Entries in Economy (15)


Egypt Seeks Nearly $5 Billion in Aid from IMF

Stockbyte/Thinkstock(CAIRO) -- Waning tourism and growing debt is threatening the Egyptian economy, and now the post-Mubarak government is asking the International Monetary Fund for help to the tune of nearly $5 billion.

In a meeting Wednesday with IMF chief Christine Lagarde, Egyptian President Mohammed Mursi requested a $4.8 billion loan to help jumpstart the country's economy.

Since the civil rebellion last year that eventually led to the ousting of former President Hosni Mubarak, Egypt's foreign reserves have tumbled far below levels seen before the revolution, BBC News reports. Now, according to experts, it will take an urgent response with financial aid to steer clear of currency devaluation, reports BBC.

Egypt's predicted budget deficit for the 2012-13 fiscal year is 7.9 percent of its GDP, BBC reports.  The country has $33.8 billion in debt owed to foreign nations, while its domestic debt stands at $193 billion.

After 18 months and two stalled attempts to obtain financial help from the IMF, Prime Minister Hisham Qandil hopes to secure a loan deal by the end of this year.  Previous attempts had been delayed as Egypt's new government wrangled budget control from the military. The IMF insisted that any loan disbursement would have to have broad political support.

On Wednesday, Lagarde indicated the conditions were right for negations.

"We have perfectly competent authorities to negotiate with and we don't see any obstacle to the negotiation that will begin very shortly," she told reporters Wednesday, The Wall Street Journal reports.

Though few details about the loan's projected size or terms have been made public, Qandil said after Wednesday's meeting that he is expecting a five year loan from the IMF at 1.1-percent interest and a grace period of 39 months, the BBC reports.

Still, The Wall Street Journal reports that many economists say currency devaluation is inevitable for Egypt, regardless of the loan's size or conditions. Mohsin Khan, a fellow at the Rafik Hariri Center for the Middle East, told the Journal that the IMF will put "tremendous pressure" on the central bank to allow adjustments to the exchange rate.

Copyright 2012 ABC News Radio


Asian Markets Down as Investors React to US Credit Downgrade

Hemera Technologies/Thinkstock(TOKYO) -- Asian markets tumbled at the open Tuesday, extending losses across the board and prompting fears of a recession after witnessing the economic crisis gripping the United States.

The Nikkei was down four percent in the first hour of trading, falling below the key 9,000 line for the first time since the March disasters.

Key indexes across Asia fell between two and five percent, as concerns about the U.S. credit rating downgrade continued to weigh on investors.

Copyright 2011 ABC News Radio


Clinton Urges India to Lead in China's Neighborhood

Secretary Clinton Is Greeted By All India's Congress Party President Gandhi(CHENNAI, India) -- U.S. Secretary of State Hillary Clinton, in a speech in Chennai, India, urged the South Asian giant to expand its influence beyond its immediate neighborhood, particularly in East Asia, where China has dominated regional politics.

“It’s a time to lead,” Clinton said, and while she never singled China out as the target, her repeated references to the need for India to export its values in the region were clear.

She spoke of “India’s growing leadership role in the world” and suggested India’s democratic values could “inspire others to follow a similar path of openness and tolerance.”

The idea of building up India in the face of Chinese power is not new. In 2005 President Bush decided to pursue a civil nuclear deal with India, in large part because they hoped it would allow India to grow into a regional power to counter Chinese influence in Asia. President Obama has backed India obtaining a permanent seat on the U.N. Security Council for much the same reason.

“India's leadership has the potential to positively shape the future of the Asia-Pacific,” Clinton said Wednesday.

Clinton’s choice of venue was no accident -- she used Chennai as an example of India’s historical role in East Asia.

“In this port city, looking out at the Bay of Bengal and beyond to the nations of East and Southeast Asia, we are easily reminded of India’s historic role in the wider region.  For thousands of years, Indian traders have sailed those waters of Southeast Asia and beyond,” Clinton said.

Clinton also announced that the U.S. would soon hold three-way talks with India and Japan, another counterweight to China in the region.

This week Clinton led a senior delegation of American officials to the latest Strategic Dialogue with Indian officials in New Delhi, the latest such talks aimed at cementing relations between the two countries.

Copyright 2011 ABC News Radio


North Korea Shuts Down Universities for 10 Months

North Korean university students (AFP/AFP/Getty Images)(NEW YORK) -- North Korea will shut down universities for the next 10 months to force students to work in factories, the construction sector, and farms, reports the Daily Telegraph.

The only exception made will be to foreign students or those graduating in the next few months.

According to the report, the cancellation of university classes until April 2012 is part of an effort to rebuild the country's economy. However, some suspect there may be other motives for the decision to temporarily halt university classes.

Copyright 2011 ABC News Radio


What a Greek Default Could Mean for Americans

Comstock/Thinkstock(NEW YORK) -- Greece, a small nation in southern Europe, is having an outsized impact on the U.S. economy amid fears among investors that Greece might default on its debt.

The news comes just as the U.S. is seeing some positive signs regarding unemployment benefits and mortgage payment rates.

Fewer Americans applied for jobless benefits in the past three weeks, and more have stayed current on their mortgage payments than at any time since 2006, before the nationwide housing crisis spurred the Great Recession.

This indicates that the U.S. economy is recovering, albeit slowly, even as problems in Europe continue to cool the stock market.

The problems in Greece could lead to these probable outcomes:

If the European economic zone countries come to an agreement to bail out Greece, those countries will have less money to spend on American goods, causing job losses here.

If Greece defaults on its debt, it would mean any entities that bought bonds (banks, governments and private investors) would have to readjust their balance sheets. Those entities had relied on the interest payments paid by Greek bonds to fund other investments and buy goods and services so that money would no longer be there to spend.

If a full default occurred, other troubled countries, notably Spain and Portugal, could also follow suit, leading to a wave of defaults that would severely affect the European zone and could send shockwaves all the way to Wall Street.

Already, Greeks are rioting in the streets and tossing petrol bombs at riot police. They are protesting austerity measures their government has tried to impose as it works to solve its country's debt crisis. Prime Minister George Papandreou has so far failed to put together a cross-party coalition that could come up with a plan to combat the debt.

"Greece has defaulted already," Richard Bove, an analyst at Rochdale Research, told ABC News. "We are arguing about how we are going to handle this default in a way that is least destructive to bank balance sheets."

Although U.S. businesses, even banks, are not severely exposed to Greece's economy, investors worry that if Greece defaults on its debt and leaves investors such as Greek bond holders out in the cold, financial trouble would spread to other troubled European economies, such as Spain's, Portugal's and Ireland's. If the European economy were to implode in a wave of defaults and associated bank failures, it could pull the U.S. economy down as well, since there is a lot of trade between the U.S. and Europe.

"Large European banks are very intertwined with American banks," said Bove. The question becomes, in the worst case-scenario, a wave of defaults, "Will these banks be able to absorb a number of defaults from a number of countries?"

Large country defaults have happened before. Argentina defaulted on part of its external debt in 2002, leading to a decade of economic turmoil for that country. Following the default, Argentina received a crucial loan from the International Monetary Fund in 2003 and restructured its massive debt. Today, Argentina is the third-largest economy in Latin America.

Next week, European leaders will convene a summit to attempt to deal with the crisis, and another meeting is set for July 11.

Europe has far more money as a whole than Latin America, so perhaps it can avoid the worst-case scenario for Greece and help save their own skins -- and ours too.

Copyright 2011 ABC News Radio


Afghanistan Strategy Questioned as New Report Warns of Economic Crisis

U.S. Dept of State(WASHINGTON) -- Corruption and poor governance remain key challenges in Afghanistan, career diplomat Ryan Crocker testified at his nomination hearing for U.S. ambassador to Afghanistan, the day Senate Democrats reported that the war-torn nation risks falling into a crisis when U.S. troops hand over power in 2014.

"I'm under no illusions of the difficulty of the challenge," the former ambassador to Iraq and Pakistan testified Wednesday before the Senate Foreign Relations Committee. "If Iraq was hard, and it was hard, Afghanistan in many respects is harder."

The United States has provided about $18.8 billion in foreign aid to Afghanistan in the past decade, more than any other country, including Iraq, according to a report compiled by Senate Democrats for the Foreign Relations Committee.

The State Department and the U.S. Agency for International Development (USAID) spend roughly $320 million a month on aid in Afghanistan, mostly on short-term stabilization programs in the south and east of the country.

While the aid has "achieved some real successes" -- mainly in the education sector -- the report questions whether the money and the United States' counter-insurgency focus is making Afghans more reliant on outside forces and will change the equation in the long term.

"Foreign aid, when misspent, can fuel corruption, distort labor and goods markets, undermine the host government's ability to exert control over resources and contribute to insecurity," the report states. "Afghanistan could suffer a severe economic depression when foreign troops leave in 2014 unless the proper planning begins now."

The United States hopes to hand over security power to Afghans by 2014, although some troops are expected to remain.

President Obama and his administration have carefully acknowledged that gains made in the country in the past 10 years are fragile and reversible. Proponents of the war use that to argue that the United States shouldn't indulge in a hasty withdrawal of troops from the country, especially as discussions ramp up ahead of the July deadline. But critics use the same argument to make the case that the United States should bring back its troops from a country where the future is, at best, uncertain.

"This is a messy situation that isn't getting any better," Sen. Jim Risch, R-Idaho, said Wednesday. "The problems here are very, very significant....I am very skeptical about how we're going to be able to handle this."

The issue of how many U.S. troops should be brought back when the drawdown begins next month has been a touchy one. Outgoing Defense Secretary Robert Gates has warned against a "premature" move and the White House has said the president's decision would be based on conditions on the ground, a sentiment that Crocker echoed Wednesday.

"As we go through a responsible transition, I think it has to be conditions-based to ensure that as we draw down our forces," he told senators. "And I'm keenly aware from my consultations of the mood both here on the Hill and publicly, there has to be transition. But at the end of the day, we have to be sure that the safe haven doesn't then relocate from Pakistan to Afghanistan."

Some argue that with Osama bin Laden's death, the terrorist threat against the United States has diminished. But Crocker warned against that argument, saying that much more still needs to be done to contain al Qaeda.

Crocker, who has served as ambassador to Lebanon, Kuwait, Syria, Pakistan and Iraq, is expected to be confirmed on a bipartisan basis.

Copyright 2011 ABC News Radio


Earthquake, Tsunami Sends Japan's Economy into Recession

JIJI PRESS/AFP/Getty Images(TOKYO) -- The earthquake and tsunami that rocked Japan two months ago have sent the country's economy back into recession.

New economic figures out Thursday show that Japan's gross domestic product shrank nearly four percent between January and March, marking the second straight quarter of decline -- an indication of a recession.

The latest report examines just 20 days following the disasters, but economists say the long-term impact is huge.

The March 11 earthquake and tsunami damaged major factories and led to parts shortages for several manufacturers, including the top players in the auto industry -- Toyota, Honda and Nissan.  The Fukushima Daiichi nuclear power plant was also crippled by the natural disasters, sparking a nuclear crisis and causing power shortages and futher damages to businesses.

Economic analysts say the massive reconstruction effort that's underway could help lift Japan's economy.

Copyright 2011 ABC News Radio


Obama to Brazil: Let Us Stand Together as Equal Partners

ABC News(RIO DE JANEIRO) -- President Obama spoke to the nation of Brazil on Sunday, telling the hemisphere’s second largest economy that he wants to be a partner with the South American country as its skyrocketing growth continues.

“Let us stand together – not as senior and junior partners, but as equal partners, joined in a spirit of mutual interest and mutual respect, committed to the progress we can make together.  Together, we can advance our common prosperity.  As two of the world’s largest economies, we worked side by side during the financial crisis to restore growth and confidence,” he told the crowd at the Teatro Municipal, a large theater.

The president has gone out of his way to praise Brazil during his two days in the country. The message is seen as critical for the White House, one of the reasons the trip was not canceled as the president prepared military strikes against Libya.

President Obama talked about universal rights as he referred to the trouble in the Middle East and acknowledged how Brazil has moved from dictatorship to democracy.

“ We yearn to live without fear or discrimination; to choose how we are governed and to shape our own destiny.  These are not American or Brazilian ideas.  They are not Western ideas.  They are universal rights, and we must support them everywhere,” he said.

The overriding message from the President came in one line of his 25 minute speech: “I am here to tell you that the American people don’t just recognize Brazil’s success – we root for it. “

Copyright 2011 ABC News Radio


With Mubarak Gone, Egyptian Army Moves to End Cairo Protests

Photo Courtesy - ABC News (CAIRO) -- The Egyptian government warned protesters Monday to finally leave the streets of Cairo and hauled away truckloads of tents and blankets, but knots of defiant protesters remained in the square demanding even more political changes while labor unions demonstrated for pay raises.

The protests have dwindled since Mubarak left office on Friday, but some demonstrators still remain. As Mubarak's portrait was removed from state buildings, rumors spread that he had fallen ill and was in a coma.

Mubarak is reportedly at his residence in the resort town of Sharm el-Sheikh on the Red Sea, 250 miles away from Cairo.

A little more than 48 hours after Egyptians toppled the government of Hosni Mubarak, the military has taken over the country's leadership and called for an end to the strikes. The military forced protesters and journalists off Tahrir, or Liberation, Square in Cairo, telling foreign reporters that only locals were allowed in the area.

A spokesman for the Armed Forces Supreme Council read a statement on television, its fifth so far, giving a not-so-gentle nudge to the people to get off the streets. He said the sit-ins and protests disrupt and stop the "wheels of production" and have negative repercussions on the national economy.

Protesters were divided over whether to continue demonstrating. Some are calling for a return to normal life while others, more skeptical, say they won't leave until they see real change. Most people want to see an immediate end to the controversial emergency law that has been in place almost continuously since 1967 and gives the government far-reaching powers at the expense of judicial review and civil liberties.

The military has promised swift presidential elections, but only a handful of viable opposition leaders have emerged and a concrete date has yet to be set. Among the contenders is Ayman Nour, a politician who was jailed when he challenged Mubarak in 2005 and became the first to announce his intention of running for the presidency.

Egypt itself is growing calmer and business is slowly returning to normal, though tourism has yet to return as international travelers remain jittery about the security situation in the region.

Tourism is the backbone of Egypt's economy, but the foreigners fled the country when the protests began in late January.

"Just to tell everyone that Egypt is safe and come back, we are ready to host a lot people, maybe millions and millions like we used to have. So we are ready. Please come to Egypt," said tour guide Shahindar Adel, one of many in the tourism industry that paraded outside the Pyramids Monday.

Holding signs like "Peace, freedom and love" and "Come to Egypt, you are safe here," the demonstrators pleaded for tourists to return.

Looting at Egypt's national museum was far worse than known, with more than a dozen priceless treasures stolen, including a small statue of a goddess holding King Tut.

Meanwhile, among Egypt's allies, there is anxiety over what the future entails for the entire region. Egypt is one of the United States' closest allies in the region and only one of two Arab countries that recognizes Israel.

Egypt's high military council is headed by Defense Minister Mohammed Hussein Tantawi, known to be relatively friendly to western governments. He was made deputy prime minister just two weeks ago in an effort to appease protesters.

Shoukry said the United States can count on the same kind of support from Egypt that it had before.

Copyright 2011 ABC News Radio 


Egypt: Strikes Bolster Protests, Threaten Economy

Photo Courtesy - Khaled Desouki/AFP/ Getty Images(CAIRO) -- Labor unions across Egypt went on strike Thursday, adding more fuel to the revolutionary fire, as protests continued for a 17th day.

Factory workers, textile workers and laborers on the Suez Canal all stopped working.

Over in Cairo, the transportation strike brought traffic in a city famous for its congestion to a standstill.  Doctors and bus drivers on strike joined the protests in Tahrir Square in a sign of solidarity.

Thursday's strikes bolstered demonstrations calling for the ouster of President Hosni Mubarak but also added to Egypt's financial woes, further threatening the country's economy which has suffered since protests began Jan. 25.

Copyright 2011 ABC News Radio

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