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
"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
Greece's budget deficit has already breached the EU cap
EU finance ministers have given Athens until 5 November
to announce measures aimed at reining in the county's spiralling deficit
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
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
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
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
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
The decision to leave rates unchanged had been
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
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
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
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
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.