FEDERAL RESERVE chairman Alan Greenspan has warned the country's politicians that unpopular steps must be taken to ensure the US economy does not suffer from a pending federal deficit crisis.
The Daily Telegraph reports the comments are the strongest yet on the deficit spending built up by the Bush administration – this year predicted to be more than $520bn.
Greenspan refers to demographic change as the driver of continued unsustainable deficits in future, and the need for politicians to look at cutting back on so-called social security payments on items such as healthcare.
Greenspan also warned the theory the Bush administration tax cuts would enable the country to grow its way out of debt was wrong, and added that encouraging consumers to take on debt now could harm growth in future when long-term interest rates started rising again.
NEWS THAT STATISTICIANS raised the estimated GDP growth rate for 2003 to 2.3% from 2.1% sent the market scrambling to buy pounds and again increases pressure on monetary authorities to continue raising interest rates, The Times writes.
The news will be a welcome boost to chancellor Gordon Brown, who last year was criticised for his growth forecasts, but will now be in a position to report his predictions were bang-on target.
With consumption holding up and exports in services much better than expected in the fourth quarter of 2003, indications are the base rate may be raised to 4.25% by May, The Times adds.
The Scotsman says the upgraded growth figures will relieve pressure on Brown to raise taxes, because the government will be better able to meet its borrowing requirements without tapping up income earners for more tax revenues.
It quotes think-tank Capital Economics as scrapping its previous forecast of small increases in interest rates, in favour of the Bank of England’s forecast that the base rate could hit 4.5% by October.
THE CLIMBDOWN over so-called Fat Cat pay came with a caveate from trade and industry secretary Patricia Hewitt yesterday, in the form of a warning the government would continue to monitor payouts for failure, especially where such failure meant big job losses.
The Times writes Hewitt’s decision to stall legislation on the issue was “welcomed” by business groups at a dinner held yesterday evening, in which the government’s position was outlined.
However, there was still some disappointment revealed in the statement from corporate governance group Pirc, which said the decision "has condemned shareowners and employees to a continuing spectacle of undeserved personal remuneration rewards with no effective restraint."
MICROSOFT IS IN trouble, this time with Japanese competition authorities, reports the FT, over its licensing deals with PC makers who pre-install its XP operating system.
The software giant narrowly avoided being broken up by US anti-trust legislators a couple of years ago, and currently faces the possibility of huge fines imposed by the EU, which started its own investigation into similar allegations.
This is not the first time Japanese authorities have hit the company, the FT adds: in 1998 it was ordered to stop forcing PC makers bundling its word processing software with its spreadsheet software for sale in the Japanese market.IFAonline
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