NEWS,22.05.2013

EU tackles tax evasion

Tax cheats big and small were under the microscope in Brussels on Wednesday, as European Union leaders gathered at a summit to discuss tax evasion amid a fresh scandal involving computing giant Apple.
"All of the questions of tax fraud and tax evasion will be taken up, meaning both those involving individuals and those involving companies," French President Francois Hollande pledged ahead of the talks with his 26 EU counterparts.
"I believe in low taxes for businesses because we've got to encourage investment, we've got to encourage jobs ... But we've got to make sure as we set those tax rates that companies pay taxes," British Prime Minister David Cameron added.
Their comments came a day after politicians in the United States publicly slammed Apple - one of the world's most successful technology companies - for using its international presence to dodge hefty US taxes. The arrangements are legal under loopholes in US law.
Among the allegations is that EU member state Ireland gave Apple a 2% income tax rate - far below its current, already-low corporate tax rate of 12.5%. But Irish Prime Minister Enda Kenny rejected those claims as he arrived for the Brussels summit.
"Ireland's corporate tax regime is very clear and transparent, and we do not do any special deals with individual companies in regard to that tax rate," he said.
The fight against tax evasion and avoidance has become a new global rallying cry, following a media expose on the widespread use of tax havens and scandals involving high-profile people in France and Germany.
The battle has gained traction in Europe amid concerns that painful austerity will be harder to sell if tax cheats are not forced to pay up. It is believed that EU governments lose €1 trillion ($1.3 trillion) annually in uncollected taxes.
The anti-poverty organization Oxfam estimates that more than €12 trillion are stashed away in tax havens within the EU and the territories it controls.
"Most governments claim to have no alternative but to cut public spending and development aid, but ... there's enough potential tax to be had on hidden 'private' money to end extreme world poverty twice over," said Natalia Alonso, head of Oxfam's EU office.
During their meeting in Brussels, the 27 leaders were set to call for progress on tackling "aggressive tax planning and profit shifting" by companies, according to a draft of their final statement seen by dpa.
European Parliament President Martin Schulz has proposed that all multinational companies should have to submit reports detailing what taxes they pay, profits they earn and how many people they employ in any given country.
"It is quite simply unfair that it should be the largest and most successful companies which pay virtually no taxes, even though they benefit enormously from state investment," Schulz told the leaders, according to a copy of his speech.
Various EU parliamentarians and non-governmental groups have called for the leaders to deliver hard-hitting measures, such as a blacklist of tax havens that would be subject to punishment.
But standing in the way of too much aggressiveness are Austria and Luxembourg, bank-secrecy stalwarts that are concerned about losing their attractiveness as banking destinations.
The draft summit statement does not propose any new measures, simply urging more action on VAT fraud, money-laundering and the taxation of the digital economy, along with more information-sharing between tax authorities including the adoption of EU reforms opposed by Austria and Luxembourg "before the end of the year."
Diplomats have argued that the Brussels summit, even without breakthroughs, will contribute to the "global momentum" against tax evasion and convey a united European position ahead of discussions at a Group of 8 summit in June.
German Chancellor Angela Merkel spoke of "a giant step forward."
"Just to be perfectly clear: we are not talking about harmonizing taxes or Europe taxing more or taxing less," EU President Herman Van Rompuy said. "We are talking about jointly fighting unacceptable practices that allow some people to avoid paying taxes altogether."
Also on Wednesday, the leaders were to discuss how energy policies can contribute to reinvigorating growth in the EU, with an unprecedented focus on energy prices. Bringing them in line with other parts of the world is seen as key to appeal to manufacturers.

Ireland feels heat from Apple tax row

Ireland called on Wednesday for an international clampdown on multinationals shifting profits around the world to avoid tax, after criticism that Irish loopholes helped technology giant Apple to shrink its tax bill.
A US Senate investigation into the tax affairs of the maker of iPhones, iPads and Mac computers has shone an uncomfortable spotlight on Ireland's tax regime and forced the government to defend itself against accusations of being Europe's onshore tax haven.
Other European governments, notably France, have previously criticised Ireland's low rate of corporation tax - 12.5% - but the revelations from Washington focus on loopholes in the Irish tax code that are more difficult to defend.
Richard Bruton, the minister in charge of attracting foreign companies to Ireland, admitted that companies need to be reined in.
"They play the tax codes one against the other; that is tax planning, and I think we do need international cooperation through the OECD to deal with the aggressive nature of that," he told state broadcaster RTE.
"Tax has always been an element of the Irish offering, and this will continue to be so, but what you have to avoid is what is known as harmful tax competition. We scrupulously avoid that."
Provoking Capitol Hill
The US investigation showed that Apple had paid just 2% tax on $74bn in overseas income, largely helped by Irish tax law, which allows companies to be incorporated in the country without being tax resident. Britain had a similar rule but changed it over 20 years ago to stop tax avoidance.
Unlike Britain, however, Ireland is heavily dependent on foreign companies such as Google, Pfizer and Intel for employment 150 000 of a labour force of around 2 million and for its much-vaunted economic model of export-led growth.
While Ireland has successfully repelled attacks on its corporate tax rate from European neighbours, US pressure is more difficult to ignore.
By closing its own loopholes, Washington could threaten Ireland's status as European hub for multinationals, and economists said it would be better for Ireland to act first.
"In the long run, the US Congress, if they wanted to, could wipe out those 150 000 real jobs, and we don't want to provoke people by over-egging it, by doing things that are clearly upsetting the US," said John FitzGerald, a professor at the Economic and Social Research Institute (ESRI), an Irish think-tank.
Ireland's Prime Minister Enda Kenny will face tough questions at a summit of European leaders in Brussels on Wednesday where the issue of tax avoidance will take centre-stage.
Bruton said scapegoating individual countries was not the answer and pointed to the fierce competition Ireland faces in trying to attract companies.
"When I go into the boardrooms either in Asia or the US, I am followed into those boardrooms by Swiss, by Singaporeans, by Dutch, by Belgians who are offering specially put-together deals on the tax front," he said.
"Ours is not a specially put-together deal; it is absolutely transparent, there are no side deals, no special arrangements."
"We make no apologies for having a regime that is designed to promote employment. It is a regime we have had for close to 50 years."

Japan trade deficit hits $8.6bn in April

Japan's trade deficit expanded a worse-than-expected 70% on year to $8.6bn in April, government data showed Wednesday, as a weaker yen made imports costlier.
The monthly trade deficit came to ¥879.9bn ($8.6bn), 69.7% higher than the year-before deficit of ¥518.4bn, finance ministry data showed.
The deficit was the biggest for the month of April in comparable official data that goes back to 1979 and was also worse than a shortfall of ¥620bn economists predicted on average in a poll by the Nikkei business daily.
Exports in April rose 3.8% to ¥5.78 trillion while imports jumped 9.4% to ¥6.66 trillion.
The yen's average rate was 96.01 to the dollar in April against 82.31 in April 2012, meaning the value of the Japanese currency fell by nearly 17% on year, the data showed.
A lower yen helps Japanese exporters but pushes up import bills.
Higher import costs have been resulting in higher materials and parts prices, which are leading to higher retail prices of various items ranging from foodstuff to laptops.
With the yen hitting multi-year lows against the dollar, some politicians have started voicing concerns over its negative impact on people's lives.
Japan's fuel imports have also stayed high as most of its nuclear reactors remain off-line since the huge earthquake and tsunami in 2011 sparked the world's worst atomic accident in a generation. 

Office bullying video sparks outcry in Singapore

A Singapore company supervisor caught on video slapping a male intern is in trouble after the clip went viral on the web and sparked a public outcry.

Police confirmed to AFP that a complaint had been lodged against the supervisor, who works at a software company, and the manpower ministry said it had also been alerted about the alleged case of workplace abuse.

The 17-second Singapore office bully clip, first uploaded on the video-sharing website YouTube last Friday, showed the boss repeatedly slapping a younger man described by local media as a 29-year-old intern.

A fellow intern who filmed the video said in a posting at an online forum that he had noticed the supervisor "constantly bullying" his co-worker soon after starting his internship.

When he confronted the boss, the supervisor explained that "there is a story behind" the abuse.

"He said that my colleague apparently has an inferiority complex and apparently my supervisor is trying to 'nurture' him to get over it," he said.

"I felt this was stupid, as how can you nurture someone by hitting them? My co-worker is very timid and seems like the kind of guy that will not stand up for himself."

The Straits Times reported on Wednesday that after the video went viral, two former interns in the same company also came out to say they had worked in fear under the supervisor.

Local Chinese-language newspaper Shin Min said the intern, a university graduate, was being paid $400 a month and that his parents may seek compensation from the firm.

NEWS,24.01.2013

Britain reaches out to world leaders

British Prime Minister David Cameron insisted on Thursday he was not turning his back on Europe as he came face to face with world leaders for the first time since unveiling plans for a referendum.In a speech to the World Economic Forum in Davos, Cameron said he would use his country's chairmanship of the G8 to counter tax avoidance by corporations and urged action to curb the threat of terror attacks. But the global elite gathered in the snowy Swiss ski resort only had ears for Cameron's comments on the European Union, a day after he unveiled his proposal to let the British public vote on whether to stay in the bloc.He held talks with German Chancellor and EU powerbroker Angela Merkel and the prime ministers of Ireland, Italy and the Netherlands on the sidelines of the annual forum to seek support for his plans."This is not about turning our backs on Europe quite the opposite," Cameron told the audience of business leaders, top politicians and journalists from around the world."It's about how we make the case for a more competitive, open and flexible Europe, and secure the UK's place within it."His announcement on Wednesday that he wants to renegotiate Britain's relationship with Brussels and then hold an "in-or-out" referendum on membership by the end of 2017 has delighted his increasingly anti-EU party at home.European leaders in Davos called on Britain to stay in the 27-nation group and made encouraging noises, in public at least, in support of Cameron's calls for reforms to make the EU more competitive.Cameron will need allies in Europe to back his quest to renegotiate Britain's relationship with Brussels before holding a referendum on the new terms.Dutch premier Mark Rutte warned that without the EU, Britain would be "an island somewhere in the middle of the Atlantic Ocean, somewhere between the United States and Europe".Irish Prime Minister Enda Kenny said the EU would be "stronger if Britain is part of it."Merkel meanwhile sidestepped the topic but reached out to Cameron by vowing more action on one of the key reforms he wants for Europe boosting competitiveness."I say this expressly to my colleague David Cameron. You too have addressed competitiveness, see this as a central issue to ensure Europe's prosperity for the future," she said.Foreign policy guru and former US secretary of state Henry Kissinger told the forum that the "idea of European unity needs to be resolved" if the continent is to make a lasting recovery from the three-year eurozone debt crisis.But Cameron rejected any idea of a European superstate or of Britain ever adopting the euro and added that he did not agree that "there should be a country called Europe".Britain's Finance Minister George Osborne backed up the message when he appeared at Davos later, saying: "I'm arguing for reform in Europe and Britain being part of a reformed Europe."Cameron said in his speech that Britain's presidency of the Group of Eight leading world economies Britain, Canada, France, Germany, Italy, Japan, Russia and the United States would focus on tackling tax avoidance and increasing transparency in a bid to boost the global economy.He said corporations must "pay their fair share" of taxes and that too many businesses were abusing tax schemes, after Britain last year announced a crackdown on multinationals such as Starbucks, Google and Amazon.UN Secretary General Ban Ki-moon, Microsoft tycoon Bill Gates and Jordan's Queen Rania are due to share the stage with Cameron on Thursday evening to speak on issues affecting the global economy.The crisis in Mali, where French forces are helping African troops fight Islamist militants, was also being discussed.No formal decisions are taken at Davos but corporate deals are often sewn up on the sidelines and presidents and prime ministers huddle to thrash out pressing issues.

Concern over currency manipulation at WEF

German Chancellor Angela Merkel expressed concern on Thursday about the risks of currency manipulation, specifically mentioning Japan, where the central bank has decided to quicken the pace of money-printing."I am not completely without worry. We have a much higher sensitivity through the discussion in the G20 for currency manipulation or political influence," Merkel said at the World Economic Forum in Davos."I don't want to say that I look towards Japan completely without concern at the moment. And it will be important for Europe as well that the ample liquidity that was given out to banks last year is collected back again."

EU carbon market plunge 'a wake-up call'

A carbon market price fall to less than €3 on Thursday must serve as a wake-up call to EU member states to back a Commission plan to prop up the European Union's Emissions Trading Scheme (ETS), the EU climate commissioner said.The cost of carbon allowances on the ETS hit a low of €2.81 a tonne on Thursday after a European Parliament committee in a preliminary, non-binding vote, rejected proposals for market reform. The price later climbed back above €4."It must be clear to all that when the Commission warned that the ETS price could drop dramatically it was not a false warning but a real possibility," Climate Commissioner Connie Hedegaard said in a statement."This should be the final wake-up call both to governments and to the European Parliament."Thursday's vote was only an advisory step in the tortuous EU process of trying to agree a plan to remove temporarily some of the surplus allowances that have depressed the market.A more decisive vote in the European Parliament's environment committee is expected next month, to be followed by a vote of member states.Hedegaard said there was widespread agreement an ETS was "the most cost-efficient tool in EU climate politics" and world-wide the idea was catching on.The European Union is working on linking up with other schemes in Switzerland and Australia, for instance.As the rest of the world moves towards coherent carbon pricing, which many in business say they need to plan investment, Hedegaard said the EU was in danger of a messy patchwork of policies, different for each of the 27 member states."The alternative to a well-functioning carbon market is hardly that the EU member states will make it cost nothing to pollute," she said."The alternative is a re-nationalisation of climate tools, meaning a future patchwork of up to 27 different systems and taxes, instead of one market creating a level playing field internally in Europe."

US fiscal cliff facts

The so-called fiscal cliff is a combination of dramatic spending cuts and tax increases mandated to take effect beginning in January if President Barack Obama and Republicans cannot bridge their differences on how best to reduce the nation's budget deficit and debt.To add to a drama that could reverse the slow US recovery and impact the global economy, the United States is also about to reach its borrowing limit, so Congress will also be asked to raise the government's debt ceiling.

What is the fiscal cliff?

The Budget Control Act of 2011 codified in law a grudging political compromise forcing the government to slash spending by $1.2 trillion over 10 years from January 1 2013. Next year's cuts, called "sequestration," would be about $109bn.Also on that date, a package of tax reductions and an extension of unemployment benefits will expire, meaning taxes will rise significantly for most Americans.

Why will this happen?

Democrats and Republicans have long been deadlocked over whether to address a $1 trillion-plus annual budget gap with higher taxes or lower spending.The Budget Control Act was a poison pill deal designed to force them to find a less austere compromise, but political wrangling and dysfunction meant no deal was done, and the deadline is now looming.

What happens if the cliff is not avoided?

Together, higher taxes and lowered spending could slice the $1.1 trillion deficit racked up in fiscal 2012 (ended September 30) by almost $500bn next year, according to the Congressional Budget Office, vastly improving the government's financial picture .But the CBO estimates the shock treatment would send the country back to recession and push the unemployment rate to 9.1%.Deep cuts would come to both defence and non-defence spending. Government suppliers and contractors would lose business, and temporary furloughs could be in store for tens of thousands of federal employees.Taxes and automatic paycheck deductions would increase for most Americans, reducing the cash they have for spending, and taxes on capital gains and dividends would rise, hitting investors.

What is the debt ceiling?

The US government will hit its statutory $16.39 trillion debt limit on Monday, according to Treasury Secretary Timothy Geithner. The limit is set by Congress, and if it is not raised, the United States will not be able to borrow any more money and would, in theory, be forced to slash spending to make ends meet. Possible, but desperate, remedies would include halting pay to the military, retirement health benefits, social security, and failing to pay government debts.

Will the US default on its debt?

Not immediately. The Treasury has various extraordinary measures in its armory, including halting the issuance of securities to state and local governments, which could buy about two months of leeway.

What would a default mean?

No one is sure: the dollar, and Treasury bonds, are the primary currency of global finance, and holders do not really have any alternatives. And most believe that eventually the US government would make good on its debts. However, the country's credit rating could be further downgraded, likely pushing up its borrowing costs over the medium term and possibly diminishing the dollar's cachet in world finance.

What will Congress do?

Eventually, Congress is likely to raise the debt ceiling but Republicans who run the House of Representatives will use the showdown as leverage to demand spending cuts from Obama in return. It is uncertain how high the raised borrowing limit will be, and any resolution will likely trigger a new confrontation between Obama and Republicans the next time around.

Talks stall as fiscal cliff looms

Two days of last-gasp talks produced no deal on Sunday between US political leaders struggling to averting a fiscal calamity due to hit the American and world economy within hours.Party leaders in the US Senate groped for a compromise to head-off a punishing package of spending cuts and tax hikes that is due come into force on January 1 and which could roil global markets and plunge the US into recession.Senate Republican minority leader Mitch McConnell warned that, despite through-the-night talks, negotiators were still a long way from success, as they raced against the ebbing 2012 calendar in search of a compromise.McConnell said he received no response to a "good faith offer" to Senate Democrats and had spoken twice by telephone with his old friend and sparring partner Vice President Joe Biden in the hope of breaking the stalemate.Senate Democratic Majority Leader Harry Reid agreed that talks were at a standstill, and warned that Americans could ring in the New Year with no deal to avert a budget disaster known as the "fiscal cliff.""There is still significant distance between the two sides, but negotiations continue," Reid told the Senate, after huddling for nearly two hours with his Democratic caucus on one of the latest December Senate workdays in 50 years."There is still time left to reach an agreement, and we intend to continue negotiations," he said, as he ordered the Senate back into session at 11:00am (16:00 GMT) Monday, New Year's eve and the last day before the deadline.Reid said Democrats were unwilling to brook talk of social security cuts."This morning, we have been trying to come up with some counteroffer to my friend's proposal," Reid told the Senate. "We have been unable to do that."The already tense mood on Capitol Hill had soured during Sunday's confusing hours, when some lawmakers tossed out varying versions of what may or may not be in Democratic and Republican offers. "I'm incredibly disappointed we cannot seem to find common ground. I think we're going over the cliff," Republican Senator Lindsey Graham said on Twitter.Moderate Democrat Clair McCaskill was also pessimistic."This is definitely not a kumbaya moment," she said.Earlier, President Barack Obama accused Republicans of causing the mess, saying they had refused to move on what he said were genuine offers of compromise from his Democrats."Now the pressure's on Congress to produce," Obama said, in an interview with NBC's "Meet the Press" that was recorded on Saturday, a day after he expressed modest optimism that a deal could be reached.Obama said it had been "very hard" for top Republican leaders to accept that "taxes on the wealthiest Americans should go up a little bit, as part of an overall deficit reduction package."But Republicans were irked by Obama's tone. "I don't know if this is the president saying $250 (thousand) or 'Go to hell'," Graham told reporters, referring to Obama's insistence that taxes rise on households income greater than a quarter million dollars per year.The Senate's number two Democrat, Dick Durbin, said Republicans want the tax threshold be raised to $550 000 per household and that Democrats might counter with $450 000, considerably higher than the president's $250 000.But Reid warned: "We're still left with a proposal they've given us that protects the wealthy and not the middle class. I'm not going to agree to that"If no deal is reached, a package of tax cuts for all Americans that was first passed by then-president George W. Bush will expire on January 1.All American workers will see their own paycheck hit and the broader economy will suffer from massive automatic spending cuts across the government.Experts expect the US economy to slide into recession if the standoff is prolonged, in a scenario that could cause turmoil in stock markets and hit prospects for global growth in 2013.The president won re-election partly on a platform of raising taxes on the rich, but Republicans who run the House of Representatives oppose tax hikes as a point of principle and claim Obama is addicted to runaway spending.Any deal must pass the Senate, before going to the House, where such is the power of the conservative bloc of the Republican Party, it is unclear whether any solution backed by Obama can win majority support.If leaders fail to find agreement, Obama has demanded a vote on his fallback plan that would preserve lower tax rates for families on less than $250 000 a year and extend unemployment insurance for two million people.Republicans admitted such an option could emerge on Monday.

Spain faces €207bn headache in 2013

Spain defied the markets by averting a sovereign bailout this year but high interest rates could yet force Madrid to its knees as the nation confronts a €207bn financing headache in 2013.The eurozone's fourth-biggest economy has skirted a rescue so far even after slipping into a recession in mid-2011 that has sent the unemployment rate soaring to 25%, the highest in Spain's modern history.Prime Minister Mariano Rajoy's government reached out in June for a eurozone rescue loan of up to €100bn to fix the balance sheets of Spanish banks, crushed by bad loans since a 2008 property crash.But even as investors fled Spain, sending its 10-year-bond yield above 7% mid-year as they watched Madrid struggle to curb soaring public debt, Rajoy managed to swerve the politically costly option of pleading for international help.European Central Bank chief Mario Draghi gave decisive support in September when he announced the bank's readiness to buy an unlimited sum of bonds to curb borrowing costs for member states that accept strict conditions.The prospect of such intervention alone was enough to calm the selling of Spanish debt securities.A grateful Rajoy says he can get by for now without even seeking the ECB's bond-buying intervention.Spain's 10-year bond yields were trading below 5.3% in the past week.In his final news conference of the year, the prime minister warned that Spain's economy faced a "very tough" year ahead."Today we are not thinking of asking the European Central Bank to intervene to buy bonds on the secondary market but that is a very useful instrument that is available to all countries of the union," he added."If Spain and its government believe that it is necessary to use it, let there not be the least doubt that we will do so. But in principle today we are not thinking of doing it," the premier said on Friday.That could change, analysts say.Spain's budget for 2013 anticipates that the Treasury will have to issue €207.2bn in gross debt in 2013, almost all through bonds and bills, to cover debt repayments and new financing needs.That compares to the €186.1bn in gross debt that last year's budget previewed for 2012."The country is heading in the right direction in reducing its deficit. But in the end, it will all depend on the markets," said Rafael Pampillon, head of economic analysis at Madrid's IE Business School.Concern over a shift in Italian economic policy with February 24-25 elections on the horizon, and doubts over Spain's ability to finance its debts or meet its deficit-cutting targets could yet push up Spanish borrowing costs, he said.At one point in mid-summer, investors in Spanish 10-year bonds demanded a premium of 600 basis points in annual return over the safe-bet German equivalent. Since Monti's offer to intervene, that has fallen to around 400 points, still a significant extra cost.Most economists now believe Spain can skirt a rescue at least in the immediate future.A sovereign rescue is not impossible, said Edward Hugh, economist based near Barcelona in the northeastern region of Catalonia."But they will definitely put it off for as long as they can, and at the moment it seems that they can put if off for quite a long time," he added.In the meantime Spain still faces steep financing costs, said Jesus Castillo, economist at French investment bank Natixis.The Spanish 10-year bond yield affected not only the state's borrowing cost but also that of many households and businesses, Castillo said.The risk premium charged on Spanish debt, even now, was "not viable over the long term", he warned."If the Spanish economy is being strangled today it is because a high interest rate is killing off investment plans as they are born," he said.It is an argument that seems to plead for a bailout.If the ECB could bring down interest rates, some say, it would breathe new life into the economy, which is expected to shrink 1.5% this year. Next year, the government tips a further 0.5% slump and most private forecasters are expecting a much sharper decline.But Spaniards themselves seem to be divided over a bailout, even as they suffer an unprecedented programme of austerity measures designed to bring the public deficit under control.A survey by Madrid pollster InvyMark for a Spanish television channel this month found 54.5% of those asked believed Rajoy should not ask for a sovereign bailout, against 31.5% who were in favour.More than two-thirds - 69.1% - said they thought such aid from Europe would not be positive for hard-hit Spaniards.

Merkel challenger remarks spark outrage

Chancellor candidate Peer Steinbrueck was widely criticised on Sunday, even by his own centre-left Social Democrats (SPD), for saying German leaders are underpaid. Steinbrueck has struggled to gain ground against Chancellor Angela Merkel ahead of next September's election, in part due to lingering criticism over him earning €1.25m as an after-dinner speaker in the past three years.The remarks from the former finance minister about what he called the inadequate compensation for the chancellor drew speedy rebukes across the country's political spectrum, including from the last SPD chancellor Gerhard Schroeder."A German chancellor does not earn enough based on the performance that is required of her or him compared with the jobs of others who have far less responsibility and far more pay," Steinbrueck, 65, was quoted on Sunday by the Frankfurter Allgemeine Sonntagszeitung newspaper saying. "Nearly every savings bank director in North Rhine-Westphalia earns more than the chancellor does," Steinbrueck said of his home state. Merkel's pay is set to rise by €930 per month to €17 106 in 2013 along with pay rises for her ministers and members of parliament, increases that have been criticised by some for sending the wrong signal in an era of austerity. "Some of the debates kicked up by the 'guardians of public virtue' are grotesque and are harmful for anyone considering getting involved in politics," Steinbrueck said. ElectionThe SPD trails Merkel's conservatives by 10 points in opinion polls, but, with its Greens allies, it does have a chance of winning power in September because of the prolonged weakness of Merkel's Free Democrat (FDP) coalition partners. Steinbrueck, whose blunt talk makes him popular among some voters despite him never winning a major election and him being defeated as state premier in North Rhine-Westphalia in 2005, said there were times in his career when he was not as well off and admitted he was now a "wealthy Social Democrat". Schroeder, chancellor from 1998 to 2005, has endorsed Steinbrueck to lead his party against Merkel but distanced himself from Steinbrueck's views on pay."In my view politicians in Germany are adequately compensated," Schroeder told Bild am Sonntag newspaper. "I was certainly always able to live off the pay. And anyone who doesn't feel it's enough pay can always look for another job."Other SPD leaders indirectly criticised Steinbrueck. Dieter Wiefelspuetz, a top SPD member of parliament, said politicians were misguided if they compared their wages to private industry."To serve as chancellor is a fascinating job and the pay is definitely not shabby," he said.Steinbrueck was once seen as the centre left's best hope of winning back the chancellorship. He was popular as the no-nonsense finance minister and the SPD hoped he would siphon centrist voters away from the conservatives. But the controversy over his earning €1.25m for 89 speeches will not go away and his campaign has been marred by setbacks and awkward comments. Analysts say he is also struggling to win over female voters, many of whom are put off by his combative style. "Merkel is popular due to a 'woman's bonus' that she gets," Steinbrueck told the paper.

Merkel challenger remarks spark outrage

Chancellor candidate Peer Steinbrueck was widely criticised on Sunday, even by his own centre-left Social Democrats (SPD), for saying German leaders were underpaid. Steinbrueck has struggled to gain ground against Chancellor Angela Merkel ahead of next September's election, in part due to lingering criticism over him earning €1.25m as an after-dinner speaker in the past three years.The remarks from the former finance minister about what he called the inadequate compensation for the chancellor drew speedy rebukes across the country's political spectrum, including from the last SPD chancellor Gerhard Schroeder."A German chancellor does not earn enough based on the performance that is required of her or him compared with the jobs of others who have far less responsibility and far more pay," Steinbrueck, 65, was quoted on Sunday by the Frankfurter Allgemeine Sonntagszeitung newspaper saying."Nearly every savings bank director in North Rhine-Westphalia earns more than the chancellor does," Steinbrueck said of his home state.Merkel's pay is set to rise by €930 per month to €17 106 in 2013 along with pay rises for her ministers and members of parliament, increases that have been criticised by some for sending the wrong signal in an era of austerity."Some of the debates kicked up by the 'guardians of public virtue' are grotesque and are harmful for anyone considering getting involved in politics," Steinbrueck said.The SPD trails Merkel's conservatives by 10 points in opinion polls, but, with its Greens allies, it does have a chance of winning power in September because of the prolonged weakness of Merkel's Free Democrat (FDP) coalition partners. Steinbrueck, whose blunt talk makes him popular among some voters despite him never winning a major election and him being defeated as state premier in North Rhine-Westphalia in 2005, said there were times in his career when he was not as well off and admitted he was now a "wealthy Social Democrat". Schroeder, chancellor from 1998 to 2005, has endorsed Steinbrueck to lead his party against Merkel but distanced himself from Steinbrueck's views on pay."In my view politicians in Germany are adequately compensated," Schroeder told Bild am Sonntag newspaper. "I was certainly always able to live off the pay. And anyone who doesn't feel it's enough pay can always look for another job."Other SPD leaders indirectly criticised Steinbrueck. Dieter Wiefelspuetz, a top SPD member of parliament, said politicians were misguided if they compared their wages to private industry."To serve as chancellor is a fascinating job and the pay is definitely not shabby," he said.Steinbrueck was once seen as the centre left's best hope of winning back the chancellorship. He was popular as the no-nonsense finance minister and the SPD hoped he would siphon centrist voters away from the conservatives.But the controversy over his earning €1.25m for 89 speeches will not go away and his campaign has been marred by setbacks and awkward comments.Analysts say he is also struggling to win over female voters, many of whom are put off by his combative style. "Merkel is popular due to a 'woman's bonus' that she gets," Steinbrueck told the paper.

Italy upbeat at end of 2012

Italy is ending 2012 on an upbeat note, with renewed financial market confidence and optimism among analysts that the worst of the financial crisis is over, despite expectations of political uncertainty in the run-up to a general election in February.The Treasury's borrowing rates were slightly higher at short, medium and long-term debt auctions last week, but were well below levels seen at the end of 2011, when Prime Minister Mario Monti took over from Silvio Berlusconi as Italy teetered on the brink amid the eurozone debt crisis.In late November 2011, the country was paying a 7.56% rate for its benchmark ten-year bonds, sparking widespread concerns it might have to ask for a bailout.On Friday, that rate stood at 4.48%.As 2012 draws to a close, "even if public debt has breached the two trillion euros mark, Italy's ability to finance itself is no longer in doubt," said Enrico Marro in Italy's Il Sole 24 Ore financial daily."For 2013, optimism reigns," he concluded.The turnaround is principally the result of two factors: the European Central Bank's promise to buy sovereign debt issued by eurozone member states without limit if necessary if they meet certain strict conditions, and Monti's decisive reforms which have restored Italy's credibility internationally. Experts have forecast a couple of months of volatility on the markets in the lead up to the February 24 and 25 elections, but the worst appears to be over. Italian bank Intesa Sanpaolo said "the fever should drop off in 2013 compared with 2012."The bond spread a key measure of the difference between Italian and German 10-year bond yields has also dropped sharply over the year, dipping below 300 basis points in early December from double that figure at its peak. While European leaders congratulated Monti on restoring calm to the markets, Berlusconi's announcement at the start of December that he is running again for prime minister sparked panic and the spread began to inch up again.The media magnate has dismissed the spread measure as "a trick and an invention" used to bring down his government. Investors will be watching closely in the coming weeks to see if Berlusconi's large-scale media campaign for re-election wins him potential votes from Italians tired of Monti's austerity packages and record unemployment levels.Renewed confidence in financial markets contrasts sharply with official forecasts for economic growth over the coming year, as Italy struggles to pull itself out of a recession.Despite Monti's "Grow Italy" plan, the economy is not expected to return to growth before the end of 2012 or the beginning of 2014."Business and household sentiment does not appear to have benefited from the easing market tension," Intensa Sanpaolo said.The government has forecast a 0.2% contraction of the country's gross domestic product in 2013 an outlook considered overly optimistic by Italy's business association Confindustria, which expects GDP to shrink by 1.1% next year.One figure is on the rise however: the number of people on Twitter following Monti, who is drumming up support for a reform-led electoral campaign. Monti, who resigned last week after Berlusconi's People of Freedom party pulled support from the government, has said he is keen to lead the country again after the elections a message welcomed by the markets, European leaders and Italy's Catholic Church alike.

 

IMF, EU push for softer deficit cuts

The International Monetary Fund and European Commission officials have encouraged France and its eurozone partners not to fixate on deficit reduction targets if it would exacerbate the bloc's debt crisis.The head of an IMF mission in France, Edward Gardner, urged officials in Paris last week to consider their 2013 budget targets "in a broader European context."The IMF and the EU Commission expect the French public deficit to amount to 3.5% of gross domestic product (GDP) next year.They do not believe France can reach its 3.0% goal, the eurozone limit, without additional measures that could aggravate an already tenuous economic situation."The credibility of the medium term orientation policy" was more important than a specific deficit target, Gardner told reporters.Loosening the criteria would "be more effective, more credible in a coordinated fashion" across the 17-nation eurozone, he suggested.In Portugal the public deficit fell at the end of the third quarter to 5.6% of GDP from 6.7% at the same point a year earlier, while neighbouring Spain has promised to slash its deficit to 3.0% by 2014 from a blowout shortfall equal to 9.4% of output last year. Germany expects its budget to be in balance this year, two years ahead of schedule, but IMF head Christine Lagarde has suggested that Berlin ease up a bit in its drive for healthy finances. "Germany ... and others ... can allow themselves to go a little more slowly than others in the push to straighten out their public finances," Lagarde told the German weekly Die Zeit in comments published last week.Her call echoed other European voices that are now arguing for greater emphasis on growth rather than austerity measures."The IMF is beginning to understand that the French situation has become dangerous," economist Marc Touati at the ACDefi consulting group said. Unemployment is climbing and the economy is still struggling, he pointed out.The IMF was "trying to prepare public opinion" for missed government targets, Touati suggested."This is not really a new position," Frederique Cerisier at the French bank BNP Paribas said of Lagarde's recent remarks. She acknowledged however that some international institutions were "placing added emphasis" on the need to cut deficits more gradually.On Tuesday, the EU's 'fiscal compact,' a hard-won step towards tighter economic coordination agreed as part of efforts to tame the debilitating debt crisis, takes effect.Finalised in March, 25 of the 27 EU member states accepted a 'balanced budget rule' in the compact to ensure that governments would no longer run the massive budget deficits which drove the debt crisis and nearly sank the euro.But as the European debt crisis drags on and economies flounder, the idea of allowing governments more time to straighten out their finances has gained ground.European Economic Affairs Commissioner Ollie Rehn said last week that France needed more reforms rather than more austerity."Once you have a credible medium-term budget strategy, backed up by reforms, you can have a slower adjustment," he told French daily Le Monde.If a 3.0% French deficit remains a valid reference, "what needs to be taken into account above all is the structural budget adjustment effort which France is making with remarkable intensity," the EU official said.French officials nevertheless seem determined to stick by their targets. They insist that the public deficit will be brought down to 3.0% of GDP next year from 4.5% in 2012, based on a 2013 growth estimate of 0.8% that economists consider overly optimistic.Friday's third-quarter growth figures gave them little comfort: official statistics revised growth over that period down from 0.2% to 0.1%.French Finance Minister Pierre Moscovici wrote in the German business daily Handelsblatt that France had a duty to reverse years of budget deficits."In the past 30 years, France has not been able to pass a balanced budget. State debt rose to an unacceptable €1.7 trillion in 2011. It is our duty to reverse this," Moscovici said. On Friday he reaffirmed the goverment's 2013 growth target.Cerisier at BNP Paribas warned that France, which is nowbenefitting from exceptionally low borrowing rates, must be careful how it communicates to markets, if it wants to maintain its credibility.But, she added: "The fact that we can begin to discuss all that is proof that countries have become more credible with respect to their economic targets."

 

France's 75% tax on rich struck down

France's top constitutional body on Saturday struck down a 75% upper income tax rate, dealing a major blow to Socialist President Francois Hollande, who had made it his centrepiece tax measure.The government vowed to push ahead with the tax rate, which would apply to incomes over a million euros a year, and propose a new measure that would conform with the constitution.The tax rate had angered business leaders and prompted some wealthy French citizens to seek tax exile abroad, including actor Gerard Depardieu who recently took up residency in Belgium. The Constitutional Council said in its ruling that the temporary two-year tax rate, due to take effect next year, was unconstitutional because unlike other forms of income tax it applied to individuals instead of whole households. As a result, the council said, the tax rate "failed to recognise equality before public burdens".Though largely symbolic it would have applied to only about 1 500 individuals the Socialists said the tax rate was aimed at making the ultra-rich contribute more to tackling France's budget deficit.The move was welcomed by the French Football League (LFP) which had expressed concern at the impact on top footballers such as Paris Saint Germain's Swedish star striker Zlatan Ibrahomovic. LFP chairperson Frederic Thiriez said if the measure had reached the statute book there could have been an "exodus of the best players" in the French league.The 75% tax rate was a flagship promise of the election campaign that saw Hollande defeat right-winger Nicolas Sarkozy in May. Prime Minister Jean-Marc Ayrault said the ruling was a "symbolic but not severe censure" and pledged to ensure the measure was adopted." The government will propose a new system that conforms with the principles laid down by the decision of the Constitutional Council. It will be presented in the framework of the next Finance Act," he said in a statement. "We want to maintain" the measure "because it symbolises the need for the effort to be more fairly shared," he added.The Constitutional Council also rejected new methods for calculating a separate wealth tax, striking down a provision that would have increased the amount of taxable revenues and capital gains. Other new measures in the budget were approved, however, including an increase in some upper tax rates to 45% and the addition of capital gains to taxable income. Finance Minister Pierre Moscovici said the ruling "does not compromise" budget efforts and said the council had approved "the essential" of the government's economic policies.But government critics hailed the ruling as proof the Socialists are pursuing unfair tax policies. "While the whole world watched us in dismay, Francois Hollande deceived the French into believing that 'taxing the rich' would be enough to solve our country's problems," said the head of the right-wing opposition UMP, Jean-Francois Cope."In reality, discouraging entrepreneurs and punishing the most wealthy until they leave our country inevitably puts the tax burden on the middle class. This moral error was sanctioned today. "France is struggling to plug a €37bn hole in its public finances to meet its target of reducing the budget deficit to the EU ceiling of 3% in 2013.The 2013 budget included €12.5bn in spending cuts and €20bn in new taxes on individuals and businesses. Critics have said the new tax measures will stifle economic growth, with the French economy already expected to contract by 0.2% in the final quarter of this year. The 2013 budget is based on a government forecast of 0.8% economic growth next year a figure many economists consider too optimistic. Hollande has seen his popularity plummet in recent months as the economy stagnates and unemployment mounts.

US lawmakers seek last-gasp fiscal deal

After weeks of failed haggling, the fiscal cliffhanger is at hand as US lawmakers convene Sunday in a bid to strike a year-end deal that avoids huge tax hikes and possibly spending cuts set to kick in January 1.With the clock ticking ever closer to the New Year's time bomb, the suddenly alarmed Senate and House were holding special sessions 36 hours before the year-end deadline for a plan that would keep America from tumbling off the so-called fiscal cliff. The stakes in the game of holiday-interrupting brinkmanship are enormous. Economists agree the $500bn in fiscal pain due to hit when the new year starts would stifle the US economic recovery and send the country back into recession, spelling bad news for the global economy as well. Aides to both sides' leaders in the Democrat-controlled Senate worked feverishly behind closed doors Saturday to fashion a deal palatable to Democrats as well as to Republicans, who control the House of Representatives. The Senate convenes Sunday at 1:00 pm (18:00 GMT) while the House goes into session an hour later, with no votes expected before 23:30 GMT. Both chambers would have little time to debate and then pass a deal that has eluded the White House and Congress for weeks. President Barack Obama, who called congressional leaders to the White House on Friday, will address the crisis once more when he gives an interview on NBC's Sunday morning talk show "Meet the Press. "Amid the tense negotiations, Obama pressed lawmakers to clinch a deal, even if they must reach a compromise that lacks the significant deficit-reduction measures both sides had sought. If lawmakers fail, "every American's paycheck will get a lot smaller," the president warned. "Congress can prevent it from happening, if they act now. "Obama, sensing a mandate from his re-election last month, wants to raise taxes on the rich. Republicans want only to close tax loopholes to raise revenue and demand significant spending cuts in return, notably to federal benefit programs like Social Security. But if nothing is done by the deadline, all taxpayers will see an increase. Following the White House talks, the Senate Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell are heading efforts to craft a deal. But any agreement would also have to pass the House, where there is doubt that an Obama-backed deal would win favor with restive conservatives in the Republican caucus. While each side must for the sake of appearances be seen to be seeking a deal, one way out is to go over the cliff, then fix the problem in the first days of next year. Under that scenario, Republicans who are philosophically opposed to raising taxes could vote to lower the newly raised rates on almost all Americans without formally hiking taxes. Lawmakers, while ruing the inability to work out a multi-trillion-dollar grand bargain in time, have said a pared down version dealing mainly with taxes was within reach. Citing unnamed people briefed on the talks, The Washington Post said one version under consideration would protect nearly 30 million taxpayers from paying the higher, alternative minimum tax rate for the first time and maintain unemployment benefits for two million people.The plan also would halt a steep cut in Medicare reimbursements for doctors and preserve popular tax breaks for both businesses and individuals, such as those for research and college tuition, the report said.But the two sides were still at odds over where to set the limits of wealthy - at $250 000 or $400 000 of annual income and over taxes on inherited estates. Nor has there been agreement on spending cuts so sought after by Republicans, who say excessive government spending is the main driver of US debt. Obama warned that if an agreement was not reached in time, he would ask the Senate to hold an up-or-down vote on a basic package that protects the middle class from a tax hike, extends unemployment insurance, and "lays the groundwork for future... deficit reduction. "In a weekly Republican address, Senator Roy Blunt expressed some optimism, saying that "going over the fiscal cliff is avoidable. "But he criticised Democrats for focusing mainly on taxes while setting aside government spending, arguing that such inaction "shouldn't be an option."

NEWS,17.12.2012

Putin touts record Russian arms sales

Russian arms exports reached a record $14 billion this year, President Vladimir Putin said today, extending a run of record-breaking sales in recent years. The world's second biggest exporter has cultivated new weapons clients in Southeast Asia and Africa, despite criticism that it is failing to deliver the technological benefits of Western suppliers or the low costs of emerging weapons exporter China. "Let's talk about our results they are positive. We are reaching a record level of weapons exports. Their total volume was above $14 billion," Putin said in a televised meeting with officials. He said Russia had signed over $15 billion in new export contracts this year alone. He did not spell out when deliveries on those deals were expected.Russia has faced Western criticism over its weapons sales to the Syrian government, worth nearly $1 billion in 2011.Moscow says its arms deliveries to Syria, a long-time ally, do not violate international law and are not intended to help President Bashar al-Assad's government fight a 21-month-old uprising, but rather to fulfil Soviet-era commitments. Russia has made clear it would use its UN Security Council Vote to veto an arms embargo against Damascus, contending such a move would be one-sided when rebels are able to obtain weapons via smuggling into territory they now control. Moscow has reported no major arms deals with Syria this year. A major order of fighter jets was not completed, although it remains unclear as to why. Putin gave no specifics on Russia's main weapons buyers.Top weapons clients also include Soviet-era client and regional Asian heavyweight India, as well as Vietnam and other Southeast Asian nations wary of China's growing military might.Putin said a major part of Russia's weapons business includes upgrades and refurbishment of Soviet-era technology and hardware. "We understand that competition in this sector of the international economy is very high and very serious," he said. Exports from the world's top producer, the United States, have hovered around $30 billion annually in recent years.State arms exporter Rosoboron export accounts for around 80% of all Russian arms sales in a given year and nearly 20 independent firms comprise the rest with sales of spare parts and upgrades.

EU holds back on eurozone overhaul

European leaders doused hopes of a radical eurozone overhaul on Friday, after brokering deals to control banks and refloat Greece seen as adequate to stem the immediate crisis.The last EU summit of a year that saw Greece close to bankruptcy and bigger Latin countries pressured to overhaul their economies in line with German demands saw a series of ambitious proposals effectively kicked into the long grass.Despite worries over political uncertainty in Italy, flagship plans to fix fundamental flaws criticised since the introduction of the single currency were put to one side until late 2014 at the earliest.Europe's effective paymaster, German Chancellor Angela Merkel, hinted that "financial aid" could in the future be given to countries committing to reforms as part of moves towards greater economic co-ordination in the bloc.In the eurozone alone, joblessness is heading towards the 20 million mark after a year of devastation and with recession set to last throughout much of 2013.However, the sense of imminent panic on financial markets that dominated much of 2012 decision-making has receded significantly since the European Central Bank (ECB) issued a long-resisted but near-unlimited guarantee in the summer to stand behind countries in financial difficulty." No doors were closed," said Jose Manuel Barroso, the head of the executive European Commission. Yet ideas heavily promoted by EU President Herman Van Rompuy over the last six months, including a central eurozone budget, seemed to fizzle out.Van Rompuy said he would present another report to leaders in June 2013, as well as proposing that national governments sign up to contracts with the EU on reforms."All the hard work is beginning to pay off. A lot has been achieved over the course of a year," he insisted. "This work is not over: the dynamic will carry on in the coming year," pledged Van Rompuy. French President Francois Hollande said that late-2014, when a new Commission is installed, "would be the time we could envisage a new phase with a modification of the treaties. "The resumption of loans to Greece followed a successful plan to wipe tens of billions of euros from the country's debt pile.A first payment of €34.3bn would be flowing to Athens "as early as next week," said outgoing Eurogroup chair and Luxembourg Prime Minister Jean-Claude Juncker.The accord prompted Greek Prime Minister Antonis Samaras to declare that "Grexit", the idea that Greece would be forced out of the 17-nation bloc, was "dead." "Greece is back on its feet," declared an ecstatic Samaras, who has pushed through painful economic reforms demanded by international creditors, sometimes in the face of violent street protests. Meanwhile, the deal for the eurozone's largest banks to come under the aegis of the ECB from March 2014 was hailed by its head Mario Draghi as "an important step towards a stable economic and monetary union, and towards further European integration".Despite a noticeably more bullish tone at the summit, fears over Italy lurked in the background, after Prime Minister Mario Monti, credited with important reforms there, said he was stepping down soon. Former leader Silvio Berlusconi had hinted that he might stand for a fourth time but appeared to row back, telling Belgian television that he had "so much to do" outside politics. Hollande downplayed the chance Berlusconi would run in a future election, saying: "I don't think there is a very serious likelihood" of this."Merkel underlined a closing of ranks at the summit. "I made clear that the government of Mario Monti has done a great deal of helpful work for the confidence that Italy is now enjoying again," she said. Leaders were to reconvene later Friday at 10:00am (09:00 GMT) to discuss moves towards a common security and defence policy as well as to take a position on the Syria crisis.

Greece's lenders warn of 'very large' risks to bailout

Political resistance and potential court challenges are among "very large" risks to reforms required for Greece's bailout programme, the country's European lenders said today. The long-awaited report from the European Commission and the European Central Bank details the findings of the "troika" of the EC, ECB and the International Monetary Fund on Athens' efforts to meet targets under its latest rescue package.The report formally confirmed that Greece deserved further aid under the 130 billion euro ($202-billion) bailout, and a Greek finance ministry source said Athens had received a long-delayed instalment of over 34 billion euros in aid today. But the lenders warned Athens still risked falling short on its commitments. "The key risks concern the overall policy implementation, given that the coalition supporting the government appears fragile and some components of the programme face political resistance, despite the determination of the government," the report said." Important budgetary measures are likely to be challenged in courts, which could lead to the need to fill a fiscal gap emerging as a consequence." Greece, which has been bailed out twice by the EU and IMF since the debt crisis erupted, has a long history of missed targets and failure to meet promises to overhaul its bloated state sector and liberalise its recession-hit economy. A separate report by an EU task force today said by the end of October Greece had completed only 88 of the targeted 300 audits of large tax payers and 467 of 1300 audits of high-wealth individuals. Despite the lingering doubts on Greece's commitment and ability to reform, the country's lenders last week agreed to disburse aid to Athens after it bought back its own debt at a fraction of face value, cutting its debt burden. The decision to unlock aid - expected to total over 52 billion euros by the end of March removed the spectre of a Greek bankruptcy and euro zone exit. Even so, Moody's ratings agency said only further debt relief from official creditors, such as governments, would put its debt back on sustainable footing. The agency classified the bond buyback scheme as a "distressed exchange" and, as a result, a default on the Greek government debt held by private bondholders. Prime Minister Antonis Samaras's conservative-led government has promised to restore the country's credibility but his coalition has faced attacks both from within and outside on its plan to push through a new round of austerity. The troika's report warned those spending cuts next year could hurt the weak economy more than expected, though that could be stemmed by the government paying bills that have been in arrears. Greece's economy will contract by about 6% this year its fifth in recession and by a further 4.2% next year before growing 0.6% in 2014, the report said. But growth would not return without a business reform drive. Criticising influential business lobbies, it said reviving the economy would require "breaking the resistance (to reform) of vested interests and the prevailing rent-seeking mentality of powerful pressure groups".The report acknowledged that privatisation proceeds had been disappointing so far but that the programme had gained some momentum since September. It forecast revenue of 8.5 billion euros by 2016 from the asset sales, roughly a billion lower than Athens' own estimates in a mid-term fiscal plan. "Doubts on the effectiveness of the governance of the privatisation process however continue to persist," it said.

Wall Street gains as Obama and Boehner meet

Wall Street gained as a meeting between US President Barack Obama and House Speaker John Boehner at the White House today bolstered optimism a budget agreement will be reached soon Wall Street took heart from the 45 minute gathering about which no further details were released. In afternoon trading in New York, the Dow Jones Industrial Average rose 0.62 %, the Standard & Poor's 500 Index gained 1.03%, while the Nasdaq Composite Index advanced 1.01%. The stakes are high for the budget talks aimed at avoiding US$600 billion of tax increases and spending cuts from taking effect on January 1; failure to reach an agreement might push the US into recession in the first half of next year.Indeed, a report today showed that manufacturing in the New York region contracted more than expected in December, underpinning the fragility of the economy that prompted the US Federal Reserve to expand its stimulus program last week."It's a historic tug of war: pulling on one side is the fiscal cliff, pulling the other side is continued global monetary easing," David Sowerby, a portfolio manager at Boston based Loomis Sayles & Co, told Bloomberg News. "The most positive thing for the market is valuation and an accommodative Fed policy. "In Europe, the Stoxx 600 Index finished the session with a 0.1% decline from the previous close. European Central Bank President Mario Draghi reminded investors of the challenges ahead, even as he predicted a recovery in the second half of 2013 in comments at the European Parliament's Economic and Monetary Affairs Committee. "We expect economic weakness to extend into next year with a very gradual recovery in the second half of the year," Draghi said. Still, "the medium-term outlook for economic activity remains challenging."The central bank's new supervisory powers over banks in the region will help restore confidence, Draghi said. Equity investors in Japan applauded the Liberal Democratic Party's victory as leader Abe Shinzo plans aggressive fiscal and monetary stimulus measures to revive the nation's economy that just tipped into recession. The Nikkei 225 closed with a 0.9% gain.It's considered bad news for the yen, however, which was last 0.4% weaker against the US dollar. Earlier in the session, the yen dropped as low as 84.48 per dollar, the weakest since April 12, 2011, according to Bloomberg. The Bank of Japan is scheduled to start a two-day policy meeting on Wednesday. Switzerland's UBS will pay around US$1.5 billion to settle charges that a group of traders at its Japanese unit rigged Libor interest rates, Reuters reported, citing a source familiar with the matter. UBS will admit that about 36 of its traders around the globe manipulated yen Libor between 2005 and 2010, according to the source, with a final deal not expected before Wednesday. Shares of Apple fell initially after Citigroup cut its rating for the stock amid concern about tapering demand for its iPhone 5. The stock rebounded, last up 1.2%.