Banks act amid new crisis warning

15 September 2011 Last updated at 20:11 GMT Christine Lagarde: "We have entered into a very dangerous zone of the crisis"

Five central banks have announced a co-ordinated move to try to help the financial system, as the boss of the International Monetary Fund warns of a "dangerous" new economic phase.

The central banks are to provide commercial banks with three additional tranches of loans to help ease funding pressures.

Banking stocks rose sharply, with BNP Paribas up as much as 22%.

IMF managing director Christine Lagarde said "bold action" was needed.

Speaking in Washington, she said: "Uncertainty hovers over sovereigns across the advanced economies, banks in Europe, and households in the United States.

"Without collective, bold, action, there is a real risk that the major economies slip back instead of moving forward."

She added that the debt woes in the eurozone also risked harming economies in the developing world.

"If the advanced economies succumb to recession, the emerging markets will not escape," said Ms Lagarde.

Exposure fears

The move by the Federal Reserve, Bank of England, European Central Bank, Bank of Japan and Swiss National Bank follows fears about the exposure of banks - primarily those in Europe - to eurozone sovereign debt.

Continue reading the main story Last Updated at 07:24 GMT

Market indexCurrent valueTrendVariation% variationThis concern has made European banks reluctant to lend to each other, creating the risk of short-term funding problems for those most exposed.

European banks and their American counterparts have been moving funds out of Europe in recent months because of these exposure fears, worsening the liquidity problems in the eurozone banking system.

The new loans are being issued in dollars, because European banks can already access additional euro funds from the European Central Bank.

The three additional three-month loan offers will be conducted in October, November and December.

The main central banks carried out similar action to boost the liquidity of commercial lenders at the height of the financial crisis in 2008. The facility has been withdrawn and reintroduced a number of times since then.

Three-month loans

The UK's FTSE 100 index ended up 2.1% following the central bank announcement, while Germany's Dax added 3.2% and France's Cac advanced 3.3%. Wall Street's Dow Jones ended up 1.7%.

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Central bankers have done what the likes of President Sarkozy and Chancellor Merkel find it so hard to do. They have acted quickly and decisively to combat a clear and present threat”

End Quote Stephanie Flanders Economics editor, BBC News French banks - which had already been higher earlier in the day - posted some of the biggest rises, as they are the most exposed to sovereign debt in Greece and other heavily indebted eurozone nations.

BNP Paribas closed up 13%, Credit Agricole 5.9% and Societe Generale 5.4%.

On Wednesday, Credit Agricole and Societe Generale each had their credit ratings downgraded by rating agency Moody's, after it reviewed their exposure to Greek debt.

Moody's also said it would keep BNP Paribas on review for a possible downgrade.

In the UK, shares in Lloyds Banking Group rose 7.2%, while Germany's Commerzbank added 7.8%.

The euro also gained against the dollar following the announcement by the central banks, adding 0.8% to $1.38519.

Analysts have welcomed the move by central banks, but warned that more will still have to be done to tackle the underlying problem of high levels of eurozone sovereign debt.

"The stress is still there as long as sovereign debt issues aren't dealt with aggressively, but this move eases short-term funding problems," said Peter Boockvar, equity strategist at Miller Tabak in New York.

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UK critical systems cyber warning

14 September 2011 Last updated at 15:10 GMT Both government and private companies are criticised over their preparedness The UK government is failing to take a strong lead in protecting critical systems such as power and water from cyber attack, according to a leading think tank.

Chatham House said there was a reluctance to share information with institutions that might be targeted.

It also criticised those same institutions for putting up with an "unacceptably high level of risk".

The government said that it ranked cyber security as a top priority.

Last year it announced £650m of additional funding to help tackle computer-based threats.

Around £130m or 20% is specifically earmarked for critical infrastructure projects.

The Chatham House report questions what that money will be used for given that "the vast majority of critical infrastructure in the UK is privately owned."

There have been numerous warnings in recent years about the risk of computerised systems being vulnerable to attack.

The issue received additional prominence following the discovery of the Stuxnet worm which was used to damage systems used in Iran's nuclear programme.

Chatham House's review was based on a series of interviews with senior figures in companies considered to be part of the critical national infrastructure, such as electricity, oil and gas.

Many were searching for guidance, according to the report, but government had failed to create an "authoritative 'big picture'... that could help develop a more comprehensive and urgent sense of the cyber threats that need to be tackled."

It recommends that government assumes an "integral role in shaping the discourse, informing wider society and raising levels of awareness."

Private problem

The report also contains criticism of the private sector.

With large parts of the UK's infrastructure - such as nuclear and the power grid - being run by private companies, there was an expectation that they would be alert to growing online threats.

The reality was often very different, according to David Clemente, a cyber security researcher at Chatham House.

"Many only pay attention to it after something unpleasant has happened to them or a competitor and they realise they have to pay attention, perhaps throw some money at the problem," said Mr Clemente.

The report urges companies to make cyber security a key component of their risk strategy.

It also warns against cutting corners "in the pursuit of efficiency savings and improved quarterly returns."

In a statement, the Cabinet Office, which looks after the UK's cyber security strategy said: "Closer collaboration between the government and the private sector is crucial to protecting our interests in cyberspace, including critical national infrastructure."

The government is expected to announced a revised cyber security plan next month.

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Disable “Open File – Security Warning” Message

19th August 2011 - Customization, Windows, Windows 7, Windows Vista, Windows XP

Type intercpl.cpl in start menu search box or run and press enter.
Select the Security tab.
Click Custom Level… Select Enable (not secure) under Launching applications and unsafe files.
Click OK.Click Yes
Click OK.

To disable the Your current security settings put your computer at risk message in Internet Explorer, check this link.

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'More abuse': Warning of more waste in war spending

WASHINGTON — The U.S. has lost billions of dollars to waste and fraud in Iraq and Afghanistan and stands to repeat that in future wars without big changes in how the government awards and manages contracts for battlefield support and reconstruction projects, independent investigators said Wednesday.

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The Wartime Contracting Commission urged Congress and the Obama administration to quickly put in place its recommendations to overhaul the contracting process and increase accountability. The commission even suggested that the joint House-Senate debt reduction committee take a close look at the proposals.

"What you're asking for is more of the same," said Dov Zakheim, a commission member and the Pentagon comptroller during President George W. Bush's first term. "More waste. More fraud. More abuse."

The bipartisan commission, created by Congress in 2008, estimated that at least $31 billion and as much as $60 billion has been lost in Iraq and Afghanistan over the past decade due to lax oversight of contractors, poor planning, inadequate competition and corruption. "I personally believe that the number is much, much closer to $60 billion," Zakheim said.

Yet new legislation incorporating the changes could prove difficult with Republicans and Democrats divided over the best way to reduce the deficit.

Several of the proposals would require new spending, the commission acknowledged, and that would be a hard sell in an election year when reducing the size of government is a priority for many. Other proposals would cost little or simply require money to be shifted from one account to another, the panel said.

"If these recommendations are not implemented, there ought to be a Hall of Shame," said Michael Thibault, co-chairman of the commission. "There's an opportunity at hand."

The commission's 15 recommendations include creating an inspector general to monitor war zone contracting and operations, appointing a senior government official to improve planning and coordination among federal agencies, reducing the use of private security companies, and carefully monitoring contractor performance.

Rep. John Tierney, the top Democrat on the House Oversight and Government Reform national security subcommittee, said Wednesday that the commission's findings are "alarming." Tierney said he plans to introduce legislation next week to create the inspector general's post.

Sen. Claire McCaskill, a Democrat and chairwoman of the Senate's contracting oversight subcommittee, said she plans to prepare legislation based upon the commission's recommendations.

The commission's report said contracting waste in Afghanistan and Iraq could grow as U.S. support for reconstruction projects and programs wanes. That would leave the countries to bear the long-term costs of sustaining the schools, medical clinics, barracks, roads and power plants already built with American money.

'It is disgusting'
Overall, the commission said spending on contracts and grants to support U.S. operations is expected to exceed $206 billion by the end of the 2011 budget year. Based on its investigation, the commission said contracting waste in Afghanistan ranged from 10 percent to 20 percent of the $206 billion total. Fraud during the same period ran between 5 percent and 9 percent of the total, the report said. Fraud includes bribery, kickbacks, bid rigging and defective products, according to the commission.

"It is disgusting to think that nearly a third of the billions and billions we spent on contracting was wasted or used for fraud," McCaskill said.

Styled after the Truman Committee, which examined World War II spending six decades ago, the commission had broad authority to examine military support contracts, reconstruction projects and private security companies. But the law creating the commission set this September as the end of its work, even as contractors continue their heavy support of U.S. operations in the war zones.

Security, transportation, food preparation and delivery, and much more are now handled by the private sector. At the same time, the officials responsible for monitoring contractor performance have been overwhelmed by increasing reliance on private companies.

"We are far more reliant on contractors than we ever were," said commission member Charles Tiefer, a professor of government contracting at the University of Baltimore Law School. "We always bought munitions from them. But we didn't used to buy much in the way of services from them."

The commission cited numerous examples of waste, including a $360 million U.S.-financed agricultural development program in Afghanistan. The effort began as a $60 million project in 2009 to distribute vouchers for wheat seed and fertilizer in drought-stricken areas of northern Afghanistan. The program expanded into the south and east. Soon the U.S. was spending a $1 million a day on the program, creating an environment ripe for waste and abuse, the commission said.

"Paying villagers for what they used to do voluntarily destroyed local initiatives and diverted project goods into Pakistan for resale," the commission said.

The Afghan insurgency's second largest funding source after the illegal drug trade is the diversion of money from U.S.-backed construction projects and transportation contracts, according to the commission. But the report does not say how much money has been funneled to the insurgency. The money typically is lost when insurgents and warlords threaten Afghan subcontractors with violence unless they pay for protection, according to the report.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Warning: Jobless youth, cuts fuel UK unrest

LONDON — Earlier this year, Tottenham lawmaker David Lammy pleaded for attention to his struggling constituency after official figures showed it had the highest jobless count in London and the 10th highest in Britain.

Last weekend, he got it — though not in the way he had hoped — after a protest over the police shooting of a 29-year-old black man sparked some of the most violent riots in the capital in years.

Politicians, including Lammy, have been quick to blame the riots and looting on Saturday night and "copycat" outbreaks of violence elsewhere in London on Sunday on small groups of criminals.

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But locals and commentators warn that high levels of long-term and youth unemployment and cuts in services like youth centers in places like Haringey — the borough where Tottenham sits — are creating a tinder box for unrest.

Story: Rioting spreads to third British city

Some 6,000 people in Tottenham, or 8 percent of the adult population, are claiming job seekers allowance, more than double the UK average. One fifth of those claiming are under 24.

Hardy said high unemployment, coupled with cuts in "cohesion instruments" like sports and community groups, created environments where people felt like outsiders in their own society.

"People learn to live outside the norms... where they have no buy-in to the structures we expect." Follow us on Twitter Get the latest updates on this story and others from @breakingnews.

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Not the police
Many of Britain's most deprived communities have worked hard to build support networks within communities, and with formal structures such as the police, in the wake of riots during the 1980s, including one in Tottenham in 1985. At that time, a police officer was killed during riots sparked by the death of a woman whose home was being searched by police.

Similarly, Saturday's protests, which Lammy said were later "hijacked" by criminals who set fire to buildings, looted shops and attacked police officers, were triggered by the killing of a 29-year-old black man by police last week.

Some have blamed the police for acting too slowly and not listening properly to community leaders who warned of potential violence, but local officials and community groups say a lack of trust in the police is not the key driver for unrest.

"Relationships between the local police force and the community have improved dramatically since the Broadwater Farm riots of 26 years ago," Lammy wrote in a newspaper column.

"One local sergeant can name almost every teenager on the estate on his beat and they know him."

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The bigger issue is a lack of purpose and lack of jobs, they say.

Sad truth behind the London riot

'Nothing to do'
"It's unacceptable. They shouldn't have started looting," said Erika Lopez, a 19-year-old university student and volunteer with Haringey's Young People Empowered, a youth network in the borough.

But she painted a telling picture of an area in which services face more and more cuts, with summer activities for young people like cooking, music and sports all slashed.

"Especially during the summer we have nothing to do... It feels like they've taken away the things that matter," she said.

Britain has embarked on an unprecedented level of spending cuts in an effort to drive down its budget deficit, with local councils slashing a host of services from elderly care to libraries.

Haringey's youth services budget was cut by 75 percent this year, as part of 84 million pounds in budget cuts planned by the council over the next three years.

On top of youth unemployment another worry is long-term unemployment, which has also increased sharply in Britain and is described by one leading think-tank as "worryingly high."

"Someone needs to help us out, we ain't getting no help and then they wonder why things turn out like this," said Tottenham resident Jason, 26, who left school at 16 and has been unemployed ever since.

Story: London sees twin perils converging to fuel riot

"Most of my friends are in the same position as me (unemployed)," he said. "That's not good. For one, there's nowhere for us to hang around.

"When we do hang around together in groups, we're a gang. When we're dispersed, we're doing something dodgy, suspicion of this, suspicion of that, there is no way to win, it's a lose-lose situation."

Prospects not likely to improve soon
In Brixton in south London, home to some of the most violent riots during the 1980s sparked by racial tensions between police and locals at a time of soaring unemployment, the picture is similar.

"I've got bricklaying skills, got plastering skills but everywhere I am looking is just, like, no vacancies. You go into a job center and they can't even get you a job -- that's what they are there for," said Michael, 31, an unemployed building worker.

"I've not got sympathy for kids smashing up things, but people don't know what it's like if you grew up in a home without a dad around you or your parents can't get a job."

He said local kids were being hit by the closure of local youth centers: "Stuff like that is going to affect youths. Brixton is one of the poorest communities."

Prospects for the unemployed — especially those with limited qualifications — are unlikely to improve soon, meaning conditions are ripe for a repeat of Saturday's unrest in areas with high unemployment and dense populations.

Britain's economy has barely grown over the past 9 months, and economists polled by Reuters see growth of just 1.3 percent for 2011 as a whole, rising to 2.0 percent in 2012.

Most of those who spoke to Reuters agreed the violence and looting was opportunistic and spontaneous, but that didn't mean the anger and frustration wasn't real and dangerous.

Politicians and the better-off risked alienating these groups further by appearing out of touch, they said.

While Tottenham residents barricaded themselves indoors against the violence on their streets, Britain's prime minister, deputy prime minister and interior and finance ministers were enjoying holidays in places like Italy, Switzerland and California. The London mayor was also on holiday.

Tim Hardy, of left-wing blog Beyond Clicktivism, told Reuters: "I think there's a real anger about the way in which this is happening while our leaders are on frankly obscenely luxurious summer holidays."

Copyright 2011 Thomson Reuters. Click for restrictions.

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Violence in north Kosovo draws EU warning (Reuters)

PRISTINA/BELGRADE (Reuters) – A deadly flare-up of violence in Kosovo's Serbian-populated north has sent tensions with Belgrade soaring and prompted a stern intervention from the European Union.

Kosovo, which has a 90 percent ethnic Albanian majority, sent special police units on Monday to take control of northern border crossings and enforce a ban on imports from Serbia -- retaliation for its block on Kosovo's exports.

Kosovo declared independence from Serbia in 2008 but Belgrade does not recognize the move and the 60,000 Serbs who live in northern Kosovo still consider Belgrade their capital.

One Kosovo police officer was shot in the head and died on Tuesday in a clash with local Serbs. On Wednesday, armed Serbs attacked and burned down the Jarinje border post and fired at members of NATO's KFOR peacekeeping force.

"It was confirmed that an act of arson was committed against that position... There have also been confirmed reports of shots fired at KFOR personnel in the vicinity," KFOR said in a statement.

It did not say whether anyone was injured in the attack or whether KFOR troops had returned fire, but said reinforcements had been sent to the border.

Kosovo's Prime Minister Hashim Thaci accused Belgrade of masterminding the violence. "We will not withdraw, there will be no return under any circumstances and at any price," he said.

He said Serbia was trying to carve out a piece of northern Kosovo, but this "will never happen."

Serbia's pro-European President Boris Tadic urged Kosovo Serbs to refrain from violence. "The hooligans who are sparking violence are not defending either the people or the Serb state," his office said in a statement.

"RESTORE CALM IMMEDIATELY"

EU foreign policy chief Catherine Ashton said she spoke on Tuesday with Thaci and Tadic, urging them to restore calm immediately with a warning that violence would not be tolerated.

"I strongly condemn the violence that has taken place in northern Kosovo. These latest developments are unacceptable," she said in a statement.

"It is the responsibility of both Belgrade and Pristina to immediately defuse the tensions, and restore calm and security for everyone."

Belgrade wants to join the EU, but it must mend its ties with Kosovo to speed up its bid to join the bloc. Pristina and Belgrade have started EU-moderated talks aimed at improving trade, movement of people and issues like energy supplies, but negotiations have moved slowly.

Kosovo's police raids on Monday and Tuesday drew criticism from both the United States as the EU, which said the government should have consulted its Western backers.

A Serb eyewitness said on Wednesday that a group of masked men armed with wooden planks, axes and crowbars attacked and burned the Jarinje border post, which consisted of two-storey prefabricated buildings and a roofed passageway for cars.

"Later a bulldozer was brought to demolish the burned buildings," he said.

A cameraman and a sound engineer of Serbia's state-run Tanjug news agency were attacked by Serb hardline nationalists near Jarinje and seriously injured, the agency said.

In a separate incident earlier on Wednesday, an unidentified gunman fired shots at a NATO helicopter, a NATO spokesman said, but there were no injuries.

The U.N. Security Council accepted a Serbian request for an urgent meeting on tensions in Kosovo after Serbia sent a letter to the 15-nation council requesting an open meeting.

The call was supported by Serbia's ally Russia, which like Belgrade has refused to recognize Kosovo's February 2008 declaration of independence from Serbia.

The council opted for a compromise and scheduled closed-door consultations on Kosovo on Thursday, rather than a public meeting, the diplomats told Reuters on condition of anonymity.

Serbia lost its former province of Kosovo in 1999, when NATO waged a bombing campaign to stop Yugoslav leader Slobodan Milosevic from killing ethnic Albanians and carrying out ethnic cleansing in a counter-insurgency war.

(Additional reporting by Louis Charbonneau in New York and John O'Donnell in Brussels; Editing by Mark Trevelyan)

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