NEWS DIGEST
Britain tries to prop up pound amidst European turmoil
LONDON — Britain frantically tried to
stabilize the weakening pound Wednesday by
hiking interest rates, buying large amounts of
the currency and suspending its foreign-ex
change links to other European countries.
Britain’s actions'intensified a sense that
cooperation among the powerful nations of
Western Europe is splintering even as they are
seeking to forge closer unity.
That added to the monetary turmoil gripping
Europe and spread economic anxiety elsewhere,
including thevLJnited States.
Capping one of the most convulsive and
frenetic trading days ever, the Treasury an
nounced late Wednesday it would suspend the
pound from the European exchange rate mecha
nism, which sets maximum fluctuation rates
for major European currencies.
This means Britain no longer is obligated to
use interest rate adjustments to keep the pound
within limits specified by agreement with its
European trading partners. The move allows
the pound to reach whatever level is determined
by the global currency market.
“The new exchange rate will depend on what
the market fixes,” British Treasury spokesman
Richard Evans said. “The market is so volatile,
it’s impossible to say what that might be now.”
In New York, the pound continued to plunge.
It was quoted at $1.7990 half an hour after the
announcement after falling from $1.8695 dur
ing the European trading day.
Earlier in the day, the Bank of England had
announced two sharp increases in its base inter
est rate, first from 10 percent to 12 percent.
When that failed to lift the pound, the bank
raised the rate to 15 percent.
Amid the announcements Wednesday
evening, the bank said it would rescind the
second increase.
Interest rates are a key tool countries use to
defend the value of their currencies. Higher
rates make a currency worth more but they
stifle economic expansion by making it more
expensive to borrow. When one country raises
lalCS, 11 piVMUIW VII VUIVIJ IV VIV HlVWWIJiC.
Also on Wednesday, Sweden’s central bank
raised a key lending rate to 500 percent in a
desperate attempt to protect the value of its
currency, the krona. Italy’s central bank, mean
while, bought lire to stabilize that currency’s
eroding value.
The crisis has intensified in the days leading
up to a crucial French vote next Sunday on a
treaty for European political and monetary unity.
A no vote is certain to raise more doubts about
Europe’s plan to become one grand market and
a single economic superpower, rivaling the
United States and Japan.
CIA failed to predict
1989 China massacre
WASHINGTON — The CIA
station chief in China left the coun
try two days before Chinese troops
massacred pro-democracy demon
strators in 1989, after predicting
that the military would not move
against the protesters, U.S. offi
cials say.
This, despite the fact that China’s
government had declared martial
law 12 days earlier and moved tens
of thousands of troops to the out
skirts of Beijing in preparation for
removing the demonstrators from
Tiananmen Square.
The CIA was well positioned to
gauge the authorities’ intentions.
The agency had sources among the
fledgling pro-democracy move
ment led by several dozen students,
as well as within China’s intelli
gence services with which the CIA
had enjoyed a close relationship
since the 1970s, U.S. officials said.
The agency had for months be
fore the June 3 massacre been help
ing China’s student activists form
their anti-govemment movement,
providing typewriters, fax ma
chines and other equipment to help
them spread their message, said
one official who spoke only on the
condition of anonymity.
U.S. intelligence services had
also been cooperating with China
around the world on a joint mis
sion: to stem Soviet influence. This
cooperation survived even the
toughest disputes between the two
governments in the 1970s and 80s,
allowing the National Security
Agency to maintain at least two
listening posts in northwest China
to monitor Soviet communications.
In the weeks leading up to the
1989 bloodshed, in which hundreds
and possibly thousands were killed,
the CIA monitored the growing ten
sion closely using its case officers,
dozens of diplomats at the U.S.
Embassy and an informal network
of informers among the students
who led the protest.
As the protest lost steam, the
chief of the CIA station decided the
threat of confrontation had been
defused, said one official who spoke
only on the condition he not be
named.
“I guess he thought the army
would have acted earlier if they
were going to at all," said the offi
cial.
The CIA declined all comment.
The station chief, whose name
is protected by law, decided to de
part for a regularly scheduled meet
ing of station chiefs at CIA head
quarters in Langley, Va., said an
other official who also spoke only
on the condition he not be named.
His departure “left the CIA’s
secret network of agents and other
sources inside China in disarray,”
according to a new book about the
CIA by autKor Mark Perry.
The CIA was far more effective
after the massacre than before, ac
cording to Perry.
The agency was instrumental in
an underground network that res
cued 15 of the 21 anti-government
leaders on China’s most wanted
list, he wrote. Two student leaders
who were captured and presum
ably executed were among the
CIA’s most important assets in
China, Perry said.
Previous reports about the stu
dent leaders’ escape from China
attributed their success to the help
of British and French intelligence
officials.
Bush answers Democrats
with new family leave plan
WASHINGTON — On the verge
of vetoing a family leave bill for the
second time, President Bush on
Wednesday belatedly proposed a $500
million tax credit alternative to the
Democrats’ compulsory approach.
Bush complained it was “very pe
culiar and highly political” for the
Democrats to wait this late in the
election year to renew the fight over
whether businesses should be required
to give workers unpaid time off to
care for a newborn child or sick rela
tive.
“I think you should be skeptical of
any new proposal coming from a presi
dent with 48 days left” until the elec
tion, said George Stephanopoulos,
communications director for Demo
cratic nominee Bill Clinton, who
strongly supports the Democrats’ bill.
“Unfortunately, they and my op
ponents believe in a government-dic
tated mandate that increases costs and
loses jobs,” said Bush, adding,
“There’s an awful lot of politics at
play here.”
The bill passed by Congress would
require employers with more than 50
workers to allow employees up to 12
weeks of unpaid leave annually to
deal with medical emergencies, in
cluding the birth of a child, adoption
or a sickness in the family.
Bush’s proposal would allow busi
nesses with fewer than 500 workers to
write off their taxes up to $20 per day
for as many as 60 days of leave a year
per worker, or a maximum of $1,200
per employee.
The White House said Bush would
pay for the tax credits by cutting other
spending. Rep. Newt Gingrich of
Georgia, the GOP whip, said Bush
would propose trimming doctors’ and
hospitals’ lab fees and other adminis
trative costs paid for by the govern
ment.
Bush said at a meeting with GOP
leaders that “There’s some $60 bil
lion that (the Office of Management
and Budget) knows about where we
can allocate to this.”
Rep. Patricia Schroeder, D-Colo.,
Brian Shellito/DN
called Bush’s proposal “half-baked”
and said if Bush knows where $60
billion can be found, he should spend
some of it on Head Start, immuniza
tion and nutrition programs for poor 1
children.
Analysts say economic growth nonexistent
WASHINGTON—Industrial pro
duction declined 0.5 percent in Au
gust, according to a government re
port Wednesday that analysts cited as
the latest evidence that the locomo
tive once pulling the economy out of
recession had lost its steam.
The Federal Reserve attributed part
of the decline to the effects of Hurri
cane Andrew and a strike at a General
Motors parts plant. But overall output
at the nation’s factories, mines and
utilities still fell even when the im
pact of those events was excluded.
Our economic growth path is now
a flat line, at best," said John M.
Albertine, head of a Washington eco
nomic forecasting firm. “The declines
... were widespread. With no strong
sector to hitch a new recovery to, we
are likely to have to endure a stagnant
economy for at least the rest of the
year."
Industrial production had risen for
four consecutive months through May,
leading many analysts to believe it
had assumed the role of leading the
economy while other sectors were
nat.
EvclinaTainer of Prime Economic
Consulting in Chicago noted that out
put then declined 0.4 percent in June,
rose just a modest 0.6 percent in July
and then fell again last month.
“What’s discouraging is the trend
in production,” she said. “We’re look
ing at... a very low trend line.”
In a section of the report on capac
ity utilization, the Fed said the operat
ing rate of the nation's factories, mines
and utilities fell 0.5 of a percentage
point to 78.5 percent.
U.S. urging Palestinians to negotiate now, official says
WASHINGTON — The Bush administra
tion is warning Palestinian Arabs to “get their
act together” and negotiate terms for self-rule
with Israel or risk time running out if the White
House changes hands.
"We are not saying, 'You’ve got to do this or
that,”’ a senior administration official said
Wednesday in an interview. "We are saying,
'You’ve got opportunities now that you ought
to take advantage of.’”
In the current round of peace talks at the
State Department, steady progress between Is
rael and Syria stands in sharp contrast to slow
paced discussions between Israel and Palestin
ians over self-rule arrangements for the West
Bank and Gaza.
The Palestinians are demanding a freeze on
construction of new homes for Jews in the
territories and East Jerusalem. They also are
seeking a commitment from Israel to withdraw
from those areas.
A top Israeli official assured the Palestin
ians on Wednesday that Israel means to give
them real authority to run their lives and does
not intend to annex the West Bank and Gaza.
“The question is whether the other side will
■ ■ .1
see that this is a real opportunity that may never
return,” said Deputy Foreign Minister Yossi
Beilin.
President Bush could get a big boost if the
peace talks produced an Arab-Israeli agree
ment. The best prospect seemed to be Palestin
ian acceptance of some version of Israeli Prime
Minister Yitzhak Rabin’s proposal for elec
tions next spring for a Palestinian administra
tive agency. It would give them control of their
day-to-day activities on the West Bank and in
Gaza.
The senior U,S. official, who spoke only on
condition of anonymity, said the Palestinians
“still have a tendency to raise issues that are
more symbolic than real.”
He said Israel and Syria had broken through
“some psychological barriers" and exchanged
written proposals for an agreement to end their
45-year-old conflict.
“I don’t think we are on the brink of an
imminent breakthrough” between Israel and
Syria, he said, “but there are serious negotia
tions under way.”
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Family spirit bolsters storm-torn Kauai
LIHUE, Hawaii — Her legs were
cut from glass shards that went flying
when Hurricane Iniki tore the roof off
her family’s house. Her possessions
sat stacked on the garage floor. But
Uluwehi Huddy was smiling.
“We’ll be fine,’’ the 22-year-old
hospital worker said. “As long as we
stick together, we’ll be fine.”
1 From the “I’ll be back” signs tacked
on roofless businesses, to drivers cour
teously waving each other through
broken traffic lights, many of the es
timated 5,500 residents seemed to be
taking pride in one resource they-had
left: community ties.
“We call it 'ohana,”’ said David
Cherrier, who was looking for grocer
ies Tuesday at a Salvation Army Cen
ter. Roughly translated, ohana (pro
nounced oh-HAH-nah) means “fam
ily feeling.”
“This is one big extended family,"
he said.
Not everyone on the hurricane
shredded Hawaiian island of Kauai is
bearing up under the pressure of life
without electricity or even a home, of
not knowing when they can bathe.
Reports have emerged of fights in
gasoline lines, of homes being looted,
of thefts of a generator and a medical
supplies shipment.
Some residents along the north
coast of Kauai, a circular island 30
miles across, were upset over a lack of
information about recovery work.
“People feel isolated, uninformed
and angry,” said Myles Ludwig.
“There is a great community spirit out
there, but people feel that government
has ignored them.”
Despite the problems, Kauai Mayor
JoAnn Yukimura said great progress
is being made considering the hurri
cane hit just last Friday.
The White House said Tuesday
that the federal government would
cover the state’s costs for hurricane
relief. President Bush was to sign a
waiver for the state Wednesday, Gov.
John Waihee said. The storm caused
an estimated $1 billion in damage, he
said.