08 - 14, 2002
EUROPEAN BANK CHIEF CRITICISES FRANCE
The European Central Bank President, Wim Duisenberg,
has delivered an unprecedented criticism of the French Government.
Speaking in Luxembourg Mr Duisenberg accused France
of unilaterally reinterpreting euro zone rules on budget deficits.
At the EU summit in Seville last month France said
it would only meet an EU target for balancing its public finances if
its economic growth reached three per cent next year.
It is highly unusual for Mr Duisenberg to single
out an individual Euro member country.
In veiled bankers' language he implied that
France's declaration making budget discipline conditional on economic
growth was a potential threat to the stability of the euro.
Mr Duisenberg accused France of making a unilateral
declaration and called on all governments to stick unconditionally to
Since elections last month, the new French
Government has said it will not eliminate its budget deficit by 2004,
an agreed EU deadline if growth falls below its target.
Mr Duisenberg made clear he believes that target,
3% growth in each of the next two years, is optimistic.
The French action has also strained relations with
Berlin — German officials believe a costly election pledge to cut
taxes is undermining Paris' commitment to financial discipline.
France has admitted that its deficit this year will
be near 2.5% of economic output — that is much higher than forecast
and close to the 3% euro zone limit.
Germany faces a similar overshoot but has insisted
it will make every effort to stay within the rules.
OECD MEMBERS' FDI FLOWS PLUNGE
Foreign direct investment flows into and from the
world's richest countries dropped by more than half last year after
hitting an all-time high in 2000 and look set fall further this year,
the OECD said.
The drop the largest in recent decades came after
big mergers and acquisitions raised cross-border investment activity
in 2000, the Paris-based Organisation for Economic Cooperation and
Development said in a report on its Website on Thursday.
The developments of 2001, rather than a seminal
decline in international investment flows, appear to have marked a
correction toward more sustainable levels, following what could
arguably have been an 'investment bubble' in 1999 and 2000, it said.
Foreign direct investment in the OECD's 30 member
countries is linked closely to mergers and acquisitions, the
organisation said. With such activity limited this year amid
turbulence on equity markets, investment flows were likely to fall
Inflows of investment into OECD countries from
mergers and acquisitions amounted to just under $200 billion between
January and early June this year compared to $636 billion in the whole
of 2001, the organisation said.
Outflows in the first five months of the year were
$185 billion, which the OECD said indicated a decline of around 20 per
cent for the whole year.
If borne out by the facts, this will reduce the
2002 FDI (foreign direct investment) flows into and out of OECD
countries to their lowest level since 1997, the organisation said.
An expected pickup in economic activity in most
OECD countries could boost FDI flows in and out of the rich countries
in the second half of this year. But further weakness on equity
markets could have a negative impact, the organization said.
FINANCE CHIEFS TARGET TERRORIST FINANCING
Finance officials from 15 European and 10 Asian
countries gather in Copenhagen on Friday and Saturday where they will
try to find new ways of halting the flood of money to terrorist
The ministers are joined by leading international
finance officials from the International Monetary Fund, the European
Central Bank, the Asian Development Bank and the European Union.
The high-level attempt to build a strong alliance
against terrorist financing is expected to seek improvements to the
way information is shared between countries.
Italy is set to call for improved transparency in
financial markets, an Italian economics ministry official said.
Ahead of the meeting, the US criticised Indonesia
and the Philippines for failing to cooperate with the international
community's attempts to starve terrorists of cash.
UK INTEREST RATES LEFT UNCHANGED
The Bank of England has kept interest rates
unchanged at 4% for the eighth successive month.
The decision had been expected by most financial
experts and was welcomed by industry officials, despite calls from
some observers for higher rates to cool the housing market.
"This is the right decision, it is clear that
there is little generalised inflationary pressure in the
economy," Ian McCafferty, the Confederation of British Industry's
chief economic adviser, said.
Stephen Radley, chief economist at the Engineering
Employers Federation, said: "We applaud the [Bank] for taking in
the wider picture and not being swayed by the current panic over the
The cut leaves interest rates at their lowest level
for about 40 years, but analysts still expect the Bank to start
raising rates later in the year.
DOLLAR WORRIES LEAD TO EURO RATE FREEZE
Interest rates in Europe have been kept at 3.25%,
amid concerns that the region's economic recovery was too fragile to
risk a tighter regime.
The European Central Bank made the decision after
its regular monthly meeting, in Luxembourg rather than its usual base
While the bank did not detail the reasons behind
its decision to keep rates on hold for an ninth successive month,
observers believe the recent surge in the value of the euro was partly
The currency's rise means import prices are
falling, helping to keep a lid on inflation, as ECB president Wim
Duisenberg told the European Parliament earlier this week. The
currency's aappreciation, he said, "will contribute to the easing
of inflationary pressures".
The jitters sweeping through global stock markets
after a stream of corporate scandals in the US may also have weighed
on the bank's thinking, sparking concerns about the solidity of
FRANCE TO GET TAX CUTS AND PRIVATISATION
France's new centre-right government will cut
income tax by 5% this year, Prime Minister Jean-Pierre Raffarin has
He also said the government would prepare the way
for part-privatisation of two key utility companies.
The legal status of Electricite de France and Gaz
de France will be changed to allow a progressive opening-up of
ownership, Mr Raffarin told parliament.
The power and gas giants have been in the state's
hands since being nationalised in 1946.
In recent years, the two have been strongly
criticised for taking advantage of liberalised European markets to buy
up rivals abroad while remaining protected from competition in their
SRI LANKAN ECONOMY
The Sri Lankan Prime Minister, Ranil Wickremesinghe,
has said he hopes economic growth will reach 3.7% by the end of the
year, after the country experienced negative growth for the first time
in its history in 2001.
CHINA PREMIER SLAMS RICH TAX DODGERS
China's premier Zhu Rongji has slammed wealthy
entrepreneurs who avoid paying their taxes, underscoring the
government's determination to increase tax revenues.
"Why is it that the super rich pay the least
taxes?" Chinese state media quoted Mr Rongji as saying.
"This is not normal. If they all don't pay,
the government won't have any money and how can it do anything?"
Mr Rongji's remarks came in response to a
government inquiry which found that few of China's wealthiest citizens
were paying their tax bills in full, state media reported.
The Chinese leader's remarks follow a steady
tightening of the country's tax collection regime in recent months.
Last month, the government signalled that it
planned to end preferential tax treatment for foreign firms, many of
which pay less than half the rate levied on local businesses.
STOCK MARKETS REGAIN SOME GROUND
London's leading FTSE 100 index ended the day 1.8%
higher than it started it while major European markets also clawed
back some of the week's losses.
About £37bn had been wiped from the value of UK
shares on Wednesday when a slide on Wall Street reverberated through
London's FTSE 100 dropped 154 points to close at
its lowest level for five years.
In Paris the Cac-40 was at its lowest level for
US DELAYS STEEL WAR EXEMPTIONS
The US has put off a final decision on who will
escape the tariffs of up to 30% on steel imports it announced in
The Commerce Department is handling requests from
more than 1,200 US companies asking that their overseas suppliers
should be exempt.
About one third of applications have now been
processed, according to the US Trade Representative's Office, which
bears responsibility for the tariffs.
The decision to delay the announcements is likely
to annoy the European Union, which was waiting for the US to unveil
its list before deciding whether to go ahead with its own retaliation
against $300m worth of US goods.
WORLDCOM TO FACE TRIAL IN MARCH
WorldCom will face trial for securities fraud in
March next year, a federal court has ruled, appointing an overseer to
make sure the company does not try to destroy evidence.
The case has been brought by the Securities and
Exchange Commission, which has accused the firm of covering up a
$1.22bn loss by pretending that $3.8bn of expenses was really capital
BBC WINS DIGITAL TV LICENCES
The BBC and Crown Castle have been conditionally
awarded the digital television licences left by the collapse of ITV
The BBC offer included 24 free-to air channels,
including some channels from satellite broadcaster BSkyB.
The bid beat off a rival offer from ITV and Channel
4 which also included a pay-TV operator called Freeview Plus.
Another bid came from Digital Television
Broadcasting (DTB) Ltd which was backed by the venture capital firm
TRANS-CHINA PIPELINE DEAL SIGNED
Petrochina, China's top oil company, has signed a
deal with a consortium led by Anglo-Dutch energy group Shell to build
a gas pipeline crossing China from West to East.
The project would constitute one of the biggest
engineering feats in China's history, stretching all the way from the
deserts in the northwestern provinces to the coastal city of Shanghai
in the east.
Only the massive Three Gorges Dam, which is costing
the government about $25bn, constitutes a larger task.
The companies want to finish building the 4,000km
pipeline by 2004, at which time 12 billion cubic metres of gas a year
should flow from Xinjiang to Shanghai.
BUSH IN SHARES EMBARRASSMENT
The White House has acknowledged that President
Bush failed to follow the US law and disclose details of shares he
sold when he was a company director.
A spokesman blamed it on a clerical mistake by
The US President's business dealings have sparked
renewed interest since the accounting irregularities at WorldCom were
revealed last week.
UK RETAIL SALES GROWTH SLOWS
Britain's High Street spending spree may be coming
to end, figures have suggested.
Retail sales in June grew at the slowest rate for
18 months, a survey by the Confederation of British Industry (CBI)
The figures back up the last set of retail sales
data from the government, which showed sales slipping 0.6% in May.
ECUADOR MOVES TO FULFIL IMF LOAN CRITERIA
Ecuador is planning a massive sell off of
state-owned assets to help get its budget under control and so
increase its chances of a new International Monetary Fund loan.
The country is seeking a $240m loan, but has been
refused the money in the past when the IMF ruled that planned economic
reforms were insufficient.
The government now plans to sell $100m of assets
before the end of President Gustavo Noboa's term in January 2003.
THAILAND'S ECONOMY SURGES
Thailand's economy is expected to grow by upto 5%
this year, much more than earlier forecast by the country's finance
The news comes five years to the day after Thailand
allowed the devaluation of its currency, the bhat, which triggered the
Asian economic crisis.
The new data is a sharp upward revision of a
forecast two months ago, which predicted just 3.7% of growth.
BRITAIN GRANTS TANZANIA £45M IN AID
Britain has granted Tanzania £45m for poverty
reduction. The decision followed talks between Britain's International
Development Minister Clare Short and Tanzania's President Benjamin
Mkapa in the administrative capital of Dodoma.
"We want to establish a long-term partnership
with Tanzania to support these efforts and see real improvements for
the people of Tanzania," Ms Short was reported as saying.
The virtually unknown Nicaraguan coffees, San
Isidro and El Regreso, fetched $11.75 a pound — more than 20 times
the current market price.
The UK's fifth largest supermarket chain Somerfield
has posted a profit for the first time in three years. The company
recorded a pre-tax profit of £22.2m for the year to 27 April,
compared with a loss of £13.1m last year.
NZ RAISES INTEREST RATES AGAIN
New Zealand's central bank has raised interest
rates yet again — by 25 basis points to 5.75%.
It was the fourth rate rise of the year as the bank
defied government pressure over lifting rates "too often".