Business and Finance

The leaders of Germany and France, the eurozone’s two biggest economies, said Sunday they have reached an agreement about how to strengthen Europe’s shaky banking sector amid the region’s debt crisis.

“We are determined to do the necessary to ensure the recapitalization of Europe’s banks,” German Chancellor Angela Merkel following talks with French President Nicolas Sarkozy in Berlin.

A “comprehensive response” to the eurozone’s debt crisis will be finalized by month’s end, including a detailed plan on recapitalizing the banks, Sarkozy said at Berlin’s chancellery.

“The economy needs secure financing to ensure growth. There is no prospering economy without stable banks,” he said. “That is what is at stake.”

However, both leaders declined to name a price tag for the new measures or elaborate further, saying the proposal must first be discussed with other European leaders.

Analysts have urged the eurozone to identify all the banks in the region that need to replenish their capital reserves, then decide whether to compel them to raise that money on the open markets and to provide government financing to the ones that can’t.

Many experts say the capital cushions of many European banks must be strengthened in order to withstand a possible government bond default by Greece. Some analysts fear that a Greek default could cause a severe credit squeeze that would even threaten banks not exposed directly to Greece’s debt because banks could be afraid to lend to each other.

The credit freeze following the collapse of U.S. investment bank Lehman Brothers in 2008 choked off lending to the wider economy and caused a deep recession.

Merkel did not provide details Sunday about how the recapitalization would work, saying only that all banks across the eurozone would be measured by the same criteria in coordination with, among others, the European Banking Authority and the International Monetary Fund.

Any solution must be “sustainable,” Merkel added.

Sarkozy said the French-German accord on the proposal “is total.”

Germany and France will now submit their proposal to shore up Europe’s shaky banking sector to other European Union governments ahead of an Oct. 17-18 summit of the bloc’s 27 leaders in Brussels, they said.

Both leaders expressed confidence that a comprehensive European response to the crisis will be finalized before a summit of the G-20 most developed nations in France Nov. 3-4.

“The global economy needs this summit to become a success, and the European Union will do its part” to ensure a positive outcome, Merkel said.

The IMF has said banks across the continent might need up to euro200 billion ($267 billion) in new capital. The EU disputes the IMF’s estimate, but has warned that lending between banks and from banks to businesses is threatening to freeze up.

Earlier this week, Merkel said that banks must first seek to raise new capital on the market before turning to their government, insisting that the eurozone’s newly strengthened euro440 billion ($590 billion) bailout fund would then only serve as a backstop if a member state can’t cope with shoring up its banks’ capital.

France, however, was reported to favor turning to the fund’s resources right away instead of relying on a national facility to re-capitalize its banks _ who are among the biggest holders of Greek bonds.

But Sarkozy sought on Sunday to dispel the notion of different approaches regarding the European Financial Stability Facility, saying “there are no disagreements.”

German Finance Minister Wolfgang Schaeuble and his French counterpart, Francois Baroin, also took part in the two leaders’ discussions.

Merkel and Sarkozy were set to have a working dinner following the news conference they gave at the chancellery.

Germany and France, which together represent about half of the 17-nation currency zone’s economic output, regularly hold talks before EU summits to chart out joint positions.

The implosion of Belgian lender Dexia following its sizable exposure to Greek and other eurozone sovereign debt, meanwhile, added a sense of urgency to the talks.

France, Belgium and Luxembourg announced Sunday they had approved a plan for the future of the embattled bank, but they offered no details. France and Belgium became part owners of the bank during a euro6 billion ($7.8 billion) 2008 bailout.

While an all-out Greek default appears unlikely, bondholders might still face severe losses, with some analysts maintaining that Greece’s debt must be cut by about 50 percent or more to attain a sustainable level.

Private bondholders agreed in July to take about a 20 percent cut on their holdings of Greek bonds as their participation in a second international euro109 billion bailout for the country.

But Finance Minister Schaeuble on Sunday joined Merkel and other eurozone officials in hinting that the agreement might have to be renegotiated.

“It is possible that we have so far assumed an insufficient percentage of debt reduction,” he told German newspaper Frankfurter Allgemeine Sonntagszeitung.

Such a move will be discussed after the so-called troika of Greece’s international creditors _ European Central Bank, European Commission and IMF _ submits its next progress report later this month, Schaeuble was quoted as saying.

Greece is currently struggling to meet budget and reform targets, but it needs an over all positive progress assessment by the troika to qualify for the next euro8 billion ($11 billion) installment of its euro110 billion package of international bailout loans to avoid bankruptcy.

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Forecasters say a weakening Hurricane Ophelia is expected to pass near Newfoundland, Canada, early Monday.

The National Hurricane Center in Miami said early Monday that Ophelia was still a Category 1 storm with top sustained winds of about 75 mph (120 kph). The storm was moving northeast at 43 mph (69 kph).

Ophelia was centered about 185 miles (295 kilometers) west-southwest of Cape Race, Newfoundland, and a tropical storm watch was in effect for Newfoundland’s Avalon Peninsula. The center says Ophelia is expected to weaken steadily but should be a strong tropical storm when it passes over the peninsula.

Meanwhile, Tropical Storm Philippe was moving over the central Atlantic and is not expected to affect land.

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Six oil workers who were rescued alive after floating for three days in the Gulf of Mexico are stable and conscious, though suffering from bumps and bruises and sunburnt after weathering a tropical storm, a doctor overseeing their treatment said Monday.

All were transferred from a hospital run by Mexico’s state oil company, Petroleos Mexicanos, or Pemex, to a private clinic, according to Dr. Liliana Santana.

One survivor transferred in a wheelchair was asked how he was feeling, and he responded, “Good.”

A Pemex official also said Bangladeshi oil worker Kham Nadimuzzaman died in the hospital after being rescued. Two other workers were found dead, and rescue crews continued the search for the last of the 10 workers.

The official could not be named because he was not authorized to speak to the news media. Authorities have not given a cause of death or identified the bodies.

Nadimuzzaman was among 10 missing oil workers who evacuated their disabled rig Thursday in a tropical storm and escaped in an enclosed life raft. Seven of them were found alive Sunday.

Pemex identified the survivors as two U.S. citizens, Jeremy Parfait and Ted Derise, Jr., both of Louisiana; and Mexicans Ruben Martinez Velasquez, Eleaquin Lopez, Luis Escobar and Ruben Lopez Villalobos.

Martinez, who was a cook on the boat, was still nervous, unable to sleep and with trembling hands, said his uncle, Roman Cruz, 51, a bricklayer from the port city of Ciudad del Carmen. Cruz said his nephew was rescued from the water, hanging onto a raft.

“He was worried about sharks,” said Cruz, who added that none appeared.

Eleaquin Lopez’s brother, Edy, would only say, “Thank God he’s healthy.”

The workers were found 50 miles (80 kilometers) off the coast of the Gulf state of Campeche by the ship Bourbon Artavaze and taken by helicopter to Ciudad del Carmen, where they were admitted to a Pemex regional hospital.

The fate of the other two Americans, identified previously as Louisiana residents Craig Myers and Nick Reed, was still not clear Monday.

The Mexican navy said four survivors and one of the dead were found in a boat, while three other survivors and a body were found in the water.

All were working for Houston-based Geokinetics Inc. on a liftboat owned by Trinity Liftboat Services based in New Iberia, Louisiana. All four U.S. citizens were from the New Iberia area, including Reed, who is the son of liftboat company owner Randy Reed.

The oil workers called for help Thursday afternoon in the middle of Tropical Storm Nate, which disabled their vessel, the Trinity II, a 94-foot (29-meter), 185-ton liftboat, that can lower legs to the sea floor and then elevate itself above the water level. It was being used as a recording vessel and housing for the crew, and it was in waters about 25 feet (8 meters) deep.

They abandoned the liftboat about eight miles (13 kilometers) offshore of the port of Frontera in the southeastern Mexican state of Tabasco.

Pemex and the Mexican navy led the search by air and sea, which intensified Saturday as the storm moved west toward the coast of Veracruz state. A dozen fishermen also disappeared aboard two shrimp boats in the Gulf during the storm Friday.

Pemex said the search for the oil workers continued with four boats, four Pemex helicopters and two airplanes making overflights.

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Associated Press Writer Antonio Villegas contributed to this report.

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U.S. stock futures are sinking as economic jitters and uncertainty about Europe’s finances fuel another day of selling around the world.

European banking shares fell near two-and-a-half-year lows, dragged down by rumors about the companies’ potential losses on bonds issued by heavily-indebted governments. Earlier, Asian shares took a beating, with major indexes in China and Japan losing more than 2.5 percent.

U.S. markets plunged Thursday in a return to the volatile trading that dizzied traders last week. Bad economic news has forecasters warning that another recession is possible.

Well before the market opens, Dow Jones industrial average futures are down 150, or 1.4 percent, at 10,867. S&P 500 futures are down 15, or 1.3 percent, at 1,128. Nasdaq 100 futures are down 22, or 1 percent, at 2,060.

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Racing to avoid a government default, President Barack Obama and Republican congressional leaders reached urgently for a compromise Sunday to permit vital borrowing by the Treasury in exchange for more than $2 trillion in long-term spending cuts. Senate Republican Leader Mitch McConnell said the two sides were “really, really close” to a deal after months of partisan fighting.

A few hours later, Senate Majority Leader Harry Reid issued a statement saying he had signed off on a pending agreement, subject to approval by the Democratic rank and file.

But that was met by conspicuous silence from the White House, McConnell and House Speaker John Boehner’s office, two days before a deadline to raise the federal debt limit and enable the government to keep paying its bills.

Privately, officials said a final sticking point concerned possible cuts in the nation’s defense budget in the next two years. Republicans wanted less. Democrats pressed for more in an attempt to shield domestic accounts from greater reductions.

As contemplated in talks that McConnell and Vice President Joe Biden were negotiating, the federal debt limit would rise in two stages by at least $2.2 trillion, enough to tide the Treasury over until after the 2012 elections.

Big cuts in government spending would be phased in over a decade. Thousands of programs _ the Park Service, Labor Department and housing among them _ could be trimmed to levels last seen years ago.

No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise.

Any agreement would have to be passed by the Democratic-controlled Senate and Republican-controlled House before going to the White House for Obama’s signature. With precious little time remaining, both houses were on standby throughout the day, and Speaker John Boehner was in his office.

Without legislation in place by Tuesday, the Treasury will not be able to pay all its bills, raising the threat of a default that administration officials say could inflict catastrophic damage on the economy.

If approved, though, a compromise would presumably preserve America’s sterling credit rating, reassure investors in financial markets across the globe and possibly reverse the losses that spread across Wall Street in recent days as the threat of a default grew.

Senate Majority Leader Harry Reid, D-Nev., said he was “hopeful and confident” a deal would come together. But in a possible hint of dissatisfaction, he pointedly made no mention of congressional Democrats when he said negotiations were between McConnell and the White House and unnamed others.

Officials familiar with the negotiations said that McConnell had been in frequent contact with Vice President Joe Biden, who has played an influential role across months of negotiations.

The talks were proceeding toward a two-step system for raising the debt limit and cutting spending.

The first step would take place immediately, raising the debt limit by nearly $1 trillion and cutting spending by a slightly larger amount over a decade.

That would be followed by creation of a new congressional committee that would have until the end of November to recommend $1.8 trillion or more in deficit cuts, targeting benefit programs such as Medicare, Medicaid and Social Security, or overhauling the tax code. Those deficit cuts would allow a second increase in the debt limit, which would be needed by early next year.

If the committee failed to reach its $1.8 trillion target, or Congress failed to approve its recommendations by the end of 2011, lawmakers would then have to vote on a proposed constitutional balanced-budget amendment.

If that failed to pass, automatic spending cuts totaling $1 online payday loan lenders.2 trillion would automatically take effect, and the debt limit would rise by an identical amount.

Social Security, Medicaid and food stamps would be exempt from the automatic cuts, but payments to doctors, nursing homes and other Medicare providers could be trimmed, as could subsidies to insurance companies that offer an alternative to government-run Medicare.

Officials describing those steps spoke on condition of anonymity, citing both the sensitivity of the talks and the potential that details could change.

The emerging deal could mark a classic compromise, a triumph of divided government that would let both Obama and Republicans claim they had achieved their objectives.

As the president demanded, the deal would allow the debt limit to rise by enough to tide the Treasury over until after the 2012 elections.

But barring a change, it appeared Obama’s proposal to extend the current payroll tax holiday beyond the end of 2011 would not be included, nor his call for extended unemployment benefits for victims of the recession.

Republicans would win spending cuts of slightly more than the increase in the debt limit, as they have demanded. Additionally, tax increases would be off-limits unless recommended by the bipartisan committee that is expected to include six Republicans and six Democrats. The conservative campaign to force Congress to approve a balanced-budget amendment to the Constitution would be jettisoned.

Congressional Democrats have long insisted that Medicare and Social Security benefits not be cut, a victory for them in the proposal under discussion. Yet they would have to absorb even deeper cuts in hundreds of federal programs than were included in Reid’s bill, which many Democrats supported in a symbolic vote on the House floor on Saturday.

As details began to emerge, one liberal organization, Progressive Change Campaign Committee, issued a statement that was harshly critical.

“Seeing a Democratic president take taxing the rich off the table and instead push a deal that will lead to Social Security, Medicare and Medicaid benefit cuts is like entering a bizarre parallel universe _ one with horrific consequences for middle-class families,” it said.

While politically powerful business groups like the Chamber of Commerce are expected to support the deal, tea party organizations and others have looked disapprovingly on legislation that doesn’t require approval of a balanced-budget amendment.

If they keep to that position, it could present Boehner a challenge in lining up enough votes to support a compromise, just as Obama may have to stand down rebels within his own party.

The day began with optimistic statements in televised interviews by McConnell and White House officials, then quickly reverted to a reminder of the fierce partisanship of the past several weeks.

Soon after the Senate convened, Republicans blocked legislation Reid had advanced several days ago as part of an outbreak of brinkmanship with Boehner and the Republicans. The vote was 50-49, or 10 short of the 60 votes needed to advance the bill.

The vote was of no consequence in the fate of the separate efforts to avoid default.

Those talks were unfolding along lines determined by McConnell and Biden, and it was unclear how much more time would be needed.

On the Senate floor, Reid told lawmakers they could leave the Capitol while awaiting developments. “I would not suggest a ball game, though, maybe closer,” he said.

A little over a mile away, on a hot, sunny Sunday, the Washington Nationals were playing host to the New York Mets.

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Some airline customers won’t see savings this weekend even though several federal taxes on tickets have expired. US Airways and American Airlines say they’ve raised fares to offset any tax savings.

That means instead of passing along the savings from expired taxes, the airlines are pocketing the money while customers pay the same amount as before.

The expired taxes can total $25 to $30 on a typical $300 round-trip ticket faxless cash advance.

The taxes expired after midnight Friday night when Congress failed to pass legislation to keep the Federal Aviation Administration running.

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Small-cap stocks have been on a roll, performing well over the last decade and particularly well in the early stages of the economic recovery, but how can long small-caps’ strong run last?

There’s a reason investors have been bullish on small-cap stocks: for the past three years and year to date in 2011, the Russell 2000 index has outperformed broader indices payday loans guaranteed no fax. So far this year, the Russell 2000

Troubled car maker Saab Automobile AB has received a euro13 million ($18.4 million) car order from a Chinese company that could help pay this month’s salaries, its owner Swedish Automobile AB said Monday.

The company, previously known as Spyker Cars, claimed the deal with an unnamed Chinese company would provide the ailing car brand with enough funds to also pay back parts of its debt to suppliers.

Last week, Saab said it had run out of cash to pay its 3,700 workers, raising doubts over how long the brand could survive.

Saab spokesman Eric Geers on Monday said the company hopes a prepayment from the Chinese company for the cars will allow it to pay the salaries, which were due last Friday, this week.

Swedish Automobile, which bought Saab from General Motors Co. last year, said it continues to hold talks with several parties to raise more cash for the brand. Among other things, it is in talks to sell and lease back Saab’s real estate.

Shares in the company rose by 22.8 percent to euro1.20 ($1.70) on the Amsterdam Stock Exchange.

The company’s message Monday wasn’t enough to calm concerns among unions and suppliers about the future of Saab.

Hakan Skott, chairman of metalworkers union IF Metall, said his organization is still working toward filing a payment request to Saab this week, demanding the company to “react” within seven days.

And the Swedish Enforcement Authority said it received a payment claim Monday of nearly 45 million Swedish kronor ($6.9 million) against Saab from the supplier International Automotive Components.

The authority’s spokesman, Fredric Orloff, said it is the biggest claim so far against Saab, out of a total of 68 filings.

Separately, Geers said two union members and Saab’s General Counsel Kristina Geers have resigned from the board of Saab Automobile, leaving Swedish Automobile CEO Victor Muller as the only board member.

“We very much regret the current cash shortage which is causing undeserved hardship to all and we are working relentlessly to resolve the current situation,” Muller said.

Muller said Russian businessman Vladimir Antonov is still interested in investing in Saab, but he has so far failed to receive the necessary approval from the European Investment Bank.

“Antonov can provide much needed financing and/or capital to Swedish Automobile/Saab Automobile at this critical time,” Muller said. “We are pushing hard to obtain this vital clearance as soon as practically possible.”

EIB spokesman Par Isaksson declined to comment on the bank’s review of Antonov, saying only that it examines all proposals to change the lending agreement thoroughly.

Antonov has previously said he is prepared to invest between $50 million-$150 million in Saab. He was forced out of Spyker as part of its deal with GM amid reports of money laundering. He has denied those allegations and has never been charged.

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The operator of Japan’s tsunami-hit nuclear plant is making final preparations to launch a crucial system to treat highly radioactive water that has hampered efforts to achieve the primary goal to cool and stabilize the damaged reactors.

More than 100,000 tons of radioactive water have pooled across the Fukushima Dai-ichi power plant, and it could overflow within a couple of weeks if action is not taken.

Operator Tokyo Electric Power Co. said workers Thursday made final tests on a treatment system ahead of full operation planned for Friday. TEPCO plans to eventually reuse the water, some of it temporarily stored in tanks, as core coolant.

Three reactor cores melted after the March 11 tsunami knocked out power and destroyed critical cooling systems.

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The Obama administration declined to brand China a currency manipulator while saying the world’s fastest-growing economy is making “insufficient” progress on letting the yuan rise.

The U.S. “believes that progress thus far is insufficient and that more rapid progress is needed,” the Treasury Department said yesterday in a report to Congress on foreign- exchange markets. The yuan’s real exchange rate remains “substantially undervalued” and the department “will continue to closely monitor the pace” of appreciation.

The report, originally due in April, follows Treasury Secretary Timothy F. Geithner’s push for a stronger yuan. Lawmakers including Senator Charles Schumer, a New York Democrat, say the exchange rate gives China an unfair advantage in the global marketplace. In talks this month between the world’s two largest economies, China agreed on the upward direction of the currency, while differing with the U.S. on the pace.

“We have differences on the degree of appreciation,” Deputy Finance Minister Zhu Guangyao said May 10 in Washington. China’s economy will expand 9.6 percent in 2011 and 9.5 percent next year, according to International Monetary Fund projections released last month.

The Treasury Department backed away from the “nuclear option” of calling China a currency manipulator, said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. The Group of 20 nations are “going to have something to say on the global imbalances later this year, so it is better to decide these matters in a world forum rather than for the U.S. to take unilateral action.”

Congressional Criticism

Rupkey said in e-mailed comments that the “late afternoon release before Memorial Day weekend appears well-timed in order to miss congressional criticism. Nice timing, as a war of words helps no one.” The report was released at 4 p.m. yesterday.

The Treasury said “no major trading partner” of the U.S. met the legal standard of improperly manipulating its currency. “Exchange-rate flexibility must play an important role in rebalancing China’s economy towards domestic demand-led growth,” the department said.

China has allowed the yuan to appreciate by 5.1 percent against the dollar from June 2010 through the end of April 2011, or at a rate of about 6 percent per year in nominal terms, the Treasury said. Since inflation in China is higher than it is in the U.S., the yuan has been rising against the dollar at an annual rate of about 9 percent on a real, inflation-adjusted basis.

Yuan’s Increase

By acknowledging the yuan’s increase since last year while criticizing the “limited progress,” the U.S. “once again takes a calibrated approach to Chinese currency policy,” Eswar Prasad, a senior fellow at the Brookings Institution in Washington and a former IMF official, said in an e-mail.

The yuan completed its second consecutive weekly gain on speculation that policy makers will tolerate appreciation to tame inflation. The People’s Bank of China set the currency’s reference rate 0.04 percent stronger at 6.4898 per dollar yesterday, the highest level since July 2005.

The yuan strengthened 0.02 percent this week to 6.4917 per dollar as of the 4:30 p.m. close in Shanghai, according to the China Foreign Exchange Trade System. It was little changed yesterday and touched 6.4858 on May 26, the strongest level since 1993. The yuan isn’t allowed to move more than 0.5 percent either side of the central bank’s daily fixing.

Hampers Progress

“China’s consistent, large reserve accumulation prolongs a substantial undervaluation and hampers progress toward global rebalancing,” the Treasury said. “It is in China’s interest to allow the nominal exchange rate to appreciate more rapidly, both against the dollar and against the currencies of its other major trading partners.”

China purchases foreign currencies to suppress the value of the yuan. It accumulated $3.04 trillion of foreign-currency reserves as of March, an increase of 24 percent over a year earlier. Its reserves are the world’s largest, accounting for 31 percent of the total.

The Treasury “continues to make the right call on China’s currency policy,” Erin Ennis, vice president of the U.S.-China Business Council, said in a statement yesterday. The council thinks the Obama administration “approach of employing multilateral and bilateral engagement with China is the most useful way to make progress on the exchange-rate issue.”

Stronger Yuan

The council’s members as of April 21 included Apple Inc. (AAPL); Chevron Corp. (CVX); Citigroup Inc. (C); JPMorgan Chase & Co. (JPM); and Bloomberg LP, the parent of Bloomberg News, according to the group’s website.

The Treasury reiterated its view that a stronger yuan would help China contain inflation. Consumer prices in China rose a more-than-estimated 5.3 percent in April from a year earlier.

If China fails to let its currency rise, it faces the risk of higher inflation, an “excessively rapid expansion of domestic credit, and upward pressure on property and equity prices, all of which could threaten future economic growth,” according to the report.

“China’s real effective exchange rate — a measure of its overall cost-competitiveness relative to its trading partners — has appreciated only modestly over the past decade,” the Treasury said.

The report was due on April 15. The previous report, due on Oct. 15, 2010, was released on Feb. 4.

International Meetings

In delaying the April report, the Treasury on April 8 cited a series of coming international meetings. In addition to the U.S.-China Strategic and Economic Dialogue, the delay also encompassed meetings of Group of 20 finance ministers, the World Bank and the IMF.

In February, the Obama administration also declined to brand China a currency manipulator while saying the No. 2 U.S. trading partner made “insufficient” progress on allowing the yuan to rise.

The Obama administration and U.S. lawmakers have said China’s currency policy gives the nation’s exporters an unfair competitive advantage. U.S. concerns have grown as China’s rising economic power put the economic relationship off balance.

Schumer and Senator Jeff Merkley, an Oregon Democrat, called May 6 for a “rebalancing” in the U.S.-China economic relationship. The two lawmakers, who had just returned from a trip to China, said the Chinese need to open their financial sector, address “abnormally low deposit and lending rates” and allow broader market access to foreign firms.

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