LIMA, Nov 28 (Reuters) - Peru said on Saturday it canceled a trip by its defense minister to neighboring Chile after Peru’s army chief was shown making anti-Chilean statements online.

Edwin Donayre was discovered on the video-sharing website YouTube this week saying that Chileans should not be allowed into the country, and that if they did enter they would have to leave in “boxes” and “plastic bags.”

The statements apparently were made months ago at a private meeting. But they caused an uproar in both countries after they appeared in local media in recent days, drawing assurances from Peruvian President Alan Garcia that the army chief would get a speedy retirement.

“I have conferred with the foreign minister and as per his recommendations I have decided not to travel to Chile for the moment and will await another time,” said Peruvian Defense Minister Antero Flores-Araoz.

He had been scheduled to attend an event in the Chilean port city of Valparaiso next week.

The decision came a day after a Chilean government spokesman said such a visit might be “inopportune” given the circumstances.

The spokesman’s remark drew a sharp response from Peru on Saturday. Garcia said his country “did not accept pressure or orders from anybody outside of Peru.”

Foreign Minister Jose Antonio Garcia Belaunde said, “Frankly, when one is ‘uninvited,’ it’s not very courteous.”

The incident is the latest diplomatic spat between Chile and Peru, which have good relations but disagree on issues ranging from maritime borders to the origins of a grape liquor they both make called Pisco. (Reporting by Teresa Cespedes; Writing by Pav Jordan; Editing by Xavier Briand)

© Thomson Reuters 2008 All rights reserved

CARACAS, Nov 28 (IPS) - Aboard the Russian submarine destroyer Admiral Chabanenko, docked at the port of La Guaira, 20 km north of Caracas, Presidents Dmitry Medvedev of Russia and Hugo Chávez of Venezuela announced the start of joint naval manoeuvres Thursday in the Caribbean.

The week-long war games, in which the nuclear-powered cruiser Peter the Great, the largest non-aircraft-carrier in the world, is taking part, mark the return of Russian warships to the Caribbean for the first time since the Cold War era, when the Soviet Union had close ties with Cuba.

But Medvedev’s visit this week to Peru, Brazil, Venezuela and Cuba seems motivated by economic, trade and investment interests and by sales of technology and arms more than by joint military exercises.

”The Russians have come here with a view to sales, to earn money in this part of the world, where the prices of their weapons appear to be competitive,” Rocío San Miguel, who heads the Venezuelan citizen oversight group Asociación Civil Control Ciudadano para la Seguridad, la Defensa y la Fuerza Armada Nacional, told IPS.

In Venezuela ”the Russians have come to review the state of the contracts for six billion dollars in weapons sales signed so far, which could reach 10 billion dollars by 2015,” said San Miguel.

Venezuela has purchased or agreed to purchase Sukhoi Russian fighter jets, Mi helicopters, diesel-fueled submarines, transport planes, radar systems and 100,000 Kalashnikov assault rifles, and Russia plans to build a Kalashnikov factory and munitions plant in this South American country.

”This region is today one of the most important customers for Russian weaponry in the world. Sales climbed from 300 million dollars in 2001 to three billion dollars in 2006, and are still growing,” said Moisés Naim, editor of Foreign Policy, a bimonthly U.S. magazine published by The Washington Post Company.

”Of course U.S. support for Georgia in the recent war in the Caucasus region was an irritant, and helped prompt Moscow to show that they can also annoy the Yankees in their neighbourhood. But for the family, partners and friends of the Kremlin, those are not the accounts that really matter — it is the bank accounts,” said Naim.

Trade between Russia and Latin America has grown nearly 30 percent a year over the last three years, to a projected 15 billion dollars this year, according to Moscow.

Russian Foreign Minister Sergéi Lavrov said his country’s aim in Latin America is to boost hi-tech exports and cooperation in the fields of energy, production and transportation of gas and oil, construction machinery, the metallurgical and transportation industries, nuclear energy for peaceful uses and space exploration.

On Thursday and Friday, Medvedev was in Cuba, to strengthen ties during the first visit by a Russian president to Cuba since 2000. Russia is the Caribbean island nation’s 10th largest trading partner, and is interested in stepping up trade between the two countries, which last year amounted to 363 million dollars.

Medvedev’s tour of the region began with his participation in the Nov. 22-23 Asia-Pacific Economic Cooperation (APEC) forum summit. He then continued on to Rio de Janeiro, where he met with Brazilian President Luiz Inácio Lula da Silva.

The Russian leader praised Brazil as his country’s top trading partner in Latin America, and the two presidents signed agreements to eliminate the need for visas, which will facilitate business travel, and for further space cooperation (Russia is assisting Brazil in the development of its own satellite launch vehicle.)

Russia has a keen interest in supplying weapons to Brazil, and in cooperating in the areas of oil and gas exploration and the construction of Brazil’s gas pipeline.

Venezuela and Russia, meanwhile, have signed dozens of agreements in the last two years. Chávez visited Moscow twice in 2008, and will go again next year.

And during Medvedev’s brief visit to Caracas this week, eight more accords were signed, to facilitate the participation of Russian companies in oil exploration and production in the Orinoco Belt in southeastern Venezuela, for assistance to Venezuela’s light industry, and for cooperation in the development of nuclear energy for peaceful purposes.

”This is the time of the meeting between the great Russian fatherland and the great Latin American fatherland,” said Chávez, who decorated the Russian president with the Order of the Liberator Simón Bolívar, Venezuela’s highest award.

The presidents spoke of the interests shared by Venezuela and Russia as oil exporting countries in need of stable prices that benefit both producers and consumers.

Russia will also consider joining the Bolivarian Alternative for Latin America and the Caribbean (ALBA), an initiative that links Bolivia, Cuba, Dominica, Honduras, Nicaragua and Venezuela.

On Wednesday, a summit of the leaders of the ALBA countries, plus Ecuadorean President Rafael Correa, announced an agreement to create a common currency, to strengthen member economies.

The signals given off by Russia indicate that it is returning to the Caribbean and Latin America ”to stay,” especially if, along with the manoeuvres that reaffirm its role as a global political player, it is able to advance towards concrete business deals that allow it to invest in the expansion and modernisation of its economy.
Last Updated ( Friday, 28 November 2008 14:25 )

MSNBC
Associated Press
updated 3:25 p.m. ET Nov. 24, 2008

WASHINGTON - Rushing to rescue Citigroup, the government agreed to shoulder hundreds of billions of dollars in possible losses at the stricken bank and to plow a fresh $20 billion into the company.

Regulators hope the dramatic action will bolster badly shaken confidence in the once-mighty banking giant as well as the nation’s financial system, a goal that so far has been elusive despite a flurry of government interventions to battle the worst global crisis since the 1930s.

Wall Street investors reacted enthusiastically. The Dow Jones industrials shot up about 300 points in morning trading. Stock markets in Britain and Germany also gained ground. Citigroup shares themselves climbed 61.3 percent to $6.08 in morning trading.

“If they didn’t help, the damage would be beyond imagination,” said Teck-Kin Suan, economist at United Overseas Bank in Singapore.

The action, announced late Sunday by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp., is aimed at shoring up a huge financial institution whose collapse would wreak havoc on the already fragile financial system and the U.S. economy.

“With these transactions, the U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy,” the three agencies said in a joint statement. “We will continue to use all of our resources to preserve the strength of our banking institutions, and promote the process of repair and recovery and to manage risks.”

President George W. Bush held open the prospect Monday of similar arrangements should other companies falter. “If need be, we will make these kind of decisions to safeguard our financial system in the future,” Bush said.

Analysts said a Citigroup failure would have seized up still fragile lending markets and caused untold losses among institutions holding debt and financial products backed by the company.

“It would create chaos,” said Winson Fong, managing director at SG Asset Management in Hong Kong, which oversees about $3 billion in equities in Asia. “Simply put, you couldn’t borrow or lend for a while. This is a nightmare scenario.”

The bold move is the latest in a string of high-profile government bailout efforts. The Fed in March provided financial backing to JPMorgan Chase’s buyout of ailing Bear Stearns. Six months later, the government was forced to take over mortgage giants Fannie Mae and Freddie Mac and throw a financial lifeline — which was recently rejiggered — to insurer American International Group.

Critics worry the actions could put billions of taxpayers’ dollars in jeopardy and encourage financial companies to take excessive risk on the belief that the government will bail them out of their messes.

The Citigroup rescue came after a weekend of marathon discussions led by Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke. Timothy Geithner, president of the Federal Reserve Bank of New York, who is being tapped by President-elect Barack Obama as his Treasury chief also participated. Bush said Monday he consulted with Obama on the Citigroup rescue.

Vikram S. Pandit, Citi’s chief executive officer, welcomed the action. “We appreciate the tremendous effort by the government to assure market stability,” he said in a statement issued early Monday.

The $20 billion cash injection by the Treasury Department will come from the $700 billion financial bailout package. The capital infusion follows an earlier one — of $25 billion — in Citigroup in which the government also received an ownership stake.

As part of the plan, Treasury and the FDIC will guarantee against the “possibility of unusually large losses” on up to $306 billion of risky loans and securities backed by commercial and residential mortgages.

Under the loss-sharing arrangement, Citigroup Inc. will assume the first $29 billion in losses on the risky pool of assets. Beyond that amount, the government would absorb 90 percent of the remaining losses, and Citigroup 10 percent. Money from the $700 billion bailout and funds from the FDIC would cover the government’s portion of potential losses. The Federal Reserve would finance the remaining assets with a loan to Citigroup.

In exchange for the guarantees, the government will get $7 billion in preferred shares of Citigroup. In addition, Citi said it will issue warrants to the U.S. Treasury and the FDIC for about 254 million shares of the company’s common stock at a strike price of $10.61.

As a condition of the rescue, Citigroup is barred from paying quarterly dividends to shareholders of more than 1 cent a share for three years unless the company obtains consent from the three federal agencies. The bank is currently paying a dividend of 16 cents, halved from a 32-cent payout in the previous quarter. The agreement also places restrictions on executive compensation, including bonuses.

Importantly, the agreement calls on Citigroup to take steps to help distressed homeowners.

Specifically, Citigroup will modify mortgages to help people avoid foreclosure along the lines of an FDIC plan that was put into effect at IndyMac Bank, a major failed savings and loan based in Pasadena, Calif.

Under the IndyMac plan, struggling home borrowers pay interest rates of about 3 percent for five years. Rates are reduced so that borrowers aren’t paying more than 38 percent of their pretax income on housing.

The IndyMac plan also was used as a model for a new program by Fannie Mae and Freddie Mac and for two other failed thrifts taken over by the government on Friday. FDIC Chairman Sheila Bair has been pressing Treasury to use $24 billion from the $700 billion bailout program to put the mortgage modification program on national footing, but Paulson is opposed to that idea.

Citigroup has seen its shares lose 60 percent of their value in the past week, reflecting a crisis of confidence among skittish investors. They are worried all the risky debt on Citigroup’s balance sheet will turn into losses as the economy worsens and the markets stay turbulent — losses that could be nearly impossible to reverse.

Citigroup is such a large, interconnected player in the financial system that it is seen by Washington policymakers as too big to fail. The company, with some 200 million customers, has operations stretching around the globe in more than 100 countries.

Analysts consider Citigroup the most vulnerable among the major U.S. banks — especially after it failed to nab Wachovia Corp., which was bought instead by Wells Fargo & Co. That was a missed opportunity for Citi to gets its hands on much-needed U.S. deposits that would bolster its cash position.

Citigroup was especially hard hit by the meltdown in risky, subprime mortgages made to people with tarnished credit or low incomes. Foreclosures on those mortgages spiked, leaving Citi and other financial companies wracking up huge losses on the soured investments. The company has failed to turn a profit during the past four quarters and has announced plans to slash thousands of jobs.

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

CARACAS (RIA Novosti) - Talks in Caracas between Russian President Dmitry Medvedev and his Vene­zuelan counterpart Hugo Chavez have yielded a host of bilateral agreements.

Dmitry Medvedev arrived in the Venezuelan capital late on Wednesday for a two-day visit, the first by a Russian head of state for 150 years.

The two parties signed a 25-year intergovernmental agreement on cooperation in oil, gas and power generation with an option to extend it for another five years, said Russian Deputy Prime Minister Igor Sechin, who is accompanying Medvedev.

“Cooperation in the oil sector covers the entire chain from development and transportation to the construction of pipelines, equipment supplies and refining,” Sechin said.

The agreement also includes building hydro and thermal power plants, and support for mining projects, he added.

Russian energy giant Gazprom and Venezuela’s state-run oil company Petroleos de Venezuela (PDVSA) signed an agreement on joint prospecting for oil at the Ayacucho-3 block in the Orinoco Oil Belt.

The two energy giants could launch talks to set up a joint venture after field data gathered from the Orinoco area has been evaluated.

Oil, jointly produced by PDVSA and a newly established Russian oil consortium that includes Gazprom, the country’s largest independent crude producer LUKoil and Russian-British joint oil venture TNK-BP, will be exported to the U.S., Chinese and European markets, said Vagit Alek­perov, LUKoil CEO.

A memo of understanding was signed between the Russian United Shipbuilding Corporation and PDVSA Naval, a shipbuilding subsidiary of PDVSA.

The two countries also agreed to sign another intergovernmental ag­reement to set up a joint bank within the next two weeks, Medvedev said.

The joint bank could become an instrument to finance projects in Russia and Venezuela, and will handle payments for oil supplies and will involve Gazprombank, Russia’s third-largest bank.

The Russian president said Moscow and Caracas could switch to national currencies in bilateral payments.

“We have discussed with President Chavez the use of the national currencies, the ruble and the bolivar, in bilateral payments,” Medvedev said at a news conference in Caracas.

The two leaders also considered establishing reserves in the two currencies as bilateral trade between Russia and Venezuela reached $772 million in the first eight months of 2008.

Medvedev also said that the two countries intended to boost contacts in the defense sector, in line with international law.

However, the two leaders did not discuss the delivery of Russian submarines to Venezuela, Chavez said.

“We did not discuss submarines. We discussed surface vessels,” Chavez told reporters after talks with Medvedev.

Medvedev and Chavez will visit Russia’s Northern Fleet missile cruiser, the Pyotr Veliky, later on Thursday in Venezuela’s La Guaira port. The naval vessel leads a Russian task force due to take part in joint naval exercises in the Caribbean on December 1.

Medvedev will crown his Latin American tour with a visit to Cuba later on Thursday.

RIO DE JANEIRO - Brazil revealed that it had bought 12 attack helicopters from Russia on October 23, after a visit here by Russian President Dmitry Medvedev on Nov. 26.

The deal, which had not previously been announced, appeared in a memorandum of understanding signed by the Russian leader and Brazilian President Luis Inacio Lula da Silva.

“The parties recognize as a promissory accord … some activities outlined during the celebration of the supply of the 12 Mi-35M helicopters for the Brazilian Air Force,” part of the text read.

Brazil and Russia “declare their conviction of the mutual benefits that can come from the continuation of the cooperation started with the negotiations relative to the fleet of attack helicopters.”

The Brazilian government confirmed the purchase in a joint statement released after Medvedev’s departure.

Medvedev signed accords to deepen military cooperation with Lula in Brazil earlier, but they did not close concrete agreements.

After the meeting the Russian president traveled to Venezuela - which has adopted Cuba’s role as the leading anti-American voice in the region - as Russian and Venezuelan warships conduct joint military maneuvers.

Spain has launched an 11bn euro (£9.2bn) plan aimed at boosting the economy and creating 300,000 jobs.

The plan, which represents 1.1% of the Spain’s Gross Domestic Product (GDP), is part of the European Union’s 200bn euro stimulus announced on Wednesday.

The money will be mainly invested in infrastructure and public works, Spain’s prime minister Jose Luis Rodriguez Zapatero said.

Spain’s unemployment reached 12.8% in October - the highest in the eurozone.

Construction crisis

The Spanish government said it would invest 0.8bn euros in the ailing car industry, which has been through a severe downturn and seen sales plummet 54.6% since the beginning of the year.

The construction industry has also been severely hit by the financial crisis, with property prices falling and companies slashing thousands of jobs.

The Spanish economy shrank by 0.2% in the third quarter, putting an end to 15 years of continuous growth.

The European Commission has demanded that each EU member must spend about 1.2% of GDP to fight the economic slowdown.

Germany launched a similar 50bn euro package, while next week France is expected to unveil economic measures worth 20bn euros.

NEW YORK: Citigroup will halt dividend payments for the next three years and agree to restrictions on executive compensation under terms of the U.S. government rescue of the struggling bank, it was revealed Monday.

Citigroup had to make the concessions in return for the U.S. government’s direct investment of about $20 billion in the bank and an agreement to back about $306 billion in loans and securities.

Investors reacted positively to the rescue, sending stocks higher on Wall Street and the big European exchanges. The Dow Jones industrial average was 280 points higher in midafternoon trading, extending its 300-point rally Friday as financial shares began to recover. The Standard & Poor’s 500-stock index rose 4.7 percent. The Dow Jones Euro Stoxx 50, an index of blue-chip shares, closed up 9.9 percent, as did the FTSE 100 in London.

Shares of Citigroup - perhaps the market gauge most widely watched Monday morning - were 53 percent higher and traded above $6 a share for the first time since Thursday. A year ago, the shares were trading at about $30.

Bank of America, Goldman Sachs and Merrill Lynch were all up about 15 percent in New York on Monday. JPMorgan shares gained 9 percent and Morgan Stanley was up 23 percent.

Banking executives said the decision to support Citigroup, while necessary, could draw a firestorm of criticism from smaller institutions that were not considered big enough to warrant a government rescue.

The ultimate cost of the deal depends in large part on whether the government has to cover losses on those assets, which are mostly residential and commercial real estate loans.

The rescue, announced late Sunday after a harrowing week in the financial markets, is the government’s third effort in three months to contain the deepening economic crisis and may set the precedent for other multibillion dollar rescues in the financial sector.

President George W. Bush said Monday that more such rescues could be arranged if they become necessary.

In pledging similar assistance, Bush said, “We have made these kind of decisions in the past, made one last night, and if need be we’re going to make these kind of decisions to safeguard our financial system in the future.”

Speaking from the steps of the Treasury Building, with Treasury Secretary Henry Paulson Jr. beside him, Bush said Paulson was working closely with the transition team of President-elect Barack Obama, and that the new president would be kept informed.

“It’s important for the American people to know that there is close cooperation,” Bush said.

With more than $2 trillion in assets and operations in more than 100 countries, Citigroup is so large and interconnected that its troubles could spill over into other institutions. Citigroup is widely viewed, both in Washington and on Wall Street, as too big to be allowed to fail.

Citigroup executives presented a proposal to U.S. government officials Friday evening after a weeklong plunge in the company’s share price threatened to engulf other big banks. In tense, round-the-clock negotiations that stretched until almost midnight Sunday, it became clear that the crisis of confidence had to be defused immediately or the financial markets would plunge further.

Whether this latest rescue plan will help calm the markets is uncertain, given the stress in the financial system caused by losses at Citigroup and other banks. Each previous government effort initially seemed to reassure investors, leading to optimism that the banking system had steadied. But those hopes faded as the economic outlook worsened, raising worries that more bank loans were turning sour.

Obama’s choice for Treasury secretary, Timothy Geithner, the president of the Federal Reserve Bank of New York, played a crucial role in the negotiations Friday but took a less active role once news of his appointment was circulated. While the initial focus of government officials was to help the embattled company, they may also seek to draw up an industrywide plan that could help other banks.

The Citigroup plan could herald another shift in the government’s financial rescue. The Treasury Department first proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions. Neither plan, however, restored investors’ confidence for long.

“By intervening, they are giving the market some heart to temporarily stave off some fear - but you can only push that so much,” said Charles Geisst, a financial historian and professor at Manhattan College.

Under the agreement, Citigroup and regulators will back up to $306 billion of largely residential and commercial real estate loans and certain other assets, which will remain on the bank’s balance sheet. Citigroup will shoulder losses on the first $29 billion of that portfolio.

Any remaining losses will be split unequally between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the Federal Deposit Insurance Corporation will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.

In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. In addition, the government is buying $20 billion of preferred stock in Citigroup. The preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.

Citigroup will effectively halt dividend payments for the next three years and will also agree to certain executive compensation restrictions, which will be reviewed by regulators. It will also put in place an FDIC plan to modify mortgage loans to help borrowers hold onto their homes, which is similar to a program Citibank recently announced.

The government said it was taking the step to bolster the economy while protecting taxpayers.

“We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the regulators said in a joint statement Sunday.

Vikram Pandit, the Citigroup chief executive, met with the bank’s board Saturday, and there was no indication that the directors would seek to replace him.

Once the largest and mightiest U.S. financial company, Citigroup lost half its value in the stock market last week as the bank confronted a crisis of confidence. Although Citigroup executives maintain the bank is sound, investors worry that its finances are deteriorating. Citigroup has suffered staggering losses for a year now, and few analysts think the pain is over. Many investors worry that it needs more capital.

Gretchen Morgenson, Louise Story and David Stout contributed reporting.

VALENCIENNES, France (Reuters) - The French government will launch a major stimulus plan to revive the flagging economy within the next 10 days, President Nicolas Sarkozy said on Tuesday.

Sarkozy said the plan would include measures to boost the construction and car sectors, especially auto suppliers who have been particularly hard hit by the recent economic slowdown.

“In less than 10 days we will announce a revival plan to save the car industry…and strengthen the building sector,” Sarkozy said in northern France, without giving further details.

Speaking later in parliament, Prime Minister Francois Fillon said the measures would include tax initiatives to help car firms, saying they had around one million vehicles in stock.

The government would also make investments to enable companies to create hybrid and electric vehicles, he added.

Coordination with the European Union and the new U.S. administration would be crucial in implementing such a plan to help the global economy, he said.

The European Commission is seeking to get EU states to agree to a broad range of measures, including temporary sales’ tax cuts, to pull the 27-nation bloc clear of recession.

France holds the rotating presidency of the European Union and has pushed hard for an EU-wide response to the slowdown following coordinated action earlier in the autumn to ease the financial crisis that brought the banking system to its knees.

Sarkozy said on Monday it was time “to invest massively in infrastructure, in research, in innovation, in education, in training people, because it is now or never.”

France has expressed frustration at Germany’s more cautious approach to the onset of recession, with Berlin unwilling to commit vast amounts of cash to spurring the economy.

A slew of poor economic data and results over the past month have highlighted the challenge facing Europe, with the continent’s car firms already suffering.

PSA Peugeot-Citroen announced last week it planned to cut 3,550 jobs across its sites in France, while Renault has said it will cut 6,000 jobs across Europe.

France’s construction industry is also feeling the pinch. Data released on Tuesday showed new housing starts fell 20.6 percent in the three months to the end of October.

(Reporting by Yann Le Guernigou, writing by Crispian Balmer; editing by Marcel Michelson)

© Thomson Reuters 2008 All rights reserved

BUENOS AIRES (AFP) - President Cristina Kirchner on Tuesday unveiled a massive public spending plan to pump more than 21 billion dollars into Argentina’s infrastructure and counter effects of the global cash crunch.

“On December 15 we will launch the most ambitious public works programs in memory,” said Kirchner, making the announcement at the closing ceremony of the trade association representing builders.

Argentina expects economic growth to slow to four percent in 2009, down from 6.5 percent expected for 2008. This follows years of growth nearing nine percent following the 2002 crisis.

“There are public works that call for (intensive) manual labor. Works that will mean hiring more than the 362,000 workers currently in the building sector, increasing the number to nearly 770,000 jobs,” Kirchner said.

Construction has been one of the engines of Argentina’s economic growth.

Argentina’s Gross Domestic Product (GDP) increased 8.8 percent in 2003; 9 percent in 2004; 9.2 percent in 2005; 8.5 percent in 2006, and 8.7 percent in 2007.

Earlier in the day Kirchner announced proposed tax and investment incentives aimed at encouraging the repatriation of capital.

The measure would allow Argentines who bring back their funds stashed abroad and pay taxes of between one and eight percent, depending on where the funds are directed.

The bill also includes tax incentives and debt relief for small businesses and for firms that encourage employment.

The Kirchner administration has been moving aggressively to counter the effects of the global crisis.

On November 20 it nationalized 26 billion dollars worth of private pension funds run by 10 banks, a move opponents believe is really aimed at preventing a loan default on Argentina’s national debt of some 150 billion dollars.

The next day it took steps toward nationalizing Aerolineas Argentinas (AA) and Austral, the country’s largest airlines both owned by the Spanish group Marsans.

The government is seen as pursuing the nationalization trend begun under Kirchner’s predecessor and husband, Nestor Kirchner, who in his 2003-2007 mandate nationalized the railroads, waterworks and communications companies.

NEW YORK — Stocks barreled higher for the second straight session, this time in a relief rally over the government’s plan to bail out Citigroup. The Dow Jones industrials soared nearly 400 points, bringing their two-day advance to more than 880, or 11%.
Investors are hoping the rescue of Citigroup will help lift some of the uncertainty hounding the financial sector and the overall economy. Many observers saw the move as offering a template for how the government might carry out other bank stabilizations if they are needed.

Still, the market remains wary, especially with the economy in a serious downturn. The Dow was up more than 500 points in the last hour before giving up some of its gains — many investors wanted to take some money off the table before the next bit of bad news arrives.

While the markets anticipated last week that some sort of rescue could occur, investors appeared emboldened by the U.S. government’s decision late Sunday to invest $20 billion in Citigroup and guarantee $306 billion in risky assets.

President-elect Obama formally named his economic team but didn’t offer specifics of an economic stimulus plan nor state that he would push back a plan to raise taxes on the richest Americans. His plan targets saving or creating 2.5 million jobs during the next two years.

FIND MORE STORIES IN: Europe | Barack Obama | Germany | Japan | France | Britain | Wall Street | Federal Reserve | Dow Jones | United States Treasury Department | Nasdaq | Freddie Mac | Fannie Mae | Citigroup | Russell | National Association of Realtors | Citigroup Inc | Federal Deposit Insurance Corp | International Group | Federal Reserve Bank of New York | Lang | Timothy Geithner | T-bill | September. | FTSEurofirst | LanczGlobal | Schwarz
Alan Lancz, director at investment research group LanczGlobal, said that while the market might have wanted a firmer commitment against raising taxes it was too soon for Obama to nail down specifics of his plan. Lancz expects the new administration wouldn’t rush to implement the hikes with an economy as weak as it has been.

“There’s so many balls in the air right now he’d be foolish to make specific comments,” Lancz said, noting that the economic picture could change greatly by inauguration day.

The market rallied following announcement of the plan by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. to stabilize Citigroup. It’s only the latest effort this year to support a banking system troubled by bad debt and flagging confidence. Besides implementing its $700 billion bailout plan for the overall financial industry, the government has bailed out insurance giant American International Group and taken over lenders Fannie Mae and Freddie Mac.

Still, despite the size of Monday’s gain, investors remain cautious because the nation faces a difficult economy and the stock market likely will continue to see volatility.

Jim Baird, chief investment strategist with Plante Moran Financial Advisors, said Wall Street is relieved by the government’s decision to help prop up Citigroup but he predicted that the initial enthusiasm could give way to further questions about the effectiveness of the government’s array of efforts to sew up problems in the financial sector.

“I think, at a minimum, what you’re seeing today is some relief that, first of all, they’re stepping in to do something,” he said. “There’s still more questions than answers surrounding whether what’s been done is going be enough.”

The Dow rose 396.97, or 4.93%, to 8,443.39.

Broader stock indicators also jumped. The Standard & Poor’s 500 index advanced 51.78, or 6.47%, to 851.81, and the Nasdaq composite index rose 87.67, or 6.33%, to 1,472.02.

The Russell 2000 index of smaller companies rose 19.04, or 4.68%, to 425.58.

The rise in stocks follows a rally Friday that saw the Dow industrials jump 494 points, or 6.5%. The other major indexes also rose sharply. Still, stocks ended the week with a loss after heavy selling Wednesday and Thursday.

Bond prices were mixed Monday as investors examined the government’s bailout plan for Citigroup. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.33% from 3.20% late Friday.

The Treasury bill market showed continuing high demand, a sign of investors’ caution. The yield on the three-month T-bill, considered one of the safest investments, fell to 0.02% from 0.04% late Friday.

The dollar was mostly lower against other major currencies, while gold prices rose.

Baird said the uncertainty over whether the government’s cocktail of direct investments in financial houses and support of debt obligations will prove effective has led to the stock market volatility. The concerns about banks and the broader economy are likely to continue, he said.

“Just the sheer breadth of potential outcomes is very, very wide which I think makes it difficult for investors to determine how do you play it from here.”

Wall Street shrugged off a larger-than-expected drop in sales of existing homes last month as investors instead focus on the government’s rescue for Citigroup. And while the housing numbers fell short of expectations, Wall Street expected sales would fall sharply after last month’s upheaval in the financial markets.

The National Association of Realtors says sales of existing homes fell 3.1% to a seasonally adjusted annual rate of 4.98 million in October. That’s down from 5.14 million in September.

Citi shares surged $1.94, or 51%, to $5.71 following the government’s decision to inject capital into the company.

Health care company Johnson & Johnson said Monday it would acquire Omrix Biopharmaceuticals Inc. for $438 million. The move is aimed at expanding J&J’s surgical product unit; J&J will pay $25 per share for the company, an 18% premium over Omrix’s close Friday of $21.16.

J&J rose 7 cents to $58.42, while Omrix rose $3.43, or 16%, to $24.59.

Advancing issues outnumbered decliners by about 6 to 1 on the New York Stock Exchange, where volume came to 1.06 billion shares.

Overseas, Britain’s FTSE 100 jumped 9.84%, Germany’s DAX index surged 10.34%, and France’s CAC-40 rose 10.09%. Hong Kong’s Hang Seng index fell 1.59%; markets in Japan were closed for a holiday.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.