Around the world in 60 seconds - 1 October 2010

Friday 1st October 2010
Ed Miliband.jpg

• Israel lets settlement-building ban expire
• European Union proposes new rules for stopping excessive debt and deficits
• New leader for Labour in Britain
• Petrobras raises record share issue

Israel lets settlement-building ban expire

At 10pm GMT on Sunday, a small number of Jewish settlers celebrated as Israel’s 10-month building ban on new settler homes in the West Bank (excluding East Jerusalem) was allowed to expire by the government.

The reason the expiration was so controversial is because Palestinian President Mahmoud Abbas warned that if settlement building was allowed to continue, he would end the US-led peace talks currently being held with Israeli Prime Minister Benjamin Netanyahu.

Netanyahu made the decision to do nothing and let the ban expire after coming under immense pressure to do so from his right-wing supporters in government.

As it stands, Abbas has said he will first consult major Arab leaders, particularly Egypt and Jordan, at the Arab League summit next week before deciding whether to abandon peace talks or not.

UN, US and European leaders have expressed their disappointment that the ban wasn’t extended, especially in the midst of promising peace talks.

A compromise allowing some settlement building to continue but banning others has been suggested but so far not tabled, and could be the agreed solution.

European Union proposes new rules for stopping excessive debt and deficits

Determined to prevent another Greek-type crisis in the future, EU officials announced proposed new rules to ensure its ‘euro-zone’ members (countries that use the euro currency) keep within the rules regarding government deficits and debt levels.

Before the economic downturn in 2008, the EU’s laws had largely been ignored and exceeded by almost all countries.

Those limits are that governments cannot run at a budget deficit (loss) of more than 3% of the country’s GDP (total economic output) and cannot acquire debt totalling more than 60% of GDP.

The abuse of the rules (with Greece being the worst culprit overall) put considerable pressure on the euro currency and wealthy economies like Germany who had to bail poorer euro-zone countries out.

Now the EU is proposing that members pay deposits of 0.2% of GDP into an EU account for breaching the rules. The deposit will become an automatic fine if that country doesn’t get its finances back in order in time.

Furthermore, the fine can only be stopped with an approval by a majority of members. Under the present system, fines were not automatic and had to be approved by a majority of members, which in reality never happened because everybody was doing it.

The proposals now need to be agreed to by all EU member governments and the European parliament which could be a difficult process.

New leader for Labour in Britain

On Saturday, Labour party officials in Britain elected Ed Miliband as the party’s new leader, in an extremely close contest with his older brother David.

Labour has been leaderless since Gordon Brown resigned after losing Britain’s election to his main opponent David Cameron of the Tory party, and Nick Clegg of the Liberal Democrat party.

Ed Miliband was Secretary of State for Energy and Climate Change under Gordon Brown’s Labour government.

It is understood he is trying to move away from the ‘new Labour’ image created under Tony Blair of being too supportive of business and America (he said in his first speech as leader that he thought the decision to go to war in Iraq was wrong).

David Miliband on the other hand was seen as the candidate to continue the ‘new Labour’ policies, which some believe caused some core supporters to drift towards the Liberal Democrats in the last election.

Petrobras raises record share issue

Last Friday, the Brazilian government oil company Petroleo Brasileiro SA, otherwise known as Petrobras, successfully raised US$70 billion in the largest share issue in history.

It easily defeated the previous record holder of Agricultural Bank of China which raised $22 billion in July (although AgBank’s share issue was only for 14% of the company compared to Petrobras’s 32%).

And with a total value of $215 billion, it makes Petrobras the fourth largest publicly-listed company in the world, largely thanks to several huge oil discoveries off the Brazilian coast that Petrobras has the lead production rights to after giving the government $42 billion worth of shares.

The company is planning to spend about $225 billion over the next five years in developing the deepwater oil fields, which lie under a layer of salt (Petrobras is one of the world leaders in deepwater drilling).

The Brazilian government, which now owns about 67% of the company, hopes that by tapping the oil from its new discoveries, the country will become one the world’s largest oil exporters.

Photo – Ed Miliband

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