INTERNATIONAL

 

Aug 09 - 15, 2004

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF

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US BUDGET DEFICIT TO HIT $445BN

The US budget deficit will hit a record high of $445bn(244bn) this year, according to White House projections.
It will rise from $375bn(205bn) in 2003, the Bush administration forecast, citing the war on terror and economic downturn as contributory factors.
The forecast is, however, lower than a $521bn figure projected in February, an improvement the White House put down to better than expected tax receipts.
A leading Democrat said the forecast deficit was bad news for the country.

 

 

 

 

A deficit of $445bn would be the equivalent of 3.8% of total economic output.

The White House said it expected the deficit to narrow to $331bn(181bn) in 2005, reducing in successive years until reaching a figure of $229bn by 2009.

The Office of Management and Budget said the rising deficit was due to an extraordinary succession of negative economic pressures including the 2000 economic downturn, the subsequent recession, the 9/11 attacks, the war on terror, increased spending on homeland security and a series of corporate scandals.

White House spokesman Scott McClellan said the administration's tax cutting agenda was continuing to strengthen the economy.

"We are meeting our national priorities and by showing spending restraint elsewhere in the budget we are on track to meet the president's commitment to cutting deficits in half over the next few years," he told reporters.

OLYMPIC COSTS HIT GREEK DEFICIT

The cost of staging the Olympic Games is pushing Greece's budget deficit well above European Union limits, according to the Greek deputy finance minister.

Petros Doukas said Greece's budget deficit was "heading towards 4%, maybe a bit over".

Under the EU's Growth and Stability Pact, eurozone member states must maintain deficits of below 3% of gross domestic product.

Greece's budget deficit has already breached the EU cap in 2003.

EU finance ministers have given Athens until 5 November to announce measures aimed at reining in the county's spiralling deficit by 2005.

Mr Doukas told Greece's Flash radio that total spending on the Athens Games which open on 13 August could rise to 7 billion euros ($8.4bn; 4.6bn), from an original government estimate of 4.6 billion euros.

Organisers of the games have been racing to complete work on venues built to stage the Olympics, drastically pushing up costs as contractors deploy double and triple working shifts.

Mr Doukas said Greece was facing cutbacks in spending in a bid to cut its deficit, although he indicated that cuts were unlikely in areas such as salaries or pensions.

"What we can try and do as much as possible is cut the defence spending, bring the private sector in as much as possible into public works projects so that they are self-financed, do away with unnecessary spending, and of course speed up privatisations," he said.

Last month, the European Court of Justice annulled a decision by EU finance ministers to suspend action against Germany and France over budget deficits.

Both countries which run the biggest economies in the eurozone are on target to breach the deficit ceiling for the third year running.

WTO RAPS EU OVER SUGAR SUBSIDIES

European Union subsidies given to sugar producers have violated global trade rules, according to a recent preliminary ruling by the World Trade Organisation.

At a meeting in Geneva to discuss free trade, the WTO upheld a complaint filed by Brazil, Australia and Thailand.

They accused the EU of breaking trade rules by providing sugar export subsidies in excess of WTO limits.

Development agency Oxfam called the WTO's decision "a triumph for developing countries".

The WTO said that by breaking agreed limits on export subsidies the EU was hurting developing countries by undercutting their producers' prices.

Though the claim has won only preliminary backing from the WTO, the trade body rarely goes back on its original decisions.

UK MANUFACTURING GROWTH RACES AHEAD

The UK manufacturing sector enjoyed its fastest pace of growth for a decade in July, putting pressure on the Bank of England to raise interest rates again.

The Chartered Institute of Purchasing and Supply's (CIPS) index rose to 56.3, up from 55.00 in June, the fastest rate of expansion since October 1994.

Any figure above the 50.0 mark indicates expansion.

Strong demand both at home and abroad led to a "marked improvement" in the business climate, the CIPS said.

The better-than-expected figures were driven by new orders in the investment goods industries, it added.

As the outlook for global economic recovery improved, more companies were investing in plant and machinery.

WORLD TRADE DEAL GETS THUMBS UP

 

 

There has been a broad welcome around the world for a framework accord designed to liberalise global trade.

The breakthrough was reached after five days of tough negotiations at the World Trade Organization in Geneva.

The deal, approved by all 147 members, will cut rich countries' farm subsidies in return for developing countries opening markets for manufactured goods.

WTO Director General Supachai Panitchpakdi called it a "minor triumph", which left much to be done.

The agreement puts the so-called Doha trade round back on track, after similar talks in Cancun ended in deadlock last September.

US Trade Representative Robert Zoellick said the deal was "a crucial step for world trade".

And for France, the biggest beneficiary of EU agricultural subsidies, Agriculture Minister Herve Gaymard said it "consolidated" the European common agricultural policy without questioning earlier reforms.

ITALY SETS OUT 2005 BUDGET PLAN

Italy's government has agreed plans to trim the country's budget deficit, bringing it back within European Union limits.

Prime Minister Silvio Berlusconi said he was confident of getting the programme approved by Parliament before the summer recess.

Mr Berlusconi, who has endured a couple of months of turbulence on the domestic politics front, also wants tax cuts.

He says they are vital FOR Europe's fourth-largest economy to keep growing.

The EU has criticised a number of countries, most notably France and Germany, for allowing their spending shortfalls to top a limit of 3% of gross domestic product.

Italy also has been in the spotlight for not keeping a tight enough rein on public spending and debt levels.

Under the latest plan, the deficit is forecast at 2.7% in 2005, down from the 2004 target of 3.2% of GDP.

US OPENS UP GUANTANAMO TRIBUNALS

Two Afghan men have denied being enemy fighters in appearances before US military tribunals reviewing the status of Guantanamo Bay detainees.

For the first time, the US allowed journalists to attend the hearings.

The men, both handcuffed and shackled, admitted they were with the Taliban but said they never fought US forces. Their requests to call witnesses were denied.

The US insists the process to determine whether the men are being held legally as enemy combatants is fair.

The tribunals, which have been running since last Friday, were instigated after the US Supreme Court ruled that the prisoners could challenge their detentions.

It is the first time any of the around 600 detainees, who have been held without trial or access to lawyers for more than two years, have been allowed any form of hearing.

BOE LIFTS INTEREST RATE TO 4.75%

The Bank of England has raised its base rate by a quarter of a percentage point to 4.75%.

The move, widely predicted by analysts, comes amid evidence of accelerating economic growth which could fuel inflation in the months ahead.

The rate rise will also be seen as an attempt to cool the UK's booming property market, and rein in soaring consumer debt.

The Bank has now pushed through five quarter-point rises in eight months.

TATA SHARE OFFER OVERSUBSCRIBED

India's biggest-ever share sale, by home-grown software services giant Tata Consultancy (TCS) was oversubscribed by six times when it closed on Thursday.

The share offering opened on 29 July, and was sold out by the second day.

"We knew that we had a good story going . The retail application could be crossing a million anytime now," said S Mahalingam, TCS's financial officer.

The debut share offering will rake in $1.2bn (660m) for the software firm, which is being spun out from Tata group.

OECD UPS GERMAN GROWTH FORECAST

Germany's growth forecast for this year has been raised to 1.5-2.0% from 1.1% just three months ago by the OECD.

The rise was due to Germany's strong export market said OECD economist Eckhard Wurzel.

The Paris-based think tank said Germany was unlikely to meet its fiscal deficit targets in 2004 and 2005.

The OECD also warned Germany must press on quickly with widespread reforms and make "substantial" extra efforts to meet medium-term budget targets.

NO CHANGE FOR EURO INTEREST RATE

The European Central Bank (ECB) has decided to keep its leading interest rate unchanged at 2% after governing council meeting held lalst Thursday.

The decision to leave rates unchanged had been widely-expected.

Economists say the bank is in no rush to tighten monetary policy, despite short-term inflation.

 

 

They believe the ECB is reluctant to squeeze credit until it is sure high energy prices will not stall domestic demand and the economic recovery.

Eurozone interest rates have now been at 2% for more than a year.

PUBLIC PENSIONS MAY NEED 50BN

Public sector pension funds may need an extra 50bn over the next 30 years to cover the cost of scheme members living longer, an actuary firm has warned.

Lane, Clark & Peacock actuaries said current estimates of future life expectancy were probably two years shy.

Taxes may have to rise to cover the pension shortfall the actuary added.

But, a Department for Work and Pensions (DWP) spokeswoman said that government forecasts on life expectancy were up to date and pension costs under control.

JAPAN RESUMES FOOD AID TO N KOREA

Japan is to resume the delivery of food assistance to North Korea after a four-year pause.

The government in Tokyo last Thursday approved sending 125,000 metric tons of aid to the country.

The package will also include medical supplies and be delivered through United Nations organisations.

It is the first part of assistance promised by Japanese Prime Minister Junichiro Koizumi to North Korea when he visited the country in May.

North Korea is suffering from severe food shortages the UN estimates the country may require almost 0.5 million tons of aid this year.

POTENTIAL HITCH FOR GOOGLE FLOAT

Search engine Google has admitted it may have breached stock market laws in the US.

In a filing to the US market watchdog, Google said it had neglected to register almost 30 million shares and options issued to staff.

It is now offering to buy them back albeit at prices way below the $108-$135 at which its flotation is set.

It is unclear whether the warning could affect the timing of the $3.3bn flotation, due to end within days.

SOUTH KOREAN FIRM SNAPS UP LYCOS

South Korean top Internet portal Daum Communications is buying US web portal Lycos Inc from Terra Lycos of Spain, to push its way into the US market.

Daum said it had agreed to pay 111.2bn won ($95m; 52m) for Lycos Inc as a springboard into the US market from which to then become a global player.

South Korea has 60% of households online, of which 11 million homes, or more than one third, use broadband.

The two sites both offer teenager friendly news, e-mail and shopping.

MITSUBISHI UNVEILS HEAVY LOSSES

Struggling Japanese car maker Mitsubishi Motors has reported heavy quarterly losses.

Japan's only unprofitable auto firm unveiled first-quarter operating losses of 31.71 billion yen ($285m; 156.5m) in the three months to June.

Mitsubishi said the figure represented a quarter of its full-year loss forecast of 120 billion yen.

A recall scandal has halved Mitsubishi's domestic sales in the past few months.

LATE MONSOON MAY COST INDIA DEAR

Crucial rains have at last reached the farms of northwestern India but the late monsoon will still dent economic prospects, analysts have warned.

The timing of the annual rainy season is vital to India, where agriculture accounts for a quarter of output.

Economists now forecast growth of 5.5-6.5% in the next 12 months, down from their previous 7-8% predictions.

Finance Minister Palaniappan Chidambaram said he was "praying for a good monsoon".

India's new government is pinning its hopes on continued strong growth, since its economic policies were called into question during May's election campaign.