Growth miss blamed on exports, credit and austerity

LONDON (Reuters) - Inflation, weak exports and tight credit were the main reasons Britain'sgrowth forecasts were wrong over the past two years, the government body responsible said on Tuesday, while austerity may also have hurt more than first assumed

The independent Office for Budget Responsibility -- set up by the government to produce forecasts and assess fiscal policy -- also said in its annual evaluation of its forecasting record that the financial crisis may have dealt a lasting blow to the economy's ability to grow.

Its overall assessment is unlikely to end the debate about what caused the weak economy, with the government pointing to the euro zone debt crisis and the opposition blaming the austerity drive

"Along with many other forecasters, we significantly overestimated economic growth over the past two years," it said.

OBR chairman Robert Chote stressed in a news conference that the main reason was not an underestimation of the impact of the government's austerity.

"The error in over-optimism is pretty much evenly spread between consumption, private investment and net trade," Chote said.

While direct government spending had been more positive for growth than the OBR anticipated in its forecasts made in 2010, Chote said the austerity package might have had more of a negative impact by affecting investment behaviour.

"Businesses might be concerned about future demand for their products because of the way they are thinking people will be responding to the fiscal consolidation," Chote explained.

In the report, the OBR said that "fiscal consolidation may also have done more to slow growth than we assumed".

The International Monetary Fund (IMF) suggested in its recent report that the so called fiscal multiplier -- which defines the overall impact of fiscal policy on growth -- may have been much larger than it initially thought.

The OBR's assessment of the main reasons why the economy grew much less than forecast two years ago largely chimes in with that given by the Bank of England.

The OBR had predicted in 2010 -- just after the current coalition government of Conservatives and Liberal Democrats came to power -- that the economy would grow 5.7 percent between the first quarter of 2010 and the second quarter of 2012.

However, it grew only 0.9 percent.

Nevertheless, public borrowing declined from 11.2 percent of gross domestic product in the fiscal year 2009-2010 to 7.8 percent in 2011-2012, largely as the OBR had forecast.

Robust nominal consumer spending and a stronger labour market helped to sustain receipts from labour and sales taxes, while restraining social security bills, the OBR said.

The government also spent less than budgeted for and less than expected on public services and administration, it added.

In March, the OBR forecast growth of 0.8 percent this year for the British economy. However, the IMF like most economists now think that the economy will shrink in 2012 after it fell back into recession in late 2011.

The OBR said that the unexpected weakness of trade and investment were the main reasons for the renewed recession.

The lack of growth has piled pressure on the government to ease austerity, aimed at erasing a huge budget deficit.

Finance minister George Osborne has reiterated his commitment to his programme of tax hikes and spending cuts, but many economists expect him to miss one of his goals -- a fall in debt to GDP ratio by 2015-16 -- anyway.

The OBR will publish new forecasts on December 5 for Osborne's autumn statement, when he may face the tough choice of either announcing more spending cuts or delaying his debt target.

(Editing by Jeremy Gaunt)

Iran: New EU sanctions 'inhuman' and ineffective

TEHRAN, Iran (AP) — Iran on Tuesday denounced the new European Union sanctions as "inhuman," vowing they will not force any retreat on the country's suspect nuclear program.

The remarks by Foreign Ministry spokesman Ramin Mehmanparast amplify Iran's insistence that it can ride out Western economic pressures aimed at reining in Tehran's uranium enrichment.

The West and its allies fear the process could lead to nuclear weapons development, a charge Iran denies, saying its nuclear ambitions are only for peaceful purposes.

The 27-nation on bloc Monday banned imports of Iranian natural gas and imposed other restrictions on trade and financial dealings. Previous Western sanctions have targeted Iran's critical oil exports and access to international banking networks.

Mehmanparast told reporters Tuesday the new EU measures will not force Iran to back down from enriching uranium to make nuclear fuel. He called the sanctions "illegal, unwise and inhuman."

"They cannot force the Iranian nation to surrender and withdraw," said Mehmanparast. "This sort of acts will encourage the Iranian nation to continue on its way, strongly."

He said the nuclear issue is merely a pretext since the West had imposed various sanctions for decades on Iran.

"It is pretty clear that Iran's persistence on its independence is the main problem" for the West, he said.

At a meeting with EU ambassadors in Jerusalem, Israeli Prime Minister Benjamin Netanyahu thanked the European Union for imposing what he called "tough sanctions" against the "greatest threat to peace in our time."

Netanyahu observed Tuesday that while the sanctions were "hitting the Iranian economy hard," they haven't yet halted the Iranian program.

"We will know that they are achieving their goal when the centrifuges stop spinning."

Taliban says its attack on Pakistani schoolgirl justified

ISLAMABAD (Reuters) - Taliban insurgents said on Tuesday that the Pakistani schoolgirl its gunmen shot in the head deserved to die because she had spoken out against the group and praised U.S. President Barack Obama.

Malala Yousufzai, 14, was flown to Britain on Monday, where doctors said she has every chance of making a "good recovery".

The attack on Yousufzai, who had been advocating education for girls, drew widespread condemnation.

Pakistani surgeons removed a bullet from near her spinal cord during a three-hour operation the day after the attack last week, but she now needs intensive specialist follow-up care.

Authorities have said they have made several arrests in connection with the case but have given no details.

Pakistan's Taliban described Yousufzai as a "spy of the West".

"For this espionage, infidels gave her awards and rewards. And Islam orders killing of those who are spying for enemies," the group said in a statement.

"She used to propagate against mujahideen (holy warriors) to defame (the) Taliban. The Quran says that people propagating against Islam and Islamic forces would be killed.

"We targeted her because she would speak against the Taliban while sitting with shameless strangers and idealized the biggest enemy of Islam, Barack Obama."

Yousufzai, a cheerful schoolgirl who had wanted to become a doctor before agreeing to her father's wishes that she strive to be a politician, has become a potent symbol of resistance against the Taliban's efforts to deprive girls of an education.

Pakistanis have held some protests and candlelight vigils but most government officials have refrained from publicly criticising the Taliban by name over the attack, in what critics say is a lack of resolve against extremism.

"We did not attack her for raising voice for education. We targeted her for opposing mujahideen and their war," said the Taliban. "Shariah (Islamic law) says that even a child can be killed if he is propagating against Islam."

Syrian regime airstrikes pummel rebels in north

Associated Press/Ugarit News via AP video - In this image taken from video obtained from Ugarit News, which has been authenticated based on its contents and other AP reporting, destruction of a residential area is seen in the aftermath of Syrian airstrikes on Maarat al-Numan, Idlib, Syria, Tuesday, Oct. 16, 2012. (AP Photo/Ugarit News via AP video)

In this image taken from video obtained from the Ugarit News, which has been authenticated based on its contents and other AP reporting on Tuesday, Oct. 16, 2012, Syrians react after a government warplane was shot down in Aleppo, Syria, on Monday, Oct. 15, 2012 (AP Photo/Ugarit News via AP video)

BEIRUT (AP) — Syrian government warplanes unleashed deadly airstrikes on rebel strongholds in the country's north on Tuesday, activists reported.

The barrage came as the U.N. food agency warned that more and more Syrians depend on assistance provided by the World Food Program to stay alive amid the worsening civil war.

The airstrikes hit Idlib and Aleppo provinces, with activists describing them as some of the worst since rebels fighting to topple President Bashar Assad made advances in the region in the past week.

Assad's regime has increasingly relied on warplanes in its struggle to crush rebels who have taken over large swathes of territory in the north and near the border with Turkey.

In addition to the air bombardment, Human Rights Watch on Sunday cited allegations that Assad's government has been using cluster bombs — which are banned by most nations. The New-York based group cited amateur video and testimony from Syrian front lines.

The Syrian military denied the reports, saying in a statement late Monday that the allegations were "baseless and are part of media propaganda that aims to divert international public opinion from crimes committed by armed terrorist groups."

Syrian authorities blame the civil war in the country on armed gangs and terrorists carrying out a foreign conspiracy to destabilize Syria.

An activist in the northern province of Idlib, who identified himself only as Abu Hamza, declining to give his full name for fear of reprisals, said Tuesday's airstrikes were some of the worst since rebels took over the key city of Maaret al-Numan in Idlib on Oct. 10.

The city lies along the main highway connecting Aleppo with the cities to the south, including Homs and the capital Damascus.

Rami Abdul-Rahman, who heads the Britain-based Observatory, said the airstrikes were "concentrated and intensive" and the worst in weeks. He said warplanes carried out 12 raids in the area of Maaret al-Numan in one hour. The group relies on a network of activists on the ground.

Activists also reported casualties from the airstrikes, saying at least two children, aged 10 and six, died in artillery shelling of the town of Kfarnebel in the Idlib countryside.

Fighting also continued in war-ravaged Aleppo, Syria's largest city with 3 million residents and its former business capital, and activists reported airstrikes in the town of al-Bab in Aleppo province Tuesday.

Activists say that more than 33,000 people have died in the Syrian conflict, which began in March 2011 as a peaceful uprising against Assad's regime but morphed into a bloody civil war.

Journalists are increasingly getting caught in the country's chaos.

A Ukrainian woman who worked as an interpreter for a Russian TV crew in Syria was kidnapped by rebels in the country's west on Oct. 9, said Ukraine's Foreign Ministry spokesman Oleksandr Dikusarov.

Dikusarov said Tuesday that Ankhar Kochneva contacted her colleagues at a Russian television channel and said she was being held in "satisfactory conditions." He added that Russian and Ukrainian embassies in Syria are working together on securing the journalist's release.

In Geneva, officials from the World Food Program said some 1.4 million people required its assistance in September in many parts of Syria, adding that aid workers cannot reach all those in need because of the raging conflict.

"There are some areas that no one can reach," WFP spokeswoman Elisabeth Byrs told reporters. Aid workers — including those from the Syrian Arab Red Crescent and local charities and non-governmental groups — are unable to get to areas of Homs, Aleppo, Daraa and some rural areas around Damascus.

Byrs said the WFP is also planning to provide food to more than 460,000 Syrian refugees by the end of this year.

As of Tuesday, there were 343,871 Syrians formally registered as refugees or being helped by the U.N. refugee agency, its spokesman Adrian Edwards said. The vast majority of them have found refuge in neighboring Iraq, Jordan, Lebanon and Turkey.

EU countries have shied away from taking in refugees, preferring instead to give Syria's neighbors money to support Syrians fleeing the violence so they would stay close to their country.

Belgium's Foreign Minister Didier Reynders visited Syrian refugees in the Turkish province of Kilis on Tuesday, and stressed the need of "the international community to help."

Turkish Finance Minister Mehmet Simsek said his country has so far spent some $220 million to aid the refugees in Turkey.

The number of Syrian refugees in Turkey has recently passed 100,000, according to government officials.

___

Associated Press writer John Heilprin in Geneva and Frank Jordans in Istanbul contributed to this report.

CDC says another 19 people diagnosed with meningitis in U.S. outbreak

Associated Press/Pouya Dianat - Shawn Lockhart looks at the meningitis-causing fungus Exserohilum rostratum at the mycotic lab at the Centers for Disease Control and Prevention on Oct. 12, 2012 in Atlanta. The staff and technicians have been working around the clock to confirm cases and inform the public regarding the multi-state meningitis outbreak that has resulted in 14 deaths. The fungal outbreak is believed to have started at New England Compounding Center where a steroid injection shipment was contaminated with the fungus. (AP Photo/Pouya Dianat)

(Reuters) - Another 19 people have been diagnosed with fungal meningitis linked to possibly tainted vials of a steroid medication, the U.S. Centers for Disease Control and Prevention said on Tuesday, bringing the total number of cases to 231.

The CDC said there were two additional cases of infection in joints after a steroid injection but these were not confirmed as meningitis, bringing the total of infections nationwide to 233.

The death toll from the unprecedented outbreak was unchanged at 15, the CDC said.

The new cases were in Tennessee (6), Florida (2), Indiana (2), Maryland (1), Michigan (1), New Hampshire (2), New Jersey (2), Ohio (2), and Virginia (1).

The federal Food and Drug Administration on Monday said it had widened its investigation to other drugs produced by New England Compounding Center, the specialist pharmacy at the center of the outbreak. The Massachusetts company faces multiple investigations and lawsuits over the tainted medication linked to the meningitis scare.

(Reporting By Greg McCune; Editing by Paul Thomasch)