Business & Finance: June 2007

US-South Korea trade pact signed

The US and South Korea have signed a controversial free trade agreement, the biggest deal of its kind the US has finalised for 15 years.

The deal has still to be ratified in the US Congress, where some Democrats have expressed concern for job losses in the American car industry.

The agreement phases out tariffs on almost all consumer and industrial goods in the next three years.

Trade between the nations is worth about $80bn (£40bn) a year.

'Unfair'

The pact was signed in Washington by US trade representative, Susan Schwab, and her South Korean counterpart, Kim Hyun-chong.

It is the largest deal of its kind since the North America Free Trade Agreement was signed in 1993.

The latest deal has sparked opposition on both sides.

Many Korean workers and farmers fear it will cost them their jobs.

US Democrat Senator Hillary Clinton said in the car-making centre of Detroit recently that the deal, agreed in April after 10 months of negotiations, was "inherently unfair".

But its supporters, from many business groups, say it will expand opportunities for the US across a range of sectors, including banking and telecommunications.

"It's a great day for international trade," Ms Schwab said.

The deal had to be signed by a 30 June deadline or Congress would have been given the power to alter its terms. US lawmakers can now either reject or accept it.

Petrol pressure drives oil price

Oil prices have continued their recent rally, adding almost $1 amid concerns that more crude will need to be refined to replenish US petrol stockpiles.

New York light crude added 92 cents, or 1.3%, to $70.49. In London, Brent crude climbed 95 cents, or 1.4%, to $71.47.

The US is entering its peak driving season and recent reports have shown that petrol supplies have dipped.

At the same time a number of refineries that had closed for repairs are set to reopen, adding to the demand for oil.

"We're heading into the July 4 holiday, the peak of summer demand, at the same time refineries are coming back on line," said Jason Schenker of Wachovia Bank.

"That's what's holding up this market."

A report by the US Energy Department's Energy Information Administration on Wednesday said gasoline inventories dropped 700,000 barrels in the week ending June 22. Analysts had expected an increase of 1.1 million barrels.

The same report also showed that there was a worsening situation in distillates such as heating oil, adding to the view that more crude will need to be refined.

"The inventory numbers are giving the pattern for the rest of the week," said Kevin Blemkin of Man Financial.

Bush aims for Congress trade deal

The White House has urged politicians on Capital Hill to renew President George W Bush's ability to agree trade deals without Congress interference.

Its comments come ahead of a 30 June deadline that ends Congress' current inability to seek to amend any global trade deals that the President agrees.

The Trade Promotion Authority (TPA) rule is designed to prevent Congress undoing any deal the White House makes.

Analysts say that without another TPA, current global trade talks will fail.

Long-running

The current round of World Trade Organization (WTO) talks, called the Doha round, started in November 2001 but have been beset by problems and delays.

They have repeatedly broken down due to disputes between the US and the European Union (EU) on one side, and developing nations led by Brazil and India on the other.

Agriculture has proven to be the main stumbling block, with Brazil and India accusing the US and EU of not making enough concessions on reducing their agricultural protectionism.

Commentators say that without a new TPA, any future deal that is agreed by President Bush, could simply be undone in Congress.

US Trade Representative Susan Schwab called on Congress to continue its recent spirit of bipartisanship and agree to a fresh TPA.

Her comments come as the White House aims to secure a new free trade deal with South Korea before the 30 June deadline.

Subpoena for Advisers on Salaries

Towers Perrin, one of the nation’s largest executive pay consulting firms, was subpoenaed yesterday by a House committee after it failed to comply with a request for information about potential conflicts in its compensation consulting business.

Representative Henry A. Waxman, the California Democrat who is chairman of the Committee on Oversight and Government Reform, is examining the potential for conflicts of interest among pay advisers who provide other lucrative services to their corporate clients.

In May, he asked the largest firms in the industry for details on their client relationships and the revenues those ties have generated in the last five years.

The firms that received the requests included Hewitt Associates; Watson Wyatt Worldwide; Mercer Consulting, a unit of Marsh & McLennan; and Towers Perrin. The consultants were given a deadline of May 29. As of yesterday, Towers had not provided the requested material.

In a letter sent yesterday to Mark V. Mactas, chief executive of Towers, Mr. Waxman wrote, “Although other firms have made significant efforts to provide complete responses to the committee’s inquiry, Towers Perrin has provided virtually none of the responsive information.

“I regret that we reached this impasse,” Mr. Waxman continued, “and that the committee had to resort to compulsory process to obtain information on whether Towers Perrin’s advice to corporate boards on executive compensation is tainted by conflicts of interest.”

A spokesman for Towers, Joseph P. Conway, confirmed yesterday that the firm had received the subpoena.

“It has always been Towers Perrin’s intent,” Mr. Conway said, “to cooperate with the committee consistent with our commitment to our clients to maintain the confidentiality of their information.

“Towers Perrin is reviewing the subpoena and is in the process of alerting its clients,” Mr. Conway said. “Towers Perrin will respond to the subpoena consistent with our legal obligations.”

He added that the firm had policies and safeguards in place to ensure the objectivity of its professional advice.

In May, Mr. Waxman asked the firms to identify the large companies that they advise on executive pay and to whom they also provide other duties like actuarial services or human resources outsourcing.

He also asked them to document the fees they earned from these services.

As consulting firms have grown more powerful in the pay arena recently, the potential for conflicts has risen. Consultants typically earn far more from actuarial and benefits outsourcing businesses than they do giving pay advice; as a result, critic say, companies hiring the same firm to do both may not be receiving unbiased advice on executive compensation.

The Securities and Exchange Commission does not require corporations to disclose whether the pay consultants they employ also receive revenues from contracts in their other operations.

Congressional investigators are not the only ones interested in receiving more details about possible conflicts among consultants. Investors have begun asking the companies whose shares they own for more disclosure about these ties.

For example, shareholders of Verizon Communications voted at the annual meeting last month on a proposal that would have required it to disclose professional relationships with its current or previous compensation consultants that might taint their independence. The proposal gained support from 47 percent of the shares voted.

When he requested information last month, Mr. Waxman said that “almost everyone agrees the extravagant increases in executive compensation make no sense. The question I’m looking at is whether potential conflicts of interest among compensation consultants and their corporate clients might play a role in some of the irrational compensation decisions.”

Fed steers steady despite risks on inflation, downturn

WASHINGTON (AFP) - After holding rates steady for a year, the Federal Reserve will likely sit on its hands for a time longer as it tries to steer through risks of inflation and a potential housing-led economic downturn, analysts say.

On Thursday, the Federal Reserve headed by Ben Bernanke kept its base interest rate steady at 5.25 percent Thursday, while citing modest improvement in the overall economic picture, both on the growth and inflation fronts.

The Fed announcement, which had been widely expected, extends the pause on rate actions since last June and was accompanied by small changes in the language of the central bank statement.

The Federal Open Market Committee said inflation remains its "predominant policy concern," and noted that economic growth has picked up a bit from a soft patch early this year.

Some analysts say the Fed appears vindicated for holding rates steady over the past year and highlighting inflation risks, even as some analysts called for a rate cut. Now, the Fed is likely to be cautious before taking its next step.

Sal Guatieri, economist at BMO Financial Markets, said the Fed appears to be stuck in a situation where it is riskier to move rates than to do nothing.

"I'd say the risks to the economy are on the downside but risks to inflation are on the upside," he said.

"If the Fed cuts interest rates and props up the housing market, it risks fueling inflation. But if it raises interest rates to dampen inflation it risks collapsing the housing market and triggering inflation. Under those conditions the best thing for the Fed is to do nothing."

FOMC members "are certainly downplaying the improvement in core inflation and not showing a lot of concern about the shaky housing market," said Guatieri.

"They see an economy that is grinding through the housing slump and is poised to return to normal growth later this year."

Guatieri said he believes this is the most likely scenario but that he and some other analysts are "a little more worried about the housing situation than the Fed appears to be."

Some analysts say the Fed may be playing its cards close to the vest but could be preparing a rate cut, in view of the slump in housing that could eventually spread to the rest of the economy by curbing consumer spending.

"The FOMC's sunny expectations are evident" in the latest statement, said Asha Bangalore of Northern Trust Global Economic Research.

But Bangalore added: "We are less optimistic about the growth path of the economy in the rest of 2007 and expect the Fed to start lowering the federal funds rate at the October 30-31 FOMC meeting."

Eugenio Aleman, senior economist at Wells Fargo Bank, said he does not believe the Fed is sending any hidden signals.

"I think what they say is what they believe. I think they still remain very, very concerned about inflation," Aleman said.

"Consumer demand is strong, resource utilization is strong, gasoline costs are higher -- that's the perfect cocktail for higher inflation."

Aleman said he sees a rate cut as highly unlikely, arguing that the housing crisis is the result of too much easy money.

"There is no way the Fed is going to throw more fuel into the housing fire," he said, pointing to the problem of a large number of low-quality "subprime" loans going bad.

"The whole subprime issue has been created by a long period of very low interest rates and I don't think the Fed is ready to give up and cut interest rates again."

"I don't see any chance of a rate cut unless the economy goes into recession," he added.

Aleman said he sees "a period of wait and see for the rest of this year and perhaps the first half of 2008." At that point, "if the economy starts to accelerate we might see a rate hike."

Fed Keeps Interest Rates Steady

WASHINGTON, June 28 — The Federal Reserve, saying that inflation remains its “predominant policy concern,” left its benchmark interest rate unchanged at 5.25 percent on Thursday and signaled that it would keep it at that level for some time.

The rate decision, which financial markets had already taken as a given, meant that the central bank’s “pause” in rate increases is now one year old — a record of sorts for a policy that was originally billed as tentative.

In its statement, the Federal Reserve acknowledged that consumer prices had climbed more slowly in recent months. Instead of describing inflation as “elevated,” as it did after its policy meeting in May, the central bank said: “Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated.”

But policy makers stopped well short of declaring victory. They repeated their concern that a tight labor market and a further reduction in available factory capacity could once again push inflation higher.

Analysts and investors have had little doubt that the central bank would continue its wait-and-see stance. The biggest question for many was how policy makers would change the nuances in their description of the economy, and especially how they would react to recent evidence of slowing inflation.

For the last several years, Fed governors including Ben S. Bernanke have set an unofficial goal of keeping the “core” rate of inflation, excluding volatile food and energy prices, at 1 to 2 percent a year.

The central bank’s favorite measure of core inflation, the Commerce Department’s price index for personal consumer expenditures, is just slightly above 2 percent and has eased from about 2.4 percent in March.

But because energy prices have climbed sharply in the last few months, the overall Consumer Price Index was up 2.7 percent in May, compared with a year before.

The sustained high energy prices, and rising prices in many categories of food, pose a potential risk to Fed policy if those high prices lead to higher inflation expectations among consumers.

Fed policy makers are in no rush to reduce interest rates. Economic growth, which slowed to a crawl in the first three months of this year, appears to have accelerated to an annual pace of about 3 percent.

Unemployment, which has hovered around 4.5 percent for the last several months, remains lower than the central bank had expected and is at levels that many economists equate with full employment.

US shoppers prop up the economy

The US economy grew faster than expected in the first three months of 2007, but showed a slowdown from the final quarter of 2006.

Gross domestic product (GDP) slowed to an annual pace of 0.7%, Commerce Department figures showed, down from 2.5% in the previous three months.

Consumer spending was the main driver of economic growth, rising 4.2%.

The housing market continue to weigh on growth, with investment in new home building down by 15.8%.

The GDP figures for the first quarter are the last of three estimates, and showed a slight improvement from the previous measure of 0.6%. However, analysts had been expecting annualised growth of 0.8%.

Interest decision

The personal consumption expenditure (PCE) price index, a measure of inflation, was 3.5%, while the "core" PCE index, excluding food and energy, was 2.4%.

Marie-Pierre Ripert at IXIS Corporate & Investment Bank said the GDP report did not alter expectations of stronger growth in the second quarter.

"Today's figures don't change our forecast for second-quarter GDP growth - still 3.5%," she said.

The report comes on the second day of the US Federal Reserve's meeting on monetary policy.

The Fed is widely expected to keep interest rates at their current level of 5.25%.

Visa signs $170m deal with Fifa

Credit card firm Visa says it has reached a deal to sponsor the 2010 and 2014 World Cup football tournaments.

The eight-year $170m (£85m) deal with world governing body Fifa would be useful in "driving business" Visa said.

It comes after Fifa paid rival credit card firm Mastercard $90m to settle a bitter sponsorship dispute.

Mastercard has sponsored each World Cup since 1990 and beleived it had first refusal to extend the deal for the 2010 and 2014 tournaments.

It took legal action against Fifa after the organisation struck what it argued was a conflicting deal with Visa.

'Global sporting property'

When it settled with Fifa on 21 June, Mastercard said it no longer wanted to work with the Zurich-based governing body.

The Mastercard sponsorship deal had been worth about $180m.

Visa will pay $170m for the sponsorship, $10m less than it had originally bid, Fifa President Joseph Blatter said.

Visa already sponsors the Olympic Games and the Rugby World Cup.

"We look forward to activating our FIFA partnership," said John Elkins, executive vice president at Visa International.

"We know first hand how valuable a global sporting property can be in driving business."

Chinese Tires Are Ordered Recalled

Federal officials have told a small New Jersey importer to recall 450,000 radial tires for pickup trucks, sport utility vehicles and vans after the company disclosed that its Chinese manufacturer had stopped including a safety feature that prevented the tires from separating.

Tread separation is the same defect that led to the recall of millions of Firestone tires in 2000. At the time, tire failure was linked to an increased risk of rollover of light trucks and S.U.V.’s.

The company, Foreign Tire Sales of Union, N.J., had originally sought the federal government’s help with a recall, saying it did not have enough money to recall all the tires itself. Typically, importers are responsible for the cost of recalling defective foreign products.

But officials at the National Highway Traffic Safety Administration said it remained the responsibility of Foreign Tire Sales to pay for the costs of the recall, said Heather Hopkins, a spokeswoman for the agency. She said the agency wanted “a full tire recall” by the company.

The defective tires join a growing list of problematic products with origins in China. A huge recall of potentially tainted pet food in March was followed by widespread reports of toothpaste manufactured with a toxic chemical and toys coated with lead paint.

Ms. Hopkins said the agency’s top officials were “outraged” that Foreign Tire Sales’ executives waited more than two years to pass on their suspicions about problems with the tires. The company first suspected problems in October 2005. Almost a year later, in September 2006, the Chinese manufacturer, Hangzhou Zhongce Rubber, a former state-owned company based in eastern China, acknowledged that a gum strip that prevents the tread from separating was left out of the manufacturing process.

Lawrence N. Lavigne, a lawyer for Foreign Tire Sales, said the company did not alert the National Highway Traffic Safety Administration about the problems until June 11 because officials had no definitive proof of a manufacturing flaw until it was revealed by further testing in May. He said it made no sense to initiate a recall based on suspicions.

Jeffrey B. Killino, a personal-injury lawyer from Philadelphia, said the company came forward only after it was named as a defendant in a lawsuit, filed in May, involving an accident in which two construction workers were killed and a third was severely injured when a van rolled over. The lawsuit contended that the accident was caused by tread separation in a Hangzhou Zhongce tire.

Earlier, an ambulance in New Mexico rolled over after a Hangzhou Zhongce tire came apart, though there were no significant injuries, according to documents supplied by Foreign Tire Sales to the federal safety agency.

An official at Hangzhou Zhongce Rubber, reached late Monday, declined to comment. The defective tires are sold under the brand names Westlake, Compass, Telluride and YKS, Mr. Lavigne said.

Tire separation led to a much larger recall in 2000. Firestone recalled 6.5 million tires after at least 271 people were killed and hundreds more injured in accidents involving its tires coming apart.

It is not clear how many defective tires might be on the road.

Hangzhou Zhongce has refused to tell Foreign Tire Sales’ officials how long it omitted the gum strip from its manufacturing process, Mr. Lavigne said. Foreign Tire Sales said it believed that it purchased about 450,000 of the tires in question from the Chinese company.

Hangzhou Zhongce sold the tires to at least six other importers or distributors in the United States.

Foreign Tire Sales, which has just seven employees, buys foreign tires, imports them and then resells them to domestic distributors. Mr. Lavigne said the company did not physically handle the tires.

The company began negotiating with Hangzhou Zhongce in 2000 to design and manufacture radial tires for light trucks. The tires were supposed to exceed federal safety standards, partly by including a gum strip between the plies to prevent separation, and ultimately passed a road test in which they were driven 40,000 miles, Mr. Lavigne said.

In October 2005, the company said it became concerned because of a sharp increase in customer complaints about the Hangzhou Zhongce radial tires. In investigating the complaints, Foreign Tire Sales’ officials became suspicious that Hangzhou Zhongce was manufacturing the tires without the gum strips or with inadequate gum strips, but the Chinese company denied it.

Tests of tire segments conducted by an outside firm were not conclusive but “seemed to indicate that there were no gum strips or insufficient gum strips in the inspected tires,” Foreign Tire Sales wrote in its June 11 report to the National Highway Traffic Safety Administration.

Hangzhou Zhongce admitted in September 2006 that it had “unilaterally decided to omit the gum strips” in the tires, the report says. The Chinese company was “generally unresponsive” when asked how many tires were involved and what they were going to do to resolve the problem, the report says.

Foreign Tire Sales stopped buying the light-truck tires from Hangzhou Zhongce in June 2006.

In May, Foreign Tire Sales conducted another round of road tests using 2005 Hangzhou Zhongce tires. This time, the tread separated after just 25,000 miles, the report said.

Mr. Lavigne said it appeared that Hangzhou Zhongce at times used no gum strips on the tires and in other instances, used half the amount of gum strip that was required by its agreement with the company.

Since Foreign Tire Sales maintains no inventory of tires, he said the company would have to buy new tires for every tire that was returned in the recall. That, added to the cost of disposing of the old tires, he said, would cost about $200 for each tire.

“We don’t really know where to start,” he said. “There’s no way F.T.S. can recall this universe of tires. It will have to go belly up.”

New World Bank chief is confirmed

The World Bank's executive board has confirmed that Robert Zoellick will become the organisation's new boss.

Mr Zoellick, who was nominated by US President George W Bush, will replace Paul Wolfowitz, who leaves on 30 June.

Mr Wolfowitz is stepping down after two years in office, following a scandal over his role in winning a pay and promotion package for his partner.

A former US deputy secretary of state, Mr Zoellick has most recently worked for investment bank Goldman Sachs.

'Proven track record'

Under an unwritten agreement, the US chooses the head of the World Bank, while European countries select the leader of its sister institution, the International Monetary Fund.

Mr Zoellick's nomination was considered by the World Bank's 24-member board of governors on Monday.

In May, Mr Zoellick acknowledged that he had much work to do to deal with the tensions which unseated his predecessor.

As deputy secretary of state, Mr Zoellick was chief aide to Condoleezza Rice between February 2005 and June last year.

He is also an ex-US trade representative.

The president of the World Bank serves a renewable, five-year term.

"Mr Zoellick brings to the bank presidency strong leadership and managerial qualities as well as a proven track record in international affairs and the drive required to enhance the credibility and effectiveness of the bank," the World Bank board said in a statement.

The executive directors also "affirmed the important role of the bank in addressing poverty and economic growth".

BP to restart hit Alaskan output

BP says it expects to restart on Monday 10,000 barrels per day of Alaskan oil output cut for a week due to a spill.

The UK energy group halted the output from its Prudhoe Bay oil field due to a small leak in one of its pipes.

Although less than a gallon of oil was released, it is politically sensitive due to a much larger spillage at the giant facility last year.

Then at least 200,000 gallons spilled onto the Alaskan tundra, and BP still faces the threat of criminal charges.

'Extreme budget pressures'

A BP spokesman said its latest repairs at Prudhoe should be completed by Monday.

BP America chief Bob Malone recently admitted there had been "extreme budget pressures at Prudhoe Bay", which had affected maintenance work.

Last year, it vowed to spend $550m (£225m) maintaining its pipeline network in Alaska, including the replacement of 16 miles of oil transit pipelines.

The Prudhoe facility usually produces around 400,000 barrels of oil a day.

Separately, BP announced on Friday that it was selling its stake in a large Siberian gas field development to Russian state-controlled firm Gazprom.

Western analysts said BP was just the latest Western energy firm to give into pressure from a Kremlin that wants to regain full control over Russia's energy resources.

Rate rise fears over eurozone reforms

Eurozone interest rates could be forced higher if member states slow the pace of economic reform, a member of the European Central Bank's executive board warned on Tuesday.

Lorenzo Bini Smaghi said any relaxing of reform would "ultimately lead to the emergence of bottlenecks in various markets". This would also prevent a strengthening of the 13-country eurozone's "potential" growth rate - the pace at which it can expand without creating excessive inflationary pressures. Speed limits on growth would be hit sooner, "unleashing inflationary pressures".

His comments appeared to be a veiled warning to political leaders not to use current strong economic growth as a reason to slow reform efforts, such as overhauling rigid labour markets or liberalising services.

"If the reform process stops, monetary policy might need to act more decisively to safeguard price stability over the medium term," Mr Bini Smaghi said at an FT-Deutschland and German Institute for International and Security Affairs conference in Berlin.

Since December 2005 the ECB has lifted its main interest rate eight times, on each occasion by a quarter percentage point, and markets expect at least one more rise this year.

Economic growth in the eurozone has recovered strongly in the past year, easing worries about the differing performances of its members. But Mr Bini Smaghi, who appears to have been given licence on the six-strong ECB executive board to speak more provocatively, said some countries still faced difficulties ahead.

Wage trends in Italy, Spain, Greece and to a lesser extent in France meant competitiveness had deteriorated, he said. "To regain the lost competitiveness, these countries will have to undertake a similarly painful adjustment to the one conducted in Germany."

Mr Bini Smaghi's comments also highlighted the scrutiny that the ECB is giving to potential growth estimates and the degree of slack in the economy.

The Frankfurt-based institution claims it is not guided by concepts such as that of an "output gap" - the difference between actual and "potential" output. But in a study released on Tuesday, the Royal Bank of Scotland pointed to the high correlation between such measures and ECB interest rates.

In contrast, trends in M3, the broad money supply measure to which the ECB attaches importance, was a poor predictor of likely changes in borrowing costs.

*German growth showed further signs of peaking yesterday with the Mannheim-based ZEW institute's economic sentiment indicator falling this month for the first time since November.

Euro hits new yen high

Dollar lower as sterling gets boost

Diverging rate expectations played the driving role in drawing the dollar lower on Monday following the release of tame US inflation data late last week.

Although few significant economic data releases were due in the session, the outlook for interest rates was the dominant force behind losses for both the US currency and Japan's yen.

Recent hawkishness from the Bank of England was expected to be reflected in Wednesday's minutes from the bank's last monetary policy committee meeting earlier this month.

The central bank's quartery bulletin on Monday, said inflation expectations in the UK may not fall as quickly as inflation itself, echoing comments last week from BoE governor Mervyn King, warning of medium-term inflation risks.

Conversely, the US inflation picture moderated last week as core consumer prices in the world's largest economy came in weaker than expected.

The pound rose 0.3 per cent against the dollar to $1.9824, and by 0.2 per cent against the euro to £0.6774.

Against the yen, sterling rose to a fresh 15-year high of Y244.97 as investors continued to seek yield through carry trades. The Aussie dollar rose 0.4 per cent against the yen to a 16-year high of Y104.35, before easing back to Y103.90. The euro hit a new record high of Y165.63, and stood at Y165.39 by late morning in London, up 0.1 per cent.

The New Zealand dollar pushed into territory not seen in 20 years against the Japanese currency - up 0.7 per cent to Y93.21, despite suspected intervention from the Reserve Bank. The Kiwi slipped against the US dollar however, down 0.1 per cent to $0.7545.

"Although not officially confirmed by the RBNZ, the market is of the view that the New Zealand authorities were again selling the NZ dollar today," said Stephen Halmarick at Citi. "Indications are that the central bank is keen to see the Kiwi remain under the $0.76 level."

Airbus goes on attack at Paris Air Show

LE BOURGET, France (AFP) - Airbus fired the first shots at the Paris Air Show on Monday, a vital battleground for the European plane maker and its US rival Boeing, with news of big orders from Middle Eastern clients.

In the first hours of the Paris event, one of the world's biggest aerospace meetings, the European group orchestrated the announcement of new orders for its troubled superjumbo A380 from Qatar Airways and Dubai-based Emirates.

At an Airbus press conference, Qatar Airways said it would buy three additional A380 superjumbos and confirmed a previous order for 80 mid-sized A350s.

The planes would be worth slightly more than 18 billion dollars (13.4 billion euros) at catalogue prices.

Soon afterwards, Emirates chairman and chief executive Sheikh Ahmed bin Saeed al-Maktoum said his company planned to buy eight more A380s worth 2.5 billion dollars at catalogue prices.

Emirates was already the single biggest client for the A380 with an order for 43 of the aircraft.

The week-long Paris Air Show sees Airbus and Boeing, the world's biggest manufacturers of civilian aircraft, go head-to-head in a commercial and public relations contest.

The companies use the event to clinch new business and compete in announcing new orders for their latest aircraft.

Airbus has fallen far behind Boeing for new orders in 2007 after being overtaken by the US manufacturer in 2006.

But chief executive Louis Gallois hinted that more new business was to come, saying that 100 orders for the mid-sized A350 plane would be made public by the end of the day.

Including the order from Qatar Airways, only 93 orders have been announced by Airbus since the launch of the 10-billion-euro A350 programme at the end of 2006.

The European manufacturer has had major production and design problems in the last few years and plunged into losses last year after a profit of 2.3 billion euros in 2006.

Deliveries of the A380, which is to enter service later this year, are running about two years behind schedule and Airbus is keen to shore up confidence in the project.

There was speculation that clients might cancel orders because of the production problems, but Airbus has reached compensation agreements with many clients.

Airbus was also forced to re-design its A350, which re-emerged with an enlarged body, after a poor response from clients to the original shape.

Boeing meanwhile has sprinted ahead in large part because of the popularity of its future mid-sized 787 model, which will enter service in mid-2008, five years ahead of the A350.

At the end of May, Airbus had reported 201 new orders for planes this year, while Boeing had 429 at the beginning of June.

The US-based group received a boost from aircraft leasing group GECAS on Monday, which said it had placed a firm order for six Boeing 777 cargo aircraft.

The Paris opened on Monday for industry professionals, but opens its doors to the public for three days from Thursday.

About 400,000 people are expected to visit the event, which features air displays as well as exhibitions, at the Le Bourget airfield on the outskirts of Paris.

Organisers decided to pay tribute to the helicopter this year, which is celebrating its 100th anniversary and is expected to be prominent throughout the week.

Visitors will be able to see a reconstruction of the prototype used by French bicycle maker and engineer Paul Cornu for the first vertical lift-off in 1907.

The first "helicopter" flight -- Cornu's contraption consisted of two spinning blades attached to a 24-horsepower engine -- took place in northern France and lifted the Frenchman 30 centimetres (12 inches) off the ground for about 20 seconds.

Airbus Hopes Its Planes, Not Its Setbacks, Will Stand Out

PARIS, June 17 — The A380 superjumbo, swooping high above Le Bourget airfield during its daily demonstration flights, may cast a long shadow over the Paris air show this year. Production delays for the much-publicized 555-seat A380, have been the catalyst for Airbus’s outsize woes over the last year.

But it is another aircraft, the twin-engine A350, that Airbus hopes will grab the headlines at the show, which opens on Monday.

“This will be the year of the 350,” John Leahy, chief operating officer of Airbus, predicted this month. He said that he expected Airbus to secure at least 200 orders for the A350 this year — and as many as half of those could be signed by the end of this week.

The pressure certainly is on. “This has to be more than just an exercise in dignity preservation,” said Richard L. Aboulafia, an aviation analyst at the Teal Group, based in Fairfax, Va. “They need to start closing some deals. They do not have the luxury of time.”

Since the titans of the global aerospace industry gathered last summer in England at the Farnborough International Airshow, Airbus has changed chief executives — twice — and has said the delays with the A380s would wipe out more than 4.8 billion euros ($6.4 billion) in earnings over the next four years. An extensive revamping of the company’s European operations is under way, aimed at eliminating 10,000 jobs in France, Germany, Britain and Spain.

Airbus views the A350 — which it began marketing in 2004 as a competitor to Boeing’s popular 787 Dreamliner — as the linchpin of its recovery. Boeing and Airbus expect the number of twin-aisle jets in the 180- to 250-seat category in operation to double to about 4,000 planes in 2025.

But like the A380, the A350 has had a checkered development history. Airline customers rejected at least two earlier designs for the plane, openly criticizing it as little more than a stretched version of the company’s A330 model.

By last spring, with barely 100 customers signed up, Airbus engineers were back at the drawing board. In July 2006, they unveiled the redesigned A350-XWB, with a wider fuselage, better fuel economy and more passenger comfort.

Yet by the time the parent company of Airbus, European Aeronautic Defense and Space Company, gave Airbus the permission to market the new version of the plane in December, Boeing had secured nearly 450 orders for the competing 787, a number that has since risen to 584. That makes the 787 Dreamliner — which enters commercial service next year, five years ahead of the A350’s scheduled debut — the most successful new aircraft in history.

Demand for the plane is so strong that Boeing says production slots at its factories are booked through 2013.

Airbus so far has just 13 signed contracts for the redesigned A350 from two airlines, while five more customers have committed to buying 148 planes.

Mr. Leahy and other Airbus executives are eager to play down the importance of Boeing’s huge competitive advantage, arguing that Boeing’s order backlog means that, for new customers at least, the wait for an A350 is no longer than for a 787. In recent weeks, the A350 has gained some momentum. In late May, Qatar Airways announced plans to buy 80 of the jets — an $18 billion contract the airline is expected to sign at this week’s show.

The order represents an increase of 20 planes over Qatar’s original commitment for 60 of the earlier version of the A350. This month, Airbus said that Aer Lingus would buy six A350s, another triumph, since Aer Lingus had not previously indicated interest in the aircraft.

Analysts said that many of the A350 orders to be announced this week could be conversions of contracts that were signed before Airbus redesigned the plane. Others may simply formalize commitments that were made public long ago, including one from Singapore Airlines for 20 planes, and 22 from the Russian state-run carrier, Aeroflot.

Still, Airbus will happily promote every deal it can, analysts said. “I think even conversions are respectable,” said Scott Hamilton, an aviation analyst based in Issaquah, Wash. “Every conversion they make is an endorsement of the program.”

The Paris air show is traditionally a show of numbers, and the Boeing-Airbus matchup continues to be one of the great corporate rivalries.

Boeing, rather than introducing the 787 here, as Airbus has with all its new models, will stage the inaugural flight at its manufacturing center in Everett, Wash., on July 8. The event will be broadcast worldwide live in nine languages and will be anchored by Tom Brokaw.

But that hasn’t stopped the United States jet maker from garnering some preshow publicity. On June 9, Boeing announced a $3.5 billion sale of 22 787s to Aeroflot — a genuine coup considering the recent souring of political relations between the United States and Russia.

On the military side, the Paris air show is considered the world’s largest arms bazaar, with governments and military contractors seeking deals. The big force is the United States government, since Pentagon budgets dwarf all other national military budgets.

After the United States invaded Iraq, it showed its displeasure with France’s opposition to the war by sending only low-level military representatives to the 2003 air show. Those ill-feelings are now in the past. United States Air Force Secretary Michael W. Wynne is scheduled to be the keynote speaker at a conference organized by the French aerospace association, Gifas, which will also feature executives from Lockheed Martin, Boeing, Northrop Grumman and other contractors.

“We’re going to be looking to what are the overseas opportunities to sell F-15s and F/A-18s and what kind of partnerships we can do with other countries,” said Dan Beck, a spokesman for the military business of Boeing.

The Pentagon, in a statement, said that participation in the air show “highlights the strength of the U.S. commitment to the security of Europe and demonstrates that U.S. industry is producing equipment that will be critical to the success of current and future military operations.”

Some of the highest-profile military planes, however, will be notably absent. The Joint Strike Fighter program, a 10-nation, $300 billion effort to build the next-generation fighter jet is not ready to be introduced at the show. The F-22 stealth fighter jet, the most expensive plane in skies, requires too much support and backup from the Air Force to make an appearance practical.

Cost of Gas and Food Rose Sharply Last Month

Americans felt the pinch of higher gas prices and eroding wages last month, even as an important gauge of inflation drifted lower, government figures showed yesterday.

Over all, the Consumer Price Index rose 0.7 percent in May, the Labor Department reported. The core rate, which excludes food and energy, was up just 0.1 percent, a welcome development that encourages the Federal Reserve to keep interest rates steady.

The news on the core rate, which has been inching steadily downward, cheered investors, who continued a stock rally that started midweek.

But for consumers, the news was hardly reassuring. Prices for staple household purchases like gasoline and food rose to even higher levels last month, effectively causing most Americans to take a pay cut. After taking inflation into account, the average weekly earnings for workers in nonmanagement jobs — some 80 percent of the work force — fell for the second consecutive month in May.

Consumer sentiment readings are reflecting some of that unease. A closely watched survey by the University of Michigan released yesterday found that consumer confidence this month dropped to the lowest level in 10 months. Americans also now expect significantly higher inflation than they expected a few months ago, the survey said.

Wall Street viewed the diminishing core rate of inflation as something that would put central bankers at ease. Core inflation, which economists and Federal Reserve officials consider a better measure of underlying price pressures because it excludes volatile food and energy prices, rose at a slower annual pace for the third consecutive month.

What Wall Street sees as good news, however, is not always good news for the average working American.

“Everybody has to eat, and everybody has to drive to work,” said Mark Vitner, senior economist for Wachovia. “For households, the headline number truly is the more important number, and clearly the run-up in gasoline prices in the last few months has left consumers with less money to spend on everything else.”

“I guess we need to walk to work and bring a brown bag lunch,” he added.

Gas prices jumped 10.5 percent last month, compared with an increase of 4.7 percent in April. Food prices rose 0.3 percent but are up sharply so far this year.

Beef prices have risen 5.1 percent, poultry prices 4.3 percent and pork prices 3.4 percent.

But steady and falling prices for other goods held down core inflation to 2.2 percent for the last 12 months. In April, the annual rate was 2.3 percent, while the monthly rate was 0.2 percent.

Overall inflation increased 2.7 percent annualized in May, compared with 2.6 percent in April. On a monthly basis, it was 0.4 percent in April.

Much of the reason for the ebbing in core inflation is housing costs, which are heavily weighted in the core calculation. They are rising more slowly than they were a year ago.

Core inflation may be easing, but few economists think the Fed could seriously consider lowering interest rates this year. For one thing, economic growth is expected to pick up again the remainder of this year. Also, it is still unclear whether rising energy prices will seep into other prices and push inflation higher.

But at the very least, the lower inflation readings lately could help convince Fed officials that interest rates do not need to go higher. The possibility they could be pressed to increase rates sent shivers through the stock market last week.

The downward trend of core inflation could also allow the Fed to change the language in its statement after policy makers meet, typically a precursor to a rate cut. In its statements so far, the central bank has held firm to its view that inflation is the biggest threat to the economy.

Ian Shepherdson, chief United States economist with High Frequency Economics, said in a research report yesterday that the recent trajectory of inflation raises “the question of just how long the Fed can credibly continue to argue that there is upside inflation risk.”

But the Fed is known to move at a glacial pace when it comes to any shift in tenor.

“It’s too early to say that inflation isn’t an issue,” said James Knightley, senior economist with ING Wholesale Banking. Like other economists who examined the numbers yesterday, Mr. Knightley noted that the 0.1 percent core inflation figure for May was rounded down from 0.149 — a negligible difference from April’s 0.177 percent.

Because energy prices remain volatile, it is to the Fed’s benefit to keep talking tough on inflation to prevent any spillover into the rest of the economy.

“Retailers are discounting to prevent losing customers who are struggling to pay their gasoline bills,” said Christopher Low, chief economist with FTN Financial.

“When energy prices are rising, other prices tend to rise less. When energy prices fall back, other prices will sort of regain some. Because of that, there’s inevitably always something for Fed officials to worry about.”

Fuel pushes up US inflation rate

US inflation rose faster than expected in May, as higher petrol costs hit consumer prices.

The month-on-month rise was 0.7%, the Labor Department said, up from 0.4% in April. Core inflation, which does not include food and energy, added 0.1%.

The figures showed that most prices were largely being contained and would not prompt a change in interest rates, analysts said.

The Federal Reserve has kept rates unchanged at 5.25% for twelve months.

"This number does not change anything for the Fed," said Robert Macintosh of Eaton Vance Management.

"We have been seeing good core numbers and this continues that."

He added: "Given all the angst we have had in the bond market the last two weeks I don't see how one number like this is going to make the sentiment change."

Oil bill

Separately the Commerce Department said that the current account deficit - the most commonly used measure of foreign trade - had grown to $192.6bn (£97.5bn) in the first three months of 2007, from $187.6bn in the October-December period last year.

A larger oil bill was blamed for the rise - though the deficit was smaller than analysts had expected.

According to the Labor Department food prices rose 0.3%, and energy added 5.4% - more than double the gains in April.

Over the past year, consumer prices have risen 2.7% and core prices up 2.2%.

Fuel Prices Aside, Inflation Is Tame

A leap in gasoline prices pushed the overall rate of inflation higher last month, government data showed today, but consumer prices nationwide generally appear to be increasing at a consistently slower rate.

The Consumer Price Index, the government’s survey of retail prices on a wide range of consumer goods, registered an increase of 0.7 percent in May, compared with a rise of 0.4 percent in April. From May 2006 to May 2007, prices rose 2.7 percent, up from the 2.6 percent annual gain in April, according to the Labor Department.

But a separate calculation of consumer prices that excludes food and energy prices and is considered by economists and the Federal Reserve to be a better measure of inflation fell for the third consecutive month on an annual basis. The core consumer price index from May 2006 to May 2007 was 2.2 percent — its lowest annual reading in nearly a year and a half.

For the month, the core consumer price index increased just 0.1 percent, compared with 0.2 percent in April.

Investors were cheered by the report, sending stocks up 1 percent in early trading.

Declining inflation is what Fed officials have sought as they raised interest rates for two years before stopping last summer. Since then, they have left the benchmark short-term interest rate on hold at 5.25 percent, saying that inflation was still too high for them to consider lowering rates.

Ian Shepherdson, chief United States economist with High Frequency Economics, said in a research report today that falling core inflation raises “the question of just how long the Fed can credibly continue to argue that there is upside inflation risk.”

Wall Street would cheer an interest rate cut. Indeed, much of the turmoil in the stock market last week and early this week was over worries that the Fed might raise rates. But a low reading on the core producer price index yesterday, which surveys prices at the wholesale level, and a report from the Fed that showed few signs of inflation in the central bank’s 12 regional districts went a long way toward calming those fears.

While core inflation is falling, that is likely of little comfort for Americans who are paying near-record prices to fill up their vehicles with gasoline. Gas prices jumped 10.5 percent last month, compared with an increase of 4.7 percent in April.

Higher gas prices were the primary reason wages for the average American worker fell last month after inflation is taken into account — meaning that most Americans have seen an effective pay cut. In a separate report, the Labor Department said today that real average weekly earnings for workers in nonmanagement jobs declined 0.2 percent last month.

Pressuring consumers further, food prices continued to rise, though not as sharply as a few months ago. This year so far, beef prices are up 5.1 percent, poultry prices 4.3 percent and pork prices 3.4 percent.

“If you drive or eat, hold on to your wallets,” said Joel L. Naroff, president of Naroff Economic Advisors. “Over the year, gasoline prices have jumped 6 percent while food is up about 4 percent. This is a real problem for many households.”

Boeing sales forecast takes off

Boeing has predicted rising demand from carriers for smaller aircraft but large jumbo jet sales will be lower than expected over the next 20 years.

The US plane maker raised its projected sales of commercial aircraft by $200m to $2.8 trillion (£1.4 trillion) in the next two decades.

Regional, single-aisle and twin-aisle jets for non-stop routes would prove more popular than expected, it said.

It scaled down the number of jumbos, of more than 400 passengers, it will sell.

Boeing now expects to sell 960 of the bigger craft, down from the 990 it set out in last year's forecast.

'Continued trend'

Airlines needed to respond to the true needs of passengers, said Randy Tinseth, Boeing's vice-president of marketing.

"Airlines have accommodated air travel by adding more frequencies and non-stop's, and what's most important for us is that we've seen this trend for the last 20 to 25 years, and we expect this trend to continue into the future," he said.

Passenger numbers would rise about 5% a year while cargo traffic would increase 6.1%, Boeing said.

Emerging markets are crucial for future sales, Boeing said, with about one-third of the demand coming from the Asia-Pacific region.

It sees flexibility as the key to success in the aviation market. It is banking on its smaller, slimmer 787 plane.

It predicts the plane, due to come into service next year, will steal a march on Airbus.

Twin-engined but with a long range, it will be able to fly direct to far more of the world's airports.

That means passengers will not need to make a connecting flight first to travel long distance.

Airbus is thought to be about five years from releasing its medium-sized rival, the A350 XWB.

But Boeing expects less demand for jumbos than Airbus, which has invested heavily in its 555-seat, delayed A380 superjumbo, due from October.

US consumers go on shopping spree

US consumers have surprised analysts, as official figures revealed that retail sales grew 1.4% in May.

Observers said that the increase, the highest in 16 months, suggested that high petrol prices may not be biting as hard as had been feared.

The data, which also comes amid slumping house prices, buoyed market investors, with Wall Street shares offsetting some of Tuesday's losses.

Sales in April had fallen 0.1%, revised Commerce department data said.

Petrol price effect?

"Is the consumer hurting because gasoline prices have soared?" asked Joel Naroff, of Naroff Economic Advisors.

"It surely doesn't look that way. Households spent money as if it was going out of style in May as retail sales skyrocketed."

The growth was well above the 0.6% which analysts had predicted.

And when vehicle sales were stripped out, retail sales rose 1.3%, again well ahead of analysts' estimates.

Observers say that the data may add credence to Federal Reserve claims that the US economy will pick up in the second half of the year.

Warm weather had bolstered the sales figures said Julian Jessop of Capital Economics, reflected in higher demand for clothes and sports goods.

Oil prices drop as storm weakens

Oil prices have fallen by more than $2 a barrel after Cyclone Gonu in the Gulf failed to damage production and amid concerns about higher interest rates.

New York light crude shed $2.17, 3.2%, to $64.76 a barrel, while Brent crude shed $2.62, or 3.7%, to $68.60.

Prices had been pushed higher by fears that the cyclone would dent output from oil producers Oman and Iran, though, it eventually weakened into a rain storm.

At the same time, analysts are worried high rates will slow the world economy.

Phil Flynn, an energy analyst at Alaron Trading, said that the market was running out of reasons to believe that oil prices would continue to climb.

However, other analysts are predicting the problems in Nigeria, where workers have been kidnapped and production facilities damaged, could underpin prices and stop them falling too far.

On Friday, Lehman Brothers raised its estimates for oil prices in 2007 and 2008.

The Wall Street brokerage said it expects an average price of $62 a barrel this year, and a price of $55 a barrel in 2008.

Cyclone Gonu was the most powerful storm in the Gulf for 60 years.

Thousands of residents were evacuated from Oman's coast, and hundreds were also moved from the Iranian coast.

Shares wobble on inflation fears

European stock markets are facing their fifth consecutive day of falls as rising bond yields make shares a less attractive investment.

The FTSE 100 in London, Dax in Frankfurt and Cac 40 in Paris have fallen every day this week so far.

Shares are being hit by the rising yield on US 10-year Treasury bonds, which increases the returns that investors can make without risk.

Bond yields have grown because a rate cut in the US has become less likely.

Many traders see the US 10-year Treasury bond as the basic cost of capital, which means that any other investment must be compared with the return that could be made from Treasuries without taking any risks.

Less risk, more reward

At the end of February, the yield on the bonds was 4.5% and now stands at 5.16%, although it went as high as 5.25% earlier in the day.

That means that investors are less likely to invest in shares, because their return compared with a no-risk investment has deteriorated.

"Either you can take the same amount of risk for comparatively less reward or you can take a lot less risk for more reward," said David Bloom, global strategist at HSBC.

The yield is the percentage return you receive when you invest in something.

Bonds provide fixed returns, which means that when their prices go down, the yield goes up.

Treasury bond prices go down if interest rates are going up.

Last week's minutes from the Federal Reserve's rate-setting meeting said that inflation was still the "predominant concern" for the economy.

This has been taken to mean that interest rates will not be cut in the near future, so Treasury bond prices have declined.

Then on Tuesday, Federal Reserve chairman Ben Bernanke predicted that the US economy would rebound, even though housing sales are still falling.

Less attractive

The crisis in the US housing market has been the big threat to the US economy, so the perception that it might have weathered the storm has also put downward pressure on bond prices and increased yields.

With shares now a less attractive investment, stock markets in Europe and the US have had a bad week.

But the yield on Treasury bonds fell in early trading in the US, so Wall Street shares opened higher and European shares have recovered some of their earlier losses.

The FTSE 100 ended last week at 6,676.7, its highest close since September 2000.

By mid-afternoon on Friday, it had fallen to 6,488.1, which is a fall of 2.8% for the week.

Frankfurt's Dax started the week at 7,987.85, having gained almost 250 points in the week.

This week it has fared less well, trading at 7,602.39 on Friday morning, which is a fall of 4.8% in the week so far.

In Paris, the Cac 40 flitted between positive and negative territory on Friday.

By mid-afternoon, it was up 20.74 points at 5911.23, but it but later fell back to 5848.91, which is 4.2% lower than the 6,168.15 at which it started the week.

US trade deficit narrows in April

The US trade deficit fell unexpectedly in April, helped by the weak dollar.

With the low value of the greenback making US exports more competitive and appearing to depress import demand, the deficit fell 6.2% to $58.5bn (£30bn).

This compares with a revised $62.4bn in March, and average market expectations of an increase to $63.5bn in April.

US exports rose by 0.2% to a record $129.5bn, said the Commerce Department, led by aircraft sales, while imports fell by 1.9% to $188bn.

Chinese concern

Despite the narrowing of the overall deficit, America's trade gap with China jumped 12.3% to $19.4bn, its highest level since January.

Analysts say this will undoubtedly cause displeasure on Capitol Hill, since many US congressmen argue that China is using unfair practices to boost its exports.

Many in the US maintain that since the Chinese government does not allow the yuan to trade freely, the country's exports are artificially cheap.

Analyst Lan Lancz of Lancz & Associates said that while the narrowing of the overall deficit was "a positive sign", the key issues remained the possibility of higher US interest rates and energy prices.

The Federal Reserve next meets to consider US interest rates on 27-28 June.

While most analysts expect rates to remain at 5.25% this time - where they have been for the past year - there is now some concern that the Fed may raise rates further towards the end of the year to control inflation.

Rival paper studies Dow Jones bid

The company that owns the Philadelphia Inquirer newspaper has said it is interested in mounting a rival bid for the Dow Jones media group.

Philadelphia Media Holdings chief executive Brian Tierney indicated that his firm would be willing to offer as much as Rupert Murdoch's current bid.

Mr Murdoch's News Corporation made its $5bn (£2.5bn) offer for the Wall Street Journal owner at the start of May.

While Dow Jones has yet to decide on this bid, its unions are opposed.

"We don't believe News Corporation is overpaying," said Mr Tierney.

"This is one of the greatest journalistic enterprises ever created."

His comments came as the main union at Dow Jones said an unnamed internet entrepreneur and Wall Street group were also looking at mounting a possible bid.

The union, the Independent Association of Publishers' Employees, has also approached billionaire investors Ron Burkle and Warren Buffett.

'Editorial independence fears'

Dow Jones' future is in the hands of the Bancroft family, which controls 64% of the firm's voting rights.

Mr Murdoch held his first meeting with members of this family earlier this week and both sides said the talks were "constructive".

Yet neither gave any more details, especially regarding whether the family was willing to sell.

Amid fears that Mr Murdoch will interfere in the running of the Wall Street Journal, he has already promised to establish "an independent, autonomous editorial board" for the newspaper if his bid for Dow Jones is accepted.

The main US share index is named after the Dow Jones company.

Pensions: work longer for less and save more, says OECD

PARIS (AFP) - Pension reforms in rich countries mean that retirement benefits will be 15-25 percent less than would have been paid, and most people will have to work for longer and save more, the OECD said on Thursday.

But although pension reforms in 16 of the 30 OECD countries have been "substantial and necessary" to ensure that pension systems remain viable, "more remains to be done," the Organisation for Economic Cooperation and Development said.

In a survey called "pensions at a Glance 2007," the OECD said bluntly:

"People in OECD countries will have to save more for their retirement as a result of the major pensions reforms carried out in recent years.

"The average pension promise in 16 OECD countries studied was cut by 22.0 percent. For women, the reduction was 25.0 percent."

Only two countries had increased the promised average rate of payouts to pensioners. These were Hungary and Britain.

"In France, Germany, Italy, Japan and Sweden, future benefits will be cut by between 15.0 and 25.0 percent and in Mexico and Portugal by over 30.0 percent from what people would have been entitled to before reforms."

But the structure of reforms varied widely. For example, Mexico, Portugal and Britain, Austria, France, Germany and Sweden emphasised benefits to poorer pensioners.

But some countries had tightened up the linkage between earnings and pension payments. "Poland and the Slovak Republic, for example, have tightened the link between pension entitlements and earnings when working ... This may increase poverty risk for retirees who have not been covered by the system over their full career," the report said.

A raising of the retirement age was a central feature of most reforms.

When the reform process has been completed "most OECD countries will have a standard retirement age of 65 years, although in Denmark, Germany, Iceland, Norway, the United Kingdom and the United States, the pension age is or will be 67.

Only France, Hungary and the Czech and Slovak Republics planned to have pension ages below 65.

Reform is too slow in Austria, Italy, Mexico and Turkey, the OECD warned.

"In Turkey, for example, the new retirement age of 65 will only be reached in 2043 for men and even later for women.

"This will mean spending on pensions will remain high for many decades and these financial pressures might require short-term adjustments that may cause more hardship than faster reforms would have done."

And early retirement remained an extra burden on public finances in many countries.

"Between 1999 and 2004, for example, the average retirement age for men was below 60 in eight OECD countries, including Belgium, France, Hungary and Italy."