Needles found in sandwiches on four U.S.-bound Delta flights

Delta Air Lines Inc said it was working with federal authorities after what appeared to be sewing needles were found in food on four U.S.-bound flights that left Sunday from Amsterdam, injuring one passenger.

The needles were found in sandwiches made by the airline's Amsterdam caterer, Gate Gourmet, Delta spokeswoman Chris Kelly said in an email Monday. The FBI and Netherlands officials are investigating, as are officials from Gate Gourmet, Delta said.

"Delta is taking this matter extremely seriously and is cooperating with local and federal authorities who are investigating the incident," the airline said in a statement.

"Delta has taken immediate action with our in-flight caterer at Amsterdam to ensure the safety and quality of the food we provide onboard our aircraft," the statement said.

One person on a flight to Minneapolis was injured but declined medical treatment.

A suspected sewing needle was also found in a sandwich by a passenger on an Atlanta-bound flight. A U.S. air marshal found another while flying on another Atlanta-bound flight.

Another apparent needle was found aboard a Seattle-bound flight in a sandwich that had not been served.

Gate Gourmet is a subsidiary of gategroup Holding AG, one of the largest independent global providers of airline passenger products and services.

Needles found in sandwiches on four U.S.-bound Delta flights

Delta Air Lines Inc said it was working with federal authorities after what appeared to be sewing needles were found in food on four U.S.-bound flights that left Sunday from Amsterdam, injuring one passenger.

The needles were found in sandwiches made by the airline's Amsterdam caterer, Gate Gourmet, Delta spokeswoman Chris Kelly said in an email Monday. The FBI and Netherlands officials are investigating, as are officials from Gate Gourmet, Delta said.

"Delta is taking this matter extremely seriously and is cooperating with local and federal authorities who are investigating the incident," the airline said in a statement.

"Delta has taken immediate action with our in-flight caterer at Amsterdam to ensure the safety and quality of the food we provide onboard our aircraft," the statement said.

One person on a flight to Minneapolis was injured but declined medical treatment.

A suspected sewing needle was also found in a sandwich by a passenger on an Atlanta-bound flight. A U.S. air marshal found another while flying on another Atlanta-bound flight.

Another apparent needle was found aboard a Seattle-bound flight in a sandwich that had not been served.

Gate Gourmet is a subsidiary of gategroup Holding AG, one of the largest independent global providers of airline passenger products and services.

Court delay, Spanish doubts hinder Merkel euro response

Chancellor Angela Merkel appears to be reaching the limits of German patience on the euro zone crisis, with the Constitutional Court and members of her own coalition seeking deeper scrutiny of whether emergency measures comply fully with national law.

The Constitutional Court said on Monday it would keep Europe waiting for nearly two more months before announcing on September 12 whether Germany can legally ratify Europe's permanent bailout scheme and the fiscal pact for budget discipline.

More immediately, Merkel faces growing dissent in her own centre-right coalition about concessions she made at the last European Union summit, permitting direct help for Spanish banks, which the Bundestag (lower house) will vote on this week.

Merkel, who still enjoys a high level of popular support in Germany, is not expected to fall at either hurdle, but both may send signals that she will not be cut any more slack.

Constitutional experts see the court approving the European Stability Mechanism (ESM) and fiscal pact, albeit with warnings, while parliament's approval of Spain's banking bailout on Thursday requires only a simple majority.

Confirming on Sunday that she will seek a third term next year because she still enjoys her job, Merkel said the 2013 federal election will be a referendum on "where Europe is and what ideas we have about Europe".

Germans are already voicing frustration about the debt crisis and the financial and political demands it is making on Europe's largest economy.

Court president Andreas Vosskuhle said in last week's public hearing that the court might opt for a "very thorough summary review", which could take up to three months.

"It's not great news as it just increases the uncertainty and effectively prevents the ESM from being where it should be," said Lloyds Bank strategist Eric Wand. "But I think after last week, when they said they needed further time, the market kind of understood it wouldn't happen this side of the summer break."

Carsten Brzeski, an economist at ING, said the court in Karlsruhe was "one of few European institutions" that felt able to take its time in the crisis, but added: "I believe September is still fast enough to keep markets from falling into turmoil."

CONSTITUENTS WORRIED

The ESM, which would boost the firewall against debt crisis contagion to 700 billion euros, had been due to come into effect on July 1. It needs ratification by countries representing 90 percent of its capital to be implemented - meaning it cannot be launched without Germany, whose parliament has already approved both pieces of euro crisis legislation by a large majority.

The court last week heard complaints from groups including eurosceptic academics, citizens and some lawmakers from Merkel's own coalition that the ESM and fiscal pact violate German law by depriving parliament of control of the budget.

Some of these groups also express concern about committing to an aid package of up to 100 billion euros for Spanish banks. Finance Minister Wolfgang Schaeuble needs a green light from the Bundestag to commit Germany's share of the bailout.

"We always get the majority we need," Merkel told German TV. But her chief whip Michael Grosse-Boehmer acknowledged that some coalition MPs faced "concerns" in their own constituencies.

This could lead to more backbenchers rebelling, after 26 MPs from Merkel's conservatives and their Free Democrat (FDP) allies voted against the ESM at the end of June, some concerned about the Spanish government not being liable for aid to banks.

That was an increase on the 19 coalition MPs who rebelled against the second Greek bailout package in February. Merkel's coalition controls 330 seats in the 620-seat house, so rebellions on that scale can force her to rely on opposition votes, a potential embarrassment.

"Clearly the Constitutional Court can take its time, which is not something we are given. Why is it not possible to do this calmly and after a proper debate?" asked Lars Lindemann, an MP from the FDP who voted against the ESM on June 29 but has not yet made up his mind how to vote on the Spanish aid this week.

Lindemann told Reuters he would only back aid for Spain's banks if there were waterproof guarantees that the Spanish state was liable - something Merkel's spokesman Steffen Seibert said on Monday was already "crystal clear".

However, Merkel said on Sunday the euro zone had not yet resolved if the current bailout fund, the European Financial Stability Facility (EFSF), and its eventual permanent successor the ESM would be liable for aid to banks in future.

In a nod to concerns that she has ceded ground on her core principle of no aid without conditions, she added: "All attempts... to say 'oh let us practice solidarity and nonetheless have no supervision and no conditions' will stand no chance with me or with Germany."

IMF cuts global growth forecast as emerging economies slow

The International Monetary Fund on Monday cut its forecast for global economic growth and warned that the outlook could dim further if policymakers in the euro zone do not act with enough force and speed to quell their region's debt crisis.

In a mid-year health check of the world economy, the IMF said emerging market nations, long a global bright spot, were being dragged down by the economic turmoil in Europe. It said a drop in exports in these countries would combine with earlier policies meant to prevent overheating and slow growth more sharply than hoped.

The IMF shaved its 2013 forecast for global growth to 3.9 percent from the 4.1 percent it projected in April, trimming projections for most advanced and emerging economies. It left its 2012 forecast unchanged at 3.5 percent.

"Downside risks to this weaker global outlook continue to loom large," the IMF said. "The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis."

U.S. stocks closed slightly lower on Monday as investors worry about the economy losing steam.

The global lender said advanced economies would grow only 1.4 percent this year and 1.9 percent in 2013.

It also trimmed its forecast for emerging economies, projecting they will expand 5.9 percent in 2013 and 5.6 percent in 2012. Both figures are 0.1 of a percentage point lower than in April.

The IMF cut its 2013 growth forecast for the crisis-hit euro zone to 0.7 percent, while maintaining its projection of a 0.3 percent contraction this year. It said it now believes Spain's economy will shrink both this year and next.

The IMF sharply revised down its growth projections for the United Kingdom to 0.2 percent this year and to 1.4 percent in 2013. In April, the fund said the UK economy would expand 0.8 percent in 2012 and 2.0 percent next year.

Central banks in China, the euro zone and Britain have all eased monetary policy in recent weeks to support growth. The U.S. Federal Reserve has said it is poised to do more if needed.

The IMF said the European Central Bank had room to ease policy further and said officials in emerging economies should stand ready to cope with a drop in trade and increased volatility in capital flows.

MOVING IN THE RIGHT DIRECTION, BUT ...

The fund praised crisis-fighting measures adopted by European leaders at a summit in June as "steps in the right direction," but called for more fiscal and banking integration.

It urged the creation of a pan-European deposit insurance guarantee program and a mechanism to resolve failing banks, and called on the ECB to provide ample liquidity to support banks under "sufficiently lenient conditions."

It made clear, however, that Europe was not the only risk.

The IMF, which trimmed its U.S. forecasts slightly, said concerns were rising over a political battle brewing in Washington over how to avoid painful automatic spending cuts and tax increases at the start of next year.

The United States faces a "fiscal cliff" with the scheduled expiration of Bush-era tax cuts and $1.2 trillion in automatic spending reductions - enough budget tightening to knock the still-weak U.S. economy back into recession.

If the United States failed to deal with the "fiscal cliff" it could potentially be an "enormous shock" to the U.S. and other advanced economies, IMF Chief Economist Olivier Blanchard told a news conference.

Washington is also expected to run into the statutory $16.4 trillion cap on its debt before the end of the year, raising the prospect of a default absent congressional action to raise it.

While financial markets believe Congress and the White House will find a way to avoid a fiscal train wreck, the IMF warned of the "potential for a significant adverse market reaction" if that consensus view began to falter.

The IMF said while emerging economies, such as China, may no longer be growing at a rapid 10 percent annually, growth in these countries was likely to remain strong.

"It is really case by case but in general we think (emerging economies) will be able to increase demand and grow at fairly high rates," Blanchard said.

"The question here is whether these countries will be able to handle this slowdown in demand? Here we think they really have the policy space to do it," he said, "In terms of sustaining high growth, we think they can do it."

Earlier this year, policymakers in emerging economies were worried about large-scale capital inflows and excessive appreciation of their currencies. Now, concerns have shifted to a rapid depreciation and increased volatility in exchange rates. Currencies like the Brazilian real and Indian rupee have depreciated by between 15 and 25 percent in less than a quarter, the IMF noted.

The IMF cut its 2012 growth forecast for China to 8.0 percent from 8.2 percent, and said it now expects growth of 8.5 percent next year, down from 8.8 percent.

It revised its growth projections for India to 6.1 percent this year from 6.9 percent, and chopped its 2013 forecast to 6.5 percent from 7.3 percent.

Blanchard attributed the fall-off in Indian growth and investment to "political uncertainty about policy" and freezing of permits for infrastructure projects. The country faces tough elections by 2014 that are widely expected to produce a fragmented parliament with no clear winner.

Meanwhile, Africa's growth is still seen at a robust 5.4 percent this year and 5.3 percent in 2013, as the region remains relatively insulated from external financial shocks.

The IMF said growth in the Middle East will be stronger this year as key oil-producing countries boost production and Libya's economy rebounds from conflict in 2011, but it held its forecast for next year at 3.7 percent.

Noyer says low ECB rates not easing bank funding costs

Euro zone banks are not fully benefiting from the European Central Bank's record low interest rates as funding costs in the market remain high, ECB policymaker Christian Noyer told German financial daily Handelsblatt.

In an unprecedented move, the ECB earlier this month cut the euro zone's key interest rate to a record low of 0.75 percent and lowered the rate it pays banks for overnight deposits to zero to help revive lending and growth.

But Noyer was quoted as saying on Monday that such changes had little effect on banks' funding costs.

"What we see is that we have a clear problem of transmission of monetary policy. In the eyes of the markets, the interest rate charged to individual banks depends on the funding costs of the sovereign and not on the rates set by the central bank."

"This means that the monetary policy transmission does not work. We tried to counter this phenomenon which is unacceptable for a central bank in a monetary union," Noyer said.

To ease banks' funding strains, the ECB has pumped more than 1 trillion euros into the banking system in the form of 3-year loans since December, but Noyer said the ECB could not keep such support measures in place indefinitely.

"For the future we cannot indefinitely rely on a system where the central bank is massively funding the banking system and massively receiving liquidity on the other side of its balance sheet," he said.

"It cannot be such an intermediary in the long run."

Asked whether there would be another 3-year tender, he said: "For the time being we don't see the need, but we will see. I do not exclude it, but at the moment it does not seem to be needed."

Noyer, who is also the head of the French central bank, called instead for a deeper integration of the euro zone's banking system to help solve the debt crisis and said a special fund could pave the way for a deposit guarantee scheme.

"For the time being, the way to do it for me would be to set up a euro zone fund as a sort of reinsurance fund," Noyer said, adding the fund would back national deposit guarantee schemes, intervene if needed and would get its money back later. It would be funded by banks.

"After one or two decades we could make a step to a simpler system, but that would be in a much more federalized euro zone."

SUPERVISORY ROLE

Euro zone leaders agreed last month to bend their aid rules to shore up banks and bring down borrowing costs of stricken debtors like Italy and Spain, as well as to form a single supervisory body for the bloc's banks, housed under the ECB.

Noyer said that in its new role, the ECB would work closely with national supervisors, but it would need to create a separate supervisory committee next to the ECB's Governing Council to avoid a conflict of interest.

"The ECB would be the centre, where policies are decided," he said. "The decisions would be taken in a centralized way so that there would clearly be a federal institution able to dictate what is being done. But the day-to-day supervision would be done in the national central banks/supervisors," he said.

All banks should be subject to the new supervisory structure, Noyer added, as it would otherwise be "meaningless".

Noyer said he rejected calls for higher inflation as a way to reduce debt levels, saying more inflation fuelled consumers' and investors' fear that they would lose purchasing power. They would cut spending and the effect on growth would be negative.