London, England, United Kingdom (AHN) – The international banking regulator, the Bank for International Settlements (BIS), urged over the weekend the Bank of England to raise the country’s record-low interest rates.

The regulator warned that financial stability of Britain is at risk unless the country’s central bank imposes tighter monetary policy.

Although the BIS, in its yearly report released on Sunday, made the same warning to central banks around the world, it singled out the Bank of England because Britain’s inflation rate had exceeded the BOE’s 2 percent target since December 2009.

The BIS pointed out that the United Kingdom’s consumer price index has reached 4.5 percent, while the country’s key lending rate continues to be at 0.5 percent since March 2009.

The BIS stressed that the BOE’s extremely accommodative policies threaten to embed high inflation in the system and damage prospects for long-term growth. It also places at risk financial stability because the very low rates encourage risk-taking in the financial sector.

The BIS said central banks must be prepared to hike key lending rates at a faster pace than previous monetary tightening episodes.

The BOE favors low rates because the recent rise in commodity prices was a one-time incident and there is enough slack in the economy to keep wage pressures down. But the BIS disagrees with the bank’s assumptions.

The BIS said there is still a threat of second-round effects because higher food prices could cause higher salaries in emerging markets, which in turn, could cause an increase if the global supply chain.

Despite inflation rate in England hitting 4.5 percent in April, and economists expectation of a key lending rate increase within the year, the Bank of England’s monetary policy committee has not yet indicated an interest rate hike is underway soon.

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London, United Kingdom (AHN) – Just a day after Iceland rejected a referendum on repayment plan, the British and Dutch governments have decided to take the Nordic country to the court to recover their $578,000,000, which was lost when Icelandic savings bank Icesave collapsed.

The British and Dutch governments had asked their depositors to bail out the money to Iceland, however, the collapse prompted them to demand their money back. Only 40.9% votes were in favor and 59.1% were against it.

Responding to the vote, the British government said that Iceland’s vote disappointed them, while the Dutch government said that this ended the time for negotiations.

Danny Alexander, UK’s Chief Secretary to the Treasury said that they would take Iceland to the international court.

Speaking on the Andrew Marr program, Alexander said, “It’s obviously disappointing… We tried to get a negotiated settlement. “We have an obligation to get that money back, and we will continue to pursue that until we do… We have a difficult financial position as a country and this money would help,” Alexander added.

Dutch Finance Minister Jan Kees de Jager said that his government would discuss what actions should be taken with Britain, adding that the European Free Trade Association Surveillance Authority would finally resolve this matter.

“I am very disappointed that the Icesave agreement did not get through. This is not good for Iceland, nor for the Netherlands. The time for negotiations is over. Iceland remains obliged to repay. The issue is now for the courts to decide,” De Jager said in a statement.

Meanwhile, Iceland’s Finance Minister Steingrimur Sigfusson said that it would take at least 12 months to resolve this matter in the court. Talking to the BBS, Sigfusson said that the bankrupt bank is still able to pay out 90% of the British and Dutch claims. Iceland’s Prime Minister Johanna Sigurdardottir said that the rejection of the plan had divided the country.

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London, Britain, United Kingdom (AHN) – Tight finances will continue to squeeze people in Britain, causing more families to struggle to pay debts, according to the Consumer Credit Counseling Service.

Charity CCCS issued the dire forecast in its Statistical Yearbook for 2010 based on an analysis of 470,000 households with debt.

Most people coming to the agency for help managing debt say they are having problems because of a loss of income or rising prices, or a combination of the two.

Homeowners with unsecured debt faced more problems than renters did, CCCS found.

Increases in prices meant that families with children needed more money to meet expenses.

The average age of people who sought advice from the CCCS was 42.

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Jerusalem, Israel Arieh O’Sullivan – The unrest that has brought down two Middle Eastern leaders and threatens a host of others could be bad news for the global arms industry, which regards the region, with its security issues, deep pockets and little domestic manufacturing, as a choice market.

Faced with demands for more political pluralism and economic policies that spread the wealth, governments across the region have stepped up subsidies for basic commodities and promised make-work schemes, all of which will put pressure on their defense budgets. Meanwhile, violent crackdowns in Bahrain and Libya have given European governments cold feet about doing arms deals.

Iraq, which has undertaken such consumer purse-pleasing steps as 1,000 kilowatt-hours of free electricity a month and increased food rations, announced Feb. 14 that it had diverted the money previously allocated for U.S.-made Lockheed Martin F-16 fighter jets to save the $900 million it needs.

“If the internal pressures of civil discontent in Iraq continue and percolate, I can definitely see more of that money going the way it has gone …diverted toward food and relief for the most poverty stricken Iraqi,” Dan Darling, Middle East Defense analyst for Forecast International, told The Media Line.

Arms sales to the Middle East rose nearly 40 percent in the last five years, according to the Stockholm International Peace Research Institute (SIPRI). As late as mid-January, industry analysts predicted that defense spending in the region would continue to grow dramatically. Forecast International said spending on modernization programs would expand 14 percent, with Iraq alone investing an average of $12.5 billion every year through 2015 to bolster internal-security challenges.

But in the space of a month, those forecasts have been dashed. Egypt faces a fiscal squeeze as its economy slows and the government has promised pay raises and other handouts. Jordan has taken similar measures to calm the streets. In Oman, where police shot dead as many as six demonstrators on Sunday, the government ordered a monthly allowance of 150 riyals ($390) for each registered job seeker and announced 50,000 new jobs.

Even countries such as the United Arab Emirates (UAE), which has remained calm so far and has considerable wealth from oil and trade, may be looking to save money by shopping around for cheaper weaponry.

Last week, the UAE announced that it had stopped talks with the Italian firm Aermacchi over a $1.37 billion deal to buy 48 M-346 jet trainers. It is now expected that they will return to talks with South Koreans to purchase the T-50 trainer, a move that manifested a greater readiness to engage in deals with Far East nations. Current annual UAE trade with the U.S. is $13 billion, but it is $25 billion with China, according to Defense News.

Iraq, which faces serious security issues both domestically and on its border, may return to the arms market but look for cheaper tanks, guns and jets. “Iraq is going to have some serious security issues in terms of border security and their position in the Middle East,” Darling said, adding they may seek cheaper alternatives for arms with France or even Russia.

Thousands of weapons dealers were in Abu Dhabi last week for IDEX 2011, the Middle East’s largest arms fair. It drew over 1,060 companies from 53 countries. A spokesperson for IDEX told The Media Line that the arms fair saw a “wealth of deals” and that the UAE armed forces alone said it had signed deals worth about $4 billion.

Despite a hefty public relations campaign, participants told The Media Line that the fair was greatly toned down from previous years, particularly since the delegations from Egypt, Tunisia, Libya and Yemen never showed up. “The opening ceremony was very short and a lot of people left early,” said one, who declined to be named.

As demand falls, arms makers are also being pressured from the supply side, as their host governments clamp down on weapons sales to countries that have used their lethal weapons against protestors. Hundreds were killed in Egypt and Tunisia before their leaders were toppled. The death toll in Libya, where Muammar Gaddafi has used bombers and helicopter gunships against rebels, has probably passed 1,000.

British Prime Minster David Cameron, who visited Egypt and the Gulf last week, to urge on democratic opponents of the regimes, also had a group of arms executive in his entourage, provoking controversy back at home with the mixed message he was sending the region. Britain, which exports some $6.5 billion in arms annually, suspended sales to Libya and revoked 44 licenses to sell arms to Bahrain, where at least seven have been killed.

The U.S. was sending mixed signals, too, after The Wall Street Journal reported that the Obama administration had launched a review of military assistance and prospective weapons sales to countries experiencing popular revolts.

“I don’t think that in the short term we are going to see any interruption in arms trade at least from the U.S. Europe probably will review each country. They are a little more hesitant. They don’t seem to feel they are shaping the Middle East the way the U.S. does,” Forecast International’s Darling said.

Such hesitancy is unlikely to be felt by China and other emerging arms-export powers in Asia. China advertised its ambitions at IDEX 2011, where it set up a large and glitzy pavilion. Besides its heavy arms, the state-owned Chinese companies were also hawking at IDEX their sophisticated avionics and shipbuilding expertise.

“This has been an excellent business opportunity for us,” said Yuan Jun, marketing director for China North Industries, which produces rocket launchers, tanks and artillery. “We will certainly have a presence at every event for the foreseeable future.”

The U.S., by far the world’s largest weapons producer, sells about a third of its arms exports to the Middle East, and a drive by China into the region would be a serious loss, “China is interested in seeing the geopolitical order become more multi-polar and not one of U.S. hegemony,” a senior Israeli official told The Media Line.

The political turmoil is also a headache for Russia’s arm industry as long-time client regimes, like Libya, fall to the opposition, Defense Minister Anatoly Serdyukov admitted this week. “There’s a chance we might lose something,” he said on a visit to Russia’s Pacific port city of Vladivostok. “But I hope that the main weapons and military equipment agreements will be fulfilled.”

Russia stands to lose some $3.8 billion of orders contracted or under negotiation to Libya after the United Nations Security Council declared an embargo on Libya, Russia’s Interfax news agency quoted a military source as saying. Nevertheless, Russia is going ahead with a $300 million deal to sell anti-ship Yakhont cruise missiles to Syria.

But Russia isn’t the only country whose weapons sales are threatened by regime change. Political uncertainty is likely to grip the Middle East for some time, as transition governments struggle to win support and gain legitimacy. Some of them may fall, raising concerns that sophisticated arms could find themselves in the hands of anti-Western governments possibly controlled by Islamic radicals, as happened when the Shah of Iran was overthrown in 1979.

“This is definitely on the minds of a lot of people in Congress, probably some people in the Pentagon and I have no doubt within the administration. I imagine it is a bit of a wait-and-see approach,” Darling of Forecast International said. “Egypt is definitely something to keep an eye on. We sold an awful lot of equipment to them in the past.”

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London, England, United Kingdom (AHN) – British ministers said that the United Kingdom is set to seize the assets of embattled Libyan strongman Moammar Gaddafi in Britain in the coming days.

The minister said the Treasury had established a unit that traced the Libyan dictator’s assets made up of billions of dollars in bank accounts, commercial property and a $15 billion (GBP 10 billion) mansion in London.

The Treasury estimated Gaddafi’s total liquid assets in Britain at $30 billion (GBP 20 billion), mostly in London.

The assets will be frozen as part of a global effort to unseat Gaddafi from his grip on power for decades.

Whitehall, however, emphasized that the ongoing identification and subsequent seizure of the dictators’s assets is secondary to getting Britons out of Libya where the civil unrest keeps building up.

Libyans have taken their cue from Egyptians, who successfully ousted President Hosni Mubarak from power.

On Thursday, British Prime Minister David Cameron – who is in Muscat, Oman for a British Petroleum event – apologized for the problems related to the evacuation of British nationals in Libya. The BP plane that the coalition government borrowed turned out to have mechanical problems and was delayed by at least 10 hours before it could fly out of Gatwick Airport.

While Cameron was in the Middle East, Deputy Prime Minister Nick Clegg was on a family holiday at a ski resort in Davos, Switzerland, causing a vacuum in political leadership in 10 Downing Street.

Clegg had to cut short his vacation and admitted he “forgot” he was supposed to run Britain while Cameron was on an overseas official trip.

Despite the blunders in the evacuation effort, Britons stranded in Libya were finally able to leave the country aboard military planes and a Royal Navy warship.

Cameron said he was disappointed with the decision of British Airways and BMI to cancel scheduled flights out of Tripoli because the government initially held back chartering aircraft so as not to disrupt the scheduled flights of the two commercial air carriers.

Shadow Foreign Affairs Secretary Douglas Alexander, who used to hold the transportation portfolio under the Labour government, said the Tories should have recognized as early as Monday that BA and BMI would likely not fly into a war zone and chartering planes became more difficult because of the high cost of insurance for planes flying into Libya.

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London, England, United Kingdom (AHN) – A study released Monday by the British think tank Institute for Fiscal Studies said that more Britons will pay higher income tax rates.

With these changes, effective tax rates for middle-income Britons could reach 83 percent, the IFS estimated. It is the same tax rate for Britain’s top earners which the Labour government imposed in 1979.

Beginning April, 750,000 Britons will pay 40 percent higher income taxes because of reforms initiated by the coalition government. Under the changes, the level which residents will begin paying income taxes will be increased by $1,500 (GBP 1,000) to $11,212.50 (GBP 7,475) a year.

But tax credit reductions will make the marginal rates of 175,000 working parents reach 70 percent. Hardest hit would be a worker who earns $67,500 (GBP 45,000) and with a non-working spouse and two children. This worker will be worse off by $1,500 (GBP 1,000), the think tank pointed out.

That would be on top of higher National Insurance premiums and value added tax.

By 2014, another 850,000 Britons will pay higher tax rates that when the next general election takes place, the number of higher-rate taxpayers would hit five million.

The coalition government, however, continued to justify the changes, claiming those who have the capacity to pay higher taxes carry the greatest burden. A Treasury spokesman added tax credits will be enjoyed by residents who need them most. The changes also moved almost one million taxpayers out of paying taxes, while 23 million taxpayers in the basic rate bracket will even gain $255 (GBP 170) a year, the spokesman said.

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London, England, United Kingdom (AHN) – The British coalition government has thrown in the towel when it comes to regulating bankers’ bonuses. Prime Minister David Cameron admitted Monday he is helpless in preventing the financial institutions from making huge payouts to executives amid heavy public criticism and slow recovery of the British economy.

Cameron’s admission of defeat ends a two-year battle with banks to limit the amount of bankers’ bonuses, particularly for banks that were not bailed out by the government. The prime minister said he is in favor of more restraint, but would not micromanage the banks to achieve that.

Some Liberal Democrats in the coalition are pushing for another round of onerous taxes on bonuses. The government collected last year a 50 percent tax on bonuses above $37,500 (GBP 25,000), which earned for the government $5.25 billion (GBP 3.5 billion). But the Tories explained it was a one-off deal.

However, the policy does not apply to banks partly owned by the government such as the Royal Bank of Scotland and Lloyds. For No. 10 Downing Street to approve high bonuses for these banks, ministers want the banks to first increase their lending to small businesses.

According to a 2010 survey, 2,800 bankers in Britain got over $1.5 million (GBP 1 million) bonuses. Reports said RBC Chief Executive Stephen Hester would get a $3.75 million (GBP 2.5 million) bonus, while City bonuses could top $10.5 million (GBP 7 million). The 2010 bonus is expected to total $13.5 billion (GBP 7 billion).

As a face-saving measure, ministers are planning to publish information on the five highest paid executives at each bank and for bonuses above $1.5 million (GBP 1 million).

Deputy Prime Minister Nick Clegg called on bankers, particularly those whose banks got bailout money from taxpayers, to show extra sensitivity on the matter.

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London, England, United Kingdom (AHN) – British Prime Minister David Cameron admitted Sunday to being worried over the country’s inflation rate.

Britain’s consumer price index reached 3.3 percent in November, while the Bank of England’s target is to keep inflation rate at 2 percent throughout 2011. The recent 2.5 percent hike in value added tax is feared to kick up further the country’s CPI to 4 percent.

Cameron said that while he is aware that soaring prices of goods and services is harmful to the economy because it eats people’s savings and he does not want a return to the past of galloping inflation rates, the prime minister said he was leaving it up to the Bank of England to decide on interest rates.

The British central bank, which had kept the key lending rate at a record-low of 0.5 percent, will be under pressure to hike the benchmark interest rate as a tool to contain inflation.

However, Cameron said the Bank of England must balance between adjusting interest rates based on inflation trends and the impact of a one-time increase in prices due to the VAT hike.

Among the most hit by the high inflation rate are salaried workers whose wages went down in the last three months to December by 1.1 percent. The double whammy for consumers is that a high CPI affects their employers’ profit and pressures companies to reduce costs and hold wage hikes, according to an official of VocaLink, which tracks salary movements.

Cameron refused to speculate if the VAT hike would result to job losses. The prime minister is slated to hold on Monday an employment summit in which 19 British companies will pledge to create up to 40,000 new jobs this year. The bulk of the jobs are in the retail industry.

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London, England, United Kingdom (AHN) – A report released Thursday by the Department for Work and Pensions found that about 1.5 million Britons abused the country’s welfare system the past decade by claiming welfare payments, but refusing work.

According to the report, about 750,000 of them were given sanctions and had their benefits cuts because they refused to follow regulations that would help them get jobs. Another 177,000 got Jobseeker’s Allowance and turned down offers, 444,000 more quit their work voluntarily and filed for Jobseeker’s Allowance and 123,000 were sanctioned because they claimed allowance after they were fired because of misconduct.

Employment Minister Chris Grayling said because of these abuses of Britain’s welfare system, the coalition government will impose tougher rules. Among the regulations the government is considering is to introduce fixed-term cuts in benefits beginning at three months and going up to three years for Britons who repeatedly refuse to obey regulations.

Another investigation the DWP initiated is on Britons receiving welfare, but who have moved overseas to warmer countries such as Spain and Thailand, or other western nations such as the U.S. and Sweden.

The department is also running after relatives who claim benefits of dead welfare recipients, those who have unreported assets such as property, savings or even yachts and those with exaggerated disability.

Minister for Welfare Reform Lord Freud estimated the cost to taxpayers for welfare payments to Britons living overseas at $99 million (GBP 66 million) in 2009.

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New York, NY, United States (AHN) – A lawsuit looms over accounting firm Ernst & Young for its alleged role in window dressing the books of Lehman Brothers before the latter’s collapse.

New York Attorney General Andrew Cuomo is expected to file the case this week for violations of the state’s securities fraud statutes.

The lawsuit would be the result of investigations made by Cuomo’s office into the accounting firm’s role in Lehman’s use of repurchase agreements to boost the Lehman’s bank accounts. It is part of a broader New York probe into the role of banks in misleading investors by using window dressing strategies to temporarily shift debt off their accounts.

It would be the first lawsuit against the major accounting firm for the role it played in contributing to the credit crisis.

Lehman, once the fourth largest investment bank, collapsed in September 2008 because of risky real estate accounts and too much debt.

Bankruptcy examiner Anton Valukas issued a 2,200-page report that said that Lehman used a gimmick caled “repo 105″ to transfer $50 billion in loans off its books before the collapse as part of the bank’s role in hiding its real financial status from investors.

Lehman, which called the transactions “securities sales”, made the book value transfers quarterly in 2007 and 2008. Valukas said Lehman deliberately manipulated its balance sheet and Ernst & Young failed to apply professional accounting standards.

Valukas pointed out that Lehman accounting staff wrote to Ernst & Young about the bank’s use of repo 105 in a letter on May 2008 four months prior to Lehman’s collapse. But the accounting firm did not act on the letter.

In addition to New York’s investigation, Britain’s Accountancy and Actuarial Discipline Board is also probing into the role Ernst & Young played in Lehman’s collapse.

Ernst & Young was included in a class-action lawsuit that charged former Lehman Chairman Richard Fuid and other bank executives of misleading investors by using Repo 105. The case. based on Valukas’ report, was filed on behalf of retirement funds in the U.S. and Guam.

Lehman and Ernst & Young asked the judge to dismiss the lawsuit because the accounting used by Lehman and approved by the accounting firm followed generally accepted accounting principles. But Valukas said financial statements could still be materially misleading even if they do not violate GAAP.

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