24 - 30, 2002
FRENCH DEAL OPENS UP EU SUMMIT
Europe's finance ministers have cut a deal on
France's demands for elbow room on its budget deficit, setting up a
possible upbeat message from their summit.
The deal also means the focus will return to
asylum, and arguments between member states over the rights and wrongs
of a common policy on refugees.
Meetings to settle the squabble over France
stretched into the early hours in Seville.
The result was a compromise: while the European
Union's 1997 growth and stability pact requires all countries to bring
their budgets into balance by 2004, France will be exempt unless
growth in both 2003 and 2004 tops 3%.
Given the Eurozone's recent record, that could
prove a tall order.
The argument was triggered by an audit,
commissioned by France's new right-wing administration, which showed
2002's deficit growing to 2.5% of gross domestic product.
As well as being far in excess of the 1.9%
predictions, the figure is dangerously close to the
3% ceiling built into the pact. And it leaves little space for the tax
cuts promised by the incoming government.
France's new finance minister made it clear that
his colleagues had accepted France's arguments.
"If we don't have this growth, we will all
have to accept to push things back by — who knows? — a year or two
years," Francis Mer told reporters.
Failure to hammer out a deal could have risked
undermining the pact, an agreement aimed at taming national deficits
so as to contain inflation and reassure financial markets.
Portugal, which looks set to narrowly avoid
breaching the 3% deficit limit this year, has signalled that it will
join France in pushing for greater flexibility.
BANGLADESH SPEEDS PRIVATISATIONS
Bangladesh plans to sell 49 state-owned companies
in the next 12 months to save itself millions of dollars in subsidies.
"Ultimately we would like to privatise almost
all public enterprises ... to make the private sector vibrant and
productive and the main vehicle for economic development," Enam
Ahmed Chowdhury, chairman of the Privatisation Commission told the
BBC's World Business Report.
As a result of the sell-off, Mr Chowdhury estimates
about 26,000 workers would lose their jobs.
Bangladesh, which is heavily dependent on foreign
aid and imports, has been under pressure from foreign donors to speed
The IMF and other lenders provide nearly $1.5bn in
The South Asian country spends more than $500m, or
over 6.5% of its annual budget, funding around 200 public sector
The government expects to raise about 5bn taka
($86.3m) from the sales, Mr Chowdhury said adding a 4bn taka
compensation fund had been set up for the employees made redundant.
But the full amount may not be raised as bidders
who pay the full sale cost upfront will be offered discounts of up to
"Foreign investors are most welcome to invest
here and in order to quicken the process of transfer of ownership a
rebate of 35% has been provided of the total sales price, and if
someone pays in foreign currency they will be given a 40%
discount," he said.
Mr Chowdhury claimed about 200 state-owned
companies had been pushed into the red by mismanagement and labour
BRAZIL HIT BY DEBT DOWNGRADE
The real has slumped in recent weeks Brazil's
economy suffered a sharp shock on Thursday after was given a
pessimistic bill of health by international agencies.
As credit rating agency Moody's cut its outlook on
Brazilian government debt to "negative" and Fitch's
downgraded its rating as well, stocks tumbled and the currency, the
real, slumped in value.
Both agencies noted that the problem was a matter
of sentiment: October elections could gift the presidency to a
socialist, Lula da Silva, and that — they believe — could
undermine investor confidence in the stability of Brazil's debt.
The government, unsurprisingly, played down the
EUROPE AND US TALK ON STEEL
The EU trade commissioner Pascal Lamy is flying to
Washington for two days of crucial trade talks ahead of the G8 summit
of world leaders next week.
Tensions are rising between the world's two biggest
trading blocs despite the agreement last year to begin a new round of
world trade talks.
The biggest issue is the decision by the US to
impose tariffs of up to 30% on a range of European and Asian steel
But the EU and the United States are also at
loggerheads over US tax breaks to its companies for foreign sales, and
big increases in US farm subsidies.
Mr Lamy will meet key Congressional leaders on
Thursday and the US Trade Representative, Robert Zoellick, on Friday.
TRADE BOOST FOR JAPAN'S ECONOMY
Exports from Japan have soared a massive 715%
during May — nearly double the amount expected by forecasters.
The export boom was driven by soaring demand across
Asia for Japanese hi-tech products like computer chips and flat screen
television sets. Japan's trade surplus — the value of its exports
minus the amount of goods it imports — now stands at 619.2bn yen
($5bn) — up from a 344.5bn surplus in April.
It is the fifth month of rising exports, and a sign
of the continuing recovery of an economy that until very recently was
mired in its deepest recession since World War II.
EURO SOARS ON RECORD US TRADE GAP
News of a record US trade deficit has propelled the
European single currency to a two-year high against the dollar.
The euro rose from $0.9574 late on Wednesday to
$0.9645 on Thursday, its strongest showing since June 2000.
The single European currency's new-found strength
stemmed from figures showing that the US current account deficit had
mushroomed to a record $112.5bn in the first three months of the year.
The higher current account deficit — which shows
that more money is leaving the US in the form of foreign investments
and spending on imports than is coming in — suggests rising demand
for foreign currencies, undermining the dollar.
US GETS TOUGH ON ACCOUNTANTS
The US financial watchdog is to set up a new body
to oversee the accounting industry.
The decision comes after regulatory bodies were
heavily criticised for failing to intervene in the Enron/Andersen
The government is desperate to avoid a repeat
performance, and to restore investor trust in corporate America.
Energy giant Enron collapsed late last year after
admitting that it had vastly overstated its results for five years.
Andersen, the auditor in charge of approving
Enron's accounts, was heavily criticised for failing to flag up
irregularities in the energy firm's books.
URUGUAY FLOATS THE PESO
Uruguay has allowed its national currency, the
peso, to float freely in an effort to make its exports more
The Uruguayan economy ministry said on Thursday
that it had abandoned exchange rate controls which kept the peso's
fluctuations against the dollar within a 12% band.
The currency fell 11.9% to 19.5 pesos per dollar
shortly after the controls were scrapped.
The tiny south American republic has been hit hard
by the devaluation of the Argentine peso earlier this year, which has
made competing Argentine exports cheaper for international buyers.
The country's close economic ties with crisis-torn
Argentina have put the wider Uruguayan economy under severe pressure.
Uruguayan consumer spending has nosedived, and its
banks have been hit by a run on deposits.
UK RETAIL BOOM FALTERS
The British shopping boom has stalled, in a sign of
the challenges still facing the UK economy.
Retail sales slid 0.6% last month, the Office for
National Statistics said.
The fall, which was larger than analysts had
expected, reflected poorer sales by clothing and shoe stores, the ONS
And it comes as a series of reports have signalled
caution over the strength of the UK economic revival, with the Royal
Institution of Chartered Surveyors on Thursday suggesting that the
first signs of a slowdown in the property market are appearing.
The data will ease pressure on the Bank of England
to raise interest rates to counter the risk of inflation.
UGANDA PUSHES ON WITH CONTROVERSIAL DAM
Ugandan President Yoweri Museveni has said that a
controversial dam project will go ahead in spite of financial
difficulties and criticism about its impact on the environment.
President Museveni said that the Bujagali dam,
which would be East Africa's largest private construction project at
$550 million, would be built, whether it was paid for by the World
Bank or Uganda itself, in remarks reported by the Ugandan daily New
On Tuesday, the World Bank postponed a decision to
approve $250 million in political risk guarantees.
NIGERIAN PUBLIC SPENDING UNDER INVESTIGATION
Nigeria's government is under attack again for its
lack of financial transparency.
The upper house of parliament has launched an
investigation into the country's public spending under President
A recent report by a parliamentary committee says
there has been a "virtual slide into financial anarchy".
UK EXPORTS ARMS DURING KASHMIR STAND-OFF
The UK continued to grant arms export licences to
India and Pakistan despite escalating tensions between the two nuclear
It emerged on Wednesday that even as British
nationals were told to leave the two countries because the situation
was getting increasingly dangerous, the government was granting
licences for military planes and weapons.
ARGENTINA'S ECONOMY SLUMPS
Argentina's economy shrank 16% during the first
three months of this year, plunging the country ever deeper into a
recession that has now lasted for three-and-a-half years.
According to government figures this is the highest
drop since statistics began.
There was a 6% fall in economic activity in this
quarter, compared with the last three months of 2001.
MINISTERS 'WARNED' OVER FARM DISEASE
The government was warned two years before the
foot-and-mouth crisis that its vets could be overwhelmed by rapid
spread of the disease, says a powerful watchdog.
Progress was made on many of those problems, says
the National Audit Office (NAO), but action on other key concerns was
delayed because other "high priority work" had to be done.
The watchdog argues not enough was done to prepare
for the unprecedented scale of last year's foot-and-mouth outbreak —
the total cost of which it puts at over £8bn.
The report comes as initial results of an
investigation into a suspected new case of foot-and-mouth in the
Midlands are due to be released.
The Department of Environment, Food and Rural
Affairs says the findings show the government did much right in its
handling of the crisis but that there are lessons to be learned.
HOPES RISE FOR NEW OILFIELD
Exploration of a recently discovered North Sea
oilfield has revealed it is significantly bigger than was first
The Buzzard field is now being hailed as one of the
biggest finds in 25 years after revised forecasts suggested it may
contain more than one billion barrels of oil.
Figures released in January suggest the field, 125
kilometres north east of Aberdeen, could yield around 400 million
barrels — 25% more than was forecast when it was discovered.
The operator Pan Canadian, which is now called En
Cana, is to start planning for the field's development with support
from the Department of Trade Industry.
MAURITANIA GRANTED DEBT RELIEF
The West African country of Mauritania has had
$1.1bn (£740m) of debt wiped clean from its slate.
The debt relief was granted after Mauritania
satisfied the criteria of the International Monetary Fund (IMF) and
the World Bank under a new scheme aimed at helping the world's poorest
and most heavily indebted countries.
BLAIR DEFENDS TAX ON PENSION FUNDS
The Prime Minister has publicly defended his
government's controversial tax on pension funds.
At question time in the House of Commons, Mr Blair
backed the £5bn a year tax which was introduced by the Chancellor,
Gordon Brown, in 1997.
The Conservative leader, Iain Duncan Smith,
challenged the Prime Minister to defend his comments that the pensions
tax was justified because "of the buoyancy of the stock
MADAGASCAR ECONOMY HIT HARD
The disputed presidential contest in Madagascar is
continuing to have a profound effect on the economy of the African
It had been hoped that the political situation
would improve if the incumbent president, Marc Ravalomanana, included
allies of his arch rival Didier Ratsiraka in a government of national
But a reshuffle on Tuesday failed to result in
ministerial appointments for any of Mr Ratsiraka's allies.
Already political uncertainty has seen foreign
investment dry up and many businesses have been forced to close.