US carmakers ask for $34bn

US carmakers ask for $34bn

By Bernard Simon in Toronto and John Reed in London

Published: December 2 2008 19:59 | Last updated: December 3 2008 02:01

Detroit’s beleaguered carmakers sought to present themselves as lean, innovative and environmentally aware as they appealed to Congress for up to $34bn in emergency loans on Tuesday.

In a second appeal to Washington in a month, General Motors, Ford Motor and Chrysler set out plans to become more competitive, stressing attempts to transform themselves from high-cost behemoths focused on gas-guzzling sports-utility vehicles.

“As a company and as an industry, we readily admit that we have made our share of mistakes and miscalculations,” Ford said in a 36-page plan submitted to Congress. But, it added, “we recognised that our business model needed to change, and we are changing it”.

After being lambasted by critics last month for arriving in Washington on corporate jets, Ford and GM on Tuesday vowed to sell their corporate aircraft.

Rick Wagoner, GM’s chief executive and Alan Mulally, his Ford counterpart, said they would be willing to draw a $1 salary. Mr Mulally’s offer is conditional on Ford drawing its proposed $9bn share of the bridging finance.

Mr Mulally, Mr Wagoner and Chrysler’s chief, Bob Nardelli, all plan to drive to Washington in hybrid cars to appear before Congress on Thursday and Friday.

GM said it would ask Congress for $12bn in bridging loans, as well as a hitherto-undisclosed $6bn line of credit “to provide liquidity should a severe market downturn persist”. Ford has asked for access to up to $9bn, and Chrysler $7bn.

Data published on Tuesday showed another slump in the US car market, with all six leading companies reporting year-on-year declines of more than 30 per cent in November.

GM ascribed part of its 41 per cent slide to widespread speculation that it might be forced to file for bankruptcy. Ford set a 2011 target for breaking even or returning to profitability, on a pre-tax basis, in its submission. Earlier this year, it abandoned its target of returning to profitability by 2009.

In an accelerated drive to produce more fuel-efficient vehicles, Ford announced plans to develop a battery-powered van by 2010 and an electric saloon by 2011.

GM aims to offer 15 hybrid models by 2012.

Democratic lawmakers in particular are expected to demand stronger commitments by Detroit to make cleaner cars as a quid pro quo for any federal aid.

However, Ford cautioned that “transforming our industry will require the shared sacrifice of many stakeholders and we will be asking our employees, dealers, and others to make changes”.

It said it was in talks with the United Auto Workers union with the goal of bringing its labour costs down to the same level as foreign rivals’ US plants, which are not unionised.

-----------------------------
Somalia’s jihad

Published: December 2 2008 19:04 | Last updated: December 2 2008 19:04

Before Ethiopia invaded with Washington’s blessing, Somalia barely registered on the global jihadi radar. Two years later, the conflict is a significant mobilising force. Videos seeking recruits and financing for Islamist militias fighting the Ethiopian-backed transitional government have proliferated on jihadi web sites. Fighters from Zanzibar, the Comoros islands and as far away as Pakistan have been drawn to the insurgency. Ethiopia’s intervention has bolstered extremist elements that the US and other western powers hoped – against the advice of most experts at the time – that it would contain.

In recent months, hardline al-Shabaab militias have gained control over much of southern Somalia. By contrast, the transitional government that Ethiopia stepped in to install can claim influence over the town of Baidoa and only parts of the capital, where roadside bombs explode daily. Ethiopian troops are bogged down fighting an insurgency that gains strength from their presence, while the government they support shows no signs of becoming more effective. It is a familiar scenario for the US and its allies in Iraq and Afghanistan. Ethiopia however, has announced its decision to cut its losses and withdraw by the end of the year.

This poses near-term dangers not only for long-suffering Somalis, whose plight is barely recorded, but for the world. Somalia is a failed state that has been without effective government now for 17 years. International trade is already hampered by the surge in piracy off its coast. If the al-Shabaab militia are able to seize the opportunity to gain more ground, they could turn Somalia into the breeding ground for international terrorism that the US feared it was becoming back in 2006, although there was little evidence for this at the time.

In the longer term, Ethiopia’s withdrawal could take the wind out of Somali jihadist sails. The al-Shabaab derived legitimacy at home from nationalism, and further afield from their battle against essentially Christian invaders. Once these are gone, Somalis, Islamists included, are all too likely to resume fighting among themselves.

Blame for this debacle is not only Ethiopia’s. Burnt by the UN intervention in Somalia in the early 1990s, western powers were reluctant to back a large-scale peacekeeping operation that would have allowed the Ethiopians to withdraw sooner. If there is any hope, it is that the Somalis can now unite against an extremist form of Islam anathema to their own, and that fellow Muslim states will help them do it.

-------------------------------
Extra capital to boost investment bank

By Tony Barber in Brussels

Published: December 3 2008 02:00 | Last updated: December 3 2008 02:00

Europe's fight against recession received a useful if modest boost yesterday when finance ministers agreed to increase the capital of the European Investment Bank, the European Union's investment agency.

The bloc's 27 ministers decided to raise the EIB's capital by €67bn to €232bn ($295m, £198m) to help it fund "green technology" projects in the European car industry, make loans to small and medium-sized businesses, and accelerate the distribution of EU regional aid to central and east European member-states.

There was less obvious progress on a European Commission proposal to pull the EU out of recession by means of a co-ordinated fiscal stimulus worth €200bn, or about 1.5 per cent its gross domestic product.

Ministers expressed support for the "principles" behind the Commission's plan, but a sense of detailed, EU-wide co-ordination was absent as several countries made clear they would make up their own minds on how much they could afford and what form their stimuli would take.

"We are not obliged to copy what all other countries are doing," said Peer Steinbrück, the German finance minister. "The situation is different from country to country, in particular in Germany."

Private sector economists say some national plans, already made public, give a misleading impression of aggressive deficit spending when in reality they consist to a great extent of previously announced initiatives.

For example, an Italian government spending programme with an official tag of €80bn has as little as €6.25bn in new money, according to economists at the Royal Bank of Scotland.

Jean-Claude Juncker, head of the 15-member eurozone finance ministers' group, said the countries sharing the euro had agreed not to follow the UK's example and cut value added tax rates to combat the recession.

"It doesn't guarantee a proper impact on consumption. To say that VAT will go down, then up again shortly afterwards, is not going to produce the desired effect," said Mr Juncker, who is also Luxembourg's prime minister.

Philippe Maystadt, president of the EIB, said the bank's capital increase would enable it to lend €8bn over the next two years to European carmakers, which must meet strict EU targets on cutting carbon dioxide emissions.

The EIB should also be able to expand its lending to small and medium-sized businesses, a sector that rec-eives only 14 per cent of EIB loans - a proportion the UK and others are keen to increase because of the difficulties companies face with credit during the financial crisis and recession.

The EU finance ministers reached agreement yesterday on raising bank deposit guarantees across the bloc. From next July, a minimum €50,000 in an account will be guaranteed, rising to €100,000 in January 2012.

---------------------------
Blow as Italy’s power demand falls

By Guy Dinmore in Rome

Published: December 2 2008 19:42 | Last updated: December 2 2008 19:42

Italian industry has slashed its electricity consumption by almost a third in two months in a stark sign of the force of the recession and a serious blow to efforts by Silvio Berlusconi’s centre-right government to play down the depth of the crisis.

Terna, the company responsible for electricity transmission across the national grid, recorded a 30 per cent fall in October and November, Flavio Cattaneo, chief executive, said. Output of steel and cars was particularly affected.

Terna’s observations fit a stark pattern. On Monday the transport ministry reported that car sales of domestic and foreign cars in Italy dropped by 29 per cent in November from a year earlier.

Italy is already in recession following two quarters of shrinking economic output. After a decade of lagging behind European growth rates, the eurozone’s third largest economy is heading towards a longer and deeper recession than its peers, according to analysts’ forecasts.

Cisl, the second largest trade union federation, reported on Tuesday that 180,000 workers in manufacturing and construction lost their jobs from January to October. It warned that 900,000 jobs were at risk over the next two years.

The government’s public response has been to accuse the centre-left opposition and unions of scaremongering and assert that Italy is in good shape. “Italy today is more solid than we are disposed to believe,” Giulio Tremonti, finance minister, said a week ago.

On Friday, launching a modest fiscal stimulus package constrained by Italy’s already large public debt and budget deficit, he told reporters: “The message we want to send is one of confidence, for consumers and for workers.”

Italians can be forgiven if they feel confused. Eight months ago at the height of the election campaign, “Italy is on its knees” and a promise to pick it up was one of Mr Berlusconi’s favourite slogans in attacking the centre-left government of Romano Prodi.

On Tuesday Il Giornale, the Berlusconi family-run newspaper, attacked what it called the left-wing doom-laden “catastrofisti” who were “painting an Italy on its knees”. Inflation was falling and Italians had one of Europe’s best savings records, it said.

Analysts say conservative lending practices have helped shelter Italian banks from the worst of the global financial storm, but Italy – with a large industrial sector as the world’s second largest exporter of capital goods – cannot escape the storm hitting the real economy.

Tito Boeri, professor of economics at Bocconi university, slammed the “miserable third of a point of GDP” stimulus, accusing Mr Tremonti of being fiscally lax during the previous 2001-06 centre-right administration, but now adopting a “drip drip” policy when tax cuts were really needed.

-----------------------------
Nato seeks to repair divisions over Russia

By James Blitz in Brussels

Published: December 3 2008 02:00 | Last updated: December 3 2008 02:00

Nato on Tuesday night agreed to a “conditional and gradual” resumption of dialogue with Russia, seeking to end divisions between the US and its main European allies on what stance the defence organisation should adopt towards the Kremlin.

On the same day the European Union resumed talks on an economic co-operation agreement with Russia, the 26-member Nato alliance made a similar attempt to renew relations with Moscow, which were badly undermined by the Russian invasion of Georgia.

At a meeting of alliance foreign ministers, Nato agreed to start informal sessions of the Nato-Russia Council, set up to manage security ties between Moscow and the west. It also mandated Jaap De Hoop Scheffer, Nato's secretary-general, to explore the scope to resume the political relationship. But Mr De Hoop Scheffer made clear Nato's move did not mean the alliance accepted Russia's takeover of Abkhazia and South Ossetia or its threat to site short-range missiles in the Kaliningrad enclave.

“It certainly does not mean that we consider it acceptable to hear voices from Moscow we thought we would not hear any more on a possible siting of Iskander missiles near Lithuania or threatening our staunch ally Poland,” he said.

Condoleezza Rice, US secretary of state, reinforced this. “This is not business as usual,” she said. The US still considered Russia's action in Georgia in the summer to be “unacceptable”.

The outgoing Bush administration has been keen to maintain a tough position after the Georgian war but Germany and France - which want to resume ties with a big trading and energy partner - sought a rapprochement. Diplomats said Nato’s move gave Barack Obama, US president-elect, more scope to recast the relationship with Moscow as he wished.

“This will take some of the bad blood out of the relationship,” said a senior diplomat from an EU state. “But the speed with which ties are resumed – especially military ties – will depend on how Moscow acts now.”

The decision to resume informal meetings of the Nato-Russia Council came as Nato moved not to grant Georgia and Ukraine immediate admission to the organisation’s membership action plan (Map) – a crucial step towards membership.

Nato agreed to engage with the two former Soviet republics over political and security reforms they must undertake to become Nato members.

But, in deference to Germany and France, Nato agreed not to rule out the possibility that both former Soviet republics might have formally to qualify for Map.

-------------------------
Norway’s central bank warns on stability

By David Ibison in Stockholm

Published: December 2 2008 11:17 | Last updated: December 2 2008 11:17

Norway’s central bank said on Tuesday that it needed to implement additional measures to enhance the stability of the country’s banking system and called for stronger links with other Nordic countries to prevent future crises.

Norges Bank said in its twice yearly Financial Stability Report that measures taken so far to bolster the banks had been effective but added it needed to “implement extraordinary measures to strengthen liquidity in the banking system”.

This will involve making capital adequacy rules less pro-cyclical, revising loan loss provisions to increase banks’ buffers, strengthening banks’ liquidity management and eventually reorganising the existing deposit guarantee scheme, it said.

These new measures will come on top of action already taken by Norges Bank to boost liquidity in the banking system but which may no longer be sufficient as the crisis deepens, it added. No time frame for the new measures was revealed.

It also pointed to problems dealing with other Nordic countries – a probable reference to lengthy negotiations over a rescue package for Iceland – and said “it is essential to strengthen cooperation between Nordic authorities in order to prevent future crises”.

Norway’s financial system and economy are starting to feel the full effects of the global economic downturn having remained relatively immune in the early stages of the crisis.

The latest economic growth figures showed gross domestic product in the third quarter slowed to 0.2 per cent from 0.5 per cent the previous quarter. On Tuesday, it was revealed consumer confidence fell to a 16-year low in the fourth quarter of the year.

“The fall in confidence is not particularly surprising given the recent sharp drops in asset prices: equity prices in Norway have fallen around 60 per cent from their peak and house prices have fallen 7 per cent or so. The collapse in confidence confirms that the outlook for consumer spending remains grim,” said Nicola Mai, economist at JP Morgan, in a report.

As the economy weakens, the central bank sent out a strong warning to banks to avoid cutting back on lending, a move it argued would exacerbate the depth of the downturn and in time undermine the earnings power of the banks themselves.

“It is important that banks avoid excessive tightening. If banks…seek to improve their financial strength by rationing loans to enterprises, municipalities and households, sound investment projects will also be postponed.

“Moreover, enterprises that do not have access to operating credit may have to close down. This will in turn have adverse effects on the banks, resulting in higher loan losses, weaker results and thus reduced equity capital.”

The central bank has cut interest rates by 100 basis points to 4.75 per cent since the start of October to try to support the economy and alleviate pressure on the credit market. It is scheduled to meet again in December and there are expectations it may make another sizeable cut.

Despite the bad news, the report concluded that financial stability in Norway was broadly sound and that its banks were doing better than their counterparts in other countries.

“Securities account for a small share of banks’ assets, and Norwegian banks have not invested in very high risk securities. Price losses on securities are therefore limited. In addition, banks have experienced high profitability for several years and have maintained their capital levels,” it said.

“The cyclical turnaround, and thus the rise in loan losses, has occurred later than in many other countries. Moreover, the Norwegian banking system has limited activity abroad and constitutes a smaller share of the economy than the banking industry in many other countries, including the Nordic countries.”

------------------------------
BA/Qantas

Published: December 2 2008 17:26 | Last updated: December 2 2008 17:26

It’s good to head into air turbulence with a parachute. British Airways has three tucked under its seat. It is in the middle of merger talks with Iberia. It’s thinking about teaming up with American Airlines. Now it is in merger talks with Australia’s Qantas too. Completing just one of these deals would be pretty good; all three would be out of this world.

Which will it do? BA can’t prioritise any of them until it knows exactly what each offers, and what regulators will allow. Talks with Iberia have already dragged on a year [?], with the Spaniards using BA’s pension deficit to bash down BA’s share of the combined group. A Qantas tie-up would face different problems. To qualify for national carrier status, BA’s routes can only be flown by a majority European-owned airline; Qantas’ routes only by a majority Australian-owned airline. The proposed solution, a company dual-listed in London and Sydney, with two boards but one set of directors, promises to be a cumbersome beast.

Each plan has it merits. A tie-up with Iberia offers expansion into the Americas, Qantas offers a quicker entrée into fast-growing Asia. BA already has code-sharing with both, although deeper cultural ties with the Aussies. Qantas also has an appetizing queue of planes on order, which BA could use to optimise its own fleet.

It is an enviable position for BA. Neither the Iberia or Qantas deals are mutually exclusive. And either, or even both, could eventually lead to a tie-up with American Airlines. The result would be the first truly global airline, just as exists in most other industries.

The need to consolidate is clear. The industry is plagued by over-capacity, even as ferocious new entrants dive-bomb the traditional carriers. On one side, there are deep-pocketed new entrants, like Emirates; on the other, low cost carriers, like Ryanair, and even they are consolidating. Air France/KLM shows a successful cross-border airline merger is possible, and can generate significant cost cuts too. BA’s talks offer a multitude of combinations, however are eventually sequenced. BA’s and Iberia’s share prices have rocketed on the prospect at least one of them will happen.

-------------------------
Qantas will remain Aussie, despite BA merger talks: govt

AFP Madeleine Coorey

Qantas will remain a majority-owned Australian airline even if it merges with British Airways to create a global carrier to better cope with challenging market conditions, the government said Wednesday.

The chief executives of the two iconic airlines have been in merger talks since August as they battle volatile fuel prices and shrinking passenger demand as the world economy creeps into recession.

The Australian Financial Review said the merger would create an 8 billion dollar (5.2 billion US) carrier with bases on two continents.

Qantas Airways confirmed in a statement Wednesday it was "exploring a potential merger with British Airways plc via a dual-listed company structure" but said that there was no guarantee a transaction would be forthcoming.

But the airline has acknowledged that the industry was heading towards a period of consolidation and as recently as last week said that it would be in Qantas' interests to merge with a rival sooner rather than later.

Treasurer Wayne Swan said there was no proposal yet before the government but any merger would have to abide by the regulation that foreign ownership of Qantas be limited to 49 percent.

"Our bottom line is that the 'flying kangaroo' remains majority Australian owned and based," he told reporters in Canberra.

But the government has hinted it will alter other foreign ownership rules, which currently limit individual foreign airlines to a 25 percent holding and aggregate foreign airline interests to a 35 percent stake.

Transport Minister Anthony Albanese said under current law Qantas' base must remain in Australia, it must retain its name and be incorporated in Australia, and its chairman and at least two-thirds of its board must be Aussie citizens.

"To think that the 'flying kangaroo' would disappear is a bit like thinking that the Sydney Opera House would be bulldozed," he said.

Talk of a merger between Qantas and BA, which formerly held a 25 percent stake in the Australian carrier but had sold out by 2004 to pay off debts, comes amid moves towards consolidation of the sector in Europe and the US.

BA is continuing in talks to link up with Iberia while reports here said Qantas could be included in a "three-way" deal with the Spanish carrier.

Neil Hansford, chairman of Strategic Aviation Solutions said Qantas' rivals, including Singapore Airlines, would be unhappy with the news, but a merger with BA made the most sense.

"Qantas has got a choice, it either gets into bed with somebody like BA or (German carrier) Lufthansa or it retreats to being an Asian carrier with a couple of routes to Europe," he told AFP.

"It will allow Qantas to stay servicing Europe meaningfully and it makes it (in combination with BA) about the third biggest fleet in the world."

Brent Shaw, research manager with Shaw Stockbroking, said Qantas had realised it had to "change and move with the times to survive."

Qantas shares gained on the news of the merger talks, closing up 10 cents, or 4.4 percent, at 2.35 dollars in an overall flat market.

But some traders said Qantas, one of the world's most profitable airlines, would be unwise to link itself to a carrier with a less robust bottom line.

"Qantas has low debt, a protected US-Australia route and an oligopoly on one of the most profitable short-haul legs in the world between Melbourne and Sydney," Goldman Sachs JBWere senior trader Patrick Crabb.

"If I am a shareholder of Qantas, my initial response is cold feet, as the potential groom has a good name but his short-term financial prospects look challenged," he told Dow Jones Newswires.

Last year an 11.1 billion dollar (7.1 billion US) private equity bid for Qantas, which was supported by the airline's board, crashed after the Macquarie Bank-led consortium did not reach a minimum 50 percent of shareholder acceptances for its proposal.

-------------------------------
Citigroup Said to Cut Most of Asia Real Estate Team After Slump
Email | Print | A A A

By Cathy Chan

Dec. 3 (Bloomberg) -- Citigroup Inc. fired most employees at its real estate investment banking team in Asia after slumping property prices stifled share sales and acquisitions in the industry, three people familiar with the matter said.

The New York-based bank dismissed at least five people two weeks ago, the people said, declining to be identified because they aren't authorized to discuss the matter publicly. Departures included Edmund Ho, a managing director who headed the team, and Director Edward Yeh, they said.

The global credit crisis has caused more than 191,000 job losses at financial firms worldwide, while driving property prices lower from Beijing to New York. Hong Kong's and China's benchmark property indexes have both fallen 59 percent this year, while Singapore's FTSE Straits Times Real Estate Index tumbled 62 percent.

Singapore, Hong Kong and China accounted for most of Citigroup's real estate investment banking transactions in Asia excluding Japan in the past two years, according to data compiled by Bloomberg.

Citigroup, which in November embarked on a plan to shed 52,000 jobs worldwide, will serve property clients through its country and corporate bankers after closing down Ho's team, the people said.

The bank, with operations in more than 100 countries, last month received U.S. government insurance on $306 billion of toxic assets to help it weather the credit crunch.

Share Sales Dwindle

Ho, 41, joined Citigroup as a director in 2004 from JPMorgan Chase & Co., focusing on Hong Kong client coverage. He was named head of Asia real estate investment banking in 2006, and promoted to managing director early this year.

Jobs cuts at the team began in September with the departure of co-head of Asia real estate banking Sonny Badiga, the people said. Badiga couldn't be reached for comment. James Griffiths, a Hong Kong-based spokesman at Citigroup, declined to comment on the departures.

Share sales by Asian property companies tumbled 82 percent to $4.8 billion this year from 2007, according to data compiled by Bloomberg. In 2006, the year Ho was put in charge of the team, real estate firms in the region sold a combined $14 billion of stock.

Among deals Ho helped arrange last year were Shenzhen Investment Ltd.'s $167 million stock sale and a $373 million offering by C C Land Holdings Ltd., a real estate developer in western China.

-----------------------------
Merrill Said to Cut Year-End Bonuses by 50% as Revenue Slumps
Email | Print | A A A

By Bradley Keoun

Dec. 3 (Bloomberg) -- Merrill Lynch & Co. plans to cut year-end bonuses in half after more than $20 billion of losses that forced the U.S. securities firm to sell itself to Bank of America Corp., two people with knowledge of the situation said.

The average bonus reduction will be about 50 percent at the New York-based company, and some traders and investment bankers will face steeper cuts, said the people, who declined to be identified because the plans aren’t public. While employees won’t find out their bonuses until later this month, division managers are being told now how much they’ll get to distribute.

Merrill’s revenue through September fell 96 percent from a year earlier, forcing Chief Executive Officer John Thain to slash compensation -- the firm’s biggest expense. Congressmen and regulators scrutinizing Wall Street pay have sought to ensure that economic-rescue funds from the U.S. government are used to stimulate lending and not to enrich executives.

The drop in bonuses at Merrill would be less severe than the 70 percent average cut for all Wall Street firms that compensation consultant Johnson Associates predicted last month. Bonuses make up the bulk of a year’s pay for most traders and investment bankers, and they usually fall when markets sour.

Merrill spokeswoman Selena Morris declined to comment.

A crisis of confidence sent Merrill shares plunging 36 percent in a single week during September, forcing the firm to sell itself to Charlotte, North Carolina-based Bank of America. Shareholders of both companies are scheduled to vote on the deal this week, with the closing targeted for the end of December.

Loss May Widen

Merrill and Bank of America were allotted a combined $25 billion of government money in October, when the Treasury Department agreed to invest $125 billion in nine of the biggest U.S. banks to bolster their dwindling capital.

Hit with mortgage-bond writedowns and plunging investment- banking fees, Merrill may report a loss this year of $13.3 billion, based on the average estimate of nine analysts surveyed by Bloomberg. That would be almost twice as wide as the $7.8 billion loss for 2007, then a record for the 94-year-old firm.

The company has dropped 78 percent this year in New York Stock Exchange composite trading and closed yesterday at $11.56.

Merrill’s costs for compensation and benefits this year through September totaled $11.2 billion, down 3 percent from a year earlier. Although bonuses aren’t paid until the end of the year, Wall Street firms usually estimate them in advance and account for a portion of the payout costs in each quarter.

$248,000 Average Pay

Even if Merrill set aside nothing for compensation in the fourth quarter, the firm’s 60,900 employees still would reap an average of $184,000 in compensation and benefits for the full year.

In 2007, Merrill paid out a total of $15.9 billion in compensation, or about $248,000 per employee.

Merrill’s revenue for the first nine months of this year totaled $834 million, or $13,695 per employee, compared with $19.4 billion in the 2007 period.

Goldman Sachs Group Inc., Wall Street’s most profitable firm, said last month Chief Executive Officer Lloyd Blankfein and six deputies would forgo year-end bonuses. Executives at Frankfurt- based Deutsche Bank AG and UBS AG in Zurich also have agreed to waive pay.

Merrill officials have declined to comment on bonuses for top executives, saying the payouts hadn’t been set. Thain, 53, a former Goldman Sachs executive, received a $15 million bonus when he joined Merrill last December.

------------------------------
China Property Slump Threatens Global Economy as Growth Slows

By Kevin Hamlin

Dec. 2 (Bloomberg) -- House prices in Shanghai, Shenzhen and Guangzhou are plunging, and the global economy may grind almost to a halt next year because of it.

Construction of homes, offices and factories fell at least 16.6 percent in October after rising 32.5 percent a year earlier, according to Macquarie Securities Ltd. That's squeezing an economy already slowed by recessions in the U.S., Japan and Europe that have cut demand for exports. Building is the biggest driver of China's expansion, contributing a quarter of fixed-asset investment and employing 77 million people.

The central bank cut its key interest rate by the most in 11 years last week and the government said “forceful” measures were needed to arrest a faster-than-expected economic decline. Without more rate cuts and government spending, China is unlikely to contribute the 60 percent of global growth Merrill Lynch & Co. forecasts for next year, further slowing the world economy.

“China is now at the heart of the global slowdown,” said Jim Walker, chief economist at Asianomics Ltd., an economic advisory firm in Hong Kong. “It means that global growth is probably going to be dragged down close to zero next year.”

Walker, voted best regional economist in an Asiamoney magazine brokers' poll for 11 years through 2004 when he worked for CLSA Asia Pacific Markets, estimates China will grow zero to 4 percent next year, with a 30 percent chance of a contraction.

In 2005, China vaulted past the U.K. to become the world's fourth-largest economy, after expansion averaged 9.9 percent annually for the previous 30 years. GDP has increased 69-fold since Deng Xiaoping began free market changes in 1978. China accounted for 27 percent of global growth last year.

'Close to Zero'

The World Bank last week slashed its forecast for China's expansion next year to 7.5 percent, the slowest in almost two decades, from 9.2 percent in the previous quarterly report, saying the country could no longer rely on overseas consumers.

“The real estate sector has seen a particularly pronounced slowdown,” said Louis Kuijs, a senior economist at the World Bank in Beijing. “Real estate investment growth is now close to zero.”

China's export orders and output shrank in November by the most since records began as the global financial crisis sapped demand for the nation's toys, textiles and computers.

Exports and property together have contributed about half of the expansion in China's GDP, estimates Shanghai-based Andy Xie, an independent analyst who was formerly Morgan Stanley's chief Asia economist.

“That growth is gone,” he said. “Can the government make it up with something else? It's going to be tough.”

Merrill Forecast

Merrill's forecast of 1.5 percent global growth next year is based on an 8.6 percent expansion in China. The prediction on Nov. 21 came 12 days after China announced a 4 trillion yuan ($586 billion) stimulus plan, mostly for public works projects.

“In order to curb an excessive economic slowdown, we must adopt forceful measures that have a noticeable impact,” said Zhang Ping, chairman of China's top economic planning agency, on Nov. 27. “Some economic indicators weakened further in November, showing a faster decline.”

President Hu Jintao on Nov. 30 said the economic slump is a test of his administration's ability to govern.

The government is trying to limit fallout from the slowdown for fear that rising unemployment may lead to social unrest. Police and security guards last week attempted to breakup demonstrations by fired workers who overturned a police car, smashed motorbikes and broke company equipment in southern Guangdong province, the state-run Xinhua news agency reported.

'Massive Policy Stimulus'

A second stimulus package to boost consumption may be imminent, the Beijing-based Economic Observer reported Nov. 24. Measures being considered include raising income-tax thresholds, higher salaries for state workers and increased subsidies for low-income groups, the newspaper said, citing people involved in discussion of the plan.

China has room to spend even more than already announced because it has debt equal to 15.7 percent of gross domestic product -- compared with 75 percent in India -- a budget surplus and the world's largest currency reserves at $1.9 trillion, said Lu Ting, a Hong Kong-based economist with Merrill Lynch.

“Investors should prepare for massive policy stimulus,” Lu said.

Shanghai house prices fell 19.5 percent in the third quarter from the previous three months, according to real estate broker Savills Plc. Declines in apartment values are accelerating in Shenzhen and Guangzhou, two of the fastest growing cities in Guangdong province, which produces 30 percent of China's exports.

Construction will contract 30 percent next year after expanding 9 percent in the first three quarters of 2008, according to Macquarie Securities.

'Property Is the Epicenter'

“If real estate contracts by 30 percent it doesn't matter how much the government spends on infrastructure, the economy is still going to be very weak,” said Paul Cavey, a Hong Kong-based economist at Macquarie who forecasts a 6.6 percent expansion next year. “Property is the epicenter of economic weakness.”

Slumping demand for commodities is already reverberating beyond China's shores. Melbourne-based BHP Billiton Ltd. last week abandoned plans to buy Rio Tinto Group and create the world's biggest mining company, blaming a rout in commodities prices. China is the world's biggest metals buyer and the second- largest consumer of oil.

Fortescue Metals Group Ltd., Australia's third-largest iron ore exporter, last week suspended work on a railroad that will carry the steelmaking ingredient to port. Australian mining companies may delay $50 billion of projects, reducing investment that accounts for a third of GDP, Credit Suisse Group AG said in a report last month.

Commodities Slowdown

“China is a huge source of demand for commodities, and now its slowdown is a key reason behind the collapse of commodity prices,” said Nicholas Lardy, a senior fellow at the Washington- based Peter G. Peterson Institute for International Economics. “It's experiencing the sharpest deceleration of economic growth since reforms started 30 years ago.”

Steel prices in China have tumbled because of the slowdown in construction, which accounts for 38 percent of demand, according to Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. Spot prices of hot-rolled sheet have plunged almost 40 percent since the end of June to 3,594 yuan a ton.

Zhengzhou-based Bayannur Zijin Nonferrous Co. is reducing zinc output by 30 percent as demand for the metal declines, it said Nov. 19. Zinc, which is used as a protective coating for iron and steel used to build homes and make cars, has tumbled 49 percent this year on the London Metal Exchange.

Fallout for Neighbors

For every 1 percentage point growth in China's economy, the rest of Asia will be boosted by half that, says Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong.

Countries with the most at stake are Taiwan, which shipped almost 36 percent of its exports to China last year; South Korea, 25 percent; and Japan, 19 percent, according to UBS AG.

Taiwan's export orders from China and Hong Kong dropped 23 percent in October, the biggest decline since 2001, the government reported Nov. 24.

Concern over a slowdown spurred China to cut interest rates by 1.89 percentage points since September and end restrictions on bank lending. To encourage home sales it trimmed mortgage rates, taxes and down-payments for first-time home buyers.

That's a U-turn from the first half, when Central Bank Governor Zhou Xiaochuan was focused on fighting inflation that rose to a 12-year high of 8.7 percent in February. It dropped to 4 percent in October.

The slump in residential and commercial building may undermine efforts to buoy the economy.

“The global financial crisis won't get China to zero percent growth and neither will recession in developed economies,” said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong. “If there's a collapse in the property market that might do the job.”

----------------------------
Iceland Crisis Sends Viking Descendants Back to Norway for Jobs
Email | Print | A A A

By Meera Bhatia and Helga Kristin Einarsdottir

Dec. 2 (Bloomberg) -- Almost 1,200 years after Viking chief Ingolfur Arnarson left Norway to found Reykjavik, the crisis engulfing Iceland is forcing his descendants home.

“There are no jobs here,” said Baldvin Kristjansson, an 18-year-old former container repairman from western Iceland, at a European job fair in Reykjavik. “I’m going to move away and go to Norway.”

The Atlantic island of 320,000, suffering from its worst financial crisis since gaining independence in 1944, faces the biggest exodus in a century. Iceland’s $7.5-billion economy may shrink about 10 percent next year, according to the International Monetary Fund, which is helping provide a $4.6 billion bailout package.

About half of Icelanders aged between 18 and 24 are considering leaving the country, Reykjavik-based newspaper Morgunbladid said, citing a survey of 1,117 people between Oct. 27 and Oct. 29.

“Tens of thousands” will depart, estimated Jesper Christensen, chief analyst at Danske Bank A/S, the biggest lender in neighboring Denmark.

Iceland’s biggest wave of emigration was in the late 1800s and early 1900s. Then, 15,000 out of a total population of 70,000 left, joining a flow to North America from countries including Norway, Sweden and Ireland.

Foreign Debt

A hundred years later, Iceland’s economy is struggling after the nation’s banking system collapsed under the weight of its foreign debt last month.

Inflation surged to an 18-year high of 17.1 percent in November following a currency collapse that drove up prices. A protest against the government turned violent last week as police used pepper spray to battle activists in front of Reykjavik’s main police station.

Unemployment is forecast to rise to 7 percent by the end of January from a three-year high of 1.9 percent in October, the country’s Labor Directorate estimates.

“A lot of people are registering unemployed,” said Valdimar Olafsson at European Employment Services in Reykjavik. “It’s very hectic and Icelanders are asking for jobs, especially in Norway.”

Norse settlers arrived in Iceland around 874 on sail-powered wooden longships. The country came under Norwegian control in 1262 and then under Danish dominion in 1380. It gained autonomy 90 years ago yesterday and became fully independent from Denmark in 1944.

‘State of Coma’

The Danes and Norwegians, along with Germans and Poles, returned to pluck Icelandic talent at a job fair on Nov. 21 and 22. It drew 2,500 people.

Neither country has been fully spared from the effects of the global crunch. Denmark’s economy will shrink 0.5 percent next year, according to the Paris-based Organization for Economic Cooperation. Norwegian economic growth more than halved to 0.2 percent in the third quarter.

Both remain in much better shape than Iceland, though, and Norwegian and Danish companies are seeking skilled workers.

“Iceland is more or less in a state of coma,” said Sigrun Thormar, who runs a consulting business for Icelanders moving eastward. “There’ll be an increase in the number of Icelanders seeking work in Denmark.”

Danish unemployment is 1.6 percent. In Norway, the jobless rate rose to 1.8 percent last month from 1.7 percent the previous month. Norway’s Labor and Welfare Administration, or NAV, expects unemployment to stay below 3 percent over the next two years.

Swamped

Kristiansand-based Teknova, a research institution looking for scientists, and Billingstad-based Aibel AS, a provider of products and services to the oil and gas industry, are among Norwegian companies seeking Icelandic workers.

In total, NAV has 350 vacancies posted, according to Ragnhild Synstad, an adviser at NAV EURES who attended the job fair.

“I have been absolutely swamped with employers that are interested,” said Synstad. “The response was overwhelming. We heard some very sad stories about families who have lost everything.”

Stefan Gudjonsson, 37, who was let go from his job as an account manager at an information technology company, said he may have to leave his 6-year-old son behind for work elsewhere.

“I don’t like the look of things right now and also worry about what has yet to happen,” he said. “People are trying their best to be optimistic, but the prospects look anything but good.”

-----------------------------
Ruble Requires 20% Depreciation to Revive Economy, Troika Says

By Emma O’Brien

Dec. 2 (Bloomberg) -- Russia should abandon its defense of the ruble to kick-start economic growth by devaluing the currency 20 percent, according to Troika Dialog, the country’s oldest investment bank.

“The sooner they do it, the more chance that the economy will start to recover,” Evgeny Gavrilenkov, Troika’s chief economist, said in an interview in Moscow yesterday. “The exchange rate prevents growth.”

Russia’s oil-led economy is deteriorating as crude trades below $50 a barrel. Manufacturing contracted more in November than during the 1998 financial collapse in the world’s worst financial crisis since the Great Depression.

The ruble has slumped 16 percent against the dollar since August as investors pulled $190 billion out of the country, according to data compiled by BNP Paribas SA. Attempts by the central bank to defend the currency has drained $148 billion from its foreign-currency reserves, the world’s third largest.

“Five percent growth is easily achievable with this adjustment in the exchange rate,” Gavrilenkov said. The devaluation would create a “minor shock” for the economy, he said.

Russia’s central bank buys and sells foreign currency to keep the ruble within a trading band against a basket comprised of 55 percent dollars and the rest in euros. Policy makers widened the band three times last month, allowing it to weaken by 3 percent against the basket. They raised interest rates twice.

The currency weakened to 28.0573 per dollar today, the lowest since March 2006. It traded at 31.3056 against the basket, the weakest end of the new trading band.

Oil

Urals crude, the country’s chief export oil blend, has lost 69 percent since July and is below the $70-a-barrel average needed to balance the country’s 2009 budget. It slid 11 percent to $44.27 a barrel yesterday, the biggest drop in seven years.

Russia’s current account deficit may be as much as $6 billion after a $91.2 billion surplus for the first nine months of the year, Gavrilenkov said.

VTB Group’s Purchasing Managers’ Index showed a fourth monthly decline in Russian manufacturing yesterday, falling to a record low. Economic growth will slow to 5 percent next year from an average of 7 percent a year since 1999, according to the average estimate of 11 banks surveyed by Bloomberg.

A total 30 percent drop in the ruble from its August peak against the basket would balance the current account and support domestic manufacturing, Gavrilenkov said. The ruble should be as weak as 35 per dollar by the end of January, he said.

“It’s inevitable, there’s no other way out,” Gavrilenkov said. “It’s not only to help the financial system to recover but also to boost the economy.”

---------------------------
Vietnam Football Federation offer big money to lure Manchester United

AFP

The Vietnam Football Federation (VFF) is negotiating to pay up to 2.47 million US dollars to entice Manchester United for a one-off game next year, with AC Milan also on its radar.

"This is a huge amount of money but we can arrange it. We can get money from tickets, advertising and broadcasting rights and so on," VFF chairman Nguyen Trong Hy was quoted as saying by the Asean Football Federation.

But negotiations with United are far from over.

According to VFF, the Red Devils have insisted on strict conditions for the game, whose date has yet to be set.

These include no advertising at the stadium while Vietnamese players must wear jerseys sporting only their names and national flag, with logos banned.

United last played in Asia in 2007, with stops in Japan, South Korea, Macau and the southern Chinese city of Guangzhou.

Trong Hy added that the VFF is also looking at bringing Italian giants AC Milan to Vietnam in 2009.

"Everything is running well. If AC Milan agrees, the match between the national squad and AC Milan will be held in early September 2009," Trong Hy said.

---------------------------
再防委・大西氏ＶＳ露鵬＆白露山法廷対決も

　尿検査による大麻の陽性反応で日本相撲協会を解雇された元幕内の露鵬（２８）と白露山（２６）の兄弟が解雇は不当として地位確認を求めた訴訟の第１回口頭弁論が１日、東京地裁（渡辺弘裁判長）で開かれた。協会側は解雇は正当と反論。次回の弁論は来年１月１６日に行う弁論準備手続きを経て日程が決まる。

　元露鵬と元白露山は出廷しなかったが、塩谷安男弁護士は「今後、出廷する可能性はある」と明言。協会側が裁判所に提出した再発防止検討委員会の大西祥平委員の陳述書に不透明な部分があるため、同弁護士は「大西さんにも出廷を求めたい」と加えた。出廷は来年の４月か５月になりそうで、両者の因縁の対決が法廷で実現する可能性が浮上した。

　また、同弁護士は係争中の和解はないことを明言。「裁判も始まったことですし、一般の人々に向けて自分たちの気持ちを言う機会を設けたい」と今月中にも２人が会見を開く計画も明かした。

------------------------------
協会「解雇は適正」大麻問題口頭弁論

　大麻問題で日本相撲協会から解雇されたロシア出身の大相撲の元幕内露鵬（２８）と元十両白露山（２６）の兄弟が、尿検査の不備を理由に処分は無効として力士の地位確認を求めた訴訟の第１回口頭弁論が１日、東京地裁（渡辺弘裁判長）で開かれ、協会側は解雇処分は適正だったと反論した。

　今後は争点を整理し、裁判所が尋問などが必要と認めれば兄弟および尿検査を管理した大西祥平・慶大教授らが出廷する可能性もある。この日、兄弟は出廷しなかったが、代理人の塩谷安男弁護士は来週にも兄弟が会見を開く意向があることを明らかにした。

　来年１月９日までに双方が主張と反論をまとめて裁判所に提出し、同１６日に準備手続きが行われる。

--------------------------------
露鵬、白露山が大麻問題で４月出廷か

　大麻問題で９月に日本相撲協会を解雇された元幕内露鵬（２８）と元十両白露山（２６）の力士としての地位保全を求める裁判の第１回口頭弁論が１日、東京地裁で行われた。終了後、代理人の塩谷安男弁護士は、２人が法廷で証言する可能性を示唆した。被告側から出された協会の再発防止検討委員会の大西祥平委員（慶大教授）の陳述書には、「精密検査の結果が（処分などで）不利に働くことがあるという説明をした」と、２人の主張と逆の事実が記された。同弁護士は「大事なところで食い違っており尋問が必要」と話した。

　来年４、５月になりそうだが、２人と大西委員が法廷で直接対決する可能性もある。また、今週末以降に２人が公の場で会見することも明かした。

-----------------------------
元若ノ鵬の「Ｘ氏」架空!?週刊現代報じる

　現役力士の八百長を「週刊現代」で告発し、それを撤回した元若ノ鵬（２０＝本名ガグロエフ・ソスラン）の「二枚舌」ぶりを１日発売の「週刊現代」が報じている。元若ノ鵬は１１月２８日の八百長告発撤回会見と、力士としての地位保全を求める抗告手続きで提出した陳述書では「ある親方の代理」と名乗る男「Ｘ」に促されての告発だったと主張していた。

　だが、同誌は会見前日の同２７日に元若ノ鵬が「相撲界に戻るために、それと週刊現代に迷惑をかけないために、どうすれば一番いいかを考えた。それでＸさんという（架空の）人を考えて、その人に全部だまされたことにすればいいと思った」などと、同誌に語ったとしている。

　一方で元若ノ鵬の代理人の宮田真弁護士は同３０日、「正式には記事を見てから対応となるが、本人は私に『週刊現代にそのようなことは言っていない』と話している」と説明。その上で「Ｘの存在は、私は随分前から聞いていたし、週刊現代もその存在を知っていたはずです」と話している。

----------------------------
元若ノ鵬「八百長」告発　弁護士がこれまでのくわしい経緯を説明した文書を配布

週刊誌で現役力士の実名を挙げ、八百長を告発した元若ノ鵬が、告発はうそだったとの陳述書を提出した件で、元若ノ鵬の弁護士が、これまでのくわしい経緯を説明した文書を報道各社に配布した。

この中で、弁護士は、元若ノ鵬が八百長を告発した9月29日の会見以降、10月21日まで、週刊現代側が用意した宿泊施設に滞在させられ接触できなかったうえ、本人もその場所から自由に移動できなかったことを明らかにしている。

また、陳述書を裁判所に提出したことが報道されたあと、元若ノ鵬は、週刊現代の記者の訪問を受け、陳述書の撤回を要請され、11月28日の会見についても中止するよう週刊現代側から強い要請があったという。

(12/01 13:15)

-----------------------------
元若ノ鵬の弁護士、「週刊現代」を暗に批判 (1/2ページ)
2008.12.1 17:58

　講談社発行の「週刊現代」の記事で八百長を告発したロシア出身の元幕内力士、若ノ鵬（２０）が「八百長はなかった」と告発を撤回する陳述書を東京地裁に提出し、記者会見した問題で、元若ノ鵬の訴訟代理人の宮田真弁護士は１日、「週刊現代が元若ノ鵬を約１カ月間かくまっていた」と指摘して、取材手法を暗に批判した。

　日本相撲協会から解雇された元若ノ鵬が処分撤回を求めた訴訟の代理人を務める宮田弁護士が、１日付で文書を報道機関に配布。元若ノ鵬が陳述書を提出した経緯などを補足説明した。

　宮田弁護士は文書で、元若ノ鵬は八百長告発の会見を開いた９月２９日から１０月２１日までの約１カ月間、週刊現代が用意した宿泊施設に滞在させられて自由に移動できなかったため、宮田弁護士と面談できなかったと主張。「週刊現代側が取材する場合、本職（宮田弁護士）らの同席、あるいは自由な連絡が可能な状況であれば、混乱も生じなかった」と訴えた。

　さらに、「だまされて八百長を告発した」とする陳述書をめぐり、週刊現代が長時間にわたり元若ノ鵬に撤回を要請したと指摘。八百長告発は虚偽だったと自ら語った１１月２８日の記者会見についても、中止要請があったとした。

　これに対し、週刊現代側も１日、コメントを発表。「約１カ月の取材期間中、宿泊施設を用意したのは若ノ鵬本人の希望による。その間の行動や通信も当方で制限したことはいっさいない。本人は『とても楽しかった』と話していた」として、宿泊施設提供を認めつつも、行動や通信に制約はかけていないとした。　

　その上で、元若ノ鵬の八百長告発記事について、「インタビューも本人が自発的に話した。当方が強制したことはいっさいない。若ノ鵬が『八百長はない』と言ったことは一度もない」とし、本人の意思に基づいていたと強調。

　会見撤回要請についても、「止めるよう要請した事実はない」と反論した。

------------------------------
ブッシュ大統領、イラク諜報活動失敗を“痛恨事”にあげる
特集 イラク情勢

　【ワシントン＝本間圭一】「私には戦争の準備が出来ていなかった」。ブッシュ米大統領は１日放映された米ＡＢＣ放送とのインタビューで、２期８年間の「痛恨事」として、２００３年３月に開戦したイラク戦争を挙げた。

　大統領は、その最大の理由として、「イラクでの諜報(ちょうほう)活動が失敗したことだ」と述べ、中央情報局（ＣＩＡ）を始めとする情報機関などが指摘した大量破壊兵器（ＷＭＤ）が実際、イラクに存在しなかったことを悔いてみせた。

　ブッシュ政権の任期は残り約５０日となったが、イラクでの米軍要員の死者は４０００人を超え、なお１４万人余が駐留する。大統領は、早期撤退を求める世論について、「私は戦争を望んでいたわけではなかった」と弁明した。