NEWS,08.11.2012

Draghi open to ECB rate cut

The euro zone economy shows little sign of recovering before the year-end despite easing financial market conditions, European Central Bank President Mario Draghi said today, leaving open the possiblity of an interest rate cut in the months ahead.But after keeping rates on hold, Draghi said the ECB cannot do much more to help Greece with its debt burden and gave Spain none of the assurance it wants that ECB bond buying will lower its borrowing costs."The ECB is by and large done," Draghi told his monthly news conference when asked what the bank could do for Greece.The euro zone is grappling to find a formula to make Greek debt sustainable, with Germany and the International Monetary Fund at odds over the need for governments and the ECB to take a "haircut" on Greek bonds they hold to make the numbers add up.The ECB agreed earlier this year to hand over to euro zone governments profits on its Greek bonds but has refused to take a hit on the value of the paper, saying that would be "monetary financing" which it is prohibited from doing.The ECB held its main rate at 0.75%, deferring any cut while it waits for a cue to use its new bond-purchase plan. That wait may be prolonged after Spain completed its 2012 funding at affordable rates on capital markets on today.A  poll had given an 80% chance the ECB would hold its main rate, but most of the 73 analysts polled expect it will be cut to a new record low of 0.5% within the next few months.Draghi said ECB monetary policy is "very accommodative". He declined to comment when asked whether markets were right to expect a rate cut next month and said the policymaking Governing Council had not discussed what it would do next year.Economist Howard Archer at IHS Global Insight said: "Draghi appeared to ease open the door to a cut in interest rates over the coming months and potentially as soon as December." Not everyone expects a cut that soon. "Our sense is that the ECB is firmly on hold," said JP Morgan economist Greg Fuzesi, though he added: "Next year, the ECB will act if growth disappoints more fundamentally." Describing "a picture of weaker economies" in the euro zone, Draghi said this would influence new ECB economic forecasts due next month. Inflation would remain above the ECB's target for the rest of the year, before falling below 2% in 2013."We certainly continue monitoring economic activity and we stand ready to act," he said." We stand ready to act with OMT (bond-purchase plan) once the prerequisites are in place. We also stand ready to act with the rest of standard, normal monetary policy instruments. "Recent survey evidence gave no sign of improvement towards the year-end and the risks surrounding the euro area remain on the downside, Draghi said. As he spoke, the euro fell against the dollar and hit a session low in early New York trade.Gloomy data this week indicated the euro zone economy will shrink in the fourth quarter, which the ECB could eventually respond to by cutting rates.Before making any decision to cut rates further, the ECB will focus on making sure that its looser policy reaches companies and households across the euro zone, a mechanism that has been broken by the bloc's debt crisis.The new bond-purchase plan - dubbed Outright Monetary Transactions (OMTs) is the ECB's designated tool for this but can only be activated once a euro zone government requests help from the bloc's rescue fund and accepts policy conditions and strict international supervision.So far no request has been made, but the announcement of the policy alone has calmed markets."We are ready to undertake OMTs which will help to avoid extreme scenarios, thereby clearly reducing concerns about the materialisation of destructive forces," Draghi said.Asked whether he could imagine an extreme scenario in which the bank began buying bonds without conditions, he said the answer was 'no'.Investors and euro zone policymakers have been urging Spain to seek aid but Prime Minister Mariano Rajoy has so far held off a request, saying he wants assurances that ECB intervention would bring down Spain's debt costs.Draghi gave Rajoy no comfort."The Governing Council will take the final decision in total independence," he said of any decision on whether to use the OMT programme."In so doing, it cannot give any assurance ex ante".Spain sold 4.8 billion euros of debt including its first longer-term issue in 18 months on Thursday, enough to complete its 2012 financing programme and begin raising funds for next year. So there is little immediate pressure on that front.Yields on Spanish government bonds have dropped by around 2 percentage points since Draghi said in late July the ECB was ready to do "whatever it takes to preserve the euro" - a pledge that heralded the bond-buying plan.

Obama mulls new cabinet picks

US President Barack Obama, fresh from re-election and facing a new clash with congress, got back to work on Thursday, with an important item on his to-do list, stocking his new cabinet.Obama is expected to lose his heavyweights including Treasury Secretary Tim Geithner, Secretary of State Hillary Clinton and Defence Secretary Leon Panetta, for most if not all of his second four-year term.The president will also likely have to make changes to his White House staff with some senior aides, exhausted by a crisis-strewn four years, expected to move on and others shifting to different administration jobs.Speculation is already rife about who will replace Clinton, who has reiterated that she wants to reclaim a private life put on hold by decades in the spotlight of top level politics. Clinton has said she has no interest in another White House race, but the campaign blitz for Obama by her husband former president Bill Clinton, and the power couple's passion for politics, has sparked renewed speculation.Until Clinton makes her final decision known, the Democratic Party's other possible 2016 presidential candidates will likely hold their fire, as the former first lady would be a prohibitive favourite if she did run.UN ambassador Susan Rice, who has been close to Obama for years, has long been seen as a likely replacement for Clinton at the state department, despite being caught up in the furore over the raid in the US consulate in Benghazi.Another possible contender is John Kerry, chairperson of the senate foreign relations committee, whose stock rose in Obama world after he played Republican nominee Mitt Romney in Obama's practice dry runs for the presidential debates.Rice would be the second African American woman to hold the post after Condoleezza Rice, to whom she is not related. She is known at the United Nations for an assertive manner and not shy about pounding home the US point of view.A report in Russia's Kommersant newspaper on Thursday said that Moscow, with whom Rice has clashed heatedly over Syria, would prefer to see Kerry get the job, at a sensitive time between Obama and restored Russian President Vladimir Putin."It would be more difficult for Moscow to work with Washington" if Rice became secretary of state, the unnamed Russian official was quoted as saying.Kerry would have to step down from the senate, however, and there is concern that his Massachusetts perch could fall prey to Republican Scott Brown, who lost a race with Democrat Elizabeth Warren for the state's other senate seat.White House sources said that the usual timetable for replacing cabinet members  in plenty of time for confirmation by the Senate after the presidential inauguration in January could slip this time.Geithner and Panetta are key figures in the year-end budget and tax showdown looming with Republicans, and may not move on until the so-called "fiscal cliff" drama is resolved.Some insiders talk about White House chief of staff Jacob Lew, himself a budget specialist, as a possible successor for Geithner while others speculate that Obama may reach for someone with business credentials to improve his shaky standing with the corporate world.Panetta is expected to leave the administration at some point, but did not serve for the full four-year first term, having taken over just last year from Robert Gates, a holdover from the previous Bush administration.Also known as a budget specialist, Panetta may stay in place until expected spending reductions are factored in to the Pentagon's budgetary plan to return to his walnut farm in California's Carmel Valley.The current favourite to succeed him is Michele Flournoy, who served as under secretary of defence for policy early in Obama's first term.Her appointment may appeal to Obama's sense of history as she would be the first woman to hold the role.Should Flournoy not get the job, some defence analysts think that the current deputy defence secretary Ashton Carter could be in the frame.There may also be other cabinet departures. It is unclear whether Attorney General Eric Holder, a close associate of Obama who has had a bruising from Republicans, will stay on.Education Secretary Arne Duncan is expected to remain in place to pilot through congress Obama's reform programme, likely a highlight of his second term agenda.Obama may also have some shuffling to do at the White House, especially if Lew moves to Treasury. His political guru, David Plouffe, is expected to leave and there may be other high profile departures.The president sparked speculation on Tuesday when he said he wanted to sit down with Romney to work out how they could take the country forward.Obama's first term "Team of Rivals" approach of choosing former political foes like Clinton, modelled on that of his hero Abraham Lincoln, could apply in Romney's case, perhaps in a job like Commerce Secretary.However, it is unclear whether Romney would be prepared to swallow his pride and work for the man who vanquished him in a bitter White House campaign.

Iran not ruling out nuclear talks with US

Iran, reeling from international sanctions over its nuclear programme and facing four more years with Barack Obama as leader of arch-enemy the United States, does not rule out direct talks with Washington but says they will not come overnight.Obama's re-election drew an ambiguous response from President Mahmoud Ahmadinejad, who dismissed the US elections as a "battleground for the capitalists," at a forum on democracy in Indonesia.Without directly commenting on Obama's victory, he lambasted democracy in the West as having "turned into the rule of a minority over the majority".But behind the flamboyant rhetoric, senior regime figures have expressed cautious signs of interest in the election of Obama, who four years ago famously "extended his hand" to Tehran and may be preparing to do so again.Not overnight An influential cleric among the ruling conservatives, judiciary chief Ayatollah Sadeq Larijani, did not rule out Tehran and Washington coming "to the negotiating table" one day but warned it would not happen "overnight."Larijani said on Wednesday that "relations with the United States are not simple".The United States, which Tehran dubs the "Great Satan", severed diplomatic relations with Iran after the 1979 takeover of the US embassy in Tehran, and the two have been in a tense stand-off ever since."Four years ago, Obama was elected on a platform for change and said he was extending his hand for co-operation with Iran, but he acted otherwise and unprecedented sanctions were imposed," Larijani said.Obama has rallied US allies against Iran, toughening sanctions, with Tehran's oil exports and access to world financial systems being key targets.The United States and other world powers, including Tehran's arch-enemy Israel, accuse Iran of using its nuclear programme to mask a drive for atomic weapons. Tehran denies that, saying it is for purely peaceful purposes.The last offer called for Iran to cease enriching uranium to purities of 20% - technically not far from the 90% needed for a nuclear weapon. It also wanted Iran to close its Fordo enrichment facility and to export existing stockpiles of 20% purity uranium.Iran rejected that, saying it did not offer sufficient relief from sanctions that have begun to cause real economic problems.Larijani's brother and international affairs adviser, Mohammad Javad Larijani, reiterated that negotiating with Washington "is not taboo," but any decision to renew contact "is a prerogative of the supreme leader"."If the interest of the regime requires it, we are prepared to negotiate with the Satan in the pits of hell," he said on Wednesday.A Western ambassador in Tehran said the regime "gives the impression of being willing to be more realistic in its negotiations with major powers, providing they offer it an honourable way out of the crisis".This could include, according to many Western diplomats in Iran, the revival of bilateral contact with the United States.Another European ambassador said "both sides have shown some interest (in such a revival), but the question is what the Iranians are going to ask for, and if Washington is willing to give it."In recent months, Washington has repeatedly expressed readiness for direct talks with Iran. Tehran has declined, saying its conditions were not met.Foreign ministry spokesperson Ramin Mehmanparast has said Iran "respects the vote of the American people".But "the wall of mistrust can only be reduced if the US government respects the will and the rights of the Iranian people and changes its past mistaken policies".The second European ambassador sees hope nonetheless."Whether it's nuclear talks or a possible resumption of dialogue with Washington, the Iranians are insisting on what they call the recognition of their rights as well as mutual respect," he said."The wording is vague enough to allow solutions if both parties are open to it," he added. "The re-election of Obama in any case opens a window of a few weeks or months to overcome the crisis."As it stands, a new round of talks between Iran and six world powers, the first since June, is expected by the end of the year, or in early 2013, analysts say.Mark Fitzpatrick, nuclear expert at the International Institute for Strategic Studies in London, said "it's pretty clear that the United States and its European allies are gearing up to try again for diplomatic engagement. But the question is, what will be on the table? Iran won't be making concessions unless it gets some form of sanctions relief," he said.As put by Mark Hibbs, at the Carnegie Endowment for International Peace: "There is reason for some optimism, but it is guarded optimism because in the final analysis it depends on whether Iran will 'play.' If they won't, all bets are off."

Greece passes crucial austerity bill

 

Greece's parliament passed a crucial austerity bill early on Thursday in a vote so close that it left the coalition government reeling from dissent.The bill, which will further slash pensions and salaries, passed 153-128 in the 300-member Parliament. It came hours after rioters rampaged outside parliament during an 80 000-strong anti-austerity demonstration, clashing with police who responded with tear gas, stun grenades and water cannons.Approval of the cuts and tax increases worth €13.5bn ($17bn) over two years was a big step for Greek efforts to secure the next installment of its international rescue loans and stave off imminent bankruptcy.The country's international creditors have demanded that the bill and the 2013 budget, due to be voted on Sunday, pass before they consider releasing an already delayed €31.5bn installment from Greece's €240bn bailout. Without it, Prime Minister Antonis Samaras says Greece will run out of money on November 16."Greece made a big decisive and optimistic step today. A step toward recovery," Samaras said, adding that he was "very happy" with the result.Development and growth for the country, which faces a sixth year of a deep recession in 2013, will come "only with a lot of work, with coordinated action, with investments," he said.But the close vote was a major political blow to the three-party coalition government, which holds a total of 176 seats in Parliament. The result shows support for continued austerity three years into Greece's financial crisis is dwindling fast."The government now has very little margin to take measures like this again," said Dimitris Mardas, associate professor of economics at the University of Thessaloniki. "But unless it takes various obvious actions like limiting the black economy, addressing tax evasion and improving the country's investment framework, we may end up needing new measures. And then things will be very difficult."Straight after the vote, two of the three coalition parties  Samaras' conservatives and former finance minister Evangelos Venizelos' socialists  expelled a total of seven dissenting deputies from their ranks.Lawmakers from the third, the small Democratic Left, mostly abstained from the vote in accordance with their party's line. Leader Fotis Kouvelis had said he could not back labour reforms included in the bill.During hours of acrimonious debate in parliament, Samaras acknowledged that some of the measures in the bill were unfair, but insisted they were vital to avoid bankruptcy and Greece being forced out of the euro zone and back to its old currency, the drachma."This (bill) will finally rid the country of drachmophobia," he said."Many of these measures are fair and should have been taken years ago, without anyone asking us to," Samaras said. Others are unfair cutting wages and salaries and there is no point in dressing this up as something else." But, he said, the alternative was bankruptcy that would trigger financial chaos as the country would likely have to leave the 17-country euro bloc.The measures are for next year and 2014, and include new, deep pension cuts and tax hikes, a two-year increase in the retirement age to 67, and laws that will make it easier to fire and transfer civil servants who are currently guaranteed jobs for life.The reforms aim to lower public debts but will in the process also hurt the economy, which is set to enter a sixth year of recession with unemployment at a record 25%."You are throwing people onto to the street, people who need a few more years till they get their pensions," said Panagiotis Lafazanis of the main opposition Syriza, or Radical Left, party. "What will happen to them? Will they starve?"

NEWS,09.10.2012

Merkel tells irate Greeks painful reforms will pay off

Tens of thousands of angry Greek protesters filled the streets of Athens to greet German Chancellor Angela Merkel, who offered sympathy but no promise of further aid.Police fired teargas and stun grenades to hold back crowds chanting anti-austerity slogans and waving Nazi flags while Merkel's host, Prime Minister Antonis Samaras, welcomed her on Tuesday as a "friend" of Greece.On her first visit to Greece since the euro zone crisis erupted three years ago, Merkel struck a conciliatory tone.She reaffirmed Berlin's commitment to keep the debt-crippled Greek state inside Europe's single currency but offered Samaras no concrete relief ahead of a new report on Greece's reform progress due by next month."I have come here today in full knowledge that the period Greece is living through right now is an extremely difficult one for the Greeks and many people are suffering," Merkel said at a news conference with Samaras just a few hundred yards from the mayhem on Syntagma Square, outside parliament."Precisely for that reason I want to say that much of the path is already behind us," she added.Samaras, who invited Merkel to Greece during a visit to Berlin in August, promised to press on with economic reforms necessary to restore confidence."The Greek people are bleeding but are determined to stay in the euro," he said. "They are not asking for more money or favours. They only want to get back on their feet as soon as possible and exit this recession."On the other side of the parliament building, tens of thousands of demonstrators defied a ban and gathered to voice their displeasure with the German leader, whom many blame for forcing painful cuts on Greece in exchange for two EU-IMF bailout packages worth over 200 billion euros ($315 billion).Greek riot police clashed with protesters who tried to break through a metal barrier to reach the cordoned-off area where Merkel and Samaras were meeting. Some demonstrators pelted police with rocks, bottles and sticks.At least 30 people were hurt or suffered breathing problems from tear gas and about 300 were detained, police said.Four people dressed in World War Two-era German military uniforms and riding on a small jeep, waved black-white-and-red swastika flags and raised their hands in the Hitler salute.Banners read "Merkel out, Greece is not your colony" and "This is not a European Union, it's slavery"."We know that she is not here to offer favours but she must help us, this is our last chance," said 45-year-old Mari Hanioti, a saleswoman supporting her two children and her unemployed husband."She must be able to see what we are going through, how much we are suffering. She should see the poor neighbourhoods not just the expensive hotels."Some 6000 police officers were deployed for the six-hour visit, including anti-terrorist units and rooftop snipers. German sites in the Greek capital, including the embassy and Goethe Institute, were under special protection.Before departing, Merkel met Greek business people to ask how reforms were progressing and hear how they were affected by an economy that has shrunk by a fifth in five years, leaving 25% of workers out of a job."She said: talk to me as if I wasn't a leader but a good reporter," one attendant said on condition of anonymity.Merkel decided to come to show support for Samaras, a fellow conservative, as he struggles to convince reluctant, leftist coalition partners to impose more austerity on a society fraying at the edges after several rounds of cuts.With a year to go until Germany holds a parliamentary election, Merkel also hoped to neutralise opposition criticism at home that she has neglected Greece and contributed to its woes by insisting on crushing budget cuts.After her government flirted earlier this year with the idea of allowing Greece to exit the euro zone, she now appears determined to keep it in - at least until the German election is out of the way.Greece is in talks with its "troika" of lenders - the European Union, European Central Bank and International Monetary Fund - on the next tranche of a 130-billion-euro ($204 billion) loan package, its second bailout since 2010.Without the 31.5-billion-euro tranche, Greece says it will run out of money by the end of November.Merkel said the aid payment was "urgently needed" but stopped short of promising that the funds would flow."The troika report will come when it is ready. Being thorough is more important than being quick," Merkel said.Ties between Germany and Greece run deep. Thousands of Greeks came to Germany after World War Two as "guest workers" to help rebuild the shattered country and more than 300,000 Greeks currently reside there.But the relationship is clouded by atrocities Greeks suffered at the hands of the Nazis. Samaras's own great grandmother killed herself after Nazi tanks rolled down the streets of Athens and the swastika flew over the Acropolis.Greek President Karolos Papoulias, whom Merkel also met on Tuesday, fought against the Germans as a teenager, before fleeing to escape persecution by the Greek military dictatorship and finding refuge in Germany.

Wall Street falls on IMF report

Equities slumped on both sides of the Atlantic after the International Monetary Fund reduced its forecast for global growth.The global economy will expand 3.3% this year and 3.6% in 2013, the IMF said in its World Economic Outlook. That is down from July forecasts of 3.5% in 2012 and 3.9% in 2013.Meanwhile, the latest round of US earnings-kicked off by Alcoa-is expected to clearly reflect the impact on corporate profits. Earnings reports for S&P 500 companies may show the first quarterly drop in three years, with analysts forecasting a 2.3% decline from the year-ago quarter, according to Thomson Reuters data.To be sure, some say expectations are so low that it leaves plenty of room for good news."There's so much pessimism over earnings that there's room for upside with any positive surprise," Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, told Bloomberg News."Overall I think traders are too pessimistic. Even with the IMF economic numbers we got, those are still pretty good numbers. The IMF is forecasting global growth next year will be above 3%. That's probably higher than what most people are fearing at the moment," Zemsky said.In afternoon trading in New York, the Dow Jones Industrial Average dropped 0.55%, the Standard & Poor's 500 fell 0.74%, while the Nasdaq Composite Index shed 1.29%.It was five years ago that the S&P 500 reached a record high of 1565.15. Today, it was last at 1445.12The IMF's downgrade of expectations for global growth helped demand for US Treasuries-an auction of US$32 billion in three-year notes was met with record demand.Shares of Intel fell, last down 2.55%, after downgrades from Sanford Bernstein & Co and Robert Baird & Co.In Europe, the Stoxx 600 Index ended the session with a 0.5% decline from the previous close.Benchmark indexes also fell in Germany, France and the UK, declining 0.8%, 0.7% and 0.5% respectively.The euro weakened too, dropping 0.9% against the Japanese yen, while falling 0.7% against the greenback.European Union finance ministers met in Luxembourg today, while German Chancellor Angela Merkel and Greek Prime Minister Antonis Samaras met in Athens."I want Greece to remain in the euro," Merkel told reporters, according to Bloomberg. "A lot has been done, much remains to be done."Her visit came as the IMF forecast today that Greece will miss the five-year debt reduction goal that underpins the nation's bailout.

Europe edges towards banking union

European Union ministers examined a proposal today to limit planned new powers for the European Central Bank to supervise lenders, in a bid to allay the concerns of countries outside the euro zone over a new banking union.The diplomatic drive came as the President of the ECB and Germany's markets regulator cautioned that setting up a new system of supervision would take up to the end of next year, later than many expected and a potential setback to efforts to help distressed euro zone countries and their banks.Brussels proposed earlier this month that the ECB take charge of supervising all banks in the euro currency zone in stages from January, as a first step towards creating a banking union under which chiefly euro zone countries would eventually jointly back their lenders.Winning broad support for a prompt introduction of the new supervision framework is important because it should allow the euro zone's rescue fund, the European Stability Mechanism (ESM), to directly inject much-needed capital into banks, such as those in Spain.However, the plan has sparked concerns among the 10 EU countries which do not use the euro that they will be indirectly affected by the ECB's new supervisory powers and put at a competitive disadvantage, whether they join the scheme or not.On Tuesday, diplomats from Cyprus, the current holder of the European presidency, delivered a proposal to change the blueprint for banking supervision, a move, in the words of one EU official, to make it more "digestible" for countries outside the euro.In the document, seen by Reuters, they recommend a counterweight to the central bank's authority to withdraw a bank's licence, the ultimate threat a supervisor holds, by giving national regulators a large say in such a decision.They also suggest a way for countries outside the currency area that choose to join the banking union, subjecting lenders to ECB control, to leave it again, by allowing them to "request the ECB to terminate the close cooperation at any time".Speaking to journalists after the meeting, Michel Barnier, the European commissioner in charge of regulating banks, called for "flexibility and imagination" in reaching a "fair" system for those countries outside the euro zone to participate.Barnier is aiming to reach agreement on the new supervisory system by the end of this year. But Mario Draghi, the president of the ECB, cautioned on Tuesday that setting up a new framework of supervision would take longer."The ECB is not supposed to take over supervision in three months' time and do it," Draghi told lawmakers in the European Parliament. "There is a phase-in time. We foresee that one year will be needed to adapt all the structures."Elke Koenig, head of Germany's markets regulator BaFin, also warned that the original deadline to start such supervision by the beginning of next year was unrealistic."I could imagine that we get there in January 2014. That's a guess," she told German television station ARD on Tuesday, advocating a cautious approach."I support the idea of a strong European regulator. But I have not seen a roadmap of how we get there," she said."The last thing we can afford is to have an interregnum between those who are no longer responsible (for supervision) and those who are not yet in a position to act."Word play Others urged quick action.The Dutch central bank said today that policymakers should quickly allow the European Central Bank to supervise major lenders and to enable the ESM to directly recapitalise troubled banks.Gerard Rameix, head of the French markets watchdog AMF, said that he had heard nothing to suggest there would be a change to the timeframe."I think they are playing on words a bit. If they are talking about the utmost end of the process, then they are maybe not wrong," Rameix said.As a first step, the ECB is set to take responsibility for supervising banks which have received state aid beginning 2013. From mid-2013 the ECB will add systemically relevant institutions, before finally overseeing all euro zone banks by 2014.Germany, the euro zone's economic heavyweight, has criticised efforts to allow the ECB to supervise all euro zone lenders, claiming it will be overstretched.In reality, the ECB will not be in day-to-day charge of supervision, which will still lie with national regulators, but will have the power to overrule those authorities.The close ties between some troubled governments and the banks they supervise - and on which they also rely to buy their debt - have dragged both ever deeper into crisis.A banking union would break this link by making the policing of banks supranational and establishing central schemes paid into collectively to cover the costs of closing failed lenders and protecting savers' deposits.

French parliament backs EU budget discipline treaty

France's lower house of parliament voted to ratify a European budget discipline treaty today.A law ratifying the fiscal pact was passed by 477 votes in favour to 70 against, despite a small but noisy revolt from left-wingers and Greens that threatened to embarrass Hollande just before an October 18-19 European Union summit.In all, 45 among the 314 lawmakers that make up Hollande's left-wing parliamentary coalition either voted against the law or abstained, ignoring pleas from Prime Minister Jean-Marc Ayrault in recent days to fall into line.Yet Hollande still rallied 282 left-wing votes in favour, above the 274 required for a majority and sparing him from having to rely on votes from opposition conservatives, who voted largely in favour of ratification."This sweeping majority will give France a bigger voice, that is to say it will enable us to forge ahead with the rebuilding of Europe that I have committed to since my election," Hollande said after the result.When former president Nicolas Sarkozy signed up to it in March, the Socialists had opposed the fiscal pact, which holds governments to meet deficit-cutting goals or face sanctions.Plagued by painful memories of failing to rally his party behind a 2005 referendum on an EU constitution, Hollande persuaded his EU partners at his first summit in June to sweeten the pact with accompanying measures to stimulate growth in Europe.As recalcitrant left-wingers continued to revolt against the pact this month, Ayrault told them voting against it meant putting the euro's future in danger.Still, 20 out of the 264 Socialist Party deputies in the lower house voted against the law on Tuesday, along with 12 Greens. Among opposition parties, 13 radical leftists voted against and 17 conservatives.Shackles Hollande is anxious to show that his party will stand united behind him on steps agreed in June to deepen fiscal and economic integration in Europe, steps opponents on the left view as handing too much control of national affairs to EU authorities."We salute the no vote of a number of Socialist and Green deputies who, like us, reject the shackles this austerity treaty imposes on the people of Europe," said Andre Chassaigne, leader of far-left lawmakers in the National Assembly."It will lead our country, like other EU states, towards the abyss of recession," he said.Hollande is treading a fine line as he tries to convince his EU partners, and investors from London to Beijing, that he is serious about bringing down the public deficit while also battling to restore jobs and growth to a stalled economy.Since his May election Hollande's approval ratings have fallen from 55% to as low as 41%, the fastest drop of any recent president, as unemployment has surged to a 13-year high above 10%.Tuesday's vote came as riot police used teargas to disperse protesters during nationwide demonstrations over mounting job losses and a wave of industrial layoffs.Hollande's economic credibility is being put to the test by the jobs crisis and by a 2013 budget that hinges on an economic growth target of 0.8% that many view as over-optimistic.The International Monetary Fund joined sceptical economists on Monday and halved its growth forecast for France to 0.4% next year. Finance Minister Pierre Moscovici responded by calling the government's outlook "realistic".The president has promised the European Union he will cut the deficit to 3% of gross domestic product in 2013, but the gloomier growth outlook and his decision to make two-thirds of the adjustment through tax rises has raised doubts.The fiscal pact enters into force on January 1 next year or when 12 of the 17 euro zone member countries ratify it, as half a dozen, including Germany, already have.The ratification law passes to the Senate today and should be finally adopted before the end of the week.

NEWS,26.909.2012

Clashes erupt as thousands of Greeks protest austerity

Greek police clashed with hooded rioters hurling petrol bombs as tens of thousands took to the streets of Athens on Wednesday in Greece's biggest anti-austerity protest in more than a year.Violence erupted after nearly 70,000 people marched to parliament chanting "We won't submit to the troika (of lenders)" and "EU, IMF Out!" on the day of a general strike against a new round of cuts demanded by foreign lenders.As the rally ended, dozens of black-clad youths threw stones, petrol bombs and bottles at riot police, who responded with several rounds of teargas. Police chased the protesters through Syntagma square in front of parliament as helicopters clattered overhead. Smoke rose from small blazes in the streets.About 120 people were detained after angry protesters smashed bus stop kiosks and set fire to garbage cans."We can't take it anymore - we are bleeding. We can't raise our children like this," said Dina Kokou, a 54-year-old teacher and mother of four who lives on 1,000 euros a month."These tax hikes and wage cuts are killing us."The 24-hour nationwide strike, called by the country's two biggest unions representing half the four-million-strong work force, is shaping up to be the first test of whether Prime Minister Antonis Samaras can stand his ground.Police officials estimated the demonstration was the largest since a May 2011 protest, and among the biggest since near-bankrupt Greece first resorted to aid from international lenders in 2010 - which has come at the price of painful austerity cuts.The traditional summer break has allowed the fragile conservative-led coalition to enjoy relative calm on the streets since narrowly coming to power on a pro-euro, pro-bailout platform, but unions say the lull is over."Yesterday the Spaniards took to the streets, today it's us, tomorrow the Italians and the day after - all the people of Europe," Yiorgos Harisis, a unionist from the ADEDY p u blic sector group told demonstrators."With this strike we are sending a strong message to the government and the troika that the measures will not pass even if voted in parliament, because the government's days are numbered."About 3000 police - twice the number usually deployed - stood guard in the centre of Athens, which last saw serious violence in February when protesters set shops and banks ablaze as parliament approved an austerity bill.Police formed a barricade outside parliament, and officers blocked a pensioner who tried to move towards Samaras's office holding a banner with pictures of Greek prime ministers under the title: "The biggest traitors in Greek history".Ships stayed docked, museums and monuments were shut to visitors and air traffic controllers walked off the job for a three-hour stoppage. Train service and flights were suspended, public offices and shops were shut, and hospitals worked on skeletal staff as part of the general strike."Destroying our lives" Much of the union anger is directed at spending cuts worth nearly 12 billion euros over the next two years that Greece has promised the European Union and International Monetary Fund in an effort to secure its next tranche of aid.The bulk of those cuts is expected from cutting wages, pensions and welfare benefits, heaping a new wave of misery on Greeks who say repeated rounds of austerity have pushed them to the brink and failed to transform the country for the better."We can't just sit by idly and do nothing while the troika and the government destroy our lives," said Dimitra Kontouli, a 49-year-old local government employee whose salary was cut to 1100 euros a month from 1600 euros previously."My husband has lost his job, we just can't make ends meet."A survey by the MRB polling agency last week showed that more than 90% of Greeks believe the planned cuts are unfair and burden the poor, with the vast majority expecting more austerity in coming years.Unions argue that Greece should remain in the euro but default on part of its debt and ditch the current recipe of austerity cuts in favour of higher taxes on the rich and efforts to nab wealthy tax evaders.But with Greece facing certain bankruptcy and a potential euro zone exit without further aid, Samaras's government has little choice but to push through the measures, which have also exposed fissures in his coalition.With Greece in its fifth year of recession and nearly one out of four jobless, analysts say patience is wearing thin and a strong public backlash could tear apart the weak government."What people want to tell Samaras is that they are hurt and Samaras could use this to demand concessions from the troika," MRB polling director Dimitris Mavros said."The people are willing to give the government time, but on certain conditions like cracking down on tax evasion and securing a bailout extension. If the government succeeds in that, its life will also be extended."

Greek protests cast shadow over the euro

Protests in Spain and Greece put the European sovereign debt crisis centre stage, renewing investors' worries about the risk the euro zone's problems pose to global growth and corporate profits.Those concerns are underpinning demand for fixed-income securities including US Treasuries, and helped fuel appetite for today's auction of US$35 billion of five-year bonds. "It was a good auction," Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, which as a primary dealer is obliged to bid in US debt offerings, told Bloomberg News. "It is suggesting more and more fear - that things could spiral out of control in Europe. The demand for dollars and Treasuries continues to rise."All eyes are on Spain, which is scheduled to announce its budget tomorrow. And on Friday, Moody's will publish its latest review of the nation's credit rating. In contrast to rising demand for US government bonds, the yield on Spain's 10-year bond surged more than 30 basis points back through the 6% mark.Figures released on Tuesday suggested Spain will miss its public deficit target of 6.3% of gross domestic product this year, and on Wednesday the Bank of Spain said the economy continued to shrink markedly in the third quarter, according to Reuters.Spain's prime minister, Mariano Rajoy, has so far resisted the calls to ask for an EU financial bailout but may not be able to hold out much longer. In a speech in New York earlier today, Rajoy said all Spaniards were going to have to make sacrifices.Europe's Stoxx 600 Index ended the session with a 1.8% slide. National benchmark indexes in Germany, France and the UK dropped. So did Spain's IBEX 35 Index, closing 3.9% lower. In late afternoon trading in New York, the Dow Jones Industrial Average shed 0.16%, the Standard & Poor's 500 declined 0.38%, while the Nasdaq Composite Index fell 0.62%. Meanwhile, the latest indicator on the US housing market continued to underwrite the view that at least this part of the economy is gaining forward momentum.Sales of new homes eased 0.3% to a 373,000 annual pace in August after a revised 374,000 rate in July that was better than previously estimated and the strongest since April 2010, according to Commerce Department data. And the average price of a home in the US has now risen to its highest since March 2007."There are increased signs that the housing recovery is now on a more sustainable path, though its impact on overall economic activity will remain relatively modest at best over the near-term.

Spain unveils austerity budget

Squeezed by financial markets and denounced in the streets, Spain's government will adopt on Thursday a 2013 austerity budget which could be a precursor to a full-blown bailout.The final step before a rescue is likely to come a day later, analysts say, when Madrid unveils an independent audit of its limping banks to determine how much capital they need.Spain's eurozone partners have agreed to provide a rescue loan of up to €100bn to help the banks recover from bad loans built up after a 2008 property crash.But Madrid insists €60bn will be enough.Once that matter is dealt with, the eurozone's fourth-largest economy will have all the data it requires to seek a broader, sovereign rescue from the eurzone's bailout funds.If Spain bends to the will of the markets and some of its eurozone partners by formally requesting the bailout, it would trigger a bond-buying programme for troubled states outlined by the European Central Bank on September 6.That would have the effect of curbing Spain's borrowing costs.Before making the leap, however, Prime Minister Mariano Rajoy wants to know what the conditions would be.The conservative leader likely wanted to make progress on the budget for next year, also, before making the request.The basic outline for the budget has been known since July: the plan to be adopted by the cabinet on Thursday is expected to enact spending cuts and tax increases worth a combined €39bn.The government aims to claw back a total of more than €150bn between 2012 and 2014: €62bn this year, €39bn next year and €50bn in 2014.On the austerity menu for 2013: an increase in sales tax and other taxes is expected to rake in €15bn and nearly seven billion euros will be found from cuts in the regions, which manage health and education.Other savings come from lowering unemployment benefits and social assistance, as well as a freeze in public sector hiring.But Spain will probably have to go further, said Juan Ignacio Conde Ruiz, deputy director of the Foundation of Applied Economic Studies (FEDEA)."To be credible with the markets, which is the government's ultimate goal, it would seem hard to avoid touching retirement pensions, which account for 25 percent of total spending," he said.Rajoy's election campaign promise to maintain pensions by inflation would cost €3bn - €3.5bn, Conde Ruiz said."There won't be the means to do it"That, he said, would make it impossible for Spain to meet its commitment to slash the public deficit to 6.3% of gross domestic product this year from a runaway 8.9% last year."There won't be the means to do it," added Jesus Castillo, southern European specialist at French bank Natixis. "So we should not be surprised by a freeze in pensions," he said, or even a cut so as to stay on track with the 2013 target of a deficit equal to 4.5%.Despite the analysts' doubts, Spain's Popular Party government insists pensions are going up, not down, as it faces growing protests to the austerity measures including hundreds taking to Madrid's streets Tuesday.Deputy Prime Minister Soraya Saenz de Santamaria said the new level for pensions would be decided in November."Will pensions go up? Yes, pensions are going to go up. Pensions will obviously be adjusted for the cost of living," she said.At the Spanish investment bank Inversis, analysts predict the public deficit forecasts will be revised higher for 2012 and 2013 in line with a deeper than expected recession.On Thursday, a new package of reforms negotiated with Brussels to stimulate business activity and exports also will be announced, "which could be the stage prior to a bailout request", said a report by Spanish brokerage Renta4.If Spain fails to take convincing action, the verdict could come quickly.Moody's Investors Service has until Sunday to decide whether to downgrade Spain's debt after a review. If it does so, it could be the first agency to rate the nation's debt at the equivalent of a junk bond.Spain's hesitation before seeking a rescue could be "highly risky", European Competition Commissioner Joaquin Almunia warned on Monday in an interview with AFP.The country's budget and economic reform announcements on Thursday are aimed at addressing just those concerns, said Conde Ruiz."The idea is to anticipate the conditions the aid would impose, and thus to introduce them now in the budget," he said, adding that this would ease the political sting.

NEWS,23.08.2012

Global economy slips into dire straits

The eurozone is on track for its second recession in three years, China's once booming manufacturing sector is contracting at a faster pace than previously reported, and the United States is widely seen as struggling to keep up its pace of growth.Business surveys released on Thursday painted a global picture of economic malaise from Beijing to Berlin.The eurozone economy will shrink around 0.5% in the current quarter as the economic rot is even spreading through Germany, the region's largest and strongest economy, Markit's Purchasing Mangers' Index (PMI) suggested.It came on the heels of the HSBC Flash China manufacturing PMI falling to 47.8 for August, its lowest level since November and well down from July's final figure of 49.3.Growth in the United States manufacturing sector is also expected to have slowed in August. U.S. data due at 12:58 GMT."The indicators taken as a whole indicate a material slowdown in the pace of the world economy," said economist Philip Shaw at Investec.The eurozone composite PMI, which measures manufacturing and services together, was actually slightly better than a month earlier, nudging up to 46.6 and just pipping forecasts for it to hold steady at July's 46.5. But was still its seventh month in a row below 50, the dividing line between contraction and growth."August's flash eurozone PMI does nothing to challenge the notion that the single currency area is now firmly in recession," said Jonathan Loynes, chief European economist at Capital Economics.More worryingly, the downturn in smaller eurozone economies is clearly taking root in the core. The flash composite PMI for Germany fell to a three-year low, a fourth straight month of contraction.German economic growth slowed to 0.3% in the second quarter on a sharp drop in investment, adding to evidence that it can no longer be relied on to pull the eurozone out of a deep slump, data showed earlier on Thursday. "Another reminder that a chronic lack of economic growth in the eurozone will continue to impede efforts to bring the debt crisis to an end," Loynes said.The eurozone economy shrank by 0.2% in the three months to June, according to official data. Economists polled by Reuters last week predicted a similar outcome for the current quarter, with no growth until the start of next year. Falling demand from debt-ridden Europe, China's single biggest export market, has put the Chinese economy under pressure, with the ripples now being felt across the world."It's very hard to put a positive spin on anything within the (China) data. Bottom line - a very poor update," said Robert Rennie, chief currency strategist at Westpac Bank In Sydney.Japan said on Wednesday that exports slumped the most in six months in July as shipments to Europe and China tumbled. Exports from Taiwan, a key part of the global technology supply chain, fell for a fifth straight month in July and South Korea, home to major car makers, computer chip and flat-screen producers, recorded its sharpest export fall in July in nearly three years.Six consecutive quarters of slowing Chinese growth have also taken a toll on commodities markets, with falling prices and an uncertain outlook prompting miner BHP Billiton to shelve a $20bn expansion project in Australia."Today's PMI report is a clear reminder that the slowdown is not yet over and that the Chinese economy is still too shaky to recover without ongoing policy stimuli," said Nikolaus Keis at UniCredit. "The pressure on the Chinese authorities to further step up their policy accommodation is therefore growing."China has been fine tuning policies to keep growth on track without releasing curbs on the property sector.In contrast central banks in the developed world have slashed interest rates to near zero and injected trillions of dollars into the money supply in efforts to support growth.The European Central Bank is expected to cut rates by 25 basis points to a new record low of 0.5% when it meets next week, but analysts say that will do little to stimulate lending. The U.S. Federal Reserve is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably, minutes from the U.S. central bank's latest meeting suggested.

Venezuela Elections 2012: Chavez Has Money Edge In Presidential Race

Opposition candidate Henrique Capriles typically runs his presidential campaign by jogging through Venezuela's small towns, reaching out to supporters with both hands and climbing aboard the back of a flatbed truck to speak to hundreds of people.By contrast, President Hugo Chavez brings large sound trucks, a production team and a fleet of buses that carry supporters and government employees to plazas to cheer him on by the thousands.A little more than a month ahead of Venezuela's Oct. 7 election, Chavez enjoys clear advantages over his challenger in campaign funding and media access. While neither campaign has revealed how much it's spending, Capriles says he is in a "David vs. Goliath" contest, facing a well-financed incumbent backed by an even richer government."We're fighting against two checkbooks. There's no way to compete economically speaking," said Rafael Guzman, who is in charge of finances for the opposition coalition. He accused the government of using money from the state oil company, Petroleos de Venezuela SA, and a separate development fund, Fonden, to support Chavez's campaign and bankroll projects aimed at boosting his support.Chavez's allies say Capriles is being backed by business tycoons including fugitive bankers who have fled the country and oppose the president. Chavez's camp hasn't provided details of those accusations.The law does not limit individual campaign contributions, though Guzman says the Capriles campaign caps donations it receives at a maximum of 2,000 bolivars ($465), even though people can make many such donations. He said all have come from individuals, none from companies."We aren't receiving anything from businesses," Guzman said.So far, Capriles' campaign doesn't look like it's rolling in wealth. It has even taken to holding raffles, fundraising dinners and weekend street fairs selling used clothes and donated food.Judith Beltran recently browsed through stands selling landscape paintings, handbags, underwear and used baby clothes at Caracas' Petare slum, holding a bagful of clothes she'd just purchased."I came because they're selling everything cheap and also to help out Capriles," she said.Meanwhile, Chavez's face smiles down from innumerable billboards and signs festooned on lampposts throughout Caracas and other cities, far more than Capriles' campaign has managed.There's no spending limit on such advertising, but the law limits campaigns to just three minutes of paid TV ads a day, and Capriles' backers say there's no clear line between Chavez's campaign ads and the much more frequent government promotional spots showing the president doling out apartments to the needy.The law doesn't prevent Chavez from using his power as president to take over programming on all of the country's TV channels and radio stations for his speeches, something he does regularly.Chavez and his allies say he's merely governing, not wielding any campaign edge that could be considered unfair."Hugo Chavez's advantage (is) in his power of communicating with his people," his campaign manager, Jorge Rodriguez, said last month.Rodriguez on Wednesday also denied that Chavez has an edge in airtime, saying much of the coverage by private TV channels and radio stations favors Capriles.In a recent televised appearance for the opening of a state-run supermarket, Chavez tried to differentiate his roles as president and candidate. "I'm complying with an obligation to inform the public," he said."I am going to say what I'm going to say very carefully. It shouldn't be interpreted as campaigning," Chavez said. Chavez then responded to criticism by Capriles and other adversaries that he is giving away Venezuela's oil wealth through preferential deals with allies.Chavez's socialist party, for its part, insists it uses no public funds and gets its money from supporters. It held a raffle last week with prizes that included a new car, motorcycles and appliances. Some Chavez opponents called for electoral officials to investigate that raffle, saying public employees had reported that they were forced to buy tickets.Venezuelan election law requires candidates to provide detailed monthly financial reports to electoral officials, but the National Electoral Council generally doesn't publicly release financial figures during the campaign.Neither the Chavez nor Capriles campaign revealed how much money they've raised when asked. Chavez's campaign didn't respond to requests for comment, and officials in Capriles' campaign said it was unable to provide a figure.Venezuelan election law also prohibits campaign donations from government entities, foreign donors and companies that are contracted to provide public services.Venezuela is atypical in Latin America in that it doesn't provide public financing for campaigns or political parties, said Jennifer McCoy, director of the Americas program at the Carter Center. She has directed past election-monitoring missions in Venezuela and other countries."Because there's no regulated public financing, then that means that all of the sources of money are private or undisclosed, and so it's very difficult to assess how much each side is spending and where the money comes from," McCoy said in an interview during a visit to Caracas."I really have no idea how much each side is spending," she said, "but in terms of the opportunities particularly for the media presence and the opportunities for providing benefits to voters, certainly an incumbent government – and this incumbent government – has an advantage."The opposition has complained that Chavez has abused his presidential authority by taking over the airwaves, but the National Election Council has taken no action on the matter. Four of the council's five members are Chavez allies or widely perceived as favoring the president.Vicente Diaz, the one council member often openly critical of the government, said in an interview that a candidate such as Capriles is essentially running "against the state.""It's not fair," Diaz said, but added that "the popular will is respected, and the one who has the votes is going to win."

NEWS,16.07.2012

IMF: Global growth forecasts cut

 

The International Monetary Fund (IMF) stepped up its warnings on Monday on risks to the global economy, especially coming from Europe, as it trimmed its growth forecast for the rest of the year.The IMF said the world economy appeared weaker since its assessment just three months ago, and while growth was only slightly off the expected pace, "downside risks continue to loom large," especially from inadequate or slow policy reactions in major economies."In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness," the fund said in its quarterly revision of economic forecasts."Financial market and sovereign stress in the euro-area periphery have ratcheted up," it said, while growth has fallen below expectations in a number of major emerging-market economies.It pointed to renewed deterioration in the markets for European sovereign debt as a sign that eurozone leaders need to move fast on pledged reforms.The IMF also singled out the overhanging risk from US political stasis that could send the country over a "fiscal cliff" due to laws that, if not changed, will force massive government spending cuts coupled with automatic tax hikes on January 1 that would severely crunch the world's largest economy."Avoiding the fiscal cliff, promptly raising the debt ceiling, and developing a medium-term fiscal plan are of the essence," the global crisis lender said in recommendations for the United States.After forecasting in April that the global economy would expand by 3.5% this year, the IMF said it had cut 0.1% off the forecast, but that the number remained at 3.5% because of rounding.For 2013, the forecast is 3.9%, down from 4.1%.The change in the worldwide outlook mainly came from sharp cuts to growth forecasts for the large emerging economies like China, India, Brazil and newly industrialized Asia.But in addition the IMF saw slower-than-expected growth in the United States, Britain and France, among the major industrialized nations. The US forecast dropped 0.1% to 2% ; France was down 0.1% to 0.3%; and Britain was projected to grow at just 0.2%, compared with 0.8% forecast three months ago.The bank also said Spain's recession would persist through 2013, after having forecast in April that the country's economy would return to growth next year.On the bright side, forecasts for this year for Germany and Japan were revised higher -- to 1% and 2.4%, respectively, though the 2013 prediction for each was also trimmed slightly.Also getting an upgrade was the Middle East and North Africa region, much of which has been struggling through deep political turmoil in the past two years. The IMF said the region would grow about 5.5% this year, much better than the 4.2% predicted in April. The IMF said that major economies were making progress on cutting their fiscal deficit burdens, but that doing so remained hampered by more volatility and risk aversion in debt markets, which have sent the borrowing costs of the troubled eurozone periphery countries skyrocketing.The global lender reiterated its prescriptions of recent months: short-term fiscal balance targets for troubled economies like Spain and Italy can be de-emphasized to allow for growth while more focus is placed on medium-term adjustments and reforms."A steady pace of adjustment focused on the measures to be implemented rather than on headline deficit targets is preferable, especially in light of heightened downside risks to the outlook."Moreover, the IMF suggested, the political stress of too much austerity, set to meet fiscal targets, could backfire in countries with IMF or IMF-linked bailout programs, like Ireland, Portugal and Spain."The recent deterioration in the political and economic climate in Greece serves as a warning about the potential onset of 'adjustment fatigue,' which remains a threat to continued program implementation."

U.S. Stocks Retreat as IMF, Retail Data Spur Concern on Economy

 

U.S. stocks fell, following the best one-day gain in two weeks for the Standard & Poor’s 500 Index, as the International Monetary Fund cut its global economic forecast and retail sales unexpectedly dropped.General Electric Co. lost 1.3 percent after Morgan Stanley reduced its recommendation on the stock. Alpha Natural Resources Inc. declined 12 percent as Bank of Montreal cut its rating on the coal producer, citing potential financing issues. Visa Inc. and MasterCard Inc., the world’s biggest payment networks, rose at least 1.8 percent after agreeing to a settlement of at least $6.05 billion in a price-fixing case.The S&P 500 declined 0.3 percent to 1,353.2 at 1:43 p.m. in New York, trimming a drop of as much as 0.6 percent. The Dow Jones Industrial Average slipped 49.76 points, or 0.4 percent, to 12,727.33 today.“The retail sales gives you another indicator that uncertainty has showed up in the consumer side,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “We’re in a bit of the summer doldrums.”The S&P 500 is down almost 5 percent from a four-year high in April as economic data trails forecasts and investors brace for what is projected to be the first decrease in quarterly earnings since 2009. The Citigroup Economic Surprise Index for the U.S., which measures how much data from the past three months is beating or missing the median estimates in Bloomberg surveys, is at minus 64, near the almost 11-month low of minus 64.9 reached last week.Retail SalesU.S. retail sales dropped 0.5 percent in June, following a 0.2 percent decrease in May, Commerce Department figures showed today. The decline was worse than the most-pessimistic forecast in a Bloomberg News survey in which the median projection called for 0.2 percent rise.The IMF cut its 2013 global growth forecast as Europe’s debt crisis prolongs Spain’s recession and slows expansions in emerging markets. Growth worldwide will be 3.9 percent next year, less than the 4.1 percent estimate in April, the fund predicted in an update of its World Economic Outlook.Manufacturing in the New York region expanded in July at a faster pace than anticipated, signaling factories will keep contributing to growth. The Federal Reserve Bank of New York’s general economic index rose to 7.4 from 2.3 in June. The median forecast of 51 economists surveyed by Bloomberg News called for an increase to 4.0. Readings greater than zero signal expansion in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.Earnings SeasonEarnings beat estimates at 21 of the 32 companies in the S&P 500 that have reported quarterly results so far, data compiled by Bloomberg show. Profits probably decreased 2.1 percent in the second quarter, the first drop in almost three years, according to a Bloomberg survey of analysts.GE, the world’s biggest maker of jet engines, power generation equipment and locomotives, declined 1.3 percent to $19.52. The Fairfield, Connecticut-based company was cut to equalweight from overweight by Morgan Stanley, citing the stock’s higher valuation relative to peers with or without GE Capital Corp.Caterpillar Inc., the world’s largest maker of construction equipment, declined 1 percent to $81.28, while Boeing Co. fell 0.8 percent to $72.96 as industrial stocks led declines out of 10 groups in the S&P 500. Energy stocks were added 0.3 percent after earlier falling as much as 0.8 percent as the price of crude oil reversed a 0.8 percent decline to rise 0.5 percent to $87.57 a barrel.Coal StocksAlpha Natural Resources Inc. declined 12 percent to $6.74 as Bank of Montreal cut its rating to underperform from outperform, citing potential financing issues. Arch Coal Inc., the fourth-largest U.S. producer of the fuel, sank 3.9 percent to $5.90 after BMO cut the stock to underperform from market perform.MasterCard advanced 1.9 percent to $437.79 and Visa rose 1.8 percent to $126.32 after they agreed to settle a price- fixing case brought by retailers over credit-card swipe fees.Citigroup Inc., the third-biggest U.S. bank, advanced 0.7 percent to $26.83 after reporting second-quarter profit that beat analysts’ estimates on revenue from advising on mergers and underwriting stocks and bonds.Net income declined to $2.95 billion, or 95 cents a share, from $3.34 billion, or $1.09, a year earlier. Excluding accounting adjustments and a loss from the sale of a stake in a Turkish bank, earnings were $1 a share, compared with the average estimate of 89 cents in a Bloomberg survey of 18 analysts.Gannett Co., the owner of 82 daily newspapers including USA Today, rallied 2.5 percent to $14.66. The company reported second-quarter profit that topped analysts’ estimates, bolstered by growing Internet revenue. Excluding some items, profit was 56 cents a share in the period, beating the 53-cent average estimate by analysts, according to data compiled by Bloomberg.

 

The Ignominy of Being Poor in an Emerging Asia

 

Everybody's talking about Asia's meteoric rise, set against the apocalyptic backdrop of a crumbling Eurozone and the rhetoric of a done-for-good American economy, but why is it so hard to look behind the number-crunching banners of Asian economies that hide a worrisome reality. One that speaks of a glaring socio-economic intolerance that stems from growing income disparities and which rocks the cradle of social inequities that Asia has become synonymous with. Pepsi drinkers in India, today, easily outnumber those with access to clean, drinking water. Finding a working polyclinic in rural Indonesia, Thailand or Cambodia would be far tougher than procuring aphrodisiacs made out of crushed exotic animals. Paved streets are light years away in many parts of Asia. And those that exist have people pissing on them in the absence of access to proper sanitation. Travelers who have walked through the stinky lanes of New Delhi, Mumbai, Calcutta, Kathmandu, Karachi and Islamabad, know exactly what I am talking about. Everyday, thousands do it nonchalantly. No sweat at all. But who cares? Asian politicians? Not at all. In fact Asian GDP junkies have learnt by now, how to manoeuvre their luxurious sedans through the stench of piling trash and human waste. While it's true that emerging Asian economies have seen many cross the poverty line, a cursory glance still finds millions living a pitiable life. And as if living an undignified life was not punishment enough, poverty itself has been made an excuse by the 'haves' in Asia to disregard the 'have-nots'. To be poor in an emerging Asia is now an unspeakable misdemeanour, worse than it ever was. For countless Asians, poverty's curse is homicidal and far more embarrassing than any known Asian taboo. There is an appalling tolerance among the noveau rich for social anomalies such as bribery, dowry, arranged and forced marriages, female infanticide, honour killings and child labour, but no place for the poor and destitute. Poverty's scorn in metropolitan Mumbai or Manila is boorish and the indignity, piercing.For an impecunious person living under the shadow of absurd amount of foreign direct investments and scores of decked-up Asian headquarters of multinational companies, poverty puts a debilitating price on one's mere existence. One that enslaves the desperately poor either as domestic servants, dishwashers, rag-pickers or even as bonded child laborers. Born and brought up in Asia, I have either lived in or visited Asian cities that have unfailingly displayed disdain and contempt for the indigent. Hiring a haplessly poor woman at ruthlessly low wages, to work as a domestic maid and clean toilets, is taken for granted in many parts of South and East Asia. No shame, no remorse at all. And this intolerance for the deprived has only increased with every striking headline of the rising GDPs. On top of it, this economic intolerance of the poor has cemented all prevalent racial, religious, political, social and gender based prejudices and discrimination that plague Asian societies.While I do see more Mercedes and BMWs on the streets of India as many news reports indicate, I also see countless sleeping inside sewer pipes and sniffing industrial glue to beat hunger. For the downtrodden, the story remains the same; whether it is Philippines, Vietnam, Cambodia, Indonesia, China or Thailand. Poverty brings with it a disclaimer that robs the underprivileged of their basic dignity, respect and human rights. With a dismal human rights record, there isn't much hope for the victims of economic discrimination in Asia.So we see mansions built by construction workers who retire at night to their huts made out of disposed plastic bags and packaging material, super-fast highways laid down by men and women who toil relentlessly, all for one meal a day, and state-of-the-art luxury hospitals erected by those who have no access to health care and are guaranteed to be shooed away from these deluxe hospitals the moment they become operational. Wealth is being churned at a pace that shocks business journalists and titillates private fund managers; yet, it remains concentrated within a few iron hands. No wonder, despite amassing huge fortunes not many Asian multi-millionaires have come forth to share their bounty or create growth opportunities for their fellow citizens. The Li Ka Shings, Azim Premjis and Narayana Murthys are between few and far. Where have the rich and proud Indian and Chinese CEOs CFO's and venture capitalists gone into hiding? It is estimated that over 100 million Indians, mostly urban middle-class families, piggybacked on India's rising fortunes and leapfrogged to a better standard of living. However, the remainder of over a billion are yet to experience electricity, drinking water, health care and sanitation. In interior mainland China, millions are yet to be a part of its remarkable growth story, despite their city cousins toting around with Armani and Gucci handbags.The Indian rickshaw-puller, Chinese sweat-shop worker, Vietnamese paddy field farmer and the Indonesian mason are not at all concerned, whatsoever, with the disintegration of the Eurozone or the toxic debts of American banks. Not even with President Barack Obama's re-election bid. If only they could somehow escape the indignity of being caught in the wealth gap just for one day, they could live that day of their life honourably.