NEWS,12.05.2013

G7 to press on with bank reforms

Group of Seven finance officials agreed on Saturday to redouble efforts to deal with failing banks and gave a green light to Japan's drive to galvanise its economy.
British finance minister George Osborne said the finance ministers and central bankers meeting 40 miles outside London focused on unfinished bank reforms, with signs that plans for a eurozone banking union are fraying.
"It is important to complete swiftly our work to ensure that no banks are too big to fail," Osborne told reporters after hosting a two-day meeting in a stately home set in rolling countryside.
"We must put regimes in place ... to deal with failing banks and to protect taxpayers and to do so in a globally consistent manner," he said.
The emergency rescue of Cyprus after a near meltdown in March served as a reminder of the need to finish an overhaul of the banking sector, five years after the world financial crisis began.
Germany has come under pressure to give more support to a banking union in the euro zone. The plan could help strengthen the single currency area, but Berlin worries it may pay too much for future bank bailouts if it signs up to a scheme to wind up stricken lenders.
While the first step to create a single bank supervisor under the European Central Bank - looks set to be in place by mid-2014, a second pillar, a 'resolution' fund to close failed banks, is in doubt. And there is little prospect that a single deposit guarantee scheme will ever see the light of day.
A senior US Treasury official said the talks at the 17th-century Hartwell House zeroed in on the need not just for better bank supervision but also to clean up balance sheets so lending can pick up.
"There was a sense of urgency among the euro area participants," the official said.
German Finance Minister Wolfgang Schaeuble countered that the eurozone was no longer the main risk to the world economy.
As at previous international meetings, Japan escaped any censure for printing money on a scale that has pushed the yen sharply lower.
Osborne said the G7 - the United States, Germany, Japan, Britain, Italy, France and Canada - reaffirmed that fiscal and monetary policy should be aimed at domestic concerns, not currency manipulation.
"We will not target exchange rates," Osborne said. "I would say that the statement by the G7 of earlier this year was a successful statement and one that has been held to."
The yen hit a four-year low against the dollar on Friday , driven in part by Japanese investors shifting into foreign bonds, a move that had been expected since the Bank of Japan unveiled a massive stimulus plan.
But having urged Tokyo for years to do something to revive its economy, other world powers are not in a strong position to complain now that it is doing so. Then there is the fact that central banks such as the Federal Reserve and Bank of England have printed money in the way the Bank of Japan is.
Japanese Finance Minister Taro Aso said the G7 had levelled no criticism at Japan's monetary policy but Schaeuble said there had been "intense discussions" and that the situation would be monitored carefully.
Growth debate
Debate has also heated up about the need for governments to ease up on austerity, something Germany, Britain and Canada view with caution but Washington, Paris and Rome favour.
Osborne said there was less disagreement about whether governments should focus on debt-cutting or growth-boosting measures than is commonly assumed.
"Everyone is clear that there needs to be credible medium-term fiscal consolidation ... We also agreed that there needs to be flexibility," he said. "Growth prospects remain uneven and we can't take the global recovery for granted."
But his suggestion before the meeting that it should consider what more monetary policy could do to support economic recovery appeared to fall on deaf ears.
"There wasn't any call to do more," European Central Bank chief Mario Draghi told reporters after the meeting.
"It is quite clear that all central banks have done a lot, each one within its own mandate. So (the meeting) was just taking note of this ... All of us have really been active."
Several officials from visiting delegations questioned why Britain had called the gathering just three weeks after they and others met at International Monetary Fund meetings in Washington, but Bank of England Governor Mervyn King said the informal nature of the discussions had paid dividends.
"Freed from burden to agree a communique, the principals engaged more with each than I can recall before and as a result genuinely made real progress in taking forward some of the questions and issues that are facing the G7," he said.

Experts cautious over equities rally

Optimism is blowing through stock markets around the world, lifting many of them to record high levels but this contrasts with widespread economic gloom and leads some analysts to wonder if some of it is just hot air.
Records have been created with increasing speed since the beginning of May.
The main DAX index in Frankfurt has reached a new record high level, and the markets in London and Tokyo have returned to the levels reached in October 2007 just before the financial crisis began.
Wall Street in New York is leading the way and sets a fresh record almost every day.
But the stock market in Paris lags behind. The main CAC 40 index has just risen to the level last reached in the middle of 2011 and is far below the record high level of almost 7,000 points set in October 2000, and still trails the 4,332 points registered just before the collapse of Lehman Brothers bank in the United States in September 2008.
Analysts at Swiss Life private investment managers commented recently that the markets "are swimming in the midst of paradox", questioning the strong rises at a time when the global economic situation is a long way from being stabilised and is even deepening in some places, including in Europe.
In financial circles, experts give various explanations for the rise of stock markets in mature economies.
Some hold that it is an artificial bull market driven by huge amounts of money pushed into economies by central banks. Others say that the rises are justified because investors are anticipating a recovery of the world economy and a recovery of those stocks which have fallen heavily.
"The dichotomy between the real economy and the financial sphere is widening and this is worrying," commented Guillaume Garabedian, a portfolio manager at French brokers Meeschaert Gestion Privee.
He held that that stock markets were rising mainly because central banks had been applying highly accommodating monetary policies, reducing their key interest rates, and pushing huge amounts of liquidity into the financial sector.
All classes of assets have been boosted by this, even the riskiest assets such as debt bonds issued by crisis-hit countries in southern Europe which are able to place their bonds despite still being in difficulty.
The rise of asset prices could even lead to a new financial bubble, some analysts are beginning to warn.
At Capital Spreads, Jonathan Sudeira said that "despite the efforts of the central banks, the volume of trading is falling and the high levels reached by some shares is beginning to look unjustified for traders who are being asked at the same time not to take account of the economic situation."
The "bulls", meaning those who think that share prices will continue to rise on a healthy and justified basis, also have their arguments. At the moment, they seem to have the upper hand.
"Extremely favourable" context
Portfolio managers in dealing rooms say that investors are encouraged by signs that the US economy is recovering, by underlying strength of activity in Germany, encouraging statements by the leaders of big companies about the outlook for the end of the year, and by the removal of the risk that the eurozone might collapse.
At French Natixis bank, economist Philippe Waechter said that apart from the policies of the central banks, the situation in the United States, still the guiding light for stock markets around the world, was satisfactory and explained why optimism had lifted the indices.
"There is growth, certainly it is moderate, but it is there and so there is positive anticipation," he said.
He noted that portfolio managers were looking for good rates of return from the shares they hold and consequently were inclined to go for riskier shares which offered higher returns.
In addition, companies which were cautious about trying to expand their businesses, were buying their own shares which pushed up the value of those stocks.
"Overall, we are in a context which is extremely favourable for stock markets," he said.
Garabedian said that the question boiled down to analysing the fundamental causes of the rise.
"Because if the markets are rising for reasons which are not sufficiently viable, the correction will be severe," he warned.

Clinton did not make Benghazi call

A seasoned diplomat who penned a highly critical report on security at the US consulate in Libya that was attacked last year defended his scathing assessment on Sunday but absolved then-Secretary of State Hillary Clinton.

Thomas Pickering, whose career spans four decades, stood by his conclusion in the report that decisions about the consulate were made well below the secretary's level.
His comments during several television show appearances were unlikely to quiet renewed Republican demands for accountability for the attacks in Benghazi that left four Americans dead, including US Ambassador Chris Stevens. Democrats say Republicans are trying to exploit the Benghazi deaths to undercut Clinton, an early favourite for the Democratic presidential nomination in 2016.
"We knew where the responsibility rested," said Pickering, who headed the Accountability and Review Board that investigated the attack, along with retired Admiral Mike Mullen, the former chair of the Joint Chiefs of Staff.
"They've tried to point a finger at people more senior than where we found the decisions were made," Pickering said of Clinton's critics.
Pickering and Mullen's report released in December found that "systematic failures and leadership and management deficiencies at senior levels" of the State Department meant that security was "inadequate for Benghazi and grossly inadequate to deal with the attack that took place."
The Obama administration has tried to move past the controversy, but a steady drip of new information is fuelling Republican claims that the government initially misled the public about the nature of the assault.
The House Oversight and Government Reform Committee last week heard a riveting minute-by-minute account from a former top diplomat in Libya about the two night time attacks on 11 September, 2012. Gregory Hicks, a former deputy chief of mission to Libya, detailed his phone conversations from Tripoli with Stevens.
Hicks and two other State Department witnesses criticized the Pickering and Mullen's review. Their complaints centred on a report they consider incomplete, with individuals who weren't interviewed and a focus on the assistant secretary level and lower.
Cover-up
The hearing produced no major revelation but renewed interest in the attacks that happened during the lead-up to the November 2012 presidential election.
The top Republican on the oversight committee, Republican Darrell Issa, said he wants sworn depositions with Pickering and Mullen. Issa said his panel has not been provided sufficient details on the State Department review, such as a list of everyone the investigators interviewed or a full transcript of those conversations.
"We want the facts. We're entitled to the facts. The American people were effectively lied to for a period of about a month," Issa said.
Republicans are insisting on exploring what happened at the consulate, what might be done to prevent future such attacks and what political calculations went into rewriting talking points the US Ambassador to the United Nations, Susan Rice, used on news shows the Sunday after the attack.
A series of e-mails that circulated between the State Department and the CIA led to weakened - and, in some cases, wrong - language that Rice used to describe the assault during a series of five television interviews the Sunday after the attacks.
"I'd call it a cover-up," said Senator John McCain, a Republican. "I would call it a cover-up in the extent that there was wilful removal of information, which was obvious."
2016 campaign
"I was surprised today that they did not probe Secretary Clinton in detail," Senator Kelly Ayotte said, of the review board.
One Republican eyeing a White House run, Senator Rand Paul, said at a public appearance that he thinks the Benghazi attack "precludes Hillary Clinton from ever holding office".
Clinton's allies said Republicans were looking to weaken her ahead of a potential 2016 campaign.
"This has been caught up in the 2016 presidential campaign, this effort to go after Hillary Clinton," said Senator Dick Durbin, a Democrat. "They want to bring her in because they think it's a good political show and I think that's unfortunate."

NEWS,06.02.2013

US tightens oil sanctions on Iran

The United States on Wednesday imposed new sanctions on Iran to choke off its oil income, saying it was necessary to increase the pressure on Tehran over its suspected nuclear weapons program.The US Treasury said it was tightening up the list of countries allowed to continue buying Iranian oil without violating the US sanctions regime.Those still permitted to buy Iranian oil will have to retain their payments outside Iran, to prevent Tehran access to the funds, the Treasury said."So long as Iran continues to fail to address the concerns of the international community about its nuclear program, the US will impose tighter sanctions and intensify the economic pressure against the Iranian regime," said US Treasury official David Cohen.The United States also placed sanctions on Islamic Republic of Iran Broadcasting, the government's broadcast authority, and its chief Ezzatollah Zarghami, for censorship and for broadcasting forced confessions of political detainees.

 

US sues S&P over inflated ratings

The US Justice Department said on Tuesday it is seeking at least $5bn in civil penalties from Standard & Poor's for losses due to inflated ratings of mortgage bonds.Announcing a suit against S&P and its parent, The McGraw-Hill Companies, Attorney General Eric Holder said the powerful rating agency knowingly exaggerated the ratings on financial securities, misrepresenting their true credit risk."Put simply, this alleged conduct is egregious and it goes to the very heart of the recent financial crisis," said Holder, flanked by justice officials from several states joining the suit."Today's action is an important step forward in our ongoing efforts to investigate and punish the conduct that is believed to have contributed to the worst economic crisis in recent history," he said.The suit cited S&P's top-grade ratings of dozens of mortgage-based collateralsed debt obligations (CDOs) issued in early 2007 that were in default within one year, some within six months.The defaults dealt billions of dollars in losses to financial institutions insured by the US, some of which collapsed in the 2008 crisis and others, like Citigroup, forced to seek a government bailout."At the very least, we believe conservatively that S&P's actions make it liable for more than $5bn in civil penalties," said US Acting Associate Attorney General Tony West.S&P called the lawsuit "entirely without factual or legal merit," and an S&P lawyer hinted that it was political retribution for the agency's historic downgrade of the US credit rating from triple-A status in August 2011."Is it true that after the downgrade the intensity of the investigation significantly increased? Yes," Floyd Abrams, an attorney representing S&P, said on CNBC television."I'm sure the government would say it has nothing to do with it."Holder, in a news conference, said there was "no connection" between the S&P downgrade and the litigation.The suit, filed in California and backed by a number of state governments, accused the credit rater of knowingly inflating its ratings on CDOs and residential mortgage-backed securities in 2007 in order to win revenue from issuers.S&P was specifically charged with wire fraud, mail fraud and financial institution fraud.The suit cited internal communications in which S&P considered the need to update its analytic models to keep up with the securities in the changing market, only to continue with the weaker models that permitted higher ratings to go through.S&P's modus operandi was to "limit, adjust and delay those updates" to favor issuers and "maintain and grow S&P's market share and profits," the complaint alleges.S&P staff debated how many securities to downgrade as more of the loans came up delinquent and the housing market began to sink. As the troubles became more widely apparent, one S&P analyst likened the situation to "Burning Down the House" in an email, satirizing the market problems with mock lyrics of the famous Talking Heads song."Strong market is now much weaker. Subprime is boi-ling o-ver. Bringing down the house."But at the same time, S&P continued to rate new CDOs "without making adjustments to account for continuing deterioration" in the investments, the complaint alleges. S&P said the Justice Department took statements from internal communications out of context. "There was robust internal debate within S&P about how a rapidly deteriorating housing market might affect the CDOs - and we applied the collective judgment of our committee-based system in good faith," S&P said. "The email excerpts cherry-picked by DOJ have been taken out of context, are contradicted by other evidence, and do not reflect our culture, integrity or how we do business," S&P continued.S&P also argues that it was far from alone in its failure to predict the scale of the housing collapse.But the government has not taken any action against S&P's competitors. Moody's remained quiet on the subject Tuesday, while Fitch told AFP that it has "no reason to believe Fitch is a target of any such action."S&P is a unit of McGraw-Hill, whose shares fell 10.7% on Tuesday after losing nearly 14% on Monday. Moody's lost 8.8%.

Obama unveils plans to avert budget cuts

US President Barack Obama on Tuesday called for a balanced program of stop gap spending reductions and tax reforms to avert punishing multi-billion dollar automatic budget cuts due to kick in on March 1.Obama said the fragile US economy could not afford the hit from huge cuts to defense and other government programs, known as the sequester, and the jobs of Americans should not be held hostage to partisan wrangling in Washington.The president said if Congress could not act on a bigger deficit cutting package by March 1, lawmakers should pass a smaller plan of spending cuts and tax reforms to delay the economically damaging impact of the sequester."There is no reason that the jobs of thousands of Americans who work in national security or education or clean energy, not to mention the growth of the entire economy, should be put in jeopardy," Obama told reporters."Let me repeat, our economy right now is headed in the right direction. It will stay that way as long as there aren't any more self-inflicted wounds coming out of Washington."The Congressional Budget Office reported Tuesday that if the sequester is put through, the US budget deficit will shrink sharply this year but that also economic growth will be crunched from 2012's 1.9% to just 1.4%."If all of the fiscal tightening still embodied in current law for 2013 was removed, growth in real GDP would be about 1.5 percentage points higher this year than CBO currently projects," the study said.Obama said his short-term spending would allow the White House and Congress more time to come up with a plan to cut the deficit, which he insists, despite Republican opposition, must include new revenue from higher taxes.The sequester was agreed by the president and Congress last year to be so punishing that it would force Washington's warring political factions to forge an agreement on deficit cuts.But no agreement is in sight, and the cuts have already been put off once, by a short-term deal agreed between Obama and Republicans late last year.House Republican Speaker John Boehner Tuesday blamed Obama for the sequester, which many observers now believe will come into force, despite its punitive impact on defense and social programs and the fragile US economy."We believe there is a better way to reduce the deficit, but Americans do not support sacrificing real spending cuts for more tax hikes," Boehner said in a statement."The president's sequester should be replaced with spending cuts and reforms that will start us on the path to balancing the budget in 10 years."Cuts due to come into force in March will slash defense spending by $55bn and non defense discretionary spending by $27bn this year, and will have a painful impact on the economy.The Bipartisan Policy Center has warned that a million jobs will be lost by the end of next year caused by a slowdown brought on by the cuts.

Clinton website stokes 2016 speculation

Once again fuelling speculation about whether she will run for president in 2016, Hillary Clinton launched a new website even before she officially stepped down as secretary of state.HillaryClintonOffice.com only features a picture of Clinton without the black glasses she took to wearing in the last few weeks of her reign at the State Department and a contact sheet.But in a nod to her future career and the fierce news buzz which surrounds her, the contact sheet urges visitors to specify whether they are trying to contact Clinton for a scheduling request, or for a media inquiry.According to news reports, the website was registered on Thursday, just 24 hours before Clinton stepped down as America's top diplomat, handing the baton to John Kerry.Clinton has so far said she has no plans to re-enter politics and run in the 2016 presidential elections, saying she wants to rest after two decades in the public spotlight, catch up on reading and spend time with her family.But as the woman dubbed "the rock star diplomat," there is little doubt she will be highly sought after on the lecture circuit and could command substantial fees.In a second bid aimed at ensuring she remains in the public eye, her husband, former president Bill Clinton, and her daughter, Chelsea, sent out a message on Tuesday entitled "Thank you Hillary" that praised her four-year tenure as secretary of state."We couldn't be more proud of what she's accomplished or more humbled by her commitment to making our country and our world stronger, safer, and better," they said in a joint message released by the Clinton Foundation."She's transformed the way we practice diplomacy and taken advantage of global trends - engaging directly with people, embracing technology, and championing economics, education, and energy to improve lives and strengthen communities around the world."The message, emailed to supporters, also called on them to send a message of thanks to Hillary Clinton a move that could add even more names to her already substantial mailing list, vital if she intends to elicit donations for a 2016 campaign.

Obama picks second female cabinet member

President Barack Obama will seek to add another woman to his cabinet on Wednesday by picking business executive Sally Jewell to head the vast interior department, a White House official said. Obama has been criticised for naming middle aged white men to the top jobs in his second term team, but has pledged to promote diversity in his other picks, and has now settled on several prominent females.If confirmed by the Senate, Jewell who heads Recreational Equipment, an outdoors retail chain will succeed Ken Salazar at interior, which manages US national resources, wildlife, tribal issues and national parks."With years of experience managing a nearly $2bn a year company, she will bring to the position integrity, keen management skills, as well as dedication to the department's mission of managing our nation's lands," a White House official said."She believes deeply in the American tradition of preserving our nation's wild places, while also understanding firsthand the inextricable link between conservation and the economy. "She also believes we must be good stewards of our nation's natural resources, underscoring the administration's ongoing priority of expanding safe and responsible energy production," the official said, noting that Jewell began her career as an engineer for Mobil Oil Corporation.Obama had been under pressure to add more diversity to his new cabinet after picking Chuck Hagel, John Kerry and Jack Lew, to serve as the secretaries of defence, state and treasury.In January, Obama nominated high powered New York prosecutor and organised crime buster Mary Jo White to lead the Securities and Exchange Commission to implement his Wall Street reforms.

Media vents North Korea frustration

China should exact a "heavy price" from North Korea if an imminent nuclear test goes ahead, state-run media said on Wednesday in their strongest call yet, but analysts say Beijing appears unable to restrain its wayward ally. The state-run Global Times raised the prospect that the relationship founded on the battlefields of the 1950-53 Korean War, and which Pyongyang has relied on ever since, "might break down" over the issue.That would "be of no benefit to Pyongyang", it said. "North Korea would face an even worse situation, but China could find some ways to compensate for geopolitical losses."The article appeared in both the English- and Chinese-language editions of the paper.But analysts and diplomats said that despite its discontent Beijing was unwilling to carry out meaningful action, leaving the media as its only theatre to display its frustrations.North Korea vowed to conduct its third nuclear test after the UN Security Council condemned its 12 December rocket launch in a resolution that was the product of extensive negotiations with China.The Global Times - which is owned by the People's Daily, the official mouthpiece of the ruling Communist Party has previously urged Beijing to cut off aid if it goes ahead with the blast.But the threats contrast with Beijing's official position of repeatedly urging calm and restraint, and avoiding punitive measures to prevent regional instability.China is widely seen as fearing the consequences of a North Korean collapse, which could send an exodus of refugees across the border and potentially lead to a reunified, US-allied Korea on its border."If North Korea insists on a third nuclear test despite attempts to dissuade it, it must pay a heavy price," said Wednesday's Global Times editorial. "The assistance it will be able to receive from China should be reduced.""China is never afraid of Pyongyang," it went on. "If Pyongyang gets tough with China, China should strike back hard, even at the cost of deteriorating bilateral relations."Stephanie Kleine-Ahlbrandt, the Beijing-based Northeast Asia director for the International Crisis Group, said that "editorials are a great way to let off steam".Although Beijing has long maintained its stance of supporting its unpredictable neighbour, she said, the media provides a way to vent the views of those arguing for a tougher tack."They are really upset," she said. "But there's a higher-order priority."Avoiding instability was China's main concern in the Korean peninsula, she said."Even if they diminish the assistance, they are not going to do it enough to cripple the regime or make a difference," she said. "Beijing is simply afraid of pushing the regime too far."Beijing provides substantial economic support to Pyongyang through cross-border trade and investment, while aid constitutes "just one part of the relationship", she added.The foreign ministry did not immediately respond to requests for comment on reports in South Korea that Pyongyang's ambassador had been summoned for talks "several times".A car bearing diplomatic plates and carrying a North Korean flag was seen entering the foreign ministry on Tuesday.A Western diplomat in Beijing said: "I don't think the Chinese are going to change their policy, even if there is a lot of frustration here about the fact that they can't persuade Pyongyang."The foreign ministry distanced itself from the editorials, with spokesperson Hua Chunying saying that Global Times pieces "are perhaps not that in line" with its positions, and repeating China's call for calm and restraint.China has acted as Pyongyang's main benefactor since the Korean War, providing vital diplomatic support and economic ties to one of the world's most isolated regimes.

President Obama to make first Israel trip

President Barack Obama will go to Israel in March, the White House said on Tuesday, marking his first visit to the staunch US ally since becoming president. While in the region, Obama will make stops in the West Bank and Jordan.Obama and Israeli Prime Minister Benjamin Netanyahu discussed the visit to Israel in late January, when Obama congratulated Netanyahu on his success in Israel's recent election. The White House has not released the date of Obama's trip or details about Obama's itinerary, but Israel's Channel 10 reported that the trip had been scheduled for 20 March."The start of the president's second term and the formation of a new Israeli government offer the opportunity to reaffirm the deep and enduring bonds between the United States and Israel and to discuss the way forward on a broad range of issues of mutual concern, including Iran and Syria," said National Security Council Spokesperson Tommy Vietor.White House spokesperson Jay Carney said Obama would work closely with Palestinian Authority and Jordanian officials on regional issues during his visit to Jordan and the West Bank.Obama's trip to Israel, coming shortly after the start of his second term, could offer an opportunity to repair a notoriously strained relationship with Netanyahu. But the trip is almost certain to raise expectations for the type of peace initiative that eluded Obama and his foreign policy team during his first four years in office. Obama has in the past warned against setting expectations too high for a breakthrough in stalled negotiations between Israelis and Palestinians.Although Obama visited Israel and Jordan while running for president in 2008, he hasn't been back since, drawing intense criticism from some pro-Israel groups who have claimed he is insufficiently supportive of the United States' closest Mideast ally. Other top administration officials, including former Secretary of State Hillary Clinton, have visited, and Clinton's replacement, John Kerry, is expected to travel to Israel on his first Mideast trip.For Obama, the trip might also be a chance to improve his image within Israel, where many view him as not supportive enough of the Jewish state.Netanyahu's office in Jerusalem had no immediate comment on the report of Obama's visit. Hanan Ashrawi, a senior official with the Palestine Liberation Organisation, said the visit was important given Obama's expressed interest in playing a role in Mideast peace efforts."We hope that this is more than just a symbolic visit, but with a clear message and clear commitment to the genuine substance and imperative of peace," Ashrawi said.The announcement of Obama's visit comes at a time of uncertainty for Netanyahu who emerged weakened from January's election but will remain in charge if he can build a governing coalition before the mid-March deadline. The emergence of a new centrist party in Israel's election offered hope to those urging the hawkish Netanyahu to make peace with the Palestinians a higher priority.Negotiations have remained frozen during Netanyahu's previous four-year term, in part because of Israeli settlement construction in the West Bank and east Jerusalem, which the Palestinians claim for their future state.Obama's upcoming trip was a long time in the making. In July, when Republican presidential candidate Mitt Romney was hammering Obama on Israel, Obama's campaign said that if he were re-elected, he would visit Israel during his second term. Then Romney himself made the trip, where Netanyahu hosted Romney as if he were already a world leader. Netanyahu denied backing either candidate but was widely perceived as preferring Romney.But the tenuous chemistry between Obama and Netanyahu was clear from early in Obama's first term. On one visit to Washington, the US-educated Netanyahu appeared to lecture Obama on the pitfalls of peacemaking, and gave a speech to Congress in which he appeared to be rallying support against Obama.For Obama, starting his second term out on firmer ground with his Israeli counterpart could also make it easier to co-ordinate on a number of pressing regional issues of critical concern to both nations. These include Iran's nuclear programme and Syria's ongoing civil war, plus lingering questions about what kind of partner Egyptian President Mohammed Morsi will be in efforts to bring stability to the region."Obama knows that he's going to have a lot of conversations with Netanyahu this year," said David Makovsky of the Washington Institute for Near East Policy. "Those conversations will be easier conversations if Obama connects with the Israeli public and demonstrates what he believes, which is that he has their back."

NEWS,04.11.2012

Obama and Romney sprint to unpredictable finish

President Barack Obama and Republican challenger Mitt Romney are sprinting to an unpredictable finish in the last 48 hours of a very close race for the White House.The two candidates have been trying to turn out supporters and woo undecided voters in a handful of toss-up states.Obama and Romney began cross-country trips on the next-to-last day of a race that polls show is deadlocked nationally, although the president appeared to have a slight edge in the swing states that will decide who captures the 270 electoral votes needed to win on Tuesday .US correspondent told Breakfast the race was "insanely tight", with polls showing the two candidates within a margin of error of each other."Both candidates are trying to win over any last-minute voters that they can especially in the swing states that will likely win this election," he said."Perhaps the state of most importance of crucial importance to both campaigns - is Ohio. Barack Obama is campaigning there every day at the moment," he said.Political Editor Corin Dann told the programme that support in Obama's hometown was muted and there was some disappointment after his first term.He said Chicago was "very much a Democrat town" but that Romney supporters were also visible.Obama himself did not have any events scheduled in Chicago over the next couple of days, Dann said. "All the effort and energy is spread out into those states which will decide this election."But our correspondent said that despite the popular vote being close, he believed Obama had "a pretty clear lead when it comes down to the Electoral College vote", which will actually decide the election.After months of sometimes bitter attacks and saturation advertising in pivotal states, Obama and Romney pressed their arguments that they offer the best solution to weak economic growth and partisan gridlock in Washington.The two also made direct appeals for votes in a race that may come down to which side does the best job of getting its supporters to the polls."It's up to you. You have the power," Obama told a crowd of more than 14,000 people who filled the downtown streets of Concord, New Hampshire."You will be shaping the decisions for this country for decades to come, right now, in the next two days."In Iowa, Romney urged more than 4,000 people in a Des Moines hall to get out and vote and convince a few undecided or former Obama supporters to back him while they are at it.Romney, the former governor of Massachusetts, renewed his argument that he is the candidatewho offers real change and can reach out to Democrats to craft bipartisan agreements."Accomplishing real change is not just something that I talk about. It's something that I've done," Romney told supporters in Des Moines."And it's something I'm going to do when I am president of the United States."Advisers for Obama and Romney blanketed the Sunday morning news shows to predict victory in a race focused on eight or nine battleground states that will provide the margin of victory in what national polls show is likely to be a very tight race.A daily online tracking poll on Sunday showed Obama with a national lead over Romney of 48% to 47% - essentially a dead heat.The result fell within the survey's credibility interval, a tool used to account for statistical variation in Internet-based polls.Many polls show Obama with a slight but persistent lead in Ohio, Wisconsin, Iowa and Nevada states that would give him more than the 270 electoral votes he needs, barring any surprises elsewhere.Republicans said they see a different story in early voting in key states, which mostly shows Democrats casting more early ballots but not at the pace that Obama set in his victory in 2008 over Republican John McCain by 7 percentage points.Obama and Romney planned stops on Sunday in Ohio, perhaps the most critical of the swing states and particularly vital for Romney. If he loses Ohio, Romney would need a breakthrough in another state where polls currently show him trailing.Both candidates were getting plenty of help in the late stages from their running mates, Vice President Joe Biden and Wisconsin congressman Paul Ryan.Obama also got help at his New Hampshire rally from popular former President Bill Clinton.Ryan joined fans holding tailgate parties outside a Green Bay Packers football game in Wisconsin.Campaigning in Ohio, Biden joked that the end of Daylight Savings Time in the United States on Sunday was Romney's favorite day because he could officially turn back the clock.

World week ahead: All eyes on US election

All eyes are on the US presidential elections this week and investors may prove hesitant to make fresh bets until the results are in.One of the latest polls showed that President Barack Obama is slightly ahead of Mitt Romney in Ohio and Florida, viewed by many strategists as the two most important swing states. The Wall Street Journal/Marist College survey of likely voters put Obama ahead of Romney in Ohio, 51% to 45%, and in Florida, 49% to 47%, according to Bloomberg News. Obama appears to be receiving a lift from his managing of the crisis in the wake of Hurricane Sandy as well as encouraging economic signs."The market might like the fact of an Obama win since it would mean less uncertainty," Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, in Cincinnati, told Reuters.Trading on Wall Street was limited to three days last week-stock markets were closed on Monday and Tuesday-as Hurricane Sandy caused an estimated US$50 billion of damage to the East Coast of the US.New York City in particular was hit hard with transportation and the power grid suffering significant damage. In addition, almost half of the people killed as a result of the superstorm died in the New York City area.Amid low volume and a focus on the storm, markets were mostly muted the final three days of last week: the Standard & Poor's 500 Index gained 0.2%; the Dow Jones Industrial Average fell 0.1%; and the Nasdaq Composite Index shed 0.2%.There were notable and individual exceptions among companies including Starbucks which lifted its profit forecast for the fiscal year and whose shares surged 9% on Friday.The latest clues on the state of the world's largest economy will come in the form of the ISM Non-Manufacturing Index and reports on international trade and weekly jobless claims in the days ahead.Last week, data provided much-needed relief with better-than-expected numbers on consumer confidence and manufacturing. Most importantly October's jobs report-released on Friday-was stronger than anticipated and bolstered hope that progress is being made after all in the struggling labour market. US employers added 171,000 jobs in October and more people resumed looking for work, which pushed the jobless rate slightly higher to 7.9%.The US Treasury is scheduled to sell US$72 billion in notes and bonds this week, according to Bloomberg. The appetite for US government debt remains strong as the economic impact of Sandy raised fresh concerns about the recovery. A Reuters poll of economists predicted that Sandy will knock 0.2 percentage points off of fourth-quarter gross domestic product. US bonds also are being lifted by the lingering EU crisis. Europe's feeble finances may take five years or more to resolve, German Chancellor Angela Merkel told some of her own party officials on Saturday.Looking beyond the elections, the outlook for US corporate earnings continues to weigh on Wall Street. Of the 378 companies in the S&P 500 that have reported earnings so far, 61.9% have exceeded forecasts, in line with the 62% quarterly average since 1994, according to Thomson Reuters data through Friday.However, just 38.2% of companies having reported better-than-expected revenue, compared with the 62% quarterly average since 2002 and the 55% average over the past four quarters.Companies set to report this week include Groupon, Time Warner Cable and News Corp.In Europe, the Stoxx 600 Index increased 1.6% last week lifted by some strong results from a range of companies including Deutsche Bank as well as a plan by UBS to slash 10,000 jobs as it refocuses its business.Not to be forgotten, policy makers at the European Central Bank and the Bank of England meet later this week. BOE officials will decide whether to extend the bank's asset-purchase program after the UK economy grew in the third quarter. The nine-member Monetary Policy Committee will probably leave the target for asset purchases at 375 billion pounds (nz$728 billion), according to 35 of 45 economists in a Bloomberg News survey. Seven forecast a 50 billion-pound increase in quantitative easing, and three expect a 25 billion-pound expansion.The latest data on China-with reports on retail sales, industrial production, and the consumer price index due this week-will also be closely watched for further clues that the slowdown in the pace of expansion of the world's second-largest economy is less than initially feared. A report on the weekend showed that China's non-manufacturing sector rebounded in October. The timing is good as it comes days ahead of the once-in-a-decade leadership change at the top of the Communist Party set for November 8.

Greek PM warns of euro exit

Greek Prime Minister Antonis Samaras warned again on Sunday that the debt-crippled country could be forced out of the euro if parliament fails to approve a new round of austerity measures needed for a lifeline from creditors."We must save the country from catastrophe... if we fail to stay in the euro nothing will make sense," he told lawmakers from his conservative party.Parliament is due to vote Wednesday on a bill outlining €18bn of cuts and other reforms, followed by a vote on Sunday on the 2013 budget as Greece battles to secure a new tranche of aid from its troika of international creditors.Samaras said the votes were vital to "put an end once and for all" to the risk that Greece, faced with a crushing debt mountain, could return to the drachma.He called on coalition partners, the socialist Pasok and the moderate left-wing Dimar (Democratic Left) parties, which have raised concerns about the scope of the measures, to act in the "supreme interests of the nation".Greek unions however are planning a two-day strike from Tuesday to coincide with the austerity vote amid seething public anger over further painful cuts in a country that is heading for its sixth year of recession.Greece has been negotiating with the European Union, International Monetary Fund and the European Central Bank to unlock a €31.5bn tranche of a bailout package or risk bankruptcy in mid-November.But the IMF said last week that the talks were stalled over the conditions for financing Greece, which has been seeking a two-year extension to meet its fiscal goals, sending stocks crashing.The Dimar party, which has 16 deputies, has suggested it would vote against the bill Wednesday because of its objections to labour market deregulation proposals, while up to five socialist lawmakers could also defy Samaras.The dissenters would leave the government with a narrow majority, with just 154-159 seats in the 300-member assembly, the Greek press said on Sunday, while predicting the measures would nevertheless go through.

 

G20 flags US fiscal cliff

Finance chiefs of the world's 20 leading economies are ringing alarm bells over the US fiscal cliff and Europe's debt woes at a meeting in Mexico this weekend as they look to push back deficit reduction targets to help boost growth.Unless a fractious US Congress can reach a deal, about $600bn in government spending cuts and higher taxes are set to kick in on January 1, threatening to push the American economy back into recession and hit world growth.But with the US presidential election looming on Tuesday, dealing with the fiscal cliff has been delayed. "The Americans themselves acknowledge that this is a problem," a G20 official said on condition of anonymity. "The US administration says it doesn't want to fall off the fiscal cliff, but right now it can't tell us how exactly it will address it because that issue is on ice ahead of the election."Tax cuts enacted under President George W. Bush are set to expire in January, when automatic spending cuts designed to put pressure on lawmakers to strike a long-term budget deal are also set to kick in."What remains a sort of key aspect is that the United States is not respecting the current commitments (to reduce its deficits) and does not have a credible fiscal consolidation plan," one European official said. The US Congress will also soon have to raise the nation's debt limit to avoid a default. An initial consensus around the need for urgent action to prevent a new depression has given way to deep differences over issues such as spending to boost growth and the right pace of belt-tightening to tackle high debt levels. Jose Angel Gurria, head of the Organisation for Economic Co-operation and Development, said on Saturday the G20 should appeal to the United States to avoid the fiscal cliff, but added he was optimistic that Congress would strike a deal."I still believe it is not going to be applied," Gurria said in an interview before the meeting of G20 finance chiefs, which formally starts on Sunday. Officials are also concerned about Japan's own fiscal cliff, and recognise that previous commitments made by developed countries to cut their budget deficits in half by 2013 and to stabilise their debt load by 2015 look unfeasible.US and European officials are also likely to come under pressure from G20 peers for dragging their feet on implementing the so-called Basel III accords on financial regulations, the world's response to the 2007-09 financial crisis. Despite the issue's prominence, a G20 source said Russia wants to keep financial regulation discussions at a more technical level when it takes over the presidency of the group from Mexico after this meeting, which ends on Monday. Spain's reluctance to seek financial aid is stoking worries that Europe's debt crisis could further hurt world growth. The government is under pressure to seek a bailout as it struggles to cope with high public debt and the cost of recapitalising its banks. Eurozone sources say they expect Spain to seek financial aid from the eurozone in November. A government source told Reuters on Wednesday that Prime Minister Mariano Rajoy had not ruled out applying for a rescue, but Rajoy has signaled he will not rush unless market conditions deteriorate significantly.

G20 finance chiefs to tackle euro crisis

G20 finance chiefs begin Sunday two days of talks aimed at quelling fears of a global economic downturn amid a persistent eurozone debt crisis and a looming fiscal crunch in the United States.Finance ministers and central bank governors from the Group of 20 top economies will gather in Mexico City as debt-riddled Greece continues to trouble Europe while Spain fights off pressure to seek a bailout.While Madrid avoids the bailout route, the problems in Greece are still haunting Europe's single currency, more than two years after Athens received its first multi-billion-euro rescue.Greek officials are locked in tough negotiations with European Union and IMF auditors over austerity measures Greece must take in return for a bailout payment it needs to avoid defaulting on its debt.While the fiscal situation in the United States is also a major concern, officials do not expect any movement on that front until after Tuesday's US presidential election.The White House and Congress need to find a compromise by the end of the year to avoid a "fiscal cliff" of automatic spending cuts and tax hikes, which experts say could hurt the US economy and curb global growth.The meeting is a follow-up to a June summit, when G20 leaders vowed to coordinate "fiscal actions" to boost domestic demand if economic conditions deteriorated.Since then, the IMF slashed its 2012 global growth forecast to 3.3%, eurozone unemployment rose to a record 11.6% in September and growth decelerated in emerging nations.

NEWS,11.10.2012

Spain comfortable with waiting game on aid

Spain is comfortable putting off an international aid request for weeks or even months as it waits out German political obstacles, analysts and sources say.In the meantime, Spanish Prime Minister Mariano Rajoy is focusing on measures such as intensifying labour market reforms, as well as pushing for a European banking union that would help rebuild confidence in Spain's tarnished banking sector.Spain's borrowing costs spiked in July, the yield on the benchmark 10-year bond jumped over an unsustainable 7%, but tumbled after ECB head Mario Draghi unveiled a bond-buying scheme to lower Spanish borrowing costs.Spain must first sign up for a European rescue plan to trigger the bond buying. Given its debt position, the Spanish government still sees that step as inevitable but pressure has eased as investors are less willing to bet against Spain with the ECB waiting in the wings.Germany has sent Spain strong signals that it should hold off because German Chancellor Angela Merkel is wary of presenting a fresh aid request to her parliament, euro zone sources say.Sources familiar with Rajoy's thinking say he also wants the ECB to indicate exactly what it will achieve with the bond-buying. "We will end up there, with ECB action, but the ECB is still designing the instrument in more accurate terms," said a source close to the government. "The markets understand that we have the fire extinguisher. We'll see how it evolves in the coming weeks."Turmoil over Greece, a fresh spike in Spanish yields or a credit rating downgrade to junk status for Spanish government bonds could accelerate the process, but for now Madrid is comfortable taking it slow, the source said.Spanish officials see more risks to moving ahead quickly without assured German backing, than in delaying a request.Meanwhile, they think things are moving in the right direction. For example, criticism of Draghi's plan has died down after strident objections from European Central Bank Governing Council Member Jens Weidmann, who heads the German Bundesbank."We think that the current period of vacillation might last for several months if events don't intervene," Alex White, an economist with JP Morgan in London, wrote in a research note.White said he saw little on the horizon to change Germany's desire to avoid a Bundestag vote on Spain in the near-term.Then there is Rajoy's personality to consider."Rajoy has infinite patience to put up with tension where others would break down," said a senior banker in Spain.Although Rajoy has said he is studying conditions for seeking European aid, there is no mystery over what the European Commission would demand of Spain in terms of structural reforms and spending cuts.Euro zone sources have said conditions are likely to be largely in line with measures the country has already taken, since Spain would not be applying for a full rescue programme that would cover all of its financing needs.The International Monetary Fund has sent a strong message to European policymakers to focus on growth even as they try to correct deficits, a line Spain applauds.With the economy in a deep recession and unemployment close to 25 percent, Spanish officials point out that ECB intervention might bring liquidity, but won't revive economic growth."With or without liquidity we have a growth problem globally, that we must start discussing," said the source close to the government.Banking reform Rajoy has concentrated on moving forward with banking union - under which the ECB would supervise European banks and the region would set up a deposit guarantee fund - which he sees as key to improving Spanish banks' access to liquidity.After meeting French President Francois Hollande on Wednesday the two leaders called for rapid progress toward banking union at a European leaders' summit next week. However, Germany and others do not expect agreement even on cross-border supervision for a year or more.Originally, Spain was pushing for the banking union because it would have allowed the ESM rescue fund to directly recapitalise Spanish banks, keeping the cost of a financial sector rescue off the country's public accounts.However, Spain is less concerned about that impact now, since it estimates it will use only 40 billion euros of the 100 billion euros of bank rescue funds lined up, equivalent to only 4 points of gross domestic product.Treasury Minister Cristobal Montoro calculated the deficit would swell to 7.4% of GDP this year when taking the bank rescue into account, but he said the European Commission would not consider that as non-compliance with targets, since it is a one-off.But banking union is still paramount for Spain since it would foster some confidence in its financial sector, which was crippled by a decade-long building boom that collapsed four years ago leaving the banks with 184 billion euros of bad debt.Rajoy has announced 65 billion euros in budget savings by the end of 2014 to try to bring Spain's deficit down drastically, in line with European Union targets.But rising unemployment, falling tax revenue and the recession are undermining his efforts.The Spanish government is acutely aware that next door, Portugal's severe spending cuts have failed to revive the economy.In Madrid, the source close to the government said under European rules if the government misses is deficit target because of recession, the European Commission would not apply sanctions for a missed deficit.

S&P downgrades Spain two notches

Standard & Poor's cut Spain's sovereign debt rating on Wednesday by two notches to just above junk level, citing the deepening recession and strains from the country's troubled banks.S&P cut the rating to BBB- from BBB+, just one level above "speculative" or "junk" grade debt, which could have sent Madrid's borrowing costs skyrocketing to untenable levels."The downgrade reflects our view of mounting risks to Spain's public finances, due to rising economic and political pressures," S&P said."The deepening economic recession is limiting the Spanish government's policy options," it said, adding that rising joblessness and tighter spending will likely intensify social conflict and tensions between the country's regions and Madrid.Moreover, S&P expressed doubts that all of the eurozone governments will give their backing to the bloc's effort to recapitalize Spain's banks, leaving more of the burden at least on the Spanish government and forcing its debt burden to balloon."Against the backdrop of a deepening economic recession, we believe that the government's resolve will be repeatedly tested by domestic constituencies that are being adversely affected by its policies," S&P said."Accordingly, we think the government's room to maneuver to contain the crisis has diminished."The ratings agency also attached a "negative outlook" to the rating, a warning of a possible further downgrade over the medium term.Such a downgrade would come, S&P said, if political support for the government's reform agenda weakens, if eurozone support fails to prevent Spain's borrowing costs from jumping above sustainable levels, or if debt tops100 percent of economic output or debt payments surpass 10% of general government revenues.

Greece's biggest company flees

Greece's biggest company, Coca Cola Hellenic, is leaving the country, the drinks bottler announced today. The immediate material impact on Greece is limited - its Greek plants stay open and CCH said the small portion of it activity that the world's second-ranked Coke bottler has in Greece will be unaffected. But analysts quickly saw it as bad news for a nation struggling to compete inside the euro zone.CCH, which has said it fears the Greek crisis could disrupt its multinational business, said in a bourse filing in Athens that shareholders, most of whom are abroad, will exchange their stock for shares in Coca Cola HBC AG, based in Switzerland and effectively shorn of the Greek tag "Hellenic".That stock will be primarily quoted on London's LSE."A primary listing on Europe's biggest and most liquid stock exchange reflects better the international character of Coca Cola Hellenic's business activities and shareholder base," the company said in its regulatory statement.The firm, in which The Coca-Cola of the United States has a 23% stake, bottles Coke and other produce in 28 countries from Russia to Nigeria. About 95% of its shareholders and business activity are outside Greece."This transaction makes clear business sense," chief executive Dimitris Lois told analysts in a conference call. An overwhelming majority of shareholders have already accepted moving a company which has long complained about Greek taxes.Analyst Manos Hatzidakis of Beta Securities in Athens said that the move made sense for the firm, which follows Greek dairy group FAGE this month in seeking a low-tax, low-volatility haven for its corporate base - in FAGE's case Luxembourg."The Greek bourse is losing a very good company and the London Stock Exchange is gaining a very important group," said Hatzidakis. "It's very bad news for the Greek economy and bourse."For brokers on the stock exchange, losing a stock that made up 8% of daily turnover this year will be unwelcome - especially since total volumes are down by half since last year.For the Greek treasury, the loss of tax revenue is unclear. Though CCH officials did not detail tax savings from moving the registered office to Switzerland, it has complained of high - and increasingly unpredictable - taxation in crisis-hit Athens.But the move may further discourage investment in Greece.Trade unionists saw the corporate exodus as immoral and one, Stathis Anestis, spokesman for the biggest labour group GSEE, suggested a boycott of Coke: "This is unacceptable," he said."CCH and FAGE are speculating at the most crucial moment for the Greek economy and the Greek people. Consumers should use their power to punish these companies."Country risk One analyst said CCH, which rose to the top of corporate rankings as the values of Greek banks collapsed, was out to rid its share price of such risks associated with Greece; the country is mired in recession and facing mass discontent as its leaders slash budgets to meet international creditors' terms for loans intended to keep Athens inside Europe's single currency."This is a healthy company that does not want to suffer from Greece's high country risk," said the analyst, who spoke on condition of anonymity.Foreign investors have been steadily reducing their investment in the Athens Stock Exchange since the country was engulfed by the sovereign debt crisis in 2009. Greece's future in the 17-nation euro zone still remains in doubt.Aided by the fact that it is doing most of its business outside Greece, CCH consistently outperformed the general Athens stock market index, which has slumped to 20-year lows.CCH has become the country's biggest firm by market value with a capitalisation of around 6 billion euros, representing about a fifth of the Athens bourse's total.The company, which last year made net profit of 330 million euros on sales of 6.85 billion, has complained of taxes imposed under Greek government austerity measures.A US filing shows it paid about 20 million euros in both 2009 and 2010 for one-off "social responsibility" levies in Greece.Profits at operating units in other countries are generally taxed locally. The Greek parent company reported 32 million euros in Greek taxes in 2010 and none last year. New withholding tax on dividends in Greece might have affected CCH in future.In its US filing for 2011, the company said: "Greece, which accounted for approximately 6% of our unit case sales volume and approximately 8% of our net sales revenue in 2011, is currently facing a severe economic crisis resulting from significant government fiscal deficits and high levels of government borrowing.""The ... Greek government debt crisis may have impacts on our liquidity that currently cannot be predicted."CCH said it would delist from the Athens Stock Exchange and then seek to re-enter that bourse with a secondary listing.Coca Cola Hellenic shares closed down 4.9% at 15.66 euros in Athens. Analysts explained the drop by the low cash price of 13.58 euros the company is offering to those shareholders who refuse the offer of new Swiss shares.