Murdochs face ranks of investor critics at LA event as Labour MP claims type of snooping distinct from hacking Tom Watson, the Labour MP who has been a leading figure in parliament’s investigation into the News of the World phone-hacking scandal, plans to make dramatic allegations about News Corporation’s use of surveillance at the company’s annual shareholder meeting. Watson, who sits on the Commons culture, media and sport committee which has investigated the scandal, said he would be giving News Corp’s shareholders details of previously undisclosed surveillance methods used by the firm that were technologically quite distinct from the phone hacking carried out by NoW staff. He refused to go into details about the allegations he would be making or to offer any evidence to corroborate them. He said: “I want to leave investors in no doubt that News Corporation is not through the worst of this yet and there are more questions for the Murdochs to answer.” Watson has flown to Los Angeles to attend the shareholders meeting, which he will gain access to having been given a proxy vote by the US trade union umbrella group, the AFL-CIO. News Corporation is bracing itself for independent shareholders to vote in considerable numbers at the meeting against the reappointment of Rupert Murdoch and his sons, James and Lachlan, in the wake of the phone-hacking scandal. The scale of the protest outside the Murdoch family is expected to be substantially over 20% of independent shareholders, with several expected to raise questions at the meeting at Fox studios. But their protest will not be enough to topple the family, because Rupert Murdoch controls 40% of the voting shares. Nevertheless, before the meeting there were clear signs of tension at the upper levels of News Corp, with particular emphasis on security at the event and worries about what sort of tone the 80-year-old media mogul will strike in front of those who, alongside him, have a stake in the empire he built. Murdoch’s opening address is expected to show less of the contrition than in London in July, when he told MPs: “This the most humble day of my life.” Instead he is expected to strike a more combative tone, although there are worries that this will alienate some investors and outsiders. The language is understood to reflect the sentiments expressed 10 days ago in a stock exchange filing in which News Corp, in response to the growing army of concerned shareholders, accused its critics of having a “disproportionate focus on the News of the World matter” which
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Thailand’s worst floods in half a century are seeping into the outer districts of the capital Thailand’s prime minister has urged Bangkok residents to get ready to move their belongings to higher ground as the country’s worst floods in half a century begin seeping into the capital’s outer districts. The warning came one day after the government opened several floodgates in a risky bid to let built-up water flow through the city’s canals toward the sea. Authorities had said the canals could overflow but it was not known to what extent. Water has entered homes in Bangkok’s northern Lak Si district, which is located along the capital’s main Prapa canal. The water rose to knee height in some places but damage was minor and had not yet affected Bangkok’s main business district. Yingluck Shinawatra, the prime minister, told reporters the Prapa canal was a big concern as the water had risen significantly overnight. “I would like to ask people in all districts of Bangkok to get ready to move their belongings to higher ground as a precaution,” Yingluck said, adding that people should not panic. Sukhumbhand Paribatra, the Bangkok governor, said managing the Prapa canal was a “top priority”. Vast runoff from the north is expected to swell its level. Authorities have said immense networks of sandbagged barriers could deteriorate under pressure from the water, since they were not designed as dams. Yingluck has said there are no other options to slow down the approaching water. Prolonged rain and storms have killed 745 people – a quarter of them children – in Thailand, Cambodia, Vietnam, Laos and the Philippines this year, according to the United Nations. At least 342 of them were Thais, according to their government. The floods have submerged land in about one-third of the country, leaving some towns under water more than two metres high. The threat of floodwaters swamping downtown Bangkok and ruining treasured ancient palaces has loomed for weeks. No major damage has occurred yet and life remains mostly normal, but inhabitants are preparing for the worst. “The water is coming. It’s inevitable,” said Oraphin Jungkasemsuk, a 40-year-old employee of Bangkok Bank’s headquarters, where sandbags have been stacked two metres high. “They are fighting a massive pool of water. They cannot control it any more,” Oraphin said. “There are barriers but it can come into the city from any direction, even up through the drains.” Economic analysts say the floods have already cut Thailand’s 2011 GDP projections by as much as 2%. Damages could run as high as $6bn (£3.8bn) – an amount that could double if Bangkok floods. Thailand Flooding Natural disasters and extreme weather Rivers guardian.co.uk
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Tory MPs likely to defy No 10 as prime minister abandons attempt at compromise ahead of Commons debate David Cameron is bracing himself for the biggest rebellion since he took office, with possible frontbench resignations, when Tory MPs defy No 10 to vote in favour of a referendum on Britain’s EU membership on Monday. As ministers and their aides lined up to tell the chief whip, Patrick McLoughlin, that Downing Street had badly mishandled the debate, No 10 sources indicated that Cameron has abandoned attempts to agree a compromise. Downing Street threw in the towel when George Eustice, the prime minister’s former spokesman who was being lined up by the government to table a “helpful” amendment, defied his former boss. Eustice tabled an amendment calling on the coalition to publish a white paper in the next two years setting out which powers ministers would repatriate from Brussels. The government would then renegotiate the UK’s relationship with the EU and hold a referendum on the outcome. One No 10 source said the prime minister agrees with the Eustice amendment, but cannot support it – and would whip his MPs to vote against it – because it would be unacceptable to the Liberal Democrats. “If the prime minister supported George Eustice’s amendment that would mean the end of the coalition and we would not be holding a referendum. We would be holding a general election.” Eustice indicated on Thursday night that he was “minded” to support the original motion which calls simply for a referendum on Britain’s membership of the EU. Senior Tories said that Downing Street ran into trouble when it imposed a three-line whip on Tory MPs requiring them to vote against a motion, tabled by the Commons backbench business committee, which calls for a referendum to be held on Britain’s membership of the EU. MPs were given the message at a meeting of the 1922 committee at 5pm on Wednesday by a whip who said that the debate would go ahead, as planned, on Thursday next week. Within 30 minutes, a nervous No 10 brought forward the vote by three days, to Monday, to ensure that Cameron and William Hague could be present. By next Thursday, the prime minister and the foreign secretary are due to be in Australia for the Commonwealth heads of government meeting. In a sign of the panic in Downing Street, aides failed to brief key government supporters who had been trying to shore up support for Cameron. One senior figure, who was not told until 7pm on Wednesday, was telling MPs to calm down as he denied reports that the date of the debate had been changed. With increasing numbers of Tory MPs signing up to the motion, one parliamentary aide said he was prepared to resign so he could support the
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Forensic report says Muammar Gaddafi was shot in arm upon capture, then in the head while being driven away Muammar Gaddafi died from a bullet wound to the head received in crossfire between government fighters and his own supporters after he had been captured in Sirte, the Libyan interim prime minister has said, citing a forensic report. Conflicting reports have emerged about how exactly Gaddafi died. He was captured after a Nato air strike hit his convoy as it tried to break away from the siege of his hometown. “I am going to read to you a report by the forensic doctor who examined Gaddafi,” Mahmoud Jibril told a news conference in the capital, Tripoli. “It said: ‘Gaddafi was taken out of a sewage pipe … he didn’t show any resistance. When we started moving him he was hit by a bullet in his right arm and when they put him in a truck he did not have any other injuries.’”‘When the car was moving it was caught in crossfire between the revolutionaries and Gaddafi forces in which he was hit by a bullet in the head.’” “The forensic doctor could not tell if it came from the revolutionaries or from Gaddafi’s forces,” Jibril said. Gaddafi had been alive when he was taken from Sirte but died a few minutes before reaching hospital, the prime minister said. Jibril said DNA samples and blood was taken from the body. Also removed were samples of Gaddafi’s hair but that turned out to be “fake”, seemingly confirming widespread rumours that Libya’s feared ruler of 42 years had hair implants. Libya’s National Transitional Council had been in touch with the international criminal court, which had wanted to try Gaddafi for crimes against humanity, Jibril said. It had wanted a forensic expert to inspect the body before the burial, he said, but after seeing the NTC’s own report the court agreed that would not be necessary. Gaddafi’s son Mutassim was also killed on Thursday. “As for Mutassim there is a wound in the head and a break in the skull and five bullets in the back and one in the neck,” Jibril said. Muammar Gaddafi Libya Middle East Africa guardian.co.uk
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Independent investigation of the key issues sceptics claim can skew global warming figures reports that they have no real effect The world is getting warmer, countering the doubts of climate change sceptics about the validity of some of the scientific evidence, according to the most comprehensive independent review of historical temperature records to date. Scientists at the University of California, Berkeley, found several key issues that sceptics claim can skew global warming figures had no meaningful effect. The Berkeley Earth project compiled more than a billion temperature records dating back to the 1800s from 15 sources around the world and found that the average global land temperature has risen by around 1C since the mid-1950s. This figure agrees with the estimate arrived at by major groups that maintain official records on the world’s climate, including Nasa’s Goddard Institute for Space Studies in New York, the US National Oceanic and Atmospheric Administration (Noaa), and the Met Office’s Hadley Centre , with the University of East Anglia , in the UK. “My hope is that this will win over those people who are properly sceptical,” Richard Muller , a physicist and head of the project, said. “Some people lump the properly sceptical in with the deniers and that makes it easy to dismiss them, because the deniers pay no attention to science. But there have been people out there who have raised legitimate issues.” Muller sought to cool the debate over climate change by creating the largest open database of temperature records, with the aim of producing a transparent and independent assessment of global warming. The initial reluctance of government groups to release all their methods and data, and the fiasco over emails from the University of East Anglia’s Climatic Research Unit in 2009, gave the project added impetus. The team, which includes Saul Perlmutter , joint winner of this year’s Nobel Prize in Physics for the discovery that the universe is expanding at an increasing rate, has submitted four papers to the journal Geophysical Research Letters that describe their work to date. Going public with results before they are peer-reviewed is not standard practice, but Muller said the decision to circulate the papers before publication was part a long-standing academic tradition of sanity-checking results with colleagues. “We will get much more feedback from making these papers public before publication,” he said. Climate sceptics have criticised official global warming figures on the grounds that many temperature stations are poor quality and that data are tweaked by hand. However, the Berkeley study found that the so-called urban heat island effect, which makes cities warmer than surrounding rural areas, is locally large and real, but does not contribute significantly to average land temperature rises. This is because urban regions make up less than 1% of the Earth’s land area. And while stations considered “poor” might be less accurate, they recorded the same average warming trend. “We have looked at these issues in a straightforward, transparent way, and based on that, I would expect legitimate sceptics to feel their issues have been addressed,” Muller said. Nevertheless, one prominent US climate sceptic, Anthony Watts , claimed to have identified a “basic procedural error” concerning time periods used in the research, and urged the authors to revise the paper. Jim Hansen, head of Nasa’s Goddard Institute for Space Studies , said he had not read the research papers but was glad Muller was looking at the issue, describing him as “a top-notch physicist”. “It should help inform those who have honest scepticism about global warming. “Of course, presuming that he basically confirms what we have been reporting, the deniers will then decide that he is a crook or has some ulterior motive. “As I have discussed in the past, the deniers, or contrarians, if you will, do not act as scientists, but rather as lawyers.” “As soon as they see evidence against their client (the fossil fuel industry and those people making money off business-as-usual), they trash that evidence and bring forth whatever tidbits they can find to confuse the judge and jury.” Peter Thorne at the Cooperative Institute for Climate and Satellites in North Carolina and chair of the International Surface Temperature Initiative , said: “This takes a very distinct approach to the problem and comes up with the same answer, and that builds confidence that pre-existing estimates are in the right ballpark. There is very substantial value in having multiple groups looking at the same problem in different ways. “Openness and transparency is a must, particularly now with climate change being so politicised, but more to the point, with the huge socioeconomic decisions that rest on it.” Phil Jones, the director of the Climatic Research Unit at UEA who was at the centre of the Climategate incident, said: “I look forward to reading the finalised paper once it has been reviewed and published. These initial findings are very encouraging and echo our own results and our conclusion that the impact of urban heat islands on the overall global temperature is minimal.” The Berkeley Earth project has been attacked by some climate bloggers, who point out that one of the funders runs Koch Industries, a company Greenpeace called a ” financial kingpin of climate science denial “. Muller points out the project is organised under the auspices of Novim, a Santa Barbara-based nonprofit organisation that uses science to find answers to the most pressing issues facing society and to publish them “without advocacy or agenda”. Other donors include the Fund for Innovative Climate and Energy Research (funded by Bill Gates), and the Department of Energy’s Lawrence Berkeley Lab. The next phase of the project will focus on warming trends in the oceans. Some scientists were critical of the project and Muller’s decision to release the papers before they had been peer reviewed. Peter Cox, professor of climate system dynamics at Exeter University said: “These studies seem to confirm the global warming estimated from the existing datasets, which is pleasing but not exactly a surprise to those of us who know how carefully the existing datasets are put together. “It is surprising, however, that the authors believe that this news is so significant that they can’t wait for peer review, especially when their conclusions aren’t exactly revolutionary.” Climate change scepticism Climate change Climate change Controversies in science Ian Sample guardian.co.uk
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Defendant denies there was sexual element to case but says he strangled 25-year-old in panic after she rebuffed his kiss More than 10 months after killing his next door neighbour, Joanna Yeates, Vincent Tabak has given his first full public account of the moment he attacked her. Tabak said he tried to kiss Yeates after she invited him into her flat and made a flirtatious remark. He insisted he had not meant to kill or seriously harm her, adding that he had only wanted to kiss her and was not planning to try to have sex with her. The 33-year-old Dutch engineer denied that he had lifted Yeates’s top or touched her breasts. He also said he had not been spying on her before the attack, which happened on 17 December last year. He apologised for hiding Yeates’s body on a country lane three miles from her flat, where it was found eight days later, on Christmas morning, and said he was sorry for putting Yeates’s parents and her boyfriend, Greg Reardon, through “hell”. Tabak was asked in court to demonstrate how he put an arm around Yeates and how he put his right hand around her neck. Her parents, David and Teresa, sat in the front row, five metres from Tabak, as he did so. They did not appear to look at him once as he gave evidence. Tabak – who admits manslaughter but denies murder – began by answering questions from his barrister, William Clegg QC. He spoke of his childhood and education in Holland, saying he grew up in a small town, went to university and became an expert in the flow of people through buildings and public areas. He said he studied until he was 29, when he came to England and got his first job at a design and engineering company in Bath. He had no girlfriends in Holland but met Tanja Morson online via Guardian Soulmates and they began living together in Clifton, Bristol. Yeates and Reardon moved in next door in October 2010, but Tabak was soon sent to California for work. He said he may only have seen his neighbours once. On the night of the killing, Morson was out at a staff party. Tabak said he had pizza and a beer then decided to go to Asda. “I felt a bit lonely,” he said. “I didn’t want to stay home alone.” As he walked down his path, Tabak said Yeates, a 25-year-old landscape architect, waved and indicated that he should come into her flat. He said he told her he was “a bit lonely and a bit bored” because his girlfriend was away. Yeates said she was also “bored at home” because Reardon was not there. The defendant said they talked about Yeates and Reardon’s cat, which used to find its way into Tabak and Morson’s flat. Tabak said Yeates had told him the cat sometimes went into places “that it shouldn’t go. A bit like me … ” He told his barrister: “I got he impression that she wanted to kiss me. She had been friendly. I leaned forward and I think I put one of my hands on her back and tried to kiss her. She started to scream quite loudly.” Tabak’s voice broke as he described how he “panicked”. He said he put his hand over her mouth, said he was sorry and asked her to stop screaming. He said he took his hand away and she began to scream again. “I put my hand over her mouth and the other hand on her neck,” he said. “I was panicking. I wanted to stop her screams. I wanted to calm her down.” “Did you intend to kill her?” Clegg asked. “No definitely not,” Tabak said. He was then asked: “Did you intend to cause her serious harm?” “No, definitely not,” he replied. Clegg asked how long Tabak had kept his hand around her neck. “For a short, short time, I think less than a minute,” he said. The barrister asked him to “relive” the moment in court, close his eyes and estimate how long he held her for. Tabak held his eyes shut for 15 seconds. Tabak said Yeates “went limp”. “She fell to the floor. I was in a state of panic, shock,” he said. “I still can’t understand what happened.” He claimed the attack took place in the kitchen. He carried Yeates’s body into the bedroom, where he placed it on the bed. He then carried it into his own flat. Tabak said he went back to Yeates’s flat, switched off the oven and television and picked up a pizza that she had bought on the way home that night and one of her socks that had fallen off. He took those items to his flat. He then put the body into a bicycle bag and put it in his car boot before driving to Asda. Asked why he had done so, he said: “I can’t believe I did that. I wasn’t thinking straight.” Tabak drove towards Bristol airport and stopped at Longwood Lane. He said: “I did something horrendous. I decided to leave her body there.” He said he tried to heave the body over a wall but could not, so he covered it with leaves. Clegg asked him about Yeates’s clothing being “rucked up”, exposing part of one breast. Tabak said it must have happened when he moved the body. He said traces of his DNA found on the outside of Yeates’s jeans and on her breast area must also be the result of him moving the body. He removed his spectacles and seemed to wipe away a tear when he apologised for dumping the body, saying: “I’m so sorry for doing that. I know I put Joanna’s parents and Greg though hell for a week. I still can’t believe I did it.” Tabak said he returned to his flat after dumping Yeates’s body. He collected the bicycle bag, pizza and sock and dumped them at a recycling centre. Later, he went and picked his girlfriend up and tried to carry on with life as normal. He said he expected the police to come for him at any moment. He began to drink and take sleeping pills. He told the court that before he was arrested on 20 January, he considered killing himself by jumping off Clifton suspension bridge. Even after his arrest, he admitted he lied to police, saying he “stupidly” hoped they would not find the evidence to convict him. Clegg concluded by again asking Tabak if he had meant to kill Yeates or cause her serious harm. “Definitely not,” he said. Nigel Lickley QC, for the prosecution, began by asking Tabak if he was “calculating, dishonest and manipulative”. Tabak accepted that he had been after killing Yeates. Lickley put it to him that if he was like that after the event, he was probably like it before, but Tabak disagreed. Lickley accused him of being “calculating, dishonest and manipulative” in the witness box. The defendant insisted he was not. The prosecutor suggested there was a “sexual element” to the case. Tabak had said he wanted to kiss Yeates. “Were you thinking of having sex with Joanna?” Lickley asked. “No,” Tabak replied. Lickley asked if Tabak was attracted to Yeates. He accepted he liked her face and may have been attracted by her hair and clothes. The prosecutor asked Tabak to demonstrate how Yeates had “waved” to him as he left for Asda. Tabak did so. He said he could not remember the gesture she had used to “beckon” him in. Tabak repeated that he believed she had flirted with him in the flat. Lickley then asked him to demonstrate how he had put his hand on Yeates’s back. Tabak did so. The prosecutor asked Tabak how and why he had put his hands on Yeates’s mouth and neck. He repeatedly asked him how Yeates had reacted. Tabak repeatedly replied: “I can’t remember.” He said he could not remember whether she was frightened, adding that she was “definitely not struggling”. Lickley asked Tabak to demonstrate how he had put his hand around Yeates’s neck. He did so using his right hand. The prosecutor then asked Tabak if he had pulled her top up. “No,” Tabak replied. Tabak was then asked whether he had touched her breasts, and whether that was what made her scream. “No, definitely not,” Tabak said. He asked Tabak twice whether he had eaten Yeates’s pizza. Tabak denied that he had. Lickley said: “All you had to do, Vincent Tabak, was walk out of the house. Correct?” Tabak said: “Yes, but I didn’t”. The trial continues. Joanna Yeates Crime Steven Morris guardian.co.uk
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Researchers follow whole Danish population aged over 30 and find incidence of brain cancer in mobile users is no higher There is no link between the long-term use of a mobile phone and brain cancer, research suggests. In what has been described as the largest study on the subject, researchers found that cancer rates in the central nervous system were almost the same in both long-term mobile phone users and people who do not use the handsets, the study published on bmj.com found. There are more than 5bn mobile phone subscribers worldwide and people have expressed fears that the electromagnetic fields emitted by holding a handset to the ear may cause adverse health affects. Researchers from the Institute of Cancer Epidemiology in Copenhagen studied the whole Danish population aged over 30 and born in Denmark after 1925 by gathering information from the Danish phone network operators and the Danish Cancer Register. They analysed data of 10,729 central nervous system tumours between 1990 and 2007 and found that people who had used mobiles for 13 years or more had similar cancer rates to non-users. The researchers said they observed no overall increased risk for tumours of the central nervous system or for all cancers combined in mobile phone users. The authors said: “The extended follow-up allowed us to investigate effects in people who had used mobile phones for 10 years or more, and this long-term use was not associated with higher risks of cancer. “However, as a small to moderate increase in risk for subgroups of heavy users or after even longer induction periods than 10-15 years cannot be ruled out, further studies with large study populations, where the potential for misclassification of exposure and selection bias is minimised, are warranted.” Mobile phones Cancer Cancer guardian.co.uk
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Merkel and Sarkozy at loggerheads over French proposal for bailout fund to become $2tn ‘bank’ overseen by ECB Europe was thrown into fresh chaos on Thursday after a failure to resolve deep differences between France and Germany forced the postponement of a new plan to save the single currency. A joint statement from the French president, Nicolas Sarkozy, and the German chancellor, Angela Merkel, admitted that a deal at the weekend was now unachievable and that talks in Brussels on Sunday would be followed by a second summit next Wednesday. Financial markets have rallied strongly in recent weeks amid hopes of a breakthrough agreement this weekend that would recapitalise Europe’s weak banks, write off part of Greece’s debts and – crucially – increase the firepower of the eurozone’s bailout fund to protect Italy and Spain from speculative attack. It emerged , however, that Berlin and Paris still differ over the size of the European financial stability facility (EFSF) with Germany resisting French calls for it to resemble a bank capable of issuing €2tn (£1.75tn) of loans. Merkel is also opposed to Sarkozy’s plan to put the European Central Bank (ECB) at the heart of the plan. “The president and the chancellor will meet Saturday night in Brussels ahead of the European council summit in the euro area on Sunday,” the statement said. “France and Germany have agreed that all elements of this ambitious and comprehensive response will be discussed in depth at the summit on Sunday in order to be finally adopted by the heads of state and government at a second meeting no later than Wednesday.” One of the sticking points holding up a deal is that Merkel needs the backing of German MPs before agreeing to an enhanced bailout fund. Officials said delays in the talks prevented the chancellor from achieving it before the weekend, but at Sarkozy’s insistence Sunday’s summit would go ahead as planned. Bond markets were the first to react to fears that a deal would fail to materialise, sending the interest rate on Italian debt back above 6%. Spanish yields rose above 5.5%. Both countries already depend on the ECB for short-term money, though both held successful bond auctions in the morning, before news of the delay. Contradictory reports of the progress made ahead of the weekend talks were reflected in briefings by Brussels officials. One well-placed EU diplomat insisted a sense of urgency could enable Sunday’s eurozone summit to deliver a political agreement. The source said divergences between France and Germany were “exaggerated.” Another official said the gap between France and Germany was significant, though resolvable. “Sunday’s summit is unlikely to produce any real decisions; the real stuff will have to be done on Wednesday or even Friday,” he said. Sarkozy and Merkel said the full details of a “global and ambitious” response to the crisis would be definitively adopted at a second summit “no later than Wednesday”. The pair are to meet in Brussels on Saturday evening. This weekend’s series of meetings and a second summit are also due to endorse the payout of a further €8bn to Greece early next month to save it from bankruptcy. But Athens’ debts are said by international inspectors to be unsustainable even with the second €109bn bailout agreed only last July. EU leaders are acutely aware that markets when they open on Monday are expecting a three-pronged deal on Greek debt “haircuts”, bank recapitalisation – already agreed at €90bn overall – and boosting the firepower of the EFSF. This was acknowledged in a statement last night from Sarkozy’s Élysée Palace. It said Greece had to make “ambitious” pledges to restore its economy on the basis of a new programme – indicating that the €109bn second bailout agreed only in July was inadequate. Merkel and Sarkozy demanded that talks begin with private creditors “to find an agreement that will reinforce the sustainability of Greek debt” – longhand for accepting far larger losses. In July the losses to be borne voluntarily by bondholders such as banks were agreed at 21% but these are now likely to be at least 30%. High-ranking eurozone officials admit that a huge amount of work remains to be done before Sunday’s summit to agree on how and by how much to raise the EFSF’s lending capacity from its current €440bn. Merkel, beset by splits within her coalition government and pressure for parliamentary approval of any EFSF deal, will only be able to agree in principle on Sunday and get the detailed, technical issues resolved by finance ministers before being signed off at another time. She called off Friday’s planned speech to the Bundestag on the topic. Wolfgang Schäuble, her embattled finance minister, boosted hopes on Thursday by saying France and Germany had reached an “outline” deal to increase EFSF firepower. “Germany and France are in complete agreement on this question but we know this is not the same as a European solution,” he said. His upbeat comments came less than 24 hours after Sarkozy in effect gate-crashed an opulent farewell in Frankfurt for outgoing European Central Bank president, Jean-Claude Trichet, to hold emergency talks with Merkel on the issue. Earlier, senior EU financial officials said late doubts had emerged about a German plan to turn the EFSF into an insurer in effect able to offer credit default swaps on, say, the first 20% of losses. This could boost its firepower to just over €1tn – or short of the €2tn demanded by the markets, US and UK. But the plan is said to resemble too closely the arrangement that helped bring down Lehman Brothers in 2008, triggering the worst of the financial crisis and recession. So far Germany and the ECB have rejected French ideas of making the EFSF a bank. Sunday’s summit will clearly fail to set the new, higher “haircuts” for private creditors exposed to Greek debt after the International Monetary Fund reportedly fell out with the European commission (EC) and ECB over the scale of that debt. The creditors, marshalled by Deutsche Bank’s outgoing chief, Josef Ackermann, now accept the haircuts could be even higher. A leaked draft report from the “troika” of IMF, ECB and EC said details of Greece’s debt sustainability would be given to the eurogroup of finance ministers who meet on Friday(fri). The report said the country’s debt dynamics were “extremely worrying” after a deeper than expected economic contraction – 5.5% this year and likely to be 2.75% in 2012. One source of relief for worried EU and eurozone leaders is that the draft communiqué for the eurozone summit says both Spain and Italy will give fresh commitments on fiscal consolidation and structural reforms. Senior EU diplomats confirmed that Madrid and Rome would put forward fresh proposals on Sunday. What would the deal look like? The new financial bailout plan is expected to cover debt reduction for Greece, new capital for ailing banks that might take losses from Greek bonds, and enhanced financial firepower for the bailout fund to stabilise markets. The European financial stability facility has recently been expanded to €440bn (£384bn). But it may need at least €1.5
Continue reading …Merkel and Sarkozy at loggerheads over French proposal for bailout fund to become $2tn ‘bank’ overseen by ECB Europe was thrown into fresh chaos on Thursday after a failure to resolve deep differences between France and Germany forced the postponement of a new plan to save the single currency. A joint statement from the French president, Nicolas Sarkozy, and the German chancellor, Angela Merkel, admitted that a deal at the weekend was now unachievable and that talks in Brussels on Sunday would be followed by a second summit next Wednesday. Financial markets have rallied strongly in recent weeks amid hopes of a breakthrough agreement this weekend that would recapitalise Europe’s weak banks, write off part of Greece’s debts and – crucially – increase the firepower of the eurozone’s bailout fund to protect Italy and Spain from speculative attack. It emerged , however, that Berlin and Paris still differ over the size of the European financial stability facility (EFSF) with Germany resisting French calls for it to resemble a bank capable of issuing €2tn (£1.75tn) of loans. Merkel is also opposed to Sarkozy’s plan to put the European Central Bank (ECB) at the heart of the plan. “The president and the chancellor will meet Saturday night in Brussels ahead of the European council summit in the euro area on Sunday,” the statement said. “France and Germany have agreed that all elements of this ambitious and comprehensive response will be discussed in depth at the summit on Sunday in order to be finally adopted by the heads of state and government at a second meeting no later than Wednesday.” One of the sticking points holding up a deal is that Merkel needs the backing of German MPs before agreeing to an enhanced bailout fund. Officials said delays in the talks prevented the chancellor from achieving it before the weekend, but at Sarkozy’s insistence Sunday’s summit would go ahead as planned. Bond markets were the first to react to fears that a deal would fail to materialise, sending the interest rate on Italian debt back above 6%. Spanish yields rose above 5.5%. Both countries already depend on the ECB for short-term money, though both held successful bond auctions in the morning, before news of the delay. Contradictory reports of the progress made ahead of the weekend talks were reflected in briefings by Brussels officials. One well-placed EU diplomat insisted a sense of urgency could enable Sunday’s eurozone summit to deliver a political agreement. The source said divergences between France and Germany were “exaggerated.” Another official said the gap between France and Germany was significant, though resolvable. “Sunday’s summit is unlikely to produce any real decisions; the real stuff will have to be done on Wednesday or even Friday,” he said. Sarkozy and Merkel said the full details of a “global and ambitious” response to the crisis would be definitively adopted at a second summit “no later than Wednesday”. The pair are to meet in Brussels on Saturday evening. This weekend’s series of meetings and a second summit are also due to endorse the payout of a further €8bn to Greece early next month to save it from bankruptcy. But Athens’ debts are said by international inspectors to be unsustainable even with the second €109bn bailout agreed only last July. EU leaders are acutely aware that markets when they open on Monday are expecting a three-pronged deal on Greek debt “haircuts”, bank recapitalisation – already agreed at €90bn overall – and boosting the firepower of the EFSF. This was acknowledged in a statement last night from Sarkozy’s Élysée Palace. It said Greece had to make “ambitious” pledges to restore its economy on the basis of a new programme – indicating that the €109bn second bailout agreed only in July was inadequate. Merkel and Sarkozy demanded that talks begin with private creditors “to find an agreement that will reinforce the sustainability of Greek debt” – longhand for accepting far larger losses. In July the losses to be borne voluntarily by bondholders such as banks were agreed at 21% but these are now likely to be at least 30%. High-ranking eurozone officials admit that a huge amount of work remains to be done before Sunday’s summit to agree on how and by how much to raise the EFSF’s lending capacity from its current €440bn. Merkel, beset by splits within her coalition government and pressure for parliamentary approval of any EFSF deal, will only be able to agree in principle on Sunday and get the detailed, technical issues resolved by finance ministers before being signed off at another time. She called off Friday’s planned speech to the Bundestag on the topic. Wolfgang Schäuble, her embattled finance minister, boosted hopes on Thursday by saying France and Germany had reached an “outline” deal to increase EFSF firepower. “Germany and France are in complete agreement on this question but we know this is not the same as a European solution,” he said. His upbeat comments came less than 24 hours after Sarkozy in effect gate-crashed an opulent farewell in Frankfurt for outgoing European Central Bank president, Jean-Claude Trichet, to hold emergency talks with Merkel on the issue. Earlier, senior EU financial officials said late doubts had emerged about a German plan to turn the EFSF into an insurer in effect able to offer credit default swaps on, say, the first 20% of losses. This could boost its firepower to just over €1tn – or short of the €2tn demanded by the markets, US and UK. But the plan is said to resemble too closely the arrangement that helped bring down Lehman Brothers in 2008, triggering the worst of the financial crisis and recession. So far Germany and the ECB have rejected French ideas of making the EFSF a bank. Sunday’s summit will clearly fail to set the new, higher “haircuts” for private creditors exposed to Greek debt after the International Monetary Fund reportedly fell out with the European commission (EC) and ECB over the scale of that debt. The creditors, marshalled by Deutsche Bank’s outgoing chief, Josef Ackermann, now accept the haircuts could be even higher. A leaked draft report from the “troika” of IMF, ECB and EC said details of Greece’s debt sustainability would be given to the eurogroup of finance ministers who meet on Friday(fri). The report said the country’s debt dynamics were “extremely worrying” after a deeper than expected economic contraction – 5.5% this year and likely to be 2.75% in 2012. One source of relief for worried EU and eurozone leaders is that the draft communiqué for the eurozone summit says both Spain and Italy will give fresh commitments on fiscal consolidation and structural reforms. Senior EU diplomats confirmed that Madrid and Rome would put forward fresh proposals on Sunday. What would the deal look like? The new financial bailout plan is expected to cover debt reduction for Greece, new capital for ailing banks that might take losses from Greek bonds, and enhanced financial firepower for the bailout fund to stabilise markets. The European financial stability facility has recently been expanded to €440bn (£384bn). But it may need at least €1.5
Continue reading …Merkel and Sarkozy at loggerheads over French proposal for bailout fund to become $2tn ‘bank’ overseen by ECB Europe was thrown into fresh chaos on Thursday after a failure to resolve deep differences between France and Germany forced the postponement of a new plan to save the single currency. A joint statement from the French president, Nicolas Sarkozy, and the German chancellor, Angela Merkel, admitted that a deal at the weekend was now unachievable and that talks in Brussels on Sunday would be followed by a second summit next Wednesday. Financial markets have rallied strongly in recent weeks amid hopes of a breakthrough agreement this weekend that would recapitalise Europe’s weak banks, write off part of Greece’s debts and – crucially – increase the firepower of the eurozone’s bailout fund to protect Italy and Spain from speculative attack. It emerged , however, that Berlin and Paris still differ over the size of the European financial stability facility (EFSF) with Germany resisting French calls for it to resemble a bank capable of issuing €2tn (£1.75tn) of loans. Merkel is also opposed to Sarkozy’s plan to put the European Central Bank (ECB) at the heart of the plan. “The president and the chancellor will meet Saturday night in Brussels ahead of the European council summit in the euro area on Sunday,” the statement said. “France and Germany have agreed that all elements of this ambitious and comprehensive response will be discussed in depth at the summit on Sunday in order to be finally adopted by the heads of state and government at a second meeting no later than Wednesday.” One of the sticking points holding up a deal is that Merkel needs the backing of German MPs before agreeing to an enhanced bailout fund. Officials said delays in the talks prevented the chancellor from achieving it before the weekend, but at Sarkozy’s insistence Sunday’s summit would go ahead as planned. Bond markets were the first to react to fears that a deal would fail to materialise, sending the interest rate on Italian debt back above 6%. Spanish yields rose above 5.5%. Both countries already depend on the ECB for short-term money, though both held successful bond auctions in the morning, before news of the delay. Contradictory reports of the progress made ahead of the weekend talks were reflected in briefings by Brussels officials. One well-placed EU diplomat insisted a sense of urgency could enable Sunday’s eurozone summit to deliver a political agreement. The source said divergences between France and Germany were “exaggerated.” Another official said the gap between France and Germany was significant, though resolvable. “Sunday’s summit is unlikely to produce any real decisions; the real stuff will have to be done on Wednesday or even Friday,” he said. Sarkozy and Merkel said the full details of a “global and ambitious” response to the crisis would be definitively adopted at a second summit “no later than Wednesday”. The pair are to meet in Brussels on Saturday evening. This weekend’s series of meetings and a second summit are also due to endorse the payout of a further €8bn to Greece early next month to save it from bankruptcy. But Athens’ debts are said by international inspectors to be unsustainable even with the second €109bn bailout agreed only last July. EU leaders are acutely aware that markets when they open on Monday are expecting a three-pronged deal on Greek debt “haircuts”, bank recapitalisation – already agreed at €90bn overall – and boosting the firepower of the EFSF. This was acknowledged in a statement last night from Sarkozy’s Élysée Palace. It said Greece had to make “ambitious” pledges to restore its economy on the basis of a new programme – indicating that the €109bn second bailout agreed only in July was inadequate. Merkel and Sarkozy demanded that talks begin with private creditors “to find an agreement that will reinforce the sustainability of Greek debt” – longhand for accepting far larger losses. In July the losses to be borne voluntarily by bondholders such as banks were agreed at 21% but these are now likely to be at least 30%. High-ranking eurozone officials admit that a huge amount of work remains to be done before Sunday’s summit to agree on how and by how much to raise the EFSF’s lending capacity from its current €440bn. Merkel, beset by splits within her coalition government and pressure for parliamentary approval of any EFSF deal, will only be able to agree in principle on Sunday and get the detailed, technical issues resolved by finance ministers before being signed off at another time. She called off Friday’s planned speech to the Bundestag on the topic. Wolfgang Schäuble, her embattled finance minister, boosted hopes on Thursday by saying France and Germany had reached an “outline” deal to increase EFSF firepower. “Germany and France are in complete agreement on this question but we know this is not the same as a European solution,” he said. His upbeat comments came less than 24 hours after Sarkozy in effect gate-crashed an opulent farewell in Frankfurt for outgoing European Central Bank president, Jean-Claude Trichet, to hold emergency talks with Merkel on the issue. Earlier, senior EU financial officials said late doubts had emerged about a German plan to turn the EFSF into an insurer in effect able to offer credit default swaps on, say, the first 20% of losses. This could boost its firepower to just over €1tn – or short of the €2tn demanded by the markets, US and UK. But the plan is said to resemble too closely the arrangement that helped bring down Lehman Brothers in 2008, triggering the worst of the financial crisis and recession. So far Germany and the ECB have rejected French ideas of making the EFSF a bank. Sunday’s summit will clearly fail to set the new, higher “haircuts” for private creditors exposed to Greek debt after the International Monetary Fund reportedly fell out with the European commission (EC) and ECB over the scale of that debt. The creditors, marshalled by Deutsche Bank’s outgoing chief, Josef Ackermann, now accept the haircuts could be even higher. A leaked draft report from the “troika” of IMF, ECB and EC said details of Greece’s debt sustainability would be given to the eurogroup of finance ministers who meet on Friday(fri). The report said the country’s debt dynamics were “extremely worrying” after a deeper than expected economic contraction – 5.5% this year and likely to be 2.75% in 2012. One source of relief for worried EU and eurozone leaders is that the draft communiqué for the eurozone summit says both Spain and Italy will give fresh commitments on fiscal consolidation and structural reforms. Senior EU diplomats confirmed that Madrid and Rome would put forward fresh proposals on Sunday. What would the deal look like? The new financial bailout plan is expected to cover debt reduction for Greece, new capital for ailing banks that might take losses from Greek bonds, and enhanced financial firepower for the bailout fund to stabilise markets. The European financial stability facility has recently been expanded to €440bn (£384bn). But it may need at least €1.5
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