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January 17th, 2012
Finance, Business, Economic
SANAA, Yemen _ A Norwegian man who was working for the United Nations was kidnapped by armed tribesmen in Yemen’s capital Sanaa on Sunday, officials said.
Norwegian Foreign Ministry spokesman Ford Overland Andersen said the ministry was informed the 34-year-old Norwegian man was abducted early Sunday, but would not give more details.
According to a Yemeni security official, the U.N. worker was kidnapped in the capital Sanaa by armed tribesmen who transferred him to central Marib province, 110 miles (170 kilometers) east of the capital.
The official said the U.N. worker was taken hostage by the Obeyid Marib tribe. They were demanding the release of a tribesman who was arrested on charges of killing four soldiers assigned to guarding oil tankers.
Tribal leaders with close ties to the Obeyid Marib tribe said the U.N. worker was in good health and that his captors were in contact with the U.N. office in Yemen.
Also Sunday, a Yemeni military official said al-Qaida militants executed two soldiers who had been abducted two months ago while fighting al-Qaida militants west of Zinjibar, the provincial capital of Abyan province.
The official said the bodies of the soldiers were found in the country’s south.
Al-Qaida’s dangerous Yemen branch has been taking advantage of nearly a year of internal turmoil over demands that President Ali Abdullah Saleh step down to take control of areas in Yemen’s south.
For the past two days, around 200 al-Qaida militants have been occupying an 500-year-old mosque and school in the central province of Bayda.
On Friday the militants overran the building, which has not been in use for years. The site was a tourist attraction in the town of Radda.
An Associated Press photographer who visited Radda said the militants put up a nearly 40-meter cordon around the site and are armed with RPG’s, automatic rifles and other weapons.
Residents of Radda said the black al-Qaida flag has been raised atop the historic mosque. Some feared that if security forces try to storm the site, they would be forced to flee their homes.
A top security official in Bayda said it was not the responsibility of police to remove the militants from the school, but to maintain general calm in the province.
All Yemeni officials spoke on condition of anonymity because they were not authorized to brief reporters.
Bayda, about 100 miles (150 kilometers) south of the capital Sanaa, has seen large anti-Saleh street protests over the past year.
Yemen’s opposition has accused Saleh of trying to torpedo a power transfer deal by allowing security to deteriorate in the south as a way of arguing that he must stay in power.
The U.S. long considered Saleh a necessary ally in combatting Yemen’s active al-Qaida branch, which has been linked to terror attacks on U.S. soil and is believed to be one of the international terror organization’s most dangerous franchises. The U.S. withdrew its support last summer and said he should step down.
Islamist militants began seizing territory in the southern Abyan province last spring, solidifying their control over the town of Jaar in April before taking the provincial capital, Zinjibar, in May.
Yemeni security forces have been trying unsuccessfully to push them out since then in fierce fighting that has caused many casualties on both sides. The conflict has forced tens of thousands of civilians from Zinjibar and the surrounding area to flee, many to the port city of Aden.
At least 2,000 displaced Yemenis returned home to Zinjibar for the first time in months on Saturday, raising fears that al-Qaida may be trying to use the civilians as human shields.
Spain successfully raised nearly euro10 billion ($12.7 billion) in debt auctions Thursday in a sign of investor confidence in the new conservative government’s attempts to get a grips on the country’s debt.
The treasury said demand for the three bonds, which mature in 2015 and 2016, was strong and the amount sold was double the maximum sought.
The auction was the first since the conservative Popular party took office last month after its landslide election win Nov. 20. It came a day after Parliament approved the government’s first austerity measures, a euro15 billion ($19.1 billion) package aimed at reining in the swollen deficit. The country’s Ibex stock market index rallied 1.5 percent on news of the sale.
Spain has a 21.5 percent unemployment rate and its economy is expected to fall back into recession. It is battling to avoid slumping further into a debt crisis that has already forced Greece, Ireland and Portugal to seek financial bailouts.
Its borrowing costs shot up last year but have eased in auctions since the election.
Marc Ostwald, strategist for Monument Securities described the demand Thursday as “very impressive” and said the sale indicated a welcome for the government’s efforts to quickly bring the deficit under control.
“There is no denying the overall success, particularly as yields are well down on previous equivalent sales, ” he said in a note.
In 2010, Spain began to emerge from a near two-year recession triggered by the collapse of a property and construction bubble that drove growth for nearly a decade. Economy Minister Luis de Guindos predicts the economy will slide back into recession early this year with the last quarter of 2011 and the first of 2012 both registering negative growth free business cards.
Also on Thursday, Italy saw its borrowing costs drop sharply as it easily sold euro12 billion ($15 billion) in bonds in its first test of market sentiment of the new year.
Investors bought euro8.5 billion in 12-month bonds at a yield of 2.735 percent, sharply down from last month’s rate of 5.95 percent, and euro3.5 billion in bonds expiring at the end of May at just 1.644 percent interest, down from 3.251 percent in the last comparable auction.
Spain has pledged to slash its deficit from 11.2 percent of GDP in 2009 to within the European Union limit of 3 percent by 2013.
Under the former Socialist government, widely criticized for its handling of the economic crisis, the deficit target for 2011 had been 6 percent. But the new government claims their predecessors concealed data and that the figure will be at least 8 percent.
Finance Minister Cristobal Montoro, however, insists the aim for 2012 remains 4.4 percent, as the Socialists had planned.
The new austerity measures include euro8.9 billion ($11.3 billion) in spending cuts, a freeze on civil servants’ salaries and on practically all government hiring. The government has also ordered a two-year increase in income and property taxes.
The package was part of an extension of the 2011 budget because the last government did not pass one for 2012. More austerity measures are expected when the government presents its 2012 budget by the end of March.
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Italy’s Premier Mario Monti has warned that his country needs to see more concrete support from the European Union and Germany in return for the painful austerity measures it has adopted.
Monti, who was headed to Berlin Wednesday for talks with Chancellor Angela Merkel in his first official visit to the German capital, was quoted in an interview with German daily Die Welt as saying that his country’s economic reforms do not receive the recognition they deserve.
“It is a problem that despite our sacrifices we do not experience any kind of concession by the EU, for example in the form of a cut in interest rates,” Monti said in an interview that was printed in German.
He warned Italians could turn hostile toward Europe and Germany if they do not see that the austerity measures they have accepted lead to any progress in the country’s financial situation. Although Monti’s government has adopted debt-cutting reforms, Italy’s borrowing rates remain dangerously high.
“If the Italians do not see concrete rewards for their willingness to save and reform, there will be protests in Italy against Europe and also against Germany which is seen as ringleader of EU intolerance and against the European Central Bank,” Monti told the paper quick guaranteed personal loans.
Italy is a key focus because of its size, huge debt load and need to borrow heavily in the first quarter. The yield on its 10-year bonds is hovering around the 7 percent level that is widely considered to be a danger mark.
Some economists say the European Central Bank should help Italy more by buying its government bonds on the open market in larger quantities. That would lower Italy’s borrowing rates and ease pressure on its finances. But the ECB, along with Germany, resist such as move.
Monti’s meeting with Merkel is the latest in a series of talks between European leaders. The German leader met in Berlin on Monday with French President Nicolas Sarkozy and on Tuesday evening with International Monetary Fund chief Christine Lagarde. Lagarde was in Paris on Wednesday to speak with Sarkozy.
Merkel and Sarkozy also plan to travel to Italy on Jan. 20 before a European summit at the end of the month.
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Swiss National Bank Chairman Philip Hildebrand resigned abruptly Monday, bowing to a public uproar over his private currency deals just as a Swiss parliamentary committee was preparing to grill him behind closed doors.
Hildebrand’s resignation took effect immediately, Switzerland’s central bank said in a brief statement.
A short time later, Hildebrand called an impromputu press conference in the Swiss capital of Bern, where emphasized that he was proud of his achievements and working for financial institutions in Switzerland and international organizations such as the World Bank.
“I would like to think I have been a damn good central banker,” Hildebrand told reporters.
“I personally advocated strongly and early for stricter capital requirements for the big banks,” he added. “The policy of the central bank was a success in recent years.”
For the past week, Switzerland has awash with reports about public unease over the dollar swaps last year that netted Hildebrand and his wife, a former currency trader, tens of thousands of dollars in profits at the same time Hildebrand was working to lower the value of the soaring Swiss franc.
It was his second news conference in less than a week pay day advance. He first broke weeks of silence Thursday to deny any breach of central bank rules and announce he was donating the trades’ profits to charity.
But questions remain about the propriety of the trading, and his departure came just before he was to face a Swiss parliamentary committee Monday seeking answers about the deals he engaged in while leading efforts to soften the Swiss franc.
Hildebrand acknowledged Monday the past few weeks have been “a difficult time.”
Lawmakers on the Committees for Economic Affairs and Taxation were holding the confidential session to examine questions such as whether Hildebrand and his wife traded currency from accounts other than the one at Basel-based Bank Sarasin. Hildebrand said he was still appearing before the lawmakers.
Details of the Hildebrands’ trading were leaked by an IT support employee at the bank who was apparently concerned about the possibility of insider trading.
The Swiss National Bank cleared Hildebrand of any wrongdoing in a report in late December.
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No European nation is strong enough to ride out the continent’s debt crisis alone, Italy’s new premier insisted Saturday, urging fellow EU members to develop a common growth policy.
Premier Mario Monti, leader of the eurozone’s third-largest economy, is an economist who came to power in November with a mandate to pull Italy back from the brink of financial disaster.
“Italy, in order to develop economically and socially, needs Europe, and Europe to be stronger needs Italy,” Monti said in a speech in the northern city of Reggio Emilia at a ceremony honoring the Italian flag.
“No European country is so strong to think it can go forward alone in facing the great global economies,” he added. “It’s time for everyone to do their homework. No one can think they can do less than the others.”
Monti didn’t single out any country, but some critics have felt that Germany has been putting its own economic policy ahead of EU-wide interests. Monti will meet with German Chancellor Angela Merkel in Berlin on Wednesday, and at a major European summit in Brussels at the end of the month.
EU leaders at that summit will be wrestling with a worsening economic outlook, as more European nations tip over into recession, skepticism keeps rising over many EU countries’ bonds and the survival of the sinking euro remains in doubt.
Monti has successfully prodded Italy’s often slow-moving parliament into approving quick spending cuts, new and higher taxes and reforms to the long-generous pension system that will see Italians working longer and retiring later instant payday loan.
“Italy is doing its part. Now the other European Union countries should do the same,” Monti.
While praising Italy’s “decisive contribution” in fighting the European financial crisis, Monti also tried to rally Italians to combat two chronically stubborn problems: corruption and widespread tax evasion by companies and citizens alike.
Foreign investors are frequently discouraged from operating in Italy, where bureaucrats and politicians are often involved in corruption when it comes to securing permits, contracts or funding.
Monti’s next priority is spurring growth in Italy, where the economy is stagnant, women have one of the EU’s lowest rates of employment and youth joblessness rates run 30 percent nationally and much higher in the underdeveloped south.
But unions have vowed strikes and rallies to protest the government’s plan to overhaul labor laws protecting workers, including abolishing a provision that makes it very difficult to fire workers.
Lawmakers, with an eye on 2013 elections, may also be nervous about demanding their voters make financial sacrifices.
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Central bank actions work better than tax and spending measures to protect an economy from shocks, even when interest rates are at rock bottom levels, St. Louis Federal Reserve President James Bullard said on Saturday.
“Monetary policy has been quite effective, even when the policy rate has been near zero,” he said in remarks to an economics conference.
“It is not necessary, or desirable to turn to fiscal stabilization policy.”
The Fed cut rates to near zero more than three years ago and has bought $2.3 trillion in bonds to spur growth. Some officials want it to buy more mortgage-backed bonds to boost flagging housing markets.
Despite signs the economic recovery is gaining momentum, many economist including ones at the Fed forecast sluggish growth and high unemployment through 2012. The Fed is expected to announce later this month projections that will show the benchmark fed funds rate is likely to stay near zero into 2014.
Bullard said that after the Fed cut interest rates to near zero, many people assumed that fiscal policies would be better tools to protect the economy from outside shocks. He said he would be publishing a paper that would disagree with that view.
“Stabilization policy should be left to the monetary authority,” he said. “Fiscal authorities should set the tax and spending programs in such a way that makes economic and political sense for the medium to longer term.”
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Despite the uptick in oil prices thanks to Iran’s threats last week, experts don’t foresee a major oil price spike even as evidence mounts that tougher oil sanctions against the country are beginning to bite.
Crude prices have risen about 2% since Iran vowed to shut down the Strait of Hormuz last week. About a sixth of the world’s oil production passes through the Strait.
It is believed that Iran’s posturing is the result of ever tightening sanctions as Iran spars with the West over its nuclear program. Iran says its nuclear intentions are peaceful, but many experts suspect they are designed to produce weapons.
On Wednesday the noose around Iran’s economy tightened further. Reports said Europe may be close to enacting an outright oil embargo on Iran. About 15% of Iran’s oil exports go to Europe.
The European news comes after President Obama sanctioned Iran’s central bank last month in an attempt to restrict Iran’s oil exports and a similar, stronger move from England.
The West is walking a fine line with Iran, hoping to squeeze its vital oil export business enough so the country’s regime curtails its nuclear ambitions but not enough to cause oil prices to spike.
So far it seems to be working.
Refineries in Japan, which buy a big chunk of Iran’s oil, are said to be talking with the Saudis about getting oil from there instead, according to Addison Armstrong, head of market research at Tradition Energy.
Iran oil targeted by Obama sanctions
In China, which is the largest buyer of Iranian crude, Iranian oil shipments have dropped significantly in the last two months, said Fariborz Ghadar, a senior adviser at the Center for Strategic and International Studies.
"We know the Chinese aren’t using any less oil," said Ghadar. "So someone must have stepped in."
That someone is also most likely the Saudis. Not on particularly friendly terms with Iran to begin with, Saudi Arabia technically has enough spare production capacity to make up for all of Iran’s 2 on line pay day loans.2 million barrels a day in oil exports.
And that’s what experts hope will keep the price of oil in check.
"There’s not going to be much of an impact if the Saudis and others are willing to jack up production," said Ghadar.
Armstrong agrees.
"I don’t think it will be as great as some people think," he said. "That oil can easily be replaced by Saudi Arabia or rising exports from Libya."
While the embargo isn’t affecting the price of oil, it is having an effect on Iran.
Oil exports account for half of the Iranian government’s revenues, so even a small drop in exports can have a big impact.
Last week, partly as a result of the sanctions on Iran’s central bank, there was a run on many of the country’s banks and the national currency dropped 40%, said Ghadar. Inside the country, prices are rising as the currency falls.
"People are complaining very loudly," said Ghadar. "This is the first time sanctions have been effective."
As for Iran’s threats to close the Strait, experts say they are just bluster.
Armstrong notes that Iran is completely dependent on seaborne exports and imports for its entire economy. Shutting down the Strait would be economic suicide.
Ghadar pointed out that even at its narrowest point the Strait is still 21 miles wide and Iran’s navy is no match for the United States.
Still, with so much military hardware in the region and the stakes being so high, the potential exists for a miscalculation on either side which could turn this standoff into an outright war.
If that happens, even if the Strait is closed for an hour, some traders say oil prices would see an initial spike of at least 50%.
Service industries in the U.K. grew at the fastest pace in five months in December and strengthened in the U.S., suggesting their economies are partly withstanding the euro-area debt crisis.
A gauge of U.K. services activity based on the survey of purchasing managers (PMITSUK) rose to 54 from 52.1 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said today in London. A U.S. services index rose to 52.6 in December from 52 the previous month.
The data suggest the U.K. economy strengthened in December after surveys earlier this week showed construction and manufacturing improved. Still, the euro-area crisis is clouding the outlook for the global recovery. The Bank of England said today banks may toughen loan terms because of the debt turmoil, hampering growth, while some Federal Reserve officials have said prospective economic conditions may warrant
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