Nov 17 -  23 , 2003









Germany and France, the eurozone's two biggest economies, returned to growth in the second quarter of the year. New figures show that Germany's economy expanded 0.2% in the three months to September, after slipping the same amount in the previous quarter. France managed 0.2-0.3% growth in the same period, meaning it escaped the traditional definition of recession as two straight quarters of contraction. Germany, in contrast, had been shrinking throughout the year to date. In another sign of European recovery, the recent data also brought news that the Netherlands grew 0.1% in the third quarter, bringing the country out of a nine-month recession.




Germany's nascent recovery was the product of a growing trade surplus on the back of a resurgent US economy, the German Federal Statistics Office said, and came despite flagging domestic demand. The end of the recession there comes as little surprise, following a string of reports indicating expectations of recovery. Late last month, the well-respected Ifo index showed German business confidence rising well ahead of expectations and marking its sixth monthly improvement in succession. Still, recent performance has injected a note of caution. The problems in Germany and France have hampered the 12-nation eurozone as a whole, since together with Italy the two contribute 70% of the zone's output. The federal government in Berlin is hoping its shake-up of welfare and taxation will help cement the return to growth.Chancellor Gerhard Schroeder has staked his career on winning a parliamentary vote in October on the controversial measures, which included cuts in unemployment benefit.


Japan's much-battered economy has grown for the seventh quarter in a row thanks to continued demand for Japanese goods in China and the US. For the three months to September, GDP was up 0.6% from the previous quarter, making an annual rate of 2.2%. Economists said that domestic spending was also climbing, albeit at a slower rate than the impact of overseas trade. The data will be good news for Prime Minister Junichiro Koizumi, re-elected last week with a shrunken majority.

"It's stronger than we thought it would be," Mr Koizumi told reporters. His party's disappointing performance in recent poll has widely been seen as a response to dissatisfaction with the slow pace of economic reform and of Japan's recovery from four recessions in little more than a decade. The spurt, the government's data showed, was largely a response to continued expansion in the US and China, both of whom are major buyers of Japanese goods.

Exports contributed a third of the growth, and economists said they believed the trend was set to stay for the next few months at least. "With the US economy seen growing strongly, Japan's exports are likely to grow at a stable pace," said Ryota Sakagami, economist at Nomura Research Institute in Tokyo. Domestic demand was less impressive, but business investment which recent surveys have indicated is picking up was doing better than some had feared, with spending on electronics, communications and automobiles showing healthy gains.


Muslims must acquire skills and technology so they can create modern weapons and "strike fear into the hearts of our enemies", Malaysian Prime Minister Mahathir Mohamad said. Mr Mahathir told an international conference of young Muslim leaders that they must catch up with Western development to "prevent Islam from being humiliated, looked down upon and regarded as a religion of terrorists."

Frustrations in the Muslim world led to anger and rash actions, such as suicide bombing, but this did not benefit Islam and would not lead to victory, Mr Mahathir said. "We need modern weapons. We need tanks, battleships, fighter planes, knowledge of rockets. These are the weapons that can strike fear into the hearts of our enemies and defend us." He said Muslim nations depended on others, including their enemies, for such weapons and received only inferior versions, making no effort to invent, design and test such weapons themselves.


Japan's three-party ruling coalition led by Prime Minister Junichiro Koizumi's Liberal Democratic Party won 275 seats in recent election for the 480-seat Lower House of parliament, Kyodo news agency said. It said the LDP won 237 seats and New Komeito, its main partner in the coalition, won 34, while the main opposition Democratic Party took 177 seats.

The head of Japan's main opposition Democratic Party, Naoto Kan, said the ruling coalition led by Prime Minister Junichiro Koizumi's Liberal Democratic Party had won the public's mandate in election. "It is proper to think that the ruling coalition, which has won a majority and possibly an absolute majority, at least in numbers in the election, has won the public's mandate," Kan told reporters. In the election, Japan, dominated by a single conservative party for nearly half a century, took a big stride towards a two-party system as the main opposition made big strides and smaller groups floundered.


President Bush has said he will decide "within a reasonable period of time" whether to scrap controversial tariffs on imported steel. The World Trade Organisation (WTO) ruled last week that the tariffs broke international trade rules. Mr Bush said he would decide after reviewing the state of the US steel industry. The WTO upheld the European Union's (EU) right to impose sanctions if the US does not back down.

President Bush said he was examining how far the US steel industry has restructured since his administration imposed the tariffs on steel imports in early 2002. The European Commission has drawn up a hit list of US imports worth about $2.2bn a year including citrus fruits and textiles which will be targeted with retaliatory sanctions.


China is opening its market to US planes and cars in a move which could ease growing trade tensions. Beijing has signed $1.7bn in aircraft and engine deals for 30 Boeing 737s with General Electric engines. At the same time, pacts with the Big Three US carmakers will allow thousands more US-made vehicles into the fast-growing Chinese auto market. The US has criticised China for an under-valued currency and a swelling trade surplus.

The Boeing-GE plane deal is designed to supply new aircraft for five Chinese airlines, for delivery in 2005-6. China's aviation business is fastest-growing in the world, with up to 100 airports expected to open in the next decade. A separate deal to supply engines for a regional jet project could bring GE up to $3bn over the next 20 years.


Europe's police forces need more support in trying to tackle the growing problem of euro counterfeiting, according to the head of the European Union's criminal investigation bureau. Europol Director Juergen Storbeck believes officers on the front line in poorer countries in Eastern and Central Europe are struggling keep pace with the counterfeiters. He wants EU governments to agree to more training, technical assistance as well as hard cash to back up local investigations in countries like Bulgaria.




Wal-Mart Stores, the world's biggest retailer, reported a 14% jump in July-to-September profits to $2bn (1.2bn).


China's biggest city Shanghai has said it is talking to Walt Disney about building a Disney theme park by 2010. A city official said the municipal government and Disney had organised a team to research the plan. A Shanghai park would be Disney's third Asian centre after Tokyo and Hong Kong, which is still under construction. Shanghai, which wants to attract more tourists, is already building a Universal Studios theme park, and is also to host the 2010 World Expo. Chinese officials said the Shanghai Disneyland would be built in the city's business district, Pudong.


Europe's largest phone company, Deutsche Telekom, is predicting a better year than expected thanks to improving mobile revenues. Net profit in the third quarter rose to 508m euros ($593.7m; 353.5m) from a record loss of 20.6bn euros a year earlier, Deutsche Telekom said. Sales rose 4.9% to 14.1bn euros.


Some homeowners could be facing negative equity if UK interest rates continue to rise, Bank of England Governor Mervyn King has warned. But he played down fears that the problem would be as bad as that faced by homeowners 10 years ago. "There is a risk that heavily-indebted households will be badly affected by changes in economic circumstances or interest rates," Mr King said. People must "think carefully" about how much debt they can afford, he added. Earlier the Bank raised UK interest rates for the first time in nearly four years, to 3.75%.


Recovery in the UK manufacturing sector has been hit by a prediction from the CBI that 36,000 industrial jobs will be lost over the next three months. The CBI said optimism in manufacturing firms was still low, despite recent recovery, but had risen in almost half the UK's 11 regions in recent months. The CBI warned "severe difficulties remain and there are some sharp contrasts in outlook". But firms in most regions expect orders to rise in the next three months. Despite some signs of an improvement in the sector in parts of the country, there have been signs recently that a recovery in the sector might not be as strong as initially thought.


Californian governor-elect Arnold Schwarzenegger is considering tackling the state's fiscal crisis with a record-breaking $20bn bond issue. The proposal, which requires approval by electors, would increase California's debt by 50%. But it would also solve the immediate headache of an $8bn 2004 deficit and $12bn of disputed debt financing. And Mr Schwarzenegger's team is reportedly drawing up a linked austerity package.




Asian steelmakers have said they will consider retaliation if the US does not remove tariffs on imported steel. The warning came a day after the World Trade Organisation's highest court ruled that the US tariffs violate global trade rules. Japan said it would retaliate if the US did not back down while China and Korea indicated they might follow suit. The EU is set to impose retaliatory sanctions of $2.2bn on imports of some US goods. Japanese trade and industry minister Shoichi Nakagawa said Japan would notify the WTO of its retaliatory measures if the US did not lift the tariffs.


China, the world's biggest maker and consumer of cigarettes, says it is planning to slap new, larger health warnings on cigarette packets. Under an international treaty which China signed in New York earlier this week, the warnings are expected to cover at least 30% of the printed surface of the packet. It is not yet clear how soon China will ratify the treaty. Only a handful of signatories have already done so. Even when it does, with over 350 million Chinese, or a quarter of the population, smoking, cutting the human cost of China's tobacco habit will be a huge task.


The number of UK workers out of a job has risen during the three months to September, but people claiming benefit remains at its lowest since 1975. The so-called ILO survey, the government's preferred method of gauging unemployment, rose slightly by 12,000 people to 1.48 million. This equates to a jobless rate of 5% of the workforce. But the claimant count, of people drawing jobless benefit, fell 3,300 to 926,900, the lowest since 1975.


Britain's trade deficit with the rest of the world has risen to its highest level in almost a year, according to the latest official figures. The Office for National Statistics said the UK imported 4.8bn worth of goods more than it exported in September, much more than the 3.5bn forecast. It was the UK's biggest monthly trade deficit since the all time high of 5.1bn recorded last November. The deficit growth was largely caused by reduced output of North Sea oil.