Spain central bank undercuts budget as rescue looms
Spain's central bank chief undercut
the government's proposed 2013 budget today, saying it was based on over-rosy
forecasts for economic growth and tax revenue.Speaking to a parliamentary
budget committee, newly-appointed Central Bank Governor Luis Maria Linde
delivered a blunt message as Prime Minister Mariano Rajoy weighs when to seek
an international bailout."This outlook ... is certainly optimistic in
comparison with the outlook shared by the majority of international
organisations and analysts," he said.Linde said the government, which has
already hiked taxes and cut tens of billions of euros in costs, should consider
further steps this year to meet next year's deficit target of 4.5% of gross domestic
product agreed with the European Union.Expectations that Rajoy will request a
euro zone rescue package before the end of the year lowered Spain's borrowing
costs at a Treasury auction on Thursday of 4 billion euros in government
bonds.The yield on bonds due in 2014 dropped significantly to 3.282% from
5.204% when it was last sold in July.But market pressure could return if Rajoy
drags his feet on seeking a bailout or is held back by German reluctance to put
more assistance for Spain to its parliament.The European Central Bank has
pledged to support Spain by buying its short-term debt on the open market, but
only once Madrid signs up to the conditions attached to European
aid."Markets are giving Spain the benefit of the
doubt in anticipation of a rescue. Foreign investors need to see some sort of
conditional backstop in place before seriously thinking about buying Spanish
debt again," said Sassan Ghahramani, head of New York-based hedge fund
consultancy SGH Macro.The euro zone is considering aiding Spain by providing
insurance for investors who buy government bonds in a move designed to maintain
Spanish access to capital markets, shaping a rescue differently than the
previous full bailouts of Greece, Ireland and Portugal.The bond gaurantee
scheme, which is under consideration and has not been decided yet, would
achieve two important aims. Spain would be rescued without draining Europe's
entire bailout fund and there would be no contagion to Italy.ECB head Mario
Draghi praised Spain's fiscal consolidation and economic reforms but reiterated
that countries would have to make a formal application and sign up to strict
conditions to benefit from the bank's bond-buying programme.Central banker warns A rescue looks
increasingly on the cards, as a prolonged recession complicates efforts to cut
government spending.Tens of thousands of protesters gathered near parliament in
Madrid on three nights last week, demonstrating against the austerity measures
and demanding changes in government.Anger over costly rescue plans for banks
has increased with one in four workers jobless. The shrinking economy has eaten
into tax revenue and also pushed up unemployment benefit costs.Much of the
savings from aggressive cost-cutting have gone to servicing debt due to high
borrowing costs.Linde said most independent forecasters expect a 1.5% economic
contraction in Spain next year, rather than the 0.5% fall on which the
government based its calculations.Rajoy sent a tough budget to parliament on
Saturday with 13 billion euros in savings from spending cuts and tax
increases.The budget included a 1% increase in state pensions next year but
Rajoy has not yet said whether he will maintain an inflation-pegged rise in
pension payments as well.Linde said an inflation adjustment to pensions would
be so costly as to endanger budget execution.The government is also taking on
additional debt - some of it from European rescue funds - to bail out troubled
banks and cash-strapped regional governments.The central bank chief also urged
ministers to make a prudent forecast for revenue next year, saying the tax-take
outlook in the 2013 budget was subject to downside risks.Fitch ratings agency
also flagged the budget as unrealistic but said it would not downgrade Spanish
bonds to junk status if the country sought a bailout and unlocked ECB
bond-buying."Some of the assumptions certainly are optimistic in terms of
the Spanish budget, nonetheless we do think that they're putting in place a
programme which is consistent with giving support. And we'll give some tine to see
how that will evolve," Fitch's head of sovereign ratings David Riley said
in an interview with Reuters on Thursday.Fellow credit watchdog Moody's is due
to decide this month whether to downgrade Spain's sovereign rating to junk.The
yield on Spain's benchmark 10-year bond traded slightly higher on Thursday at
5.8% . In July, before Draghi announced the ECB's bond-buying programme, the
Spanish 10-year yield spiked above 7%, a level seen as unsustainable.
Russia dismisses talk of new spy scandal with US
Russia said today that the Kremlin
had nothing to do with a network alleged by the United States to be smuggling
military technology to Moscow.The US Justice Department said on Wednesday it
had broken up an elaborate network aimed at illegally acquiring US-made
microelectronic components for Russian military and spy agencies.It charged 11
people with taking part.The Russian Foreign Ministry expressed surprise at the
allegations."The charges are of a criminal nature and have nothing to do
with intelligence activity," Deputy Foreign Minister Sergei Ryabkov told
Russian news agencies.The situation had caused deep concern in Russia, whose
relations with its former Cold War enemy are difficult despite President Barack
Obama's call for a new start.Authorities were questioning the Russian nationals
who were among the accused, Ryabkov said.Foreign Ministry spokesman Alexander
Lukashevich said Washington had informed Moscow that the charges were criminal
and unrelated to espionage."We will look into this situation and what
really happened, and what charges are being imposed on our citizens," he
said.US authorities had "not properly informed" Russia of the arrest of its
citizens and Russian diplomats were seeking access to them, he added. A consul
had met one in a courtroom, he said.Foreign Minister Sergei Lavrov said in an
interview this week that Moscow and Washington must do more to strengthen
relations because the "reset" called for by Obama could not last
forever.Republican candidate Mitt Romney has accused Obama of being soft on
Moscow during his four-year term and described Russia as the United States'
"number one geopolitical foe".In a case in 2010 that harked back to
the Cold War, the United States arrested 10 suspected Russian agents who were
later sent back to Russia in the biggest spy swap since the Soviet era.Security experts puzzled The US
Justice Department said 11 people, and companies based in Houston, Texas and
Moscow, had been accused on Wednesday of illegally exporting high-tech
components to Russian security agencies.The US companies from whom the
components were bought were not identified.A US official said Alexander
Fishenko, a Kazakhstan native who immigrated to the United States in 1994 and
has frequently travelled to Russia, had been charged with operating in the
United States as an unregistered agent of the Russian government.He was being
held in custody with seven others in Houston.The Justice Department said the
three others were in Russia including Sergei Klinov, identified as CEO of Apex
System, which it said served as a certified supplier of military equipment to
Russia's government, working through subsidiaries.Klinov, reached by telephone
in his office in Moscow, said he had learned about the accusations from media
reports."Honestly, I am very upset. I just don't know what to say.
Everyone has his own truth and it is somewhere in the middle,".Asked whether he worked either for the security services or for the
Defence Ministry, he said: "I am floored by this. I don't know what I'm
supposed to say."Russia's Federal Security Service, successor of the KGB,
and the Defence Ministry denied immediate comment.Another person facing
accusations was named as Yuri Savin and described as the marketing director of
Russia-based company Atrilor. The company denied having an employee of that
name.Asked about the allegations, a Russian security expert said such practices
has not been unusual in Soviet times.
US: Secret chemical tests raise concerns
Doris Spates was a baby when her father died inexplicably in 1955. She has
watched four siblings die of cancer, and she survived cervical cancer.After
learning that the US army conducted secret chemical testing in her impoverished
St Louis neighbourhood at the height of the Cold War, she wonders if her own
government is to blame.In the mid-1950s, and again a decade later, the army
used motorised blowers atop a low-income housing high-rise, at schools and from
the backs of vehicles to send a potentially dangerous compound into the
already-hazy air in predominantly black areas of St Louis.Local officials were
told at the time that the government was testing a smoke screen that could
shield St Louis from aerial observation in case the Russians attacked.But in
1994, the government said the tests were part of a biological weapons programme
and St Louis was chosen because it bore some resemblance to Russian cities that
the US might attack. The material being sprayed was zinc cadmium sulfide, a
fine fluorescent powder.Now, new research is raising greater concern about the
implications of those tests. St Louis Community College-Meramec sociology
professor Lisa Martino-Taylor's research has raised the possibility that the
army performed radiation testing by mixing radioactive particles with the zinc
cadmium sulfide, though she concedes there is no direct proof.But her report,
released late last month, was troubling enough that both US senators from
Missouri wrote to army Secretary John McHugh demanding answers.Aides to
Senators Claire McCaskill and Roy Blunt said they have received no response.
Army spokesperson Dave Foster declined an interview request from The Associated
Press, saying the army would first respond to the senators.The area of the
secret testing is described by the army in documents obtained by Martino-Taylor
through a Freedom of Information Act request as "a densely populated slum
district". About three-quarters of the residents were black.Spates, now 57
and retired, was born in 1955, delivered inside her family's apartment on the
top floor of the since-demolished Pruitt-Igoe housing development in north St Louis. Her family
didn't know that on the roof, the army was intentionally spewing hundreds of
pounds of zinc cadmium sulfide into the air.Three months after her birth, her
father died. Four of her 11 siblings succumbed to cancer at relatively young
ages."I'm wondering if it got into our system," Spates said.
"When I heard about the testing, I thought, 'Oh my God. If they did that,
there's no telling what else they're hiding.'"Mary Helen Brindell wonders,
too. Now 68, her family lived in a working-class mixed-race neighbourhood where
spraying occurred.The army has admitted only to using blowers to spread the
chemical, but Brindell recalled a summer day playing baseball with other kids
in the street when a squadron of green army planes flew close to the ground and
dropped a powdery substance. She went inside, washed it off her face and arms,
then went back out to play.Over the years, Brindell has battled four types of
cancer - breast, thyroid, skin and uterine."I feel betrayed," said
Brindell, who is white. "How could they do this? We pointed our fingers
during the Holocaust, and we do something like this?"Martino-Taylor said
she wasn't aware of any lawsuits filed by anyone affected by the military tests.
She also said there have been no payouts "or even an apology" from
the government to those affected.The secret testing in St Louis was exposed to
Congress in 1994, prompting a demand for a health study. A committee of the
National Research Council determined in 1997 that the testing did not expose
residents to harmful levels of the chemical. But the committee said research
was sparse and the finding relied on limited data from animal testing.It also
noted that high doses of cadmium over long periods of exposure could cause bone
and kidney problems and lung cancer. The committee recommended that the army
conduct follow-up studies "to determine whether inhaled zinc cadmium
sulfide breaks down into toxic cadmium compounds, which can be absorbed into the
blood to produce toxicity in the lungs and other organs".But it isn't
clear if follow-up studies were ever performed. Martino-Taylor said she has
gotten no answer from the army and her research has turned up no additional
studies. Foster, the army spokesperson, declined comment.Martino-Taylor became
involved years ago when a colleague who grew up in the targeted area wondered
if the testing was the cause of her cancer. That same day, a second colleague
confided to Martino-Taylor that she, too, lived in the test area and had
cancer.Martino-Taylor decided to research the testing for her doctoral thesis
at the University of Missouri. She believes the St Louis study was linked to the Manhattan Atomic Bomb Project
and a small group of scientists from that project who were developing
radiological weapons. A congressional study in 1993 confirmed radiological
testing in Tennessee and parts of the West during the Cold War."There are strong lines
of evidence that there was a radiological component to the St Louis study," Martino-Taylor
said.Blunt, in his letter to the army secretary, questioned whether radioactive
testing was performed."The idea that thousands of Missourians were
unwillingly exposed to harmful materials in order to determine their health
effects is absolutely shocking," the senator wrote.McCaskill agreed.
"Given the nature of these experiments, it's not surprising that Missouri
citizens still have questions and concerns about what exactly occurred and if
there may have been any negative health effects," she said in a
statement.Martino-Taylor said a follow-up health study should be performed in
St Louis, but it must involve direct input from people who lived in the
targeted areas."Their voices have not been heard," Martino-Taylor
said.
