Thursday, June 30, 2011
UN warns of severe food crisis in Horn of Africa
The worst drought in 60 years in the Horn of Africa has sparked a severe food crisis and high malnutrition rates, with parts of Kenya and Somalia experiencing pre-famine conditions, the UN said yesterday.
More than 10 million people are now affected in drought-stricken areas of Djibouti, Ethiopia, Kenya, Somalia and Uganda and the situation is deteriorating, it said. "Two consecutive poor rainy seasons have resulted in one of the driest years since 1950/51 in many pastoral zones," Elisabeth Byrs, spokeswoman of the UN Office for the Co-ordination of Humanitarian Affairs, said. "There is no likelihood of improvement [in the situation] until 2012," she added.
Food prices have risen substantially in the region, pushing many moderately poor households over the edge, she said. A UN map of food security in the eastern Horn of Africa shows large areas of central Kenya and Somalia in the "emergency" category, one phase before what the organisation classifies as catast-rophe/famine – the fifth and worst category.
Child malnutrition rates in the worst affected areas are more than double the emergency threshold of 15 per cent and are expected to rise, Ms Byrs said. High mortality rates among children are also reported.
Drought and fighting are driving ever greater numbers of Somalis from their homeland, with more than 20,000 arriving in Kenya in just the past two weeks, the UN refugee agency UNHCR said. It voiced alarm at the dramatic rise, noting the average monthly outflow had been about 10,000 so far this year.The Independent
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The aftermath of another clash at Egypt's Tahrir Square
Cairo
Dozens of wounded file into a makeshift hospital tucked between buildings on Tahrir Square, the symbolic heart of Egypt’s five-month old revolution. They were coming from the scene of clashes between protesters and police that began in the twilight hours of Tuesday, and underscore the volatility of Egypt’s security situation in the nation’s transitional period.
“We just want to live in peace,” says Mahmoud Mohammad, a 15-year-old protester who was injured by rubber bullets in the clashes; he was one of several young men being bandaged up. Among other points of contention that include slow reform, the protesters called for faster prosecutions of the police who killed hundreds of demonstrators earlier this year and speedier trials of former corrupt officials, including former President Hosni Mubarak and former Interior Minister Habib al-Adly.
The speed with which a small protest snowballed into rioting and hours of clashes with the police, is a reminder of the potential for even greater volatility as Egypt's ongoing transition grinds forward. Security services used to violently suppressing dissent remain on the streets and some Egyptians are furious at the history of state torture and violence.
“If you have slow justice, people get angry – slow justice is injustice,” says a volunteer doctor who gave her name as Dina, just before she ran to a patient. The middle-aged man breathed in remnants of tear gas that lingered in downtown’s air.
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S&P to deeply cut U.S. ratings if debt payment missed
(Reuters) - The United States would immediately have its top-notch credit rating slashed to "selective default" if it misses a debt payment on August 4, Standard & Poor's managing director John Chambers told Reuters.
Chambers, who is also the chairman of S&P's sovereign ratings committee, said on Tuesday that U.S. Treasury bills maturing on August 4 would be rated 'D' if the government fails to honor them. Unaffected Treasuries would be downgraded as well, but not as sharply, he said.
"If the U.S. government misses a payment, it goes to D," Chambers said. "That would happen right after August 4, when the bills mature, because they don't have a grace period."
Fears of a technical default have been rising after budget negotiations between Democrats and Republicans fell apart in Washington earlier this week. Even a brief default by the United States would immediately increase the country's borrowing costs, weighing on the fragile economic recovery and eroding the dollar's status as a reserve currency.
On August 4, the Treasury Department is due to pay off $30 billion in maturing short-term debt.
With the debt talks stalled, new ideas are surfacing such as prioritizing debt payments. But Treasury Secretary Timothy Geithner warned lawmakers on Wednesday that such a move would still cause investors to shun Treasury securities.
Geithner said that because the United States now borrows roughly 40 cents of every dollar it spends, prioritizing payments with no debt limit increase would require cutting 40 percent of all government expenditures.
S&P is not the first agency to say it will downgrade the United States if a payment is missed. Rival credit rater Moody's on June 2 was the first to say it would downgrade the United States shortly after a possible ceiling-related default to the Aa range.
Moody's on Wednesday said a U.S. credit downgrade would also affect the ratings of some states and municipalities with strong credit links to the federal government.
Chambers insisted that the likelihood of a U.S. default is "extremely low," as S&P expects a last-minute increase to the country's debt ceiling just like it has happened more than 70 times since the 1960s.
He also noted a default on U.S. Treasuries -- a benchmark against which all other debt is measured -- would dwarf any worries about U.S. credit ratings as global markets would crumble.
Chambers made clear, however, that S&P is more worried about the ability of the government to meaningfully cut its deficit over the next two years, with presidential elections in 2012 making a bipartisan agreement much tougher.
S&P is so far the only of the big-three credit ratings agencies to revise the outlook on the U.S. AAA credit rating to negative. It has said it sees a one-in-three chance of a downgrade within the next two years.
Moody's Investors Service and Fitch Ratings have expressed concern about the pace of budget negotiations in Washington, but still maintain a stable outlook on U.S. ratings.
Yet they have been more vocal about the risks of a "technical default" in August. Fitch said earlier this month it would cut U.S. issuer ratings to "restricted default" if the government misses a more substantial debt payment on August 15.
The Treasury reached the country's $14.3 trillion debt limit on May 16 and has been making use of extraordinary measures to keep servicing its debt since then. It will run out of alternatives to avoid a default on August 2, Geithner has said.
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North Korea threatens a ‘sacred war’ on neighbor
North Korea threatened yesterday to launch “a retaliatory sacred war” against South Korea for alleged slander as the two sides held rare talks on a stalled joint tourism project.
A Pyongyang government spokesman accused the South Korean frontline army units of displaying slogans slandering the North’s “army, system and dignity” and said they are “little short of a clear declaration of war.”
The unidentified spokesman, in a statement carried by the official news agency, vowed to respond to any provocations with a “merciless retaliatory sacred war.”
The South’s Hankyoreh newspaper on Monday quoted some of the slogans as reading: “Let’s stick swords and guns into the hearts of North Korean enemy army,” and “A club is the only medicine for a mad dog.”
The North made similar threats when South Korean reservists were found to be using pictures of Pyongyang’s ruling Kim dynasty as rifle-range targets. That practice has since been stopped.
The latest warning came as 12 South Korean government officials and businesspeople traveled to a jointly-run mountain resort in the North to discuss the ownership of South Korean assets there.
Mount Kumgang opened in 1998 as a symbol of reconciliation and helped the impoverished communist state to earn tens of millions of US dollars a year. However, the South suspended visits after a North Korean soldier shot dead a Seoul tourist who had strayed into a restricted military zone in 2008.
Last year the North seized or sealed off several South Korean properties in protest at the failure to restart the tours.
On June 17, Pyongyang warned it would dispose of properties in the zone, and asked South Korean parties to visit Kumgang by today to discuss the process.
The South’s unification ministry, which handles cross-border affairs, said the North should respect all agreements with private businesses and Seoul’s government.
Taipei Times
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U.S. Fed extends dollar swap lines with central banks
(Reuters) - The U.S. Federal Reserve said on Wednesday it extended its dollar liquidity swap lines to the European Central Bank and counterparts in Britain, Canada and Switzerland by one year amid continued worries about Europe's sovereign debt crisis.
The Bank of Japan will consider the extension to August 1, 2012, at its next monetary policy meeting, the Fed said.
The swap lines allow foreign central banks, including the ECB, the Bank of England and the Canadian, Japanese and Swiss central banks to borrow an unlimited amount of dollars for a fee and lend them out to banks in their home countries.
The swap lines had been set to expire Aug 1.
Just after the extension was announced, Greece's parliament approved the first of two votes in favour of a five-year austerity plan, clearing a major hurdle in the country's bid to avoid default by accessing aid from the European Union and International Monetary Fund.
A liquidity crunch similar to the one that occurred during the 2008 credit crisis was in danger of developing in Europe, where regional banks' exposure to Greece and other struggling euro zone countries was making borrowing in the money markets difficult.
European banks need dollars to fund their dollar-denominated assets, such as mortgage bonds. In a crisis, dollars would be difficult to obtain.
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Housing prices could fall 25%, research firm warns
Canada’s housing market is a bubble ready to burst as valuations have “lost touch with fundamentals” and household debt is at a record high, says a report by Capital Economics.
The independent research firm’s report says it fears that house prices could fall by as much as 25% over the next three years.
“House prices have been growing rapidly for nearly a decade now and it has reached the point where housing is so overvalued relative to incomes that a downward correction seems unavoidable,” says Capital Economics.
“Relative to disposable income per capita, our calculations suggest that housing is around 25% overvalued, which is approaching the level of excess that the U.S. market reached at its peak in 2006.”
The report says the downturn in the housing sector will severely constrain economic growth over the next couple of years as consumption expands at a more “muted” pace and housing investment “shrinks.”
“We also anticipate that the end of the housing boom will lead to a marked decline in housing-related activity and employment,” it says.
Capital Economics says signs of over-building are evident as unoccupied housing units are at historically high levels, similar to 1994-95 when housing construction was last mired in a slump.
“Another sign of over-building, or perhaps over-consumption, is the sharp increases in the home ownership rate over the last 10 years,” it says. “This run-up has coincided with a housing price boom fuelled by rising financial leverage.
“Our concern is that these excesses will eventually lead to a house-price correction, which would greatly impact household wealth, consumer confidence and the economic recovery.”
Financial Post
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http://business.financialpost.com/2011/06/29/housing-prices-could-fall-25-research-firm-warns/
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Obama: New York's gay marriage vote 'a good thing'
President Obama simply won't take a position on gay marriage, no matter how many times reporters ask him.
Still, the president let his personal feelings be known with his remarks. He cited "a profound recognition on the part of the American people" that gays "have got to be treated like every other American. I think that principle will win out."
And he said, "I think we're moving in a direction of greater equality, and I think that's a good thing."
Obama did deplore discrimination based on sexual orientation; he bragged about ending the "don't ask, don't tell" ban on gays in the military; he stressed a new policy permitting federal benefits for same-sex partners.
The president pointed out that the administration has also decided against making legal arguments on behalf of the congressional Defense of Marriage Act, which defines marriage as between a man and a woman. Republicans have blasted his action.
And he did praise the New York state Legislature for approving a gay marriage bill last week -- but only in terms of process, not outcome.
"What you saw was the people of New York having a debate, talking through these issues," Obama said. "It was contentious, it was emotional, but ultimately they made a decision to recognize civil marriages."
Obama said "it is important for us to work through these issues, because each community is going to be different and each state's going to be different.
"I think the combination of what states are doing, what the courts are doing, the actions that we're taking administratively all are how the process should work," he said.
Some gay rights advocates have criticized Obama for not outright endorsing gay marriage, saying he is concerned about more conservative states heading into the 2012 elections.
Richard Socarides, who advised President Bill Clinton on gay rights issues, told ABC News that "the president has staked out a cynical political position aimed at not rocking the boat."
"This states' rights argument is a separate but equal argument," he said. "Would the president have thought it right to let the states decide on the issue of interracial marriage, or on whether or not women should be allowed to vote?"
Others gay rights advocates aren't as concerned, citing progress on some of their other issues.
The Oval
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Greek and German banks could fail EU stress tests
Speculation has risen that several Greek, German, Portuguese and Spanish banks will be among those failing the latest European Union industry stress tests.
As many as 15 out of the 91 banks taking part in the latest round of tests are said to have failed, according to unnamed sources quoted by Reuters.
Between 10 and 15 banks are expected to have failed, compared to seven when the EU-wide tests were conducted last summer.
German and Spanish savings banks are expected to be among the most prominent failures, while Greek and Portuguese banks are also expected to fall short of the capital needed to pass the stressed scenarios banks have been subjected to.
The stress tests have been conducted by the national authorities in each member state under the guidance of the newly-formed European Banking Authority.
For the first time, the tests include a peer review element meaning the national authorities of different countries can challenge the results published by their fellow regulators.
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