Feb-11 - 17, 2002
US sets aside $5.2bn for war on terrorism
In the heavily military-oriented budget proposals sent to the
US Congress for the fiscal year 2003, the Bush administration proposes to spend
24,300 million dollars on foreign affairs — a 1,000 million dollars increase
over the current year's budget.
But this allocation too has its military component, with 5.2
billion dollars set aside for programmes related to the "war on
terrorism". Among provisions made in the foreign affairs section of the
budget proposals are efforts designed to enlist new support from Pakistan and
other countries in the region for the US campaign in Afghanistan and to assist
the Pakistan government through diplomatic and economic assistance.
In the summary on foreign affairs released here, there is no
mention of new aid to Israel, which is always the largest recipient of US
assistance. Current aid levels to the country are pegged at 2.04 billion dollars
in military and 720 million dollars in economic aid.
The proposed budget would include a four per cent increase in
spending for the State Department to 9,234 million dollars. It would allocate
2,740 million dollars for international development assistance programmes
administered by the US Agency for International Development (USAID). In all,
13,886 million dollars would be spent on international assistance programmes.
However, for the first time, support for international
financial institutions is to be linked to performance. The budget proposes 178
million dollars to help meet US international commitments under a plan to clear
US stimulus package fails
A US economic-stimulus package is all but dead after two
votes in the Senate that failed to pass either version of plans crafted by
Democrats and Republicans.
The votes followed a warning from the White House on
Wednesday morning that a failure to approve the measures would lead to job
"One way to read the consequence is about 300,000
jobs," said Glenn Hubbard, who heads the White House Council of Economic
The Democrat's bill, as introduced by Senate Majority Leader
Tom Daschle, would have provided an economic boost to the tune of $69bn
(£48.9bn), considerably less than a comparable Republican bill, which proposed
to spend nearly $90bn.
Japan to raise bad loans issue at G7 meeting
Japan said on Tuesday it would do its best to allay fears of
a financial crisis at a meeting of the Group of Seven (G7) industrialized
countries by discussing the condition of its debt-laden banking sector.
"The biggest issue for Japan at the meeting will be the
disposal of banks' bad loans," Finance Minister Masajuro Shiokawa told a
"Prime Minister (Junichiro) Koizumi has reiterated Japan
will take all possible measures to avoid being the origin of a financial
crisis," he said.
G7 finance ministers will meet in Ottowa from Friday.
Japanese banks are under pressure to reduce a mountain of bad
loans to safe levels within the next three years as part of a drastic government
reform plan to lift the economy from its third recession in a decade.
Aggressive bad debt write-offs, coupled with the pressure of
more loans turning sour amid an economic slump and spiralling deflation has
raised serious concerns over the sustainability of Japanese banks without public
funds. "The government cannot force a capital injection on the banks unless
they collapse," Shiokawa said.
"The government might have to deal with aggressive
disposals of bad loans by banks but the judgment must be made by the banks'
management. I think at this stage banks don't need a capital injection," he
On Monday, chairman of the Japan Federation of Economic
Organizations called for an early injection of funds to offset a crisis.
"Banks should shift more attention to launching new
businesses to increase profitability and expand financial activity instead of
focusing on enhancing the capital-adequacy ratio and bad-loan disposals,"
The finance minister said he was surprised by a sharp drop in
Koizumi's once sky-high public approval rating after the premier sacked his
outspoken but hugely popular foreign minister Makiko Tanaka.
Blair mulls Africa's economy
British Prime Minister Tony Blair is in West Africa in order
to discuss ways of driving economic growth.
Sub-Saharan Africa is one of the poorest region's of the
world, and produces only 1% of the world's gross domestic product despite being
home to 10% of its population.
Trade, aid and debt will be given priority in the discussions
taking place in Nigeria, Ghana, Sierra Leone and Senegal.
Mr Blair's tour prepares for Friday's meeting of the New
Partnership for African Development (Nepad) — an initiative of 15 African
countries to tackle issues of poverty, corruption and the introduction of good
Nepad is modelled on the US Marshall Plan which rebuilt
Europe after World War II — and targets annual investment of $64bn.
Euro-zone business confidence improves
Business confidence in the euro zone improved in January
owing to better outlook for production, the European Commission said on Tuesday.
The commission's euro-zone business confidence index rose
0.19 points to -1.03 points from -1.21 taking into account the effect of
rounding, the commission said. The index had been worsening ever since June
2000, when it reached a peak of 1.78 points.
It fell into negative territory in June 2001, when -0.01
points were registered. However, in December the index had stabilized in
comparison with November.
On Monday, the European statistics institute Eurostat said
its economic sentiment indicator for January had shown an increase of 0.1 per
cent in the 12-nation euro zone.
Eurostat said that even though the rise was modest, it
signalled a reversal of the negative trend seen since the third quarter of 2000.
The economic sentiment indicator takes into account the
opinion of big and small companies, the construction sector and consumers.
Meanwhile, the European Central Bank meets on Thursday to reassess its monetary
policy stance amid growing expectations it will not cut interest rates
A large majority in a Reuters poll expect the ECB to hold its
key interest rate steady at 3.25 per cent at the meeting, to be held in the
Dutch city of Maastricht to mark the 10th anniversary of the treaty that laid
the foundation of Europe's single currency.
Preliminary data show euro zone inflation rose to 2.5 per
cent in January from 2.1 per cent in December, meaning it was visibly higher
than the ECB's two per cent ceiling.
Single EU finance market edges closer
Proposed reforms to the way pan-European financial
legislation is drafted have won the backing of the European Parliament, boosting
plans to create a single European market for financial services.
Euro-deputies voted in favour of the reforms on Tuesday,
ending 11 months of bickering between the parliament and the other European
Under the proposals, which have yet to come into force,
responsibility for working out the details of pan-European securities market
legislation would pass to two new panels of regulators and finance experts.
The two specialist committees are expected to accelerate the
process of drafting laws needed to integrate the EU's 15 national financial
regulatory systems, paving the way for the introduction of a single European
market for financial services by 2005.
Russia regains leading place on world energy map
The global energy equilibrium is changing. Russia, over the
last few years has regained its position as a potent force on the global energy
It is now only second to Saudi Arabia, the world's largest
oil exporter. The change in the equilibrium is going to have profound impact on
the world oil market, many here in Dhahran, the virtual global energy capital
Despite the recent agreement between the Organization of
Petroleum Exporting Countries (Opec) and Russia over the issue of cut in
production, to stem the downward trend in oil market prices, analysts fear that
compromise could only be a short lull in a long confrontation.
Many believe "compromise" that has resulted from
this trial of strength between Opec and Russia is far from a solution to the
fundamental problem that divides the two sides over production levels and the
Argentina to resume IMF talks
In a bid to convince the International Monetary Fund (IMF) to
resume economic assistance to Argentina, economy minister, Jorge Remes Lenicov
will on Tuesday visit Washington to present his package of economic measures.
"He is coming for two days to present his plans and
start a discussion," said the Fund's deputy managing director, Eduardo
Crisis meeting over $750m bank fraud
Heads at Allied Irish Banks have, after a crisis meeting,
given no fresh clues of how the bank's US division suffered a suspected $750m
Bank representatives had, before the meeting, said the
session would help unravel "the complexity of what is involved and why the
systems did not work and whether some people didn't do their job".
But emerging from the session, chief executive Michael
Buckley merely restated his regret at the failure of security controls, and
pledged to discover the truth behind the loss. And bank chairman Lochlann Quinn,
pressed on who was to blame, said: "I want all the facts, not some of
Bank keeps UK rates on hold
The Bank of England has kept interest rates on hold following
its latest rate-setting meeting.
The move was expected by most observers, and many analysts
now believe the current cycle of interest rate cuts has come to an end.
Last year the Bank cut interest rates seven times to its
current level of 4% as it tried to prevent the UK economy from falling into
The Bank has had to try and balance the demands of different
parts of the economy with consumer demand still strong but industry struggling.
Nepal wins $2.5bn foreign aid pledge
International donors have pledged $2.5bn to Nepal to help
bail out the Himalayan kingdom's cash-strapped economy.
The decision came at the end of a four-day meeting of
multilateral aid agencies and donor countries in the Nepalese capital Kathmandu.
The Nepalese Finance Minister, Ram Sharan Mahat, said donor
countries understood Nepal's needs.
Eurozone interest rates unchanged
The European Central Bank (ECB) has left its key interest
rate unchanged at 3.25%.
The decision had been widely predicted by financial market
The outgoing ECB president, Wim Duisenberg, who earlier on
Thursday said he will stand down this year, predicted that the eurozone
economies is set for a gradual recovery this year.
Manufacturing gloom continues
Output in the UK's manufacturing sector has recorded its
largest annual decline for more than 10 years.
New figures from the Office for National Statistics showed a
0.5% fall in December, slightly better than November's drop of 0.6%.
Compared to December 2000, output was 6.4% lower — the
largest fall since August 1991.
The figures were worse than expected and may dash hopes than
the sector was beginning to recover.
The wider measure of industrial output also shrank by 0.3% in
December, implying a 4.6% drop since the same month the previous year.
Manufacturers have called for more cuts in interest rates to
help the beleaguered sector.
But on Thursday the Bank of England left the UK base rate
unchanged at 4%.
Japanese go for gold
Fears are growing again about the health of the Japanese
On 1 April the government begins to phase out its guarantee
to reimburse all deposits in the event of bank failures — a decision which is
adding to an already nervous mood.
Stocks and property have proved disastrous investments over
the last decade, and the continuing recession leaves little prospect of an
That is why private investors are seeking out other options
— such as gold bars.
Mexico is in recession
Mexico is officially in recession after its economy shrank
during the last six months of 2001, the country's finance ministry said.
The fall-out from the US recession meant that the Mexican
economy shrank 0.2% for the year as a whole.
The full year figure was pulled lower by sharp declines in
economic growth during the last two three-month periods of the year.
During the last three months of the year, Mexico's economy
shrank by 1.2%
Gold prices hit two-year high
Gold prices have risen sharply on the financial markets,
rising above $300 an ounce for the first time in two years earlier this week.
It may be a sign that investors have lost confidence in the
real value of shares as a result of the scandal over accounting practices at the
bankrupt energy group Enron.
There has also been a surge in demand in Japan, where
investing in the metal is seen as a potentially safer option than putting money
in the country's ailing banks.
German unemployment has risen above the critical four million
mark in January.
On a seasonally unadjusted basis, there were 4.29 million
people out of work, taking the jobless rate up to 10.4% from 9.6% in December.
Argentina halts currency trading
The Argentine Government has extended the closure of banks
and foreign exchange centres until 11 February, giving the market more time to
prepare for a full flotation of the peso.
Foreign exchange trading has been suspended since Sunday,
when the government announced plans to scrap all remaining exchange rate
controls as part of a wider package of reforms aimed at restoring economic
stability after months of crisis.
The government ordered the closure of retail banks at the
same time in order to prevent a run on bank deposits by savers.
Blow to Irish confidence
For a normally quiet market, the first week of February has
proved to be extraordinarily eventful for the Irish Stock Exchange.
The Iseq index typically takes its lead from other markets,
but this week two of its largest companies have dictated share movements not
just in Ireland but also elsewhere.
Elan Pharmaceuticals has fallen from its position as the
biggest Irish company by market capitalisation following news that investors
have filed lawsuits, alleging misleading accounting practices.
Allied Irish Bank — the next biggest company — fell from
grace on Wednesday morning as it told investors of a suspected $750m fraud.
Shell: Falling oil and gas prices have led to a profit
drop at Anglo-Dutch oil giant Royal Dutch/Shell.
Adjusted net profit for the last three months of the year was
almost halved at $1.9bn (£1.4bn), down from $3.6bn a year ago and compared with
analysts' expectations of $1.9bn-$2.3bn.
Philips: Philips Electronics, lost 2.6bn euro last year,
a sharp turn-around from its 9.6bn euro profits in 2000.
Cisco: The company said on Wednesday that profits before
one-off expenses for the three months to late January came in at $644m, down
from $1.3bn the year before, but nearly double what analysts had expected.
DaimlerChrysler: The poor performance has pushed it into
a net loss of 662m euros (£406m; $589m) for 2001, down from a 7.9bn euro profit
the year before.
Hyundai Motor: High Sonata sales helped profits
accelerate Hyundai Motor, South Korea's leading automaker, has reported record
results with a surge 75% in net profits for 2001.
Profit for the year hit 1.17 trillion won (£627m; $895.3m)
while sales over the same period rose 23.4% to 22.5 trillion won.
Software house goes for broke
Software company InterX has seen its shares slump by three
quarters after it told its investors that it only has enough money for another
By the close in London, InterX shares were down 73% or 49.5p
at 18p. The company — which makes information-sharing products for
corporations said its full year figures would be "substantially below
market expectations" as the market weakened.
Russia grows amid high inflation
Russia's economy continued to expand last year, at the same
time as economies around the world slipped into recession.
Gross domestic product (GDP) was up a sturdy 5% in 2001,
according to the preliminary results, published by the State Statistics
The growth was fuelled mainly by increased oil and gas export
prices, as well as by a surge in domestic demand and output.
The result was in line with the government expectations, but
the inflation rate exceeded state predictions.
Monthly consumer price inflation in January leapt to a
three-year high of 3.1%, well the forecast 2.7%.
This makes the state's 14% annual goal look at least
Wim Duisenberg, the Dutch president of the European Central
Bank, is to resign next year. The date chosen — 9 July — is Mr Duisenberg's
68th birthday. Though in an afternoon speech he said he would stay on longer if
it would help his, as yet, unchosen successor.