Finance and Economic

European Central Bank council member Yves Mersch said the economic recovery in the 16 nations that share the euro will probably be uneven.

“Available data suggest the economic recovery process in the euro zone has started, though the upswing will most likely remain erratic,” Mersch said in a report from Luxembourg’s central bank, which he heads. “Risks to this outlook are balanced in a climate that continues to be marked by uncertainty.”

The ECB on March 4 left its benchmark interest rate unchanged at a record low of 1 percent and said it will tighten the terms of some long-term loans to banks as it gradually withdraws emergency lending measures used to fight the financial crisis. Mersch today reiterated ECB President Jean-Claude Trichet’s statement that the key rate remains “appropriate free 3-in-1 credit report.”

The ECB’s Governing Council “will continue to gradually unwind non-standard measures” and “absorb liquidity over time to effectively counter any remaining risks to price stability in the medium to long term,” Mersch said.

Turning to Greece’s budget crisis, Mersch said the conditional support pledged by the European Union together with the measures announced by the Greek government “should succeed in calming the concerns of the markets.”

The fiscal situation in some euro-area nations has “clearly” contributed to the euro’s decline against the dollar, he said.

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Greece replaced its debt management chief as declines in the country’s bonds roil European markets.

Petros Christodoulou, general manager of treasury and global markets at National Bank of Greece SA, the country’s biggest lender, will take over from Spyros Papanicolaou as head of the Athens-based Public Debt Management Agency, the country’s Finance Ministry said yesterday in an e-mailed statement.

“The incoming guy is walking into a tough mandate,” said Charles Diebel, senior interest-rate strategist at Nomura International Plc in London. “Such is the sentiment towards Greece at the moment, a new broom could be a positive.”

Greek bonds have slumped in the past two months, driving yields to the highest in 10 years, on concern the government will struggle to narrow a budget deficit that is more than four times the European Union limit. Prime Minister George Papandreou’s government needs to sell 53 billion euros ($72 billion) of debt this year, the equivalent of 20 percent of gross domestic product.

Papanicolaou, a former central bank official, was appointed general director of the debt office by the previous New Democracy government in January 2005. His predecessor, Christopher Sardelis, had held the role since 1999, when the organization was created.

“I’m not stepping down,” Papanicolaou said in a telephone interview yesterday. “It’s normal” that a new government changes staff, he said. “It’s a long tradition. Whether it’s good or not, that’s another story,” he said.

Rising Yields

The Greek government is under pressure to show that it can reduce a budget deficit that was equivalent to 12.7 percent of gross domestic product last year after the EU this week stopped short of offering financial support.

The yield on Greek two-year notes has remained above 5 percent, the highest in the euro region, even after officials this week urged the nation to reduce the deficit. The premium investors demand to hold the notes instead of benchmark German securities has held above 4 percentage points, the most since the Mediterranean nation joined the euro and more than 10 times its 37 basis point average the past decade.

The yield on two-year Greek government notes yesterday rose 31 basis points to 5.67 percent. The 10-year bond yield added 16 basis points to 6.54 percent.

“It’s a very challenging job,” Papanicolaou said. “We are going through a very difficult period.”

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After four years of relative stability, Savvis Inc. is again looking for a new chief executive.

Phil Koen, who took the helm of the Town and Country-based company during a turbulent time, resigned abruptly Friday.

Koen will be replaced temporarily by Savvis Chairman Jim Ousley while the company searches for a more permanent option. The search is expected to take three to six months.

On Monday, Ousley said Koen’s departure is simply part of the company’s evolution. Koen joined the cloud computing firm — it provides information technology services and data storage for other companies — after former CEO Robert McCormick’s ugly departure. He left in late 2005 amid controversy over a $241,000 bill at a New York topless club that had been charged to a company credit card.

During Koen’s tenure, the company remade itself through acquisitions and the construction of data centers.

"The new CEO will have different traits than Phil. But Phil’s were ideal for that time," Ousley said.

Where Koen excelled in operational and financial areas, the new leader will be expected to have strong business development and sales and marketing skills, he said.

There’s certainly a challenge awaiting the company’s next chief executive.

After several years of significant losses following the dot-com bust, the firm finally turned a profit in 2007, only to slip again when the economy failed. Still, Ousley said Savvis is confident it is positioned to take advantage of an improving economic environment.

As to the suddenness of Koen’s departure, Ousley said it followed lengthy discussions about the company’s future and whether Koen wanted to commit another three to four years. Once the decision was made, there was no reason to put it off, with a considerable amount of strategic planning about be done, Ousley said.

"It came quicker just because it was the end of the year," he said.

In a company release, Koen cited the strength of the company’s management team and said "this is an excellent time for me to move on to a new opportunity and to watch Savvis continue to grow and excel."

Ousley also said the company has no plans to leave the St. Louis area.

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More doctors are dropping their private practices, choosing to go to work behind bars treating murderers, rapists and other hardened criminals.

Better pay, better hours, retirement benefits and free malpractice insurance are just a few of the reasons why physicians are picking prisoners over civilian patients.

In 2009, private contractor Prison Health Services (PHS) saw a 77% increase over 2008 in the number of respondents applying for job opportunities.

At the University of Massachusetts Medical School, this year 22 of 150 new students chose the correctional health care clerkship as their first choice, more than double the typical response.

"Students are looking for an employer who offers flexible work hours and a steady paycheck. Correctional health care offers both," said Dr. Michelle Staples-Horne, medical director for the Georgia Department of Juvenile Justice, adding that doctors who have stayed with a government agency long enough also benefit from pension plans.

Typically a salaried job with steady work hours, correctional physicians can earn starting salaries of around $140,000, according to Staples-Horne, roughly the same as the average school loan for graduating med students.

A dangerous job?

Dr. Kurt Johnson dumped his practice and became a jailhouse doctor in November. Johnson operated a solo practice in Laramie, Wyo., for six years. Two years ago he started working part time for Brentwood, Tenn.-based PHS, a division of America Service Group (ASGR), which provides doctors, nurses and other health care professionals to detention centers around the country.

"I never thought of correctional health care as a career. It wasn’t even on my radar in [medical school] training," said Johnson, now a regional medical director for PHS.

At his private practice he had to cram in dozens of patients daily, sometimes for only five minutes, just to earn enough to cover his overhead expenses.

He was constantly filing insurance paperwork, and malpractice insurance was eating into his income.

With correctional health care, Johnson has a steady paycheck of about $175,000 — roughly 20% more than he made in private practice.

"Since I was a PHS employee, my malpractice insurance was covered through them. I felt like they had my back," he said.

But he’s still getting used to the sound of the prison doors slamming shut. "It’s an impressive sound. It gives me goose bumps at times wired payday loan."

He has treated death row inmates. "It’s intimidating," he admits, but says he’s never felt physically threatened by his patients.

Staples-Horne agrees that doctors typically didn’t consider prison to be an ideal or safe setting to practice medicine. She admits that there is risk, but points out that most doctors don’t have the benefit of high security that prisons provide.

"Doctors are often safer in this setting than in an emergency room when you don’t know any thing about the person coming in," she said. "You don’t know if they have a weapon, if they are violent or aggressive."

Doctors say the medical problems affecting inmates can range from simple ailments to serious, chronic problems such as drug and alcohol addiction, heart disease, cancer and AIDS.

Health care on the inside

Dr. Ryan Herrington is a regional medical director with Correctional Medical Services, a St. Louis-based contracted health care provider.

Herrington, a general physician, closed his private practice in Ohio and started working full time in the prison system in April. Anecdotally, Herrington said there is growing interest among doctors seeking opportunity in the corrections environment.

He feels he now has "the financial stability that was harder to attain in private practice."

But Herrington said his own interest in public health also influenced his decision. "These patients have problems that are complex," Herrington said. "They have gone through a tremendous period of time with no health care prior to incarceration."

PHS’s Dr. Johnson is mostly happy with his decision. His prison work allows him to spend more time with his wife and three children. In fact, he credits his patients for making him a better doctor.

"I’m trying to make this a career," said Johnson. "So I’ve also honed my BS detector quite a bit. Now I know when they’re trying to get one over me."

Are you stuck in a lousy 401(k) plan at work but want help maximizing your retirement savings? Send us an email at makeover@moneymail.com. For the CNNMoney.com Comment Policy, click here.
 

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The beleaguered auto industry is poised for a slow but steady turnaround in 2010 that will usher in an era of profitability and job growth after years of declines, according to a new industry forecast.

The Conference Board of Canada, a private-sector economic forecaster, said the auto sector isn't necessarily out of trouble but there are encouraging signs that profits will return in 2010 and strengthen each year through to at least 2014.

"The Canadian auto industry appears to have turned a corner in the second half of 2009 and is expected to return to profitability in 2010," economist Sabrina Browarski wrote in the report.

"However, production will remain below historical levels," Browarski added. "Manufacturers will have to make concerted and ongoing efforts to streamline product line-ups, control costs, and innovate to maintain profitability."

The Conference Board said the industry will close 2009 with a $2.3-billion loss before taxes, but Canadian auto assemblers including the Japanese carmakers Toyota and Honda will have a collective profit of $100 million in the final quarter.

Still, the Conference Board expects Canadian production for all of 2009 to be about half of what it was in 2007, due to a halt in production by Chrysler and General Motors at the beginning of 2009.

"In fact, real production this year will fall below levels not seen since the 1992 recession," the report said.

The forecast for 2010 sees the industry returning to the black with before-tax profits of $263 million, a number which will rise to just under $2 billion in 2014.

The Conference Board indicated that conditions south of the border will determine the pace of recovery for Canadian auto producers because 84 per cent of production is destined for the U.S. market.

In the United States, vehicle sales are expected to edge up to 11.6 million units in 2010, with industry revenues rising by nearly 38 per cent.

Tony Faria, co-director of the automotive research centre at the University of Windsor, said the report is on par with analysts' predictions that the market is slowly returning.

"The expectation is that 2010 (and) 2011 will be rather slow growth years in the auto industry," he said.

Faria said the North American auto market demand will rise from 12.3 million vehicles in 2009 to as much 14 million in 2010. In the years before the recession hit, the market had called for about 20 million vehicles each year.

"It's going to be a slightly better market next year than this year, although the market's going to be well below the level that we became accustomed to from 1999 through 2007, which were nine extraordinarily good years."

Auto analyst Dennis DesRosiers was less optimistic than the report, saying there is too much competing information that makes it difficult to tell whether or not the industry is taking a turn for the better.

"My independent assessment is that this industry is still in a lot of trouble and a lot of denial…(as to) how serious the issues still are," DesRosiers said.

"I see all kinds of positives, but I don't know whether it leads to profitability or not, or whether it leads to these companies' long-term survival or not. But I see an equal amount of negatives."

The report said cost-cutting measures, such as labour agreements between the Canadian Auto Workers union and subsidiaries of Chrysler, General Motors and Ford (NYSE: F) will aid in the return to profitability.

General Motors and Chrysler have also reduced costs in other ways, such as cutting dealership networks, and reducing the number of shifts in operation. They also received a total of $13 billion in loans from the Canadian and Ontario governments.

"As of today, the outlook for the Canadian, Ontario and U.S. governments getting a good chunk of their loan money back is a lot more optimistic than it would have been six months ago," Faria said.

The Conference Board projects employment to rise 2.4 per cent to 53,200 workers in 2010 from 51,900 this year, after falling 19.4 per cent from 64,400 employees in 2008.

Next year's predicted employment gains would come after four years of steady declines.

Faria said there will continue to be job losses in assembly jobs for a short period of time, as the Detroit Three work to get production capacity in line with sales volumes.

But he added, some automakers are beginning to call employees back to work, and the trend will continue as production ramps up through 2010.

Toyota Canada announced Dec. 10 it is hiring 800 more people to raise production of a popular SUV built in Woodstock, Ont. by introducing a second shift.

GM Canada said last month it will recall 150 laid-off employees to its CAMI facility in Ingersoll, Ont., to meet strong demand for its 2010 Chevrolet Equinox and GMC Terrain. The company will also bring back 600 workers to its Oshawa, Ont., plant in 2011 to begin production of the company's new Buick Regal.

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Malaysia’s exports unexpectedly rose for the first time in a year in October as demand from China jumped amid an Asian economic recovery.

Overseas shipments climbed 1.6 percent from a year earlier to 54.3 billion ringgit ($16 billion) after falling 24.2 percent in September, the trade ministry said in a statement in Kuala Lumpur today. The median estimate in a Bloomberg News survey of 13 economists was for a 10.5 percent decline, with none expecting an increase.

Asia is leading the world’s recovery from its worst recession since the 1930s after policy makers pledged more than $950 billion in stimulus measures and cut interest rates to revive growth. Malaysia’s government, which raised its 2009 economic forecast in October, said this week that next year’s expansion may exceed the current 2 percent-to-3 percent target.

“The outlook on the export front is getting brighter as recovery remains unabated,” said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. “Investment is still a drag on the economy as companies have remained cautious on business spending while waiting for outlook to improve further. This will change if the improvement in export performance proves sustainable.”

Malaysia is able to achieve economic growth of 5 percent next year, aided by private investment, Second Finance Minister Ahmad Husni Hanadzlah said Dec. 2. That target may be “easily” achieved as improving exports spur business expansion and employment, boosting consumption, Seah said.

Stimulus Measures

Prime Minister Najib Razak has unveiled 67 billion ringgit of stimulus measures in the past year to help the nation climb out of its recession no faxing payday loans. Southeast Asia’s third-largest economy shrank 1.2 percent in the three months through September, the smallest decline in three quarters.

The benchmark stock index has risen more than 40 percent this year as Asia’s recovery boosted demand for emerging-market assets. The ringgit has increased more than 3 percent in the past six months.

Shipments to China, Malaysia’s second-biggest market during the month, jumped 39.2 percent in October from a year earlier as electronics sales rose, the trade ministry said. Exports to Hong Kong surged 28.2 percent, while those to Thailand and Australia also gained. The decline in sales to Singapore, Japan and the U.S. eased.

Sales of electrical and electronics products by companies including Malaysian Pacific Industries Bhd. and Unisem (M) Bhd. climbed 18.4 percent in October, compared with a 19.2 percent decline the previous month. Such goods made up 43 percent of total exports.

Malaysia’s imports dropped 2.3 percent in October from a year earlier to 42.8 billion ringgit, the smallest decline in a year. That widened the trade surplus to 11.5 billion ringgit.

Exports fell 20.7 percent to 448.58 billion ringgit in the 10 months through October while imports contracted 21.4 percent to 351.2 billion ringgit, resulting in a trade surplus of 97.4 billion ringgit, the report showed.

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South Korea’s won, Asia’s second best-performing currency this year, may be “affected” as the nation’s current-account surplus narrows by about 50 percent in 2010 and capital inflows slow, a central bank official said.

The surplus, forecast to widen to more than $40 billion this year, will decrease by “half next year as domestic demand revives, imports increase and oil prices continue a modest rise,” Ahn Byung Chan, head of the international bureau at the Bank of Korea, said in an interview yesterday. Inflows of investment may be slowed by the global financial crisis, he said.

“The unrest in the international financial markets won’t evolve into a systemic risk but if the wobbles are prolonged, the Korean won rate will be affected,” Ahn said, declining to comment on any level or direction for the currency. “Capital inflows won’t be larger than this year.”

Finance Minister Yoon Jeung Hyun said in October it is “premature” to unwind expansionary policies as the nation still faces risks from a possible delay in the global economic recovery and asset price instability. Exporters helped drive acceleration in economic growth to 2.9 percent last quarter from the previous three months, the fastest pace in seven years.

“This is probably mostly an attempt to talk down the won,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “A lot of the economic pickup this year has been due to the earlier won weakness. They wouldn’t want to lose the edge the currency has provided.”

Bullish Forecasts

The won was little changed at 1,155 per at 9:16 a.m. in Seoul, according to data compiled by Bloomberg. It touched 1,149.4 on Nov. 17, the strongest level since September 2008. The currency strengthened 9 percent this year, second in Asia only to the 16 percent gain in the Indonesian rupiah.

The won will rise to 1,070 per dollar by the end of June, Kowalczyk predicted. That is more bullish than the 1,110 median forecast of 22 analysts in a Bloomberg News survey.

The current account swung to a $37 billion surplus in the first 10 months of the year after a deficit of $6.41 billion in 2008, the first shortfall since 1997, central bank data showed. The current account is the broadest measure of trade, tracking the flow of goods, services and investment income.

Foreign-exchange reserves climbed to a record $270.9 billion last month from $264.2 billion at the end of October, the Bank of Korea said yesterday. Reserves slumped to their lowest level in almost four years in November 2008 after the won declined and the global financial crisis made it difficult for companies to refinance overseas debt.

The central bank probably bought dollars to slow gains in the won, Mitul Kotecha, Hong Kong-based head of global foreign- exchange strategy at Calyon, said yesterday.

‘No Complaints’

November’s reserves were boosted by investment inflows and a weaker U.S. dollar which increased the value of holdings in euros and yen. Ahn said the greenback will weaken until the Federal Reserve increases interest rates. He said a stronger greenback won’t necessarily translate to won appreciation.

The competitiveness of Korean companies contributed more to the recovery in exports than a weaker currency, Ahn said. Hyundai Motor Co., the nation’s largest automaker, more than tripled third-quarter profit from a year earlier on a weaker won and surging sales in the U.S. and China.

South Korea’s exports rose 18.8 percent in November from a year earlier, the first increase in more than a year, the Ministry of Knowledge Economy said Dec. 1. Imports rose 4.7 percent, driven by higher consumer spending and fuel costs. Crude oil gained 74 percent this year.

“The Korean won appreciated a lot since March, but still our exports are growing,” he said. “These days there are no complaints among exporters and importers. We decide our exchange rate policy. Their opinion is not important.”

Capital Movements

Foreign investors bought $22.9 billion more local shares than they sold this year through yesterday, helping drive the Kospi stock index 42 percent higher. Stocks fell 4.7 percent on Nov. 27 after Dubai World sought to delay payments on its debt.

“Any similar case to the Dubai shock will slow the inflows,” Ahn said. “A rise in stock prices towards 1,600 reduces incentives for foreigners to jump in.”

South Korea may discuss measures to address inflows of speculative capital that are causing the currency to strengthen, Kim Jong Chang, governor of the Financial Supervisory Service, said on Nov. 19.

“We will watch the global discussions about imposing taxes on capital movements,” said Ahn. “So far, we think capital inflows haven’t had any side effects on the Korean financial market. We are monitoring it carefully.”

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The Treasury Department is expected to meet with lenders on Monday to press them to do more to rework troubled home mortgage loans, a source familiar with the Treasury’s thinking said.

Herbert Allison, the Treasury Department’s assistant secretary for financial stability, is expected to meet with the mortgage servicers, said the source who requested anonymity because the meeting has not been publicly announced.

The New York Times in its Sunday edition quoted Michael Barr, the Treasury Department’s assistant secretary for financial institutions, as expressing dissatisfaction with lenders over the slow pace at which they are amending loan agreements to help borrowers make their monthly payments.

A Treasury spokeswoman said on Saturday the department was taking additional steps to enhance mortgage servicer transparency and accountability as part of a broader focus on maximizing conversion rates to permanent modifications.

The Treasury spokeswoman said that that could include new resources for borrowers and said the department will announce new measures on Monday.

(Reporting by Rachelle Younglai, editing by Matthew Lewis)

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World governments should consider urgently a levy on banks to fund future bailouts, British Prime Minister Gordon Brown said on Saturday, departing from London’s longstanding resistance to a global tax.

France and Germany have led the way in Europe in seeking to force the financial sector to return some of the billions of public money plowed into banks over a year of crisis.

A global levy would be hard if not impossible without U.S. backing, a country traditionally hostile to new taxes. U.S. officials declined comment on Brown’s proposal before a later news conference by U.S. Treasury Secretary Timothy Geithner.

London to date had also resisted, mindful of the interests of its powerful financial services industry, which generates a large proportion of Britain’s tax revenues.

“We should discuss whether we need a better economic and social contract to reflect the global responsibilities of financial institutions to society,” Brown told a meeting of financial policymakers from the G20 nations in Scotland.

“There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global transaction levy,” he said.

Brown said any measure would have to be global in nature and implemented by all the world’s main financial centers in the United States, Europe, Asia, Middle East and Switzerland.

In recent Congressional testimony, U.S. Treasury Secretary Timothy Geithner was cool to an idea from a domestic regulator who called for big financial firms to pay risk-based assessments into a fund that would be available for use if they hit trouble.

Geithner opposed pre-funding bank bailouts on the basis that it make banks less wary of risk taking.

Britain this week forked out another 30 billion pounds on bailing out two of its biggest banks for the second time, and opinion polls all show Brown heading for defeat at the hands of opposition conservatives in next year’s election.

IMF REVIEW

Brown said the International Monetary Fund would review the possibility of a global transaction tax and report back in April next year — signaling the G20 had agreed as a group to take up the matter more seriously.

“I do not in any way underestimate the enormous and difficult practical and technical issues that will need to be overcome that a globally cohesive system requires and raises.

“But I do not think these issues should prevent us from considering with urgency the legitimate issues I have discussed,” he said.

Banks have already warned the G20 that if they have to meet new higher capital charges too soon, they will have less money left to lend and aid recovery. 

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Some of the nation’s largest companies pushed back against U.S. Democrats’ plans to deliver a government-run insurance option in a healthcare overhaul, decrying it as a step backward that would drive up costs for employers and their workers.

The Business Roundtable, comprised of chief executives at Verizon Communications, JPMorgan, General Electric, Wal-Mart and other companies that together employ more than 12 million people, said the federal government is inefficient and would underpay providers. That would result in providers boosting prices for private insurers and employers, the group said on Wednesday.

“A public plan would neither manage cost nor encourage innovation,” said Antonio Perez, chief executive of Eastman Kodak Co and head of the Business Roundtable’s health initiative. “We believe it is the wrong direction for fixing our health care system.”

On Monday, Senate Majority leader Harry Reid said his bill would include a so-called “public option” as an alternative to those sold by private insurers. Individual states could “opt out” against offering the plan.

President Barack Obama, who has made health reform his top priority this year, has said a government alternative will force private insurers to be more competitive.

The U.S. House of Representatives’ proposals also contain a public insurance option.

Although an earlier congressional analysis found that about 9 million to 10 million people, most uninsured, would opt for the public plan, the Business Roundtable fears that number will jump as people see their private plan premiums climb.

“The costs for all of us in the system will continue to go up and again put pressure on employers to get out of the healthcare system,” John Castellani, president of Business Roundtable, told reporters at a news conference payday advances.

Other business groups also oppose a public insurance option and are pushing for alternative cooperative exchanges. The U.S. Chamber of Commerce launched television ads on national cable stations and in seven states on Wednesday to fight the government option.

‘ORBITZ’ FOR HEALTH PLANS?

The United States is the only developed nation that pays for the bulk of its health care through private employers rather than the government, and studies have shown premiums for workers and their companies continue to rise each year.

Health insurers earlier said they would back some reforms as long as a bill included a strong requirement for people to buy health insurance policies, a move they said would spread risk among a wider pool of people and disperse costs. Insurers also vowed to pass through additional taxes and costs onto purchasers.

While details from the final Senate and House bills have yet to emerge, so far the proposals differ somewhat on what penalties either individuals or companies would face for not buying or providing health insurance.

Companies want to offer employees health care to recruit and retain talented workers, said Bruce Josten, a vice president at the Chamber of Commerce.

The chamber backs an national exchange “with an Orbitz-like website,” Josten told Reuters, referring to a popular travel site that compares deals among various providers. 

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