Sept  29 - Oct 05 , 2003









France has pledged to get its public finances back in order by 2005, hoping to avoid an increasingly bitter row with the European Commission. In its 2004 budget bill, the French government pledged to cut its public deficit next year to 3.6% of gross domestic product, and to get it under the EU's 3% ceiling by the following year. But European Monetary Affairs Commissioner Pedro Solbes said the budget measures did not go far enough in addressing the problem.




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 Stability Pact.

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 sluggish economy.

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."


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 community.

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.


Microsoft's internet service MSN is to cut back drastically its chatroom services because of concerns about child safety, it said.

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.


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.


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.




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 votes.

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.


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 deployment.


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.


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 on appeal.

The case stems from a contract between US medical equipment maker Beckman Coulter and Dovatron International, a company that Flextronics bought in 2000.


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.


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'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.


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 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".


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'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.




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.