Sunday, January 22, 2012

looking for trouble

WASHINGTON (Reuters) - A U.S. aircraft carrier sailed through the Strait of Hormuz and into the Gulf without incident on Sunday, a day after Iran backed away from an earlier threat to take action if an American carrier returned to the strategic waterway.

The carrier USS Abraham Lincoln completed a "regular and routine" passage through the strait, a critical gateway for the region's oil exports, "as previously scheduled and without incident," said Lieutenant Rebecca Rebarich, a spokeswoman for the U.S. Fifth Fleet.

The Lincoln, accompanied by strike group of warships, was the first U.S. aircraft carrier to enter the Gulf since late December and was on a routine rotation to replace the outgoing USS John C. Stennis.

The departure of the Stennis prompted Iranian army chief Ataollah Salehi to threaten action if the carrier passed back into the Gulf.

"I recommend and emphasize to the American carrier not to return to the Persian Gulf. ... We are not in the habit of warning more than once," he said.

The threat led to a round of escalating rhetoric between the two sides that spooked oil markets and raised the specter of a military confrontation between Iran and the United States.

Iran threatened to close the strait, the world's most important oil shipping gateway, while the United States warned such a move would require a response by Washington, which routinely patrols international sea lanes to ensure they remain open.

Iran appeared to ease away from its earlier warnings on Saturday, with Revolutionary Guard Corps Deputy Commander Hossein Salami telling the official IRNA news agency that the return of U.S. warships to the Gulf was routine and not an increase in its permanent presence in the region.

"U.S. warships and military forces have been in the Persian Gulf and the Middle East region for many years and their decision in relation to the dispatch of a new warship is not a new issue and it should be interpreted as part of their permanent presence," Salami said.

Pentagon officials declined to comment directly on Salami's remarks, but reiterated that continued U.S. presence in the region reflected the seriousness with which Washington takes its security commitments to partner nations in the region and to ensuring free flow of international commerce.

The Lincoln's arrival in the Gulf was unrelated to Iran's statement on Saturday.

Tensions between Iran and the United States have been escalating in recent weeks as President Barack Obama prepares to implement new U.S. sanctions against Iran over its nuclear enrichment program, which Tehran says is for energy production but the West believes is aimed at producing atomic weapons.

The EU is preparing to intensify sanctions against Tehran with an embargo on Iran's oil exports and possibly freezing the assets of Iran's central bank. Obama is preparing new U.S. sanctions that target foreign financial institutions that do business with Iran's central bank.

Both sides tried to scale down the rhetoric last week. The White House emphasized the United States was still open to international talks on Iran's nuclear program, even as it denied Iranian assertions that discussions were under way about resuming a dialogue.

The White House would not confirm or deny Iranian reports that Obama had sent a letter to Iranian leaders, but spokesman Jay Carney said any communications with Tehran would have reinforced the statements Washington has made publicly.

The United States supports talks between Iran and the so-called P5 + 1, the five permanent members of the U.N. Security Council - Russia, China, France, England and the United States - plus Germany.

Carney urged Iran to respond to the letter sent in October on behalf of the P5 +1 by European Union foreign policy chief Catherine Ashton.

"If the Iranians are serious about restarting talks, then they need to respond to that letter," Carney told a White House briefing. "That is the channel by which ... the restarting of those talks would take place."

(Reporting By David Alexander; Editing by Peter Cooney and Stacey Joyce)

Sunday, January 1, 2012

difficult year ahead, as many economists predict recession in 2012

The most likely outcome in pure economic terms is a moderately bad fiscal crisis, a survivable sovereign debt event and a sharp growth downturn, all in the first half of the year”


Paul Mason
Economics editor, Newsnight

European leaders have warned of a difficult year ahead, as many economists predict recession in 2012.

German Chancellor Angela Merkel said Europe was experiencing its "most severe test in decades" but that Europe was growing closer in the debt crisis.

France's President Sarkozy said the crisis was not finished, while Italy's president called for more sacrifices.

Growth in Europe has stalled as the debt crisis has forced governments to slash spending.

The leaders' new year messages came as leading economists polled by the BBC said they expected a return to recession in Europe in the first half of 2012.

The cost of borrowing for some of the eurozone's largest economies, including Italy and Spain, has shot up in recent months as lenders fear governments will not be able to pay back money they have already borrowed.

With growth stalled, the pressure is on governments across Europe, not just ones using the single currency, to cut spending in order to meet debt obligations.

Fears are now focusing on a potential second credit crunch, triggered by the exposure of banks across Europe to Italy's huge debt.

Euro defended
In her TV address, Chancellor Merkel said that despite Germany's relatively good economic situation, "next year will no doubt be more difficult than 2011".



"The road to overcome it [debt crisis] remains long and not without setbacks, but at the end of this path Europe will re-emerge stronger from the crisis than it was when it entered it."

She defended the euro, saying it had made "everyday life easier and our economy stronger... and protected from something worse" in the financial crisis of 2008.

Heading into an election year trailing his Socialist rival Francois Hollande in the polls, French President Nicolas Sarkozy said structural changes to the economy were needed in order to return to growth.

"I know that the lives of many of you, already tested by two difficult years, have been put to the test once more," he said in a televised address.


French President Nicolas Sarkozy faces an uphill battle to be re-elected in April
"You are ending the year more worried about yourselves and your children," he said.

But after having already pushed budget cuts in order to forestall a downgrade of France's treasured AAA sovereign credit rating, he promised there would be no more budget cuts.

"What was to be done was done by the government," he said.

Mr Sarkozy is due to meet Mrs Merkel in early January to push forward a European Union agreement in December for a new fiscal compact.

'Unavoidable' sacrifices
The president of Italy, the eurozone's third-largest economy, urged people to make sacrifices to prevent the "financial collapse of Italy".

President Giorgio Napolitano said: "Sacrifices are necessary to ensure the future of young people, it's our objective and a commitment we cannot avoid."


Government austerity has undermined growth and caused a great deal of anger around Europe
Fears that Italy might need a Greek-style bailout that Europe would have difficulty dealing with have forced the government's borrowing costs up and led to the replacement of Silvio Berlusconi by Mario Monti, leading a cabinet of unelected experts.

"No-one, no social group, can today avoid the commitment to contribute to the clean-up of public finances in order to prevent the financial collapse of Italy," President Napolitano said.

"The sacrifices will not be in vain, especially if the economy begins to grow again."

Greek Prime Minister Lucas Papademos, another technocrat who was appointed to lead an interim coalition government after the debt crisis forced George Papandreou to resign, also warned of a difficult year ahead.

"We have to continue our efforts with determination, so that the sacrifices we have made up to now won't be in vain," he said in a televised address.

His government has imposed harsh austerity measures in order to ensure Greece continues to receive an international bailout.

The austerity measures, begun in 2010 by the previous government, have led to mass protests and riots as high unemployment, raised taxes, salary cuts and reduced government services take their toll