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New fees for tribunals from 2013

2011-11-02T14:55:00.000-07:00

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3 October 2011 Last updated at 14:33 GMT Employees will have to work for longer before being able to go to a tribunal A fee for bringing an employment tribunal will be charged for the first time from April 2013, Chancellor George Osborne has announced.

There will be a refund for any individual who wins their case.

The amount that will be charged and how it should be paid will be subject to consultation starting by the end of November.

There is currently no fee for an applicant who wants to make an employment tribunal claim.

The low-paid, or those without an income, may also have the fee waived or reduced at the start of the process, under the new scheme.

"We are ending the one way bet against small businesses," Mr Osborne told the Conservative conference in Manchester.

Timescale

The chancellor also confirmed that, from April 2011, the qualifying period for a claim for unfair dismissal will be that the individual must have been in the job for at least two years.

At present they only need to have been working for one year.

"We respect the right of those who spent their whole lives building up a business, not to see that achievement destroyed by a vexatious appeal to an employment tribunal. So we are now going to make it much less risky for businesses to hire people," Mr Osborne said.

Last year there were 236,000 employment tribunal claims - of which only some were unfair dismissal claims, with an average award for successful complainants of ￡8,900.

Under Mr Osborne's plan, workers will still be able to take action immediately if they suffer discrimination, but by reducing the risk of tribunals for unfair dismissals the government hopes bosses will feel more confident about hiring people.

The GMB union has criticised the plan.

"The very notion that reducing the rights of workers of between 12 months and two years service to bring unfair dismissal claims will create a single new job is quire frankly absurd. Job creation is not the real reason the Tory party want to take away these rights," said Paul Kenny, general secretary of the GMB.

TUC general secretary Brendan Barber said the move was a "charter for bad bosses".

Abandoned

However, business lobby the CBI, welcomed it.

"We have been urging the government to do everything it can to make it easier for firms to grow and create jobs, and this will give employers, especially smaller ones, more confidence to hire," said director general John Cridland.

In 2010-11 the cost to the taxpayer of running employment tribunals and the Employment Appeal Tribunal in England, Wales and Scotland was more than ￡84m, according to the Ministry of Justice.

The Treasury said that more than 80% of applications made to an employment tribunal did not result in a full hearing.

Almost 40% of applicants withdrew their cases, but employers still had to pay legal fees in preparing a defence. More than 40% settled out of court and there was no record of how much applicants settled for, it added.

Martin Edwards, employment law expert at law firm Weightmans, said: "The changes may have mixed results. Someone who has not worked long enough to claim unfair dismissal may claim they are a whistleblower or a victim of discriminaiton instead, causing employers even more hassle than before.

"But people who have to pay to bring a claim may regard that as a significant disincentive to litigating a dispute."

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VIDEO: Build up a cash cushion, says Alvin Hall

2011-11-02T10:55:00.000-07:00

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30 September 2011 Last updated at 10:22 GMT Help

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VIDEO: My Bottom Line: Greg Lucier

2011-11-02T07:35:00.000-07:00

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29 September 2011 Last updated at 14:06 GMT Help

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US nears South Korea free trade

2011-11-02T04:30:00.000-07:00

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6 October 2011 Last updated at 03:19 GMT The trade deal is expected to dominate President Lee Myung-bak's visit to the US later this month The free trade agreement between the US and South Korea has cleared the first hurdle four years after the deal was first agreed.

The House Ways and Means Committee has voted to advance US free-trade agreements with South Korea, Colombia and Panama to the full House.

The push for a swift approval of the deals comes amid a slowdown in the US economy and high rates of unemployment.

Backers of the deals said they will boost US exports and create jobs.

"With zero jobs created last month and the unemployment rate hovering around nine percent, we must look at all opportunities to create American jobs," said David Camp, chairman of the House Ways and Means Committee.

Tariff concerns

The deal with South Korea is the largest US trade pact since it signed the North American Free Trade Agreement in 1994.

According to some estimates, it is expected to increase US exports to the Asian economy by as much as $10bn (￡6.5bn).

Though the deal was agreed in 2007, there had been concerns in the US over tariffs imposed by South Korea on the US carmakers.

The two sides finally managed to reach an agreement on the issue last year. South Korea said it would halve its tariff on US cars to 4% and lift it completely in four years.

At the same time, US said it would also lift its 2.5% tariff on Korean cars during that period.

South Korea had also agreed to allow the US to export up to 25,000 cars a year that do not meet its more stringent safety requirements.

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Stiglitz: Austerity not the way

2011-11-01T23:57:00.000-07:00

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3 October 2011 Last updated at 23:01 GMT Viewpoint by Joseph Stiglitz Professor at Columbia University Joseph Stiglitz won the Nobel Prize in Economics in 2001 and is a former World Bank chief economist Most economists thought that when the euro was put together, it was an incomplete task. They'd taken out too many adjustment mechanisms and had not put anything in its place.

One of the things that makes the American common currency work across the country is we have a common fiscal authority and high migration - we're willing to allow North Dakota to become empty.

In Europe, there's no fiscal authority, migration is more difficult and most of the countries are not willing to let themselves become empty. So the framework for allowing for an effective common currency is not there.

Now you might be able to make up for the deficiencies in one part by strengthening another part, for instance by having a stronger fiscal authority. But they don't have that.

What they did fiscally was tie themselves to the stability and growth pact, which was a pact for recession rather than for growth because limiting deficits when you have a shock is a recipe for recession, which is what is happening in Greece.

So the question was always: when a crisis occurred would they be able to finish the task? And I think the jury is still out.

Misguided

The agreement that they made in July was a reasonably good agreement. It recognised that Greece needed help to grow but they haven't put in any money and the process of ratification has been very slow.

So I think it's really a question that has not yet been resolved.

There are a number of institutional ways of going about helping to resolve it. The European Financial Stability Facility (EFSF) needs to be larger or to have more ability to leverage itself. That's a minimum.

Over the longer term they're going to need European bonds and a number of other actions, and they have to recognise the framework of austerity is not the way to go.

Issuing bonds should be one part of the fiscal framework.

The problem with the eurozone was the one part of the framework that they thought they needed was limiting fiscal deficits and that was just a misguided analysis.

Ireland and Spain had surpluses before the crisis. But they thought that having limited fiscal deficits was necessary and sufficient for protecting the economic framework and that was just wrong.

Politics

The July agreement was a good start if they implement it quickly. But that's not been happening.

Austerity measures in Greece have brought widespread protests

Let me say, for democracy it's not been that slow. Two months to get landmark legislation through is not a long time. But markets move quickly. So I don't criticise the fact that there's been a deliberate pace - that's the nature of democracy.

My criticism is they didn't do anything in the 10 years before there was a crisis.

I suspect that we're going to see a lot of volatility. Whether at the end the eurozone will emerge intact or not, it's hard at this point to say.

It all depends on the politics. Even though I think the commitment of the leaders to do something is there, the political process in some ways is not in tune with the economics. The problems are deep.

I think there is a reasonably good chance that a year from now you would find the eurozone smaller than what it is today.

There's a broad consensus among economists that the best way of doing it would be for the northern European countries to leave. That would be the easiest adjustment.

But the general view is that is not what's going to happen. The view is that some of the weaker countries will leave and that will lead to very large trauma in the global financial markets such as freezing the credit markets, a repeat of 15 September 2008 (when Lehman Brothers collapsed).

Growth potential

If Europe insists on going forward with the kind of austerity packages in Germany and without the kind of assistance they need to help those countries with severe economic problems, such as Greece, then almost surely the eurozone will break up.

But if they come forward with that money, then it can survive, at least for a while.

Continue reading the main story Use the dropdown for easy-to-understand explanations of key financial terms:AAA-rating GO The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule.The European Central Bank (ECB) is the one institution that has the kind of flexibility that is necessary to deal with the crisis. It will be absolutely essential, because they will be able to step into the breach and be willing to do that.

Now the problem is that some people in Germany and elsewhere have said the ECB should not be buying Italian and Spanish bonds and that it should not be stepping into the breach. But if the ECB doesn't do that, then the eurozone's prospects are very, very bleak.

It's not inevitable that Greece will default if they come forward with enough assistance for it to grow. It has enormous growth potential, so if Europe comes up with enough money, it will grow and that will enable it to manage its debts.

But so far I've seen nothing in the form of growth assistance as opposed to austerity assistance just to meet its budget shortfall, and I'm not very optimistic that it will avoid a default.

Joseph Stiglitz is a recipient of a Nobel Prize in Economics and a former chief economist at the World Bank.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.

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AUDIO: Autonomy due to decide on HP bid

2011-11-01T19:37:00.000-07:00

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3 October 2011 Last updated at 11:33 GMT Help

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Germany approves EU bailout fund

2011-11-01T16:13:00.000-07:00

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29 September 2011 Last updated at 16:40 GMT Chancellor Merkel achieved her majority after intense lobbying Germany's parliament has voted by a large majority in favour of supporting a more powerful fund to bail-out troubled Eurozone economies.

Chancellor Angela Merkel received strong support despite criticism of the plan from some of her ruling coalition.

Many Germans are against committing more money to prop up struggling eurozone members such as Greece.

There are protests in Athens where international inspectors have held talks on further bailout funds.

The measure is expected to pass in Germany's upper house of parliament, where it will be put to a vote on Friday.

In the Bundestag, 523 deputies approved the bill to support the expansion of the European Financial Stability Facility (EFSF) - 85 voted against and three abstained in the 620-seat chamber. Nine members were not present.

Dissidents

Some members of Mrs Merkel's coalition had vowed to vote against the bill.

But in the end, 315 deputies voted in favour, meaning that Mrs Merkel did not have to rely on opposition support to get the measure passed.

The outcome of the vote was not in question, however, as the main opposition parties, the SPD and the Greens, indicated they would support the expansion of the fund.

Before the vote, there was intense lobbying by Mrs Merkel's Christian Democrats (CDU) and their coalition allies to pressure the handful of dissidents to get in line.

Continue reading the main story Stephen Evans BBC News, Berlin

Chancellor Merkel got her majority more easily than she might have expected. Fifteen members from parties in her coalition government voted against her, not enough to make her have to rely on the opposition.

The main opposition party, the Social Democrats, supported the government.

As one of its MPs put it in the debate: "We will vote with you because Europe needs this vote. Don't rely on us next time."

In the end, 523 MPs voted with the government and 85 against, including the left group.

Chancellor Merkel emerges not quite unscathed but not as a dramatically weakened leader either.

A reliance on this support would have cast into doubt her ability to get forthcoming votes on both a further bailout for Greece and a permanent successor to the EFSF through the Bundestag.

"The broad majority in parliament clearly shows Germany is committed to the euro and to protecting our currency," said Hermann Groehe, the number two in Ms Merkel's Christian Democrats (CDU) party.

But Frank Schaeffler of the Free Democrats party - a junior coalition member - argued that bailout measures have made Greece's economic situation deteriorate.

"Despite all arguments, the first bailout did not make the situation for Greece better, but worse," Mr Schaeffler said, according to the AP news agency.

"Expanding the fund will make the situation even worse."

Athens blockade

All 17 countries that use the euro must ratify the commitment made in July to expand the powers of the EFSF and boost its bailout guarantees from 440bn euros (￡383bn) to 780bn euros.

So far, 10 have approved the measure.

As Europe's largest economy, Germany's commitment to the fund would rise from 123bn euros to 211bn.

That bigger fund is already being dismissed as inadequate in the light of the worsening Greek crisis and the threat of it spreading to other economies.

The former President of European Commission Romano Prodi said the German public will come round to supporting the deal

Inspectors from the "troika" of international creditors supporting Greece - the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) - returned to Athens on Thursday to decide if the government has done enough to warrant another 8bn euros (￡6.9bn) of loans.

"The climate was positive and creative after the tough measures that were decided," Greece's finance ministry said in a statement.

Public workers blocked entrances to a number of ministries in Athens, protesting against the deep austerity measures the government has imposed as a condition of the bailout.

"Take your bailout and leave," shouted protesters outside the finance ministry, Reuters news agency reported. They said they wanted to prevent Finance Minister Evangelos Venizelos from meeting the troika officials.

Taxi drivers, hospital workers and other public sector staff were also due to strike on Thursday, angered by the announcement of new austerity measures including pension cuts and a new property tax.

Without the new loans - laid out under the terms of a bailout agreed last year - Greece will soon run out of money.

New taxes have been approved and deeper spending cuts have been promised, but some decisions have been delayed and privatisation is running behind schedule says the BBC's Chris Morris in Athens.

Many people believe that austerity measures are pushing Greece's crippled economy deeper into recession and strangling any chance of growth.

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Dhallywood's fight for survival

2011-11-01T12:34:00.000-07:00

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5 October 2011 Last updated at 17:37 GMT By Anbarasan Ethirajan BBC News, Dhaka Sixty local films were made last year in Bangladesh The Bangladeshi film industry, known as Dhallywood, is about to face serious competition.

Ever since its independence from Pakistan in 1971, local cinema halls have been banned from showing Indian films.

It was an attempt to protect the local film-making industry which is worth $20m (￡12.9m).

But in the coming days, cinema halls here will show three Indian Bengali movies and nine more Hindi movies from Bollywood will be screened later.

Even though the move is not permanent, it has angered film-makers, producers and actors and has caused a fight between them and the theatre owners.

"Bollywood is a big institution. Their production cost is 100 times more than our production cost. How can we compete with them?" asks Masud Parvez Sohel Rana, a well-known Bangladeshi actor and director.

"It seems to me like you are asking a flyweight boxer to fight with a heavyweight boxer," he adds.

He says even the one-off screening of Indian movies will put more pressure on the government to lift the ban permanently, and if it happens, the home-grown movie industry will vanish in no time.

Film industry leaders also warn that more than 100,000 people are dependent on the industry and their jobs could be in danger.

Huge losses

However, cinema hall owners argue that they are losing revenue because of the ban.

Bangladeshi cinema owners are keen to show Bollywood movies

It is also because of the falling number of films produced locally.

About a decade ago, Bangladesh produced about 100 movies a year.

But last year, the number dropped to about 60 and it is expected to go down further this year.

"We are not getting enough movies to screen in our cinema halls," says Iftekharuddin Naushad, who owns Madhumita cinema hall in the capital Dhaka.

"As a result, many halls have either been shut down or converted into malls."

In recent years, the number of cinema halls in Bangladesh has reduced from about 1,500 to just over 600.

Many say the business is not sustainable under present circumstances and satellite television channels have been drawing away viewers.

"Our cinema halls are running with one fourth of their capacity and we are incurring huge losses," says Ahasanullah Moni, who owns Razmoni cinema hall.

The Bangladesh Motion Pictures Exhibitors Association has been urging the government to allow Bollywood movies to be screened in local cinemas to inject new life into the business.

"We are not asking to open the floodgate by importing hundreds of films. We want to screen a certain number of good Indian movies, Bollywood films, so that we can have some healthy competition," says Mr Naushad.

Joint production

Some film critics argue that importing Bollywood movies will also have benefits by forcing Dhallywood to improve its standards.

They say the poor scripting, production and technique of Bangladeshi films are driving away viewers from cinema halls.

Bollywood movies are already shown on satellite television channels in Bangladesh.

Pirated DVDs of these films are freely available across the country with Bollywood stars like Shahrukh Khan, Salman Khan and Aishwarya Rai are more popular than local actors.

Film Meherjaan include cast and crew from Bangladesh, India and Pakistan

"Without bringing Indian films to the local market, there is no way to revitalise the industry. Actually there is no industry here," says young Bangladeshi director Rubaiyat Hossain.

To overcome the present crisis, Ms Hossain proposes more Indo-Bangla joint production.

Her critically acclaimed film Meherjaan, included cast and crew from Bangladesh, India and Pakistan.

"I don't think I could have brought my film to the present technical level, if I hadn't worked with Indian technicians," says Ms Hossain.

"I have learnt a lot by working with them and we do not have that kind of post-production facilities here in Bangladesh," she adds.

In an age of satellite channels, internet and cell phones, the demand for good and well-made movies is increasing.

So it seems Bangladeshi films cannot avoid competition for very much longer.

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Warning over mobility aid scams

2011-11-01T09:03:00.000-07:00

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28 September 2011 Last updated at 23:02 GMT By Simon Gompertz Personal finance correspondent, BBC News The elderly are vulnerable to high prices quoted on the doorstep Elderly and disabled people face risks from unscrupulous traders offering stairlifts and other mobility aids on the doorstep, a watchdog is warning.

The Office of Fair Trading (OFT) is promising to try to stamp out unfair sales practices, by removing credit licences and encouraging trading standards officers to prosecute.

The watchdog said it had received thousands of complaints.

Buyers can pay 50% more than High Street prices on the doorstep.

Some have overpaid by hundreds or even thousands of pounds.

Promises

The OFT has received thousands of complaints about sales of the equipment, which includes mobility scooters, special chairs and adjustable beds.

Some victims found the equipment they were promised failed to turn up.

May Bell, an 88-year-old from Sheffield, told BBC News how she was left ￡1,800 out of pocket and trapped on the ground floor of her house after a visit from a salesman.

"I thought I'd had it," she said. "I thought it was the end of my time."

May Bell said she was trapped on the ground floor of her home

She had been promised a new stairlift. But after her old one was disconnected, the replacement did not arrive.

For five weeks, she was forced to sleep in a chair and use a commode instead of her toilet.

In July, the man who visited her, Shane Johnson of Nottingham Mobility, was convicted of breaching consumer protection regulations and sentenced to a year in prison.

Ann Pope, from the OFT, promised more enforcement activity to protect consumers.

"We are issuing a warning to the industry that we will take further action where necessary," she said.

Rules

There is nothing to prevent traders knocking on doors, although there are rules on what they can do once they gain entry to a potential customer's home.

They should show identification and be honest about who they are. They should make it clear that they are selling something and not put consumers under pressure.

Some doorstep sellers have pretended to be from social services to establish trust. Others stay for hours and refuse to leave.

In Sheffield, May Bell had a new stairlift installed for free after the manufacturer heard about her plight. But she remains frightened about answering the phone or dealing with a knock on the door.

Her granddaughter, Frances Bell, is still angry about what happened.

"They are scum to do that to old age pensioners, to vulnerable people, and leave them in the situation that they left my nan in," she said.

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Firms fear energy price hikes

2011-11-01T04:19:00.000-07:00

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4 October 2011 Last updated at 04:09 GMT By Gerry Northam Reporter, File on 4 Energy-intensive industries have seen gas and electricity bills soar Despite government hopes that manufacturing will lead the UK recovery, there are fears some energy-intensive industries may be forced to leave the UK as prices rocket.

Davin Bates is standing at the cool end of a tunnel kiln watching racks of cups and sugar bowls trundle out ready for glazing.

As we peer fifty feet in to the bright orange centre, he tells me that the internal temperature is well over 1000 degrees centigrade.

Then he breaks the bad news about his gas bill.

Davin is a management accountant at one of Stoke-on-Trent's remaining successful potteries, Steelite. It is a sprawling village of redbrick buildings employing 650 people which produces half a million pieces of crockery a week.

There are seven kilns in all. Keeping them fired up was costly enough last year.

But this year Davin has faced a 55% rise in the cost of gas. The firm's electricity bill has also gone up by 17%.

Tough decisions

"We find it difficult to pass on these costs to our customers," says Davin.

He says profits are therefore getting squeezed and the company's future plans are in jeopardy: "Investment will have to be looked at, because this is coming off the bottom line," he adds.

Across the whole sector, energy bills are driving managers to make tough decisions.

At the British Ceramic Confederation, Dr Laura Cohen has watched factory after factory close - and she identifies high energy costs as a major problem.

She knows that other companies have moved production overseas.

"We heard only a few weeks ago that one firm has transferred all of their manufacturing to China," she says. "Energy costs are a significant part of that."

It is a trend which is not confined to the long-troubled Potteries. Other parts of the country are hit too.

The huge chemical industry, which contributes ￡30m a day to the British economy, is also suffering.

At the family firm of Thomas Swan in County Durham, enormous sealed vats of chemicals are heated and stirred to make specialist powders and liquids for niche hair dyes, printing and cleaning products.

Managing director Harry Swan, a great-grandson of the founder, has steered the company through the recession and now finds himself hit by electricity and gas bills of almost ￡1m.

His plant uses 28,000 megawatt hours of energy a year. Even before the latest round of price rises, his extra energy costs this year were equivalent to a month's profit. He is dreading the next bill.

For the Chemical Industries Association, chief executive Steve Elliott fears British job losses could be imminent: "There will come a moment when people say enough is enough," he says.

"There will only be one direction of travel - out of the UK."

There could be worse to come.

Industries have been totting up the cost of government and European initiatives to promote a low-carbon economy, the so-called "green taxes", and some say their additional bill will run into the millions.

'Tipping point'

Cemex UK runs the biggest cement plant in the country, based on the outskirts of Rugby. It is not averse to the idea of a green economy. In recent years it has moved away from dependence on coal alone.

It now also burns chippings from old tyres and a fuel made from minced-up household waste. But the company is worried about the impact of coming green taxes.

Director Andy Spencer estimates that they will increase his annual energy costs by ￡12m.

What most concerns Cemex is that other countries will not impose similar new taxes on their cement producers. His prices would then struggle to compete on world markets.

So Andy Spencer's thoughts are already turning to the possibility of switching production out of the UK to Cemex plants abroad, particularly in Egypt.

"I can foresee a time when economically it makes more sense to do that and I don't think that time is far away," he says.

"We are very committed to the UK, but there is a genuine concern that we could reach that tipping point where the economics don't stack up to produce domestically in the UK."

This seems at odds with the government's goal of rebalancing the economy in favour of manufacturing industries. The Chancellor George Osborne has called for "a march of the makers".

Andy Spencer sees that march hitting a roadblock. "We know we need to make the transition to a green economy," he says.

"But it must not come at the price of exporting our domestic energy intensive industries."

No blank cheques

The Energy Secretary Chris Huhne says there is little the government can do about some energy price rises.

"How much of this is due to the fact that these businesses are very reliant on world market factors? We've had a 27% increase in the gas price on world markets over the year to August," he says.

"Now with the best will in the world, I can't do anything about that."

But he argues the government's reform of the electricity market will reduce prices for business and domestic consumers alike.

He is working on plans to announce special help for high-energy industries later this year, and says that in 2020 the net effect of the government's energy and climate change policies will be to reduce bills across the board.

But he is sceptical of some complaints on green taxes.

"I don't accept that some of the stories we are hearing about green taxes are correct. There are some ludicrously inflated and exaggerated claims," he says.

"I do not want to see even the most energy-intensive industries leave the UK, that would be madness.

"But am I writing blank cheques to anybody who says they've got a problem? No."

File on 4 is on BBC Radio 4 on Tuesday 4 October at 20:00 BST and Sunday 9 October at 17:00 BST. Listen again via the Radio 4 website or download the podcast.

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VIDEO: 'Absurd' to blame China for US woes

2011-10-31T23:56:00.000-07:00

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3 October 2011 Last updated at 01:53 GMT Help

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VIDEO: The future for in-flight movies

2011-10-31T20:50:00.000-07:00

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Keith Wallace reports on how technology could bring about major changes to in-flight entertainment in the skies.

Airlines are looking at options to link your phone or laptop to the aircraft's entertainment system or the internet and touch-screen ordering for your drinks and snacks on board.

Get in touch with Fast Track via e-mail or Facebook.

Watch Fast Track on the BBC World News channel on Saturdays at 0430, 1230 and 1930 GMT or Sundays at 1930 GMT.

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Growing trade ties between Indian and Pakistan

2011-10-31T16:01:00.000-07:00

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2 October 2011 Last updated at 16:04 GMT By Shahzeb Jillani BBC News Pakistan's commerce minister (right) took a large delegation with him Business leaders from India and Pakistan say there's new optimism about the efforts their governments are making to improve trade ties. But critics warn that overcoming decades of mistrust may not be that easy.

For the first time in 35 years, a Pakistani commerce minister led a business delegation to India last week. The entourage included nearly 80 leading industrialists, traders and high-ranking officials.

Peace talks between the two nuclear-armed neighbours broke down in 2008 after the attacks in the Indian city of Mumbai, which India blamed on Pakistan-based militants.

Nearly three years on, as if to emphasize a sense of normalcy, the Pakistani Commerce Minister, Makhdoom Amin Fahim, was hosted at the city's iconic Taj Mahal Hotel - which was one of the main targets of the 2008 attacks.

There, leading Pakistani traders got a chance to mingle with their equally eager-for-business Indian counterparts.

Between them, they spoke not just of the profits their individual businesses could make if their governments removed the long standing hurdles in their way. But also of how much the people of their two countries, and indeed the wider region, stand to benefit from freer movement of goods, money and commodities.

Win-win situation Continue reading the main story

The only way I see realization of trade potential between our two countries is for India to remove its non-tariff trade barriers and for Pakistan to reciprocate by granting the MFN status to India”

End Quote Hasan Khan Former advisor to Pakistan's Ministry of Finance Vijay Kalantri, president of All India Association of Industries, said traders on both sides feel business between India and Pakistan is a win-win situation for everyone.

"Why are Indians and Pakistanis forced to trade unofficially via third countries like Dubai or Sri Lanka?" he tells the BBC from Mumbai.

"All we are asking is, let there be direct business-to-business contact between us."

After the talks in Delhi, ministers from the two sides announced their agreement to boost their annual bilateral trade from current $2.7bn (￡1.7bn) to $6bn by 2015.

They also pledged to ease business travel and promote bilateral trade through the land route.

For Pakistan, a significant announcement was a pledge by India to drop its opposition to the European Union's plan to grant Pakistan tariff waiver on select commodities to help it recover from the devastation of 2010 floods.

There was hope that Pakistan might reciprocate and grant India the Most Favoured Nation status (India granted Pakistan MFN status way back in the 1990s).

Even though no such announcement came, Pakistan committed itself to a road map to implement preferential trade ties with India, as prescribed under the South Asia Free Trade Agreement (SAFTA).

Trade barriers

There are a number of explanations why Pakistan has so far withheld the MFN status from India.

At present there are a number of barriers to prevent trade between Indian and Pakistan

First is political. Pakistani leaders have often linked it to the resolution of the core issue of Kashmir.

It's a stance which has long been propagated for mainly domestic consumption.

But there is a sense in Pakistan that while the country should continue to push for a negotiated settlement of the Kashmir issue, trade and commerce should not be held hostage to resolution of political disputes.

The second is protectionism. For years, domestic industry in Pakistan has feared it would be swamped by imports from India. But even there, the mood appears to have shifted.

Senator Haji Ghulam Ali, president of Federation of Pakistan Chambers of Commerce and Industry, says there's a consensus that Pakistan should open up to Indian business.

"Everyone now recognizes it will be beneficial for both sides. It's just a matter of time before it's done," he tells the BBC from Delhi.

Business leaders say that less trade barriers would benefit firms in both countries

However, the last, and more plausible, obstacle is the issue of non-tariff barriers.

"In my experience, India has one of the most restrictive trade regimes in the region," asserts Dr Ashfaq Hasan Khan, a former advisor to Pakistan's Ministry of Finance. His view matters, given has decades of dealings with South Asian governments on trade liberalization.

He explains that despite granting Pakistan the MFN status, India has a variety of non-tariff barriers in place - such as, stringent certification codes, customs rules, security clearances and movement restrictions - which make it virtually impossible for Pakistani traders to do business in India.

"The only way I see realization of trade potential between our two countries is for India to remove its non-tariff trade barriers and for Pakistan to reciprocate by granting the MFN status to India," says Mr Khan.

He adds: "Unless there's political will to do that, everything else is just talk and photo-op."

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New £50 note set for 2 November

2011-10-31T12:50:00.000-07:00

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30 September 2011 Last updated at 15:24 GMT Boulton (left) and Watt were two key figures in the Industrial Revolution The Bank of England has announced that the new-style ￡50 note will be introduced on 2 November.

The design of the new note was revealed in 2009 and features entrepreneur Matthew Boulton and engineer James Watt, who pioneered the use of steam engines in textile manufacturing.

The Bank says the note will have a range of enhanced security features.

It will be the first time that two portraits will appear together on the reverse of one its banknotes.

The Boulton and Watt note will initially be circulated in tandem with the current ￡50 note featuring Sir John Houblon, the first governor of the Bank of England.

The Houblon note will eventually be withdrawn. The Bank will announce a withdrawal date in due course.

The design has seldom changed since it was first introduced in 1725. A white ￡50 was in use for more than 200 years until 1943.

There are 210 million ￡50 notes in circulation, valued at ￡10.5bn. That is 84% higher than 7 years ago.

The ￡20 is the most common Bank of England note in circulation, with 1.55 billion notes in circulation worth ￡31bn.

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US factory orders drop slightly

2011-10-31T08:41:00.000-07:00

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4 October 2011 Last updated at 15:08 GMT Activity remained subdued at US factories in the summer New orders at US factories declined slightly, adding to concerns over the health of the world's largest economy.

The Commerce Department said orders for manufactured goods fell 0.2% in August, after rising a downwardly revised 2.1% in July.

Economists had expected orders to be unchanged.

But orders for capital goods - expensive items such as computers and communications equipment - rose 0.9%, the second gain in three months.

Sluggish growth in the US economy earlier this year has not been sufficient to reduce high levels of unemployment.

The economic recovery is "close to faltering", Federal Reserve Chairman Ben Bernanke said on Tuesday.

On Monday, the ISM Manufacturing Index unexpectedly rose in September, beating expectations that the index would remain unchanged.

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Kodak denies any bankruptcy plans

2011-10-31T05:00:00.000-07:00

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2 October 2011 Last updated at 10:09 GMT Kodak is one of the best-known and most iconic brands in photography Eastman Kodak has said it has "no intention of filing for bankruptcy".

The struggling US camera and printing group's comments came after it confirmed it had hired a law firm well-known for handling bankruptcy protection cases, Jones Day.

Kodak said it was "not unusual for a company in transformation to explore all options".

Shares in the firm fell 54% on Friday as fears persist about its future. It has not made a profit since 2007.

Kodak, synonymous with film photography for more than 100 years, has struggled to adapt to the digital age.

Last week it announced plans to borrow $160m (￡103m) for "general corporate purposes".

Kodak is now continuing to explore a sale of its digital imaging patents, worth an estimated $2bn.

Mark Kaufman, an analyst at Rafferty Capital Markets, said: "I don't believe bankruptcy is inevitable.

"This is a pretty valuable portfolio, they should get a good price.

"They need to get this [sale] out of the way. They need to sell this portfolio, raise some type of cash."

The company currently has a market value of $210m. This compares with $31bn at its height in February 1997.

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Sharp rise in eurozone inflation

2011-10-31T00:31:00.000-07:00

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30 September 2011 Last updated at 11:18 GMT Continue reading the main story Last Updated at 03:49 GMT

Market indexCurrent valueTrendVariation% variationThe eurozone inflation rate increased to 3% in September, up from 2.5% in August, according to the first estimate from the EU statistics agency.

No breakdown was given, but Eurostat said its initial forecasts were usually "reliable".

Separate figures also released by Eurostat showed the eurozone unemployment rate unchanged at 10% in August from the previous month.

The number of people unemployed fell by 38,000 compared with July.

The unemployment rate in Spain, the highest in Europe, rose slightly to 21.2%, with youth unemployment hitting 46.2%.

However, the jobless rate for those under 25 in the eurozone as a whole fell slightly, to 20.4%.

Falling shares

Analysts, who had expected a small rise in inflation, pointed to technical changes in the way price rises are calculated as a contributory factor in the sharp increase.

Continue reading the main story Andrew Walker Economics correspondent, BBC World Service

This rise in the inflation rate makes the situation even more complicated for the European Central Bank.

The ECB has been widely criticised for raising interest rates earlier this year, as several eurozone countries are struggling with government debt crises and economic growth that is either weak or completely stalled.

The ECB has an inflation target of close to but below 2%. So the increased rate of price rises will make the Bank even more cautious about making interest rate cuts.

In addition, some of the ideas being discussed for responding to the eurozone crisis involve a wider role for the European Central Bank which could be characterised as, in effect, "printing money". As this could be inflationary, the latest data on price rises underlines the potential risk of such a move.

"It's not a nice number, but I wouldn't panic that the high inflation which some have warned about for years is finally here," said Martin Van Vliet at ING.

"We will see inflation declining over the next months, staying above 2.5% but next year, with stable oil and food prices, we will fall to lower levels."

The European Central Bank target for inflation is 2%, and the bank raised interest rates in July from 1.25% to 1.5% in order to combat rising prices.

However, the continuing debt crisis makes further rate rises in the coming months unlikely, analysts say.

With confidence in the outlook for economic growth in the eurozone fragile, policymakers are unlikely to risk raising rates, they say.

Equally, however, sharply rising prices make a cut in interest rates less likely.

This put further downward pressure on markets that fell sharply in early trading.

Germany's Dax index was down 2.5%, with France's Cac 40 and the UK's FTSE 100 sliding about 1.5%.

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Apple unveils refreshed iPhone 4S

2011-10-30T19:52:00.000-07:00

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4 October 2011 Last updated at 23:38 GMT Rory Cellan-Jones looks at Apple's new iPhone 4S

Apple has unveiled the latest iteration in its iPhone range, but there was no sign of the widely rumoured iPhone 5.

The iPhone 4S, as the model will be known, boasts an improved camera and significantly extended battery life.

It will run the latest iOS5 operating system, which is set for release on 12 October.

The event was the first major announcement for new boss Tim Cook who took over from Steve Jobs in August.

The iPhone 4S, which will go on sale on 14 October, will be available in 16GB, 32GB and 64GB models - in both black and white.

It has the same look and feel as the existing iPhone 4 which was launched 15 months ago.

However, Apple said that updates to iOS meant the phone would boast some "200 new features".

Continue reading the main story Shares in Apple fell by almost 5% within minutes of the eagerly anticipated launch, with analysts saying that investors and Apple fans had expected the latest version to be a more radical improvement over its predecessor.

However, the company's shares later regained most of their losses to close down just 0.6%, albeit underperforming the NASDAQ index as a whole.

Voice control

Among the additions is an "intelligent assistant" that allows users to ask questions aloud and receive detailed answers back.

Siri, which began life as a third-party app, was purchased by Apple in 2010 but has yet to appear within its software.

Luke Peters, editor of gadget magazine T3, said that the software announcements would do just enough to keep Apple fans interested in the face of strong challenges from rival smartphone manufacturers.

Continue reading the main story

You could sense a great wave of disappointment rolling through the Apple community.

Why rush out and buy the new, new thing if it looks just like that old phone that's been around for more than a year?

"Some people were looking for a brand new phone and they haven't got that today, so some will be disappointed," he told BBC News.

"But with the update to iOS5 and Siri that could be enough to sway people to make the investment."

Disappointment

Other industry watchers were less charitable about the iPhone refresh, and the non-appearance of the iPhone 5.

Gareth Beavis, phones editor at TechRadar said that the new hardware would leave many people underwhelmed.

"It was quite disappointing. I think there is going to be a lot of anger from users expecting something big bold and quite exciting after a long time of waiting from the iPhone 4.

"People will buy this in their droves, but Apple has missed a trick by just releasing the exact same phone again with marginally upgraded specs."

Details of the new phone were unveiled by Apple's Philip Schiller

For Apple's new chief executive, the event was as much about making a statement about his leadership as it was new products.

Tim Cook had previously acted as interim boss, looking after the company while Steve Jobs was on sick leave.

Unlike his charismatic predecessor, Mr Cook left the biggest announcement of Tuesday's event to a colleague - marketing boss Phil Schiller.

"Maybe he wants to bring other people to the forefront by letting others speak on his behalf," said Gregory Roekens, chief technology officer at PR firm Wunderman.

"But in terms of style, it was underwhelming. People were expecting iPhone 5, but instead it's almost fixing the weaknesses the previous phones had.

"It will be interesting to see how people react to that."

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Southern Cross homes transferred

2011-10-30T15:05:00.000-07:00

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30 September 2011 Last updated at 07:57 GMT Southern Cross is to be wound up by the end of the year A third of Southern Cross care homes have been transferred to new operators, the company has announced.

Southern Cross said the transfer of 250 homes would be followed by further transfers in October and November.

Southern Cross was the UK's biggest care home operator, with 752 homes, but ran into difficulties when it was unable to pay its rent to landlords.

In July, the firm said it was to cease trading after all of its landlords said they wanted to leave the group.

The first "wave" of homes have been transferred to about 18 different operators.

Its largest landlord, NHP, which owns 249 of the homes, will be included in the second wave.

NHP is forming a new company with turnaround specialists Court Cavendish to run the homes itself.

Winding up

Southern Cross said it had entered unconditional business purchase agreements covering 70% of its homes, with the remaining 30% still in progress.

It said all the homes would be transferred by the end of the year and the company would be wound up.

The company also announced the resignation of it chairman, Christopher Fisher, who stepped into the role in April to oversee the restructuring process.

"Now that the transfer of homes has commenced, I consider my role complete," Mr Fisher said.

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Fraudsters turn to card snatching

2011-10-30T11:05:00.000-07:00

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4 October 2011 Last updated at 23:18 GMT Card snatching when customers have been distracted in shops has been used by fraudsters Con-artists are resorting to basic card snatching, police say, as the payments industry continues to cut losses from more hi-tech crimes.

Fraud losses on UK credit and debit cards in the first half of the year fell by 9% compared with the same period of 2011.

The UK Cards Association said this was the third consecutive half-year fall and that ￡169.8m was lost.

Fraudsters were often relying on distracting shoppers to steal cards.

Police dealing with cases say con-artists have been grabbing cards in shops or at cash machines without the owners noticing, or tricking them into revealing their Pin code.

Online banking

Total losses hit a peak at ￡610m in 2008, but have mainly been falling since.

Online banking dropped by 32% from the first half of 2010 to the first six months of this year to ￡16.9m.

This was the result of computer users being more wise to security and banks' use of fraud detection software, the association said.

Continue reading the main story Shield entry of a Pin number at a cash machine with a free handRegularly update a computer's anti-virus softwareBe wary of unsolicited e-mails and telephone callsThe amount lost through telephone banking rose by 48% over the same period to ￡8.6m.

Often, this involved a caller pretending to be from the police or a bank and telling their victim that card has been subject to a fraudulent transaction.

They then asked the victim to key some details into the handset. They guessed the numbers from the audio tones on the keypad and used those details to access their bank account and withdraw money.

Detective Chief Inspector Paul Barnard is head of the Dedicated Cheque and Plastic Crime Unit, which is a specialist police unit sponsored by the industry.

"There has been an increase in old fashioned scams - criminals using distraction techniques and social engineering methods to get hold of people's cards or phone banking details," he said.

"We are urging everyone to be on their guard. Your bank or the police will never cold call you or email you and ask you for your login details, cards or Pins. If anyone does, they are probably a criminal, so hang up the phone or delete the email."

Innocent victims of fraud on their debit or credit cards are protected under rules in the UK banking system, so they should always be refunded any financial losses.

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Where are the Occupy Wall Street protests heading?

2011-10-30T06:30:00.000-07:00

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3 October 2011 Last updated at 22:58 GMT By Laura Trevelyan BBC News, New York Commentators are wondering if this movement could become a "Tea Party" for the left As a man known as Mercury puts the finishing touches to his corporate zombie make up, he explains why he's joined the anti-capitalist protests here in the shadow of Wall Street.

"We are inspired by the Arab Spring. Americans have rights but they're too often apathetic."

Welcome to Zuccotti Park, where the leaderless protest is now entering its third week.

Sophie is here to protest about the execution of a Georgia man, Troy Davis.

Will Estrella believes this is his generation's revolution.

And Brian Phillips, a marine turned housing community official, wants to see the Federal Reserve abolished.

The protesters aren't unified in their motivations or their demands, but they're tapping into discontent about inequalities in an America still struggling after one recession and fearful about entering a second.

'We're the 99%'

Brian Phillips, who wears his marine dog tags round his neck, says he has been lied to all his life by officialdom and he's had enough.

The protesters want a change in political and economic culture

That's what made him leave Washington state and his job at a low-income housing unit to come here.

Now Brian is efficiently dealing with media requests.

I tell him that I want to speak to one of the 700 arrested on Brooklyn Bridge on Sunday.

"Arrested Sunday!" calls Brian. Two young men step forward for me to interview.

That's how we communicate, Brian explains, with marine-like efficiency, as to his left a group start the day with yoga.

Police officers stand at the edges of the protesters' encampment, and today at least relations seem cordial enough.

But on Saturday the demonstrators say the police ushered them on to a roadway section of the Brooklyn Bridge rather than the pedestrianised walkway, fenced them in and then arrested them for disorderly conduct.

The NYPD says this isn't correct, and has released a video of the police telling the protesters not to go on the roadway section of the bridge.

Freelance photographer Will Estrella says the police clearly guided him and others on to the bit of the bridge they weren't meant to be on.

The NYPD's tactics for policing this protest have been called into question after a high ranking officer was seen on a YouTube video using pepper spray on demonstrators the weekend before last.

Will Estrella wants this to be a peaceful protest, a theme echoed across Zuccotti Park.

Most of the protesters I saw camping out at Zuccotti Park were young - in their mid-20s. Many have gone from job to job since graduating.

They have known difficult economic times in young adulthood, and they don't like a system which to them seems to reward what they call the "1%" of society.

"We're the 99%", they say.

Their manifesto supports the people of the world against corporate greed, and calls for people to assert their power and create a process to address the problems we face.

In the centre of Zuccotti park, amid the sleeping bags, is the communal food area.

Ange, a 24-year-old redhead who does freelance art work in Manhattan, is helping organise the food for the protesters.

"I like communal decision making, something that comes from the bottom up," she explains. Ange isn't sure how long she'll be here, but she's pleased to be part of a grassroots movement.

Where will this lead? No-one knows. But the protesters say their enthusiasm won't fade with the autumn sunshine.

The question is whether this ad hoc group of protesters - who feel they're getting the short end of the stick while corporate America hoards money - could morph into a political movement, a kind of left wing Tea Party.

The city's unions are now starting to back the protesters, something they didn't at first, suggesting they see the potential here.

Jesse Cooper Levy, a bearded 24-year-old, hopes this movement will influence politics.

His particular concern is what he sees as the corrupting influence of corporate lobbyists on Washington DC.

"What do you want?" I ask the protesters. "Change", comes the answer - a change in political and economic culture.

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Greeks worry about ambitious privatisation plans

2011-10-30T01:48:00.000-07:00

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4 October 2011 Last updated at 23:30 GMT By Nigel Cassidy Business correspondent, BBC News, Athens The Greek lottery OPAP will be sold as part of an ambitious privatisation programme Go into any of Greece's 5,000 OPAP lottery shops and there is one thing you definitely cannot bet on.

It is that the array of Greek state assets lined up for sale will fail to raise an agreed 50bn euros by 2015 to lighten the country's crushing international debts.

OPAP is on a long list of nearly 20 entities earmarked for full or partial sale, by order of the European Union (EU) and the International Monetary Fund (IMF).

They are the sell-offs Greece's European partners are now demanding should be stepped up, not least because efforts to raise revenue through tax receipts are still defeating the country.

But in spite of Greece's lofty plans, the BBC has found that only one solitary stake has actually been sold in recent months: a 10% stake in the mobile phone group OTE has been bought by Deutsche Telecom for 400m euros.

Consequently, the chances of Greece reaching its target of raising 5bn euros by the end of the year from asset sales look slim.

Fear and frustration

It is easy to see why the programme is being opposed every step of the way by most of the state's employees.

As protesters unfurl their banners in Syntagma Square, it is clear that they bracket all the mooted sell-offs with other unpalatable measures, such as austerity tax rises and job cuts.

Greek utility workers are wary about plans to sell off the companies they work for

Staff fear that as public services - from power and water supply to transport and defence industries - are sold, it is inevitable that their pay and pensions will be drastically cut.

For their part, Greece's European partners are infuriated at the painfully slow progress in freeing up all these utilities.

Critics frequently suggest Greek privatisation is mired because the Pasok party in power has traditionally protected state workers, and is not pushing the measures through with enough vigour or conviction.

Much resistance

Whether or not this is true, there are several other reasons for the delays.

Some of these are apparent if you take a ride to the Athens suburb of Zografou.

(Bids for 49% of the railway OSE are welcome, by the way, but offers may not be forthcoming until losses of a billion euros a year have been stemmed.)

Greece remains "the last Soviet bastion in Europe", says Eydap's chief executive Nikolaos Bardis

This is where you find the headquarters of Eydap, the well-respected water and sewage utility serving Athens, which employs 2,800 workers and has a good reputation for maintaining supplies of high-quality drinking water.

Eydap is supposed to be privatised next year, but the company says little has happened since it was put on the list.

Few workers are expected to lose their jobs after any sell-off, but bosses admit that pay, conditions and pensions may not be maintained at current levels.

Yet a huge union poster outside the front door shows a wad of euro notes, with a running tap emerging from them.

The message: Do not try to profit from our essential services.

'Soviet bastion'

There are two reasons why the sell-off process has been slow, according to Eydap's chief executive Nikolaos Bardis.

Bureaucratic delays have contributed, as have investors' concerns that the potential value of the company might fall, given the current financial climate.

"We can say that Greece remains the last Soviet bastion in Europe," Mr Bardis says.

"There is a lot of opposition to the process. Socially this is a completely new idea. People here are just not used to private investors controlling state-owned companies.

"It is also true that the (Eydap) capitalisation is low because the market is extremely distressed and [the sell-off] didn't happen much earlier when the capitalisation was larger."

Investors' concerns

Mr Bardis has recently returned from a visit to the City of London to drum up investor interest in his company.

MP Elena Panaritis says privatisation is slow because democracy in Greece is weak

One concern expressed there was that the Greek government was retaining the right to set water charges, a job that might be expected to fall to an independent regulator.

Potential buyers do not like the idea of political interference in consumer charges, which could easily have the effect of wiping out profits or investment spending plans, Mr Bardis observes.

"They are also concerned about the country's solvency and whether it will stay in the eurozone or be forced to re-adopt the drachma," he says.

"And they are making the assumption that the country will ask its lenders to take a 50% haircut on its loans," he adds, which means the lenders should expect only half their money to be repaid.

While investors are getting used to the idea, the same seems to be the case with the Greek people, who are gradually coming to realise that their country is broke.

"I do believe there is now a a silent majority in the society which is in favour of reform," says Nikos Koritasis, a principal at the Koultadis law firm that is deeply involved in the country's gas privatisation.

The company is working for a new Greek agency that has been set up expressly to run the sale of the country's assets, and Mr Koritasis insists people understand Greece has to try something new.

"There have been long delays, but there is now a new will to speed up the whole process," he says.

Speedy privatisation

One member of the Greek parliament who has a clearer perspective than most is Elena Panaritis.

She is a former World Bank executive, brought into the ruling Pasok party by Prime Minister George Papandreou to help oversee decisions and educate other politicians about the ways of the markets.

Following another long night of parliamentary debate, the country is making "superhuman" efforts to clear the way for the privatisations, yet it is taking time, she laments.

"We haven't been able to be as effective precisely because our bureaucracy is so bad," she reasons.

"Getting anything done is so complicated, with conflicting regulations and far too many people involved in taking decisions on each single asset.

"All this is taking longer than the 16 months we have to get it resolved. There really is the appetite to get the job done, but there are layers of steps and we get bogged down with the actual details."

It took the privatisation pioneer Britain well over a decade to free up and sell off its essential industries. Greece is expected to do much the same in a few months.

So it is no wonder that privatisation is a hard sell. It is another leap for this state-dominated island nation into what are seen as shark-infested commercial waters.

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VIDEO: Philippines aims to boost rice output

2011-10-29T22:06:00.000-07:00

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7 October 2011 Last updated at 00:40 GMT Help

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UK construction activity 'stalls'

2011-10-29T17:18:00.000-07:00

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4 October 2011 Last updated at 10:11 GMT Markit said uncertainty over future economic conditions dampened confidence in the sector Activity in the UK construction sector slowed to "near stagnation" in September, a closely-watched survey has suggested.

The Markit/Cips construction purchasing managers' index (PMI) fell to 50.1, just fractionally above the 50 "no-change" threshold that separates expansion from contraction.

In August, the index had read 52.6.

Markit said fewer new orders was the reason behind the slowdown, but added that staffing levels rose slightly.

Confidence in the sector remained relatively subdued, the research group said.

Also on Tuesday, builders' merchant Wolseley announced a return to full-year profit but said recent weaker economic forecasts were likely to have an impact on its markets.

On Monday, Markit/Cips data showed surprise growth in the manufacturing sector.

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Dexia shares slump on Greece woes

2011-10-29T13:31:00.000-07:00

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3 October 2011 Last updated at 19:56 GMT Dexia received a 6bn-euro bailout at the height of the financial crisis Dexia has called an emergency board meeting amid fears over its exposure to Greek debt.

Meanwhile, shares in the Franco-Belgian bank fell 10% on Monday after rating agency Moody's said it was reviewing Dexia for a possible downgrade.

The finance ministers of Belgium and France are meeting eurozone colleagues in Luxembourg, and are expected to discuss ways to support the bank.

Financial markets fell on news Greece would miss deficit reduction targets.

Greece announced on Sunday that the 2011 deficit was projected to be 8.5% of gross domestic product, down from 10.5% in 2010, but short of the 7.6% target set by the EU and IMF.

Write-off

The news affected financial markets across Asia and Europe, with bank shares among the hardest hit.

Eurozone banks have been hit by cash outflows since the summer amid fears that Greece, and possibly other governments, may ultimately default on their debts, and even leave the eurozone, leaving their lenders sitting on big losses.

Dexia shares initially fell 14% on news of the possible rating downgrde, and despite a rally back in later trading, they were still the worst hit in the financial sector.

Moody's cited Dexia's potential losses on a Greek debt default, as well as the bank's recent difficulties in borrowing short-term cash from markets, as reasons for the rating review.

Continue reading the main story

It was only on July 15 that the European Banking Authority [stress tests]... portrayed Dexia as one of the strongest banks in Europe”

End Quote Robert Peston Business editor, BBC News Dexia's exposure to Greek government debt totals 3.4bn euros ($4.5bn; ￡2.9bn). Its total exposure to Greece - including to private-sector Greek borrowers - is 4.8bn euros.

It has already written off 21% of its Greek debts, but market prices now suggest the eventually loss to lenders could be in excess of 50% of the amount owed by Greece.

Paris-based business newspaper Les Echos reported on Friday that the French and Belgian governments would discuss measures to shore up Dexia's balance sheet.

The bank is already partly-owned by the two governments, after it received a 6bn euros joint bailout at the height of the financial crisis in 2008.

There were reports last week that the bank could be split up, and speculation of a possible nationalisation of the bank.

Another option under consideration is the sale of Credit Local, a unit of the bank responsible for lending to French local governments.

Belgian Finance Minister Didier Reynders told Belgian radio on Friday that Dexia's shareholders should be behind the bank and be ready intervene if there was a problem.

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