NEWS,13.11.2012

Latin America's middle class now rivals poor, study finds

Rapid economic growth and more inclusive social policies in Latin America in the last decade have lifted 50 million people into the middle class, which for the first time rivals the poor in number, the World Bank has said in a new study.Rising income levels have also created a 'vulnerable' class, which at 38% makes up the largest income group.These people hover just above poverty, living on a daily income between $US4 and $US10 per person."As poverty fell and the middle class rose... the most common Latin American family is in a state of vulnerability," the World Bank, the global development lender, said in a report looking at the middle class and economic mobility in Latin America and the Caribbean . The World Bank measures the middle class as people who have economic security, facing less than a 10% chance of falling back into poverty.For the region, that translates into a daily income of $US10 to $US50 ($12 and $61) per person.Roughly 30% of the population now falls into that category, equal to the third of people still in poverty a remarkable shift in a continent that has been known for its vast income inequalities, dominated by the poor and a narrow slice of the rich.With global economic expansion, and redistributive policies in some countries, at least 40 percent of the region's population has moved to a higher economic class between 1995 and 2010.In Brazil, the region's largest nation and the world's sixth biggest economy, booming commodity-led growth and conditional cash transfers helped pull 30 million people out of poverty under left-leaning former president Luiz Inacio Lula da Silva.Across the region, the rise of the middle class has had clear effects, helping countries like Brazil become less reliant on foreign assistance and less amenable to foreign pressure.Latin America is now the only region in the world with narrowing income inequality, the World Bank said in a report last month, though the rich-poor divide remains higher than in most developed countries.It has nudged some countries toward greater democracy, and raised hopes for businesses eager to take advantage of the growing consumer tastes for everything from the Internet to financial services.The question is whether this rapid rise can continue, especially with the global slowdown.While families have improved their situation in the last decade, children are often still bound by the incomes and education of their parents, meaning mobility between generations remains low, the World Bank said.It is unclear whether the middle class's rising expectations can by themselves create a society of more equal opportunities.Traditionally in Latin America the middle class has opted out of public services like education and health if they can afford to do so, creating a fragmented society where the poorest members are stuck with subpar social protection. Low taxation has also exacerbated the problem of low-quality services, the World Bank said."The middle classes may not automatically become the much-hoped-for catalytic agents for reforms," the Bank said.

US re-elected to UN Human Rights Council

The United States was re-elected on Monday to another three-year term on the UN Human Rights Council in the only contested election for the organisation's top human rights body.The US was competing with four countries for three open seats belonging to the Western Group on the council. Germany and Ireland were also elected by the 193-member General Assembly. Greece and Sweden lost out.US Ambassador to the UN Susan Rice said her country was "pleased and proud to have been re-elected to a second three-year term"."I'm proud to say that, today, the Obama administration's leadership of the Human Rights Council has delivered real results. Today's vote affirms that active US leadership in the Human Rights Council and throughout the United Nations system will continue to pay real dividends for Americans and for the rest of the world," Rice said following the voteGermany's UN Ambassador Peter Wittig also praised the vote, thanking member states for their support."It was a good sign that we had a healthy competition at least in the Western Group, we could explain and promote our human rights agenda and we believe this also should also be an example for other regional groups," Wittig said.African, Asian, Eastern European and Latin American countries put forward uncontested slates, meaning candidates were virtually certain of winning one of the 18 open seats up for grabs in this year's election on the 47-member council.Several human rights groups have criticised a number of the candidates as unqualified, including Ivory Coast, Ethiopia, Gabon, Kazakhstan, Pakistan and Venezuela.On Monday, Venezuela's UN Ambassador Jorge Valero said his country's efforts to become a member of the council had "unleashed a truly unusual campaign"."It's important to emphasise that Venezuela has committed itself to defend the sovereignty and liberty of people," Valerio said in an apparent allusion to Venezuelan President Hugo Chavez's comments that Venezuela would oppose any actions or aggressions against allied countries such as Syria or Cuba.The five Western nations competing for seats were all deemed qualified by the rights groups as was Estonia, which was elected from the Eastern Europe groupAlso elected on Monday were Argentina, Brazil, Ivory Coast, Ethiopia, Gabon, Japan, Kazakhstan, Kenya, Montenegro, Pakistan, South Korea, Sierra Leone and the United Arab Emirates. They begin three-year terms on 1 January 2013.Jamil Dakwar, the director of the American Civil Liberties Union's Human Rights Programme, welcomed the US re-election to the council."Despite an imperfect human rights record, US membership on the council helped turn the tide on key issues, especially in the area of LGBT [Lesbian, Gay, Bisexual and Transgender] rights, freedom of speech and association, and women's rights," Dakwar said in a statement. "Now that the Obama administration has won a second term, human rights at home and abroad should be a high priority." The Human Rights Council was created in March 2006 to replace the UN's widely discredited and highly politicised Human Rights Commission. But the council has also been widely criticised for failing to change many of the commission's practices, including putting much more emphasis on Israel than on any other country and electing candidates accused of serious human rights violations.Former President George W Bush's administration boycotted the council when it was established because of its repeated criticism of Israel and its refusal to cite flagrant rights abuses in Sudan and elsewhere. But in 2009, then newly elected President Barack Obama sought to join the council, saying the US wanted to help make it more effective. Rice said Obama's decision was vindicated on Monday when the US was re-elected to serve on the council with 131 votes."The United States is clearly of the view that the Human Rights Council clearly has its flaws ... including its excessive focus on Israel, but it is also a body that is increasingly proving its value and we've been proud to contribute to some of what we think are some of the finer moments of the Human Rights Council it's approach to Syria, it's approach to Sudan, it's approach he situation in Libya with the commission of inquiry."

Satellite shows N Korea missile activity

Satellite imagery indicates North Korea has been testing rocket engines, a sign it continues to develop its long-range ballistic missiles, a US academic institute said on Monday.The analysis provided to The Associated Press is based on satellite images taken as recently as late September of the Sohae site on the secretive country's northwest coast. In April, the North launched a rocket from there in a failed attempt to propel a satellite into space in defiance of a UN ban.The analysis on the website of the US-Korea Institute at Johns Hopkins School of Advanced International Studies, which is called "38 North", said it remains unclear whether the North is preparing another rocket launch but predicted it may embark on new rocket and nuclear tests in the first half of 2013.The analysis underscores the challenges posed by the North's weapons programmes to the United States and its allies as President Barack Obama heads into his second term. Washington's most recent attempt to negotiate a freeze in the North's nuclear programme and a test moratorium in exchange for food aid collapsed with the April launch that the US regarded as a cover for testing ballistic missile technology.In 2009, North Korea tested a long-range missile and its second nuclear weapon within months of Obama taking office, and the 38 North analysis says North Korea may conduct new tests in the aftermath of presidential elections recently completed in US and due in December in South Korea. That could be viewed as a tactic to exert more pressure on the close allies as the North seeks recognition as a nuclear power.Last month, Defence Secretary Leon Panetta said North Korea continues to prepare for such tests, and the North, angered by Washington's recent agreement to let Seoul possess missiles capable of hitting all of its territory, has recently claimed that the US mainland is within range of its missiles.According to South Korea's Defence Ministry, North Korean missiles are believed to have a range of up to about 6 696km, putting parts of Alaska within reach. But the North is not believed to have mastered the technology needed to hit a distant target and miniaturise a nuclear warhead to mount on a missile. The North has a spotty record in test launches, raising doubts about whether it is truly capable of a long-distance attack.The 38 North analysis concludes that since the failed launch on 13 April of the Unha-3 rocket that disintegrated shortly after takeoff, the North has conducted at least two, and possibly more, tests of large rocket motors at a test site less than a kilometre away. The tests are critical for the development of new rockets."Pyongyang's large motor tests are another clear sign that its missile programme is moving forward. Whether there will be another long-range missile test this spring remains unclear but is a distinct possibility," said Joel Wit, a former US State Department official and editor of 38 North.A 9 April satellite image shows what appear to be dozens of fuel tanks near a stand used for conducting tests of rocket engines. A 17 September image shows the tanks are no longer there, and a flame trench has been stained orange and surrounding vegetation has been burned from the exhaust of an engine. An image from 28 September indicates a further test has taken place.The analysis was written by Nick Hansen, a retired expert in imagery technology with a 43-year experience in national intelligence.He concludes the tests were likely of the first-stage engines of the Unha-3 or the new, bigger KN-08 long-range missile first viewed in a military parade in Pyongyang shortly after the April launch attempt.The capabilities of the KN-08 and whether it could pose a potential threat to the continental United States remains unclear. Some analysts have also questioned whether the half-dozen of KN-08 missiles shown at that parade were genuine or just rigged up for show.The analysis by 38 North says the 28 September images also show construction work on the upper platform of a launch tower at Sohae to enable it to accommodate even larger rockets than the Unha-3 or KN-08.

NEWS,26.06.2012

British economy in the 'middle of a deep crisis'

 

Britain's economic outlook has worsened markedly in the space of just six weeks due to the deepening euro zone crisis and signs that a global slowdown is taking root in the United States and emerging markets, the Bank of England said today.BoE Governor Mervyn King told legislators the world is not yet halfway through the financial crisis that began in 2008, and that Britain risked a downward spiral as businesses continue to put off investment due to the turmoil in the euro zone.His comments bolster expectations that the BoE will launch a new round of asset purchases next month under its quantitative easing programme, and suggested the central bank and British government may need to come up with further measures.Evoking the depression-ridden 1930s, King said it would be difficult to overcome the hit to confidence from the "black cloud" of uncertainty with consumer and business spending alone."We are in the middle of a deep crisis, with enormous challenges to put our own banking system right and challenges for the rest of the world that they are struggling with," King told parliament's Treasury Committee.Britain's economy slipped into its second recession since the start of the financial crisis around the turn of the year and fears of a longer slump have been rising as companies hold back investment and exports suffer from the euro zone crisis.The government and BoE announced two schemes on June 14 to get credit flowing through the economy, but finance minister George Osborne remains under pressure to increase spending to jump-start growth.Osborne announced on Tuesday that he would cancel a planned rise in fuel duty, providing some relief for hard-pressed consumers and businesses.An unexpected leap in borrowing in May, however, highlighted the constraints for the government, which has pledged to erase a budget deficit still at around 8 percent of GDP.Speaking two days before a European Union summit at which measures to spur growth will be a focus, King called on euro zone countries to finally accept that some of the huge debt pile will never be paid back."I am pessimistic (about the euro zone outlook). I am particularly concerned because over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road," King said."In the last six weeks ... I am very struck by how much has changed since we produced our May Inflation Report," he added.Global worries Earlier this month, the central bank's Monetary Policy Committee voted 5-4 against buying more government bonds with newly created money to boost the economy.King was one of those favouring buying another 50 billion pounds of gilts, to take the total to 375 billion pounds."The remarks of Sir Mervyn King and other MPC members are pretty grim, and fan belief that the Bank of England is likely to pull the Quantitative Easing lever again in July," said IHS Global Insight economist Howard Archer.Policymakers Ben Broadbent and Spencer Dale who both voted against more stimulus in June and David Miles all identified the euro zone debt crisis as the main threat to Britain's economy in their annual reports to parliament.Chief economist Dale said he thought easing credit costs might be a better option to help the economy, while Broadbent also said he would take new schemes designed to do so into account when deciding how to vote next month.The new 'funding for lending' scheme - designed to lower banks' funding costs in return for more lending to companies and households by allowing them to swap illiquid assets for more liquid ones should be up and running within weeks, King said.Lasting damage? Britain has not recovered from the 2008/2009 slump, which left many Britons worse off. Now, fears are rising that a prolonged recession will do lasting damage to the economy."What has particularly concerned me in the last several months - why I have voted for more easing policy was my concern about the worsening I see in the position in Asia and other emerging markets," King said."And my colleagues in the United States are more concerned than they were at the beginning of the year about what is happening to the American economy," he added.The central bank governor remained adamant that QE cash injections could still stimulate the economy."We haven't run out of road in terms of our basic policy weapon, asset purchases, and we are prepared to use that if necessary," King said.But he agreed with the view of the Bank for International Settlements - published in its annual report on Sunday - that ultra-low interest rates pose dangers in the long run, and said monetary policy alone would not end the crisis.

 

'Mr Euro' named Greek finance minister

 

Yannis Stournaras, a well-respected liberal economist, was appointed Greece's new finance minister today after the sudden resignation of the first choice for the job at a crucial moment for the debt-laden country.The new conservative-led government scrambled to make a quick decision on the post after banker Vassilis Rapanos quit yesterday on the advice of doctors after spending four days in hospital with dizziness and abdominal pains.His sudden resignation threw the government into confusion at a time when it faces the daunting task of trying to persuade sceptical international lenders to ease the harsh terms of a bailout that has enraged the population.With Greece weeks away from running out of cash and in desperate need of a minister to lead negotiations with lenders, party officials said the three ruling coalition leaders quickly agreed on Samaras's choice of Stournaras, 55, who is nicknamed "Mr Euro" in Greece.He faces a difficult juggling act pushing for more time and money from sceptical foreign lenders while coaxing reluctan officials at home to push through unpopular reforms."Stournaras is a serious, respected person who will inspire some confidence in the markets.But he is entering a bad government, where many old-style, spendthrift politicians are occupying key positions," said political analyst John Loulis."He will have to wage a hard battle against them. He is entering the wolf's lair and he won't survive without the prime minister's solid support."The Samaras government has been in place less than a week but already looks accident prone after deputy Shipping Minister George Vernikos also resigned yesterdayHe had been attacked by the media and opposition for using offshore companies.Ministers are banned from using such companies, which are a common tactic by wealthy Greeks to avoid taxes.Stournaras is an economics professor at the University of Athens and the head of the influential IOBE think-tank. Most recently he was development minister in the caretaker government that led Greece to elections on June 17.Described by colleagues as affable, he is considered an ardent supporter of structural reforms to make the economy more competitive - ideas that are likely to win him favour with international lenders exasperated with the slow pace of reform.

NEWS, 04.06.2012.

Spain puts on the pressure for financial rescue

 

Prime Minister Mariano Rajoy is pressing for a direct European rescue for Spain's banks with moral support from the European Commission, but Germany appeared to rule out such a "bailout lite" for the euro zone's fourth biggest member.A source with knowledge of the matter said Madrid is working along with European institutions to find a way to directly refinance banks using rescue funds without the government having to come under a full EU/IMF adjustment programme."Right now the most urgent issue is the banks, and there are negotiations to refinance the banks directly without it being an intervention. It's a mechanism for all (European) banks, not just for Spanish banks," the source said.Spain's borrowing costs have jumped in recent weeks, largely due to doubts over whether the government can raise enough funds for the rising bill to strengthen its banks, left with big holes after the 2008 crash of the housing and construction market.Under current rules Spain can get a loan from the European rescue fund, or EFSF, but it would come with tough conditions and intrusive supervision, with a high political cost for Rajoy. The new permanent European rescue fund, the European Stability Mechanism (ESM), due to enter into force in July, can lend to banks but the request still has to be made by the state.The source with knowledge of the matter said Spain believed the European Union's executive could take a plan for bank aid to a summit of the bloc's leaders on June 28-29.EU Economic and Monetary Affairs Commissioner Olli Rehn said Brussels was considering direct bank recapitalisation by the ESM to break the link between weak sovereigns and ailing banks, but it was not possible under the treaty currently being ratified by member states."This is not part of the ESM treaty for the moment, in its present form, but we see that it is important to consider this alternative of direct bank recapitalisation as we are now moving on in the discussion on the possible ways and means to create a banking union," Rehn said.Germany, the main contributor to the bailout fund, opposes changing the ESM treaty to allow direct bank recapitalisation and has veto power. Berlin contends that only a formal programme approved by national parliaments permits proper international supervision of how aid funds are spent."It is only for a national government to decide whether it draws on the rescue mechanism and the requirements that are linked to it. That of course is also true for Spain," government spokesman Steffen Seibert told a news conference when asked about media reports that Berlin was pushing Madrid to apply.Seibert also said Spain first needed to figure out how much money it needs to recapitalise its banks.After pressing in vain for the European Central Bank to ride to Spain's rescue by buying government bonds, Rajoy took a different line on Saturday, calling in a speech for a euro zone fiscal authority with powers to manage member states' budget policies, to show markets the euro project is irreversible.Some analysts saw the call as a way of preparing Spaniards for the need for a European rescue for their country. Others saw it as a goodwill gesture towards the Germans.Gary Jenkins, director at Swordfish Research, said the fact Rajoy was pushing for greater transfers of fiscal sovereignty was a sign of how urgent the situation was in Spain."Spain is heading towards requiring significant intervention in order to avoid a disaster scenario," he wrote.Spain meets criteria for aid Spain already complies with the terms for the state to tap the temporary European Financial Stability Facility (EFSF) under its "guidelines on recapitalisation of financial institutions".Those conditions are: it needs the money as a last resort to recapitalise systemic lenders, such as Bankia, and it has also started an independent audit of its banks in two stages.The ECB and key EU partners such as Berlin are keen to avoid a repeat of last year's events when they had to push Portugal to seek aid after former Prime Minister Jose Socrates resisted for months owing to the stigma attached to an "IMF bailout".The ECB stopped buying Portuguese bonds in the secondary market and Portuguese banks took the unprecedented step of warning the government that they too might stop buying its debt -- a move that probably tipped Socrates into seeking help.The head of Portugal's banking association, Antonio de Sousa, told Reuters in an interview at the time that the ECB had told the country's banks to cut exposure to government debt.German Finance Minister Wolfgang Schaeuble insisted then that aid could only be granted in the framework of a reform programme, the same stance Berlin is now taking towards Madrid.Bank audits Spain rescued its fourth biggest bank, Bankia, in May, in a bailout that will cost some 23.5 billion euros, much higher than anticipated, raising doubts over whether other Spanish banks have yet to recognise bigger losses.Independent auditors contracted by the government are due to report in mid-June on the state of the banks, and a detailed International Monetary Fund report on the financial system is due on June 11.Both studies should shed light on the scale of the final bill for plugging the holes in the banks, which have some 184 billion euros in exposure to repossessed property and sour loans to real estate developers.The government and the biggest banks hope the reports will show Bankia was an exception, that most of the banking system is solvent and that the rest has been addressed by regulations that have forced lenders to recognise more than 80 billion euros in losses.Still, after confusion over how Bankia's rescue would work damaged Madrid's market credibility, it's hard to imagine a bank rescue figure that will automatically restore confidence."What is not clear is whether it will be enough to recover the market confidence, that is not going to make things worse," said a senior Spanish banker, regarding the audits.Spain has said it will borrow money on the markets to recapitalise Bankia.Even with 10-year bond yields at 6.5 percent, the government says it does not face trouble tapping the markets because its average borrowing costs are lower, at 4.07 percent, and only 2 percent of public expenditures go to service debt.Political risk consultancy Eurasia Group said Europe would do its best to ease the pain for Rajoy, who has spread much of the blame for mismanaging the banking sector on his Socialist predecessors and the outgoing Bank of Spain governor."At this stage, EU political and policy elites are open to design a programme that would emphasize banks and would be light on conditionality to facilitate Rajoy's ability to manage internal constraints," it said in a report.But Eurasia Group said Rajoy would delay as long as possible to avoid the stigma that could affect his party in subsequent elections and because it will look as if his austerity programme and economic reforms had merely set the country up for a banking bailout instead of putting it back on track.One high-level government source argued that there is little motivation for Rajoy to take some 70 billion euros in aid for the banks if there are no guarantees it will actually bring down borrowing costs.