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Israel-US relations ‘facing severe crisis’

Israeli Prime Minister Benjamin Netanyahu has vowed settlement building in east Jerusalem will continue, despite a diplomatic spat over the issue with key ally the United States.

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Western-backed Palestinian president Mahmud Abbas responded by saying he would not return to peace talks without a complete settlements freeze.

The US State Department declined to comment on the hawkish Israeli premier’s remarks, saying it was awaiting a ‘formal’ response.

“Construction will continue in Jerusalem as this has been the case over the past 42 years,” Netanyahu told members of his Likud party.

Israel occupied mainly Arab east Jerusalem in the 1967 Six-Day War and later annexed it in a move not recognised by the international community.

Last week’s go-ahead for 1,600 new homes for Jewish settlers in the east of the city infuriated Washington, coming during a visit by US Vice President Joe Biden aimed at promoting renewed peace talks with the Palestinians.

Israel’s ambassador to Washington said bilateral relations have hit a 35-year low.

“Israel’s relations with the US are facing the most severe crisis since 1975,” the Yediot Aharonot newspaper quoted ambassador Michael Oren as telling consuls in the United States.

US calls in 1975 for a partial Israeli withdrawal from Egypt’s Sinai peninsula, then under Israeli occupation, ignited a major crisis between the two allies.

Last week’s announcement sparked fury among the Palestinians, who view east Jerusalem as their capital and see the growth of Israeli settlements as the main obstacle to the establishment of their promised state.

“There will not be any negotiations with the continuation of settlement activity,” Abbas’s spokesman Nabil Abu Rudeina quoted him as saying on Monday.

“These policies do not create an appropriate atmosphere for the resumption of the peace process.”

Senior US officials including Biden and US Secretary of State Hillary Clinton have slammed both the new construction and the announcement’s timing as insulting and damaging to peace efforts.

On Monday State Department spokesman Philip Crowley told reporters Hillary Clinton had asked Netanyahu for a formal response to US demands.

“When she outlined what she thought appropriate actions would be to the prime minister, she asked for a response by the Israeli government. We wait for the response,” Crowley said.

Still, he uttered the first conciliatory words in recent days from the US, reaffirming that “Israel is a strategic ally of the US and will continue to be so.”

And Netanyahu won backing from Obama’s political opponents.

“In an effort to ingratiate our country with the Arab world, this administration has shown a troubling eagerness to undercut our allies and friends,” said House Republican Whip Eric Cantor, the only Jewish Republican in the House of Representatives.

Also on Monday, EU foreign policy chief Catherine Ashton said Israel’s move “endangered and undermined the tentative agreement to begin proximity talks.”

The March 9 green light for the new construction in east Jerusalem’s Ramat Shlomo district came just two days after the Palestinians had reluctantly agreed to hold indirect negotiations with Israel.

Direct talks collapsed after Israel launched a devastating 22-day military offensive in December 2008 against the Islamist Hamas-run Gaza Strip aimed at halting Palestinian rocket fire.

Israeli troops wounded 10 Palestinians on Monday as they opened fire on dozens of students hurling stones at a West Bank checkpoint to protest against Israel’s actions in east Jerusalem, Palestinian medics and witnesses said.

As tensions mounted, Israel barred men aged under 50 and non-Muslims from entering Jerusalem’s flashpoint Al-Aqsa mosque compound for the fourth day running.

The compound is Islam’s third holiest site after Mecca and Medina in Saudi Arabia. It is also Judaism’s holiest site as the location of the Second Temple, destroyed by the Romans in 70 AD.

Police and demonstrators have clashed in and around the compound on the past two Fridays, and police fear Monday’s reopening of a 17th century synagogue a few hundred metres (yards) from the compound could reignite protests.

The Islamist Hamas movement ruling the Gaza Strip declared Tuesday a “day of rage and alarm” over the opening of the Hurva synagogue, calling on Arabs and Muslims to “come to the aid of Jerusalem and Al-Aqsa.”

“Israel is playing with fire and touching off the first spark to make the region explode,” exiled Hamas leader Khaled Meshaal warned.

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US rebounds from recession

The United States rebounded from recession in the third quarter, posting its strongest economic growth in two years as government stimulus spurred consumer spending.

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After four negative quarters, the world’s largest economy grew at a seasonally adjusted 3.5 per cent annual rate in the July-September period from the second quarter, the Commerce Department said.

The increase was the first since the second quarter of 2008 and the strongest expansion since the 2007 third quarter, when a US subprime mortgage crisis triggered a global financial crisis that hammered the world economy.

The expansion followed an unrevised 0.7 per cent decline in the second quarter.

The department’s first estimate of third-quarter gross domestic product (GDP), a broad measure of the country’s output of goods and services, was slightly higher than the 3.2 per cent reading expected by most analysts.

President Barack Obama welcomed the data as “an affirmation that this recession is abating and the steps we’ve taken have made a difference.”

Unemployment a major hurdle

But, he warned: “We have a long way to go to fully restore our economy, and recover from what has been the longest and deepest downturn since the Great Depression.”

“The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well.”

While a recession is widely regarded as ended by one quarter of economic growth, in the United States the economy will not be officially out of recession until it has been declared by the National Bureau of Economic Research.

Unemployment remains a key hurdle to sustained recovery. The jobless rate rose to a new 26-year high of 9.8 percent in September and is expected to hit double digits. Since the official start of recession in December 2007, the number of unemployed has climbed by 7.6 million to 15.1 million.

The Labor Department reported Thursday that new weekly claims for unemployment benefits fell slightly.

“The recession is over, but don’t be fooled by today’s number — the underlying rate of recovery is weaker,” said Nariman Behravesh, chief economist at IHS Global Insight.

Economy ‘on life support’

Behravesh said that underlying growth was closer to 2.0 per cent and predicted momentum would only pick up in the second half of next year as consumers and businesses grow more confident.

After shrinking a sharp 6.4 per cent in the first quarter, the world’s largest economy has been on life support from the federal 787-billion-dollar emergency stimulus and other support measures.

The third-quarter rebound was led by consumer spending, which accounts for two-thirds of US economic activity and added 2.36 percentage points to GDP growth.

Consumer spending surged 3.4 per cent after a 0.9 percent drop in the second quarter, a rise the department said “largely reflected” auto purchases under the government’s popular “cash-for-clunkers” program in July and August.

Dean Baker, co-director of the Center for Economic and Policy Research, noted that, excluding the auto sector, consumption grew at a 1.0 per cent annual rate.

Core inflation rate falling

“With disposable income falling due to continued job losses and declining hourly wages, and the reversal of the surge in car sales, consumption growth will almost certainly be negative in the fourth quarter,” Baker said.

Other leading drivers of third-quarter growth were business inventories and home building.

The core inflation rate — which strips out volatile food and energy prices — fell to 1.4 per cent from 2.0 per cent, indicating inflationary pressures remain tame amid economic weakness.

The Federal Reserve, which keeps a close eye on the reading, is widely expected to leave its key interest rate unchanged at nearly zero when policymakers meet on November 3-4.

“If we do indeed get a second consecutive quarter of good growth, there will be a lot of pressure on the Fed to start raising rates,” said Joel Naroff of Naroff Economic Advisors.

“Indeed, I wouldn’t be surprised if the markets start pricing that into bond yields during the rest of the year.”

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New Hendra outbreak in Queensland

Biosecurity Queensland is managing another case of Hendra virus infection, after test results on a deceased horse came back positive for the virus.

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Deputy Chief Veterinary Officer, Rick Symons, said a private vet last week reported a suspected case on a property outside Bowen in north Queensland to Biosecurity Queensland after attending a sick horse on the property.

“The vet attended the horse over several days last week and samples were taken and forwarded to Brisbane for testing,” Dr Symons said in a statement.

The horse was euthanased on Thursday.

Control procedures were put into place when the sample results came back positive on Tuesday night, Dr Symons said.

“There is one other horse on the property, which is healthy,” he said. “A third horse on the same property died one month ago but we do not have any samples to test.

“The property is under quarantine.”

The resident of the property has been informed of the test results.

Vets ‘wearing protective clothing’

Dr Symons said there were a number of horses on an adjoining property and Biosecurity Queensland officers were working with the owner to assess if they had been exposed to the horse that died most recently.

“Staff will also speak to a small number of residents in the immediate area today and provide the latest information about Hendra virus,” he said.

It is the 13th known incident of Hendra virus infection since 1994.

Rockhampton vet Alister Rodgers died this month after catching the virus from an infected horse he treated near Rockhampton on July 28.

Dr Symons said it was understood the vets who attended the Bowen horse had been wearing appropriate protective clothing.

“Following the recent tragic events surrounding the Hendra outbreak at Cawarral near Rockhampton, there is a greater awareness amongst vets and horse owners of the risks associated with Hendra virus,” he said.

“We encourage vets, horse owners and the community to be vigilant and report any suspected cases of Hendra virus to Biosecurity Queensland and, most importantly, to take appropriate precautions when handling any sick horse.”

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London 2012 faces ‘tight’ finances

The London Olympics face a “tight” financial situation, with only 194 million pounds available to cover any new risks in the run-up to 2012, a parliamentary committee warned on Wednesday.

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The Committee of Public Accounts also raised concerns about how organisers LOCOG intend to raise 400 million pounds from ticket sales while balancing its commitment on affordability.

“The position is tight, with no room for complacency and limited flexibility to respond to new problems as the Games approach,” said committee Chairman Edward Leigh.

Construction of the Olympic Park in east London is on time and within the 9.3 billion pound budget, the committee noted. It praised the Olympic Delivery Authority (ODA) for controlling costs and finding savings across its programme, especially after the collapse of private funding for the Olympic Village and media centre during last year’s credit crunch.

But of the original 2.74 billion pounds of contingency, only 1.2 billion remain, and all but 194 million of that is currently earmarked for known risks.

Unforeseen costs continue to arise, including a recent 276 million pound bill to secure the Park after construction.

Staying within budget also depends on receiving about 600 million pounds of receipts from the Olympic Village.

LOCOG aims to raise the 2 billion pounds it needs to stage the Games through sponsorship, merchandising and ticket sales, and has attracted 70 percent of that total so far.

Tickets do not go on sale until next year, but the committee called on LOCOG to publish now the principles on which ticket availability and prices would be determined.

It said it was “reasonable to assume” tickets for a family of four could cost about 100 pounds, with prices varying according to each event.

The committee also urged LOCOG to establish a contingency fund to protect against failure to raise the funds.

The government aims to repay 675 million pounds of the 2.1 billion pounds the National Lottery has put up for the Games through future profits on the sale of Park land and assets, but the committee noted there was no guarantee on the value and timing of that payment.

Responsibility for security in certain areas has yet to be resolved, such as the “grey space” between the transport hubs and Park venues, the committee said. It called on the government to make clear who has overall executive authority.

(Editing by Steve Addison)