But the Economic and Monetary Affairs Commissioner
Pedro Solbes said that France's planned budgetary deficit of 2.6% of
economic output for 2003 was "dangerously close" to the 3%
limit set for euro members.
He added that the Commission was "worried"
by the French targets, saying it was concerned that the government may
not be able to balance its budget by the new deadline of 2006.
Earlier this week the Commission relaxed the previous
budget balancing deadline of 2004 for France, Italy, Germany and
When the euro was launched, participating countries
agreed to balance their public finances in the medium term.
But the economic slowdown has made it harder for
countries to match spending and income, as tax receipts fall.
The Commission's extension of the budget-balancing
deadline was granted on the condition that countries tackled their
structural budget deficit — which strips out the effects of changes to
tax receipts and welfare spending through the economic cycle.
But Mr Solbes said he was concerned that the French
plans would fail to do this.
"At first sight we are worried by the budgetary
targets announced by the French government," Mr Solbes said.
"The first source of concern is the lack of
clear improvement in the cyclically-adjusted budget deficit position
that shows clearly that the French government is postponing its fiscal
JAPAN PM'S TO RESHAPE CABINET
Prime Minister Junichiro Koizumi has confirmed he
plans to reshuffle his cabinet on Monday and speculation is rife that he
will clear out opponents of a bank rescue plan.
Japan's finance minister has revealed he will set out
plans to pump public money in the country's ailing banking system to
wipe away bad debt when he meets fellow G7 finance ministers in
Washington over the weekend.
Prime Minister Koizumi's new cabinet will be focused
on its leaders plans to stimulate the economy, probably with huge tax
cuts, which he will draft by November.
Unemployment and inflation figures issued on Friday
underscored the depth of Japan's economic woes.
About 50,000 Japanese lost their jobs in August,
taking unemployment to 5.4%, official figures showed.
Unemployment stood above 5% for the fourteenth month
in a row and was hovering just below the 50-year record of 5.5% set in
Job insecurity has dampened Japanese shoppers'
willingness to spend money, despite repeated government urging to
stimulate the economy and near-zero interest rates.
Prices in the shops have now been falling for three
August inflation figures showed consumer prices
dropped 0.9% compared with August 2001, the thirty sixth month of
declines and a steeper fall than 0.8% in July.
Finance Minister Masajuro Shiokawa said he will tell
other G7 finance ministers that the Japanese government "should
inject new public funds into the banks if necessary".
But the banks would not receive a blank cheque to go
on shoring up ailing firms who refuse to restructure.
WORLD ECONOMY STUMBLES, SAYS IMF
A scant six months ago, the International Monetary
Fund (IMF) was scrambling to revise upward its estimates for worldwide
That followed an unexpected robust quarter of growth
in the US — first pegged at about 6% for the first three months of the
year — which led many to believe economic recession had abated.
In its most recent assessment of the world's
economies, however, the IMF has ratcheted down many of its estimates for
this year and most of its projections for 2003.
Despite the myriad revisions, the IMF's World
Economic Outlook (WEO) still calls for the global economy to expand by
2.8% in 2002.
The international-finance organisation, however, has
lowered its estimate for 2003, calling for worldwide growth of 3.7%,
three-tenths less than what it called for last spring.
The United States, the world's largest economy, is
forecast by the IMF to grow by 2.2% this year and 2.6% the next.
JAPAN UNDER PRESSURE ON BANK LOANS
A senior White House adviser has said the Japanese
government should be taking the lead in attempting to solve the bad debt
problem in Japan's banking sector.
Last week the Bank of Japan surprised analysts when
it said it would step in to assist the country's troubled banks by
buying some of their shares.
The banking sector is estimated to be carrying a bad
loan burden of about 52 trillion yen ($428bn; £272bn).
But Glenn Hubbard, chairman of the White House
Council of Economic Advisers, said the Japanese government needed to get
EUROPE BACKS DOWN IN STEEL WAR
The European Commission has decided to back down from
a plan to impose sanctions on the United States as a punishment for high
tariffs on steel imports.
The US imposed extra duties of up to 30% on foreign
steel imports in March, saying they were unfairly subsidised.
The move sparked a global trade dispute as the EU,
Japan and other countries filed complaints at the World Trade
The EU's executive body has now decided against going
ahead with a list of potential sanctions worth more than $300m "at
this stage", and will recommend a delay to the meeting of EU
foreign ministers on Monday.
CHINA SIGNS INDONESIAN GAS DEAL
A 25-year agreement was signed on Thursday for the
supply of Indonesian liquefied natural gas (LNG) to China's Fujian
The deal between a BP-Pertamina consortium and
China's CNOOC oil firm is a boost to Indonesia's efforts to shore up its
The agreement covers the supply of 2.6 million tonnes
of LNG per year to Fujian from the Tangguh field in Papua province.
The BBC's Richard Galpin in Jakarta said the gas was
likely to come on stream from 2007.
He told the BBC's World Business Report that the deal
was regarded as a major breakthrough.
"This particular gas field down in the province
of Papua is believed to be huge."
SHARES RALLY ON US DATA
Cheer in the US filtered through to Europe Stock
markets on both sides of the Atlantic have received a welcome boost from
better-than-expected US economic figures.
In New York the Dow Jones index closed up 155.3
points at 7,997.12, a rise of nearly 2%.
In London the FTSE 100 index made its biggest closing
gain since 15 August, closing up 154 points, or 4.2%, at 3,850.
In Frankfurt the Dax index rose by nearly 2%, while
in Paris the Cac 40 jumped 6.3%.
IMF CALLS FOR 'BETTER GLOBALISATION'
The International Monetary Fund (IMF) has
acknowledged that some of its lending programmes are faulty and in need
"The IMF is in the process of change,"
managing director Horst Koehler told a press briefing ahead of the Fund
and World Bank annual meetings this weekend.
The Fund has come under increased scrutiny in recent
weeks, owing to current economic crises in Latin America — not least
Once viewed as a poster child for economic-assistance
programmes, the South American nation has become defiant of late,
threatening to not repay existing loans.
AIB CLINCHES ALLFIRST MERGER
Allfirst was at the centre of a $700m trading fraud
Allied Irish Banks (AIB) has merged its Allfirst subsidary, engulfed
earlier this year by a currency trading scandal, with another US bank.
AIB said on Thursday it had agreed to combine
Allfirst with regional US bank M&T Corporation in a deal worth a
total of $3.1bn (£2.1bn).
COCOA PRICE HITS 16-YEAR HIGH
The price of cocoa has soared to its highest level
for 16 years because of fears that a military uprising in Ivory Coast
will cut off supplies.
The price of cocoa for delivery in December jumped
$37 (£23) in New York to $2,157 per tonne on Wednesday, a rise of
nearly 2% and the highest closing price since September 1986.
SRI LANKA BUDGET BACKS PEACE BID
Sri Lanka will present ambitious budget plans next
year fuelled by lower defence costs and a big jump in overall spending.
The plan to boost expenditure by 60% comes amid the
peace bid to end the island's two-decade war with the Tamil Tiger
With peace talks that started last week expected to
last for several years and a ceasefire in place, defence spending was
forecast to fall.
The government has been struggling to right an
economy hit hard by the separatist war and a drought last year.
The halt in fighting will allow capital spending for
the military that has averaged more than 5% of gross domestic product in
INVESTORS 'LOSE CONFIDENCE IN INDIA'
India has become a significantly less attractive
place for foreign companies to invest in, a new global survey has said.
In its latest survey of business leaders' attitudes
towards foreign direct investment (FDI), the management consultancy AT
Kearney places India fifteenth — down eight places from a year ago.
Several other large emerging markets, including
Mexico and Poland, saw their position weaken compared to the last survey
in February 2001.
PARIS MOTOR SHOW KICKS OFF
No less than 29 world premiers will be launched when
Europe's largest motor show opens its doors for press-previews on
Thursday ahead of Saturday's opening for the public.
The global premiers, along with dozens of cars never
seen before in Europe, make the Paris Motor Show a key barometer of the
market for cars.
The show is also a stage for car maker's executives
who will be on location to tell the world where they are heading.
DEVELOPING STATES 'HOOKED ON AID'
An evaluation of lending programmes has concluded
that many countries have become stubbornly reliant on aid from
international lending bodies.
The report, produced by the Independent Evaluation
Office (IEO) of the International Monetary Fund (IMF), also found that
prolonged use of IMF initiatives has expanded considerably over the past
CHINA TELECOM UNVEILS US FLOTATION
Telephone giant China Telecom's massive flotation
looks set to start next month, and could raise as much as $4bn for the
The firm's application for a listing in the US with
the Securities and Exchange Commission, filed on Tuesday, allots 159.6
million American Depositary Shares (ADSs) — each worth 10 shares in
the company itself — to the US market.
The US economic slowdown has led to an increase in
the number of poor people in the world's richest country for the first
time in eight years.
New figures from the US Census Bureau show that the
poverty rate increased to 11.7% in 2001, compared with 11.3% in 2000.
The number of people in poverty rose by 1.3 million to 32.9 million.
TANZANIA GEARS UP FOR TOURISM PUSH
Tanzania is hoping the trend towards ecotourism,
adventure and cultural experience holidays will help it become a leading
The home of Kilimanjaro, the Serengeti plans and the
beaches of Zanzibar believes its natural resources can help it build up
its share of the massive tourism market.
REVIVING KENYA'S COTTON INDUSTRY
The American government has offered assistance to
Kenya's once-thriving cotton industry.
The United States Trade and Development Agency said
it would provide aid worth more than $300m, as well as advice from
American cotton industry experts.
US INTEREST RATES KEPT ON HOLD
The Federal Reserve has kept US interest rates on
hold, warning of the risk of "heightened geopolitical risks"
on economic recovery.
The Fed, the US central bank, left interest rates at
a 40-year low of 1.75%, despite an attempt by two of its chiefs to win a
While saying it was confident that current economic
policies would foster recovery, the Fed's open market committee (FOMC)
warned that amid a period of growing tensions, the timing of the
recovery was uncertain.