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Business this week: 24th February – 2nd March 2007

March 1, 2007 Leave a comment

Business this week

Mar 1st 2007
From The Economist print edition

Stockmarkets around the world fell precipitously on February 27th, sparked by a drop of 8.8% in the Shanghai Composite Index, which was triggered by a threat of tighter regulation on trading—later withdrawn. As investors in Asia and Europe took fright, American markets also digested comments from Alan Greenspan, the former head of the Federal Reserve, concerning a possible recession, as well as some poor economic data. The Dow Jones Industrial Average had its worst day in almost four years. See article

Yet another record was set for the biggest leveraged buy-out when a private-equity consortium led by Kohlberg Kravis Roberts and Texas Pacific Group agreed to buy TXU, a Texan power company, for around $45 billion. The private-equity firms stressed the deal’s green credentials (bolstering support ahead of any potential regulatory scrutiny) by announcing that TXU would reduce the number of coal-fired power plants it was planning to build from 11 to 3. See article

Airbus unveiled a long-awaited restructuring plan, which had been held up by last-minute negotiations between France and Germany. Some 10,000 jobs are to go over four years, split between Airbus and its contractors. New “industrial partners” and buyers are being sought for six factories. In order to win backing for the plan in France (where outraged unions called for industrial action), final assembly of the A350 XWB jet will be exclusively based in Toulouse, but Germany is to win increased production of the bestselling A320 narrow-bodied aircraft. After last year’s woes, Airbus forecast that the plan would provide it with eventual annual savings of euro2.1 billion ($2.8 billion). See article

Italy’s government increased the size of the stake it is selling in Alitalia to 39.9% (from the 30.1% announced last December). New conditions were also attached to any potential sale, such as retaining the loss-making airline’s base in Italy.

Deutsche Telekom reported a surprise net loss of euro898m ($1.2 billion) for the fourth quarter. The company booked charges related to its effort to shed 32,000 jobs, but it is also suffering from the continued drain of customers away from its fixed-line business.

In a sign of the further strengthening of Ferdinand Piëch’s hand at Volkswagen, the carmaker raised its stake in MAN, a German lorry-maker, to nearly 30%. Mr Piëch, VW‘s chairman, has proposed a merger of its heavy-truck division with MAN and Scania, a Swedish lorry-maker in which VW also retains a large stake.

The European Bank for Reconstruction and Development barred a German engineering company from its contracts because of corruption in a project backed by the World Bank in Lesotho. It is the first time one development bank has barred a firm for mischief on another bank’s project (the World Bank has already blacklisted the company).

Citigroup named Gary Crittenden as its chief financial officer. Mr Crittenden, who has spent the past seven years at American Express, joins the world’s biggest bank amid criticism from shareholders that it has dampened profits by running up expenses. See article

Station Casinos agreed to an $8.8 billion buy-out from a group of investors led by Frank and Lorenzo Fertitta, respectively the company’s chief executive and president. Operating casinos away from the Strip that cater to locals, Station also owns large tracts of lucrative undeveloped land around Las Vegas.

Blockbuster reported a 28% drop in fourth-quarter net profit compared with a year ago, as the promotion costs for its online service soared. The film-rental company also said it was trying to “resolve a disagreement” with its chief executive over his bonus.

Wal-Mart made an expansive move in China by acquiring 35% of the operator of Trust-Mart hypermarkets. The deal throws down a challenge to Carrefour, China’s biggest foreign retailer. Trust-Mart’s stores are located in city areas where space is at a premium.

Following last year’s debacle over a Dubai company buying American port operations, the House of Representatives voted 423-0 to pass a bill, supported by the White House, that strengthens the government’s scrutiny of foreign deals in the United States.

There was good news and bad news for America’s housing market. Sales of existing homes rose to an annual rate of 6.46m in January, the highest level for seven months. But after increasing in December, the median price of an existing home fell by nearly 5%, to $210,600. Separate data for the smaller market in new homes showed that sales plunged in January by 16.6%, to an annual rate of 937,000—the biggest drop in 13 years.

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Politics this week: 24th February – 2nd March 2007

March 1, 2007 Leave a comment

articles from this week’s edition of The Economist
Markets and the world economy | Goodbye to the blues | A progress report on South Africa | Corporate R&D | Beijing’s Olympic-building boom | The Iraqi-American crackdown in Baghdad | Italy’s government wins its confidence vote | Hillary Clinton’s campaign falters | Incentivising invention | Controlling hospital spending in Britain | Private equity | DNA tracking | The French election | Mario Chanes de Armas, prisoner of Castro

Politics this week

Mar 1st 2007
From The Economist print edition

In a shift of policy the Bush administration said it would take part in a regional meeting this month organised by Iraq’s government, even though Iran and Syria would take part too. See article

The Iraqi government said its main factions had at last agreed to a draft law on how to regulate the oil industry and share out its revenue, though some final touches had still to be made.

The five permanent members of the UN Security Council plus Germany discussed ways of tightening UN sanctions against Iran, in the wake of its refusal to comply with previous UN resolutions ordering it to suspend its enrichment of uranium.

The African Union asked for extra cash to pay for its proposed peacekeeping mission to Somalia, where Ethiopian troops recently overthrew an Islamist government. Only Uganda has said it is ready to send troops, offering 1,500; Nigeria, Ghana, Burundi and Malawi may also chip in, bringing the number up to around 4,000, but the AU says 8,000 are needed.

The International Criminal Court at The Hague named its first two suspects to be summoned for alleged atrocities in the Sudanese region of Darfur: a former junior interior minister in Sudan’s government and now its minister for humanitarian affairs; and a leader of the janjaweed militias that have killed thousands of civilians. See article

Sierra Leone’s former defence minister, Sam Hinga Norman, who was being tried for war crimes at a UN-backed tribunal in Senegal, died before a verdict was due, apparently of a heart attack.

Senegal’s president, Abdoulaye Wade, was re-elected in a landslide, with opponents crying foul.

Italy’s centre-left government is back, after narrowly winning a vote of confidence in the Senate, where it lost a big foreign-policy vote last week. But few Italians expect the government to last for anything like its full term. See article

AP
AP

The International Court of Justice in The Hague ruled that Serbia was not directly responsible for genocide in Bosnia during the 1992-95 war. But it said that the massacre of some 8,000 Bosnian Muslims by Bosnian Serb troops at Srebrenica in 1995 did constitute genocide, and it denounced Serbia for failing to prevent it. See article

A surge of support for the centrist candidate for the French presidency, François Bayrou, unsettled the two front-runners. One opinion poll gave Mr Bayrou 19%, compared with 25.5% for the Socialist candidate, Ségolène Royal, and 29% for the centre-right’s Nicolas Sarkozy. See article

Two Picasso oil paintings with a combined valu
e put at euro50m ($66m) were stolen from his grand-daughter’s home in Paris.

Canada’s Supreme Court revoked a law allowing foreign terrorist suspects to be detained indefinitely without trial while waiting for deportation. Later, Parliament voted against renewing two other anti-terrorist measures allowing suspects to be held for three days without charge and compelling witnesses to testify in terrorist trials. See article

Fidel Castro, Cuba’s ailing president, spoke live on a radio programme for the first time since falling ill last July. The 80-year-old leader, who is said to be suffering from diverticulitis, a bowel disease, said he was “gaining ground”, but did not say when, or if, he would return to work.

America’s vice-president, Dick Cheney, visited Pakistan’s president, General Pervez Musharraf, and asked him to do more to tackle the Taliban and al-Qaeda fighters taking refuge in Pakistan’s tribal borderlands, before an expected spring offensive by Taliban fighters against NATO forces in Afghanistan. See article

Mr Cheney went on to Afghanistan, where a Taliban suicide-bomber attacked the military base at Bagram where he was staying. Mr Cheney survived. The bomber and 11 others did not. Meanwhile, Britain followed America in announcing an increase—of 1,400 soldiers—in its commitment of troops to Afghanistan.

Pridiyathorn Devakula, Thailand’s finance minister resigned, opening further cracks in the troubled military government that seized power in a coup last September. See article

Reuters
Reuters

India’s ruling Congress party suffered electoral setbacks in two northern states, Punjab and Uttarakhand. Its loss of power in both states was blamed in part on popular anger at rising prices. Curbing inflation was a central theme of the annual budget, unveiled in Parliament by the finance minister. See article

Sixteen Indian soldiers were killed in a grenade attack on a convoy of army trucks in the north-eastern state of Manipur. The attack was blamed on one of many insurgent groups fighting Indian rule there. See article

Timor-Leste’s prime minister, José Ramos Horta, said he would run for president in April’s election. As instability in the country persists, he asked Indonesia to close its border with Timor-Leste, to prevent the flight of a group of army mutineers. See article

Reuters
Reuters

John McCain confirmed on a talk show that he would run for president, but said he was saving a formal announcement until April. Earlier, Mr McCain received a fillip to his nascent campaign when he was endorsed by Senator John Warner, who is a strong critic of George Bush’s policy of extra troops for Iraq, a policy which Mr McCain supports.

Virginia’s legislature voted to express “profound regret” at the state’s historical role in slavery. Separately, it emerged that the ancestors of the Rev Al Sharpton, a prominent black activist, were slaves owned by ancestors of the late Senator Strom Thurmond, a prominent segregationist.

Arthur Schlesinger died at the age of 89. The prolific historian wrote about the New Deal, the cold war and the Kennedy administration, to which he was an adviser, but he is best known for his 1973 book, “The Imperial Presidency”, which has experienced a revival of late.

Richard Daley shrugged off his opponents’ accusations of corruption at City Hall and cruised to a sixth term as mayor of Chicago, winning more than 70% of the vote.

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