European Central Bank President Jean-Claude Trichet pressed Greece to halt its flirtation with International Monetary Fund aid and work with European allies to tame its record budget deficit.
As protesters besieged the Greek Finance Ministry to denounce 4.8 billion euros ($6.5 billion) of tax increases and spending cuts, the Athens government said the absence of European support might force it into the hands of the IMF.
Trichet yesterday spoke out against appealing to the Washington-based lender “as a supplier of help,” keeping the pressure on Greece to cut the highest deficit in the euro’s 11- year history — and on European governments to step in if Greece can’t go it alone.
“For Trichet, using the IMF would be an admission that Europe can’t deal with its own business,” said Gilles Moec, a senior economist at Deutsche Bank AG in London and a former Bank of France official. “Trichet’s very keen on saying that Europe has its own system of safeguards. He went almost as far as saying Europe has something in the pipeline.”
The region’s biggest deficit spender collides with Europe’s largest economy when Greek Prime Minister George Papandreou meets tonight in Berlin German Chancellor Angela Merkel, co-author of a Feb. 11 European pledge of “determined and coordinated action, if needed” to aid Greece.
Domestic Pressure
Facing political pressure at home not to squander German taxpayers’ money, Merkel said two days ago that tonight’s Berlin encounter won’t be “about aid commitments.”
Starting five days of financial diplomacy that take him to Berlin, Luxembourg, Paris and Washington, Papandreou pushed for European help in getting credit at rates below the 6.11 percent investors currently demand on Greek 10-year bonds. Papandreou will meet with U.S President Barack Obama and not the IMF in his swing through Washington.
“We’re not asking for money,” Papandreou said in an interview in today’s Frankfurter Allgemeine Zeitung. “We don’t want to be the Lehman Brothers of the EU. I’m not demanding loans for Greece at the same favorable conditions that Germany gets, but we need more favorable terms than we’re getting now.”
Greece bought time yesterday by selling 10-year bonds with investors bidding for more than three times the 5 billion euros it sought to raise. The goal was to avoid a repeat of a five- year note sale in January, when the debt tumbled on the first day of trading. Greece faces more than 20 billion euros in debt redemptions in April and May.
Wage Cuts
“Now it’s really playing for time,” said Carsten Brzeski, an economist at ING Group in Brussels who used to work at the European Commission.
Tax increases and pay cuts for government employees outlined on March 3 were designed to guarantee Greece would meet a January pledge to trim the deficit to 8.7 percent of gross domestic product from 12.7 percent, more than four times the euro region’s 3 percent limit.
Concern that Europe will fail to cope with Greece’s fiscal woes has knocked the euro down 5.4 percent against the dollar this year. Trichet’s opposition to the IMF as a safety valve further undercut the currency yesterday. It fell more than 1 cent to $1.3560.
“Europe is being short-sighted,” said Ted Truman, a senior fellow at the Peterson Institute for International Economics and a former adviser to U.S. Treasury Secretary Timothy F. Geithner. “If Europeans get it wrong then this impacts financial markets. It will likely impact European growth and that of the rest of the world.”
Greek Backlash
Yesterday brought mixed messages about Greece’s romance with the IMF. Finance Minister George Papaconstantinou called the IMF a last resort if the European Union fails to “rise to the occasion.”
That shifted the focus back to Greece’s efforts to get out of the fiscal jam on its own, a job made harder by protests against austerity steps by a socialist government that came to power in October on promises of higher wages and pensions.
“Grossly unfair” was the verdict of Dimitris Bratis, president of the Greek teaching federation, on NET TV yesterday. Teachers plan to walk off the job today, along with the main public transport union.
Trichet — involved in drawing up the Feb. 11 declaration of moral support for Greece — didn’t rule out European support yesterday, while keeping vague about what the EU would do.
“I gave publicly my support for the statement,” Trichet said, reading excerpts aloud at his Frankfurt press conference. “I take that commitment as very, very important.”
German lawmakers briefed on the aid discussions have spoken of contingency plans to offer Greece about 25 billion euros, enough to cover the maturing debt. One option may be for state- owned lenders such as Germany’s KfW Group to buy Greek bonds.
“It has been a game of chicken,” said Paul de Grauwe, a professor at the Catholic University of Leuven in Belgium. “The European authorities have not been willing to give clear signals because they are afraid that the Greeks will not go far enough in budgetary tightening. But now I think we can say the Greeks have gone quite far. The euro zone governments should take a step forward now which could create a virtuous circle.”
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Design Within Reach will soon require a lot more effort, as the chain closes its midtown store at 16th and J streets.
The company confirmed it would close the 2,700-square-foot store at 1020 16th St. — in the ground-floor of the Loftwork’s o1 Lofts development, which includes Bistro 33 Midtown and P.F. Chang’s China Bistro. Design Within Reach will close March 15, with a 30 percent-off sale until then, a company spokeswoman said paydayloans.
The San Francisco-based company, which has about 60 of the boutique stores featuring cool and trendy furniture nationwide, is the latest to close its local outlet during the recession. Two employees work at the store.
The company has a Berkeley and three San Francisco stores, the soon-to-be closest outlets to Sacramento.
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Luxembourg’s Jean-Claude Juncker said the group of euro-area finance ministers, which he heads, may not reach a decision next week on a successor for European Central Bank Vice President Lucas Papademos.
“Whether we do this on Monday evening or in February, I cannot yet say,” Juncker said at a press conference in Luxembourg today. The so-called eurogroup of finance chiefs is scheduled to discuss the three candidates to succeed Papademos at a regular monthly meeting on Jan. 18 in Brussels.
The candidates to take over the central bank’s vice- president post on June 1 are ECB Governing Council members Yves Mersch and Vitor Constancio and Peter Praet, a director at the Belgian central bank who also is chairman of the Frankfurt-based ECB’s Banking Supervision Committee low interest rate personal loans.
Juncker said he lobbied French President Nicolas Sarkozy on behalf of Mersch, who is head of Luxembourg’s central bank, at a meeting yesterday in Paris.
“I’m in touch with all the euro-zone countries. I outlined the merits of Mersch’s candidature to President Sarkozy,” Juncker said. “It’s not my intention to reveal publicly the various reactions I’ve had.”
The number of Americans filing first-time claims for unemployment insurance fell sharply last week to the lowest level in 17 months, the government said Thursday. Analysts had expected an increase.
There were 432,000 initial jobless claims filed in the week ended Dec. 26, down 22,000 from the previous week’s revised 454,000, the Labor Department said. The figure is the lowest since July 19, 2008, when there were 413,000 claims filed.
A consensus estimate of economists surveyed by Briefing.com expected claims to jump to 460,000.
The 4-week moving average of initial claims totaled 460,250, down 5,500 from the previous week’s revised average of 465,750.
"It’s encouraging to see that we’re continuing to move in the right direction toward 400,000 claims," said Tim Quinlan, economic analyst at Wells Fargo. "We’re certainly off the highs we saw earlier this year.
Jobless claims have been trending downward since the end of March, when they peaked at 674,000, the highest figure since 1982.
Continuing claims: The government said 4,981,000 people filed continuing claims in the week ended Dec. 19, the most recent data available. That’s 57,000 down from the preceding week’s revised 5,038,000 claims.
The 4-week moving average for ongoing claims fell by 122,250 to 5,101,250 from the previous week’s revised 5,223,250.
But the slide may signal that more filers are dropping off those rolls into extended benefits.
Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks business card design. The figures do not include those who have moved to state or federal extensions, or people whose benefits have expired.
Congress passed legislation last month to extend federally paid benefits up to 99 weeks, depending on the state, but the law only helps those who exhaust their federal unemployment lifelines by the year’s end.
Lawmakers in the House and the Senate recently passed measures to extend the filing deadline through the end of February. The President is expected to sign the legislation soon.
Both chambers initially introduced bills to push the deadline to apply for benefits through 2010 or beyond, but Democratic leaders in the House scaled back the effort in hopes of getting the bill through the Senate more quickly.
State-by-state: Jobless claims in 10 states declined by more than 1,000 for the week ended Dec. 19, the most recent data available. Claims in Tennessee dropped the most, by 2,972.
A total of 12 states said claims increased by more than 1,000. Claims in New York jumped the most by 1,155. A state-supplied comment attributed the increase to layoffs in the construction, service and real estate industries.
Outlook: The employment picture will continue to improve as jobless claims continue to fall, but Quinlan said they will need to drop near 350,000 for positive job growth.
He expects nonfram payrolls to return to positive territory by the second quarter of 2010, and for the unemployment rate to fall by the end of the year.
Because oil prices have always been directly related to the strength of the economy, a recovery might have seen headlines like these:
• The recession ends: Get ready for $100 oil
• The economy roars: $140 oil, is there an end in sight?
• Everyone in China buys a Cadillac: World tapped out
But a growing number of experts are saying that you can forget all that. For the next couple of years, they say, oil prices will remain well below $100 a barrel as the economy remains fragile and efficiency measures kick in.
"The world will never run out of oil," Deutsche Bank analysts wrote in a recent research note, echoing the old logic that the Stone Age didn’t end because the world ran out of stone. "If the oil age does end, it likely will be because we become more efficient and simply use less petroleum."
It’s this "becoming more efficient" idea that the Deutsche Bank analysts use to predict even lower oil prices in 2010 than now - an average of $65 a barrel next year compared to nearly $80 currently.
To get there, they employ a metric known as energy intensity, which basically measures the amount of oil used in relation to the size of the economy. (Keep an eye on this term in the next couple of weeks - countries at the upcoming Copenhagen summit on climate change will use it to try to wiggle out of making any hard commitments on cutting greenhouse gases.)
The energy intensity of the U.S. economy has actually dropped by about 2% a year every year since the early 1980s. In the next couple of years Deutsche Bank expects it to decline by around 3% as people buy more fuel efficient cars and respond in other ways to the high prices of 2004-2008 and as government conservation measures kick in.
With economic growth expected to remain at a sluggish 2.5% or so over the next couple of years, that translates into an actual drop in U.S. oil consumption.
"US oil demand may have already peaked," the note said.
The bank’s numbers aren’t far off from what the government is saying either no fax payday loans.
U.S. oil consumption, which peaked at almost 21 million barrels a day in 2005, is now under 19 million barrels a day, according to the Energy Information Administration.
"The last time we had a decline in consumption of this magnitude was 1979-82," said Tancred Lidderdale, an oil analyst at EIA. U.S. oil demand isn’t expected to near 21 million barrels a day again until 2029.
The rest of the world
But what about Chinese demand? Speculators? Geopolitical tensions? Or any one of the myriad reasons cited for rising oil prices?
Chinese economic growth at this quick rate is not sustainable, said Addison Armstrong, director of market research at Tradition Energy, an energy brokerage in Stamford, Conn. Besides, he says, the Chinese will likely reduce the energy intensity of their economy even faster than America.
And by the time hundreds of million of Chinese are buying cars, the fleet could very well be all-electric.
As for speculators, Armstrong said credit tightening is making it harder for them to make the big bets on energy that were seen before the crisis.
And geopolitical flare-ups in oil-rich nations are much less apt to affect prices now that the world has the ability to produce much more oil than it is using. Indeed, this lack of spare capacity was an underlying reason oil prices got so high in 2008. That year, spare capacity hit a low of 1 million barrels a day, a mere tanker load away from demand exceeding supply.
Now that number is almost 4 million barrels a day, and expected to grow to 4.5 million barrels a day by the middle of next year.
"There’s so much spare capacity right now," said Armstrong, noting that oil prices in the $70 range are still high enough to insure new supplies are being brought online. "It’s very difficult to see prices much higher."
Gordon Brown and David Cameron will offer business leaders rival views of how to return the U.K. to economic growth after a poll showed the gap between their parties at its narrowest this year.
The prime minister and his Conservative Party rival will both address the Confederation of British Industry’s annual conference, starting at about 11 a.m. today in London. While Cameron said yesterday that the government needs to cut spending to avoid losing the confidence of bond investors, Brown will argue that such a course would put any recovery in danger.
“Choking off recovery by turning off the life support for our economies prematurely would be fatal to British jobs, British growth and British prosperity for years,” Brown will say, according to extracts released in advance by his office. “That’s why we will continue with our current plans to support our economy until the private sector recovery is established.”
With an election six months away at most and the country facing the biggest budget deficit since World War II, the question of when to cut spending is dominating political debate. Last month, the Conservatives pledged to freeze most public sector pay and make voters wait a year longer before they retire. Yesterday, an Ipsos-Mori poll showed their lead at six percent, putting them on course for a minority government.
Cameron told the BBC yesterday he was “working night and day” for a majority government pay day loans. “We’ve got to take some tough and difficult decisions and I’d rather have a government that could do that,” he said on the Andrew Marr show.
‘Emergency Budget’
Cameron pledged to deliver an “emergency budget” which “goes for growth” within 50 days of winning the election. The Organization for Economic Cooperation and Development last week urged Britain to do more to mend public finances as data showed the deficit in October was the worst for the month since records began in 1993.
While Brown will repeat the suggestion of a Tobin tax on banking that he aired at the Group of 20 finance ministers’ meeting earlier this month, he will say the idea could only work if adopted globally. The U.S. has rejected the proposal.
Brown will still tell bankers they must expect to pay for the costs of rescuing them.
“Make no mistake, we must agree international action to redress the balance of risk and reward between the public and the financial sector so that it reflects fully the potential damage of financial failure and the cost of preventing it,” the prime minister will say.
A prospective homebuyer might be surprised to find a new subdivision of large houses and townhouses in the city of St. Louis.
But there it is, the Boulevard Heights development, just off Blow Street and Trainor Court in south St. Louis.
Bearing the same name of the surrounding neighborhood, the project’s 11 acres are subdivided for new houses comparable to those offered in competing subdivisions throughout the suburbs.
C.F. Vatterott Construction Co. and Rolwes Homes Inc., the subdivision’s developers, are betting on the city’s housing renaissance. And they’re hoping to grab some of those returning to south St. Louis.
"This is a neighborhood that has deep roots, and a lot of people want to come back to it," said Gregory Vatterott, president of C.F. Vatterott.
Selling the houses hasn’t been helped by the recent collapse of the housing market. Despite the challenge, the project is doing rather well, said Joe Zanola, president of a real estate market research firm based in Rock Hill.
"Boulevard Heights, in line with the total St. Louis region market, has been closing more new homes than (they) have been starting," Zanola said. "This is a very healthy sign."
Mayor Francis Slay even gave a personal vote of confidence in the project. His family moved into a house he bought there earlier this year.
The subdivision is being built on the former site of greenhouses once maintained by the St. Louis Public Schools for a horticulture program.
The developers’ plan calls for 44 single-family houses and 32 townhouse units, with the first houses constructed in 2007. Sizes range from 1,200 square feet for the smallest townhouse unit to more than 3,000 square feet for the largest house.
So far, 25 houses and 11 townhouse units have been finished. Of those, 22 houses and nine units are occupied.
Work and sales of the houses and townhouses are split between the two developers. If there is enough interest, condominiums also could be built, Vatterott said.
Partnering on the project gave each company more leverage in financing about $35 million they’ve invested in the subdivision, he added.
Norma Stoltz, a Rolwes Homes sales manager for Boulevard Heights, said one good feature of the subdivision’s architecture was that "we maintain the historic integrity of the (Boulevard Heights) neighborhood in our designs."
Like sales elsewhere, demand for housing in Boulevard Heights subdivision slowed this year, Vatterott said. But he said there was a recent spike in interest.
The least expensive townhouse unit starts in the $190,000 range, while the most expensive house is in the $400,000 range.
The developers are offering customized house styles. Vatterott’s green package with energy-saving features includes high-efficiency heating and air-conditioning, tankless water heaters and double-pane insulated glass windows.
Energy-efficient features have helped Boulevard Heights compete with large older houses for sale in the area, said Jill Woodard, a Vatterott sales manager for Boulevard Heights.
"That’s one of the hidden benefits of new construction," she said.
Another draw is the variety of stores and restaurants nearby at shopping center Loughborough Commons, at Interstate 55 and Loughborough Avenue, Woodard added.
The Boulevard Heights project brings to almost 500 the number of city housing units Vatterott has built either on its own or with other developers since the mid-1980s.
But it is the first time the company has been involved in developing so large a subdivision within the city limits.
The developers said Boulevard Heights would be completed within a few years.
American International Group Inc Chief Executive Robert Benmosche said on Wednesday he remains “totally committed” to staying at the company, countering an earlier report that he was considering stepping down.
In a letter to employees obtained by Reuters, Benmosche said he and the company’s board are “frustrated” about restrictions on pay and are in discussions with the U.S. government about them.
AIG, which has received up to $180 billion of federal aid, including more than $80 billion in loans, and is now 80 percent-owned by U.S. taxpayers, posted its second straight quarterly profit last week, helped by a recovery in the value of its investments.
Benmosche said compensation restraints present a “barrier that stands in the way of restoring AIG’s value.”
The Wall Street Journal reported that Benmosche was so frustrated that he told the company’s board last week he was considering stepping down payday cash advance loans. The newspaper cited people familiar with the matter.
The giant insurer’s chief executive said in his letter that he is particularly concerned with the pay of the company’s top 100 executives, which are under the purview of Kenneth Feinberg, the U.S. government’s pay czar.
Benmosche told AIG directors that he was “done” but agreed to think it over when they reacted with shock, the people told the paper.
(Reporting by Steve Eder in New York and Ajay Kamalakaran in Bangalore; editing by Valerie Lee, Andre Grenon, Leslie Gevirtz)
AXA Asia Pacific rejected a $10.3 billion bid from parent AXA SA and Australian rival AMP Ltd on Monday, an initial hurdle for the French insurer’s bold ambitions to expand in Asia.
AXA SA, Europe’s second-largest insurer it would raise $3 billion to buy out its Asian assets in a two-stage deal which would see AXA Asia Pacific sold to AMP, then divided on geographical lines with the Australian firm keeping the Australia and New Zealand assets and selling the Asian assets back to AXA SA.
But AXA Asia Pacific’s independent directors rejected the main plank of the deal saying the deal “significantly undervalued” the company.
AXA SA had tried to buy out the minorities in AXA Asia Pacific five years ago but was knocked back.
“They’ve obviously wanted to have at least some of the assets of AXA Asia Pacific for some time. They wanted to do it cheaply before and they’re probably wanting to do it cheaply again,” said Ross Barker, managing director of Australian Foundation Investment Co.
AXA Asia Pacific shares jumped 30 percent on news of the takeover bid, with the market punting on AMP and AXA improving the offer.
AXA SA holds its Asian operations through its stake in Australia-based AXA Asia Pacific Holdings but now wants to own these assets outright, doubling its exposure to Asian life insurance savings, including in China and India.
“The proposal has been received against the backdrop of recent weakness in global financial markets and before the growth of our Asian operations is fully reflected in our profitability,” AXA Asia Pacific Chairman Rick Allert said in a statement.
With the buyout, AMP would buy all of the shares in the Asia Pacific unit, including the parent’s 53 percent stake in a deal worth $10.3 billion, and then sell AXA Asia Pacific’s Asian assets back to the French parent.
“The Asian assets are attractive,” said Mark Daniels, head of Australian equities for Aberdeen Asset Management.
“That’s one of the reasons why you’d hold AXA (Asia Pacific). They’ve got a very good business in Hong Kong and other Asian businesses are coming on track,” Daniels added.
In a separate development, AXA’s 15.6 percent stake in China’s No.4 life insurer, Taikang, attracted foreign and domestic bidders, including Temasek and Blackstone, valuing the holding at more than $1 billion, sources told Reuters.
“A BIT LIGHT”
AMP’s cash-and-shares offer for all of AXA Asia Pacific, the first stage of the deal, implied a bid of A$5.34 per AXA Asia Pacific share, valuing the target firm at A$11.2 billion ($10.3 billion), based on AMP’s closing share price on Friday. AMP is offering a 26 percent premium to AXA’s close on Friday.
AXA’s shares surged 33 percent to close at A$5.70, their highest since the collapse of Lehman Brothers.
At the new GM, the buck now stops with the board.
The surprise decision by General Motors Co to drop a plan supported by Chief Executive Fritz Henderson to sell the company’s Opel unit has raised new questions about the standing of the veteran GM insider after just six months on the job.
“It isn’t clear who is running GM,” said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. “They’ve got a problem here.”
Henderson, who joined GM in 1984 and worked his way up as a financial manager, has only been in charge of GM since this spring, when the Obama administration ousted Rick Wagoner and ordered the company to appoint outsiders to its hitherto insider-dominated board.
The reversal on selling Opel to a group led by Canada’s Magna International Inc suggests to some the new directors — including Ed Whitacre, the former AT&T Inc CEO who now serves as GM’s chairman — are not deferring to anyone. Noteven Henderson, who expressed confidence recently the Opel sale would be wrapped up soon.
The sale was controversial from the start.
“My view was always if at the end of this Opel ended up outside GM, that was a strategic mistake,” Mike Jackson, the head of Auto Nation, told the Reuters Auto Summit in Detroit.
John Smith, a GM group vice president and chief negotiator in the Opel restructuring, told reporters on Wednesday that the decision not to sell Opel was debated vigorously within GM advanced payday loan.
“This has been a close call from the very first of the three detailed reviews with our board,” Smith said. “It was a coin toss in August, it was a coin toss in September and a coin toss of a kind in November.”
HENDERSON HAD FAVORED
Henderson, who vowed to shake up the slow-moving culture of the 101-year-old automaker, had argued the Magna deal was the best remaining choice for cash-strapped GM after seven months of painstaking talks with bidders.
He also said in an interview on CNBC in late October that he thought the board supported the move.
So the company’s announcement on Tuesday that the board had decided to abandon the sale left industry watchers wondering whether Henderson was out of the loop — or losing clout.
“What worries me is the indecisiveness,” Ken Lewenza, the head of the Canadian Auto Workers union told the Reuters Auto Summit on Wednesday. “But if at the end of the day it means success for General Motors, it might make sense.”
Henderson was already looking like the odd man out in Detroit, where the other two car companies, Ford and Chrysler, are now run by executives — Alan Mullaly at Ford and Sergio Marchionne at Chrysler — who have spent most of their careers outside the car industry.
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