NEWS,07.07.2013

Inquiry into Vatican bank chief dropped

Italian prosecutors have dropped inquiries into the Vatican bank's former president, Ettore Gotti Tedeschi, after concluding a money laundering investigation that did implicate two of his juniors, judicial sources say.
Prosecutors accused the bank's director general, Paolo Cipriani, and its deputy director, Massimo Tulli, who both earlier resigned, of "authorising illegal financial transactions", the sources said.

A judge will now decide whether to proceed to a trial of Cipriani and Tulli.

The two directors left the bank on Monday last week after the arrest of a senior cleric who is accused of plotting to smuggle millions of euros into Italy from Switzerland.
Gotti Tedeschi was ousted from the bank last year.
He said earlier he had been dismissed because he wanted more transparency, but the board of directors said he had neglected his duties.
The Vatican bank, known formally as the Institute for Works of Religion (IOR), has been a byword for opaque and secretive dealings for decades and its future has been in question since the appointment of Pope Francis in March.
Italian investigators believe the way the bank operated may have facilitated money laundering, according to a document summing up their preliminary inquiries that was leaked to Italian newspapers on Saturday.

Snowden: Western states in bed with NSA

Fugitive intelligence leaker Edward Snowden said the US National Security Agency operates broad secret spying partnerships with other Western governments now complaining about its programmes, in an interview published on Sunday.
Snowden said in comments made before his exposure of US espionage practices came to light last month and printed in German news weekly Der Spiegel that NSA spies are "in bed together with the Germans and most other Western states".
In remarks published in German, Snowden said an NSA department known as the Foreign Affairs Directorate coordinated work with foreign secret services.
The partnerships are organised so that authorities in other countries can "insulate their political leaders from the backlash" if it becomes public "how grievously they're violating global privacy", he said.
The interview was conducted by US cryptography expert Jacob Appelbaum and documentary filmmaker Laura Poitras using "encrypted emails shortly before Snowden became known globally for his whistleblowing", Spiegel said.
On cooperation with Germany's BND foreign intelligence agency, Snowden said the NSA provides "analysis tools" for data passing through Germany from regions such as the Middle East.
The US government has revoked the passport of Snowden, a former NSA contractor who is seeking to evade US justice for leaking details about a vast US electronic surveillance programme to collect phone and internet data.
He has been stranded at a Moscow airport for two weeks but three Latin American countries have now offered him asylum.
His claims about widespread US spying on Western partners have sparked uproar among European allies in particular and threatened to derail talks on the world's largest free-trade zone due to start on Monday.
German Chancellor Angela Merkel spoke with US President Barack Obama on Wednesday and agreed to a "high-level meeting" between US and German security officials in the coming days to address intelligence matters.

Brazil Target Of U.S. Spying, Globo Newspaper Reports

The U.S. National Security Agency monitored the telephone and email activity of Brazilian companies and individuals in the past decade as part of U.S. espionage activities, the Globo newspaper reported on Sunday, citing documents provided by fugitive Edward Snowden, a former NSA intelligence contractor.

The newspaper did not say how much traffic was monitored by NSA computers and intelligence officials. But the Globo article pointed out that in the Americas, Brazil was second only to the United States in the number of transmissions intercepted.

Brazil was a priority nation for the NSA communications surveillance alongside China, Russia, Iran and Pakistan, Globo said.

In the 10-year period, the NSA captured 2.3 billion phone calls and messages in the United States and then used computers to analyze them for signs of suspicious activity, the paper said. In the United States, the NSA used legal but secret warrants to compel communications companies to turn over information about calls and emails for analysis.

Some access to Brazilian communications was obtained through American companies that were partners with Brazilian telecommunications companies, the paper reported, without naming the companies.

The Globo article was written by Glenn Greenwald, Roberto Kaz and José Casado. Greenwald, who works for Britain's Guardian newspaper and lives in Rio de Janeiro, was the journalist who first revealed classified documents provided by Snowden, outlining the extent of U.S. communications monitoring activity at home and abroad.

After providing the information to Greenwald, Snowden fled the United States for Hong Kong and was most recently seen in the transit area of the Moscow airport.

Snowden's U.S. passport has been revoked. He has made asylum requests to several countries, including Ecuador, Venezuela and Bolivia. Three countries - Bolivia, Venezuela and Nicaragua - have offered to give Snowden asylum.

IMF Chief Christine Lagarde Calls U.S. Budget Cuts 'Inappropriate'

The U.S. federal budget cuts are an inappropriate measure that will weigh on potential growth, IMF chief Christine Lagarde said on Sunday, urging Washington to present "credible" fiscal plans.
Washington enacted across-the-board federal government spending cuts, known as sequestration, in March because Congress could not agree on an alternative.
It has meant everything from furloughs for air traffic controllers to fewer planes for the U.S. Navy to smaller subsidies for farmers.
"The budgetary procedure that is in place in the United States, which leads to a budgetary adjustment, seems to us absolutely inappropriate ... because it blindly affects certain expenditures that are essential to support medium and long term growth," Lagarde told an economists' conference in Aix-en-Provence, southern France.
Her comments echoed those last month from the IMF itself, which said: "The deficit reduction in 2013 has been excessively rapid and ill-designed."
In its annual check of the health of the U.S. economy, the IMF forecast economic growth would be a sluggish 1.9 percent this year. The IMF reckons growth would be as much as 1.75 percentage points higher if not for the rush to cut the government's budget deficit.
While the budget cuts that took hold on March 1 do not appear to be hitting government payrolls directly so far, some economists said they were weighing on private employers and helped explained a sharp slowdown in hiring in the health care and social assistance sector.
Lagarde urged Washington  as well as Tokyo to come up with fresh plans to cut their debt.
Japan has pledged to halve the primary deficit the budget excluding new bond sales and debt servicing by March 2016 and bring it to surplus by March 2021 to contain its ballooning public debt. It will detail how it wants to accomplish that in a medium-term fiscal plan expected in August.
"It is indispensable that these countries indicate for the long and medium term predictable, credible fiscal policies, anchored in legislation that will not be challenged, which will bring the deficit down in a way that will reverse the debt trajectory to a downward trend," she said.

Bundesbank Chief: ECB Cannot Solve Euro Zone Crisis

The European Central Bank cannot solve the euro zone crisis, Bundesbank chief Jens Weidmann told economists on Sunday, pressing the bloc's governments to get their economies in shape and tighten their fiscal rules.

Weidmann addressed an economists' conference in Aix-en-Provence, southern France, only three days after the ECB broke with precedent by declaring that it intended to keep interest rates at record lows for an extended period and may yet cut further.

"Monetary policy has already done a lot to absorb the economic consequences of the crisis, but it cannot solve the crisis," Weidmann said in his speech.

"This is the consensus of the Governing Council. The crisis has laid bare structural shortcomings. As such, they require structural solutions."

Weidmann, widely recognised to be the most hawkish member of the ECB's 23-man Governing Council, does not want the bank to intervene too strongly in tackling the bloc's economic crisis, thereby allowing governments to soft-pedal reforms.

He spoke a day after fellow ECB policymakers Christian Noyer and Benoit Coeure said the bank's decision to abandon its customary insistence that it never precommits on policy was a change in communication but meant no change from its strategy, which is based on monitoring inflation, real economy and monetary developments.

"The euro zone is on the mend, it must be at peace, protected, be allowed to heal," Coeure told the same conference on Sunday to explain the ECB's decision to issue such forward guidance, while urging governments to tackle structural problems.

The EU's top economic official, Olli Rehn, welcomed the ECB's move, saying the step - taken in response to turbulence caused by the U.S. Federal Reserve's plan to slow monetary stimulus - was needed to preserve recovery in Europe.

"The United States and Europe are at different points of the economic cycle. While the U.S. has a more restrictive approach, Europe needs to continue with a more accommodative policy," the EU monetary affairs commissioner said.


FISCAL RULES

While he does not see sufficient support in the euro zone for governments to give up sovereignty on fiscal matters to forge a fiscal union to prevent such crises in the future, Weidmann pressed them to stiffen Europe's fiscal rules.

"To fully unleash the common currency's potential, efforts are needed on two fronts: structural reforms as well as the abolition of implicit guarantees for banks and sovereigns (government bonds)," Weidmann said.

"In addition to stronger rules, we need to make sure that in a system of national control and national responsibility, sovereign default is possible without bringing down the financial system. Only then will we really do away with the implicit guarantee for sovereigns."

The Bundesbank chief also called for euro zone governments to sever what he describes as the "excessively close links" between banks and sovereign governments, saying that European banks hold too many of their own governments' bonds.

"This is because banks do not have to hold any capital against their government debt, as the risk-weight assigned to sovereign bonds is zero.

To counteract excessive investment in sovereign bonds, Weidmann believes that the capital rules need to be changed to take account of risk and exposure levels.

"Only then will banks be able to cope with the repercussions of sovereign default."

Countries Spending the Most on the Military

For the first time since 1998, global military spending is down. This coincides with a major decline in U.S. spending, which fell by more than $40 billion between 2011 and 2012. Even with this decline, however, the United States still had a military budget four times larger than China, the next biggest spender.

 

The Stockholm International Peace Research Institute (SIPRI) measures annual military spending for most of the world’s armed countries. According to SIPRI, the United States spent $668 billion, more than the combined budgets of the next 10 countries. While the U.S. budget has declined, some of the other global powers, including Russia and China, have ramped up spending. Based on SIPRI’s 2012 data, these are the countries spending the most on the military.
The major decline in the U.S. military budget was the result of two factors, explained Carina Solmirano, senior researcher at SIPRI’s Military Expenditure and Arms Production Programme. The first is the severe decline in overseas military spending after America’s eight-year war in Iraq ended in 2011, as well as the continued wind down of operations in Afghanistan, Solmirano said.
“The second reason,” said Solmirano, “is purely economics. … The United States is facing a huge deficit crisis, and as part of the agreements in 2011 and 2012, the Department of Defense agreed to start a reduction of expenditure quite a significant reduction.” Solmirano added that barring the emergence of a new conflict, U.S. military spending likely will continue to fall.
Short-term changes in military spending, like the nearly 6% decline in the United States, often go hand-in-hand with periods of economic growth or crisis. Indeed, spending among nearly all the top European military powers, including Italy, France and the United Kingdom, declined last year.
Meanwhile, China went against the global trend by increasing its spending by nearly 8% between 2011 and 2012, and by more than 47% since 2008. Part of this increase is for geopolitical reasons, explained Solmirano, who added the increase in spending has “been parallel to its increase in economic power as well.”
Other nations, while not the biggest spenders overall, have much larger military budgets relative to the size of their economies. As of 2012, the United States spent 4.4% of its gross domestic product (GDP) on the military. In countries like Saudi Arabia and Oman, military costs amounted to more than 8% of GDP. Part of this, explained Solmirano, has to do with the consistently tense security situation in the Middle East. She added that countries like Saudi Arabia are able to fund massive militaries with substantial oil revenue.
24/7 Wall St. reviewed the 10 countries that spend the most on their military in 2012, based on SIPRI’s measure of military spending in more than 130 nations. We also reviewed SIPRI data on military exports and imports, as well as military expenditure as a percentage of GDP. From Globalfirepower.com, we reviewed statistics on military size and strength, based on the most recent available data. We also considered GDP and GDP growth figures from the International Monetary Fund (IMF).

NEWS,27 AND 28.05.2013

Europe needs a youth jobs plan - govts

Europe must urgently tackle youth unemployment, the French, German and Italian governments said on Tuesday, urging action to rescue an entire generation who fear they will not find jobs.
Ministers called for a mixture of measures including helping small companies and boosting apprenticeships.
Some 7.5 million Europeans aged 15-24 are neither in employment nor in education or training, according to EU data. Youth unemployment in the EU stood at 23.6% in January, more than twice as high as the adult rate.
"We have to rescue an entire generation of young people who are scared. We have the best-educated generation and we are putting them on hold. This is not acceptable," Italian Labour Minister Enrico Giovannini told a conference in Paris.
Germany in particular, weary of a backlash as many in crisis-hit European countries blame it for austerity, has over the past weeks taken steps to tackle unemployment, striking bilateral deals with Spain and Portugal.
Its labour and finance ministers told the conference that, to help young people find jobs, Europe must continue on the path of structural reforms to boost its competitiveness as well as make good use of available EU funds, including €6bn that leaders have set aside for youth employment for 2014-20.
"We need to be more successful in our fight against youth unemployment, otherwise we will lose the battle for Europe's unity," German Finance Minister Wolfgang Schaeuble said.
While Germany insists on the importance of budget consolidation, Schaeuble spoke of the need to preserve Europe's welfare model.
If US welfare standards were introduced in Europe, "we would have revolution, not tomorrow, but on the very same day," Schaeuble told students at the Sciences PO political science institute hosting the conference.
While all agreed on the urgency needed to tackle youth unemployment, ministers offered no concrete plans, insisting Europe must be pragmatic and work on various strands.
Schaeuble said this was why Germany had also decided to strike deals with countries such as Spain and Greece.
"Let's be honest, there is no quick fix, there is no grand plan," said Werner Hoyer, head the European Investment Bank.
Together with ministers, he said policies aimed at boosting youth employment must focus on small and medium-sized enterprises as they are the main entry point to the labour market for most.
More than half of Spain's under 25-year-olds are jobless, as are nearly 40% in Portugal. In Greece, youth unemployment shot to a record 64% in February.
In March 2013, the lowest youth unemployment rates were in Germany and Austria, both below 8%, highlighting the wide disparities within the EU.
The youth employment crisis will be a central theme of a June EU leaders' summit, and German Chancellor Angela Merkel has invited EU labour ministers to a youth unemployment conference in Berlin on July 3.
Following up on an idea aired earlier this month, French President Francois Hollande urged the euro zone to work towards a joint economic government with its own budget which could take on specific projects including tackling youth unemployment.

Bashir threatens to cut South Sudan oil

Sudanese President Omar al-Bashir warned on Monday he will order the flow of oil from South Sudan to be cut off if Juba provides assistance to rebels in South Kordofan and Darfur.
Bashir said he would "completely close the pipeline" that carries oil from South Sudan to ports on Sudan's Red Sea coast.
He was speaking at a ceremony after the army recaptured Abu Kershola town in the far north of oil-rich South Kordofan, which rebels seized a month ago.
In March Sudan and South Sudan, which split from Khartoum in July 2011, signed detailed timetables to resume the flow of South Sudan oil through a major pipeline in the north that runs to a port on the Red Sea, and eight other pacts to normalise relations.
Bashir said on Monday that all of the nine agreements must be respected.
"Failure to abide by any agreement will nullify the nine accords," he said.
Bashir's remarks come less than a month after the Khartoum government announced that South Sudanese petroleum had returned to Sudan's main Heglig facility.
Heglig, along the disputed border with South Sudan, is where the export pipeline begins a journey of about 1 500 kilometres (930 miles) to the Port Sudan terminal on the Red Sea.
The pipeline will carry oil that will bring billions of dollars in revenue to both impoverished nations once exports resume.
But Khartoum accuses South Sudan of backing rebels fighting in South Kordofan and Blue Nile states as well as in Darfur claims which Juba denies.
Gibril Adam, a spokesperson for the rebels, said the fighters pulled out of Abu Kershola to ease a government blockade on the town that was taking its toll on residents there.

Crisis-hit Italians swap cars for bikes

Bikes are outselling cars in cash-strapped Italy, but while cyclists in Milan say their city is ready for a two-wheel lifestyle, there are daily nuisances for riders on Rome's busy streets.
Some cities in Italy have bike-sharing initiatives, bike paths and public awareness schemes, while cyclists are still barely tolerated in others.
Giulietta Pagliaccio, head of the Italian Federation of Friends of the Bicycle, said: "The economic crisis has had repercussions for everyone, including in transport.
"There's been a small revolution in terms of lifestyle.
"We have seen a lot of people who have re-discovered this means of transport because it's ease, it's simplicity, its speed for short distances... " she said.
There were 2 000 more bicycles sold than cars in Italy in 2011 - a differential that rose to more than 200 000 units last year, according to figures from an association of biking businesses and the transport ministry.
The car sector has been hit by what the head of auto giant Fiat, Sergio Marchionne, dubs "Carmageddon" - with a 20% drop in sales in 2012.
Pagliaccio said Rome was a particularly "difficult" city for cyclists and that in general conditions were worse in the southern half of the country, with poorer quality roads and few bicycle paths.
Benefits
She said mentalities were beginning to change, except for a few motor die-hards "who would drive from their bedroom to the kitchen if they could" - but that politicians remained "very behind" in terms of bike-friendly policies.
"They are afraid of losing votes.
"It's terrifying since everything is done in this perspective, without a long-term urban vision," she said.
Piero Nigrelli, head of bicycles of an association of biking businesses, said it was "breathtaking to what point politicians lack awareness of the bicycle's value".
He said Germany boasts about seven million cycling tourists a year who generate €9bn in turnover and only "a modest investment in bike paths" would be needed to bring such benefits to Italy.
In the Italian capital, those who use existing routes complain of daily trials, from junk strewn across the paths, to stretches along the riverbank which periodically flood and in one case a path blocked by a sprawling Roma camp.
Famed for its annual Giro d'Italia bike race, Italy has yet to embrace bicycles as a form of transport, though a "Bikemi" bike-sharing scheme in Milan has been enthusiastically received by locals and sales in foldable models are on the up.
Specialist shops in the economic capital have begun stocking bikes specifically designed for urban life, such as the British Brompton model, which folds up neatly and has a handle so it can be pulled along like a suitcase.
The world's oldest bicycle-making company, Bianchi, famed for kitting out biking champions such as Fausto Coppi, has branched out into electric bicycles to meet a growing demand from Italians keen to swap four wheels for two.
"Customers are asking now for high-range commuter models...they are looking for a long-term investment that supports the idea that they are turning away from the car," said Bob Ippolito, head of Bianchi.
Commuter bikes are now the company's fastest selling models - up 35% last year - which is partly because some customers "instead of having two cars, now prefer to have a car and a bicycle", he said.

Romanians protest shale gas plans

Thousands of Romanians protested on Monday against plans by the US company Chevron to explore for shale gas in eastern Romania.
"I have three children and I want them to grow up within a safe environment with clean water. Exploring for shale gas threatens to contaminate ground water," Alina Secrieru, a 39-year old nurse from the Barlad region told AFP.
"No fracking", "Chevron go home", "We say no to shale gas", read some of the banners carried by protesters who came from Barlad and surrounding villages.
Chevron obtained a vast concession in this poor and rural area of Romania to prospect for shale gas.
"This area survives on agriculture. If our water gets contaminated by the extraction of shale gas, agriculture will die and this area as well," said Constantin, a water specialist who was among the protesters.
He refused to give his last name out of fear of losing his job as most of the local politicians are now defending shale gas drilling.
Chevron has said in the past that all its activities "have, and will continue to be conducted in compliance with Romanian laws, EU requirements and stringent industry standards."
Shale gas drilling has fuelled controversy around the world.
The technique to extract the gas, hydraulic fraction or fracking, has been banned in countries such as France and Bulgaria but is widely used in some US states.
Fracking is a process whereby liquid products, including water and chemicals, are pumped deep into oil or gas-bearing rock to cause fractures and release the hydrocarbons.
Environmentalists say the method poses serious threats that include contaminating ground water and triggering earthquakes.
Romania together with Britain, Hungary, Poland and Spain strongly pleaded for developing shale energy during the last European council on energy.
Protesters lashed at centre-left Prime Minister Victor Ponta, accusing him of flip-flopping on his position against shale gas.
Ponta, in power since May 2012, had slammed the previous government's decision to grant Chevron and other oil groups concessions to prospect for shale gas.
His government last year adopted a moratorium on drilling, putting Chevron's operations on hold.
But since the moratorium expired in December, Ponta said he was in favour of exploration.
"Politicians have let us down but we want to remind them that the people in this area are against the exploration of shale gas. People here care about their environment" said Lulu Finaru, a notary who helped organise the protest.
A US Energy Information Administration study said the joint reserves for Romania, Bulgaria and Hungary were around 538 billion cubic metres (19 trillion cubic feet), among the biggest in eastern Europe.

China 'steals' Australia spy agency plans

Chinese hackers have stolen top-secret blueprints to Australia's new intelligence agency headquarters, a report said on Tuesday, but Foreign Minister Bob Carr insisted ties with Beijing would not be hurt.

The Australian Broadcasting Corporation said the documents taken in the cyber hit included cabling layouts for the huge building's security and communications systems, its floor plan, and its server locations.

Carr said the government was "very alive" to the threat of cyber attacks on national security, adding that "nothing that is being speculated about takes us by surprise".

But he refused to confirm or deny China was behind the attack.

"I won't comment on whether the Chinese have done what is being alleged or not," he said.

"I won't comment on matters of intelligence and security for the obvious reason: We don't want to share with the world and potential aggressors what we know about what they might be doing, and how they might be doing it."

'Enormous areas of co-operation'

While Australia has a long-standing military alliance with the United States, China is its largest trading partner and the two countries have been forging closer ties.

Carr insisted that the relationship would not be damaged by the allegations, which follow several other hacking attacks on government facilities in the past two years.

"It's got absolutely no implications for a strategic partnership," he said. "We have enormous areas of co-operation with China."

The revelations saw Canberra came under pressure to launch an independent inquiry into the "sorry saga" by opposition politicians, but Prime Minister Julia Gillard declined to comment on "these unsubstantiated reports".

The state broadcaster's investigative Four Corners programme said the attack on a contractor involved with building the new Canberra headquarters of the Australian Security Intelligence Organisation was traced to a server in China.

It cited security experts as saying the theft exposed the agency to being spied on and may be the reason for a cost blowout and delays to the opening of the building, which was supposed to be operational last month.

Deepening concern

Des Ball, from the Australian National University's Strategic and Defence Studies Centre, said the blueprints would show which rooms were likely to be used for sensitive conversations, and how to put devices into the walls.

"Once you get those building plans you can start constructing your own wiring diagrams, where the linkages are through telephone connections, through wi-fi connections," he was quoted as saying.

The report, which did not say when the alleged theft took place, comes amid deepening concern about aggressive state-sponsored hacking by China.

In 2011, the computers of Australia's prime minister, foreign minister and defence minister were all suspected of being hacked, with the attacks reportedly originating in China.

At the time, Canberra said cyber attacks had become so frequent that government and private networks were under "continuous threat".

Beijing dismissed the allegations as "groundless and made out of ulterior purposes".

Earlier this year, computer networks at the Reserve Bank of Australia were hacked, with some said to be infected by Chinese-developed malware searching for sensitive information.

This followed Chinese telecoms giant Huawei being barred in 2012 from bidding for contracts on Australia's ambitious $35bn broadband rollout due to fears of cyber attacks.

N Korea kidnap numbers 'much higher'

The number of Japanese people kidnapped by North Korea decades ago to train its spies may be far higher than previously thought, a report said on Tuesday, citing a former Pyongyang agent.

Between 1965 and 1985, a team of around 120 North Korean troops repeatedly abducted young Japanese fishermen, the conservative Sankei Shimbun reported, citing a government interview with a formerly high ranking North Korean military official.

One of the missions involved the snatching of a man in his 30s from a boat in waters off Aomori prefecture in northern Japan, the report said. The vessel and its remaining four crew members were sunk, it said.

The issue of Japanese kidnapped by North Korea is a running sore in relations between the two countries.

Pyongyang admitted in 2002 its agents had snatched some young Japanese in what Tokyo said was an operation to train spies in Japanese language and customs.

Following a summit between then-prime minister Junichiro Koizumi and Kim Jong-Il, the late North Korean leader, five of those who were taken were allowed to return to Japan, along with their Korea-born offspring.

Pyongyang insisted at the time that all the others had died.

‘Acts of terrorism’

But suspicions persist in Japan that the isolated state has not come clean about the scope of its abductions and the issue colours all of Tokyo's dealings on North Korea.

Asked about the report, Keiji Furuya, the state minister in charge of the kidnap issue, declined to comment, saying he could not give specifics about what the government discovered.

Japanese officials say they believe many of the hostages are still alive, and say the kidnapping of at least 17 nationals during the 1970s and 1980s - some of whom were as young as 13 - were "acts of terrorism"

The Sankei report on Tuesday, which did not name the defector or say where the interview with him took place, comes as Japan has struck out alone to re-engage with North Korea.

Earlier this month a top aide to Prime Minister Shinzo Abe visited Pyongyang in a move that appeared to take Washington and Seoul by surprise.

The US and South Korea have pushed for North Korea to re-join a six-party forum, which also involves Japan, China and Russia.

Those talks, which were derailed by nuclear and missile tests that began at the end of 2012, are aimed at curbing North Korea's atomic ambitions.

But despite the keen threat felt by Tokyo, which lies within easy reach of North Korean weaponry, the kidnapping issue trumps all others because of its domestic resonance.

Japan would not resume aid to even a completely de-fanged North Korea unless all abduction cases have been settled, Furuya said earlier this month.

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.