Australia's Labor roiled by resignations after failed leadership coup

By Rob Taylor

CANBERRA (Reuters) - Australia's Prime Minister Julia Gillard faced a string of ministerial resignations on Friday in the wake of a botched leadership coup against her, forcing a reshuffle of her Labor government just months from potentially disastrous elections.

Resources Minister Martin Ferguson said he would step down, joining departing Cabinet colleagues Simon Crean and Chris Bowen, as well as junior minister Kim Carr. All had backed Gillard's chief rival Kevin Rudd as the party's best hope to reverse polls pointing to a thrashing by conservative opponents at the September 14 elections.

"I have a view it's the only honorable thing to do. I would have voted for Kevin Rudd yesterday and Simon Crean to try and give this party a fresh start," an emotional Ferguson told reporters at parliament in Canberra.

The political unrest in the country threatens to cloud decision making with elections just six months away and as the minority government readies to take leadership of the G20 and after Canberra became a rotating United Nations Security Council member.

Gillard stamped her authority on Labor by being re-elected unopposed after Rudd conceded he did not have the numbers to topple her after a tumultuous day of backroom plotting that will do even more damage to the government's fading popularity.

Treasurer Wayne Swan, widely derided by voters despite having steered the Group of 20 wealthy nations member through the last financial downturn with 5.4 percent unemployment and a 21st year of unbroken economic growth, was re-elected as Gillard's deputy.

Crean was sacked immediately by Gillard on Thursday for backing Rudd in what newspapers called a political "suicide bombing" that appeared to have delivered no gains for Labor except the near-certainty of a thumping election defeat.

TALENT DRAIN

Rudd, a Mandarin-speaking former prime minister ousted by Gillard in 2010 amid another round of plummeting polls, said on Friday he would never again run for the leadership - unless it was already vacant.

"I don't think it's worth raking over the coals. What's done is done and let's get on with the future," Rudd said. "It's really important that we bind together and that's what the Australian people expect of us."

Bowen, one of Rudd's key backers and a former immigration minister, said he would also quit, stripping Gillard's top ranks of another of its most effective political talents.

Ferguson, in particular, had been an influential advocate for the country's mining industry and helped broker a 2010 deal with major resource companies including BHP Billiton and Rio Tinto to abandon a damaging campaign against a mining profits tax introduced by Labor and later watered down.

Gillard, the plain-speaking daughter of Welsh migrants, has consistently failed to arrest a slump in opinion polls, which predict a major defeat in September with Labor losing about 20 seats in the 150-seat parliament.

But she attempted to draw a line under the divisions and concerns about her leadership, extending a press conference at a road construction site north of Sydney on Friday to face down questions from journalists about the government's stability.

"This issue is over and done with. This issue has been resolved for all time, and I think Kevin's statement reflects that," she said.

Gillard said she would make changes to her ministry in coming days, but faced a headache over who to appoint after the departure of some her most effective talents.

"I'm someone who is made of I think pretty strong stuff, and I think that's been on display. Politics is not an easy business," she said.

(Reporting by Rob Taylor; Editing by Ian Geoghegan)

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Australian Cabinet minister quits over leadership

CANBERRA, Australia (AP) — Australia's prime minister has accepted the resignation of a Cabinet minister who had supported a bungled leadership challenge.

Chris Bowen told reporters Friday that his resignation was "the honorable thing to do."

He had been the minister of tertiary education, skills, science and research.

Thursday's fiasco is reinforcing perceptions of Julia Gillard's government as dysfunctional. Gillard already removed the minister who forced her to call the party leadership ballot and a junior minister who supported the would-be challenger.

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Australian Cabinet minister quits over leadership

CANBERRA, Australia (AP) — Australia's prime minister has accepted the resignation of a Cabinet minister who had supported a bungled leadership challenge.

Chris Bowen told reporters Friday that his resignation was "the honorable thing to do."

He had been the minister of tertiary education, skills, science and research.

Thursday's fiasco is reinforcing perceptions of Julia Gillard's government as dysfunctional. Gillard already removed the minister who forced her to call the party leadership ballot and a junior minister who supported the would-be challenger.

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Australia's Gillard calls for leadership ballot

CANBERRA, Australia (AP) — Prime Minister Julia Gillard has called for a leadership ballot Thursday as her party faces the growing prospect of a sound election defeat later this year.

She said the ballot of a leader and deputy leader of the Labor Party would be held in the afternoon, hours after a senior minister called on her to hold a vote.

Minister Simon Crean said he would nominate as the deputy and wanted former prime minister Kevin Rudd to stand as the candidate for the top post.

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Australian minister calls for leadership ballot

CANBERRA, Australia (AP) — A government minister Thursday called on Prime Minister Julia Gillard to hold a leadership ballot because her government faces defeat at elections this year.

Minister Simon Crean said government colleagues must sign a petition to force a ballot if Gillard refuses. Her office did not immediately comment, and the office of Kevin Rudd, her likely challenger, said he would issue a statement later.

Crean said he would nominate as deputy leader and wanted former prime minister Rudd to challenge for the top post. Crean is a senior minister for regional Australia, regional development and local government and arts.

Australian prime ministers are selected by lawmakers in the ruling party, but part of Rudd's appeal is opinion polling that shows Rudd would be a far more popular choice of the public.

He led Labor to victory at elections in 2007, then was deposed by his then-deputy Gillard in an internal party coup in 2010. He was roundly defeated in a ballot of Labor lawmakers last year, but recent reports have cited sources in saying he's now believed to have stronger support.

"Kevin Rudd in my view has no alternative but to stand for the leadership," Crean told reporters.

"He can't continue to play the game that says he's reluctant or he has to be drafted," he said.

"This is an issue that has to be resolved. There's too much at stake," Crean added.

Speculation has been growing that Gillard would be challenged before national elections in September. Opinion polls have indicated her party would be soundly defeated in the vote.

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Australian PM Gillard wins leadership vote unopposed

CANBERRA (Reuters) - Australia's Prime Minister Julia Gillard faces a leadership challenge after rivals called for a ballot to resolve months of slipping polls and internal tensions that put her minority Labor government on course to be swept away at September elections.

"This is not personal. It's about the party, the future of the country," said senior Labor minister Simon Crean, calling the challenge to break a deadlock between Gillard and chief rival Kevin Rudd, who she deposed in 2010.

Crean said Gillard had told him she would not call a leadership vote and he urged the Labor party to now pressure her to stage a ballot.

(Reporting by James Grubel; Editing by Michael Perry)

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China's new leadership faces myriad challenges

BEIJING (AP) — China named the Communist Party's No. 2 leader, Li Keqiang, premier on Friday as a long-orchestrated leadership transition nears its end, leaving the new leaders to confront uneven economic growth, unbridled corruption and a severely befouled environment that are stirring public discontent.

The rubber-stamp legislature endorsed Li for the post, voting 2,940 in favor with one opposed and six abstaining. A day earlier, the legislature similarly appointed Xi Jinping to the ceremonial post of president, making him China's pre-eminent leader following his ascent last November to head the Communist Party and the military.

Though the outcome of the legislative session was a foregone conclusion, it's the result of years of fractious behind-the-scenes bargaining. They hail from different factions: Li Keqiang (pronounced lee kuh chahng) is a protege of the now-retired President Hu Jintao while Xi Jinping (pronounced shee jin ping) is the son of a revolutionary veteran with backing among party elders.

After Li's selection was announced, he and Xi shook hands and smiled for photographers in the Great Hall of the People. Evidence of their and their patrons' ability to forge consensus will be seen Saturday when appointments to the Cabinet and other top government posts are announced.

The son of a revolutionary veteran, Xi cuts an authoritative figure with a confidence and congeniality that was lacking in his predecessor, the aloof and stiff Hu. New Premier Li, from a low level officials' household, has appeared to be a cautious administrator, like Hu, and has not been associated with particular policies on his rise.

Together, Xi and Li now steer a rising global power beset with many domestic challenges that will test their leadership. Chief among them are a sputtering economy that's overly dominated by powerful state industries.

Chinese leaders want to nurture self-sustaining growth based on domestic consumption and reducing reliance on exports and investment. Consumer spending is rising, but not as fast as Beijing wants, which has forced the government to support an economic recovery with spending on public works and investment by state companies.

"If the official data is to be believed, China has been moving in the wrong direction for the past decade - towards 'more investment, less consumption,'" wrote Standard Chartered economists Stephen Green and Wei Li in a research note. "This could create problems."

An increasingly vocal Chinese public is expressing impatience with the government's unfulfilled promises to curb abuses of power by local officials, better police the food supply and clean up the country's polluted rivers, air and soil.

"What do ordinary people care about? Food safety, and smog if you are in a big city, and official corruption," said the prominent Chinese author and social commentator Murong Xuecun, the pen name of author Hao Qun. "They just want to have a peaceful, stable and safe life. To have money and food, and live without worry of being tortured, or having their homes forcefully demolished."

"The entire country is watching for Xi's next step," the writer said.

Wu Xiangdong, chairman of a wine company in central Hunan province and one of the congress delegates who poured out of the vast, ornate Great Hall of the People after Friday's vote, said expectations also were high for Li, the new premier.

"We are very excited and look forward to the premier and the new generation of leaders to be better able to work on the economy, food safety, the environment and improving social equality," Wu said.

Xi's accession marks only the second orderly transfer of power in more than six decades of Communist Party rule. Underlining that transition, after the result of Thurday's vote was announced, the 59-year-old Xi bowed to delegates and turned to his predecessor, Hu. The two shook hands and posed for photos.

Governing China is often plodding as leaders, none of them politically strong enough to prevail individually, forge consensus with their colleagues in the collective leadership.

In some intriguing signs of the new leadership's direction, the congress on Friday appointed as supreme court president Zhou Qiang, a provincial party secretary with a reputation as a progressive and a former aide to a well-known legal reformer. On Thursday, another liberal-minded reformer and a close ally of Hu, Li Yuanchao, was named vice president, breaking with the practice of recent years because he is not in the party's seven-member ruling inner sanctum.

Early indications of the new government's priorities came in a policy program delivered during last week's opening of the legislative session. It pledged to clean up the country's environment, fight pervasive graft and official extravagance and improve welfare benefits for the poor.

The report promised to give private companies a fairer chance to compete, but did not say how Beijing would deal with big state companies controlling most of China's industries that economists have warned need to be curbed in order to preserve future growth. Many experts fear the government will be too hamstrung by powerful interest groups, linked to state industries, to be able to make these changes. But few doubt the urgency of the reform that's needed.

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China opens congress that tests new Xi leadership

BEIJING (AP) — Newly installed Chinese leader Xi Jinping faces an early test of his pledges to curb corruption, raise living standards and create a fairer society when China's national legislature opens Tuesday to appoint top government posts and approve policies.

The annual session of the National People's Congress comes as the government has shifted more resources to provide social benefits to an increasingly demanding public that is empowered by the Internet and tired of the waste and extravagance of the governing Communist elite.

An indication of the Xi leadership's priorities and how it is doing in consolidating power after three months in office will come with the opening policy address to the congress. Though given by Premier Wen Jiabao, who is retiring after a decade in office, the address and an accompanying budget are consensus documents approved by Xi and others in the collective leadership.

Among the crucial figures are outlays for defense and domestic security — both of which have seen double-digit percentage increases in recent years.

The legislature's spokeswoman defended booming military spending Monday, saying the vast investment has contributed to global peace and stability, though she did not announce the coming year's percentage increase, as usually has been done on the eve of the legislature's opening.

With China now the world's No. 2 military spender after the U.S., the amount of this year's increase will be a barometer of the complicated relationship between Xi and the politically influential military. A big boost would show Xi wants robust backing for the People's Liberation Army at a time when China has tense territorial disputes with neighbors and wants to reduce U.S. influence in the region. A smaller increase would show that Xi feels he already has strong military support without the need to pander to its recent demands for ever-larger outlays.

Growth in the military budget should match or exceed last year's rate, if only to keep up with rising inflation, said Ni Lexiong, a military expert at Shanghai University of Political Science and Law. Tensions with Japan and others, he said, should ensure a bigger voice for the military.

"The more serious the situation becomes, the higher status the military will enjoy and that includes military, social and political status," Ni said.

Put in power in November after political scandals further tarnished the Communist Party leadership's battered public image, Xi impressed ordinary Chinese with plain talk about fighting corruption, closing a wealth gap, improving social justice and addressing quality-of-life issues like the environment. That honeymoon is waning, as the public looks for concrete policies to match the rhetoric.

"Whether it has been 'harmonious society' or 'beautiful China,' those are really sort of idealistic goals they have held up, the kind of life that Xi Jinping has articulated," said Dali Yang, a China politics expert at the University of Chicago. "The challenge now is that everywhere people look, China is far from harmonious, or beautiful for that matter."

During its 13-day session, the legislature, most of whose nearly 3,000 deputies are party members, will approve appointments to top government posts and ministries, completing the once-a-decade leadership transition begun in November with the elevation of Xi and others in the Communist Party's Politburo. The congress will approve a proposed streamlining of government ministries, and give Xi the largely ceremonial title of president. In reality, the decisions have already been made by Xi and party power-brokers behind closed doors.

The outcomes provide a measure of how Xi has fared in the divisive back-room negotiations, whether he has been able to install allies in crucial posts and gain endorsement for some of his signature policies.

Beyond the politics, the party faces a legitimacy crisis among the public. Many Chinese see business, society and politics as dominated by a party-connected elite and wonder if Xi, as the son of a revolutionary veteran, has the political will to take on entrenched interests. The disaffected include the middle class, which has risen out of the successful market reforms for the past decades and has tended to support the party.

There's a "perception that there's a so-called new aristocracy," said Willy Lam, a China politics watcher at the Chinese University of Hong Kong. "There's a sense that the economic tide is being monopolized by people with political connections, even amongst the college educated and the professionals."

With the party's reputation damaged and communism and the revolution now seen as abandoned ideals, meeting public expectations will be all the more important for Xi and Li Keqiang, the next premier. "Both Xi and Li do not have national stature, so they really have to justify their leadership position by performance," Lam said.

The military, with its deep roots in the communist revolution and its large delegation to the congress, is a key constituency, and Xi is seen by analysts as having a stronger hand to play than his predecessor, Hu Jintao. The 59-year-old Xi is the son of a famed revolutionary general, and he served briefly in uniform as aide-de-camp to the defense minister three decades ago.

Hu stepped aside in November, not only from the party leadership but also from its Central Military Commission, in favor of Xi, who immediately moved to court the People's Liberation Army. He has conspicuously visited naval, air force and infantry bases and met with the commanders of the nuclear missile command.

"Clearly he has a very solid grip on the PLA," said Warren Sun, an expert on the Chinese leadership at Australia's Monash University.

Chinese defense spending has grown substantially each year for more than two decades, and last year rose 11.2 percent to 670.2 billion yuan ($106.4 billion), an increase of about 67 billion yuan. Only the United States spends more on defense. Its military budget last year was estimated from $1 trillion to $1.4 trillion.

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Associated Press writer Gillian Wong contributed to this report.

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