UN Grim on World Economic Prospects for 2012
United Nations economists have sharply cut their projections for world growth and warned that 2012 will be key to whether the global economy makes a slow recovery or falls back into recession.
In their report, World Economic Situation and Prospects 2012, U.N. economists forecast very low growth, warning that developed economies are on the brink of a downward spiral because of four factors: sovereign debt distress, fragile banking sectors, weak aggregate demand and policy paralysis.
The U.N.’s director of development and policy analysis, Rob Vos, warns the world could be facing a new economic downturn.
“We are at the brink of possible new recession," he said. "Though our baseline still assumes that the global economy may, as we call it in the report, 'muddle through' in the next two years, in the sense that maybe the sovereign debt crisis in Europe can be contained to some extent and also the problems in the U.S. economy will not worsen by much more. But that means that we are still in problems, in the sense that economic growth is very meager, it has slowed down already this year from the recovery we have seen in 2010.”
The International Monetary Fund has recommended fiscal austerity measures to ease the global economic crisis, but the U.N. Assistant Chief for Economic Development, Jomo Kwame Sundaram, cautioned against this approach.
“This turn toward fiscal austerity has exacerbated the downturn throughout the world," said Sundaram. "It is unlikely, of course, that a reversal will have an immediate effect all around, but there is a strong case to be made for further fiscal actions in the near term in order to create the conditions for stronger recovery.”
Sundaram said without collective action on recovery the situation could deteriorate further, especially in Europe where the debt crisis is spreading.
The U.N. recommends strengthening the European Financial Stabilization Fund, which helps troubled eurozone economies. The authors say if the fund could reduce borrowing costs that would lessen pressure on governments under financial stress.
The report notes that there is much greater pressure on political leaders to make policy decisions based on how they will impact financial markets. Sundaram said this was not the case even 20 years ago.
“It would be inconceivable at that time, let us say in the early 1990s, to think of the political leadership of the world sort of looking behind their shoulders and wondering what markets would say,” said Sundaram.
A more complete report with regional breakdowns will be released in January, but the projections released Thursday include a peek at how some parts of the world are doing.
The U.N. says the United States’ high unemployment rate and low wage growth are holding back demand. This combined with the prospect of prolonged depressed housing prices has raised the risk of a new wave of home foreclosures.
In Asia, economists say growth in China and India is expected to remain “robust,” but GDP growth in China is expected to slow. A fact confirmed by China’s deputy finance minister Thursday when he announced the manufacturing sector had contracted.
In Latin America, Brazil and Mexico are expected to suffer a more visible economic slowdown. While in Africa, the forecast is mixed, more due to political and climate factors than reaction to world markets.
Sarkozy: France Germany ties key to eurozone stability
The French President, Nicolas Sarkozy, has said France and Germany must come together to ensure stability at the heart of Europe.
In a major speech in the port of Toulon, Mr Sarkozy said he and the German Chancellor, Angela Merkel, would meet on Monday to propose measures to "guarantee the future of Europe".
He warned that economic convergence would be long and difficult.
But he promised that France would not give up its sovereignty.
He said the euro could not continue to exist unless eurozone economies pulled together.
Europe had to be "refounded" he said, with France and Germany at its heart to ensure "a zone of stability".
"We must confront those who doubt the stability of the euro and speculate on its break-up with total solidarity.
"France is fighting so that Europe can still make its voice heard in the world of tomorrow," he said.
Stricter financial discipline was needed, he added, with more severe sanctions for countries which did not meet their responsibilities.
Mr Sarkozy also made a robust defence of measures he had already introduced to tackle France's debts.
He said the country had to end doubts about its ability to pay, in order to avoid being targeted by speculators.
Two-speed Europe
Mr Sarkozy said Europe's response to the debt crisis had not been fast enough.
He said Germany and France had agreed that there should be a new European treaty to govern the relations between countries.
However, he rejected German suggestions that national budgets could be approved and regulated in Brussels.
The BBC Paris correspondent, Christian Fraser, says the French president's speech was a sombre assessment of the eurozone crisis and an acknowledgement that eurozone leaders had not worked quickly enough to solve the problems.
Mr Sarkozy has previously expressed the belief that a two-speed European Union is inevitable, arguing that full economic integration will be impossible as the EU expands to more than 30 members.
In a speech in November he said "there will be a two-speed Europe: one speed that moves toward more integration in the eurozone and one speed for a confederation in the EU."
The French president's speech in Toulon comes amid warnings by analysts that France could lose its triple-A credit rating, due to its exposure to the European debt crisis.
Mr Sarkozy will meet the British Prime Minister, David Cameron, in Paris on Friday.
Britain is concerned about the possible impact of a two-speed Europe in which it could be left on the margins along with other countries outside the euro.
European Union leaders will hold a summit in Brussels next week, which is seen by many analysts as a crucial moment in efforts to tackle the debt crisis.
US banks sued over homes seizures
Massachusetts is suing five major banks alleging "illegal" and "deceptive" conduct in the way they seized homes during the financial crisis.
Bank of America, JP Morgan, Wells Fargo, Citigroup, and GMAC must pay for the "harm" caused, the writ says.
Martha Coakley, the state's attorney general, said the banks had no legal right to foreclose on "hundreds, if not thousands, of properties".
The banks have expressed disappointment over the move.
Massachusetts' action could potentially de-rail attempts to reach a US-wide settlement against banks accused of hastily calling in debts as the country's property bubble imploded.
Federal and state prosecutors have been negotiating a $25bn (£16bn) deal to resolve the issue over so-called "robo-signing", where banks employed people to sort out foreclosure documents without reviewing homeowners paperwork and circumstances.
Ms Coakley said: "We have two clear goals with this lawsuit - one is to provide for real accountability for the role the banks have played in unlawful and illegal foreclosures, and secondly to provide for real and enforceable relief for the harm that the misconduct has caused."
The complaint claims the banks violated Massachusetts law with "unlawful and deceptive" conduct in the foreclosure process, including unlawful foreclosures, false documentation, robo-signing, and deceptive practices related to loan modifications.
'It's taken too long'
A statement from the state attorney general's office said: "The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis.
"Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behaviour and real relief for homeowners."
In October 2010, major banks temporarily suspended foreclosures following revelations of fraudulent documents processed by banks.
Ms Coakley said banks have had more than a year to "show accountability for this economic mess," and have failed to do so. "It's taken too long," she said.
Citigroup said it would defend its actions vigorously. Bank of America said it wanted a collaborative resolution to the issue.
JP Morgan said in a statement that it was disappointed the lawsuit was filed while negotiations were ongoing about a broader settlement.
GMAC said it was unhappy that Massachusetts "elected not to continue a more constructive path that could help borrowers in the state, but rather has chosen to use the court process."
Wells Fargo said it disagreed with Ms Coakley that it had not kept a promise to modify loans.
Citigroup said it had not yet reviewed the lawsuit, but the bank believed it had operated appropriately and in compliance with existing laws.
Obama Presses Senate Republicans on Tax-Cut Extension
President Barack Obama on Wednesday made another visit to an important 2012 election state seeking support for his economic policies, while back in Washington Democrats and Republicans in Congress continued negotiations on how to pay for an extension of expiring tax breaks for Americans.
Mr. Obama has returned repeatedly to Pennsylvania, a state he won in the 2008 presidential election and which political analysts say remains crucial to his strategy for winning a second term.
His stop in Scranton, Pennsylvania was his eighth there this year. With a visit to New Hampshire last week, it marked his latest effort to pressure Congress to extend and expand tax breaks scheduled to expire at the end of this year.
President Obama and Democrats control the Senate, where a key procedural vote is expected later this week, say extended payroll tax cuts should be paid for by a permanent surtax on Americans earning $1 million or more.
Republicans generally continue to oppose increasing taxes. However, they are also seeking to avoid political damage that would result from voting against preserving a tax break that would help middle class families, especially during the Christmas holiday.
In Scranton, Mr. Obama sought to keep the pressure on Republicans, chiding them for votes in October that blocked his $447 billion jobs bill, which contained the payroll tax extension.
Republicans, he suggested, care more about opposing tax increases for the wealthy than keeping and expanding a tax break that will help middle class families.
"How is it that they can break their oath when it comes to raising your taxes, but not break their oath when it comes to raising taxes for wealthy people. That doesn't make any sense. I hope that they don't want to just score political points, I hope that they want to help the economy. This cannot be about who wins or loses in Washington, this is about delivering a win for the American people, that is what this is about," he said.
In 2008, President Obama won Pennsylvania by a 10 percent margin over Republican nominee John McCain, but U.S. economic difficulties have hurt his approval ratings there, and the White House hopes to improve that as the 2012 election campaign heats up.
On Capitol Hill, negotiations continued on how to pay for the payroll tax extension. Speaker of the House of Representatives, Republican Congressman John Boehner, spoke of the need to find common ground.
"There is no debate though about whether these extensions ought to be paid for. The president has called for them to be paid for. Democrats here have called for them to be paid for. So, if in fact we can find common ground on these extensions I think you can take to the bank that they will be paid for," he said.
On troubled efforts to bring deficit spending and debt under control, and disagreements between President Obama and Republicans, Boehner said there was a need for a balanced solution but said there is still "room between us" on what that means.
President Obama's day on Wednesday also included a stop in New York City and three events to raise money for his 2012 re-election campaign, ticket prices ranged from $1,000 to the $35,800 maximum permitted under federal fundraising rules.
Chinese Central Bank to Ease Lending Restrictions
China's central bank has announced plans to lower reserve requirements for the country's banks.
The bank said Wednesday that it will reduce the amount of money banks must hold as reserves by half a percent (0.5) starting December 5.
China's state-run Xinhua news agency says the cut is the first of its kind since December 2008.
The move is the latest in a series of measures aimed at tackling concerns that economic slowdowns in Europe and the United States could lead to reduced growth in China.
Last month, the government's statistics bureau said the nation's economy grew at a 9.1 percent annual pace in the three months through September 30. That compares to 9.5 percent growth in the previous three months.
China's booming economy has been a major engine in the growth of the global economy, but the European debt crisis and high unemployment in the United States have weakened demand for Chinese-made goods.
Some information for this report was provided by AP and AFP.
US Senate passes sanctions on Iran central bank
The US Senate has unanimously approved economic sanctions on Iran targeting the country's oil industry, despite warnings the move could backfire.
The measures, passed by 100 votes to nil, would ban foreign firms from doing business with the Iranian central bank.
Before it can become law, it must be approved by the House and President Barack Obama, who is sceptical.
The effort to thwart Iran's alleged nuclear ambitions followed new EU sanctions imposed earlier on Thursday.
Meanwhile, diplomats at the Iranian embassy in London must leave Britain by Friday afternoon.
They were ordered to go after hundreds of Iranian protesters stormed the UK embassy in Tehran on Tuesday.
Oil-price rise?
In recent weeks the US has introduced sanctions against Iran's financial sector, although it has stopped short of targeting the central bank outright.
President Barack Obama has been cautious about harsher sanctions, fearing such a move could disrupt the oil markets at a time of economic uncertainty for many Americans, and alienate potential allies.
US officials have also warned that depriving global markets of Iranian exports could send oil prices sharply higher, gifting Tehran a funding boost.
Unless a compromise is reached, the president will have to decide whether to veto it.
The US has already forbidden its own banks from dealing directly with the Iranian central bank.
Under the new sanctions, drafted by Democrat Robert Menendez and Republican Mark Kirk, foreign banks that do business with Iran's central bank would be cut off from the US financial system.
The sanctions are designed to come into effect after a six-month grace period - in order to give oil markets time to factor them in.
The measures were part of a much larger $662bn (£422bn) defence bill, which also cruised through the Senate on Thursday night.
Europe's new sanctions blacklist 180 Iranian officials and firms, but do not impose an oil embargo on Iran, because some European countries are dependent on Iranian oil.
Ministers meeting in Brussels also agreed on Thursday to work on other measures targeting Iran's energy sector.
The latest round of sanctions follow a recent UN report that linked Iran with the development of a nuclear weapon.
Tehran insists its nuclear programme is strictly for civilian purposes.
Officials say the latest round of sanctions is not related to this week's storming of the UK embassy in Iran.
The British government says all UK diplomatic staff in Tehran have been evacuated and the embassy closed.
Iran has said it regretted the incident, which it described as "unacceptable behaviour by a small number of protesters".
Clinton Offers Rewards for Reforms in Burma
U.S. Secretary of State Hillary Clinton says the United States is ready to support Burma's transition to democracy and will consider re-establishing diplomatic relations if political and economic reforms there take hold.
Secretary Clinton said Thursday during a landmark visit to Burma's capital Naypyidaw that any step Burma's government takes will be carefully considered.
She urged the government to speed up reconciliation efforts by releasing more political prisoners and stop violent campaigns against ethnic minorities. Clinton also urged Burma to end any “illicit” military ties to North Korea and respect international consensus against the spread of nuclear weapons.
She spoke to reporters after a historic meeting with Burmese President Thein Sein who has overseen tentative steps to reform since he took over in March. The former military officer hailed what he called a new chapter in U.S.-Burmese relations.
Later Thursday, the U.S. secretary of state dined with opposition leader Aung San Suu Kyi in her home. The two are scheduled to hold formal talks Friday.
Clinton will also meet with representatives of Burma's ethnic minorities and civil society representatives before departing Burma Friday afternoon.
Clinton is the first U.S. secretary of state to visit Burma in 50 years.
The new Burmese government has released about 200 political prisoners, eased some press restrictions and opened a dialogue with some of its critics, including Aung San Suu Kyi.
The Nobel peace prize laureate was freed from house arrest last year after spending much of the previous 20 years in detention. Her party won a national election in 1990 by a landslide, but was stopped from taking power. She confirmed Wednesday that she will run for parliament in upcoming elections.
The United States and other Western nations imposed sanctions on the former Burmese military government because of its harsh human rights abuses, including military operations against ethnic groups and the jailing of up to 2,000 political prisoners.
Clinton stressed Thursday that the sanctions will not be lifted until Burma makes concrete steps toward democracy.
The Associated Press quoted Burma's state-run newspaper New Light of Myanmar Thursday as saying that a high-level delegation met with a six-man team from the Kachin Independence Organization in China's Yunnan province. Kachin people make up one of Burma's largest ethnic minorities in the north that have had armed clashes with the Burmese army. The report says the two sides agreed to hold more talks toward establishing dialogue and ending violence.
Syria Battling Civil War
The United Nations' top human rights official says Syria's bloody crackdown on anti-government protesters has degenerated into a civil war.
Human Rights Commissioner Navi Pillay told reporters in Geneva Thursday an increasing number of soldiers are defecting and taking up arms against the government. She also said the “reliable information” from Syria indicates the death toll from the past eight months of unrest is far higher than the confirmed U.N. figure of 4,000.
The U.N. Human Rights Council will hold an urgent meeting Friday to discuss the crisis.
But U.S. State Department spokesman Mark Toner said the violence in Syria should not be characterized as a civil war, because, he said, the government is overwhelmingly responsible for the use of force.
Syria has refused to end the crackdown, saying it is a necessary response to attacks by “armed terrorists” on civilians and security personnel.
Meanwhile, a report Thursday by the Russian news agency Interfax says Moscow delivered supersonic cruise missiles to Syria, despite calls from the U.S. and Europe for a weapons embargo against the government.
The European Union said it is tightening sanctions on Syria. EU officials also said they added 11 more entities and 12 more individuals to a blacklist hit by travel bans and asset freezes.
An Arab League committee in Cairo also released a list of 17 Syrians banned from traveling to Arab states. Those banned include the brother of Syrian President Bashar al-Assad, top Cabinet ministers and the country's richest businessman.
Officials say the list and other recommendations will be presented to Arab League members meeting in Doha on Sunday.
Arab League member Kuwait on Thursday urged its nationals to leave Syria due to safety concerns. The move follows mob attacks in Damascus on the embassies of Qatar, Saudi Arabia and the UAE after the Arab League decided to suspend Syria's membership.
Al-Qaeda says it kidnapped Warren Weinstein in Pakistan
Al-Qaeda says it has 70-year-old US aid expert Warren Weinstein, who was kidnapped by armed men in the Pakistani city of Lahore nearly four months ago.
In a video, al-Qaeda leader Ayman al-Zawahiri said he would be freed if the US stopped air strikes in Afghanistan and Pakistan, among other demands.
Mr Weinstein is a former USAID worker who has lived in Pakistan for five years.
US officials have not said publicly who they believed was holding him.
"Just as the Americans detain whomever they suspect may be connected to al-Qaeda or the Taliban even in the slightest of ways, we have detained this man who has been involved with US aid to Pakistan since the 1970s," Zawahiri said in the 31-minute video.
'Retaliation'
He also demanded that America stop air strikes on Somalia and Yemen, according to a US monitoring group, Site Intelligence.
And he called for the release of al-Qaeda and Taliban suspects around the world, including the 1993 World Trade Center bombers.
Zawahiri confirmed, too, an announcement by US officials in August that his Libyan deputy, Atiyah Abd al-Rahman, had been killed in an air strike in Pakistan's north-western tribal region.
"The retaliation, with permission from Allah, will be taken against those crusader Westerners who killed him [Rahman] and his two sons, and killed hundreds of thousands of our brothers, sons, women, and sheikhs, and occupied our countries [and] looted our wealth," said Zawahiri.
He took over at the top of the militant network this year after Osama Bin Laden was killed in May by US special forces at his hideout in the Pakistani city of Abbottabad.
In the video, Zawahiri reportedly addressed Mr Weinstein's family, telling them not to believe any claim by US President Barack Obama that he would try to free the hostage.
"He might say to you, 'I sought to release your relative, but al-Qaeda was stubborn.' Do not believe him," Zawahiri was quoting as saying.
"He might say to you, 'I tried to contact them and they did not answer.' Do not believe him."
Twelve days after Mr Weinstein's abduction on 13 August, Lahore police said he had been freed, but they then retracted the claim. The US embassy in Islamabad said at the time it had no evidence he had been released.
Herman Cain gave cash to Ginger White
Republican candidate Herman Cain has admitted giving money to Ginger White, the woman who says they had a 13-year affair.
In an interview with the New Hampshire Union Leader newspaper, he also said he had not told his wife, Gloria, about the friendship.
But Mr Cain still insists he never had sexual relations with Ms White.
Rival contender Newt Gingrich, who has surged in polls as Mr Cain has dropped, now predicts he will win the race.
The former House Speaker said in an interview with ABC News on Thursday: "It's very hard not to look at the recent polls and think that the odds are very high I'm going to be the nominee."
'Soft-hearted person'
In response to Mr Gingrich's sudden rise, frontrunner Mitt Romney, a former Massachusetts governor, is preparing to launch attack ads in the key election state of Iowa on Friday.
In January, Iowa holds the first of a series of state-by-state contests that will pick the Republican nominee to challenge Barack Obama for the White House in November 2012.
Asked whether the most recent allegations of sexual misconduct to blight his campaign could force him to drop out of the race, Mr Cain told the New Hampshire newspaper: "Yes, it is an option."
He said he repeatedly gave Ms White money to help her with "month-to-month bills and expenses".
"I'm a soft-hearted person when it comes to that stuff," Mr Cain was quoted as saying. "I have helped members of my church. I have helped members of my family."
His wife of 42 years "did not know that we were friends until she [Ms White] came out with this story", he said.
Meanwhile, the Atlanta Journal-Constitution newspaper reported that it had reviewed Ms White's mobile phone records.
It found as many as 70 text messages had been exchanged between her phone and Mr Cain's between 22 October and 18 November, some in the early hours and some late at night.
Mr Cain's lawyer, Lin Wood, has asked for Ms White's phone records to "test her credibility and motive".
The former pizza executive has said he will make a decision about his campaign after a face-to-face meeting with Mrs Cain on Friday.
Ms White's emergence follows allegations of sexual harassment against Mr Cain by four women, during his time as head of a restaurant lobby group in the 1990s.