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Britain unveils austerity budget Britain's new government today unveiled an austerity budget that calls for £17-billion in cuts and a freeze on public sector pay for two years. One of the key measures is a new bank levy that will begin next year and will affect not only domestic banks but also the British operations of foreign financial institutions. Chancellor of the Exchequer George Osborne, in unveiling the emergency budget, said France and Germany have similar plans, and he expects the new tax to bring in £2-billion a year.
Mr. Osborne said the government aims to slash government borrowing to 1.1 per cent of gross domestic product by 2015-2016, and even Queen Elizabeth II has agreed to a freeze on her financial support from the government. By 2014-2015, Mr. Osborne said, the government will cut spending by £30-billion. Among other measures:
- A cut in the corporate tax rate to 24 per cent over four years.
- Cuts to welfare aimed at saving £11-billion by 2014-2015.
- A freeze on the country's child benefit for three years.
- A medical check for disability benefits.
Three agree to controversial bank tax Germany and France joined Britain today in proposing new levies on financial institutions. Details are scant at this point, but the draft of a joint statement from the three countries, according to Bloomberg News, says France will unveil its proposal soon while Germany will unveil draft legislation in the summer. "All three levies will aim to ensure that banks make a fair contribution to reflect the risks they pose to the financial system and wider economy, and to encourage banks to adjust their balance sheets to reduce this risk," the statement said.
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Mr. Osborne told the House of Commons that the crisis began in the banking sector, and that their failures put a hefty burden on society. The banks, he said, must "make a more appropriate contribution, which reflects the many risks they generate." Read the story
Related: Flaherty steps back from contingent capital idea
Japan pledges to cut deficit 'Austerity' has become a key word after the massive government spending to fight the recession. Japan's Prime Minister Naoto Kan, in his first speech to the Diet, pledged today to get a handle on the country's deficit, estimated at almost 10 per cent of GDP, and overall debt, pegged at 227 per cent of GDP. There were few details, but he aims to cut the deficit in half by 2015-2016, with a surplus by 2020-2021.
Austerity v. stimulus: A Hoover moment? The austerity measures being unveiled by many of the world's debt-burdened countries are setting the stage for a showdown of sorts at the G20 summit in Toronto this week. As governments such as Britain, Japan and Europe's laggards cut deep, the United States is pushing for sober second thoughts, warning that the pullback in stimulus could threaten the global recovery. Prime Minister Stephen Harper is also pushing for governments to focus on their fiscal policies. The United States, notes the Wall Street Journal today, fears a "Hoover moment," a reference to the fiscal pullback that is blamed for prolonging the Great Depression in the 1930s.
"The No. 1 topic of conversation [at the G20]will be how quickly should fiscal stimulus be withdrawn," Harvard economist Kenneth Rogoff told the newspaper. "The U.S. is at one extreme [pushing growth]while the rest of the world is much more anxious."
Related
- Higher yuan no cure-all for China
- China's move gives U.S. symbolic victory
- Yuan revaluation expected to boost commodities demand
- Interactive: Behind China's yuan move
- Kevin Carmichael's G8/G20 Global View summit blog
- Harper, Obama differ on best path to same goal
Canada's inflation tame Inflation in Canada is in Goldilocks territory - not too hot, not too cold - giving Bank of Canada Governor Mark Carney the freedom to raise rates or hold steady as his next interest rate setting in late July. Consumer prices rose 0.3 per cent in May from a month earlier, Statistics Canada said today, though fell 0.1 per cent on a seasonally-adjusted basis, bringing the annual inflation rate down to 1.4 per cent from 1.8 per cent in April. The core measure, which excludes volatile items and guides the Bank of Canada's monetary policy, dipped to 1.8 per cent from 1.9 per cent. BMO Nesbitt Burns deputy chief economist Douglas Porter said the tame inflation should continue for another month, but the July measure will be higher when British Columbia and Ontario introduce the harmonized sales tax.
"Canadian inflation is going nowhere fast," Mr. Porter said. "It's neither sprinting higher, nor falling dangerously close to deflation terrain (as in the U.S.). While the HST will give it a big bump higher in two months, at least temporarily, it appears that underlying inflation trends remain quite benign."
Canadian, Australian dollars gain fans The Canadian and Australian dollars, winning fans around the world as Europe's troubles mount, will gain even more favour as central banks seek to diversify their holdings, a ranking European monetary official says. However, Christian Noyer of the European Central Bank told Bloomberg News in an interview several days ago, neither the Canadian nor the Australian markets are big enough to make the currencies major holdings. "They'll gain an increasing place in reserves because of diversification," Mr. Noyer told the news agency.
'Ambush marketing' case dropped The world soccer body has reached a settlement with Dutch brewer Bavaria NV, ending the case against two Dutch women arrested at the World Cup in South Africa for suspect "ambush marketing." Charges against the women were dropped. They were among 36 women at last week's match between the Netherlands and Denmark, who all wore orange miniskirts in the stands. Orange is the Dutch team's official colour. FIFA, the soccer body, said it agreed with Bavaria that all claims would be dropped. "We are happy to go home and that the situation has been resolved," the women said in a statement. Read the story
From today's Report on Business Gulf spill plays havoc with real estate