Sequester Set to Trigger Billions in Cuts

Nobody likes the sequester.

Even the word is enough to send shivers of fiscal panic, or sheer political malaise, down the spines of seasoned politicians and news reporters. And today, the sequester will almost certainly happen, a year and a half after its inception amid the stalemate of the debt-limit crisis in 2011.

Automatic budget cuts will be triggered across federal agencies, as President Obama will be required to order sequestration into effect before midnight Friday night. The federal bureaucracy will implement its various plans to save the money it's required to save.

Read more: How Automatic Cuts Could Hurt at the Local Level

Now that the sequester will probably happen, here are some questions and answers about it:

1. HOW BIG IS IT?

The cuts were originally slated for $109 billion this year, but after the fiscal-cliff deal postponed the sequester for two months by finding alternate savings, the sequester will amount to $85 billion over the next 10 months. In 2013, nondefense programs will be cut by nine percent, and defense programs will be cut by 13 percent.

If carried out over 10 years (as designed), the sequester will amount to $1.2 trillion in total.

2. WHAT WILL BE CUT, SPARED?

Most government programs will be cut, with the cuts distributed evenly (by dollar amount) between defense and nondefense programs.

Sequester Countdown: The Reality of Budget Cuts Watch Video

Sequestration: Democrats, Republicans Play Blame Game Watch Video

Some vital domestic entitlements, however, will be spared. Social Security checks won't shrink; nor will Veterans Administration programs. Medicare benefits won't get cut, but payments to providers will shrink by two percent. The Children's Health Insurance Program (CHIP), food stamps, Pell grants, and Medicaid will all be shielded from the sequester.

But lots of things will get cut. The Obama administration has warned that a host of calamities will befall vulnerable segments of the population.

Read more: Sequester May Revive 'Amtrak' Joe Biden

3. WHY DOES IT HAVE TO BE SO BAD?

Questions persist over whether or not it really does.

The sequester will mean such awful things because it forces agencies to cut indiscriminately, instead of simply stripping money from their overall budgets.

But some Republicans, including Oklahoma Sen. Tom Coburn, have suggested that federal agencies have plenty of flexibility to implement these cuts while avoiding the worst of the purported consequences. Louisiana Gov. Bobby Jindal accused President Obama of trying to "distort" the severity of the sequester. The federal government will still spend more money than it did last year, GOP critics of sequester alarmism have pointed out.

Read more: 57 Terrible Consequences of the Sequester

The White House tells a different story.

According to the Office of Management and Budget, the sequestration law forces agency heads to cut the same percentage from each program. If that program is for TSA agents at airports, the sequester law doesn't care, and Homeland Security Secretary Janet Napolitano can't do anything about it.

Agency heads do have some authority to "reprogram" funds, rearranging their money to circumvent the bad effects. An OMB official told ABC News that "these flexibilities are limited and do not provide significant relief due to the rigid nature of the way in which sequestration is required by law to be implemented."

4. WHEN WILL THE WORST OF IT START?

Not until April -- but some of the cuts could be felt before then.

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US pledges US$60m for Syria opposition

ROME: The United States on Thursday pledged US$60 million in "non-lethal" assistance for the Syrian political opposition to President Bashar al-Assad as well as the first direct US aid to rebel fighters in the form of food and medical assistance.

"The US will be providing an additional US$60 million in non-lethal assistance to support the efforts of the Syrian opposition coalition over the coming months," US Secretary of State John Kerry said after talks between the 11-nation Friends of Syria and the opposition in Rome.

"We will be sending medical supplies and food to the (rebel) Supreme Military Council, so there will be direct assistance," he added.

"All Syrians... must know that they can have a future," Kerry said.

A State Department official said the US$60 million (49 million euros) in aid would be used to help local councils and communities in liberated areas in Syria, to provide basic goods and services and "fulfil administrative functions including security, sanitation and education services."

The official said the new money was in addition to US$50 million in non-lethal support Washington has already provided to help Syrian opposition activists, including communications equipment.

That aid was provided through Turkey, while the United States has also contributed some US$380 million dollars in humanitarian aid through UN agencies and aid groups.

Asked about congressional approval of the funding, Kerry told journalists he was "very confident for rapid delivery".

He said the goal was to give a boost to the opposition and show Assad that he could not use violence to resolve the conflict.

"This is the beginning of the process that will change (Assad's) calculation."

The announcement of aid came as news broke of a car bomb explosion in a suburb of the flashpoint city of Homs that left "dead and wounded", according to state news agency SANA, which blamed "terrorists" for the blast.

Kerry had earlier met for about an hour with opposition leader Ahmed Moaz al-Khatib at the 16th-century Villa Madama on a hilltop above Rome.

The Rome talks come two days before an important meeting of the main opposition National Coalition on Saturday in Istanbul, where the umbrella group is to elect a prime minister and government to run parts of Syria seized from Assad's control.

A watchdog reported, meanwhile, that rebels had seized control of the Umayyad Mosque in the second city of Aleppo after days of fierce clashes that damaged the historic building.

Regime troops were forced to withdraw at dawn, taking up positions in buildings around the landmark structure, said the Syrian Observatory for Human Rights.

Officials from the United States, Britain, France, Germany, Italy, Turkey, Egypt, Jordan, Saudi Arabia and the United Arab Emirates took part in the Rome talks, as well as EU foreign policy chief Catherine Ashton.

The Syrian opposition -- which initially vowed a boycott -- had been lured back to the meeting after the US and Britain promised specific offers of help.

In Paris on Wednesday, Kerry said he wanted to hear from Khatib about how best to end the violence in Syria, where the United Nations says at least 70,000 have died and hundreds of thousands have been uprooted since the conflict broke out in March 2011.

US media including The New York Times and Washington Post have reported that the "non-lethal" aid to be provided to the opposition could include equipment such as vehicles, communications gear and night-vision goggles.

The New York Times also reported that a US mission training rebels at a base in the region was already under way.

Russia, Assad's most powerful supporter, has kept up pressure for the two sides in the Syrian conflict to sit down for negotiations.

In Moscow, French President Francois Hollande said ahead of a meeting with Russian counterpart Vladimir Putin that a political solution to the Syrian crisis was possible within weeks.

"I think that in the next few weeks we will manage to find a political solution that will stop the conflict from escalating," Hollande told Echo of Moscow radio station in comments translated into Russian.

Hollande stressed Russia's key role as a member of the UN Security Council, where it has vetoed resolutions that would have put pressure on Assad to end hostilities.

"We must finally start the process of political dialogue that has not yet started on the territory of Syria."

"President Putin and I both understand all the seriousness of the situation. And even though our positions at the moment differ, we want to find the best solution for Syria."

- AFP/xq

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Left returns to power in Tripura for 5th consecutive time; Congress retains Meghalaya

AGARTALA: The Left Front in Tripura today retained power for the fifth consecutive time since 1993 with the coalition securing a three-fourths majority by winning 50 of the 60 Assembly seats.

While CPM, which contested in 55 seats, secured win in 49 seats, coalition partner CPI won one seat of the two it had contested. However, RSP which fought in two seats and Forward Bloc in one, failed to open their accounts.

The Left Front also increased its tally from 49 seats in 2008 and 42 seats in 2003, paving the way for the seventh Left Front government since 1978 in the Northeast state.

The Congress managed to retain 10 seats of the 48 in which it had contested, while allies Indigenous Nationalist Party of Tripura and National Conference of Tripura were unable to win a single seat. The INPT and the NCT had contested in 10 and one seats, respectively.

All ministers of the outgoing ministry except science and technology minister Joy Gobinda Debroy of RSP were re-elected.

Chief minister Manik Sarkar won from the Dhanpur constituency where he defeated his nearest rival -- Congress' Shah Alam -- by 6,017 votes. Sarkar had won by 4,000 votes in the last Assembly elections.

Finance minister Badal Chowdhury made electoral history by defeating his nearest rival, a Congress candidate, by 12,429 votes in the Hrishyamukh constituency.

Other prominent Front leaders who won are Agriculture Minister Aghore Debbarma (Asharambari constituency), Industries Minister Jitendra Chowdhury (Manu) and Jail Minister Manindra Reang (Shantirbazar; ST).

Among Congress winners were Leader of the Opposition Ratan Lal Nath (Mohanpur constituency) and TPCC President Sudip Roy Burman (Agartala).

INPT president Bijoy Hrankhawl (Ambassa) and former TPCC president Surajit Dutta (Ramnagar) were among prominent candidates who lost in electoral battle.

CPM state party secretary Bijan Dhar said: "It is a victory of the people of the state, and a victory of peace and development and good governance of the sixth Left Front government."

Leader of the opposition Ratan Lal Nath said, "We accept defeat and will review the causes for it.

Nagaland for NPF and Congress wins Meghalaya

The Left Front stormed back to power in Tripura and the Naga People's Front (NPF) in Nagaland, while the Congress, which fared poorly in both states, emerged as the single largest party in Meghalaya with two seats short of absolute majority in the assembly election results declared today.

The three outgoing chief ministers of Tripura, Nagaland and Meghalaya, Manik Sarkar, Neiphu Rio and Mukul Sangma respectively were victorious.

The Left Front, which has won for the fifth consecutive term in Tripura, secured a three fourths majority with 50 of the 60 seats, with major partner CPM itself securing 49.

In Nagaland, NPF swept back to power for the third consecutive time winning absolute majority securing 38 of the 59 seats. Election in one seat was countermanded following the death of a candidate.

Congress could win only 10 of the 48 seats it contested in Tripura while it could manage to win only eight seats compared to the 18 it clinched last time in Nagaland.

In Meghalaya, the Congress bagged 29 of the 60 seats, falling two short of an absolute majority.

But the Congress improved its tally by securing four more than its tally in 2008.

The results were a shot in the arm of Congress chief minister Mukul Sangma who faced stiff opposition from old warhorse P A Sangma whose National People's Party managed to win just two seats.

In Tripura, the Left Front increased its tally from 49 seats in 2008 and 42 seats in 2003 paving the way for the installation of the seventh Left Front government since 1967.

Congress allies INPT and National Conference of Tripura, which had virtually revolted over allocation of seats before being pacified, drew a blank.

All ministers of the outgoing ministry except Science and Technology minister Joy Gobinda Debroy of RSP were re-elected.

Finance minister Badal Chowdhury made electoral history by defeating his nearest Congress rival by 12,429 votes in the Hrishyamukh constituency.

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Why African Rhinos Are Facing a Crisis

The body count for African rhinos killed for their horns is approaching crisis proportions, according to the latest figures released by the International Union for Conservation of Nature (IUCN).

To National Geographic reporter Peter Gwin, the dire numbers—a rhinoceros slain every 11 minutes since the beginning of 2013—don't come as a surprise. "The killing will continue as long as criminal gangs know they can expect high profits for selling horns to Asian buyers," said Gwin, who wrote about the violent and illegal trade in rhino horn in the March 2012 issue of the magazine.

The recent surge in poaching has been fueled by a thriving market in Vietnam and China for rhino horn, used as a traditional medicine believed to cure everything from hangovers to cancer. Since 2011, at least 1,700 rhinos, or 7 percent of the total population, have been killed and their horns hacked off, according to the IUCN. More than two-thirds of the casualties occurred in South Africa, home to 73 percent of the world's wild rhinos. In Africa there are currently 5,055 black rhinos, listed as critically endangered by the IUCN, and 20,405 white rhinos. (From our blog: "South African Rhino Poaching Hits New High.")

Trying to snuff out poaching by itself won't work, said Gwin. The South African government is fighting a losing battle on the ground to gangs using helicopters, dart guns, high-powered weapons—and lots of money. (National Geographic pictures: The bloody poaching battle over rhino horn [contains graphic images].)

"Every year they get tougher on poaching, but rhino killings continue to rise astronomically," said Gwin. "Somehow they have to address the demand side in a meaningful way. This means either shutting down the Asian markets for rhino horn, or controversially, finding a way to sustainably harvest rhino horns, control their legal sale, and meet what appears to be a huge demand. Either will be a formidable endeavor."

Hope and Hurdles

The signing in December of a memorandum of understanding between South Africa and Vietnam to deal with rhino poaching and other conservation issues raises hope for some concrete action. Observers say the next step is for the two governments to follow through with tangible crime-stopping efforts such as intelligence sharing and other collaboration. The highest hurdle to stopping criminal trade, though, is cultural, Gwin believes. "In Vietnam and China, a lot of people simply believe that as a traditional cure, rhino horn works." (Related: "Blood Ivory.")

The recent climb in rhino deaths threatens what had been a conservation success story. Since 1995, due to better law enforcement, monitoring, and other actions, the overall rhino numbers have steadily risen. The poaching epidemic, the IUCN warns, could dramatically slow and possibly reverse population gains.

The population growth is also being stymied by South Africa's private game farmers, who breed rhinos for sport hunting and tourism and for many years have helped rebuild rhino numbers. Many of them are getting out of the business due to the high costs of security and other risks associated with the poaching invasions.

Those who still have rhinos on their farms will often pay a veterinarian to cut the horns off—under government supervision—to dissuade poachers, but the process costs more than $2,000 and has to be repeated when the horns grow back every two years. Even then the farmers are stuck with horns that are illegal to sell—and which criminals seek to obtain.

Room for Debate

Rhino killings and the trade in their horns will be a major topic at a high-profile conference, the 16th meeting of the Conference of the Parties to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which opens in Bangkok March 3. What won't surprise Gwin is if the issue of sustainably harvesting rhino horns from live animals comes up for discussion.

"It's an idea that seems to be gaining traction among some South African politicians and law enforcement circles," he said, noting that the international conservation community strongly opposes any talk of legalizing the trade of rhino horn, sustainably harvested or not. The bottom line for all parties in the discussion is clear, said Gwin: "The slaughter has to stop if rhinos are to survive."

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Why Should We Care? The Politics of Picking a Pope

Feb 28, 2013 9:34am

                             (Image Credit: L’Osservatore Romano/Vatican/Getty Images)

ANALYSIS

VATICAN CITY – In a U.S presidential campaign, the New Hampshire primary is thought of as “retail politics,” where the candidates actually get to meet and have contact with real voters.

That’s Walmart, compared to a Vatican conclave. This process is more of a boutique.

READ MORE: Benedict XVI Begins Final Day as Pope

All the voters and all the viable candidates can fit into one room. In some cases, they have known each other – or known “of” each other – for years. In some cases, they have worked with (or against) each other in the daily management of the church.

It’s not just the fancy costumes, the churchly rituals or the sweep of history that makes this process so fascinating. There’s also the sheer human drama of it all.

VIDEO: Pope Benedict’s Last Sunday Prayer Service

For the 115 men planning to take part in the conclave to elect a pope, all of whom have devoted their lives to the Catholic church, this choice might well be the most important contribution they make. A lifetime of service reduced to a single election.

It’s also crucial for the world’s 1.2 billion Roman Catholics.

The new pope will set the tone of the institution on issues of life and death: abortion, birth control, genetic medicine, euthanasia and more.

He’ll frame the church’s role in the moral debate about the way we live our lives, as individuals and as families. Divorce, gay rights, adoption, education, the role of women (not least in the church) are all areas in which previous pope’s have exerted tremendous influence.

He’ll instantly be the most powerful spiritual leader in the world, a global ambassador for Christian values (however he and the rest of the church interpret that mandate).

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Will he be able to win over a wayward flock? Many have left the church, bitterly disappointed by the betrayal of pedophile priests, the mismanagement of arrogant administrators or even what they perceive as the institution’s irrelevance in the modern era.

At its best, the church is a voice of compassion and social justice. But it has also, at times, been a voice of intolerance, as well as a bastion of the status quo.

On one level, this is local politics. Each voting cardinal – even the ones who live thousands of miles away – has a titular church, an actual church here in Rome assigned to them where they officially serve as the pastor. So the conclave represents the Roman clergy’s electing the next Bishop of Rome.

At another level, it’s global. Prelates from 50 countries do their best to discern (through the guidance of the Holy Spirit) how to make the universal church thrive in a new millennium.

Win or lose in a presidential election, we all know it’ll start all over again in four years’ time. There are checks and balances too, so, for better or worse, “change” tends to be largely a campaign slogan.

It would be sheer exaggeration to say any presidential contest were a battle for the soul of the United States.

But in a very real way that’s what this process is for the world’s largest church.

SHOWS: Good Morning America World News

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Portugal seizes 79 tonnes of meat containing horse

LISBON: Portuguese authorities said they had launched fraud proceedings after seizing 79 tonnes of wholesale food and thousands of packaged meals that contained horsemeat despite not being labelled with it.

The 79 tonnes of "meat and meat-based products" were seized in plants that processed, packaged and distributed meat to supermarkets, the government's Economic and Food Safety Authority said in a statement.

Authorities also seized nearly 19,000 packets of food "such as lasagne, hamburgers, canneloni and meatballs" in retail and distribution outlets, said the statement published on Tuesday.

Five criminal cases of fraud were opened over the seizures, it added, without giving further derails.

A vast food scandal has erupted across Europe after horsemeat was found in supposedly beef ready-made meals and burgers in Britain and Ireland.

Among various companies implicated in the scandal, Swiss food giant Nestle last week withdrew dishes destined for restaurants in Portugal, Spain and Italy.

- AFP/xq

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India silent over US-backed resolution against Lanka at UN rights body

NEW DELHI: India is not ready to reveal its hand on the US-sponsored resolution against Sri Lanka at the UN Human Rights Council (UNHRC). And, the radio silence is all for a good reason.

Despite the loud support by DMK and AIADMK members in the Rajya Sabha for the resolution on Wednesday, there is discomfort within the Indian government regarding the document's fine print. Sources said recommendations in the resolution are "intrusive", which would be unacceptable for India.

However, India will continue to push Sri Lanka to devolve more power to the Tamil areas, as part of the promise of the 13th amendment. Colombo maintains that most of the amendment has been implemented, but they wanted to "adjust" some of what was left to work on. The government has set up a select committee, but the Tamil parties have refused to be part of it.

Although the text of the resolution has not yet been made public, it is believed that the US resolution calls for an international committee to monitor that justice, equity, accountability and reconciliation are implemented by the Lankan government. India would much rather like that issues of accountability are kept as sovereign responsibility of a nation and not imposed from outside. Like China, India is opposed to externally imposed solutions on countries.

Foreign minister Salman Khurshid remained non-committal on how India would vote at the UN body. He told the Rajya Sabha on Wednesday that while the recent photographs of Prabhakaran's son's death were "very sad, very moving, very tragic" and "that is the reason we have engaged with Sri Lanka". This accountability, he said, should come from within, rather than from outside. "When accountability comes from within, there is a greater chance of sustainability," he added.

India has more problems with the report of the UN High Commissioner for Human Rights Navi Pillay. Her report, which the US has said it will support, calls for an "independent, international inquiry" into the Lankan actions during the concluding phase of the war against the LTTE. The report also calls for investigations of "violations" of international law. In addition, India is uncomfortable with the idea of special rapporteurs being appointed to visit Sri Lanka, fearing that at some stage it could come back to bite New Delhi.

"Our initiative is to find a solution... go beyond pain and anger. We want a sustainable settlement to the issues in Sri Lanka. "There is no question of our having a blinkered vision of the ground situation," Khurshid said.

Traditionally, India did not support country-specific resolutions, though New Delhi went against its own unwritten rule to vote against Sri Lanka at the UNHRC last year. Second, there is a strong opinion in the government that the US resolution is basically going after an easy target. "There is no accountability sought in the wars in Iraq or Afghanistan, where there was significant violations of international law," said sources.

Quietly, the government is also wary of fanning the flames of ethnic nationalism among the Tamils again, given the dangers of that operating in India as well. In the past year, Tamil Nadu has seen violence against Lankan tourists and pilgrims which has got the Centre worried.

Human rights organisations like Human Rights Watch (HRW) have documented horrific tales of rape and torture of Sri Lankan Tamil detainees who have told their stories after fleeing from the country. This is in addition to the film, No Fire Zone by Callum McCrae, which showed disturbing visuals of Prabhakaran's son's last hours.

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A History of Balloon Crashes

A hot-air balloon exploded in Egypt yesterday as it carried 19 people over ancient ruins near Luxor. The cause is believed to be a torn gas hose. In Egypt as in many other countries, balloon rides are a popular way to sightsee. (Read about unmanned flight in National Geographic magazine.)

The sport of hot-air ballooning dates to 1783, when a French balloon took to the skies with a sheep, a rooster, and a duck. Apparently, they landed safely. But throughout the history of the sport, there have been tragedies like the one in Egypt. (See pictures of personal-flight technology.)

1785: Pioneering balloonist Jean-Francois Pilatre de Rozier and pilot Pierre Romain died when their balloon caught fire, possibly from a stray spark, and crashed during an attempt to cross the English Channel. They were the first to die in a balloon crash.

1923: Five balloonists participating in the Gordon Bennett Cup, a multi-day race that dates to 1906, were killed when lightning struck their balloons.

1924: Meteorologist C. LeRoy Meisinger and U.S. Army balloonist James T. Neely died after a lightning strike. They had set off from Scott Field in Illinois during a storm to study air pressure. Popular Mechanics dubbed them "martyrs of science."

1995: Tragedy strikes the Gordon Bennett Cup again. Belarusian forces shot down one of three balloons that drifted into their airspace from Poland. The two Americans on board died. The other balloonists were detained and fined for entering Belarus without a visa. (Read about modern explorers who take to the skies.)

1989: Two hot air balloons collided during a sightseeing trip near Alice Springs, Australia. One balloon crashed to the ground killing all 13 people on board. The pilot of the other balloon was sentenced to a two-year prison term for "committing a dangerous act." Until today, this was considered the most deadly balloon accident.

2012: A balloon hit a power line and caught fire in New Zealand, killing all 11 on board. Investigators later determined that the pilot was not licensed to fly and had not taken  proper safety measures during the crash, like triggering the balloon's parachute and deflation system.

2012: A sightseeing balloon carrying 32 people crashed and caught fire during a thunderstorm in the Ljubljana Marshes in Slovenia. Six died; many other passengers were injured.

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Pope Thanks Crowd in Final Address

On his final full day as the leader of the Roman Catholic Church, Pope Benedict XVI thanked a huge crowd for respecting his historic decision to step down and told them that God will continue to guide the church.

"The decision I have made, after much prayer, is the fruit of a serene trust in God's will and a deep love of Christ's Church," Benedict said to cheers in his last public words as pope.

Benedict, 85, is the first pope to resign in 600 years. He told the crowd today that he was "deeply grateful for the understanding, support and prayers of so many of you, not only here in Rome, but also throughout the world."

Pope Benedict's Last Sunday Prayer Service

Under sunny skies on this late February day, hundreds of thousands of people, some waving flags, some banners, flocked to Vatican City to see Benedict make a final lap around St. Peter's Square. Throughout his eight-year papacy, Benedict has conducted a weekly audience from St. Peter's. Before delivering his last papal address today, Benedict waved to the festive group of supporters as he toured the square in his glass-encased popemobile.

The city of Rome planned for more than 200,000 people to head to the Vatican for today's event. Streets around St. Peter's were blocked off to cars as pedestrians from around the world headed to the square.

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The conclave to elect Benedict's replacement will start next month at a date yet to be determined. Benedict issued a decree known as a "motu poprio" that will allow cardinals to convene the conclave sooner than the March 15 date that would have been mandated under the old rules.

Benedict today asked the faithful to pray for him and for the new pope.

"My heart is filled with thanksgiving to God who ever watches over his church," Benedict said.

The German-born Benedict, who had appeared frail at times in recent months, seemed more energized in his remarks today. He has said he will devote more time to prayer and meditation after he leaves the papacy.

Benedict will meet Thursday with his cardinals in the morning and then flies by helicopter at 5 p.m. to Castel Gandolfo, the papal residence south of Rome. Benedict will greet parishioners there from the palazzo's balcony, his final public act as pope.

Then, at 8 p.m., the exact time at which his retirement becomes official, the Swiss Guards standing outside the doors of the palazzo at Castel Gandolfo will go off duty, their service protecting the head of the Catholic Church finished.

In retirement, Benedict will continue to wear white and will be called "Pope Emeritus," or the "Supreme Roman Pontiff Emeritus" or "Your Holiness," the Vatican announced Tuesday. Benedict will ditch his trademark red shoes, opting for a pair of brown shoes given to him on a trip to Mexico. But he will still reside on Vatican grounds in a former nunnery.

Benedict's final days as pope have been marked by controversy. For nearly a week now Italian newspapers speculated that Benedict really resigned because of a dossier he was given detailing a sex and blackmail scandal in the Catholic Church. The Italian media news reports do not state any attribution.

It turns out a dossier does exist. The Vatican spokesman Monday underscored that the contents of the dossier are known only to the pope and his investigators, three elderly prelates whom the Italian papers have nicknamed "the 007 cardinals."

But the dossier itself will remain "For the Pope's Eyes Only."

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Impact of China's demand for iron ore on shipping industry

SINGAPORE : China's appetite for iron ore may be among the few bright spots for the shipping industry this year, although there are still many empty vessels plying the waterways.

Analysts have said that those unable to wait out the recovery are likely to go under.

After years of low freight rates, overcapacity and few cargoes, dry bulk shipping firms are finally seeing the light on the horizon.

Credit Suisse predicts China's appetite for iron ore will grow 11 per cent this year, fuelling a pick-up for shippers.

Credit Suisse expects this to spur global commodity demand to 5.3 per cent, from 4.8 per cent last year.

Mercator Lines (Singapore) believes 2013 may be a turning point.

During its third quarter, the dry bulk shipping company was forced to lower its debt by selling one vessel, and terminating settlement agreements with two of its chartered vessels in advance.

Shalabh Mittal, CEO of Mercator Lines (Singapore), said: "We have seen the worst in 2012. 2013 will be more of consolidation...We have already seen the current freight rates are better than 2012's average. So even though it is a very small increase from a very small base, the sentiments reflect that the growth in trade is happening."

But that does not mean a quick turnaround for the global market.

Industry watchers expect overcapacity rates to remain high.

ICAP Shipping said there is still an oversupply of about 16 per cent in the dry cargo market.

Christopher Jones, director of Sale & Purchase at ICAP Shipping, said: "This year, we do not see too much of an improvement. One of the key factors is the oversupply of tonnage in all sectors.

"Freight rates are still lolloping and we seize on any kind of upturn, but analysing ore trades into China for example, they are very slack at the moment because of the high price of iron ore."

ICAP Shipping added that unless more older vessels exit the market by 'scrapping', or the demolition of old ships, market fundamentals are not going to return to equilibrium anytime soon.

Meanwhile, others unable to hold out will either have to fold or find a more profitable business to operate in, like oil and gas.

Patrik Wheater, editor of Shipping World & Shipbuilder, said: "We are seeing a lot of diversification in the shipbuilding side. Shipyards, either building bulk carriers, tankers, that market is not as good as it once was, so they need to diversify and look at other segments and the oil and gas segment is a saving grace for some yards.

"Although last year 900 Chinese shipyards closed, more shipyards are likely to close in China this year."

So far in 2013, the Baltic Dry Index (BDI), the key benchmark for international freight rates, has risen 6.4 per cent, a minor recovery at least, from last year's near 60 per cent slump.

- CNA/ms

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