July 04 - 10, 2005






Germany's parliament was due to hold a vote of confidence in the government, which Chancellor Gerhard Schroeder wants to lose to trigger new elections.
Mr Schroeder called for the vote after his Social Democratic Party suffered a bad defeat in a key state poll in May.
He says bringing the election forward by a year is necessary to secure a mandate for his tough economic reforms.



An early election, which needs approval from the president, could hand power to the more popular Christian Democrats.

If Mr Schroeder loses Friday's vote as he hopes to, it will be up to President Horst Koehler to decide whether there are sufficient grounds to call an early election.

Some experts have questioned whether Mr Schroeder's move is constitutional.

The German leader is due to give his reasons for calling the confidence vote just before politicians in the Bundestag, Germany's lower house of parliament, cast their ballots.

SPD leader and closer Schroeder ally Franz Muentefering echoed the chancellor's call for even his supporters not to back him.

"One can voice confidence in the chancellor by abstaining in the vote, because this will enable new elections to be held," Mr Muentefering said.

But many MPs from among Mr Schroeder's own Social Democrats and his Green Party coalition allies oppose the move and say they will vote for the government.

Mr Schroeder's hand was forced after the conservative Christian Democrat Union (CDU) won the former SPD stronghold of North Rhine-Westphalia in May.


Britain would be assuming the presidency of the EU on Friday with disputes about farm subsidy reform and the UK's 3bn rebate set to overshadow budget talks.

UK Foreign Secretary Jack Straw said that drafting what he described as a "rational budget" would top the agenda.

He wants a deal by the end of the six-month presidency but EU Commission President Jose Barroso warned agreement would not come without compromise.

Talks on fixing the budget for 2007-13 collapsed two weeks ago.

Speaking in Dublin ahead of his meeting with the prime minister , Mr Barroso criticised Tony Blair's attempts to link the "very different" issues of the Common Agricultural Policy (CAP) and the British rebate.

Possible agreement?

"I do not think the best way is to link reform of CAP to the British rebate and I've said it very clearly to Tony Blair," he said.

But he said the EU countries should be "ready to support the efforts of the British presidency" and reaching financial agreement was "possible".

He warned Britain it would have to compromise over the rebate and there would have to be movement from countries who were beneficiaries of the CAP.

Shadow environment and rural affairs spokesman Oliver Letwin said Mr Blair was giving out conflicting signals, and had talked of scrapping the CAP when in fact structural reforms were needed.

He said: "It is really absurd that we have tariffs still in place so high that there need to be export subsidies for producers in Europe which disadvantage farmers in less developed countries.


President George W Bush has proposed doubling US aid to Africa over the next five years.

He said this would happen if African leaders made a commitment to honest government and the rule of law.

Outlining his priorities for the G8 summit next week, Mr Bush said the West now had an extraordinary opportunity to help end extreme poverty in Africa.

But on the other main issue facing the summit - climate change - he gave no indication of a compromise.

The president criticised those who opposed energy development and wanted to place restrictions upon it.

"About two billion people have no access to any form of modern energy," he said.

"Blocking that access would condemn them to permanent poverty."

Mr Bush said the US would double assistance to the region by 2010, but stressed trade and good government were as important as financial aid.

He said the "primary focus" would be on "reforming countries".

African leaders, he said, must be the "agents of reform" rather than "passive recipients of money".

The announcement is in addition to $674m (350m) in aid for Africa promised by Mr Bush in a summit with UK Prime Minister Tony Blair earlier this month, at which the writing off of debts owed by some of the poorest countries was agreed.

US government development aid is lower than most Western countries when measured in terms of gross national product, but its non-governmental donations are much higher.


The United Nations has approved $52.5bn (29.3bn) in compensation payments to Iraq's neighbours arising from its 1990-91 occupation of Kuwait.

The final figure is a fraction of the $354bn sought by countries which suffered damage from the invasion.

Iraq has called for an end to payouts from its oil revenue, seeking negotiated settlements instead.

Iraq has so far paid $19.2bn, but it is thought it could be decades before all the claims are finally met.

The United Nations Compensation Commission (UNCC), which oversaw the compensation claims, wound up its final three-day meeting on Thursday last.

Over the past 12 years it has processed a total of $354bn in claims but rejected the bulk of them.

Compensation was sought by individuals, corporations and governments.

Rolf Knutsson, UNCC executive director, told Reuters news agency: "I wouldn't say the claims were inflated. They reflected the impression of claimant countries of the magnitude of damage, which is a subjective matter."

A report said most of the outstanding payments are owed to Kuwait, which was plundered by Iraq following Saddam Hussein's invasion in August 1990.

Under a UN scheme, Iraq uses 5% of its oil revenue in compensation payments.

Iraqi Deputy Foreign Minister Mohammed Hamud Bidan called for an end to the arrangement, saying Iraq wished to negotiate settlement of the claims instead.

Kuwait, however, rejected the move, insisting on "uninterrupted payments" to all the claimants.


China has again denied that it plans to revalue the yuan after US Treasury Secretary John Snow suggested it would.

"[China] has agreed that it is in their interest to adopt greater exchange rate flexibility," Mr Snow was quoted as saying.

Mr Snow's comment mollified US senators who had pushed for punitive measures against imports from China.

But a spokesman for the People's Bank of China insisted that "with regard to the yuan's revaluation, we never make predictions and there is no timetable".

Senators Charles Schumer and Lindsey Graham announced their decision to delay a vote on tariffs on imports from China after meeting Mr Snow and Federal Reserve chairman Alan Greenspan.


An abrupt slowdown in consumer spending meant the UK economy grew by just 0.4% in the first three months of the year, slower than previously thought.

The Office for National Statistics (ONS) revised the figure down from an earlier estimate of 0.5%.



The ONS also revised the annual growth rate from 2.7% to 2.1% - the slowest figure for more than two years - as it revised past growth data upwards.

The figures could raise pressure for an early interest rate cut, analysts said.

Household spending grew by just 0.1% in the quarter, the weakest rate since the end of 2000. The ONS data also showed manufacturing output fell by 0.9%


Strong exports and home-building has kept the US economy growing faster than expected, official figures show.

Gross domestic product (GDP) rose at an annual rate of 3.8% in January-March 2005, above the initial 3.1% estimate and in line with the previous quarter.

The data from the Commerce Department suggests that high oil prices have yet to dent the US's capacity to expand.

They could also indicate that the Federal Reserve is likely to raise interest rates again.

The Fed began its monthly rate-setting meeting on Wednesday, and is widely expected to push the cost of borrowing up to 3.25% on Thursday last - for the ninth month in a row - from the current level of 3%.


High energy prices and rising interest rates will substantially slow the global economy this year, the United Nations has warned.

Worldwide growth will slow to 3% in 2005, down from 2004's 4.1%, according to the report from the UN's Department of Economic & Social Affairs (UNDESA).

Industrialised nations will be the worst affected, said the report.

Developing countries will generally see better growth thanks to strong demand for their minerals and farm goods.

The report forecasts that growth in western Europe will slow to about 2% in 2005, down from 2.2% in 2004.

US growth is expected to ease to 3% from 4.4%, while developing nation economies are set to grow by 5% in 2005, the same rate as last year.

The Chinese economy is expected to grow at 9% in 2005, as its economy continues to grow strongly, while Africa as a whole will see growth of more than 5%.


Lingerie shops in the strictly conservative Muslim kingdom of Saudi Arabia have been ordered to recruit women to replace male salesmen.

At present women, who are not allowed to mix with men other than close family members outside the home, must buy underwear in shops staffed by men.

The country's labour minister said the ruling will create jobs for women.

Women in Saudi Arabia are not allowed to drive or vote, and face restrictions on where and when they can work.


Oil prices fell by $2.34 a barrel on Tuesday last, after reaching record highs over the previous three days.

US light crude ended down $2.34 to $58.20 a barrel, while London's Brent crude dropped $2.02 to $57.28 barrel.

Analysts said the fall was likely to be temporary, and that oil prices should soon rise again due to supply concerns.

They put the drop down to some profit-taking by traders after prices hit record highs on Monday - $60.95 for US light and $59.59 for Brent.


A Central American free trade agreement signed a year ago has been approved by the US Senate despite much opposition.

The US textile and sugar industries and US trade unions have opposed the deal.

But President George W Bush insisted it is "good for American workers, good for our farmers and good for small businesses".

Five countries in the region have signed up to Cafta, which will aim to help ease poverty, foster development and strengthen democracy in the region.

"The agreement is also a strong boost for young democracies in our own hemisphere whose success is important for America's national security and for reducing illegal immigration," Bush added.

The US Senate voted 54-45 in favour of the trade agreement which will next be considered by the US House of Representatives.


Bank of America, the second-biggest bank in the US, is to buy credit card firm MBNA for $35bn (19.5bn).

The deal will double the size of the bank's credit card operations to 40 million accounts.

Bank of America said the takeover will involve 6,000 job cuts, but gave no further details.


The US House of Representatives has voted to block the Bush administration from backing a Chinese takeover attempt for US oil firm Unocal.

The Republican-led house voted against any backing for the $18.5bn (10bn) bid put forward by China's CNOOC oil firm.

But the move needs approval from the Senate, which has not considered such a proposal.

CNOOC's bid trumps a $16.3bn cash and share offer tabled by fellow US oil group Chevron.


The US Federal Reserve has maintained its "measured" pace of interest rate rises, raising the cost of borrowing by 25 basis points to 3.25%.

It was the ninth monthly rise in a row by the Fed's Open Market Committee.

Analysts had widely expected the move as the Fed tries to maintain economic growth but keep a lid on inflation.

The economy has fared well with 3.8% growth in the first three months of the year, but rising oil prices have stoked inflation fears.

The recent cycle of increases has seen US rates gradually rise from 50-year lows of 1% set in 2002.


US prosecutors have decided not to take Royal Dutch Shell to court for overstating its oil reserves by 4.47 billion barrels, the company has said.

The threat was withdrawn after the company assisted an investigation into how it had overstated reserves by 20%.

The firm revealed the miscalculation last year, and agreed to pay a $120m (66.9m) penalty to settle with the US Securities and Exchange Commission.

Oil reserves can affect share prices as they indicate potential future income.

Shell's shares dived when it downgraded its reserves last year, but they have since recovered, boosted by the rising global price of oil.


US agrochemical giant Monsanto has blamed an 81% drop in third quarter profits on write-offs caused by two large-scale acquisitions.

St Louis-based Monsanto said net profits for the three months to 31 May fell to $47m (26m) compared with $252m for the same period last year.

Net sales rose by 22% to more than $2bn, and the firm said demand continued to grow for its products.


The cost of petrol in Zimbabwe has been raised by a factor of three, in an attempt to curb rampant fuel smuggling and cope with the rising cost of oil.

An announcement in the official Herald newspaper said a litre of petrol would cost 10,000 Zimbabwe dollars ($1; 0.55), up from Z$3,600. The rise follows months of extreme fuel shortages in Zimbabwe.


The European Commission has opened an investigation into whether China and India are dumping footwear in Europe.

The move follows calls for an investigation from Europe's shoemakers, after an estimated sevenfold leap in China's imports since January 2005.

If it finds predatory pricing from either country, the European Commission promised it would take action.

Chinese clothing exports in general have surged following the end of an international quota agreement.

The shoe-dumping investigation would probably take between nine and 15 months, a spokeswoman said.


Shares in Chinese shipping firm Cosco have fallen sharply on their first day on the Hong Kong stock exchange.

The group, which includes the world's seventh-largest container firm, floated shares in a holding company in Hong Kong to raise money for expansion.

But fears of a glut in the shipping market - driven by China's booming economy - meant investors stayed nervous about the company's prospects.


The Paris Club of creditor countries has agreed the outline of a debt relief package for Nigeria.

About $18bn (10bn) of debt will be written off and Nigeria plans to buy back a chunk of outstanding loans.

The country owes the rest of the world $35bn, and the new talks are linked to an agreement between Nigeria and the IMF on debt repayments.

Nigeria is the world's seventh-largest oil exporter and Africa's most populous nation, but also one of its poorest.

About $31bn of Nigeria's debt is owed to members of the 19-nation-strong Paris Club. It has not received any fresh loans since 1992, but repaid $8bn debt since then.


Germany looks set to face disciplinary proceedings after warning it is likely to break European Union (EU) budget deficit limits for another year.

Official figures showed that without policy changes Germany is likely to break the EU deficit cap of 3% of gross domestic product (GDP) until 2008.

It has already broken that limit every year since 2002, and is set to unveil a deficit of 3.7% of GDP in 2005.

Europe began action against Italy last week for breaking deficit rules.

The European Commission (EC) gave Italy until the end of 2007 to slash its deficit to below EU limits.

Italy's deficit stood at 3.2% of GDP in 2001, 2003 and 2004, and the EC has predicted it will record a 3.6% shortfall this year - before rising to 4.6% in 2006.


Falling consumer confidence in France has underlined the problems facing new Prime Minister Dominique de Villepin as he tries to revitalise the economy.

Consumer confidence was worse than expected in June, while the unemployment rate refused to budge from a five-year high.

Unless the job situation improves, economic growth is unlikely to pick up and may even slow, analysts warned.

Separately, a fall in Germany's jobless rate was attributed to summer hiring.

The seasonally-unadjusted jobless rate dipped to 11.3%, but the German Labour Office made clear that this figure reflected seasonal factors, not an improving economy.


Sri Lanka's economic growth has started to recover from the tsunami which hit the island state in December.

Expansion for the year to March was 4.8%, up from the 4.4% recorded three months earlier.

But the central bank warned that the after-effects of the tsunami which killed thousands and devastated tourism and fishing could still depress growth.

It also said instability within the government could pose a threat to continued recovery.

It is predicting growth of 5.3% for 2005, down from 5.4% in 2004 and 5.9% the year before that.


UK house prices dipped by 0.2% in June, according to the Nationwide, while annual price growth fell to 4.1% - the lowest level since July 1996.

Prices in the three months to June were up 0.8% against the previous quarter, the building society added.

"While the weather was hotting up, house prices in June cooled," the Nationwide said, adding price growth this year had been "almost horizontal".

The survey said the price of an average house in June was 157,791.

Nationwide said that activity levels in the market had "stagnated" recently, after a pick-up in the first few months of the year.


US President George W Bush has restored duty-free access of some goods from India and Pakistan to US markets.

Mr Bush said he restored the trade benefit because the two countries had made progress on intellectual property and worker rights.

The list of goods was not made available by the White House.

The US has been strengthening trade and defence ties with India, while Pakistan is a key ally in its war against terrorism.

Mr Bush said that he had made the decision after reviewing the steps taken by Delhi and Islamabad.

"I have determined that India has made progress in providing adequate and effective protection of intellectual property rights," he said.

"Accordingly, I have determined to terminate the suspension of India's duty-free treatment for certain articles," he said.


The UK attracted a record number of investment projects from foreign firms last year, official figures have shown.

Government body UK Trade and Investment said nearly 40,000 jobs were created in 2004/05 from 1,066 investment projects.

That was an increase from the 25,463 jobs created by 811 projects in the previous year.

The figures showed a 61% increase in the number of IT and software projects to 240, with research and development projects up 22% to 101.

A total of 451 projects were in the services sector - the most popular sector for investment - while 268 projects were in the manufacturing sector.


Foreign investment in Japan in 2004/05 outstripped the country's investment overseas for the first time in half a century, official figures have shown.

According to the Finance Ministry, foreign firms sank more than 4 trillion yen ($36bn; 20bn) into Japan in the 12 months to March.

The figure, which had doubled in three years, was driven by an upsurge in money coming from the US.

Japan has till now had a reputation for being hostile to foreign investment.

Its corporate structures have traditionally been set up to cement cross-shareholdings between Japanese companies, preventing hostile takeovers by either domestic or outside buyers.


German business confidence has improved for the first time in five months, following recent falls in the euro.

Research institute Ifo said its business index rose to 93.3 points from 92.9 points in May.

The retail sector index hit its highest level since October 2003. Construction was the only sector not to improve.

The weakening euro had proved to be good news for exports, analysts said, adding that news of a September general election had also improved confidence.

The euro has fallen by about 11% since the beginning of the year. By Monday last, it was trading close to the $1.20 level - approximately four cents lower than at the time of the previous Ifo survey.


A co-defendant in the trial of Egyptian opposition leader Ayman Nour has withdrawn his testimony, saying his confession had been forced out of him.

Ayman Ismail said security agents had threatened to harm his family if he did not testify against the politician.

Mr Nour denies forging signatures to register his party and says the charges are politically motivated.

He wants to challenge incumbent Hosni Mubarak in the first multi-candidate presidential elections, in September.

If convicted, he would lose his right to take part and could face up to 15 years in prison.

Mr Ismail had admitted forging documents at Mr Nour's request.

But he told the Cairo court that "security people threatened to hurt" his nephews if he did not confess.

"Anybody in my shoes would have done the same. I don't know what will happen to me now," he said.