Athens, Greece (AHN) – A day after winning a confidence vote in the Greek Parliament, the country’s cabinet approved austerity measures for the 2012 to 2015 budgets and laws for the measures’ application.

The measures include $40 billion (EUR 28 billion) of spending cuts, tax increases, fiscal reforms and sale of government assets.

The next step for the financially challenged government is to secure the approval of the parliament where the ruling party of Prime Minister George Papandreou has enough numbers to pass the measures. However, unlike the confidence vote in which all members of the Socialist Party rallied behind the government, some MPs from the party also oppose the austerity measures.

Papandreou will have to convince the public, who have held several protests the past weeks over the belt-tightening measures. Ahead of the Parliament’s approval of the measures, protesters warned Athens of a major day of action when legislature votes on the issue next week.

Parliamentary approval is required by the European Union and the International Monetary Fund for the two bodies to release the second tranche of Greece’s bailout.

Despite Papandreou’s government winning a vote of confidence, Pimco, the world’s largest bond fund, opined that Greece would still likely default on its debts. Pimco Chief Executive Mohamed El-Erian said in a video conference in Taipei that Greece’s way to solve its financial problem is through a default.

The Pimco executive based his bleak outlook on the Greek government failing to enact measures that would enhance the country’s growth and the fact that no single economic indicator has shown strength due to fears that a restructuring would hurt European banks.

El-Erian said the EU and IMF are risking wasting their funds on the ailing Greek economy. But he said a Greek default alone would not trigger another round of global financial crisis because Greece is too small to create an economic impact on the international community.

He said other eurozone members, particularly Ireland, Portugal, Italy and Spain, must also default on their loans to negatively impact the global financial community.

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Manila, Philippines (AHN) – Budget airline Cebu Pacific will expand its fleet to 88 planes by the end of the decade with the purchase of 37 new Airbus jets worth $3.8 billion, the largest-ever aircraft order made by a Philippine carrier.

Cebu Air Inc. announced the acquisition Thursday as the airline looks to expand its reach in the Asia Pacific region while maintaining affordable fares through the more fuel-efficient A321neo. The purchase will be funded by internal funds and loans.

Cebu Pacific chief executive Lance Gokongwei said in a press conference that the 220-seater A321neo can fly to as far as Australia, India and northern Japan, countries that cannot be reached by the A320.

The airline has 30 orders of A321neo and seven A320s to be delivered between 2015 and 2021. An order of 18 A320s placed earlier is scheduled for delivery beginning in the second half of this year.

Currently, its fleet consists of 33 aircraft comprised of 25 A320s and eight small ATR turbo-props.

Gokongwei said Cebu Pacific is targeting a 10 to 15 percent domestic passenger growth a year and a 25 percent annual increase in foreign passengers through its additional planes.

The 15-year-old airline carried 12 million passengers this year, surpassing the number flown by Philippine Airlines, the country’s first airline.

In 2010, Cebu Pacific flew 10.5 million people to 30 local destinations and 16 Asian cities.

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Washington, D.C., United States (AHN) – The International Monetary Fund is considering only two candidates to replace resigned Managing Director Dominique Strauss-Kahn.

The shortlisted candidates are French Finance Minister Christine Lagarde and Mexican Central Bank Governor Agustin Carstens.

Lagarde, the frontrunner, has been making the rounds of developing nations such as India and China in a bid to convince them to vote in her favor. On Monday, it was Carstens’ turn to lobby.

Carstens warned Washington that if Lagarde would be appointed as IMF chief, the fund could face a conflict of interest.

The central bank governor said at a speech before the Peterson Institute for International Economics that the IMF would be perceived as protecting the interests only of European if the fund still lives by a six-decade old backroom agreement that the top IMF post to a European and the leadership of the World Bank to an American.

Carstens told the audience – which includes IMF board members, U.S. government officials and known economists – that the IMF has to work harder to maintain its credibility with developing nations. He said making a European the IMF’s head at this point would create doubt among emerging economies because Europe is apparently weak in overseeing the economies of its member-nations.

He cited as proof the recent IMF loans to Greece, Ireland and Portugal, which were the largest in the fund’s history. This situation, he added, is an indicator that Europeans continue to dominate the IMF, which would be worsened with Lagarde’s appointment as replacement for Strauss-Kahn, who is battling sexual assault charges in New York.

Carstens acknowledged that Lagarde’s chances of clinching the top IMF post are high. He said what his candidacy provides is an option for developing economies to have more say in international bodies such as the IMF.

With the shortlisting of the two, the IMF executive board will soon meet Carstens and Lagarde in Washington, discuss the strengths of two and announce the new IMF managing director by June 30.

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Cleveland, OH, United States (AHN Sports) – Former Syracuse Orange forward Rick Jackson worked out for the Cleveland Cavaliers Friday, making it his sixth stop in his ongoing Pre-NBA Draft tryout tour.

Jackson, 22, attended a workout session with Cavs executive and scouts, three months after Syracuse bowed out to Marquette in the third round of NCAA Tournament at Quicken Loans Arena.

Jackson scored seven points and 4 boards in his final game after four years with the Orange.

Now, the 6-foot-9, 240-poind banger hopes to start his professional basketball career with the Cavs, who hold the 1st, 2nd, and 31st pick in the upcoming 2011 NBA Draft.

Jackson still plans to continue his workout with the Chicago Bulls, Atlanta Hawks, and Portland Trail Blazers before draft night on June 23.

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Washington, DC, United States (AHN) – Beneficiaries of a $1.25 billion settlement of a discrimination case between the government and black farmers have begun receiving notifications, bringing a decades-old class action lawsuit a step closer to conclusion.

The Agriculture Department settled the historic case, known as Pigford II, in early 2009 but appropriation from Congress was delayed over Republican concerns about fraudulent claims and the costs of the settlements during a recession.

The settlement is the second one reached with black farmers, led by Timothy Pigford, who filed a class-action suit in 1997 alleging racial discrimination in farm loan programs dating back to 1983.

The government paid out $1 billion in 1999 to more than 15,000 farmers in the settlement known as Pigford I. However, about 72,000 missed the filing deadline for claims, leading to another settlement and allegations of fraud from conservatives.

Lawmakers appropriated $100 million for the Pigford II case in 2008 through a farm bill, leaving $1.15 billion that still required approval. Last December, a bill appropriating the remaining amount was signed into law despite GOP opposition.

House Republicans led by Reps. Michelle Bachman (R-MN) and Steve King (R-IA) had sought to withhold funding, citing fraud in the claims process and in spite of assurances from Agriculture Sec. Tom Vilsack that the bill includes protections against abuse.

A December 2010 report from the Congressional Research Service also confirmed arguments by black farmers that the USDA census on farmers in the period covered by the case was inaccurate. According to the report, the census failed to account for farmers who rented farmland and those who were not actually farmers because they tried to farm but were denied loans.

The Pigford II settlement still requires final court approval, which will be handed down during a hearing on Sept. 1. Following the ruling, each claim will be reviewed, making payments unlikely before late 2012.

The filing deadline for claims may be as early as the end of February next year. Beneficiaries who oppose provisions of the settlement may file their objections by Aug. 12.

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Washington, D.C., United States (AHN) – US Treasury officials confirmed plans to sell its remaining 6 percent share of US automaker Chrysler Group LLC to Italian automaker Fiat for $500 million, which represents about 98,461 shares of stock.

The sale will give Fiat a majority 52 percent share of the Detroit company whose automotive lines include Jeep. In addition, the sale ends the federal government’s relationship with Chrysler that began with a bailout to rescue the automaker from bankruptcy in 2009.

However, the deal is still expected to leave taxpayers with a $1.3 billion loss.

Chrysler received $12.5 billion in emergency loans from the US Treasury and still briefly entered bankruptcy in 2009, but quickly came out of bankruptcy under management help from Fiat. That resulted in a turnaround for Chrysler, which recorded a $116 million profit in the first quarter of this year.

Fiat is also paying $75 million for the right to buy shares held by the United Auto Workers retiree trust with $60 million of that going to the US Treasury and $15 million going to the Canadian government.

 

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Toronto, Ontario, Canada (AHN) – Large Canadian banks reduced their residential mortgage rates by one-tenth of a percentage point for mortgages of one to 10 years.

With the reduction, the rate for a five-year closed mortgage is now 5.49 percent at the Bank of Montreal, Royal Bank of Canada, TD Canada Trust, Scotiabank and the Canadian Imperial Bank of Commerce.

The first four banks announced their home mortgage rate cuts last week, while CIBC announced it on Monday.

Interest rates for long-term loans are down due to concerns over the health of the global economy and the chances that the Bank of Canada will not raise its benchmark lending rate until the second half of 2011, at the earliest.

Analysts forecast the Canadian central bank will leave the key lending rate at one percent for the sixth straight time when the bank meets on Tuesday.

An analyst of Scotia Capital predicted that Bank of Canada Governor Mark Carney would even hold on to the current interest rate into 2012.

The Organization for Economic Cooperation and Development urged the Bank of Canada last week to approve at least one rate increase in the coming months to show to consumers and businesses that it is doing something to address inflation.

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Dhaka, Dhaka, Bangladesh (AHN) – Nobel laureate Muhammad Yunus, the founder and former chief of the microfinance bank Grameen Bank, laments that the Bangladesh prime minister was wrong to criticize him.

In an interview with the BBC’s Lesley Curwen broadcast on Wednesday, Yunus said he was forced to stand down last month. He said Prime Minister Sheikh Hasina had only done so because she had been “badly advised.”

Yunus spoke to news media for the first time since he was forced out of Grameen Bank following a brief legal battle.

Microcredit guru Yunus was alleged to have siphoned money from Grameen Bank. Hasina on Dec. 5 last year told journalists that he was “sucking blood from the poor.”

Hasina, criticizing Yunus, said “there is no difference between a person who enjoys taking interest on money and one who takes bribe.”

The pioneer of microfinance contested the prime minister’s observation that the bank of the poor failed to play its role to eradicate poverty.

An estimated 10 million rural women have received modest loans from the Grameen Bank.

Meanwhile, Dr Qazi Kholiquzzaman Ahmad, a former president of the Bangladesh Economic Association, on Thursday discounted the possibility of overcoming poverty through traditional “recovery-based” micro lending activities. “Microcredit alone cannot bring in changes,” he told the New Age daily.

Ahmad, chairman of the World Bank-supported microcredit funding agency Palli Karma-Sahayak Foundation (PKSF), said the introduction of some restrictions on microfinance operations next month will streamline microcredit operations to some extent.

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Tel Aviv, Israel (TML) – Western powers and their allies in the Middle East hope to grease the wheels of democracy and political stability as they begin to release billions of dollars in loans and other financial aid to the region’s Arab Spring economies.

The economies of countries like Egypt, Tunisia and Jordan are facing a near-perfect storm of political unrest combined with negative growth and rising prices for imported energy and food. But the emerging aid pipeline may be clogged by domestic opposition inside donor countries. Recipients may balk at the conditions placed on much of the aid.

Aid could ease the way for Egypt and Tunisia to evolve into Western-friendly democracies as well as give a boost to beleaguered friends like Jordan’s King Abdullah. Without it, deteriorating economic conditions risk strengthening the hand of already powerful Islamic movements and undermining public confidence in the free markets and private business that economists say are needed to ensure long-term prosperity.

“These countries, particularly Egypt, face a financial hole and their economies have come to a standstill. The way out is to spend money which their governments don’t have,” said Paul Rivlin, author of Arab Economies in the Twenty-First Century. But the recipients will have to show they are taking the right political and economic measures. “The U.S wants to draw them back into a Western orientation. But the political systems in these countries may draw them elsewhere.”

Egypt, as the biggest of the Middle East’s troubled economies and the country most likely to set the direction of the region political, is the focus of the aid.

The International Monetary Fund (IMF) kicked off the effort May 12, saying it would respond to Egypt’s request for as much as $12 billion. That amount has since has been lowered to $4 billion. But in the meantime, U.S. President Barack Obama last week offered to forgive some $1 billion in Egyptian debt and. Egypt is reportedly close to an agreement with the World Bank to receive loans worth $2.2 billion.

But the biggest largesse of them all may come from Saudi Arabia, which on Saturday pledged $4 billion in the form of soft loans, deposits and grants, the Egyptian Middle East News Agency (MENA) reported, citing Field Marshal Mohamed Hussein Tantawi, the head of Egypt’s ruling military council, as saying.

Egypt won’t be the only beneficiary of international aid.

On Saturday, the European Bank for Reconstruction and Development (EBRD), which was formed to smooth eastern Europe’s transition to free market democracies, is working on a program that may eventually lead to investment of as much as 2.5 billion euros ($3.5 billion) a year in the Middle East. The EBRD said it is considering a request by Egypt to become a country of operations. Morocco, another EBRD shareholder, has also expressed an interest in qualifying, it said.

On Monday, the Group of Eight (G-8) – a forum for many of the world’s biggest economies – will discuss how they can contribute to modernizing the economies of the Middle East, without pledging dollar amounts for assistance. A special session will be devoted to Tunisia and Egypt.

Tunisia plans to attract $5 billion a year in foreign aid, loans and private investments over the next five years during meetings at the G-8 summit, Finance Minister Jelloul Ayed said in an interview with The Wall Street Journal Friday. Tunisia would apply for a $500 million standby loan, possibly from the World Bank.

Obama told a visiting King Abdullah that he would provide Jordan with several hundred millions of dollars in aid, channeled through the Overseas Private Investment Corp. (OPIC). Obama said the funds would “leverage ultimately about $1 billion for economic development in Jordan.”

Rivlin said Washington will lead the aid drive and should America judge that the Arab Spring economies aren’t meeting its conditions it “will be difficult” for Europe and international institutions to provide it either.

The Arab Spring economies are in bad shape by almost every measure. The five countries hit hardest by turmoil will show a combined drop in economic output of about 2.3% this year, according to figures based on a forecast by the Institute for International Finance (IIF) released in early May.

Egyptian Finance Minister Samir Radwan estimates his country’s budget deficit will top 10% of gross domestic product in the coming fiscal year, up from a previous forecast of 7.9% and has to borrow to cover the gap. Its official foreign currency reserves have fallen to $28 billion, but some economists think the drop is bigger than being report.

Uri Dadush and Marwan Muasher, from the Carnegie Endowment for International Peace, expressed concern that it will be difficult to convince the leaders of Egypt and other recipient countries to undertake the economic reforms needed to rekindle economic growth and enable them to eventually get off aid.

So far, the transitional governments of the region, as well as veteran leaders trying to retain power, have increased subsidies for consumer goods and promised to create jobs, all at a cost to badly strained budgets and economic efficiency. But Dadush and Muasher add that the bigger problem may be convincing Arab public opinion that free markets are beneficial.

“Change in the Middle East is about refusing an autocratic political system and calling for democracy – without a clear vision for what economic system should be put in place,” they wrote in the National Interest on April 13. “There is a significant possibility that the governments that ultimately emerge out of this crisis will renounce previous economic reforms as misguided.”

Indeed, many analysts think Egypt won’t agree to the economic reforms the IMF typically demands in exchange for its aid, such as subsidy cuts, for fear that they will spark another round of mass protests like the kind that brought down President Husni Mubarak in February.

“For understandable political reasons, the Egyptian government says that it is unthinkable to cut subsidies for food or energy. But can the IMF simply extend a loan without any conditionality? I doubt it,” Gideon Rachman wrote in the Financial Times last week.

Back at home, both American and European leaders will have to make a case for sending billions of dollars overseas at a time when they are experiencing severe economic difficulties of their own. Europe is trying to put out debt fires in Greece, Portugal and Ireland.

In the U.S., President Barack Obama is battling Congress over increasing the country’s debt ceiling. He faces opposition from a Republic-controlled House of Representatives to helping countries whose allegiance to America is more in doubt as long-time pro-Western despots are replaced by governments whose views are yet to be fully articulated.

The U.S. budget is weighed down by $14 trillion in debt as the White House and Congress fight over raising the national debt ceiling.

“Considering our own national debt, we cannot afford to forgive up to $1 billion of Egypt’s debt,” Elena Ros-Lehtinen, the chairwoman of the House Foreign Affairs Committee, said last Thursday. “The U.S. should only provide assistance to Egypt after we know that Egypt’s new government will not include the Muslim Brotherhood and will be democratic, pro-American and committed to abiding by peace agreements with Israel.”

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Geneva, Switzerland (AHN) – The World Trade Organization appeals board confirmed in a ruling released on Wednesday that Airbus benefited from European support in its battle with Boeing to secure contracts for passenger jets with major air carriers.

The decision came after another WTO panel declared this year that Boeing benefited from about $5 billion in government assistance from 1989 to 2006.

The WTO board said that the EU must reduce its support for Airbus, done through launch aid loans with below market interest rates for the development of new aircraft models. The low cost financing from France, Germany, Britain and Spain gave Airbus unfair advantage over its competitors, the board said.

The subsidies displaced Boeing’s export of aircraft to key buyers in China, South Korea, Australia and Europe.

U.S. officials hailed the WTO board’s decision because it would mandate Europe to reform its launch aid program used by Airbus to develop the A380 jet that competes with Boeing’s 787 Dreamliner aircraft.

But the Europeans also saw victory in the WTO decision because it rejected American claims that the European research and development support, the airport infrastructure development and other programs were subsidies to Airbus.

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