Capital flees Spain, consumer spending crumbles - Reuters UK

Capital flees Spain, consumer spending crumbles - Reuters UK

By Paul Day and Nigel Davies

MADRID | Tue Jul 31, 2012 2:24pm BST

MADRID (Reuters) - Capital flight from Spain gathered pace in May and the central government deficit rose further above target in June, taking the country two steps closer to the full-scale bailout it is desperate to avoid.

Outflows rose to 41.3 billion euros (32.3 billion pounds) as the government's rescue of one its biggest banks hit already fragile investor confidence and triggered a plea for European aid worth up to 100 billion euros for the country's lenders.

In all, 163 billion euros - or around 16 percent of economic output - left Spain between January and May, with domestic banks sending money abroad, foreign lenders pulling out cash and mostly non-resident investors dumping domestic assets.

Over the last 11 months, funds equivalent to 26 percent of GDP exited the country, Tuesday's data from the Bank of Spain showed.

Spain's struggling economy, which is expected to remain in recession well into next year, is at the centre of the euro zone debt crisis, and rising refinancing costs risk shutting the country out of international debt markets.

Domestic demand has stalled since the crisis started four years ago, hitting a service sector that accounts for around 70 percent of the economy, while sky-high unemployment rates have further eroded consumer confidence.

Retail sales fell by 5.2 percent year-on-year on a calendar-adjusted basis in June, separate data showed on Tuesday, marking a 24th straight month of declines.

"These figures are proof that the Spanish economy continues in recession and a drop in retail sales could indicate a GDP contraction of around 2 percent this year," economist at Madrid broker M&G Valores Nicolas Lopez said.

"For the moment there's no sign this is going to change in the medium term."

SQUARING THE CIRCLE

With tax revenues falling sharply as the recession deepens, Spain reported a deficit of 4 percent of GDP on its central government accounts in the first half of the year, above a goal of 3.5 percent set for the whole of 2012.

That target could be eased as Spain decides later in the year how to use an extra 1 percent cushion granted by the European Union in July when the country's deficit target was widened to 6.3 percent for 2012 from 5.3 percent initially.

The government announced a new 65-billion-euro austerity package in July, two months after stepping in to prop up major lender Bankia.

In June, it requested help from Europe to recapitalise its banks, battered by the collapse of a decade-long real estate bubble in 2008.

But the initiatives failed to calm investors for more than a few days, and Tuesday's gloomy numbers will do nothing to ease pressure on the bond yields that Spain needs keep from rising to avert a full-fledged bailout.

The premium investors pay to buy Spanish over German debt was around 532 basis points on Tuesday, far below last week's euro-era highs on hopes the European Central Bank will announce stimulus measures, helping to bring Spanish and Italian borrowing costs down.

Tuesday's data showed Spanish and non-domestic banks moved 31.9 billion euros out of the country in May. The headline figure compared with total outflows of 26.6 billion euros in April and a peak of 66 billion euros in March.

Plummeting domestic demand was reflected in May current account numbers also published on Tuesday by the central bank and showing a deficit of 754 million euros, narrowing sharply from 3.4 billion euros in the same month of 2011.

The gap shrank on a lower trade deficit and a lower primary income deficit - the difference between money paid abroad and money received.

The trade gap stood at 1.5 billion euros, down from 3 billion euros a year earlier, as exports rose 5.5 percent while imports dropped 2.1 percent.

The government, which expects the economy to shrink 1.5 percent this year and 0.5 percent in 2013, has passed some of the deepest budget cuts in decades to deflate one of the euro zone's largest budget deficits. The gap stood at 8.9 percent in 2011.

The tax hikes also passed under the austerity programme, including a 3 point rise in value-added tax, are expected to further dent high street spending.

"(Spain) needs more time to rebalance the economy and hit the deficit targets. The current framework is making Spain dig itself into a slightly bigger hole," Guillaume Menuet, economist at Citi in London, said.

(Additional reporting by Jesus Aguado and Manuel Ruiz; Editing by Julien Toyer, John Stonestreet)

Consumer confidence rises in July - Reuters

NEW YORK | Tue Jul 31, 2012 10:10am EDT

NEW YORK (Reuters) - Consumer confidence unexpectedly rose in July as Americans were more optimistic about the short-term outlook than they were about their current conditions, according to a private sector report released on Tuesday.

The Conference Board, an industry group, said its index of consumer attitudes climbed to 65.9 from a upwardly revised 62.7 in June, topping economists' expectations for a decline to 61.5.

June was originally reported as 62.0.

Despite the improvement, confidence still remains at historically low levels, Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

"While consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. Given the current economic environment - in particular the weak labor market - consumer confidence is not likely to gain any significant momentum in the coming months," said Franco.

The expectations index improved to 79.1 from 73.4, while the present situation index edged down to 46.2 from 46.6.

Consumers' labor market assessment was mixed as the "jobs plentiful" index slipped to 7.8 percent from 8.3 percent, while the "jobs hard to get" index also fell to 40.8 percent from 41.2 percent.

The view in six months from now was more optimistic, with 17.6 percent expecting to see more jobs, up from 14.8 percent in June.

But consumers were more concerned about price increases, with expectations for inflation in the coming 12 months rising to 5.4 percent from 5.3 percent.

(Reporting By Leah Schnurr; Editing by Padraic Cassidy)

Young Alaska Native men at high risk for suicide: study - Reuters UK

Young Alaska Native men at high risk for suicide: study - Reuters UK

By Yereth Rosen

ANCHORAGE, Alaska | Tue Jul 31, 2012 4:52am BST

ANCHORAGE, Alaska (Reuters) - Young Alaska Native men between the ages of 20 and 29 are at extremely high risk for suicide, killing themselves at a rate more than 13 times the overall national average, a state government study released on Monday showed.

The study by the state Department of Health and Social Services, which tracked records from 2003 to 2008 and examined a myriad of demographic groups, said that lack of opportunity and identity issues may be among factors contributing to the phenomenon.

"Profound changes have occurred over the last 75 years among Alaska Native people," the survey said. "In the past, more males aged 20-29 years would have had families of their own and would have been involved in subsistence activities in order to support their families."

Alaska Native refers to indigenous people from Alaska, comprising Inuit, Indian and Aleut.

The study said psychosocial factors which may contribute to the higher suicide rate include "confusion around identity and purpose resulting from perceived discordance between traditional and contemporary values, and a low sense of agency to control their own life or to fulfill their ambitions due to lack of jobs and training infrastructure in rural communities."

Overall, the suicide rate in Alaska was 17.7 per 100,000 for the study period, compared with a national rate of 11.6 per 100,000 recorded in 2008, the report said.

For Alaska Natives as a whole, the suicide rate during the period was nearly four times the national rate. For Alaska Native men aged 20-29, the rate was 155.3 per 100,000, according to the study.

Suicide rates for Alaska Native men were three times the rate for Alaska Native women, according to the statistics compiled in the study. Researchers believe vulnerable Native women were more likely to use suicide-prevention services, said Deborah Hull-Jilly, a public-health specialist with the department's Alaska Section of Epidemiology.

Common threads for the recorded suicides were alcohol abuse, mental health problems and geographic isolation, according to the study. Residents of small villages appeared particularly vulnerable, with suicide rates in remote villages more than twice those in larger rural hub communities.

"That was eye-opening," Hull-Jilly said, adding that follow-up studies with data from more recent years were planned.

One positive sign researchers found was that Native suicide rates had leveled off overall after growing dramatically in the past decades, she said.

(Editing By Cynthia Johnston and Mohammad Zargham)

Pussy Riot members go on trial in Moscow - BBC News

30 July 2012 Last updated at 07:12 ET

Pussy Riot band in court

All three members of Russian punk band Pussy Riot have pleaded not guilty to charges of hooliganism over an anti-Vladimir Putin protest at Moscow's main cathedral.

The women were taken into custody in February after the protest at Moscow's Christ the Saviour Cathedral.

The case has divided Russia and inflamed the religious establishment, correspondents say.

The song outraged the Russian Orthodox Church. It accused them of blasphemy.

Supporters say the case reflects the state's growing intolerance of government opponents.

Continue reading the main story

At the scene

We watched as the three young women were led down the concrete stairs and into the courtroom.

Their handcuffs were only removed once they were locked inside the bullet-proof cage.

As so often in this case, they were smiling despite their imprisonment. But their relatives sitting only a couple of metres away looked nervous.

The trial is getting widespread publicity both in Russia and overseas, and there were too many reporters to fit in the courtroom.

Cameras were allowed in briefly before proceedings, but the judge arranged a live internet broadcast from inside the court.

International superstars from the world of music have backed Pussy Riot. But their supporters believe the Kremlin could be much more influential on the outcome of this case.

• Pussy Riot trial divides Russia

In a written statement, band member Mariya Alekhina said the performance was an administrative offence, but had become a criminal case "as a result of the influence of political, law-enforcement and spiritual elites".

At the start of the trial, the three women, Nadezhda Tolokonnikova, Ms Alekhina and Yekaterina Samutsevich, were led into court in handcuffs, and locked into a cage of bullet-proof glass.

In court, Ms Tolokonnikova said that although they were pleading not guilty, that did not mean they were not prepared to apologise for the pain their performance in the cathedral had caused.

They each stood up and answered a series of questions from the judge in turn, which included their educational level, citizenship and the birth dates of their children.

The women are facing the charge of hooliganism motivated by religious hatred or hostility and could face up to seven years in prison.

In an interview with UK newspaper The Times, which was also broadcast on Russian TV, Russian Prime Minister Dmitry Medvedev has said it is up to the court to decide whether the women have committed a crime.

"This case is a high-profile one because it really is about our understanding of the rights and freedoms of an individual.

"However, there will always be differences in the perception of what is permitted and what is not permitted from a moral point of view and of where moral misdemeanours transform into criminal offences."

Bail denied

The women caused outrage when they stormed on to the altar of Christ the Saviour Cathedral, and sang an obscenity-laced song that implored the Virgin Mary to "throw Putin out".

The head of the Russian Orthodox Church, Patriarch Kirill, has said the act amounted to blasphemy.

The case has divided Russia, with many feeling the women have been too harshly treated, and are being made an example of as part of attempts to clamp down on the opposition, the BBC's Daniel Sandford reports from the court.

Two of the women have young children, and all three have repeatedly been denied requests to be given bail while awaiting trial.

Pussy Riot made headlines around the world late last year when footage of their controversial public performances at Moscow landmarks such as Red Square attracted millions of viewers on the internet.

More than 100 prominent Russian actors, directors and musicians have urged the authorities to release the three.

Western musicians such as Sting and the Red Hot Chili Peppers have also criticised the women's arrest.

Activists have said the case indicates that President Putin, now serving a third term in office, is not heeding calls for him to be more tolerant of political opponents.

Tearful Korean fencer stages sit-in protest at Olympics - ESPN.co.uk

South Korean fencer Shin Lam sobbed as she held a 75-minute protest after being denied a place in the final of the epee at London 2012.

Shin thought she had guaranteed herself at least a silver by winning her semi against Germany's Britta Heidemann - but the clock, which had apparently run down, suddenly changed from zero to one second remaining. And when the action resumed, Heidemann landed a decisive hit to take victory.

The Korean coach furiously launched an appeal against the decision to let the fight continue after the clock controversy, and it was half an hour before the crowd were told Heidemann's victory was to stand.

Shin broke down in tears and remained on the piste in order to validate her appeal: if she left, it would have been deemed an acceptance of defeat. She was escorted off 75 minutes later.

She was back in action a few minutes later for the bronze contest, which she lost to world No. 1 Sun Yujie.

Shin said: "I think it's unfair. The one second was over - I should have won. The hour was really difficult, but I thought if I got a yellow card [for leaving the piste] I might not be able to fight for bronze. I'm very sorry for the spectators. They spent a lot of money and I just don't understand how this could have happened."

© ESPN EMEA Ltd

UPDATE 3-GM signs Man United deal day after marketing exec exit - Reuters UK

Tue Jul 31, 2012 2:25am BST

* Man United jersey deal valued at as much as $600 mln -source

* GM: former marketing head did not meet company expectations

* Ewanick failed to properly report details of jersey deal -sources (Recasts story, new first sentence, adds analyst comment, details on Manchester United IPO)

By Ben Klayman

DETROIT, July 30 (Reuters) - The ouster of General Motors Co's global marketing chief is related to a hugely expensive sponsorship deal with England's Manchester United soccer club for which GM is paying twice as much as the team's previous automotive sponsor.

On Monday, GM, the biggest U.S. automaker, announced its Chevrolet brand would sponsor the hugely popular club's shirts for the next seven years. The deal is worth $60 million to $70 million a year and includes a $100 million activation fee that brings the total value to as much as $600 million, said a person with knowledge of the contract who asked not to be identified.

By comparison, insurance broker Aon Plc pays about $31 million a year for the current jersey sponsorship, which runs through the 2013-2014 season.

GM did not disclose financial terms of its agreement, which was announced the day after the Detroit company said it was removing its global marketing chief Joel Ewanick because he "failed to meet the expectations that the company has for its employees." Sources told Reuters Ewanick didn't properly report financial details about the jersey deal.

Another source said the wording of the affected deal terms was changed before the deal was made public on Monday. The persons requested anonymity because they are not authorized to discuss contract details.

GM, which spent almost $4.5 billion on advertising last year, announced another sponsorship deal with Manchester United in May. GM said then it wanted to tap in to Manchester United's estimated 659 million fans around the world to boost the image of the automaker's Chevy brand, especially in Asia. GM last week also said it signed a four-year auto sponsorship deal with Manchester United rival Liverpool.

While GM would not discuss Ewanick's departure, some industry officials said a deal as big as the Manchester United sponsorship agreements would have been signed by multiple executives. They also raised the possibility that GM simply wanted to dump Ewanick as the automaker's U.S. market share has declined by nearly 2 points in the first half of 2012 compared with the year before to 18.1 percent.

"Joel was good for shaking up the staid GM marketing function and he made a real positive difference in just two years, but this episode, whatever it turns out to be, has tarnished his reputation overnight," said Peter DeLorenzo, Editor-in-chief of auto website Autoextremist.com.

AGENT OF CHANGE

However, sources said GM was committed to Ewanick's efforts to shake up the automaker's image. Ewanick, 52, was named vice president and head of GM's U.S. marketing in May 2010, about seven months before the automaker's blockbuster initial public offering in November of that year.

Brought in by former GM chairman Ed Whitacre, former vice chairman Robert Lutz and current North American chief Mark Reuss, the high-energy Ewanick was given free rein to shake up GM's marketing, which had been perceived as stale.

The first major effort under his watch was the "Chevy Runs Deep" campaign that launched at the start of the Major League Baseball's World Series in 2010. Critics say the campaign has failed to connect well with consumers.

When he was promoted to global marketing chief in December 2010, Ewanick said the move was intended to give marketing a seat at the executive conference table and a say in planning and budgeting for new GM vehicles.

Ewanick, who was credited with helping drive Hyundai Motor Co's fast growth in the U.S. market, steered GM back to sponsorship of high-profile events like the Super Bowl.

In May, he announced GM would pull its paid ads from Facebook days before the highly anticipated initial public stock offering for the social networking website, and said GM would not advertise on CBS during the 2013 Super Bowl because they were both overpriced.

Ewanick also led GM's effort to drive down the ad fees paid to broadcast TV networks during the advanced selling season that ended in June, said Brad Adgate, senior vice president of research at Horizon Media. The big four U.S. TV networks garnered single-digit increases from advertisers.

With his aggressive cost-cutting and a hyper personality some found off-putting, Ewanick clearly made enemies. One former GM executive, who asked not to be identified, received an email about the marketing chief's ouster with the subject line "Ding Dong, the witch is dead."

GM Chief Executive Dan Akerson previously said the automaker needed to focus more on marketing.

The "Chevy Runs Deep" campaign, which features the voice of actor Tim Allen, has aimed to focus buyers on the positive association many Americans had with GM before the long decline that culminated in its bankruptcy and $50 billion bailout by the Obama administration in 2009.

In April 2010, GM's Whitacre ordered the ouster of Campbell-Ewald, which had handled advertising for Chevy for over 90 years in favor of San Francisco-based Goodby, Silverstein & Partners, which is owned by Omnicom Group Inc and best-known for the "Got Milk?" ad campaign. Goodby worked with Ewanick at Hyundai.

Campbell-Ewald created some of the most memorable advertising campaigns in U.S. auto history for Chevrolet, including the "Baseball, hot dogs, apple pie and Chevrolet" ads of the 1970s and "See the USA in your Chevrolet" in the 1950s. Industry officials said agencies that were cut may see Ewanick's ouster as a chance to get back in the door with GM.

Earlier this year, GM announced efforts to save $2 billion over five years by pruning the number of ad agencies it uses.

Chevrolet sold 2.48 million cars and trucks in the first six months of the year, and the U.S. market accounted for 42 percent of that total. GM is pushing to boost demand for the mass-market brand in China, Brazil, Eastern Europe and other regions.

Appealing to consumers overseas was a big reason for the sponsorship deals with Manchester United, which set terms for its U.S. initial public offering on Monday.

The soccer club's current jersey sponsorship deal is with Aon, which pays for the right to put its name on the front of jerseys worn by players during games. That practice is quite lucrative for soccer clubs around the world, but is not allowed by most U.S. sports leagues.

In a sign of how important the size of the deal is for Manchester United, the club revealed in its IPO filing that its revenue fell 3 percent to 5 percent in the year just ended to 315 million to 320 million pounds ($495 million-$503 million). Based on those figures, the annual value of the shirt deal is about 13 percent of the club's revenue.

In May, GM announced a five-year deal with Manchester United for what is known as its auto sponsorship in which GM replaced Volkswagen's Audi brand. Terms of that deal were not disclosed, but analysts said it is likely worth at least tens of millions of dollars.

Alan Batey, GM's North American vice president of sales, was named the interim head of GM's marketing. The automaker declined to make him available for comment. (Reporting by Ben Klayman, additional reporting by Paul Lienert and Deepa Seetharaman; Editing by Gary Hill, Matthew Lewis and Muralikuma

Mancini confident City to retain title - Football

Published: 30 Jul 2012 - 20:17:03

Manchester City manager Roberto Mancini expressed confidence his champion squad will be able to retain their Barclays Premier League trophy after beating Malaysia in style.

Playing in humid conditions in Malaysia as part of City's Far East tour, Mancini's boys wrapped up their visit with an impressive 3-1 victory Monday over the Southeast Asian team.

The star of the game was Argentine striker Sergio Aguero who looked fresh and full of energy after a brief summer rest.

Aguero, who scored the goal that won City their Premier League trophy in May, opened the scoring on 17th minutes and created the other two goals for Carlos Tevez and Adam Johnson.

Aguero had the chance to put City one up in the ninth minute when he rounded the Malaysian defence only to see his shot hit the crossbar.

But he was not to be denied eight minutes later when he burst past three defenders before chipping the ball over Malaysian goalkeeper Mohamad Farizal Marlias.

A smiling Mancini was delighted with the performances of his players and Aguero in particular and said the tour reinforced his belief the team can go all the way in the coming season.

"We were confident two weeks ago and I?m even more confident today. Sergio played very well and his partnership with Carlos has continued from last season," he said when asked about City's chances of retaining the Premiership title.

"They scored a goal each today which is good. Sergio also played in the wide position today but still produced the goods. Hopefully we can continue his good form in the coming season," he added.

Meanwhile the City manager was quick to downplay injury concerns surrounding team captain Vincent Kompany, who had to cut short his Malaysian tour after picking up a knock earlier in the week.

"It's nothing serious. He had a scan and should be fit to play against Chelsea in the Charity Shield in two weeks' time," Mancini said.

"I'm happy we didn?t have any injuries today despite playing two matches in four days. It is difficult but the players are alright now," he added.

Mancini described the tour as a "eye opener" for his team as he was able to try out several of his younger players.

Although City started as the favourites, it was Malaysia who nearly opened the scoring in the second minute when City goalkeeper Costel Pantilimon handled the ball outside the box.

Pantilimon however made up for his error when he saved Safiq Rahim?s freekick.

It was City who then dominated play and kept the Malaysian side defending.

Just three minutes into the second-half Aguero turned provider, slipping the ball to compatriot Tevez, who dinked the ball home from close range.

Four minutes later Aguero?s sublime chip split the Malaysian defence and Johnson collected the ball on his chest before slotting home.

Malaysia pulled a goal back three minutes from time when substitute Azamuddin Akil dribbled through the City defence and hammered the ball past substitute goalkeeper Eirik Johansen.

City has three more friendlies before they play in the Community Shield against Chelsea on August 12.

City, who are visiting Malaysia for the first time, won 2-0 in a friendly against Premier League rivals Arsenal in Beijing on Friday.

Malaysia has hosted several top English Premier League clubs, who are increasingly keen to nurture a fan base and help attract sponsors in Asia.

Arsenal visited the Southeast Asian country before travelling to China to meet Manchester City. Queens Park Rangers played two friendlies in Malaysia earlier this month.

---

Related Manchester City News

• Aguero leads City to easy win
• Roberto Mancini interview: Manchester City ...
• Mancini says news on new players soon
• Man City expose Arsenal weaknesses

Madonna says boos at Paris gig were from 'a few thugs' - BBC News

30 July 2012 Last updated at 13:47 ET

Madonna has said the angry reaction from a crowd at her recent 45-minute show in Paris was from "thugs who were not my fans".

"Playing the Olympia was a magical moment for me," she said in a statement on her website.

"Unfortunately at the end of the show, after I left the stage, a few thugs who were not my fans rushed the stage... pretending to be angry fans," she said.

Some fans on Twitter agreed with her but others said they had booed her.

One said: "I have been a fan for 20 years and I booed Madonna at the Olympia! 45 minutes for 275 euros. Shame on you."

Another tweeted: "Madonna has blamed 'rogues' attending her concert at the Olympia without understanding that her fans feel cheated."

'Very frustrated'

Media website The Examiner said "many fans did feel short-changed due to lack of communication on how the show would be shorter".

But it suggested that "the actual riots and the screaming were started by supporters of Marine Le Pen, the leader of the far right National Front in Paris. Apparently, they are still upset that Madonna compared Le Pen to a Nazi in her tour."

Continue reading the main story

“Start Quote

Wherever there is darkness, I'm going to bring some light.”

End Quote Madonna

The 2,000 tickets sold out in minutes, with fans paying between £80-£200 and some reportedly changing hands for up to £1,000.

Speaking to the BBC's John Hand at the show on Thursday, Paris resident Allain Zambrana, 26, from Nicaragua, said he wanted to ask for his money back.

"I felt very frustrated because I camped out on the streets and then the show just ends like that."

Several people cried "refund" as they realised Madonna had left the stage for good.

Dutch fan Ellis Van Zoen, 22, agreed the show was "very short", but added: "I'm torn - I thought it was a fantastic show and it was special. I don't want to see fans yelling at her but I can understand why."

Other fans vented their frustration on a Facebook page owned by the star's publicist, Liz Rosenburg.

"Some people slept in the streets for 48 hours. So what happened with the concert?" asked Rudy Vanhover. "She was incredible but we were all shocked by the departure and the duration of the concert."

Others were more supportive. "It was an amazing experience to be part of this wonderful show," commented Christopher Houthaeve.

"I purchased the categorty 1 ticket and have absolutely no regrets."

'Wonderful experience'

Madonna said the "thugs" threw plastic bottles at the stage and that "the press reports have focused on this and not the joyous aspect of the evening".

"But nothing can take away or ruin this very special evening for me and my fans. When I looked out in the audience, everyone I saw had a smile on their face. I look forward to having this wonderful experience again."

At her concert in Vienna on Sunday, the singer told the crowd: "Those people were not my fans, they were not there to support me.

"But that's ok because wherever there is darkness, I'm going to bring you some light... we're not going to let them spoil our fun, are we?"

Pussy Riot members go on trial in Moscow - BBC News

Pussy Riot members go on trial in Moscow - BBC News

30 July 2012 Last updated at 07:12 ET

Pussy Riot band in court

All three members of Russian punk band Pussy Riot have pleaded not guilty to charges of hooliganism over an anti-Vladimir Putin protest at Moscow's main cathedral.

The women were taken into custody in February after the protest at Moscow's Christ the Saviour Cathedral.

The case has divided Russia and inflamed the religious establishment, correspondents say.

The song outraged the Russian Orthodox Church. It accused them of blasphemy.

Supporters say the case reflects the state's growing intolerance of government opponents.

Continue reading the main story

At the scene

We watched as the three young women were led down the concrete stairs and into the courtroom.

Their handcuffs were only removed once they were locked inside the bullet-proof cage.

As so often in this case, they were smiling despite their imprisonment. But their relatives sitting only a couple of metres away looked nervous.

The trial is getting widespread publicity both in Russia and overseas, and there were too many reporters to fit in the courtroom.

Cameras were allowed in briefly before proceedings, but the judge arranged a live internet broadcast from inside the court.

International superstars from the world of music have backed Pussy Riot. But their supporters believe the Kremlin could be much more influential on the outcome of this case.

• Pussy Riot trial divides Russia

In a written statement, band member Mariya Alekhina said the performance was an administrative offence, but had become a criminal case "as a result of the influence of political, law-enforcement and spiritual elites".

At the start of the trial, the three women, Nadezhda Tolokonnikova, Ms Alekhina and Yekaterina Samutsevich, were led into court in handcuffs, and locked into a cage of bullet-proof glass.

In court, Ms Tolokonnikova said that although they were pleading not guilty, that did not mean they were not prepared to apologise for the pain their performance in the cathedral had caused.

They each stood up and answered a series of questions from the judge in turn, which included their educational level, citizenship and the birth dates of their children.

The women are facing the charge of hooliganism motivated by religious hatred or hostility and could face up to seven years in prison.

In an interview with UK newspaper The Times, which was also broadcast on Russian TV, Russian Prime Minister Dmitry Medvedev has said it is up to the court to decide whether the women have committed a crime.

"This case is a high-profile one because it really is about our understanding of the rights and freedoms of an individual.

"However, there will always be differences in the perception of what is permitted and what is not permitted from a moral point of view and of where moral misdemeanours transform into criminal offences."

Bail denied

The women caused outrage when they stormed on to the altar of Christ the Saviour Cathedral, and sang an obscenity-laced song that implored the Virgin Mary to "throw Putin out".

The head of the Russian Orthodox Church, Patriarch Kirill, has said the act amounted to blasphemy.

The case has divided Russia, with many feeling the women have been too harshly treated, and are being made an example of as part of attempts to clamp down on the opposition, the BBC's Daniel Sandford reports from the court.

Two of the women have young children, and all three have repeatedly been denied requests to be given bail while awaiting trial.

Pussy Riot made headlines around the world late last year when footage of their controversial public performances at Moscow landmarks such as Red Square attracted millions of viewers on the internet.

More than 100 prominent Russian actors, directors and musicians have urged the authorities to release the three.

Western musicians such as Sting and the Red Hot Chili Peppers have also criticised the women's arrest.

Activists have said the case indicates that President Putin, now serving a third term in office, is not heeding calls for him to be more tolerant of political opponents.

Plan B scores second number one album - BBC News

29 July 2012 Last updated at 14:04 ET

Plan B has gone straight to the top of the UK album chart with Ill Manors, the soundtrack to his directorial film debut of the same name.

It is the London rapper's second number one album following his 2010 hit The Defamation of Strickland Banks.

The record beat US rockers Gaslight Anthem's fourth album, Handwritten, which entered the chart at two.

Last week's number one, Sir Elton John's Good Morning To The Night, fell nine places to number 10.

The next highest new entry was Jennifer Lopez's greatest hits collection, Dance Again - The Hits, at four.

Joss Stone's The Soul Sessions - Volume 2 was the only other new entry in the top 10.

The highest climber was Hans Zimmer's soundtrack to The Dark Knight Rises, which rose from 36 to 19.

Meanwhile, an album containing music from the London 2012 opening ceremony has sold more than 10,000 copies within 24 hours of going on sale.

The compilation, named Isles of Wonder, includes music which featured in Friday night's event with tracks from Dizzee Rascal, Emeli Sande, Arctic Monkeys, David Bowie and U2.

The Official Charts Company said sales from Friday and Saturday earned it the number five spot in this week's compilation albums chart.

In the singles chart, Florence and the Machine held on to the number one spot for a third week with Spectrum.

Maroon 5 also remained at two with Payphone, while Stooshie's Black Heart rose two places to three.

Teen singer Conor Maynard was the highest new entry at four with Vegas Girl, while Karmin's Brokenhearted made its debut at six.

UPDATE 2-Lufkin cuts FY outlook on labor unrest in Argentina - Reuters

Mon Jul 30, 2012 1:09pm EDT

* Cuts FY EPS view to $3.00-$3.20, from $3.75-$4.05

* Trims FY rev view to $1.25-$1.27 bln, from $1.25-$1.30 bln

* Q2 adj. EPS $0.66 vs est. $0.82

* Q2 rev $305.6 mln vs est. $307.7 mln

* Shares fall as much as 20 pct

July 30 (Reuters) - Oilfield services provider Lufkin Industries Inc sharply cut its earnings forecast for the year as labor unrest continues to disrupt its manufacturing operations in Argentina, driving its shares down as much as 20 percent.

The company, which runs an oilfield equipment manufacturing plant in the city of Comodoro Rivadavia in Argentina, has been hit by shipment delays over the last year as pay-related labor strikes become more prevalent in the South American country.

"Argentina will continue to be an area of risk so long as the labor unrest and political uncertainty loom around the oil and gas industry in that country," Chief Executive John "Jay" Glick said in a statement.

The "current operational challenges" in Argentina have impacted customers' ability to accept deliveries, he said.

Argentina, which in April nationalized Spanish-controlled oil company YPF SA, has an energy investment plan that intends to tighten control over private companies. Petrobras , Exxon Mobil Corp and Royal Dutch Shell Plc are some top energy companies operating there.

Labor disruptions hurt production in Argentina and a newly negotiated labor contract led to higher costs in the region, a company executive said on a conference call with analysts.

"We made significant headway managing the issues under our control in Argentina. The situation with the oil and gas sector will remain very uncertain for the foreseeable future," another executive said on the call.

Until natural gas prices strengthen to support higher development work, the company would continue to be impacted by weak demand in North America, he said.

Several oilfield services companies have been hit by disruptions caused due to the industry-wide shift to lucrative oil drilling from natural gas drilling, prompted by decade-low prices for the fuel.

Lufkin shares, which have fallen more than a quarter in the last year, were down 20 percent at $47.37 in afternoon trade on Monday on the Nasdaq. They touched a month-low of $47.14 earlier in the session. More than 2.0 million shares changed hands by 1300 ET, nearly 4 times their 10-day average volume.

Lufkin, which sells and services oilfield pumping units and power transmission products, slashed its full-year earnings expectation to a range of $3.00 to $3.20 per share, from $3.75 to $4.05 per share it forecast earlier.

The company trimmed its full-year revenue forecast to between $1.25 billion and $1.27 billion from $1.25 billion to $1.30 billion.

Third-quarter earnings are expected to be between 70 cents and 80 cents per share, on revenue of between $330 million and $340 million.

Analysts on average were expecting earnings of $1.09 per share and revenue of $341.21 million, according to Thomson Reuters I/B/E/S.

Lufkin's second-quarter net income rose more than 4 percent to $19.3 million, or 57 cents per share.

Adjusted earnings of 66 cents per share fell short of estimate of 82 cents.

Revenue rose 35 percent to $305.6 million but was below analysts expectations of $307.7 million.

United strike Chevrolet shirt deal - Football

Published: 30 Jul 2012 - 16:17:07

Manchester United have announced a seven-year shirt sponsorship deal with General Motors.

Chevrolet, the club's official car partner, will become only the fifth shirt sponsor in the club's 134-year history from the 2014-2015 season, in an agreement that has been signed for an undisclosed amount.

United's commercial director, Richard Arnold, told the club's official website, www.manutd.com: "This is a fantastic, long-term deal for the club. We have been partners with Chevrolet for only six weeks, but already they have produced some fantastic ideas that will benefit both the partnership and our 659 million followers around the world."

Arnold added: "They are a key partner on our current tour and I know they have enjoyed experiencing the buzz generated by our fanatical support and the sell-out crowds in South Africa, China, and Europe.

"It is a great thrill for those of us who work with partners all year round when an existing partner steps up to being one of our principal partners. This commitment to United and its fans will bring real benefits to everyone who cares about the club."

Chevrolet will replace Aon, whose partnership with United began in the 2010/11 season.

Alan Batey, General Motors' North America vice-president, US sales and service, said: "We are extremely proud to connect our brand, Chevrolet, with Manchester United and its passionate supporters all around the world.

"Manchester United's statistics are impressive, but this relationship goes far beyond the numbers - this relationship is about connecting our brand with the deep-seated emotion that surrounds the team everywhere it goes.

"When you consider the core values of Chevrolet, our passionate customers around the world, and our rich 100-year history, the partnership with Manchester United is a perfect fit.

"And, to be only the fifth name on the iconic red jersey is a genuine honour. We very much look forward to the road ahead and the opportunities we have in partnering with such a legendary club."

---

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Irish data watchdog to publish Facebook review by Oct - Reuters

By Georgina Prodhan and Lorraine Turner

VIENNA/DUBLIN, July 30 | Mon Jul 30, 2012 1:29pm EDT

VIENNA/DUBLIN, July 30 (Reuters) - An Irish watchdog says it will determine by early October whether Facebook, the world's biggest social network, will face legal action under European privacy laws.

Ireland is the headquarters of Facebook's non-U.S. business, and the data regulator there is responsible for ensuring that the company complies with European and Irish data protection law, which is generally tougher than in the United States.

The Data Protection Commissioner denied on Monday it had frozen out an Austrian-based group of student activists, europe-v-facebook, which has succeeded in extracting some concessions on privacy from Facebook and had been working with the watchdog.

The pressure group's founder told Reuters he feared the watchdog was favouring Facebook, partly because Ireland prizes the fact that large U.S. IT firms like Facebook and Microsoft have made the country their international base.

"Our main concerns are about transparency and control," said Max Schrems, giving the examples that Facebook still held data that users believed they had deleted, and was also failing to provide users with their own raw data.

Facebook was the first American company to debut with a value of more than $100 billion in its initial public offering in May, buoyed by its global user base of almost 1 billion, but had shed one third of its value on its uncertain sales outlook.

The social network is under pressure to boost advertising revenues, but doing so is a delicate exercise as it must avoid giving users the impression it is invading their privacy.

The Irish watchdog has already carried out a privacy audit of Facebook, as a result of which it made recommendations about Facebook's policies on tagging photos, retaining and deleting data and the level of control users have over their information.

A second audit is designed to test Facebook's progress in implementing those recommendations, and to ensure that the company is complying with the law.

"Failure to comply with any such obligation could result in enforcement action," the Commissioner's office said.

"It's still all systems go, on getting this work with Facebook to an end, and from our perspective producing an output which ensures that Facebook is compliant with European data protection," Gary Davies, Deputy Data Protection Commissioner (DPC), told Reuters.

Europe-v-facebook earlier complained that the watchdog had stopped taking its calls and had sent a text message saying it would no longer speak to the organisation. It said it feared its concerns about Facebook were no longer being taken seriously.

The Irish data watchdog said in a statement on Monday: "Europe-v-facebook performed a useful public service in highlighting the specific issues raised in its complaints."

"We informed the organisation last week that we had nothing to add to the answers we had already provided both orally and in writing and that therefore senior staff members were not available to discuss such procedural matters any further."

Schrems said a delegation from europe-v-facebook planned to fly to Dublin next Monday to consult with their lawyers and to try to meet with the Commissioner.

The Commissioner's office said the purpose of its audit was not to address the complaints of europe-v-facebook, but that it would be happy to address any remaining complaints not resolved as part of the audit process.

Armitstead's road race silver gives GB first medal - ESPN.co.uk

Armitstead's road race silver gives GB first medal - ESPN.co.uk

Team GB picked up their first medal of London 2012 as Lizzie Armitstead snatched silver in a pulsating conclusion to the women's cycling road race.

Schedule
Results
Medal Table

In a sprint finish contested in treacherous conditions, with heavy rain a near-constant throughout the race, Netherlands' Marianne Vos took gold, while Olga Zabelinskaya of Russia grabbed bronze.

Armitstead's team-mates - Nicole Cooke, the 2008 Olympic champion, Lucy Martin and Emma Pooley - laid the platform, with Pooley making a particularly decisive contribution.

There were a host of ill-fated breakaway attempts in the early and middle parts of the race, most of which came from the Dutch riders. Although no-one was able to streak clear, the bursts did serve to spread out the field - and the pace was too hot for Lucy Martin to handle as she dropped off the back of the peloton. It was Pooley who stationed herself at the head of the pack and had the responsibility for reeling in those who surged out front.

The first effective breakaway came from Zabelinskaya with around 40km remaining, and she was joined by Armitstead, Shelley Olds and Vos in building the biggest gap of the race, which was ultimately too significant for the chasers to bridge.

As the rain lashed down, Olds dropped off from the leading group just inside the 30km mark, leaving just three frontrunners incentivised by a guaranteed medal if they could stay at the head of the action. They worked together to shoulder the burden as the stripped-down peloton continued to lose decisive ground, with around 40 seconds the gap with 5km remaining.

They meandered towards an inevitable closing sprint, with Zabelinskaya left behind, and Vos and Armitstead contesting the final few seconds. Despite Armitstead's brave effort, it was Vos, a former road race world champion, who crossed first in a breathtaking finish.

"It's just really strange," Armitstead said to the BBC. "I'm a bit shocked. My team-mates did exactly what was asked. I needed an aggressive race."

In other British action on Sunday, defending champion Rebecca Adlington qualified as the slowest of the eight 400m freestyle swimming finalists. Gemma Spofforth, Georgia Davies, Robbie Renwick and Liam Tancock also came through their heats.

Colin Oates shocked Khashbaater Tsagaanbaater, the bronze medallist in Beijing, in judo action before suffering defeat in the quarter-finals.

Ben Ainslie, the three-time sailing gold medallist, placed second in his first race of the Games.

Britain's defending rowing champions, Zac Purchase and Mark Hunter, reached the semi-finals of the lightweight men's double sculls.

Welsh boxer Fred Evans was too good for Ilyas Abbadi of Algeria in the men's welterweight round of 32.

In women's team event archery, GB were knocked out in the first round by Russia. The trio of Alison Williamson, Naomi Folkard and Amy Oliver looked on course for victory but their opponents finished the stronger to win through 215-208.

GB's men produced a valiant display in the volleyball but ultimately Bulgaria proved too strong at Earls Court. Bulgaria, ninth in the world standings, overcame their 92nd-ranked opponents 25-18 25-20 26-24. GB's women's pair Zara Dampney and Shauna Mullin fought from a set down to beat the Canadian team of Annie Martin and Marie-Andree Lessard. Having lost a close first set, Dampney and Mullin, cheered on by a partisan crowd at Horse Guards Parade, got back on level terms before sealing a 17-21 21-14 15-13 victory.

Badminton mixed doubles pair Chris Adcock suffered their second defeat in as many Group A matches, losing 11-21 21-17 21-14 to German duo Michael Fuchs and Birgit Michels.

In table tennis, Joanna Parker was outclassed by Germany's Kristin Silbereisen at the second-round stage - but Paul Drinkhall beat Yang Zi 4-1 in the second round.

© ESPN EMEA Ltd

Sangh backing for Ramdev, Hazare: Digvijaya - Hindustan Times

Congress leader Digvijaya Singh on Sunday said the RSS and its affliate organisations were continuing to support yoga guru Ramdev and Anna Hazare and would back them even during elections. "Baba Ramdev and Anna Hazare had and will continue to have the support of the Sangh Parivar. Even during elections these people have been supportive of them (Sangh)," Singh told reporters.

Singh's remarks came on the day yoga guru Ramdev and Gujarat chief minister Narendra Modi shared the dais at a function in Ahmedabad.

On Hazare joining the fast from Sunday, the Congress leader said "poor Anna will be forced to sit on fast, if Arvind Kejriwal and others from Team Anna cannot fast."

Team Anna had on Wednesday launched an indefinite fast in New Delhi demanding passage of the Janlokpal Bill by Parliament and action against "corrupt" ministers.

While Team Anna members had begun the fast on Wednesday, Hazare joined them in fasting from Sunday.

Rhode in record books, more chapters to come - Reuters UK

By Steve Keating

LONDON | Sun Jul 29, 2012 6:33pm BST

LONDON (Reuters) - Kim Rhode could finish her shooting career as the United States greatest Olympian ever but it will be one spent mostly in obscurity defending a sport she maintains is misunderstood.

A gold medal victory in the women's skeet on Sunday put Rhode into the record books as the first American to medal in five consecutive Olympics and at just 33-years-old, competing in a sport that has seen winners in their 60s, could easily take part in five more Games before putting away her shotgun.

With gold from London, Atlanta and Athens, a silver from Beijing and a bronze in Sydney, Rhode may be entering Michael Phelps like territory but there will be no long lineup of television appearances to schedule or massive endorsement deals to be signed when she returns home.

"Shooting isn't like Phelps or (Michael) Jordan or something, this is more of sport that you can, when you are at the top level, make a living but it is always a struggle," Rhode's father Richard told Reuters. "Shooting is an expensive sport, every time you pull the trigger it costs you money."

Rhode practises every day firing between 500 and 1,000 rounds, each training session costing between $400 and $600.

Certainly Rhode did not waste any ammunition on Sunday hitting 99-of-100 targets breaking the Olympic record and equalling the world mark to win the gold in style.

"I don't think it has hit me yet but I'm sure it will, the record and everything it represents," said Rhode, who will be back on the range on Monday preparing for the trap event. "The last few shots I was trying to keep myself from not crying.

"Every emotion hit me at once when I was out there."

TRAGIC BACKDROP

Rhode's record smashing day unfolded under a tragic backdrop with guns again at the centre of polarizing debate in the U.S. following the latest horrific shooting spree that left 12 people and 58 wounded after a gunman opened fire at a movie theatre in the Denver suburb of Aurora earlier this month.

Rhode, a poster girl for the powerful National Rifle Association (NRA), has faced questions about guns, the people who use them and the link to the Aurora shootings in almost every interview since arriving in London.

"Shooting teaches responsibility, discipline, focus and this is a sport, it's sad when those lines get blurred by someone who was obviously disturbed," she said. "Hopefully we continue on a positive path and teach others."

Shortly after they were married, Richard Rhode introduced his new wife Sharon to the sport and then their young daughter.

Richard became and remains his daughter's coach, he and his wife travelling the globe to every Olympics cheering her on.

"We both shoot, my husband taught me to shoot when we were married," said Sharon. "We go to the range like other people go bowling and shoot skeet or trap so Kim was just sort of born into it."

Rhode was just 13 when she claimed her first world title and three years later was the youngest member of the U.S. Olympic team taking gold at the 1996 Atlanta Summer Games.

Later that year she was named one of the Top 10 Sports Phenoms by Time magazine.

"Her eye-hand coordination is very, very good," said Richard. "Even as a child with video games or a computer, what she sees she can make her hands do.

"She very focused and has very good eyesight too."

Rhode may not stick around as long as Swedish marksman Oscar Swahn, the oldest person to win an Olympic medal when he took a silver at the 1920 Antwerp Summer Games at 72 but she definitely has Rio in her sights.

"I'm not looking at this as my last Olympics," said Rhode. "I can go a very long time, that's the beauty of shooting.

"It's not a flash in the pan type thing. I definitely don't see an end in sight."

RSS backing Ramdev, Anna Hazare: Digvijay - zeenews.india.com

New Delhi: Congress leader Digvijay Singh on Sunday said the RSS and its affliate organisations were continuing to support yoga guru Ramdev and Anna Hazare and would back them even during elections.

"Baba Ramdev and Anna Hazare had and will continue to have the support of the Sangh Parivar. Even during elections these people have been supportive of them (Sangh)," Singh told reporters.

Singh's remarks came on a day yoga guru Ramdev and Gujarat Chief Minister Narendra Modi shared the dais at a function in Ahmedabad.

On Hazare joining the fast from today, the Congress leader said "poor Anna will be forced to sit on fast, if Arvind Kejriwal and others from Team Anna cannot fast."

Team Anna had on Wednesday launched an indefinite fast here demanding passage of the Janlokpal Bill by Parliament and action against "corrupt" ministers.

While Team Anna members had begun the fast on Wednesday, Hazare joined them in fasting from today.

PTI

Villas-Boas slams Adam tackle - Football

Published: 29 Jul 2012 - 07:17:10

Tottenham manager Andre Villas-Boas has criticised Liverpool midfielder Charlie Adam for a heavy challenge on Gareth Bale in their goalless pre-season friendly in the United States.

Spurs and Liverpool played out a 0-0 draw at the M&T Bank Stadium, home of NFL franchise the Baltimore Ravens. In a game which marked the Liverpool debut of summer signing Fabio Borini, Villas-Boas was critical of Adam who has previous history with Bale.

In quotes reported by several national newspapers, Villas-Boas said: "I think it was a very nasty challenge from Charlie. The player had gone and he came in from behind on Gareth's ankle. I did not know the previous history between the two. I do now."

He added: "It is a difficult one to be fair. You do not want to end up in a game with Liverpool with 10 men. At half-time Charlie came to me and said something about the challenge.

"I can accept that but I think he should go to the player to say sorry."

In May 2011 the Scotland international injured Bale in a tackle, an incident Villas-Boas was only made aware of following the game in Baltimore.

Bale was out for three months with ankle ligament damage after that incident. Adam's latest challenge left Villas-Boas waiting to hear on the seriousness of Bale's injury.

He added: "If the player escapes hospital it is because he is very lucky. The last time he was out for three months and in the end it is the Premier League that suffers without a player of Bale's talent."

Bale's appearance on Spurs' United States tour had already caused controversy as he scored in the game with Los Angeles Galaxy on Wednesday despite having pulled out of the Team GB squad for the Olympics with a back injury.

---

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RSS supports Hindu Jagaran Vedikeon on rave party - Times of India

MYSORE: RSS leadership in Karnataka seems to have no qualms on the issue of supporting violent opposition to the rave party at Mangalore on Saturday, but support comes only with a rider that the volunteers would not have assaulted the women.

Though the issue has it's own ramifications and seriousness, the RSS leadership is unperturbed and it's leaders feel that the issue whether women should participate in such rave parties needs a debate on larger scale.

Talking to TOI a RSS spokesman who initially was on record to say various things on the issue later does not wanted him to be quoted for the reasons best known to him.

Admitting Hindu Jagaran Vedike as one of the frontal organizations of the RSS like BMS and ABVP , spokesman said RSS is against rave parties , but it condemns the attack on the women involved in the rave party. But it does not mean RSS supports the rave parties, he clarified.

It is a fact that HJV volunteers have attacked the women participating in rave party, but RSS demands a debate on the issue of rave parties, he said wanting to know why the girls hid their participation in the rave parties to their parents." It goes to indicate that there is something amiss in the issue and rave parties" he said and added: RSS is against indecent culture of rave parties which are against the tenets of Hindutva which stood for decency and respect.

In reply, the spokesman said girls and women in the guise of freedom cannot indulge in immoral acts." Comparing RSS to Taliban is a fashion and a big word for RSS , but this allegation does not deter us from adhering to our ideology and doctrines " he replied, denying that incident smacked of fundamentalism.

Taylor replaces Bopara in England squad - ESPN.co.uk

James Taylor, the Nottinghamshire batsman, has been called up for the second Test at against South Africa at Headingley after Ravi Bopara was ruled out for what the ECB said were "personal issues".

The first match of the series at The Oval marked Bopara's return to the Test line-up after nearly a year out of the team but he struggled, making 0 and 22. He had been due to play in Essex's CB40 match against Worcestershire on Sunday.

Taylor, who has played one ODI against Ireland last year, will enter the match in good form after making a century in the current round of Championship matches against Sussex - although before that innings it had been a lean season in four-day cricket for him with one half-century in nine matches. However, he did hit a century for England Lions against the West Indians earlier this season.

He is the only change to the 13-man squad after the innings-and-12-run defeat in the opening Test at The Oval, although question marks remain over the make up of the bowling attack after England took just two wickets in 189 overs. Steven Finn and Graham Onions, who both played Championship cricket this week, are the other options should the selectors decide on a change.

The most vulnerable of the pace bowlers appears to be Tim Bresnan although he would bring local knowledge on his home ground and can bowl long spells. Stuart Broad was below his best at The Oval but it is unlikely that England will consider leaving him out after showing such faith in him during previous slips in form.

Finn took six wickets against Durham at Chester-le-Street while by the start of the third day Onions had four to his name. Both played against West Indies at Edgbaston when England rotated their pace attack and Finn showed excellent form against Australia in the one-day series.

Geoff Miller, the national selector, said: "We were outplayed during the first Test last week but it is important that this squad regroups and focuses on preparing for the second Test. This is a talented squad with plenty of international experience and they will be determined to improve on the performance during the first Test.

"We have made one change to the squad with James Taylor replacing Ravi Bopara who is unavailable for selection due to personal reasons. James has been part of the England Performance Programme for a number of years and has performed consistently for England Lions and now has an opportunity to step up and experience the Test environment.

"We have played a lot of good cricket over the last few years and it's important we remember that, learn from the mistakes that we made and retain the belief that we can level this series at Headingley."

Squad: Andrew Strauss (capt), Alastair Cook, Jonathan Trott, Kevin Pietersen, Ian Bell, James Taylor, Matt Prior, Tim Bresnan, Stuart Broad, Graeme Swann, James Anderson, Steven Finn, Graham Onions

Andrew McGlashan is an assistant editor at ESPNcricinfo

© ESPN EMEA Ltd

Euro zone crisis heads for September crunch - Reuters

Euro zone crisis heads for September crunch - Reuters

By Jan Strupczewski

BRUSSELS | Sun Jul 29, 2012 6:47am EDT

BRUSSELS (Reuters) - Over the past couple of years, Europe has muddled through a long series of crunch moments in its debt crisis, but this September is shaping up as a "make-or-break" month as policymakers run desperately short of options to save the common currency.

Crisis or no crisis, many European policymakers will take their summer holidays in August. When they return, a number of crucial events, decisions and deadlines will be waiting.

"September will undoubtedly be the crunch time," one senior euro zone policymaker said.

In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.

On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy - or what do if one or both were to topple.

"In nearly 20 years of dealing with EU issues, I've never known a state of affairs like we are in now," one euro zone diplomat said this week. "It really is a very, very difficult fix and it's far from certain that we'll be able to find the right way out of it."

Since the crisis erupted in January 2010, the euro zone has had to rescue relative minnows in Greece, Ireland and Portugal as they lost the ability to fund their budget deficits and debt obligations by borrowing commercially at affordable rates.

Now two much larger economies are in the firing line and policymakers must consider ever more radical solutions.

If Spain, the euro zone's fourth biggest economy and the world's 12th, loses affordable market financing the next domino at risk of falling is Italy - the euro zone's third biggest economy and a member of the G7 group of big wealthy nations.

A bailout of Spain would probably be double those of Greece, Ireland and Portugal combined, while Italy's economy is twice as large as Spain's again.

The European Union has already agreed to lend up to 100 billion euros to rescue Spanish banks. One euro zone official said Madrid has now conceded that it might need a full bailout worth 300 billion euros from the EU and IMF if its borrowing costs remain unaffordable.

DEFLATING LIFE RAFT

The euro zone does not seem to have enough cash in the current setup to deal with a scenario of Spain and Italy needing a rescue, and a sense of doom is growing among some policymakers. Fighting the crisis, said the euro zone diplomat, is like trying to keep a life raft above water.

"For two years we've been pumping up the life raft, taking decisions that fill it with just enough air to keep it afloat even though it has a leak," the diplomat said. "But now the leak has got so big that we can't pump air into the raft quickly enough to keep it afloat."

Compounding the problems, Greece is far behind with reforms to improve its finances and economy so it may need more time, more money and a debt reduction from euro zone governments.

If Greek debt cannot be made sustainable, the country may have to leave the euro zone, sending a shockwave across financial markets and the European economy.

September 12 is a crucial date in the European diary. On that day the German Constitutional Court is scheduled to rule on whether a treaty establishing the euro zone's permanent bailout fund, the 500 billion euro European Stability Mechanism (ESM), is compatible with the German constitution.

A positive ruling is vital, because Germany is the biggest funder of the ESM, and the euro zone would be powerless to protect Spain or Italy without the ESM.

On the same day, parliamentary elections are held in the Netherlands where popular opposition to spending any more money on bailing out spendthrift euro zone governments is strong. The Dutch vote may complicate talks on a revised second bailout for Greece, which also has to be agreed in September.

Athens wants two more years than originally planned to cut its budget deficit to below 3 percent of GDP, so as not to impose yet more spending cuts on a country which is already in a depression.

This would mean Greece's 130 billion euro second bailout package may need to be increased by 20-50 billion euros, according to estimates by some euro zone officials and economists, and there is no appetite in the euro zone to give Greece yet more extra money.

More importantly Greece needs to bring its debt, which is equal to 160 percent of its annual economic output, under control. This means euro zone governments, which own roughly two thirds of it, may need to write part of it off.

Private creditors have already suffered a huge writedown in the value of their Greek debt holdings but so far euro zone taxpayers have not lost a cent on any of the bailouts.

LAST CHANCE OPTIONS

Policymakers are working on "last chance" options to bring Greece's debts down and keep it in the euro zone, with the ECB and national central banks looking at also taking significant losses on the value of their bond holdings, officials said.

If governments swallowed the bitter pill by also accepting a cut in the value of their contributions to loans already made to Greece, this would break a taboo and could provoke demands for similar treatment from Ireland or Portugal.

Peter Vanden Houte, chief economist at ING bank, said euro governments might be forced to accept a halving of the value of their Greek debt - known in the business as haircut.

"If Greece is to be saved, we must see some debt forgiveness from euro zone governments in the coming years because otherwise Greece is never going to come out of the situation it is in now," he said. "We are talking about potentially a 50 percent haircut, which would still mean the Greek debt would be (proportionately) around the euro zone average."

The euro zone would want concessions from Athens. "Most probably in exchange, euro zone partners will be more strict on Greek compliance with structural reforms and may ask Greece to give up some sovereignty," said Vanden Houte.

While no official discussions are underway on another Greek debt restructuring, euro zone officials say privately it may be necessary if Greece is to have a fighting chance.

"The Greeks might say they are in such a mess that to survive they we need to ease up the austerity a bit, and to still regain debt sustainability they will have to default on 30-40 percent of the loans," one euro zone official said.

"There would be a lot of people saying this is understandable, so maybe this makes sense and maybe we could have a reasonable discussion among the member states on how Greece can move forward," the official said.

The official speculated that euro zone debt forgiveness for Greece could be made dependent on progress in structural reforms or that it could be reviewed once Athens has to start paying back the capital of the loans in 10 years.

"Maybe we could agree to give debt relief of, say, 25 percent to make possible some changes in the program. Then we implement that for six months or a year and maybe we find out that we need to give them another 25 percent and at the end of the day we might get to a stable situation," the official said.

The situation will become clearer once international lenders produce a new debt sustainability analysis for Greece at the end of August.

THE BATTLE OF SPAIN

Preventing Spain and Italy from losing debt market access may require the crossing of another red line - European Central Bank help in keeping down governments' borrowing costs.

ECB President Mario Draghi signaled last Thursday the bank was ready to act, indicating it may revive its program of buying bonds of troubled governments on the secondary market.

"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," Draghi said. "To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate."

However, Germany has always been hostile to the idea and the Bundesbank said on Friday that it continued to view it "in a critical fashion".

German Finance Minister Wolfgang Schaeuble dismissed suggestions Spain will ask the bailout fund to try to lower its borrowing costs by purchasing its bonds.

Spain faces high borrowing costs because investors fear they will not get their money back. The Spanish economy is shrinking, many of its autonomous regions need bailouts from Madrid and banks need the recapitalization of up to 100 billion euros.

Madrid still has to raise about 50 billion euros on the market by the end of the year. This may be impossible if its funding costs stay well above 7 percent for 10-year bonds.

Draghi's remarks knocked yields down by more than 40 basis points to below 7 percent on Thursday, but they could quickly climb back if the market does not see firm ECB buying soon.

The ECB also seems to be softening its stance on another taboo - giving the ESM a banking license so the fund can borrow from the ECB against euro zone government bonds.

If Spain or Italy applied for euro zone help in bringing down their borrowing costs, the temporary European Financial Stability Facility (EFSF) bailout fund or the ESM could help.

But with their combined firepower, under current agreements, of 459.5 billion euros until July 2013 and at 500 billion from July 2014, the funds do not have enough to impress markets.

If the ESM could refinance itself at the ECB, however, it would have virtually unlimited firepower for bond market intervention without causing inflationary pressure.

Discussions on the banking license for the ESM have been going on in the background for many months, officials said, with France openly calling for such a solution, but Germany, Finland and the Netherlands strongly against.

(Additional reporting by Luke Baker; editing by David Stamp)

Taylor replaces Bopara in England squad - ESPN.co.uk

James Taylor, the Nottinghamshire batsman, has been called up for the second Test at against South Africa at Headingley after Ravi Bopara was ruled out for what the ECB said were "personal issues".

The first match of the series at The Oval marked Bopara's return to the Test line-up after nearly a year out of the team but he struggled, making 0 and 22. He had been due to play in Essex's CB40 match against Worcestershire on Sunday.

Taylor, who has played one ODI against Ireland last year, will enter the match in good form after making a century in the current round of Championship matches against Sussex - although before that innings it had been a lean season in four-day cricket for him with one half-century in nine matches. However, he did hit a century for England Lions against the West Indians earlier this season.

He is the only change to the 13-man squad after the innings-and-12-run defeat in the opening Test at The Oval, although question marks remain over the make up of the bowling attack after England took just two wickets in 189 overs. Steven Finn and Graham Onions, who both played Championship cricket this week, are the other options should the selectors decide on a change.

The most vulnerable of the pace bowlers appears to be Tim Bresnan although he would bring local knowledge on his home ground and can bowl long spells. Stuart Broad was below his best at The Oval but it is unlikely that England will consider leaving him out after showing such faith in him during previous slips in form.

Finn took six wickets against Durham at Chester-le-Street while by the start of the third day Onions had four to his name. Both played against West Indies at Edgbaston when England rotated their pace attack and Finn showed excellent form against Australia in the one-day series.

Geoff Miller, the national selector, said: "We were outplayed during the first Test last week but it is important that this squad regroups and focuses on preparing for the second Test. This is a talented squad with plenty of international experience and they will be determined to improve on the performance during the first Test.

"We have made one change to the squad with James Taylor replacing Ravi Bopara who is unavailable for selection due to personal reasons. James has been part of the England Performance Programme for a number of years and has performed consistently for England Lions and now has an opportunity to step up and experience the Test environment.

"We have played a lot of good cricket over the last few years and it's important we remember that, learn from the mistakes that we made and retain the belief that we can level this series at Headingley."

Squad: Andrew Strauss (capt), Alastair Cook, Jonathan Trott, Kevin Pietersen, Ian Bell, James Taylor, Matt Prior, Tim Bresnan, Stuart Broad, Graeme Swann, James Anderson, Steven Finn, Graham Onions

Andrew McGlashan is an assistant editor at ESPNcricinfo

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