INTERNATIONAL

 

Dec 23  - 29, 2002

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

EU AGREES TO ADMIT 10 NATIONS

Ending the cold war division of their continent, European Union leaders late on Friday agreed to open the doors to 10 mainly east European states in 2004.
The historic redrawing of Europe's borders came after four years of complex membership negotiations and last-minute haggling between leaders on money and farm subsidies.

 

The deal was won, however, after the EU agreed to raise its initial 40.3 billion euro financial package for the 10 newcomers.

"A new Europe is being born," declared Danish Prime Minister Anders Fogh Rasmussen who steered the milestone summit to its successful conclusion. Brushing off eleventh-hour haggling over cash, Rasmussen said leaders had closed "one of the darkest and bloodiest chapters in European history."

Added German Foreign Minister Joschka Fischer: "It's the definite end of the cold war."

Future EU members will be Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.

As Europe opened its arms to the 10 future members, Turkey was rebuffed by EU leaders over its demands for a 2003 date for entry negotiations.

The EU said it would wait until December 2004 before deciding whether or not to set a date for starting Turkey's accession talks.

In a last-minute improvement, however, Ankara got a promise that these negotiations would begin "without further delay" - provided Turkey implemented key political reforms.

MORE GLOOM FOR JAPAN'S ECONOMY

Japan has lowered its economic outlook for a second consecutive month, blaming weaker industrial production and exports.

"As movements towards an incipient recovery are weakening, the state of the economy remains roughly flat," the government Cabinet Office said in its monthly report on the economy.

"Exports are declining somewhat and industrial production has become flat."

Industrial output in October, the latest month for which data is availble, fell 0.2% from September owing to slowing demand at home and overseas.

Last month's assessment indictated that while the economy was showing signs of recovery, the pace was slowing.

The government last lowered its economic assessment for two consecutive months in May and June last year.

However, the Cabinet Office upgraded its assessment of corporate profits and said earnings could improve further.

The Bank of Japan's quarterly "tankan" survey of business confidence last week reported companies expect profits to rise in the coming financial year.

But with few positive indicators, the government remained cautious on the economic outlook.

"The environment, such as concerns over the future of the US and other economies, and sluggish domestic stock prices, continues to be severe, and there are concerns over downward pressure on final demand," it said.

The report was also downbeat on the labour market, after unemployment hit a record 5.5% last month.

US-AUSTRALIA PACT 'DANGEROUS'

Australia's drive to sign a free trade pact with the US could do more harm than good by undermining Australia's relationship with China, critics are warning.

The proposal, unveiled in November by US Trade Representative Robert Zoellick, reflects the increasingly warm relationship between the two countries built on Australia's unstinting support for the US "War on Terror".

But signing up with the US will simply close lucrative doors elsewhere to Australian trade, critics suggest.

At particular risk, they say, is the relationship with China and Hong Kong, which absorbed the second-biggest share of Australia's exports in the year to September.

Australia's former ambassador to Beijing, Ross Garnaud, has accused the government of pursuing the pact for political purposes in the face of economists' advice.

US INSURER IN THIRD-BIGGEST BANKRUPTCY

Conseco has naming rights to Indianapolis' Fieldhouse Insurance and loans giant Conseco has filed the third biggest US bankruptcy after WorldCom and Enron, with $6.5bn (4bn) in outstanding debts.

The company, which was founded by encyclopaedia salesman Stephen Hilbert, had already defaulted on bank and bond debts and had been expected to go bust.

Conseco warned last month it might file for bankruptcy protection after reporting a quarterly loss of $1.8bn.

Insurance subsidiaries were excluded from the filing and would continue to honour policies.

The holding company was de-listed from the New York Stock Exchange in the summer and faces an investigation by stock market regulator, the Securities and Exchange Commission.

BANK OF ENGLAND SPLIT ON INTEREST RATES

Two of the nine people who set the UK's interest rates still think the state of the economy calls for borrowing to be cheaper.

The minutes of the last meeting of the Bank of England's monetary policy committee, on 4 and 5 December, show that the two believe soaring house prices in the UK are less of a risk than the world economic slowdown.

The two members, Stephen Nickell and Christopher Allsopp, have now voted for a cut three months in succession.

But the majority still fear that the rampant housing market, and the spike in consumer debt, mean higher inflation is too much of a risk to drop interest rates from their current 38-year low of 4%.

But they are fighting shy of taking action to puncture the house price boom, saying it would be "inappropriate". The fact also remains that manufacturing output is falling, and higher rates could handicap investment.

JAPAN EASES UP ON BUSINESS LOANS

Japan's central bank is trying to make it easier for businesses to borrow money from the country's debt-ridden banks, in the hope of preventing further economic crisis.

The Bank of Japan (BoJ) said after its regular meeting on Tuesday that it will expand the range of collateral that companies can use to get access to loans.

Registered financial institutions can act as conduits for loans from the BoJ to businesses, but the sheer weight of bad debts clogging the financial system has slowed lending to a crawl.

The Bank hopes that by allowing shorter-term deeds to be used as collateral the bottleneck can be eased.

"The Bank expects today's decision will make it easier for financial institutions to refinance (loans) to business firms, thereby facilitating smooth corporate financing," the BoJ said in a statement.

S KOREA WINNER LOOKS TO US

The winner of South Korea's presidential election has vowed to work closely with the United States to peacefully resolve concerns over North Korea's nuclear weapons programme.

Speaking the morning after his victory, Roh Moo-hyun said the nuclear issue was "shadowing the entire Korean Peninsula".

He also said he would press for changes in the agreement with the United States covering the 37,000 American troops based in the country, following recent anti-American protests, but added that nothing would be "drastically changing".

US ENERGY FIRMS FINED $5M

Dynegy's marketing and trade unit and West Coast Power have been jointly fined $5m (3.1m) to settle charges of attempting to manipulate gas prices.

NIGERIA WINS $1BN GAS DEAL

Leading finance houses from around the world have pledged $1bn (630m) towards a major new gas initiative in Nigeria.

It is part of a $2bn project being undertaken by Nigeria LNG, which liquefies natural gas for export to Europe and the US.

CHINESE SHOPPERS QUEUE FOR GOLD

China has allowed its citizens to buy gold bullion for the first time since the Communist Party took power in 1949.

Shoppers queued on Thursday to look at gold bars on sale in department stores in Beijing and the southern city of Nanjing.

SOLVENCY FEARS FOR AUSTRALIAN STOCKS

Australia's financial watchdog has found that one-fifth of the firms listed on the country's stock market are at risk of bankruptcy.

It ordered a check up on the accounts filed by listed firms after the collapse of former US market darlings Enron and WorldCom amidst auditing scandals.

But the regulator said the review found no reason to worry about similar sharp practices by the auditors in Australia.

UK SLAPS RECORD FINE ON SWISS BANK

Investment bank Credit Suisse First Boston International (CSFBi) has been hit with a record fine for trying to mislead Japanese tax and regulatory authorities.

The 4m ($6.2m) fine is the largest to be imposed by the UK regulator, the Financial Services Authority (FSA), so far.

FUEL CRISIS MAKES ZIMBABWE DIG DEEP

Zimbabwe is spending US$15m (8.7m) of its desperately scarce foreign currency reserves on fuel imported from Kuwait and South Africa, to alleviate a shortage which has almost brought the country to a standstill.

RAY OF LIGHT FOR TECH INVESTORS

Mini-computer maker Palm and software giant Oracle have lifted technology investors' spirits with better than expected results.

Palm, the world's biggest manufacturer of pocket-sized computers, posted a profit of $3.5m for the second quarter of the financial year, bouncing back strongly from a $25.2m loss one year ago.

SIBNEFT WINS RUSSIAN OIL GIANT

Russia has auctioned off its last major state-owned oil company, Slavneft, in what has been billed as one of the largest and most open privatisations in the country's history.

Sibneft, an ambitious but controversial Russian oil firm founded in 1995, beat off competition from seven bidders to snap up the government's 75% stake in Slavneft for for $1.86bn (1.2bn).

MUGABE EYES OIL FIRM ASSETS

Zimbabwean President Robert Mugabe has threatened to take over petrol stations owned by oil giants BP, Mobil and Caltex.

Mr Mugabe promised to handle the fuel crisis personally as chronic fuel shortages worsened over the weekend.

VAN HEUSEN TO BUY CALVIN KLEIN

The US' biggest shirt maker Phillips-Van Heusen has agreed to buy fashion house Calvin Klein for more than $400m (248m).

BUSINESS GLOOM DEEPENS IN GERMANY

German business confidence has slipped for the seventh consecutive month, despite a half-point interest rate cut earlier this month. The Ifo economic institute said its western German index had fallen to 87.1 in December, from 87.3 in the previous month.

The continuing fall in sentiment comes as the German government, facing weak growth and a widening budget deficit, has proposed increasing taxes and social contributions, as well as cutting spending.

Economists closely watch the Ifo survey because it gives an indication on future investment plans.

STOCKHOLM SETS EURO VOTE QUESTION

Sweden has announced the wording of the question to be put in a referendum next year on whether to adopt the euro - to the anger of some opponents.

The decision was made after talks involving all of Sweden's political parties represented in parliament.

The question - "Do you think that Sweden should introduce the euro as its currency?" - will be answered either by "yes" or "no".

AFGHANISTAN ASKS FOR LONG-TERM AID

Afghan President Hamid Karzai has asked international donors at a conference in Norway to focus on long-term infrastructure projects rather than short-term aid such as food and medicine.

Members of the Afghan Support Group pledged about $1.7bn in aid for next year, the same amount pledged for 2002 and significantly more than the United Nations requested.

UK EMPLOYMENT

Economists fear unemployment is still on the rise. More people are working in Britain than ever before thanks to a rise in part-time jobs, according to official figures.

The Office for National Statistics (ONS) said almost 28 million people were now employed in Britain, an all-time high.

UK INFLATION HITS FOUR-YEAR HIGH

Inflation in the UK has risen to 2.8%, its highest level for more than four years.

Rising house prices helped push the figure above the Bank of England's 2.5% target rate.

JAPAN BANK RESCUE 'IMPOSSIBLE'

The construction industry is responsible for much of the debt Government plans to halve the massive bad debt burden crippling Japan's banks by March 2005 are doomed to failure, according to the leader of Japan's biggest business organisation.

The comments from Hiroshi Okuda, head of the Keidanren, or Japan Employers' Federation, reflect increasing concern that the banks' bad debts exceed even the 50 trillion yen estimated by the government.

GROWTH AT RISK IN HONG KONG

Hong Kong's economy is likely to under-achieve for the next four years, its top finance official has warned.

In a briefing to legislators delivered on Monday, financial secretary Anthony Leung said that sky-high unemployment and falling retail sales were playing havoc with economic forecasts.

"March's forecast for 2003 to 2006 of nominal GDP growth of 4.4% may not be attainable," he said.

The prediction had been made in Mr Leung's budget speech, before the current predicament took hold.