Washington, D.C., United States (AHN) – World Bank President Robert Zoellick plans to leave his post after five years when his term expired on June 30.

Zoellick began his term under President George W. Bus. He previously served the Bush administration as deputy secretary of state and U.S. Trade Representative.

In announcing he was leaving, Zoellick mentioned that some key reforms had made the WB more open and effective.

The World Bank offers financial help to nation. Lately it has been focusing on trying to help eastern Europe and central Asia as concerns over the European sovereign debt crisis continues to create chaotic economic conditions.

Although the bank’s new leader is technically selected by the bank’s global membership, by tradition, the president of the United States generally appoints the head of the World Bank because the U.S. helped to found the bank after World War II. That means the task falls on President Barack Obama.

The White House has not made public the name of potential candidates under consideration by the president.

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Brussels, Belgium (AHN) – A nationwide strike in Belgium greeted EU leaders meeting in a summit in Brussels on Monday as international trains were not in service and some flights at the capital’s international airport cancelled and delayed.

The high-speed international train services of Eurostar from London and Thalys from Paris grounded to a halt starting 9 p.m. Sunday as Belgian rail workers protested against the government’s plan to raise retirement age and other austerity measures aimed at saving $14.8 billion.

The main airport in Zaventem cancelled some flights from Washington, Frankfurt and Berlin among others as a precaution while the second airport in Charleroi closed. Public transport did not operate and postal service was not available.

Workers at the Audi and Volvo car plants and at the Coca-Cola factory near Antwerp walked off their jobs. Container terminals at the port of Antwerp were also shut.

The first nationwide strike in six years was initiated by three major unions. The FGTB union leaders said the austerity plan was designed to please the financial markets and unfairly hit rank-and-file workers.

 

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Washington, D.C., United States (AHN) – The U.S. Supreme Court plans to issue a ruling in a corporate tax shelter case this spring at a time of uncertainty in the tax laws.

Some tax breaks for individuals and corporations are scheduled to expire next month but Congress is still debating whether to extend them.

The United States v. Home Concrete & Supply LLC case the Supreme Court heard last week is likely to determine how much discretion the Internal Revenue Service can exercise in enforcing the tax code.

It also is expected to decide what happens to about $1 billion that companies commonly shelter in the bond market.

The IRS was trying to crack down on “Son of Boss” tax shelters in the case.

Boss is the acronym for “bond and option sales strategies.” In essence, corporations create paper losses by buying and selling bonds and options, then use what appears to be a loss to offset their profits.

As a result, their tax rate can be lowered significantly.

Companies that use the shelter include contact lens maker Bausch & Lomb and several homebuilders.

The lawsuit against Home Concrete & Supply is one of about 30 Son of Boss cases pending in federal courts.

Together, the cases could produce about $1 billion in new revenue for the federal government from taxes, interest and penalties, according to court documents.

Even then, $1 billion is only about one-sixth of the tax revenue the IRS says is hidden in Son of Boss shelters nationwide.

The companies say that making them pay taxes and penalties would mean the IRS is retroactively changing its own rules to make it easier to punish anyone using a tax shelter.

They say the lawsuits against them represent an unconstitutional violation of the IRS’s enforcement authority.

A judgment for the IRS would broaden the authority of many federal agencies to make up their own rules for how they enforce the laws, according to attorneys for Home Concrete & Supply.

About 1,800 people have invested in the tax shelters, according to the IRS.

The federal agency already has won other tax judgments against investors in Son of Boss shelters. However, the court judgments have been spotty and show a mix of opinion among judges.

As a result, the Supreme Court is stepping in to resolve any confusion.

The same kind of split opinions and confusion can be found in Congress as lawmakers try to decide which tax breaks for income, capital gains and estates should be extended and which should be eliminated.

The temptation for Congress to let the breaks expire is strong as lawmakers seek ways to raise new revenue.

The last time they extended the tax breaks was in 2010, but they argued the issue until mid-December.

The same arguments are arising again, this time with the added emphasis created by election year politics.

For taxpayers, the result means that any tax planning this year will be difficult, according to tax experts.

The Supreme Court docket number for United States v. Home Concrete & Supply LLC et al is 11-139.

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Washington, D.C., United States (AHN) – The U.S. Supreme Court plans to issue a ruling in a corporate tax shelter case this spring at a time of uncertainty in the tax laws.

Some tax breaks for individuals and corporations are scheduled to expire next month but Congress is still debating whether to extend them.

The United States v. Home Concrete & Supply LLC case the Supreme Court heard last week is likely to determine how much discretion the Internal Revenue Service can exercise in enforcing the tax code.

It also is expected to decide what happens to about $1 billion that companies commonly shelter in the bond market.

The IRS was trying to crack down on “Son of Boss” tax shelters in the case.

Boss is the acronym for “bond and option sales strategies.” In essence, corporations create paper losses by buying and selling bonds and options, then use what appears to be a loss to offset their profits.

As a result, their tax rate can be lowered significantly.

Companies that use the shelter include contact lens maker Bausch & Lomb and several homebuilders.

The lawsuit against Home Concrete & Supply is one of about 30 Son of Boss cases pending in federal courts.

Together, the cases could produce about $1 billion in new revenue for the federal government from taxes, interest and penalties, according to court documents.

Even then, $1 billion is only about one-sixth of the tax revenue the IRS says is hidden in Son of Boss shelters nationwide.

The companies say that making them pay taxes and penalties would mean the IRS is retroactively changing its own rules to make it easier to punish anyone using a tax shelter.

They say the lawsuits against them represent an unconstitutional violation of the IRS’s enforcement authority.

A judgment for the IRS would broaden the authority of many federal agencies to make up their own rules for how they enforce the laws, according to attorneys for Home Concrete & Supply.

About 1,800 people have invested in the tax shelters, according to the IRS.

The federal agency already has won other tax judgments against investors in Son of Boss shelters. However, the court judgments have been spotty and show a mix of opinion among judges.

As a result, the Supreme Court is stepping in to resolve any confusion.

The same kind of split opinions and confusion can be found in Congress as lawmakers try to decide which tax breaks for income, capital gains and estates should be extended and which should be eliminated.

The temptation for Congress to let the breaks expire is strong as lawmakers seek ways to raise new revenue.

The last time they extended the tax breaks was in 2010, but they argued the issue until mid-December.

The same arguments are arising again, this time with the added emphasis created by election year politics.

For taxpayers, the result means that any tax planning this year will be difficult, according to tax experts.

The Supreme Court docket number for United States v. Home Concrete & Supply LLC et al is 11-139.

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London, United Kingdom (AHN) – The European Central Bank met Thursday and kept its key interest rate unchanged at 1.0 percent.

ECB officials made the decision after cutting rates for the previous two months in an effort to boost growth in the eurozone. They mentioned continued high uncertainty in the eurozone.

Although many analysts predict the ECB will cut rates later in the year, it has not dropped below 1 percent since the ECB began setting rates 13 years ago.

The Bank of England also announced on Thursday that it was keeping its key interest rates unchanged at 0.5 percent. It has kept the rate at that level since March 2009.

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Beijing, China (AHN) – The governments of China and Japan, the world’s second- and third-largest economies, announced Monday an agreement to directly trade in yuan and yen instead of converting their currencies first to dollars.

Chinese Premier Wen Jiabao and Japanese Prime Minister Yoshihiko Noda also agreed during a meeting in Beijing ending on Monday that Japan will hold yuan in its foreign-exchange reserves, which are now largely denominated in dollars.

The direct currency swap is seen to benefit Chinese and Japanese companies in terms of reduced trading cost and currency risk. The direct currency exchange will also ease investments between the two countries.

Trade between the two countries amounted to $340 billion in 2010. From January to November this year, Japan exported $138.5 billion (10.8 trillion yen) to China and imported $154 billion (12 trillion yen) with 60 percent of the trade transactions settled in dollars, according to Japan’s finance ministry.

A joint working group will be formed to set the implementing guidelines for the agreement.

Last week, China also forged a deal with Thailand for a direct currency swap worth $11 billion in a move to promote the use of the yuan in the 10-nation Association of Southeast Asian Nations (Asean).

 

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Kathmandu, Nepal (AHN) – Nepal has been selected as eligible for the threshold program of the Millennium Challenge Corporation (MCC), a United States aid agency established to help fight global poverty.

An MCC board meeting chaired by U.S. Secretary of State Hillary Clinton last week found Nepal eligible to receive MCC assistance. The decision paves the way for Nepal to get assistance for large infrastructure projects. Around three dozen countries are associated with MCC, which has an annual budget of $9 billion.

The inclusion of Nepal under MCC is seen an indicator that the country’s progress in its peace process could bring in more international assistance. An MCC statement said, “Nepal performs well on the policy indicators on MCC’s scorecard, and with recent landmark agreements on the Comprehensive Peace Accord in place, MCC looks forward to establishing a threshold partnership with Nepal.”

The MCC board is comprised of high-level U.S. officials, including Treasury Secretary Timothy F Geithner, Trade Representative Ron Kirk, USAID Administrator Rajiv Shah and Global Leadership Coalition Senior Director Mark Green.

MCC has yet to announce how much Nepal would get under the threshold program. However, it is expected that Kathmandu will get assistance in the range of $100 million to $250 million.

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New York, NY, United States (AHN) – The average rate on the 30-year fixed mortgage stayed near its record low for the sixth consecutive week. But, the historically low rates have done little to goose the ailing housing market.

On Thursday, mortgage giant Freddie Mac said the rate on the 30-year home loan edged down to 3.99 percent from 4 percent the previous week. It dropped to a record low of 3.94 nine weeks ago, according to data from the National Bureau of Economic Research.

The average rate on the 15-year fixed mortgage ticked down to 3.27 percent from 3.30 percent. It also hit a record low nine weeks earlier when it fell to 3.26 percent.

For all of but two weeks in 2011, rates have been below 5 percent. Yet this year may turn out to be the worst for home sales in 14 years.

The record low rates have not helped homes sales. Sales of previously owned homes are just a hair ahead on last year’s figures, which were the worst in 13 years. In addition, new homes sales appear to be headed for their worst year on records dating back 50 years.

High unemployment and tight bank lending standards have made it much harder for potential home owners to qualify for loans. Also, many Americans are reluctant to pour money into homes that could lose value over the next several years.

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Devens, MA, United States (AHN) – Former hedge fund manager Raj Rajaratnam reported to prison Monday to begin serving an 11-year sentence.

The Galleon Group founder and manager was convicted of insider trading in May on 14 counts of conspiracy and fraud, in what is one of the biggest insider trading scams in history.

Rajaratnam reported to the Federal Medical Center Prison for men in Devens, MA, around 12:30 p.m. Monday. The 54-year-old suffers from a variety of health problems.

His lawyers are seeking an appeal of his conviction. Last week, the U.S. Second Circuit Court of Appeals denied Rajaratnam’s bid to remain free on bail while his challenges his conviction.

Rajaratnam was also ordered to forfeit $53.8 million in illicit gains and pay $10 million in fines.

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Cairo, Egypt (The Media Line) – Egypt’s political and economic clocks are running on dangerously different speeds: While Egyptians make repeat visits to the polls over the next three months to elect a new government and debate the future of their country under Islamist rule, the country’s foreign currency reserves are rapidly running down to perilous levels.

The reserves dropped to just over $22 billion in October from $36 billion since the start of the revolution last January. But with the latest round of unrest and the prospect of Islamist rule, the pace of the decline has picked up. On Thursday, the Supreme Council of the Armed Forces (SCAF) forecasted that the figure would plummet to just $15 billion by the end of January.

“We’re nearing a critical benchmark, which is three months of imports. We’re not quite there yet, but at the rate reserves have been deteriorating we’ll be there by the end of January,” Magda Kandil, executive director of the Egyptian Centre for Economic Studies, told The Media Line. “We can live with it a while if there are measures put into place. Left alone, it may become very critical.”

Reserves to pay for three months of imports is the minimum recommended for any country by the International Monetary Fund (IMF). But, according to Mahmoud Nasr, a senior army financial official, Egypt’s import cover will be even smaller because $5 billion of its reserves are already committed.

In a sign of how critical the situation is growing, the army announced on Thursday a loan of $1 billion to the central bank.

Egypt faces a raft of challenges, from staging elections and writing a constitution to maintaining security in the Sinai and keeping a lid of simmering sectarian tensions. But the economic meltdown, which has been given short shrift both by the country’s interim rulers as well as by elected candidates, poses an imminent threat and one that could easily foment a new round of political turmoil before an elected government can take office.

Plunging forex reserves are symptomatic of economy coming apart. Egypt eked out some economic growth in the second quarter of the year, but not enough to claw back the 4.2% drop in gross domestic product that occurred in the first quarter. The IMF expects the GDP to grow just 1.2%, down from 5.1% in 2010.

Revenue from tourism, a major source of foreign currency for Egypt as well as a major employer, dropped by more than a third in the first half of the year. But other big forex earners — revenues from Suez Canal and energy exports– have held up well. The problem, said Kandil, has been foreign investment: Overseas investors have pulled their money out of Egypt and funding for projects like factories and construction have all but dried up.

The percentage of Egyptian Treasury bills held by overseas investors declined to less than 5% in August from 22% before the revolution. Standard & Poor’s cut the country’s sovereign credit rating four notches to B+, putting it deeper into the “junk” category on November 24, the second such cut in five weeks.

Absent demand from foreign investors, the cost of borrowing has gone up for the government, exacerbating its already difficult financial position. On Sunday, the Finance Ministry sold 273-day T-bills at an average yield of 15.084%, compared with 14.251% at the last sale on November 15.

Meanwhile, the Egyptian pound has lost some 3.8% of its value in the past year despite the government’s efforts to prop it up. Egyptian stocks briefly rallied last week on the elections, but turned lower on Sunday.

“People were encouraged that elections went on scheduled and went fairly peacefully. On the other hand, the strong showing of Salafist candidates has raised eyebrows. We’re waiting to see what kind of government we will get,” said an economist, who spoke to The Media Line on condition of anomity, citing the sensitivity of the foreign reserves issue.

Some analysts have pointed to the Turkey’s Justice and Development Party (AKP) as a model for Egypt’s prospective Islamist rulers. In power since 2002, the moderately Islamist party has presided over a period of export-led economic growth for Turkey. But Egypt’s Islamists, if they take power as expected, will be facing a severe economic crisis, high expectations for budget-busting social welfare programs and few clearly articulated ideas about how to solve the country’s multiple economic problems.

Kamal el-Ganzouri, appointed interim prime minster by SCAF almost two weeks ago, is an economist who helped shepherd economic reforms in his previous stint at the post a decade ago. But given the political upheavals underway now, he is likely to be more preoccupied with elections, constitutional questions and maintaining public order.

In any case, the policy remedies needed to stem the decline in reserves are all unattractive because they would impose political and/or economic costs on a country with little ability to absorb them, economists said.

In a rare proactive measure, Egypt’s central bank raised its benchmark interest rate the last week of November for the first time in more than three years. The increase was aimed at stemming a further depreciation of the pound by making dollar deposits less attractive. But raising interest rates will also deter investment at a time when the Egyptian economy badly needs it.

Raising money abroad is another policy alternative. Capital Economics, in a comment last week, said Egypt’s financing needs are likely to exceed $10 billion next year, leaving the government no choice but to seek outside financial assistance. Without that, the London-based firm warned, “a sharp fall” in the pound and assets value looks “inevitable.”

But the government has been loathe to borrow. Last spring, Egypt turned down an offer from the IMF for a $3.2 billion loan apparently out of national pride, saying it preferred to rely on domestic financing to cover the government’s growing budget deficit. Gulf Arab states have offered $10 billion, but little of this has been delivered.

But by taking up a bigger chunk of domestic capital to cover its deficit, the government deprives the private sector of investment funds.

Instead of borrowing more, the government could reverse some of the increased subsidies and wage hikes it introduced earlier in the year to put a lid on public discontent. But it risks rekindling protests from a populace pressured by double-digit inflation and unemployment.

Imposing capital controls is another alternative, but that might scare away foreign investors worried that they won’t be able to repatriate money they invest in Egypt. It would also signal a reverse in the free-market direction of economic policy of the past decade.

“At this late game in the process, it would be a step backward. It would be problematic as far as reform agenda,” said Kandil. “But if they have their backs against the wall, they may act.”

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