After spending the last four years trapped in a loveless grand coalition with the centre-left Social Democrats, Germany’s conservative chancellor Angela Merkel is looking forward to happier, more productive days in a cosy new centre-right coalition with her preferred partners, the pro-business Free Democrats.

However, rather than smooth sailing with her new, more like-minded coalition partners, it’s turned out to be one turf battle after another between Merkel’s conservative Christian Democrats and their Bavarian sister party, the Christian Social Union, on the one side and the Free Democrats on the other.

Weeks of unseemly arguing over tax cuts, healthcare, conscription and other issues in coalition talks has earned the new coalition the nickname Fehlstart” (false start) in the German media.

That awkward beginning was confirmed in a most embarrassing fashion for Merkel on Wednesday when at least nine deputies in her own coalition withheld their support.

Merkel was easily re-elected chancellor with 323 votes in the 622-seat parliament, 11 more than she needed. The nine deputies who either abstained or voted against her in the secret ballot served as a tangible reminder that the CDU/CSU and FDP might not be the marriage made in heaven some had expected. It was a political kick in the shins that Merkel did not need.

Four years ago she got 397 of the 612 votes, 51 less than the CDU/CSU and SPD had together. That, however, was not surprising because the grand coalition had an enormous majority in parliament and because the two camps had long been such arch enemies. This time around it was nine deputies in her own preferred coalition who stabbed her in the back. Is that a harbinger of things to come?

“Let’s try forget about this,” said Volker Kauder, CDU parliamentary floor leader. Several conservatives are already picking holes in the coalition deal, which is only a few days old. Kauder said he was sure all the CDU/CSU deputies voted for Merkel. The FDP’s parliamentary floor leader, Birgit Homburger, said the same of her party.

At least one of them was wrong. 

PHOTO: Merkel reacts after her re-election on Wednesday by a narrower than expected margin in parliament. REUTERS/Kai Pfaffenbach

A few weeks ago I asked a Pakistani diplomat what was, among the multiple threats facing the country, the single biggest challenge?

It wasn't al Qaeda or the Taliban, it wasn't the United States as many Pakistanis believe. And it wasn't even India, for long the existential threat the military and succeeding generations of politicians have invested blood and treasure to checkmate.

It was the economy which has virtually ground to a halt as the global recession erodes exports and investment, the diplomat said. Fix the power shortages, win investors back and get the economy moving, the tide of militancy could begin to be pushed back.

You could of course argue that the miitancy itself has sapped the economy and if it weren't for the militants, Pakistan would have done far better . So tackle them first, and the economy would take care of itself. In the light of the attacks of last week and this, that certainly would seem to be an overiding immediate objective.

But the diplomat's point was that the opportunities created by an expanding economy would, in the longer term,  make it a bit less likely for young men to gravitate to a hate-filled career of violence in the name of religion.

The suicide bomber who struck in Shangla near the Swat valley on Monday was apparently in his early teens, one report put his age at 13.  Was he from the impoverished masses that the Taliban have increasingly turned to, to carry out the attacks ?

Pakistani Foreign Minister Shah Mehmood Quereshi told National Public Radio that the Taliban had been "extracting out of poverty and the misery of people." If the people were educated and enlightened they wouldn't join them, he said. And it doesn't stop at Waziristan or other parts of the northwest where the Taliban and al Qaeda are operating out of. It may well be also Punjab in the very heart of Pakistan; its poverty stricken, feudal dominated southern part with a  large illiiterate population a huge pool to tap. 

The Kerry-Lugar bill that has so riled many in Pakistan for what are seen as humiliating benchmarks is aimed at boosting Pakistan's social and economic development which its planners hope will ultimately drain the swamp in which terrorism breeds. The assistance is intended to fund a range of projects, including Pakistani schools and roads, agricultural development, energy generation, water resource management and the judicial system.

Pakistan's Finance Minister  Shaukat Tarin has warned that if the U.S. aid didn't come through because of objections at home the deficit would widen further forcing the cash-strapped government  to borrow further.

 Last month, the Asian Development Bank cut its forecast for Pakistan's economic growth to 3 percent in the year to 2010. Some others are predicting even lower growth, as little as 0.3 percent which must be the weakest pace in five decades.

It wasn't like this before.  If you just wanted to do a basic comparison Pakistan grew at 5.2 percent between 1965 and 1980, while much larger India plodded at a slow 3.6 percent. The lead continued during the 1980s as Pakistan grew at 6.3 percent and India followed at  5.5 percent . It was only in the sixth decade after partition in 1947 that India really began to power ahead with growth rates of 9 percent. With a population aroiund seven times  that of Pakistan, its absolute GDP dwarfs that of the neighbour and makes India look like a heavyweight in the global arena.

Is that reason enough for Pakistan to pull up its anaemic economy by the bootstraps?

[Picture outside the army headquarters in Rawalpindi and a woman walks past a coal dump in Karachi]

By Tim Gaynor

The foreign born population in the United States dipped slightly last year for the first time in more than a generation, as this nation of immigrants weathered its worst recession in decades, figures released by the U.S. Census Bureau this week indicated.

The Bureau’s American Community Survey showed the total foreign-born population dipped by around 99,000 people to 37.9 million in 2008, as the U.S. sank into its most extended recession since the Great Depression. It was the first recorded decline since 1970.

The Census Bureau cautioned that the dip in the foreign born, to 12.5 percent of the population in 2008 from 12.6 percent in 2007, was well within the margin of error, although analysts found it nevertheless suggestive.

“It’s a modest decline when you’re looking at the overall size of the foreign born population of about 38 million ….  but that said, it is the first time that there has been one,” said Michelle Mittelstadt, of the nonpartisan Migration Policy Institute in Washington.

“We believe it’s very much tied to economic conditions in the United States and the fact particularly that immigrant flows to the United States have declined significantly during the downturn, and … illegal immigration flows in particular,” added Mittelstadt, who is the co-author of a report on global migration flows and the recession published this month.

The U.S. foreign born population includes naturalized Americans, refugees and both legal and illegal immigrants, of whom there are some 12 million illegal immigrants living and working in the shadows.

One sign that immigrants have been hurt by the recession are falling remittances to Mexico, which began a decline last year for the first time on record. Cash sent back to Mexico fell 16.2 percent in the year to July to $1.83 billion, down from $2.19 billion a year earlier, according to figures released by Mexico’s Central Bank earlier this month.

Whether or not migrants, legal or otherwise, were returning home in the downturn remained moot.
Mittelstadt said evidence suggested that the foreign born population was not being replenished by fresh immigration, rather than significant numbers of people leaving the United States — although other analysts disagreed.

“Fewer people are coming, and significantly more people are going home,” Steven Camarota of the pro-enforcement Center for Immigration Studies think tank in Washington.

“For these numbers to look as they do, it strongly implies that it’s illegal immigrants who are coming in lower numbers and going home in higher numbers,” he added.

Whatever the cause, the tentative decline in the foreign born population is more likely temporary than structural - with immigration likely to trend upward with the economic recovery, Mittelstadt said.

“We believe … this is cyclical and tied to the economy. Within the next two to five years as you see the economy take off again, you will see immigration increase,” she said.

“If this ends up being a jobless recovery … and if Americans decide to consume less and cutback on spending … this could in turn affect migration patterns.”

With two weeks to go before Germany holds an election, Chancellor Angela Merkel’s conservatives have unveiled a new set of election posters, depicting Merkel, Merkel, and more Merkel.

Rather than campaigning on the issues highlighted in their election programmes, the Christian Democrats (CDU) and their Bavarian sister party the Christian Social Union (CSU) are keeping it simple and hoping to capitalise instead on the popularity of their leader, Germany’s first female chancellor.

(Photo: A new election campaign poster of German Chancellor Merkel is pictured in Berlin, Sept. 14, 2009, Reuters/Fabrizio Bensch)

“The key question is whether Angela Merkel, who has intelligently guided Germany throughout the crisis, should continue to govern,” said Ronald Pofalla, general secretary of the CDU, at a press conference in Berlin.

“With the new posters, we want to make clear to people that they will only get Merkel again as a chancellor if they vote for the CDU.”

The posters show only Merkel, smiling benevolently against a minimalist black background, and feature slogans like: “We vote for the Chancellor” or “We vote for confidence”.

The latest posters are emblematic of the conservatives’ general campaign, which has focused less on hard-hitting issues such as tax cuts and atomic energy than on popular personalities like Merkel and the Economy Minister Karl Theodor zu Guttenberg.

On previous posters, Guttenberg and other well-known conservative politicians were shown against a blurry background, alongside vague slogans such as “economy with reason”, “strong families” and “good education”.

The posters contrast with those of other parties, which make strong statements on specific policies. A poster for the Social Democrats (SPD), the conservatives’ main challenger, shows an anonymous young woman and reads “atomic energy was yesterday, clean energy is the future, and that is why I am voting SPD”.

 With the election looming, the question is whether voters will let the conservatives get away with their refusal to engage on the issues and failure to offer a new vision for the future of Europe’s largest economy.

Analysts said Merkel did worse than her SPD challenger Frank-Walter Steinmeier in a television debate on Sunday — partly because she preferred to echo the vague slogans of her campaign rather than spell out what she plans to do if she is re-elected.

Is she smart to steer clear of controversy and rely on her popularity to win a second term, or could the strategy backfire on Sept. 27 as it did in the TV debate?

(Additional Reporting by Wolfgang Kerler)

Australian Treasurer Wayne Swan will take questions from Thomson Reuters clients on how Australia managed to avoid recession and where the economy goes from here, at 9:15 am AEST on Tuesday (7:30 pm on Monday, EST).

The so-called “lucky country” dodged recession partly because of massive government stimulus, a conservative banking sector and strong Chinese demand for its resources exports, but there are concerns its luck may eventually run out. While other rich nations grapple with record high unemployment, Australia is starting to worry about inflation, a possible housing bubble and an over-reliance on China.

Click here to watch the live video.

    Hiking through rubble-strewn streets, taking in a quake exhibit or bedding down in a concrete police compound — leaders at this week’s G8 summit in the Italian town of L’Aquila  are in for a change of pace from the routine luxury spa and resort experience of past summits.

    Devastated by an April earthquake that killed nearly 300 people and ringed by tent camps with portable toilets, L’Aquila is a far cry from previous G8 host cities like the Baltic seaside town of Heiligendamm, French lakeside resort Evian and Scottish golf resort Gleneagles.

    U.S. President Barack Obama and other leaders are being housed in a grey police school building on the outskirts of the mountain town, where they are to stay in spartan rooms with granite floors and cream-coloured walls and furnished with little more than simlpe wooden beds with white sheets.

    “There won’t be the luxuries of hotels on (Sardinia’s) Emerald Coast or (Rome’s) Via Veneto, but there will be dignified accommodation worthy of welcoming such important people,” said Italy’s emergency services chief, Guido Bertolaso.

    Room service menus will be absent, but each room will be supplied with instructions on what to do in the event of another earthquake.  Aftershocks have been persistent and plentiful in the run-up to the summit.

    In their free time, leaders can browse through an exhibit on “100 years of earthquakes” in Italy or take up Italian Prime Minister Silvio Berlusconi’s offer of a guided tour of areas laid to waste by the tremor, like Germany’s Angela Merkel did on Wednesday.

Earthquake victims have even welcomed leaders with a giant sign on a hill near the summit site declaring “Yes we camp” to protest the slow pace of reconstruction in the area.

For all the lack of luxury, L’Aquila does guarantee voters back home will see images of their leaders rolling up their sleeves under the hot Abruzzo sun at a time of recession and financial turmoil.

    “I think it’s better to have (the summit) in a damaged zone than in an ultra-touristy region where people are spending millions of dollars on their vacations, while the leaders are there to discuss solutions to the global economic crisis,” said Dimitri Soudas, spokesman for Canadian Prime Minister Stephen Harper, ahead of the summit.

    Italy was initially set to host the annual summit of leaders from the world’s richest nations on the picturesque island of Sardinia, but hastily moved it to L’Aquila citing solidarity with victims when faced with complicated logistics and spiralling costs.

    One thing that won’t be lacking at the summit is fine Italian cuisine, since good food is not a luxury given up easily in Italy.  Among the local delicacies on offer are goat on skewers, baby lamb, rabbit from the small town of Goriano Valli, artichokes from Prezza and red garlic from nearby Sulmona.

Pope Benedict issued an ambitious call to reform the way the world works on Tuesday shortly before its most powerful leaders meet at the G8 summit in Italy. His latest encyclical, entitled "Charity in Truth," presents a long list of steps he thinks are needed to overcome the financial crisis and shift economic activity from the profit motive to a goal of solidarity of all people.

Following are some of his proposals. The italics are from the original text. Do you think they are realistic food for thought or idealistic notions with no hope of being put into practice?

• "There is urgent need of a true world political authority. .. to manage the global economy; to revive economies hit by the crisis; to avoid any deterioration of the present crisis and the greater imbalances that would result; to bring about integral and timely disarmament, food security and peace; to guarantee the protection of the environment and to regulate migration... such an authority would need to be universally recognized and to be vested with the effective power to ensure security for all, regard for justice, and respect for rights."
• The economy needs ethics in order to function correctly - not any ethics whatsoever, but an ethics which is people-centred..."
• "Financiers must rediscover the genuinely ethical foundation of their activity, so as not to abuse the sophisticated instruments which can serve to betray the interests of savers. Right intention, transparency, and the search for positive results are mutually compatible and must never be detached from one another."
• "Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value... there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference... What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development."
• "One possible approach to development aid would be to apply effectively what is known as fiscal subsidiarity, allowing citizens to decide how to allocate a portion of the taxes they pay to the State."

(Photo: Pope Bendict, 1 July 2009/Tony Gentile)

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By Barani Krishnan

A decade ago, Malaysia’s former deputy prime minister Anwar Ibrahim was on trial for sodomy and corruption in a trial that exposed the seamy side of Malaysian justice and the anxieties of a young country grappling with a crushing financial crisis and civil unrest.

Anwar is Malaysia’s best known political figure, courted in the U.S. and Europe and probably the only man who can topple the government that has led this Southeast Asian country for the past 51 years.

Photo: Anwar Ibrahim, with a bruised eye, at court on Sept 30, 1998 during his his first trial. REUTERS/David Loh

Now the leader of the opposition, will go on trial next week again charged with sodomising a 23-year old male aide. The trial once again looks likely to provide gory evidence and bringing some unwanted attention from the world’s media on this Southeast Asian country of 27 million people. It could also embarrass the government and draw international criticism.

Anwar vowed in a recent interview to fight what he says are trumped up charges.

The 14 months I spent covering the 1998 trials saw Anwar accused of sodomy with three men and having sex with a woman over a period of years. This case is simpler, there is just one accuser. All homosexual acts are illegal in this mainly Muslim country and sex outside marriage is illegal for Muslims.

The first trial was gruelling. Lines began as early as four in the morning as people tried to get into the court that could seat less than 200. Most of the spectators were ordinary people, but there was a sprinkling of dignitaries and businessmen who had known Anwar when he was in office.

There was a separate media queue and again a fight to get in line as dozens of reporters from local and international outlets jockeyed for space. Ringing the court were hundreds of riot police, backed by watercannon, waiting for trouble in a country where there were daily protests at the time, often involving tens of thousands of people.

Once inside the courtroom, things were equally unpredictable. Judge Augustine Paul, plucked from obscurity to oversee Malaysia’s most important criminal trial, won national fame for his oft-repeated response of “not relevant” to evidence introduced by the defence team.

The evidence itself was often contradictory and often bizarre. Ummi Hafilda Ali, a star witness for the prosecution called Anwar a “dog” and prayed that he would contract AIDS. At one stage the prosecution paraded a mattress in and out of the courtroom, saying that semen stains showed Anwar had had sex with a man on it.

One day outside the court, a witch doctor cast a spell, for no apparent reason.

Anwar showed up sporting a black eye that he said had been inflicted on him in prison by the country’s police chief. This time round he says that he was forced to strip and his sexual organs measured in a hospital.

The evidence to be presented by the prosecution this time looks likely to be just as sensational. The malaysianmirror web portal, backed by one of the government parties, said there will be 30 witnesses, a carpet and a video recording, as well as a DNA evidence brought into court.

Anwar’s team, citing two medical reports, says there is no evidence that Saiful Bukhari Azlan was sodomised. Saiful meanwhile has sworn on the Koran that he was and wasn’t best pleased when the charge against Anwar was changed to consensual sex.

One key actor in the whole drama is missing this time round. Former prime minister Mahathir Mohamad, who critics say used the 1998 trial to drive Anwar from office and to humiliate him, is no longer in power. That removes some of the sting.

Even so, incumbent premier Najib Razak attracts plenty of ire from the opposition. He has been forced to deny allegations from the opposition and opposition-supporting websites that he was involved in the lurid murder of a Mongolian model.

The country remains tense in the wake of the 2008 general election in which the government lost its customary two-thirds majority.

Can Anwar survive another trial? Without him, can the opposition prosper and have a real chance of winning at the ballot box  in elections due to be held by 2013. Can Najib survive as prime minister if Anwar remains free and can he implement economic reforms?

In a country like Spain, where a large majority still identify themselves as at least more-or-less Catholic, you'd think the government would shy away from taking on the Roman Catholic Church.  In fact, there are probably few things Spanish Prime Minister Jose Luis Rodriguez Zapatero likes better than a brawl with the bishops.

Lingering anti-clerical sentiment in sectors of Zapatero's Socialist Party, particularly on its left-most fringes, means the PM has few more effective tools for rallying his voters than the sight of a protest march led by priests and nuns.

(Photo: Prime Minister Zapatero, 5 June 2009/Juan Medina)

At a time when unemployment is closing in on 20 percent, Zapatero knows matters economic are not going to provide anything to cheer his supporters. So there was little surprise when the government rolled out a bill to liberalise abortion laws, including a provision to allow 16 year olds to abort without parental consent, in time for the European elections. At present, Spanish law allows abortion only in certain circumstances, such as if the birth poses a psychogical risk to the mother, although in practice it is easily available.

Just in case the bill didn't drive the Church into a sufficient paroxysm of rage, the government's Equality Minister Bibiana Aido, defended the proposal to allow legal minors to seek terminations without their parents' knowledge by comparing the procedure to breast-enlargement surgery. So, last Friday it must have seemed like mission accomplished to the Socialists when Spain's bishops duly rebuked them for undermining the country's moral fabric (see Spanish text of their statement here).

Only one thing is now missing for the manoeuvre to attain political perfection, i.e. to lure the main opposition Popular Party, traditionally allied to the Church, into aligning itself with the religious authorities.  From there, thanks to the historical closeness of the Church to the former dictator Francisco Franco, it is but a short rhetorical jump for the Socialists to accuse the PP of being on the extreme right and out of touch.

From a political point of view, it looks like a neat way of keeping your voters amused while you wait for 150 billion euros in extraordinary public spending to revive the economy. And using the strategy of exploiting Spain's deep divides on social issues has already been very profitable to Zapatero over the past few years, becoming still more important as it has allowed him to steal voters from the fading force of Izquierda Unida, the United Left coalition located to the left of the Socialists.

But this time, the abortion battle looks like it is in danger of proving a miscalculation.  The Popular Party is doing its best not to fall into the prime minister's trap, claiming that its opposition to the law has nothing to do with the position of the Church. Opposition leader Mariano Rajoy now bases his strategy on targetting moderate centrist voters and would sprint across across a busy motorway to avoid getting drawn into any heated debate on social issues.

(Photo: Spanish nun at Madrid anti-abortion rally, 29 March 2009/Sergio Perez)

Even more damagingly, Socialists don't seem to like the law either, with one poll showing 56 percent of Socialist voters against allowing 16 year old girls to abort without parental consent.

Spain's main left-wing daily El Pais, which has little love for the Popular Party, recently had an interesting take on how Zapatero's apparent dependence on pleasing his most socially liberal voters might backfire on him. El Pais quoted a senior member of the PP, who gave thanks for Zapatero: "If he turned towards the centre, the PP wouldn't know how to respond. But he won't .... He's making it easy for us, because he's always doing things that the middle classes, the moderate people, don't like."

A wealthy businessman and critic of President Cristina Fernandez is spending millions of dollars in his own money to win the biggest race in Argentina’s upcoming mid-term elections.

Polls show Francisco de Narvaez, who leads a congressional ticket for a dissident faction of the ruling Peronist party, in a close race against Fernandez’s husband, former President Nestor Kirchner, who is widely seen as the government’s top political and economic strategist.

Both are bidding for a congressional seat from Buenos Aires province, Argentina’s largest and most populous, in a vote that will define to what extent the Kirchners keep their grip on the governing party through 2011 presidential elections.

Fernandez is expected to lose her congressional majority in the June 28th balloting.

Little-known politically only months ago, de Narvaez has raised his profile by spending heavily on television advertising and using his wealth to lead one of the most technologically modern campaigns in Argentine history.

De Narvaez, who was born in Colombia and is known for a tattoo spread across his neck, has said he plans to spend up to the $4 million limit allowed under Argentine campaign finance laws — virtually all of it out of his own pocket.

He has spent an additional undisclosed amount on a mass marketing campaign before the campaign formally got underway.

A member of an Argentine family that sold a popular supermarket chain it once owned for $600 million in the late 1990s, de Narvaez has used the Internet and employed his own video production crew to bolster his campaign.

It has also helped him that the Kirchners are struggling with slumping popularity ratings.

A center-right candidate, de Narvaez has campaigned on fighting crime and criticizing the governing style of the Kirchners as confrontational and authoritarian.

Kirchner has lashed out at de Narvaez’s campaign, saying he is looking to buy his way into a more prominent role in politics.

But his campaign is shaking up the Buenos Aires province race, and at least one poll last week showed him holding a slight lead over Kirchner.

Photo credit: REUTERS/Marcos Brindicci -  Francisco de Narvaez gestures during an interview at his campaign headquarters in Buenos Aires, May 4, 2009