Oct 27 - Nov 02 , 2003









The US Senate last week granted President Bush's request for $87 billion for operations in Iraq and Afghanistan. The House of Representative has already approved the request. The Bush administration will now have to battle with the lawmakers over whether some of the aid for Iraq should be a loan. The 87-12 vote in the Senate came after the House approved its version of the package by a 303-125 vote. The House earlier accepted





an amendment by Congressmen Jim Ramstad, a Republican, and Dennis Moore, a Democrat, to shift $98 million from Iraq reconstruction to help troops on leave pay for their trips home.

For the first time since the Vietnam War, the military is giving service members with 12 months in the field in Iraq or Afghanistan a 15-day home leave. But after flying into the port of entry in this country, they must pay for the rest of theirs trip out of their own pockets. The Senate approved similar language in its debate.

The President and Vice-President Dick Cheney and Secretary of State Colin Powell, pressed lawmakers to make all reconstruction money grants rather than loans. They argued that loans would worsen Iraq's foreign debt situation and undermine efforts to get other nations to write-off their outstanding loans to Iraq. But the administration was confronted by lawmakers who said constituents were disturbed by the idea that the United States, while racking up record federal deficits, was giving billions in aid to a nation sitting on the second-largest oil reserves in the world.

By a 55-44 vote, mostly along party lines, the Senate rejected an amendment by Senate Democratic leader Tom Daschle that would have barred future US aid to Iraq unless President Bush certified that foreign countries' contributions equalled those by the United States. In the House, Democrats sought to convert half the $18.6 billion in the House bill for reconstruction but lost, 226-200.


The European Commission has decided not to impose sanctions against France, even though it will be in breach of the EU's strict financial rules for the third year in a row. The Commission has given France another year until 2005 to bring its budget deficit below the permitted level of 3% of Gross Domestic Product (GDP). Paris will have to make cuts in government spending and report every six months to explain how it is bringing its deficit under control. Some smaller countries had asked the Commission to levy big fines on France.

They are upset that France, and also Germany, appear to be ignoring EU rules with impunity while they the smaller nations were obliged to introduce painful cuts in public spending in order to meet them. But EU Monetary Affairs Commissioner Pedro Solbes has insisted that the "spirit of the pact" was being kept. The Commission has recommended Paris make bigger cuts than already planned for 2004, especially in the health sector, to reduce the deficit by another 0.4% of GDP.



Solbes said past violators of EU spending rules Portugal and Germany have managed to make the same level of cuts. If EU finance ministers accept the recommendation on 4 November as expected France would have two months to demonstrate compliance or the threat of fines could re-emerge. Germany is also expecting to go over-budget again next year but Berlin has adopted a less confrontational approach to avoid financial sanctions. Six leading economic forecasting institutes in Germany have predicted that its economy will grow moderately next year, after three years of stagnation.


The US budget deficit for the most recent financial year has hit a new record, according to official figures. The Treasury Department last week said the budget gap the amount by which spending exceeds revenues grew to $374.2bn (224bn) in the year to 30 September. The figure was double the previous year's deficit, and easily outstripped the previous record of $290bn, set in 1992. It was in line with independent economists' expectations, but fell short of the US government's own forecast of $455bn. The government blamed the imbalance on sluggish economic growth, and the cost of the war in Iraq. Officials warned that the deficit would continue to rise in the months ahead, breaking the $500bn barrier in the current financial year.


Malaysian Prime Minister Mahathir Mohamad called for fair rather than free trade, saying poorer countries have the right to protect their "little businesses" until they can compete with the giants. Taking sweeping broadsides at rich nations and multinational companies, he said: "Fair trade can be free, but free trade can be unfair. That's what we are asking for. Nothing much really. We are ready to be exploited but we must be fairly exploited." Mahathir made his remarks in a speech to corporate chief executives on the sidelines of the Asia-Pacific Economic Cooperation summit. It is his last major international appearance before he retires at the end of this month after 22 years at the helm. Mahathir, an avowed champion of the developing world, said the poorer countries could not agree to the agenda at the failed World Trade Organizations talks in Cancun, Mexico, last month because "it was not our agenda."


China and Australia have agreed to closer trade and economic ties, after China's President Hu Jintao became the first Asian leader to address the joint houses of Australia's Parliament. The two countries signed a framework document which could eventually lead to a free trade agreement.President Hu said the priority was to develop energy and resources projects.

"We want to forge a long-term and stable co-operation partnership," he said. President Hu also said Australia could play a "constructive role" in reuniting China with the island of Taiwan.Addressing the Australian parliament, Hu warned that "the greatest threat to peace in the Taiwan Straits is the splittist activities by Taiwan independence forces".


High Street sales grew by far more than expected last month, making an imminent interest rate increase more likely. The Office for National Statistics said retail sales expanded by 0.6% in September, easily outstripping the 0.4% increase pencilled by City forecasters. The figures suggest that consumers are still engaged in a debt-fuelled spending spree, and could prompt the Bank of England to raise borrowing costs in an effort to dampen down the High Street boom.



The Bank's rate-setting monetary policy committee (MPC), which has long been concerned over rising consumer debt, earlier this month voted by the narrowest possible margin to keep rates on hold at 3.5%. Four of the MPC's nine members voted in favour of raising interest rates to 3.75%.


Former US President Bill Clinton has brokered a deal to supply cut-price Aids drugs to developing countries. An agreement was reached with four generic drug companies in India and South Africa to provide certain treatments at less than a third of the cost of patented versions. Nine countries in the Caribbean, as well as Mozambique, Rwanda, South Africa and Tanzania will receive the low-cost medication.


The world's biggest software maker, Microsoft, has reported an increase in quarterly profits. Profits were $2.6bn (1.53bn; 2.2bn euros), or 24 cents a share, for the three months to 30 September compared to a figure of $2bn adjusted to reflect stock options granted for the same period last year.


The German government has cut its previously optimistic forecast of economic growth for this year from 0.75% to zero. And in a further reappraisal of its economic prospects it has revised down its envisaged 2% growth figure for 2004, saying the economy might grow by only 1.5-2%.

However, the outlook still matches widespread expectations that Germany will finally break out of three years of near-zero growth with a moderate recovery next year. Berlin is trying to boost recovery with a package of economic reforms, including tax cuts, pension changes and merging unemployment benefit and social welfare payments.


Anglo-Dutch oil giant Shell said profits rose to $2.6bn (1.53bn), up 16% on the same period last year, but investors had been expecting profits to be at least $3.1bn (1.8bn).


US media giant Time Warner has reported a 3.7% overall rise in profits, although its AOL internet unit has seen revenues drop. Time Warner said its net profit rose in the third quarter to $541m, or 12 cents a share, from $57m, or 1 cent a share, a year earlier.


Drugs giant GlaxoSmithKline has seen profits rise sharply in the third quarter of the year. The company, the third-largest drugmaker in the world, made 1.69bn ($2.84bn) in the three months to September, up 24% on the same period the year before.


Japanese shares have plunged by more than 5%, their sharpest one-day drop since 12 September 2001. At the October 23 close, the Nikkei share index had lost 554 points to 10,335.

But the mood among investors remained relatively calm. Instead of reflecting any particularly acute crisis, the fall was mainly seen as a reaction against recent sharp gains in the Nikkei, which hit a 16-month high at the beginning of this week.


The dollar has once again fallen, losing more than 1% against the euro, the Swiss franc and the Canadian dollar. The greenback's losses followed a dip in US stocks which was reportedly compounded by investment funds joining in on the selling amid a data vacuum.

"There is no data... that triggered this dollar sell-off. Lower stock markets started it and as the momentum built up, model funds were generally pushed back into short-dollar positions," Rebecca Patterson, at J.P. Morgan Chase in New York told Reuters news agency. The euro reached $1.1819 a rise of 1.25%.


Zimbabwe's tobacco production has halved this year compared with 2002, according to official statistics released in Harare. The Tobacco Industry Marketing Board said the country's output of its main export crop had fallen to its lowest level since Zimbabwe gained its independence in 1980. Less than 80 million kilograms of the country's once lucrative crop was auctioned off during this year's sales season which started in April.




Amazon reported a net profit of $16m (9.5m; 13.7 euros), or 4 cents per share, for the three months to 30 September. That compares with a loss of $35m, or 9 cents per share, in the same period a year earlier.


The world's fifth largest carmaker, DaimlerChrysler, has announced a substantial drop in quarterly operating profit to 1.25bn euros (871m, $1.46bn).


Mortgage lending hit a new record in September, the Council of Mortgage Lenders (CML) has said. Total mortgage lending was 25.7bn in September, putting it on course to touch 270bn in 2003, substantially higher than the 219bn advanced in loans in 2002.


China's annual growth rate has topped 9% fuelling concern its economy could be overheating.

"It's growing almost too fast," Hong Kong businessman and broker Howard Gorges told BBC World Business Report. The figures from the State Statistical Bureau were at the high end of analysts' expectations. And are in stark contrast to growth rates in the rest of the industrialised world, which are between zero and 3%.

The figures are likely to lead to renewed pressure from the United States on Beijing to allow its currency to rise, to reflect its economic strength and make US manufacturers more competitive.China's Gross Domestic Product (GDP) went up by 9.1% in the 12 months to the end of September, the figures showed.


An unexpected rise in consumer confidence has boosted hopes of an economic recovery in the United States. The closely watched University of Michigan consumer confidence survey suggests that in October sentiment rose to 89.4 above economists' forecasts of 88.0 and higher than the reading of 87.7 in September.

Maintaining consumer spending, which makes up two-thirds of the US economy, is the key to continuing economic growth. The increased confidence is mainly due to the strengthening job market, with government figures showing that the economy added 57,000 jobs in September.

This confirms that consumers are starting to feel an improvement," said Kurt Karl, head of economic research at Swiss Re.