Larry Summers withdraws name for Federal chairmanship

Barack Obama says he will 'always be grateful' to his former economic aide for his 'tireless work and service'

Barack Obama's hopes of a smooth transition of power at the US Federal Reserve were dealt a significant blow on Sunday night when Larry Summers unexpectedly pulled out of the running to replace Ben Bernanke when he stands down in January.

Summers, a former Treasury secretary under President Clinton, had been frontrunner to take charge of US monetary policy during a crucial phase in the economic recovery but is understood to have been deterred by the prospect of bumpy Senate confirmation hearings.

Despite an impeccable track record as an economist and policymaker, Summers remains widely associated with the period of laissez-faire economic policy-making that led up to the banking crash and his decision to step aside on the eve of the fifth anniversary of the crisis shows how raw the politics remain in Washington.

The White House will issue a report on Monday detailing the steps it has taken to reform Wall Street and repair the economy, but has been criticised by Democrats for failing to tackle the entrenched power of the banks.

Obama paid tribute to the role of Larry Summers in dealing with the aftermath of the financial crisis as director of the White House economic council from January 2009 until November 2010.

"Earlier today, I spoke with Larry Summers and accepted his decision to withdraw his name from consideration for Chairman of the Federal Reserve," Obama said in a statement. "Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today."

The decision leaves the way open again for Janet Yellen, current vice chairwoman at the Fed, who has been lobbying hard for the job and would be the first woman at the helm of US economic policy.

Summers withdrew from the race in a phone call to Obama on Sunday morning, according to initial reports in the Wall Street Journal.

"I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation's ongoing economic recovery," Summers wrote in a separate letter.

Obama said in a White House statement issued on Sunday: "I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future."

Summers's career was dogged by controversies, notably over his support for deregulation in the 1990s and for comments he made while president of Harvard about women's aptitude in maths and science.

Rumours that Obama was leaning toward nominating Summers over Yellen elicited an unprecedented amount of controversy for a potential nominee to run the US central bank. Four Democratic senators on the Senate Banking Committee were expected to vote against him if nominated by the president.

Summers is the second high-profile potential nominee to withdraw under pressure in Obama's second term. Susan Rice, now Obama's national security adviser, stepped back from consideration to be secretary of state over controversy surrounding her role in explaining the 2012 attack in Benghazi, Libya, which claimed the lives of four US government employees, including the ambassador.

Article Source : http://www.guardian.co.uk

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Japan turns off last nuclear reactor amid fears of surge in gas prices

A survey by the business group the CBI found that around 95% of British business leaders are worried about the cost of energy

Japan will switch off its last nuclear reactor on Monday, amid fears that a growing dependence on gas imports there could push up electricity bills in the UK.

Kansai Electric Power's only functioning reactor was scheduled to be disconnected from the power grid and then shut for planned maintenance, ending hopes that an industry that until three years ago provided 30% of the electricity to power the world's third largest economy would stage a quick recovery.

Continuing problems at the Fukushima plant, where radioactive water has continued to spill into the sea, and a reluctance by voters to back what looks like a badly managed industry, have led to more than 50 nuclear plants being closed, sending Japanese imports of liquefied natural gas (LNG) back to levels last seen after the 2011 tsunami.

Energy analysts said that Japan's shutdown, combined with Germany's commitment to end nuclear power production by 2022, was pushing up gas prices on the international markets.

Rising demand for gas combined with the cost of subsidies for renewable energy, much of which is added to household and business bills, is expected to push up energy prices in the west.

According to the CBI, there is a growing unease among UK businesses that energy costs look likely to rise.

A survey and report published by the business lobby group the CBI found that around 95% of British business leaders are worried about the cost of energy and that more than three-quarters of them have little faith that matters will improve in the next five years.

The pessimistic view about government policy – and inaction – may be related to the way in which energy has overtaken transport as the chief area of concern among the 526 executives polled by the CBI and the business services firm KPMG.

"The huge number of businesses concerned about energy supply and costs is alarming," said John Cridland, the CBI's director general. "The government must get the energy bill on to the statute books and bring forward secondary legislation to give potential investors the certainty to deliver the energy infrastructure we need to keep our lights on."

German businesses have complained that they pay the highest energy bills in the EU following the pioneering decision to subsidise renewable production. Much of the subsidy cost is passed on through higher bills, forcing major manufacturers BMW, Mercedes and Siemens to pay double the cost of electricity in the US. The German chancellor, Angela Merkel, has promised to cut subsidies to solar and wind farm operators, but has yet to specify the size of the cut or the timescale.

It is also unclear what will replace the more environmentally friendly forms of electricity if operators are discouraged from further investments by lower subsidies. At the moment Germany and the UK have dramatically increased their consumption of coal and gas to make up the shortfall from nuclear production. At their conference in Glasgow, the Liberal Democrats said the prospect of rising gas prices meant it was necessary for the UK to back further investment in nuclear power.

The UK's trade deficit widened in 2003 when the country became a net importer of oil and gas, and the situation is projected to deteriorate as production falls over the next 10 years.

Japan, which ran huge trade surpluses until the Fukishima disaster, has seen its balance of payments thrown into reverse by the costs of purchasing LNG.

Japan consumes about a third of the world's LNG and it is likely that demand will grow to record levels over the next couple of years. LNG imports rose 4.4% to a record 86m tonnes, and 14.9% in value to a record 6.21tn yen (£39bn) in the year to March.

Imports are likely to rise to around 88m tonnes this year and around 90m tonnes in the year to March 2015, according to projections by the Institute of Energy Economics Japan, based on 16 reactors being back online by March 2015.

Thirty months on from the Fukushima disaster, such is the level of public concern about nuclear safety that the government is struggling to come up with a long-term energy policy – a delay that is having a profound impact on the economy and underlining just how costly a nuclear-power-free future may be. "There's talk the Abe administration is putting heavy pressure on the regulator [to restart reactors]," said Osamu Fujisawa, a Japanese-based independent oil economist.

"It's obviously the economy the administration is [concerned about] [rather than safety]. Otherwise, the business community will look away, [which would be] an end to the Abe administration."

Article Source : http://www.guardian.co.uk

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