NEWS,03.02.2013

Fiat boss eyes Chrysler merger in 2014

Fiat boss Sergio Marchionne said Sunday that he expected the merger of the Italian car giant and its US partner Chrysler will take place in 2014."We will succeed in doing it," he said in an interview with the editor of the Repubblica newspaper. "We and VEBA (the United Auto Workers pension fund a Chrysler shareholder) have different opinions on the value of Chrysler but we will resolve the problem in 2014."Macchione, who heads both companies, had said on January 30 that the ties between the two automakers were "irreversible" and would merge "as soon as I can afford it" but did not put date on the merger.Asked on Sunday if Fiat would keep its Turin headquarters Macchione said: "We are a big group present throughout the world, it will depend on access to financial markets and the choices of the Agnelli family" who founded Fiat.He had "not thought" about the future name of the new entity, he said.The deal will ultimately give Fiat a 65% stake in Chrysler and full ownership by 2015.Boosted by increased sales at Chrysler, the Italian giant on Wednesday reported a profitable 2012, announcing a fourth quarter net profit that rose to €388m from €265m the year before.The company said it was aiming for profits of between €1.2bn and €1.5bn this year.Fiat took a 20% stake in Chrysler in 2009 as the third largest US automaker emerged from a government-financed restructuring under bankruptcy protection.It has since steadily expanded its stake by purchasing shares owned by the US government and the VEBA fund.

Starbucks tax offer too little, too late

Despite pledging to pay millions of pounds in extra tax in Britain, Starbucks faces a battle to restore its reputation over its fiscal stance, with analysts saying the offer is "too little too late".With 760 Starbucks outlets dotting Britain, coffee lovers need not travel far to find the familiar green signage and grab a frothy latte or a flat white.But surveys suggest British consumers may be losing appetite for the US chain following the revelation last year that it has paid just £8.6m in British corporation tax since 1998, despite generating £3 billion in revenues.The revelations sparked a stream of negative publicity plus protests outside coffee shops which analysts say hit the brand hard, though Starbucks itself insists "UK customers have remained loyal".Under the weight of pressure from lawmakers and consumers, the company pledged in December to pay an additional £20m in corporation tax over two years.But Sarah Murphy, director of market researchers YouGov BrandIndex, said the offer "has done little to slow down negative sentiment surrounding the brand."BrandIndex has tracked public perception of the coffee giant over several months. Its "Buzz" index gives companies a score based on what people have been hearing about the brand, with zero representing equal levels of positive and negative.In early October Starbucks' Buzz score stood at +1.9, but this plummeted to -28.4 following the tax headlines, and reached -45.2 in mid-December."That was quite a significant decline," said Murphy, adding that measures of perceptions of Starbucks' quality and value also sank during that time.In November, Britain's parliamentary accounts committee grilled top executives from Google, Amazon and Starbucks over their tax affairs.The apparent peak in negativity surrounding Starbucks in December came after the committee's chairman Margaret Hodge slammed companies involved in tax avoidance schemes as "totally immoral".Since then, Murphy says the brand "does seem to be making a slow recovery", but that the company "did too little too late."Social media agency Yomego identified similar patterns. It tracked online conversation over the same period and found negative comments about Starbucks increasingly outweighed positive.Some 95% of comments on Starbucks UK's Facebook and Twitter pages made reference to tax evasion, analysts said.Yomego managing director Steve Richards said: "The outrage over tax avoidance can't help but have an impact on a company's reputation in social channels."The old adage that 'bad news travels fast' has never been more true. Now news has so many channels to travel through, with the potential to multiply as people comment on and share stories."But does negative chatter cause consumers to shop elsewhere?Restaurant manager Julia Stypik said she's "not a huge fan of Starbucks... There's much better coffee and plenty of competitors."However this did not stop her frequenting a busy London branch of the chain one lunch-hour.On the tax issue, she told AFP: "I think they have been very clever but this should end at some point. It's unfair. Everyone has to pay taxes. "Some critics argue Starbucks is being unfairly targeted; Britain needs to tighten up on loopholes which allow companies to pay less corporation tax by moving profits abroad. Starbucks has acknowledged paying no corporation tax for three years on sales worth £400m owing to fees paid to other parts of its business. Executives insist its British division is unprofitable.Despite operating within the law, the multinational has borne fierce criticism from lawmakers, including Prime Minister David Cameron who told the World Economic Forum in Davos last month that tax-avoiding companies must "wake up and smell the coffee".The swipe was ill-received by Starbucks, according to the Sunday Telegraph which claimed it threatened to pull £100m of British investment, though a source close to the company told AFP "no threat was made".A Starbucks spokesperson said: "Starbucks agrees with the prime minister that all businesses should pay their fair share."In the UK, we employ 9 000 people, contribute £300m a year to the economy and are foregoing tax deductions that will make the Exchequer at least £20m better off."Starbucks says it remains "fully committed" to opening 300 new stores and creating 5 000 new jobs by 2016.

Kuwait growth to slow - report

Oil-driven economic growth in the Gulf state of Kuwait is forecast to slow down this year and in 2014 as crude output is expected to remain flat, the National Bank of Kuwait said in a report Sunday.After Gross Domestic Product (GDP) grew by a healthy 6.1% in real terms last year, thanks to continued strong oil income, it is forecast to drop to 3.2% in 2013 and to 2.5% in 2014, NBK said.Following a massive contraction of around 8% in 2009 due to the impact of the global financial crisis, Kuwait's economy gradually rebounded to grow by around 8% in 2011 as oil output and price remained high.Oil income in the OPEC member contributes an average of 95% to public revenues. Kuwait ended the past 13 fiscal years in the black and is forecast to post a huge budget surplus in the current fiscal year which ends on March 31.Oil GDP, which grew by 15% and 10% in 2011 and 2012 respectively, is expected to remain flat this year and contract by around 1.5% in 2014, according to the NBK report.But the bank revised upward expected non-oil GDP growth from 4% to 5% this year based on signs of greater determination by the authorities to implement large infrastructure projects.Most projects under a $110bn four-year development plan, that runs until 2014, have been stalled because of a political crisis in the emirate.The opposition has staged protests to demand the dissolution of parliament elected last month on the basis of an electoral law that was amended by the emir, claiming that the change is illegal and aimed at electing a rubber stamp body.But over the past few months, authorities either signed or gave the green light for mega projects worth around $40bn, mostly in the oil and power sectors.Inflation this year and next is expected to remain moderate at between 3-4%.Kuwait says it sits on around 10% of global oil reserves and pumps around 3.0 million barrels per day. It is estimated to have $400bn in foreign assets run by the sovereign wealth fund.The emirate has a native population of 1.2 million in addition to 2.6 million foreigners, mostly Asians and Arabs.

China's shortage threatens economy

China's demographic timebomb is ticking much louder with the first fall in its labour pool for decades, analysts say, highlighting the risk that the country grows old before it grows rich.The abundant supply of cheap workers in the world's most populous nation has created unprecedented cost efficiencies that underpinned its blistering economic expansion over the past 35 years, propelling the global economy forward.But now the inexorable consequences of the one-child policy imposed in the late 1970s are beginning to appear, and threaten to impact its future growth.China's working-age population, defined as 15-59, fell 3.45 million last year, official data showed earlier this month the first decline since 1963, after tens of millions died in a famine caused by the Great Leap Forward.The immediate effect may be small in a nation of 1.35 billion people, but the cumulative effects will accelerate over the coming decades.The number of people aged between 15 and 64 will drop by around 40 million between 2014 and 2030, said Wang Guangzhou, a researcher with the Chinese Academy of Social Sciences (CASS), a government think-tank --more than Poland's entire population."The population is aging so fast that we are running short of time to deal with it," said Li Jun, also of CASS, adding the family planning policy had exacerbated the problem.China's proportion of over-65-year-olds is projected to double from seven to 14% over only 26 years a key demographic measure that took the United States 69 years to complete."Undoubtedly it will substantially slow down China's potential growth rate," Yao Wei, an economist with Societe Generale in Hong Kong, told AFP.An ageing population not only means fewer people available to employ and higher labour costs, but investment a key driver of China's growth will be harder to maintain as families spend their savings on health care, she said.Chinese authorities maintain that controlling its population growth has been key to increasing its prosperity.But while China has risen to become the world's second-largest economy, on a per capita basis it still lags far behind the US and other developed countries.Industrial disputes have become more common in recent years, as workers demand higher pay and better working conditions on the back of growing awareness of their rights and the shortage of skilled staff.Multinational companies are looking to other developing economies with lower wages for further expansion, with some already moving production bases out of China to rivals such as Indonesia and Vietnam.In a survey of 514 Japanese manufacturers by the Japan Bank for International Cooperation last year, the number of respondents voting China as the top destination for overseas business fell by more than 10 percentage points on 2011.Economists said China must look to speed up the transformation of its economic model and move up the value chain.The golden period of the manufacturing industry, particularly those depending on exports, has gone," said Yao.At the same time, she said, the country was woefully underprepared to meet the burden of caring for the elderly."The fiscal situation is not prepared and the social security network is not complete," she said.By around 2060, every three Chinese workers will have to support two people above 60, compared with a ratio of five to one now, according to Li's projections.It is a crucial challenge for the ruling Communist Party, said Ren Xianfang, a Beijing-based analyst with research firm IHS Global Insight."Delivering growth and delivering social security to the general public are the key things for the state to (maintain) its legitimacy."Analysts said the medical services are increasingly expensive and hard to access, while the country's flagship public pension plans are crippled by problems including insolvency risks, difficulties in expanding coverage and mismanagement.A rural areas programme was introduced in 2009 to provide people from the countryside with their first ever state-subsided retirement scheme, but its payouts are particularly meagre in many areas as low as 55 yuan ($9) a month.The husband of Du Wenlan, a farmer from Chongqing, gets 80 yuan a month from the plan. She only buys new clothes once every three years, she said, and tries to save money by diluting their rice porridge."What can 80 yuan do?" she asked.On the streets of Beijing, Su Xu, 30, who works for a cosmetics company, told AFP: "I panic when I think about my retirement."

Why 'A players' matter

It's All About Who You Hire, How They Lead... and Other Essential Advice from a Self-Made Leader by Morton L MandelTHIS is an unusual book on leadership.It is the distilled wisdom of an American businessman and philanthropist, but that in itself is not unusual as there are literally thousands of books of this kind.There are three facts that make this book unusual. First, Mandel was described by the business guru, Peter Drucker, in a Forbes magazine article as one of the three businessmen he admired most. (The other two were Jack Welsh of General Electric and Andy Grove of Intel.)Second, his company, Premier Industrial Corporation, was the lead anecdote in a Business Week cover story on customer service, and superlative customer service is always the result of a business that is well managed.Finally, Mandel is a self-made dollar billionaire; his is a genuine story of rags to riches.The title of the book, “It is all about who you hire" encapsulates much of its wisdom. Great leaders have always had an undue impact on the organisations they lead, whether the organisation is a non-profit, a for-profit or a country.This position has led to Mandel insisting that only “A players” occupy leadership positions in his own companies, and in the many public benefit organisations he served and those he established with his own wealth.In a conversation with Mandel, Drucker asserted that you must always put your very best person into your greatest opportunity. When Mandel countered with the question: what if your best person is dentist and your greatest opportunity is a brass foundry, Drucker replied that the best person would fast realise what he could not do and fast find the right person to do it.This begs the question  what is an “A player?” Mandel has five criteria: intellect, values, passion, work ethic, and experience in this order.The complexity of modern business requires its leader to have intellectual firepower, that ability to analyse facts correctly, interrogate situations cleverly, apply thoughtful judgement, and make good decisions.Fortunately, there are many ways to see a person’s intellect and Mandel favours school and university grades because they are taken over long periods and therefore are more reliable than a quick test or flash of brilliance in an interview. Values are harder to discern, but how a candidate talks about their parents, teacher and role models does provide clues.Intellect and values without passion won’t get results you require from the leader. Passion, unlike values, is much easier to discern because you can feel it, hear, it see it. If you can feel it, so will the leader’s staff.The work ethic Mandel is referring to is not only the capacity to work long and work hard, but the way you engage with your work. The work ethic is the belief that work goes a long way in defining oneself.Experience comes last on this list of what you look for when you hire an “A player” because you can help an incumbent to have the relevant experience if he has the other four ingredients.“A players” will need to be paid well, but this is always a small investment for the type of return they are able create. A greater problem is keeping them; they will not stay long in a company or organisation which does not have a rich, deep and ethical culture.A deeply ethical culture is the created and maintained only through diligently enforcing and reinforcing ethical behaviour between staff, and between the company and its suppliers and customers. It requires the establishing codes of conduct that are taken seriously, and never giving in to the temptation to compromise even if the cost is high.Mandel recalls a hugely valuable deal his firm had worked hard to close. When it was secured, the representative of the customer company explained that a 5% consideration was required a veiled request for a “side payment.”There was no discussion as to whether Mandel’s company should accede to the request, so clear were the company's values to all. They don’t engage in dishonest practices, no matter the cost, so the deal was declined.The style of management practised and promoted by Mandel is the polar opposite of the laissez faire type, where the CEO hires his leaders and releases them to do as they will. It is also not a command and control style.Mandel stays on top of all issues to provide guidance and assistance so that both the decisions and the execution are superb.The managers we want out of our way are invariably the managers who we do not respect. These are not managers who are helping you to do your best work; rather, they want you to blindly execute their will.One of the techniques to achieve your personal best in your private life as well as your career is the “Factsbook.” This is a three-ring binder that every leader at every level has that contains minutes of every meeting you have with your manager, all your assignments, your progress in these assignments, and even a schedule of your meetings for the year.At the beginning of each meeting the notes from the last meeting are read aloud to the manager. This seemingly odd practice is of enormous value in keeping responsibilities clear and ensuring they are fulfilled. Consider this: how many times have decisions you and a staff member agreed should be done, not been carried out? Then read the chapter on Factbooks and start using them.The book covers a wide array of thoughts ranging from uncommonly high commitment to satisfying a customer to what to watch out for in mergers or acquisitions. Many of the lessons were learned from Mandel’s successes, but equally from failures or missteps. What Mandel stresses, as seen from having been there, is that there is no difference between running a for-profit and a not-for-profit organisation. The only difference is the measures of success.This book will enlighten you, remind you of things you already know, but perhaps don’t practice, and give you a perspective on doing business successfully. The approach works. Mandel proved it.

NEWS,24.01.2013

Britain reaches out to world leaders

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

Concern over currency manipulation at WEF

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

EU carbon market plunge 'a wake-up call'

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

NEWS,06.12.2012

Obama tough on fiscal cliff

President Barack Obama and Republicans crept closer to negotiations on avoiding a recession-threatening package of automatic tax increases and spending cuts, but the White House reaffirmed it would not budge on demands for higher taxes on the wealthy.With a new AP-GFK poll showing clear support for Obama's position and dwindling backing for cutting government services to curb the climbing US budget deficit, the president and House of Representatives Speaker John Boehner spoke by telephone on Wednesday for the first time in days about a way to avoid the so-called fiscal cliff which would occur on 1 January.The telephone contact, disclosed by a Boehner spokesperson, raises the possibility that negotiations could soon resume on heading off what some economists warn could be a serious blow to an economy still recovering from the Great Recession.So far, Republican leaders have said they would only agree to higher tax revenues by closing loopholes or reducing tax breaks, not by raising rates as demanded by Obama. The opposition has struggled, however, to remain united and find its footing in talks with a president emboldened by his November election victory and unified congressional Democrats.While insisting that tax rates go up on the top 2% of American earners, Obama, too, has called for government spending cuts but by less than the Republicans want.Obama, addressing business leaders on Wednesday, said the White House and Republicans could reach an agreement "in about a week" if the Republicans drop their opposition to raising taxes on families making more than $250 000 a year."If we can get the leadership on the Republican side to take that framework, to acknowledge that reality, than the numbers actually aren't that far apart," Obama said.Administration officials are hardening their warnings that Obama is willing to risk going over the cliff. Treasury Secretary Timothy Geithner said on Wednesday that the Obama administration is "absolutely" ready for that risky step.Geithner said in an interview on CNBC the administration thinks budget deficits are so large that they can't be closed without boosting tax rates on the wealthiest 2% of Americans. He also said that the administration would reject a budget plan that didn't include an increase in the federal borrowing limit, which is expected to expire early next year. However, Geithner said he still thinks progress is being made in the budget negotiations and that the outlines of an agreement are becoming clearer."They look inevitable," he said.Speaking to business chieftains Wednesday, Obama warned Republicans not to inject the threat of a government default into negotiations over the fiscal cliff as a way of extracting concessions on spending cuts. "It's not a game I will play," he said, recalling the brinkmanship of last year in which a budget standoff pushed the Treasury to the edge of a first-ever default and led to a downgrade of the US credit rating.While saying he is willing to accept some reductions in government programs such as Medicare, the highly popular federal health insurance programmes for older Americans, he flatly rejects Republican contentions that they can raise about $800bn in additional government revenue over a decade by closing loopholes and narrowing tax deductions on the wealthy, rather than raising income tax rates. The opposition argues increasing rates from 35% to 39.6% as Obama wants would impose a particularly harmful impact on the economy and job creation at a time when the country is still struggling to recover fully from the deepest recession in decades.The White House has ridiculed the Republican plan as "magic beans and fairy dust."

 

US jobless claims fall

The number of Americans filing new claims for unemployment benefits fell for a third straight week last week, dropping back to their pre-superstorm Sandy range.Initial claims for state unemployment benefits dropped 25 000 to a seasonally adjusted 370 000 in the week ended Dec. 1, the Labor Department said on Thursday.Last week's drop brought them back to their pre-storm's 360 000-370 000 range, which economists said suggested there had been no marked weakening in the labor market. They had forecast claims falling to 380 0000."We could reasonably assume there is no underlying deterioration or acceleration in the labor market before the storm," said Pierre Ellis, senior global economist at Decision Economics Inc. in New York."We should still have a relative poor payroll reading tomorrow, but we should have some confidence that payrolls would bounce back in December."The four-week moving average for new claims, a better measure of labor market trends, rose 2 250 to 408 000, reflecting the impact of the late October storm. That was the highest level since October last year.Last week's claims data has no bearing on Friday's employment report. Economists estimate the monster storm, which slammed into the densely populated East Coast, could subtract between 25 000 and 75 000 jobs from November's nonfarm payrolls.The closely watched report is expected to show payrolls increased only 93 000 last month after advancing 171 000 job in October, according to survey of economists. The unemployment rate is seen holding steady at 7.9%.A Labor Department official said there was nothing unusual in the state-level data, but noted claims tend to post their largest percentage increase in the last week of November, catching up from the Thanksgiving holiday.In addition, seasonal layoffs in sectors like construction, start picking up this time of the year. This will make claims a less useful gauge of labor market conditions in the weeks ahead.A separate report from consultants Challenger, Gray & Christmas showed planned layoffs at US firms rose nearly 20% in November to their highest level in six months.The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid dropped 100 000 to 3.21 million in the week ended Nov. 24.

 

ECB cuts euro-zone growth for 2013

The euro weakened against the US dollar and the yen after European Central Bank President Mario Draghi said the euro-zone was expected to stay in recession next year, reversing an earlier forecast for a recovery in economic growth.The downgrade to the outlook for gross domestic product came as the ECB left its benchmark interest rate at a record low 0.75%.Draghi said that there had been wide discussion on interest rates within the ECB, which taken together with the weaker growth track has stoked speculation the central bank may cut rates next year.The euro fell 0.9% to $1.2954 and dropped 1% to 106.64 yen after the statement."By the second part of the next year, we should see the beginning of a recovery" in Europe, as the global economy picks up pace, Draghi said.The ECB forecasts the region's economy will shrink 0.5% this year, worse that the 0.4% contraction it forecast three months ago. The economy would shrink 0.3% in 2013, compared to an earlier forecast of 0.5% growth.The ECB lowered its forecast for inflation in 2013 to 1.6% from 1.9% and said inflation would be even weaker in 2014 at 1.4%. Separately, the Bank of England kept its key interest rate at a record low 0.5% while maintaining its quantitative easing programme.Euro-zone GDP shrank 0.1% in the third quarter, the European Union confirmed, following a 0.2% contraction in the second quarter."The underlying reason for euro weakness is still there, and the ECB's warnings of continued weakness over the next year could be the catalyst for a continued euro drop," Neal Gilbert, market strategist at GFT. The ECB's first monetary policy decision in 2013 "could include another cut in interest rates."Equity markets were broadly stronger across Europe, though sentiment was driven by optimism the US Congress will find a way to avert the fiscal cliff which could plunge the US economy back into recession next year.Germany's DAX 30 rallied 1.1% to 7,534.54, the highest since January 2008, as figures showed factory orders in Europe's biggest economy jumped 3.9%, seasonally adjusted, in October. The Economy Ministry revised the previous month's decline to 2.4% from 3.3%.France's CAC 40 rose 0.3%. The Stoxx Europe 600 Index rose 0.7% to its highest close since May last year.Cracks are showing within Republican ranks over hiking taxes for the wealthiest Americans, a move that House Speaker and senior Republican John Boehner has refused to budge on in negotiations with President Barack Obama.Some 80 members of the US Congress, including Republicans and Democrats, have signed a letter calling for an exploration of "all options" in to end a deadlock between Obama and Boehner, Bloomberg reported, citing a spokeswoman for Representative Mike Simpson of Idaho, a republican who has signed the letter.US stocks were little changed. The Dow Jones Industrial Average fell 0.15 and the Standard & Poor's 500 Index was up 0.025. The Nasdaq Composite rose 0.3%.

ECB depicts bleak 2013

The euro zone economy is likely to shrink next year as it has in 2012, the European Central Bank predicted on Thursday, sharply downgrading its outlook after holding interest rates at a record low 0.75%.The bank's new staff projections put gross domestic product in a range of falling by 0.9% to growing by just 0.3% next year, suggesting contraction is far more likely than not. ECB President Mario Draghi said downside risks prevailed.In September, the ECB's staff had pencilled in a significantly higher range of -0.4% to +1.4% for the euro area economy."Economic weakness in the euro zone is expected to extend into next year," Draghi told a news conference after the central bank's monthly policy meeting."Later in 2013, economic activity should gradually recover as global demand strengthens and our accommodative monetary policy stance and significantly improved financial market confidence work their way through the economy."The Governing Council's decision to leave its main interest rate unchanged matched economists' expectations, which also showed opinion was split down the middle over the chances of a cut early next year."The Governing Council continues to see downside risk to the economic outlook for the euro area," Draghi said. "These are mainly related to uncertainties about the resolution of sovereign debt and governance issues in the euro area."A political impasse over the United States' fiscal policy, which could presage steep tax hikes and budget cuts if a deal is not reached, could also dampen sentiment for longer, he said.The level of uncertainty was reflected in the ECB's first attempt to forecast 2014, for which it pencilled in growth of between 0.2% and 2.2%. The midpoint forecast for 2012 was pushed slightly lower to -0.5%.Draghi said rates were not lowered because of high indirect taxes and increasing energy prices in some euro zone countries."There was a wide discussion ... but the consensus was to leave the rates unchanged," he said, a hint that opinions differed about what course to take.He also said the policymakers discussed setting a negative rate on the ECB's deposit facility in an attempt to encourage banks not to hoard cash at the ECB but lend it into the real economy instead.German Bund futures rose in response to that and the euro came under pressure.The ECB will also continue to supply eurozone banks with all the liquidity they ask for in the central bank's refinancing operations at least until July 2013, Draghi said.While financial markets have calmed since the European Union and the International Monetary Fund put in place further steps to help Greece, and the ECB promised to do what it takes to preserve the euro, the bloc's economy has sunk into recession from which it shows few signs of emerging soon.An inflation forecast of 1.1% to 2.1% next year compared with the ECB's target of close to but below two percent there would appear to be plenty of room to cut rates further.But recent policymakers' comments have suggested the ECB is unlikely to do so in the near future and the central bank is wary of taking any action that could see the bloc's governments soft-pedal on budget consolidation efforts.Also, market interest rates vary greatly across the 17-country bloc and the ECB is focused on fixing what it calls the 'transmission mechanism' for passing on its rates to all corners of the euro area before contemplating lowering official borrowing costs.The most obvious mechanism for doing that would be the ECB's yet to be used new bond-buying scheme, which could drive down government borrowing costs.The ECB has not yet bought any sovereign debt under its new programme dubbed Outright Monetary Transactions (OMT) because Spain, which is seen as most likely to become the first country to make use of the new support measure, has not yet fulfilled the precondition of asking for help from the euro zone's rescue fund.Pressure for the ECB to intervene is building.Spain auctioned fewer bonds than it hoped to on Wednesday as investors fret over the timing of an expected aid request by the government.

Europe needs to tackle tax avoidance

European governments should coordinate their efforts to root out tax avoidance costing them around €1 trillion every year, the European Union's executive body said on Thursday.The European Commission said member states need to share information better, introduce an EU-wide tax identification number and devise common criteria for blacklisting tax havens.The proposals were part of an action plan detailed by EU taxation policy commissioner Algirdas Semeta on Thursday to deal with inventive and increasingly common tactics used by big companies and others to reduce their tax bills."Tax competition must not open the door to fraudulent or abusive tax practices," Semeta said. A new framework would result in profits being taxed in the state where the "actual economic activity takes place".The Commission intends to present its action plan to EU finance ministers next year but is not aiming to persuade member states to pass binding legislation.The impetus to deal with the problem has grown as several European countries try to increase tax revenues and cut spending to rein in heavy debts.A number of high-profile examples have hit headlines in recent months, including one involving coffee chain Starbucks .A recent examination of Starbucks' accounts showed that the company had reported 13 years of losses at its UK unit, even as it told investors the operation was profitable and among the best performing of its overseas markets.The chain's UK unit paid no corporation tax on its income in the last three years for which figures were available.Starbucks said on Thursday it could pay up to $32.18m more in tax as it announced plans to change its accounting practices, surrendering to criticism from lawmakers, campaigners and the media.Examination of Amazon's accounts showed how the world's biggest online retailer had minimised corporate taxes by setting up in Luxembourg, and channelling sales through its units there.In effect, Amazon used inter-company payments to form a tax shield for the group, behind which it has accumulated $2bn to help finance its expansion. Amazon declined to answer questions about its tax affairs.BusinessEurope, the lobby group that represents companies, said it supported the Commission's initiative, but also called for a simplification of the tax system across European Union.Semeta suggested part of the blame lay on tax regimes "artificially designed to steal tax bases or encourage aggressive tax planning".He rounded on non-EU state Switzerland as one country whose policies encourage aggressive tax avoidance."I can openly say that we consider that several tax regimes in Switzerland, according to our estimations, do not meet criteria of the code of conduct on business taxation," he said.

Prada shrugs off slowdown concerns

Italian fashion house Prada SpA beat forecasts with a 30% rise in third-quarter net profit, shrugging off concerns about a slowdown in demand for luxury goods.The Hong Kong-listed company, popular for its coloured Miu Miu dresses and leather handbags and shoes, has outperformed its sector so far, helped by its retail expansion in new markets."The group has continued to grow at a rate that has exceeded our expectations but great care has still been paid to cost control and working capital management," Patrizio Bertelli, chief executive, said in a statement.The company, led by trend-setting designer Miuccia Prada and her husband Bertelli, posted a net profit of €122.1m in the third quarter, boosted by wealthy spenders from Asia and other emerging markets.That compares with an average forecast from analysts SmartEstimate of €110m and with €93.6m a year earlier.Wealthy tourists from Asia and Russia have shielded the fashion house from a sluggish growth in Italy, being felt by domestic peers such as Tod's.Milan-based Prada also says it still has plenty of room for growth because it has a limited presence in fast-growing markets including Asia, compared with rivals such as LVMH and Salvatore Ferragamo.Prada shares have soared 80% so far this year, outperforming the benchmark Hang Seng Index which is up 21% over the same period.Global sales of luxury goods are expected to grow 5% this year, stripping out currency effects, from 13% last year, according to a report by Bain and Italy's luxury goods trade body Altagamma.

Brazil launches port investment program

Brazil's government launched a $26bn port investment program on Thursday to reduce the high costs and notorious delays in shipping goods in and out of the major commodities exporter.The plan to modernize port infrastructure announced by President Dilma Rousseff seeks to increase investment in Brazil's ports through partnership with private companies.The bidding process that will open next year will favor tenders that offer the lowest tariffs for handling the greatest volume of cargo, moving away from a prior model of granting concessions to the highest bidder."Our objective is the greatest movement of cargo possible at the lowest possible cost," Rousseff said."We want to increase the efficiency of Brazilian ports with this partnership, which will make our exports more competitive and increase production," she said. "We want an explosion of investment through this partnership with the private sector."The bulk of the investment would be made between 2014 and 2017, Ports Minister Leonidas Cristino said.The ports slated for modernization include Santos, which is Latin America's largest port by value of goods moved, Rio de Janeiro, Paranagua, Porto Alegre, Espiritu Santo, Itaqui, Pecem and Suape. Rousseff said Brazil's ports handle 95% of Brazil's foreign trade. The country is the world's top exporter of coffee sugar and citrus and a major grains exporter. It is also one of the world's biggest exporters of iron ore used to make steel.