India, Brazil, S.Africa for action to contain financial crisis

With financial crisis gripping the developed world, India, Brazil and South Africa said those responsible for it should be held "liable" and asked the US and Europe to take urgent action to prevent such "unprecedented turbulence" from reaching developing nations.


The three leading developing economies raised questions over financial management of the developed world and advocated a new international initiative to bring about structural reforms in the world's financial system which entails stronger systems of multinational consultations and surveillance.

In an effort to ensure that the impact on them is minimum, the three countries at a trilateral summit at New Delhi on Wednesday, decided to immediately convene a meeting of their Finance Ministers and Governors of central banks to evolve a joint strategy.

Addressing a joint press conference with Presidents of Brazil and South Africa after the summit, Prime Minister Manmohan Singh said the three leaders exchanged views in depth on the financial crisis and other challenges.

"We agreed on some ideas to tackle them and to collaborate closely as the international community grapples to find satisfactory solutions," he said.

"To this end, we have decided to instruct our Finance Ministers and Governors of central banks to convene a meeting, as soon as possible, in order to establish a coordination mechanism," Singh said.

Brazilian President Luiz Inacio Lula da Silva said the US and Europe should take immediate action to ensure that the crisis does not "reach the developing countries that did not participate in this financial casino."

India seeks reforms in UN, G-8

With financial crisis gripping the developed world, Prime Minister Manmohan Singh on Wednesday raised the pitch for reforms in the UN, G-8 and other international institutions of governance and emphasised that the voice of the developing countries should be heard.

Inaugurating the India-Brazil-South Africa (IBSA) Summit in New Delhi, he said the Doha round of WTO talks should be approached purposefully so that these negotiations are concluded in a "manner that promotes development and inclusive growth".

"We are meeting against the backdrop of international financial crisis," he said addressing the third Summit of the three leading economies of three continents.



"Our voice on how to manage this crisis in a way that does not jeopardise our development priorities needs to be heard in international councils," Dr Singh said in the presence of Brazilian President Luiz Inacio Lula da Silva and his South African counterpart Kgalema Motlanthe.


The Prime Minister underlined the need for renewed effort, more than ever before, for the reform of institutions of international governance whether it is the UN or the G-8.



Singh also talked about the challenges posed by increase in energy and food prices and the problem of terrorism, saying these "threaten our development effort".



Underlining the importance of IBSA, he said the forum is "uniquely placed" to cooperate in these areas.

Noting that India, Brazil and South Africa are "dynamic developing economies" located in three different continents, the Prime Minister said "IBSA has an important role to play internationally."



He underlined that the three countries "have a key role to play in ensuring equitable global growth and in contributing to international stability."



Contending that IBSA has become a role model for effective South-South cooperation, Singh said the forum provides a platform for the three countries to learn from each other's experiences and to synergise complementaries in a mutually-beneficial manner.



He said the working groups of the IBSA are making efforts to identify concrete projects and activities for trilateral cooperation.



"Our focus must constantly remain on implementation so that the benefits of our cooperation can be brought to the doorsteps of our people."



The Prime Minister said improving connectivity among IBSA countries "remains a challenge and must remain a strategic objective".

Jet Airways cuts 1,900 jobs to cut costs

Battling a clawing downturn enveloping the aviation industry, Jet Airways on Wednesday announced laying off 1,900 jobs across all operations that will result in savings of USD one million a month.


"It is an unfortunate decision, which all of us in the company regret but it is an attempt to save the company and the jobs of the remaining employees," Jet Airways Executive Director B Saroj Dutta told reporters at the airlines headquarters in Mumbai on Wednesday.

"A total of 1,900 people are being served separation notice. 800 have already been served notice. In the next few days the others will also be served notice. It is an attempt to save the jobs of remaining 11,100 employees," he said.

He said the decision to terminate the employees, which will result in savings of USD 12 million a year, had nothing to do with the alliance entered into with Kingfisher.



"It (alliance) has nothing to do with the workforce of the companies. These are independent decisions."



Kingfisher has laid-off nearly 300 jobs and may announce more cuts across the board in the coming days.



The airline chief Vijay Mallya gave enough hints of it, saying the company would do whatever it takes to cut costs.



Dutta said all sections and activities of the company were being covered by this action, which the airline said was inevitable in view of the declining traffic volumes.



The sack order evoked protests from Raj Thackeray, who warned that no Jet flights would be allowed from Mumbai in case the airline did not reconsider the decision.



But, Dutta said: "They (politicians) are diligent and rational people and they know what the aviation industry is going through."



He also denied any cartelisation, saying the alliance with Kingfisher was just rationalisation and cooperation.

Govt hints at bailout package for airlines; awaits report

Against the backdrop of airline industry's demand for a Rs 4,750 crore bailout package, Civil Aviation Minister Praful Patel has expressed disappointment over the approach of some ministries on sops for the sector.


"We need a consensus," he said while regretting that "many departments are not taking a positive approach."

Taxes on ATF and charges for aviation services could be eased to help airlines fly out of the crisis fuelled by high jet fuel costs and the world economic slowdown, he said.



But the government is awaiting the recommendations of an official panel in this regard.



"It is a tough time for the entire aviation industry worldwide... Government is sensitive to the problem... I have already given (the Prime Minister) an overall picture... after which a committee was constituted. But its recommendation will take sometime," he told reporters in Hyderabad on Wednesday.



Airlines, both private and state-owned that are already facing high fuel costs, are now reeling under the effects of the global financial crisis with drop in premium air traveller numbers.



"We can reduce fuel bills by cutting taxes or ask oil companies to cut base price for airline industry, landing, parking and route navigation charges could also be reduced for a small period of time," said Patel, who was in Hyderabad for the India Aviation-2008, civil aviation expo.



The airlines have sought a bailout package worth Rs 4,750 crore to tide over the crisis spawned by fuel costs and poor load factor.



"If tomorrow no plane flies on the Indian skies, who is there to answer. There is a bad patch in the industry and it needs to be resolved," he said.



Patel said that many airlines had complained to him that banks and lending institutions were not happy to lend to them.



"This will be on top of my agenda. I will meet the Finance Minister, will also meet bankers and ask them not to put undue pressure on airline industry, because it is infrastructure. They should keep some open window for the sector." he said.



The panel appointed to look into the bailout plan for airlines has in turn constituted a sub-committee, which is looking into the finer details of the Rs 4,750 crore package sought by the industry.



The sub-committee is expected to submit its report to the panel shortly, after which a comprehensive report would be presented to the Aviation Ministry.



The crisis in the industry has already forced Jet Airways and Kingfisher Airlines to strike an operational alliance, prune staff strength and routes to cut costs.



Earlier inaugurating the expo, Patel said India provided a huge investment opportunity in the aviation sector, and that about 200 to 300 billion dollars would be required in the next 10-15 years for development of aviation infrastructure.



There were about 400 old or unused airports in the country that could be brought into operation in a phased manner, he said.



Apart from regular air traffic, helicopter tourism, general and business aviation should also be exploited as they held huge potential, Patel noted.



Govt may provide Air India Rs 2,500 cr to see through crisis



The government may provide flag carrier Air India up to Rs 2,500 crore in the absence of funds from the market route, to help it stay in the skies right through the global financial crisis.



"It is owned by the government and as like any owner of a company, government should be ready to infuse liquidity into it. Air India has a very small liquidity base of Rs 145 crore and with an estimated aircraft of Rs 40,000 crore it is absolutely unacceptable.


"There is need to infuse further liquidity to make Air India a viable entity," Civil Aviation Minister Praful Patel told reporters in Hyderabad on Wednesday.


The 77-year-old airline, which initiated a fleet renewal programme three years ago and merged with its sister airline Indian last year, has proposed infusion of Rs 1,000-1,500 crore of equity capital.


It is also looking for soft loans to the tune of Rs 1,000 crore from the government that can be repaid over a period of time.


The airline like its private sector competitors has been facing a drop in traffic, especially premium air travellers a fallout of the global economic slowdown.



Asked about plans for the Air India IPO, Patel said there is no discussion on public listing and that there was "no point in talking about that at this juncture."

G8 backs financial reform summit

The leaders of the G8 major industrialised nations have agreed to hold a summit with other states to discuss global financial reform.

The move came as French President Nicolas Sarkozy said EU leaders had backed a plan to aid the bloc's banking sector at a summit in Brussels.

UK PM Gordon Brown has called for the rebuilding of the IMF to help regulate the world's financial systems.

Meanwhile, shares across the world have fallen sharply amid fears of recession.

The Dow Jones index in New York sank nearly 8% and shares in Brazil by 10%. There were sharp falls in London and on other European markets.

In a joint statement, the leaders of the G8 countries - the US, UK, France, Italy, Germany, Canada, Japan and Russia - said that changes had to be made to the "regulatory and institutional regimes for the world's financial sectors to remedy deficiencies exposed by the current crisis".

The statement added: "We look forward to a leaders' meeting with key countries at an appropriate time in the near future to adopt an agenda for reforms to meet the challenges of the 21st Century."

Speaking to reporters on Wednesday ahead of the EU summit in Brussels, Mr Brown made an impassioned plea for a global summit to reform the International Monetary Fund (IMF), to help regulate the world's financial systems.

He also called for the creation of an early warning system for the international economy and for more cross-border supervision of multinational financial companies.

At the EU summit, the 27-member bloc rallied behind plans agreed on Sunday by officials from the 15-nation eurozone, AFP news agency quoted French President Nicolas Sarkozy as saying.

The plan includes guarantees on bank deposits to 100,000 euros ($136,760; £77,760) within a year.

The proposal is one of several due to be tabled at the summit, and follows a commitment last week to raise the guarantee level to 50,000 euros.

New York 'faces 165,000 job cuts'

New York City could lose as many as 165,000 jobs as a result of the crisis in the financial sector, the city's chief financial officer has warned.

Comptroller William Thompson estimates the positions will go over the next two years, including 35,000 directly employed in the financial sector.

The 165,000 figure is more than double the earlier prediction Mr Thompson made in July of 80,000 job losses.

Since then the health of the US financial sector has worsened sharply.

As the country's financial industry is centred on New York, the city is bearing the brunt of the downturn that has seen Lehman Brothers seek bankruptcy protection, and fellow investment bank Merrill Lynch bought by Bank of America.

'General recession'

Mr Thompson said the increase in his job cut estimate reflected "the spreading of the economic troubles to other industry sectors as the nation slips into a general recession".

His fears are shared by New York City Mayor Michael Bloomberg.

Mr Bloomberg has already ordered a cut in New York City's budget as the losses among Wall Street firms mean they may not have to pay most taxes to the city for a number of years - or at least until profits return.

Last month he told all city agencies to cut their spending by 2.5% this financial year, and by 5% for the next.

The US government is currently implementing a $700bn bail-out package for the financial sector, and, as part of the package, on Tuesday unveiled a $250bn plan to purchase stakes in a wide variety of banks to help restore confidence in the sector.

Shares plummet on Asian markets

Share prices in Asia have followed the sharp downward trend set by US and European markets, amid growing fears of a global recession.

Japan's Nikkei index fell by about 10% in early trading while shares in Australia, South Korea and Singapore dropped by at least 5%.

Hong Kong opened nearly 7% down and Shanghai by nearly 4%.

New York's Dow Jones index saw its worst one-day fall on Wednesday since October 1987, closing almost 8% down.

There were also big falls in London and other European markets on Wednesday.

Ben Bernanke, the chairman of the Federal Reserve, warned that the US economy now faced a "significant threat" from the credit crisis.

'Real economy' impact

Signs of optimism seen earlier this week when markets recovered some of the lost ground have been all but wiped out, the BBC's John Sudworth reports from Tokyo.

The Nikkei average had dropped 10.33% by 0944 (0044 GMT) in Tokyo. It rose slightly afterwards.

"There's a certain degree of panic selling in Tokyo but the sentiment's different from last week," Takashi Ushio, head of the investment strategy division at Marusan Securities, was quoted as saying by Reuters news agency.

"Last week people were panicking over the financial system, nobody really knew what would happen. But now it's the real economy."

Yutaka Miura, senior strategist at Shinko Securities Co Ltd, said investors were particularly unnerved by a 1.2% fall in the value of US retail sales between August and September.

"It really confirmed a severe slowdown in the US economy," he told The Associated Press news agency.

Slowing economy

Many investors are now convinced that the US economy, if not already in a recession, is moving towards one.

A Federal Reserve report showed economic activity had weakened across the country.

In a speech in New York, Mr Bernanke said the US had avoided making the mistakes that helped plunge the country into the 1930s Great Depression.

He pledged that the Fed would continue to fight the credit crisis. But he warned it would take time for the country's economic health to mend.

"The turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth," he said.

"The last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the US economy."

The leaders of the G8 major industrialised nations agreed on Wednesday to hold a summit with other states to discuss global financial reform.

In Brussels, EU leaders rallied behind a plan to aid the bloc's banking sector.