Plans to reduce budget deficit
The Portuguese newspaper Diario Economico said yesterday that the government is considering saving money by cutting tax breaks on things like medical and mortgage expenses as part of a long term plan to reduce the budget deficit. A recovery strategy is to be presented by Portugal to the European Union as part of the stability and growth plan.

The national government has already pledged to reduce the budget deficit to below 3 per cent of GDP by 2013 from 9.3 per cent last year but has not said how it proposes to achieve that. Plans are already in place to freeze public sector wages but this is being challenged by civil service workers who have mounted strike action in response to the move.

Madeira investment
The Prime Minister announced yesterday that the European Investment Bank will support a loan to Madeira to cover 75 per cent of the amount needed to restore the damage caused by last month’s flooding and severe storms. Three priority areas were identified as part of a special framework set in place to assist in the recovery programme. In a statement made by José Socrates, public investment of €245 million will be used to provide investment to the Region of Madeira.

Horse show in hurricane
Hurricane conditions caused havoc at last weekend’s Comporta Tour, a show jumping event advertised as an international event with good weather which failed to impress contestants last Saturday when the showground was hit by winds of over 100 km hour.

As a precaution all of the horses were returned to their horseboxes and organisers frantically tried to weight down the marquee tents using tractors and other heavy objects to anchor them. The continued rain on Sunday proved to make the weekend events a washout and the organisers postponed them until the weather improved.

The showground in Comporta, Alcácer da Sal on the west coast, south of Sétubal is being used as a site for jumping, dressage and children’s competitions and is due to finish on 2 May.

Alentejo storm damage
Last weekend’s bad storms caused damage to a large number of greenhouses in Castelo de Vide in Portalegre when a landslide hit the structures on Saturday, destroying around 75 per cent of crops. Buildings sustained damage and many roads in the region will need to be repaired.  Heavy rains have made it difficult or in some cases impossible to access land with farm machinery to carry out activities such as spreading fertilizers and it has not been possible to graze animals in some parts due to the heavy flooding. Meanwhile farmers across the region are assessing the loss of production and crops.

UK
Pound drops
Concern over a possible hung parliament resulting from imminent elections has caused sterling to fall to a 10-month low.  The pound fell against the dollar, the euro and most other major currencies.

A parliament in which no one party has a majority could mean it would be more difficult to effect any legislation, a situation which could harm the UK’s fragile recovery from recession.  

Sunday’s release of a new YouGov poll showed that the Conservative lead over Labour had narrowed to two points down from six points last week.  This means that Labour could win 317 seats (nine more would give it a majority) with the Tories having 263 MPs.

Foreign lenders are worried about the possibility of a hung parliament in a country which has little experience of them and that such a parliament would not be able to take sufficient action to cut spending when necessary.

Fears are that the government might default on its debts.  These fears lead to higher interest rates for loans and bond purchases which in turn creates a yet higher debt.  Total borrowing for the UK’s last financial year was above £122bn.

UK
Shares fall
Prudential shares fell by more than 11 per cent after its announcement that it is to buy AIA, the Asian branch of the American Insurance Group, an international insurance and financial services operation.

The cost of the purchase is $35.3 bn (£23bn) and Prudential, Britain’s second biggest insurer, feels the arrangement offers a “compelling” opportunity to establish South East Asia’s leading insurer.
The Prudential is aiming for a rights issue to gain $20bn, one of the largest calls for cash from any UK firm, along with borrowing $5bn.

Trading was suspended pending Prudential’s announcement, but shares fell immediately when trading began again.

The US government bailed out parent company AIG in 2008 which stemmed an exodus of customers, but left the government owning 80 per cent.  Its Asian branch will be sold to repay its debt.  AIA is one of its most profitable operations, and demand is growing because of Asia’s strong economic performance.

If the deal goes ahead, it will make Prudential the largest in South East Asia.  But first the shareholders will need to be convinced.

UK
Eta member ordered back to Spain
In Belfast a court has ordered the extradition to Spain of a Basque separatist who was found guilty in Spain of 25 murders.

De Juana Chaos, 54, served more than 21 years in prison for participation in an Eta campaign of murder and was released in August 2008.  Since then he has been on bail and living with his wife in Belfast.

He is wanted by Spain owing to a letter read out at a rally in San Sebastian in the Basque country the day following his release from prison.  The letter was allegedly in his name.  If found guilty of the public justification of terrorist activities, he could face a new prison sentence of up to two years.

His lawyers argue that in jail he had been beaten repeatedly, subjected to 17 years in solitary confinement, and suffered serious health consequences as a result of prolonged hunger strikes.

The judge said he had confidence in the Spanish judicial system and that there was no evidence that Mr Chaos would not receive a fair trial.  

Spain
Venezuela named as link to rebels
Venezuelan officials have been accused by a Spanish judge of helping Eta and Farc, rebel groups which plotted to assassinate Colombian officials in Spain including President Alvaro Uribe.

Judge Eloy Velasco said he believed the Colombian group Farc had sought help from Eta to carry out the plot and that both groups had the benefit of assistance from Venezuelan government cooperation.

The judge alleges that Era and Farc collaboration began in 1993.  He named Arturo Cubillas Fontan, a Venezuelan working in the government, as a key link between the two groups.  He went on to allege that Mr Fontan is a member of Eta, coordinating Eta participating in courses on explosives and guerrilla warfare.

An investigation begun in 2008 has uncovered evidence of the Venezuelan link between Eta and Farc and indications that Farc members went to Spain with the intention of killing a former Colombian president and others along with an attack on the Colombian embassy.

The investigation followed the discovery of a computer used by a Farc leader which showed certain links to Spain.  The computer was seized in a military raid on a Farc encampment in Ecuador in 2008.

Allegations of Venezuelan involvement predate Judge Velasco’s statements.  President Chavez denies any such links.

Zimbabwe
Law targets foreign firms
A newly promulgated law will oblige foreign-owned companies to sell a majority stake of their firms to indigenous Zimbabweans.

Foreign-owned companies worth more than £332,000 have five years in which to sell 51 per cent of their business.  Failure could bring imprisonment.

President Mugabe backs the law and believes that foreign firms would be “foolish” not to comply while Prime Minister Tsvangirai rejects the regulation.

Analysts view the new law as an extension to the government’s appropriation of white-owned farms which were given to Zimbabweans.  Many of the farms taken over have languished and the country has gone from being the bread basket of Africa to an importer of food.  

It is feared that the move will further alienate any foreign investment in the country and will result in a similar negative impact to that of the farm seizures.  Moreover, any benefits may accrue to friends of the government who get appointed to control the foreign firms rather than empowering any of the wider populace.