NEWS,27.06.2013

EU deals on banks and budget lift mood

European officials struck two significant deals on banking resolution and their long-term budget in last-ditch negotiations early on Thursday, giving EU leaders a much needed lift at the start of a summit on youth unemployment and growth.
After late-night talks in Luxembourg that followed 18 hours of unsuccessful bargaining last week, European Union finance ministers finally agreed how to share the costs of future bank failures among investors and wealthy savers.
Separately, negotiators for the European Parliament, the European Commission and EU member governments clinched agreement on a €960bn ($1.25 trillion) seven-year budget for the bloc for the period 2014-20, ending months of squabbling.
That cleared the way for a drama-free summit, at which EU Council President Herman Van Rompuy said the 27 leaders, joined by industry and trade union represenatives, aimed to achieve results for young job seekers and small businesses.
They would adopt concrete measures to tackle "the credit crunch that is holding back the very companies that should be driving the recovery", Van Rompuy told the opening session.
Designed to shield European taxpayers from having to foot the bill for rescuing troubled banks, the banking resolution deal will be implemented on a national basis from 2018.
It also lays the ground for a single system to resolve failed banks in the euro zone and the 27-nation EU, the second stage of what policymakers call a European banking union, meant to strengthen supervision and stability of the financial sector.
The European Commission, the EU's executive, will put forward proposals for a single resolution mechanism next week, but any deal on it is a long way off because EU paymaster Germany opposes taking any liability for other countries' banks.
German Chancellor Angela Merkel welcomed the breakthrough on the EU budget, saying it would allow new spending on everything from agriculture to research, roads, bridges and development aid to move ahead.
"This is about improving our competitiveness with an eye to global competition and not mainly about creating ever new pots of resources," she said on arrival at the summit.
The European Parliament, which has gained greater power in recent years, had held up approval to demand more flexibility in how the money is spent and the right to redirect unspent funds instead of returning surpluses to member states.
In the end, a compromise was struck to the relief of EU officials, not least because the plan includes 6 billion euros EU leaders want to bring forward to launch programmes to fight youth unemployment the focus of the summit.
Low growth, no job
With two major obstacles out of the way, EU leaders faced a far less awkward agenda during the two-day summit focused on unemployment, the most devastating legacy of the crisis that has bedevilled the EU since 2010.
The last summit before Germany's September general election a key date in Europe's political calendar - may prove to be one of the least contentious of the past three years.
It is a far cry from the peak of the debt and economic turmoil of late 2011 and early-to-mid 2012, when there was a real threat of the euro zone collapsing.
Since then, thanks largely to a promise by the European Central Bank last July to do whatever it takes to defend the single currency, pressure from financial markets has eased and EU leaders have made some progress in reforming their economies.
As well as strict new rules on budget deficits and tighter oversight of budget spending plans by the European Commission, steps have been taken to improve banking supervision and weaken the link between indebted countries and problem banks.
British Prime Minister David Cameron, under pressure from eurosceptics in his own country, said the budget compromise must not affect Britain's annual rebate from EU coffers.
EU officials said a change in way rural development is funded in eastern Europe could potentially reduce London's entitlement to repayments by up to €350m a year, but they said a technical solution could be found.
From late next year, the European Central Bank will become the single supervisor for virtually all the euro zone's 6,000 banks the first stage of banking union.
The next step, the creation of a single resolution mechanism, is likely to prove a deeply divisive and drawn out process, with sharp differences between the views of the EU institutions, Germany, France and other member states.
Further-reaching plans for a single bank deposit guarantee across the euro zone look unlikely to gain traction due to German and north European opposition, although officially the idea remains on the table.
Most of Europe has been either in recession or on the brink of it for the past three years, while unemployment has steadily risen. EU unemployment now stands at 11%, the highest since records began, with youth unemployment a particular problem, especially in Spain, Greece, Italy, Portugal and Cyprus.
EU leaders have agreed to invest €6bn in a "youth employment initiative" that would offer people under 25 a promise of a job, training or apprenticeship within four months of leaving education or being unemployed.
It's a bold promise, and one that will be targeted at regions of the EU where youth unemployment exceeds 25%, including much of Greece and Spain.
Politicians and sociologists are worried that extended unemployment for young Europeans will lead to a "lost generation" that never gets fully incorporated into economic life, with deep psychological and financial implications.
That will even further undermine Europe's ability to boost growth and compete with the rest of the world, especially China and a United States that is shifting its focus to Asia.

Syria doubles diesel prices

Syria has nearly doubled the price for diesel fuel to cut back on the cost of maintaining generous subsidies to the population after two years of war that crippled its economy.
The new official price of £60 (33 US cents) for a litre of diesel from state petrol stations is still a fraction of the commercial price for the fuel on the black market, the only way it is available in many parts of Syria.
Even in government-held areas, petrol stations that sell subsidised fuel at the official price often run out or experience long queues.
Syria's government boasts that it has managed to maintain subsidies on food, fuel and energy that give it some of the lowest official prices in the region, despite a war that has killed 93 000 people and displaced millions.
However, it is not clear how much of the subsidised goods actually reaches the population. The United Nations says many Syrians have little access to subsidised bread and have to pay commercial prices many times higher.
Businessmen and trade officials said this week's diesel price increases, which were not publicised widely, reflect growing official concern about the hard currency cost of imports needed to maintain the subsidies.
The price of a litre of diesel, used for transport, as heating oil and to power army tanks military vehicles, was raised to £60 from £35, the biggest hike since the war's start. The price of gasoline, now £85 a litre, has not yet gone up but is also expected to be raised soon.
Before the war diesel was sold for £20 a litre under a subsidy programme that then cost $8bn a year.
The pound has lost about 75% of its value against the dollar during the conflict. Economists warn that Syria could be heading for hyperinflation with inflation running at around 60% since the start of the year.
Western sanctions do not bar companies from selling diesel to Syria, but restrictions on some financial transactions have raised the cost of imports and cut the exports that Syria uses to raise hard currency.
"With the increase in the value of the dollar, import costs have doubled. Our ability to export has dropped and on the other hand imports have increased in value and quantities," Economy Minister Mohammad Zafir Muhabik said in an interview with state television.
A source close to a government procurement agency, who requested anonymity, said the price hike was given impetus by the increasing need to route imports over land through Lebanon rather than through Syria's own Mediterranean ports. The source said imports through Lebanon in the first four months of this year were already equal to all of 2012.
Imports via Lebanese ports incur lower insurance costs than through Syria's Mediterranean ports and provide better security of supply to Damascus. Syria's own ports are far from the capital over routes through areas that have seen fighting.
Smaller shipments from Iran have also arrived by sea to Syria's Latakia and Tartous ports in recent months. Syria sends surplus gasoline to Iran in return for Iranian diesel.
Rebels control most of Syria's main eastern oil producing areas that produced around 380 000 barrels of crude oil daily, starving the government of a major hard currency earner.
Syrians have been grappling with fuel supply shortages for months, with areas under rebel control worst hit. That has helped reduce the cost of the subsidies for the government, since so many Syrians have no access to subsidised goods.
"We are facing worse shortages in our besieged areas, where people are relying on the black market instead of risking going through road blocks to petrol stations in regime-held areas," said Rami al-Sayyed, a resident of the southern, rebel-held Damascus neighbourhood of Hajar al-Asswad.
The price hike follows a debate within the Syrian cabinet and government whether to reduce subsidies, which use up two thirds of the budget. The government has also argued that raising prices will reduce smuggling of oil products out of Syria to neighbouring countries such as Lebanon and Turkey.
"A lot of our petroleum products are being smuggled to neighbouring countries as a result of its low prices,' said Muhabik.
The price increases in petroleum products have neutralised the impact of public sector salary increases on Saturday of between 20 to 40% that were announced to ease the social impact of the plunge in the local currency.
Already, public transport costs have shot up by an a average 20% this week alone, residents contacted by phone said. Many bakeries rely on subsidised diesel to run their ovens.

French consumer morale hits record low

French consumer confidence has hit an all-time low, the latest survey showed on Thursday, just as the state auditor warned that a likely economic contraction would knock the government off course on this year's deficit reduction target.
The June consumer confidence index fell to the lowest level since records began in 1972 and households are more pessimistic than ever about their future living standards, data from the national INSEE statistics institute showed.
The trend suggests that Europe's second-biggest economy, hit by lagging trade competitiveness and caught in a shallow recession, will not be able to count on its traditional driver of consumer spending to rebound.
The Cour des Comptes, a quasi-judicial body that oversees state accounts, warned in an annual review that with the public spending deficit heading for near 4% of economic output this year, missing a 3.7% official target, structural reforms must be implemented immediately to cut spending.
"Large doubts weigh on the flow of corporate and sales tax revenues," the auditor said in its 250-page review.
The body's president, Didier Migaud, told lawmakers as he presented the document that "reforms enabling a reduction in the weight of public spending seem more necessary than ever."
French GDP shrank 0.2% quarter-on-quarter in the first three months of the year, INSEE data confirmed this week. The government sees full-year growth at 0.1%, but INSEE and the European Commission both forecast a 0.1% drop.
The June consumer confidence index came in at 78, three points below analyst expectations of 81 and far below a long-term average of 100, data from statistics office INSEE showed.
The view by French households on how their living standards would evolve also came in at the lowest in over four decades, while more people said they felt now was the right time to save and fewer planned important purchases.
The gloom is being driven by record-high jobless claims and growing doubts that President Francois Hollande can make good on his promise to reverse the unemployment trend by the end of the year.
Adding to the gloom, weeks of cold and rainy weather have left retailers with huge stocks of unsold summer clothes, forcing them to offer huge discounts of up to 80% as sales kicked off this week, although even rock-bottom prices had yet to make an impact, store owners complained.
"It's really terrible. Sales are really low, we've never seen such a drop," said Celeste Touboul, who manages two clothes shops in central Paris with her husband.
For the first day of sales on Wednesday, they met the very low target they had set themselves, she said, with turnover 50 percent down on more normal years.
"Don't even talk to me about the weather, it killed us even more, the season is ruined," Touboul said in her shop of colourful dresses, tops, and bags amid big "Sales" signs.
INSEE said last week that with subdued consumer demand weighing, growth would be too weak this year for the economy to start creating new jobs. It also forecast that the unemployment rate would rise to 11.1% by year-end, up from 10.8% today and just shy of a 1997 record of 11.2%.
The statistics office will publish May consumer spending data on Friday. French consumer spending fell last year for the first time in 19 years.

Eurozone's jobless sit tight

The car plant where 46-year-old Agathe Martin works is shutting down, but when PSA Peugeot offered her a job in another factory elsewhere in the Paris region she said "Non".
After 17 years working in the same plant, taking the job would have meant either a much longer commute or losing her cheap social housing and uprooting her two daughters in a move.
The single mother prefers to stay put and look for another job even if that will be hard amid soaring unemployment and with only factory work and small jobs on her CV. If all else fails, she will still have more than €60 000 in severance pay.
"I am lucky enough to have a small house with a rather modest rent and I would not find that elsewhere," Martin said, huddled in a bicycle shed to escape the rain with colleagues who had just cashed in their severance cheques.
More than 2 000km away on the sunny Italian island of Sicily, 47-year-old Calogero Cassia struggles with the same problems.
After losing his job nearly two years ago when the Fiat plant near Palermo where he had worked for 25 years shut down, the father of three would be happy to take any kind of job in the area, where he has strong family ties.
But he worries that he does not have the skills to transfer to other sectors.
"If you look around it is just desperation, you find nothing, we can't manage," he said. The Termini Imerese plant, the main local employer, shut because of its remote location on an island south of mainland Italy, with 2 200 workers affected.
In both countries, hit by industrial decline and factory shut-downs, the lack of mobility fuels raging unemployment, adding to recession and lagging competitiveness.
Too many workers are unwilling or unable to move from one sector to another or one region to another, due to a debilitating mix of factors from high real estate prices to deficient training and family dependency.
The immobility in wealthier "old Europe" is a contrast to the hundreds of thousands of workers from poorer central and eastern Europe who took advantage of the EU's free movement of labour to flock westwards in the mid-2000s in search of jobs.
About 19.2 million people are now out of work in the 17-nation eurozone, a top priority for EU leaders who meet on Thursday and Friday in Brussels, but with little concrete relief to offer.
Housing costs
The number of jobless is at a record high in Italy, where it reached 12% in April, and in France, where anlysts polled by Reuters see it at 11.5% in the last quarter of 2013. Among young people, the unemployment rate is more than double.
So greater movement across jobs and regions is an imperative at a time when whole sectors are struggling and factories closing, says Herve Boulhol, the lead economist for France at the OECD think-tank.
"When a sector is in decline, restructuring and reallocation of jobs takes too much time in France. Some of the labour rules, including on collective redundancies, need to be trimmed, while training and assistance to find jobs must be improved," he said.
People move eight times less among the EU's 27 member states than between the 50 US states, according to OECD 2010 data.
This is partly due to language barriers. But even between regions of a same EU country, mobility is still nearly two-and-a-half-times lower than among US. states, data on the EU's 15 oldest states shows.
More people from crisis-hit southern EU now want to move to the wealthier north, but mobility within countries is still low, the European Commission said in a report on Tuesday.
A key obstacle in France is the jump in real estate prices in the past decade, with 40% of French businesses blaming housing problems for difficulties in recruiting staff or transferring them to another location.
People who have rented the same home for years will lose out if they move, especially if they have to give up subsidised social housing.
For Peugeot worker Martin, this was the main reason not to accept the job offer in Poissy, west of Paris, when her plant in Aulnay-sous-Bois in the northern suburbs shuts down next year as the loss-making French group tackles production over-capacity by cutting 8 000 jobs nationwide.
She pays just €320 per month for a modest house with a garden south of Paris, thanks to a deal struck between Peugeot and the local authority landlord. That is affordable on her monthly salary of €1 200 and a bargain in a region with the highest real estate prices in the country.
For those who own their home, high transaction costs, from notary and registration fees to taxes, are a major obstacle to moving, which the government plans to tackle with tax breaks.
France has the second-highest housing transaction costs among 33 OECD countries in a study the think-tank based on 2009 data nearly three times higher than in the United States.
Skills mismatch
Italy is a nation of home owners and many young Italians live with their parents.
While younger people with fewer ties are more likely to move abroad or to the wealthier north, they can be put off by the types of work contract they are offered, said Raffaele Fabozzi, professor of labour law at LUISS University of Rome.
"A young person who has to move to another region has to pay for their rent ... so if they don't have a stable contract they don't have any reason to leave their family home," he said.
Italy, like France, has a two-tier labour market that gives protection and benefits to salaried workers and hardly any rights to hundreds of thousands of mostly young people on temporary contracts. In the current recession, employers have become even more reluctant to hand out long-term contracts.
Unemployed people also face difficulties moving to new sectors due to limited retraining and qualification services.
Welfare spending in Italy has traditionally focused on pensions, while spending for labour policies has been more limited, said Luca Paolazzi, head of the research unit at employers' lobby Confindustria.
"We have few active policies to boost work. We have few training, education and requalification capacities and ability to move workers from one sector to another," he said.
In France, government officials acknowledge privately that too much is spent on generous unemployment benefits and not enough on training. But reforming the unemployment benefit fund, is a matter for negotiation between labour unions and employers, due to begin this autumn.
Rudy Tichy, who heads a public employment agency in Altkirch in the eastern French region of Alsace, said the closure of big plants in former industrial regions such as his triggered a skills mismatch which requires people to either move or retrain.
"Half of the people registered here have industry sector profiles but the jobs on offer are in the services sector, personal assistance to people, trade," he said.
Family ties
Beyond that experience mismatch and the practical difficulties of moving a family and making sure both spouses have a job, "French tradition means people simply don't have geographic mobility in mind," said Tichy.
While France has an extensive network of childcare services and subsidies, in Italy, many families rely on grandparents to help look after children, which also makes it harder to move.
In Lazio, south of Rome, 57-year-old Guerino Ventre is struggling to make ends meet with the roughly €1 000 a month he earns for working about 10 days a month since Fiat's Cassino plant in Lazio started running at reduced hours.
But the father of three grown children, who has been working in the plant for 34 years, said he doesn't want to leave the region, where most of his relatives live.
"I have my family here now, my things. And then there is the question, where to and to do what? All plants are experiencing the same situation, so moving does not make a difference."

US consumer spending rebounds

US consumer spending rebounded in May and new applications for unemployment benefits fell last week, suggesting the economy remained on a moderate growth path.
Other data on Thursday showed contracts to buy previously owned homes surged to their highest level in more than six years in May, keeping the recovery anchored in the face of tighter fiscal policy.
"Economic growth is not over the top, that's for sure," said Chris Rupkey chief financial economist at the Bank of Tokyo-Mitsubishi UFJ in New York. "We expect, however, economic growth will be strong enough to bring unemployment down at an acceptable pace."
The Commerce Department said consumer spending increased 0.3% last month, reversing April's 0.3% drop. The increase was in line with expectations.
When adjusted for inflation, consumer spending rose 0.2% last month. However, the so-called real consumer spending for April was revised to show the first contraction in six months.
This suggests second-quarter consumer spending growth could slow a little bit more than economists had previously anticipated and hold back overall economic growth.
Consumer spending grew at a 2.6% annual pace in the first quarter.
Some economists pared their second-quarter gross domestic product estimates. Barclays cut its GDP forecast by 0.4 percentage point to a 1.4% annual pace, while Morgan Stanley trimmed its estimate to 1.5% from 1.6%.
The economy expanded at a 1.8% rate in the first three months of the year.
In a separate report, the Labor Department said initial claims for unemployment benefits fell 9 000 to a seasonally adjusted 346 000. The four-week moving average for new claims, which irons out week-to-week volatility, fell 2 750 to 345 750.
The claims report signaled little change in the pace of job growth. Employment growth has averaged 189 000 jobs per month so far this year.
"It appears that the underlying pace of layoffs remained stable during June. The other half of the employment equation, hiring, also likely held steady," said Guy Berger, an economist at RBS in Stamford, Connecticut.
Data tone improving
Recent data, including housing, regional factory activity, business spending plans and consumer confidence, have pointed to an economy that is regaining its footing after stumbling early in the second quarter.
That is broadly supportive of the view the Federal Reserve expressed last week that the downside risks to the economy's outlook have waned. Fed chairperson Ben Bernanke said the US central bank could start scaling back on the pace of its monthly bond purchases this year.
US stock were trading higher in morning trade. The dollar touched a session high against the yen, while prices for US Treasury debt pushed higher.
The economy's stabilizing tone was underscored by a report from the National Association of Realtors showing signed contracts in May to buy previously owned homes surged to their highest level since December 2006.
While part of the jump in pending home sales reflected a rush by buyers to lock in deals before mortgage rates climbed higher, it was also a sign of underlying strength in the housing market.
The NAR's Pending Home Sales Index, based on contracts signed last month, increased 6.7% to 112.3.
The improving growth theme held as other details of the Commerce Department report showed income grew 0.5% last month, the largest gain since February, after nudging up 0.1% in April. That reflects a steady pace of job gains.
Households also saved a bit more last month, lifting the saving rate to a five-month high of 3.2%.
There was also a bit of inflation in the economy last month, pointing to some pick-up in demand.
A price index for consumer spending inched up 0.1% in May after declining two straight months. A core reading that strips out food and energy costs also rose 0.1% after being flat in April.
Over the past 12 months, inflation increased 1%, well below the Fed's 2% target but up from a 0.7% reading in the period through April.
Core prices were up 1.1% from a year ago, the same as in April. While that suggested some stabilization after a long period of disinflation, it matched a record low reached only a few times since the series started in 1960.
Falling healthcare costs have pulled core inflation lower, but Bernanke said last week that those prices should turn higher as he made the case for a likely reduction in the Fed's bond-buying stimulus later this year.
One Fed official, St. Louis Federal Reserve Bank President James Bullard, has said Bernanke should have waited for clearer signs inflation was turning higher before laying out the case for less Fed stimulus.

Deal struck on EU budget

Top European Union officials reached a deal Thursday on the bloc's 2014-20 budget, paving the way for measures to tackle youth unemployment and stimulate growth following months of wrangling between the bloc's parliament and member states.
"This is a good deal for Europe, this is a good deal for Europe's citizens, this is a good deal for the European economy," Barroso said of the agreement reached with European Parliament President Martin Schulz and Irish Prime Minister Enda Kenny, who represented member states.
Without the 960-billion-euro (1.25-trillion-dollar) budget, several of the measures being discussed Thursday at an EU summit to overcome the bloc's lingering economic crisis could not come into effect.
EU President Herman Van Rompuy welcomed the compromise, stressing that the seven-year budget was "an indispensable tool to help more young people to secure jobs."
"It must be effective as of 1 January 2014," he added, urging all parties to formally approve it without delay.
But many have argued that the funding plan, which represents the first real-term cut to a multi-year budget, does not go far enough to address the EU's economic woes.
Schulz said he would have to "fight in parliament for a majority" to approve the compromise, after lawmakers had rejected a previous deal, arguing that it did not fully take into account their demands aimed at maximizing resources.
"This is not what I thought would be the best solution, but it is the maximum I could, and we could, negotiate here," Schulz said. He said he would try to have the budget vote scheduled for next week's plenary session.
But initial reactions from parliament were mostly positive.
The European People's Party, the largest group in parliament, said the budget deal demonstrated responsibility "in times of economic difficulties," but avoided sentencing the EU to "seven years of rigour," in the words of chairman Joseph Daul.
Hannes Swoboda, the leader of the second-largest party, the Socialists and Democrats, said the deal was a "decisive improvement," and welcomed increased funding for youth employment schemes, as well as support for research and small and medium-sized enterprises.
But British lawmaker Martin Callanan, of the far smaller European Conservatives and Reformists group, complained that "too much EU money will still be spent on French cows and not enough on research and economic growth."
Irish Prime Minister Enda Kenny said he was "confident" that all EU member states would support the deal. Ireland holds the bloc's rotating presidency until the end of the month.
Under the compromise, the budget will be reviewed in a few years' time -a key demand of the parliament - but spending increases will be limited to a maximum of 7 billion euros for 2018, 9 billion euros for 2019, and 10 billion euros for 2020.
These ceilings are in response to member states' fears that budgetary demands could balloon in the course of such a review, once the worst of the economic crisis is over.
The deal also takes into account lawmakers' calls for flexibility, by agreeing to place unspent funding during the first few years of the financial framework into a pot, to be redistributed across the latter half of the budget period.
Kenny also pledged that member states would agree by July 9 to a second top-up for the 2013 budget, which is short of 11.2 billion euros according to the commission - thus meeting another condition of the parliament.
This is the first time the parliament has the power to sign off on the EU's expenditures.

Inflow of money in rich economies plummets

Developing countries have attracted more foreign direct investment than developed ones for the first time last year, the UN Conference on Trade and Development (UNCTAD) said on Wednesday.
The reversal came as the inflow of money in rich economies plummeted by nearly a third to $561bn in 2012.
On a global scale, direct foreign investments fell 18% to $1.35trn, with developing countries attracting just over half of the world's investment flows.
"The road to foreign direct investment recovery is bumpy," and increases would be only moderate in the next two years, Unctad said in its report, citing the fragile state of the global economy.
The United States remained the world's largest recipient of foreign investment, followed by China, Hong Kong, Brazil and the British Virgin Islands.
Britain, Australia, Singapore, Russia and Canada completed the top-10 list.
Investments in the Middle East fell for the fourth year in a row as foreign investors remained wary of political uncertainties, Unctad said.
At the same time, foreign interest in natural resources pushed up inflows to Africa and South America.
In Asia, foreign money shifted to Cambodia, Myanmar and Vietnam along with labour-intensive manufacturing.

NEWS,10.2.2013

Obama to devote state address to jobs

President Barack Obama will build his annual state of the union address on Tuesday around a push for job creation as the fragile economy, which dogged his first term, threatens to hamper his second.Obama will lay out a governing program that he hopes to squeeze through a divided US Congress, so as to complement the soaring progressive vision he sketched for history in his inaugural address last month.Aides said Obama will seek to build support for new laws to curb gun violence, as the horror of December's massacre of 20 school kids begins to fade, at least outside the town of Newtown, Connecticut that it blighted.The president also told Democratic lawmakers last week he would focus on job creation, new forms of energy and education reform in his ceremonial annual address delivered from the House of Representatives.And he will make a pitch for immigration reform, the centerpiece of his second-term agenda, amid signs that Republicans keen to ease the distrust they suffer from among Hispanic voters may be ready for some rare cross-party compromise.With political capital renewed by his re-election triumph in November, Obama will retool some old suggestions for jobs programs that never made it past Republicans in Congress and add some new ideas, advisers said.After a sluggish economic recovery, there are new signs of alarm in the flat economy, after GDP contracted at an annual rate of 0.1% in the last quarter of 2012 and the unemployment rate has ticked up to 7.9%.Obama will not shun conflict with Republicans over taxes and spending, a spat currently being waged over huge budget cuts due to come into force on March 1, with potential to hammer the economy."We're going to talk about, yes, deficits and taxes and sequesters and potential government shutdowns and (the) debt ceiling," Obama told the Democrats."But all from the perspective of how are we making sure that somebody who works hard in this country a cop, or a teacher, or a construction worker, or a receptionist - that they can make it if they work hard?"Obama has fashioned his crusade for a more equitable economy for the middle class around higher taxes for the rich a stance which Republicans oppose, arguing unsustainable public spending should be issue number one.The president barely mentioned foreign policy in the inaugural address which enshrined his second White House term on January 21.But the watching world may get a window into his thinking on Tuesday night.Aides expect Obama to note the impending return home of the remaining 60 000 US troops in Afghanistan in 2014, but it is unclear if he will offer more details on the pace of their withdrawal.Vice President Joe Biden gave a few hints on the State of the Union address on a recent trip to Munich, Germany.He said Obama would mention his bid to reduce global nuclear stockpiles and halt the proliferation of the components of weapons of mass destruction.Biden also previewed initiatives on climate change, global poverty and a new effort to reduce trade barriers, including with Europe, plus a commitment to Middle East peace and the US pivot to Asia.Obama's speech will also be watched for any response to Iran's Supreme leader Ayatollah Ali Khamenei who just rejected a US offer for direct nuclear talks.The US president is required by the Constitution to report to the Congress on the State of the Union "from time to time."In the 20th century, the event evolved into today's ceremonial address, punctuated by multiple standing ovations.Obama sees this speech as part two of a dialogue with the American people."I think that Obama's second inaugural address will go down in history as the last speech of his election campaign," William Galston, a former advisor to president Bill Clinton, now with the Brookings Institution, told AFPTV."I think the 2013 State of the Union address will be regarded as the framing speech for his second term."Obama has a thorny challenge in getting an ambitious second term agenda through the gridlocked Congress."If President Obama wants to be a transformational president and be regarded in history in that way, he's going to have to build on this new vision of government that he's advancing," Galston said. Republicans have nominated rising star Senator Marco Rubio, a possible 2016 presidential candidate, for the tricky assignment of responding to the president's address.Response speeches, robbed of the euphoric power of the State of the Union, can come across as flat and are a risk for the person delivering them.The stakes for Rubio are particularly high, given his rising prospects, epitomized by a Time magazine cover dubbing him the "Republican Savior."

UK rejects Argentina bullying

Foreign Secretary William Hague said Britain could never be bullied by Argentina into giving up the Falkland Islands, in an interview published on Sunday. Hague told The Sun newspaper that Argentina's "intimidatory" behaviour only fortified the 2 500-odd Falkland Islanders in their determination to remain a self-governing British overseas territory.He also branded his Argentine counterpart Hector Timerman's claims that the South Atlantic archipelago would be under the control of Buenos Aires within 20 years as "fantasy"."There should never be a reward for bullying or threatening behaviour in international affairs," Hague said."This is a community that is nearly 200 years old. They seem very determined to remain British."If there's any chance they would change their minds, the approach by Argentina is completely counter-productive."It only fortifies the islanders' determination to stay British. It is only going to add to the decades and centuries that the Falklands will remain British."Britain has held the barren, windswept islands since 1833, but Argentine forces invaded in 1982, prompting London to send a naval task force to reclaim control in a brief but bloody conflict. Buenos Aires claims the islands are occupied Argentinian territory. Timerman visited London last week but refused to meet Hague as the British minister insisted on Falklands government representatives being present.On his visit, Timerman shook hands with a strangerwho gave him a letter, only to learn it was one of the Falklands representatives."You would think the poor minister had suffered an electric shock judging by the way he recoiled," Hague said."These are people who have rights just like those in the UK and Argentina. "There are families in the Falklands who are in their ninth generation."The Falklands have been there longer than Argentina has had its current boundaries or existed in its current form."He hinted that Argentina's President Cristina Kirchner was using the Falklands as a way to divert from domestic problems.Buenos Aires has rejected the dialogue of the 1990s in favour of "a pattern of bullying and intimidatory behaviour", he said."It would be better to talk to the islanders rather than deny their existence or claim Argentina will have the islands within 20 years. These things are fantasy."It would be far better for their country to be realistic."Hague accused Kirchner and Timerman of "misreading the character" of British and Falklands people."Everything we have seen and heard in the last week is the last thing that would ever work."A referendum is to be held on the Falklands on 10 and 11 March, asking the islanders whether they wish to retain their current status.

Storm hammers US

A blizzard packing hurricane-force winds hammered the northeastern United States on Saturday, cutting power to 700 000 homes and businesses, shutting down travel and leaving at least nine people dead.The mammoth storm that stretched from the Great Lakes to the Atlantic dumped more than 90cm of snow across the Northeast, the National Weather Service said.Coastal blizzard and flood warnings were in effect, but Massachusetts and Connecticut lifted vehicle travel bans as the storm slowly moved eastward on Saturday evening.Stratford, Connecticut, Mayor John Harkins said he had never seen such a heavy snowfall, with rates reaching 15cm an hour."Even the ploughs are getting stuck," Harkins told local WTNH television.The storm centred its fury on Connecticut, Rhode Island and Massachusetts, with the highest snowfall total, 102cm in Hamden, Connecticut.About 2 200 flights were cancelled on Saturday, for a total of more than 5 800 over the past two days, according to FlightAware, which tracks airline delays. A few hundred additional cancellations are possible for Sunday, it said.Boston's Logan International Airport and Bradley International Airport in Windsor Locks, Connecticut, were shut down. Logan, hit by nearly 56cm of snow, was expected to reopen at least partly later on Saturday.The storm dumped 74cm of snow on Portland, Maine, breaking a 1979 record, the weather service said. Winds gusted to 134km/h at Cuttyhunk, New York, and brought down trees across the region.The storm contributed to at least five deaths in Connecticut, according to Governor Dannel Malloy and police.An 80-year-old woman was killed by a hit-and-run driver while clearing her driveway, and a 40-year-old man collapsed while shovelling snow. One man, 73, slipped outside his home and was found dead on Saturday, Malloy said.A 53-year-old Bridgeport man was found dead in the snow on Saturday morning outside his home, and a 49-year-old man died while shovelling snow in Shelton, police said.Two people died of carbon monoxide poisoning in separate incidents in Boston. One of the victims was an 11-year-old boy who was overcome by fumes as he sat in an idling car to keep warm, a fire official said. The other victim was a man in his early 20s who was found unresponsive in his car, police said. In Poughkeepsie, New York, a man in his 70s was struck and killed on a snowy roadway, local media reported. A 23-year-old man was killed in Germantown, New York, when the tractor he was using to plough his driveway rolled down an embankment, according to local media. A 30-year-old motorist in New Hampshire died when his car went off the road, but the man's health might have been a factor in the accident, state authorities said.Police in New York's Suffolk County, some using snowmobiles, rescued hundreds of motorists stuck overnight on the Long Island Expressway, said police spokesperson Rich Glanzer.Emergency medical services personnel in Worcester, Massachusetts, delivered a baby girl at her mother's home at about 03:00 on Saturday with the aid of National Guard soldiers.Even as the big storm's force was slackening, the National Weather Service warned of blizzard conditions developing in the Great Plains on Saturday and continuing into Monday.Utility companies reported about 700 000 customers without electricity across nine states as the wet, heavy snow brought down tree branches and power lines.

700 000 without power in US

A record-breaking blizzard packing hurricane-force winds pummeled the northeastern United States on Saturday, causing at least two storm-related deaths, cutting power to 700 000 homes and businesses and shutting down travel.The mammoth storm that stretched from the Great Lakes to the Atlantic coast dumped more than 90 cm of snow across the Northeast, the National Weather Service said. Blizzard and flood warnings were in effect for the coast.In Stratford, Connecticut, Mayor John Harkins said he had never seen such a heavy snowfall, with rates of 12.5 cm an hour at times overnight, he told local WTNH television."Even the plows are getting stuck," Harkins said.The storm concentrated its fury on Connecticut, Rhode Island and Massachusetts, with the top snowfall 95 cm in Milford, Connecticut.Rhode Island Governor Lincoln Chafee banned all travel on roads in order to aid snow plow crews. He told CNN that National Guard troops were rescuing stranded motorists, especially at uncleared on-ramps.The mammoth storm dumped 73.2 cm of snow on Portland, Maine, breaking a 1979 record, and the weather service said there is more on the way.Police in New York's Suffolk County turned to snowmobiles in some cases to rescue hundreds of motorists stuck overnight on the Long Island Expressway, said police spokesperson Rich Glanzer. Some spent the night in their cars.In Poughkeepsie, New York, a man in his 70s was killed when a driver lost control of her car and hit him, media reported. An 80-year-old woman clearing her driveway in Prospect, Rhode Island, died on Friday when she was struck by a hit-and-run driver, a spokesperson for state emergency services said.A 30-year-old motorist in Auburn, New Hampshire, died when his car went off the road, but the man's health, and not the weather, might have been a factor in the accident, state authorities said.Utility companies reported about 700 000 customers without electricity across Massachusetts, Rhode Island and Connecticut as the wet, heavy snow brought down tree branches and power lines.The Pilgrim Nuclear Power Plant in Plymouth, Massachusetts, lost power and shut down automatically late on Friday, but there was no threat to the public, the Nuclear Regulatory Commission said. Almost 2 000 flights were canceled on Saturday, according to FlightAware, which tracks airline delays. Boston's Logan International Airport and Bradley International Airport in Windsor Locks, Connecticut, were shut down.The National Weather Service said the storm was expected to taper off from West to East into the afternoon. Snowfall is forecast to total from 60 to 90 cm in eastern Massachusetts, Rhode Island and Connecticut.

Chavez still absent after 2 months

Two months have passed since Venezuelan President Hugo Chavez climbed the stairs of the presidential jet, blew kisses to supporters and flew to Cuba to undergo cancer surgery.Chavez hasn't been seen or spoken publicly since that departure to Havana on 10 December, and the mystery surrounding his condition has deepened even as the government's updates have remained optimistic but have lately offered few specifics.Foreign Minister Elias Jaua said on Saturday that Chavez is recovering slowly but that he is convinced he "is also going to win this battle".Some analysts say they expect that sooner or later, Chavez's delicate health could make necessary a new presidential election. Chavez's allies, however, insist the 58-year-old president remains in charge and they express optimism he will be able to return home.

NEWS,29.12.2012

FEW DAYS AWAY DUE TO FLU, BACK ONLINE AGAIN

US fiscal cliff battle heats up

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

US gun lobby to fight arms treaty

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

Recession batters Spain as protests grow

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

 

Italy keeps debt costs in check

 

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

China launches rival GPS satellite system

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

Weak Japan data points to stimulus

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