BBC News - Greek prime minister warns of March default

Greek Prime Minister Lucas Papademos has said Greece may default on its debts in March unless unions accept further cuts to salaries.

Greek prime minister Lucas Papademos (L) made the warning at a meeting with union leaders.

Mr Papademos said more cuts were needed to avoid exiting the eurozone.

Analysts say the warning is to prepare Greece for more austerity measures.

European Commission, International Monetary Fund and European Central Bank inspectors, known as the troika, arrive to assess Greece's progress in cutting its deficit on 15 January.

They will decide whether to provide further bailout funds to the country.

"Without an agreement with the troika and further funding, Greece in March faces an immediate risk of an uncontrolled default," Mr Papademos said.

However, analysts said the risks of not providing the funding were too great.

"Without a firewall in place to stem contagion from a Greek default to other European banks, it is very unlikely the troika will decide to deny Greece the funds and cut the country loose," Megan Greene at Roubini Global Economics told the BBC.

"However, even if the troika does transfer the next tranche of funds to Greece, the country risks a hard default, unless a deal is agreed on private sector involvement before March."

Second bailout

Greece owes a large part of its debt to private sector investors and the majority of these loans must be refinanced by March 12.

The country is currently negotiating with the troika about a second bailout of 130bn euros ($169.5bn, £108.7bn), which was agreed in principle in October 2011, provided the country takes further steps to cut its deficit and restructure its economy.

"If we want to secure our most significant achievements - participation in the euro and avoidance of a massive, vertical income devaluation that a disorderly bankruptcy and exit from the euro would lead to... then we must accept a short-term income reduction," said Mr Papademos at a meeting with union leaders and employers' federations.

Union resistance

Union leaders, however, appeared ready to fight further cuts to their members' salaries.

"On the minimum wage of the poor worker, we are not willing to make any step back. We are not discussing [cuts] in the 13th and 14th month salary or the minimum wage," said Yannis Panagopoulos, head of the GSEE private sector union.

In Greece and some other European countries, workers are paid additional months' salaries as part of their annual pay package.

Some Greek economists maintain that the situation can be resolved through concerted efforts.

"It is possible to exit this vicious circle, but unambiguous actions are required by all in the next three months," Nikos Vettas, professor at the Athens University of Economics, told the BBC.

"Private creditors have to agree swiftly on the haircut procedures, the EU partners to deliver the support needed, the citizens to actively support a reform agenda and the politicians to reach the minimum consensus required for such reforms."

BBC News - Iran nuclear crisis: EU moves towards crude oil ban

EU member states have agreed in principle to ban imports of Iranian crude oil to put pressure on the country over its nuclear programme.

The Iranian leadership insists the country's nuclear programme is entirely peaceful

The move is expected to be announced formally at an EU foreign ministers' meeting at the end of January.

The US, which recently imposed fresh sanctions on Iran, welcomed the news.

Iran has dismissed the threat of new sanctions and denies Western claims that it is trying to develop a nuclear weapons programme.

Iran has also denied that a record low of its currency this week was linked to punitive US measures against its banks.

Oil prices on international markets rose on news of the EU agreement.

"We have an [EU] foreign ministers' meeting on January 30, and on this occasion I hope we will be able to take the decision on the embargo of oil and petrol from Iran", said French Foreign Minister Alain Juppe.

"We have to reassure some of our European partners who purchase Iranian oil. We have to provide them with alternative solutions", he added.

On Tuesday France had called for "stricter sanctions" on Iran.

However, even if sanctions are adopted at the end of the month, it may be several months before they are implemented.

'Tightening the noose'

"These are the kinds of steps that we would like to see not just from our close allies and partners in places like Europe but from countries around the world", said US State Department spokeswoman Victoria Nuland.

"We do believe that this is consistent with tightening the noose on Iran economically," she added.

The Iranian state gets more than half of its revenue through the export of crude oil, says the BBC's James Reynolds.

If Europe does stop buying, Iran will have to turn to countries in Asia to replace its lost trade, who will demand a discount, he adds.

The EU currently accounts for around 17% of Iranian oil exports.

The US has longstanding bilateral sanctions in place which prohibit almost all trade with Iran.

In November, the US, Canada and the UK announced new sanctions against Iran in the wake of a report from the UN nuclear watchdog, the International Atomic Energy Agency (IAEA), that said Iran had carried out tests related to the "development of a nuclear device".

Last week President Obama signed into law a bill cutting off from the US financial system foreign firms that do business with Iran's central bank.

But Iran was not referred to the UN Security Council because Russia and China were opposed to the move.

The Security Council has already passed four rounds of sanctions against Iran for refusing to halt uranium enrichment. Highly enriched uranium can be processed into nuclear weapons.

These sanctions include a ban on the supply of heavy weaponry and nuclear-related technology to Iran, a block on Iranian arms exports, and an asset freeze on key individuals and companies.

Iran has been holding a series of naval exercises in the Gulf in recent days, test-firing several missiles.

The exercises were held near the Strait of Hormuz, through which around 20% of the world's traded oil passes.

Tehran said on Monday that "mock" exercises on shutting the strait had been carried out, although there was no intention of closing it.

BBC News - Iran nuclear crisis: Sanctions 'beginning to bite'

The US has said threats by Iran to restrict Gulf shipping in the event of further sanctions shows international pressure is having an effect.

Iran has told the US to keep the aircraft carrier John C Stennis out of the Gulf

The State Department said sanctions on Tehran over its nuclear programme were starting to bite and that Iran was trying to create a distraction.

Iran has conducted 10 days of exercises near the strategically vital Strait of Hormuz, test-firing several missiles.

Its currency is at a record low, but it has denied sanctions are to blame.

The UN Security Council has already passed four rounds of sanctions against Iran for refusing to halt uranium enrichment.

Highly enriched uranium can be processed into nuclear weapons, but Iran denies Western charges that it is trying to develop them.

Tehran says its programme is peaceful - it needs nuclear technology to generate electricity to meet growing domestic demand.

The US has also sanctioned dozens of Iranian government agencies, officials and businesses over the nuclear programme.

The government in Tehran has dismissed the latest measures announced in the wake of a critical IAEA report in November.

US President Barack Obama signed into law the US bill targeting Iran's central bank on Saturday. It enters into force in six months' time.

Since then, however, the Iranian national currency, the rial, has lost about 12% of its value - trading at about 17,200-18,000 rials to $1.

Earlier on Tuesday, French Foreign Minister Alain Juppe called for "stricter sanctions" and urged EU countries to follow the US in freezing Iranian central bank assets and imposing an embargo on oil exports.

'Mock' exercises

Speaking to journalists, the State Department's Victoria Nuland said Tehran was feeling increasingly isolated because of the sanctions.

"Frankly we see these threats from Tehran as just increasing evidence that the international pressure is beginning to bite there and that they are feeling increasingly isolated and they are trying to divert the attention of their own public from the difficulties inside Iran, including the economic difficulties as a result of the sanctions," she said.

Meanwhile Pentagon spokesman George Little responded to Iranian warnings to keep an aircraft carrier out of the Gulf, saying the Navy was operating within international law and had no plans to pull warships out of the region.

Iran has been holding a series of naval exercises in the Gulf, and on Monday said it had successfully test-fired a surface-to-sea Qader cruise missile, a shorter range Nasr and later, a surface-to-surface Nour missile.

A medium-range surface-to-air missile was successfully launched on Sunday, Iranian media reported.

Iran has conducted 10 days of exercises near the Strait of Hormuz, through which 20% of the world's traded oil passes.

Tehran said on Monday that "mock" exercises on shutting the strait had been carried out, although there was no intention of closing it.

The BBC's Iran correspondent James Reynolds says Iran is using the exercises to try to show that it owns the Gulf and has the military capability to defend against any threat to its dominance.

But, says our correspondent, few believe Iran would carry out its threat to shut the Strait of Hormuz as to do so would be considered too economically, politically and possibly militarily damaging for Tehran.

BBC News - Nigerians protest at removal of fuel subsidy

One protester has been killed as thousands of Nigerians have demonstrated against the removal of a fuel subsidy, which has led petrol prices and transport fares to double.

Marchers in Lagos blocked main roads and tried to force petrol stations to close

Officials say the man was killed by "mob action" in Kwara state, while witnesses say he was shot by police as they tried to disperse protesters.

There were marches in Lagos and other cities around the country.

Nigeria is Africa's biggest oil producer, but imports refined petrol.

Police fired tear gas at youths in the commercial capital, Lagos, after they blocked main roads, set up burning barricades and tried to force petrol stations to close.

However, the BBC's Tomi Oladipo in the city says the main march passed off peacefully, with demonstrators chanting anti-government slogans.

Analysts say many Nigerians regard cheap fuel as the only benefit they get from the nation's oil wealth.

Nigeria's trade unions have said they will call a strike and are meeting on Wednesday to decide on the plans.

Police block protests

Tuesday is the first working day since the measures were announced on 1 January.

The demonstrator was killed in Kwara's state capital, Ilorin.

There have been protests in numerous parts of the country, including Lagos, Ibadan, Lokoja, Nasarawa and Kano, where about two dozen people were arrested as they gathered.

Our reporter in Lagos says the city is not as busy as it normally is, with many people stranded as they cannot afford the new transport fares after going away for the holidays.

Police in the capital, Abuja have blockaded Eagle Square, where protesters had planned to gather.

On Monday, police fired tear gas to disperse some 200 people who had gathered in the capital, chanting: "Remove corruption, not subsidy."

Prices have increased from 65 naira ($0.40; £0.26) per litre to at least 140 naira in filling stations and from 100 naira to at least 200 on the black market, where many Nigerians buy their fuel.

There are reports that petrol prices have tripled in some remote areas, while commuters have complained that motorcycle and minibus taxi fares have already doubled or tripled.

Many Nigerians expect the prices of other goods to rise as well.

The government has said it will spend the money saved by removing the subsidy on improving the country's erratic electricity supply, as well as health and education.

However, analysts say that many Nigerians have little faith that the money will be well spent and fear it will instead be stolen by corrupt officials.

In December, the government released a list of the people who benefit most from the subsidy, which include some of Nigeria's richest people - the owners of fuel-importing firms.

Years of mismanagement and corruption mean Nigeria does not have the capacity to refine oil into petrol and other fuels.

Several previous governments have tried to remove the subsidy but have backed down in the face of widespread public protests and reduced it instead.

The IMF has long urged Nigeria's government to remove the subsidy, which costs a reported $8bn (£5.2bn) a year.

BBC News - Iran's rial slides against US dollar on fresh sanctions

Iran's currency has continued to slide against the US dollar after the United States imposed fresh sanctions targeting its central bank.

The Iranian rial has come under increasing pressure against the US dollar in recent months

According to media reports, the rial was being traded at 17,800 to the dollar by money changers in Tehran.

The US has threatened to take action against foreign financial institutions dealing with the Iranian central bank.

The central bank's website showed the exchange rate as 11,180 rial to one US dollar.

Reports from Iran say the nation's currency has slumped to a record low against the U.S. dollar, two days after U.S. President Barack Obama signed into law new sanctions that could affect Iran's central bank and financial system.

Traders said Monday the exchange rate dipped to around 17,000 rials to the dollar, which is about a 10 percent slide from Thursday's exchange rate.

The new U.S. sanctions will target financial institutions that deal with Iran's central bank, and if fully implemented could affect Iran's ability to sell oil on international markets. The step is part of a push to hamper Tehran's ability to finance its nuclear and missile programs.

The United States and the European Union contend Iran is secretly trying to develop nuclear weapons under the guise of its civilian nuclear program. Iran says its nuclear intentions are peaceful. 

The European Union is expected to consider additional sanctions later this month, possibly including an embargo on Iranian oil imports.

Iran has threatened to respond to such wider sanctions by closing the Strait of Hormuz, a vital export route for the other oil-producing countries of the Persian Gulf. The U.S. Navy's Fifth Fleet, based in Bahrain, says it will not allow disruptions to Gulf shipping.  

Meanwhile, Iran says it successfully tested a ground-to-sea cruise missile near the Strait of Hormuz Monday. It says its 10-day naval exercises also included the test-firing of a medium-range surface-to-air missile on Sunday.

Iran also reported Sunday an advance in its nuclear program, saying it had successfully tested and produced fuel rods for use in nuclear power plants.

Middle East analyst Stephen Zunes of the University of San Francisco in California said that the step does not present a major security threat, and that Iran still has a long way to go in developing a nuclear weapon.

"Whether or not it's true, it's not that critical from a security perspective, because we're talking about the concentration of uranium that is far below what is necessary for nuclear weapons," he said. "If true, it does shows that their program is advancing, but it's been slowly advancing for years and they're still probably at least several years away from actually being able to create a nuclear weapon."

BBC News - Eurozone manufacturing decline persists, PMI survey says

Activity in the eurozone manufacturing sector fell for the fifth successive month in December, but showed a slight improvement on the previous month, a closely-watched survey suggests.

Greece, which saw its first strike of the year on Tuesday, had the severest downturn in activity

The Markit eurozone manufacturing PMI was 46.9, up from November's 28-month low of 46.4. Any score under 50 represents a contraction.

Employment rose in Germany and France, but fell across the bloc as a whole.

Markets in Germany, France and Italy rose after the news.

Market boost

However, trading was very light, with UK markets closed for a public holiday, which can mean share movements are more pronounced than usual.

Frankfurt's Dax index was the strongest performer, rising 3%. In Paris, the Cac 40 was 2% higher and Milan's FTSE MIB was up 2.4%.

The relative strength of the German economy was also highlighted by two pieces of domestic data.

The number of people in employment in Germany hit a new record in 2011, topping 41m for the first time, official data showed.

This may have boosted consumer spending, which the German Chamber of Commerce and Industry suggested was at its highest level for more than 10 years.

Recession fear

Markit said manufacturing growth in the final three months of last year was the weakest since the middle of 2009.

"Eurozone manufacturing is clearly undergoing another recession," said Markit's chief economist Chris Williamson.

"Despite the rate of decline easing slightly in December, production appears to have been collapsing across the single currency area at a quarterly rate of approximately 1.5% in the final quarter of 2011."

Markit said production levels and new orders fell in all 17 member nations in December.

Austria recorded the highest score of 49, followed by France on 48.9 and Germany on 48.4.

The survey also found that input prices across the eurozone fell for the third straight month.

Many economists believe the eurozone economy as a whole is heading for recession, after growing by just 0.2% between July and September - the latest figures available.

"Eurozone manufacturers are now very much on the back foot and finding life extremely challenging as domestic demand is hit by tighter fiscal policy across the region, squeezed consumer purchasing power, and heightened eurozone sovereign debt tensions leading to tightening credit conditions and financial market turmoil," said Howard Archer, of IHS Global Insight.

The research group believes the latest PMI data provides "significant support" to the case for the European Central Bank to cut interest rates again in the next few months.

A poll conducted among leading economists by the BBC last week found that, of the 27 who responded, 25 forecast a return to recession for Europe next year.

Eurozone summit

The most severe contractions were in Italy, Greece and Spain, the Markit survey suggested.

Greece, which saw its first strike of the year on Monday when doctors and pharmacists protested against cuts, had a score of just 42. Spain was 43.7, while Italy was 44.3.

Markit highlighted particularly sharp falls in new business at Spain's factories, where the number of new orders has now be declining for 8 months in a row.

Last week, Spain's newly elected centre-right government has said that the country's deficit was worse than previously forecast.

On Friday, the government said the deficit in 2011 would be 8% of GDP rather than the 6% predicted by the outgoing socialist government. It economy minister indicated in a radio interview on Monday that the figure may be even higher.

And the leaders of France and Germany have announced their first meeting of 2012 to discuss measures to tackle the crisis in the eurozone.

French President Nicolas Sarkozy and German Chancellor Angela Merkel have announced they will meet on 9 January to prepare for a meeting of the European Council at the end of the month.

BBC News - David Cameron: UK will get up to strength in 2012

David Cameron has promised to use the "global drama" of the Olympics and "glory" of the Queen's Diamond Jubilee to help get Britain "up to strength".

Mr Cameron said the government had clear plans to deal with the deficit

"This will be the year Britain sees the world and the world sees Britain," the PM said in his new year message.

"It must be the year we go for it - the year the coalition government I lead does everything it takes to get our country up to strength."

He admitted 2012 would be difficult as the economy struggled.

But he insisted the coalition understood the problems and would "do more" to help people through them.

"The coming months will bring the global drama of the Olympics and the glory of the Diamond Jubilee," Mr Cameron said.

"Cameras and TV channels around the planet will be recording these magnificent events. It gives us an extraordinary incentive to look outward, look onwards and to look our best: to feel pride in who we are and what - even in these trying times - we can achieve."

'Taking action'

He continued: "Of course, I know that there will be many people watching this who are worried about what else the year might bring.

"There are fears about jobs and paying the bills. The search for work has become difficult, particularly for young people. And rising prices have hit household budgets.

"I get that. We are taking action on both fronts. I know how difficult it will be to get through this. But I also know that we will."

Mr Cameron said the government had "clear and strong plans" to bring down the deficit, which were giving "some protection from the worst of the debt storms now battering the eurozone".

"We have gained security for now - and because of that, we must be bold, confident and decisive about building the future," he added.

"I know much needs to change. We've got to do more too to bring our economy back to health. So we've set out big plans for the transformation of our infrastructure, starting now - with better roads and railways, superfast broadband and new homes."

'Tackling excess'

He said although much of Europe was struggling there were huge opportunities for UK businesses in other parts of the world.

And he promised to be bold in sorting out public services and social issues - complaining that "too often our schools aren't up to scratch, our hospitals aren't always clean enough and our police don't catch criminals".

"While a few at the top get rewards that seem to have nothing to do with the risks they take or the effort they put in, many others are stuck on benefits, without hope or responsibility," he said.

"So we will tackle excess in the City just as we're reforming welfare to make work pay and support families."

In his new year message to Lib Dems, issued last week, the deputy PM Nick Clegg said next year posed "many great challenges for everyone".

He said the UK had been "pulled back from the brink" by a government which remained focused on its "economic rescue mission".

Meanwhile, Labour leader Ed Miliband - who also issued his message ahead of the new year - said his party must convince people in 2012 that "optimism can defeat despair".

He said the UK needed "profound change" to avoid a future of struggling to compete in the world and called on politicians to show they could make a difference.