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Japanese politicians need to find ways to boost economic growth and can’t count on legislation that would reduce the Bank of Japan’s independence to cure deflation, a ruling Democratic Party of Japan lawmaker said.

“We can’t expect Japan’s economy to overcome its difficulties just because the law is revised — the issues aren’t so simple,” Shinichiro Furumoto, 45, chairman of the DPJ’s fiscal and finance policy panel, said in an interview on Nov. 26 in Tokyo. “Just implementing quantitative easing and churning out yen won’t spur demand.”

Some ruling and opposition lawmakers want to revise the BOJ law to force the central bank to adopt an inflation target to help conquer more than a decade of falling prices. Furumoto’s comments signal DPJ lawmakers calling for the change may have difficulty convincing party members that shape economic policy.

Discussions on how much influence the government should have over monetary policy must be conducted “carefully” and people need to take into account that the central bank’s independence is guaranteed under the current law, said Furumoto, whose panel is in charge of making fiscal-policy recommendations to the government.

Some 150 DPJ lawmakers, who call themselves the anti- deflation league, said last week the BOJ should adopt an inflation target to eradicate price declines and bolster employment. Opposition group Your Party this month submitted a bill to the diet calling for a revision to the law.

Tax Incentives

The government needs to boost personal consumption through subsidies and tax incentives that are similar to recent stimulus programs that have promoted purchases of energy-efficient cars and electronic goods, Furumoto said.

The DPJ lawmaker said bolstering consumption “will create the demand for money” and it is “only with such demand that the policy of printing money will become effective.”

BOJ Governor Masaaki Shirakawa said today that increasing growth expectations among companies and consumers and reviving demand are crucial in trying to overcome deflation.

Japanese companies have 164 trillion yen ($1.95 trillion) in cash on hand because they haven’t found attractive investment options, he said in a speech in Nagoya, central Japan.

The ruling party is considering increasing inheritance taxes while lowering gift levies to encourage older generations to pass on wealth to younger people who have more incentives to buy cars, houses and goods, Furumoto said.

Despite increased calls by politicians for a revision of the BOJ law, Prime Minister Naoto Kan and Finance Minister Yoshihiko Noda haven’t openly discussed the need to overhaul the central bank’s policy goals.

Government Views

Furumoto, who has also served as a parliamentary secretary at the Finance Ministry, said government views on the economy have been reflected in BOJ policy because Kan and Noda have been in close contact with central bank officials.

“Some argue the BOJ is doing whatever it wants because it is protected by its independence,” Furumoto said. “But that would imply the prime minister and the finance minister haven’t played any role in policy, and I disagree with the view.”

Furumoto also said the BOJ is already adopting a price framework similar to inflation targeting, with its board members saying they consider price rises of around 1 percent as stable. The bank last month pledged to maintain a “virtually zero-rate policy” until an outlook emerges for sustained price increases.

Governments of countries such as the U.K. and New Zealand set inflation targets for central banks, and the banks decide themselves the policy steps needed to meet those goals. The Bank of England’s governor needs to write a letter of explanation to the Treasury if inflation fails to stay within the limits.

The 1998 Bank of Japan Law strengthened the bank’s independence by ending the government’s authority to dismiss the governor and deputy chiefs and its right over supervising BOJ operations. It states the bank should strive to achieve “price stability, thereby contributing to the sound development of the national economy.”

Furumoto said the law can be interpreted as making it part of the BOJ’s mandate to support employment even though it does not explicitly say so because policies to stabilize prices can also create jobs.

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OTTAWA — Canada’s top credit card companies are warning politicians against meddling in their businesses, saying regulations on fees they charge could wind up hurting consumers.

Citing Australia as a “lesson in unintended consequences,” MasterCard’s Canadian president Betty De Vita said that country’s attempt to regulate fees has backfired.

“The regulation was expected to reduce consumer prices. What happened … however, produced no reduction,” she told a Senate committee Thursday.

“If interchange fees are artificially reduced, banks will be forced to take action to make up the shortfall. In Australia, consumers have seen annual fees and finance charges increase while consumer benefits have decreased.”

Liberal senators, who are proposing a law that would create a body to monitor credit card behaviour, expressed disbelief.

Liberal Senator Pierrette Ringuette said the credit card industry needs to be reined in and a voluntary code, which was introduced by Finance Minister Jim Flaherty earlier this year, is not sufficient.

She estimated credit card companies, banks and other players in the industry are raking in $7 billion a year “too much” in high fees to merchants and exorbitant interest rates charged to late payers.

As in past hearings on the issue, the senators came armed with anecdotes of what they considered gouging.

One senator gave the example of a shopkeeper in Nova Scotia that had seen his fees increase by 45 per cent in a four-month period business card.

And committee deputy chair Celine Hervieux-Payette brought her own example, saying she had recently been given notice that the interest rate for late payment on her card was being raised to nearly 30 per cent.

She called the rate “fantastic” in an era of historically low interest rates.

“Code of conduct or no code of conduct, it is happening,” she said.

In their submission, De Vita, Visa Canada president Tim Wilson, and Nancy Fung of the Canadian Bankers Association used almost identical words in calling a mandatory policing body “redundant.”

They said the voluntary code, which the major players signed on to this year, and a recently announced task force to study the payments system was capable of achieving what the Senate bill seeks.

The code requires credit card companies to provide clear information regarding fees and rates, and give advance notice of any changes. Merchants can also cancel contracts without penalty should fees rise or new fees be introduced.

But Ringuette said the problem with the code is that it doesn’t prevent companies from raising fees.

She said the Senate bill should be regarded as only the first step, and that the ultimate goal is for governments to cap fees.

She accused the three witnesses of “collusion” for their similar arguments, although she retracted the charge after an objection from Conservative Senator Don Plett.

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The European Commission is pushing to include tests on bank liquidity in next year’s round of European Union stress tests in the wake of Ireland’s financial turmoil, according to two people familiar with the discussions.

The possible changes follow concerns that the last tests, made public in July, didn’t show that banks could withstand funding crises, said the people, who declined to be identified because the talks are private.

This year’s Europe-wide stress tests focused on the levels of capital banks had to absorb losses and didn’t measure the risks posed by a lack of liquidity. Regulators will gather data for the tests at the start of next year, under the guidance of the European Banking Authority, the European Central Bank and the commission, the 27-nation EU’s executive arm.

“You need a clear view of what will be liquid and what won’t be and there are too many variables,” Simon Gleeson, a financial regulatory lawyer at Clifford Chance LLP, said in a telephone interview in London today. “That’s why it hasn’t been done yet — it’s very easy to call for but very difficult to do in practice.”

During preparations for this year’s EU stress tests, some nations indicated that it would be difficult to compare banks’ liquidity, said one of the people familiar with the discussions.

Irish Bailout

Ireland is in talks with the European Union and the International Monetary Fund on an 85 billion-euro ($113.7 billion) aid package as the authorities seek to avoid the nation’s financial crisis spreading to Portugal and Spain. Ireland’s financial system imploded after banks racked up losses when a decade-long real-estate boom ended.

Allied Irish Banks Plc and Bank of Ireland Plc passed the European stress tests on their capital holdings. Anglo Irish Bank Corp. wasn’t tested. Germany’s Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks failed EU-wide stress tests on 91 banks in July.

Stress tests measure banks’ ability to withstand economic crises. The scenarios this year included securitized debt products being downgraded four levels by credit ratings companies, a 20 percent fall in the value of European equities in both 2010 and 2011, falls in real estate prices and tests in 50 other macroeconomic parameters.

The tests were criticized for not being stringent enough because European banks were shown by regulators to need only 3.5 billion euros of new capital, about a tenth of the lowest analyst estimate.

‘Demanding’

The next stress tests will be “demanding,” Jonathan Faull, director general of financial services at the commission, said at a conference hosted by the French markets regulator in Paris.

Regulators are “going to try and draw all the lessons from this year to try and improve” the stress-test methodology, Chantal Hughes, a commission spokeswoman, told reporters in Brussels. The European Banking Authority, or EBA, is scheduled to carry out the 2011 test “sometime towards the beginning of next year,” she said.

Within the past two weeks, Ireland’s three publicly quoted lenders reported an outflow of deposits since the end of June, amid concerns that bad-loan losses will exceed stress tests carried out by the country’s central bank. Irish lenders’ reliance on emergency European Central Bank liquidity rose a further 7.3 percent to 130 billion euros in October, Ireland’s central bank said on Nov. 1, as they were frozen out of wholesale markets.

Lost Deposits

Allied Irish, Bank of Ireland and Irish Life & Permanent Group Holdings Plc “lost 12 billion euros, 10 billion euros and 600 million euros of corporate deposits, respectively, since end-June,” said Emer Lang, an analyst with Dublin-based securities firm Davy, in a note to clients on Nov. 24.

“We fully cooperated” with the European “stress tests in the past and would continue to do so,” Ronan Sheridan, a spokesman for Allied Irish, said in a phone interview.

Anne Mathews, a spokeswoman for Bank of Ireland, declined to comment. Spokespeople for Anglo Irish declined to immediately comment. Ray Gordon, spokesman for Irish Life & Permanent, couldn’t be immediately reached for comment.

Heidi Ashley, spokeswoman at the U.K. Financial Services Authority, William Lelieveldt, a spokesman at the European Central Bank, and Franca Rosa Congiu, spokeswoman at the Committee of European Banking Supervisors declined to comment. The EBA will replace London-based CEBS in January.

Liquidity measures banks’ reserves of readily available assets and cash that can be used to pay off liabilities.

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French business confidence declined in November for the first time in five months after a wave of strikes hindered economic growth and Europe’s sovereign debt crisis raised the possibility of further budget tightening.

An index of sentiment among factory executives slipped to 100 from 102 in October, national statistics office Insee said today. Economists expected a reading of 102, according to the median of 14 forecasts gathered by Bloomberg News.

Strikes and transport disruptions to protest President Nicolas Sarkozy’s plan to raise the retirement age caused fuel shortages and hampered shipping in late October. That probably hurt confidence just as renewed market turbulence is forcing European governments to clamp down on spending, economists said no fax payday loans.

“The strikes will have had an impact on sentiment,” said Joost Beaumont, an economist at ABN Amro in Amsterdam. “Now the concern will be that Ireland, Portugal and general fiscal tightening may hurt growth in the months ahead.”

The strikes, which began Sept. 7 and came to a head at the end of October, cost the French economy between 200 million euros ($273 million) and 400 million euros a day at their peak when the blockage of France’s ports and refineries caused fuel shortages, according to Finance Ministry estimates.

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Hard rock layers slowed the progress of drills boring into a New Zealand mine as rescuers waited impatiently for a chance to test if air quality underground is safe enough for them to go in to pull out 29 trapped miners.

Family members have expressed frustration with the pace of the response as officials acknowledged for the first time it may be too late to save the miners, who have not been heard from since a massive explosion ripped through the Pike River Mine on the country’s South Island on Friday.

A buildup of methane gas is the suspected cause of the explosion. And now the presence of that gas and others _ some of them believed to be coming from a smoldering fire deep underground _ are delaying a rescue over fears they could still explode.

A diamond-tipped drill was put to work on Tuesday as workers came within 33 feet (10 meters) of the tunnel where they believe some of the miners are trapped, police superintendent Gary Knowles said. The 500-foot (160-meter)-long shaft they are creating will allow them to sample gas levels _ including explosive methane and carbon dioxide _ and determine if rescuers can finally move in days after the blast.

Two workers stumbled out of the mine within hours of Friday’s explosion, but there has been no contact at all with the missing 29. A phone line deep inside the mine has rung unanswered.

Officials will also feed a high-resolution laser camera down the hole to give rescuers their first sight of conditions _ and potentially the men inside _ said John Dow, the chairman of Pike River Coal Ltd., the mine owner. The camera will not be affected by the air quality.

Authorities are also hoping to send in a bomb-disposal robot into the mine. Army specialists worked through the night fitting the robot with a camera and up to 1.5 miles (2.5 kilometers) of fiber optic cable so it could take video of conditions in the tunnel.

The battery-operated robot can only operate in fresh air, and so cannot be sent into the mine until the air clears. Work was continuing to spark-proof the electronic robot so it would not cause a spark or anything else that could ignite flammable gases inside.

“Everybody’s frustrated, everybody’s upset,” said Laurie Drew, whose 21-year-old son, Zen, is among the missing. “I have my moments I can keep it together but deep down my heart’s bleeding like everybody else’s.”

Authorities appealed for patience.

“You can’t put men underground as a rescue team until it’s a safe environment,” Knowles said Tuesday. “I’ve looked at other rescuers and the chance of rescue teams dying or being critically injured (in a fresh explosion) is great.”

The youngest missing miner was so excited about his new job he persuaded mine bosses to let him start his first shift three days early _ on the day of the deadly gas explosion _ his mother told local media.

Joseph Dunbar was one day past his 17th birthday when he joined his fellow miners in the pit.

Mine shift supervisor Gary Campbell said Dunbar was desperate to be part of the team.

His mother, Philippa Timms, said her son “got offered this chance to have a career _ and that’s how he saw it, as a career,” she told TV One.

The wait to begin the rescue bid for the men had been frustrating, but Timms said she understood why.

“They can’t just rush in there because, I know right from the word go, I know how it works,” she said. “If the oxygen rushes in and it hits that methane, then bam, they’re gone, (in) another blast.”

One of the two workers who escaped, Daniel Rockhouse, 24, described the explosion as being like an oversized shotgun blast.

He said the explosion smashed him into the mine wall and knocked him out. When he came to, he staggered to a nearby compressed air line to breathe in fresh air and gain some strength.

“I got up and there was thick white smoke everywhere _ worse than a fire. I knew straight away that it was carbon monoxide,” Rockhouse, whose brother Ben remains underground, was quoted as saying by the New Zealand Herald newspaper. “I couldn’t see anything, and it was dead quiet. I yelled, ‘Help, somebody help me!’ But no one came. There was no one there.”

Rockhouse stumbled toward the exit and eventually found the unconscious body of Russell Smith, the other survivor. Rockhouse began dragging Smith, until the other awoke. The two men stumbled through the dark haze to finally reach the surface nearly two hours after the explosion.

Police have said the miners, aged 17 to 62, are believed to be about 1.2 miles (two kilometers) down the tunnel.

Each miner carried 30 minutes of oxygen, and more fresh air was stored in the mine, along with food and water, that could allow several days of survival, officials say.

New Zealand’s mines are generally safe. A total of 181 people have been killed in the country’s mines in 114 years. The worst disaster was in March 1896, when 65 died in a gas explosion. Friday’s explosion occurred in the same coal seam.

The Pike River coal mine differs from the Chilean gold and copper mine where 33 men were rescued after being trapped 69 days. Methane gas was not a concern at the Chilean mine, but its only access shaft was blocked, while the Pike River mine has two exits.

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They went through a rough patch in recent years as their precious and base metal counterparts stole some of their shine, but diamonds are sparkling once again for investors.

With operating mines in the Northwest Territories and Ontario, Canada is now the third-largest producer in the world of these scarce, coveted carats, behind Botswana and Russia. And the “girl’s best friend” has been a pal to investors lately, too, with increased demand and dwindling supply in the pipeline globally.

Enter Stornoway Diamond Corp., whose stock price has more than doubled over the last year to nearly 60 cents on the Toronto Stock Exchange.

The management and technical team of the Vancouver junior had a successful track record of digging up bling in the Northwest Territories through the 1990s.

Along with its 50-50 joint venture partner SOQUEM Inc. (an arm of the Quebec government), it’s on track to open that province’s first diamond mine, with production slated for as early as 2013, says chief executive Matt Manson.

Developing the Renard site in north-central Quebec is a dream job for the 44-year-old geologist from Glasgow, Scotland, who finds himself doing French homework while working closely with the province to usher through the long-awaited, $511 million capital project.

In an interview with the Star, Manson explained how some oddly-positioned kimberlite pipes and the recent economic downturn had an upside for Stornoway that will probably help Quebec realize its longtime diamond dreams.

You had to do a hostile takeover to get your hands on the prospective Renard property in 2006. Was it all smooth sailing from there?

No. We spent the first two years getting the project up to having the first formal resource calculation and first formal statement of economics. In December 2008, we put out the first study and it wasn’t setting the world on fire. Back then, it was only a seven-year mine life with pretty marginal economics. And this was in the middle of the credit crisis. So our stock hit 5.5 cents at the bottom after we had acquired it with all this fanfare two years before.

Were you tempted to just walk away?

The conventional wisdom for that time was to pack it up, conserve your cash. Luckily, the only kind of venture capital that was available to us in 2008 was Quebec super flow-through (a government program that provides tax incentives for grassroots exploration). Those funds were available to companies drilling from surface in Quebec. So here we had this asset that we could drill to make bigger, and we had a complete home run.

How so?

During 2009, we discovered that one of our main ore bodies at Renard was actually four times bigger than we had previously thought. Kimberlites, which are the ore bodies that host diamonds, are supposed to be carrot-shaped, fat at the top and skinny at the bottom.

Turns out, one of these ore bodies at Renard is upside down. And as we were drilling deeper we were getting all this extra tonnage, so by the end of the year we had tripled the size of the resource on the project.

Why couldn’t you figure out how big it was the first time around?

We just hadn’t drilled enough and we didn’t have a good enough sense of the size of the ore bodies. We had been missing all this kimberlite on a couple of sides of the ore body. All the metrics changed. Before we had a net present value of $60 million and that has been bumped up to $885 million over the mine life.

How is your French?

It’s getting better. I’m in intensive lessons. I’m Scottish…Quebec is very important for us. We have a big investor base in Quebec and this is a very high-profile project for the province.

Why are diamonds so revered in the mining industry?

Diamonds are a non-discretionary luxury product, and they have a very special place in our culture. They are the most valuable, the rarest, the most lustrous. They’re special. So cultures around the world adopt diamonds as the thing they want to use to celebrate the most important moments in your life. It’s a fantastic business to be in.

With so few pure plays, what about global supply?

The thing about diamonds is that we’re running out of them. If you look at all the mineable reserves of diamonds anywhere in the world, there’s only thought to be 12 to 13 years of supply left. So the hunt is always on. They don’t come along very often. In the exploration business, it’s probably the hardest commodity to find.

What’s the next step for your Quebec deposit?

By the end of next year, we want to be able to say ‘yay’ or ‘nay’ to the project. We want to be in construction in 2012 and through 2013 in support of a production schedule beginning at the end of ‘13 and beginning of 2014. We’re contemplating a mine plan that has both open pit to start and then quite quickly we go underground with a shaft, and most of that 25 years will be underground.

Will Stornoway operate the mine or are you looking to sell to the big guns?

Oh no. We want to and expect to be the operators. Our vision for Stornaway is to build a Canadian mining company with this very good diamond mine being the first production asset. We’re all people in our late 30s, early 40s, and we’ve all worked for other companies and we’ve all done it for other people, so this is our company-building exercise.

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China’s reserve-ratio increases for banks and threats of price controls on essential goods are likely to prove insufficient to tame inflation, and the central bank will have to raise interest rates further, economists said.

The People’s Bank of China yesterday ordered a 50 basis point increase in the amount of money that lenders must set aside, two days after the cabinet announced measures to tackle inflation. A basis point is 0.01 percentage point.

Stocks and oil fell on the central bank announcement, highlighting concern that Chinese efforts to cool the nation’s fastest rise in consumer prices in two years may cause growth to falter. Analysts at nine banks surveyed this week by Bloomberg News predicted the central bank will add to last month’s rate rise, the first since 2007, by year-end.

“Monetary policy is being tightened, as it should be, and a rate hike will follow sooner rather than later,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. who formerly worked for the International Monetary Fund and the European Central Bank. The next move “inevitably” will be on rates, Shen said.

China’s benchmark stock index has had its biggest two-week decline since May amid concern that monetary tightening will hamper spending in the fastest-growing major economy. The Standard & Poor’s 500 Index and the MSCI World Index slipped after yesterday’s announcement. The Shanghai Composite Index earlier closed 0.8 percent higher, paring its weekly decline to 3.2 percent.

Wen’s Meeting

Concern that rising consumer prices will undermine the economy spurred Premier Wen Jiabao to hold a cabinet meeting on the issue this week. The measures contemplated by the State Council range from a crackdown on speculation in agricultural goods to the imposition of price caps on “daily necessities” if needed.

The meeting came amid concern at the threat increased food costs pose to the poorest people in the world’s most populous nation. More than 81 million people in disaster-affected areas may need food assistance from the government this winter, the Ministry of Civil Affairs said on its website on Nov. 18.

At Societe Generale, Hong Kong-based economist Yao Wei said this week that China’s “old-fashioned price stabilization policies” will not be enough to reduce the case for monetary tightening. The possibility of “more interest-rate hikes by the year-end remains relatively high,” she said.

Controlling Lending

The increase in banks’ reserve requirements, effective Nov cash advance loans. 29, was the second announced in two weeks. The aim is to step up liquidity management and “appropriately control” credit and loans, the central bank said on its website.

China’s inflation rate reached 4.4 percent in October, exceeding economists’ forecasts. Standard Chartered Plc analysts yesterday lifted their projection for the consumer price index for next year to an average of 5.5 percent, from about 3.2 percent for 2010.

While vegetable costs have helped to drive Chinese inflation higher this year, officials need to use tools such as interest rates to “prevent food inflation from spreading to the general economy,” Wang Tao, a Beijing-based economist for UBS AG. said yesterday.

Inflows of money from the trade surplus, foreign direct investment, and investors betting on gains by the yuan threaten to propel consumer prices after unprecedented lending by banks flooded the economy with cash from late 2008.

Rents, Wage Costs

Standard Chartered, HSBC Holdings Plc, BNP Paribas SA, Citigroup Inc., Credit Suisse Group AG, Mizuho, Royal Bank of Canada, UBS, and Australia and New Zealand Banking Group Ltd. predict that the central bank will add this year to the quarter- point increases that took the benchmark one-year lending rate to 5.56 percent and the one-year deposit rate to 2.5 percent.

“Inflation is showing up in food most obviously, but also in rents, service sector wages, and non-food commodities,” analysts including Stephen Green, head of research for Greater China at Standard Chartered, wrote in a report yesterday. The bank anticipates a rate increase by Dec. 31 and three more by June 30.

Across Asia, China’s inflation compares with deflation in Japan and, at the other extreme, a 9.8 percent rate in India. In the U.S., consumer prices rose 1.2 percent last month from a year earlier.

Besides possible price caps, the State Council’s plans to rein in prices include selling state food reserves.

“Price intervention could be counter-productive because it may cause panic and worsen inflation expectations,” said Liu Li-Gang, a Hong Kong-based economist at ANZ who previously worked at the Hong Kong Monetary Authority and World Bank.

Excess liquidity is the “root of the problem” in China, Tao Dong, a Credit Suisse Group AG economist in Hong Kong said this week.

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Magna International Inc. has confirmed its interest in acquiring Italy’s Pininfarina SpA, after speculation about a possible deal sent stock for the luxury automobile design company soaring.

“This type of acquisition would be one that would earn us additional competence on development matters,” Dieter Althaus, vice president at Magna’s European unit, told Bloomberg News on Wednesday.

“We’re also very considerably engaged in the field of engineering and that’s where design and technology also play a role,” he said.

Pininfarina, designer of Ferrari SpA’s Testa Rossa and Fiat SpA’s Alfa Spider, released a statement noting the company “will communicate any advanced talks when they take place.”

Reports of a possible sale to the auto parts manufacturing giant sent Pininfarina’s stock up 22.3 per cent by 11:30 a.m. EST, the biggest gain in 19 months.

Magna shares closed at $49.28, up 61 cents, or 1.25 per cent.

David Soberman, a professor of marketing with the Rotman School of Management said the move could signal aspirations by Magna to expand beyond being a supplier to become an automobile manufacturer.

But, he said it is more likely a move to offer “one stop shopping” or a broader range of services from design to supplying parts for major customers including Chrysler, Ford and GM payday loans.

“There is obviously a skill or a talent that exists within that company,” said Soberman. “Magna clearly wants to expand the types of services where it is active,” he said.

Speculation about the deal was sparked by the publication of a story by Automotive News Europe published on Wednesday that said three sources with “direct knowledge of the matter” confirmed a deal was being discussed.

Reporter Luca Ciferri noted that Pininfarina had disclosed in a recent quarterly report that the company could be sold as soon as Dec. 31 2010.

Founded eight decades ago the Italian design company has offices in Italy, Germany, Sweden, Morocco, China and the U.S. and counts Ferrari, Maserati, Alfa Romeo, Ford, Volvo, Tata Motors and Chery among its customers.

Pininfarina has well established relationships with several luxury brands, having collaborated with Alfa Romeo for almost 70 years and Ferrari for the better part of six decades.

With files from Bloomberg News

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Sadly, the federal government’s decision to block the purchase of Potash Corporation by BHP Billiton Ltd. is likely to hurt the future competitiveness of Canadian companies.

This does not imply that Canada has no right or cause to challenge foreign takeovers of Canadian companies. Far from it. The problem is with the “net benefit” theory and rationale used by our government to block the takeover.

This approach to foreign direct investment is in stark contrast to the approach to merchandise trade, the traditional focus of trade policy, where the theory is reciprocity: you let us send you our BlackBerrys without tariffs or restrictions and we will let in your GE MRI machines.

We need to move policy from net benefit to reciprocity as the defining criterion.

If net benefit was used in merchandise trade, there would never be a lowering of trade barriers because every single industry or company that is adversely affected would wrap itself in the protective flag of net benefit.

Quebec textile makers would declare there to be no net benefit to allowing free trade in textiles and Washington State sawmills would declare there to be no net benefit in allowing free trade in softwood lumber, etc instant payday loans no faxing.

The world has gotten to freer trade only by way of utilizing broad reciprocity: we will open our markets broadly to your imports if you open yours broadly to our exports. Nations understand that there will be some net beneficiaries and net benefactors but that overall there will be an efficiency gain for both economies, so it is sensible to put up with the minuses.

We are in the middle of an historic 50-year reshuffling of the ownership of the world’s business assets, making international capital flows centrally important to long-term country competitiveness.

Around the world, national franchise companies (such as Labatt’s) are being bought up by global players (e.g. Interbrew). And smaller or narrower global players (Zenon Environmental or Falconbridge) are being bought up by bigger and/or broader global players (GE and Xtrata respectively).

For this reason, Canada needs to bring the sophistication of the long-established thinking from merchandise trade to the realm of foreign takeovers.

We need our Canadian companies to globalize without being hobbled by government policies related to foreign takeovers. And we can’t be naïve boy scouts while this is all transpiring. Basing our policy on reciprocity, not net benefits, is essential to the desired outcome.

If our policy remained based on net benefits, other countries will start using net benefits logic against Canadian companies when they attempt to grow globally through foreign acquisition. And unfortunately, net benefits is such a vague and subjective concept that every single foreign takeover here or abroad can be struck down if the government in question wants to show that there aren’t net benefits.

It wasn’t at all pleasant to have RTZ buy our wonderful Alcan and turn it into a tightly-managed subsidiary. But it was critical that the U.K. allow Thomson to buy their Reuters.

It wasn’t a highlight to have America’s AMD buy our ATI, but our Couche Tard needed to be allowed to buy their Circle-K to become an international heavyweight in C-store retailing. That is reciprocity in action.

But it is not reciprocity to allow Vale to buy Inco. The Brazilian government has the absolute right to stop any takeover of Vale. Reciprocity would mean that if Vale has the right to buy Inco, then Inco would have the right to buy Vale.

Similarly, it is not reciprocity to allow BHP to buy Potash no teletrack payday loan lenders. As part of the BHP-Billiton merger, the Australian government imposed draconian restrictions on BHP, meaning that BHP can go hunting internationally but it can never be hunted.

The approach that would have protected Canadian competitiveness would have been to allow the Potash takeover with two conditions:

First, that the Australian government remove all restrictions on the foreign takeover of BHP – and prove it by allowing a subsequent standstill period that would enable Potash to put together a consortium to bid for BHP.

And second, that it also signs an agreement binding it to not to block any acquisition of an Australian company by a Canadian company. In addition, there could be mutual agreement to exclude certain sectors or to enforce certain requirements post-acquisition, just as we would find in merchandise trade agreements.

That would be the first of what would hopefully become a series of free Foreign Direct Investment agreements.

Roger Martin is dean of the Joseph L. Rotman School of Management at the University of Toronto and chairman of the Institute for Competitiveness & Prosperity.

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Greece’s governing Socialists have won mayoral races in Greece’s two largest cities for the first time in 24 years, extending gains in local government elections.

Socialist-backed mayoral candidates Giorgos Kaminis and Yiannis Boutaris won in the capital Athens and the northern city of Thessaloniki, interrupting a streak of conservative victories dating back to 1986.

Prime Minister George Papandreou praised Sunday’s result as a vote of confidence in his austerity program ahead of an inspection by EU and IMF officials on the implementation of a rescue loan agreement worth euro110 billion ($150 billion).

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

ATHENS, Greece (AP) _ Greece’s governing Socialists won several key local election runoffs Sunday, including a mayoral race in Athens for the first time in 24 years, despite renewed pressure on the crisis-hit nation to further cut spending.

With 75 percent of the national vote counted, the governing party led in eight of 13 races for regional governors, clinching the contest in greater Athens and three other regions.

The result provided a badly needed boost for Prime Minister George Papandreou, who is facing growing discontent over austerity and rising unemployment _ as well as pressure from European partners to make deeper cuts.

On Monday, the European Union is expected to announce an upward revision of Greek budget deficit figures, including for the year 2009, while officials from the EU and International Monetary Fund are due in Athens for another inspection of cost-cutting efforts.

Papandreou called Sunday’s result a vote of confidence in his austerity reforms and a defeat for the conservatives who campaigned against the terms of a euro110 billion ($150 billion) bailout loan agreement with the IMF and EU .

“Today the citizens have shown the way forward as we proceed on our course, and have rejected cries of destabilization,” he said in a televised address.

Papandreou dropped a threat to call an early general election after the first round of voting Nov. 7, and on Sunday promised his 13-month-old government would serve a full four-year term.

“We have been given sufficient time, precious time to change in the next three years to do what wasn’t done in decades,” he said.

Late Sunday, Papandreou visited the newly elected greater Athens governor Yiannis Sgouros and the city’s mayor-elect Giorgos Kaminis, a mild-mannered outsider who had been written off by pundits at the start of the campaign.

In a weekend newspaper interview, Papandreou said Greece could seek an extension for repaying its rescue loans, and conceded the deficit revision would add pressure on his government to cut costs.

“It’s like running a marathon, and finding out during the race that they have added more kilometers to the course,” he told the Proto Thema newspaper.

Voter turnout Sunday hit record lows with just 34 percent in Athens and 45 percent nationally _ figures that opposition parties argued revealed popular discontent with the government.

“The electorate, and the high level of abstention, have sent a stern warning to all of us,” conservative opposition leader Antonis Samaras said.

“Voters have called on the government to change course, away from policies that have suffocated the economy and plunged society into despair.”

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