Germany questions UK rescue plan

Germany's finance minister has strongly criticised Gordon Brown's plans for reviving the UK economy, describing them as a "breathtaking" and "crass".

But sources close to the British government hit back, saying Berlin was "out of step" with most nations on how to handle the crisis.

Peer Steinbruck had criticised the UK's decision to cut VAT and raise the national debt to record levels.

His attack came as EU leaders gathered for an economic summit in Brussels.

The two-day meeting has been billed as one of the most important summits for years.

Diplomatic breach

French President Nicholas Sarkozy, who will be chairing the talks, said in a letter to fellow leaders: "We shall be required to take a series of decisions with highly significant implications for the future of Europe."

Germany is less than happy with the direction being taken in the UK, and was expected at the summit to question the European Commission's recovery package along similar lines.

Mr Steinbruck's comments, in an interview with Newsweek magazine, represented an unusual breach of diplomatic conventions.

He questioned the effectiveness of the decision to cut VAT from 17.5% to 15%.

"Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90?" he said.

"All this will do is raise Britain's debt to a level that will take a whole generation to work off."

'Tossing around billions'

Mr Steinbruck questioned why Britain was "tossing around billions" and closely following the high public spending model put forward by 20th Century economist John Maynard Keynes.

"The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said.

Shadow chancellor George Osborne said the comments shattered Labour's charge that only the Conservatives oppose the VAT measures.

BBC political correspondent Jo Coburn said sources close to Downing Street and the Treasury were unhappy about the comments.

But she said they dismissed them by saying that Germany "was in a minority position and out of step with most other countries on how to deal with the looming recession".

Downing Street also pointed out that Germany has already introduced its own package of extra spending.

Chancellor Alistair Darling announced in last month's pre-Budget report that the government would inject an extra £20bn into the UK economy in a bid to get it moving again.

Rescue package

And combined with the impact of the downturn on tax receipts, the chancellor said that the UK's total annual public sector deficit would soar to £118bn next year.

While Mr Steinbruck has accused the UK of over-spending on the economic recovery, the German government has put 480bn euros (£370.4bn; $645bn) into a rescue package for its banks.

Most other European governments have also increased public spending to try to ease the impact of the economic downturn.

France recently announced plans to spend 26bn euros, and the European Commission wants to spend 200bn euros across the European Union.

A Treasury spokesman said: "There is a broad international consensus that a fiscal stimulus is the right thing for economies now."

Bank deal ends US factory sit-in

Demonstrating workers at an Illinois factory have ended their six-day sit-in after reaching a $1.75m (£1.17m) agreement with creditor banks.

About 200 staff had been occupying Republic Windows and Doors since being laid off with only three days' notice.

They will receive eight weeks' salary and healthcare benefits and pay for any unused holiday time.

The protest came to symbolise the resentment of those who felt banks were not passing on their bail-out benefits.

The total cost was covered by a $1.35m loan from Bank of America and a $400,000 loan from JPMorgan Chase, both of which were creditors of the plant.

The owners of the company had blamed Bank of America for cutting off their credit line.

Collapse in housebuilding

Republic Windows and Doors was a victim of the collapse in house building in the US.

It said it had given its bankers a plan for an orderly wind-down that would have led to an end of production in January 2009.

But it said that the bank had rejected permission to give holiday pay to its employees.

It told workers last week that Bank of America had shut off its line of credit and had refused to allow further expenditures.

But Bank of America blamed with the company, expressing concern at "Republic's failure to pay their employees the claims to which they are legally entitled".

It also said that Republic had lost $10m over the past two years and that it had lent the company the maximum amount it could.

In July, JPMorgan wrote off a $7m investment in Republic as well as a $5m loan, which had made it a 40% shareholder, and resigned its seat on the board.

Sensex ends almost flat in volatile trade; IT stocks hit

The Bombay Stock Exchange benchmark Sensex on Thursday closed almost unchanged after shuttling between high and lows as investors globally were cautious which also saw most of the Asian markets ending flat and European bourses following the same trend in their early trade.

Market participants were edgy after the 5.4 per cent jump on Wednesday that took the benchmark index's rise to more than 10 per cent in four straight sessions.

After moving in a highly erratic fashion, the BSE barometer settled lower by 9.44 points at 9,645.46.

The key-index moved between 9746.01 and 9441.97 points during the day.

The broad-based National Stock Exchange index Nifty also fell by 8.10 points at 2920.15 after moving between 2945.30 and 2861.55 points during the day.

Markets on one hand gained on expectations of more incentives for the economic growth, while a fresh fall in stocks of software exporting companies following a rise in Indian rupee kept the market volatile, marketmen said.

IT sector index was worst performer today by shedding 3.90 per cent at 2359.20 with TCS, the largest software developer, tanked 6.24 per cent, the most in almost four weeks.

Infosys Technologies, another IT blue-chop declined 3.23 per cent to its lowest since 20th November.

Brokers said the companies also retreated on concern lower technology budgets amid weakening dollar against rupee would cut revenues at Indian software developers, which earn over 50 revenue from the U.S. markets.

The rupee was ruling ar 48.51 a dollar, up 0.9 per cent.

Air India, Indian Airlines propose to fly under common code

Flag carrier Air India, which merged sister airline Indian Airlines with itself last year but continues to use separate nomenclature for flight bookings, would switch to a common code in the next 12 months, the Lok Sabha was informed on Thursday.

"As a merged entity, it is proposed to operate all flights under a common code. Air India is currently in the process of imeplementing a combined new state-of-the-art PSS. All erstwhile Air India and Indian Airlines flights will be migrated to this new PSS under a common code," Civil Aviation Minister Praful Patel said in a written reply.

The PSS and the common code are scheduled to be implemented within the next 12 months.

Both the airlines at present use the thier own legacy Passenger Service Systems (PSS) as they are not compatible and use of common code is not possible as of now, he said.

The erstwhile Air India continues to use International Air Transport Association (IATA) code 'AI' and erstwhile Indian Airlines continues to use IATA code 'IC'.

Replying to another question, the minister said that Air India has discontinued operations to Lahore, Seoul, Dar-E-Sallam, Birmingham and Los Angeles and has also rationalised its flights in the domestic sector.

The restructuring of the international and domestic routes and cutting down capacity by nearly 10-15 per cent is expected to result in savings of Rs 1,200 crore per annum

China inflation eases in November

Chinese consumer inflation hit a 22-month-low in November as food and energy costs eased.

Consumer prices rose 2.4% last month, compared with the same period last year, well down from 4% in October and February's 12-year-peak of 8.7%.

Falling inflation gives the government more scope to stimulate the economy without worrying about rising prices.

It announced a $500bn (£334bn) stimulus package, with tax cuts, construction spending and aid for the poor.

It has also cut interest rates four times since September.

Food prices

The need to stimulate growth was highlighted on Wednesday when China reported its first fall in exports for seven years, which was blamed on the global economic downturn.

Exports dropped by 2.2%, while imports shrank by a massive 17.9% as Chinese consumer spending slumped.

Although politically sensitive food inflation eased in November, it is still high by most standards.

Food costs overall were up by 5.9%, according to the National Bureau of Statistics, which was down from the previous month's figure of 8.5%.

November's figure included 9.3% increase in the price of pork, which is China's staple meat.

Government leaders have been having an anti-inflation campaign since last year, with aid for farmers to boost output and cuts in taxes on food imports.

The government finally removed food price controls on 1 December.

US trade gap unexpectedly grows

The US trade deficit unexpectedly grew in October, despite falling oil prices, according to Commerce Department data.

The trade deficit rose to $57.2bn, which was an increase of 1.1% from September's figure.

While there was a record decline in the average cost of a barrel of oil, there was also a record surge in the amount of oil that was imported.

Imports and exports both fell for the third consecutive month as the downturn hit demand.

"It's now clear, what all of us were afraid of, that the global recession is taking its toll on what had been one of the main props for the US economy's expansion," said David Resler at Nomura Securities in New York.

"I think the trade balance is going to shrink, because I think imports are going to fall faster than exports. Both of them represent declines in world production, that can't be good."

There were other signs of the downturn in weekly jobless figures from the Labor Department.

The number of people making initial claims for unemployment benefits rose 58,000 to a seasonally adjusted 573,000 in the week ending 6 December.

It was the highest total since November 1982.

Corus workers 'may face pay cut'

Bosses at steelmaker Corus proposed that workers take a pay cut to save the firm money, the Community union said.

But it was unclear whether the pay cut was an alternative to job losses among the 25,000 strong workforce or the closure of plants, the union added.

Fears remain that the Llanwern site in Newport, South Wales, will close as the company make savings, costing 1,000 jobs.

The deepening economic downturn has hit demand for steel.

Construction and carmaking, two steel-intensive industries, are among those to have suffered.

'Changes needed'

It had been reported that unions had come up with the plan for workers to earn less in a battle to keep their jobs.

But Michael Leahy, general secretary of the Community union, told the BBC that "any proposals which have come forward have done so as consequence of proposals that have been put by the company".

"They've put a number of proposals including a general pay cut," he added.

"They've not even suggested this is an alternative to reductions in the workforce or closures, but we know however if the order book stays as it is for a long period of time, then we know structural changes may need to take place in Corus."

Mr Leahy said that members would be informed of the range of options were on the table, adding that they and Corus were committed to avoiding closures and job losses, if at all possible.

"We realise that there's been a global downturn in production of steel and people wanting steel - in fact we realise there's been over 40% reduction in the order books for steel in Corus UK and Europe-wide.

"We've been discussing a range of possible arrangements to ensure we have a sustainable industry going ahead and protect interest of our members - they have mortgages and commitments. We didn't want a dramatic impact on their jobs or ability to earn as a consequence of this crisis."

Closure fears

Earlier this month, Corus, the Anglo-Dutch subsidiary of Indian steel giant Tata, asked Gordon Brown for UK government aid.

The firm's head Philippe Varin said state help was needed to allow firms to avoid redundancies amid falling output.

Corus axed 500 jobs from its UK workforce of 25,000 last month.

The firm, which was bought by Tata Steel for $12bn (£8bn) in 2007, plans to reduce its European output by 30% by March.

Llanwern is one of the last remaining steel mills in the UK and employs around 1,000 people.

Corus also runs sites at locations including Port Talbot in South Wales, Scunthorpe in Lincolnshire and Rotherham in South Yorkshire.

Earlier this year, thousands of workers at digger-maker JCB agreed to accept a pay cut to save 350 jobs.

Inflation falls to eight percent from previous week's 8.4 pc

Inflation fell for the fifth consecutive week to a seven-and-a-half-month low of 8 per cent due to cheaper food items, justifying the RBI stance to ease money supply to shift bias towards boosting growth instead of controlling prices.

Wholesale price inflation came down by 0.40 per cent for the week ended on 29th November, from 8.40 per cent a week ago and is expected to come down further when the data is released next week, as then fuel prices cuts would also be reflected.



In fact, the rate of price rise in all certainty is expected to moderate substantially with cascading effect of

fuel price cut and four per cent across the board excise duty reduction getting mirrored in the data in subsequent weeks.



"Policy responses to inflation has brought down the inflation below nine per cent and we expect further reduction," Commerce Minister Kamal Nath said in New Delhi, adding it was a good sign.



Many food items like vegetables, fruits, gram, barley, unrefined oil, gur and rapeseed and mustard oil turned less costlier, even as most other indices either rose or remained unchanged.



However, even then food inflation for the week was higher at elevated level of 10.52 per cent compared to 10.48

per cent a week ago.



Incidentally, the inflation was at 3.89 per cent during the corresponding period a year-ago.



Ever since the collapse of Lehman Brothers in mid-September, RBI has been taking measures to ease money supply by reducing short-term rates and reserve ratios, reversing its earlier stance of tight monetary policy to tackle rising inflation.



In fact, unrefined oil prices declined by 12 per cent, vegetables by 3.5 per cent, gur by three per cent and fruits by 0.5 per cent, among other food items.



Some food items like ragi, urad, bajra, maize and groundnut oil turned expensive.



Prices of non-food items in the primary articles category like raw rubber and copra also declined.



However, prices of most manufactured products like paper, rubber, plastic and chemicals rose. But non-metallic minerals turned cheaper.



Prices of fuels remained unchanged this time, but it would be reflected in the data to be released next week and is expected to bring down inflation substantially.



While prices of petrol was cut by Rs 5 a litre, diesel was reduced by Rs 2 per litre with effect from 6th December.



It was administered hike in prices of petrol, diesel and cooking gas that catapulted inflation to double digits, where it remained for almost five months.



The declining inflation, which would also be abated by an across-the-board excise duty cuts, would give a leeway to RBI to target slowing growth, instead of inflation.



As such, RBI's target of bringing down inflation to seven per cent by this fiscal end is likely to be achieved much earlier.



In fact, its broader target of bringing inflation to tolerable limit of five per cent at the earliest may not be too far, analysts said.



The wholesale price index declined by 0.04 per cent to 233.6 points from 233.7 points for the previous week.



Inflation was revised to 11.49 per cent for the week ended October 4 from 11.44 per cent estimated earlier as the index underwent a change from 239.6 points to 239.7 points

Canada's biggest buyout collapses

The biggest takeover in Canada's history has collapsed on the day it was supposed to have been completed.

A group led by Ontario Teachers Pension Plan Board had agreed to buy BCE, owner of Bell Canada, for Canadian $34.8bn ($27.8bn; £18.6bn) in June 2007.

But the accountants KPMG said last night the company would fail solvency tests because it had too much debt.

It is good news for the banks that had agreed to provide the $35bn (£23bn) of debt to finance the deal.

One of the conditions for closing the deal was receiving an independent solvency opinion.

The buy-out deal was done just before the credit crunch made such agreements all but impossible, because banks that were struggling with their own liquidity problems were reluctant to loan the huge amounts of cash needed.

Citigroup was due to provide $11bn of the funding, with Royal Bank of Scotland, Deutsche Bank and Toronto-Dominion Bank funding the rest.

No termination fee will be paid by either side.

BCE has more than 54,000 staff and is Canada's largest communications company.

As well as telephone and internet business, it owns a satellite communications company, Telesat Canada, and has an interest in CTVglobemedia, Canada's premier media company, which owns the Globe and Mail newspaper.