News & Current Affairs

October 2, 2008

US markets wary over rescue deal

US markets wary over rescue deal

Wall Street trader

The markets remain nervous

US shares have fallen sharply with investors cautious over whether the House of Representatives will back the revised bank rescue plan.

The House is due to discuss the scheme later, with a vote expected on Friday. The bill successfully passed through the US Senate on Wednesday.

On Wall Street, the Dow Jones index was down 263 points or 2.4% at 10,571, a slide dragging European shares lower.

The falls came as France said it would host a summit on the financial crisis.

The UK’s FTSE 100 closed was down 1.8% to 4,870.3 points while Germany’s Dax index shed 2.5% and France’s Cac 40 lost 2.3%.

Sentiment was further hit by glum economic data – showing that the number of people filing for new unemployment benefit claims rose to a seven-year high, while factory orders had seen a steeper-than-expected drop in August.

European talks

The office of French President Nicolas Sarkozy said the special meeting on Saturday would discuss a co-ordinated response to the financial turmoil amongst European members of the G8 ahead of a meeting of world finance leaders in Washington next week.

UK Prime Minister Gordon Brown is due to attend, together with German Chancellor Angela Merkel, Italian Prime Minister Silvio Berlusconi and European Central Bank President Jean-Claude Trichet.

Investors are still concerned about the efficiency of this rescue plan and how it can help the global economy
Aric Au, Phillip Securities

But with just two days to go before the talks start, EU members are deeply divided, correspondent said.

France and Holland favor a European response to help banks hit by the credit crisis while Germany and Luxembourg believe a joint rescue plan is not necessary.

European leaders have denied speculation that they wanted to establish a unified 300bn euro ($418.4bn; £236bn) banking rescue deal along the same lines as the US plan.

The rescue idea was said to be being proposed by France, but Mr Sarkozy insisted that there were no such plans.

“I deny both the amount and the principle [of such a plan],” he said.

‘Essential’

In the US, a number of changes had to be made to the $700bn (£380bn) bail-out plan in order to help win approval in the Senate.

These include raising the government’s guarantee on savings from $100,000 to $250,000, tax breaks to help small businesses, expansion of child tax credit, and help for victims of recent hurricanes.

President George W Bush said that the package was “essential to the financial security of every American”.

However, economists said doubts remained about how effective the package would be.

“Investors are still concerned about the efficiency of this rescue plan and how it can help the global economy,” said Aric Au of Phillip Securities in Hong Kong.

McCain and Obama

US presidential hopefuls John McCain and Barack Obama, who both returned from the campaign trail for last night’s Senate debate, voted in favor of the rescue plan.

Senate majority leader Harry Reid, a Democrat, said he was happy with the result and praised both presidential candidates for voting.

“I think it shows that when we work together we can accomplish good things,” he said.

Mitch McConnell, leader of Republican senators, was also in jubilant mood.

“This was a measure that was much needed, to unfreeze the credit markets and get America’s economy working again,” he said.

August 30, 2008

Russia moves to calm Georgia row

Russia moves to calm Georgia row

Russian troops in Tskhinvali, 29/08

Russian troops repelled Georgian forces from the breakaway regions

Russia has taken a series of diplomatic steps in an apparent effort to ease tensions with the West over this month’s conflict in Georgia.

President Dmitry Medvedev told UK Prime Minister Gordon Brown Moscow wanted more monitors from Europe’s security body in Georgia, the Kremlin said.

Separately, Russian and German foreign ministers agreed to seek to calm tensions over the crisis, Moscow said.

The issue is set to dominate the agenda of an EU meeting on Monday.

SOUTH OSSETIA & ABKHAZIA
BBC map
South Ossetia
Population: About 70,000 (before recent conflict)
Capital: Tskhinvali
President: Eduard Kokoity
Abkhazia
Population: About 250,000 (2003)
Capital: Sukhumi
President: Sergei Bagapsh

French Foreign Minister Bernard Kouchner said earlier this week that the bloc was considering sanctions “and many other means” against Russia over the crisis.

But he said he hoped the matter would “be solved by negotiation”.

Moscow’s military action in Georgia and its subsequent recognition of independence of Abkhazia and South Ossetia – Georgia’s two rebel regions – have angered the West.

Moscow has defended its actions, saying they prevented a “genocide” in South Ossetia.

However, after the inflammatory rhetoric Russia now appears to have decided it is time for a bit of diplomacy, the BBC’s Rupert Wingfield-Hayes in Moscow says.

‘Non-existent threats’

During Saturday’s telephone conversation with Mr Brown, President Medvedev said Russia was “in favor of the deployment of additional OSCE [Organization for Security and Co-operation in Europe] monitors in the security zone” in Georgia, the Kremlin statement said.

It said observers in the security zone would provide “impartial monitoring” of Tbilisi’s actions.

Earlier this month, the OSCE decided to increase the number of its military observers by up 100 in Georgia.

Mr Medvedev also said that Russia recognised Georgia’s regions of South Ossetia and Abkhazia because of Tbilisi’s aggression.

He said that the Georgian move “fundamentally altered the conditions in which, during 17 years, attempts were made to settle the relations between South Ossetia, Abkhazia and Georgia,” the statement said.

In a separate development, Russian Foreign Minister Sergei Lavrov spoke to his German counterpart, Frank-Walter Steinmeier.

They both “agreed on the need to put an end to attempts to use the situation surrounding Georgia… to raise tensions in Europe by speculating on non-existent threats concerning other post-Soviet countries,” a Russian foreign ministry statement said.

Ties cut

The conflict in the region began on 7 August when Georgia tried to retake South Ossetia by force after a series of lower-level clashes.

Russia launched a counter-attack and the Georgian troops were ejected from both South Ossetia and Abkhazia. Russian troops continued their operation, advancing deep inside Georgia’s territory.

An EU-brokered ceasefire brought a formal end to the conflict five days later, although each side has accused the other of breaking the agreement.

Russia has since withdrawn the bulk of its force and says the troops left behind are serving as peacekeepers.

Georgia has described them as an occupation force, announcing that it is cutting diplomatic relations with Moscow.

Create a free website or blog at WordPress.com.