Greek drivers continue strike

Greek truckers said they will maintain the strike at the height of the busy tourism season [AFP]

The Greek government has ordered its military to help with fuel deliveries in the country as 33,000 truck drivers continue to refuse to go back to work.
Their strike continued into a sixth day on Saturday, defying an emergency government order to return to the road, which has resulted in fuel shortages across the country.
The protest began last Sunday against plans by the government to liberalise the tightly-controlled freight sector.
But authorities warn that the greatest damage has been caused to the vital tourism industry, which accounts for nearly a fifth of the recession-hit Greek economy, leaving thousands of travellers stranded and booking cancellations mounting.
"The period to August 15 is the heart of the tourism season and an entire week has now been lost," Vassilis Korkidis, the head of the Greek trade association, told state television.
'Unfair' reforms
The truckers decided to maintain their protest, ignoring warnings by the government that strikers who continue to defy the law would be prosecuted and that their operating licenses could be forfeit.
George Tzortzatos, the head of the Greek truck owners confederation, told reporters after a union meeting: "We will continue [the strike] in dynamic fashion."
The truckers say that boosting competition in the freight sector by reducing new licence charges is unfair to existing operators ,who have already paid high start-up fees running up to $391,000.
The plan is part of a reform programme that the Athens government committed to in May in exchange for a $143bn loan package from the International Monetary Fund and the European Union.
Greece has suffered waves of strikes and protests over the unprecedented budget cuts and reforms the government had to agree to in order to tap the IMF-EU money it desperately needed to avert default on debts close to 300 billion euros.

Analysis: IMF bound by politics in Chinese yuan debate

Yuan banknotes are seen in this illustrative photograph taken in Beijing July 26, 2010

(Reuters) - Substantially.

That single word, left out of the International Monetary Fund's assessment of China's undervalued currency, laid bare the tricky IMF internal politics that govern even its most routine interactions with the world's newest economic power.
IMF staff, under pressure for years from member countries to tell it like it is when assessing a country's economic health, said China's yuan was "substantially" undervalued.
But by the time the final assessment passed through the IMF's 24-member board of shareholder countries on Monday, that word had fallen victim to disagreements between those who put faith in Beijing to let its currency rise more rapidly and those among the Group of Seven rich nations who doubt much progress would be made.
The board statement simply called the yuan "undervalued" with several countries questioning the accuracy of IMF staff projections of a major increase in China's current account surplus over the next several years.
On the one side are emerging market economies, like Brazil, who stood behind China, and on the other the G7 old-line powers who believe the yuan is still too cheap but did not say so.
"The G7 wants more flexibility in how the currency is managed but at the same time they want to do that diplomatically," said Domenico Lombardi, a former IMF board member now at Brookings Institution.
Still, Lombardi said calling the yuan undervalued, regardless of whether it is substantial or not, sent a strong signal to Beijing that it needs to revalue the currency.
"It is clear the board adopted a diplomatic stance. They tried to do their best not to upset the Chinese authorities but in the end preserved the substance of the IMF staff's message by concurring the exchange rate was undervalued," he added.
SOFTER ONE FROM WASHINGTON
The outcome reflects not only muscle-flexing on the part of China but some softening of the U.S. position.
The Obama administration has toned down some of the rhetoric the previous Bush administration used when describing the extent to which China's yuan is undervalued.
Treasury Secretary Timothy Geithner has said repeatedly it is "China's choice" to decide how and when to let market forces play a larger role in determining the yuan's value, even as he emphasized it was in China's interest to do so.
As recently as Sunday, he praised Beijing's recent move to free the yuan from a dollar peg and described that as a helpful move toward easing global trade imbalances even though the yuan has risen less than one percent since China did so.
"What matters to us is how fast and how far they let it go," Geithner said, a gentle reminder that while Washington likes Beijing's policy direction it is also monitoring its effectiveness.
In contrast, the Bush administration grew frustrated with efforts to convince China to let its currency rise faster and pressured the IMF unsuccessfully to label China a currency manipulator.
While the IMF never bowed to that pressure, it did change its currency surveillance rules to say that member countries should stay away from policies that result in "external instability," in addition to avoiding currency manipulation and intervention.
Beijing accused the IMF of not being even-handed and stalled the IMF's process for reviewing its economy for two years. Current IMF Managing Director Dominique Strauss-Kahn has overturned that rule, saying it made discussions with member countries less open.
DISAPPEARING FOOTNOTE
In another twist, China -- supported by other emerging market economies -- took umbrage with a footnote in the IMF staff report stating that staff estimated the yuan was undervalued by somewhere between 5 percent and 27 percent.
The footnote was removed at China's behest before the staff documents were published on Thursday.
Such estimates are not unusual and fall under the IMF's expertise. They have, however, always been a thorny issue because of the broad disagreement among economists on how best to determine whether currencies accurately reflect a country's economic fundamentals.
To be fair, all IMF member countries have a say in what is published and what is not in reviews of their economies.
"The Chinese looked at the whole report to assess whether it's a fair and balanced report and also if we had reflected their views correctly in the report," IMF mission chief to China Nigel Chalk told reporters on a conference call.
Eswar Prasad, a former IMF official and trade professor at Cornell University, said China's surprisingly quick agreement to release the report reflected Beijing's growing confidence it is control of the global debate over its currency.
While the staff report had some tough language on the need for further currency reforms, it also praised Beijing's recent announcement to move to a more flexible exchange rate, even though there has been little actual movement in the yuan.
China was further emboldened by the board's at best lukewarm support for the IMF staff's relatively hard-line position on the currency issue, said Prasad, a senior fellow at Brookings. He said the staff report, which contains the authorities' views, shows Beijing pushing back on all of the staff's analysis and assertions used to support the finding of a substantially undervalued exchange rate.

IMF delays aid to Pakistan

Islamabad: The International Monetary Fund has delayed the fifth installment of a $1.2 billion aid plan to Pakistan.

The IMF has also raised objections on Pakistan’s Letter of Intent for the fifth installment. The letter was sent by Pakistan’s representative to IMF Adnan Mazari to Paul Ross, who will be heading the upcoming IMF Review Mission to Pakistan.
Ross has raised objections and has said the decision taken by Prime Minister Gilani in the Energy Conference must be included in the letter.
High level officials say the IMF is pressurising the government to increase electricity prices by six percent from April as promised.

India integrating more with rest of Asia: IMF

Kalpana Kochhar, Deputy Director, Asia Pacific Department, IMF. Photo: Special Arrangement

India is now integrating more with the rest of Asia and will play a major role in the Asia’s growth, top officials of the International Monetary Fund has said.

“You have a very rapidly growing large economy in the South Asia region, and that is India, and India is now also integrating much more with the rest of Asia,” Kalpana Kochhar, IMF Deputy Director of the Asia Pacific Department told reporters late Saturday.

“For example, trade between China and India is growing rapidly. Of course, it is mostly imports from China-but it has grown very rapidly in recent years. So prospects for integration both in the South Asia region amongst themselves and with the rest of Asia I think have greatly improved and will continue to do so,” she said.

IMF Director, Asia Pacific Department, Anoop Singh said that the fund expects Asia to continue leading the global recovery and grow by about 7 per cent this year and next year.

“As is now well-known, China and India will again lead Asia’s growth with growth rates of 10 and 8.8 per cent this year,” he said.

While the pattern of recovery has varied in Asia, as it has in other regions, Mr. Singh said it is important to note that both the more domestically oriented economies such as China, India and Indonesia as well as the more export-oriented economies are experiencing strong upturns.

Responding to a question, Mr. Singh said the IMF expects output gaps to close this year in a number of economies, including countries in South Asia such as India.

“Therefore, it is not surprising that inflation has begun to turn up. I recently presented an outlook that shows how expectations have moved up. There is a significant contribution to higher inflation coming from food and energy prices.

“There are reasons for that increase in food and energy prices, so we are not yet seeing an increase in underlying inflation at the same rate at which we are seeing a rise in overall inflation,” he said.

He said that there is a clear commitment in many countries to ensure that inflationary expectations do not broaden to result in higher underlying inflation.

“So we are seeing monetary policy already being tightened in a number of countries. For example, India moved the second time just last week,” Mr. Singh said.

Peter Schiff CNN International - World News Europe

Buy gold to diversify reserves

The price of gold hit a record high above US$1,100 (S$1,532) an ounce in London trading on Friday following a report that Sri Lanka had joined India in purchasing the precious metal. -- PHOTO: AP

COLOMBO - SRI Lanka's central bank on Saturday said it has been buying gold to diversify its reserves amid volatile currency markets, days after India announced it had purchased 200 tonnes of the precious metal.
Central Bank assistant governor Nandalal Weerasinghe declined to confirm analysts' estimates that the tropical island nation had purchased around five tonnes of gold.
'We have been observing that prices of gold have been going up so we have been strategically buying gold over the past several months as part of a reserve management process of diversifying our portfolio,' he told AFP.
The price of gold hit a record high above US$1,100 (S$1,532) an ounce in London trading on Friday following a report that Sri Lanka had joined India in purchasing the precious metal.
Mr Weerasinghe did not disclose from which sources the bank was buying the gold or at what prices. He gave no breakdown of how much of the country's more than US$5 billion in foreign reserves were held in gold.
A senior source close to the central bank said the gold purchases were part of moves to smooth periods of dollar volatility and the amount bought was in the neighbourhood of 5.3 tonnes as of September. -- AFP

US and EU at odds over bank rules

Obama says more must be done to prevent another global financial crisis but has so far stepped back from imposing caps on bonuses awarded by the finance sector [EPA]

Protectionism, the removal of stimulus packages and capping bank bonuses will dominate next week's G20 meeting in Pittsburgh.
As workers apply the finishing touches to the David Lawrence Convention Centre in Pittsburgh, the site of the G20 meeting, the business of constructing a stronger global system of financial regulation is still a work in progress.
In video
The summit host, US President Barack Obama, says more needs to be done to prevent another worldwide breakdown.
"Abuses in financial markets anywhere can have an impact everywhere," Obama said in a speech on Wall Street September 14.
"And just as gaps in domestic regulation lead to a race to the bottom, so too do gaps in regulation around the world."
Despite Obama's rhetoric, the US and Britain actually want less robust rules than do France and Germany. Those countries want a formal agreement to slash bankers' bonuses.
Excessive compensation, they argue, encourages reckless risk taking. The global banking industry is lobbying furiously against bonus caps.
Nicolas Sarkozy says he will walk out if the leaders fail to agree on a bonus crackdown.
Another fight may be brewing over trade.
Protectionist moves
"The good news is there haven't been huge protectionist moves like we saw in the 1930s," says Ian Vasquez of the Cato Institute in Washington.
Sarkozy has threatened to walk out of the G20 meeting if bonus caps are not agreed [AFP]"The bad news is virtually every country has in one way or another violated the spirit of free trade and imposed some sort of protectionist measures including, most recently, the United States."
Obama's decision to impose tariffs on imports of Chinese tyres pleased his labour union constituents but infuriated the Chinese, who retaliated by penalising American chicken and car parts imports.
Obama and Hu Jintao, the Chinese president, will meet in Pittsburgh.
At their London meeting in April, the G20 agreed to use government funds to stimulate economic growth.
Now, with France, Germany and Japan officially out of recession and US Federal Reserve Chairman Ben Bernanke saying America is "very likely" out as well, the G20 have to work out an orderly exit strategy for withdrawing government financial support.
Inflation risks
"We had to have the stimulus to get the economy kick started again," Clyde Prestowitz, president of the Economic Strategy Institute, "but the stimulus is inflationary, so if you keep doing it you will wind up with a nightmare scenario. So therefore it's a high priority to stop doing it, but if you stop it too soon then you're back in the soup."
The G20 already approved more funding for the International Monetary Fund (IMF) and the World Bank to help poorer countries get through the recession.
"We have a global economy characterised by enormous imbalances with the US, Britain and a few other... countries running chronic trade and current account deficits"
Clyde Prestowitz, Economic Strategy InstituteFinance ministers agreed last month that the IMF, which is dominated by European countries, should make way for more representation and influence from emerging and developing countries, including the poorest.
But Prestowitz says the G20 is neglecting more fundamental issues that will, over time, require massive readjustments.
"We have a global economy characterised by enormous imbalances with the US, Britain and a few other mostly Anglo countries running chronic trade and current account deficits and Asia, Germany and the Middle East running chronic current account surpluses," Prestowitz says.
"That system is not stable; it was a big reason behind the economic crisis of the past year, its still there and has not been addressed."
Meanwhile Pittsburgh is gearing up for widespread disruption, with large sections cordoned off for security and thousands of anti-capitalist and environmental protesters converging on the city.

IMF revises upward South Korea GDP forecasts

Foreign currency dealers monitor exchange rates on computer screens at the Korean Exchange Bank

WASHINGTON — The International Monetary Fund on Sunday revised upwards its predictions for economic forecast in South Korea, forecasting that gross domestic product would shrink by just 1.75 percent for 2009.

"Faced with a sluggish recovery in demand from trading partners, and highly leveraged households and SMEs (small and medium enterprises), Korean growth is projected at -1.75 percent in 2009 and 2.5 percent in 2010," the IMF said in its annual report on the country's economy.

Just a month earlier, on a trip to Seoul, IMF officials indicated they were expecting GDP to shrink by three percent in 2009. In February, officials were even less upbeat, predicting a four percent contraction for the year.

The forecast for 2010 is unchanged from the July predictions.

Among the risks factored into their forecast, the IMF cited "a distinct possibility that weak global exports will weigh on Korean growth well beyond 2010."

"Other risks to the outlook are another bout of global risk aversion, rising oil prices, or -- on the upside -- a stronger impact from stimulus measures in Korea and abroad," the report said.

The IMF said South Korea's won remains "undervalued," despite its recent appreciation of close to 30 percent in the last five months against the dollar.

"Directors took note... that the won is undervalued relative to its medium-term equilibrium level, and expected this trend to be reversed as capital inflows regain momentum," the report said.

The group added that "the weak won redirected domestic demand from imports to domestic production," adding that "the current global crisis has highlighted the urgency of rebalancing Korea's growth toward the nontradable sector."

IMF delays Iceland payment

In the soup: a political row has held up payments to Icesave customers. Pictured is the Blue Lagoon outside Reykjavik, Iceland's capital Photo: AFP

Political row over compensation for Britain's Icesave customers.

The International Monetary Fund has delayed handing over the second tranche of Iceland's emergency bail-out loan.

It is thought to be linked to the political row over compensation for Britain's Icesave customers, as opposition grows in Iceland to the terms of a loan from Britain to help the country cover the liability.

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Iceland had to turn to the IMF for bail-out last October, when its three biggest banks, Kaupthing, Landsbanki and Glitnir failed.

A diplomatic dispute between Iceland and Britain ensued over compensation for UK customers of Icesave, Landsbanki's internet bank.

Earlier this year, Britain agreed to compensate 300,000 UK savers with Landsbanki's Icesave, lending Iceland £2.1bn to cover the first €22,000 (£18,800) in each account.

However, over the last month, it has appeared increasingly unlikely that Iceland's politicians will accept punitive interest rates of 5.5pc attached to the British and Dutch loans.

Polls in Reykjavik show that a parliamentary bill needed to approve the loan does not have the support needed to be passed.

It is possible that a failure to pass the bill could topple a second Icelandic government in less than six months.

A vote on the bill is not expected at least until the assembly reconvenes next week.

IMF warns of soaring debt

Pedestrians walk past the International Monetary Fund building in Washington. -- PHOTO: BLOOMBERG NEWS

WASHINGTON - THE International Monetary Fund warned on Thursday that rising public debt of the major developed countries could undermine efforts to spur economic recovery.

The growing debt levels could undermine investor confidence and push up interest rates, and eventually reverse economic gains, according to an IMF report.

'With a delayed withdrawal investor concerns about sustainability may increase, leading to higher interest rates on government paper, undermining the recovery and increasing risks of a snowballing of debt,' the Washington-based institution said.

The IMF said public debt would represent around 120 per cent of gross domestic product (GDP) by 2014 in the nine advanced economies of the Group of 20. That would represent a whopping 40 percentage point increase since the start of the global financial and economic crisis in 2007.

The report highlighted growing debts in the Group of Seven countries - Britain, Canada, France, Germany, Italy, Japan and the United States - and Australia and South Korea, two other major economies in the G20.

The IMF called on the advanced countries to do more to reduce their budget deficits in the medium term. 'Although fiscal balances are expected to improve over the next few years as the global economy recovers, the outlook for the public debt in many countries is more worrying,' the 186-nation institution said.

The average debt-to-GDP ratio of the G20 developed and developing countries, which stood at 62.4 per cent at pre-crisis levels in 2007, rose to 82.1 per cent in 2009 and was expected to hit 86.6 per cent in 2014.

The average ratio for the developed countries would rise from 78.6 per cent in 2007 and exceed output at 100.6 per cent this year. By 2014, it was projected at 119.7 per cent.

'While fiscal policy should continue to support activity until recovery has taken hold, clear strategies are needed to consolidate fiscal balances in the medium term as conditions improve and ensure that solvency is preserved,' the IMF said.

The IMF, which had urged member nations to adopt stimulus measures to fight the severe economic downturn, has called on them in recent months to formulate exit strategies once recovery takes hold. -- AFP

Rally May Cool on Earnings Reality Check

NEW YORK (Reuters) - Wall Street may take a breather this week after an earnings-driven rally lifted the major U.S. stock indexes to their highest levels in months.

(Getty Images)
The blue-chip Dow Jones industrial average <.DJI> climbed back above the 9,000 mark last week for the first time since January. And the Standard and Poor's 500 Index <.SPX> ended Friday at 979.26 -- up 44.7 percent from the 12-year closing low hit on March 9 -- after a number of prominent companies' earnings surpassed Wall Street's expectations.
This week's "market enjoyed the better-than-expected earnings, or I should say, less bad-than-expected earnings, but we can play the game for only so long," said Scott Marcouiller, senior equity market strategist at Wells Fargo Advisors in St. Louis.
"Stay cautious. We can't put a cap on it (the rally) yet, but there will be a correction."
The exuberance was interrupted Friday as disappointing quarterly revenues from Microsoft Corp and Amazon.com hit their stocks and weighed on the Nasdaq, which fell on Friday and halted a 12-day run of gains. In contrast, both the Dow average and the S&P 500 ended Friday at eight-month closing highs.
For the week, the Dow was up 4 percent, the S&P 500 was up 4.1 percent and the Nasdaq was up 4.2 percent.
The earnings blitz will continue this week. About a third of the S&P 500 companies are expected to report results, including such high-profile names as Exxon Mobil Corp and Walt Disney Co Both are also Dow components.
BERNANKE ON THE TUBE
Wall Street and Main Street are likely to tune in when Federal Reserve Chairman Ben Bernanke appears on PBS this week in a town hall-style forum called "Bernanke on the Record," hosted by Jim Lehrer.
After being grilled repeatedly on Capitol Hill about the troubles continuing to roil the nation's economy, Bernanke will talk about the Fed's response to last year's economic crisis and its role in economic recovery. The program, which will be recorded on Sunday at the Federal Reserve Bank of Kansas City, will be broadcast on "The NewsHour with Jim Lehrer" on PBS on Monday, Tuesday and Wednesday; a one-hour special will be aired on or after Wednesday, PBS said.

IMF welcomes China's progress on currency

The International Monetary Fund Wednesday welcomed China's progress on liberalizing its currency, but said some countries still view the yuan or renminbi as "substantially undervalued."

The IMF executive board "welcomed the important progress made in the past few years in increasing the market's role in determining the exchange rate, as well as the consequent substantial real appreciation that has been achieved since the exchange rate reform in 2005," the multilateral institution said.

"Some directors nevertheless supported the view that the renminbi remains substantially undervalued," it said in its first review of China's economy since 2006.

The 24-member exeuctive board, chaired by IMF managing director Dominique Strauss-Kahn, includes directors representing the US, China, Japan, Germany, France, Britain, Russia and Saudi Arabia. The remaining 16 directors represent groups of countries in the 186-member IMF.

The statement on the conclusion of the so-called Article IV bilateral consultation with China on July 8 signaled an improvement in relations between the Washington-based IMF and Beijing.

The Chinese authorities had disagreed sharply with the IMF's October 2006 report, which found China's renminbi, or yuan, currency was out of line with the country's economic fundamentals.

The United States, the largest IMF stakeholder, and European countries have pressed China to allow the yuan to appreciate, accusing Beijing of keeping it artifically low to protect its crucial export sector.

Cheaper Chinese products have flooded into the US, building a gargantuan dollar trade surplus. The politically sensitive US trade gap with China, the country's second-largest trading partner and responsible for more than half of the deficit, widened to 17.484 billion dollars in May.

The latest IMF board assessment on China's economy comes ahead of the first US-China high-level strategic and economic talks next week under US President Barack Obama's administration.

Obama is scheduled to speak Monday at the opening of the two-day US-China Strategic and Economic Dialogue meeting in Washington.

The discussions are an extension and expansion of an economic dialogue begun under the previous administration of George W. Bush.

The IMF executive board said that since the middle of 2008, the yuan's nominal exchange rate appreciation against the US dollar "has stopped although the nominal effective exchange rate has appreciated 5.0 percent," with real appreciation in the 12 months to May at 5.0 percent.

However, IMF directors were divided over the role of the currency in China's rebalancing of its economy to reduce its dependence on exports.

"Looking ahead, many directors considered that a further strengthening of the renminbi would be part of a comprehensive strategy to rebalance the economy by increasing the purchasing power of households and the labor share of income, and reorienting investment toward non-tradable sectors," the statement said.

"A number of other directors pointed to the methodological difficulties of making exchange rate assessments. These directors generally considered that exchange rate appreciation would only play a supplementary role in supporting reforms to reorient the Chinese economy and should be pursued in a gradual manner, as and when conditions permit."

War refugees interned in camps built by donors

In this June 8, 2009 photograph, internally displaced ethnic Tamil civilians unload water from a tanker as others walk past at a camp for displaced in Manik Farm in Vavuniya, Sri Lanka. (AP Photo)

COLOMBO, Sri Lanka -- In just six months, one of the world's largest camps for war refugees has been carved out of the jungles of northern Sri Lanka, complete with banks, post offices, schools and a supermarket. But no one is allowed out, and hardly anyone is allowed in.

Aid workers and foreign diplomats increasingly fear that Manik Farm, a facility they helped build, is actually a military-run internment camp where 210,000 ethnic Tamil civilians displaced by the civil war are being held indefinitely. Government memos and U.N. documents obtained by The Associated Press, as well as interviews with more than two dozen aid workers, U.N. officials, diplomats and rights advocates, detail how the international community poured tens of millions of dollars into these camps, despite their concerns.

"At best, it is at the edge of all kinds of international principles," said one Western diplomat based in Colombo, who spoke on condition of anonymity for fear of reprisals from the government. "But more likely, it is illegal."

The documents and interviews also reveal what appear to be worsening conditions at the camp, which houses civilians displaced in the final, bloody battles of the quarter-century civil war that ended two months ago.

In June, chicken pox was rampant and cases of typhoid, tuberculosis, skin and respiratory infections, hepatitis A, scabies and diarrhea have begun cropping up, according to U.N. reports. More than 35 percent of children under 5 are suffering from wasting, or acute malnutrition, according to a July 3 government presentation leaked to the AP.

Tents meant for five are packed with up to 15 people, water is scarce and the seasonal rains expected in the coming weeks could create a health nightmare, several foreign aid workers said. Relatives are not allowed to visit, although many gather at the barbed wire fence hoping to get messages to their loved ones. Opposition lawmakers are barred as well, and independent journalists are only allowed in on rare, military-guided tours.

Signs of unrest are growing. Several weeks ago, inmates held a protest demanding they be reunited with family members in other fenced-off sections of the camp, aid workers said. Military troops shot in the air to disperse the angry residents.

The Sri Lankan government has branded Manik Farm a "welfare village," where children can go to school, parents can get vocational training and those traumatized by the war can get medical and social care. Sri Lankan officials say most of the refugees will be able to return to their homes by the end of the year, and that they will open up the camps after they screen out former Tamil Tiger rebels who could stir up trouble.

However, aid workers say the military officer in charge told them almost no war refugees would go home this year, and the screening process is dragging on, with even civilians who fled the war in January still confined to the camps.

Mano Ganesan, an ethnic Tamil parliamentarian, said the government sealed the camps to keep those inside from telling the world about the final months of the war, when human rights groups say the military killed thousands of civilians with heavy shelling.

"There is no other logical reason to understand the government's position," he said.

---

The civil war in Sri Lanka pitted the government of this island off the southern coast of India against one of the world's most sophisticated insurgencies, which was fighting for a separate state for the Tamil minority. The battle raged across the Tamil Tigers' shadow state in the north. The U.N. says the conflict the U.N. killed between 80,000 and 100,000 people since 1983.

By last August, government forces appeared to finally have the upper hand. Anticipating a wave of civilians fleeing the fighting, the U.N. High Commissioner for Refugees drew up a three-page memo Aug. 29 setting out the conditions it would require to help Sri Lanka set up displacement camps. The camps should be run by a civilian administration, and the displaced should be guaranteed "full and unhindered freedom of movement," the memo noted.

In January, the government asked international donors to help build five camps - with 39,000 semi-permanent homes, 7,800 toilets and 390 community centers - to hold civilians for up to three years.

Aid workers feared they were being asked to build military-run prison camps to indefinitely detain hundreds of thousands of civilians, according to an official who took part in meetings with the government. They decided to provide temporary tents instead of shacks and to make only a three-month commitment to the camps.

In four days in the middle of April, more than 100,000 civilians escaped the war zone. The same month, a U.N. document reported that armed soldiers and some paramilitary groups were stationed inside the camps. In a private memo written at that time, Walter Kaelin, a senior U.N. official, demanded a time frame for the civilians to be freed from the camps. By the end of the war in May, nearly 300,000 civilians were living in schools and displacement camps. The largest was Manik Farm, so densely populated it would stand as the second-largest city in the country. Aid groups put up 43,000 shelters and tents, 8,761 latrines, 339 places to bathe, 12 nutrition centers and 132 temporary learning spaces for students, according to the U.N.

Aid groups continued to help well after their initial three-month commitment expired, despite ongoing concerns. The head of one group said the major agencies and the U.N. "are incapable of negotiating or playing hardball with the government."

The conflict exposes a major dilemma aid groups and donors worldwide face: They feel bound to assist desperate civilians, yet such work might support government policies they strongly protest.

Most of the aid officials spoke to the AP on condition of anonymity out of fear the government would further restrict their access to the camps or expel their organizations from the country. In recent weeks, the government demanded agencies sign agreements promising not to make "public comments" about camp conditions without authorization. It asked the Red Cross, one of the more critical groups, to "scale down" its operations.

As an AP journalist interviewed one agency head, five immigration officials raided his office to ensure his foreign staff had the proper visas. The AP has not been allowed into the camps since May, and requests to interview Maj. Gen. G. A. Chandrasiri, the military official who ran the camps until he was named governor of the Northern Province on Wednesday, have gone unanswered.

"We are doing a great wrong to these people," former Chief Justice Sarath Silva said after a visit to Manik Farm last month, just days before his retirement.

Paikiasothy Saravanamuttu, executive director of the Center for Policy Alternatives, a local public policy group, said Manik Farm and the other facilities are "internment camps or detention camps." His group filed a suit in the Supreme Court last month accusing the government of illegally detaining hundreds of thousands of its own citizens.

Ganesan filed a second suit, with four other opposition lawmakers, demanding access to what he called "more or less prison camps."

That description angered Resettlement Minister Rishard Badurdeen.

"That is wrong. People are very happy there," he said.

Badurdeen said the government has allowed more than 3,000 people over the age of 60 to leave the camps and resettled several thousand people since May who were displaced in fighting in 2007. He said the government needs to finish registering and screening the camp residents, and that authorities have already pulled out nearly 10,000 former insurgents for rehabilitation.

Badurdeen declined to give a time frame for when the refugees can be released: "After the registration, we can consider it, along with security concerns."

Government officials say they cannot return the civilians to their former homes until the north is demined and certified safe by the United Nations.

"Every square centimeter has been mined by the LTTE (the rebels). If something happens, I am responsible," President Mahinda Rajapaksa told the Indian newspaper The Hindu in a recent interview.

Demining experts say Rajapaksa is grossly exaggerating the problem, with one estimating that only 2 to 3 percent of the region might be mined. Experts said it would take about six months to remove unexploded shells from towns and fields and to mark off the minefields so residents don't wander into them. But deminers have been barred from all but a tiny corner of the former war zone, said three people involved in the demining process.

Ganesan said he feared the government was using the mines as an excuse to keep civilians out so it could set up armed military camps across the north.

-----

In the meantime, military officials are pushing to make the facilities at the camps more permanent - a move many aid workers had long feared.

When temporary latrines overflowed from use by more than 100 people each - 2 1/2 times their intended capacity - military commanders demanded concrete latrines. The aid groups offered to build more wooden latrines instead.

With heavy rains expected in the coming weeks, military commanders suggested giving residents bags of cement to pour foundations for their tents. The aid groups protested that cement floors could become the foundations for permanent structures.

Some infrastructure is going up. The army ran electricity lines to power lights and loudspeakers. UNICEF laid pipe to bring in water from a nearby river.

The government says 80 percent of those in the camps will return home by the end of the year. But Chandrasiri told aid officials that no more displaced families would go home in the next six months and only 20 percent within a year, said an official at the meeting. Meanwhile, the government is clearing more sites and building more camps.

"At the current rate, they will still be building the camp at the time they should be taking it down," the official said.

The pressure is growing on the government to compromise.

The U.N. called for $270 million in aid to Sri Lanka this year, but only $96 million has been promised. The lack of funds forced aid groups have cut back on fruit and vegetables for the camps, leaving many with little more than rice and lentils.

The camps cost nearly $400,000 a day to operate. Foreign governments will be hesitant to pledge more if conditions don't change, and Sri Lanka would be hard pressed to pay on its own.

"We can't keep these people very long in a refugee camp. We don't have the resources," said Badurdeen, the resettlement minister.

Neil Buhne, head of the U.N. mission in Sri Lanka, said aid agencies would review the situation in the camps in mid-August, but declined to say whether they would pull out if the gates remained shut.

For now, those trapped inside worry about their future, Buhne said.

"Every time I go to the camps more people ask me, 'When are we going to be let out?'"

Latvian prime minister says IMF deal proving 'difficult'

Riga - Latvian Prime Minister Valdis Dombrovskis said Wednesday negotiations with the International Monetary Fund (IMF) over a 200-million-euro (280-million-dollar) loan payment were proving "difficult."Speaking on Latvian public radio, Dombrovskis struck a much more cautious note than he did on Monday, when he had said he was optimistic about receiving the cash. "Discussions with the lenders are difficult and the conditions which the IMF proposes are also quite tough," Dombrovskis said. He refused to reveal details, but said the IMF was making new demands. Representatives of the European Commission and the IMF are in Latvia to assess wide-ranging fiscal and structural reforms introduced by his coalition government. The European Commission has already promised a 1.2-billion-euro payment will be made by the end of July, but the IMF has yet to decide whether it will release a scheduled 200-million-euro payment. A previous payment of the same amount was withheld after the IMF decided reforms were not happening fast enough. Both payments form part of a 7.5-billion-euro (10-billion-dollar) aid package from international lenders agreed in late 2008. However, Latvia's economic outlook has deteriorated significantly since the deal was signed by Dombrovskis' predecessor, Ivars Godmanis. The economy is expected to contract by at least 18 per cent in 2009 and unemployment has risen to around 15 per cent. In an effort to balance the books to satisfy lenders, Dombrovskis has introduced hard-hitting austerity measures, including tax hikes and big public sector wage and spending cuts. On Monday the cabinet announced plans to sack around a third of staff working at government ministries.

Rivals set to meet at NAM summit

Delegates from 118 nations are attending the 15th NAM summit in Egypt's Sharm el-Sheikh resort [AFP]

World leaders from 118 nations have gathered in Sharm El-Sheikh, Egypt, for talks aimed at giving a voice to the developing world.

The summit of the Non-Aligned Movement (NAM), held every three years, will this year focus on "international solidarity for peace and developm

'New world order'

Raul Castro, the Cuban president, addressed the opening session of the summit on Wednesday with a call to create a financial system that is fairer to developing nations in light of the global recession.

"As usual, the wealthy countries were the source of the current crisis, which was affected by the ... illogic of the international economic order that depends on blind market principles and consumption, and wealth of the few," he said.

"So we call for the creation of a new international financial and economic structure that is based on actual participation of all states, and especially developing states."

Hosni Mubarak, Egypt's president, also urged a new "international political, economic and trade order" to be established.

"A more just and balanced order that prevents discrimination and double standards, achieves the interests of all, takes into account concerns of developing countries and
establishes democratic dealings between rich and poor states," he said.

While the summit is expected to largely focus on the economic crisis, Sheila Sisulu, from the World Food Programme, told Al Jazeera she hopes the it also addresses the plight of those most vulnerable to food insecurity.

She said while the Group of Eight summit earlier this month pledged help poor nations become self sufficient, there would "always be people ... whose food security will not be addressed by agricultural development".

"The most vulnerable ... should always be catered for. At the moment, with high food prices, we at the World Food Programme are only 25 per cent funded this year".

India-Pakistan contacts

Pakistani and Indian foreign ministry officials held a meeting in the Red Sea resort town on Tuesday in advance of their prime ministers' meeting, according to an Indian official.

In what will be the second high-level contact between the two nations in eight months, Manmohan Singh, the Indian prime minister, and Yusuf Raza Gilani, his Pakistani counterpart, are expected to hold talks on Thursday.

New Delhi and Islamabad's already fraught relations worsened after last November's bombings in the Indian commercial capital, which killed nearly 170 people.

India blamed the attack on the banned Pakistani group Lashkar-e-Taiba.

Singh voiced hope that Pakistan will promise action against those behind the attacks when he meets Gilani.

The Mumbai attacks destroyed a fragile peace process launched in 2004 to resolve all outstanding issues of conflict between the neighbours, including a territorial dispute over the divided Himalayan territory of Kashmir.

Gilani said he hoped the meeting would get peace talks back on track.

Rehman Malik, the Pakistani interior minister, said over the weekend that Pakistan had completed its investigation into five suspects and they were expected to be put on trial this week.

Pakistan handed over to India on Saturday a fresh dossier on its probe into the attack.

Iran-Egypt relations

In another set of diplomatically significant meetings, the Egyptian and Iranian foreign ministers have held three rounds of talks this week, the two countries' diplomats said on Tuesday.

Formal diplomatic ties were severed in 1979 when Egypt signed a peace deal with Israel.

Although Iran has been looking to improve relations, Egypt accuses it of meddling in Arab conflicts and refuses to renew formal ties until Iran ends its support for Shia fighters in Iraq, Hezbollah in Lebanon and the Palestinian group Hamas.

An Iranian diplomat said the talks between Ahmed Aboul Gheit, the Egyptian foreign minister, and Manouchehr Mottaki, his Iranian counterpart, took place in "a positive and cordial atmosphere".

Hossam Zaki, the Egyptian foreign minister's spokesman, said the two countries have had their differences but expressed hope that they could work together for "stability in the region."

As the meetings took place, Egypt confirmed that two Israeli warships had crossed through the Egyptian-controlled Suez Canal, a strategic waterway linking the Mediterranean to the Red Sea.

Use of the canal could significantly shorten the time it would take Israeli ships to reach waters off Iran.

President Zardari reiterates all out support for IDPs

ISLAMABAD Pakistan: President of Pakistan Asif Ali Zardari Monday said the entire focus of the government will now shift to the rehabilitation of displaced persons and rebuilding of the damaged infrastructure in Malakand Division.

He was addressing a select gathering of international donors, NGOs and civil society, who had contributed to the relief of the displaced person in and off camps and were especially invited to the Presidency to honor them for their efforts and contributions.

Prime Minister Syed Yusuf Raza Gilani, Federal Ministers, diplomats, senior government officials, representatives from donors, NGOs and civil society attended the function.

Briefing newsmen about the meeting, spokesperson former Senator Farhatullah Babar said that the President described it is an auspicious occasion as the formal return of the displaced persons back to their homes has started today.

The President said that the beginning of the return journey of the displaced person marked the beginning of the end of one phase; and the start of another.

President Zardari said that the issue of rehabilitation of displaced persons was a huge challenge before the nation which should be met through the collective effort of the people, the government and the international community.

Babar quoted the President as saying, “Perhaps never before the world witnessed such large scale displacement in such a short span of time. The fallout was enormous. The challenge was huge.”

The President appreciated the huge sacrifices made by the internally displaced persons.

“They were forced to leave their homes, businesses and workplaces. They underwent great hardships but they courageously endured it. Without their patience and endurance it would have been most difficult for us to pursue the fight against the militants,” the President said.

“I salute their courage and the sacrifices they have made,” he said.

“We resolve not to abandon our brothers and sisters in this hour of trial. We will take every possible step to help them resume normal life in their homes.”

He said that the government deeply appreciates the humanitarian assistance provided by the civil society and the international community.

The President said that “the problems of the IDPs are both short term and long term. In the short term our aim was to provide immediate relief and in the long term, we have to rehabilitate them in their homes and also rebuild and reconstruct the damaged infrastructure.”

The relief phase is phasing out but has not come to end and it will continue till the last family is relocated with dignity and honor, the President said.

The President urged the donors, the international community and members of civil society to keep this in mind and continue to extend humanitarian assistance to the IDPs.

“We have been emphasizing upon the world that rehabilitation of the IDPs is the most critical element of fight against militancy, the President said.

“We have asked them to come forward and play their role,” he added.

Pakistan expects the international community, the Friends of Democratic Pakistan to step forward, the President said.

“Help us in establishing peace, help us in fighting this cancer of militancy, otherwise the cancer will spread to other parts of world and no one will be safe,” he added.

WB seeks timeframe for power tariff hike

Protestors burn their KESC bills to demonstrate against a price increase in early 2008 — File photo.

ISLAMABAD: While expressing its reservations over the delay in removing electricity subsidies, the World Bank Mission has suggested the government divert gas supplies from the CNG sector to power generation to reduce energy cost.

The WB Mission headed by Ms Sato held a meeting with Pakistani officials led by State Minister of Finance Hina Rabbani Khar here on Tuesday and tried to finalise the mode and the time-fame for enhancing electricity tariff.

Officials who participated in the meeting told Dawn that the World Bank wanted to end the power subsidies within six months, but the government officials suggested a tariff raise from the second quarter and complete the process by the last quarter of 2009-10.

The two sides also discussed raising power tariffs by five per cent from October 2009 and by another 10 per cent from January 2010.

‘The accumulated impact of these two raises would be over 17 per cent,’ said an official of the finance ministry.

He added that it was also suggested to further push up power tariffs by five per cent from April 2010 if furnace oil prices go up during the winter months of December to February.

The meeting also discussed an option of shifting 150 mmcfd gas from the CNG sector to power generation that could bring down electricity generation cost to affordable limits.

‘We have to find a solution to end energy crisis,’ Ms Hina said. Sources said that the WB took serious note of continuous delay in ending the power tariff that was causing fiscal imbalance and wanted the government to take some concrete steps.

‘The negotiations focused on various options and formulae for ending subsidies on electricity,’ said Secretary Finance Salman Siddique, adding that the final decision would be reached on Wednesday.

He said that the IMF had allowed Pakistan a six-month extension for ending electricity subsidies, which was originally scheduled from the start of 2009-10.

‘The IMF has allowed that the impact of Rs60 billion in subsidies may be covered from other government development expenditures,’ said the finance secretary, adding that the cuts in the PSDP would be figured out later.

The negotiations with the World Bank Mission are crucial as the release of $850 million IMF tranche is linked with the time-frame for removal of power subsidies, said the officials said.

Angola seeks deal with IMF on new loans: report

LUANDA (Reuters) - Prospects for a deal between Angola and the International Monetary Fund (IMF) that could pave the way for development funds are increasing as both parties signalled they were willing to work together, a media report said.

Economy Minister Manuel Nunes Junior was cited as saying on Monday that the IMF had vowed to remove "rigid pre-requisites" for a deal that will grant Angola, which is rebuilding after a ruinous 27-year civil war, access to financial help.

The announcement was made after Angolan President Jose Eduardo dos Santos met with IMF chief Dominique Strauss-Khan at the G8 summit last week.

Nunes told state-owned Jornal de Angola's online website that an IMF delegation would arrive in Angola in coming weeks to start a new round of talks with the Angolan government.

"The IMF will remove demands that have for years prevented Angola from getting loans from that institution," Nunes was cited as saying on state-owned Jornal de Angola's website.

Relations between Angola and the IMF have been frosty since the end of the civil war in 2002. The IMF has criticised Angola several times since the end of the war about the way the country manages and accounts for its oil revenues.

In 2007, Angola broke off talks with the IMF on an economic support programme on the grounds that it was quite able to keep economic stability on its own, raising fears over future oil transparency in one of Africa's biggest oil producers.

Instead, it decided to implement its own macro-economic programme on the back of its own resources and multi-billion loans from China. The country has had double-digit growth since 2004 and managed to control inflation.

AIG prepares to pay millions in executive bonuses

AIG chairman Edward Liddy and other executives were to receive a quarter of their 2008 bonuses on July 15.

Company wants OK from US

WASHINGTON - American International Group is preparing to pay millions of dollars more in bonuses to several dozen top corporate executives after an earlier round of payments four months ago set off a national furor.

The company has been pressing the federal government to bless the payments in hopes of shielding itself from renewed public outrage.

The request puts the administration’s new compensation czar on the spot by seeking his opinion about bonuses promised long before he took his post.

AIG doesn’t actually need the permission of Kenneth Feinberg, who President Obama appointed last month to oversee the compensation of top executives at seven firms that have received large federal bailouts. But officials at the troubled insurance giant, whose federal rescue package stands at $180 billion, have been reluctant to move forward without political cover from the government.

“Anytime we write a check to anybody’’ it is highly scrutinized, said one AIG official, who spoke on condition of anonymity because the negotiations with Feinberg are ongoing. “We would want to feel comfortable that the government is comfortable with what we are doing.’’

The payments coming due next week include $2.4 million in bonuses for about 40 high-ranking corporate officers at AIG, according to administration documents from earlier this year. Though the actual sum may have changed, the payments are much smaller than those that caused the upheaval in March.

Still, officials at AIG and within the government see them as a landmine.

Feinberg, who previously managed the government’s efforts to compensate the families of those killed in the Sept. 11, 2001 attacks, has the power to determine salaries, bonuses, and retirement packages for all executive officers and the 100 most highly paid employees at firms such as Citigroup, Bank of America, General Motors, and AIG.

AIG’s upcoming payments do not fall under Feinberg’s official purview, as they involve bonuses delayed from 2008. Feinberg is charged with shaping only current and future compensation. As a result, some Treasury officials believe they are under no obligation to offer an advisory opinion in this case, which could leave company officials to decide the matter on their own, according to a person familiar with the talks.

In November, AIG’s top seven executives, including chairman Edward Liddy, agreed to forgo their bonuses through 2009. Then, in March, facing pressure from Treasury Secretary Timothy Geithner and other government officials, the company restructured its corporate bonus plans for the remaining top 50 executives. As part of this agreement, the senior executives were to receive half their 2008 bonuses - which totaled $9.6 million - in the spring, with another quarter disbursed on July 15 and the rest on Sept. 15. The last two payments would depend on whether the company made progress in revamping its business and paying back bailout money.

The exact range of the payments due this month to AIG executives was unclear in company disclosure filings.

AIG’s proxy statement filed last month explains why AIG initially instituted the retention payments. The company stated that after the federal bailout began in September, “we needed to confront the fact that many of our employees, perhaps the majority, knew that the long-term future with us was limited, and our competitors knew that our key producers could perhaps be lured away. . . . Allowing departures to erode the strength of our businesses would have damaged our ability to repay taxpayers for their assistance.’’

The Treasury declined to comment specifically about the bonuses due this month.

Feinberg did not respond to an e-mail seeking comment.

U.S. watchdog eyes energy trading limits

CFTC to hold hearings amid complaints oil speculation is inflating prices

U.S. federal regulators will examine whether the government should impose limits on the number of futures contracts in oil and other energy commodities held by speculative traders, the head of the Commodity Futures Trading Commission said Tuesday.

The agency will hold a public hearing this month to gather views from consumers, businesses and market participants on the idea of new limits for energy futures contracts, CFTC Chairman Gary Gensler said in a statement. It will be the first in a series of hearings in July and August on various topics to determine how the commodities agency “should use all of its existing authorities to accomplish its mission,” he said.

The move comes against a backdrop of concern in Congress and complaints by traders over speculation in the oil futures market. By law, the CFTC sets limits on the amount of futures contracts in some agricultural products that can be held by each market participant to protect the market against manipulation. But for energy commodities – crude oil (CL-FT59.66-0.75-1.24%) , heating oil (HO-FT1.53-0.006-0.42%) , natural gas (NG-FT3.37-0.04-1.26%) , gasoline (XRB-FT1.65-0.01-0.77%) and other energy products – it is the futures exchanges themselves that set the position limits if they desire to do so.

“This different regulatory approach to position limits for agriculture and other physically delivered commodities deserves thoughtful review,” Mr. Gensler said. “It is incumbent upon the CFTC to ensure a fair and transparent price discovery process for all commodities.”

Sen. Carl Levin, D-Mich., welcomed the potential action. Examinations by a Senate investigative panel he heads have found upward pressure on prices for crude oil, natural gas and wheat futures caused by market speculation.
“It is a relief to know that the Obama administration does not plan to stand by silently while inflated crude oil prices top $70 (U.S.) per barrel despite ample oil supplies and low demand,” Mr. Levin said in a statement. “Excessive speculation is distorting prices, undermining our commodity markets and hurting our economic recovery.” Crude oil prices hit an eight-month high last week above $73 a barrel, and some analysts expect prices to surge again soon amid signs that the worst of the economic slowdown is over. On Tuesday, benchmark crude for August delivery shed more than $1 to dip below $63 a barrel.

Sen. Byron Dorgan, D-N.D., one of six senators who voted against Mr. Gensler's confirmation in May, called the agency's move “a positive first step.”

Opponents of Mr. Gensler, who was a Treasury Department official during the Clinton administration, had expressed concern about what they said was his past deregulatory stance and his actions in an area blamed for aggravating the financial crisis – complex investments known as derivatives.

“If these hearings lead to rigorous, federally-imposed position limits across all markets on oil speculators looking for a quick buck at the expense of American consumers, then that will be action I can applaud,” Mr. Dorgan said. “It is only concrete action that will prove the CFTC is finally an effective cop on the beat protecting the wallets of American consumers.”

Oil traders and brokers have griped that funds traded on exchanges, such as the United States Oil Fund, have pumped billions of dollars into energy commodities – enough to artificially prop up energy prices.

For example, benchmark crude oil prices have roughly doubled since March even though government reports show U.S. supplies brimming with surplus oil. Investors have been buying oil barrels not because of traditional supply and demand, but on the expectation that the economy will eventually improve. Some are also buying crude oil as a hedge against inflation, betting that the dollar will get weaker and push the price of energy commodities even higher.

Merrill Lynch estimates that investors are currently plowing $125-billion into commodity indices like the S&P GSCI Commodity Index, up from $80-billion in February. However, much of the increase is due to a rebound in commodity prices, Merrill Lynch analysts said.

In Congress, the House approved measures last fall aimed at curbing excessive speculation and trading abuses in oil and other commodity markets, despite a threatened veto by President George W. Bush. The bipartisan legislation called for giving the CFTC broader authority and limiting the size of the position that traders can hold in certain markets. It stalled in the Senate, however.

The CFTC twice last year took the unusual step of disclosing investigations into the possible manipulation of prices – of crude oil and cotton futures.

Mr. Gensler also said the agency will make improvements to its weekly report on the futures contracts positions held by commercial and noncommercial traders that will provide fuller disclosure of the market data.