Wall Street starts new year with a bang after "cliff" deal

NEW YORK (Reuters) - Stocks kicked off the new year with their best day in over a year on Wednesday, sparked by relief over a last-minute deal in Washington to avert the "fiscal cliff" of tax hikes and spending cuts that threatened to derail the economy's growth.


In 2013's first trading session, the S&P 500 achieved its biggest one-day gain since December 20, 2011, pushing the benchmark index to its highest close since September 14.


Concerns over Washington's ability to sidestep the cliff had driven the S&P 500 down for five straight sessions, before signs that a resolution was near sent the benchmark index higher on the final trading session of 2012.


The CBOE Volatility Index or the VIX <.vix>, Wall Street's favorite gauge of investor anxiety, dropped 18.5 percent to 14.68 at the close. The VIX has fallen 35.4 percent over the past two sessions, the biggest 2-day percentage drop in the history of the index.


The Dow Jones industrial average <.dji> jumped 308.41 points, or 2.35 percent, to 13,412.55 at the close. The Standard & Poor's 500 Index <.spx> gained 36.23 points, or 2.54 percent, to finish at 1,462.42. The Nasdaq Composite Index <.ixic> climbed 92.75 points, or 3.07 percent, to end at 3,112.26.


U.S. markets were closed on Tuesday for New Year's Day.


Market breadth reflected the strong rally, with 10 stocks rising for every one that fell on the New York Stock Exchange. All 10 of the S&P 500 industry sector indexes gained at least 1 percent. The S&P financial index <.gspf> shot up 2.9 percent.


The S&P Information Technology index <.gspt> gained 3.2 percent, including Hewlett-Packard , which climbed 5.4 percent to $15.02. HP's gain followed a miserable 2012 when the stock fell nearly 45 percent as one of the S&P 500's worst performers for 2012.


On Tuesday, Congress passed a bill to prevent huge tax hikes and delay spending cuts that would have pushed the world's largest economy off a "fiscal cliff" and possibly into recession.


The vote avoided steep income-tax increases for a majority of Americans, but failed to resolve a major showdown over cutting the budget deficit, leaving investors and businesses with only limited clarity about the outlook for the economy. Spending cuts of $109 billion in military and domestic programs were temporarily delayed, and another fight over raising the U.S. debt limit also looms.


"We got through the fiscal cliff. The next big thing, and probably more contentious thing, is negotiating the debt ceiling and possibly entitlement reform in early 2013," said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.


Hard choices about budget cuts and the critical need to raise the debt ceiling will confront Congress about the same time in two months "so the fur will be flying," Russell said.


U.S. stocks ended 2012 with the S&P 500 up 13.4 percent for the year, as investors largely shrugged off worries about the fiscal cliff. For the year, the Dow gained 7.3 percent and the Nasdaq jumped 15.9 percent.


Bank shares rose following news that U.S. regulators are close to securing another multibillion-dollar settlement with the largest banks to resolve allegations that they unlawfully cut corners when foreclosing on delinquent borrowers.


Bank of America Corp rose 3.7 percent to $12.03 and Citigroup Inc gained 4.3 percent to $41.25. The KBW bank index <.bkx> rose 3.2 percent.


Shares of Zipcar Inc surged 47.8 percent to $12.18 after Avis Budget Group Inc said it would buy Zipcar for about $500 million in cash to compete with larger rivals Hertz and Enterprise Holdings Inc. Avis advanced 4.8 percent to $20.77.


Shares of Apple rose 3.2 percent to $549.03, helping to lift the S&P information technology index <.gspt> up 3.2 percent following a report that the most valuable tech company has started testing a new iPhone and a new version of its iOS software.


Economic data from the Institute for Supply Management showed U.S. manufacturing ended 2012 on an upswing despite fears about the fiscal cliff, but the Commerce Department reported that construction spending fell in November for the first time in eight months.


Volume was heavy, with about 7.8 billion shares traded on the New York Stock Exchange, the NYSE MKT and the Nasdaq, well above the 2012 daily average of 6.42 billion.


(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)



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Pa. governor sues NCAA over Penn State sanctions


STATE COLLEGE, Pa. (AP) — Pennsylvania's governor, in a challenge to the NCAA's powers, claimed in a lawsuit Wednesday that college sports' governing body overstepped its authority and "piled on" when it penalized Penn State over the Jerry Sandusky child molestation scandal.


Gov. Tom Corbett asked that a federal judge throw out the sanctions, which include an unprecedented $60 million fine and a four-year ban on bowl games, arguing that the measures have harmed students, business owners and others who had nothing to do with Sandusky's crimes.


"A handful of top NCAA officials simply inserted themselves into an issue they had no authority to police under their own bylaws and one that was clearly being handled by the justice system," Corbett said at a news conference.


The case, filed under federal antitrust law, could define just how far the NCAA's authority extends. Up to now, the federal courts have allowed the organization broad powers to protect the integrity of college athletics.


In a statement, the NCAA said the lawsuit has no merit and called it an "affront" to Sandusky's victims.


Penn State said it had no role in the lawsuit. In fact, it agreed not to sue as part of the deal with the NCAA accepting the sanctions, which were imposed in July after an investigation found that football coach Joe Paterno and other top officials hushed up sexual-abuse allegations against Sandusky, a former member of Paterno's staff, for more than a decade for fear of bad publicity.


The penalties include a cut in the number of football scholarships the university can award and a rewriting of the record books to erase 14 years of victories under Paterno, who was fired when the scandal broke in 2011 and died of lung cancer a short time later.


The lawsuit represents a reversal by the governor. When Penn State's president consented to the sanctions last summer, Corbett, a member of the Board of Trustees, embraced them as part of the university's effort to repair the damage from the scandal.


Corbett said he waited until now to sue over the "harsh penalties" because he wanted to thoroughly research the legal issues and did not want to interfere with the football season.


The deal with the NCAA has been unpopular with many fans, students and alumni. Corbett, who is up for re-election next year, deflected a question about whether his response has helped or hurt him politically.


"We're not going to get into the politics of this," he said.


An alumni group, Penn Staters for Responsible Stewardship, applauded the lawsuit but said Corbett should have asked questions when the NCAA agreement was made.


"If he disapproved of the terms of the NCAA consent decree, or if he thought there was something illegal about them, why didn't he exercise his duty to act long before now?" the group said.


Paterno's family members said in a statement that they were encouraged by the lawsuit. Corbett "now realizes, as do many others, that there was an inexcusable rush to judgment," they said.


Corbett's lawsuit accuses the NCAA of cynically exploiting the Sandusky case, saying its real motives were to "gain leverage in the court of public opinion, boost the reputation and power of the NCAA's president" and "enhance the competitive position of certain NCAA members." It said the NCAA has not cited a rule that Penn State broke.


Corbett charged that the NCAA violated the Sherman Antitrust Act, which prohibits agreements that restrain interstate commerce. Legal experts called it an unusual case whose outcome is difficult to predict.


The NCAA has faced antitrust litigation before, with a mixed record of success. In 1984, the Supreme Court ruled against the NCAA's exclusive control over televised college football games. And in 1998, the Supreme Court let stand a ruling that said the NCAA's salary cap for some assistant coaches was unlawful price-fixing.


But federal courts have consistently rejected antitrust challenges to NCAA rules and enforcement actions designed to preserve competitive balance, academic integrity and amateurism in college athletics.


In this case, the courts might not be as sympathetic to the NCAA, said Matthew Mitten, director of the National Sports Law Institute at Marquette University Law School.


"It's difficult to justify the sanctions as necessary to protect the amateur nature of college sports, preserve competitive balance or maintain academic integrity," he said.


Joseph Bauer, an antitrust expert at the University of Notre Dame law school, said of Corbett's line of reasoning: "I don't think it's an easy claim for them to make, but it's certainly a viable claim."


Sandusky, 68, was convicted in June of sexually abusing 10 boys, some of them on Penn State's campus. He is serving a 30- to 60-year prison sentence but insists he's innocent.


Michael Boni, a lawyer for one of Sandusky's accusers, said he does not consider the lawsuit an affront. But he said he hopes Corbett takes a leading role in pushing for changes to state child-abuse laws.


"I really question who he's concerned about in this state," Boni said.


Michael Desmond, a businessman who appeared with Corbett at the news conference, said business at his five State College eating establishments was down about 10 percent during Penn State home game weekends this year.


"The governor's actions are going to be immensely popular with all Penn State alumni," Desmond said.


Corbett, a Republican, said his office did not coordinate its legal strategy with state Attorney General-elect Kathleen Kane, who is scheduled to be sworn in Jan. 15. Instead, the current attorney general, Linda Kelly, granted the governor authority to pursue the matter.


Kane, a Democrat, ran on a vow to investigate why it took prosecutors nearly three years to charge Sandusky. Corbett was attorney general when his office took over the case in 2009.


Kane had no comment on the lawsuit because she was not consulted about it by Corbett's office.


State and congressional lawmakers have objected to use of the NCAA fine to finance child-abuse prevention efforts in other states. Penn State has already made the first $12 million payment, and an NCAA task force is deciding how it should be spent.


___


Associated Press writers Peter Jackson in Harrisburg and Michael Rubinkam contributed.


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Wind Energy Tax Credit Survives Fiscal Cliff






After months of wondering whether or not the Production Tax Credit for wind energy would be extended or allowed to expire, word came from the White House this week that the credit was, in fact, extended through this year as part of the fiscal cliff deal. Here are the details.


* According to the White House, the Production Tax Credit will be extended through the end of the year via the American Taxpayer Relief Act, which was passed by the House of Representatives on Tuesday.






* Forbes reported that the credit gives a tax break of 2.2 cents for every kilowatt-hour of energy produced by wind.


* The American Wind Energy Association stated that the continuation of the tax credit is expected to save up to 37,000 jobs and create more over time, and to revive business at 500 manufacturing facilities across the country.


* According to the American Wind Energy Association, the extension covers all wind projects that start construction in 2013 — something the companies who manufacture and install wind turbines sought in order to allow for the 18-24 months it takes to develop a wind farm.


* Rob Gramlich, the American Wind Energy Association’s interim CEO, stated that the passage of the extension means “we can continue to provide America with more clean, affordable, homegrown energy, and keep growing a new manufacturing sector that’s now making nearly 70 percent of our wind turbines in the U.S.A.”


* A new record for wind energy was set in 2012, the American Wind Energy Association reported, with the installation of 44 percent of all new electrical-generating capacity in America.


* Had the Production Tax Credit not been extended, the association stated, about half of the American jobs in wind energy and hundreds of U.S. factories supplying products for wind energy would have been at stake.


* On Wednesday, Sen. Mark Udall, D-Colo., who has been an outspoken supporter of the tax credit, praised the extension, stating that it “gives manufacturers in Colorado and throughout North America the signal they need to create jobs, make capital investments in the United States, and ensure that wind energy remains a strong part of our national energy strategy.”


* Udall did, however, have criticism for Congress in delaying the credit extension, stating that the length of time it took to pass the measure resulted in industry uncertainty and layoffs.


* Congress now needs to work on passing a comprehensive energy plan, the senator stated.


* In addition to the Production Tax Credit, the Research and Experimentation tax credit was also extended, the White House reported .


Energy News Headlines – Yahoo! News





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Look beyond the fiscal cliff






STORY HIGHLIGHTS


  • Dean Baker: Budget deficit is not the only top issue in our national economic policy

  • Baker: Fiscal cliff debate has been a distraction of the bigger problem of a downturn

  • He says fears of big deficits are preventing us from boosting the economy more

  • Baker: Given the economy's weakness, the government has to run big deficits




Editor's note: Dean Baker, an economist, is co-director of the Center for Economic and Policy Research, a progressive economic policy organization. He is author of "The End of Loser Liberalism: Making Markets Progressive."


(CNN) -- We have just passed into the new year, and the distractions created by the debate over the fiscal cliff appear to be behind us. Maybe.


That debate has been part of a larger distraction -- the concern over budget deficits at a time when by far the country's most important problem remains the economic downturn caused by the collapse of the housing bubble. The obsession with budget deficits is especially absurd because the enormous deficits of recent years are entirely the result of the economic downturn.


In spite of this, the leadership of both parties has elevated the budget deficit to be the top and virtually only issue in national economic policy. This means ignoring the downturn that continues to cause enormous amount of unnecessary suffering for tens of millions of people.



Dean Baker

Dean Baker




But fears of big deficits are preventing us from giving the same sort of boost to the economy that got us out of the Great Depression. The explanation is simple: profits have returned to prerecession levels.


Opinion: Cliff deal hollow victory for American people


This means that from the standpoint of the people who own and run American businesses, everything is pretty much fine. Moreover, they see the deficits created by the downturn as providing an opportunity to go after Social Security and Medicare.


The Campaign to Fix the Debt, a nonpartisan organization involving many of the country's richest and most powerful CEOs, sets out to do just that. It has become standard practice in Washington for Wall Street types and other wealthy interests to finance groups to push their agenda.


The Campaign to Fix the Debt involves the CEOs themselves directly stepping up to the plate and pushing the case for cutting Social Security and Medicare as well as lowering the corporate income tax rate.


It's clear what's going on here. We don't need any conspiracy theories.


iReport: What's your message for Washington?








CEOs from both political parties have openly come together to demand cuts in Social Security and Medicare, two programs that enjoy massive political support across the political spectrum. The wealthy are joining hands without regard to political affiliation to cut benefits that enjoy broad bipartisan support among everyone who is not rich.


President Barack Obama has an opportunity to show real leadership. He should explain to the public the basic facts that all budget experts know: We do not have a chronic deficit problem. The big deficits are the result of collapsed economy. The priority of the president and Congress must be to put people back to work and bring the economy back up to speed.


Fiscal cliff deal: 5 things to know


When the housing bubble burst, annual spending on residential construction fell back by more than 4% of GDP, which is $600 billion in today's economy. Similarly, consumption plunged as people drastically curtailed their spending in response to the loss of $8 trillion in housing bubble generated equity.


There is no easy way for the private sector to replace this demand. Businesses don't invest unless they see demand for their products, regardless of how much love we might shower on the "job creators." In fact, if anything, investment is surprisingly strong give the large amount of excess capacity in the economy. Measured as a share of GDP, investment in equipment and software is almost back to its prerecession level. It is hard to envision investment getting much higher, absent a major boost in demand from some other sector.


This is why it is necessary for the government to run large deficits. Ideally, the money would be spent in areas that will make us richer in the future: Education, infrastructure, research and development in clean energy, etc. There is just no way around a large role for the government given the economy's current weakness.


Big issues still pending


Obama needs to explain this simple story to the country. The rich of both parties will hate him for going down this route. They will use their powers to denounce him. But the American people support Social Security and Medicare, and they support an economy that creates jobs for ordinary workers.


Obama needs the courage to tell the truth.


Follow us on Twitter @CNNOpinion


Join us on Facebook/CNNOpinion


The opinions expressed in this commentary are solely those of Dean Baker.






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Chicago man charged in estranged wife's slaying in Munster









A Chicago man with a history of domestic violence arrests has been charged with the murder of his estranged wife in Munster, Ind., early New Year’s Day, authorities said.

Margarito Valdivia, 44, of the 10800 block of South Troy Street, is being held without bail in the slaying of his estranged wife, Erica Valdivia, 33, early on Tuesday, Munster Police said in a news release this afternoon. The attack at a home in the 800 block of Boxwood Drive in Munster also injured Erica Valdivia’s boyfriend, police said.

Erica Valdivia, whom the Lake County coroner’s office said suffered blunt force trauma to the head in an apparent homicide, had been separated from her husband for about four months, according to police.

Margarito Valdivia is believed to have driven to the Boxwood Drive home early Tuesday, gone in and confronted his wife and her boyfriend, police said. He hit the boyfriend in the head “numerous times” as he drove the boyfriend from the home, police said in the release.

Once the boyfriend was outside, Margarito Valdivia went back into the home and began beating his wife, police said.

Police were called to the Boxwood Drive home about 5:45 a.m. Tuesday and found the boyfriend outside with a severe cut to the head. Officers tried to go into the house, but were at first unable to, as Margarito Valdivia had barricaded himself inside. After a SWAT team was called, police sent a remote-controlled robot into the home, and he surrendered.

Police entered the home and found Erica Valdivia lying in a bathroom, with “major trauma” to the head, including her face, police said. She was taken to Community Hospital in Munster, where she was declared dead at 10:04 a.m. Tuesday, according to the coroner’s office.

The Lake County, Ind., prosecutor’s office charged Margarito Valdivia with murder and felony battery today, police said. Court information was not immediately available, but he was being held without bail in Lake County Jail.

Court records show that Margarito Valdivia has Cook County arrests dating back to 1990, when he was arrested on a domestic violence charge and an order of protection was lodged against him. The charges were later dropped. In 1994, he was charged with domestic battery and resisting arrest and was sentenced to a year’s probation after being found guilty of the resisting arrest charge, according to court records.

In 1997, Margarito Valdivia was charged with criminal damage and having a firearm without a gun owner’s permit, and given two years court supervision following a guilty plea. A 2000 domestic battery charge was dropped, but in August 2012 he was found guilty of battery after an attack July 23 in the 9800 block of South Commercial Avenue and sentenced to a year’s conditional discharge, records show.

At the time of the battery arrest, he was still living at the same home in the 10600 block of South Avenue N that the coroner’s office listed as Erica Valdivia’s home address.

lford@tribune.com

Twitter: @ltaford



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Asia holds breath as U.S. fiscal talks go to wire

SYDNEY/HONG KONG (Reuters) - Asian stocks started new year trading with tentative gains as investors anxiously wait to see if the U.S. Congress can strike a last-minute compromise and avert the harsh "fiscal cliff" tax rises and spending cuts that are technically already in force.


The U.S. Senate early on Tuesday passed a bill that aims to avoid the cliff's automatic implementation of $600 billion in spending cuts and tax increases.


But the bill's fate was uncertain in the House of Representatives, where a number of Republicans complained it did not tackle spending cuts adequately.


"Frankly, we don't know what to make of it all. It's like a circus there," said one exasperated forex dealer at an Australian bank in Sydney.


"The markets have always assumed they would eventually strike a deal that would avoid the worst affects of the fiscal cliff, but it's getting harder and harder to stay optimistic."


The MSCI Asia Pacific ex-Japan index of stocks <.miapj0000pus> was up 0.3 percent largely on the back of gains in Australian markets where mining giants Rio Tinto and BHP Billiton helped the local benchmark <.axjo> rise 0.6 percent in early trading.


Asian stocks outside Japan rose nearly 20 percent last year as a combination of improving economic data from China, receding worries about the euro zone, and global central bank easing that encouraged investors back into equity markets.


Sakthi Siva, Asia strategist for Credit Suisse, said 2013 could see similar returns for Asian equities as the pace of earnings downgrades slows.


Improved earnings could prompt a long-awaited switch out of safe haven assets such as gold and bonds, she said, noting such a view assumes "a minimalist compromise deal is reached on the fiscal cliff."


With the last-minute Senate deal on the fiscal cliff already hitting stumbling blocks in the House of Representatives, and the prospects of more wrangling as the U.S. nears its debt ceiling in February, there is little comfort for investors as political events continue to trump market fundamentals.


YEN SLIPS


The Japanese yen continued its slide as investors wagered the Bank of Japan would have to take ever-more aggressive easing steps to support the economy and satisfy the new government.


The dollar held firm on the yen at 86.60 yen, having touched its highest level since August 2010. The Japanese currency also dropped to depths not seen in over four years against the Australian and New Zealand dollars.


Japanese stock markets <.n225> will reopen on Friday.


The euro was a shade weaker against the U.S. dollar at $1.3195, but turnover was extremely thin.


Spot gold was little changed at $1,671 an ounce, while oil futures dipped 11 cents to $91.71.


(Reporting by Wayne Cole in SYDNEY and Vikram Subhedar in HONG KONG; Editing by Eric Meijer)



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Stanford holds off Wisconsin 20-14 in Rose Bowl


PASADENA, Calif. (AP) — Although Stanford didn't score many style points in the 99th Rose Bowl, the Cardinal could celebrate because they didn't let Wisconsin score any points at all after halftime.


Stepfan Taylor rushed for 89 yards and an early touchdown, Kevin Hogan passed for 123 yards, and No. 8 Stanford won its first Rose Bowl since 1972, beating the Badgers 20-14 on Tuesday night.


Usua Amanam made the decisive interception near midfield with 2:30 to play as the Pac-12 champion Cardinal (12-2) ended their four-decade drought in the Granddaddy of Them All with arguably the biggest bowl win yet during the long-struggling program's recent renaissance.


Stanford clamped down on the Big Ten champion Badgers (8-6), who lost the Rose Bowl in heartbreaking fashion for the third consecutive season. Montee Ball rushed for 100 yards and his FBS-record 83rd touchdown, but Wisconsin managed only 82 yards after halftime.


With impressive defense of its own, Wisconsin still stayed in position for an upset in the one-game return of Hall of Fame coach Barry Alvarez, who was back on the Badgers' sideline in his red sweater-vest seven years after hanging up his whistle.


When Bret Bielema abruptly left Wisconsin for Arkansas after winning the Big Ten title game, Alvarez agreed to coach his fourth Rose Bowl before handing off his program to new coach Gary Andersen, who met with Alvarez on the field before the game.


But the Badgers' third straight Rose Bowl appearance ended in much the same way as the last two: With the Wisconsin offense failing to get the late score they desperately needed.


Curt Phillips went 10 for 16 for 83 yards passing and that crucial interception for Wisconsin, doing more with 64 yards on the ground. Jordan Fredrick caught a short TD pass right before halftime, but no Badgers receiver had more than Jared Abbrederis' three catches.


And though Ball became the first player to score touchdowns in three Rose Bowls, the powerful back fell short of Ron Dayne's career Rose Bowl rushing record, swarmed under by waves of tacklers from one of the toughest defenses in the nation.


Kelsey Young rushed for a score on Stanford's opening possession, and Taylor scored on the second. Wisconsin kept the Cardinal out of the end zone for the final 51 minutes, but Stanford's defense didn't need any more help.


Stanford won its first conference title and earned its first Rose Bowl appearance in 13 years with seven straight wins. The Cardinal ousted top-ranked Oregon on the way to the biggest season yet in the improbable surge of success started by Jim Harbaugh and Andrew Luck, and extended by coach David Shaw and Hogan, who took over as the starter in November.


Wisconsin returned to Pasadena in a much more roundabout way as the first five-loss team to make it, losing three overtime games and making the Big Ten title game only because Ohio State and Penn State were ineligible. The Badgers then steamrolled Nebraska to become the first Big Ten team in three straight Rose Bowls since Michigan in the late 1970s.


The Cardinal led 14-0 on Taylor's 3-yard TD run just 8½ minutes in, but Wisconsin finally got rolling behind Ball, who rushed for 296 yards in his first two Rose Bowls. Stanford stopped James White inside the 1 on fourth down early in the second quarter after a touchdown run by Ball was wiped out by a holding penalty, but Ball scored on the next drive.


The Badgers then mounted an 85-yard drive in the waning 2 ½ minutes of the first half, with Phillips' 38-yard run setting up Fredrick's short TD catch to trim Stanford's halftime lead to 17-14.


After halftime adjustments, both defenses dominated the scoreless third quarter, allowing just three combined first downs.


Wisconsin's personal foul on a fair-catch punt return finally sparked Stanford early in the fourth quarter. Stanford got inside the Wisconsin 5 before stalling, and Jordan Williamson's short field goal put the Cardinal up by six points with 4:23 to go.


The Badgers got to midfield, but Phillips threw behind Jacob Pedersen, and Amanam easily made the pick.


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Europe Tackling Big Space Projects in 2013






LONDON — The European Space Agency has some ambitious resolutions for the New Year. The year 2013 will include the agency’s first spaceflight for its newest class of astronauts, the launch of its latest robot cargo ship Albert Einstein, and the development of new rockets and spacecraft, including a reusable space plane and work on NASA’s new Orion spacecraft.


January and February should see agreements and contracts signed for the new rockets, Ariane 5 Mid-Life Evolution (ME) and Ariane 6, and for ESA’s participation in NASA’sOrion space capsule. ESA is providing the service module for the Orion capsule, which NASA plans to use to fly astronauts on future deep-space missions.  






With deadlines in 2014 for the rocket work, and 2017 for an unmanned Orion test flight, ESA officials know 2013 will see lots of activity right from the start.


“The Orion service module funding has been approved, so now the usual work process starts. I think [the NASA-ESA agreement signing] is in January. It should be rather early from what I’ve heard, it is something to be done towards the beginning of the year,” Franco Bonacina, spokesman for ESA’s director-general, Jean-Jacques Dordain, told SPACE.com. [Meet the European Space Agency (Video)]


Powerhouse for NASA’s Orion


ESA will provide one service module for Orion’s 2017 test launch. The module’s preliminary design review, or PDR, is planned for July 2013. The PDR is a major milestone for spaceflight projects, allowing managers to check a spacecraft’s design progress.


The ESA service module’s previous review, the system design review, occurred in September 2012, and the next major design review is not until 2015. The service module will provide propulsion, avionics, heat control and energy from solar arrays. It will also store water, oxygen and nitrogen for life support.


ESA’s Orion module is being delivered as an in-kind contribution for International Space Station (ISS) operations, for the period 2017 to 2020. The module is expected to cost ESA several hundred million dollars.


Europe’s new rockets


Before the Orion work shifts into gear, a pair of two-year studies is due to begin at the start of 2013 for the agency’s Ariane 5ME and Ariane 6 rockets. This is so ESA can make a decision about the future of its launchers in late 2014.


Operated by the company Arianespace, the workhorse Ariane 5 rocket launches ESA missions and commercial satellites. The rocket launches from the South American territory of French Guiana and is able to launch two spacecraft at a time. It first flew in 1997 and can launch up to 22,000 pounds (10,000 kilograms) into orbit.


The new Ariane 5 version, the Ariane 5ME, has already been in development for many years and it had been planned to be operational from 2016. It will be the same height, excluding the nose cone, and weight as its predecessor, but will be able launch an additional 2,540 pounds (1152 kg) of payload, with a maximum payload of 24,640 pounds (11,176 kg) for geostationary orbits.


The Ariane 5ME will use a new upper stage and rocket engine, the Vinci, and has a larger nose cone. If approved in 2014, the Ariane 5ME could be operational towards the end of this decade.


However, ESA has concluded that it needs a simpler rocket that can launch more frequently with only one payload onboard. This is the planned Ariane 6, which was originally called Next Generation Launcher (NGL).


The Ariane 6 rocket has been the subject of numerous studies that have evaluated NGL versions that either only have solid rocket motors or only liquid fuel engines. According to Bonacina, for Ariane 6, the two year studies will determine, “what shape and configuration it will have and what kind of money will be needed over what timeframe”. Neither Ariane 5ME nor Ariane 6 will launch astronauts.


A decision on Ariane 6 was supposed to take place in 2012, but disagreement between France and Germany, the largest ESA budget contributors, saw a compromise. France was in favor of Ariane 6, while Germany wanted Ariane 5ME to go ahead.


“It was a heavy compromise between Germany and France. They all had their interesting points of view and a solution has been found,” Bonacina said. “The good thing is that Ariane 6 has started and Ariane 5ME continues in parallel.”


In April of this year, ESA expects to hit two rocket milestones. They include second launch of its latest rocket, Vega, which uses solid rocket motors for its first, second and upper stages. The Vega rocket will launch the Earth observation satellite, Proba-V. The V in Proba-V stands for vegetation because the satellite will monitor the Earth’s plant life. [Europe’s Vega Rocket 1st Launch (Photos)]


Then in mid or late April, the latest version of the Ariane 5 — the Ariane 5 ES — is due make its next launch. The Ariane 5 ES has an upper stage whose engine can reignite. This allows it to launch ESA’s robotic Automated Transfer Vehicle cargo ships.


Europe’s ATV spacecraft deliver supplies to the International Space Station and propellant to raise the station’s orbit when needed. The ATV to be launched in April, called Albert Einstein, will be the fourth ESA’s five planned ATV missions to the space station.


Satellites galore


Europe’s other launches in the second half of 2013 include satellites for the European Union’s space-based navigation system, Galileo. The Galileo satellites will be launched by a Russian Soyuz 2 rocket from the Soyuz launch site in French Guiana.


Also launched in the latter half of 2013 by Soyuz rockets will be ESA’s Gaia mission and the Sentinel-1A satellite. The Gaia spacecraft will operate beyond the Moon, over 600,000 miles (965,606 kilometers) from Earth, and its goal is to create the largest and most precise three-dimensional map of the galaxy.


The Sentinel-1A is a polar orbit satellite that uses synthetic aperture radar. It is the first dedicated satellite for the Global Monitoring for Environment and Security constellation, a joint venture between ESA and the European Union. A constellation of two satellites, GMES’ Sentinel-1B is expected to launch in 2015.


An Ariane 5 will also launch Alphasat this year. This high bandwidth telecommunications satellite will provide commercial services and test various communications technologies including lasers.


Europe’s astronauts and robot arm


In May, a Russian Soyuz spacecraft will launch ESA’s Italian born astronaut Luca Parmitano from Baikonur Cosmodrome in Kazakhstan. Parmitano is launching on a six-month mission to the International Space Station and is slated to return to Earth in November.


Parmitano was selected to join ESA’s astronaut corps in May 2009 as one of six candidates. The five others hailed from France, Germany, Italy, Denmark and the United Kingdom. Of those, Parmitano is the first bound for the space station.


The 35-year old former Italian Air Force test pilot will be a flight engineer on the station crew. While Albert Einstein and Parmitano are headed to the orbiting laboratory in 2013, a new robotic arm for the orbiting laboratory will likely slip to 2014.


The station’s new European Robotic Arm, or ERA, will launch on a Proton rocket from Baikonur Cosmodrome, ESA’s ERA will be attached to Russia’s multipurpose laboratory module.


The robotic arm consists of two end-effectors, two wrists, two limbs and one elbow joint, together with electronics and cameras. Both end-effectors act as either a hand or the base from which it can operate. ERA will be used in the assembly and servicing of the Russian segment of the station, and its infrared cameras will allow it to carry out inspections of the station’s exterior.


The arm will also be able to transport astronauts, like a cherry picker crane, from one external location to another. This saves time and effort during spacewalk activities. ERA is also compatible with the new Russian airlock, so it can transfer small payloads between the station’s interior and the vacuum of space quickly. This will also reduce the crew’s space walk set-up time and allow ERA to work with astronauts outside the station.


Space plane under development


Like ERA, ESA’s space plane prototype, the Intermediate Experimental Vehicle (IXV), was to have been launched in 2013. It will now fly on ESA’s Vega rocket in 2014. The IXV vehicle is designed to test re-entry technologies during a suborbital flight launching from French Guiana and splashing down in the Pacific Ocean using parachutes.


ESA has now approved funds for IXV’s possible follow-on, Innovative Space Vehicle (ISV), under the Program for Reusable In-orbit Demonstrator in Europe.


The ISV would be Europe’s civilian equivalent of the U.S. Air Force’s unmanned X-37B Orbital Test Vehicle, a robotic miniature space shuttle that has flown on three missions since 2010. The unmanned European space plane would be much smaller than the Air Force vehicle, however.


Giorgio Tumino, IXV program manager told SPACE.com: “We did not get all what we asked, but enough to go ahead and keep the planning.”


Follow SPACE.com @Spacedotcom. We’re also on Facebook and Google+.


Copyright 2013 SPACE.com, a TechMediaNetwork company. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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13 key stories to watch for in 2013




Among the few virtual certainties of 2013 is the ongoing anguish of Syria and the decline of its president, Bashar al-Assad.




STORY HIGHLIGHTS


  • Look for more unrest amid power transitions in the Middle East

  • Disputes and economic worries will keep China, Japan, North Korea in the news

  • Europe's economy will stay on a rough road, but the outlook for it is brighter

  • Events are likely to draw attention to cyber warfare and climate change




(CNN) -- Forecasting the major international stories for the year ahead is a time-honored pastime, but the world has a habit of springing surprises. In late 1988, no one was predicting Tiananmen Square or the fall of the Berlin Wall. On the eve of 2001, the 9/11 attacks and the subsequent invasion of Afghanistan were unimaginable. So with that substantial disclaimer, let's peer into the misty looking glass for 2013.


More turmoil for Syria and its neighbors


If anything can be guaranteed, it is that Syria's gradual and brutal disintegration will continue, sending aftershocks far beyond its borders. Most analysts do not believe that President Bashar al-Assad can hang on for another year. The more capable units of the Syrian armed forces are overstretched; large tracts of north and eastern Syria are beyond the regime's control; the economy is in dire straits; and the war is getting closer to the heart of the capital with every passing week. Russian support for al-Assad, once insistent, is now lukewarm.


Amid the battle, a refugee crisis of epic proportions threatens to become a catastrophe as winter sets in. The United Nations refugee agency says more than 4 million Syrians are in desperate need, most of them in squalid camps on Syria's borders, where tents are no match for the cold and torrential rain. Inside Syria, diseases like tuberculosis are spreading, according to aid agencies, and there is a danger that hunger will become malnutrition in places like Aleppo.


The question is whether the conflict will culminate Tripoli-style, with Damascus overrun by rebel units; or whether a political solution can be found that involves al-Assad's departure and a broadly based transitional government taking his place. U.N. envoy Lakhdar Brahimi has not been explicit about al-Assad's exit as part of the transition, but during his most recent visit to Damascus, he hinted that it has to be.









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"Syria and the Syrian people need, want and look forward to real change. And the meaning of this is clear to all," he said.


The international community still seems as far as ever from meaningful military intervention, even as limited as a no fly-zone. Nor is there any sign of concerted diplomacy to push all sides in Syria toward the sort of deal that ended the war in Bosnia. In those days, the United States and Russia were able to find common ground. In Syria, they have yet to do so, and regional actors such as Turkey, Qatar, Saudi Arabia and Iran also have irons in the fire.


Failing an unlikely breakthrough that would bring the regime and its opponents to a Syrian version of the Dayton Accords that ended the Bosnian war, the greatest risk is that a desperate regime may turn to its chemical weapons, troublesome friends (Hezbollah in Lebanon and the Kurdish PKK in Turkey) and seek to export unrest to Lebanon, Iraq and Jordan.


The Syrian regime has already hinted that it can retaliate against Turkey's support for the rebels -- not by lobbing Scud missiles into Turkey, but by playing the "Kurdish" card. That might involve direct support for the PKK or space for its Syrian ally, the Democratic Union Party. By some estimates, Syrians make up one-third of the PKK's fighting strength.


To the Turkish government, the idea that Syria's Kurds might carve out an autonomous zone and get cozy with Iraq's Kurds is a nightmare in the making. Nearly 800 people have been killed in Turkey since the PKK stepped up its attacks in mid-2011, but with three different sets of elections in Turkey in 2013, a historic bargain between Ankara and the Kurds that make up 18% of Turkey's population looks far from likely.


Many commentators expect Lebanon to become more volatile in 2013 because it duplicates so many of the dynamics at work in Syria. The assassination in October of Lebanese intelligence chief Brig. Gen. Wissam al-Hassan -- as he investigated a pro-Syrian politician accused of obtaining explosives from the Syrian regime -- was an ominous portent.


Victory for the overwhelmingly Sunni rebels in Syria would tilt the fragile sectarian balance next door, threatening confrontation between Lebanon's Sunnis and Hezbollah. The emergence of militant Salafist groups like al-Nusra in Syria is already playing into the hands of militants in Lebanon.


Iraq, too, is not immune from Syria's turmoil. Sunni tribes in Anbar and Ramadi provinces would be heartened should Assad be replaced by their brethren across the border. It would give them leverage in an ever more tense relationship with the Shia-dominated government in Baghdad. The poor health of one of the few conciliators in Iraqi politics, President Jalal Talabani, and renewed disputes between Iraq's Kurds and the government over boundaries in the oil-rich north, augur for a troublesome 2013 in Iraq.


More worries about Iran's nuclear program


Syria's predicament will probably feature throughout 2013, as will the behavior of its only friend in the region: Iran. Intelligence sources say Iran continues to supply the Assad regime with money, weapons and expertise; and military officers who defected from the Syrian army say Iranian technicians work in Syria's chemical weapons program. Al-Assad's continued viability is important for Iran, as his only Arab ally. They also share sponsorship of Hezbollah in Lebanon, which, with its vast supply of rockets and even some ballistic missiles, might be a valuable proxy in the event of an Israeli strike against Iran's nuclear program.


Speaking of which, there are likely to be several more episodes in the behind-closed-doors drama of negotiations on Iran's nuclear sites. Russia is trying to arrange the next round for January. But in public, at least, Iran maintains it has every right to continue enriching uranium for civilian purposes, such as helping in the treatment of more than 1 million Iranians with cancer.


Iran "will not suspend 20% uranium enrichment because of the demands of others," Fereydoun Abbasi-Davani, head of Iran's Atomic Energy Organization, said this month.


International experts say the amount of 20% enriched uranium (estimated by the International Atomic Energy Agency in November at 297 pounds) is more than needed for civilian purposes, and the installation of hundreds more centrifuges could cut the time needed to enrich uranium to weapons-grade. The question is whether Iran will agree to intrusive inspections that would reassure the international community -- and Israel specifically -- that it can't and won't develop a nuclear weapon.


This raises another question: Will it take bilateral U.S.-Iranian talks -- and the prospect of an end to the crippling sanctions regime -- to find a breakthrough? And will Iran's own presidential election in June change the equation?


For now, Israel appears to be prepared to give negotiation (and sanctions) time to bring Iran to the table. For now.


Egypt to deal with new power, economic troubles


Given the turmoil swirling through the Middle East, Israel could probably do without trying to bomb Iran's nuclear program into submission. Besides Syria and Lebanon, it is already grappling with a very different Egypt, where a once-jailed Islamist leader is now president and Salafist/jihadi groups, especially in undergoverned areas like Sinai, have a lease on life unimaginable in the Mubarak era.



The U.S. has an awkward relationship with President Mohamed Morsy, needing his help in mediating with Hamas in Gaza but concerned that his accumulation of power is fast weakening democracy and by his bouts of anti-Western rhetoric. (He has demanded the release from a U.S. jail of Sheikh Omar Abdel Rahman, convicted of involvement in the first bombing of the World Trade Center in 1993.)


The approval of the constitution removes one uncertainty, even if the opposition National Salvation Front says it cements Islamist power. But as much as the result, the turnout -- about one-third of eligible voters -- indicates that Egyptians are tired of turmoil, and more concerned about a deepening economic crisis.


Morsy imposed and then scrapped new taxes, and the long-expected $4.8 billion loan from the International Monetary Fund is still not agreed on. Egypt's foreign reserves were down to $15 billion by the end of the year, enough to cover less than three months of imports. Tourism revenues are one-third of what they were before street protests erupted early in 2011. Egypt's crisis in 2013 may be more about its economy than its politics.


Libya threatens to spawn more unrest in North Africa


Libya's revolution, if not as seismic as anything Syria may produce, is still reverberating far and wide. As Moammar Gadhafi's rule crumbled, his regime's weapons found their way into an arms bazaar, turning up in Mali and Sinai, even being intercepted off the Lebanese coast.


The Libyan government, such as it is, seems no closer to stamping its authority on the country, with Islamist brigades holding sway in the east, tribal unrest in the Sahara and militias engaged in turf wars. The danger is that Libya, a vast country where civic institutions were stifled for four decades, will become the incubator for a new generation of jihadists, able to spread their influence throughout the Sahel. They will have plenty of room and very little in the way of opposition from security forces.


The emergence of the Islamist group Ansar Dine in Mali is just one example. In this traditionally moderate Muslim country, Ansar's fighters and Tuareg rebels have ejected government forces from an area of northern Mali the size of Spain and begun implementing Sharia law, amputations and floggings included. Foreign fighters have begun arriving to join the latest front in global jihad; and terrorism analysts are seeing signs that al Qaeda in the Islamic Maghreb (AQIM) and groups like Boko Haram in Nigeria are beginning to work together.


There are plans for an international force to help Mali's depleted military take back the north, but one European envoy said it was unlikely to materialize before (wait for it) ... September 2013. Some terrorism analysts see North Africa as becoming the next destination of choice for international jihad, as brigades and camps sprout across a vast area of desert.


A bumpy troop transition for Afghanistan


The U.S. and its allies want to prevent Afghanistan from becoming another haven for terror groups. As the troop drawdown gathers pace, 2013 will be a critical year in standing up Afghan security forces (the numbers are there, their competence unproven), improving civil institutions and working toward a post-Karzai succession.



In November, the International Crisis Group said the outlook was far from assuring.


"Demonstrating at least will to ensure clean elections (in Afghanistan in 2014) could forge a degree of national consensus and boost popular confidence, but steps toward a stable transition must begin now to prevent a precipitous slide toward state collapse. Time is running out," the group said.


Critics have also voiced concerns that the publicly announced date of 2014 for withdrawing combat forces only lets the Taliban know how long they must hold out before taking on the Kabul government.


U.S. officials insist the word is "transitioning" rather than "withdrawal," but the shape and role of any military presence in 2014 and beyond are yet to be settled. Let's just say the United States continues to build up and integrate its special operations forces.


The other part of the puzzle is whether the 'good' Taliban can be coaxed into negotiations, and whether Pakistan, which has considerable influence over the Taliban leadership, will play honest broker.


Private meetings in Paris before Christmas that involved Taliban envoys and Afghan officials ended with positive vibes, with the Taliban suggesting they were open to working with other political groups and would not resist girls' education. There was also renewed discussion about opening a Taliban office in Qatar, but we've been here before. The Taliban are riven by internal dissent and may be talking the talk while allowing facts on the ground to work to their advantage.


Where will North Korea turn its focus?


On the subject of nuclear states that the U.S.-wishes-were-not, the succession in North Korea has provided no sign that the regime is ready to restrain its ambitious program to test nuclear devices and the means to deliver them.



Back in May 2012, Peter Brookes of the American Foreign Policy Council said that "North Korea is a wild card -- and a dangerous one at that." He predicted that the inexperienced Kim Jong Un would want to appear "large and in charge," for internal and external consumption. In December, Pyongyang launched a long-range ballistic missile -- one that South Korean scientists later said had the range to reach the U.S. West Coast. Unlike the failure of the previous missile launch in 2009, it managed to put a satellite into orbit.


The last two such launches have been followed by nuclear weapons tests -- in 2006 and 2009. Recent satellite images of the weapons test site analyzed by the group 38 North show continued activity there.


So the decision becomes a political one. Does Kim continue to appear "large and in charge" by ordering another test? Or have the extensive reshuffles and demotions of the past year already consolidated his position, allowing him to focus on the country's dire economic situation?


China-Japan island dispute to simmer


It's been a while since East Asia has thrown up multiple security challenges, but suddenly North Korea's missile and nuclear programs are not the only concern in the region. There's growing rancor between China and Japan over disputed islands in the East China Sea, which may be aggravated by the return to power in Japan of Shinzo Abe as prime minister.


Abe has long been concerned that Japan is vulnerable to China's growing power and its willingness to project that power. Throughout 2012, Japan and China were locked in a war of words over the Senkaku or Diaoyu islands, with fishing and Coast Guard boats deployed to support claims of sovereignty.


In the days before Japanese went to the polls, Beijing also sent a surveillance plane over the area, marking the first time since 1958, according to Japanese officials, that Bejing had intruded into "Japanese airspace." Japan scrambled F-15 jets in response.


The islands are uninhabited, but the seas around them may be rich in oil and gas. There is also a Falklands factor at play here. Not giving in to the other side is a matter of national pride. There's plenty of history between China and Japan -- not much of it good.


As China has built up its ability to project military power, Japan's navy has also expanded. Even a low-level incident could lead to an escalation. And as the islands are currently administered by Japan, the U.S. would have an obligation to help the Japanese defend them.


Few analysts expect conflict to erupt, and both sides have plenty to lose. For Japan, China is a critical market, but Japanese investment there has fallen sharply in the past year. Just one in a raft of problems for Abe. His prescription for dragging Japan out of its fourth recession since 2000 is a vast stimulus program to fund construction and other public works and a looser monetary policy.


The trouble is that Japan's debt is already about 240% of its GDP, a much higher ratio than even Greece. And Japan's banks hold a huge amount of that debt. Add a shrinking and aging population, and at some point the markets might decide that the yield on Japan's 10-year sovereign bond ought to be higher than the current 0.77%.


Economic uncertainty in U.S., growth in China


So the world's third-largest economy may not help much in reviving global growth, which in 2012 was an anemic 2.2%, according to United Nations data. The parts of Europe not mired in recession hover close to it, and growth in India and Brazil has weakened. Which leaves the U.S. and China.


At the time of writing, the White House and congressional leadership are still peering over the fiscal cliff. Should they lose their footing, the Congressional Budget Office expects the arbitrary spending cuts and tax increases to be triggered will push the economy into recession and send unemployment above 9%.



A stopgap measure, rather than a long-term foundation for reducing the federal deficit, looks politically more likely. But to companies looking for predictable economic policy, it may not be enough to unlock billions in investment. Why spend heavily if there's a recession around the corner, or if another fight looms over raising the federal debt ceiling?


In September, Moody's said it would downgrade the U.S. sovereign rating from its "AAA" rating without "specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term." In other words, it wants action beyond kicking the proverbial can.


Should the cliff be dodged, most forecasts see the U.S. economy expanding by about 2% in 2013. That's not enough to make up for stagnation elsewhere, so a great deal depends on China avoiding the proverbial hard landing.


Until now, Chinese growth has been powered by exports and infrastructure spending, but there are signs that China's maturing middle class is also becoming an economic force to be reckoned with. Consultants PwC expect retail sales in China to increase by 10.5% next year -- with China overtaking the U.S. as the world's largest retail market by 2016.


Europe's economic outlook a little better


No one expects Europe to become an economic powerhouse in 2013, but at least the horizon looks a little less dark than it did a year ago. The "PIGS' " (Portugal, Ireland/Italy, Greece, Spain) borrowing costs have eased; there is at least rhetorical progress toward a new economic and fiscal union; and the European Central Bank has talked tough on defending the Eurozone.


Mario Draghi, president of the European Central Bank, fended off the dragons with the declaration in July that "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."



Draghi has promised the bank has unlimited liquidity to buy sovereign debt, as long as governments (most likely Spain) submit to reforms designed to balance their budgets. But in 2013, the markets will want more than brave talk, including real progress toward banking and fiscal union that will leave behind what Draghi likes to call Europe's "fairy world" of unsustainable debt and collapsing banks. Nothing can be done without the say-so of German Chancellor Angela Merkel, renowned for a step-by-step approach that's likely to be even more cautious in a year when she faces re-election.


Elections in Italy in February may be more important -- pitching technocrat Prime Minister Mario Monti against the maverick he replaced, 76-year old Silvio Berlusconi. After the collapse of Berlusconi's coalition 13 months ago, Monti reined in spending, raised the retirement age and raised taxes to bring Italy back from the brink of insolvency. Now he will lead a coalition of centrist parties into the election. But polls suggest that Italians are tired of Monti's austerity program, and Berlusconi plans a populist campaign against the man he calls "Germano-centric."


The other tripwire in Europe may be Greece. More cuts in spending -- required to qualify for an EU/IMF bailout -- are likely to deepen an already savage recession, threatening more social unrest and the future of a fragile coalition. A 'Grexit' from the eurozone is still possible, and that's according to the Greek finance minister, Yannis Stournaras.


Expect to see more evidence of climate change


Hurricane Sandy, which struck the U.S. East Coast in November, was the latest indicator of changing and more severe weather patterns. Even if not repeated in 2013, extreme weather is beginning to have an effect -- on where people live, on politicians and on the insurance industry.


After Sandy, New York Gov. Andrew Cuomo said that after "the last few years, I don't think anyone can sit back anymore and say, 'Well, I'm shocked at that weather pattern.' " The storm of the century has become the storm of every decade or so, said Michael Oppenheimer, professor of geosciences at Princeton.


"Climate change will probably increase storm intensity and size simultaneously, resulting in a significant intensification of storm surges," he and colleagues wrote in Nature.


In the U.S., government exposure to storm-related losses in coastal states has risen more than 15-fold since 1990, to $885 billion in 2011, according to the Insurance Information Institute. The Munich RE insurance group says North America has seen higher losses from extreme weather than any other part of the world in recent decades.


"A main loss driver is the concentration of people and assets on the coast combined with high and possibly growing vulnerabilities," it says.


Risk Management Solutions, which models catastrophic risks, recently updated its scenarios, anticipating an increase of 40% in insurance losses on the Gulf Coast, Florida and the Southeast over the next five years, and 25% to 30% for the mid-Atlantic and Northeastern states. Those calculations were done before Sandy.



Inland, eyes will be trained on the heavens for signs of rain -- after the worst drought in 50 years across the Midwest. Climatologists say that extended periods of drought -- from the U.S. Midwest to Ukraine -- may be "the new normal." Jennifer Francis at the Institute of Marine and Coastal Sciences at Rutgers University has shown that a warmer Arctic tends to slow the jet stream, causing it to meander and, in turn, prolong weather patterns. It's called Arctic amplification, and it is probably aggravating drought in the Northwest United States and leading to warmer summers in the Northern Hemisphere, where 2012 was the hottest year on record.


It is a double-edged sword: Warmer temperatures may make it possible to begin cultivating in places like Siberia, but drier weather in traditional breadbaskets would be very disruptive. The U.N. Food and Agriculture Organization reports that stocks of key cereals have tightened, contributing to volatile world markets. Poor weather in Argentina, the world's second-largest exporter of corn, may compound the problem.


More cyber warfare


What will be the 2013 equivalents of Flame, Gauss and Shamoon? They were some of the most damaging computer viruses of 2012. The size and versatility of Flame was unlike nothing seen before, according to anti-virus firm Kaspersky Lab.



Gauss stole online banking information in the Middle East. Then came Shamoon, a virus that wiped the hard drives of about 30,000 computers at the Saudi oil company Aramco, making them useless. The Saudi government declared it an attack on the country's economy; debate continues on whether it was state-sponsored.


Kaspersky predicts that in 2013, we will see "new examples of cyber-warfare operations, increasing targeted attacks on businesses and new, sophisticated mobile threats."


Computer security firm McAfee also expects more malware to be developed to attack mobile devices and apps in 2013.


U.S. Defense Secretary Leon Panetta is more concerned about highly sophisticated attacks on infrastructure that "could be as destructive as the terrorist attack on 9/11."


"We know that foreign cyber actors are probing America's critical infrastructure networks. They are targeting the computer control systems that operate chemical, electricity and water plants and those that guide transportation throughout this country," he said in October.


Intellectual property can be stolen, bought or demanded as a quid pro quo for market access. The U.S. intelligence community believes China or Chinese interests are employing all three methods in an effort to close the technology gap.


In the waning days of 2012, the interagency Committee on Foreign Investment in the United States said "there is likely a coordinated strategy among one or more foreign governments or companies to acquire U.S. companies involved in research, development, or production of critical technologies."


It did not name the country in its unclassified report but separately noted a growing number of attempts by Chinese entities to buy U.S. companies.


Who will be soccer's next 'perfect machine'?



There's room for two less serious challenges in 2013. One is whether any football team, in Spain or beyond, can beat Barcelona and its inspirational goal machine Lionel Messi, who demolished a record that had stood since 1972 for the number of goals scored in a calendar year. (Before Glasgow Celtic fans start complaining, let's acknowledge their famous win against the Spanish champions in November.)


Despite the ill health of club coach Tito Vilanova, "Barca" sits imperiously at the top of La Liga in Spain and is the favorite to win the world's most prestigious club trophy, the European Champions League, in 2013. AC Milan is its next opponent in a match-up that pits two of Europe's most storied clubs against each other. But as Milan sporting director Umberto Gandini acknowledges, "We face a perfect machine."


Will Gangnam give it up to something sillier?



Finally, can something -- anything -- displace Gangnam Style as the most watched video in YouTube's short history? As of 2:16 p.m. ET on December 26, it had garnered 1,054,969,395 views and an even more alarming 6,351,871 "likes."


Perhaps in 2013 the YouTube audience will be entranced by squirrels playing table tennis, an octopus that spins plates or Cistercian nuns dancing the Macarena. Or maybe Gangnam will get to 2 billion with a duet with Justin Bieber.







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House Republicans balk at fiscal cliff deal






























































WASHINGTON (Reuters) - The U.S. House of Representatives looked set to end the "fiscal cliff" crisis in a vote on Tuesday night on a bipartisan deal meant to prevent Washington from pushing the world's biggest economy into recession.

After a day of deliberation, there appeared to be enough Republicans in the House ready to back a Senate bill that would raise taxes on the wealthiest Americans and close a crucial chapter of the budget dispute that has consumed Washington for months.






"We've gone as far as we can go and I think people are ready to bring it to a conclusion," Republican Representative Jack Kingston of Georgia said. "We fought the fight."

Rules Committee Chairman David Dreier, a Republican, predicted the House would back the Senate bill, which also postpones for two months $109 billion in spending cuts on military and domestic programs set for 2013.

Lawmakers have struggled to find a way to head off across-the-board tax hikes and spending cuts that began to take effect at midnight, a legacy of earlier failed budget deals that is known as the fiscal cliff.

Strictly speaking, the United States went over the cliff in the first minutes of the New Year because Congress failed to produce legislation to halt $600 billion of tax hikes and spending cuts scheduled for this year that started kicking in on January 1.

While many Republicans were uneasy with the tax hikes and wanted more spending cuts in the bill, they seemed to realize that the fiscal cliff would begin to damage the economy once financial markets and federal government offices returned to work on Wednesday. Opinion polls show the public would blame Republicans if a deal were to fall apart.

The House Republicans had earlier considered adding $330 billion in spending cuts over 10 years to the Senate bill, which raises taxes on the wealthiest U.S. households by $620 billion over the same period.

But Senate Democrats refused to consider any changes to their bill, which passed 89 to 8 in a rare display of unity early Tuesday morning.

(Additional reporting by Rachelle Younglai, Thomas Ferraro and David Lawder; Writing by Andy Sullivan; Editing by Alistair Bell and Eric Beech)


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