Reuters News - Euro surges to 14-month high, Fed decision awaited

1 of 8. Electronic information boards display market information at the London Stock Exchange in the City of London January 2, 2013.

Credit: Reuters/Paul Hackett

By Marc Jones

LONDON | Wed Jan 30, 2013 3:36am EST

(Reuters) - The euro hit its highest level in over a year on Wednesday and shares, oil and metals were also on the rise, as confidence in the global economic outlook strengthened ahead of European data and the U.S. Federal Reserve's latest policy decision.

The Fed is expected to maintain asset buying at $85 billion a month when it concludes its meeting later and retain its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent.

European economic confidence data for January at 1000 GMT, ECB crisis loan repayments and Italy's sale of five and 10-year bonds will absorb most of investors' attention before then, as they look for further evidence of a pick-up in the region.

Share markets in London .FTSE, Paris .FCHI and Frankfurt .GDAXIopened little changed ahead of the data, leaving all eyes on a rally by the euro as it broke above $1.35 for the first time since December 2011. <FRX/>

Alongside the recent rebound in confidence in the euro zone, one of the drivers behind the recent spike has been the eagerness of banks to repay the crisis loans they took from the European Central Bank just over a year ago.

"It (the euro rise) is just a carry on with the current trend, risk is pretty healthy and equities are doing well," said Bank of Tokyo Mitsubishi strategist Derek Halpenny.

"The danger is European policymakers allow a spike (in euro and market rates) as a result of a removal of one of the principle support measures ... With the Fed and the BOJ still easing the euro is clearly the path of least resistance."

An earlier rise in Asian equities meant the MSCI world share index .MIWD00000PUS was up 0.2 percent at a new 21-month high as European trading gathered pace. U.S. stock futures suggested a cautious start on Wall Street.

Strong U.S. housing data on Tuesday and China's promising economic growth forecast for 2013 also supported the upbeat mood and raised expectations for robust demand for fuel and industrial commodities, underpinning oil prices and lifting copper.

In the bond market, German Bund futures opened lower as investors made room for a sale of long-dated German paper and braced for solid demand at an Italian debt auction.

Italy will offer up to 6.5 billion euros of bonds maturing in 2017 and 2022. Traders expect the sale to benefit from yield-hungry investors but flagged the risk of indigestion after a bout of buying in recent months that triggered a sharp rally.

"(The auction) probably (goes) alright but I don't think it trades well afterwards," one trader said.

(Additional reporting by Ana Nicolaci da Costa; Editing by Giles Elgood)

Reuters News - Japan government approves $1.02 trillion budget for 2013/14 amid fiscal worries

By Tetsushi Kajimoto

TOKYO | Tue Jan 29, 2013 3:47am EST

(Reuters) - Japan's government approved on Tuesday a $1.02 trillion draft budget for the next fiscal year that aims to nudge tax revenues above new bond sales for the first time in four years, but still relies on borrowing to cover 46.3 percent of its spending.

The first full-year draft budget compiled under Prime Minister Shinzo Abe, who led his Liberal Democratic Party back to power last month with promises of economic revival, marks symbolic improvement after years of deterioration.

With the 92.6 trillion yen ($1.02 trillion) in spending, the government effectively trimmed the size of its draft budget from the previous year for the first time in seven years, taking into account government funding for basic pension payouts.

Still the budget size hovered around record levels, underlining the difficulty which Abe's government is facing in striking a balance between economic stimulus and fiscal reform.

Taken together with an 10.3 trillion yen extra stimulus plan signed off earlier this month and financed in more than half by new bond sales, it drives borrowing to new highs, pushing Japan's record high debt further into uncharted territory.

In fiscal year 2013/14 starting in April, the government plans to issue new bonds worth 42.8 trillion yen, below this year's 44.2 trillion yen initial target. But combined with the extra budget borrowing of 5.2 trillion, Abe's government will borrow 48 trillion yen, though technically the extra budget borrowing will be booked in the 2012/13 accounts.

Tax revenue is targeted to rise 750 billion yen to 43.1 trillion yen, mainly reflecting an expected pick-up in economic growth to 2.5 percent from 1.0 percent forecast for the current year.

FISCAL TARGETS

Within the 92.6 trillion yen general-account budget, spending excluding debt servicing costs is estimated at about 70.3 trillion yen, slightly less than the 71 trillion yen earmarked in the regular budget for the current fiscal year.

The government is expected to submit the extra budget to parliament this week and the 2013/14 budget in late February.

The previous government led by the Democratic Party of Japan had set a 44 trillion yen ceiling on annual bond issuance and a 71 trillion yen cap on spending excluding debt servicing costs.

Rating agencies, institutions such as the International Monetary Fund and many economists have been saying that the limits were seriously insufficient, allowing Japan to rack up budget deficits of close to 10 percent of GDP, above those seen in some of the most indebted euro zone countries.

So far, however, vast domestic savings have allowed Japan to comfortably cover nearly all of its financing needs at home and at record low interest rates.

Abe's government has reaffirmed its predecessors' goal of bringing the primary budget, which excludes borrowing and debt service, into balance by 2020/21. This can only be achieved with substantial spending cuts and tax hikes.

With Japan's population rapidly ageing, social security spending reached 29.1 trillion yen, including a natural annual increase of 800 billion yen and accounting for about one-third of the budget spending.

Public works outlays were increased from the previous year for the first time in four years to 5.3 trillion yen as Abe focuses on disaster prevention and other infrastructure spending, compared with the peak of 15 trillion yen hit in the late 1990s.

The snowballing debt has boosted debt-servicing costs -- interest payments and redemption -- to 22.2 trillion yen, up 300 billion yen from a year before, even with an expected interest rate at its lowest of 1.8 percent.

The government earmarked in a separate special budget account 4.4 trillion yen for rebuilding in areas battered by the 2011 earthquake.

It boosted planned reconstruction spending to 25 trillion yen from the current 19 trillion yen for a five-year period up to fiscal 2015/16 by selling its stakes in Japan Post Holdings Co and tapping other budget reserves.

($1 = 90.6350 Japanese yen)

(Additional reporting by Kaori Kaneko; Editing by Tomasz Janowski and Kim Coghill)

BBC News - Greek finance minister eyes 2014 recovery for economy

By Mark LowenBBC News, AthensGreece's finance minister believes that the worst is over for his country.

"The worst is now over," says Finance Minister Yannis Stournaras

"There is definitely a glimmer of hope; light at the end of the tunnel," Yannis Stournaras said.

As reforms were rushed through and a massive austerity package passed late last year, Greece secured a huge slice of bailout money from its international creditors.

"The probability of Greece leaving the euro - Grexit - is now very small", he told the BBC.

"We have managed to turn the economy around. From the markets, there's much more optimism. Deposits are coming back to banks, the government is paying its arrears to the private sector and there is a change in how Europe sees us. So all the leading indicators are positive. We are two-thirds of the way towards our target. So people can have hope."

But few here do. Unemployment is now Europe's highest at 26.8%. Homelessness and poverty have soared. And the recession, the worst of any country in modern history, is in its sixth straight year.

However, the finance minister said that he thinks the bad times are coming to an end.

"Towards the last quarter of 2013, we are going to have recovery," he said.

He is adamant that growth will come next year, even if the economy contracts in 2013 by an estimated 4.5%.

"I feel sure, 100% certain that this will be the last year of Greece's recession."

Debt write-off

Greece has the unenviable task of reducing its debt down to a sustainable level.

It currently stands at around 180% of GDP this year, the target is 124% of GDP by 2020, but the IMF has recently said Athens won't achieve it without another helping hand. So is Mr Stournaras, I asked, pushing for debt forgiveness from EU countries?

"I would welcome a reduction of the level of debt - but there are many ways to achieve that", he said, diplomatically, "but it should happen in a way that minimises the loss to other parties."

But while Greece is tired of austerity, northern Europe is tired of bailing out Greece.

German taxpayers feel they have shouldered the burden and so any further debt restructuring may be delayed by domestic European politics, at least until the Bundestag elections in September. But Mr Stournaras was confident that it will come.

And what of more crippling spending cuts?

"If we implement this year's reform programme, there will be no more austerity packages", the Finance Minister told me, "No more cuts to wages, benefits and pensions."

It's a promise Greeks have heard before, and many here don't believe it'll be kept.

As a stark reminder of how angry the Greek people have felt about austerity measures they have had forced upon them, there is a bullet hole in one of the minister's windows.

The gun was shot from the ground during one of the most violent anti-austerity protests in recent months. A clear target up to the hated Ministry of Finance.

Yannis Stournaras has decided to keep the glass in its half-shattered state, as a monument to what he hopes was the lowest point in Greece's financial crisis.

But the minister had critical words about the austerity-driven approach forced on his country.

"Greece was forced to cut too far, too fast", he explained. "In hindsight, we should have placed more emphasis on structural reform and privatisations at the start. But we can't go back. There's no point crying over spilt milk. The eurozone was not prepared for the crisis."

A criticism often levelled at the much-despised political class here is that it is utterly divorced from the pain caused by austerity but the minister said that he understands very well.

"From my friends, my mother, my family, people I talk to. But I'm convinced there was no other way. Without this bailout money, Greece would be outside the eurozone. And that would spell disaster."

Grexit to Brexit

Many began 2012 predicting "Grexit" and yet we are starting 2013 with talk of "Brexit" - Britain's potential departure from the European Union, following Prime Minister David Cameron's speech last week.

"It would be a grave mistake for Britain to leave the EU", said the minister.

"Britain belongs to Europe politically, financially and from a cultural point of view."

So would Greece accept Britain renegotiating the terms of its EU membership?

"No", he said, "that would open a Pandora's Box. Everybody would like to do the same. So that would spell the end of the European Union."

Six months after taking the job, Yannis Stournaras seemed relaxed and positive. Vast challenges remain, social unrest is flaring once again and there will be enormous resistance once the spending cuts start to bite.

But he's convinced this exhausted country will make it.

"Now that Greece has turned a corner, I'm actually enjoying the job" he smiled, looking out towards parliament through a bullet-scarred window.

Reuters News - Bank of America begins moving $50 billion of derivatives to UK: FT

A woman walks past as customers use ATMs at a Bank of America banking center in New York's financial district January 17, 2013.

Credit: Reuters/Brendan McDermid

LONDON | Sun Jan 27, 2013 7:32pm EST

(Reuters) - Bank of America (BAC.N) has begun moving $50 billion of derivatives out of its Irish-based operations into its British subsidiary, The Financial Times reported on its website on Sunday, citing people close to the operation.

The move will allow the world's number 10 bank by assets to benefit from tax breaks stemming from accumulated losses in its UK business, the FT said.

According to the Financial Times, bankers said Irish officials were uncomfortable with the scale of the business which posed a theoretical risk to Irish taxpayers.

UK regulators were also keen to have closer control of the European operations of the bank which has its operational management based in London, said the FT.

A large chunk of Bank of America's European business, including cash management, corporate lending and derivatives, is traditionally routed through the Dublin subsidiary, said the FT. Bank of America was unavailable for immediate comment.

(Reporting by Costas Pitas; Editing by Jason Webb, Bernard Orr)

BBC News - Burma gets Asian Development Bank and World Bank loans

The Asian Development Bank (ADB) and the World Bank have approved fresh loans for Burma to aid the social and economic development of the country.

The World Bank and ADB have resumed lending to Burma after sanctions against the country were lifted

The ADB granted $512m (£325m), while the World Bank approved a $440m credit.

The loans were made possible after Burma cleared overdue arrears to the two banks with the aid of Japan.

Burma, also known as Myanmar, has been implementing economic and political reforms, resulting in various sanctions against it being lifted.

"Myanmar has come a long way in its economic transformation, undertaking unprecedented reforms to improve people's lives, especially the poor and vulnerable," said Annette Dixon, country director for Myanmar at the World Bank.

"Much work remains to be done. We are committed to helping the government accelerate poverty reduction and build shared prosperity.

"The Bank's engagement, together with the ADB, the Government of Japan and other partners, will help attract investment, spur growth and create jobs," Ms Dixon added.

'Tipping point'

Burma, one of the poorest countries in Asia, has been hurt by decades of international isolation in wake of the sanctions imposed against it.

However, it has huge growth potential, not least because its rich in resources such as natural gas reserves.

At the same time, it has a big agricultural potential as well as the availability of low-cost labour.

The World Bank expects Burma's economy to expand by 6.3% in the financial year 2012-13, up from 5.5% in the previous 12 months.

However, many analysts have said that for the country to be able to translate that potential into actual growth it needs increased investment in key sectors.

Stephen Groff, vice president of ADB said the bank's loan will help Burma lay the foundation for sustainable growth "which will ultimately lead to major investments in road, energy, irrigation and education projects, as well as investments in other sectors".

"This is a historic tipping point for Myanmar," he said.

The bank added that its aid will also help the country "develop a strategy to make banking services more widely available".

The ADB's loan to Burma is the first such credit it has approved in almost 30 years.

Last year, the World Bank started lending to Burma after a gap of 25 years.

Further aid

In a further boost to Burma, the Paris Club of creditor nations has agreed cancel almost half of its debts to member countries.

It has also agreed to reschedule the payment of the remaining loan over a period of 15 years.

According to a press release on the state-run New Light of Myanmar, Norway, which is a member of the club, has cancelled all of its claims amounting to $534m.

Meanwhile, another member Japan has committed to a cancellation of its arrears worth over $3bn.

The release said that the overall agreement with the club "results in a very favourable debt relief of nearly $6bn or over 60% of total debt immediately in effect."

"Meanwhile, other bilateral donors are expected to follow suit and more debt cancellation is coming on the way in the next six months," it added.

The Paris Club is an informal group of creditors that helps countries, especially poor nations, restructure or reduce their debt.

According to its website, it has 19 permanent members including the US, UK and Australia.

Reuters News - Analysis - Deal with PM buys BOJ time, but probably just few months

Japan's Prime Minister Shinzo Abe (R) talks with Finance Minister Taro Aso (C), Economics Minister Akira Amari, and Bank of Japan Governor Masaaki Shirakawa (L), during their meeting at the prime minister's official residence in Tokyo January 22, 2013.

Credit: Reuters/Koji Sasahara/Pool

By Leika Kihara

TOKYO | Wed Jan 23, 2013 2:42pm GMT

(Reuters) - The Bank of Japan appears to have accomplished a tactical masterstroke in giving Prime Minister Shinzo Abe an ambitious inflation target and an "open ended" commitment to buying assets, without expending any of its policy firepower.

At least that is financial markets' initial read. Japan's central bankers see it differently; a hard-fought compromise that allowed the Bank of Japan to fend off the most serious threat to its 15-year independence, but which left it obliged to carry out more radical policies in the future.

"For the BOJ, once the law is revised it's game over," said a source familiar with policymaker thinking. The source spoke on condition of anonymity due to the sensitivity of discussing central bank issues.

Markets were less than impressed with the BOJ measures. The yen, which fell steadily in the buildup to the meeting on expectations of bold action, has risen. Tokyo's Nikkei average .N225, which rose in the hope a weaker yen would boost exports, fell on Wednesday to a three-week closing low.

The disappointment is based on the fact that the BOJ's open-ended asset purchases will only begin next year and will expand the central bank's balance sheet by a relatively modest 10 trillion yen. The BOJ topped up its existing asset buying programme by 46 trillion yen in 2012 alone.

It will not boost asset purchases this year beyond its existing programme and refrained from taking on longer-dated bonds or risky assets, a sign it remains cautious, not bold.

Abe lauded the BOJ decision as "epoch making" and the government's top spokesman said he now saw less need to revise the BOJ Law guaranteeing its independence, given the central bank's commitment to a new price target. That suggested the BOJ had bought some time.

"They've been very smart, getting the government not to change the BOJ law without doing anything that dramatically different," said Neale Vincent, strategist at Nomura Securities in Tokyo.

TRIGGER POINTS

As time goes by a different picture could emerge. By committing in a joint statement with the government to double its inflation target to 2 percent, the BOJ gave politicians a pressure button that could be pressed at any time given doubts the country can achieve such an inflation level anytime soon.

It has experienced 2 percent inflation in only a handful of months since the late 1990s.

The next trigger point is likely to be the appointment of a successor to BOJ Governor Masaaki Shirakawa in two months time, analysts say. Abe has made no secret of the fact he wants a governor in office more sympathetic to his views and once in place Abe could press his advantage.

The government will also review progress in achieving the inflation target on a quarterly basis at its top economic panel. At the next such review in April, it is almost certain the target will not have been met. Both headline consumer prices, or the more closely watched core consumer index that excludes volatile fresh food prices, have struggled to rise beyond 0.5 percent at any point in several years.

"Abe seems to be quite happy with the new inflation target, so I don't think he will pressure the BOJ into acting again next month. But there could be one more easing by April," said Izuru Kato, chief economist at Totan Research Institute in Tokyo.

"Much will depend on the economic outlook and the future direction of the yen," he said.

When bolder action from the BOJ is needed, the new open-ended approach gives the central bank more flexibility. It can increase monthly purchases if it needs to roll over huge amounts of treasury discount bills.

If it wants to expand its balance sheet, it can extend the maturity of government bonds it accepts to five years from the current three years, the sources say.

There is not much to stop the board from boosting the volume of monthly asset purchases, shifting to longer-dated bonds or bringing forward its launch -- all of which would make it into a much more potent stimulus.

INTERNATIONAL CONCERN

To be sure, the central bank managed to push back on several fronts in its policy battle with the government.

It avoided setting a deadline for achieving the inflation target and avoided adding job growth to its mandate, which it sees as problematic because of the government's role in influencing both factors.

The statement also included a caveat that meeting the inflation target depended on government efforts to lift the economy's long-run growth potential, and obliged the government to provide assurances that it will respect fiscal discipline.

"The BOJ threw the ball back in the government's court," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo.

Although further government pressure on the BOJ is likely in the months ahead, the central bankers may find allies in unlikely places. Some politicians are growing wary of pushing the BOJ too hard, fearing that threats to its independence could scare investors into selling bonds en masse, an unappetising prospect for a country with the biggest debt burden among industrialised nations.

Japan's aggressive push for monetary stimulus and resulting yen decline have also sent ripples abroad, which may temper how hard Abe's government pushes the BOJ.

Both International Monetary Fund chief Christine Lagarde and Bundesbank chief Jens Weidmann have voiced concerns about threats to the BOJ's independence. Russia and Germany have warned Tokyo is contributing to a global liquidity glut that risks competitive currency devaluations.

"Japan cannot afford a diplomatic row over currency. It's mindful of the risk of going too far," said another source familiar with policymakers' thinking.

(Additional reporting by Chikako Mogi; Writing by Tomasz Janowski and Leika Kihara; Editing by Neil Fullick)

Reuters News - Cameron promises Britons straight choice on EU exit

1 of 5. Britain's Prime Minister David Cameron delivers a speech on the European Union and Britain's role within it, in central London January 23, 2013.

Credit: Reuters/Suzanne Plunkett

By Andrew Osborn and Peter Griffiths

LONDON | Wed Jan 23, 2013 8:38am EST

(Reuters) - Prime Minister David Cameron promised on Wednesday to give Britons a referendum choice on whether to stay in the European Union or leave if he wins an election in 2015, placing a question mark over Britain's membership for years.

Cameron ended months of speculation by announcing in a speech the plan for a vote sometime between 2015 and the end of 2017, shrugging off warnings that this could imperil Britain's economic prospects and alienate its biggest trading partner.

He said the island nation, which joined the EU's precursor European Economic Community 40 years ago, did not want to retreat from the world, but public disillusionment with the EU was at "an all-time high".

"It is time for the British people to have their say. It is time for us to settle this question about Britain and Europe," Cameron said. His Conservative party will campaign for the 2015 election promising to renegotiate Britain's EU membership.

"When we have negotiated that new settlement, we will give the British people a referendum with a very simple in or out choice to stay in the European Union on these new terms; or come out altogether. It will be an in-out referendum."

The speech firmly ties Cameron to an issue that was the bane of a generation of Conservative leaders. In the past, he has avoided partisan fights over Europe, the undoing of the last two Conservative prime ministers, John Major and Margaret Thatcher.

Britain would seek to claw back powers from Brussels, he said, a proposal that will be difficult to sell to other European countries. London will do an "audit" to determine which powers Brussels has that should be delegated to member states.

Sterling fell to its lowest in nearly five months against the dollar on Wednesday as Cameron was speaking.

The response from EU partners was predictably frosty. French Foreign Minister Laurent Fabius quipped: "If Britain wants to leave Europe we will roll out the red carpet for you," echoing Cameron himself, who once used the same words to invite rich Frenchmen alienated by high taxes to move to Britain.

German Foreign Minister Guido Westerwelle said his country wanted Britain to remain a full EU member, but London could not expect to pick and choose the aspects of membership it liked.

Business leaders have warned that the prospect of years of doubt over Britain's EU membership would damage the investment climate.

"Having a referendum creates more uncertainty and we don't need that," Martin Sorrell, chief executive of advertising giant WPP, told the World Economic Forum in Davos.

"This is a political decision. This is not an economic decision. This isn't good news. You added another reason why people will postpone investment decisions."

The speech also opens a rift with Cameron's junior coalition partners, the Liberal Democrats. Their leader, Deputy Prime Minister Nick Clegg, said the plan would undermine a fragile economic recovery.

And even allies further afield are wary: the United States has said it wants Britain to remain inside the EU with "a strong voice".

EUROSCEPTICS THRILLED

Cameron has been pushed into taking such a strong position in part by the rise of the UK Independence Party, which favors complete withdrawal from the EU and has climbed to third in opinion polls, mainly at the expense of the Conservatives.

"All he's trying to do is to kick the can down the road and to try and get UKIP off his back," said UKIP leader Nigel Farage.

Eurosceptics in Cameron's party were thrilled by the speech. Conservative lawmaker Peter Bone called it "a terrific victory" that would unify 98 percent of the party. "He's the first prime minister to say he wants to bring back powers from Brussels," Bone told Reuters. "It's pretty powerful stuff".

Whether Cameron will ever hold the referendum remains as uncertain as the Conservatives' chances of winning the next election in 2015.

They trail the opposition Labour party in opinion polls, and the coalition government is grappling with a stagnating economy as it pushes through public spending cuts to reduce Britain's large budget deficit.

Cameron said he would prefer Britain, the world's sixth biggest economy, to remain inside the 27-nation EU. As long as he secured the reforms he wants, he would campaign for Britain to stay inside the EU "with all my heart and soul".

But he also made clear he believed the EU must be radically reformed. It was riskier to maintain the status quo than to change, he said.

"The biggest danger to the European Union comes not from those who advocate change, but from those who denounce new thinking as heresy," he said.

"WAFER THIN" CONSENT

The euro zone debt crisis was forcing the bloc to change, and Britain would fight to make sure new rules were fair to countries that didn't use the common currency, he said. Britain is the largest of the 10 EU members that do not use the euro.

Democratic consent for the EU in Britain was now "wafer thin", he said, reflecting the results of opinion polls that show a slim majority would vote to leave the bloc.

"Some people say that to point this out is irresponsible, creates uncertainty for business and puts a question mark over Britain's place in the European Union," said Cameron. "But the question mark is already there: ignoring it won't make it go away."

Asked after the speech whether other EU countries would agree to renegotiate Britain's membership, Cameron said he was an optimist and that there was "every chance of success."

"I want to be the prime minister who confronts and gets the right answer for Britain on these kind of issues," he said.

It is nearly 40 years since British voters last had a say in a referendum on Britain's membership of the European club. A 1975 vote saw just over 67 percent opt to stay inside with nearly 33 percent wanting to leave.

(Additional reporting by Paul Taylor in Davos and Alexandra Hudson in Berlin; Editing by Guy Faulconbridge and Peter Graff)

BBC News - Financial transactions tax in Europe given go-ahead

EU finance ministers have given the green light for 11 eurozone members, including France and Germany, to ready a new tax on financial transactions.

The tax is expected to be charged at a rate of one euro for every 1,000 euros of shares traded

The approval under "enhanced co-operation" rules allows the smaller group to pioneer the tax.

Governments previously failed to agree to impose the tax across the entire 27-member EU or 17-member eurozone.

The UK and 15 other EU members will not introduce the tax, which is intended to discourage speculative trading.

Some European governments have blamed speculators and excessive trading for exaggerating the swings in financial markets during the 2008 crash and the recent eurozone crisis.

"It is a milestone for EU tax policy, as it paves the way for more ambitious member states to progress on a tax file, even when unanimity could not be achieved," said Algirdas Semeta, the European Commissioner for tax.

"Those who want to move ahead, and who appreciate the merits of working more closely on taxation at EU level, can do so."

Jeroen Dijsselbloem, the Eurogroup's new Dutch chair, supports the tax, but his country stayed out

Tax avoidance

The tax - also known as a Tobin tax after the economist who originally came up with it 40 years ago - is expected to be charged at a rate of 0.1% of the value of any trade in shares or bonds, and 0.01% of any financial derivative contract.

Although the tax is not being adopted by the UK, which already charges its own 0.5% stamp duty on trading in shares, it will nonetheless have to be paid by investors trading on the London Stock Exchange who are based in one of the 11 countries.

The other nine going ahead with the tax are Spain, Portugal, Italy, Belgium, Austria, Slovakia, Slovenia, Greece and Estonia.

Agreement over the tax had already been reached before the meeting, and the nod from a majority of the Ecofin group of EU finance ministers - a requirement of the enhanced co-operation procedure - was merely a procedural matter, according to the Irish Finance Minister Michael Noonan.

It is only the third time the voting procedure has been used to enable a select group to go ahead with deeper integration, having previously been used for divorce and patents laws.

The Netherlands, which did not join the pioneer group on this occasion, had been strongly opposed to the transactions tax, but recently elected a new government.

The new Dutch Finance Minister, Jeroen Dijsselbloem, who was elected the new chair of the Eurogroup of eurozone finance ministers on Monday, is supportive of the measure.

Other eurozone countries that chose not to participate include Luxembourg and Cyprus, both of whom are significant offshore financial centres, as well as the eurosceptic Czech Republic.

The UK and Sweden, while not opposed to the tax in principle, have both warned that it makes little sense unless it is applied globally, as investors will simply move their trading activity to a different country in order to avoid paying it.

It is not yet clear how the proceeds of the tax will be used, but one possibility is that they will be collected by the European Commission to finance a bailout fund for eurozone banks.

BBC News - Treasury must be more innovative, says Item Club

The UK economy will see "sluggish growth" for the next two years unless the Treasury and Bank of England adapt a more innovative approach to boosting its expansion, a study has said.

The Item Club wants the government to do more to boost the UK's housing market

The call comes in the latest report from the Ernst & Young Item Club.

It wants the government to spend more on infrastructure, and do more to support the housing market.

A Treasury spokeswoman said it was continuing to take action to boost the UK economy.

"This report repeats the Office for Budget Responsibility's assessment, saying that the weak global environment has exerted 'a major drag on the UK economy'," she said.

"Despite the difficult conditions, the economy is healing: the deficit has been cut by a quarter in two years and more people are in work than ever before."

"The government has taken action to support the economy, including through its innovative Funding for Lending Scheme, which the report notes has already provided a significant boost to the mortgage market".

'Muddling through'

The report predicts that the UK economy will grow 0.9% this year, less than the government's own 1.2% forecast.

The most recent official figure showed that the UK economy exited recession in the third quarter of 2012, when it expanded by 0.9%.

The first estimate for the last three months of 2012 will be released on Friday, this week.

Peter Spencer, chief economic advisor to the Item Club, said: "The UK has crawled out of recession, but the government's mid-term report card should read 'could do better'.

"A fresh approach to monetary and fiscal policy in the UK could help open the door to long-term sustainable growth."

He added: "There is scope for borrowing to help fund infrastructure investment, and the government could certainly do more to encourage housing investment, which is subtracting from GDP when it should be adding to it."

Regarding the Bank of England, the Item Club said the 2% inflation target had become "a risk to the credibility" of the Bank, and that the target was "long-past its sell-by date".

The UK's inflation rate currently stands at 2.7%, and it has not been at or below 2% since 2009.

The current bank governor, Sir Mervyn King, will retire in June. The Item Club says that the change should be used by the Treasury to "review the remit" that it gives the Bank's interest rate-setting Monetary Policy Committee.

The Item Club report said that as the government continued with its "plan A" of cutting public spending to try to reduce the UK's public deficit, the economy was "muddling through".

Yet despite the Item Club's concerns, it did say that the UK economy should see at least short-term growth, "driven by improving prospects for the consumer, with falling inflation and rising employment levels boosting disposable income, helping to revive the High Street".

The Office for Budget Responsibility (OBR) is the government's independent financial watchdog.

The Funding for Lending scheme was launched by the Bank of England and Treasury in August last year, with the aim of boosting lending to businesses and home buyers.

Reuters News - Irish cellphone entrepreneur banks on a smarter Haiti

1 of 5. Digicel Chairman Denis O'Brien attends an interview with Reuters at the company's headquarters in Port-au-Prince, in this picture taken December 18, 2012.

Credit: Reuters/Swoan Parker

By David Adams

PORT-AU-PRINCE | Wed Jan 16, 2013 10:04am EST

(Reuters) - When Irish billionaire Denis O'Brien set about building a cellphone company in the western hemisphere's poorest country, there was no shortage of skeptics.

Six years later O'Brien's company Digicel is the largest private investor in Haiti and has 4.8 million users, about half the population. It is a rare beacon of entrepreneurship in a country still struggling to rebuild after the 2010 earthquake.

O'Brien's ambitious plans for Digicel are part of his bullish vision for Haiti which stands in sharp contrast to the usually gloomy forecasts for a nation crippled by perpetual political turmoil andnatural disasters.

Promotion of homegrown entrepreneurship is rare in Haiti, where the government and banks have done little to stimulate investment and a small business elite has traditionally profited from import monopolies that stifle local production.

On a typical whirlwind visit shortly before Christmas, O'Brien, 54, flew into Haiti from New York on his corporate jet for a monthly Digicel board meeting. He then hosted a gala celebrating Digicel's 'Entrepreneur of the Year', a televised event he imported from Ireland to inspire small business.

Six feet tall with white hair and ruddy cheeks, O'Brien is easy to spot among the crowd of mostly local business people and dignitaries, including President Michel Martelly.

"Haiti needs more people like you," Martelly said. "If it wasn't for Denis, we'd all be sitting here alone."

PHONES FOR THE POOR

The Digicel Group is a privately-held company founded by O'Brien in 2001 and headquartered in Jamaica, with 13 million customers in 31 emerging markets, mostly in the Caribbean and Pacific regions.

O'Brien holds 94 percent of Digicel shares and made Forbes' billionaires list last year (No. 205) with a net worth of $5 billion. He models himself on Sudanese-born British billionaire Mo Ibrahim, founder of Celtel, an Africa-wide cellphone network, and India-based Sunil Mittal, founder of Bharti Airtel.

Ibrahim sold Celtel in 2005 for $3.4 billion and now runs the Mo Ibrahim Foundation to encourage better governance in Africa, while Mittal also runs his own foundation.

"They proved the concept that you can have people with very little disposable income in real terms, but who want a phone and they'll pay you for it, and you can afford to build up quite a large network," O'Brien told Reuters.

Digicel is now looking to enter Myanmar, a country of around 60 million people that has one of the lowest mobile penetration rates in the world, with only 3 percent of the population owning a phone in 2011, according to the World Bank.

Digicel says it had revenue of about $2.5 billion in the year to March 2012, with Haiti leading the way, generating $439 million.

O'Brien, who is nonresident in Ireland for tax purposes, is not without his critics back home in Ireland where he launched his first mobile phone company and also is the main shareholder in the country's largest media company.

His purchase of an Irish mobile phone license in the 1990s led to a lengthy public inquiry that found "beyond doubt" that a government minister had imparted substantive information to O'Brien in securing the license.

O'Brien has said the 14-year-old inquiry was fundamentally flawed because it was based on the opinions and theories of one judge and his legal team. He later sold the company, Esat Telecom, before launching Digicel.

The company's arrival in Haiti in 2006 was a rare example of foreign investment in a country more used to dependence on foreign aid handouts. Digicel's shiny headquarters was inaugurated a year before the 2010 quake and was one of the few big buildings to withstand it virtually intact.

Two existing cellphone companies which offered spotty, more expensive services were quickly overtaken as Digicel invested in a national infrastructure and offered handsets for as little as $7 with low rates for its mostly pre-paid customer base.

"Denis revolutionized the communications sector. Before cellphones were a luxury and now they are a must," said Haiti's tourism minister, Stephanie Villedrouin.

'NATURAL-BORN' TALENT

O'Brien's investments in Haiti go far beyond telephony.

Last month, he broke ground on Haiti's first Marriott hotel and Digicel's charity foundation is spending millions to build 150 schools across the country for 90,000 students.

His approach has won acclaim from the likes of former U.S. President Bill Clinton, who heads the Clinton Global Initiative (CGI) and is also the United Nations special envoy to Haiti.

O'Brien coordinates CGI's Haiti Action Network, whose members have committed more than $350 million to education, infrastructure and business-development projects.

"The CGI program in Haiti is considered one of the best. It's really because of Denis's strong leadership," said Anne Hastings, director of Fonkoze, a micro-credit finance institution in Haiti. "He sets goals and people have to achieve them. That's unusual in Haiti."

His first non-profit investment in Haiti was the capital's historic Iron Market, the heart of downtown commercial activity, which O'Brien spent millions to rebuild after the earthquake.

"All the problems in Haiti are fixable, you just need the right project skills," he said. "You have to harness the people and show them how to do it. There's so much talent here, people who are creative and inventive."

To prove his point, Digicel has moved its call center for the French-speaking Caribbean from affluent Martinique to Haiti.

On his first visit to Haiti, O'Brien was struck by the streets crowded with vendors. "You have all these entrepreneurs all over this city. They are natural-born sellers," he said.

By celebrating enterprise on the TV show, a highly-produced affair with crane-mounted cameras, lighting, and dry ice and confetti for the winner, O'Brien hopes to inspire a new business culture of import substitution. This year's finalists included a coffee milling business, a solar energy company, a fish exporter, and local artisans and fashion designers.

"Hopefully somebody is sitting at home or under a tree and says ‘I got an idea,'" he said. "Instead of importing rice, grow rice. Instead of importing chickens, breed chickens. Instead of importing eggs, lay eggs."

O'Brien's next goal: launching a smartphone revolution in Haiti and offering mobile banking to the poor. Digicel is investing in extra bandwidth this year to handle a 4G network upgrade, raising its total investment in Haiti to more than $600 million. "What we're trying to have is a First World telecommunications network in a developing economy, and most of the time that doesn't happen," he said.

Digicel relies on Asian firms such as Samsung to continue lowering prices thanks to cheap Taiwanese semi-conductors. "We can buy a smartphone for $70 today. In 2013 it will be $30," he said, predicting prices would hit $10 within a couple of years.

Since gobbling up its main competitor, Comcel, last year, Digicel admits it has had service issues but says they are being addressed. Some suggest it may have too cozy a relationship with the government, creating a virtual state within a state, rivaling the influence of the United Nations or the World Bank.

Indeed, Digicel is Haiti's largest taxpayer and its main building houses the offices of the mayor of Port-au-Prince as well as the Red Cross. "Digicel's building is where I come to give blood," says Cyril Pressoir, a local businessman whose father owns a travel company. "Should it be like this? Shouldn't we be able to stand on our own feet? Sure, but he (O'Brien) gets things done."

EDUCATING HAITI

O'Brien, whose mother was a human rights activist in Ireland and who is a father of four, has spent $25 million on development projects through the foundation.

"Our foundation is every bit as important as our technical department," O'Brien said. "Most multi-billion dollar companies rob the country blind. We like to make a good profit but sleep well at night."

His work is dotted all over Haiti. "Denis is always the first to respond if we need help," said Gena Heraty, an Irish woman who has worked in Haiti for almost 20 years and heads a special needs program for poor children run by the charity Friends of the Orphans.

When Heraty told him about a girl who suffered brain damage when a wall fell on her during the earthquake, O'Brien built a house for the girl and her mother and bought a 'tap-tap' - a traditional Haitian pick-up truck taxi - to help out the father.

The morning after the business gala, O'Brien drove out to the rural community of Saut d'Eau for the inauguration of one of the new schools built by his foundation.

The school's nine classrooms, computer lab, auditorium, cafeteria, library and basketball court cost $326,000.

The Digicel Foundation has built 87 schools so far, at an average cost of around $180,000. It does not pay operating costs so is careful to pick communities that are committed to running the school.

Teachers at the Saut d'Eau school earn $60-65 a month and school fees are $10 a year. The school was founded by Paul Calisme, a 59-year-old Haitian ex-pat who runs it with savings from his job at a Connecticut car wash. "I left my town 23 years ago but I had a dream," he said, noting that about 25 percent of local children do not attend school.

At a simple ceremony, children in plaid uniforms sang a welcome song ending with a shout of "Long live Haiti. Long live Digicel."

(Editing by Kieran Murray and Claudia Parsons)