G20 meets to tackle world crisis

Finance ministers from the world's leading countries are gathering near London to discuss plans for coordinated action to tackle the economic crisis.

They hope to agree the agenda for the G20 summit of world leaders next month.

The aim is to send a signal to the world that key countries are working together to tackle the worst economic downturn since the Great Depression.

The G20 includes the world's biggest industrial and developing countries, making up 85% of the world economy.

The meeting is likely to focus on the need for tougher regulation of banks and more funds to tackle the crisis.

UK Chancellor Alistair Darling, who is hosting the meeting, said that the world's biggest economies must work with other countries if they are to bring about economic recovery.

Disagreements But there are already signs of disagreement among the G20 countries over how much money governments should spend to get their countries out of recession, with Europe notably less enthusiastic than the US about further spending.

French President Nicolas Sarkozy said on Thursday that "in Europe we have already invested a lot for the recovery" and that the priority should be "putting in place a system of regulation so that the economic and financial catastrophe the world is seeing does not reproduce itself".

However, Chinese Prime Minister Wen Jiabao said that China had enough "economic ammunition" to launch a new economic stimulus plan at any time.

Madoff fraud investigation widens

With disgraced US financier Bernard Madoff now behind bars, attention has turned to whether others were involved in his estimated $50bn (£35bn) fraud.

While Madoff insists he acted alone, prosecutor Lev Dassin said he was investigating if others had joined in the crime.

Investigators are also continuing work to see how much of the stolen funds can be recovered.

Madoff has been remanded in jail ahead of his sentencing in June.

This has seen him swap his wife's luxury Manhattan apartment for a small cell in New York's Metropolitan Correctional Centre, just a few miles away.

No plea deal

"We are continuing to investigate the fraud and will bring additional charges against anyone, including Mr Madoff, as warranted," said Mr Dassin.

He also rejected speculation that Madoff had agreed to plead guilty in exchange for leniency to help any others who may have been involved in the crime. "There is no agreement whatsoever," he said.

Madoff told his Thursday court hearing that his family members, and other colleagues, had only ever worked in parts of his business - Bernard L Madoff Investment Securities - that were "legitimate, profitable and successful".

Some of Madoff's thousands of victims have said they were angry that Madoff had been allowed to plead guilty, as this means he will avoid a full jury trial.

The victims had hoped that such a trial would have allowed the full details of the crime to be revealed.

"If there will not be a trial... a lot of this information that people want to hear about... may not come to light," said victim Richard Friedman.

'Money we need'

Investigators say they are now continuing efforts to recover $177bn from Madoff. He himself estimates that the fraud totalled $50bn, and investigations have only managed to recover $1bn so far.
Because of the nature and length of the scheme, victims may recover only a small fraction of their losses," added Mr Dassin.

Some victims have also been paying taxes for a number of years on profits that have turned out to be fake.

Under current US rules, taxes can only be reimbursed for the past three years, but Madoff's fraud started in at least the early 1990s.

"We were paying taxes on money that didn't exist. We paid a fortune," said victim Lenore Schupak, 55.

"This is money we need to live on," added Ms Schupak, who said she had been forced to sell her home and move in with her sister.

Authorities have yet to make any comment on whether Madoff victims will be able to claim back taxes from more than three years ago.

McDonald's warns of revenue drop

US fast-food chain McDonald's warned that the stronger dollar and commodity costs will squeeze its first-quarter revenues and earnings per share.

First quarter revenues could be at least $600m (£434m) lower, it said.

McDonald's sales have remained steady in the economic downturn, helped by its low prices and the ubiquity of its fast-food outlets.

It posted a 1.4% rise in sales in February, compared with a year earlier, at outlets open at least 13 months.

The small increase in sales came despite having one fewer day in February this year than in last year's Leap Year.

But the rates of increase are substantially lower than last year when, with McDonald's reporting an increase of 11.7% in February 2008.

Sales were up 2.8% in the US, helped, it said, by the chicken menu, particularly the quarter pounder. Sales were down 0.2% in Europe compared with the year before .

"If foreign currency rates remain at current levels, currency translation is expected to negatively impact first-quarter revenues by at least $600m and earnings by at least $0.07 to $0.09 per share," the company said in a statement.

"In addition, as previously stated, commodity cost pressures are expected to have a greater impact during the first half of the year."

Pound slides as bank shares hit

The pound has sunk back below $1.40 to a six-week low, as confidence in the UK economy took yet another knock following falls in bank shares.

The pound was down almost four cents at $1.3776. Sterling touched its lowest levels in 24 years in mid-January, nearing $1.35.

UK financial shares fell in Monday trading after the government increased its stake in Lloyds Banking Group.

Against the euro, the pound was down over two cents at 1.0927 euros.

Shares in Lloyds fell more than 10%, before recovering during afternoon trading to end the day up 4.1%.

Barclays lost 13% before bouncing to end down 5.3%.

Other banking stocks among the day's biggest losers included HSBC, down 3.3%, and RBS, which fell 4%.

'Downward pressure'

"What's going on in UK shares at the moment is putting pressure on sterling," said Geraldine Concagh at AIB Group Treasury.

She added that the Bank of England's programme of quantitative easing will put further downward pressure on sterling.

The taxpayer will soon own 65% of Lloyds Banking Group - up from the current 43%.

Chinese prices record rare fall

Chinese consumer prices showed an annual fall in February for the first time since 2002, figures have shown.

The consumer price index fell 1.6% from a year earlier, dragged down by falls in food prices but officials downplayed the threat of a deflationary spiral.

Consumers welcome falling prices, but a prolonged drop undermines company profits as people put off purchases.

Growth in China has slowed sharply as its exports have been hit hard by the global economic downturn.

"Deflation is a symptom of a weak real economy and industrial capacity, which has left companies with little pricing power," said Jing Ulrich, an analyst at JP Morgan.

She added that China's bout of deflation was likely to be temporary as government measures to kick-start spending take effect.

Slowdown

China's inflation rate hit a 12-year high of 8.7% in February 2008 because of shortages of grain and pork.

Officials said this high base for comparison partly explained February's fall.

In the first two months of 2009, prices were down just 0.3% from a year earlier.

In the final three months of last year, China's economy expanded by 6.8% from a year earlier - below the 8% that officials view as the level needed to keep unemployment in check and avoid social unrest.

Overall growth in 2008 stood at 9% - the first time since 2002 that the economy has expanded at a single-digit pace.

Airbus company returns to profit

European aerospace group EADS, the parent company of Airbus, made a profit of 1.57bn euros ($2bn; £1.45bn) in 2008 despite the uncertain economic climate.

In 2007, EADS made a loss of 446m euros. The firm said it expected 2009 profits to be lower than 2008's amid doubts about future aircraft demand.

Airbus delivered a record 483 aircraft in 2008, beating main rival Boeing.

However, EADS said that setbacks in the production of its A400M military transporter would continue.

The A400M's first flight has been postponed because of problems with its engines.

Reshaping

In the fourth quarter of 2008, EADS made a net profit of 490m euros, up 89% from a year earlier.

EADS said the robust profits were in part down to cost cutting.

"We made significant headway in reshaping the company," said Louis Gallois, EADS chief executive.

Although 2009 would be "challenging", he said that 2009 profits would be "significantly positive".

Unlike many companies that have been forced to cut payments to shareholders because of the economic downturn, EADS said it would pay a dividend of 0.20 euros per share, up from 0.12 euros a year ago.

Ford staff accept working changes

Workers at US carmaker Ford have voted to accept changes to their contracts and other benefits, the United Auto Workers union (UAW) says.

The changes include freezing wages, eliminating cost-of-living increases as well as some paid holidays and bonuses.

The deal, which is aimed at helping the firm remain competitive, also involves a new funding arrangement for a health care trust.

Ford's rivals GM and Chrysler will now face pressure to do similar deals.

Ford is the first US carmaker to come to an agreement with the UAW. US carmakers have struggled with a slump in demand as the economic crisis continues. Ford is also the only one of the so-called Detroit Three that has not asked the US government for any emergency loans.

Ford claims it currently has enough money to survive the downturn but says the deal will help it address a fall of income as car sales collapse.

The deal with the UAW is one of several steps Ford has taken to cut costs as part of a turnaround plan that the company initiated four-years-ago.

Sacrifices

The union said 59% of production workers and 58% of skilled-trades workers voted for the agreement.

"We are facing an unprecedented loss of sales and revenue at Ford," said UAW Vice-President Bob King.

"The voting results show that our members are prepared to make painful sacrifices in order to be part of the solution to the problems facing Ford and the US auto industry."

The deal will also save Ford billions of dollars in health care costs. The company will now pay up to half of its obligation to a trust fund for retired workers in stock rather than cash.

The announcement came as members of the Obama administration task force were touring General Motors and Chrysler facilities in the Detroit area.

GM and Chrysler have already received $17.4bn (£12.6bn) between them in federal support, and have asked for a further $21.6bn.

Similar agreements with the UAW are needed as a requirement of their bailout packages.

IMF predicts a global recession

The world economy is likely to shrink for the first time in decades this year, the head of the International Monetary Fund (IMF) has warned.

Dominique Strauss-Kahn's prediction is gloomier than that the IMF's current official forecast of 0.5% growth.

He added that trade was falling at an alarming rate and business and consumer confidence had collapsed.

He was speaking at a conference in Dar-es-Salaam, Tanzania, to discuss how Africa should respond to the crisis.

"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," Mr Strauss-Kahn said.

The World Bank, the IMF's sister institution, on Monday said it also expects the world economy to shrink in 2009.

'Severe'

Mr Strauss-Kahn also warned that Africa's economic growth will be affected by the continuing world downturn. The IMF predicts that growth in sub-Saharan Africa will slow to about 3% in 2009, half the growth rate it previously thought.

Mr Strauss-Kahn said even this rate may be "too optimistic".

"Even though the crisis has been slow in reaching Africa's shores, we all know it is coming and its impact will be severe," he said.

"We must ensure that the voice of the poor are heard. We must ensure that Africa is not left out."

The conference will discuss what external support the IMF and other Western donors may be able to provide to help mitigate the impact of the crisis on Africa, which has the highest poverty rate of any region in the world.

Not at fault

The IMF's managing director, Dominique Strauss Kahn, told the BBC on Monday that the conference would be a "milestone" and that he wanted to build a different kind of partnership with Africa, as well as providing additional funds.

Africa has little direct exposure to the credit crisis. Its banks have not invested much, if at all, in the problem financial assets at the heart of the crisis.

But the global downturn has undermined demand for many industrial commodities, which are important exports for several African countries. - including oil in Nigeria, Angola and Equatorial Guinea, and copper in Zambia.

Less than a year ago, the IMF's forecast for sub-Saharan Africa was economic growth of 6.7% in 2009, an increase on the 5% growth enjoyed in 2008.

Now the low growth forecast means that many African countries are likely to see very little increase in living standards, and could fall further behind in meeting poverty targets.

It says that 15 of the 21 countries which it judges most vulnerable to the crisis are in Africa.

Inflation back to 2002 level at 3.03 per cent

Inflation declined to about a six-and-a-half-year low of 3.03 per cent by the third week of February as most food, fuel and manufactured items turned cheaper, justifying the RBI's rate cut move to propel growth.

With wholesale prices-based inflation coming to a level seen on 10th August, 2002, by falling 0.33 percentage points from 3.36 per cent a week ago, economists expect the RBI to further cut rates next month.


This is the fifth consecutive week that inflation has fallen.


Economists expect inflation to reach zero by this fiscal end.


While most food products in raw form saw a decline in prices, manufactured food items like sugar and ghee turned marginally expensive.


Most other manufactured products also became cheaper, with the exception of metals alloys and machine tools.


Crisil Principal Economist D K Joshi said, "There could be further rate cuts. I believe there could be a cut of 50 basis points in both the repo and reverse repo rates next month."



With inflation going below four per cent, the RBI on Wednesday cut the short-term lending and borrowing rates the repo and reverse repo by 50 basis points to arrest economic slowdown with India's GDP growth falling to over a five-year low of 5.3 per cent in Q3 of the current fiscal.


However, the central bank has noted that consumer prices are still high, but expressed the hope that they may also come down after some time.


The Reserve Bank pointed out that consumer price inflation, as reflected in various indices, is in the range of 9.85-11.62 per cent as of December 2008-January 2009 and is yet to show moderation.


"Consumer price inflation has remained at elevated level due to increase in primary articles' prices. With WPI inflation having moderated significantly, consumer price inflation may also be expected to decline, though with a lag," the RBI said.


However, it is mainly wholesale price inflation that is widely tracked.


The wholesale price index (WPI), on which inflation is based, declined by 0.1 per cent to 227.6 points for the week ended
21st February, 2009, from 227.8 points a year ago.



Among food products, vegetables turned cheaper by 3.2 per cent and fruit by little less than one per cent. Bajra, jowar and gram also became cheaper.


However, prices of maize and arhar moved up.


Among non-food items in raw form, raw silk prices declined by seven per cent, copra by three per cent and rape and mustard seed and gingelly seed by one per cent each.


In fuels, jet fuel saw a 4 per cent decline in prices, and furnace oil by one per cent.


In the manufactured goods category, sugar turned expensive by two per cent and ghee by one per cent.


Prices of machinery and machine tools also rose, but those of textiles, basic metals alloys and transport equipment and parts declined.

Satyam approved to sell 51% stake

Fraud-hit IT firm Satyam has been given the go-ahead to sell most of itself.

Indian financial authorities approved plans for the company to sell a 51% stake as it seeks to win back clients and restore customer confidence.

Reports suggest computing giant IBM and Indian engineering firm Larsen & Toubro are frontrunners for the stake.

Satyam has struggled since former boss Ramalinga Raju admitting inflating their assets by more than $1bn.

Shares in Satyam jumped 18% after the company's state-appointed board got approval to sell the majority holding.

Satyam lost more than 80% of its market value following Mr Raju's confession in January.

The auction for the stake will be global and potential buyers would need to have assets of at least $150m.

The buyer then would not be able to sell its stake for at least three years, Satyam said in a statement.

Satyam had been one the biggest players in the booming Indian IT software market, supplying back-office services to firms from around the world.

EU calls for crisis talks over GM

The European Commission has called for a crisis meeting among EU states hosting General Motors (GM) plants.

EU Industry Commissioner Guenter Verheugen said that the way GM was "dealing with the issue of Europe is not acceptable".

Earlier, the troubled carmaker's auditors said there was "substantial doubt" about the ability of General Motors to stay afloat.

Last week GM posted a $30.9bn (£21.9bn) loss for 2008.

It also warned that 2009 was set to be "challenging".

Shares in General Motors fell more than 15% in New York trading.

European worries

Earlier this week, GM's top executive warned the European divisions of General Motors (GM) could collapse within weeks without European governments' help - costing up to 300,000 jobs.

Chief operating officer Fritz Henderson also said governments should step in immediately to ensure GM Europe did not run out of money by April or May.

Mr Verheugen said: "We expect GM to disclose everything,

"What are their plans with their European daughter companies and locations? What are they doing with property rights, and especially is GM prepared to maintain responsibility for the European companies or not?"

He said that at the emergency meeting he wanted to find out "what the different member states that have GM sites are considering to do".

EU countries that have GM-related production plants include Britain, Belgium, Poland, Germany, Spain and Sweden. Some other EU states host suppliers.

Liquidation fear

Ongoing losses and the struggle to generate cash flow meant the firm's ability to continue as a going concern should be questioned, said the auditors.

The firm, which plans to cut 47,000 jobs, has said it might need another $22.6bn in government loans to survive.

It had already received $13.4bn in federal loans as it struggles in what analysts say is the worst vehicle sales market in 27 years.

GM said that its creditors had decided not to force the company to repay more than $6bn in loans following the auditor's warning, in order to let GM press the case for more government financial aid.

"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for Deloitte & Touche wrote in the annual report.

GM reiterated on Thursday that a bankruptcy filing could lead to liquidation, as the company would not have enough funds to finance its reorganisation.

Besides, consumers could be reluctant to buy bankrupt carmakers' vehicles, GM said.

According to GM, its February sales plummeted 53% from a year earlier, while its rival Ford posted a 48% drop.

The auditors' remarks reflect comments already made by the firm about its difficulties.

GM said in its annual report: "Our future is dependent on our ability to execute our viability plan.

"If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the US bankruptcy code."