Starbucks to review British tax arrangements

LONDON: Global coffee giant Starbucks said Sunday it was reviewing its tax affairs in Britain after it took a roasting from lawmakers and campaigners who accuse the chain of paying too little.

The Seattle-based firm admitted that "we need to do more" although it would not confirm a report in Britain's Sunday Times newspaper that it will promise this week to increase the amount of corporation tax it pays.

"We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more," Starbucks said in a statement.

"As part of this we are looking at our tax approach in the UK. The company has been in discussions with HMRC (Her Majesty's Revenue and Customs) for some time and is also in talks with the Treasury (finance ministry).

"We will release more details later in the week."

Starbucks had previously confirmed that it did not pay any corporation taxes in Britain for the past three years on sales worth £400 million ($640 million, 493 million euros).

It was able to do so by paying fees to other areas of its business -- such as "royalty payments" for the use of the brand -- which resulted in the company posting a series of losses and not having to pay any corporation tax.

The Sunday Times said that since coming to Britain in 1998 the chain has paid just £8.6 million in corporation tax despite generating £3 billion in revenue.

The spokesman added: "Starbucks is committed to the UK for the long term and we have invested more than £200 million in our UK business over the past 12 years.

"Starbucks has complied with all the tax laws in this country but has regretfully not been as profitable as we would have liked."

The Public Accounts Committee -- a panel of British lawmakers -- is due to release a report this week which is expected to criticise the measures used by corporations to avoid paying tax as the rest of the country grapples with tough austerity measures.

The committee quizzed senior figures from Starbucks, US online retailer Amazon and Internet search giant Google.

During the hearing Margaret Hodge, a Labour party lawmaker who chairs the committee, said Starbucks' claim that its British division was unprofitable "just doesn't ring true".

Starbucks has faced calls by activist groups for a consumer boycott in recent weeks.

- AFP/ck

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FDI in retail to safeguard international market mafias' interest: BJP

ANI Dec 1, 2012, 03.28PM IST

NEW DELHI: India's main opposition Bharatiya Janata Party (BJP) today said retail reform is a step taken by the Congress led-federal government to safeguard the interests of the international market mafias at the cost of national interest.

BJP vice president Mukhtar Abbas Naqvi said on Saturday that voting inside the parliament would decide as to who is in favour of national interest and who is working for international interests.

"The government feels that their responsibility is to safeguard the interest of international market mafias instead of national interest and for saving the interest of international market mafias, the government is ready to compromise with national interests. Now, the parliament will decide as to who is in support of international market mafias and who are supporting national interests," said Naqvi.

The government's decision to allow foreign supermarket chains such as Wal-Mart had triggered protest not only from opposition parties but also from some of its allies.

BJP had sought debate on the issue of allowing Foreign Direct Investment (FDI) in the retail sector, under the rule that entails voting after discussions.

Meanwhile, Minister in the Prime Minister Office (PMO), V Narayanaswamy said the government would answer all the queries raised by the opposition parties in the parliament and will explain the benefits of allowing FDI in retail sector.

The lower house of parliament has set December 04 and 05 as the date to vote and debate on FDI. The dates for the upper house are yet to be decided.

Narayanaswamy said the government is confident of becoming victorious in the debate.

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Asperger's dropped from revised diagnosis manual

CHICAGO (AP) — The now familiar term "Asperger's disorder" is being dropped. And abnormally bad and frequent temper tantrums will be given a scientific-sounding diagnosis called DMDD. But "dyslexia" and other learning disorders remain.

The revisions come in the first major rewrite in nearly 20 years of the diagnostic guide used by the nation's psychiatrists. Changes were approved Saturday.

Full details of all the revisions will come next May when the American Psychiatric Association's new diagnostic manual is published, but the impact will be huge, affecting millions of children and adults worldwide. The manual also is important for the insurance industry in deciding what treatment to pay for, and it helps schools decide how to allot special education.

This diagnostic guide "defines what constellations of symptoms" doctors recognize as mental disorders, said Dr. Mark Olfson, a Columbia University psychiatry professor. More important, he said, it "shapes who will receive what treatment. Even seemingly subtle changes to the criteria can have substantial effects on patterns of care."

Olfson was not involved in the revision process. The changes were approved Saturday in suburban Washington, D.C., by the psychiatric association's board of trustees.

The aim is not to expand the number of people diagnosed with mental illness, but to ensure that affected children and adults are more accurately diagnosed so they can get the most appropriate treatment, said Dr. David Kupfer. He chaired the task force in charge of revising the manual and is a psychiatry professor at the University of Pittsburgh.

One of the most hotly argued changes was how to define the various ranges of autism. Some advocates opposed the idea of dropping the specific diagnosis for Asperger's disorder. People with that disorder often have high intelligence and vast knowledge on narrow subjects but lack social skills. Some who have the condition embrace their quirkiness and vow to continue to use the label.

And some Asperger's families opposed any change, fearing their kids would lose a diagnosis and no longer be eligible for special services.

But the revision will not affect their education services, experts say.

The new manual adds the term "autism spectrum disorder," which already is used by many experts in the field. Asperger's disorder will be dropped and incorporated under that umbrella diagnosis. The new category will include kids with severe autism, who often don't talk or interact, as well as those with milder forms.

Kelli Gibson of Battle Creek, Mich., who has four sons with various forms of autism, said Saturday she welcomes the change. Her boys all had different labels in the old diagnostic manual, including a 14-year-old with Asperger's.

"To give it separate names never made sense to me," Gibson said. "To me, my children all had autism."

Three of her boys receive special education services in public school; the fourth is enrolled in a school for disabled children. The new autism diagnosis won't affect those services, Gibson said. She also has a 3-year-old daughter without autism.

People with dyslexia also were closely watching for the new updated doctors' guide. Many with the reading disorder did not want their diagnosis to be dropped. And it won't be. Instead, the new manual will have a broader learning disorder category to cover several conditions including dyslexia, which causes difficulty understanding letters and recognizing written words.

The trustees on Saturday made the final decision on what proposals made the cut; recommendations came from experts in several work groups assigned to evaluate different mental illnesses.

The revised guidebook "represents a significant step forward for the field. It will improve our ability to accurately diagnose psychiatric disorders," Dr. David Fassler, the group's treasurer and a University of Vermont psychiatry professor, said after the vote.

The shorthand name for the new edition, the organization's fifth revision of the Diagnostic and Statistical Manual, is DSM-5. Group leaders said specifics won't be disclosed until the manual is published but they confirmed some changes. A 2000 edition of the manual made minor changes but the last major edition was published in 1994.

Olfson said the manual "seeks to capture the current state of knowledge of psychiatric disorders. Since 2000 ... there have been important advances in our understanding of the nature of psychiatric disorders."

Catherine Lord, an autism expert at Weill Cornell Medical College in New York who was on the psychiatric group's autism task force, said anyone who met criteria for Asperger's in the old manual would be included in the new diagnosis.

One reason for the change is that some states and school systems don't provide services for children and adults with Asperger's, or provide fewer services than those given an autism diagnosis, she said.

Autism researcher Geraldine Dawson, chief science officer for the advocacy group Autism Speaks, said small studies have suggested the new criteria will be effective. But she said it will be crucial to monitor so that children don't lose services.

Other changes include:

—A new diagnosis for severe recurrent temper tantrums — disruptive mood dysregulation disorder. Critics say it will medicalize kids' who have normal tantrums. Supporters say it will address concerns about too many kids being misdiagnosed with bipolar disorder and treated with powerful psychiatric drugs. Bipolar disorder involves sharp mood swings and affected children are sometimes very irritable or have explosive tantrums.

—Eliminating the term "gender identity disorder." It has been used for children or adults who strongly believe that they were born the wrong gender. But many activists believe the condition isn't a disorder and say calling it one is stigmatizing. The term would be replaced with "gender dysphoria," which means emotional distress over one's gender. Supporters equated the change with removing homosexuality as a mental illness in the diagnostic manual, which happened decades ago.

___

AP Medical Writer Lindsey Tanner can be reached at http://www.twitter.com/LindseyTanner .

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Geithner on Fiscal Cliff: Ball Is in GOP's Court

Dec 2, 2012 9:00am

(ABC News)

With the fiscal cliff looming and no deal to resolve it in sight, Treasury Secretary Timothy Geithner expressed confidence that a compromise could be reached during my interview with him on “This Week,” but said the burden is now on Republicans to help find a solution to avoid a potential economic crisis.

(More from Sunday’s show HERE.)

“I actually think that we’re gonna get there. I mean, you know, just inevitably gonna be a little political theater in this context,” Geithner said, when asked whether Senate Minority Leader Mitch McConnell laughed after hearing President Obama’s plan to avert the fiscal cliff. ”Sometimes that’s a sign of progress. Think we’re actually making a little bit of progress, but we’re still some distance apart.”

Echoing widespread Republican rejection of the White House’s proposal last week, House Speaker John Boehner said after meeting with Geithner that ” the White House has to get serious.”

“And at this point though — you gotta recognize that they’re in a very difficult place. And they recognize they’re gonna have to move on a bunch of things.  But they don’t know really how to do it yet. And how to get support from the — from the members on the Republican side,” he said, adding later that the proverbial ball was “absolutely” in the GOP court. “And, you know, when they come back to us and say, ‘We’d like you to consider this.  And we’d like you to consider that,’ we’ll take a look at that.”

Geithner — who met with top GOP leaders this week to present the White House’s proposal to end the fiscal standoff — predicted support from “the business community” and “from the American people” for a deal approximating the one being offered, which reportedly includes tax hikes on the wealthy, cuts to Medicare and some stimulus spending.

However, if there is no agreement by the end of the year, the treasury secretary told me going over the cliff would be “very damaging.”

“Look, there’s a huge amount at stake here in this economy, George.  And there’s just no reason why 98 percent of Americans have to see their taxes go up because some members of Congress on the Republican side want to block tax rate increases for 2 percent of the wealthiest Americans.  Remember, those tax rates, those tax cuts, cost a trillion dollars over 10 years,” he said.

Geithner said the White House plan offered a “good mix” of increased taxes and spending cuts. He also added that Social Security reform would not be part of the discussion to resolve the fiscal cliff.

“We think we have a very good plan, a very good mix of tax reforms that raise a modest amount of revenue on the wealthiest 2 percent of Americans, combined with very comprehensive, very well designed, very detailed savings that get us back to the point where our debt is stable and sustainable,” he said. “We’re prepared to, in a separate process, look at how to strengthen Social Security.  But not as part of a process to reduce the other deficits the country faces,” he said.

Finally, with Geithner wrapping up his time in the president’s cabinet, I asked him if banking executive Jamie Dimon – who has  billionaire Warren Buffett’s endorsement — should be named the next treasury secretary, but Geithner declined to answer directly.

“George, the president’s gonna choose somebody very talented to lead the Treasury for his next four years.  And– I’m very fortunate I’ve been able to work with him to help solve these problems in the country over this period of time.  And I’m very confident he’s gonna have somebody in place– in January to succeed me,” he said.

SHOWS: This Week

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Islamists rally behind Mursi as Egypt's rifts widen

CAIRO (Reuters) - Islamist crowds demonstrated in Cairo on Saturday in support of President Mohamed Mursi, who is racing through a constitution to try to defuse opposition fury over his newly expanded powers.

Many thousands assembled outside Cairo University, waving Egyptian flags and green Islamist emblems to show their backing for the president and the constitution he is promoting.

Mursi was expected later in the day to set a date for a referendum on the constitution hastily approved by an Islamist-dominated drafting assembly on Friday after a 19-hour session.

Mohamed Ibrahim, a hardline Salafi Islamist scholar and a member of the constituent assembly, said secular-minded Egyptians had been in a losing battle from the start.

"They will be sure of complete popular defeat today in a mass Egyptian protest that says 'no to the conspiratorial minority, no to destructive directions and yes for stability and sharia (Islamic law)'," he told Reuters.

Demonstrators, many of them bused in from the countryside, held pro-constitution banners. Some read "Islam is coming", "Yes to stability" and "No to corruption".

Tens of thousands of Egyptians had protested against Mursi on Friday and rival demonstrators threw stones after dark in Alexandria and the Nile Delta town of Al-Mahalla Al-Kobra.

"The people want to bring down the regime," they chanted in Cairo's Tahrir Square, echoing the slogan that rang out there less than two years ago and brought down Hosni Mubarak.

Mursi plunged Egypt into a new crisis last week when he gave himself extensive powers and put his decisions beyond judicial challenge, saying this was a temporary measure to speed Egypt's democratic transition until the new constitution is in place.

His assertion of authority in a decree issued on November 22, a day after he won world praise for brokering a Gaza truce between Israel and the Palestinian Islamist Hamas movement, dismayed his opponents and widened divisions among Egypt's 83 million people.

Two people have been killed and hundreds wounded in protests by disparate opposition forces drawn together and re-energized by a decree they see as a dictatorial power grab.

Mursi has alienated many of the judges who must supervise the referendum. His decree nullified the ability of the courts, many of them staffed by Mubarak-era appointees, to strike down his measures, although says he respects judicial independence.

A source at the presidency said Mursi might rely on the minority of judges who support him to supervise the referendum.

Mursi, once a senior Muslim Brotherhood figure, has put his liberal, leftist, Christian and other opponents in a bind. If they boycott the referendum, the constitution would pass anyway.

If they secured a "no" vote to defeat the draft, the president could retain the powers he has unilaterally assumed.

And Egypt's quest to replace the basic law that underpinned Mubarak's 30 years of army-backed one-man rule would also return to square one, creating more uncertainty in a nation in dire economic straits and seeking a $4.8 billion loan from the IMF.

"NO PLACE FOR DICTATORSHIP"

Mursi's well-organized Muslim Brotherhood and its ultra-orthodox Salafi allies, however, are convinced they can win the referendum by mobilizing their own supporters and the millions of Egyptians weary of political turmoil and disruption.

"There is no place for dictatorship," the president said on Thursday while the constituent assembly was still voting on a constitution which Islamists say enshrines Egypt's new freedoms.

Human rights groups have voiced misgivings, especially about articles related to women's rights and freedom of speech.

The text limits the president to two four-year terms, requires him to secure parliamentary approval for his choice of prime minister, and introduces a degree of civilian oversight over the military - though not enough for critics.

The draft constitution also contains vague, Islamist-flavored language that its opponents say could be used to whittle away human rights and stifle criticism.

For example, it forbids blasphemy and "insults to any person", does not explicitly uphold women's rights and demands respect for "religion, traditions and family values".

The draft injects new Islamic references into Egypt's system of government but retains the previous constitution's reference to "the principles of sharia" as the main source of legislation.

"We fundamentally reject the referendum and constituent assembly because the assembly does not represent all sections of society," said Sayed el-Erian, 43, a protester in Tahrir and member of a party set up by opposition figure Mohamed ElBaradei.

Several independent newspapers said they would not publish on Tuesday in protest. One of the papers also said three private satellite channels would halt broadcasts on Wednesday.

Egypt cannot hold a new parliamentary election until a new constitution is passed. The country has been without an elected legislature since a court ordered the dissolution of the Islamist-dominated lower house in June.

(Additional reporting by Marwa Awad; Editing by Louise Ireland)

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29 bus drivers who will be repatriated will be paid: SMRT

SINGAPORE: Public transport operator SMRT said the 29 drivers who will be repatriated will be paid, before they leave the country. They will be given all salaries, all claims if any, and ex gratia bonuses on a pro-rated basis.

In its statement on Saturday evening, SMRT said there are valuable lessons learnt from this incident which are being addressed by the management.

SMRT said it needs to improve its management, communication and engagement efforts to be more proactive, responsible and sensitive to the needs of its drivers.

SMRT said: "We are determined to come out stronger from this episode. We want to thank all our drivers for continuing to work hard on the roads to serve our passengers, and we value their service to the company. We will continue to actively engage all drivers at all levels to address their concerns holistically, and work together to make the workplace a more conducive one for everybody."

- CNA/ck

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FDI in retail to safeguard international market mafias' interest: BJP

NEW DELHI: India's main opposition Bharatiya Janata Party (BJP) today said retail reform is a step taken by the Congress led-federal government to safeguard the interests of the international market mafias at the cost of national interest.

BJP vice president Mukhtar Abbas Naqvi said on Saturday that voting inside the parliament would decide as to who is in favour of national interest and who is working for international interests.

"The government feels that their responsibility is to safeguard the interest of international market mafias instead of national interest and for saving the interest of international market mafias, the government is ready to compromise with national interests. Now, the parliament will decide as to who is in support of international market mafias and who are supporting national interests," said Naqvi.

The government's decision to allow foreign supermarket chains such as Wal-Mart had triggered protest not only from opposition parties but also from some of its allies.

BJP had sought debate on the issue of allowing Foreign Direct Investment (FDI) in the retail sector, under the rule that entails voting after discussions.

Meanwhile, Minister in the Prime Minister Office (PMO), V Narayanaswamy said the government would answer all the queries raised by the opposition parties in the parliament and will explain the benefits of allowing FDI in retail sector.

The lower house of parliament has set December 04 and 05 as the date to vote and debate on FDI. The dates for the upper house are yet to be decided.

Narayanaswamy said the government is confident of becoming victorious in the debate.

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South Africa makes progress in HIV/AIDS fight

JOHANNESBURG (AP) — In the early 90s when South Africa's Themba Lethu clinic could only treat HIV/AIDS patients for opportunistic diseases, many would come in on wheelchairs and keep coming to the health center until they died.

Two decades later the clinic is the biggest ARV (anti-retroviral) treatment center in the country and sees between 600 to 800 patients a day from all over southern Africa. Those who are brought in on wheelchairs, sometimes on the brink of death, get the crucial drugs and often become healthy and are walking within weeks.

"The ARVs are called the 'Lazarus drug' because people rise up and walk," said Sue Roberts who has been a nurse at the clinic , run by Right to Care in Johannesburg's Helen Joseph Hospital, since it opened its doors in 1992. She said they recently treated a woman who was pushed in a wheelchair for 3 kilometers (1.8 miles) to avoid a taxi fare and who was so sick it was touch and go. Two weeks later, the woman walked to the clinic, Roberts said.

Such stories of hope and progress are readily available on World AIDS Day 2012 in sub-Saharan Africa where deaths from AIDS-related causes have declined by 32 percent from 1.8 million in 2005 to 1.2 million in 2011, according to the latest UNAIDS report.

As people around the world celebrate a reduction in the rate of HIV infections, the growth of the clinic, which was one of only a few to open its doors 20 years ago, reflects how changes in treatment and attitude toward HIV/AIDS have moved South Africa forward. The nation, which has the most people living with HIV in the world at 5.6 million, still faces stigma and high rates of infection.

"You have no idea what a beautiful time we're living in right now," said Dr. Kay Mahomed, a doctor at the clinic who said treatment has improved drastically over the past several years.

President Jacob Zuma's government decided to give the best care, including TB screening and care at the clinic, and not to look at the cost, she said. South Africa has increased the numbers treated for HIV by 75 percent in the last two years, UNAIDS said, and new HIV infections have fallen by more than 50,000 in those two years. South Africa has also increased its domestic expenditure on AIDS to $1.6 billion, the highest by any low-and middle-income country, the group said.

Themba Lethu clinic, with funding from the government, USAID and PEPFAR, is now among some 2,500 ARV facilities in the country that treat approximately 1.9 million people.

"Now, you can't not get better. It's just one of these win-win situations. You test, you treat and you get better, end of story," Mahomed said.

But it hasn't always been that way.

In the 1990s South Africa's problem was compounded by years of misinformation by President Thabo Mbeki, who questioned the link between HIV and AIDS, and his health minister, Manto Tshabalala-Msimang, who promoted a "treatment" of beets and garlic.

Christinah Motsoahae first found out she was HIV positive in 1996, and said she felt nothing could be done about it.

"I didn't understand it at that time because I was only 24, and I said, 'What the hell is that?'" she said.

Sixteen years after her first diagnosis, she is now on ARV drugs and her life has turned around. She says the clinic has been instrumental.

"My status has changed my life, I have learned to accept people the way they are. I have learned not to be judgmental. And I have learned that it is God's purpose that I have this," the 40-year-old said.

She works with a support group of "positive ladies" in her hometown near Krugersdorp. She travels to the clinic as often as needed and her optimism shines through her gold eye shadow and wide smile. "I love the way I'm living now."

Motsoahae credits Nelson Mandela's family for inspiring her to face up to her status. The anti-apartheid icon galvanized the AIDS community in 2005 when he publicly acknowledged his son died of AIDS.

None of Motsoahae's children was born with HIV. The number of children newly infected with HIV has declined significantly. In six countries in sub-Saharan Africa — South Africa, Burundi, Kenya, Namibia, Togo and Zambia —the number of children with HIV declined by 40 to 59 percent between 2009 and 2011, the UNAIDS report said.

But the situation remains dire for those over the age of 15, who make up the 5.3 million infected in South Africa. Fear and denial lend to the high prevalence of HIV for that age group in South Africa, said the clinic's Kay Mahomed.

About 3.5 million South Africans still are not getting therapy, and many wait too long to come in to clinics or don't stay on the drugs, said Dr. Dave Spencer, who works at the clinic .

"People are still afraid of a stigma related to HIV," he said, adding that education and communication are key to controlling the disease.

Themba Lethu clinic reaches out to the younger generation with a teen program.

Tshepo Hoato, 21, who helps run the program found out he was HIV positive after his mother died in 2000. He said he has been helped by the program in which teens meet one day a month.

"What I've seen is a lot people around our ages, some commit suicide as soon as they find out they are HIV. That's a very hard stage for them so we came up with this program to help one another," he said. "We tell them our stories so they can understand and progress and see that no, man, it's not the end of the world."

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Obama: Don't Hold Middle-Class Tax Cuts Hostage

Dec 1, 2012 6:00am

AP Photo/Charles Dharapak

President Obama is urging Congress to extend tax breaks for the middle class, saying it’s “unacceptable for some Republicans in Congress to hold middle class tax cuts hostage simply because they refuse to let tax rates go up on the wealthiest Americans.”

With the clock ticking toward the so-called “fiscal cliff,” Obama asked lawmakers in his weekly address to “begin by doing what we all agree on” and extend the middle class tax cuts set to expire at the end of the year.

Read: Cliff Dive: A Stalemate and a Scrooge Christmas

“With the issue behind us, we’ll have more time to work out a plan to bring down our deficits in a balanced way, including by asking the wealthiest Americans to pay a little more, so we can still invest in the things that make our nation strong,” he said from a toy manufacturing facility in Hatfield, Pa., where he delivered a similar message to workers Friday.

The president has launched a public campaign to try and force Republicans to sign on to his position on the expiring Bush tax cuts, asking them to pass a Senate bill that would maintain low middle class tax rates while allowing them to go up on the top income earners.

“If we can just get a few House Republicans on board, I’ll sign this bill as soon as Congress sends it my way,” he said.

Read: Could Outgoing Republicans Hold Keys to ‘Fiscal Cliff’?

Earlier this week, the White House put forth a deficit reduction proposal to avert the looming tax increases and spending cuts set to kick in on Jan. 1, which included $1.6 trillion in tax increases over the next 10 years, $50 billion in new stimulus spending, $400 billion in unspecified Medicare cuts, and a measure to effectively end Congress’s ability to vote on the debt limit.  The offer, which closely mirrors the president’s previous deficit-reduction plans, lacked concessions to Republicans, including detailed spending cuts, and was strongly rejected.

Since then, as House Speaker John Boehner put it, negotiations between the White House and House Republicans have come to a “stalemate.”

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Palestinians win de facto U.N. recognition of sovereign state

UNITED NATIONS (Reuters) - The 193-nation U.N. General Assembly on Thursday overwhelmingly approved the de facto recognition of the sovereign state of Palestine after Palestinian President Mahmoud Abbas called on the world body to issue its long overdue "birth certificate."

The U.N. victory for the Palestinians was a diplomatic setback for the United States and Israel, which were joined by only a handful of countries in voting against the move to upgrade the Palestinian Authority's observer status at the United Nations to "non-member state" from "entity," like the Vatican.

Britain called on the United States to use its influence to help break the long impasse in Israeli-Palestinian peace talks. Washington also called for a revival of direct negotiations.

There were 138 votes in favor, nine against and 41 abstentions. Three countries did not take part in the vote, held on the 65th anniversary of the adoption of U.N. resolution 181 that partitioned Palestine into separate Jewish and Arab states.

Thousands of flag-waving Palestinians in the West Bank and the Gaza Strip set off fireworks and danced in the streets to celebrate the vote.

The assembly approved the upgrade despite threats by the United States and Israel to punish the Palestinians by withholding funds for the West Bank government. U.N. envoys said Israel might not retaliate harshly against the Palestinians over the vote as long as they do not seek to join the International Criminal Court.

If the Palestinians were to join the ICC, they could file complaints with the court accusing Israel of war crimes, crimes against humanity and other serious crimes.

U.S. Secretary of State Hillary Clinton called the vote "unfortunate and counterproductive," while the Vatican praised the move and called for an internationally guaranteed special status for Jerusalem, something bound to irritate Israel.

The much-anticipated vote came after Abbas denounced Israel from the U.N. podium for its "aggressive policies and the perpetration of war crimes," remarks that elicited a furious response from the Jewish state.

"Sixty-five years ago on this day, the United Nations General Assembly adopted resolution 181, which partitioned the land of historic Palestine into two states and became the birth certificate for Israel," Abbas told the assembly after receiving a standing ovation.

"The General Assembly is called upon today to issue a birth certificate of the reality of the State of Palestine," he said.

Israeli Prime Minister Benjamin Netanyahu responded quickly, condemning Abbas' critique of Israel as "hostile and poisonous," and full of "false propaganda.

"These are not the words of a man who wants peace," Netanyahu said in a statement released by his office. He reiterated Israeli calls for direct talks with the Palestinians, dismissing Thursday's resolution as "meaningless."

ICC THREAT

A number of Western delegations noted that Thursday's vote should not be interpreted as formal legal recognition of a Palestinian state. Formal recognition of statehood is something that is done bilaterally, not by the United Nations.

Granting Palestinians the title of "non-member observer state" falls short of full U.N. membership - something the Palestinians failed to achieve last year. But it does have important legal implications - it would allow them access to the ICC and other international bodies, should they choose to join.

Abbas did not mention the ICC in his speech. But Palestinian Foreign Minister Riyad al-Maliki told reporters after the vote that if Israel continued to build illegal settlements, the Palestinians might pursue the ICC route.

"As long as the Israelis are not committing atrocities, are not building settlements, are not violating international law, then we don't see any reason to go anywhere," he said.

"If the Israelis continue with such policy - aggression, settlements, assassinations, attacks, confiscations, building walls - violating international law, then we have no other remedy but really to knock those to other places," Maliki said.

In Washington, a group of four Republican and Democratic senators announced legislation that would close the Palestinian office in Washington unless the Palestinians enter "meaningful negotiations" with Israel, and eliminate all U.S. assistance to the Palestinian Authority if it turns to the ICC.

"I fear the Palestinian Authority will now be able to use the United Nations as a political club against Israel," said Republican Senator Lindsey Graham, one of the sponsors.

Abbas led the campaign to win support for the resolution, which followed an eight-day conflict this month between Israel and Islamists in the Gaza Strip, who are pledged to Israel's destruction and oppose a negotiated peace.

The vote highlighted how deeply divided Europe is on the Israeli-Palestinian conflict.

At least 17 European nations voted in favor of the Palestinian resolution, including Austria, France, Italy, Norway and Spain. Abbas had focused his lobbying efforts on Europe, which supplies much of the aid the Palestinian Authority relies on. Britain, Germany and many others chose to abstain.

The traditionally pro-Israel Czech Republic was unique in Europe, joining the United States, Israel, Canada, Panama and the tiny Pacific Island states Nauru, Palau, Marshall Islands and Micronesia in voting against the move.

'HOPE SOME REASON WILL PREVAIL'

Peace talks have been stalled for two years, mainly over Israeli settlements in the West Bank, which have expanded despite being deemed illegal by most of the world. There are 4.3 million Palestinians in the West Bank and Gaza.

After the vote, U.S. Ambassador to the United Nations Susan Rice called for the immediate resumption of peace talks.

"The Palestinian people will wake up tomorrow and find that little about their lives has changed save that the prospects of a durable peace have only receded," she said.

She added that both parties should "avoid any further provocative actions in the region, in New York or elsewhere."

Palestinian Prime Minister Salam Fayyad said he hoped all sides would use the vote to push for new breakthroughs in the peace process.

"I hope there will be no punitive measures," Fayyad told Reuters in Washington, where he was attending a conference.

"I hope that some reason will prevail and the opportunity will be taken to take advantage of what happened today in favor of getting a political process moving," he said.

Britain's U.N. ambassador, Mark Lyall Grant, told reporters it was time for recently re-elected U.S. President Barack Obama to make a new push for peace.

"We believe the window for the two-state solution is closing," he said. "That is why we are encouraging the United States and other key international actors to grasp this opportunity and use the next 12 months as a way to really break through this impasse."

(Additional reporting by Andrew Quinn in Washington, Noah Browning in Ramallah, Jeffrey Heller in Jerusalem, Robert Mueller in Prague, Gabriela Baczynska and Reuters bureaux in Europe and elsewhere; Editing by Eric Beech and Peter Cooney)

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