Wednesday, August 31, 2011

Android smartphones gain more ground in US

Google's Android software strengthened its grip on the US smartphone market, powering nearly 42 percent of handsets as of July, industry tracker comScore reported on Tuesday.

Android's share of the US smartphone market grew to 41.8 percent from 36.4 percent at the start of April, according to comScore.

In that same three-month period, Apple's share of the market rose slightly to 27 percent while BlackBerry maker Research In Motion saw its ranks of subscribers erode four percent to 21.7 percent, comScore reported.

The portion of the market using smartphones powered by Microsoft software shrank to 5.7 percent from 6.7 percent and Symbian's share dipped to 1.9 percent from 2.3 percent.

The number of US smartphone owners climbed 10 percent to 82.2 million in the three months ending in July, while the overall number of mobile phone users was 234 million, according to comScore.

Samsung was the most popular handset maker with 25.5 percent of the market and LG second with 20.9 percent, comScore reported.

Apple's beloved iPhones were the fourth most prevalent handsets and accounted for 9.5 percent of the overall US market, according to the industry tracker.

Saturday, August 20, 2011

Morgan Stanley warns of US, EU recession

Morgan Stanley on Thursday said the United States and Europe are dangerously close to recession, blaming in part policy errors by authorities on both sides of the Atlantic.

The investment bank said a slow European response to the euro zone's mounting sovereign debt problems and the US political battle over raising its debt ceiling had hit financial markets and eroded both business and consumer confidence.

"Our revised forecasts show the US and the euro area hovering dangerously close to a recession -- defined as two consecutive quarters of contraction -- over the next 6-12 months," it said in a new report.

For the moment, the combination of cash-rich companies, oil prices falling from their highs earlier this year, and rate-cutting by central banks appear more likely to prevent a plunge into a "double-dip" recession, after the 2008-2009 collapse of growth, the bank said.

But it added that policymakers have been making things worse by tightening spending to pare fiscal deficits.

"A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the US. This should be aggravated by the prospect of fiscal tightening in the US and Europe," it said.

Morgan Stanley cut its global economic growth forecast to 3.9 per cent in 2011 from the previous 4.2 per cent, and to 3.8 per cent from 4.2 per cent in 2012, mainly due to the stagnation in advanced economies.

It said the G-10 developed economies -- the United States, the euro zone, Britain and Japan -- will only grow at about 1.5 per cent this year and in 2012, more than a full percentage point lower than in 2010, when the countries were rebounding from the "Great Recession".

But it noted a clear divergence between the developed countries and the giant "BRIC" emerging economies -- China, India, Russia and Brazil -- which will expand 6.4 per cent -- slightly lower than its previous forecast of 6.6 per cent -- and 6.1 per cent in 2012.

It pointed to errors by the leadership in Europe and in Washington, and actions by the European Central Bank, for enhancing already-weak economic growth.

"The ECB's past rate hikes and, more so, the sovereign crisis and the additional fiscal policy tightening as well as the banking sector funding stress it produces, will take an additional toll on growth, in our view," Morgan Stanley said.

It also cited the months-long battle between US Democrats and Republicans over passing an increase to the US debt ceiling, which raised fears that the country might default on its debts because of a political deadlock.

And it pointed to efforts in the United States and Europe to cut government spending which could slow growth.

The bank said the six months from October to March would be critical for the US economy, "when we may see some fallout from the heightened volatility of risk markets... and when we get an automatic tightening of fiscal policy if, as our US team currently assumes, this year's fiscal stimulus measures will expire."

The report, together with new data pointing to a stall in the United States, sent stock markets plunging, with the leading European and US markets losing more than four per cent on Thursday.

Thursday, August 18, 2011

Google-Motorola deal highlights patent arms race

When an Internet company plunks down $12.5 billion to buy a struggling cellphone company for its collection of patents, it's another sign that, for the high-tech industry, patents have become a mallet wielded by corporations to pummel their competitors.

Google Inc. announced the deal to buy Motorola Mobility Holdings Inc. on Monday, specifically for its trove of 17,000 patents. Google needs them to shield companies like HTC Corp. and Samsung Electronics Co. -who make phones based on Google's Android software- from lawsuits filed by Microsoft Corp. and Apple Inc.

"Google is not acquiring Motorola for the sake of its technology or its research," said James Bessen, a lecturer at Boston University and co-author of a book on the patent system. "Patents have become legal weapons - they're not representing ideas anymore."

The trend, decades in the making, raises questions that pending patent legislation in Washington only begins to answer.

Google's multi-billion bid to get its hands on Motorola's output of legal paperwork is the culmination of a "bubble" in the value of patents relating to smartphones that started last year, as Microsoft and Apple mounted their legal attack. Industry watchers say that bubble may deflate now that Google is set to gain the protection of Motorola's patents in a deal that's set to close late this year or early next.

But an underlying problem will keep growing: patent filings and lawsuits that distract companies and sap resources that are better spent on other things.

Engineers spend their time writing patents rather than inventing things, or reworking products just to avoid patent infringement. Customers put off purchases because of pending lawsuits, and independent software developers close up shop because they can't afford licensing fees.

"If you have to pay $12.5 billion dollars to play, you can sense why maybe an individual who has a great idea would feel discouraged," said Julie Samuels, a patent lawyer with the Electronic Frontier Foundation, a technology-oriented civil liberties group. "It affects the whole economy."

It wasn't always this way. The U.S. software industry got its start with nary a patent filed, and on the hardware side, patent suits were rare until the mid-1980s. That was when calculator and chip maker Texas Instruments Inc., on the brink of extinction, decided to see if it could make some money from its patent portfolio. It started filing patent lawsuits and demanding money from companies with infringing products. It saved the company.

IBM Corp. latched on to TI's lead in patent licensing in the mid-90s, when it was down on its luck. That coincided with courts broadening the types of patents allowed. Patents on software and "business methods," with vague, broad claims, were now accepted.

Since then, an arms race has slowly escalated in the industry. Companies found that the best defense against a patent suit from a rival was to have a patent portfolio to wield as a deterrent: "Sue me and I'll sue you back," is the message Google is sending by buying Motorola.

Motorola is already suing Apple over several patents, including one that purports to cover the act of sending address data between two phones. Another patent at issue covers the idea of concealing a phone's antenna in its outer case, which Apple arguably does with the iPhone 4.

It's a situation reminiscent of the nuclear standoff between the U.S. and the Soviet Union. But just as the threat of nuclear weapons didn't stop third-world guerillas during the Cold War or deter terrorists today, the patent arsenals are useless against "patent trolls" - companies that own patents but don't do actual research or development. Since they don't make anything themselves, they can't be the targets of patent suits, says Colleen Chien, assistant professor at the University of California, Berkeley.

"Mountains of patents have proven useless against the patent system's `stateless actors,' non-practicing entities who are invulnerable to patent counterclaims," Chien writes.

In one example, a company with a 1980s patent on a kiosk that made music audiotapes on the spot for customers in stores tried to levy license fees from tens of thousands of technology companies, claiming that the patent covered any downloading of media from the Internet. Microsoft was among the companies that settled.

Bessen puts the cost of dealing with "patent trolls" at half a trillion dollars in the last two decades. Yet patent trolls account for only one in six patent suits, by his estimate, so the patent system's burden on the economy is much higher.

Just as we worry about old Soviet nuclear weapons falling into the wrong hands, Chien says that the patent hoards accumulated by corporations as "defensive" measures are starting to end up with "non-practicing entities" who use them for lawsuits.

For example, memory chip-maker Micron Technology Inc. in 2009 sold 4,500 patents to a patent lawyer in 2009. Chien points out that the patents are worth more to "non-practicing entities," because they can sue without fear of retaliatory patent suits.

During the Cold War, there were arms limitation talks. Similarly, many of the big technology corporations want the patent bombs taken away, or at least limited. Google's lawyers are critical of the patent system, and it's clear the company would rather not have to strike deals like the one to buy Motorola. Cisco Systems Inc., the world's largest maker of networking gear, wants patent infringement damages to be based on the value of the component in question rather than the entire product.

Tech companies can expect little help from Washington. After a decade of wrangling, Congress is set to approve a patent reform bill when the Senate reunites in December. It will be the largest legislative change to the patent system since 1952. Even so, experts say its effect on the high-tech industry will be marginal. It had sought more sweeping changes, but resistance from the pharmaceutical industry, which is much better served by the current system, has kept out the more radical proposals.

The legislation will make it marginally harder to get and hold onto patents, Chien said, but that's unlikely to cut down on the number of spurious patents, she believes.

And paradoxically, the bills could expand the glut of patents that's plaguing the industry, since one of its goals is to reduce the three-year backlog of patents pending at the Patent Office.

"It's going to take a long time for Congress to tackle patents again, and that's really a problem because this troll problem is going to continue to fester," Samuels said. "We all feel the effects."

Monday, August 15, 2011

Google to buy Motorola Mobility in biggest deal ever

Google Inc's biggest deal ever, acquiring Motorola Mobility Holdings Inc for $12.5 billion, is an attempt to buy insurance against increasingly aggressive legal attacks from rivals such as Apple Inc.

The acquisition of one of the mobile telecommunications industry's most storied names is Google co-founder Larry Page's boldest move since taking over as CEO in April, launching the Internet giant into a lower-margin manufacturing business and pitting it against many of the 38 other handset companies that now use its Android software.

Motorola Inc was split this year into two: Motorola Mobility, which got the faster-growing cellphone and TV set-top box businesses; and Motorola Solutions, which sells gear like walkie-talkies to corporate and government clients.

Google is paying a massive 63 percent premium to gain access to one of the mobile phone industry's largest patent libraries. The company had been under pressure to build a patent portfolio after losing out to Apple, Microsoft Corp and others in a recent auction of bankrupt Nortel's assets.

Unlike the Nortel deal and others, the fact that Google avoided having to compete in an auction for Motorola by engaging in exclusive negotiations for the company underscores the pressure it was under to bolster its patent portfolio. Paying such a rich premium even though it was the only buyer dovetails with analysts' view that the increasingly litigious posture its competitors have taken over intellectual property left the Internet search giant with no choice but to pay up.

"No matter how you think about this, you have to look at it through the spectrum of the Android ecosystem under incredible attack from an IP (intellectual property) perspective. And this is Google going out and trying to fix that," said W.P. Stewart Advisors Chief Investment Officer Jim Tierney. "The biggest implication here is that Google wants Android to be one of the dominant phone operating systems for years to come."

Wall Street quickly anointed Microsoft a winner in this deal, with Windows benefiting should the move spur current Android partners to explore other options.

The deal also stoked speculation that struggling Nokia and Research in Motion would become takeover targets themselves, sending Nokia's shares up 17.35 percent and RIM's up 10.3 percent.

Google made its first foray into hardware by co-developing the Nexus One phone with HTC in 2010 -- an effort that met mixed results. Monday's deal, however, could mark the start of a shift to an Apple-style model, integrating mobile hardware with underlying software.

"Google decided to cross the Rubicon on the device side," said Fred Huet, head of telecoms and media consultancy Greenwich Consulting. "There has been growing frustration (at Google) about the lack and speed of internet centric devices.

"With Nexus they tried to show the industry what they thought was the right evolution for handsets and it did not have an impact .... With the patents they make sure that Android stays strong."


The acquisition is likely to draw even closer regulatory scrutiny than usual, with the search leader already the subject of antitrust inquiries. Experts will want to review how it affects mobile industry competition.

But the deal -- which took Wall Street by surprise -- appears to mark a shift in strategy from Google's traditional Internet search and advertising empire and forays into video and social networking.

"The danger is that other handset makers feel disenfranchised," said Nomura Securities global technology specialist Richard Windsor. "Motorola is the weaker player. This could actually collapse the entire community."

Page, who also launched the ambitious Google+ social network since taking over as CEO, reassured investors on Monday this would not happen, saying Motorola will be run as a separate company licensing Android software in the same way as rivals like HTC Corp and LG Electronics.

Phone makers including Samsung officially said they welcomed a deal that will aid their own legal battles, but some analysts questioned the sincerity of those claims, noting that rival companies would now be unlikely to heavily promote Android since it would benefit a direct competitor.

Andy Lees, president of the Windows Phone Division at Microsoft, said in a statement that, "Investing in a broad and truly open mobile ecosystem is important for the industry and consumers alike, and Windows Phone is now the only platform that does so with equal opportunity for all partners."

Some analysts also doubt that Google will continue manufacturing handsets in the long term.

"We don't think they necessarily want to be in the handset business. They want those patents first and foremost," said Brian Pitz, an analyst at UBS. "This is really a game of protection."

Analysts say that Google's rivals are likely to continue to enforce their patent rights on mobile devices through legal means. Microsoft, for instance, recently settled a lawsuit with HTC over the Taiwanese company's Android devices. Oracle is also seeking billions of dollars from Google for infringing on Java patents. Analysts expect Apple to continue its increasingly effective patent war against its rivals as well, which could hurt Google by potentially raising licensing costs that need to be paid to Apple.

While Apple's iPhone leads in market prestige and is considered more innovative, Android has managed to quietly surpass it in market share. Android held a 43.4 percent share of the smartphone market at the end of the second quarter, ahead of Nokia's 22 percent, according to Gartner data. Apple ranked third with 18 percent, the data showed.

Shares of Motorola Mobility jumped more than 55 percent on the news, while Google shares fell by roughly 1 percent.

The deal values Motorola Mobility at $40 per share in cash, a 63 percent premium to its Friday closing price. The terms of the deal also features an unusually rich reverse breakup fee of $2.5 billion, according to a source close to the situation.

"It's a deal that will take time to pay off, but they have a lot of cash and they want to chase after profit," BGC Partners analyst Colin Gillis said.

The deal delivers a windfall for investors including Carl Icahn, Motorola's top shareholder with a stake of just over 11 percent. The activist shareholder had been urging Motorola to look into splitting off its patent business -- one of the biggest in the industry -- from its handset business, ranked eighth in the world by Gartner in terms of unit sales. In late July, Icahn even went so far as to estimate that Motorola could be worth $44 per share, or $13 billion in a sale.

Despite cashing out for $4 less than what he estimated the company was worth, Icahn said he was "quite happy with this result."

It's unclear how much Icahn spent on his stake in Motorola since he started scooping up shares in 2007, but regulatory filings indicate it may have been about $3 billion. His stake in Motorola Mobility is worth about $1.34 billion at the deal price, up by $520 million since Friday. Including his stake in Motorola Solutions, Icahn's total stake is about about $2.9 billion in the two companies.


As part of the deal, Google also gets Motorola's set-top box businesses, giving its nascent TV operation a much-needed boost by providing it with a more direct route into the home.

Bernstein analyst Craig Moffett noted that Google, a frequent disrupter of the pay-television market via its ownership of YouTube and launching of over-the-top TV products that allow consumers to get streaming video in the home, will now be one of its largest suppliers.

"It will be fascinating to see whether this tempers their enthusiasm for disruptive business models as they have to face the practical realities of satisfying their cable customers," said Moffett. "I think the cable industry would be delighted to see Google inside the tent."

Google said it expects the deal to close by the end of 2011 or early in 2012, and that it was confident it would gain the regulatory approvals required in the United States and Europe and the blessing of Motorola Mobility's shareholders.

Others aren't so sure.

"The legal question here is would this deal give Google the incentive to make Android less open or somehow discriminate against the other smart phone and tablet makers," said Beau W. Buffier, a lawyer with Shearman & Sterling LLP. "That will be the key issues in any review both here in the U.S. or in Europe."

The fact that the deal has the support of other major mobile device players who have a stake in the matter should help Google in the regulatory process.

Lazard advised Google on the deal, while Motorola used Centerview Partners and Frank Quattrone's Qatalyst Partners, sources told Reuters.

Monday, August 8, 2011

Second recession in US could be worse than first

If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around. Given the tumult of the Great Recession, this may be hard to believe. But the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009.

“It would be disastrous if we entered into a recession at this stage, given that we haven’t yet made up for the last recession,” said Conrad DeQuadros, senior economist at RDQ Economics.

When the last downturn hit, the credit bubble left Americans with lots of fat to cut, but a new one would force families to cut from the bone. Making things worse, policy makers used most of the economic tools at their disposal to combat the last recession, and have few options available.

Anxiety and uncertainty have increased in the last few days after the decision by Standard & Poor’s to downgrade the country’s credit rating and as Europe continues its desperate attempt to stem its debt crisis.

President Obama acknowledged the challenge in his Saturday radio and Internet address, saying the country’s “urgent mission” now was to expand the economy and create jobs. And Treasury Secretary Timothy F. Geithner said in an interview on CNBC on Sunday that the United States had “a lot of work to do” because of its “long-term and unsustainable fiscal position.” But he added, “I have enormous confidence in the basic regenerative capacity of the American economy and the American people.”

Still, the numbers are daunting. In the four years since the recession began, the civilian working-age population has grown by about 3 percent. If the economy were healthy, the number of jobs would have grown at least the same amount.

Instead, the number of jobs has shrunk. Today the economy has 5 percent fewer jobs — or 6.8 million — than it had before the last recession began. The unemployment rate was 5 percent then, compared with 9.1 percent today.

Even those Americans who are working are generally working less; the typical private sector worker has a shorter workweek today than four years ago.

Employers shed all the extra work shifts and weak or extraneous employees that they could during the last recession. As shown by unusually strong productivity gains, companies are now squeezing as much work as they can from their newly “lean and mean” work forces. Should a recession return, it is not clear how many additional workers businesses could lay off and still manage to function.

With fewer jobs and fewer hours logged, there is less income for households to spend, creating a huge obstacle for a consumer-driven economy.

Adjusted for inflation, personal income is down 4 percent, not counting payments from the government for things like unemployment benefits. Income levels are low, and moving in the wrong direction: private wage and salary income actually fell in June, the last month for which data was available.

Consumer spending, along with housing, usually drives a recovery. But with incomes so weak, spending is only barely where it was when the recession began. If the economy were healthy, total consumer spending would be higher because of population growth.

And with construction nearly nonexistent and home prices down 24 percent since December 2007, the country does not have a buffer in housing to fall back on.

Of all the major economic indicators, industrial production — as tracked by the Federal Reserve — is by far the worst off. The Fed’s index of this activity is nearly 8 percent below its level in December 2007.

Likewise, and perhaps most worrisome, is the track record for the country’s overall output. According to newly revised data from the Commerce Department, the economy is smaller today than it was when the recession began, despite (or rather, because of) the feeble growth in the last couple of years.

If the economy were healthy, it would be much bigger than it was four years ago. Economists refer to the difference between where the economy is and where it could be if it met its full potential as the “output gap.” Menzie Chinn, an economics professor at the University of Wisconsin, has estimated that the economy was about 7 percent smaller than its potential at the beginning of this year.

Unlike during the first downturn, there would be few policy remedies available if the economy were to revert back into recession.

Interest rates cannot be pushed down further — they are already at zero. The Fed has already flooded the financial markets with money by buying billions in mortgage securities and Treasury bonds, and economists do not even agree on whether those purchases substantially helped the economy. So the Fed may not see much upside to going through another politically controversial round of buying.

“There are only so many times the Fed can pull this same rabbit out of its hat,” said Torsten Slok, the chief international economist at Deutsche Bank.

Congress had some room — financially and politically — to engage in fiscal stimulus during the last recession. But at the end of 2007, the federal debt was 64.4 percent of the economy. Today, it is estimated at around 100 percent of gross domestic product, a share not seen since the aftermath of World War II, and there is little chance of lawmakers reaching consensus on additional stimulus that would increase the debt.

“There is no approachable precedent, at least in the postwar era, for what happens when an economy with 9 percent unemployment falls back into recession,” said Nigel Gault, chief United States economist at IHS Global Insight. “The one precedent you might consider is 1937, when there was also a premature withdrawal of fiscal stimulus, and the economy fell into another recession more painful than the first.”

There is at least one factor, though, that could make a second downturn feel milder than the first: corporate profits. Corporate profits are at record highs and, adjusted for inflation, were 22 percent greater in the first quarter of this year than they were in the last quarter of 2007.

Nervous about the future of the economy, corporations are reluctant to make big investments like hiring. As a result, they are sitting on a lot of cash. While this may not be much comfort to the nation’s 13.9 million unemployed workers, it may be to their employed counterparts.

“In the financial crisis, when markets were freezing up, the first response was, ‘I’ve got to get some cash,’ ” said Neal Soss, the chief economist at Credit Suisse. “The fastest way to get cash is to not have a weekly payroll, so that’s why we saw such big layoffs.”

Corporate cash reserves today, he said, could act as a buffer to layoffs if demand drops.

“There are arguments that another recession would be worse, and there are arguments in the other direction,” Mr. Soss said. “We just don’t know at this juncture. But ultimately it’s a question you don’t want to know the answer to.”

Sunday, August 7, 2011

Millions of Israelis flood streets for reforms protest

At least a quarter of a million Israelis, fed up with the mounting cost of living, poured into the streets of the country's major cities Saturday night to demand that their leaders address their plight - and proving by their tremendous numbers that they will not go away.

The snowballing protest, which started out three weeks ago with a few 20-somethings pitching a tent encampment on a posh Tel Aviv street, has swiftly become a big headache for Prime Minister Benjamin Netanyahu, seen by many middle-class Israelis as too friendly to big business. An aide to the Israeli leader said the government would soon devise a programme to break the monopolies and cartels he blames for Israel's economic ills.

Protesters appeared to have a more sweeping agenda on their minds. Travelling by car, bus, train and foot, some 230,000 Israelis, according to police estimates, descended on Tel Aviv to mount the largest social protest in the country's history. Young, old and middle-aged, they beat drums and waved flags, some chanting, "Social justice for the people" and "Revolution."

Some held signs reading "People before profits," ''Rent is not a luxury," and "Working class heroes." In Jerusalem, more than 30,000 protesters gathered outside Netanyahu's residence after streaming past some of the most expensive real estate in the city. Other protests took place in further flung cities in Israel's north and south, drawing about 10,000 people.

This third straight Saturday night of pocketbook protests was widely seen as a litmus test of the strength of the grassroots revolt. Similar demonstrations last week drew 150,000 people across this country of 7.7 million. A smaller turnout this week would have signalled weakness; a bigger turnout would send a clear message that the government could not afford to ignore.

Moshe Levy and his wife Naama are middle-aged Jerusalemites who have a combined monthly income of almost $6,000 but are overdrawn at the bank by $9,000.

They said they don't often go to demonstrations, "but I think this one is important," Moshe Levy said. He said he worries for his four children. "I hope their future will be better than mine," he said.

Ehud Rotem, a 26-year-old student and bartender who also lives in Jerusalem, sees a bleak future for people of his generation.

"It's hard to live in this country, we go to the army, work and pay high taxes and still don't earn enough" to make ends meet, he said.

The protests initially targeted soaring housing prices, but quickly morphed into a sweeping expression of rage against a wide array of economic issues, including the cost of food, gasoline, education and wages.

The protesters' demands have resonated broadly in a middle class that has found it increasingly difficult to make ends meet. Taxes are high, market competition is low, and salaries haven't kept pace with the price rises - even as Israel's leading economic indicators show the economy is thriving in a way that most developed countries would envy.

The protests have stunned the government, which had been preoccupied by stalled peace-making with the Palestinians. Polls released last week showed Netanyahu's approval ratings have plunged while support for the protesters was high. Although those same polls showed Netanyahu's coalition government maintaining its majority, in recent days, larger numbers of his right-wing camp have begun showing up at protests.

Netanyahu has announced a series of bureaucratic reforms including freeing up land for construction and offering tax breaks. He also promised to set up a committee to address protesters complaints.

"The prime minister believes strongly that these claims are valid, that we have artificially high prices that are there predominantly because of monopolistic practice and cartels," Netanyahu spokesman Mark Regev said as protesters were chanting their demands. "The government hopes to push through a series of reforms that will bring down the prices that Israeli consumers pay."

But the promised reforms have only increased anger in the streets, with protesters predicting the measures would not help them. A Netanyahu-championed law enacted earlier this week to streamline construction procedures was roundly denounced by protesters who said it would do nothing to ensure affordable housing.

"The prime minister hasn't told us anything," said Stav Shafir, one of the protest leaders. "We are going to keep protesting, we want solutions, we want real willingness by the government to work with the people and answer our demands, until then we will be here."

US downgrade: G-7 countries seek to reassure markets

Finance officials from major industrial countries, seeking to calm nervous global markets, pledged Sunday to increase cooperation on attacking economic problems.

The officials from the Group of Seven industrial countries issued a joint statement late Sunday saying they were prepared to take all necessary measures to support financial stability and growth. "We are committed to addressing the tensions stemming from the current challenges on our fiscal deficits, debt and growth," the group said.

The G-7 statement came after the group held an emergency conference call to discuss the debt crisis in Europe and market prospects following the announcement of the first-ever downgrade of the credit rating of the U.S. government.

U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke participated in the G-7 call.

The G-7 statement did not specifically address the decision by credit rating agency Standard & Poor's to lower the U.S. credit rating a notch from AAA to AA+. But it did praise the agreement approved by Congress last week that raised the country's borrowing limit and pledged between $2.1 trillion and $2.4 trillion in deficit reduction over 10 years. The statement said the United States had "adopted reforms that will deliver substantial deficit reduction over the medium term."

That was in contrast to the S&P ratings decision, which criticized the U.S. debt agreement as not going far enough.

The G-7 statement also took note of developments regarding the debt crisis in Europe and said the focus should be on "quick and full implementation of the agreements" that have been reached to deal with debt burdens in countries facing problems.

On Sunday, the European Central Bank said it would "actively implement" a bond purchase program aimed at supporting Spanish and Italian bonds by driving down interest rates that have threatened both countries.

The G-7 statement also said the group would be alert for any indications of "excess volatility and disorderly movements" in exchange markets. "We will consult closely in regard to actions in exchange markets and will cooperate as appropriate," the G-7 said.

The G-7 countries are the United States, Japan, Germany, France, Britain, Italy and Canada.

Britain's super rich lose billions; Mittal tops the list

Billions were wiped off from Britain's super wealthy last week, with Indian-origin steel tycoon Lakshmi Mittal taking the biggest hit, on fears of a recession, says a media report.

The share price of ArcelorMittal, of which Mittal owns 40.83 per cent, tanked 18.7 per cent eroding 2.16 billion pounds from his fortune thereby reducing the value to 9.7 billion pounds, according to a report in the British newspaper, The Times.

Other significant losers include commodities trader Ivan Glasenberg, who lost 788 million pounds, as the share price of his company Glencore International plummeted 13.2 per cent, it said.

Glasenberg, whose worth now stands at 4.7 billion pounds, owns 15.8 per cent in the company.

Among others, owner of Sports Direct International and Newcastle Football Club Mike Ashley saw an erosion of 203.4 million pounds from his wealth to 885 million pounds, whilst easyJet entrepreneur Stelios Haji-Ioannou lost 54 million pounds to 546.1 million pounds and Carphone warehouse founder Charles Dunstone lost 38.6 million pounds to 506.4 million pounds, the report added.

The erosion in the wealth of the richie-rich club of Britain was largely owing to the steep fall in the UK's FTSE 100 index, which slumped to its worst week since the financial crisis as fears of a new global recession resurfaced, the daily said.

FTSE 100 lost more than 600 points in the past six days -- the most punishing drop since the depths of the financial crisis three years ago, when it shed more than 1,000 points in a week, it said.

Meanwhile, the Dow Jones Industrial Average and the S&P 500 were poised for their steepest weekly declines in three years.

Fears of a new global recession has wiped off more than USD 2.5 trillion (1.5 trillion pound) from the value of stock markets around the world.

Last night, Standard & Poor's downgraded the US government's 'AAA' sovereign credit rating - a development, which raises concerns that investors will lose confidence in the US economy.