China Leaders Oust Bo Xilai
Bo Xilai, the disgraced Chinese politician and husband of Gu Kailai, who was given a suspended death sentence for killing a British businessman, was charged by China’s Communist Party with abuse of power and corruption, as well as other lesser accusations such as adultery. Chinese leaders, who also set the date for the 18th Party Congress to November 8, expelled Bo from the party, saying he and his family accepted “massive bribes.” Bo was a powerful politician, a regional party chief and one of the nine members of the Central Politburo Standing Committee, the nation’s highest decision-making body. He is also a “princeling,” as sons of revolutionary leaders are known. Bo’s wife was accused of poisoning Englishman Neil Heywood, and his chief of police was also jailed over the matter. This comes just in time before the once-in-a-decade leadership transition, which will take place at the 18th Party Congress.
France Presents 2013 Budget, Spain Tests its Banks
French President François Hollande and his cabinet presented today the nation’s budget for 2013, focusing on tax increases for the rich as well as large companies. The government projected €20 billion ($26 billion) in tax revenues for next year, and about €10 billion ($13 billion) in spending cuts. The goal is to reduce France’s deficit to three percent of gross domestic product, from 4.5 percent this year. This was also a chance for newly elected Hollande to make good on his campaign promise to create a temporary 75 percent tax for the wealthiest people, and implement a new tax bracket of 45 percent imposition for incomes above €150,000 ($193,000). Public spending will be frozen, with some ministries more hit than others. For example the Defense Ministry will see its budget slashed for the benefit of education and security. “Big companies of the CAC 40 pay less than the small companies and sometimes don’t pay at all,” said French Prime Minister Jean-Marc Ayrault. “So we’re asking them for an effort too.” Meanwhile, a stress test commissioned by the Spanish government on the country’s financial institutions showed banks have a capital deficit of €59.3 billion ($76.3 billion), less than was initially estimated. In July, Spain obtained a €100 billion ($130 billion) bailout package to recapitalize its banks.
U.S. Economy Muddles Along
A survey released today showed consumer sentiment in the U.S. rose to a four-month high as Americans saw improvements in the job market and the economy. The Thomson Reuters/University of Michigan index rose this month to 78.3 from 74.3 in August. A separate index showed consumer expectations increased as well to 73.5 from 65.1 last month. More specifically, households that make less than $75,000 were the most optimistic in five years. Even still, a report by the Institute for Supply Management-Chicago Inc. showed business activity dropped this month for the first time since the 2009, when the recession was at its worst. The contraction was unexpected and can be explained by fears of a slowdown in Europe and China that prevented companies from hiring and increasing production. Separately, the Commerce Department said today consumer spending stagnated in August due to rising gasoline and food prices. Goods and services prices increased by 0.5 percent last month, the biggest jump since February.
FSA’s Proposals on Libor May Quickly Become Law
Financial Services Authority (FSA) Managing Director Martin Wheatley said today in London those guilty of manipulating Libor should be jailed. Wheatley presented a set of proposals to reform the way the benchmark interest rate is set that could become law by early 2013, according to U.K. Treasury Financial Secretary Greg Clark. The rigging scandal surrounding the London interbank offered rate, which underpins over $300 trillion in assets worldwide, resulted in a £290 million ($468 million) fine for Barclays in June and prompted the authorities to investigate all submitting banks. Wheatley’s proposals include reducing the number of Libor benchmarks, which exist in 15 maturities (overnight to 12 months) for 10 different currencies. The FSA suggests focusing on four periods for a maximum of five different currencies. Wheatley also asked for more banks to be included in the submitting process. To avoid a repeat of 2008-2009, when submitters artificially lowered the rate to make it look like their banks were in good financial health, Wheatley proposed that submitters wait three months before making their rates public. The numbers submitted will rely on actual transactions rather than estimates. The FSA would also become responsible for vetting submitting banks, all of which would sign a code of conduct. Wheatley will become the chief of the Financial Conduct Authority as the FSA splits into two agencies.
Somali Rebel Group Under Siege
Kenyan and Somali troops, backed by soldiers of the African Union, invaded the port of Kismayo in southern Somalia today, surrounding the last stronghold of rebel group Al Shahab. The militant organization, which is suspected of being linked to Al Qaeda, was driven out of Somalia’s capital Mogadishu last year and has slowly been losing its grip on the country. Kismayo is considered the group’s last bastion, though Al Shahab has carried out attacks, more recently attempting to kill Somalia’ newly elected president Hassan Sheikh Mohamud, of the Peace and Development Party. Residents said the forces had entered the town but hadn’t yet taken complete control of it. Al Shahab denied reports that the Kenyan military is in the city. Al Shahab has been waging a war for years to impose strict sharia law on the country.
Weekend Read: Rhythm in Disguise
In a hospice of southeast London, many patients are dying, but music therapists help their minds to keep going, making those moments a little easier. In The Morning News.