted North Korean and Chinese troops against US-led UN and South Korean forces. It ended on 27 July 1953 - 60 years ago on Saturday - with the signing of an armistice.

But a formal peace treaty was never signed, leaving the Korean Peninsula in a technical state of war and divided at the 38th parallel between its communist north and democratic south.

At least 2.5 million people were killed in the fighting.

In a proclamation declaring on Saturday as National Korean War Veterans Armistice Day, Obama said the anniversary marks the end of the war and the beginning of a long and prosperous peace.

In the six decades since the end of hostilities, Obama said, South Korea has become a close US ally and one of the world's largest economies.

He said the partnership remains "a bedrock of stability" throughout the Pacific region, and gave credit to the US service members who fought all those years ago and to the men and women currently stationed there.

Japan military plan worries China

China's Defence Ministry on Saturday urged international vigilance of Japan's military plans after it unveiled an interim report calling for strengthened armed forces, including the possible acquisition of the ability to hit enemy bases.

Japan's proposal  its latest step away from the constraints of its pacifist constitution  is part of a review of defence policy by Prime Minister Shinzo Abe's government, which released an interim report on the issue on Friday. Final review conclusions are due by the end of the year.

Japan's Defence Ministry also said it would consider buying unmanned surveillance drones, create a force of Marines to protect remote islands, such as those disputed with China, and consider beefing up the ability to transport troops to far-flung isles.

"The sections about China in this report by Japan are playing on the same old themes, exaggerating the military threat from China, and have ulterior motives," China's Defence Ministry said in a statement on its website.

"This year, Japan has come up with all kinds of excuses to continue to expand its armaments... creating tensions in the region. These moves deserve the highest vigilance from neighbouring countries in Asia and from the international community," it said.

Security environment

The hawkish Abe took office in December for a rare second term, pledging to bolster the military to cope with what Japan sees as an increasingly threatening security environment including an assertive China and an unpredictable North Korea.

Abe called on Friday for a leaders' summit or a foreign ministers' meeting between his country and China as soon as possible.

But Abe's appeal drew a cool reaction from China which accused Japan of lacking sincerity.

Over the past year, China's stand-off with Japan over a string of uninhabited rocky islands in the East China Sea known as the Senkaku in Japan and Diaoyu in China has become more acrimonious.

China also believes that Japan has never properly atoned for its brutal invasion and occupation of parts of the country before and during World War Two.

Europe's Incomplete One-Year Anniversary

Exactly a year ago when Mario Draghi, the well-respected president of the European Central Bank (ECB), made his now-famous "whatever it takes" remarks.
Twelve months later, this stands out as the boldest and most successful initiative in the history of modern central banking. Yet the durability of the benefits is undermined by Europe's frustratingly slow progress in getting to grips with its growth and employment deficits.
Europe's economic context was a daunting one that sunny day in London.
The Eurozone's financial system was fragmenting and deposits were fleeing struggling banks. Credit intermediation was coming to a complete stop, starving companies of working capital and putting investment plans on hold. Financial markets were in turmoil, with surging borrowing costs threatening sovereign creditworthiness and eroding liquidity.
In essence, Europe stood on the verge of a great depression, facing an immediate future of serial bankruptcies and massive unemployment.
In a conference organized by the British government, Mr. Draghi took the stage for a panel of central bankers' panel. In addition to those in the room attending the "Global Investment Conference," the event was well covered by the media and simultaneously streamed to nervous world markets.
Mr. Draghi totally upstaged his colleagues on the panel. He directly and frankly addressed the what, how and why of Europe's enormous financial strains. Comparing the Eurozone to a bumble bee that is able to fly despite seemingly-irregular aerodynamic properties, he confidently and calmly re-assured all that were listening that "the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."
It was an extremely bold step.
Mr. Draghi courageously placed the ECB front and center in what were (and still are) complicated and stressful political interactions among the 17 member governments of the Eurozone. He seemingly did so without fully consulting with his colleagues on the central bank's governing council. And he put forward ambitious claims without concrete measures to back them as yet. (These came later, culminating in a dramatic ECB announcement in September.)
It also turned out to be an extremely successful step.
Without spending a single Euro, Mr. Draghi calmed markets, reversed the bank deposit flight and allowed the financial system to partially heal. In the process, he managed to unify a governing council that could have easily disintegrated into one big national political mess - thus bringing an important element of coherence to often-erratic cross-border and regional interactions.
Yet I suspect that the one-year celebration will not be an entirely satisfactory one for Mr. Draghi and his ECB colleagues.
While they brilliantly delivered and did so by literally making it up as they went along national and regional politicians have lagged. As such, the financial improvement has not been accompanied by a meaningful change in what matters most: namely, the ability to generate economic growth, create jobs and arrest excessive income and wealth inequalities.
Europe's incomplete anniversary speaks to a broader phenomenon that serially frustrates the global economy from recovering fully from the shock of the 2008 global financial crisis: Politicians have failed to exploit the window offered by experimental central bank policies, and continue to do so.
In Europe, national governments still differ on the causes of the region's malaise; and if you cannot agree on history or at least put it aside it is hard to press forward with a unified and credible vision that gets sufficient buy-in from naturally-skeptical citizens.
In the United States, a polarized Congress has undermined virtually every policy step proposed by the Obama Administration to bring the economy closer to escape velocity for economic growth and job creation; and Capitol Hill has done so regardless of merit and need. As such, the Federal Reserve has felt compelled to venture deeper and deeper into experimental policies, raising concerns about collateral costs and unintended consequences.
In celebrating the one-year anniversary, the West would be well advised to look beyond the great success of a courageous (and extremely cost effective) policy measure.
We should also think in terms of foregone opportunities. And we should constantly remember the millions of unemployed, the alarmingly high joblessness among the young, the struggles that too many face in securing their families wellbeing, and the growing number of retirees that are legitimately worried about their pensions.
They all serve as a vivid reminder of an incomplete success. Hopefully, they will also add to the calls for more comprehensive and durable actions.

Israel's Cabinet To Vote On Freeing Palestinian Prisoners Ahead Of Peace Talks

In April 1993, Omar Masoud and three accomplices broke into a European aid office in Gaza City, grabbed a young Israeli lawyer working there and stabbed him to death.
Israel arrested Masoud a month later and sentenced him to life, meaning he was doomed to die in prison one day for killing the lawyer in the name of the Popular Front for the Liberation of Palestine, a small PLO faction.
Now Masoud, along with dozens of other long-term Palestinian prisoners, is up for release as part of U.S. Secretary of State John Kerry's attempt to restart Israeli-Palestinian talks after five years of diplomatic paralysis.
Israel's Cabinet is being asked to approve a prisoner release in principle on Sunday, as part of a Kerry-brokered deal to get the two sides back to the table.
The Cabinet vote would pave the way for a preliminary meeting of Israeli and Palestinian negotiators in Washington on Tuesday, followed by up to nine months of talks in the region on setting up a Palestinian state alongside Israel. Such a deal has eluded Israelis and Palestinians for two decades and they have low expectations.
The fate of those held in Israeli jails is an emotionally wrought issue for Palestinians, who view the prisoners as heroes who made personal sacrifices in the struggle for statehood.
A prisoner release particularly of lifers with "blood their hands" would go a long way toward giving Palestinian President Mahmoud Abbas a popular mandate to give talks another shot, even if many Palestinians believe Israel's hardline prime minister, Benjamin Netanyahu, is not serious about a deal.
Israelis tend to view the prisoners as cold-blooded terrorists, and early releases of security prisoners in previous swaps elicited vociferous objections from the public, including Supreme Court appeals.
For Israel's government, approving the release of prisoners it refused to free in the past even if in stages and linked to progress in talks poses the most difficult test so far of its professed willingness to reach a peace deal.
In a statement late Saturday, Netanyahu said that a decision to release prisoners is "painful to the bereaved families, painful to the people of Israel and very painful for me."
Yet, he said, prime ministers "are required from time to time to take decisions that are against public opinion if it is important to the state," signaling he is pushing for Cabinet approval of the release.
Abbas, meanwhile, briefed reporters on the terms of the upcoming negotiations, based on what he said were Kerry's assurances to him. He said the American invitation would state that the talks will be about establishing a Palestinian state next to Israel, based on the 1967 borders and with mutually agreed upon land swaps.
The Palestinians want to set up a state in the West Bank, Gaza and east Jerusalem lands Israel captured in 1967. In previous negotiations, Abbas offered to trade 1.9 percent of West Bank land for the same amount of Israeli territory, a swap that would enable Israel to keep some of the dozens of Jewish settlements it has built since 1967.
Israeli officials have declined comment on the negotiations. Netanyahu refused in the past to accept the 1967 lines as a starting point, and it's not clear whether his position has changed.
Abbas said the situation would become clearer after Sunday's Cabinet meeting.
A senior Palestinian official said the Palestinians would go to talks without Israel having agreed to a freeze of settlement building in the West Bank and east Jerusalem. Nearly 600,000 Jews already live there, and thousands of homes are under construction.
In guidelines for the talks requested by the Palestinians, Kerry stipulated earlier this month that both sides have to refrain from unilateral steps, according to the Palestinian official, who spoke on condition of anonymity because of a gag order the U.S. secretary of state slapped on the negotiators.
The Palestinians understand this to mean that Israel will slow down settlement construction and refrain from provocative steps, such as announcing new projects, the official said. The Palestinians, in turn, will suspend plans to seek further recognition at the U.N. General Assembly, which last year recognized a state of Palestine in the 1967 borders. Israel fears further international isolation as a result of Palestinian activity at the U.N.
Abbas has argued he would need either a settlement freeze or Israeli recognition of the 1967 lines as a baseline to be able to resume negotiations.
In Sunday's Cabinet meeting, ministers will be asked to vote on a number of fateful issues, an official in Netanyahu's office said, speaking on condition of anonymity in line with briefing regulations.
The ministers will be asked to authorize the resumption of talks with the Palestinians and appoint a team reportedly the premier and three ministers to oversee the negotiations.
They will be asked to approve an amended bill that would require a national referendum on any partition deal with the Palestinians.
Netanyahu's decision to fast-track the referendum bill has prompted contradictory speculation. Some say this shows the lifelong hawk is serious about a deal this time and wants to silence opposition by ultra-nationalists in his Likud party and his coalition from the outset. Others suspect he is trying to create new obstacles to any agreement.
The Cabinet ministers would also have to approve, in principle, a release of Palestinian prisoners who were arrested before the start of the so-called Oslo talks on interim peace deals in the early 1990s.
Abbas gave Kerry a list of 104 names, including that of Omar Masoud who is No. 77, ranked by seniority. The two longest-held at the top of the list are cousins Karim and Maher Younis, imprisoned since 1983 for kidnapping and killing an Israeli soldier, Palestinian officials said.
When Israeli media reported last week that Israel would only release 82 and that Palestinians from Israel and east Jerusalem would not be freed, Abbas asked Kerry for clarifications.
The U.S. diplomat gave Abbas to understand that all 104 would be freed, said a Palestinian official, also speaking anonymously to avoid violating Kerry's call for discretion. The prisoners are to be released in four stages over six months, beginning a month after the resumption of talks, the official said.
As of late June, nearly 5,000 Palestinians were being held by Israel.
Masoud's mother, 70-year-old Tamam, said she is optimistic.
"I hope everything will work out between Jews and Arabs," she said, speaking in her shack in the Shati refugee camp. Abbas "took a good step by talking about releasing prisoners," she said.
Omar Masoud's family was evasive when asked about the killing, portraying it as the rash act of an immature youth. A recent prison photo of him showed a balding middle-aged man who his mother says often cooks for other prisoners because of his work experience as a teenager in an Israeli restaurant.
Despite considerable opposition in Israel to prisoner releases, polls indicate a majority support a resumption of peace talks. Yuval Diskin, former head of Israel's domestic security agency Shin Bet, expressed that ambivalence.
He noted that he opposed a 2011 swap in which Israel agreed to free some 1,000 Palestinians for an Israeli soldier held by Gaza militants, but that the upcoming round of talks may be the last chance for a deal.
"We need to understand that the negotiations cart is stuck in very, very deep mud," he told Israel TV's Channel 10 on Friday. "And there are some very painful things that will need to happen in order to get that cart out of the mud."