BBC News - Venezuela devalues currency by 32% against the dollar

Venezuela has cut the value of its currency against the US dollar by 32%, in an effort to boost its economy.

The devaluation of the bolivar is expected to have an impact on an already rising inflation

The widely expected measure ramps up the official exchange rate of the bolivar from 4.3 to 6.3 per US dollar.

It was announced after Vice-President Nicolas Maduro's return from Cuba, where he said President Hugo Chavez gave him instructions on the economy.

The leader has not been seen or heard in public since December, when he went to Havana for cancer treatment.

This is the fifth devaluation of the bolivar since Hugo Chavez' administration started controlling the exchange rate, in 2003.

The previous devaluation was in 2010.

Experts have long considered the bolivar overvalued and the move came as no surprise in the oil-based economy.

As oil exports are calculated in US dollars, a weaker bolivar should mean more cash for the government.

Strict controls to prevent currency going out of the country mean that dollars are normally hard to get in Venezuela, but in recent times this situation had become acute, says the BBC's Sarah Grainger, in Caracas.

Dollars have been trading at four times the official rate on the black market.

'Campaign money'

In a country that largely depends on food imports, the scarcity of dollars also led to shortages of products such as sugar and flour.

The new exchange rate is expected to address this situation.

But the measure is also expected to have an impact on the inflation, which has already been climbing.

The leader of the opposition, Henrique Caprilles, criticised on Twitter the fact that the government announced the devaluation on Carnival Friday in South America.

The opposition says the government has waited until after the elections to take the necessary steps in the economy.

"They've spent the money on the campaign, corruption and presents overseas," wrote Mr Caprilles, who lost the presidential elections to Mr Chavez last year.

Mr Chavez went to Cuba on 8 December to treat an undisclosed cancer and has not been seen or heard from since.

Mr Maduro recently said the president was "battling on" and had entered a new stage of treatment, after successfully finishing the post-operative phase.

BBC News - Euro strength to top finance ministers' meeting

France is set to voice concerns about the strength of the euro at a meeting of eurozone finance ministers later.

French Finance Minister Pierre Moscovici has expressed fears about the strength of the euro

French Finance Minister Pierre Moscovici is worried that the rising single currency is making the country's goods less competitive.

The euro has risen by 6% against a basket of other currencies in the past six months.

But with other countries also wanting to weaken their exchange rates, there are renewed fears of "currency wars".

Japan has also moved to force down the value of the yen.

Last week, Mr Moscovici called for the European Central Bank (ECB) to consider setting a target for the single currency - steering it lower when the value got too high.

But both Germany and the ECB are against such a move, arguing that the central bank's mandate is to ensure price stability and not to manage currency markets.

However, ECB President Mario Draghi was widely thought to be trying to talk down the euro at his interest rate press conference last week.

"The exchange rate is not a policy target but it is important for growth and price stability," Mr Draghi said in response to a question.

"We will closely monitor money market developments."

Daragh Maher, a senior currency strategist at HSBC, told the BBC that France was probably more "twitchy" because numbers were showing its competitiveness to be declining.

Today's Eurogroup meeting - attended by eurozone finance ministers - is the first to be hosted by the Netherlands. Financial aid to Greece and Cyprus is also likely to be discussed.

Reuters News - Back to the future as G20 comes to Russia

1 of 2. A general view of the Ritz-Carlton hotel in central Moscow February 11, 2013.

Credit: Reuters/Sergei Karpukhin

By Douglas Busvine

MOSCOW | Mon Feb 11, 2013 5:12am EST

(Reuters) - Group of 20 policymakers have an ideal chance in Moscow this week to ponder whether monetary policy largesse will blunt their will to carry out the economic reforms needed to put global growth on a sustainable footing.

On their drive from the airport to the city center, down highways clogged with luxury cars, it may dawn on finance ministers and central bankers thatRussia, this year's G20 host, got there first.

Some will check in to the five-star Ritz-Carlton hotel near the Manezh, the former 19th-century cavalry stable by the Kremlin walls where they meet this weekend. But convenience comes at a price: almost $17,000 per night for a luxury suite.

The world's largest oil producer has, through much of the Vladimir Putin era, been minting money as its central bank bought up hundreds of billions of export petrodollars, and the government spent its way out of the 2009 slump.

But the side-effects -- political complacency, declining competitiveness and a misallocation of capital towards conspicuous consumption and prestige projects -- increasingly outweigh the benefits to Russia's $2.1 trillioneconomy.

Some economists say Russia's story could foretell the outcome of ultra-loose monetary policy in the United States, Britain, Japan and symbolized by European Central Bank President Mario Draghi's vow last July to do "whatever it takes" to see the euro through its debt crisis.

"Russia has oil; Europe has Draghi," Tim Ash, the London-based head of emerging marketsresearch at Standard Bank, said on a recent trip to Moscow. "Europe is catching up to all the problems that Russia has done nothing about for the past decade."

Others say that may be stretching the point but there are certainly signs that the zeal for major economic and regulatory reforms in Europe has faded somewhat since Draghi took the sting out of the debt crisis.

CURRENCY WARS

The G20 accounts for 90 percent of the world's economy and two-thirds of its population. Russia has taken the helm this year as the group has split between borrowers seeking to grow out of a debt trap and surplus countries keener on austerity.

Gone is the shared sense of purpose that embodied the G20 summit in London of 2009, which created a huge financial backstop to stem the crisis that resulted from the collapse of Wall Street investment bank Lehman Brothers.

"The G20 has really struggled in the past couple of years after its really great 2008 and 2009," Jim O'Neill, the outgoing chairman of Goldman Sachs Asset Management and leading emergingmarkets economist, told Reuters.

"It's already desperately searching for an identity."

Russia, holder of the world's fourth-largest gold and foreign exchange reserves, also finds itself on the barricades in an as yet merely rhetorical "currency war" after its central bank accused Japan's new government of protectionist monetary policy.

But, G20 sources and economists say, officials are likely to tone down their rhetoric over competitive currency devaluations.

"I don't see how anybody can complain. Washington is keeping quiet because that's what it has done for the past 30 years," said O'Neill.

SUPPLY VS DEMAND

For its G20 presidency, Moscow has drawn up an agenda focusing on jobs and investment, improved financial regulation and deficit reduction that is enthusiastically backed by the International Monetary Fund and World Bank.

But in a world suffering a dearth of demand, there is likely to be pushback, again led by the United States, against Russia's push for "binding and realistic" goals to cut borrowing.

A target set at the G20's Toronto summit in 2010 to halve budget deficits expires this year, and one G20 source told Reuters there could be heated debate as the euro zone's dominant economy, Germany, calls for new deficit targets to be set.

Here, at least, Russia can show some leadership by pointing to its own balanced budget, and its adoption last year of a so-called fiscal rule intended to reduce the dependence of its public finances on oil and gas revenues.

"Russia's agenda reflects their own policy preoccupations. To the extent that it is relevant to a broader global forum, that will be a fluke," said Christopher Granville, managing director of Trusted Sources, an emerging markets consultancy.

"But it's not an agenda that's way off in outer space."

Policymakers will hope to set aside friction between Russia and the West over trade and human rights during the build-up to this September's G20 summit in St Petersburg, given the forum's focus on economic issues.

Russia, a country of more than 140 million people, says it is up to the task of leading the G20, not least thanks to its experience as half of the 'G2' that once dominated global diplomacy during the Cold War.

"It's used to thinking kind of big," said Russia's top financial diplomat, summit 'sherpa' Ksenia Yudayeva.

But things may be more tricky next year, part two of a double-header, when Russia chairs the G8. Moscow is the odd one out in what Granville calls "a group of like-minded Western countries withJapan as an honorary member".

Putin, elected for a third term as president last March after four years as prime minister, has made international summits and sporting events an important part of his development agenda for Russia.

He will host the G8 summit in the summer of 2014 in Sochi, the venue of the next Winter Olympics, and hosts the World Cup soccer finals in 2018.

Russia expects to spend $50 billion on preparing for the Sochi Games, a sum that would make it the most expensive Olympics. That is progress at a high price.

(Additional reporting by Lidia Kelly and Lesley Wroughton, editing by Mike Peacock)

BBC News - US trade deficit narrows to near three-year low

The US trade gap with the rest of the world fell to $38.5bn (£24.3bn) in December, a near three-year low, according to the Commerce Department.

The trade figures may lead to an upward revision in GDP

Record overseas sales of petroleum pushed up exports, while imports dropped.

Crude oil imports fell to the lowest level since 1997 during 2012 as a whole.

The data suggests that the US economy was stronger in the fourth quarter than initially estimated.

The figures could result in a revision of the a 0.1% annualised contraction in gross domestic product (GDP) during the quarter, which was initially calculated before these figures were available and were based on projections of a widening trade gap.

"The economy did not fare as badly as the initial GDP estimate suggested in the fourth quarter," said Chris Williamson, chief economist at financial information firm Markit.

"The data also add to an increasingly bright picture of the global economy at the turn of the year."

Total exports rose to $186.4bn, up $3.9bn from November. Imports fell $6.2bn to $224.9bn as less overseas crude oil was bought.

China trade gap

These figures should add 0.7 percentage points to economic growth during the October-December quarter, according to Jim O'Sullivan, the chief US economist at High Frequency Economics.

That would mean an annual growth rate of 0.6%. The next estimate is due on February 28th.

However, during 2012 the US trade gap with China increased to $315bn - the largest on record with any country.

That fact rankles with American manufacturers who believe the Chinese benefit from an unfairly weak currency.

"Congress and the administration must take action on currency manipulation," said Scott Paul, president of the Alliance for American Manufacturing.

BBC News - Bank of England rejects more economic stimulus

The Bank of England has chosen not to inject any more money into the economy, leaving its quantitative easing (QE) programme at £375bn.

There has been some debate over the effectiveness of the central bank's QE programme

The Bank also left interest rates unchanged at 0.5%.

Incoming Bank governor Mark Carney has said he is open to reviewing the UK's monetary policy framework.

The Bank of England sets interest rates to achieve a certain level of inflation, but some believe its remit should include focusing on growth.

The Bank has a 2% target for inflation on the consumer prices index (CPI) measure, and has leeway of one percentage point either side of that.

Mr Carney, who replaces Sir Mervyn King in July, told a panel of MPs on Thursday: "Flexible inflation targeting, in my opinion, is the most successful monetary policy framework that has been in existence. And so the bar for change to that framework, the overall framework, is very high.

"But I would note that there seems to be an appetite for some debate about what exactly the framework is, and what alternatives could be to it, and that should be encouraged."

On Wednesday, the Organisation for Economic Co-operation and Development (OECD) said the Bank should consider injecting more money into the economy if growth remains weak.

However, some policymakers have questioned the effectiveness of QE - which involves the central bank pumping billions of pounds into the financial system, creating money to buy back government bonds.

Bank statement

The UK economy shrank by 0.3% in the final three months of 2012, and the Bank of England's Monetary Policy Committee (MPC) said it had taken that into account at its most recent meeting.

"The committee discussed the appropriate policy response to the combination of the weakness in the economy and the prospect of a further prolonged period of above-target inflation," it said in a statement.

"It agreed that, as long as domestic cost and price pressures remained consistent with inflation returning to the target in the medium term, it was appropriate to look through the temporary, albeit protracted, period of above-target inflation."

Inflation has remained above the Bank's 2% target since the end of 2009.

The Bank added: "The MPC's remit is to deliver price stability, but to do so in a way that avoids undesirable volatility in output. The committee judged that its policy stance was fully consistent with that remit.

"The committee agreed that it stood ready to provide additional monetary stimulus if warranted by the outlook for growth and inflation."

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said no change in interest rates or on quantitative easing was no surprise.

"The weak fourth quarter is unlikely to have swayed further members into more QE action and, if anything, some survey indicators have been a little better at the start of the year," she said.

Meanwhile the National Institute for Economic and Social Research (Niesr) estimates that UK economic output was unchanged in the three months to January.

Niesr, which correctly predicted the 0.3% fall in output in the three months to December, expects annual growth of 0.7% this year and 1.5% in 2014.

Reuters News - EU leaders agree outlines of 960 billion euro budget

1 of 3. European Council President Herman Van Rompuy attends an European Union leaders summit meeting to discuss the European Union's long-term budget in Brussels February 7, 2013.

Credit: Reuters/Yves Herman

By Charlie Dunmore and Luke Baker

BRUSSELS | Fri Feb 8, 2013 2:17am EST

(Reuters) - European Union leaders agreed the framework of a new long-term budget on Friday after 15 hours of through-the-night negotiation, laying the ground for 960 billion euros of spending on agriculture, aid and scientific research in the years ahead.

The agreement, which EU officials said would only be finalized later on Friday, strikes a tight balance between the demands of northern European countries such as Britain and the Netherlands that wanted a belt-tightening budget, and countries in the south and east such as France and Poland that wanted spending on farming subsidies and much-needed infrastructure.

"We feel pretty confident that we have the framework for a deal," said one EU official speaking on condition of anonymity moments after leaders agreed the outlines. "The deal is not completely finalized, but we feel sureit will be done today."

Several diplomats and other senior officials from a number of EU member states confirmed the framework agreement.

The officials said around 12 billion euros would be cut from the last budget proposal, made at a summit in November when agreement eluded leaders, bringing the headline ceiling for spending down to 960 billion over the full 2014-2020 plan.

That represents a decrease of around three percent on the last multi-annual framework - the first time a long-term spending plan has seen a net reduction in the EU's history.

While vast in headline terms, in annual terms the budget appropriation amounts to only around 140 billion euros, equivalent to just 1 percent of total EU economic output.

The cuts agreed on Friday fell mainly on a new fund for cross-border transport, energy and telecoms projects, which was cut by more than 11 billion euros, and on pay and perks for EU officials - a top target for Britain - which were cut by around 1 billion euros, officials said.

Spending on agriculture was spared further cuts and there was an increase of about 1.5 billion euros on rural development over the seven years, satisfying France, Italy and others.

As well as the deal needing to be signed off by all EU leaders later on Friday, it must be approved by the European Parliament, an obstacle that could prove difficult. The European Parliament president has said he will not accept excessive cuts.

Ahead of the summit, France and Britain appeared at sharp odds over the headline numbers, with Denmark, the Netherlands and Sweden lining up on Britain's side and Italy, Spain, Poland and others allied with France. Germany was left in the middle.

NARROW GAP

Thursday's summit got off on a poor footing after French President Francois Hollande failed to turn up to a meeting with British Prime Minister David Cameron, German Chancellor Angela Merkel and Herman Van Rompuy, the European Council president who chairs EU summits.

Britain interpreted Hollande's absence as a snub, while French officials said no invitation had been made. The diplomatic contretemps put Paris and London at odds, contributing to frosty early negotiations that at one point late on Thursday appeared set to break down completely.

Even if a final deal is struck on the seven-year framework, around 40 percent of the spending will still be dedicated to farming and regional development, something that frustrates many northern European states, which want a more dynamic budget.

At the same time, officials said money had been set aside for growth-stimulating measures, for research and for structural funds to flow to countries worst hit in the economic crisis, includingGreece, Ireland, Portugal and Spain.

There were also stipulations for green investment and 6 billion euros was set aside for a fund to combat youth unemployment via training and apprenticeships in countries such as Spain, Greece, Portugal and Ireland.

In recent weeks, Van Rompuy has been in touch with every EU leader to assess where the contours of an agreement may lie. He had said that he would only call a summit if he saw sufficient "convergence" among the countries to make a deal possible.

In November, he began the talks by reducing the European Commission's original budget proposal by around 80 billion euros, bringing the headline figure down to 972 billion.

Thursday's summit was supposed to resume on the basis of that figure, although it was never going to be a simple question of cutting the total since the budget also involves delicate negotiations over rebates - amounts countries get reimbursed after they have made contributions.

In the end, the rebate system was left largely untouched, and Denmark won a rebate of around 130 million euros a year.

Northern European states, including Britain, Denmark and the Netherlands, were adamant that at a time when they are trying to cut budgets at home to bring finances into balance, it was incumbent on the EU to pursue a similar objective.

Because of a difference in the way the budget is calculated, there are two numbers - both the headline 'commitments' figure which sets a ceiling on how much can be paid out, and a lower 'payments' figure that indicates what will actually be spent.

The baseline payments figure in the framework agreed on Friday was 908.4 billion euros, a figure low enough to convince Britain, which focuses on payments rather than commitments, that it was getting a satisfactory deal.

(Additional reporting by Justyna Pawlak, John O'Donnell and Teddy Nykiel; writing by Charlie Dunmore and Luke Baker)

BBC News - EU leaders set for crucial budget summit

European Union leaders are due to begin a two-day summit in Brussels to try to strike a deal on the next seven years of EU spending.

Angela Merkel and Francois Hollande held a "short but intense" meeting on Wednesday

High EU expenditure at a time of cutbacks and austerity across the continent is the main issue dividing the 27 member states.

They failed to reach a compromise at a similar summit last November.

The BBC's Europe editor Gavin Hewitt says the summit will almost certainly demand cuts in EU administration.

However, whatever is agreed still has to go to the European Parliament and MEPs are big backers of EU spending, he adds.

The EU Commission - the EU's executive body - had originally wanted a budget ceiling of 1.025tn euros (£885bn; $1.4tn) for 2014-2020, a 5% increase. In November that was trimmed back to 973bn euros and later revised down to 943bn euros.

However, with other EU spending commitments included, that would still give an overall budget of 1.011tn euros.

The UK, Germany and other northern European nations want to lower EU spending to mirror the cuts being made by national governments across the continent.

Downing Street said on Wednesday that Prime Minister David Cameron was intent on seeking an agreement to lower EU spending.

"The UK's position is unchanged since the November European Council - spending needs to be reduced further than the proposals on the table," a spokesman said.

"The prime minister said in the [House of] Commons that he thought a deal would be difficult. That's not saying that it can't be done. The EU budget negotiations are always traditionally fairly difficult."

David Cameron and Angela Merkel want EU spending to mirror Europe's tough financial times

Compromises

Another grouping, led by France and Italy, wants to maintain spending but target it more at investment likely to create jobs.

French President Francois Hollande told reporters on Sunday that conditions were "not yet in place" for a deal but also signalled that Paris was prepared to make compromises.

He and German Chancellor Angela Merkel held talks in Paris on Wednesday before attending a France-Germany football match.

Mrs Merkel's spokesman said she and President Hollande had had "a short but intense meeting... to see what kind of agreement could be made".

Mrs Merkel - seen as the powerbroker in the summit - has already acknowledged that the talks will be "very difficult".

In Brussels, a European Parliament spokesman warned that more severe cuts would leave the commission unable to do its job as the EU integrates more deeply in response to the financial crisis.

"How can we imagine that an EU institution can ensure a proper banking union with a budget that is cut by whatever billions in figures we hear, here and there?" said spokesman Olivier Bailly.

"At the moment, there is a need for a reality check between the requests that are sent to the commission, the council, the parliament, or the European Central Bank, and the budget - the means - that are given to these institutions to fulfil their commitments."

The split in the EU reflects the gap between richer European countries and those that rely most on EU funding.

The argument for higher spending is supported by many countries that are net beneficiaries, including Poland, Hungary and Spain.

Others, mostly the big net contributors, argue it is unacceptable at a time of austerity.

Germany, the UK, France and Italy are the biggest net contributors to the budget, which amounts to about 1% of the EU's overall GDP.

Analysts say failure to reach an agreement on its seven-year budget would mean the EU falling back on more expensive annual budgets.