INTERNATIONAL

 

Sept  22 - 28 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF


NEW EU GROWTH PLAN UNVEILED

France and Germany have put forward a plan to kick-start Europe's sluggish economy through a programme of public spending on major infrastructure projects. German Chancellor Gerhard Schroeder and French President Jacques Chirac unveiled a list of ten investment priorities, including plans to beef up France and Germany's digital broadcasting networks, and to link up the two countries' high-speed railway lines. Speaking at the end of the latest in a regular schedule of meetings between the two leaders, the French president said putting money into major infrastructure projects would help stimulate economic growth.

 

 

 

"Europe should not wait for growth, it should go out and look for it," Mr Chirac said. Mr Schroeder and Mr Chirac did not say how much their ten-point investment plan would cost, but estimates of 3 billion euros ($3.4bn) have been reported. The Franco-German investment plan would complement a separate proposal from Italy, which currently holds the European Union's rotating presidency, to boost EU infrastructure spending by 50 billion euros between 2003 and 2010.

Under the Italian plan, the bulk of the money would come in the form of extra loans from the European Investment Bank, the EU's long-term financing arm. But Schroeder and Chirac's proposal to revive the economy through increased public spending is likely to draw fire from other EU countries irked by France and Germany's failure to keep within eurozone budgetary rules.Both countries look set to breach the so-called Growth and Stability Pact which limits annual government borrowing to 3% of gross domestic product for the second year running in 2003.

IMF UPBEAT ON WORLD GROWTH

US growth is pulling the world economy out of its slump and raising the prospect of a return to normal rates of growth in the global economy according to Kenneth Rogoff, the International Monetary Fund's top economist.Since it published its last official assessment of the global economy in April, the IMF has not had to downgrade its predictions Rogoff said.

The IMF still sees global growth of 3.2 per cent in 2003 and 4.1 per cent in 2004 he said. "The difference is that we now see at least as much upside potential as downside risk over the next 9-12 months" Rogoff said.The driver of the recovery, he made clear is the US economy, forecast to see a 3.9 per cent growth surge next year with "the short- term risks until late 2004 tilted on the upside.

The US upsurge is buttressed by "a remarkable uptick" in Japan's growth numbers which has led the IMF to revise its forecasts upwards "even though it would be premature, to say the least, to declare that Japan is out of the woods," Rogoff said.The black spot, in the IMF's view, is Europe where "the most concrete positive news seems to be the good news from elsewhere," according to Rogoff. For the Middle East and North Africa region the IMF is expecting growth of 5.2 per cent this year and 4.5 per cent in 2004. The IMF's optimism for this region is, Rogoff said, heavily pegged on the higher oil prices and higher oil production which represent significant share of income in the Middle East.

PENTAGON 'TO PROBE BOEING DEAL'

The US Defence Department is to launch an investigation into whether Boeing got improper support from its officials to beat European rival Airbus in a multi-billion dollar contract battle, a US senator has said. The Pentagon's decision was announced by Republican senator John McCain, a member of the Senate Armed Services Committee who has been pushing for an inquiry into the deal. The Pentagon's inspector general Joseph Schmitz reportedly told a Congressional Committee last week that "sufficient credible information exists to warrant the initiation of an investigation".

The allegations which Boeing reject stem from a contract, worth at least $22bn (13.6bn), to provide the US military with refuelling tankers. The US Air Force decided in December 2001 to lease 100 Boeing 767 planes and convert them to refuelling tankers before eventually buying them outright. Boeing has rejected claims that it was fed unfair information about Airbus' pricing by Pentagon officials.

UK GOVERNMENT FINANCES WORSEN

Increases in government spending aimed at upgrading Britain's creaking public services have pushed the country's public finances deeper into the red. Public sector borrowing the difference between revenues and spending widened to 4.8bn ($7.6bn) in August, up from 1.8bn one year earlier, according to the Office for National Statistics.

Just five months into the financial year, the public sector deficit has risen to 16.8bn, nearly two thirds of the 27bn forecast by Chancellor Gordon Brown for the year as a whole. The widening budget gap shows that the government is spending money more quickly than it can collect it in the form of tax and other revenues.

TAX BREAK FOR JAPAN'S BANKS

Japan's banks saw their shares soar last week as investors responded to recent signs of a pickup in the economy. Reports of a massive tax settlement by the Tokyo city government which could boost profits at the banks, long drowning in red ink, also acted as a spur to the markets.

Shares in Mizuho, the biggest bank in the world by assets, were up more than 15% to an all-time high, and its fellow Big Four banks gained between 8% and 13%. Stronger than expected growth and a slight fall in unemployment levels reflected in unusually optimistic Bank of Japan monthly report have stirred hopes of that Japan's moribund economy may be poised for recovery, revitalising banking stocks.

CHINA JOINS EU'S SATELLITE NETWORK

China has struck a deal to invest in Galileo, the European Union's space satellite navigation network. China is already one of the biggest players in the global satellite launch industry and is making final preparations for its first manned space flight which could take place as soon as next month.

"China will help Galileo to become the major world infrastructure for the growing market for location services," said EU transport commissioner Loyola de Palacio. China will invest 230m euros ($259m; 160m) in the Galileo satellite tracking system. The EU is developing Galileo to provide an alternative to the United States' Global Positioning System (GPS), which is used by the Pentagon.

AMERICA'S RICHEST GET RICHER

America's richest tycoons increased their personal wealth over the past 12 months, partly reversing a two-year decline, according to Forbes magazine's annual snapshot of America's super-wealthy. The total net worth of the 400 wealthiest people in the US rose by 10% over the year to $955bn (573bn).

Their wallets were fattened by renewed gains in Internet and technology stocks, after the huge losses of the 2000 dotcom crash, and subsequent doldrums for IT stocks, according to Forbes.Microsoft chief Bill Gates remains the US' richest tycoon, worth $46bn, or $3bn more than a year ago.

 

 

US SHARES HIT 15-MONTH HIGH

Fresh hopes of an economic recovery have powered US shares to their highest closing level since June last year. The benchmark Dow Jones share index settled 1.2% higher at 9,659 on September 18, its first close above the symbolic 9,600 mark since 18 June 2002. The Nasdaq index of technology stocks reached an even more important milestone, closing 1.4% higher at 1,909.5, the first time it has settled above 1,900 in 18 months.

COLA SALES SET TO LOSE SPARKLE

Sales of soft drinks like Coca Cola and Pepsi are set to decline as consumers turn to alternatives like bottled water and fruit juices. Britons drink 130 cans of soft drinks or 43 litres each per year. But the sales of soft drinks like Coca Cola and Pepsi are set to fall. The UK spends 5bn per year on the fizzy drinks, and is the world's tenth biggest cola market.

BUSINESS DRIVES CHINA RETAIL BOOM

Retail sales in China leapt almost 10% in the 12 months to August, powered by demand for cars, phones and building materials. The 9.8% annual growth suggest a strong comeback from the damage done to spending in the first few months of the year, when the Sars virus swept across East Asia. In May the growth was just 4.3%, good by some countries' standards but poor in an economy growing at close to 8% a year.

CHINA NETS MILLION JAPAN PROTESTS

More than one million people in China have signed an online petition demanding that Japan compensate Chinese victims poisoned by abandoned chemical weapons from World War II. The online petition was launched by seven Chinese websites and is believed to be the country's largest ever.

EU BLOCKS ALSTOM RESCUE PLAN

The European Commission has prevented the French government from subsidising the beleaguered engineering group Alstom. The European Union's executive arm said it was blocking "in principle" the rescue plan worth 2.8bn euro ($3.1bn) and launching an investigation into the bail-out.

Alstom, battered by cost overruns on key projects, accounting irregularities at its US operation, and the bankruptcy of a major client, has lost 90% of its market value and shed thousands of jobs over the past two years.

US BOSSES STEP UP CHINA YUAN ROW

A powerful industrial lobbying group is calling on the US government to take China to the World Trade Organisation (WTO) over its fixed exchange rate policy. The National Association of Manufacturers (NAM) has said it plans to file a trade complaint with the US Trade Representative, which would force trade officials to consider an official response. The Bush administration would have to decide whether to take the filing to the next stage by making a complaint of unfair trade practices to the WTO.

PROFITS SURGE AT WORLD BANK LENDER

Profits at the World Bank's private sector lending division have tripled to $528m in the year to June 2003, thanks to stronger developing world economies.

MERRILL BANKERS CHARGED OVER ENRON

Three former high-ranking Merrill Lynch bankers have been charged with fraud in connection with the fallen energy giant Enron. Robert Furst, Daniel Bayly and James Brown are accused of involvement in a transaction that helped Enron meet a 1999 profit target through a "sale" of three barges carrying generators moored off Nigeria.

KLM AIR FRANCE DEAL 'NEAR'

Air France and loss-making Dutch airline KLM have moved closer to forging an alliance. The two airlines are in the advanced stages of negotiating KLM's entry into the SkyTeam group, a statement said. Air France which already has ties with US carrier Delta Air Lines and Italy's Alitalia in the SkyTeam marketing alliance has been trying for months to recruit KLM.

NYSE CHIEF RESIGNS

New York Stock Exchange (NYSE) chairman Richard Grasso has resigned amid public anger over his $140m pay package.

UK UNEMPLOYMENT AT 28-YEAR LOW

The number of people out of work and claiming benefits in the UK is at a 28-year low. The claimant count dropped by 6,900 to 930,800 much better than the 2,000 decline forecast by economists and the lowest level since September 1975, the Office for National Statistics (ONS) said.

 

 

BOE HINTS AT HIGHER RATES

The Bank of England's interest rate setters have hinted that a rise in the cost of borrowing is in the pipeline. All nine members of the central bank's monetary policy committee (MPC) this month voted to keep interest rates steady at their 48-year low of 3.5%.

US INFLATION SUBDUED

US inflation grew at a slower than expected pace last month, reinforcing expectations that the US Federal Reserve will leave interest rates at their current 48-year low of 1% for some time to come. The broadest measure of consumer prices rose 0.3% in August to stand 2.2% higher than one year ago.

US LOOKS FOR INDUSTRIAL BOOST

The US Government has outlined plans to safeguard manufacturing jobs by making American heavy industry more competitive in global markets. In a speech to the Detroit Economic Club, Commerce Secretary Don Evans said he would set up a team to probe hurdles to fair trade, notably what some see as unfair Chinese currency practices. With a presidential election now just over a year away, there has been mounting concern over the 2.5 million manufacturing jobs lost since President George W. Bush came to power in 2000.

Many US industry lobbyists contend that cheaper developing economies, especially in Asia, have an advantage because of the relatively strong dollar. Despite a generally resurgent US economy, industrial output grew by just 0.1% in August, held back by a decline in the manufacturing sector.