NEWS,02.05.2013

Obama Mexico Trip: Drug War, Trade At Center Of Meetings With Enrique Peña Nieto

 

US President Barack Obama headed to Mexico on Thursday to put trade back at the heart of bilateral ties, but his southern neighbor's shifting drug war tactics loom large over the visit.
Mexican President Enrique Pena Nieto hosts Obama on the first stop of a three-day trip that will also take him to Costa Rica for a summit with Central American leaders, with trade, US immigration reform and the battle against drug cartels high on the agenda.
After almost seven years of bloodshed by drug gangs that has left 70,000 people dead in Mexico, Pena Nieto and Obama have both made clear they want to turn the spotlight back on trade ties and other matters.
"We've spent so much time on security issues between the United States and Mexico that sometimes I think we forget this is a massive trading partner responsible for huge amounts of commerce and huge numbers of jobs on both sides of the border," Obama said on Tuesday.
Twenty years into the North American Free Trade Agreement (NAFTA), also including Canada, Mexico is Washington's third-ranked trade partner, with $500 billion exchanged every year.
Mexico and Washington want to "talk about the benefits and the need to re-balance and diversify the relationship," Sergio Alcocer, Mexico's deputy foreign minister for North America, told AFP.
Before Obama's departure, the United States announced the creation of a bilateral forum on higher education, innovation and research to broaden educational exchanges.
But the relationship has been marked by deep cooperation in the fight against powerful drug cartels that make billions of dollars by feeding cocaine, marijuana and heroin to US addicts.
The United States is providing $1.9 billion in aid, including police training and crime-fighting equipment, to help Mexico fight the drug gangs.
Pena Nieto, who visited Obama in Washington shortly before taking office in December, wants to refocus the drug war on reducing the wave of violence plaguing his country.
While he is keeping troops that were deployed in the streets by his predecessor for now, he has launched a new strategy that includes a crime prevention program and a shift in the way Mexico will work with US law enforcement.
His predecessor, Felipe Calderon, forged unprecedented security ties with Washington by allowing US agencies to deal directly with Mexican counterparts during his six-year administration.
But the new government wants to channel all security matters through a "one-stop window," the powerful interior ministry, which has been tasked with coordinating Mexico's fight against organized crime.
Obama said he was not yet ready to judge how Pena Nieto's strategy would change security relations until he had spoken to him.
"At this point, we're confident that we're going to have a good constructive and effective security relationship with Mexico, and we look forward to hearing from them about how they plan to go forward with it," said Obama's advisor for Latin America, Ricardo Zuniga.
Rights groups want Obama to address the high level of impunity in Mexico, with Reporters Without Borders urging the US leader to commit to helping "restore the rule of law and civil liberties" in a country where 86 journalists have been killed in the past 10 years.
Pena Nieto will hold talks with Obama at the historic National Palace, with tight security around the building famous for its Diego Rivera murals, before hosting a dinner at the Los Pinos presidential residence.
Obama then travels to San Jose on Friday for a summit with Central American leaders before returning to Washington the next day.
With 11 million undocumented migrants living in the United States two thirds of them from Mexico regional leaders will want to discuss Obama's push for comprehensive immigration reform.

ECB cuts interest rate to historic low

The European Central Bank cut its key interest rate to a historic low and extended unlimited cheap loans to banks to try and help the flagging European area economy climb out of a stubborn recession - with ECB President Mario Draghi holding out the prospect more help was on the way.

The bank's governing council lowered the benchmark refinancing rate Thursday to 0.50% from 0.75%t and President Mario Draghi left open the possibility of cutting rates even further.
And the bank extended its all-you-want policies on its regular loans to banks. That means lenders can get as much funding as they feel they need at the bank's low rate, through at least July of next year.
Yet Draghi had only a sketchy proposal of how to solve what he and other bank officials say is the real problem: that the bank's low rates aren't being passed on to small and medium-sized companies in heavily indebted countries that could use such stimulus the most.
Draghi said that ECB officials were working with the European Union's executive commission and the European Investment Bank lending agency about creating a market for securities backed by loans to businesses, a step that could free up more money for lending. Small businesses are key because they provide most of the jobs in the eurozone.
Most economists had expected a cut after recent economic indicators gave alarming signs that the ECB's prediction for a recovery by year-end might not be coming true. Draghi stuck with that prediction but said there were risks that "could dampen confidence and delay the recovery."
Draghi only added the bank would "look at all the incoming data, monitor them closely, and stand ready to act if needed"language similar to that which preceded Thursday's cut.
He also warned that governments could derail the recovery if they fail to take steps to right their finances and make their economies more business-friendly, such as by cutting excessive regulation on hiring and firing.

Executive Pay Of Austerity Advocates Saves Companies More Than $1 Billion Via Tax Loophole

 

Companies in the Fix the Debt coalition, which advocates for federal austerity policies, qualified for $1 billion or more in tax breaks tied to executive pay packages from 2009 to 2011, according to a new report by the liberal think tanks Institute for Policy Studies and Campaign for America's Future.
The four highest-paid executives at the firms received a total of $6.3 billion in pay over the period, according to the report. Federal tax law allows companies to deduct executive pay based on performance from the firm's tax bill as a business expense. This performance-based compensation includes stock options, stock awards and other types of incentive pay. These 90 companies qualified for tax perks totaling between $1 billion and $1.5 billion over the course of three years, depending on how many types of pay firms actually deducted.
Companies can choose to be more or less aggressive about their tax deductions, and some types of incentive pay exist in a gray area where certain companies choose to claim deductions and others do not. Firms do not make their tax filings public, although they release estimates of overall taxes paid in SEC filings. The IPS-CAF study was based on actual payments to executives that were taxable in the years 2009, 2010 and 2011 that would have qualified for deductions, but whether firms chose to take them is not a matter of public record.
Fix the Debt is one of several austerity advocacy groups tied to Wall Street billionaire Peter Peterson, who started a think tank devoted to deficit reduction in 2008 and has bankrolled multiple public relations campaigns on the issue.
A total of 125 CEOs are officially members of the coalition, including CEOs of 90 public companies. The IPS-CAF report only examined tax perks for public companies in the coalition. The same CEO pay loophole is available to private companies, but private firms do not have to disclose executive pay to the SEC.
The coalition urges a host of spending cuts and tax reforms, including benefit cuts for Social Security, Medicare and Medicaid, as a means to reduce the federal budget deficit. A spokesman for the group told  that while the group doesn't advocate for specific policies, it does insist that comprehensive tax reform be part of any debt deal.
"It's a lot easier for groups like this to sit on the sidelines and throw stones than to talk about the 4 million meals that are going to be eliminated for seniors because Congress wouldn't pass a debt deal," Fix the Debt spokesman Jon Romano said. "All of our supporters understand that there is going to be pain associated with a comprehensive debt deal and that people are going to have to give something up to get a debt deal in place. But everything has to be on the table. We're a campaign about fixing the debt. This is not about protecting special interests, this about what's in the best interest of the American people."
The group is currently airing an online video pushing to cut Social Security benefits by using a more conservative measure of inflation to calculate annual cost-of-living increases.
The CEO pay loophole being used by Fix the Debt companies is extremely popular in corporate America. According to a report by Citizens for Tax Justice, Fortune 500 companies skipped out on $11.2 billion in taxes in 2011 alone thanks to this loophole.
"The stock option loophole is a major reason why corporations are paying record-low federal income tax rates," said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy. "The worst of it is that there is no 'cost' to a corporation that uses stock options to pay its executives, so there's no justification for allowing them to deduct it as an expense. It's not an expense."
Sen. Carl Levin (D-Mich.) has introduced legislation that would eliminate the loophole, but the plan is rarely included in deficit reduction talks on Capitol Hill.
The highest-paid executive in the Fix the Debt coalition is UnitedHealth Group CEO Stephen Hemsley, who received $198.9 million from 2009 to 2011, which would have qualified his company for $67.7 million in tax breaks. UnitedHealth declined to comment for this article.
Some of the companies eligible for the biggest tax breaks from CEO pay are run by politically influential executives.
According to the IPS-CAF report, Honeywell could have lowered its tax burden by as much as $21.5 million based on CEO David Cote's $70.1 million in pay from 2009-2011 -- the fifth-highest break among the firms analyzed. Cote serves on Fix the Debt's steering committee, and is also close with President Barack Obama, who named him to the Simpson-Bowles Commission, where he served as the second-ranking Republican. (Alan Simpson and Democrat Erskine Bowles also co-chair Fix the Debt.)
Honeywell is very aggressive about minimizng its tax payments, paying nothing at all in federal income taxes between 2008 and 2010, and receiving $34 million in tax rebates from the federal government during that period.
"Mr. Cote's compensation is aligned with the company's strong growth and reflects our variable, at-risk and long-term compensation plan that’s based on sustainable, profitable growth and stock price appreciation," said Honeywell spokesman Rob Ferris. "Honeywell is in compliance with U.S. tax law for treatment of corporate tax deductions for CEO pay."
President Obama named former Verizon CEO Ivan Seidenberg to his Export Council in 2010. From 2009 and 2011, Verizon qualified for $29.9 million in tax breaks from Seidenberg's $94.2 million in pay, third-highest among the Fix the Debt CEOs. Seidenberg stepped down from Verizon in 2011 but remains a member of Fix the Debt. Verizon declined to comment for this article.
Verizon disputed IPS' methodology and told it only had $32.9 million in deductible CEO pay for Seidenberg during those years, which would have reduced the firm's tax bill by $11.5 million. Verizon said its deductions were the sum of $3 million in salary, $10.4 million in short-term incentive pay and $19.5 million in long-term incentive payments recognized during the years. Verizon did not provide documentation to verify the claims.
"We strongly dispute the IPS findings which are simply inaccurate with respect to Verizon," company spokesman Robert Varettoni told . "We fully comply with tax law, which makes performance-based compensation deductible provided we obtain the requisite shareholder approval."
The IPS-CAF report based its Verizon calculations on a 2012 SEC filing which stated that Seidenberg exercised $20 million in stock options from 2009 - 2011 in 2012 which were tax deductible. Seidenberg cashed in another $30 million in stock options from the period in 2011, and $25 million in 2010. In addition, Seidenberg received $10,434 in non-equity performance compensation, including $3.5 million in 2011, $3.0 million in 2010 and $3.9 million in 2009.
Although the scope of the federal budget deficit has been a major political issue over the past four years, it has faded in recent months as Congress has considered gun legislation and immigration reform.
The deficit itself is also shrinking rapidly. With no policy changes, Goldman Sachs economists expect it to fall from $775 billion in 2013 to $475 billion by the end of 2015 due to economic growth.

NEWS,27. AND 28.02.2013

News of the Day From Across the Globe

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

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

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

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

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

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

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

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

 

US economy shows strength

 

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

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

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

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

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

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

Will Italian Politics Be a Threat for International Financial Stability?

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

Wall Street gains despite IMF warning

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

NEWS,19.02.2013

Italy Elections 2013: Nearly A Third Of Population Undecided Or Will Not Vote, According To Final Poll

Five days before national elections almost a third of Italians have yet to decide who to vote for or are considering not voting at all, a survey showed on Tuesday, highlighting uncertainty over the outcome. The poll in Corriere della Sera daily showed the proportion of Italians undecided or tempted to abstain has declined from 51.5 percent in December but remains at a significant 27.7 percent less than a week before the vote on Sunday and Monday. Final polls on Feb. 8, before a legal black-out period set in, indicated that the centre-left Democratic Party would win a lower house majority but will need to form a coalition with outgoing Prime Minister Mario Monti's centrist grouping. Silvio Berlusconi's centre-right alliance was about 6 percentage points behind the frontrunners. But the hefty proportion of undecided voters means the outcome is still unpredictable and the final days of campaigning will be crucial. Publication of polls is illegal in the two weeks leading up to the Feb. 24-25 election but analysts are permitted to reveal data on likely participation rates. Most of the undecided are middle-aged housewives or pensioners with relatively low education levels, mainly living in the south of Italy, and with little interest in politics, pollster Renato Mannheimer of the ISPO institute said. "More than half of those who are currently undecided or potential abstainers say they can't place themselves on the right or the left," Mannheimer told the Milan daily. He added it was likely that many people who were yet to decide would probably not vote, based on past electoral trends. But historical participation rates suggest about 5 million people, or 10 percent of voters, will make up their minds in the last few days, swayed by last-minute promises from party leaders regardless of their place on the political spectrum, he said. Many polls over the last year have shown Italians disenchanted with a political class clinging to its privileges as the euro zone's third biggest but chronically uncompetitive economy descended deeper into crisis.

China Suspected Of Hacking Attacks Against The U.S.

A secretive Chinese military unit is believed to be behind a series of hacking attacks, a U.S. computer security company said, prompting a strong denial by China and accusations that it was in fact the victim of U.S. hacking. The company, Mandiant, identified the People's Liberation Army's Shanghai-based Unit 61398 as the most likely driving force behind the hacking. Mandiant said it believed the unit had carried out "sustained" attacks on a wide range of industries. "The nature of 'Unit 61398's' work is considered by China to be a state secret; however, we believe it engages in harmful 'Computer Network Operations'," Mandiant said in a report released in the United States on Monday. "It is time to acknowledge the threat is originating in China, and we wanted to do our part to arm and prepare security professionals to combat that threat effectively," it said. The Chinese Foreign Ministry said the government firmly opposed hacking, adding that it doubted the evidence provided in the report. "Hacking attacks are Trans national and anonymous. Determining their origins is extremely difficult. We don't know how the evidence in this so-called report can be tenable," spokesman Hong Lei told a daily news briefing."Arbitrary criticism based on rudimentary data is irresponsible, unprofessional and not helpful in resolving the issue."Hong cited a Chinese study which pointed to the United States as being behind hacking in China. "Of the above mentioned Internet hacking attacks, attacks originating from the United States rank first. "China's Defence Ministry did not immediately respond to faxed questions about the report. Unit 61398 is located in Shanghai's Pudong district, China's financial and banking hub, and is staffed by perhaps thousands of people proficient in English as well as computer programming and network operations, Mandiant said in its report.The unit had stolen "hundreds of terabytes of data from at least 141 organisations across a diverse set of industries beginning as early as 2006", it said.Most of the victims were located in the United States, with smaller numbers in Canada and Britain. The information stolen ranged from details on mergers and acquisitions to the emails of senior employees, the company said.The 12-storey building, which houses the unit, sits in an unassuming residential area and is surrounded by a wall adorned with military propaganda photos and slogans; outside the gate a sign warns members of the public they are in a restricted military area and should not take pictures. There were no obvious signs of extra security on Tuesday. "ECONOMIC CYBER ESPIONAGE" Some experts said they doubted Chinese government denials of military involvement in the hacking. "The PLA plays a key role in China's multi-faceted security strategy, so it makes sense that its resources would be used to facilitate economic cyber espionage that helps the Chinese economy," said Dmitri Alperovitch, chief technology officer and co-founder of CrowdStrike, one of Mandiant's competitors. Though privately held and little known to the general public, Mandiant is one of a handful of U.S. cyber-security companies that specialise in attempting to detect, prevent and trace the most advanced hacking attacks, instead of the garden-variety viruses and criminal intrusions that befoul corporate networks on a daily basis. But Mandiant does not promote its analysis in public and only rarely issues topical papers about changes in techniques or behaviours. It has never before given the apparent proper names of suspected hackers or directly tied them to a military branch of the Chinese government, giving the new report special resonance. The company published details of the attack programmes and dummy websites used to infiltrate U.S. companies, typically via deceptive emails. U.S. officials have complained in the past to China about sanctioned trade-secret theft, but have had a limited public record to point to. Mandiant said it knew the PLA would shift tactics and programmes in response to its report but concluded that the disclosure was worth it because of the scale of the harm and the ability of China to issue denials in the past and duck accountability.The company traced Unit 61398's presence on the Internet including registration data for a question-and-answer session with a Chinese professor and numeric Internet addresses within a block assigned to the PLA unit and concluded that it was a major contributor to operations against the U.S. companies. Members of Congress and intelligence authorities in the United States have publicised the same general conclusions: that economic espionage is an official mission of the PLA and other elements of the Chinese government, and that hacking is a primary method. In November 2011, the U.S. National Counterintelligence Executive publicly decried China in particular as the biggest known thief of U.S. trade secrets. The Mandiant report comes a week after U.S. President Barack Obama issued a long-awaited executive order aimed at getting the private owners of power plants and other critical infrastructure to share data on attacks with officials and to begin to follow consensus best practices on security.Both U.S. Democrats and Republicans have said more powerful legislation is needed, citing Chinese penetration not just of the largest companies but of operations essential to a functioning country, including those comprising the electric grid.

Chavez returns to Venezuela from Cuba

 

President Hugo Chavez returned to Venezuela early Monday after more than two months of treatment in Cuba following cancer surgery, his government said, triggering street celebrations by supporters who welcomed him home while he remained out of sight at Caracas' military hospital. Chavez's return was announced in a series of messages on his Twitter account, the first of them reading: "We've arrived once again in our Venezuelan homeland. Thank you, my God!! Thank you, beloved nation!! We will continue our treatmen there. "They were the first messages to appear on Chavez's Twitter account since Nov.1."I'm clinging to Christ and trusting in my doctors and nurses," another tweet on Chavez's account said. "Onward toward victor always!! "Vice President Nicolas Maduro said Chavez arrived at 2:30 a.m. and was taken to the Dr.Carlos Arvelo Military Hospital in Caracas. Chavez's return came fewer than three days after the government released the first photos of the president in more than two months, showing him looking bloated and smiling alongside his daughters. The government didn't release any additional images of Chavez upon his arrival in Caracas, and unanswered questions remain about where he stands in a difficult and prolonged struggle with an undisclosed type of pelvic cancer. Chavez was re-elected to a new six-year term in October, and his inauguration, originally scheduled for Jan. 10, was indefinitely postponed by lawmakers in a decision that the Supreme Court upheld despite complaints by the opposition. Some speculated that with Chavez back, he could finally be swornin. Hundreds of Chavez supporters celebrated his return in downtown Caracas, chanting his name and holding photos of the president in Bolivar Plaza. Supporters also gathered outside the hospital. "I want to see my president," said Alicia Morrow, a seamstress who stood outside the hospital on the verge of tears. "I've missed him a lot because Chavez is the spirit of the poor. "Chavez's precise condition and the sort of cancer treatments he is undergoing remain a mystery, and speculation has grown recently that he may not be able to stay on as president. The Venezuelan Constitution says that if a president dies or steps down, a new vote must be called and held within 30days. The 58-year-old president hasn't spoken publicly since he left for Cuba on Dec. 10. He underwent his fourth cancer-related surgery on Dec. 11, and the government says that he is now breathing through a tracheal tube that makes talking difficult.

Israeli leader brings dovish rival into coalition

Israeli Prime Minister Benjamin Netanyahu on Tuesday added his first coalition partner as he works to build a new government, agreeing to bring in a dovish rival to oversee contacts with the Palestinians in what could signal a new approach to peacemaking by the hard line leader. Under the deal, former Foreign Minister Tzipi Livni will serve as justice minister in the next Israeli government, in charge of peace efforts with the Palestinians. Livni, who led negotiations during the last substantive round of peace talks four years ago, has a good relationship with Palestinian President Mohmoud Abbas and favours a softer line than Netanyahu. Standing alongside Livni at a news conference Tuesday evening, Netanyahu vowed to make a serious attempt to reach peace under his next government. He said bringing in Livni, who has been a fierce critic, was part of his goal of forming a "wide and stable" government. "We need a Palestinian partner and I hope we will find a Palestinian partner who will take seriously Israel's security needs and that will be willing to end the conflict once and for all. Today Israel outstretches its hand to peace once again," he said. Netanyahu, who has come under heavy criticism, both at home and abroad, for the deadlock in peace efforts during his previous term, has promised to take a more aggressive approach under his next government. But he has given no details on whether he is prepared to make any new concessions, and it remained unclear whether Livni's addition to his Cabinet would be enough to lure the Palestinians back to negotiations. "What is important is the policies that will be adopted and implemented by the incoming Israeli government," said Yasser Abed Rabbo, a top adviser to Abbas. He said that if Netanyahu stuck to his policies of building settlements on occupied land, "it's better for Livni to search for another mission." As foreign minister, Livni served as the chief negotiator with the Palestinians under former Prime Minister Ehud Olmert. While both sides have said they made great progress during that time, the talks collapsed in late 2008 and have remained virtually frozen since Netanyahu took office early the following year. The Palestinians have refused to negotiate with Netanyahu while he continues to build Jewish settlements in the West Bank and east Jerusalem, areas captured by Israel in the 1967 Mideast war. The Palestinians claim both areas, along with the Hamas-ruled Gaza Strip, for their future state. The Palestinians also want negotiations to resume from the point where they broke off under Olmert and Livni. Olmert has said he offered a near total withdrawal from the West Bank and shared control over Jerusalem. Netanyahu has said these concessions were far too generous and that negotiations should begin without any preconditions. He also has claimed that even when he imposed a partial freeze on settlement construction, the Palestinians did not enter substantive negotiations. But after four years of deadlock, the international community has grown impatient with the Israeli leader. In a sign of the international disapproval, the U.N. General Assembly overwhelmingly voted in November in favour of an independent Palestinian state in all of the West Bank, east Jerusalem and Gaza. Although largely symbolic, the vote signified an international endorsement of key Palestinian demands on future borders. With President Barack Obama scheduled to visit in late March, Netanyahu is eager to present a new face to the international community. Livni's addition to his Cabinet is a step in that direction. In addition to her good working relationship with the Palestinians, Livni is well known and well respected around the world, and has appeared on lists of the world's most influential women compiled by magazines like Forbes and Time.

NEWS,14.08.2012

Europe's Economic Crisis -- Follow the Politics

 

If you've been following the Eurozone's crisis but have found the economic technicalities trying (or worse, boring) don't despair. The roots of the crisis, the obstacles impeding solutions, and the consequences of success or failure are essentially political.The technicalities of bond yields, the implications of creating Eurobonds, the appropriate size and ground rules of the proposed European Stability Mechanism (ESM), the proper role of the European Central Bank (keeping inflation low vs. providing stimulus to economies crippled by massive unemployment and stalled growth), and the pros and cons of cutting budgets as opposed to running short-term deficits to create jobs and increase demand  these are all undoubtedly important. But ultimately the economic decisions will depend on what European leaders  those needing help and those able to give it  decide they can do politically.German Chancellor Angela Merkel leads the European Union's powerhouse and is certainly no economic neophyte. She knows that the downside of pushing Greece and Spain to slash public spending is that their unemployment rates could increase, thus reducing demand and preventing the economic recovery that will produce the increased tax revenues required to reduce their debt and increase their creditworthiness. She also understands that the worse things get in Spain, the more likely that the bond markets will make life untenable for Italy's leaders, and that the euro itself will then be in (greater) peril.Yet Merkel isn't an economics professor; she's a politician and, as such, can't ignore the political reality that German taxpayers are unwilling to guarantee bonds that will allow the Greek, Spanish, and Italian governments to borrow at lower interest rates, or to make big contributions to schemes that will enable them to revive their economies by spending more in hopes of creating jobs and boosting demand. On the streets of Stuttgart or Hamburg, it doesn't much matter what Keynes said. True, Germany's big export surpluses have been enabled in large measure by the big imports of the very European countries now being castigated for their profligacy. So it is in Germans' self-interest to help them recover. But imagine Merkel the politician making this pitch to the German electorate. For all the happy talk of the European Union having created a unity that has transcended nationalism, the reality is that that stubborn sentiment remains alive and well on the continent. Germans won't write checks or take big economic risks for foreigners (even of the European variety) who, as they see it, are suffering from self-inflicted wounds. Pumping huge sums of money  over 1 trillion euros since 1990  into the former East Germany was one thing; making sacrifices for Greeks and Spaniards, let alone for "Europe," is another. Likewise, while Greek and Spanish leaders understand that they must cut government spending, they can't keep doing so at the risk of losing ground to opposition parties that accuse them of succumbing to the diktat of a German-dominated EU and ignoring the plight of the poor, the unemployed, and the retired. Elections are not imminent in either country, but in democracies all politicians are exquisitely and perennially sensitive to polls, and the risk of social unrest in Greece and Spain is ever present. So imagine Greek Prime Minister Antonis Samaras telling his fellow citizens that, yes, he feels their pain, but that, unfortunately, it's the price they must now pay for their rampant tax evasion and attachment to social programs that had to be financed by running red ink. Picture Spanish Prime Minister Mariano Rajoy whose country's problems, unlike Greece's, stem from the insolvency of its banks rather than outsize government spending giving a national television address, the gist of which is that, yes, the bankers messed up and damaged the economy, but now everybody has to pay for the repairs and that bigger bills await. That refrain won't be well received at a time when a nearly a quarter of the Spanish workforce is jobless and feels that it's footing the bill for the blunders of well-heeled bankers.Politics also explains the roots of the Eurozone's crisis. A common economic explanation is that what's happening was bound to happen because the EU foolishly decided to create a monetary union without a fiscal counterpart. That's true as far as it goes, but the choice didn't result from economic illiteracy. Countries were simply unwilling to transfer that much political power to distant European institutions and bureaucrats. The primacy of politics applies to the future as well. It's in the political realm that we'll see the biggest results of the Eurozone's success, or lack thereof, in solving its economic crisis. If it succeeds, the idealistic post-World War II project of pan-Europeanism will survive, even if the Eurozone may not retain all of its current members. The coordination of domestic and foreign policies and EU enlargement will resume, albeit at a reduced tempo, and Europe will prove that it is indeed more than the sum of its parts. If it fails, European politics will be transformed as parties with nationalistic, populist, anti-immigrant platforms overshadow moderate ones. "European" positions on major global issues will prove elusive. NATO's unity and sense of purpose, already hard to maintain in a non-Soviet world, will fray as American presidents, facing their own budgetary pressures, push European allies to spend more on defense and the latter, preoccupied with domestic problems and facing inward-looking voters, refuse.So if you find the economic details of Europe's crisis soporific keep your eyes on the politics. That's the main event.

 

Eurozone economy shrinks by 0.2%

The eurozone's debt-ravaged economy shrank in the second quarter, having flatlined in the first, despite continued German growth which economists said could soon be snuffed out.The 17-nation currency bloc contracted by 0.2% on the quarter, data showed on Tuesday. Germany eked out growth of 0.3%, marginally beating forecasts, but its forward-looking ZEW sentiment index slid for a fourth month running, undercutting even the lowest estimate in a Reuters poll.Economists said worse is likely to come and even Europe's largest economy is unlikely to defy gravity for long unless decisive action is taken to tackle the bloc's debt crisis. "Growth turned out to be pretty solid. But this could be the last positive piece of news out of Germany for some time," said Joerg Kraemer at Commerzbank. "The German economy could contract in the summer. It is fundamentally in good structural shape, but can't decouple from the recession in the euro zone, plus the global economy has also shifted down a gear."Aside from a downward blip in the last three months of 2011, the eurozone has posted pretty consistent, albeit anaemic, growth over the past three years although some of its debt-laden members have been in recession for some time."Overall it confirms the idea that the euro zone is in a recession phase," Aline Schuiling, economist at ABN AMRO, said."What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising," she said. "Policymakers are moving very slowly ... We expect another contraction in Q3."For France, it was the third consecutive quarter of zero growth. The central bank has already said it expects a mild contraction in the third quarter. "These figures are not excellent, but at the same time France is not in recession while the majority of its European partners are," Finance Minister Pierre Moscovici told Europe 1 radio. Safe-haven German Bund futures fell and European stocks rose after the slightly stronger than expected German and French GDP reports. The euro also rose though its climb was thwarted after the ZEW survey came in worse than expected. The think tank's monthly poll of economic sentiment slid to -25.5 from -19.6 in July. ZEW economist Christian Dick said the German economy would slow due to weak growth in its main export markets, but would not deteriorate sharply.Austria and the Netherlands almost matched Germany's performance, each posting growth of 0.2%. But Finland, one of Germany's northern European allies in pushing for austerity, suffered a 0.7% year-on-year (y/y)fall in GDP.EU Economic and Monetary Affairs Commissioner Olli Rehn said the European Union and European Central Bank (ECB) were ready to act if needed to shore up the currency bloc."To my mind it is clear that both the European Union and ... ECB are ready to take action once certain conditions are met and if there is a request by some member state," he said in an interview.Spanish and Italian bond yields have steadied since ECB President Mario Draghi promised to do whatever it takes to save the eurozone although a government would first have to ask for help from the bloc's rescue funds.For the countries at the sharp end of the debt crisis, the picture is bleaker still and as economies shrink, so do tax revenues, making deficit-cutting even harder to achieve.That has fostered a growing debate inside and outside Europe about the sense of austerity drives.Bailed-out Portugal's recession deepened with GDP diving by 1.2% on the quarter and Cyprus contracted by 0.8%. Figures released on Monday showed deficit-cutting measures helped to shrink Greece's economy 6.2% y/y in the second quarter. Economists say the slump will persist as the government scrambles to secure billions in additional cuts to keep bailout funds flowing. Italy's second quarter data last week showed the economy contracted 0.7% quarter-on-quarter, compounding the difficulties for Mario Monti's technocrat government as it tries to avoid a bailout. Spain's economy shrank 0.4% over the same period, pushing it deeper into recession. The big unanswered question is whether a weakening economy will make Germany, the EU's paymasters, less likely to support government rescue efforts for the broader eurozone. German Chancellor Angela Merkel has said repeatedly over the past year that she will do everything to save the euro, most recently after the ECB signalled it would intervene in the bond market to lower Spanish and Italian borrowing costs.Not all Germans support that course and the chancellor's room for manoeuvre appears to be shrinking at a time when both Greece and Spain may soon require new rescues. However, if ordinary Germans start to feel real economic pain, their response could be to demand their leaders sort out the crisis that is now finally knocking at their door."I have full trust in the German people and political leaders that they are fully committed to the euro," Rehn said.It is quite possible that Madrid and Rome will seek help from the euro zone's rescue funds and the ECB before the year is out. If so, most economists expect the German economy at least to rebound after a gruelling third quarter as confidence revives.Christian Schulz, an economist at Berenberg Bank in London, said it was vital to get a grip on the euro zone crisis. "We expect that the ECB has initiated a turning point with its signal of bond purchases," he said. "After a weaker summer the German economy will be able to grow faster again from the fourth quarter."

Eurozone narrowly escapes recession

The eurozone economy narrowly skirted recession in the first half of the year, but austerity programmes across the region and a debt crisis weighing ever more heavily on its periphery suggest the reprieve will be short-lived. Gross domestic product (GDP) shrank by 0.2% in the second quarter from the first after risk-averse businesses and consumers reined in spending, European statistics agency Eurostat said on Tuesday. Quarterly growth flatlined in January-March, meaning the region averted the two consecutive quarters of contraction that define a recession. Eurostat revised up the year-on-year GDP figure for that period to zero from a 0.1% contraction. Europe’s debt crisis intensified during the second quarter, with Greece coming closer to an exit from the single currency and Spain struggling with a banking crisis that pushed its borrowing costs to danger levels. Analysts agree the gloomy picture is not about to change. “What we see is a vicious circle of budget cuts, high interest rates in the periphery and sovereign debt rising,” said Aline Schuiling, an economist at ABN AMRO. “There is still a lot of uncertainty related to the crisis.” A decline in GDP from the end of last year levelled off in the first quarter of 2012 as exports offset a plunge in investment and inventories. “The economy is avoiding recession by the skin of its teeth, but it will be a temporary reprieve,” Kenneth Wattret, economist at BNP, said. “You could argue we have one leg in the recession already,“ said Martin Van Vliet, economist at ING. “Leading indicators point to a further contraction in the third quarter, so we might indeed see a technical recession.” Tuesday’s flash GDP estimate for the second quarter was in line with the average of economists’ expectations as polled by Reuters. Industrial production, a key component of GDP, fell 0.6% in June from May and 2.1% compared to June 2011, another reading from Eurostat showed. This was slightly above forecasts of a 0.7% and 2.2% fall respectively. Earlier on Tuesday, Germany posted modest growth in the second quarter, while France stagnated, as Europe’s core gets drawn further into to the debt crisis. German analyst and investor sentiment also dropped for a fourth straight month in August, undercutting even the lowest forecast in a Reuters poll, a survey showed on Tuesday.