Worst of financial crisis yet to come: IMF chief economist

Adam Dupont

ZURICH, Switzerland (AFP) — The IMF's chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010, a report said Saturday.

Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.

"The worst is yet to come," Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that "a lot of time is needed before the situation becomes normal."

He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again.

The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan.

But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.

Withdrawals of capital leading to problems of liquidity "can be so significant that the IMF alone cannot counter them," he said, adding that massive withdrawals of investments from emerging countries could represent "hundreds of billions of dollars.

"We do not have this money. We never had it," he said.

The IMF had spent a fifth of its 250 billion dollar (200 billion euro) fund in the last two weeks, Blanchard added.

He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut Thursday.

The central banks "should lower interest rates to as close to zero as possible," he said.

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Swedish CEO says he will work for free

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STOCKHOLM, Sweden – Lars G. Nordstrom isn't the only CEO being criticized these days for earning too much money during the world financial crisis. But he may be one of the few who has reacted by deciding to work for free.

Since becoming head of the Swedish postal service in July, Nordstrom has been paid 900,000 kronor ($110,000) a month. And that is on top of the millions he receives in a retirement package from his previous job as chief executive officer of the banking group Nordea AB.

The Swedish media have criticized Nordstrom for making more money as CEO of Sweden's Posten Sverige AB than 45 letter carriers do, and seven times more than Sweden's prime minister.

On Saturday, Nordstrom said in a TV interview that he will give back all the money he has earned with the postal service and work for free from now on.

He said the debate over his pay has been damaging to the company and its staff, and he just "doesn't like indications that I am greedy."

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Barack Obama reveals two-year plan to create 2.5m jobs

Matthew Weaver and agencies

Barack Obama has outlined his plan to create 2.5m jobs in his first two years in office with an ambitious spending programme on roads, schools and and renewable energy.

In his weekly internet address the United States president-elect warned that the US was "facing an economic crisis of historic proportions".

But he suggested he was keen to launch a major two-year spending programme, to "jumpstart job-creation in America and lay the foundation for a strong and growing economy". He pledged the programme would create 2.5 million jobs by January 2011.

That goal has led to speculation that Obama will try to launch a spending package larger than the $175bn (£118bn) plan he outlined in his election campaign.

Obama said details of the programme were being worked out by his transition team.

"We will put people back to work rebuilding our crumbling roads and bridges, modernising schools that are failing our children, and building wind farms and solar panels and fuel efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil," he said.

Both Republican and Democrat support would be needed to get the programme approved, he said, but "what is not negotiable is the need for immediate action".

Noting the turmoil on Wall Street, a drop in house sales, rising unemployment and the threat of deflation, he said: "There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better."

But Obama said his inauguration day on January 20 "is our chance to begin anew".

"We must do more to put people back to work, and get our economy moving again.

"There are Americans showing up to work in the morning only to have cleared out their desks by the afternoon. These Americans need help and they need it now."

Wall Street ended a volatile week with renewed confidence last night, after reports that Obama had chosen Timothy Geithner, the head of the New York Federal Reserve, as his treasury secretary.

The Dow Jones industrial average recorded a 494-point gain on the day as stocks surged by 6.5% to close above the psychologically important 8,000 level at 8046.42. It was still 5% down for the week, however, as worries persisted about the global economic slowdown.

Geithner, 47, has always been a favourite to take the top job and his appointment was expected to be announced by the Obama camp this weekend.

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Average gasoline price falls below $2, cheapest since 2005

Enlarge By Kiichiro Sato, AP The price of one gallon of regular unleaded gasoline at a BP gas station in Hebron, OhioThursday.

Staff and wire reports

WASHINGTON — The national average price for a gallon of gasoline has fallen below $2 for the first time since March 2005, the Energy Department and AAA say.

The price for regular unleaded gasoline fell for the ninth week in a row, sinking to $1.989 a gallon overnight Friday, AAA says.

Thirty states have gasoline prices that average under $2 a gallon, according to the AAA travel club.

Falling gasoline prices are putting extra money in the pockets of consumers, but there is concern some drivers may return to their gas-guzzling vehicles.

The chairman of the Senate Energy Committee said Monday the new Congress probably will not approve legislation to raise the federal tax on gasoline.

Democratic Sen. Jeff Bingaman said he was aware of arguments that a high "variable tax" should be put on U.S. gasoline to prevent falling pump prices from encouraging Americans to drive more while making alternative fuels less attractive.

Such a tax hike "would be very tough to pass," Bingaman said. "I don't think something like that has much prospect of being enacted in my honest opinion."

Americans pay an 18.4-cent federal tax on each gallon of gasoline they buy, plus another 29 cents on average in combined state and local taxes.

Contributing: Reuters

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Brothers jailed over murder of toddler who was tortured in a hot clothes dryer

By Richard Shears

Tragic loss: Little Nia Glassie was murdered

As Britain reels from the shocking abuse of Baby P, on the other side of the world New Zealanders have been sickened by the murder of a three-year-old girl who was put in a dryer and hung from a clothes line.

Two men were found guilty on Tuesday of murdering little Nia Glassie and her mother was found guilty of manslaughter, with other defendants being found guilty of lesser crimes.

The month-long trial had heard how the child had been put in a clothes dryer, which was then turned on, while adults stood around laughing.

There were other times when the tiny Maori girl was tied to a clothes line and spun around while on other occasions she was subjected to painful wrestling moves that were carried out on her.

But the final fatal blow was a brutal kick to the head, which led to her dying in hospital.

Even then, she had not been taken immediately to hospital - she lapsed into a coma 36 hours after the blow which resulted in medical attention finally being sought.

A doctor told the court that if Nia had been taken to hospital immediately she likely would have survived.

Two brothers, Michael and Wiremu Curtis, were convicted of murdering Nia while the girl's mother 35-year-old mother Lisa Kuka was found guilty of failing to seek medical attention for the child and failing to protect her from violence.

The toddler's cousin, Michael Pearson, 20, and Michael Curtis's partner, Oriwa Kemp, 18, were found guilty of child cruelty, but were not convicted on the manslaughter charges they faced in the complex case.

Pearson and Kemp also lived in the house with the toddler.

Curtis denied kicking Nia, insisting she had fallen from his shoulders and hit her head on the ground.

During the hearing in the Rotorua High Court the jury was told by Crown prosecutor Fletcher Pilditch that Nia had suffered a long period of abuse that lasted weeks, possibly months.

Evil: Michael Pearson (left), Michael Curtis (second left) and Oriwa Kemp (right) in court at an earlier hearing

Referring to the tumble dryer incident, he said Nia was forced into it before the door was shut and the appliance turned on while people stood around laughing.

She had also been hoisted onto a clothes line and spun around.

Details of the child's torture outraged New Zealanders who flooded newspaper web sites with angry comments.

After the guilty verdicts were announced, the Mayor of Rotorua, Mr Kevin Winters said the Nia case had 'haunted' the resort town since last year.

'I'm pleased that a verdict has been reached and I'm also pleased that the community has rallied around since the death of baby Nia,' he said.

'Justice has been served.'

Social welfare groups admitted that while there had been concerns about baby Nia, she had somehow 'slipped through the net'.

Sentencing will be made at a later date.

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'War criminal' Bush blamed for global crisis

PROTESTERS have demanded that US President George W Bush get out of Peru where he is attending an Asia-Pacific Economic Cooperation (APEC) summit, blaming him for the world economic crisis.

"Bush out," about 1000 demonstrators chanted in the centre of the capital Lima, watched by scores of police in riot gear who made sure they did not move towards the APEC summit venue several kilometres away.

"This crisis didn't come from the Peruvian people. We shouldn't have to pay for it," a union leader told the crowd, which demonstrated peacefully.

Mr Bush, one of 21 leaders of Asia-Pacific economies converging on Lima for the weekend summit, arrived shortly after the protest. He was escorted under tight US Secret Service and Peruvian police security from Lima airport to the army headquarters building housing the APEC meetings.

Friday's anti-Bush protest, organised by Peru's biggest labour union, charged that Mr Bush's decision to wage a costly war in Iraq contributed to the financial and economic crises.

"The International Criminal Court should try him for crimes against humanity, war crimes and crimes of aggression," a big banner next to the main stage for the rally proclaimed.

"Bush - genocide. The Peruvians repudiate your crimes," said another.

"We believe that Bush is responsible for the fall of the financial system," explained Aldo Gil Cristostomo, a 54-year-old mechanic standing near other protesters carrying portraits of Che Guevara.

"The war in Iraq is partly responsible for the fall," he said.

Mr Cristostomo added that, while he had more sympathy for Mr Bush's successor, Barack Obama, he believed the Democrat "is going to maintain the neo-liberal system" championed by the current US president.

Lima was filled with 39,000 police officers ensuring that none of the heads of state and government would be able to see any demonstrations. At least five people who were among 20 protesters holding a separate against corruption close to the summit venue were arrested late Thursday.

The participants had tried to release a number of live rats in a gesture decrying graft in Peruvian public life, the organiser, Fidel Supo, said in a video published on the website of El Comercio newspaper.

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Somali pirates build up defences after making ransom demand

MOGADISHU (AFP) — Somali pirates built up their defences around a captured Saudi Arabian super-tanker Friday after demanding a 25 million dollar ransom.

As foreign navies sent warships to Somalia's dangerous waters and shipping companies sought alternative routes, extra clan militia and other fighters were brought in at the pirate lair of Harardhere, residents said.

"Some of them are inside the town and others are taking shelter in a nearby village and can be called if need be," local resident Mohamed Awale told AFP. He said the fighters had come from neighbouring Gulgudud and Mudug regions.

Local militia and hardline Shebab fighters also arrived in Harardhere in what some residents said was a move to position themselves for a share of any ransom paid.

"There are two armed vehicles belonging to al Shebab. They have reached the town of Harardhere but there are no intentions of attacking the ship from here," a Harardhere Islamist official told AFP by phone.

"There are many militiamen who have arrived in the town and they want to get a share from the pirates if the ransom is paid," said Ahmed Abdullahi, a local elder.

The Sirius Star, the biggest ship ever hijacked, and its 100 million dollar load of oil was seized last Saturday and taken to Harardhere, 300 kilometres (180 miles) north of lawless Somalia's capital Mogadishu.

The pirates on Thursday gave the owners 10 days to pay a 25 million dollar ransom, said a pirate who identified himself as Mohamed Said, threatening "disastrous" consequences if Vela International, shipping arm of the Saudi oil giant Saudi Aramco, fail to comply.

"The Saudis have 10 days to comply, otherwise we will take action that could be disastrous," he said.

He did not specify the threatened action but the 330-metre (1,000-foot) long tanker is carrying two million barrels of crude oil.

Environmental groups have warned of a huge catastrophe if oil from the super-tanker was released.

Some experts have told AFP that the MV Faina, a Ukrainian ship seized by the same pirates in September with a cargo of tanks and other weaponry, was booby-trapped by the hijackers.

With close to 100 attacks on ships in the Gulf of Aden and Indian Ocean this year, the pirates now pose a growing threat to international trade.

Pirates with no confirmed links to bigger organisations and relatively modest means have seized ships of all sizes and in an ever-growing area.

Two speedboats with pirates armed with Kalashnikov rifles and rocket-launchers seized the Saudi tanker in 16 minutes on Saturday, according to a military report obtained by AFP.

The United States said it would seek support at the United Nations for a resolution to tighten international measures against Somali pirates.

Saudi Foreign Minister Prince Saud al-Faisal said he was opposed to any negotiations with pirates.

"Like terrorism, it is an evil that has to be eradicated," Prince Saud told reporters in Oslo.

Kenyan Foreign Minister Moses Wetangula said Somali pirates had been paid 150 million dollars in ransom over the past 12 months, adding that this was fueling a global criminal enterprise.

"We are advised that in the last 12 months, ransom to the excess of 150 million dollars has been paid to these criminals and that is why they are becoming more and more audacious in their activities," Wetangula said.

The Indian frigate INS Tabar, one of dozens of warships from several countries protecting commercial shipping lanes in the Gulf of Aden, sank a Somali pirate ship Tuesday after coming under fire.

Russia announced it would send more warships to combat piracy and also called for an international ground military operation to crush piracy.

Meanwhile, pirates on Friday freed Greek-owned MV Genius chemical tanker and its 19 Romanian crew hijacked on September 25, a Kenyan maritime official said.

After the International Maritime Bureau (IMB) said the pirates were now "out of control," Arab nations bordering the Red Sea meting in Cairo on Thursday and pledged cooperation to end the threat -- but offered few specifics.

Oslo-based Frontline Ltd, the world's biggest oil tanker company, said that a more aggressive military approach was needed.

Other maritime groups have decided to steer clear of Somalia's treacherous waters by diverting ships to the Cape of Good Hope, despite the extra delays and costs.

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