Oct  06 - 12 , 2003









France has blamed its inability to reduce its budget deficit next year on the cost of the 35-hour working week, brought in under the previous socialist government. Economics minister Alain Lambert said France was trying to reduce its deficit to the 3% of GDP limit laid down in the European stability pact signed by eurozone countries but it would not do so at the risk of creating a recession. France was to have formulated plans to present to the European Union on how it would reduce its budget deficit. If it does not the EU has made clear it will start a process of sanctions, which could lead to Paris being heavily fined. Finance Minister Francis Mer said this week France did not intend to alter its 2004 budget before October 3 deadline.




The BBC's Caroline Wyatt in Paris says France began the argument with the EU over its budget deficit in somewhat aggressive mode, but now seemed to be adopting a more placatory tone. Mr Lambert said France would do its best to meet the European Commission's requirements as long as those measures did not plunge France into a recession. But, he added, the government's hands were tied by its commitment to implement the 35-hour week which entails extra costs "If we had not been committed to this expense, he said, we would be well under 3% of public deficit," he said. Mr Lambert ruled out any chance of achieving this in 2004. "The Commission cannot believe that it is possible," he said. Promises The French economy has been growing far more slowly than anticipated this year, at 0.5% or less, while unemployment is high and rising, at nearly 10%.


The world economy is still trying to shake off the hangover of the late 1990s boom years and there is little prospect of a sustained recovery in the near future. That is the stark message of United Nations' annual report on trade and development. In a gloomy assessment of the world's economic prospects, the report says there are still too many workers chasing too few jobs and too many goods chasing too few buyers. And the world cannot necessarily look to the United States, the traditional engine of growth, to haul it out of the mire. "This is an anxious time for the global economy," the United Nations Trade and Development (UNCTAD) report says.

"The long-anticipated rebound in the US continues to be delayed and there are concerns that imbalances and excesses ... could result in a long period of erratic and sluggish growth." Despite a succession of interest rate cuts by the US Federal Reserve, investment has still not recovered as expected and the labour market is in "its worst shape for some time". The upturn in the US is already beginning to look like the "double dip, jobless recovery" of the 1990s, the report says.

At the same time, neither Europe with its weak consumption and tight spending controls or Japan, where the economy continues to stagnate, were well placed to step into the breach and provide the necessary leadership. The consequences for "even the most resilient developing countries" are likely to be grim, the report warns. And there is a growing consensus that the Millennium Growth Targets the agenda for halving extreme poverty by 2015 are already out of reach.


The Japanese currency, the yen, is falling against the dollar in the wake of action by the authorities to arrest its recent gains. Japan is keen to cap the yen's appreciation, which could damage prospects for the exporters on which the country's fragile recovery depends. Newspaper reports suggest that the Bank of Japan is preparing to raise the legal limit on its borrowing so it can keep buying dollars. But the yen's decline is proving hard to sustain, as investors continue to bet on US determination to keep the dollar weak.




The European Commission has thrown its weight behind a controversial plan to boost economic growth in the European Union (EU) by pouring money into transport. The plan is the latest in a series of unilateral and multilateral initiatives aimed at Europe's stagnant economy. It calls for a sustained increase in spending on transportation infrastructure.

Commission President Romano Prodi said that an increase in public investment of 1% of gross domestic product could boost economic growth by up to a percentage point per year. And spending 220bn euros (154bn; $256bn) to finish 29 designated projects over the next two decades could lead to the creation of 400,000 extra jobs a year, he said.


The market for mergers and acquisitions in Japan grew by almost 50% in the first nine months of 2003, a new report says. M&A activity was up to $56bn including the massive $16.5bn taxpayer-funded bailout of insolvent bank Resona Holdings, Thomson Financial said. But even without that, the total amount of M&A in Japan grew, after three straight years of decline.

The biggest driver for the renewed growth, Thomson said, was interest from overseas, with cross-border deals rising more than 60% to $11bn. Within that figure, deals with US companies almost doubled, with highlights including the purchase by US investment group Ripplewood Holdings of Japan Telecom's fixed-line business from Vodafone for $2.2bn in August. The figure for January-September already outstripped that for the whole of 2002, Thomson said.


European interest rates are to stay at 2% for the fourth successive month, and are expected to remain unchanged for the rest of this year. October 3 rate-setting meeting was the last to be presided over by outgoing European Central Bank (ECB) President Wim Duisenberg, who has seen the bank through its first five years. The ECB faced its biggest challenge to date, the launch of the euro, during Mr Duisenberg's term in office.

When reporters asked what it felt like to hand over monetary leadership of the world's second largest economy, Mr Duisenberg replied: "Relief." His successor, France's Jean-Claude Trichet, takes office on November 1, 2003, but is not expected to back any change in interest rates until he has settled in.


Japan pledged a billion dollars in grant aid for poverty-stricken nations in Africa last week at the start of a major conference on development issues. Japanese Premier Junichiro Koizumi told the conference that the money would go towards meeting basic human needs and promote economic growth.




South African writer John Maxwell Coetzee has been awarded the 2003 Nobel Prize for Literature.

The Nobel Academy's head, Horace Engdahl, said Coetzee "in innumerable guises portrays the surprise involvement of the outsider". The 18 lifetime members of the 217-year-old Swedish Academy made the annual selection in deep secrecy at one of their weekly meetings. The prize includes a cheque for more than 10 million kronor ($1.3m), but it can also bestow increased sales, celebrity and admiration.


Russian oil firms Yukos and Sibneft have completed their $45bn merger, reports say, forming what is likely to be the biggest listed company in Russia. According to Russian news agency Interfax, Yukos President Mikhail Khodorkovsky said on October 3 that the deal was signed off, creating a group to rival the current world number four oil firm, France's Total. Shares in both firms had soared on October 2 as investors betted that the merger was ready to be completed, further extending the Russian stock market's recent breakneck gains.


Charities and underground money networks are in the spotlight as experts meet to talk about ways of strengthening the fight against money laundering and terrorist finance. Also high on the agenda at the meeting in Stockholm of the 31-nation Financial Action Task Force (FATF) is the need for countries to be quicker about freezing funds identified as being linked with crime or terrorism. The FATF, an international task force set up in 1990 to tighten the rules worldwide on money laundering, expanded its responsibilities into terror finance with a new set of regulations issued shortly after 9/11.


The price of fuel in Nigeria has gone up by 12% without the government making any kind of intelligible public announcement to explain just what is going on.Earlier this week, the petroleum pricing body said that in principle they supported deregulating the price of petroleum products, but it did not explain this would actually take effect the following day.


Russia's stock market is celebrating a record closing high just five years after a rouble crisis brought the country's economy to its knees. The country's main RTS index has gained more than 1,300% in the past five years and this week topped the previous high of 571.66 points recorded in 1997. The landmark was hailed by analysts in Moscow as a psychological break with the 'old Russia'.But some economists also warned about an over-reliance on energy stocks and Western investment.


Zimbabwe has introduced its first ever 1,000-dollar bill worth little more than one US dollar at the official exchange rate to try and ease the country's chronic cash shortage.Long queues at banks have eased slightly since the issuing last week of short-term "bearer cheques" valued at up to Z$20,000, and of new-design Z$500 notes on Friday. But people are still spending hours trying to extract a few thousand dollars from their bank, in the face of hyperinflation which currently means prices are rising at more than 400% a year. The new note will form part of Z$2.5bn the government says it will inject into the economy every day from now until the end of the year.




Dutch retailer Ahold has revealed losses of 1.208bn euros for 2002, following an accounting scandal at a US subsidiary. The results have been delayed for months as the company struggled with the aftermath of the admission that the fiddling of figures at the US Foodservice unit meant profits had been overstated by $880m.


US stocks have soared on Wall Street after figures showed the country's manufacturing sector was not as weak as feared. The Dow Jones closed up 194.14 points, or 2.1% at 9,469.2, wiping out Sept 30 fall which had been triggered by worse-than-expected consumer confidence figures.But news that the US manufacturing sector had grown for the third month in a row during September provided an excuse for investors to head back into the market. The strong performance on Wall Street lifted share prices in Europe, with London's FTSE 100 index closing up 1.9%, Germany's Dax rising 2.2% and France's Cac 40 ending 1.8% higher.


Talks aimed at liberalising air services between the US and Europe have got underway in Washington. The negotiations over a so-called 'open skies' policy could lead to US and EU airlines having unlimited access to airports on either side of the Atlantic.


For the second time in as many weeks, France is in trouble with Europe's competition authorities for giving state aid to struggling French companies. The European Commission has said it will take the French government to the European Court of Justice to recover a 450m euro ($525.5m; 317m) loan granted to the troubled computer firm, Bull. The temporary rescue package should have been repaid in June this year.


The UK manufacturing sector has expanded for the third month running, reinforcing hopes that Britain's beleaguered factories are poised for recovery. The Chartered Institute of Purchasing and Supply (CIPS) last week said its manufacturing index a closely-watched barometer of activity in the sector climbed to 52.9 in September, up from 52.2 the previous month. A reading above 50 on the CIPS index denotes expansion, while a score below 50 indicates contraction.