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Corus chief executive John Cassaday
Corus chief executive John Cassaday

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Dire warnings from Greece; what's pushing the economy? Add to ...

Stories Report on Business is following today:

Dire warnings from Greek PM

Details of a rescue plan with the International Monetary Fund and the European Union have entered the final stretch and by most accounts, a cash infusion isn't too far off. But Greek Prime Minister George Papandreou is warning that new austerity measures must be taken for the survival of debt-ridden Greece.

The talks over what extra steps Athens must take as part of the rescue, which will provide €45-billion in loans this year and up to a reported €120-billion over several years, are expected to be completed over the weekend, possibly by Sunday.

Once an agreement on further cuts is in place, Germany - which would be the largest EU contributor to the aid package and has insisted on strict conditions for releasing the money - is expected to quickly push the issue through parliament so funds can be approved before Greece faces a May 19 debt payment date.

"The measures we must take, which are economic measures, are necessary for the protection of our country. For our survival, for our future, So we can stand firmly on our feet," Mr. Papandreou said in Parliament.

"It is a patriotic duty to undertake this, with whatever political cost, which is tiny faced with the national cost of inaction ... and indecision," he said.

Indications that help will soon be approved for Greece has calmed markets. Greece's borrowing costs fell for the second day, with the interest rate gap, or spread, between Greek 10-year bonds and their benchmark German equivalent narrowing to 6.20 percentage points Friday, from a staggering 10 points Wednesday.

Mr. Papandreou's government is already implementing a €4.8-billion austerity package that has trimmed civil servants' income, frozen pensions and hiked taxes which has already drawn the ire of labour unions.

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Manufacturing pushes economy

Statistics Canada says the economy grew by 0.3 per cent in February, driven mostly by manufacturing.

The agency says real gross domestic product was also boosted by gains in mining.

Manufacturing output overall rose 1.2 per cent in February, but durable goods makers showed 1.4 per cent growth.

Overall, the mining sector increased 0.4 per cent in February, although with oil and gas taken out, output grew by 7.6 per cent.

There were modest increases in retail trade and construction.

The volume of wholesale activity declined 1.4 per cent following five consecutive monthly increases.

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Quebec stations changing hands

Cogeco Inc. says it will pay $80-million cash to buy the Quebec radio stations currently owned by Corus Entertainment Inc. .

The 11 Corus stations are in several cities throughout the province, including four in Montreal, two in Quebec and two in Sherbrooke.

They will join the five radio stations that Cogeco already owns in Montreal, Quebec, Trois-Rivieres and Sherbrooke.

The deal between Cogeco and Corus will require approval from Canada's broadcasting regulator.

Toronto-based Corus said earlier this year that it intended to sell the Quebec radio stations, which have suffered along with the rest of the industry because of a drop in advertising revenue.

Corus also has radio stations in other parts of Canada but as well as several major specialty cable television channels.

Montreal-based Cogeco owns both radio stations and Canada's fourth-largest cable TV system.

Cogeco says it plans to reach new audiences by adding to its radio network in Quebec.

"The Corus radio stations are a natural fit with Cogeco's existing radio stations," said Louis Audet, the president and chief executive officer of Cogeco Inc.

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Gold hits 2010 high

Gold hit a 2010 high above $1,170 (U.S.) an ounce in Europe on Friday, fuelled by euro strength and investors continuing to embrace the metal's safe-haven properties on unease over euro zone sovereign debt levels.

Spot gold reached a peak of $1,176.40 an ounce and was bid at $1.174.55 an ounce at 0913 GMT, against $1,166.10 late in New York on Thursday. It also hit a record peak in Swiss francs at 1,281.19 francs an ounce.

The precious metal has rallied 5.3 per cent so far in April, its biggest one-month rise since November 2009, as credit ratings downgrades of Greece, Spain and Portugal unleashed a wave of risk aversion, channelling money into gold.

Financial markets were settling down slightly, helping the euro to rally, on hopes that a multibillion-euro aid package for Greece would be hammered out within days and prevent the crisis from spilling over to other countries.

But the fear of contagion was clearly evident in gold, analysts said, with prices now on track to move back towards their December high, a record peak of $1,226.10 an ounce.

"Gold has been trading in a range of $1,160-1,175, and if $1,175 gets taken out, we should be in for a sharp rally," said Afshin Nabavi, head of trading at MKS Finance in Geneva. "We could head for the $1,200 area."

"Precious metals have put in a very good performance this week," he added. "Once the metals show confidence and direction, we see investors coming back in, given the situation in Europe."

U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $7.30 to $1,176.10 an ounce.

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U.S. economy expands

The economy grew at a solid 3.2 per cent pace during the first quarter of this year as consumers boosted their spending by the most in three years.

The Commerce Department's initial estimate of the economy's performance in the January-to-March quarter, released Friday, provided more evidence that the economy is strengthening. It marked the third straight quarterly gain as the United States heals from the longest and deepest recession since the 1930s. Still, growth was weaker than in the fourth quarter of last year, when the economy grew at 5.6 per cent.

Consumers rebounded and powered the first-quarter's growth. They increased their spending at a 3.6 per cent pace, the strongest showing since early 2007 - before the economy tipped into a recession. That marked a big improvement from the fourth quarter when consumer spending grew at a lacklustre 1.6 per cent pace.

Even though consumers aren't spending as freely as they normally do early in strong economic recoveries, they are spending sufficiently to keep the economy expanding.

Looking ahead, analysts believe consumers will be wary of stepping up spending much further. The unemployment rate is high at 9.7 per cent and is expected to stay elevated in the months ahead. Sluggish income growth and problems getting loans could restrain shoppers' appetite to spend, they say.

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