Cairo, Egypt (The Media Line) – Egypt faces a risk-laden game of Beat the Clock as it tries to get its political house in order before its foreign currency reserves sink much more.

Reserves fell to $16.4 billion in January from about $36 million a year earlier, a drop that economists all agree imperils the economy and requires Egypt to seek support from external sources and make difficult decisions to cut back government spending and subsidies. But that will be difficult given the political situation.

Presidential elections are now scheduled for late May, preceded by a six-week election season. Meanwhile, a parliament dominated by Islamists is tussling over who will control the government with the interim military council. A dispute with the United States over foreign human rights activists detained in Egypt is threatening vital American aid to the country. In the meantime, no U.S. assistance is being transferred to the country.

The timetable looks even more challenging when the role of the International Monetary Fund (IMF) is factored in. Egypt’s Ministry of Finance is reportedly counting on the IMF’s executive board to approve a $3.2 billion facility towards mid-March, which will then go to parliament for approval about the time the presidential campaign is getting under way.

“Time is not on Egypt’s side and politics could be the prime suspect to derail or delay an IMF program or exacerbate dollarization and [foreign currency] outflows,” Bank of America Merrill Lynch analyst Jean-Michel Saliba said in a note to investors last week.

Concerns that Egypt’s political trajectory looks to be on a collision course with its financial needs came in the form a downgrade in its bond rating by Standard & Poor’s (S&P) on Feb. 10. S&P lowered its ratings to B from B+ on Friday, five notches into junk territory, and said further downgrades could be on the way.

“The negative outlook reflects our view that a further downgrade is possible if the government fails to stem the decline in reserves, or an uncertain policy environment and weak institutions emerge from the ongoing political transition,” S&P said. Moody’s and Fitch, two other bond-rating agencies, cut their ratings on Egypt earlier.

Diminishing foreign reserves may be the most immediate threat to Egypt’s economy, but it is not the only one. More than a year after the revolution that brought down Hosni Mubarak, economic growth has stalled, the number of visiting tourists has plummeted and foreign investment has evaporated, all of which is exerting huge economic pressure on the government at a time of political flux.

Bank of America Merrill Lynch estimated that Egypt’s drawdown of its foreign currency would slow to what it called a “more manageable” $500 million a month because the foreign capital that has been responsible for much of the decline has been nearly drained out of the country.

On the other hand, Egypt could also get a boost from a rare instance of foreign investment if France Telecom goes ahead with the purchase of a $2 billion stake in the Egyptian Company for Mobile Service, popularly known as Mobinil, which it agreed to buy from Egyptian entrepreneur Naguib Sawiris last week. If the transaction goes through, that money might be transferred to Egypt in March.

But Merrill also noted that Egypt’s finances look more precarious than the headline foreign reserves figures show. Taking out Egypt’s holdings of gold, reserves fall to $13.6 billion, which are equal to just 2.8 months of imports, Saliba wrote in the Feb. 16 note. Meanwhile, Egypt’s external financing needs could reach some $11 billion through June 2013, Finance Minister Momtaz el-Saieed said Feb. 10.

But accepting aid is politically problematic because the public looks askance at foreign assistance, especially from the U.S. Only 26 percent favor accepting American aid, according to a Gallup poll taken in December. The proportion willing to accept international aid rises to 50 percent (with 42 percent opposing) and those willing to accept it from fellow Arabs reaches 68 percent (28 percent opposing), Gallup found.

Egyptians don’t like aid because it usual comes with strings attached, such as unpopular economic reforms in the case of the IMF and maintaining the 1979 peace treaty with Israel, in the case of American assistance. Political opposition to foreign assistance caused the interim military government to reject the original offer of an IMF credit last spring, a decision many economists say has exacerbated the financial troubles in which Egypt now finds itself.

Parliament must approve an IMF loan, but Essam el-Erian, a leader of the Muslim Brotherhood’s Freedom and Justice Party, which dominates parliament, said his group may vote against it because it might impinge on Egyptian sovereignty. “Look at Greece,” el-Erian said in an interview with Bloomberg News this week. “Everybody is telling it what to do.”

Above and beyond accepting foreign financial assistance, the other remedies for Egypt’s foreign reserves ailment are all painful for politicians and the public alike.

One is bringing down the budget deficit. As the economy has shrunk and the government boosted handouts in the early days of the revolution to try and palliate the population, Egypt’s fiscal deficit has ballooned. Officials recently revised upward their forecast for the budget deficit for the fiscal year ending June 30 to 9.4 percent of gross domestic product.

The solution would be to cut spending, particularly costly and wasteful subsidies on food and energy. Indeed, the military government recently announced plans for $4 billion in spending cuts and the IMF and others providing aid will have their own list of fiscal measures. But political analysts suggest that will inevitably mean cuts to popular energy and food subsidies of the kind that have set off riots in the past.

Another remedy is devaluing the Egyptian pound. In spite of Egypt’s mountain of economic woes, the pound had shed only about 1 percent of its value over the past year as the central bank acted to shore up its value by raising interest rates and drawing down on reserves. But the bank’s options are narrowing as it is forced to devalue the pound, which will almost certainly lead to higher inflation.

Analysts see some positive elements in the Egyptian political scene. Saliba notes that the decision to move up the presidential vote to May reduces the length of the campaign season and the opportunity for grandstanding by candidates. Ahmed Galal, managing director of the Economic Research Forum in Cairo, maintains that the Muslim Brotherhood has taken a pragmatic line on subsidiary reform and supports free markets.

©2012. The Media Line. All Rights Reserved.

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Washington, D.C., United States (AHN) – President Barack Obama has issued an executive order freezing all assets of the Iranian government and financial institutions being held in the U.S.

In the order, which takes effect Monday, Obama declared that all property and interests in property of the Government of Iran, including the Central Bank of Iran, that are in the United States are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in. Iranian property that comes to the U.S. or taken possession by any U.S. person were also ordered frozen.

Obama directed the Secretary of the Treasury, Secretary of State and other U.S. government agencies to implement the order.

The President cited attempts by Iran’s central bank and other banks’ to conceal transactions of sanctioned parties and the weakness of the Islamic country’s anti-money laundering regulations as reason for issuing the order.

But the main aim of the latest sanction is to cripple Iran’s nuclear program that Washington believes is intended to make weapons of mass destruction. Tehran has repeatedly denied that it is building a nuclear bomb saying the nuclear program is for peaceful purposes.

The United Nations and the European Union had also imposed arms and economic embargo against Iran in an attempt to force Tehran to stop enriching uranium.

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Los Angeles, CA, United States (AHN) – “Underworld Awakening” came out on top of the weekend box office, taking in $25.4 million in its debut.

The film is a 3-D fourth installment of the popular vampires vs. werewolves franchise. “Awakening,” starring Kate Beckinsale, took in more than its 2009 predecessor “Underworld: Rise of the Lycans,” which started with $20.8 million, and did not feature Beckinsale.

Taking the No. 2 spot with $19.1 million was George Lucas’ “Red Tails,” a $58-million tale starring Terrence Howard and Cuba Gooding Jr. that chronicles WWII’s African-American Tuskegee airmen.

In third place was “Contraband,” starring Mark Wahlberg and also featuring Beckinsale. The film topped the box office last week. Its 10-day total is roughly $46.1 million.

“Extremely Loud and Incredibly Close,” the 9/11 drama adapted from Jonathan Safran Foer’s novel, finished in a disappointing fourth, with a lukewarm $10.5 million. The Warner Bros. flick stars Oscar winner Sandra Bullock.

Rounding out the top five was “Haywire.” The Steven Soderberg film, featuring mixed martial arts fighter Gina Carano, took in a dismal $9 million.

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Los Angeles, CA, United States (AHN) – Warner Bros. will extend the time customers have to wait to watch movies on DVDs from services such as Netflix to 56 days, more than twice as long as the current delay.

The move is a bid to bolster flagging DVD sales as well as fledging online movie service UlraViolet, which lets buyers of DVDs or movie downloads watch those movies online using computers, smartphones or tablets.

Warner Bros. has told movie rental companies that it wants the eight-week delay a standard part of its deals. Netflix has agreed to the terms, but Redbox has not yet signed on, the website AllThingsDigital reported.

Coinstar, parent company of Redstar, has deals with Sony Pictures, Lions Gate Entertainment and Paramount Studios to obtain DVDs for rental the same day they are released for sale.

In 2010, Warner Bros imposed a four-week delay on rental outlets.

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Tokyo, Japan (AHN) – In an attempt to reduce spending on national defense and strengthen domestic arms industry, Japan on Tuesday eased self-imposed arms exports ban.

The liberalization will allow hundreds of Japanese companies to take part in multinational projects of developing weapons for the first time in several decades.

“Under the new standards, Japan will be able to transport military equipment for missions of peace-building and international cooperation,” Foreign Minister Koichiro Gemba told reporters.

“This will mean that Japan can now address international peace cooperation and global challenges such as terrorism and piracy more proactively and effectively,” he added.

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Tampa, FL, United States (AHN) – It’s beginning to be a tough week for newspapers, with one major publication announcing a round of lay-offs, while another publisher announces bankruptcy.

Media General announced Monday that it will let go 165 staffers from the Tampa (FL)Tribune newspaper, TBO.com, and other community papers it publishes. Meanwhile, in Davenport, IL, Lee Enterprises has filed for bankruptcy. Lee Enterprises is a 121-year-old company that publishes 54 newspapers in 23 states, in addition to more than 300 weekly and specialty publications.

After the lay-offs, Virginia-based Media General will retain only 675 staffers for its Tampa-area print and online publications. The lay-offs will come in early 2012, according to rival publication St. Petersburg Times.

Lee Enterprises will attempt to refinance about $1 billion in debt, filing its bankruptcy petition in Wilmington, DE. The filing comes after Friday’s annual report, disclosing that the company is almost at its debt limit.

“Our ability to operate as a going concern is dependent on our ability to obtain approval by the U.S. Bankruptcy Court of the refinancing plan approved by creditors and to generate cash flows and maintain liquidity sufficient to service our debt,” Lee Enterprises explained.

Nationally, Lee Enterprises employs an estimated 10,700 people and owns such newspapers as St. Louis Post Dispatch, Columbus Telegram, Rapid City Journal, Post-Star in New York, and Sioux City Journal.

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New York, NY, United States (AHN) – U.S. stocks cheered strong retail sales over the long Thanksgiving weekend and early forecasts of a strong showing for Cyber Monday with a strong rally.

With less than an hour in the trading day, stocks were off earlier highs but still boasted impressive gains. The Dow Jones Industrial Average was up 220 points, the Standard & Poor’s 500 Index added 27 points and the tech heavy NASDAQ jumped 70 points.

Retail sales broke records over the long holiday weekend and early estimates are the Cyber Monday sales are expected to climb 20 percent over last year.

The broad based rally included retailers, financials, and technology shares. Best Buy rose nearly 3 percent. Macy soared almost 5 percent and Apple was better by more than 3 percent.

Also giving stocks room to run was news out of Europe that progress was being made in the ever growing and lengthy euro zone sovereign debt crisis.

While some analysts called the rally a technical bounce and warn markets still face numerous risks, investors welcomed the much needed gains.

Commodities were also strong. Oil rose 88 cents to $97.71 a barrel. Gold closed solidly higher on bargain hunting, rising $29 to $1709 a troy ounce, and silver, the grey metal, closed up $1.08 an ounce to settle the day at $32.06.

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Seattle, WA, United States (AHN) – Starbucks has stopped charging $1.50 for orders of coffee beans less than a pound in stores in the United States.

The Seattle-based company made the decision after being fined by the the Massachusetts Division of Standards for not disclosing the hidden charge to customers.

The fee was ended on Nov. 7 nationwide. It was charged whenever customers ordered coffee beans less than the one-pound bags readily available in Starbucks stores.

Coffee beans cost $11.95 a pound, which should be half a pound at $5.98. Customers who bought half a pound, however, paid $7.48 without being informed of the added cost.

Starbucks, like other companies, can charge additional fees for its products and services so long as it indicated these fees on price lists or informs customers before purchase.

The $1.50 extra charge by Starbucks violated consumer protection laws in Massachusetts against “unfair or deceptive” practices.

The Massachusetts Division of Standards said it became aware of the violation in August. It proceeded to investigate by buying coffee beans at Starbucks stores in Andover, Concord, Reading and other areas. Each time, the store charged the undisclosed fee.

The agency fined the stores it visited a total of $1,575. In response, Starbucks informed officials it would stop charging customers the fee in stores in Massachusetts and all other states.

“Additional fees have to be clearly and conspicuously disclosed to the consumer before the purchase,” Barbara Anthony, undersecretary of the agency’s Office of Consumer Affairs, said in a statement.

Massachusetts officials estimate about 75,000 customers in the state have paid for the extra fee without being aware of it.

A spokesman for the coffee chain, Alan Hilowitz, told the Boston Globe the $1.50 was for “additional labor and packaging” required for orders of half-pound coffee beans.

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Washington, D.C., United States (AHN) – The U.S. Supreme Court upheld a 2008 decision that allowed patients to file a parallel claim against manufacturers of medical devices.

With the ruling, the court rejected an appeal by Stryker Corporation against a lawsuit foiled by Illinois resident Margaret Bausch who got a replacement hip six days after the Food and Drugs Administration (FDA) issued a warning about problems at Stryker’s manufacturing plant.

In seeking to dismiss Bausch’s lawsuit, Stryker cited a 2008 Supreme Court ruling that patients cannot file state-law product liability suits over products that went through FDA review.

However, a Chicago Federal Appeals court allowed Bausch’s suit based on the exception made the Supreme Court which allowed parallel claims.

The FDA investigated Stryker’s facility in Ireland and informed the company in March 2007 that it must correct manufacturing deficiencies. In 2008, Stryker recalled hip and knee replacements manufactured at its Ireland plant, including the one implanted on Bausch, requiring her to undergo a second surgery to have the defective device replaced.

Stryker, based in Kalamazoo, Michigan, reported last month that its profit went down 3 percent in the third quarter due to cost related to recent acquisitions. As a result, Stryker’s earnings went down to $327 million from $337 million after it purchased former rival Orthovita, the neurovascular business of Boston Scientific Corporation and Memometal Technologies, which makes foot and hand implants.

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Washington, DC, United States (AHN) – Just days after the death of Apple co-founder Steve Jobs, the U.S. company has won a legal battle against Taiwanese smartphone maker HTC.

HTC had lodged a patent infringement complaint against Apple last year and sought a ban on import of Apple products.

However, the U.S. International Trade Commission (ITC) on Tuesday said in its verdict that the American company did not violate the rules – an announcement that prompted the fall of HTC shares to as much as 6 percent.

HTC had charged Apple violated its patents relating to data protection, contact information storage and power supply management.

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