January 20, 2022

France Not Eager for U.S.-Europe Trade Agreement

PARIS — If anyone thought working out a free trade agreement between the United States and the European Union was going to be easy, France has a message: Slow down.

“We will all win, provided we don’t rush,” the French trade minister, Nicole Bricq, told journalists on Monday after meeting with French business leaders. She said that a trade agreement, which would create a zone accounting for 40 percent of world trade, could provide a “formidable” lift to jobs and economic growth, but that the European Union should use access to its market, the world’s largest, as leverage to ensure it obtained a good deal.

She also suggested that a plan to have the 27 E.U. member states provide the European Commission with a mandate for negotiations by mid-June could turn out to be too ambitious, saying: “This is a very tight schedule.”

Efforts to bolster global commerce under the auspices of the World Trade Organization have gone nowhere in recent years, so many nations are seeking bilateral agreements. Ms. Bricq was speaking Monday not long after officials in Tokyo and Brussels announced the start of negotiations for a Japan-Europe free trade area. In addition to the economic benefits from reducing barriers to business, officials in Washington, Tokyo and Brussels hope that such arrangements will allow them to form a common front to set global trade rules in the face of a rising China.

Ms. Bricq appeared to be seeking to lower expectations that were raised last month by European and U.S. officials, including President Barack Obama, who endorsed a trade deal in his State of the Union address, and Ron Kirk, the U.S. trade representative, who said an agreement was possible before the end of 2014. European officials, including Trade Commissioner Karel De Gucht, have also sounded optimistic about the prospects for an agreement.

Both Germany and Britain have signaled eagerness to get a deal, but Ms. Bricq, a member of President François Hollande’s Socialist Party, sounded considerably less enthusiastic. She said any agreement would have to overcome a number of thorny problems, including a “red line” on “l’exception culturelle” — France’s insistence on special treatment to protect its homegrown music and movies.

“We want to exclude from the negotiations everything that concerns culture,” she said.

She said other potential deal breakers included Europe’s opposition to genetically modified crops and the use of hormones in meat, practices that are common in the United States. And any accord would have to pass muster with trade unions and with the European Parliament, she said.

France’s caution notwithstanding, the European Union and its trading partners are considering measures that would have been unthinkable just a few short years ago. The Japanese-E.U. free trade talks are a case in point.

Prime Minister Shinzo Abe of Japan, the European Council president, Herman Van Rompuy, and the European Commission president, José Manuel Barroso, said Monday that they had agreed to work toward a “deep and comprehensive” free trade agreement that would “stimulate economic growth both in Japan and in the E.U.” The three spoke during a conference call after a summit meeting that had been scheduled to begin Monday in Tokyo was postponed because of the crisis in Cyprus.

European leaders say a trade agreement with Japan would generate 400,000 new jobs and add as much as 0.8 percent to the bloc’s gross domestic product.

Mr. Abe, who took office in December, is eager to break down barriers with major trading partners as he tries to revitalize the long-stagnant Japanese economy. He said this month that Japan would join negotiations for the U.S.-led Trans-Pacific Partnership, a pact that would encompass almost 40 percent of the global economy.

Mr. Abe wants Japanese exporters to regain ground lost to rivals, particularly in South Korea, which has already reached trade deals with the European Union and the United States. But he faces opposition at home from a powerful farming lobby that has benefited from high tariffs on agricultural produce and that argues that free trade will destroy the country’s rural economy and way of life.

The agricultural tariffs deemed most critical to Japan will remain off the table in the Trans-Pacific negotiations, Mr. Abe has promised. Tokyo could seek similar exemptions in talks with the European Union.

Ms. Bricq said that French companies, including most of the industrial sector, were largely in favor of opening negotiations with the United States and that most saw the harmonization of regulations — in areas like technical standards, chemical ingredients and intellectual property — as being the primary benefit. But troubled French auto companies, Renault and PSA Peugeot Citroën, are opposed.

French farmers, she said, believed overwhelmingly that nontariff barriers were the primary concern and wanted to ensure that their American counterparts were bound by the same sanitation, environmental and animal welfare rules that Europeans are.

Meat and egg producers, corn growers and ethanol producers want to be excluded from any tariff-reducing deal, she said, because they believe Americans have unfair advantages in those areas.

The biggest problem to overcome, though, could be the question of reciprocity with the United States, she said. She was particularly critical of “Buy American” provisions that oblige the government to buy domestically made goods when possible. The Union says those measures have harmed European companies by excluding them from the public procurement market.

“The United States talks free trade,” Ms. Bricq said, “but the practice is somewhat different.”

Hiroko Tabuchi contributed reporting from Tokyo.

Article source: http://www.nytimes.com/2013/03/26/business/global/france-not-eager-for-us-europe-trade-agreement.html?partner=rss&emc=rss

Indonesian Carrier Orders $24 Billion in Jets From Airbus

PARIS — Airbus said Monday that it had a received an order for $24 billion worth of new single-aisle jets from the Indonesian budget airline Lion Air, marking a significant inroad for the European plane maker into one of Asia’s fastest-growing air travel markets that until now has been dominated by its American rival, Boeing.

The firm order, for 234 of the company’s popular A320- and A321-series jets, was announced by top executives of Airbus and Lion Air at a ceremony in Paris overseen by France’s president, François Hollande. The signing is part of a series of events planned by the government this week aimed at promoting France’s manufacturing industry, which is struggling amid Europe’s economic downturn.

The first of the new planes, which sell for between $92 million and $117 million each at list prices, were expected to be delivered in 2014.

The announcement in the gilt halls of France’s Elysée Palace follows an equally high-profile ceremony in Jakarta in 2011, when President Barack Obama attended the signing of a $22 billion deal between Lion Air and Boeing.

Despite only modest signs of a global economic recovery, many of the world’s established airlines are continuing to order new jets at a rapid pace as they seek to upgrade to more energy-efficient models amid stubbornly high fuel prices.

Lion Air’s latest deal follows a flurry of new orders for new jets announced last week, totaling more than $30 billion at list prices. Lufthansa, the German flag carrier, announced orders for more than 100 new single-aisle and wide-body planes from both Airbus and Boeing, while Turkish Airlines said it would purchase up to 117 Airbus single-aisle planes. Ryanair, the Irish discount carrier, is also expected to reach a deal soon for up to $15 billion worth of Boeing 737 jets.

Meanwhile, emerging markets, particularly in Southeast Asia, are experiencing a boom in air traffic demand as higher incomes give rise to a growing middle class. The Indonesian archipelago alone is expected to see air traffic double over the next five years.

The spectacular growth in Indonesian air travel, however, has some air safety experts concerned that country’s infrastructure and regulatory oversight have been unable to keep pace with the expansion. The European Union, for example, which maintains a list of what it says are unsafe airlines, bars all but one Indonesian carrier — Garuda Indonesia — from its skies.

Article source: http://www.nytimes.com/2013/03/19/business/global/indonesian-carrier-orders-24-billion-in-jets-from-airbus.html?partner=rss&emc=rss

U.S. Reassures an Impatient Europe on Trade

DAVOS, Switzerland — President Barack Obama is committed to reaching an agreement to smooth trade with the European Union, the United States’ top negotiator has said, but only if it is constructed in a way that would overcome objections from farm groups and that could win congressional approval.

In an interview Saturday in Davos, Ron Kirk, the U.S. trade representative, responded to European leaders who in the past week renewed their calls for a U.S.-Europe deal to dismantle tariffs and other barriers, which they badly want as a way of stimulating their ailing economies.

At the World Economic Forum, David Cameron, the British prime minister, and Angela Merkel, the German chancellor, were among a host of leaders and business people pleading for a pact that would eliminate tariffs as well as regulations that impede trade. Even without changes, the United States and Europe between them already have the world’s largest trading market.

On both sides of the Atlantic, proponents of a deal have expressed frustration about the delaying of an official report by a U.S.-European working group that would set the stage for formal talks. The delay has fed the widespread perception that Mr. Obama does not care that much about a trade pact or, for that matter, about Europe in general.

“We greatly value the trans-Atlantic relationship,” Mr. Kirk said at a hotel in Davos. “We have devoted an extraordinary amount of time” to a possible trade agreement, he said. But the administration wants to make sure objections from farmers and other constituencies are addressed first, he said. Otherwise, officials might spend years negotiating an agreement only for Congress to reject it.

“If we do this, we want there to be a bridge to somewhere and we want to get there on one tank of gas,” Mr. Kirk said. He declined to predict when formal talks might begin.

Trade had been one of the main topics of discussion at the World Economic Forum, which concluded Saturday. There were signs of progress toward a trade accord, which, if it proved durable, could provide a riposte to the eternal criticism of the elite event: that the annual Davos forum is just an expensive cocktail party where little of substance is ever accomplished.

While it is true that Davos is rarely the venue for concrete agreements, the event attracts a diverse international crowd in an informal setting. It can be a place where political and business leaders work toward consensus on difficult issues like trade. That may have been the case in the past week, some of the people involved said.

“I’m carefully optimistic we will kick off negotiations this year,” Alexander Stubb, the Finnish minister for foreign affairs and trade, said after a panel on trade issues at the forum Saturday. “It’s going in the right direction.”

Noting that trade ministers from more than 20 nations were in town, Mr. Kirk said: “It’s a great opportunity to touch base with a number of them bilaterally. This saves me a trip to nine other countries.”

“Everybody criticizes Davos until they come,” Mr. Kirk said.

Friction-free commerce between the United States and Europe could create jobs and add an estimated $50 billion a year to the U.S. economy, Mr. Kirk said. European political leaders fervently want a deal to help their anemic economies grow. There is also strong support from business groups on both sides of the Atlantic.

“Half a dozen senior leaders in Europe are ready to move forward,” Thomas J. Donohue, president of the U.S. Chamber of Commerce, said in an interview in Davos on Thursday. He said that a deal could be concluded within 18 months if both sides set their minds to it.

But others are skeptical, noting that Europe and the United States have been talking on and off about a trade deal for years. While U.S. companies like General Electric have expressed strong support for an agreement, progress has always been stymied by objections from interest groups, particularly over agricultural issues. Some Europeans, for example, object to imports of U.S. food containing genetically modified plants.

Article source: http://www.nytimes.com/2013/01/28/business/global/us-reassures-an-impatient-europe-on-trade.html?partner=rss&emc=rss

Wall Street Flat

Extending Wednesday’s 6.4 percent decline, Apple was trading down 0.7 percent at $535 early on Thursday, after falling as much as 3.7 percent at the open, which brought the market capitalization of the world’s largest publicly traded company down to below $500 billion briefly. In September, it was capitalized at a record $663 billion.

Broadcom shares led the advance in chip makers with a 2.1 percent gain, one day after it forecast for fourth-quarter revenue at the high end of its target range, citing slightly better-than-expected sales in its mobile business.

The PHLX semiconductor index rose 0.4 percent.

Budget discussions continued to be a key focus for investors. President Barack Obama said there could be a quick deal to avert the “fiscal cliff” – tax hikes and spending cuts set to begin next year, possibly driving the U.S. economy back into recession – if Republican leaders agree to raise tax rates for those making more than $250,000 a year.

While Republican leaders in the House of Representatives insist that raising tax rates on the rich is a no-go, some GOP lawmakers now see it as inevitable to avoid the fiscal cliff.

“There are no real triggers here. It is just positioning going on for year-end, and this big decision” on the fiscal cliff, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.

He said Apple’s weakness was taking a toll on the market and expects equities to continue trading choppily through the day.

The Dow Jones industrial average fell 17.89 points, or 0.14 percent, to 13,016.60. The SP 500 dropped 1.78 points, or 0.13 percent, to 1,407.50. The Nasdaq Composite Index gained 2.89 points, or 0.10 percent, to 2,976.59.

Apple Inc’s rank in China’s smartphone market fell to No.6 in the third quarter as it faces tougher competition from Chinese brands, research firm IDC said Thursday. Apple’s 6.4 percent drop on Wednesday was its worst daily performance since December 2008 and dragged down the Nasdaq Composite.

Shares of Apple were down 0.7 percent at $535, after earlier falling more than 3 percent.

Sirius XM Radio shares rose 2.2 percent to $2.83 after its board approved a $2 billion stock repurchase and issued a special dividend, giving a big payout to its largest shareholder, Liberty Media.

Without action from Congress in coming weeks, tax cuts on capital gains and dividends will expire at the end of 2012.

Garmin shares rose 5 percent to $41.71 after Standard Poor’s said it would add the navigation device maker to its SP 500 index. Garmin will replace R.R. Donnelley Sons after the close of trading on December 11.

Several European equity benchmark indexes hit 2012 highs, boosted by hopes a U.S. budget deal will be reached before the year-end, and that the worst of Europe’s debt crisis might be over.

(Additional reporting by Herbert Lash; Editing by Bernadette Baum)

Article source: http://www.nytimes.com/reuters/2012/12/06/business/06reuters-markets-stocks.html?partner=rss&emc=rss

Today’s Economist: Uwe E. Reinhardt: Redistribution of Wealth in America


Uwe E. Reinhardt is an economics professor at Princeton.

A recent article in The Washington Post and an audio clip accompanying it on the Web featured an excerpt from a speech in 1998 by Barack Obama, then an Illinois state senator, at Loyola University Chicago.

Today’s Economist

Perspectives from expert contributors.

In that speech he remarked, “I actually believe in redistribution, at least at a certain level, to make sure that everybody’s got a shot.”

The article then quotes Mitt Romney: “I know there are some who believe that if you simply take from some and give to others then we’ll all be better off. It’s known as redistribution. It’s never been a characteristic of America.”


Aside from hard-core libertarians, who view the sanctity of justly begotten private property as the overarching social value and any form of coerced redistribution as unjust, how many Americans on the left and right of the political spectrum would disagree with Mr. Obama’s very general and cautiously phrased statement?

In fact, I wonder whether even Governor Romney actually disagrees with that general statement, aside from some dispute over “the certain level” at which redistribution takes place. After all, he has promised elderly voters to protect the highly redistributive Medicare program, which would remain highly redistributive, or become more so, under proposals by his running mate, Representative Paul D. Ryan, for restructuring Medicare.

The fact is that redistributive government policy — mainly through benefits-in-kind programs, agricultural policy and the like — has been very much a characteristic of American life, just as it has been in every economically developed nation, albeit at different levels.

Start at the local level. Through property taxes, local governments all over the United States routinely take from high-income Americans living in expensive houses to subsidize the education of children from lower-income families. It is the American way, based on the widespread belief that doing so will make society as a whole better off. Is there a significantly large constituency for abolishing this form of redistribution at the local level and instead letting every family fend for itself, with its own budget, in a private market for education?

The same can be said, at the local level, for fire and police protection. One could imagine a world in which every family cuts a deal with private contractors to provide fire and police protection — leaving poor neighborhoods to fend for themselves — but that is just not an American characteristic. Is there a sizable constituency in America for completely privatizing local fire and police protection?

At the state level, consider Medicaid. By design, Medicaid is purely redistributive. It takes from higher-income people at the state and federal levels and pays fully for the health care of low-income people. Is there a strong constituency for abolishing Medicaid and letting the poor, when they are ill, fend for themselves in the market for health care?

Or take public colleges and universities. Although tuition has increased in past years, these institutions are still heavily supported by the states and charge tuition much below the full cost of the education they impart.

At the federal level, Social Security and Medicare were deliberately structured by their designers to be in part redistributive. As Eugene Steuerle and Adam Carasso of the Urban Institute’s Retirement Project have reported, both programs redistribute from retirees who had been high-income earners in their work years to those who had been low-income earners.

Would elimination of this redistributive feature inherent in Social Security and especially in Medicare have much of a political constituency today? Would any politician dare propose openly — and I stress openly — that Medicare beneficiaries who had been high-income earners in their work years should have a health care experience superior to those who had low incomes in their work years? Would that proposal be a winner this year?

By the way their benefits and the financing of these benefits are structured, Social Security and Medicare also redistribute income from the current working population collectively to the currently retired population collectively. Is that fair?

In thinking about this issue, keep in mind that a young generation about to enter the workplace has, for a fifth to a quarter of a century, been the beneficiary of huge transfers of human and nonhuman capital. Overwhelmingly, they have taken from society and not contributed to it.

By human capital economists mean the education and training that foster in the young marketable skills that can be traded for cash at the workplace. Although, unlike students in many other countries, American students do contribute significantly to the financing of their human capital — at the college and postgraduate levels — the production of their human capital remains very heavily subsidized by the preceding generational cohorts. Charge the total value of that transfer to an intergenerational account.

Charge to it next the nonhuman capital transferred to the young. This includes the vast array of physical structures built and largely financed by preceding generations, transferred virtually free of charge to the younger generation for its use, along with the scientific knowledge and the blueprints for applied technology developed and financed by previous generations but available, again largely free of charge, as an economic platform for the younger generation.

I believe the designers of Social Security and Medicare were mindful of this vast redistribution of assets to the young when they embedded in these programs a social contract creating a reverse redistribution from the young to the old during the latter’s retirement years.

These designers seem also to have kept in mind that future generations benefit greatly from the secular increase in overall productivity in the economy. It can reasonably be assumed that future long-run growth in real gross domestic product per capita will be 1 to 2 percent a year. At only 1 percent, real G.D.P. per capita in 2050 will be about 46 percent larger than it is today. At 2 percent growth, it will be more than twice as large.

At issue between the two political camps in this election season, then, is not redistribution per se, which is as American as apple pie. Rather, at issue is the “certain level” to which that redistribution is to be pushed. An honest and thoughtful debate on that would certainly be useful at this time. It would be useful at any time.

To be respectful to voters, such a debate should proceed at a level concrete enough to allow voters — or at least researchers and news organizations — to estimate fairly precisely how different families would fare under the different visions of that “certain level.”

It is the minimum voters ought to expect from political candidates.

Article source: http://economix.blogs.nytimes.com/2012/09/28/redistribution-of-wealth-in-america/?partner=rss&emc=rss

Economix Blog: Bruce Bartlett: I’d Rather Be an Unlucky Ducky


Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.

During Thursday’s Fox News debate among Republican presidential candidates, Representative Michele Bachmann of Minnesota was asked how much money people should be allowed to keep from their earnings. Here was her response, from a transcript of the event:

I think you earned every dollar. You should get to keep every dollar that you earn. That’s your money. That’s not the government’s money. That’s the whole point. Barack Obama seems to think that when we earn money, it belongs to him, and we’re lucky just to keep a little bit of it. I don’t think that at all. I think when people make money, it’s their money.

Today’s Economist

Perspectives from expert contributors.

Her response drew applause and cheers. While she acknowledged that some money needed to be given back to the government, the thrust of her comment was that taxation is essentially theft and the best government is one in which taxes are virtually nonexistent. None of the other candidates for the G.O.P. nomination disputed her view, during or after the debate.

I’m not saying that Republicans are anarchists, only that when it comes to taxes they talk as if they are. Their default position is that there is no level of taxation below which it would be unwise to go, no tax cut too large not to be taken seriously and no justification for a government any larger than one that could be drowned in a bathtub, as the Republican activist Grover Norquist once put it. The Wall Street Journal editorial page routinely refers to those who pay no taxes as “lucky duckies,” as if zero taxation is the ideal state of nature.

Oddly, one never hears Republicans praise those countries where people are lucky duckies — those where taxation is a small fraction of what it is here. Let’s take a look at some of the places.

Equatorial Guinea: According to the Republican-leaning Heritage Foundation, those who live in this small country in sub-Saharan Africa are lucky duckies indeed. Because of recently discovered oil deposits, the citizens of Equatorial Guinea pay less than 1 percent of the gross domestic product in taxes. The comparable figure for the United States is 26.9 percent of G.D.P., according to Heritage.

However, Equatorial Guinea doesn’t seem to be a very pleasant place to live. The people are poor and have little freedom. Heritage says that “persistent institutional weaknesses impede creation of a more vibrant private sector” and “the rule of law is weak.” This sounds suspiciously as if government is too small to do its job properly. But I’m sure that the citizens of Equatorial Guinea don’t mind having a dysfunctional government; after all, they’re lucky duckies.

Myanmar: The people who live in this small country in Southeast Asia are also lucky duckies, if not quite as lucky as those in Equatorial Guinea. According to Heritage, taxes in Myanmar are 3 percent of G.D.P.

Oddly, this also doesn’t sound like someplace one would want to live. Heritage says “longstanding structural problems include poor public finance management and undeveloped legal and regulatory frameworks.” Apparently, the government doesn’t protect property rights very well, the infrastructure is poor, and there is a lot of corruption. But at least the people get to keep almost all their earnings.

Libya: Why the people revolted in this North African fiscal paradise is a mystery. According to Heritage, government revenues are just 3.4 percent of G.D.P.

Chad: Heritage says the people of this African nation pay just 5.3 percent of G.D.P. in taxes. But for some reason, the nation is mired in poverty. Perhaps because, as Heritage says, “the efficiency and quality of government remain poor.” I wonder why.

Republic of Congo: The people of this country in Africa also pay 5.3 percent of G.D.P. to the government. But it is also very poor. Heritage says a key reason is “the government has failed to provide basic public goods and infrastructure.” This doesn’t really make much sense by the logic of Republican candidates, who seem to agree that all government spending is bad unless it goes to the Defense Department and that public works are nothing but worthless pork.

I could go on, but I’m sure everyone gets the point. Low taxes and small government are not the keys to prosperity. If they were, these five countries and many others where taxes as a share of G.D.P. are in the single digits would be magnets for immigration and investment.

Of course, there are a few countries in the Middle East with lots of oil where taxes are low and the quality of life isn’t so bad. But they tend to be choosy about whom they grant citizenship to, and they often enforce Islamic law. But who cares? The important thing is that you will be lucky duckies.

Personally, I would rather live in Denmark, where taxes are a confiscatory 49 percent of G.D.P., according to Heritage, but where the government works and people have considerably more business, trade, investment and financial freedom than in the United States, according to Heritage. It also says that the Danes have more secure property rights and freedom from corruption than Americans do.

For that, I think it would be worth being an unlucky ducky.

Article source: http://feeds.nytimes.com/click.phdo?i=ccd6a81a96d73991aa6668b8766bacf8

Italian Bond Sale Gets Tepid Response as Debt Crisis Festers

Amid a growing sense that Europe’s response to the debt crisis lacks coordination and conviction, the United States Treasury Secretary Timothy Geithner will make a rare if not unprecedented appearance at a meeting of European finance ministers, to be held Friday in Wroclaw, Poland. The trip will be his second across the Atlantic in a week, following the Group of 7 session in France last weekend.

“Clearly the U.S. Treasury is disappointed with the direction of the European debt crisis and is looking for action, before further sections of the banking system are drawn in and a global financial crisis is re-visited,” Chris Turner and Tom Levinson, strategists at ING, said in a research note.

President Barack Obama, in a meeting with Spanish-speaking journalists in Washington, reportedly called on euro-zone leaders to show markets that they are taking responsibility for its debt crisis.

“In the end the big countries in Europe, the leaders in Europe must meet and take a decision on how to coordinate monetary integration with more effective co-ordinated fiscal policy,” EFE, a Spanish news agency, quoted Mr. Obama as saying.

The German chancellor Angela Merkel, meanwhile, sought to dampen fears surrounding Greece — where the debt crisis began and which is having trouble meeting the conditions for its second bailout.

“The top priority is to avoid an uncontrolled insolvency, because that wouldn’t just hit Greece and the danger that it hits everyone, or at least a number of other countries, is very big,” Mrs. Merkel said in a radio interview, according to Bloomberg News. “I have made my position very clear: that everything must be done to keep the euro area together politically, because we would very quickly face a domino effect.”

While the immediate problems revolve around Greece, much-bigger countries like Italy, which is equally overstretched, have been losing market confidence as well, creating even greater worries.

On Tuesday, the Italian Treasury sold €3.9 billion, or $5.3 billion, of a new 5-year bond at an average yield of 5.6 percent. That compared to a rate of 4.93 percent the last time securities of a similar maturity were sold on July 14. Demand at the auction was 1.28 times the amount on offer, compared with 1.93 times at the last sale.

Analysts said demand was disappointing and that the European Central Bank had been seen by traders to be buying Italian bonds around the auction as part of their program of asset purchases to stable volatile markets.

The yield on 10-year Italian bonds was around 5.7 percent on Tuesday, again approaching the 6 percent level that is considered to be unsustainable — and that prompted the E.C.B. to intervene and start buying Italian and Spanish debt on Aug. 8. Spanish bonds were trading at around 5.3 percent.

Greece’s 10-year bond yields rose 48 basis points to 24.03 percent, after earlier climbing to a euro-era record of 25 percent as concerns about a near-term Greek default increased

European stocks declined, but were off their early lows, as French banks were again punished by investors amid concerns about their exposure to high-yield European debt and ability to finance themselves in dollars. U.S. futures dropped, while Asian shares were little changed.

At midday, the Euro Stoxx 50 slid 1.4 percent and the CAC-40 shed 2 percent in Paris.

Reports of a meeting last week in Rome between Finance Minister Giulio Tremonti and the chairman of China Investment Corp., Lou Jiwei, were confirmed by Mr. Tremonti’s office on Tuesday, news agencies reported.

Citing unnamed Italian officials, media reports have suggested that the Italian government was preparing additional measures to cut debt and that the country was discussing sales of its debt to cash-rich China.

Those reports were greeted with skepticism by analysts, who have seen Italy announce new measures — and then apparently backslide on them — over the summer. China’s purchase of bonds during the crisis from other euro-area countries like Spain and Portugal also had limited effects.

“Purchases of Italian bonds or other Italian assets by China’s sovereign wealth fund would buy Italy some time, but that is all,” Robert O’Daly, economist at The Economist Intelligence Unit, said. “As seen with the E.C.B.’s purchases of €40 billion to €45 billion worth of Italian government bonds in August the effect was temporary.”

He said that to restore confidence the Italian government would “have to put aside its internal wrangling to implement the program of fiscal austerity presented to Parliament on September 1st and at the same time come up with a coherent medium-term strategy to improve the country’s dismal economic growth performance.”

But he added that “does not seem likely to happen” given the differences within the ruling coalition.

Article source: http://feeds.nytimes.com/click.phdo?i=320f941de9b29b256dfc8e89dc53497a

Renewed Worries About Europe Shake Asian Markets

The Nikkei 225 index closed down 2.3 percent, and in Australia, the S. P./ ASX 200 slumped 3.7 percent by the end of trading.

In Singapore, the Straits Times index was 2.6 percent lower by midafternoon, and in Hong Kong, the Hang Seng fell 4 percent. The Sensex index retreated 2.3 percent by early afternoon in India.

Key European markets also were expected to fall at the open.

The markets in mainland China, Taiwan and South Korea were closed for a holiday.

On the foreign exchange markets, the euro was trading at $1.356 to the dollar, having fallen sharply on Friday.

The slide in the currency and stock markets had been set off by the resignation of Jürgen Stark, a key German official at the European Central Bank, on Friday, which appeared to signal policy discord within the E.C.B., shaking already fragile market sentiment in Europe and the United States.

A much-anticipated jobs program speech by President Barack Obama, meanwhile, had done little to lift the global malaise about the prospects for U.S. economic growth.

The Dow Jones industrial average and the Standard and Poor’s 500 index both slumped 2.7 percent on Friday. In Europe, DAX in Germany plunged 4 percent, the CAC 40 in France lost 3.6 percent, and the FTSE 100 in Britain closed down 2.4 percent.

Asian markets had missed the selloff at the end of last week, but the worries about Europe caught up with them on Monday, as investors ignored unexpectedly strong import, export and bank lending data from China that were released over the weekend.

Exports from China in August were up 24.5 percent from a year earlier and imports climbed 30.2 percent. Local banks extended nearly 580 billion renminbi, or $90.8 billion, in loans, in the same month, which was more than analysts had expected.

The data were latest of a string of statistics showing that the world’s second- largest economy, after the United States, remains on a firm footing: Growth is slowing but at a modest pace, while the Chinese authorities have ample room to prop up the economy by opening the lending spigot, or lowering interest rates again, if needed.

The bank loans data released over the weekend, for example, showed that the central bank “is easing its control over credit growth as an attempt to address the funding difficulties faced by some sectors, especially the small- and medium-sized enterprises,” Yao Wei, a China economist at Société Générale in Hong Kong, commented in a research note on Monday.

As for the trade data, Qu Hongbin, co- head of Asian economics research at HSBC, said in a research note that the solid export growth suggested that external demand, especially from emerging markets, has held up well despite the turbulence in the global financial markets.

At the same time, he said, the import data showed that domestic demand remained strong.

“Going forward, China’s exports will likely soften in the coming months thanks to the likely slackness with developed markets,” Mr. Qu said. But he added that a “total collapse” of exports is unlikely.

Analysts at DBS in Singapore said, “For now, the global recovery story is still underpinned by leading indicators heading up in the U.S. and China.”

The resignation of Mr. Stark, however, “will keep investors extremely cautious this week,” they said.

Adding to the jitters were new doubts about the health of French banks and about Greece’s ability to stick with key austerity goals.

In Greece, the finance minister, Evangelos Venizelos, warned over the weekend that the economy would be likely to shrink 5.3 percent this year — a sharp downward revision from the previous forecast of a 3.8 percent contraction. This would make it even more challenging for Greece, which has been at the center of the continent’s debt woes, to pay its debts.

And in France, government officials braced for possible ratings downgrades by Moody’s Investors Service of France’s three largest banks, BNP Paribas, Société Générale and Crédit Agricole.

The biggest banks in Europe, especially in France, hold billions of euros’ worth of Greek bonds, and investors fear that even a partial default by Greece would sharply diminish the value of those assets, eroding already weak capital positions.

Article source: http://www.nytimes.com/2011/09/13/business/daily-stock-market-activity.html?partner=rss&emc=rss

Economix: For Stocks, Day 7 Since the Walkout

Today was the seventh trading day since John Boehner walked out of talks with Barack Obama at the White House. That move made it clear that the House speaker would not risk alienating the Tea Party and that if a debt default were to be averted, the president would have to capitulate on virtually all issues or defy Congress by claiming the debt limit legislation was unconstitutional. He chose to capitulate.



Notions on high and low finance.

This is also the seventh consecutive session that the Standard Poor’s 500-stock index has declined. The total fall for the seven days is 6.8 percent.

This is something that Wall Street did not see coming. It took for granted that something more reasonable would be worked out. To make it worse, the economic data has turned much bleaker, highlighted by last Friday’s revisions in the gross domestic product. In normal times, the politicians would be vying to come up with plans to stimulate the economy. Now that seems to be out of the question, and there is more talk of a double-dip recession than at any time since the last downturn ended.

The last time I can recall Wall Street’s being so wrong about what the government would do was in September 2008. Lehman Brothers was collapsing, but the Bear Stearns precedent provided assurance that the government would not take the risks to the financial system inherent in letting a big bank fail.

Over the seven sessions after the Lehman bankruptcy, the S..P fell 5.1 percent. It was a much wilder ride than this one, with two days when the market lost more than 4 percent and two days when it rose more than 4 percent. The market would go on to lose much more. By contrast, the largest decline in this string was today’s fall of 2.6 percent.

Wall Street was so very wrong in 2008 because ideology trumped caution in Washington. Sort of like what seems to be happening now.

Article source: http://feeds.nytimes.com/click.phdo?i=c0cdf988f1eb71326d15687fb8ffc34a