US scholar urges dramatic rethink on Taiwan

WASHINGTON: With Beijing growing in strength, a US scholar is calling for a major rethink on Taiwan in which the island would cut its troop numbers in half and rebrand its army as a self-defence force.

The proposal marks a rare break from the conventional view of American and Taiwanese policymakers that the island needs to close the military gap with Beijing, but its author said an opposite course could strengthen Taipei.

Scott Bates, president of the Washington-based Center for National Policy, said the balance was "irretrievably shifting" in China's favor and it was politically and economically unrealistic that Taiwan would commit enough to close the gap.

Instead, Taipei can take the lead by halving the size of its army, rebranding it as a Self-Defence Force in the style of Japan and renouncing any military action on mainland China's soil, he argued.

"If Taiwan were to take a bold step like this, that would change perceptions on the mainland and perhaps win some popular support for the Taiwanese position," said Bates, a former congressional aide.

"If there were a showdown, it might make (Beijing) think twice."

Taiwan should turn the new force into a disaster response team ready to deploy throughout Asia and also highlight the island's democracy through a major initiative that supports civil society across the continent, Bates said.

And instead of waging a battle to preserve a dwindling number of nations' recognition of Taipei instead of Beijing, Taiwan can use its diplomatic resources to seek solutions on Asia's bitter territorial disputes, he said.

The new Taiwanese approach would give the island the moral high ground, winning over global opinion and ensuring that China would appear to be the aggressor if it attacked, he argued.

"Mainland Chinese public opinion is beginning to matter more. The Chinese Communist Party cannot ignore its own people without repercussions," Bates said.

China considers Taiwan to be a territory awaiting reunification, by force if necessary. China's defeated nationalists fled to Taiwan after defeat by the communists in 1949, with the island developing into a self-ruling democracy.

The United States switched recognition from Taipei to Beijing in 1979 but at the same time Congress passed the Taiwan Relations Act, which requires Washington to provide the island with means to defend itself.

Bates said that his proposal would complement efforts by Taiwan President Ma Ying-jeou, who has sought to ease tensions with China by expanding economic ties, though domestic critics accuse Ma of jeopardising the island's de facto independence.

Bates supported the continuation of the Taiwan Relations Act, saying the island needed a credible deterrent. While cutting its army, Bates called for Taiwan to launch a major upgrade of its air defences and navy to show that any effort to gain supremacy over the island would be costly.

The Taiwan Relations Act enjoys virtually unanimous support in the US Congress, where lawmakers have pressed President Barack Obama to sell to the island new F-16 jets - a step that China strongly opposes.

Bates' ideas, however, are unlikely to win quick support.

Joseph Bosco, a former Pentagon official, sharply criticised the proposal, saying it went against accepted concepts of deterrence and that Taiwan already had the moral high ground.

"Taiwan does not need to disarm unilaterally in order to prove its moral or political legitimacy," Bosco said on Wednesday at an event where Bates presented his proposal.

Bates, who spoke last year at Taiwan's National Defence University and wrote an opinion piece in the Taipei Times, said he wanted to start a debate.

"It doesn't have to be my plan, but there does have to be a strategic rethink," he said.

- AFP

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'Vishwaroopam' gets overwhelming response in Kerala

CHENNAI: Kamal Haasan's " Vishwaroopam" opened to an overwhelming response in Kerala, but after the first screening, the film's run was stopped in several theatres following protest from Muslim groups. Trade insiders say it is a clean movie.

"The first screening of the film was at 11am in approximately 82 screens in Kerala. But the film had to be banned in several cinemas after the first screening. Theatres closer to Tamil Nadu-Kerala border had to stop screening since Muslim outfits intervened," Arvind Nambiar, a distributor, told IANS.

"It's a clean film and is not targeted against any group or community. People should watch and decide for themselves whether it has any scenes that hurt the sentiments of any community," he added.

The shows were disrupted in places like Palakkad, Ettumanoor and some other towns of Kerala.

"There was no buzz around the release of the film as most of the cinemas decided to screen the film at the last minute, which was this morning. Since it released in smaller sections such as B and C, there were no problems initially, but later on the situation aggravated," Nambiar added.

The Tamil and Telugu versions of "Vishwaroopam", which deals with the adversities of war, were scheduled to release on Friday, but the Tamil Nadu government on Wednesday imposed curbs on it following protests from Muslim groups.

A day later, Kamal challenged the ban by the state government in the Madras high court. In his plea, he contended that the movie was cleared by the censor board and the state government could not ban it.

The court has suspended the release till January 28. A judge will watch the film and then decide its fate.

Meanwhile, the Andhra Pradesh government Friday stopped the release of "Vishwaroopam" in Hyderabad after some Muslim organizations complained that the movie hurt religious sentiments of the community.

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Penalty could keep smokers out of health overhaul

WASHINGTON (AP) — Millions of smokers could be priced out of health insurance because of tobacco penalties in President Barack Obama's health care law, according to experts who are just now teasing out the potential impact of a little-noted provision in the massive legislation.

The Affordable Care Act — "Obamacare" to its detractors — allows health insurers to charge smokers buying individual policies up to 50 percent higher premiums starting next Jan. 1.

For a 55-year-old smoker, the penalty could reach nearly $4,250 a year. A 60-year-old could wind up paying nearly $5,100 on top of premiums.

Younger smokers could be charged lower penalties under rules proposed last fall by the Obama administration. But older smokers could face a heavy hit on their household budgets at a time in life when smoking-related illnesses tend to emerge.

Workers covered on the job would be able to avoid tobacco penalties by joining smoking cessation programs, because employer plans operate under different rules. But experts say that option is not guaranteed to smokers trying to purchase coverage individually.

Nearly one of every five U.S. adults smokes. That share is higher among lower-income people, who also are more likely to work in jobs that don't come with health insurance and would therefore depend on the new federal health care law. Smoking increases the risk of developing heart disease, lung problems and cancer, contributing to nearly 450,000 deaths a year.

Insurers won't be allowed to charge more under the overhaul for people who are overweight, or have a health condition like a bad back or a heart that skips beats — but they can charge more if a person smokes.

Starting next Jan. 1, the federal health care law will make it possible for people who can't get coverage now to buy private policies, providing tax credits to keep the premiums affordable. Although the law prohibits insurance companies from turning away the sick, the penalties for smokers could have the same effect in many cases, keeping out potentially costly patients.

"We don't want to create barriers for people to get health care coverage," said California state Assemblyman Richard Pan, who is working on a law in his state that would limit insurers' ability to charge smokers more. The federal law allows states to limit or change the smoking penalty.

"We want people who are smoking to get smoking cessation treatment," added Pan, a pediatrician who represents the Sacramento area.

Obama administration officials declined to be interviewed for this article, but a former consumer protection regulator for the government is raising questions.

"If you are an insurer and there is a group of smokers you don't want in your pool, the ones you really don't want are the ones who have been smoking for 20 or 30 years," said Karen Pollitz, an expert on individual health insurance markets with the nonpartisan Kaiser Family Foundation. "You would have the flexibility to discourage them."

Several provisions in the federal health care law work together to leave older smokers with a bleak set of financial options, said Pollitz, formerly deputy director of the Office of Consumer Support in the federal Health and Human Services Department.

First, the law allows insurers to charge older adults up to three times as much as their youngest customers.

Second, the law allows insurers to levy the full 50 percent penalty on older smokers while charging less to younger ones.

And finally, government tax credits that will be available to help pay premiums cannot be used to offset the cost of penalties for smokers.

Here's how the math would work:

Take a hypothetical 60-year-old smoker making $35,000 a year. Estimated premiums for coverage in the new private health insurance markets under Obama's law would total $10,172. That person would be eligible for a tax credit that brings the cost down to $3,325.

But the smoking penalty could add $5,086 to the cost. And since federal tax credits can't be used to offset the penalty, the smoker's total cost for health insurance would be $8,411, or 24 percent of income. That's considered unaffordable under the federal law. The numbers were estimated using the online Kaiser Health Reform Subsidy Calculator.

"The effect of the smoking (penalty) allowed under the law would be that lower-income smokers could not afford health insurance," said Richard Curtis, president of the Institute for Health Policy Solutions, a nonpartisan research group that called attention to the issue with a study about the potential impact in California.

In today's world, insurers can simply turn down a smoker. Under Obama's overhaul, would they actually charge the full 50 percent? After all, workplace anti-smoking programs that use penalties usually charge far less, maybe $75 or $100 a month.

Robert Laszewski, a consultant who previously worked in the insurance industry, says there's a good reason to charge the maximum.

"If you don't charge the 50 percent, your competitor is going to do it, and you are going to get a disproportionate share of the less-healthy older smokers," said Laszewski. "They are going to have to play defense."

___

Online:

Kaiser Health Reform Subsidy Calculator — http://healthreform.kff.org/subsidycalculator.aspx

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Alleged Doctor Killer Had Anger Issues, Friend Says

Jason Smith, the Philadelphia exterminator who police say showed up at the home of Dr. Melissa Ketunuti this week to solve her rodent problem before strangling her, was a problem child as an adolescent, a family friend told ABC News.

The family friend from many years ago, who asked for anonymity, said Smith, 36, had behavior and anger issues, and that he also liked to set things on fire.

After Smith and Ketunuti got into "some kind of argument" in Ketunuti's basement, he struck her, strangled her and set her on fire, according to police.

Smith reportedly admitted to the brutal slaying after hours of police questioning Wednesday night.
Smith told police that Ketunuti had "belittled" him, sources told ABC News affiliate WPVI-TV in Philadelphia

He snapped and apparently tried to hide any evidence by setting the 35-year-old doctor on fire with paper he lit in the kitchen, the station reported.

Philadelphia Police Department/AP Photo

Pa. Doctor Killing: Person of Interest in Custody Watch Video

Philadelphia Doctor's Murder Leaves Police Baffled Watch Video

"People like Mr. Smith basically walk around with a huge chip on their shoulder, and they feel so inadequate and so insecure that any perceived belittlement of them will set them off," ABC News consultant and former FBI agent Brad Garrett said.

Capt. James Clark of the Philadelphia Police Department said Smith's mood and clarity varied during his alleged confession.

"At some points, he was solemn. At other points, it was like he was in a fog," Clark said at a news conference.

Smith has been charged with murder, arson, abuse of a corpse and risking a catastrophe.

Ori Feibush, who owns a coffee shop near Ketunuti's street, said he and police pored over hours of surveillance video until they saw Ketunuti walking home from doing errands, with Smith steps behind her.

"Forty-five minutes later, we see this same guy walking past, but [he] looks a little more disheveled and he's got gloves on," Feibush told ABC News.

Police say that after the slaying, Smith circled Ketunuti's block twice, before heading off to another job.

Ketunuti was a doctor at the Children's Hospital of Philadelphia and had lived alone in the Graduate Hospital neighborhood of the city for about three years. Her family released a statement saying they are "devastated by this senseless act of violence."

"Melissa's friends from childhood, college, residency and elsewhere remember her many kindnesses, even during long hours, as well as her zest for life: traveling, running and spending time with friends and family," the statement said. "Melissa was a source of joy to everyone in her life. Her passing has left an enormous gap in our lives."

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North Korea to target U.S. with nuclear, rocket tests

SEOUL (Reuters) - North Korea said on Thursday it would carry out further rocket launches and a nuclear test that would target the United States, dramatically stepping up its threats against a country it called its "sworn enemy".

The announcement by the country's top military body came a day after the U.N. Security Council agreed to a U.S.-backed resolution to censure and sanction North Korea for a rocket launch in December that breached U.N. rules.

North Korea is not believed to have the technology to deliver a nuclear warhead capable of hitting the continental United States, although its December launch showed it had the capacity to deliver a rocket that could travel 10,000 km (6,200 miles), potentially putting San Francisco in range, according to an intelligence assessment by South Korea.

"We are not disguising the fact that the various satellites and long-range rockets that we will fire and the high-level nuclear test we will carry out are targeted at the United States," North Korea's National Defence Commission said, according to state news agency KCNA.

North Korea is believed by South Korea and other observers to be "technically ready" for a third nuclear test, and the decision to go ahead rests with leader Kim Jong-un, who pressed ahead with the December rocket launch in defiance of the U.N. sanctions.

China, the one major diplomatic ally of the isolated and impoverished North, agreed to the U.S.-backed resolution and it also supported resolutions in 2006 and 2009 after Pyongyang's two earlier nuclear tests.

Thursday's statement by North Korea represents a huge challenge to Beijing as it undergoes a leadership transition, with Xi Jinping due to take office in March.

China's Foreign Ministry called for calm and restraint and a return to six-party talks, but effectively singled out North Korea, urging the "relevant party" not to take any steps that would raise tensions.

"We hope the relevant party can remain calm and act and speak in a cautious and prudent way and not take any steps which may further worsen the situation," ministry spokesman Hong Lei told reporters at a regular press briefing.

North Korea has rejected proposals to restart the talks aimed at reining in its nuclear capacity. The United States, China, Russia, Japan and the two Koreas are the six parties involved.

"After all these years and numerous rounds of six-party talks we can see that China's influence over North Korea is actually very limited. All China can do is try to persuade them not to carry out their threats," said Cai Jian, an expert on Korea at Fudan University in Shanghai.

Analysts said the North could test as early as February as South Korea prepares to install a new, untested president or that it could choose to stage a nuclear explosion to coincide with former ruler Kim Jong-il's Feb 16 birthday.

"North Korea will have felt betrayed by China for agreeing to the latest U.N. resolution and they might be targeting (China) as well (with this statement)," said Lee Seung-yeol, senior research fellow at Ewha Institute of Unification Studies in Seoul.

U.S. URGES NO TEST

Washington urged North Korea not to proceed with a third test just as the North's statement was published on Thursday.

"Whether North Korea tests or not is up to North Korea," Glyn Davies, the top U.S. envoy for North Korean diplomacy, said in the South Korean capital of Seoul.

"We hope they don't do it. We call on them not to do it," Davies said after a meeting with South Korean officials. "This is not a moment to increase tensions on the Korean peninsula."

The North was banned from developing missile and nuclear technology under sanctions dating from its 2006 and 2009 nuclear tests.

A South Korean military official said the concern now is that Pyongyang could undertake a third nuclear test using highly enriched uranium for the first time, opening a second path to a bomb.

North Korea's 2006 nuclear test using plutonium produced a puny yield equivalent to one kiloton of TNT - compared with 13-18 kilotons for the Hiroshima bomb - and U.S. intelligence estimates put the 2009 test's yield at roughly two kilotons

North Korea is estimated to have enough fissile material for about a dozen plutonium warheads, although estimates vary, and intelligence reports suggest that it has been enriching uranium to supplement that stock and give it a second path to the bomb.

According to estimates from the Institute for Science and International Security from late 2012, North Korea could have enough weapons grade uranium for 21-32 nuclear weapons by 2016 if it used one centrifuge at its Yongbyon nuclear plant to enrich uranium to weapons grade.

North Korea has not yet mastered the technology needed to make a nuclear warhead small enough for an intercontinental missile, most observers say, and needs to develop the capacity to shield any warhead from re-entry into the earth's atmosphere.

North Korea gave no time-frame for the coming test and often employs harsh rhetoric in response to U.N. and U.S. actions that it sees as hostile.

The bellicose statement on Thursday appeared to dent any remaining hopes that Kim Jong-un, believed to be 30 years old, would pursue a different path from his father, Kim Jong-il, who oversaw the country's military and nuclear programs.

The older Kim died in December 2011.

"The UNSC (Security Council) resolution masterminded by the U.S. has brought its hostile policy towards the Democratic Peoples Republic of Korea (North Korea) to its most dangerous stage," the commission was quoted as saying.

(Additional reporting by Christine Kim in SEOUL, Ben Blanchard and Sui-Lee Wee in Beijing; Writing by David Chance; Editing by Raju Gopalakrishnan and Ron Popeski)

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Keppel Corp's net profit falls 22% on-year in Q4

SINGAPORE: Falling margins from building oil rigs has hit the bottomline of Keppel Corp.

Net profit for the world's leading rig builder fell 22 per cent on-year to S$305 million in the fourth quarter last year.

Still, full year profit for the conglomerate came in 15 per cent to S$2.24 billion.

Despite lower net profit in the three months ended Dec 31, Keppel Corp still declared a final dividend of 27 cents per share.

As part of its 45th anniversary, Keppel Corp is handing out more goodies to its shareholders.

The company has proposed to distribute one Keppel REIT unit for every five Keppel Corp shares.

That is about 27.4 cents per share based on Keppel REIT's closing price of S$1.37 on Thursday.

Together with the interim dividend of 18 cents, total distribution for 2012 will be 72.4 cents per share.

Keppel Corp said the lower net profit was partly due to lower contributions from its offshore and marine unit.

Offshore and Marine's contribution was 12 per cent lower from a higher base in 2011 when margins were at record highs. It contributes to half of Keppel Corp's net profits.

"Keen rivalry from Chinese and Korean yards have suppressed prices and squeezed margins on newbuilds," said Choo Chiau Beng, chief executive officer at Keppel Corp. "In 2013, we will be completing a record of 22 newbuild units."

Analysts remained upbeat of Keppel's prospects going forward.

They say their financial results still outperformed market expectations.

Keppel Corp expects crude oil prices to stay above US$100 per barrel, supporting the need for more global exploration and production.

But global challenges like the slower US economy and the eurozone crisis from last year will continue to pose uncertainties for Keppel Corp's business.

Keppel Corp's property arm, led by the listed Keppel Land, boosted the group's earnings.

Net profit for the property division was 2.5 times higher than in 2011, offsetting the lower earnings from business in the offshore and marine, and infrastructure.

But Keppel Corp does not expect its property arm to perform better this year.

This is because recognition from sales of completed units at its development Reflections at Keppel Bay is expected to be lower this financial year.

- CNA/xq

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Union home minister Sushilkumar Shinde should be tried for sedition: Balbir Punj

BHOPAL: Journalist and Rajya Sabha BJP MP Balbir Punj on Thursday said that Union home minister Sushilkumar Shinde should be charged with sedition and tried for treason for his statement linking BJP-RSS to 'Hindu terrorism' at the recently held Jaipur Congress Conclave. Punj was in the Madhya Pradesh capital on Thursday to lead the BJP's protest here seeking Shinde's sacking from the post of the nation's home minister.

Blinded by vote-bank politics, the home minister has made a statement favouring Pakistan and feeding the anti-India propaganda machine. The home minister of the country making the statement in the presence of the entire UPA government is a dishonour to India. It is internationally known that terror is bred in Pakistan and exported to India,'' the Rajya Sabha MP said. Pakistan has so far denied having terror training camps in that country. Sushil Shinde spoke like he is the home minister of Pakistan and not of India. Going by the gravity of his crime, the government must try him for treason under the various sections of IPC,'' he added.

Attacking the UPA-Centre on its Hindu terror propaganda, Punj said that the NIA was arresting Indian nationals in connection with the Samjhauta Express blasts while the United States department of Treasury in a press note issued on July 1, 2009 specifically named Arif Qasmani, chief co-ordinator of the Lashkar-e-Tayyiba as the facilitator of the July 2006 Mumbai suburban train blasts and the February 2007 Samjhauta Express blasts.

While the government made a series of arrests to prove Hindus as terrorists, the UPA has done nothing to extradite Arif Qasmani and bring him to justice for the Samjhauta blasts. Instead they built a case to connect Hindus to terror to favour their political motives,'' Balbir Punj argued.

Punj quoted the US department of treasury press note which said: "Arif Qasmani is the chief coordinator for the Lashkar-e-Tayyiba's dealings with outside organisations and has provided significant support for LeT terrorist operations. Qasmani has worked with LeT to facilitate terrorist attacks, including the July 2006 train bombing in Mumbai, India and the February 2007 Samjhauta Express bombing in Panipat, India.''

The US treasury department press release mentioned how Qasmani was being funded by Dawood Ibrahim and how he provided logistics support to the Al Qaida.

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Burger King drops supplier linked to horsemeat

LONDON (AP) — British and Irish burger fans could face a Whopper shortage. Burger King says it has stopped buying beef from an Irish meat processor whose patties were found to contain traces of horsemeat.

The fast food chain said in a statement Thursday that it had dropped Silvercrest Foods as a supplier for its U.K. and Ireland restaurants as a "voluntary and precautionary measure."

Last week Silvercrest, which is owned by ABP Food Group, shut down its production line and recalled 10 million burgers from supermarket shelves in Britain and Ireland after horse DNA was found in some beef products.

Burger King said the decision to drop the supplier "may mean that some of our products are temporarily unavailable." It stressed that "this is not a food safety issue."

The presence of horsemeat in beef is a sensitive issue in Britain and Ireland, which do not have a tradition of eating horses. The British tabloid The Sun reported the Burger King story under the headline "Shergar King," a reference to a famous racehorse.

Products from another Irish firm and one in Britain also were contaminated by horsemeat. Most had only small traces, but one burger of a brand sold by the British supermarket chain Tesco contained 29 percent horsemeat.

Irish food officials say an ingredient imported from an unspecified European country and used as filler in cheap burgers is the likely source of the horsemeat contamination.

Burger King says its patties are made from 100 percent beef.

Officials say the horsemeat poses no risk to human health, but the episode has raised food security worries.

More concern arose Thursday when lawmaker Mary Creagh, environment spokeswoman for Britain's opposition Labour Party, said that several horses slaughtered in the country last year had tested positive for phenylbutazone, an anti-inflammatory drug given to horses that can cause cancer in humans.

"It is possible that those animals entered the human food chain," she said.

The Food Standards Agency confirmed that meat from five horses had tested positive for the drug, but said none had been approved for sale in Britain. It said the relevant food safety authorities were informed in cases where the meat was exported to other countries.

The agency said no horsemeat in the current scandal contained phenylbutazone.

Very little horsemeat is sold in Britain but the country sends thousands of horses a year abroad to be killed for meat.

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N. Korea Vows More Nuke Tests Targeting U.S.

In a bellicose statement singling out the United States as the "sworn enemy" of the Korean people, North Korea today announced plans for a third nuclear test and continued rocket launches.

The move is seen as a disappointment to those who hoped the country's new leader, Kim Jong-Un, might take a less aggressive path than his predecessor and father, Kim Jong-il.

It is also seen as a direct challenge to President Obama and South Korea's newly elected president, Park Geun-hye, who takes office next month.

The statement from North Korea's National Defense Commission read:

"Settling accounts with the U.S. needs to be done with force, not with words as it regards jungle law as the rule of its survival."

North Korea Launches Missile After 4 Failed Attempts Watch Video

The renewed threats come in response to the U.S. backed resolution tightening sanctions against North Korea after its December rocket launch.

At that time, North Korea repeatedly insisted that the launch was simply part of its peaceful space program. The recent statement made no mention of that.

It read: "We are not disguising the fact that the various satellites and long-range rockets that we will fire and the high-level nuclear test we will carry out are targeted at the United States."

South Korean officials analyzed debris from the December launch that, they say, indicates North Korea built and tested crucial components for a missile that can fly further than 6,200 miles.

Analysts say that preparations at the Pungyee test site in northeastern North Korea are underway and that a new underground test could take place on short notice.

Within the international monitoring community it is not believed that North Korea currently has the capability to launch a long-range rocket with the capacity to reach the United States or the technology to mount a nuclear warhead on a long-range missile. But the U.S. is not pleased with North Korea's plans. Glyn Davies, the top U.S. envoy to the region, said in Seoul, "We hope they don't do it. We call on them not to do it."

China, North Korea's main ally in the region, is also urging restraint. China backed the U.S. resolution at the United Nations and today the Foreign Ministry cautioned North Korea not to take further steps to increase tension.

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Cameron promises Britons straight choice on EU exit

LONDON (Reuters) - Prime Minister David Cameron promised on Wednesday to give Britons a referendum choice on whether to stay in the European Union or leave if he wins an election in 2015, placing a question mark over Britain's membership for years.

Cameron ended months of speculation by announcing in a speech the plan for a vote sometime between 2015 and the end of 2017, shrugging off warnings that this could imperil Britain's economic prospects and alienate its biggest trading partner.

He said the island nation, which joined the EU's precursor European Economic Community 40 years ago, did not want to retreat from the world, but public disillusionment with the EU was at "an all-time high".

"It is time for the British people to have their say. It is time for us to settle this question about Britain and Europe," Cameron said. His Conservative party will campaign for the 2015 election promising to renegotiate Britain's EU membership.

"When we have negotiated that new settlement, we will give the British people a referendum with a very simple in or out choice to stay in the European Union on these new terms; or come out altogether. It will be an in-out referendum."

The speech firmly ties Cameron to an issue that was the bane of a generation of Conservative leaders. In the past, he has avoided partisan fights over Europe, the undoing of the last two Conservative prime ministers, John Major and Margaret Thatcher.

Britain would seek to claw back powers from Brussels, he said, a proposal that will be difficult to sell to other European countries. London will do an "audit" to determine which powers Brussels has that should be delegated to member states.

Sterling fell to its lowest in nearly five months against the dollar on Wednesday as Cameron was speaking.

The response from EU partners was predictably frosty. French Foreign Minister Laurent Fabius quipped: "If Britain wants to leave Europe we will roll out the red carpet for you," echoing Cameron himself, who once used the same words to invite rich Frenchmen alienated by high taxes to move to Britain.

German Foreign Minister Guido Westerwelle said his country wanted Britain to remain a full EU member, but London could not expect to pick and choose the aspects of membership it liked.

Business leaders have warned that the prospect of years of doubt over Britain's EU membership would damage the investment climate.

"Having a referendum creates more uncertainty and we don't need that," Martin Sorrell, chief executive of advertising giant WPP, told the World Economic Forum in Davos.

"This is a political decision. This is not an economic decision. This isn't good news. You added another reason why people will postpone investment decisions."

The speech also opens a rift with Cameron's junior coalition partners, the Liberal Democrats. Their leader, Deputy Prime Minister Nick Clegg, said the plan would undermine a fragile economic recovery.

And even allies further afield are wary: the United States has said it wants Britain to remain inside the EU with "a strong voice".

EUROSCEPTICS THRILLED

Cameron has been pushed into taking such a strong position in part by the rise of the UK Independence Party, which favors complete withdrawal from the EU and has climbed to third in opinion polls, mainly at the expense of the Conservatives.

"All he's trying to do is to kick the can down the road and to try and get UKIP off his back," said UKIP leader Nigel Farage.

Eurosceptics in Cameron's party were thrilled by the speech. Conservative lawmaker Peter Bone called it "a terrific victory" that would unify 98 percent of the party. "He's the first prime minister to say he wants to bring back powers from Brussels," Bone told Reuters. "It's pretty powerful stuff".

Whether Cameron will ever hold the referendum remains as uncertain as the Conservatives' chances of winning the next election in 2015.

They trail the opposition Labour party in opinion polls, and the coalition government is grappling with a stagnating economy as it pushes through public spending cuts to reduce Britain's large budget deficit.

Cameron said he would prefer Britain, the world's sixth biggest economy, to remain inside the 27-nation EU. As long as he secured the reforms he wants, he would campaign for Britain to stay inside the EU "with all my heart and soul".

But he also made clear he believed the EU must be radically reformed. It was riskier to maintain the status quo than to change, he said.

"The biggest danger to the European Union comes not from those who advocate change, but from those who denounce new thinking as heresy," he said.

"WAFER THIN" CONSENT

The euro zone debt crisis was forcing the bloc to change, and Britain would fight to make sure new rules were fair to countries that didn't use the common currency, he said. Britain is the largest of the 10 EU members that do not use the euro.

Democratic consent for the EU in Britain was now "wafer thin", he said, reflecting the results of opinion polls that show a slim majority would vote to leave the bloc.

"Some people say that to point this out is irresponsible, creates uncertainty for business and puts a question mark over Britain's place in the European Union," said Cameron. "But the question mark is already there: ignoring it won't make it go away."

Asked after the speech whether other EU countries would agree to renegotiate Britain's membership, Cameron said he was an optimist and that there was "every chance of success."

"I want to be the prime minister who confronts and gets the right answer for Britain on these kind of issues," he said.

It is nearly 40 years since British voters last had a say in a referendum on Britain's membership of the European club. A 1975 vote saw just over 67 percent opt to stay inside with nearly 33 percent wanting to leave.

(Additional reporting by Paul Taylor in Davos and Alexandra Hudson in Berlin; Editing by Guy Faulconbridge and Peter Graff)

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