Finance news. My opinion.

France's gross domestic product rebounded less than initially estimated in the first quarter as household spending, the driving force of the economy, failed to grow.

Europe's third-biggest economy expanded 0.5 percent in the quarter from the previous three months, when it grew a revised 0.4 percent, Paris-based government statistics office Insee said in an e-mailed statement today. In its preliminary report on May 15, Insee said GDP grew 0.6 percent in the latest quarter.

The first quarter “was a bit supernatural,'' said Jean- Christophe Caffet, an economist at Natixis in Paris. “From there on, growth figures will be particularly bad.''

Soaring energy and food prices are stoking inflation, crimping consumers' spending power across the 15-nation euro region. European Central Bank President Jean-Claude Trichet said June 5 that the ECB may increase its benchmark rate next month to rein in inflation expectations even as economic growth slows.

French inflation, based on a non-EU harmonized method, will peak at a 17-year high of 3.6 percent in the coming months before slowing to 2.8 percent in December, Insee forecast earlier this month. Inflation will average 3.2 percent in 2008, the highest since 1991 and up from 1.5 percent last year, Insee said.

As a result of soaring prices, consumer spending, which has been the main engine of French growth in the past decade, remained flat in the first three months of 2008 after growing 0.5 percent in the fourth quarter, and 0.8 percent in the third, Insee said.

Purchasing Power

French households saved 16 percent of their disposable income in the first quarter, unchanged from the fourth quarter, Insee said. Their gross purchasing power failed to grow after having added 1 percent in the earlier quarter.

France's economy will expand 1.6 percent this year, the slowest pace in five years, as rising prices damp consumer spending and the housing market slumps, Insee said on June 20. Confidence among French consumers fell to a record low in June, a report said yesterday.

Producer prices rose 1.3 percent in May from April and jumped 6.7 percent from a year earlier, Insee said in a separate report today. Economists polled by Bloomberg expected a 0.6 percent increase on the month, according to the median of 15 forecasts.

Consumer Spending

“If consumer spending clearly slows in relation to the faster inflation and the decrease in households' purchasing power, we may hope trade will in turn contribute to growth'' through lower imports and stronger exports to countries such as Germany, said Mathieu Plane, an economist at Paris-based Observatoire Francais des Conjonctures Economiques.

Exports jumped a revised 3.2 percent in the first three months of the year. In a June note, Insee said it expects exports to drop 0.1 percent in the second quarter and show little growth in the second half.

Imports also increased by 2.3 percent in the first three months after having fell 1.1 percent he previous quarter. Trade added 0.3 percentage points to the fist quarter compared with 0.7 percentage points the last three months of 2007, Insee said.

French GDP will grow 0.2 percent in the second quarter, the least in almost two years and a third of the pace of the first three months of 2008, Insee said last week. The economy will stagnate in the third quarter and expand 0.2 percent in the final three months, Insee said.

“The second quarter won't be as solid and strong as the first, but even so I think that Insee's forecasts are very gloomy,'' French Finance Minister Christine Lagarde said in a Bloomberg Television interview on June 19. She cited job creation and falling unemployment as reasons to be optimistic.

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Honolulu Weekly has named a former staff member as its new editor.

Ragnar Carlson, who formerly worked as a staff writer and later news editor at the paper from 2004 to 2005, replaces Mindy Pennybacker, an environmental journalist who took over the alternative newspaper's reins in January.

Carlson is no relation to Honolulu Weekly Publisher Laurie Carlson.

Since 2003, the Weekly, a free publication, has had at least four interim top editors and six permanent top editors.

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The Maricopa Special Health Care District voted unanimously May 29 to approve an employment extension for Betsey Bayless as CEO of Maricopa Integrated Health System.

Bayless will remain CEO until January 2010. This November, all board members will be up for re-election.

Mike Cowley, chairman of the Maricopa Special Health Care District, which oversees MIHS, said he is pleased to have Bayless remain as CEO.

"Her knowledge of state and federal government along with her outstanding leadership skills has led to vast improvements throughout the entire public health system," he said. "I look forward to our continued work together in offering outstanding medical services to our patients."

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A federal mediator will join the contract talks between The Honolulu Advertiser and its six employee unions.

Federal mediator Ken Kawamoto, who has been involved in previous talks between the newspaper and its unions, is being brought in to help move the negotiations forward, said Wayne Cahill, administrative officer of the Hawaii Newspaper Guild, one of the unions that is part of the Hawaii Newspaper Trades Council.

About 600 unionized Advertiser employees have been working under contracts that expired last June 9 and were extended by the agreement of both sides.

The Advertiser is asking workers to pay a larger share of their health insurance premiums and to switch to plans with fewer benefits and larger co-payments, the unions say. In addition, Cahill said the Advertiser is now proposing a three-year contract with 1 percent bonuses in each of the three years but no increases in the wage base.

Workers would also get a $200 bonus if the unions agree to a new payroll system that will pay them every two weeks instead of weekly.

Most unionized employees at the newspaper make between $50,000 and $70,000 a year but Cahill said a significant number make less, citing clerical workers and newspaper inserters.

In a statement Wednesday announcing the move toward mediation, Advertiser president and publisher Lee Webber said even with the new contract the newspaper will continue to pay "among the highest wages and benefits by job category of almost any Hawaii employer."

"But we also have a responsibility to protect the long-term health of the newspaper in light of the uncertainties of our state and national economies - particularly the challenges faced by the newspaper industry," Webber said.

Cahill said the unions had proposed mediation in January and "the company consistently refused."

"We think it's a great idea, just a day late and a dollar short," he said.

Cahill said he didn't know when the mediated sessions would begin. The mediator can't impose anything on the parties but is often able to suggest ways to break deadlocks on contentious issues.

The unions took a strike authorization vote in February. Since then, both sides have met several times but Cahill said the company has moved "considerably backward" in its proposals.

In his statement, Webber described the company's offers as a "fair benefit and wage package."

"Our employees want the best contract they can get. It is our responsibility in management to meet their needs, while ensuring the newspaper remains strong and stable into the future. But in the end, we have a common purpose - to provide high quality journalism to the people of Hawaii. That shared mission is why I am confident we will soon reach an agreement," Webber said.

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Home furnishings retailer Linens ‘N Things filed for Chapter 11 bankruptcy protection Friday and said it will close 120 underperforming stores as part of its restructuring, including its store in Beaverton.

Clifton, N.J.-based Linens Holding Co., parent of the chain, said the Chapter 11 filing was largely the result of the economic downturn.

"The significant deterioration in the mortgage, housing and credit markets and the resulting impact on the retail marketplace, particularly the home sector, has overwhelmed the operating and merchandising improvements that we have made over the past two years," said Robert J. DiNicola, Linens Holding executive chairman, in a release. "We are making the strategic decision to use a Chapter 11 filing to proactively address our capital structure and ensure that our stores will remain well stocked while we work through the steps to align the capital structure of the company with the realities of today’s business environment."

Linens ‘n Things logged $2.8 billion in sales in 2007. It operates 589 stores in 47 U.S. states and seven Canadian provinces. In addition to the store in Tanasbourne Town Center in Beaverton that will be shuttered, the chain has six others in Oregon.

The company’s Canadian stores, which are among the strongest performers in the chain, are not included in the filing and there are no plans for a bankruptcy filing in Canada, Linens Holding said.

The company has secured $700 million in debtor-in-possession financing from General Electric Capital Corp., which Linens Holding said will ensure healthy merchandise flow as it gets ready for the back-to-school and holiday selling seasons.

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The New England chapter of the National Association of Corporate Directors named this year's winners of its annual director of the year awards.

The awards recognize leaders of New England-based companies who have made outstanding contributions to the area's corporate community.

This year's recipients include:

-Board of the Year: Raytheon Co. of Waltham

- Lifetime Achievement Award: Neal Finnegan. Finnegan has held senior leadership posts in a dozen of Boston's financial institutions, including U.S. Trust, Worcester Bancorp., Hanover Insurance, and Citizens Bank.

-Leadership in Public Corporate Governance Award: Dr. Sandra Moose, presiding director of Verizon Communications Inc. and Rohm and Haas Co.; director, AES Corp.; chairman of the board, Natixis Advisor and Loomis, Sayles Funds.

-Leadership in Private Corporate Governance Award: Wendell J. Knox, president & CEO, Abt Associates.

-Leadership in Non-Profit Governance Award: Harold Hestnes, former partner, Wilmer Cutler Pickering Hale & Dorr LLP.

"This year's nominees represent a broad array of industries with a group of individuals who are leaders in their chosen fields and role models for good corporate governance," said Edward H. Pendergast, New England chapter president, in a statement.

An awards dinner will be held on May 8 at Boston's Intercontinental Hotel.

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Delta Air Lines and Northwest Airlines, which both serve Hawaii, on Monday announced a merger agreement that creates the world’s largest carrier.

Officials for the Atlanta-based Delta (NYSE: DAL) and Northwest (NYSE: NWA), based in Eagan, Minn., say the new airline, to be called Delta, will be more resilient to volatile fuel prices and well positioned to compete globally with foreign carriers.

Combined, the new airline and its regional partners will fly to more than 390 destinations in 67 countries.

It will have more than $35 billion in aggregate annual revenues, employ 75,000 people, and operate about 800 aircraft.

Delta’s world headquarters will be in Atlanta, with executive offices in Minneapolis/St. Paul and New York and international offices in Tokyo, Paris and Amsterdam.

Delta currently has many routes in the U.S. South, Mountain West and Northeast, and flies to Europe and Latin America.

Northwest has concentrated in the Midwest, Canada and Asia.

No hubs are expected to be closed, and employees will be provided seniority protection and equity.

Delta’s pilot union also reached agreement on a post-merger contract.

The U.S. airline industry has lost more than 150,000 jobs and lost nearly $30 billion since 2001.

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Finance chiefs from the U.S. and Europe said the eight-month credit squeeze is still festering and urged banks to take steps to relieve it.

“The chain of bad news may not have come to an end,'' Italian Finance Minister Tommaso Padoa-Schioppa said yesterday as the International Monetary Fund held its semi-annual meetings in Washington.

The collapse of the U.S. subprime-mortgage market led to a seizing up in capital markets and has triggered $245 billion in asset writedowns and losses since the start of 2007. Finance ministers and central bankers from the Group of Seven are trying to strengthen market regulation and want banks to speed disclosure of losses and improve the way they value assets.

“The market is still adjusting, the turmoil has not yet settled down,'' Federal Reserve Vice Chairman Donald Kohn told reporters in Washington. “It's still a fragile situation out there.''

The G-7 on April 11 endorsed proposals by the Basel, Switzerland-based Financial Stability Forum to impose tougher oversight on financial markets. The cost of borrowing in euros and dollars for three months was still at the highest since December in the past week.

New York Fed President Timothy Geithner indicated that regulators may have relied too much on financial companies and investors to police themselves.

`Better Balance'

“What we have to do is find a better balance between market discipline and regulation,'' Geithner said. “I don't think anybody can look at the system and say we got that balance right.''

By the end of July, the G-7 wants financial companies to “fully'' disclose in mid-year earnings reports their investments that are at risk of loss. Firms should also establish “fair-value estimates'' for the complex assets that investors have shunned and boost their capital as needed, the G- 7 said.

Regulators must revise liquidity risk management rules, improve accounting standards for off-balance-sheet units and enhance guidance on how assets are fairly valued, the group said. International panels of supervisors will also be formed by the end of this year for each of the largest global financial companies.

Bear Collapse

The investor exodus from securities linked to subprime U.S. mortgages caused the credit crisis that began in August, and led to the collapse of Bear Stearns Cos. last month. Credit markets remain “substantially impaired,'' Geithner said April 3.

“March was a very, very tough month,'' Lehman Brothers Holdings Inc. Chief Financial Officer Erin Callan said in a Bloomberg Television interview last week. General Electric Co. Chief Executive Officer Jeff Immelt said “the last two weeks in March were a different world in financial services.''

While urging stronger supervision, officials agreed that they still won't be able to eliminate the chance of another financial crisis.

“I don't think we can prevent the kinds of waves of optimism and pessimism that pass over the market,'' Kohn said. “There will be future events. Our role as regulators is to try to make the system more resilient.''

Geithner said the goal is to make the system more resilient and have financial institutions with better “cushions'' and “shock absorbers'' in place to weather crises.

`Very Hard'

“If we could figure out a way to have on our desks a screen that gave us the capacity to predict financial crises of this magnitude, we would do it in a second,'' Geithner said. “It's a good thing to work on, but it's very hard to do.''

The G-7 officials dined April 11 with chief executive officers from banks including Deutsche Bank AG, Credit Suisse Group and Lehman Brothers Holdings Inc.

Bank of Italy Governor Mario Draghi, who chairs the Financial Stability Forum, said the response of banks to the report had been “possibly favorable,'' while acknowledging the 100-day deadline for action is a “tight one.'' ECB council member Nout Wellink said banks had been constructive in reacting to the report.

Wellink said the reason it's hard to foresee financial crises is that “innovation has outpaced risk management, supervision and regulation.''

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