Archive for March 2010

Eurozone agrees on bailout plan for Greece

Monday, March 29, 2010 · Posted in

Greece won a major pledge of financial support from the other countries that use the euro and the International Monetary Fund in a deal that aims to halt a government debt crisis undermining confidence in Europe's currency union.

The joint eurozone and IMF bailout program comes with strict conditions and makes no money available right now.

It could be tapped only if Greece or other financially troubled eurozone members cannot raise funds from financial markets. It would require the unanimous agreement of the 16 eurozone countries to release the loan funds.

The deal at a summit meeting Thursday night in Brussels was a clear victory for German Chancellor Angela Merkel, who had taken a tough line on any bailout. She demanded that a rescue for Greece only come when the country runs out of other options and said it must include the IMF.

It was also a comedown for the French and the European Central Bank, which had opposed turning to the IMF out of fear it would damage the euro's prestige and show that Europe was unable to solve its own financial woes.

Greece's financial difficulties have weighed on the shared currency, driving its exchange rate down to $1.33 from $1.51 in November. It has also illustrated a basic weakness in the euro: the budget and deficit rules adopted to support it were not strong enough to prevent governments from spending their way into trouble.

A default — if Greece cannot raise money to pay off debt coming due this year — would be a further serious blow to the euro, and most economists and market analysts expected that the European Union would find a way to stop it. But pledges of support had been vague until now.

"We hope that it will not have to be activated," said the European Union's president Herman Van Rompuy. "This would be triggered as a last resort." He said the program should tell markets to "have confidence that the eurozone will never abandon Greece."

Luxembourg's prime minister Jean-Claude Juncker, who heads the group of eurozone finance ministers, said "speculators will be discouraged because they know from now on we have this instrument."

Greek government officials say they believe the existence of a eurozone safety net will help them borrow at lower costs. They expect the spreads to fall significantly in coming weeks.

"We hope and believe that we won't ever use it," a Greek source said under condition of anonymity because he was not authorized to be quoted in the news media.

French President Nicolas Sarkozy said eurozone nations would offer loans totaling some two-thirds of the package with the IMF offering the last third. "We didn't count up to the last euro," he said. "It can be adjusted."

Juncker said they did not agree an amount of a possible bailout for Greece. Two diplomats earlier said the total loans would be some €22 billion. All eurozone nations are pledging to help — although any contribution would be voluntary.

Eurozone nations also want to take steps to prevent debt and deficits getting out of control again, calling for tougher rules and sanctions. Van Rompuy said they "want all necessary measures to be taken to ensure that this does not recur."

He has been tasked with drawing up possible options to toughen EU oversight of member's budgets and economic performance.

The bailout program could be used to help other vulnerable eurozone nations such as Portugal and Spain who have seen debt soar after the global economic turmoil of the past several years saw their economies sink into recession.

The Washington D.C.-based lender has already joined the EU in bailing out and demanding budget cuts from three EU members that don't use the euro: Hungary, Latvia and Romania.

European and U.S. stock markets rose earlier Thursday on news that a financial rescue package for Greece was taking shape. Market worries over Europe's weeks-long hesitation to set up a safety net for eurozone members who can't pay their bills has sent the euro sliding to a 10-month low.

Greece needs to borrow some €54 billion this year and must refinance some €20 billion in April and May. It has been able to sell bonds but says it cannot keep paying the high interest rates investors have been demanding to compensate them for the perceived risk that Greece might not pay.

Germany's Merkel was not sympathetic, saying financial rescue could only come in an "exceptional emergency."

Germany sees itself as a fierce defender of prudent budget spending and is unwilling to use its taxpayer money to help Greece, which overspent and faked budget figures for years. Merkel also faces a key regional election May 9 which could damage her center-right government by overturning its majority in Germany's upper house of parliament.

Source: MSNBC

Tax officer Gayus may get the ax

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The Directorate General of Taxation is seeking the dismissal of tax officer Gayus Tambunan for his alleged involvement in a corruption case involving Rp 25 billion (US$2.75 million) of funds.

Director General of Taxation M. Tjiptardjo said in Jakarta on Friday that he would request the minister to fire Gayus, who may have fled the country shortly after the court acquitted him in a money laundering and embezzlement case last week.

Tjiptardjo said that the directorate general will also examine other tax officials who have worked with Gayus to anticipate other possible violations.

“I won’t stop there. Other officials, his bosses, will be examined. This is embarrassing. I will eradicate [the tax office] of corruption,” he said.

Tjiptardjo added that Gayus had admitted he received Rp 370 million from taxpayers. “Based on a temporary report, he admitted to receiving Rp 370 million. We will examine his tax returns to check whether there are other funds,” he said.

Gayus said the Rp 25 billion found in his bank account belonged to businessman Andi Kosasih, but Tjiptardjo is suspicious about that. Gayus told the police earlier that Andi, a businessman from Batam, transferred the Rp 25 billion fund to his account to buy a plot of land in Jakarta. Andi is currently under police investigation.

Tjiptardjo said the case should be settled immediately otherwise taxpayers might be reluctant to pay taxes for fear their money could be used in corruption incidents.

“We don’t want the people not to pay taxes. We will ensure our bureaucracy is clean,” he said.

Gayus’ case has now been scrutinized by the Directorate of Internal Compliance for Official Resources Transformation at the Directorate General of Taxation.

The Directorate General of Taxation and the Directorate General of Customs and Excise are responsible for 70 percent of total state revenue.

Inspector General Hekinus Manao at the Finance Ministry said he would work with the Financial Transactions Reports and Analysis Center (PPATK) to scrutinize the transactions in Gayus’ account.

“We want to see the inflow and outflow of transactions in Gayus’ account. We will ask the PPATK,” he said. Hekinus also said he would check companies whose tax files were handled by Gayus for possible violations.

“We will check Gayus’ background, including which companies he worked with,” he said.

Also Friday, Mulyani installed members of the Taxation Supervisory Committee, whose main task is to support the finance minister in supervising tax officials and addressing taxpayers’ complaints.

Former director general of customs and excise Anwar Suprijadi was elected as chairman, while former director general of budgetary affairs Abdul Anshari Ritonga the vice chairman. Other members are Hekinus, professionals Shidarta Utama and Hikmahanto Juwana.

source : thejakartapost

Apindo disagrees with Facebookers over tax boycott

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Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said Sunday he did not support a Facebook group that was pushing for a boycott of tax payments in a protest against recent corruption by tax officials.

Sofjan said he could understand the community’s disillusion at recent corruption among tax officials, but called on taxpayers to abide by the law and continue to pay taxes.

“All over the world people need to pay taxes because all countries need money to finance development,” Sofjan said as quoted by Antara during a fun walk on Sunday.

The group decided to promote its boycott online using the Facebook social networking site as a platform, following the revelation of a tax official's involvement in a Rp 25 billion ($2.75 million) corruption case.

The Finance Ministry official in question, Gayus Tambunan, was fired following the revelation of his fraud.

Sofjan also suggested the Finance Ministry continue with its tax reforms, to restore taxpayers’ confidence in it.

“We have actually built trust in the tax office, but because of the acts of one or two people we now have a feeling that that some of the tax money we paid is not used for development, but for personal use,” he said.

Sofjan urged the tax office to restore its image that had been tarnished by the recent corruption case.

“The image of tax officials, which has been not so good for a long time, has to be improved. Strict punishments are the only way to improve their image,” he said.

source: thejakartapost

US economic growth revised down

Friday, March 26, 2010 · Posted in

This is the rate of economic growth for the three months that assumes the same level for a full 12 months.

It was revised down from 5.9%, in the US Commerce Department's third estimate of fourth-quarter GDP.

The main factors behind the revision were weaker personal and government consumption, and lower investment.

The figure is significantly up on the 2.2% annualised rate of growth seen in the third quarter and is the strongest reported since the third quarter of 2003.

The Commerce Department said that the acceleration in inflation-adjusted growth or "real GDP" was chiefly due to a slowdown in the rate at which business drew down on its inventories. But there were other factors.

"The pickup in real GDP also reflects rebounds in business investment in equipment and software and in net exports," the Commerce Department said.

Source : BBC

Japan's consumer prices continue to fall

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Prices fell by 1.2% in February from a year earlier, threatening the country's recovery from recession.

Japan's economy has been periodically plagued by deflation since the "lost decade" of the 1990s, which led to years of stagnation.

The prospect that goods will become cheaper in the future makes consumers reluctant to buy today.

This leads to a vicious circle of falling company profits and wages.

Downward trend

The latest figures - where the core consumer price index fell by 1.2% - is not as bad as in previous months.

But the preliminary figures for Tokyo for March showed a steeper decline. The capital is seen as an indicator for nationwide trends.

Eyeing an election in the summer, the government is putting pressure on the Bank of Japan to further increase the money supply to tackle the problem.

"The pace of decline in prices is slowing somewhat, but prices are still falling," said Finance Minister Naoto Kan.

"More efforts will be needed to escape deflation."

Record budget

But the government has little room to spend more to counter deflation.

Its debt is already the largest in the industrialised world and rising.

For this reason, analysts said it could be a long time before prices start rising again in Japan.

"There is still long way to go before Japan pulls out of deflation," said Takeshi Minami at the Norinchukin Research Institute.

"The Bank of Japan has said it will patiently maintain very easy monetary policy. They really need to do so for a very long time for the country to escape deflation."

On Wednesday, parliament passed a record $1 trillion budget, much of it financed by borrowing.

The Japanese economy grew by 0.9% in the final three months of last year, or 3.8% on an annualised basis.

It is vying with China for the title of the world's second-largest economy, behind the US.

Source : BBC

Both sides say they are winning in BA strike

Sunday, March 21, 2010 · Posted in

The Unite trade union said half of BA's 250 planes had been grounded on the first day of the three-day stoppage.

But BA says it reinstated flights as so many worked, adding that 97% of cabin crew due to show up at Gatwick did so on Saturday, as did half at Heathrow.

The dispute centres on job cuts and a pay freeze. Another four-day stoppage is planned to begin on 27 March.

Unite insisted 80% of its 12,000 members had supported the first day of the walkout - the first by BA cabin crew in 13 years.

The union said BA's Terminal 5 at Heathrow was like a "ghost town", adding that the airline contingency plans were failing.

Speaking on the second day of the strike, Unite's Brian Boyd said: "We are absolutely confident that this strike is holding firm and it will hold firm again tomorrow."

However, BA described the union's claims as "rubbish", and said it had reinstated some long-haul flights this weekend because more staff had worked, including services to Miami, Los Angeles, Tel Aviv, JFK in New York and Cape Town.

BA said its contingency plans for the first day of the strike went "extremely well".

It said more than 65% of passengers would reach their destinations, with 1,157 staff working and some cancelled flights reinstated.

BA said it was confident that it could handle 49,000 passengers on each of Saturday and Sunday, compared with about 75,000 on a normal weekend day in March.

The company is advising customers to check the BA website to find out what extra flights will now be operating.

At the start of the strike it said 65% of passengers would be able to reach their destinations, despite 1,100 BA flights out of the 1,950 scheduled being cancelled.

'Management bullying'

BBC business correspondent Joe Lynam said that, with a week's notice to plan their journey, very few passengers turned up shocked to find that their flight had been cancelled.

Former BA cabin crew manager Jamie Bowden said most of the check-in staff at Terminal 5 were working without any disruptions.

He told BBC News: "The leased aircraft that British Airways have chartered in, they are part of the normal computer system now, and so far things are going pretty smoothly."

Unite said a number of planes had been stacked up at airports, including 85 parked planes at Heathrow, 20 at Cardiff and 20 in Shannon.

It said none of the buses which normally transport crew to work had crossed its picket lines at airports.

A spokesman said: "The support we are getting shows how strongly people feel about this and is in spite of the bullying by management."

At Gatwick, all long-haul flights and more than half of short-haul flights were expected to operate as normal this weekend, along with more than 60% of long-haul flights and 30% of short-haul flights at Heathrow.

On Saturday, BA said London City airport was operating as normal.

Many flights are operating with the help of aircraft hired in from other carriers.

'Terrible day'

In a video message on the BA website, chief executive Willie Walsh apologised to passengers for a "terrible day" and said he was confident a "good service" would be provided.

About 200 union members attended a rally at Bedfont Football Club, near Heathrow, where Unite assistant general secretary Len McCluskey said the "intransigent management" at BA could be "defeated".

Although the effect of the strike is being disputed, brand strategist Simon Middleton told BBC News the strike is set to be "enormously damaging" for BA's image and likely to put people off flying with the airline.

"It is renowned for quality - for service in particular. This kind of strike can only damage that," he said.

However, he added that Unite's image is also likely to have been tainted.

"Nobody has gained from this," he said.

BA has been in negotiations with Unite for many months.

Workers are particularly angry that last November BA reduced the number of crew on long-haul flights and is introducing a two-year pay freeze from 2010.

The airline also proposed new contracts with lower pay for fresh recruits.

Unite says it accepts the need for BA to cut costs but that it was not consulted on the changes.

BA suffered a loss before tax of £342m for the nine months to the end of December 2009 and says it needs to cut costs in order to survive.

source : BBC

Foreign tourists stay shorter in Bali

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Foreign tourists stayed in Bali for an average 8.75 days each last year, down from 13.6 days each in the previous year, an official says.

As consequence of the shorter stay, each foreign tourist spent only US$136.9 per day on average, or nearly $12 less than individual average spending in the earlier year.

Spokesman for the Bali administration I Ketut Teneng told Antara Friday the decline in the foreign holiday makers’ spending and length of stay had resulted in a lower quality of tourism industry on the island, although the number of tourists went up.

The provincial government data revealed that 2.38 million foreigners visited Bali in 2009, up from 2.08 million in the previous year.

Teneng said the underperforming tourism industry contributed to the province’s failure to meet its economic growth target of 5.74 percent in 2009. The province’s economy grew by 5.33 percent that year.

To make matter worse, the province’s export of handcraft also slid by nearly 2 percent to $262.9 million in 2009 from $268.05 million in 2008.

source : thejakartaposts

4 cities that best weathered the recession

Saturday, March 20, 2010 · Posted in

Call them the Final Four: The four large cities that have made it through the Great Recession with the smallest increases in unemployment.

Minneapolis, Buffalo, Oklahoma City and Rochester, N.Y., don't have much else in common. But a government report shows they've had the smallest increases in joblessness over the past two years among cities with at least 1 million people.

None of the four relies on heavy manufacturing industries, such as autos or steel, which have been hit hard by the downturn. And all have avoided the extremes of the housing boom and bust that devastated much of California, Florida and Nevada.

Minneapolis was the city with the smallest rise in unemployment among the nation's 49 largest metro areas, according to Labor Department data released Friday. Its jobless rate rose by only 2.8 percentage points from January 2008, a month after the recession began, through January 2010. Its rate reached 7.7 percent that month.

Nationwide, the rate rose by nearly 5 points during those two years, to 9.7 percent in January, up from 5 percent. Employers cut 8.4 million jobs, the most in any downturn since the 1930s.

Minneapolis benefited from a medical equipment industry that's fared better than other manufacturers during the downturn, according to Jeet Dutta, a senior economist at Moody's The city's major employers include Medtronic Inc. and Boston Scientific Corp. Health care is one of the few sectors of the economy that have added jobs during the downturn.

Oklahoma City's January unemployment rate of 6.7 percent, meanwhile, is the lowest among large metro areas, the Labor Department said. It's risen only 2.9 percentage points in the past two years. About a fifth of the city's workers are employed by state or local government, said Russell Evans, a regional economist at Oklahoma State University. That includes the employees of 29 Native American tribal governments in the region, most of which have offices in Oklahoma City, the state's capital.

Those workers benefited from federal stimulus money that helped plug holes in the state government's budget and avoid layoffs, he said.

In addition, booming oil and gas prices leading up to the recession and a growing aerospace maintenance industry led to strong income gains for the region's workers even as the recession took hold in other parts of the country, Evans said.

"Consumers in Oklahoma were a little slower than in the rest of the nation to tighten their wallets," he said.

Buffalo and Rochester, N.Y., by contrast, didn't suffer so much in the recession partly because their economies had already been struggling beforehand. Buffalo's unemployment rate was 9.2 percent in January. That's high but below the national rate of 9.7 percent. It rose only 2.9 percentage points during the recession.

Buffalo has diversified out of heavy manufacturing industries, like steel, that used to underpin much of its economy and moved into growing areas like health care, economists said. And last year, in the depths of the downturn, Canadian shoppers flooded into the city as the U.S. dollar weakened against the Canadian dollar.

"That's been a boon to retailers," said Marisa DiNatale, a director at Moody's

Unemployment grew 3 percentage points in Rochester, N.Y., reaching 8.7 percent in January. The city has also diversified, said Richard Dietz, senior economist at the New York Federal Reserve. Its largest employer is now the University of Rochester. The university took over from Eastman Kodak, which is based in the city but has shrunk.

Overall, unemployment rose in nearly all 372 metro areas in January, the Labor Department said Friday, because the weak recovery hasn't spurred much hiring.

The figures aren't seasonally adjusted. And January is traditionally a grim month for employment as retail workers and other seasonal employees lose their jobs.

Among cities of all sizes, the lowest unemployment rates were in Fargo, N.D. and Bismarck N.D. They reported rates of 4.8 percent and 4.9 percent, respectively. Higher prices for agricultural commodities have bolstered the upper Plains states throughout the recession.

Source : Msnbc

Mortgage lending 'rose in February'

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Gross lending for home loans in the UK rose by 6% in February compared with January to an estimated £9.2bn, the Council of Mortgage Lenders (CML) said.

The figures come after a slowdown in January when housing market activity was hit by the weather and the end of stamp duty relief.

Lenders said they expected an uneven market in the months ahead.


The February lending figure is still well below the average during 2009, and was 6% lower than mortgage lending in the same month a year earlier.

CML economist Paul Samter said: "Lending remains relatively weak, suggesting that activity is still at low levels."

The cold weather and the return to a £125,000 threshold for the payment of stamp duty at the start of the year led to a sharp dip in lending in January.

This explained the "unusual" rise in lending in February compared with January, despite it being the shortest month of the year, the CML said.

The lenders' group said that the start of the year was broadly in line with their forecast of £150bn of mortgage lending in 2010.

Mr Samter said that they expected to see some emerging confidence in the UK economy, but that the economy would slow owing to action to tackle the fiscal deficit.

This, together with a squeeze on banks' and building societies' mortgage funding, meant an uneven housing market in the months ahead.

Recent house price data from lenders suggested that property values dipped in February.

"Given the short-term weakness and distortions in the housing market, as well as more properties coming onto the market, it was perhaps unsurprising to see falls in some of the monthly house price indices," Mr Samter said.

"With activity unlikely to pick up much in the short term, we would expect to see continuing price fluctuation in the coming months."

Jobs market

Figures published on Wednesday showed that the number of people unemployed in the UK had fallen again, leaving the jobless rate at 7.8%.

The CML said that unemployment had not been as bad as had been feared. Many workers had proved to be flexible, accepting pay cuts and part-time work.

As a result - with interest rates low - borrowers have managed to keep up with their monthly mortgage payments, which has kept a lid on arrears and repossessions.

However, the CML said new lending was still expected to be limited in 2010 as banks rebuilt their finances. This was likely to mean limited mortgage availability for more "risky" borrowers, such as those without a large deposit and first-time buyers.

However, the Bank of England's Trends in Lending report, published at the same time as the CML figures, found that prices had dropped for those who could get a mortgage and who offered a significant deposit.

"In recent months, the major UK lenders reported some downward pressure on mortgage pricing due to increasing competition to lend," the report said.

The general election is also likely to have an effect on the housing market, according to Brian Murphy, of the mortgage broker, the Mortgage Advice Bureau.

"This is clearly going to play on the minds of many prospective buyers and those people who are in a position to buy and would probably buy now if there was not a general election just around the corner, may well hold off making a decision until early summer," he said.

"As a result, we could well see a levelling off in mortgage activity in the coming months."

The Bank of England report said that demand for other forms of lending, such as personal loans and credit cards, remained subdued as people looked to reduce their unsecured borrowing.

Interest rates on this lending remained high compared with the Bank rate as there was a heightened risk of people defaulting, the report said.

Source : BBC

British Airways cabin crew strike under way

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Talks between the airline and the Unite union, which represents the crew, collapsed on Friday.

A further four days of action are set to begin on 27 March, although BA has said this weekend's action could disrupt flights into next week as well.

Cabin crew are striking over pay and working conditions.

BA said that 65% of passengers would still be able to reach their destination during the first three-day strike, even though a total of 1,100 BA flights out of the 1,950 scheduled to operate would be cancelled.

At Gatwick, all long-haul flights and more than half of short-haul flights are expected to operate as normal.

At Heathrow, more than 60% of long-haul flights will operate, though only 30% of short-haul flights are expected to do so, with the help of aircraft leased from rival airlines.

Uncertainty still exists about just how many BA crew will go on strike after BA said that any staff who took part in strike action would lose perks, including heavily-discounted travel fares.

BA said it was confident that it could handle 49,000 passengers on each of Saturday and Sunday, compared with around 75,000 on a normal weekend day in March.

Unite said the strike was having an effect, saying that more than 80 BA planes were grounded at Heathrow on Saturday morning.

Revised offer

In a video message on the BA website, chief executive Willie Walsh apologised to passengers for what he said was a "terrible day" for the airline.

However, he said he was confident that a "good service" would be provided.

Mr Walsh and Unite union joint general secretary Tony Woodley failed to reach an agreement to avert action on Friday in the increasingly bitter dispute.

After the talks failed, Mr Woodley said Mr Walsh wanted to "go to war" with the union. Mr Walsh dismissed the claim as "absolute nonsense".

Mr Woodley had called on BA to put an earlier deal to end the strikes "back on the table", which he said would have allowed him to call off the strike while union members considered it.

Instead, Mr Walsh offered a less attractive deal to compensate the company for the costs already incurred in making alternative arrangements for some passengers to fly during the strikes.

Mr Woodley called the revised offer a "disgrace and an insult", and refused to present it to union members.

'Fairly quiet'

BBC business correspondent Joe Lynam, who is at Heathrow, said the situation at Terminal 5 was relatively quiet early on Saturday morning.

He said: "I spoke to a few passengers, they had been expecting delays, but for the most part they had made contingency plans, just as much as British Airways had made contingency plans.

"Those contingency plans seem to be paying dividends because so far it's moving smoothly."

Former BA cabin crew manager Jamie Bowden said most of the check-in staff at Terminal 5 were working without any disruptions.

He told BBC News: "The leased aircraft that British Airways have chartered in, they are part of the normal computer system now, and so far things are going pretty smoothly.

"Of course, British Airways' long-haul flights from Terminal 5 won't start until later on this morning so predominantly the first three or four hours are going to be short-haul, but so far it seems to be fairly quiet over there."

Cost cutting

However, Unite national official Steve Turner said: "I have seen the 80-plus aircraft that are grounded right now.

"British Airways have cancelled an enormous amount of flights and many passengers have realised that given the turmoil they are likely to face today, they are not going to travel and have sought and achieved a refund."

Among the passengers inconvenienced is James Alexander, from Newcastle, who is due to emigrate to Australia with his partner on Monday, the last day of the strike.

He said: "I've told them today on the phone I'll never fly BA again. Never. Just purely as a matter of principle now. This is chaos."

BA has been in negotiations with Unite for many months.

Workers are particularly angry that last November BA reduced the number of crew on long-haul flights and is introducing a two-year pay freeze from 2010.

The airline also proposed new contracts with lower pay for fresh recruits.

Unite says it accepts the need for BA to cut costs, but that it was not consulted on the changes.

BA suffered a loss before tax of £342m for the nine months to the end of December 2009 and says it needs to cut costs in order to survive.

Source : BBC

Major banks face derivatives fraud case in Italy

Wednesday, March 17, 2010 · Posted in

JP Morgan Chase, UBS, Deutsche Bank and Germany's Depfa bank have been told they will be tried for aggravated fraud, along with 13 other people.

The charges relate to the sale of derivates to the city of Milan.

JP Morgan denied employees involved had acted inappropriately, while Deutsche and UBS also denied any wrongdoing. Depfa was not available for comment.

Interest payments

Prosecutors say the trial, which is due to begin in May, is an important test case for hundreds of Italian cities who have lost money through similar deals.

The arrangements between banks and cities, including Milan, were designed to reduce interest payments on their loans.

In the case of Milan, the four banks are accused of misleading the city authorities when they agreed a derivatives deal on a 1.68bn euro ($2.31bn; £1.51bn) loan in 2005.

The deal adjusted the interest payments on the loan - a move which Milan says leaves it facing a 100m euros loss.

Two former Milan city officials have also been ordered to stand trial, along with 11 bank employees.

Source : BBC

EU attacks 'optimistic' economic outlooks

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The UK must tackle "uncertainty" in plans to cut its deficit, the EU said.

EU rules say government deficits must be below 3% of GDP, but the UK's deficit is expected to hit £178bn - or 12.6% of GDP - this year.

Germany, France, Spain and Italy were also warned they were over-reliant on economic recovery to meet debt targets.

Brussels was commenting on plans by some of the biggest EU countries to bring down public spending.

'Absence of detail'

As was reported earlier in the week, the report warned that the UK was not on course to cut its deficit in line with EU rules by a deadline of 2015.

"The absence of detailed departmental spending limits is a source of uncertainty," the European Commission said.

In the run-up to next week's Budget, UK chancellor Alistair Darling has defended the government's approach to the deficit, arguing that cutting it too quickly by reducing government spending would risk harming the UK's emergence from recession.

The shadow chancellor, George Osborne, said the report's conclusions - that the government needed to cut spending more rapidly - were "a heavy blow for Gordon Brown's credibility".

One of the other countries criticised was Spain. The report said Spain's forecast that it would cut its deficit to 3% of GDP in 2013 from 11.4% in 2009 was based on "markedly" optimistic growth forecasts.

The pace of bank restructuring in Spain, which the EU said posed a risk to growth, was also attacked as being too slow.

Source : BBC

Asian stocks lower amid spike in China inflation

Thursday, March 11, 2010 · Posted in

Asian stock markets were mostly lower Thursday as China's burst of inflation and Japan's weaker growth tempered confidence in the regional economic rebound.

Most markets were modestly higher in the first two hours of trading but reversed course as the latest figures raised doubts about the outlook for major economies.

Oil prices fell below $82 a barrel amid signs of tepid U.S. crude demand and the dollar lost ground against the ye while rising slightly versus the euro.

China's inflation rate jumped to 2.7 percent in February over a year earlier from 1.5 percent in January, adding to pressure on Beijing to prevent overheating without derailing recovery.

Japan, meanwhile, cut its reading of fourth quarter growth to an annualized3.8 percent from the initial estimate of 4.6 percent. That underscored the patchy recovery in the world's No. 2 economy.

In Australia too, there was a break in the recent slew of positive economic news. The jobless rate edged up slightly to 5.3 percent in February, the first rise since peaking at 5.8 percent last October.

Japan's Nikkei 225 stock average was up 88.91 points, or 0.9 percent, to 10,653.70 while Hong Kong's Hang Seng lost 74.07, or 0.4 percent, to 21,134.22.

South Korea's Kospi was off 0.2 percent at 1,659.35 and China's Shanghai benchmark slipped 0.1 percent to 3,047.92.

Elsewhere, Autralia's index fell 0.1 percent and Singapore's market also shed 0.1 percent. India's Sensex added 0.1 percent.

Oil prices were lower in Asia. Benchmark crude for April delivery was down 51 cents to $81.58 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 60 cents to sette at $82.09 on Wednesday.

In currencies, the dollar fell to 90.37 yen from 90.49 yen. The euro fell to $1.3646 from $1.3654.

source : thejakartapost

Trade gap shrinks as auto, oil imports drop

· Posted in

The U.S. trade deficit unexpectedly shrank in January, reflecting a big drop in imports of oil and foreign cars. American exports also fell, a potential blow to hopes that the economic recovery will be aided this year by U.S. sales abroad.

The Commerce Department said that the trade deficit declined to $37.3 billion in January, a drop of 6.6 percent from a revised December deficit of $39.9 billion. Economists had been expected the deficit to widen to $41 billion.

U.S. exports dipped 0.3 percent, reflecting weaker sales of a wide variety of products from civilian aircraft and machinery to agricultural products. But imports dropped by a larger 1.7 percent as both oil and foreign cars saw big declines.

If the trade deficit held at January's level for an entire year, it would give the country an imbalance of $447.5 billion in 2010, up from a 2009 deficit of $378.6 billion, which had been the smallest trade gap in eight years. That improvement reflected a drop in global oil prices and a deep recession, which cut into demand for imported goods.

Economists believe the 2010 deficit will rise as a rebounding U.S. economy purchases more imports. However, the hope is that the U.S. recovery will be supported by strength in export sales as American manufacturers benefit from economic rebounds in other nations and a weaker dollar, which makes U.S. goods cheaper in foreign markets.

That expectation, however, has been clouded somewhat by a rise since December in the dollar's value against the euro, the common currency of 16 European countries. But economists believe that gain will not be large enough or last long enough to derail America's export prospects.

The Obama administration is also hoping to get a boost in exports from a fall in the dollar's value against the Chinese yuan. It has been lobbying China to allow the yuan to rise in value against the dollar, responding to complaints from American manufacturers that China is unfairly manipulating its currency by holding down the yuan's value to gain trade advantages.

China has held the yuan steady against the dollar for 18 months to help Chinese exporters withstand the global economic crisis. But the United States and other countries have been increasing pressure on China to allow its currency to resume rising in value now that the global economy is rebounding.

So far, the Chinese have made no moves to change its currency regime but private analysts believe such an action could happen this year, given that China's economy came through the global recession in better shape than other nations and its exports have begun to surge. China reported Wednesday that its exports rose in February by 45.7 percent from a year earlier.

The U.S. trade report showed that the U.S. deficit with China edged up by 0.9 percent in January to $18.3 billion even though imports from China fell to the lowest level since June.

The deficit with the European Union dropped by 56.3 percent in January to $2.8 billion, the lowest level with May. The big decline reflected a huge drop in imports of European autos. The deficit with Japan fell 27.3 percent to $3.3 billion, also the lowest level since May with the decline also attributed to a big drop in car imports.

The 0.3 percent drop in exports of goods and services left the total at $142.7 billion while imports fell to 1.7 percent to $180 billion.

While the dollar fell for much of 2009 against the euro, it has been rising in value since December. That rebound reflected all the worries over the debt problems of Greece, which uses the euro. If that trend continued, it could dampen U.S. export growth this year.

But many analysts believe the increase will not be large enough to derail the export gains they expect. However, they see imports rising as well as the U.S. economy rebounds.

A panel of 42 top forecasters for the National Association for Business Economics said in their latest projections that the U.S. trade deficit will rise to $437.5 billion this year.

source: msnbc


Gas prices’ run likely won’t top $3

· Posted in

As the economy recovers, energy prices are rising and that is placing extra strain on families' budgets.

Each spring brings a familiar ritual in gasoline markets — rising prices — and this year won't be an exception. But motorists aren't likely to pay much more than $3 a gallon, on average, during the peak summer driving season.

Lingering effects of the recession, such as high unemployment, reduced shipping and limited business travel, are keeping a lid on energy demand in the U.S. And global oil supplies are on the rise. For now, these trends are providing energy markets with enough of a cushion to prevent geopolitical tensions from causing severe price volatility.

On Tuesday, the Energy Department's statistical arm predicted that oil prices would average $80 a barrel this spring, and rise to about $82 a barrel by the end of the year, influenced by robust growth in China. This is consistent with the agency's past four monthly outlooks. Last year, oil prices averaged about $62, trading in a range between $33.98 and $82.66.

The average nationwide price for regular gasoline was $2.76 a gallon on Tuesday. Because of the anticipated bump in crude prices, the government estimates that gasoline prices will average $2.84 a gallon this year, up from $2.34 in 2009. It's enough for families to take notice, economists say.

Gasoline accounts for about 4 percent of the typical family's budget. But consumers tend to pay the increase at the pump instead of driving less. That leaves less to spend on clothing and other discretionary purchases.

Sung Won Sohn, an economics professor at the Smith School of Business at California State University, lowered his forecast for U.S. economic growth to 3 percent, from 3.2 percent, because of the anticipated rise in energy costs.

"Higher gasoline prices are like a tax that depresses overall consumer spending," he said.

The more gradual the pump-price increase the more manageable it is for family budgets, retail consultant Howard Davidowitz said.

Given time to adjust, people "can decide what to do," Davidowitz said. "Maybe they can buy less. Maybe the kids can't have the ice creams anymore."

Or maybe people will remain tentative about getting behind the wheel more than is absolutely necessary.

Americans used 377.5 million gallons of gas per day in 2009, according to Oil Price Information Service, down from 378 million gallons in 2008. Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, expects demand to rise by a fraction of 1 percent this year.

There are other factors keeping Americans off the road beyond high gas prices. Chief among them: lack of job security. Unemployment is 9.7 percent in the U.S., meaning fewer people commuting to work or driving on vacation.

Oil prices will continue to be supported by demand from China. This week, Premier Wen Jiabao has promised to maintain enough stimulus spending to coax China's economy to 8 percent growth this year.

But elsewhere around the globe, energy demand will remain weak. Americans burned 18.8 million barrels of petroleum a week in January, according to EIA, the lowest average for the first month of any year since 1998.

In Europe, GDP should grow about 0.7 percent this year, according to the European Commission. The Organization of Petroleum Exporting Countries forecasts that European oil consumption will decline by 1.4 percent this year.

Energy-intensive industries feel particularly constrained.

On average, U.S. airlines bought 4.5 million fewer barrels of jet fuel each month in 2009, compared with 2008. Corporate travel, the more lucrative part of the business, fell dramatically last year and has only recently shown signs of a turnaround.

Things have been just as tough for shippers. Consumers and businesses sent fewer packages and moved fewer goods. The use of distillate fuels, which includes the diesel used by trucks, dropped 8 percent in 2009.

Oil supplies are expected to continue rising. That should keep prices under control. The EIA expects OPEC nations to adhere to current production quotas while non-OPEC nations increase output by about 500,000 barrels per day.

Compared with years past, this spring's run-up in gasoline is forecast to be moderate. If gas averages $3 a gallon nationwide on Memorial Day, that would represent an increase of about 13 percent since the start of the year. That compares with a nearly 50 percent increase in the same period a year ago and 29 percent in 2008.

Back in 2008, the average gas price topped $4 per gallon in the summer. Don't expect prices to test those levels this year.

"To get to $3.50 you need crude prices near $120 or $125 per barrel. Numbers not in realm of probability of 2010," said Kloza. "$3 is reasonable number for a peak."

source: msnbc

Asian markets gain ahead of US jobs report

Monday, March 8, 2010 · Posted in

Asian stock markets rose Friday amid hopes a key U.S. jobs report would show the world's largest economy was on track toward a sustainable rebound.

Every major market was higher as the region bounced back from declines the day before. Oil prices extended gains above $80 a barrel, while the dollar strengthened against the yen and the euro.

Investors were awaiting the U.S. government's February jobs figures - the monthly employment snapshot that is among the market's most important reports- for clues to whether the recovery under way in the world's largest economy is sustainable.

Thursday brought cause for optimism the monthly report wouldn't disappoint. The number of people filing jobless claims for the first time fell last week and major retailers posted February sales numbers that topped expectations - suggesting hard-hit Americans whose spending is critical for Asian export companies were healing financially.

In Asia, speculation that Japan was mulling extra measures to shore up its recovery added to the upbeat mood. A top paper reported the Bank of Japan might easy monetary policies to keep money flowing through economy.

In Japan, the Nikkei 225 stock average jumped 223.24 points, or 2.2 percent, to 10,368.96.

Hong Kong's market rose 0.9 percent to 20,754.30 and Shanghai's market gained 0.7 percent to 3,043.25 as investors focused on Chinese Premier Wen Jiabao's annual policy address.

Wen said Beijing would more than halve the annual increase in spending, to 11.4 percent, as the country winds down measures that insulated the economy from last year's global slowing. He set an economic growth target of 8 percent for 2010.

Elsewhere, South Korea's Kospi was up 0.9 percent at 1,632.69. Markets in India, Taiwan and Singapore gained, as well.

Friday's U.S. jobs report is likely to show unemployment continued to rise, to 9.8 percent in February from 9.7 percent from the month before, as employers cut 50,000 jobs. But economists say there could be a silver lining if, as expected, both average hourly earnings and average hours worked climbed last month. Such increases often precede more hiring.

In currencies, the dollar rose to 89.27 yen from 89.13 yen. The euro fell to $1.3573 from $1.3580.

Oil prices rose in Asia with benchmark crude for April delivery up 54 cents at $80.757.

In the U.S. Thursday, the Dow rose 47.38, or 0.5 percent, to 10,444.14, its highest close since Jan. 20. The Dow is now up 16 points, or 0.2 percent, for 2010.

The Standard & Poor's 500 index rose 4.18, or 0.4 percent, to 1,122.97. It is up 0.7 percent for the year.

source: thejakartapost

Good economy can only be damaged by bad politics

· Posted in

More than anything else, people expect their government to create an environment within which they can get on with their lives. Creature comforts add to the quality of life, by reducing the effort required for daily chores. The buying and selling of these simpler pleasures of life are pillars of the economy.

The signs for the consumer economy are still positive. The Roy Morgan Consumer Confidence index was at an all-time high of 124 points across the nation at year’s end, contrary to the drop indicated by Bank Indonesia in its big city indicator.

The Good Governance monitor continued to rate the SBY administration highly, but the thumbs-down from big-city-folk had already become visible by December. The Bank Century scandal has undoubtedly taken its toll, with the mood of the people adversely affected primarily in the big cities for now. But the contagion is spreading and could dampen buoyant spirits if the seemingly unending saga isn’t brought to a conclusion soon.

A walk through a home reveals a lot about the family that lives in it. A virtual look inside all the homes should say a lot about the country. Equally revealing are the intentions, the desires of Indonesian households. That is what this column will attempt to explore this week, because there’s never been a better time. For three consecutive quarters more people believed now is “a good time to buy major appliances”, with 36 percent agreeing at year’s end.

87 percent of Indonesians live in homes owned, not rented, by the family. By international standards, that is a big number. Two reasons explain the phenomenon. First, most homes are inherited, handed down from generation to generation. Second, a number of generations live together as an extended family, under the same roof. Only 3.5 percent of homes have a car parked outside. This number is growing, but very slowly. What is growing steadily is the population of motorcycles, with 60 percent of households proudly owning at least one today.

Inside the home, domestic appliances help make life easier. The consumer electronics industry had a good year in 2009 and expects a much better year in 2010. In that sense, life should be getting better for a lot more people and not only those replacing ageing gadgets. Today, nine out of 10 homes have a TV set. In the next 12 months, 2.5 million people are planning to buy a new one but most of them will be replacements or additions. Refrigerators are on top of the nation’s shopping list.

While only 38 per cent of homes have one today, some 8 million people are planning to buy one.

Washing machines are a similar story. Only 10 percent of homes have one, but ranks as No. 2 on the wish-list with 7.6 million intenders. The international favourite, the humble toast, is neither popular today nor about to become a best-seller. Only 7 percent of households own one, less than 800,000 Indonesians are planning to buy one.

The microwave oven also personifies growing middle-class aspirations. Some 600,000 women are planning to add one to the kitchen this year. While nine out of 10 homes have an electric iron today, the replacement market remains strong with about 700,000 homes looking at another one. Ovens and dishwashers remain upper-class conveniences, each garnering only 200,000 intenders nationwide.

Less than 100,000 people want a new coffee-maker, or a telephone answering machine.

In the home entertainment arena, the country’s affluent homes are reflections of a global phenomenon. Plasma or LCD screens and accompanying surround systems have jumped in popularity, with some 2 million people eyeing a new system. A similar number are hoping to add a personal computer to the home. Almost a million are thinking of a new digital video camera. Over 800,000 have been thinking of a new portable music system like an MP3 or MP4, and 500,000 are keen on an iPod in particular. But it’s not just the passive seekers of entertainment who are grwoing in numbers. Almost a million people are planning to buy an electrical musical instrument, like a guitar or keyboards.

Material possesions are not the only reflections of a home. Gender differences reflect an interesting facet of life in Indonesia. 70 percent of women and only 30 percent of men “enjoy grocery shopping”.

83 percent of women “love to cook”, a pleasure shared by only 17 percent of men. Six out of 10 women and two out of five men “can’t relax till I know the house is clean and tidy”. About half of all men and women and women have “worked in the garden” in the last month, a number that will surprise many a reader.

On the one hand, this report pays little attention to the everyday struggle of millions of poor Indonesians living with very little joy, either material or emotional. On the other, it does not address the role consumer credit can play in boosting the consumption of goods and services
that forms the backbone of Indonesia’s economy. To do those updates real justice, they are best left for another day.

These conclusions are based on Roy Morgan Single Source, a syndicated survey with over 24,000 Indonesians 14 years and older interviewed each year. The information gathered is projected to reflect over 85 percent of Indonesia’s population 14 years and older.

source: thejakartapost

China lawmakers call for more crude, fuel reserves

National crude demand would exceed 550 million tonnes by 2020, compared with about 400 million tonnes in 2009, National People's Congress member Chen Geng told the China Energy News in an interview published on Monday.

Chen, also a former general manager of state-owned China National Petroleum Corp (CNPC), the country's top oil producer, said it was unlikely China would increase domestic oil production above 200 million tonnes in the next 10 years.

"That means we have to import about 350 million tonnes of oil by then," he told the newspaper.

China imported 204 million tonnes of crude oil last year, and produced about 190 million tonnes. The level of reliance on external supply has prompted calls for the government to move to safeguard sustainable oil supply.

Chen suggested a diversification of oil import sources and increased stockpiles of strategic crude reserves.

"Current state crude reserves are far lower than sufficient," he said in the interview.

China finished filling the 102-million-barrel first phase of strategic crude reserves in early 2009 and has started construction of the second phase with a total capacity of 170 million barrels.

Beijing should also build up more state reserves of refined fuel products, a member of parliament was quoted as saying by a local newspaper.

State reserves of refined fuel products, including gasoline, jet kerosene and diesel, should be equivalent to two weeks of domestic demand, Wang Yuying, a former top official of Sinopec Yanshan, told the China Petrochemical News, an in-house newspaper of Sinopec (0386.HK)(600028.SS)(SNP.N).

Wang called for a refined fuel stockpile of 8.6 million tonnes in 2010 and 11.1 million tonnes in 2015.

Beijing last year approved a plan for refined fuel reserves of 10 million tonnes by 2011, as part of its economic stimulus plan, an industry official familiar with the plan told Reuters.

source: REUTERS

Cost of gas jumps almost a dime in last 2 weeks

The average price of regular gasoline in the United States is up 9.58 cents over a two-week period to $2.73.

That's according to the national Lundberg Survey of fuel prices released Sunday.

Analyst Trilby Lundberg says the average price for a gallon of mid-grade was $2.86. Premium was at $2.97.

Cheyenne, Wyo., had the lowest average price among cities surveyed at $2.47 a gallon for regular. Honolulu was the highest at $3.33.

In California, the average price for a gallon of regular was up 13.71 cents to $3.01.

Fresno had the state's least expensive gas at $2.95 a gallon. San Francisco was the steepest at $3.05.

Toyota to refute electronics link to acceleration

Toyota Motor Corp. plans Monday to try to undercut suggestions that its electronics systems caused the sudden acceleration problems that led to the recall of more than 8 million vehicles.

The automaker plans an event in which it will seek to debunk a critic who claims faulty gas pedals did not cause the sudden acceleration.

Toyota will aim to duplicate the scenario created by David W. Gilbert, a professor at Southern Illinois University Carbondale. Gilbert told Congress on Feb. 23 that he was able to recreate sudden acceleration in a Toyota vehicle by manipulating its electronics.

The company is calling in the director of Stanford University's Center for Automotive Research to try to refute the claims. Toyota said Stanford professor Chris Gerdes will show that the malfunctions Gilbert produced "are completely unrealistic under real-world conditions and can easily be reproduced on a wide range of vehicles made by other manufacturers."

Stanford's Center for Automotive Research is funded by a group of auto companies, including Toyota.

Toyota also has hired a consulting firm to study whether electronic problems could cause unintended acceleration. The firm, Exponent Inc., released an interim report that has found no link between the two.

The event planned Monday is part of a broad campaign by the world's biggest automaker to discredit critics, repair its damaged reputation and begin restoring trust in its vehicles.

On Friday, a congressional committee questioned Toyota's efforts to find the causes of the problems. It also questioned whether the company had sufficiently investigated the issue of electronic defects.

Toyota executives will also address recall issues at its annual suppliers meeting in Kentucky on Tuesday.

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