The global digital camera market may contract next year, the president of industry leader Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) warned, as sluggish economic conditions dampen consumer demand.
Tsuneji Uchida also told Reuters that Canon was aiming to cut $1 billion in costs with a new computer system to be completed by 2010 and that he was in no rush to join an acquisition spree by other cash-rich Japanese firms.
The economic slowdown has started to hit sales of digital single-lens reflex (SLR) cameras — high-end models that use interchangeable lenses — but overall Canon’s camera sales are solid ahead of the year-end shopping season, Uchida said.
The outlook, however, has become increasingly murky and the $40 billion digital camera market may shrink next year in unit terms, Uchida said, a development that would heighten the risk that Canon’s earnings downturn stretches into 2009.
“We hope we will see the same level of demand next year as this year,” Uchida said in an interview conducted on Friday and embargoed from publication until Tuesday. “Whether or not that will become reality is up to economic conditions.”
Global digital camera demand grew 24 percent to 130.7 million units in 2007, according to research firm IDC, and Canon and its top rivals, which include Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) and Nikon Corp (7731.T: Quote, Profile, Research, Stock Buzz), are still forecasting sales growth this year.
Canon last month cut its 2008 compact digital camera sales forecast by 6 percent to 23.5 million units, though that would still mark a year-on-year jump of 10 percent businesscards. It stood by its estimate for SLR sales to rise 38 percent to 4.4 million units.
Demand for SLR cameras has grown strongly over the past few years, spurred on by a drop in prices that has expanded the customer base beyond professional and advanced amateurs.
That has meant big profits for Canon and Nikon, which dominate the high-margin segment of the market.
Uchida said SLR demand was starting to show signs of “stagnation” but that it was not enough to knock its overall camera sales forecasts off track.
“According to our internal data, recent sales appear to have been fairly good … no worse than we had thought,” he said. “In fact, we saw our products gain some market share last week.”
HOLDING ON TO CASH
Canon was founded 71 years ago with the goal of overtaking Leica and other German camera makers to become the global leader.
Uchida joined the company in 1965 and has played a key role in Canon attaining and keeping the industry’s top spot, first as an engineer developing cameras and then as head of the camera division before he became president in 2006.
It diversified during the 1960s into copiers and other office equipment, creating a new growth driver that now accounts for about two-thirds of its revenues. Its rivals in the copier market include Ricoh Co (7752.T: Quote, Profile, Research, Stock Buzz) and Xerox Corp (XRX.N: Quote, Profile, Research, Stock Buzz).
Tech industry watchers are already speculating on replacements for Jerry Yang, but a new chief executive for Yahoo won’t likely be named until well into the new year.
Yang announced Monday that he will step down as CEO when the board names a replacement. But finding the right leader with the right skills to turn around Yahoo (YHOO, Fortune 500) won’t be easy. Executive recruiters say it takes roughly four-to-six months to name a CEO if the board acts quickly. And a new executive typically gives at least a month notice before leaving his or her old employer. Yahoo has hired Heidrick & Struggles to find candidates.
Recruiters say that Yahoo’s board must first decide the company’s strategy is before it goes looking for a new leader. Yang stumbled in articulating that vision after taking over for Terry Semel, who molded Yahoo into a media company. Yang has described Yahoo as a "starting point" for users, a "must-buy" for advertisers, and an "open platform" for developers. Most recently, he described Yahoo as a "consumer brand."
A new CEO will need to have a clear direction of where Yahoo is headed in order to effectively turn around the company. "You can’t fit the problem to the leader. That’s like the tail wagging a dog," said Bob Concannon, lead tech recruiter for Boyden, which has placed executives for IBM (IBM, Fortune 500), Apple (AAPL, Fortune 500), and Palm. "You need to figure out where you want to go to find the leader to address that. At this level, a CEO is either going to really help the company or further bury it. Yahoo needs to do something because every month it gets less relevant."
The process for vetting a new executive for Yahoo is made more complicated by the makeup of the 11-member board. Shareholder activist Carl Icahn won three spots on the Yahoo board in exchange for dropping a proxy fight last summer cash in one hour. Icahn has actively campaigned to sell Yahoo to Microsoft (MSFT, Fortune 500), but beyond that he has remained mum on how he plans to drive long-term shareholder value for the struggling Internet company.
Said Concannon, "Candidates have to meet with all board members to get approval. I imagine Icahn will have a big voice in this process."
If Yahoo’s game plan is to groom itself for a sale, the company won’t have to look very far. Yahoo president Sue Decker is an obvious internal candidate to replace Yang. Headhunters say there’s no need to hire an outsider if the goal is simply to divest Yahoo’s assets. Said Charley Geoly, a tech recruiter with Russell Reynolds, "I would think Sue Decker is imminently qualified to execute a transaction."
Speculation about possible CEO candidates has centered around Decker, former AOL chief executive Jonathan Miller, former Yahoo chief operating officer Dan Rosensweig and News Corp. (NWS, Fortune 500) president Peter Chernin.
Analysts say that no matter who takes over for Yang, Yahoo can’t rely on an outright sale to Microsoft as its exit strategy. Despite its struggles to compete with Google (GOOG, Fortune 500) in search advertising, Yahoo remains the search king’s nearest competitor. Yahoo also still has $3.2 billion in cash and returns a profit margin of 13%.
"A new CEO would still have a number of moves to improve shareholder value," said Jefferies analyst Youssef Squali. Among its options are offering a major stock buyback, partnering with Time Warner’s (TWX, Fortune 500) AOL to form the dominant display ad business, and selling its Asian assets. "As a board, the last thing you want to do is bring in a new CEO banking on Microsoft coming back."
Dear Annie: I work in an office with about 40 peers (and 2 bosses), and rumors are rife that about 10 or 12 of us are going to get laid off as part of the latest cost-cutting drive. The situation has really brought out the worst in some of my colleagues, who are kissing up to the bosses, spreading damaging gossip about certain people, and generally acting in ways that are, in my opinion, highly unprofessional. Should I just ignore all this, or would it be smart to point out to higher-ups (discreetly) that there is a lot of self-serving behavior going on here? -Avoiding the Water Cooler
Dear AWC: If your bosses aren’t already aware of your colleagues’ Machiavellian maneuvers - and I bet they are - then telling them what’s going on is just going to look self-serving on your part (and, let’s be frank here, rightly so). No surprise: A recent survey of 522 office workers found that more than half (53%) say underhanded behavior has increased at work lately.
"In times of uncertainty and rising unemployment, some people feel insecure, which leads them to start trying to curry favor with decision-makers any way they can," says Jon Zion, CEO of staffing firm Accountemps, which hired an independent research firm to conduct the survey a couple of months ago. "It’s a mistaken strategy because, in general, office politics just drains productivity and damages morale. You’re far better off staying focused on your job. In the end we’re all measured on results."
A cynic would say that’s not always entirely true but, on the other hand, we’ve all known people who have aimed to undermine a colleague and ended up shooting themselves in the foot. Still, only 29% of those surveyed said that it’s best to steer clear of office politics completely. A majority, 54%, opined that the smart course is to be aware of what’s going on without getting directly involved. The other 16% said that "it’s best to participate [in political maneuvering] so you can get ahead."
Zion and his colleagues divide that small group into five distinct types. See if any of these sound familiar:
1. The Pundit. "This is the person who sits around at lunch, or hangs around the water cooler, endlessly speculating about ‘what’s really going on’ and seeming to have inside information," observes Zion. "Every once in a while, usually just by coincidence, these people turn out to be right." Tempting as it may be to listen - "after all, knowledge is power," he notes - the worst thing you can do is give the Pundit any information about anything: "You never know how it will get twisted."
2. The Lobbyist. A vocal advocate of his or her projects, and often skilled at getting other people to go along, the Lobbyist "may be unreceptive to outside points of view," Zion says creditscore.com. "It’s okay to support this person’s agenda, but you need to be careful not to get run over. Make sure your own point of view gets heard."
3. The Covert Operator. "These are not hard to spot," says Zion. "They’re the people trying to use manipulation rather than excellent work to get ahead - and they can be very charming, so keep your guard up." You might even show the Covert Operator that you’re on to him, by politely objecting when he puts down a colleague or takes credit for someone else’s work.
4. The Activist. Enthusiasm is contagious, so you may find yourself getting swept up in this person’s cause. "An Activist can be a very persuasive and aggressive advocate for what he or she believes is the right thing to do," Zion says. But watch out: "You don’t necessarily want to be identified with a cause that doesn’t benefit your employer’s big-picture goals," says Zion. "You’re at work to do a job, not to get caught up in extraneous stuff that, 9 times out of 10, isn’t going to benefit you."
5. The Advisor. "This is an interesting type," says Zion, "because this person is often closely aligned with a company’s top leadership and serves as senior managers’ eyes and ears." Advisors don’t always rank high in the official pecking order: "The Advisor could be anybody - a senior aide or an administrative assistant." Don’t kiss up, but don’t alienate this person, either: "Advisors wield considerable behind-the-scenes influence, so a decent rapport with them could ultimately work in your favor."
If there’s any job security at all these days, Zion says, it depends not on sneaky tactics but on being really great at your actual job.
"The important thing is to concentrate on your performance, demonstrate to your bosses why you are indispensable, and not get embroiled in office politics," he says. Easier said than done, but look at it this way: If you stand out as a star performer, then even if you do get laid off, at least you’ll have terrific references for your job hunt.
Readers, what do you say? Have office politics gotten nastier at your shop lately? What type of behavior bothers you the most or seems to cause the most trouble? Any tips for handling office politics? Post your thoughts on the Ask Annie blog.
Macau has no plans to help Las Vegas Sands Corp (LVS). with financing after the struggling casino operator announced it was suspending multibillion-dollar projects in the Chinese gambling city amid a cash crunch, the territory’s leader said Tuesday.
In his annual policy address, Macau Chief Executive Edmund Ho said that the government was aware of Sands’ funding difficulties. "Because of its over-leveraged borrowing in the U.S. and around the world, it’s normal and expected that it has to suspend some of its projects," he said.
Asked whether he had any comment on reports that a Chinese bank would extend a significant loan to Sands, Ho responded that the government was not in a position to intervene. "Until now, the Macau government has no concrete measures to help it solve its financing difficulties immediately," he said.
On Monday, Sands said it was suspending several projects, in Macau and elsewhere, and had agreements to raise $2.14 billion in new capital. The announcement, amid worse-than-expected results for the third quarter, came after Sands said Thursday it was in danger of breaching lending conditions Dec. 31 and defaulting on $5.2 billion in credit facilities secured by its Las Vegas operations.
The company said it would temporarily shut down sites five and six along Macau’s Cotai Strip, including a Shangri-La/Traders hotel tower, a Sheraton hotel tower and three casinos. The Macau sites cost $1.16 billion so far, and represent a part of the company’s $13 billion master plan to develop Cotai short term cash loan.
The company said other projects, however, were still on track, including the $2.7 billion Marina Bay Sands to open in Singapore at the end of 2009.
Sands has controlled almost a quarter of of the gambling market in the southern Chinese gambling enclave, with its popular Venetian Macao Hotel Resort taking in $2.18 billion in revenues during its first 12 months.
Sands’ successful Macau properties have given the company a needed boost in the last year, accounting for almost 70% of revenues.
A Sands representative did not immediately respond to a request for comment Tuesday evening. On Tuesday, Ho said the suspension of Sands projects could cost some workers their jobs and revealed government officials had started discussions with the company to "make appropriate arrangements."
Ho also said he expected monthly gambling revenue to drop to about 7 billion patacas ($876 million) next year from about 8 billion patacas ($1 billion) a month this year. "We expect there certainly will be some downward pressure on the entire gaming industry next year," he said. "Although there’s pressure, we believe there’re still business. On one hand, we have to be cautious, but on the other, we shouldn’t be too pessimistic."
Lending rates fell again Friday, but as the cost of borrowing eases, some government data suggest private lending is not expanding.
The 3-month Libor rate dropped to 2.29% from 2.39% on Thursday, according to Dow Jones, marking the rate’s lowest point since Nov. 12, 2004.
The overnight Libor rate held steady at 0.33%, according to Bloomberg.com. The overnight rate is just a hundredth of a percentage point above the all-time low.
About a month ago, 3-month Libor was at 4.82%, and the overnight rate was at an all-time high of 6.88%. Lower rates are a major boost for the strangled credit markets because more than $350 trillion in assets are tied to Libor.
A number of U.S. government programs aimed at easing funding concerns for banks and encouraging lending between financial institutions have also helped lower Libor rates. Such initiatives include lowering interest rates, injecting capital into banks and providing insurance on all non-interest bearing accounts.
Falling Libor rates are "a very important ingredient" in the recipe for economic recovery, said Michael Strauss, chief economist at financial research firm Commonfund.
"Improvement in the Libor market is an important first step towards getting banks to act like banks again," Strauss said.
As financial institutions become more confident in lending to each other, they will become more willing to lend to businesses and consumers, according to Strauss.
But with the economy likely in a recession, some indications show the Federal Reserve’s programs and lower rates have not yet encouraged banks and free market investors to lend to businesses.
The Fed announced Thursday that it lent another $100 billion to companies over the past week through a new short-term funding program. In its so-called Commercial Paper Funding Facility, the Fed has provided critical short-term financing to businesses and financial institutions in desperate need of cash.
But in a separate report, Fed data showed the market for commercial paper expanded by just $50.5 billion. Even as the Fed’s program has dragged down borrowing rates, the difference of $49.5 billion between the Fed’s injection and the market’s growth suggests that the commercial paper market would have contracted without the Fed’s involvement.
In another indication that the central bank’s actions have not yet persuaded others to join it in lending, banks still borrowed an average of $110 billion a day from the Fed’s emergency lending window, down just a hair from the record set the week before. Banks continued to borrow a staggering amount from the central bank despite the Treasury’s $250 billion capital injections into financial institutions and access to the commercial paper facility.
The poor lending environment was echoed in the Federal Reserve’s survey of senior loan officers. According to the survey, released this week, banks and individuals reported that loans were available over the past three months but that demand for them declined as companies opted instead to hoard cash and take less risky bets.
"There is a fear that improvement in the credit market will not sustain itself," Strauss said. But he thinks monetary policymakers have acted appropriately and he expects to see more aggressive fiscal policy moves soon.
"Steps are being taken to eventually alleviate some challenges of recession," he said cash advance loans.
Though credit remains tight, two key gauges of risk sentiment indicated that confidence is returning.
The Libor-OIS spread fell to 1.75 percentage points from 1.83 points on Thursday. The spread measures the difference between actual borrowing costs and the expected official borrowing rate from the Fed. It is used as a gauge to determine how much cash is available for lending between banks. The bigger the spread, the less cash is available for lending.
Former Fed chairman Alan Greenspan has said that the Libor-OIS spread will serve as a good gauge for when credit has returned to normal. Though the indicator has fallen from a high of 3.66 points set last month, it is still far above the 0.11 percentage points seen prior to Sept. 15.
Another indicator, the "TED spread," fell to 1.89 percentage points from 2.08 points, falling below 2 points for the first time since the financial crisis gripped Wall Street.
The TED spread measures the difference between the 3-month Libor and the 3-month Treasury bill, and is a key indicator of risk. The higher the spread, the less willing investors are to take risks.
U.S. Treasury prices fell Friday as investors responded to the Department of Labor’s monthly employment report.
The nation’s economy lost 240,000 jobs in October and the unemployment rate rose to 6.5% from 6.1% the month before, according to the Labor Department. So far this year, employers have cut 1.2 million jobs.
Bonds have recently made very small movements in either direction, as investors weigh the rising cost of the financial bailout with what appears to be a deep and prolonged economic recession.
The government said Wednesday it will auction off $25 billion in new 3-year notes and $20 billion in 10-year notes next week. The auctions are part of the Treasury’s plan to borrow $550 billion in the fourth quarter as it looks to fund the massive financial rescue costs.
The benchmark 10-year note slipped 23/32 to 101-24/32, and its yield rose to 3.78% from 3.69% late Thursday. Bond prices and yields move in opposite directions.
The 2-year note fell 3/32 to 100-10/32, and its yield rose to 1.33% from 1.28%.
The 30-year bond lost 26/32 to 104-8/32, and its yield rose to 4.24%.
The yield on the 3-month bill fell to 0.28% from 0.3%. The yield on the 3-month Treasury bill is closely watched as an immediate reading on investor confidence. Investors and money-market funds shuffle money into and out of the 3-month bill frequently, as they assess risk in the rest of the marketplace. A lower yield indicates that investors are less optimistic.
Did you vote for Obama? How do you think the new president will affect your wallet? What do you think Obama needs to do to fix the economy - both in the short run and the long term? What should be first on the new Congress’s agenda? E-mail us your thoughts, including your name, photo and contact info; the best answers will be featured in an upcoming CNNMoney.com article.
Hungary had its foreign-credit rating cut one step to A3 by Moody's Investors Service, citing strains in the country's ability to service its debt.
The rating is six levels below the highest grade and carries a negative outlook, Moody's said in a statement from New York today. The downgrade comes a day after the International Monetary Fund approved emergency loans that the government says will cover its short-term financing needs.
Hungary's economy is being hurt by the global financial crisis as investors shun emerging markets in favor of safer assets. Government debt increased to 66 percent of Hungary's $138 billion gross domestic product last year, according to the European Union statistics office Eurostat.
“Since the onset of the global liquidity crisis, the country's access to external market-based funding has been much more constrained than previously,'' Moody's said.
The forint fell to 266.34 per euro by 4:55 p.m. in Budapest, from 262.37 late yesterday.
Hungary secured 20 billion euros ($25.5 billion) in loans from the IMF, the European Union and the World Bank to shore up its economy after stocks, bonds and the forint plunged on investor concern the government may face difficulties in financing its debt.
Rising Cost
The debt downgrade is likely to raise the cost of borrowing for the country, which is working toward adopting the euro. Hungary's government and central bank had gross foreign- currency debt of 20.5 billion euros ($26.2 billion) on June 30, Magyar Nemzeti Bank data show same day cash advances.
Fitch Ratings reduced the outlook on the Hungary's debt on Oct. 17, citing “heightened downside credit risk.'' Standard & Poor's on Oct. 15 put the country on revision for a possible downgrade. Both companies rate the country's credit BBB+, the third-lowest investment grade.
The IMF agreement has improved the country's financing position and is a guarantee “that economic policies are heading in the direction of international practice,'' Janos Samu, a Budapest-based analyst at Concorde Securities, said in an note to clients.
“The deterioration of the rating is thus a reflection of recent financial volatility rather than a guide to future prospects'' for the economy, Samu said.
Hungary has postponed tax cuts planned for next year to focus on cutting the budget deficit and reduce reliance on external financing. The government projects the shortfall at 3.4 percent of gross domestic product this year and 2.6 percent next year. Earlier estimates were 3.8 percent and 3.2 percent.
The government has managed to reduce the deficit from a record 9.2 percent of GDP in 2006 to 5 percent last year.
Moody's today also cut Latvia's credit ratings and lowered the outlook for Lithuania and Estonia to negative, citing the worsening economic decline and the global liquidity crisis.
Japan will benefit from a strong yen because it will hold down prices for raw materials, said Eisuke Sakakibara, formerly Japan's top currency official.
“I still believe a strong yen is in the national interest of Japan, particularly in this situation when raw material prices will increase,'' Sakakibara said yesterday in an interview with Bloomberg Television in Singapore. The yen may rise to 80 per dollar as so-called carry trades unwind, said Sakakibara, who was dubbed “Mr. Yen'' during his 1997-1999 tenure at the Finance Ministry because of his influence over currency markets.
The yen's 15 percent gain against the dollar this year and 32 percent advance versus the euro prompted Japan's government to say last month it may buy or sell currencies to influence exchange rates as the world's second-largest economy stumbled. Gross domestic product shrank an annualized 3 percent in the second quarter as exports dropped 2.5 percent, according to government data.
The yen traded at 97.27 versus the dollar as of 1:21 p.m. in Tokyo, from 97.75 late yesterday. It was quoted at 123.85 per euro from 124.29. Against the Australian dollar, the yen was at 64.92 from 66.35, and it traded at 57.21 versus the New Zealand dollar from 58.53.
Japanese exporters are competitive even if the yen rises to between 80 and 85 per dollar, Sakakibara said.
Property Bubble
The last time the yen climbed over 80 per dollar was in April 1995 when it reached as high as 79.75 as the bursting of a stock and property market bubble prompted the nation's investors to bring money home. At that time, Sakakibara was director- general at Japan's International Finance Bureau.
“You have to differentiate between balance sheet and competitiveness,'' he said. “On the balance sheet, a high yen will cut into their profits but as far as competitiveness is concerned, they are competing quite well with Ford or General Motors.''
The yen has surged since August as the global credit crunch threatened to push the world's economy toward a recession, damping investor confidence and prompting money managers to pull out of carry trades everyone approved 1 hour payday loans.
In such trades, investors get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the spread between the two. The risk is that currency market moves can erase those profits. The Bank of Japan's benchmark rate of 0.3 percent compares with 1 percent in the U.S., 3.25 percent in Europe, 5.25 percent in Australia and 6.5 percent in New Zealand.
`Probably Overshoot'
“The unwinding of yen carry trades will probably continue and they will probably overshoot, and the yen going to 80 to the dollar is possible,'' Sakakibara said. “We also must note that the Bank of Japan may intervene when it breaks 90. I don't know if it will be successful. It may be effective in the short term but in the longer term, we have to see.''
The Bank of Japan's decision last week to cut its benchmark policy rate by 20 basis points, or 0.2 percentage point, was surprising, Sakakibara said.
“Probably they didn't want to cut and the market was expecting 25 basis points,'' he said. “So cutting by 20 basis points was probably due to resistance to market pressure and political pressure.''
The rate reduction wasn't aimed at weakening the yen, Sakakibara said, calling it a “symbolic move.''
Sakakibara said he also doubted the Bank of Japan or the Federal Reserve would reduce benchmark policy rates to zero.
“No chance,'' he said. “Cutting interest rates by another 30 basis points doesn't matter. Zero interest rate policy is something no central bank wants to do as that implies that the short-term money market doesn't function.''
The Fed may lower its benchmark policy rate by a further 25 or 50 basis points at the most, he said.
Sakakibara, 67, currently a professor at Tokyo's Waseda University, is a member of the Asia-Pacific advisory board of Bloomberg LP, the parent of Bloomberg News.
The U.S. Treasury said on Wednesday it will resurrect the 3-year note and conduct more frequent auctions of 10-year notes and 30-year bonds to cope with staggering borrowing needs that some say could reach $2.1 trillion in the current fiscal year.
The Treasury said it will sell $55 billion worth of these securities next week to refund $54.9 billion in maturing debt.
It said the new 3-year note auctions would be held monthly and it will also move to monthly auctions of 10-year notes, including reopenings in December and January.
The 30-year bond auctions will now be conducted on a quarterly basis instead of twice a year.
The Treasury retired the 3-year note just 18 months ago when better economic times allowed it to cut borrowing, but the situation has quickly reversed.
“Over the last several months, changes in economic conditions, financial markets and fiscal policy, as well as a decline in nonmarketable debt issuance, have contributed to an increase in Treasury’s marketable borrowing needs,” the Treasury said in a statement.
U.S. tax receipts are being hurt by a moribund economy and financial market losses, while the government is spending hundreds of billions of dollars on financial rescue programs and continuing heavy outlays for wars in Iraq and Afghanistan.
MORE ADJUSTMENTS SEEN
The Treasury may need to borrow up to $2.1 trillion in marketable debt in fiscal 2009, according to some members of the Treasury’s borrowing advisory committee, made up of 18 primary government bond dealers no fax pay day loan.
In minutes of a meeting with the panel, Treasury officials cited consensus estimates of a $1.4 trillion borrowing need in 2009, but noted that this could vary by $500 million.
“These are highly uncertain times,” added Karthik Ramanathan, the Treasury’s acting assistant secretary for financial markets told a news conference.
The Treasury said it will monitor its debt needs and may make other adjustments, including reintroducing or establishing new benchmark securities. Meanwhile it could expand issues in its current auction calendar for Treasury bills and notes and will issue cash management bills during the quarter.
While the Treasury has focused recently on shorter-dated securities, it may look at medium- to longer-dated securities to meet additional borrowing needs, Ramanathan noted in the borrowing committee minutes.
“It sounds like we’re going to see more issuance everywhere except for short-term TIPS,” said Lou Crandall chief economist at Wrightson ICAP in Jersey City, New Jersey, referring to Treasury inflation-protected securities.
Ramanathan noted that demand for shorter-dated TIPS was less enthusiastic than for the longer-dated inflation-indexed notes. Some studies have shown that borrowing via short-term TIPS is more expensive than via normal securities.
For the first time in almost half a century, Vatican administration staff will clock in for work as part of a clampdown on slackers, a sign that the global financial crisis has also spread to the world's smallest state.
Timekeeping was scrapped in 1960 under Pope John XXIII. Starting Jan. 1, the practice returns. All Holy See employees will be given magnetic badges and forced to clock in and out in an effort to track their movements and ensure they're working a full day, said a Vatican spokesman who declined to be named.
“We can't afford any waste,'' Bishop Renato Boccardo, secretary of the Governatorate of Vatican City State, told La Stampa newspaper. “There is a lot of work that needs doing, and the financial situation doesn't allow us to hire more staff.'' A spokesman confirmed the comments today.
The Vatican, located across Rome's Tiber River and home to Pope Benedict XVI, relies on earnings from $1 billion in stocks, bonds and real estate to top up donations from Catholics around the world. While the Holy See benefited in the 1990s from booming stock markets and a strong dollar, it plunged into the red in 2003 and again in 2007 because of the U.S. currency's tumble. The financial turmoil is now taking its toll as well.
`Worrying' Results
“The results from the first part of 2008 are worrying and don't inspire optimism,'' according to a Vatican document published on Sept. 26 by U.K. Catholic weekly “The Tablet.'' Vincenzo Di Mauro, secretary of the Prefecture of Economic Affairs for the Holy See, declined to comment on the current state of the Vatican's finances loans until payday.
The Holy See, the central administration for the Roman Catholic Church, swung into a deficit in 2007 because of “brusque and accentuated inversion of the currency markets, above all the American dollar,'' according to a statement posted on the Vatican Web site on July 9. The combined surplus in the past three years was 15.2 million euros ($19.4 million).
The push for greater efficiency comes from the Administration of the Patrimony of the Apostolic See, which oversees the property owned by the Holy See. The source of the Vatican's wealth invested in the global markets dates to the 1929 Lateran Treaties, when Fascist dictator Benito Mussolini compensated the pope for the loss of the Papal States in 1870 with the reunification of Italy.
The Holy See, which according to its annual financial statement has 2,748 employees including priests and lay people, has also devised an evaluation system to reward hard workers and punish slackers, the spokesman said. According to the new measures, prolonged absences will result in pay cuts while virtuous employees can benefit from bonuses.
Vatican workers earn between 1,300 euros and 2,300 euros a month, according to La Stampa newspaper. In addition to their salaries, they also enjoy perks such as duty-free gas and subsidized housing.
Reserve Bank of India Governor Duvvuri Subbarao, in the job two months, insists his priority is to fight inflation. The trouble is, the battlefield keeps changing.
India's money-market rates tumbled earlier this month after Subbarao reduced the amount of money that lenders must hold in reserve, giving the new central bank chief room to keep benchmark interest rates unchanged in his first quarterly monetary-policy statement on Oct. 24.
Since then, the rate at which Indian banks lend to each other overnight has more than tripled, increasing speculation that Subbarao will be forced to cut the reserve requirement again. Elsewhere in Asia, rates have declined as the Federal Reserve pledged to inject more U.S. currency into money markets and global central banks cut borrowing costs to spur lending.
“Subbarao's policy stance is dictated by movements in India's money-market rates, which aren't following the rest of the region,'' said N. R. Bhanumurthy, an economist at the Institute of Economic Growth in New Delhi. “Rising call rates don't give him time to assess whether inflation is a problem.''
The rate at which Indian banks lend to each other touched 21 percent today. India's 10-year bonds gained, heading for their best month in almost a decade, on speculation policy makers will be forced to step up efforts to boost cash with banks and ease a credit squeeze.
`Bigger Problem'
Hong Kong's three-month interbank offered rate, or Hibor, fell 4.6 basis points today to a one-week low of 3.35 percent, according to the 11 a.m. fixing by Hong Kong Association of Banks. The similar rate for U.S. dollar loans in Singapore, or Sibor, plunged 19 basis points to 3.09 percent, the lowest since Sept. 17, according to the Association of Banks in Singapore.
Inflation in India may be easing, making Subbarao more comfortable about reducing interest rates to support growth.
Once he has time to assess where inflation is heading, Subbarao “may veer around to the point that growth may be a bigger problem now,'' said D. H. Pai Panandiker, president of the RPG Foundation, an economic policy group in New Delhi.
Commerce Ministry figures yesterday validate that view: India's inflation rate fell below 11 percent for the first time since May, rising 10 freecreditreport.68 percent in the third week of this month.
“Inflation is not going to be a big problem in India going forward,'' said Hugo Navarro, international economist at Capital Economics Ltd. in London. “We expect a further easing in monetary policy to support economic growth.''
Credit Crunch
Subbarao lowered the benchmark repurchase rate by 1 percentage point last week to 8 percent to cushion Asia's third- largest economy from a global credit crunch.
He followed the cut with a quarterly monetary policy statement on Oct. 24 that placed equal emphasis on controlling inflation and backing economic expansion. The stance caused bonds to decline the most in almost three months and the stock index to fall by 11 percent.
Subbarao, 59, told reporters that food prices may pick up because the country's winter crop harvest will be less than previously anticipated. And global crude oil prices — while coming down — are subject to volatility, he said.
The governor also said a weakening rupee, which increases import costs, adds to the inflationary risks. The rupee has dropped 21 percent against the dollar this year.
Meanwhile, Prime Minister Manmohan Singh is piling on the pressure to lower rates. He told parliament two weeks ago that there is a “clear deceleration'' in inflation, while warning of a “temporary slowdown'' in the Indian economy. Singh said the precise impact would depend on the depth and duration of the global slowdown.
Slowing Growth
“The central bank seems to be giving more emphasis than perhaps is necessary on inflation, especially given the significant drop in commodity prices,'' said Rajeev Malik, regional economist at Macquarie Group Ltd. in Singapore. “In the current global setting, it should be putting more policy easing in place because the economy is screaming for it.''
Reserve Bank economists are already paring their forecasts. The central bank on Oct. 24 cut its economic growth forecast to 7.5 percent from 8 percent in the year to March 31. It retained its forecast for inflation to slow to 7 percent by March 31.
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