The budget watchdog has slashed its forecast for 2002
through 2011 to an accumulated total of $336bn (£220bn).
In March, the CBO had forecast that the surplus would
be $1.7 trillion. Last year, it had forecast a $5.6 trillion surplus.
The "vanishing surplus" has created much
anger in political circles ahead of congressional elections in November.
Crucially, the controversy could shift party control
of both the House of Representatives and the Senate because even small
shifts in votes would be enough to do so.
Democrats blame the reduced surplus on President
George W Bush's $1.35 trillion tax cuts announced last year.
"The budget, under Republican stewardship, is
deteriorating at a rapid rate," said the leading Democrat on the
House Budget Committee, John Spratt.
"The problem is getting worse, and the Bush
administration has no plan to correct it."
The Republicans insist that the tax cuts have been
crucial to lift the US out of recession and to avoid excessive economic
damaged from the recent weakness in the stock market and the fall-out
from the 11 September attacks.
So rather than blaming the tax cuts, spending by
Congress should be targeted, they say.
"Democrats want to have their cake and eat
it," said House Budget Committee Chairman Jim Nussle.
"These projections reinforce the need for
Congress to constrain spending to put us back on the path to fiscal
GERMAN RECOVERY STUMBLES
Business confidence in Germany weakened for the third
month in a row during August.
Germany's economic woes are in the spotlight ahead of
the general election in September, with fears that recent floods might
jeopardise the fragile economic recovery.
The data signals "a possible — at least
temporary — interruption of the recovery", the Ifo research
Its closely-watched index of business confidence
dipped to 88.8 points in August from 89.9 points in July. Back in May,
the index stood at 91.6.
The index is based on a poll of about 7,000 German
companies, who are asked for their view of the next six months.
The survey also found that businesses were more
gloomy about their current situation than last month, especially in the
crucial manufacturing sector.
Germany, which is Europe's biggest economy, is
recovering from a recession last year but growth remains feeble, at only
0.3% in April, May and June.
Economists had been expecting a fall and shrugged off
the gloomier interpretations of the data, pointing out that recent
rollercoaster swings on world stock markets were bound to produce some
The Ifo was "weaker than expected but could have
been a lot worse," said Julian Jessop of Standard Chartered in
"There had been some rumours of a much weaker
number coming around so I think it's actually holding up reasonably well
considering the doom and gloom in the German economy," he said.
The consensus forecast among economists had been for
a reading of 89 points.
NORWAY, UK TO BOOST NORTH SEA OUTPUT
Norway and Britain unveiled an ambitious plan to
strengthen cooperation on their ageing North Sea oil and gas fields,
which they said could save energy companies $2.0 billion by 2010.
The plan aims to boost output, cut operational costs
and promote cross-border cooperation in a 60 km-wide corridor either
side of the Norwegian-British median line.
The area contains reserves of an estimated 13 billion
barrels of oil equivalent (boe), of which two-thirds is oil.
"The challenge is to get as close as possible to
behaving as if there was not a border, to look at fields in an
integrated way," British Energy Minister Brian Wilson told Reuters.
He said it had taken about eight months to draw up the plan.
Britain, whose own gas supplies are waning while
demand is growing, is a key market for Norwegian gas exports and sales
are expected to rise rapidly.
EUROPE WELCOMES US STEEL VOTE
The European Commission (EC) has welcomed a vote
against new steel tarriffs by the US Trade Commission.
The Commission voted late on Tuesday not to impose
'dumping' duties on countries who are allegedly filling the American
market with cold-rolled steel at unfair prices.
It ruled in favour of five countries — Australia,
India, Japan, Sweden and Thailand. A total of 20 countries are accused
of selling cold-rolled steel products below the fair market value or the
cost of production.
The EC said it would continue to defend the interests
of Belgium, France and Germany, and said that European steel exports to
the United States were "thoroughly fair and legitimate".
TURKEY FACES WATER "CRISIS"
Turkey has admitted that its water supplies are
running low and it will have to invest $1bn a year in new dams, just a
few weeks after agreeing to sell water to Israel.
"Turkey is not water-rich, in fact it is a
country that could soon hit a water crisis," State Water Works
Director Mumtaz Turfan said.
Mr Turfan warned that more investment in dams was
needed and that water-waste in farming needs to be reduced.
FOOD INFLATION HITS AFRICAN CLOTHES SALES
The budget retailing group Pepkor has warned that
rising food prices in South Africa could cause consumer spending to fall
in the coming months.
"As long as food inflation remains at its high
level, it must unavoidably affect clothing sales to consumers with a low
disposable income," Pepkor said.
Food inflation in South Africa rose at an annual rate
of 16.8% in July, in part because the country's currency fell 37%
against the US dollar last year.
The rand has since regained 13% of its value.
US REJECTS SUMMIT CRITICISM
The United States has strongly defended its record at
the World Summit on Sustainable Development in Johannesburg, following
criticism from European and developing countries.
American delegation leader Paola Dobriansky called
the US a "leader" in promoting development, and said the
absence of President Bush at the summit was not a sign of neglect.
EU MINISTERS TO GATHER IN DENMARK
European Union foreign ministers begin two days of
meetings in Denmark on Friday with international concern about Iraq high
on their agenda.
The ministers meeting at Hamlet's castle in Elsinore
are due to spend the first day discussing the timetable for EU
But on Saturday they will go on to discuss Iraq and
the likelihood of US military action there.
Also on the agenda will be the Israeli-Palestinian
conflict and the growing dispute with America about the newly
established International Criminal Court (ICC).
Up to 10 new countries from central Europe and the
Mediterranean are expected to be invited to join the EU in 2004, with
negotiations due to finish by the end of 2002.
UK WORKING HOURS RISE SHARPLY
An increasing number of employees are working more
than 60 hours a week, according to a government survey.
One in six surveyed said they were working more than
60 hours a week compared to one in eight two years ago.
One in every eight women now work more than 60 hours
a week, more than double the number of women doing so in 2000.
SUMMIT LAUNCH FOR NEW AID SCHEMES
Western governments at the World Summit on
Sustainable Development in Johannesburg are due to announce a series of
partnerships with businesses and communities in developing countries on
Led by the United States, they will promote
partnerships worth millions of dollars as a means to help economic
development and preserve the environment.
However, environmental groups say such projects are a
poor substitute for specific targets and timetables which other
governments are prepared to support.
ZAMBIA REINS IN SPENDING
Zambia has angered unions by suspending food and
travel expenses paid to some government staff.
The spending cuts are in response to criticism from
the International Monetary Fund (IMF).
IMF officials raised concerns about a gap in the
country's budget during a recent visit to the country.
CHINA WOOS GIANT TAIWAN CHIP FIRM
A Taiwan firm which is the world's biggest contract
maker of computer chips has signed a deal to build a huge factory in
The deal means that one of the mainstays of Taiwan's
economy has joined the rush of Japanese, US, European and Asian hi-tech
firms flocking to shift production to China.
Taiwan lifted restrictions on investment in China by
the semiconductor industry in March, after China and Taiwan both joined
the World Trade Organisation.
TAIWAN TO EASE CHINA TRADE RULES
Taiwan's government has announced plans to lift more
restrictions that currently limit business exchanges with China.
The island says it will allow Chinese companies to
advertise their products on the island.
And it will make it easier for Chinese employees of
large firms to work in Taiwan.
In a process that began last year, Taiwan is slowly
dismantling its 50-year-old restrictions on trade with mainland Ch