Archive for July, 2011


Several German industrial giants have seen their share prices fall after reporting disappointing results.

Siemens, Europe’s largest engineering conglomerate, reported a drop in third-quarter profits, sending shares down 1.5%.

Chemical firm BASF and carmaker Volkswagen also saw their stocks drop.

The share-price falls helped pushed down the benchmark Dax index of the 30 biggest stocks in Germany. The Dax fell 1.2%, or 89.58 points, to 7,163.10.

Stocks across Europe were lower on fears of the health of the US economy and also concerns over whether the US will reach a political deal to pay its debts.

‘Challenging’ environment

Siemens said its third-quarter net profit from continuing operations had fallen 47% to 763m euros ($1.11bn, £673m) from the same period a year earlier- below the 1bn euro profit many analysts had expected.

Much of the decline came from the healthcare division, which makes products such as MRI machines and radiation equipment.

“The business environment for healthcare remained challenging,” Siemens said.

VW, Europe’s biggest carmaker, said its net profit for the first six months of the year rose three-fold to 6.5bn euros.

However, it added that higher commodity prices would “weaken the volume effect” over higher sales for 2011, sending shares down 4.9%.

Meanwhile, BASF shares fell 5.2% after it reported a 22%-increase in second-quarter net profit to 1.45bn euros, but added that high oil prices were weighing on new orders.

“We continue to be concerned about the development of the euro as well as the debt situation in some European countries and the United States,” BASF chief executive Kurt Bock said.

Rival Bayer said its second-quarter net income rose 41% to 747m euros and confirmed “the full-year sales and earnings forecast that we raised in April”.

However, its revenues of 9.25bn euros fell short of analysts’ forecasts, and Bayer’s shares fell 1.9%.

Shares in Lufthansa declined 2.8% after it warned of high oil prices and “competitive pressure in certain markets”.

The German airline, which owns the brands Swiss, Austrian and BMI, said its net income rose 55% to 301m euros for the April-to-June period.

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The lawyer defending Anders Behring Breivik, who admits carrying out Friday’s mass killings in Norway, says his client is probably insane.

However he added it was too early to say if Mr Breivik would plead insanity.

Meanwhile, police have defended their handling of the event in which 76 people died in the bombing in Oslo and a shooting spree on a nearby island.

It was an hour-and-a-half before an armed unit reached Utoeya island after the shooting began.

“I don’t think we think we could have done this faster,” Police Chief of Staff Johan Fredriksen told journalists in Oslo.

He also dismissed criticism that staff manning the police department‘s one helicopter were on holiday.

Mr Fredriksen said the helicopter was only used for observational purposes and would not have affected the reaction to the shooting.

Mr Breivik is facing terrorism charges and police are considering also charging him with crimes against humanity, which carry a possible 30-year sentence, a prosecutor has said.

Mr Breivik’s lawyer, Geir Lippestad, told reporters: “This whole case indicated that he is insane.”

He said his client believed that he was in a war and that he would be vindicated in 60 years’ time.

A medical evaluation would be carried out to establish his psychiatric condition, Mr Lippestad added.

He said Mr Breivik had told him he was part of an anti-Islam network that had two cells in Norway and several more abroad.

Norwegian police and researchers have cast doubt on such claims, but said they were investigating them.

A police spokesman said two psychiatrists would assess Mr Breivik, who was also being kept on suicide watch.

Mr Lippestad also said that his client had used “some kind of drugs” before the crime.

‘Fantastic’ police work

Mr Breivik, a right-wing Christian extremist, appeared in court on Monday to face charges of destabilising vital functions of society, including government, and causing serious fear in the population.

He accepted responsibility for the attacks but denied the terrorism charges.

Prosecutor Christian Hatlo told Aftenposten that a new charge of crimes against humanity, which could be brought under a 2008 law, was “a possibility”.

Police spokesman Sturla Henreiksboe told AFP news agency: “Police have so far cited… the law on terrorism but seeking other charges has not been excluded.”

Earlier Mr Hatlo said Mr Breivik claimed he had worked in a cell, or group, and that there were two other cells working with him.

Although police sources say other groups are unlikely, Mr Hatlo said he “cannot completely, and I stress completely, rule out that others were involved in what happened”.

He said his operation had not been aimed at killing as many people as possible but that he wanted to create the greatest loss possible to Norway’s governing Labour Party, which he accused of failing the country on immigration.

The bomb in Oslo targeted buildings connected to the Labour government, and the youth camp on Utoeya island that was attacked was also run by the party.

The police have said they are to start to formally release the names of the victims on their website at 18:00 local time (16:00 GMT).

Police chief Sveinung Sponheim said the names, including the victims’ ages and where they lived would be published.

Names will continue to be released at 16:00 GMT each day until all the victims have been identified and all relatives informed, he said.

Earlier Norwegian Justice Minister Knut Storberget praised the “fantastic” work done by police.

“I had the opportunity to thank police in Oslo and other districts,” he told reporters after talks with Oslo’s police chief.

The praise comes despite criticism in the media that officers were slow to respond to the shooting on Utoeya island, where most of the victims died.

“It is very important that we have an open and critical approach,” Mr Storberget said, “but there is a time for everything.”

Mr Breivik has been remanded in custody for eight weeks, the first four in full isolation.

On Monday up to 250,000 people poured on to the streets of the capital, many of them holding flowers in memory of the eight people killed in the Oslo blast and the 68 who died at the youth camp on Utoeya.

 

Growth in the UK economy slowed in the three months to 30 June, partly because of the extra bank holiday in April.

Gross Domestic Product (GDP) grew by 0.2% in the second quarter, according to the Office for National Statistics.

It grew by 0.5% in the previous three months, but contracted by 0.5% in the last three months of 2010.

The ONS said growth had also been slowed by some other one-off factors, including the effects of the Japanese earthquake and tsunami.

‘Safe haven’

“The positive news is that the British economy is continuing to grow and is creating jobs,” said Chancellor George Osborne.

“And it is positive news too that at a time of real international instability we are a safe haven in the storm.”

But shadow chancellor Ed Balls said that the slowdown was a serious problem for the government and it should take steps to boost growth.

“These figures show that last year’s recovery has been recklessly choked off by George Osborne’s VAT rise and spending review,” he said.

“The economy has effectively flatlined for nine months and this is very bad news for jobs, living standards, business investment and for getting the deficit down.”

Mr Balls has called on the government to reverse the increase in VAT that took effect at the beginning of the year.

The think tank the Institute for Public Policy Research (IPPR) was also critical of the level of growth.

“Last June, the OBR [Office for Budget Responsibility] predicted GDP would grow by 2.6% in 2011, but even if the economy gets back on track in quarters three and four this year, it will barely reach 1.2%,” said IPPR director Nick Pearce.

“Outside of London, in particular, the recession continues to be felt and the UK economy might as well still be in recession, even if technically it isn’t.”

The ONS highlighted a number of special events in the second quarter that may have affected the GDP figures.

They were: the additional bank holiday for the royal wedding, the wedding itself, the after-effects of the Japanese earthquake and tsunami, the first phase of Olympic ticket sales and the record warm weather in April.

The ONS estimated that without these one-off factors, GDP would have been 0.5 percentage points higher.

Not all of the one-off factors were negative. Warm weather in April, for example, boosted spending on hotels and restaurants, but reduced spending on domestic fuel.

Nonetheless, analysts say that the ONS statement that GDP would have grown by 0.7% without one-off factors is good news.

“Given the comments from the ONS, this is a better-than-hoped-for report, but with confidence remaining weak and household finances under major pressure the underlying trend remains subdued,” said James Knightley at ING Financial Markets.

“Nonetheless, with firms still looking to hire and invest… we remain hopeful of a gradual acceleration in GDP growth over the next 12 months.”

Alan Clarke at Scotia Capital said: “What seems to have driven this is a stellar bounce-back in services output after the Easter fall, but 0.2% growth is nothing to get the champagne corks popping.”

“The biggest drag on growth at the moment is inflation and that’s eating into household disposable income and holding back consumer spending.”

Credit rating agency Moody’s has cut Greece‘s rating, warning that a planned debt swap would constitute a default.

The rating was cut another three notches from Caa1 to Ca – just two more notches shy of a default rating.

“The announced EU programme… implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100%,”

The debt swap would increase Greece’s borrowing terms by up to 30 years.

However,  – a trade body representing global banks and other major lenders – conceded that the debt deal would cost private sector creditors an estimated 21% of the value of the Greek debts they currently hold.

It comes after another rating agency, Fitch, warned that it too expected the deal would mark a “selective” debt default by Athens.

The debt exchange with private sector lenders is part of a comprehensive package announced on Thursday by European leaders to shore up the euro and prevent the Greek debt crisis from spreading to other economies, notably Spain and Italy.

‘Developing’ outlook

Despite Moody’s view that the debt swap deal would constitute a default, the agency was generally upbeat about Greece’s longer-term prospects.

“Looking further ahead, the EU programme and proposed debt exchanges will increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden,” it said.

As well as the private sector debt swap deal, European leaders also agreed last week to lengthen the repayment terms on existing bail-out loans, and lower the interest rate they were charging.

“The support package for Greece also benefits all euro area sovereigns by containing the severe near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt,” said Moody’s.

The ratings agency also warned that Greece “will still face very significant implementation risks to fiscal and economic reform”.

Austerity measures demanded by Greece’s European partners and the International Monetary Fund remain highly unpopular among many of the country’s voters, and face continuing street protests.

Unusually, Moody’s assigned the rating a “developing” outlook, instead of the more typical “positive” or “negative” outlooks.

The man who has admitted carrying out Friday’s twin terror attacks in Norway, Anders Behring Breivik, is due to make his first appearance in court.

 

The hearing will be held behind closed doors, the judge has ruled.

A minute’s silence was held at 1200 (1000 GMT) to remember the victims.

Mr Breivik, 32, has admitted carrying out a bombing in the capital, Oslo, and a massacre on an island youth camp, killing at least 93 people in total.

He is said to be linked to far-right groups and to have spent years planning the attacks.

At least 96 people were injured in the attacks. But Oslo police have said the death toll from the shooting spree on the island could be revised downwards from the current 86, based on the information now available.

Mr Breivik, who is set to appear in court at 1300 (1100 GMT), has said he will explain his actions to the court. Earlier, he described the attacks as “gruesome but necessary”.

There have been calls for a media blackout of the trial so as not to give Mr Breivik a platform for his views.

Under Norwegian law, he faces a maximum of 21 years in jail if convicted, although that sentence can be extended if a prisoner is deemed a threat to the public.

Police said that while the suspect had admitted the killings, he had not accepted criminal responsibility for them.

His lawyer, Geir Lippestad, told Norwegian media on Sunday: “He thought it was gruesome having to commit these acts, but in his head, they were necessary.

“He wished to attack society and the structure of society.”

Still pictures of the suspect, wearing a wetsuit and carrying an automatic weapon, appeared in a 12-minute anti-Muslim video called Knights Templar 2083, which appeared briefly on YouTube.

A 1,500-page document written in English and said to be by Mr Breivik – posted under the pseudonym of Andrew Berwick – was also put online hours before the attacks.

The bomb in Oslo targeted buildings connected to Norway’s governing Labour Party, and the youth camp on Utoeya island was also run by the party.

‘Dum-dum bullets’

It was reported on Monday that Crown Princess Mette-Marit’s stepbrother, Trond Berntsen, an off-duty police officer, was among those killed at the youth camp. He was the son of Mette-Marit’s stepfather, who died in 2008.

In France, police are searching Mr Breivik’s father’s home in Couranel in the south of the country, although they have not commented on the operation. Jens Breivik is reported not to have been in touch with his son for many years.

Bodies of those killed on the island were moved to a morgue in Oslo on Sunday.

More details have emerged about the killings and the police operation which led to Mr Breivik’s apprehension.

Police said officers trying to get to the island had been delayed because they had difficulty finding a suitable boat to take them there, and there were no police helicopters close enough.

The gunman was arrested an estimated 90 minutes after the massacre began. Police say he still had a lot of ammunition, and hospital sources said he had used dum-dum bullets, designed to disintegrate inside the body and cause maximum internal damage.

One of the first victims on the island was an off-duty police officer who had been hired by the camp organisers to provide security, Reuters news agency reported authorities as saying.

At least seven people were killed in the bomb attack on the government quarter in Oslo. Soon afterwards, 85 people were shot dead as the gunman, dressed as a policeman, ran amok on the nearby island of Utoeya. An 86th victim from the island shooting died in hospital on Sunday.

At least four people from the island camp shooting are yet to be found; it is thought some may have drowned after swimming out into the lake to escape the hail of bullets.

In Oslo, police said the death toll could rise further as bodies were in buildings damaged by the bomb, but still too unstable to search.

Police say they are not searching for a second attacker, but have not ruled out more people being involved, after eyewitness reports suggested a possible second shooter.

Map of central Oslo and Utoeya

Shares have risen following the eurozone’s agreement designed to resolve the Greek debt crisis.

UK and French markets gained more than 1% in morning trading, while Japan’s Nikkei closed up 1.2%. The euro also rose further against the dollar.

Eurozone leaders agreed a new package worth 109bn euros ($155bn, £96.3bn).

Private lenders will also be asked to contribute and, as a result, the Fitch ratings agency said it would consider Greece in “restricted default”.

‘Unthinkable’

German Chancellor Angela Merkel hailed the accord and said it was her country’s duty to support the single European currency.

“It is our historical duty to support the euro,” Mrs Merkel said.

“The euro is good for us, the euro is part of Germany’s economic success, and a Europe without the euro is unthinkable.”

Relief at the deal offset any concerns about banks losing out as a result the planned debt restructuring.

Banking shares continued to rise after Thursday’s sharp gains, with France’s Credit Agricole and the UK’s Royal Bank of Scotland and Barclays all up more than 3%.

Bond yields, which reflect the risk investors attach to government debt, fell across the eurozone, particularly those in Greece and Portugal.

Eurozone leaders hailed the comprehensive agreement.

Greece’s Finance Minister Evangelos Venizelos said the deal would provide “great relief for the Greek economy”.

Dutch Prime Minister Mark Rutte said: “We have sent a clear signal to the markets by showing our determination to stem the crisis and turn the tide in Greece, thereby securing the future of the savings, pensions and jobs of our citizens all over Europe”.

Package measures

They designed not only to resolve Greece’s debt crisis but to prevent contagion to other European economies, thereby shoring up the euro in the process.

The package includes:

  • 109bn euros in new loans to Greece
  • Various options to extend Greece’s repayment terms and reduce the amount it repays on existing loans
  • Voluntary private sector participation in these options, so that banks share taxpayers’ burden
  • Doubling the length of repayment terms for the Irish Republic and Portugal, both of which have received financial assistance previously
  • Additional powers granted to the European Financial Stability Facility to buy up bonds and to make credit available to countries such as Spain and Italy that are not at immediate risk of insolvency.

The Institute of International Finance (IIF) – a global trade body representing big banks and other major lenders – said the planned debt restructuring would target participation by 90% of Greece’s private sector lenders.

Debt to GDP ratios

  • Greece 142.8%
  • Italy 119%
  • Belgium 96.8%
  • Ireland 96.2%
  • Portugal 93%
  • Germany 83.2%
  • France 81.7%
  • Spain 60.1%

Source: Eurostat. Government debt expressed as a percentage of economic output.

French President Nicolas Sarkozy said private lenders would contribute a total of 135bn euros of financing to Greece.

This is expected to provide some 50bn euros of debt relief to Greece.

Three of the four options offered to lenders to swap or relend existing debts would extend Greece’s repayment terms by 30 years, while the fourth would do so by 15 years.

They all offer a much lower interest rate than Greece’s current 15%-25% cost of borrowing in financial markets.

Two of the options would also involve “haircuts” – reducing the amount of debt Greece has to repay.

The terms of the deal imply a loss to Greece’s lenders equivalent to 21% of the market value of their debts, said the IIF.

But because the contributions are “expressly voluntary”, the International Swaps and Derivatives Association said that the deal should not trigger payments on default-swaps designed to protect against a default.

‘Right signal’

Fitch ratings agency said it would consider Greece to have defaulted on its debts once old bonds had been swapped for new bonds.

Although the agency welcomed the agreement as a positive step, it said it would have no choice but to declare a default once the swap had been made.

“An exchange that offers new securities with terms that are worse than the original contractual terms of the existing debt, and where the sovereign is subject to financial distress, constitutes a default event under Fitch’s [ratings criteria],” the firm said in a statement.

Other ratings agencies have previously threatened to declare a default in the event of a debt restructuring.

Observers suggest they are under considerable political pressure not to do so, as if they do it could severely undermine confidence in both the eurozone economy and its banks.

 Herman Van Rompuy: “This situation was… threatening the stability of the eurozone”

The ECB and France had been particularly opposed to a restructuring and involving the private sector, but it was ultimately insisted on by Germany.

German Chancellor Angela Merkel said: “I strongly welcome the voluntary contribution from the banks. I believe that this is the right signal coming at a difficult time”.

Mr Sarkozy played down the significance of the banks’ participation in the aid package.

“If the rating agencies are using the word you just used (default), it is not part of my vocabulary. Greece will pay its debt,” he told reporters.

European Commission President Jose Manuel Barroso indicated plans to rein in the power of the agencies.

“We… endorsed the plan of reducing over reliance on external credit ratings,” he said, adding that policymakers would come forward in the autumn “with further proposals”.

The police team investigating phone hacking has been boosted from 45 to 60 officers, Scotland Yard repoerted

Metropolitan Police Deputy Assistant Commissioner Sue Akers said the move came after a “significant increase in the workload” over the past fortnight. Meanwhile, the investigation into alleged misconduct by newspapers may be spreading beyond News International.

Police have asked for files of an earlier inquiry into the use of private investigators, the BBC has learned. The files from Operation Motorman, which was run by the Information Commissioner’s Office in 2003, were requested three months ago.
They contain 4,000 requests from 300 journalists and 31 publications for confidential information from a private investigator, which in many cases had been obtained illegally.The investigation found the Daily Mail had made the most requests, followed by the Sunday People and the Daily Mirror.

The Daily Mail said the information obtained may have been for reasons of public interest, and Trinity Mirror Group said its journalists worked within the law and the Press Complaints Commission code of conduct.

On the hacking probe known as Operation Weeting, Ms Akers said there had been a “surge of enquiries and requests for assistance from the public and solicitors.”I have said all along that I would keep the resources under review and this has led to the increase. Similarly, if the demand decreases, I will release officers back to other duties.”

But the MPs said they were “alarmed” only 170 people had so far been informed and noted that “up to 12,800 people may have been affected”.They warned that if the process dragged on it would “seriously delay” the start of Lord Justice Leveson’s public inquiry announced by Prime Minister David Cameron.

After Ms Akers’ announcement, home affairs committee chairman Keith Vaz said: “This is excellent news. The extra resources will assist to help move things along much more quickly.”

Speaking at a press conference on Thursday, Deputy Prime Minister Nick Clegg said the public’s faith in institutions like the police had been “shaken” by the phone-hacking scandal.He said people’s “low and cynical” opinion of politics had probably become lower still as a result of the affair and there was now an opportunity to clean up the “murky” practices and relationships that had taken root.Innocent members of the public and their families had their privacy “abused in an outrageous way”, he added.In other developments, it emerged that former News of the World editor Andy Coulson was only given mid-level security clearance when he went to work as the prime minister’s communications director in May last year.

A Cabinet Office source confirmed to the BBC that he was subject to the “security check” level but not the more rigorous “developed vetting” level.

Mr Cameron told the Commons on Wednesday that Mr Coulson was not able to see the government’s most secret documents.

Elsewhere, the legal firm that represented News of the World owners News International (NI) has been given permission by the newspaper group to answer questions from the police and MPs.Harbottle & Lewis is said to have received e-mails from the company four years ago which the legal firm concluded did not reveal reasonable grounds for believing the hacking went beyond the News of the World’s royal editor Clive Goodman

Glenn Mulcaire, the private investigator jailed for phone hacking, speaks to the BBCBut on Tuesday, former director of public prosecutions Lord Macdonald, who reviewed for NI’s owner News Corporation the e-mails in a file relating to bribes allegedly paid to police, said they contained “evidence of serious criminal offences”.

The law firm had said it was being prevented from responding to “inaccurate” comments made by News International chairman James Murdoch because it was not allowed to breach its duty of client confidentiality.

Mr Cameron faced repeated questions on the issue in the Commons on Wednesday and told MPs he had had no “inappropriate conversations”.But Jeremy Hunt said afterwards that “the discussions the prime minister had on the BSkyB deal were irrelevant” because he, as culture secretary, was responsible for making the decision, prompting the Labour attack.

Mr Hunt’s aides later said he had been talking about discussions in general, rather than specific discussions with NI executives.

Conservative deputy chairman Michael Fallon dismissed what he called petty point-scoring by saying former NI executive Rebekah Brooks and Mr Cameron were both clear no inappropriate discussions had taken place.

Labour MP Nick Raynsford said that when Mr Coulson was still working at Downing Street, the cabinet secretary had been alerted to evidence of illegal phone hacking, covert surveillance and hostile media briefing against a senior government official – a claim the cabinet secretary denied.

But the Cabinet Office later completely reversed its position, conceding that a meeting on the matter did take place last summer.