Piano maker Steinway takes down "for sale" sign

NEW YORK (Reuters) - Steinway Musical Instruments Inc, the famous manufacturer of pianos, saxophones and trumpets, said on Wednesday it had decided not to sell itself following a 17-month-long exploration of strategic alternatives.
An American icon synonymous with handmade grand pianos, Steinway has struggled to keep its production margins competitive amid stagnant sales, and has seen its shares plunge 10 percent year-to-date. Still, its third-quarter earnings last month offered signs that cost-cutting was paying off.
In a statement on Wednesday, Steinway said it had received several non-binding indications of interest in buying the company, following talks with other companies in the sector as well as private equity, yet these did not offer more value than its own strategic plan.
"We will continue to focus management's efforts on execution of that plan and we look forward to a prosperous 2013," Steinway CEO Michael Sweeney said in the statement.
An in-principle agreement to sell its band instrument division to an investor group led by two of its board members, Dana Messina and John Stoner, was also scrapped in light of the current operating performance of the band division, Steinway said.
In July 2011, Messina, Stoner and other members of management made an offer for Steinway's band instrument and online music divisions, prompting the company to set up a special committee in order to assess it.
Later that month, Steinway asked investment bank Allen & Company LLC to a assist the special committee on exploring strategic alternatives that could also include selling the whole company outright to other interested parties.
By October 2011, Messina had stepped down as CEO of the company after 15 years at the helm to pursue his bid, yet he remained a board member. He was replaced by Sweeney, a chairman of the board of Star Tribune Media Holdings and a former president of Starbucks Coffee Company (UK) Ltd.
Steinway said on Wednesday that it was continuing a separate process to sell its leasehold interest in New York's Steinway Hall building, situated on Manhattan's 57th Street, and was in talks with several parties.
According to its website, Steinway & Sons, the company's piano unit, opened the first Steinway Hall on 14th Street in Manhattan in 1866.
With a main auditorium of 2,000 seats, it became New York City's artistic and cultural center, housing the New York Philharmonic until Carnegie Hall opened in 1891. These days, Steinway Hall is a showroom for the company's instruments.
The Waltham, Massachusetts-based company's pianos have been used by legendary artists such as Cole Porter and Sergei Rachmaninoff and by contemporary ones like Chinese concert pianist Lang Lang.

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RIM shares jump in Toronto, rebound from sharp decline

TORONTO (Reuters) - Shares of Research In Motion Ltd jumped nearly 10 percent on the Toronto Stock Exchange on Thursday, following similar gains in New York on Wednesday, in a rebound from last week's sharp decline.
Last Friday, the volatile stock plunged more than 20 percent after the company said on an earnings conference call that it was rolling out a new fee structure for its services segment, which some investors fear could pressure the high-margin business.
"It got hit so hard after the conference call," said Ed Snyder, an analyst with Charter Equity Research. "People are still fairly optimistic about (BlackBerry 10) coming out in January, so (the rebound is) really just a value play."
The new fee structure overshadowed stronger-than-expected quarterly results.
RIM shares were up 9.7 percent to C$11.42 in midday trade on the Toronto Stock Exchange. The company's Nasdaq-listed stock was down 2 percent to $11.60 after big gains on Wednesday, when Canadian equity markets were closed for Boxing Day.
Through the autumn of 2012, RIM rallied as investors grew optimistic about prospects for its new make-or-break BlackBerry 10 devices, to be formally unveiled January 30. On Thursday, the shares were still up more than 80 percent from the year's low, touched in September.
The Wednesday and Thursday gains also came after several websites posted photos of what they said could be the first BlackBerry 10 phone with a physical keyboard.
Evercore Partners analyst Mark McKechnie said the photos boosted RIM's stock, which he said was depressed from last week's selloff, on a quiet trading day.
"There certainly are folks that believe in the new product cycle," he said. "The whole Wall Street community's been trying to handicap how strong that product cycle will be for RIM."
RIM has said it plans to roll out touchscreen-only devices first, a few weeks before it releases a smartphone with the QWERTY keyboard many longtime BlackBerry users rave about. But some analysts believe devices with hard keyboards will not hit the market until spring.
Management has touted BlackBerry 10's new on-screen keyboard, but some see the company's reputation for building solid, usable physical keyboards as an important competitive advantage as RIM fights for market share against Apple Inc and Samsung Electronics .
McKechnie said volatility is not unusual ahead of big smartphone launches.
"There's so much scale involved in this industry, one way or the other. A successful product versus a failure is going to really change the earnings power of a company," he said.

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A surprisingly good vintage as market logs gains

NEW YORK (AP) — If you'd told investors what was going to happen in 2012 — U.S. economic growth at stall speed, an intensifying European debt crisis, a slowdown in China, fiscal deadlock in Washington, decelerating corporate earnings growth — and asked how the stock market would perform, few would have predicted a good year.
But that's just what they got.
The Dow Jones industrial average, the Standard & Poor's 500 and the Nasdaq composite index all ended the year substantially higher, despite losing ground in the final days of year as concerns about the looming "fiscal cliff" mounted.
The Dow gained 7 percent for the year, its fourth consecutive annual advance, having started the year at 12,217. The S&P 500, which started the year at 1,257, is up 13 percent, beating the 7.8 percent average annual gain of the past 20 years. The Nasdaq also logged a better-than-average gain, 16 percent.
Including dividends, the total return on the S&P 500 index was even better: 16 percent.
Financial companies led the gains among S&P 500 stocks, advancing 26 percent, as banks continued their restructuring efforts after the recession. Bank of America more than doubled, gaining $6.05 to $11.61 and Citigroup advanced $13.25, or 50 percent, to $39.56. Utilities, the best-performing industry group last year, was the only sector of 10 industry groups in the index to decline, dropping 2.9 percent.
"There's been a lot thrown at this market, and it's proven to be very resilient," said Gary Flam, a portfolio manager at Bel Air Investment Advisors in California. "Here we are at the end of the year, and it's still relatively strong."
Stocks started the year on a tear, with optimism about an improving job market and a broader economic recovery providing the backdrop to the S&P 500's best first-quarter rally in 14 years.
The index advanced 12 percent by the end of March, closing the quarter at 1,408, its highest in almost four years, with financial companies and technology firms leading the charge. The Dow ended the first quarter at 13,212, logging an 8 percent gain.
Apple was one of the star performers of the first quarter and was probably the year's most talked-about company.
The popularity of the iPhone and iPad led to staggering sales growth that helped push its stock up 48 percent to almost $600 at the end of March. Apple also announced a dividend and overtook Exxon Mobil as the U.S.'s most valuable company.
At the start of the second quarter, the intensifying European debt crisis and concerns about the impact that it would have on global economic growth prompted a sell-off.
By the start of June, U.S. stocks had given up the year's gains. Borrowing costs for Spain surged and investors fretted over the outcome of Greek elections that had the potential to pull the euro currency bloc apart.
The outlook for growth in China, the world's second-largest economy, also began to weigh on investors' minds. Economic growth there slowed to 8.1 percent in the first quarter as export demand waned, and investors worried that it would keep falling.
The Dow fell as low as 12,101 June 4. The S&P dropped to 1,278 June 1.
The second quarter was also marred by Facebook's initial public offering.
The stock sale was one of the most keenly anticipated initial public offerings in years, but investors didn't "like" the $16 billion market debut. The social network priced its IPO at $38 per share, and the stock started to fall soon after the first day of trading on concern about the company's mobile strategy.
Facebook closed as low as $17.73 on Sept. 4 before recovering some of the ground it lost to close the year at $26.62.
Company earnings reports were also starting to make uncomfortable reading for investors. Earnings growth for S&P 500 companies fell as low as 0.8 percent in the second quarter, according to S&P Capital IQ data.
The stock market only recovered its poise after the European Union put together loans to bail out Spain's banks on June 10 and the head of the European Central Bank, Mario Draghi, pledged to do "whatever it takes" to save the euro.
Speculation that the Federal Reserve was set to provide the economy with more stimulus to prevent it from slipping back into recession also bolstered stocks.
The rally even survived a blip when a software glitch at trading firm Knight Capital threw stock prices into chaos Aug. 1.
The firm said the problem was triggered by new trading software it installed. Erroneous orders were sent to 140 stocks listed on the New York Stock Exchange, causing sudden price swings and surging trading volume.
Apple launched the iPhone 5, the latest version of its smartphone, in September, and the company's stock climbed to a record close of $702.10 on Sept. 19. That gave Apple a market value of $658 billion, and many analysts predicted more gains lay ahead.
By the time Fed Chairman Ben Bernanke announced Sept. 13 that the U.S. central bank would start a third round of its bond-purchase program, which is intended to push longer term interest rates lower and encourage borrowing and investment, the S&P 500 had surged 14 percent from its June 1 low. A day later, the index peaked at five-year high of 1,466. The Dow Jones reached its peak for the year of 13,610, Oct. 5.
As is often the case on Wall Street, investors "bought the rumor and sold the fact," and quickly turned their attention to the challenges that lay ahead.
Analysts had also been cutting their outlook for growth in the final quarter of the year. At the start of the second quarter, estimated earnings growth for the period was 15.7 percent. That forecast had fallen to 3.4 percent by Dec. 27.
"One of the blessings that supported the stock market's moves in prior years was earnings growth," said Lawrence Creatura, a portfolio manager at Federated Investors. "That's true this year, but at a decelerating rate. It's not gone unnoticed that earnings growth is slowing, and many forecasts now include a full stall."
Apple's halo also began to slip in the final three months of the year. Its iPad Mini tablet, launched Nov. 2, met with lukewarm reviews, there were hints of unrest among its executive ranks. Investors began to fret that the intensifying competition in the smartphone market would crimp Apple's profits. The stock tumbled, and despite rallying in recent days is still down 27 percent from its September peak.
The year's final twist came in Washington.
Stocks wavered ahead of a presidential election that at times seemed too close to call, and while President Barack Obama ultimately reclaimed the White House by a comfortable margin, the Republicans retained control of the House.
The divided government set the stage for a tense end to the year as Democrats and Republicans sought to thrash out a budget plan that would avoid the U.S. falling off the "fiscal cliff," a series of tax hikes and government spending cuts that economists say would push the economy back into recession.
Initially, markets fell as much as 5 percent in the 10 days after the elections as investors worried that a divided government would not be able to agree on a budget plan to cut the U.S. deficit.
While the S&P 500 managed to recoup those losses by December on optimism that a deal would be reached, some investors are still urging caution. Any agreement will still be "ill-tasting medicine" to the economy, as it will almost certainly involve both spending cuts and tax hikes, says Joe Costigan, director of equity research at Bryn Mawr Trust Company.
"The question is, how much will the drag from the government be offset by business and personal spending," says Costigan. "The market has reasonable expectations for growth priced in, so I don't think we're going to see a big run-up.

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Backward step for reform in Myanmar?

Myanmar's military has stepped up attacks on ethnic Kachin rebels in recent days with airstrikes. This move calls into question efforts by the United States and other international powers to richly and quickly reward the nominally civilian regime there for a series of gestures toward political reform.
US State Department spokesman Victoria Nuland told reporters yesterday that the Obama administration is "deeply troubled" by increased violence and urged dialogue between Myanmar's government and the Kachin Independence Organization, the political wing of the Kachin Independence Army, which has been in an on again, off again, war against the central state for decades.
Simon Roughneen wrote for the Monitor yesterday that "the Myanmar Army offensive – which includes helicopter gunships and aerial bombardment – comes after weeks of heavy fighting at outposts about 10 miles outside the KIA headquarters on the Myanmar-China frontier." He then quoted Joseph Nbwi Naw, a Kachin Catholic priest in the KIA headquarters town of Laiza as saying "the situation is very tense. The bombers are bombing just about four or five miles from the town here."
Myanmar (also known as Burma) is as ethnically complex a country as they come, and while most in the West have focused on the democracy struggle of Aung San Suu Kyi and her National League for Democracy, there is no guarantee that any new order that emerges from a political promise, with promised free elections scheduled for 2015, will create stability or justice for its minorities. Ms. Aung San Suu Kyi, an ethnic Burman like most of the junta that kept Myanmar under military rule from 1962 until 2011, has been mostly silent on violence targeting the ethnic Muslim Rohingyas recently and does not appear to have spoken out on the situation involving the Kachin.
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In September, the Irrawady, a Thailand-based news organization that focuses on Myanmar, reported that Aung San Suu Kyi argued against taking a strong stand, as it could make the situation worse. "There are people who criticized me when I remained [silent] on this case," she told a Burmese group on a visit to New York. "They can do so as they are not satisfied with me. But, for me, I do not want to add fire to any side of the conflict." The Irrawady wrote: "Some critics have condemned [Aung San Suu Kyi] for staying silent on Kachin as well as the sectarian violence between Arakanese Buddhists and Rohingya Muslims in western Burma."
In early November, I wrote about doubts over the wisdom of America's breakneck pace of normalization with Myanmar, with President Obama becoming the first US leader to ever visit the country that month.
Has there ever been faster restoration of US relations with a country it had once worked so hard to isolate, in the absence of either a US invasion or a revolution? I can't think of one. The once-maligned leaders are being brought in from the cold. The US even indicated in October that Burmese officers would be invited to the annual Cobra Gold military exercise between the US and Thailand as official observers.
The Obama administration's motivations are clear: Demonstrate the benefits of the generals’ political opening and turn toward democracy. But with the breathless rush to friendship comes a country where ethnic tensions still dominate, and ethnic violence, specifically against ethnic Rohingya Muslims, that the generals have been either unwilling or unable to stop.
... If all goes well, the Obama administration’s overture toward Myanmar will go down as a major foreign policy achievement, and more importantly signal a brighter future for Myanmar’s 48 million people. But there are challenges and pitfalls ahead, and with each concession the US and other major powers make before 2015, a potential carrot to offer for positive change is spent.
Hopefully, Obama will not have gone to Myanmar too soon.
The recent war with the Kachin is evidence of how hard it has been to build on the fruits of "dialogue" between Myanmar and armed ethnic-minorities. A 17-year cease-fire between the Kachin rebels, in northeastern Myanmar along the Chinese border, broke in June of 2011, and the results have been catastrophic. Human Rights Watch estimated that 75,000 Kachin were displaced from their homes in the fighting, recording the razing of homes, stealing of property, torture of Kachin civilians, use of civilians as slave labor, and the rape of Kachin women, all by Myanmar soldiers.
Such events have been frequent for Myanmar's ethnic minorities since shortly after independence from Britain in 1948. In February 1947, nationalist hero Aung San, the father of Aung San Suu Kyi, and other nationalist leaders signed the Panglong agreement with ethnic minorities, who today make up about 40 percent of the national population. The agreement envisioned Myanmar as a federal state, with regional autonomy for ethnic minority states like Kachin, where the residents are mostly Christian and speak a language distinct from the ethnic-majority Burmans, who are mostly Buddhist.
But autonomy was never delivered, and when Aung San and six members of his cabinet were assassinated in July 1947, the stage was set for decades of conflict not just with the Kachin but other ethnic minorities like the Shan and the Wa, many living in the rugged mountains in eastern and northern Burma.
For now, the elections of 2015 are a long way away, and whether those elections will lead to a more just approach to ethnic minorities remains an open question. That Aung San Suu Kyi has suffered personally and for decades for her principled stand on democracy for Myanmar is no guarantee that she or anyone else who may come to power there will handle the country's ethnic tensions any better than their predecessors have for the past 60 years.
Holding some diplomatic and sanctions pressure in the back pocket may prove a wiser course than declaring a democracy victory in early 2013.

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US drone strike in Pakistan kills influential Taliban commander

Key Pakistani Taliban commander Maulvi Nazir – considered a "good" Taliban by some among the Pakistani military – died in a US drone strike that left at least six dead on Thursday, according to local reports.
According to Pakistan's Dawn newspaper, Taliban and local government officials confirm that Mr. Nazir and at least two of his deputies were killed when a US drone hit their vehicle in South Waziristan, a Pakistani tribal region along the Afghan border. The commander's truck had reportedly broken down at the time.
The Guardian notes that neither the Pakistani government nor the Taliban has made an official statement on the reports, and that details remain murky.
Because journalists are usually prevented by militants from visiting places hit by drones, the exact details of what happened and who was killed in such attacks are often extremely hard to verify.
Residents and an intelligence official in South Waziristan who spoke to a local journalist said the total number of people killed in the first attack was either six or 10. The intelligence source said all the men killed were "top leaders" of the Mullah Nazir group, the leading militant group in South Waziristan.
Recommended: How much do you know about Pakistan? Take this quiz.
Maulvi Nazir was the primary militant commander in South Waziristan and a key figure in Pakistan's Taliban, having maintained a complex set of relationships among the region's players.
Unlike some of Pakistan's domestic militants, Nazir chose to focus his efforts fully on Afghanistan and the NATO and US forces stationed there, and according to the US “had a clear collaboration” with Afghanistan's powerful Haqqani network, a primary foe of US and NATO troops in Afghanistan. The Washington Post notes that he was accused of regularly sending troops into Afghanistan to fight alongside the country's own Taliban against the US-led forces there.
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His Afghan focus on targeting foreign troops earned him a reputation with parts of the Pakistani military as a "good" Taliban, and he negotiated a deal with the Islamabad to stay out of its battle with domestic militants in the region. His militants have also aided Pakistani troops in attacking members of Tehrik-e-Taliban Pakistan (TTP), an anti-Islamabad faction of the Taliban.
But that also earned him the hostility of some of his domestic Taliban peers. Nazir was wounded in November during a suicide attack on his convoy. Rival Taliban commanders were believed to have been behind the attack, which was said to have caused some fracturing of the Pakistani Taliban in the region.
Security analyst Imtiaz Gul told the Guardian that Nazir's death will likely be welcomed by both the US and Pakistan – despite the latter's peace deal with the late militant.
"Both the US and Pakistan will be happy because they now have one less enemy," he said. "Although he was in an undeclared peace deal with the government, he was also subverting the stated goals of that agreement by providing support and shelter to al-Qaida people whose leaders have pleaded with the rank and file of the Pakistani army to rebel against the state."

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Russia plans biggest war games since Soviet era

The Russian navy has announced that it will hold its biggest war games since Soviet times in the Mediterranean and Black seas later this month.
The ambitious exercises, which will involve ships from all four major Russian fleets, are a sign of growing confidence on the part of Russia's military as it begins to enjoy the benefits of President Vladimir Putin's huge budget allocations for renewing and re-equipping all branches of the armed forces.
The purpose of the war games will be to strengthen integration between different types of forces and gain practice with major military deployments outside Russia's immediate neighborhood, the Defense Ministry said in a statement Tuesday.
Do you know anything about Russia? A quiz.
As part of the maneuvers, naval ships will arrive at an "unprepared" coast in the Russian northern Caucasus region to take amphibious troops onto transport vessels.
"The primary goal of the exercise is to train issues regarding formation of a battle group consisting of troops of different branches outside of the Russian Federation, planning its deployment and managing a coordinated action of a joint Navy group in accordance with a common plan," the ministry's statement said.
The participating ships, it said, will be drawn from all of Russia's four major naval formations: the Northern, Baltic, Pacific, and Black Sea fleets.
Some experts suggest the war games may be cover for an increasingly nervous Moscow's preparations to evacuate Russian citizens and their dependents from war-torn Syria.
About 9,000 Russians are registered with the Russian embassy in Damascus, but some experts say the full number may be 30,000 or more. Over the nearly half a century that Moscow has enjoyed good relations with Syria, thousands of Russian women have married Syrian men and moved to the country. Many of them may urgently demand to return with their children to Russia if the situation turns critical.
This week the Russian navy refreshed a fleet, including several huge amphibious assault ships capable of carrying thousands of people, which it had deployed to the eastern Mediterranean last summer.
Experts say the replacement fleet dispatched this week is of similar makeup, with at least five huge troop-transport ships at its core.
As part of Russia's 8-year, $659-billion rearmament program, the navy is slated to receive 50 new warships by 2016, including new Borey-class nuclear-powered ballistic-missile submarines – the third of which entered service last weekend – 18 major surface warships, and dozens of special purpose and support vessels.

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Gerard Depardieu's latest drama: a Russian passport

Vladimir Putin flourished his pen Thursday morning and signed what must be the oddest decree of his long years in power: an order granting a Russian passport to French actor and tax exile Gerard Depardieu.
A terse announcement posted on the Kremlin website noted that Mr. Putin acted "to satisfy an application for citizenship of the Russian Federation by Gerard Xavier Depardieu, who was born in 1948 in France."
Mr. Depardieu, star of over 170 films and possessing what is often politely referred to as a "colorful" public personality, has been locked in a high profile battle with France's new socialist government over an emergency tax that would levy a 75 percent rate on people earning more than $1.3 million. He recently renounced his French citizenship and took up residence in Belgium, which offers a friendlier tax regime for the super-rich.
Recommended: Vladimir Putin 101: A quiz about Russia's president
France's high court struck down the law last week as "unconstitutional," but the government announced it will soon reintroduce the measure after taking the court's concerns into account.
It's not clear whether Depardieu actually applied for residence in Russia, which has a 13 percent flat income tax for all, but in a far-ranging press conference last month Putin declared "If Gérard really wants to have a residence permit or a Russian passport, you can consider it done, the issue solved positively."
Putin also said that he has long enjoyed "kind, friendly, personal relations" with the French actor.
COME TO CHECHNYA
Depardieu is no stranger to Russia. He has appeared in several ad campaigns and filmed the 2011 movie Rasputin in St. Petersburg. He is also rumored to be close to Chechen strongman Ramzan Kadyrov, and was guest of honor at the pro-Kremlin leader's birthday party in Grozny last October.
Mr. Kadyrov has said that he would happily invite Depardieu to come and live permanently in Chechnya if he wanted to. "If the country's leadership decides in favor of granting Depardieu Russian citizenship, we will be glad to create deserved conditions for the great cultural figure in our republic," Kadyrov said last week.
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Russia's blogosphere erupted in derision and sarcastic comment Thursday, with some people writing painfully of their own troubles with Russia's notoriously bureaucratic passport department.
One man posted on Facebook his own tale of trying for years to repatriate his own Russian-born elderly mother from next-door Belarus, but he has so far failed to move Russian authorities because her Belarussian documents show a slightly different spelling of her name than appears on her Russian birth certificate.
PART OF SPAT WITH WEST?
Sergei Strokan, a foreign affairs columnist with the liberal Moscow daily Kommersant, says the granting of citizenship to Depardieu should be seen in context with the escalating war of words between Russia and the West. Last month President Barack Obama signed the Magnitsky Act, which aims to punish corrupt Russian officials, and Moscow responded by enacting the Dima Yakovlev Act, whose main feature is a ban on US citizens adopting Russian orphans.
"Russia is very much on the defensive right now. The vindictive nature of Russia's adoption ban has shocked not only the US, but also many in Europe and here in Russia as well," Mr. Strokan says.
"We seem to be entering into a cold war-like battle of images, in which Russia is trying to show that it offers a better life, has higher ideals, and is more friendly to humanity than the West.... So this may be seen as a calculated PR move, an effort to demonstrate that we understand and care for the beloved French actor more than his own homeland does," he adds.
"I can't imagine that Depardieu would actually want to live here and experience the life of Russians, though. Let's see how it goes the first time he attempts to travel with that new Russian passport.

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Backward step for reform in Myanmar?

Myanmar's military has stepped up attacks on ethnic Kachin rebels in recent days with airstrikes. This move calls into question efforts by the United States and other international powers to richly and quickly reward the nominally civilian regime there for a series of gestures toward political reform.
US State Department spokesman Victoria Nuland told reporters yesterday that the Obama administration is "deeply troubled" by increased violence and urged dialogue between Myanmar's government and the Kachin Independence Organization, the political wing of the Kachin Independence Army, which has been in an on again, off again, war against the central state for decades.
Simon Roughneen wrote for the Monitor yesterday that "the Myanmar Army offensive – which includes helicopter gunships and aerial bombardment – comes after weeks of heavy fighting at outposts about 10 miles outside the KIA headquarters on the Myanmar-China frontier." He then quoted Joseph Nbwi Naw, a Kachin Catholic priest in the KIA headquarters town of Laiza as saying "the situation is very tense. The bombers are bombing just about four or five miles from the town here."
Myanmar (also known as Burma) is as ethnically complex a country as they come, and while most in the West have focused on the democracy struggle of Aung San Suu Kyi and her National League for Democracy, there is no guarantee that any new order that emerges from a political promise, with promised free elections scheduled for 2015, will create stability or justice for its minorities. Ms. Aung San Suu Kyi, an ethnic Burman like most of the junta that kept Myanmar under military rule from 1962 until 2011, has been mostly silent on violence targeting the ethnic Muslim Rohingyas recently and does not appear to have spoken out on the situation involving the Kachin.
Get our FREE 2013 Global Security Forecast now
In September, the Irrawady, a Thailand-based news organization that focuses on Myanmar, reported that Aung San Suu Kyi argued against taking a strong stand, as it could make the situation worse. "There are people who criticized me when I remained [silent] on this case," she told a Burmese group on a visit to New York. "They can do so as they are not satisfied with me. But, for me, I do not want to add fire to any side of the conflict." The Irrawady wrote: "Some critics have condemned [Aung San Suu Kyi] for staying silent on Kachin as well as the sectarian violence between Arakanese Buddhists and Rohingya Muslims in western Burma."
In early November, I wrote about doubts over the wisdom of America's breakneck pace of normalization with Myanmar, with President Obama becoming the first US leader to ever visit the country that month.
Has there ever been faster restoration of US relations with a country it had once worked so hard to isolate, in the absence of either a US invasion or a revolution? I can't think of one. The once-maligned leaders are being brought in from the cold. The US even indicated in October that Burmese officers would be invited to the annual Cobra Gold military exercise between the US and Thailand as official observers.
The Obama administration's motivations are clear: Demonstrate the benefits of the generals’ political opening and turn toward democracy. But with the breathless rush to friendship comes a country where ethnic tensions still dominate, and ethnic violence, specifically against ethnic Rohingya Muslims, that the generals have been either unwilling or unable to stop.
... If all goes well, the Obama administration’s overture toward Myanmar will go down as a major foreign policy achievement, and more importantly signal a brighter future for Myanmar’s 48 million people. But there are challenges and pitfalls ahead, and with each concession the US and other major powers make before 2015, a potential carrot to offer for positive change is spent.
Hopefully, Obama will not have gone to Myanmar too soon.
The recent war with the Kachin is evidence of how hard it has been to build on the fruits of "dialogue" between Myanmar and armed ethnic-minorities. A 17-year cease-fire between the Kachin rebels, in northeastern Myanmar along the Chinese border, broke in June of 2011, and the results have been catastrophic. Human Rights Watch estimated that 75,000 Kachin were displaced from their homes in the fighting, recording the razing of homes, stealing of property, torture of Kachin civilians, use of civilians as slave labor, and the rape of Kachin women, all by Myanmar soldiers.
Such events have been frequent for Myanmar's ethnic minorities since shortly after independence from Britain in 1948. In February 1947, nationalist hero Aung San, the father of Aung San Suu Kyi, and other nationalist leaders signed the Panglong agreement with ethnic minorities, who today make up about 40 percent of the national population. The agreement envisioned Myanmar as a federal state, with regional autonomy for ethnic minority states like Kachin, where the residents are mostly Christian and speak a language distinct from the ethnic-majority Burmans, who are mostly Buddhist.
But autonomy was never delivered, and when Aung San and six members of his cabinet were assassinated in July 1947, the stage was set for decades of conflict not just with the Kachin but other ethnic minorities like the Shan and the Wa, many living in the rugged mountains in eastern and northern Burma.
For now, the elections of 2015 are a long way away, and whether those elections will lead to a more just approach to ethnic minorities remains an open question. That Aung San Suu Kyi has suffered personally and for decades for her principled stand on democracy for Myanmar is no guarantee that she or anyone else who may come to power there will handle the country's ethnic tensions any better than their predecessors have for the past 60 years.
Holding some diplomatic and sanctions pressure in the back pocket may prove a wiser course than declaring a democracy victory in early 2013.

Read More..

Fed minutes short-circuit Wall Street rally

NEW YORK (Reuters) - Stocks dipped on Thursday after signs the Federal Reserve has growing concern about its highly stimulative monetary policy, giving investors reason to pull back after a two-day rally.
The minutes from the Fed's December policy meeting, released on Thursday, showed increasing reticence about adding to the central bank's $2.9 trillion balance sheet, which it expanded sharply in response to the financial crisis and recession of 2007-2009.
Some policymakers thought asset buying should be slowed or stopped before the end of 2013 while others highlighted the need for further stimulus. The Fed's policy of easy credit has helped push the S&P 500 to a 13.4 percent gain in 2012. Ending that policy would remove an incentive for investors to purchase riskier assets like stocks.
"The surprise was the changes to duration and extent of that program in 2013, but given the tone in previous Fed meeting minutes, it should not have been an entire surprise," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Despite the concerns about the effects of its asset purchases, the Fed look set to continue its open-ended stimulus program for now.
Stocks pushed the S&P 500 index 4.3 percent higher in the previous two sessions. On Thursday investors turned their focus to coming battles in Congress, including the likelihood of bitter fights over budget cuts and raising the federal debt ceiling.
"We were definitely technically extended and ripe for a little bit of a consolidation and today is very orderly - traders and investors are still trying to digest the language and the details from the 2012 taxpayer act," Dickson said.
The Dow Jones industrial average <.dji> dropped 21.19 points, or 0.16 percent, to 13,391.36. The Standard & Poor's 500 Index <.spx> shed 3.05 points, or 0.21 percent, to 1,459.37. The Nasdaq Composite Index <.ixic> lost 11.70 points, or 0.38 percent, to 3,100.57.
Economic data showed U.S. private-sector employers shrugged off a looming budget crisis and stepped up hiring in December, offering further evidence of underlying strength in the economy as 2012 ended.
The government's broader monthly payrolls report, due on Friday, is expected to show the economy created 150,000 jobs compared with 146,000 in November, according to a Reuters poll. The U.S. unemployment rate is seen holding steady at 7.7 percent.
Retailers advanced after several major companies in the sector beat expectations of modest sales increases in December, with the S&P retail index <.spxrt> up 0.4 percent.
Shares in Costco Wholesale Corp rose 1 percent to $102.49 after the company reported a better-than-expected 9 percent rise in December sales at stores open at least a year.
Gap Inc stock climbed 2.3 percent to $32.09 following news that the retailer will buy women's fashion boutique Intermix Inc, the Wall Street Journal reported.
Family Dollar Stores Inc stumbled 13 percent to $55.74 on the company's report of lower-than-expected quarterly profit.
Volume was relatively strong, with about 6.68 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, slightly above the 2012 daily average of 6.42 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,692 to 1,321, while on the Nasdaq, decliners beat advancers 1,287 to 1,187.

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Hong Kong shares may trim strong 2013 start after Fed voices concern

HONG KONG, Jan 4 (Reuters) - Hong Kong shares could end a
two-day rally on Friday, tracking Wall Street weakness after
signs that the U.S. Federal Reserve has growing concerns about
its stimulative monetary policy.
Any losses could be limited if mainland China markets reopen
strongly on Friday, trading for the first day in 2013 after a
three-day New Year holiday.
On Thursday, the Hang Seng Index ended up 0.4 percent
at 23,398.6, its highest since June 1, 2011. The China
Enterprises Index of the top Chinese listings in Hong
Kong added 0.8 percent, reaching another peak since August 2011.
On the week, the indexes are up 3.2 and 5.5 percent,
respectively. The H-share index's relative strength index (RSI)
value suggests that it is now at its most overbought since
October 2010.
Elsewhere in Asia, Japan's Nikkei is up 3 percent in
its first trading session for the year, while South Korea's
KOSPI is down 0.4 percent at 0042 GMT.
FACTORS TO WATCH:
* Consolidation of Austria's cutthroat telecom market moved
ahead on Thursday when Hutchison Whampoa Ltd completed
its 1.3 billion euro ($1.7 billion) takeover of Orange Austria,
making it the country's third-biggest mobile operator.
* Hong Kong's Li & Fung Group agreed to acquire a
majority stake in South Korean children's apparel maker Suhyang
Networks for roughly 200 billion won ($188 million), a South
Korean newspaper reported on Thursday.
* Hong Kong November 2012 retail sales rose 9.5 percent from
a year earlier.
* Bestway International Holdings Ltd has cancelled
part of its mining area in Mongolia due to the implementation of
new regulations.
* Chinese property developer Kaisa Group Holdings Ltd
has issued $500 million in senior notes due 2020
bearing an interest rate of 10.25 percent per annum.
* Chinese property developer Country Garden has
issued $750 million senior notes due 2023 with an interest rate

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Asia stocks eke out gains on China hopes, oil eases

HONG KONG (Reuters) - Most Asian stock markets edged higher on Thursday on hopes of a steady economic revival in China, although oil gave back part of the previous session's strong gains as investors took some money off the table and braced for more U.S. budget battles.
The MSCI Asia Pacific ex-Japan index of stocks rose 0.2 percent following Wednesday's 2 percent jump on relief that U.S. politicians had averted the "fiscal cliff".
Data from China showing the services sector expanded in December continued to underpin expectations of an economic recovery that has helped spur a strong rally in Hong Kong-listed Chinese shares over the past month.
The China Enterprises index which rallied more than 4 percent in the previous session eased 0.2 percent. Onshore Chinese markets will resume trading on Friday.
"China looks like it's improving at the margin and the market has momentum that could last for at least a few months," said Christian Keilland, head of trading at BTIG in Hong Kong.
"Investors seem to have accepted that reforms are underway but they're going to happen at a slower pace."
Australian stocks rose 0.7 percent to their highest in more than 19 months, with mining giants Rio Tinto up 2.4 percent and BHP Billiton up 0.8 percent, among the top gainers on the benchmark S&P ASX/200 index.
South Korea's Kospi underperformed the region, falling 0.4 percent as automakers and other exporters slumped on a stronger Korean won, which hit a 16-month high against the dollar overnight.
In other currency markets, the Japanese yen bounced after hitting a 29-month low versus the dollar earlier in the day but analysts warned that any strength is likely to be short-lived.
"Technically dollar/yen looks somewhat overbought here. It's gone a long way in a very short time," said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore, adding that the dollar could see some consolidation in the near term before heading higher.
The euro which in overnight trading was close to a 8-1/2 month high against the dollar, slipped 0.1 percent.
The U.S. dollar rose 0.2 percent against a basket of major currencies.
President Barack Obama and congressional Republicans face even bigger budget battles in the next two months after a hard-fought deal averted the fiscal cliff of automatic tightening that threatened to push the U.S. into recession.
Strength in the dollar and profit-taking pushed oil prices lower with Brent crude slipping 0.3 percent and U.S crude futures down 19 cents to $92.93.
"After the initial excitement, reality sets in," said Victor Shum, oil consultant at IHS Purvin & Gertz. "There will be other negotiations and the deal is a compromise."

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South African rand weakens in muted trade

JOHANNESBURG (Reuters) - South Africa's rand softened against the dollar on Thursday in thin post-holiday trade, underperforming many emerging market currencies.
The rand was at 8.5168 to the dollar at 0651 GMT, 0.3 percent weaker than Wednesday's New York close, making it one of the worst performers in a basket of 20 emerging market currencies monitored by Reuters.
It had reached a 3-month high of 8.42 to the dollar early on Wednesday, lifted by U.S. lawmakers reaching a deal to avoid a "fiscal cliff" of tax increases and spending cuts that threatened the world's biggest economy.
The rand erased most of those gains later in the session.
Trading was expected to pick up next week when most market participants return from their holidays, giving the rand some direction.
"There's still a holiday mentality out there and liquidity has been very thin. The rand has been trading erratically," said one trader.
"We will only start seeing proper trades coming back into the market next week when market participants are back again."
The yield on the 2026 government bond was at 7.25 percent while the 2015 issue was yielding 5.33 percent.

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Brent falls towards $112; China data offsets US concerns

 Brent crude pared earlier losses to stay above $112 a barrel on Thursday as positive data reinforced hopes of an economic recovery in China, but the prospect of more budget battles in the United States and rising oil supply weighed on prices.
President Barack Obama and congressional Republicans face even bigger budget wrangling in the next two months after a hard-fought deal halted a round of automatic fiscal tightening that threatened to push the world's largest economy into recession.
Brent crude fell 29 cents to $112.18 a barrel by 0529 GMT after rising more than 1 percent on Wednesday to settle at the highest since October.
U.S. crude for February delivery was down 21 cents to $92.91 after closing at its highest since September.
"After the initial excitement, reality sets in," said Victor Shum, oil consultant at IHS Purvin & Gertz. "There will be other negotiations and the deal is a compromise."
Both contracts pared earlier losses of more than 50 cents after data showed China's services sector expanded in December, fueling hopes that the world's second largest economy is recovering.
Oil prices surged at the start of the year despite analysts' expectations of a lower price in 2013 as supply outweighs demand. Crude production in the United States has hit a 19-year high while Russia pumped the most oil in the world last year, ahead of Saudi Arabia.
"If one focuses on the oil fundamentals, pricing at the current level appears overbought," Shum said, pointing to the fragile global economy and the growth in oil production from non-OPEC countries.
"In 2013, OPEC may have to limit supply in order to accommodate a rise in non-OPEC oil production growth," he said.
In the United States, a major pipeline expansion that aims to ease the bottleneck at Cushing, Oklahoma -- a factor that has depressed U.S. crude prices -- should pump at full rates from the end of next week.
The spread between Brent and West Texas Intermediate has narrowed to about $19 a barrel, down from 2012 highs of about $26.
Investors will be scouring weekly data on U.S. jobless claims and oil inventories due later on Thursday for further cues on the economic health of, and fuel demand in, the world's largest economy.
U.S. commercial crude oil stockpiles likely fell last week due to lower imports as refiners drew down inventories for year-end tax purposes, a preliminary Reuters poll of eight analysts showed.
The American Petroleum Institute (API) will release its report on Thursday, delayed due to the New Year day's holiday on Tuesday. The U.S. government's Energy Information Administration (EIA) will issue its data on Friday.

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New Constitution divides Egypt as economy falters

New constitutions are usually greeted with great fanfare. They're assumed to carry both the promise of a fresh start and signal that a chaotic transition has come to an end.
But Egypt's new constitution is something else again. Signed into law on Dec. 26 by President Mohamed Morsi, the new charter has become a symbol of a sharply divided nation. Mr. Morsi's opponents charge the passage of the constitution is not the result of a national consensus, but evidence that the Muslim Brotherhood that propelled Morsi to power intends to push its agenda over the heads of secular-leaning and liberal political opponents.
While Morsi extended an olive branch to opponents in a nationally televised speech on Dec. 26, the country is at its most sharply polarized point since longtime dictator Hosni Mubarak was ousted in February 2011. Egypt is scheduled to hold parliamentary elections in about two months, and the runup to that election is more likely to exacerbate Egypt's open political wounds rather than heal them.
What will that mean? More street protests, more chaotic governance, and no short-term fixes for an economy that was weak at the time Mr. Mubarak fell and has gone from bad to worse. The Egyptian pound fell to its lowest point against the dollar in eight years this week, and the currency may say more about what happens to Egypt in the coming years than the contents of the new Constitution. Roughly 30 million of Egypt's 80 million people get by on $2 or less a day, and are heavily reliant on government subsidies. The Egyptian government spent $3 billion on its subsidized bread program alone last year.
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And with tourism in the dumps and a collapse in local and foreign investment, the government's ability to meet the most fundamental needs and demands of its citizens has been badly strained. Foreign reserves stood at about $36 billion at the start of 2011. Today, foreign reserves are at about $15 billion.
Finding a solution to Egypt's economic woes won't be easy. But for now, that issue is being pushed to the side, with a loose coalition of secular-leaning groups vowing to fight against the Muslim Brotherhood's agenda. The opposition argues that individual liberties are now threatened by the enshrining of aspects of Islamic law into the Constitution and giving Egypt's powerful military the right to detain and try civilians under some circumstances.
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Morsi promised a national dialogue this week and said "mistakes" were made in the drafting of the Constitution, but those remarks fell completely flat as a conciliatory gesture. In the past few weeks he's gotten everything he wanted and critics of the Constitution received zero concessions. Now that he has the document in hand, offers of "dialogue" are being seen as an attempt to put a magnanimous gloss on what was a bare-knuckle, winner-take-all contest that Morsi and the Muslim Brotherhood just won.
Leftists, so-called liberals, and Egyptians who want a secular approach to the state and Egyptian identity are furious and pondering their next moves. The Brotherhood, meanwhile, is sticking to the game plan that's made it the winner in all four elections held (two referendums, the last parliamentary election, and the presidential) since Mubarak was driven from power in February 2011: superior organization and on-the-ground mobilization.
While opponents of the Constitution pointed to low turnout in the referendum as a sign of general public dissatisfaction with the document, the Brothers have won both elections with overwhelming turnout and ones with small turnout. With the constitution set, next up are fresh parliamentary elections that the movement is going to pull out all the stops to dominate, just like it did last time.
That annulled parliamentary election has much to do with why Morsi's political opponents trust neither him nor his movement. In 2011, the Brothers loudly proclaimed that they had no intention of dominating Egyptian politics and vowed to contest only about 30 percent of the seats in the next parliament. The movement and its newly minted Freedom and Justice Party (FJP) also promised not to run a candidate for president.
But as the contours of the new Egypt started to emerge, and the prospect of a counter-revolution by military officers looked less likely, the Brothers abandoned both promises. Obviously, Morsi won the presidency. And as for Parliament, the Brother's contested 100 percent of the seats, winning almost half of them.
Now on Morsi's agenda is victory in the parliamentary election. If the Brothers can steamroll the opposition again, they'll hold the presidency, the legislature, and a Constitution written with little input from the country's secular-leaning forces.
But the real challenge is Egypt's weak economy and the increased suffering of its poor. Absent economic improvement, and soon, the turmoil of Egypt's past two years could well end up being overshadowed.

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Progress watch 2012: Smart phones, jobs returning to America, and war crimes trials

Good news is hard to find. That's partly because, no matter what the topic, there's so much distracting bad news: ongoing violence in Syria, America's allegedly imminent fiscal demise, the National Hockey League lockout. From the front page to the sports page, so little looks good.
It isn't just the cacophony of naysaying and fear that crowds out good news. It's also the nature of progress itself: Good news happens slowly. The American storytelling ethos loves narratives of overnight success, but real change isn't usually so sudden. Earlier this year, the World Bank announced that the number of people living on less than $1.25 a day – what policy wonks call "extreme poverty" – had dropped by half since 1990. That study might have been the biggest bit of good news to go overlooked this year, but consider this: Global extreme poverty was actually halved in 2010 – it took two years even to see that progress had happened.
Other highlights, too, have been subject to the long arc of incremental change. Nearly 90 percent of people globally have access to clean water, according to the World Health Organization. In Mexico, homicide rates – driven to outrageous levels in the drug wars – are down for the first time in six years.
Recommended: 2012's 'good news' stories
In The Hague, two international war criminals were found guilty in landmark rulings: the International Criminal Court convicted Thomas Lubanga, a Congolese rebel, of recruiting child soldiers. The conviction, after a two-year trial, was a first for the ICC, established a decade ago. The verdict "was the culmination of decades of hope that accountability for the most serious crimes would be achieved," says James Goldston, founding director of the Open Society Justice Initiative. "It took 10 years, but this conviction [is] an enormous accomplishment and a major step forward for international justice."
In a long-awaited verdict from a different court, the Special Court for Sierra Leone, former Liberian President Charles Taylor was convicted of war crimes. He is effectively the first former head of state to be convicted of war crimes. (The formal distinction goes to Karl Dönitz, who served as president of Germany for the 23 days between Hitler's suicide and the dissolution of the government after Germany's surrender in World War II.)
Not all of this year's good news comes on the heels of tragedy. In Nigeria, Egypt, and India, mobile technology is expanding entrepreneurship so quickly that small, mobile-tech-heavy businesses make up 38 percent of the gross domestic product, according to a study released earlier this year by global consultancy Booz Allen.
Americans are seeing their own mobile revolution – more than half of all Americans today use their cellphones to access the Internet, up from a third three years ago, according to the Pew Research Center. That puts the United States on the brink of a breakthrough: "Within a few years, [smart phone use] is going to be ubiquitous, and when you get that many people using smart phones, it transforms the economy, society, and politics," says Darrell West, director of the Center for Technology Innovation at the Brookings Institution in Washington.
Indeed, technology drives much of the change seen in America, even just this year. Sales of nonpolluting electric cars are surpassing expectations. And self-driving cars are now legal in California. Google conducted the first test of its self-driving car with a passenger who was chauffeured to the dry cleaner and Taco Bell. Even this flashy moment has been slower to brew than it may seem. "This has always been one of the more popular predictions about the future people were talking about in the '60s and '70s, back when they were discussing all the other sort of wide-eyed, post-cold-war futures," says Patrick Tucker, the director of communications at the World Future Society. Beyond being wide-eyed, self-driven automobiles might make passengers safer – computers are likely eventually to be better drivers than humans, Mr. Tucker says – and transform cities. Summoning one's car from even a mile away "removes the need for designing cities on the basis of the availability of on-site parking," he says. Ordering up an automobile also makes car sharing easier, which can reduce carbon emissions, he adds.
Even traditional travel by land, sea, and air has gotten safer this year. The accidental death rate for children in the US plunged 30 percent in the past decade, led by auto safety improvements such as increased use of seat belts and booster seats and safer vehicle design, according to the Centers for Disease Control and Prevention. Piracy and armed robbery at sea dropped to the lowest levels since 2009, when Somali piracy spiked, reports the International Chamber of Commerce International Maritime Bureau, which attributes the decline to improved policing by international navies and onboard security measures. And in the air, there were no major commercial airline crashes in the US in 2012, the 11th year in a row, says Todd Curtis, director of the AirSafe.com Foundation.
Election season debates overshadowed some exciting news about the economy, which may get a transforming boost from a new kind of robot: Baxter, the (comparatively) affordable factory robot from Rodney Brooks, the man who brought the world the Roomba vacuum cleaner. Tucker calls Baxter "the most unique factory robot that's ever been made" because of its dexterity. "It's about the size of an NFL linebacker, and it's got two arms [that] can pick up a whole bunch of types of objects and do a wide variety of very simple tasks," Tucker says.
"That doesn't sound ... as earthshaking as it is," he concedes. But it might be a major game changer. Most factory robots can perform a few specific tasks, and they can't easily be programmed to do something else. That's why they're seen on assembly lines for cars and appliances but not on those for toys or personal electronics, Tucker says. Baxter can handle the little items that need an update every season. And that might bring some of the manufacturing that's migrated to China back to the US.
Then again, some of that labor is already returning: This year, "reshoring" entered the lexicon as a way of talking about manufacturing jobs returning to the US, usually from China. There isn't tracking of official numbers for this, but the Reshoring Initiative estimates that 12 percent of the manufacturing jobs the economy has seen return since 2010 were from abroad.
Observers caution that the reshoring trend may be a fad; more time is needed to know for sure. That brings us back to the slow pace of progress. However maddening it may be, it is also undeniable: Things are getting better.
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"We're winning more than we're losing," says Jerome Glenn, director of the Millennium Project, a global futures research center and think tank. The project releases an annual "State of the Future" index, and this year's says that "the world is getting richer, healthier, better educated, more peaceful, and better connected, [and] people are living longer."
Mr. Glenn cautions that things aren't all rosy, and thumbing through any newspaper would suggest there are still plenty of world problems to make progress on. He compares it to making ice: Cooling water isn't too difficult, but turning it into ice requires serious energy. "We're at that point of going from water into ice in a sense of difficulty" of shared global challenges. It's time, he says, "to roll up our sleeves.

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Secret cremation for gang-rape victim sparks anger against Indian government

Protests became violent today in Delhi as the youth wing of the opposition Bhartiya Janata Party (BJP) pelted stones at police and tried to climb over barricades following news of the secret cremation of the body of the Delhi gang rape victim.
The young woman was cremated on the outskirts of Delhi Sunday morning, in an effort to prevent the public from swarming the funeral site. However, this only increased public resentment, reaffirming the growing perception that the government was being hostile to the protests.
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Protests began nearly two weeks ago, after the gang-rape and brutal assault of the 23-year-old on Dec. 16, with an outpouring of anger by Indians demanding greater protection for women from sexual violence. Demonstrators marched to Raisina Hill, which houses the presidential palace. There, on the first day of demonstrations a young girl breached security and entered the palace.
As protests became more organized on Facebook and by political organizations, more people took to the streets and the relationship between protestors and police grew more strained.
One protester was filmmaker Anusha Rizvi, who witnessed left-wing groups form a circle and peacefully protest within it. “By afternoon we heard policemen announce loudly in their walkie talkies that they would start charging on the crowd. The regular police went behind and the police criss-crossed through the group of people in the circle.”
The police then charged the crowds with batons, fired tear gas and water canons. The government later said the police had little choice because the protests had become violent. However, many witnesses say the police charged on nonviolent crowds who were sitting on the road.
“I couldn’t see anything. I just heard the two cracks of a split bamboo stick on my back, butt, and thighs. Then I heard the police screaming ... and then I saw a boot kicking my knees and shin,” wrote graphic designer Sangeeta Das in a widely circulated Facebook note.
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Lokesh, an activist with the feminist organization Streemukti Sangathan, said that a few people were seen pelting stones out of frustration but the rest tried to stop them. “I don’t know who they were,” she said, “but ... the government was ignoring us and not responding to the protests.”
That the police wanted to disperse the protests and not simply respond to stray stone-pelting became clear when it also attacked media personnel and their vehicles, say observers.
“News channels had declined [a] government request to leave the site and [so] they showered our broadcast vans [with a water hose] to make us leave,” said one journalist on condition of anonymity. Another journalist was injured when a tear gas shell exploded near her. The Information and Broadcasting Ministry later issued an “advisory” asking news channels to show restraint with their reporting, threatening action if they didn’t.
Metro stations in central Delhi were closed for nearly a week. India Gate and Raisina Hill were cordoned off from most traffic.
“This is how the government handles public protest across India, even firing directly at protestors and killing them,” says political scientist Nivedita Menon. “Be it agitations against nuclear plants or land grabs, this is the language of the government,” she says echoing the views of many Indians as the protest movement has become as much about police repression as it has been about the safety of women.
TO QUELL POPULAR ANGER
The government has appointed a special commission designed to give recommendations on how to keep women safe and has made various statements to assuage public anger to little avail.
“The government didn’t have to take the burden of guilt in this case, it could have shared people’s grief,” says political commentator Ajoy Bose, adding that since the anticorruption protests of 2011 the government has showed it has become scared of demonstrations. “There is a huge disconnect between the government and the people, the government no longer knows how to interact,” he said adding that that, too, has angered Indians.
Barkha Dutt, editor of the NDTV news channel, tweeted, ”From day one the government needed to (and didn't) show Compassion, Communication and Commonsense. Now their attempts seem forced, puny, insincere.”
Still, say some, directing anger at the government is misplaced. “The protestors are taking the easy way out by blaming government apathy. The state only reflects a deeply misogynistic society – the protestors need to look within, not without,” said columnist Mihir Sharma.

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UN envoy: Without deal in Syria, think Somalia not Yugoslavia

• A daily summary of global reports on security issues.
After a week of attempting to craft a peace plan that both President Bashar al-Assad and the Syrian opposition would agree to, the United Nations' envoy to Syria said the situation will not stabilize on its own and that a political deal is no closer.
“People are talking about a divided Syria being split into a number of small states like Yugoslavia,” Lakhdar Brahimi said, according to The New York Times. “This is not what is going to happen. What will happen is Somalization – warlords."
“The situation is bad and it’s getting worse,” Brahimi also said, according to Bloomberg Businessweek. “I can’t see anything other than these two paths: Either there will be a political solution that will meet the ambitions and legitimate rights of the Syrian people, or Syria will turn into hell.”
He warned that the violence could claim as many as 100,000 lives in 2013.
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According to the New York Times, Mr. Assad did not respond to Mr. Brahimi's proposals and a Syrian opposition leader declined an invitation to Moscow to meet with Russian officials. Sergei Lavrov, Russia's foreign minister, said Assad could not be convinced to leave the country, which the opposition has insisted is a precondition for talks.
Speaking about the yawning gap that has to be bridged for the two sides to sit down for talks, CNN reports that Brahimi said, "The Syrians disagree violently. On one side, the government says we are doing our duty to protect our people from ... terrorists. On the other side, they say the government is illegitimate," Brahimi said. "They are not talking about the same problem. They are talking about two different problems."
Brahimi's comments came the day after what CNN said might be the bloodiest day in the uprising – on Dec. 29, at least 399 people were killed.
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According to Reuters, Mr. Lavrov pinned the blame for continuing violence on the opposition, even though the US, European countries, and most Arab states back the opposition's demand that Assad's removal from power come first.
"When the opposition says only Assad's exit will allow it to begin a dialogue about the future of its own country, we think this is wrong, we think this is rather counterproductive," he said. "The costs of this precondition are more and more lives of Syrian citizens."
But the Syrian opposition's calculus has changed over the last couple months. A string of victories has made it optimistic abut winning the war in the end, and therefore less flexible in negotiations, according to Reuters.
REGIME STILL HAS STRENGTH
But despite their recent success, "the government still has the bigger arsenal and a potent air force. It controls most of the densely populated southwest of Syria, the Mediterranean coast, most of the main north-south highway and military bases countrywide," Reuters notes.
Russia appears to be making an effort to secure a meeting, agreeing to meet the opposition representative outside of Russia if he insists. Bloomberg reports that, according to RIA Novosti, the foreign ministry said talks could be held in Geneva or Cairo instead.
Meanwhile, Brahimi is rapidly losing ground support in Syria, Reuters reports.
The envoy's credibility with the rebels appears to have withered. In the rebel-held town of Kafranbel, demonstrators held up banners ridiculing Brahimi with English obscenities.
"We do not agree at all with Brahimi's initiative. We do not agree with anything Brahimi says," the rebel chief in Aleppo province, Colonel Abdel-Jabbar Oqaidi, said on Friday.

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Obama's pivot to Asia? Middle East will still demand attention in 2013.

Nearly four years ago, President Barack Obama addressed a packed, enthusiastic crowd at Cairo University and promised a "new beginning" between the United States and the Muslim world.
In that speech, Mr. Obama outlined a vision for a new era of economic cooperation in the Middle East, one of steadfast US support for democracy, and of reset priorities.
"I've come here to Cairo to seek a new beginning between the United States and Muslims around the world, one based on mutual interest and mutual respect," he said then.
While Obama ended the war in Iraq on a schedule provided to him by his predecessor, George W. Bush, many of the promises in that speech went unfulfilled. The Guantánamo Bay military prison was never closed. Progress on peace between Palestinians and Israelis was not made. The promised economic development of Afghanistan, beset by a war that Obama now looks set to end in 2014, never took root.
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Nevertheless, four years later, he's got his new beginning – not by his own hand, and not the one he would have either imagined or wanted when he made his series of stirring promises in Cairo.
The self-immolation and death of Mohamed Bouazizi in Tunisia in December 2010 led to the sharpest change in the politics of the Middle East since the 1960s. The events of the past year in Egypt, Syria, Tunisia, and Libya have cemented a radical new reality that Obama will have to contend with in his second term.
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For all the talk of a US strategic "pivot" to Asia, a dramatically changed Middle East looks set to suck up a huge portion of American diplomatic energy and attention in the coming years. Old, comfortable patterns of dealing with regional dictators like Egypt's Hosni Mubarak and Tunisia's Zine El Abidine Ben Ali have been severely disrupted. Islamists, long feared by the US, have since won power in free elections in Egypt and Tunisia, and are among those fighting the secular regime in Syria.
SYRIA'S DENOUEMENT
In Syria, the civil war has claimed more than 40,000 lives, and there are threats to US interests in both the demise of Bashar al-Assad's regime there, if it comes, and in his survival. As this year draws to a close, the US has edged closer to full-fledged support for elements of the uprising against Mr. Assad even as it labeled one of the opposition's most effective fighting groups, the jihadi Jabhat al-Nusra, a foreign terrorist organization.
The denouement there, when it comes, could well have destabilizing ripples for neighboring Lebanon and Iraq. Syria's chemical weapons stockpiles are a reality that can't be ignored, and the prospect of those weapons falling into the hands of jihadi groups has the Obama administration drawing up contingency plans for possible intervention.
Israel, while it's had a long cold war with Assad's Syria and continues to occupy the Golan Heights, nevertheless is frightened by the prospect of yet another Sunni Islamist regime, rather than a secular nationalist one, on its doorstep.
TROUBLES AT HOME FOR ISRAEL
The Israeli-Palestinian conflict is also moving into new, dangerous waters. The so-called peace process that began with the Oslo Accords in 1993 has petered out completely. In 2009, Obama called for an end to Israeli settlement construction in the West Bank and early in his presidency leaned hard on Israeli Prime Minister Benjamin Netanyahu for at least a temporary freeze. But expansion has continued unabated, and the Obama administration appears to have lost interest in pressing the issue.
In the West Bank, Palestinian Authority President Mahmoud Abbas has been weakened by his failure to negotiate an end to the encroaching Israeli settlements, and in Gaza the Islamist movement Hamas remains as entrenched as ever.
In November, Israel was a hairbreadth away from an invasion of Gaza that was only avoided at the last minute by a negotiated cease-fire. A key figure in heading off that crisis was Egypt's president, Mohamed Morsi, the Muslim Brotherhood stalwart whom the US turned to as intermediary with Hamas.
BROTHERLY RELATIONS
The rise to power of the Islamist Muslim Brotherhood in Egypt captures the peril for the US of this new beginning. Mr. Morsi was elected in a free election, but the country's new constitution, which is set to pass a referendum this month, is filled with alarming elements in terms of personal freedoms and minorities' rights.
The state of that country's economy has deteriorated sharply thanks to the political turmoil of the past two years, with clashes in Cairo between supporters of Morsi and his opponents in November being the latest reminder that the authoritarian stability of the Mubarak years has been replaced by something fluid and hard to predict.
Many of the Egyptian liberals and secularists who listened to Obama's Cairo speech so appreciatively now grumble that he's backing the Brothers as they seek to cement their power and influence over the country. In the year ahead, and beyond, Obama will have to weigh criticism of Egyptian suppression of civil liberties on the one hand against a desire for Egyptian cooperation in keeping Hamas, an offshoot of the Muslim Brotherhood, contained in Gaza.
There are still other shoes to drop in the region. Libya is struggling to create a new order after decades of one-man rule by Muammar Qaddafi, with weapons smuggling rife along its desert borders and sharp clashes there still to be worked out over the role of Islam in the country's political life. In Bahrain, a close US ally and home to the US Navy's Fifth Fleet, a Sunni monarchy is contending with the simmering political discontent of the country's Shiite majority, which is challenging Obama's earlier assertion of a personal commitment to advocating "governments that reflect the will of the people."
EAST OF THE MIDDLE EAST
The one constant from four years ago is hardly reassuring: the slow, steady progress of Iran's nuclear program. Obama has spearheaded an effort among Western governments to financially isolate Iran, with restrictions on its oil sales and the financial transactions of its central bank, which have taken a heavy toll on Iran's economy but have done little to lessen the commitment of Ayatollah Khamenei, the country's supreme leader, to what he insists is a peaceful nuclear program.
For now, Iran continues to insist on its right to nuclear enrichment, which the US argues is producing material that could be eventually used in a nuclear bomb.
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The situation in Afghanistan and Pakistan is as fraught as ever. Yes, Osama bin Laden was killed in a daring raid in Pakistan by US troops in 2011. But, notwithstanding billions of dollars in annual US aid, that country continues to provide a home to militants, and Shakil Afridi, a Pakistani doctor who helped the US track Mr. bin Laden to his compound in Abbottabad, remains in a Pakistani jail.
In Afghanistan, the Army is completely reliant on US financing and technical support to operate, and the Taliban appear no weaker than they did when Obama took office.
As the Obama administration looks ahead to 2013 and its new challenges, it is looking over a Middle East landscape transformed from four years ago. The old ways of doing business in the region aren't going to work anymore. How Obama must miss them.

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Will retailers rebound after weak holiday season?

As signs emerge that holiday sales this year grew at the weakest pace since 2008, investors are dumping retail stocks. Analysts are crowing about the missing "consumer engine" without which the economy may stagnate.
Many fear that the season's weakness will reverberate throughout the economy: Stores will be saddled with excess merchandise, forcing them to slash prices and accept razor-thin profit margins. Demand will soften for goods up and down the supply chain, leading eventually to a decline in orders for factory goods and weaker manufacturing. Growth will slow.
Yet there are plenty of reasons to believe that these fears are overblown, some market-watchers argue. Auto sales are strong, as are some measures of consumer sentiment. Home values are rising, leaving fewer Americans on the brink of foreclosure and helping many feel more financially secure.
Above all, they point out, there is nothing permanent about the "fiscal cliff," a set of tax hikes and spending cuts that will automatically take effect at the beginning of 2013 if lawmakers are unable to reach a deal to avert it.
When the fiscal issue is addressed and demand bounces back, these contrarians argue, beaten-down retail stocks may turn out to be this year's best after-Christmas bargain.
"There may be some caution ahead of the fiscal cliff" because of uncertainty about tax rates, "but it's more of a road bump than any fundamental weakness," says David Kelly, chief global strategist for JP Morgan Funds.
He notes that a daily tracker of consumer sentiment, the Rasmussen Consumer Index, rose Friday to 98.9, the highest level measured since January 2008. Other measures of consumer sentiment appear weaker, but Kelly believes the Rasmussen data is more reliable because it is updated daily. Most other indices rely on monthly surveys.
The fiscal cliff isn't the only reason consumers slowed down in November and December. Americans were buffeted by a series of events that made them more likely to stay home.
Superstorm Sandy caused steep holiday sales declines in the Northeast and mid-Atlantic that made the national picture appear far weaker. The presidential election distracted people in November, the Newtown massacre in December. And the rising din about Washington's current budget impasse left many people unsure what their 2013 household budgets will look like.
The outcome: Holiday sales of electronics, clothing, jewelry and home goods in the two months before Christmas increased just 0.7 percent compared with last year, according to preliminary data released Tuesday by MasterCard Advisors SpendingPulse, which tracks holiday spending across all payment methods. That's the weakest holiday performance since 2008, when sales dropped several percent as the cresting financial crisis pushed the economy into a deep recession.
For many, the early results were a worrisome sign of things to come. Jeff Sica, president and chief investment officer of SICA Wealth Management in Morristown, N.J., called the retail sales result "onerous" and "a negative overhang on the market."
Still, the nation's largest retail trade group, the National Retail Federation, is sticking to its forecast that total sales for November and December will be up 4.1 percent from last year. A clearer picture will emerge next week as retailers like Macy's and Target report monthly sales.
That didn't keep investors from reacting hastily to the grim early data. Retail stocks in the Standard & Poor's 500 index fell 5.4 percent this month, while the broader index declined only 1 percent. Computer and electronics retailers fared the worst, sinking 10.3 percent.
Not so fast, says Karyn Cavanaugh, market strategist with ING Investment Management in New York. She favors the consumer discretionary sector, represented in the S&P 500 by Home Depot, Amazon.com Inc., Target Corp. and Ford Motor Co., among others.
"The consumer has shown surprising resilience throughout this tepid recovery and we believe will continue to do so," Cavanaugh says. The housing turnaround "will further aid consumer and consumer confidence," she says.
Sales of new homes rose in November to the fastest pace in two and a half years, the government said Thursday. The National Association of Realtors' pending home sales index also rose last month to its highest level in two and a half years, the group said Friday.
Consumer spending, to be sure, is a critical indicator of economic activity. It accounts for about 70 percent of the economy, so a true slowdown could have a painful ripple effect. That's especially true in the final two months of the year, which contribute as much as 40 percent of annual sales for many retailers.
Some analysts are warning that the pain for retailers has only just begun. Brian Sozzi, chief equities analyst at NBG Productions, says revenue results and fourth-quarter earnings forecasts, due out early next month, pose another threat to retail stocks. Sozzi recommends betting against some weaker brands, including teen apparel chain Aeropostale.
Assuming stocks continue to sink because of weak guidance and "general market angst," Sozzi said in a note to clients Friday, "the moment to potentially entertain this sector from a long perspective will be sometime before earnings season begins in mid-February."
According to Kelly and other market bulls, consumers haven't meaningfully slowed their spending. They're merely holding off as they wait for lawmakers to craft a deal that would prevent some of the scheduled tax increases.
"There's a difference between confidence and spending attitudes," Kelly says. "People are generally feeling more confident because home prices are going up."
Kelly and others believe that a deal on the fiscal cliff is all but inevitable — eventually. He acknowledges that the waiting could be painful for consumers, retailers and most other businesses, but says, "If we don't get a fiscal cliff deal, then we'll wait and get a fiscal cliff deal."
Analysts who doubt that spending will bounce back quite so quickly argue that consumers are still paying down debt and have less interest in shopping sprees, in part because median incomes are falling.
Despite the stronger housing market and other positive signs, "they're going to take the opportunity to retrench, rather than buy stuff," says Derrick Irwin, portfolio manager for Wells Fargo Advantage Funds.
Peter Tchir, manager of the hedge fund TF Market Advisors, says consumers may be shopping less because economic turbulence has helped people reassess the value of what they consume.
"We've overconsumed for so long ... how much do you really need to add?" he says. "To some extent, it's healthy for Americans to live within their means. But clearly, this week, it's not great for retail stocks."

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Immigration, economic revival head Obama's second-term checklist

- President Barack Obama is pledging to focus in his second term on immigration reform, boosting economic growth through infrastructure repair and energy policies that nod to environmental protection.
The president is mired in a difficult fight with congressional Republicans to avoid sharp spending cuts and steep tax increases collectively referred to as the "fiscal cliff." However, he still has a longer-term to-do list for his remaining four years in office, he said in an interview on NBC's "Meet the Press" that was broadcast on Sunday.
Obama, who won re-election in November after a campaign in which he succeeded in painting himself as a strong advocate for the middle class and those aspiring to join it, also promised in the interview to make a run at passing gun control legislation in the first year of his second term.
"Fixing our broken immigration system is a top priority," he said. He renewed a pledge to introduce legislation in the first year of his second term to get it done.
Immigration reform is a sensitive subject for the president, who failed to fulfill his promise to revamp the system during his first term. Latino voters were a critical part of the coalition that helped get him re-elected, a fact that may soften political opposition from Republicans, who are eager to bolster their support with that demographic group.
Immigration reform supporters on the left believe that the 11 million undocumented foreigners in the United States should be allowed a path to work toward citizenship. But opponents believe that this approach would reward people who broke the law by coming to the United States illegally.
Republicans have sought stronger measures to keep illegal immigrants from entering the United States from Mexico. Advocates on both sides of the debate want to more effectively verify legal workers in an economy in which businesses want to hire non-U.S. workers ranging from low-paid farm hands to technology-savvy professionals.
While negotiations to avoid the fiscal cliff have hogged the spotlight in the first weeks after the election, Obama said he wants to take steps to ensure the sluggish recovery gains steam.
Many observers had believed a persistently high level of unemployment would thwart Obama's chances of winning a second term. The U.S. jobless rate peaked at 10 percent in 2009 after the harshest recession since the Great Depression but has been falling and dipped to 7.7 percent in November.
The president said rebuilding crumbling roads, bridges and schools could put people back to work and put the economy on a sounder footing. He said he would pair those steps - which would likely involve government spending - with deficit reduction measures to tame the nation's budget deficit.
The president also said energy policy would be a leading emphasis. He said he would focus on how the country can produce more energy and export energy, while also dealing with environmental challenges. He did not specify how he would do that. The president's effort to fight climate change with a broad emissions trading system failed during his first term.
When pressed, Obama added gun control to his list of priorities, reiterating his support for a ban on assault rifles and high capacity clips, as well as background checks.

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Fiscal deal stalls as clock ticks to deadline

Efforts to prevent the economy from tumbling over a "fiscal cliff" stalled on Sunday as Democrats and Republicans remained at loggerheads over a deal that would prevent taxes for all Americans from rising on New Year's Day.
One hour before they had hoped to present a plan, Democratic and Republican Senate leaders said they were still unable to reach a compromise that would stop the automatic tax hikes and spending cuts that could push the U.S. economy back into recession.
"There are still serious differences between the two sides," said Senate Democratic leader Harry Reid.
Progress still appeared possible after the two sides narrowed their differences on tax increases and Republicans indicated they would withdraw a contentious proposal to slow the growth of Social Security retirement benefits.
Failure to secure a deal would deliver a heavy blow to the U.S. economy just as it is showing signs of a quicker recovery. Planned tax increases and spending cuts would suck $600 billion out of the economy and again force up unemployment, which had shown signs of improving.
Senate Republican leader Mitch McConnell talked several times to Vice President Joe Biden by phone in the hope of breaking the standstill. "I'm willing to get this done, but I need a dance partner," McConnell said.
Any agreement needs to be rushed through both chambers of Congress before midnight on Monday. But, even if the two sides reach a deal, procedural barriers in the Senate and the House of Representatives make quick action difficult.
Buoyed by his re-election in November, President Barack Obama has insisted that any deal must include a tax increase on the wealthiest Americans, who have seen their earnings rise steadily over the past decade at a time when income has stalled for the less affluent.
Many conservative Republicans in the House of Representatives oppose a tax hike on anyone, no matter how wealthy.
The two sides were close to agreeing to raise taxes on households earning around $400,000 or $500,000 a year - higher than Obama's preferred threshold of $250,000 - several senators told reporters.
Republicans aim to pair any tax increase with government spending cuts to benefit programs that are projected to grow ever more expensive as the population ages in coming decades.
But their proposal to slow the growth of Social Security benefits by changing the way they are measured against inflation met fierce resistance from Democrats. Obama included the proposal, known as "chained CPI," in an earlier proposal, but many of his fellow Democrats remain opposed.
'POISON PILL'
"We consider it a poison pill - they know we can't accept it. It is a big step back from where we were on Friday," a Senate Democratic aide said.
Several Senate Republicans said they would support taking that idea out of the discussion. "Most of us agree the chained CPI is off the table in these negotiations," Senator John McCain said on Twitter.
In a rare appearance on NBC's "Meet the Press," Obama pressured lawmakers to reach a deal.
"If people start seeing that on January 1st this problem still hasn't been solved... then obviously that's going to have an adverse reaction in the markets," he said, adding that he had offered Republicans significant compromises that had been rejected repeatedly.
Obama said he would try to reverse the tax hikes for most Americans if Congress fails to act.
John Boehner, the House speaker, rejected Obama's accusations that Republicans were not being amenable to compromise.
"The president's comments today are ironic, as a recurring theme of our negotiations was his unwillingness to agree to anything that would require him to stand up to his own party," he said in a statement. (Additional reporting by Tabassum Zakaria, Jeff Mason, David Lawder, Fred Barbash and Richard Cowan.

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Equity futures rise, but "cliff" stalemate suggests more losses

Equity futures were slightly higher at the beginning of electronic trading on Sunday night as talks continued in Washington over resolving the "fiscal cliff."
However, stocks still could end up falling on Monday when the cash markets open if lawmakers are unable to come to an agreement to avoid a series of $600 billion in tax hikes and spending cuts that are expected to hurt economic growth.
"Hard to predict how or when there will be a deal, but I believe investors will show their displeasure tomorrow by selling stocks if there is no deal," said Mohannad Aama, managing director at Beam Capital Management, an investment advisory firm in New York.
S&P 500 futures were up 5.5 points, or 0.4 percent, to 1,389.50 in electronic trading. Stocks fell sharply on Friday, with significant losses in the last minutes of trading, as prospects for a deal worsened at the beginning of the weekend.
The rise in the futures market does not necessarily augur for a rally on Monday, however. The cash market and futures markets closed with a wide gulf on Friday, by virtue of the extra 15 minutes of trading in futures, when investors sold aggressively.
The S&P 500 closed at 1,402.43 at 4 p.m. EST on Friday, down 1.1 percent, but futures continued to fall before closing 15 minutes later with a loss of 1.9 percent. S&P futures and the S&P cash index don't match point by point, but that kind of disparity is uncommon, and it points to a weak opening in stocks on Monday.
One hour before they had hoped to present a plan, Democratic and Republican Senate leaders said they were still unable to reach a compromise that would stop the automatic tax hikes and spending cuts that could push the U.S. economy back into recession.
Earlier in the day, President Barack Obama, appearing on NBC's "Meet the Press," said investors could begin to show greater concerns in the new year.
"If people start seeing that on January 1st, this problem still hasn't been solved ... then obviously that's going to have an adverse reaction in the markets," he said,
Investors have remained relatively sanguine about the process, believing that it will eventually be solved. In the past two months, markets have not shown the kind of volatility that was present during the fight to raise the debt ceiling in 2011.
Both the Dow industrials and the S&P 500 lost 1.9 percent last week, after falling for five straight sessions, the S&P 500's longest losing streak in three months. Equities have largely performed well in the last two months despite constant chatter about the fiscal cliff, but the last few days shows a bit of increased worry.

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Monti's reform path faces test beyond Italy elections

 Mario Monti declared "mission accomplished" when he resigned as Italy's prime minister, having seen off the debt crisis that loomed as he took office just over a year ago but 2013 will test whether he has laid the foundations for lasting economic change.
Elections on February 24-25 will give Italian voters their first chance to decide whether they want to stick to the broad course he has set or turn to a growing chorus of politicians who have attacked his austerity medicine.
Monti's decision to enter the race himself has put his reform agenda at the heart of the campaign and will have effects far outside Italy, the euro zone's third-largest economy, which took the single currency to the brink of collapse last year.
Former European Commissioner Monti, favored by the markets, the business establishment and even the Catholic church, has insisted that the election must be about creating agreement on policy rather than on any individual.
In that sense, the true test of his success may be not whether he wins a second term but whether he has succeeded in convincing the other parties and the country as a whole to stay with the liberalizing agenda he has laid out.
That remains uncertain, despite the plaudits he earned abroad for his handling of the crisis, as ordinary Italians have seen their living standards fall and unemployment rise relentlessly.
The centre-left Democratic Party (PD), the favorites to win the election, have supported Monti in parliament and say they will maintain the broad course he has set, while putting more emphasis on growth and helping workers and the poor.
But some on the left of the party and among its trade union allies say inequality has risen under Monti.
On the right, Silvio Berlusconi accuses Monti of taking orders from German Chancellor Angela Merkel and penalizing middle class Italians for the benefit of German banks. He has called for sweeping tax cuts to stimulate growth.
The runaway success of the anti-establishment comic Beppe Grillo and his 5-Star Movement, which wants to hold a referendum to decide whether to leave the euro, has also underlined the widespread mood of disillusion now deeply anchored in Italy.
"I don't have any confidence in my country, absolutely not," said Rosaria Resciniti, one of thousands of young people lining up to enter a competition for a job as primary school teacher in Rome.
"It is a country for old people. We should all leave and leave the country to the pensioners," she said.
UNEMPLOYMENT EMERGENCY
Monti himself acknowledged the disaffection on Friday when he confirmed that he would be joining the election campaign as head of a centrist alliance committed to continuing his reforms.
"Fortunately, it seems that the financial emergency is over, but there is another emergency which is just as serious or even more so, which is the unemployment emergency, especially as regards youth unemployment and the lack of growth," he said.
Helped by the promise of European Central Bank support, the main gauge of investor confidence, the spread between yields on Italian 10 year government bonds and safer German Bunds has narrowed from the crisis levels of more than 550 basis points hit when Monti took office to about 320 points.
But the broader indicators of economic health have got worse, a fact constantly pointed out by critics such as Berlusconi and Grillo, who say the tax hikes and spending cuts imposed to calm the markets have dragged Italy into a recessionary spiral.
The economy has contracted for five consecutive quarters and is estimated to have shrunk by 2.4 percent in 2012. Public debt has topped the symbolic 2 trillion euro level, corruption and waste are still rampant, and youth unemployment is over 36 percent.
Italy has had the euro zone's most sluggish economy for more than a decade, and whether any of the leaders fighting the election can turn that around quickly is doubtful, as one of the possible ministers in a centre-left government acknowledged.
"This crisis will last throughout the whole of the next parliament at least," deputy PD leader Enrico Letta told Reuters last month.
The task will be greatly complicated if market sentiment turns against Italy as it did in 2011, when tensions in the Berlusconi government raised doubts about its commitment to budget discipline.
Monti, seen outside Italy at least as a guarantor of stability, has said he was "not a man sent by Providence", but whether he himself will be involved in the next government has been one of the main questions hanging over the race.
His sober, professorial style came as a welcome relief to international investors and European partners unnerved by the turmoil and scandal surrounding Berlusconi as bond markets crashed in the summer of 2011.
But if opinion polls are confirmed on election day, it is difficult to see how he could become prime minister without resorting to the kind of backroom deals that characterized the shaky coalitions of the postwar period, when governments often survived no more than months or even weeks.
The most recent opinion poll gave centre-left PD leader Pier Luigi Bersani support of 36 percent, with Monti on 23.3 percent, ahead of both Berlusconi's People of Freedom (PDL) and Grillo's 5-Star Movement.
Monti's involvement in the election has ruled him out as a candidate for president of the Republic, a post that would have given him significant behind-the-scenes influence.
That leaves the possibility of becoming finance minister in a Bersani government, though there has been little sign of enthusiasm either from his side or from the PD, which has maintained a respectful tone towards Monti but now clearly sees him as a political adversary.
GROWTH AGENDA
Beyond the issue of personalities, the deep-rooted problems afflicting the Italian economy will be a formidable challenge to any new government.
"The situation in Italy is not easy, there are too many centres of power where everybody blocks everything. Our infrastructure isn't working and we've got corruption all over," said Renzo Rosso, head of the group behind Diesel jeans, one of the Italian companies that has managed to find a way past the obstacles in its home market to create a global success.
All the main parties in the race have called for more emphasis on creating growth, which along with its towering public debt has long been Italy's Achilles heel.
Monti's own 25-page agenda lays out a range of answers, such as taxing consumption and large fortunes more than companies and workers, and opening up markets to more competition and breaking down the suffocating power of special interest groups.
Turning such ideas into practice and convincing the public to go along with them is another matter.
Reflecting on her time in office, Elsa Fornero, an academic expert recruited into Monti's technocrat government whose labor reform plans were largely stymied by resistance from both unions and employers, said she had learned the difference the hard way.
"In this period of almost a year now, I have been able to measure the distance between being a professor and being a minister," she told foreign reporters last month.
"It's something completely different. I have been more used to formulating rational solutions, but the rationality of a solution is not enough because society is more differentiated and doesn't just live on rationality.

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