Economic Calendar

Sunday, March 18, 2012

Britain Will Keep Austerity With Unemployment at 16-Year

By Nick Taborek - Mar 18, 2012 11:00 AM GMT+0700

Britain won’t ease austerity in its budget to be presented this week, U.K. Chancellor of the Exchequer George Osborne said in an interview to be aired today on CNN’s “Fareed Zakaria GPS” program.

“We are going to stick with the deficit reduction plan that I set out almost two years ago,” Osborne said, according to a transcript of the interview.

British Finance Minister George Osborne at 11 Downing Street in London on Feb. 14, 2012. Photographer: Justin Tallis/AFP/Getty Images

U.K. jobless claims rose more than economists forecast in February, and a broader measure of unemployment remained at the highest level in 16 years, according to data released March 14 by the Office for National Statistics in London.

Keeping austerity measures in place is important “to provide the stability that the British economy needs and the low interest rates the British economy needs to allow the recovery to take hold,” Osborne said.

“The plan we put in place is bringing that deficit down and borrowing is coming down,” he said. “But even with that, we still have one of the highest budget deficits in the world.”

The U.K. has the third highest deficit in the Group of Seven countries, behind Japan and the U.S. Osborne is trying to rid Britain of a budget deficit equal to 9 percent of gross domestic product by 2017. His austerity program will cost more than 700,000 government jobs. Critics including the opposition Labour Party say the scale of the squeeze is worsening Britain’s economic woes.

Fitch Rating

Britain risks losing its top investment grade because of its limited ability to deal with shocks, Fitch Ratings said in a March 14 statement.

Fitch changed the outlook on Britain to “negative” from “stable,” indicating a “slightly greater” than 50 percent chance that the AAA rating will be reduced within two years, the company said, citing the weak economic recovery, high debt levels and threats from Europe’s debt crisis.

Osborne is meeting with coalition partners to agree on a budget he will present on March 21.

Osborne said the U.S. and the U.K are “not that dissimilar” in their need for deficit reduction.

“All Western countries know that they’ve got to deal with that question the rest of the world and the markets have, which is, OK, well, how are you going to pay your way?”

To contact the reporter on this story: Nick Taborek in Washington at

To contact the editor responsible for this story: Ann Hughey at


Merkel Unhurt by Spat as Germany Elects President From the East

By Tony Czuczka and Patrick Donahue - Mar 18, 2012 6:01 AM GMT+0700

Chancellor Angela Merkel is set to vote for a German president she rejected once already, shrugging off the setback to focus on state elections and crisis-fighting steps that are more likely to shape her chances of a third term.

The probable election today of Joachim Gauck, 72, a former pastor and East German anti-communist activist, would mean Europe’s biggest economy is headed for the first time by both a chancellor and president who grew up behind the Iron Curtain.

Germany's Chancellor Angela Merkel. Photographer: Michele Tantussi/Bloomberg

German President Joachim Gauck, who had been a pro-democracy activist in East Germany. Photographer: Johannes Eisele/AFP/Getty Images

The vote also enables Merkel to dodge a conflict in her coalition that failed to dent her record-high approval ratings. Three state elections and a decision due by the end of the month on whether to back an expanded financial firewall against the crisis are her immediate challenges.

“She’s like Teflon,” Carsten Brzeski, an economist at ING Groep in Brussels, said in an interview. “Everything that could have been blamed on her hasn’t affected her at all.” Merkel “has shown that she can sit things out.”

A special federal assembly is due to convene in Berlin at noon today for the presidential election, the second vote for the mainly ceremonial post in less than two years. Gauck was the main opposition candidate in 2010, when he lost to Christian Wulff, Merkel’s pick. Wulff quit on Feb. 17 to face a criminal probe that may lead to corruption charges. He denies any wrongdoing.

The only other candidate this time is Beate Klarsfeld, 73. The German-born Nazi hunter living in Paris was nominated by the anti-capitalist Left party. With Merkel’s coalition and two opposition parties backing Gauck, his election is assured.

Stasi Hunter

Gauck, the son of a sailor who was sent to a Soviet Gulag for more than three years in the 1950s, grew up in the Baltic Sea port city of Rostock and became a leading figure of East Germany’s anti-communist opposition in 1989. He later gained a reputation as Germany’s leading “Stasi hunter” for his work in overseeing the opening of millions of files kept by informants of the communist-era Ministry of State Security.

“The central issue in the public life of Joachim Gauck has been that of freedom and responsibility,” Merkel said Feb. 20 when she announced his candidacy. “That’s what connects me to him personally, despite our differences.”

After expressing reservations about the opposition’s pick of Gauck, Merkel backed down last month when the Free Democrats, her junior coalition ally, supported him. By retreating and moving on, she tamped down a domestic distraction as European leaders were struggling to craft a second bailout for Greece.

Latest Poll Scores

An Emnid poll on March 11 showed national support for her bloc at 36 percent, a level last exceeded in 2008. Her FDP ally, which has seen voter support collapse amid leadership changes and a split over its stance on euro bailouts, had 3 percent backing after almost 15 percent in 2009. The main opposition Social Democrats had 28 percent and the Greens 14 percent.

“She checked it off the list in a hurry,” Manfred Guellner, head of the Berlin-based Forsa polling firm, said of the Gauck spat. “It didn’t harm the high approval she enjoys. When Merkel is alone on the stage saving the euro, that’s when she scores points.”

Next stop for Merkel is Saarland, where voters cast ballots on March 25 in the first of three German state elections this year. It’s followed by votes in the northern state of Schleswig- Holstein on May 6 and North Rhine-Westphalia, Germany’s most populous region, which with almost a quarter of the country’s 82 million people is a bellwether for the respective parties’ national fortunes before the federal election in 2013. While not yet scheduled, that vote will probably also take place in May.

Grand Coalition Redux

Merkel’s position is a turnaround from last year, when her national coalition was defeated or lost votes in all seven state elections as Germany’s involvement in the crisis stemming from Greece made it the biggest contributor to euro-region bailouts.

Polls now show the CDU and Social Democrats in a dead heat in Saarland, suggesting the CDU and SPD will ally to govern the region bordering France and Luxembourg in a “grand coalition,” mirroring Merkel’s first-term government.

That’s a constellation Germans like because they favor cooperation among the two biggest parties rather than conflict, making another grand coalition a possible outcome of the next national election in 18 months, Forsa’s Guellner said.

With the Free Democrats decimated, Merkel reached out to the opposition to agree on the presidential candidate, who is elected by a 1,240-member assembly of national lawmakers and state delegates that meets at the Reichstag building in Berlin.

The chancellor’s majority in the assembly has narrowed to as little as two seats from 21 seats in 2010, when Wulff defeated Gauck, according to election website

To contact the reporters on this story: Tony Czuczka in Berlin at; Patrick Donahue in Berlin at

To contact the editor responsible for this story: James Hertling at


Lagarde Says World Can’t Be Lulled Into Sense of Security

By Bloomberg News - Mar 18, 2012 9:22 AM GMT+0700

International Monetary Fund Managing Director Christine Lagarde urged policy makers to be vigilant as oil prices, debt levels, and the risk of slowing growth in emerging markets threaten global economic stability.

“Optimism should not give us a sense of comfort or lull us into a false sense of security,” Lagarde said today at a speech in Beijing at the China Development Forum. “We cannot go back to business as usual.”

Christine Lagarde, managing director of the International Monetary Fund, speaks during a news conference in Beijing, China, on Thursday, Nov. 10, 2011. Photographer: Adam Dean/Bloomberg *** Local Caption *** Christine Lagarde

The IMF last week approved a 28 billion-euro ($36.6 billion) loan for Greece as part of a 130 billion euro second bailout by the European Union that requires more austerity and an overhaul of its economy. Greece completed the world’s largest sovereign-debt overhaul and agreed to deeper spending cuts to obtain new funds as it faces a fifth year of recession.

“The measures that were proposed are ambitious and it will be important to focus on steady rigorous implementation of the situation on the ground,” Lagarde said about Greece. “We have made important steps forward.”

Brent crude oil futures have rising 18 percent this year on concern Iran’s standoff with the West over its nuclear program will escalate into military action in a region that holds 54 percent of global petroleum reserves. Increased gasoline prices threaten to slow consumer spending in the U.S., tempering the recovery in the world’s largest economy.

Oil prices are “becoming a threat to global growth,” Lagarde said. “I think it’s a major threat.”

Praising China

Lagarde praised China’s rising leadership role in the world economy, while saying the world’s second-biggest economy must “continue shifting the drivers” of growth toward domestic consumption and away from investment and exports. China’s leadership should work to improve standards of living, she said.

The IMF chief said March 8 that the fund may raise its growth forecast for the U.S. on signs the recovery is picking up in new forecasts to be released in about a month.

“I wouldn’t be surprised if it was upward compared with our previous forecast of 1.8” percent for 2012, she said in an interview on the “Charlie Rose” show broadcast on PBS and Bloomberg Television.

The Washington-based IMF in January cut its global growth forecasts for this year and next and warned that the European debt turmoil could tip the world into another recession if it were to worsen. The fund has been seeking $600 billion from its members to be able to allow an increase in lending resource of $500 billion, to protect the world from consequences of the European debt crisis.

While euro nations have pledged about $200 billion, Group of 20 officials meeting in Mexico last month sided with the U.S. and said any decision on more funding hinges on the euro area delivering more of its own financial firepower first.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at

To contact the editor responsible for this story: Paul Panckhurst at


U.S. Citizen Freed After Nine-Month Iraq Detention, UN Sa

By Nick Taborek and Flavia Krause-Jackson - Mar 18, 2012 4:24 AM GMT+0700

A U.S. citizen was handed over to the United Nations mission in Iraq by two Iraqi legislators, the UN said in an e-mailed statement.

The man had been held in detention for about nine months by an Iraqi group, the UN said in the statement, without identifying the group. The U.S. State Department said in an e- mailed statement an American was transferred to the U.S. Embassy in Baghdad from the UN mission in Iraq.

The UN and the State Department declined to identify the American. He was handed over today by Deputy Speaker of the Council of Representatives, Quasay Al-Suhail, and Maha al-Douri, a member of the Iraqi Parliament, according to the UN.

The Iraqi news agency Al Sumaria reported that the man was handed over by followers of the anti-U.S. Iraqi Shiite cleric Moqtada al-Sadr.

Without identifying himself, the man spoke at a press conference outside the Green Zone in Baghdad today, the Associated Press reported.

Iraqi lawmakers displayed U.S.-issued military and contractor ID cards that identified him as Randy Michael Hultz, the Associated Press reported. The Al Sumaria report said the man’s name is Randy Michael Hill, 59, a retired member of the U.S. military.

At the press conference the man gave few details of what he described as a “kidnapping,” or how he was treated while captured, according to AP. The man was taken into the Green Zone and turned over to the UN mission immediately after the press conference, AP said.

The kidnappers, the man said during the press conference, were from the Promised Day Brigade, a branch of the Mahdi Army, a militia that is controlled by al-Sadr, according to the AP.

The Al Sumaria report, citing al-Douri, said the man was freed after the withdrawal of U.S. troops from Iraq “to give a message about Iraq’s good intentions and to say that Iraq restored its sovereignty.”

To contact the reporter on this story: Nick Taborek in Washington at

To contact the editor responsible for this story: Ann Hughey at


Goldman Sachs Board Must Act on Smith Op-Ed, Ex-Partner Writes

By Christine Harper - Mar 18, 2012 6:00 AM GMT+0700

Goldman Sachs Group Inc. (GS)’s directors must investigate a former employee’s allegations about a change in the firm’s culture, Jacki Zehner, who was a partner when she left the firm in 2002, wrote on her blog.

Zehner said she doesn’t know Greg Smith, the derivatives salesman whose New York Times op-ed piece blamed Chief Executive Officer Lloyd C. Blankfein and President Gary D. Cohn for fostering a “toxic and destructive” environment, causing Smith to quit last week. Zehner, who worked at Goldman Sachs for 14 years, wrote that she’s heard from “many people” in the past few years that the firm is emphasizing profits over character.

“These are very serious accusations from a credible person in my view and I hope it does indeed provide a ‘wake-up’ call to the board of directors,” wrote Zehner, who was the first female trader promoted to partner and is married to a former partner. She is now CEO and president of Women Moving Millions, a non- profit supporting the advancement of women and girls worldwide.

“It is the board that is accountable to shareholders and before they take another paycheck I hope they ask a heck of a lot of questions and get honest answers,” Zehner, 47, wrote in her March 16 commentary.

Blankfein, 57, and Cohn, 51, who have held their current roles since 2006, responded to Smith’s op-ed with a memo expressing disappointment with his assertions and cited a survey of employees that found most disagree. Still, “if an individual expresses issues, we examine them carefully and we will be doing so in this case.”

‘Verbal Hand Grenade’

David Wells, a spokesman at Goldman Sachs, declined to comment beyond the contents of the memo.

Janet Tiebout Hanson, who left Goldman Sachs after almost 14 years in 1993 and in 1997 founded the women’s networking firm 85 Broads, wrote her own blog response to Smith’s op-ed piece, calling it a “cowardly act.”

“By tossing a verbal hand grenade on his way out the door, he sullied the reputations of the vast majority of the people at the firm who work and live by the highest possible professional standards every single day,” wrote Hanson, who was the first woman at Goldman Sachs to be promoted into sales management. “He is just a quitter who never gave management an opportunity to respond before he verbally strafed the entire firm in print.”

Seek Some Answers

Hanson, 59, said she was “delighted” to become a Goldman Sachs client when she started an asset-management firm, Milestone Capital, in 1995. Milestone Capital had an “awesome relationship” with the fixed-income trading desks at Goldman Sachs, which she said was partly responsible for its growth the next five years.

Greg Smith got his 15 minutes of lame fame, which is all it is,” she added.

In Zehner’s blog post, she said the board should decide how to respond to Smith’s accusations after they get some answers.

“If those answers are that the kind of behavior reported by Mr. Smith is not the norm, then they would have done their job, this story will fade and Goldman will go about its business for another 143 years,” she wrote. “If the answers are the opposite, heads should roll.”

To contact the reporter on this story: Christine Harper in New York at

To contact the editor responsible for this story: David Scheer at