GLOBAL RECESSION GROWS CLOSER AS G20 SUMMIT FAILS

[IMF to monitor Italy to ensure austerity as leaders fail to agree plan for financial aid for distressed countries]

By Patrick Wintour and Larry Elliott

A world recession has drawn closer after a fractious G20 summit failed to agree fresh financial help for distressed countries and debt-ridden Italy was forced to agree to the International Monetary Fund monitoring its austerity programme.

Financial markets fell sharply after the two days of talks in Cannes broke up in disarray, amid concerns that Italy will now replace Greece at the centre of Europe's deepening debt crisis.

UK hopes that the Germans would relent and allow the European Central Bank to become the lender of last resort for the euro were also dashed.

On a day of unremitting gloom and yet more market turbulence, the Greek prime minister, George Papandreou, won a late-night confidence vote in his parliament after making a speech in which he promised to start powersharing talks to form a caretaker coalition government. Although he won the vote by 153-145, he is now expected to step down and a national unity government is expected to take over in the coming days.

Papandreou said he would visit the country's president on Saturday to launch power-sharing talks "with the [opposition] parties … for the formation of a government of broad co-operation."

In a sign that the spread of the debt crisis to Italy could break up the single currency, the chancellor, George Osborne, admitted the Treasury was undertaking crisis planning for a eurozone collapse.

The G20 deadlock led David Cameron to issue one of his starkest warnings about the impact on the UK economy, saying: "Every day the eurozone crisis continues and every day it is not resolved is a day that it has a chilling effect on the rest of the world economy, including the British economy.

"I am not going to pretend all the problems in the eurozone have been fixed. They have not. The task for the eurozone is the same as going into this summit. The world can't wait for the eurozone to go through endless questions and changes about this.

"We, like the rest of the world, need the eurozone to sort out its problems. We need more to happen in terms of detail on the European firewall."

Cameron hinted at worse to come, describing this as only "a stage of the global crisis".

There had been hopes that the G20 would agree to increase IMF resources by as much as $250bn to more than $1tn, but disagreements about the wisdom of it, structure, size and contributors to the fund left world leaders forced to pass the issue on to a meeting of G20 finance ministers next February.

The French president, Nicolas Sarkozy, had been eager to flourish a figure both to reassure the markets and to top his chairmanship of the G20.

Cameron revealed the friction, saying: "The very worst thing would be to try to cook up a number without being very specific about who is contributing what. If you cannot do that, it is better to say the world stands ready to increase resources to the IMF as necessary."

In the financial markets an early rise in share prices was reversed after it became clear that divisions in the G20 would prevent a deal in Cannes to boost the firepower of the European financial stability facility (EFSF) or the IMF. The yield on 10-year Italian bonds rose from 6.2% to 6.4%, the highest since the euro was founded, raising fears that the country would face problems financing its huge debts.

Obama, under pressure from Congress, was deeply reluctant to contribute to an expansion of IMF funds without clearer signs that the eurozone was sorting out its problems. Admitting that he had been given a crash course in European politics, Obama urged Greek and Italian parliaments to take decisive action to control their deficits and combat what he described as some of the psychological origins of the crisis.

He also urged the euro area to start putting some resources into the EFSF, which Europe hopes to turn into a bailout fund with at least €1tn to deploy.

But the German chancellor, Angela Merkel, said: "There are hardly any countries here which said they were ready to go along with the EFSF."

Berlusconi was summoned to a late-night hotel meeting with Merkel, Sarkozy, the IMF director general, Christine Lagarde, and Obama, where he was told that the IMF was to start monitoring to ensure tough austerity measures are implemented. The measures include changes to the labour market, pension reform and the sell-off of state-owned assets.

Italy has debts of €1.9tn, or 120% of GDP, and if it followed Greece down the path towards a financial bailout, or default, the impact on the European banking system would be vast. Italy faces new tests in further auctions of its debt this month – it has to raise €30.5bn in November and a further €22.5bn in December.

Sarkozy denied that the demands on Berlusconi represented an IMF coup, saying: "We never wanted to change governments, either in Greece or in Italy. That is not our role, that is not our idea of democracy, but it's clear that there are rules in Europe and if you exonerate yourself from these rules you exclude yourself from Europe."

Berlusconi, facing defections from his own party, insisted he had invited the IMF to offer advice. Berlusconi said on Friday he had rejected an offer of funds from the IMF – "I don't think Italy needs that" – and said his country was more solid than France or the UK.

British officials privately admit that potential economic collapse in Italy is now the single biggest concern gripping world leaders. One said: "We cannot have the Italians meeting in crisis every three days. We need some action."

The UK government will now focus on urging its European partners to make progress, and will continue to support extra cash for the IMF. Cameron said he would not need UK parliamentary approval for this as the Commons has already agreed to an increase that would cover the proposed UK additional contribution.

The EFSF has €440bn ($608bn) available to lend, of which roughly half is expected to be consumed by bailouts of Ireland, Portugal and Greece. Italy has nearly €2tn in debt outstanding.

The European Central Bank has purchased Italian debt since August, but will not carry on doing so indefinitely. The need to bolster the EFSF has led the EU to pursue countries outside the euro zone with surplus cash, such as China.

@ The Guardian

THEPRIVILEGES OF CHINA’S ELITE INCLUDE PURIFIED AIR

[News that Chinese leaders are largely insulated from Beijing’s famously foul air comes at a time of unusually heavy pollution in the capital. In recent weeks, the capital has been continuously shrouded by a beige pall and readings from the United States Embassy’s rooftop air monitoring device have repeatedly registered unsafe levels of particulate matter.]

By Andrew Jacobs

Agence France-Presse — Getty Images

Officials have been slow to address air pollution in Beijing, where a heavy

 smog hung over Tiananmen Square for a string of days in late October.

BEIJING — Membership in the upper ranks of the Chinese Communist Party has always had a few undeniable advantages. There are the state-supplied luxury sedans, special schools for the young ones and even organic produce grown on well-guarded, government-run farms. When they fall ill, senior leaders can check into 301 Military Hospital, long considered the capital’s premier medical institution.

But even in their most addled moments of envy, ordinary Beijingers could take some comfort in the knowledge that the soupy air they breathe on especially polluted days also finds its way into the lungs of the privileged and pampered.

Such assumptions, it seems, are not entirely accurate.

As it turns out, the homes and offices of many top leaders are filtered by high-end devices, at least according to a Chinese company, the Broad Group, which has been promoting its air-purifying machines in advertisements that highlight their ubiquity in places where many officials work and live.

The company’s vice president, Zhang Zhong, said there were more than 200 purifiers scattered throughout Great Hall of the People, the office of China’s president, Hu Jintao, and Zhongnanhai, the walled compound for senior leaders and their families. “Creating clean, healthy air for our national leaders is a blessing to the people,” boasts the company’s promotional material, which includes endorsements from a variety of government and corporate leaders, among them Long Yongtu, a top economic official who insists on bringing the device along for car rides and hotel stays. “Breathing clean air is a basic human need,” he says in a testimonial.

In some countries, the gushing endorsement of a well-placed official would be considered a public relations coup. But in China, where resentment of the high and mighty is on the rise, news of the company’s advertising campaign is fueling a maelstrom of criticism. “They don’t have to eat gutter oil or drink poisoned milk powder and now they’re protected from filthy air,” said one posting on Sina Weibo, the country’s most popular microblog service. “This shows their indifference to the lives of ordinary people.”

News that Chinese leaders are largely insulated from Beijing’s famously foul air comes at a time of unusually heavy pollution in the capital. In recent weeks, the capital has been continuously shrouded by a beige pall and readings from the United States Embassy’s rooftop air monitoring device have repeatedly registered unsafe levels of particulate matter.

But those very readings, posted hourly on Twitter or through an iPhone app, have prompted a public debate over whether the Chinese government is purposely obscuring the extent of the nation’s air pollution. Unlike the American Embassy readings, Chinese environmental officials do not publicly release data on the smallest particulates, those less than 2.5 micrometers, which scientists say are most harmful because they are able to penetrate the lungs so deeply. Instead, government data covers only pollutants larger than 10 micrometers —a category that includes sand blown in from the arid north and dust stirred up from construction sites.

Environmental officials prefer to focus on air quality improvements of recent years, largely achieved by replacing coal-fired stoves with electric heaters and closing heavy industry in and around the capital. Driving restrictions have slightly eased the environmental injury of the 700,000 new vehicles that last year joined the capital’s jammed roadways.

But when pressed, those same officials acknowledge that their pollution metrics willfully ignore the smaller particles, much of them generated by car and truck exhaust. In fact, the American Embassy’s monitor has become an unwelcome intrusion into China’s domestic affairs, according to a diplomatic cable released this year by WikiLeaks, which said a Foreign Ministry official had requested that the Americans stop publicizing the data.

The director of the Institute of Public and Environmental Affairs, a nonprofit organization in Beijing, said many government officials feared that publicly revealing such data could stymie development or dent the image of cities that had been trumpeting their environmental bona fides.

“I don’t agree with this philosophy,” said the director, Ma Jun. “The government’s more urgent priority should be to warn the public when the air quality is dangerous so people susceptible to poor air quality, like children or the elderly, can make decisions to protect their health.”

The government does appear to be moving in that direction. In September, the Ministry of Environmental Protection said it planned to amend the nation’s air quality standards to include the smallest particulates, although it has not released a timetable for adopting the new standards.

Officials in Beijing, however, are apparently not quite ready to embrace it. In response to criticism over the heavy smog of recent weeks, a spokesman for the city’s environmental protection bureau, Du Shaozhong, assured the public that they should feel secure in the government’s own readings, which termed the city’s air “slightly polluted” even as the embassy monitor found it so hazardous that it exceeded measurable levels. “China’s air quality should not be judged from data released by foreign embassies in Beijing,” he said.

According to the Broad Group’s Web site, it did not take much to convince the nation’s Communist Party leaders that they would do well to acquire the firm’s air purifiers, some of which cost $2,000. To make their case, company executives installed one in a meeting room used by members of the Politburo Standing Committee. The deal was apparently sealed a short while later, when technicians made a show of cleaning out the soot-laden filters. “After they saw the inklike dirty water, Broad air purifier became the national leaders’ appointed air purifier!” the Web site said.

Edy Yin contributed research.


@ The New York Times