15/10/2012 World Business Report


15/10/2012

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Those are the latest headlines from BBC World News. Now for the latest

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financial news with World Business Report.

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Welcome to World Business Report. I'm Sally Bundock. The headlines:

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More pain, no gain? Portugal's government unveils another five

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billion euros of cuts as it falls behind in plans to reduce national

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debt. 20 years after its creation we examine the challenges and

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successes of the European Union Single Market. We begin in Portugal.

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The government is set to unveil another 4.9 billion euros worth of

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spending cuts and tax rises when it presents its budget later. The

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country is already a year behind targets set when it received a 78

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billion euro rescue package from the EU and IMF. Portugal is in the

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midst of its deepest recession for a generation. Wealth is shrinking

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and tax receipts are falling short of forecasts. Nice to see you. No

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doubt this will be a bitter pill. That is right. We have had some

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indication there will be enormous tax increases. The deepest

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recession in a generation. The economy is doing worse than

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expected. That means more spending cuts, more tax increases in order

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to meet the more relaxed targets for this year. It is a coalition

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government. All of these problems with reaching the target and the

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issue of higher taxes has led to tensions within the coalition. This

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is going down to the wire. We will have a Cabinet meeting shortly.

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you say, it is a coalition government that is quite shaky.

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When it comes to tax increases, where is that going to fall?

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has already been increased to 23%. Many of the law rated goods have

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been increased to 23%. -- lower. The emphasis will be on income tax.

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That will be discussed at the cabinet meeting this morning. How

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many new tax brackets there will be. Who will be most badly affected.

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40% of Portuguese do not pay tax because they do not earn enough.

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The increases will fall more heavily on those who do pay. We are

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hearing that protests are planned. Yes, there is a process scheduled

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for 6pm local time. -- protest. It is being organised through social

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networks, not trade unions. There will be hundreds of people,

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possibly thousands. It will be quite ratty. So far we have not

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seen the violence we have seen in other countries. A lot of people

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are certainly very angry right now. Fresh from last week's surprise

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Nobel Peace Prize, European Union officials have a week of

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celebrations planned. It's to mark 20 years since the creation of the

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Single Market. In 1992, there were just 12 members of the European

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Economic Market. Its successor, the European Union, now has 27 member

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states. The agreement to remove customs and tariffs on cross-border

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commerce in the region is estimated to have boosted business by 240

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billion euros. It's thought to have created 2.5 million jobs. Our

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Europe business correspondent, Nigel Cassidy, caught up with one

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company, an underfloor heating specialist, which has grown and

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prospered over the past two decades. Born two decades ago in the early

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days of the European single market, this enterprise now exports the

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heating. Lower tariffs have helped build a pan-European business. 50%

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of the London staff were recruited for skills elsewhere in the EU.

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Underfloor heating still has to meet different standards.

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French have their own core principles for building houses and

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allowing usage of electricity. We have a lower density heater for

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France. We have to produce things that produce less electricity.

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single market has not relieved a requirement to record anything that

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moves. We know it is important to measure trade flows. We think it is

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a bit over-engineered. It probably uses 20-30% more manpower than we

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would like. We have to account for all of the products that we export.

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This is incredibly detailed. It relates to separate product codes

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for everything we sell in a book that is thousands of pages. It is a

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big administrative burden. future single market focus in

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Brussels will be on Europe's backbone, things like transport,

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energy networks. Electronic commerce and recruitment. With

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growth stalling across Europe right now, the renewed emphasis on

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freeing up the market will not come a moment too soon. Staying with the

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EU, Greece needs more time to reduce its debts according to

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international auditors. German magazine Der Spiegel reports that

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officials from the European Commission, European Central Bank

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and International Monetary Fund have asked EU finance ministers to

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give Greece two more years to meet its debt targets. The so-called

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Troika advise Greece should be given until 2016 to carry out

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reforms needed to cut 13.5 billion euros of costs. Executives from

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Chinese car maker Geely Automotive fly into the UK for rescue talks

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with black taxi maker Manganese Bronze. The maker of the

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distinctive hackney carriages warned it could run out of cash on

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Friday after it was forced to recall hundreds of faulty vehicles

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and suspend new sales. It's just the latest blow for the Coventry-

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based manufacturer which had already warned it would make a loss

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this year. Geely already owns a 20% stake in the company.

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The price of ordinary goods is rising at a more modest pace in

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China. The latest inflation data shows prices slowed to 1.9% in

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materials and components for manufacturers also fell 3.6% from a

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year earlier. That could free the central bank to pump money into the

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economy or cut the cost of borrowing without pushing prices up

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beyond the reach of ordinary Chinese households. Patrick

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Chovanec is an Associate Professor at Tsinghua University's School of

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Economics and Management. He joins us from our studio in Beijing.

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Thank you for being on the programme. Give me your take on

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these numbers. Is it positive or negative? The good news is that we

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are not seeing the run-up in food prices, in particular that we

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feared from the US drought. Whether this translates into the ability to

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ease monetary policy further, I do not think that follows. Just

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yesterday the Governor of China's Central Bank said he was still

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concern about inflation. Debt remains an issue for him. More

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importantly, China's Central Bank has been dumping a great deal of

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money through the summer into the banking system. Not through the

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reserve ratio. This has been keeping the banking system liquid

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in order to roll over a large man of bad debt. That is fine of the

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reasons he is concerned. -- large amount. -- one of the reasons.

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Central Bank chief is indicating there is no interest rate cuts to

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come. What will they do to try and boost the economy? This really gets

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to the heart of what the solution is. Does China need a new stimulus?

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Does China need a rebalancing? If you believe that China needs to

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rebalance away from export-driven growth towards more domestic

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consumption, some people argue, I am one of them, China should not be

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cutting interest rates, it should be raising them to help boost

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consumption by giving people a greater return on their savings. To

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diminish some of the over investment that has been driving

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this economy. We have to leave it there. Thank you. The news from

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