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Europe Steps Up Pressure on Greece

January 24, 2012 by Leave a Comment

The ministers backed efforts by Greece to keep the interest rate on newly issued bonds below 4 percent, Jean-Claude Juncker, who represents the 17 nations using the euro currency, told a news conference. That is below the level offered by bondholders in exchange for their current holdings of Greek debt..

“The negotiations will have to be resumed on that point as we don’t have a final picture,” said Mr. Juncker, referring to the interest rate on Greek debt.

At stake is the need to pare Greek debt to levels where the country can conclude a bailout with the European Union and the I.M.F. that would give it the cash it needs to repay loans coming due in March and, officials hope, allow Athens to finance its needs through 2013. Without such a package, Greece could be faced with a chaotic default that would further destabilize the rest of the euro zone.

Efforts to address another aspect of the region’s debt crisis took a step forward late Monday, as ministers made progress toward establishing a permanent rescue fund, the European Stability Mechanism.

Olli Rehn, the European Union’s commissioner for economic and monetary affairs, said the ministers were able to complete most of the details of the permanent fund, which should be “in place and operational” by July after member states ratify the agreement.

Setting up a permanent fund and giving it adequate financial firepower is a priority for European leaders including Chancellor Angela Merkel of Germany and for officials like Christine Lagarde, the head of the I.M.F.

An obstacle to establishing the fund was cleared on Monday night when ministers found a way to ease concerns in Finland, one of the contributing nations, that it would not incur additional liabilities without prior consent.

Earlier Monday, Ms. Lagarde suggested that the 440 billion-euro European Financial Stability Facility, a temporary bailout fund established in 2010, could be rolled into the 500 billion-euro permanent fund.

The fund is expected to be less exposed to downgrades by ratings agencies than the existing European Financial Stability Facility.

“I am convinced that we must step up the fund’s lending capacity,” to help defend “innocent bystanders” elsewhere in the world who are hurt by the euro contagion, Ms. Lagarde said. “A global world needs global firewalls.”

Mrs. Merkel said that she wanted to see the new fund put into operation quickly. She also said Germany was willing to speed up its share of payments.

Despite continuing concerns about Greek debt, the euro strengthened to an almost three-week high against the dollar after the French finance minister, François Baroin, said in Paris that negotiations with Athens were making “tangible progress.”

Evangelos Venizelos, the Greek finance minister, said as he arrived in Brussels that Greece was ready to complete a private sector debt swap “on time.”

Private sector bondholders are seeking yields of nearly 4 percent, but Greece, as well as Germany and the I.M.F., argue that a yield closer to 3 percent is necessary to give the restructuring a serious hope of success. With the talks at an impasse, the pressure is now mounting on finance ministers to push for a solution.

Reinforcing the need for a deal, Mrs. Merkel said she wanted agreement “soon enough that no new bridge loan whatsoever will be needed” for Greece.

Even as ministers prodded financiers to do their part to ease the crisis in the euro zone, the I.M.F. pressed European governments to bolster the bailout funds available for euro zone countries so that the region’s problems could be contained.

Ms. Lagarde called on European leaders to complement the “fiscal compact” they agreed to last month with some form of financial risk-sharing. She mentioned bonds backed by debt securities issued by the euro zone or a debt-redemption fund as possible options.

While the sense of crisis has ebbed and markets have calmed since the European Central Bank last month announced longer-term refinancing operations to inject nearly 490 billion euros of liquidity into the banking system, analysts say the central bank has only bought time for leaders to put the 17-country currency bloc on firmer footing.

Without more such actions from governments and the central bank to reassure financial markets, Ms. Lagarde said, “countries like Italy and Spain, that are fundamentally able to repay their debts, could potentially be forced into a solvency crisis by abnormal financing costs.”

Ms. Lagarde also called for more fiscal integration among euro members, saying, “it is not tenable for 17 completely independent fiscal policies to sit alongside one monetary policy.” She called for new measures to increase the sharing of risk, including possibly jointly issued euro area debt instruments, or, as Germany has proposed, a debt redemption fund.

The monthly meeting of the ministers in Brussels came at a time of widespread gloom about the broad European economy. Austerity budgets in the euro zone are reducing demand and weighing on growth.

Even Germany, where factories are bustling, is feeling the effects. The Federal Statistical Office said last month that the German economy probably contracted by about 0.25 percent in the fourth quarter of 2011 from the previous three months.

The economy of Spain, which is struggling with an unemployment rate of more than 20 percent, may contract about 1.5 percent this year, the Bank of Spain estimated.

James Kanter reported from Brussels and David Jolly from Paris. Reporting was contributed by Melissa Eddy in Berlin and Landon Thomas Jr. in London.

Article source: http://www.nytimes.com/2012/01/24/business/global/lagarde-urges-europe-to-beef-up-bailout-funds.html?partner=rss&emc=rss

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Making Case for Jobs Bill, Obama Cites Europe’s Woes

October 7, 2011 by Leave a Comment

“Our economy really needs a jolt right now,” Mr. Obama said at the White House, in an abruptly scheduled morning news conference timed to pressure Republicans before the Senate begins debate on his bill, which is scheduled for next week.

“This is not the time for the usual political gridlock,” the president added. “The problems Europe is having today could have a very real effect on our economy at a time when it’s already fragile.”

Mr. Obama repeatedly cited the findings of independent economists that his $447 billion package, which calls for tax cuts, public works spending and federal aid to reduce teacher layoffs, would reduce unemployment and bolster economic growth. He challenged Republicans to offer a plan that likewise could be assessed by outside analysts and win similarly good marks. And Mr. Obama said that if his full plan fails, Democrats will press for votes on its individual parts.

Timothy F. Geithner, the treasury secretary, echoed Mr. Obama in testimony on Capitol Hill, and said the jobs bill could help increase business and consumer confidence.

The White House scheduled the news conference not only to set up next week’s Senate debate but also to get in front of Friday’s release of September employment numbers. The report is expected once again to show job growth too anemic to significantly reduce a jobless rate that has hovered at 9 percent.

For all of Mr. Obama’s pressure over the past month — a speech to a joint session of Congress, coast-to-coast travel and a pugnacious new stump style — prospects for the jobs plan remain uncertain. Republicans, who control the House and can filibuster bills in the Senate if they remain united, generally oppose the plan; they say temporary tax cuts and spending will not create jobs, and they oppose raising taxes on affluent individuals and corporations.

To allay the concerns of Senate Democrats, Mr. Obama said that he could support their proposal to pay for the jobs plan by imposing a 5.6 percent surtax on individual taxpayers’ income above $1 million. A number of Senate Democrats had objected to Mr. Obama’s proposals to offset the cost of his plan by limiting tax deductions, including for charitable contributions, that could be taken by individuals making more than $200,000 and couples making more than $250,000. And oil-state Democrats opposed his plans to increase oil companies’ taxes.

Even as Mr. Obama took reporters’ questions, Speaker John A. Boehner, Republican of Ohio, rebuked him for his more confrontational tack. “Nothing has disappointed me more than what’s happened over the last five weeks, to watch the president of the United States give up on governing, give up on leading and spend full-time campaigning,” Mr. Boehner said during a public forum in Washington.

Mr. Obama, when asked by a reporter whether he should be talking to Congressional Republicans rather than traveling the country like a presidential candidate, responded that he had tried repeatedly to compromise with Republicans. His efforts, he said, were “sometimes to my own political peril and to the frustration of Democrats,” and Republicans rebuffed him even when he offered ideas, like business tax cuts, that Republicans had proposed in the past.

“What I’ve done over the last several weeks is to take the case to the American people so that they understand what’s at stake,” he said. “It is now up to all the senators, and hopefully all the members of the House, to explain to their constituencies why they would be opposed to common-sense ideas that historically have been supported by Democrats and Republicans in the past.”

The president even returned to the point, unbidden, when he closed the 74-minute news conference. “I would love nothing more,” he said, “than to see Congress act so aggressively that I can’t campaign against them as a do-nothing Congress.”

In prodding Republicans, Mr. Obama plainly had in mind the small number of moderates in the party who might join with the 53 Senate Democrats and independents to get to 60 voters and overcome a filibuster. Citing examples of how he believed his jobs plan would help, he named a Boston teacher with long experience and a master’s degree, who has been laid off three times because of budget cuts in Massachusetts — the home of Senator Scott P. Brown, a Republican facing a re-election race next year. Mr. Obama also cited a bridge that he said was falling apart in Maine, which is represented by two Republican senators, Olympia J. Snowe and Susan Collins.

Jennifer Steinhauer contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=404e052989e71c4c6e1a5b088787d01a

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Central Banks Take Different Tacks on Europe’s Economy

October 7, 2011 by Leave a Comment

The E.C.B.’s restraint came in contrast to the action of the Bank of England, which announced another round of bond buying to support the slowing British economy. The pound fell against all major currencies after the announcement; the euro rose against the dollar.

As a slump in German factory orders provided the latest sign of a looming recession, the E.C.B. left its benchmark rate unchanged, at 1.5 percent. The Bank of England also left its main rate unchanged, at 0.5 percent.

During his last news conference as E.C.B. president, Jean-Claude Trichet said that members of the central bank’s governing council had discussed a rate cut before concluding “by consensus” that inflation in the euro area — at 3 percent — was still too high. The statement, and a subdued assessment of the euro zone economy, suggested the bank will be open to cutting rates in coming months, as many analysts expect.

Mr. Trichet said the central bank expected “very moderate” growth ahead in “an environment of particularly high uncertainty.”

Janet Henry, chief European economist at HSBC, wrote in a note to clients that the E.C.B. “has clearly left the door open to a cut, possibly as soon as November.” She said that Mr. Trichet may have been reluctant to send any stronger signals on E.C.B. intentions that might constrain his successor, Mario Draghi, now governor of the bank of Italy. Mr. Draghi will take office Nov. 1.

Mr. Draghi brings a similar outlook and background as Mr. Trichet and is not expected to radically alter monetary policy. But he may find it hard to move boldly at the beginning of his term, given that he may feel it necessary to establish his anti-inflation credentials. He has kept an extraordinarily low profile in the final months of Mr. Trichet’s tenure and his intentions are largely a mystery.

The E.C.B. did respond to signs that banks are reluctant to lend to each other because of fears about their exposure to shaky government debt.

Those fears were intensified by the woes of the French-Belgian bank Dexia, which is seeking its second taxpayer-financed bailout in three years and said Thursday that it was close to selling its Luxembourg unit.

The central bank will spend €40 billion, or $53.6 billion, in the coming year buying so-called covered bonds, a form of debt secured by payments received on assets like packages of loans.

Covered bonds are one of the main ways that European banks raise money. The E.C.B. also bought covered bonds in 2009 to alleviate the bank financing squeeze that followed the collapse of the U.S. investment firm Lehman Brothers in 2008.

The E.C.B. measure, however, was dwarfed by the Bank of England’s plans to widen its so-called quantitative easing program to £275 billion from £200 billion.

“Vulnerabilities associated with the indebtedness of some euro area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally,” the Bank of England’s governor, Mervyn A. King, wrote in a letter to the British Treasury explaining the bank’s decision.

The E.C.B. does not have the power to save ailing banks like Dexia or address deeper problems in the banking system, officials insist, caused by banks’ exposure to sovereign debt and reserves that are too thin to absorb potential losses. That task belongs to governments.

Angela Merkel, the chancellor of Germany, suggested Thursday that Europe was moving closer to a coordinated effort to bolster European banks and address the longer-term problems.

While cautioning that more expert advice was needed, she said, “If the conditions are there we shouldn’t hesitate.” Mrs. Merkel appeared at a news conference in Berlin that also included Christine Lagarde, president of the International Monetary Fund, and Robert B. Zoellick, president of the World Bank.

Her comments were similar to what she said Wednesday during a visit to Brussels and in line with remarks made Thursday by José Manuel Barroso, president of the European Commission, the executive arm of the European Union.

Article source: http://feeds.nytimes.com/click.phdo?i=48b47cb9c1bb2f912668917d70f11409

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News Analysis: Greece Insists It Can Pay Its Bills a Bit Longer

October 4, 2011 by Leave a Comment

In the early hours of Tuesday, euro zone finance ministers called Greece’s bluff.

After several hours of talks, Jean-Claude Juncker, the head of the Eurogroup, an organization of the euro zone’s 17 finance ministers, emerged to say that a meeting he had only recently scheduled for Oct. 13, where the group was supposed to consider releasing the cash, was now canceled.

At a news conference, he made it clear Greece would have to wait until November at the earliest, and hinted that the terms of a second Greek bailout, agreed to in July, might be reopened to require bigger write-downs by private investors.

Olli Rehn, the European Commissioner for Economic and Monetary Affairs, suggested that it was “very likely” Greece would need to push through new austerity measures as well.

Back in Athens later Tuesday, the Greek finance minister, Evangelos Venizelos, assured taxpayers that the country did, after all, have enough money to last into mid-November. Asked at a news conference what had changed, Mr. Venizelos said there had never been an official deadline. He also said that no new austerity measures would be introduced, insisting that those already announced would be adequate “as long as the state mechanism functions and we see cooperation by citizens.”

During an interview, the deputy finance minister, Pantelis Economou, said the extra breathing room might reflect a better-than-anticipated state of Greek finances. Tax collection was up 3 percent in July and August, he added.

He also rebuffed talk of brinkmanship between Greece and its international lenders as “conspiracy theories.”

This latest stand-off may be partly tactical: Greece wants the next €8 billion installment, or $10.6 billion, installment of its €110 billion loan package agreed to last year. Hawks in the euro zone, led by Germany and the Netherlands, want to keep up the pressure to make sure that Greece and other vulnerable countries carry out the difficult, unpopular changes that they have promised.

At the same time, it also reflects real concerns that Greece has failed to make necessary structural changes and that, against the background of a continuing recession, its public finances cannot be made to add up.

Negotiations are under way in Athens with the so-called troika — the European Commission, the European Central Bank and the International Monetary Fund — which so far has been unable to produce the recommendation required for the money to be released. And though the odds are that ultimately they will, this is not a certainty.

“Even if the European Commission is more political and flexible, the I.M.F have to be sure the figures work to get this through their board,” said one European official, who was not authorized to speak publicly.

On Sunday, Greece acknowledged that it would miss its deficit targets for this year, partly because the recession has been worse than feared. Greek officials say that, because the shortfall has been discovered so late in the year, it is almost impossible to recover the necessary ground in 2011, so any further changes need to be undertaken in future years.

But the hardliners see a pattern.

Bailouts do not resolve the fundamental financial issues in these overstretched countries, they argue. In fact they make them worse. As one official said, as soon as the E.C.B. intervened in the summer to relieve pressure on Italy’s bonds, the Italian government tried to soften its austerity package.

According to two E.U. diplomats, the real deadline for Greece is not November, although the Greek government might have problems paying its civil servants. Instead, they say, it is December, when around €2.9 billion in bond repayments are due.

Article source: http://www.nytimes.com/2011/10/05/business/global/greece-seeks-to-quash-fears-of-imminent-default.html?partner=rss&emc=rss

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Ford Reaches Contract Deal With U.A.W.

October 4, 2011 by Leave a Comment

Ford said the numbers include 6,250 jobs and $2.4 billion in investment that it had previously announced. The U.A.W. planned to provide more details at a news conference scheduled for later Tuesday.

“We really believe that it’s fair to our employees and recognizes the contribution that they’ve made to the success of Ford Motor Company,” John Fleming, Ford’s executive vice president of global manufacturing and labor affairs, told reporters at Ford’s headquarters.

Mr. Fleming declined to elaborate on how the deal affects Ford’s labor costs. He said nearly all of the new jobs will pay entry-level wages, which are currently about half as much as veteran workers earn. He said the entry-level pay scale would increase to be roughly on par with General Motors, which gave entry-level workers an hourly raise of $2 to $3 in a deal ratified last week, but he declined to give specific figures.

Ford said the deal brings work to the United States from Mexico, China and Japan. Including design work, engineering and other expenses, Ford said its total investment in the United States through 2015 would be $16 billion.

Bob King, the U.A.W.’s president, said most of the new jobs will be added by the end of 2012.

“This agreement adds another 5,750 new jobs to communities across America where people have been struggling to recover from our nation’s economic turmoil,” Mr. King said in a statement. “The American auto industry is on its way back.”

Negotiators remained at the bargaining table overnight Monday until reaching the agreement early Tuesday.

The U.A.W. had already called union officials from Ford plants across the country to meet Tuesday in Detroit in anticipation of a deal, even though normally it does not call such a meeting until a settlement has been reached. After those officials review the agreement, the union will present it to rank-and-file members for ratification.

The union’s next task will be reaching an agreement with Chrysler. Talks with that company have been ongoing but union leaders chose to focus on Ford first when talks with Chrysler bogged down. The 2007 contract with Chrysler has been extended through Oct. 19.

Analysts expected the union’s contract with Ford deal to look similar to the G.M. deal, but with some terms made more favorable to reflect the fact that Ford was the only Detroit automaker that did not go through bankruptcy protection in 2009.

G.M.’s deal gives workers a $5,000 signing bonus and $1,000 in each of the other three years. Ford workers — who, unlike their counterparts at G.M. and Chrysler, did not have to give up their right to strike if negotiations broke down — have been vocal about their desire for larger bonuses.

The G.M. deal also calls for creating or retaining 6,400 jobs in the United States, moving some work to American plants from Mexico and raising pay for entry-level workers. G.M. workers earning full wages did not receive a pay raise.

Bill Vlasic contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=ff0e22a380278ff62cda7cc06489664a

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Debt Ceiling Talks Collapse as Boehner Walks Out

July 23, 2011 by Leave a Comment

The latest turn in the summer’s epic clash between the White House and Congressional Republicans came little more than a week before the government hits its borrowing ceiling, and set off accusations from both sides about who was to blame.

A visibly angry President Obama, in a hastily scheduled White House news conference, demanded that Congressional leaders come to the White House on Saturday morning. “I want them here at 11 a.m. tomorrow,” he said. “They are going to have to explain to me how it is that we are going to avoid default.”

Mr. Obama said Mr. Boehner had stopped returning his calls when it became clear that rank-and-file House Republicans would not agree to raise revenues on wealthy Americans as part of a debt-reduction deal, despite Mr. Obama’s concessions on reducing future spending for Medicare, Medicaid and Social Security. Both sides have sought a deficit-reduction agreement as part of the essential vote to raise the government’s $14.3 trillion debt limit, which will be reached Aug. 2.

In a letter to his Republican colleagues on Friday night, Mr. Boehner said, “A deal was never reached, and was never really close.” He added: “In the end, we couldn’t connect. Not because of different personalities, but because of different visions for our country.”

The speaker said Mr. Obama wanted to raise taxes too high and would not make “fundamental changes” to entitlement benefit programs like Medicare.

But according to a White House official, Mr. Obama had agreed over the coming decade to cut $250 billion from Medicare spending and $310 billion from other domestic entitlement programs, like farm subsidies and education programs. And Mr. Obama was willing to change the formula for Social Security cost-of living adjustments, which many economists say would more accurately reflect inflation, for savings of about $125 billion more.

All of Mr. Obama’s concessions on the benefit programs were contingent, however, on Mr. Boehner and Republicans agreeing to higher taxes for wealthy individuals and corporations.

At the news conference, Mr. Obama said Republicans were forfeiting an “extraordinarily fair deal” to trim the deficit and raise the debt ceiling. “I have gone out of my way to make compromises,” the president added.

“Essentially what we had offered Speaker Boehner was over a trillion dollars in cuts to discretionary spending, both domestic and defense,” Mr. Obama said. “We then offered an additional $650 billion in cuts to entitlement programs Medicare, Medicaid, Social Security. We believed that it was possible to shape those in a way that preserved the integrity of the system, made them available for the next generation and did not affect current beneficiaries in an adverse way.”

Republicans, though, said that the White House pushed for more revenue midway through the talks. “The White House moved the goal posts,” Mr. Boehner said in a news conference.

The breakdown was the second time this month that Mr. Boehner had walked away from the table with Mr. Obama after word of their private talks was leaked to the news media, provoking protests from Republican lawmakers and antitax conservative groups.

“I’ve been left at the altar now a couple of times,” Mr. Obama said. “And I think that one of the questions that the Republican Party is going to have to ask itself is, Can they say yes to anything?” 

This time, however, Mr. Obama had also faced a firestorm from within his party, because of the spending cuts he was considering with Mr. Boehner.

Hours before the tempest, the three top stewards of the nation’s financial system — Treasury Secretary Timothy F. Geithner; Ben S. Bernanke, chairman of the Federal Reserve, and William C. Dudley, president of the Federal Reserve Bank of New York — had met to discuss how to react to shield the economy from the blow if Congress failed to raise the debt limit. But in a joint statement, they said they remained confident Congress would act.

Mr. Obama, too, said he thought that default could be avoided. “I am less confident at this point that people are willing to step up to the plate and actually deal with the underlying problem of debt and deficits,” he said at his news conference.

Mr. Boehner said he would work now with Senate leaders on a plan to raise the debt limit.

Article source: http://www.nytimes.com/2011/07/23/us/politics/23fiscal.html?partner=rss&emc=rss

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German Banks Agree to Roll Over Greek Debt

June 30, 2011 by Leave a Comment

The banks and insurance companies will commit to providing financing for a Greek aid package, Mr. Schäuble told a news conference in Berlin, according to Reuters.

The agency quoted him saying that as a minimum, the Greek debt held by German groups that matures by 2014 would be rolled over, or extended. He also said that 55 percent of Greek bonds held by German institutions would mature after 2020.

At the same event, the Deutsche Bank chief executive, Josef Ackermann, said a French proposal was being used as a basis for the German agreement, although modifications would be built into that plan.

German and French lenders are the biggest foreign holders of Greek debt. And the involvement of private creditors is seen as crucial in international agreement on a second bailout for the crippled Greek economy.

A separate hurdle was passed Wednesday after Prime Minister George A. Papandreou of Greece won the passage of a bill setting new government spending cuts and revenue-raising steps.

Mr. Schäuble said that he was confident that an agreement on the terms of a new aid deal could be fleshed among euro-area finance ministers at a meeting July 3.

Under the complex French plan, banks agreed to roll over 70 percent of their Greek bonds falling due from July 2011 to June 2014, while pocketing the remaining 30 percent for themselves. Of the amount to be rolled over, just over two-thirds would be reinvested in new Greek securities with a maturity of 30 years that paid a coupon close to the current official interest rate on the loans to Greece.

The remaining securities, just under one-third, would be invested in a separate “guarantee fund,” consisting of zero-coupon bonds with triple-A ratings.

The Deutsche Bank chief, Mr. Ackermann, was quoted as saying Wednesday by Bloomberg News that financial companies would contribute to the bailout to help avert a “meltdown.” Banks would “offer our hand in a solution,” Mr. Ackermann said.

Commerzbank’s chief executive Martin Blessing, speaking in Berlin Wednesday, said German financial institutions had reached a draft agreement on participation in a Greek rescue, although there are still “a few hitches.”

Article source: http://www.nytimes.com/2011/07/01/business/global/01iht-euro01.html?partner=rss&emc=rss

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Britain and China Set $2.2 Billion in Deals and a Goal of Doubling Trade by 2015

June 28, 2011 by Leave a Comment

In announcing the deals, worth about $2.2 billion, the British prime minister, David Cameron, restated the goal of doubling trade between the countries to $100 billion by 2015. Mr. Wen said that he was “confident” of meeting that goal.

“The purpose of my visit is to promote communication, cooperation and development,” Mr. Wen said at a news conference in London. Mr. Cameron said China presented a “huge opportunity” for British companies.

Mr. Wen was more than half through a four-day European tour. He had already visited Hungary and was to travel to Germany late Monday.

After a meeting with the Hungarian prime minister, Viktor Orban, over the weekend, Mr. Wen said that China had “total trust in Europe’s economic development” and would “consistently support Europe and the euro.”

In Britain, Mr. Cameron’s government is trying to strengthen trade relations with the faster-growing China. The goal is to increase exports and bolster British manufacturing to speed an economic recovery that recently has started to slow.

British exports to China have grown 20 percent since last November, when Mr. Cameron visited Beijing with a business delegation. China has become the third-largest source of British imports, after Germany and the United States, according to the Office for National Statistics.

Britain and China agreed Monday to increase infrastructure investments in both countries and grant British businesses better access to China’s civil engineering and research markets. A ban on British poultry exports to China, which was imposed as a result of avian flu cases in 2007, was lifted, and Britain is to sell more pigs and their meat to China.

Diageo, the British spirits company, said Monday that Chinese regulators had approved its acquisition of an additional 4 percent stake in the liquor maker Sichuan Chengdu Quanxing, giving Diageo control.

Other deals announced after the talks included an agreement between Weatherly International, a British mining company, and the East China Mineral Exploration and Development Bureau to cooperate on the development of a lead zinc mine in Namibia. The BG Group, the British natural gas company, also signed a deal with Bank of China to receive as much as $1.5 billion in financing.

During the news conference, Mr. Wen dodged questions about China’s human rights record. “On human rights, China and the U.K. should respect each other, respect the facts, treat each other as equals, engage in more cooperation than finger-pointing and resolve our differences through dialogue,” he said.

On the same issue, Mr. Cameron merely repeated a statement from his last visit to China, saying, “We do believe the best guarantor of prosperity and stability is for economic and political progress to go in step together.”

Mr. Wen was to meet Chancellor Angela Merkel of Germany in Berlin on Monday. China and Germany are expected to announce 30 cooperation and trade agreements on Tuesday, the German foreign ministry said.

As part of those talks, officials were to discuss a possible order for superjumbo jets that has caused controversy. China is pushing the European Union to abandon plans to regulate the greenhouse gas emissions of airlines, including foreign-owned ones, flying to and from the 27-country bloc. China warned this month that it could block its airlines from buying new planes built by Airbus, which is based in France, if Brussels proceeded with the plans.

The issue came to a head at the Paris Air Show last week, when Chinese officials sought to derail an order for 10 Airbus A380 superjumbo jets by Hong Kong Airlines, a domestic airline that operates between Hong Kong and the Chinese mainland. Airbus had planned to announce the $3.8 billion contract, which had already been signed by the airline, at the show, but Beijing declined to give final approval, people with knowledge of the talks said.

Formal approval of the deal was expected to be granted eventually, said these people, who spoke on condition of anonymity because the situation was politically fragile. They said, however, that further Chinese orders of Airbus jets had been delayed, including a large one that Airbus had hoped to announce while Mr. Wen was in Germany. It was unclear whether that order would now be modified or postponed.

Nicola Clark contributed reporting from Paris.

Article source: http://www.nytimes.com/2011/06/28/business/global/28iht-ukchina28.html?partner=rss&emc=rss

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Government Sees Deep Recession Ahead for Portugal

May 5, 2011 by Leave a Comment

But even as the terms were being outlined, the challenge facing the country deepened, with the caretaker government forecasting two years of deep recession ahead.

At a news conference in Lisbon, Jürgen Kröger, the chief negotiator for the European Commission, called the €78 billion, or $116 billion, package “tough but fair.”

“We are convinced that the program provides the basis for a more sustainable and competitive economy and is the right means to boost growth and jobs,” he said.

Crucial details remain to be decided, however, chief among them the interest rate Lisbon will be charged by its European Union partners for the bulk of the money, Mr. Kröger said. E.U. finance ministers are to take up the question in Brussels on May 16.

The tentative agreement, which follows three weeks of negotiations in Lisbon between the caretaker government of Prime Minister José Sócrates and officials from the E.U. and the International Monetary Fund, has so far not removed market worries about Portugal’s financial prospects, or those of other ailing euro-area economies.

On Thursday, Spain was forced to offer higher rates to sell €3.4 billion of five-year bonds, a day after Portugal’s financing costs also rose in selling €1.1 billion of short-term debt. The average yield in Spain’s bond sale rose to 4.55 percent, up from the 4.39 percent when Spain last sold such bonds on March 3. The bond sale had a bid-to-cover ratio of 1.9, compared with 2.2 at the last auction.

Interest costs have also recently soared for Greece and Ireland as many investors expect the tough austerity measures included in their rescue packages will actually deepen the countries’ economic slumps and make it even harder for them to balance their budgets and repay their debts.

Underlining Portugal’s difficulties, Fernando Teixeira dos Santos, the Portuguese finance minister, forecast on Thursday that the economy would contract by 2 percent both this year and next — about twice what the government had predicted in March, and even worse than last month’s I.M.F. forecast.

In fact, some analysts are already warning that the bailout could worsen Portugal’s longer term situation.

“Lending money to Portugal that it cannot borrow from the markets at an affordable rate is not doing it any favors,” said in a research note Carl B. Weinberg, chief economist at High Frequency Economics in Valhalla, New York. “The loan package will only increase Portugal’s indebtedness. It will lead to an even bigger default when Portugal has to repay this new lending on top of its prior obligations.”

However, Poul Thomsen, head of the I.M.F. negotiating team, insisted that creditors had been careful to strike a balance between demanding more budgetary tightening and risking stifling further the economy, notably by hurting consumer demand.

Two-thirds of the rescue money will be disbursed in the first of the three years of the program, he said at the news conference in Lisbon. That should take Portugal “out of the markets” for medium- and long-term debt “for a little over two years,” he said, giving Portugal “breathing space” to restore credibility among investors in terms of implementing policies, after failing to meet its deficit target in 2010.

Of the €78 billion total package, two-thirds will come from the E.U. and the rest from the I.M.F.

The creditors argued that it was not possible to compare directly the terms agreed by Portugal with the conditions imposed on Greece and Ireland last year. Still, they played down a claim made by Mr Sócrates on Tuesday that his government had negotiated better terms.

“The program is by no means lighter but is much different,” said Mr Kröger. “In fiscal terms it is not really lighter and in terms of structural it is much deeper.”

For its I.M.F. lending, Portugal will pay an interest rate of 3.25 percent for the first three years, after which it will rise to 4.25 percent, Mr. Thomsen said.

Article source: http://www.nytimes.com/2011/05/06/business/global/06portugal.html?partner=rss&emc=rss

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European Central Banks Stand Pat on Rates

May 5, 2011 by Leave a Comment

The Bank of England also kept its main interest rate and bond purchasing program unchanged despite even worse inflation, amid signs that the British economy was still too weak to cope with higher borrowing costs.

A month after delivering its first rate increase in almost three years, the European Central Bank’s governing council, meeting in Helsinki, left its main policy rate at 1.25 percent. The E.C.B. broke ranks with other major central banks in April when it raised the rate in April from a historic low of 1 percent, citing “upside risks to price stability.”

Jean-Claude Trichet, the E.C.B. president, said at a news conference that the central bank “will continue to monitor very closely” risks of inflation. That is considered to be a code phrase indicating that the E.C.B. will not raise rates at its next meeting in June, but could act as early as July to temper economic growth and ease price pressures.

“This was the right decision, in our view,” Jens Sondergaard, an analyst at Nomura in London, said in a note. “Signaling a more aggressive tightening cycle at this stage is not warranted and would have been a policy mistake.”

At the same time, Mr. Trichet indicated that the E.C.B. remains concerned about signs of higher inflation. He noted that prices in the euro zone rose at an estimated annual rate of 2.8 percent in April after rising 2.7 percent in March, according to official European figures. That is well above the E.C.B.’s target of about 2 percent.

Mr. Trichet also noted that higher energy prices, aggravated by upheaval in the Middle East, are beginning to affect the cost of manufactured goods.

So far E.C.B. policy makers do not seem to have heeded many critics who say it is premature to raise rates when Greece is teetering on the brink of default, and days after Portugal accepted a European rescue package. The E.C.B. is required by its charter to make price stability its top priority.

“We think that tightening monetary policy at this point is a mistake and that the E.C.B. runs the risk of having to reverse the rate increases,” Marie Diron, an economist in Britain who advises the consulting firm Ernst Young, said in a note.

Mr. Trichet expressed concern Thursday that some countries are falling behind in efforts to get their debt under control.

“Current information points to uneven developments in countries’ adherence to the agreed fiscal consolidation plans,” he said. “There is a risk that, in some countries, fiscal balances may fall behind the targets agreed.”

But Mr. Trichet rejected suggestions that Greece should restructure its overwhelming debt load, a scenario regarded as inevitable by many analysts and investors.

“It is not in the cards,” Mr. Trichet said. The heavily indebted countries must rigorously follow the debt-reduction plans they have agreed to, he said.

Still, problems in the so-called peripheral countries will prompt the E.C.B. to raise more rates cautiously than it has in the past, said Jörg Krämer, chief economist at Commerzbank in Frankfurt. The E.C.B. “will take the plight of the ailing peripheral countries into account,” he said in a note.

Economic indicators have been sending mixed signals about the direction of the European economy. Signs of faster growth in France and even Spain have been offset by inklings of slower growth in Germany, as well as a slump in retail spending across the euro area. Mr. Trichet said Thursday that overall growth in the euro area remains solid.

Another source of uncertainty is the rise of the euro against the dollar, which has been fueled in part by expectations of higher interest rates. At about $1.48, the euro is near its highest level compared to the dollar since the end of 2009. A strong euro can hurt growth by making European exports more expensive abroad.

The euro fell about 0.7 cents Thursday following the E.C.B. decision.

Britain’s central bank decided to keep interest rates at a record low of 0.5 percent despite an inflation rate that had reached double the bank’s 2 percent target. Recent economic data showed that growth had slowed, prompting some economists to cut their forecasts and predict a prolonged economic recovery. The Bank of England also kept its bond purchasing program, which is intended to stimulate the economy, at £200 billion, or $331 billion.

Article source: http://www.nytimes.com/2011/05/06/business/global/06euro.html?partner=rss&emc=rss

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