French bees find a haven in Paris
Corinne Moncelli offers guests at her Eiffel Park Hotel more than a view of the Paris landmark. She serves them honey from bees she keeps on the rooftop.
There are more than 300 known colonies in the French capital, up from about 250 five years ago, according to the National Beekeepers' Association. Hives have appeared on the roof of the Opéra Garnier, on balconies and in parks.
Bees are thriving in cities because "flowers and plants are changed constantly and there aren't pesticides," said Moncelli, who co-owns the hotel with her husband, Pascal.
The success of a three-year-old French program to encourage beekeeping in cities, the largest such project in the world, is sparking hope of a revival among their country cousins. Global agriculture, valued at € 153 billion, or $214 billion, relies on pollination by bees, according to the French National Institute of Agricultural Research, or INRA.
As in the United States and in Britain, where bee colonies are dying, about 300,000 to 400,000 French hives have disappeared every year between 1995 and 2007, victims of pesticides, pollution and disease.
"We need bees in the countryside," said Henri Clément, president of the Paris-based National Apiculture Association, which ran the project. "The potential of cities is limited. Our operation in the city is one of creating awareness."
The Eiffel Park Hotel began beekeeping three years ago, when it turned one of its terraces into a site for two to three hives, which produce 150 kilograms, or 331 pounds, of honey a year. The hotel gives honey out as gifts and serves it at breakfast.
"We say 'close the jars when you're done and avoid wearing lots of perfume or the bees may think you're a big flower,"' Moncelli said.
The apiculture association rolled out the French urban program in 2005, and will present its results next year in Montpellier, France, at a conference organized by Apimondia, a global group of beekeepers' associations, based in Rome.
The United States and Britain also have used cities as breeding grounds for bees, although the "French program is very well developed and has huge scale compared to others," said Asger Sogaard Jorgensen, the president of Apimondia. "In many countries, the countryside has become a desert for bees."
The United States saw large hive losses in 2006, 90 percent or more in some cases. Colony Collapse Disorder, the sudden, massive disappearance of bees, was found in 35 states and has harmed hives in Asia, Europe and South America, according to the United States Department of Agriculture. Pesticides, mites and viruses are among leading causes.
In Europe, about 84 percent of crop species depend directly on insect pollinators, especially bees, according to a June report co-authored by Bernard Vaissière, the head of research at the INRA. France is Europe's biggest agricultural producer.
"There is mounting evidence of pollinator decline all over the world and consequences in many agricultural areas could be significant," the report said.
Jean Paucton, who has kept bees on the roof of Paris's opera house for about 25 years, has seen that rural decline first hand. The retired opera house accessory artist said that the hives, which overlook the Galeries Lafayette department store in central Paris, are healthier than the ones he keeps in the country.
Paucton's city hives produce 450 kilograms of honey a year. He sells little jars of it to the opera house gift shop for about €4, which are resold for €14.50. Paucton, 75, said losses in the countryside can be as much as 50 percent, while the number in the city doesn't even approach 5 percent. Some years, he doesn't lose any in the city, he said.
"The harvest is worse and worse in the countryside," he said. "There aren't farmers anymore. There are only agricultural companies and they use pesticides."
His experience is mirrored by that of Michèle Bonnefond and Armand Malvezin, the beekeepers who maintain the Eiffel Park Hotel's hives. The couple also keeps hives in Corrèze, one of France's most rural regions, and there have been bigger losses there.
On a recent weekday, they sprayed smoke on the hotel terrace to calm the bees before extracting honey. They scraped a layer of wax off the honeycombs, placing it in a centrifuge machine, catching the honey that flew against the sides of the machine, through a faucet into jars. They said they don't obtain such rich supplies from their Corrèze hives.
The apiculture association has called on the French government to block the use in the country of some pesticides, which it says harms bees. Like with its city project, it is also encouraging more people to keep bees in rural areas.
Meanwhile, Olivier Darne, 37, an artist and beekeeper who designed an exhibition at the Parc de la Villette in Paris, that ran through Sept. 28 and included a glass-walled bedroom near a hive to bring people closer to the bee, said he's worried.
"Bees are dying everywhere but in cities," he said. "The bees are speaking to us."
Brother Nikanor, a Nasdaq broker turned monk, advises former colleagues to put a jar with soil on their desks to remind them where we are all heading and what matters in life.
As western banks fold into each other like crumpled tickets and commentators portray the current crisis as the last gasp of modern capitalism, Hristo Mishkov, 32, shares the pain -- and offers home truths.
His story partly resembles that of Brother Ty, the monk-tycoon protagonist of the 1998 satire "God is my Broker" by U.S. writers Christopher Buckley and John Tierney -- he failed on Wall Street and became a monk.
But 10 years later, the similarities are superficial: the Bulgarian had a successful broking career, does not write self-help manuals and aims to get happy, not rich.
His interest in financial markets began under communism in the 1980s when he and other children created their own play stock exchange in their apartment block's basement in Sofia.
Five years ago, after failing to find happiness in the life he lived, the Christian Orthodox who hadn't practised as a child quit the New York-based market for a dilapidated Bulgarian monastery that once served as a communist labour camp.
Retaining one luxury -- a mobile phone, which connects him with both potential donors and former trading colleagues -- he has brought the rigour of his broking experience to his faith.
He has helped to raise hundreds of thousands of levs (dollars) to rebuild the monastery -- a hard task in a country where charity is not part of the mentality and building shopping malls and golf courses is a priority.
"Many people... in the world do not realise that they have not earned the food they eat, that they take without giving," Mishkov told Reuters. "But if someone consumes more than they have earned, it means someone else is starving.
"It is right to see people who consume more than they deserve shattered by a financial crisis from time to time, to suffer so that they can become more reasonable."
Being a trader has seldom been more traumatic: placing bets on political decisions about billion-dollar bank bailouts which, if they fail, could mean much more than a bad day for yourself or colleagues, but also jeopardise livelihoods.
Some have found solace in religion, others in humour, but a few fall. Surveys show traders reporting more stress and every news report of a trader suicide is accompanied by suggestions the pressure may have been too much.
"We always search for happiness in the outside world, in material things, which makes us constantly unsatisfied, angry with ourselves and the world," said Mishkov, who exudes a sense of tranquillity, intelligence, and humour.
Greed and the marketisation of our lives have reached the point where people have been turned into a commodity -- even their health can be traded like a stock, he said.
"We have so quickly lost our human appearance, we have become beasts ... There's no-one to count on and say 'hey neighbour come help me.' He will come but demand a payment."
His monastery, tucked among hills 50 km (31 miles) west of Sofia, was founded in the 12th century. The communist regime which banned religion turned it into a labour camp, then a children's pioneer camp and a livestock farm.
Now Mishkov works hard every day milking buffalo cows and building stone walls. He says he is not against rich people but can only respect those who contribute to the good of society -- pointing to Microsoft founder Bill Gates as an example.
As a younger man working for more than two years for Karoll, one of Bulgaria's leading brokerages, Mishkov was good at his job, former colleagues say.
"He was a religious person and that annoyed me sometimes," said Alexander Nikolov, head of international capital markets at Karoll. "There were occasions when he would not show up at work because of some religious holiday."
His colleagues were stunned when he decided to become a monk, but Mishkov felt the time had come to look after people's souls.
"Everybody can be a good broker but this does not bring much benefit for the world," he said. Religion can help people cope in today's stressful times and find answers, Mishkov added.
Churches in New York's financial district reported last month increased attendance at lunchtime meetings, with many more people in business attire than usual, when some of the world's biggest investment banks collapsed.
Steven Bell, chief economist of London hedge fund GLC, said keeping a sense of reality is what traders needed.
"It is very important to just remind yourself that there is a real world out there. In any job but particularly in financial markets, you need to try and keep your feet on the ground," Bell told Reuters by phone.
Mishkov says the crash should also help correct a dangerous global trend of an excessive outflow of labour to the service sectors, by people attracted by high pay and an easy life.
"Milk is not produced by computers, bread doesn't come from a good company PR. It is necessary to plough, sow and harvest before that," says the monk.
Food scandal touches new dairies and Hong Kong
BEIJING: Melamine has been found in milk powder from 15 more Chinese dairies, the authorities said Wednesday, and Hong Kong's food safety agency said its tests had found melamine in a Japanese-brand cheesecake that is made in China.
Contamination with melamine, an industrial chemical that can make a product appear to have more protein than it does, has been blamed for the deaths of four children and kidney ailments among 54,000 others. More than 13,000 children have been hospitalized and 27 people have been arrested in connection with the poisonings.
The Hong Kong Center for Food Safety said a sample of Lotte Cream Cheese Cake, manufactured by Lotte China Foods in China, was found to contain melamine.
According to data on the Chinese food safety administration's Web site, 31 new batches of Chinese milk powder were found tainted with melamine. Of the 20 companies on the list, 15 have not been named in previous tests.
It was a national holiday in China and officials could not be reached for comment.
In the most recent tests, nine of the batches containing melamine were produced by Sanlu, the company at the center of the scandal.
The new batches tested were mostly milk powder products for adults, ranging from full-fat milk powder to milk powder said to be high in calcium and zinc. Previous testing, results of which were posted on Sept. 16, found melamine in 69 infant milk powder batches.
The new figure brings to at least 100 the number of tested batches of milk powder found to contain melamine.
Tests have also found melamine in 24 batches of liquid milk produced by three of China's best-known dairies.
The Web site quoted the State Administration of Quality Supervision, Inspection and Quarantine as saying it had tested 265 batches produced by 154 different companies before Sept. 14. China has 290 companies making powdered milk, the administration said.
In Japan, a trading company has begun recalling a popular dessert imported from China after finding chemical contamination in the treats, officials said Wednesday.
The company, Kanematsu, said tests had found that the treats, made by a frozen food manufacturer in China's southern province of Guangdong, contained a tiny amount of melamine.
Melamine, which is high in nitrogen, is used to make plastics and fertilizers, and experts say some amount of the chemical may be transferred from the environment during food processing. But in China's case, suppliers trying to raise output are believed to have diluted their milk, adding melamine because its nitrogen content can fool tests aimed at verifying protein content.U.S. requires labeling origin
Under a new rule, meats, produce and some nuts sold in U.S. supermarkets must show their country of origin. Though the rule took effect Tuesday, the U.S. Department of Agriculture gave retailers six months to comply.
Country-of-origin labeling, already required for seafood, has long been sought by consumer groups, farmers and ranchers, who argue that consumers deserve to know where their food is coming from. Some consumer groups complain that the new rule is too broad because it exempts many processed foods, including roasted nuts and mixed vegetables.
The meat and grocery industries opposed the rule, saying it would be expensive and burdensome.
Thieves steal donated food in Haiti
Food donated for Haitian storm victims was stolen and put up for sale, according to authorities who seized three storehouses full of illegally diverted food aid Tuesday.
In the western city of Carrefour, Mayor Yvon Jerome said authorities acted after residents complained about the sale of donated rice.
"A lot of people were buying the rice because it was much cheaper compared to prices on the regular market," Jerome told Reuters. "You can read on the bag 'Donated by Taiwan' and on some other bags we read 'U.S. Rice.'"
The storehouses full of stolen food were placed under seal and the food will be redistributed to the needy, said Jerome, who called the diversion of desperately needed aid an outrage against humanity.
"There are so many people starving and desperate for that food," said Jerome. "And to see people that are better off trying to steal it goes against all sense of humanity and charity."
Haiti was hit by four tropical storms and hurricanes -- Fay, Gustav, Hanna and Ike -- in about a month. The storms triggered flooding and mudslides that killed at least 800 people, including 534 in the hardest-hit northern town of Gonaives, which was almost entirely submerged.
The Haitian government, donor countries and humanitarian groups are struggling to feed hundreds of thousands of flood victims in dire need of help.
Judicial authorities were looking for several suspects in connection with the depots in Carrefour, which neighbours the capital of Port-au-Prince, but it was unclear how widespread such thefts were.
The World Food Program said the misery index is rising daily in Haiti, the poorest country in the Americas, and the situation will require a massive effort to help people stave off hunger and save lives.
New Chevrolet Cruze seen as forerunner of stylish - and profitable - small cars
PARIS: Accompanied by a troupe of break dancers, Chevrolet on Wednesday unveiled a car it hopes will lure American consumers out of Toyota and Honda showrooms and broaden the appeal of the all-American carmaker in international markets.
General Motors' decision to show the car here, on the eve of the Paris auto show, reflects the company's increasing emphasis on its international operations as a source of sales growth and car development.
With fuel prices hovering near record levels, GM and its Detroit rivals, Ford and Chrysler, have been struggling to respond to a shift in demand from U.S. consumers, who are abandoning gas-guzzling trucks and sport utility vehicles in favor of smaller, more fuel-efficient cars. To fill the gaps in their U.S. lineups, the Big Three American automakers are turning to their European and Asian operations or foreign partners.
"As soon as the market went into a 180-degree turn over the last 18 months, it was unsurprising to learn that the Detroit carmakers had empty cupboards," said Peter Schmidt, managing director of Automotive Industry Data, a research firm in Warwick, England. "No carmaker can respond overnight to such a change in demand, so they had to turn elsewhere."
The Cruze, a compact car with an arched roofline, slanted headlights and a two-tier grille, was engineered and designed in Europe and Asia, with GM tapping resources from the former Daewoo Motor, which it acquired in 2001. The car will be built in South Korea as well as St. Petersburg and in Lordstown, Ohio. Chevrolet plans to start selling the car in Europe next year, with other regions, including the United States, to follow in 2010.
The Cruze will be the "ambassador" for Chevrolet's approach to globalization, Wayne Brannon, executive director of Chevrolet Europe, said during an interview just before the car was unveiled. "It's essential to be able to compete on a global basis."
Ford has taken a similar approach with a new version of the Fiesta, a subcompact that was largely developed in Europe, on a platform shared with Mazda of Japan, in which Ford owns a strategic stake. Manufacturing has begun in Cologne; the Fiesta will also be built in Valencia, Spain, and in China, Thailand and Mexico. It is scheduled to be introduced in the United States in 2010.
GM, which lost $15.5 billion in the second quarter, is trying to turn Chevrolet, an iconic American brand, into a bigger global player. While Ford sells cars under its flagship brand everywhere, GM cars are sold under different brands in different countries, including Opel and Vauxhall. They also want to increase small-car sales in the United States.
But more importantly, U.S. automakers expect to make a profit on the stylish new models - something that has eluded them with other compacts, at least in North America.
At an event in August at the Lordstown plant, Rick Wagoner, GM's chairman, said the Cruze's fuel economy and stylish package should allow the company to charge a higher price than it has for previous compacts.
"With fuel prices higher, I think people's value equation is changing," he said.
Industry analysts also see the Cruze as a forerunner in the industry's shift to better-equipped, fuel-efficient small cars that can actually be profitable.
"The Cruze seems to be indicative of where the next generation of compact vehicles is headed: larger, higher content, and most certainly more expensive than the models they are replacing," said Aaron Bragman, senior auto analyst for the research firm Global Insight in Lexington, Massachusetts.
The third-largest U.S. automaker, Chrysler, which last year was separated from Daimler of Germany in a private equity buyout, has stopped short of its bigger rivals in global product development. (It had some success with bigger cars during the merger - the popular Chrysler 300 sedan featured Mercedes engineering - but not compacts.)
Instead, Chrysler is looking to outside suppliers to try to compete in small cars. Chrysler has reached agreements with Nissan of Japan and Chery Automotive of China to export cars to the United States and sell them under Chrysler brand names, though these vehicles have not yet arrived in the U.S. market.
The Cruze and the Fiesta are not the first "world cars" from the Big Three. After the oil crises of the 1970s, Ford took a similar approach in the development of the Escort, a small car that was adapted for U.S. consumers from a European model.
But the idea fell out of favor in Detroit as global auto markets diverged, with U.S. consumers opting for minivans and other light trucks. A European-developed world car from Ford, the Mondeo, had only limited success when it was sold in North America as the Ford Contour and Mercury Mystique in the 1990s. Moreover, the car cost an astronomical $6 billion to develop and became a symbol of the fractured state of Ford's global operations.
Another small sedan, the Focus, has done better globally: Ford executives project that the automaker will build 2 million cars off the platform by 2012, making it the largest volume for any single platform in the industry.
The new Fiesta was originally intended primarily for European and Asian markets. But as oil prices rose and U.S. consumers started looking at smaller cars again, the high-mileage Fiesta was added to Ford's North American plans.
The stakes are huge for Ford, which under Alan Mulally, its chief executive, has made global integration perhaps its top priority.
Under Mulally, a former Boeing executive, Ford has consolidated control of its far-flung engineering, sales and manufacturing staffs under a tight cadre of senior managers at corporate headquarters. With Ford losing billions of dollars and under intense pressure to executive a turnaround, Mulally's goal of creating "One Ford" throughout the world seems to be gaining traction.
The Fiesta will give Ford its first entry in the pint-size "B-car" segment in the United States, which Ford sees as an essential part of its worldwide growth. The company's product development chief, Derrick Kuzak, said recently that the global B-car segment would grow to 21 million vehicles by 2014, nearly double what it was just five years ago.
While Europeans have long paid far more than Americans to fill up their tanks, largely because of higher taxes on oil, European consumers have also been moving toward more fuel-efficient models this year, after SUVs briefly became chic.
In France, where the government imposed a tax on gas guzzlers on Jan. 1, sales of SUVs fell 28 percent in the first seven months of the year, even as the overall car market grew by nearly 4 percent, Schmidt said. Germany and other European countries are considering similar taxes, which means demand for more fuel-efficient cars like the Fiesta and the Cruze should grow, he added.
"The likelihood is that the patterns we are seeing in the French market today will be echoed elsewhere - small cars!" Schmidt said.
Warren Buffett to invest in GE
General Electric said on Wednesday it would sell $3 billion of preferred shares to Warren Buffett's Berkshire Hathaway, with another $12 billion in common shares going to the public.
The news erased some of the decline in GE shares earlier in the day and left the stock down 3 percent at $24.74 in afternoon trading on the New York Stock Exchange. The stock fell as low as $23.09 on Wednesday.
The company expects to price the offering before the market opens on Thursday.
"GE is the symbol of American business to the world," Buffett said in a statement. "I am confident that GE will continue to be successful in the years to come."
The U.S. conglomerate's current market capitalization stands at about $235 billion. Its stock has lost about 34 percent of its value so far this year as investors worried about deteriorating profits at its GE Capital finance arm.
"The economic environment remains volatile," said GE chairman and chief executive Jeff Immelt in a statement. "However, the company's performance remains on track with the earnings guidance we provided last week for 2008."
GE last week warned that its 2008 profit could fall as much as 12 percent.
EU fines petrochemicals companies for operating 'paraffin mafia'
BRUSSELS: The European Commission fined nine petrochemical companies a total of €676 million Wednesday for forming a "paraffin mafia" to fix prices and carve up markets for wax.
"There is probably not a household or company in Europe that has not bought products affected by this 'paraffin mafia' cartel, with all that implies in terms of paying over the odds, higher costs and economic damage," the EU competition commissioner, Neelie Kroes, said.
Paraffin waxes are used in a wide range of products like candles, paper cups and plates, the wax coating of cheese, chemicals, tires and chewing gum.
Of the total fine, worth $955 million, the largest individual fine of €318.2 million was imposed on Sasol of South Africa and Germany. The European Union executive described Sasol as the leader of the illegal cartel, an official statement said.
The British-Dutch oil company Shell escaped a potential fine of €96 million because it blew the whistle first to the EU competition authorities.
The moves by the companies were a serious infringement of EU treaty antitrust rules, compounded by the duration of the cartel, Kroes said.
The fine ranked fourth among fines imposed by EU regulators on a sector, topped only by the record €992.3 million on elevator companies last year, €790.5 million on makers of vitamins in 2001 and €750.5 million on manufacturers of gas-insulated switch gear in 2007.
Sasol, the world's biggest maker of motor fuel from coal, said it expected to appeal the ruling.
"Sasol is surprised by and does not understand the reasons for the magnitude of this fine and will be studying the reasons for the finding with a view to lodge an appeal against it," the company said in a statement.
The other companies fined were Total (€128.1 million). Exxon Mobil (€83.6 million), RWE (€37.4 million), ENI (€29 million), Hansen & Rosenthal (€23.7 million), Repsol (€19.8 million), and Tudapetrol (€12 million).
The commission said the cartel activity occurred from 1992 to 2005, when it began investigating with raids on petrochemicals companies prompted by an application from Shell for leniency in return for information.
The companies were well aware their activity was illegal, Kroes added.
She said that she hoped "that these high fines will encourage the management of these companies and others to look very carefully at what their staff are doing, and I hope that in turn the shareholders" would look very carefully at the management.
The commission said individuals or companies that were victims of the cartel were entitled to seek damages in national courts of EU member states.
Ford sales fell 35 percent in September
DETROIT: Tight credit, economic worries and high gasoline prices combined to cut Ford Motor's U.S. sales once again in September, with the beleaguered automaker reporting a 35 percent decline from the same month last year.
It was Ford's worst sales month this year, and the results are a strong indication that analysts' forecasts of another dismal month will come true. Other automakers are set to release their results later Wednesday.
Analysts have predicted September declines of more than 20 percent for most major automakers when compared with the same month last year as upheaval in the financial markets unnerved consumers.
If overall U.S. industry sales drop in September, it will be the 11th straight monthly decline when compared with the year-ago period. That would be the longest string of down months since 14 straight negative months ended in December 1991, according to Autodata.
Dealers from many manufacturers have said their customers are having an increasingly hard time qualifying for loans to buy autos, as banks have restricted lending because of widespread mortgage defaults that led to disruptions in the financial markets and the collapse of several banks. Plus, several automakers' finance arms have limited or discontinued leasing.
Ford sales also were hurt as buyers continued to favor small fuel-efficient cars over trucks and sport utility vehicles. Truck sales were down 39 percent, while car sales dropped 19 percent. The numbers do not include Ford's Volvo Cars unit.
Ford, like its U.S.-based competitors, has been trying to shift its factories and model lineup from trucks and SUVs to more efficient cars and crossover vehicles, while burning through billions of dollars in cash.
Ford has lost $23.9 billion in the past 2½ years and has had to mortgage its assets to stay in business. General Motors Corp. has performed strongly overseas but plummeting demand for its most profitable products in the U.S. has led to losses of $57.5 billion in the past 18 months, including $15.5 billion in the second quarter.
The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total number of vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 25 sales days last month, one less than in September 2007.
Bush approves huge loan package for auto makers
WASHINGTON: President George W. Bush on Tuesday signed into law a mammoth spending bill to keep the government running until early March 2009 that includes a $25 billion loan package for troubled automakers.
The action came after the Senate over the weekend gave final congressional approval to the more than $630 billion (353 billion pound) spending bill that was needed to finance defence, education, farm, health, foreign aid and other government programs after the current fiscal year expired on September 30.
The spending legislation allows a ban on offshore drilling to expire on September 30. Democrats had hoped to extend the ban, but did not have the votes to overcome strong opposition from Republicans.
Bush, in a statement announcing that he had signed the legislation, said the measures to lift the ban on offshore drilling "will allow us to reduce our dependence on foreign oil."
The bill sets aside $7.5 billion in taxpayer funds needed to guarantee $25 billion in low-interest loans to help General Motors Corp, Ford Motor Co and Chrysler LLC produce more fuel-efficient cars and trucks.
U.S. automakers have said the taxpayer-backed loan package
would give them access to capital at a time when credit markets are shut and they are being driven to invest in new technologies to meet tough new federal fuel economy standards.
The $25 billion loan package, the biggest federal subsidy for the auto industry since the 1980 bailout of Chrysler, cleared Congress last weekend when the focus was on the debate over the $700 billion financial rescue package.
GM, Ford and Chrylser had said they could manage without the federal loans but also suggested that without the federal subsidy thousands more industry jobs could be at risk.
Both presidential candidates, Democrat Barack Obama and Republican John McCain, backed the auto loan package, which had strong support in battleground election states like Michigan and Ohio.
U.S. auto sales have been slumping for three consecutive years, forcing Detroit automakers to slash jobs and cap new investment. Through August, U.S. sales were down 11 percent and on track to hit the lowest level in 15 years.
The loan package was authorized -- but not funded -- in a 2007 energy law that requires automakers to improve the fuel efficiency of their vehicles by 40 percent by 2020.
Major automakers have said that will require up to $100 billion in combined new investment to retool factories and invest in new technology, including next-generation battery-packs for electric vehicles.
Industry executives, including GM Chief Executive Rick Wagoner and Chrysler Chief Executive Bob Nardelli, said they would press for liberal federal guidelines once the law was sent to regulators in order to use the funds to offset the cost of a wide range of investment.
Japanese automakers Toyota Motor Corp and Honda Motor Co could be eligible for the low-cost federal funding but have said they have no intention of applying for the loans.
Congress passed the massive spending bill before the new fiscal year began October 1 because lawmakers failed to approve any of the 12 spending bills needed every year to fund government operations.
Gazing at America, the French still see a wild frontier
PARIS: The French have always found American elections amusing, in a horror movie sort of way. They grumpily regard the American president as in some unfortunate sense also their own, but they see the campaign through their own cultural lens.
They value sophistication above almost anything, and so they regard their own hyperactive president, Nicolas Sarkozy, with his messy romantic life and model-singer wife, as "Sarko the American."
But this year has been difficult for the French. Sarkozy has generally supported American foreign policy and has praised the United States' openness and entrepreneurial verve. And the sudden emergence of Senator Barack Obama — black, and seen as elegant and engaged with the larger world — has sent many French into a swoon.
But the combination of two recent surprises — Governor Sarah Palin and America's terrifying financial meltdown — has brought older, nearly instinctual anti-American responses back to the surface.
These two surprises, one after the other, have refreshed clichés retailed under President George W. Bush, confirming the deeply held belief of the French that the United States remains the frontier, led by impenetrably smug and incurious upstarts who have little history, experience or wisdom.
Even worse, from the French perspective, Americans are reckless optimists, incurably blind to the tragedy of life, to the weary convolutions of history and thus to the need for lengthy August vacations and financial regulations.
While the French see themselves as the heirs of urban revolutionaries, with a strong distaste for politicized religion, the American revolutionary spirit seems to them these days to come like a hurricane from the uncosmopolitan right — from the dry, dull flatlands of Texas ranch country or the emptiness of Vice President Dick Cheney's Wyoming, and now from the odd sunset communities of Arizona and the bizarre bars, churches and hockey rinks of Alaska.
The financial meltdown also seems inevitably American, a product of the reckless audacity that the French pretend to abhor, but often secretly admire. But however careful France's own banks may have been, the United States is so large and so dominant that the French are afraid of being hit with what one economist, Daniel Cohen, called the "toxic waste" of the scandal.
This year, mocking the candidates has become an industry, with the satirical puppet show "Les Guignols de l'Info" recently adding a squeaky-voiced Senator John McCain puppet to the jug-eared Obama model. In general, though, Americans are portrayed as Sylvester Stallone, lunky and thick-headed. Palin has been a kind of godsend.
The French know exactly what to make of her, said Frédéric Rouvillois, and that is the problem. Palin may be an American dream but she is a French nightmare, said Rouvillois, a lawyer and social historian who has just written a book titled "The History of Snobbery."
"She's a caricature of a certain America that hasn't parted with its boorish 'Wild West' side," said the impish Rouvillois, who has also written a history of good manners. "For the French snob, the only admissible American is from the East Coast, knows Henry James, is comfortable in French, a sort of European on the other side of the Atlantic."
A little, yes, like Senator John Kerry.
Le Canard Enchaîné, the country's satirical, investigative weekly, did a take on Palin under the headline "Alaska, It's Exquisite." If McCain is a war hero, Palin "is the heroine of a trashy soap opera," the paper said. The picture magazine Paris Match called her "La Pasionaria come in from the cold," a reference to her fervent conservative and religious beliefs, as its reporters, too, trawled Wasilla, Alaska, for insights into this new American life form.
France, like most of Europe, is quite taken with the Democratic candidate, whom the French regard as a "métis," politely translated as someone of mixed race, usually used for those of African colonial ancestry. Obama is seen uniquely as an American métis with global experience and antecedents in Africa, through his Kenyan father, not in slavery.
Bernard-Henri Lévy wrote in the magazine Le Point of Obama as a new type of American black politician.
"Obama is, certainly, black," Lévy wrote. "But not black like Jesse Jackson; not black like Al Sharpton; not black like the blacks born in Alabama or in Tennessee and who, when they appear, bring out in Americans the memories of slavery, lynchings and the Ku Klux Klan — no; a black from Africa; a black descending not from a slave but from a Kenyan; a black who, consequently, has the incomparable merit of not reminding middle America of the shameful pages of its history."
He goes on for a while, but you get the idea.
There is less philosophizing about Palin. Dominique Dhombres, writing in a commentary in Le Monde under the headline "She Believes in God, America, the Family and Firearms," calls Palin "a powerhouse — she's almost a tank." He then compares McCain to Monsieur Verdoux, "the dapper family man who murders 12 women for their money," as played by Charlie Chaplin. "I guess you could call them Monsieur Verdoux and his pit bull."
McCain is admired for his bravery, but his "maverick" qualities are less understood, partly because he is seen as so conservative on social and religious issues. His experience in foreign affairs is appreciated here, even though some recall his remark during the prewar Iraq debate, when he described the French this way: "They remind me of an aging movie actress in the 1940s who is still trying to dine out on her looks but doesn't have the face for it."
On Saturday, after the first debate and the economic meltdown, François Sergent, the foreign affairs editor of the newspaper Libération, criticized American exceptionalism and McCain's embrace of it. "McCain, with that name of a character in a western, incarnates this American exceptionalism that pleases the Republicans so much — and if we believe the polls, still half of Americans," he wrote. "But in the world of the real economy, we measure today the consequences of that hegemony without reference to that ideology."
Rouvillois, the expert on snobbery, said there was a general acceptance in France that the American president, in general, was not particularly interested in Europe or France. "People have always said that American presidents didn't know exactly where France was," he said.
And as for moose-hunting, he said, it is no worse than what French women used to do long before there was a Louis Vuitton. "When women of Louis XV's court would hunt wild boars with their knives, it wasn't less violent or bloody than killing a moose with a scope-mounted rifle," he said.
France's Lagarde denies report of EU bank plan
PARIS: French Economy Minister Christine Lagarde denied on Wednesday that France was planning a 300 billion euro (239 billion pound) EU bank rescue package.
Earlier on Wednesday, a European Union government source told Reuters that France was planning to propose an EU rescue package for banks worth 300 billion euros.
Asked about the report, Lagarde told reporters: "There is no such thing. There is nothing of the sort."
Speaking later to the BBC, Lagarde again denied any bailout plan, but said what she did want was a level playing field among EU countries when it came to accounting rules as well as tighter regulation of hedge funds and credit ratings agencies.
"In terms of a level playing field, we can make progress, there's no question of that," she told the Newsnight television program.
"When it comes to accounting rules, there needs to be a level playing field," Lagarde said, adding that she wanted to see more coordinated regulation across the financial sector.
Hedge funds, investment banks and ratings agencies needed to be included and subjected to the same surveillance, she added.
"Clearly there needs to be better discipline, more measure and more reason," she said. "Sanctions need to be taken so that implementation of the rules is achieved."
France has been outspoken in calling for greater oversight of banks and other institutions, with officials calling for executive pay to be put under the spotlight following the financial market crisis.
"I think we all need to close ranks together and work out the best proposal that will be workable, efficient, feasible for the financial sector and for the financial crisis to be addressed properly on a global basis," Lagarde told reporters.
"But don't quote me on any numbers because I don't have any numbers available," she added.
French bees find a haven in Paris
French police clash with youths
ROMANS-SUR-ISÈRE, France: A French police officer was shot and wounded during clashes with youths that broke out after a teenager was killed in a car crash while fleeing the police, the authorities said Tuesday.
The police used tear gas and rubber-coated pellets to push back about 50 people during clashes late Monday and early Tuesday.
In an effort to prevent a second night of violence, about 300 riot police officers and gendarmes took up positions around the center of Romans-sur-Isère, 60 miles east of Lyon in the Rhone Valley.
Some officers were brought in from neighboring regions.
The wounded officer appeared to have been shot in the leg with a hunting rifle, the police prefecture said. The officer's life was not in danger. Dents from bullets and buckshot were also found in police vehicles nearby.
The violence broke out after a 16-year-old was killed after driving a stolen car into a wall while fleeing the police. Four other minors in the car were injured.
Accidents involving the police and youths have been potentially explosive in France since riots in 2005 that were set off by the deaths of two teenagers electrocuted in a power substation while hiding from the police.
Jean-Pierre Nahon, a prosecutor in the regional capital, Valence, said a police watchdog agency would investigate the latest episode.
Nahon said that, according to a preliminary investigation, the five teenagers had stolen the car overnight and were driving at high speed through the center of Romans-sur-Isère when the police began chasing them. The driver took a sharp turn and lost control of the car, running into a wall.
Pilot missing as French fighter jets collide
PARIS: Two French fighter jets collided off the coast of Brittany on Wednesday and one of the two pilots was found while the other was being searched for, the Defence Ministry said.
The two Super-Etendard jets, made by Dassault Aviation, crashed during a training exercise at around 5:10 p.m. (4:10 p.m. British time) 27 km (17 miles) north of the town of Morlaix, on the French region's northern coast, the French Navy said in a statement.
A spokeswoman for the Defence Ministry said the planes collided during the exercise.
One pilot was able to eject and was recovered "apparently in good health" by a search team, but the second was missing late on Wednesday, the Navy's statement said.
U.S. general urges troop surge in Afghanistan
WASHINGTON: The top U.S. military commander in Afghanistan said Wednesday that he needed more troops and other aid "as quickly as possible" in a counterinsurgency battle that could get worse before it gets better.
The commander, General David McKiernan, said it would take more than adding troops to stabilize Afghanistan, including efforts to strengthen the government, improve the economy and build its military and police forces.
Speaking to Pentagon reporters, McKiernan, the head of NATO forces in Afghanistan, said there had been a significant increase in foreign fighters coming in from neighboring Pakistan this year, including Chechens, Uzbeks, Saudis and Europeans.
And he said he needed the more than 10,000 additional forces he has requested, in part, to increase his military campaigns in the south and east, where violence has escalated.
"The additional military capabilities that have been asked for are needed as quickly as possible," he said, adding that he was hoping to get units that would be able to both fight the insurgents and serve as trainers for the Afghan National Army and the police.
McKiernan, who was to meet with President George W. Bush late Wednesday, said he had been encouraged by recent Pakistani military operations against insurgents waging cross-border attacks into Afghanistan. But he also said that it was too soon to tell how effective they had been.
McKiernan's comments came after General David Petraeus, who is preparing to take up his new post as head of the U.S. Central Command, said in an interview in London this week that he also expected the fight against the insurgents in Afghanistan and Pakistan to get worse before it gets better.
"Obviously, the trends in Afghanistan have been in the wrong direction and I think everyone is rightly concerned about them," said Petraeus, who as the commander of forces in Iraq oversaw the troop escalation that has been credited as one factor in helping reduce the violence there.
Turning things around in Afghanistan and Pakistan would require taking away militant sanctuaries and strongholds that the insurgents would defend tenaciously, he said. "Certainly in Afghanistan, wresting control of certain areas from the Taliban will be very difficult," he said.
The same goes for Pakistan, he said, where extremism presents a deadly threat. "In both places, in certain areas, the going may be tougher before it gets easier," he said.
Petraeus was in London and Paris this week as part of several weeks of information gathering before he takes up his job as commander of all U.S. forces in the Middle East and Afghanistan on Oct. 31.
He visited Afghanistan in August and spent a day with the Pakistani chief of army staff, General Ashfaq Parvez Kayani, on a U.S. aircraft carrier in the Arabian Sea as part of his information gathering, he said.American attack in Pakistan?
A suspected U.S. missile strike on a Taliban commander's home in Pakistan killed six people, Pakistani officials said Wednesday, a possible indication that Washington was moving ahead with cross-border raids despite protests from the new government, The Associated Press reported from Islamabad.
The attack was the first since President Asif Ali Zardari warned that Pakistani territory could not "be violated by our friends."
Late Tuesday, missiles fired by a U.S. drone struck the home near Mir Ali, a town in North Waziristan, said two intelligence officials, who spoke on the condition of anonymity.
PAKISTAN AND AFGHANISTAN
Heeding the lessons of another war
Forty years ago, the United States began to mount raids into Cambodia and to undermine the government of King Sihanouk in order to cut Vietcong supply lines.
As a result, America's war with Vietnamese Communism spread into Cambodia, leading to the triumph of the Khmer Rouge and the Cambodian genocide. But these horrors occurred after the U.S. itself had quit Vietnam and after the U.S.-backed regime in South Vietnam had collapsed. Washington's widening of the war benefited neither America nor its local allies.
The U.S. is now making the same mistake in Afghanistan and Pakistan. If continued, ground incursions by U.S. troops across the border into Pakistan in search of the Taliban and Al Qaeda risk drastically undermining the Pakistani state, society and army.
Many Pakistanis are berating their new civilian government and the military for being too supine in their response to the American actions. There have also been public calls for NATO supply lines through Pakistan to be cut, which could cripple the Western military effort in Afghanistan. The latest dreadful terrorist attack in Islamabad illustrates the danger of a wider conflagration and the price Pakistan is paying for its role as a U.S. ally.
The dangers involved in Pakistan are greater even than in Cambodia, where the disasters were contained in one country. The current war has already been driven into the Pakistani heartland. If turmoil increases in Pakistan then the forces of extremism will be strengthened, in the region and the world. Thus the long term implications of "losing" Afghanistan pale into insignificance when set against the risk of "losing" Pakistan.
Nor would undermining Pakistan, whether intentionally or not, in any way help the U.S. and NATO mission in Afghanistan. Pakistan has six times Afghanistan's population and is a nuclear state. The Pashtun population of Pakistan is greater than that of Afghanistan, and provides a large number of Pakistani soldiers. Far from saving Afghanistan, present U.S. strategy toward Pakistan will only risk sinking Afghanistan itself in a whirlpool of regional anarchy.
Instead of this approach, the U.S. and NATO should adopt a radically new strategy for Afghanistan that relies more on soft power. The approach should be based on the recognition that Afghanistan cannot be transformed along Western lines and that the U.S. cannot maintain an open-ended presence in that country without destabilizing the entire region.
Afghanistan must sooner or later be left to the Afghans themselves to run. Local actors should take the lead in carrying out counter-insurgency, as Western forces and an overwhelming reliance on military force are liable only to multiply enemies.
The terrible effects of bombardment on the civilian population have become a potent factor behind the will of many Afghans to resist what they see as an alien military occupation.
The next U.S. administration therefore should announce a return to America's original objective, that of hunting international terrorist networks and preventing them from creating safe havens in Afghanistan. This should in fact be America's only core objective. The attempt of the West to "transform" Afghanistan is already meeting the same fate as the Soviet attempt to do so. It is strengthening the insurgency, by creating the impression of a threat to the Islamic way of life and local tradition.
Instead of continuing with what is in effect a purely Western approach, Washington should initiate serious regional talks on Afghanistan's future.
The United States and the West need to remember that however long their forces stay in Afghanistan, sooner or later they will leave, while Afghanistan's neighbors will always remain. Tragically, their policies have in the past generally been directed against each other, with disastrous results for the people of Afghanistan.
The United States should instead seek to shape a regional concert that will stand some chance of at least containing Afghanistan's problems in the long term. None of this will be easy; but a continuation of present U.S. strategy promises only widening turmoil in the region, or at best war without end.
Maleeha Lodhi is a fellow at Harvard and former Pakistani ambassador to Washington and London. Anatol Lieven is a professor at King's College London and a senior fellow of the New America Foundation.
Pakistani Taliban deny report leader Mehsud dead
Questions swirled on Wednesday over the fate of Pakistani Taliban leader Baitullah Mehsud, with a Pakistani television channel reporting he had died of illness but Taliban spokesmen dismissed the report.
Mehsud is the militant commander Pakistani authorities accuse of being behind a wave of suicide attacks across the country, including the assassination of former prime minister Benazir Bhutto in December.
Mehsud, an ethnic Pashtun tribesman in his mid-30s, has denied involvement in the attack on Bhutto as she left an election rally in the city of Rawalpindi on December 27.
The Geo television channel reported late on Tuesday that Mehsud, based in the lawless Waziristan region on the Afghan border, had died of kidney failure after a long illness.
But Taliban spokesmen denied the report of his death, or even that he was seriously ill.
"I just spoke to a close aide of Baitullah Mehsud and he did not mention any such thing," said militant spokesman Muslim Khan, based in northwest Pakistan's Swat Valley.
"It could be government propaganda," Khan said of the Mehsud death report.
In the United States, a Pentagon official said he could not confirm the reports. A U.S. counterterrorism official, who spoke on condition of anonymity, said "we've known for some time that he has some health problems, including diabetes, but (there is) nothing at this time to confirm that he is dead."
'FINE AND HEALTHY'
The media-shy Mehsud is known to be a diabetic but another Taliban spokesman rejected recent media reports Mehsud had been seriously ill.
"Our leadership is fine and healthy. There's no serious illness," said the second spokesman, Maulvi Omar.
A round-faced man with a trim black beard, Mehsud rose to prominence over the last couple of years after more senior commanders were killed.
Analysts say in the event of his death he would quickly be replaced by a new leader rising through the ranks.
Mehsud heads the Tehrik-e-Taliban Pakistan, or Taliban Movement of Pakistan, a loose umbrella group of factions based in northwest Pakistan formed in late 2007.
A close aide to Mehsud, Ibrahim Burqi, said Mehsud had been sick some time ago but was fine.
"Rumours about his death are being spread to weaken the Tehrik-e-Taliban," Burqi told Reuters by telephone from an undisclosed location.
"He is a diabetic and had typhoid a few months ago, but he is all right now," Burqi said. He also denied reports Mehsud had any kidney ailment.
Burqi said Mehsud was due to marry his second wife this weekend.
Badaruddin Haqqani, a son of veteran Taliban commander Maulvi Jalaluddin Haqqani, said by telephone he had spoken to Mehsud's driver on Wednesday who had also denied the report he was dead.
Afghans urge IAEA to tackle Pakistan "tie" to Khan
Afghanistan urged the U.N. nuclear watchdog on Wednesday to tackle what it called the Pakistani government's apparent knowledge of a Pakistani-led ring responsible for the illicit spread of atom bomb know-how.
Western-backed Afghanistan is bidding for a seat on the International Atomic Energy Agency's 35-nation Board of Governors. Kabul is competing with Syria, an ally of Iran. A decision by the IAEA's 145-nation assembly is expected on Friday.
Pakistani authorities have denied any part in the A.Q. Khan smuggling network that provided nuclear weaponisation blueprints to Iran, North Korea and Libya before it was broken up in 2004.
Khan, a nuclear scientist lionized by countrymen as the father of Pakistan's atom bomb, made a televised confession in 2004 to selling nuclear secrets to the three countries.
He was put under house arrest in Islamabad, where he remains, after Pakistan was confronted with evidence by the U.S. Central Intelligence Agency.
Three months ago he was quoted in a media report as saying Pakistan's army, spy agency and then-President Pervez Musharraf knew about a past, covert centrifuge sale to North Korea.
The chief of Pakistan's strategic planning division, which oversees its nuclear arsenal, said Khan's charges were "categorically wrong and false."
Khan backed off and pointed to passages in a Musharraf autobiography saying Pakistani police searched a North Korea-bound plane but found nothing because Khan's associates had been tipped off and never loaded suspect cargo.
"It is regrettable that Khan's confession clearly indicates the willingness of his own government to participate in such acts," said Wahid Monawar, Afghanistan's ambassador to the IAEA.
"We call upon the agency to avail its agenda and discuss this matter with serious consideration," he told the annual meeting of the IAEA's General Conference (assembly) in Vienna.
"We cannot sit and watch while such international treaties are violated in a dangerous and irresponsible matter."
Pakistan has never joined the Non-Proliferation Treaty or permitted IAEA inspectors to interview Khan to help resolve Western intelligence allegations of secret atomic bomb research by Iran, which has denied any such activity.
Monawar told Reuters Kabul was concerned that Afghan Taliban insurgents known to have sanctuaries in border areas of Pakistan "one day might grab off one of those (nuclear) weapons, and the ramifications of that will be grave -- how could one explain that? This is a concern of the world."
Musharraf pardoned Khan and Islamabad has said it considers its investigation of him to be closed.
But IAEA investigators and U.S. officials fear Khan's secrets may have spread wider than North Korea, Iran and Libya because much of the sensitive information was in electronic form and therefore easily transmitted via the Internet.
Iraqi anti-Qaeda fighters wary of their new masters
Eyed with suspicion by the state but credited with dealing al Qaeda a heavy blow, Iraq's largely Sunni Arab neighbourhood guards cautiously welcomed their transfer from U.S. to government control on Wednesday.
Baghdad has taken responsibility for paying the 54,000 guards stationed in the capital, the first step in a plan to absorb 20 percent of them into the Iraqi security forces and offer the rest civilian jobs and vocational training.
The U.S.-backed movement numbers some 100,000 men across Iraq. It was formed in 2006 as a backlash against the indiscriminate violence and austere version of Islam that al Qaeda had inflicted on many parts of Iraq.
In a statement on Wednesday, government spokesman Ali al-Dabbagh praised the "defeat of terrorists and criminals in face of the heroic Sahwa (guards)," adding: "the government values and respects these efforts, and expresses its commitment to the inclusion of these (Sahwa) members in public life."
But some officials in the Shi'ite-led government are wary of the guards, many of whom are former insurgents.
Abu Merna, a spokesman for the guard movement in Baghdad's Fadhil district, welcomed the handover, but said more of the guards, known as the "Sahwa" in Arabic, should be absorbed.
"Twenty percent inclusion in the security forces is too little ... We don't have complete confidence in government, because it does not have confidence in us," he said. "Without the Sahwa, al Qaeda would return within hours, not days."
The government has said it cannot absorb all its members into the security forces. It has also said it must weed out former insurgents who are accused of murders and other crimes.
The neighbourhood guard movement has helped cut violence in Iraq to four-year lows in recent months, and was instrumental in driving al Qaeda and other Sunni militants from their former strongholds in Iraq's western Anbar province and elsewhere.
In the mainly Sunni Arab Doura area on Baghdad's southern outskirts, Sattar al-Dulaimy, 24, stood with an old AK-47 rifle by a sandbagged checkpoint, wearing a camouflage print T-shirt and a bright orange reflector strap, the guards' only uniform.
He supports his parents and seven brothers and sisters on the salary of $300 a month, which until now has come from the U.S. military but will come from the Iraqi government in future.
"It's very good news because we are serving our country," he said of the handover to Iraqi control. But so far a promised job in the police has yet to materialise.
"I am worried: We had all of our screening a few months ago but it still hasn't happened," he said of the police job.
Neighbourhood guard leaders have warned that members who are not given a security forces job or a civilian post could be become targets for al Qaeda, either for recruitment, or revenge.
Fate of African 'rendition' victims unknown
NAIROBI: At least 10 victims of a secret "rendition" programme in the Horn of Africa remain in Ethiopian jails and the whereabouts of others is unknown, an international human rights group said on Wednesday.
Activists and Muslim groups have long accused Kenyan authorities of rounding up scores of people for transfer to Somalia and then to Ethiopia in early 2007 after the fall of a Somali Islamist movement and the scattering of its fighters.
Many of them were taken for questioning to Ethiopia, the groups say, and kept in jails that some campaigners called an "African Guantanamo" in comparison with the U.S. jail in Cuba.
Torture was rife, rights groups say.
"The dozens of people caught up in the secret Horn of Africa renditions in 2007 have suffered in silence too long," said Jennifer Daskal, author of the report "Why am I still here?" for U.S.-based Human Rights Watch (HRW). The governments of Kenya, Somalia and Ethiopia have all denied illegally transporting and jailing people, saying they have only taken action against legitimate suspects.
HRW said at least 150 men, women and children from more than 18 countries, including the United States, United Kingdom and Canada, were rounded up near the Somali border in early 2007.
Ethiopian forces, who entered Somalia in 2006 to help oust the Islamists from the capital Mogadishu, also rounded up an unknown number of people in Somalia, HRW said.
"Denied access to their embassies, their families, and international humanitarian organisations such as the International Committee of the Red Cross, the detainees were even denied phone calls home," it said.
"Several have said that they were housed in solitary cells, some as small as two meters (6.6 feet) by two meters, with their hands cuffed in painful positions behind their backs and their feet bound together."
Most detainees were eventually sent home after interrogation, including by U.S. agents, the group said. But 10 remain in Ethiopia and several others are missing.
Washington has denied involvement in interrogations.
Former prisoners said they were tortured.
"Detainees said Ethiopian interrogators pulled out their toe-nails, held loaded guns to their heads, crushed their genitals, and forced them to crawl on their elbows and knees through gravel," HRW said.
"Several reported being beaten to the point of unconsciousness."
HRW called on Ethiopia to release remaining rendition prisoners or prosecute them in an open court. It also urged Kenya to secure repatriation of all its nationals.
"The previous Kenyan government deported its own citizens and then left them to rot in Ethiopian jails," Daskal said.
"The new Kenyan government should reverse course, bring these men home, and show that it is not following the same shameful path as the old."
Al Qaeda says it was behind Algeria bombing
DUBAI: Al Qaeda's north Africa wing said it was behind a deadly suicide bombing in Algeria on Sunday, according to a statement posted on the Internet on Wednesday.
A car bomb exploded in the Takdemt district near the coastal town of Dellys, 100 km (62 miles) east of Algiers, on Sunday, killing three people and wounding six.
The group, which calls itself al Qaeda organisation in the Islamic Maghreb, identified the bomber as Abu al-Abbas Abd al-Rahman and said his car was laden with 600 kg (1,320 pounds) of an unspecified explosive material.
The statement, posted on an Islamist website, said the bombing had targeted army barracks.
"We bring (the Muslim Ummah) the glad tidings of the mujahideens' victories and their massacre of the apostate slaves of America," the statement said.
Al Qaeda's north Africa wing has posted several statements on the Internet during September saying it will not stop its attacks until Algeria is free from French and U.S. influence and what it called the "apostate" Algerian government is removed.
Since adopting the al Qaeda name early last year, the group, previously known as the Salafist Group for Preaching and Combat (GSPC), has claimed several attacks including twin suicide bombings of U.N. offices and a court building in Algiers in December 2007 which killed 41 people.
It also claimed a suicide truck bombing against a coastguard barracks in Dellys in September 2007 that killed 37 people.
As the events on Wall Street play themselves out, one basic question emerges: How could extraordinarily well-educated and well-paid professionals at prestigious financial institutions make rotten bets on such a massive scale?
A simple explanation: Contrary to mainstream economic theory, human beings - even smart, sophisticated ones - are often irrational actors. As psychologists have shown, they suffer from a series of behavioral biases: overconfidence and the tendency toward groupthink.
Many individuals tend to overestimate their own talents. They tend to absorb and interpret information in ways that reinforce their preconceived notions. And when people work in groups, they tend to reinforce the group's ideas at the expense of constructive dissent.
This is groupthink. You can almost hear it: The markets will get better; the macro-economic data is not as bad as it seems; if everyone is lending sub-prime, then why shouldn't we?
So how do we try to mitigate these impulses?
It is no coincidence that the powerful deregulatory winds of the past 40 years have assumed that economic actors are rational automatons magically going about maximizing utility. A more balanced approach is to recognize that government regulation can occupy a counterweight to these natural human tendencies for irrational behavior.
Some will no doubt argue that government is subject to its own behavioral biases. Government is by no means perfect, but it thankfully cares about different things than private-market actors. And even if government reflects behavioral biases, those tendencies must serve as a useful counterweight to the biases of private actors, who as the events of the past week have shown, sometimes need protection from themselves.
Reza Dibadj, San Francisco
There is a striking resemblance between the failure of the financial system rescue plan in the U.S. House of Representatives and last year's failure to pass comprehensive immigration reform in the U.S. Senate.
In each case, bipartisan measures that would have provided at least some relief for serious problems facing the country were voted down because of a populist backlash and search for scapegoats - last year, illegal immigrants, and this year, Wall Street bankers.
This is not to say that either of the two failed proposals was perfect. Nor should unregulated financial sector manipulation or breaking the immigration laws be encouraged. But with regard to each of these issues, a choice had to be made between a rational solution that would have held out some hope of improving the situation on the one hand, or giving in to popular prejudices against bailouts for greedy CEOs and "amnesty" for minority immigrants on the other. By opting for the second choice, Congress only made both of these problems worse.
Roger Algase, New York
While one cannot deny the irresponsible conduct of the financial sector in creating the "toxic waste" of subprime mortgages and loans, we should be asking about the responsibility of millions of Americans who have spent this money buying houses, cars and expensive vacations. They certainly enjoyed the good life while forgetting that they would have to pay back all these loans. Shall we feel sorry for them?
Growing up in Greece in a low-income family, I learned from my early years to spend only my own money, but I guess this an old fashion way of living.
Vassilis Vassiliou Vouliagmeni, Greece
Lesson from a crisis: When trust vanishes, begin worrying
By David Leonhardt
In 1929, Meyer Mishkin owned a shop in New York that sold silk shirts to workingmen. When the stock market crashed that October, he turned to his son, then a student at City College, and offered a version of this sentiment: It serves those rich scoundrels right.
A year later, as Wall Street's problems were starting to spill into the broader economy, Mishkin's store went out of business. He no longer had enough customers. His son had to go to work to support the family, and Mishkin never held a steady job again.
Frederic Mishkin, Meyer's grandson and, until he stepped down a month ago, an ally of Ben Bernanke's on the Federal Reserve Board, told me this story the other day, and its moral is obvious enough. Many people in Washington fear that the country is starting to spiral into a terrible downturn. And to their horror, they see the public, and many members of Congress, turning into modern-day Meyer Mishkins, more interested in punishing Wall Street than saving the economy.
All of which may be true. But there is good reason for the public's skepticism. The experts and policy makers who so desperately want to take action have failed to tell a compelling story about why they're so afraid.
It's not enough to say that markets could freeze up, loans could become impossible to get and the economy could slide into its worst downturn since the Great Depression. For now, the crisis has had little effect on most Americans, beyond their 401(k) statements. So to them, the specter of a depression can sound alarmist, and the $700 billion bill that Congress voted down this week can seem like a bailout for rich scoundrels.
Bernanke and his fellow worriers need to connect the dots. They need to use their bully pulpits to teach a little lesson on the economics of a credit crisis, how A can lead to B, B to C and C to Depression.
Let's give it a shot, then.
Why are we talking about the Depression, anyway?
Almost no economist thinks that even a terrible downturn would look like the Depression. The government has already responded more aggressively than it did in Herbert Hoover's day. So a Depression-like contraction,a 30 percent drop in economic activity, is highly unlikely. The country is also far richer today, which means that a much smaller portion of the population is living on the edge of despair. No matter what happens, you're not likely to see shantytowns.
But the Depression is still relevant, because the basic mechanics of how the economy might fall into a severe recession look quite similar to those that caused the Depression. In both cases, a credit crisis is at the center of the story.
At the start of the 1930s, despite everything that had happened on Wall Street, the American economy had not yet collapsed. Consumer spending and business investment were down, but not horribly so.
In late 1930, however, a rolling series of bank panics began. Investments made by the banks were going bad, or, in some cases, were rumored to be going bad, and nervous customers besieged bank branches to demand their money back. Hundreds of banks eventually closed.
Once a bank in a given town shut its doors, all the knowledge accumulated by the bank officers there effectively disappeared. Other banks weren't nearly as willing to lend money to local businesses and residents because the loan officers at those banks didn't know which borrowers were less reliable than they looked. Credit dried up.
"If a guy has a good investment opportunity and he can't get the funding, he won't do it," Mishkin, who's now an economics professor at Columbia, notes. "And that's when the economy collapses." Or, as Adam Posen, another economist, puts it, "That's when the Depression became the Great Depression." By 1932, consumption and investment had both collapsed, and stocks had fallen more than 80 percent from their peak.
As a young academic economist in the 1980s, Bernanke largely developed the theory that the loan officers' lost knowledge was a crucial cause of the Depression. He referred to this lost knowledge as "informational capital." In plain English, it means that trust vanished from the banking sector.
The same thing is happening now. Financial markets are global, not local, today, so the problem isn't that the failure of any single bank locks individuals or businesses out of the credit markets. Instead, the nasty surprises of the last 13 months, the sort of turmoil that once would have been unthinkable, have caused an effective breakdown in informational capital. Bankers now look at longtime customers and think of that old refrain from a failed marriage: I feel like I don't even know you.
Bear Stearns, for example, was supposed to have solid, tangible collateral standing behind some of its debts, so that certain lenders would be paid off no matter what. It didn't, and they weren't.
The current, more serious stage of the crisis began two weeks ago today, after the collapse of Lehman Brothers and the Fed's takeover of the American International Group. Those events created a new level of fear. Banks cut back on making loans and instead poured money into Treasury bills, which paid almost no interest but also came with almost no risk. On the loans they did make, banks demanded higher interest rates. Over the past two weeks, rates have generally continued to rise — and these rates, not the stock market, are really what you should be watching.
The current fears can certainly seem irrational. Most households and businesses are still in fine shape, after all. So why aren't some banks stepping into the void and taking advantage of the newly high interest rates to earn some profit?
There are two chief reasons. One is fairly basic: bankers are nervous that borrowers who look solid today may not turn out to be so solid. Think back to 1930, when the American economy seemed to be weathering the storm.
The second reason is a bit more complex. Banks own a lot of long-term assets (like your mortgage) and hold a lot of short-term debt (which is cheaper than long-term debt). To pay off this debt, they need to take out short-term loans.
In the current environment, bankers are nervous that other banks might shut them out, out of fear, and stop extending that short-term credit. This, in a nutshell, brought about Monday's collapse of Wachovia and Glitnir Bank in Iceland. To avoid their fate, other banks are hoarding capital, instead of making seemingly profitable loans. And when capital is hoarded, further bank failures become all the more likely.
The crucial point is that a modern economy can't function when people can't easily get credit. It takes a while for this to become obvious, since most companies and households don't take out big new loans every day. But it will eventually become obvious, and painfully so. Already, a lack of car loans has caused vehicle sales to fall further.
Could the current crisis lift, could banks decide they really are missing out on profitable investing opportunities, without a $700 billion government fund to relieve Wall Street of its scariest holdings? Sure. And is Congress right to fight for a workable program that's as inexpensive and as tough on Wall Street as possible? Absolutely.
But in the end, this really isn't about Wall Street. It's about reducing the risk that something really bad happens. It's about limiting the damage from the past decade's financial excesses. Unfortunately, there is no way to accomplish that without also extending a helping hand to Wall Street. That is where our credit markets are, and we need them to start working again.
"We are facing a major national crisis," as Meyer Mishkin's grandson says. "To do nothing right now is to do what was done during the Great Depression."
Roger Cohen: Nixon, Bush, Palin
NEW YORK: In 1970, in the midst of the longest bear market since World War II, President Nixon declared: "Frankly, if I had any money, I'd be buying stocks right now."
The market soared.
Now, I've been asking myself, for the heck of it, what would happen if President Bush tried his own jawboning of the market and said: "Frankly, if I had any money, I'd be buying stocks right now."
My conclusion is: Mr. President, please, please, whatever your next whim, do not say that! I reckon the market could tank in ways that would make this week's 777 point one-day plunge look paltry.
I'm not about to write a paean to Nixon. I watched him quit in a bar in Bolinas, California; I can still hear the cheer. But even his tortured nature betrayed some essential seriousness about the fate of the United States of America. By contrast, the Bush crowd has gambled the future of this country with abandon.
(And Nixon did resign. Whatever happened to the notion that someone - a Cabinet member, a Wall Street CEO, the inventor of credit-default swaps - might actually fall on his or her sword? Shame has become a quaint chivalric notion, like honor, a thing of another American time.)
Let's take a closer look at the Bush gamble. It's worth doing, because the first person in this country to re-price risk on the basis that it no longer existed was the president. Now, that's leading by example.
The gamble involved going to war in Iraq at an estimated cost to date of about $700 billion (does that figure sound familiar?) while opting not to raise taxes but lower them. It involved going into that war, and another in Afghanistan, while asking not for shared sacrifice but a collective maxing-out in the service of shopping.
At the same time, Bush, who often seemed to need directions to the Treasury, opted to allow an opaque derivatives market to grow into the trillions without supervision, regulation or information. The market knew best. Turns out that what the market knew best was how to turn capitalism into a pyramid scheme for trading worthless pieces of paper.
The terrible cost is now clear. But we should be grateful for small mercies. Remember Bush wanted to throw Social Security into the gamble, too, by privatizing it!
Market capitalism is a sophisticated thing that calls for transparency, ethics and rules. Bush and his crowd gambled that some "new paradigm" meant these things were passé.
They're not. We have to be careful now. Already the contagion of bank failures has spread to Europe. People are asking of the United States: What became of this country?
The Chinese have been ready to treat U.S. Treasuries as a rock-hard store of value and loan us the dollars they accumulate at a very low interest rate. But what if they start to doubt the U.S. government will repay its debt?
"We are getting closer to a tipping point," said Benn Steil, an economist. "People are asking, can we really trust the dollar as a store of value?"
The Bretton Woods system of monetary management collapsed in 1971. Since then the dollar's been the primary reserve currency. Now, we're reaching another point where a rethink of the foundations for a global economy is needed.
Global trade and capital flows are essential to prosperity. But it's illogical to have a global system with no global reserve as insurance. Perhaps the trillions of Gulf and Chinese surpluses could be used to fund that. Or perhaps it's time for a return to the gold standard.
I know one thing: This is no time for further gambling. I'm grateful to Bob Rice of Tangent Capital for pointing out that the actuarial risk, based on mortality tables, of Sarah Palin becoming president if the McCain-Palin Republican ticket wins the election is about one in six or seven.
That's the same odds as your birthday falling on a Wednesday, or a flipped coin coming up heads three times running. Is America ready for that?
When power is a passport to gamble, people can end up seriously broke or seriously dead. There is one capable, sober guy in the Bush administration: Defense Secretary Robert Gates. He recently said U.S. forces in Iraq had to learn how to do counterinsurgency there. "But that came at a frightful human, financial and political cost," he noted.
Gates warned that "warfare is inevitably tragic, inefficient." He urged skepticism of any notion that "adversaries can be cowed, shocked or awed into submission, instead of being tracked down, hilltop by hilltop, house by house, block by bloody block."
In short, he lambasted the Rumsfeld-Cheney-Bush war effort for its gambler's irresponsibility. The same has been true on the financial front. The equivalent of "Shock and Awe" has been "Sub and Prime."
And people's houses across America really did go up in smoke while fear stalked the land.
Thomas L. Friedman: Rescue the rescue
I was channel surfing on Monday, following the stock market's nearly 800-point collapse, when a commentator on CNBC caught my attention. He was being asked to give advice to viewers as to what were the best positions to be in to ride out the market storm. Without missing a beat, he answered: "Cash and fetal."
I'm in both - because I know an unprecedented moment when I see one. I've been frightened for my country only a few times in my life: In 1962, when, even as a boy of 9, I followed the tension of the Cuban missile crisis; in 1963, with the assassination of JFK; on Sept. 11, 2001; and on Monday, when the House Republicans brought down the bipartisan rescue package.
But this moment is the scariest of all for me because the previous three were all driven by real or potential attacks on the U.S. system by outsiders. This time, we are doing it to ourselves. This time, it's our own failure to regulate our own financial system and to legislate the proper remedy that is doing us in.
I've always believed that America's government was a unique political system - one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.
This is dangerous. We Americans have House members, many of whom I suspect can't balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don't understand, swamped them with phone calls. I appreciate the popular anger against Wall Street, but you can't deal with this crisis this way.
This is a credit crisis. It's all about confidence. What you can't see is how bank A will no longer lend to good company B or mortgage company C. Because no one is sure the other guy's assets and collateral are worth anything, which is why the government needs to come in and put a floor under them. Otherwise, the system will be choked of credit, like a body being choked of oxygen and turning blue.
Well, you say, "I don't own any stocks - let those greedy monsters on Wall Street suffer." You may not own any stocks, but your pension fund owned some Lehman Brothers commercial paper and your regional bank held subprime mortgage bonds, which is why you were able refinance your house two years ago. And your local airport was insured by AIG, and your local municipality sold municipal bonds on Wall Street to finance your street's new sewer system, and your local car company depended on the credit marks to finance your auto loan - and now that the credit market has dried up, Wachovia bank went bust and your neighbor lost her secretarial job there.
We're all connected. As others have pointed out, you can't save Main Street and punish Wall Street anymore than you can be in a row boat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We're all connected. "Decoupling" is pure fantasy.
I totally understand the resentment against Wall Street titans bringing home $60 million bonuses. But when the credit system is imperiled, as it is now, you have to focus on saving the system, even if it means bailing out people who don't deserve it. Otherwise, you're saying: I'm going to hold my breath until that Wall Street fat cat turns blue. But he's not going to turn blue - you are, or we all are. We have to get this right.
My rabbi told this story at Rosh Hashana services on Tuesday: A frail 80-year-old mother is celebrating her birthday and her three sons each give her a present. Harry gives her a new house. Harvey gives her a new car and driver. And Bernie gives her a huge parrot that can recite the entire Torah. A week later, she calls her three sons together and says: "Harry, thanks for the nice house, but I only live in one room. Harvey, thanks for the nice car, but I can't stand the driver. Bernie, thanks for giving your mother something she could really enjoy. That chicken was delicious."
Message to Congress: Don't get cute. Don't give us something we don't need. Don't give us something designed to solve your political problems. Yes, Henry Paulson and Ben Bernanke need to accept strict oversights and the taxpayer must be guaranteed a share in the upside profits from all rescued banks. But other than that, give them the capital and the flexibility to put out this fire.
I always said to myself: Our government is so broken that it can only work in response to a huge crisis. But now we've had a huge crisis, and the system still doesn't seem to work. Our leaders, Republicans and Democrats, have gotten so out of practice of working together that even in the face of this system-threatening meltdown they could not agree on a rescue package, as if they lived on Mars and were just visiting us for the week, with no stake in the outcome.
The story cannot end here. If it does, assume the fetal position.
Hedge fund's assets locked up in Lehman bankruptcy
LONDON: Two weeks after the bankruptcy by Lehman Brothers, hedge fund clients are still struggling to retrieve assets held by the firm.
According to bankruptcy filings, large hedge funds like GLG, Harbinger, Amber Capital and Elliott Associates still have varying degrees of exposure to Lehman Brothers - with many of the assets held at Lehman's prime brokerage unit in London.
Many hedge fund investors will have negative returns this year. The near-certain prospect of having to take additional write-downs from unrecoverable assets at Lehman Brothers brings an extra level of concern that could lead to more rapid redemptions. That would add to a broader sense of unease in an industry facing regulatory pressures and greater scrutiny.
Many hedge funds have given the end of September as a cutoff date for investors who want to take their money out by the end of the year. With the future and efficacy of the U.S. bailout plan still unclear, some investors are expected to take the opportunity to retreat to a safer investment haven.
Hedge fund exposure to Lehman came in many shapes and forms and was not limited to its prime broker unit.
Harbinger, the $13 billion fund that achieved recognition for its successful bet against subprime mortgages, has exposure through complex swap agreements made with an obscure Lehman subsidiary. In its filing, Harbinger said it is owed "not less than $250 million," from exposure to "swap agreements." According to the filing, Harbinger's exposure was to a wholly owned Lehman subsidiary, Special Financing. Jeffrey Sabin, a lawyer representing Harbinger's claim against Lehman, said that Harbinger did not have assets in Lehman's London prime brokerage unit.
While $250 million may seem a small amount for a fund of that size, an accompanying footnote stating that "the full amount is still being calculated" is not likely to give outside investors much comfort.
While Lehman's prime brokerage unit was not as dominant as that of Morgan Stanley, Goldman Sachs and even Bear Stearns, it did have some deep relationships with large hedge funds like Harbinger and GLG, one of the larger hedge funds in Europe.
As Lehman's troubles grew this year, many funds began to withdraw assets, switching to larger banks like Credit Suisse. But the speed with which Lehman fell surprised many, and assets - ranging from complex derivatives to futures, options, stocks and bonds - were immediately frozen.
Lehman's administrator, Price WaterhouseCoopers, is now valuing these assets and determining how much can be returned to hedge funds - and, ultimately, their investors.
For smaller funds, the combination of uncertainty and an expected write-down can be lethal. MKM Longboat, a $1.5 billion London fund that was a Lehman client, closed last week because of poor performance.
Pursuit Capital, a small fund that is based in Greenwich, Connecticut, and specializes in bonds supported by mortgages and aircraft leases, is also listed as a creditor of Lehman, according to court filings. The fund this year had to bar investors from redeeming assets. An executive at Pursuit did not respond to an e-mail message seeking more information on Pursuit's Lehman exposure.
How investors react to Lehman exposure will be largely tied to the performance of their funds. Harbinger, for example, is coming off a magnificent year in which some of its funds returned more than 100 percent on the fund's bets against subprime - but its performance in recent months has fallen off sharply, especially in September.
Elliott, which focuses on distressed debt and is run by Paul Singer out of New York, has fared well this year.
"As of September 30, after provisioning for the Lehman exposure, we are still ahead more than 6 percent for the year to date," a spokesman said in a statement. "The Lehman exposure is very small for us."
Through August, GLG's funds were down about 15 percent for the year. The firm also faces a large outflow of as much as $4 billion in capital when one its top managers, Greg Coffey, leaves in November.
GLG said recently that its assets still stuck at Lehman were not material, but marketplace speculation suggests that the true exposure is larger because of the fund's ties to the firm, which backed GLG at its founding.
In an environment where rumors can sink a bank, no less a hedge fund, GLG has tried to ease investor concerns and on Friday is to release a letter to investors and the public in which it quantifies its exposure to Lehman, said a person briefed on the matter. The number is not expected to contradict the fund's earlier statements, the person said.
Credit crunch leads Xstrata to drop takeover
By Douwe Miedema and Tessa Walsh
LONDON: The credit crunch is threatening mergers even in resilient sectors like mining, with fears about loan refinancing prompting Xstrata to drop its $10 billion bid for Lonmin on Wednesday.
Tough loan markets also make it harder to finance the few lucrative mergers and acquisitions deals that bankers are still working on, including BHP Billiton's hostile bid of more than $100 billion for Rio Tinto.
The syndicated loan market, which is the primary source of funds for mergers and acquisitions, has all but dried up because it is becoming more difficult for banks to sell loans as a result of rising financing costs while the number of lenders shrinks.
Xstrata, which had secured $15 billion of loan financing to buy Lonmin, said it had decided to cancel the deal because of worries about refinancing the package in the next 12 months. Major M&A loans typically have a large short-term component that needs to be refinanced in the bond market.
A hoard of large M&A loans mature in the next 12 months, and this deadline will push companies into the bond markets just as spreads on debt have exploded and fears of default grow.
But some analysts said Xstrata might be using the credit squeeze as an excuse to pull out of the deal.
Xstrata scooped up Lonmin shares as they fell on the news that it was backing away from the acquisition, effectively blocking any chance of a rival deal and setting the scene for another takeover attempt later.
Global M&A activity dropped 25 percent in the first nine months of the year, Thomson Reuters data showed this week, because companies are finding it hard to assess the value of acquisition targets and the market for leveraged buyouts remains shut.
Paradoxically, bank bailouts are now a major source of income for investment banks while the rescue of American International Group and Bank of America's acquisition of Merrill Lynch has added to a dwindling pool of fees.
The data showed that bankers are relying heavily on deals in resilient sectors like energy and power, consumer staples, materials and health care. But as Xstrata's decision showed, a tight loan market might stem even those.
Unfavorable conditions in the loan and bond markets continue to challenge a $55 billion loan backing BHP Billiton's planned acquisition of Rio Tinto, the biggest ever loan to be underwritten in Europe.
The deal is all shares, but BHP Billiton needs the extra financing because of its large debt pile and a planned share buy-back.
BHP's loan is on hold until at least January although the deal will need to be repriced in light of further market deterioration.
BHP Billiton said it was not concerned about the financing.
Other deals, though, have suddenly been scrapped.
Montagu Private Equity this week dropped plans to sell BSN Medical, a maker of bandages, and a private equity consortium walked away from a bid of £1.9 billion, or $3.4 billion, for the British media company Informa.
Doubts have also started to put into doubt Roche's $43.7 billion bid for the rest of the American biotechnology company Genentech that it does not already own, with shares of Genentech now trading at below Roche's offer price.
Genentech has traded at a big premium to the $89-a-share offer from Roche since it announced an unsolicited bid in July. But recent fears over financing have stoked uncertainty and raised doubts about the scope for a higher offer.
"When Roche proposed the deal, the cost of borrowing was not where it is now," said David Heupel, a portfolio manager at Thrivent Financial for Lutherans.
Roche has said it remains committed to a deal, but worsening loan markets are pushing the company to work harder to get its money.
Under strain, U.S. cities are cutting back projects
Cities, states and other local governments in the United States have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening.
The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike. In New York, a real estate boom has suddenly gone bust. Washington has shelved a planned bond offering to pay for terminal expansion and parking garages already under construction at Dulles and Reagan National Airports.
Billings, Montana, is struggling to come up with $70 million more for a new emergency room. And Maine has been unable to raise $50 million for highway repairs.
"We really are in terra incognita here," said Robert Lenna, executive director of the Maine Municipal Bond Bank, which helps that state's towns and school districts raise money. He said he had worked in public finance for 34 years and had never seen credit evaporate so completely.
Maine had already begun some of its road work when the bond markets stopped functioning, so now it is scrambling for bank loans to keep the dump trucks rolling. If money does not start flowing soon, Lenna said, Maine will have to cancel some of its road and bridge projects.
The only alternative would be what New York City did on Monday: Go into the locked-up markets and whip up demand by offering to pay investors a very high return.
Analysts said the dysfunction in the municipal bond markets appeared to signal the end of an era of relatively cheap money for governments and, probably, the start of an era of tough choices for communities. When the market starts moving again, they said, it will look a lot like the municipal bond market of 10 years ago, before the arrival of financial wizardry in the form of structured-finance products, which lowered borrowing costs but added big new risks. Instead, governments will probably be issuing plain-vanilla bonds with fixed rates of interest, higher than they are accustomed to.
And higher rates suggest some degree of belt-tightening, especially difficult in places where tax revenues are being squeezed because of falling real estate values and the slowing economy.
Municipalities will probably be able to function, but may not expand services, said John Miller, chief investment officer at Nuveen Asset Management, a municipal bond investment firm. "For some, the level of service they provide will decline."
Some governments, already straining to balance their budgets, will have to cut payrolls, he said, and others may decide to raise taxes.
Last year, governments across the country issued about $23 billion of fixed-rate municipal bonds in September. This September they issued $15 billion — all but about $2.2 billion of it in the first two weeks of the month, according to Municipal Market Advisors, a research and strategy firm.
Tight money is already becoming apparent in some states. In Montana, officials had planned to sell $130 million of bonds to the public last December to pay for a new emergency room, cancer center and improvements at the Billings Clinic, a 272-bed hospital in the state's largest city. But they were dissuaded by higher interest rates even then.
"I've been second-guessing it since then," said Michelle Barstad, executive director of the Montana Facility Finance Authority. "Things just keep getting worse and worse."
The authority borrowed $60 million of the total cost from private lenders in May, but is now unsure where to get the remaining $70 million. Barstad said one option under consideration was to borrow about $20 million from local banks and scale back the project, at least for now.
"We're just sitting on our hands like everybody else, trying to figure out what to do and how we do it," said Barstad, adding that she would welcome a return of the days of simple, fixed-rate bonds.
The credit crisis caused Athens-Clarke County, Georgia, to delay a $221 million bond issue planned for the day Lehman Brothers declared bankruptcy. The county has been planning for 10 years to upgrade three sewage treatment plants built more than 40 years ago when the population was much smaller.
The county's finance director, John Culpepper, said he had delayed the issue rather than raise the monthly sewer bills to the system's 39,000 customers.
"We're going to wait it out for the next month or two, until the market returns to more normal conditions," he said.
The Washington Metropolitan Airports Authority has already begun construction of a bigger international arrivals building at Dulles, a new parking deck at Reagan National and other major projects, and said it intended to forge ahead using cash and commercial paper.
New York City decided to brave the markets on Monday and ended up having the whole place to itself. It managed to issue $300 million of bonds for public schools, the only issue of the day. The New York Transitional Finance Authority will pay 5.75 percent on those 30-year bonds, the equivalent of a 10.5 percent interest rate to New York City residents, who will not have to pay city, state and federal tax on the income.
Yet even with that rate, the issue was not completely sold, said Miller of Nuveen.
"This is for a very well-liked name, a very well-known name," said Miller, explaining that New York City's bonds usually sell out quickly.
Lenna said Maine's advisers had warned that it might end up paying interest as high as 10 percent if it brought its highway bonds to market now. "We're not going to go out and incur these costs," he said.
The municipal bond markets had already hiccupped before the latest turmoil. But analysts say the gridlock began in mid-September, when Lehman Brothers declared bankruptcy.
Lehman Brothers was one of several Wall Street firms that had created structured-finance products for municipalities for the past few years. These products could be hybrids, allowing a local government to issue what seemed like a fixed-rate bond that could in turn be bought by an investor who received a variable rate of interest.
Governments generally prefer fixed-rate bonds because the cost is predictable — but variable-rate bonds were attractive because of their generally lower rates. Securities firms tried to merge the best of both worlds by linking derivatives contracts to municipal bonds. One structured product was a variable-rate demand note, which gave the investor the option of putting the note back to the securities firm if the investor decided the rate was too low.
The notes were often bought by mutual funds for their tax-exempt bond funds. The booming demand for those funds, in turn, held down the price of borrowing for states and cities, at least for a while. But when Lehman collapsed, the mutual funds suddenly perceived a risk: the securities firms that had created the products might go out of business. So, owners of the notes put them back to the securities firms that had sold them.
The prices investors were willing to pay for the notes plunged, driving up short-term rates for municipal bonds. Securities firms, under pressure, unwound the notes and reconstituted them as old-fashioned fixed-rate bonds.
None of this had anything to do with the behavior of local governments or their ability to repay their debts, but it brought the municipal bond market to a halt.
Thomas Doe, president of Municipal Market Advisors, said his firm was fielding calls this week from government contractors asking how much credit might be available next year. For insight, he pointed to municipal bond data from the 1930s.
"During the first few years after the '29 crash, municipal issuance dropped 24 percent," he said. "It wouldn't be unreasonable to think that we could see municipal issuance go from a total of $430 billion last year, to something like $350 billion next year, which would be a drop of 25 or 30 percent."
This would not mean widespread bond defaults, he said, just greatly narrowed local budgets.
"It's no different from a family budget," he said. "We're not going to go out to dinner any more. We're not going to buy a new car. That's the similarity."
Why the dollar surge could quickly unwind
LONDON: If the world's leading central banks are even partly successful in easing the drastic shortage of U.S. dollars on global money markets in this new quarter, then the recent surge by the dollar against the euro may quickly unwind.
The global financial storm now in full blast is rooted in a crisis over U.S. dollar mortgage assets, but, crucially, those dollar assets are held as much by European banks as U.S. banks.
The frenzy of cross-border flows related to this - as well as seismic asset allocation shifts and the dash for "havens" - has been a headache for strategists who are trying to assess the long-term foreign exchange fallout from a deepening crunch.
But it may be revealing to look at the likely currency market flows related to European banks' balance sheets and liability management at critical end-quarter accounting periods.
"The big problem in the banking system is a shortage of dollars. So when funding issues get tight, the dollar goes up, and when they ease, the dollar retreats," said Joe Prendergast, currency investment adviser at Credit Suisse.
The dollar rose against the euro as a torrid third quarter came to a close Tuesday, ringing up one of its biggest one-day gains since the euro was introduced in 1999.
Ostensibly, the move was driven by a sudden realizations the European banking system and the economy were both highly exposed to the U.S. crisis; that official European central bank interest rates might need to drop sharply and soon; and that the United States was closer to a comprehensive government-led solution.
But some analysts say the surge was primarily fueled by the severe shortage of dollars in Europe as banks on the Continent closed quarter-end books, a shortage that froze dollar interbank lending. This meant that banks have run into liquidity problems, prompting a doubling of U.S. dollar swap lines to European central banks.
The scramble for scarce dollars in Europe sent overnight borrowing rates in London soaring to more than three times the Federal Reserve's 2 percent target rate Tuesday. It also saw the dollar recoup the entire 5 percent that it lost to the euro after the U.S. investment bank Lehman Brothers filed for bankruptcy protection on Sept. 15.
"If people can't fund themselves through the money market or swaps, they have to go out and buy dollars. That's what we've descended into," said Gerrard Katz at Standard Chartered in Hong Kong.
Overnight dollar rates Tuesday were about 2.5 percentage points higher than euro equivalents, despite official U.S. rates being more than three points below the European Central Bank rates.
To underline the end of the quarter, overnight dollar rates fell by almost half to 3.79 percent on Wednesday.
A big question now is whether this raw flow is powerful enough to influence the exchange rate for long. Some say the major test will come as the new quarter gets under way and the doubling to some $620 billion of the Fed's swap lines to foreign central banks starts to flood the market in earnest.
"Central action to provide large scale dollar liquidity may help markets but takes away one important source of dollar support as the dollar funding squeeze eases," Prendergast said. "We recommend investors consider using current levels to position for a return of significant dollar weakness."
He also said that the influence of balance sheet management was not intuitive and could lead to "lumpy" flows being misread.
The overall picture is a bit of a maze, but the cumulative losses to date for European banks on U.S. mortgage debts are estimated to be between $65 and $120 billion. While these write-downs and losses have been marked, with damage to balance sheets, these dollar assets still need to be financed in full to maturity.
Because most were funded in the dollar money markets, to avoid foreign currency exposure, the need to roll over short-term loans remains intense even though balance sheet concerns have made doing that for any extended period of time very difficult.
The currency market fallout unfolds from this.
For example, a European bank that writes down a $2 billion asset by 50 percent will still have a $2 billion liability to finance and will also risk a net short dollar position on quarterly financial statements, forcing it buy dollars to square it off.
The balance sheet gap can be bridged by either raising U.S. dollar capital directly from the likes of sovereign fund investors or by using euro capital to exchange for dollars.
This goes some way to explaining why the severe shortage of dollars in Europe at end of the quarter led to a surge in both interbank borrowing rates and the exchange rate.
Guesstimates of the scale of the flow can be gleaned from data from the Bank for International Settlements.
This data shows total euro zone bank holdings of foreign currency assets doubled to $4 trillion in the four years to 2007 and their total foreign currency exposure to nonbanks rose to near $1.5 trillion, mostly financed by short-term interbank borrowing.
Credit Suisse estimates that if these nonbank assets were to be marked down by an average of just 5 percent, it would imply that euro zone banks would need some $75 billion of foreign currency to level external balance sheets.
So if the main strain on foreign currency from the asset crisis is what set off the increased demand for dollars in Europe, then any easing of that distress via higher asset prices or central bank funds should in theory weaken the dollar accordingly.
Yet, Stephen Jen, chief currency economist at Morgan Stanley, says he thinks the positive demand for dollar financing overseas merely offsets fears about the problems at U.S. institutions. They "offset each other in a way that is hard to disentangle and have a net effect for the spot rate," he said.
INSIDE THE MARKETS
Investors, driving blind
LONDON: Investors are driving into the fog without headlights. They are supposed to be planning their strategies for the rest of this year and setting the stage for 2009. But after one of the most volatile quarters in a decade, the road ahead is decidedly obscure.
Few, if any, of the stresses that have battered investors during recent months have gone away.
"All you can say with certainty is that there is more uncertainty," said Michael Dicks, head of research and investment strategy at Barclays Wealth.
The implication is that investors are likely to stay supercautious over the short term and that a search for clarity will be the most important market mover for some time to come.
It is a recipe for continued volatility.
The third quarter was brutal for many, particularly in September, during which Lehman Brothers failed, Merrill Lynch was acquired and American International Group was bailed out.
Financial institutions in Britain, Belgium, Germany and Iceland also needed varying degrees of help from government or industry competitors.
Stocks in the United States, meanwhile, went into a one-day free fall Monday when the U.S. House of Representatives rejected a $700 billion rescue plan for the American financial industry.
As a result, equity investors have watched wealth drain away. The MSCI world stock index lost 17 percent in the quarter and is on track for its worst year since it was created in its current form at the end of 1987.
Formerly highflying emerging-market stocks are in the same boat, with MSCI's sector benchmark down more than 27 percent for the quarter, the worst in its history of over 20 years.
There has been little to take up the slack. Emerging-market bond spreads widened by 119 basis points while commodities turned as the world economy stumbled. Copper lost 25 percent and oil 28 percent.
Government bonds did give some returns, with 10-year euro-zone yield falling a solid 61 basis points as prices rose on demand, but such debt is widely seen as expensive.
It is perhaps not surprising, therefore, that the one of the biggest winners in the quarter was the VIX index, the so-called fear index that acts as a proxy for stock market volatility. It gained more than 64 percent.
So what do investors do now? Not much, it would seem.
Reuters asset-allocation polls released on Tuesday showed an almost palpable retreat from risk. Investment banks are heading into the fourth quarter with stock exposure at its lowest level in the nearly four and a half years that the global data have been compiled, with weightings well below long-term average levels.
Bond holdings, meanwhile, were roughly at average levels - hardly a major endorsement, given the climate - and cash was king.
The latest data from fund tracker EPFR Global shows a similar flight to relative safety, relative because for many nothing looks particularly safe these days. The group tracked large outflows from global bond and equity funds in the latest week and inflows into U.S. equity funds and money market funds. These moves suggest that American investors are repatriating their money to the less risky home shores.
Extreme caution, essentially, is the watchword.
"We are in capital preservation mode still," said Tony Dolphin, economics and strategy director at Henderson Global Investors. Dicks, the Barclays Wealth executive, went further, saying partly in jest, "Most investors are clearly saying let's put less weight in 2009 because we might not get there." Although investors have largely given up on the short-term, there is hope that 2009 will be better for investors even if the inflection point remains elusive. Michala Marcussen, director of strategy and economic research at Société Générale Asset Management, sees two possible outcomes for investors: Either everything blows up and a full-fledged global depression takes hold, or governments and central banks step in and stop the financial crisis. She is betting on the latter and projects that equities could recover over the next year to gain as much as 15 percent. But that would be a recovery from an extraordinary situation and would not remove all the hazards on the road. "What's clear is that even once the fog lifts, the economic landscape we are going to find is one of weak economic growth," Marcussen said. "There is no quick fix."
Domino's Pizza says Q3 up as diners stay at home
LONDON: Pizza home delivery chain Domino's Pizza said trading in the third quarter had continued strongly, as it benefited from customers saving money by choosing a takeaway meal rather than eating out.
Chief Executive Chris Moore described the performance as "particularly encouraging" given that the company was coming up against strong comparatives from the previous year.
Domino's, which operates the UK and Ireland franchise of the global brand, said like-for-like sales in the 449 stores it has owned for a year or more increased by 8.8 percent in the quarter, bringing total like-for-like sales growth for the 39 weeks to Sept 28 to 10.5 percent.
Total sales for the quarter rose by 17.8 percent to 83.3 million pounds ($148.6 million), bringing total sales for the nine month period to 253.5 million.
"We are very pleased with the momentum in the business and the resilience of our business model during these more challenging times," said Moore.
The company, which this year sponsored TV reality show 'Britain's Got Talent', said it had opened nine new stores during the quarter, giving it 535 outlets in total.
It said it is on track to achieve its target of 50 new store openings this year.
Shares in Domino's have outperformed the FTSE All Share Food Producers Index by 53 percent since the start of the year with analysts saying they are likely to be a beneficiary of customers trading down in the consumer downturn.
The shares closed yesterday at 195-1/4 pence, valuing the business at 318 million pounds.
This economy does not compute
By Mark Buchanan
Mark Buchanan, a theoretical physicist, is the author, most recently, of "The Social Atom: Why the Rich Get Richer, Cheaters Get Caught and Your Neighbor Usually Looks Like You."
A few weeks ago, it seemed the financial crisis wouldn't spin completely out of control. The government knew what it was doing - at least the economic experts were saying so - and the Treasury had taken a stand against saving failing firms, letting Lehman Brothers file for bankruptcy.
But since then we've had the rescue of the insurance giant AIG, the arranged sale of failing banks and we'll soon see, in one form or another, the biggest taxpayer bailout of Wall Street in history.
It seems clear that no one really knows what is coming next. Why?
Well, part of the reason is that economists still try to understand markets by using ideas from traditional economics, especially so-called equilibrium theory. This theory views markets as reflecting a balance of forces, and says that market values change only in response to new information - the sudden revelation of problems about a company, for example, or a real change in the housing supply. Markets are otherwise supposed to have no real internal dynamics of their own. Too bad for the theory, things don't seem to work that way.
Nearly two decades ago, a classic economic study found that of the 50 largest single-day price movements since World War II, most happened on days when there was no significant news, and that news in general seemed to account for only about a third of the overall variance in stock returns. A recent study by some physicists found much the same thing - financial news lacked any clear link with the larger movements of stock values.
Certainly, markets have internal dynamics. They're self-propelling systems driven in large part by what investors believe other investors believe; participants trade on rumors and gossip, on fears and expectations, and traders speak for good reason of the market's optimism or pessimism.
Really understanding what's going on means going beyond equilibrium thinking and getting some insight into the underlying ecology of beliefs and expectations, perceptions and misperceptions, that drive market swings. Surprisingly, very few economists have actually tried to do this, although that's now changing - if slowly - through the efforts of pioneers who are building computer models able to mimic market dynamics by simulating their workings from the bottom up.
The idea is to populate virtual markets with artificially intelligent agents who trade and interact and compete with one another much like real people. These "agent based" models let market behavior emerge naturally from the actions of the interacting participants, which may include individuals, banks, hedge funds and other players, even regulators.
What comes out may be a quiet equilibrium, or it may be something else.
For example, an agent model being developed by the Yale economist John Geanakoplos, along with two physicists, Doyne Farmer and Stephan Thurner, looks at how the level of credit in a market can influence its overall stability. Obviously, credit can be a good thing as it aids all kinds of creative economic activity, from building houses to starting businesses. But too much easy credit can be dangerous.
In the model, market participants, especially hedge funds, do what they do in real life - seeking profits by aiming for ever higher leverage, borrowing money to amplify the potential gains from their investments. More leverage tends to tie market actors into tight chains of financial interdependence, and the simulations show how this effect can push the market toward instability by making it more likely that trouble in one place - the failure of one investor to cover a position - will spread more easily elsewhere.
That's not really surprising, of course. But the model also shows something that is not at all obvious. The instability doesn't grow in the market gradually, but arrives suddenly. Beyond a certain threshold the virtual market abruptly loses its stability in a "phase transition" akin to the way ice abruptly melts into liquid water.
Beyond this point, collective financial meltdown becomes effectively certain. This is the kind of possibility that equilibrium thinking cannot even entertain.
It's important to stress that this work remains speculative. It is not meant to be realistic in full detail, only to illustrate in a simple setting the kinds of things that may indeed affect real markets. It suggests that the narrative stories we tell in the aftermath of every crisis, about how it started and spread, and about who's to blame, may lead us to miss the deeper cause entirely.
Financial crises may emerge naturally from the very makeup of markets, as competition between investment enterprises sets up a race for higher leverage, driving markets toward a precipice that we cannot recognize even as we approach it. The model offers a potential explanation of why we have another crisis narrative every few years, with only the names and details changed. And why we're not likely to avoid future crises with a little fiddling of the regulations, but only by exerting broader control over the leverage that we allow to develop.
Another example is a model explored by the German economist Frank Westerhoff. A contentious idea in economics is that levying very small taxes on transactions in foreign exchange markets might help to reduce market volatility. A tax of 0.1 percent of the transaction volume, for example, would deter rapid-fire speculation, while preserving currency exchange linked more directly to productive economic purposes.
Economists have argued over this idea for decades, the debate usually driven by ideology. In contrast, Westerhoff and colleagues have used agent models to build realistic markets on which they impose taxes of various kinds to see what happens.
So far they've found tentative evidence that a transaction tax may stabilize currency markets, but also that the outcome has a surprising sensitivity to seemingly small details of market mechanics - on precisely how, for example, the market matches buyers and sellers. The model is helping to bring some solid evidence to a debate of extreme importance.
A third example is a model developed by Charles Macal and colleagues at Argonne National Laboratory in Illinois and aimed at providing a realistic simulation of the interacting entities in that state's electricity market, as well as the electrical power grid. They were hired by Illinois several years ago to use the model in helping the state plan electricity deregulation, and the model simulations were instrumental in exposing several loopholes in early market designs that companies could have exploited to manipulate prices.
Similar models of deregulated electricity markets are being developed by a handful of researchers around the world, who see them as the only way of reckoning intelligently with the design of extremely complex deregulated electricity markets, where faith in the reliability of equilibrium reasoning has already led to several disasters.
Sadly, the academic economics profession remains reluctant to embrace this new computational approach. Something of the attitude of economic traditionalists spilled out a number of years ago at a conference where economists and physicists met to discuss new approaches to economics. As one physicist who was there tells me, a prominent economist objected that the use of computational models amounted to "cheating" or "peeping behind the curtain," and that respectable economics had to be pursued through the proof of infallible mathematical theorems.
If we're really going to avoid crises, we're going to need something more imaginative, starting with a more open-minded attitude to how science can help us understand how markets really work. With simulations, we can discover relationships that the unaided human mind would never grasp.
Better market models alone will not prevent crises, but they may give regulators better ways for assessing market dynamics, and more important, techniques for detecting early signs of trouble. Economic tradition, of all things, shouldn't be allowed to inhibit economic progress.
India to reconsider luxury brand limits
PARIS: India pledged to consider a legal reform that would help luxury goods companies gain a more certain foothold in one of their biggest untapped markets, potentially worth $15 billion in annual sales.
During a visit to Paris on Wednesday, the Indian trade minister, Kamal Nath, said he would think about allowing foreign retailers to own 100 percent of their companies in India, up from 51 percent today.
"We are considering it, seriously," Nath said in an interview on the fringes of a conference organized by the Comité Colbert, the French luxury trade group whose 70 members' combined sales reach €22 billion, or $31.12 billion, annually.
India has been the laggard of emerging luxury markets because of lack of retail space, excessive red tape, high duties, poor infrastructure and the capping of foreign ownership at 51 percent since 2006.
Given the political opposition, the Indian government has been reluctant to open the country's retail sector more.
Nath was pressed by several French luxury groups Wednesday, including LVMH Moët Hennessy Louis Vuitton, Hermès, Remy Martin and Chanel, to allow greater access.
Louis Vuitton, for example, entered the Indian market in 2003 and still has only four outlets there, compared to 25 in China. "We would like to have the right to own 100 percent of our retail company rather than 51 percent today - that is our request and we will continue to talk to the Indian authorities," Yves Carcelle, Louis Vuitton's chief executive, told the conference.
Carcelle said Louis Vuitton was also one of several luxury goods groups that found high duties a barrier to establishing themselves in India.
Tariffs on French luxury goods can reach 500 percent.
"India has an infant and infinite market," Nath told the conference, referring to luxury goods. He added that the country was eager to promote competition and fight counterfeiting.
According to a report by the Federation of Indian Chambers of Commerce and Industry, the population of high-net-worth individuals in India stood at 123,000 in 2007, up 22.7 percent from 2006, making India the country with the fastest-growing population of the wealthy in the world.
"For the moment, India is a very small market, but it is a market that has a very strong potential," Elisabeth Ponsolle des Portes, chief executive of the Comité Colbert, said.
The Indian jeweler and manufacturer Gitanjali estimated that some 1.6 million households in India earned $100,000 a year and the luxury market could reach $15 billion, from $500 milion today.
"India is a very new market for luxury," said Mehul Choksi, managing director of Gitanjali.
Blasts in India kill at least 2 and injure scores
GAUHATI, India: A series of blasts exploded in crowded markets in India's remote northeast on Wednesday, killing two people and injuring at least 100.
The first of four blasts went off at 7:30 p.m. when markets in Agartala, the state capital of Tripura, were packed with shoppers during the Muslim holiday of Eid al-Fitr and ahead of a Hindu holiday on Thursday.
Three more blasts went off at nearby markets over the next 90 minutes, said senior police official Shreyesh.
The blasts killed two people and injured at least 100, said Shreyesh, who uses one name. He added that 20 victims are in critical condition.
There are two separatist militant groups in the remote state of Tripura who have clashed with police in the past. Shreyesh said it was too early to say if they were responsible for the blasts.
The groups, All Tripura Tiger Force and the National Liberation Front of Tripura, have been relatively quiet in recent years.
Shreyesh said police are investigating whether the bombers came across the long and porous border Tripura shares with Bangladesh.
India has been hit by a spate of recent bomb attacks. The latest explosions killed six people and wounded 45 others Monday night in the western cities of Malegaon and Modasa.
Macedonia dispute has an Asian flavor
SKOPJE, Macedonia: It is one of Europe's most bizarre - and stubborn - international disputes, and certainly the only one that invokes an argument about Asian tribes stretching back to Alexander the Great.
Greece insists that its northern neighbor, which calls itself the Republic of Macedonia, change its name. Ever since the tiny former Yugoslav republic became independent in 1991, the Greeks have argued that the name implies territorial ambitions on Greece, whose northernmost province is Macedonia, and an attempt to usurp the heritage of Alexander, the most famous Macedonian of all time, who is claimed by both countries.
Recently, in its 17-year fight to call Alexander its own, the Republic of Macedonia has reached out as far as the Himalayas, to the residents of the Hunza Valley in northern Pakistan, who claim descent from Alexander's soldiers who stayed in the region 23 centuries ago.
What may appear an arcane argument is in fact a real conflict with serious consequences for this country of two million. Macedonia is among Europe's poorest and most unstable states, facing deeply rooted political disputes with most neighbors and an insurrection in 2001 that originated in its large ethnic Albanian minority.
The country was admitted to the United Nations in 1993 using "Former Yugoslav Republic of Macedonia" as a provisional name, and Greece has previously agreed that its northern neighbor could use that name, though in recent negotiations it has not specified what name would be acceptable.
The Greeks' most damaging blow landed at the NATO summit meeting in Bucharest in April, when they vetoed Macedonia's bid to join the alliance. Greece says it will do the same when Macedonia tries to join the European Union unless the name is changed.
The name issue thus has international strategic repercussions. Further escalation, analysts warn, could even jeopardize Macedonia's internal stability in an already volatile region.
At the United Nations in September, President Branko Crvenkovski of Macedonia told the General Assembly that "despite the obvious absurdity of the issue" his country was ready to compromise. He added: "We should not allow ourselves to be humiliated and to experience internal destabilization due to ill compromise."
Secretary of State Condoleezza Rice met Greece's foreign minister and said again that the United States would like to see the conflict "resolved as quickly as possible."
Both the Greek and Macedonian governments are using the issue to buttress popularity with nationalist posturing, says Biljana Vankovska, a political science professor at Skopje University. She said there are no politicians with the courage to present any debate on possibilities for compromise.
"The problem that had been kept to level of political elites is now spilling over and affecting the general public," Vankovska said.
In Skopje, Macedonia's capital, the word "Bucharest" still reverberates like a slap in the face, and anti-Greek feeling smolders.
Macedonia changed the name of the capital's airport last year to Skopje International Alexander the Great Airport, heightening the dispute with Greece and drawing the attention of Barack Obama, who introduced a resolution in the U.S. Senate urging the two countries to resolve their dispute and asserting that the change of name for the airport violated an agreement hammered out between the two sides in 1995 by the United Nations.
So all-consuming is the nationalist quarrel that every local encountered on a recent visit was ready to ascribe sides to the U.S. presidential candidates. According to popular belief, Obama is pro-Greece, while John McCain is for Macedonia.
Macedonia is experiencing a renaissance of curiosity about its ancient history, stoked by the nationalist rhetoric of Prime Minister Nikola Gruevski. But It was the visit of Prince Ghazanfar Ali Khan, sovereign of the Hunza people, in July that set off intense soul-searching about the relationship with Alexander the Great.
The Hunzas believe they are descended from Macedonian soldiers who followed Alexander on his eight-year march to India and stayed. To support their claims, the Hunzas note their fair skin and eyes, and their practice of dodecatheon, or the ancient Greek religion of the 12 gods, before they converted to Islam in 1974.
When the royal Hunza delegation landed in Skopje, the entourage got a boisterous Balkan greeting, complete with some 20 men dressed as Alexander's soldiers - with spears, helmets, shields and period uniforms. Several hundred well-wishers chanted "Macedonia!" and waved Macedonian flags. Some shouted "Welcome home!"
During the eight-day trip, the entourage was received by the prime minister, who offered 10 scholarships for Hunza students at Macedonian universities. They were blessed by the Archbishop Stephan, unrecognized head of the Macedonian Orthodox Christian Church.
Bishop Peter of Bitola proclaimed that the prince "looks like Alexander the Great." One man signed over to the prince a plot of land near Lake Ohrid "so that he would always have a place in his homeland."
The official organizer of the trip was the Macedonian Institute for Strategic Research 16:9, a private organization set up by Marina Doichinovska, a television journalist. (The name refers to Acts 16:9, a verse in the New Testament in which a Macedonian man appears to the Apostle Paul begging him: "Come over into Macedonia, and help us.")
Doichinovska says her group aims to investigate historical questions about Macedonia and to show its contributions to the world. She invited the royal family while visiting the Hunza Valley in 2005 for her weekly television program "Macedonium." She said that officials got involved with the summer visit only at the last moment.
Meeting her first Hunza in Pakistan, Doichinovska said, "was like finding a long-lost relative."
"They expressed their emotions in such a Macedonian way," she said. "It felt to me like a 2,300-year break in communication had been resumed."
At the end of his visit, the prince told Macedonian television: "We didn't feel like we were in a foreign country." He likened the attention showered on his entourage to a fairy tale.
But many Macedonian commentators criticized the emotional reactions to the visit as funny or pathetic. And Greece, for its part, finances a cultural center and provides social services for the Pakistani branch of the Kalash, who make similar claims, some 300 kilometers, or 200 miles, to the southwest in the Hindu Kush.
Maps of the ancient Kingdom of Macedonia show that it spans the territories of both the contemporary countries of Greece and Macedonia. "No one can contradict that," said Vladimir Misev, head of the Institute for Democracy, a private group in Skopje. "It's geography."
"But I can't agree that only one country can have exclusive rights," Misev said about the struggle to claim Alexander. "In a normal, civilized part of the world, this would be something we could share and be proud of and not fight about."
HIV has been in humans for 100 years, study says
NEW YORK: The AIDS virus has been circulating among people for about 100 years, decades longer than scientists had thought, a new study suggests.
Genetic analysis pushes the estimated origin of HIV back to between 1884 and 1924, with a more focused estimate at 1908.
Previously, scientists had estimated the origin at around 1930. AIDS was not recognized formally until 1981, when it got the attention of public health officials in the United States.
The new result is "not a monumental shift, but it means the virus was circulating under our radar even longer than we knew," said Michael Worobey of the University of Arizona, an author of the new work.
The results appear in the Thursday issue of the journal Nature. Researchers note that the newly calculated dates fall during the rise of cities in Africa, and they suggest urban development may have promoted the initial establishment and early spread of HIV.
Scientists say HIV descended from a chimpanzee virus that jumped to humans in Africa, probably when people butchered chimps. Many individuals were probably infected that way, but so few other people caught the virus that it failed to get a lasting foothold, researchers say.
But the growth of African cities may have changed that by putting many people close together and promoting prostitution, Worobey suggested. "Cities are kind of ideal for a virus like HIV," providing more chances for infected people to pass the virus to others, he said.
Perhaps a person infected with the AIDS virus in a rural area went to what is now Kinshasa, Congo, "and now you've got the spark arriving in the tinderbox," Worobey said.
Key to the new work was the discovery of an HIV sample that had been taken from a woman in Kinshasa in 1960. It was only the second such sample to be found from before 1976; the other was from 1959, also from Kinshasa.
Researchers took advantage of the fact that HIV mutates rapidly. So two strains from a common ancestor quickly become less and less alike in their genetic material over time. That allows scientists to "run the clock backward" by calculating how long it would take for various strains to become as different as they are observed to be. That would indicate when they both sprang from their most recent common ancestor.
The new work used genetic data from the two old HIV samples plus more than 100 modern samples to create a family tree going back to these samples' last common ancestor. Researchers got various answers under various approaches for when that ancestor virus appeared, but the 1884-1924 bracket is probably the most reliable, Worobey said.
The new work is "clearly an improvement" over the previous estimate of around 1930, said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases in Bethesda, Maryland. His institute helped pay for the work.
Fauci described the advance as "a fine-tuning."
Experts say it is no surprise that HIV circulated in humans for about 70 years before being recognized. An infection usually takes years to produce obvious symptoms, a lag that can mask the role of the virus, and it would have infected relatively few Africans early in its spread, they said.
HIV infection up eightfold among gays in southern China
HONG KONG: HIV infections jumped eightfold over the past few years in parts of China among gay and bisexual men, according to new data from southern China.
Published in Nature, the study found that the proportion of HIV-positive women of child-bearing age doubled in the past 10 years and researchers warned the disease was moving from high-risk communities into the wider population.
There were an estimated 700,000 HIV-AIDS cases in China as of October 2007, up 8 percent compared to 2006, it said. Some 38 percent of cases were attributed to heterosexual contact, more than triple the 11 percent in 2005.
Cases among gay and bisexual men jumped to 3.3 percent in 2007 from 0.4 percent in 2005.
"HIV-AIDS is spreading beyond the high risk populations, largely due to increased transmission through sexual contact," the professor Zhang Linqi, director of the AIDS Research Center in Beijing, wrote in an e-mail message. "It implies that HIV-AIDS is not only a disease that affects high-risk population, but the general population alike."
The study focused on the epidemic in southwestern Chinese province of Yunnan, which has a long history of opium and heroin trade and where infections are highest among intravenous drug users. Yunnan borders Laos, Myanmar and Vietnam.
The researchers studied 3.2 million blood samples tested between 1989 and 2006 in Yunnan.
While the proportion of intravenous drug users fell from 100 percent in 1989 to 40 percent in 2006, heterosexual transmission rose markedly, accounting for 37.5 percent of infections in 2006.
Women now make up 35 percent of those infected in Yunnan, from 7.1 percent before 1996.
"As 90 percent of these women are of child-bearing age (age 15 to 44), this is likely to translate into more vertical transmission from mother to child," they wrote in the article.
Such changing demographics have resulted in changes in HIV strains now circulating in Yunnan. They can be classified into two main groups, one circulating in Thailand and Myanmar and the other in France and the United States.
"It makes treatment and vaccine development even more challenging," Zhang wrote, adding that prevention strategies that have proven successful should be scaled up.
Lack of medical workers causes new health crisis in developing countries
BANGALORE, India: When her baby turned blue, Nivetha Biju rushed the child to the emergency room of an Indian hospital and watched helplessly as the baby lost consciousness because the nurses on duty had no idea what to do.
Eventually, a doctor saved the baby's life. But many patients are not so lucky in India and in other developing countries, where a scarcity of doctors and trained nurses means there is often no helping hand in times of need.
A lack of skilled personnel has health systems in developing countries "on the brink of collapse," said Ezekiel Nukuro, an Asia adviser for the World Health Organization.
"In some countries, deaths from preventable diseases are rising and life expectancy is dropping," he said.
Some specialists say the health crisis in such countries is being exacerbated as Western countries relax stringent immigration regulations to attract doctors and nurses. Doing so helps the West's flagging health systems while saving money on expensive training.
But this "brain drain" leaves gaping holes in the health care systems of countries where children die daily from diarrhea and where diseases like AIDS, tuberculosis and malaria run rampant.
Aid agencies have warned that a "blue card" plan in the European Union to attract highly skilled migrants like hospital workers, which gained initial backing from ministers, would make the drain worse.
Africa, which has a quarter of the world's disease burden but only 3 percent of its health care workers, is affected the most. Across Africa, AIDS patients are often left unattended for days in rudimentary clinics staffed by a single overworked nurse and a few untrained orderlies. Doctors often visit only once every few weeks.
"There is a clinic run by a nurse who is over 70 years old, and she can hardly remember what she did with a patient yesterday," said Dr. Pheello Lethola, an HIV and tuberculosis specialist in Lesotho, where almost one-quarter of the population is infected with HIV, the virus that causes AIDS. "Yet she still runs the clinic because there is no one willing to there."
The lack of medical workers in Africa is most pronounced in regions where AIDS has whittled away the ranks of health workers.
"A nurse taking care of 400 patients is paid $3 a day in Malawi - not enough even for a bag of maize," said Moses Massaquoi, a doctor with the aid group Médecins Sans Frontières in Malawi. "So health care workers move overseas or work private companies here."
WHO officials said in a report in July that international aid to Africa should be used to increase doctors' salaries and to bolster recruitment and training. The report also said that efforts to connect African hospitals with laboratories and specialists abroad through the Internet and telephone, a practice known as telemedicine, might ease cost pressures in countries that lack skilled personnel.
In Afghanistan, some of the best public hospitals cannot afford disinfectant or rubber gloves, and doctors and nurses do not earn enough to feed their families.
In India, patients may spend days lined up for tests and drugs at New Delhi hospitals because there are not enough doctors and nurses to attend to them all.
"Many end up sleeping outside the clinics, and we are now looking at building shelters so people can come and stay," said one AIDS activist, Loon Gangte, adding that some patients abandoned treatment because the waiting was too grueling.
Indian doctors and nurses are being hired away either by private medical centers that cater to an expanding middle class or by hospitals abroad. Some leave medicine and take jobs in the growing and relatively high-paying information technology sector.
"Demand is greater than the supply," said Dr. Sunita Maheshwari, a pediatric cardiologist at a hospital in Bangalore who returned to India to practice after graduating from Yale University.
"India traditionally lost all our best nurses and technicians to the West because they too don't have enough," Maheshwari said. "So what do they do? They poach from here."
India is estimated to need 600,000 more doctors, 200,000 dental surgeons and one million nurses, as well as X-ray technicians, dental hygienists, physiotherapists and laboratory technicians. There is one nurse for every 1,000 patients in India, compared with about 11 for every 1,000 in Europe.
India boasts of a flourishing "medical tourism" industry, with low-cost plastic surgery and other procedures attracting patients from around the world. Yet poor, sick Indians often get no medical assistance at all.
Experts say there is no easy solution, because the problems of developing countries, including war, disease and malnutrition, often persuade those who are able to leave to do so. But they do suggest that retention strategies could reduce the problem.
"It would be impossible to solve or stop migration of health workers," said Nukuro of the WHO. It is an "individual's basic human right to freedom of movement."
But he said he believed that political and international commitment and innovative strategies, like "partnerships and alliances and long-term investments should be among the key ingredients in tackling medical 'brain drain."'
Some practical steps being taken in India include reducing the burden on health professionals by training housewives to give medical advice for conditions like diarrhea and to dispense fever medicine, oral hydration tablets and rapid diagnostic kits for malaria and pregnancy.
Such community-based training projects are also under way in African countries, especially in remote, rural areas.
"This is a small intervention, but it will have a big impact on reducing maternal mortality rates and infant mortality rates," said Naresh Dayal, the Indian health secretary.
Cartoonist who lampooned USSR's enemies dies at 108
Soviet cartoonist Boris Yefimov, who lampooned Adolf Hitler and later Cold War foe the United States on the instructions of the Soviet leadership, has died aged 108, relatives said on Wednesday.
Yefimov's portrayal of Hitler as a crazed ridiculous figure in cartoons published in Soviet newspapers in World War Two was aimed at sustaining morale at the front. Red Army soldiers cut out his cartoons and kept them in their pockets.
In later interviews he said the Nazi leader had put him on a list of Soviet figures to be hanged if Moscow were captured.
On the orders of dictator Josef Stalin, he depicted the United States in the form of a mean-looking Uncle Sam bristling with missiles. He would throw in a dollar sign in case readers missed the point.
He received the Soviet Union's highest state awards for his work, but he was familiar too with the dark side of Communist rule. "You know, the point about my work is that it was a weapon. Cartoons have to flog, to beat with their sharpness, to expose and to mock," he said in 2004.
With a very sharp memory until very late in his life, he expressed regret about some of his past work.
"I could not refuse to do them ... but today I remember this with disappointment," he told Reuters in 1998 about some of his cartoons. "To say 'No, I don't want to do this, shoot me!' That would be naive."
His brother, journalist Mikhail Koltsov, was killed in the purges overseen by Stalin in the 1930s. Yefimov was also once a friend of revolutionary leader Leon Trotsky, who was killed in exile on Stalin's orders.
One day in 1947, Stalin gave Yefimov just a few hours to draw a caricature lampooning a U.S. military build-up in the northern hemisphere.
"I had two day's worth of work ahead. Had I failed to fulfil the order, I would have perished, but miraculously I finished it," Yefimov once told Reuters.
He included penguins at Comrade Stalin's suggestion -- not daring to tell the dictator that penguins do not live on the North Pole.
The artist began his career during the Russian Civil War after the Bolsheviks came to power in 1917.
"Boris Yefimov is the most political of our graphic artists," Trotsky wrote in an introduction to a book of his cartoons published in 1924. "He knows politics, likes it and penetrates all the details. This is his strongest trait."
In his remarkable career Yefimov saw Lenin speak in 1922, witnessed Hitler in Berlin in 1933 and covered the Nuremberg trials of Nazi leaders after World War Two.
He said his secret to longevity was to not follow any special plan. "I frequently meet friends at the table and drink vodka and cognac and beer, and eat everything. I don't follow any diet."
Russian rules out any war with U.S.
STRELNA, Russia: On the day European Union monitors began patrolling Georgian territory, President Dmitri Medvedev of Russia said there were no ideological grounds for a new Cold War, or any other kind of war, with the United States.
Russia's relations with the United States were already at a post-Cold War low when they were further damaged by Russia's war with Georgia, a U.S. ally, in August. Russia has complained vehemently about what it says is a growing U.S. military presence near its borders.
But Medvedev said Wednesday that the Cold War was based on ideological differences between the United States and the Soviet Union. He said that no differences today were strong enough to bring about similar conflict with the United States.
"We do not have such ideological differences around which a new cold or any other kind of war could start," Medvedev said at a news conference after talks with Prime Minister José Luis Rodríguez Zapatero of Spain outside St. Petersburg, Russia.
European Union monitors began patrolling Georgian territory Wednesday, and Russian troops allowed some of the new monitors into a buffer zone around the breakaway region of South Ossetia, despite earlier warnings from Moscow that they would be blocked.
Russian Supreme Court rehabilitates last czar
MOSCOW: The Russian Supreme Court on Wednesday ruled in favor of full rehabilitation for the last czar, Nicholas II, and his family, officially recognizing the executed royals as victims of Soviet repression 90 years after their deaths.
The ruling brings Russia closer than ever to public reconciliation with the execution, one of the most significant events in a bloody revolutionary period that led to more than 70 years of Soviet rule.
Nicholas II and the monarchy were reviled in official Soviet history. But since the fall of the Soviet Union they have increasingly come to be seen as important, if not positive, elements of Russia's past.
Until Wednesday, however, the Russian government seemed hesitant on the question of rehabilitation because of the czar's own repressive and bloody rule.
The ruling "recognizes their unfounded repression and rehabilitates the members of the royal family," a spokesman for the court, Pavel Odintsov, said. "This is a final decision," he said
It is unclear why the court reversed a ruling made last November, when it decided that the Romanov family was not eligible for rehabilitation because their execution was ordered in 1918 on criminal, not political grounds.
"This decision shows the supremacy of law and the victory of justice over evil and tyranny," said German Lukyanov, the lawyer for Grand Duchess Maria Vladimirovna, a descendant of the czar who first filed a suit for the rehabilitation of her family three years ago.
In July 1918, under Lenin's orders, the czar, his wife, Aleksandra, and their children, Olga, Tatyana, Maria, Anastasia and the 13-year-old heir to the throne, Aleksei, were shot to death in the basement of a house in Yekaterinburg, a city in the Ural Mountains in central Russia.
The killings by the fledgling Bolshevik government were meant to solidify its hold on power in the midst of an intensifying civil war.
The Romanovs' bodies were likely doused in acid to mask their identities before being buried in secret graves. The remains of Nicholas and Aleksandra and three of their five children were discovered in 1991 in the waning days of the Soviet Union, and interred in a special chamber in St. Petersburg's Peter and Paul Cathedral, where many other Russian royals are buried.
The remains of the czar's two other children stayed hidden for another sixteen years. In August 2007, an archeologist in Yekaterinburg unearthed bone fragments from a site not far from where the other Romanovs had been buried. Authorities announced earlier this year that DNA testing had confirmed that the remains belonged to the royal children, Aleksei and Maria.
Other members of the royal family had been rehabilitated previously. In 1999, four Romanov princes killed by the Bolsheviks, including the son of Aleksandr II - the Russian czar blown up by revolutionaries in 1881 - were found innocent of criminal wrongdoing.
But the reputation of the last czar, referred to as "Bloody Nicholas" in revolutionary propaganda, has been clouded by the brutality of his own reign, and by the famines, wars and social collapse that some historians claim he helped provoke.
Lukyanov said that in the coming months he would file suits on behalf of other Romanovs who have yet to be rehabilitated, including the czar's brother, Mikhail, and several other members of the royal dynasty.
The Russian Orthodox Church, which canonized the Romanovs as martyrs in 2000 and was itself subject to massive persecution by the Bolsheviks, welcomed Wednesday's decision. "It is an important step to remove from our history the heavy burden of this crime against the czar's family," said Father Vsevolod Chaplin, a spokesman for the Church.
"In one way or another the perceptions of society toward Nicholas II and his family are changing," he said. "More and more people are becoming free of the sharp clichés that were imposed in the recent past."
Even after war, many Georgians revere Stalin
GORI, Georgia: With his signature mustache, medal-encrusted Soviet marshal's uniform and determination to be addressed as "Comrade," the Stalin impersonator Jamil Ziyadaliev should perhaps be out of work in Georgia, a country still reeling from a war with Russia.
But Ziyadaliev, 64, an avuncular father of two who dresses as Stalin even on days off, insists that business has seldom been better. He is a frequent hired guest at weddings, where he dances to Soviet Katyusha music from World War II.
The benefits of looking eerily like the former dictator, he boasts, include free meals, free car repairs — and free passage through Russian checkpoints.
"Looking like Stalin is like having a visa in Georgia," said Ziyadaliev, a Muslim originally from Azerbaijan, who drove a taxi, peddled vegetables and worked as an accountant before deciding on a career as a modern incarnation of the brutal, diabolically brilliant Soviet tyrant.
"All Georgians respect Stalin, because he was a great leader who created a great empire — and of course, he was the most famous Georgian who ever lived," Ziyadaliev said.
Not everyone agrees. Nika Jabanashvili, a Georgian construction worker whose grandparents were deported by Stalin from Tbilisi to Central Asia as part of his repression of ethnic minorities, views Stalin as little more than a murderer.
"Stalin was a Satan," he said. "He killed more people than Pharaoh. I don't care if he was Georgian. He was a bad man."
Whatever the range of opinions, an enduring cult of Stalin persists in this small but proud nation of 4.6 million, where the Georgian-cobbler's-son-turned-20th-century-titan remains a towering if contentious figure. A recent survey on Tbilisi Forum, a popular political Web site, asked whether people were proud that Stalin was Georgian; a vocal minority of 37 percent of the several hundred respondents said yes, while 52 percent said no and 11 percent said they did not care.
Vakhtang Guruli, a historian of Georgia who works in the KGB archives in Tbilisi, said that most Georgians regarded Stalin as "higher than man, more than human and less than God."
He said contemporary Georgian history books still lauded Stalin for vanquishing Hitler's fascism and transforming the Soviet Union into an industrial superpower, even as they criticized him for engineering the Red Army invasion that ended Georgia's short-lived independence in 1921.
Stalin's lust for power, Guruli added, was a decidedly Georgian characteristic, the outgrowth of having an outsize ego in a tiny, macho country long consumed by banditry.
"Russians tend to forget that Stalin had a Georgian last name, Dzhugashvili, which was overshadowed when he adopted the nom de guerre of Stalin, meaning man of steel, when he was in his 30s," Guruli said. "But every Georgian knows Stalin came from here. He may have given his execution orders in Russian, but he did so with a heavy Georgian accent" — a lineage, Guruli said, that Khrushchev seized on after he denounced Stalin's rule in 1956, mocking him and his henchmen as uncouth Georgian peasants.
Simon Sebag Montefiore, author of "Young Stalin," which chronicles Stalin's violent upbringing as an aspiring priest who became a Marxist revolutionary in Tbilisi, said that even when Stalin became the supreme Soviet leader, he retained a deep attachment to Georgia.
He wrote frequently to his mother here, vacationed in Abkhazian sea resorts and retained an abiding love of Georgian wine, food, poetry and folk music.
"There are two Stalins: the Russian Stalin and the Georgian Stalin," Sebag Montefiore said. "In the Georgian version, Stalin is still the street Marxist, the Georgian boy from Gori. In the Russian version, Stalin is the most important leader of the 20th century and his Georgian identity has been laundered and Russified."
Liana Imanidze, 71, whose grand home in Tbilisi has a sculpture of Stalin in the backyard and is decorated inside with a replica of his death mask perched on a pedestal, lamented that younger Georgians were ignorant about Stalin, including her own grandchildren, who she complained were more interested in Paris Hilton than in World War II.
She regretted that her Stalin-worshiping husband was "more in love with Stalin than with me," but she nevertheless lauded Stalin as a flawed genius.
Sociologists here said the residual appeal resulted from the lack of historical reckoning about Stalin's darker deeds after Georgia gained independence from the Soviet Union in 1991.
In Gori, Stalin's birthplace, a dusty provincial town where a marble Stalin statue dominates the central square, toasts to "our great comrade" remain commonplace at births and weddings. Embarrassed Georgians in the Ministry of Interior said privately that they were disappointed a Russian bomb had not landed on the statue during the August war.
On a recent day at the Stalin Museum here, young Georgian staff members in Soviet military uniforms sold Stalin T-shirts, Stalin poetry books and bottles of red wine embossed with Stalin's image, even as cleaners removed mortar left over from the recent Russian shelling.
Olga Topchishvili, the museum's senior tour guide, said she had been extolling Stalin's accomplishments for nearly 30 years, until three months ago, when the museum added a "gulag section." The section consists of a laminated, letter-size piece of paper quoting three sentences from a 1997 issue of Pravda, the Russian newspaper: "About 3.8 million people were prosecuted between 1921 and 1954," the paper says. "About 643,000 people were sentenced to death. And this happened in a country that experienced three revolutions, two world wars, one civil war and several local wars."
Exact figures are unknown, but historians say the reality was far more murderous: that as many as 18 million people were sentenced to the gulag under Stalin, while up to 10 million peasants died or were killed in the collectivization of the early 1930s, and nearly one million people were executed in the purges of 1937-38.
But Topchishvili said the new exhibit was progress: "Until three months ago, no one wanted to talk about this part of history."
Jacob Jugashvili, the dictator's 36-year-old great-grandson, an artist in Tbilisi, said that if Georgians were nostalgic for Stalin, it was because he made a small country part of a great superpower. Jugashvili, who grew up in Moscow, said that when Georgians hear his famous surname, they almost always respond, "Stalin was Georgian; that is why he was great!"
Jugashvili, who favors the Westernized spelling of his name, said that growing up as Stalin's great-grandson in 1980s Russia was emotionally difficult, as Stalin's leadership was attacked under Mikhail Gorbachev. At that time, he said, Georgians were far more respectful of his legacy — though in Vladimir Putin's Russia, Jugashvili said, Stalin's stature has again risen.
In 1989 he was in high school, "and perestroika had reached its boiling point," he said, adding: "Moscow newspapers were publishing stories with the headline 'Dzhugashvili Is a Killer!' I was 16 years old and I was very upset. I didn't know how to defend myself."
These days, respect for Stalin can unite Georgians and Russians.
Nodari Baliashvili, 72, a Gori native who has a large tattoo of Stalin on his back and another of Stalin and Lenin on his chest, recalled that after war broke out in early August, he was working as a security guard at a bus depot when a Russian colonel burst in and pointed a pistol at him.
Baliashvili recalled that he took off his shirt and the colonel "put his gun down, kissed me on the cheek, gave me a bottle of vodka and chocolates, and said, 'Grandpa, go home.' "
Baliashvili, who got the tattoos as a young soldier in the Soviet Army, said his own grandfather, a poor orphan from Gori, had been adopted by Stalin's father, who made him an apprentice cobbler.
"I'm proud that Stalin comes from Gori," Baliashvili said. "He built the USSR He brought order where there was chaos. Today, everything is for sale."
Five Russian children die in school collapse
Part of a school building in a provincial Russian town collapsed on Wednesday, killing five children and injuring four, the latest casualties of Russia's crumbling infrastructure.
An entire section of the two-storey building housing the school in Belyayevka, 120 km (75 miles) from the regional capital Orenburg in the southeastern Urals, came crashing down, spreading debris over a wide area.
Local people rushed to help firemen and police trying to rescue children from the rubble, and emergency workers sent from Orenburg brought in a crane to help remove the piles of debris.
"Eleven children have been taken out of the rubble, five of them are dead, four are injured and 800 people were evacuated," an Emergencies Ministry spokeswoman in Orenburg said. The death toll was not expected to rise, she added.
The collapse exposed a children's map of the region and a poster in memory of local war heroes on the inner walls of what had been the stairwell.
The school catered for children aged between 7 and 17.
Prosecutors opened a criminal investigation into the accident for possible violations of building safety regulations, while experts tried to identify the main point of weakness in the fabric of the building, constructed in 1962.
"The main load-bearing wall of the building collapsed, not the stairwell. The accident was not caused by roof maintenance, but may have been linked to the removal of old windows," said Angelika Linkova, an official in the local prosecutor's office.
Cracks were visible in the remaining walls of the school, where windows were being replaced before the building's partial collapse, said a photographer at the scene.
Many Russian schools and other public buildings are decaying after decades of neglect, though the Kremlin has pledged to renovate buildings in poor condition.
Two years ago, 45 women perished in a fire at a Moscow drug treatment centre. Days later, 62 elderly people and staff members died in a nursing home fire in South Russia.
They were the worst in a series of accidents blamed on the poor state of public buildings.
LETTER FROM GERMANY
End of a political era
BERLIN: Last Sunday, at six o'clock in the evening, one of the great political success stories of post-war Germany came to an end. The Christian Social Union, which had governed Bavaria for nearly half a century - and had transformed the backward agricultural Catholic community into a modern, high-tech state - suffered a humiliating defeat, losing the absolute majority it had held since the early 1960s.
The results matter because they weaken the overall conservative support for Chancellor Angela Merkel.
The Christian Social Union is the sister party of Merkel's Christian Democrats and they campaign as a bloc in federal elections. Any decrease for either party is bad news for the conservatives as a whole before federal elections next year.
More important, the outcome in Bavaria revealed much about what is happening to Germany's postwar political structures: political fragmentation. As support declines for the big "Volkspartei," or the people's parties - the Christian Democrats, the Social Democrats and the Christian Social Union - other parties are entering the arena. That is making it much more difficult for governments to set clear economic, political and social policies for Europe's biggest economy.
"Maybe the decline of support for these big parties is normal for a democracy," said Gero Neugebauer, a political scientist at Berlin's Free University. "Others say it is due to social change, that society has become more individualistic, that the parties have not sensed this and so have not modernized sufficiently or fast enough to take into account these changes."
What is special about Germany is that it has taken so long for the Volkspartei to lose their appeal. In Austria, Scandinavia, France and Italy, far right parties have sapped support from conservatives and social democrats. Curiously, few, if any radical left parties have emerged.
"If you look at what is happening in other West European countries, the surprising thing here in Germany is that the people's parties could remain so strong for such a long time," said Gerhard Hirscher of the Academy for Policy and Current Events at the Hanns Seidel Foundation. The foundation is affiliated with the Christian Social Union. "Perhaps it has something to do with the need for social consensus, given our history."
After Germany's capitulation in May 1945, the country was devastated and most of the political parties were discredited. The Americans, as one of the Allied forces occupying the country, searched for credible leaders to create new political parties and a political class to rebuild democracy. The idea was to establish mass parties - Volkspartei - that would mobilize people and engage them in a new social, economic and political consensus.
For many years, the Christian Democratic Union and the Social Democrats, the two biggest parties, drew their strength from among the churches and trade unions. Today, with church attendance in decline and trade union membership reduced to about six million, half of what it was in 1991, the parties have suffered.
Membership in the Christian Democrats and Social Democrats has fallen to little more than 500,000, half of what it was in the 1970s.
Electoral support for the Christian Democrats has plummeted to below 30 percent compared with more than 40 percent in previous decades.
The Social Democrats, according to the latest opinion polls, would win 26 percent of the vote if federal elections were held this Sunday.
So weak was support for either of the big parties in 2005 that Merkel was forced to create a "grand coalition" with the Social Democrats. Neither party was strong enough to govern with a smaller partner.
In Bavaria, the Christian Social Union managed to hold out the longest as a Volkspartei. Under Franz-Josef Strauss who led the party from 1961 until his death in 1988, the party built a sophisticated grass-roots organization in the cities, towns, villages and the countryside.
Strauss also dragged Bavaria out of relative poverty by lobbying the West German federal government for subsidies, contracts and favors.
Merkel's predecessors loathed the Bavarians but could not alienate them. It was the price any conservative chancellor had to pay for the support of a difficult but crucial ally.
Until last Sunday, it was worth it. The Bavarians could deliver the vote for the conservative bloc. Now, it seems, they cannot.
Support for the Volkspartei drifted at first to the pro-business Free Democrats, and to the Greens who emerged out of protest movements of the postwar generation.
Hirscher said younger, educated voters wanted something new. They wanted a politics based on more individualism, less bureaucracy for businesses, more opportunities for women and greater attention to the environment. The Volkspartei chose to counter those challenges by moving their policies toward the center rather than appealing to populism.
That approach changed over the past couple of years with the rise of the Left Party, a movement of former East German communists, angry West German trade unionists and traditional Social Democrats.
They caused the defeat of Gerhard Schröder, who as chancellor from 1998 to 2005 had introduced radical economic reforms aimed at modernizing his Social Democratic Party and Germany's postwar social welfare system.
Merkel, who succeeded Schröder, considered continuing those reforms. But she abandoned them as the Left Party, exploiting people's fears about globalization, drained more support from the Social Democrats and even the Christian Democrats.
By now, a certain panic has set in among the Volkspartei, including the Christian Social Union. Instead of pursuing a modernizing, centrist path, the parties are playing the populist card in a desperate bid to show that they, not the Left Party, are the guardians of social justice and a benevolent state.
Despite these efforts to win back support, few analysts said they thought the Volkspartei could regain their former status.
"Those days are over," said Oskar Niedermayer of the German Political Science Association.
In which case, whoever wins the elections next year will find it increasingly difficult to create stable governments in this part of Europe.
In that case, Germany's Volkspartei might as well bite the bullet, discard populism and modernize.
Australian parents on trial for starving daughter
SYDNEY: An Australian couple charged with starving their seven-year-old daughter to death were committed on Wednesday to stand trial for murder.
The girl weighed just nine kgs (20 pounds) when her body was found last November in a room littered with faeces at the family's home, north of the coal port of Newcastle on Australia's east coast, the prosecutor told the Newcastle Local Court.
Magistrate Michael Morahan committed the 46-year-old man and his 37-year-old wife, who cannot be named, to stand trial via a videolink to their jail.
The trial is set for November 7 in the Sydney Supreme Court.
U.S. Supreme Court won't revisit death penalty case
WASHINGTON: The Supreme Court on Tuesday voted, 7 to 2, not to reconsider its decision last June that the death penalty is unconstitutional punishment for the rape of a child.
On the first day of its new term, the court slightly amended its June ruling, but left the basics of it alone. As a result, death penalty laws in Louisiana and five other states that allowed the execution of child rapists in instances in which the child was not killed remain void.
Justice Anthony Kennedy, writing on Tuesday for the five justices in the original majority, said some facts that the court was unaware of when it ruled on June 25 did not alter the court's analysis.
The court's announcement that it would not rehear the case, which originated in Louisiana, was not a surprise, since petitions for rehearing cases already decided by the Supreme Court are very rarely granted. But the circumstances of the case, known as Kennedy v. Louisiana, were unusual in that the arguments and deliberations were accompanied by a factual error that surfaced only after the justices ruled.
In its 5-to-4 decision in June, the court reasoned that, because so few states allowed the execution of child rapists, there was a national consensus against applying the ultimate punishment to such criminals. Not long afterward, it was disclosed that the lawyers arguing the case, and the justices themselves, had been unaware of a 2006 amendment to the Uniform Code of Military Justice, specifically making child rape committed by service members a capital crime.
Thus, the State of Louisiana argued in urging the justices to reopen the case, the high court should review its conclusion that there was a national consensus against the execution of child rapists.
Not so, Kennedy wrote on Tuesday. The 2006 change to the military-justice code merely tinkered with a statute that had authorized capital punishment for the rapes of children (and adults) all along, he wrote. Besides, he said, "authorization of the death penalty in the military sphere does not indicate that penalty is constitutional in the civilian context."
In the Louisiana case, Patrick Kennedy was convicted and sentenced to death in 2003 for raping his 8-year-old stepdaughter. Joining Kennedy in the majority ruling voiding the penalty in June were Justices John Paul Stevens, David Souter, Ruth Bader Ginsburg and Stephen Breyer.
Chief Justice John Roberts Jr. and Justice Antonin Scalia, who were in the minority in June, voted on Tuesday not to rehear the case. Scalia called the original decision disingenuous, but suggested that nothing would have changed it. "The views of the American people on the death penalty for child rape were, to tell the truth, irrelevant to the majority's decision," Scalia wrote on Tuesday.
Justices Clarence Thomas and Samuel Alito Jr. voted on Tuesday to rehear the case, but did not offer reasons.
Dresden bombing killed fewer than thought, report concludes
BERLIN: The Allied firebombing of the eastern German city of Dresden in 1945 killed no more than 25,000 people, far fewer than scholars' previous estimates running as high as 135,000, a special commission has found.
The team of a dozen experts, including university professors, archivists and military historians, said Wednesday that four years of research so far has confirmed 18,000 deaths and showed that police and city administrators at the time believed there were about 25,000 victims of the bombing.
Since the end of World War II, scholars have varied in their tally of people killed by waves of British and U.S. bombers on Feb. 13-14, 1945. Some estimates have run to 135,000 or more. In his 2005 book on the bombing, British historian Frederick Taylor argued the real toll was between 25,000 and 40,000.
The high civilian death toll in Dresden and the devastation of the centuries-old city center have been a source of controversy for decades — as has the dispute over whether the Allies were justified in targeting the refugee-choked city. The Allies hoped the bombing would hurt the Nazis where they would feel it most, and help force their capitulation.
Recently, neo-Nazis in Germany have talked of 500,000 to 1 million victims, calling the raid a "bombing Holocaust" and comparing it to Adolf Hitler's murder of 6 million Jews. They accused Britain and the United States of committing mass murder.
It was after the far-right NPD party won seats in Saxony's parliament in 2004 and gave greater voice to these claims that state officials decided a commission was needed to put the matter to rest.
"The commission, in this preliminary report, believes there were a maximum of 25,000 people who died during the February aerial attack," a team statement said Wednesday. The research is to continue until 2009.
Nazi authorities had failed to provide adequate air raid shelters for Dresden. That left people cowering in basements where many were asphyxiated or buried by collapsing buildings. The town's anti-aircraft guns had been removed for use against the approaching Soviets, letting the bomber crews take undisturbed and deadly aim.
The fire made superheated air rise rapidly, creating a vacuum at ground level that produced winds strong enough to uproot trees and suck people into the flames. Some who managed to get through the blinding sparks and fiery debris staggered into the Grosser Garden park, where many were killed by a second bomber wave.
But the exact death toll has always been a question.
Nazi propaganda from 1945 put the toll at some 200,000. Under communist East Germany, authorities agreed upon 35,000. The neo-Nazis offered a sharply inflated figure.
The team of experts has pored through more than 2,600 linear feet (800 linear meters) of files in the Dresden state archives and interviewed dozens of witnesses.
The commission has also consulted studies on aerial attacks, rescue operations, firefighting, and archaeological evidence.
Despite the chaos during the final days of the war and the devastation of the bombing, they said they found that records of the recovery and burial of the dead from the raid was "remarkably orderly."
"Through this work of the commission the victims get a face and a name," said Dresden Mayor Helma Orosz. "Behind every single victim is ... suffering and we should remember this."
Osaka downtown fire kills 15 men at video theatre
TOKYO: A fire at a pornographic video theatre in downtown Osaka, Japan's second-biggest city, killed 15 men and injured 10 people, local police said on Wednesday.
Police arrested an unemployed man, 46, who admitted to arson, a spokesman said, declining to give further details.
"I got tired of living, so I set a fire," Kyodo news agency quoted the man as saying.
He lit a newspaper in one of the 32 rooms in the "Preview Room Cats" theatre, which each had a reclining sofa, TV and video recorder, Kyodo said.
About 120 firefighters and 40 fire engines battled the blaze on the first floor of a seven-storey building before dawn, a local fire department spokeswoman said. It was extinguished about 90 minutes later.
The establishment, which described itself as an "adult video theatre," is among many in Japan where customers can watch rented videos in small, separate rooms. Equipped with showers, the theatres are often used as cheap hotels by customers to spend the night, domestic media said.
At "Cats," customers could stay up to 11 hours for 1,500 yen (8 pounds) after 11 p.m., Kyodo said.
Japan has relatively little violent crime, but several cases have shocked the public lately.
A man who said he was tired of life went on a stabbing rampage in Tokyo's Akihabara shopping district in June, killing seven people and wounding a dozen others.
Fossett's family was monitoring developments as authorities in the area where the items were found -- the eastern Sierras between Yosemite National Park and the Nevada border -- rushed to set up a command post to search for wreckage of his plane.
"I am hopeful that this search will locate the crash site and my husband's remains," Peggy Fossett, the missing adventurer's widow, said in a statement.
Local officials provided few details of the personal items recovered by the hikers.
Kendall told Reuters that wreckage from the small airplane Fossett was piloting when he disappeared was not located with the identification and a sweatshirt discovered by hikers.
They came across the items in a remote part of neighbouring Madera County linked by the mountainous area's only road to Mono County.
"It's very rugged alpine terrain," said Lt. Michael Salvador of the Madera County Sheriff's Office. "You hike in or you fly in (by helicopter)."
Fossett, 63, vanished in his airplane after taking off from a private airstrip in Nevada in September 2007.
Despite weeks of extensive land and air searches, no wreckage was found, and he was declared legally dead in February 2008 after investigators concluded that his airplane was destroyed in a fatal accident.
Hiker Preston Morrow told cable TV's Fox News Channel that he had found the Federal Aviation Administration ID cards with Fossett's name on them, along with several $100 bills, while returning from a mountain hike on Monday. There was no sign of any wreckage, he said.
The sweatshirt was found in an area higher up the same mountain ridge by searchers on Tuesday, Morrow said.
"I was coming back down this really steep terrain, and what caught my eye was these little (ID) cards in the dirt and the pine needles, and some $100 bills."
"I see the ID. I caught the name. I got the ID cards ... and about five or six of the hundred-dollar bills (which) were dirty and muddy," he said.
"I was wondering, 'why are there some ID cards and money when there was nothing else?' No wallet, no bags, nothing nothing, nothing," Morrow told Fox News.
Fossett held several aviation and sailing records, becoming the first person to fly a balloon solo around the world in 2002.
He disappeared after setting off from western Nevada on September 3 in a single-engine plane for what friends said was a casual pleasure flight.
City and military police were dispatched to disarm the device, which was found around 8 a.m. EST (1 p.m. British time) on a playing field in Rock Creek Park about 4 miles (6.5 km) from the White House, Park Police spokesman Robert Lachance said.
BIRMINGHAM, England: It was supposed to be so easy. Up against an almost embarrassingly unpopular prime minister and way ahead in the polls, the opposition Conservative Party was all set to romp and swagger its way through its annual conference here.
But that was two weeks ago. Since then, banks have failed, the stock market has crashed and bounced and sunk again and the future seems uncertain at best. The Labour Party has had its own conference, in which Prime Minister Gordon Brown argued forcefully that a country in turmoil needed an experienced leader, not a "novice," as he slyly put it. The Conservatives are still ahead in the polls, but their lead has been cut to around 9 percentage points from 15 to 20 points.
So the Conservative conference, which ended Wednesday, was sober rather than giddy, serious rather than gloating. Or, as one party member, Peter Bowden, said: "They're not jumping up and down on a podium and whipping people up into a frenzy while yelling 'hurrah, hurrah."'
The party's smooth and articulate leader, David Cameron, sought in the conference's closing speech to present himself as full of fresh ideas - a wholesale change after 11 years of Labor rule - but responsible and mature enough to lead Britain through bad times.
"We understand the gravity of the situation our country is in," he said of the party, "and our response is measured, proportionate and responsible."
Much as Brown did at the Labor conference last week, Cameron said he wanted to take the opportunity to discuss himself and his values.
"I hold to some simple principles," he said. "That strong defense, the rule of law and sound money are the foundations of good government. But I am also a child of my time. I want a clean environment as well as a safe one. I believe that quality of life matters as much as quantity of money. I recognize that we'll never be truly rich while so much of the world is so poor."
His ideas are more centrist, sometimes even resembling Labour's, than the Conservatives are used to.
"I feel great pain for David Cameron: he's trying to drag the party into the 21st century," said Jason Luty, a National Health Service psychiatrist who is a Conservative council member in Southend.
While he said that Cameron had given a good speech, he acknowledged that the leader - who looks younger than his years - was still vulnerable to charges that he lacks experience.
"It's still a problem for us," Luty said. "It won't do him any harm to wait in the sidelines for a few more years."
On Tuesday, Cameron ripped up the conference schedule and gave a surprise address to the party about the economic crisis, saying the gravity of the situation called for multiparty cooperation.
His message received mixed reviews.
"I didn't think he did anything wrong, but it looked like he was saying, Crikey, I really need to appear somber now," said a lobbyist for the oil and gas industry, who spoke on condition of anonymity because he did not want to publicly criticize the party.
Inevitably, Cameron's speech included a few digs at the prime minister and the Labour Party, which has been riven by internal bickering, a fractious cabinet and endless rumors of a challenge to Brown's leadership.
He mocked Brown's contention that experience was the key to governance, pointing out that Brown had presided over the British economy for a decade before becoming prime minister.
"Gordon Brown talks about his economic experience," Cameron said. "The problem is, we have actually experienced his experience. We've experienced the massive increase in debt. We have experienced the huge rise in taxes."
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