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LONDON -

European economic growth put in a healthy performance for the third quarter of 2007, which has done nothing to settle economists’ fears of a future slump on the back of the credit crunch, falling consumer confidence and the strong euro.

The EU said Friday that third-quarter gross domestic product had grown 2.9% year-on-year, or 0.8% since the second quarter of 2007. The 13-member eurozone grew 2.7% year-on-year, or a quarterly growth of 0.7%. Equities put in a good performance in Europe, with the Dow Jones Euro Stoxx 50 index closing up 1.1%, or 47.95 points, to 4,394.95 points.

Economists had expected the bounce-back after a second quarter distorted by reduced government spending and investment, which saw European growth up 2.8% year-on-year, or 0.3% quarterly, and eurozone growth up 2.5% year-on-year, or 0.5% quarterly.

But the solid performance is not likely to last in the wake of this summer’s credit crisis, which prompted central banks to bail out paralyzed banking systems with emergency loans. Turbulence in the financial markets and a wider slowdown in the United States pushed the European Commission earlier this month to cut its growth forecast for 2008 to 2.2% from 2.5%. (See “EU Economy Cooling”)

“The European Central Bank is discovering the fact that the credit crunch did not have as big an impact on the third quarter as had been expected,” said Matthew Cairns, senior economist at Moody’s Economy.com. “The real question for them now is the lagged effect of the credit crunch and whether or not that will impact real economic growth.”

What makes the current situation even trickier for the ECB is that some parts of the economy are showing signs of overheating. The European Commission said on Friday that it expected consumer price inflation for the eurozone in November to hit a six-year-high of 3.0%, up from 2.6% in October. Oil prices are dancing between $90 and $100 per barrel, and food and dairy prices are also on the rise, creating a macroeconomic Catch-22 for the ECB: how to fight inflation without curbing economic growth. (See “Stagflation In Europe?”)

“With the euro uncomfortably strong and eurozone economies currently showing clear signs of slowing, any additional tightening of monetary policy by the ECB would exacerbate already significant downside risks to the eurozone growth outlook,” said Howard Archer, chief economist with Global Insight.

The key short-term interest rate in Europe will likely stay at 4.0% for some time to come, at least until ECB Governor Jean-Claude Trichet can better gauge whether the current balancing act needs tweaking. But the strong euro will continue to hurt companies like Airbus parent European Aeronautic Defense and Space (other-otc: EADSF - news - people ), Dutch-American grocer Ahold (other-otc: AHONY - news - people ) and electronics maker Thales (other-otc: THLEY - news - people ) for some time to come, especially if Federal Reserve Chairman Ben Bernanke follows through on his hints of an interest-rate cut at the U.S. central bank’s policy meeting on Dec. 11. (See “Recession Fears Sink The Dollar”)

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Satellite radio dreams may be on the verge of coming true.

Sirius Satellite Radio (nasdaq: SIRI - news - people ) and XM Satellite Radio (nasdaq: XMSR - news - people ) have been working together for months on a deal to merge the two companies into one. On Friday, one analyst, at least, said that goal was about to be achieved.

Shares of both companies skyrocketed after Bear Stearns analyst Robert Pek said that while he believes the Justice Department’s junior staffers will attempt to block the deal, senior members will likely rule in favor of the merger allowing Sirius to buy out its larger counterpart, XM.

If the deal is approved, shareholders of XM will receive 4.6 shares of Sirius stock per share of XM.

XM Satellite Radio soared 15.7%, or $2.16, to $15.90, in Friday midday trading while Sirius Satellite Radio leaped 9.0%, or 32 cents, to $3.84.

In order to finalize the merger, the Federal Communications Commission must give its stamp of approval as well. According to Pek, the FCC decision could come soon after the Justice Department, as it is nearing the end of its 180-day timeline to make its judgment.

Back in February, Sirius annouced its intention to buy XM for $4.7 billion, as long as the Justice Department and the FCC give their stamps of approval. (See: Sirius/XM Gets Thumbs Up From Fowler)

Earlier this month, shareholders of both Sirius and XM voted in favor of the merger. Now, the fate of the two companies lies in the hands of federal regulators. While no official verdict has been given, several bigwigs support the union.

“If the two satellite radio companies, each only several years old, need to combine to be more effective competitors in an audio entertainment marketplace teeming with technological change and innovation, the government should not stand in the way,” former Federal Communications Commission chairman Mark Fowler said in September. (See: Sirius About A Merger)

According to Pek, if the merger receives federal regulatory approval, shares of XM could hit $20.00 while shares of Sirius could rise as high as $4.50.

The Associated Press contributed to this article.

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LONDON -

If there is one thing that irks Michael O’Leary, the fiery chief executive of Ryanair, it is government subsidies to his competitors, and the European Union’s apparent failure to do anything about it.

Ryanair (nasdaq: RYAAY - news - people ), the low-cost Irish carrier launched its fifth lawsuit in a month against the European Commission on Friday, this time over state aid to Italy’s beleaguered Alitalia (other-otc: ALAIF - news - people ) airline.

In the suit, filed in the European Court of First Instance in Luxembourg, Ryanair accused the commission of failing to investigate 1.7 billion euros in state aid given to the Italian government, despite the repeated complaints they have made since 2005. He said that the government of Romano Prodi continued to “illegally bail” out the airline, which was losing 400 million euros a year.

While it may seem rather unkind to go after Alitalia, which has struggled to keep afloat and has failed to find a single buyer, it is nothing personal. Ryanair has also launched similar complaints about government subsidies to Air France (nyse: AKH - news - people ), Germany’s Deutsche Lufthansa (other-otc: DLAKY - news - people ), Greece’s Olympic Airlines and Volare, a subsidiary of Alitalia.

The target doesn’t appear to be the airlines themselves, so much as the European Commission, which has given Ryanair many a rap for its own business practices. Ryanair faces inquiries over its business dealings in regional airports in different parts of Europe, including Finland, Sardinia and France. A decision by the EU Competition Commissioner Neelie Kroes to reject Ryanair’s takeover of rival Irish carrier Aer Lingus, led an apoplectic O’Leary to declare the decision “unlawful,” “unjustified,” and “nakedly political” and promise to launch an appeal in the European Court of First Instance. (See: ” Ryanair Talks Tough To E.U.”)

“We are calling on the commission to end its discriminatory and biased approach to state aid enforcement, to start promoting competition and consumer choice, and to put an end to this scandal of unlawful state aid to flag carrier airlines,” he said Friday.

Shares in Ryanair soared by 17 euro cents (25 cents), or 3.6%, to 4.89 euros ($7.19), in late afternoon trading in Ireland. Alitalia, which currently has far more urgent things to worry about than Ryanair’s action, ticked down by 0.7%, to 82 euro cents ($1.21) in Milan. Despite claims by Prodi that the airline will find a buyer by Christmas, the market remains skeptical about its prospects of finding a bidder willing to take up to a 49.9% stake in the government-controlled airline.

In addition to the heavy losses being made on a monthly basis, a buyer would have to contend with a strong union, which would fiercely battle any attempts to cut jobs. Air France-KLM (nyse: AKH - news - people )and Deutsche Lufthansa have all been thought of as potential bidders, though nothing concrete has ever emerged. A public auction failed to result in a single binding bid over the summer after a number of companies, including Russia’s Aeroflot (other-otc: AERUF - news - people ), pulled out of the bidding. (See: ” Another Day, Another Rumored Alitalia Buyout”)

The Associated Press contributed to this report.

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U.S. stocks were mostly higher at midday Friday though below their best levels of the day.

Wall Street opened sharply higher after Federal Reserve Chairman Ben Bernanke said Thursday evening that the U.S. central bank remains “alert and flexible” in the face of challenging economic conditions. Investors interpreted that statement as an indication the Fed will cut interest rates at its Dec. 11 meeting. (See: “Rate Cut Optimism Fuels Gains”)

The Dow Jones industrial average pulled back from an initial triple-digit rise, but was still up 74 points, or 0.6%, to 13,386. The Standard & Poor’s 500 was also still in the black with an 11 point, or 0.8%, gain, to 1,481, but the tech-centric Nasdaq Composite slipped into negative territory, down a point, less than 0.1%, at 2,667. American technology companies, which tend to have significant international sales, have less to gain from a domestic rate cut than more U.S.-focused industries.

Computer-maker Dell (nasdaq: DELL - news - people ) was proving a drag on the Nasdaq after Thursday’s third-quarter earnings report missed analyst expectations. Dell’s profit jumped 27%, but it still missed analyst expectations by a wide margin. Its shares tumbled 13.6%, falling $3.82, to $24.32.

Meanwhile, in the financial sector, the ax continues to fall at firms battered by the subprime mortgage meltdown. Morgan Stanley (nyse: MS - news - people )’s former co-president Zoe Cruz was replaced Friday, ahead of monstrous losses from the fixed-income operations she managed.

Cruz’s departure is being termed a retirement, but many Wall Street firms are finding management restructuring to be the most effective way to show investors they are taking steps to alleviate the pressures of the credit crunch amid market turmoil that is unlikely to slow down in the near term. (See: “The Morgan Stanley Shuffle”)

Shares of Morgan Stanley were up 60 cents, or 1.2%, to $52.94, on news of the executive shuffle.

In other management news, Motorola (nyse: MOT - news - people ) announced Chief Executive Ed Zander will step down effective Jan. 1. Zander has come under fire from activist investor Carl Icahn, over the struggles of Motorola’s handset division. Chief Operating Officer Greg Brown has been tapped to replace Zander. Motorola shares posted a slight gain on the announcement, up 4 cents, or 0.3%, to $15.69. (See: “Zander To Depart Slumping Motorola”)

Crude prices continued to beat a hasty retreat this week, falling well below $90 a barrel. After a brief rally Thursday on news of an explosion at a Canada-U.S. pipeline, the commodity resumed its slide. A strong U.S. inventory report and rumors of a production increase from the Organization of Petroleum Exporting Countries contributed to easing crude prices, which dropped $2.31, to $88.70 a barrel, in Friday trading.

Despite the recent decline, a Fed rate cut in December would depress the dollar, possibly sending oil shooting back up toward the $100 threshold.

The major oil companies were edging higher despite the sliding prices, with Dow component Exxon Mobil (nyse: XOM - news - people ) up 32 cents, or 0.4%, to $88.91. Chevron (nyse: CVX - news - people ) shares added 49 cents, or 0.6%, to $87.05, while ConocoPhillips (nyse: COP - news - people ) gained 43 cents, or 0.6%, to $79.25.

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HARRISBURG, Pa. (AP) — Hershey (HSY), the century-old maker of chocolate bars recognizable in every corner of America, is selling a mint that police officers and judges say would be recognizable on a drug corner.

Ice Breakers Pacs are nickel-size dissolvable pouches with a powdered sweetener inside. They look similar to the tiny heat-sealed bags used to sell illegal powdered drugs like crack, heroin and cocaine.

“Being in narcotics the majority of my career, I thought it was the real stuff,” Philadelphia Police Chief Inspector William Blackburn told the Philadelphia Daily News.

DALILY NEWS COLUMN: Mint or drug: Is Hershey’s cracked?

The mints, which are sold in blue and orange plastic slide-top cases, first hit store shelves in November.

Linda Wagner, a Philadelphia narcotics officer whose teenage daughter died of a heroin overdose, held back tears when she saw the pouches.

“I was shocked,” Wagner told the newspaper.

A spokesman for the company, based in Hershey, Pa., about 80 miles west of Philadelphia, pointed out that each pouch — made by two dissolvable mint strips — bears the Ice Breakers logo.

“It is not intended to simulate anything,” said spokesman Kirk Saville.

Saville would not directly respond to questions about whether Hershey has plans to change the product’s appearance or whether anyone in law enforcement or inside the company has previously raised a concern about it.

Contributing: Philadelphia Daily News

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By John Dunbar, Associated Press WASHINGTON — The Federal Communications Commission has approved the $1.3 billion sale of 35 television stations owned by Clear Channel Communication (CCU) to Newport Television, a private equity group, subject to certain conditions.

Newport is an investment group controlled by Providence Equity Partners. The sale will result in a violation of FCC ownership rules in nine markets and will require the divestiture of several stations. The agency announced the decision Thursday night.

The sale was conducted within the context of a much larger plan that will take Clear Channel private. The company is the nation’s largest operator of radio stations. Last month, shareholders approved the $19.5 billion sale of the company to a private equity group led by Thomas H. Lee Partners and Bain Capital Partners for $39.20 a share.

The sale of the 35 television stations will mean the new owner will be out of compliance with FCC rules that limit the number of stations one company may own in a single market. The market areas include Bakersfield, San Francisco, Santa Barbara, Fresno and Monterey in California; Salt Lake City; Albany, N.Y.; Jacksonville, Fla., and San Antonio, Texas.

The companies asked the FCC for waivers to operate the stations for six months until it comes into compliance with the rules. The FCC granted waivers in eight of the nine markets, denying the request for Albany.

Providence also owns a stake in Spanish language network Univision Communications and Freedom Communications Holdings and is in violation of the newspaper-broadcast station cross-ownership rule in five markets. Providence has said it would divest properties in those markets but has yet to do so, blaming “volatile conditions” in the credit markets.

As part of its reasoning for granting the waivers, the agency in its decision noted the larger sale, which will result in Clear Channel spinning off a number of radio stations. When Clear Channel announced the buyout in November of 2006, it said it would sell 448 of its 1,150 radio stations, all located in smaller markets, in deals separate from the larger transaction.

Democratic FCC commissioner Michael Copps, an outspoken opponent of the consolidation of ownership in the media, filed the lone dissent to the transaction.

“No one should be under any illusion that Clear Channel’s sale of its 35 full-power stations strikes a blow for de-consolidation,” he wrote. After the deal closes, Providence will have “attributable interests in a whopping 86 television stations and 99 radio stations in the United States” among other media properties, he added.

Copps questioned the recent trend of public media companies being taken private, and asked whether the FCC has enough information about the ownership and control of such groups to determine whether such transactions are in the public interest.

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 FIVE TRADING DAYS
Dow Jones industrial average, five days

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NEW YORK (AP) — Stocks pared early gains Friday and the Nasdaq composite turned negative, led by technology shares as No. 2 computer maker Dell (DELL) suffered its worst percentage decline in seven years on a disappointing outlook.

In late morning trade, the Dow Jones industrial average was up 58.77 points, or 0.4%, at 13,370.50. The Standard & Poor’s 500 index was up 7.64 points, or 0.5%, at 1477.36. The Nasdaq was down 6.43 points, or 0.2%, at 2661.70.

Stocks jumped early Friday, resuming this week’s rally after Federal Reserve Chairman Ben Bernanke gave investors more reason to believe further interest rate cuts are on the way.

In a speech late Thursday, Bernanke said persistently tight credit conditions, the housing slump and high energy prices will probably create some “headwinds for the consumer in the months ahead.” Although he expects the U.S. will avoid a recession, Bernanke said he believes consumers could become more cautious.

STORY: Bernanke’s speech AUDIO: Hear a key piece of Bernanke’s speech TEXT: Full text of Bernanke’s remarks

The central bank will have to be “exceptionally alert and flexible,” Bernanke said, echoing comments by Fed Vice Chairman Donald Kohn earlier in the week that helped Wall Street recover some of its recent steep losses. Investors appeared to read the phrase as a sign the Fed is willing to lower interest rates again, after cutting rates at the past two meetings.

The Fed meets again on Dec. 11. A rate cut could help reinvigorate growth, which has been slowing.

Evidence of that came Thursday in the Commerce Department’s latest report on consumer spending.

The department said spending rose a modest 0.2% in October, the slowest pace in four months and slightly below the 0.3% rise analysts expected. Personal income also rose 0.2% last month, weaker than the 0.4% increase analysts projected.

Contributing: Reuters

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Roger SmithFile photo by Tim Dillon, USA TODAY

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By Tom Krisher, AP Auto Writer DETROIT — Roger Smith, who led General Motors Corp. in the 1980s and was the subject of Michael Moore’s searing documentary “Roger and Me,” has died, the automaker said Friday. He was 82.

Smith died Thursday in the Detroit area after an unspecified brief illness, GM said.

He was appointed chairman and chief executive Jan. 1, 1981, and led the world’s largest automaker until his retirement on July 31, 1990.

During Smith’s tenure as chief executive, GM introduced its first front-wheel-drive midsize cars, formed a joint venture with Toyota to manufacture cars in California, created the Saturn brand and acquired Electronic Data Systems and Hughes Aircraft.

“Roger Smith led GM during a period of tremendous innovation in the industry,” current GM Chairman and CEO Rick Wagoner said Friday. “He was a leader who knew that we have to accept change, understand change, and learn to make it work for us.”

“Roger was truly a pioneer in the fast-moving global industry that we now take for granted,” Wagoner said.

Smith also served GM as an executive vice president and a member of the board of directors beginning in 1974.

Moore has become an Oscar-winning documentary maker, but he became famous with “Roger & Me,” which explored how GM’s plant closings and layoffs affected his hometown of Flint.

The 1989 film chronicles Moore’s fruitless attempts to interview Smith about the devastation in Flint, although magazine articles and documentaries have alleged that Smith granted interviews to Moore before the film’s release.

Moore has acknowledged a five-minute interview with Smith about a company tax abatement at a 1987 shareholders’ meeting, but said that was before he started working on “Roger & Me.”

Smith often faced questions about the documentary, which contained interviews of people who said they lost their homes after GM plant closures in Flint.

One woman said she had to start killing rabbits for food after GM shut down the plants, eliminating 30,000 jobs in the city of 150,000.

“I haven’t seen it,” Smith told reporters shortly after the film was released. “I’m not much for sick humor, and I don’t like things that take advantage of poor people.”

At the time, Moore said he arranged with Warner Bros. to reserve a seat for Smith at every showing of the movie across the United States.

Smith was born in Columbus, Ohio, in 1925 and served in the Navy from 1944 to 1946. He received a bachelor’s degree in business administration in 1947 from the University of Michigan, and a master’s degree in business from the school in 1953.

His career at GM began in 1949 as an accounting clerk. He became treasurer in 1970 and vice president in 1971. In 1974, he was elected executive vice president in charge of the financial, public relations and government relations staffs.

He led the company as import brands began to expand their market share and as GM grew its global business and dealt with tough U.S. environmental and safety standards.

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By John Porretto, AP Business Writer HOUSTON — Oil exploration and production company ConocoPhillips (COP) said Friday that it has proposed to develop a multibillion-dollar pipeline that would transport natural gas from Alaska’s North Slope to the lower 48 states and Canada.

The company said it’s “prepared to make significant investments, without state matching funds, to advance this project.”

ConocoPhillips spokesman Charlie Rowton said the company’s best estimate for the entire project, including the pipeline from Alaska’s North Slope to Chicago, is between $25 billion and $42 billion.

The pipeline would provide an important avenue for bringing Alaska’s massive stores of natural gas to U.S. markets that rely on it for fueling home heaters and other uses. It would move about 4 billion cubic feet of natural gas per day.

The North Slope has 35 trillion cubic feet of known natural gas, and is believed to hold many more times that in undiscovered reserves. But there is no method for shipping natural gas and the staggering cost of such a project has left the resource stranded thousands of miles from markets.

Now with natural gas prices high, a national market eager for cleaner-burning energy, Alaska seeking new participants in its energy industry and mature North Slope oil fields ripe for conversion to gas production, the time may be finally right for the long-desired project, said Marty Rutherford, deputy commissioner of the Alaska Department of Natural Resources.

The state’s Alaska Gasline Inducement Act calls for competitive proposals from energy companies for the right to launch what residents hope will be the next Alaska pipeline boom.

In a statement, ConocoPhillips Chairman and Chief Executive Jim Mulva said the company hopes to work directly with the state to advance the project as quickly as possible.

“We also expect to approach other parties to explore ways through which their participation could add value to this effort,” Mulva said.

Specifically, Rowton said ExxonMobil and BP would be logical participants as the project moves forward. “We think it makes sense for their to be other owners,” he said.

ConocoPhillips said it is already gathering data to support the pipeline permit application.

During the initial phase of the project, Bechtel Oil, Gas and Chemicals will provide construction and design support, the company said.

Contributing: Reuters

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LONDON - The European Union reported healthy third-quarter economic growth on Friday, marking a welcome change from the sluggish rate in the previous period. But with inflation at a six-year high, the strong euro hurting exports and consumer confidence rapidly falling, central bankers are unlikely to change their “wait-and-see” policy just yet.

The EU said on Friday that third-quarter gross domestic product had grown 2.9% year-on-year, or 0.8% since the second quarter of 2007. The 13-member eurozone grew 2.7% year-on-year, or a quarterly growth of 0.7%. Economists had expected the bounce-back after a second quarter distorted by reduced government spending and investment.

But the solid performance is not likely to last in the wake of this summer’s credit crisis, which prompted central banks to bail out paralyzed banking systems with emergency loans. Turbulence in the financial markets and a wider slowdown in the United States pushed the European Commission earlier this month to cut its growth forecast for 2008 to 2.2% from 2.5%. (See “EU Economy Cooling”)

“The European Central Bank is discovering the fact that the credit crunch did not have as big an impact on the third quarter as had been expected,” said Matthew Cairns, senior economist at Moody’s Economy.com. “The real question for them now is the lagged effect of the credit crunch and whether or not that will impact real economic growth.”

What makes the current situation even trickier for the ECB is that some parts of the economy are showing signs of overheating. The European Commission said on Friday that it expected consumer price inflation for the eurozone in November to hit a six-year-high of 3.0%, up from 2.6% in October. Oil prices are dancing between $90 and $100 per barrel, and food and dairy prices are also on the rise, creating a macroeconomic Catch-22 for the ECB: how to fight inflation without curbing economic growth. (See “Stagflation In Europe?”)

“With the euro uncomfortably strong and eurozone economies currently showing clear signs of slowing, any additional tightening of monetary policy by the ECB would exacerbate already significant downside risks to the eurozone growth outlook,” said Howard Archer, chief economist with Global Insight.

The key short-term interest rate in Europe will likely stay at 4.0% for some time to come, at least until ECB Governor Jean-Claude Trichet can better gauge whether the current balancing act needs tweaking. But the strong euro will continue to hurt companies like Airbus parent European Aeronautic Defense and Space (other-otc: EADSF - news - people ), Dutch-American grocer Ahold (other-otc: AHONY - news - people ) and electronics maker Thales (other-otc: THLEY - news - people ) for some time to come, especially if Federal Reserve Chairman Ben Bernanke follows through on his hints of an interest-rate cut at the U.S. central bank’s policy meeting on Dec. 11. (See “Recession Fears Sink The Dollar”)

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