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Pension funds warn on cost of economic stimulus

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LONDON | Fri Oct 7, 2011 10:35am BST

LONDON (Reuters) - Britain's pension funds have warned the Bank of England's latest round of quantitative easing to help revive the stalled economy will put an onerous burden on companies as it drives up the cost of funding payments to retired workers.

Quantitative easing depresses the yield on UK government bonds, known as gilts, making it more expensive to pay for future liabilities, pension funds association the NAPF said.

On Thursday the Bank announced a new round of stimulus, expanded by 75 billion pounds, to try and kick-start economic growth, pushing yields on longer-dated debt to record lows.

"This measure has adverse consequences for pension funds in the short term. Quantitative easing makes it more expensive for employers to provide pensions and will weaken the funding of schemes as their deficits increase," said Joanne Segars, Chief Executive of the NAPF.

"All this will put additional pressure on employers at a time when they are facing a bleak economic situation."

Segars added the NAPF is writing to the Pensions Regulator, requesting a meeting to discuss ways to protect funds.

The NAPF's concerns were echoed by consultant Aon Hewitt.

"This stands to place even more of a burden on UK companies already buckling under the weight of the pension promise, with implications for employment and hence the economy," said Colin Robertson, global head of asset allocation at Aon Hewitt.

(Reporting by Chris Vellacott; Editing by Laurence Fletcher and Erica Billingham)

ECB Saves Banks as Governments Act on Greece

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October 07, 2011, 5:04 AM EDT By Gabi Thesing and Jeff Black

(Updates with Sarkozy comment in sixth paragraph. Click EXT4 for more on the European debt crisis.)

Oct. 7 (Bloomberg) -- The European Central Bank’s move to keep euro-area banks afloat is buying governments more time to recapitalize them as Greece edges closer to default.

The ECB said yesterday it will reintroduce yearlong loans, giving banks access to unlimited cash through January 2013, and resume purchases of covered bonds to encourage lending. At the same time, the European Commission is pushing for a coordinated capital injection into banks and German Chancellor Angela Merkel said policy makers “shouldn’t hesitate” if it turns out financial institutions are undercapitalized.

“Politicians, including Angela Merkel, have finally realized the urgency in protecting banks as a Greek default can no longer be ruled out and no-one wants a Lehman in Europe,” said Christoph Kind, head of asset allocation at Frankfurt Trust, which manages $24 billion. “From its side, the ECB is making sure that banks won’t face funding issues throughout that period.”

Financial shares advanced yesterday after Merkel fed speculation that policy makers are working on plans to boost bank capital to stem the spread of the sovereign debt crisis. Europe’s rescue fund, the European Financial Stability Facility, could be relied upon as a last resort to bolster banks if needed, she said, adding that Germany is ready to discuss possible bank aid at this month’s European Union summit.

Euro, Stocks

The euro headed for a weekly advance after two weeks of losses, trading at $1.3448 at 10:36 a.m. in Frankfurt. Stocks gained for a third day in Europe after the overnight advance in Asia, with the Stoxx 600 up 0.7 percent to 231.8 at 9:00 a.m. in London.

European leaders are under pressure from global counterparts to find a solution to the debt crisis as it threatens to tip the world economy back into recession. EU leaders hold a summit on Oct. 18 followed by a meeting of the Group of 20 on Nov. 3-4. French President Nicolas Sarkozy said today he will discuss banks with Merkel when he visits Berlin on Oct. 9.

Germany’s Deutsche Bank AG on Oct. 4 scrapped its profit forecast and announced 500 job cuts and further writedowns on Greek bond holdings, while Belgium’s Dexia SA is facing its second bailout in three years.

The ECB’s measures buy banks “a lot of time as Europe is basically moving toward recapitalizing the sector,” said Silvio Peruzzo, an economist at Royal Bank of Scotland Group Plc in London. “Where the ECB can and does contribute very aggressively is to breaking the nexus between the sovereigns and the banks.”

ECB Purchases

The ECB will spend 40 billion euros ($53 billion) on covered bonds from next month and offer banks two additional unlimited loans of 12 and 13-month durations, President Trichet said at a press conference in Berlin yesterday after leaving the benchmark interest rate at 1.5 percent. The ECB will continue to lend banks as much money as they need in its regular refinancing operations at least until July 2012.

The ECB used the same measures during the global financial crisis to avert a credit crunch.

The 2.5 trillion-euro market for covered bonds -- assets backed by mortgages or public-sector loans -- underpins much of Europe’s real estate lending, which almost ground to a halt in the wake of Lehman Brothers Holdings Inc.’s collapse in September 2008.

Fear Factor

Banks’ overnight deposits with the ECB jumped to the most in more than a year this week as concern about other institutions’ sovereign debt holdings discouraged them from lending to each other.

“For the banking sector the focus is more on liquidity rather than capital,” UniCredit SpA Chief Executive Officer Federico Ghizzoni said in an interview published yesterday.

Policy makers are “determined to do everything necessary to ensure that Europe’s banks are able to play their essential role in lending,” commission President Jose Barroso told reporters in Brussels yesterday. “Close coordination at European level is essential.”

Chairing his final rate-setting meeting before handing the reins to Italy’s Mario Draghi at the end of the month, Trichet resisted calls to reverse two rate increases earlier this year even as the debt crisis threatens to tip Europe back into recession.

Klaus Baader, co-chief economist at Societe Generale SA in London, said the ECB’s decision to focus on greasing the banking sector rather than cutting rates “is a completely appropriate reaction to the current conditions” as “the problem in the euro area is not an excessively high level of short term interest rates.”

Risk to Growth

Still, the crisis has “started to infect the real economy,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt.

The ECB in September cut its growth forecasts to 1.6 percent from 1.9 percent for 2011 and to 1.3 percent from 1.7 percent for 2012. Euro-area service and manufacturing industries last month contracted for the first time in more than two years.

Deutsche Bank Chief Executive Officer Josef Ackermann blamed the slowdown in Europe for his bank’s troubles. About 42 percent of revenue from the bank’s sales and trading operations came from Europe last year, Ackermann said on Oct 4.

The bank will write down its Greek sovereign debt holdings by about 250 million euros for the third quarter after a 155- million-euro value reduction at the end of the second quarter.

Banks Gain

France’s Natixis and BNP Paribas SA were among the biggest gainers on the 46-member Bloomberg Europe Banks and Financial Services Index yesterday. Natixis climbed as much as 13 percent, while Paribas was up as much as 7.8 percent.

Trichet yesterday said European banks and supervisors including the European Banking Authority should do everything they can to address the need for recapitalization and banks shouldn’t be reluctant to accept state help when needed.

“There finally seems to be a plan in Europe and what the ECB did yesterday certainly complemented that,” said Gilles Moec, co-chief European economist at Deutsche Bank in London. “The ECB has always been ready to step up to the plate if governments show a willingness to shoulder responsibility. It wasn’t always the case in the past, but it looks like it’s coming together now.”

--With assistance from Jana Randow in Frankfurt and Christian Vits in Berlin. Editors: Matthew Brockett, Simone Meier

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net; Jeff Black in Frankfurt at Jblack25@bloomberg.net.

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Asian stocks climb amid European developments

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Asian stocks climbed Friday after Europe's move to backstop troubled banks and Britain's plan to pump more stimulus into its fading economy gave a boost to confidence.

After a week of wild gyrations stemming from Europe's debt crisis, investors in Asia reacted positively to news that the Bank of England will turn on its stimulus taps and that the European Central Bank will offer new short-terms to banks that are facing difficulties securing funding.

Hong Kong's Hang Seng index leaped 3.5 per cent to 17,778.34 after surging 5.7 per cent the day before while South Korea's Kospi index jumped 2.9 per cent to 1,760.31.

Japan's Nikkei index rose 1.4 per cent to 8,640.34 after the country's central bank said the economy is "picking up" and predicted an eventual return to a moderate recovery.

Benchmarks in Taiwan, Singapore, Australia and New Zealand also advanced. Markets in mainland China were closed for a weeklong holiday.

"We're seeing a lot of buying today basically because markets have bounced off their lows so a lot of people are covering their shorts ahead of the weekend" before stock prices increase further, said Andrew Sullivan, a sales trader at Piper Jaffray Asia Securities Ltd. in Hong Kong.

Short sellers borrow a stock to sell and "cover their shorts" when they buy it back at a lower price, pocketing the difference when it is returned to the lender.

"There was positive news out of the U.K., out of Europe on the banking side certainly and that spurred a run on the U.S. banks being positive as well," Sullivan said.

European and U.S. bank stocks gained after the ECB and Bank of England announcements on Thursday. The moves gave hope to global financial markets and were a sharp turnaround from the beginning of the week, when stocks tumbled on fears that European policymakers were acting slowly and indecisively to contain the debt crisis.

The ECB offered new unlimited emergency short-term loans to the Continent's battered banks, which have faced difficulties borrowing from each other because of worries about each other's financial stability.

The ECB will also buy up to €40 billion ($53 billion) in covered bonds, an important source of funding for banks. But it held interest rates steady, disappointing some economists who had hoped for a cut.

On the same day, the Bank of England said it would pump another £75 billion ($116 billion) into the country's stagnant economy, reviving an asset purchase program that injected £200 billion from March 2009 to January 2010. The bank's decision came earlier and was bigger than many economists had predicted.

A U.S. report later Friday on September employment will provide guidance on the state of the economic recovery. Investors are looking closely for any clues ahead of its release.

Piper Jaffray's Sullivan said that in a speech on Thursday U.S. President Barack Obama "criticized Europe for dithering over Greece and its banks."

"To some people that might indicate that jobs number is going to be worse than the market is expecting."

In currencies, the euro was marginally higher at $1.3430 from $1.3429 late Thursday. The dollar inched up to 76.62 yen from 76.61.

Oil prices rose, with benchmark crude for November delivery up 34 cents, or 0.4 per cent, to $82.95. The contract jumped $2.91, or 3.7 per cent, to finish at $82.59 per barrel in New York on Thursday.

Brent crude rose 27 cents, or 0.3 per cent, to $106.00 in London

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Belgium’s Ratings Put by Moody’s Under Review for Downgrade

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October 07, 2011, 5:24 PM EDT By Dave Liedtka

Oct. 7 (Bloomberg) -- Belgium’s Aa1 local- and foreign- currency ratings were placed under review for a downgrade by Moody’s Investors Service because of rising funding risks for euro region nations with high levels of debt and additional bank support measures which are likely to be needed.

The review will focus on the vulnerabilities of the Belgian public debt in the current euro area sovereign crisis and potential costs and contingent liabilities that the government may incur in supporting Dexia SA, Moody’s said in a statement today. Moody’s will also assess how the risks for the growth outlook of the economy and the government’s fiscal and economic plans may impact the country’s debt trajectory.

The downgrade warning comes as France, Belgium and Luxembourg seek to protect their local banking units of Dexia from the debt crisis threatening the heart of Europe’s financial system. Belgian Prime Minister Yves Leterme said he’ll do whatever it takes to safeguard the bank in Belgium. Dexia’s troubled assets may total as much as 190 billion euros ($256 billion).

Spain and Italy, the euro region’s fourth- and third- largest economies, were downgraded earlier today by Fitch Ratings on concern they will struggle to improve their finances as Europe’s debt crisis intensifies. Spain had its foreign and local currency long-term issuer default ratings cut to AA- from AA+, while Italy had the same set of ratings cut to A+ from AA-, the company said today. The outlook for both countries is negative. Fitch also maintained Portugal’s rating at BBB-, saying it would complete a review of that ranking in the fourth quarter.

--Editor: Greg Storey

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Activists call for board shake-up at News Corp

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LONDON | Thu Oct 6, 2011 10:57am BST

LONDON (Reuters) - Pension funds should oppose the re-election of James Murdoch to News Corp's board to draw a line under the hacking scandal that has engulfed the company, a shareholder activist body said on Thursday.

The Local Authority Pension Fund Forum, whose members have combined assets of 100 billion pounds, also said the roles of chief executive and chairman held by Rupert Murdoch should be separated and an independent chair installed to improve accountability.

"News Corp (NEWS.O) and its shareholders desperately want to draw a line under this scandal, but that will only be possible if the board accepts the need to demonstrate real accountability," said forum chairman Ian Greenwood.

"Whilst these are difficult issues for the company to address, we believe that to secure News Corp's long-term future such reform is necessary."

Murdoch's News Corp has been rocked by the admission of phone hacking at its tabloid News of The World, culminating in it closing the 168-year-old paper and withdrawing a prized $12 billion bid for pay-TV group BSkyB (BSY.L) in July.

James Murdoch, Rupert's son, oversees News Corp's operations in Europe, including the British newspaper arm News International.

(Reporting by Paul Sandle)

Moody's cuts UK banks as capital worries simmer

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By Sudip Kar-Gupta and Steve Slater

LONDON | Fri Oct 7, 2011 11:56am BST

LONDON (Reuters) - The credit rating of two top UK banks was cut on Friday due to the likelihood of less state support in a future crisis, as the government sought to reassure investors UK banks were well capitalised and able to cope with a European debt crisis.

Ratings agency Moody's cut its rating on Royal Bank of Scotland (RBS.L) by two notches, downgraded Lloyds (LLOY.L) by one notch, and cut its ratings on Santander UK (SAN.MC), the Co-Operative Bank, Nationwide Building Society and seven other smaller British building societies.

Banks had been on review for possible downgrade as part of a trend where state support for lenders is being reduced, and reforms proposed last month by Britain's Independent Commission on Banking had been expected to have a negative influence.

"The market's central expectation around the ICB impact had been for a 2-notch downgrade across the board, so it's better than expected," said Gareth Hunt, analyst at Investec.

But concern is growing that banks may need more capital as part of a wider European move to shore up the industry to tackle a debt crisis and restore investor confidence. The European Union plans to present a plan for member state to coordinate a bank recapitalisation.

Chancellor George Osborne said Britain's banks remained well-capitalised and in better shape than many of their European rivals, who face bigger losses on holdings of peripheral euro zone debt.

"I am confident that British banks are well capitalised, they are liquid, they aren't experiencing the kind of problems that some of the banks in the euro zone are experiencing at the moment," Osborne said in an interview with BBC radio.

RBS, 83 percent owned by the government, said it remained one of Europe's most strongly capitalised banks, responding to a Financial Times report citing concerns in government circles that it might need more state aid.

RBS's capital position came under strain under a "stress test" of lenders in the summer, raising fears it would need at least 5 billion pounds more in a widespread recapitalisation. But analysts said its solvency was stronger than showed in the test, which included historical toxic losses shown by the bank and ignored a big reduction in its balance sheet.

"Compared to their European peers the UK banks are well positioned from a capital perspective," Elisabeth Rudman, senior vice president at Moody's, told Reuters after the downgrade. "But the environment they are operating in is still very tough and there's an awful lot of uncertainty out there in the euro zone."

Standard and Poor's on Friday downgraded the core banks of Franco-Belgian financial group Dexia (DEXI.BR) by one notch, citing difficulties in securing wholesale funding and the need for increased collateral.

UK banks have raised over $120 billion (77 billion pounds) in the last three years, forced by the government to raise low capital levels. In the same time German banks have raised about $40 billion, Italian banks have raised $29 billion and French banks -- seen as most in need of fresh funds -- have raised $22 billion, according to Reuters data.

By 11:45 a.m. RBS shares were down 4.23 percent and Lloyds was down 3.47 percent, underperforming a 0.79 percent fall by the European bank sector .SX7P.

Gilt futures fell, underperforming Bunds after the a credit rating downgrade added to worries another bailout could be needed.

Moody's move reduced the uplift that RBS and Lloyds receive from state support to three notches, in line with rival Barclays (BARC.L) and international peers like Bank of America (BAC.N). It did not reflect a deterioration in the financial strength of banks or the government, Moody's said.

It did not change its rating on Barclays or HSBC (HSBA.L). Lloyds said the downgrade would only have a "minimal" impact on its funding costs.

Moody's said authorities did not yet have all the necessary tools to allow an orderly resolution of the largest, most complex banks, and proposals to reform the industry put forward by the Independent Commission on Banking would take time.

"The implementation is still a long way off, but the trend is towards trying to lower the possibility of government support into banks, but we see that as taking time to unfold," Rudman said.

Moody's said the UK government is likely to continue to provide some level of support to systemically important financial institutions, but is more likely now to allow smaller institutions to fail if they become troubled.

"What's really interesting is the polarity between the downgrade to small institutions and the lack of downgrade to the big institutions. This will have interesting consequences for the government's stated aims to increase competition in retail banking," Investec's Hunt said.

(Additional reporting by Avril Ormsby and Tim Castle; Editing by Mike Nesbit and Hans-Juergen Peters)

EU Leaders Under Pressure for Bank Rescue Plan

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October 07, 2011, 7:01 AM EDT By Gavin Finch and Liam Vaughan

(Updates with Shapiro’s comment in sixth paragraph.)

Oct. 7 (Bloomberg) -- European Union leaders are under pressure from investors to devise a comprehensive plan to rescue the region’s banks before a Group of 20 summit in November.

“A blanket recapitalization of banks, in some cases, over- capitalizing those banks, would be the only thing that’s going to restore confidence at this juncture,” Simon Maughan, head of sales and distribution at MF Global Ltd. in London, said in a Bloomberg Television interview yesterday.

Plans to inject capital into Europe’s banks are “well under way,” European Commission President Jose Barroso said yesterday. The European Central Bank also reintroduced yearlong loans, giving banks unlimited access to cash through January 2013. Lenders in the region may need as much as 200 billion euros ($269 billion) of additional capital, according to the International Monetary Fund’s European head Antonio Borges.

Speculation that EU leaders may agree on a comprehensive recapitalization plan has helped to boost the Bloomberg Europe Banks and Financial Services Index 9 percent in the past two days. Bank stocks dropped 30 percent this year as investors became concerned that financial firms will have to write down their holdings of Greek, Italian, Spanish and Portuguese government bonds.

Investors are also pushing up the cost of borrowing for those governments on concern that they will have to bail out their lenders. The challenge is for EU leaders to break that cycle before rising funding costs trigger a default by Greece or force banks to curtail lending and cause a recession.

‘Meltdown’

“If they can’t address this in a credible way, I believe within perhaps two to three weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system,” Robert Shapiro, chairman of the economic consulting firm Sonecon LLC in Washington and an adviser to the IMF, told the British Broadcasting Corp.’s Newsnight yesterday. “It will spread everywhere because the global financial system is so interconnected,” he said. “This would be a crisis that would be more serious than the crisis in 2008.”

Even a recapitalization of European banks may fail to reassure investors because they will still question the ability of governments to meet their borrowing costs. Injecting capital into Europe’s banks won’t provide the “silver bullet” that is needed to solve the crisis, said Huw van Steenis, a banking analyst at Morgan Stanley in London. It needs to be done in conjunction with measures to shore up sovereign debt, he said.

“The banking crisis isn’t going to be resolved until the sovereign crisis is resolved,” said David Watts, a strategist at CreditSights Inc. in London. “Capital isn’t the way to go because the needs are too big and will weaken the sovereign.”

Relying on ECB

Banks would need to raise about 148 billion euros in the event of a 60 percent writedown on their holdings of Greek debt, 40 percent for Portugal and Ireland and 20 percent for Italy and Spain, Kian Abouhossein, a JPMorgan Chase & Co. analyst, wrote in a note to clients Sept. 26. Deutsche Bank AG, Germany’s biggest lender, would need 9.7 billion euros more capital, Commerzbank AG 5.1 billion euros and France’s Societe Generale SA 6 billion euros, Abouhossein said.

European lenders are struggling to fund themselves and are reliant on emergency cash from the ECB. U.S. money-market funds cut their holdings of commercial paper sold by foreign financial firms, mostly European, by 31 percent in the third quarter, according to data compiled by Bloomberg. Lenders increased overnight deposits at the ECB yesterday to the highest in more than a year. Banks parked 221 billion euros at the ECB, the most since July 2010.

‘Scaring the World’

“The priority is to work hard and fast to prevent banks’ funding drying up, as this will only exacerbate funding difficulties for companies and consumers at a time when they are already under pressure due to the wilting recovery,” said Yael Selfin, head of macro consulting at PricewaterhouseCoopers in London. “The alternative could easily see the euro-zone economy going back into recession.”

Smarting from global criticism including U.S. President Barack Obama’s comment that Europe’s fiscal pain is “scaring the world,” EU leaders are looking at the November G-20 summit in Cannes as a deadline to show they are in control of events.

“They won’t want to go to Cannes without putting a plan in place to solve the euro zone’s problems,” Maughan said in an interview. EU leaders want to use the meeting to push through the Basel Committee on Banking Supervision’s latest round of capital requirements, he said. “That will be totally derailed if all that happens is that China, the U.S. and a whole number of other countries just lecture them on why they haven’t sorted their own problems out.”

Berlin Meeting

EU leaders must still decide who provides additional capital to the banks and what form it will take. German Chancellor Angela Merkel said on Oct. 5 that Europe’s rescue fund should be relied upon only as a last resort.

“If a country cannot do it using its own resources and the stability of the euro as a whole is put at risk because the country has difficulties, then there’s the possibility of using the EFSF,” or the European Financial Stability Facility, she said. Using the EFSF rescue fund is “always tied to a certain conditionality.”

French President Nicolas Sarkozy said he will discuss bank refinancing with Merkel when he visits Berlin on Oct. 9. Sarkozy, who was speaking today in Yerevan, Armenia, declined to comment further on banks.

Magnifying ESFS

German lawmakers last week approved an expansion of the rescue fund, setting the stage for the overhauled 440 billion- euro facility to be in place by mid-October. If approved by all 17 euro-zone countries, the fund will be able to provide money to governments, which could then inject it into their banks.

Policy makers are debating how to magnify the firepower of the EFSF to as much as 1 trillion euros. While one route would be for the facility to operate like a bank and borrow from the ECB, using bonds it purchases as collateral, Jean-Claude Trichet, president of the central bank, said yesterday that leverage wasn’t “appropriate.”

“The EFSF is simply not large enough to provide support to both troubled banks and troubled sovereigns,” said Sony Kapoor, managing director of London-based policy group Re-Define Europe. “Even after its upgrade, the EFSF won’t be able to support weak banks in troubled countries that are exactly the kind of institutions that most need its support.”

New Stress Tests

Southern European states are most likely to need money from the EFSF to recapitalize their banks, said Nick Firoozye, a senior rates strategist at Nomura Holdings Inc. in London.

“France and Germany can recapitalize their own banks, but it’s likely that Spain and Italy would need EFSF support to do so,” Firoozye said. “France and Germany are able to raise money in the bond markets at a cheaper rate than they can do through the EFSF. Europe needs to do the bank recapitalizations in a coordinated fashion to make sure they are effective.”

EU regulators’ stress tests on the region’s lenders in July failed to reassure investors that European banks will be adequately capitalized in the event of sovereign defaults. Eight banks failed the European Banking Authority’s tests, with a combined shortfall of 2.5 billion euros.

A new round of tests that require banks to maintain a minimum core Tier 1 capital ratio of 7 percent to 8 percent after writedowns on Greek, Italian, Irish, Spanish and Portuguese government debt would provide the trigger for further injections, Firoozye.

Preference Shares

Still to be decided are the instruments individual governments will use to inject capital into their banks.

Under one option being discussed, banks will issue preference shares to governments that would convert into core Tier 1 equity if a lender fails to reach a set capital target within a given timeframe, Morgan Stanley’s van Steenis wrote in a note. That would avoid immediate dilution of shareholders and allow lenders to raise capital when there is less stress in the markets, he said. Banks would be likely to face limits on compensation and dividends paid to investors until they repaid the government.

Also under consideration are mandatory convertible bonds, which would automatically convert into common equity on a set date; or contingent convertible bonds, which would convert into common equity if a bank’s capital levels drop below a predefined trigger, according to JPMorgan’s Abouhossein.

Edouard Carmignac, whose Paris-based Carmignac Gestion fund oversees about 40 billion euros, has called on the ECB to buy unlimited amounts of distressed countries’ sovereign debt. That would “relieve European banks of the more than problematic need for massive, immediate recapitalizations required by the depreciation of their sovereign debt holdings,” Carmignac wrote in a full-page advertisement in the Financial Times on Oct. 5.

European leaders need to address concerns about Italy’s solvency or risk treating only the symptoms of the crisis, Jon Peace, a banking analyst at Nomura, wrote in a report today.

“The intensity of policy debate has taken a step up, but it is a complex process and there is still a lot to be decided,” said Morgan Stanley’s van Steenis. “Odds are the recapitalization program is in November.”

--With assistance from John Glover, Nejra Cehic and Ben Moshinsky in London and Dawn Kopecki in New York. Editors: Edward Evans, Robert Friedman.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net; Liam Vaughan in London at lvaughan6@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

Ireland Aims to Be First to Exit Euro Rescue

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October 07, 2011, 11:39 AM EDT By Dara Doyle and Margaret Brennan

(Updates with credit-default swaps in ninth paragraph.)

Oct. 7 (Bloomberg) -- Ireland aims to be the first of three bailed-out euro-area countries to exit their rescue program, Irish Prime Minister Enda Kenny said.

Kenny said the government wants to sell debt in 2012 and intends to be in the market “as soon as possible.” Ireland will “in time be upgraded by the rating agencies,” Kenny said.

“Of all the countries in difficulty, Ireland leads by example,” Kenny said in a Bloomberg Television interview in Dublin today, adding that the nation is best positioned to be the first to “wave goodbye to the IMF.”

The government, which needed help from the International Monetary Fund and European Union last year, is planning as much as 4 billion euros ($5.4 billion) in savings next year to cut its deficit further. Ireland was forced out of credit markets as debts at its banks became too large for the state to handle.

Kenny said he expects to beat the 2011 budget deficit target of 10.6 percent of gross domestic product set by the IMF and EU. Ireland’s shortfall, excluding capital injections into its banks, declined by more than 3 billion euros in the first nine months of the year, according to the finance ministry.

Ireland’s 10-year borrowing cost, which reached 14.22 percent in July, has dropped to about 7.70 percent. It was the second euro country to need a rescue, getting 67.5 billion euros, after Greece’s 2010 package. Portugal was forced to seek emergency aid in April.

‘Right Direction’

“We’re down 5.5 points in the yields which is very good, and heading in the right direction,” Kenny said.

The government has an investment-grade BBB+ rating from Standard & Poor’s, while Moody’s Investors Service has it at Ba1, the highest non-investment grade. Ireland expects to pass the next review with its bailout partners this month, Kenny said.

Credit-default swaps insuring Irish government bonds rose 10 basis points to 710 as of 2 p.m. in London, according to CMA. That implies a 46 percent probability of defaulting in five years.

Kenny, who came to power in March, is seeking to reduce the government’s deficit to 3 percent of GDP by the end of 2015. Finance Minister Michael Noonan said yesterday he expects that a cut in the interest rate of country’s bailout loans will save the state about 9 billion euros.

Ireland’s central bank cut its growth forecast to 1.8 percent on Oct. 4 from 2.1 percent as consumer spending falls and export growth declines. The Dublin-based central bank urged the government to frontload budget cuts to protect its finances from “negative shocks.”

‘Exemplary’

Antonio Borges, the IMF’s European department head, said Oct. 5 that Ireland’s implementation of its rescue program is “exemplary.” The state’s steady achievement of its program goals is “exactly right,” Borges told Dublin-based broadcaster RTE in an interview, adding that Ireland remains vulnerable to a global slowing of growth.

The International Monetary Fund said Sept. 7 in its base scenario it expects Ireland’s general government debt to peak at 118 percent of gross domestic product in 2013, equivalent to almost 200 billion euros. That’s up from 25 percent of GDP in 2007.

“We’re going to meet all our targets,” Kenny said. “So we don’t contemplate default. We want to pay our way fully and completely and we will do that.”

--With assistance from Finbarr Flynn in Dublin. Editors: James Hertling, Andrew Atkinson

To contact the reporters on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net; Margaret Brennan in New York at mbrennan25@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

The Job Market Is Frozen For Everyone

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The number of jobs in America grew by 103,000 last month, according to this morning's big jobs report. That's not as bad as economists were predicting, but it's not good.

This kind of job creation is enough to keep up with population growth, but not enough to drive down the unemployment rate, which has been just over 9 percent for months now. The job market seems frozen in place.

The unemployment rate varies significantly among different demographic groups. But the trend over the past few years is basically the same for everyone, regardless of age, gender, or education. And the trend is grim.

Unemployment shot up in 2008 and 2009. Since then, with a few exceptions, it's barely budged — it's down a bit from it's peak, but still far higher than normal.

There is one jobs measure that has continued to change: average duration of unemployment. But that has gotten worse, not better.

As noted last month, this is a very worrying sign:

The longer people are unemployed, the less likely they are to find a new job.
This is partly due to the fact that the most employable people — those whose skills are in highest demand — get snapped up right away.
But there are also more insidious forces at work. As Ben Bernanke recently pointed out, the skills of unemployed workers erode, making it harder for them to find a new job. Employers may be wary of hiring someone who has been out of work for a long time. And after months of searching, the unemployed tend to spend less time looking for work. ...
One final, somewhat technical note: The extension of unemployment benefits — which typically expire after six months, but now can run for nearly two years — has probably played some role in driving up the long-term unemployment rate.
But several studies have found that this accounts for only a small part of the overall rise in long-term unemployment. (See this paper from the San Francisco Fed for more on the subject.)
For the most part, "people are simply flowing into unemployment and not finding jobs," Bart Hobijn, an economist at the San Francisco Fed, told me. "That's the overall weakness in the economy."

U.S churns out 106,000 jobs

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The United States added 103,000 jobs in September, a burst of hiring that followed a sluggish summer for the economy. The figure at least temporarily calms fears of a new recession that have hung over Wall Street and the nation for weeks.

The Labor Department also said Friday that the nation added more jobs than first estimated in July and August. The government's first reading had said the economy added zero jobs in August.

The unemployment rate stayed at 9.1 percent.

While the report was clearly better than feared, it also showed the economy is not gaining much momentum, said Tom Porcelli, chief U.S. economist at RBC Capital Markets.

"It moves you away from the ledge," he said.

Stock futures jumped after the report came out an hour before trading.

The unemployment report, one of the most closely watched economic indicators, showed that there are two ways of looking at the economy. On one hand, the news was encouraging for economists. Some of them had feared the nation would lose jobs, raising the risk of a devastating second recession.

But everyday Americans can't take much solace from that. Unemployment has been stuck at around 9 percent for more than two years. The economy has to add roughly 125,000 jobs a month just to keep up with population growth, more to bring down unemployment.

The report included some signs that business activity is increasing. The temporary help industry added almost 20,000 jobs, and the length of the average workweek increased slightly. Wages also rose a bit.

More hiring and better pay could add up to more consumer spending. That accounts for 70 percent of the economy. When people spend more money, it generates demand for businesses, which hire more workers.

The private sector added 137,000 jobs, up from August but below July's revised total. The economy lost 34,000 government jobs. Local governments in particular cut teachers and other school employees.

'It moves you away from the ledge'—Tom Porcelli RBC economist Tom Porcelli

Among the industries that added jobs in September were construction, retail, temporary help services and health care. Manufacturing cut jobs for a second straight month.

The economy returned in September to something closer to the job growth of earlier this year. In February, March and April, the nation added an average of more than 200,000 jobs a month.

But then manufacturing slowed, consumer confidence crashed, and Washington was caught in gridlock - first over whether to raise the nation's borrowing limit and then on how best to get the economy going.

Meanwhile, hiring slowed dramatically. The economy added only 53,000 jobs in May and 20,000 in June. The figures out Friday showed hiring improve in July, slowed slightly in August, and improved again in September.

Still, Federal Reserve Chairman Ben Bernanke warned Congress earlier this week that the economic recovery was "close to faltering," with slow job growth dragging down consumer confidence.

Bernanke, speaking in ununsually blunt terms, said he could not blame Americans for being frustrated at the financial industry "for getting us into this mess" and at Washington for not coming up with a strong response.

President Barack Obama, adopting a combative tone as he prepares for next year's re-election campaign, has challeged Congress to get behind his $447 billion jobs bill or risk being run out of Washington.

The Obama plan aims to jolt the economy but cutting taxes and increasing spending on schools, roads and other public projects. He has proposed paying for it in part by raising taxes on the wealthy and corporations.

Nearly half of the job gains last month came from the rehiring of 45,000 Verizon employees who had been on strike.

August's figures were revised up to show a gain of 57,000 jobs, up from a previous estimate of zero. July was revised up to 127,000 jobs, from 85,000.

More Americans are working part time but would prefer full-time work. When these people are added to those without jobs who have given up looking, the so-called "underemployment" rate rose to 16.5 percent from 16.2 percent.

The faltering economy has led many employers to reduce hiring. In the first half of this year, the economy grew at the slowest pace since the recession ended in June 2009. Since then, Europe's debt crisis and stock market declines have heightened fears that the economy will struggle to grow enough to avoid a recession.

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Short sellers shift focus onto fund managers

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By Tommy Wilkes

LONDON | Fri Oct 7, 2011 10:32am BST

LONDON (Reuters) - Short-sellers are ramping up their bets against European fund managers hit by falling stock markets and the risk of nervous clients pulling out of their investments, research from Data Explorers shows.

Unlike banks and insurers, European asset managers have little direct exposure to Greek sovereign debt after selling their holdings as the country was downgraded in previous years.

But the wider market turmoil hurts managers' bottom lines as a slump in equity markets and a client rush for the exit hits the quantity of assets they manage -- which determines how much they earn in fees.

The percentage of stock out on loan -- a proxy indicator of shorting interest -- in Ashmore Group (ASHM.L), which runs assets invested in emerging markets, is up 48 percent at 2.24 percent of total shares in the month to October 5, the data shows.

Short interest in the company hit 2.73 percent on Monday, its highest level for at least three years -- the longest period the data covers.

Meanwhile, the share of stock out on loan in UK wealth manager Hargreaves Lansdown (HRGV.L) is 2.4 percent, up 40 percent in the month to October 5 -- its highest level since late 2008 and making it the 13th most shorted stock in the FTSE 100.

The average ratio for stock out on loan in a FTSE 100-listed company is 1.32 percent of total shares outstanding, according to the research from Data Explorers.

Man Group (EMG.L), the world's largest listed hedge fund operator, has seen its stock out on loan rise to 1.85 percent of total shares outstanding, up 22 percent during the past month, and earlier this week it reached its highest level in 2011.

Stock on loan in Schroders (SDR.L), a 200-year old fund firm managing money for retail and institutional investors, is up around 19 percent in the week to October 5, to 2.21 percent of total shares outstanding, the data also shows.

Keith Baird, analyst at Oriel Securities, said fund managers shares often serve as leveraged plays on asset price moves - whereby falling markets combine with weakening investor sentiment to send their stock tumbling lower.

"If your earnings are directly driven by market levels then that's a second level of leverage so they are double leveraged, and so it wouldn't be surprising to see them move (downwards)," he said, noting that he has recently lowered his estimates for Schroders' investment flows performance to account for further market falls.

Last week Man Group said clients withdrew money over the summer months at the fastest pace since early 2009, while Aberdeen Asset Management (ADN.L), another London-listed funds house, reported 800 million pounds of net outflows in the two months to end-August.

However, Aberdeen has bucked the recent rising shorting interest in its rivals. The stock out on loan in Aberdeen has fallen to 3.09 percent of total shares outstanding on October 5 from 3.69 percent a month earlier.

The apparent rise in shorting interest in fund managers comes as shares in the UK's largest investment houses sharply underperform the FTSE 100 .FTSE.

Man Group shares are down more than 25 percent since the start of September, Ashmore by close to a fifth, Schroders by some 13 percent and Hargreaves by around 6 percent, against a 1.8 percent drop in Britain's blue chip index.

Other UK-listed fund managers outside the FTSE 100 have also seen growing short interest, the data shows.

The percentage of stock out on loan in UK house Jupiter Fund Management (JUP.L), which holds most of its assets in equity markets, has also increased over the last month, though at 1.20 percent it is still at a low level, according to the data.

(Reporting by Tommy Wilkes; Editing by Greg Mahlich)

After Jobs, Who Will Be Next American Visionary?

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Thomas Alva Edison: Transformed American industry and culture by inventing the phonograph and the motion picture camera and developing a long-lasting electric light bulb. Known as the Wizard of Menlo Park, Edison also founded General Electric. In this photo from 1877, Edison stands with the phonograph.

Visionary. Uncompromising. Intuitive. Risk-taking. Steve Jobs — the man who helped build a company and used it to transform multiple industries and popular culture — could have been lifted from the pages of a college textbook on how to be a successful CEO.

He was "the most incredible businessperson in the world," Apple co-founder Steve Wozniak told CBS News on Thursday, a day after Jobs' death.

Sure, there are other luminaries doing groundbreaking work in the technology industry: Amazon.com's Steve Bezos revolutionized e-commerce. Google's Sergey Brin and Larry Page transformed the way we find things on the Internet. But to find someone like Jobs, someone who so thoroughly fit the multiple roles of visionary, innovator and cultural icon, you'd probably have to reach for your iPad and search back decades.

Who's out there today? Gee, the example that [Jobs] set, it's hard to think of anyone.

- Saul Kaplan, founder of the Business Innovation Factory

"Who's out there today? Gee, the example that [Jobs] set, it's hard to think of anyone," said Saul Kaplan, founder of the Business Innovation Factory, a Providence, R.I.-based network for businesses and organizations.

Jobs belongs on a short list of great modern innovators — alongside the likes of Thomas Edison and Henry Ford, says Michael Cusumano, a professor at the MIT Sloan School of Management.

And while no one discounts the importance of his longtime rival, Microsoft founder Bill Gates, Jobs ultimately stands alone, Cusumano says. He adds: "What Gates did was important — he brought cheap, usable software to the masses. But the impact of Jobs is greater."

So where will the next American visionary come from? By definition, it's someone on the cusp of an entirely new industry with an as-yet unrealized potential to change the culture, says Karim Lakhani, a professor at Harvard Business School who specializes in technology and operations management.

"The thing is, if there is a Steve Jobs out there right now, we won't know for the next 30 years," Lakhani says. "He had a wonderful, luscious career starting at the beginning of the PC revolution. He moved computers from the realm of an engineering tool to an object of daily use by individuals of all stripes."

Jobs' unique qualities also narrow the field for potential successors.

"What made him so special? If I had to choose a few words, I would say intuition and focus," says Erik Calonius, author of Ten Steps Ahead: What Separates Successful Business Visionaries from the Rest of Us.

In 1985, after losing an internal power struggle Apple, Jobs was forced out. A year later, he switched gears and bought the computer graphics unit of Lucasfilm. That company became Pixar, which released the first of its transformative computer-animated films, Toy Story, in 1995.

The following year, Jobs made a messiah-like return to Apple, which had lost significant market share to PCs running Microsoft's Windows operating system. The Cupertino-based company's share price was in the gutter, hovering around $6.

"He came into the company that he founded just as it was about to die," Calonius says, adding that Apple also had way too many products — about 300 — at the time.

"Jobs whittled it down to 50 and then to just a half-dozen that he was really going to concentrate on. He had the intuition to know which ones were the right products to focus on," Calonius says.

The thing is, if there is a Steve Jobs out there right now, we won't know for the next 30 years.

- Karim Lakhani, professor at Harvard Business School

Jobs' resurgence is another reason his story is so strong, Calonius says. He compares the Apple founder's return from oblivion to another dreamer who stumbled but recovered to write the most important chapters of his life: Walt Disney. The famous animator's first studio went bankrupt in 1923.

And few CEOs have such close involvement with their products and customers as Jobs did, and it's the thing that helped him turn the impersonal MP3 and mobile phone into cultural totems: the iPod and the iPhone, Harvard's Lakhani says.

"He truly understood the average user's experience with these devices," Lakhani notes. That kind of involvement with the product is something CEOs tend to lose once they've settled into the corner office, he said.

Jobs also had a "disruptive" quality because he understood that constant change was the only way to stay out in front, says Kaplan of the Business Innovation Factory. He set out to create the market, to lead the market, and to let companies follow behind.

"Imagine when Steve Jobs came in and said, 'We are going to open up our own stores to distribute our products," Kaplan muses. "Everyone in that organization at that time was invested in the old model where they distributed through other retailers. And here comes Jobs saying we're going to completely upend that."

The first Apple store opened in 2001 in Tyson's Corner, Va., drawing a crowd of hundreds of people. There are now more than 350 outlets around the world, from Fifth Avenue in New York City to outside the Louvre in Paris.

Innovators like Jobs "are incredibly passionate," Kaplan says. "They have a very strong viewpoint that they are willing to put out there, but they also have this vulnerability because they know that they're missing something. They are constantly looking for that missing thing.

Lakhani recalls Jobs' 2005 commencement address at Stanford University.

He spoke to the graduates about death and advised them not to waste their short time "living someone else's life."

"Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition," Jobs said.

Jobs himself "had the courage to do that when everything was going south, and he had the courage to do it repeatedly," Lakhani says. "That's what makes him great."

Steve Jobs leaves behind an Apple generation

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Hong Kong (CNN) – Antonia Murray, 17, spends nearly every waking hour in the company of an Apple device. She has an iPad, an iPod Touch, a Macbook and a Mac desktop. Among her peers at Hong Kong’s Island School, she’s no outlier though. She’s just an ordinary member of the Apple generation.

"I don't think I could last a day of school without my iPad. I'd be so bored” Murray says.

For her and her classmates, there has never been a world without Apple. They were toddlers when the first iMac was released, that blue-and-white, compact egg that turned heads after two decades of the gray boxes known as computers. They were in primary school when the iPod hit the shelves and became the first digital music player to click with consumers. iTunes, iPhones and iPads are all part of their upbringing. At Island School, nearly all secondary students carry a MacBook to class.

The appeal for these students is convenience, mixed with design and, of course, the cache that comes with being an Apple user. Why would you use a dull, overly-complicated PC, some asked, when you could have a cool new Mac?

The rise of Apple has of course gone hand in hand with the rise of mobile computing. For these young people, that has meant the decline of many tried and true student accessories. Textbooks are going out of style. So is the old-fashion pen and paper.

Hayden Warren says he never takes notes by hand. "I've been using a Mac for three years straight now and it is just brilliant. I've got everything on there. No need to take notes and I don't lose anything."

The students here understand that Steve Jobs has been the man behind this transformation. They know the smartphone and the tablet existed before, but Apple is the company that made everyone want one. For them, Steve Jobs isn’t the college drop-out who founded Apple in his garage. He isn’t the demanding executive who was thrown out of his own company for ten years. He’s the pioneer in the black turtleneck, launching the newest “it” product.

Emily Tuck, 14, sees Jobs as more than a visionary who created some incredible products. He’s the man who helps bring the members of her generation together. "He is like part of the community, I guess. Because we all have one. It’s what makes us all related."

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F&C's CEO Grisay to leave as Bramson takes reins

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By Tommy Wilkes

LONDON | Thu Oct 6, 2011 11:02am BST

LONDON (Reuters) - Edward Bramson, the activist investor who won a bitter boardroom tussle to lead the board of F&C Asset Management in February, has been appointed executive chairman of the funds house after CEO Alain Grisay decided to retire.

Grisay, who has worked at the fund manager for over 10 years, the last six as CEO, will step down from the board and as CEO in May 2012, before retiring from the company at end-September, F&C said in a statement on Thursday.

F&C's board appointed New York-based Bramson as executive chairman for "an interim period with immediate effect", F&C said, with a gradual transfer of responsibilities from Grisay to Bramson between now and next year's annual general meeting.

Between now and Grisay's stepping down in May 2012, F&C's board could decide to keep Bramson on as executive chairman or appoint a new chief executive to replace Grisay, as well as add a new independent director to the board.

Bramson, whose Sherborne Investors vehicle holds almost 20 percent of F&C shares according to Thomson One data, is currently heading a strategy review of the business and is expected to report its findings later this month.

"On behalf of the Board I would like to thank Alain for his contribution during his years at F&C. He will leave with our best wishes for the future. We look forward to completing and implementing the strategy review and driving the business forward," Bramson said in the statement.

The news of Grisay's departure will not come as a surprise to many. Grisay has sold F&C shares he owned and pocketed cash rather than stock under vested share schemes since opposing Bramson's appointment as chairman in February.

F&C shares, which like other asset managers have fallen in recent weeks, were up 2.85 percent at 10:10 a.m., against a 2.24 percent rise in the FTSE 250 .FTMC.

Bramson has offered little indication so far of how he plans to shake up the fund manager, which runs more than 106 billion pounds in assets, weighing on investor sentiment towards the company's shares.

"Until the strategic review is announced (expected "during October 2011"), when we will hopefully be able to make a proper assessment of the group's strategy and so prospects, we continue to regard the stock as uninvestable," Numis analysts said in a note, maintaining their "Hold" rating.

(Reporting by Tommy Wilkes; editing by Chris Vellacott and Jane Merriman)

TSX closes with a loss as traders eye Europe

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The Toronto stock market fell Friday as traders ignored better-than expected jobs data in both Canada and the U.S. last month and instead focused on Europe’s debt crisis.

The S&P/TSX composite index closed near its lows of the day, down by 191.71 points, or 1.6 per cent, at 11,588.36 after gaining about 600 points in the previous two sessions.

Statistics Canada reported that the Canadian economy created 61,000 net new jobs in September while the unemployment rate dropped 0.2 of a point to 7.1 per cent.

The U.S. Labour Department said that the American economy added 103,000 jobs last month while the jobless rate held steady at 9.1 per cent.

"There is no hint in September's Employment Report that another recession is starting," said Paul Ashworth, chief U.S. economist at Capital Economics.

S&P/TSX 3-month chart.

"Overall, the U.S. economy is just about hanging in there, but growth is susceptible to any adverse shock coming from the euro zone."

U.S. markets were also lower. The Dow Jones industrial index slipped 20.2 points to 11,103.12, the Nasdaq composite index gave back 27.47 points to 2,479.35 and the S&P 500 index fell 9.51 points to 1,155.46.

The Canadian dollar slipped 0.05 of a cent to 96.31 cents US.

The December gold contract in New York fell $17.40, or one per cent, to $1,635.80 US an ounce. November crude on the New York Mercantile Exchange closed with a gain of 39 cents at 82.98 US a barrel after surging almost $7 US over the last two sessions.

Investors focused on Europe, on a day when the Fitch ratings agency cut the government bond ratings of Italy and Spain and Moody’s downgraded a dozen British and nine Portuguese banks.

The European Central Bank offered new emergency loans to banks on Thursday to help steady them through the government debt crisis.

The ECB will offer an unlimited amount of 12-month and 13-month loans to banks. That will provide financing for a longer period and shield them from turbulence in borrowing markets.

But analysts observed that that the measures won't keep banks from facing questions about solvency.

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Food agency database shows rise in serious product recalls

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Lettuce from California, some of which was shipped to Alberta, was recently recalled after a sample tested positive for Listeria contamination. U.S. Food and Drug Administration

The number of recalls involving possibly deadly food products has increased over the past two years, and it's a trend that is likely to continue as Canada's food safety body steps up its monitoring.

According to a CBC News analysis of product recall data the Canadian Food Inspection Agency posts on its website, the number of its most serious recalls increased from about 129 in 2010 to 147 up until the end of September of this year.

The agency was unable to provide a spokesperson for an interview, but in an e-mailed response, the CFIA confirmed its own internal, more detailed numbers demonstrate a similar trend that could continue next year "at the same rate as we have experienced so far this year."

"The agency is educating itself on how to better monitor risks," says Sylvain Charlebois, a food-safety expert who teaches at the University of Guelph. "And as a result, we're seeing more recalls. So one shouldn't be surprised by that result.

"Because we have a voluntary-based recall system in Canada, we rely on the major players in the industry to recognize which products can pose a threat to consumers. This industry is trying to control and contain risk as much as possible."

Of recalls listed on the agency’s website, listeria and E. coli 0157:H7 caused about half the recalls in the class 1 category, considered to be the most serious because the products could make people sick, and in some cases prove fatal if they are consumed.

The E. coli strain has been the subject of the high-profile recalls of several products lately, including walnuts. The recall for raw-shelled walnut products was first announced on Sept.1, and was expanded on five occasions ending on Sept. 12. The products, which were sold in Ontario and Saskatchewan didn’t result in any reported illnesses or deaths.

The most recent product recall at the time of the CBC’s analysis involving listeria was Romaine lettuce distributed in Calgary and Edmonton. The product may have been contaminated with listeria monocytogenes, the most deadly strain that led to at least 23 deaths and Canada’s largest recall in 2008.

Processed meat contaminated with a deadly strain of listeria at a Toronto-area Maple Leaf Foods plant caused the deaths, many of which were elderly people with weakened immune systems living in nursing homes. The crisis led to two investigations, an out-of-court settlement with the families of the victims, and more stringent testing for listeria at meat processing plants.

One of the outcomes from increased scrutiny of Canada’s food safety system was a pledge by the agency to be more transparent, in part by posting more information about recalls, which it began doing in November of 2009.

The product recalls come in three classes, with the first one being the most serious. The second and third classes are less serious and may lead to recalls. In the past, the agency only alerted Canadians about class 1 recalls in the form of warning letters posted on its website and news releases that may have been picked up by the media.

In 2005, an internal audit was critical of its recall system, concluding that it was broken and needed to be fixed. “A public warning may be issued depending on the seriousness of the health risk, the audit noted. “There is no clear policy on when a recall requires public warning.” Now the agency posts recalls in all three categories in a table that is easier for consumers to read.

Sylvain Charlebois says posting recall data on its website is a good first step, but the agency needs to go further. For instance, information on whether recalls are successful or not are not contained in the database.

The 2005 audit, which the agency says led to many changes, also noted that "….processes and strategies do not appear to be in place for systematically dealing with repeat (recall) offenders."

Charlebois says this is the kind of information that Canadians need in order to have the ultimate confidence in the safety of their food.

"You don’t see a thorough, transparent, risk-communication strategy that really stretches over time. If as a consumer you want to know what has happened with the investigation into Maple Leaf, you'll be hard-pressed to find detailed information about some of the investigations that were ongoing at the time.

"I think we should think about creating a separate agency that would not only convey information to the general public, but this independent agency would also make sure that these investigations are reported to the general public and Parliament. So Parliament knows what’s going on about food policy and food-safety measures.”

Charlebois says these reforms would help restore the public’s confidence in the food they eat. He says research at the University of Guelph shows that confidence has been decreasing ever since the 2008 listeriosis crisis.

This seems to contradict a recent survey conducted for the agency that found 68 per cent of Canadians gave the system a favorable confidence rating, up from 65 per cent in 2010 and 60 per cent in 2008, concluded the agency on its website.

However, the survey concluded, "More communication activities would increase awareness and help provide increased levels of confidence in the system."

If you have specific information about this topic that you’d like to share with David McKie, he can be reached at david_mckie@cbc.ca

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Barry Eisler's 'Detachment' From 'Legacy' Publishing

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Enlarge Courtesy Barry Eisler

Barry Eisler is a former CIA operative turned thriller writer. His latest book, The Detachment, was e-released on Amazon in September.

Courtesy Barry Eisler

Barry Eisler is a former CIA operative turned thriller writer. His latest book, The Detachment, was e-released on Amazon in September.

Thriller writer Barry Eisler has turned his back on traditional publishing — or as he calls it, legacy publishing. His latest book, The Detachment, was released as an e-book in September. It comes out in paperback in October. Both versions are published by Amazon.

No longer satisfied with just selling books, the online retailer now has its own publishing arm, which is starting to attract some successful writers like Eisler. The best-selling author shook up the publishing world last March when he walked away from a two-book, half-million-dollar deal with St. Martin's Press. Instead, Eisler announced, he would self-publish his next book electronically.

"Amazon read about it and approached me with what is essentially a hybrid deal, the best of both worlds," Eisler tells NPR's Lynn Neary. Eisler retained control over packaging and business decisions that were important to him. The digital title was released about a month after the manuscript was finished. And he was thankful to have "the entire Amazon marketing juggernaut behind the book" — something an author misses out on when self-publishing. "Amazon offered me the best of both worlds, and it really worked out well," he says.

It works for Amazon, too. The company uses popular books to attract customers to buy not only its e-reader — the Kindle and now its tablet device, the Fire — but other products as well. That isn't an option for traditional publishers, whose interests lie deeply and exclusively in books. But Eisler says that like any company, publishers exist to make money.

"To say that publishers really care passionately about books as though they are concerned about what's better for the world ... I'm sure when they look in the mirror they feel that way. ... We all do," he says. "But in fact, what they care about is preserving their own position, perks and profit — that's just what establishment players come to do over time."

At the end of the day, what matters to Eisler is how easily and how cheaply he can get his writing into the hands of his readers. "What I care about is readers," he says, "because without readers I can't make a living. ... And I think it's a bad thing for the world if people don't read anymore. I want people to read a lot. To that end, if I can find a way to get readers books that cost less and are delivered better and faster, I want that."

And as far as he can tell from his experience with the e-release of The Detachment, it's working: "Sales of The Detachment have blown away sales of any of my previous titles," Eisler says.

But not everyone is celebrating his success. His decision to self-publish, he says, was initially greeted with a lot of enthusiasm and excitement from people advocating for changes in the publishing industry. A best-selling author walking away from a big advance from a legacy publisher was a milestone for the self-publishing world.

If a better way comes along ... of course I'm going to take it. Publishing for me is a business, not an ideology.

- Author Barry Eisler

"But then, when I signed with Amazon, those 'attaboys' turned to cries of 'Hypocrisy!' and 'Eisler is a sellout!' and that sort of thing," Eisler says.

But Eisler stands by his decision to sign on with the distribution giant. "My objectives were to make more money from the title to get the digital out first, and to retain more control over business decisions," he says. Self-publishing was a good way to achieve those goals, but Amazon's deal was a better way.

"If a better way comes along ... of course I'm going to take it," he says. "Publishing for me is a business, not an ideology."

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Moody's: Belgium could face downgrade

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Credit rating agency Moody's Investors Service late Friday said it was putting Belgium on notice for a possible downgrade.

The announcement came after markets closed and was the latest of three from either Moody's or rival Fitch Ratings during the day focusing attention on Europe's debt and banking crisis.

Moody's announcement meant the ratings on Belgium's government bonds could be downgraded within the next three months from its high rating of Aa1.

Moody's cited Belgium’s high debt levels, the growing reluctance of European banks to lend to each other and slowing economic growth.

It also expressed concern about uncertainty over how much the Belgian government might be on the hook for its share of the rescue package for Franco-Belgian bank Dexia.

Earlier Friday, both the Wall Street Journal and the Financial Times reported that officials of the French and Belgian governments would meet over the weekend to discuss Dexia's fate.

The bank carries a large number of Greek government loans on its balance sheet.

Earlier in the day, Fitch Ratings on Friday downgraded the credit ratings of bonds issued by Italy and Spain.

It lowered Spain to AA- from AA+ and Italy from AA- to A+ and said its long-term outlook for both countries was negative.

Fitch based its decision on the growing debt crisis in Europe and deteriorating prospects for getting deficits under control.

While saying Italy's recent austerity measures improved its standing, "the initially hesitant response by the Italian government to the spread of contagion has also eroded market confidence in its capacity to effectively navigate Italy through the eurozone crisis," Fitch said.

Separately, Fitch also said it was keeping Portugal's debt rating on watch for a possible downgrade, with a decision due by the end of the year. Portugal was the third and latest eurozone country to receive an international bailout package after Greece and Ireland.

Earlier Friday, another credit-rating agency, Moody's Investors Service, downgraded a dozen British and nine Portuguese banks Friday, for different reasons.

Moody's expressed doubts about the strength of government support for the British banks, saying it believed it is more likely that smaller institutions would be allowed to fail.

In the case of the Portuguese banks, it cited concerns about growing reluctance among banks to lend to each other, bad loans and their holdings of Portuguese government debt.

Among the downgrades, Moody's reduced its rating on government-controlled Royal Bank of Scotland PLC by two notches to A2.

It also cut its rating on Lloyds TSB Bank, a unit of part-nationalized Lloyds Banking Group PLC, by one notch to A1.

On Thursday, signs of a slowing economy prompted the Bank of England to launch a £75 billion ($120 billon) monetary stimulus.

At the same time, the European Central Bank said it would offer credits to banks, with an unusually long duration of up to 13 months, to give lenders a chance to shore up their finances through early 2013.

German Chancellor Angela Merkel said Europe's banks should look first to raise money in the private sector before turning to governments to bolster their financial cushions against potential losses from the Continent's sovereign debt crisis.

Merkel said banks should first try to raise money on their own and if that was unsuccessful, they should be bailed out by the national government.

Only if that was impossible, "and only then," she said, should a European bailout fund be used, and only with tough strings attached.

The International Monetary Fund, a key player in the 17-nation eurozone's debt crisis, has said banks across the Continent might need up to €200 billion ($280 billion) in new capital.

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Maple seeks regulator OK for TSX bid

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Maple Group Acquisition Corp. submitted its proposal to take over TMX Group to four provincial regulators Friday, even though the acquisition attempt has yet to be approved by the company's board.

Regulators will seek public comment on the controversial $3.8 billion TMX takeover bid by Maple Group, a consortium of 13 Canadian banks and insurance companies.

Maple wants to create a bigger Canadian exchange by merging the owner of the Toronto Stock Exchange with the alternative Alpha Trading System, and clearing and depository firm CDS Inc.

Alpha and CDS are owned by the major players in the Canadian securities industry, several of which are part of the consortium.

Maple has submitted its proposal to various provincial regulators including the Ontario Securities Commission, Quebec's Autorite des marches financiers, the Alberta Securities Commission and the British Columbia Securities Commission.

Each of the regulators has said it will hold a public comment period and the OSC and Alberta regulator will hold hearings in December.

The Ontario Securities Commission said Friday will hold a 30-day comment period to gather input to determine whether the move is in the public interest.

"This Proposal raises a number of complex and novel issues for the capital markets," it said in a statement.

The board of TMX Group has not approved the takeover proposal, which was recently extended to Oct. 31.

The groups have been in talks since late summer in the hopes of making the offer a friendly deal, but no details have emerged on the scope of the discussions.

TMX said Friday that discussions with Maple are ongoing, but would make no comments on the status of those talks or Maple's regulatory filings.

Provincial regulators and the federal Competition Bureau must approve the proposal, which critics say would create a virtual monopoly that could lead to higher fees and create enforcement and transparency issues.

Maple is in the process of gathering additional information requested by the Commissioner of Competition for its review.

Luc Betrand, spokesman for Maple said Friday he believes the group can obtain all the necessary regulatory approvals by early 2012.

"These applications mark an important milestone in the regulatory process and set out further details of our vision for an integrated exchange and clearing group that is well-positioned to pursue new growth opportunities and meet the needs of Canada's capital markets and capital market participants," he said.

Maple's proposal to regulators argues that creating one integrated exchange would better position it to pursue growth opportunities including expanded distribution, international acquisitions or joint ventures.

It also pledged to maintain fair fees and open access in both trading and clearing.

"Simply put, if Maple fails to sustain fair practices and produce these efficiencies, our vision will not be fulfilled," it said.

TMX also owns NGX, the Calgary-based market which trades and clears physical crude oil, natural gas and electricity contracts, the junior Toronto Venture Exchange and the Montreal derivatives exchange.

A friendly merger between TMX and the London Stock Exchange was called off earlier this year because there was not enough TMX shareholder support in the face of the richer Maple bid.

Maple is seeking a minimum of 70 per cent and a maximum of 80 per cent of the shares of TMX with its offer of $50 per share.

The investors in Maple are the Alberta Investment Management Corp., Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets, Desjardins Financial, Dundee Capital Markets, Fonds de solidarite des travailleurs du Quebec, GMP Capital, National Bank Financial, Ontario Teachers' Pension Plan, Scotia Capital, TD Securities and Manulife.

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T-Mobile Client Losses Seen Tripling on AT&T Deal Review: Tech

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October 07, 2011, 5:19 PM EDT By Scott Moritz and Sarah Frier

Oct. 7 (Bloomberg) -- T-Mobile USA, the wireless company AT&T Inc. is trying to acquire, may lose three times the number of contract subscribers this year as in 2010 as the U.S. Justice Department’s attempt to stop the deal is hampering the company’s ability to cut prices and creating concerns among users.

The fourth-largest U.S. wireless operator will see the number of customers on monthly contracts decline by about 1.2 million, compared with a drop of 390,000 the year before, according to the average estimate of six analysts surveyed by Bloomberg. That would give the company 33.5 million total customers and 25.2 million contract subscribers by year’s end.

T-Mobile’s market share losses are being exacerbated because it’s refraining from the aggressive price cuts it has used in the past, said Craig Moffett, an analyst with Sanford C. Bernstein & Co. Though price cuts have helped the company attract customers in the past, they may now aid the Justice Department in making its case T-Mobile should remain independent because it helps suppress prices for consumers, he said.

“Cutting prices at this point would be very difficult because the DOJ has said their strategic importance stems from their role as a price cutter,” said Moffett.

The Justice Department sued in August to block AT&T’s proposed $39 billion takeover of T-Mobile, a unit of Deutsche Telekom AG, saying that such a deal would “remove a significant competitive force from the market.” AT&T said in a response last month that the deal would not inhibit competition and would allow the combined companies to offer high-speed wireless services more rapidly and broadly.

Revamping Stores

T-Mobile spokesman David Henderson declined to comment on the company’s pricing plans. Henderson said AT&T has promised to honor T-Mobile’s rate plans after the merger is completed.

The loss of 1.2 million contract, or postpaid, subscribers is based on estimates from analysts at Sanford C. Bernstein, UBS AG, JPMorgan Chase & Co., RBC Capital Markets, Hudson Square Research and Robert W. Baird & Co. The highest estimated loss is 1.39 million subscribers and the lowest is 965,000.

In the past, when T-Mobile wanted to draw customers, it would offer promotions like $40 a month for 1,000 minutes or one-day specials where every phone was free with a new contract, said Roger Entner, an analyst with Recon Analytics LLC. Without such deals, T-Mobile will struggle, especially because the company’s future is uncertain, he said.

“T-Mobile is already in a difficult spot from a consumer perspective,” Entner said in an interview. “People will ask themselves, ‘Am I really going to sign a two-year contract with a company that may be on life support if the deal doesn’t go through?’”

Advertising and Stores

T-Mobile is likely to gain prepaid customers, or those who pay month-to-month, this year, in part through offers such as a $30 a month plan for unlimited text messaging and Web access through Wal-Mart Stores Inc.

Still, such customers, who don’t agree to long-term contracts, are less profitable than contract customers and T- Mobile is unlikely to attract enough of them to boost the total number of customers, according to Nick Lyall, an analyst with UBS. He estimates the company will lose a net 250,000 subscribers, including prepaid and contract customers, this year, compared with 56,000 last year.

T-Mobile, which also will be the only major U.S. carrier without Apple Inc.’s iPhone after Sprint Nextel Corp. begins selling the device this month, is investing in marketing and store improvements. The company spent $115 million in the second quarter, compared with $111 million in the first, according to Kantar Media, a company that analyzes ad spending. In the same period, AT&T decreased spending on wireless ads to $356 million from $468 million, Kantar said.

“Suddenly you’re seeing T-Mobile advertising everywhere you look,” said Moffett.

‘Hand-Tied’

Last week, T-Mobile also said it was remodeling nearly 400 stores in an effort to boost sales and improve the customer experience. The first remodeled stores opened in Boston and Washington this week, the company said.

T-Mobile does have wireless service plans that are less expensive than its largest rivals. In some of its major markets, T-Mobile, for example, charges $80 a month for its unlimited data, text and calling plan, while AT&T gets about $115 for a comparable offering. Still, T-Mobile may not be as aggressive with its pricing as it has been in the past, said Michael Cote, whose consulting firm Cote Collaborative Inc. has advised U.S. handset makers and wireless operators.

“They’re a bit hand-tied on pricing because they need to show the DOJ that the pricing gap isn’t that big,” Cote said in an interview.

AT&T rose 3 cents to $28.44 at the close in New York and has dropped 3.2 percent this year. Deutsche Telekom lost 17 cents to 9.07 euros in Frankfurt trading and has lost 6.1 percent this year.

--Editors: Peter Elstrom, Ville Heiskanen

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net Sarah Frier in New York at sfrier1@bloomberg.net;

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

How That Food You Throw Out Is Linked To Global Warming

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Enlarge iStockphoto.com

The greenhouse gas emissions associated with food waste amount to 135 million tons a year, a company has found.

iStockphoto.com

The greenhouse gas emissions associated with food waste amount to 135 million tons a year, a company has found.

It's funny how some people are embarrassed by the state of their refrigerator – perhaps because it's full of beer and condiments and nothing else.

For me, it's the guilt of seeing off-color sausage or slimy lettuce disintegrating in my refrigerator drawer. Sadly, I am just another American prone to wasting food. Collectively, we waste about 55 million tons of the stuff a year, or 40 percent of the food supply, researchers estimate.

For the guilt-ridden food wasters among us, a little company out of Oregon recently found a way to poke us to shop more prudently. They've crunched the numbers to show how the greenhouse gas emissions from the production, transport and disposal of all the food we could eat — but don't — adds up.

CleanMetrics builds software that does life cycle analysis for companies and organizations who want to measure and reduce their environmental impact. Last year, Kumar Venkat, the company's founder and president, was asked by the Environmental Working Group to measure the climate impact of meat consumption, which resulted in its Meat Eater's Guide to Climate Change & Health.

That project got him thinking about other emissions associated with food, and wasted food in particular, Venkat tells The Salt. So he gathered USDA's estimates of food loss from retail and consumers for 2009. And when he fed it into his software he found that food waste is responsible for 135 million tons of greenhouse gases every year, or about 1.5 percent of all emissions.

So how does that break down for a family or an individual? The average family is responsible for about 1,800 pounds of emissions from food waste, while an individual contributes about 440 pounds a year, Venkat found. A typical car, meanwhile, emits about 9,000 pounds a year. The emissions from food waste don't include food eaten in restaurants or the energy used in cooking or packaging wasted food, however.

Enlarge USDA and CleanMetrics Corp.

Greenhouse gas emissions from wasted food: Comparing commodities

USDA and CleanMetrics Corp.

Greenhouse gas emissions from wasted food: Comparing commodities

But all this food that goes to rot isn't evenly distributed across the grocery store. For example, we waste about 35 percent of the chicken, fish and fruit we produce, while we only waste about 15 percent of the nuts and legumes on the market, according to USDA.

And some foods also have a much bigger impact on the climate than others. "If you compare beef to tomatoes, beef has a much higher footprint," says Venkat. "So if you're going to reduce waste, you need to prioritize."

And by the time the food has reached you, the consumer, a lot of those emissions are already on their way to the atmosphere. Venkat says that nearly 80 percent of the greenhouse gas emissions come from producing and processing food.

But not only does food waste make a sizable contribution to global warming – it's also a lot of money. Venkat calculated that if household food waste could be cut in half, a family of four could save $600 a year. And since there are no regulations that force companies or individuals to reduce their emissions yet, the opportunity to save money is probably the best incentive to reduce food waste there is, says Venkat.

But most people will always have some food waste no matter how hard they try to avoid it, and so the next best thing to do is compost it. That, at least, will keep it out of a landfill, where huge piles of decomposing material generates methane, a potent greenhouse gas.

Herbicide-resistant superweeds overpowering crops

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Farming costs, food prices and agricultural pollution may rise as a result of nature's strike back against a biotechnology that has revolutionized modern farming.

"Superweeds" resistant to the herbicide glyphosate, also known by the trade name Roundup, have infested millions of hectares of cropland through much of the U.S. and areas of southwestern Ontario.

That means farmers may no longer be able to reap the benefits of Roundup Ready crops, which are genetically modified to be resistant to glyphosate, allowing farmers to control weeds with the herbicide without harming the crops themselves.

Bill Johnson, a weed scientist at Purdue University in West Lafayette, Ind., told CBC's The Current that the development of Roundup crops was among agriculture's top one or two most important in the past 60 or 70 years because it allowed farmers to control weeds that had become resistant to a variety of other herbicides. That resistance had been forcing farmers to use complicated mixtures of chemicals to control weeds.

'The solution is not always more and different pesticides.'—Chris Willenborg, weed scientist

It also meant farmers no longer had to till their fields to control weeds, Johnson said.

"It greatly reduced soil erosion. It allowed farm sizes to expand," he said, noting that tillage is time-consuming and expensive because it uses lots of fuel. Forgoing tillage has also reduced the amount of polluting agricultural run-off into waterways, he said.

Johnsons said glyphosate-resistant weeds began popping up in fields around a decade ago, and by 2002 or 2003, there was a large area in southeast Indiana where over 80 per cent of soybean fields had a glyphosate-resistant strain of mare's tale, a weed also known as Canada fleabane.

Such weeds can double or triple the costs of weed control, he said, and lead to more tillage, more erosion, more water pollution from run-off, increased costs, yield losses and higher food prices.

Philip Shaw, a farmer and agricultural economist near Dresden, Ont., said glyphosate-resistant giant ragweed, a "very aggressive" weed that can grow up to three-metres tall, first appeared on his farm about 10 years ago. The plant can destroy 93 per cent of the yield of soybeans in the surrounding area, he added.

Shaw said he wonders if Monsanto, the U.S. biotechnology company that makes both Roundup and Roundup-Ready crops, has some responsibility to deal with this problem: "Because some of these weeds are getting away from what it says on the label will be killed."

Trish Jordan, director of public and industry affairs for Monsanto Canada, said her company is committed to working with farmers and academics to make sure glyphosate continues to be effective weed control.

Jordan downplayed the impact of Roundup-resistant crops in Canada, where she says they are a relatively new phenomenon and confined to parts of Ontario. She credited good crop rotation practices and lower adoption of Roundup Ready crops compared to the U.S.

The company has been recommending practices such as crop rotation, tilling their fields from time to time if appropriate, and using other herbicides to help control weeds.

It is also working on genetically modified crops that are resistant to other herbicides, such as dicamba-resistant soybeans.

"In the U.S., we think that will be a potential option to help grower who have been relying on roundup ready soybeans to introduce a new technology into their fields that has a different mode of action."

However Chris Willenborg, a weed scientist at the University of Saskatchewan, cautioned, "The solution is not always more and different pesticides."

He suggested using additional methods such as crop rotation and high seeding rates to keep weed populations low and minimize the chance that they become resistant to Roundup.

Johnson noted that the process of natural selection inevitably leads to the appearance of weeds resistant to any widely used herbicide. The genetic variation within a population eventually produces an individual that can survive the pesticide, and over time, that strain will come to dominate, since all the other strains will have been killed off.

He said companies need to stay ahead of the resistance curve by developing new herbicides and investigating other means of controlling weeds.

He added, "We've simply gotten too accustomed to relying too heavily on a very good technology."

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