France plans to unilaterally impose a 0.1 percent tax on financial transactions starting in August, President Nicolas Sarkozy said, brushing aside opposition from the nation
Much work remains to maximize U.S. employment and stabilize prices, and the central bank will do its part, an influential Federal Reserve official said on Friday.
The pace of the U.S. economic recovery remains “sluggish” and is likely to slow somewhat this year, said New York Fed President William Dudley. Unemployment is likely to remain “unacceptably high” for some time, he added, while inflation is likely to be below the Fed’s new 2-percent objective for several years.
“Clearly, much work remains to achieve the Fed’s dual mandate of maximum sustainable employment in the context of price stability,” Dudley told reporters in a regular briefing.
The Fed, which has kept interest rates near zero for more than three years, “has done and will continue to do its part in supporting the recovery - but it is not all-powerful,” he added.
“Other complementary policy actions in housing, fiscal policy and structural adjustment or rebalancing of the economy will be essential if we are to achieve the best available recovery.”
Aside from the low rates, the Fed has also bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades. Yet the recovery has been slow and the outlook issued by the Fed this week was bleak, leading the central bank to say it expects to keep rates “exceptionally low” at least through late 2014.
Dudley, a permanent voter on the Fed’s policy-setting committee, added that he expects “moderate” growth this year, and warned the risks are skewed to the downside in part because of Europe’s debt crisis business cards design.
The economy continues to operate with “significant excess slack,” he said, adding: “Inflation has retreated and may be headed down further.”
On Wednesday, Chairman Ben Bernanke said the Fed stood ready to offer more stimulus in the form of bond purchases if inflation remains below 2 percent - a formal target unveiled earlier that day - and if unemployment, now at 8.5 percent, remains high.
The speech by Dudley, a policy dove focused on driving down the high jobless numbers, could add confidence to those who, since the Wednesday meeting, see another round of asset purchases - including mortgage-backed securities - as all but inevitable.
Still, the slow overall recovery has cast some doubt on the U.S. central bank’s far-reaching strategy, with some, including congressional Republicans, warning that the massive quantitative easing efforts over the last few years could crimp the Fed’s ability to tighten policy when the time comes.
The Fed’s ultra easy monetary policy stance, to nurse the recovery, got some support from data on Friday showing U.S. gross domestic product expanded at a 2.8 percent annual rate in the fourth quarter of 2011.
It was a sharp acceleration from the 1.8 percent clip of the prior three months and the quickest pace since the second quarter of 2010. But it was a touch below economist expectations in a Reuters poll for a 3-percent rate, and nearly 2 percentage points were attributed to the build-up in business inventories.
Attention college students: The interest rate on federal student loans is scheduled to double this summer unless Congress acts soon.
Loans taken out for the current school year carried an interest rate of 3.4%, thanks to a 2007 law that phased in rate reductions for subsidized Stafford loans to undergraduate students. But the law did not specify the rate after this year. So unless something is done, rates on new loans will revert back to 6.8% — where they were in 2007.
President Obama urged lawmakers in his State of the Union address Tuesday to stop this rate hike from going into effect. He also asked Congress to extend the enhanced Hope Scholarship program, which increased the maximum tax credit to $2,500. And he wants to double the number of federal work-study jobs.
But it remains to be seen whether this deficit-conscious Congress will act, especially since extending the 3.4% rate would cost $5.6 billion a year, according to Mark Kantrowitz, publisher of FinAid.org. All told, Obama’s proposals would total at least $10 billion a year.
While the president has focused on expanding access to college for low- and middle-income children, lawmakers have taken several steps to whittle away at student aid.
5 colleges slashing tuition
Congress has eliminated subsidized loans for graduate students, as well as most discounts. They also cut $8 billion out of the Pell Grant program for low-income students and reduced the income threshold for eligibility for a full Pell Grant.
"[Since] Congress just passed legislation cutting student financial aid funding, it’s unlikely they’ll pass legislation increasing student aid funding," Kantrowitz said.
Raising student loan rates will prove costly, said Lauren Asher, president of the Project on Student Debt. Someone who graduates with $23,000 in debt will pay an additional $4,600 in interest over 10 years.
Two-thirds of college seniors graduating in 2010 had student loan debt, and the average balance was more than $25,000, the project found.
"In this tough economy, people are concerned about the cost of college and the burden of debt to follow," Asher said.
A four-year economic crisis has left societies battered and widened the gap between the haves and have-nots, financial leaders conceded Wednesday _ with one suggesting that Western capitalism itself may be endangered.
With the global economic outlook gloomy at best as Europe struggles with its debt crisis, there’s a sense at the heavily guarded World Economic Forum in the Swiss Alps that free markets are on trial.
There’s a widespread acceptance that more must be done to convince critics that Western capitalism has a future and that it can learn the lessons of its massive failures.
For David Rubenstein, the co-founder and managing director of asset management firm Carlyle Group, leaders must work fast to overcome the current crisis or else different models of capitalism, such as the form practiced in China, may win the day.
“As a result of this recession, that’s lasted longer than anyone predicted and will probably go on for a number more years … we’re gonna have a lot of economic disparities,” said Rubenstein.
“We’ve got to work through these problems, if we don’t do in 3 or 4 years … the game will be over for the type of capitalism that many of us have lived through and thought was the best type,” he added.
His stark appraisal may have been an outlier, but there was a clear defensive posture among many participants on this opening day of the World Economic Forum in Davos.
There were numerous references to the need to innovate, the need to consult with employees and the realization that power in the world is shifting from the west to the east. While the traditional industrial economies of the United States and Europe have limped through the last few years, often from one crisis to another, many economies in Asia and Latin America have been booming.
As Ben Verwaayen, the chief executive of Alcatel-Lucent, said, there’s a “very different view” of capitalism in Brazil.
“This is a very different discussion depending where you are,” Verwaayen said.
Many rejected the suggestion from Sharan Burrow, the general secretary of the International Trade Union Confederation, that capitalism has lost its “moral compass” and needed to be “reset.” Still, representatives of the business community insisted they were learning from the mistakes that dragged the world into its deepest economic recession since the World War II.
Bank of America’s CEO Brian Moynihan said the excesses of banks in the run-up to the banking crisis of 2008 reflected the economies they were operating in, so it was important that policymakers don’t overreact.
Moynihan, whose bank was forced to back down on plans to start charging a $5 debit card fee after protests by the Occupy movement and others, said banks have “done a lot” to reduce excesses. He also noted that boom and bust cycles are a part of the Western capitalist structure.
Many outside the confines of the Davos conference center disagree, after years of crisis in which hundreds of millions of people have lost their jobs even as top executives have continued to reap huge pay packets.
Davos activists on Wednesday sent aloft big red weather balloons carrying a huge protest banner reading “Hey WEF, Where are the other 6.9999 billion leaders?”
The activists were from the Occupy WEF movement, a small group camping out in igloos here and following in the footsteps of the Occupy Wall Street movement that spread to cities around the world.
Davos is a hard-to-reach place to protest, tucked in the Swiss Alps. Some 2,600 of the world’s most influential people are gathered for the forum this week, amid increasing worries about the global economy and social unrest due to rising income inequalities.
The CEO of accounting giant Deloitte, Joe Echevarria, talked about developing “compassionate capitalism.”
“You’re going to have to deal with regulation _ balancing the need to protect society along with stifling growth,” he told The Associated Press in an interview. “I think that has to manifest itself through the choices that governments and businesses make.”
While the bigwigs debated at Davos, key Greek bondholders were holding closed-door meetings in Paris to discuss how _ and whether _ to continue talks central to resolving Europe’s debt crisis that would forgive 50 percent of Greece’s enormous debt.
Mark Penn, global CEO of the public relations firm Burson-Marsteller, told AP “the whole crisis has raised larger questions about how is capitalism working, how do you redefine fairness in the 21st century?”
Later Wednesday, German Chancellor Angela Merkel may chart her course for Europe’s crisis in her keynote speech at the Davos forum.
In an interview with six European newspapers published Wednesday, Merkel drove home the need for reform in debt-troubled eurozone nations instead of spending more to beef up the region’s bailout fund.
Surveys ahead of the meeting showed pessimism among world CEOs and plunging levels of public trust in business and government leaders and concerns that fragility in the U.S. and European economies will bring the whole world’s economy down.
It’s a move that Ameren Missouri’s founders couldn’t have possibly imagined more than a century ago: Utility officials on Friday proposed spending $145 million over three years to reduce electricity use.
The filing comes three months after Ameren made deep and widely criticized cuts to its existing efficiency programs, saying they penalized shareholders by not compensating the company for lost energy sales.
The program proposed on Friday would more than double what Ameren Missouri was spending on energy efficiency before the cuts, and promises to save its customers 800 million kilowatt-hours a year, an amount of equal to the energy use of 60,000 homes.
Of course, energy efficiency programs aren’t free — and Ameren wants ratepayers to finance them. From 2013 through the end of 2015, Ameren would collect the cost of implementing the plan through a surcharge on customer bills that would equal a rate increase of a little more than 3 percent, said Warren Wood, the utility’s vice president of legislative and regulatory affairs.
But all of Ameren’s 1.2 million customers will benefit from a reduction in energy use, Wood said.
“This filing aligns the business interests of the utilities and their customers,” he said.
The Public Service Commission has 120 days to review Ameren’s proposal. If approved, it would take effect in January 2013.
The plan is the first filed by St. Louis-based Ameren under the Missouri Energy Efficiency Investment Act. The law, signed by Gov. Jay Nixon in 2009, was designed to encourage reductions in energy use by allowing utilities to earn the same profit on energy efficiency investments that they do on investments in power plants, poles and wires. The PSC, utilities and other groups have spent the past two years debating rules to implement the law.
Ameren spent $70 million on efficiency from 2009 to 2011, helping customers save more than 550 million kilowatt-hours. But the those efforts led to $26.4 million in losses, according to Wood. That amount will grow to $60 million by 2014 — the reason why Ameren killed many of the rebates and other incentives at the end of September to the chagrin of energy efficiency advocates.
Wood explained the problem like this: Every time a customer pays their electric bill, some of the money is used to pay for variable costs like coal and other fuel used to run power plants. Another piece goes to cover fixed costs like poles, wires and substations — infrastructure that’s needed regardless of how many electrons flow through the grid.
When electricity demand declines, so does revenue, including that portion that goes to cover fixed costs. Friday’s proposal would compensate Ameren for that lost revenue while still producing tangible benefits for consumers, he said.
Efficiency and consumer advocates hadn’t read through all of the hundreds of pages that Ameren filed as of Friday afternoon.
While they would welcome an increase in efficiency spending in Ameren’s plan, they said they need to analyze the details before endorsing or opposing the plan.
“Are they seeking to be overcompensated (for efficiency investments)? Are they overreaching?” asked Lewis Mills Jr., Missouri’s Public Counsel. “That’s my biggest concern.”
Rebecca Stanfield of the Natural Resources Defense Council’s Chicago office said it’s time for Ameren, regulators, and consumer and environmental groups to make energy efficiency work in Missouri.
“We’ve had three years of positioning and brinksmanship on this issue,” she said. “All of the parties need to recognize that there’s tremendous value in what can be created with these programs. Lets look at the big picture of what we could achieve if they are successful.”
No one disputes that energy efficiency must be a significant part of the state’s energy policy. That includes Ameren, which has identified efficiency as the cheapest way to meet energy demand in the future.
Missouri has long been dependent on relatively cheap coal to meet its electricity needs. But prices for the fuel and cost of hauling it from mines in Wyoming have been increasing. And new environmental regulations aimed at cutting back on air and water pollution from coal-fired power plants are certain to lead to further increases.
The state also continues to lag behind most others when it comes to policies to reduce energy use. The American Council for an Energy-Efficient Economy ranks Missouri 44th in the nation for energy efficiency.
In Illinois, meanwhile, utilities are increasing spending on energy efficiency programs. That includes Ameren’s sister utility, which sells electricity to customers across much of central and southern Illinois.
Ameren Illinois will spend $78 million this year on discounts and rebates for energy saving lighting and appliances to its 1.2 million electric customers and 800,000 gas customers.
One key difference is that Illinois has an energy efficiency standard. The law requires Ameren and the state’s other investor-owned utility, ComEd, to cut energy use by 25 percent from 2007 levels by 2025.
Without a mandate, Missouri utilities must be willing to aggressively push efficiency programs on their own. How to get them do that has been a contentious issue.
Mills, the main advocate for consumers on utility issues, realizes some Ameren customers may chafe at the idea of seeing bills go up, at least initially, to pay for energy efficiency programs.
But energy efficiency can benefit all consumers — even those who don’t take advantage of rebates and other incentives — by lowering statewide energy use, Mills said. That can help utilities defer or avoid building new power plants or running more expensive plants when electricity demand spikes.
“While it looks like rates are going to be going up,” he said, “they’re going to be going up more if we don’t do this.”
Sales of previously owned homes rose to an 11-month high in December and the supply of properties on the market tumbled to a near 7-year low, pointing to a nascent recovery in the housing market.
The National Association of Realtors said on Friday existing home sales increased 5 percent month over month to an annual rate of 4.61 million units.
November’s sales pace was revised down to a 4.39 million-unit pace, previously reported as a 4.42 million-unit rate.
Economists polled by Reuters had expected sales to rise to a 4.65 million-unit sales pace. Sales in December were up 3.6 percent from a year ago. A total of 4.26 million homes were sold in 2011, up 1.7 percent from the prior year.
“A sector of the economy that has been a large weight on growth has started to stabilize over the last few months and we will continue to look for momentum in 2012,” said John Doyle, currency strategist at Tempus Consulting in Washington.
The third straight month of gains in sales added to hopes that a tentative recovery in the housing market was starting to take shape, but progress will be painfully slow given a glut of unsold properties that is weighing down on prices.
Data this week showed single-family home starts rose for a third straight month in December and optimism among builders this month was the highest in four-and-a-half years.
But the sector, responsible for the 2007-09 recession, remains challenged by an oversupply of homes amid an 8.5 percent unemployment rate. In addition, declining prices have left many Americans with homes that are worth less than their mortgages.
But there are tentative signs of improvement. There were 2.38 million unsold homes on the market last month, the fewest since March 2005. That represented a 6.2 months’ supply at December’s sales pace, the lowest since April 2006, and compared to 7.2 months’ supply in November.
However, the inventory of unsold homes tends to decline in winter. A supply of 6 months is generally considered as ideal and anything above indicates further declines in house prices. The median sales price fell 2.5 percent to $164,500 from a year ago.
Sales last month rose across all four regions, with gains in both the multifamily home and single-family home segments.
Single family home sales rose 4.6 percent, while multi-family dwellings advanced 8.7 percent.
But the road to recovery will be bumpy. Distressed properties, foreclosures and short sales which typically occur at deep discounts, accounted for 32 percent of overall sales last month, little changed from November.
A third of pending existing home sales contracts were canceled, the NAR said.
European officials said the euro region
Coast guard divers searching the submerged part of the Costa Concordia on Sunday found the bodies of two elderly men still in their life jackets, authorities said, raising to five the death toll after the luxury cruise liner ran aground and tipped over off the Tuscan coast.
Divers scouring the bowels of the ship in the murky, cold sea discovered the bodies at the emergency gathering point near the restaurant where passengers were dining when the ship carrying more than 4,200 people hit a reef or rock near the island of Giglio, Coast Guard Cmdr. Cosimo Nicastro said.
The discovery reduced to 15 the number of people still unaccounted for after an Italian who worked in cabin service was pulled from the wreckage Sunday and a South Korean couple on their honeymoon were rescued late Saturday in the unsubmerged part of the liner when a team of rescuers heard their screams.
“We are still searching” for any bodies, “but (also) in the hope that there might have been an air pocket” to allow the survival of others, Nicastro told Sky TG24 TV dockside.
Authorities are holding the Italian captain for investigation of suspected manslaughter and abandoning his ship among other possible charges. According to the Italian navigation code, a captain who abandons a ship in danger can face up to 12 years in prison. A coast guard official said Sunday officers exhorted Francesco Schettino to return to his ship as panicked passengers desperately fled the cruise liner.
The chaotic evacuation has added to the difficulty in tracking down survivors _ with six of those unaccounted for crew members and the others passengers. Two of the unaccounted for passengers are American, the U.S. Embassy in Rome said.
In the first hours after the accident late Friday night, three bodies were found in the waters near the ship. The victims discovered Sunday were two elderly men who were wearing life vests, said Coast Guard Cmdr. Francesco Paolillo.
“The divers had to remove the life vests to get the bodies out,” he said, because they could have floated away. Their nationalities were not immediately released.
The divers’ search through the ship, which is lying on its side with a huge gash, was already dangerous because of the risk the vessel could suddenly move and sink into waters over a nearby lower sea bed.
Their safety was increasingly threatened by floating objects in the belly of the 290-meter (nearly 1,000) foot long liner, as well as muck drastically reducing visibility, Nicastro said.
“There are tents, mattresses, other objects moving which can get tangled in the divers’ equipment,” Nicastro said. Officials were going to huddle soon to see how long the underwater search could safely continue, he said.
Divers say they are using a kind of long cord they hook near the point of entrance and unroll as they work, so they can find their way out when finished.
Prosecutor Francesco Verusio confirmed reports that prosecutors are investigating allegations the cruise liner’s captain, Francesco Schettino, abandoned the stricken liner before all the passengers had escaped.
Asked Sunday by Sky TG24 about the accusations, Grosseto prosecutor Francesco Verusio replied, “unfortunately, I must confirm that circumstance.”
Paolillo said the captain was spotted on land during the evacuation. Officers had urged him to return to his ship and honor his duty to stay aboard until everyone else was safely off the vessel, but Schettino ignored them, he said.
“We did our duty,” Paolillo told The Associated Press.
A French couple who boarded the Concordia in Marseille, Ophelie Gondelle and David Du Pays of Marseille, told the AP they saw the captain in a lifeboat, covered by a blanket, well before all the passengers were off the ship. They insisted on telling a reporter what they saw, so incensed that _ according to them _ the captain had abandoned the ship before everyone had been evacuated.
“The commander left before and was on the dock before everyone was off,” said Gondelle, 28, a French military officer.
“Normally the commander should leave at the end,” said Du Pays, a police officer who said he helped an injured passenger to a rescue boat. “I did what I could.”
Schettino has said the ship hit rocks that weren’t marked on his nautical charts, and that he did all he could to save lives.
“We were navigating approximately 300 meters (yards) from the rocks,” he told Mediaset television. “There shouldn’t have been such a rock.”
He insisted he didn’t leave the liner before all passengers were off, saying “we were the last ones to leave the ship.” That clearly wasn’t the case as the finding of the three survivors aboard Saturday night and Sunday showed payday loan no faxing.
Coast guard spokesman Capt. Filippo Marini told Sky Italia TV that Coast Guard divers have recovered the so-called “black box” with the recording of the navigational details from a compartment now under water.
A Dutch firm has been called in to help extract the fuel from the Concordia’s tanks before any leaks into the area’s pristine waters. No leaks have so far been reported.
While ship owner Costa has insisted it was following the same route it takes every week between the Italian ports of Civitavecchia and Savona, residents on the island of Giglio said they had never seen the Costa come so close to the Le Scole reefs and rocks that jut from Giglio’s eastern side.
“This was too close, too close,” said Italo Arienti, a 54-year-old sailor who has worked on the Maregigilo ferry service that runs between the island and the mainland for more than a decade. A now-retired Costa commander used to occasionally do “fly-bys” on the route, nearing a bit and sounding the siren in a special salute for his hometown, he said. Such a fly-by was staged last August, but there was no incident, he said.
He said the cruise ship always stayed more than five to six nautical miles offshore, well beyond the reach of the “Le Scole” reefs, popular with scuba divers.
The terrifying escape from the luxury liner, which was on a weeklong Mediterranean cruise, was straight out of a scene from “Titanic.” Many passengers complained the crew didn’t give them good directions on how to evacuate and once the emergency became clear, delayed lowering the lifeboats until the ship was listing too heavily for many to be released.
Several other passengers said crew members told passengers for 45 minutes that there was a simple “technical problem” that had caused the lights to go off.
Amateur footage taken aboard the ship showed the situation immediately after it ran aground, as an announcement in various languages tells passengers the liner is having electrical problems and “the situation is under control.” When a man asks a crew member in Spanish why he is wearing a life vest, the crew member doesn’t answer and continues on his way.
Other video shows people crowded together in life jackets, apparently calm and waiting to disembark the ship. A third video taken from a lifeboat, shows mostly darkness as people shout and scream in panic.
Passengers said they had never participated in an evacuation drill, although one had been scheduled for Saturday. The cruise began on Jan. 7.
Costa Crociera SpA, which is owned by the U.S.-based cruise giant Carnival Corp., defended the actions of its crew and said it was cooperating with the investigation. Carnival Corp. issued a statement expressing sympathy that didn’t address the allegations of delayed evacuation.
Some 300 of the crew members were Filipinos and three of them were injured, the Philippine Department of Foreign Affairs said.
The captain has insisted that the reef was not marked, but locals said the stretch of sea is not difficult to maneuver. Anello Fiorentino, captain of a ferry that runs between Giglio and the mainland, said he makes the crossing every day without encountering problems.
“Yes, if you get near the coast there are reefs, but this is a stretch of sea where all the ships can safely pass,” he said.
Islanders on Giglio opened up their homes and businesses to accommodate the sudden rush of survivors. Rossana Bafigi, who runs a newsstand, said she was really moved by the reaction of the passengers.
She showed a note left by one Italian family that said, “We want to repay you for the disturbance. Please call us, we took milk and biscuits for the children. Claudia.”
At Mass on Sunday morning in Giglio’s main church, which opened its doors to the evacuees Friday night, altar boys and girls brought up to the altar a life vest, a rope, a rescue helmet, a plastic tarp and some bread.
Don Lorenzo, the parish priest, told the faithful that he wanted to make this admittedly “different” offering to God as a memory of what had transpired.
He said each one carried powerful symbolic meaning for what happened on Friday night: the bread that multiplied to feed the survivors, the rope that pulled people to safety, the life vest and helmet that protected them, and the plastic tarp that kept cold bodies warm. “Our community, our island will never be the same,” he told the few dozen islanders gathered for Mass.
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Frances D’Emilio contributed to this story from Rome.
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