NEWS,11.01.2013

British manufacturing output slumps

British manufacturing output fell in November and industrial production was weaker than expected, official data showed on Friday, sparking renewed speculation that the economy shrank at the end of 2012.Manufacturing output contracted by 0.3% in November from activity in October and dived by 2.1% on a 12-month comparison, the Office for National Statistics (ONS) said in a statement. That was worse than market expectations for a monthly increase of 0.5% and an annual drop of 2.1%, according to analysts polled by Dow Jones Newswires. Manufacturing suffered a sharp downturn as construction industry output fell by 3.4% in November from activity in October - which was the biggest monthly decline for seven months - and tumbled 9.8% on an annual basis. "November's disappointing UK industrial production and construction figures provided yet more evidence that the economy probably contracted in the fourth quarter of last year," said Vicky Redwood, chief UK economist at British research group Capital Economics. The wider measure of industrial production - which includes also mining and quarrying, electricity, gas and water supply - rose by 0.3% in November from October, but fell 2.4% on an annual basis. The ONS said that the modest increase in industrial output was caused by the return to production of the North Sea's Buzzard Oil field, which was closed throughout September and October for maintenance. As a result, oil and gas extraction soared 11.3% in November compared with October. That was the biggest monthly gain since January 1968."Although overall production posted a 0.3% monthly rise, this just reflected a bounce-back in the energy sector," added Redwood. The ONS will publish its initial estimate for British gross domestic product (GDP) in the fourth quarter, or October-December period, on January 25.Britain, which has suffered two recessions since the 2008 financial crisis, will suffer a triple-dip recession should GDP contract in both the fourth quarter of last year and first quarter of 2013.

Japan unveils $226bn stimulus package

Japan's new government unveiled a massive $226.5bn stimulus plan on Friday in the latest bid to boost the world's number three economy, with plans to rebuild disaster-hit areas and beef up the military. Japanese investors welcomed the news, with the Nikkei index surging to a 22-month high and the yen tumbling, but analysts questioned its long-term effect and warned it could lead to more misery further down the line. Prime Minister Shinzo Abe, who came to power in a landslide election victory last month, followed through with one of his key pledges by outlining details of a big-spending plan designed create jobs and end deflation. "With the measures, we will achieve real GDP growth of two percent and 600 000 jobs will be created," he told a briefing. Japan's economy shrank by 0.6% in 2011, while last year's gross domestic product figures are yet to be released. "It is crucially important to break out of prolonged deflation and the high yen," he added. A hawkish Abe also repeated his call for Tokyo and the Bank of Japan to "join hands" on driving growth, comments that have stoked tension between the him and BoJ chief Masaaki Shirakawa over perceived threats to its independence and policy decisions. The new premier had pledged before the election that he would press the BoJ to carry out more aggressive monetary easing and warned that if it did not agree to a two percent inflation target he would change the law regarding its remit. While the total size of Friday's package came in at ¥20.2 trillion, Tokyo's direct spending on economic stimulus and pension financing amounts to about ¥13 trillion, with local governments and the private sector kicking in the rest, Abe said. Rebuilding disaster-struck areas, making more schools and hospitals earthquake resistant, and upgrading ageing infrastructure were among the planned measures. It will also see ¥180.5bn spent on missiles, fighter jets and helicopters to beef up the military as Tokyo is embroiled in an increasingly bitter territorial row with China over a group of uninhabited islands in the East China Sea.Friday's stimulus is the latest unveiled by successive governments who have tried to lift the economy from years of anaemic growth. Investors gave a big thumbs up, with the Nikkei surging 1.5% in the afternoon to levels not seen since before the March 2011 quake tsunami. The yen also tumbled to ¥89.35 against the dollar, its lowest since June 2010 and a far cry from the record high 75 it hit in late 2011, which hammered exporters. But the big spending plans have stoked fears over Japan's already tattered fiscal health, the worst among industrial countries with public debt standing at more than twice the size of the economy. "Huge spending of this size will, of course, have a one-time effect on boosting the economy. But if it fails to ignite a sustained recovery, Japan could fall into a vicious cycle of needing more stimulus spending," said Taro Saito, senior economist at NLI Research Institute. Saito also raised fears that some of the money would fall into a black hole of "wasteful spending". "If that is the case, it would only have a negative impact on Japan's fiscal health and a limited effect on boosting the economy," he said. Abe, however, insisted the package was not just a return to form for his Liberal Democratic Party (LDP), which has a history during its decades-long domination of what critics say is pork-barrelling, especially in the vote-rich countryside. "There is a suspicion that it is a kind of wasteful spending on white elephant projects that the LDP did in the past. That's wrong," Abe said on Friday. "Fiscal discipline is quite important. However, without a strong economy... we cannot improve our fiscal health."

Banks Officially No More Than Giant Babies: Seven And A Half Things To Know

Thing One: Are You Comfortable, Banks? Can We Get You Anything? When it comes to big banks, we're like overly doting parents: Four years after the financial crisis, we just can't stop babying them.Apparently, despite the personal guarantee of Warren Buffett that the banks are okey-dokey, they still need our assistance. Their profit margins are getting squeezed in several ways, writes Robin Sidel in the Wall Street Journal (as we'll observe when they report fourth-quarter earnings, starting with Wells Fargo today). For one thing, they have way too many deposits, on which they must pay interest. For another, they're having a hard time finding anybody they want to loan money, so they're not getting as much interest back. As a result, their net interest margins are too thin. Meanwhile, they also just can't seem to stop getting into trouble and paying hefty fines all of the time, which is also not great for business. Big lenders will take hits totaling about $20 billion in fines this quarter from their various settlements with the government, Sidel notes settlements that weren't too awfully onerous and that almost never involved any criminal charges being filed, mind you. Even as we speak, they're getting into more trouble: A couple of top UBS executives testifying before a UK parliamentary commission yesterday expressed shock and ignorance about rampant Libor fraud at their bank, for which it has paid $1.5 billion in fines. And Reuters reports that JPMorgan Chase will soon get a strongly worded letter from the U.S. government that it needs to do a better job of keeping an eye on the money going through its coffers, lest it run afoul of money-laundering laws, as HSBC, Standard Chartered and many other banks have before.Meanwhile, banks complained so much about the fragile state of housing that they won some key concessions in the new mortgage-lending rules announced yesterday by the Consumer Financial Protection Bureau, notes Peter Eavis in the New York Times. The rules may prevent some of the pre-crisis abuses in mortgage lending that helped lead to the housing collapse, but they will take effect over many years, and the CFPB offered possibly unnecessary protections to the banks against being sued by homeowners. In another sop to the banks, the recent government settlement with mortgage lenders over their shoddy foreclosure practices was based on a belief that actually reviewing cases of foreclosure abuse was just way too hard, and that it's better for everybody (except homeowners) just to let lenders handle things as they see fit, as Jessica Silver-Greenberg in the NYT reminds us (and EleazarDavid Melendez and Ben Hallman wrote earlier this week).All of this follows the most profound bank concession of all: the retreat earlier this week on tougher bank capital and liquidity standards by the Basel III regulators. Some commentators suggested this surrender was a good thing, otherwise these tender banks would be so fragile as to not be able to lend money any more. That's just completely wrong. The banks already aren't lending money, as Sidel's WSJ story today points out, either because they're being too finicky or because the economy is weak or because there's just not that much demand for loans, or all of the above. Distant-future capital and liquidity standards are not really a big part of the equation. Sure, business is bad, and we help industries when business is bad. But we shouldn't sacrifice the future safety of the financial system in the process. It's time to stop spoiling these banks.

Thing Two: More Stimulus For Japan: The government of new Japanese Prime Minister Shinzo Abe approved a $116 billion stimulus plan for that country this morning, the latest in a long series of measures aiming to jolt that moribund economy back to life. The move puts pressure on Japan's central bank to pitch in with its own monetary stimulus measures later this month, writes Reuters.

Thing Three: Dreamliner Nightmare Won't End: Another day, another set of mishaps on Boeing 787 Dreamliner airplanes. This time both incidents happened in Japan, one involving a fuel leak and another involving a cracked windshield. Both planes were operated by All Nippon Airways. Earlier this week, two separate Japan Airlines flights had trouble at Boston's Logan International Airport. The FAA is launching an investigation with a press conference in Washington later today.

Thing Four: Google's European Vexation: U.S. antitrust regulators may have given Google a pass, but European regulators aren't going to be such pushovers. The European Union's competition chief told the Financial Times that the search giant will have to "change the way it presents search results in Europe or face antitrust charges."

Thing Five: Fed To America: You're Welcome: Well, this should help with the deficit, a little: The Federal Reserve turned a record profit of $88.9 billion last year, the WSJ writes. That will go straight to the Treasury Department. Funny thing is, that profit came from the Treasury Department, in the form of interest payments on the mountain of Treasury bonds the Fed holds as a result of its stimulus programs.

Thing Six: Shell Game: A Shell oil rig that ran aground off the coast of Alaska last week might have been in motion only because Shell was trying to avoid paying taxes, according to a letter from Rep. Edward Markey (D-Mass.) to Shell's CEO. Shell denies the claim and says the rig was being moved for safety reasons. But a Shell spokesman last month told a local paper the timing of the rig's move was influenced by tax considerations, Reuters writes.

Thing Seven: Not-So-OK Computer: Some years back the RAND Corporation touted far and wide the benefits of switching health records from paper to electronic systems as a way of improving health-care efficiency and cutting costs, and the government spent tons of money to help speed up the process. Now, after a new study, RAND admits that it can see little benefit from the switchover, the New York Times writes. Awesome show, RAND. Great job!

Thing Seven And One Half: A Day In The Life: As a public service, to provide you a yardstick against which to measure your own life, Uproxx has unearthed an old AP story with a chronological list of all of the things Hunter S. Thompson ingested in a typical day. (Hint: Cocaine is well-represented.) It's a miracle he survived to that afternoon, much less the age of 67.

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Shell Kulluk Rig May Have Been Moved To Avoid Paying Millions Of Dollars In Taxes: Lawmaker

Shell may have moved an oil rig that ran aground off Alaska last week partly to avoid millions of dollars in taxes, U.S. Rep. Ed Markey said, raising even more questions about the oil company's decision on the timing of the move. The letter from the top Democrat on the House of Representatives Natural Resources Committee adds to the already-intense political scrutiny of Royal Dutch Shell's ambitious and troubled Arctic drilling foray last year. Shell's 30-year-old Kulluk drillship ran aground on New Year's Eve in what were described as "near hurricane" conditions while it was being towed south for the winter. In a letter to Shell's top U.S. executive, Marvin Odum, Markey said the decision to move the rig "may have been driven, in part, by a desire to avoid...tax liability on the rig. "In late December, a Shell spokesman told a local newspaper, the Dutch Harbor Fisherman, that it was "fair to say the current tax structure related to vessels of this type influenced the timing of our departure." But Shell said in response to Markey on Thursday that its decision was guided by safety, not taxes. Markey, an outspoken critic of the oil and gas industry, said his office received information about Shell and taxes from Alaska's revenue department. Shell could have been exposed to a state tax if the rig had remained in the state until January 1, as Alaska law says an annual tax of 2 percent can be assessed on drilling equipment on that date, Markey said in the letter sent on Wednesday.The company spent $292 million on upgrades on the rig since purchasing it in 2005, so the liability could have been about $6 million, he wrote. In total, Shell has spent $4.5 billion since 2005 to develop the Arctic's vast oil reserves. Jim Greeley, Anchorage-based petroleum property assessor for the Alaska Department of Revenue, explained that the tax applies to property used for exploration, production or transportation of oil or natural gas. He could not say whether the Kulluk would have been taxed or whether Shell's actions avoided a tax. The issue was complicated by the fact that Shell's drilling was in federal waters. "There's no tax precedent for that," at least in recent times, Greeley said, adding that department officials were researching the tax practices from two decades ago when there was a flurry of drilling offshore Alaska.The decision would have to be made by the time the state publishes its tax rolls on March 1.Shell's Arctic work has been closely watched by many in the industry and especially by ConocoPhillips ahead of its planned Alaska offshore drilling program slated for 2014.According to the U.S. government, the Beaufort and Chukchi seas hold an estimated 23 billion barrels of recoverable oil  equivalent to a tenth of Saudi Arabia's reserves. A Shell spokeswoman said the plan for the Kulluk this winter was always to move it in December. "While we are aware of the tax environment wherever we operate, the driver for operational decisions is governed by safety." She said an approved tow plan for the rig included weather considerations. Winter transit in northern waters is not unusual for rigs. Just this month, a rig owned by contractor Seadrill was due to arrive in Norway to start work for Statoil, while another was headed to Canada for Exxon Mobil Corp. The Kulluk accident is only Shell's latest problem in Alaska. Its 2012 Arctic drilling season was plagued by delays due to lingering ice and problems getting a mandatory oil spill containment vessel certified by the Coast Guard. Also, the U.S. Environmental Protection Agency said late on Thursday it issued notices of violation for air pollution in 2012 for the Noble Corp-owned Discoverer, Shell's other Arctic rig, and for the Kulluk. The EPA also terminated a temporary, more lenient permit granted to Shell in September for the Discoverer and said Shell's application for a less strict air permit was still under review. The U.S. Department of the Interior said this week it would review Shell's Arctic oil drilling program to assess the challenges it faced and to guide future Arctic permitting. Markey's committee does not have the power to stop drilling. His investigation would focus on why the rig was being towed along the coast down to Washington state in such severe weather and on Shell's safety policies, an aide to Markey said. Any permitting changes or delays resulting from the Interior Department review could threaten Shell's 2013 drilling plans, as the company has a limited drilling window during the summer. The Kulluk, before heading south, had previously been at a private facility in Unalaska/Dutch Harbor operated by Kirkland, Washington-based Offshore Systems Inc, which serves fishing and other vessels in Alaska. Harbormaster Jim Days said it was there for at least a month after completing its Beaufort Sea drilling. The environmental impact of the Kulluk accident is so far limited. The incident response team has located all four survival ships and one rescue ship that were dislodged from the drillship when it ran aground. The survival ships all had 68-gallon-capacity fuel tanks and two had been breached. None of the 155,000 gallons of fuel and other oil products aboard the Kulluk itself had leaked.

NEWS,08.12.2012

US 'fiscal cliff' fear may push investors to sell

Investors typically sell stocks to cut their losses at year end. But worries about the 'fiscal cliff' and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.The $US600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-loss selling even more appealing than usual.Tax-related selling may be behind the weaker trend in the shares of market leader Apple, analysts said. The stock is down 20% for the quarter, but it's still up nearly 32% for the year.Apple dropped 8.9% in this past week alone. For a stock that gained more than 25% a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one's tax bill is going to jump sharply just because the calendar changes."Tax-loss selling is always a factor but  tax-gains selling has been a factor this year," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont."You have a lot of high-net-worth individuals in taxable accounts, and that could be what's affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual."Of this year's top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.The rush to avoid higher taxes on portfolio gains could cause additional weakness.The S&P 500 ended the week up just 0.1% after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.Next week's Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster US economy. The Federal Open Market Committee will meet on Wednesday and Thursday.The policy statement is expected on Thursday after the conclusion of the meeting - the Fed's last one for the year.The jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that Superstorm Sandy had hit the labor market hard."After the FOMC meeting, I think it's going to be downhill from there as worries about the fiscal cliff really take center stage and prospects of a deal become less and less likely," said Mohannad Aama, managing director of Beam Capital Management LLC in New York."I think we are likely to see an escalation in profit-taking ahead of tax rates going up next year," he said.Volume could increase as investors try to shift positions before year end, some analysts said.While most of that would be in stocks, some of the extra trading volume could spill over into options, said J.J. Kinahan, TD Ameritrade's chief derivatives strategist.Volatility could pick up as well, and some of that is already being seen in Apple's stock."The actual volatility in Apple has been very high while the market itself has been calm. I expect Apple's volatility to carry over into the market volatility," said Enis Taner, global macro editor at RiskReversal.com, an options trading firm in New York.Shares of Apple, the largest US company by market value, registered their worst week since May 2010. In another bearish sign, the stock's 50-day moving average fell to $US599.52 - below its 200-day moving average at $US601.38."There's a lot of tax-related selling happening now, and it will continue to happen. Apple is an example, even (though) there are other factors involved with Apple," Aama said.While investors may be selling stocks to avoid higher taxes in 2013, companies may continue to announce special and accelerated dividend payments before year end.To be sure, the big sell-off in stocks following the November 6 election was likely related to tax selling, making it hard to judge how much more is to come.Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said there's a decent chance that the market could rally before year end."Even with little or spotty news that one would put in the positive bucket regarding the cliff negotiations, the market has basically hung in there, and I think it's hung in there in anticipation of something coming," he said.

Jobless Benefits Should Be Included In Fiscal Cliff Deal, Democrats Say

 

Hovering in the background of the "fiscal cliff" debate is the prospect of 2 million people losing their unemployment benefits four days after Christmas."This is the real cliff," said Sen. Jack Reed, D-R.I. He's been leading the effort to include another extension of benefits for the long-term unemployed in any deal to avert looming tax increases and massive spending cuts in January."Many of these people are struggling to pay mortgages, to provide education for their children," Reed said this past week as President Barack Obama and House Speaker John Boehner, R-Ohio, rejected each other's opening offers for a deficit deal.Emergency jobless benefits for about 2.1 million people out of work more than six months will cease Dec. 29, and 1 million more will lose them over the next three months if Congress doesn't extend the assistance again.Since the collapse of the economy in 2008, the government has poured $520 billion an amount equal to about half its annual deficit in recent years into unemployment benefit extensions.White House officials have assured Democrats that Obama is committed to extending them another year, at a cost of about $30 billion, as part of an agreement for sidestepping the fiscal cliff and reducing the size of annual increases in the federal debt."The White House has made it clear that it wants an extension," said Michigan Rep. Sander Levin, the top Democrat on the House Ways and Means Committee.Republicans have been relatively quiet on the issue lately. They demanded and won savings elsewhere to offset the cost of this year's extension, requiring the government to sell some of its broadcasting airwaves and making newly hired federal workers contribute more toward their pensions.Boehner did not include jobless benefits in his counteroffer response this past week to Obama's call for $1.6 trillion in new taxes over the next decade, including raising the top marginal rates for the highest-paid 2 percent.Long-term unemployment remains a persistent problem. About 5 million people have been out of work for six months or more, according to the Bureau of labor Statistics. That's about 40 percent of all unemployed workers.The Labor Department said Friday that the unemployment rate fell to 7.7 percent from 7.9 percent, the lowest in nearly four years. But much of the decline was due to people so discouraged about finding a job that they quit looking for one.Democrats have tried to keep a flame burning under the issue. Ending the extended benefits would "deal a devastating blow to our economy," 42 Democratic senators wrote Senate Majority Leader Harry Reid, D-Nev., this past week.The Congressional Budget Office said in a study last month that extending the current level of long-term unemployment benefits another year would add 300,000 jobs to the economy. The average benefit of about $300 a week tends to get spent quickly for food, rent and other basic necessities, the report said, stimulating the economy.The liberal-leaning Economic Policy Institute found that extended unemployment benefits lifted 2.3 million Americans out of poverty last year, including 600,000 children.States provide the first 20 weeks to 26 weeks of unemployment benefits for eligible workers who are seeking jobs. When those are exhausted, federal benefits kick in for up to 47 more weeks, depending on the state's unemployment rate.The higher a state's unemployment rate, the longer state residents can qualify for additional weeks of federal unemployment benefits. Only seven states with jobless rates of 9 percent or more now qualify for all 47 weeks.Congress already cut back federal jobless benefits this year. Taken together with what states offer, the benefits could last up to 99 weeks. Cutting the maximum to 73 weeks has already cut off benefits to about 500,000 people.Opponents of benefit extensions argue that they can be a disincentive for taking a job."Prolonged benefits lead some unemployed workers to spend too much time looking for jobs that they would prefer to find, rather than focusing on jobs that they are more likely to find," said James Sherk, a labor policy analyst at the conservative Heritage Foundation.But Sen. Tom Harkin, D-Iowa, noted that unemployment checks add up to about $15,000 a year. "That's poverty level," he said. "This is not something people just want to continue on, they want to get jobs."

Berlusconi in comeback bid

Billionaire media baron Silvio Berlusconi, who resigned in disgrace with Italy tottering through the European debt crisis, announced on Saturday he was making a comeback and running for a fourth term as premier.Berlusconi, 76, reluctantly stepped down last year after pressure from international financial markets. He was later convicted of tax fraud and is on trial in Milan for alleged sexual misconduct and abuse of power when he was premier.An unelected government of technocrats, led by widely respected economist Mario Monti, was appointed to replace him. Opinion polls have seen the popularity of Berlusconi's Freedom People Party plunge to far below that of Italy's other large political force, the center-left Democratic Party.But Berlusconi professed confidence he can achieve victory."I'm running to win," Berlusconi told reporters outside the training facilities of his soccer team AC Milan.One of Monti's biggest backers in Parliament, centrist leader Pier Ferdinando Casini, bemoaned Berlusconi's bid to return to office."It has been a year that Italians are seriously sacrificing to try to avoid Greece's abyss, and, today, there's the re-emergence of Berlusconi, who wants to bring us back five years," Casini said on state TV.Since Monti took office, the retirement age for Italy's generous pensions has been raised, sales taxes have been hiked and a property tax on primary residences abolished by Berlusconi to fulfill one of his own campaign promises - has been reinstated.But while opinion polls of prospective voters find slumping support for Berlusconi's party, to lower than 15%, the media mogul might be betting on public impatience with those sacrifices.No date has been set for elections, linked to the end of Parliament's term in late April. But Berlusconi's decision earlier in the week to withdraw the support of his party Parliament's largest for Monti's anti-crisis government increased the likelihood that Italy's president would dissolve the legislature weeks early and elections ahead of schedule."It seems to me that 10 March has been indicated" as a possible date for early elections, "and that seems a date that's fine with me," Berlusconi said.Monti headed back from a conference in France for a meeting on Saturday evening at the presidential palace to take the pulse of political tensions. President Giorgio Napolitano has made clear he wants Parliament to at least pass a vital budget law later this month and avoid a "precipitous" demise amid mounting political uncertainty.When pressure from international financial markets forced Berlusconi to reluctantly step down in November 2011 at the height of sovereign debt worries, many pundits dismissed any prospects for a comeback bid for the combative businessman-turned-politician, who has led Italy's conservatives for nearly 20 years.Since Berlusconi resigned 18 months short of the end of his third stint in the premiership, he has been convicted of tax fraud. He is appealing, and in Italy, convictions don't become definitive until after two levels of appeals are exhausted.He is also on trial in Milan for allegedly having sex with an underage prostitute and using his office when premier to try to cover it up, charges he has denied. The young woman has also denied having sex with the then-premier. Berlusconi, whose convictions in previous trials on charges linked to his media empire's dealings have either been overturned or thrown out when statute of limitations expired, claims he is the victim of prosecutors he contends sympathize with the left.With financial markets rattled over the prospect that Monti might see his tenure in the premiership end before May if early elections are called, the premier insisted that the political crisis was "manageable." Monti contended his government, with its austerity agenda of spending cuts, higher taxes and pension reform, spared Italy and with it, other nations in the eurozone from succumbing to financial disaster.Standard & Poor's rating agency on Friday indicated it could lower Italy's rating if the recession endures well into 2013, and it cited "uncertainty" the next Italian government can stay the tough course of austerity Monti's nonpartisan government managed to move through Parliament, thanks to the wide support.Berlusconi declared "the campaign is already on" and insisted he's running "out of a sense of responsibility" toward recession-plagued Italy. For months, he had been coy about whether he would run again. But on Saturday he claimed that a search for a new leader, like the one he was when he burst into politics in the early 1990s, failed, and so "out of desperation" for lack of alternative, he was jumping into the race.Italian media have reported that Berlusconi was particularly irked by Monti's Cabinet approval, earlier in the week, of a measure that would ban from running for office anyone sentenced to more than two years in prison after convictions are definitely upheld in cases of terrorism, organized crime and offenses in public office, including corruption.Berlusconi's tax fraud conviction in October carries a four-year sentence, but the case could be dismissed if the statute of limitations runs out before all appeals are exhausted.Critics have contended that Berlusconi expended much of his efforts as premier to push through legislation tailor-made to help him in his legal woes, and any new term in the premier's office could offer a similar opportunity.Since his last election bid, in 2008, Berlusconi has lost the key support of its biggest coalition partner, the Northern League, which refused to support Monti's government. But the League, whose founder, Umberto Bossi, has been tarnished by scandal, hasn't ruled out forging a new election alliance with Berlusconi.

NEWS,24.11.2012

Fiscal Cliff Raises Questions On Reality Of Debt Deal

 

President Barack Obama and leaders of the lame-duck Congress may be just weeks away from shaking hands on a deal to avert the dreaded "fiscal cliff." So it's natural to wonder: If they announce a bipartisan package promising to curb mushrooming federal deficits, will it be real?Both sides have struck cooperative tones since Obama's re-election. Even so, he and House Speaker John Boehner, R-Ohio, the GOP's pivotal bargainer, have spent most of the past two years in an acrid political climate in which both sides have fought stubbornly to protect their constituencies.Obama and top lawmakers could produce an agreement that takes a serious bite out of the government's growing $16 trillion pile of debt and puts it on a true downward trajectory.Or they might reach an accord heading off massive tax increases and spending cuts that begin to bite in January that's the fiscal cliff while appearing to be getting tough on deficits through painful savings deferred until years from now, when their successors might revoke or dilute them.Historically, Congress and presidents have proven themselves capable of either. So before bargainers concoct a product, and assuming they can, here's a checklist of how to assess their work:

OVERALL DEFICIT CUTS

The House and Senate have four weeks until Christmas. Their leaders and the president want a deal before then. Bargainers are shooting for a framework setting future debt-reduction targets, with detailed tax and spending changes to be approved next year but possibly some initial savings enacted immediately.Obama has suggested 10-year savings totaling around $4.4 trillion.Passing a framework next month that sets deficit-cutting targets for each of the next 10 years would be seen as a sign of seriousness. But look for specifics. An agreement will have a greater chance of actually reducing deficits if it details how the savings would be divided between revenue increases and cuts in federal programs, averting future fights among lawmakers over that question.Better yet would be including a fast-track process for passing next year's tax and spending bills if they meet the savings targets so they can whisk through Congress without the possibility of a Senate filibuster, in which 41 of the 100 senators could kill a measure they dislike.Another sign of sincerity: An enforcement mechanism that imposes savings automatically if lawmakers gridlock over details. Legislators' efforts now to avert January's combination of automatic tax boosts and spending cuts underscores the effectiveness of forcing them to act.Less impressive would be verbal pledges by the White House and congressional leaders to meet deficit-cutting goals without passing legislation inscribing the figures into law.

TAXES

A deal that specifies where revenue would come from would lay important groundwork for next year's follow-up bill enacting actual changes in tax laws.The biggest clash has been over whether to raise income tax rates on earnings over $200,000 annually for individuals, $250,000 for families. Obama wants to let them rise next year to a top rate of 39.6 percent but has suggested he would compromise. Boehner and other Republicans oppose any increase above today's top marginal rate of 35 percent. Instead, they advocate lower rates and eliminating or reducing unspecified deductions and tax credits. Settling that would resolve the toughest impediment to a deal.Raising money from higher rates, closing loopholes or a combination of the two would create real revenue for the government. The problem is many tax deductions and credits , such as for home mortgages and the value of employer-provided health insurance, are so popular that enacting them into law over objections from the public and lobbyists would be extremely difficult.With the price tags of tax and spending laws typically measured over a decade, delaying the implementation date can distort the projected impact of a change on people and the government's debt.Tax cuts written to expire in a certain year can put future lawmakers under political pressure to extend it. That is what Obama and Congress face today with the January expiration of tax cuts, including many enacted a decade ago under President George W. Bush.Even more questionable are assumptions that overhauling tax laws will boost economic activity and thus produce large new revenues for the government. Many Republicans and ideologically conservative economists contend that's the case, but most economists say there is no sound way to estimate how much revenue can be generated from strengthening the economy by revamping the tax system. Many believe the amount is modest.

SPENDNG

A serious agreement should specify how much savings would come from entitlements, meaning those big, costly benefit programs such as Social Security and Medicare. It also should say how much would come from discretionary spending, which covers federal agency budgets for everything from the military and national parks to food safety inspections and weather forecasts.Why the need for specificity?Because spending for entitlements occurs automatically, accounts for nearly two-thirds of federal spending and is the fastest growing part of the budget. Discretionary spending has been shackled by past budget deals and, according to the nonpartisan Congressional Budget Office, is moving toward falling below 6 percent the size of the economy by 2022, the lowest level in at least 50 years.A sincere effort to control expenditures would focus on entitlements, the true source of the government's spending problem. An agreement that envisions deep discretionary cuts risks a reliance on savings that future lawmakers could find unbearable and rescind.Savings that come from weeding out waste, fraud and abuse, which sounds good but are difficult to find, or rely on one-time sales of federal assets should be treated with suspicion.Deep cuts that take effect in the future, say after Obama leaves office in 2017, might be better than imposing them now and hurting an already weak economy by reducing spending.But delayed cuts also open the door for Obama's successors and future Congresses to roll them back. In 1997, Congress voted for cuts in Medicare reimbursements to doctors; those cuts have grown so large that lawmakers now vote annually to restore the money.Postponing the implementation of spending increases already scheduled to take effect, such as federal health insurance subsidies under Obama's health care overhaul, saves money upfront but makes no permanent changes that would ease future spending pressures.Another debatable source of deficit reduction would be the hundreds of billions of dollars the Obama administration says the government is saving by winding down wars in Iraq and Afghanistan. While there is no question those expenditures are dropping, the government has run huge deficits while those wars were waged, so there's no money being left unspent as those wars end.

Allies help UK's Cameron prevail in EU showdown

British Prime Minister David Cameron has gained allies in his fight against EU spending rises to avoid having to wield a solitary veto that would have further isolated Britain and fuelled questions about its future in the 27-nation bloc.The collapse of talks in Brussels to agree a 1 trillion euro ($US1.30 trillion) budget also meant Cameron for now will avoid having to present a deal to a fractious parliament that defeated him last month in a vote calling for European Union spending cuts.That undermined Cameron's authority and raised doubts about how he would appease anti-EU rebels in his Conservative Party without upsetting partners in Europe, Britain's biggest trading partner.Last December, Cameron angered many EU neighbours when he became the first British prime minister to veto an EU treaty, blocking plans for stricter fiscal rules in the euro zone. He warned he was prepared to do it again.There was talk of the other 26 countries reaching a budget deal without Britain, while the opposition Labour Party said Britain under Cameron risked "sleepwalking" out of the EU."There might have been (attempts) to say let's just put the British in a box over there and do a deal without them," Cameron said after the talks ended."That didn't work because there are other countries that I worked with very closely."Cameron, who wants a budget freeze, said Germany, Sweden, the Netherlands, Finland, and Denmark supported tighter spending controls. Attempts to find a 2014-2020 budget will resume early next year.Cameron faced a difficult balancing act. Trailing in opinion polls, he had to appear tough to the growing chunk of voters who would vote to leave the EU, seen by critics as a wasteful super-state that threatens British sovereignty.He also was squeezed by anti-EU Conservatives, a group that unseated former leader Margaret Thatcher and wants to use the euro zone crisis to rethink Britain's EU role.However, Britain had to be careful to avoid upsetting its main trading partner at a time of austerity. London also wants to retain influence before a critical summit next month on plans for a European banking union.Cameron's pro-European coalition partners, the Liberal Democrats, had warned him to tone down the anti-EU talk.According to one EU diplomat, Cameron "played it well", defying expectations he would be the "bad guy", and winning the support of Germany's Chancellor Angela Merkel.The Labour-supporting Guardian newspaper said the scale of the divisions among the other countries had helped Cameron."With no one in Europe agreeing on anything, he could strike a moderate tone," it said in an editorial.

 

Thai police fire tear gas in clash with hundreds of protesters

Thai police have fired tear gas in clashes with hundreds of protesters in Bangkok ahead of a rally seeking to overthrow the government of Prime Minister Yingluck Shinawatra in the largest demonstration yet against her administration.The protest highlights tensions which have been simmering since Yingluck's Puea Thai party swept to victory in July 2011 and could herald another period of unrest in Thailand.Anti-riot police wielding plastic shields fired gas canisters at protesters who tried to climb over cement and barbed wire barriers blocking entry to the rally site. Police said "between 300 and 400 protesters" clashed with police.At least seven police were wounded and up to 132 protesters arrested in the clash near the United Nations headquarters in Bangkok, a stone's throw away from the main rally site.Pitak Siam, a new anti-government group, has attracted the support of various royalist groups including 'yellow shirt' members of the People's Alliance for Democracy (PAD) who helped destabilise governments either led or backed by former premier Thaksin Shinawatra, Yingluck's brother, in 2006 and 2008.Authorities have deployed 17,000 police at the rally site and the government has invoked the Internal Security Act allowing police to detain protesters and carry out security checks and set up roadblocks.Police said they have seized various weapons, including knives and bullets, as protesters arrived at the protest area."We used tear gas because protesters were blocking police and did not comply with the security measures we put in place," police spokesman Piya Uthaya told a local TV station.Thailand has seen frequent bloody street protests in recent years including a rally that lasted more than two months by supporters of the present government in 2010.Those protests sparked a military crackdown that left at least 91 people dead and more than 1700 injured.The royalist Pitak Siam group, led by retired military general Boonlert Kaewprasit, accused Yingluck's government of corruption and being a puppet of former premier Thaksin.Thaksin remains a deeply divisive figure in Thailand. He was ousted in a 2006 military-backed coup and fled the country in 2008 shortly before being found guilty of abuse of power."I'm telling Thaksin that if he wants to return to Thailand he needs to bow before the king and serve his prison sentence," Boonlert told the thousands of protesters at the rally site.Some held pictures of Thailand's revered King Bhumibol Adulyadej as Boonlert shouted "Yingluck, get out" to cheers of his supporters.Thailand has seen a series of political protests since 2006 with pro-Thaksin and anti-Thaksin groups taking turns to challenge various administrations' right to rule.

NEWS,18.10.2012

Clashes erupt at Greek anti-austerity protests

Greek police clashed with anti-austerity protesters hurling stones and petrol bombs on the day of a general strike that brought much of the near-bankrupt country to a standstill.In the second major walkout in three weeks, almost 40,000 protesters marched in Athens in a bid to show EU leaders meeting in Brussels that new wage and pension cuts will only worsen their plight after five years of recession.Tensions mounted when a small group of protesters began throwing pieces of marble, bottles and petrol bombs at police barricading part of the square in front of parliament, prompting riot police to fire several rounds of teargas to disperse them.A 65-year old protester died of a heart attack, hospital sources. Another three people were injured. Police detained about 50 protesters suspected of attacking them.Most business and public sector activity ground to a halt at the start of the 24-hour strike called by the country's two biggest labour unions, ADEDY and GSEE."Enough is enough. They've dug our graves, shoved us in and we are waiting for the priest to read the last words," said Konstantinos Balomenos, a 58-year-old worker at a water utility whose wage has been halved to 900 euros and who has two unemployed sons.It was the third time since late September that tens of thousands of Greeks have taken to the streets holding banners and chanting slogans to show their anger at austerity policies imposed by EU and IMF lenders in exchange for aid.Some were carrying Greek, Spanish and Portuguese flags and shouted: "EU, IMF out"."Agreeing to catastrophic measures means driving society to despair and the consequences as well as the protests will then be indefinite," said Yannis Panagopoulos, head of the GSEE private sector union, one of two major unions that represent about 2 million people, or half of Greece's workforce.Greece is stuck in its worst downturn since World War Two and must make at least 11.5 billion euros of cuts to satisfy the "troika" of the European Commission, European Central Bank and IMF, and secure the next tranche of a 130-billion-euro bailout.Lenders demand austerity European Union leaders will try to bridge their differences over plans for a banking union at a two-day summit which starts on Thursday. No substantial decisions are expected, reviving concerns about complacency in tackling the debt crisis which exploded three years ago in Greece.The austerity policies being pursued in Europe's indebted Mediterranean countries at the behest of Germany and other rich euro zone members will drive the euro apart, protesters warned."This can't go on. We sure need measures but not as tough as the ones (German Chancellor Angela) Merkel is asking for," said Dimitris Mavronassos, a 40-year-old shipyard worker who has not been paid for six months.The strike emptied streets and offices in Athens. Ships stayed in port, Athens public transport was disrupted and hospitals were working with emergency staff, while public offices, ministries, bakeries and other shops were shut.Newspaper kiosk owners, lawyers, taxi drivers and air traffic controllers were among those protesting over the cuts, which include further drastic reductions in welfare and health spending.Opinion polls show rising anger with the terms of the bailout keeping the economy afloat, and Greeks becoming increasingly pessimistic about their country's future."The new, painful package should not be passed," the ADEDY public sector union said in a statement."The new demands will only finish off what's left of our labour, pension and social rights."During Hundreds of youths pelted riot police with fire bombs, bottles and chunks of marble Thursday as yet another Greek anti-austerity demonstration descended into violence, less than a month after more intense clashes broke out during a similar protest.Authorities said around 70,000 protesters took to the street in two separate demonstrations in Athens during the country's second general strike in a month as workers across the country walked off the job to protest new austerity measures the government is negotiating with Greece's international creditors.Thursday's strike was timed to coincide with a European Union summit in Brussels later in the day, at which Greece's economic fate will likely feature large.Riot police responded with volleys of tear gas and stun grenades in the capital's Syntagma Square outside Parliament as protesters scattered during the clashes, which continued on and off for about an hour. Another general strike in late September had also seen limited, but much more intense, clashes between protesters and police.A 65-year-old protester suffered a fatal heart attack during the demonstration but efforts to revive him failed. The organizers of the protest march he participated in said the man had fallen ill before any rioting had broken out.Four demonstrators were injured after being hit by police, volunteer paramedics said. The Health Ministry said two of the protesters were treated in hospital and that their injuries were not serious. Three policemen also required hospital treatment.Hundreds of police had been deployed in the Greek capital ahead of the demonstration. Police said seven people were arrested Thursday, out of more than 100 detained.The strike grounded flights, shut down public services, closed schools, hospitals and shops and hampered public transport in the capital. Taxi drivers joined in for nine hours, while a three-hour work stoppage by air traffic controllers led to flight cancellations. Islands were left cut off as ferries stayed in ports.Athens has seen hundreds of anti-austerity protests over the past three years, since Greece revealed it had been misreporting its public finance figures. The country has been surviving since then with the help of two massive international bailouts worth a total (EURO)240 billion ($315 billion). To secure them, it has committed to drastic spending cuts, tax hikes and reforms, all with the aim of getting the state coffers back under some sort of control.But while significantly reducing the country's annual borrowing, the measures have made the recession worse. By the end of next year, the Greek economy is expected to be around three quarters of the size it was in 2008. And with one in four workers out of a job, Greece has, along with Spain, the highest unemployment rate in the 27-nation European Union."We are sinking in a swamp of recession and it's getting worse," said Dimitris Asimakopoulos, head of the GSEVEE small business and industry association. "180,000 businesses are on the brink and 70,000 of them are expected to close in the next few months."The country's four-month-old coalition government is negotiating a new austerity package with debt inspectors from the EU, International Monetary Fund and European Central Bank. The idea is to save (EURO)11 billion ($14.4 billion) in spending largely on pensions and health care and raise an extra (EURO)2.5 billion ($3.3 billion) through taxes."In 2011, only 20 percent of businesses were profitable," Asimakopoulos said. "So these new tax measures present small businesses with a choice: Dodge taxes or close your shop."After more than a month and a half of arguing, a deal seems close. On Wednesday, representatives from the EU, International Monetary Fund and European Central Bank, said there was agreement on "most of the core measures needed to restore the momentum of reform" and that the rest of the issues should be resolved in coming days.

Why Spain's Economic Doldrums Could Be Good For Startups

 

Spain is having a rough month. Again.Standard & Poor's downgraded its rating on the country by two notches last week, which has brought Spain close to junk status. On Saturday, thousands of people marched through the streets of Madrid, where they protested the Spanish government's latest austerity cuts. And the country's hiring situation remains bleak, with unemployment hovering around 25 percent.But could this kind of sour environment ultimately turn out to be a sweet one for start-ups?"This landscape is perfect for entrepreneurship," says Josemaria de Churtichaga, associate dean for IE School of Architecture in Madrid. "I'm not defending the crisis but in some way the crisis is helping to change or should help to change the attitude within the young people, which I think is the mass that is suffering more -- and, at the same time, is the mass that has been living too well for the last decades, too protected from their parents, too protected by the state."Certain universities in Spain are more aggressively pushing for the creation of homegrown entrepreneurs who could launch and oversee new ventures and the Spaniards who might work there. One tactic, besides teaching courses on entrepreneurship: getting students from business schools as well as engineering or science departments to participate in startup or acceleration labs, and prepping recent grads to pitch their business plans in front of potential investors. But the academic efforts may also mean students both those wanting to launch a business, and others seeking a job at an existing organization need to be taught to become much more competitive as a way to survive in Spain's uncertain economy. "I sometimes wonder whether we should emphasize more some facets of managerial personality, like competition," says Santiago Iniguez de Onzono, dean of IE Business School in Madrid. "Should we make our graduates more fierce, more willing to compete in a really tough way as some others do?"Companies are also playing a nurturing role in the growth of new startups. Everis, a technology consultancy that is headquartered in Madrid, hosts speed dating-like meetings between entrepreneurs and investors, who boast more than 40 million euros in funds to help grow startups during the first stage of operation. The initiative could spur innovation and job creation in the country's tech sector, says David Garcia Hernandez, a director at Eversis.Creative minds have also carved out a space in an old garage near Madrid's CaixaForum Museum for entrepreneurs who want to start or nurture enterprises with a socially driven mission. Known as Hub Madrid, which launched three years ago, it is designed to be a shared working space where member entrepreneurs "are challenging you, provoking you, inspiring you to do what it is you're passionate about and also makes an impact," says Max Oliva, a Hub Madrid co-founder. Around 300 members have been paying between 15 to 300 euros a month to garner access to this shared space. It encourages collaboration through rounded desks, where there is no hierarchical "head" of the table, as well as non-ergonomic seats that regularly "encourage" people to get up and mingle near the kitchen or a library built of old wine cases. A second floor is being completed, where giant holes punched through the walls are supposed to encourage more discussion flow and better opportunities for eavesdropping, which could lead to new collaborations. "It's an ever-changing space to provoke sparks, to provoke accidents, to provoke failures that are positive failures," says Churtichaga, who helped design Hub Madrid.Other companies are working closely with local universities to provide additional training to students who are looking for a leg up in a tough hiring climate. Emzingo, for one, sends MBA candidates from Spain and other countries from around the world to South Africa and Peru, where students work with NGOs to improve and expand operations through mini-consulting projects. The for-profit social enterprise provides students with leadership development training as part of the experience and is a growing network of alumni (more than 75 so far), including some who have landed jobs at companies such as McKinsey, PwC, Bayer and Johnson & Johnson. "We're working now [on] placement after the MBA, so that's an extra benefit that you get for going through the program," says Pablo Esteves, who is based in Madrid and works as Emzingo's director of branding and partnerships.

Exhibition explores love, hate of money

New York - How does money make you feel? Fearful, stressed, happy?

US financial guru Suze Orman has teamed with the producer of the popular Body Worlds exhibits for a new traveling show to look at how we relate to and understand money.Orman, media star and author of best-selling books on personal finance, described the finance-themed exhibit as "an extension of my life's work as a financial educator, and an innovative way to teach people about money".The interactive, multi-media exhibit, "Economia: Money Matters," will begin a five-year, nationwide next year, starting in Chicago. The admission-charging show will move on to other venues that include science and natural history museums.Gail Vida Hamburg, who designed and developed the exhibition, said she hit on the idea several years ago."I found a study about worry, stress and depression and their links to money or rather the lack of money ... I realized that I could synthesize all of this information into a designed exhibition with multimedia and interactives (displays)," said Hamburg, who designed the Body Worlds traveling exhibition of preserved human corpses that has toured Europe, North America and Asia.The Money Matters exhibit spans 7 000 square feet with galleries on phases of life ranging from College Road to Third Phase, or retirement. It aims to meet national and state financial literacy goals for children and adults.Hamburg, who founded museum exhibit firm Rainworks Omnimedia in 2010, believes the show's appeal is universal because money is something that everyone has a relationship with throughout life.Orman has described the show as a walk through the life of money, and the effect it can have on you."It will be entertaining," she said in a statement, "and when you're having fun learning, the lessons stay with you."Hamburg said she addressed finance's fear factor by engaging people with various exhibits and displays."How do you make it easy for visitors to understand the power of compounding?" she asked, adding that it has traditionally been taught with graphs or charts or calculators.She decided to approach it differently using visitor prompts, and entry into a computer terminal and to show the results through the growth of actual physical objects."We should all be so smart with money and channel our inner Suze Orman. But we're not and we don't. Unless you're an MBA or an economist or a freak, you don't want to read about SEP-IRA or social security or student loan interest rates."The goal of the exhibition "is to give visitors the tools and resources for financial self actualization," she added.

NEWS,19.08.2012

Greece told to trim further €2.5bn

Greece's creditors say it must cut €14bn from its budget in the next two years, €2.5bn more than they originally demanded, German weekly Der Spiegel reported Saturday.The amount was revised upward as a result of the most recent audit mission by the country's so-called troika of bailout lenders, the European Union, the International Monetary Fund and the European Central Bank, Der Spiegel said.Troika auditors visited Athens recently and are expected to return in September, when they have said they will remain for the entire month.Based on that audit, the EU and IMF will decide whether to release Greece's next loan disbursement of €31.5bn.The Greek government is scrambling to slash its budget in order to access the funds, which it needs to keep it from defaulting on its debt and crashing out of the eurozone.Der Spiegel said the troika had ordered the extra cuts because planned privatisations were not shaping up to be as lucrative as hoped and tax revenues were falling short of forecasts as the economy struggled through its fifth year of recession.The auditors also said in a report that the government had so far been unable to show how it planned to reach the €11.5bn in savings it had already pledged to find for 2013 and 2014.

Obama slams Romney on taxes

President Barack Obama hounded Mitt Romney on Saturday, saying his wealthy rival would pay only 1% in taxes on his vast wealth under a plan authored by his running mate Paul Ryan.Obama escalated his effort to use the pick of the conservative Republican congressman last week to drive votes away from Romney in swing states, including New Hampshire, where he was campaigning Saturday."The centerpiece of my opponent's entire economic plan is a new five-trillion-dollar tax cut, a lot of it going to the wealthiest Americans," Obama said. "His new running mate, Congressman Ryan, he put forward a plan that would let governor Romney pay less than 1% in taxes each year, and here's the kicker - he expects you to pick up the tab."The president is demanding that Romney, a former venture capitalist, release more than the two years of personal tax returns he has already promised, and paints his rival as the epitome of a society tilted toward the rich.On Thursday, Romney insisted that he had always paid at least 13% in taxes, but that figure could still be politically damaging as it is much lower than the rate paid by most middle class Americans.Romney, estimated to be worth around $250m, has his income taxed as investment earnings, rather than as an annual salary, hence the lower rate, complicating his campaign to deny Obama a second term on November 6.In his budget proposal, Ryan would eliminate double taxation on interest, capital gains or dividends, reasoning that greater savings would lead to higher productivity and more investment.Romney has however said he would keep taxes on capital gains, interests and dividends at the current rate, but eliminate them entirely for those earning less than $200 000 a year.Obama cited a study by the bipartisan Tax Policy Centre that said that Romney's policies would result in middle class families paying an extra $2 000 a year, while the wealthiest Americans would get a big tax cut.But the Romney campaign said that after the release of new figures showing a rise in the unemployment rates in 44 states, it was not surprising the president was launching another attack."The fact is President Obama wants to raise taxes on private investment and job creators, which will lead to higher unemployment and fewer jobs," said Romney campaign spokesman Ryan Williams."The Romney-Ryan plan eliminates taxes for the middle class on interest, dividends and capital gains and implements pro-growth policies to deliver more jobs and more take-home pay for middle-class families."

 

Another food crisis looms - expert

With drought parching farms in the United States and near the Black Sea, weak monsoon rains in India and insidious hunger in Africa's Sahel region, the world could be headed towards another food crisis.Asia should keep a catastrophe at bay with a strong rice harvest while the G20 group of industrialized and emerging economies tries to parry the main threat, soaring food prices."We have had quite a few climate events this year that will lead to very poor harvests, notably in the United States with corn or in Russia with soja," warned Philippe Pinta of the French farmers federation FNSEA."That will create price pressures similar to what we saw in 2007-2008," he added in reference to the last global food alert, when wheat and rice prices nearly doubled.In India, "all eyes will be on food inflation - whether the impact of a weak monsoon feeds into food prices," Samiran Chakraborty, regional head of research at Standard Chartered Bank was quoted by Dow Jones Newswires as saying.Monsoon rains were 15.2% below average in mid-August, according to latest data from India weather bureau, and Asian rice prices are forecast to rise by as much as 10% in the coming months as supplies tighten.India and Thailand are two of Asia's leading rice exporters.Indian Food Minister Kuruppasserry Varkey Thomas told parliament this month that prevailing conditions "could affect the crop prospects and may have an impact on prices of essential commodities."Despite that warning however, the UN Food and Agricultural Organization expects rice output to slightly surpass "excellent results" recorded last year, though the FAO cut its global forecast for production of unmilled rice to about 725 million tons from its previous figure of 732 million.The world is feeling the onset of the El Nino weather phenomenon, which has a natural warming effect, is active in the western Pacific and expected to last until winter in the northern hemisphere, according to Japanese meteorologists.The US farm belt has been ravaged by the most stifling drought since the 1950s, and the country's contiguous 48 states have just sweltered through the hottest July on record.Corn production is probably at the lowest level in six years, the US Department of Agriculture said, and curtailed production will likely send corn and soybean prices to record highs, it added."Cereal prices have shot up, with an increase in (corn) prices of almost 40% since June 1," strategists at the CM-CIC brokerage noted.Commerzbank commodity experts said high temperatures and drought around the Black Sea "have resulted in wheat crop shortfalls on a scale that cannot yet be predicted with any accuracy."US commodities analyst, AgResource Company president Dan Basse told the Australian Broadcasting Corporation last week that the Australian harvest could play a role in easing the food shortage."We need every metric tonne of wheat and grain the Australian farmers can produce," Basse said. "Anything that the Australian farmer can do to assure or boost his production should be profitable in the year ahead."Jean-Rene Buisson, head of France's national association of food industries (ANIA) said: "All products based on cereals, including meat, will be affected by price increases, not necessarily by September, but definitely during 2013."In China, food prices are considered politically sensitive and account for up to a third of a consumer's average monthly budget, government statistics show.China has reined in inflation as its economy slows however, while its grain output stood at 1.3 trillion tonnes in the first half of the year, up 2.8% from the same period a year earlier.The Financial Times (FT) said concerns over the US harvest had prompted senior G20 and United Nations officials to consider an emergency meeting on food supply, with a conference call on the issue scheduled for August 27.The newspaper cited officials as saying the talks were not a sign of panic but rather reflected the need to establish a consensus to avoid a repeat of the riots and tensions sparked in 2007-08 by spiking food prices.Major concerns include hoarding or export restrictions by food producing countries, along with panic buying by others.Also crucial is the balance between the use of grain as a direct source of food and its role as animal feed or as a basis for motor fuels.FAO director general Jose Graziano da Silva of Brazil called in the FT for the United States to suspend biofuel production programmes to ease the pressure on food resources."An immediate, temporary suspension" of a mandate to reserve some crops for biofuels "would give some respite to the market and allow more of the (corn) crop to be channelled towards food and feed uses," he wrote.A region where food is in chronic shortage is the Sahel region of Africa, where the number of malnourished children is estimated to have hit a new high of 1.5 million as cholera and locusts emerge as new threats, UNICEF has warned.The relief agency World Vision Australia said 18 million people need food assistance in Niger, Mali, Chad, Mauritania and Senegal.