Leading economies told Europe it must put up extra money to fight its debt crisis if it wants more help from the rest of the world, piling pressure on Germany to drop its opposition to a bigger European bailout.
Euro zone countries pledged on Sunday at a Group of 20 meetings of finance leaders to reassess the strength of their bailout fund in March, which could clear the way for other G20 countries to contribute more funds to the International Monetary Fund.
“This will provide an essential input in our ongoing consideration to mobilize resources to the IMF,” the G20 said in the final communique of the two-day meeting of finance ministers and central bankers due to be released later on Sunday.
Germany, as Europe’s largest economy, came under intense pressure to support enlarging the region’s war chest. But facing political hurdles at home, it has sent conflicting signals over whether it was ready to move.
British finance minister George Osborne left no doubt the G20 requires a clear euro-zone commitment.
“We have to see the color of the eurozone’s money first – and, quite frankly, that hasn’t happened. Until it does, there’s no question of extra IMF money from Britain or probably anyone else,” he said.
The G20 is racing to line up massive international resources worth nearly $2 trillion – including existing and new funds – possibly by late April. That would help to draw a line under the financial crisis that erupted in 2008 when Lehman Brothers collapsed, spawned the deepest U.S. recession since the 1930s and now has engulfed Europe’s deeply indebted countries.
It would mark their boldest move since they ploughed $1 trillion into their economies three years ago to combat recession. Many advanced economies are still flooding markets with cheap money to combat weak growth and prevent financial contagion.
Yet the world economic recovery remains patchy and risks remain high that it could stumble, the G20 finance officials said in the communique.
Germany said it would make a decision sometime in March on strengthening Europe’s bailout fund.
The proposal is to combine Europe’s temporary and permanent bailout fund to create a 750 billion euro ($1 trillion) war chest. This would open the door for other G20 countries, like Japan and China, to meet the IMF’s request for $500-$600 billion in new resources, on top of its current $385 billion in funds.
Put together, this would total almost $2 trillion in firepower. The G20 finance chiefs next meet in Washington in late April and they showed they will not ease pressure on Europe by giving it a signal now that new IMF money is in the bag.
U.S. Treasury Secretary Timothy Geithner said on Saturday that Europe had come a long way in laying the foundations for a “credible” crisis response but could not rest there.
“It’s important not to rest on that progress … That progress is in part based on expectations of more progress to come,” he said.
Financial Post
How would you define “unemployment?” Statistics on unemployment are bandied around in the media all the time. Changes in these statistics are hailed as good or bad news for the President, with varying degrees of emphasis from the news networks, depending on which party the President belongs to. But what do these statistics truly measure?
Would you define “unemployment” as measuring “people who want a job, but can’t get one?” This is, broadly speaking, the definition embraced by the Bureau of Labor Statistics. The trick to making those numbers dance lies in measuring “people who want a job.” The widely reported U-3 unemployment metric, currently standing at 8.3 percent, is very aggressive in shaving off people who have not made recent efforts to find work. It is further distorted by massive “seasonal adjustments,” which made over a million people vanish into thin air last month.
This is why the official unemployment rate gets lower when the American workforce contracts. Workforce contraction is a very bad thing. People who simply cannot find work, and languish on unemployment insurance for years, are the last thing a prosperous country needs… but those people don’t count in the official unemployment rate. For example, if everyone under the age of 25 abruptly stopped looking for work, it would be an economic disaster, but the official unemployment rate would go down, because the pool of people looking for work would get smaller.
(That’s not quite as far-fetched an example as it might sound, incidentally. Even the heavily-massaged U-3 unemployment rate currently sits at 23.2 percent for ages 16-19, and 13.3 percent for ages 20-24… and it’s about two percent higher for young men. Policies that increase the cost of labor, such as minimum-wage increases and mandated benefits, have a particularly punishing effect on young entry-level workers, since their labor has less intrinsic value than experienced older employees.)
This is precisely what has been happening under Barack Obama. The workforce is contracting with horrible speed, but it has the beneficial side effect of making the official unemployment rate go down a little, although 8.3 percent is still pathetic. The Administration bounces happily before the cameras and announces its policies are “working,” and job creation is now “on the right track,” even as their best months post job creation only slightly in excess of population growth – and they’ve only had a few such months. Pundits begin wondering if the old political rules that say re-election is impossible with unemployment over 6 or 7 percent might not apply to this President, if he can campaign on a slowly declining unemployment rate.
Another side effect of the way our unemployment statistics are prepared, and reported, comes when America's employment picture is compared to the figures from other nations. Are the unemployment statistics reported from, say, Greece or Italy calculated in precisely the same manner as the American U-3 rate? If not, then how can we make valid comparisons between them?
Since the concept of people who aren’t looking for work is so fluid, and some of those people have clearly been persuaded not to look for work because of job-destroying government policies, it might be more logical to measure unemployment using the standard incorrectly offered by the Bureau of Labor Statistics for the U-3 rate: “total unemployed, as a percent of the civilian labor force.” That’s what the U-3 rate claimsto measure, but it doesn’t, not by a long shot.
What is the current percentage of working-age Americans, eligible to participate in the civilian labor force, but not currently working? Answer: 36.3 percent.
That’s the worst labor participation rate in three decades, and it’s part of the worst employment picture we’ve seen since the Great Depression. Labor force participation is the number we should really be looking at, even more than the unemployment figures cooked up on the monthly basis by the Bureau of Labor Statistics. Those figures have their uses as well, but it seems reasonable to measure the overall health of the economy by the number of people who simply are not participating in the labor force.
This would always be a much higher number than the BLS unemployment statistic, even when the economy was humming along at maximum power. There are always going to be working-age people who drop out of the labor force, for reasons that have nothing to do with the nation’s overall economic health. The labor force participation rate hasn’t exceeded 67 percent in the past decade, so we would be looking at a true “unemployment” number that bounces between roughly thirty and forty percent. The difference between good and bad percentages is relatively small, which makes the true “unemployment” figure less sexy for news coverage, and therefore less useful to politicians… but it’s more logical to measure small changes in a large, accurate number than big changes in a small, largely fantastic number.
Writing at Red State, Rep. Jim Jordan (R-OH), who chairs the House Subcommittee on Regulatory Affairs, Stimulus Oversight, and Government Spending, offers an eye-popping chart measuring the effect of President Obama’s “stimulus” policies on workforce participation:
Jordan writes in support of the Jobs Through Growth Act, a package of dramatic reforms that includes a flat tax with two low rates, reduced corporate taxes, regulatory relief, and increased domestic energy production. Those are the sort of changes America needs to make, if we want to do more than fiddle with imaginary unemployment numbers, whose very definition is subject to “adjustment” on a massive scale. Those who define “unemployment” as “the number of working-age Americans who aren’t working” should waste no time on small reforms.
The rise in the United States public debt is a serious threat to the whole world if Washington fails to rein it in, the head of the Institute of International Finance warned on Feb. 25.
“You look at the U.S. budget deficit, and you cannot help but feel that this is a serious accident waiting to happen. And not just a serious U.S. accident, but a serious global accident,” IIF chief Charles Dallara told a conference on the sidelines of a G-20 meeting of finance ministers and central bankers.
“Countries that are occasionally immature in their ability to manage their economic affairs as well as they should -- and that includes most of them -- are going to find that the world is at risk,” Dallara said.
‘Shower of cold water’“These countries are going to wait for the marketplace to give them a shower of cold water. And we know that when that happens... it can give a shower of cold water to the global economy.”
The non-partisan U.S. Congressional Budget Office estimates that President Barack Obama will finish his first mandate with four consecutive fiscal years showing a deficit above $1 trillion.
Earlier this month an administration official said Obama’s budget for the current fiscal year projects a $1.3 trillion deficit, slightly higher than the $1.296 trillion in 2011.
According to estimates from the International Monetary Fund, the U.S. national debt surpassed the country’s gross domestic product (GDP) in 2011 and should rise to more than 107 percent of GDP this year.
Economics
Lloyds Banking Group made a loss of £3.5bn for the year to 31 December after setting aside £3.2bn to cover payment protection insurance claims.
In 2010 the bank, which is 41% owned by the UK taxpayer, had made a pre-tax profit of £281m.
The bank said last year that it was setting money to cover claims over mis-sold PPI - loan repayment insurance for borrowers should they lose their job.
Lloyds said its bonus pool for 2011 was £375m, down 30% against 2010.
The average bonus for each of its 100,000 staff will be £3,900.
Earlier this week the bank, which also owns TSB and Halifax Bank of Scotland, announced it would not be paying £2m of the pre-announced bonuses to 13 executives, including the former chief executive Eric Daniels.
The current chief executive, Antonio Horta-Osorio, took over at the start of last year. Towards the end of the year he took two months off after suffering severe sleep deprivation.
He returned to work last month, but said he would not take the bonus he was entitled to, which was worth up to £2.4m.Challenges
The bank is undergoing a wide-ranging reorganisation, which includes 15,000 job cuts and the disposal of 632 branches.Continue reading the main storyThe bank's shares fell after the results announcement.
Lloyds is also cutting its international activities to 15 nations by 2014, compared with 30 currently.
Its share price was 63p at the time the government took ownership of what was then just over 43% of the company. But it was about half that, at 35p, in Friday morning trading.
The bank said that it was "in a significantly stronger position than it was 12 months ago", but that the 2012 financial year was likely to present a raft of challenges, from regulatory issues to the eurozone economy.
Lloyds' chief executive, Antonio Horta-Osorio, said in a statement: "We expect the external environment to remain challenging in 2012, with a subdued economy, continued high levels of regulatory scrutiny and political uncertainty relating to the banking sector, and the continued potential for downside effects from financial market volatility and instability in the eurozone."
Lloyds, which is the country's biggest retail bank, said it expected the unemployment rate to top 9% in 2013.
It does not expect to see any improvement in the housing market this year or next and is forecasting prices to remain flat well into 2013.
Mr Horta-Osorio told BBC business editor Robert Peston that Lloyds is only one year into a three-to-five-year process of rehabilitating the bank.
He said that by the start of 2013, Lloyds may have adequate capital for the board to start thinking about the resumption of dividend payments, something that is crucial if taxpayer is ever to see a return on their investment in the bank.
BBC
