France is trying to redeem its reputation in Brussels,
where it has been one of the main offenders against the so-called
Stability Pact, which aims to shore up confidence in the euro by imposing
fiscal discipline. If France's budget deficit exceeds 3% of GDP for three
years in a row, it could be fined under the rules laid down under the
France first breached the 3% limit last year, and has
since come in for mounting criticism of its budgeting — especially since
the present government opted to focus on cutting tax to stimulate the
The new deficit forecasts assume that economic growth
will accelerate from 0.5% this year to 1.7% in 2004 — an assumption that
many economists say is optimistic.
For a while, it seemed that France was likely to lead a
rebellion against the Pact, which many eurozone member states say is
inappropriate to the current slow economy.
Despite France's pledge to get its deficit under
control, Brussels said that its budget plans did not go far enough.
"On the basis of the Finance Law presented today,
French budget plans would not be in line with what was recommended by the
Ecofin Council (of EU finance ministers)," Mr Solbes said in a
statement. "If no measures are announced before the expiry of the
deadline of 3 October 2003, set by the Council in June, the Commission
will, in line with the Treaty, activate the next steps of the excessive
deficit procedure during the month of October."
JAPAN RESHUFFLE TARGETS ECONOMY
Japanese Prime Minister Junichiro Koizumi has appointed
a new, reformist finance minister as part of a sweeping cabinet reshuffle.
Sadakazu Tanigaki, previously minister for public
security, takes over from the 81-year-old Masajuro Shiokawa, who is
stepping down because of illness. Combined with the reappointment of Heizo
Takenaka, the minister for economic policy and financial services and one
of Japan's most prominent liberals, the move is seen as an attempt to
accelerate economic reform.
Mr Koizumi's government needs to create jobs, bolster
battered banks and regain the trust of the international investment
Mr Koizumi was re-elected as leader of the ruling LDP
at the weekend, a victory that triggered the reshuffle. He is now likely
to call a general election, as early as November. But financial markets,
which have long been sceptical of the political will to tackle tricky
reforms, were unimpressed by the reshuffle, which left almost all other
cabinet members unchanged.
"Overall it's more of the same, which is not
particularly good because it implies inaction," said Richard Jerram
of ING Securities.
The Nikkei share index was down 3.9% after the
reshuffle announcement, but the fall reflected events over the weekend and
concerns over Japan's exchange rate, analysts said. Under Japan's current
cabinet structure, Mr Takenaka has more economic influence than the
finance minister, who is largely restricted to policing the currency, the
yen. Mr Takenaka was brought in in 2001 to co-ordinate economic reform,
and his breezy, vigorous style was initially seen as a welcome change from
the traditionally cautious pace of Japanese politics.
There had been persistent rumours that Mr Takenaka was
to be relieved of one of his two ministerial portfolios in the reshuffle,
owing to dissatisfaction at his abrupt methods.
MSN SHUTS DOWN ITS CHATROOMS
Microsoft's internet service MSN is to cut back
drastically its chatroom services because of concerns about child safety,
MSN is closing all its chatrooms in Europe, the Middle
East, Latin America and most of Asia from 14 October, and changing the way
others are operated globally.
"As a responsible leader we feel it necessary to
make these changes because online chat services are increasingly being
misused," it said. Children's charities welcomed the move as
"momentous" and said they saw it as a big step towards
protecting young web users, but some have criticised the decision.
RISING DEBT 'NOT IRRESPONSIBLE'
The main reason for soaring household debt in the UK is
a rise in home ownership, the Bank of England has said. It said more
people were buying houses, so rising debt means "an increase in the
number of households with debt, rather than an increase in the amount of
debt per household." The bank said low inflation was also slowing the
rate at which debts reduce in real terms. Rising debt does not therefore
mean irresponsible spending by consumers, says the BBC's Evan Davies. But
the bank could not account for all the increase in debts since 2000, so
critics will still worry, he added. The average Briton is said to have
debts of nearly £3,500.
PRODI UNDER PRESSURE OVER EU 'FRAUD'
The President of the European Commission Romano Prodi
is to face tough questioning over allegations of fraud at the European
Union's statistical agency, Eurostat.
Members of the European parliament (MEPs) are openly
calling for the resignation of the commissioner in overall charge of
Eurostat, Pedro Solbes, but Mr Prodi is expected to mount a vigorous
defence of his officials when he appears before a committee of MEPs.
Initial reports into the scandal released contain
serious criticisms of management at Eurostat but show no evidence of
wrongdoing since 1999 — a year before Mr Prodi, took office.
NO U-TURN ON REFORM, VOWS SCHROEDER
German leader Gerhard Schroeder has accused voters of
being "afraid of change", after his party suffered an election
drubbing in Bavaria.
Mr Schroeder vowed to press ahead with a controversial
reform programme, which is thought to have been at least partly to blame
for the poll flop. Support for his Social Democrats plunged nearly eight
points to 19.6% in Bavaria's elections — the worst showing there since
World War II. The beneficiaries were the right-wing Christian Social
Union, led by Edmund Stoiber, who gained nine points to take 60.7% of the
Mr Schroeder, speaking in Berlin, insisted that his
reforms — aimed at reinvigorating Germany's lifeless economy — were
putting the country back on the path to health.
US GRANTS TURKEY $8.5BN LOAN
The United States has agreed to lend Turkey $8.5bn as
compensation for the damage its economy suffered during the Iraq war.
US Treasury Secretary John Snow negotiated the deal
with Turkish officials on the sidelines of meetings of the International
Monetary Fund (IMF) in Dubai.
The loan was first proposed during the Iraq war even
though Turkey had turned down a US request to move tens of thousands of
American troops through the country into northern Iraq.
There are conditions to the loan. Turkey must implement
what strong economic policies and cooperate with the US over Iraq.
Some say that's a reference to Turkey sending troops to
Iraq, something the government is now considering. But both the US and
Turkey deny any link between the loan and the question of Turkish troop
STRONG QUAKE HITS NORTH JAPAN
A strong earthquake has struck the northern Japanese
island of Hokkaido injuring over 230 people. The quake, which hit at about
0450 local time on Sept 26 (1950GMT Sept 25), sparked a fire at an oil
depot, shook buildings and derailed a train. The main tremor was of force
eight, making it the most powerful quake in the world this year, and was
followed by two slightly smaller aftershocks.
MANUFACTURER FACES $1BN FRAUD PENALTY
One of the world's largest contract manufacturers faces
a penalty of nearly $1bn after a California jury found it guilty of fraud,
breach of contract and economic arm-twisting against a former customer.
Flextronics, whose clients include Microsoft, Dell and
Hewlett Packard, said it was "appalled and extremely
disappointed" by the verdict and would appeal.
The loss-making Singapore firm's recovery prospects
could face a setback unless it fails to knock a large amount off the sum
The case stems from a contract between US medical
equipment maker Beckman Coulter and Dovatron International, a company that
Flextronics bought in 2000.
GERMANY FACING 'HESITANT UPTURN'
Business optimism in Germany is continuing to rise even
though current trading conditions are getting worse, the country's top
economic survey has found.
The latest monthly survey by the Ifo institute saw its
closely-watched business climate index for west German firms rise to 91.9
from 90.8 in August.
It was the fifth month in a row that the index had
risen, and its highest level since spring 2001. But the Ifo institute said
that a fall in companies' assessment of current business levels meant that
it remained cautious about recovery prospects.
OIL PRICE RISE HITS SHARES
Shares in Asia dived on Sept 25 as investors reacted to
a surge in the price of oil after Opec's surprise decision to cut output.
The oil producers' cartel said at its meeting in Vienna on Sept 24 it
would cut output by 900,000 barrels a day from November 1, 2003 in order
to pre-empt a possible fall in prices. Most major Asian stock markets -
with the exception of Hong Kong — plunged more than 2%, but regained
some ground by the end of trading. In London, the FTSE 100 index opened
lower. Asian losses followed steep declines on US markets, with New York's
Nasdaq hi-tech index closing down 3%, the Dow Jones industrial average off
1.5% and the broader S&P index down nearly 2%.
JAPAN LEADER 'TO CALL EARLY POLL'
Japan's prime minister is expected to call a snap
general election for November 9, local media reported.
Junichiro Koizumi will dissolve parliament on October
10, and campaigning would begin on October 28, Kyodo news agency and
leading newspapers reported.
Mr Koizumi had to call an election before next June,
but he had been expected to go to the polls this year to prevent a clash
with an upper house vote due in July.
GOVERNMENT RAISES FUEL PRICES
Fuel duties will increase by 1.28p per litre from
October 1, the Treasury of UK has announced. The Treasury said the
increase, which will add 5p a gallon to petrol and diesel prices, was in
line with inflation.
US AND GERMANY DECLARE RIFT 'OVER'
US President George Bush says a long-standing rift with
German Chancellor Gerhard Schroeder is "over" after the pair's
first formal meeting in 16 months.
Both leaders said they had set aside past differences
on Iraq and agreed to work together to stabilise the country. "The
first thing I told him, I said, 'Look, we had differences. And they're
over.' We're going to work together," Mr Bush told reporters after
the leaders spoke privately at the UN General Assembly. Mr Schroeder says
he believes agreement on a US resolution on Iraq can be struck "in
the next few weeks".
STEELMAKER CUTS ITS LOSSES
Troubled Anglo-Dutch steelmaker Corus has announced its
losses have narrowed in the first six months of the year.
The company said a recovery in steel prices and volumes
had helped it trim losses to £36m, against £252m a year earlier. New
chief executive Philippe Varin also promised major investment in Corus's
UK business following a year of turmoil. He said £90m would be put into
the company's engineering steels business, which has its main base at
Rotherham, South Yorkshire. The unit makes specialised products for
sectors including the aerospace industry.
ARGENTINA OUTLINES REPAYMENT PLAN
Argentina's government has started talks in Dubai on
rescheduling at least $90bn (£55bn) of debt owed to banks and other
private sector lenders.
The talks with private creditors have been made
possible by a groundbreaking deal over the weekend with the International
Monetary Fund (IMF), which is holding its annual meeting in Dubai. The IMF
offered Argentina a fresh loan worth $12.5bn over the next three years.
Argentina staged the biggest ever debt default in late
2001, when it pulled out of repayments on loans totalling $140bn.
DANISH CAPITAL LOSES POWER
The Danish capital, Copenhagen, and parts of Sweden
have been hit by massive power cuts.
Around four million homes and businesses lost supplies
last week. Engineers restored most power, but the exact cause of the cuts
remained unclear. The problem stretched as far north as the Swedish
capital, Stockholm, where the underground railway reportedly shut down for
half an hour.