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July 7 - 13 2010
μWorld News PAGES 14-17
μComment PAGES 18-21
μObituaries PAGES 22-23
μ Features PAGES 24-26
μExpat Life PAGES 30-32
μBusiness PAGES 33-37
What are they for? Rowan Pelling on the latest salvo in the breast-feeding debate
The dragon has got to go The challenges of taking ‘Shrek the musicial’ on tour
Philosophy rocks Helen Brown meets Slavoj Zizek, the world’s hippest thinker
EXPAT LIFE P30-31
Special report: Isle of Man Mike Goodman on the impact of the Budget on offshore savers
18 6 20 25 35 36 8 31 37 43 44 48
Bonus Ball 31
Bonus Ball 14
There were five winners of Saturday’s £7.6m jackpot but no one won Wednesday’s £2.5m prize
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By Jonathan Russell and Angela Monaghan FRESH fears over a global economic slowdown were raised last week after Goldman Sachs’s chief economist warned that data from China and the US revealed that any recovery was facing a “challenging period” and that evidence from America was “troubling”.
As Britain enters a selfimposed period of austerity to deal with a historically large budget deficit, Jim O’Neill, one of the world’s foremost economists, said that events beyond our shores could pose more of a problem than any domestic economic problems.
Mr O’Neill, the head of global economic research at Goldman, said: “What is clear is that a persistently struggling US, in addition to a major disappointment in China, would not be good news for the rest of us.”
Mr O’Neill, the man who first identified the BRIC economies of Brazil, Russia, India and China as the future for global economic growth and who has previously been bullish on the recovery, went on to pinpoint growth in China as the main concern for the global economy.
He did say, though, that the present slowdown in China is to be welcomed as long as it is controlled.
“If we are wrong [about estimates for growth in China] especially significantly, then the world will be a very challenged place, particularly for those living on selfimposed domestic austerity,” he said.
The warnings came just after Goldman downgraded its forecast for GDP growth in China this year from 11.4pc to 10.1pc. China is carrying out a difficult rebalancing operation of slowing its high-speed economic growth without killing the global economic recovery.
While China is still growing, the outlook in the US is “distinctly chilly”, Mr O’Neill warned, and the country could be threatened by a period of deflation.
“Despite our global optimism of the past year, we have remained rather cautious about the US, expecting the past problems
of housing excess and domestic savings weakness to plague domestic consumption for some time,” he said.
“What is more troubling recently is that the housing market indicators have turned especially weak again.”
The other danger highlighted by Mr O’Neill was the concern that too many G20 economies undertaking austerity measures at the same time could reverse the global economy recovery.
His view mirrors concerns voiced by President Barack Obama at the recent G20 meeting when he wrote to other world leaders expressing worries about the speed of budget cuts.
“All G20 members tightening fiscal policy at the same time as the UK’s tough stance would make it hard to deliver on improving growth for all, or possibly any,” Mr O’Neill said.
The gloomy outlook came just days before the Bank of England’s Monetary Policy Committee meets to decide whether to raise interest rates. The expectation is that members will vote to leave interest rates on hold at 0.5pc on Thursday amid the mounting concerns of a double-dip global recession.
They are also expected to maintain quantitative easing target at £200bn of asset purchases.
Unlike the US, the MPC has been grappling over recent months with the twin pressures of above-target inflation and the risk that the fragile recovery under way in the UK could be derailed.
Mervyn King, the Bank’s Governor, has already indicated that loose monetary policy will be required to offset the impact that the severe fiscal tightening announced in the Budget last month is likely to have on growth.
The British Chambers of Commerce (BCC) urged the MPC to maintain its ultraloose monetary policy stance.
“The recent tough Budget’s… scale and severity inevitably increases the danger of an economic setback,” said David Kern, the chief economist at the BCC.
On Thursday, data from the Office for National Statistics are expected to show that manufacturing output and the broader industrial production measure both grew by 0.3pc in May.
Business, page 37
By Roland Gribben A BARCLAYS Bank-style rescue is being discussed by BP with Middle East investors to strengthen its defences against opportunistic bids as it reaches another crucial stage in efforts to contain the Gulf of Mexico oil disaster.
Institutions in Abu Dhabi and Qatar are understood to have been approached about the prospect of taking a strategic shareholding to support the ailing share price and deter potential bidders. The Kuwait Investment Office (KIO), now down to a 1.75pc holding after being rebuffed in an earlier attempt to take over BP, is also being targeted.
The tactic worked successfully for Barclays at the height of the banking crisis. International Petroleum Investment Company (IPIC), a stateowned Abu Dhabi business, and the Qatar Investment Authority stepped in to buy shares and provide much of the backing needed to avoid Barclays following the Royal Bank of Scotland and Lloyds Banking Group in seeking a government handout.
Sheikh Mansour bin Zayed al-Nahyan, the head of IPIC and owner of Manchester City, was a key figure in Barclays’ £7billion capitalraising exercise when Middle Eastern investors stumped up £5.3 billion. A year ago IPIC sold its 11pc Barclays stake and walked away with a profit of £1.45 billion.
Senior figures in Middle East financial circles said proposals linked to the strategic investment have been presented to BP. One told The National newspaper in Abu Dhabi: “BP knows there is potential support from the Middle East.”
The 50pc slump in its share price since the Gulf disaster has made BP increasingly vulnerable to a takeover.
BP braced for storm, page 34
By Andrew Porter and Rosa Prince BRITAIN will vote next year on whether to change the electoral system.
As part of the Coalition agreement, a referendum to end the first-past-the-post system will take place on May 5, to coincide with local elections.
Nick Clegg, the Deputy Prime Minister, said that he expected a formal announcement this week.
It will place the biggest strain yet on the Coalition with Mr Clegg campaigning for a “yes” vote but David Cameron opposed to a change
The date on which a referendum to end the first-past-the-post system will be held next year to the historic way of electing MPs. Mr Clegg will be desperate to convince the electorate that a new alternate vote (AV) is needed. His backbench Lib Dem MPs know that, after supporting the Tories, they must show action on voting reform if they are to avoid accusations of selling out in the wake of cuts and a VAT rise.
Tory MPs and some from Labour will join in a “no” campaign. Many Labour MPs opposed Gordon Brown’s “death-bed conversion” to voting reform.
Despite not being a proportional form of voting, a move to AV would be portrayed as the first step to a more “democratic” way of voting by the Lib Dems.
The disclosure comes as the Government issued an online invitation to members of the public to nominate laws and regulations they would like to see scrapped.
News, page 4 Matthew d’Ancona, page 20
‘Based on the second preference system, Andy Murray is the winner’