S. Korea President Accepts PM's Resignation

SEOUL — South Korean President Geun-hye's office says she will accept her prime minister's resignation, but not until the Sewol ferry disaster has been brought under control.

Prime Minister Chung Hong-won offered his resignation earlier Sunday, following a public uproar over his government's response to the April 16 ferry disaster that left more than 300 people dead or missing.

A somber-looking Chung announced his resignation in a brief televised address Sunday morning, saying "keeping my post is too great a burden on the administration."  The prime minister's position in South Korea is largely ceremonial, with the president wielding most of the power.

Chung said he would like to offer an apology to the people as a representative of their government. He said the government could not solve many problems that occurred in the process of preventing the incident, the initial response, and in controls afterwards.

12 days since sinking

The 5-story ship, the Sewol, capsized on April 16th southwest of mainland South Korea with 476 people on board and quickly sank.

Most were teenagers on a trip organized by their high school, just south of Seoul, to the resort island of Jeju.

Authorities were severely criticized for what many saw as a slow and poorly coordinated initial response to the disaster.

Inaccurate information on the numbers of rescued, passengers and missing made matters worse for already distraught parents.

Education authorities initially indicated most of those on board the sinking ship were rescued before corrections revealed the scale of the loss.

Hundreds of rescue divers were deployed but were hampered by weather, strong currents and poor visibility. Relatives of those on board, hoping for survivors, watched helplessly as it took days to get divers inside the sunken ship.

Bodies were still slowly being recovered more than a week later as bad weather continued to plague recovery efforts.

PM accepts blame

Prime Minister Chung, along with the Coast Guard chief, was in charge of the rescue operation. He says his resignation would be a sensible way to offer the people of South Korea an apology.

He said he should be responsible as a prime minister. He saw the pain of the families of victims who writhed in agony from losing their loved ones and the sorrow and anger of their people.

During separate visits to a gym on Jindo island housing the relatives, angry parents pounced on the prime minister and heckled the president.

Opposition politicians criticized the prime minister's offer to resign as irresponsible and demanded President Park be the one to apologize.

But most of South Korea's outrage is directed at the captain and crew in charge of steering the ship. They have been arrested and charged with negligence and violating maritime law for telling passengers to stay put and then later saving themselves.

It is still not clear what caused the ferry to sink. Investigators are looking into many possibilities including an alleged sharp turn, design or repair flaws, or overweight cargo.

Prime Minister Chung last week announced plans for a safety overhaul to prevent similar disasters.

He is not the only official to take a fall from the ferry disaster.

A Coast Guard official was removed from duty for remarks deemed insensitive to relatives of victims. Another official was fired for taking photos of worried relatives.

Resignations by prime ministers are not uncommon in South Korea. The mainly ceremonial nature of the post makes it convenient for prime ministers to take the blame during political crises.

The last prime minister to resign was Chung Un-chan under the previous president Lee Myung-bak. He twice in 2010 offered to step down for the party's defeat in regional elections and a then again for failing to stop an administrative relocation to a town south of Seoul.

Mediators in Ukraine to Negotiate Release of Detained Observers

— A group of European monitors detained by pro-Russia insurgents in eastern Ukraine appeared in public Sunday to give assurances they are not being mistreated, even as negotiations began to secure their release.

With armed rebels watching as they spoke, the leader of the monitors from the Organization for Security and Cooperation in Europe, German Colonel Axel Schneider, assured reporters in Slovyansk they were in good health.

The insurgents called the eight military observers "prisoners of war." Schneider said they were being held for political reasons.

"Our presence here in Slovyansk is for sure a political instrument for the decision-makers here in the region, and the possibility to use it for negotiations."

The OSCE sent a team of negotiators to eastern Ukraine to meet with the self-proclaimed mayor of Slovyansk, Vyacheslav Ponomaryov, about freeing the military monitors.

The rebels also displayed three bloodied and blindfolded officers from Ukraine's Security Service it captured. The officers were shown with heads bowed, and stripped of their pants and shoes.

Meanwhile, at a news conference in Malaysia, U.S. President Barack Obama warned economic sanctions against Russia will be stiffened because he said Moscow is encouraging unrest in the largely Russian-speaking eastern Ukraine.

"There is strong evidence that they have been encouraging the kinds of activities that taking place in eastern and southern Ukraine and so, collectively, us and the Europeans have said that so long as Russia continues down the path of provocation rather than try to resolve this issue peacefully and de-escalating, there are going to be consequences. And those consequences will continue to grow."

In a joint statement late Friday, the Group of Seven major economies announced it had agreed to "move swiftly" on new sanctions against Russia because of its interference in Ukraine.

The G-7 nations said they would take measures to intensify "targeted sanctions" against Moscow. A U.S. official said the penalties could take effect as early as Monday.

Obama says the U.S. and Europe must act together in levying sanctions against Russia over its actions in Ukraine that he says threaten that country's independence and sovereignty.

The American leader said a deal had been reached with Russia to de-escalate the crisis, but "Russia has not lifted a finger to help."

On Saturday, U.S. Secretary of State John Kerry called for Russian support "without preconditions" for efforts to free the European monitors seized Friday.



A senior State Department official said Kerry delivered his demand in a telephone call to Russian 
counterpart Sergei Lavrov. Moscow later said it is taking what it called "all measures to resolve the situation," but blamed Ukrainian authorities for failing to secure the safety of the team.

The German-led OSCE team was acting under the authority of a four-party agreement directing the OSCE to monitor security and human rights in Ukraine's Russian-speaking east and south. The deal, reached in Geneva, was signed by Russia, Ukraine, the United States and the European Union.

Separately, interim Ukrainian Prime Minister Arseniy Yatsenyuk told reporters Saturday that Russian aircraft had violated Ukrainian airspace seven times overnight.

The Russian Defense Ministry said its "objective monitoring of the air situation" had not detected any overflight violations.

Meanwhile, in the eastern Ukrainian city of Donetsk, VOA correspondent Brian Padden says he was confronted by an angry mob Saturday as he tried to cover a rally in front of an occupied building. He says protesters accused him of supporting a "fascist" U.S. government.

Armed pro-Russian gunmen have seized government facilities in about 10 cities in eastern and southern Ukraine, and are demanding a referendum on whether to secede from the country and join Russia.

Ukraine's PM Accuses Russian Military of Airspace Violations

Ukraine's prime minister says Russian military aircraft have repeatedly crossed into Ukraine's airspace, in what he called Russian aggression designed to undermine global security.

Arseniy Yatsenyuk told reporters Saturday that Russian forces had "violated" Ukrainian airspace seven times overnight.

"We do understand the reason Russian military did it. The only reason is to provoke Ukraine to strike missile and to accuse Ukraine of waging the war to Russia," he said.

On Friday, U.S. military officials also said Russian aircraft had flown into Ukrainian airspace, a charge Russia denies.

In a Saturday statement carried by the Itar Tass news agency, Russia's Defense Ministry said its "objective monitoring of the air situation" had not detected any air border violations.
Prime Minister Yatsenyuk had made the accusation in Rome, after announcing he was cutting short a trip to Italy that included talks with Pope Francis.

The pontiff told Yatsenyuk that he would "do everything possible" to promote peace in Ukraine, where pro-Russian separatists continue to occupy government buildings in about a dozen cities in eastern Ukraine.

According to VOA correspondent Brian Padden, who is on the ground in the eastern Ukrainian city of Donetsk, anti-American sentiment appears to be on the rise among pro-Russian separatists.
An angry mob confronted him on Saturday as he tried to cover a rally in front of an occupied building. He says protesters accused him of supporting a "fascist" U.S. government.

"As we were walking away, the crowd just got more angry and started following us and one guy tried to grab my colleague's camera," he said. "I tried to stop him. Then he grabbed me and another guy came with a baton. But before anything could really deteriorate into a real scuffle, the police kind of came between all of us and pulled us out and we just kept walking."

International monitors

In another development, Russia vowed to help free a team of international military observers who are being detained by pro-Russian separatists who suspect the observers are "NATO spies."

On Friday, the separatists seized a bus carrying more than a dozen people from the Vienna-based Organization for the Security and Cooperation in Europe (OSCE), near the town of Slovyansk.

According to a senior State Department official, U.S. Secretary of State John Kerry on Saturday demanded full Russian support "without preconditions" in efforts to free the European monitors.

Kerry delivered his demand during a telephone call to his Russian counterpart Sergei Lavrov, who said Ukraine must stop its military operations in the country's southeastern region as part of efforts to end the crisis.

In a statement, Moscow later said it is taking what it called "all measures to resolve the situation," but blamed Ukrainian authorities for failing to secure the safety of the OSCE team.

In a Saturday statement, a White House official said U.S. President Barack Obama underscored the importance of solidarity in responding to Ukraine's crisis during talks with his European counterparts.

Earlier, the Group of Seven major economies announced it had agreed to "move swiftly" on new sanctions against Russia because of its alleged actions in Ukraine.

In a joint statement, the G-7 nations of Canada, Britain, France, Germany, Italy, Japan, and the U.S. said they would take measures to intensify "targeted sanctions" against Moscow.

A U.S. official said the sanctions could begin as early as Monday.

On Saturday, about 150 U.S. troops arrived in Lithuania. They are part of a U.S. contingent of about 600 troops being deployed to the region.

Obama Makes Landmark Visit to Malaysia

KUALA LUMPUR — President Barack Obama has become the first U.S. president to visit Malaysia in nearly half a century. Obama on Saturday arrived in Kuala Lumpur, the third stop on an Asian tour aimed at reassuring allies in the region. President Barack Obama is the first American leader to set foot in Malaysia since President Lyndon Johnson came here in 1966. With a red carpet, and an elaborate honor guard at a ceremony in central Kuala Lumpur, Malaysia's King, Sultan Abdul Halim and Prime Minister Najib Tun Razak welcomed Mr. Obama on this two-day visit aimed at strengthening already robust trade and security ties. Malaysia is predominantly Muslim and the national Mosque is on the president's itinerary as a gesture of good will. Obama arrived here from South Korea, where he offered reassurances to his allies as North Korea appears to prepare another nuclear test. Before departing Seoul, the president spoke at Yongsan Garrison to some of the 28,000 troops the U.S. has stationed in South Korea. Referring to North Korea, he said real strength lies not in military displays but in allowing democracy, free speech, and open markets that lift millions out of poverty. “We don't use our military might to impose these things on others, but we will not hesitate to use our military might to defend our allies and our way of life," he said. The president gave his condolences to South Koreans following the loss of more than 300 people in the recent ferry disaster. He comes to Malaysia as the country remains preoccupied with last month's mysterious disappearance of Malaysia Airlines flight 370 with 239 people aboard. At a state dinner Saturday, the Malaysian monarch thanked Obama for U.S. cooperation in the ongoing search for the missing plane.

Bond Market Belgian Mystery Draws China Focus: Cutting Resear

Is China the answer to the mystery of why Belgium is now home to so many U.S. Treasuries? The euro area’s sixth-largest economy has boosted its holdings by $140.6 billion since the start of December, making it the third-biggest holder of the world’s benchmark debt, with $341.2 billion in February. That’s almost twice what it had a year earlier. When investors first began wondering about the rise, they initially turned to Russian billionaires, said Simon Derrick, chief currency strategist of Bank of New York Mellon Corp. The theory was that they were switching their investments to accounts elsewhere to protect against sanctions amid the Ukraine crisis. Belgium hosts Euroclear Bank SA, which provides securities settlements for foreign banks. Taking on the role of data detective, Derrick deduced the Russians probably aren’t the culprits. While Russian holdings of Treasuries did decline in January and February, by $12.4 billion, that most likely reflects a reduction in currency reserves, he said in an April 22 report. He instead looked to China. Its currency reserves rose $32 billion in December -- and its holdings of Treasuries fell $46.7 billion. Assuming its authorities need to keep a third of their overall reserves in U.S. debt, that leaves it looking for an alternative home for $55 billion in December, according to Derrick’s calculations. That suggests that approximately the same amount of China’s Treasury holdings have been parked in Belgian banks. “Curiously, this is almost exactly the amount that the holdings in the name of Belgium rose by than month,” said London-based Derrick. * * * It’s too soon to write off Japan as an export powerhouse. With the government announcing this week that its trade deficit widened to the biggest ever for March, at 1.45 trillion yen ($14.2 billion) the country’s reputation as a supplier of the world’s goods is indeed in doubt. The shortfall has gone on for 21 straight months, the longest slide in comparable data back to 1979. The deficit may nevertheless soon start to narrow again, perhaps sharply, according to Julian Jessop, chief global economist at Capital Economics Ltd. in London, in an April 22 report. He expects the unexpected events that hurt the trade balance to unwind. The deficit stems in part, Jessop says, from the earthquake and subsequent Fukushima disaster of 2011, an increase in energy prices and a slide in the yen, which boosted the cost of imports more than it aided exports. Anticipation of this month’s consumption tax increase has also hurt. Still, the government is planning to restart some nuclear plants, global oil prices should drop and a recovery in the rest of the world will lift demand from abroad as the tax increase slows it at home, Jessop said. The yen’s decline is largely over and exporters might be willing to cut prices to regain market share. “Over the longer term, the structural reforms to labor and product markets promised under ’Abenomics,’ probably corporate tax cuts and lower energy costs should go some way towards reviving the attractiveness of Japan as a production base,” Jessop said. * * * The Organization for Economic Cooperation and Development is the latest institution to have a crack at estimating what an emerging-market slowdown would mean for the developed world. Its simulations suggest for every 2 percentage points of slowdown in developing nations, growth in high-income countries could be about 0.75 point lower on average. Half a point of that pullback would be accounted for by trade. A risk is that the fallout could be exacerbated by swings in exchange rates and financial markets, the Paris-based group said in an April 17 study. Among its membership, Belgium, Japan and the Netherlands would be the hardest-hit given their strong trade links with emerging markets, it said. * * * The return of global inventories to their historical average is masking differences between developed and emerging economies. That’s according to a new tracking gauge produced by HSBC Holdings Plc economist James Pomeroy. He estimated that the contribution to economic growth from inventories is negative in 80 percent of cases following aggressive stock-replenishment and so expansion is subsequently lower. The U.K. and Germany have low inventory levels, suggesting upsides for production, he said in an April 23 report. Strong production in Japan has led to low inventories but the tax increase may hold it back. By contrast, many developing nations have excess inventories they’ll need to run down, suggesting some weakening of production. China and Russia are in that group, Pomeroy said. * * * Okun’s Law lives. The relationship suggesting a link between economic growth and unemployment appeared to break down during the U.S. recession of 2007 to 2009. Unemployment rose more quickly in those two years than would be expected given the modest drop in gross domestic product reported at the time. Since then joblessness has declined rapidly despite fairly modest growth. The rule was designed by the late Arthur Okun, a professor at Yale University in New Haven, Connecticut, and onetime chairman of the Council of Economic Advisers. Now economists at the Federal Reserve Bank of San Francisco say that recent revisions to GDP data suggest unemployment followed a typical cyclical pattern during the slump comparable with past deep recessions and slow recoveries. “The comparatively common patterns suggest that rumors of the death of Okun’s law during the Great Recession were greatly exaggerated,” said Mary C. Daly, John Fernald, Oscar Jorda and Fernando Nechio in their April 21 report. To contact the reporter on this story: Simon Kennedy in Paris at skennedy4@bloomberg.net To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net Anne Swardson, Mark Rohner