Taliban Ignite Spring Offensive With Coordinated Attacks

By Eltaf Najafizada and James Rupert - Apr 16, 2012 5:45 AM GMT+0700

Afghan police and troops battled Taliban guerrillas who attacked simultaneously at least six government or foreign centers in Kabul and three other provinces yesterday in their highest-profile assault this year.

Guerrillas seized three construction sites of multi-story buildings in the capital, using them as high ground from which to fire down on police and threaten government offices, foreign embassies and military camps. Police surrounded the attackers, killing at least 19, while at least 14 officers and 9 civilians were wounded, Siddiq Siddiqui, an Interior Ministry spokesman, said by phone.

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A Norwegian soldier, left, aims his rifle toward the scene of attacks in Kabul on April 15, 2012. Photographer: Bay Ismoyo/AFP/Getty Images

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Afghan National Army soldiers hold rocket-propelled grenade launchers as they keep watch near the scene of an attack in Kabul on Sunday, April 15, 2012. More than 10 explosions in all rocked the capital, and heavy gunfire shook the city for more than an hour after the initial blast. Photographer: Shah Marai/AFP/Getty Images

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An Afghan security officer runs to a building being used as a shelter by insurgents at the scene of an attack in Kabul on April 15, 2012. Photographer: Massoud Hossaini/AFP/Getty Images

Some of the battles, including one about a kilometer (0.6 mile) from the palace of President Hamid Karzai and the U.S. Embassy, continued late into Kabul’s evening, nine hours after the attacks began, police said. Gunfire and at least two explosions jolted the neighborhood, and Agence France-Presse cited an aide to Karzai as saying he had been moved to a safe shelter. Karzai’s spokesman, Aimal Faizi, did not answer calls seeking confirmation.

Following last year’s offensives by U.S. forces and the annual winter lull in Afghanistan’s war, “the Taliban are sending a message to the U.S. and its allies that they are still powerful,” said Waheed Mujda, a political analyst at the independent Kabul Center for Strategic Studies and a former Foreign Ministry official during the Taliban regime in the 1990s.

Pakistan Attacks

Also yesterday, Pakistani Taliban guerrillas, which include factions allied to the Afghan movement, attacked a government prison in Bannu, Pakistan, with gunfire and rocket-propelled grenades. The assault freed more than 300 Islamic militant prisoners, GEO television and other Pakistani news channels reported. The information minister and prisons director for Khyber-Pakhtunkhwa Province, as well as local officials in Bannu, did not respond to phone calls seeking comment.

The day’s complex assault in Afghanistan “has just been a high-profile showing by the Taliban,” said U.S. Army Lieutenant Colonel Jimmie Cummings, a spokesman for the NATO-led International Security Assistance Force, or ISAF. “The good news in all of this is how well the Afghan national security forces have responded,” he said by e-mail.

While U.S. officials say expanded military operations last year by the reinforced American combat force have undercut the Taliban’s strength, analysts said recent data on guerrilla attacks suggest that their spring offensive, following the annual winter lull in fighting, is undiminished this year.

‘Little Lasting Effect’

“The data show that the U.S. military surge in 2011 succeeded in reducing the number of security incidents per month, but had little lasting effect,” John McCreary, a retired U.S. Defense Intelligence Agency analyst, wrote in an April 11 newsletter for Washington-based Kforce Government Solutions. “The south and east remain the areas under greatest stress, with the Taliban instigating more than half of the combat actions.”

The top U.S. and ISAF commander in Afghanistan, Marine General John Allen, told the House Armed Service Committee March 20 that, “as a result of our recent winter operations, we have seriously degraded the Taliban’s ability to mount a major spring offensive.”

“We know that the Taliban remain a resilient and determined enemy and that many of them will try to regain their lost ground this spring through assassination, intimidation, high profile attacks and the emplacement of IEDs,” or bombs, Allen said.

Afghan Government Forces

“No one is underestimating the severity” of the attacks, Allen said in a statement yesterday. “But the very fact that they chose these types of targets speaks volumes about where we are in this campaign,” Allen said.

Afghan forces had led the response to the Taliban assault, he said.

Afghan forces “were on the scene immediately, well-led and well-coordinated,” Allen said. “They integrated their efforts, helped protect their fellow citizens and largely kept the insurgents contained. I consider it a testament to their skill and of far they’ve come, that they haven’t yet asked” for ISAF support, he said.

Allen’s spokesman Navy Captain John Kirby said ISAF believes more than 20 insurgents attacked Kabul and that the Afghan National Police have detained at least three suspects, including one planner.

Kirby said it was difficult at this time to estimate the number killed “‘but we know they did suffer casualties.’’

Haqqani Faction

Yesterday’s attacks took place in Kabul and the nearby provincial capitals of Jalalabad, to the east, and Pul-e-Alam and Gardez, to the southeast. Those are areas where the Taliban’s Haqqani faction, based partly in Pakistan, is the primary Taliban fighting force.

The U.S. ambassador to Afghanistan, Ryan Crocker, said in an interview with CNN’s ‘‘State of the Union” program that he believed yesterday’s assaults were conducted by the group, led by the family of an aged Afghan militant, Jalaluddin Haqqani.

Afghan intelligence officers intercepted three Haqqani faction militants carrying guns and two suicide bombs as they entered Kabul to attack the home of one of Karzai’s two vice- presidents, Mohammad Karim Khalili, said Lutfullah Mashal, spokesman of the Afghanistan National Security Directorate.

In Pul-e-Alam, the center of Logar province, Taliban with heavy weapons targeted the governor’s office and the Afghan intelligence agency office, said Din Mohammad Darwish, the provincial government spokesman. “The governor and all the government workers are stuck inside” their offices, he said by phone.

U.S. Embassy Lockdown

In Jalalabad, “a suicide bomber blew himself up at the gate of the Americans’ PRT,” or Provincial Reconstruction Team base, said Ahmad Zia Abdulzai, the local government spokesman. “Other Taliban tried to enter but were shot dead by Afghan police and American forces,” he said by phone.

A Taliban spokesman, Zabihullah Mujahed, said in an e- mailed statement that the attackers had targeted the nation’s parliament, police and other government agencies, the German and British embassies and ISAF.

The U.S. Embassy in Kabul went into a “lockdown, following our standard operating procedures after hearing explosions and gunfire in the area,” Gavin Sundwall, an embassy spokesman, said in a statement in Kabul. All its personnel were safe, he said.

Afghan Security Forces have things “pretty much under control,” Crocker told CNN. “We are hearing from the Afghans they have been successful in killing and capturing the terrorists while taking relatively few casualties of their own.”

Crocker said the attacks don’t buttress an argument for the U.S. to accelerate the planned withdrawal of its main combat forces, now set for 2014. While the Afghan forces’ response yesterday was “a clear sign of progress,” the attacks also showed “a very dangerous enemy with capabilities,” Crocker said. An early withdrawal would “invite the Taliban and Haqqani” network “back in and set the stage for another 9-11,” he said.

To contact the reporters on this story: Eltaf Najafizada in Kabul at enajafizada1@bloomberg.net; James Rupert in New Delhi at jrupert3@bloomberg.net

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

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French Campaign Enters Final Week With Hollande Extending Lead

By Helene Fouquet and Gregory Viscusi - Apr 16, 2012 5:01 AM GMT+0700

French President Nicolas Sarkozy and Socialist Francois Hollande held their biggest campaign rallies a week before the first round of voting as polls showed the challenger widening his lead.

They addressed supporters in Paris yesterday with Hollande extending his advantage in a head-to-head race by two points to 56 percent against 44 percent, according to a TNS Sofres survey on April 13. The challenger took the lead in the 10-person first round set for April 22. A CSA poll on April 12 put the gap at 57-43, up from eight points two weeks ago.

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French President Nicolas Sarkozy shakes hands with supporters in Paris, on Sunday April 15, 2012. Photographer: Michel Euler/AFP/Getty Images, Pool

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French Socialist presidential candidate Francois Hollande, second left, shakes hands with supporters on April 13, 2012 in Chelles. Photographer: Patrick Kovarik/AFP/Getty Images

A bounce for Sarkozy after police killed a self-declared jihadist who murdered seven people last month has ebbed. The campaign focus has returned to the sputtering economy and rising unemployment.

Hollande’s message yesterday was for voters to turn out and punish Sarkozy for his “bankrupt leadership.” “You must vote for France, for the republic,” he said, blaming Sarkozy for mounting debt and slowing growth. Sarkozy said electing a Socialist government risked economic catastrophe.

Both campaigns claimed that more than 100,000 attended the rallies -- Sarkozy’s at place de la Concorde in central Paris and Hollande’s at Vincennes park at the city’s eastern edge.

France is in a “race against time” and “has no right to err” in fighting Europe’s financial crisis, Sarkozy told the flag-waving throngs that stretched down the Champs Elysees.

Learning Lessons

“If we do not want to risk losing our agriculture, our factories, our jobs, our way of life, our culture, then we must learn the lessons of these terrible crises the world has just experienced,” Sarkozy said.

With ubiquitous banners declaring “Now Is The Time,” Hollande criticized Sarkozy for failed and divisive policies. “He wants to arouse all the old fears -- of foreigners, of others, of the crisis, of the left -- because he’s afraid to lose,” the lawmaker and former Socialist Party chief said.

With Hollande advocating a renegotiation of Europe’s fiscal-discipline treaty, Sarkozy called on the European Central Bank to do more to support growth, reviving an issue he raised in his 2007 campaign.

The TNS Sofres poll questioned 1000 people on April 11-12, while CSA questioned 1,123 on April 10-11. Neither published a margin of error.

To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net; Gregory Viscusi in Paris at gviscusi@bloomberg.net

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

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Secret Service Agents With Obama Probed for Misconduct

By Kate Andersen Brower - Apr 15, 2012 7:29 AM GMT+0700

Eleven U.S. Secret Service agents were placed on administrative leave today because of allegations of misconduct that involve contact with prostitutes near the site of the Summit of the Americas in Colombia.

The agents, who were sent to Cartagena, Colombia, in advance of the arrival of President Barack Obama, were relieved from their duties and returned to the U.S. when the charges were made on April 12, according to a statement today from Secret Service spokesman Paul S. Morrissey.

They were special agents and uniformed officers who were not assigned to Obama’s protective detail, Morrissey said.

At least one agent is being accused of getting into a dispute over payment to a prostitute in Cartagena, according to Jon Adler, president of the Federal Law Enforcement Officers Association, which provides legal representation for Secret Service agents.

The story of the agents’ alleged misbehavior became public just as leaders of the Western Hemisphere were beginning talks on trade, drug legalization in South America, and creating greater transparency among South American governments.

Obama was told about the allegations yesterday and the issue “has been more of a distraction for the press” than for the president at the Summit of the Americas, spokesman Jay Carney told reporters at a briefing today.

President Secure

“These actions have had no impact on the Secret Service’s ability to execute a comprehensive security plan for the President’s visit to Cartagena,” Morrissey said. “This matter was turned over to our Office of Professional Responsibility, which serves as the agency’s internal affairs component.”

The personnel involved were interviewed at Secret Service headquarters in Washington, D.C. today and placed on administrative leave, a “standard procedure,” Morrissey said in the statement.

Morrissey said, “We regret any distraction from the Summit of the Americas this situation has caused.”

The agents had stayed at Cartagena’s Hotel Caribe, where several members of the White House staff and the news media also stayed, the Associated Press reported.

In addition, five members of the U.S. military who were staying at the same hotel violated a curfew set by the senior U.S. defense official at the U.S. embassy in Colombia, according to Colonel Scott Malcom, the public affairs officer for the U.S. Southern Command.

The five had been sent to Colombia to support the summit, in part by providing security, Malcom said. They will remain in Colombia during the summit because their skills and knowledge are needed, Malcom said, adding that they will be restricted to their hotel rooms when not carrying out official duties.

The military has yet to determine whether the five violated any rules beyond the curfew, Malcom said. He didn’t provide their ranks or military branch.

To contact the reporter on this story: Kate Andersen Brower in Cartagena, Colombia at kandersen7@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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Euro Area Seeks Bigger IMF War Chest on Spanish Concerns

By Patrick Donahue and Simon Kennedy - Apr 16, 2012 5:01 AM GMT+0700

European officials travel to Washington this week seeking a bigger global war chest to combat the debt crisis as Spain’s government battles to quell renewed market turmoil over its finances.

Three weeks after European leaders unveiled emergency euro- area funding exceeding the symbolic $1 trillion mark, concerns about Spain’s position have ratcheted the nation’s borrowing costs to the highest levels this year. Crisis-fighting resources will dominate talks at the International Monetary Fund’s spring meeting in Washington from April 20-22.

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International Monetary Fund (IMF) Managing Director Christine Lagarde, seen here on April 12, said that she is hoping to make “real progress” at this week’s meetings. Photographer: Joshua Roberts/Bloomberg

While the U.S. insists that Europe can overcome the crisis using its own financial firepower, euro-area officials say they’ve done enough to trigger additional global assistance. The urgency was underscored last week as Spanish and Italian yields jumped, challenging assumptions among the region’s leaders that the worst of the fallout was behind them.

“After three months that were calmer than expected, the euro crisis is back,” said Holger Schmieding, chief economist at Berenberg Bank in London. “The speed of the recent surge in yields has elements of a renewed market panic.”

Spain’s 10-year bond yield climbed 19 basis points last week to 5.98 percent, while similar-maturity Italian yields increased seven basis points to 5.52 percent. The euro retreated against the U.S. dollar April 13, falling 0.8 percent to $1.3078, bringing the decline since Feb. 28 to 2.4 percent.

The surge in borrowing costs prompted Spain’s deputy economy minister, Jaime Garcia-Legaz, to call on the European Central Bank to resume its direct intervention in the markets.

Increase Bond Purchases

“They should step up purchases of bonds,” Garcia-Legaz said in an April 13 interview, wading into a debate that has split the ECB. While Executive Board member Benoit Coeure signaled April 11 the ECB may buy up Spanish bonds, his Dutch colleague Klaas Knot said two days later that the ECB is “very far” from reactivating the measure.

Spanish Prime Minister Mariano Rajoy, who is pushing through an austerity agenda targeting spending on health and education, won backing from his party’s regional leaders over the weekend. People’s Party chiefs from regions including Madrid, Valencia and Galicia agreed to streamline bureaucracy and write deficit targets into budget laws.

“We need to manage a reality that is very tough,” Maria Dolores Cospedal, the deputy party head and president of Castilla La Mancha, told reporters after a party meeting. Rajoy’s government has struggled to convince investors after last month saying it would not meet budget deficit targets set by the European Commission and the previous government.

Spanish Auctions

European governments are banking on a bigger safety net to soothe markets as the crisis continues to simmer, with Spanish borrowing nearing the level that prompted Greece, Ireland and Portugal to seek bailouts. Sentiment will be gauged again on April 19, when Spain auctions two- and 10-year debt.

The Europeans’ appeal for funds may find more success after IMF Managing Director Christine Lagarde last week scaled back her request for $600 billion in new contributions. Lagarde said April 12 that she is hoping to make “real progress” at this week’s meetings. She has also said the IMF needs more cash to quell economic risks separate from Europe’s woes, such as higher oil prices and slowing U.S. growth.

Her retooled strategy reflects international and particularly U.S. reluctance to deliver more cash amid suspicion Europe isn’t doing enough to save itself. The IMF has less than $400 billion available to lend.

‘Non-European Friends’

Bowing to international pressure to do more while stopping short of a bolder proposal, European governments agreed last month that 500 billion euros ($654 billion) in fresh money would be placed aside 300 billion euros already committed to create an 800 billion-euro defense against contagion.

By also offering to give the IMF 150 billion euros, “European governments have done their part,” ECB Executive Board Member Joerg Asmussen said April 13. “I would now expect our non-European friends and partners to contribute their part to IMF resources.”

Foreign governments have been slow to rally, although emerging markets including Brazil and Mexico have indicated they are willing to participate.

Japanese Finance Minister Jun Azumi said April 11 that “if we’re asked if we’re 100 percent satisfied with Europe’s efforts, I would say they need further efforts.” U.S. Treasury Secretary Timothy F. Geithner has already ruled out more support for the IMF from its largest shareholder, saying last month the lender already has “substantial financial resources.”

French Elections

After spending or committing at least 386 billion euros to bailing out Greece, France and Ireland, Europe now has the money to fully finance Spain through the end of 2014 if needed, according to Schmieding at Berenberg Bank. Italy -- with a sovereign debt of 1.9 trillion euros -- is not so easily saved and would require the ECB to intervene if faced with an investor revolt, he said.

Added to the mix are the looming French presidential elections, with the first round due on April 29. EU officials and investors will be looking to see how the Franco-German partnership could be altered if Socialist candidate Francois Hollande beats President Nicolas Sarkozy in the second-round vote on May 6.

Both candidates addressed supporters in Paris yesterday after Hollande extended his advantage in a possible head-to-head race by two points to 56 percent against 44 percent, according to a TNS Sofres survey published April 13.

“France faces a highly intriguing election, which could add to market woes,” Jim O’Neill, chairman of Goldman Sachs Asset Management, wrote in an e-mailed note to clients.

To contact the reporters on this story: Patrick Donahue in London at pdonahue1@bloomberg.net; Simon Kennedy in London at skennedy4@bloomberg.net

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

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China Doubling Yuan Band Signals Drive for Convertibility

By Bloomberg News - Apr 15, 2012 10:29 AM GMT+0700

China’s decision to widen the yuan’s trading band against the dollar for the first time since 2007 signals a drive toward a convertible currency that also saw overseas investors get bigger investment quotas this month.

The band’s increase to 1 percent from 0.5 percent takes effect tomorrow, the People’s Bank of China said on its website yesterday. This month, regulators raised quotas for foreigners buying onshore stocks and bonds to $80 billion from $30 billion and increased the amount of yuan held offshore that can be invested locally.

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A bundle of Chinese yuan banknotes is arranged for a photograph in Beijing, China. Photographer: Nelson Ching/Bloomberg

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Zhou Xiaochuan, governor of the People's Bank of China. Photographer: Keith Bedford/Bloomberg

Chinese officials pledged in a five-year plan running through 2015 to keep loosening controls on currency flows as Premier Wen Jiabao targets higher domestic consumption and an enlarged global role for the yuan that would curb the dollar’s dominance. Mizuho Securities Asia Ltd. said yesterday that moves including the increased investment quotas indicate that the government is stepping up the pace of its efforts.

“Greater two-way exchange rate risk makes possible capital account opening, which would be a logical next step,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore. “If so, we are in the early stage of what will be as momentous for China” as the nation joining the World Trade Organization in 2001, he said.

Trading Band

The previous broadening of the trading band, which is centered on a rate set daily by the central bank, was from 0.3 percent in May 2007. Gains in the currency against the dollar have stalled this year as China’s growth slows and officials say that the yuan may be near “equilibrium.”

“It’s a positive decision and one that the market has long waited for,” Helen Qiao, an economist at Morgan Stanley in Hong Kong, said yesterday. “But in the end, the most important thing to watch is how much of that band will actually be used.”

Still, the U.S. Treasury Department says China needs to do more. “While we welcome the progress to date, the process of correcting the misalignment of China’s exchange rate remains incomplete, and further progress is needed,” a Treasury official said in an e-mailed statement. “China’s decision to widen the daily trading band for its exchange rate, if implemented in a way that allows the value of the exchange rate to reflect market forces, could contribute to rebalancing, which would be positive for China, the U.S. and the global economy.”

At Standard Chartered Plc, Shanghai-based economist Li Wei said yesterday that more “two-way variability” in the yuan is a pre-condition for opening the capital account because of the reduced risk of one-way capital inflows.

‘High on Agenda’

“High on China’s financial reform agenda is to increase its capital account opening to allow domestically trapped idle money to invest offshore for better uses and returns,” Li added.

The yuan ended last week at 6.3030 per dollar, up about 8.3 percent since the scrapping in June 2010 of an almost two-year peg imposed during the global financial crisis.

In a March 5 state-of-the-nation address, Wen said that the government will “work steadily” to make the currency convertible under the capital account and expand the use of the yuan in cross-border trade and investment.

Yesterday’s announcement came days before the International Monetary Fund and Group of 20 hold talks in Washington, forums used by finance chiefs to lobby China to let the yuan gain.

“This underlines China’s commitment to rebalance its economy toward domestic consumption and allow market forces to play a greater role in determining the level of the exchange rate,” Christine Lagarde, managing director of the IMF, said in a statement.

‘Political Year’

Expectations for a stronger currency dwindled in the past six months as Wen cut the country’s economic growth target, Europe’s sovereign-debt crisis hurt exports, and China’s trade deficit in February swelled to the biggest since at least 1989.

Political pressure may be a “main factor” in the latest move, said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd., who added that this is a “political year” because of a looming U.S. presidential election.

While the yuan reached an 18-year high at 6.2884 per dollar on Feb. 10, President Barack Obama’s administration and U.S. lawmakers say the currency remains weak enough to give China, the world’s biggest exporter, an unfair advantage in trade.

The Obama administration is reviewing China’s announcement “very closely,” Ben Rhodes, a deputy national security adviser at the White House, told reporters in Cartagena, Colombia, where Obama is attending summit of Latin American leaders. “They’ve made some progress and we’d like to see more.”

‘Little Gift’

China always tries “to offer something” before big international meetings, said David Smick, a former Congress staff member and chief executive officer at Washington-based consultancy Johnson Smick International Inc. “It’s like when you go to dinner you take a little gift,” Smick said in Berlin.

After keeping the exchange rate stable for a decade, China allowed its currency to strengthen 21 percent from July 2005 to July 2008, including an initial, single-day gain of 2 percent. Appreciation was then halted for almost two years to help exporters weather a global recession.

The yuan’s 31 percent advance in almost seven years makes it the third best of the most-traded Asian currencies tracked by Bloomberg, excluding the Japanese yen. The Brazilian real jumped 28 percent, while India’s rupee declined 16 percent and the Russian ruble dropped 3.3 percent.

Yuan May Weaken

Nobel laureate Joseph Stiglitz told reporters that the yuan may weaken as China takes steps to increase the ability of its investors to invest abroad.

“Opening up the band in conjunction with other actions they’ve taken may lead to a fall in the exchange rate rather than appreciation,” he said yesterday in Berlin, where he’s attending an economics conference. “To the extent they do open up, money may leave and that will weaken their currency. A free market exchange rate may not go in the way the U.S. thinks it should.”

The central bank said the widening of the band is to meet “market demands,” promote price discovery, and enhance the currency’s two-way flexibility. The change improves a managed, floating exchange-rate regime that is based on supply and demand and operates in reference to a basket of currencies, it said.

The monetary authority will keep the currency “basically stable at an adaptive and equilibrium level,” to preserve the stability of the Chinese economy and financial markets, it said.

Soft Landing

Twelve-month non-deliverable forwards for the yuan were 0.5 percent weaker than the onshore spot rate at the end of last week, according to data compiled by Bloomberg, suggesting that the currency could fall over that period. The yuan is already down 0.14 percent against the dollar this year.

“China will avoid significant appreciation or depreciation this year,” Lu Ting, an economist at Bank of America Corp. in Hong Kong, said after the announcement, citing reasons including an “uncertain” global economy.

“It adds to my confidence in a soft landing,” Goldman Sachs Asset Management Chairman Jim O’Neill said in an e-mail. The change is positive for equities because it shows reformers are “in charge,” while “for FX it just means more volatility,” he said.

Cliff Tan, a currency analyst at Bank of Tokyo-Mitsubishi UFJ in Hong Kong, said yesterday he’s leaving unchanged a forecast for the yuan to reach 6.17 by the end of 2012.

The U.S. House of Representatives has yet to take up a bill passed on Oct. 11 by the Senate, which would allow sanctions on countries with so-called misaligned exchange rates. Treasury Secretary Timothy F. Geithner said on Jan. 27 that China’s currency is “still below almost all measures of fundamentals.”

Trade Deficit

The U.S. trade deficit with China rose 8 percent to $295 billion last year, fueling friction between the two nations.

Mitt Romney, the Massachusetts governor who is seeking nomination as the Republican presidential candidate to run against Democratic President Barack Obama, is committed to applying “strong and sustained pressure” on China to overhaul its trade and currency practices, according to a statement released today from his spokeswoman.

“Even as our trade deficit with China has grown each year, President Obama has made no progress confronting China on its wide range of unfair trade practices,” said Andrea Saul, Romney’s spokeswoman.

PBOC Governor Zhou Xiaochuan said March 12 that market forces are playing a greater part in determining the yuan’s value, which is also affected by the balance of payments. China may “appropriately” widen the trading band to better reflect market supply and demand, the official Xinhua News Agency reported Zhou as saying on March 5.

Growth Target

China will aim for a 7.5 percent economic expansion this year, having had an 8 percent goal in place since 2005, Premier Wen said on March 5. Growth slowed more than forecast last quarter to the least in almost three years, with the economy expanding 8.1 percent from a year earlier, a statistics bureau report showed last week.

Before yesterday’s announcement, views had varied on how far the central bank could or should expand the trading band.

One option is an increase to as much as 2 percent, China Business News reported on Dec. 9, citing Liu Yuhui, a researcher with the Chinese Academy of Social Sciences. A band of 0.7 percent or 0.75 percent would be appropriate, Li Daokui, then a central bank adviser, said March 6.

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net; Fion Li in Hong Kong at fli59@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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Cartagena Prostitute Wouldn’t Leave Hotel Until Paid, King Says

By Jesse Hamilton and Kate Andersen Brower - Apr 16, 2012 3:17 AM GMT+0700

A Cartagena prostitute refused to leave the hotel room occupied by the U.S. Secret Service until she was paid, said U.S. Representative Peter King, who heads the House Homeland Security Committee.

Eleven U.S. Secret Service agents, working in advance of President Barack Obama’s arrival for a summit this weekend in Cartagena, Colombia, were returned to the U.S. and placed on administrative leave April 12 because of allegations of misconduct involving contact with prostitutes, according to a statement yesterday from Secret Service spokesman Paul S. Morrissey.

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Visitors of guests at the Hotel Caribe in Cartagena, seen here on April 15, were required to leave identification at the front desk and had to be out by 7 a.m., according to U.S. Representative Peter King, a Republican from New York, who said he was briefed on the incident twice yesterday. Photographer: Mandel Ngan/AFP/Getty Images

Visitors of guests at the Hotel Caribe, near the site of the Summit of the Americas, were required to leave identification at the front desk and had to be out by 7 a.m., according to King, who said he was briefed on the incident twice yesterday.

When hotel officials noticed that one guest hadn’t left by the curfew, they knocked on the room door and were refused admittance, King said. The hotel called the local police, and the woman in the room wouldn’t leave because she was owed money, according to King. The agent paid the money and the police filed a report because it involved a foreign national, according to King, a New York Republican.

Supervisors Involved

Two or three of the 11 were uniformed officers and two were Secret Service supervisors, and all had previously untarnished records, said King.

“They were questioned all day yesterday at Secret Service headquarters,” King said today in an interview. All 11 were believed to have brought women to their Cartagena, Colombia, hotel rooms, said King, whose staff “is going to begin an investigation” to examine procedures in place at the time and how they might be changed to prevent a recurrence.

The agents involved weren’t assigned to Obama’s protective detail, according to Morrissey. After they were withdrawn from the country, their duties were “backfilled” by replacements brought in from Florida and Puerto Rico, King said.

No Security Impact

“These actions have had no impact on the Secret Service’s ability to execute a comprehensive security plan for the President’s visit to Cartagena,” Morrissey said. “This matter was turned over to our Office of Professional Responsibility, which serves as the agency’s internal affairs component.”

The story of the agents’ alleged misbehavior became public just as leaders of the Western Hemisphere were beginning talks on trade, drug legalization in South America and creating greater transparency among South American governments.

Obama was told about the allegations April 13 and the issue “has been more of a distraction for the press” than for the president at the summit, spokesman Jay Carney told reporters at a briefing yesterday.

Morrissey said, “We regret any distraction from the Summit of the Americas this situation has caused.”

Congressional Interest

Representative Darrell Issa of California, the Republican chairman of the House Oversight and Government Reform Committee, suggested there may be more than 11 officials involved, saying on CBS’s “Face the Nation” today that there may be “20 or more” and that “we’re asking for the exact amount of all the people.”

“I don’t want to presume anything,” King said. “I wouldn’t want this used to indict the entire Secret Service.”

In addition, five members of the U.S. military who were staying at the same hotel violated a curfew set by the senior U.S. defense official at the U.S. embassy in Colombia, according to Colonel Scott Malcom, the public affairs officer for the U.S. Southern Command.

The five had been sent to Colombia to support the summit, in part by providing security, Malcom said. They will remain in Colombia during the summit because their skills and knowledge are needed, Malcom said, adding that they will be restricted to their hotel rooms when not carrying out official duties.

The military has yet to determine whether the five violated any rules beyond the curfew, Malcom said. He didn’t provide their ranks or military branch.

To contact the reporters on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net. Kate Andersen Brower in Cartagena, Colombia at kandersen7@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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North Korea’s Kim Says His Regime Can’t Be Blackmailed

By Sangwon Yoon - Apr 16, 2012 6:50 AM GMT+0700

North Korea won’t be bullied by its nuclear-armed enemies, third-generation dictator Kim Jong Un said in his first public address at a military parade as South Korea warned that his regime may conduct an atomic test.

Dressed in a dark Mao suit and standing on a podium high above Kim Il Sung Square in Pyongyang yesterday, the new leader said, “the days of enemies threatening and blackmailing us with nuclear weapons are forever over.” Goose-stepping soldiers, mobile rocket launchers and tanks rumbled through the streets below in a celebration broadcast on state television.

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North Korean leader Kim Jong Un gives his first public speech in Pyongyang. Source: AP Photo/KRT via AP video

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North Korean soldiers march during a military parade to mark 100 years since the birth of Kim Il-Sung in Pyongyang. Photographer: Ed Jones/AFP/Getty Images

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North Korean soldiers carry a portrait of late leader Kim Jong-Il during a military parade to mark 100 years since the birth of the country's founder Kim Il-Sung in Pyongyang. Photographer: Pedro Ugarte/AFP/Getty Images

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A North Korean soldier salutes during a military parade to mark 100 years since the birth of Kim Il-Sung in Pyongyang. Photographer: Pedro Ugarte/AFP/Getty Images

North Korea’s humiliation from a long-range rocket that disintegrated within minutes of liftoff two days earlier increases the chance of Kim ordering an atomic test to regain face, South Korean Deputy Defense Minister Lim Kwan Bin said on April 13. The launch also ended a U.S. food-aid deal.

“Kim is very aware of how powerful the military is and knows his only strategy is to keep selling the ‘military-first’ policy,” said Koh Yu Hwan, a professor of North Korean studies at Seoul’s Dongguk University. “Stability is what the young Kim needs most and he needs the full support of the military.”

The parade was broadcast on North Korean state television and held to commemorate the centenary of the birth of Kim’s late grandfather, state founder Kim Il Sung. The younger Kim is thought to be less than 30 years old and assumed power after his father, Kim Jong Il, died of a heart attack on Dec. 17.

Ballistic Missile

It also featured what appeared to be a new, larger ballistic missile, said Baek Seung Joo, who studies Pyongyang’s military at the Korea Institute for Defense Analyses in Seoul. South Korea’s Defense Ministry was unable to comment on the design or whether it was a real missile.

North Korea, which technically remains at war with the South since their 1950-53 conflict ended without a peace treaty, has 1.2 million people in its armed forces and has twice detonated an atomic device, in 2006 and 2009.

“In order to realize our goal of building a socialist, strong and prosperous nation, we must first, second and third strengthen the people’s army on all fronts,” said Kim, who shuffled his feet as he read from notes. “We have grown into a powerful military, equipped with our own means of defense and attack in any modern war.”

He didn’t mention the rocket launch or his regime’s atomic weapons program during the speech, which lasted 20 minutes. While North Korea said the launch was intended to put a satellite into orbit, the U.S. said it violated international commitments and scrapped the February plan to provide 240,000 tons of food aid.

Starving People

North Korea can’t compete against world superpowers in an arms race and must give up its conventional and nuclear weapons development programs to focus on improving its economy, South Korean President Lee Myung Bak said in a radio speech today.

Last week’s launch may have cost $850 million, equivalent to six years worth of food for the North’s 24 million people, Lee said. As many as 1 million people starved to death during the 1990s, according to estimates from Marcus Noland and Stephan Haggard of the Peterson Institute for International Economics in Washington D.C.

The North’s parliamentary body ruled to allocate 15.8 percent of the total state budgetary expenditure for national defense this year, the official Korean Central News Agency said on April 14, citing Finance Minister Choe Kwang Jin.

Kim Jong Il’s third son inherited an economy a 40th the size of South Korea’s. His father also left behind the goal of making the North a “strong and prosperous nation” by 2012.

Kim Jong Un, who formally assumed the regime’s top political and military posts last week, acknowledged past economic difficulties.

‘Splendor of Socialism’

“The Workers’ Party firmly determines that the people, who suffered much hardship, should enjoy the wealth and splendor of socialism and never again tighten their belts,” he said.

Soldiers massed in formation filled the square, while citizens watched from the periphery, waving red and pink pompoms. Celebrations continued into the night, with fireworks and a laser show lighting the skies over the capital.

New homes were built for 300 farming families and a new hydroelectric power plant opened last week in the northwestern province of Jagang, according to KCNA reports on preparations for the Kim Il Sung anniversary.

The words “Our eternal leader Comrade Kim Il Sung” were also carved 37 meters high into a rock face near Gaeseong, where North Korea operates a joint economic zone with South Korea.

Kim Jong Un, who was schooled in Switzerland, styles his hair and mannerisms like his grandfather. He appeared more charismatic in his speech yesterday than his father, who shunned national addresses, according to Kim Hyung Suk, the spokesman for South Korea’s Unification Ministry.

“Kim is taking after his charismatic grandfather, the family patriarch, in trying to engage the people more openly,” said Kim Young Yoon, senior research fellow at the Korea Institute of National Unification in Seoul.

To contact the reporter on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net

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

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