This proposal has angered the Swedish government

Saturday, 10 October 2009

Valdis Dombrovskis said his coalition would meet on Monday to look at ways to extend the 325m lats ($677.5m; £423m) of cuts already agreed for 2010.
Latvia is under pressure to increase cuts for next year to 500m lats.
This is the level it agreed with the EU in exchange for 7.5bn euros ($11bn;£6.9bn) of emergency loans.
The country needed this financial support, which also includes contributions from the International Monetary Union and the Swedish government, because it has been hit hard by the global recession.
Its economy contracted at an annual rate of 18.7% from April to June, while its unemployment rate soared in August to 18.3%, the highest in the European Union after Spain.
'On track'
ANALYSIS
By Mark Sanders, Europe business correspondent
Latvia's economy is one of the sickest in Europe.
Its government is having to make deep cuts to public spending in order to qualify for international aid. Public services like the health care system are already being squeezed.
But under pressure, the government will meet next week to discuss further cuts. That's likely to mean more pain for many in Latvia.
There have already been disturbances in the country which brought down the previous government. And with the economic crisis weighing down so heavily on its people, the current government knows there could be a political price to pay.
"We are working on additional measures... so that we reach agreement with international loan providers," said Mr Dombrovskis.
"We are on track to meet our budget deficit target both this and next year."
He said the deficit would fall to 10% this year, and 8.5% in 2010.
Monday's cabinet meeting comes a day before the EU's European Monetary and Economic Affairs Commissioner Joaquin Almunia's is due to visit Riga to discuss the continuing impasse.
Mr Dombrovskis had earlier told BBC World that the worst of Latvia's recession is now over, and ruled out devaluing the currency.
Monday's meeting is also due to discuss the prime minister's controversial proposal that Latvian homeowners behind on their mortgages should only be liable for the value of their property rather than the level of their outstanding loan.
This proposal has angered the Swedish government, whose banks dominate the sector in Latvia.
While Mr Dombrovskis admitted that there remained "difficulties to overcome", he said the Latvian economy was now "stabilising".

More protection

Mr Obama said it was more important than ever to have a new consumer watchdog, and accused vested interests of trying to scupper reform.
He accused the US Chamber of Commerce of trying to "kill" plans for the Consumer Financial Protection Agency.
The president was talking on the day he received the Nobel Peace Prize.
More protection
His administration has proposed a number of regulatory reforms designed to prevent another financial crisis.
One of them is to create a new consumer agency to regulate products such as credit cards and mortgages.
It would also force banks to offer low-risk, standard versions of these products.
"Predictably, a lot of banks and big financial firms don't like the idea of a consumer agency very much," Mr Obama said.
"They're doing what they always do - using every bit of influence to maintain the status quo that has maximised their profits at the expense of American consumers.
"In fact, the US Chamber of Commerce is spending millions on an ad campaign to kill it."
But the president said he would not back down from his plans for reform. He said the new agency was needed to protect US consumers from "ridiculously confusing contracts" used by financial institutions.
"We have already seen and lived the consequences of what happens when there is too little accountability on Wall Street and too little protection on Main Street, and I will not allow this country to go back there," he said.
The White House also wants to give the central bank, the Federal Reserve, new powers over big financial firms, including the ability to seize banks whose collapse could threaten the economy.

Nigeria depends heavily on oil exports

Thursday, 8 October 2009

The fund was set up as a way to protect Nigeria's economy from unpredictable movements in the oil price.
The Nigerian government says it will take money from the fund for an economic stimulus package.
Economists fear the move will leave the country vulnerable if recovery in the global economy suffers a setback.
Spending fears
The government wants to tap into the fund, which currently holds about $9bn, to stimulate the economy.
Nigeria depends heavily on oil exports, and the savings fund is there to shelter the economy if the oil price falls.
But there is criticism over how it plans to spend the money.
Economic stimulus packages in other countries have targeted infrastructure projects, job creation, and tax cuts for small businesses.
Nigeria's government says it will spend half the cash on clearing the debts of federal government contractors.
The rest of the money is to be handed out to local government - to states and local authorities. Many of them have records of serious corruption and financial mismanagement.
Economists - even some advising the government - are warning that the plan is not focussed enough to make an impact.

Many agree that the US economy is now recovering

The Institute of Supply Management (ISM) said the sector, which accounts for 80% of the US economy, increased and the jobs situation improved.
Separate data showed that the US jobs market strengthened last month for the first time since January 2008.
The data boosted US markets with the Dow Jones index rising 1.2%. The Nasdaq and the S&P 500 also saw gains.
Many agree that the US economy is now recovering, but there are mixed signals about the strength of the upturn.
Markets boost
The service index rose to 50.9 last month, from 48.4 in the previous month, the first increase since August 2008, ISM said.
Any figure above 50 indicates growth, while a reading below 50 signals a contraction in the sector. Analysts had expected a reading of exactly 50.
The ISM also said service-sector employment contracted at a slower pace than in August.
The data gave investors confidence, and the Dow closed 112 points higher at 9,599.75, while the Nasdaq rose 1% and the S&P 500 gained 1.5%.
European markets had also rallied earlier, with leading share indexes in London, Paris and Frankfurt all closing higher.
'Reluctant'
The data comes after the Labor Department said on Friday that the US economy lost 263,000 jobs in September, more than had been expected, taking the jobless rate to a fresh 26-year high.
Job creation tends to lag behind any recovery in the economy.
"Businesses are more reluctant than in the past to start the hiring process," said Bank of America economist Ethan Harris. "We won't likely see increased hiring until January."
The US Conference Board said its employment trends index edged up to 88.5 from an upwardly-revised 88.2 in August.
But the index is now down 15.6 percent from one year ago, it said.

Weakness of the dollar

WHY HAVE GOLD PRICES REACHED SUCH HIGHS?
There are several factors at play which are leading to demand for gold rising, pushing up the price:
Weakness of the dollar: The greenback is commonly seen as the World's reserve currency. Low interest rates and the US government's massive economic support package have weakened the dollar.
Those who would typically have invested in that currency are looking for other places to put their money where it will, they hope, gain value.
Speculation: A lot of the investment into gold is coming from institutions such as hedge funds - whose money needs to go somewhere.
When banks are offering very low rates of interest on savings - and money can be borrowed extremely cheaply - gold becomes attractive, observers say.
Inflation risk: Gold is seen as a hedge against inflation. Right now, inflation is pretty low, but mounting worries about potential inflation in 2010 may be enticing more investors to the precious metal.
Psychological: Gold has a "primeval" quality argues Adrian Ash of UK online gold exchange, BullionVault.com (which makes its money when customers buy and sell gold).
He says that while it is essentially a "lump of metal with little purpose", gold tends to hold its value over the long term and is not anchored to the value of cash.
This means that people are drawn to it in uncertain times, Mr Ash adds, though he cautions the price can be volatile.
Seasonal: In Western cultures, individuals buying into gold as an investment remains relatively rare. It is not the kind of advice you are likely to get from a financial adviser, for example.
However, in countries such as China and India, buying gold as in investment is more common. And at this time of year, in the run-up to the Diwali festival, there is a seasonal increase in gold purchases because the metal is traditionally given as a gift.
Indian farmers are also big gold customers at this time of year - seeing it as a way of keep their profits safe after harvest - free from threat of currency fluctuations.
DOES THE PRICE OF GOLD REALLY MATTER?
The reality for most people is that their main contact with Gold is when Spandau Ballet gets played on the radio.
Arguably its biggest role is as a sentiment barometer. A high gold price is an indicator that all is not well with the global economy.
It could be bad news if you are looking for an engagement ring or another piece of jewellery. Higher prices are likely to be passed on to shoppers.
On the other hand, it could be good news if you have gold that you no longer want and could do with making some money.
The rising price has seen an explosion in "scrap gold dealing" - where High Street shops and postal companies will offer to turn the gold into cash.

Weakest of the major currencies last week

Sunday, 4 October 2009

The Australian dollar was the weakest of the major currencies last week, and a bearish engulfing candle on the daily AUDUSD charts on October 1 suggests further declines could be in store. Since the Australian dollar still tends to move with other risky assets, traders should look for any fallout from the release of the G7 statement over the weekend. Though the statements don’t usually signal any sort of groundbreaking new biases, there are lingering concerns that there may be a more pronounced focus on currencies, and more specifically, US dollar weakness. Such a move would likely lead the US dollar higher, and thus, AUDUSD lower, on speculation of a coordinated intervention effort. Later in the week, the Australian dollar is going to encounter two of its most market-moving reports: a rate decision from the Reserve Bank of Australia and the net employment change.
On Tuesday, the Reserve Bank of Australia (RBA) is anticipated to leave their cash rate target unchanged for the sixth straight month at 3.00 percent, and the Australian dollar may only respond to a change in the bias of RBA Governor Glenn Stevens’ monetary policy statement. As it stands, Credit Suisse Overnight Index Swaps (OIS) are pricing in a 22 percent chance of a 25 basis point rate hike during this upcoming meeting, and 175 basis points worth of hikes over the next 12 months, which is generally in line with what we’ve seen since early August. It was actually in early July when the RBA’s bias shifted from dovish to neutral, as Stevens removed a line from his statement noting that “scope remains for some further easing of monetary policy.” As long as we see these RBA statements continue to provide progressively optimistic outlooks, the markets are likely to remain in favor of large rate increases over the next year. However, if the RBA starts to signal a more cautious tone, this sentiment could shift very quickly and lead the Australian dollar lower.
On Wednesday, the net employment change for the nation is anticipated to fall for a second straight month, this time by 10,000. As a result, the Australian unemployment rate is projected to edge up to a 6-year high of 6.0 percent from 5.8 percent, but this isn’t so bad when compared with other regions like the US, the UK, and the Euro-zone where unemployment has reached 26-year, 12-year, and 10-year highs. Regardless, the net employment change is similar to the US non-farm payrolls report in that the results are notoriously difficult to predict and thus, prone to providing “surprising” news that can trigger volatile moves in the Australian dollar.