IMF chief sees limits to free market

AFP, WASHINGTON, April 4: The liberal theories that have guided the global economy for the last 30 years need to be overhauled, according to the head of the IMF—an institution long seen as their chief cheerleader.

The International Monetary Fund's Dominique Strauss-Kahn, in a speech on Monday said the 'Washington Consensus'—a set of liberal theories that stress the efficiency of the free market—were antiquated.

'The Washington consensus is now behind us,' Strauss-Kahn told students in Washington, reflecting on lessons learned from the 2008-2009 financial crisis.

'In designing a new macroeconomic framework for a new world, the pendulum will swing—at least a little—from the market to the state,' he said.

The IMF has long championed free-market policies, calling on member countries to privatize state-run industries and to ease rules for businesses.

'Don't get me wrong—the old pattern of globalization delivered a lot—lifting hundreds of millions out of poverty,' he said.

'But this globalization had a dark side—a large and growing chasm between rich and poor. While trade globalization is associated with lower inequality, financial globalization—the big story of recent years—increased it.'

Strauss-Kahn, who is widely expected to leave his post soon to lead France's Socialist Party in 2012 presidential elections, said more focus on social cohesion as well as tighter rules were needed.

'Over the longer term, sustainable growth is associated with a more equal income distribution,' he said. 'The new global governance must also pay more heed to social cohesion.'

'We need a tax on financial activities to force this sector to bear some of the social costs of its risk-taking behavior.'

Bank of England set to freeze interest rates

AFP, LONDON, April 5: The Bank of England is forecast to maintain its key interest rate at a record-low 0.50 per cent in a vote Thursday, when the ECB is widely expected to announce its first hike in almost two years.

The European Central Bank is expected to announce its first interest rate hike since July 2008 -- from an all-time low of 1.0 per cent—to combat high inflation across the eurozone.

Inflation is even higher in Britain but because its recovery from recession has stalled, the Bank of England (BoE) is expected to wait a while longer before embarking on a policy of rate tightening.

'Investors now have to contemplate the prospect of higher interest rates, at least in Europe over the near term as this week the ECB are expected to hike their base rate from 1.00 per cent to 1.25 per cent,' said Simon Denham, an analyst at trading group Capital Spreads.

'The BoE on the other hand is due hold fire as things in the UK continue to look rather fragile,' he added.

Recent official data showed Britain's economy shrank by 0.5 per cent in the final quarter of 2010, while analysts have said that the government's austerity drive will hinder growth this year.

Britain's Conservative-Liberal Democrat government is slashing state spending in a bid to virtually eliminate a record public deficit it inherited from the previous Labour administration after winning power last year.

Britain also faces further rises to its consumer price inflation, whose annual rate jumped to 4.4 per cent in February, the highest level for more than two years and more than double the Bank of England's official target of 2.0 per cent.

'A further increase in the rate of inflation would clearly make the MPC increasingly nervous as it eyes its credibility as an inflation tackling force,' said Victoria Cadman, an economist at financial group Investec.

In March, the BoE's Monetary Policy Committee (MPC) voted 6-3 to keep rates at 0.50 per cent, with those in favour of a rise pointing to inflationary pressures.

'There is little to suggest that the Monetary Policy Committee has shifted its position at all since its last meeting. A rate rise therefore does not look very likely,' said Vicky Redwood at research group Capital Economics.

The BoE slashed interest rates to 0.50 per cent more than two years ago, in March 2009, when it also launched a radical quantitative easing (QE) programme to help drag Britain out of a deep recession.

Under QE, the bank has created some £200 billion (235 billion euros, $322 billion) of new money by purchasing government bonds and high-quality private sector assets so as to give the economy an added boost.

Britain's recession, sparked by the global financial crisis, ended in the final quarter of 2009.

Merkel stops India-Bundesbank Iran deal

AFP, Berlin, April 5: Chancellor Angela Merkel has put a stop to plans that have irked Washington and Israel for India to channel oil payments to Iran through the German central bank, a press report said Tuesday.

According to the Handelsblatt business daily, India, under US pressure to break direct commercial links with the Islamic republic, intended to place money for its Iranian oil imports in an account with the Bundesbank.

The Bundesbank would then transfer the money—around nine billion euros ($12.8 billion) annually—to the European-Iranian Trade Bank AG (EIH), based in the northern German city of Hamburg, the paper had said.

The German government had said it was powerless to stop the deal because EIH, also known as EIHB, was not subject to sanctions because the bank was not involved in financing Iran's controversial nuclear activities.

The New York Times last week quoted an unnamed US Treasury official as saying the United States was 'concerned' and that Washington wanted 'to work with all our allies to isolate EIH.'

Israel and Jewish groups were also reported to be annoyed.

But now, Berlin has stepped in, the Handelsblatt cited high-ranking German government officials as saying on Tuesday. Payments for oil already delivered can go ahead, but no new transactions will take place, the paper said.

Contacted by AFP, neither the Bundesbank nor the German economy ministry were immediately available for comment.

Germany has long been under fire for its close business ties with Iran, with the country's exports there totalling 3.8 billion euros in 2010, according to official figures.

Sales generated by German industrial giant Siemens in its last business year, which ended September 30, rose more than 20 per cent to 680 million euros, the Wall Street Journal reported Tuesday.

EU launches debate on quotas for women in boardrooms

AFP, Brussels, April 5: The European Commission, seeking more diversity in Europe's boardrooms, launches a debate Tuesday on whether to impose quotas to help more women break the glass ceiling.

The public consultation will collect ideas on how to shake-up boards of directors to bring people of different nationalities and profiles to companies in the 27-nation European Union.

An EU source said the option of imposing quotas to help more women get seats on the board will be part of the consultation.

With an average of just one woman for every 10 board members in Europe, top EU officials have lamented the lacklustre representation of women at the helm of companies.

European Financial Services Commissioner Michel Barnier has called for a 'culture change' in companies.

European Justice Commissioner Viviane Reding and European Parliament President Jerzy Buzek said in March that quotas should be imposed as a last resort if companies fail to reform their boardrooms.

The public consultation will be used to determine if the commission needs to draft EU-wide legislation.

Bankers to succeed officals at Russia company boards

AFP, Moscow, April 5: Russia plans to pick investment bankers and professional directors to replace government officials at state company boards in line with President Dmitry Medvedev's orders, a report said on Tuesday.

Kommersant business daily published a list of candidates who could replace deputy prime ministers and ministers on the boards of the top 19 companies which accounted for 15 per cent of the country's gross domestic product in 2009.

Last week, Medvedev reeled off a list of measures to improve the investment climate that among other things calls for some of Prime Minister Vladimir Putin's most trusted allies to stand down from company boards.

This prompted some observers to speculate that the Kremlin chief is seeking to assert himself ahead of presidential polls next year.

According to Kommersant, Igor Sechin, Putin's influential deputy and energy czar, could be replaced by Rair Simonyan, non-executive chairman at Morgan Stanley Russia, or Vyacheslav Martynov, general director for SAP CIS.

Finance Minister Alexei Kudrin, who has to quit the board of VTB bank, could be replaced by Vladimir Gusakov, vice-president of MICEX exchange, former deputy economics minister Kirill Androsov or Nikolai Pryanishnikov, president of Microsoft Russia, the report said.

On Saturday, the Kremlin published a list of 17 companies whose boards state officials should leave by July 1. The Kremlin added that government officials should quit boards of all state companies by October 1.

Kommersant indicated that even though the lists of successors appeared to have been put together in haste, it must have taken at least several weeks to compile them.

'The presidential initiative was clearly not a completely impromptu move,' it said.

While many economists have said that if implemented, the move would improve corporate governance, others say Medvedev's order is another false dawn in an uphill struggle to dismantle a system of state control over the economy put in place under his predecessor.

Bankers to succeed officials at Russia company boards

AFP, Moscow, April 5: Russia plans to pick investment bankers and professional directors to replace government officials at state company boards in line with President Dmitry Medvedev's orders, a report said on Tuesday.

Kommersant business daily published a list of candidates who could replace deputy prime ministers and ministers on the boards of the top 19 companies which accounted for 15 per cent of the country's gross domestic product in 2009.

Last week, Medvedev reeled off a list of measures to improve the investment climate that among other things calls for some of Prime Minister Vladimir Putin's most trusted allies to stand down from company boards.

This prompted some observers to speculate that the Kremlin chief is seeking to assert himself ahead of presidential polls next year.

According to Kommersant, Igor Sechin, Putin's influential deputy and energy czar, could be replaced by Rair Simonyan, non-executive chairman at Morgan Stanley Russia, or Vyacheslav Martynov, general director for SAP CIS.

Finance Minister Alexei Kudrin, who has to quit the board of VTB bank, could be replaced by Vladimir Gusakov, vice-president of MICEX exchange, former deputy economics minister Kirill Androsov or Nikolai Pryanishnikov, president of Microsoft Russia, the report said.

On Saturday, the Kremlin published a list of 17 companies whose boards state officials should leave by July 1. The Kremlin added that government officials should quit boards of all state companies by October 1.

Kommersant indicated that even though the lists of successors appeared to have been put together in haste, it must have taken at least several weeks to compile them.

'The presidential initiative was clearly not a completely impromptu move,' it said.

While many economists have said that if implemented, the move would improve corporate governance, others say Medvedev's order is another false dawn in an uphill struggle to dismantle a system of state control over the economy put in place under his predecessor.

Philippines to curb worst forms of child labour

AFP, Manila, April 5: The Philippines has vowed to crackdown on the worst forms of child labour under a new programme for its estimated 2.4 million underage workers, officials said Tuesday.

The scheme aims to halve the number of children working in dangerous areas such as the sex trade, mining, as child soldiers or in factories making home-made firecrackers by 2016, Labour Undersecretary Lourdes Trasmonte said.

'We hope to rescue children from the worst forms of child labour.' Trasmonte told a news conference. 'It's a do-able plan.'

To gauge the scale of the problem, Manila and the International Labour Organisation (ILO) will count all child workers in the Philippines and sort them by profession.

Backed by business groups, unions, non-governmental organisations and the ILO, the programme also calls for stricter enforcement of child labour laws and for alternative employment to be identified for child workers' families.

Trasmonte said widespread poverty made fighting child labour more challenging in a country where more than 23 million people—or 26.5 per cent of the population—survive on around 46 pesos ($1) a day or less.

Although it is illegal, thousands of Filipino children work as domestic helpers, agricultural workers, street vendors, labourers as well as the more dangerous areas targeted by the government.

'The root cause is still poverty. The only asset the poor have is their labour. Children are brought in to work because that is the only asset the family has,' she added.

Rodel Morcozo, a former child worker, recalled how he worked in an illegal gold mine at age 10, carrying equipment and mixing toxic mercury with his bare hands.

He told reporters he had heard even more child labourers were now working in the mines, lured by the belief they could get rich and help their parents and siblings.

ILO country director Lawrence Jeff Johnson cited some local progress in the global campaign, recalling that the number of child workers had dropped 40 per cent over nine years from four million in 2001.

Eurozone economic activity survey gives mixed signals

AFP, Brussels, April 5: A closely-watched survey indicating the pace of growth across the eurozone logged a 43-month high for the services sector in March, upwardly-revised EU data showed on Tuesday.

The composite eurozone index for manufacturing and services output compiled by the London-based Markit research firm fell 0.6 points from February to 57.6 points in March, a slight improvement from a previous estimate of 57.5 points.

Any reading above 50 indicates activity is expanding.

Markit said the latest reading signalled an expansion in economic activity for the 20^th consecutive month and emphasised that the acceleration in services sector activity was the strongest since August 2007.

Manufacturing output growth, however, eased to a three-month low and once again sharp divergences in economic performance could be seen between France and Germany, and the rest.

'Signs of weakness remained very much in evidence' outside the big two, with Spain falling back into a 'services-led contraction and the downturn in Greek manufacturing continued,' the survey said.

'Although the debt crisis in the periphery was affecting confidence, there was no evidence that the crisis in Japan had affected business materially,' said Markit chief economist Chris Williamson.

'The unrest in the Middle East and North Africa, on the other hand, continued to have an impact via higher oil prices,' he warned, highlighting rising input costs 'at a rate approaching the near eight-year highs seen in 2008.'

According to London-based IHS Global Insight analyst Howard Archer 'the key question is can the Eurozone sustain this apparent improved growth in the early months of 2011 as fiscal tightening increasingly kicks in across the region?'

He added: 'There can be little doubt that the European Central Bank will deliver a 25 basis point interest rate hike from 1.00 per cent to 1.25 per cent on Thursday — even though higher interest rates threaten to add to the problems of Greece, Ireland, Portugal and, even Spain.'