KLEINMOND, South Africa, Nov. 17--Finance leaders of the world’s 20 major economies meet Saturday amid tensions over the slumping dollar and strong Asian currencies, especially China’s tightly controlled yuan.
Also on the agenda for finance ministers and Central Bank governors are the deadlocked Doha trade talks on free markets, with the United States widely blamed for the failure, AP reported.
On the table for the two-day meeting of the Group of 20 are reforms to the International Monetary Fund and World Bank, which developing nations consider too much under the thumb of the United States.
US Treasury Secretary Henry Paulson is at the talks along with the new directors of the IMF and World Bank.
“We have a number of emerging market countries that contribute significantly to the global economy, yet their voices at these institutions are not reflected,“ said Reserve Bank Governor Tito Mboweni of South Africa, the host nation.
The meeting brings together top finance officials from the Group of Seven developed nations and emerging economies including Brazil, India, Argentina and China to discuss economic development and financial stability.
Mboweni told reporters a week ago that there would be debate on whether the currency crisis could be resolved by strengthening the global regulatory framework or by leaving it to market forces.
The global imbalance, driven partly by the huge current account deficit of the United States and higher commodity prices, has produced large current account surpluses and boosted currencies in several emerging economies, as has happened with China and South Africa.
He also noted the global inflation challenge from record oil prices.
The officials are expected to comment on the currency crisis--comments that could affect markets.
China likely will come under pressure to revalue the yuan to reduce its huge trade surplus.

LONDON, Nov. 17--The impact of the US mortgage market crisis on the underlying economy could be “dramatic“ as leveraged investors may need to scale back lending by up to $2 trillion, according to investment bank Goldman Sachs.
In a report dated November 15, Goldman’s chief US economist Jan Hatzius said a “back-of-the-envelope“ estimate of credit losses on outstanding mortgages, based on past default experience, was around $400 billion, Reuters wrote.
But unlike stock market losses, which are typically absorbed by “long-only“ investors, this mortgage-related hit is mostly borne by leveraged investors such as banks, broker-dealers, hedge funds and government-sponsored enterprises. And leveraged investors react to losses by actively cutting back lending to keep capital ratios from falling--A bank targeting a constant capital ratio of 10 percent, for example, would need to shrink its balance by $10 for every $1 in losses.
“The macroeconomic consequences could be quite dramatic,“ Hatzius said in the note to clients. “If leveraged investors see $200 billion of the $400 billion aggregate credit loss, they might need to scale back their lending by $2 trillion.“ “This is a large shock,“ he said, adding the number equates to 7 percent of total debt owed by US non-financial sectors.
Hatzius said such a shock could produce a “substantial recession“ if it occurred over one year, or a long period of sluggish growth if it occurred over two-to-four years.
One of a number of caveats outlined in the report was that baseline economic forecasts may already include significant reductions in the pace of mortgage lending. But the conclusion remained a gloomy one regardless.
“The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized,“ he wrote. “While the uncertainty is large, the associated downward pressure on lending raises the risk of significant weakness in economic activity.“

ATHENS, Greece, Nov. 17--A decade ago Greece and Turkey were nearly at war over an uninhabited island, now a shared gas pipeline to be officially inaugurated Sunday symbolizes a new spirit of cooperation between the rivals.
Greek Prime Minister Costas Karamanlis and his Turkish counterpart Recep Tayyip Erdogan will meet on the River Evros, the natural frontier which has seen centuries of conflict, to seal the new partnership, AFP wrote.
The 300 kilometer (185 mile) pipeline, which came into operation this year, brings natural gas from Azerbaijan to Greece and should be extended to Italy and the rest of Western Europe, highlighting the strategic importance of the project.
Turkish exports to Greece more than doubled between 2000 and 2006 to reach 1.3 billion euros ($1.9 billion), a rise from 1.18 to 2.62 percent of Greece’s total imports, said a European embassy specialist on the Greek economy, speaking on condition of anonymity.
“The pipeline project constitutes yet another important milestone in the two countries’ economic rapprochement,“ added Svetoslav Danchev, a research associate at the private Greek Foundation for Economic and Industrial Research (IOVE).
Whereas Greece’s efforts to exploit its position at the European Union’s doorstep are only now coming to fruition, Turkey is already a crossroads between Europe and Central Asia’s energy fields.
But the two neighbors have the same objective, noted Danchev. “They both want to profit as much as possible from Europe’s desire to diversify its energy supply and reduce its dependence on Russian gas and oil,“ he said.
“The (Turkish-Greek) pipeline improves Greece’s geostrategic role, strengthens Europe’s energy security, creates economic and development profit and contributes to the improvement of Greek-Turkish relations,“ Development Minister Christos Folias said in a statement to AFP.
“Greece produces around 80 percent of the energy it consumes, and 65 percent of that energy comes from lignite (a low-grade brown coal) that releases large quantities of carbon dioxide into the atmosphere“, he noted. Natural gas pollutes much less.
The pipeline currently supplies only the Greek market, but from 2011 will be linked to an underwater conduit extending from the northern Greek port of Stavrolomenas to the Italian port of Otranto.
The main enterprises involved in that project are Edison, the Italian power company, Greek state-owned gas company Depa, and Turkey’s petroleum products refinery agency BOTAS.

Employees working in cubicles at the Hewlett-Packard call center in Dalian, northeastern China's Liaoning province.

DALIAN, China,
Nov. 17--German software giant SAP AG brings its toughest jobs to this port city in China’s rustbelt northeast. In a sunny, spacious office at a leafy business park, 200 technicians help run software that manages bank transactions in Switzerland and auto manufacturing in Michigan. “Nighttime support for a Swiss bank is one of the most difficult things you can do, and we do it in China,“ said Andreas Reuther, SAP’s vice president for global support, AP wrote.
Along with SAP, Hewlett-Packard Co., IBM Corp., Britain’s BT Group PLC, Japan’s Yokogawa Electric Corp. and some 230 other foreign companies have flocked to Dalian in the last decade. Now, a critical mass of development is coming. Ground broke this year for both a $2.5 billion Intel Corp. factory and a $6.5 billion nuclear power plant for the city. Cranes line the busy waterfront as office and apartment towers rise at a furious pace.
A former Japanese colony on green rolling hills, Dalian is a model for the transformation that Chinese leaders want to see in the rest of their country. Beijing is eager to raise China’s status from low-skilled factory labor to higher-paid technology jobs. A 15-year plan issued last year promises tax breaks and other aid to software, genetics, aerospace and other high-tech businesses.
“Our goal is to build up Dalian as a new leading city in global software and service outsourcing,“ said Jin Guowei, deputy director of Dalian’s technology bureau. “We want to be like America’s Silicon Valley, Ireland’s Dublin or Bangalore in India.“
The revenue of $1.9 billion generated last year in Dalian by operations such as writing and testing software, operating computer systems and accounting and finance is still dwarfed by outsourcing in Bangalore. The Indian city, Asia’s leader in the industry, brought in $11.3 billion from such operations in 2006.
But Dalian’s revenues grew 50 percent in 2006, compared to Bangalore’s 32 percent growth. And, at $11.8 billion, according to the China Software Association industry group, China’s total outsourcing revenues were similar last year to Bangalore’s.
Investors say Bangalore is strangling itself by failing to invest in infrastructure, while Dalian spends heavily on roads, power supplies and telecommunications.

PARIS, Nov. 17--The lower house of the French parliament on Saturday approved 2008 spending plans that foresee a state deficit of nearly 42 billion euros ($61.5 billion).
The 47.79 billion euros approved by lawmakers in the National Assembly was up just slightly from the figure proposed by government of President Nicolas Sarkozy, and slightly lower than the figure for this year, AFP reported.
The overall deficit- which includes social security, local government budgets and the state budget--will inch downwards to 2.3 percent of GDP for 2008 from 2.4 percent of GDP in 2007, according to the government.
France, the eurozone’s second largest economy, has come under pressure from its European partners to rein in public spending and meet a 2010 target for a balanced budget.
The national debt hovering at more than one trillion euros is to level off at 64 percent of France’s gross domestic product (GDP) in 2008, from 64.2 percent this year, according to budget forecasts.
A final vote on the entire budget was scheduled for Tuesday, with the spending plan then moving on to the Senate for consideration.

David Nalo, permanent secretary in the Kenya Ministry of Trade and Industry

NAIROBI, Kenya, Nov. 17--East African nations have reached an interim accord with the European Union to replace preferential tariff agreements due to expire this year, Kenya announced Friday.
“The much feared disruption of trade... after December 31 has been put to rest,“ said David Nalo, a top trade ministry official, AFP reported
“The deal, which is in form of an Interim Framework Agreement on the EPA (Economic Partnership Agreements) covers market access, development and fisheries,“ said Nalo, who led a Kenyan delegation to Brussels.
Under the accord reached on Wednesday, East African Community states Kenya, Uganda, Tanzania, Burundi and Rwanda will enjoy duty free, quota free access to the EU for all products--except sugar and rice--from Jan. 1.
Trade deals giving preferential market access to the African nations have to be replaced by the end of the year because the World Trade Organization has ruled they are illegal.
The EU had warned of imposing tariffs on goods from Africa, Caribbean and Pacific (ACP) nations if there was no agreement by Dec. 31, raising fears of widespread losses and collapse of local sectors.
Issues that were not covered in interim agreements will be negotiated next year, Nalo explained.
The interim deal opens up east African markets to European products as long as they do not affect “sensitive agricultural and industrial products“ in the region.
Rwanda and Burundi, who joined the EAC bloc this year, will be excluded from the deal until December 2009 to allow them to finish implementing the EAC customs union.
The new deal is designed to help EAC countries develop while diversifying their economies and meeting WTO requirements that they allow some access to European goods and services.

David Nalo, permanent secretary in the Kenya Ministry of Trade and Industry

LONDON--The “Pac-Man defense,“ in which a takeover target suddenly turns around to bid for its suitor, is a dramatic tactic--but it’s probably not one that Rio Tinto will use against larger mining rival BHP Billiton.
Press reports on Friday said that Rio Tinto was considering a counterbid for BHP Billiton, after rejecting a $174 billion takeover from the larger Australian rival last week, Google News reported.
Rio Tinto had turned down the all-share offer on the grounds that it “significantly undervalues Rio Tinto and its prospects.“ But analysts were highly skeptical that the unusual tactic, dubbed the “Pac-Man defense“ after a 1980s Japanese video game, would now be deployed by Rio Tinto.
“I would be completely amazed,“ Charles Stanley analyst Tom Gidley-Kitchen told Forbes.com.
Even after its recent takeover of Canada’s Alcan to become the world’s largest aluminum producer, Rio Tinto is dwarfed by the coal, iron ore and base metals giant that is BHP Billiton.
BHP has a market capitalization of $136 billion, while Rio’s is just $80 billion. “Rio Tinto would be taking on a company twice its size,“ said Gidley-Kitchen.
Regulatory issues also make the deal unlikely. BHP is seen by the Australian government as an important asset, so Rio Tinto would have to allow a degree of control to remain in Melbourne. “Given that Rio is more of a UK company, with a head office and shareholder base in Britain, they would have to give up quite a lot of control in order to get Australian approval,“ Gidley-Kitchen said.
Also, if Rio Tinto made an offer for BHP, the company would be conceding that there was an economic case to be made for the deal, thereby undermining its own reasons for rejecting BHP’s takeover in the first place.
Investors appeared skeptical about the rumors, which followed a report in the Wall Street Journal. Rio Tinto closed down just 0.2 percent, or 32 pence (66 cents), at £53.97 ($110.54), on Friday in London, while BHP Billiton ended the day down 0.4 percent, at £16.04 ($32.85).