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PARIS: Under the \2 billion deal, Enel takes a 12.5 percent stake in Frances next-generation reactor.

A pact sealed Friday that gives the Italian utility Enel a chunk of Йlectricitй de Frances prized nuclear assets chimes with European Union plans to break down energy borders - and provides Italy with cheap nuclear energy without having to house a politically sensitive plant on its own soil.

Under the \2 billion, or $2.9 billion, deal, signed in the presence of President Nicolas Sarkozy of France and Prime Minister Romano Prodi of Italy, Enel takes a 12.5 percent stake in Frances first, third-generation European pressurized water reactor, or EPR, which is being built in Flamanville in northern France.

Enel said the 1,600 megawatt facility should be operational in 2012 after an investment of \3.6 billion.

Enel also has the option to take part in five other third-generation reactors that are not yet under way. In turn, EDF will participate in Enels projects in Europe and the Mediterranean.

Colette Lewiner, a former EDF executive now with Capgemini, said the European Commission should welcome the deal, not least because of its promotion of nuclear energy, which is increasingly seen as a crucial part of the energy mix if the EU is to have secure and sustainable supplies.

“This should help meet the European union climate change objectives on CO2 emissions reduction,” Lewiner said.

Italy banned nuclear power generation on its own territory following a referendum after the worlds biggest nuclear disaster at Chernobyl in 1986.

But its overdependence on imported gas has made some politicians and industry executives reconsider, improving the domestic environment in Italy for a deal with the worlds biggest nuclear power operator.

EDF has 58 plants in France providing nearly 80 percent of the countrys electricity.

Lewiner said sharing the massive investment cost lowered the risk for EDF, while giving Enel access to nuclear technology.

As an advance on the EPR capacity, energy-hungry Italy gets immediate access to Frances baseload capacity. Enel said it will get 600 megawatts in 2008, increasing to 1,200 megawatts in 2012.

The deal signed Friday has been stalled for the past two years as both countries bristled at the others forays into its energy market. A preliminary accord was signed in May 2005.

After EDF swooped on Edison - Italys second-largest power company after Enel - the previous Italian government of Silvio Berlusconi capped EDFs voting rights at 2 percent, even though the French company controlled a majority stake. The cap was later removed.

France responded by blocking Enels interest in the French utility Suez, creating instead a government brokered merger with Gaz de France.

“We had some upsets,” Prodi said Friday. “This period is now behind us.”

Also at the meeting between Sarkozy and Prodi, Finmeccanica of Italy and Thales of France agreed to merge their underwater weapon system activities. The French power grid operator RTE, a unit of EDF, and its Italian counterpart, Terna, also agreed to increase their interconnection capacity by 60 percent.

The meeting “allowed us to settle the contentious issues which have poisoned relations between the two countries over energy,” Sarkozy said at a joint news conference with Prodi.

A spokesman for the EU energy commissioner, Andris Piebalgs, said for the single European market to work properly, legislation already in place needed to be enforced.

The mergers and cooperation among companies that are currently happening, he said, “prove that companies are beginning to realize that we are going towards a single European market.”

Several months have now passed since China announced that it had created a state agency to oversee the investment of its foreign exchange reserves, the bulk of which are held in USD-denominated assets. It now appears that the ensuing hysteria, which speculated that China would begin diversifying its reserves into other currencies, was overblown. The same applies to speculation that other countries would follow suit. In fact, the International Monetary Fund (IMF) announced today that fully 65% of the worlds forex reserves ($2.24 trillion) are still held in USD, which represents a 4% increase over last year. In short, the data suggests that all of the talk surrounding a shift away from the USD did not really translate into much action. The Economic Times reports:

Emerging market countriesare thought to be the main dollar holders. High oil prices bring dollars flooding into the Middle East, while in Chinas case, intervention to keep the yuan weak keeps export revenues pouring into Beijings coffers.

Read More: Move away from dollar reserves still all talk

WASHINGTON: The U.S. government is working with the home loan industry on a plan to extend lower, introductory interest rates on home loans before they reset at higher levels.

Treasury Secretary Henry Paulson Jr. and other top regulators met Thursday with loan servicing companies, which that collect and distribute loan payments, and other industry executives. No formal agreement was announced, but an accord on the issue could be revealed in the next week or two.

“Weve all agreed that there should be some sort of standardized approach to reaching more homeowners faster,” said the Treasury Department spokeswoman, Jennifer Zuccarelli.

Among the executives attending were David Lowman, head of the JPMorgan Chase home lending business and Michael Held, a division president with the Wells Fargo home mortgage unit, company representatives said.

The meeting was held as part of coalition organized by the administration of President George W. Bush, dubbed Hope Now, that was formed in October as a response to soaring defaults and foreclosures.

The mortgage industry and U.S. regulators have been under intense pressure from activists, lawmakers and consumer groups to help borrowers stave off foreclosure, particularly as adjustable-rate mortgages begin to reset, meaning much higher payments.

Last week, California officials announced a deal with four major loan servicing companies. That agreement with Governor Arnold Schwarzenegger includes Countrywide, GMAC Financial Services, Litton Loan Serving and HomEq Servicing.

The Bush administration plan, however, may meet resistance from investors. They have been critical of Sheila Bair, chairman of the Federal Deposit Insurance Corp., who has spent the autumn urging mortgage servicing companies to agree to permanent conversions of adjustable-rate loans to fixed-rate loans.

The change envisioned by Bair would apply only for borrowers who are current on mortgage payments but unable to afford loans that reset to higher rates. “We need to have long-term sustainable modifications,” Bair said during a news conference Wednesday.

Instead of permanently changing the terms of loans, the Bush administrations plan is likely to allow teaser rates to be extended for five to seven years. That could give borrowers enough of a breather to shore up their finances and ultimately refinance into traditional, 30-year fixed-rate loans.

Still, some on Wall Street are skeptical. Richard Bove, an analyst with Punk, Ziegel, called the plan “yet another idea to drive funds away from the markets,” and added that “the concept of forcing banks to keep bad loans on their books violates every precept of regulation in American banking.”

Critics say that companies would face lawsuits if they permitted modifications that were not in the best interest of investors. Supporters, however, argue that investors would stand to benefit because they would avoid the cost of a foreclosure - estimated to be around $50,000 per loan.