NEWS,20. AND 21.08.2013

Tepid US growth fuel part-time hiring

US businesses are hiring at a robust rate. The only problem is that three out of four of the nearly 1 million hires this year are part-time and many of the jobs are low-paid.
Faltering economic growth at home and abroad and concern that President Barack Obama's signature health care law will drive up business costs are behind the wariness about taking on full-time staff, executives at staffing and payroll firms say.
Employers said part-timers offer them flexibility. If the economy picks up, they can quickly offer full-time work. If orders dry up, they know costs are under control. It also helps them to curb costs they might face under the Affordable Care Act, also known as Obamacare.
This can all become a less-than-virtuous cycle as new employees, who are mainly in lower wage businesses such as retail and food services, do not have the disposable income to drive demand for goods and services.
Some economists, however, say the surge in reliance on part-time workers will fade as the economy strengthens and businesses gain more certainty over how they will be impacted by Obamacare.
Executives at several staffing firms told Reuters that the law, which requires employers with 50 or more full-time workers to provide healthcare coverage or incur penalties, was a frequently cited factor in requests for part-time workers. A decision to delay the mandate until 2015 has not made much of a difference in hiring decisions, they added.
"Us and other people are hiring part-time because we don't know what the costs are going to be to hire full-time," said Steven Raz, founder of Cornerstone Search Group, a staffing firm in Parsippany, New Jersey. "We are being cautious."
Raz said his company started seeing a rise in part-time positions in late 2012 and the trend gathered steam early this year. He estimates his firm has seen an increase of between 10% and 15% compared with last year.
Other staffing firms have also noted a shift.
"They have put some of the full-time positions on hold and are hiring part-time employees so they won't have to pay out the benefits," said Client Staffing Solutions' Darin Hovendick. "There is so much uncertainty. It's really tough to design a budget when you don't know the final cost involved."
Cautious strategy
The delay in the Obamacare employer mandate "confused people even further," said Bill Peppler, managing partner at Kavaliro, a technology staffing firm in Orlando, Florida. "When we talk to customers, I still don't think anyone has a handle on this."
Obamacare appears to be having the most impact on hiring decisions by small- and medium-sized businesses. Although small businesses account for a smaller share of the jobs in the economy, they are an important source of new employment.
Some businesses are holding their headcount below 50 and others are cutting back the work week to under 30 hours to avoid providing health insurance for employees, according to the staffing and payroll executives.
Under Obamacare, any employee working 30 hours or more is considered full-time. An effort to trim hours might have helped push the average work week down to a six-month low in July.
"As organizations and companies reduce the hours of part-time workers, they still have to replace the capacity, so they go out and hire additional part-time workers," said Philip Noftsinger, president of CBIZ Payroll in Roanoke, Virginia, which manages payroll for more than 5 000 small businesses.
Some large companies are also leaning more heavily on part-timers.
Walmart has been hiring more part-time workers, although it says the move is to ensure proper staffing when stores are busiest and is not an effort to cut costs.
Spokesperson Kory Lundberg said the world's largest retailer promotes about 75000 people from part time to full time work each year and is on track to do so again in 2013.
Similarly, a memo that leaked out from teen and young adult retailer Forever 21 last week showed it was reducing a number of full-time staff to positions where they will work no more than 29.5 hours a week, just under the Obamacare threshold.
In a statement, the company said the move will affect fewer than 1% of its US store employees, and was taken to better align staffing with sales expectations - not to lower costs under the Affordable Care Act.
Some public school boards and local governments, including the city of Long Beach in California, are also cutting hours.
"The difference between 30 and 40 hours can be the difference between being able to make ends meet month-to-month," said Heidi Shierholz, a senior economist at the Economic Policy Institute in Washington.
"That contributes to reduced living standards for American families and translates into having less income to spend on goods and services, which holds back the economy."
Weak economy not helping
Obamacare is only one factor. The surge in part-time employment also reflects an economy that has struggled to maintain decent growth.
That has left business owners such as Jason Holstine, who owns a building supply store in Baltimore, Maryland, reluctant to take on full-time staff.
Holstine said he was more concerned about budget policy in Washington than about Obamacare, given that federal government furloughs tied to across-the-board spending cuts led some of his clients to put home renovations on hold.
"We are still working in an environment that is very hard to forecast the near future and remains very cash-constrained," said Holstine. "We were always nimble, but we had to become more reactive. Using part-timers gives us more flexibility."
In a paper published last month, the San Francisco Federal Reserve Bank said uncertainty over fiscal and regulatory policy had left the US unemployment rate 1.3 percentage points higher at the end of last year than it otherwise would have been. The jobless rate stood at 7.8% in December; it has since fallen to 7.4%.
"That's about 2 million jobs below where we should have been in 2012 because of policy uncertainty," said Keith Hall, a senior research fellow at George Mason University's Mercatus Center in Arlington, Virginia.
Economists and staffing companies are cautiously optimistic that part-time hiring and the low wages environment will fade away as the economy regains momentum, starting in the second half of this year and through 2014.
But businesses, accustomed to functioning with fewer workers, might not be in a hurry to change course. A study by financial analysis firm Sageworks found that profit per employee at privately held companies jumped to more than $18 000 in 2012 from about $14 000 in 2009.
"Private employers are either able to make more money with fewer employees or have been able to make more money without hiring additional employees," said Sageworks analyst Libby Bierman. "The lesson learned for businesses during the recession was to have lean operations."

 

Disasters cost insurers $20bn

Catastrophes cost global insurers more than $20bn (€15bn) in just the first six months of 2013, including $17bn for natural disasters alone, Switzerland-based reinsurance giant Swiss Re said on Wednesday.
While the insurance bill is huge, it is below the average for the past decade.
And it covers less than half of the estimated $56bn in global economic losses suffered during the first six months of the year owing to man-made and natural disasters, Swiss Re said in a statement.
About 7 000 lives were lost because of such catastrophes during the same period, it pointed out.
Flooding was responsible for $8.0bn of the disaster-related insurance claims during the first half of the year, according to a Swiss Re survey called sigma.
This noted that massive June floods in Central and Eastern Europe alone cost insurers $4bn and killed 22 people, while floods in Alberta, Canada left insurers with a $2bn bill.
At least 1 150 people meanwhile died in India because of floods in June, while Australia, Southern Africa, Indonesia and Argentina also experienced cyclones and heavy rains that sparked large-scale flooding.
"As a result, 2013 is already the second most expensive calendar year in terms of insured flood losses on sigma records," Swiss Re said, pointing out though that in 2011, flooding in Thailand caused record flood losses of more than $16bn.
Other natural disasters during the first half of the year included deadly tornadoes in the Midwestern United States, which left 28 people dead and slapped insurers with $1.8bn in claims.
"Though 2013 has so far been a below-average loss year, the severity of the ongoing North Atlantic hurricane season, and other disasters such as winter storms in Europe, could still increase insured losses for 2013 substantially," Swiss Re chief economist Kurt Karl warned in the statement.

UK govt criticised for tax cut

Britain's government has come under fire for abolishing a tax on top earners after data released on Tuesday showed companies delayed paying employees £1.7bn ($2.66bn) in bonuses until the tax cut took effect.
Bonuses are traditionally paid between December and March, the so-called "bonus season", but an Office of National Statistics (ONS) report revealed that a number of companies deferred payouts until April, after the top income tax rate was reduced from 50 percent to 45%.
Bonuses paid to Britain's workers were £2.9bn in April 2013 compared to £1.9bn in April 2012, according to the ONS. In the finance and insurance industry, which pays more than a third of all bonuses, bonuses in April totalled £1.3bn, more than double the figure a year earlier.
The data show almost 30% of companies in the finance and insurance sector deferred bonus payments until April.
Chris Leslie, from the opposition Labour party which introduced the tax in 2010 and the shadow financial secretary to the Treasury, said on Tuesday the data showed the government was putting the richest before ordinary Britons.
"While ordinary families on low and middle incomes are seeing their living standards fall, those at the top are reaping the benefits of David Cameron's tax cut for millionaires," he said in a statement, adding that millions of pounds of revenue will have been lost as a result.
The issue of bankers' bonuses has triggered public anger in Britain, where despite signs of an economic recovery, ordinary citizens' incomes remain stuck at some of their lowest levels in a decade.
In January, US investment bank Goldman Sachs scrapped plans to delay paying bonuses to its Britain-based bankers after the then Bank of England Governor Mervyn King criticised the idea.
A spokesman for The Robin Hood Tax Campaign, which is lobbying for financial transaction taxes to help the government fund welfare programmes and reduce poverty, attacked the government's tax cut on top earners.
"The Government's manipulation of the tax code to benefit the super-rich has made a bad situation worse. It should put substance to its phrase that 'we are all in this together' and ensure the City pays its dues," a statement said.
A spokeswoman for the Treasury said the bonus figures were in line with forecasts in finance minister George Osborne's budget and said bankers' bonuses were well below their peak before the financial crisis.
The ONS figures show bonuses across the UK economy stood at £37bn in the 2012/2013 financial year (April to March), up 1% from the year earlier. Workers in finance and insurance got the largest bonuses, taking home on average an £11 900 bonus, nearly twice the next highest payment of £6 700 paid to those working in mining and quarrying.

Risky crisis derivatives return

Collateralised debt obligations, the complex financial instruments that cratered disastrously in the financial crisis, are back.
The market for the instruments, which were based on subprime mortgages, shrank from $520bn in 2006 to just $4.3bn in 2009 after the housing bust. Warren Buffett once called CDOs "financial weapons of mass destruction" because of their riskiness.
This time around, the investment has shifted from a mortgage-based CDO into a "collateralised loan obligation," a cash-generating asset structured similarly to CDOs, but consisting of loans to businesses.
Financial institutions have issued $50bn in CLOs in the US in 2013, estimates the Loan Syndication and Trading Association, a trade group. The LSTA estimates the industry will issue $7bn worth in the US overall in 2013 and $100bn worldwide.
Goldman Sachs, Morgan Stanley, Barclays and Citigroup are among the banks most active in structuring CLOs in 2013. Citigroup alone has sold about 20 of the instruments this year.
"There really isn't a CDO market anymore," but "the CLO market has been quite active" for a couple of quarters, said an executive at a major Wall Street bank, who asked not to be named.
Still, observers note the comeback is only partial.
"There's an uptick, but it's still small compared with the pre-crisis peak," said Campbell Harvey, a finance professor at Duke University.
CLOs are structured financial products in which financial institutions pool loans of varying risk and market the securities to investors.
The securities can be sliced into tranches of different underlying loan risk levels. The riskiest "junior" or "equity" tranches - which were at the heart of the financial crisis of 2008 - remain popular with speculative funds because they pay higher yields.
"With interest rates still very low and borrowing costs so cheap, some investors are searching for risk," said Ruben Marciano, a trader at Societe Generale.
Tranches packed with loans of moderate risk are known as "mezzanine" loans, while "senior" tranches are the safest.
Before the financial crisis, many CDO slices that were categorised "senior" and rated highly by credit ratings agencies were actually high-risk and contained many subprime mortgages that ended up in default.
Moreover, because all of the loans packaged in the same derivative products were in the same sector - housing - the instrument itself was vulnerable when the housing market collapsed.
An analyst who specialises in CDOs for a large British bank said the investments are better bets when they contain loans from different sectors.
Buyers of the current batch of CLOs have hired independent specialists to analyse the instruments and no longer rely on credit-rating agencies, said the analyst.
Even as new CDO issues have vanished, Marciano said there remains an active secondary market since the crisis.
"There are investors out there who have made a lot of money from buying low-quality CDOs at very low prices," Marciano said.

EU set for big wheat crop

The European Union's main wheat producers have gathered a bumper harvest despite worries the long winter and hot summer would damage crops, traders and analysts said on Tuesday.
"It looks as though wheat came through the long winter and scorching start to the summer better than feared," one German trader said. "EU wheat supply for export and domestic use will be better than expected only a few weeks ago and the problems in Britain have not spoiled the overall good picture."
In France, the EU's largest wheat producer, harvesting is almost over and a bumper crop is expected.
Analyst Agritel estimates France's 2013 soft wheat crop at 37.0 million tonnes, up 4 percent on 2012 and the largest in nine years.
"There were fears at first but the good weather at the end of the growth cycle helped yields," a French trader said.
Harvesting is 90% complete in France, but some producers said harvesting could last until mid-September in the far north of the country.
The French crop's specific weight and Hagberg values, two essential criteria for bread-making, are good but protein levels differed, sometimes below the 11 percent threshold for export in large producing regions such as Poitou-Charentes, analyst Strategie Grains said.
In the EU's second largest producer Germany, harvesting is in its final stages. Germany's Farm Cooperatives Association forecasts Germany will harvest 24.35 million tonnes of wheat in 2013, up 8.8% from 2012.
"Overall quality is satisfactory and the crop size good," a German trader said. "The extreme weather we had this year has led to some regional variations in quality but overall the crop is reaching a decent quality standard and I think there will be ample supplies of bread-quality wheat for German exports in the coming year."
In the UK, the third largest producer, harvesting is now in full swing, with traders forecasting a crop of around 12 million tonnes, down from 13.3 million tonnes last year and the smallest crop in over a decade.
ODA UK consultant Jake French estimates around 28% of the crop has now been collected. He said yields were better than expected, pegging the estimated average yield at 7.26 tonnes per hectare, close to the five year average of 7.7 tonnes.
He said quality is generally good but better quality wheat may be harvested first so early cuttings may not indicate the end result.
The wheat area in England fell to a 30-year low this season after wet autumn weather ruined sowings.
In the EU's number four wheat producer Poland, the harvest should rise to 9.03 million tonnes from 8.6 million tonnes last year, said ODA Polska director Regis Miola.
"Wheat has been harvested from over 80% of the sown area but there have been delays, especially in north Poland due to recent rain," Miola said.
"Yields are good and grain quality good until now, but we have to be careful about making overall judgements because recent showers may have impacted quality parameters."
Better weather is expected at the end of this week and 3-4 days without rain should see the harvest complete, Miola said.
Harvesting of wheat in Italy, a major grain importer, has ended, and the smaller crop was gathered after earlier heavy rains delayed and reduced plantings.
"The qualities are good," said Paolo Abballe, crop analyst at farmers group Coldiretti.
Soft wheat output is seen at 2.99 million tonnes, down from 3.41 million tonnes last year. The durum wheat crop, used for making pasta, is forecast at 3.71 million tonnes from 4.18 million tonnes.

NEWS,12.07.2013

Vatican freezes funds of a cleric

The Vatican said on Friday it had frozen funds belonging to a senior cleric at the centre of a suspected money smuggling operation, and could open investigations into other individuals.
Monsignor Nunzio Scarano, who has close links to the Vatican Bank, was arrested last month, accused of plotting to bring millions of euros in cash into Italy from Switzerland for rich friends.
The case was the latest in a series of scandals to tarnish the Catholic Church's image.
Details of the investigations, including police wiretaps and allegations of plots to smuggle the cash past customs, were also seen as a particular embarrassment for Pope Francis who has focused on the Church's duty to care for the poor since his election in March.
The Vatican's chief judicial official had ordered the freezing of Scarano's own funds in the Vatican Bank, the tiny city state said in a statement.
"The inquiries may also be extended to other persons," it said, without giving details.
The bank, known formally as the Institute for Works of Religion (IOR), had appointed US financial consultancy Promontory Financial Group to conduct a review of all accounts potentially affected, and was cooperating with the investigation, the statement added.
Scarano, a former senior accountant in the Holy See's financial administration, was arrested with Giovanni Zito, an Italian secret service agent, and financial broker Giovanni Carenzio.
They have been accused of plotting to bring in €20m ($26.08m) for Scarano's rich friends in the shipping industry in the southern city of Salerno.
Although the Vatican bank has not been directly implicated in the case, it is already caught up in a separate investigation into suspected money laundering.
Scarano, currently held in Rome's Queen of Heaven jail, is also under investigation in another case linked to his accounts in the Vatican bank.
Two of IOR's top managers resigned earlier this month in the wake of Scarano's arrest and prosecutors are considering seeking to have the two, former director Paolo Cipriani and former deputy director Massimo Tulli, sent to trial.

Britain, carmakers invest in research

The British government and the auto industry will invest £1bn pounds ($1.5bn) in a research centre to develop low-carbon technologies and help secure the jobs of 30 000 people working in the country's car engine supply chain.
The government and a group of 27 firms including oil major BP, Indian carmaker Tata Motors and component maker GKN will each invest £500m over the next decade in an Advanced Propulsion Centre, which will look to research, develop and commercialise those technologies.
Sixteen straight months of rising car sales in the UK are a rare bright spot for Europe's recession-hit motor industry and the government aims to persuade more of the world's top carmakers and automotive suppliers to base operations in Britain.
"The UK automotive sector has been incredibly successful in recent times, with billions of pounds of investment and new jobs," Business Secretary Vince Cable said on Friday. "With the next generation of vehicles set to be powered by radically different technologies we need to maintain this momentum and act now."
Other companies backing the investment include BMW, Bosch, Ford, Caterpillar and Nissan.

US surprises with large budget surplus

The US government posted an unexpectedly large budget surplus in June, a further sign of the rapid improvement in public finances that has taken the heat off Congress to find savings and raise the nation's borrowing limit.
Rising tax revenue, public spending cuts and big payments to the Treasury from government-backed mortgage companies helped the government take in $117bn more last month than it paid out, the US Treasury said on Thursday.
Analysts had expected a surplus of $39.5bn.
June's surplus was the largest on record for that month.
While the government is still $510bn in the red with three months to go in the fiscal year, June's big surplus will buy it time before it runs up against the limit on borrowing set by Congress. Analysts expect the Treasury to hit the debt ceiling by early November.
The surplus in June also highlighted how much an improving economy and existing legislation have helped improve the fiscal outlook. That has made overhauling public pension and healthcare systems a little less pressing.
Rising incomes and tax increases enacted earlier in the year helped cause government receipts to rise to $287bn in June, up 10% from a year earlier. While economic growth has been lackluster in the first half of 2013, job growth has been more steady. In June, 195 000 jobs were added to the nation's nonfarm payrolls.
Across-the-board budget cuts that began in March also contributed to the surplus.
Gross outlays at the department of defence and for military programmes, for example, are down about 7% in the fiscal year to date from the same period a year earlier. The current fiscal year began in October 2012.
Government-backed mortgage companies Fannie Mae and Freddie Mac, which were bailed out by taxpayers during the financial crisis but have since returned to profitability, also helped drive June's surplus by pouring billion of dollars into public coffers.
Fannie Mae, which said in May it would return $59bn to the Treasury in quarterly dividends, provided most of the funds. The big dividend payment reflected an extraordinary gain from the reversal of a tax-related writedown.

Doubts over UK 'no work' contracts

No work, no pay, but still employed? Welcome to Britain's 'zero-hours contracts', which offer no guaranteed amount of work and pay, and some weeks provide nothing.
Almost unheard of in the rest of Europe and the United States, the rapid growth of this type of work helps explain how Britain's barely growing economy has nonetheless been able to provide jobs for a record number of people.
One in five jobs created in Britain since late 2008 has come with a zero-hours contract, many of them in low-paid roles such as caring for the elderly or stacking shelves, but increasingly in work that requires more qualifications.
Under a zero-hours contract, an employer has no obligation to provide a minimum number of shifts, unlike other jobs.
Workers are not obliged to accept hours either. But critics argue that the flexibility mostly benefits employers because workers who reject being called up on one occasion risk being frozen out of all future work.
This has engendered criticism. Opposition Labour party leader Ed Miliband said the contracts make some British workplaces "nasty, brutish and unfair".
His colleague Julie Elliott, who led a parliamentary debate criticising the contracts, said it put too many people's life "on call".
Some Labour politicians are trying to push through legislation to ban the contracts. But they stand little chance of success, with the governing coalition of Conservatives and Liberal Democrats convinced there is a place for them.
Flexibility in hiring is viewed by many as key to employment growth, and Britain has long had easier rules on hiring and firing workers than other European countries.
Even so, some change may still be on the way. Britain's business ministry is holding informal talks with employers and unions, which Lib Dem Employment Minister Jo Swinson said this week may presage a more in-depth inquiry.
Lawmakers also say plenty of their constituents face difficulties with the contracts. The experience of one 26-year-old man who spoke to earlier this year is typical.
He worked in warehouse jobs in central England for several months under a zero-hours contract from an employment agency. He did not wish his name to be published in case he got sacked.
Usually he gets a text message to tell him if there is work the following day. But often the number of hours is unclear, and sometimes he is required at even shorter notice.
"It is very sporadic and unpredictable, making it virtually impossible to budget or plan for my other commitments," he said. "I don't earn enough, and since I've been doing zero-hours contracts I've been getting more and more in debt."
Some weeks he works eight hours, others more than 40, generally at a minimum wage of £6.19 an hour. The unpredictable income plays havoc with his state benefit entitlements, which assume a steady amount of work each week.
'Dodgy' data
How many people are in a similar situation is unclear.
The latest official data from the Office for National Statistics - which covers the last three months of 2012 - suggests just 200 000 people are employed under zero-hours contracts, up from 116 000 in late 2008.
This is 0.7% of the workforce, but the 70% increase is a fifth of the net jobs increase over the period.
But the numbers may significantly undercount the number of people on zero-hours contracts, as its survey relies on workers knowing the precise legal status of their jobs.
Earlier this week the government said that it was possible that 300 000 people were employed on zero-hours contracts last year in the social care sector alone.
"The numbers are dodgy, really dodgy," said Ian Brinkley, a former chief economist for Britain's Trades Union Congress who now heads the Work Foundation, a labour market think.
Brinkley said he expected such contracts to grow further in the future and did not advocate a ban, but he predicted a damaging effect on worker morale would limit their use.
Data on whether the contracts acted as a stepping stone into more permanent employment or left workers stuck in a rut was largely absent, he added.
Kevin Green, director of the Recruitment and Employment Confederation, whose members place a lot of people into temporary work, does not dispute that some bad practice exists.
But he questions whether it is more prevalent in zero-hours work than in other types of contract, and added that it benefited people who might not be able to work otherwise.
"It's hugely important for businesses that they can flex and provide the right resource and the right capability to meet their customers' needs."

China watchdog warns against nepotism

China's regulator of major state-run industries has warned senior executives to control their impulses and manage their family connections as the government steps up the fight against corruption.
Zhang Yi, Communist Party chief of the State-Owned Assets Supervision and Administration Commission (Sasac), told a meeting of more than 150 senior executives that they should treat battling graft as one of their most important tasks.
"Cultivate your moral character and nurture virtue, raise your ability to fight corruption," the watchdog quoted Zhang saying on its website (www.sasac.gov.cn) on Friday.
"Properly manage your relatives and those close to you; don't be encumbered by your emotions, damaged by your emotions or misled by your emotions," he added.
Sensitive to public outrage and warning that corruption threatens the party's very survival, President Xi Jinping has pledged to crack down on corruption at all levels, though only a few senior officials have been fired or investigated for corruption since he came to power last year.
Sasac is a ministerial-level body run by China's cabinet, the State Council, and is directly responsible for 116 state-owned companies, including national industrial champions such as CNOOC, PetroChina, China Mobile, State Grid Corp and Air China.
Xi has gone after extravagance and warned officials to be morally upstanding as part of his graft-fighting strategy.
Government departments and ministries have held meetings similar to the State-Owned Assets Supervision and Administration Commission gathering over the past few weeks and months.
A string of high-profile incidents, including a high-speed Ferrari crash reportedly involving the son of a senior public official, and numerous scandals with family members of government employees, have enraged many Chinese who have taken to the internet to vent their anger.

US, China restart investment treaty talks

The United States and China agreed on Thursday to restart stalled negotiations on an investment treaty, with Beijing dropping previous efforts to protect certain sectors of its economy from the start.
The agreement to resume negotiations was welcomed by the U S  business community as a major advance during annual Strategic and Economic Dialogue talks in Washington, which have often produced few agreements of substance.
Top officials from both sides strived to project a friendly, businesslike tone as they tried to build what China calls a "new model of major country relations" between the world's two biggest economies in the first year of Chinese President Xi Jinping's mandate.
But talks struck a sour note over China's handling of former spy agency contractor Edward Snowden, who hid out in the Chinese territory of Hong Kong last month as he revealed a secret US  surveillance programme before fleeing to Russia.
Disputes over cyber security topped the agenda going into this year's talks, which were launched in 2008 to manage a relationship that was growing more complex and tense with China's emergence as major economic and military power.
US  Treasury Secretary Jack Lew hailed the investment treaty commitment as a sign of positive change in Beijing, as China retools its economic growth model away from heavy investment and exports toward growth driven by consumption.
"China announced its intention to negotiate a high standard bilateral investment treaty with us that will include all stages of investment and all sectors - a significant breakthrough, and the first time China has agreed to do so with another country," he said as the talks concluded.
China and the United States began negotiations on a pact to govern bilateral investment in 2008 under then-US president George W Bush, but discussions were put on hold after President Barack Obama took office the following year.
Previously, Beijing had agreed to talks only if certain Chinese industries, especially in its service sector, were exempt. But it agreed to drop blanket restrictions for the current talks, a US  Treasury official said.
The official, briefing reporters at the US-China economic talks, said the move was an encouraging sign the world's second-largest economy was willing to open up more sectors to foreign competition.
Chinese Commerce Minister Gao Hucheng told reporters China and the United States share "a common purpose, which is to try to find ways to reduce and mitigate differences and barriers that both sides place in our trade and investment relations".
Explaining China's motives for reopening the investment talks, Chinese Vice-Finance Minister Zhu Guangyao said China had about $20bn of direct investment in the United States and $1.2trn in US treasury bills.
"With such an extensive investment relationship, it is necessary for the two sides to have an institutional environment for the protection of these investments," he told reporters.
In addition, Zhu said: "Business leaders from China and the United States have a strong desire to invest in the market of the other. They both want an open and more transparent market."
Analysts and US officials said another factor was a relative reversal of fortunes from previous years, with the United States enjoying economic recovery while China grappled with a slowing economy that showed the limits of its model.
"This set of meetings, as many of the meetings that I've had in recent months have had this character to them, that there's a renewed recognition and respect for the resilience of the American economy," said Lew.
US business groups welcomed the agreement to resume negotiations, but warned that both sides still faced many other tough issues and that negotiations on a treaty could be lengthy. Any pact would need to be ratified by the US Senate.
"The US chamber called for this last year as a pre-condition, and we are very pleased that both governments rose to the challenge," said Myron Brilliant, head of international affairs at the US Chamber of Commerce.
Barriers to business
US investors face barriers or ownership limits in about 90 Chinese sectors, while Chinese companies seeking to invest in the United States often fear a political backlash in Congress or rejection on national security grounds.
"If China negotiates a treaty that not only protects investments after they are made but also improves US investors' access to the Chinese market, this would be a real breakthrough," said Michael Smart of consultants Rock Creek Global Advisors, who worked on investment issues in the Bush White House.
The talks opened just weeks after Snowden' disclosure of extensive US electronic surveillance of American citizens and foreign countries, including China, which undercut years of complaints from Washington about Chinese hacking.
In remarks at the end of the talks, the United States said it had made clear its displeasure that Chinese authorities allowed Snowden, on the run in Hong Kong, to leave for Moscow rather than send him back to face US justice.
"We were disappointed with how the authorities in Beijing and Hong Kong handled the Snowden case, which undermined our effort to build the trust needed to manage difficult issues," US Deputy Secretary of State William Burns said.
Chinese State Councilor Yang Jiechi swiftly brushed off Burns' criticism of Hong Kong, the former British colony that h is a special administrative region of China. Hong Kong answers to Beijing on matters of foreign policy, but unlike China, it has an extradition treaty with the United States.
"The central government has always respected the Hong Kong SAR government's handling of cases in accordance with law," he said.
"The Hong Kong government handled the Snowden case in accordance with law, and its approach is beyond reproach," Yang said about the decision to not detain Snowden.
Douglas Paal, of the Carnegie Endowment for International Peace, said Snowden's case "makes it impossible for any countries to make concessions to the United States for the time being, because we look like big cyber offenders."
Burns said the two powers "need to reach a shared understanding of the rules of the road" in cyber space and repeated US complaints about the cyber theft of intellectual property that most American experts blame on China.
"The cyber-enabled theft of trade secrets, intellectual property, and confidential business information is unacceptable," he said.
Chinese leaders did not publicly address the cyber-theft issue during the Washington talks, although Gao said China was determined to improve protection of intellectual property.
A US official said that Washington's lobbying on the issue had made some headway - in part because China was generating more of its own intellectual property.
"What we're seeing is an acknowledgment that this realm of activity is distinct, is important and needs to be addressed," said the official, speaking on condition of anonymity.
Both countries' officials said they were clear-eyed about the differences in political system, wealth and values that divided them, saying the key was to manage relations.
"Of course, because of differences, there's a need for us to make rules. And to formulate those rules, we need to have dialogue," Chinese Vice-Premier Wang Yang said in a dinner speech late on Thursday.

French super rich thrive despite crisis

The economic crisis in France has spared the super rich, according to a survey published Thursday, which showed the combined wealth of the country's 500 richest people up nearly 25% in the last year.
Challenges magazine's 2013 ranking of the country's biggest fortunes estimated the top 500 earners to have combined assets of €330bn ($423bn), the highest level since the ranking began in 1996.
The 500 richest people accounted for 16% of gross domestic product and 10% of the total financial assets of the French, meaning one-hundredth-thousandth of the population controlled one-tenth of the nation's wealth.
"It's enough to make you dizzy and to lend arguments to a country that has always hated the rich, especially in times of crisis," Challenges wrote.
Keeping his top spot was the boss of luxury goods conglomerate LVMH, Bernard Arnault, who was estimated to be worth €24.3bn.
Second came Liliane Bettencourt, the elderly heiress to the L'Oreal cosmetics fortune, with an estimated fortune of €23.2bn.
Luxury goods, defence, retail, telecommunications and wines and spirits were all represented in the Top 10.
Bertrand Puech, chief executive of high-end handbags-maker Hermes and the Hermes family were ranked fourth behind Gerard Mulliez, founder of Auchan supermarket chain, and his family.
Of the richest 500, 55 were billionaires, 10 more than in 2012.
The statistics showed the 10 wealthiest people getting richer faster than others in the elite club, meaning more wealth concentrated in the hands of a few.
The Top 10 accounted for 40% of the riches of the Top 500, up from 25% in 1996.
The survey was likely to reignite debate about whether France's highest earners are sharing the burden of the crisis.
President Francois Hollande's attempts to push through a 75% super tax on top earners last year was condemned by business leaders, who warned of an exodus of top talent if it passed.
He was eventually forced to abandon the proposal after it was struck down by the Constitutional Council.

NEWS,20.03.2013

UK budget overshadowed by leak

Details of Britain's market moving budget were published on the Internet by a reporter at a London newspaper minutes before the finance minister stood up to give his speech in parliament on Wednesday, prompting calls for an investigation from lawmakers.

A copy of the front page of the London Evening Standard, containing details of economic forecasts, tax changes and borrowing, was published on Twitter at least fifteen minutes before George Osborne rose to his feet.

Some opposition lawmakers waved copies of the page, which had been compiled with embargoed details of the speech, at Osborne while he spoke in the lower chamber of parliament, the House of Commons.

"He almost needn't have bothered coming to the House because the whole budget, including the market sensitive forecasts, were in the Standard before he rose to his feet," Ed Miliband, leader of the opposition Labour party, told Osborne.

"I'm sure he'll investigate and report back to the House," Miliband said.

Osborne's ministry was unavailable for immediate comment.

The newspaper's editor, Sarah Sands, apologised and said the paper's journalists were "devastated" that an embargo had been breached.

"An investigation is immediately underway into how this front page was made public and the individual who tweeted the page has been suspended while this takes place," Sands said.

Sands told the BBC that a young journalist had tweeted a copy of the front page.

The budget is supposed to be kept secret until the chancellor of the exchequer, as the finance minister is known in Britain, briefs parliament on its contents.

In 1947, Labour finance minister Hugh Dalton resigned after divulging details of his budget to a newspaper journalist before his statement to parliament.

Britain sticks to austerity in budget

British finance minister George Osborne stuck firmly to the government's controversial austerity plan as he presented his annual budget to parliament Wednesday, despite a promise to spend on infrastructure to boost a weak economy.

Chancellor of the Exchequer Osborne, whose is facing calls from within his own Conservative party to change course, told MPs that Britain "must hold to the right track" as he outlined his tax and spending plans for 2013/14.

"We are slowly but surely fixing our country's economic problems," Osborne told the nation.

"We have now cut the deficit, not by a quarter but by a third. Despite the progress we have made there is much more to do and today I am going to level with people... It is taking longer than anyone hoped but we must hold to the right track."

This referred to sticking to his so-called Plan A of driving down the record budget deficit inherited from the previous Labour administration in 2010, despite calls from both inside and outside the coalition government to curb massive spending cuts to kick-start the economy.

Osborne's insistence on driving down the deficit comes despite the chancellor announcing that the government was halving its economic growth forecast for 2013.

Gross domestic product (GDP) was expected to grow by just 0.6% this year compared with a previous forecast of 1.2%, according to estimates issued by the Office for Budget Responsibility (OBR).

Economic growth guidance for 2014 was also cut to 1.8% from the previous estimate of 2% that was given in December.

Osborne added that Britain was on course to avoid sinking into its third recession since the 2008 global financial crisis, despite its economy contracting by 0.3% in the final three months of 2012.

In better news, Osborne said infrastructure plans would be backed by €3.5bn a year from 2015-2016, to ensure that the "economic arteries of every part of this country" could benefit.

On the eve of the budget, Prime Minister David Cameron's Downing Street office said some government departments would be made to cut their budgets to save 2.5bn over the next two years.

The money saved between now and 2015 -- the time of the next general election -- would be used on infrastructure spending, a spokesperson said.

The decision is at odds with Business Secretary Vince Cable, who has called on the government to consider borrowing more to stimulate economic growth.

Cable, a leading member of the Liberal Democrats which shares power with the Conservatives, said that the danger of slow growth may now be more damaging than the loss of confidence through increased borrowing.

But Cameron earlier this month insisted that his government, which passed the mid-term mark in January, would stick to the path of austerity despite a turbulent few weeks that saw Britain stripped of its top-level AAA credit rating.

In a further blow to the prime minister, civil servants were Wednesday holding a 24-hour strike in a row over pay and other working conditions.

The Public and Commercial Services union said up to 250 000 of its members would join the walkout, hitting government departments, jobcentres, tax offices, border patrols and courts.

On Tuesday meanwhile, a pool showed that more than four out of 10 voters believe Osborne should be sacked.

Cyprus in limbo after bank levy rejection

Cypriots faced uncertainty on Wednesday after parliament rejected a controversial levy on savings that had been agreed with international creditors as part of a bailout deal.

Lawmakers on Tuesday evening overwhelmingly rejected plans to apply a one-off tax of up to 10% on people's bank deposits, leaving decision makers scrambling on how to avert the Mediterranean island's bankruptcy or exit from the eurozone.

The euro was slightly down on the dollar, while the German stock market lost 0.6% during early morning trading Wednesday.

"The decision was the right one to take, but I would be lying if I said I am not worried - we need help and we need it now," said 50-year-old Michalis Michael, a shopkeeper in central Nicosia.

Banks across the island remained closed as the government and the country's central bank were working on an alternative proposal to find €5.8bn in funds, as requested by the European Union and the International Monetary Fund.

The eurozone, together with IMF, has asked the Cypriot government to raise the amount as part of negotiations for a €10bn package to bail out its banks and shore up the country's public finances.

Banks were not expected to reopen until Tuesday, according to news reports, although no official decision had yet been taken by the central bank.

ATMs have been dispensing cash, while credit and debit cards were working normally, although electronic transfers continued to be blocked, bank officials confirmed to dpa.

For the time being, the European Central Bank has vowed to continue to provide liquidity to the island's banks.

Cyprus' influential Orthodox Church has offered to help, with Archbishop Chrysostomos II saying the church was willing to mortgage its properties to invest in government bonds.

Nicosia was looking to renegotiate its bailout deal, with President Nicos Anastasiades due to meet creditors later in the day.

Meanwhile, Finance Minister Michalis Sarris was in Moscow to see if an existing loan of €3bn taken out in 2011 with Russia could be extended or increased to €5bn.

"We had a good meeting  no decision has been made - discussions will continue later in the day," Sarris said after he emerged from the talks in Moscow.

Anastasiades had a telephone conservation the night before with Russian President Vladimir Putin, whose country holds billions of euros in Cypriot banks.

Reports said Cyprus would attempt to also strike a deal with Moscow for the sale of troubled Popular Bank of Cyprus, known as Laiki, as well as the Bank of Cyprus.

Cypriot state broadcaster RIK said Russia would likely seek compensation for such an investment, possibly in the form of a naval port in Cyprus for the Russian fleet, and access to the country's natural gas reserves.

Anastasiades is also believed to be looking at the option of making use of social security fund reserves, which amount to €5bn, and offering depositors with more than €100 000 natural gas-indexed bonds in return for voluntarily paying a levy.

India's billionaires slow to share riches

They may build skyscraper mansions, travel by private jet and throw sumptuous wedding parties, but it seems India's super-rich are much slower at opening their wallets for charity.

India now has 55 dollar billionaires, the fifth-biggest number in the world, according to a Forbes ranking this month.

But like other emerging economies such as China, its charitable giving still lags markedly behind that in the West where the tradition of wealthy businessmen donating chunks of their fortunes is much more deeply ingrained.

High net worth Indians gave up an average 3.1% of their income to charitable causes in 2011 - up from 2010 but far behind the 9.1% average in the United States, according to global consultancy Bain & Company.

But analysts say the upturn in giving as more Indians get seriously rich is going at a snail's pace.

"The pace for corporate India and especially the new rich giving up its wealth is excruciatingly slow," said Manjeet Kripalani, executive director at Gateway House, a Mumbai-based think tank.

"Corporate philanthropy needs to look at a thoughtful way of scaling up giving," she said.

While impressive growth in the past decade has created a swathe of Indian tycoons, the more recent economic slowdown has compounded the slow take-up of philanthropy, despite a pressing need to tackle widespread poverty.

"Giving is impacted by sentiment, which remains weak at the moment. It is likely to be flat or extremely moderate in terms of growth," said Arpan Sheth, author of Bain's annual Indian study.

The latest report released this month did not give fresh statistics, but said donors were "putting a higher bar on understanding the impact of their giving, before they commit to causes" in the tough business environment.

India's richest man Mukesh Ambani, chief of Reliance Industries and owner of a billion-dollar, 27-storey family home, has criticised Western corporate charity as a "disempowering tool" that "increases dependency".

India does not lack a culture of giving.

Reliance has followed the lead of large industrial groups such as Tata and Aditya Birla, which donate heavily to charity through their own trusts, with projects ranging from healthcare and education to rural infrastructure.

Azim Premji, chief of software giant Wipro, last month gave $2.3bn from his own pocket to the education charity he controls, and he is now considered "Asia's most generous man" by Forbes.

He was the first Indian to join the "Giving Pledge" club, set up by Microsoft co-founder Bill Gates and billionaire investor Warren Buffet to encourage the world's wealthiest to donate at least half their fortunes to charity.

But the scale of Premji's donation has renewed the debate on why the richest are not giving away more of their wealth.

"Many others haven't demonstrated the same kind of generosity," said business journalist Anand Mahadevan in an Economic Times column.

One explanation from businessmen, Mahadevan said, is that wealth creation is still a recent phenomenon in India compared with countries such as the United States, and philanthropy usually comes further down the road.

Also, Indian charity often takes a more informal form: people might donate to local schools or hospitals in kind, or "give money, hair, gold, to our temples as charity", said Kripalani.

India currently ranks a lowly 133rd out of 146 countries in the latest World Giving Index - down from 91st position in 2011 - based on surveys of charitable behaviour around the globe.

Its far poorer neighbours Pakistan and Bangladesh came in respectively at 85 and 109 in the same survey.

Analysts say a major barrier to giving is not knowing whether donations will produce sustainable results, given the lack of accountability, transparency and impact assessments.

"When we met philanthropists, the message we got was: show us the impact, we will give more," said Anant Bhagwati, co-author of the Bain report, at a conference in Mumbai this month to encourage a greater philanthropic culture.

The trends may be encouraging: last year's Bain survey found more than 70% of donors had less than three years of philanthropic experience and more than a third were 30 or younger.

Manas Ratha, director of the non-profit Dasra group which helps to pair donors with charities, said willing philanthropists were there but needed more guidance.

"A lot of work needs to be done. There is good reason to be optimistic, but we are losing time and opportunity," he said.

Ripples from Cyprus

ONE of the most interesting banking countries in the world is Cyprus, as technically it is still a country at war with its northern neighbour, making it an unlikely candidate for a safe haven.

Cyprus also has the highest private sector debt to gross domestic product (GDP) ratio in the world, which should have set alarm bells ringing to any savers - let alone Russians - who are taking their money to the island.

The Russians too are an interesting bunch in this picture, as many of them are hiding money in Cyprus due to the Russian taxman. President Vladimir Putin is out fighting the European Union for Russian private interests, and not to collect rightful Russian taxes.

A friend said this of Russian money in Cyprus: “I believe that there is a lot of money from Russia that was stolen by members of the previous communist regime and banked in Cyprus.

"There are many exceptionally wealthy Russians living in Cyprus. I wonder what Putin's agenda is.”

Nothing is what it seems in Cyprus as the overall €15bn bailout is very, very small in the bigger €16 trillion EU picture.

Yes, the bailout is less than 7% of the size of that of Greece and would be the smallest country bailout in the EU by far - smaller than some private bank bailouts in 2008. 

Something changed here, and that is that Germany - which has been the major financier of the bailouts -  has an election in September. The citizens are worried that their country’s debt to GDP is staying high at 80%, and that they are picking up the tab for everyone else.

That is one thing; the other is that the never-ending bailouts are starting to get northern Europe in a tangle as country after country in the south has a problem but does not want to fix it.

Italy had an election and those newly elected do not want to fix state overspending; neither actually did the Greeks. The Spanish are also feeling pain, but much is done to avert future social spending cuts which are still needed.

So enter Cyprus: a small EU member which allowed its banking system to rise and rise until it was out of all proportion to its economic size.

It paid 4% plus interest while European Central Bank rates are under 1%, and savers in Germany only get 0.75% a year.

Germany started taxing social pensions to help pay for all the problems, and people with savings in the bank also get hammered as interest rates are very low.

The Finns and the Dutch have also been complaining in recent years about their payments to others, and with the Russians not part of the EU and some making use of guarantees in EU banking systems while evading taxes back home, Cyprus was never going to be such an important country for the EU to bail out.

Britain is not part of the eurozone but is seen by richer members as shouting solutions while not helping to pay for them.

The English are subscribers to the EU with a discounted subscription and many solutions northern Europeans have to pay for via taxes.

They are very, very unpopular at present and you can bet your bottom dollar that the most sane English advice is at least ignored in public.

So when Barclays shouted “fire” about Cyprus, that made the situation worse politically for Angela Merkel.

Yes, the wrong medicine was prescribed - “you get a third of the money from your depositors and we will present the rest”. Savers get hammered, even if Russian, and that makes other weak countries' savers very nervous.

Already, I suppose many in Italy are putting their money in German banks because they now fear a “Cyprus” in their own country. This policy was a mistake.

The problem is that the banking system in Cyprus could now be allowed to collapse, as parliament decided that this savers' tax option was not on. This too would make the rest of southern Europe nervous.

The banks are intertwined and I suspect that this may be a small problem that turns big, like Iceland, the Lehman Brothers, etc. Each of the banks allowed to fail would have assets in other banks, and so the situation would broaden.

But that would still be a small problem  the real issue however is the idea that a country goes back to the Middle Ages, as no money in the banks would result in a cash and barter economy and having all savings tied up for decades would also hurt.

Imagine you are have saving in Italy or Spain or worse, in Greece where banks are dicey and confidence is just coming back. The confidence in southern Europe could go up in smoke again - big time - with knock-on effects into the Middle East, Russia and other weaker European states.

Again, some world growth could get taken away.

The EU has drawn a line in the sand and said to governments and banks"'we will let you fail or make you pay a price".

This actually should have been worked out before the eurozone was established so everyone knew what the rules were, but it is human to make rules up in a crisis.

My feeling is that this was not the time for it, as the world economy was just getting back to slightly faster expansion and better prospects.

If commodity prices fall again as a result of weaker growth if confidence slips again, then I am afraid South Africa’s current account will again get exposed. The rand may dip yet again and inflation will go another few basis points higher, exposing our already extremely low rates. 

Raising rates is something the South African Reserve Bank would be loath to do, but it creeps in and confidence and growth decline here again.

With ongoing wildcat strikes in the Post Office and parts of agriculture, the economy may also stall just as the first signs of higher growth showed up on the BankservAfrica Economic Transaction Index.

How ironic that another small situation is allowed to get big. Policy makers are looking at too many interest groups to make the right decisions.

Is this 2008 all over again? No, please no.

Britain awaits tough new budget

Britain's government was on Wednesday set to unveil plans to grow the country's recession-threatened economy, despite insisting on greater state savings as it struggles to meet its deficit-reduction target.

Finance minister George Osborne unveils his latest tax and spending plans in an annual budget likely to stick firmly to the coalition government's austerity drive, even though the country's economy is sailing close to another recession.

Chancellor of the Exchequer Osborne, whose Conservative party heads a coalition government with the Liberal Democrats, will present his 2013-14 budget to parliament at 12:30 GMT on Wednesday.

Analysts expect Osborne to stick to his so-called Plan A of driving down the record budget deficit inherited from the previous Labour administration in 2010 - despite calls from both inside and outside the government to curb massive spending cuts.

On the eve of the budget announcement, Prime Minister David Cameron's Downing Street office said some government departments would be made to cut their budgets to save €2.5bn over the next two years.

The money saved would be used to on infrastructure spending, a spokesperson said.

"All unprotected departmental resource budgets will be reduced by a further 1.0% a year for the next two years," the spokesman told reporters.

"That will help fund further investment in capital spending which will be announced" in the budget.

He added that spending on health, schools and overseas development aid would be protected, while defence would benefit over the next two years from €1.6bn in underspend in its previous budget allocation.

UniCredit Research economist Mauro Giorgio Marrano said that "any new measures implying an increase in expenditure... will need to be funded by spending cuts and/or higher taxes in other areas, leaving little scope for a significant stimulus to the economy."

Cameron earlier this month insisted that his government, which passed the mid-term mark in January, would stick to the path of austerity despite a turbulent few weeks that saw Britain stripped of its top-level AAA credit rating.

But Business Secretary Vince Cable has called on the government to consider borrowing more to stimulate economic growth.

Cable, a leading Liberal Democrat, said that the danger of slow growth may now be more damaging than the loss of confidence through increased borrowing.

Also on Wednesday, Osborne was expected to revise the government's growth and budget-deficit forecasts to better illustrate Britain's present economic woes.

Markets were also waiting to see whether Osborne uses the budget to announce changes to the Bank of England's inflation target to boost an economy at risk of its third recession since the start of the global financial crisis five years ago.

The chancellor traditionally uses the budget to state the central bank's policy mandate, which for many years has been to meet an inflation target of 2.0%.

Incoming Bank of England governor Mark Carney, the Canadian central bank chief who takes up his role in July, has suggested that economic output might be a better target measure than inflation.

The BoE uses interest rates as a tool to try and keep inflation close to the government-set target, but in recent years it has spiked above 5.0%, hampering economic recovery.

British 12-month inflation rose to 2.8% in February from 2.7% in January, official data showed on Tuesday.