Australia’s Swan Says Nothing Off Limits at Tax Forum Debate

By Joe Schneider - Oct 2, 2011 10:54 AM GMT+0700

Australian Treasurer Wayne Swan said no topics, including a national sales tax and a proposed mining tax, will be off-limits at this week’s tax forum discussions in Canberra, disputing earlier reports those issues wouldn’t be considered.

“Nothing is taboo,” Swan said in an e-mailed economic note released today. “Participants that mention the mining tax or the GST won’t have their microphones cut off or be thrown out by bouncers.”

Prime Minister Julia Gillard agreed to the review of the country’s tax system at the forum, scheduled for Oct. 4 and Oct. 5, as part of a deal with independent lawmakers to gain their support for her minority Labor government. Gillard and Swan had earlier ruled out changing the 10 percent national sales tax on most goods and services, altering a tax on carbon emissions or the mining tax.

“Many are skeptical that the tax summit will deliver any changes at all,” Haslam chartered accountants said in a Sept. 22 note on their website. “Aside from the bungled mining tax,” the government “is still trying to force through a grossly unpopular carbon tax,” the firm said.

The government plans to charge the country’s biggest polluters A$23 ($22) per metric ton of carbon dioxide from July 1 in a bid to reduce emissions 5 percent by 2020 from their 2000 levels. The tax is forecast to raise A$27.8 billion in three years.

Support Falls

Support for Gillard has fallen since she announced the carbon tax in July, reversing a pledge made before last year’s election that the government wouldn’t make such a move. Gillard had an approval rating of 23 percent, a six percentage point decline in two weeks, in a Sept. 6 Newspoll survey published in the Australian newspaper.

Gillard also plans to impose a 30 percent tax on profits generated by coal and iron ore mining companies. The tax is scheduled to take effect in July and is forecast to raise A$7.7 billion in its first two years.

The government plans to use the tax revenue to cut the corporate tax rate to 29 percent from 30 percent, encourage retirement savings and pay for roads and railways.

Even though Swan said he’ll listen to all points of view, he indicated some decisions made already won’t be changed. He didn’t specify which.

“It’s just common sense that the government isn’t going to hit the reset button on policies that we’ve already consulted on extensively,” he said. “Likewise, we’re not going to revisit policies that we’ve ruled out in the interests of business and community certainty.”

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

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Emaar, Alhokair, Qatar International, Shuaa: Gulf Equity Preview

By Mourad Haroutunian - Oct 2, 2011 12:07 PM GMT+0700

The following stocks may rise or fall in Persian Gulf markets. Stock symbols are in parentheses and prices are from the last close.

Dubai’s DFM General Index (DFMGI) dropped 0.5 percent to 1,431.71, the lowest level since March 8, and Abu Dhabi’s ADX General Index (ADSMI) slipped less than 0.1 percent. Saudi Arabia’s Tadawul All Share Index (SASEIDX) climbed less than 0.1 percent.

Fawaz Abdulaziz Alhokair & Co. (ALHOKAIR) : The Saudi Arabian clothing retailer signed a $50 million Islamic loan facility, or murabahah, with the International Finance Corp. to expand its operations outside Saudi Arabia. The shares dropped 1.8 percent to 53.75 riyals.

Emaar Properties PJSC (EMAAR) : The Dubai developer of the world’s tallest tower said it’s seeking financing options and that details in reports that it plans to raise cash backed by the emirate’s largest shopping mall were wrong. The shares rose 0.7 percent to 2.75 dirhams.

Qatar International Islamic Bank (QIIK) : The country’s third-largest Islamic bank by assets hired Qatar National Bank, the Islamic unit of HSBC Holdings Plc (HSBA) and Standard Chartered Plc for the sale of its first sukuk. The bank plans to sell a five- year, benchmark-size dollar sukuk “when market conditions permit,” according to Chief Financial Officer Edward Wong. The shares dropped 1.3 percent to 53.30 riyals.

Shuaa Capital PSC (SHUAA) : The investment bank controlled by Dubai’s ruler said it appointed Michael Philipp to its board. The shares tumbled 3.6 percent to 74.9 fils.

To contact the reporter on this story: Mourad Haroutunian in Riyadh at mharoutunian@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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Zain Saudi Tumbles Most in Six Weeks After Stake Sale Abandoned

By Mourad Haroutunian - Oct 1, 2011 9:45 PM GMT+0700

Mobile Telecommunications Co. of Saudi Arabia, or Zain Saudi Arabia, tumbled the most in six weeks after Kingdom Holding Co. (KINGDOM) and Bahrain Telecom Co. (BATELCO) abandoned their offer to purchase a stake.

The shares declined 2.4 percent, the largest loss since Aug. 14, to 6.10 riyals at the 3:30 p.m. close in Riyadh after trading down as much as 4.8 percent.

Kingdom and Bahrain Telecom, known as Batelco, said on Sept. 29 that they won’t proceed with a $950 million bid for Zain Group’s 25 percent stake in Zain Saudi Arabia, the country’s third-largest mobile-phone company by market value.

To contact the reporter on this story: Mourad Haroutunian in Riyadh at mharoutunian@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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Toyota-Honda U.S. Rebound Brings Call of ‘What Recession?’: Cars

By Craig Trudell and Alan Ohnsman - Oct 1, 2011 3:06 AM GMT+0700
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Toyota Motor Corp.'s 2012 Toyota Camry SE vehicle. Toyota, ramping up production of the redesigned Camry sedan, expects to reverse monthly U.S. sales declines beginning next month, according to Bob Carter, group vice president for U.S. sales. Source: Toyota Motor Corp. via Bloomberg

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Sept. 2 (Bloomberg) -- Jessica Caldwell, an analyst at Santa Monica, California-based Edmunds.com, talks about the U.S. auto market. Nissan Motor Co. and Kia Motors Corp. led U.S. sales gains for Asia-based auto brands in August as Toyota Motor Corp. and Honda Motor Co. continued to battle tight supplies months after Japan's earthquake. Caldwell speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)

Toyota Motor Corp. (7203) and Honda Motor Co.’s return to full production this month is boosting U.S. auto sales back near the pace reached before Japan’s earthquake.

September light-vehicle sales, to be released Oct. 3, probably rose to a 12.8 million seasonally adjusted annual rate, the average estimate of 14 analysts surveyed by Bloomberg. That would be the fastest pace since April, when lost output caused by Japan’s tsunami crimped supply of parts and finished cars.

“Recovering inventory levels have helped to bring buyers back into the market,” said Jeff Schuster, executive director of global forecasting at J.D. Power & Associates.

Jesse Toprak, who develops forecasts at TrueCar.com, went so far as to title his latest report “What Recession?” as the auto rebound defies consumer confidence that is near a two-year low. Toyota has said it expects to reverse monthly U.S. sales declines beginning next month, and Honda is adding overtime shifts at two Ohio plants. Better supply also probably meant incentives rose from the lowest in almost six years.

“The big story this month was better inventory and favorable pricing” for consumers, said Jessica Caldwell, an analyst at Santa Monica, California-based Edmunds.com.

Sales declines at Toyota and Honda contributed to the U.S. auto sales pace slowing from a 13.1 million rate averaged in the year’s first four months to as low as 11.6 million in June, according to researcher Autodata Corp.

Toyota Still Recovering

Toyota slipped behind Ford Motor Co. (F) to third in U.S. sales this year through August, which was the first month in the past year that its global production increased. The Toyota City, Japan-based automaker is still recovering and may say sales dropped 15 percent, the average estimate of five analysts surveyed by Bloomberg, leaving it in third again.

“With the launch of the new Camry, October should be even better,” said Paul Atkinson, who operates Toyota dealerships in Bryan and Madisonville, Texas. “We’re selling as fast as they’re coming off the damn truck.”

Toyota, ramping up production of the redesigned Camry sedan, may say sales dropped 15 percent, the average estimate of five analysts surveyed by Bloomberg. The Toyota City, Japan- based automaker’s global production increased for the first time in 12 months in August.

Toyota shares fell 0.5 percent to 2,688 yen in Tokyo at the 3 p.m. close of Tokyo trading. Nissan Motor Co. gained 0.4 percent, while Honda fell 1.4 percent.

Overtime at Honda

Sales may decline 6.1 percent at Honda, the average of five analysts’ estimates, after deliveries slid 20 percent or more in each of the past four months. The Tokyo-based automaker is scheduling overtime shifts at its Marysville and East Liberty assembly plants in Ohio, Ron Lietzke, a spokesman, said in a Sept. 28 phone interview.

Honda began the month with 32 days supply of vehicles, from 28 in August, Westlake Village, California-based J.D. Power said in a Sept. 22 statement. The industry standard is about 60 days.

General Motors Co. (GM) and Ford are anticipating that demand will keep increasing as the largest U.S. automakers negotiate labor contracts that boost production and add jobs.

GM, which reached a new four-year contract with the United Auto Workers this month, may report a 19 percent increase in September sales, the average of eight analysts’ estimates. The Detroit-based automaker and union said the accord adds or retains 6,400 jobs and reopens an assembly plant in Tennessee.

Ford, Chrysler

Ford has discussed with the UAW adding as many as 10,000 union jobs in the U.S., according to three people familiar with the talks. Some of those workers would assemble Fusion sedans, which are currently made in Mexico, said one of the people who asked not to be identified because the negotiations are private.

Deliveries this month may rise 5.9 percent for Dearborn, Michigan-based Ford, the average of eight analysts’ estimates.

Sales at Fiat SpA-controlled Chrysler Group LLC, which has extended its UAW contract to Oct. 19, may climb 20 percent, the average of seven analysts’ estimates.

GM fell 58 cents, or 2.8 percent, to $20.18 at 4 p.m. in New York Stock Exchange composite trading. Ford dropped 33 cents, or 3.3 percent, to $9.67.

Confidence among U.S. consumers stagnated in September near a two-year low as the share of households saying it was difficult to find a job climbed to the highest level in almost three decades. The Conference Board’s sentiment index increased by 0.2 to 45.4 from an August reading that was the lowest since April 2009, the New York-based researcher said Sept. 27.

Auto Industry Shrinks

“The economy is stopped dead in its tracks,” George Magliano, a New York-based economist at IHS Automotive, said in a phone interview. “Considering that, the auto business is showing pretty good strength. The industry is hiring, it’s producing more and there’s pent-up demand.”

GM and Ford will be adding back only a portion of the jobs they shed during the recession that sent auto sales to a 27-year low of 10.4 million in 2009, according to Autodata Corp.

GM had about 49,000 U.S. hourly employees at the end of 2010, a year after its U.S.-backed bankruptcy. That’s down from 111,000 such workers at the end of 2005, the company said in a Sept. 28 conference call with analysts.

Last year, about 962,000 U.S. workers were employed making vehicles and parts, according to the Bureau of Labor Statistics in Washington. That’s down 32 percent from 1.41 million in 2005.

The downsizing of the industry, achieved in part by U.S.- backed bankruptcies for GM and Chrysler, meant cutting production capacity. That prevented U.S. automakers from raising output and offsetting industrywide constraints on inventory after the Japan earthquake and tsunami in March, said Alan Baum, an industry consultant at Baum & Associates.

‘Limited Ability’

GM, Ford and Chrysler “had a fairly limited ability to capitalize because there are a lot fewer auto plants and workers than there were four years ago,” said Baum, who is based in West Bloomfield, Michigan. “You can’t just add a shift willy- nilly.”

Nissan, whose better supply of parts has buoyed inventory levels above its Japan-based rivals, may say deliveries climbed 18 percent, the average of five analysts’ estimates.

Hyundai Motor Co. (005380), South Korea’s largest automaker, and its affiliate Kia Motors Corp. (000270), may combine to sell 20 percent more vehicles than a year earlier, according to the average of three estimates. Both automakers are based in Seoul.

J.D. Power today increased its estimate for the September auto-sales rate to 13 million from 12.9 million.

Industrywide deliveries may rise to 12.7 million cars and light trucks this year, the average of 18 analysts’ estimates surveyed by Bloomberg in August. Sales may climb to 13.6 million in 2012, the average of 15 estimates. The U.S. averaged annual sales of 16.8 million vehicles from 2000 to 2007, according to Woodcliff Lake, New Jersey-based Autodata.

The following table shows estimates for car and light-truck sales in the U.S. Estimates for companies are a percentage change from September 2010. Forecasts for the seasonally adjusted annual rate, or SAAR, are in millions of light vehicles.

September had 25 selling days, matching the year-earlier period.

                              GM     Ford   Chrysler   SAAR  Himanshu Patel                NA      NA       NA      12.8 (JPMorgan) Rod Lache                     21%    8.5%      22%     13.0 (Deutsche Bank) Chris Ceraso                  14%     4%       16%     12.6 (Credit Suisse) Brian Johnson                 17%     7%       25%     12.8 (Barclays) Peter Nesvold                 24%    1.6%      NA      12.7 (Jefferies) Patrick Archambault           15%    -1.3%     13%     12.4 (Goldman Sachs) Itay Michaeli                 NA      NA       NA      12.9 (Citigroup) Adam Jonas                    NA      NA       NA      12.8 (Morgan Stanley) George Magliano               NA      NA       NA      12.4 (IHS Automotive) Jeff Schuster                 NA      NA       NA      13.0 (J.D. Power) Jessica Caldwell              19%     11%      23%     12.9 (Edmunds.com) Jesse Toprak                  21%    8.5%      20%     13.1 (TrueCar.com) Alan Baum                     NA      NA       NA      12.8 (Baum & Associates) Seth Weber                    21%     8%       24%     12.8 (RBC)  Average                       19%    5.9%      20%     12.8 

To contact the reporters on this story: Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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White House Cuts $25 Billion More From Defense to Fund VA

By Tony Capaccio - Oct 1, 2011 4:33 AM GMT+0700

The White House has directed the Pentagon to reduce its 10-year spending plan by another $25 billion, on top of the roughly $450 billion it’s already planning to cut, according to three government officials.

The Office of Management and Budget directed the action because the White House decided to protect Veterans Administration medical funding from cuts, said one the officials. All three spoke on condition of anonymity because the change hasn’t been announced.

The reduction might mean a $1 billion cut in the pending $513 billion defense bill for fiscal 2012, said the official, who was familiar with the OMB action. The bill’s already been reduced $26 billion from the Pentagon’s original budget request, meaning about no increase from current year spending.

The OMB guidance came in early September, said one of the three sources.

A $27 billion reduction remains within the range laid out in the Budget Control Act signed into law Aug. 2. For the fiscal years beginning in 2013, the new cut would average an additional $2.5 billion a year, the official said.

The Budget Control Act has an overall cap for fiscal 2012 and 2013 that includes the Defense Department, State Department, Veterans Administration and Department of Homeland Security, so to protect this veterans funding means that all other accounts in the security budget will have to be cut that much more, said Todd Harrison, an analyst with the Center for Strategic and Budgetary Assessments, a non-partisan budget analysis group in Washington.

VA Health Costs

The President’s fiscal 2012 budget request included $52.6 billion for veteran’s health care. The VA’s discretionary budget and veteran’s health care budget is projected to reach $60 billion by fiscal 2016, Harrison said.

The Pentagon may get hit with another $500 billion over 10 years in automatic cuts if the supercommittee in Congress fails to find $1.5 trillion in overall federal savings, according to the Congressional Budget Office.

Joint Chiefs of Staff Chairman Admiral Mike Mullen told a business group last week the cumulative cuts might be as high as $1.1 trillion. That would represent between 15 and 18 percent of an estimated $6.14 trillion 10-year spending projection, according to administration figures.

War Costs

Separately, the White House in its deficit reduction discussions has made clear that the cost of the Iraq and Afghanistan wars remains a driving force in the budget.

The Pentagon’s latest figures through July 30 indicate the military’s spent $1.054 trillion since Sept. 11, 2001, with $704.6 billion obligated for Iraq and $323.2 billion for Afghanistan.

The spending total includes war-related operations, transportation, special combat pay and benefits, food, medical services, maintenance, replacement of lost combat equipment and building the Iraq and Afghanistan security forces.

The average monthly cost for both wars this fiscal year through July 30 -- the latest figures available -- is $11.6 billion. That’s up from $9.7 billion as of April 30, according to Pentagon Comptroller figures.

As of July 30, monthly Afghanistan spending has increased to $7.8 billion from $6.2 billion April 30; Iraq spending has increased slightly to $3.8 billion from $3.5 billion, according to the figures. The U.S. has 46,000 troops in Iraq and 98,000 in Afghanistan.

The Afghanistan increase has been driven primarily by more expensive base and facilities support, greater command, control and intelligence equipment, and maintenance and base support of fortified MRAP vehicles, according to Pentagon briefing charts.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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Alaska to BP to Conoco Count On Shell’s Bounty From Arctic Oil

By Katarzyna Klimasinska - Oct 1, 2011 9:48 PM GMT+0700
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Among the winners if The Hague-based Shell moves forward is the Trans Alaska Pipeline, shown, which needs more oil to keep running. The flow in the 800-mile Trans Alaska Pipeline shrank to about 570,000 barrels a day this year from a record 2 million barrels in 1988, as output from onshore tracts fell. Photo: Daniel Acker/Bloomberg

(Corrects name of lake in first paragraph of story published Sept. 29.)

The parking lot at the Millennium Alaskan Hotel in Anchorage was as jammed at 6:30 a.m. on a Thursday as the float-plane marina at neighboring Lake Spenard. About 170 oil executives, tribal entrepreneurs and state employees entered through a lobby adorned with stuffed polar bears and mounted moose heads.

The predawn visitors were there to hear Pete Slaiby, 53, the head of Alaska operations for Royal Dutch Shell Plc (RDSA), outline the company’s plans to drill in icy Arctic seas.

They came because Shell’s good fortune may also be their own. The offshore fields the company is seeking U.S. permission to develop may contain oil valued at as much as $2.4 trillion. Drilling would set off a cascade of revenue for contractors, 54,700 jobs across the U.S. and $176 billion in federal, state and local tax revenue through 2057, according to a study Shell commissioned from consulting company Northern Economics and the University of Alaska Anchorage.

“You’re looking at decades of economic impact,” Kara Moriarty, deputy director of the Alaska Oil and Gas Association, said in an interview. Production in the Beaufort and Chukchi seas “would be a tremendous boost,” she said.

Among the winners if the Obama administration gives the required permits to The Hague-based Shell: Owners of the Trans Alaska pipeline, including BP Plc (BP/) and Exxon Mobil Corp., which say they need more oil to keep it running; Statoil ASA (STL) and ConocoPhillips, which want to win approval to develop their own federal leases in the Arctic; and Noble Corp., which will supply a drilling vessel.

‘A Big Opportunity’

“This is a big opportunity,” Slaiby told the audience at the Sept. 8 meeting, showing them an animation of Shell’s spill- response plans over a breakfast of eggs and bacon.

Shell’s spending since winning Arctic leases in federal waters in 2005 is approaching $4 billion for drilling rights, engineering, government-ordered studies and research, according to the company. The Chukchi and Beaufort sea deposits may hold 25 billion barrels of oil, Shell says, citing government estimates, for a value of $2.4 trillion based on the average price of oil on the New York Mercantile Exchange this year.

Until now, the native village of Point Hope, which juts into the Chukchi Sea, and environmental groups staved off the company by contending in court and in comments to government agencies that drilling may disrupt a fragile land, putting at risk the animals that provide the Inupiats with whale blubber for fuel, pickled-flipper snacks and sealskin for the drums they beat in time to traditional dances.

White House Meetings

The delay may end soon. In August, the company won Interior Department approval for exploratory drilling in the Beaufort Sea near the North Slope towns of Deadhorse and Kaktovik. The Environmental Protection Agency issued air-quality permits on Sept. 19 for a ship Shell plans to use for drilling.

Slaiby said Shell executives met three times with White House officials, most recently on Sept. 20, to talk about Arctic drilling.

The company expects Interior Secretary Ken Salazar to uphold the Chukchi Sea lease sale by Oct. 3, and the Bureau of Ocean Energy Management, Regulation and Enforcement to give the go-ahead for the Chukchi exploration plan in December, Slaiby said at the hotel breakfast in Anchorage.

Shell says it must decide by the end of October whether to gamble that it will get all 35 permits needed and start lining up about 18 vessels and 1,200 workers to drill the first offshore wells in U.S. Arctic waters in July.

Alaska’s Republican Governor Sean Parnell has backed Shell’s plans partly as the best bet to restore the flow in the state’s largest oil pipeline to 1 million barrels a day within 10 years.

Trans Alaska Pipeline

Oil flowing through the 800-mile (1,287-kilometer) Trans Alaska Pipeline shrank to about 570,000 barrels a day this year from a record 2 million barrels in 1988, as output from onshore tracts fell. The pipeline’s owners, including BP, Exxon and ConocoPhillips (COP), say that less petroleum in the pipes allows ice to form, wax to build up and metal to corrode.

Shell, which said it expects Arctic offshore production to start after 2020, would use the pipeline to deliver its crude across the state to Valdez, the northernmost ice-free port in the U.S.

“Beaufort and Chukchi are critical for our long-term future,” Tom Barrett, president of Trans Alaska operator Alyeska Pipeline Service Co., said in an interview. Alyeska employs more than 800 workers, according to its website.

Shell said it also plans to build a connector, half the length of the Trans Alaska pipeline, across the North Slope to bring Chukchi oil to the existing line.

Tax Revenue

“It will be hugely expensive, it’s in the billions,” Slaiby said in an interview at his office in an Anchorage high- rise with a view of the Chugach Mountains, blue and shrouded in clouds.

Shell’s investments will bring $3.7 billion of tax revenue to the North Slope Borough, which borders both seas, according to the Northern Economics-University of Alaska analysis, which was released in February. Alaska’s state government would gain about $4.8 billion from property, corporate and income taxes through 2057, and the federal government would collect $161.3 billion.

U.S. approval for Shell to drill 10 Arctic offshore wells over the next two years may encourage more investment from Statoil of Stavanger, Norway, and Houston-based ConocoPhillips. Those companies also purchased Chukchi Sea leases and aren’t as far along in the process.

Statoil in Anchorage

“We’re following what’s happening with the other operators closely, and we hope that Shell is successful in drilling next year,” Lars Andreas Sunde, head of Statoil’s Anchorage office, said in an interview. “It will of course be a positive to the industry.”

Statoil opened its Anchorage office this year, as did Noble Corp. (NE), owner and manager of the Discoverer rig that Shell plans to use for the 2012 to 2013 drilling season. Shell rented the Discoverer in January to use in New Zealand this year at a rate of $155,000 a day, according to the website of Baar, Switzerland-based Noble.

Pledging to benefit local residents, Shell hired North Slope native corporations to write permit applications, engineer oil-spill response and containment and dispose of waste once exploration begins.

Waste-Management Contract

Among Shell’s Eskimo contractors is Tikigaq Corp., which provides financial support for the Inupiat villagers in Point Hope, the center of opposition to Shell’s plans.

Tikigaq’s waste-management contract with Shell, renewed every year since 2007, is more profitable than services sold to its main client, the U.S. Department of Defense, according to the corporation’s Chief Operating Officer Troy Izatt.

Because exploration hasn’t begun, Tikigaq has allotted only two workers to Shell, both based in Anchorage. One is a native of Point Hope.

“Tikigaq Corp. and its board of directors support the offshore development if it’s responsible,” Izatt said in an interview at his office, where a fur-trimmed wooden tribal mask hangs on the wall.“I always look forward to good news for Alaska, what helps all Alaskans, including natives.”

To contact the reporter on this story: Katarzyna Klimasinska in Anchorage, Alaska, at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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Sarkozy, Merkel to Meet as Europe Weighs Greece

By Helene Fouquet - Oct 2, 2011 12:29 AM GMT+0700

French President Nicolas Sarkozy will meet German Chancellor Angela Merkel Oct. 9 as European officials begin debating a new phase in their efforts to prevent a Greek default.

There’s “no credible alternative” to channeling aid to Greece, Sarkozy said Sept. 30 after meeting Greek Prime Minister George Papandreou in Paris.

His remarks signal the fight over an expansion of Europe’s bailout tool kit that will follow the enactment in coming weeks of the upgraded 440 billion-euro ($594 billion) European Financial Stability Facility. Euro finance chiefs in the new week will discuss accelerating enactment of a permanent rescue fund that provides more capital and a way of managing defaults.

“The failure of Greece would be the failure of all of Europe,” Sarkozy told reporters. “Remember in 2008, when the U.S. let Lehman Brothers fail, the global financial system paid the price. For both economic reasons and moral reasons, we can’t let Greece fail.”

Sarkozy said he will travel to Berlin to meet Merkel to discuss speeding the economic integration of the euro region.

The two leaders will meet on Oct. 9, said a person with knowledge of the plan, who declined to be identified because the date hasn’t been formally announced.

Oct. 9 Meeting

Steffen Seibert, Merkel’s chief spokesman, declined to comment on the date to Bloomberg News today, saying that the two leaders plan to meet before the next European Union Council summit in mid-October.

Greek bonds, debt of other bailed-out nations and European stocks gained this past week on speculation that euro leaders were responding to international pressure to address the crisis, which began in Greece in late 2009.

Europeans haven’t responded “as effectively as they needed to,” President Barack Obama said during a roundtable discussion at the White House this past week.

Papandreou said he committed to Sarkozy to carrying his promises to fix Greek finances and “change” the nation. As he traveled to Paris, civil servants and unions in Athens opposed to wage and pension cuts occupied government offices for a second day, blocking access for officials seeking to determine whether the country qualifies for an international loan to avert default.

Aid ‘Assured’

Greek Finance Minister Evangelos Venizelos continued meetings with the officials from the European Union, European Central Bank and International Monetary Fund today, a finance ministry official said. Another meeting with the so-called troika was due late Saturday to discuss final details to the 2012 budget, which is to be discussed by Cabinet in Athens Sunday, the official said.

Venizelos told To Vima newspaper in an interview published today that it is “assured” Greece will receive the next, 8 billion-euro tranche of bailout loans needed for the nation to meet debt payments for the remainder of this year.

Separately, Papandreou today welcomed news of a $1 billion investment by Qatar Holdings LLC in European Goldfields Ltd. (EGU), the London-listed company behind one of the biggest gold-mining projects in Greece.

Qatar will acquire a 10 percent stake from Ellaktor SA and will have an option to buy another 5 percent from the Greek construction company. It will also provide European Goldfields with a $600 million financing facility, Ahmad al-Sayed, the chief executive officer of Qatar Holdings told reporters in Athens.

EFSF Changes?

European governments are moving toward enacting the permanent fund next year, a year sooner than planned, to replace the EFSF. Phasing in the permanent fund, known as the European Stability Mechanism, would provide a 500 billion-euro war chest. It also includes provisions for sharing costs with bondholders for countries with “unsustainable” debt.

Additional measures now in play include reopening the second Greek rescue agreed in July to increase the financial industry’s contribution and creating a safety net for Europe’s banks.

“The situation on the international financial markets is worrying,” German Finance Minister Wolfgang Schaeuble told lawmakers Sept. 30 in Berlin. He said the EFSF upgrade is “urgent.”

To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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