Shoppers Drug Mart sells C$500 mln notes in 2 parts - term sheet

Shoppers Drug Mart Corp on Wednesday sold C$500 million ($490 million) of senior unsecured medium-term notes in two parts, according to a term sheet seen by Reuters.

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The sale included C$225 million ($221 million) of notes due May 24, 2016. The 2.01 percent notes were priced at 99.980 to yield 2.017 percent, or 79.7 basis points over the Canadian government benchmark, according to the term sheet.

It also included C$275 million ($270 million) of notes due May 24, 2018. The 2.36 percent notes were priced at 99.962 to yield 2.368 percent, or 94.8 basis points over the Canadian government benchmark.

The joint book-running managers on the sale were the investment dealer arms of Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank.

UPDATE 1-LATAM Airlines says aims for $1 bln cap hike in late Q3

LATAM Airlines Group SA aims to launch a capital increase at the end of the third quarter and its controllers intend to subscribe their respective proportional stakes in the operation, the company said during a conference call on Wednesday.

Latin America's largest carrier will ask shareholders on June 11 to approve the $1 billion increase aimed at helping to finance its spending plans over the coming years and regain its investment grade.

"Regarding the timing for the capital increase, we would target at this point definitely towards the end of the third quarter... it would be probably September-October this year," said Gisela Escobar, LATAM's head of investor relations.

The company is the fruit of Chilean airline LAN's takeover of Brazil's TAM in June. Following the takeover, Fitch Ratings lowered LATAM's ratings on global debt to "BB plus" from "BBB," citing the carrier's high debt levels and constrained cash holdings following the combination.

But the increase on its own will not be sufficient for the company to recoup its prized investment grade, chief financial officer Alejandro de la Fuente added, citing a need to improve liquidity.

"We will recover the rating only to the extent that we can show strong cash flow generation from our operations, which is something we are on track to achieve," he said.

Chile's Cueto family and Brazil's Amaro family control the airline.

The two families "have stated their intention to subscribe their proportional stakes in the rights offering," De la Fuente added.

LATAM's first-quarter net profit skidded to $42.7 million, or nearly half of a year earlier, on foreign exchange fluctuations, a drop in cargo revenue and the grounding of its three Dreamliners, it reported on Tuesday.

Shares of LATAM were down 1.09 percent in midday Wednesday trade, underpeforming a broadly steady Santiago blue-chip IPSA stock index.

Ally, ResCap creditors reach settlement

Bankrupt Residential Capital LLC said on Tuesday that parent Ally Financial Inc reached a private settlement with ResCap creditors, who say Ally owes them $25 billion.

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The deal will keep sealed a potentially damaging report on Ally's role in ResCap's collapse.

A deadline to release the report by examiner Arthur Gonzalez had initially been set for 11 a.m. EDT (1500 GMT) if the sides could not reach a deal. Creditors had lambasted an initial offer by Ally to contribute $750 million for ResCap creditors.

 

Lewis Kruger, ResCap's chief restructuring officer, said after a hearing in U.S. Bankruptcy Court in Manhattan on Tuesday that a term sheet between Ally and the creditors had been signed. The sides still had to work out details on how to implement its terms, Kruger said.

Details of the deal remained private. The examiner's report will remained sealed until May 23, Kruger said.

Bulgaria resumes sale of ailing arms plant

Bulgaria on Tuesday resumed the sale of state-owned arms maker VMZ Sopot, aiming to attract a strategic investor to overhaul the debt-laden plant and funds for the cash-strapped government.

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The privatisation agency set an end-November deadline for binding bids for the largest state producer of missiles, grenades and ammunition.

The agency cancelled a previous sale attempt in January after Bulgarian company EMCO, the sole interested party, withdrew because of a condition that none of the over 3,000 staff could be laid off without trade union consent.

 

The Bulgarian parliament has since changed the sell-off strategy and the size of the future workforce will be negotiated with bidders.

The sell-off agency had no word on likely bidders or how much the sale might raise. The annual results of VMZ Sopot are kept secret by the government.

VMZ Sopot has debts of over 150 million levs ($100 million)and the management has already started to lay off some 600 people to avoid bankruptcy, trade unions have said. ($1 = 1.5063 Bulgarian levs) (Reporting by Tsvetelia Tsolova; Editing by David Cowell)

UPDATE 1-Ally reaches deal with ResCap creditors

Ally Financial Inc on Tuesday agreed to an important deal with creditors of its bankrupt Residential Capital LLC subsidiary that will allow the lender finally to separate itself from its former mortgage business.

 

The details of the agreement will remain private until a request to approve the deal is filed next week with the U.S. Bankruptcy Court in Manhattan, which is overseeing ResCap's Chapter 11.

"This agreement is a seminal moment for Ally," said Ally Chief Executive Officer Michael A. Carpenter in a statement.

The settlement will allow Ally to put behind it problems tied to mortgage lending so it can focus on its U.S. auto lending business and its online bank.

Ally has raised billions of dollars by selling its international business and wants to use that money to repay the U.S. government, which still owns three-quarters of the company following a bailout.

Ally and the ResCap parties were still working out the details of how to implement the agreement, ResCap Chief Restructuring Officer Lewis Kruger said after a bankruptcy court hearing on Tuesday.

The agreement would shield Ally from all legal claims that could be brought by ResCap or its creditors.

The agreement also heads off the publication of a potentially damaging report by a court-appointed examiner who was charged with investigating claims by ResCap creditors that Ally stripped ResCap of valuable assets before its bankruptcy.

The examiner's report was filed on Monday, but under seal. Kruger said it would remain under seal till May 23.

The Ally deal will likely form the basis of a plan to allow ResCap to exit bankruptcy and repay its creditors, which includes about $3 billion owed to bondholders.

In addition, investors who bought mortgage bonds issued by ResCap entities claim they are owed money because they were misled about the quality of the mortgages backing those bonds. Tuesday's agreement will shield Ally from any further legal claims related to those bonds, according to a statement by Ally.

The U.S. government rescued Ally, formerly known as General Motors Acceptance Corp, in the wake of the 2008 financial crisis with a $17 billion bailout.

California cities to remain 'fiscally challenged'-Moody's

Many California cities are showing signs of improvement, but limits on raising revenues, swelling pension costs and other pressures will leave them "fiscally challenged over the next few years," Moody's Investors Service said on Tuesday.

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The agency said it downgraded the ratings on 27 cities' obligations and upgraded the general obligation ratings of two cities after reviewing all of the 95 California cities it assesses.

 

The review was inspired by the bankruptcy filings of Stockton and San Bernardino, California, to understand the risk of future bankruptcy filings and the cities' current budget conditions, Moody's said.

Bankrupt Alabama county says has deal on $105 mln of bonds

Alabama's bankrupt Jefferson County has reached a deal with creditors JPMorgan Chase and Bayerische Landesbank covering $105 million of general obligation warrants, county officials said on Monday.

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The agreement, one of a series the county has reached since filing a landmark $4.2 billion bankruptcy in late 2011, covers the county's 2001b GO series and was expected to be approved on Thursday by the Jefferson County Commission.

 

The deal saves the county $2 million in fees and interest payments and shifts its variable rate to a fixed interest rate, officials said.

Detroit Mayor Bing will not run for reelection in crisis-hit city

Detroit Mayor Dave Bing, who has lost most of his authority to an emergency manager appointed by the state, said on Tuesday that he will not seek reelection, and accused Michigan, the media and political pundits of unfairly denigrating the city.

A former professional basketball player and steel company executive, Bing swept into office in 2009 with pledges to fix the city's ballooning deficit and restore neighborhoods decimated by crime, fires and residential flight.

 

Detroit's long slide continued under his watch and the state of Michigan in March stepped in to appoint a bankruptcy lawyer, Kevyn Orr, to take over management of its finances.

Orr on Monday said Detroit is clearly insolvent and could face a possible bankruptcy if talks with labor unions and creditors do not make substantial progress on easing the city's cash crunch by the end of June.

A bankruptcy filing by Detroit would be the largest municipal filing in U.S. history.

Bing, a Democrat, did not explain why he would not run for a new term but expressed frustration with Republican Governor Rick Snyder's decision to appoint an emergency manager.

"I find myself wondering how the state (of Michigan) defines partnership," Bing said.

His popularity suffered because he reduced fire and police protection, laid off thousands of city employees and cut bus routes. Bing's relations with the city council were fractious and he was unable to stave off the state takeover.

He also blamed the media and political pundits for sensationalizing Detroit's problems.

"The press fails to be fair and balanced in its reporting," Bing said to applause. "They need to be held accountable," he said.

Detroit is the poorest large city in the United States with more than a third of its residents living below the poverty line defined by the U.S. government. The city suffers from high crime, a population drain and a lack of jobs.

Bing, who turns 70 in November, was hospitalized twice last year for health problems.

Even though the emergency manager has drained most of the power of the mayor, a number of Detroit and state politicians have announced they will run for mayor. The general election will be in November.

UPDATE 1-Bankrupt Alabama county has deal on $105 mln of bonds

As Alabama's Jefferson County readies a workout proposal for its landmark $4.2 billion bankruptcy, officials on Tuesday announced an agreement with creditors JPMorgan Chase and Bayerische Landesbank covering $105 million of defaulted debt.

 

The deal, one of a series the county has reached since filing the biggest U.S. municipal bankruptcy in late 2011, covers the county's 2001b general obligation warrants and was expected to be approved on Thursday by the Jefferson County Commission.

The Jefferson County case is seen as a testing ground for how bondholders fare when a local issuer breaks under excessive financial pressure. The bankruptcy is the result of debts taken on in a costly overhaul of the county's sewer system.

The agreement announced on Tuesday saves the county $2 million in fees and interest payments and shifts its variable rate payments on the bonds issued for infrastructure projects to a 4.9 percent fixed interest rate, officials said.

The deal will end the debt's default status and also waives claims by the creditor banks of $10 million of other interest since the bankruptcy, according to a briefing note from the county.

Jefferson County, which last week told a bankruptcy judge it aimed to file a proposed plan to adjust its debts by late June, hopes the deal encourages holders of the county's $3.2 billion of sewer debt and other creditors to compromise, officials said.

"We are cautiously optimistic as we work toward a cram down," Commissioner Joe Knight said on Tuesday. "It would be better to reach a consensual agreement, for it not to be adversarial. But we need to be prepared for whatever comes."

Jefferson County already has in place deals with creditors Ambac Assurance Corp and Depfa Bank Plc on some claims and has slashed spending by laying off workers, closing some operations and reducing services since 2011.

The chief bankruptcy lawyer for Jefferson County, whose finances were wrecked by soured sewer debt and a court order killing a local tax, last week reported "substantial progress" toward a consensual agreement with Wall Street banks, hedge funds, insurers and creditors.

But holders of sewer debt, including JPMorgan, have shown little willingness to give ground and may be faced with non-negotiated terms that can be approved without their agreement, according to county officials.

Tuesday's $105 million agreement includes terms that allows JPMorgan to exit the GO warrants agreement, according to one of the bankruptcy lawyers for the county.

"If JPMorgan and the county do not reach a satisfactory agreement over the sewer debt, JPMorgan has the right to withdraw from the agreement," attorney Lee Bognanoff said.

UPDATE 2-California cities to remain 'fiscally challenged' -Moody's

Many California cities will remain fiscally challenged over the next few years due to limits on raising revenues and demands for pensions and other spending, Moody's Investors Service said on Tuesday.

The agency said it downgraded the ratings on 27 cities' obligations and upgraded the general obligation ratings of two cities - San Francisco and Los Angeles - after reviewing all of the 95 California cities it assesses.

The review was inspired by the bankruptcy filings of Stockton and San Bernardino, California, to understand the risk of future bankruptcy filings and the cities' current budget conditions, Moody's said.

 

California stunned the $3.7 trillion municipal bond market last year with three bankruptcy filings. Mammoth Lakes also filed for creditor protections under Chapter 9 municipal bankruptcy law.

In general, lease-backed and unsecured bonds are at greatest risk, Moody's said, noting that all three bankrupt cities defaulted on some of the obligations. It downgraded all lease-backed obligations that already had ratings below an issuer's general obligation rating, it said.

"These bankruptcies reinforced our belief that large tax bases and stabilizing economies are not sufficient by themselves to assure repayment," Moody's said. "The risk to these general revenue-backed obligations is markedly greater than to those supported by a city's general obligation pledge."

Stockton neighbor Fresno suffered a raft of downgrades. Its taxable pension obligation bonds were knocked down three notches to Ba2 with a negative outlook, as 10 of its lease revenue refunding bonds were cut two notches to Ba1 with a negative outlook. Some revenue bonds issued by nearby Sacramento were also downgraded.

The median rating for California cities' general obligation bonds "remains relatively high" at Aa2, Moody's said, a reflection of "their fair success, so far, in adapting to the new fiscal reality: moderate revenue growth compared to pre-recession levels and continuing cost pressures."

"After some initial optimism for a quick economic recovery, most cities adopted more realistic economic expectations and implemented significant budget cuts, reestablishing, for the most part, structural budget balance and stable credit quality," it added.

The revenues of inland cities, which grew during the housing bubble will likely not return to pre-recession levels "in the next few years," Moody's said. San Bernardino is the anchor of the part of the state known as "The Inland Empire," while Stockton sits in the Central Valley.

Coastal cities, meanwhile, are recovering faster.

Across the most populous state in the country, though, pent-up spending demands will likely eat up improving revenues.

"After declining for two consecutive years, expenditures picked up again in 2012, and on average this increase in expenditures more than offset the modest revenue gains," Moody's said.

In Los Angeles, the state's biggest city, Mayor Antonio Villaraigosa has proposed raising revenue, cutting spending, and reducing funds for many city employees, to help close a $216 million budget gap. San Francisco also faces a shortfall, of about $124 million, and officials expect costs to outpace revenue growth over the next five years.

Another major rating agency, Standard & Poor's, said earlier this month that it does expect to see more bankruptcy filings this year.

Nonetheless, rating agencies are closely watching for the effects of a rate increase approved by California's public pension fund last month. The California Public Employees' Retirement System, known as Calpers, changed the methods for calculating future pension obligations and amount of money to set aside to cover costs. In some cases contribution rates could rise as much as 50 percent.

"Retirement costs, which are growing at disproportionate rates to cities' general revenue growth, are an additional and likely longer lasting pressure on expenditures," Moody's said.

Suntech lenders agree to defer $541 mln bond repayment again

China-based solar panel maker Suntech Power Holdings Co Ltd, whose main unit is in insolvency proceedings, said it reached an agreement with some lenders to further defer its obligations on a $541 million loan.

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Suntech defaulted on the principal payment on the 3 percent convertible notes on March 15. The company earlier that month reached a deal with 60 percent of the note holders to defer payments until May 15.

 

Under the agreement disclosed on Wednesday, the signing bondholders have agreed not to exercise their rights until June 28.

Myanmar authorities work to evacuate camps as cyclone nears

Authorities in Myanmar struggled on Wednesday to evacuate tens of thousands of people, most of them Rohingya Muslims, before a cyclone reaches camps in low-lying regions that have been their home since ethnic and religious unrest last year.

Cyclone Mahasen has already killed at least seven people and displaced 3,881 in Sri Lanka, its Disaster Management Center said on Tuesday.

 

The storm is moving north over the Bay of Bengal and is expected to reach land on Thursday, hitting north of Chittagong in Bangladesh.

The Myanmar government had planned to move 38,000 internally displaced people, most of them Rohingya Muslims, by Tuesday but many have refused to relocate from camps in Rakhine State in the west of the country, afraid of the authorities' intentions.

At least 192 people were killed in June and October last year in violence between ethnic Rakhine Buddhists and Rohingya, who are denied citizenship by the government in Myanmar and considered by many Buddhists to be immigrants from Bangladesh.

At a camp near the sea by Hmanzi Junction on the outskirts of Sittwe, the capital of Rakhine State, several people told Reuters they would rather perish in the storm than evacuate.

"We arrived here last year because of the clashes between Rakhine and Muslims. I lost everything. Both my mother and my two young daughters died," said Hla Maung, 38, a Muslim.

"If the cyclone hits here, I will pray to Allah. Everyone here wants to die in the storm because we lost everything last year."

The U.N. Office for Coordination of Humanitarian Affairs, which is helping Myanmar's government in Rakhine State, said the storm appeared to have weakened but could still threaten 8.2 million people in northeast India, Bangladesh and Myanmar.

There are up to 250,000 Rohingya living in southern Bangladesh, many of whom fled from Myanmar in the early 1990s complaining of abuses by the army.

The U.N. refugee agency said about 40,000 Rohingyas in Bangladesh were living in two unofficial sites and the government had given an assurance that everyone would get help.

Authorities in Bangladesh started moving people out of low-lying areas on the coast as the storm approached to within 800 km (500 miles). It was likely to intensify and bring a storm surge of up to 2.1 meters (seven feet), authorities said.

The port in the Bangladeshi city of Chittagong and the airport in Cox's Bazar were closed on Wednesday.

PRESIDENT URGES HELP FOR ALL

The evacuations in Myanmar are seen as a test of the government's willingness to help the Rohingya, an impoverished, long-persecuted people who bore the brunt of sectarian violence in Rakhine State and suffered before that during half a century of military rule.

Hla Maung and others had rejected efforts by the U.N. refugee agency on Tuesday to move them to a nearby army barracks. They were told early on Wednesday they could take shelter in a school, but many still refused to go.

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Most of the people in the camp had lived in Thandawli, a village in the Sittwe region destroyed in last June's violence.

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About 140,000 people were displaced in June and a second wave of violence in October.

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Even before the storm developed, the United Nations has said about 69,000, most of them Rohingya Muslims, were living in Rakhine State in accommodation at risk of flooding and other damage during the rainy season, which starts this month.

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It warned last week there could be a humanitarian catastrophe if people were not evacuated.

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One of a small convoy of boats carrying Rohingya Muslims capsized at around midnight on Monday after hitting rocks off Pauktaw in Rakhine State. Official media said 42 people had been rescued but 58 were missing. Some reports have said eight bodies were found.

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Speaking at a coordination meeting for Cyclone Mahasen in Yangon on Tuesday, President Thein Sein urged officials to use the experience gained in 2008 after Cyclone Nargis killed up to 140,000 people in the Irrawaddy Delta, south of the main city, Yangon. He stressed the need to treat everyone equally.

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"Security, safety, food and health care are crucial. And it's very important to carry out relief work on humanitarian grounds for all regardless of race and religion," official papers quoted him as saying.

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Myanmar is a mainly Buddhist country but about 5 percent of its 60 million people are Muslims. They face a growing anti-Muslim campaign led by radical Buddhist monks and a Reuters Special Report found apartheid-like policies were segregating Muslims from Buddhists in Rakhine State.

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(Additional reporting by Aung Hla Tun in YANGON, Ruma Paul in DHAKA; Writing by Alan Raybould; Editing by Robert Birsel)

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Kuwait court ruling may threaten economic recovery

A ruling by Kuwait's top court next month could end a period of relative political stability, jeopardizing government plans to push ahead with long-delayed economic projects.

One of the world's richest countries per capita, Kuwait has struggled for years to get big infrastructure projects off the ground because of bureaucratic red tape and political turmoil. A parliamentary election in December was the fifth in six years.

 

The election seemed to be a turning point, however, since an opposition boycott of the poll meant members of parliament seen as more willing to cooperate with the government were elected.

This stirred investor hopes that the state would ramp up spending under a 30 billion dinar ($105 billion) development plan, which aims to draw private and foreign investment and diversify the oil-reliant economy.

That optimism, which has helped to fuel a more than 30 percent rise in the stock market since the start of this year, could come to an end on June 16.

The constitutional court is expected to rule on an emergency decree issued by Kuwait's ruler last year, six weeks before the December poll, which changed the rules for voting and triggered some of the largest street protests in the country's history.

If the court rules that the decree was not constitutional, parliament will need to be dissolved, triggering a snap election, and legislation passed by the assembly may also be made invalid - sending Kuwait back to square one in economic policy terms, or close to it.

"An annulment of the current parliament and the return of major political uncertainty would be negative for investor perceptions and the economy," said Farouk Soussa, Middle East chief economist at Citigroup in Dubai.

If the court rules in favor of Emir Sheikh Sabah al-Ahmad al-Sabah's decree, which changed the number of votes per citizen to one from four, the current parliament will be able to continue; this would make progress on investment more likely.

INDEPENDENT COURT

The court is widely seen as independent in Kuwait, which has the most democratic political system in the Gulf Arab region. Analysts and diplomats think the ruling could go either way.

"All Kuwaitis, we pride ourselves - even the opposition, even the government detractors - that our judiciary system is one of the best and the most independent in the Arab world," said Abdullah al-Shayji, chairman of the political science department at Kuwait University.

In the past, constitutional court judges have issued some rulings in line with the government's wishes, but they have also passed verdicts with the opposite effect.

Last June, for example, the court effectively dissolved a parliament dominated by the opposition, citing a technicality. But in September, it rejected a government request to change electoral boundaries, saying it did not have the authority to rule on the matter; it was this ruling that ultimately prompted the emir to issue his emergency decree.

In their upcoming ruling, the judges will assess whether the decree can be described as a "decree of necessity" and if it was issued in the correct way. The constitution lets the emir pass urgent decrees when parliament is not in session or dissolved.

The emir said at the time that the voting rule changes aimed to ensure security and stability in Kuwait, following months of political stalemate between the cabinet and parliament.

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Opposition politicians, who boycotted the December election in protest at the decree, said changes to the voting system should be agreed by parliament. Protesters alleged the new rules aimed to weaken the opposition, which was able to form effective parliamentary alliances under the old four-vote system in a country where political parties are banned.

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MODEST PROGRESS

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The opposition boycott of the election meant that liberals, Shi'ites, neutral MPs and complete newcomers to parliamentary politics were elected to the assembly, initially working well with the cabinet.

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They have passed some laws seen as helping the economy, such as a law aimed at simplifying the issuance of company licenses and plans for a fund to aid small and medium-sized firms.

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"The authorities now seem more determined to put a shoulder to the wheel to get the economy going, including on the projects," said Daniel Kaye, head of macroeconomic research at National Bank of Kuwait.

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Under the new parliament, partly because of a more stable political environment, two major projects have inched towards implementation.

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The government signed a contract with South Korea's Hyundai Engineering and Construction Co last November to design and build a $2.6 billion causeway connecting the north and south of the country. In January, it signed a deal with a consortium led by France's GDF-Suez, and including Sumitomo Corp of Japan, to build the Az Zour gas-fired power and seawater treatment plant.

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From the cabinet's point of view, the current parliament is by no means perfect; there are signs of some of the old tensions. This week MPs submitted requests to interrogate the oil minister and interior minister over their performance, which could lead to a vote of no confidence in them.

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Members of the cabinet then offered to resign and the government kept away from two parliament sessions, causing them to be cancelled.

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The possibility that the court ruling could lead to a fresh election means that some MPs may want to be seen as holding the government to account, Kuwait University's Shayji said.

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"There are now some problems between the parliament and the government, because of dissatisfaction with some of the ministers and a lack of cooperation on the part of some ministers," said Saleh Ashour, a long-serving MP.

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"Everyone is waiting for the constitutional court ruling."

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Nor is the current parliament's economic policy-making completely in line with the cabinet's wishes. In April the assembly passed a consumer debt relief law allowing the state to spend up to 744 million dinars to buy loans taken out from banks before March 2008, write off the interest and reschedule repayments.

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Economists described the law as a populist measure forced on the government by MPs. While the state can afford the measure, with its 14 straight years of budget surpluses, bankers argued that the plan encouraged bad behavior by consumers and could cost local banks money.

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But measures to reform the economy and get development projects on track still appear more likely under the current parliament than under a new one which would include opposition MPs emboldened by a court ruling against the emir's decree.

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"We would like to see further, deeper economic reforms that help support the private sector and make the economy more dynamic," NBK's Kaye said, citing privatization, labor market reforms, housing policy and business regulation as key areas.

(Additional reporting by Mahmoud Harby; Editing by Andrew Torchia)

Iran MPs urge ban on presidential runs by Rafsanjani, Mashaie

Some 100 legislators are demanding a ban on two top independent candidates including ex-president Akbar Hashemi Rafsanjani from Iran's June presidential election in what may be a further move to thwart any brewing challenge to the clerical supreme leader.

The petition by parliamentarians to Iran's Guardian Council emerged three days after the electoral watchdog said outgoing President Mahmoud Ahmadinejad may face charges for accompanying former aide Esfandiar Rahim Mashaie, the other high-profile independent, to register on Saturday for the vote.

 

That warning raised speculation that the council would bar Mashaie. The parliamentarians - conservative hardliners loyal to Supreme Leader Ayatollah Ali Khamenei - appeared to follow up by urging the watchdog to disqualify both independents.

After mass protests that followed the 2009 election, Khamenei may have counted on the June 14 vote to install a loyal conservative as president but the surprise candidacies of Rafsanjani and Mashaie scrambled that outlook.

In entering the fray, Rafsanjani - Iran's most prominent political grandee and a relative moderate - and Mashaie, former chief of staff to Ahmadinejad, have broadened what many thought would be a contest between rival pro-Khamenei "principlists".

Principlists dominate parliament and they lost little time in condemning Rafsanjani and Mashaie's electoral quest as the Guardian Council carries out its task of vetting all candidates.

In a letter to the Council, the legislators criticized Rafsanjani for having aligned with opposition forces, who hardliners refer to as "seditionists," after Ahmadinejad's disputed 2009 re-election over reformist challengers triggered months of popular unrest eventually suppressed by force.

"This all shows that he cannot be entrusted with a great responsibility like the presidency," the letter said, according to the semi-official Mehr news agency.

"BLOCK DEVIANTS, SEDITIONISTS"

The petition further denounced Mashaie, who is seen by conservatives in Iran's political establishment to be leading a "deviant current" that promotes an unorthodox version of Islam and seeks to sideline clerical authority.

"The same ones who tried to replace Islamism with nationalism have ... gathered the corrupt and the liberals around them," the letter read. "The Guardian Council, as in the past, can block the way for deviants and seditionists."

The presidential field is otherwise top-heavy with conservatives loyal to Khamenei including Saeed Jalili, chief negotiator in talks with world powers on Iran's disputed nuclear program, and former foreign minister Ali Akbar Velayati.

The Guardian Council is due to issue a final list of approved candidates around May 23.

The council is a body of Islamic jurists and clerics seen to be generally within Khamenei's orbit but has said it is not susceptible to political pressure and would perform its vetting duties in accordance with the law.

Ahmadinejad, barred by Iran's constitution from running for a third consecutive term, was once the favorite of Khamenei's faithful but after repeatedly challenging the supreme leader's authority since 2009, he has fallen from political grace.

Authorities are mindful of pre-empting another eruption of protests like those that followed the 2009 vote, and critics say the government has sought to stifle journalists and activists ahead of the election.

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On Wednesday Iranian Intelligence Minister Heydar Moslehi said his ministry was ready to counter any plans to disrupt the elections.

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"They have designs for these elections, but they will all be foiled," he said, according to Fars news agency. "Most of these plans are in the areas of media."

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In a speech on Wednesday, Khamenei, Iran's most powerful man, said the people of Iran should vote for a "pious, revolutionary" candidate in order to ensure the failure of Iran's "enemy," the ISNA news agency reported.

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But he also warned candidates not to promise too much in their campaigns. "In order to attract votes, sometimes candidates introduce slogans outside of the discretion of the president and the possibilities of the country," he said.

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(Editing by Mark Heinrich)

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U.N. watchdog, EU's Ashton to press Iran in nuclear dispute

The United Nations' nuclear agency failed to persuade Iran on Wednesday to let it resume an investigation into suspected atomic bomb research, leaving the high-stakes diplomacy in deadlock.

With Iran focused on a presidential election next month, expectations had been low for the meeting between Iran and the International Atomic Energy Agency (IAEA), which has been trying for more than a year to reopen an inquiry into "possible military dimensions" of Tehran's nuclear work.

 

"We had intensive discussions today but did not finalize the structured approach document that has been under negotiation for a year and a half now," IAEA Deputy Director General Herman Nackaerts said after the eight-hour meeting, referring to a long-sought framework deal for the investigation.

"Our commitment to continue dialogue is unwavering. However, we must recognize that our best efforts have not been successful so far. So we will continue to try and complete this process." No date was set for future talks.

Iran's envoy, Ali Asghar Soltanieh, said both sides had put forward proposals during "intensive technical discussions" and the aim was to bridge the differences in future talks. Iran denies it has any aims to develop nuclear weapons.

The United States, which accuses Tehran of using stalling tactics at the IAEA talks and parallel negotiations with world powers, said it expected the nuclear agency to eventually urge the U.N. Security Council, which has imposed several sanctions resolutions on Iran, to take more action.

"At some point, the director general of the IAEA will have to return to the Security Council and say: ‘I can go no further. There has been no response. You have to take further action,'" Under Secretary of State Wendy Sherman told lawmakers in Washington. That could happen in June or in September, she said.

TWO TRACKS

Later in the day, the European Union's foreign policy chief and Iran's nuclear negotiator met for dinner in Istanbul to discuss the other line of talks which are a bid to resolve a row that could ignite war in the Middle East.

The meeting between Catherine Ashton, who represents six nations in the talks, and Saeed Jalili, who is running for president in Iran, followed a failed round of big power diplomacy in April, in the Kazakh city of Almaty.

Ashton called it a "useful discussion" but the two diplomats did not set out plans for a new round of negotiations.

"We talked about the proposals we had put forward and we will now reflect on how to go on to the next stage of the process. We will be in touch shortly," she said.

In Almaty, the six powers - United States, Russia, China, France, Britain and Germany - had asked Tehran to suspend its most sensitive nuclear work in return for some relief in economic sanctions.

Tehran had said the offer was not enough. It reiterated its calls that they recognize its "right" to refine uranium - which can have both civilian and military purposes - and end oil and financial sanctions.

The two sets of talks represent distinct diplomatic tracks but are linked because both centre on suspicions that Iran may be seeking the capability to assemble nuclear bombs behind the facade of a declared civilian atomic energy program.

Any movement in the decade-old standoff will now probably have to wait until after Iranians vote on June 14 for a successor to President Mahmoud Ahmadinejad.

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Israel and the United States have threatened possible military action if diplomacy and increasingly tough trade and energy sanctions fail to make Iran curb its nuclear program.

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In the latest U.S. step to try to choke off funding for that program, the U.S. Treasury blacklisted an exchange house and a trading company based in the United Arab Emirates on Wednesday, saying they had dealt with Iranian banks that Washington has declared off limits.

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Tehran says its nuclear activity has only peaceful purposes and that it is Israel, widely believed to be the Middle East's only nuclear-armed power, that threatens peace and stability

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(Additional reporting by Justyna Pawlak in Brussels and Arshad Mohammed in Washington; Editing by Robin Pomeroy and Doina Chiacu)

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Egypt judges suspend talks with Mursi over disputed reforms

Senior Egyptian judges halted talks with President Mohamed Mursi on judicial reforms on Wednesday after parliament decided to discuss the proposed laws despite presidential promises to seek consensus first.

Islamist lawmakers allied to Mursi's Muslim Brotherhood are pushing a bill that would force out more than 3,000 judges by lowering the retirement age.

The Brotherhood accuses many judges of being remnants of the era of deposed President Hosni Mubarak, saying they have sought to obstruct elections, legislation and attempts to bring corrupt former officials to justice.

 

The judicial reform bill has also angered liberal, leftist and ultra-conservative Islamist opposition groups which accuse the Brotherhood of trying to control state institutions rather than pressing genuine reforms. The Brotherhood denies this.

Under pressure over the bill last month, Mursi invited senior jurists to hold a "justice conference" to discuss the reforms. He said he would personally adopt the proposals that came out of the meeting.

But the Supreme Judicial Council said it was halting preparations for the conference after the Shura Council, the Islamist-dominated upper house that claims legislative power, said it would resume discussions of the law on May 25.

"We've stopped work on the conference until the presidency clarifies its position on this issue," senior judge Abdel Rahman Behloul told Reuters by phone.

"There are bodies in dispute. The vision of the president is different from the vision of the Shura Council. So what will happen?"

A spokesman for the presidency was not immediately available to comment on the judges' decision.

The row has widened Egypt's political rifts, adding to the turbulence that has hammered the economy since Mubarak's overthrow in a popular uprising in February 2011.

Cairo negotiating with the International Monetary Fund for a $4.8 billion loan conditioned on economic reforms which the IMF says should be backed by a broad political consensus.

Abdullah Fathi, deputy head of the Judges Club, said parliament's decision to resume the discussions was "a farce and a joke", the state news agency MENA reported.

(Editing by Alistair Lyon)

Freeport suspends Indonesia mine after tunnel collapse

Freeport-McMoRan Copper & Gold Inc halted operations at the world's second largest copper mine in Indonesia on Wednesday as rescue workers scrambled to find 25 workers caught underground in a tunnel collapse a day earlier.

The head of Freeport Indonesia said he would travel to the remote West Papua site later on Wednesday to assess rescue operations and decide on when to resume production at the Grasberg mine, which also holds the world's largest gold reserves.

Thirty-nine workers were attending an underground training class near the mine when a tunnel collapsed on them early on Tuesday morning, the company said. Rescue crews evacuated 14 people, four of whom died, the company said.

The Grasberg mine, which employees more than 24,000 workers, was not significantly affected, but production was suspended to pay homage to those involved in the accident.

"There is no direct impact on our operation but as a sign of sympathy we have suspended the operation," Rozik Soetjipto, president director of Freeport Indonesia, told reporters. "I will go to the site tonight and from there we can decide what is the next step."

Rescuers were using jacks, saws and other hand tools to free the remaining workers, as the tight space in the collapsed underground tunnel prevented them from using heavy earth-moving equipment, the company said.

"We may have a different situation tomorrow. The rescue team is working 24-hours," said company spokeswoman, Daisy Primayanti.

The cause of the accident was still unclear. Freeport Indonesia was not allowing journalists access to the site and details of the collapse itself and the rescue efforts were scant. The training tunnel was located outside the mining area and around 500 meters from the entrance of the Big Gossan mine.

The company was also reviewing other underground structures at the mine to ensure they were safe.

Freeport Indonesia's sales are expected to reach 1.1 billion pounds of copper and 1.2 million ounces of gold in 2013, up 54 percent and 31 percent over 2012 figures, respectively, as mining moves into higher ore grades.

The tunnel collapse is one of a number of worker-related incidents at the Papua mine in recent years, where a separatist movement has long pushed for a greater share of resource revenues. Mining contributes around 12 percent to Indonesia's economy.

(Editing by Patrick Graham)

UK warns Sri Lanka on abuses before Commonwealth summit

Britain said on Wednesday there would be "consequences" for Sri Lanka if its leaders did not address international concerns over human rights abuses, ahead of a Commonwealth summit scheduled to be held in Colombo in November.

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Deputy Prime Minister Nick Clegg told parliament "despicable human rights violations" had taken place in Sri Lanka, but that Britain still planned to attend the Commonwealth meeting there, a stance that has drawn heavy criticism from rights groups.

 

Sri Lanka has repeatedly rejected calls for an independent, international investigation into accusations of war crimes committed during the war with the Liberation Tigers of Tamil Eelam that ended in May 2009.

Tens of thousands of civilians, mostly Tamils, were killed in the final months of the war, a U.N. panel has said.

"All of us accept the controversy around this, accept the unease around this, but what we'll be doing by attending the Commonwealth Heads of Government Meeting in Sri Lanka is using the opportunity to cast a spotlight on the unacceptable abuses in Sri Lanka," Clegg said.

"Of course there will be consequences if there is not a change in conduct of the Sri Lankan authorities," added Clegg, standing in for Prime Minister David Cameron during parliament's weekly question and answer session.

Britain's Foreign Office was not immediately available to outline what consequences Clegg was referring to.

Sri Lankan government officials have repeatedly rejected accusations of human rights violations.

Cameron and Foreign Secretary William Hague are expected to attend the bi-annual Commonwealth meeting, and in a break with tradition, Prince Charles will represent Queen Elizabeth, who usually attends but is now, aged 87, cutting down on long-distance travel.

The summit is a meeting of leaders mostly from former British colonies, where issues including trade, development and human rights are discussed.

As well as human rights violations, Clegg said media freedom had been suppressed and legal professionals attacked.

Last month, Human Rights Watch called on the summit to be shifted from Sri Lanka, warning the Commonwealth will face "ridicule" if the meeting goes ahead.

Amnesty International has said Sri Lanka is intensifying a crackdown on critics, creating a "climate of fear", an accusation the Sri Lankan government rejected.

(Reporting by Mohammed Abbas; Editing by Alison Williams)

Man killed in attack on police station in Libya's Benghazi

A man was killed in an overnight attack on police in Libya's eastern city of Benghazi and their station was later set on fire in a possible act of revenge for the killing, police sources said on Wednesday.

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The army deployed additional forces to Benghazi after a car loaded with explosives blew up near a hospital on Monday, killing three people.

 

Police sources said the man lived in the neighborhood and was involved in the assault, but local residents said he was an innocent bystander caught in the crossfire.

The raid was meant to free someone arrested two days ago, police said.

"A crowd of angry people came to burn the police station, and police members (left) to avoid clashes with them," one police source said.

Soldiers near the station were firing guns into the air to warn people away, a Reuters witness said.

(Reporting by Feras Bosalum; Additional reporting by Ghaith Shennib; Writing by Jessica Donati; Editing by Raissa Kasolowsky)

France says 3.25 billion euros pledged for Mali

International donors pledged more than 3.25 billion euros ($4.22 billion) on Wednesday to help Mali recover after a conflict with al Qaeda-linked Islamists, French President Francois Hollande said.

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The sum exceeds the goals of Mali which had asked donors for nearly two billion euros for this year and next.

"It has been confirmed to me that more than 3.25 billion euros have been mobilized at this conference," Hollande said in a speech to the donors' conference in Brussels.

 

France and the EU led the drive for funding to rebuild Mali and halt a resurgence of al Qaeda-linked Islamists who were driven out of the major northern towns by a French-led offensive.

Large pledges of money by the EU, France, the United States, Britain and others brought the West African country over its goal to fill a funding gap in its 4.34 billion euro plan to keep the peace and build infrastructure.

"A huge part of the plan is financed so it is very good news. We are really happy. It's beyond our expectations quite frankly," one EU official said.

(Reporting by Ethan Bilby; Editing by Adrian Croft)

Former Dutch minister Koenders to be named U.N. Mali envoy: diplomats

Former Dutch development minister Gerard Koenders will be named U.N. special envoy for Mali and head of the U.N. peacekeeping mission in the West African country, where Islamist militants hijacked a revolt by Tuareg rebels, diplomats said on Wednesday.

U.N. Secretary-General Ban Ki-moon has written to the U.N. Security Council to notify the 15 members of his intention to appoint Koenders, who is currently head of the U.N. peacekeeping mission in Ivory Coast, council diplomats said.

 

The diplomats, speaking on the condition of anonymity, said there were unlikely to be any objections to Koenders, who is due to travel to New York shortly for briefings.

Last month, the U.N. Security Council unanimously approved a mandate for a 12,600-strong peacekeeping force for Mali from July 1. The force will be supported by French troops if needed to combat Islamist extremist threats.

But the creation of the force is subject to a council review of security in Mali in late June.

France, aided by some 2,000 troops from Chad, began a military offensive in January to drive out Islamist fighters, who had hijacked a revolt by the Tuareg rebels and seized two-thirds of Mali.

The U.N. peacekeeping force - to be known as MINUSMA - will assume authority from a U.N.-backed African force deployed there to take over from the French. Most of the African force, known as AFISMA, is likely to become part of the U.N. peacekeeping operation, diplomats say.

The new peacekeeping force will be the U.N.'s third largest, behind deployments in Democratic Republic of Congo and Darfur in Sudan, and will cost up to $800 million annually, U.N. officials say.

Mali was once viewed as an example of a working democracy in Africa but its North has been a center of cross-desert trafficking of drugs, stolen goods and Western hostages. Border towns are used as transit hubs for trans-Sahara cocaine and hashish smuggling.

Koenders was the Dutch minister for development cooperation between 2007 and 2010 before he took up the role as head of the U.N. Ivory Coast mission in 2011.

Diplomats say Koenders is likely to be replaced in Ivory Coast by Aichatou Mindaoudou Souleymane of Niger, who is currently the deputy special envoy for the joint African Union and U.N. peacekeeping mission in Sudan's Darfur.

(Additional reporting by David Lewis in Bamako; Editing by David Brunnstrom)

Bosnian experts present U.S.-backed plan for reform

Bosnian legal experts presented on Wednesday a U.S.-backed plan to reform one of the Balkan state's two autonomous regions, a month after it was warned that its bid to join the European Union would be frozen without constitutional changes.

Bosnia's Serbs, Muslims and Croats differ over how to change a governing structure enshrined in their 1995 peace treaty dividing it into a Serb Republic and a Muslim-Croat Federation with a weak central government in Sarajevo.

The last internationally-sponsored effort to advance constitutional reform foundered three years ago because rival communal leaders could not agree on any notable measure.

This is why Washington, main sponsor of the Dayton peace deal, commissioned independent Bosnian experts to draft constitutional amendments but this time applied only to the Federation, according to U.S. Ambassador Patrick Moon.

"The structure of the federation is the most complicated and expensive of any government structures in Bosnia," he said.

Divided into 10 cantonal administrations, the Federation is a complex web of ethnic power-sharing symptomatic of Bosnia's unwieldy ruling system that encourages political gridlock.

The experts proposed cutting the number of deputies in both houses of the federation parliament as well as their salaries, now among the highest in the Balkans.

This could speed up decision-making in parliament, where smaller parties now trade votes for benefits, and trim government spending that accounts for an onerous 45 percent of the Federation's GDP.

The experts also recommended abolishing the posts of federation president and two vice-presidents and replacing them with the existing parliamentary presidency.

Political parties will debate the proposals and deliver their verdict in the autumn, but some senior political figures were quick to come out against the blueprint.

Bosnian Justice Minister Barisa Colak, a Croat, said that scrapping the positions of federation president and two vice-presidents would disadvantage Croats, the smallest of the three main ethnic groups in the ex-Yugoslav republic.

"This is a good step in the right direction but I don't think there will be the political will to push the changes forward," said Jakob Finci, president of Sarajevo's Jewish community in Sarajevo.

Finci, along with Sarajevo's Roma community, won a case at the European Human Rights Court in 2009 ordering Bosnia to amend its constitution and allow members of minority groups to run for top government offices.

That was a major condition set by the EU for Bosnia to apply for membership, but has become hostage to political maneuvering by Serb, Croat and Muslim leaders seeking concessions in negotiations with the EU.

On April 11, the EU enlargement commissioner warned that Bosnia's EU accession bid faced being "frozen" and a planned election next year declared invalid without urgent reform of its constitution.

(Additional reporting by Maja Zuvela; Editing by Zoran Radosavljevic and Mark Heinrich)

Turkish court sees conspiracy behind Armenian editor's murder

A Turkish appeals court on Wednesday ruled that the killers of Armenian journalist Hrant Dink did not act alone but were part of a criminal conspiracy, paving the way for a retrial of the case that has gripped the nation for years.

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Judges in Ankara overturned a lower criminal court's 2012 judgment that only two people, now serving prison sentences, were behind the 2007 murder, Fethiye Cetin, a lawyer for the Dink family, told Reuters.

 

"We have strong evidence that state officials were involved in the conspiracy, and that evidence is even in the prosecutor's report... Prosecutors must re-open the case," said Cetin.

Dink was gunned down in broad daylight outside the office of his newspaper Agos in central Istanbul, unleashing huge street rallies and public outpourings of grief.

The killing led to suspicions of a deep-rooted conspiracy in a country that has seen dozens of political murders.

It also prompted criticism from the European Union, which Turkey hopes to join, on its treatment of minorities. Turkey's population of 76 million is overwhelmingly Muslim.

Dink, 52, was an outspoken critic of government policies towards the country's 60,000 or so Christian Armenians and its diplomatic standoff with neighboring Armenia.

(Reporting by Ayla Jean Yackley; Editing by Andrew Heavens)

Peru foreign minister quits over health after Venezuela spat: report

Peru's foreign minister has resigned for health reasons, local media reported on Wednesday, days after he was criticized for contributing to a diplomatic spat with Venezuela.

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Rafael Roncagliolo submitted his resignation to President Ollanta Humala citing "strictly health reasons" but did not specify his illness, the newspaper La Republica reported, quoting government sources.

 

The government and foreign ministry declined comment.

In early May, Roncagliolo called for "tolerance" in Venezuela and urged the South American bloc Unasur to push for mediation to calm political tensions in Caracas after a disputed election won by President Nicolas Maduro.

Maduro complained that Roncagliolo was meddling in Venezuela's internal affairs by appearing to give voice to opposition leaders. Lima then softened its tone.

Humala was a friend and admirer of Maduro's political mentor, late Venezuelan President Hugo Chavez.

Peru's ambassador to Venezuela also resigned on May 8 after opposition lawmakers in Peru's Congress criticized comments he made in support of Maduro's government.

Earlier this month, Ecuador's President Rafael Correa said Lima acted prematurely by asking Ecuador's ambassador in Peru to leave the country after he was involved in a scuffle with two women in a supermarket.

(Reporting By Omar Mariluz; Editing by Terry Wade and David Brunnstrom)

Moldova names PM nominee as leaders try to end crisis

Moldova's president nominated Iurie Leanca on Wednesday to become prime minister to lead the country out of a political crisis that has paralyzed legislation and drawn criticism from Brussels.

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Leanca, who has been acting prime minister, was deputy to Vlad Filat, who resigned in March after losing a confidence vote amid feuding among leaders of their pro-European coalition.

The three-party coalition of Filat's Liberal Democrats, the Liberals and the Democrats will now try to reach a compromise and rebuild behind him to avert an early election that could hand power to Moldova's opposition communists.

"A draft agreement on creating a new coalition is almost ready," Adrian Candu, a parliamentary deputy from the Democratic Party, told Reuters.

"We would like to see more transparency and feedback to our proposals on how to more efficiently combat corruption in a new government."

Political warfare between Filat and his coalition allies has involved all branches of government and drawn condemnation from the European Union, which Moldova wants to sign an association agreement with this year.

In April, Moldova's Constitutional Court barred Filat from running the interim government and being nominated for prime minister, forcing him to hand over the job to Leanca.

In response, Filat's supporters, together with the communists, passed a series of laws that allowed parliament to sack Constitutional Court judges and boosted the powers of the interim cabinet.

The EU criticized the steps as undemocratic. EU Commissioner for Enlargement and European Neighborhood Policy, Stefan Fuele is expected to visit Moldova on May 18-19, Leanca said this month.

Parliament has 15 days to vote on Leanca as prime minister.

(Reporting by Alexander Tanas; Writing by Olzhas Auyezov; Editing by Alison Williams)

Venezuela's Maduro buries hatchet with billionaire businessman

Socialist leader Nicolas Maduro and the billionaire boss of Venezuela's biggest private company have buried the hatchet after a war of words over food shortages and other economic problems in the South American nation.

Perpetuating the hard-line rhetoric of his predecessor Hugo Chavez, newly-elected Maduro turned on Empresas Polar president Lorenzo Mendoza in recent days, accusing him of hoarding products as part of an "economic war" on the state by private business.

 

Mendoza, whose company is Venezuela's biggest beer- and flour-maker, denied that and pointedly challenged the government to sell production plants nationalized under Chavez back to the private sector to boost efficiency.

On Tuesday night, the pair met to discuss their differences in a spat seen by Venezuelans as a bellwether for state-business relations going forward under Maduro's government.

Both sides came out of the meeting sounding reconciliatory and pledging to work together to overcome food shortages that have increased tensions in Venezuela after Maduro's disputed election win last month.

"It was very cordial, direct, sincere meeting ... We clarified we are producing at full capacity," Mendoza said.

"The president was very kind in listening to us and communicating the need to keep investing, producing and supplying markets. That is our lifelong commitment, passion and vocation ... Part of this issue (shortages) has to do with the high politicization (in Venezuela)."

Vice President Jorge Arreaza gave a similar account of the meeting. "The problem's been overcome," he told state TV.

TOUGH ECONOMIC PANORAMA

Supplies of food and other basic products have been patchy in recent months, with long queues forming at supermarkets and rushes occurring when there is news of a new stock arrival.

The situation has spawned jokes among Venezuelans, particularly over the lack of toilet paper. The government announced this week it was importing 50 million rolls to compensate for "over-demand due to nervous buying."

Authorities have also allowed increases in some price controls on products - including basics like chicken, beef and milk - to the consternation of consumers but relief of private businesses that complain of sometimes having to sell at a loss.

Mendoza's Polar is a central player in the Venezuelan economy, employing more than 31,000 people and accounting for 3 percent of non-oil GDP, according to its own figures.

As well as dominating Venezuela's beer market, the company controls 48 percent of the flour sector, 35 percent of pasta, 20 percent of rice, and 11 percent of cooking oil.

According to Forbes, the U.S-educated Mendoza, 47, is Venezuela's second richest man with $4 billion net worth.

Chavez frequently threatened to nationalize Polar, but in the end went no further than a few minor takeovers of warehouses and land, perhaps in recognition of the status the company has, with its products in almost every Venezuelan household.

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Opposition leader Henrique Capriles, who disputes Maduro's narrow win by 1.5 percent of votes in last month's presidential election, says the food shortages and rhetoric against Polar have simply illustrated the government's economic incompetence.

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Others have been struck by Mendoza's unusually public defense against Maduro's comments, something the businessman seldom did during Chavez's 14-year rule.

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"In the end, the meta-story here is the change in attitudes. It strains the mind to think that Mendoza would have been this feisty in defending his company if he were dealing with Hugo Chavez at the peak of his popularity," wrote pro-opposition blogger Juan Cristobal Nagel.

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"The fact that he is willing to go to bat for his company - and his ideas - so vehemently is further proof that Maduro is a weak president, that he is no Chávez."

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Maduro supporters, however, say the former bus driver and union leader's willingness to sit down with Mendoza demonstrated his qualities as a negotiator.

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The late Chavez turned the state into a major player in the food industry through a wave of nationalizations, but many of those operations have struggled to maintain production after their takeover due to factors including labor disputes.

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With inflation at a worrying 12.5 percent in the first four months of the year alone, and growth expected by most economists to slow after the end of last year's election-year, Maduro faces a tough economic as well as political environment.

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Aware of the long-held enmity by Venezuela's business elite towards his mentor Chavez, Maduro has since his first day in power been railing against "bourgeois" saboteurs and "speculators" whom he blames for economic problems.

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(Additional reporting by Enrique Andres; Writing by Andrew Cawthorne; Editing by Vicki Allen)

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Swiss limit permits for workers from all EU countries

Switzerland will impose immigration quotas on a further 17 European Union countries from June, the Federal Office for Migration said on Wednesday, a move that could pose a headache for many multinational companies that rely on EU workers.

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Prosperous, non-EU Switzerland has seen the net influx of workers rise to up to 80,000 a year, contributing to a house price bubble and prompting criticism from right-wing parties.

 

Under the terms of the 1999 Agreement on the Free Movement of Persons, Switzerland may invoke a "safeguard clause", which allows temporary caps on work permits if the annual influx exceeds a certain number.

Last month, the Swiss government imposed quotas restricting arrivals from eight central and eastern European countries and on Wednesday the Migration Office confirmed the quotas will also apply to a further 17 states in western and southern Europe from June 1.

Immigration of workers from Bulgaria and Romania - the two EU members of the 27 not covered by the two sets of quotas - is already restricted separately.

The quotas are effective for 12 months and will restrict the number of so-called B-permits, which allow foreigners to work for up to five years in Switzerland, to 53,700.

(Reporting by Caroline Copley; Editing by Alison Williams)

Bombs, shooting kill at least 15 across Iraq: police

Bomb attacks in Shi'ite areas of Baghdad and in northern Iraq killed more than 35 people on Wednesday, following weeks of violence by Sunni Islamist insurgents determined to unleash sectarian confrontation.

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Tensions between minority Sunni Muslims and the Shi'ites who now lead Iraq are at their highest since U.S. troops pulled out in 2011, with relations coming under more pressure by the day from the largely sectarian conflict in neighboring Syria.

A string of car bombings hit Shi'ite neighborhoods across the capital Baghdad on Wednesday evening, including one outside a cafe and another at a market, killing at least 22 people and wounding dozens more, police said.

"I saw a bright flash followed by a strong explosion that shook the building. Glass was shattered everywhere, people immediately ran to the scene and started evacuating the wounded and the dead," said Jabar al-Rubaie, a policeman at the scene in Sadr City district in Baghdad.

One channel broadcast images from the capital's Zaafaraniya district, where many houses were partially damaged and several cars were in flames. Ambulances evacuated victims and a man ran holding a wounded child.

Earlier, 10 people were killed when two car bombs exploded near government buildings in the ethnically mixed oil city of Kirkuk.

A suicide bomber on a motorcycle also blew himself up near a police patrol in northern Baghdad, killing at least two officers, while a roadside bomb killed a policeman in a town near Mosul, 390 km (240 miles) to the north, police and medical sources said.

Relations between Iraq's Shi'ite, Sunni and ethnic Kurdish communities have come under growing strain since the last U.S. troops left in December 2011.

The coalition government, split among Shi'ite, Sunni and Kurdish political blocs, is hobbled by disagreements about how to share power.

But the conflict in neighboring Syria, where mostly Sunni rebels are trying to oust President Bashar al-Assad, who follows the Alawite offshoot of Shi'ite Islam, has also put pressure on Iraq's delicate intercommunal balance.

Although violence is well below the height of sectarian slaughter in 2006-7, when tens of thousands were killed, Sunni Islamist insurgents now carry out attacks almost daily to try to undermine the Shi'ite-led government.

Al Qaeda's local wing, Islamic State of Iraq, and other Sunni insurgents are trying to use Syria's war to gain legitimacy and tap into frustrations among Iraqi Sunnis, hoping to regain ground they lost during their long battle with American troops.

(Reporting by Mustafa Mahmoud in Kirkuk and Kareem Raheem in Baghdad; Writing by Suadad al-Salhy; Editing by Patrick Markey and Alison Williams)

Bulgarian president tries to break election stalemate

Bulgaria's political stalemate deepened on Wednesday after final results confirmed a prospective Socialist alliance with ethnic Turkish MRF allies lacking a majority, and its president warned of destabilization without a new government soon.

President Rosen Plevneliev appealed to political parties to hammer out a coalition deal after the inconclusive weekend election in the European Union's poorest member state.

 

"It is important to have a stable government. Everything else, new elections, would mean destabilization," he told reporters. "Bulgaria does not need new elections now. This will scare away investors."

Plagued by poverty, corruption and organized crime, Bulgaria has been in political disarray since nationwide protests forced the previous leadership from power, and it risks drifting further until a new government is formed.

A turnout of just 51 percent, the lowest since the fall of communism in 1989, drove home the deep frustration of many Bulgarians with an entrenched political elite seen as corrupt and self-interested, and unable to boost incomes.

A working government is needed urgently to negotiate EU funds for the next seven years, draft the 2014 budget and try to address popular anger over poor living conditions and high energy prices that kindled unrest earlier this year.

Political uncertainty has driven up the cost of insuring Bulgarian debt against default since last week.

It now costs $110,000 annually to buy $10 million worth of protection against a Bulgarian default using a five-year CDS contract, up from $92,000 on Friday, according to credit default swaps prices from provider Markit.

JITTERS OVER INSTABILITY

The business community worries that an unstable government forced to rely on unpredictable nationalists who demand state takeovers of companies and huge wage increases might deter investment urgently need to kickstart growth.

Plevneliev said he would start consultations on Friday with a view to convening the new parliament before the end of May.

But it was not immediately clear how the coalition would take shape as the official results showed no group would get over the 121-seat threshold needed to form a viable government.

The center-right party of former prime minister Boiko Borisov, who once served as a bodyguard to Communist dictator Todor Zhivkov, won 97 seats in the 240-strong parliament. But it has little chance of governing as other groups shun it.

Borisov's GERB party has in the past ensured a majority by getting the support of the Attack party but the nationalists have ruled it out this time around. Even if they changed their mind, their alliance would be one seat shy of a majority.

GERB has been tarnished by its fall to street unrest and its embroilment in scandals over wiretapping and illegal ballots.

The more likely government will be one formed by the second largest group, the Socialists, who have voiced readiness for a non-partisan technocratic administration to shepherd a rise in living standards and avert further unrest.

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But the final results showed that the Socialists and their allies, the ethnic Turkish MRF, would also be a seat short of a majority and would need to persuade Attack, or individual legislators from either GERB or Attack, to work with them.

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(Writing by Christian Lowe; editing by Mike Collett-White)

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Myanmar President Thein Sein to visit Obama at White House on May 20

Myanmar President Thein Sein will meet with President Barack Obama at the White House on May 20 as Obama continues to push the country to make reforms while it moves away from military rule, the White House said on Wednesday.

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"The president looks forward to discussing with President Thein Sein the many remaining challenges to efforts to develop democracy, address communal and ethnic tensions, and bring economic opportunity to the people of his country, and to exploring how the United States can help," White House spokesman Jay Carney said in a statement.

 

(Reporting by Roberta Rampton; Editing by Vicki Allen)

No breakthrough in nuclear talks with Iran: U.N

Talks between the U.N. nuclear watchdog and Iran about Tehran's nuclear program failed to clinch an accord and no date has been set for more meetings, a senior U.N. official said on Wednesday.

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"We had intensive discussions today but did not finalize the structured approach document that has been under negotiation for a year and a half now," Herman Nackaerts, deputy director general of the International Atomic Energy Agency (IAEA), told reporters after meeting Iranian officials in Vienna.

"Our commitment to continue dialogue is unwavering. However, we must recognize that our best efforts have not been successful so far. So we will continue to try and complete this process."

(Reporting by Fredrik Dahl; Writing by Michael Shields; Editing by Kevin Liffey)

France suggests EU link easing Syria arms embargo to peace talks

France is floating a proposal that the European Union ease an arms embargo for Syrian rebels but delay acting on the decision to intensify pressure on Damascus to negotiate an end to Syria's civil war, a French diplomat said on Wednesday.

Sweden, Austria and some other EU member states are resisting efforts by France and Britain to modify the ban to strengthen rebels fighting Syrian President Bashar al-Assad.

The embargo is part of a package of EU sanctions on Syria that expires on June 1. EU foreign ministers will discuss the issue on May 27 and it could come up at an EU summit on May 22.

The French diplomat's suggestion that the arms embargo could be linked to the outcome of a new initiative from the United States and Russia for a diplomatic solution in Syria appears designed to win support for the French-British proposal.

It would effectively introduce a brake on the lifting of the arms embargo, allowing for it to take effect only if the proposed peace conference in Geneva next month fails.

"Strengthening the hand of the opposition is not contradictory to holding talks," the French diplomat said, briefing reporters on condition he was not further identified.

"There are always questions about the time frame. We could take a decision at the end of May - if we take a decision - with its implementation deferred depending on what happens or what doesn't happen in Geneva," he said.

"We've always said that the goal was a political solution, but (that) a political solution depended to a large degree on what happened on the ground," the diplomat said.

The U.S.-Russian peace drive is based on a deal announced in Geneva in June 2012 for the creation of a transitional Syrian government "with full executive authority by mutual consent".

That wording left unresolved the question of any future role for Assad and the agreement was never implemented.

Britain argues that lifting the arms embargo for rebels would strengthen the "moderate" opposition and ensure the EU could respond to any Syrian government use of chemical weapons.

Austrian Chancellor Werner Faymann said on Tuesday he opposed the idea on the grounds that more weapons would only fan the fighting and might snuff out chances for peace talks.

Neither France nor Britain has decided whether to go ahead and arm rebel factions, with Paris saying it first wants to see what impact the threat of doing so has on Assad.

(Editing by Alistair Lyon)