Afghanistan: Billions in aid failed to create progress

Tuesday 6 August 2013

Kabul, Aug 7 (Newswire): The global community has failed to create a politically stable and economically viable Afghanistan despite pouring billions of dollars into the South Asian nation during a decade-long war against the Taliban, says the International Crisis Group.

The Brussels-based think tank said the United States and its allies still lacked a coherent policy to strengthen Afghanistan ahead of a planned withdrawal of foreign combat troops from the unpopular war by the end of 2014.

"Despite billions of dollars in aid, state institutions remain fragile and unable to provide good governance, deliver basic services to the majority of the population or guarantee human security," it said in a report released this week.

Violence is at its worst in Afghanistan since U.S.-backed Afghan forces toppled the Taliban government in late 2001, with high levels of foreign troop deaths, and record civilian casualties during the first six months of 2011.

Afghanistan relies on foreign aid for around 90 percent of its spending, but many international donors are reluctant to channel aid through the country's ministries because of a lack of capacity and rampant corruption.

Public sector corruption is seen as worse than in any other country except Somalia, and equal to Myanmar, according to Transparency International. President Hamid Karzai has acknowledged graft exists in his government but says foreigners are also to blame.


"The impact of international assistance will remain limited unless donors, particularly the largest, the U.S., stop subordinating programing to counter-insurgency objectives, devise better mechanisms to monitor implementation, adequately address corruption and wastage of aid funds," said the International Crisis Group (ICG).

A gradual transition of security control to Afghan forces began last month and the ICG said that as the foreign military drawdown progresses toward its end-2014 deadline, donor funding and civilian personnel presence may also decline rapidly.

This decline would undermine "oversight and the sustainability of whatever reconstruction and development achievements there have been," the group said.

So far $57 billion in aid has been spent in Afghanistan, but largely failed to fulfil the pledge to rebuild the country, the report said, and sustainability was "virtually impossible" as only 20 percent had been channeled through the government.

About $29 billion of that had been spent on the Afghan police and army, which "have thus far proved unable to enforce the law, counter the insurgency or even secure the seven regions" recently handed over to them, the report found.

"There is no possibility that any amount of international assistance to the Afghan National Security Forces will stabilize the country in the next three years unless there are significant changes in international strategies, priorities and programs," it said.

"As more and more districts come under Taliban control, despite U.S. claims of substantial progress, and the insurgency spreads to areas regarded until recently as relatively secure, displacement and humanitarian needs are also rising," ICG said.

After 30 years of conflict, Afghanistan is one of the poorest countries in the world, where children make up half the 30 million people, a quarter of children die before the age of five and the average Afghan life expectancy is 44 years.

"Time is running out before the international community transfers control to Kabul by the end of 2014," the ICG said. "Afghanistan will undoubtedly need continued political, economic and technical assistance to ensure that it does not unravel."

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US dropped deal to 'wire Afghanistan' that could have prevented 9/11 attacks: Report

Washington, Aug 7 (Newswire): An intelligence operation that involved the setting up of a cell-phone and Internet system in Afghanistan in 1999, ran into major obstacle from the Clinton administration and was hampered by a lack of cooperation from the CIA, the FBI and the National Security, it has emerged.

According to Vanity Fair magazine, the plan, named 'Operation Foxden', was for an American telecommunications firm set up by an Afghan-American FBI source to win a contract from the ruling Taliban government and wire the nation.

The magazine's contributing editor David Rose said that the network would have been linked to the NSA's headquarters in Fort Meade and could have logged every call made, the number called and a recording of the call, CBS News reports.

Had the secret deal been completed, the US would have had complete access to Al-Qaeda and Taliban calls and e-mails.

According to the report, the deal could have been a priceless intelligence asset that could have prevented the September 11, 2001 terrorist attacks.

The Taliban inked a deal in June 1999 giving the FBI's source a monopoly on Afghanistan's cell phone network for 15 years, Rose said.

Operation Foxden hit a major roadblock when President Clinton signed an executive order preventing US citizens from doing business with the Taliban.

The FBI and the NSA attempted to receive an exemption from the order and tried to maneuver around it but couldn't, the report said.

Rose reported that when the CIA became involved in January 2000, the plan was virtually mired in an 'interagency review' until after Clinton left office.

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Families reunite in Detroit as troops return from Afghanistan

Detroit, Aug 7 (Newswire): Carrying American flags, balloons and homemade posters, friends and family welcomed home 75 National Guard soldiers after a one-year stint in Afghanistan.

All members of the 1225 Combat Sustainment Support Battalion returned home safely, Sgt. Jeffery Duddy said during a welcome back ceremony at the Detroit Light Guard Armory on Eight Mile.

The group of soldiers deployed to Kandahar, Afghanistan, last August. Dressed in uniform, they returned to the cheers and hugs of family and friends, including children who had grown much taller since they left.

Spc. Marla Mitchell, 26, of Detroit, returned home to her daughter, Julianna, 3, who giggled as she playfully ran back and forth to her mother.

"I missed the things that she was doing," Mitchell said. "I'm glad I made it home before she starts school. She starts school in the fall."

Mitchell held a bouquet of colorful flowers as she was also welcomed back by her husband, mother, brother and other family and friends. She made friends of fellow soldiers while she was away, she said.

"This unit did an amazing job," she said. "We all made it and stuck together."

Kim Ostrander of Jackson welcomed home her husband, Lt. Douglas Ostrander. With them were their two children, Courtney, 12, and Joshua, 9.

"I'm happy," said Kim Ostrander. "It's been a long time. It's been hard, just the fact that their dad was gone." The family says one of the first things they'll do is take a trip to a lake.

"It's great," Douglas Ostrander said of his return. "It's almost overwhelming."

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Deal to share fingerprints is dropped, not program

Washington, Aug 7 (Newswire): US Federal immigration officials have announced that they were terminating the joint agreements with state and local governments that have been at the center of a controversy surrounding a national fingerprint-sharing program, although they said they would continue setting up the program unilaterally.

In a letter to 40 governors and local officials who had signed the agreements, John Morton, the director of Immigration and Customs Enforcement, said the change was intended to eliminate widespread confusion, which has plagued the program since its kickoff in 2008, over whether the agreements were necessary to initiate it. The move also seemed intended to remove political pressure from local officials who felt uneasy about appearing to collaborate with federal authorities on immigration enforcement.

The decision was met with a chorus of angry criticism from immigrant groups. More than 200 immigrant advocacy groups recently signed a letter demanding that the Obama administration suspend the program until changes are made to ensure that illegal immigrants who are not criminals are not deported. But the move made clear that the administration had no intention of suspending or even slowing the pace of the program.

The agreements, called memorandums of agreement, laid out the guidelines for setting up the program, known as Secure Communities, which is being rolled out across the country and is scheduled to be in effect nationwide by 2013.

Under the program, a cornerstone of the Obama administration's enforcement strategy, the fingerprints of everyone booked into a local or county jail are automatically sent to the Department of Homeland Security and compared with prints in the agency's files, which record immigration violations.

Immigration officials insist that the program is intended to identify and deport the most serious noncitizen criminals as well as those who threaten national security. But critics have argued that the program has resulted in the deportations of a disproportionate number of foreigners guilty only of low-level offenses, like traffic infractions, or immigration violations.

This year, the governors of Illinois, New York and Massachusetts, in the belief that Secure Communities was voluntary, announced they were suspending or canceling their participation in the program.

But since at least last fall, federal officials have insisted that the program was never voluntary and could be carried out across the country without the consent of local or state officials.

In a letter to Gov. Jack Markell of Delaware, Mr. Morton said that his agency was canceling the agreements because it had determined that they were "not required to activate or operate Secure Communities."

"We are going to bring to an end any questions about whether or not we are requiring any state involvement in immigration enforcement," a senior official from Immigration and Customs Enforcement said in an interview.

Obama administration officials have explained that as long as local jurisdictions continue to share fingerprints with the F.B.I. — a routine procedure — then the fingerprints will automatically flow into a general federal database accessible to Homeland Security Department officials.

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Mexico keeps reputed drug lord on education payroll

Mexico City, Aug 7 (Newswire): Mexican security forces would like very much to capture, or even kill, reputed crime boss Servando "La Tuta" Gomez, leader of the cultlike Knights Templar drug gang.

According to Mexico's El Universal newspaper, the former schoolteacher is still on the ministry's payroll, even though federal prosecutors are offering millions in reward money for his capture — and despite the fact that he hasn't set foot in a classroom in more than a decade.

What's worse, Gomez was issued checks totaling more than $2,000 in the first three months of 2011, although the paper first reported the unseemly payments in December. Mexican lawmakers opened an investigation this week, demanding to know why Gomez — who was also indicted for drug trafficking by a New York federal court in 2009 — hasn't been fired.

Given the relatively small amounts of money involved, it seems unlikely that the payments are a case of direct corruption. Instead, experts say, they appear to be something possibly more embarrassing — a galling reminder of the immense power of Mexico's teachers union and the difficulty of dismissing bad teachers, even if they are notorious drug lords.

"Firing a teacher is nearly impossible here, a true bureaucratic labyrinth," said Otto Granados, a professor of public policy at Mexico's Tecnologico de Monterrey university. "This kind of thing happens all the time," he said, citing a recent study that found that more than 100,000 Mexican teachers were drawing salaries despite not showing up for work.

The country's main teachers union — the largest in Latin America — is a political juggernaut so powerful that it assigns jobs through an extensive system of patronage, Granados said. Only teachers who have been convicted of a crime can be fired, and since Gomez remains at large, he apparently can't be taken off the payroll.

Gomez, whose nickname "La Tuta" means "the teacher," first registered as an educator 15 years ago at a small rural primary school in his home town of Arteaga, in Michoacan state. He taught there for a few years, then tried his hand at farming, and ended up working with local drug smugglers, according to George W. Grayson, who has written extensively about the La Familia drug cartel, of which Gomez was a founding member. The group became famous for its bizarre Christian-themed worldview and for beheading and burning alive its enemies.

With the cartel weakened by the death and capture of its other top leaders, Gomez broke away to form the Knights Templar, styling it after the Crusades-era holy warriors. "He's their top Bible-pounder," Grayson said.

Since forming last year, the Knights have killed scores of rivals and attacked police and other authorities while moving huge amounts of methamphetamine and cocaine into the United States, according to Mexican and U.S. law enforcement officials.

It's not clear whether Gomez has ever cashed the Education Ministry paychecks.

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Another groping attack, this time in central park

New York, Aug 7 (Newswire): The man suspected by police of having groped at least 10 women on the Upper East Side since May has been accused in another attack.

The latest episode occurred in Central Park. The police said a man who fits the description of the suspect who carried out the earlier attacks approached a 28-year-old woman at about 10 p.m. as she was walking near the 66th Street Transverse Road near West Drive.

"She was approached from behind,'' said Sgt. Carlos Nieves of the New York police. The man began a conversation and then groped the woman in the groin area, he said, and the woman punched and kicked him. The man then fled east on the path.

The woman called the police and was taken to a hospital where she was treated and released. There has been no arrest.

Earlier in the week, the man is believed to have attacked another woman on the No. 6 subway train. Sgt. Nieves said in that case, which occurred just before 7 p.m. on Aug. 3 when the train was between the 51st Street and 68th Street stops, a woman was approached by a man who rubbed himself against her arm.

When the train doors train opened at 68th Street, the woman ran out and called the police.

The man has struck mostly on the Upper East Side, and all of his victims have been between 21 and 31, the police said. He is between 4-foot-10 and 5-foot-3 and his image was captured by a subway surveillance camera more than two weeks ago.

Sgt. Nieves said he is perplexed that the man is still at large, given how widely police have disseminated his photograph and his description. "And it's a very good picture too,'' Sgt. Nieves said.

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China slowdown takes toll on trade partners

Beijing, Aug 7 (Newswire): Signs of economic weakness are emerging out of Asian tigers South Korea and Taiwan as the slowdown in key trading partner China takes a toll on the export-driven nations.

The mainland is the biggest export destination for South Korea and Taiwan, accounting for 24 and 27 percent, respectively, of overall shipments.

"Data out of Korea and Taiwan reflects the weakness in China we saw in the first-half. When you look at share of exports that China takes from those two countries, if Chinese demand weakens its inevitable they suffer," Dariusz Kowalczyk, Senior Economist & Strategist, Asia ex. Japan at Credit Agricole told CNBC.

Taiwan's economy unexpectedly contracted in the second quarter by 0.2 percent from the same period a year earlier. The country's government cut its annual growth forecast to 2.1 percent from 3 percent as export growth forecast was slashed to 0.1 percent from 2.7 percent.

In South Korea industrial output in June contracted by 0.4 percent from May - the first month-on-month shrinkage in three months.

Products exported to the mainland market include hi-tech components and goods, autos, household appliances and machinery.

A large portion of the goods shipped to China, for example technology components, are used to assemble products which are then re-exported. But Erik Leuth, Senior Regional Economist at RBS Global Banking & Markets, says an increasing share of Taiwan and South Korea's exports are consumed within China.

Exports to China make up 15 percent of Taiwan's gross domestic product (GDP), and 7 percent of Korea's GDP, Leuth said, citing IMF data.

Leuth says while he expects Chinese economic growth, and hence demand, will likely improve in the second half of the year, overall exports out of the two countries will remain flat, due to continued weakness in Europe and the United States.

With the outlook remaining bleak, Kowalczyk and Leuth say there is increasing likelihood that central banks in both countries will step in to prop up growth via monetary policy in the coming months.

"For China the worst is over, but for rest of Asia it may not be the end of bad news. Policymakers need to take insurance against that, which is increasing chance of rate cuts," Kowalczyk said.

The Bank of Korea, earlier this month unexpectedly cut its benchmark interest rate by 0.25 percent to 3 percent - its first such move in 3 years. Taiwan's central bank, which has a strong focus on price stability, however kept its rates on hold in June for the fourth consecutive quarter at 1.875 percent.

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Asian banks fill in gap left by Europe lenders

London, Aug 7 (Newswire): As European banks continue to pull back in Asia, reeling under the debt crisis back home, regional banks are filling in the gap by buying their assets and increasing lending, say analysts.

"It's interesting because we were very worried about the effect of European banks in Asia. We know they don't have enough capital and are gradually withdrawing from the region, selling assets and cutting lending and you wonder whether that is going to be disruptive," Richard Jerram, Chief Economist at Bank of Singapore, told CNBC Asia's "Squawk Box."

"But all the signs we are getting are that regional banks are prepared to buy the assets (of European banks) and increase lending (to corporates), so the damage from that European distress is rather less than it seemed likely a year ago," he added.

Concerns about a debt crisis in the euro zone have mounted this year, with focus turning to Italy and Spain, where borrowing costs have soared. The worries have rattled global markets as investors weigh the likely fallout of the crisis in Europe on the rest of the world.

"Lending by the continental European banks was more than a third of total Asian cross-border lending pre-Lehman and now that's down to 20 percent and it hasn't really seemed to matter that much," Jerram said referring to the collapse of Lehman Brothers in 2008 which sent global markets into a tailspin.

Lending by continental European banks to Asia-Pacific stood at $356 billion at the end of 2011, according to the latest data from the Bank for International Settlements. That compares with $379 billion at the end of 2010 and is down from a peak of around $455 billion in June 2008.

Jerram said that instead of leading to shrinking liquidity in Asia, the fall in European bank lending to the region has prompted local banks to step up their lending to corporates in the region and that has been a positive sign.

According to a report published by Standard & Poor's Rating Services, banks in Singapore, Hong Kong and China have recently shown particularly rapid credit growth overseas and this has outpaced credit growth in their domestic markets.

In Singapore, for example, growth in credit exposure overseas rose to almost 30 percent in 2011 from just over 10 percent in 2010. Credit growth in domestic markets has been relatively stable at just over 10 percent in 2011 and 2010, the S&P report showed.

Banks in Singapore, Hong Kong and to some extent Japan are all benefiting from a pullback in banking activity by Europe's banks in Asia, Ritesh Maheshwari, Managing Director for Financial Services Ratings at S&P told CNBC.

Earnings reports from the region's big banks have helped boost share prices which were dealt a blow last year from concerns about the global economic outlook.

Singapore-based DBS, (Singapore Exchange: DBSM-SG) Southeast Asia's largest bank, posted a record first-quarter profit and said its expansion in the region would drive the bank's future earnings. The bank's income from Singapore rose 15 percent in the first quarter, while revenue outside Singapore jumped 35 percent as loans to China soared 81 percent and lending to India rose 42 percent. DBS unveils its earnings for the second quarter later this week.

Jerram at Bank of Singapore added that local banks in the region would continue to eye assets up for sale by European banks as they pull back their exposure globally. Malaysia's CIMB Group (Kuala Lumpur Stock Exchange: CIMB.KL) is paying about $267 million for some of the Asian units of Royal Bank of Scotland.

There are more opportunities for Asian banks: ING Groep, (Euronext Amsterdam: INGA-NL) the Dutch financial services group that was bailed out during the financial crisis, is selling its stake in Thailand's TMB Bank. The stake is valued at about $775 million.

Both DBS and Australia's ANZ have expanded into the region in recent years. In the last two years, DBS, for instance snapped up RBS's retail and commercial banking businesses in China.

"To the extent that those (assets) are made available by European banks deleveraging, they will be snapped up by Asian banks," Maheshwari said.

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Spanish deadlines loom: Is full bailout on its way?

London, Aug 7 (Newswire): Two key events will help determine the direction Spain, one of the euro zone's biggest and most troubled economies, will take in the next few months.

A report prepared by the "Big Four" auditors (Deloitte, KPMG, PricewaterhouseCoopers and Ernst & Young) into the source of much of Spain's woes, its banking sector.

With the first tranche of aid for Spanish banks, amounting to 30 billion euros ($36.8 billion), due soon, this report could help assess who needs the recapitalization cash and how urgently.

BBVA (BBVA), the country's second-biggest bank, thought to be much stronger than smaller regional banks, reported disappointing first half net profits - down 35 percent, to 1.5 billion euros ($1.8 billion), after it wrote down 1.4 billion euros in real estate losses.

The under-fire Spanish government is expected to submit its 2012-2014 budget plan to the European Commission, a condition of extending its deficit cutting.

If that data chimes with recent gloomy figures on Spain's GDP and unemployment, it will not make for pleasant reading.

GDP sank by 0.4 percent in the second quarter, while unemployment hit a euro-era high of 24.6 percent.

Comparisons with Italy, tipped as the country which might be next to seek a bailout if the Spanish government goes cap-in-hand to the international rescue fund of the European Union and the International Monetary Fund (IMF - click here for an explanation), are getting worse.

"They're both deteriorating countries but Spain faces a much tougher economic proposition," Alberto Gallo, senior European credit strategist at Royal Bank of Scotland, told CNBC's "Squawk Box Europe".

"As a whole, Italy's a more diversified economy. Spain needs urgent surgery in terms of reforms and economic aid. Italy's problems are more political than economic."

Spain's banks are worth more than three times its GDP (click here for an explanation), while Italy's are closer to twice its GDP. Italy's mortgage debt is also less than half that on Spain's books.

"We continue to expect a deterioration (for Spain) going forward. The situation from a macro standpoint remains difficult," Gallo said.

He believes that Spain needs to change its focus from austerity to growth.

Robert Mundell, the Nobel Prize-winning economist known as the "father of the euro" told CNBC earlier this week that it is "clear" Spain will need a full bailout - although respected economist Jim O'Neill, head of asset management at Goldman Sachs, disagreed.

Gallo recommends selling BBVA bonds and buying UniCredit bonds to bet on Italy outperforming Spain.

"There has been a lot of focus on sovereigns. In banks, in CDS, Italian banks are wider compared to Spanish. You see the opposite in government bonds and that's not sustainable," he said.

Spanish bond yields have come down this week, but are still trading close to euro-era highs, while Italy's have been consistently lower.

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Some concern abroad about US downgrade

Paris, Aug 7 (Newswire): Europe was taken aback at the unprecedented downgrade of America's sterling sovereign credit rating, as officials of the Group of 7 industrial countries decided whether to hold an emergency conference call to discuss the debt crisis that has beset Europe and the United States.

While officials in both Europe and Asia had girded for such a possibility, the news that Standard & Poor's had lowered Washington's AAA rating to AA+ was nonetheless received with a degree of concern in the corridors of power on the Continent.

The French finance minister, François Baroin, questioned the move, which he said appeared to be based on "nonconsensual figures."

The Obama administration had disputed the judgment, noting that Standard & Poor's had made a significant mathematical mistake and overstated the federal debt by about $2 trillion.

Standard & Poor's said the downgrade was based more on the view that the effectiveness, stability and predictability of American policymaking had eroded during the rancorous debate over lifting the debt ceiling.

Mr. Baroin said he found it curious that neither Moody's nor Fitch, the two other major ratings agencies, had reached a similar conclusion. Moody's has said it was keeping its AAA rating on the nation's debt, but that it might still lower it.

"We have total confidence in the solidity of the American economy," Mr. Baroin said in an interview on French radio. Nonetheless, he added, the decision "confirms" that the world's most developed economies are confronted with the same urgent priorities: to lift growth and reduce public and private debt.

The Australian prime minister also warned against overreacting to the downgrade. Standard & Poor's "had been signaling for some time that unless they saw a certain figure of budget cutbacks out of the discussion that there's been in Washington about the American budget and fiscal consolidation, that they were intending to do that downgrade," Prime Minister Julia Gillard said.

"At the same time, the other two major ratings agencies, Moody's and Fitch, continue to have the American economy rated at AAA. So I think people just need to look at all of the facts."

Japan's reaction was also more muted, according to media reports. Officials in Tokyo said their trust in American Treasuries remained unchanged. In Germany, however, commentators saw the downgrade as further evidence of the decline of American prestige.

The weekly newsmagazine Focus called the downgrade "a public humiliation." The magazine noted a scolding that the United States received from Chinese officials.

"Now the country must allow itself to be reprimanded and lectured before the eyes of the world," Focus said, referring to the United States.

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Euro builder ends his career on a bitter note

Frankfurt, Aug 7 (Newswire): Jean-Claude Trichet, the president of the European Central Bank, has spent much of his career building and defending the euro. But now, in a bitter twist, it looks as if his career may well end with the common currency in shambles.

Mr. Trichet, 68, will retire at the end of October after an eight-year term. Yet markets are crashing, bond investors have turned on Italy and Spain, and it appears certain that when Mr. Trichet returns to civilian life on Nov. 1, the European sovereign debt crisis will be far from resolved.

Indeed, the euro area threatens to become the epicenter of a global financial crisis to rival the one that followed the collapse of Lehman Brothers in September 2008 — a horror sequel that Mr. Trichet himself has said the world cannot bear.

"Our democracies would not be ready to provide once again the financial commitments to avoid a great depression in case of a new crisis of the same nature," he told an audience in Madrid in May.

A lifelong civil servant who wraps his sangfroid and political toughness in French courtliness, Mr. Trichet generally gets high marks for the way he has managed the central bank.

He may be the most influential public official on the Continent, the person who most embodies the dream of a single coin for the European realm.

But recent days have also highlighted what some critics say are policy mistakes by Mr. Trichet, or at least the institution he leads. And just as Alan Greenspan went from being lionized to lacerated after his years at the Federal Reserve were quickly followed by the global financial collapse, these missteps threaten to tarnish Mr. Trichet's legacy.

Mr. Trichet may be remembered "as a charming and talented leader who failed to grasp the gravity of the crisis," said Charles Wyplosz, a professor of economics at the Graduate Institute in Geneva.

Some critics, including Professor Wyplosz, say the bank made a fatal error when it began buying Greek, Irish and Portuguese bonds in May 2010, a decision that has left the bank holding more than 74 billion euros worth of questionable debt. Greece should have been allowed to default and restructure under the guidance of the International Monetary Fund, Professor Wyplosz said.

Other analysts say the bank had no choice other than to intervene in dysfunctional markets, but sabotaged its own efforts by moving too hesitantly. The bank should have shown a willingness to buy Spanish and Italian bonds as well, they say.

"What isn't helpful is if you stop halfway," said Frank Engels, co-head of European economics at Barclays Capital in London, who generally holds Mr. Trichet in high regard. "Either you would have abstained entirely, or you would have gone all the way."

The bank's interest-rate policy has also drawn scorn, with critics calling it deeply inconsistent. The bank has raised the benchmark interest rate twice since April to prevent inflation in fast-growing countries like Germany and the Netherlands. At the same time, the central bank has pursued a loose monetary policy in weaker countries like Greece and Ireland by allowing banks there to borrow central bank funds cheaply. On Thursday, amid signs of serious tension in the interbank markets, the central bank expanded the availability of low-cost loans to banks.

"If this is all part of a single objective, then how can you turn one lever toward the right and one to the left?" asked Marie Diron, an economist in London who advises the consulting firm Ernst & Young and previously worked at the central bank.

With European economies slowing and the debt crisis intensifying, critics say, the central bank is making the same mistake this year that it made in July 2008. Then, the bank raised the benchmark interest rate to 4.25 percent from 4 percent even as the financial crisis was gathering force.

After the collapse of Lehman Brothers only two months later, the bank was obliged to throw monetary policy into reverse, lowering the rate to 1 percent by May 2009. It has been at 1.5 percent since July.

To be fair to Mr. Trichet, who declined through a spokeswoman to comment for this article, he has a more limited arsenal of policy tools than Ben S. Bernanke, his counterpart at the Federal Reserve. 
The bank charter would not allow it to flood the economy with money the way the Fed has done through its huge purchases of securities.

Some concern abroad about US downgrade

Paris, Aug 7 (Newswire): Europe was taken aback at the unprecedented downgrade of America's sterling sovereign credit rating, as officials of the Group of 7 industrial countries decided whether to hold an emergency conference call to discuss the debt crisis that has beset Europe and the United States.

While officials in both Europe and Asia had girded for such a possibility, the news that Standard & Poor's had lowered Washington's AAA rating to AA+ was nonetheless received with a degree of concern in the corridors of power on the Continent.

The French finance minister, François Baroin, questioned the move, which he said appeared to be based on "nonconsensual figures."

The Obama administration had disputed the judgment, noting that Standard & Poor's had made a significant mathematical mistake and overstated the federal debt by about $2 trillion.

Standard & Poor's said the downgrade was based more on the view that the effectiveness, stability and predictability of American policymaking had eroded during the rancorous debate over lifting the debt ceiling.

Mr. Baroin said he found it curious that neither Moody's nor Fitch, the two other major ratings agencies, had reached a similar conclusion. Moody's has said it was keeping its AAA rating on the nation's debt, but that it might still lower it.

"We have total confidence in the solidity of the American economy," Mr. Baroin said in an interview on French radio. Nonetheless, he added, the decision "confirms" that the world's most developed economies are confronted with the same urgent priorities: to lift growth and reduce public and private debt.

The Australian prime minister also warned against overreacting to the downgrade. Standard & Poor's "had been signaling for some time that unless they saw a certain figure of budget cutbacks out of the discussion that there's been in Washington about the American budget and fiscal consolidation, that they were intending to do that downgrade," Prime Minister Julia Gillard said.

"At the same time, the other two major ratings agencies, Moody's and Fitch, continue to have the American economy rated at AAA. So I think people just need to look at all of the facts."

Japan's reaction was also more muted, according to media reports. Officials in Tokyo said their trust in American Treasuries remained unchanged. In Germany, however, commentators saw the downgrade as further evidence of the decline of American prestige.

The weekly newsmagazine Focus called the downgrade "a public humiliation." The magazine noted a scolding that the United States received from Chinese officials.

"Now the country must allow itself to be reprimanded and lectured before the eyes of the world," Focus said, referring to the United States.

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Wild market quiets the buzz for IPO’s

London, Aug 7 (Newswire): Offerings by well-known brands like Zynga, a maker of online games, might perform well for a time while the rest of the market struggles.

As stocks swing violently, a chill is beginning to settle on the initial public offering market. A small number of companies have already retreated on their offering plans. WageWorks, an employee benefits provider, pushed its offering, originally scheduled for Friday, to next week and dropped its target price range by as much as 43 percent.

Two real estate investment trusts, Orchid Island Capital and Eola Property Trust, have withdrawn their filings. And Old Mutual, a big South African insurance company, said on Friday that it was now unlikely to go public in the United States before the end of next year because of market conditions.

For volatility is the enemy of the I.P.O. market. The ripples could spread, affecting even larger offerings this year, including some hotly awaited Internet offerings, as well as the sales of government-owned shares in companies like the American International Group, General Motors and the lender Ally Financial.

Ally may prove to be the most difficult, with the Treasury Department and its underwriters having postponed its initial public offering in June. The former G.M. financing arm may now seek to go public in September, though that is looking unlikely given the recent market swings, according to a person briefed on the matter.

Yet A.I.G.'s chief executive, Robert H. Benmosche, professed little worry about the current market conditions' effect on the insurer's next stock offering. "We're going to make that decision in November," he said in an interview.

Still, when there are jitters in the market, offerings are vulnerable. "Until volatility settles, we're not going to see a lot of IPO launches," said Brian Reilly, head of United States equity capital markets at Barclays Capital, referring to the moment a company sets its price range and starts a road show to court investors.

One measure of market volatility, the Chicago Board Options Exchange Volatility Index, or VIX — known as Wall Street's fear gauge —reached its highest level since May 2010. That degree of uncertainty makes it difficult for companies to price their offerings and for investors to feel confident that they can generate meaningful returns.

"The best advice for most clients is to wait for volatility to calm down," Mr. Reilly said. The sharp jitters in the market threaten a broad range of deals on Wall Street, including acquisitions, which can be ultrasensitive to price fluctuations in the equity markets. But the current roller coaster may be particularly damaging to the offerings market, analysts say, which is still recovering from the financial crisis, when it was virtually moribund.

Although demand for offerings in the United States has been somewhat uneven, the market has shown signs of strength. So far this year, the number of offerings is up nearly 15 percent, to 93, while proceeds have more than doubled to $28.5 billion, according to data from Renaissance Capital, a firm that advises on stock offerings.

A lot of that growth can be traced to the technology sector, which has produced some of the most highly anticipated public offerings, like the online music service Pandora Media and LinkedIn, the social network for professionals. When LinkedIn went public in May, it raised more than $350 million and its shares surged 109 percent on their first day of trading.


Prolonged and severe market turbulence could batter the offerings of even the most popular start-ups, like Groupon. LinkedIn's success was seen to be a curtain raiser to a string of even larger Internet blockbusters. The popular games maker Zynga and Groupon, a daily coupon Web site, have recently filed to go public.

Facebook, the world's largest social network, is on track to file within the next eight months, at a valuation north of $100 billion, according to people close to the matter.

These popular start-ups, which have been heavily traded on secondary markets, were largely seen as immune to market turbulence because of the feverish demand for their shares. But a prolonged severe period of volatility could eventually drag down these companies too, analysts say, forcing management and bankers to revise timelines and trim valuations.

"You can't sit here with a high valuation, when everything else is crashing around you," said Kathleen Smith, a principal at Renaissance. "Even Facebook may have a hard time getting its offering done at a premium."

For now, the hope is that the economy calms down by September, when the stock offering market restarts in earnest after a traditionally slow August.

"Thank goodness it's August," said Horace Nash, a partner at Fenwick & West, a prestigious Silicon Valley law firm. "In the medium term, it's pretty unpredictable, but it's not going to kill a filed transaction."

Though Mr. Nash still believes the largest offerings exist in a silo apart from the rest of the technology sector, he says instability will most likely sway their valuations. "That would really put the sand in the gears," he said.

David J. Abella, a portfolio manager with Rochdale Investment Management, says he is closely watching the markets and has already lowered his price expectations based on the broader market declines. He foresees a stark divide in the market, where offerings from well-known brands like Dunkin' Donuts and Zynga perform well, but the rest of the market struggles to find its footing.

"If I'm able to get an allocation from a top-tier name, I will generally be a buyer," he said. "In this market, you might not get the same upside as LinkedIn, but it will probably still be attractive."

Mr. Abella says his firm will not buy shares from top tier names on the first day of trading and will be especially wary of debt-laden, private-equity-backed offerings, which he predicts will suffer in this environment.

Investor confidence will be put to the test once again next week, with 12 companies expected to go public in the final push before the late-summer lull. WageWorks is back, along with Trustwave Holdings, an enterprise software company, and HomeStreet, a modest-sized regional bank. If all go public, it will be the best showing since 2007. But few expect next week to go without a hitch.

"Some may do better than expected, but it's gotten a lot riskier," Mr. Abella said.

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'Agitation to continue'

Jammu, Aug 7 (Newswire): Notwithstanding the Indian HRD Ministry's reported approval to appoint former Chief Secretary of occupied Jammu and Kashmir as the first Vice-Chancellor (V-C) of Central University Jammu (CUJ), the warring groups categorically stated that they would continue their agitation till formal orders of V-C's appointment are issued.

 "Our struggle shall continue till formal orders of V-C's appointment are issued by HRD Ministry. We don't trust the government as it has deliberately delayed the establishment of Central University in Jammu," Paviter Singh, chairman Jammu Province People's Forum (JPPF) said here.

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Mother demands son’s whereabouts

Srinagar, Aug 7 (Newswire): It's a tale of search and pain. Raja Begum, 50, is looking for her son who she alleged was picked up by police a month ago from occupied Kashmir's Islamabad (Anantnag) town.

Begum said her son, Ali Muhammad Sheikh, 22, was picked up by the policemen near the General Bus Stand before her eyes. "I begged before the cops to let me know why they were arresting my son, but my pleas fell into deaf ears," she said.     

"Policemen belonged to Saddar Police Station. From that day I have been regularly visiting the police station to ascertain what happened to my son. Whenever I visit they deny that they have picked my son," she said. 

Begum said her son Ali left studies in the midway to support the family by taking up a job of a laborer after his father passed away.

She apprehends that the he may have undergone severe torture and that is why police are prolonging his detention.
 "After making repeated rounds of Saddar police station, some policemen demanded Rs 10, 000 from me to release my son," she said. "I am really confused now. Officially they don't agree my son is in their custody while as in private they are demanding a bribe"
 
"I want my son back," she screamed as tears rolled down.

 However, sources said that Ali's elder brother, Bashir Ahmad Sheikh, who lives separately with his family, is wanted in some cases and is evading arrest. "Police  have arrested his brother (Ali) to pressurize him (Bashir)," they added.

A lawyer in the district court said that they have moved an application to the concerned Station House Officer to seek the reason of Ali's detention.

"If he is involved in any case he should have been sent to the police remand and we could have applied for the bail, but police are denying that they have arrested him," the lawyer said.

He said they have urged the State Human Rights Council to take the cognizance of the matter. "We have moved an application there and asked them to summon the DIG, SSP, SHO (Saddar) and DO Bus stand police station to cite the reason of his illegal detention," the lawyer said.
He said that on Friday Ali's mother had spotted her son Ali in Islamabad Police station.

"She has given her clothes and food. She has gone there," the laywer said. "Later we moved an application in  Munsif Court. The Court instructed the concerned police station to give the report, but police again denied arresting him."

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Kashmir under undeclared martial law: Mirwaiz

Srinagar, Aug 7 (Newswire): With streets of occupied Srinagar witnessing fresh clashes over the continued house-arrest of Kashmiri leaders, the chairman of Hurriyat Conference (M) Mirwaiz Umar Farooq believes the protests are "consequence of curbs on religious freedom in Kashmir which seems to have become a policy of the Jammu and Kashmir Government."

In a chat with Greater Kashmir, the Mirwaiz said that "in a Muslim-majority state like Jammu and Kashmir, such curbs are simply intolerable. There are religious sentiments which people hold dear to them. But it is height of repression that the Hurriyat leaders are not allowed to offer prayers even on the first Friday of the holy month of Ramadan. People have no alternative but to come out on roads and protest this religious interference."

He said on Friday, the police and paramilitary forces "unleashed a reign of terror at Jamia Masjid after its Imam led peaceful protests against the curbs on Hurriyat leadership."

"Jamia Masjid is a place where thousands of people visit during Ramadan for prayers and Islamic teachings. We don't only talk politics there but try to address social issues as well. But it seems to have become policy of the government not to allow the separatists to meet anyone, not to talk of allowing political rallies and speeches. This is the extreme form of repression," Mirwaiz, who continues to remain under house-arrest, said.

"Like 12 days of Urs on Milad-un-Nabi (SAW) at Hazratbal shrine, we have our own programmes for Ramadan at Jamia Masjid. During these 30 days, we also go to different places to impart religious education to people. But I really wonder what kind of thinking is this to impose curbs on religious freedom. And I wonder who the people behind such moves and policies are. This only strengthens our stand that the state government wants to silence everyone through the barrel of gun and baton."

The Mirwaiz lashed out at the ruling National Conference, saying it must "openly declare Martial Law in Jammu and Kashmir so that we have no regrets."

"Today, there seems to be a Martial Law in Kashmir in the garb of so-called democratic set-up. The National Conference-led government must openly declare Martial Law so that we have no regrets on why our social, political and religious rights are trampled," he said.

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Human hearts respond differently than mouse hearts to two cardiovascular drugs

Islamabad, Aug 7 (Newswire): Anyone who follows science has read enthusiastic stories about medical breakthroughs that include the standard disclaimer that the results were obtained in mice and might not carry over to humans.

Much later, there might be reports that a drug has been abandoned because clinical trials turned up unforeseen side effects or responses in humans. Given the delay, most readers probably don't connect the initial success and the eventual failure.

But Igor Efimov, PhD, a biomedical engineer at Washington University in St. Louis who studies the biophysical and physiological mechanisms that underlie heart rhythm disorders, is acutely aware of the failure of once-promising drugs to pass clinical trials.

"The problem is the difference in gene expression between the mouse and the human is very very large," Efimov says.

Mice are the most popular animal model in cardiovascular research in part because it is easy and cheap to create a transgenic mouse, and these mice allow research questions to be asked and answered precisely and quickly.

To avoid the "mouse trap," Efimov has established connections with local institutions that supply his lab with human hearts. The hearts are either diseased ones removed from patients undergoing heart transplants or "non-failing" hearts that have been donated for research but are considered unsuitable for transplantation.

An article in the August issue of the Journal of Molecular and Cellular Cardiology beautifully demonstrates the importance of working with human hearts. It reports on studies in human hearts of two drugs that had already been studied in the mouse heart (work also published in the Journal of Molecular and Cellular Cardiology). The results show that a drug target that looked promising in the mouse model would not work in humans.

The research is a collaboration between Efimov, the Lucy & Stanley Lopata Distinguished Professor of Biomedical Engineering, Cell Biology and Physiology, and Radiology, and Colin G. Nichols, PhD, the Carl Cori Professor of Cell Biology and Physiology and co-director of the Center for the Investigation of Membrane Excitability Disorders (CIMED) at the School of Medicine.

"We were able to demonstrate this without the expense of clinical trials and without putting patients at risk," Efimov says.

The heart is an electromechanical pump, and normal contraction of the heart muscle depends on normal electrical activity. Electrical activity in the heart ultimately reflects the coordinated opening and closing of ion channels in the surface membranes of heart muscle cells.

Ion channels are proteins that control the passage of electrically charged atoms, called ions, into and out of cells. The currents that flow through the heart with each beat depend on the orchestrated opening and closing of channels specific for sodium, potassium and calcium ions. Genetic mutations that affect ion-channel function are thought to underlie many forms of heart disease.

Efimov and Nichols have been studying an ion channel known as the KATP channel. This is a potassium channel that is sensitive to the presence of ATP, the body's energy storage molecule.

The KATP channel is both a tempting and dangerous target for drug therapy. When there is a blockage in the coronary artery, the main vessel that carries blood to the heart muscle, this channel immediately opens. By opening, says Efimov, the channel seems to protect the heart from oxygen deprivation.

On the other hand, the activation of the channel can kill the patient by dramatically shortening the action potentials, or electrical impulses that trigger heart-muscle contraction. This shortening causes the onset of arrhythmia, or the loss of normal heart rhythm.

The KATP channel can have either of two regulatory subunits that are sensitive to the presence of ATP. These are called SUR1 and SUR2 (for sulfonylurea receptor types 1 and 2).

In an article published in the Molecular and Cellular Cardiology, Nichols and Efimov reported that, in the mouse, the SUR1 gene is expressed only in the atria and not in the ventricles. SUR2, on the other hand is expressed only in the ventricles and not in the atria.

"This is really quite remarkable," Efimov says, "because there are very good drugs that are specific to SUR1 or to SUR2. This means if the mouse data translates to humans, it would be possible to design a drug that would work only on the atria without affecting the ventricles."

"The lack of specificity is a huge problem with other drugs," he says. "If you want to treat atrial fibrillation, you need a drug that works only on the atria and does not affect the ventricles. If you treat with a drug that has some targets in the ventricles, you'll treat the atrial fibrillation, but you'll kill by ventricular fibrillation."

Fibrillation is the chaotic or unsynchronized contraction of heart muscle. Ventricular fibrillation causes sudden cardiac death because the heart no longer pumps effectively and blood does not reach the brain. Atrial fibrillation is less lethal but puts patients at increased risk from stroke and sudden cardiac death.

After the mouse study, Efimov and Nichols wanted to know if the results would hold in the human heart.

To find out, the scientists repeated the mouse study with human hearts. They excised a piece of the heart that included both atrial and ventricular tissue, perfused it with a solution that would keep the tissue functioning and treated it with two drugs. One is specific to the SUR1 variant of the potassium-ion channel, and the other is specific to SUR2 variant.

In order to record the drugs' effects, they bathed the heart tissue with voltage-sensitive dyes. These bind to the membrane of cardiac cells and, when illuminated with an arc lamp, fluoresce with an intensity directly proportional to the transmembrane voltage.

Action potential duration (the physiologically important parameter) can be calculated from the change in these intensities over time.

The result? "In human hearts," Efimov says, "it doesn't work. The SUR1 drug doesn't work in the atria at all, but it does affect the ventricles; it is the opposite of what happens in the mouse. The SUR2 drug affected both the atria and the ventricles, and shortened the action potentials in the ventricles so much that it would cause fatal arrhythmias in people."

Efimov sees the results as indicative of a larger problem with cardiovascular research, one that has blocked the development of effective therapies for many years.

The current approach to studying arrhythmia and many other diseases goes back to a three-step protocol worked out by the German scientist Rudolf Virchow, Efimov says. The first step is to identify the clinical signs and symptoms of the disease; the second is to recreate those symptoms and identify a therapy in an animal model; and the third evaluate the safety and efficacy of the therapy in clinical trials.

"The problem is that at least in the cardiac arrhythmia field, this paradigm has had very few successes," Efimov says. "It has resulted in the discovery of almost no successful drugs. Clinical trial after clinical trial has ended in failure."

Mice are the most popular animal model in physiology, but the mouse is not a very good model for cardiac physiology. "A mouse's heart beats about 600 times per minute, so you can imagine it is a little different from humans, whose hearts beat on average 72 times per minute," Efimov says.

"You can mutate in mice the gene thought to cause heart failure in humans and you don't get the same disease, because the mouse is so different," Efimov says.

"So, unfortunately, even with the help of transgenic mice, very few results made it from the animal model to the clinic."

The answer, Efimov says, is to insert an additional step in the three-step research protocol. After a therapy has been tested in an animal model, it should be tested in human hearts before moving to clinical trials.

"Since we've begun to work with human hearts," he says, "we're finally starting to catch up with animal physiology."

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Artificial lung device: Feasibility of lung transplants demonstrated

Islamabad, Aug 7 (Newswire): Surgeons at the University of Kentucky have announced that they were among the first to use artificial-lung technology to demonstrate the feasibility of a lung transplant, using a device invented by two university faculty members, Dr. Joseph Zwischenberger and Dr. Dongfang Wang.

"The device helps patients get oxygen into their blood by transporting blood to a gas exchanger that removes carbon dioxide and oxygenates the blood before returning it to the heart, bypassing the lungs of the patient," said Zwischenberger, chairman of the UK Department of Surgery. "It's meant for patients who are too sick to be maintained on a ventilator and is designed as temporary treatment for severe respiratory failure."

Normally, a patient is sedated while using an extracorporeal membrane oxygenation (ECMO). Consequently, the patient is bedridden, which causes the muscles to become increasingly weak. However, Zwischenberger's device, the bi-caval double lumen catheter, manufactured by Avalon Laboratories, is an advanced form of ECMO, also known as "ambulatory artificial lungs."

Zwischenberger's goal was to allow patients to do normal things, even exercise, while using the device.

That goal was achieved on April 8, when Dr. Charles Hoopes, director of the UK Heart and Lung Transplant Program and the Ventricular Assist Device Program, performed surgery on Ernie Gillispie, of Canada, Ky., to allow the use of this artificial lung and double lumen catheter.

With the assistance of the device, Gillispie proved himself to be a candidate for a lung transplant; without it he would not have been strong enough for the surgery, Zwischenberger said.

"This lung technology sets us up to be able to bridge patients to lung transplant, rather than their condition continuing to deteriorate while waiting for a transplant," Zwischenberger said. "Dr. Hoopes is an early adopter of this technique and we are now one of a very few places in the country that uses ambulatory ECMO as a bridge to transplant."

Hoopes says the machine proved that if Gillispie's lungs worked properly, he could live a normal life.

"If a patient cannot exercise after their breathing is 'replaced' with an artificial lung, then transplant will provide little clinical benefit," Hoopes said. "The limited number of donor organs can be used in patients who will most likely benefit. Artificial lung technology allows us to be certain that the patient potentially receiving the organ transplantation is physically well enough to undergo the surgery and recovery."

After only three days using the artificial lung, Gillispie underwent a successful double-lung transplant surgery on April 11, 2011.

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Researchers find way to help donor adult blood stem cells overcome transplant rejection

Islamabad, Aug 7 (Newswire): Findings by UT Southwestern Medical Center researchers may suggest new strategies for successful donor adult stem cell transplants in patients with blood cancers such as leukemia, lymphoma and myeloma.

The study, published in Cell Stem Cell, showed for the first time that adult blood stem cells can be regulated to overcome an immune response that leads to transplant rejection. It also opens up further studies in stem cell immunology, said Dr. Chengcheng "Alec" Zhang, assistant professor of physiology and developmental biology at UT Southwestern and senior author of the study.

"We speculate that a common mechanism exists to regulate immune inhibitors in different types of stem cells," he said.

Nearly 1 million people in the U.S. are living with or in remission from blood cancers; more than 135,000 are expected to be diagnosed this year. Blood and bone marrow stem cell transplants are needed when a patient's body stops making enough healthy blood cells.

In this current study, UT researchers developed a culture "cocktail" that successfully supported adult blood stem cells from humans and from mice, and found that they express immune inhibitors on their surfaces that protect them from immune attack. Using the increased number of cultured blood stem cells, the scientists were able to overcome the protein barrier that alerts the immune system to foreign material and significantly repopulated healthy cells in the rodent transplantation recipients.

"We revealed that the expansion of adult blood stem cells through culture and an increase in cell surface expression of an immune molecule are the keys for this to happen," Dr. Zhang said.

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Researchers find way to help donor adult blood stem cells overcome transplant rejection

Islamabad, Aug 7 (Newswire): Findings by UT Southwestern Medical Center researchers may suggest new strategies for successful donor adult stem cell transplants in patients with blood cancers such as leukemia, lymphoma and myeloma.

The study, published in Cell Stem Cell, showed for the first time that adult blood stem cells can be regulated to overcome an immune response that leads to transplant rejection. It also opens up further studies in stem cell immunology, said Dr. Chengcheng "Alec" Zhang, assistant professor of physiology and developmental biology at UT Southwestern and senior author of the study.

"We speculate that a common mechanism exists to regulate immune inhibitors in different types of stem cells," he said.

Nearly 1 million people in the U.S. are living with or in remission from blood cancers; more than 135,000 are expected to be diagnosed this year. Blood and bone marrow stem cell transplants are needed when a patient's body stops making enough healthy blood cells.

In this current study, UT researchers developed a culture "cocktail" that successfully supported adult blood stem cells from humans and from mice, and found that they express immune inhibitors on their surfaces that protect them from immune attack. Using the increased number of cultured blood stem cells, the scientists were able to overcome the protein barrier that alerts the immune system to foreign material and significantly repopulated healthy cells in the rodent transplantation recipients.

"We revealed that the expansion of adult blood stem cells through culture and an increase in cell surface expression of an immune molecule are the keys for th

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