29/10 Đức cắt giảm chi tiêu

5:05 PM, 29/10/2010
(Chinhphu.vn) - Quốc hội Đức hôm qua (28/10) đã thông qua gói biện pháp "thắt lưng buộc bụng" trị giá hàng chục tỷ Euro nhằm giảm thâm hụt ngân sách.

Ảnh chỉ có tính minh họa

Từ tháng 9, Chính phủ Đức đã thông qua kế hoạch cắt giảm chi tiêu khoảng 80 tỷ Euro vào năm 2014, cũng là kế hoạch cắt giảm chi tiêu lớn nhất của nước này kể từ Chiến tranh thế giới thứ II đến nay.

Theo đó, Chính phủ Đức sẽ cắt giảm mạnh các khoản trợ cấp xã hội, chi tiêu công và sẽ tăng thuế đánh trên vé máy bay đối với các chuyến bay khởi hành từ Đức.

Kinh tế Đức năm 2009 đã phục hồi nhanh hơn so với dự kiến sau cuộc khủng hoảng kinh tế, chủ yếu do nhu cầu thế giới tăng mạnh đối với các mặt hàng xuất khẩu của Đức.

Bộ Tài chính Đức cho biết thâm hụt ngân sách của Đức năm nay dự kiến tương đương 4% GDP và quốc gia này hy vọng sẽ đưa thâm hụt ngân sách xuống dưới mức trần quy định của EU là 3% GDP vào năm 2011.

Tổng đình công ở Pháp

Ngày 28/10, hơn 560.000 người đã tham gia hàng trăm cuộc biểu tình tại nhiều thành phố trên toàn nước Pháp để phản đối kế hoạch cải cách hệ thống hưu trí của Chính phủ vừa được Quốc hội nước này thông qua lần cuối cùng trước khi Tổng thống ký ban hành thành luật. Theo đó, tuổi nghỉ hưu của người lao động sẽ tăng từ 60 lên 62 tuổi.

Đây là lần thứ 9 trong vòng 2 tháng qua, giới công đoàn Pháp phát động "Ngày hành động toàn quốc" để phản đối dự luật này.

Bộ Nội vụ Pháp cho biết khoảng 50% số chuyến bay dự định đi và đến Pháp tại một số sân bay trong nước đã bị hủy bỏ do cuộc đình công của nhân viên kiểm soát không lưu, một số dịch vụ đường sắt cũng bị ảnh hưởng do nhân viên nhà ga tham gia biểu tình.

Trong ngày 28/10, 4 nhà máy lọc dầu vẫn tiếp tục bị phong tỏa, khiến việc cung ứng nhiên liệu gặp khó khăn. Khoảng 20% trạm xăng dầu vẫn trong tình trạng thiếu nhiên liệu.

Mai Hằng

29/10 Anh trở thành quốc gia kỹ thuật số

1:13 PM, 29/10/2010
(Chinhphu.vn) - Anh đã trở thành nước của kỹ thuật số, với ngành công nghiệp mạng là ngành đứng thứ 5 đóng góp vào GDP của nước này.


Tổ chức tư vấn Boston (BCG) do Google ủy quyền đưa ra số liệu việc mua hàng qua mạng, dịch vụ băng thông rộng và xuất khẩu hàng hóa kỹ thuật số và dịch vụ chiếm tới 7,2% GDP của Anh, cao hơn cả các ngành công nghiệp vận tải, xây dựng và giáo dục. Một nửa trong số này là nhờ thương mại trên mạng mang lại.

Theo BCG, những công ty nào tận dụng tối đa internet để bán hàng và tiếp thị thì có mức tăng trưởng trung bình 4,1%/năm trong 3 năm qua. Còn nếu sử dụng mạng ít hơn thì tăng trưởng chỉ đạt 0,6%/năm.

Ông Paul Zwillenberg, đối tác của BCG và là một trong những tác giả của báo cáo này, nhiều doanh nghiệp vừa và nhỏ nói rằng họ sẽ không tồn tại nếu thiếu internet. Chính những công ty này là động lực cho ngành công nghiệp kỹ thuật số của Anh. Paul Zwillenberg dự đoán ngành công nghiệp này tăng trưởng 10%/năm trong 5 năm tới và sẽ chiếm 10% GDP của nước Anh vào năm 2015.

Zwillenberg cũng không ngờ Anh trở thành một đất nước của kỹ thuật số và Internet đóng góp rất lớn vào tổng sản phẩm quốc nội, bởi ông cho rằng nước Anh phải nhập khẩu cả phần cứng, phần mềm.

Linh Đức

28/10 Nga thông qua chương trình tư nhân hóa 900 DN nhà nước

2:30 PM, 28/10/2010
(Chinhphu.vn) – Điểm đáng chú ý nhất của chương trình kéo dài đến năm 2015 này là Tập đoàn Dầu khí hàng đầu Rosneft, Ngân hàng lớn nhất của Nga Sberbank sẽ được tư nhân hóa từng phần.

Tập đoàn Dầu khí Rosneft, 1 trong 900 DN sẽ được tư nhân hóa từ nay đến 2015.

Chính phủ Nga ngày 20/10 đã thông qua một chương trình tư nhân hóa rộng lớn chưa từng có kể từ khi Liên Xô sụp đổ.

Theo đó, 900 doanh nghiệp nhà nước giữ quyền chi phối sẽ được tư nhân hóa từng phần.

Điểm đáng chú ý của chương trình này là: Rosneft - Tập đoàn Dầu khí hàng đầu của Nga; Sberbank, ngân hàng lớn nhất mà trong đó nhà nước nắm 60,3%; ngân hàng lớn thứ hai VTB nhà nước nắm giữ 85%; Tập đoàn Vận tải biển Sovkomflot; Tập đoàn lớn thứ 2 thế giới trong lĩnh vực thủy điện RusGuidro; Tập đoàn RJD nắm giữ 85.000 km đường sắt của Nga đều sẵn sàng nhượng lại từ 4% - 50% tài sản của mình.

Đến năm 2015, Chính phủ Nga có thể sẽ không còn kiểm soát được Tập đoàn Rosneft nữa.

Với việc bán ra thị trường một phần tài sản do nhà nước nắm giữ, Chính phủ Nga hy vọng từ nay đến năm 2015 sẽ thu được 42 tỷ Euro, một khoản có thể bù đắp phần nào cho thâm hụt ngân sách.

Sau 10 năm tăng trưởng liên tục, nước Nga cũng bị ảnh hưởng nặng nề bởi cuộc khủng hoảng tài chính toàn cầu. Giờ đây Nga ý thức được cơ sở hạ tầng công nghiệp của mình còn lạc hậu, đầu tư trực tiếp nước ngoài thấp và nền kinh tế Nga vẫn còn phụ thuộc quá nhiều vào nguyên liệu cơ bản.

Igor Iourgens, Giám đốc Viện Nghiên cứu phát triển của Nga cho biết, nền kinh tế của Nga đang mất cân đối. Nhà nước thì có tất cả, khu vực tư nhân thì chẳng có gì. Phần kinh tế quốc doanh chiếm 50% GDP, đây là điều hiếm thấy trong một nền kinh tế tự do. Đầu tư nước ngoài vào Nga thấp là do các doanh nhân thường gặp phải nhiều trở lực như: tham nhũng, cơ sở hạ tầng xuống cấp, cạnh tranh không trung thực và nguồn nhân lực không được đào tạo đầy đủ.

Còn theo một chuyên gia về môi trường đầu tư tại Nga, Tổng thống và Thủ tướng Nga ý thức được không có đầu tư và kỹ năng của nước ngoài, Nga không thể vươn tới vị trí các cường quốc.

Chương trình khá hấp dẫn này đang được giới ngân hàng và công nghiệp phương Tây đang theo dõi kỹ lưỡng.



Nguyễn Chiến

28/10 Bernanke’s Reluctance to Speak Out Rankles Some

October 28, 2010

By SEWELL CHAN
WASHINGTON — The Federal Reserve is all but certain next week to begin a multibillion-dollar effort to coax the recovery along, but privately, Ben S. Bernanke, the chairman, worries that more is needed to turn the sluggish economy around and revive employment.

He believes that without the Obama administration’s $787 billion stimulus program, the nation would have been worse off, and that Congress needs to continue to prop up the economy in the short run. He agrees that fiscal measures to support the recovery would probably make the Fed’s unconventional monetary policy more potent.

But Mr. Bernanke has been reluctant to prominently voice those views, which were gleaned from testimony, speeches and interviews with people close to him over the last several months. His predecessor, Alan Greenspan, did not display such hesitation, advocating for the Bush tax cuts of 2001 and 2003.

Mr. Bernanke is uncomfortable in that role, which he believes to be outside his purview, even — or especially — in an election season dominated by economic anxiety. He has not ruled out weighing in when a bipartisan budget commission named by President Obama delivers its report in December, but it seems unlikely that he will intervene in the battle over the Bush tax cuts.

The hesitance of Mr. Bernanke, who was President George W. Bush’s chief economic adviser for six months before becoming Fed chairman in 2006, has sharply divided economists.

Some say he could guide the debate, and give a lift to the White House, by speaking out against the aggressive budget-cutting proposed by many Republican candidates, particularly those backed by the Tea Party movement.

Others assert that Mr. Bernanke needs to be more outspoken in warning of the dangers posed by the country’s unsustainable debt burden. Still others say the Fed should stay out of the way, given its failure to prevent the financial crisis and the longest recession since the 1930s.

What is clear is that Mr. Bernanke is intent on not embroiling the Fed in a partisan brawl, and that he believes the central bank should weigh in on fiscal policy in only the broadest terms — even if past chairmen like Marriner S. Eccles in the 1930s, Arthur F. Burns in the ’70s and Paul A. Volcker in the ’70s and ’80s at times broke that mold.

“The chairman’s relative reticence is unusual, but it reflects the difficult circumstances in which the Fed now operates,” said Iwan W. Morgan, a University of London historian who studies American fiscal policy. “Its credibility, which was so high in the Volcker and early Greenspan years owing to its success in constraining inflation, is now at its lowest ebb since the inflationary 1970s.”

Mark W. Olson, who served with Mr. Bernanke on the Fed’s board of governors and is now co-chairman of Treliant Risk Advisors in Washington, acknowledged that “fiscal policy decisions could either exacerbate or negate monetary policy decisions,” but said that Mr. Bernanke wanted to avoid the “oracle trap” into which Mr. Greenspan sometimes fell.

Mr. Greenspan’s reputation as a sage, developed over 18 years as chairman, has lost its luster, owing not only to his aversion to regulation and his decision to keep interest rates low after the 2001 recession, but also to his support for the tax cuts, which he has since renounced, saying the cuts should be allowed to expire.

“For a long time, Alan Greenspan’s pronouncements were viewed in Congress and elsewhere as if orchestrated on Mount Sinai, and there seems a consensus now is that this was a mistake,” said Bernard Shull of Hunter College in New York.

As a scholar of the Depression, Mr. Bernanke chastised Japan for being too timid in combating deflation and advocated overwhelming force as a response to financial crises — advice he has followed at the Fed.

But Mr. Bernanke, who was confirmed to a second term in January by an uncomfortably narrow margin, has been adroit in avoiding fiscal controversy.

At a pair of Congressional hearings in September, for example, he gave each party a message it wanted to hear. He told Democrats that the government should maintain short-term fiscal support for the recovery. He assured Republicans of the need to rein in deficits and stabilize debt levels. And when pressed, he declined to be precise.

“I’m reluctant to take positions on specific tax and spending measures,” he told Representative Spencer T. Bachus of Alabama, the top Republican on the House committee that oversees the Fed. “I’m sure you can understand my position on that.”

However, Mr. Bernanke has spoken of the budgetary challenges posed by an aging population. And he came the closest he has in a while to advocating fiscal measures in an Oct. 4 speech in Providence, R.I., when he suggested that the government adopt fiscal rules — in essence surrendering some of Congress’s and the president’s discretion.

Congress already uses so-called pay-go rules, which require that spending increases or tax cuts be offset within a 10-year horizon, but there are significant exemptions. Moreover, the rules are intended only to prevent projected deficits from getting worse and do not require Congress “to reduce the ever-increasing deficits that are already built into current law,” Mr. Bernanke noted.

Of the dozen economists interviewed for this article, those who favored additional stimulus tended to want Mr. Bernanke to speak out.

“Further short-run fiscal expansion paired with credible measures to deal with longer-term deficits would be a good idea,” said Alan J. Auerbach, a professor of economics and law at the University of California, Berkeley. “The political difficulty of accomplishing this puts pressure not only on the Fed but also on our trade policy, where we are forced to lean more heavily on China.”

William G. Gale, of the Brookings Institution, said additional federal spending would be more effective than new debt purchases by the Fed — a strategy known as quantitative easing — and that Mr. Bernanke should at least explain the connection between the two.

“By pursuing quantitative easing, he is committing to monetary expansion,” Mr. Gale said. “He has the right to say that he has made the commitment, and now it is time for Congress to make a similar commitment.”

Other economists say the Fed has already gotten dangerously close to the Treasury Department, given their collaboration under Mr. Bush in bailing out Wall Street, and in propping up the housing market.

“The distinction and separation of monetary and fiscal policy has almost disappeared,” said Alberto F. Alesina, an economics professor at Harvard. “This is, I believe, dangerous.”

Another Harvard professor, Martin S. Feldstein, who like Mr. Bernanke is a former chairman of the White House Council of Economic Advisers, said, "There have been times when the Fed has in effect said: If fiscal policy is tightened, the Fed will be able to lower interest rates. That does not apply now."

28/10 Stores Push Black Friday Into October

By STEPHANIE CLIFFORD
Published: October 28, 2010

Attention bargain shoppers! It is October — and Black Friday specials are here.

The year’s most popular discount shopping event, referring to the Friday after Thanksgiving, is arriving ahead of Halloween this year, with some promotions beginning this week and others throughout November.

Both retailers who have had tepid sales lately (Wal-Mart Stores, Sears) and those with rising sales (Amazon, Target) are pushing the tradition forward in a bid to snag shoppers’ limited money. Recession-trained customers are also pushing the stores to offer big deals now or risk losing out to competitors, though there is some skepticism about how significant some of the early discounts are.

The first “Black Friday Now” deals at Sears will be available beginning Friday and Saturday. Amazon’s electronics department will offer sales on items like Blu-ray players and high-definition TVs on Friday, and Toys “R” Us is putting all the items in its 80-page Christmas toy book on sale on Sunday.

Black Friday creep has been around for a while, but analysts say this year breaks new ground: the range of stores offering early discounts is wider, the discounts are steeper and the sale periods longer — in some instances, a full month before the real thing. Sears, for example, offered early promotions last year but expanded the hours and days this year, while Amazon is beginning earlier than ever.

“Consumers have been trained to buy merchandise only ‘on sale,’ ” Sherif Mityas, a partner in the retail practice at the consulting firm A. T. Kearney, said in an e-mail. “Given a limited budget, if retailers don’t capture that first or second purchase, they may find themselves with a lot of inventory the week before Christmas and the need for massive discounting to save the holiday.”

Some shoppers asked for a longer sale period, both for convenience and out of nervousness over crowds, said Barbara Schrantz, executive vice president of marketing and sales promotion at Bon-Ton Stores. After a Wal-Mart employee was trampled and killed on Black Friday in 2008, stores increased their crowd-control measures, but they do not want safety concerns to keep shoppers away from stores.

In some instances, deal hunters say, stores are just hijacking the Black Friday label. Mike Riddle, who started the site Black-Friday.net in 2006 to track deals, said shoppers should not believe that “special” prices for the Friday were necessarily lower than the usual price.

“Retailers are taking advantage of the term,” he said, citing the first Sears “Black Friday Now” circular as “nothing more than their weekly ad rebranded.” Tom Aiello, a spokesman for Sears Holdings, said the prices were not standard discounts; so far, customer response has been positive about this weekend’s deals, he said.

Traditionally, stores used low prices on the Friday after Thanksgiving to attract shoppers, who, they hoped, would put full-price items in their carts alongside the bargains.

In 2008, as the economy sank, the offers became more intense. “Retailers had to go even further in the breadth and depth of their sales post-Black Friday in attempts to salvage some degree of revenue,” Mr. Mityas said. Last year, with consumers trained to look for deals, “sales growth improved, but at the cost of profitability — retailers were essentially buying their foot traffic,” he said.

This year, the pre-Friday deals are expanding more than ever. And consumers and retailers are more evenly matched, Mr. Mityas said, as shoppers demand early and frequent sales, and retailers “aim to drive foot traffic without resorting to ‘70 percent off everything’ signs in the windows.”

For the first time, Target will run a four-day sale starting the Sunday before Thanksgiving in which more than 170 gift items will be discounted as much as 50 percent. While in the past Target has issued a standard circular before Thanksgiving, this year the discounts are deeper, more items will be discounted and the focus will be on gift-ready items in toys, electronics and entertainment, said Kathee Tesija, Target’s executive vice president of merchandising.

“The economy does play into it a little bit — this is always a very competitive time of year,” Ms. Tesija said. “We want them to come to us first, middle, last.”

She said discounts had to be good because shoppers had gotten smarter.

“Throughout the recession, I think they’ve been very thoughtful about how they spend their money,” she said. “They know when they’re getting a good deal.”

Some stores are holding out until Thanksgiving week, like Bon-Ton Stores, which will put most of its merchandise on sale the Sunday before Thanksgiving.

J. C. Penney will run a one-day sale on Nov. 17, adding to the “Biggest Sale of Them All” on Nov. 6, a “Huge Sale” on Nov. 20 and a “Day Before Thanksgiving” sale on Nov. 24.

The early sales extend to the Web. At Amazon.com, beyond the electronics sales beginning this week, the Black Friday deal page will go live sometime around the week of Thanksgiving, offering big discounts on popular products. Wal-Mart’s Web site will also run discounts starting in early November, offering up to 30 percent off 200 items a week in categories like toys, electronics, home and other gifts.

And Staples.com will offer discounts of more than 50 percent on some items like laptops, cameras and printers on the Sunday through Wednesday before Thanksgiving.

Even with the effort to capture more sales through early promotions, there is no guarantee that retailers will see a bounce in their bottom lines. In the three years before the financial crisis, there was accelerated spending in early November, said Mike Berry, director of industry research for MasterCard Advisors SpendingPulse, which estimates total retail sales. But in 2008 and 2009, as shopping creep took hold, spending was weaker.

One explanation is that retailers cut prices too steeply, leading perhaps to increased traffic but low revenue over all. And customers simply refused to buy anything at full price.

Brad Wilson, who runs BlackFriday2010.com, said he expected consumers to have the upper hand again this year. “After an exhilarating late 2008 and full-year 2009, this year has been boring in the ‘great deals’ corner of retail,” he said in an e-mail. “October has started to pick that up, and I think November and December could break it wide open.”

Robert Buchanan, a finance professor who specializes in retail at the John Cook School of Business at Saint Louis University, said shoppers had become smart enough to sidestep the regularly priced goods.

“My guess is that the majority are just cherry-picking the special items,” he said. “They’re looking for the $6 toaster and they’re on their way.”

A version of this article appeared in print on October 28, 2010, on page A1 of the New York edition.

27/10 Charge Leaves Deutsche Bank With a Loss

By JACK EWING
Published: October 27, 2010
FRANKFURT — Deutsche Bank said Wednesday that it had lost money in the third quarter due to the costs of acquiring Germany’s largest retail bank, but the shares rose as its investment banking unit performed better than competitors.

Another European giant, BBVA, also reported a drop in earnings Wednesday as it continued to feel the effects of the ailing Spanish economy.

Deutsche Bank’s €2.3 billion, or $3.2 billion, charge connected to the takeover of Postbank contributed to an overall loss of €1.2 billion, which was slightly better than expectations. The bank had previously warned it would post a loss for the period, and analysts polled by Reuters had expected it to be around €1.33 billion. The bank reported a €1.38 billion net profit in the third quarter of 2009.

Like other big banks, Deutsche Bank felt the effects of slumping stock markets earlier this year. But a rebound in debt trading in late September compensated for a decline in equity trading and contributed to an 12 percent increase in profit from investment banking, to €1.1 billion.

“The third quarter results again prove the robustness of our recalibrated business model despite the difficult ongoing macroeconomic and market conditions,” Deutsche Bank’s chief executive Josef Ackermann said in a statement.

Deutsche Bank shares rose 1.6 percent in Frankfurt trading as its earnings compared favorably with rivals. The Swiss bank UBS said Tuesday that its investment banking unit lost 406 million Swiss francs, or $417 million, in the third quarter, overshadowing an overall profit of 1.66 billion francs. Credit Suisse last week reported a surprising profit drop.

“The Swiss banks disappointed, Deutsche didn’t disappoint,” said Jon Peace, a banking analyst at Nomura in London. He noted, though, that the performance of Deutsche Bank’s investment banking unit is merely average compared with global institutions.

BBVA became the latest Spanish bank to report a drop in earnings as government austerity measures weigh on economic growth. BBVA said that net profit in the third quarter fell 17 percent to €1.14 billion. The bank said, however, that the percentage of bad loans is declining. Its shares fell in early trading, but recovered to nearly even later in the day.

Deutsche Bank’s acquisition of Postbank would vastly expand its branch network and more than double the number of retail customers to 24 million. Ordinary depositors have become more valuable in the banking industry now that it is more costly for banks to raise funds on wholesale money markets.

“Our retail banking operation is vastly increasing its footprint in Germany, which will balance our earnings towards an even more stable business,” Mr. Ackermann said.

Earlier this month Deutsche Bank sold new shares to raise €10.2 billion, which it will use to complete the Postbank takeover and comply with regulations requiring banks to hold more capital in reserve.

The bank said its so-called core tier one capital ratio, a measure of financial strength, was 7.6 percent at the end of the quarter, up from 7.5 percent at the end of the second quarter. The figure does not include the new capital that Deutsche Bank raised.

Regulators from the world’s largest economies have proposed requiring banks to hold core tier one capital of at least 7 percent in order to absorb unexpected losses, but the rule would not take full effect until 2019.

Though Deutsche Bank complies with the new rules, investors may punish the company for being so close to the minimum, Mr. Peace of Nomura said. “With Deutsche being at the low end it is likely to trade at a discount,” he said, adding that investors are also unlikely to see big increases in dividends as the bank holds on to profits to strengthen its capital base.

Deutsche Bank warned earlier this month that it would take the write-down on the value of the 30 percent stake in Postbank that it already owned. Deutsche Bank has offered Postbank shareholders €25 a share for the rest of the bank.

The drop in earnings at Spanish banks has also started to trigger some management changes. Last week Bankinter surprised investors by announcing the resignation of its long-standing chief executive, Jaime Echegoyen, who is being replaced by the head of its insurance subsidiary, Maria Dolores Dancausa.

Raphael Minder contributed reporting from Barcelona.

This article has been revised to reflect the following correction:
Correction: October 27, 2010
An earlier headline for this article misstated the outcome for BBVA. It reported a drop in earnings, not a loss.

28/10 Santander Profits Hit by New Banking Rules

By REUTERS
Published: October 28, 2010
MADRID (Reuters) - Santander, the euro zone's biggest bank, said new central bank rules would hit 2010 profit and called a halt to acquisitions while provisionally scheduling a flotation of its UK unit in the first half of 2011.

The aggressively acquisitive bank said it would work to consolidate recent buys after a multi-billion euro spending spree since the beginning of the summer on assets from Britain to Mexico.
"(There's) nothing expected, nothing on the horizon," Chief Executive Alfredo Saenz told analysts.

The bank said profit for 2010 would fall short of its forecasts after taking a greater-than-expected charge for bad Spanish assets under new Bank of Spain accounting rules enforced after a property crash and the nation's worst recession in half a century.

Santander reported a 9.8 percent fall in nine-month net profit after the one-off hit of 472 million euros (411 million pounds) for the provisions, against around 400 million euros estimated by the bank at end-July, and higher-than-expected costs.

"The miss was cost and provision driven," said Ronit Ghose, analyst at Citi.

Shares fell 1.00 percent against a little changed Spanish blue chip index and a 0.1 percent rise in European banks. The stock fell as low as 8.985 euros, its lowest in nearly a month.

Santander had previously said it expected 2010 net profit to be in line with the 8.9 billion euros it achieved in 2009.

"Underlying trends are quite solid but the numbers look weak at first glance and are not a positive catalyst," said analyst Arturo de Frias at Evolution Securities, who rates the stock "buy."

BAD LOANS

Under new rules which came into effect on September 30, the Bank of Spain has cut the time over which banks can fully provide for estimated losses on non-performing loans. It has also required a further 10 percent writedown on properties held for more than two years.

Home market Spain, comprising the Santander retail banking network and the contribution from majority-owned unit Banesto, now accounts for 23 percent of Santander's net profit, less than the 25 percent brought by Britain and 34 percent from Brazil.

Santander shares have fallen 19 percent from the beginning of the year. Hedge funds used Spanish banking shares as proxies for Spain earlier this year as investors fretted the country faced a Greek-style debt crisis.

The bank, whose shares have underperformed European peers by around 16 percent since the beginning of the year, said its bad loans as a percentage of total loans at a group level rose to 3.42 percent, from 3.37 percent at end June.

Santander's list of acquisitions has raised concerns about its capital strength just when regulators are forcing banks to hold more and better quality capital under the Basel III rules.

"Our key concern remains capital adequacy under Basel III," said Andrew Lim, analyst at Matrix.

Saenz ruled out a capital hike to boost the bank's reserves but said a flotation of its UK business was likely for the first part of 2011.

No adviser had yet been appointed for the deal, he said.

A UK listing would be the highest profile London flotation since telecoms firm Orange nine years ago and Santander is expected to sell about 20 percent of the business, sources have told Reuters.

That could value the business at over 15 billion pounds and raise more than 3 billion pounds to boost strained group capital.

(Additional reporting by Steve Slater in London: Editing by David Cowell)

28/10 International Borrowers Take to Islamic Bond Market

By SARA HAMDAN
Published: October 28, 2010

DUBAI — Until recently the issuance of Islamic bonds, or sukuk, was confined to the Muslim world. But now a number of international borrowers are tapping the markets, including Nomura Holdings in Japan and Europe's first corporate borrower, International Innovative Technologies.

The $100 billion Shariah-compliant bond industry prohibits the generation of interest and investments in areas that go against Islamic moral codes. As their use spreads beyond the Gulf and Malaysian markets where they originated, some analysts are warning that regulators must watch closely to prevent money laundering in the developing market segment.

“It is good that sukuk and Islamic finance are gaining acceptance internationally, but regulators must be careful in doing this because they may not necessarily have experience in regulating this market,” said Khairum Nizam, assistant secretary general of the Accounting and Auditing Organization for Islamic Finance, based in Bahrain. “The challenge is to make sure new jurisdictions are well informed, where sukuk is fairly new and not tested, to provide all necessary disclosures, transparency and anti-money laundering mechanisms.”

The ratings agencies Moody’s and Standard & Poor’s say they expect to see a rise in the number of sukuk issues by new players over the next 12 months, including issues by borrowers in Singapore, Australia, Luxembourg, Thailand, Hong Kong, France and Russia.

In August, International Innovative Technologies, based in Britain, made the first sukuk offering by a European corporate borrower. Totaling a modest $10 million, the sukuk, which will be listed on the Cayman Islands Stock Exchange, will mature in 2014. It followed a $100 million sukuk issuance in Japan by the investment bank Nomura Holdings in July.

Kuveyt Turk Katilim Bankasi, a Turkish Islamic lender, raised $100 million through three-year Islamic bonds in August and announced plans a month later for a second sukuk issuance of a similar size in 2012. Similarly, Kazakhstan, which last raised debt overseas in 2000, and the Philippines state-owned Al Alamanah Islamic Bank, both say they are planning debut Shariah-compliant debt sales by the end of this year.

“We are seeing the market opening to non-Islamic issuers who are intending to diversify their funding access and investor base, in Europe and even the U.S.,” said Emmanuel Volland, a senior director at Standard & Poor’s based in Paris. “Aside from differing sukuk structures, one issue as the sukuk market goes global is the interpretation of Shariah law in different countries. To have a global definition of Shariah compliancy for sukuk is extremely challenging when scholars come from different schools of thought.”

Differing interpretations of Shariah law for financial products caused widespread confusion in February 2008, when a religious scholar said that nearly 80 percent of sukuk in the market were not actually compliant. While no fingers were pointed at specific debt issuances, analysts say the comment caused substantial disruption in the market, even before the financial crisis hit. As debt markets dried up over the course of 2009, the sukuk market struggled with at least $10 billion in delayed sukuk and defaults of high-profile issuances including Dubai World and Nakheel. Global sukuk sales fell 23 percent to $10.9 billion in 2010, according to data compiled by Bloomberg.

“Given the failure of some sukuk in the past year or so, there is a call for new regulation,” said Hatim El-Tahir, director of the Islamic Finance Knowledge Center for Deloitte & Touche in Bahrain. “Investors need more information for their own protection. This is still a young industry and lack of regulation will cause difficulty for investors and for cross-border investments in sukuk.”

While the Islamic Financial Service Board and the accounting and auditing organization have defined standards for sukuk, defaults over the past year have shown that new guidelines must be set as problems arise, particularly as sukuk start to generate global attention.

“There isn’t a global standardized contract and documentation process relevant for this product; whether in London, Luxembourg or the D.I.F.C., there is no consensus of countries abiding by one set of rules,” said Dr. Tahir, referring to the Dubai International Financial Center. “The standards are developed here, but not every issuer is following these.”

He added that ideally, they would all have to abide by guidelines set by the accounting and auditing organization and the financial service board to ensure that they followed best practices.
Analysts say regulatory weaknesses are understandable in what is still a young market.

“Yes, it is underregulated, but it is just a normal evolution of the market as it goes from phase one, where rapid growth often ignores poor practice, to maturing in phase two, with better regulation and industry-wide standardization on a global scale,” said Mohieddine Kronfol, a fund manager at Algebra Capital in Dubai.

As conventional debt markets have developed momentum this year, sukuk issuance has expanded too.

Global sukuk issuance topped $13.7 billion in the first half of 2010, nearly twice the $7.1 billion reported a year earlier, according to a report by Standard & Poor’s.

In the past three months, Saudi Electric Co. issued $1.8 billion in three large sukuk offerings; Dar Al Arkan sold $450 million worth through sukuk; Qatar Islamic Bank sold $750 million in sukuk, the first international sukuk issuance by a Qatari financial institution; and in late October, the Saudi-based Islamic Development bank raised $500 million through sukuk sales as part of a $3.5 billion program.

Still, analysts say, further growth risks being hampered until proper regulations are in place to allow the development of a diversified institutional investor base.

“Non-bank institutional investors are growing in the Gulf, but it’s still not where it should be,” said Raphael de Ricaud, head of Islamic finance at Rothschild based in Dubai. “We need more of these companies in the region, and we also need the existing ones to be more informed about these products. And at the end of the day, it’s about managing risk.”

27/10 Regulators Push Banks to Limit Reliance on Credit Ratings

By JACK EWING
Published: October 27, 2010

FRANKFURT — Banks and institutional investors should break their dependency on credit rating agencies and take more responsibility for assessing the quality of the debt that they buy, a panel that is rewriting global rules on risk said Wednesday.

The Financial Stability Board, which was created by members of the G-20 to work on ways to avoid future financial crises, said in a report that overreliance on credit ratings had contributed to the financial crisis, as downgrades of certain debt issuers provoked market stampedes.

The main credit rating agencies — Standard & Poor’s, Moody’s and Fitch Ratings — have faced sharp criticism for assigning high ratings to subprime mortgages and other assets that later declined drastically in value. During Europe’s sovereign debt crisis, downgrades of debt issued by countries like Greece or Portugal helped prompt sell-offs of their government bonds and contributed to market turmoil.

Large banks should be required to supplement the work of ratings agencies by doing their own research, the F.S.B. said, and they should disclose what methodology they use. Regulators, in turn, should make sure that banks are not underestimating risks.

“Larger, more sophisticated banks within each jurisdiction should be expected to assess the credit risk of everything they hold,” the F.S.B. said.

However, the panel acknowledged that it would take institutions some time to build up the capability to better scrutinize debt, and set no deadline. “Changes in market practices cannot happen overnight,” the F.S.B. said.

Based in Basel, Switzerland, the F.S.B. cooperates with the Basel Committee on Banking Supervision to establish global rules governing finance. The F.S.B. chairman is Mario Draghi, governor of the Bank of Italy and a member of the European Central Bank’s Governing Council.
G-20 finance ministers and central bank governors endorsed the F.S.B.’s findings last week when they met in South Korea, the panel said.

The F.S.B. said that regulators and central bankers had contributed to the system’s dependence on credit ratings by “hard-wiring” their verdicts into laws and regulations. Central banks should, for example, avoid using credit ratings as the sole criterion for determining what kind of debt they accept from banks as collateral for loans, the F.S.B. said

The F.S.B. acknowledged that smaller banks might not have the resources to assess every investment. But if that is the case, then they should disclose how much they have depended on ratings agencies, the F.S.B. said. Regulators should consider setting limits on the percentage of assets that banks or institutional investors could hold for which they had not assessed the quality themselves, the panel said.

In addition, debt issuers should release more information so that investors were in a better position to make their own judgements. “In some cases, investors have weaker access to issuer information than C.R.A.s,” the F.S.B. said, referring to credit ratings agencies, “thus adding to their reliance on C.R.A. ratings.”

Bank of Japan Details Plan to Buy Assets
By REUTERS
Published: October 28, 2010

TOKYO (Reuters) — The Bank of Japan made no major policy moves at its meeting on Thursday, but said that a plan to spend 5 trillion yen ($61 billion) buying assets was a “strong option” if the outlook for the economy sharply deteriorated.

The central bank also moved up its next policy review to begin Nov. 4, right after the Federal Reserve’s meeting. Markets took that schedule change as a sign that the bank was ready to act swiftly if there is a rush to sell dollars once the Fed moves, as expected, to buy more bonds to stimulate the economy.

The governor of the Bank of Japan, Masaaki Shirakawa, said, however, the change of the date had nothing to do with the Fed and was aimed at speeding up the roll-out of the bank’s asset buying plan, particularly purchases of less conventional instruments.

“If there is a big change in our economic and price outlook, expanding it is a strong option,” Mr. Shirakawa told reporters when asked whether the bank would increase its asset purchases.

The bank announced the plan this month when it also pegged its benchmark rate from 0 to 0.1 percent and vowed to keep it near zero until the end of deflation was in sight.

Its updated price and growth forecasts were slightly more optimistic than markets had expected, but still showed it could take perhaps two years before prices started rising at a pace the central bank wanted to see before lifting rates.

While new economic powers like Brazil, China and India have swiftly recovered from the global financial crisis and the economic slump that followed, Japan, the United States and other rich nations have struggled to sustain growth.

Furthermore, the side effects of the trillions of dollars they spent on economic stimulus and record low lending rates have aggravated strains in currency markets, causing fears of currency and trade conflict.

On Thursday, the Bank of Japan provided details of its asset purchasing plan, which would begin with buying government debt next month and corporate bonds and commercial paper possibly in December.

The central bank said it would buy 1.5 trillion yen in long-term government bonds and 2 trillion yen in short-term government securities. It also plans to spend 1 trillion yen on commercial paper and corporate debt.

The Fed is expected to extend its government bond buying scheme next week to prop up the sputtering American economy.

The prospect of more dollars flowing into markets has driven the American currency to near record lows against the yen, prompting Japanese exporters like Toyota and Nissan to talk of a looming crisis. Speculation that the Fed will opt for piecemeal fund injections rather than a single big operation has given the dollar some respite, but a more aggressive action could knock it down again and force the Bank of Japan’s hand.

In its twice-yearly economic report, the bank cut its growth forecast for the fiscal year to March 2012 to 1.8 percent, from the 1.9 percent predicted three months ago, less than markets had expected.

It also predicted prices would inch up 0.1 percent in the next fiscal year and 0.6 percent thereafter, prompting some analysts to wonder whether the central bank was too optimistic.

28/10 Positive Signs on Europe and Central Asia Recovery

By JACK EWING
Published: October 28, 2010

A main indicator of consumer and business sentiment in Europe rose more than expected on Thursday, while a public bank that finances private enterprise in ex-Communist countries raised its growth forecasts.


The two reports, along with a drop in German unemployment, reinforced expectations that Europe and the former Soviet Union were recovering from last year’s sharp downturn, though growth was still wobbly in places.

The European Commission’s economic sentiment indicator, which measures confidence among consumers and a broad range of industries, rose 0.5 points in October after rising 0.3 points in September. In the euro area, the index rose 0.9 points for the second month in a row. The index is 104.1 for both regions, above the long-term average.

But strong gains in Northern Europe were partly offset by continued pessimism in Spain and other countries in the south that have been the focus of Europe’s sovereign debt crisis.

“So far, the expected growth dip in the euro area has not really materialized,” Christoph Weil, an economist at Commerzbank in Frankfurt said in a note. But he added, “tensions are increasing below the surface.”

In addition, the public European Bank for Reconstruction and Development, whose largest shareholder is the United States, raised its forecast for economic growth in the 29 so-called transition countries it covers, which extend from Hungary to Mongolia.

“The recovery from the crisis is gradually becoming more broad-based across the region, although it is still fragile in some subregions,” the bank said in a report. “Even the recessions in the Baltic states and southeastern Europe appear to be finally bottoming out.”

Growth in the region will reach 4.2 percent this year and 4.1 percent next year, the European Bank for Reconstruction and Development said. In July, the bank, which also receives financing from Europe and countries including Japan and Australia, predicted growth of 3.5 percent this year and 3.9 percent next. Last year, output in the region shrank by 5.5 percent.

Countries that suffered double-digit plunges in economic output last year, including Latvia, Lithuania, Armenia and Ukraine, will grow again next year as bank lending resumes and unemployment falls, the bank said. It also raised its growth forecasts for countries like Poland, Romania and Turkey.

The bank left its forecast for Russia next year unchanged at 4.6 percent. It also said there remained big disparities among regions. In Southeastern Europe, which includes the former Yugoslavia as well as Albania, growth will reach only 1.6 percent next year. That is a more optimistic forecast than the bank made in July, but shows that the region is still struggling after output fell 0.6 percent this year and 5.4 percent in 2009.

Central Asia, including countries like Kazakhstan, will grow the fastest because of higher prices for oil and other commodities, the bank said.

The rise in the European Commission sentiment indicator was led by France and the Netherlands, with Germany recording only a modest increase — another sign that the record growth there this year may be cooling. However, there was other good economic news from Germany on Thursday, as unemployment fell below the three million mark to 7 percent, an 18-year low.

Germany is cashing in the dividend from changes to labor laws made several years ago, Axel A. Weber, president of the German Bundesbank, said. “Comprehensive and sometimes painful labor market reforms have helped to make the labor market significantly more flexible,” Mr. Weber told an audience in Eltville, Germany, according to a release.

Among business, the biggest improvement in the sentiment indicator was among manufacturers, because of booming exports. Financial services recorded a decline for the second month in a row.
But Mr. Weber and others cautioned that there were still many dangers, like excessive trade deficits or surpluses, that could derail growth. “While the financial crisis has been associated with a narrowing of imbalances, recent data suggest that this development has started to go into reverse,” Mr. Weber said. He called on China to allow its currency to fluctuate more to increase domestic demand and compensate for a soaring trade surplus.

Erik Berglof, chief economist of the bank, said that some of the problems that had caused a severe economic crisis in Eastern Europe last year, like a dependency on loans denominated in dollars, have eased. But much more work needs to be done, he said. “There is no room for policy complacency,” Mr. Berglof said.

A version of this article appeared in print on October 29, 2010, on page B9 of the New York edition.

28/10 Potash Shares Fall on Worries About BHP Deal

By IAN AUSTEN
Published: October 28, 2010

OTTAWA — Investors seem to be growing nervous about the future of the Potash Corporation of Saskatchewan.


Shares of the company, the world’s largest fertilizer maker, fell $4.79, or 3.25 percent, to $142.53 in New York trading despite the release of an unusually strong quarterly financial report. Some analysts attributed the decline to increasing speculation that the government of Canada might block a hostile $38.6 billion bid for Potash from BHP Billiton, the Australian mining company.

The province of Saskatchewan — home to both Potash, the company, as well as some of the world’s largest deposits of potash, the mineral, increased pressure on the government this week to block the takeover.

The province is concerned that an acquisition by BHP would cut its tax revenues and royalty payments.

Both Saskatchewan and the Canadian government are controlled by right-of-center political parties. Before coming to Ottawa to meet with his federal counterparts earlier this week, Brad Wall, Saskatchewan’s premier, cited recent remarks to an Australian newspaper by Don Argus, BHP’s former chairman.

Last May, Mr. Argus told The Herald Sun of Melbourne that Australia should shun Canada’s practice of allowing foreign companies to control natural resources.

“Australia needs to be most careful that it does not forfeit the economic merit of our resources sector,” he said. The newspaper paraphrased Mr. Argus, who was chairman at the time, as saying that Canada had lost control over many of its crucial resources “much to the detriment of the country.”

On Thursday, The Globe and Mail, a Toronto newspaper, reported that the federal government now “appears to be swayed” by Saskatchewan, although it did not offer a source within the government.

“There is a lot more noise coming out of Saskatchewan than anybody expected or wanted.” said a person with knowledge of the negotiations between BHP and the government who did not wish to be identified because the person was not authorized to speak to the media.

Potash said Thursday that strong demand increased third quarter revenue by 43 percent, to $1.58 billion. Earnings were $402.7 million or $1.32 a share in the quarter, compared with $247.9 million or 82 cents a share a year earlier.

William J. Doyle, the president and chief executive of Potash, said that talks were under way with other potential bidders.

But during a telephone interview, he also suggested that the growth reflected in the quarterly results was a sign that shareholders would prosper even if the company was not sold.

“We’re at the precipice of a new long-term period of growth,” he said. “The future upside will be reflected in our stock price.”

Cyrus Sanati contributed reporting from New York.
A version of this article appeared in print on October 29, 2010, on page B6 of the New York edition.

28/10 China Is Said to Resume Shipping Rare Earth Minerals

By KEITH BRADSHER
Published: October 28, 2010

BAOTOU, China — The Chinese government on Thursday abruptly ended its unannounced export embargo on crucial rare earth minerals to the United States, Europe and Japan, four industry officials said.

The embargo, which has raised trade tensions, ended as it had begun — with no official acknowledgment from Beijing, or any explanation from customs agents at China’s ports.
Rare earths are increasingly in demand for their use in a broad range of sophisticated electronics, from smartphones to smart bombs.

Having blocked shipments of raw rare earth minerals to Japan since mid-September, and to the United States and Europe since early last week, Chinese customs agents on Thursday morning allowed shipments to resume to all three destinations, the industry officials said. They spoke only on condition of anonymity because of the business and diplomatic delicacy of the issue.

Shipments to Japan, however, still face additional scrutiny and some delays, the officials said.
Even with containers of rare earths once again leaving China’s docks, foreign buyers still face potential shortages. As China’s own industrial needs for rare earths have grown, Beijing has repeatedly reduced its export quotas for the minerals over the last five years. So even when China is shipping its full quotas, the outbound supply is now well below world demand.

Moreover, the tight export quotas have caused world prices to soar, even while holding steady in China.

Officials in two departments of China’s General Administration of Customs in Beijing declined to comment on Thursday evening about the status of rare earth exports. The commerce ministry, which handles trade policy, also had no immediate comment.

Although deposits of rare earths are found in various parts of the world, including the United States, China produces about 95 percent of the global supply of the minerals. That is largely because rare earth mining and processing can be so environmentally risky, creating toxic and even radioactive wastes, that other countries have tended to avoid or abandon production. Only recently have other nations begun scrambling to develop or expand their own mining capabilities.

The Chinese shipments resumed Thursday morning only hours before Secretary of State Hillary Rodham Clinton raised the embargo issue at a news conference in Honolulu, where she announced plans to visit China on Saturday to pursue the matter with Chinese officials.

Mrs. Clinton spoke after meeting with Japan’s foreign minister, Seiji Maehara, and said that the suspension of shipments had been a “wake-up call” and that both countries would have to find alternative sources of rare earth materials.

Because China is on the opposite side of the international dateline from Honolulu, it was already midday on Thursday in China by the time Mrs. Clinton spoke in Honolulu on Wednesday. Later, after the New York Times Web site reported that the embargo had been lifted, an administration official said the United States was still seeking clarification from China.

In recent weeks, senior Chinese commerce ministry officials have insisted that they had not issued any regulations halting shipments. They have suggested at various times — implausibly, in the view of industry executives — that the halt resulted from a spontaneous and simultaneous decision by the country’s 32 authorized rare earth exporters not to make shipments, whether because of a deterioration in Sino-Japanese relations or a greater thoroughness on the part of customs inspectors.

Under this year’s quota — 30,300 metric tons of authorized shipments — only a few thousand metric tons remain to be exported in 2010. Meanwhile, annual demand outside China for raw rare earths approaches 50,000 tons, according to industry estimates.

The Chinese government assigns its quotas to the authorized exporters, who often trade those rights like commodities. As recently as 2008, the quota rights themselves had no market value. But lately, with rising demand, the value of the remaining quotas has soared to the point that the right to export a single ton of rare earths from China now sells for about $40,000, including special Chinese taxes.

That is a sizable, additional cost for buyers of neodymium, a rare earth used to make lightweight, powerful magnets essential to technologies including giant wind turbines, gasoline-electric cars and Apple iPhones.

Neodymium sells for about $40,000 a metric ton in China, having recovered from a nose-dive during the global economic crisis. But it sells for twice that much outside the country because of the export restrictions, according to data from Metal Pages, a database service in London.

The cost of quotas has become exorbitant for users of lanthanum, which is vital for the catalytic converters that clean the exhaust of conventional, gasoline-powered cars. It is mostly produced here in Baotou, a smoggy mining and steel city in China’s Inner Mongolia that is the capital of China’s rare earth industry. Lanthanum sells for less than $4,500 a ton in China, but up to 10 times that much outside China because of the export restrictions.

Such price differences have created a big incentive for companies to move factories to China, and many already have.

China’s shipping embargo has caused much more distress in Japan than in the United States or Europe, and not just because Japan’s shipments were cut off much earlier. It is because Japan tends to be affected more than other industrial nations by the way China sets its rare earth export quotas.

China’s quotas — and the shipping embargo — have involved only shipments in which the material has a rare earth content of about 50 percent or more. High-technology materials made from rare earths, like special magnetic powders for the clean energy and electronics industries, or polishing powders for the glass industry, are not subject to quotas and are inexpensively available.

Because the United States and Europe mainly buy highly processed rare earth powders from China, the customs policy of blocking shipments of raw rare earths had a limited, mostly symbolic effect. Japan, in contrast, is the biggest importer of raw rare earths and tends to process them into industrial materials. So Japan is more dependent on the materials affected by China’s tightening quotas.

It was on Oct. 18 that the Chinese government broadened its halt in raw rare earths to include the United States and Europe. That step enabled customs officials to take the position that they were checking all rare earth shipments closely and were not singling out Japan.

The move also occurred only hours after Zhang Guobao, the country’s top energy official, summoned foreign reporters in Beijing. There, he delivered a blistering denunciation of the Obama administration’s decision the previous Friday to begin investigating whether China’s clean energy policies violated the World Trade Organization’s free trade rules. But the exact interaction between American policy decisions and Chinese customs enforcement actions is unclear.

For China, the embargo on rare earth shipments has provided at least some geopolitical leverage. The halt was one of a series of measures that China took after Japan detained the captain of a Chinese fishing trawler that collided with two Japanese patrol boats; Japan later released the trawler’s captain.

Japanese companies had been able to weather the embargo without any significant factory shutdowns because many Japanese companies had accumulated rare earth stockpiles in the last few years. Still, the interruption of shipments caused dismay and alarm in the Japanese business community and Japan’s government.

But China’s willingness to play economic hardball could yet have long-term drawbacks, if it prompts multinationals to reduce their reliance on manufacturing in China and spread their investments among more countries.

28/10 E.U. Moves to Tighten Rules Governing the Euro Zone

By STEPHEN CASTLE
Published: October 28, 2010

BRUSSELS — The European Union approved plans to tighten the rules governing the euro early Friday, and said it would seek more changes and a limited alteration to the bloc’s main treaty in December.

At a meeting in Brussels, the leaders of the 27-nation bloc approved a set of tougher budget rules, crafted by their finance ministers, which included new sanctions against eurozone states that fail to keep deficits and debt in check, and earlier warnings over asset bubbles and declining competitiveness.

Its declaration also said the union will consider ways to change its governing treaty in December to set up a permanent fund to help eurozone nations in times of crisis.

But moves by the German Chancellor, Angela Merkel, for a more radical alteration to the treaty were rebuffed, as the leaders emphasized a more limited and technical set of changes.

That effectively tabled Ms. Merkel’s ideas of a more significant amendment of the treaty, aiming to deprive spendthrift nations of their EU voting rights.

In their declaration, the EU leaders said Ms. Merkel's idea would be considered “subsequently,” suggesting it was not a priority.

“Most member countries, including us, are against the idea that voting rights can be withdrawn, also those related to the economic and monetary union," said Jean-Claude Juncker, prime minister of Luxembourg.

In May, Mrs. Merkel reluctantly helped create a temporary crisis fund for the euro zone and, to make this permanent when its mandate expires in 2013, Ms. Merkel has said that she would need a treaty chance to satisfy Germany’s constitutional court.

On that issue the German Chancellor, who already had the support of France, won broad agreement.

“We need a robust and credible permanent crisis mechanism,” said Herman Van Rompuy, President of the European Council, where national governments meet. “Today all heads of state agreed on that need."

But most governments are alarmed at the prospect of a full-scale treaty change, which might trigger referenda in some nations. Less than a year after the Lisbon Treaty went into force - a process that took eight years to bring to fruition – few nations feel ready for another lengthy and difficult exercise in institutional change requiring voter approval.

Mr. Van Rompuy, who will draw up the options for treaty change by December, said the changes would be “limited” and would be made “if possible using a quick procedure” – a formulation that excludes the idea of removing voting rights from nations that fail to comply with EU guidelines.

Instead it suggests that the EU is likely to opt for a simplified procedure for revising its treaty, which can only be used for more technical changes.

Earlier Ms. Merkel had pressed the case for changes that would curb voting rights for spendthrift nations.

"I also want to discuss the withdrawal of voting rights, Ms. Merkel told reporters on arrival in Brussels. "We have a Lisbon treaty in which there already is a withdrawal of rights when fundamental values of the European Union are damaged."

But Jose Manuel Barroso, President of the European Commission, sought to limit the scope of any treaty change.

“If treaty change is to reduce the rights of member states on voting, I find it unacceptable, and frankly speaking it is not realistic,” he told a media conference.

The start of the two-day meeting was also marked by calls from the British Prime Minister, David Cameron, for austerity in the EU budget, prompting an unprecedented debate among about a dozen leaders at the start of discussions.

While many European nations, including Britain, have embarked on aggressive public spending cuts, the European Parliament voted last week for an increase of around 6 percent in the bloc’s budget.

"At a time when European countries, including the United Kingdom, are taking tough decisions on their budgets and having to cut some departments, it is completely wrong that European institutions should be spending more money on themselves in the way that they propose," Mr. Cameron said.

As he arrived in Brussels Thursday, he began lobbying other leaders.

"Six percent is not acceptable," he added, as he appealed for support to restrain the bloc's budget increase to no more than the 2.91 percent jump agreed by the 27 EU nations in August.

The European Parliament now has joint powers in budget setting and negotiations are underway with the national governments.

But the parliament’s President, Jerzy Buzek, defended its stance when hea ddressed heads of government, sparking a debate led by Mr. Cameron.

“The Parliament has not called for unreasonable budgetary increases,” Mr. Buzek said in a speech to leaders. "We have shown some moderation.”

Later at a media conference, Mr. Buzek said between 10 to 12 leaders had intervened – the first time a lengthy debate has followed a presentation by the President of the European Parliament to summit meetings.

At Mr. Cameron’s request, the declaration agreed upon early Friday mentioned the need for budgetary restraint within the EU.

28/10 In Marseille, Bipartisan Calls for Strikes to End

By SCOTT SAYARE
Published: October 28, 2010

Related
Numbers Diminish at Protests in France (October 29, 2010)

MARSEILLE — The strikes and protests against a seemingly inevitable pension change may be waning here, as elsewhere in France, but much of the port remains blocked, nearly 11,000 tons of uncollected trash remain piled in the streets, and residents remain embarrassed and exasperated, if somewhat unsurprised.

Dockers and other port workers have been blocking two major oil depots here for the past month, and have signaled no intent to stop. And thousands of city trash collectors spent two weeks on strike this month, seeing expansive piles of refuse occupy the streets and sidewalks. Though they returned to work on Tuesday, the clean-up is expected to last at least several more days and cost the city almost $700,000, officials said.

The strikes are widely viewed as having had a greater impact on day-to-day life here than anywhere else in France. They have once again shown the sunny port city to be something of a paradox: a heavily immigrant coastal refuge, seen as largely untouched by the racial and cultural tensions so tangible elsewhere in the country, but also a hotbed of social conflict and union strong-arming.

Perhaps tellingly, in an uncharacteristic show of bipartisanship, local leaders from Nicolas Sarkozy’s ruling U.M.P. party were joined in recent days by opposition Socialists in calling for an end to the strikes.

“It’s deplorable to give an image of such strong fanaticism,” said Jean-Claude Gaudin, the mayor of Marseille and a U.M.P. member, speaking Wednesday on France-Info radio. “The unions completely blocked the city.”

Union-led protests here on Thursday saw 12,000 marchers in the streets, the police estimated, while union leaders put the number at 150,000; the vast disparity between those estimations might itself be considered testament to the longstanding tensions here between the unions and government. Marseille commonly has the widest spread between police and organizer estimates in France.

“I was born in Marseille, and it’s always been this way,” said Antoinette Gomis, 47, a waitress at Le Bellagio, a cafe and bakery on the city’s central drag, the Canebière. She noted that this was far from the first time the city’s trash-collectors had gone on strike, despite a host of special, union-won rights.

“It’s always the ones who work the least who protest the most,” she said. She added that she typically works far more than the standard 35-hour French workweek, though business has slowed lately as a result of the strikes and the trash.

Since the end of the Second World War, the city’s port workers and trash collectors have protested and struck with great regularity, and gained a great deal of local influence. The trash collectors alone have gone on strike about 20 times in the past three decades.

The contentious attitude of many of Marseille’s unions, according to Domenichino, a historian who has studied them, is in part the result of a “strong corporatism.”

“To become a trash-collector in Marseille, this is not something open to everyone,” said Mr. Domenichino.

Like the city’s dock and port workers, he said, the trash collectors “recruit within their own network,” and generally strike for reasons specific to themselves, with little concern for what the public might think of them.

“You can’t be mixed up about the role of the unions,” said Patrick Rué, the genial deputy secretary general of a local union of city employees, including the trash collectors. “We’re the representatives of the employees we represent.”

He added: “If you tell me local business people aren’t happy, honestly, it’s not my problem.”
In the narrow Rue du Tapis-Vert, near the stock exchange, local business people were not happy. Mounds of bulging bags of putrid trash bags, old sofa cushions, cardboard boxes and bottles of all sizes and varieties were still waist high on the street on Thursday.

“You never get used to this system, it’s completely illogical,” said Laura Atlan, 22, marking packages inside Basic & Cie, a women’s clothing wholesaler. The store has been offering protective masks to clients to block the smell. “It’s had an enormous impact on our revenues,” she said, of the trash-collectors’ strike.

The trash pile in front of the store was also recently set aflame; the fire charred part of the storefront and destroyed the sign above the entrance.

“It’s a pure and simple catastrophe,” offered the owner, Monique Amsellem, 46, Ms. Atlan’s mother. “In particular, they shouldn’t count on end-of-year tips this year!” she said, referring to the trash-collectors.

Instead, she said, she might offer them an envelope stuffed with trash.

This article has been revised to reflect the following correction:
Correction: October 29, 2010
An earlier version of this article misspelled the name of the mayor of Marseille. He is Jean-Claude Gaudin.

28/10 Leaving for Asia, Clinton Says China is Not an Adversary

By MARK LANDLER
Published: October 28, 2010

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China Is Said to Resume Shipping Rare Earth Minerals (October 29, 2010)

HONOLULU — Opening a seven-country tour of Asia shadowed by fears about China’s rising influence, Secretary of State Hillary Rodham Clinton declared here on Thursday that the United States was not bent on containing China, even if its relationship with Beijing was complicated.

“There are some in both countries who believe that China’s interests and ours are fundamentally at odds,” she said in closely watched address. “But that is not our view. In the 21st century, it is not in anyone’s interest for the United States and China to see each other as adversaries.”

Mixing conciliatory words with hints of a firmer American stance, Mrs. Clinton said China must be a partner of the United States on issues ranging from climate change to North Korea’s nuclear program.

She called on Beijing to make “responsible policy adjustments” on its artificially depressed exchange rate — an issue that has deepened tensions between the United States and China in recent weeks because the undervalued Chinese currency has hurt American exports.

Mrs. Clinton’s remarks came as China apparently lifted an unannounced halt on shipments of strategicallyimportant rare-earth minerals to the United States, Japan, and other countries. Officials traveling with Mrs. Clinton said they were seeking clarification from the Chinese government about its policy.

Mrs. Clinton made no mention of the rare-earth minerals dispute in her speech. But a day earlier, after a meeting with Japan’s foreign minister, Seiji Maehara, she said that the United States, Japan, and other countries would need to find alternative sources of supply for these elements.

In her speech, Mrs. Clinton sought to project a more aggressive American role in Asia, labeling it “forward-deployed diplomacy.” The policy, she said, means reinvigorating Cold War alliances with Japan and South Korea and seeking bigger American influence in regional security groups.

Alluding to disputes between China and its neighbors over islands in the South China Sea, Mrs. Clinton said she was encouraged that China showed signs of cooperating more with these groups.
Mrs. Clinton noted that Asia was the only place where three Nobel laureates — Aung San Suu Kyi of Burma; the Tibetan spiritual leader the Dalai Lama, and Liu Xiaobo, the Chinese dissident who recently won the peace prize — “are either under house arrest, in prison or in exile.”

In recent months, the United States has sought to assemble coalitions of countries to pressure China on issues like currency, trade, and Beijing’s maritime ambitions in its coastal waters. Mrs. Clinton insisted this did not amount to containment, despite what she said were the suspicions of many in China.

“I would simply point out that since the beginning of diplomatic relations between our two countries, China has experienced breathtaking growth and development,” she said. “This is primarily due, of course, to the hard work of the Chinese people,” she added. “But U.S. policy has consistently, through Republican and Democratic administrations and Congresses, supported this goal since the 1970’s.”

The day before Mrs. Clinton left for Asia, the State Department hastily added a China stop to her itinerary, reflecting its sensitivities about Beijing. She will stop for two hours on Hainan, a resort island east of Vietnam to meet with China’s state councilor for foreign policy, Dai Bingguo.

The symbolism of Hainan is awkward: in 2001, an American spy plane was forced to land there after colliding with a Chinese fighter jet. China detained the plane’s 24 crew members, amid a war of words between both sides, and released them only after the United States agreed to apologize.

Mrs. Clinton said she and Mr. Dai would discuss the preparations for a visit to the United States by President Hu Jintao next year. Mr. Dai is also a key Chinese contact for Mrs. Clinton on North Korea.

“We have a long list of issues to discuss,” she said, though she noted that if the Chinese government offered reassurances on shipments of rare-earth minerals, it would “shorten that discussion.”

If anything, Japan has had an even more turbulent time with China than the United States. The two traded harsh words after a Chinese fishing vessel collided with two Japanese patrol boats near the disputed Senkaku islands, and Japanese authorities detained the Chinese skipper.

Mr. Maehara said he was encouraged that Mrs. Clinton reaffirmed that the islands fell under the scope of the U.S.-Japan Mutual Security Treaty, which guarantees the United States will come to the defense of any Japanese territory under attack.

Since it released the China captain, Japan has been eager to lower the temperature with Beijing. “Japan and China are neighbors,” Mr. Maehara said, ‘Neither of the neighbors can move elsewhere.”

For her part, Mrs. Clinton avoided criticizing Chinese behavior, preferring to celebrate the alliance between the United States and Japan. “The security environment is always evolving,” she said. “The security environment of 2010 is not the security environment of 1960.”

A version of this article appeared in print on October 29, 2010, on page A9 of the New York edition.

Inquiry Finds U.S. Official Set Up Spy Ring in Asia

By MARK MAZZETTI
Published: October 28, 2010

United States Air Force Michael D. Furlong, the official who was said to have hired private contractors to track militants.
RelatedTimes
Topic: Michael D. Furlong
Urging Secrecy, British Spy Chief Goes Public (October 29, 2010)

WASHINGTON — A senior Pentagon official broke Defense Department rules and “deliberately misled” senior generals when he set up a network of private contractors to spy in Afghanistan and Pakistan beginning last year, according to the results of an internal government investigation.

The Pentagon investigation concluded that the official, Michael D. Furlong, set up an “unauthorized” intelligence network to collect information in both countries — some of which was fed to senior generals and used for strikes against militant groups — while masking the entire operation as a more benign information operations campaign.

The inquiry concluded that “further investigation is warranted of the misleading and incorrect statements the individual made” about the legality of the program, according to Col. David Lapan, a Pentagon spokesman.

Reached by telephone on Thursday, Mr. Furlong was angry about the conclusions of the investigation, saying that nobody from the Defense Department ever interviewed him as part of the inquiry.

“This is a lot like kangaroo court justice,” Mr. Furlong said.

He said that his work had been approved by a number of senior military officers in Afghanistan, and that he had never misled anyone about what he was doing.

“They only talked to one side, and those are the people running for cover,” he said.

Defense Secretary Robert M. Gates ordered the investigation after The New York Times reported on the existence of the network in March. The inquiry was carried out by Michael Decker, a top aide to Mr. Gates for intelligence issues.

The results of the Pentagon investigation are classified, and Defense Department officials gave few specifics about the accusations.

Mr. Furlong, a senior Air Force civilian official, has been barred from his office in San Antonio for several months. The Air Force inspector general is conducting a separate investigation into the matter, to determine whether Mr. Furlong broke any laws or committed contract fraud.

Pentagon rules forbid the hiring of contractors as spies. Military officials said that when Gen. David H. Petraeus, then the top commander in the region, signed off on Mr. Furlong’s operation in January 2009, there were specific prohibitions against intelligence-gathering, including hiring agents to provide information about enemy positions in Pakistan.

The contractors were supposed to provide only broad information about the political and tribal dynamics in the region — called “atmospherics” — and “force protection” information that might protect American troops from attack, the officials said.

But some Pentagon officials said that over time the operation appeared to transition into traditional spying activities.

Mr. Furlong’s network, composed of a group of small companies that used agents deep inside Afghanistan and Pakistan to collect intelligence on militant groups, operated under a $22 million contract run by Lockheed Martin.

One of the companies used a group of American, Afghan and Pakistani agents overseen by Duane Clarridge, a Central Intelligence Agency veteran best known for his role in the Iran-contra scandal. Mr. Clarridge declined to be interviewed.

Officials said that the contractors delivered their intelligence reports via “Hushmail,” an encrypted e-mail service, to an “information operations fusion cell” at a military base at Kabul International Airport. There, the reports were put into classified military computer networks and used either for future military operations or intelligence reports.

The contractors continued their work for weeks after Mr. Gates ordered the investigation, sending dozens of reports to the fusion center. The Pentagon finally let the contract lapse at the end of May.

Colonel Lapan said the investigation concluded that Pentagon rules governing intelligence operations needed to be more clearly defined and that “better coordination and de-confliction of both intelligence and information operations is required by staffs at all levels.”

A version of this article appeared in print on October 29, 2010, on page A10 of the New York edition.

In Writings of Obama, a Philosophy Is Unearthed

By PATRICIA COHEN
Published: October 27, 2010

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James T. Kloppenberg

When the Harvard historian James T. Kloppenberg decided to write about the influences that shaped President Obama’s view of the world, he interviewed the president’s former professors and classmates, combed through his books, essays, and speeches, and even read every article published during the three years Mr. Obama was involved with the Harvard Law Review (“a superb cure for insomnia,” Mr. Kloppenberg said). What he did not do was speak to President Obama.

“He would have had to deny every word,” Mr. Kloppenberg said with a smile. The reason, he explained, is his conclusion that President Obama is a true intellectual — a word that is frequently considered an epithet among populists with a robust suspicion of Ivy League elites.
In New York City last week to give a standing-room-only lecture about his forthcoming intellectual biography, “Reading Obama: Dreams, Hopes, and the American Political Tradition,” Mr. Kloppenberg explained that he sees Mr. Obama as a kind of philosopher president, a rare breed that can be found only a handful of times in American history.
“There’s John Adams, Thomas Jefferson, James Madison and John Quincy Adams, then Abraham Lincoln and in the 20th century just Woodrow Wilson,” he said.

To Mr. Kloppenberg the philosophy that has guided President Obama most consistently is pragmatism, a uniquely American system of thought developed at the end of the 19th century by William James, John Dewey and Charles Sanders Peirce. It is a philosophy that grew up after Darwin published his theory of evolution and the Civil War reached its bloody end. More and more people were coming to believe that chance rather than providence guided human affairs, and that dogged certainty led to violence.

Pragmatism maintains that people are constantly devising and updating ideas to navigate the world in which they live; it embraces open-minded experimentation and continuing debate. “It is a philosophy for skeptics, not true believers,” Mr. Kloppenberg said.

Those who heard Mr. Kloppenberg present his argument at a conference on intellectual history at the City University of New York’s Graduate Center responded with prolonged applause. “The way he traced Obama’s intellectual influences was fascinating for us, given that Obama’s academic background seems so similar to ours,” said Andrew Hartman, a historian at Illinois State University who helped organize the conference.

Mr. Kloppenberg’s interest in the education of Barack Obama began from a distance. He spent 2008, the election year, at the University of Cambridge in England and found himself in lecture halls and at dinner tables trying to explain who this man was.

Race, temperament and family history are all crucial to understanding the White House’s current occupant, but Mr. Kloppenberg said he chose to focus on one slice of the president’s makeup: his ideas.

In the professor’s analysis the president’s worldview is the product of the country’s long history of extending democracy to disenfranchised groups, as well as the specific ideological upheavals that struck campuses in the 1980s and 1990s. He mentions, for example, that Mr. Obama was at Harvard during “the greatest intellectual ferment in law schools in the 20th century,” when competing theories about race, feminism, realism and constitutional original intent were all battling for ground.

Mr. Obama was ultimately drawn to a cluster of ideas known as civic republicanism or deliberative democracy, Mr. Kloppenberg argues in the book, which Princeton University Press will publish on Sunday. In this view the founding fathers cared as much about continuing a discussion over how to advance the common good as they did about ensuring freedom.

Taking his cue from Madison, Mr. Obama writes in his 2006 book “The Audacity of Hope” that the constitutional framework is “designed to force us into a conversation,” that it offers “a way by which we argue about our future.” This notion of a living document is directly at odds with the conception of Justice Antonin Scalia of the Supreme Court, who has spoken of “the good, old dead Constitution.”

Mr. Kloppenberg compiled a long list of people who he said helped shape Mr. Obama’s thinking and writing, including Weber and Nietzsche, Thoreau and Emerson, Langston Hughes and Ralph Ellison. Contemporary scholars like the historian Gordon Wood, the philosophers John Rawls and Hilary Putnam, the anthropologist Clifford Geertz and the legal theorists Martha Minow and Cass Sunstein (who is now working at the White House) also have a place.

Despite the detailed examination, Mr. Kloppenberg concedes that President Obama remains something of a mystery.

“To critics on the left he seems a tragic failure, a man with so much potential who has not fulfilled the promise of change that partisans predicted for his presidency,” he said. “To the right he is a frightening success, a man who has transformed the federal government and ruined the economy.”

He finds both assessments flawed. Conservatives who argue that Mr. Obama is a socialist or an anti-colonialist (as Dinesh D’Souza does in his book “The Roots of Obama’s Rage”) are far off the mark, he said.

“Adams and Jefferson were the only anti-colonialists whom Obama has been affected by,” he told the audience in New York. “He has a profound love of America.”

And his opposition to inequality stems from Puritan preachers and the social gospel rather than socialism.

As for liberal critics, Mr. Kloppenberg took pains to differentiate the president’s philosophical pragmatism, which assumes that change emerges over decades, from the kind of “vulgar pragmatism” practiced by politicians looking only for expedient compromise. (He gave former President Bill Clinton’s strategy of “triangulation” as an example.)

Not all of the disappointed liberals who attended the lecture in New York were convinced that that distinction can be made so easily. T. J. Jackson Lears, a historian at Rutgers University, wrote in an e-mail that by “showing that Obama comes out of a tradition of philosophical pragmatism, he actually provided a basis for criticizing Obama’s slide into vulgar pragmatism.”

And despite Mr. Kloppenberg’s focus on the president’s intellectual evolution, most listeners wanted to talk about his political record.

“There seemed to be skepticism regarding whether Obama’s intellectual background actually translated into policies that the mostly left-leaning audience could get behind,” Mr. Hartman said. “Several audience members, myself included, probably view Obama the president as a centrist like Clinton rather than a progressive intellectual as painted by Kloppenberg.”

A version of this article appeared in print on October 28, 2010, on page C1 of the New York edition.