10/09/2012 World Business Report


10/09/2012

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be a step forwards towards democracy.

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Now for the latest financial news, here is World Business Report.

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The headlines: Greece's coalition government fights over vital

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spending cuts. Francois Hollande promises to turn

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around the flagging French economy in just two years.

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The leaders of the three parties in Greece's coalition government had

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failed to agree on Sunday's packages of spending cuts worth

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$14.7 billion. Prime minister Antonis Samaras is calling the cut

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crucial to sustaining the bailout funding. The Conservative premier

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and the two other party leaders, the Socialists and the Democrats,

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disagree on the across the board cuts to pensions and wages. They

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insist that Greece's international creditors give the country more

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time to implement the cuts. The three leaders will meet again on

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will be speaking to representatives from the IMF today, and on Tuesday

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with the ECB president. I am joined by head of foreign exchange... We

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seem to be no closer to Greece hitting targets and getting the

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extra money they need. That's right. We are back into the diplomacy

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element where the various politicians are negotiating with

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each other. The problem is, as time goes on and economies continue to

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attract, their ability to meet the targets in terms of cuts will

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continue to diminish. They are hoping to get more time in order to

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enact some of the cuts, but whether the creditors are prepared to give

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them that time is still a moot point, that is the problem. What do

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the creditors want to see in terms of evidence that Greece is

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deserving of the next tranche of cash? There will be some scrutiny

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of how aggressive the cuts have been. How they have been

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implemented. Also the implementation of other measures

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such as privatisation. It's all very well saying they will sell for

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the area's industries or sections of assets, without actually moving

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ahead and doing that the international community will say

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that it is not really being enacted. We need to see real time cuts.

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EU think this is a question of these politicians having to bite

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the bullet? -- do you think. They need to see the politicians or are

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in a position of strength. Antonis Samaras cannot deliver unless

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creditors agree. If you're faced with a painful decision, if you can

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postpone or delay it you will try to do that. That is what the

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politicians are attending. That is reliant on the creditors plane ball.

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-- playing. It is quite rational for them to say "we don't want to

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give you more time" it will not just be more time, it will be more

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money. There is this issue of a debate between the parties. It will

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be a case of them trying to push the envelope to try to get the best

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terms possible. It is a Game of bluff in poker, with the financial

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markets being the key element. Briefly, Antonis Samaras will meet

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with the head of the ECB tomorrow. His announcement last week about

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buying bonds in the financial markets does not help Greece at all,

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does it? No, that was about economies which still have access

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to the financial markets, which Spain still does. For those such as

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Greece which is reliant on funding - they are a separate account. We

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are talking about two separate strands which overlap, because they

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are in the eurozone, but we are talking about the head of the ECB

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having a process that could be helpful to Spain, Ireland and

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Portugal at this point. French President Francois Hollande

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has promised to turn the country's stagnant economy around by 2014. He

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made the announcement in a prime- time television interview on Sunday,

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it comes four months into his presidency. Critics have accused

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him of procrastination. He outlined a series of measures including

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spending cuts, and he said the government would lower its growth

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forecast for next year to just 0.8%, down from 1.2%. There will be a...

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We have more on Francois Hollande's controversial tax plans. The

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wealthy in France promised to raise income tax on the wealthy up to 75%.

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That was one of his more popular pledges, which helped him win the

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election. Not everyone thinks the plan is feasible. The problem with

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this absurd pledge, the 75% tax rate, once you are in power, you

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more or less have to go by it and abide by it. Now we see the

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Government considering that it was obviously out rages and done by

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Francois Hollande to react to some piece of news during the elections.

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They are trying to water the proposal down now. Of course, they

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will get the worst of both worlds, because their supporters will say

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they are betraying them.... Attempts to water down the

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proposals in Parliament have met with difficulties. France's

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government needs to raise more tax or cut spending. The new President

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has made a commitment to balance the budget within five years. He

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has damaged his credibility on being able to do that on public

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finances. That acts as a restraint on the government's ability to

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refloat the economy. There is a limit to how far the government can

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go. This means Francois Hollande faces a tough act of balancing on a

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tightrope. He will be watched with intense scrutiny in the lead-up to

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the Budget. We had had a lot of economic news

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out of China. The trade surplus has widened to $27.6 billion as exports

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rose and imports went down. What picture is this painting about

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China? It's still showing that things are slowing down.

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Absolutely. The export numbers grew at a slower pace than forecast in

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the month of August, while imports fell as well, surprisingly. The

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latest numbers revealed that there is a mounting challenge that

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Shanghai's policymakers face. The data confirms President Hu Jintao's

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warning over the weekend of the great challenges posted by the

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world economy. They could be further stimulus and monetary

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easing to support the expansion of the economy. We have seen off the

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August data now from the Trade report, Investment and retail sales,

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it has become clear that the slowdown is growing and that the

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government is feeling the need to act. One economist I spoke to is

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worried on how this might affect the rest of Asia. The region had

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been hoping China would come up with some sort of stimulus and

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packages in terms of consumption, but this is not happening.

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A couple of other business stories: The chief executive of extra Otter

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is ready to step down after a $36 billion takeover. -- XStrata.

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