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EU faces protests despite recovery signs
AFP - Wednesday, March 18
MILAN (AFP) - - A top EU offical warned Tuesday that Europe faced increased social protest this year despite signs of an improving economic climate, underscored by another gain in German investor confidence.
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Bouyant market sentiment in Asia was underpinned Tuesday by news that Japan was weighing a stimulus scheme for its critical high-tech sector.
In Europe, where stocks opened lower, prospects grew for further interest rate cuts by the European Cental Bank in the face of gloomy growth forcasts.
Analysts at Morgan Stanley said they now foresaw a contraction in eurozone output this year of 3.3 percent rather than a previously estimated 1.6 percent.
But in Germany, the largest eurozone economy, investor confidence was reported to have risen for the fifth straight month in March.
The ZEW confidence indicator rose by 2.3 points to minus 3.5. The index, which is watched for future economic trends, had surged 25.2 points in February, leading some to perceive a glimmer of light for Germany's recession-hit economy.
Nevertheless, according to European Union Economic Affairs Commissioner Joaquin Almunia, Europe faced a "hot autumn" of social protest.
"Social conditions have deteriorated and are getting worse... and we will need a spring dialogue to prevent a hot autumn," he told the Italian daily La Stampa.
"We cannot stand by and observe (rising) tensions everywhere," he insisted, adding that it would be necessary "to use all available means to help those who lose their jobs."
France's main unions are organising a day of nationwide strikes and demonstrations Thursday to protest President Nicolas Sarkozy's handling of the crisis, an action that has the backing of nearly 75 percent of the French population, according to a poll released Tuesday.
But Almunia also said in his interview he had noticed that "signs have improved compared to three months ago: some banks have announced better results than expected, the liquidity market is going a bit better and government programmes for public works will begin to bear fruit soon."
Such sentiment was evident in Japan Tuesday, where shares ended at their highest level in five weeks on hopes for a recovery thanks to government intervention to spur consumption and investment.
The Nikkei-225 index gained 3.18 percent to end at 7,949.13, the highest closing level since February 9.
Sydney, Seoul and Shanghai all rose more than 3.0 percent while Hong Kong, falling victim to profit taking after five straight positive trading sessions, slipped 0.8 percent.
In Tokyo a Japanese official said the government might invest more than 2.0 billion dollars (1.53 billion euros) in new information and communication systems under an economic stimulus package with the aim of creating 400,000 jobs by 2011.
Under the blueprint, the government would build vast fibreoptic networks to supply broadband to entire communities and subsidise new technologies such as wireless communication networks for cars, the official said.
The three-year plan, if approved, could be financed under a new economic stimulus package that Prime Minister Taro Aso announced last week, said Ministry of Internal Affairs and Communications official Yoshinori Shibayama.
Under that proposal, expected to be worth at least 200 billion yen (two billion dollars), Japan could also link many of the nation's schools, hospitals and other public institutions with fibreoptic networks, said Shibayama.
Japan and other once-vibrant and export-dependent Asian economies are suffering from crumbling global demand for their trademark high-tech products, notably in Europe and the United States.
Latest figures from Singapore showed that the value of its exports fell 24 percent in February year on year following a record 35 percent slide in January.
European stocks meanwhile slid as dealers cashed in recent gains.
In morning European trade, London's FTSE 100 index dipped 0.51 percent, Frankfurt's DAX 30 retreated 0.29 and in Paris the CAC 30 handed back 0.72 percent.
European equities had risen Monday amid tentative hopes of an economic rebound in the United States.
But the prognosis for Europe remains grim, and the ECB on Tuesday said it could still cut its benchmark interest rate from its historic low of 1.5 percent.
"We still have a little room for manoeuvre to cut rates again," ECB chief economist Juergen Stark told the German daily Handelsblatt in an interview.
"But in my opinion, the floor is not far from where we are at the moment."
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Demonstrators march in Paris to protest against rising unemployment, 2006. A top EU offical warned that Europe faced increased social protest this year despite signs of an improving economic climate, underscored by another gain in German investor confidence.
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