Libyan Oil Output Can Reach 800,000 Barrels by End of 2011, Berruien Says

By Robert Tuttle and Nayla Razzouk - Nov 13, 2011 6:53 PM GMT+0700

Libya, the holder of Africa’s biggest oil reserves, will produce as much as 800,000 barrels of crude a day by the end of this year, the chairman of state-run National Oil Corp. said.

Libya’s oil industry will recover more quickly than the International Energy Agency predicted after suffering disruptions this year amid fighting that engulfed the country, Nuri Berruien said today in an interview in Doha, Qatar. The nation currently pumps 600,000 barrels a day, he said, adding in comments to reporters that authorities will not award licenses to energy companies during its political transition after the death of Muammar Qaddafi.

The IAE stated in a Nov. 10 report that Libya’s output capacity will reach an average of 800,000 barrels a day in the first quarter of 2012, then rise to 1.17 million barrels a day in the fourth quarter of next year. The Paris-based IEA doesn’t know “the facts on the ground,” Berruien said.

Libya produced 345,000 barrels a day in October, more than triple the 100,000 barrels it pumped in September, according to data compiled by Bloomberg. The country produced almost 1.6 million barrels a day in January, before protests against the against Qaddafi’s regime flared into armed rebellion.

Libya is using 140,000 barrels a day of the crude and exporting the rest, Berruien said.

Three Fields

The country’s Waha oil field is expected to start producing by the end of this year and will pump more than 400,000 barrels a day at full capacity, Berruien said. The Elephant field, known as “El Feel” in Arabic, started producing on Nov. 11 and is pumping at a rate of 40,000 barrels a day, he said. The offshore Bouri field will begin pumping any day, he said.

Ras Lanuf refinery may resume operations by the end of the year, he said. The facility is Libya’s biggest, with a processing capacity of 220,000 barrels of crude a day, according to Bloomberg data. Abdo A. Ahmed, the acting chief executive officer of Libyan Emirates Refining Co., the plant’s owner, said in an interview on Oct. 17 that Ras Lanuf might start operations as early as November.

Libya issued a tender to buy 3 million metric tons of gasoline for delivery next year, or about 60 to 70 percent of its needs, Berruien said. The nation has been in discussion with suppliers such as Vitol Group, Glencore International Plc, Trafigura Beheer BV and Exxon Mobil Corp. to buy the 95-octane fuel, he said.

Following the start of the Ras Lanuf refinery, the state won’t import diesel next year, he said. It is currently buying gasoline and diesel from the spot market while exporting some naphtha, Berruien, he said.

Libyan natural-gas exports through Eni SpA (ENI)’s Greenstream pipeline to Italy reached 300 million cubic feet a day and will jump to 900 milliob by the middle of next year, Berruien said. Shipments through the pipeline resumed last month. The country is resuming exploration for gas with companies that already hold licenses, he told reporters.

To contact the reporters on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net; or Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net.

To contact the editor responsible for this story: Bruce Stanley at bstanley5@bloomberg.net

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Most Greeks Positive on Papademos, Polls Show

By Tom Stoukas - Nov 13, 2011 2:53 AM GMT+0700

A majority of Greeks say Lucas Papademos was the right choice to lead the nation’s interim government and that elections should be held later than currently envisioned in mid-February, according a poll to be published tomorrow in Athens-based Ethnos newspaper.

Of the 952 households polled by Marc SA from Nov. 10-11, 79 percent were positive about the selection of Papademos to lead the interim government. When asked if the government’s term should last longer than now planned, 54 percent said yes while 76 percent said it should make important decisions during its term. The poll had a margin of error of plus or minus 3.2 percent.

Former Prime Minister George Papandreou announced agreement on a unity administration on Nov. 9 after his proposal for a referendum on a second Greek financing package roiled markets and angered Greeks and European Union partners.

A separate survey by Kapa Research of 1,033 people showed 73 percent were positive or somewhat positive about the choice to select Papademos. The poll, to be published in To Vima newspaper tomorrow, showed 57 percent of respondents thought elections should be held later than now planned. Almost eight in 10, or 79 percent of respondents said Greece’s place in the euro-region was more secure or probably more secure because of the establishment of the new government.

The poll was conducted on Nov. 11 and had a margin of error of plus or minus 3.1 percent.

The new government must implement budget measures and decisions related to an Oct. 26 European bailout amounting to 130 billion euros ($180 billion) as well as manage a voluntary debt swap, before holding elections that have been tentatively set for Feb. 19.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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U.S. Retail, Manufacturing Likely Rose in October

By Shobhana Chandra - Nov 13, 2011 12:01 PM GMT+0700

Retail sales probably rose in October and U.S. manufacturing accelerated, helping give the world’s biggest economy a boost entering the final months of 2011, economists said before reports this week.

The 0.3 percent rise in purchases would follow a 1.1 percent gain that was the most in seven months, according to the median forecast in a Bloomberg News survey ahead of Commerce Department figures on Nov. 15. Industrial production climbed 0.4 percent, twice as much as in September, according to the survey median. The cost of living was little changed and home construction cooled, other data may show.

Unemployment at 9 percent and limited wage growth help explain why retailers like Macy’s Inc. (M) and Kohl’s Corp. (KSS) plan to use more discounts to lure consumers this holiday shopping season. At the same time, equipment purchases and record exports are propelling manufacturing and sustaining a recovery that’s yet to extend to the housing market.

“There’s positive momentum in demand, which suggests retailers should see a decent Christmas,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The economy is continuing to expand though it’s not firing on all cylinders.”

Retail sales may reflect improved demand for cars as Americans returned to showrooms. Auto purchases ran at a 13.2 million annual rate in October, the highest since February and up from a 13.04 million pace in September, according to data from Ward’s Information Products.

New-Vehicle Demand

“Consumers are just saying it’s time to get a new vehicle,” Ken Czubay, Ford Motor Co. (F)’s U.S. sales chief, said on a Nov. 1 conference call. “We’re seeing that more and more everyday from our dealers.”

Sales excluding automobiles climbed 0.2 percent in October after a 0.6 percent jump, according to the median forecast in the Bloomberg survey.

Even with the projected slower pace in retail sales, consumer spending in the current quarter is tracking at a 2.5 percent annual rate after a 2.4 percent pace in the third quarter, according to economists at Credit Suisse in New York.

Retailers are crafting incentives to lure more shoppers during the November-December holiday period. Menomonee Falls, Wisconsin-based Kohl’s, the fourth-largest U.S. department-store company, said it has stepped up marketing and promotions.

‘Heavy Promotions’

Macy’s, the second-biggest U.S. department-store chain, is seeing “the lower-income customer is struggling more than the middle- or upper-end customer,” according to Chief Financial Officer Karen Hoguet. The Cincinnati-based retailer has planned “heavy promotions” for the holiday season.

“We feel confident that the momentum we have heading into the fourth quarter, combined with our holiday strategies, bode well for that quarter,” Hoguet said on a conference call on Nov. 9. “We’ll have a spectacular Christmas.”

The Standard & Poor’s Supercomposite Retailing Index has gained 7.7 percent this year through Nov. 11, while the broader S&P 500 Index climbed 0.5 percent during the same period.

Manufacturing remains a pillar of the recovery, a Federal Reserve report may show on Nov. 16. Output at factories, mines and utilities may have increased in October by the most in three months.

The pickup at factories extended into November, regional Fed reports may show. The Philadelphia-area manufacturing index, due Nov. 17, rose to the highest level since April, according to the median projection in a Bloomberg survey. The so-called Empire manufacturing gauge for the New York region, to be released Nov. 15, may have also improved.

Distressed Housing

The economy is still without support from a housing market restrained by the overhang of distressed properties, which limits prices and discourages building. Starts fell 7.9 percent in October to a 606,000 annual rate, from a 658,000 pace that was the fastest since April 2010, according to the Bloomberg survey median.

A stronger labor market is needed to speed up growth in the third year of the recovery and to cushion the U.S. from risks related to Europe’s sovereign debt crisis. Payrolls climbed by 80,000 workers in October, the fewest since June. While the jobless rate fell to 9 percent from 9.1 percent, it has been stuck near 9 percent or higher for more than two years.

The Fed is “focusing intently on supporting job creation,” Chairman Ben S. Bernanke said on Nov. 10 in El Paso, Texas, describing unemployment as “painfully high.” While the economy is “far from where we want it to be,” he said, inflation may stay under control for the “foreseeable future.”

The consumer-price index, the broadest of the monthly price gauges, was unchanged in October from a month earlier, according to the Bloomberg survey median ahead of Labor Department figures due Nov. 16.

                        Bloomberg Survey  ============================================================                         Release    Period    Prior     Median Indicator                 Date               Value    Forecast ============================================================ PPI  MOM%                11/15      Oct.      0.8%     -0.1% Core PPI MOM%            11/15      Oct.      0.2%      0.1% Retail Sales MOM%        11/15      Oct.      1.1%      0.3% Retail ex-autos MOM%     11/15      Oct.      0.6%      0.2% Empire Manu. Index       11/15      Nov.      -8.5      -2.2 Business Inv. MOM%       11/15     Sept.      0.5%      0.1% CPI  MOM%                11/16      Oct.      0.3%      0.0% Core CPI MOM%            11/16      Oct.      0.1%      0.1% Ind. Prod. MOM%          11/16      Oct.      0.2%      0.4% Housing Starts ,000’s    11/17      Oct.      658       606 Housing Starts MOM%      11/17      Oct.     15.0%     -7.9% Philly Fed Index         11/17      Nov.      8.7       9.0 ============================================================ 

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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El-Erian: There’s Still Time to Solve EU Debt Crisis

By Todd Shields - Nov 13, 2011 12:00 PM GMT+0700

Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian said it’s not too late to solve the European debt crisis and that action is needed quickly.

“Europe can no longer kick the can down the road,” El- Erian, whose company manages the world’s biggest bond fund, said in an interview on CNN’s “Fareed Zakaria GPS,” scheduled for broadcast today.

“The good news is it’s not too late to solve,” El-Erian said. “The bad news is with Italy, the crisis has entered a very dangerous phase.”

Last week, Italy’s bond yields surged past the 7 percent threshold that prompted Greece, Portugal and Ireland to seek bailouts. Italy’s parliament gave final approval yesterday to a debt-reduction measure aimed at bolstering investor confidence.

Europe’s fiscal woes have turned into a “global crisis,” IMF Deputy Managing Director Zhu Min said Nov. 11. Asia-Pacific officials said they were bracing for a deterioration of Europe’s debt crisis that may push the global economy into a recession.

European finance ministers failed last week to bridge divisions over a permanent rescue fund. European Central Bank policy makers said the bank can’t do much more to stem the region’s debt crisis, suggesting they are reluctant to increase bond purchases to lower Italy’s borrowing costs.

Persuade Markets

Italy needs to persuade markets it’s serious about taking actions that will allow the economy to grow, said El-Erian, a former deputy director of the International Monetary Fund.

Asked if a Greek exit from the euro zone might spark panic about Spain, Ireland and Portugal, El-Erian said, “The risk is there.”

“We’ve waited so long that there is no cost-less solution,” he said. “Every solution has enormous consequences, collateral damage and unintended results.”

The European Central Bank can’t quell the debt crisis on its own and “individual countries need to step up their reform effort,” El-Erian said.

Pimco’s Italian debt is “de minimus,’ El-Erian said.

“We were concerned very early on, but people should be generally defensive, but also selectively offensive,” he said.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

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

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China’s Hu Pledges More Imports

By Michael Forsythe - Nov 13, 2011 5:00 PM GMT+0700

Chinese participants at the Asia- Pacific Economic Cooperation forum in Honolulu expressed confidence in their nation’s economic prospects, with President Hu Jintao pushing for increased imports as a means to balance the economy and foster global growth.

After Hu spoke yesterday, two of China’s best-known economists, International Monetary Fund Deputy Managing Director Zhu Min and National Economic Research Institute Director Fan Gang, said the country’s economy was heading for a “soft landing” as growth slows. They cited lower inflation and bad debts at banks, and what Fan said were timely measures to avoid a bubble in the property market.

“It has become ever clearer that the Chinese economy is moving to a soft landing,” Zhu said. “The Chinese economy today is really moving to an inflection point, moving to more services and capital-intensive economy.”

Zhu and Fan, speaking on the same APEC panel, said economic expansion would slow from the 9.1 percent growth in the third quarter of this year, with Fan saying sustainable growth in gross domestic product was about 8 percent. Their forecast for a soft landing is in contrast with some observers including hedge fund manager Jim Chanos, who has forecast since at least February 2010 that the property market will slump, saying that China is on a “treadmill to hell” because of its reliance on real estate for growth.

Hu told business executives that China will seek to boost imports in part to help stimulate economies around the world.

Trade Surplus Critics

“We must be firmly committed to maintaining growth and promoting stability, with a special emphasis on ensuring strong growth in order to add momentum to the economic development in the Asia Pacific and beyond,” Hu said. China will “focus more on increasing imports while maintaining a stable level of exports.”

China, the world’s biggest exporter, has been the target of critics for its large trade surplus with the U.S., the world’s biggest importer. China’s overall trade surplus has been declining as imports, including Porsche Automobil Holding SE (PAH3)’s Cayenne sport-utility vehicles and iron ore from Rio Tinto Plc (RIO), have increased along with rising incomes and a nationwide surge in construction spending.

China’s exports rose at the slowest pace in almost two years in October as Europe’s deepening debt crisis crimped demand. Overseas shipments from the world’s second-largest economy rose 15.9 percent from a year earlier, customs bureau data released Nov. 10 showed. The trade surplus was $17 billion, lower than all 24 estimates in a Bloomberg News survey. Imports climbed a more-than-forecast 28.7 percent.

Inflation Slows

China’s inflation cooled in October, home sales fell and industrial output grew at the slowest pace in a year, adding pressure for measures to support growth in the world’s second- biggest economy.

Consumer prices rose 5.5 percent from a year earlier, the least in five months, the statistics bureau said Nov. 9. Housing transactions slid 25 percent from September, the bureau’s data showed.

Chinese business leaders conveyed the message that worries about a sharp downturn in the economy were unfounded.

Bank of China Ltd. (3988) Chairman Xiao Gang said the bank had controlled lending to local-government investment vehicles, whose ability to repay debt is a source of concern for the government and international investors. He told reporters at APEC that the lender, the country’s third-biggest by assets, had controlled lending to local governments. The bank said it had 531.5 billion yuan ($83.8 billion) in loans to such entities at the end of June. Xiao said much of the debt was to highway companies that had steady revenue streams from tolls.

‘Major Challenge’

“Their toll collections are a guarantee that they’ll repay their debt,” he said.

A government audit released in June said that more than 6,000 local government financing vehicles around the country had total debt of 10.7 trillion yuan as of the end of last year. Nearly a third of China’s local government financing vehicles are losing money, according to a study published in September in the magazine of the country’s official bond clearing house.

Still, Hu said “unbalanced, uncoordinated and unsustainable development poses a major challenge to China.” The country’s wealth gap is rising, food prices rose 11.9 percent in October from a year ago and investment makes up more than 40 percent of the economy.

“It will be very difficult to say for the time being that the Chinese consumer will save the world,” Zhu said. “China invests too much and it consumes too little.”

To contact the reporter on this story: Michael Forsythe in Honolulu at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Obama’s Pacific Free-Trade Agreement Would Be Biggest for U.S. Since Nafta

By Shamim Adam - Nov 13, 2011 5:00 PM GMT+0700

The U.S. and eight other Asia- Pacific nations outlined a framework for a free trade accord and agreed to accelerate negotiations with the aim of completing an agreement within the next year.

Leaders involved in the Trans-Pacific Partnership trade talks are setting July as a target for reaching an agreement, Malaysian Prime Minister Najib Razak said in Honolulu Yesterday. President Barack Obama said the aim is to reach a formal pact in the next 12 months and a U.S. official said there is “no firm deadline.” Negotiators will meet in early December and schedule more discussions then, the leaders said in a statement yesterday.

An accord among the Pacific Rim nations would be the first trade deal that Obama signed rather than inherited and the biggest for the U.S. since the North American Free Trade Agreement with Canada and Mexico that took effect in 1994. It would also help the U.S. regain economic influence it has ceded to China in a region that contains sea lanes vital to world commerce, as well as coal, oil and other commodities.

“There’s no region in the world that we consider more vital than the Asia-Pacific region,” Obama told a gathering of chief executive officers at the Asia-Pacific Economic Cooperation forum in Honolulu yesterday. TPP countries are “trying to create a high-level trade agreement that could potentially be a model not just for countries in the Pacific region but for the world generally.”

Seeking Agreements

Some nations are seeking their own free-trade agreements as the World Trade Organization’s Doha round of global talks remains unfinished after a decade. Japanese Prime Minister Yoshihiko Noda, rebuffing opponents of the trade deal within his own Democratic Party of Japan, said before the APEC summit started that he aims to join the U.S.-led TPP negotiations.

“A one-year timeline is a bit tight but given the impetus of a weak global economy, it can be done if there is political will,” said Irvin Seah, an economist at DBS Group Holdings Ltd in Singapore. “The Doha round has been impeded by layers and layers of bureaucracy and political issues. The TPP will be a boost for trade.”

The current TPP talks involve Australia, Chile, Peru and Singapore, all of which already have separate free-trade agreements with the U.S., as well as Malaysia, New Zealand, Vietnam and Brunei. In addition to tackling traditional trade issues such as tariffs and market access, negotiators at the talks are seeking restrictions on government-owned companies and stricter protections for patents and copyrights.

‘Move Forward’

“There are many relevant countries besides the U.S., and it will become clear what these countries want from Japan as we move forward with our discussions with them,” Noda said yesterday in Honolulu. “I will make that information clear to the Japanese people as we embark on a national debate” on the TPP, he said.

Two-way trade between the U.S. and the eight nations in the TPP totaled $171 billion last year, compared with $457 billion with China, $181 billion with Japan and $88 billion with South Korea, according to the U.S. Commerce Department. Taken together, the eight member economies would be America’s fifth largest trading partner, Obama said.

“An APEC agreement on broad outlines may not signify much,” Razeen Sally, director of the Brussels-based European Center for International Political Economy, said by telephone. “It might provide some kind of impetus to the negotiations, but there’s still a long way to go given how disparate the membership is.”

Earnings Boost

Asia’s growth has boosted earnings for its companies and led to stock market gains that have beaten U.S. equities. The MSCI Asia Pacific Index of stocks has outperformed the Dow Jones Industrial Average seven of the past nine years through 2010.

“The United States is behind the eight ball in Asia,” Thomas Donohue, president and chief executive officer of the U.S. Chamber of Commerce, the nation’s largest business lobbying group, said in an e-mailed statement. While the announcement is welcome, “the Chamber urges further substantial progress as quickly as possible. Expanding trade represents one of the best ways to create jobs without raising taxes or increasing the deficit.”

A trade accord such as the TPP may face political hurdles as leaders fight protectionism and sensitive issues in domestic politics. Japan’s largest farm lobby submitted a petition with almost 11.7 million signatures saying the accord would mean the “collapse” of a farm industry that accounts for about one percent of the country’s economy.

‘Political Rebellion’

“The fundamental fact is that no Japanese political party has been able to withstand the political rebellion that the Democrats are facing now,” said Steven R. Reed, a professor of political science at Chuo University in Tokyo.

The TPP would slash tariffs like Japan’s 778 percent duty on rice and open competition in industries including pharmaceuticals. Failure to join a free-trade accord may hinder companies such as Mitsubishi Corp. (8058) and Toyota Motor Corp. (7203) in competing abroad.

Polls show Japanese are divided over the accord. Thirty- four percent of respondents said Japan should join the TPP, 25 percent said it shouldn’t, and 39 percent didn’t know, according to a Mainichi newspaper poll published Nov. 7. The paper surveyed 981 voters and didn’t provide a margin of error.

In Malaysia, reluctance to change policies that give preferential treatment for some state contracts to ethnic Malays and indigenous people were among issues that led to a previous breakdown in negotiations with the U.S. on a free trade pact.

‘Be Flexible’

“There is a need to be flexible in our approach and to be realistic in terms of what can be achieved and accepted, or the buy-in by our local constituencies,” Najib said yesterday, referring to the TPP nations. “The question of sensitivity varies from country to country.”

The U.S.-South Korea free trade pact, initially agreed on by presidents George W. Bush and Roh Moo Hyun more than four years ago, was delayed as their successors Obama and Lee Myung Bak sought wide domestic support for the deal. While Obama signed the agreement into law on Oct. 21 after Congress passed it earlier that month, South Korea’s main opposition Democratic Party has stalled the government’s efforts since June to put the bill to a vote.

China, the world’s second largest economy, has not received an invitation to join discussions on the TPP and would “seriously study” such a request, Assistant Commerce Minister Yu Jianhua said Nov. 11. U.S. Trade Representative Ron Kirk said no nation needed an invitation as it is not a “closed clubhouse.”

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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Obama Pressures China as U.S. Asserts Asia Influence

By Margaret Talev and Julianna Goldman - Nov 13, 2011 5:27 PM GMT+0700

President Barack Obama used his role as host of the Asia-Pacific Economic Cooperation summit to pressure China on currency and intellectual property rights while telling voters that nations in the region are counting on U.S. leadership.

Obama told Chinese President Hu Jintao yesterday that the American public and businesses are growing “increasingly impatient and frustrated” with the pace of progress in relations between the two nations, said Michael Froman, White House deputy national security adviser. Hu told Obama that a large appreciation of the yuan won’t solve U.S. problems, a statement on the Chinese Foreign Ministry’s website said.

Obama’s strong language came only hours after he announced the U.S. and eight other nations will join in forging an Asia- Pacific trade accord within the next year, a move he said demonstrates that “American leadership is still welcome.”

With the APEC summit followed by stops in Australia and Indonesia, Obama is underscoring his administration’s pivot toward Asia after a decade in which U.S. attention was focused on wars in Iraq and Afghanistan. The outreach is spurred by the rising commercial importance of the region and by China’s mounting economic and military power.

At a session yesterday morning with company executives moderated by Boeing Co. Chief Executive Officer Jim McNerney, Obama said the U.S., the world’s biggest economy, views the Pacific rim as the driver of future economic growth and intends to use its influence in the region.

Pacific Power

“The United States is a Pacific power and we are here to stay” Obama said. “There’s no region in the world that we consider more vital than the Asia Pacific region.”

The U.S. this year has exported more to the Pacific Rim than to Europe, according to the Commerce Department. Last year, exports to the region supported 850,000 U.S. jobs, the State Department says.

Obama also told the executives, representing companies in the U.S. and Asia, that he wants China to “play by the rules” and that the U.S. “can’t be expected to stand by” without getting reciprocity from China on currency, trade and protection of intellectual property.

China’s policies also have become an issue in U.S. politics. The Senate approved a bill last month that would let manufacturers seek duties on Chinese imports if they prove they were harmed by manipulation of the yuan. Tough talk on China has become a staple for many of the Republicans seeking their party’s nomination to run against Obama next year.

WTO Case

At a debate last night in South Carolina, Former Massachusetts Governor Mitt Romney said he would make a case against China at the World Trade Organization for manipulating its currency in order to artificially lower prices and run a trade surplus. The U.S. had a $273 billion trade deficit with China last year.

Still, China, which is also the biggest holder of U.S. debt, has made steps on its currency. The yuan has gained about 8 percent against the dollar in nominal terms since the country ended a two-year peg to the U.S. currency in June, 2010. In real terms the gain has been more than 10 percent, because inflation is higher in China than in the U.S.

The yuan rose 0.06 percent to 6.3424 in Shanghai on Nov. 11, according to the China Foreign Exchange Trade System.

Business Climate

John Rice, the General Electric Co. vice chairman who oversees the company’s international operations, said in a Nov. 10 interview in Honolulu that China is making progress improving the climate for foreign businesses such as GE.

He cited a decision by the government to put off new rules encouraging indigenous innovation that international companies said could shut them out of an annual state procurement market worth as much as $1.1 trillion.

“I think the playing field is improving all the time,” Hong Kong-based Rice said. “The government listens when people recommend opportunities for improvement.”

Obama took a less confrontational public stance when he began a bilateral meeting with Hu yesterday in Honolulu. He said Americans should be “rooting for China to grow” because it would benefit both nations, by raising living standards in China and providing new markets for U.S. companies.

“Although there are areas where we continue to have differences, I am confident that the U.S.-China relationship can continue to grow in a constructive way based on mutual respect and mutual interests,” Obama said.

Greater Progress

In private, Obama “made it very clear” the U.S. wants to see greater progress and cooperation on those issues, Froman said.

White House press secretary Jay Carney said Obama was “very direct” with Hu and told him the U.S. frustrations exist broadly across the political spectrum.

The U.S. trade deficit and unemployment are not caused by the yuan exchange rate and a “large” appreciation in the currency won’t solve U.S. problems, Hu told Obama, according to the Chinese Foreign Ministry statement.

“China’s foreign exchange policy is a responsible one,” Hu told Obama, according to the statement. The country will “continue reforming its exchange rate mechanism.”

White House deputy national security adviser Ben Rhodes said Obama also stressed that “this is not simply a matter of the United States” raising concerns and that China is risking the collective pushback of other countries in the region and around the world.

In his own speech to business executives, Hu said China will seek to boost imports in part to help stimulate economies around the world.

“We must be firmly committed to maintaining growth and promoting stability,” Hu said. China will “focus more on increasing imports while maintaining a stable level of exports.”

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Julianna Goldman in Washington at jgoldman6@bloomberg.net

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

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Berlusconi Resigns, Monti Prepares New Italian Government

By Andrew Davis - Nov 13, 2011 5:38 PM GMT+0700

Prime Minister Silvio Berlusconi, who dominated Italian politics for almost two decades, stepped down as the fallout from his legal woes and contagion from the euro-region’s debt crisis led his government to unravel.

Berlusconi presented his resignation last night to President Giorgio Napolitano after the Parliament in Rome approved measures to spur growth and reduce the euro-area’s second-biggest debt. Napolitano will ask former European Union Competition Commissioner Mario Monti to form a government this evening after talks with political parties that began at 9 a.m.

Thousands of Italians gathered outside the presidential palace to witness the final minutes of the country’s longest- serving prime minister since the Second World War. Berlusconi won three elections and governed for more than half the 17 years he was in politics. Many yelled “buffoon” as he drove by. Celebrations broke out with people waving flags, drinking prosecco and dancing, producing an atmosphere more reminiscent of Italy’s 2006 World Cup victory than a political event.

“We cannot imagine that without Berlusconi our problems are solved, but without Berlusconi we can start working on how to solve the problem,” Rocco Buttiglione, a member of the Union of Centrists and a member of Berlusconi’s previous government, said yesterday in Rome.

Yields Surge

Berlusconi, 75, said on Nov. 8 that he would resign as soon as the budget measures were passed. Defections had left him without a majority in parliament, and Italy’s 10-year bond yield had surged past the 7 percent threshold that led Greece, Ireland and Portugal to seek EU bailouts. Squabbling among his Cabinet paralyzed the government, and his defense of charges that include bribery and paying for sex with a minor sapped his popularity at home and undercut his support abroad.

Since Berlusconi’s first election, “not very much has changed,” said Grant Amyot, professor of politics at Queen’s University in Ontario, Canada, and co-author of “The End of the Berlusconi Era?”

“All the world has become more competitive,” Amyot said. “Italy’s economic and state structures needed to be reformed, and it hasn’t been done. That’s the real problem: Stagnation is the word I would use to describe the impact of Berlusconi’s rule.”

Markets React

The yield on Italy’s benchmark 10-year bond jumped to a euro-era record 7.48 percent on Nov. 9, hours after Berlusconi first said he would resign. Italy was forced to pay 6.087 percent on one-year bills at an auction on Nov. 10, the most in more than 14 years. News of the growing support for a Monti government helped knock more than 100 basis points off that peak and sent Italy’s benchmark SPMIB Index up 3.7 percent on Nov. 11, the biggest advance of any European benchmark.

In his third term, Berlusconi was increasingly distracted by his four personal court cases while his government faced pressure from European allies to accelerate debt reduction as Italy’s bonds slumped, leading the European Central Bank to start buying the country’s debt in August.

Berlusconi’s fall comes two days after Greek Prime Minister George Papandreou resigned to make way for a coalition government with broader support to implement cost-cuts that will shrink the biggest deficit in the euro region. Changes of governments in Italy and Greece were “positive,” U.S. President Barack Obama said in Honolulu yesterday.

Party Backs Monti

Monti, 68, must still win confidence votes in both houses of parliament. Berlusconi’s People of Liberty party said in a statement yesterday that it will back Monti, diffusing calls from some Berlusconi allies to try to block his confirmation in the Senate, where the outgoing premier still has a majority.

Monti would lead a so-called technical government of mostly non-politicians charged with implementing the austerity measures passed by Berlusconi. They will try to persuade investors that Italy can trim its debt of 1.9 trillion euros ($2.6 trillion), more than that of Greece, Spain, Portugal and Ireland combined.

His economic policy will initially focus on cutting debt, before seeking to revive expansion in an economy where growth has lagged behind the euro-region average for more than a decade, la Repubblica reported today, without saying where it got the information.

Tax Policy

Monti is considering resurrecting a property tax on first homes that was abolished by Berlusconi, introducing a wealth tax and speeding up asset sales, the newspaper said. He will follow with an overhaul of labor-market laws that could make it easier for companies to fire workers, and offer incentives for taking on young workers in a country where youth unemployment is almost 30 percent, according to the report.

Monti plans to name Guido Tabellini as finance minister, Corriere della Sera reported yesterday, without saying where it got the information. Tabellini, 55, is a professor of economics at Bocconi University in Milan, where Monti is president. Giuliano Amato, a former prime minister and now an adviser to Deutsche Bank AG, will be foreign minister, Corriere said.

To win the ECB bond purchases, Berlusconi pledged to ease rigid hiring rules, raise the retirement age, open up closed professions and balance the budget in 2013. Monti’s government won’t have much time because he can’t serve beyond April 2013, when Berlusconi’s term was due to expire.

Lagarde, Draghi

Monti has the support of much of the opposition to Berlusconi, and Napolitano’s decision to push for a Monti government has already been praised by leaders outside Italy. International Monetary Fund Managing Director Christine Lagarde, speaking in Tokyo yesterday, called Monti “extremely competent.” ECB President Mario Draghi met with Monti this morning in Rome.

Monti spent almost a decade in Brussels as EU commissioner, first for the internal market and then for competition. In 2001, he blocked General Electric Co.’s takeover of Honeywell International Inc., the first time the EU had stopped a deal previously approved by U.S. authorities. He also levied a record 497 million-euro fine against Microsoft Corp. He’s been an international adviser to Goldman Sachs Group Inc. for six years.

To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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Palm Oil Price May Rise to Highest Since 2008 as Output Slows, Mistry Says

By Ranjeetha Pakiam - Nov 13, 2011 8:41 AM GMT+0700

Palm oil may rise to 4,000 ringgit ($1,277) by the end of the first half next year, the highest since 2008, as output slows in Indonesia and Malaysia and “buoyant” demand, said Dorab Mistry, director of Godrej International Ltd.

Futures in Malaysia may advance to 3,300 ringgit a metric ton in January and “gradually” increase to 4,000 ringgit, Mistry said, keeping a forecast made in July. January-delivery futures closed at 3,135 ringgit a ton on Nov. 11 taking this year’s decline to 17 percent, snapping a two-year gain.

Rising prices may lift world food costs that the United Nations predicts will stay at historically high levels this year, increasing pressure on central banks to raise interest rates. Commodities fell to a 10-month low on Oct. 4 on concern that the deepening European debt crisis may slow global economic growth and curb demand for raw materials.

“With growth in crude palm oil production decelerating and demand remaining buoyant, prices must rise,” said Mistry, who in September correctly predicted the tropical oil would drop to 2,800 ringgit last month. Demand for vegetable oils is expected to grow by 6 million tons in the 2011-2012 marketing year, outpacing global supply, Mistry said in remarks prepared for the China International Oils and Oilseeds conference in Guangzhou today.

Mistry cut his estimates for this year’s palm oil production for Malaysia to 18.8 million tons from 19 million tons and Indonesia’s output to 25.2 million tons from 25.5 million tons.

Global output growth for 2011 may be 5.5 million tons from an earlier forecast of 6 million tons, he said. Production may increase by about 2 million tons in 2012, he said.

Slower Harvesting

“In the last few weeks, the pace of increase has been decelerating, particularly in the case of older tall trees,” he said. “Add to that, the weather in Malaysia and in Indonesia has turned far too wet and this leads to flooding, slower harvesting and other related problems.”

Production typically peaks from July to October and tapers off during the annual rainy season from November onwards. La Nina, a cooling of the Pacific Ocean, can increase rainfall in Malaysia and Indonesia and cause drier weather in Latin America and southern U.S. Forecast models suggest the La Nina event is likely to peak towards the end of 2011, and persist into early 2012, Australia’s Bureau of Meteorology said Nov. 9.

Stockpile Drawdown

“From November this year, we shall see a drawdown in palm oil stocks,” Mistry said. “It will become a function of price and of spreads to keep stocks in the second half of 2012 at a workable level and to prevent them from falling to a dangerously low level. As stocks decline, the new export tax structure in Indonesia will magnify those changes and create a disproportionate bullish effect on prices.”

Indonesia, the largest palm oil grower, reduced the maximum tax on refined, bleached and deodorized palm olein to 13 percent, from 25 percent, while crude palm oil will be taxed at a maximum of 22.5 percent from 25 percent earlier. The new tax took effect Oct. 1.

China, the world’s biggest user of cooking oils, may import larger amounts of oilseeds, vegetable oils and grains, helped by the stronger yuan, to replenish state reserves, he said.

“China will soon become the world’s largest importer of food,” he said. “Our oilseed complex is important to China and China is even more critical to price behaviour with each passing year. I expect some recovery in soybean imports and crushing in China in 2012.”

Biodiesel

U.S. biodiesel production is expected to pick up “strongly” in the second half of 2012 and Brazil and Argentina, the biggest soybean exporters after the U.S., may increase their biodiesel mandates next year, which will be positive for soybean oil prices, Mistry said. Soybean oil futures in Chicago may trade between 65 and 70 cents a pound by June 2012, he said. December-delivery soybean oil was at 50.98 cents on Nov. 11.

The strength in rapeseed oil prices was supported by the strong demand for biodiesel in Europe and the limited supply due to lower crops in 2011, a 2 percent biodiesel mandate in Canada, strong exports to the U.S., and the lower rapeseed crop in China.

“The threat of contagion can scuttle this bullish forecast,” Mistry said. “If equities tank, for any reason, then all commodity prices will also fall and will take vegetable oil, oilseeds and meal down as well.”

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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U.S., Russia to Form ‘Common Response’ on Iran

By Julianna Goldman - Nov 13, 2011 8:44 AM GMT+0700

PresidentBarack Obama said he and Russian President Dmitry Medvedev agreed the two nations must be part of a “common response” to keep up pressure on Iran over its nuclear program.

“We discussed Iran and reaffirmed our intention to work to shape a common response so that we can move Iran to follow its international obligations when its comes to its nuclear program,” Obama said after he and Medvedev met in Honolulu where both are attending the Asia-Pacific Economic Cooperation forum.

Obama said U.S.-Russian cooperation on Iran and American support for Russia’s accession to the World Trade Organization demonstrate that the reset of relations he sought at the start of his administration is delivering results.

Both men said Russia joining the WTO will benefit global trade.

Medvedev said one area of difference remains over U.S. plans for a European missile defense system. “Our positions still remain far apart,” Medvedev said through a translator.

To contact the reporter on this story: Julianna Goldman in Honolulu at jgoldman6@bloomberg.net

To contact the editor responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net

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Syria Suspended From Arab League

By Ola Galal and Glen Carey - Nov 13, 2011 2:16 AM GMT+0700

Syria was suspended from the Arab League today for failing to halt violence against demonstrators, less than two weeks after President Bashar al-Assad’s government agreed to a plan to end the clashes.

Assad’s country, which became the second Arab nation this year to be suspended from the regional bloc after Libya, will be barred from the group’s meetings until it withdraws tanks from its cities, releases detained protesters and starts supervised talks with the opposition, the Arab League said in a statement handed to reporters in Cairo.

“This is following the Libyan path to some kind of action,” Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis, said by phone from Dubai. “It is much more complicated than Libya. It raises the ante quite a bit.”

The Arab League invited Syrian opposition leaders for talks in Cairo within the next three days aimed at developing a “unified vision” for the future of Syria, Qatar’s Prime Minister Hamad bin Jasim Al Thani told reporters in Cairo.

The league will hold another meeting on Nov. 16 in the Moroccan capital, Rabat, to discuss progress in Syria, he said.

Anti-regime demonstrations erupted in Syria during March, inspired by uprisings that toppled the leaders of Tunisia and Egypt and which last month led to the death of Libya’s long-time ruler, Muammar Qaddafi.

End to Violence

While Syria agreed to a Nov. 2 plan for ending the violence, it has continued to crack down on dissenters, according to opposition and human rights groups.

More than 3,500 protesters have been killed in the country since the clashes started, the Office of the United Nations High Commissioner for Human Rights said on Nov. 8. Human Rights Watch, a New York-based advocacy group, has urged the United Nations to refer Syria to the International Criminal Court for torture and the killing of civilians, accusations the government rejects.

Syria isn’t concerned by the Arab League decision, which isn’t “worth the ink it was written with,” Youssef Ahmed, head of the Syrian delegation to the group, told reporters in Cairo. “The Arab League is applying a U.S. and Western agenda in the region,” he said.

The league, which called on all Arab countries to withdraw their ambassadors from Damascus, plans to impose economic and political sanctions on Syria, Sheikh Hamad said, without giving further details.

‘Increases Syria’s Isolation’

“It’s a hard line, and increases Syria’s isolation substantially,” said Andrew Tabler, a Syria analyst at the Washington Institute for Near East Policy, in an e-mailed response to questions. “Phrases about sanctions, political and economic, are major moves.”

President Barack Obama said the league “demonstrated leadership in its effort to end the crisis and hold the Syrian government accountable.” In an e-mailed statement, he also said, “These significant steps expose the increasing diplomatic isolation of a regime that has systematically violated human rights and repressed peaceful protests.”

Syria is committed to implementing the Arab League’s plan and has withdrawn its military from cities and ordered an amnesty for those who now hand in their weapons, Ahmed said earlier in a copy of a speech handed to reporters in Cairo. In the past 10 days, Syria has released 553 prisoners and will continue to release others gradually, he said.

Of the Arab League’s 22 members, 18 voted for Syria’s suspension, with Iraq abstaining and Yemen and Lebanon opposing the plan, Sheikh Hamad said.

“We wanted a full suspension of Syria’s membership but this is better than nothing,” said Ahmed Eissa, a 31-year-old student who was taking part in a protest to condemn the Syrian violence outside the Arab League headquarters in Cairo today. “This is the first time that the Arab countries have taken a positive step, a step forward.”

To contact the reporters on this story: Ola Galal in Cairo on at ogalal@bloomberg.net; Glen Carey in Riyadh on at gcarey8@bloomberg.net

To contact the editor responsible for this story: Alastair Reed at areed12@bloomberg.net

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Obama, Leaders Agree on Pacific Trade Outline

By Julianna Goldman and Margaret Talev - Nov 13, 2011 10:21 AM GMT+0700
Enlarge image

Barack Obama, president of the United States. Photographer: Yuri Gripas/Pool via Bloomberg

President Barack Obama said a commitment by eight other nations to join the U.S. in forging an Asia-Pacific trade accord within the next year is evidence that “American leadership is still welcome.”

Obama announced today that the officials agreed on a blueprint that will lead to drawing up a formal Trans-Pacific Partnership in the next 12 months, a deal that could create a model for expanded trade with more Asian countries.

Obama also said he would continue to press for reforms to address an undervalued Chinese currency that undercuts U.S. businesses as well as protections for intellectual property at his meeting today with Chinese President Hu Jintao while at the Asia-Pacific Economic Cooperation forum in Honolulu.

Obama is playing host to the APEC summit and will travel on to Australia and Indonesia, a trip that underscores renewed focus on Asia after a decade dominated by wars in Iraq and Afghanistan. The outreach is spurred by the rising commercial importance of the region and by China’s mounting economic and military power.

In the U.S. there are times when “we question our influence around the world,” Obama said in remarks directed to U.S. voters while attending a meeting with international chief executive officers. “But the news I have to deliver for the American people is American leadership is still welcome.”

Welcomed Re-engagement

He said he is “encouraged by the eagerness of countries to see the U.S. re-engaged in this region.”

Japanese Prime Minister Yoshihiko Noda, who met privately with Obama, told reporters through a translator that he welcomed the renewed U.S. emphasis on the region.

Boeing Co. Chief Executive Officer Jim McNerney, who moderated the discussion with Obama, said expansion in Asia is “a huge opportunity for job creation here in the United States.”

One of the key advances Obama sought to deliver while in Hawaii was an agreement on the framework for the Trans-Pacific Partnership agreement. The current talks involve Australia, Chile, Peru and Singapore, all of which already have separate free-trade agreements with the U.S., as well as Malaysia, New Zealand, Vietnam and Brunei.

Two-way trade between the U.S. and those eight nations totaled $171 billion last year, compared with $457 billion with China, $181 billion with Japan and $88 billion with South Korea, according to the U.S. Commerce Department.

July Deadline

Malaysian Prime Minister Najib Razak said countries involved in the U.S.-led TPP talks are setting July as a deadline for reaching an agreement.

“It is a very ambitious deadline because of the enormous amount of work that needs to be done,” Najib told reporters today in Honolulu. “There is a need to be flexible in our approach and to be realistic in terms of what can be achieved and accepted.”

Obama said taken together, the eight member economies would be America’s fifth largest trading partner.

“With nearly 500 million consumers between us, there is so much more that we can do together,” he said.

Noda, rebuffing opponents of the trade deal within his own party, said before the APEC summit started that he aims to join the negotiations.

China, South Korea, Russia and Canada may be added to the negotiations later. U.S. Trade Representative Ron Kirk said yesterday that the accord isn’t intended to be “a closed clubhouse.”

Pacific Power

Obama told the CEO summit that the U.S. “is a Pacific power and we are here to stay.” He said the TPP can become “the seed of a broader set of agreements” in the region.

One of the main meetings today on the sidelines was the session between Obama and Hu, leaders of the world’s two biggest economies.

Obama said at the CEO summit that the current valuation of the yuan puts U.S. businesses at a disadvantage and ultimately will hold back China’s growth. The U.S. “can’t be expected to stand by” without getting reciprocity with China on differences over currency, trade and protection of intellectual property, he said.

Before starting his meeting with Hu this afternoon, Obama said cooperation between the U.S. and China “is vital” for global security and growth.

Rebalancing

The agenda for their meeting includes “how we can continue to rebalance growth around the world, emphasize the importance of putting people back to work and making sure that the trade relationships and commercial relationships between our two countries end up being a win-win situation,” Obama said.

Hu said the Asia-Pacific region can be a base for continued cooperation.

One of the biggest sources of friction is China’s currency valuation, which the U.S. said is being kept too low, driving up trade imbalances.

China’s yuan dropped 0.05 percent this week to 6.3424 per dollar, snapping a two-week advance. Exports increased 15.9 percent in October from a year earlier, less than the 16.1 percent economists surveyed by Bloomberg forecast, data showed Nov. 10.

Lawmakers in the U.S. are pressing the Obama administration to take a stronger stand on China’s currency. The U.S. Senate approved a bill last month that would let manufacturers seek duties on Chinese imports if they prove they were harmed by manipulation of the yuan. It faces opposition in the Republican- controlled House, where Speaker John Boehner of Ohio has called the measure “dangerous” and said it “poses a very severe risk of a trade war.”

To contact the reporters on this story: Julianna Goldman in Honolulu at jgoldman6@bloomberg.net; Margaret Talev in Honolulu at mtalev@bloomberg.net

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

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Duke’s Mike Krzyzewski Ties Bob Knight’s 902 Wins as Division I Coach

By Nancy Kercheval - Nov 13, 2011 7:51 AM GMT+0700

Duke University basketball coach Mike Krzyzewski is one win away from a record 903rd victory that would move him past Bob Knight atop college basketball’s highest level.

The sixth-ranked Blue Devils beat Presbyterian College 96- 55 today in a Division I match at Cameron Indoor Stadium in Durham, North Carolina, giving Krzyzewski a career record of 902-284 over 37 seasons.

Krzyzewski, 64, who has led the Blue Devils to four National Collegiate Athletic Association championships, can break Knight’s mark with a win Nov. 15 when Duke plays Michigan State at Madison Square Garden in New York.

Krzyzewski played for Knight before his 1969 graduation from the U.S. Military Academy at West Point, New York. Knight amassed a 902-371 career record over 42 seasons before quitting as Texas Tech University’s coach in 2008.

Ryan Kelly had 17 points for the Blue Devils (2-0), who took a 53-30 halftime lead. Besides Kelly, Duke had five other players score at least 10 points, including Austin Rivers with 15, Miles Plumlee with 13 points and 11 rebounds and Mason Plumlee with 13.

Al’Lonzo Coleman led the Blue Hose (1-1) with 11 points and Pierre Miller added 10 as Presbyterian shot 32.1 percent from the floor compared with Duke’s 61.4 percent.

To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net

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Berlusconi Resigns as Monti Prepares New Italian Government

By Andrew Davis - Nov 13, 2011 5:07 AM GMT+0700

Prime Minister Silvio Berlusconi, who dominated Italian politics for almost two decades, resigned as fallout from his legal woes and contagion from the euro- region’s debt crisis led his government to unravel.

Berlusconi presented his resignation last night to President Giorgio Napolitano after the parliament in Rome approved measures to spur growth and reduce the euro-area’s second-biggest debt. Napolitano will ask former European Union Competition Commissioner Mario Monti to form a government tomorrow after consulting with the country’s political parties. Talks are scheduled to begin at 9 a.m. in Rome.

Berlusconi, 75, said on Nov. 8 that he would resign as soon as the budget measures were passed. Defections had left him without a majority in parliament, and Italy’s 10-year bond yield had surged past the 7 percent threshold that led Greece, Ireland and Portugal to seek EU bailouts. Squabbling among his Cabinet paralyzed has government and his defense of charges that include bribery and paying for sex with a minor sapped his popularity at home and undercut his support abroad.

“We cannot imagine that without Berlusconi our problems are solved, but without Berlusconi we can start working on how to solve the problem,” Rocco Buttiglione, a member of the Union of Centrists and a member of Berlusconi’s previous government, said yesterday in Rome.

Celebrated Departure

Thousands of Italians gathered outside the presidential palace to witness the final minutes of the country’s longest- serving prime minister since the Second World War. Berlusconi won three elections and governed for more than half the 17 years since he entered politics in 1994. Many yelled “buffoon, buffoon” as he drove to the president’s residence. Celebrations broke out with people waving Italian flags and dancing upon his departure.

Since Berlusconi’s first election, “not very much has changed,” said Grant Amyot, professor of politics at Queen’s University in Ontario, Canada, and co-author of “The End of the Berlusconi Era?”

“All the world has become more competitive,” Amyot said. “Italy’s economic and state structures needed to be reformed, and it hasn’t been done. That’s the real problem: Stagnation is the word I would use to describe the impact of Berlusconi’s rule.”

Bonds Slump

The yield on Italy’s benchmark 10-year bond jumped to a euro-era record 7.48 percent on Nov. 9, hours after Berlusconi first said he would resign. Italy was forced to pay 6.087 percent on one-year bills at an auction on Nov. 10, the most in more than 14 years. News of the growing support for a Monti government helped knock more than 100 basis points off that peak and sent Italy’s benchmark SPMIB Index up 3.7 percent on Nov. 11, the biggest advance of any European benchmark.

In his third term, Berlusconi was increasingly distracted by his four personal court cases while his government was pressured by European allies to accelerate debt reduction as Italy’s bonds slumped, leading the European Central Bank to start buying the country’s debt in August.

Berlusconi’s fall comes two days after Greek Prime Minister George Papandreou resigned to make way for a coalition government with broader support to implement cost-cuts that will shrink the biggest deficit in the euro region. Changes of governments in Italy and Greece were “positive,” U.S. President Barack Obama said in Honolulu yesterday.

Implementing Austerity

Monti will lead a so-called technical government of mostly non-politicians charged with implementing the austerity measures passed by Berlusconi. They will try to persuade investors Italy can trim its debt of 1.9 trillion euros ($2.6 trillion), more than that of Greece, Spain, Portugal and Ireland combined.

Monti plans to name Guido Tabellini as finance minister, Corriere della Sera reported, without saying where it got the information. Tabellini, 55, is a professor of economics at Bocconi University in Milan, where Monti is president. Giuliano Amato, a former prime minister and now an adviser to Deutsche Bank AG, will be foreign minister, Corriere said.

To win the ECB bond purchases, Berlusconi pledged to ease rigid hiring rules, raise the retirement age, open closed professions and to balance the budget in 2013. Monti’s government won’t have much time because he can’t serve beyond April 2013, when Berlusconi’s term was due to expire.

‘Extremely Competent’

Monti has the support of much of the opposition to Berlusconi, and Napolitano’s decision to push for a Monti government has already been praised by leaders outside Italy. International Monetary Fund Managing Director Christine Lagarde, in remarks in Tokyo yesterday, called Monti “extremely competent.” European Central Bank President Mario Draghi met with Monti this morning in Rome.

Monti spent almost a decade in Brussels as EU commissioner, first for the internal market and then for competition. In 2001, he blocked General Electric Co.’s takeover of Honeywell International Inc., the first time the EU had stopped a deal previously approved by U.S. authorities. He also levied a record 497 million-euro fine against Microsoft Corp. He’s been an international adviser to Goldman Sachs Group Inc. for six years.

To contact the reporter on this story: Andrew Davis in Rome at abdavis@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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