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President-elect Barack Obama’s economic stimulus package will include hundreds of billions of dollars worth of tax breaks for individuals and businesses, according to a transition official and Democratic aides.

Obama is asking that tax cuts make up 40 percent of a stimulus package, the people say. The measure may be worth as much as $775 billion, a Democratic aide says, meaning tax cuts may constitute more than $300 billion of the legislation.

The dollar today rose to the highest level in almost three weeks against the euro and also surged against the yen on speculation that the Obama plan would help the U.S. economy recover from recession.

Making tax cuts such a large part of the stimulus may help win support from congressional Republicans. Senate Minority Leader Mitch McConnell, a Kentucky Republican, said his party would support an immediate middle-class tax cut as part of any stimulus package.

“Republicans, by and large, think tax relief is a great way to get money to people immediately,” McConnell said yesterday on ABC’s “This Week.”

The plan would attempt to boost consumer demand by spending $140 billion on tax breaks worth $500 for individuals and $1,000 for couples, according to a House Democratic aide. The change would come by altering tax-withholding rules, rather than through a rebate check as with the previous stimulus plan enacted last year, so that workers would see an immediate increase in their take-home pay.

The $500 tax credit would apply to the first $8,100 of wages, meaning a worker who earns $24,400 a year and is paid twice a month would get about $60 extra per paycheck for four months.

Business Tax Breaks

For businesses, the aide said, lawmakers will use similar measures they’ve employed in past stimulus bills, such as allowing companies to get refunds for taxes paid in any or all of the past five years by deducting losses they’ve incurred now; those losses can currently only be carried back two years.

Congress is also likely to include incentives such as accelerated depreciation to encourage companies to buy equipment now rather than defer such investments. The plan also attempts to combat joblessness by offering companies tax breaks for hiring more workers, the aide said cash advance no fax.

The tax provisions are also likely to repeal the alternative minimum tax on municipal bonds issued to build airport runways, sewer systems and other privately run facilities that benefit the population at large, another aide said. Congress is unlikely to enact a new round of incentives for U.S.-based multinational corporations to repatriate foreign earnings at a discounted tax rate as urged by business groups such as the Chamber of Commerce, that aide said.

Accelerated Tax Breaks

Many of the business tax incentives would be accelerated so that any dollar written off now would not be able to be claimed in future years, the aide said. That would reduce the long-term impact of the tax cuts on the federal budget deficit.

Obama is slated to meet today with congressional leaders from both parties to discuss the plan. Democrats said Congress probably won’t be able to complete work on the plan by January 20, the day of the inauguration, as some had hoped.

“It’s going to be very difficult to get a package put together that early,” said House Majority Leader Steny Hoyer in an interview on “Fox News Sunday.” “We want to do this right.” He said he expects the House to pass the bill by the end of the month and get the legislation through the Senate and signed into law in February.

Urgency

Senate Majority Leader Harry Reid, in an interview yesterday on NBC’s “Meet the Press,” downplayed the importance of what he called a “false” deadline. “The urgency of this, everyone knows about — but I’m not going to have some false deadline,” Reid said. “It’ll take as much time as it needs to get done.”

Obama has called on lawmakers to quickly pass legislation to prop up the economy, which is in its worst slump in decades and could deteriorate further without significant fiscal stimulus. Economists surveyed by Bloomberg last month projected gross domestic product would shrink in the fourth quarter by 4.3 percent, the biggest decline since 1982.

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Belgian business confidence declined to a record low in December as the global financial crisis pushed Europe’s economy deeper into a recession.

The confidence index for Belgium, whose government is reeling from a crisis surrounding the state-organized breakup of Fortis, plunged to minus 31.3 from minus 23.7 in November, the Brussels-based National Bank of Belgium said today in an e-mailed statement. That is the lowest since the data were first collated in 1980. Economists expected a decline to minus 26, according to the median of 19 estimates in a Bloomberg News survey.

Business and consumer confidence across Europe is tumbling as the financial turmoil saps demand for exports and unemployment rises. In Belgium, where the prime minister offered to resign over allegations his government tried to interfere with a court ruling on the Fortis breakup, the economy is forecast to shrink in 2009 for the first time in 16 years, the central bank said this month.

Confidence in Europe is “at a record low already. How deep, how low can you go?” Carsten Brzeski, an economist at ING Group in Brussels, said on Bloomberg Television today. “Unfortunately, there is some scope to see a further deterioration.”

European executive and consumer confidence in the economic outlook has dropped to a 15-year low even after interest-rate cuts and government stimulus measures aimed at battling the impact of the financial crisis health insurance. Executive sentiment in Germany, the region’s largest economy, slumped to the lowest level in more than a quarter-century in December, data showed last week.

Slowest Pace

Belgium’s economy grew at the slowest pace in five years in the third quarter and the drop in business confidence indicates the slump will extend into 2009. Gross domestic product will contract 0.2 percent next year after growing 1.4 percent this year, the central bank forecast on Dec. 8, revising a June forecast for 2009 expansion of 1.5 percent.

The Belgian king is working to name a new prime minister by Christmas after Yves Leterme tendered his resignation Dec. 19, with the fate of Fortis, formerly the nation’s largest financial- services firm, hanging in the balance. Leterme yesterday ruled himself out as the leader of a new government.

Leterme’s coalition collapsed after the Justice minister quit because the nation’s highest appeals court didn’t clear him from allegations of interfering with a ruling that blocked the sale of Fortis assets to BNP Paribas SA.

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OTTAWA–In a precedent-setting judgment, the Supreme Court of Canada has written that executives who run a company have a primary duty to do what is best for the corporation, not necessarily its shareholders or its bondholders.

Canada’s top court has ruled against the idea that the interests of shareholders supersede other stakeholders in a corporation, such as investors who have bought bonds.

The clarifications governing corporate law in Canada come from a 76-page written judgment on a decision the court made in June, when it gave the go-ahead on the planned privatization of BCE Inc., owner of Bell Canada.

Both the written reasons – and the original ruling – were unanimous, giving greater clarity to the rights of directors and stakeholders of corporations.

The court noted that, in most cases, the interests of the corporation and its investors and creditors were identical, but as was the case with BCE’s proposed acquisition by a group of investors headed by the Ontario Teachers’ Pension Plan, sometimes conflicts arise.

"Directors may find themselves in a situation where it is impossible to please all stakeholders," the court said.

"In each case, the question is whether, in all the circumstances, the directors acted in the best interests of the corporation, having regard to all relevant considerations, including, but not confined to, the need to treat affected shareholders in a fair manner."

The written ruling will bring no comfort to BCE, or shareholders who stood to benefit from the $42.75 per share sale price. It comes just over a week after the $52 billion leveraged buyout collapsed because of volatile credit markets and the impact of the North American recession.

The written reasons, nevertheless, were called important by Michael Gans, a partner with Blake, Cassels & Graydon LLP, for clarifying points of confusion that arose from an earlier decision the Quebec Court of Appeal cited to rule against the acquisition bad credit pay day loans.

In that case, the Quebec court found BCE’s directors did not give adequate consideration to how the deal would impact bondholders. Bondholders had argued that BCE would be crippled by taking on $34 billion in debt and that the value of their bonds would be diminished.

Gans said the Supreme Court found BCE had considered the effect on bondholders but decided the directors were acting in the best interest of the corporation.

"If you are a director of a Canadian corporation, you can feel good about this judgment, because it gives you significant leeway to do your job as long as you do so in a reasonable and informed manner," he said.

Gans said the top court made clear Canadian law differs from the U.S., where judgments have placed shareholders at the top of the totem pole in a contest of interests.

"There is no principle that one set of interests – for example the interests of shareholders – should prevail over another set of interests," the court wrote.

"Everything depends on the particular situation faced by the directors and whether … they exercised business judgment in a responsible way."

The ruling will likely be used to clarify the relationships of corporate executives, shareholders and bondholders in future mergers, bankruptcies or hostile takeovers when stakeholder interests collide.

In June, the Supreme Court had approved the "plan of arrangement" – dismissing a challenge from bondholders that their interests had not been protected – but given the time constraints issued no reasons for its decision.

That ruling appeared to clear the last hurdle to the world’s largest leveraged buyout … until the size of the debt proved a bridge too far.

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With the clock ticking toward a Dec. 11 closing deadline, the $52 billion buyout of BCE Inc. appeared to dodge yet another bullet this week after Washington moved to bail out Citigroup Inc., the deal’s biggest financial backer.

Shares of BCE soared nearly 10 per cent, or $3.39, to $37.94 yesterday on the Toronto Stock Exchange after the U.S. government said a day earlier that it would shield Citigroup from hundreds of billions in losses from toxic assets by injecting $20 billion (U.S.) of capital into the bank.

Investors in the Canadian phone giant had become concerned about the deal’s chances last week as the spectre of bankruptcy was raised at Citigroup.

Such an outcome could put in jeopardy the bank’s commitment to funding the $42.75 per share (Canadian) takeover of BCE by the Ontario Teachers’ Pension Plan.

Citibank is estimated to be contributing between $11 billion and $13 billion of the deal’s $32 billion in financing, while Royal Bank of Scotland Group and Deutsche Bank are believed to be on the hook for between $8 billion and $9 billion each. Canada’s Toronto Dominion Bank has pledged $3 billion in loans.

Greg MacDonald, an analyst at National Bank Financial, said in a note to clients yesterday that bank insolvencies now pose the biggest risk to the deal’s completion, but noted that governments around the world have so far shown a willingness to provide bailouts for the financial sector.

"With recent international stability efforts for the global financial system, we believe the probability of deal close is growing," MacDonald said.

Signed at the height of the market in June 2007, the deal to privatize BCE was quickly thrown into doubt after the crisis in the U business card design.S. subprime mortgage market spawned a corporate credit crunch and, ultimately, a market meltdown.

As a result, investors have been concerned for months that the transaction would be scrapped as the banks backing the deal faced steep losses on the loans they pledged to fund the transaction.

More recently, questions arose about the solvency of the institutions themselves.

The U.S. government’s bailout of Citigroup, which last week revealed a plan to cut 52,000 jobs globally, represents Washington’s biggest effort yet to prevent a major bank from failing.

The bailout would give the U.S. government a 7.8 per cent stake in Citigroup and marks the latest effort to contain a widening financial crisis that has already brought down storied Wall Street investment firms, including Bear Stearns and Lehman Brothers Holdings Inc.

The move is designed to protect Citigroup from losses on $306 billion (U.S.) of troubled U.S. home loans, commercial mortgages, subprime bonds and corporate loans when the firms tumbling share price sparked concern that depositors might pull their money and destabilize the company. Citigroup has $2 trillion of assets and operations in more than 100 countries.

The $20 billion of new cash comes on top of a $25 billion infusion the bank received last month under the Troubled Asset Relief Program, passed by U.S. Congress to shore up the financial industry.

Shares of Citigroup surged 57 per cent to close yesterday at $5.95 on the New York Stock Exchange.

With files from the Star’s wire services

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In a sign that the global credit crisis is seeping across Canada’s borders, Bank of Canada Governor Mark Carney warned yesterday that the country "has been importantly affected by global events" and hinted that another interest rate cut may be in the offing.

Pointing to "a tightening in credit conditions," Carney said in a speech to the Canada-United Kingdom Chamber of Commerce in London that "the risks to growth and inflation in Canada identified (in October) appear to have shifted to the downside."

Carney emphasized that Canada is weathering the storm better than most major economies.

But around the world, some economists and policy makers are now anxiously considering another worrisome prospect: A deflationary spiral that could make recovery even more difficult.

Those concerns were heightened yesterday by a report that showed U.S. consumer prices plummeted by 1 per cent in October (month-over-month), the biggest one-month decline since record-keeping started.

The drop was driven by a precipitous fall in oil prices, which have lost more than 60 per cent of their value since peaking in mid-July. But core consumer prices, which exclude food and energy, also fell by 0.1 per cent last month, showing broader price declines.

U.S. Federal Reserve vice-chairman Donald Kohn said yesterday that the risk of deflation "is still small in my mind … But it is also the case that whatever I thought that risk was, four or five months ago, I think it is bigger now even if it is still small."

For consumers, the prospect of deflation – an ongoing fall in the general level of prices – might seem appealing.

Under normal circumstances, lower prices are "supposed to signal to people (that) now might be a good time to buy, and that brings about an adjustment," said Gregor Smith, an economics professor at Queen’s University.

"It encourages people to spend, and that helps sales for those companies."

But a period of deflation carries the risk of "a deflation mentality, where people, if they can, postpone purchases because they expect that prices will fall," said Michael Gregory, a senior economist at BMO Capital Markets cash in one hour.

Businesses may follow suit by postponing building plants or buying new equipment in anticipation of lower prices, creating a pernicious cycle of decreasing demand, production cuts and layoffs that can cause demand to dip even further.

Such a spiral is "very hard to break," said Gregory, pointing to the Great Depression of the 1930s, and Japan’s 10-year spiral of falling prices and economic stagnation.

While rare, he added, "it’s a low probability of something really, really bad happening, which weighs in on your policy thinking."

Some officials have publicly mused about the possibility.

"Deflation is probably the worst case for the financial sector because it is very difficult to overcome. Therefore, all central banks are going to do everything to avoid it," European Central Bank policy maker Ewald Nowotny said earlier this month.

But Smith warned not to read too much into yesterday’s U.S. consumer price figures.

"Certainly, the credit crisis … is one of the causes of a fall in demand in the economy. And that in turn can show up in some falling prices," he said.

"Whether it will really show up in deflation is still an open question. I think it’s a bit early to say based on one month’s CPI numbers."

Canada’s consumer price index for October is scheduled to be released tomorrow .

In September, annual inflation stood at 3.4 per cent, just off August’s five-year high.

Minutes from the Federal Reserve’s October meeting, released yesterday, show that officials slashed economic growth forecasts for 2009, and some believed more interest rate cuts might become necessary.

At that session, the central bank cut its key interest rate by a half a percentage point to 1 per cent.

Its next scheduled interest-rate setting meeting is Dec. 16.

The Bank of Canada is to consider its overnight rate, which sits at 2.25 per cent, on Dec. 9.

With files from the Star’s wire services

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For the world’s largest brewery, the sale of Labatt USA represents a small ripple in an ocean of beer.

But for brewery workers in Canada, it could mean the loss of up to 15 per cent of production in Canada within three years.

And for border-town beer drinkers, it means the future of two favourite brands, Labatt Blue and Blue Light, is in doubt.

Belgium-based InBev announced yesterday it had agreed to divest Labatt USA as part of a $52 billion (U.S.) deal to buy America’s largest brewer, Anheuser-Busch Cos.

The U.S. Department of Justice required the divestiture as a condition for approval of the larger deal.

"At this time, it’s too early to tell what the impact will be to our Canadian operations," Charlie Angelakos, a spokesperson for Labatt Brewing Company Ltd., said yesterday.

However, he confirmed the sale of Labatt USA to an unidentified third party would mean the end of production of U.S.-bound beer at Labatt’s Canadian breweries within three years.

The London, Ont.-based company said it brews all the Labatt beer sold in the U.S., which accounts for "just under" 15 per cent of Labatt’s total production in Canada.

The company declined to reveal which of Labatt’s seven breweries ships to the U.S. market, citing competitive reasons.

The breweries are in London, Ont., Edmonton, St freecreditscore. John’s, Nfld., Montreal, Halifax, Creston, B.C. and the recently acquired Lakeport Brewery in Hamilton.

Considered the best-selling Canadian brand south of the border, Labatt USA accounted for 1.7 million hectolitres of production last year.

InBev said yesterday the sale of Labatt USA would have no material impact on its earnings.

The brewer also said it has identified "a number of interested potential purchasers" but has not yet determined a fair market value for the asset.

InBev has owned Labatt since 1995.

Labatt Blue and Blue Light have less than 1 per cent of the broader U.S. market, but upstate New York accounts for 60 per cent of those sales, said Eric Shepard, executive editor of trade publication Beer Marketer’s Insights, based in Nanuet, N.Y.

In Syracuse, Buffalo and Rochester, Labatt competes head-to-head with Anheuser-Busch brands such as Bud and Bud Light. Regulators feared the merger could lead to price increases.

"This divestiture will ensure that consumers will continue to benefit from the significant competition between the merging companies in upstate New York," deputy assistant Attorney-General Deborah Garza said in a statement.

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General Motors’ October U.S. sales plunged 45 percent, and Ford’s and Chrysler’s weren’t far behind, as low consumer confidence and tight credit combined to bring the industry’s sales to an "unsustainably weak level" that is the worst in 25 years.

Automakers sold 838,156 vehicles in October, 32 percent fewer than in the same month last year and the worst performance since January 1991, according to Autodata Corp. and Ward’s AutoInfoBank. The seasonally adjusted annual sales rate of 10.6 million vehicles was the lowest since February 1983.

"It’s really an unsustainably weak level for all manufacturers," said Mike DiGiovanni, GM’s executive director of global market and industry analysis. "This is clearly a severe, severe recession for the U.S. automotive industry and something we really can’t sustain."

The annual sales rate in October 2007 was 16.1 million.

Chrysler’s sales tumbled 35 percent, and Ford’s dropped 30 percent. Toyota’s sales fell 23 percent despite its zero-percent financing offer, and Nissan and Honda posted 33 percent and 25 percent declines, respectively.

Overall, General Motors Corp. sold 168,719 vehicles in October, while Ford Motor Co., including its Volvo brand, sold 132,278 light vehicles and Chrysler LLC’s sales totaled 94,530 units.

If GM’s sales were adjusted for population growth, October would be the worst month of the post-World War II era, DiGiovanni said.

"Clearly, we’re in a very dire situation," he said. Detroit-based GM said its light truck sales tumbled 51 percent compared with the same month last year, while demand for passenger cars fell 34 percent.

Despite the steep drop, GM’s total was enough to keep it ahead of Toyota Motor Corp bad credit cash loans. for the No. 1 U.S. sales spot. Toyota, which rolled out an offer of zero-percent financing during the month, sold 152,101 vehicles. The Japanese company’s light truck sales fell 34 percent, while car sales dropped 15 percent.

Honda Motor Co.’s sales fell to 85,864 vehicles as truck sales fell 29 percent. But sales of cars from its Acura luxury division rose 6 percent.

Nissan Motor Co. sold 56,945 vehicles, and its truck sales dropped 52 percent.

Ford officials said on a conference call with reporters and industry analysts that as bad as October sales were, it’s probably not the bottom.

Emily Kolinski Morris, the Dearborn, Mich.-based company’s senior economist, said that because automobiles are more durable, people can wait without buying a new vehicle until they feel more confident in the economy.

"The answer to when we will start to come out of that trough lies in when the economy comes out of that trough," Kolinski Morris said.

Ford likely will announce car and crossover vehicle production cuts when it announces its third-quarter earnings on Friday, said George Pipas, Ford’s top sales analyst. Truck production cuts earlier in the year have kept inventories low, but car and crossover inventories need to be brought into line, he said.

The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 23 sales days last month, two less than in October 2007.

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3M Co (MMM.N: Quote, Profile, Research, Stock Buzz) reported a 10 percent rise in quarterly earnings on Tuesday, a pleasant surprise, sending shares as much as 7 percent higher compared with a decline in the broader market.

3M’s broad lineup of businesses — from high-tech industrial products such as chemicals used in aircraft maintenance to basic consumer goods like Post-It notes — make it a bellwether of the U.S. economy. With U.S. demand slowing, 3M has been relying on foreign markets for growth.

“They’re definitely benefiting from the fact that they make things that everybody needs,” said Sterne Agee analyst Nick Heymann, noting that international markets generated 62 percent of the company’s sales.

The company, which makes products ranging from Scotch tape to optical films for liquid crystal displays, posted third-quarter net income of $991 million, or $1.41 per share, compared with $960 million, or $1.32 per share, a year earlier.

Factoring out special items, the St payday advance lender. Paul, Minnesota-based company posted earnings of $1.42 per share, which compares with analysts’ estimates of $1.38 per share, according to Reuters Estimates.

Revenue rose 6.2 percent to $6.56 billion, a bit short of analysts’ estimates of $6.67 billion.

The company lowered its outlook slightly, predicting 2008 earnings in the range of $5.40 per share to $5.48 per share, an 8 percent to 10 percent increase, instead of the minimum 10 percent increase it had previously predicted. Analysts see 2008 EPS of $5.45, according to Reuters Estimates.

But even the reduction translated into a positive against reduced expectations, as the outlook was “far from the disaster many have come to expect,” wrote J.P. Morgan analyst C. Stephen Tusa Jr, who rates 3M shares “overweight.” 

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Maple Leaf Foods Inc. said freshly sliced meats from its now thoroughly sanitized processing plant in Toronto would begin reappearing on store shelves by the middle of next week.

The plant on Bartor Rd. had been found to contain the same type of listeria implicated in the deaths of at least 17 Canadians and has been closed since Aug. 20.

The company said it had started the process of reopening the plant yesterday, four weeks after efforts to locate the source of listeria led it to areas deep within two meat-slicing machines.

As part of Maple Leaf’s efforts to regain consumers’ confidence, the country’s largest food processor said it has implemented rigorous new sanitation and food safety procedures on all 84 meat-slicing machines in its plants around the country.

As well, the entire Bartor Rd. plant has been thoroughly sanitized six times, tested and given a clean bill of health by government inspectors, third party experts and its own staff, the company also said.

Maple Leaf Foods said it would conduct several test runs before releasing any new products into stores.

"We recognize that we have to rebuild consumers’ confidence," said Michael McCain, president and chief executive officer of the $5.2 billion food-processing giant. "I am confident in the machines, with adjusted protocols."

He said it could take anywhere from several months to a year to restore product sales, based on other product recalls of this nature.

McCain declined to be more specific, or speculate on how much the recall had cost the processor of fresh pork and chicken, bacon, and ready-to-eat meals cheap payday loans. The company’s initial estimate was $20 million.

"While we operated to the highest standards … our best efforts were not enough. We have learned from this tragic experience and we can and will do more," said McCain.

While closed, the plant underwent six sanitization procedures under independent supervision, McCain said.

The company will disassemble and deep-clean all its slicing machines on a regular basis, McCain said. It will also double its testing of possible sources of listeria in the surrounding environment, such as fridges, walls and floor drains.

While defending Canada’s food safety standards, McCain also announced plans to name a chief food safety officer at Maple Leaf, who will report directly to McCain on the latest innovations and processes.

And the company plans to assemble a food safety advisory panel, within three months, to look at industry-wide best practises, he said.

McCain said he’d welcome more government food safety inspectors in his plants.

The union representing federal inspectors has complained they are understaffed.

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NEW YORK–The percentage of Americans who were delinquent on their credit card payments rose slightly in the second quarter from the same time last year, while average debt per borrower jumped 8.6 per cent, according to credit reporting agency TransUnion LLC.

For the quarter ended June 30, 1.04 per cent of credit card holders were delinquent at least 90 days on one or more of their cards. That compares with 0.91 per cent for the second quarter of 2007, although it did represent a decline from 1.19 per cent in the first quarter of 2008.

The decline from the first quarter to the second quarter likely reflected tax refunds and economic stimulus cheques, according to Ezra Becker, principal consultant in TransUnion's financial services group. Becker said delinquency rates tend to be seasonal, "and it does tend to go down in the second quarter."

Banks have been tightening lending standards and credit card limits, which also may have contributed to the quarter-over-quarter decline, he said. "A lot of people who would have gone delinquent in the past are no longer getting new credit cards or those higher limits," Becker said.

The figures are culled from TransUnion Trend Data, which consists of 27 million consumer records randomly sampled each month from the credit reporting agency's national consumer credit database.

Second-quarter delinquency was highest in Nevada, at 1.72 per cent, followed closely by Florida, at 1.34 per cent paydayloans. These two states are among the hardest hit by the housing and mortgage crisis.

The lowest credit card delinquency rates were found in North Dakota, at 0.59 per cent, Vermont, at 0.68 per cent, and Utah, at 0.70 per cent.

Meanwhile, the average debt per borrower for the second quarter stood at $1,717, up 8.9 per cent from $1,581 in the second quarter of 2007. Debt per borrower increased 2.6 per cent from the first quarter, when it stood at $1,673.

Becker said the increases are likely due to the slow economy and the spike in gasoline prices during the quarter.

The highest state average card debt was in Alaska, at $2,494, followed by Tennessee at $2,109 and Alabama at $2,015. Residents of Iowa had the lowest average debt of $1,281, with North Dakota second at $1,318 and South Dakota third, at $1,388.

TransUnion expects the 90-day delinquency rate to fall again in the third quarter, but rebound in the fourth quarter as spending increases toward the holiday season. High gas prices and the addition of heating oil and natural gas costs are expected to contribute as well, Becker said.

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