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Taiwan President Ma Ying-jeou said his rapprochement with China will encourage other nations to strengthen trade with the island and make it less dependent on the mainland, rebutting opposition criticism that he

Natural rubber demand in China, the world

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The federal government is on pace to run a deficit below $1 trillion for the first time in four years, modest progress in the face of intense debate in Washington over spending.

The Treasury Department said Monday that the deficit was $137 billion in October. That brings the total for the first two months of the budget year to $236 billion _ $55 billion less than the same two months last year.

Still, part of the reason for the lower deficit is an accounting quirk.

And the government is on pace to end the year $973 billion in the red, according to the Congressional Budget Office. While that’s lower than last year’s $1.3 trillion imbalance, it would still be higher than any previous deficit before fiscal year 2009.

The government ran an all-time record deficit of $1.41 trillion in 2009, and a $1.29 trillion imbalance in 2010.

The CBO estimate does not include an extension of the Social Security tax cut and emergency unemployment benefits. Congress is likely to extend both before they expire at the end of the year. That could push the deficit back above $1 trillion if those programs aren’t offset. The two programs are estimated to cost around $200 billion.

A big reason the first two months are lower than last year is an accounting shift. Roughly $31 billion in benefit payments for October went out in late September. Federal benefits are paid on the first day of the month. But because Oct. 1 fell on a Saturday, the payments went out a day earlier and were accounted for in last year’s deficit.

Through, the first two months of this budget year, government spending totals $551.2 billion. That’s down 5.8 percent from a year ago, by mostly reflects the benefit shift.

Government revenues total $315.5 billion. That’s up 4.7 percent from a year ago.

Net interest payments on the government debt continued to be one of the fastest rising categories of government spending. They totaled $44 billion in October and November, up 19.5 percent from the same period a year ago.

A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable. Now, the nation’s public debt is $15 trillion and rising and polls show growing voter anger with the inability of both parties to reach solutions to the country’s budget problems.

A special 12-member committee was unable to reach agreement on at least $1.2 trillion in deficit reduction by a November deadline. That means automatic cuts of that amount will begin on Jan. 1, 2013.

Republicans want to modify the timetable for the automatic cuts, largely because it includes steep cuts to the defense budget.

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New polymer banknotes demand that all money-handling machines in the country be upgraded at a cost of $75-100 million, the Bank of Canada estimates.

That compares to $20-30 million for the last conversion in 2004-2006, bank spokesperson Julie Girard said Tuesday.

“This transition is going to be a little more involved,” she said in a phone interview.

The new $100 bill came into circulation last month, made of a smooth, film-like polymer material and incorporating such high-tech security features as the world’s first transparent windows with embedded metallic pictures.

The $50 bill goes into circulation in March, the $20 bill late next year, the $10 and $5 in 2013.

Although the currency size remains unchanged, the texture, security enhancements and relative lightness of the new bills necessitate machinery upgrades.

“In Canada, we have 500,000 machines that accept, dispense or sort bank notes,” Girard said. “They include ATMs, parking machines, and sorting machines that banks and financial institutions use — the full gamut.”

Automated Teller Machines, or ATMs, number 75,000 alone, she said.

They don’t usually dispense $100 bills. Nor do automated parking wickets, TTC token dispensers or change-making machines.

So far, the mechanisms affected mainly include institutional ones that count and sort $100 notes. But in the coming months, other money-machine owners will have to adjust, modify, convert or replace their equipment.

“We’ve been working (on this) for more than two years,” Girard said. “People from our regional offices go out every single day to retailers, financial institutions, law-enforcement officers.

“They do presentations at public libraries,” she said. “They talk to the blind and the visually impaired. You can insert these bills in a banknote reader and it will read out what the denomination is.”

While upgrade costs might appear steep, the polymer bills generate savings in other areas, Girard said.

Staying with the familiar cotton-paper blend to execute the high-security features would have cost $200 million more than by using polymer, the bank estimates.

Being more durable, the new bills are expected to last two-and-a-half times longer than existing ones — at least seven years.

That means savings on production costs as well as on costs to transport replacement bills across the country, especially as the new bills are 10 per cent lighter than the old ones, Girard said.

Thwarting counterfeiters also implies savings for police and courts, the bank says.

The showcase security feature — a world first — is the large see-through window running vertically toward the right on the face side, next to the portrait of former prime minister Sir Robert Borden on the $100 bill.

A smaller, metallic portrait of Sir Robert and a metallic picture of the Parliament buildings embedded in the window can be seen equally from the face and reverse sides of the bill.

The metallic Sir Robert reflects rainbow colours when tipped in the light. The metallic Parliament, created using different technology, does not reflect light in the same way.

About 30 other countries issue polymer currency, Girard said. Some also have a window, but not as large a window as the Canadian one and the metallic pictures count as a world first.

Sooner or later, counterfeiters are expected to catch up to the bank’s technologists. The new series is given a lifespan of eight years, when machine upgrades must begin again.

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Stock indexes gave back some of their gains Monday and the euro turned lower against the dollar following a report that Germany and five other major European nations could risk having their credit ratings downgraded.

The Dow Jones industrial average jumped as much as 167 points Monday but gave up more than half of that gain in the afternoon. The Financial Times reported that Standard & Poor’s might put the six nations on “creditwatch negative,” which means there is a 50-50 chance that one might be downgraded in the coming months.

The Dow and S&P 500 rose in early trading on hopeful signs that Europe was making progress toward preventing a breakup of its 17-nation currency union. Yields on Italian government bonds receded sharply after the new government of Mario Monti introduced sweeping austerity measures over the weekend.

Also, the leaders of France and Germany called for a new European treaty to prevent nations from running up big debts like the ones that pushed Greece and other weak countries to the brink of default.

“There’s pent-up demand, and people will use any excuse to get back in, thinking there’s been too much pessimism,” Gendreau said. Despite strong signals about the U.S. economy, the market has been weighed down by negative headlines about the U.S. budget impasse, credit-rating downgrades of the U.S. and other nations, and Europe’s spreading crisis, Gendreau said.

The Dow was up 70 points, or 0.6 percent, at 12,089 at 2:30 p.m. Eastern. The Standard & Poor’s 500 index rose 12, or 1 percent, to 1,256. The Nasdaq composite index rose 28, or 1.1 percent, to 2,655.

The gains were broad. All 10 industry groups in the S&P 500 rose. Financials stocks were among the biggest winners. Investors have feared that U.S. banks might be dragged down by their close connections to the unstable European financial system.

JPMorgan Chase & Co. jumped 3.5 percent, the most in the Dow. Bank of America was the second-biggest gainer of the Dow 30, rising 3.2 percent. Citigroup Inc. rose 5.7 percent, Morgan Stanley 6.1 percent.

Investors are hoping that a summit of European leaders on Thursday and Friday will produce concrete measures to prevent a messy breakup of the euro currency, which is shared by 17 nations. Markets have been jittery because of fears that the euro might disintegrate, causing a sharp recession in Europe that would spread through the world economy.

While the statements from French President Nicolas Sarkozy and German Chancellor Angela Merkel were far from a long-term solution, investors are eager to buy on any hint of good news because they have been earning meager returns from relatively low-risk investments such as Treasurys and CDs, said Brian Gendreau, investment strategist with Cetera Financial Group instant payday loans.

Italian bond yields dropped to their lowest level in a month, a day after the nation’s new government introduced austerity measures. That suggests traders believe that Italy is far less likely to default. The main Italian stock index jumped 2.9 percent.

Italy’s borrowing costs pulled back from a level that might have forced the nation to default. Analysts say bailing out Italy would be too costly and would hurt the credit standing of German and France, which have the strongest economies in the euro group.

The yield on the 10-year Italian bond plunged half a percentage point to 5.93 percent. It rose above 7 percent last month, a level at which other nations were forced to take bailouts. By comparison, bond yields in Germany, Europe’s largest and most stable economy, are roughly 2 percent.

Monday’s strong gains follow the best week in more than two years for U.S. stock indexes. The S&P 500 rose 7.4 percent last week, the most since March 2009. The Dow jumped 7 percent, the most since July 2009.

Markets are hopeful that, given the gravity of the situation afflicting the euro zone, the German and French leaders will come up with a common proposal for tighter integration on budget matters. Analysts say that such a plan could lead to further emergency aid from the European Central Bank, possibly through the International Monetary Fund.

In corporate news:

_ Gannett Co. leapt 11.4 percent after the media company was upgraded to “buy” from “neutral” by analysts at Lazard Capital Markets.

_ Incyte Corp. fell 2.7 percent after a Citigroup analyst downgraded the drug maker to “neutral” from “buy,” saying its new blood-disease drug Jakafi might not work as a long-term treatment.

_ SuccessFactors Inc. soared more than 50 percent after the company agreed to be sold to German software company SAP for $3.4 billion. SuccessFactors makes software specializing in human resources tasks. The deal is part of SAP’s plan to compete with software rival Oracle Corp.

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Premier Mario Monti has called a Cabinet meeting in Rome on Sunday to approve emergency austerity and growth measures aimed at saving the euro currency from collapse, his office said in a statement.

The premier, an economist who once was an EU commissioner, is under extreme pressure to come up with speedy and credible measures that will persuade markets to stop betting against the common currency.

The meeting was originally scheduled for Monday, when Monti is also expected to outline the measures to both houses of Parliament on Monday.

The premier has been briefing political parties, unions, business groups and consumer lobbies on his plans over the weekend.

Monti hasn’t disclosed details of his rescue plan, but has said it includes both austerity cuts and measures to boost growth in Italy’s anemic economy. He has promised it would be socially equitable, and that it would go after those who hadn’t paid their share of taxes before

Italian borrowing costs have spiked, which could spell disaster if Italy is unable to keep up on payments to service its enormous debt of euro1.9 trillion ($2.57 trillion), or 120 percent of its GDP.

Unlike Greece, Portugal and Ireland, which got bailouts after their borrowing rates skyrocketed, the eurozone’s third-largest economy is considered to be too big to bail out. An Italian default would be disastrous for the 17-member eurozone and reverberate throughout the global economy.

The head of Italy’s industrial lobby said Sunday that the survival of the common euro currency depends on Italy’s coming up with very strong austerity and growth measures _ followed by a concerted effort at the European level so that Italian sacrifices are not in vain.

The various parties briefed have said the package likely includes reinstating an unpopular home property tax abolished by Berlusconi, raising the sales tax and the income tax at the highest brackets by a few percentage points, and requiring Italians to work more than the 40 years now needed to receive a pension.

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A U.S. trade envoy has accused China’s government of increasing its role in the economy in violation of its free-trade pledges and he appealed to Beijing to reconsider its embrace of “state capitalism.”

The comments reflect a harder U.S. tone toward Beijing amid disputes over market access for banking and other services and complaints China is supporting its producers of solar power and other technology despite promising to allow free competition.

In a speech this week, the U.S. ambassador to the World Trade Organization cited a “troubling trend” of increased Chinese government intervention in the economy over the past five years despite its WTO commitments to open its markets.

The ambassador, Michael Punke, made the comments Wednesday in Geneva, according to a transcript on the website of the U.S. Trade Representative’s office. He was speaking at a WTO meeting for the tenth and final annual review of China’s compliance with its WTO obligations since it joined the body in 2001.

“China seems to be embracing state capitalism more strongly each year, rather than continuing to move toward the economic reform goals that originally drove its pursuit of WTO membership,” he said. “This is a troubling development, and the United States urges the Chinese government to reconsider the path it is on.”

During a trip through Asia last month, President Barack Obama called on Beijing to show more maturity in its economic relations with other nations.

“Increasingly, trade frictions with China can be traced to China’s pursuit of industrial policies that rely on trade-distorting government actions to promote or protect China’s state-owned enterprises and domestic industries,” Punke said.

China’s trade and economy have grown rapidly since 2001, propelling it past Japan as the world’s second-largest economy behind the United States and financing a military buildup that has alarmed its neighbors.

On Wednesday, China’s Defense Ministry criticized Washington’s strengthened military pact with Australia as a throwback to “Cold War thinking.”

Beijing has alarmed foreign companies by unveiling initiatives to build up state-owned corporate champions in an array of fields from telecommunications to wind energy.

Business groups complain Beijing appears to be trying to squeeze foreign companies out of its clean energy and other promising industries. They have questioned whether the communist government wants to live up to pledges to allow foreign companies to compete on an equal footing with Chinese rivals.

Punke said that in its first five years of WTO membership, Beijing took “impressive steps” to reduce tariffs, eliminate trade barriers and improve protection for intellectual property rights.

But he noted complaints that Beijing tries to intimidate foreign companies, threatening to retaliate if they speak up about problematic policies or cooperate with their governments in challenging them.

Punke complained that Beijing appears to resort to trade actions in response to legitimate steps by the United States and other trading partners under their trade laws.

Last month, China launched a probe of U.S. government support for its solar, wind and other renewable energy industries after American authorities agreed to investigate a complaint by a group of companies that Beijing improperly subsidizes exports of solar panels and hurts foreign competitors.

“This type of conduct is at odds with fundamental principles of the WTO’s rules-based system,” Punke said.

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Ryerson University plans to make a major announcement Tuesday about its fundraising efforts for the Maple Leaf Gardens, leading to speculation the school may be about to reveal the title sponsor for the venue.

The school, which is a part-owner of the iconic structure, set a goal of raising $60 million to install badly needed student athletic facilities in part of the former hockey arena.

The $60 million is to be raised in equal portions by a federal government infrastructure grant, a special levy on Ryerson students, and corporate donations from such firm as Gardens

Greece’s tortuous power-sharing talks entered a fourth day Thursday, with the country’s president hosting a meeting of party heads a day after negotiations descended into chaos and political leaders failed to name a new interim premier.

Outgoing Prime Minister George Papandreou, the head of the opposition conservatives, Antonis Samaras, and the leader of a small right-wing party were meeting with the president Thursday morning to settle on a new prime minister and cabinet.

The new temporary government’s aim will be to secure a new European debt deal and ensure Greece receives the vital next euro8 billion ($10.9 billion) installment of its existing euro110 billion facility, without which the country faces a catastrophic default within weeks. Elections are then expected to be held in February.

Thursday’s talks come after a similar meeting Monday night collapsed, with Giorgos Karatzaferis, the head of the right-wing LAOS party, storming out in a rage only minutes after entering the presidential mansion. The precise reason for his anger was unclear.

The hope is that the fourth day of talks will finally yield a new prime minister to head an interim government that will secure the country’s continued bailout funding payday loans. European leaders have been pressing for an end to the political turmoil in Athens that has endangered the country’s bailout funding and even its continued presence in the eurozone.

“This is the third time I’m coming here for (this) issue, and I hope it’s the last,” Samaras said as he arrived for the meeting.

Despite three days of wrangling and intense European pressure, Greece’s main parties have been unable to agree on who will lead the new government, which is expected to only be in power for a few months before leading the country to early elections in February.

Greece’s deliberations over the past few days have taken a backseat to developments in Italy where Premier Silvio Berlusconi has announced his intention to resign soon after a new package of economic reforms are passed. But his announcement has done to little to assuage market concerns that Italy is facing a Greek-style economic crisis and the country’s borrowing costs have shot through the roof.

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