Europe could be in worst hour since WWII: Merkel (Reuters)

LEIPZIG, Germany (Reuters) – German Chancellor Angela Merkel said on Monday that Europe could be living through its toughest hour since World War Two as new leaders in Italy and Greece rushed to form governments and limit the damage from the euro zone debt crisis.

A rally on financial markets sparked by the appointment of respected European technocrats in Rome and Athens soon stalled. Analysts warned that daunting obstacles could hinder decisive action needed to breathe new life into their ailing economies.

Italy had to pay a euro-lifetime record yield of 6.3 percent to sell five-year bonds with investors wary of buying its debt until prime minister-designate Mario Monti can undertake profound economic reforms.

In a first sign of trouble for new Greek Prime Minister Lucas Papademos, the leader of the main conservative party rejected any toughening of austerity and refused to sign a letter sought by European authorities pledging support for a new 130 billion euro bailout.

Merkel dramatized the situation facing the euro zone in an attempt to rally her conservative party behind the government at a congress in Leipzig.

"Europe is in one of its toughest, perhaps the toughest hour since World War Two," she told her Christian Democrats (CDU), saying she feared Europe would fail if the euro failed and vowing to do anything to stop this from happening.

In a one-hour address, Merkel called for closer European political union but offered no new ideas for resolving the crisis that has forced bailouts of Greece, Ireland and Portugal, raising fears about the survival of the 17-state currency zone.

European Union governments have until a summit on December 9 to come up with the outlines of a much bolder and more convincing strategy, with some form of massive, visible financial backing.

Prospects are uncertain as the German government, the Bundesbank and hardliners in the European Central Bank have blocked key policy options. These include issuing common euro zone bonds, mutualising the euro zone's debt stock, letting the ECB create money to fight the crisis, or act as a lender of last resort, directly or via the euro zone rescue fund.

HIGH DRAMA IN ROME

In weekend drama, Italy's president asked Monti, a former European commissioner, to form a government to reverse a disastrous collapse of market confidence in an economy whose debt burden is too big for the euro bloc to bail out.

Italians sang, danced and drank champagne in the streets to celebrate the resignation of scandal-plagued billionaire Silvio Berlusconi, and an impromptu orchestra near the presidential palace played the Hallelujah chorus from Handel's Messiah.

The ECB has been buying troubled euro zone governments' bonds episodically to try to stabilize markets. But figures released on Monday showed it halved its weekly bond buy at the height of the Italian government crisis last week, suggesting it was no longer willing to help Berlusconi.

After a tumultuous week, when Italy's borrowing costs rose to the kind of levels that saw Ireland and Greece forced to seek international bailouts, initial market reaction was positive on Monday, with both stocks and bond markets lifted.

But in a sign of the fragile state of confidence, the trend was reversed after the Italian bond auction, and the release of figures showing industrial production slumped by 2 percent in the euro zone in September, raising the specter of recession.

"(Monti) is perceived to be a positive change for the country," said Annalisa Piazza, rate strategist at Newedge.

"Cautiousness on the future developments in Italy is fully justified. Credibility has been lost and it will take a while for market participants to believe that the country is back on the right track."

Monti held talks with political parties on Monday before separate meetings with trade unions and employers on Tuesday, as he moves to appoint what is expected to be a relatively small cabinet made up of experts from outside parliament.

He went to work after a frenetic weekend in which Italy's parliament approved a package of economic reforms agreed with European leaders, clearing the way for Berlusconi to resign.

"Monti spoke about a significant program with many sacrifices," Francesco Nucara, a lawmaker from one of the myriad tiny parliamentary groups involved in the talks, said after meeting the prime minister designate.

"IT DOESN'T END HERE"

But some were skeptical about the strategy to reverse the collapse of market confidence in Italy.

"It doesn't end here" read a headline in Libero, a fiercely pro-Berlusconi daily which said that "the Left and its newspapers may have uncorked the champagne too early".

While Italy's problems and the long-drawn-out departure of Berlusconi have pushed the collapse of the much smaller Greek economy backstage, IMF and European leaders will keep Papademos under pressure to implement radical reforms.

Papademos succeeded George Papandreou, whose proposal to hold a referendum on the bailout terms prompted EU leaders to raise the threat of a Greek exit from the currency bloc.

The new premier, who oversaw Greece's entry to the euro zone in 2002, must win a confidence vote on Wednesday before meeting euro zone finance ministers in Brussels on Thursday.

The Herculean task facing Papademos was illustrated on Monday when New Democracy leader Antonis Samaras said he would not vote for new austerity measures, adding that the policy mix of spending cuts and tax rises agreed with international lenders should be changed in favor of economic growth.

"I agree with the goals to cut government spending ... to reduce debt, to erase the deficit, to make structural changes. I do not agree with whatever stunts growth," he told party MPs.

Inspectors for Greece's international lenders, known as the troika, were due to meet the new administration of Papademos following Wednesday's confidence ballot but uncertainty surfaced over whether they would indeed come.

DISRUPTIVE DEMONSTRATIONS

Most Greeks hailed Papademos's appointment, but thousands of people angry at more than a year of austerity are expected to rally on Thursday, the anniversary of a 1973 student uprising that helped to bring down a 1967-1974 military junta.

That could complicate talks between the troika and the new cabinet, as the demonstration is expected to shut down central Athens and could be the biggest rally in months of protests that have at times erupted into bloody clashes.

"They may come at the end of the week but nothing is fixed," Carlos Martin Ruiz de Gordejuela, spokesman for the European Commission's mission in Greece, said of the troika team, which had been expected to arrive early in the week.

Monday's euro zone industrial production figures pointed to a sharp contraction toward the end of the year and the risk of a double-dip recession.

The slide in output at factories in the 17 nations sharing the single currency was the biggest fall since February 2009 -- when the economy was reeling from the worst financial crisis since the 1930s.

"It clearly doesn't bode well for the future," said Francois Cabau, an economist at Barclays Capital. "If we don't see some resolution of the euro zone sovereign debt crisis, business confidence could go even lower."

(Additional reporting by Philip Pullella and James Mackenzie in Rome, Ben Harding and Harry Papachristou in Athens, Eva Kuehnen in Frankfurt, Alexandra Hudson in Berlin and Robin Emmott in Brussels, writing by Peter Millership; Editing by Paul Taylor)

View the original article here

Irene batters shuttered New York but worst is over (Reuters)

NEW YORK (Reuters) – Hurricane Irene lashed New York with heavy winds and driving rain on Sunday, flooding some of Lower Manhattan's deserted streets and large parts of the northeast, but the feared major devastation was avoided as the storm lost some of its punch.

Irene was downgraded to a tropical storm on Sunday morning after marching up the East Coast, leaving 11 dead, as many as 3.6 million customers without electricity, forcing the closure of New York's mass transit system, and the cancellation of thousands of flights.

"It's safe to say that the worst of the storm up to and including New York and New Jersey has passed," Homeland Security Secretary Napolitano said late Sunday morning as the sun started to peek through the clouds in New York City.

She said pre-storm preparations dramatically reduced the loss of life, but warned that river flooding across the eastern seaboard posed a danger.

While weakened, the swirling storm still packed a wallop, sending waves crashing onto shorelines and flooding coastal suburbs and broad swathes of New Jersey, where residents reported basements full of water and numerous trees down.

There was about a foot of water in the streets at the South Street Seaport in Lower Manhattan before the tide began receding. There appeared to be less damage than many had feared, and New Yorkers shrugged it off.

"It's not bad as they said it would be. The streets are flooded but not as bad as I thought," said John Harris, 37, who defied an evacuation order and stayed home overnight in the Rockaways.

Wall Street's financial district seemed largely unaffected as did Ground Zero, where the 10th anniversary of the September 11 attacks is soon to be observed. The New York Mercantile Exchange building planned to open as usual on Monday, while the New York Stock Exchange and Nasdaq Stock Market also said they expected a normal trading day.

But the big question for residents and the millions who commute to work in the city each day, was whether the city's subways and public transportation would be allowed to resume in time for Monday's rush hour after being closed from noon on Saturday.

About 370,000 city residents were ordered to leave their homes in low-lying areas in an unprecedented move by the authorities. It was unclear when they would be allowed to return.

BEACH DAMAGE

Heavy rains and wind forced the closure of three bridges leading to the Rockaways peninsula facing the Atlantic Ocean, and further east on Long Island sand berms built to hold off the flooding and protect coastal businesses appeared to have failed. Six inches of rain fell on Central Park.

Irene was blamed for at least 11 deaths in North Carolina, Virginia, Florida and Maryland as it churned up the East Coast.

By 11 a.m. EDT (1500 GMT) Irene's winds had diminished to 60 mph (95 kmh) and the center had reached Danbury, Connecticut, about 70 miles northeast of New York.

There was a general sense in New York that the storm, reported on breathlessly for days by television reporters, was not as bad as it could have been.

"The water looks really groovy, it's like in that movie 'The Perfect Storm,' -- it's swelling every way and the wind is blowing it every way, it's heaving," said Jill Rubenstein, speaking from her third-floor apartment in an evacuation zone at the Harlem Yacht Club on City Island in the Bronx.

New York City's normally bustling streets were mostly quiet overnight but as the waters receded, tourists and locals began venturing out for a look around New York's Times Square, where Broadway shows had been canceled in anticipation of the bad weather.

In Astoria, Queens, about a dozen people were out on the waterfront overlooking Manhattan, some snapping photographs of a partially flooded playground.

The storm dumped up to eight inches of rain on the Washington region, but the capital avoided major damage. Some bridges were closed but airports remained open and transit operated on a normal schedule.

Rick Meehan, mayor of Ocean City, Maryland, said initial assessments showed flooding and continuing power outages in some areas of the seaside resort, but not much damage.

"It looks like we dodged a missile on this one," Meehan told the local Fox News station, WBOC News.

New Jersey Governor Chris Christie told NBC's "Meet the Press" he expects damages from Irene to be costly, possibly worth billions of dollars, along the Atlantic coast and from inland river flooding.

The Federal Emergency Management Agency said it could take several days to make preliminary damage assessments.

On the south shore of Long Island, Jim Nolan, a 55-year-old architect, was out making his own assessment of the area around his home on the shore of a lagoon at Copiague. But downed trees and flooding stopped him from driving very far.

"It was about as bad as I expected," he added of the storm. "The more scientific weather channels had a tropical storm, the high end news companies had doom and gloom reports of 80 to 90 miles an hour -- I just didn't believe it."

He had a busy night taking care of his 34-foot cabin cruiser tied to a dock by a number of lines that broke during the night. "About 3 O'clock two snapped, two snapped about four or five o'clock and one snapped half an hour ago," Nolan said. "It was nice and warm so I put my bathing suit on and went out there to work on it with my son," Nolan said.

BAD YEAR FOR U.S. STORMS

From the Carolinas to Maine, tens of millions of people were in the path of Irene, which howled ashore in North Carolina on Saturday, dumping torrential rain, felling trees and knocking out power. The storm was forecast to pass over parts of Massachusetts and Rhode Island later on Sunday.

After Irene, weather watchers were keeping an eye on Tropical Storm Jose, which formed near Bermuda.

This year has been one of the most extreme for weather in U.S. history, with $35 billion in losses so far from floods, tornadoes and heat waves.

(Additional reporting by Pascal Fletcher in Miami; Joe Rauch and Jim Brumm in Wilmington, N.C.; Tom Hals in Delaware; Claudia Parsons, Basil Katz and Jonathan Allen in New York; Alistair Bell, Malahti Nayak, Andy Sullivan, David Morgan and Lisa Lambert in Washington; Andrea Shalal-Esa in Ocean City; Michael Fitzpatrick in Long Branch, New Jersey. Writing by Steve Holland, Editing by Jackie Frank, Martin Howell)

View the original article here

Somalis dying in world's worst famine in 20 years (AP)

NAIROBI, Kenya – Tens of thousands of Somalis are feared dead in the world's worst famine in a generation, the U.N. said Wednesday, and the U.S. said it will allow emergency funds to be spent in areas controlled by al-Qaida-linked militants as long as the fighters do not interfere with aid distributions.

Exhausted, rail-thin women are stumbling into refugee camps in Kenya and Ethiopia with dead babies and bleeding feet, having left weaker family members behind along the way.

"Somalia is facing its worst food security crisis in the last 20 years," said Mark Bowden, the U.N.'s top official in charge of humanitarian aid in Somalia. "This desperate situation requires urgent action to save lives ... it's likely that conditions will deteriorate further in six months."

The crisis is the worst since 1991-92, when hundreds of thousands of Somalis starved to death, Bowden said. That famine prompted intervention by an international peacekeeping force, but it eventually pulled out after two American Black Hawk helicopters were shot down in 1993.

Since then, Western nations have mainly sought to contain the threat of terrorism from Somalia — an anarchic nation where the weak government battles Islamic militants on land and pirates hijack ships for millions of dollars at sea.

Oxfam said $1 billion is needed for famine relief. On Wednesday, the U.S. announced an additional $28 million in emergency funding on top of the $431 million in assistance already given this year.

Most importantly, as long as the Islamists don't interfere with aid distributions, those new U.S. funds aren't restricted under rules implemented in 2009 that are designed to keep food and money from being stolen by the insurgency.

"If (the insurgents) are willing to allow access we are willing to stand fully with the humanitarian actors," said Dr. Raj Shah, head of the U.S. Agency for International Development.

Aid groups have repeatedly called for the restrictions to be lifted and say the rules severely limited their operations in the past two years. U.S. humanitarian contributions in Somalia fell from $237 million in 2008 to $29 million last year.

"We've seen a very large shortfall over the past few years given the political restrictions attached to humanitarian funding," said Tanja Schumer of the Somalia NGO Consortium, which represents 78 aid agencies working on Somalia. "To get American money we have to vouch for all our contractors and all our local partners and that is tricky."

Susan Rice, the U.S. ambassador to the United Nations, blamed al-Shabab for exacerbating the crisis.

"The reason the aid hasn't gone in sufficient quantities into south and central Somalia is because al-Shabab has prevented those capable of delivering large quantities of aid from having access — and when they have had access they've taxed them, harassed them, killed them, kidnapped them," Rice told reporters at U.N. headquarters in New York.

Somalia is the most dangerous country in the world to work in, according to the U.N.'s World Food Program, which has lost 14 relief workers in the past few years. Kidnappings, killings and attacks on aid convoys occur frequently. Two years ago WFP pulled out of Islamist-controlled southern Somalia after the rebels demanded cash payments and other concessions.

U.S. military operations against terrorism suspects also have disrupted humanitarian operations, said Bowden. Insurgents vowed to target foreign aid workers after a U.S. missile strike killed the head of the Islamist al-Shabab militia and 24 other people in 2008. Aden Hashi Ayro was reputedly al-Qaida's commander in Somalia and linked to a string of attacks on foreign aid workers and journalists.

But WFP head Josette Sheeran said the agency is willing to return to southern Somalia if the insurgents guarantee safe passage and free access to aid. Two regions of Somalia — Bakool and Lower Shabelle — are suffering from famine and eight more are at risk.

"We are absolutely fully committed to going where the hungry are," she said.

The Horn of Africa is suffering a devastating drought compounded by war, neglect, poor land policies and spiraling prices. Some areas in the region have not had such a low rainfall in 60 years, aid group Oxfam said. Kenya, Ethiopia and Djibouti have all been badly affected, and Eritrea is also believed to be suffering, although its repressive government does not release figures.

Yet only parts of Somalia are technically suffering from famine, defined as when two adults or four children per 10,000 people die of hunger each day and a third of children are acutely malnourished.

In some areas of Somalia, six people are dying a day and more than half of children are acutely malnourished, Bowden said. Prices of staple foods have increased 270 percent over the last year, compounding the misery.

Somalia's civil war is partly to blame, said Joakim Gundel, who heads Katuni Consult, a Nairobi-based company often asked to evaluate international aid efforts in Somalia.

He said aid groups found fundraising easier if they blamed natural disaster rather admitting the emergency was partly caused by a complex, 20-year civil war worsened by international apathy and incompetence.

"There is no clear cut answer," he said. "People are suffering and there is a need to respond. But drought is not the only cause. Conflict is a key reason and it is not being addressed properly."

___

Associated Press writer Edith M. Lederer at the United Nations contributed to this report.

View the original article here

UN: Somalia drought is worst humanitarian crisis (AP)

By MALKHADIR M. MUHUMED and LUC VAN KEMENADE, Associated Press Malkhadir M. Muhumed And Luc Van Kemenade, Associated Press – 1?hr?6?mins?ago

DADAAB, Kenya – The head of the U.N. refugee agency said Sunday that drought-ridden Somalia is the "worst humanitarian disaster" in the world after meeting with refugees who endured unspeakable hardship to reach the world's largest refugee camp.

The Kenyan camp, Dadaab, is overflowing with tens of thousands of newly arrived refugees forced into the camp by the parched landscape in the region where Somalia, Ethiopia and Kenya meet. The World Food Program estimates that 10 million people already need humanitarian aid. The U.N. Children's Fund estimates that more than 2 million children are malnourished and in need of lifesaving action.

Antonio Guterres, the head of UNHCR who visited Dadaab on Sunday, appealed to the world to supply the "massive support" needed by thousands of refugees showing up at this camp every week. More than 380,000 refugees now live there.

In Dadaab, Guterres spoke with a Somalia mother who lost three of her children during a 35-day walk to reach the camp. Guterres said Dadaab holds "the poorest of the poor and the most vulnerable of the vulnerable."

"I became a bit insane after I lost them," said the mother, Muslima Aden. "I lost them in different times on my way."

Guterres is on a tour of the region to highlight the dire need. On Thursday he was in the Ethiopian camp of Dollo Ado, a camp that is also overflowing.

"The mortality rates we are witnessing are three times the level of emergency ceilings," he said. "The level of malnutrition of the children coming in is 50 percent. That is enough to explain why a very high level of mortality is inevitable," he said.

Dr. Dejene Kebede, a health officer for UNHCR, said there were 58 deaths in camps in one week alone in June.

Most of the deaths take place at the registration office and transition facilities of the refugee camps in the southeastern Dollo region of Ethiopia, the health officer said.

Up to 2,000 Somali refugees are crossing the border into Ethiopia every day, UNHCR said. Thousands of families arrive in poor conditions often after walking for days in search of food.

Guterres said the influx is overwhelming for UNHCR and other international and local aid organizations: "Nothing can compare to what we have seen this month."

"I believe Somalia represents the worst humanitarian disaster in the world," he said.

The camps are full and lack capacity to provide the Somali people with food and shelter.

This makes effective health treatment almost impossible, said Jerome Souquet, head of Doctors Without Borders at the Dollo Ado camps.

"We can treat the severely malnourished children, but they will definitely come back to us underfed because there is not enough food and almost all of them suffer from diarrhea," he told The Associated Press.

Habiba Osman Ibrahim, a 76-year old Somali refugee from the al-Shabab-controlled Luk region of Somalia, said she walked for three days with her two underfed grandchildren. Al-Shabab is Somalia's dangerous militant group. It had forced out all international aid groups, but earlier this month said they could return considering the desperate conditions.

"We were dependent on food aid," she said. "But because al-Shabab forced out all relief operations and there was no food we had no choice but to flee."

Aden Dayow, 32, said he was a sorghum-growing farmer in Ufurow in Somalia, but fled to Ethiopia because his harvest failed because of a lack of rains.

The epicenter of the drought lies on the three-way border shared by Kenya, Ethiopia and Somalia, a nomadic region where families heavily depend on the health of their livestock. Uganda and Djibouti have also been hit.

The World Food Program said it expects 10 million people in the Horn of Africa to require food assistance. WFP currently provides food aid to 6 million people in East Africa.

The group said it is facing a shortfall of 40 percent on the $477 million needed to address hunger needs in the region.

Somalis desperate for food are also overrunning Dadaab, the world's largest refugee camp in neighboring Kenya, which is seeing some 10,000 new arrivals each week, six times the average at this time last year.

The U.N.'s refugee agency says Dadaab's three camps now host more than 382,000 people, while thousands more are waiting at reception centers outside the camp.

___

Van Kemenade contributed to this report from Dollo Ado and Bisle, Ethiopia.

View the original article here