Reuters News - European political fears send euro, shares lower

Traders work on the floor of the New York Stock Exchange (NYSE) September 12, 2011.

Credit: Reuters/Brendan McDermid

LONDON | Mon Apr 23, 2012 3:54am EDT

(Reuters) - The euro edged down from two-week highs and shares weakened on Monday as political developments in France and the Netherlands raised fears about the region's commitment to tackle its ongoing debt crisis.

The single currency stood at $1.3189, down from Friday's peak of $1.3225 after French President Nicolas Sarkozy came second to Socialist challenger Francois Hollande in the first round of the presidential elections, and a budget crisis erupted in the Netherlands that could bring down the government.

"The Netherlands could be a problem because up until now it was a stable partner in the euro zone. This shows the problems and increasing tensions within the area," said Christian Stocker, strategist at UniCredit Global Research.

The news sent German government bond yields to record lows of 1.591 percent and increased the premium investors demand to buy French and Dutch bonds.

Europe's top shares opened lower on Monday on the political concerns, but attention was expected to switch to the economy, with euro zone manufacturing activity indicators due out later after data from China showed some signs of recovery in factory output but not enough to prevent the sector contracting.

The FTSEurofirst 300 was down 10.19 points, or 1 percent, at 1035.89, having posted its best week in a month on Friday.

(The story corrects paragraph four to show the premium investors demand, not pay, to buy French and Dutch bonds)

(Additional reporting by by David Brett; Editing by Will Waterman)

Reuters News - Europe pressed for action to end debt crisis

By Gernot Heller and Glenn Somerville

WASHINGTON | Mon Apr 23, 2012 3:12am EDT

(Reuters) - Global finance chiefs pressed Europe in weekend talks to quickly put in place the economic reforms needed to finally extinguish its debt crisis now that newly increased financial buffers have bought some precious time.

A day after advanced and emerging countries agreed to double the firepower of the International Monetary Fund to help contain the crisis, the IMF's governing panel said on Saturday that the 17-nation euro area must cut government debt burdens further, push bold economic reforms and stabilize financial systems.

Debt problems will resurface and growth will stumble unless these steps are taken, the head of the IMF's governing panel, Singapore's finance minister, Tharman Shanmugaratnam, warned.

An uneasy calm returned to world financial markets after the Greek crisis subsided but the IMF is concerned that without strong action fresh tensions will erupt, sapping global growth.

The IMF panel said all advanced economies needed plans to rein in deficits, but it singled out theeuro zone as crucial to revitalizing strong growth.

The euro area, the world's second-largest economic bloc, already has slipped into a mild recession, weakening its major export partner China and other parts of emerging Asia, while growth in the United States remains sluggish.

Unless stronger growth is restored and investor confidence returns, the IMF and finance chiefs from around the globe said the world will not break out of a vicious debt-driven cycle.

"What was really critical in all our minds was to get back to normal growth over the medium term and preferably sooner rather than later, in other words within two to three years," Tharman said at a news conference on Saturday.

"If we don't get back to normal growth, if we don't get GDP back to its potential levels, then fiscal sustainability is not possible either," he warned.

The Group of 20 developed and emerging nations on Friday agreed to provide the IMF with a further $430 billion, more than doubling its lending power to erect a higher firewall in case the euro zone's debt crisis spreads. That complements a $1 trillion fire-fighting fund being assembled by Europe.

"If the time that liquidity can buy is used to address the growth, solvency and institutional problems, fine," economists at Morgan Stanley wrote. They worried, however, that policy-making complacency might set in.

Political developments are clouding the picture. In France, a presidential election could bring to power Socialist Francois Hollande, who has vowed to renegotiate a German-inspired budget discipline treaty. Support for the pact is also waning in the Netherlands, where budget talks collapsed on Saturday.

FINGER POINTING

The United States piled the pressure on Europe to take advantage of its newly won breathing space.

"The success of the next phase of the crisis response will hinge on Europe's willingness and ability, together with the European Central Bank, to apply its tools ... aggressively to support countries as they implement reforms," U.S. Treasury Secretary Timothy Geithner told the IMF's panel.

But in what participants said was an intense discussion, Germany pointed the finger back at the United States, the world's largest economy. U.S. fiscal troubles may reach the boiling point at year's end when expiring tax cuts and plans for deep budget cuts could throw the economy into recession.

Despite the need for action, a U.S. presidential election in November has resulted in political stalemate.

"We understand the political constraints but there is no way around it and there is urgency," said German Finance Minister Wolfgang Schaeuble.

ROOM TO ACT

But it was Europe that the IMF panel singled out for policy advice. It stressed that budget consolidation must be balanced to avoid overly harsh cuts that undermine growth and make deficits even worse - a tricky act that Italy and Spain currently are facing.

"There has been a big discussion about how to make it possible to have fiscal strengthening and growth," said Italy's deputy finance minister, Vittorio Grilli. While the timing matters, fiscal tightening must come first, he said.

The panel, made up of finance ministers who advise the IMF on policy, called upon major central banks to help by keeping interest rates low and monetary stimulus in place, as long as growth remains weak and inflation under control.

A call by the IMF for lower euro zone interest rates, however, met resistance from some ECB policymakers in Washington. Germany in particular is concerned that loose monetary policy will stir inflation, and argued it is no panacea for budgetary woes.

EMERGING MARKETS POWER

The IMF committee called on its members to ratify "expeditiously" a 2010 plan to increase representation of emerging economies on the IMF's executive board, reflecting their growing clout in the world economy. Brazil said this was an essential condition for it to provide the IMF funding.

But voting reforms are unlikely to get approved by the IMF's October meetings because of the highly partisan climate in Washington and the need for U.S. congressional approval.

"I did not hear any clear announcement from the U.S. that they will be able to deliver," Schaeuble said.

Britain said its $15 billion contribution would only become available once the 2010 IMF reforms were completed.

(Additional reporting by Reuters IMF reporting team; Editing by Andrea Ricci)

BBC News - 'Huge' water resource exists under Africa

By Matt McGrathScience reporter, BBC World Service

Scientists say the notoriously dry continent of Africa is sitting on a vast reservoir of groundwater.

They argue that the total volume of water in aquifers underground is 100 times the amount found on the surface.

The team have produced the most detailed map yet of the scale and potential of this hidden resource.

Writing in the journal Environmental Research Letters, they stress that large scale drilling might not be the best way of increasing water supplies.

Across Africa more than 300 million people are said not to have access to safe drinking water.

Demand for water is set to grow markedly in coming decades due to population growth and the need for irrigation to grow crops.

Freshwater rivers and lakes are subject to seasonal floods and droughts that can limit their availability for people and for agriculture. At present only 5% of arable land is irrigated.

Now scientists have for the first time been able to carry out a continent-wide analysis of the water that is hidden under the surface in aquifers. Researchers from the British Geological Survey and University College London (UCL) have mapped in detail the amount and potential yield of this groundwater resource across the continent.

Helen Bonsor is from the BGS is one of the authors of the paper. She says that up until now groundwater was out of sight and out of mind. She hopes the new maps will open people's eyes to the potential.

"Where there's greatest ground water storage is in northern Africa, in the large sedimentary basins, in Libya, Algeria and Chad," she said.

"The amount of storage in those basins is equivalent to 75m thickness of water across that area - it's a huge amount."

Ancient events

Due to changes in climate that have turned the Sahara into a desert over centuries many of the aquifers underneath were last filled with water over 5,000 years ago.

The scientists collated their information from existing hydro-geological maps from national governments as well as 283 aquifer studies.

The researchers say their new maps indicate that many countries currently designated as "water scarce" have substantial groundwater reserves.

However, the scientists are cautious about the best way of accessing these hidden resources. They suggest that widespread drilling of large boreholes might not work.

Dr Alan MacDonald, lead author of the study, told the BBC: "High yielding boreholes should not be developed without a thorough understanding of the local groundwater conditions.

"Appropriately sited and developed boreholes for low yielding rural water supply and hand pumps are likely to be successful."

With many aquifers not being filled due to a lack of rain, the scientists are worried that large-scale borehole developments could rapidly deplete the resource.

African water supplies may be more resilient to climate change than was thought

According to Helen Bonsor, sometimes the slower means of extraction can be more efficient.

"Much lower storage aquifers are present across much of sub-Saharan Africa," she explained.

"However, our work shows that with careful exploring and construction, there is sufficient groundwater under Africa to support low yielding water supplies for drinking and community irrigation."

The scientists say that there are sufficient reserves to be able to cope with the vagaries of climate change.

"Even in the lowest storage aquifers in semi arid areas with currently very little rainfall, ground water is indicated to have a residence time in the ground of 20 to 70 years." Dr Bonsor said.

"So at present extraction rates for drinking and small scale irrigation for agriculture groundwater will provide and will continue to provide a buffer to climate variability."

Reuters News - BRICS demand bigger IMF role before giving it cash

(From L-R) Brazil's President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh, Chinese President Hu Jintao and South African President Jacob Zuma join their hands together during a group photo for the BRICS Summit in New Delhi March 29, 2012.

Credit: Reuters/B Mathur

By Walter Brandimarte and Louise Egan

WASHINGTON | Fri Apr 20, 2012 1:48am EDT

(Reuters) - The International Monetary Fund's bid to win a big boost in funding to handle the euro-zone debt crisis hit a speed bump on Thursday when Brazildemanded more power at the IMF for emerging economies as a condition for lending it extra cash.

Brazilian Finance Minister Guido Mantega laid out the terms for a deal after a meeting with fellow BRICS nations Russia, India, China and South Africa.

"We are not ready to set a figure, because there are preconditions that have not been fulfilled by the countries - whether they will comply with the agenda of reforms," he said.

Support from China, Russia and Brazil is critical to strengthening the firepower of the IMF.

Its managing director, Christine Lagarde, wants at least $400 billion in extra funds to protect countries from any worsening of the euro zone debt crisis. So far, Europe and Japan have pledged $320 billion and the IMF is relying on the BRICS to plug the hole as it seeks to double its war chest.

Calling the euro zone the "epicenter of potential risk" for a world economic recovery that is "timid and fragile," Lagarde had said earlier on Thursday she was working on a deal.

"We expect our firepower to be significantly increased as an outcome of this meeting," she said at a news conference to kick off the spring meetings of the IMF and World Bank.

The IMF firewall would complement the $1 trillion in emergency funds for Europe agreed upon by the EU leaders last month. Lagarde welcomed those funds as a "significant" step toward addressing euro-zone problems but also urged the EU to use that money to directly inject capital into banks.

Finance ministers and central bankers from the Group of 20 advanced and emerging economies were holding a dinner on Thursday night, ahead of a longer session on Friday. IMF funding was at the top of the agenda.

A source from a major emerging economy said the BRICS were leaning toward contributing, but faced two hurdles. The group both wants more IMF voting power to reflect its growing sway on the world financial stage, and some countries also need to have any agreement approved by their capitols, the source said.

In another move that could complicate the funding drive, Canada was pushing to weaken Europe's dominant power on the IMF's 24-member board when votes come up on how to use the new resources. This would give more say to emerging economies.

"Given that the major challenge here is a sovereign debt challenge in euro zone countries, and that euro zone countries are asking non euro-zone countries to contribute to resources at the IMF, our view is that there ought to be two votes," said Canadian Finance Minister Jim Flaherty.

Japanese Finance Minister Jun Azumi, whose country is contributing $60 billion to the IMF, said as he arrived in Washington that BRICS funding is indispensable for global growth and he expects them to announce IMF support at some stage.

Lagarde acknowledged in her news conference that giving emerging economies a greater say is a priority and said it was an issue she will raise in one-on-one meetings with IMF member countries.

"We are going to ask the membership to finish the job in terms of quota resources and in terms of governance," she said.

"There are changes that need to take place to better reflect the membership of the institution in terms of better economic strength, in terms of economic rule and we are not there."

Lagarde took aim at the United States for its delay in approving voting reforms the IMF members agreed to in 2010, and called on Washington to show leadership as the fund's largest shareholder.

The United States has declined to provide fresh funds for the IMF but on Wednesday it threw its weight behind the effort to raise more capital from other nations. Previously, it had pressed for bolder action from Europe first.

Lagarde also welcomed Europe's efforts in building its own firewall on Thursday. "There is a little bit missing here or there but it shows significant determination to defend their currency zone."

A larger IMF war chest to safeguard countries could help ease concerns in financial markets over the risks of global contagion. Investors are growing increasingly worried that Italy and Spain will fail to ratchet down their budget deficits as their economies shrink, forcing them to join Greece, Ireland and Portugal as bailout recipients, a prospect that weighed on global stocks on Thursday.

Concerns also are mounting about the resiliency of the European banking system. The IMF estimates its banks must shrink assets by $2.6 trillion over the next two years to meet higher capital standards and cover bad loans, causing credit to contract in an already weak economy.

Spain's banks are particularly vulnerable, hit by a plunging property market and the falling value of Spanish government debt. An auction on Thursday highlighted nervousness over Madrid's finances. Although bidding was solid, the government paid an uncomfortable 5.74 percent on its new 10-year bond.

Lagarde said the EU should use its bailout funds to inject capital directly into euro-zone banks, which would lessen the risk piled onto government balance sheets, and she called for the EU to supervise national banks.

"What we are advocating is that this be done without channeling through the sovereigns," she said.

Despite progress, the euro zone problems still pose a threat to world economic recovery, she said. "We are seeing a light recovery blowing in the spring wind but we are also seeing some very dark clouds on the horizon."

World Bank President Robert Zoellick joined the call for deep and lasting economic reforms to secure the shaky global recovery.

"Countries both developing and developed need to focus on structural reforms that will be the drivers of future growth, otherwise the world will keep stumbling along," he said.

(Writing by Stella Dawson; additional reporting by Lesley Wroughton, Leika Kihara; Editing by Neil Stempleman)

Reuters News - IMF says secures 199 billion pounds in drive for new funds

International Monetary Fund Managing Director Christine Lagarde speaks at the Brookings Institution on ''Seizing the Moment: Thinking Beyond the Crisis'' in Washington April 12, 2012.

Credit: Reuters/Kevin Lamarque

By Glenn Somerville and Lesley Wroughton

WASHINGTON | Thu Apr 19, 2012 4:04am BST

(Reuters) - The International Monetary Fund said on Wednesday it had raised $320 billion (199 billion pounds) so far in a bid to boost its firepower to deal with the euro zone debt crisis, with Poland and Switzerland joining the effort.

IMF Managing Director Christine Lagarde said she had received commitments of $34 billion (21 billion pounds) on Wednesday, including $8 billion (4 billion pounds) from Poland and "a substantial amount" from Switzerland.

"Ensuring that the Fund has sufficient resources to tackle crises and to promote global economic stability is in the interests of all our members," she said in a statement.

Lagarde is hoping to secure at least $400 billion (249 billion pounds) in commitments from finance officials from around the globe, who meet this week in Washington under the auspices of the Group of 20 nations and the IMF and World Bank.

The issue has taken on new urgency given increased borrowing costs in Spain and Italy that have reignited fears the euro zone crisis could flare again, and that the fallout could imperil the global economic recovery.

The United States has declined to provide fresh funds, saying it had done its part by ensuring dollar liquidity for banks in Europe, but it threw its weight behind the fundraising effort on Wednesday.

"We're actually very supportive of that process and we'll be very supportive of it this week," U.S. Treasury Timothy Geithner said, avoiding past rhetoric about Europe needing to do more first to erect its own financial firewall.

Europe had already said it would provide about $200 billion (124 billion pounds) to the IMF andJapan pledged $60 billion (37 billion pounds) on Tuesday, becoming the first non-European nation to offer a commitment.

Sweden said it would commit $10 billion (6 billion pounds) and increase the amount to $14.7 billion (9.1 billion pounds) later, while Denmark said it would give $7 billion (4 billion pounds). Norway pledged about $9.3 billion (5.8 billion pounds).

The effort to expand the IMF's coffers is expected to dominate a meeting of G20 finance officials over dinner on Thursday and during the day on Friday. It will also be front and centre at the IMF's semi-annual session on Saturday.

Speaking at the Brookings Institution, Geithner said the commitments that had already flowed in should make it apparent to financial markets that the fund can bulk up quickly when necessary, a prospect that could ease crisis-related jitters.

He said it was a positive that the IMF could raise money quickly to "cushion if necessary the effects of European trauma" on the economies of other nations.

HOPING FOR A DEAL

While Europe has won some praise for actions it has taken to build up its own defences to keep its debt troubles contained, the IMF warned this week that the crisis was still the single greatest threat to the world economy.

"Solving the issues in Europe is not about a firewall, it's about decisions that will be taken in Europe over a sustained period of time; and it's European actions that will be decisive here as opposed to outside money," Bank of Canada Governor Mark Carney told a news conference.

Carney, who also heads the global Financial Stability Board, said the G20 had yet to reach a consensus on how to proceed.

Like the United States, Canada has ruled out putting more money into the IMF. "Really, the Europeans need to step up to the plate much more than they have," Canadian Finance Minister Jim Flaherty told reporters in Toronto.

But Canada seemed increasingly isolated.

In Mexico, Finance Minister Jose Antonio Meade sounded an optimistic note about a deal for more IMF money. He said commitments made by Japan, Sweden and Denmark were a sign of good progress - a potentially significant comment because Mexico, as this year's G20 chair, has a chance to shape not only the agenda but the outcome of this week's talks.

"It creates a good environment for the meeting," Meade said of money pledges.

Germany's finance minister, Wolfgang Schaeuble, predicted in an interview with Reuters on Tuesday that a deal would be reached this week.

In a report on global financial stability, the IMF offered advice for Europe: set a course for fiscal union to match the existing monetary union so that unified policy can be passed that works equally for members and makes it harder for financial markets to single out the weakest for attack.

"European authorities need to provide investors with a clear vision of where monetary union is going, because the answer to this is more and better Europe, not less Europe," IMF financial counsellor Jose Vinals said as he issued the report.

The IMF urged central supervision of European banks. It also suggested that the European Union should consider injecting public capital into banks - a tactic the United States employed in 2008 when its banking system was at risk of collapse.

(Additional reporting by Stella Dawson and Rachelle Younglai in Washington, Krista Hughes in Puerto Vallarta and Louise Egan in Ottawa; Editing by Dan Grebler and Peter Cooney)

Reuters News - Africa's demographics: dividend or disaster?

A customer leaves a Game store in Johannesburg, April 10, 2012.

Credit: Reuters/Siphiwe Sibeko

By Ed Stoddard

JOHANNESBURG | Wed Apr 18, 2012 4:08pm BST

(Reuters) - Wanted: Investors for young, hot and thirsty continent. Population to double in 40 years. Poor, but less than it was. Interested parties must think long term.

Africa's demographic profile could make it a dream for retailers if spending power continues to rise - or an unfolding disaster for everyone if the labour market fails to absorb its swelling ranks of young people.

Top business executives at the Reuters Africa Investment summit see potential. They expect ever higher numbers of childless young people to enter the labour market and earn money that they can spend or save.

The latest U.N. figures project that Africa's population will double over the next four decades to almost 2 billion. To give just one example, 46 percent of Zambians are below 15.

"We are going to benefit from a demographic dividend. You are going to have this significant increase in consumers," said John van Wyk, who co-heads the Africa business of private equity firm Actis, which has $1.5 billion under management in Africa.

A 2010 study by the McKinsey Global Institute projected the number of African households with discretionary income earning over $5,000 would rise to 128 million by 2020 from 85 million.

Credit Suisse estimates African household wealth grew at 19 percent in 2010-2011 - outpaced only by India and Latin America.

Some argue that hype around Africa is overdone and that concentrating on the big macroeconomic numbers gives a misleading picture on a continent where most trade remains informal.

"(It) doesn't tell you about the peasants, it doesn't tell you about the urban slums," author Duncan Clarke told Reuters this month.

"The idea that because there are expanding consumer markets or more mobile phones in Africa and more people waltzing around in Armani suits, that this is somehow going to drive the economies out of poverty, is pure fatuous nonsense," he said.

UNTAPPED DESIRES

But retailers are not discouraged and Actis sees pent up consumer desires to be tapped.

"If you look at Nigeria for example, a sophisticated retail model there is actually non-existent. The bulk of trade still happens in informal markets," he said. "But as people become more affluent they become aspirational."

That was also the watchword for Mark Bowman, brewer SABMiller's managing director for Africa.

SABMiller's Africa business, not counting South Africa, is the group's fastest growing. Underlying volumes in the last three months of 2011 were up 11 percent on the year before.

"Beer is highly aspirational. As the economies improve and the legal drinking populations grow the prospects are very positive for beer and soft drinks," he said.

SABMiller plans to invest up to $2.5 billion in Africa over the next 5 years.

The strategy with Africa's income levels and demographics, he said, was simple: make beer affordable by cutting the price.

"You have this natural increase in wealth slowly but surely and inexorably across Africa and what we want to do is go down and meet it earlier as opposed to waiting for it because beer is just too expensive, on balance," he said.

"So if you can get beer down to a Latin American type earning profile where within 30 minutes of work you have enough money to buy a beer, from the 3 to 4 hours it takes currently, we would significantly increase the opportunity for our sales."

UNMET NEEDS

But the big worry is those who cannot afford to buy any sort of drink as youth unemployment rises in many parts of the continent, fuelling resentment against the expanding elites and potential social unrest.

"Youth underemployment and unemployment is a major source of concern to our government," Zimbabwe's youth minister, Saviour Kasukuwere, told the summit in Johannesburg.

"If you have young people who are restless and they have nothing to occupy them then the sure way will be the Egyptian kind of uprising," he said, referring to the uprising that toppled President Hosni Mubarak last year.

There has been no sign yet of North African style revolts spreading south of the Sahara.

And Zimbabwe is a particular case after losing more than a decade of growth to what detractors say were disastrous economic policies.

But Zimbabwe's demography is not unique to the continent. According to the World Bank, about 40 percent of its population is below the age of 15 and estimates of its unemployment rate run as high as 80 percent.

"In 1900 there were only 110 million people in Africa, now there are over a billion. In 2050 Africa is going to have 2 billion. So there will still be huge problems of poverty, of income scarcity, and most importantly of unemployment," said Clarke.

(Editing by Matthew Tostevin)

BBC News - Japan to give the IMF $60bn in loans to help stability

Japan has agreed to give the International Monetary Fund (IMF) loans worth $60bn (£38bn).

Japan is a key member of the IMF

The IMF has been calling for extra cash from its members to shore up its finances and help deal with problems stemming from the European debt crisis.

As the debt problem has deepened, the IMF has been providing emergency funding to countries such as Greece.

Japan said it now expected other IMF members to also contribute to the fund.

"I am confident that many other countries will pledge contributions to the IMF," said Jun Azumi, Japan's finance minister.

"Following a series of eurozone's policy responses, it is important to strengthen IMF funding and pave the way for ensuring an end to the crisis, not only for the euro zone, but also for Japan and Asian countries."

The head of the IMF, Christine Lagarde, said that the deal with Japan was an important step forward and would help promote global economic stability.