Sunday, 12 October 2008

A Place in the Auvergne, Saturday, 11th October 2008


China may draw farms into market economy
By Edward Wong
Saturday, October 11, 2008
BEIJING: Chinese leaders are expected to allow peasants to buy or sell land-use rights for the first time, a step that could draw hundreds of millions of farmers more firmly into the city-centered market economy.
The new policy, which is being discussed this weekend by Communist Party leaders and could be announced within days, would be the biggest economic reform in many years and would mark another significant departure from the system of collective ownership and state control that China built after the 1949 revolution.
Party leaders began reviewing a draft of proposed rural land reform laws on Thursday at their annual planning session, now under way. Policy changes are expected to be announced after the session ends on Sunday, scholars and government advisers say.
The most important change would allow China's peasantry, which by official count includes about 800 million people, to sell land-use contracts to other farmers or to agricultural companies. Some economists say this shift would lead to more efficient land use and allow much larger farms to be established.
The Chinese leadership has long insisted that the country must remain self-sufficient in the production of staple foods, and is highly unlikely to allow farmers to sell land-use rights for nonagricultural development. But if a market for trading farmland developed as expected, peasants could gain a new source of cash income that could help revitalize the stagnant rural economy.
"If all the speculations are true, if senior leadership is going to lift all the restrictions out the door, I'd say this is a great positive," said Keliang Zhu, a lawyer with the China research division of the Rural Development Institute, a Seattle-based organization that has pushed for land rights for the rural poor. "It'll free up the dead capital and allow all this wealth to materialize."
Zhu added that the change would give China "huge momentum in terms of agricultural development."
Chinese leaders are alarmed by the prospect of a deep recession in leading export markets at a time when their own economy, after a long streak of double-digit growth, is slowing. Officials are eager to stoke new consumer activity at home, and one potentially enormous but barely tapped source of demand is the peasant population, which has been largely excluded from the raging growth in cities.
Average income in rural areas lags far behind the average in cities, giving China one of the starkest income gaps in the world, according to government estimates.
Many farmers work on tiny, state-allocated plots of land for a small fraction of the year, investing little in agriculture. While they are entitled to 30-year land-use contracts, the state retains ownership of rural land, and local officials often seize or reallocate it to suit their development priorities.
Rural land disputes are perhaps the biggest source of social unrest in China. Protests and riots in rural areas number in the thousands each year, according to national police estimates. They are often incited by allegations of corruption and illegal land seizures.
Many farmers leave the land to seek work in cities, but they are still classified as farmers under the country's population control policies and tend to work in low-wage factory or construction jobs on a seasonal basis.
Advocates for land reform say the proposed changes would create more asset wealth for farmers and increase land security, which would in turn encourage peasants to invest in farming and increase productivity.
A law enacted in 2002 allows limited land-use trades between individual farmers, but does not permit unrestricted trade between farmers and companies, straight sales of land-use rights or the option to use the land as collateral to obtain a loan, Zhu said.
The major state news organizations reported Friday that rural land reform was at the top of the agenda for the plenary session. China Daily, the country's official English-language newspaper, said, "The meeting is expected to make it easier for farmers to lease or transfer the management rights of their land, measures that have become necessary as many farmers move to cities as migrant workers."
Private ownership of land is not allowed under the Constitution, and rural land is still effectively controlled by township- and village-level leaders. Officials characterize the proposed policy changes as allowing the farmers to lease or trade their 30-year land-use contracts to individuals or companies.
The issue remains a delicate one. Many party traditionalists strongly favor collective land ownership. They have argued that China's economy is still not robust enough to absorb hundreds of millions of rural laborers full time. They also defend the system of allocating small plots of land to all rural families as guaranteeing farmers at least a subsistence income.
But repeated efforts to enliven the rural economy without freeing up land have failed, and proponents of moving toward partial privatization appear to have the upper hand.
One point under discussion is whether land contracts should be extended to 70 years from 30 years, scholars say, a move that would give farmers more security and presumably increase the value of their land-use rights.
Chinese leaders have been carefully preparing the public for a major announcement.
On Sept. 30, President Hu Jintao, who is also the secretary general of the Communist Party, made a well-publicized visit to Xiaogang village in Anhui Province, the site in 1978 of a bold experiment in rejecting Maoist-era land collectivization. Since then, the village has been held up as a symbol of rural land reform.
Hu said at the time that farmers would soon be allowed to transfer their land contracts.
"Not only will the current land contract relationship be kept stable and unchanged over time, greater and protected land contract and management rights will be given to the peasants," Hu said, according to Xinhua, the state news agency. "Furthermore, if the peasants wish to, they will be allowed to transfer the land contract and management rights in various ways and to develop management on an appropriate scale."
Some farmers are already informally leasing out their land-use contracts. After Hu's visit to Xiaogang, China Daily reported glowingly that one farmer who took part in the risky experiment in 1978, Yan Jinchang, had recently joined about 10 other households in renting 44 acres of land to a Shanghai company. In 2006, the company built a pig farm on the land.
Yan, 65, was made the pig farm's manager. "We raise special pigs that produce lean pork," Yan said, according to The China Daily. "Our meat sells well in Shanghai, and we are profitable."
From dynastic times onward, control of farmland has always been a central part of the relationship between Chinese rulers and the common people. Rulers are keenly aware of the fact that peasant rebellions related to land use and taxes have overthrown kingdoms throughout Chinese history.
Mao forced farmers into collectives, a move that turned out to be disastrous. In 1978, before the Chinese leader Deng Xiaoping officially announced the start of his bold Reform and Open policy, 18 families in Xiaogang, including Yan's, quietly decided to divide up communal farmland for personal use. It was the precursor to the land-use contract system that the government later enacted.
But since then, rural land reform has failed to keep pace with urban land reform, which partly explains while farmers have failed to capitalize on the economic gains of the past few decades. China allows urban residents to trade or sell their land-use contracts freely. That right has allowed people to profit from city property in ways that farmers have not legally been able to do.
There is speculation that Hu has chosen the party's planning session this year to announce the rural reforms in order to link himself in the public eye with Deng, whose initial economic reforms were unveiled 30 years ago this month.
Huang Yuanxi contributed research.


China sets plan to settle 470,000 Tibetan herders
Saturday, October 11, 2008
SHANGHAI: Authorities in the Chinese province of Sichuan plan to spend 5 billion yuan (431 million pounds) to settle 470,000 Tibetan herders in permanent houses, state media said, as part of efforts to promote the development of ethnic Tibetan areas.
Rioting broke out in ethnic Tibetan areas of the southwest province earlier this year after Lhasa, the capital of neighbouring Tibet, was hit by violent protests against Chinese rule.
Over the next four years, the Sichuan government will build brick houses and villages including primary schools, clinics and offices for the Tibetan nomads, Xinhua news agency said in a report on Saturday.
Of 533,000 herders in the province, 219,000 have no fixed residences and 254,000 are living in shanty homes, it added.
Provincial authorities also decided at a meeting on Friday to invite companies to design and make special tents and other goods to modernise the living standards of the herders, Xinhua said.
Xinhua did not detail how authorities would choose the locations of the villages or convince herders to move into them. Some ethnic Tibetans claim China has been trying to destroy their way of life as a people.
After a massive security operation to end this year's unrest, during which 21 people were killed in Lhasa, the Chinese government has announced a range of projects to promote the economic development of ethnic Tibetan areas.
Last month, Xinhua said the government would spend $3.1 billion (765 million pounds) by 2013 on a series of industrial schemes in Tibet, including 10 mining projects and five industrial zones.
($1 = 6.83 yuan)
(Reporting by Andrew Torchia; Editing by Sanjeev Miglani)

GM and Chrysler discuss merger
By Bill Vlasic and Andrew Ross Sorkin
Saturday, October 11, 2008
DETROIT: General Motors is in preliminary talks about a possible merger with Chrysler, a deal that could drastically remake the landscape of the auto industry by reducing the Big Three of Detroit automakers to the Big Two.
The talks between GM and Cerberus Capital Management, the private equity firm that owns Chrysler, began more than a month ago, and the negotiations are not certain to produce a deal. Two people close to the process said the chances of a merger were "50-50" as of Friday and would most likely still take weeks to work out.
At the same time, Cerberus is continuing to hold talks with other automakers including Nissan and Renault, said people familiar with the discussions. It is unclear at what stage those discussions have reached.
A merger of GM and Chrysler would be a historic event, with two of the most iconic names in U.S. industry coming together to survive in an increasingly difficult environment. Both have roots dating back decades in Detroit and, with Ford, long dominated the auto industry - until foreign carmakers like Toyota of Japan and Daimler of Germany began making inroads into the U.S. market.
The auto industry is being pummeled from all sides - by high gas prices that have soured consumers on profitable SUVs, by a softening economy that has scared shoppers away from showrooms, and by tight credit that is making it difficult for willing buyers to obtain loans. Both GM and Chrysler have been struggling with product lineups that are out of sync with consumer demand for smaller, more fuel-efficient cars.
General Motors' stock has fallen from more than $43 a share last year to less than $5, and it is burning through its cash hoard at a rapid rate. Chrysler, as a private company, no longer needs to report its finances.
The meetings between General Motors and Cerberus began more than a month ago, said people familiar with the discussions, and the companies have held several talks involving their most senior executives. Given that both GM and Chrysler are struggling, the two sides may determine a merger may not be in their best interests.
The exploratory talks have included debates over various calculations of the savings that would result from a merger, these people said, but neither side has yet to dig into each others' private financial books and records.
Speculation about a possible bankruptcy filing by GM has mounted in recent weeks because of that automaker's dwindling cash reserves. GM had $21 billion in cash on hand at the end of the second quarter, but it was burning through more than $1 billion a month. The credit rating firm Standard & Poor's put GM on negative credit watch on Thursday.
But GM has said it is confident that it can increase its liquidity, and it emphasized in a statement released Thursday that it was not considering a bankruptcy filing.
GM once commanded about 50 percent of the U.S. vehicle market, but its share so far this year has fallen to 22 percent, according to the research firm Autodata. Chrysler had a market share of about 15 percent before its acquisition in 1998 by Daimler, but its share this year has dwindled to 11 percent.
How government and labor might react to a potential merger of GM and Chrysler is unclear. Antitrust questions could be raised, but political issues could be overshadowed by the precarious financial prospects of both automakers.
If GM, the largest U.S. automaker, combined operations with Chrysler, the smallest of Detroit's Big Three, they would create an auto giant that would surpass Toyota, which recently has been battling GM for bragging rights as world's largest automaker.
A GM spokesman declined to comment on any specific talks with Chrysler. "Without referencing this specific rumor, as we've often said GM officials routinely discuss issues of mutual interest with other automakers," said the spokesman, Tony Cervone.
There was no immediate comment from Cerberus.
People briefed on the talks said they had started as an exploration of possible joint venture opportunities between GM and Chrysler.
Cerberus acquired an 80.1 percent stake in Chrysler in August 2007 for $7.4 billion from Daimler.
Under the terms of the deal being discussed, Cerberus would end up owning an unspecified equity stake in GM-Chrysler, people briefed on the talks said.
The ramifications of a merger would be enormous in the global auto industry. GM and Chrysler together would control more than 35 percent of the United States vehicle market, and be by far the dominant producer of pickup trucks, sport utility vehicles and minivans.
However, the potential merger carries enormous risks. Both GM and Chrysler are struggling mightily in what is the worst market for vehicle sales in the United States in 15 years.
While GM and Chrysler may be hamstrung by labor contracts from cutting jobs, the two companies could combine dealers, product lines and advanced vehicle technology.

Palin violated ethics law, inquiry finds
By Serge F. Kovaleski
Saturday, October 11, 2008
Sarah Palin, the Republican U.S. vice-presidential candidate, abused her powers as governor of Alaska by pressuring subordinates to try to get her former brother-in-law, a state trooper, fired, according to an investigation by the Alaska Legislature released Friday.
The report concludes that the action was a violation of the Alaska Executive Branch Ethics Act. It was not immediately clear what actions the State Legislature would take in light of the findings. Palin could be censured or the State Legislature could choose not to act at all.
The 236-page report found that Palin had exerted pressure to get State Trooper Michael Wooten dismissed and also allowed her husband and subordinates to press for Wooten's firing as a result of a messy divorce proceeding between Wooten and Palin's sister in 2005.
"Such impermissible and repeated contacts," the report states, "create conflicts of interests for subordinate employees who must choose to either please a superior or run the risk of facing that superior's displeasure and the possible consequences of that displeasure."
The inquiry found, however, that she was within her right to dismiss her public safety commissioner, Walt Monegan, who was the trooper's boss. Palin, who was elected governor in 2006, was tapped as John McCain's running mate in August, about a month after an inquiry was opened into her firing of Monegan.
At a news conference Friday evening, a local McCain-Palin campaign spokeswoman, Meghan Stapleton, said the finding that Palin had abused her power was the result of an "overreach" by the investigator who went beyond "the intent of the original" inquiry.
Stapleton added that the governor "feels absolutely vindicated" because the report concluded that Palin was acting within her legal authority when she removed Monegan from his position.
In the report, the independent investigator, Stephen Branchflower, a former prosecutor in Anchorage, said Palin had wrongfully allowed her husband, Todd, to use state resources as part of the effort to have Wooten dismissed.
Branchflower based his finding of abuse of power on Alaska's Executive Branch Ethics Act, which was established to "discourage executive branch employees from acting upon personal interest in the performance of their public responsibilities and to avoid conflicts of interest in the performance of duty," the report says.
The report said she had knowingly "permitted Todd Palin to use the governor's office and the resources of the governor's office, including access to state employees, to continue to contact subordinate state employees in an effort to find some way to get Trooper Wooten fired."
Further, it said, she "knowingly permitted a situation to continue where impermissible pressure was placed on several subordinates in order to advance a personal agenda."
Three years ago, Wooten and the governor's sister, Molly McCann, were locked in a harsh divorce and child-custody battle that further turned the Palin family against him. The couple divorced in January 2006.
As a result of several complaints against Wooten, he was suspended from the state police force for five days. However, Branchflower's report found numerous instances in which Palin, her husband and her subordinates tried to press for harsher punishment, even though Monegan and others told them they had gone as far as the law and civil service rules would allow. Palin has denied that anyone told Monegan to dismiss Wooten or that the commissioner's ouster had anything to do with the trooper.
But Monegan has said that he believes he lost his job July 11 because he would not bend to pressure to dismiss Wooten.
On July 28, Monegan was told by the governor's acting chief of staff that Palin wanted him to head the state Alcoholic Beverage Control Board and that she wanted to take the public safety agency in a new direction.
The same day, the Legislative Council, a bipartisan body of House and Senate members who can convene to make decisions when the Legislature is not in session, approved an independent investigation into whether the governor abused the powers of her office to pursue a personal vendetta.
Monegan said in an interview Friday night that he felt relieved.
"I feel that my beliefs and opinions that Wooten was a significant factor, if not the factor, in my termination have been validated," Monegan said. "I was resisting the governor from the very beginning on the Wooten matter to protect her from exactly what just happened to her here, being found to have acted inappropriately."
The report was released after Alaska lawmakers emerged from a private session in Anchorage where they spent more than six hours discussing the report and what portions should be made public. The Legislative Council ended up voting unanimously to make part of the overall report public.
The report chastised Palin for declining to be interviewed. "An interview would have assisted everyone to better understand her motives and perhaps help explain why she was so apparently intent upon getting Trooper Wooten fired in spite of the fact she knew he had been disciplined following the administrative investigation."
Palin has pledged to cooperate with a separate investigation by the state Personnel Board.
A pre-emptive report on the investigation by the McCain-Palin campaign that was released late Thursday said that beginning in October 2007, the governor and members of her administration had repeatedly clashed with Monegan over budgetary issues and the direction of his agency.
After months of "repeatedly ignoring the governor's budget priorities, making public statements that directly challenged the governor's policy agenda and taking numerous unilateral actions in conflict with the governor in support of his own policy agenda, his replacement in July 2008 should have come as no surprise," that report said.
Branchflower's report agreed that the reassignment of Monegan was proper.
"Governor Palin's firing of Commissioner Walt Monegan was a proper and lawful exercise of her constitutional and statutory authority to hire and fire executive branch department heads," it said. The Alaska Constitution says that "the governor may discharge department heads without cause" and that department heads "serve at the pleasure of the governor."
"In light of this constitutional and statutory authority, it is clear that Governor Palin could fire Commissioner Walt Monegan at will, for almost any reason, or no reason at all."
The report states that, while there is no doubt that Monegan's "failure to fire Trooper Wooten was a substantial factor in his own firing, the evidence suggest it was not the sole reason."
Palin has provided various reasons for terminating Monegan. Initially the governor said through a spokeswoman that Monegan's firing had nothing to do with a "personality conflict." Since then, her explanations have evolved, from saying that he was falling short on filling trooper vacancies and attacking alcohol-abuse problems in rural Alaska to showing an "intolerable pattern of insubordination" and a "rogue mentality" by resisting her authority and fiscal change.
Even as Palin drew large crowds and media attention as she campaigned across the United States, the issue was brewing in Alaska as the inquiry moved forward. But the McCain-Palin campaign repeatedly shrugged off the allegations, stating that they were not serious and that she was not guilty of any wrongdoing.
The McCain campaign flew operatives into Alaska to wage a public relations campaign on Palin's behalf and to mount legal challenges to the investigation.
Six Republican lawmakers in Alaska had sued to block the investigation, saying it was unfair and partisan. A lower court rejected the lawsuit, and on Thursday, the Alaska Supreme Court batted down an emergency appeal, paving the way for the publication of the report.

U.S. dropping North Korea from terror list, officials say
By Matthew LeeThe Associated Press
Saturday, October 11, 2008
WASHINGTON: The United States is dropping North Korea from a terrorism blacklist, officials said, in the latest attempt to salvage a nuclear disarmament deal before President George W. Bush's term ends in January.
The removal from the U.S. list of state sponsors of terrorism, is only provisional, the officials said. North Korea would return to the list if it failed to comply with inspections of its nuclear facilities as part of the effort to get it to abandon atomic weapons.
The action comes as North Korea moves to restart a disabled nuclear reactor and takes other provocative steps, including expelling UN inspectors and test-firing missiles. These steps in recent weeks have heightened tensions with the United States and threatened the shaky agreement.
It also follows days of intense internal debate in Washington and consultations with U.S. negotiating partners China, South Korea, Russia and Japan. Tokyo had balked at the move because North Korea has not resolved issues related to its abduction of Japanese citizens.
The decision has been in the works since the chief U.S. negotiator, Christopher Hill, returned from a trip to North Korea late last week. On his visit, he pressed North Korea to accept a plan to verify its accounting of nuclear activities.
The decision already has drawn criticism from conservatives who believe the U.S. is rewarding North Korea for bad behavior.
The Republican presidential candidate, John McCain, said in a statement he would not support the step unless it was clear that North Korea was serious about disarmament and would accept intrusive inspections of its nuclear sites.
"I expect the administration to explain exactly how this new verification agreement advances American interests and those of our allies before I will be able to support any decision to remove North Korea from the list of state sponsors of terrorism," he said.
McCain added that he was "concerned that this latest agreement appears to have been reached between Washington and Pyongyang and only then discussed with our Asian allies in an effort to garner their support."
On Friday, U.S. officials said they were trying to build a consensus among negotiating partners on the step as well as the inspection rules that Washington insists must accompany removing North Korea from the list.
At issue was whether tentative arrangements worked out last week between Hill and the North Koreans were acceptable to the others. Under those terms, the U.S. provisionally would remove North Korea from the terrorist list once the North agrees to the inspections.
North Korea, along with Iran and Iraq under Saddam Hussein, were branded as part of an Axis of Evil by Bush after the Sept. 11, 2001 terrorist attacks.

Austrian rightist leader dies in accident
The Associated Press
Saturday, October 11, 2008
VIENNA, Austria: Joerg Haider, who catapulted his rightist anti-immigration party into a powerful force with sharp attacks on rivals and provocative praise of the Nazi era, died Saturday in a car accident. He was 58.
His death on a little traveled stretch of a southern highway left Austria without one of its best-known politicians — a figure whose strident rhetoric that sometimes sounded contemptuous of Jews once led to months of international isolation for the Alpine republic.
Alone at the wheel, Haider was overtaking another motorist when his car veered off the road, crashing into a concrete pillar and overturning. He died of multiple injuries. Authorities said they do not suspect foul play, but are investigating.
Although he was commonly labeled a rightist, Haider was more a populist who defied categorization, often swiftly embracing positions contrary to his early reputation as an admirer of Nazi times and a hater of foreigners.
Often at odds with the telegenic Haider, politicians from across the ideological spectrum expressed shock at his death.
Austrian President Heinz Fischer described it a "human tragedy." Chancellor Alfred Gusenbauer expressed his condolences to Haider's family and said he had shaped Austria's domestic political landscape over decades.
Haider, who never held a post in the national government, was governor of the province of Carinthia at the time of his death and leader of the Alliance for the Future of Austria — a party he formed after breaking away from the far right Freedom Party in 2005.
He achieved notoriety for past remarks that sounded sympathetic to the Nazis and critical of Jews, a visit with Saddam Hussein on the eve of the Iraq war and a friendship with Moammar Gadhafi when Libya was still an international pariah.
He praised a member of Hitler's notorious Waffen SS convicted of eradicating the population of an Italy village as someone "who (only) did his duty." He lauded Nazis as creating "a good policy of employment." He condemned the "laziness of the Southerners" — meaning immigrants south of Austria, describing their countries as "the place of criminality and corruption."
And in a mocking reference to the first name of Vienna's Jewish leader, which is also that of a popular detergent, Haider said: "I don't understand how someone called Ariel can have so much dirt on his hands."
But later in his political life, he also endorsed European Union membership for Turkey — out of line with most Austrians. He apologized for some comments hateful of Jews and contemptuous of foreigners and stopped making others.
His indirect comparison of President Bush to Saddam and Hitler in 2003 outraged many members of Austria's political establishment while stirring consternation abroad. The year before, the U.S. State Department, which normally takes scant public notice of tiny Austria, linked Haider to electioneering comments that "could be interpreted as xenophobic or anti-Semitic."
Still, such sentiments, and his Freedom Party's anti-foreigner stance, played well with Austrians critical of America, unrepentant about their country's role in Nazi atrocities and fearful of the growing influx of Islam and other outside cultures.
When Haider took over the party in 1986, it was a staid middle-of-the-road fringe organization polling well below 10 percent nationally. By 2000, it was No. 2 force in the country, capturing 27 percent of the vote and powered by Haider's sharp attacks on traditional political rivals and his bursts of xenophobia and immigrant-bashing.
His party subsequently formed Austria's government in coalition with the centrist People's Party, prompting Israel to recall its ambassador in protest and the EU to impose unprecedented sanctions on a fellow member nation.
But for Haider, the balloon burst five years later — his party split, and his faction sank nearly into inconsequence as the extreme radical wing of the party blossomed in popularity.
That trend was moderated this year after Haider took an active role in the fortunes of his Alliance for the Future of Austria. The party took nearly 11 percent of the vote last month, up from just over 4 percent in the last election.
Haider was born Jan. 26, 1950, in the Upper Austrian town of Bad Goisern to parents who were enthusiastic Nazi party members. His father, a shoemaker, was forced after the war to unearth mass graves dug by the SS, while his mother, a teacher, was prohibited from working in her profession for several years.
His right-wing associations continued into high school, where he was a member of a dueling fraternity that is part of Austria's network for the country's extreme nationalists. In 1974, he took over the leadership of the youth wing of the party he would later head, while studying for his doctorate in law at the University of Vienna.
A brief stint in the army was followed by work as a university lecturer before he turned to full time political activities.

IMF warns of meltdown
Saturday, October 11, 2008
By Lesley Wroughton and Francois Murphy
The IMF warned on Saturday the world's financial system was on the brink of meltdown as France and Germany promised a European crisis response to try to prevent the worst global downturn in decades.
The International Monetary Fund said it backed a Group of Seven plan to try to stabilize markets and urged "exceptional vigilance, coordination and readiness to take bold action" to contain the firestorm sweeping through markets.
French President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting in France, said they had "prepared a certain number of decisions" to present at a Sunday meeting of European leaders as they work feverishly to restore blocked credit markets to working order.
The United States appealed for patience but the IMF said time was short after industrialized nations failed to agree on concrete measures to end the crisis at a meeting on Friday.
"Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," IMF chief Dominique Strauss-Kahn said.
Strauss-Kahn later expressed confidence that government action will prove powerful enough to "unfreeze" markets in coming days.
U.S. President George W. Bush met with G7 economic chiefs and officials from the IMF and World Bank and said top industrial nations would work together to solve the crisis.
"I'm confident that the world's major economies can overcome the challenges we face," Bush said, adding that Washington was working as fast as possible to implement a $700 billion financial bailout package approved a week ago.
"The benefits will not be realized overnight, but as these actions take effect, they will help restore stability to our markets and confidence to our financial institutions."
Panic has swept through global markets, driving stocks to a five-year low on Friday and prompting banks to hoard cash. That has choked off lending, threatening to turn a global economic slowdown into a dangerously deep recession.
U.S. Treasury Secretary Henry Paulson said risks to the global economy were "the most serious and challenging in recent memory."
An emergency meeting of euro zone leaders on Sunday will discuss a bank rescue package, taking a British initiative to guarantee lending between banks as a reference point, a source close to the French presidency said.
France's Sarkozy said euro zone countries were seeking a joint solution, but declined to provide specifics. He planned to meet with British Prime Minister Gordon Brown shortly before Sunday's euro zone gathering.
French Economy Minister Christine Lagarde sounded a cautious note about the British proposals, saying guarantees of interbank lending or bank deposits would have to to be checked to ensure they don't cause market distortions in the European Union.
If one country offers guarantees, it can add pressure on its neighbors to do the same.
Britain's rescue plan, launched last week, makes available 50 billion pounds ($86 billion) of taxpayers' money for injection into its banks and, crucially, calls for underwriting interbank lending, which has all but frozen around the globe.
Media reports on Saturday said Germany was readying a rescue package that could be worth up to $549 billion, including the injection of equity capital worth "double digit" billions into its banks and guarantees for interbank lending.
Rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no specifics on collective action.
In a surprisingly brief statement, the G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- stopped short of backing the British interbank lending guarantee, something many on Wall Street saw as vital to end growing market panic.
Kenneth Rogoff, a Harvard University professor and former IMF chief economist, said the G7 would have been better served adopting some version of the British plan so that banks would feel confident enough to loosen their grip on lending.
"Saying that they'll take all steps necessary leaves hanging the question of whether they know what is best and necessary," he told Reuters. "It was a signature moment for the G7. I think markets are going to be very disappointed."
European Central Bank President Jean-Claude Trichet said markets needed time to digest a series of dramatic steps taken by world central banks in recent days, including pouring billions of dollars into financial markets and lowering interest rates in the broadest coordinated cut on record.
(Reporting by G7 team; Writing by Emily Kaiser and Glenn Somerville; Editing by Tim Ahmann)
AIG's gallows humour gives bankers a laugh
Saturday, October 11, 2008
WASHINGTON: Insurance giant American International Group , on the receiving end of a multi-billion dollar bailout from the U.S. Federal Reserve, was trying hard on Saturday to look on the bright side of life.
"Credit markets do not function. Why not, because the word credit comes from credibility," AIG Vice Chairman Jacob Frenkel told a group of top global bankers at a lively luncheon where he took a philosophical view of the upheaval in financial markets.
"The left side of the balance sheet has nothing right and the right side of the balance sheet has nothing left. But they are equal to each other. So accounting-wise we are fine," he told the Institute of International Finance.
AIG, crippled by losses on bad mortgage bets, was bailed out by the Fed with an $85 billion (50 billion pound) cash lifeline last month. Three days ago, the Fed expanded its assistance in a manner that could bring the total aid up to around $120 billion.
"Transparency is 'what you see is what you get' -- and what you don't see gets you," Frenkel said.

Quake kills 4 in Russia's Chechnya region
Saturday, October 11, 2008
GROZNY, Russia: Four people were killed in Russia's Chechnya region Saturday when an earthquake shook the Caucasus mountains, the Emergencies Ministry said.
The U.S. Geological Survey put the quake's magnitude at 5.9, classing it as moderate.
The four victims were killed in the Chechen town of Kurchaloi, about 20 km (12 miles) southeast of the regional capital Grozny, a ministry spokesman said on Vesti news channel. Russian news agencies said the dead included a soldier who was killed when a wall collapsed on him.
The 40-second tremor knocked windows out of a literature institute in Grozny and cracked the facade of the regional administration headquarters. But damage in the town was otherwise minimal.
A Reuters Television producer in Tbilisi said the quake could be felt in the Georgian capital nearly 250 km (180 miles) away.
(Writing by Melissa Akin: Editing by Richard Balmforth)

U.S.-led forces kill 9 militants in Afghanistan
Saturday, October 11, 2008
KABUL: U.S.-led coalition and Afghan troops killed nine militants in overnight clashes in southern and central Afghanistan, the U.S. military said on Saturday.
Violence has surged in Afghanistan with some 3,800 people, a third of them civilians, killed by the end of July this year.
In the latest fighting, U.S.-led coalition troops killed four militants including two al Qaeda and Taliban commanders in Ghazni province on Friday, about 200 km southwest of Kabul. Two other suspects were detained.
"The al-Qaeda and Taliban commanders were known weapons and foreign fighter facilitators," the U.S. military said.
Five Taliban insurgents were killed in an operation in the southern province of Kandahar, the U.S. military said in another statement.
The escalating violence has prompted some in the Afghan government and its allies to consider talks with the Taliban insurgents to end the war.
(Reporting by Hamid Shalizi, Editing by Sanjeev Miglani0
Pakistan tribes raze Taliban houses after bombing
Saturday, October 11, 2008
By Mohammad Hashim
Pakistani tribesmen exchanged fire with Taliban militants and destroyed their houses in a northwestern tribal region after a suicide attack killed at least 50 people, residents and officials said Saturday.
Television channels put the death toll at as high as 80.
The bomber detonated a car loaded with explosives in the middle of a tribal council meeting in Orakzai region Friday where hundreds of tribesmen were discussing a government-backed plan to raise a lashkar or tribal militia to evict militants.
Pakistan's tribal areas on the Afghan border are regarded as safe havens for al Qaeda and Taliban militants, and the government is under pressure from the United States to take stern action to stem the flow of insurgents to Afghanistan.
"Everyone is angry and upset here. The tribesmen attacked houses of the Taliban in Khadizai after the bombing. Two houses have been demolished," Noorzad Orakzai, a resident of the Khadizai area where attack took place, told Reuters by telephone.
"There have been exchanges of fire throughout the night. It's still going on," he added.
Suspected U.S. drones fired two missile Saturday into a Pakistani region on the Afghan border killing three people, a Reuters witness and an intelligence official said.
It was the second such attack in North Waziristan tribal region this week. "The missiles were fired with a gap of a minute," the Reuters witness said from Miranshah, the main town of North Waziristan. "They caused huge blasts. I saw flames rising towards the sky after the explosions."
A senior government official in Orakzai told Reuters they had confirmation of 51 deaths from the car bombing and the toll could rise further. He said more than 100 people were injured, many of them critically.
The attack in Orakzai came a day after a suicide blast inside the heavily guarded police headquarters in the capital Islamabad in which eight policemen were wounded.
Orakzai has been the most peaceful of Pakistan's seven semi-autonomous tribal regions. Unlike most of the others, Orakzai does not border Afghanistan.
Militants have unleashed a wave of violence in Pakistan in recent months after the military launched major offensives against them in the rugged northwest including Bajaur and Swat regions.
Saturday, a soldier and three militants were killed in clashes in Swat, security officials said.
The mounting militant threat prompted the government to convene a closed joint session of the two-chamber parliament for a briefing by intelligence officials on internal security.
The parliamentarians are due to begin debate on the situation after Pakistan's newly appointed intelligence chief briefed them this week on the militant threat.
But a Pakistani foreign ministry spokesman criticised U.S. missile attacks into Pakistan, saying it will stoke public anger.
Since the start of September the United States has carried out at least 10 missile attacks, and a commando raid on militant targets in Pakistan's tribal areas.
"Such strikes will fuel anti-American sentiments which will neither be beneficial for us nor for the United States," foreign ministry spokesman Mohammad Sadiq said.
(Writing by Zeeshan Haider; Editing by Richard Balmforth)
Five killed in U.S. missile attack in Pakistan
Saturday, October 11, 2008
By Haji Mujtaba
Suspected U.S. drones fired two missile on Saturday into a Pakistani region regarded as an al Qaeda and Taliban safe haven, killing at least five militants, residents and an intelligence official said.
It was the second such attack in North Waziristan tribal region on the Afghan border this week.
"The missiles were fired with a gap of a minute," a Reuters witness said from Miranshah, the main town of North Waziristan. "They caused huge blasts. I saw flames rising towards the sky after the explosions."
An intelligence official said five militants were killed in the attack on a house in a shanty neighbourhood known as Machis Colony. There were foreigners also among those killed and their number and nationality had not yet been ascertained, he said.
"The mud-walled house has long been used by the guests as their abode," he said, referring to the term used for the militants in the tribal areas.
Residents said the drones had been flying over Miranshah for hours and tribesmen also fired shots in the air before they struck.
The Pentagon had no comment on the report.
Six people, including three Arab fighters linked to al Qaeda, were killed in a similar attack near Miranshah on Thursday night.
Since the start of September the United States has carried out at least ten missile attacks and a commando raid on militant targets in Pakistan's tribal areas.
Pakistan has condemned these attacks and a Pakistani foreign ministry spokesman earlier on Saturday said these strikes would neither be helpful for Pakistan nor for the United States.
"Such strikes will fuel anti-American sentiments which will neither be beneficial for us nor for the United States," the spokesman Mohammad Sadiq said.
(Additional reporting by Alamgir Bitani, writing by Zeeshan Haider; editing by Sami Aboudi)
U.S. warns of "Al-Qaeda" group threat in Sudan
Saturday, October 11, 2008
By Andrew Heavens
The United States said on Saturday a group called "Al Qaeda in the Land of the Two Niles" has threatened its citizens and allies in Sudan, adding to fears of a growing extremist presence in the country.
Embassy officials also said they had warned staff against using a Khartoum cafe popular with Westerners and rich Sudanese.
The Sudanese government has repeatedly denied al Qaeda has an active presence in Sudan.
A message on the U.S. embassy website said the group had issued a statement which referred to the murder of U.S. aid official John Granville and his driver on January 1.
The group said its "jihad and fight against the United States of America and its allies of crusaders and apostates will continue," according to the embassy.
Another U.S. embassy message said it had warned staff not to use the Ozone cafe in an affluent Khartoum district as it was "particularly vulnerable."
Ozone is an open air cafe in the centre of a busy roundabout surrounded by houses and businesses. Staff and customers are clearly visible from the road and buildings.
An embassy spokeswoman said she could not comment on whether the Ozone warning was linked to the Al Qaeda threat.
There have been growing fears that extremist groups have set up operations in Khartoum.
In August 2007, Sudanese security services said they had broken up a plot to attack the French, British, U.S. and U.N. diplomatic missions in Khartoum.
The group was discovered in a Khartoum house after explosives went off by accident, foreign sources said.
Five men are currently appearing in court in Khartoum charged with the murder of John Granville and his driver Abdelrahman Abbas Rahama 1. All five deny the charge.
Prosecutors said the group that killed Granville and his driver targeted Americans it thought were trying to "Christianise" the predominantly Muslim nation.
Earlier this year, al Qaeda graffiti also started appearing on walls in the capital.
Sudan, which hosted al Qaeda chief Osama bin Laden in the 1990s, has been on a U.S. list of state sponsors of terrorism since 1993.
(Editing by Angus MacSwan)


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