Poverty haunts India's economic miracle

Released on - Sunday,18 July , 2010 -09:24

When flames from an open cooking fire raced through Fida Hussein's shack in northern India, it was a disaster for him and his poverty-stricken family.

"We have nothing," said Hussein as he stood in the ruins of his hut through which the sky could be seen between the burnt roof timbers in a remote corner of Uttar Pradesh, India's most populous state.

India's number of millionaires grew by 51 percent to 126,700 in 2009, according to US investment bank Merrill Lynch and consultants Capgemini, boosted by a buoyant economy which grew 8.6 percent in the last fiscal quarter.

But increasing wealth has not trickled down to the likes of 40-year-old Hussein, a landless labourer whose seamed face is prematurely aged, and his family of six children who have no toys, books or other possessions.

"We have no clothes, no furniture," he said, gesturing to what remained of his burned out shack which he had roughly patched up with plastic bags.

"We have only one quilt -- eight of us sleep under it in winter," he said, as his children played in the dirt yard outside the hut. "But there's no use in crying -- no one hears us," he added.

Like the more than 400 million Indians who have no electricity, Hussein's home has has no lighting and there is no running water in the huts in his village, which lies 60 kilometres (40 miles) from the state capital Lucknow.

In 1947, in his midnight independence address, India's first prime minister, Jawaharlal Nehru, called for "the ending of poverty and ignorance and disease and inequality of opportunity."

It's an end that still seems a long way off.

In April, the Planning Commission, India's premier economic policymaking body, raised its estimate of the number of Indians living in poverty -- unable to meet their nutritional needs -- from 28 percent to 37 percent, which is roughly 440 million of the 1.2 billion population.

A new international Mulitple Poverty Index, developed at Oxford University and measuring a wide range of household-level deprivation, suggests that more people are mired in poverty in just eight Indian states than in the 26 poorest African countries.

"There are two categories growing in the 'Rising India'... the super rich, and the abysmally poor," noted newspaper editor M.J. Akbar in a recent column.

The left-of-centre Congress government was re-elected on a pro-poor platform that promised to do something for its main support base in India's rural hinterlands.

During its first term, it increased social spending, raising health and education budgets and launched a huge public works program -- the National Rural Employment Guarantee Act -- and a big loan repayment waiver for farmers.

But Hussein, who does work for local farmers, says he has not managed to obtain a card needed to work in the jobs scheme. Others in the area complain that they only get a few days work with the programme.

Former premier Rajiv Gandhi once said only 15 percent of development money gets to its intended targets. While things have improved, there is still a lot of "leakage" from poverty programmes.

The government will spend at least 250 billion dollars on services for the poor in the next five years but a recent report by investment house CLSA Asia Pacific Markets estimated more than 100 billion dollars would be skimmed off.

"There's personal gain going on at public cost where people who are supposed to look after the interests of the people accumulate large sums," Anupama Jha, executive director of Transparency International India, said.

Corruption, she said, is rife -- percolating through government, the private sector, the police and the judiciary.

"There are signs of deterioration in behaviour where people who have access to money do not feel accountable to the people they represent," Jha said.

"The poor are not spared even in the case of targeted programmes" and are often obliged to pay bribes to take advantage of public services, according to a recent study by the group.

Hardwari Lal, a labourer who has three children and whose wife is expecting a fourth, says he also has not received the card needed to get work.

Lal, 32, owes a moneylender who is charging five percent interest a month on a 7,000 rupee (150-dollar) loan he took out for his son's hospital bill.

"There is only so much I can do," he said, adding he has no way of feeding his family properly as he can barely keep up with the interest payments let alone make a dent in the principal.

"So many poor villagers are caught up in this cycle of poverty where they get into difficulty and go to a moneylender," said local development worker Vikrant Kumar.

As part of its anti-poverty drive, the government is drafting a Right to Food Act which calls for a government-subsidized minimum of 25 kilograms (55 pounds) of wheat and rice a month for households below the poverty line.

Hussain feeds his six children two meals a day -- potatoes and wheat chapatis or flat bread -- and eats one meal a day himself. Dal, the mainstay of Indian diets because of its high protein, is too expensive, he says.

Malnutrition among under-fives in India stands at 43.5 percent -- worse than sub-Saharan Africa -- and only nine percentage points less than when India's "economic miracle" began in 1991.

During the same period, India's gross domestic product per capita has jumped 50-fold.

"We have gone from being a food deficit country to a food surplus country, which is a big achievement, but there's a lot to be done in terms of getting the food to people who need it," said Indian political author Ajoy Bose.

"You look slightly stupid in claiming to be a major power or even a modern progressive state if you haven't done the very elementary basics for your marginalised population," Bose said.

Mountains of grain and vegetables still rot each year due to poor storage and distribution.

The immense gap between poor and rich has been pointed to by numerous commentators as a factor fuelling a growing Maoist insurgency that has spread across a large swathe of the country and is at its strongest in remote, impoverished regions.

"It is not just poverty that is increasing, it also the inequality," said senior Indian communist leader Brinda Karat.

The government insists it needs double-digit growth to eradicate poverty, but New Delhi-based food and trade policy analyst Devinder Sharma argues that effective distribution of wealth is the real key.

"We are already on a growth trajectory, but people are getting poorer. Eradicating poverty is not woven into growth," he said.

Pension funds slowly recovering, says OECD

Released on - Sunday,18 July , 2010 -08:34

Pension funds, a big worry for workers and governments everywhere, are recovering from crisis, but also face new risks including government debt and seem to be raising their use of hedging for safety.

Private funds have made up nearly half of the hit they took in the market nightmare of 2008, the Organisation for Economic Cooperation and Development says on the basis of sample data for December 2009.

This means that at the end of last year, private investment funds had assets totalling 16.8 trillion dollars (13.0 trillion euros).

By way of comparison this is bigger than total US gross domestic product last year, which was 14.25 trillion dollars according to World Bank data, substantially more than eurozone GDP of 12.455 trillion dollars. Total world output in 2009 was 58.133 trillion dollars.

The market crash in 2008 cut OECD private pension fund values by 3.5 trillion dollars. By December, a stocks rally had retrieved about 1.5 trillion dollars of this but the boost has petered out.

"Anecdotal evidence shows that pressure ... to raise returns is driving a move into alternative investments with pension funds increasingly using derivatives to hedge risks and as an alternative to direct investment in the underlying markets."

This trend "by pension funds into hedge funds and other alternative instruments as well as a growing appetite for derivatives" was likely to continue, it said in remarks which may be seen as ironic just as many governments tighten the noose around such activities, much vilified during the financial crisis.

Private funds earned a return averaging 6.6 percent last year but at the end of the year the assets they owned were still worth 9.0 percent less than at the end of 2007.

Many public pension reserve funds underpinning social security systems had almost recovered at the end of last year to where they were at the end of 2007 before the crisis really took hold.

In contrast to the size of private funds, the data shows that the total of reserve funds to back-up public pensions in the OECD area was 4.5 trillion dollars at the end of last year.

This public reserve figure rose by 7.3 percent from the level at the end of 2008 and 13.9 percent from the total in 2007.

These are some of the conclusions of an OECD analysis published this week that offers important insights into how the money of people with pension entitlements performed during the economic crisis and what the outlook is during recovery and beyond, towards retirement day.

"This is not a pessimistic or alarmist report," one of the main authors Jean-Marc Salou of the OECD's financial affairs division told AFP. "There are signs of recovery."

The value of both private and state pension reserves rallied when stocks recovered strongly last year, but pension investment overall is weighted towards government bonds.

State schemes generally, being more vested in conservative instruments such as government bonds, suffered less on the way down and by the end of last year had recovered their losses.

There are signs of an industry-wide further move from stocks toward bonds as a result of the crisis, but this is in parallel with evidence of increased use of hedge funds, derivative instruments and alternative assets.

Salou said that these signs should be treated with some caution since it was not yet clear which types of hedging and derivatives were being favoured.

The recovery of pension funds is faltering in line with nervousness on stock markets. In addition, uncertainty over weak sovereign debt markets is a factor among new challenges.

However, private funds are broadly well placed relative to long-term liabilities although there was a balance sheet funding gap of 26 percent at the end of last year, and one measure for Japan showed a shortfall of about 45 percent.

In the OECD area, pension fund assets rose on average to the equivalent of 67.1 percent of gross domestic product last year from 60.3 percent in 2008.

However, about 60 percent of OECD pension assets are in funds of stock market listed companies that guarantee an amount of pension payment and some of the funding levels in such corporate pension schemes "remain very low in some OECD countries."

The report barely refers to the sensitive subject of radical reforms to ensure long-term solvency of state pensions schemes, which are pivotal in many countries to the overall outlook for the structure of pensions.

Overall, the facts, figures and some surprises paint a mixed picture of a global industry, which is based mainly in advanced economies.

The report warns: "As pension funds heal their wounds from the financial crisis, new challenges are appearing: the onset of retirement of the baby-boom generation, uncertainty over the strength of the economic recovery, and weakness of public bond markets."

The analysis also says that new challenges arise from changes to regulations affecting solvency and accounting standards.

In countries studied that lie outside the OECD area of 31 advanced economies "pension funds apparently suffered less in 2008 and have also recovered quicker in 2009." At the end of last year, their assets were worth more than at the end of 2007.

Some funds bought shares heavily as markets fell and then eased up as markets recovered. But in some countries, the opposite occurred and this "raises concerns over the funds' long-term performance" as well as the role of funds as market stabilisers.

Some responded to a fall in stock prices during the crisis by increasing their holdings of state debt to reduce risk, the report says, implying they were adjusting their strategies just as alarm about government debt was about to become acute.

The report notes that many state systems invest heavily in shares, while being heavily dependent, even totally in the case of the United States and Belgium, on government debt bond markets.

It made only an indirect reference to how concern about government borrowing has overhung debt markets for the last six months, and could cut into such holdings. However, it did explain that much of the value regained as stock prices rallied had been offset by a technical factor related to government bonds.

Authorities in many countries have injected massive funds into the financial system to fight the crisis. This has pushed down the interest rate or yield on some government bonds, a vital source of income for pensions funds.

These yields are used by some funds as a measure of their obligations to pay under guaranteed final income schemes. When yields rose, their liabilities fell but now the opposite had occurred, offsetting much of the book recovery in asset values.

Airbus will not cut price to win US tanker bid: EADS

Released on - Sunday,18 July , 2010 -08:13

European aircraft manufacturer Airbus will not slash prices as it battles US rival Boeing for a 40-billion-dollar US Air Force contract, the head of its parent company EADS said Sunday.

"I want to be extremely clear, we want to gain money. We prefer to lose (the contract) than not to gain money," EADS chief executive Louis Gallois said ahead of the opening of the Farnborough International Airshow on Monday.

The Financial Times Deutschland (FTD) reported last week that Airbus had cut the proposed cost of the contract to build 179 aerial refuelling tankers by at least 10 percent from the level in a previous offer in 2008.

"Boeing said they have reduced the price. I don't know," Gallois told reporters in London, adding: "We do our price with our profitability target. I think we are competitive."

Last week, the two rival firms submitted their offers to Washington, ahead of the decision due in November.

It will be the third time the contract has been awarded -- Boeing won the first one but it was annulled due to a conflict of interest, while a later Airbus deal was also annulled because of concerns over the way the bids were analysed.

Gallois said he expected a "fair" decision from the Pentagon, saying: "They have demonstrated so far that they wish a competition to get the best price and the best product for the taxpayers."

He said the deal would be a "very important strategic move for us" because the European Aeronautic Defence and Space Company would boost its US business -- although he admitted the aerospace giant would also have to prepare to "live without it if we don't win."

Meanwhile, Gallois condemned the postponement this month of a World Trade Organisation (WTO) ruling on US subsidies to Boeing, after it ruled that some state support for Airbus was illegal.

"I think it's not a fair situation," he said.

Gallois was speaking ahead of the opening Monday of the biennial Farnborough airshow near London, a key industry event.

Europe gets a breather before bank stress tests

Released on - Sunday,18 July , 2010 -08:05

The markets have given Europe some respite in its struggle against debt but the EU faces a moment of truth this week with tests that will show whether banks can survive a new economic cataclysm.

European Union governments hope the results of "stress tests" on the banking industry, which will be released on Friday, will reassure investors worried about the banks' exposure to the continent's sovereign debt crisis.

"It is clear to my mind that the stress test exercise is of paramount importance to restore confidence in the European economy," European Economic Affairs Commissioner Olli Rehn said this week.

The markets have turned their attention to the health of banks after an explosion of public deficits and debts in the 16-nation eurozone weakened the single currency.

The debt drama forced European governments to bail out Greece and set up a 750-billion-euro (950-billion-dollar) safety net with the IMF for other countries to tap into if they get into trouble.

But Greece, Spain and Portugal have successfully raised money in the bond market in recent days after being battered for months by soaring interest rates demanded by investors concerned by their shaky public finances.

"Everything indicates that the situation is normalising," Klaus Regling, head of the European Financial Stability Facility, which oversees the eurozone rescue fund, told French business daily Les Echos.

Spain passed a new test on on Thursday when it borrowed three billion euros through a 15-year bond issue which garnered strong demand.

Portugal had raised 1.68 billion euros a day earlier despite a new downgrade of its debt by the Moody's international credit rating agency.

Greece, the epicentre of the debt storm, raised more than 1.6 billion euros on Tuesday in its first operation since a last-minute, 110-billion-euro bailout from the EU and IMF saved it from default just two months ago.

"What some people considered was not possible is possible," Luxembourg's central bank governor Yves Mersch, a top member of the European Central Bank, told The Wall Street Journal.

But the eurozone is not out of the woods yet.

Greece, Spain and Portugal still have to pay high premiums to borrow money, a sign that investors still see risks involved in lending money to them. The rates demanded for Greek and Spanish bonds were slightly higher than in April.

The big test comes on Friday, when the results of stress tests on 91 banks accounting for 65 percent of the European banking system are released, and the markets will pay particular attention to the health of Spanish institutions.

Markets want full disclosure of the results, but European finance ministers vowed this week that the test would be transparent as they refuted concerns that the tests would be crafted in a way to ensure positive results.

"Not just in credit markets but in wider markets too the key focus for the week ahead will be the stress tests," said an analysis by Dutch bank and insurance group ING.

"The greatest fear is that the test shows too little diversification between the good, the bad and the ugly and is seen by the market as being too optimistic," it said.

Economists warn that the results could reveal that some banks exposed to bad debt need injections of fresh capital.

Banks in Spain could need a total capital injection of 50 billion euros (63 billion dollars), analysts at Royal Bank of Scotland estimated.

The eurozone's economic prospects have also become a concern after governments launched austerity programmes with deep spending cuts and tax hikes to slash their massive public deficits.

The single currency area posted growth of just 0.2 percent in the first quarter and is expected to rise only slighty more in the second quarter before slowing down in the second half of the year, according to German, French and Italian forecasts.

Hong Kong hires grannies to keep eye on brokers

Released on - Sunday,18 July , 2010 -08:04

Hong Kong's hard-nosed financial regulators are adding a new weapon to their arsenal in the battle to protect investors from unscrupulous stockbrokers: old ladies and pregnant women.

The Securities and Futures Commission (SFC) and de-facto central bank, the Hong Kong Monetary Authority, plan to hire actors -- including retirees and pregnant women -- to make sure banks and brokerages use above-board techniques when selling investment products.

The controversial move has Hong Kong's financial community up in arms, claiming the so-called "mystery shopper" program will entrap good and bad financial advisers alike -- and ruin their careers.

"It's a mess -- this kind of entrapment will hurt a lot of honest, hard working people," Glenn Turner, chairman of Hong Kong's Independent Financial Advisers Association, told AFP.

"You may have nine good but inexperienced advisers for every one bad one, but they'll all get dumped into the same basket. It doesn't help the industry move forward to hurt nine people to get one."

The move comes two years after a mis-selling scandal rocked the city of seven million following the collapse of Wall Street brokerage Lehman Brothers.

More than 40,000 Hong Kong investors, including many retirees, bought about two-billion US dollars worth of complex financial products backed by Lehman Brothers, including so-called minibonds.

Most saw their investment dissolve when Lehman went bust in 2008 as it buckled under the weight of the collapse in US sub-prime, or high-risk, mortgages.

Many Lehman investors claimed they had been misled about the risks involved, sparking angry protests against banks, the government and even financial regulators whom they accused of failing to prevent the scandal.

Last year, 16 banks in Hong Kong agreed to partially refund some of the investors in a deal that could cost them up to 6.3 billion Hong Kong dollars (810 million US) -- almost 25,000 investors have so far accepted settlements worth a combined 5.2 billion Hong Kong dollars.

The Lehman scandal also prompted the SFC to announce proposals aimed at tightening rules on the sale of investment products.

Among them, banks and brokerages would have to give investors a five-day grace period if they had second thoughts about the deal.

In March, Hong Kong police said they arrested two female bank employees suspected of mis-selling Lehman-linked products.

Hong Kong legislator Kam Nai-wai described the mystery shopper program as "very much needed".

"The Lehman minibonds fiasco showed there are many mis-selling practices," Kam told the daily South China Morning Post.

"In fact, I think this scheme should go beyond investment products to other consumer and lending products to make sure retailers and bankers are treating their clients appropriately."

The program would help regulators better assess how certain investments are sold and pin-point red flags, they said, noting that securities watchdogs in other jurisdictions have used mystery shopper programs.

"It's not something new or groundbreaking," an SFC spokesman said.

The regulators' plan could keep the industry on its toes, as long as it doesn't go too far, a Post columnist wrote this week.

"It's a legitimate technique for monitoring the industry. It's another matter if the SFC then proceeds to use the testimony of these 'mystery shoppers' to slap big fines on people or send them to jail through our courts of conviction," the column said.

"Inciting people to commit a crime is in itself a crime. I think the SFC understands this or, at least, I hope it does."

Aviation industry descends on Farnborough show

Released on - Sunday,18 July , 2010 -07:35

The aviation sector descends on the Farnborough International Airshow near London this week amid fresh setbacks and increased competition for top planemakers Boeing and Airbus.

Any new orders for aircraft at one of aerospace's biggest events are likely to be dominated by airlines from emerging economies across Asia and the Middle East where air traffic is growing rapidly, according to analysts.

"In Asia and China in particular, there are massive orders coming through. Similarly in the Middle East. There is enormous growth coming through that part of the world as well," said independent aviation analyst John Strickland.

"The economic climate has certainly slowed orders for established traditional markets such as Europe and the US," he told AFP.

The biennial Farnborough show also traditionally sees the announcement of orders for military jets but with governments set to slash their defence budgets to help reduce huge public deficits, major deals may be scarce.

US planemaker Boeing and its European rival Airbus meanwhile head to the show facing increased competition for their mid-sized civilian jets from smaller manufacturers, such as Brazil's Embraer and Bombardier of Canada.

"Commercially, we've still got the big players Boeing and Airbus slugging it out," said Strickland.

"We've also got emerging producers of small aircraft such as Bombardier, Embraer, and indeed new players coming up in Russia and China which are producing aircraft which in future decades can become bigger challengers to the established order of Boeing and Airbus."

Ahead of Monday's start to the show, Boeing said it may be forced to delay to 2011 the delivery of its first 787 Dreamliner aircraft scheduled at the end of this year.

The fuel-efficient mid-sized aircraft designed to fly long distances, and which has been beset by delays, will be on display at Farnborough alongside Airbus' long-delayed A400M military transport plane.

Airbus recently suffered a blow of its own when the World Trade Organization ruled that multi-billion-dollar subsidies it received from the EU were illegal. Whether Airbus will have to repay any money is not yet clear. Meanwhile the WTO is soon expected to deliver a ruling on the legality of US subsidies to Boeing.

Howard Wheeldon, senior strategist at BGC Brokers, said he did not expect "many, if any really significant orders" for either Boeing or Airbus at the airshow.

"Financing remains a big issue for airlines and my guess is that this is a situation that will get worse," he said.

But in June, Emirates boosted its reputation as the world's most bullish airline with an order for 32 "superjumbos," the biggest contract in civil aviation history according to a delighted Airbus.

The 11.5-billion-dollar deal, unveiled just as the global airline sector emerges bruised and battered from the worst global slowdown in decades, will take the number of A380s ordered by debt-ridden Dubai's flag carrier to 90.

"We'll probably expect to hear the announcement of one or two more aircraft orders from Emirates" in Farnborough, said analyst Strickland.

Export drop hits prices for Vietnam rice farmers

Released on - Sunday,18 July , 2010 -07:29

Over-production and lower exports have left rice farmers in Vietnam's Mekong Delta holding on to their stocks in the face of lower prices, analysts say.

Vietnam is the world's second-largest exporter of rice and the Delta accounts for more than half of the country's production.

But surpluses, the beginning of the wet season, and a shortage of places for drying wet rice are adding up to heavy potential losses, says Vo Tong Xuan, an internationally-recognised rice expert.

He fears Vietnam will lose one million tonnes of the grain this season.

The country hopes to sell about six million tonnes on the international market in 2010, a figure similar to last year's, but shipments fell in the first half. Between January and June Vietnam exported more than three million tonnes, down 8.76 percent on the same period a year earlier, according to official statistics.

Export value for the period fell only 1.32 percent, which Xuan said indicates that shippers received a good price. The farmers, however, did not fully benefit from those proceeds.

Xuan, based in the Delta province of An Giang, said farmers may have over-produced this year on an expectation of earnings after state-owned VinaFood assured them the Philippines would buy in bulk.

But the Philippines had not yet confirmed all its purchases, Xuan said, while other buyers like those in Europe were betting on fresh falls in the price and delaying their orders.

Le Van Banh, director of the Mekong Delta Rice Research Institute, notes that competition from other exporters including India and Pakistan leaves less room for Vietnamese grain abroad, while at home "we have an abundance of rice so the prices are relatively low."

Bags of rice piled on the porch of Dang Thi Bay's house in Tien Giang province symbolise the problem.

With prices down she is not rushing to sell her 15 tonnes (16.5 tons) of stock.

"If we take into account the fertilizer price and the costs of production, selling now would bring a loss. It is too cheap," says the mother of five.

"We're waiting for the price to go up, but don't know how long that will be," Bay says at her home in Phu Nhuan commune.

For one kilogram (2.2 pounds) of paddy -- unmilled rice -- she can get between 3,200 and 3,300 dong (about 18 cents) from a local processor. That is a drop from 4,000 to 4,200 dong last year.

Bay has started growing a new crop and says she can keep her current stock for two months before rainy-season humidity could take its toll. She fears losing her harvest.

To help farmers, the government has announced preferential loans to local businesses for buying up to one million tonnes of rice. They have been asked to purchase one kilogram at a minimum price of 3,500 dong, according to Vietnamese media.

In Phu Nhuan, just down the road from Bay's house, Ngo Thi Thanh Thuy works in a family trading business, buying paddy from neighbouring farmers, milling it and selling to markets.

"We are still buying because certain families in difficult situations keep selling, but we are having problems reselling it," she said.

In normal times the paddy is milled in the morning and resold in the afternoon but lately four or five days pass before the business can resell.

Xuan, the professor, says too many farmers plant three crops of rice annually. He would like to see lower production in the Delta to assure them better prices.

"It's very easy to ramp up production but difficult to increase (their) revenues," he said.

Germany tries discrimination-busting 'blind' hiring

Released on - Sunday,18 July , 2010 -07:09

Germany revelled in its multicultural national team at the World Cup this month but still has a long way to go in its labour market, according to the sponsors of a radical new trial hiring scheme.

Later this year, top companies operating in Europe's biggest economy are to begin testing "blind" applications that remove any reference to ethnic background or other personal information irrelevant to job performance.

Whether your first name is Dieter or Murat should play no role in whether you are employed by a company, or so goes the theory, and five major corporations plan to test the vetting of anonymous CVs to keep them honest.

Later this year, groups including consumer products behemoth Procter and Gamble and cosmetics giant L'Oreal as well as smaller companies will only ask applicants to provide their qualifications.

Christine Lueders, the director of the German Anti-Discrimination Agency, which is sponsoring the voluntary programme, said she wanted to show companies what they were sacrificing with their -- often subconscious -- prejudices.

"This is necessary because we have observed that job candidates of Turkish origin have a 14-percent slimmer chance of being invited to an interview, simply because of their ethnic heritage," she told AFP.

"Not only immigrants but also people with disabilities and mothers of small children" can benefit from the trial programme, which is also being tested in France, Switzerland, the Netherlands and Sweden, she said.

Eleven of Germany's 23 players at the football championships in South Africa had immigrant roots, and the country took pride in its diverse team as the "Mannschaft" cruised to a third-place finish.

But despite official efforts to combat stereotyping in German employment in recent years, a 2010 study by the private, Bonn-based Institute for the Study of Labour showed rampant bias in hiring.

"Discrimination is even more pronounced at small companies -- those with fewer than 50 employees tend to give around 24 percent more positive responses to a 'Dennis' or 'Tobias' than to a 'Fatih' or 'Serkan'," it said, referring to typical German and Turkish first names.

Researchers responded to 528 classified advertisements for internships with two applications each: both with the same qualifications but one with a classically German name and the other with a Turkish-sounding name.

In Germany, job applications generally include a photograph and information considered taboo for employers in other countries such as date of birth, marital status and nationality.

But hobbled by a bitter shortage in skilled employees and an ageing work force as its economic recovery gathers pace, Germany "cannot allow itself to overlook the best candidates," Lueders said.

"Major companies can set an example that others can follow," she said, adding that the government preferred to convince industry with positive examples rather than imposing new laws.

Since 2006, German employers have been subject to anti-discrimination legislation covering hiring but most cases are difficult to prove.

Procter and Gamble had for several years used largely "anonymous" hiring practices when selecting executives in Europe.

Now, it plans to test the practice for workers at a Berlin plant that employs 1,300 people, many of them of Turkish origin.

"We will see if there are areas where we could stand to improve," Joerg Uhl, a spokesman for the company's operations in German-speaking countries, told AFP.

For L'Oreal, "the aim is to avoid possible subconscious discrimination in the pre-selection" of candidates," said Oliver Sonntag, the company's personnel chief for Europe, where he said "33 nationalities are represented in our German offices alone."

Fresh statistics show that nearly 20 percent of the German population had immigrant roots.

The biggest ethnic minority is the population of Turkish origin with around three million members, most of them the children of so-called "guest workers" who came to the country in the 1960s and 1970s.

Swiss exporters warn of job losses on franc rise

Released on - Sunday,18 July , 2010 -06:58

The strengthening Swiss franc is starting to take its toll on exporters, who warn that the appreciation of the currency is eating into their earnings margin and threatening thousands of jobs.

"Until the 1.40 (franc against the euro) barrier, the consequences were not too serious. But now it is really starting to hurt," said Rudolf Minsch, chief economist of an umbrella group of companies economiesuisse.

Hit by the eurozone's debt crisis woes, the euro sank to lows against the Swiss franc, with a euro trading between 1.30 and 1.35 francs. A year ago, one euro fetched more than 1.50 francs.

The Swiss currency was also punished for the country's strong economic fundamentals, as its reputation as a refuge was enhanced during the economic crisis and now the eurozone woes.

Economists said the trend is far from ending.

"It is possible that the Swiss franc will gain further and that it could reach 1.32 (against the euro) by the end of three months," said Marcus Hettinger, who heads forex trade at Credit Suisse.

He added that the euro could even dip below the 1.30 franc mark.

Pictet analysts have also said the the franc could strengthen to "levels never seen against the euro and maybe also against the dollar."

Against this trend, Swiss companies that owe part of their competitiveness to a weak franc now find themselves in a difficult position.

"One franc in two is earned from exports," said Jean-Philippe Kohl from Swissmem, the federation of machine tools industry, a sector that is particularly exposed to currency fluctuations.

"Only very few companies can resist the speed at which the franc is appreciating. Certain companies are not making money anymore at 1.35, the margin is cut," he pointed out.

Kohl noted that the economic crisis has already cost the sector 20,000 jobs but "now we worry that other jobs will be lost" due to the strength of the franc.

The movement of the franc against the euro is particularly worrying as the eurozone is Switzerland's biggest trading partner.

Between January and May, Switzerland exported 47 billion francs' worth of goods to the EU from a total of 79 billion francs in exports. Comparatively, only 15.3 billion euros' worth of goods were sold to Asia and 8.9 billion to North America.

The Swiss National Bank has tried to alleviate the woes of Swiss exporters by purchasing euros in recent months in a bid to shore up the currency.

However, it stopped its intervention in June as it noted that the risk of deflation had diminished.

The Swiss federation of unions USS called on the central bank to restart its intervention, pointing out that the strengthening Swiss franc could "cause sustainable damages to the Swiss export economy" and threaten some 30,000 jobs.

Others note that the situation emphasises the need for Swiss exporters to develop new markets.

"It would be necessary to live with a strong franc," said Minsch, noting that companies will need to find other export partners notably in Asia.

For consumers, however, the strong franc is a bonanza.

Supermarket giant Coop said it will cut its prices by 10 percent on 150 products as its import costs fall.

Travel agency Kuoni noted that bookings have increased for all eurozone destination countries, such as Spain, Italy and Greece, where Swiss consumers are capitalising on their strong buying power.

Hungary must step up efforts against deficit: EU

Released on - Saturday,17 July , 2010 -22:23

Hungary must make more efforts to slash its public deficit under European Union limits by next year, the EU's executive arm said Saturday after a mission on financial aid to Budapest.

The European Commission said it decided to postpone conclusions of its latest financial aid review mission to Hungary to give the government more time to clarify its budgetary plans.

"Hungary has returned to a positive economic growth path and now has one of the lowest budget deficits in the EU. I welcome the authorities' commitment to the 2010 deficit target," said EU economic affairs commissioner said Olli Rehn.

"However, the correction of the excessive deficit by next year will require tough decisions, notably on spending. Care will also be needed to ensure a stable environment for both domestic and international investors," he said.

Hungary has vowed to slash its deficit to 3.8 percent of growth domestic product this year as part of a 20-billion-euro (25-billion-dollar) financial lifeline it agreed with the IMF, World Bank and EU in late 2008.

In February, the previous government had said that Hungary would not draw on the complete amount of the bailout, arguing improved economic situation allowed the government to drum up financing on the markets itself.

But the new conservative government said last month that it wants to negotiate an extension of the deal, which expires in October, until December and reach a new agreement for 2011.

Prime Minister Viktor Orban unveiled a package of austerity measures last month, including efficiency savings worth up to 120 billion forint (430 million euros) and an annual 200-billion-forint tax on banks.

The European Commission said the corrective measures considered so far are "largely of a temporary nature" and "fall somewhat short" of what is required.

"Hence, the government has to make increased efforts to bring the deficit below 3.0 percent of GDP, on a sustainable basis, in 2011," the commission said following a July 6-17 mission with IMF officials.

The EU executive body said a planned levy on the financial sector would help in the short term, but it warned that it could also have "a significantly negative impact on the country's investment climate and economic growth."