Archive for June, 2010

World leaders meet to thrash out recovery plans (AFP)

Sunday, June 27th, 2010 | Finance News

The leaders of the world's most powerful countries were to pursue talks Sunday on settling their differences over how to nurse the fragile world economy back to health.

The G20 nations convened in the eastern Canadian city of Toronto on the heels of a tough-talking G8 summit, in which the world's major industrialized powers laid down the law to rogue operators Iran and North Korea.

US officials called on leading economies to focus on a return to growth, in a move set to pit the world's top economy against European nations some of whom have ordered spending cuts to slash back public deficits.

"This summit must be fundamentally about growth, and our challenge, as the G20, is that we all need to act to strengthen the prospects for growth," US Treasury Secretary Timothy Geithner told reporters.

He took a swipe at powers like Germany, Britain and Japan that he fears have moved too quickly towards budget cuts.

"It's fair to say that I don't think that you've seen from those countries yet a set of policies that would, again, give everybody confidence that you're going to see stronger domestic demand growth," he said.

The G20 talks opened late Saturday with battle lines being drawn as members disagreed over the balance to be struck between reducing budget deficits and encouraging growth and spending.

"If it sounds like everyone is rushing to the exit it might cause problems," a senior G20 official told AFP, summarizing the concerns of the United States and many emerging powers that Europe's new parsimony could stifle growth.

Brazil warned Europe's plans to radically cut government spending would hurt emerging economies, comments echoed by UN chief Ban Ki-moon.

"If the cuts take place in advanced countries it is worse, because instead of stimulating growth they pay more attention to fiscal adjustments, and if they are exporters they will be reforming at our cost," said Brazilian Finance Minister Guido Mantega.

Ban also warned the G20 working dinner that the challenge facing the group had changed from when it first came together in Pittsburgh in September.

"Let me emphasize this evening that, under any circumstances we must not balance budgets on the backs of the world's poorest people," he said.

He called for greater investment in agriculture and the green economy which could help fuel jobs.

France's President Nicolas Sarkozy stuck up for Europe, insisting there was no deep trans-Atlantic rift on the deficit issue.

"I've heard Obama say how important it is to support sustainable policies, including for the United States, he has indicated quite clearly the risk posed by deficits and debt," he told reporters.

At the end of two days of talks in an exclusive resort north of Toronto, the leaders of the Group of Eight richest nations acknowledged in their final statement that economic recovery remained "fragile."

The leaders of Britain, Canada, France, Germany, Italy, Japan, Russia and the United States also took a tough stand on pressing international problems.

They demanded Iran reveal the extent of its nuclear program in transparent talks, condemned North Korea's alleged torpedo attack on a South Korean warship and urged Afghanistan to boost efforts to take charge of its security.

In bilateral talks US President Barack Obama concentrated on ties with Asia, meeting China's Hu Jintao and assuring his South Korean counterpart Lee Myung-Bak that Washington would stand "foursquare behind" Seoul in its standoff with the north.

Security remained tight, and the G20 leaders' arrival in Toronto was marred by clashes between so-called "black bloc" anarchist protesters and vandals, who broke away from a large, peaceful protest.

At least three police cars were set ablaze and riot officers arrested 75 people, resorting to tear gas to protect the steel and concrete barricade shielding the downtown conference venue.

Canada spent more than a billion dollars to secure this week's back-to-back G8 and G20 summits, hoping to avoid the serious street battles that have marred recent gatherings of such global forums.

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Europe in firing line as G20 leaders meet (AFP)

Saturday, June 26th, 2010 | Finance News

Europe's economic policies came under blistering scrutiny as world leaders gathered in Toronto, with the Old Continent being cast by allies as the sick man of the global economy.

Leaders from the Group of 20 top economies huddled in Toronto to discuss policies that might put some heat in a tepid global recovery and turn the page on the worst financial crisis since the Great Depression.

But Europe -- rocked by a sovereign debt crisis that has threatened the future of the euro and the decades-long movement toward continental integration -- found its prescriptions rejected by global partners.

Even before the landing gears were down on the planes of late-arriving leaders, Europe's biggest hitters were forced to admit their ideas for a global bank tax to moderate financial sector excess had been shot down in flames.

A proposal from Britain, Germany and France to impose levies on banks' liabilities or profits appeared to receive close to no backing from other G20 members.

"Three countries supported this idea. We are a year into the process and there are still three countries which support the idea," a senior G20 official told AFP. "The parrot is not sleeping, it is no more. It's dead."

German Chancellor Angela Merkel conceded defeat. "We have to expect that we will get a negative decision," she said.

"The French president and myself will speak in favor of it tomorrow but unfortunately we ... don't have a consensus, neither on a bank levy nor on a financial tax."

The three countries are now expected to move ahead alone with domestic banking taxes, despite initial fears that it may make their banks less competitive. But worse may be to come.

With investors demanding ever-higher risk premiums for lending to indebted European nations, the leaders from Britain, France and Germany arrived at the summit pledging to dramatically cut budgets to put their books in order.

But that plan come under attack from the United States, which voiced concern that the recovery could be put at risk if government spending is cut too quickly and domestic demand dips.

That concern bubbled to the surface Saturday when Geithner said Europe and Japan must do more to fuel domestic demand.

"I don't think that you've seen from those countries yet a set of policies that would, again, give everybody confidence that you're going to see stronger domestic demand growth in those countries coming forward," he said.

"This recovery is now being led by very strong growth in the emerging markets and a solid expansion in the United States.

"Growth started somewhat later in Europe and Japan and it's projected to be somewhat slower over time, and it's still dependent on exports to the rest of the world."

Meanwhile Brazil warned that Europe's plans would also hurt emerging economies.

Brazilian Finance Minister Guido Mantega called for any budget cuts "to be realistic and not inhibit growth."

"If the cuts take place in advanced countries it is worse, because instead of stimulating growth they pay more attention to fiscal adjustments, and if they are exporters they will be reforming at our cost."

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Oil spill efforts ramp up as storm eyed anxiously (Reuters)

Saturday, June 26th, 2010 | Finance News

GRANDE ISLE, Louisiana (Reuters) –
The first named storm of the Atlantic hurricane season is posing an uncertain threat to the Gulf of Mexico, even as efforts to contain the worst oil spill in U.S. history are set to ramp up.

For now, Tropical Storm Alex, which is hitting the western Caribbean with rain and high winds, is not expected to pass close to BP Plc.'s blown-out well off the Louisiana coast.

But even a miss that only generates large waves could greatly complicate clean-up efforts from Louisiana to Florida

Current official estimates suggest between 35,000 to 60,000 barrels a day are leaking from the rogue well. BP collected over 24,000 barrels on Friday and about 11,640 barrels in the first half of Saturday, the company estimated.

New equipment being moved to the site of the leak in the coming week could raise the daily collection rate to 53,000 barrels a day, U.S. Coast Guard Admiral Thad Allen, who is coordinating the U.S. oil spill response, said on Saturday.

U.S. Energy Secretary Steven Chu and Interior Secretary Kenneth Salazar are also scheduled to review plans on Wednesday for a new containment system that could boost collection to 80,000 barrels per day, Allen said.

The ultimate solution to plugging the undersea gusher still lies in a relief well being drilled by BP. On Friday, the company said drilling is on track to intercept the blown well.

But progress could be scuttled if Alex, or a subsequent storm, comes too close to the leak site.

Allen said BP would be forced to evacuate the vessels and personnel working to contain the spill if a storm with gale-force winds, 39 miles per hour or stronger, were expected within five days at the leak site. That would once again leave the well gushing uncontrollably.

For now, Alex does not pose such a risk -- a rare piece of good news for the unprecedented oil spill disaster now in its 69th day. "We understand it's moving westerly at this time and does not threaten the site," said Allen.

Late on Saturday, Alex had sustained winds of 65 miles per hour (104 km per hour) with higher gusts, and was about 15 miles southeast of Belize City, Belize, according to the U.S. National Hurricane Center.

In Grand Isle, Louisiana, a tiny village jutting out into the Gulf of Mexico and a haven for commercial and recreational fishing, residents anxiously awaited updates on the storm.

"If it comes and it's somewhat severe, you might as well say goodbye to Grand Isle," said Pam Brooks, 50. "The oil will get thrown up and coat everything."

The Gulf disaster and its impact on London-based energy giant BP was on the agenda on Saturday when U.S. President Barack Obama and new British Prime Minister David Cameron held their first face-to-face meeting.

Shares of BP, a staple holding of many U.K. pension funds, have been savaged since the oil crisis started and fell another 6 percent to a 14-year low on Friday.

Investors are fretting about the potential costs to BP, which include but are not limited to a $20 billion compensation fund it set up under intense U.S. political pressure. BP said it has paid out $2.35 billion so far in clean-up and compensation costs related to the spill.

Obama has been highly critical of the company, even as his own poll ratings have fallen amid perceptions that his handling of the Gulf crisis has been too slow.

Cameron and Obama "agreed that there was nothing to be gained from damaging BP as a going concern," a UK official said after the leaders met at the G8/G20 summit in Canada.

The pair also agreed that BP must meet its obligations to cap the leak, clean up the damage and meet legitimate compensation costs. [nLDE65P0I8]


The Obama administration on Friday asked a U.S. appeals court to stay a ruling from a federal judge that overturned a six-month ban on new deepwater drilling in the Gulf.

On Saturday, the state of Louisiana filed a brief opposing the administration's request. Each day the ban is in place, "millions of dollars of income are lost to the citizens of Louisiana, and by the state," the brief said.

The disaster is also taking a heavy toll on fishing, tourism and the environment. About one-third of U.S. federal waters in the Gulf of Mexico remain closed to fishing.

The U.S. Fish and Wildlife Service reports a growing toll of birds, sea turtles and marine mammals, mostly dolphins, found dead or debilitated along the Gulf Coast.

In Florida on Saturday, hundreds of local residents and supporters protested the spill with a 15-minute "Hands Across the Sand" demonstration calling for a halt to U.S. oil drilling in the Gulf.

"It a sick feeling," said Cindy Nevens, resident of Navarre Beach, Florida. "There is no end in sight and we don't know if it can be stopped or if they are telling us the truth about how much oil they are collecting."

(Additional reporting by Erwin Seba in Houston, Sumeet Desai in Toronto, Jose Cortazar in Cancun, Cyntia Barrera Diaz in Mexico City, Steve Gorman in Los Angeles, Jeremy Pelofsky in Washington, and Mike Peltier in Florida; Writing by Ros Krasny; editing by Todd Eastham)

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