Business Week

Wednesday, November 30

Greek deputy defects, reduces Socialists majority

3:53 AM defects, deputy, Greek, majority, reduces, Socialists No Comments

ATHENS, Greece — A Greek governing party deputy has defected over the prime minister's surprise decision to hold a referendum on a European debt deal, leaving the Socialists with only a two-seat majority in Parliament.

Milena Apostolaki's office said Tuesday she had declared herself an independent deputy in a letter to Parliament speaker. The move leaves the governing Socialist party with 152 seats in the 300-member legislature.

Prime Minister George Papandreou's shock decision late Monday led to markets plunging on fears that Europe's plan to save the euro will unravel. Papandreou has not set a date for the referendum, expected to be held early next year. He has also called a confidence vote in his government on Friday.

Emirates to add 50 planes worth $18 billion

4:41 PM billion, Emirates, planes, worth No Comments

DUBAI, United Arab Emirates — Dubai's fast-growing airline Emirates kicked off the region's biggest airshow Sunday with an order for 50 Boeing 777s, which the U.S.-based aircraft maker described as its biggest single order in dollar terms in history.

The list price for the deal is $18 billion, but airlines typically negotiate discounts for large orders.

Although the Gulf airlines are the among the world's most ambitious in expanding their fleets and routes, a deal the size of the Emirates contract had not been expected at the airshow because of the large backlog of planes already on order for Emirates and rivals such as Abu Dhabi-based Etihad and Qatar Airways.

The deal, announced by Emirates chairman and CEO Sheik Ahmed bin Saeed Al Maktoum, is for an extended-range version of the 777-300. Emirates already has 95 777s in service, which is the most of any carrier.

Chicago-based Boeing Co. said the deal is the largest single aircraft order in dollar terms in its history.

"It sustains a lot of jobs in the United States — several thousand," said Jim Albaugh, president and CEO of Boeing Commercial Airplanes.

Before Sunday's order, Emirates already had 40 of the planes booked. That means it now has nearly as many of the twin-aisle planes on order as it already operates.

Emirates is the Middle East's largest carrier. It is owned by the government of Dubai, which is recovering from a debt-fueled financial crisis that came to a head two years ago.

Its young fleet also includes Airbus A330s, A340s and the double-decker A380.

Wary about Iran, Obama lobbies Russia and China

7:29 PM about, China, lobbies, Obama, Russia No Comments

HONOLULU — Searching for help, President Barack Obama lobbied the skeptical leaders of Russia and China on Saturday for support in keeping Iran from becoming a nuclear-armed menace to the world, hoping to yield a "common response" to a crisis that is testing international unity.

Yet Obama's talk of solidarity with Russian President Dmitry Medvedev and Chinese President Hu Jintao was not publicly echoed by either man as Iran moved anew to the fore of the international stage — and to the front of the fierce U.S. presidential race.

Obama, at home in Hawaii and holding forth on a world stage, also sought to show aggressiveness in fixing an economy that has weakened his standing with voters. He pushed Hu about American impatience with China's economic policy, touted the makings of a new pacific trade zone and showered attention on the lucrative Asia-Pacific export market.

The United States' vast worries about Iran grew starker with a report this week by the U.N. atomic agency that asserted in the strongest terms yet Iran is conducting secret work with the sole intent of developing nuclear arms. The U.S. claims a nuclear-armed Iran could set off an arms race among rival states and directly threaten Israel.

Russia and China remain a roadblock to the United States in its push to tighten international sanctions on Iran. Both are veto-wielding members of the U.N. Security Council and have shown no sign the new report will change their stand.

With Medvedev on the sidelines of an Asia-Pacific summit here, Obama said the two "reaffirmed our intention to work to shape a common response" on Iran.

Shortly after, Obama joined Hu, in a run of back-to-back diplomacy with the heads of two allies that hold complicated and at times divisive relations with the United States. Obama said that he and the Chinese leader want to ensure that Iran abides by "international rules and norms."

Obama's comments were broad enough to portray a united front without yielding any clear indication of progress. Medvedev, for his part, was largely silent on Iran during his remarks, merely acknowledging that the subject was discussed. Hu did not mention Iran at all.

White House aides insisted later that Russia and China remain unified with the United States and other allies in preventing Iran from developing nuclear weapons, and that Obama, Hu and Medvedev had agreed to work on the next steps. Deputy national security adviser Ben Rhodes said the new allegations about Iran's programs demand an international response, and "I think the Russians and the Chinese understand that. We're going to be working with them to formulate that response."

As the president held forth on the world stage in his home state, Republicans vying to compete against Obama for the presidency unleashed withering criticism in a debate in South Carolina. It was a rare moment in which foreign policy garnered attention in a campaign dominated by the flagging U.S. economy.

"If we re-elect Barack Obama, Iran will have a nuclear weapon. And if you elect Mitt Romney, Iran will not have a nuclear weapon," said Romney, the former Massachusetts governor. Minnesota Rep. Michele Bachmann warned that Iran's attempt to develop a nuclear weapon is setting the table "for worldwide nuclear war against Israel."

Iran has insisted its nuclear work is in the peaceful pursuit of energy and research, not weaponry.

U.S. officials have said the report by the International Atomic Energy Agency was unlikely to persuade China and Russia to support tougher sanctions on the Iranian government. But led by Obama, the administration is still trying to mount pressure on Iran, both through the United Nations and its own, for fear of what may come should Iran proceed undeterred.

More broadly, Obama sought Saturday to position the United States as a Pacific power determined to get more American jobs by tapping the explosive potential of the Asia-Pacific.

For businesses, he said, "this is where the action's going to be."

"There is no region in the world that we consider more vital than the Asia-Pacific region," he told chief executives gathered for a regional economic summit.

The president went so far as to saying the United States had grown "a little bit lazy" in trying to attract business to the United States.

Obama's aides said he was blunt with Hu in expressing concern about China's undervalued currency, which keeps its exports cheaper and U.S. exports to China more expensive.

Deputy National Security Adviser Mike Froman said Obama made it clear that Americans are growing "increasingly impatient and frustrated" with the state of change in China economic policy. China had a $273 billion trade surplus with the U.S. last year and U.S. lawmakers say the imbalance hurts American manufacturers and taken away American jobs.

Underscoring the search for some good economic news ahead heading toward a re-election vote, Obama announced the broad outlines of an agreement to create a transpacific trade zone encompassing the United States and eight other nations. He said details must still be worked out, but said the goal was to complete the deal by next year.

"The United States is a Pacific power and we're here to stay," Obama said.

The eight countries joining the U.S. in the zone would be Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. Obama also spoke with Japanese Prime Minister Yoshihiko Noda about Japan's interest in joining the trade bloc.

In a sign of potential tension with China, Froman shrugged off complaints from China that it had not been invited to join the trade bloc.

He told reporters that China had not expressed interest in joining and said the trade group "is not something that one gets invited to. It's something that one aspires to."

Addressing the European debt crisis, Obama said he welcomed the new governments being formed in Greece and Italy, saying they should help calm world financial markets. Obama's ever increasing attention to the Asia-Pacific is driven in part by Europe's own financial woes and the U.S. need to get more aggressive in tapping its export options.

Obama will be in Honolulu through Tuesday, when he leaves for Australia before ending his trip in Indonesia.

___

Associated Press Writer Erica Werner in Honolulu contributed to this report.

Ende einer Ära: Italiens Berlusconi tritt zurück

10:21 PM Berlusconi, einer, Italiens, tritt, zurck No Comments

ROME - Italian Prime Minister Silvio Berlusconi resigned Saturday after parliament's lower chamber passed European-demanded reforms, ending a 17-year political era and setting in motion a transition aimed at bringing the country back from the brink of economic crisis.

Surging Gingrich nabs key NH paper's endorsement freed American student: 'It was very scary' what to expect from Cyber Monday where is d.b. Cooper? Best bets: 'America's most wanted' returns thinking road trip? Tap into your wild side

A chorus of trade's "Alleluia," performed by a few dozen singers and classical musicians, rang out in as front thousands of Italians of the president's palace poured into downtown Rome to rejoice at the end of Berlusconi's scandal-marred reign.

Hecklers shouted "Buffoon, Buffoon!" as Berlusconi's motorcade entered and exited the presidential palace, where he tendered his resignation to President Giorgio Napolitano, the palace said in a statement.

Respected former European commissioner Mario Monti remained the top choice to try to steer the country out of its debt woes as the head of a transitional government, but Berlusconi's allies remained split over whether to support him.

Their opposition wasn't expected to scuttle Napolitano's plans to ask Monti to try to form of interim government once Berlusconi resigns, but it could make Monti's job more difficult.

Napolitano is expected to hold consultations Sunday with all of Italy's political forces before proceeding with his expected nomination of Monti. Late Saturday, Berlusconi's party said it would'nt support Monti, albeit with conditions.

Berlusconi's resignation which set in motion after the Chamber of Deputies, with a vote of 380-26 Saturday with two abstentions, approved economic reforms which include increasing the retirement age starting in 2026 but do nothing to open up Italy's inflexible labor market.

The Senate approved it a day earlier and Napolitano signed the legislation Saturday afternoon, paving the way for Berlusconi to leave office as he promised to do after losing his parliamentary majority earlier in the week. He chaired his final cabinet meeting Saturday evening.

Carrots and bananas for Berlusconi's last supper?

Berlusconi stood as lawmakers applauded him in the parliament chamber immediately after the vote. But outside his office and in front of government palazzos across town, hundreds of curiosity-seekers pleasantly to witness the final hours of his government heckled him and his ministers.

"Shame!" and "Get Out!" the crowds yelled, many toting "bye bye Silvio party" poster as they marched through downtown Rome in a festive indication that for many Italians, like financial markets, the time had come for Berlusconi to go.

Demonstrator chanting "resign, resign, resign" so gathered outside the prime minister's office and parliament, heckling ministers as they walked between the two buildings.

A small group of pro-Berlusconi demonstrators gathered outside his residence but were outnumbered by opponents.

"This is something that deeply saddens me," the Italian news agency ANSA quoted Berlusconi as telling aides.

Earlier in the day, Berlusconi lunched with Monti in a clear sign the political transition was already under way, news reports said.

While the euroskeptic Northern League remained opposed to Monti's nomination, some lawmakers suggested they could support a Monti-led government for a few months to enact the additional EU-demanded reforms before elections are held in early 2012.

In a statement issued late Saturday, Berlusconi's peoples of liberty party said its members would'nt support Monti, but added that they would thus ensure that Monti's Cabinet, legislative agenda and the timeframe of his government meets their requirements.

Napolitano himself for lawmakers to put the good of the country ahead of short-term, local interests - an indirect appeal to members of Berlusconi's party and the allied Northern League to work with the new government.

"All political forces must act with a sense of responsibility," he said.

It was at ignoble end for the 75-year-old billionaire media mogul, who came to power for the first time in 1994 using a soccer chant "Let's go Italy" as the name of his political party and selling Italians on a dream of prosperity with his own personal story of transformation from cruise ship crooner to Italy's richest man.

While he became Italy's longest-serving post - premier Berlusconi's three stints was as premier were tainted by corruption trials and accusations that he used his political power to help his business interests.

His last term has been marred by sex scandals, "bunga bunga" parties and criminal charges he paid a 17-year-old girl to have sex - accasions he denies.

Italy is under intense pressure to quickly put in place a new and effective government to replace him, one that can push through even more painful reforms and austerity measures to deal with its staggering debt, which was € at 1.9 trillion ($2.6 trillion), or a huge 120 percent of economic output. Italy has to roll over a little more than €300 billion ($410 billion) of its debt next year alone.

Markets battered Italy this past week amide uncertainty that Berlusconi would really leave and questions over whether Italy's notoriously paralyzed parliament could rally around a replacement. But Italy's borrowing rates pulled back after Napolitano made clear he intended to tap the politically neutral economist Monti to try to head to interim government to push the reforms through.

The yield on benchmark Italian 10-year bonds fell to 6.48 percent Friday, safely below the crisis level of 8 percent reached earlier this week.

Greece, Ireland and Portugal all required international bailouts after their own borrowing rates passed 7 percent. The Italian economy would not be so easy to save. It totals $2 trillion, twice as much as the other three countries combined.

An Italian default could tear apart the coalition of 17 countries that use the euro as a common currency and deal a strong blow to the economies of Europe and the United States, both trying to avoid recessions.

The head of the International Monetary Fund, Christine Lagarde, said Saturday that Italy's political transition over the next few days should send a "clear sign of clarification and of credibility" that the country is now on the right path to get its finances back in order.

Speaking to reporters in Tokyo, Lagarde had high praise for Monti, saying she had great esteem for the "quality" economist with whom she had long enjoyed a "extremely warm" and effective relationship.

The IMF has a key role to play over the next few months in overseeing Italy's efforts to pull itself back from a Greek-style economic disaster, monitoring how it implements reforms to jump into debt and track projected at a growth, which is scan 0.6 percent this year and 0.3 percent next year.

Amid market turmoil last week, Berlusconi was forced to ask for IMF monitoring of Italy's finances, a humiliating prospect for the heterogeneous's third-largest economy and an embarrassment for the long-defiant Berlusconi.

The premier, however, received a warm sendoff from one of his closest pals, Russian Prime Minister Vladimir Putin, who called Berlusconi "one of the last Mohicans of European politics" who had brought political stability to Italy.

The associated press and Reuters contributed to this story.

Qantas cleared to fly again after fleet grounding

9:47 AM after, again, cleared, fleet, grounding, Qantas No Comments

CANBERRA, Australia — Qantas Airways was expected to resume flying Monday after an Australian court intervened in a labor dispute that led the airline to ground its entire fleet over the weekend.

By the time the labor-relations court acted, several hundred flights had been canceled and tens of thousands of passengers stranded around the world.

Some airline industry experts say Qantas' surprise grounding of its entire fleet Saturday could cause many travelers to book future trips on other airlines.

Qantas CEO Alan Joyce said he had no choice but to order the lockout of union workers and end months of rolling strikes that led to canceled flights, $70 million in losses and a collapse in future bookings.

Joyce told the Australian Broadcasting Corp. that he expected some flights to resume by mid-afternoon Monday. It was unclear how long it would take for the airline to resume a full schedule. The airline had estimated that it would lose $20 million a day during the lockout.

The Australian labor-relations court issued its ruling ending the standoff early Monday morning — midday Sunday in the United States — after holding an emergency hearing that included testimony from company, labor union and government officials.

The president of the labor-arbitration panel, Geoffrey Giudice, said the group acted to protect Australia's tourism and aviation industry.

The airline said 447 flights had been canceled in the first 24 hours of the lockout. Qantas did not immediately update that figure.

Qantas is the largest of Australia's four national domestic airlines, carrying about 70,000 passengers a day on a fleet of 108 planes that operate in 22 countries. It is the 10th largest airline in the world by passenger miles flown, according to the International Air Transport Association, an airline trade group.

Its major international destinations include Singapore, Hong Kong and London. In the United States, Qantas flies to Los Angeles, Dallas, New York and Honolulu.

Travelers reported being ordered to leave planes that were already on the tarmac when the lockout began Saturday. More than 60 planes in mid-flight flew to their destinations, then were parked.

Don't miss these Travel stories Tastes and sounds of Montreal lure US tourists These days, Montreal is selling itself to U.S. tourists as more than just poutine and a port.

Burglar targets traveling Facebook friends Power your gadgets with your own bag 8 most complicated countries to visit Be prepared for worst-case travel scenarios

Qantas said it paid to rebook passengers on other airlines, including compensating those who had to pay higher last-minute fares to get home.

For several weeks, workers have carried out rolling strikes and refused to work overtime to demand higher pay and protest the airline's plans to cut about 1,000 jobs. Qantas, which has about 32,500 employees, wants to reduce costs by creating new Asia-based airlines for international flying. International flights were a roughly $200 million drain on the company last year.

The company reported in August that annual profit had doubled. But it said the business climate was too turbulent — partly because of labor turmoil — to forecast future earnings.

Henry Harteveldt, an airline industry analyst in San Francisco, predicts the shutdown will do long-term damage to the Qantas name by hurting its reputation for reliability.

"A lot of travelers won't take a chance and will book away to Virgin Australia, Air New Zealand and other airlines," Harteveldt said. "Brand loyalty in the airline business is very low, and there is so much competition."

Before the court ruling, Virgin Australia said it was scheduling extra flights and offering 20 percent fare discounts to help stranded Qantas passengers through Thursday.

If Qantas loses customers, that could also hurt partners in its alliance of global airlines, including American Airlines. A rival alliance that includes Air New Zealand and is led by United Continental Holdings Inc. could benefit. So could a third group of airlines that includes several major Asian carriers and is led by Delta Air Lines Inc. and Air France-KLM.

Other industry veterans said the lockout was a daring move that will pay off for Qantas, which wants to expand the low-cost, low-fare model that it uses at its Jetstar Airways subsidiary.

Jetstar has extensive routes to Southeast Asia and Japan, and lower costs than Qantas. But Qantas unions fear that expansion of low-cost airlines will result in Australian jobs being sent overseas. CEO Joyce hopes to bend the unions closer to the company's vision for growth by tapping into Asian markets.

"It was a very shrewd move by their CEO to force the issue and stop the potential deterioration of the brand," said Mo Garfinkle, an airline consultant who has worked for Qantas rival Virgin Australia. "In the end, it will benefit Qantas financially."

Garfinkle said the short duration of the fleet grounding will help Qantas get back up to full speed quickly, cutting its losses.

Rod McGuirk in Canberra, Australia, contributed to this report.

EU leaders call on G-20 for more joint action

11:56 AM action, joint, leaders No Comments

BRUSSELS — Two European Union leaders have called on the upcoming G-20 summit of wealthy and developing countries to build on the EU plans to stabilize the eurozone and further boost the global recovery.

EU Council President Herman Van Rompuy and Commission President Jose Manuel Barroso wrote in a weekend letter to the leaders that there was "continued need for joint action" to get the world economy back on track.

Last Thursday's three-pronged EU deal appeared to have met expectations for some kind of major action and stock market rallied in Europe and around the world. The EU plan retools the eurozone's underpowered bailout fund, calls on banks to take 50 percent losses on Greek bonds and orders them to raise €106 billion ($150 billion) in new capital by June.

The G-20 leaders meet in Cannes, France, on Thursday and Friday.

ABCs of Euro crisis have citizens asking WTF?

1:53 PM asking, citizens, crisis No Comments

BRUSSELS — From a rescue fund called the EFSF to another known as the ESM, by way of a SPIV trust and an FTT levy, the acronyms and other labels generated by the European Union's fight to contain its sovereign debt crisis range from the arcane to the bizarre.

As pressure escalates on the EU to solve the chaos, so does the tome of technical jargon for programs aimed at regaining stability. But often the capital-letter-laden alphabet soup ends up causing more confusion than it's designed to resolve.

The EU's increasing power, from a new diplomatic corps to a push for more oversight over national budgets, also raises questions over whether it uses jargon to communicate internally, or whether it uses the mystery to its advantage.

"Euro zone leaders do partly rely on the lack of understanding of ordinary taxpayers to push through these crisis measures and distract attention from their shortcomings," said Raoul Ruparel, an economist analyst at the eurosceptic Open Europe think-tank in London. "They gloss over these terms like NPV, net present value, but these are crucial details," he said.

For example: when the EFSF (European Financial Stability Facility) expires, the permanent ESM (European Stability Mechanism) will enter into force, but not before a deal on PSI (private sector involvement) in more aid for Greece.

At the same time, politicians working on avoiding more crises are drawing up revisions to MiFID, which will essentially usher in more regulation of financial markets. But there is also MiFID II in the works and proposed revisions to MAD.

The EFSF and the ESM should not be confused with their smaller partner, the EFSM — while the biggest fight could be over the MFF, the EU's long-term budget, and all that after Basel 2.5, the CRD capital requirements law and a crackdown on CRAs.

"I nearly lost my mind working through Basel," said one European banker, referring to the set of global banking supervisory rules that the EU implements across the bloc.

One summit has become a byword for EU officials to reduce a complex emergency debt package into a single phrase: July 21.

Sometimes that date has been twisted into a more unintelligible reference. "The point now is to implement a decision of the 21st of July-plus," Greek Finance Minister Evangelos Venizelos said in Brussels in late October.

Even sophisticated money managers struggle with the EU's internal workings. Some investors worried that an October 26 summit had been canceled when they heard of a procedural decision to scrap a meeting of EU finance ministers, known as Ecofin.

Hours after the summit went ahead, journalists jeered European Commission officials as they struggled to disentangle NPV from "notional haircuts" — a crucial element of an agreement designed to contain the worsening crisis.

Already losing popularity among Europeans over its clumsy handling of the debt crisis, the EU risks further alienating its citizens with the latest tide of opaque and convoluted jargon.

In the EU's latest survey on attitudes to the 27-nation bloc, less than a third of Europeans said they know what is going on at the European Parliament. Asked if they had heard of euro bonds — a proposal to issue debt jointly by the 17 nations in the euro and which could take budgetary powers away from national parliaments — 57 percent said 'no', the poll found.

The phrase generates equal but different confusion in debt markets, where 'eurobond' has long been shorthand for a type of international bond.

"The fundamental issue is that people feel almost nervous and anxious about the EU and that translates into insecurity and hostility because they don't understand how the place works," said Paul Adamson, editor of the online European affairs magazine E!Sharp and a campaigner against EU jargon.

Bureaucracies from the U.S. military to multinational companies are renowned for their jargon. But the EU's highly complex institutions are steeped in specialized language — dubbed eurospeak — with a tradition of naming policies after the places and people connected with their creation.

Schengen is no longer just a quiet Luxembourg town but a passport-free area; Gymnich, the name of a German castle, is now code for a meeting of EU foreign ministers. Officials responsible for preparing weekly talks between EU ambassadors are known as the Antici group after their Italian founder.

Jargon has grown as more countries have joined the EU to encompass its 23 languages: EFSF becomes FESF in French, FEEF in Spanish, ERVV in Finnish and SECA in Irish Gaelic.

Jose Manuel Barroso, the president of the Commission, said in late October that the bloc's complexities are "the single biggest complaint I receive everywhere I go in Europe."

One effort to bring Europeans closer to their officials and representatives is the newly-opened European Parliament visitors' center, built to rival the visitor center at the U.S. Congress in Washington. But beyond the razzmatazz of hi-tech, interactive displays and role-playing games, the debt crisis goes quietly unmentioned.

"We know there's a crisis because we live it every day," said Maria Jose Garrido, a lawyer from Madrid outside the visitor's center. "It's not going to go away just because you don't talk about it clearly."

Forbes: 147 companies that control everything

3:52 PM companies, control, everything, Forbes No Comments

Occupy this: Bruce Upbin over at our partner Forbes reports on a Swiss university study that built a model of basically the global structure of economic power or, as as Upbin puts it “who owns what.”

Aside from the Laserium-quality pretty picture that is the resulting model, they came up with what are the 147 companies that are most connected and therefore have the largest amount of control in global finance.

Says Upbin:

The #occupy movement will eat this up as evidence for massive redistribution of wealth. The New Scientist talked to one systems theorist who is “disconcerted” at the level of interconnectedness, but not surprised. Such structures occur commonly in biology, things like fungus, lichen and weeds. Economists say the danger comes when you combine hyperconnection with the concentration of power.

Here are the top 10 on the list:

1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
9. UBS AG
10. Merrill Lynch & Co Inc

'Huge relief': Banks agree to take loss on Greek debt

5:51 PM agree, Banks, Greek, relief No Comments

BRUSSELS — European leaders clinched a deal Thursday they hope will mark a turning point in their two-year debt crisis, agreeing after a night of tense negotiations to have banks take bigger losses on Greece's debts and to boost the region's weapons against the market turmoil.

After months of dawdling and half-baked solutions, the leaders had been under immense pressure to finalize their plan to prevent the crisis from pushing Europe and much of the developed world back into recession and to protect their currency union from unraveling.

World stock markets surged higher Thursday on the news. Oil prices rose above $92 per barrel while the euro gained strongly — a signal investors were relieved at the outcome of the contentious negotiations.

"We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis," French President Nicolas Sarkozy told reporters after the meeting ended early Thursday. "Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."

U.S. President Barack Obama also welcomed the deal, saying Europe's new debt plan lays a "critical foundation" for a comprehensive solution to the continent's financial crisis.

In a statement, Obama said the U.S. looks forward to the rapid implementation of the plan.

Europe's strategy unveiled after 10 hours of negotiations focused on three key points. These included a significant reduction in Greece's debts, a shoring up of the continent's banks, partially so they could sustain deeper losses on Greek bonds, and a reinforcement of a European bailout fund so it can serve as a €1 trillion ($1.39 trillion) firewall to prevent larger economies like Italy and Spain from being dragged into the crisis.

After several missed opportunities, hashing out a plan was a success for the 17-nation eurozone, but the strategy's effectiveness will depend on the details, which will have to be finalized in the coming days and weeks.

"These are exceptional measures for exceptional times. Europe must never find itself in this situation again," European Commission President Jose Manuel Barroso said after the meetings.

Japan and Canada welcomed the euro zone agreement. China's official Xinhua news agency said the outcome was "positive but filled with difficulties."

The most difficult piece of the puzzle proved to be Greece, whose debts the leaders vowed to bring down to 120 percent of its GDP by 2020. Under current conditions, they would have ballooned to 180 percent.

To achieve that massive reduction, private creditors like banks will be asked to accept 50 percent losses on the bonds they hold. The Institute of International Finance, which has been negotiating on behalf of the banks, said it was committed to working out an agreement based on that "haircut," but the challenge now will be to ensure that all private bondholders fall in line.

It said the 50 percent cut equals a contribution of €100 billion ($139 billion) to a second rescue for Greece, although the eurozone promised to spend some €30 billion ($42 billion) on guaranteeing the remaining value of the new bonds.

The full program is expected to be finalized by early December and investors are supposed to swap their bonds in January, at which point Greece is likely to become the first euro country ever to be rated at default on its debt.

"We can claim that a new day has come for Greece, and not only for Greece but also for Europe," said Greek Prime Minister George Papandreou, whose country's troubles touched off the crisis two years ago. "Let's hope the worst is over."

Since May 2010, Greece has been surviving on rescue loans worth €110 billion ($150 billion) from the 17 countries that use the euro and the International Monetary Fund since it can't afford to borrow money directly from markets.

In July, those creditors agreed to extend another €109 billion — but that plan was widely panned as insufficient.

Now, in addition to €30 billion in bond guarantees, the eurozone leaders and IMF said they will give Greece €100 billion ($139 billion) in new loans.

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

"While the headlines look good, the devil is in the details," said Damien Boey, equity strategist at Credit Suisse in Sydney.

Protecting the weak
The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility (EFSF) will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

That should make those countries' bonds more attractive investments and thus lower borrowing costs for their governments.

In addition to acting as a direct insurer of bond issues, the EFSF insurance scheme is also supposed to entice big institutional investors to contribute to a special fund that could be used to buy government bonds but also to help states recapitalize weak banks.

Such outside help may be necessary for Italy and Spain, whose banks were facing some of the biggest capital shortfalls.

Using the insurance promise, the eurozone also hopes to attract big institutional investors from outside the eurozone, such as sovereign wealth funds, to contribute to a separate fund that would back up the EFSF.

Reuters and The Associated Press contributed to this report.

S&P's French rating gaffe to be probed

5:05 PM French, gaffe, probed, rating No Comments

An erroneous downgrade of French sovereign credit rating by Standard & Poor's rating agency on Thursday was a very serious incident and will have to be investigated, the European Commission said on Friday.

"This is a very serious incident. This shows that we are in an extremely volatile situation, that markets are extremely tense, and therefore that players on these markets must be extremely rigorous and exercise a duty of responsibility," EU Internal Market Commissioner Michel Barnier said in a statement.

The Standard & Poor's mistake spooked investors already anxious over Europe's worsening debt crisis, feeding concerns that Europe's debt problems had engulfed the region's second-largest economy.

It contributed to the worst day for France's government bonds since before the euro was launched in 1999.

In a statement issued nearly two hours after the fact, S&P said the message resulted from a technical error and not from any action it intended to take against France. It said it was investigating the cause of the mistake.

"It is all the more important since these are not minor players on these markets, but actually one of the three major rating agencies and therefore an agency that has a particular responsibility," Barnier said.

"I do not wish to make a statement on the failure itself, which immediately was recognized by Standard & Poor's. The European authority for credit rating agencies, together with AMF, the French market authority, will have to look into this and draw conclusions from this incident," he said.

"This reinforces my conviction that European must have rigorous, strict and solid regulation for credit rating agencies, but not only for them," Barnier said.

Geithner: European crisis threatens global economy

8:12 PM crisis, economy, European, Geithner, Global, threatens No Comments

HONOLULU — Treasury Secretary Timothy Geithner has demanded rapid action by Europe to restore financial stability, warning that the region's economic crisis is "the central challenge to global growth."

"We are all directly affected by the crisis in Europe," Geithner said after a meeting of finance ministers of the 21-member Asia-Pacific Economic Cooperation forum late on Thursday. "It is crucial that Europe move quickly to put in place a strong plan to restore financial stability. They're moving ahead, but we just need them to move ahead more quickly and with more force behind it."

Asia-Pacific finance chiefs agreed to do whatever it takes to prevent the malaise from Europe's debt crisis spreading as a possible European recession threatens the global economy.

Wall Street rallies amid progress in Europe

President Barack Obama spoke with German Chancellor Angela Merkel and French President Nicolas Sarkozy late on Thursday and also called Italian President Giorgio Napolitano.

Turmoil
Italy's upper parliament voted on Friday to pass a package of spending cuts, after being pushed to the brink by bond markets. In Athens, a new interim government was sworn in as Greece attempted to calm the political turmoil that has threatened to bankrupt it and force it out of the euro zone.

European shares edged higher on Friday on hopes that Italy would make political progress that will enable it to quickly cut a debt mountain, easing investors' worst fears about the euro zone debt crisis.

The European Union warned on Thursday that the 17 countries using the euro common currency could slip back into recession next year as the debt crisis that has already engulfed Ireland, Portugal and Greece has shown alarming signs of spinning out of control.

The spillover from the European crisis is adding to the pressure in the Asia-Pacific — now the strongest driver of world growth — for more effective trade regimes to help spur job creation and for reforms to ensure financial resiliency.

Geithner said the Asia-Pacific's economies were "in a better position than most to take steps to strengthen growth in the face of these pressures."

A European recession would be felt sharply in the U.S., where growth is already anemic, and in Asia, which relies on Europe as a big market for its cars, clothing, consumer electronics and other exports.

In Rome, months of dithering and delay ended when the Italian upper house voted to pass an austerity package Friday. The law should in the lower house on Saturday, triggering the resignation of prime minister Silvio Berlusconi, who pledged to quit once has promised to resign after the financial stability law was endorsed by both houses of parliament.

Goodbye 'bunga bunga', hello prison for Berlusconi?

Mario Monti, a former European Commissioner who has emerged as favorite to replace Silvio Berlusconi as prime minister.

If the second vote passes smoothly as expected, Napolitano may accept Berlusconi's resignation as early as Saturday night and formally mandate Monti to try to form a new government soon afterwards.

If Rome burns, US will feel the heat

At first, Berlusconi had insisted that early elections were the only option. But he has since softened his stand and is said by sources to be open to a new government.

Greece's new interim Cabinet was sworn in Friday, with former European Central Bank Vice President Lucas Papademos at its helm as prime minister and the key position of finance minister unchanged.

The new government of Papademos, who also spent time as Greece's central bank governor, must now implement the terms of Greece's latest debt deal — a €130 billion ($177 billion) agreement reached by the European Union on Oct. 27. It includes provisions for private bondholders to forgive 50 percent — or some €100 billion — of their Greek debt holdings.

Leave Germany? Live in Germany? It's all Greek to them

With European leaders struggling to agree on how to tackle the deepening crisis, pressure has mounted on the European Central Bank to act more forcefully.

The president of the European Commission warned that the collapse of the eurozone would cause a crash that would instantly wipe out half of the value of Europe’s economy, plunging the continent into a depression as deep as the 1930s slump, according to a report in Britain's Daily Telegraph.

Jose Manuel Barroso said that if the euro area broke apart, the estimated initial cost would be up to 50 per cent of European gross domestic product. "It would jeopardize the future prosperity of the next generation. That is the threat that hangs over us," he said.

The Associated Press, Reuters and msnbc.com staff contributed to this report

Sarkozy: Greek debt crisis like Lehman Brothers'

7:43 PM Brothers, crisis, Greek, Lehman, Sarkozy No Comments

PARIS — It was a mistake to let Greece join the euro single currency when it did because its economy was not ready to form a monetary union with others in the club, French President Nicolas Sarkozy said Thursday.

How your car could testify against you Goodbye 'bunga bunga', hello prison for Berlusconi? NBC News: Paterno contacts criminal defense lawyer Updated 105 minutes ago 11/11/2011 2:31:37 PM +00:00 Ai Weiwei tackles tax bill, with Chinese help Helping women soar in tough economy Are there bogus charges on your phone bill? Good buddies: Truckers transport rescued animals

"It was a mistake," Sarkozy said, when asked during a TV interview about having Greece adopt the euro two years after the single currency was created.

"Its economy was not ready," Sarkozy said.

Sarkozy gave a rare televised interview to explain the euro zone crisis plan agreed in Brussels the previous evening to the French electorate, six months before a presidential election.

He likened Greece's sovereign debt crisis to the crisis at Lehman Brothers, and said that a failure to come up with a way to help Greece would have thrown the euro zone and world economy into disorder.

"If Greece had gone bankrupt, there would have been a domino effect that would have affected everybody. The entire euro zone risked being taken down," Sarkozy said.

The deal, thrashed out after days of tense talks between Sarkozy, German Chancellor Angela Merkel, other euro zone leaders and private financial institutions, halved Greece's private-sector debt to 100 billion euros after bondholders agreed a 50 percent haircut.

Who is stealing Germany's grapes?

10:41 PM Germanys, grapes, stealing No Comments

BERLIN — It's a ripening mystery: Who's stealing the wine grapes of Germany?

Thieves raiding lucrative southern German vineyards have made off with a minor fortune in fruit over more than a dozen forays under the cover of darkness.

Vintners have increased their vigilance, posted guards and sought help from the police, but so far, the thieves have made off without a trace.

"They picked off more than 2,500 kilograms of my best red grapes," said Stephan Attmann, who runs a vineyard near Deidesheim in southwestern Germany.

"It hurts, not just financially, but also emotionally," Attmann said. "We had spent weeks preparing the vines, getting rid of all the sour grapes, and then they came one night and stole everything."

Attmann estimates his losses so far this season at some €100,000 ($137,700) — more than 3,000 bottles of high-class Pinot Noir selling for €32 a bottle. He said he did not have any kind of insurance that covered the losses.

Hundreds of thousands of euros worth of grapes have been stolen across the wine region — and winemakers fear the worst may not be over.

While most of this year's grapes have been picked, vintners are still waiting for the first autumn frost to bring the deep chill needed before they can reap their lucrative ice wine grapes.

Sweet high-class ice wines are even more expensive than regular wines, making the remaining grapes especially valuable — and a likely prime target for the thieves.

"The vintners don't have a large amount of those grapes, but you can be sure that they are watching the ice wine grapes like hawks until they can harvest them," said Rainer Koeller, a Heilbronn police officer who has been involved in the investigation of the thefts.

The region was already suffering this year after a late frost in May wiped out a lot of grapes — and there's speculation the thieves could be other vintners, seeking to make up for those losses.

How your car could testify against you Goodbye 'bunga bunga', hello prison for Berlusconi? NBC News: Paterno contacts criminal defense lawyer

Ai Weiwei tackles tax bill, with Chinese help Helping women soar in tough economy Are there bogus charges on your phone bill? Good buddies: Truckers transport rescued animals

Attmann, whose wine estate Weingut von Winning is known to produce some of the best wines in the Pfalz region, is convinced that professional winemakers are at work. He notes that the thieves who stole his grapes used a harvesting machine at night, taking them just a few days before he was going to pick them himself.

"Often vintners pick their grapes at night, so it doesn't raise particular attention if people are working in the wine hills in the dark," he said. "But if they come with a harvesting machine, they definitely know what they're doing."

The vintners in the rolling hills surrounding the city of Heilbronn, 100 kilometers (60 miles) east of Deidesheim, have been hit more than 10 times this year, and are also convinced pros are behind the thefts.

The thieves came at night, and targeted primarily white Riesling, Trollinger or Grauburgunder grapes.

"We were once called to a vineyard in the early morning hours because witnesses saw two people moving with flashlights between the vines," said Koeller, the Heilbronn investigator. "But by the time we arrived, the suspects were gone, the vines were empty and as of today we still don't have a hot lead."

In the Heilbronn area, the thieves have always hand-picked the grapes and no area has been safe from the robberies.

"This is really a catastrophe for us," said vintner Albrecht Loehl of Flein, who lost 2,500 kilograms (5,500 pounds) of white Trollinger grapes. "We were already hard hit by the late frost in May that destroyed many of our grapes."

He said the thieves seemed to know their way around a vineyard even though they didn't use harvesting machines.

"The thieves picked off my ripe grapes and avoided the sour ones," he said, still in disbelief. "They emptied 25 vine rows, each row 53 meters (yards) long."

Ernst Buescher, a spokesman for the German Wine Institute, said many vineyards may face bankruptcy this year after losing all of their fruit to the May frost. What makes it worse — the grapes that survived have been particularly good, producing some of the best wine in years.

The combination might have turned some to theft "out of desperation," he said. "Not that those motives would justify anything."

"It's a great harvest this year, a precious wine, very harmonic due to the long maturing time and the golden autumn weather," Buescher said, adding that whoever made off with the grapes will be able to sell good wines for a good price.

Some of Germany's vineyards date to the Middle Ages, and it is not the first time thieves have targeted them, though nobody can remember a year like this one.

In the past, vintners would simply shut down all roads leading to the wine hills during harvest time and keep outsiders away.

But the growing number of tourists who come to taste the new wines, or simply enjoy hiking the hills in autumn when the wine leaves turn bright red and yellow, led communities in the region to abolish the ban in the early 1990s.

The tourism industry is too important to consider reinstituting the ban. But since the region has opened up, some towns and cities, like Stuttgart and Fellbach, have sent guards to the wine hills.

But most wine estates, which are mostly still family-run, simply cannot afford to do that and the fields are too vast to be effectively protected by individuals.

"When I look out of my window, I can see vineyards all the way to the horizon," said Heilbronn police's Koeller.

"There's no way one can guard all of this, especially at night."

Greece gambles on referendum for new debt deal

9:35 PM gambles, Greece, referendum No Comments

ATHENS, Greece — Taking a huge political gamble, Greece's prime minister announced Monday that his debt-strapped country will hold a referendum on the new European debt deal reached last week — the first such vote in 37 years.

Prime Minister George Papandreou appeared to take many lawmakers by surprise by saying that a hard-bargained agreement that took months for Europe's leaders to hammer out will be put to a public ballot.

He gave no date or other details on the proposed referendum, which would be the first in Greece since 1974, when the monarchy was abolished by a landslide vote months after the collapse of a military dictatorship.

"This will be the referendum: The citizen will be called upon to say a big 'yes' or a big 'no' to the new loan arrangement," Papandreou told Socialist members of parliament. "This is a supreme act of democracy and of patriotism for the people to make their own decision ... We have a duty to promote the role and the responsibility of the citizen."

The move allows Socialist lawmakers — who have been vilified by an increasingly hostile public during months of strikes, sit-ins and violent protests over rounds of austerity measures — to pass the responsibility for the country's fate to the Greek people themselves.

Finance Minister Evangelos Venizelos, a constitutional law professor, said the referendum was called after opposition parties repeatedly failed to side with the government in negotiations between Greece and other eurozone members.

"Greece is living through a drama, from which it must be released by asking the people to express its will," Venizelos told parliament.

"Each citizen will make his own decision, with responsibility, in a process that will provide a national sense of relief and recovery."

Later he told private Antenna television: "It is very clear: The new agreement will be submitted to parliament for approval and then submitted to the judgment of the Greek people ... the Greek people can of course say 'no' but must bear in mind the consequences of that decision."

Venizelos indicated the referendum would be held early next year, after weeks of complex negotiations to finalize details of the new agreement.

The new debt deal aims to seek 50 percent losses for private holders of Greek bonds and provide the troubled eurozone member with €100 billion ($140 billion) in additional rescue loans.

Papandreou's government has seen its majority reduced to just three seats in parliament and its approval ratings plummet amid harsh austerity measures that are sending the country into a fourth year of recession in 2012.

The EU statistics agency Eurostat estimated in a report issued Monday that unemployment in Greece reached 17.6 percent in July — even higher than the Greek estimate for that month of 16.5 percent.

"This is just the latest twist in the unfolding Greek tragedy," said Sony Kapoor, managing director of Re-Define, a London-based think tank.

"With an irresponsible opposition that is promising Greek voters the moon, it is very difficult to see how this referendum could be won under the ongoing gut-wrenching austerity."

Eurozone countries struggled for months to overcome their differences before reaching the Oct. 26 agreement — the second broad agreement reached in four months — and it is likely to cause major concern for EU officials.

Germany's Finance Ministry noted late Monday that "the summit of the eurozone's heads of states and governments last Wednesday formulated clear expectations. Accordingly, the second aid package for Greece shall be finalized by year's end."

"At the moment we are all working on this with high intensity," it said in a statement.

But it declined to comment directly on the ballot, saying "the announcement of a referendum is a development in Greece's domestic politics on which the (German) government has no information yet."

British Foreign Secretary William Hague said the referendum was "a matter for the Greeks."

"Every country needs to have their own domestic political approach to the problems ... The consequences of a 'yes' or 'no' vote are something that will have to be debated in Greece," Hague told Channel 4 News.

"We look to all the countries in the eurozone to honor the agreements they have entered into."

In Greece, opposition parties accused the government of calling the vote to save its teetering government, threatened by growing dissent from Socialist dissenters.

"The prime minister is trying to buy time," said Costas Gioulekas of the conservative New Democracy party said. "We want clear solutions. And a clear solution is obvious: Elections."

Under Greece's constitution, a referendum requires approval by parliament before it is officially declared by the country's president. Gioulekas would not say whether his party would back a "yes" vote.

Support for the Socialists has eroded so much that anti-government protesters forced authorities Friday to cancel an annual military parade to honor World War II veterans, causing deep embarrassment to the government.

Elena Becatoros from Athens, Juergen Baetz in Berlin, Gabriele Steinhauser in Brussels and Jill Lawless in London contributed.

Soaring borrowing costs push Italy to the edge

1:03 AM borrowing, costs, Italy, Soaring No Comments

ROME/LONDON — Italian borrowing costs reached a breaking point on Wednesday after Prime Minister Silvio Berlusconi's promise to resign failed to raise optimism about the country's ability to deliver on long-promised economic reforms.

Italy's president moved swiftly to reassure anxious markets, promising that Berlusconi would soon be vacating the premier's office and unexpectedly lavishing praise on economist Mario Monti, who might lead the debt-plagued country's next government.

The former European competition commissioner is widely considered to be a top contender to be the next Italian premier, now that Berlusconi has pledged to resign as soon as urgently demanded economic reforms are approved by Parliament.

President Giorgio Napolitano's office announced he had named Monti, who now runs the prestigious Bocconi University in Milan, as a senator-for-life. Senators-for-life include notable figures outside of politics and have voting privileges in the Senate. The honor could reinforce Monti's widely viewed status as a respectable figure above party politics.

Chat transcript: Why should US care about Europe?

Earlier in the day, Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting investors' concerns that they may not get their money back, prompting German Chancellor Angela Merkel to issue a call to arms.

Merkel said Europe's plight was now so "unpleasant" that deep structural reforms were needed quickly, warning the rest of the world would not wait.

She called for changes in EU treaties after French President Nicolas Sarkozy advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stayed more loosely connected -- a signal that some members may have to quit the euro if the entire structure is not to crumble.

Portugal and Ireland were forced to seek EU-IMF bailouts when their borrowing costs reached similar levels and clearing house LCH.Clearnet sounded another alarm by increasing the margin it demands on debt from the euro zone's third largest economy, effectively raising the cost of holding Italian bonds.

Stocks in Europe and the U.S. tumbled amid worries that the growing debt crisis would drag the global economy down. Mohamed El-Erian, well-respected co-chief investment officer of top bond manager PIMCO, told Reuters that Italy's debt problems signaled "a new, even more dangerous phase in Europe's debt crisis."

Wall Street rallies amid progress in Europe

And GM said Wednesday that its third-quarter net profit fell 15 percent from a year earlier, dragged down by losses in Europe. The drop in income is forcing GM's management to look at more ways to cut costs in the region.

The European Central Bank, the only effective bulwark against market attacks, intervened to buy Italian bonds in large amounts.

If Rome burns, US will feel the heat

"The ECB is buying aggressively," one trader said.

Italy has replaced Greece at the center of the euro zone debt crisis and is on the cusp of requiring a bailout that Europe cannot afford to give. Unlike Greece, an Italian default would threaten the entire euro project.

Having lost his majority in a key parliamentary vote, Berlusconi confirmed he would resign after implementing urgent economic reforms demanded by the European Union, and said Italy must then hold an election in which he would not stand.

He opposed any form of transitional or unity government -- which the opposition and many in the markets favor -- and said polls were not likely until February, leaving a three-month policy vacuum in which markets could create havoc.

Even with the exit of a man who came to symbolize scandal and empty promises, it will not be easy for Italy to convince markets it can cut its huge debt, liberalize the labor market, attack tax evasion and boost productivity.

"There is no guarantee (Berlusconi's) successor will be able to do a better job. Just keep your eyes on the Italian yield for now," Christian Jimenez, fund manager and president of Diamant Bleu Gestion, said.

While Italian bonds blew out, worries that the debt crisis could be infiltrating the core of the euro zone were reflected in the spread of 10-year French government bonds over their German equivalent blowing out to a euro era high around 140 basis points.

Policymakers outside the euro area kept up pressure for more decisive action to stop the crisis spreading.

Christine Lagarde, head of the International Monetary Fund, told a financial forum in Beijing that Europe's debt crisis risked plunging the global economy into a Japan-style "lost decade.

"Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand ... we could run the risk of what some commentators are already calling the lost decade."

Berlusconi has reluctantly conceded that the IMF can oversee Italian reform efforts.

Euro zone finance ministers agreed on Monday on a roadmap for leveraging the 17-nation currency bloc's 440-billion-euro ($600 billion) rescue fund to shield larger economies like Italy and Spain from a possible Greek default.

But there are doubts about the efficacy of those complex plans, and with Italy's debt totaling around 1.9 trillion euros even a larger bailout fund could struggle to cope.

Lagarde said she was hopeful the technical details on boosting the European Financial Stability Fund (EFSF) to around 1 trillion euros would be ready by December.

Euro zone officials said they had no plans for a financial rescue of Italy. "Financial assistance is not in the cards," one euro zone official said, adding the euro zone was not even considering extending a precautionary credit line to Rome.

The euro zone bailout fund, the European Financial Stability Facility (EFSF) will be able to extend such a precautionary credit line to countries which may be cut off from markets, once euro zone finance ministers agree on technical and legal details of the operation by the end of November.

The EFSF will also then be able to buy bonds on the primary and secondary markets, using various insurance schemes that would boost four to five-fold its currently free funds of around 250 billion euros.

But the size of the potential bailout for Italy, which needs to repay 326 billion euros in maturing debt only in the next 12 months, is too big to handle for the EFSF.

It would be up to Italy to reassure investors it would pay back what it borrowed, the official said.

"They will just have to prove that the yields are not justified, because they aren't," the official said.

Many outside Europe are calling on the ECB to take a more active role as other major central banks do in acting as lender of last resort. German opposition to that remains implacable, seeing it as a threat to the central bank's independence.

German central bank chief Jens Weidmann, a key member of the ECB, rejected a separate proposal to use national gold and currency reserves or IMF special drawing rights to boost the bailout fund, welcoming opposition from Merkel to the same.

But with the ECB just about the only buyer of Italian bonds, according to traders, it will have to act more aggressively to contain the latest wave of crisis, despite internal opposition to its bond-buying program.

It could call on limitless power if it began printing money as the Federal Reserve and Bank of England have. But for it, and Berlin, that is a step too far.

Qantas cleared to fly again after fleet grounding

11:55 PM after, again, cleared, fleet, grounding, Qantas No Comments

CANBERRA, Australia — Qantas Airways was expected to resume flying Monday after an Australian court intervened in a labor dispute that led the airline to ground its entire fleet over the weekend.

By the time the labor-relations court acted, several hundred flights had been canceled and tens of thousands of passengers stranded around the world.

Some airline industry experts say Qantas' surprise grounding of its entire fleet Saturday could cause many travelers to book future trips on other airlines.

The president of the labor-arbitration panel, Geoffrey Giudice, said the group acted to protect Australia's tourism and aviation industry.

The airline said 447 flights had been canceled in the first 24 hours of the lockout. Qantas did not immediately update that figure.

Its major international destinations include Singapore, Hong Kong and London. In the United States, Qantas flies to Los Angeles, Dallas, New York and Honolulu.

Travelers reported being ordered to leave planes that were already on the tarmac when the lockout began Saturday. More than 60 planes in mid-flight flew to their destinations, then were parked.

Don't miss these Travel stories Stranded JetBlue pilot pleaded for help from airport A recording of transmissions between a JetBlue pilot and Bradley International Airport near Hartford, Conn., captured the pilot's frustration at being stuck on the runway during a snowstorm for more than seven hours on Saturday.

Disabled vet says airline left her to sit in own urine Take a trip ... with a little help from friends Cemetary tourism: 'It's great to be alive in Colma!' Norwegian Gem diverts cruise to rescue sailors

Qantas said it paid to rebook passengers on other airlines, including compensating those who had to pay higher last-minute fares to get home.

The company reported in August that annual profit had doubled. But it said the business climate was too turbulent — partly because of labor turmoil — to forecast future earnings.

Henry Harteveldt, an airline industry analyst in San Francisco, predicts the shutdown will do long-term damage to the Qantas name by hurting its reputation for reliability.

Before the court ruling, Virgin Australia said it was scheduling extra flights and offering 20 percent fare discounts to help stranded Qantas passengers through Thursday.

Other industry veterans said the lockout was a daring move that will pay off for Qantas, which wants to expand the low-cost, low-fare model that it uses at its Jetstar Airways subsidiary.

Garfinkle said the short duration of the fleet grounding will help Qantas get back up to full speed quickly, cutting its losses.

Rod McGuirk in Canberra, Australia, contributed to this report.

James Murdoch: I didn't know about phone hacking

4:06 AM about, didnt, hacking, James, Murdoch, phone No Comments

LONDON — He didn't see. He wasn't told. He didn't know.

Called back to Britain's Parliament after former News Corp. employees challenged his credibility, senior executive James Murdoch insisted he'd been kept in the dark about widespread phone hacking at his now-defunct News of the World tabloid, blaming two of his senior lieutenants for failing to warn him of the paper's culture of criminality.

"None of these things were mentioned to me," he told an often-skeptical House of Commons' media committee.

Over more than two-and-a-half hours of questioning, Murdoch stuck to that line.

"It was not shown to me," he said of an explosive email which implicated one of his top reporters in phone hacking.

"It didn't occur to me to probe further," he said when quizzed about the legal advice his subordinates had supplied him.

"It didn't seem necessary for me to ask for a copy," he said of a seven-page document warning of overwhelming evidence of illegal behavior at his company.

Speaking quickly and confidently, Murdoch laid the blame at the door of former News of the World Editor Colin Myler and former in-house lawyer Tom Crone, both of whom resigned soon after the scandal broke earlier this year. Over the past few months, the pair have challenged the credibility of their former boss, accusing the 38-year-old News Corp. executive of not telling the truth when he claimed they never told him about the incriminating email back in 2008.

Murdoch made one important concession to their version of events — acknowledging that he'd been briefed on the incriminating email back in 2008 — but insisted that its importance was kept from him.

"What never happened is Mr. Crone and Mr. Myler showing me the relevant evidence, explaining to me the relevant evidence — and its relevance — or talking about wider spread criminality," Murdoch said. "That simply did not happen."

In a statement, Crone attacked Murdoch's testimony, insisting that he hadn't misled lawmakers.

"At best, his evidence on the matter was disingenuous," he said of Murdoch's comments. He did not immediately return calls seeking further comment.

Myler's telephone number is unlisted, and a letter sent to him more than a month ago has gone unanswered.

Murdoch's solo performance was far less dramatic than the July 19 hearing at which his 80-year-old father Rupert Murdoch repeatedly banged the table to back his points. Although the navy-suited James Murdoch showed flashes of annoyance — occasionally starting his answers with "as I testified earlier" or "as I answered earlier" — he kept his cool, even when Labour lawmaker Tom Watson described him as a bumbling crime lord.

"You must be the first mafia boss in history who doesn't know he's at the head of a criminal enterprise," Watson said in what sounded like a carefully crafted sound bite.

Murdoch, stony-faced, dismissed the comment as inappropriate.

He struck an apologetic tone when questions steered him toward his company's failure to get to grips with the scandal. He said executives at the company had given assurances, and that the company "relied on those assurances for too long."

"I'm sorry for that," he said.

He also apologized for the use of a private investigator to tail the lawyers of phone hacking victims, calling the practice "appalling."

James Murdoch runs News Corp.'s European and Asian holdings and remains tipped to succeed his father at the helm of the global media conglomerate. Thursday's appearance was mandated by lawmakers investigating the industrial-scale espionage at the News of the World, the exposure of which has already forced the paper's closure and scuttled a multibillion pound (dollar) bid for full control of satellite broadcaster BSkyB.

More than a dozen journalists at News International, News Corp.'s British newspaper subsidiary, have been arrested, and several executives, including The Wall Street Journal's publisher, Les Hinton, have resigned.

Although the media committee's investigation isn't as serious as the ongoing police investigation — its recommendations are nonbinding — Murdoch still needed to put on a strong show. Investors have become increasingly restive as the scandal continues to spread, and analysts say Murdoch's position as heir apparent to his father's company is under threat.

Paul Connew, a media consultant and former tabloid editor, said he believed Murdoch had given a mixed performance.

"Polished to a certain extent, but again suffering from the amnesia factor," he said.

The media committee wouldn't be calling Myler or Crone back for more testimony, Chairman John Whittingdale told reporters after the hearing. He said the committee's lawmakers had already heard from the pair and would now be weighing whose version of events to believe.

"It is plain that the two accounts we've heard, one of them cannot be true," he said.

Connew warned that even if Murdoch's reputation isn't damaged by the report, he would not be home free. A judge-led inquiry into Britain's media could call him back to the U.K. for more questioning. And detectives could dredge up more damaging revelations.

Lawmakers suggested as much Thursday, with one asking whether Murdoch was aware of any phone hacking at The Sun, the News of the World's sister paper and currently Britain's biggest selling daily.

Murdoch refused to say, citing an ongoing investigation.

Asked whether he would close The Sun if evidence of phone hacking emerged there, he declined comment.

Separately, Scotland Yard chief Bernard Hogan-Howe announced Thursday that police were working their way through some 300 million emails from News International.

Some 120 officers and staff are investigating the phone hacking scandal. The force said it had contacted less than a third of the News of the World's nearly 6,000 potential victims.

OECD warns on Europe's economy

1:44 AM economy, Europes, warns No Comments

PARIS — The Organization for Economic Cooperation and Development is warning of a "marked slowdown" in eurozone economies next year and says the European Union needs to clarify its anti-crisis measures.

In an update Monday of economic forecasts timed to coincide with this week's meeting of the Group of 20 major economies, the OECD says "patches of mild negative growth" are likely in the eurozone in 2012.

It says economic growth in the eurozone will stall at 0.3 percent next year, after just 1.6 percent growth this year.

The Paris-based OECD says "detailed information is needed" on how the EU will implement the package of measures announced last week aimed at resolving the European debt crisis, to prevent a repeat of the global crisis that hammered economies three years ago.

EU warns of possible recession in eurozone

7:42 AM Eurozone, possible, recession, warns No Comments

BRUSSELS — The European Union has warned that the 17-country eurozone could slip back into recession next year as the debt crisis shows alarming signs of spinning out of control.

The EU's economic watchdog, the European Commission, said its central forecast is that the eurozone will grow by only a paltry 0.5 percent in 2012. That's way down on the 1.8 percent prediction it made as recently as September.

The sharp cut in the forecast comes as the eurozone's debt crisis has spread alarmingly to Italy, the single currency bloc's third-largest economy. The interest rate on Italy's ten-year bonds has reached the same levels that forced Greece, Portugal and Ireland to request multibillion euro bailouts. Speculation that Premier Silvio Berlusconi will officially resign within days and be replaced by leading economist and former Commissioner Mario Monti has helped calm the market mood somewhat Thursday.

Greece, meanwhile, remains in political chaos as party leaders have failed for several days to appoint an interim governments, putting the country in serious danger of defaulting on its massive debts before the end of the year.

"Growth has stalled in Europe, and there is a risk of a new recession," The EU's Monetary Affairs Olli Rehn said in a statement. "While jobs are increasing in some member states, no real improvement is forecast in the unemployment situation in the EU as a whole."

EU unemployment will be stuck at 9.5 percent for the foreseeable future, the Commission warned.

The report also contained some worrying figures for some individual member states.

Italy is unlikely to fulfill its promise of balancing its budget by 2013 if recently promised austerity and reform measures aren't implemented. According to the forecast, which does not take into account the most recent promises, Italy will still run a deficit of 1.2 percent, with debt close to 119 percent of economic output.

Berlusconi has come under so much pressure that he promised to resign as soon as the new budget has been passed. The Commission this weeks started a verification mission in Rome to check on Italy's efforts, with the International Monetary Fund to follow soon.

Rehn warned that if several states don't soon implement additional measures to get their spending budgets control, he will start using new powers to sanction overspenders set to come into force in the coming weeks.

"What we need now is unwavering implementation," Rehn said. "On my part, I will start using the new rules of economic governance from day one."

ABCs of Euro crisis have citizens asking WTF?

3:52 AM asking, citizens, crisis No Comments

"I nearly lost my mind working through Basel," said one European banker, referring to the set of global banking supervisory rules that the EU implements across the bloc.

One summit has become a byword for EU officials to reduce a complex emergency debt package into a single phrase: July 21.

Already losing popularity among Europeans over its clumsy handling of the debt crisis, the EU risks further alienating its citizens with the latest tide of opaque and convoluted jargon.

The phrase generates equal but different confusion in debt markets, where 'eurobond' has long been shorthand for a type of international bond.

Jargon has grown as more countries have joined the EU to encompass its 23 languages: EFSF becomes FESF in French, FEEF in Spanish, ERVV in Finnish and SECA in Irish Gaelic.

Jose Manuel Barroso, the president of the Commission, said in late October that the bloc's complexities are "the single biggest complaint I receive everywhere I go in Europe."

Italy eyes unity cabinet as EU dithers on crisis

10:18 AM cabinet, crisis, dithers, Italy, unity No Comments

After four days of chaotic haggling, former European Central Bank vice-president Lucas Papademos was appointed to head an interim crisis cabinet charged with saving Greece from default, bankruptcy and an exit from the euro zone.

In Rome, former European Commissioner Mario Monti emerged as favorite to replace Italian Prime Minister Silvio Berlusconi within days and lead an emergency government that would implement long delayed reforms of pensions, labor markets and business regulation.

Political and economic turmoil in Italy has spurred fears of a possible break-up of the euro zone with borrowing costs for Europe's third biggest economy at unsustainable levels and the 17-nation currency bloc unable to afford a bailout.

German Chancellor Angela Merkel, Europe's main paymaster, called for broad political support for reforms in Greece and said she believed Italy was winning back confidence, but political clarity was still needed in Rome.

She rejected talk of a possible shrinking of the currency area, saying: "We only have one goal, that is to bring about a stabilization of the euro zone in its current form."

European Union officials continued to dither and pass the buck on how best to fight the worsening sovereign debt crisis.

Three senior ECB policymakers rebuffed pressure from investors and foreign governments to intervene massively as a lender of last resort on bond markets to shield Italy and Spain from rapidly spreading financial contagion.

"We have gone pretty far in what we can do but there is not much more that can be expected from us. It is now up to the governments," ECB governing council member Klaas Knot told the Dutch parliament.

Knot, who is also Dutch central bank chief, said bond-buying only had a temporary effect. The ECB has bought more than 180 billion euros of peripheral euro zone bonds and traders said it was active again in the market on Thursday, but the purchases have failed to lower borrowing costs durably.

Stepping up the scale of bond-buying would eventually force the ECB to start printing money with the risk of stoking inflation, which was why the EU treaty had excluded such action, Knot said.

ECB executive board member Peter Praet said it was not the task of the central bank to intervene "when there are fundamental doubts about the sustainability of some countries". Outgoing ECB chief economist Juergen Stark earlier rejected calls for the ECB to act as lender of last resort like the U.S. Federal Reserve or the Bank of England.

In Brussels, a euro zone official said there were no plans to use the bloc's 440-billion-euro ($600 billion) rescue fund to help Italy, even with a precautionary credit line.

"Financial assistance is not in the cards," the official said. A second official said: "The ECB will be drawn like every one else by the weight of gravity (to act)."

MARKETS STEADIER

Italian 10-year bond yields steadied at around 7 percent, a level seen as unquestionable in the long term, due to signs that the political deadlock may be easing. Rome paid less to sell 1-year treasury bills than many had feared.

Sources in Berlusconi's conservative PdL party said he was now convinced it would be better not to call elections at the moment, an abrupt reversal. The billionaire media magnate has agreed to resign within days after parliament approves long delayed economic reforms demanded by European partners.

PdL parliamentary floor leader Fabrizio Cicchitto said the party was considering backing a unity government led by Monti, a respected economist favored by the center-left opposition.

Berlusconi's populist coalition partner, the Northern League, said it would not support a Monti government.

Monti, 68, was appointed a senator for life on Wednesday in a move that appeared to prefigure his possible rise to the premiership, but he has made no public statement and it is unclear what conditions he may set for taking office.

In Athens, Papademos said after agreeing to head a crisis coalition: "The Greek economy is facing huge problems despite the efforts undertaken.

"The choices we will make will be decisive for the Greek people. The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence."

The euro rose from a one-month low and world stocks inched up on hopes that new governments being formed in Italy and Greece could help fend off a euro zone break-up.

SMALLER EURO ZONE DENIED

Merkel, French officials and the EU's executive Commission all tried to quash talk of a possible shrinking of the euro area, although they raised the possibility last week that Greece might leave the single currency.

EU sources told Reuters that French and German officials had held informal discussions on a two-speed Europe with a more tightly integrated and possibly smaller euro zone and a looser outer circle.

The discussions among senior policymakers, still in the realms of the theoretical, have focused on how to protect the euro zone from breaking up via tighter common policies which some members may by unable or unwilling to live with.

European Commission President Jose Manuel Barroso issued a stark warning of the dangers of a split in the European Union.

"There cannot be peace and prosperity in the North or in the West of Europe, if there is no peace and prosperity in the South or in the East," Barroso said in a speech in Berlin.

Merkel called on Wednesday for changes in EU treaties after French President Nicolas Sarkozy advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stays more loosely connected.

The head of the International Monetary Fund called for political clarity in efforts to tackle Italy's debt crisis, warning that the world could face a "lost decade" if Europe's problems were not tackled boldly.

Uncertainty around who would succeed Berlusconi was fuelling market volatility, Christine Lagarde said on a visit to China.

"No one exactly understands who is going to come out as the leader. That confusion is particularly conducive to volatility," she told a news conference in Beijing. "Political clarity is conducive to more stability and my objective from the Fund's point of view is better and more stability."

A senior G20 source said the idea of convening an emergency meeting of finance ministers of the world's leading economies to discuss support measures for the euro zone before the French presidency ends at the end of the year had been dropped. They would meet next in Mexico in February.

Euro zone finance ministers agreed on Monday on a road map for leveraging the currency bloc's rescue fund to shield larger economies like Italy and Spain from a possible Greek default.

But markets are running faster than policy and there are deep doubts about the efficacy of those complex leveraging plans, and with Italy's debt totaling around 1.9 trillion euros even a larger bailout fund could struggle to cope.

Euro zone inflation stays at 3 percent, could delay rate cut

6:01 AM could, delay, inflation, percent, stays No Comments

AppId is over the quota
AppId is over the quota
BRUSSELS — Euro zone inflation was surprisingly high at 3.0 percent for a second straight month in October, the EU announced on Monday, prompting economists to postpone their bets for a central bank rate cut until December.

With Europe's economy cooling, economists had forecast consumer price inflation would fall after reaching a three-year high in September. But high food and oil prices and tax hikes in Italy kept it at the same level.

"It looks a bit like stagflation with negative growth and high inflation," said Peter Vanden Houte, an economist at ING. "That's not positive news."

In a first reading of inflation for the month, the European Union's statistics agency Eurostat said inflation was 3.0 percent in October, compared to a 2.9 percent forecast by a Reuters poll of economists.

Economists had expected the European Central Bank to raise rates as soon as this week to support Europe's economy, as evidence mounts that the region's debt crisis is sapping business confidence and raising the specter of recession.

The Organization for Economic Cooperation and Development slashed its 2012 growth forecast for the euro area to 0.3 percent from 2.0 percent in May.

Underscoring that, Eurostat said the jobless rate in the euro zone rose slightly to 10.2 percent in September from a revised 10.1 percent in August, nudged up by Spain, where unemployment reached 22.6 percent.

But stubbornly high inflation, above the Frankfurt-based central bank's target of close to, but under, 2 percent, is making a rate cut call much more difficult.

"We think interest rates will be on hold this week but we're expecting a rate reduction in December," said Nick Kounis, an economist at ABN AMRO.

Crude oil prices in euro terms were still around a third higher than in the same month last year. ING forecasts that if they continue at current levels, their impact on inflation will not dissipate until March.

MARIO'S MOMENT?

Adding to the cloudy outlook, Mario Draghi takes over as ECB president on Tuesday and may not feel comfortable lowering rates at his first meeting on Thursday, particularly with inflation more than a percentage point above target.

As an Italian at the helm of the ECB, Draghi will arguably be under more scrutiny from skeptical investors worried that a southern European might be less disciplined.

Last week Draghi warned of "a further weakening in growth prospects" but German members of the ECB's Governing Council remain focused on fighting inflation, partly driven by German folk memories of the hyperinflation the 1920s.

German council member Juergen Stark said on October 26 that interest rates at their current level were "adequate."

"The latest euro zone inflation and unemployment data might leave the hawks at the ECB concerned about underlying price pressures," said Jennifer McKeown, an economist at Capital Economics. "The rate has now been above the ECB's 2 percent price stability ceiling for 11 months running, perhaps suggesting that high inflation is becoming entrenched."

IMF chief: World economy risks 'lost decade'

12:44 PM Chief, decade, economy, risks, world No Comments

BEIJING — The head of the International Monetary Fund warned on Wednesday that Europe's debt crisis risked plunging the global economy into a "lost decade" and said it was up to rich nations to shoulder the burden of restoring growth and confidence.

Christine Lagarde told a financial forum in Beijing that European plans to bolster a rescue package for Greece were a "step in the right direction," but that the outlook for the world economy remained dangerous and uncertain.

"There are clearly clouds on the horizon. Clouds on the horizon particularly in the advanced economies and particularly so in the European Union and the United States," Lagarde said.

"Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand... we could run the risk of what some commentators are already calling the lost decade."

The "lost decade" reference carries echoes of Japan's experience of persistent deflation, mounting debts and economic impotence through the 1990s and beyond after its real estate bubble burst -- an outcome many analysts fear could be repeated given the debt and property origins of Europe's problems.

The former French finance minister was speaking at the start of a two-day visit in China. Her meetings are expected to focus on efforts to contain the crisis in Europe, which has seen the prime ministers of Greece and Italy forced to announce plan to resign in the past week.

Lagarde said she was hopeful that the technical details of a European Union plan to boost the European Financial Stability Fund (EFSF) to around 1 trillion euros from its present 440 billion euros would be ready by December.

European policymakers are hopeful that big emerging economies, led by China, will invest some of their vast foreign exchange reserves to help end a debt crisis that has engulfed Greece threatens bigger economies such as Italy.

But there is skepticism in China, where public opinion is firmly against bailing out countries that still enjoy far higher average incomes than Chinese.

Chinese policy makers also worry that European plans are "not complete and not firm," according to a commentary on China's official Xinhua news agency. It criticized a lack of political will, politicians' concerns over their own re-election and a lack of coordination between EU members.

"Like a patient, if several organs are in trouble, taking drugs or surgeries will produce toxic side effects and will largely reduce the desired effectiveness. That's exactly what's happening in Italy and Greece," the commentary said.

Before arriving in Beijing, Lagarde had spent two days in Moscow, trying to convince Russia to chip in some of its petro dollars to boost bailout funds for the euro zone.

But the so-called BRIC nations, comprising Brazil, Russia, India and China, have so far been reluctant to invest directly in Europe's rescue vehicle, preferring to contribute via the IMF.

Lagarde, speaking at an event organized by the Institute for International Finance -- the global association of the world's most important banks -- also said that China needed to shift its growth model from being export-led to a more balanced one and that the country also needed a stronger currency.

Wednesday, November 30

Tuesday, November 29

Monday, November 28

Sunday, November 27

Saturday, November 26

Friday, November 25

Thursday, November 24

Wednesday, November 23

Tuesday, November 22

Monday, November 21

Sunday, November 20

Saturday, November 19

Friday, November 18

Thursday, November 17

Social Profiles

Site Search

Popular Business News

Business Tags

Business Archive