EU summit tackles climate change, Ebola

BRUSSELS - European Union leaders meet at a summit in Brussels Thursday aimed at clinching a high-stakes deal on combating climate change and boosting efforts to fight the deadly Ebola virus.

The heads of state and government from the 28-member EU will also search during the two-day meeting for ways to foster economic growth and jobs amid fears of a triple-dip recession.

The main focus on Thursday will be on an ambitious package of climate change targets for 2030, but the leaders face 11th-hour differences over how member states share the burden.

Draft conclusions for the summit seen by AFP call for cutting greenhouse gases by 40 percent over 1990 levels, making renewables account for 27 percent of energy use and setting an energy savings target of 30 percent.

But there are objections all round the table, especially from coal-reliant Poland, which says the cost of updating its power plants is too high, and from Portugal, which wants closer cross-border energy infrastructure.

"There are still difficult issues which need to be resolved. We will see if we manage to do that," a German government source told reporters on condition of anonymity.

But other European sources were more upbeat.

"There is no agreement yet but I think the differences of opinion have been narrowed down to a couple of outstanding issues which will be settled by the leaders on Thursday night," said one source.

Ebola fight

Agreement is likely to be simpler on action to tackle the Ebola outbreak in west Africa, which has claimed nearly 4,900 lives, and prevent it from becoming a global threat, although money will again be an issue.

EU foreign and health ministers met on the subject over the past week.

"Our leaders will discuss the question on what more can be done to scale up our financial support and our medical care and equipment on the ground," an EU source told reporters.

EU member states and the European Commission have already pledged nearly 600 million euros ($750 million) to fight Ebola.

British Prime Minister David Cameron is expected to call on fellow EU leaders to boost that amount to one billion euros, British government sources said.

A Spanish nurse who was the first person to catch Ebola outside Africa has been cured of the deadly virus, doctors confirmed Tuesday, easing fears of it spreading in Europe.

The leaders will also discuss Ukraine although any progress is unlikely as an EU review on the ceasefire between Kiev and pro-Moscow rebels is not due until next Tuesday.

They may also discuss the threat from the Islamic State in Iraq and Syria, particularly the threat of foreign fighters returning to carry out attacks at home.

The EU economic talks on Friday will be joined by European Central Bank chief Mario Draghi. A eurozone summit will also be held Friday.

The climate debate is likely to be the toughest, coming against a backdrop of energy security worries in the EU, which is at odds with its biggest gas supplier Russia over the crisis in Ukraine.

EU sources said poorer fossil-fuel dependent states like Poland and others in eastern Europe are at loggerheads with richer northern nations over "who pays and how much" for modernizing power plants and cutting emissions.

Meanwhile, countries like Spain and Portugal are at odds with France over their desire to build more cross-border cables to export surplus electricity produced by wind power.

The EU wants to have an agreement on the climate change targets, among the world's toughest, in place ahead of a summit in Paris in 2015 at which a new UN-backed global treaty on climate change is to be agreed.

Climate negotiators have been meeting this week in Luxembourg and are likely to stay down to the wire, a Polish diplomat said.

"The balloon of expectation is pumped up so high that if we don't have a deal (at the summit) it will be perceived in a bad way," the diplomat said.

source: interaksyon.com

Matteo Renzi formally accepts Italy PM post

ROME - Matteo Renzi formally accepted the role of Italian prime minister Friday, kicking off hopes for a revival in the eurozone's third-largest economy and a fresh approach to the country's ills.

"I am aware of the responsibility, delicacy and extraordinary honour which comes from creating a government capable of bringing hope," the former mayor of Florence told journalists after nearly three hours of talks with Italian President Giorgio Napolitano.

"I will do everything possible to deserve the trust of deputies, senators and millions of Italians who are waiting for this government to provide concrete answers," he said.

The 39-year-old has became Italy's youngest-ever prime minister at the head of a coalition government, after helping engineer the downfall of his predecessor Enrico Letta, blamed for failing to carry out promised reforms.

Renzi unveiled his new 16-strong cabinet, which will be sworn in on Saturday, before the government goes to a vote in parliament next week.

Half of the new ministers are women, and -- with an average age of 47.8 years -- it is the youngest government in Italy's history, according to the Corriere della Sera daily.

The key post of finance minister has gone to Pier Carlo Padoan, the chief economist at the Organization for Economic Cooperation and Development (OECD).

The interior ministry remains in the hands of Angelino Alfano, the head of the New Centre Right (NCR) party -- Renzi's coalition partner -- while the post of foreign minister has gone to Federica Mogherini, a specialist on European relations.

The announcement came after a day tense with last-minute haggling over key posts, with the new prime minister reluctant to keep a team that worked with Letta.

"Renzi's imprint emerges clearly from the many new names called to take on the role of minister for the first time," Napolitano said.

Economic reform promised

He called on the new government "to enact the institutional and economic reforms quickly," and bring relief to a country lumbered with a public debt equivalent to 130 percent of total economic output, and where hundreds of thousands of enterprises have been forced to fold.

Renzi has vowed to overhaul the job market, education and the tax system in his first few months in power.

His plan, outlined after a round of political negotiations on Wednesday, includes cutting the cost of politics, implementing constitutional and institutional reforms, and tackling the country's bloated justice system.

"All this will allow us -- by July, and our appointment with the EU presidency -- to be able to say what Italy asks of Europe, and not just what Europe asks of Italy," said Renzi, who has vowed his government will be able to last until the next scheduled elections in 2018.

The first test of political prowess for the fresh-faced former Boy Scout will be surviving a confidence vote in parliament next week.

Many Italians have appeared skeptical that the young Renzi can revolutionize the leadership and his popularity was dented by his daring power grab, which came just two months after he ruled out unseating Letta.

But in a country thirsting for change, analysts say his lack of experience in national government or parliament mean he is untainted by political corruption scandals, which may prove a winning quality.

With his catchy slogans and savvy use of social media, the informal Renzi has also proved particularly popular among younger voters turned off by old-school politicians -- and has called for his stellar rise to power to inspire the downtrodden and unemployed.

"If an under 40-year-old like me can become prime minister, this is a sign for the many youngsters who say that nothing is possible in Italy. It is not true," he said.

Renzi is little known internationally but sees himself in the mold of former British prime minister Tony Blair and the "New Labor" program, and his new government will be closely-watched by center-left parties in Europe.

source: interaksyon.com

Merkel wins absolute majority in Germany

BERLIN - Chancellor Angela Merkel clinched a surprise absolute majority in her winning bid for a third term in German elections Sunday, estimates on public television indicated.

Voters turned out in droves to reward Merkel, often called the world's most powerful woman, with another four years at the helm for steering them unscathed through the debt turmoil that engulfed the eurozone's southern flank.

But in one of the tightest races in German history, they punished her pro-business partner, the Free Democrats, kicking them out of parliament for the first time since 1949, according to preliminary results on two public television networks.

Merkel's stunning 42.5 percent score -- the conservatives' highest result since national reunification in 1990 -- means that she may become the only chancellor to govern without a junior partner since Germany's first post-war leader, Konrad Adenauer.

"Together we will do everything in the next four years to again make them successful years for Germany," Merkel told cheering members of her Christian Democratic Union (CDU) in Berlin.

"The party leadership will discuss everything when we have a final result but we can already celebrate tonight," a beaming Merkel told supporters, including her chemist husband Joachim Sauer, a music fan who so rarely appears in public he is nicknamed "The Phantom of the Opera".

An upstart anti-euro party, AfD, appeared to fall just short of the five-percent hurdle to representation with their bid to tap into anger over German contributions to bailout packages for stricken eurozone partners.

Exit polls had initially pointed to an awkward left-right "grand coalition" between Merkel's Christian Democrats and their traditional opponents, the centre-left Social Democrats (SPD), which scored around 26 percent.

Merkel led a fractious grand coalition during her first term in 2005-2009, with the SPD's chancellor candidate this time around, Peer Steinbrueck, as her finance minister.

Political scientist Nils Diederich said Merkel had a tendency to bleed her coalition partners dry.

"You can compare Ms Merkel to a spider that feeds on the flies it captures," he told AFP.

"That is what she did to the Social Democrats in 2009 and that is what she is doing now with the FDP."

A physicist by training, Merkel is only the third person to win a third term in Germany after Adenauer and Helmut Kohl, the father of German unity.

If she serves at least until 2017, she will become Europe's longest serving female leader, besting Margaret Thatcher who was Britain's prime minister for 11 years.

While Merkel became Germany's most popular post-war chancellor, the eurozone crisis laid waste to the careers of leaders in hard-hit countries such as Ireland, Portugal, Italy, Greece, Spain and France.

In contrast to Merkel's austerity-driven response to the eurozone crisis, the SPD called for a bit more generosity and patience with nations as they pay back their debts.

But voters handed Merkel a landslide, fully endorsing her strategy of demanding biting reforms in exchange for funding bailouts.

The near success of the AfD, which advocates ditching the single currency and an "orderly dissolution" of the 17-member eurozone, sent a jolt through German politics, where a eurosceptic party has never gained a foothold.

In a last-minute appeal for votes at a Berlin rally Saturday, Merkel had urged voters not to succumb to the AfD's siren call.

"The stabilisation of the euro is not just a good thing for Europe but it is also in Germany's fundamental interest," she said.

Nearly 62 million people were called to the polls after a campaign many voters complained was largely superficial and personality-based.

Economic growth is steady, unemployment at below seven percent -- its lowest level in two decades -- and the political culture is dominated by a long post-war tradition of consensus rather than red-blooded jousting.

That left few issues to separate the main candidates.

"I think we have a good standard of living in Europe, and for me, this must remain stable. So, to me, voting for the extremes, on the left or the right, isn't an answer," Sister Elisabeth Bauer, a nun, told AFP as she cast her vote in Berlin.

The ecologist Greens party, the SPD's preferred coalition partner, scored around a disappointing eight percent in Sunday's poll.

And the far-left Die Linke, which has roots in former East Germany's ruling communist party, also tallied about eight percent but the SPD has repeatedly ruled out forming a coalition with it at the national level.

The brash, gaffe-prone Steinbrueck stumbled again in the home-stretch of the campaign with a front-page magazine photo of him making a surly middle-finger reply to a question on his limping candidacy.

He had zeroed in on a growing low-wage sector, but it was not enough to dislodge Merkel from the top job.

"The SPD did not lead a campaign devoid of content," Steinbrueck said late Sunday in a jab aimed at Merkel.

"But we did not achieve the result we wanted."

source: interaksyon.com

Eurozone sinks further into recession

BRUSSELS  - The 17-nation eurozone sank further into recession in the last three months of 2012 as the debt crisis continued to exact a heavy price, official data showed Wednesday.

The eurozone economy shrank 0.6 percent in the fourth quarter of 2012 compared with the third quarter when it contracted 0.1 percent, the Eurostat data agency said, confirming initial estimates given in February.

For the full 27-member European Union, the economy was 0.5 percent smaller in the fourth quarter after a marginal gain of 0.1 percent in the third, Eurostat said.

A recession is counted as two consecutive quarterly economic contractions.

Compared with fourth quarter 2011, the eurozone economy was down 0.9 percent and the EU 27 off 0.6 percent.

Among the major economies, European powerhouse Germany shrank 0.6 percent in the fourth quarter after a gain of 0.2 percent in the third and France slipped 0.3 percent after growth of 0.1 percent.

Non-euro Britain lost 0.3 percent after sharp growth of 1.0 percent in the third quarter, boosted by the London Olympics.

Among the fourth quarter best performers were Estonia, which grew 0.9 percent and Lithuania, up 0.7 percent, while bailed-out Portugal was the weakest, with its economy shrinking 1.8 percent.

Eurostat said that for 2012 as a whole, the eurozone economy contracted 0.6 percent and the EU 0.3 percent.

Data so far for 2013 suggests the European economy is stabilising after a very bad 2012 but the outlook remains weak and uncertain.

Howard Archer of IHS Global Insight said the eurozone recession may have deepened in the fourth quarter but it should mark the bottom of the slump.

"The good news is that the fourth quarter of 2012 almost certainly marked the low point for eurozone economic activity as a significant easing of eurozone sovereign debt tensions underpinned by the European Central Bank's policy actions" has boosted confidence and the markets, Archer said in a statement.

"The bad news is that real economic activity is yet to show major improvement in many countries and it looks highly likely that growth will remain a major struggle for the eurozone for some time to come."

source: interaksyon.com

Asian shares fall, eyes on German ruling, Fed meeting

TOKYO - Asian shares fell on Tuesday as investors repositioned before a German Constitutional Court ruling on the euro zone's bailout funds which could remove one risk for Europe, and a U.S. Federal Reserve meeting that may yield widely expected stimulus measures.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent, dragged lower by Chinese markets, with Shanghai shares slumping 1 percent while investors took profits from recent rallies to push Hong Kong equities down 0.6 percent.

Japan's Nikkei average slipped 0.8 percent, weighed by declines in cyclical stocks which are generally linked to the health of the economy.

"Investors are cautious ahead of major events later this week," said Lee Young-won, an analyst at HMC Investment & Securities, referring to Germany's constitutional court verdict on Wednesday which would pave the way for activating the European Central Bank's scheme and the Fed's two-day policy meeting ending on Thursday.

Global shares had slipped and the euro fell at the end of last week as investors took profits from last week's rally after the European Central Bank outlined its bond-buying scheme designed to cap the rise in the borrowing cost of highly indebted euro zone states.

Spain, which has already received aid of up to 100 billion euros ($127.86 billion) from the euro zone to help it shore up its ailing banks, has said it could seek a sovereign rescue once euro zone partners and the ECB provide details on conditions attached and will likely hold discussions at the September 14-15 meetings of euro zone and EU finance ministers.

Europe continues to muddle through its crisis management, with Greece admitting it was having trouble convincing its foreign lenders to accept an austerity plan which is essential to revive the aid payments Athens needs to avoid bankruptcy.

Following Friday's disappointing U.S. jobs data, markets now believe the Fed will opt for some form of further monetary easing this week to help underpin the fragile U.S. recovery.

But views remain mixed over the specifics. Some see a powerful move such as a third round of bond buying known as quantitative easing, while others expect alternative options such as extending its commitment to keep interest rates near zero beyond the current period through late 2014 into 2015.

Reflecting growing investor jitters, the CBOE Volatility index .VIX, which measures expected volatility in the Standard & Poor's 500 index over the next 30 days, closed up 13.21 percent on Monday for its largest daily increase in seven weeks.

The euro rose 0.3 percent to $1.2790, nearing Friday's four-month peak of $1.2815.

"As long as there are expectations of quantitative easing by the Fed, the euro is likely to have some support," said a senior trader at a European brokerage.

While equities underwent an adjustment, policy hopes supported Asian credit markets, tightening the spread on the iTraxx Asia ex-Japan investment-grade index by 2 basis points.

Tight grains threatening

With the euro zone debt crisis severely undermining economic activities in Europe and dealing a blow to the world's growth engine China, which counts Europe as its key export market, the ripple effect is spreading to the rest of Asia.

South Korea announced an incremental stimulus package on Monday to nurse its export-driven economy through prolonged hard times, a move many Asian governments are expected to follow as Europe slides towards recession and the United States struggles to grow.

There were some bright spots amid general wariness. Big Japanese manufacturers' turned optimistic for the first time in four quarters in July-September. And Australian business conditions improved in August as most firms enjoyed a rebound in sales and profits.

But soaring prices of grains pose a big threat to the vulnerable global economy.

Australia, the world's No.2 wheat exporter, cut its forecast for wheat production in the 2012/13 crop marketing year and warned that yields could fall further.

Global grains prices have been bolstered by tight supplies as the worst drought in at least half a century hit U.S. farmland while Russia, the No. 4 wheat supplier, could limit exports.

"The tight supply is driving grains prices higher and they will remain elevated until demand subsides, when the number of cattle dwindles on scarce feed," said Masayo Kondo, president of research firm Commodity Intelligence in Tokyo.

"It will take about a half year for this cycle to complete and grains prices to start falling. Until then, inflationary pressures will mount and undermine global economies," he said.

Global monetary easing in itself does not necessarily put additional upward pressure on grains prices, but it will boost prices of precious metals, nonferrous metals and oil where speculative money typically flows, Kondo said.

U.S. crude eased 0.2 percent to $96.34 a barrel while Brent inched down 0.1 percent to $114.69 a barrel.

Spot gold added 0.3 percent at $1,730.54 an ounce, below a six-month high of $1,741.30 touched on Friday.

source: interaksyon.com

EU's Rehn Welcomes ECB Bond Buying Plan

CERNOBBIO, Italy (Reuters) - The European Central Bank's plan to buy the bonds of euro zone countries whose debt yields are excessive is a major step towards stabilizing markets, European Commissioner for Economic and Monetary Affairs Olli Rehn said on Saturday.

"The ECB has done a major service for short term market stabilization," Rehn told Reuters in an interview, calling the ECB's decision "an essential element of crisis response of the euro area."

ECB President Mario Draghi unveiled plans on Thursday for potentially unlimited purchases of bonds of up to three years maturity issued by countries that request a European bailout and fulfill strict domestic policy conditions.

Rehn said the policy conditions would be based on existing country-specific recommendations and "would have to include very specific objectives and a time line on how to meet the objectives."

No countries have yet applied for help from the yield reduction plan, he said.

source: nytimes.com

Eurozone jobless numbers hit record 18 million

BRUSSELS - Jobless numbers across the 17-nation eurozone hit a record 18 million in July, the EU statistics agency said Friday.

An additional 88,000 people joined the ranks of the unemployed throughout July, although upwardly-revised June data meant that the unemployment rate was unchanged at 11.3 percent, Eurostat said.

The 18,002,000 headline jobless figure was the highest since records began in 1995, it added.

With an estimated 25.254 million unemployed across the full European Union, which also includes non-euro heavyweights Britain and Poland, the figures add to concerns over a plunge back into recession for the eurozone and its nearest neighbours.

At 5.5 percent, the unemployment rate was much lower in powerhouse Germany, as well as the neighbouring economies of Austria and the Netherlands, but more than one in four are still out of work in Spain.

Annual increases in Spain and Greece were easily the highest, and both countries, labouring under sovereign and banking debt crises, logged jobless rates among the key under-25s age-group of more than 50 percent.

source: interaksyon.com

Recession sure, but eurozone analysts see green shoots too

BRUSSELS - Is the eurozone locked into a prolonged recession set to run right through 2013? Or do the latest economic data actually indicate that the crisis-hit currency area is turning a corner?
With at least an outside chance that the region's jobless could cross the threshold of 18 million when up-to-date unemployment figures are issued next week, it might seem like an odd time for analysts to pose that question.
Like the eurozone's political leaders, they are to an extent divided -- but keenly-watched growth statistics or indicators are increasingly being interpreted as evidence that austerity pain is starting to deliver long-term gain.
Late-August has seen the European Union announce that eurozone growth slipped back into reverse over the second quarter of 2012, with a 0.2-percent contraction -- but that the currency area also logged a record trade surplus (14.9 billion euros, or $18.4 billion) and bumper cash earnings from exports (12.7 billion euros) in the latest figures for June.
Subsequent commercial surveys of private business activity also gave mixed signals, with a seventh monthly decline in a row in August marked by the rate of contraction gathering pace in Germany -- while easing in France.
Rob Dobson of research firm Markit said the latest snapshot from its regular Purchasing Managers Index (PMI) implied that the eurozone was facing a 0.5-0.6 percent drop in eurozone gross domestic product (GDP) for the third quarter.
That would meet the widely accepted definition of recession, two successive quarters of economic contraction, and Dobson warned that "it would take a substantial bounce in September to change this outlook."
He said Germany's "export engine has slammed into reverse gear," despite what Julian Callow of Barclays called a "significant depreciation" in the euro's effective exchange rate, an annualised eight percent when measured against a trade-weighted index.
Slowing Chinese imports holds the key on that front despite sharply improved export performance over the past year for weaker Mediterranean economies, and Julien Manceaux of ING Bank said the PMI data "confirms that the decline in eurozone GDP in the second quarter is likely to be the first leg of a technical recession."
More and more of these number-crunchers, though, say a way through the crisis maze is opening up.
Christian Schulz of Germany's Berenberg Bank says the data pattern confirms that "by tackling internal imbalances through structural reforms and front-loaded austerity, the 17 (eurozone) countries are becoming more competitive on the global stage.
"Exports are the ultimate yardstick," he said, and while "the weaker euro and lower commodity prices" boosted performance, he stressed "additional reasons for the success: austerity, unemployment and deleveraging have reduced demand for imports in many crisis countries."
Schulz argued that better growth figures in the United States and Japan stemmed from their relying, like Britain, "on their central banks to stimulate the economy and postpone painful adjustments."
Colleague Holger Schmieding has gone further, stating that under the sort of "tough love" advocated by the European Central Bank, "we may be witnessing the birth pains of a stronger, more coherent and more dynamic economic and political entity in Europe."
Marie Diron of Ernst & Young Eurozone Forecast said that the PMI data "supports our view that, while probably shrinking further, the eurozone economy is not falling off a cliff."
She highlighted better results in the manufacturing sector.
Ratings giant Moody's, which led the downgrading of ever-bigger eurozone countries since Greek public debt discrepancies first surfaced in late 2009, says there has seen "significant progress" around eurozone governments.
"However, the correction is at best only half-way complete," its economists cautioned, urging unwavering discipline in the "unwinding" of "accumulated vulnerabilities" it blamed not on governments, but on "private sector overspending, which was itself financed by core countries' capital flows."
If Greece does leave the eurozone some time next year, as tipped by the likes of IHS Global Insight and Capital Economics, that too will be seen by these harder-line observers as the eurozone getting leaner and fitter for the challenges ahead.
Even in non-euro Britain, influential commentators are pressuring the Conservative-led UK government in London to follow Germany's lead.
Finance minister "George Osborne is studying what Germany got right," a key Daily Telegraph columnist wrote on Friday, highlighting "'mini-jobs' contracts that allow a worker to earn 400 euros a month tax-free on the condition that they can be sacked at any moment."
The newspaper predicted short-term pain if Osborne voluntarily takes the same medicine prescribed to the eurozone periphery -- but also general election victory in 2015.

source: interaksyon.com

Asian markets higher despite eurozone uncertainty

HONG KONG - Asian shares edged higher in quiet trade Tuesday, shrugging off eurozone debt worries even after Germany and the European Central Bank dampened hopes for action to drive down borrowing costs.

Tokyo's Nikkei index added to the previous day's gains, rising 0.13 percent as the dollar held on to recent gains against the yen amid a continued shift away from the safe haven Japanese currency.

Hong Kong was flat, Sydney climbed 0.67 percent, Shanghai was up 0.55 percent, and Seoul gained 0.47 percent.

German news weekly Der Spiegel reported Sunday that the ECB was considering buying bonds issued by heavily-indebted eurozone countries in a move that would ensure borrowing costs did not rise beyond a pre-determined level.

But an ECB spokesman brushed aside the report as "absolutely misleading", while another at the German finance ministry said such an action would be "be very problematic."

Germany's central bank, the Bundesbank, said such bond purchases "should be viewed critically and entail, not least, substantial stability policy risks".

Borrowing costs for Spain and Italy have shot up towards levels that forced Greece, Portugal and Ireland to seek a bailout.

European markets had advanced in early trading on the Der Spiegel report but turned down after ECB and German officials dismissed the story.

US stocks closed flat in quiet trade that still had enough might to push Apple to become the world's most valuable company of all time with a total market value of $623.52 billion.

That surpassed the previous record of $619 billion set by software titan Microsoft in 1999, during the dot-com boom years.

The Dow Jones Industrial Average slipped 3.56 points to close at 13,271.64.

The S&P 500-stock index lost a bare 0.03 points at 1,418.13, while the tech-rich Nasdaq edged down 0.38 points to 3,076.21.

In oil markets, New York's main contract, West Texas Intermediate light sweet crude for September delivery, fell eight cents to $95.89 a barrel while Brent North Sea crude for delivery in October gained 19 cents to $113.89.

Gold was at $1,621.69 at 0310 GMT, compared to $1,615.20 on Monday.

In other markets:

-- Jakarta, Kuala Lumpur, and Manila were closed for public holidays.

source: interaksyon.com

Eurozone headed back towards recession

BRUSSELS - The eurozone veered back towards recession with the latest growth figures out on Tuesday showing its economy shrinking by 0.2 percent and analysts warning of falling economic output right through 2013.

Germany steered clear of the worst of the debt crisis to post better-than-expected growth of 0.3 percent in the period from April to June, and France held on for zero growth, but the experts saw precious little good news going forward.

"The big picture is that the economic growth required to bring the region's debt crisis to an end is still nowhere in sight," said London-based Jonathan Loynes of Capital Economics.

"The slowdown has spread from the periphery into the core," said Tom Rogers, an analyst with Ernst & Young in London, one of many analysts to highlight a growing "north-south divide."

"Positive readings in Germany and the Netherlands (0.2 percent) are to be welcomed, but with conditions in the rest of Europe deteriorating further, and export markets farther afield also cooling, it is looking increasingly likely that output in the core economies will contract during the second half of the year," Rogers added.

Italy's economy lost 0.7 percent during the quarter and Spain 0.4 percent, with the economic implosion in Greece continuing unabated -- a 6.2 percent contraction after a 6.5 percent contraction in the first quarter of 2012.

These were to be expected, but, said Howard Archer of IHS Global Insight, it was "notable and worrying that GDP also contracted in Belgium and Finland," by 0.6 percent and 1.0 percent respectively.

Tipping an overall GDP contraction for the eurozone in 2012 of 0.5 percent, he said these countries "are being dragged down by the problems of Greece, Spain, Italy and Portugal."

He said IHS forecasts thereafter "are based on the assumption that Greece leaves the eurozone around mid-2013.

"We expect a strong policy response to limit the fall-out but modest eurozone recession is still expected as a consequence in the second half of 2013," Archer added, tipping a 0.2 percent contraction for next year too.

A recession is commonly defined as two consecutive quarters of contracting activity. The eurozone posted flat growth in the first quarter of this year.

The flash estimates from the EU also show how badly Europe now lags behind its main economic and trade partners, with comparative Eurostat figures saying GDP rose by 2.2 percent quarter-on-quarter in the United States and 3.6 percent in Japan.

"Only once the Eurocrisis is back under control can a rebound in investment lead to a return to trend growth in core Europe," said Christian Schulz of Berenberg in a note issued in London.

He highlighted France as a case apart between Germany and similarly-structured neighbouring economies such as Austria that are broadly holding on, and the tumbling economies of the south.

"In terms of economic confidence, it remains firmly part of core Europe, but it is losing competitiveness ... France has to bring down its excessive public deficit eventually," he underlined.

Schulz noted France is continuing to lose competitiveness to southern eurozone countries going through difficult adjustments, with imports outpacing exports and taking the trade deficit to record highs.

French Finance Minister Pierre Moscovici, whose Socialist government has to cut its budget deficit from around 4.5 percent of GDP this year to the EU limit of 3.0 percent by the end of 2013, called the result "very weak" but held to the government's forecast for 0.3 percent growth in 2012.

Germany's economy grew fractionally faster than the 0.2 percent forecast by analysts, but slower than the 0.5 percent seen in the first quarter.

"Positive impulses came from both consumer spending and from net foreign trade," national statistics office Destatis said.

Not all experts were gloomy for Germany's prospects, Newedge Strategy analyst Annalisa Piazza stating that "the German economy remains relatively resilient and the expected effects of the eurozone debt crisis remained limited."

source: interaksyon.com

US raises pressure for euro zone crisis action

FRANKFURT/BERLIN - The United States raised pressure on euro zone leaders to take decisive action to solve the region's debt crisis, notably by lowering troubled members' borrowing costs, on the eve of a crucial European Central Bank meeting.

U.S. Treasury Secretary Timothy Geithner said the euro zone must take steps including "bringing down interest rates in the countries that are reforming and making sure those banking systems can provide the credit those economies need".

He made the comments in an interview with Bloomberg Television recorded in Los Angeles on Tuesday and broadcast on Wednesday, a day after he flew to Germany to meet Finance Minister Wolfgang Schaeuble and ECB President Mario Draghi.

Italy and Spain, the euro zone's fourth and third largest economies, could lose access to credit markets as the risk premium investors demand to hold their bonds rather than safe-haven German debt has spiraled to levels considered unsustainable in the long term.

But German Vice-Chancellor Philipp Roesler rejected pressure for the ECB to step in and cap the borrowing costs of troubled euro zone countries, saying the central bank should stick to fighting inflation and not ease the market incentive to reform.

"If you take away the interest rate pressure on individual states, you also take away the pressure on them to reform," Roesler, economy minister and leader of the Free Democrats, junior partners in Chancellor Angela Merkel's centre-right coalition, told reporters in Berlin.

He also reaffirmed Germany's opposition to letting the euro zone's rescue fund borrow from the central bank to buy government bonds, calling it "the road to an inflation union".

Draghi last week said that the central bank would do whatever it takes to preserve the euro, stirring speculation it might take more radical steps when the ECB's policy-setting Governing Council holds its monthly meeting on Thursday.

Geithner said Schaeuble and Draghi had walked him through plans they were putting in place to try to solve the crisis, but he cautioned against expecting immediate action.

"What you know, from what Europe has said, that they are committed to doing what's necessary to hold the Europe Union together," said Geithner. "I absolutely believe they have the means to do it."

Geithner said past financial crisis showed that the longer it took to address the issues, the more they cost.

"I believe they understand that. That's why they've signaled they are prepared to move further. Now again, this is going to take time," he added.

Market expectations of a major ECB move this week have faded after a spike following Draghi's comments, with European shares slipping and a rally in Spanish and Italian bonds petering out.

But those traders and investors who expect action on Thursday would sell the euro and European shares and drive up Spanish and Italian bond yields if the ECB did nothing.

Nick Parsons, head of markets strategy at nabCapital in London, predicts the euro could fall a couple of U.S. cents from current levels, while bond market analysts expect Spanish yields to reach new euro-era highs if the ECB does not act.

Monti on tour

Italian Prime Minister Mario Monti, touring Europe to press for action to bring down Rome's borrowing costs, made his pitch to euro zone hardliner Finland on Wednesday, saying Italy did not need an assistance program but it might in future need "a breathing break" from high interest rates.

"The basic idea is that Italy does not seem to need special aid right now, especially not to save its economy," Monti was quoted as saying by Finnish daily Helsingin Sanomat on the day he was due to meet Prime Minister Jyrki Katainen.

He added that it was frustrating that reforms his government has carried out are not reflected in interest rates. The euro area financial crisis has sent the group's third largest economy's borrowing costs spiraling.

Central bank sources have told Reuters that intervention could be at least five weeks away because Draghi's comments had not been agreed in advance with the Governing Council, and other elements must first fall into place.

The sources said the ECB could revive its mothballed sovereign bond-buying program in tandem with the euro zone's rescue funds, but Spain would first have to request assistance, which it has resisted so far.

Euro zone leaders would have to agree to the rescue funds buying up government bonds, and the German Constitutional Court would have to uphold the legality of the bloc's permanent rescue fund in a ruling due on September 12.

The leaders have spent the past week issuing statements promising to take whatever steps are necessary to rescue the currency, but none has raised expectations as high as Draghi, who heads the only federal European institution able to act swiftly and decisively.

However, the ECB is divided with Germany's influential Bundesbank opposed to reviving government bonds or giving the euro zone rescue fund a banking license so it can borrow from the central bank to buy unlimited quantities of bonds.

Draghi met Bundesbank chief Jens Weidmann privately earlier this week to try to reconcile differences on what action the bank might take. Neither bank would comment on the meeting.

The Bundesbank released on Wednesday a June 29 interview for an in-house publication in which Weidmann said governments expected too much from the central bank, and what they wanted did not always make economic sense.

"Politicians overestimate the central bank's capacity and place too many demands of it," he said.

"Whether it's about interest rates or any sort of special measures, in the end it always comes down to the same thing: trying to rope the central bank into meeting fiscal policy objectives."

Weidmann said the Bundesbank would continue to defend its positions firmly "so that the (European) monetary union remains a stability union".

With the economy slowing and inflation under control, other options on the ECB's radar screen include a possible further cut in interest rates and a further loosening of rules on the collateral it will accept to lend funds to banks.

Unemployment in the euro zone in June hit its highest level since the single currency was born, at 11.2 percent, while data released on Tuesday showed capital fleeing Spanish banks at a growing rate.

article source: interaksyon.com

Euro Falls to 3-1/2 Year Low Versus Sterling

LONDON (Reuters) - The euro hit its lowest level in 3-1/2 years against sterling on Friday, with traders citing a German report that quoted a member of a party in the coalition government saying a country should leave the euro zone if it cannot implement agreed reforms.

The euro fell 0.25 percent on the day to 77.895 pence, its weakest level since October 2008.

Asked if Greece could stay in the euro, Gerda Hasselfeldt, a senior member of the Bavarian Christian Social Union (CSU), sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU) said it was up to Greece to implement measures that had been agreed.

"If a country is unwilling or unable to comply with its obligations, it must leave the euro zone," she added in an interview to the Rheinische Post.

The report intensified euro selling, with worries about debt problems in Spain encouraging investors to switch out of euro zone assets into ones perceived to be safer, including UK assets.

source: nytimes.com

Greece to Present Debt Inspectors 'Alarming' Data

ATHENS, Greece (AP) — A spokesman for Greece's new government says it will present "alarming" data on its recession and unemployment to international debt inspectors this week, in a bid to renegotiate the terms of its bailout agreements.

Spokesman Simos Kedikoglou said in a television interview Tuesday that the data would demonstrate that the current austerity program was counterproductive. He did not elaborate.

Debt inspectors from the European Commission, the European Central Bank and the International Monetary Fund are due in Athens Wednesday.

Greece is relying on rescue loans from its partners in the eurozone and the IMF to avoid bankruptcy. It is in a fifth year of recession, with unemployment topping 22 percent, roughly double the eurozone average.

source: nytimes.com

Eurozone crisis prompts Bangko Sentral to cut BOP, GIR targets

The Bangko Sentral ng Pilipinas on Monday said it lowered its targets for balance of payments (BOP) and gross international reserves (GIR), because of the raging financial crisis in Europe.

The GIR will hit somewhere between $77.5 billion and $78 billion, Bangko Sentral Gov. Amando Tetangco Jr. It was expected to reach $79 billion this year.

The BOP surplus is seen narrowing down to $2.6 billion from an earlier of $2.8 billion, Tetangco noted in his keynote address before the Financial Market Forum.

“The revisions took into account the latest figures, actual figures–the prospects for the future–given the developments that are taking place in Europe as well as the US,” according to the central bank chief.

What the Bagnko Sentral decided to keep were its remittance and current account targets, he said.

Remittances will likely grow 5 percent this year, from the record $20.12 billion recorded last year, according to the Bangko Sentral.

Latest Bangko Sentral data showed the current account surplus was down 20 percent to $7.1 billion last year from $8.9 billion in 2010, largely on weak global demand.

However, monetary authorities decided to keep estimates for export growth unchanged at 10 percent for the year, said Tetangco. - V S, GMA News

source: gmanetwork.com

Japan urges Europe to help banks after Greek election

TOKYO — Japan on Monday pressed Greece to swiftly form a new cabinet after pro-bailout parties won a weekend election, and called on European leaders to “urgently” strengthen the region’s financial sector.

Markets breathed a sigh on relief Monday after the conservative New Democracy party won most votes in Sunday’s poll, narrowly beating the anti-bailout Syriza group, easing fears Athens will exit the eurozone.

But Chief Cabinet Secretary Osamu Fujimura, the government’s top spokesman, said Japan wanted Athens and Europe’s leaders to build on the result.

“We will be paying close attention to upcoming negotiations to form a coalition” government, he told reporters in Tokyo.

“We hope that a stable government will be launched early and make progress towards stabilizing markets… We hope that European countries will urgently take measures to strengthen its financial sector,” he added.

Traders have grown increasingly worried about Europe’s lenders after Spain recently accepted a loan worth up to 100 billion euros ($125 billion) to rescue its troubled banking sector.

Speaking after a meeting of G7 finance chiefs in Los Cabos, Mexico, Japanese Finance Minister Jun Azumi said: “Greek political risks have yet to be wiped out, but I believe (Greece) has overcome one, big peak.”

Europe is a major market for Japanese products and Tokyo is a significant buyer of eurozone bonds, with officials saying Japan’s fragile economic recovery was heavily tied to the continent.

Sunday’s result helped alleviate fears of a victory by anti-austerity parties who had threatened to tear up an international bailout package, which was seen as a prelude to Greece exiting the eurozone.

“Countries should cooperate to stabilize market swings and we hope G20 leaders will issue a strong political message at the Los Cabos summit,” the government spokesman said.

source: japantoday.com

Global economy week ahead: US tiptoes around the euro crisis

WASHINGTON - The US employment report for May will measure America's economic resilience to the political turmoil in Europe that is weakening the global growth outlook.

Manufacturing slumped in both China and the euro zone in May, Britain is in recession, Brazil is stagnating and India's growth is faltering, leaving the United States as a relative bright spot in an uncertain world.

Home sales in the United States are perking up, consumer sentiment reached a four-year high in May, and the pace of job layoffs has slowed over the past month, all pointing to a gradual healing in the US economy.

Falling gasoline prices also are pumping up spending power into consumers' pockets. While there are some soft spots—capital goods orders are weak and manufacturing eased in May—it is not enough to derail a plodding US economic recovery.

The government's closely watched monthly jobs report due out on Friday could prove pivotal.

If employment gains accelerated in May to 150,000, the consensus in a Reuters poll and up from the 135,000 monthly average over the past two months, it would suggest the economy has regained internal momentum and has greater ability to withstand the headwinds from Europe.

"The global economy is struggling. There is recession in Europe, a slowdown in emerging markets that hasn't fully run its course and China decelerating. To offset this trend, you have modest growth in the United States and Canada," said Craig Alexander, chief economist at TD Economics.

"Political risks are high but if Europe muddles through, a risk that has not yet fully run its course, we should see moderate US growth continue," he said.

A weaker jobs number and a rise in the unemployment rate from the current 8.1 percent level, however, would suggest that businesses are growing increasingly wary as financial markets display unease over Europe and the rest of the world slows.

Narim Behravesh, chief economist at IHS Global Insight, said he sees little evidence yet that Europe's problems have spilled over to the United States. He said he is tempted to think that the slowdown in emerging markets is temporary, reflecting the lagged effects from their monetary tightening in the latter half of 2011. Additionally, a fresh round of stimulus measures promised by China should prevent a serious slump.

"We will probably see another couple of months of mixed data and then a firming, as long as Europe steers clear of crisis," he said.

European high-wire act

But Europe is casting a long shadow.

European Union leaders are playing a high-wire act in trying to convince the Greek public ahead of fresh elections on June 17 that they must stick to their austerity program if they wish to remain in the euro zone monetary union.

But as governments and banks draw up contingency plans to handle a possible Greek euro-zone exit, and polls show the leftist anti-austerity camp holding a lead in Greece, investors' hopes are diminishing for a happy ending in Europe.

Further complicating the picture is Spain, where the banking system needs recapitalizing and regional governments are running short of cash. This makes Spain highly vulnerable to market attack if Greece were to leave the euro. Italy, Portugal and Ireland could then be in the line of fire.

"The situation in Europe is becoming more uncertain," Michelle Meyer, a Bank of America economist, warned clients.

Lacking a clear road map for how EU leaders plan to stabilize the financial system and shore up monetary union, investors are fleeing the euro. It has lost more than 5 percent of its value in less than a month to reach a 22-month low against the dollar.

The weakening euro raises concern about spillover effects to the United States economy, even if Greece stays in the euro zone.

A costlier US dollar makes US exports more expensive in world markets, and if Europe sinks into recession, the United States will lose one of its primary export markets.

But the trade impact on the US economy would be quite small. Trade with Europe accounts for only a sliver of total US output, or 1.3 percent, and Bank of America said that recent research shows that exchange rates are far less of a factor today in determining import prices than they were in prior decades.

The International Monetary Fund, Bank of International Settlements and the US Federal Reserve have found that the pass-through effects of exchange rates to import prices have declined to about 20 percent from 50 percent in 1970s and 1980s. And the Organization for Economic Cooperation and Development found it would take a 10 percent depreciation of the euro against the dollar over one year to shave 0.1 percentage point from annual US growth in gross domestic product.

The primary impact on the United States from a worsening European crisis would be from financial markets turmoil.

If global stock markets plunged and the banking system in Europe seized up, Craig Alexander at TD Economics said, "It would be a mess. It would be welcome back to Lehman Brothers in 2008." –Reuters

source: gmanetwork.com

Asian markets rise ahead of European summit

HONG KONG—Asian markets rose Tuesday following a strong performance on Wall Street and on hopes EU leaders will come to an agreement on dealing with the eurozone debt crisis at an upcoming summit.

Tokyo gained 1.10 percent, or 95.40 points, to end at 8,729.29, Seoul rose 1.64 percent, or 29.56 points, to 1,828.69 and Sydney climbed 1.16 percent, or 47.4 points, to 4.121.0.

In the afternoon Hong Kong climbed 1.29 percent and Shanghai rose 0.81 percent.

Attention is now on an informal meeting in Brussels on Wednesday where the crippling debt crisis that threatens the eurozone project will be top of the agenda.

"People are feeling a little more optimistic because European leaders look as though they might put some strong growth policies in place rather than just austerity," Stan Shamu, market strategist at IG Markets in Australia, told Dow Jones Newswires.

Ahead of the talks dealers were given a boost by Germany and France who said Monday they would do whatever it takes to keep Greece in the euro amid political turmoil in the country.

"We agreed that we have to do everything to keep Greece in the euro club," said German Finance Minister Wolfgang Schaeuble after the first official meeting with his new French counterpart Pierre Moscovici.

Schaeuble hosted Moscovici to thrash out a common line for the summit, after Germany was seen as being more isolated over its drive for austerity as the answer to the ongoing debt crisis.

Greece has returned as the key issue in Europe after polls on May 6 saw 70 percent of the electorate vote against pro-austerity parties but with no overall winner.

Many now fear a new vote on June 17 will see a victory for parties who campaigned against a bailout plan, which would in turn lead Athens to default on its debt obligations and leave the euro.

There are also concerns about the state of Spain's banks, which are staggering under huge bad loans after a 2008 property crash. Economy Minister Luis de Guindos forecast the Spanish economy would contract this quarter at the 0.3 percent rate it has for the past half year.

On currency markets the euro eased from a small rally in New York that was fuelled by hopes for the EU meeting.

It bought $1.2793 and ¥101.60 in early Asian trade Tuesday, compared with $1.2815 and ¥101.62 in New York late Monday. But the single currency was up from the $1.2779 in Asia Monday and the four-month low of $1.2642 seen Friday.

The dollar was at ¥79.43 Tuesday against ¥79.30.

On Wall Street Monday the main indexes posted strong gains. The tech-rich Nasdaq was the best performer, up 2.46 percent as a strong showing from two of its biggest firms Apple and Google outweighed an 11 percent slump in market debutant Facebook.

The Dow finished up 1.09 percent and the S&P 500 climbed 1.60 percent.

Oil prices were up in afternoon Asian trade, with New York's main contract, light sweet crude for delivery in June, 14 cents higher at $92.71 a barrel on its last trading day, and Brent North Sea crude for July gaining seven cents to $108.88.

Gold was worth $1,590.00 an ounce at 0600 GMT, compared with $1,596.40 late Monday.

In other markets:


Taipei rose 1.15 percent, or 82.66 points, to 7,274.89. Leading smartphone maker HTC surged 6.02 percent at Tw$431.5 while Hon Hai Precision added 4.81 percent at Tw$87.2.

Wellington gained 1.04 percent, or 36.47 points, to 3,529.86. Telecom was up 3.5 percent at NZ$2.64 and Fletcher Building added 1.8 percent to NZ$6.38 while Contact Energy added 0.41 percent to NZ$4.86.

—Agence France-Presse

source: gmanetwork.com