BBC News - Merkel defends compromise deal on eurozone banks

Germany's Chancellor Angela Merkel says she is satisfied with a deal to help finance debt-laden eurozone countries.

Angela Merkel: "The details affecting liability... will have to be discussed... those negotiations are going to be anything but easy"

"I think we found a good compromise," she said after all-night talks which saw her come under heavy pressure from Italy and Spain.

A new supervisory body will enable the European Central Bank (ECB) to "keep a very close eye on the banks", she said.

Spain is awaiting a 100bn-euro (£80bn; $125bn) recapitalisation of its troubled banks by the eurozone.

Mrs Merkel said the deal on lending would provide sufficient safeguards for the taxpayers' money used by the EU bailout funds.

The EU's existing bailout fund - the European Financial Stability Facility - will provide aid under the current rules until the new permanent fund, the European Stability Mechanism (ESM), is ready to take over. The ESM is due to be launched next month.

The funds will not only be able to lend directly to banks. They will also be used to buy bonds of countries like Italy and Spain whose borrowing costs have soared - with the intention that those countries will not have to apply for a formal Greek-style bailout.

Eurozone leaders agreed to begin implementing the decisions by 9 July. However, it could take until the end of the year before the new money becomes available.

Germany, the biggest economic power in the eurozone, is reluctant to continue bailing out debt-laden countries. Its position is supported by the Netherlands, Austria and Finland.

Breaking 'vicious circle'

Announcing the deal, EU Council President Herman Van Rompuy said it would break the "vicious circle" between banks and national governments.

The euro surged against other currencies while european stock markets also rose sharply.

The BBC's Andrew Walker, in Brussels, says the new loans will not be given "seniority" over private sector loans.

This means that if Spain were to default, those official lenders would not get preferential treatment. The move should make Spanish government debt a little more attractive to private investors, our correspondent says.

Growth stimulus

Late on Thursday, Spain and Italy withheld support for a growth package worth 120bn euros, demanding immediate EU measures to lower their borrowing costs.

The growth package, including a funding boost for the European Investment Bank, was later agreed.

The leaders also approved a roadmap for building a more integrated eurozone - what should eventually become a fiscal union. It includes controversial plans for "eurobonds" - mutualisation of eurozone debt.

Mrs Merkel has resisted the idea of pooling eurozone debt. On Friday she said "details about liability will have to be discussed by the finance ministers and those negotiations will be anything but easy".

The deal came about after new French President Francois Hollande appeared to throw his weight behind Italy and Spain.

Reuters News - Fed's Dudley eyeing U.S. jobs, Europe

NEW YORK | Fri Jun 29, 2012 9:21am EDT

(Reuters) - An influential Federal Reserve official said he modestly lowered his expectations for inflation in coming months, but added more clarity on the U.S. jobs market and the European crisis was need to take a firmer stance on the health of the U.S. economy.

New York Fed President William Dudley, a close ally of Chairman Ben Bernanke, said on Friday U.S. employment growth has "slowed considerably of late" as the economy has lost momentum.

"Although some of the current uncertainties will take time to resolve, I can imagine material data on a number of dimensions could become available in the coming weeks and months that could lead me to adjust my forecast further," Dudley said in prepared remarks he was to deliver to the Puerto Rico Chamber of Commerce via video link.

"I will be paying particularly close attention to whether domestic momentum and hiring picks up now that the pay-back for the mild winter is over, and whether financial conditions, which are heavily influenced at present by developments in Europe, ease or tighten further."

Three consecutive months of soft U.S. jobs growth and the simmering euro zone debt crisis led the U.S. central bank last week to ramp up its monetary stimulus to the stalled economic recovery.

Dudley referenced the Fed policy action, a 6-month extension of a bond maturity-extension program called Operation Twist, but offered no fresh insight on what spurred the Fed to take that particular step instead of others, nor whether more easing might be needed.

BBC News - Merkel heads to Brussels for crucial euro summit

European Union leaders are preparing to meet for a closely-watched Brussels summit on the fate of the euro.

Francois Hollande and Angela Merkel have differing views on debt management

On the summit's eve, German Chancellor Angela Merkel held two hours of talks with the French President Francois Hollande in Paris.

The two remain at odds on how to move forward, with Germany opposed to pooling debt while France insists the eurozone needs further integration.

Mrs Merkel has warned there is no "magic formula" to solve the crisis.

"Because I know the expectations and hopes that are pinned on this summit, I will repeat right at the start what cannot be said often enough," Mrs Merkel said in Berlin before the Paris talks.

"There is no quick solution and no simple solution. There is no one magic formula... with which the government debt crisis can be overcome in one go."

Mrs Merkel left for Brussels without making further statements after her meeting with Mr Hollande but said that "progress" for a pact for growth had been made and she hoped European leaders would adopt a 130bn-euro ($162bn) stimulus package.

Mr Hollande, who became French president on a ticket of anti-austerity, has been a strong supporter of the growth package.

European authorities have unveiled proposals such as the creation of a European treasury, which would have powers over national budgets.

The 10-year plan is designed to strengthen the eurozone and prevent future crises, but critics say it will not address current debt problems.

Spanish Prime Minister Mariano Rajoy said on Wednesday that his country could not afford to finance itself for long at current bond rates.

Spanish 10-year government bonds have been trading at yields above 6.8%, coming close to the 7% considered unaffordable.

Protesters parked a mannequin of Angela Merkel outside her offices in Berlin

'Vicious circle'

Several EU leaders want individual countries' debts guaranteed by the whole eurozone, for instance in the form of centrally issued eurobonds.

But Mrs Merkel told parliament that eurobonds were "the wrong way" and "counter-productive", adding: "We are working to breach the vicious circle of piling up debt and breaking [EU] rules."

She said to loud applause: "It is imperative that we don't promise things that we cannot deliver. Joint liability can only happen when sufficient controls are in place."

Stronger competitiveness was the condition for sustained growth, the chancellor said.

Mr Hollande believes eurobonds should be a eurozone priority for helping countries like Italy and Spain bring their borrowing costs down.

But Mrs Merkel continues to insist that before anything is done to increase the burden on German taxpayers, building blocks towards greater fiscal, banking and, eventually, political union must be put in place.

The BBC's economic correspondent Andrew Walker, in London, says that there is certainly a chance that the summit will take a small step on a path that would partly deal with the fundamental weaknesses in the Eurozone.

But, in the absence of major short-term action, he explains, borrowing costs for countries such as Spain and Italy are likely to remain painfully high, making the eurozone's financial situation strained for a long time to come.

BBC News - EU asks WTO to arbitrate in China 'rare earths' row

The European Union has asked the World Trade Organization to arbitrate in a row about China's export restrictions on its "rare earth" minerals.

What are rare earths and why do they matter?


The EU, along with the US and Japan, has asked the WTO to set up a dispute settlement panel, arguing that China is being unfairly restrictive.

China could face litigation by the WTO.

Minerals such as lutetium and scandium are important in the manufacture of electrical products, including mobile phones.

Reuters News - Insight: As Congress looks away, U.S. tiptoes toward exporting a gas bounty

By Ayesha Rascoe and Emily Stephenson

WASHINGTON | Wed Jun 27, 2012 1:45am EDT

(Reuters) - In a bitterly divided U.S. political environment, there's at least one thing Republicans and Democrats can agree on: Avoid a public showdown on natural gas exports, arguably the most important energy policy decision in recent memory.

While fluctuating gasoline prices, the Keystone pipeline and the fight over fracking steal headlines, the question of how much of the newfound U.S. shale gas bounty should be shared with the rest of the world goes largely without comment or coverage -- despite holding far wider and longer-lasting consequences.

The reason is clear: unlike the relatively simple, black-and-white issues that politicians often favor and voters connect to, liquefied natural gas (LNG) is deep, deep gray.

It affects a tangled web of constituents, from Big Oil to international allies such as Japan, pits free-trade orthodoxy against the domestic economy, and requires an awkward explanation of why allowing some exports -- inevitably raising U.S. energy prices in the short term, even if at the margin -- may ultimately be better for the country in the long run.

All the same, this U.S. president or the next will have to make a tricky decision, and its consequences may only become clear years from now: How much U.S. gas should be sold to other countries if it means boosting prices for consumers at home?

"Right now I don't think this issue is getting anywhere near the attention it deserves," said Democratic congressman Edward Markey, one of a small number of politicians actively seeking to rein in energy exports.

"Keystone and Solyndra are election-year political sideshows," he said, referring to the bankruptcy of a government-funded solar panel maker. "This is the main event."

But lobbyists on both sides of the issue say it suits them best to keep the subject out of the headlines. The gas producers that stand to benefit from higher selling prices see no upside from a public brawl, while many manufacturers who could benefit from continuing low prices shy away from anti-export statements.

With Congress unlikely to weigh in, the decision falls to a small, obscure unit of the Energy Department, the Office of Natural Gas Regulatory Activities.

The department's statistical branch has been criticized for failing to predict how new drilling techniques would revolutionize the sector, and how quickly the vast stores of unearthed gas would send domestic prices to unsustainable lows.

So the natural gas office is now awaiting advice from a second and final report on the economic implications of exports -- a report so sensitive that the government has kept it under wraps, including the identity of the consultants preparing it.

SHHHHHHHH, SOFTLY-SOFTLY

Not since the liberalization of power markets in the 1980s have politicians had more sway over future energy costs -- or been less willing to grapple publicly with the issue.

Only one hearing on LNG exports has been held to date in the Senate, and in the House of Representatives, the Energy and Commerce Committee has no plan to hold hearings at the moment.

Markey has struggled to get traction behind legislation that would block gas exports, a measure almost certain to fail to pass through the divided Congress. Few lawmakers openly oppose exports, though even fewer vocally advocate a fully open market that would raise prices at home.

The Obama administration has said it will wait until the gas office releases the final economic analysis of LNG exports to make any decision on eight pending applications to sell liquefied natural gas to countries with which the United States has no free-trade agreement -- the most political step of the multiple state and federal approvals needed to send LNG abroad.

The report was due out this spring, but in March the administration pushed back the release until later in the year. A White House official said on Monday the report could be released in the next few weeks.

Overall, the boom in the energy sector, coupled with a slow recovery in domestic manufacturing, could raise gross domestic product by 2 to 3.3 percent by 2020, according to a recent analysis by Citigroup. But exports could force politicians to play favorites, effectively choosing between energy companies and industry.

Democrats, often critical of the oil and gas sector, are wary of getting out in front of an issue that divides even the manufacturers benefitting from low gas prices. Republicans, who favor free trade and support fossil fuel development, are leery of being accused of raising costs for consumers and industry.

"No politician wants to be accused of raising end-user prices to add to oil companies' bottom lines," says Kevin Book, an energy analyst at Clearview Energy Partners.

So for most officials willing to take a stand, it is inevitably one of moderation. Few are ready to weigh in on the toughest question: How much is too much?

Senator Ron Wyden, a Democrat who has backed the pause in the permitting process, knows how quickly fortunes can change: just a few years ago he witnessed the battle over the prospect of a gas import terminal in his home state of Oregon at a time when the industry was convinced of a growing U.S. gas deficit.

Instead, the pioneering use of hydraulic fracturing and horizontal drilling has lifted economically recoverable U.S. reserves of natural gas to 500 trillion cubic feet, a previously unimaginable level.

"I've always supported market-expanding agreements, and I'm trying to balance that with the fact that, with natural gas, America now has a strategic advantage," Wyden said.

"This is something where we now lead. I just want to make sure we don't trade it away," said Wyden, who is in line to be the top Democrat on the Senate energy committee next year. Unlike Markey, he has no plans to push legislation that would prevent exports, an acknowledgement of the issue's complexity.

Republicans in the House Energy and Commerce Committee believe gas companies would likely export marginal amounts compared to the current supply, and any price effects will be minimal.

"If we don't have some sort of exports, it's not going to be economic to produce as much gas here," a committee Republican aide said.

CONFLICT ON CONFLICT

Congressman Gene Green, a Democrat on the House energy committee who represents the greater part of eastern Houston, said he supports LNG export projects -- on a case-by-case basis. His district includes a chemical complex, and such plants tend to be large consumers of natural gas. Several companies plan to build new U.S. facilities to take advantage of now-low prices.

"We can simultaneously have reasonable natural gas prices that foster chemical industry expansion while we export natural gas," Green said.

Energy-intensive manufacturers are keen to use cheap gas to boost domestic production, but many companies also have plants overseas that could benefit from U.S. gas exports. Others are wary of advocating any measures that would impinge on free trade. They too are taking a quiet, moderate stance.

Although Dow Chemical is a major consumer of natural gas, it supports a limited amount of exports, controlled perhaps by some kind of quota based on total gas production.

"As a proponent of fair and free trade, (Dow) opposes policies that arbitrarily limit reasonable exports of natural gas to free-trade agreement countries or that provide for unlimited global exports," the company said in a statement.

BIG STAKES

The surge in gas output has made companies such as Chesapeake and Exxon Mobil's XTO victims of their own success, unleashing a surplus of supply that could keep prices -- and therefore profits -- depressed for decades.

For them, selling gas to Japan or Europe -- which buys imported LNG at five or six times the domestic price of $2.50 per million British thermal units -- is essential to continue expanding their U.S. business, creating jobs in the process.

The shale gas boom is on track to support 1.5 million jobs across the United States by 2015, according to an industry-funded study by IHS Global Insight.

Export licenses will make big winners out of some firms such as Cheniere, which last year secured the first and, so far, only export permit from the Energy Department.

For those that get the green light, the multibillion-dollar terminals are likely to be buzzing for decades, freezing and compressing the gas at a temperature of -260 degrees Fahrenheit (-162 Celsius) for seaborne shipment on special tankers.

But others in the queue -- which includes firms from utility Southern Co to gas giant BG Group and Australian bank Macquarie -- could come out disappointed, as few analysts expect all the projects to be approved.

"I don't think they are going to give blanket approval to all takers, but on a case-by-case basis, I think they would be favorably disposed if the supply is there," said Frank Verrastro, director of the energy and national security program at the Center for Strategic and International Studies.

The eight projects pending review span from Maryland to Oregon. Including Cheniere's Sabine Pass in Louisiana, these sites could export more than 12 billion cubic feet per day of gas -- equivalent to about one-sixth of current U.S. demand.

TAPPING THE BOUNTY

If the gap between global and domestic prices remains wide, as many analysts expect, more export projects are certain to be brought forward and the government may draw a line in the sand.

A ban on energy exports is not without precedent. The Mineral Leasing Act of 1920 and the Outer Continental Shelf Lands Act require a presidential waiver for the sale of most unrefined crude oil abroad, essentially blocking exports.

Even with a boom in domestic oil output, the United States is in little danger of becoming an oil exporter. But gas is far less fraught with geopolitical significance.

"Oil has been a political issue. Natural gas has never been that," said David Wochner, an attorney for the Sutherland law firm that represents natural gas producers.

Heather Zichal, a White House energy adviser, told a recent conference that the administration was not opposed to exports and that it wanted "analysis to drive the decisions".

That puts the burden squarely on the Energy Department's natural gas regulatory office and its coming report.

It remains to be seen whether the prognosis from the department's commissioned study is more prescient than previous examinations of the shale gas surge, which has proven extraordinarily hard to predict.

A much-critiqued, department-commissioned analysis earlier from the Energy Information Administration found that approving all pending export applications could add as much as 9 percent a year to prices of the fuel in the next two decades.

A more recent report from the Brookings Institution moderated the EIA finding, predicting that sending U.S. gas abroad would have only a "modest" upward impact on prices and that U.S. manufacturers would stay competitive despite exports.

The department has declined to commit publicly to any timeline for evaluating the export applications. Facing no legislative deadline to act, it can essentially stretch out or speed up the process to its liking.

It is already honing its rationale, including the benefit of using exports as a "balancing" mechanism for the market, one that has been so volatile over past decades that drillers and users have struggled to make long-term plans.

"One of the potential impacts that you might have from LNG exports would be creating a stable block of demand, which helps the market get to a stable sustainable price," Christopher Smith, deputy assistant secretary in the department's office of fossil energy, told Reuters in February.

APPROVALS: WAIT AND SEE

The American Public Gas Association, a lobby group representing publicly owned gas distributors, has been one of the few groups to press lawmakers against exports and supports Markey's legislation.

On the other side of the debate, the Center for Liquefied Natural Gas, a trade group that represents LNG companies, has been reaching out to lawmakers in Congress to "educate" on the process for approving exports.

It spent $40,000 on lobbying last year and about $10,000 in the first quarter of 2012, according to data from the Center for Responsive Politics. Cheniere spent $520,000 on lobbying last year, and $80,000 so far this year.

The LNG group does not want hearings or legislation. It wants Congress to step back and let the Department of Energy decide.

"There's nothing we want done other than letting DOE do its job," said Bill Cooper, the center's president. "We want people to know about the process and that it does work when it's allowed to."

BBC News - EU unveils its vision for the future of monetary union

European authorities have unveiled their vision for the future of monetary union.

Herman Van Rompuy expects to reach agreement on the way forward at Thursday's EU summit

It includes the creation of a European treasury, which would have powers over national budgets.

The document, released ahead of Thursday's EU summit, says such fiscal union could lead to common debt being issued by eurozone countries.

There would also be banking union, with a single European banking regulator and a unified deposit guarantee scheme.

The document was released by European Council President Herman Van Rompuy and was drawn up with the presidents of the European Commission, the Eurogroup and the European Central Bank.

Earlier, German finance minister Wolfgang Schaeuble also called for there to be a European finance minister, with the power to veto national budgets as well as an elected president of Europe

French, German, Spanish and Italian finance ministers are meeting on Tuesday to discuss closer union.

French finance minister Pierre Moscovici has said Thursday's EU summit should, "lay the groundwork for the second phase of the euro".

Reuters News - Egypt's Islamist president begins building government

7. Presidential candidate Mohamed Morsy of the Muslim Brotherhood waves to his supporters after casting his vote at a polling station in a school in Al-Sharqya, 60 km (37 miles) northeast of Cairo in this June 16, 2012 file photo.

Credit: Reuters/Ahmed Jadallah/Files

By Edmund Blair and Alastair Macdonald

CAIRO | Mon Jun 25, 2012 3:26am EDT

(Reuters) - Mohamed Morsy of the Muslim Brotherhood sets about building a civilian administration for Egypt on Monday that can heal a divisive history of oppression and coax a mistrustful army into relaxing its grip on power.

Behind the scenes, talks were already under way between the Islamists and generals to resolve disputes that blew up this month over steps by the ruling military council to hem in the powers of the first freely elected president Egypt has known.

Cairo's Tahrir Square, theatre of the revolution that ousted Hosni Mubarak, exploded in joy - and relief - on Sunday as Morsy was declared the narrow but convincing winner of last weekend's presidential run-off against Ahmed Shafik, another scion of the military establishment which has ruled Egypt for 60 years.

The celebrations continued through an unforgettable night after Morsy won by 3.5 percentage points or some 880,000 votes.

Those in Egypt and beyond who feared a win for Shafik might have spelled the end of the Arab Spring acknowledged a triumph for the popular will, and for the army which accepted it. From Syria's opposition came word that Cairo was again a "source of hope" for a people "facing a repressive war of annihilation."

But beyond the vast throng who waved their flags and chanted praises to God for hours on end on Tahrir Square, millions of Egyptians, and the Western powers, looked on with unease at the prospect of the long-suppressed Brotherhood making good on its dream of an Islamic state for the Arab world's biggest nation.

Among the most anxious were the young, urban revolutionaries who launched last year's uprising but saw their representatives knocked out in last month's first round vote, as well as diehard supporters of the old regime who fear for their privileges. Some Shafik admirers wept in fury that the army had "betrayed" them.

CONCILIATORY TALK

Morsy, a 60-year-old engineer who studied in California and was jailed for his politics by Mubarak's secret police, took his first steps in public to quell some fears: "I am today a president for all Egyptians," he said in an address after what he called "this historic moment, this luminous moment."

He repeated his respect for international treaties - a gesture to Israel, which has fretted about its 1979 peace deal, and to Egypt's army, whose big U.S. subsidy depends on it.

Barack Obama called him. "The president underscored that the United States will continue to support Egypt's transition to democracy and stand by the Egyptian people as they fulfill the promise of their revolution," the White House said.

The bearded Morsy, smiling occasionally, echoed that in his televised speech, saying he would work with others to see the democratic revolution through: "There is no room now for the language of confrontation," he said.

Morsy, an obscure party official before being catapulted to prominence by the disqualification of the movement's preferred candidate, has little choice but to compromise, and sources in the Brotherhood said a package of agreements, already discussed with senior generals last week, could soon be announced.

At daggers drawn for most of Egypt's modern history, the Brotherhood, an international model for many Islamist parties, and the army were drawn into a wary symbiosis once the military council pushed out Mubarak to appease the protesters and found in its long-banned enemy the most organized political force.

The Brotherhood, conscious of playing a long game, was ready to play its part in a transition. But cooperation frayed when the Islamists made a push for more control. They secured the lion's share in a parliament elected in January and, with the influence that offered over drafting a constitution, plus the presidency, would have been very much in the driving seat.

That was clearly too much for Field Marshal Hussein Tantawi and his Supreme Council of the Armed Forces. With the help of a Mubarak-era judiciary, SCAF dissolved parliament on the eve of the presidential election and then gave itself the legislative power, adding also a potential role in forming a panel to write the constitution. It also revived some powers for martial law.

Critics at home and in the West called it a "soft coup."

NEGOTIATIONS

Senior Brotherhood officials say they have been negotiating in the past week to change some of that. Though both sides deny that any deal was struck over the result of the presidential vote itself, Morsy's election now sets a key reference point around which a power-sharing compromise can be built while the process of constructing a constitutional democracy goes on.

"President Morsy and his team have been in talks with the military council to bring back the democratically elected parliament and other issues," Essam Haddad, a senior Brotherhood official, told Reuters on Monday.

Brotherhood sources told Reuters they hoped the army might allow a partial recall of parliament and other concessions in return for Morsy exercising his powers to name a government and presidential administration in ways the army approves of - notably by extending appointments across the political spectrum.

Military officials have confirmed discussions in the past few days but had no immediate comment on the latest talks.

The Brotherhood has, movement officials said, approached secular reformist politician Mohamed ElBaradei, a former U.N. diplomat and Nobel peace laureate, to take a senior post, possibly as prime minister. ElBaradei has not commented.

Brotherhood officials have said they will press on with street protests to pressure the army but this, along with a number of other contentious issues including to whom and where Morsy swears his oath of office, could be settled soon.

The army wants Morsy sworn in on June 30, meeting a deadline it set itself for handing over Egypt to "civilian rule."

"Nobody should doubt there is going to be deal-making," said analyst Shadi Hamid, director of the Brookings Doha Center. "The (SCAF) still has the tanks and guns and the Brotherhood still understands that. There has to be some temporary power-sharing agreement. There has to be give and take."

RELIGIOUS IDEALS

Morsy, who evaded questions during his campaign on such fraught issues as dress codes on Egypt's profitable tourist beaches, peppered his address with religious language as he spoke from a lectern blazoned with the presidential seal - a jarring mix of sights and sounds for the vast majority Egypt's 82 million people who can remember no president but Mubarak.

He has promised a moderate "Islamic renaissance" for an Egypt mired in economic crisis. Supporters cite the example of Turkey, where the party now led by Prime Minister Tayyip Erdogan slowly eroded the army's resistance to pious politicians and the Muslim country has emerged as a political and economic force.

But Morsy, and the party grandees behind him, are aware that without cooperation from both the army, and the wider "deep state" of business and institutional vested interests built up under military rule, the Brotherhood risks accepting a poisoned chalice, enjoying the outward trappings of power but taking all the blame when life does not improve as fast as people hope.

Describing the election as "a true example of democracy to the world" a military council source said the pressure was on Morsy: "The onus now is on the new president to unite the nation and create a true coalition of political and revolutionary forces to rebuild the country economically and politically.

"The world is now watching the new president."

WESTERN CONCERNS

Calling it a "milestone in their transition to democracy," the United States, the army's key sponsor and also long wary of the rise of political Islam, joined other Western powers in congratulating Morsy and calling on him to form a government of national unity that would respect all Egyptians' civil rights, notably those of women and the 10-percent Christian minority.

The White House said: "It is important for President-elect Morsy to take steps at this historic time to advance national unity by reaching out to all parties and constituencies in consultations about the formation of a new government."

The British and French governments echoed that sentiment.

Israel is at war with the Brotherhood's Palestinian offshoot Hamas, which celebrated Morsy's win in Gaza. Israeli Prime Minister Benjamin Netanyahu said he "respected" the result and expected to continue cooperation under the peace treaty.

Half of those who voted in last month's first round of the election backed neither Morsy nor Shafik and many who voted in the run-off voted negatively - either against Morsy's religious agenda or against Shafik as a symbol of military rule.

"We voted for Morsy reluctantly to prevent Shafik from getting in because if he were president, we would all be hanged," said Mohamed Abdel Latif, 28, a youth activist in the second city of Alexandria. "From today, we will oppose Morsy.

"The Brotherhood must remember that they won because of us and they shouldn't repeat the mistakes of the past."

Shafik, a former air force commander and Mubarak's last prime minister, offered his congratulations and said he was willing to serve in Morsy's administration if asked.

He had the support of many Christians, who reacted gloomily to his defeat. Ehab Aziz of the Coptic American Friendship League said they were worried they would face special taxes, as some interpretations of Islamic law suggest for non-believers.

Joe Fahim, 29, a Christian in Cairo, said he was personally uncertain but added: "For most Copts though, it's doomsday."

Reuters News - Euro's big four seek way out of crisis in Rome

By Gavin Jones

ROME | Fri Jun 22, 2012 1:57am EDT

(Reuters) - The leaders of Germany, France, Italy and Spain will try to find common ground in Rome on Friday to restore confidence in the euro zone ahead of a full EU summit next week, with German Chancellor Angela Merkel likely to be outnumbered.

Dangerously high borrowing costs for Spain and Italy have eased a little on market hopes for policy initiatives at the Brussels summit on June 28/29. If it falls short, both countries may be pushed closer to eventually needing sovereign bailouts.

Friday's meeting will search for ways to achieve fiscal and banking union in the euro zone and, more urgently, it may also be the occasion for Spain to formally request assistance of up to 100 billion euros for its struggling banks.

An audit released on Thursday found Spanish banks would need up to 62 billion euros in extra capital to weather adverse circumstances.

Merkel is expected to resist any pressure from Monti, French President Francois Hollande and Spanish Prime Minister Mariano Rajoy for less stringent euro zone fiscal policies or the issuance of common euro zone bonds.

While Spain's needs are most pressing - its medium term borrowing costs hit a euro era high at auction on Thursday - the political stakes may be higher for Italy's unelected technocrat prime minister, Mario Monti.

With his popularity sinking, the parties that back Monti in parliament are increasingly reluctant to support his reform proposals at home, but demand he get results in the European arena to ease the pressure on Italy's recession-bound economy.

"Monti knows he has to get his ducks in a row on the European side so he can tell the parties that he's sorted that part out, and now it's their turn to help sort out Italy," said James Walston, politics professor at the American University in Rome.

"Friday's summit is important for Monti in symbolic terms because it shows Italians that he is centre-stage."

Though hugely popular when he came to office in November, his approval rating has halved as tax hikes and pension cuts exacerbated an already severe recession, and his labor reform estranged both unions and the business establishment.

But for the markets, Monti remains the man most likely to tackle Italy's debt mountain and uncompetitiveness. If he comes under serious threat, Italy could quickly supplant Spain as the euro zone's main flashpoint.

BERLUSCONI MOVE

Monti's hand was weakened by comments on Wednesday by his predecessor, Silvio Berlusconi, who said the prospect of Italy quitting the euro was "not blasphemy" and that he failed to understand why it would hurt Italy's economy.

Berlusconi's People of Freedom party is one of the two main groups that guarantee Monti a majority in parliament.

"The best that Monti and Rajoy will get from Merkel at this meeting is talk," said Nicholas Spiro of Spiro Sovereign Strategy.

However, with 10-year Spanish bond yields having already fallen by more than 0.7 percentage points from recent highs, he said that ahead of next week's summit even vaguely supportive comments from Merkel may be enough to underpin the market.

The two hour meeting will start at 1200 GMT. It will be followed by a joint news conference by the four leaders. No joint statement is expected.

Monti, who presents himself as a mediator between France and Germany, has insisted for months that the euro zone must temper the German-led austerity drive with measures to foster growth.

That position is shared by Hollande and Rajoy, but when the Italian leader has tried to transform his pro-growth rhetoric into policy prescriptions for the euro zone his ideas have generally met a cool response from Merkel.

He proposed on the sidelines of this week's G20 summit using the euro zone's rescue funds to buy the bonds of Spain and Italy in the secondary market to bring down their borrowing costs.

Monti will raise it again in Rome.

Spain's Foreign Minister José Manuel Garcia-Margallo called the idea "intelligent", but Merkel played down the plan, which investors said might be counter-productive unless the European Central Bank stepped in decisively in support.

Other proposals from Monti, such as stripping some forms of public investment from budget deficit calculations, or commonly issued euro zone bonds, are also broadly supported by France and Spain but opposed by Germany, at least for now.

(Reporting By Gavin Jones, editing by Mike Peacock)

BBC News - China and Brazil in $30bn currency swap agreement

China and Brazil have agreed a currency swap deal in a bid to safeguard against any global financial crisis and strengthen their trade ties.

Beijing has been trying to push the yuan as an alternative global reserve currency

It will allow their respective central banks to exchange local currencies worth up to 60bn reais or 190bn yuan ($30bn; £19bn).

The amount can be used to shore up reserves in times of crisis or towards boosting bilateral trade.

China is Brazil's biggest trading partner.

"As international credit remains scarce, we will have enough credit for our transactions," Brazil's Finance Minister, Guido Mantega, said.

A global yuan?

The agreement is the latest in a series of similar deals signed by China with its trading partners.

In March this year, it signed a swap deal with Australia worth up to A$30bn ($31bn; £20bn) to promote bi-lateral trade and investment.

It has also inked currency pacts with Hong Kong and Japan.

Analysts said that Beijing has been trying to push for trade to be settled in yuan, rather than in US dollars, as part of its plans to seek a more global role for its currency.

"The motivation is to be less reliant on the US dollar," Sean Callow, chief currency strategist at Westpac, told the BBC.

"We will see firms in the two countries settle their accounts in local currencies," he added.

Mr Callow added that with an increasing number of economies signing such agreements with China, its plans for a more global role for the yuan had received a major boost.

"It is a big positive for China on that account."

Closer co-operation

While trade between China and Brazil has surged, relations between the two economies have soured in recent times.

In Brazil, there have been concerns that increased imports of low-cost goods from China were hurting the local manufacturing industry.

Beijing, on the other hand, has accused Brazil of raising taxes on Chinese goods in a bid to protect the local industry, a move it says hurts its exports.

Brazil has also levied similar allegations against China.

Despite these tensions, the two countries have agreed to co-operate in various sectors to boost bi-lateral trade.

They said they will work closely in mining, industrial, aviation and infrastructure development.

The agreement also comes at a time when growth in China, the world's second largest economy, has been slowing.

China's economy grew at an annual rate of 8.1% in the first quarter, the slowest pace in almost three years. There are concerns that growth may slow further in the coming months.

However, Brazil's Finance Minister, Mr Mantega said "China will keep being the place where to do business".

Reuters News - Fed ramps up economic stimulus, ready to do more

By Mark Felsenthal and Pedro da Costa

WASHINGTON | Wed Jun 20, 2012 7:09pm EDT

(Reuters) - The U.S. Federal Reserve on Wednesday delivered another round of monetary stimulus and said it was ready to do even more to help an increasingly fragile U.S. economic recovery.

The central bank expanded its "Operation Twist" by $267 billion, meaning it will sell that amount of short-term securities to buy longer-term ones to keep long-term borrowing costs down. The program, which was due to expire this month, will now run through the end of the year.

Fed Chairman Ben Bernanke, speaking at a news conference after a two-day policy meeting, said the central bank was concerned Europe's prolonged debt crisis was dampening U.S. economic activity and employment.

"If we are not seeing sustained improvement in the labor market that would require additional action," he said. "We still do have considerable scope to do more and we are prepared to do more."

The Fed slashed its estimates for U.S. economic growth this year to a range of 1.9 percent to 2.4 percent, down from an April projection of 2.4 percent to 2.9 percent. It cut forecasts for 2013 and 2014, as well.

In addition, officials said they expect the job market to make slower progress than they did just a couple months ago, with the unemployment rate now seen hovering at 8 percent or higher for the rest of this year. It stood at 8.2 percent in May.

The Fed's announcement met with a mixed reaction in financial markets. U.S. stocks see-sawed, with the benchmark S&P 500 index closing down slightly, while prices for most government bonds slipped. The dollar fell against the euro and rose against the yen.

A number of economists said the Fed was likely to eventually launch a more aggressive program to buy bonds outright. It has already purchased $2.3 trillion in debt in two earlier bouts of so-called quantitative easing.

"The burden of proof may now be on the incoming data to prove that a third round of large-scale asset purchases may not be necessary," said Millan Mulraine, economic strategist at TD Securities in New York.

Wall Street's top bond firms still see a 50 percent chance the Fed will launch a third round of so-called quantitative.

DOWNBEAT ASSESSMENT

Hiring by U.S. employers has slowed sharply, factory output has slipped and consumer confidence has eroded, with Europe's festering crisis and the prospect of planned U.S. tax hikes and government spending cuts casting a shadow on the recovery.

The economy grew at only a 1.9 percent annual rate in the first quarter - a pace too slow to lower unemployment - and economists expect it to do little better in the second quarter.

The Fed, which has held overnight interest rates near zero since December 2008, reiterated its expectation that rates would stay "exceptionally low" through at least late 2014. Six of the Fed's 19 policymakers do not expect an increase until sometime in 2015.

Richmond Federal Reserve Bank President Jeffrey Lacker, who has dissented at every meeting this year, voted against the decision to extend Twist.

At his news conference, Bernanke pushed back against the notion that the Fed's earlier bond-buying was not effective, and that the central bank was running out of policy ammunition.

"I do think that our tools, while they are nonstandard, still can create more accommodative financial conditions and still provide support for the economy, can still help us return to a more normal economic situation," he said.

Even though Greek voters on Sunday supported candidates who back taking painful steps to stay in the euro currency union, Europe's debt crisis remains a threat to the global economy and many central banks are eyeing economic conditions warily.

Minutes from meetings of the Bank of Japan and Bank of England released on Wednesday suggest officials are poised to ease policy again. China cut benchmark rates on June 7, while the European Central Bank could take action at its July 5 meeting.

BBC News - China warns its rare earth reserves are declining

China referred to "excessive mining" of rare earth reserves

China has warned that the decline in its rare earth reserves in major mining areas is "accelerating", as most of the original resources are depleted.

In a policy paper, China's cabinet blamed excessive exploitation and illegal mining for the decline.

China accounts for more than 90% of the world's rare earth supplies, but has just 23% of global reserves.

It has urged those with reserves to boost production of the elements, which are used to make electrical goods.

"After more than 50 years of excessive mining, China's rare earth reserves have kept declining and the years of guaranteed rare earth supply have been reducing," China's cabinet said in the paper on the rare earth industry published by the official Xinhua news agency.

'Willing to cooperate'

The term rare earth refers to a group of 17 elements that are used to make a range of hi-tech gadgets.

These elements are used in products ranging from MP3 players to mobile phones, flatscreen TVs and hybrid batteries.

With those products becoming increasingly popular, the demand for rare earths has been rising.

But China has imposed export quotas on these elements. It says it has done so to prevent excessive mining of these elements, which also causes damage to the environment.

The US, Japan and the European Union have called the quotas illegal and dragged Beijing to the World Trade Organization (WTO) over the matter.

However, Gao Yunhu, deputy chief of the Rare Earth Office at the Ministry of Industry and Information Technology, said China's policies were in compliance with the WTO rules and that Beijing was keen to settle the dispute with its trading partners.

"We're willing to cooperate with the parties involved to solve the dispute as soon as possible," Mr Gao was quoted as saying by Xinhua.

"At the same time, we will actively use WTO rules to defend China's legitimate rights and interests."

In the policy paper, China added that it would implement "stricter standards" and "protective exploitation policies" to ensure sustained growth of the sector.