NEWS,27. AND 28.02.2013

News of the Day From Across the Globe

1 Premier ousted: Slovenia's Parliament ousted Prime Minister Janez Jansa and his conservative government Wednesday, designating a financial expert from the opposition to try to form a new administration. The moves come amid corruption allegations against Jansa and growing public anger over the struggling economy and austerity measures that have seen living standards fall and unemployment rise. The 55-33 no-confidence vote named Alenka Bratusek as prime minister-designate. Bratusek, 42, would be the first woman to lead Slovenia's government since its secession from Yugoslavia in 1991.

2 Iraq warning: Iraqi Prime Minister Nouri al-Maliki warned Wednesday that a victory for rebels in the Syrian civil war would create a new extremist haven and destabilize the wider Middle East, sparking sectarian wars in his own country and in Lebanon. The prime minister's remarks reflect fears by many Shiite Muslims in Iraq and elsewhere that Sunni Muslims would come to dominate Syria should President Bashar Assad be toppled. 

3 Corruption case: Vassilis Papageorgopoulos, the former mayor of Greece's second city, Thessaloniki, and two of his top aides were sentenced to life in jail Wednesday after being found guilty of embezzling almost $23.5 million in state funds. It's a rare conviction in a country where political corruption has contributed to Greece's dysfunction and economic decline.

4 Swiss shooting: A longtime employee opened fire at a wood-processing company in central Switzerland on Wednesday, leaving three people dead, including the assailant, in the country's second multiple-fatality shooting in two months, police said. Seven other people were wounded, six of them seriously, in the shooting at the premises of the company Kronospan, in the small town of Menznau. The incident occurred as the Swiss Parliament prepares to consider tightening some aspects of the country's famously lax gun legislation.

5 Shark attack: About 150 friends and family of 46-year-old Adam Strange wrote messages to him in the sand and stepped into the water Thursday at a New Zealand beach to say goodbye after he was killed Wednesday by a large shark. Strange, an award-winning television and short film director, was swimming near popular Muriwai Beach Wednesday when he was attacked by a shark that may have been 14 feet long. The fatal attack is one of only about a dozen in New Zealand in the past 180 years.

6 Lethal fire: A fire broke out at an illegal six-story plastics market in the Indian city of Kolkata on Wednesday, killing at least 19 people, police said. The blaze was likely caused by a short circuit, police said.

7 Lion gangster: Authorities have removed four lions and two bears from the Bucharest estate of a notorious Romanian gangster. Ian Balint, who reportedly used the animals to threaten his victims, was arrested Feb. 22 with dozens of others on charges of attempted murder, kidnapping, blackmail and possessing illegal weapons. Environmental authorities tranquilized the animals Wednesday and transported them to a zoo.

8 Tallest hotel: The JW Marriott's Marquis Dubai formally opened this week after gaining the title of tallest hotel from Guinness World Records. At 1,099 feet, the 72-story hotel towers over the skylines of most cities.

 

US economy shows strength

 

Even with automatic spending cuts looming, the outlook for the US economy brightened a bit Tuesday after reports showed that Americans are more confident and are buying more new homes.Home prices are also rising steadily, and banks are lending more. Such improvements suggest that the economy is resilient enough to withstand the deep government cuts that will kick in Friday.That's especially encouraging because uncertainty over the federal budget could persist for months."The stars are lining up for stronger private sector growth this year," said Craig Alexander, chief economist at TD Bank.Sales of new homes jumped nearly 16% in January to their highest level in 4 years, adding momentum to the housing recovery. Consumer confidence rose in February after three months of declines. And home prices increased in December from the same month in 2011 by the largest amount in more than six years.The upbeat economic news contributed to a rally on Wall Street. The Dow Jones industrial average jumped more than 100 points.Consumers still face numerous burdens. Among them is a sharp increase in gas prices. The national average for a gallon, $3.78 ($1 a litre), has surged 44 cents in a month.And Social Security taxes rose 2 percentage points beginning January 1. This year, the increase will cost a typical household that earns $50 000 about $1 000. Income taxes for the highest-earning Americans also rose.Both factors could reduce overall spending.On Friday, about $85 billion in automatic spending cuts are to kick in, and there's little sign that the White House and Congress will reach a budget deal to avoid them. The cuts will cause furloughs and temporary layoffs of government workers and contractors and sharply reduce spending on defense and domestic programs.For about 2 million long-term unemployed, benefits now averaging $300 a week could shrink by about $30. Payments that subsidize clean energy, school construction and state and local public works projects could be cut. Low-income Americans seeking heating or housing aid might face longer waits.Overall, the tax increases and spending cuts could shave up to 1.2 percentage points from growth this year, economists estimate. Alexander estimates that without the spending cuts or tax increases, the economy would expand more than 3 percent this year. Instead, he predicts growth of only 2%.But growth should accelerate later this year as the effects of the government cutbacks ease, he and other economists say. And several reports on Tuesday suggest that the economy's underlying health is improving despite the prospect of lower government spending and further budget stalemates:

• The Standard & Poor's/Case-Shiller 20-city home price index rose 6.8% in December from a year earlier. That was the biggest year-over-year increase since July 2006. Rising home prices tend to make homeowners feel wealthier and encourage more spending. They also cause more people to buy before prices rise further. And banks are more likely to provide mortgages if they foresee higher home prices.

• Consumer confidence rose after three months of declines, according to the Conference Board, a business research group. Confidence had plunged in January after higher taxes cut most Americans' take-home pay. The rebound, though, suggests that some consumers have begun to adjust to smaller paychecks. The consumer confidence index rose to 69.6 in February from 58.4 in January. That's higher than last year's average of 67.1.

• Bank lending rose 1.7% in the October-December quarter, the Federal Deposit Insurance said. It was the sixth rise in seven quarters. Banks made more commercial and industrial loans to businesses and auto loans to consumers. More lending means the Federal Reserve's policy of keeping interest rates at record lows will benefit more people. Chairman Ben Bernanke reiterated to Congress on Tuesday that the Fed's efforts are helping the economy and signaled that they will continue.

• Sales of new homes rose to a seasonally adjusted annual rate of 437 000, the Commerce Department said. That's the highest level since July 2008. The gain will likely encourage more construction. Higher sales are keeping the supply of new homes low, even as builders have tried to keep up. At the current sales pace, it would take only 4.1 months to exhaust the supply of new homes for sale. That's the lowest such figure in nearly eight years.

"Builders are not putting up homes fast enough to meet underlying demand," said Patrick Newport, an economist at IHS Global Insight.New homes have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90 000 in tax revenue, according to data from the National Association of Homebuilders.Construction hiring has picked up in recent months. The industry has gained 98,000 jobs since September, its best stretch since the spring of 2006 - before the housing bubble burst.

Will Italian Politics Be a Threat for International Financial Stability?

Mr. Grillo and the Five Star movement is part of a trend across the developed world, as electorates become disenchanted with established parties and vote for a protest party. From Occupy Wall Street to the Tea Party to the EU's Pirate Party, an increasing number of transatlantic voters tire of the options presented by established two party systems. This may be driven by the failure of governing parties to adapt to societal tensions raised by the current economic crisis. In that light, the strong protest vote in Italy should not be seen as an outlier.Despite the current uncertainty in the composition of the next government, Italy remains an important ally for the United States, and a key strategic partner in all future discussions about Europe and transatlantic relations. For this reasons America should follow carefully what happens in Italy. The demand for renewal and change that is the real message of recent elections is something too important to be considered just a local case. Understanding the political process of how Italian governments are formed is therefore key.On February 25th the results of the political elections in Italy stunned all commentators by presenting a country apparently deeply divided and a parliament that seems not to allow any reasonably stable coalition for leading the country.The polls gave a limited majority to the leftwing coalition (29.5% in the lower house) leading on Silvio Berlusconi's rightwing coalition (29.1%). But the surprise was the significant result of the "Five Stars movement" of Mr Beppe Grillo (25.5%) and the relatively low result achieved by current Prime Minister Mario Monti (10.5%).The new electoral law (approved late in 2012, just few months ahead of the elections), allows the left to gain a solid majority in the lower house (with 55% of the legislature, although they led the right-wing coalition by only 0.4% of the vote), but in the upper house, there is an apparent stalemate, as the left elected 123 senators, the right 117, Five Stars 54 and Monti 18. A coalition government must include two of the first three parties mentioned, as a government requires a majority in both houses.The problem is that, at the moment, there is not much appetite for an agreement. The left-wing coalition does not seem interested in a deal with Berlusconi and the Five Stars leader, Mr Beppe Grillo, suggested that he would not make any deal with anyone at all. It now appears that Mr Bersani would like to open a bridge to Mr Grillo rather than trying a grand coalition with Mr Berlusconi. It is unclear if he will succeed, but in any case it will be hard to imagine that Italy will have a strong government in this situation.As the new parliament assumes office on March 15th, there is time for negotiations and compromise. But in the meantime, talks need to be held also in order to designate the new leadership of the lower house and Senate and its constituent committees and to elect the new president of the Republic, as the incumbent's mandate is expiring in May.Who will govern Italy in the meantime? Currently, there is still a caretaker government in office, which is the existing cabinet of Prime Minister Monti. It is nevertheless expected that after the new parliament is fully operational, the president of the republic, Mr Giorgio Napolitano, will try to facilitate the forming of a government and is likely to give a mandate to a designate Prime Minister. As Bersani's leftwing coalition has the majority in the lower house, unless the coalition otherwise indicates, Bersani remains the likely next Prime Minister. But with no agreements for a majority, he will be rather unlikely to succeed.The Italian system is a parliamentary democracy, and the new government, that formally takes office at the moment the ministers are sworn in, needs to win a vote of confidence from both houses of the parliament immediately after taking office. In the past, the tradition has been that, if the designated Prime Minister, after having made his consultations, realizes that there is no support for his government, he will indicate so to the President and resign his post. That meant that the previous government remained as caretaker until a new Prime Minister was selected and then formed the government, or, if no solution was available, the president of the republic called for new elections and dissolved the government.Currently, Monti stays in office as Prime Minister until an alternative is selected, and the need for stability would suggest that until a solution is found the best is for him to stay. However, things are so uncertain, no one can predict when or if a new government would be formed.

Wall Street gains despite IMF warning

Wall Street advanced, with gains tempered by expectations that Congress will not act to stop automatic federal spending cuts that are widely expected to put the brakes on the pace of expansion in the world's largest economy.The International Monetary Fund warned it will downgrade its economic forecast for the US if US$85 billion of schedule federal spending cuts take effect on March 1.If all cuts go ahead, the IMF would lower its current estimate for a 2% expansion for US gross domestic product this year by at least 0.5%, IMF spokesman William Murray told reporters at a news briefing. Global growth also would be hit.In afternoon trading in New York, the Dow Jones Industrial Average rose 0.14%, the Standard & Poor's 500 Index gained 0.18%, while the Nasdaq Composite Index climbed 0.37%.Expectations of a slowdown in the pace of growth buoyed US Treasuries.Commerce Department data released today showed GDP expanded at an annual rate of 0.1% in the final three months of 2012, compared with a previously estimated 0.1% contraction. That was below the 0.5% growth forecast by economists polled by Reuters."It's pretty well baked into the cake that no action is likely to be taken on the sequestration tomorrow," Thomas Simons, a government debt economist in New York at Jefferies Group, one of 21 primary dealers that trade with the Fed, told Bloomberg. "GDP was weaker than expected. It's nice to see the negative sign go away, but it's still pretty weak."The negative sentiment was offset by the latest news on the labour market. Applications for jobless benefits surprisingly dropped 22,000 last week to 344,000. Economists polled by Reuters had expected first-time applications to fall to 360,000.Shares of JC Penney sank, last down 14%, after the company reported a net loss of US$552 million in the quarter ended February 2, compared with US$87 million a year earlier.In Europe, the Stoxx 600 Index finished the day with a 1% gain from the previous close. The index has advanced for the ninth straight month and is up 3.7% so far this year, according to Bloomberg.Good news on Europe's largest economy helped as German unemployment posted a surprise drop February.Benchmark stock indexes rose in Frankfurt and Paris, both advancing 0.6%, while the UK's FTSE 100 added 0.6%.The political impasse in Italy remains a concern for all of Europe. In Berlin, Italian President Giorgio Napolitano said the formation of a new government would take time and that it's important to keep in mind that the Monti government remains in office for now.

NEWS,05.08.2012

Monti fears Europe could tear apart

Italian Prime Minister Mario Monti has voiced fears that tensions sparked by the eurozone crisis have already turned countries against each other and must not be allowed to rip Europe apart.Asked about resentment in Italy towards Germany and complaints of German arrogance in its handling of the debt crisis, Monti told Monday's edition of the German news magazine Der Spiegel that he was "concerned".He said he had talked about growing resentment in Italy not only towards Germany and at times Chancellor Angela Merkel but also towards the EU and the euro, with Merkel herself, according to an advance copy of Der Spiegel.But he said the problem went far beyond the relationship between Germany and Italy."The pressures, which have accompanied the eurozone in recent years, already bear the traits of a psychological breakup of Europe," Monti said. "We must work hard to contain it."And he warned that if the euro became a reason for Europe to drift apart, "the foundations of the European project" would be destroyed.The Italian prime minister also said he welcomed comments by the European Central Bank last week that the government bond market, where Italy and Spain's borrowing costs have soared, was distorted.The problems behind this, he said, must be quickly resolved to prevent further uncertainty about the ability of the eurozone to deal with the crisis.He also called on government chiefs to maintain clear room for manoeuvre in relation to their national parliaments. "If governments were to let themselves be bound completely by the decisions of their parliaments without maintaining their own scope for negotiation, Europe is more likely to break up than see closer integration," he warned.

Cayman Expat Tax: Haven's Planned Fee Could Damage Country's Economy

 

One among thousands of lawyers, accountants and other workers from around the globe, Paul Fordham is escaping cold weather and the taxman by working in a sunny British territory in the Caribbean. He and many others, however, worry they soon may be looking for another haven.The Cayman Islands have lost some of their allure by proposing what amounts to the territory's first ever income tax. And it would fall only on expatriate workers like Fordham who have helped build the territory into one of the most famous or, for some, notorious offshore banking centers that offer tax advantages for foreign investment operations."The discriminatory nature of the tax has stirred up so much uncertainty for people who moved here thinking they knew what they were getting into," said Fordham, an insurance sector specialist from the London area who moved to the main island of Grand Cayman 6 1/2 years ago. His recent attempt to sell his house collapsed because an interested buyer was spooked by the prospect of the islands' first direct tax.In the seaside capital of George Town, where financial experts in casually elegant clothes unwind over beer or white wine, conversations have been about little else since July 25, when Premier McKeeva Bush declared his intention to impose a 10 percent income tax on expatriate workers as part of an effort to bail the government out of a financial hole.Bush refuses to call it a tax, preferring instead to dub it a "community enhancement fee." The 10 percent payroll levy, as things stands now, will be imposed Sept. 1 on expatriates who earn more than $36,000 a year.It's a monumental shift for the territory of 56,000 people where zero direct taxation, friendly regulations and the global money they lured in recent decades helped transform the economy of the island chain, a dependency of Jamaica until 1959, from a reliance on seafaring, fishing and rope-making.Government data show 91,712 companies were registered as of March 2011. A total of 235 banks, including most of the world's top 50 banks, held licenses at the end of June as did 758 insurance companies. Assets for the registered companies totaled $1.607 trillion last September, down from $1.725 trillion a year earlier.Bush says the tax is necessary to meet British government demands that the territory diversify its sources of revenue beyond the fees and duties it now relies on, that have left his administration with a budget deficit."This is not an us-and-them story, no matter how many screaming headlines call this an expat tax," Bush told a crowd of critics and supporters late Wednesday during a four-hour meeting in a school gym, where each side vented complaints against the other.Opponents argue that a social contract may have been broken by targeting only the roughly 5,875 expatriates who are paid more than $36,000 a year, saying it could drive some away and hurt the financial services and tourism sectors that are now the pillars of the Caymans' economy. Government reports say a majority of the wealthiest residents are Cayman citizens.Numerous competing tax havens, from Jersey to the British Virgin Islands, impose income taxes on workers, but not on one sector of the population. Under a controversial "rollover" immigration policy, expatriates in the Cayman Islands already are required to leave the islands for a year after living and working locally for a period of seven years.Richard Murphy, director of British-based policy consultants Tax Research LLP, thinks fears are overblown that a direct tax on expatriates will cause an exodus."The finance industry in Cayman exists to sell to foreigners, and, like it or not, many are heavily invested in Cayman structures. They'll bear the additional price," Murphy said in an email.But leading businessmen argue that indirect taxes such as work permit fees, stamp duty on real estate deals and duties on imported goods already make the Caymans a relatively pricey place to do business. Work permit fees are typically 5 percent to 15 percent of salary and would remain along with the income tax, raising an expat worker's tax costs to between 20 percent and 30 percent of salary.Anthony Travers, chairman of the Cayman Islands Stock Exchange, described the tax plan as "probably the single greatest existential threat to the Cayman Islands in over 200 years.""The whole economic structure in the Cayman Islands has been based on having no direct taxation," he said in a phone interview.Many people complain that Bush's proposal was made without public consultation and note that it came roughly three years after a government-commissioned report said a payroll tax combined with the work permit fees would make the Caymans less competitive in the market for skilled professionals.And it's not just finance types who are troubled. At a small beach in downtown George Town, local fishermen gutted glistening jacks and snappers debated the merits of the new tax. They agreed that overspending and excessive hiring by the government was behind the islands' financial difficulties."The way I see it, this tax on expats is causing a division in this society and that's not good. It's too much spending by the government that got us here," said fishing boat captain Dennis Downs, sitting next to a table displaying the morning catch.Bush said he is looking for any feasible alternative for solving the government's revenue problems and rumors are swirling that he may withdraw the tax proposal because of the heated reaction.On Saturday, he told local TV station Cayman 27 that he was open to recasting the "community enhancement fee" on expats but only "if a solution can be found that does not affect ordinary Caymanians."Even if it is revoked, some believe damage has already been done."It has stirred up so much uncertainty," said Fordham. "It's hard to say if this place could ever be the same."

Venezuela Presidential Elections: Thumbprint Readers Stir Vote Fairness Fears

 

With President Hugo Chavez in his tightest re-election race yet, some of his opponents are warning that the use of thumbprint readers at Venezuelan ballot boxes could scare away voters, adding to fears about the fairness of the Oct. 7 vote.The country's electoral council has long used fingerprint scanners at the entrance to polling places to ensure voter identification. But this year, the readers will be hooked to the electronic voting machines themselves. Citizens must press down a thumb to activate the ballot system.Many say they fear that could let the government know how each person votes."If the thumbprint makes the machine work, how do you know it doesn't end up being recorded who you voted for?" asked Jacqueline Rivas, a 46-year-old housewife.Experts say there is no evidence the system has ever been used to reveal voters' preferences, and most opposition leaders, who stand to suffer if supporters don't vote, have been eager to assure the system is safe.But worries have persisted. Many Venezuelans say they see a pro-Chavez bias in the National Electoral Council and remember a previous scandal in which the names of Venezuelans who petitioned to recall Chavez in 2004 were publicly leaked. Hundreds of people alleged they were fired or suffered discrimination after their names turned up on the so-called "Tascon List," named after a pro-Chavez lawmaker who released it.Chavez later urged supporters to "bury the list" and put it behind them.Worries about the government obtaining the names of anti-Chavez voters led the opposition to destroy many lists of voters after a February primary, flouting a Supreme Court ruling that the lists should be turned over to the electoral council."A government that has fired people for thinking different, for voting different, that drew up the Tascon List and that puts out thumbprint machines, that puts in people's minds ... makes them fear the thumbprint," said Ramon Muchacho, an opposition politician.Opposition presidential candidate Henrique Capriles and his campaign aides have sought to assuage fears, saying that they are sure voters' choices will remain secret and that no one should cave to any government attempts at intimidation.Others who question the thumbprint readers include the vote watchdog group Sumate. Ricardo Estevez, the group's executive director, said past checks of the system have shown that safeguards are in place to ensure secrecy. "But the problem is the perception," Estevez said.When a voter presses a thumb to the reader, the image is instantly checked against a government database of thumbprints, which are collected when citizens apply for national identification cards.The National Electoral Council has been touting the system in television ads that show a smiling man pressing a thumb onto the screen as a voice assures voters that the automated identification system is a "secure key to vote."Sumate and other critics question how effective the system is, pointing to the statements by election officials that the thumbprint data are incomplete and saying the voter rolls haven't been audited to weed out errors and duplicate registrations.Diego Arria, a Chavez opponent who is a former Venezuelan ambassador to the United Nations, said the thumbprint system won't ensure that each voter casts only one ballot. "But it will work for something, and it's the fundamental aim: to intimidate voters."In addition to public employees who may fear for their jobs, there are also more than 1 million Venezuelans who have given their thumbprints when they applied for public housing, Arria said. "It serves to scare them."Even critics who say they're confident the vote will remain secret worry about the fairness of the election campaign, saying the electoral council tilts in Chavez's favor.Four of the five members of the council are either Chavez allies or perceived as favoring the president. The National Assembly, where Chavez backers have long held a majority, appoints the council members, who include a former congresswoman from Chavez's party and a former minister in his Cabinet. The council's former chief, Jorge Rodriguez, is now Chavez's campaign manager.The council has largely ignored opposition complaints that Chavez is hogging campaign airtime and abusing his presidential authority by regularly forcing all Venezuelan TV and radio stations to interrupt programming for his marathon speeches.Last week, council Vice President Sandra Oblitas accused Capriles of "contempt of the electoral authority" for ignoring council warnings about using a baseball cap with the colors of the national flag. Campaign regulations ban use of the flag's colors in electoral propaganda, but Capriles maintains he has done nothing wrong."In Venezuela, there's no electoral referee. There's a ministry of elections of the regime," Arria said. "When such a sophisticated system is put in their hands, it makes it more dangerous. "Tibisay Lucena, the president of the electoral council since 2006, insists the body is fully independent and defends the country's automated voting system, which also involves manual auditing of paper receipts printed out by the ballot machines."The Venezuelan electoral process is one of the most audited in the world," Lucena told reporters recently. "We have controls that make impossible any attempt to interfere with the public will."Capriles has been trailing in the polls, though the margin has varied widely in surveys. The Venezuelan polling firm Datanalisis found Chavez with a 15-point lead in one June poll, but also said 23 percent were undecided or didn't reveal a preference. The poll had a margin of error of nearly 3 percentage points."Beyond the automated system and other factors, we have no doubt that if we have low abstention and the presence of witnesses in all the voting centers, we're going to win," said Teresa Albanes, who leads the opposition's election commission.