News with Tags "World Updates"

TORONTO (Reuters) - Canada's main stock index ended down after a quiet, shortened Christmas Eve trading session on Monday, as oil prices extended their retreat on worries about U.S. 'fiscal cliff' budget measures, pulling energy shares lower.

With U.S. lawmakers suspending talks on the spending cuts and tax increases that could send the economy back into recession until after Christmas, the market was cautious.

Rick Hutcheon, President and Chief Operating Officer at RKH Investments, said uncertainty around the U.S. fiscal cliff was weighing on the market.

"We have to get past the fiscal cliff. That's obviously a negative," he said.

World oil prices fell for a third straight session as the budget dispute threatened to hurt demand by the United States - the world's top oil consumer. Energy was the most influential negative sector, closing down 0.7 percent.

There is no set date for budget talks to resume, and the two sides have only a few days between Christmas and January 1, when $600 billion in spending cuts and tax increases start to take effect.

But Hutcheon also cautioned that markets were quiet: "There is very little volume - you can't read too much into the transactions that are occurring today."

"It's extremely quiet," said John Kinsey, Portfolio Manager at Caldwell Securities. "There's just nobody around."

Kinsey, like most political experts and economists, expects a U.S. budget deal of some sort will come after Christmas.

"They have been through this before and they usually just kick the can down the road," he added. "Something's going to get down, not probably what I would like to see, but something is always done."

The Toronto Stock Exchange's S&P/TSX composite index <.gsptse> closed down 0.12 percent, or 14.90 points, at 12,370.80.

Canadian and U.S. equity markets closed early, shutting at 1 p.m. EST (1800 GMT) ahead of Tuesday's Christmas holiday. Canadian markets will remain closed through Wednesday's Boxing Day holiday.

Financial stocks closed little changed, up 0.03 percent. The materials sector edged down 0.13 percent as copper slipped. The Thomson Reuters-Jefferies CRB Index <.trjcrb>, which tracks commodity prices, was down 0.35 percent.

Canada Life, a unit of insurer Great-West Lifeco Inc , is close to a deal for state-rescued insurer Irish Life, a source familiar with the talks said on Sunday. On Monday, Great-West rose 0.5 percent to C$24.30.

Chevron Corp's Canadian unit said it would buy a 50 percent stake in the Kitimat liquefied natural gas project and the proposed Pacific Trail Pipeline from EOG Resources Inc and Encana Corp . Encana fell 2.3 percent to C$19.66.

After Friday's close, SNC-Lavalin Group Inc said a client had given notice that it would terminate an engineering, procurement and construction contract. But SNC said it did not anticipate a material impact on fourth-quarter earnings. Its shares closed up 0.8 percent at C$40.21.

Outside the index, Sears Canada Inc rose 1.6 percent to C$10.83 after it said its chief financial officer would resign effective January 4. The company, majority-owned by Sears Holdings Corp is pushing for a turnaround after several quarters of precipitous declines in same-store sales.

($1=$0.99 Canadian)

(Reporting by Allison Martell; editing by Peter Galloway, G Crosse)

ROME (Reuters) - Outgoing Prime Minister Mario Monti posted his reform agenda online on Monday, urging Italians to join a debate on their country's future as potentially bitter election campaign gets underway two months before Italy goes to polls.

Following weeks of hesitation, Monti declared his availability on Sunday to lead a reform-minded centrist alliance to seek a second term to complete the economic reform program begun when he took office just over a year ago.

The former European Commissioner, appointed at the head of a technocrat government to save Italy from financial crisis, has now thrown off his mantle of neutrality and entered a race that will be dominated by his tough reform agenda.

Even if he confirms his entry into the campaign, Monti appears unlikely at this stage to return to office but his involvement could strengthen a centrist alliance and help shape the agenda of the next government.

The center-left Democratic Party (PD), which has pledged to maintain Monti's broad reform course while giving more help to workers and pensioners and emphasizing growth more, is favored to win but may have to strike a coalition deal with the center.

In an open letter to Italians posted online and accompanied by a 25-page policy program, Monti said he hoped that the agenda would lead to an "open reflection" that would help shape the debate ahead of the election on February 24-25.

He urged a mix of budget rigor and structural reform as well as measures to crack down on corruption and get more women and young people to work.

However the tone of the campaign has inevitably moved away from calm debate and into the murky and sometimes treacherous territory of Italian party politics, where Monti is a novice.

GLOVES COME OFF

At a news conference on Sunday, he attacked left-wing trade unions for resisting reform but reserved special criticism for his scandal-plagued predecessor Silvio Berlusconi, whom he picked on repeatedly for his "bewildering" changes of position.

Speaking to one of his own television channels, the 76 year-old media billionaire responded by saying it would be "immoral" for Monti to fight the election after governing as an unelected premier with the support of the main parties.

One of Berlusconi's chief lieutenants, Fabrizio Cicchitto, parliamentary floor leader of his People of Freedom (PDL) party, indicated that Monti's international standing and the respect he enjoys among Italy's European partners would count for little.

"He's taken aim at the PDL, which obviously has no choice but to respond in kind," he said.

Monti, a Life Senator who does not need to stand for election to parliament, has not said exactly what forces he could support but the centrist parties he has been linked with greeted his announcement with great enthusiasm.

"We're not forcing Monti but obviously if it happens, the value it adds to our project will be enormous," Pierferdinando Casini, head of the centrist UDC party, which is close to the Catholic church, told the daily La Repubblica.

A small number of centrists from both the two main parties, including former Foreign Minister Franco Frattini announced they were leaving their parties and would support Monti, whose reform agenda is strongly backed by Italy's business establishment.

However the centrist group lags both the center-left Democratic Party (PD) and the PDL as well as the anti-establishment 5-Star Movement in opinion polls and without Monti, it has little chance of making any significant gains.

Even with the respected economics professor at its head, a centrist alliance including the UDC and other smaller parties including a new group created by Ferrari chairman Luca Cordero di Montezemolo, appears likely to struggle to pass 15 percent.

(Reporting By James Mackenzie; Editing by Jon Boyle)

CAIRO (Reuters) - Standard & Poors' cut Egypt's long-term credit rating on Monday and said another downgrade was possible if deepening political turbulence undermines efforts to prop up the economy and public finances.

Egypt's popular uprising two years ago drove away tourists and foreign investors alike, helping push its budget deficit into double digits as a percentage of national output and worsening its balance of payments.

A divisive battle over a new constitution this month has also prompted the government to delay urgent austerity measures and put a crucial $4.8 billion IMF loan on hold.

S&P reduced Egypt's long-term sovereign rating to 'B-' from 'B', but left its short-term rating at 'B' for both foreign- and local-currency debt. It kept its negative outlook on the rating - suggesting it sees another cut as the most likely next move.

"A further downgrade is possible if a significant worsening of the domestic political situation results in a sharp deterioration of economic indicators such as foreign exchange reserves or the government's deficit," S&P said.

Some Egyptians have said recently they had withdrawn funds from banks out of concern that they would be frozen by the authorities.

Seeking to quell what it called these "public rumors", the central bank on Monday said it was taking all steps needed to safeguard deposits in Egyptian banks whether denominated in local or foreign currencies.

Egypt's domestic debt was equivalent to 69.7 percent of gross domestic product as of the end of September while its foreign debt was 13.1 percent of GDP, according to the finance ministry.

Egypt reached an initial accord with the International Monetary Fund (IMF) last month for a financial support package, but later put on hold a series of austerity measures deemed necessary to secure IMF approval.

The government then asked the IMF to delay until January a meeting to approve the loan, which looks increasingly vital to prop up government finances but requires it to take unpopular measures on taxation and spending.

The measures included increases in sales tax on goods and services ranging from alcoholic beverages, cigarettes and mobile phone calls to automobile licenses and quarrying permits.

President Mohamed Mursi withdrew them within hours of their being announced after criticism from his opponents and the media.

(Reporting by Patrick Werr; Editing by Patrick Graham and Hugh Lawson)

ROME (Reuters) - Two days after stepping down, Mario Monti announced on Sunday he would consider seeking a second term as Italian prime minister if approached by allies committed to backing his austere brand of reforms.

The former European commissioner, appointed to lead an unelected government of experts to save Italy from financial crisis a year ago, resigned on Friday but has faced growing calls to seek a second term at a parliamentary election on February 24-25.

At stake is the leadership of the world's eighth largest economy, where recession and public debt of more than 2 trillion ($2.63 billion) have aggravated investor concerns about growth and stability in the euro zone.

"If a credible political force asked me to be candidate as prime minister for them, I would consider it," said Monti, who has imposed repeated tax hikes and spending cuts to shore up Italy's strained public finances.

He had kept his position a closely guarded secret for weeks, and in recent days had appeared to be have strong doubts about whether to continue in front-line politics. He made clear that if he ran, it would probably be at the head of a centrist grouping.

Monti held back from committing himself fully to the race, and said he was aware any decision to stay in politics carried "many risks and a high probability of failure".

"I am not in any party. I am ready to give my appreciation and encouragement, to be leader and to take on any responsibility I may be given by parliament," he said.

As a senator for life, Monti has no need to run for election to parliament but he said he would publish a detailed agenda of recommendations for a future government and would potentially be willing to lead a party that adopted it as its own.

Still serving as caretaker leader, Monti is widely respected for restoring Italy's reputation after the scandal-plagued era of his predecessor Silvio Berlusconi.

The former economics professor is backed strongly by Italy's business establishment and by EU allies including German Chancellor Angela Merkel. He has been urged to stay by centrist groups ranging from disaffected former Berlusconi allies to the small UDC party, which is close to the Catholic church.

But there is little sign of enthusiasm for a second term among voters weary of his austerity policies. A survey last week showed 61 percent did not think he should stand. It said a potential centrist alliance under his leadership was likely to gain around 15 percent support.

BITTER ELECTION

Both Berlusconi's center-right People of Freedom (PDL) party and the center-left Democratic Party (PD), which is leading in the opinion polls, have urged Monti not to stand in the election.

Berlusconi, who left office last year with fraud charges and a juvenile prostitution scandal hanging over him, has accused Monti's "Germano-centric" government of worsening recession with austerity measures, including a deeply unpopular housing tax he has promised to scrap.

In an exchange which may give a taste of bitter campaigning to come, Berlusconi said his nightmare would be a government with Monti at its head and Gianfranco Fini, a former ally turned bitter foe who supports the premier, "coming out of the sewers".

Fini's lieutenant Fabio Granata responded by saying Berlusconi's remark was "fitting for his court of thieves, mafiosi, corrupt politicians, slaves and prostitutes."

Monti was also scathing about Berlusconi, whom he replaced as Italy teetered on the brink of disaster in November 2011.

He said he had been "bewildered" by the 76-year-old media tycoon's frequent changes of position. And, in an interview with La Repubblica daily, he expressed incredulity that Italians might re-elect Berlusconi "after seeing the damage he did to the Italian economy and the credibility of the country".

PD leader Pier Luigi Bersani, whose party has backed Monti in parliament and pledges to maintain the broad course he has set, was more cautious, saying he would look at Monti's reform proposals closely but that it would be up to voters to decide.

Monti said he hoped the next government would have a strong majority to pursue a programme that would extend the reforms his government had begun, in areas ranging from the labor market to justice and cutting the bloated cost of the political system.

He said the next government must not make easy election promises or backtrack on reforms: "We have to avoid illusory and extremely dangerous steps backwards."

During his 13 months in office, Monti hiked taxes severely and chopped backed spending while pushing through reforms of the pension system, labor market and parts of the service sector.

However, many analysts said his efforts were too timid to significantly improve the outlook of a chronically sluggish economy, and Monti himself said that Italy was "only at the beginning of the structural reforms" required.

Italy, the euro zone's third-largest economy, has been in recession since the middle of last year. Consumer spending is falling at its fastest rate since World War Two and unemployment has risen to a record high above 11 percent.

(Editing by Barry Moody and Mark Trevelyan)

CAIRO (Reuters) - Egyptian President Mohamed Mursi will have little time to savour victory in pushing through a new constitution as it may have cost the Islamist leader broader support for urgent austerity measures needed to fix the creaking economy.

By fast-tracking the constitution through to a referendum that the opposition said was divisive, he may have squandered any chance of building a consensus on tax rises and spending cuts that are essential to rein in a crushing budget deficit.

Unofficial tallies from Mursi's Muslim Brotherhood showed the charter was approved by a 64 percent majority. But opponents said he lost the vote in much of the capital, while across the nation he alienated liberals, Christians and others worried by the text that was drafted by an Islamist-dominated assembly.

Opponents say such divisions will fuel more unrest in a nation whose economy has been pummelled by turbulence since Hosni Mubarak was overthrown almost two years ago, scaring off investors and tourists that are both vital sources of capital.

Without broad support, Mursi's government will find it harder to implement reforms needed to secure a $4.8 billion loan from the International Monetary Fund. The Muslim Brotherhood's party, which propelled Mursi to office, may also face a tougher fight in a parliamentary election expected in about two months.

"For austerity measures to be made at a time when the political system is being opened and millions of people are being enfranchised, you need political consensus within the political class," said Amr Adly, an expert on the economy.

Yet, even though there is broad acceptance of the urgency of fixing the battered economy, Adly said Mursi's approach in pushing through a constitution that angered opponents would encourage his rivals to capitalise on any public backlash against austerity rather than help sell reforms to the nation.

"His political rivals are already dealing with these problems on a very opportunistic basis," said Adly, head of the social and economic justice unit at the Egyptian Initiative for Personal Rights. "There won't be any prospect of ending ... violence in the streets or very deep political divisions."

UNITED

Egypt's fractured opposition, defeated at the ballot box by Islamists in each poll since Mubarak was overthrown in February 2011, unified their ranks after Mursi expanded his powers in a decree on November 22 to push through the constitution.

"What Mursi did has united us," said Ahmed Said, head of the liberal Free Egyptians Party and a leading member of the National Salvation Front coalition, adding he expected a unified approach to the upcoming parliamentary election.

That would give the opposition a much better chance in parliamentary polls against disciplined Islamists, who have built a broad grass-roots network across the nation over decades that liberals and other non-Islamists cannot yet match.

Though Said agreed steps were needed to fix Egypt's economy, he said Mursi had made no effort to discuss it with his rivals although they were a national concern. The IMF has long said a broad political consensus to reforms was needed for a loan.

"Who wouldn't agree with economic reforms?" Said asked, but added: "We have not been consulted at all with regard to supporting such policies or not, we are not sure what is going on in the country."

Mursi now faces the prospect of having an opposition seeking to score political points from any tax rises and measures to reduce spending, particularly steps to rein in fuel subsidies in a nation where rich and poor have become used to cheap energy.

That could make it more of a challenge for Islamists to win votes in the parliamentary election.

Though the opposition have drawn tens of thousands of Egyptians to the streets on occasion, Islamists have done so with greater regularity and also have a strong record of getting out the vote in the more local politics of a parliamentary poll.

But nation's political divisions have already taken their toll on the president's initial economic reforms.

Shortly before the referendum, Mursi introduced increases on the sales tax on goods and services that ranged from alcoholic beverages, cigarettes and mobile phone calls to automobile licences and quarrying permits. He withdrew them within hours under criticism from his opponents and the media.

An immediate result of Mursi's policy U-turn was a delay in approving the IMF loan. The IMF said it would postpone its meeting in mid-December to approve the loan. Egypt's government said it might now be approved in January.

Farid Ismail, a senior official in the Brotherhood's Freedom and Justice Party, said Egypt could not be described as divided when two-thirds of those who voted backed the constitution but said all sides needed to discuss the economic issues ahead.

"We have an economic and social challenge and this is the time for people to present initiatives and engage in a national dialogue," he said, adding that passing the constitution meant one major hurdle to stabilising the nation had been overcome.

EXPECTATIONS

Yet expectations run high in a nation where demands for social justice and a better standard of living helped drive the 2011 uprising as much as calls for political freedoms.

"We had a revolution to make life easier and prices lower, not higher," said 19-year-old student Sally Ahmed Kotb referring to Mursi's tax plans as she went to the polls on Saturday to vote "no". "This will lead to a hunger revolution."

Once a darling of emerging market investors, Egypt's economy has taken a hammering. The budget deficit surged to a crippling 11 percent of gross domestic product in the financial year that ended in June 2012 and is forecast to exceed 10 percent this year.

Without swift action, it could hit 13 percent, said Adly.

Among belt-tightening measures in the pipeline are steps to reduce how much subsidised gasoline drivers can buy, which is bound to be unpopular.

In the meantime, Egypt has been bleeding foreign reserves at a rate of about $600 million a month, cutting them to about $15 billion, less than half their level before Mubarak's fall.

Some Egyptians are still ready to give Mursi a chance. Many of those who voted "yes" in the referendum backed the charter as a vote for "stability", even if they had some reservations. But, even from supporters, Mursi may have limited leeway.

"Just as people rose against Mubarak, they can rise against Mursi," said Mohamed Mohsen, a civil servant and Islamist backer who voted "yes" in the referendum. "Let's give him two, three, four or five months to solve our problems then we can see."

The government says it is already engaged in a "national dialogue" with political forces, unions and others to win public support for an economic plan it insists will not hurt the poor.

"Passage of the new constitution is unlikely to ease recent discord, but it nevertheless marks a significant step forward in Egypt's laboured political transition," Simon Williams, HSBC economist in Dubai, wrote in a note after the constitution was approved in the first of the two-stage referendum.

He said progress on the IMF programme could now resume swiftly, but added: "The temptation to avoid pressing ahead with unpopular policy measures may also prove ever harder to resist, particularly ahead of the parliamentary polls."

(Reuters) - Here are some details of an Islamist-backed Egyptian constitution which rival camps said had been approved in a referendum at the weekend.

OVERVIEW - The draft provides for basic protections against arbitrary detention and torture and for some economic rights. But New York-based Human Rights Watch says it fails to end military trials of civilians or to protect freedom of expression and religion and rights of women and minorities.

POWERS - The constitution limits the president to two four-year terms. The president must secure parliament's approval for his choice of prime minister. The head of state can declare war with parliament's approval, but must consult a newly defined national defense council, in which generals outnumber civilians.

RELIGION - The principles of Sharia, or Islamic law, remain the main source of legislation. Al-Azhar, Sunni Islam's top seat for Islamic learning, is to be consulted on "matters related to sharia" which activists say gives way for Islamic institutes to influence state's politics. In personal affairs, Christians and Jews will follow their religious codes. But an article defining the principles of Sharia was vague and led the Christian representatives to withdraw from the drafting process over worries that the article could be used to impose Islamic rules on Christians and non-Muslims. Other religions are not mentioned, prompting fears of discrimination.

WOMEN'S RIGHTS - The draft drops an earlier article linking women's rights to sharia. But it does not mention women in an article prohibiting discrimination, saying only: "Citizens are equal before the law and equal in rights and obligations without discrimination."

WASHINGTON (Reuters) - So what now?

The U.S. House of Representatives' rejection of a bill to raise taxes on just 0.18 percent of Americans - those making more than $1 million a year - has raised questions about the Republican-led chamber's ability to approve any plan to avert the looming "fiscal cliff."

Unless President Barack Obama and the U.S. Congress can forge a deal during the Christmas and New Year's holiday season, the largest economy in the world could be thrust back into a recession because of the steep tax increases and spending cuts that are due to begin in January.

The threat of across-the-board government spending cuts and tax increases - about $600 billion worth - was intended to shock the Democratic-led White House and Senate and the Republican-led House into moving past their many differences to approve a plan that would bring tax relief to most Americans and curb runaway federal spending.

For weeks, Obama and House Speaker John Boehner, the top Republican in Congress, have struggled to find a compromise.

But after a glimmer of hope that a deal was close early this week, Boehner - apparently under pressure from anti-tax House Republicans aligned with the conservative Tea Party movement - pressed the "pause" button on negotiations. He then tried to push a backup plan through the House late on Thursday, only to see his fellow Republicans kill it.

Where do Obama and Congress go from here? Here are some possible scenarios.

* Obama and Boehner go back into their secret negotiations.

Before Boehner started touting his failed "Plan B" to boost taxes on those who make more than $1 million, he and Obama were moving closer together on a plan to raise taxes on certain high-income Americans and cut spending. They could pick up where they left off and quickly cut a deal to bridge the gap.

But a compromise with possibly $1 trillion in new taxes and $1 trillion in new, long-term spending cuts could be a tough sell for both Republicans and Democrats in Congress.

Boehner would have to persuade enough Republicans on the idea of tax increases. Obama, meanwhile, would have to get Democrats in Congress to back cuts to some social safety net programs such as Social Security pensions and Medicare and Medicaid health insurance for the elderly and poor. House Republicans appear to be the tougher sell.

* A huge drop in the stock market sends a loud message to Washington politicians to stop arguing and cut a quick but meaningful deal.

That is what happened in late September 2008, after Congress rejected a massive financial bailout package despite warnings by Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson of an economic collapse if the bill failed.

The Dow Jones Industrial Average plunged more than 700 points and Congress quickly reversed course, approving the $700 billion Troubled Asset Relief Program just days later.

The "fiscal cliff" may not be as dramatic a situation, but the tax increases and cuts in federal spending could deal a stiff blow to the economy.

* No deal happens in the dwindling days of 2012 and the U.S. government jumps off the fiscal cliff - at least temporarily.

On January 1, income taxes would go up on just about everyone. During the first week of January, Congress could scramble and get a quick deal on taxes and the $109 billion in automatic spending cuts that most lawmakers want to avoid.

Why could they reach a deal in January if they fail in December?

The reason would be that once taxes go up, it would be easier to allow a few of those increases to remain in place - mostly on the wealthy - and repeal those that would hit middle- and lower-income taxpayers.

Such a scenario would mean that no member of Congress technically would have to vote for a tax increase on anyone - taxes would have risen automatically - and the only votes would be to decrease tax rates for most Americans back to their 2012 levels.

* No deal occurs for another six weeks or so.

If Congress does not raise the nation's debt limit, by mid-February the Treasury Department likely would exhaust its ability to borrow. That would put the nation at risk of defaulting on its debt.

Republicans have withheld their approval of the debt-limit increase as leverage to try to get the kind of "fiscal cliff" solution they want: Fewer increases in spending and taxes, and more cuts to Social Security, Medicare and Medicaid.

This is the strategy they employed in mid-2011 during the last fight over the debt limit, which is about $16.4 trillion.

Republicans wrung spending cuts out of Democrats in return for new borrowing authority, but paid a political price. Global financial markets were rocked by the long uncertainty brought on by the standoff in Congress, one ratings agency downgraded U.S. credit standing and Republicans saw their public approval ratings sink.

* Boehner decides on a gutsy move: Call a House vote on a bill that would raise tax rates for families with net annual incomes above $250,000, exactly what Obama has sought.

The plan could pass the House with strong Democratic support and some Republican votes. As soon as it passed, the House likely would leave town for the rest of the year without addressing other Obama priorities such as increasing the government's debt limit.

* A partial deal is struck at any point.

Congress could pass a plan that would put off most of the income tax increases that are due in January, or extend some other expiring tax breaks - namely one to prevent middle-class taxpayers from being subject to higher tax rates aimed at the wealthy under the alternative minimum tax.

* Stock markets do not tank and Washington politicians conclude that the "fiscal cliff" is not such a bad thing.

Under this scenario, Congress and the White House could continue sniping at each other throughout 2013 and 2014 as they try to revamp tax policy and impose long-term spending cuts.

(Editing by David Lindsey and Will Dunham)

CAIRO (Reuters) - The governor of the Central Bank of Egypt, Farouk El-Okdah, said on Sunday he had not resigned from his post, denying a report aired on state television the previous day which said he had stepped down.

Egypt's cabinet had already denied the report the previous day .

"I did not resign," El-Okdah told reporters at the cabinet headquarters on Sunday after a meeting with a ministerial committee for economic policies.

There has been regular speculation in the media that he wanted to leave his post, and state TV had reported that he had resigned and that his former deputy, Hisham Ramez, had been appointed to replace him.

El-Okdah helped steer the central bank during last year's uprising which ousted former President Hosni Mubarak and is credited with helping keep the Egyptian currency relatively stable despite the political turmoil.

(Reporting by Shaimaa Fayed; Editing by Andrew Osborn)