German officials on Monday downplayed prospects of any quick and dramatic change of course in the eurozone debt crisis, days before a parliamentary vote on beefing up the continent’s rescue fund.
Weekend meetings of global financial leaders in Washington raised hopes of a change in strategy, with officials indicating that would focus on further boosting the firepower of the euro440 billion ($595 billion) rescue fund _ perhaps by allowing it to tap loans from the European Central Bank or otherwise leveraging its lending capacity.
Hopes for such a move boosted European stock markets on Monday, with German and French bank shares rising strongly.
However, ahead of a parliamentary vote Thursday on changes to the fund that eurozone leaders already agreed to in July, Berlin was keen to underline its attachment to its often-criticized step-by-step approach.
Thursday’s vote on expanding the powers of the rescue fund, the so-called European Financial Stability Facility, will be followed over the coming months by final decisions on a second bailout package for Greece and on a permanent rescue mechanism meant to succeed the EFSF from 2013, Finance Ministry spokesman Martin Kotthaus noted.
“That is quite simply the procedure that lies in front of us _ we will work through it step by step,” Kotthaus said.
When asked in Washington whether he supported the idea of leveraging the rescue fund, German Finance Minister Wolfgang Schaeuble said: “Of course we will use the EFSF in the most efficient way possible.”
His spokesman, Kotthaus, said that the EFSF “is how it is” and noted that only a small part of the funding has already been committed.
Asked about the possibility of leveraging the fund, he said “the discussion is not so far along that I could contribute any examples, ideas or subideas.”
Some in Chancellor Angela Merkel’s center-right coalition already find beefing up the EFSF by giving it new powers hard to swallow, and anything beyond that could be a hard sell among its lawmakers.
Christian Lindner, the general secretary of the Free Democrats _ Merkel’s junior coalition partner _ called on the chancellor to provide clarity and stressed that his party opposes allowing the fund to tap ECB loans quick guaranteed personal loans.
A prominent opposition lawmaker, center-left Social Democrat Carsten Schneider, said the government should come clean on its “real intentions.”
“In Washington and Brussels they are already planning new programs in the billions, and in Germany the parliament and public are having the wool pulled over their eyes,” Schneider was quoted as telling Der Spiegel magazine.
Merkel’s spokesman rejected that accusation sharply.
“The true intentions of the government and the chancellor are on the table,” Steffen Seibert said. “They will be decided on in parliament Thursday.”
Merkel has been caught between criticism from abroad for doing too little and from supporters at home who fear she is spending too much taxpayer money on the crisis. She went on German television Sunday night to defend her step-by-step tackling of the crisis.
She warned of the dangers a radical restructuring of Greek debt might bring at this stage.
“Lehman Brothers was allowed to go bust, and then the world was surprised that it fell into a deep crisis,” Merkel said on ARD television.
“What we have to learn is that we can only take steps we can really control,” she added. “The word ‘haircut’ is easy to say on its own … (but) we must go step by step.”
In financial terms, a haircut is a loss investors take on an asset. Many experts believe Greece’s bondholders will have to take a sharp haircut _ that is, not get paid back fully for the money they lent to the country _ if Greece is to have any chance of reducing its debt load.
“What we cannot do is, along the way, destroy the confidence of all investors, and (have) them say, OK, they did this with Greece now; tomorrow they’ll do it with Spain, the day after with Belgium or some other country,” Merkel said.
“Then no one anywhere would invest their money in Europe any more, and we have to prevent that.”
After eight months of contract-wrangling and negotiations that dragged past a strike deadline, supermarket workers in Southern California will stay on the job and shoppers won’t have to rely on Whole Foods or their corner liquor store for groceries.
Members of the region’s United Food and Commercial Workers voted to ratify a new contract with three major grocery chains, union local spokeswoman Ellen Anreder said, averting a strike of more than 60,000 workers that could have crippled the industry and left shoppers scrambling.
United Food and Commercial Workers local spokeswoman Ellen Anreder said Saturday that after two days of voting, members agreed to a deal struck Monday with Vons, Ralphs and Albertsons. Exact vote totals were not released.
“We’re all very grateful to our customers for their support over this eight-month process, and are very grateful that we can continue to serve them,” a tired-but-relieved Anreder said after the vote.
Union officials had urged their rank-and-file to ratify the contract, which they said addressed concerns about funding for the employees’ health plan, the main sticking point during months of negotiations.
“This package protects our members’ access to affordable comprehensive health care for themselves and their families,” the union said in a statement. “That was our top priority throughout the negotiating process.”
The supermarkets, meanwhile, said after agreeing to the deal that it would allow them to remain competitive. Messages left for grocery representatives after the vote were not immediately returned.
Details of the agreement were made available to members for the first time as they filed into their union locals’ headquarters or other voting locations to cast their ballots on Friday and Saturday.
“There was a sense of relief when people had an opportunity to really look over the new contract and see what was in it,” Ralphs clerk and union member Mario Frias said.
The deal ended months of sometimes testy discussions between union officials and representatives of The Vons Cos.; Ralphs Grocery Co., a subsidiary of The Kroger Co.; and Albertsons, which is owned by Supervalu Inc.
Ralphs had indicated it would initially close all 250 of its stores if there had been a strike; Albertsons had said it could shutter up to 100 locations, while Vons had said its stores would remain open.
The prospect of shuttered stores and tense picket lines brought fears of a repeat of the four-month strike in 2004 that cost the industry $2 billion and created a mess for shoppers. This time around, with unemployment at 12.1 percent in California, workers evidently feared that they would find little public sympathy if they voluntarily walked off the job.
The market chains, meanwhile, were likely reluctant to invite shutdowns and picket lines that might alienate shoppers already spending less due to the economic downturn.
Union leaders and the markets announced in July that they had reached a tentative agreement on the employers’ contributions to pension benefits, but remained far apart on payments to the union health care trust fund.
Union members voted overwhelmingly last month to authorize their leaders to call a strike. Those leaders said they were responding to what they characterized as the chains’ delaying tactics when they issued the required 72-hour notice Thursday evening to cancel the contract extension under which they had been working since March.
But after the Sunday evening deadline passed with neither a strike nor a deal, store employees returned to work. Union officials announced Monday that the tentative deal had been reached.
Asian stocks headed lower Thursday, stung by a pessimistic assessment of the U.S. economy by the Federal Reserve.
Japan’s Nikkei 225 slumped 1.6 percent to 8,598.32 while South Korea’s Kospi index slid 2.6 percent to 1,806.62. Benchmarks in New Zealand, Singapore and Taiwan were also lower.
Hong Kong’s Hang Seng index plummeted 3.6 percent to 18,138.32, with blue chip property developers among the biggest losers. China Resources Land Ltd. tumbled 10.1 percent while China Overseas Land & Investment slid 7.9 percent. China Vanke Co. lost 3.8 percent.
Australia’s S&P ASX 200 was 2.2 percent down at 3,984.40, with energy shares plummeting amid fears of a global economic slowdown. BHP Billiton, the world’s largest mining company, lost 3.3 percent. Rival Rio Tinto Ltd. plunged 5 percent. OZ Minerals dropped 6.3 percent.
Falling gold prices hit precious metal stocks. Hong Kong-listed Zijin Mining Group, China’s No. 1 gold miner, lost 4.9 percent. Newcrest Mining, Australia’s biggest gold miner, fell 2.2 percent.
Ben Potter of IG Markets in Melbourne, Australia said in a report that he expects “a session of heavy selling as the world reacts to the Fed’s downbeat outlook for the US economy.”
In a highly anticipated move, the Fed on Wednesday announced it would buy Treasury bonds to help the U.S. economy. But Wall Street stocks fell anyway because the U.S. central bank made it clear that a full U.S. economic recovery was likely years away.
The Dow Jones industrial average lost 2.5 percent to close at 11,124.84. The Standard & Poor’s 500 index fell 2.9 percent to 1,166.76. The Nasdaq composite fell 2 percent to 2,538.19.
The Fed said after a two-day meeting that it would buy long-term Treasurys and sell short-term ones to help the economy regain momentum. It surprised investors when it said it would include more 30-year bonds in its purchases than expected.
The Fed said it would buy $400 billion in 6-year to 30-year Treasurys by June 2012. Over the same period, it planned to sell $400 billion of Treasurys maturing in 3 years or less. The move is intended to drive down interest rates on long-term government debt, and could lower rates on mortgages and other loans.
The inclusion of more 30-year bonds than expected means the Fed saw the need to keep very long-term rates lower for an extended period. Many analysts viewed the move as an acknowledgment that the U.S. economy’s problems are long-term.
The Fed also bleakly stated that the economy has “significant downside risks” and that a number of problems won’t be easily solved, including high unemployment and a depressed housing market.
Meanwhile, the price of oil continued its slide on expectations that there’ll be less demand for energy because of the U.S. economy.
Benchmark crude for October delivery was down 99 cents per barrel to $84.92 on the New York Mercantile Exchange. The contract fell $1.00 to settle at $85.92 on the Nymex on Wednesday.
In currency trading, the dollar rose to 76.76 yen from 76.56 yen late Wednesday in New York. The euro fell to $1.3564 from $1.3667.
The Greek government says an emergency conference call between Finance Minister Evangelos Venizelos and the country’s creditors could last until early Tuesday and be continued later in the day.
Global markets remained skeptical about Greek pledges to step up urgently needed reforms, and stocks in the U.S., Europe and Asia fell sharply Monday on fears Athens will default on its mountain of debt.
Greece’s international bailout creditors had stepped up the pressure at the start of a crucial week in Europe’s nearly two-year debt crisis, urging Greece to do more to heal its finances.
Creditors are threatening to cut the cash lifeline, which would force Greece to go bankrupt in less than a month.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
ATHENS, Greece (AP) _ Greece’s finance minister is holding an emergency teleconference with the country’s creditors hours after pledging to speed up reforms and civil-service staff cuts.
Global markets were skeptical about any of Greece’s pledges, however, and stocks in the U.S., Europe and Asia fell sharply Monday on fears Athens will default on its mountain of debt.
Greece’s international bailout creditors had stepped up the pressure at the start of a crucial week in Europe’s nearly two-year debt crisis, urging Greece to do more to heal its finances.
Creditors are threatening to cut the cash lifeline, which would force Greece to go bankrupt in less than a month.
The crash of an aging Russian jet last week that killed 44 people, including an entire professional hockey team, was among a string of recent deadly crashes in Russia that have scared the public and prompted the president to suggest replacing all Soviet-era aircraft with Western-made planes.
But industry experts say that the air disasters plaguing Russia are rooted not simply in the planes’ age, but in a myriad of other problems, including poor crew training, crumbling airports, lax government controls and widespread neglect of safety in the pursuit of profits.
“It’s like an ax hanging over the head of each of us,” said Oleg Smirnov, a highly decorated pilot who served as deputy civil aviation minister during Soviet times.
He and other experts warn there is no quick remedy for the industry’s woes _ exacerbated by government inefficiency and corruption. They blame state regulators for turning a blind eye to aviation problems and failing to establish proper control over flight safety.
Veteran pilots insist aircraft like the Yak-42 that crashed last week, the Tu-134 that went down in June _ killing 47 people _ and the An-24 that crash-landed on the Ob River in July and killed seven, are solid designs that are safe to fly despite their age if they are operated properly.
An official panel conducting the probe into the Yak-42 crash hasn’t yet named the cause, but has said it has found no evidence of equipment failure. However, two other such jets belonging to the owner of the crashed plane were grounded after a safety watchdog found that some engine components had exceeded their service time.
While most pilots and industry experts describe the Soviet-era planes as outdated but rugged and reliable, some say that the airlines have struggled to keep them airworthy.
“The collapse of aircraft components production has created a major problem,” Alexander Akimenkov, a veteran test pilot who has flown 80 types of Russian and Western planes, told The Associated Press.
Akimenkov said the owners of Soviet-made planes have had to rummage around the country for spare parts to keep them flying. The shortage of spare parts has spawned the use of plane components from old depots, which sometimes lack proper service certificates, as well as recycled components.
The government has done little to strengthen air safety. Russia has four government agencies overseeing aviation, but their functions are vaguely defined and often duplicate one another.
“There is an immediate need for a single government agency in charge of aviation,” said veteran pilot Vladimir Gerasimov, who blamed authorities for failing to make safety the top priority. He argued that loose regulations contributed to some of the recent crashes by permitting pilots to perform risky landing maneuvers.
Gerasimov said that greed prevails over safety at some Russian carriers, whose management encourages crews to save fuel no matter what. That often prompts pilots to make risky decisions like landing in bad weather instead of flying to another airport out of fear of losing their pay.
“Pilots act under pressure of possible sanctions for making the right decisions,” Gerasimov told The Associated Press.
Russia’s President Dmitry Medvedev responded to the latest crash by ordering officials to shut most of the nation’s 130 carriers, saying small airlines tend to cut corners on safety. He also said the government may end attempts to bail out struggling national aircraft makers and buy more foreign planes. “The value of human life must prevail over all other considerations, such as support for local producers,” Medvedev said.
Many industry insiders warn, however, that replacing the old planes won’t solve the industry’s problems because Western aircraft require the modern infrastructure that Russia lacks.
“The president suggests using Western planes, but in that case we would also need to have Western infrastructure,” said Akimenkov, the veteran test pilot.
Akimenkov, who tested the performance of several Soviet-designed planes in extreme conditions, said that Western planes generally require more careful maintenance and aren’t always fit for use at primitive airports and in the rugged conditions of Russia’s Far North.
The nation’s airports have remained in state hands, and most of them continue to rely on outdated navigation and communications equipment and are in dire need of repairs.
While June’s Tu-134 crash in the northwestern city of Petrozavodsk has been blamed on the pilot, who might have mistaken a nearby highway for the runway while trying to land in deep fog, experts said the antiquated condition of the local airport contributed to the disaster.
Only three airports in the country are equipped with state-of-the art automatic landing systems, while all others continue to rely on old navigation equipment, which puts more pressure on the crews when they land at night or in bad weather, raising the likelihood of pilot error.
Poland said that insufficient lighting at an airport in Smolensk in western Russia was among the factors that contributed to the April 2010 crash of a Soviet-made Tu-154 that killed Polish President Lech Kaczynski and 95 other people.
The largest airlines, including the national flag carrier Aeroflot, already have withdrawn Soviet-era planes from service and rely almost entirely on Boeings and Airbuses, which burn less fuel and meet European requirements for noise and emissions. Imported planes accounted for 83 percent of passengers carried by Russian airlines last year, and the figure will likely reach 90 percent this year, Smirnov said.
But Boeings and Airbuses are used only on the busiest foreign and domestic flights, while hundreds of other routes across Russia’s nine time zones are served by small regional carriers, most of which have only a handful of aging Soviet-era aircraft and simply can’t afford Western planes.
Alexei Sinitsky, the editor of Air Transport Review monthly magazine, said that bigger carriers have shown no interest in serving smaller airports, which would require a big investment and wouldn’t bring sizable returns. He argued that many smaller carriers have a good safety record and warned that Medvedev’s orders would have “monstrous consequences for both Russia’s aviation and for the population of remote regions.”
Other experts also said that an attempt to quickly discard old aircraft and radically cut the number of carriers would paralyze air traffic across most of Russia.
“Aviation is what keeps our country together,” said Smirnov, warning that air transport provides the only link to many areas of Siberia and the Far East. “Closing an airport means closing a city.”
JEFFERSON CITY
The eurozone needs a “quantum” leap toward economic integration, the incoming chief of the European Central Bank said Monday, as the bond yields of countries with shaky finances, like Greece and Italy, jumped amid increased investor tensions.
Mario Draghi warned that measures like the bank’s buying of bonds to stabilize markets were only temporary fixes and that only substantially more integration would address the fundamental problem of a lack of coordination of the eurozone’s fiscal policies.
The movement in bond yields on Monday showed just how varied investors’ confidence was in different eurozone countries. Borrowing rates jumped in countries considered high-risk, such as Greece, Italy and Spain and fell in Germany, widely considered a safe haven in times of financial turmoil.
Speaking at a conference in Paris, Draghi dismissed the idea of eurobonds _ debt issued jointly by the eurozone countries. Some have argued this would help weaker countries borrow more easily because they wouldn’t have to pay such high interest rates, which in turn make their debts bigger. But stable countries like Germany would likely see their rates rise.
Instead, Draghi suggested the eurozone should adopt rules that would require more budget discipline. There is already a proposal that would require all eurozone countries to balance their budgets. Profligate spending during boom times funded by cheap debt is one of the root causes of the current crisis.
Market tensions were high on Monday, both due to worries about some countries’ debt problems and a global financial sell-off triggered by concerns that the U.S. economy may slip back into recession.
The difference in interest rates between the Greek and benchmark German 10-year bonds, known as the spread, spiraled to new records on Monday, topping 17.3 percentage points. Yields on the Greek bonds were above 18 percent.
High yields mean borrowing is more expensive for Greece, making it even harder to reduce its debt load.
In fact, its yields are so high that Greece has been relying since last year on funds from a euro110 billion ($157 billion) package of bailout loans from other European Union countries and the International Monetary Fund. On July 21, European leaders agreed on a second bailout, worth an additional euro109 billion.
Italy’s own 10-year bond yields jumped to 5.45 percent amid signs that the government in Rome is wavering in its commitment to enforce its austerity program.
ECB chief Jean-Claude Trichet in recent days has called on Silvio Berlusconi’s government to push through with the deficit-cutting measures promised in August.
Italy’s stability is of particular concern because it would be too expensive to rescue for the eurozone. In an effort to steady the yields, the ECB has been buying Italian and Spanish bonds in recent weeks, driving down the interest rates fast cash without a hassle.
On Monday, the bank announced that it had increased its purchases last week to euro13.3 billion ($18.8 billion). That’s double the euro6.65 billion spent the previous week.
Draghi indicated that such makeshift measures would continue, including making sure the European Financial Stability Facility _ the eurozone’s bailout fund _ takes over the bond purchases and has enough cash in it.
But, not forever.
“The Programme (of bond-buying) is temporary and fully sterilized,” he said in the version of his speech published on the Bank of Italy’s website. “In other words, it should not be taken for granted by member states.”
The eurozone needs to quickly solve the root of their problems, he said.
“The crisis starts from the incompleteness of the European construction,” he said, and important reforms need to be made to solve it. “Overall, the aim of this effort should be a quantum step up in European economic integration.”
Draghi’s remarks echoed those made by the current ECB chief, who spoke at the same conference.
Trichet said that one solution for the debt crisis would be to eventually create a “federation” with a central finance ministry for the continent that would have the power to force countries to make the difficult decisions that European leaders can only now pressure them to make.
He did not mention Italy, but he and other European officials have recently had to urge Rome to make budget cuts or risk destabilizing the entire eurozone.
“We can imagine a federal government with a federal finance minister,” he said, who would “be capable of imposing this or that decision on any country that is not acting in the interest of the greater good of the federation.”
In the heyday of the boom, several European countries spent more than the EU rules allowed. After the global financial crisis further hurt their finances, countries like Greece and Portugal came close to bankruptcy and were saved only by international rescue packages.
New legislation that would give budget rules more teeth has been floundering for months as the European Parliament and EU member states have failed to agree on more automatic sanctions.
Trichet called Monday for those news rules to be strengthened further.
Separately in Brussels, a group of former European leaders and economists also called for closer economic and fiscal integration to save the currency union.
But the group, which includes former German Chancellor Gerhard Schroeder, former British Prime Minister Tony Blair and U.S. economist Nouriel Roubini _ went further, demanding the creation of eurobonds. France and Germany, the eurozone heavy weights, have so far rejected issuing such bonds.
British police say a sixth man has been charged with murder in the deaths of three men in a hit-and-run attack during riots in the English city of Birmingham.
West Midlands Police said Wednesday the 29-year-old man will appear at Birmingham Magistrates court on Thursday in connection with the murders of 20-year-old Haroon Jahan and brothers Shazad Ali, 30, and Abdul Musavir, 31.
The trio were killed after a car, allegedly containing several looters, struck them at high speed as they stood guard in front of a row of Pakistani-owned shops paydayloans.
Five other men ranging in age from 17 to 30 have already been charged with murder. All remain in custody.
The Bank of Italy has warned that the government’s revamped austerity plan must not cut back on the proposed euro45.5 billion ($65.9 billion) in new taxes and spending cuts needed to meet European Central Bank demands for a balanced budget.
Premier Silvio Berlusconi and his allies late Monday revised the planned austerity measures after widespread public anger, deciding to scrap a special tax on high earners and spare small town governments from consolidation and cuts.
The new measures tinker with retirement age and call for a reduction in the number of lawmakers, among other things fast cash loans.
The Bank of Italy’s vice chief Ignazio Visco told parliament committees Tuesday that he hoped the market’s response to the fiscal retreat “isn’t too penalizing.” He said the overall austerity plan “cannot be reduced.”
Annual retail sales rose 4.6 per cent to $37.8 billion in June, compared to the year earlier period, driven mainly by strong gains in sales at motor vehicle and parts dealers, Statistics Canada said Tuesday.
On a monthly basis, sales rose 0.7 per cent in June compared to May, the third month in a row that retail sales made gains, the agency said.
All of the gains were driven by strong sales in automotive and gasoline. Excluding sales at motor vehicle and parts dealers, retail sales decreased 0.1 per cent month over month.
Higher sales and lower prices at new car dealers accounted for most of the 1.6 per cent increase in volume terms over May.
Gains were reported in 6 of 11 subsectors. On a month over month basis, the largest increase was registered by motor vehicle and parts dealers, up 3.4 per cent. New car dealers led the gain with growth in sales of 3.3 per cent, the third increase in four months. Sales at used car dealers rose 10.4 per cent in June, more than offsetting the declines in the three previous months.
Building material and garden equipment and supplies dealers registered a second consecutive increase, rising 2 no faxing 1 hour payday loans.1 per cent. Stronger sales of hardware and home renovation products continued in June.
Sales at food and beverage stores rose 0.3 per cent, after three months of declines. Higher sales at supermarkets and other grocery stores accounted for most of the gain.
Receipts at gasoline stations fell 1.3 per cent after four consecutive monthly increases. This was the second decline in 12 months.
Electronics and appliance store sales declined 3 per cent in June. Sales in this subsector have been relatively flat since the third quarter of 2010.
Miscellaneous store retailers reported a 2.4 per cent decline in sales, offsetting gains made in April and May. Stores in this subsector include office supplies and stationery stores, gift stores and pet supplies stores.
Retail sales rose in seven provinces in June. Ontario retailers registered sales gains of 0.5%, a third consecutive monthly gain. Sales in this province have been on an upward trend since early 2009.
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