BRUSSELS, Belgium, Dec. 1--Inflation in the 13 nations that share the euro surged to 3 percent in November, the highest level since consumers began using the currency in 2002, the EU statistical agency Eurostat said Friday.
That was up from 2.6 percent in October, both well above the European Central Bank’s guideline of just under 2 percent, AP reported.
That adds pressure for it to raise borrowing costs, even as the effects of the subprime lending crisis have led the US to cut rates.
But Euro-area growth picked up speed as trade and investments increased, with the economy growing 2.7 percent in the third quarter from a year ago--or 0.7 percent from the previous quarter--after braking sharply in the second quarter, Eurostat said in a first estimate.
EU officials predicted earlier this month that the expansion of the European economy would slow over the next two years because of rising oil prices and tighter borrowing conditions stemming from defaults and writedowns of US housing loans.
The troubles in the US economy and the cuts to interest rates have driven the dollar sharply lower against the euro--a mixed blessing for the European currency, and a growing worry for some exporters that see their products cost more for customers paying in dollars or yen.
However, analysts see the ECB holding back from its normal trend of hiking interest rates when statistics show the economy heating up because they cannot afford to make loans more costly when banks are still jittery about lending out money as the subprime crisis unwinds.
“In the current environment the ECB would love to have a slight monetary tightening but I think the external factors are going to constrain them,“ said Jeremy Stretch, senior market strategist at Rabobank. “They are going to have to keep talking tough and hoping that’s enough to limit inflationary expectations.“
Gilles Moec at Bank of America said he expected the ECB to keep interest rates on hold until September 2008 before economic worries would recede that would allow it to raise rates again.
Business and consumer confidence fell again in the euro area and across the entire 27-nation European Union, the European Commission said separately--insisting that its economic weather vane is still above a long-term average.

WASHINGTON,
Dec. 1--US construction spending fell sharply in October, led by a large fall in private home building as the US housing downturn appeared to be intensifying.
Overall construction expenditure declined 0.8 percent in October compared with September, a bigger contraction than most analysts had expected, BBC wrote.
Private home building fell 2 percent to $503.7 billion, a two-year low.
Further Commerce Department data showed that consumer spending was also weaker than expected in October, down 0.2 percent.
October’s fall in overall construction spending was much worse than the 0.2% dip predicted by analysts.
The drop in private home construction was the 20th straight monthly decline for the troubled sector.
This sharp downturn in the US housing market has been sparked by higher mortgage rates over the past year.
Centered on the sub-prime mortgage sector, it has led to record loan defaults and house repossessions.
The knock-on effect has been multi-billion dollar bad mortgage debt loses for many of America’s banks.
These banks are now much less willing to lend to prospective homeowners, who are in turn less keen to join the housing market.
The downturn is showing increasing signs of spreading to the wider US economy, hence October’s decline in consumer spending.
A majority of analysts now expect the Federal Reserve to cut interest rates next month.
Federal Reserve Chairman Ben Bernanke himself signaled in a speech on Thursday night that the central bank is prepared to cut interest rates further if needed.
The Fed last lowered rates on 1 November, reducing them to 4.5 percent from 4.75 percent.
That followed a bigger cut from 5.25 percent to 4.75 percent in October, which was the Fed’s first reduction in rates for four years.

Visiting Japanese Foreign Minister Masahiko Komura (first r) and members of his delegation sit down for talks with Chinese Vice Premier Zeng Peiyan at the Great Hall of the People in Beijing on Saturday.

BEIJING, Dec. 1--China and Japan held their first high-level economic dialogue here on Saturday.
The meeting, co-chaired by Chinese Vice Premier Zeng Peiyan and Japanese Foreign Minister Masahiko Komura, will touch upon issues concerning macro-economic policies, energy-saving and environmental protection, trade and investment, as well as multilateral and regional economic cooperation, Xinhua reported.
Japan’s foreign minister arrived in Beijing on Friday ahead of two-way weekend economic talks seeking to establish a regular channel for resolving trade issues.
A long-running dispute over gas reserves in the East China Sea was expected to top the agenda when Japanese Foreign Minister Masahiko Komura meets with his Chinese counterpart Yang Jiechi, said Mitsuo Sakaba, press secretary for Komura, AP wrote.
The two countries exercise overlapping claims to economic zones extending 370 kilometers (230 miles) from their shores as allowed under the UN Convention on the Law of the Sea. Eleven rounds of talks have failed produce any kind of agreement; the United Nations has until May 2009 to rule on the matter.
A territorial dispute over a group of islands surrounded by rich fishing grounds--known as the Diaoyu Islands in China, called Senkaku in Japan--brought “emotional issues“ to the table, Sakaba said.
“We should be imaginative to find some way which is acceptable for both sides,“ he said. There were several proposals on the table, but Sakaba refused to elaborate, citing the sensitivity of the talks.
Top officials will also join in discussions at what Japan hopes will be a series of bilateral ministerial-level economic forums, being held on Saturday and Sunday in Beijing. The sides planned to discuss trade, investment, copyright protection, and Japanese concerns that China’s currency, the yuan, is undervalued, making its exports unfairly cheap.
Japan was also keen to discuss energy efficiency and projects to help China tackle air pollution and other environmental issues that are increasingly felt across the sea in Japan.
China, including Hong Kong, is Japan’s No. 1 trading partner and Japanese companies are eager for access to Chinese consumers and labor. But the private sector in Japan was concerned over what they perceived to be a more selective approach by Beijing in agreeing to foreign investment deals.
Last year, Japanese investment in China fell 30 percent from the previous year, to US$4.6 billion, Sakaba said.

ROME, Dec. 1--Italy’s largest transport strike in 25 years crippled the country Friday, with hundreds of flights cancelled and trains, buses, ferries, emergency services and even hearses out of action.
Almost four out of five transport workers took part in the action, unions said, in protest at what they say is insufficient money for transport in centre-left Prime Minister Romano Prodi’s 2008 budget, AFP reported.
It was the first time in a quarter century that all Italy’s transport sectors had gone on strike, newspapers said.
Only taxis offered some relief to commuters in Rome after drivers called off a strike they had observed for two days in protest at plans for more taxi licenses.
More than 450 flights were cancelled from the main airports in Rome and Milan. Very few buses, trains or metros were running, forcing commuters to take their cars and causing near-gridlock in many cities.
The action followed devastating strikes in Germany and France earlier in November.
The situation was worst in Milan, Italy’s financial capital in the north of the country, where the city’s three metro lines were closed.
“I did my rounds to distribute newspapers and everything was blocked. It was terrible,“ said Stefano, who has a newsstand in the city’s centre.
Strike hours varied according to sector and city, with regulations requiring a minimum level of service available for peak hours.
At airports, pilots, other flight crew and ground staff joined the protest.
In and out of Rome’s main airport 266 national and international flights were cancelled, the airport news agency Telenews said. At Milan’s Malpensa and Linate airports 205 flights were scrapped, ANSA news agency said.
The strike was called by Italy’s main unions Cgil, Cisl and Uil, which together have some 12 million members.
Prodi’s belt-tightening budget aims to cut Italy’s budget deficit to 2.2 percent of gross domestic product (GDP) next year, from 2.4 percent this year, in line with European rules.
But unions say there is not enough money for transport. They also want the government to make a stronger commitment to state airline Alitalia, which has been losing money for more than a decade, and to the national rail company.

MOSCOW, Dec. 1--Russia’s gold and foreign exchange reserves increased by $3.8 billion (about 0.8 percent) to $459.6 billion in the period from Nov. 17-23, the economic news agency PRIME-TASS reported on Thursday with reference to the Central Bank of Russia.
The achieved size of gold and foreign currency reserves is another record for the whole period of regular publication of this information by the Central Bank.
As compared with Jan. 1, when Russia’s international reserves were equal to $303.7 billion, this index has increased by 51.3 percent.
As Russian Finance Minister Alexei Kudrin told journalists on Nov. 28, Russia’s gold and foreign exchange reserves in 2007 will grow by $150 billion. According to him, such growth of the reserves is caused by the necessity of actions of the Central Bank of Russia to withdraw excessive money resources from circulation caused by a high inflow of capital which in the current year will amount to $80 billion and high prices of oil.

North SlopeÕs proven gas reserves are enough to supply the United States for a year-and-a-half at current consumption rates.

ANCHORAGE, Alaska, Dec. 1-- Five companies, partnerships and entities have submitted proposals to build a massive pipeline from Alaska’s North Slope to bring the region’s vast but long-languishing natural gas reserves to markets thousands of miles away, state officials announced late on Friday.
The proposals, submitted under the Alaska Gasline Inducement Act passed by the legislature earlier this year, will vie against each other for state support. Friday was the deadline for applications to be submitted, Reuters reported.
“This is such an exciting day for Alaska and really an exciting day for America,“ Gov. Sarah Palin, who organized the competitive-bidding strategy, said at a news conference. “Today’s progress under AGIA demonstrates to the world that Alaska is well on our way to bringing this long sought-after infrastructure, a natural gas pipeline, to fruition.“
The applications came from the Alaska Gasline Port Authority, which proposes a liquefied natural gas project; AEnergia LLC; TransCanada Corp in partnership with Foothills Pipe Line Ltd; China-based Sinopec ZPEB; and the Alaska Natural Gas Development Authority, which proposes a spur line to Alaska’s population centers, state officials announced.
The state launched its competitive-bidding strategy after decades of frustration over the failure to develop the North Slope’s natural gas amid staggering costs-- estimated in recent years at $20 billion to $30 billion--and an uncertain US market for the fuel.
The state’s producers have been critical of the state’s new approach of soliciting competing gas pipeline proposals, saying the law’s mandates are overly restrictive and place too many financial risks on them.
ConocoPhillips said on Friday it has submitted an alternative proposal for a natural gas pipeline, separate from the AGIA process, that would run a pipeline to the existing transportation hub in Alberta or all the way to Chicago.
“We’ll hear them out, but they won’t be considered under this AGIA process,“ Palin said.
The North Slope has about 35 trillion cubic feet of proven gas reserves, enough to supply the United States for a year-and-a-half at current consumption rates, and is believed to hold several times as much in undiscovered reserves.

DUBAI, UAE, Dec. 1--PGCC (Persian Gulf Cooperation Council) central banks should not opt for a single revaluation against the US dollar, according to the Arab Monetary Fund.
Instead, they should allow their currencies to float within some form of managed range, or peg to a basket of world currencies, Arabianbusiness.com wrote.
Revaluations alone will not solve the problem, Jassem Al-Mannai, Chairman of the Arab Monetary Fund, said. Al-Mannai argues that governments in the Persian Gulf must have the freedom to fight inflation, which will require raising interest rates. Interest rates in the US are being cut in order to stimulate a slowing domestic economy. The reverse is necessary in the Persian Gulf: interest rates need to rise in order to take heat out of booming economies, analysts suggest.
Meanwhile, Bahrain accused foreign banks of unethically piling pressure on Persian Gulf currency pegs and warned it would ’take action’ against anyone targeting its dollar-pegged dinar, a magazine reported, citing the central bank governor.
Bahrain cut interest rates last week to deter bets on an appreciation of the dinar, which has been largely spared the growing pressure for a revaluation, Reuters wrote.
Investors betting Persian Gulf Arab central banks would eventually sever the pegs to the tumbling US dollar pushed the UAE dirham to a 17-year high, the Saudi riyal to a 21-year peak and the Qatari riyal to a five-year high this week.
“There are foreign institutions packaging investment products based on currency revaluation, while their analysts are propagating the revaluation story and spreading rumors,’ Rasheed Al Maraj told Middle East Economic Digest in an interview. “It is a clear conflict of interests and we look at this very suspiciously,“ he said in the text of the story.
The banks were guilty of ’unethical behavior’ and Bahrain would ’take action’ against any one who targets the dinar, Maraj said. He didn’t mention the name of banks.
Pressure on the currency pegs has been building since UAE central bank governor Sultan Nasser Al Suweidi said this month his country was under social and economic pressure to drop its peg and track a currency basket.
Saudi Arabia could consider revaluing its currency for the first time in 21 years without dropping its peg.
PGCC rulers are to meet in Qatar for talks that could settle the future of their exchange-rate policies.