By Mark Felsenthal and Alissa de Carbonnel TOKYO/DONETSK, Ukraine (Reuters) - U.S. President Barack Obama said on Thursday he was poised to impose new sanctions on Moscow if it does not act fast to end an armed stand-off in Ukraine, but there was a first, tentative sign that pro-Russian separatists were ceding ground. Moscow also flexed its economic muscles in its worst stand-off with the West since the Cold War, with the government suggesting foreign firms which pull out of the country may not be able to get back in, and a source at Gazprom saying the gas exporter had slapped an additional $11.4 billion bill on Kiev. Under an international accord signed in Geneva last week, illegal armed groups in Ukraine, including the pro-Russian rebels occupying about a dozen public buildings in the east of the country, are supposed to disarm and go home. Washington accuses Moscow of fomenting unrest in eastern Ukraine while Russia denies this and counters that Europe and the United States are supporting an illegitimate government in Kiev.
By Mark Felsenthal and Linda Sieg TOKYO (Reuters) - U.S. President Barack Obama assured ally Japan on Thursday that Washington was committed to its defense, including of tiny isles at the heart of a row with China, but denied he had drawn any new "red line" and urged peaceful dialogue over the islands. His comments drew a swift response from China, which said the disputed islets were Chinese territory. Obama also urged Japan to take "bold steps" to clinch a two-way trade pact seen as crucial to a broad regional agreement that is a central part of the U.S. leader's "pivot" of military, diplomatic and economic resources towards Asia and the Pacific. U.S. and Japanese trade negotiators failed to resolve differences in time for Obama and Prime Minister Shinzo Abe to shake hands on a deal at the summit.
South Africa's current account deficit, while shrinking, presents a marked risk to the stability of the country's financial system, the Reserve Bank said on Thursday. Africa's most advanced economy relies heavily on foreign portfolio inflows to finance the gap, which narrowed to 5.1 percent of gross domestic product in the fourth quarter of 2013, from 6.4 percent previously. In its latest financial stability review, the bank said one of the more prominent risks to domestic financial stability was the impact of tapering of loose U.S. monetary policy and the effect that potentially higher interest rates in advanced economies could have on emerging markets. It said strikes in South Africa's key mining sector - whose exports accounted for about 60 percent of export revenue in 2013 - had not only hit production but also hampered debt repayment by both companies and individuals in the industry.
Investment in infrastructure and natural resources will continue to underpin economic activity in sub-Saharan Africa, although capital outflows sparked by tighter global financial conditions pose a risk to growth, the IMF said on Thursday. "The main downside risk to this generally positive baseline scenario is the risk that growth in emerging markets might slow much more abruptly than currently envisaged," the International Monetary Fund said in its latest Regional Economic Outlook. "As advanced economies tighten their monetary policies, frontier market economies will also face higher funding costs and a heightened risk of reversal of capital flows," it said. The IMF forecasts economic growth of 5.5 percent for sub-Saharan Africa this year, up from 4.9 percent last year.
India's opposition Bharatiya Janata Party was set to make gains in two big states in the south and east that began voting on Thursday in the sixth phase of a mammoth general election that could help it build a stable majority in parliament. A final set of opinion polls predicted a strong showing by the BJP and its allies in Tamil Nadu in the south and West Bengal in the east that could make it less dependent on the two women who rule those states and who have in the past proved to be fickle coalition partners. The Hindu nationalist-led opposition, led by prime ministerial candidate Narendra Modi, is riding a wave of public anger across India against the ruling Congress party over a slew of corruption scandals and a slowing economy. A little over 180 million people were registered to vote on Thursday in the sixth phase of the world's biggest election that will end on May 16 when votes are counted from across India.
Ratings agency Standard & Poor's said there were "important considerations and uncertainties" that factored into the creditworthiness of banks should Scotland vote to end its 307-year union with England in September. Britain's three main political parties have been campaigning fiercely to keep the union intact, arguing that both countries are better off together, while Scotland's nationalists believe a split would give them the economic freedom to prosper. In a report published on Wednesday, S&P said it counted the existence of a Scottish central bank, the Scottish government's attitude towards helping struggling banks, changes to financial regulation and independent Scotland's currency among crucial factors that could impact its ratings on the country's banks. It added that its ratings on British banks currently assumed that the UK government would provide extraordinary support to systemically important banks under stress.
By Linda Sieg and Matt Spetalnick TOKYO (Reuters) - President Barack Obama will use a state visit to Japan on Thursday to try to reassure Tokyo and other Asian allies of his commitment to ramping up U.S. engagement in the region, despite Chinese complaints that Washington's real aim is to contain Beijing's rise. Obama will be treated to a display of pomp and ceremony meant to show that the U.S.-Japan alliance, the main pillar of America's security strategy in Asia, remains solid at a time of rising tensions over growing Chinese assertiveness and North Korean nuclear threats. It was unclear, however, whether a last-ditch round of talks between U.S. and Japanese negotiators would yield a breakthrough on a two-way trade pact seen as crucial to a broader trans-Pacific agreement that Obama has championed. The challenge for Obama during his week-long, four-nation tour will be to convince Asian partners that Washington is serious about its promised strategic "pivot" towards the region, while at the same time not harming U.S. ties with China, the world's second-biggest economy.
NEW YORK (AP) — In a new book, Thomas Piketty, the French economist who helped popularize the notion of a privileged 1 percent, sounds a grim warning: The U.S. economy has begun to decay into the pattern of aristocratic Europe of the 19th century. Hard work will matter less, inherited wealth more. The fortunes of the few will unsettle the foundations of democracy.
By Jeremy Laurence and Mirwais Harooni KABUL (Reuters) - A $375 million hole in the Afghan budget is threatening public projects and civil servants' salaries, officials say, putting the aid-dependent economy under stress just as Afghanistan awaits a new leader and foreign troops prepare to go home. U.S., U.N. and Afghan finance ministry officials have discussed ways to resolve what they say has become a critical situation for the budget, with civil projects most at risk as international assistance starts to taper off. "If the political situation of the country does not become normal and businesses do not start again soon this problem will become even more worrying," Alhaj Muhammad Aqa, director general of the treasury at the finance ministry, told Reuters on Wednesday. "We will not only face problems in paying salaries of employees but we will have difficulties in other issues too." Funding for security will not be affected, as costs are met by foreign governments which recognize that any chance of stability in Afghanistan rests on quelling the Taliban insurgency.
OTTAWA (Reuters) - Canadian retail sales grew for the second consecutive month in February, by 0.5 percent from January, but still have not completely recouped December's weather-induced losses, according to Statistics Canada data released on Wednesday. The sales increase follows a 0.9 percent rise in January and a 1.4 percent drop in December. The value of sales was C$41.03 billion ($37.30 billion), still a shade lower than November's peak of C$41.05 billion. All the figures are seasonally adjusted. In volume terms, relevant for calculating real economic growth, sales advanced by 0. ...
Catalan President Artur Mas said on Wednesday he would call a non-binding vote on the region's independence in November to let locals at least express an opinion after Madrid blocked a full referendum. Calls for separation have become a headache for the central government as it fights massive unemployment and the scars of a long economic slump. If the vote is also blocked, Mas said he would call an election as a last resort which would be seen as proxy vote on independence. Opinion polls show that around half of the people in Catalonia support independence from the rest of Spain.
By David Milliken and William Schomberg LONDON (Reuters) - Britain's hefty budget deficit has fallen to its lowest since the financial crisis, official data showed on Wednesday, helping the government argue it is delivering on a key economic pledge a year before a national election. The Bank of England, meanwhile, indicated it was not hurrying to raise interest rates, even if its members are somewhat divided about the economic outlook. The deficit in the 2013-14 tax year fell to 6.6 percent of gross domestic product from 7.4 percent in 2012-13 - in line with recent government plans. It was the smallest shortfall since 2007-08, though well above that of most other advanced economies - including the 3 percent expected of European Union countries - partly a reflection of how much the government used to rely on massive revenues from banking and housing before the financial crisis.
By Marja Novak LJUBLJANA (Reuters) - Slovenia's coalition government, which averted an international bailout last year, could collapse on Friday if Prime Minister Alenka Bratusek loses the leadership of her party, Positive Slovenia. The center-left Positive Slovenia will elect a leader late on Friday and Bratusek has indicated that she will quit the government if her challenger Zoran Jankovic, the party's founder and mayor of Ljubljana, becomes the new head. "I can hardly imagine that I could lead the government without having the support of my own party," Bratusek told reporters earlier this week. A government collapse and early elections would slow efforts to make Slovenia's economy more productive and could hurt sovereign bonds, whose yields have fallen back to their 2007 level in the past month as investors regained confidence in the government's budget management.
China will allow private investment in 80 projects spanning the energy, information and infrastructure sectors as part of reforms to increase privatization, Premier Li Keqiang said on Wednesday. In future, other sectors such as utilities, airports and oil and gas exploration will also be open to more private investment, he told a weekly cabinet meeting. His comments were posted on a government website and no further details were provided. Allowing more private investment in China's centrally planned economy is part of government's plans to reduce state intervention and let market forces play a bigger role in the world's second-biggest economy.
By Aaron Maasho ADDIS ABABA (Reuters) - Ethiopia's bold decision to pay for a huge dam itself has overturned generations of Egyptian control over the Nile's waters, and may help transform one of the world's poorest countries into a regional hydropower hub. By spurning an offer from Cairo for help financing the project, Addis Ababa has ensured it controls the construction of the Renaissance Dam on a Nile tributary. But the decision to fund the huge project itself also carries the risk of stifling private sector investment and restricting economic growth, and may jeopardise Ethiopia's dream of becoming a middle income country by 2025. The dam is now a quarter built and Ethiopia says it will start producing its first 750 megawatts of electricity by the end of this year.