Flaherty wants Europe to solve its own debt crisis

Finance Minister Jim Flaherty says Europe should use its own resources to resolve its debt crisis before other countries contribute.

His comment during a visit to Beijing adds to the pressure on European leaders to produce a financial rescue plan and resources to support it.

China, South Africa and others have said they might consider contributing but need to first see a detailed plan.

Flaherty said they want to see Europe build a "very strong firewall" to protect their banks and prevent debt contagion from spreading.

Chinese officials have said Beijing might consider putting money into a fund to help stabilize Europe by buying government bonds with money from outside investors but wants to see details before it can decide.

Flaherty said he discussed the issue with Chinese officials in Beijing and at a meeting of Asia-Pacific finance ministers this month, but declined to say what the officials said about China's current position.

"Generally, I think the view is that we first need to see that very substantial commitment and action by the Europeans -- and I'm talking about the members of the euro zone -- before any more would be asked of non-European G-20 countries," said Flaherty.

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EMI sold to Vivendi and Sony in $4.1B deals

EMI Group Ltd., home of The Beatles and Coldplay, has been sold in two parts for $4.1 billion

Vivendi SA's Universal Music Group said Friday that it has agreed to buy the recording division of EMI for $1.9 billion.

The second part, the publishing division in charge of songwriting copyrights, was sold to Sony/ATV, for $2.2 billion. That's according to a person familiar with the matter.

A second person says the deal leaves Citigroup, EMI's owner, with liability for a pension plan worth about $600 million.

Both people were not authorized to speak publicly and spoke on condition of anonymity.

Citigroup had put the iconic British music company up for sale after foreclosing on private equity firm Terra Firma in February.

Terra Firma bought EMI in 2007 in a $6.8 billion acquisition financed with debt from U.S. bank Citigroup, but it couldn't make enough money to keep up with the terms of its debt.

EMI Group has Canadian operations with a roster of musicians that include Nickelback and Tom Cochrane.

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France irked by S&P rating downgrade error

France reacted with outrage after the Standard & Poor's ratings agency accidentally sent out a message saying it was downgrading the country's prized "AAA" credit rating during a tumultuous week in Europe's protracted debt crisis.

The error stood for an hour and a half Thursday before it was retracted by the agency — spooking markets by foreshadowing the event that could sound the death knell for the 17-nation eurozone.

The accident came just as Greece and Italy both were in the process of getting new interim governments led by financial experts to guide them out of the continent's debt crisis. Most European markets were still open at the time, and U.S. financial markets were in full swing.

Despite Standard & Poor's statement saying the original message had gone out to some subscribers because of a technical error and its reaffirmation that France's credit rating remained "AAA" — the highest level — and stable, some damage could not be undone.

The yield, or interest rate that France pays to borrow money for 10 years, has risen 0.32 percentage points since Thursday morning, hitting 3.48 per cent Friday afternoon, the highest rate since May.

In the midst of a crisis where fear drives the markets as much as fact, the error has at the very least reminded investors of France's difficulties. And often the suggestion of something amiss is nearly as bad as having something amiss.

French Finance Minister Francois Baroin did his best to quell fears, calling the error a "rather shocking rumor of information that has no foundation."

"We won't let any negative message go," he said in Lyon in comments published Friday on the La Tribune newspaper website.

The French market regulator immediately opened an investigation into the mistake at Baroin's behest, and the minister also called for a European probe.

While the error may have increased the pressure on French bond yields, they were already rising — because, like many countries, France is struggling with slow growth and high debt piled up during the boom years.

The rise of such yields is at the heart of Europe's debt crisis: The increase of those interest rates in Ireland, Portugal and Greece — because investors considered them increasingly bad risks — eventually forced each of those countries to seek massive international bailouts.

Now Italy is coming under the same pressure. That poses a bigger problem because its economy and debts dwarf the others — Italy's economic output is 17 per cent of the eurozone's compared to a combined 6 per cent for the other three nations. Europe doesn't have enough money to fully bail Italy out.

'I can't remember a situation where an agency released a rating movement in error '—Analyst Gary Jenkins

But a French debt downgrade would be a problem on another order of magnitude. France and Germany's "AAA" credit ratings are the bedrock of Europe's bailout fund. Because the debt of those two countries is considered so safe, the fund pays very favorable interest rates on the bonds it issues.

Some analysts said the accident may have tipped the actual thinking at the ratings agency.

"I can't remember a situation where an agency released a rating movement in error and no doubt there will be many people who believe that there is no smoke without fire and that this cannot have happened unless S&P were preparing the ground for a downgrade," Gary Jenkins, an analyst with Evolution Securities, said Friday.

He hastened to add: "I have no idea if this is the case or if it was just a genuine error."

S&P, however, does not even have France on surveillance — the step that typically comes before a rating is downgraded. Moody's, on the other hand, says it is studying whether to put France's rating on notice.

A downgrade of French debt would also pose a domestic problem: President Nicolas Sarkozy, who is expected to face a re-election battle next spring, has staked his credibility on balancing France's budget by 2016.

Along the way, Sarkozy has laid out yearly targets for reducing France's deficit — each one tied to a growth projection. But those forecasts have repeatedly proved too rosy and his conservative government has already twice this year been forced to introduce extra cuts to stay on target.

It's clear the last thing Sarkozy wants to see is for French borrowing costs to rise as his government fights to clean up its deficits and keep the eurozone united.

On Thursday, the European Commission said it considered France's growth forecast for 2013 too high — and Baroin shot back that Paris has already set aside a reserve fund for that eventuality.

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MF Global fires 1,066 employees

Defunct New York-based global investment bank MF Global Inc. says it is terminating its entire workforce of 1,066 employees.

The company said Friday it is dismissing workers in accordance with a bankruptcy court-mandated liquidation. Between 150 and 200 former employees are being hired to assist with the liquidation and court proceedings.

MF Global declared bankruptcy Oct. 31, after losing money on a number of bad bets on derivatives contracts, precipitated by the European financial crisis.

The company did not immediately return a call seeking comment. It said in a statement that all the employees were notified of their termination Friday.

The company said it is working to vacate its headquarters in New York as soon as possible and will close the facility.

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Alberta premier pitches Keystone in Washington

Alberta Premier Alison Redford is in Washington, trying to convince members of Congress and government officials of the merits of the proposed Keystone XL pipeline.

On Nov. 10, the State Department said it would delay the approval process for the 2,736-kilometre pipeline, proposed by Calgary-based TransCanada Corp to carry 700,000 barrels a day of mostly oilsands crude from Alberta to U.S. refineries on the coast of the Gulf of Mexico.

It's now expected to take until 2013 for a decision on whether it should get the go ahead.

The Department said it wanted to study alternative routes for the $7-billion project that would bypass the environmentally sensitive Sandhills area in Nebraska and avoid crossing over the Ogalla aquifer, which supplies drinking water for 1.5 million people in eight states.

Redford’s meetings in Washington will extend into Tuesday.

Officials in Redford’s office said she will tell lawmakers that the project would help the struggling U.S. recovery.

Ranchers, environmentalists, Hollywood celebrities and politicians have made the project a focus of protest over several months, expressing concern not only about oil spills but also about the slow pace of developing alternatives to fossil fuel-based energy.

Keystone supporters say it will provide a boost to the economy at a critical time and also significantly reduce U.S. dependence on Middle Eastern oil.

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GG urges Canada to ramp up productivity

Canada can't afford to hunker down in the midst of global economic turmoil, Gov. Gen. David Johnston said in an interview just before the start of a 15-day trip to southeast Asia.

He said the future is at stake.

"If we want our children to have lives that are at least equal or better than ours — which has been a great Canadian dream — then we certainly have to do better on innovation and productivity," he said.

Governor General David Johnston takes part in an interview at Rideau Hall in Ottawa on Thursday, November 10, 2011. THE CANADIAN PRESS/Sean Kilpatrick Sean Kilpatrick/Canadian Press

Johnston leaves for Malaysia, Singapore and Vietnam on Saturday. He's looking to learn about Asian competitiveness, tout Canada as a prime destination for foreign investment and immigration and find opportunities for Canadian interests.

"We should broaden our horizons," he said in the library at Rideau Hall, where the walls are lined with award-winning Canadian works.

"We should look at the globe entirely as we think about markets and think about opportunities that Canadian expertise can exploit. And that would be a main purpose of this trip....seeing the world as not just North America, not just our backyard."

Long gone are the days when Canadians could depend simply on natural resources or a low Canadian dollar to make money, Johnston said.

And now, with the International Monetary Fund warning of a "lost decade" due to weakness in the United States and Europe, Canadian business can't look to its traditional markets to pick up the slack, he warned.

"It seems to me it's very important for Canada to be a trading nation with the entire globe. And the Asian area is the fastest-growing part of the globe. So we should be there."

Indeed, his trip to southeast Asia was requested by the Prime Minister's Office and comes just as Stephen Harper and Finance Minister Jim Flaherty are in Hawaii meeting with other Asia-Pacific leaders to discuss trade and economics.

Flaherty will go on to China and Japan, following in the tracks of Natural Resources Minister Joe Oliver, who was there this week.

Their message echoes that of Mark Carney, governor of the Bank of Canada: if Canada is to thrive, businesses need to get off their wallets and move aggressively into markets that are actually growing, especially in Asia.

But that's far easier said than done.

Canada's productivity — a key to being globally competitive —is mediocre at best and needs to pick up speed, Johnston said.

Johnston, who has a long history of promoting innovation in Canada, recently had dinner with Jeff Immelt, the chief executive officer of General Electric Co., a company Johnston says serves as a prime example of how Canadian firms should behave in the face of adversity.

"They've never hunkered down. When it's in recession times, they are looking even more aggressively at world markets, at the clusters of activity where they are operating in and determining how they can be one of the best in the world."

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Harper 'disappointed' by Keystone pipeline delay

Delays on the U.S. side to assess the controversial Keystone XL pipeline proposal are a disappointment, Prime Minister Stephen Harper said, before heading to a meeting with U.S. President Barack Obama at the end of the Asia-Pacific Economic Co-operation summit.

"We have already indicated of course that we are disappointed," Harper told reporters in Hawaii, where the summit was held. "Nonetheless, I remain optimistic that the project will eventually go ahead because it makes eminent sense."

Obama reportedly told Harper that delaying the project until 2013 will ensure all questions are properly addressed, during their meeting Sunday. The prime minister also noted that Obama said a final decision had not been made.

Earlier in the day, Harper said the recent decision to delay construction of the $7-billion pipeline has been met with "extremely negative reaction" in the U.S. because the project is "obviously what's in the best interests of not just of the Canadian economy but also the American economy."

Harper also noted that the delay draws attention to Canada's need to access Asian markets for energy products.

Natural Resources Minister Joe Oliver told CBC News on Sunday the U.S. decision to put the project on hold pending an environmental-impact assessment will cost the Canadian company pushing the project.

Oliver said he expects the study ordered by the U.S. State Department "will be costly for" Calgary-based TransCanada Corp.

TransCanada is seeking to build the Keystone XL pipeline expansion from Hardisty, Alta., across the border to Nebraska, where it would meet up with an existing pipeline. Another new segment would run south to Port Arthur and Houston in Texas from Cushing, Okla.

The project has approval in Canada but is awaiting the go-ahead from U.S. officials. But that won't happen until late next year, at the earliest, following a State Department announcement Thursday that it wants to look into alternative routes for the pipeline's Nebraska portion due to environmental concerns.

"I think that this was disappointing, obviously, and it will be costly for the company. It will mean lost revenue for the province and delayed economic activity for the country," Oliver said.

He said it's unlikely TransCanada will abandon the Keystone XL project, however.

"I think if it’s delayed too long then the project could, you know, fall off. And the economic viability of any project could be undermined by excessive delay. I don’t think that we’re there yet, but this wasn’t helpful."

Environmentalists opposed Keystone XL because under its currently proposed path, it would run through sensitive ecological lands in the American Midwest, where any spill would be devastating.

Other opponents of the project say Canada should refine its oilsands crude domestically — and not effectively ship refining jobs and value-added processing to U.S. facilities in the Gulf of Mexico.

Oliver dismissed the environmental concerns, saying the Keystone XL plan had received an environment impact study in the U.S. and was more of a "local issue in Nebraska as much as anything."

The Keystone XL brouhaha highlights the need for Canada to find more buyers for its petroleum, the natural resources minister said.

"Basically all of our energy exports are currently going to the United States. We have one customer. So it is a major fundamental strategic objective of Canada to diversify our customer base," Oliver said.

"I was in China and Japan and I just got back yesterday. And let me tell you there’s a keen interest in our resources in both those countries. The Japanese are interested in our natural gas, the Chinese in our oil and gas."

Calgary-based pipeline operator Enbridge has plans afoot to build $5.5 billion in pipelines from Alberta to a port in Kitimat, B.C., to ship oil to East Asia.

But that project, called the Northern Gateway, is also hotly contested. It would run through aboriginal land and expose First Nations to possible devastation from any spill, which Enbridge has had several of lately in Michigan, Illinois and the Northwest Territories.

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