Figures for second quarter expected to show Britain’s economy has flatlined for almost a year An unrepentant David Cameron prepared consumers and the markets for publication on Tuesday of gruesome growth figures by admitting Britain’s “path back to growth will be a difficult one”, but insisting no shortcut lay in either a fiscal or monetary stimulus. The chancellor, George Osborne, also set out his defence ahead of an expected political battering by claiming he had “turned Britain into a safe harbour in a storm” by focusing so rigidly on deficit reduction. He admitted: “There are risks to current and future growth.” Both the prime minister and the chancellor spoke about the depth of Britain’s economic difficulties on Monday after being briefed on the growth figures for the second quarter to be published by the Office for National Statistics . The figures are expected to show Britain’s economy has flatlined for almost a year, contrasting with strong growth in Germany and, to a lesser extent, France. Most economists believe the economy ground to a halt in the three months to the end of June after a big slowdown in the manufacturing sector, which has been instrumental in preventing the economy sinking back into recession over the last 18 months. Estimates range from a small contraction of 0.1% or 0.2% to growth of 0.7%, with most economists expecting about 0.2% to 0.3%. Either way, the numbers will push the Office for Budget Responsibility (OBR) into downgrading for the fourth time its growth forecast for 2011 – currently predicted to be 1.7 %. The OBR is likely to do that for the chancellor’s autumn statement, expected after third-quarter growth figures on 25 October. Cameron and Osborne refused to join the business secretary, Vince Cable, in his call on Monday for a further bout of monetary expansion by the Bank of England through a second round of quantitative easing, including the purchase of corporate bonds. Cameron said: “There isn’t some great monetary stimulus you can give when interest rates are as low as they are. The right steps for an economy like ours is to get on top of your debt and deficit and then make it a better place for businesses to grow and expand and employ people.” He added: “There is no country really that can afford another fiscal stimulus. They have all run out of money.” Osborne also declined to support Cable in calling for monetary expansion. He vowed not to change his plan to eradicate the structural deficit within four years. “We have an economic plan, we’re sticking to the economic plan,” he said. “In a world of great uncertainty, we’ve brought stability in the British economy, we’ve brought interest rates down, and we’re creating private sector jobs.” He added: “We turned Britain into a safe harbour in the storm. That’s not easy politically. We took some very, very difficult decisions because we had to. Our interest rates have come down while others have gone up. That has provided the stability that the British economy needs in a very, very unstable global environment.” Labour accused the government of getting its excuses in early, pointing out that growth would have to be 0.8% in the second quarter for the OBR growth projections for 2011 to be on track. It said growth of as high as 0.3% in the second quarter would severely hit Osborne’s credibility. Labour also insisted market interest rates for bonds were low and falling before the election, suggesting there was no need to go further than Labour’s plan to halve the deficit over a parliament. The TUC’s general secretary, Brendan Barber, said: “A target of eliminating the deficit in just four years always looked as if it came from what others might call ‘rightwing nutters’, rather than sensible economics.” The economy grew by 0.5% in the first three months of this year, but this was cancelled out by a 0.5% contraction in the three months to December 2010. A flat period in the previous August and September extended the UK’s run of zero growth. In a sign of slowing demand, figures from the British Bankers Association showed overall lending to non-financial companies fell by £2.5bn last month, following a similar drop in May. June’s drop was bigger than the average monthly fall of £1.4bn over the previous six months. Howard Archer, chief economist at IHS Global Insight, said the drop was more likely to be connected to a collapse in confidence than a dearth of bank funds, though small businesses were finding it difficult to get loans at affordable rates. He said the fall was “evidently influenced significantly by low demand for credit and by many companies looking to pay down debt … Companies are becoming increasingly wary about borrowing and investing in the current difficult economic environment – which in itself is worrying for growth prospects.” George Buckley, chief UK economist at Deutsche Bank, said the economy would begin to recover in the second half of the year after a rocky start, though there were many factors that could dampen growth. Jonathan Portes, director of the National Institute of Economic and Social Research, urged ministers to ease fiscal policy. He said: “If the government chooses to ease fiscal policy in response to the weak growth, which too tight fiscal policy is delivering us, that would represent a sensible change of course”. Economic policy Economic growth (GDP) David Cameron Manufacturing sector Economics Patrick Wintour Phillip Inman guardian.co.uk
Continue reading …MIA’s tribute to fellow musician Amy Winehouse is, fittingly, a song. “All rock stars go to heaven, you said you’ll be dead at 27,” MIA sings in “27,” which alludes to other singers who have also died at that age—among them Janis Joplin, Kurt Cobain, Jim Morrison—reports the…
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• 48 hours to get agreement on raising debt ceiling • AAA credit rating in peril, says top bond investor The International Monetary Fund called on the United States to resolve its debt crisis amid warnings from one of the world’s most influential investors that the country risked losing its triple-A credit rating within months because of the reputational damage caused by the ongoing disagreement over the debt ceiling. Amid nervous trading on both sides of the Atlantic, the directors of the Washington-based fund “highlighted the urgency of raising the federal debt ceiling and agreeing on the specifics of a comprehensive medium-term consolidation programme” in its review of the country’s economic prospects. The urgency expressed by the IMF came after Mohamed El-Erian, chief executive of bond trader Pimco, lambasted Washington politicians for failure to reach a compromise to raise the US’s debt ceiling. Stock markets were disappointed that a deal has still not been reached, with bank shares in London being hard hit. Barclays was down nearly 4% – the largest faller – with Lloyds Banking Group and Royal Bank of Scotland also lower. The dollar lost ground in Asian trading, hitting a fresh record low against the Swiss franc, and was lower against the yen. Gold also hit a record high on Monday, touching $1,622 an ounce, in the race for investment safe havens. With time running out, Democratic leaders in control of the Senate and Republican leaders in control of the House put forward alternative plans on Monday. Although both sides blamed one another in public, there could be enough common ground in the two plans for further negotiation and an eventual deal. But El-Erian believes the dispute – carried out in full view of an anxious world – has left investors wary about America’s prospects. “In most likelihood, a last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable,” said El-Erian, whose company is the world’s biggest bond trader. “The country can ill-afford to lose the confidence of large foreign holders of US Treasury bonds, overseas manufacturers with factories here, those that use the dollar as the reserve currency, and the many who have outsourced here the intermediation of their hard-earned savings and pensions,” El-Erian wrote in the Huffington Post. Having reached its current debt ceiling of $14.3tn (£8.7tn), America is likely to run out of money on 2 August unless Democrats and Republicans vote to raise it. Talks broke down on Friday night, with the two sides still unable to agree on a plan to address America’s debts. Republicans accuse President Obama of undermining the talks by pushing for higher taxes, prompting UK business secretary Vince Cable to blame “a few rightwing nutters in the American Congress” for the crisis. A compromise plan proposed by the Democratic leader in the Senate, Harry Reid, went a long way towards meeting Republican key demands: significant spending cuts and, crucially, no new taxes. Reid proposed cuts in the US debt amounting to $2.7tn over the next decade in return for the Republicans agreeing to raise the debt ceiling by an equivalent amount – sufficient borrowing to see the US through until after the November 2012 White House election. About $1tn of Reid’s savings would come from the anticipated drawdown of the US armed forces from costly wars in Iraq and Afghanistan. The election date is a sticking point, with the Republican leader in the House, John Boehner, proposing a shorter timeframe that would require renegotiation of the debt ceiling next summer. “It’s well understood that the president would not like to deal with a deficit reduction package in the election year,” a Republican Congressional spokesman said. Boehner is proposing a two stage approach, cuts of $1.2tn over the next decade in return for raising the debt ceiling for about a year. The second stage would involve a congressional commission proposing another $1.8tn in cuts. Democrats claimed the main obstacle to a deal was the inability of Boehner to stand up to hardline members of his party who are backed by the Tea Party movement, which wants huge cuts and no tax rises. The Democratic senator Chuck Schumer, in a television interview, said: “Everyone likes Speaker Boehner … What is happening is that instead of Boehner leading the Tea Party, he seems to be following them.” Although the deadline for default is August 2, in reality the timescale is shorter, with a bill on spending cuts and raising the debt ceiling needing to begin passage within the next few days. “I think we’ve got 48 hours within which to do something very, very meaningful,” one of the Democratic leaders in the house, James Clyburn, told cable news channel MSNBC. US economy Economics US Congress United States US politics IMF Global economy Stock markets Bonds Ewen MacAskill Graeme Wearden guardian.co.uk
Continue reading …• 48 hours to get agreement on raising debt ceiling • AAA credit rating in peril, says top bond investor The International Monetary Fund called on the United States to resolve its debt crisis amid warnings from one of the world’s most influential investors that the country risked losing its triple-A credit rating within months because of the reputational damage caused by the ongoing disagreement over the debt ceiling. Amid nervous trading on both sides of the Atlantic, the directors of the Washington-based fund “highlighted the urgency of raising the federal debt ceiling and agreeing on the specifics of a comprehensive medium-term consolidation programme” in its review of the country’s economic prospects. The urgency expressed by the IMF came after Mohamed El-Erian, chief executive of bond trader Pimco, lambasted Washington politicians for failure to reach a compromise to raise the US’s debt ceiling. Stock markets were disappointed that a deal has still not been reached, with bank shares in London being hard hit. Barclays was down nearly 4% – the largest faller – with Lloyds Banking Group and Royal Bank of Scotland also lower. The dollar lost ground in Asian trading, hitting a fresh record low against the Swiss franc, and was lower against the yen. Gold also hit a record high on Monday, touching $1,622 an ounce, in the race for investment safe havens. With time running out, Democratic leaders in control of the Senate and Republican leaders in control of the House put forward alternative plans on Monday. Although both sides blamed one another in public, there could be enough common ground in the two plans for further negotiation and an eventual deal. But El-Erian believes the dispute – carried out in full view of an anxious world – has left investors wary about America’s prospects. “In most likelihood, a last-minute political compromise will avoid a default but will leave the AAA rating extremely vulnerable,” said El-Erian, whose company is the world’s biggest bond trader. “The country can ill-afford to lose the confidence of large foreign holders of US Treasury bonds, overseas manufacturers with factories here, those that use the dollar as the reserve currency, and the many who have outsourced here the intermediation of their hard-earned savings and pensions,” El-Erian wrote in the Huffington Post. Having reached its current debt ceiling of $14.3tn (£8.7tn), America is likely to run out of money on 2 August unless Democrats and Republicans vote to raise it. Talks broke down on Friday night, with the two sides still unable to agree on a plan to address America’s debts. Republicans accuse President Obama of undermining the talks by pushing for higher taxes, prompting UK business secretary Vince Cable to blame “a few rightwing nutters in the American Congress” for the crisis. A compromise plan proposed by the Democratic leader in the Senate, Harry Reid, went a long way towards meeting Republican key demands: significant spending cuts and, crucially, no new taxes. Reid proposed cuts in the US debt amounting to $2.7tn over the next decade in return for the Republicans agreeing to raise the debt ceiling by an equivalent amount – sufficient borrowing to see the US through until after the November 2012 White House election. About $1tn of Reid’s savings would come from the anticipated drawdown of the US armed forces from costly wars in Iraq and Afghanistan. The election date is a sticking point, with the Republican leader in the House, John Boehner, proposing a shorter timeframe that would require renegotiation of the debt ceiling next summer. “It’s well understood that the president would not like to deal with a deficit reduction package in the election year,” a Republican Congressional spokesman said. Boehner is proposing a two stage approach, cuts of $1.2tn over the next decade in return for raising the debt ceiling for about a year. The second stage would involve a congressional commission proposing another $1.8tn in cuts. Democrats claimed the main obstacle to a deal was the inability of Boehner to stand up to hardline members of his party who are backed by the Tea Party movement, which wants huge cuts and no tax rises. The Democratic senator Chuck Schumer, in a television interview, said: “Everyone likes Speaker Boehner … What is happening is that instead of Boehner leading the Tea Party, he seems to be following them.” Although the deadline for default is August 2, in reality the timescale is shorter, with a bill on spending cuts and raising the debt ceiling needing to begin passage within the next few days. “I think we’ve got 48 hours within which to do something very, very meaningful,” one of the Democratic leaders in the house, James Clyburn, told cable news channel MSNBC. US economy Economics US Congress United States US politics IMF Global economy Stock markets Bonds Ewen MacAskill Graeme Wearden guardian.co.uk
Continue reading …Stocks are falling after congressional leaders failed to agree on a deal to raise the nation’s debt limit to avoid default. At the opening bell today, the Dow Jones industrial average fell 101 points, or 0.8%, to 12,575. The Standard & Poor’s 500 was down 12, or 0….
Continue reading …Aiming to keep his “martyrdom operation” a secret, Anders Behring Breivik worked hard come across as a regular guy—and he succeeded at being forgettable. “He didn’t say anything you could remember,” an acquaintance tells the New York Times . “He’s one of the crowd, if you know what I mean….
Continue reading …Tim Pawlenty hasn’t been shy about attacking Michele Bachmann: He has called her Congressional record “nonexistent” and expressed concern over her ability to lead while suffering migraines. Now, ahead of the Ames, Iowa, straw poll, Bachmann is finally hitting back at the former governor of her state, ABC News reports….
Continue reading …After an American blogger’s discovery of three fake Apple stores in a Chinese city, officials took action—and they uncovered 5 such stores in Kunming, the AP reports. Two of the stores have been suspended during the investigation, but officials couldn’t shut down the other three because they weren’t actually…
Continue reading …Details are emerging about Anders Behring Breivik’s months of planning for the Norway terror attacks—from Breivik himself. Included in his 1,500-page manifesto is a meticulously detailed diary that begins on May 1. He writes that his preparations began years earlier, but got truly serious in April when he…
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Our Afghanistan correspondent Jon Boone survived dozens of embedded missions unscathed. Then, one morning, his luck finally ran out . . . Just as I thought things couldn’t get much worse, they did. The decrepit Humvee, a hand-me-down from the US Army, juddered to a halt and smoke billowed from the air vents below the bulletproof windscreen. I was now stranded in a broken- down Afghan National Army (ANA) vehicle in the middle of a deadly stretch of highway where only two days earlier there had been a small firefight between the Taliban and the security forces. More to the point, I also had a broken leg. My right fibula had snapped at the ankle at around 8am that morning after I fell into a flooded irrigation canal near the town of Kandalay in the district of Zhari, the neighbourhood of Mullah Omar (in the days when the one-eyed cleric was gathering his forces for what would ultimately lead to the Taliban conquest of almost the entire country). I really needed to be in hospital. Instead I was crammed into the front seat of a baking-hot armoured vehicle watching a bunch of Afghan soldiers running back and forth to a nearby puddle, scooping up water into their helmets to cool the engine. Despite the quantum leap the ANA has made in recent years, they are still not the people to help you when you are in serious difficulties. And it had arguably been more than a little unwise to hitch a lift with the ANA to get back to the relative civilisation of Kandahar City, from where I hoped to get a flight to Dubai or Kabul. Or anywhere with a decent hospital prepared to treat a wounded civilian. A few days previously, sitting in the comfort of the ANA’s 205th “Hero” Corps headquarters on the outskirts of
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