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aI HAVE learnt that marathon is indeed a Greek word.a Thus spoke Olli Rehn, the European monetary affairs commissioner, at the end of a 14-hour negotiating session that produced a second bailout package for Greece this morning.
This had been agreed in principle at a European summit in July last year. But political turmoil in Greece, hesitation in the euro zoneaand an ever-worsening fiscal hole caused by an ever-deepening recessionamade the deal elusive for months.
It was concluded before dawn this morning after finance ministers, the European Central Bank and representatives of private creditors squeezed the numbers to produce a package that was deemed both politically acceptable to creditors and provided Greece with something it reckoned to be sustainable.
As explained in my earlier post, the negotiators were working within self-imposed constraints. According to the final statement, the deal is expected to bring down Greeceas debt ratio to 120.5% of GDP in 2020, while requiring no more than a!130 billion ($173 billion) in additional finance in the coming two years. To square the circle, ministers have applied the file to several aspects.
- Private creditors have accepted a haircut of 53.5% of the nominal value of Greek bonds they hold, plus a reduction in the coupon for new bonds, starting at 2% and rising to 4.3% from 2020. This amounts to a loss of net present value of about 75% (up from the 21% originally agreed in July).
- A 50 basis-point reduction in interest rate charged by euro-zone members on their bailout loans to Greece, applied retroactively. This is justified by reference to the profits that will be made by the European Central Bank (ECB) on the discounted bonds it had bought earlier in the crisis. This will be redistributed to national central banks, which will pass them on national governments. This roundabout flow is to avoid any semblance of monetary financing of Greece.
- By contrast, governments promise to pass on directly to Greece any profits made by their central banks on Greek bonds they currently hold.
All this is made conditional on Greece completing a set of aprior actionsa by the end of the monthafor example, reducing the minimum wage to make labour markets more flexibleaand submitting to an aenhanced and permanenta monitoring of European Commission officials in Greece.
In particular, Greece will be expected to deposit a quarteras worth of debt-service payments into a asegregated accounta that will be monitored by the troika (made up of the commission, the ECB and the IMF). Over the next two months Greece has promised to adopt legislation aensuring that priority is granted to debt-servicing paymentsa, with a view to enshrining this in the constitution aas soon as possiblea. These arrangements may not amount to the budget acommissaraonce threatened by some creditors, but the effect may be pretty much the same.
Christine Lagarde, the IMF head who attended the meeting, declined to say how much her organisation would contribute. But it is clear it will be not be the one-third share that the IMF has so far borne in euro-zone bailouts.
Mrs Lagarde also made clear that the IMFas view would be coloured by whether the euro zone creates a more credible firewall against contagion. This would be done by allowing the current temporary rescue fund, with about a!250 billion of lending capacity, to run alongside a permanent new system with about a!500 billion. A decision is expected at a European summit on March 1st.
The euro zone claims all this amounts to aa comprehensive blueprint for putting the public finances and the economy of Greece back on a sustainable footinga. But a leak of the troikaas debt-sustainability analysis makes clear that the second bailout may well fail. In adverse conditions, ie if Greece does not enact structural reforms, the debt ratio could remain at 160% of GDP in 2020. The politics of imposing a near protectorate on Greece may turn yet more poisonous (see my earlier post on the depiction of German leaders as Nazis.)
Mrs Lagarde makes no secret that there are adownside risksa. But she argued that, by placing greater focus on reforms to boost Greeceas productivityarather than simply on reducing the budget deficitaGreece will have a better chance of returning to growth. European assistance and close monitoring increases the chance of success.
Still, helping Greece remains a huge gamble, and today the euro zone has just agreed to double its stake.
(Picture credit: AFP)
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AFTER weeks of angry words, tear gas and smoke, there is an air of agreement over the salvage of Greece. European finance ministers gathered in Brussels tonight sounding hopeful that an accord over a second Greek bail-out, worth a!130 billion ($170 billion), was at hand. aToday we have all the elements we need to reach a deal. It’s like a puzzle. All the pieces are on the table; what’s needed now is to put them together,a said FranASSois Baroin, the French finance minister. Even Germanyas Herr Nein, Wolfgang SchA$?uble, said he was confident of a deal, saying ministers were aaiming to finalise the decision on a new rescue package for Greecea. Another symbolic bit of good news came from the European Central Bank (ECB), which announced today that it had made not made any purchases last week under its bond-buying programme. This is the first time the ECB has not resorted to this emergency measure since August, when it acted to stop Italy and Spain from being sucked down the drain. So is the debt crisis finally on its way to resolution? Not so fast. The Dutch finance minister, Jan Kees de Jager, poured so much cold water on his colleagues’ optimistic comments that the euro dropped immediately. On his way into the meeting, he said: Greece wants the money and so far we havenat given them anything. We have said no over the past weeks. We can afford to say to no until Greece has met all the demands. Itas up to Greece and the troika to say whether this has been done and for us it is a no until Greece has done so. Tough talk. But it is hard to imagine the Dutch wrecking a deal on their own if the Germans have decided to grant the second bail-out. Does the Netherlands really want to provoke another round of the crisis now that its economy is in recession? Indeed, Dutch sources whisper that the minister’s words have been overplayed. More likely, Mr de Jager is living up to his reputation as the hard man of the Eurogroup, whose job is to stiffen Germanyas resolve. The real issue for the finance ministers is to try to fit the ever-deteriorating Greek numbers within two self-imposed conditions. One is that the restructuring of Greeceas debt should reduce its burden down to aabout 120% of GDPa by 2020. The other is that that the contribution of governments to the second package should be a!130 billion (including some funds left over from the first a!110 billion bail-out) after the “voluntary” losses being negotiated with Greece’s private creditors*. Both are somewhat artificial figures. The debt ratio of 120% was chosen because it is the level of Italy’s debt; the contribution of a!130 billion was decided in October, so cannot be changed for fear of giving the impression that Greece is a “bottomless pit”. But as matters stand at the start of the meeting, the package would leave Greece with a debt burden of 129% of GDP a too high for many of the creditors. Tonight’s homework for the ministers will be to fill the remaining fiscal hole: by convincing the ECB to forego profits on the bonds it bought at a discount (it has more or less agreed to do so) and perhaps by reducing the interest rate that Greece is charged by its creditors. For lovers of numbers, the details of the options are reported in some detail in the FT (here), the Wall Street Journal (here) and Reuters (here). But even if a deal is agreed tonight, big questions remain. How long will it be before Greece must come back for still more money? And if it must be kept permanently under threat of default, what is the chance of restoring the confidence needed to help Greece recover? For now, the ministers seem ready to play for time, in the hope that Italy and Spain can be stabilised. They will no doubt express confidence that the Greek problem has been settled once and for all. But sooner or later, they will be back for more crisis talks. * insert Update 22:00 – The word is that it’s going to be a long night. The finance ministers are busy with another round of negotiations with Greece’s private creditors to squeeze a bigger “voluntary” contribution, beyond the 70% loss negotiated so far. Update 22:20 – The scale of uncertainty about the prospects for Greece are highlighted in the IMF’s debt sustainability assessment, which concludes that, if Greece does not carry out structural reforms, its debt ratio could reach 160% of GDP in 2020. From Reuters: … a scenario of particular concern involves internal devaluation through deeper recession (due to continued delays with structural reforms and with fiscal policy and privatisation implementation). This would result in a much higher debt trajectory, leaving debt as high as 160 percent of GDP in 2020. Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it Update 02:30 – A more detailed account of the IMF’s debt sustainability report is here, from the FT’s Peter Spiegel. Diplomats claim the leak is having little impact on the negotiations. But it will have a big impact on the journalists’ interpretation of the deal of the credibility off the deal – if and when it is reached.
(Updates at end of this post)
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Withthe Arab world in ferment,the West as a whole in decline and America drawing down its military commitment to Europe, one would assume that Europeans would have a lot to think about and do in international affairs. But a year after the launch of its “foreign ministry”, though, the despair is palpable. Fewer and fewer people have anything good to say about its boss, Cathy Ashton. One unusually fierce shot was fired last month from the pages of The Economistas sister publication, European Voice (here). The author, Toby Vogel, concluded: I wrote here a year ago that the EEAS would be judged not by its performance at launch but by the state of the EU’s foreign and security policy after a year or two. The new service is still failing. Among all the design flaws that have held back the EEAS, by far the biggest has been to put Ashton in charge of it. Since then the reports and assessments have been coming in thick and fast. One poor grade comes from the foreign-policy ascorecarda issued by the European Council on Foreign Relations. Another think-tank, FRIDE, analyses more generally the growing trend towards commercial interests in “Challenges for European Foreign Policy in 2012″ (PDFhere). Perhaps the most comprehensive demolition came today from Stefan Lehne, a former senior Austrian diplomat who worked for Mrs Ashtonas predecessor, Javier Solana. His analysis, “More Action, Better Service: How to Strengthen the European External Action Service” (PDF here) is phrased diplomatically, as one might expect, but its exposition of the weakness of the EEAS is more devastating for the sober tone in which it is delivered. In some ways, he concludes, the situation is worse today than it was under the previous system of fragmented roles. Any new organisation is bound to have its teething problems, particularly one such as the EEAS, which incorporates functions that had been performed by several officers, and which must reconcile the aims and prejudices of 27 different countries. The service, moreover, has been systematically undermined by the European Commission, and by the bigger beasts among the foreign ministers. But much of the trouble boils down to poor leadership, ie, Lady Ashton. There are some first-rate people in the EEAS. But the stories of chaos in her entourage and despair among her subordinates are worryingly commonplace.
WHEN it is not fretting about the failures of the euro, Brusselsas favourite pastime is to fret about the failures of its diplomatic arm, the European External Action Service (EEAS).
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BY THE standards of past summits, European leaders finished earlyashortly before 10pm on January 30th. And by the acrimonious standards of past gatherings, notably last monthas bust-up with Britain, this event was uneventful, even amicable. Agreement was reached on the fiscal compact, the new treaty to toughen budget rules, in record time: less than two months.
A final row between France and Poland over who gets to attend which summits was resolved with a complicated compromise. This involves variable configurations of meetings involving 17 countries (the euro zone), 23 (the largely-forgotten Euro-Plus Pact, 25 (the signatories of the fiscal compact), 27 (all EU member states, still in charge of the single market) and 28 (involving soon-to-join Croatia).
It shows that, at the very least, European leaders can negotiate rapidly when they have the political will to do soaand when the British and the Czechs decide to step aside. Whether electorates will be quite so quick to shackle themselves to Germanic fiscal rules is another matter.
But did the leaders achieve anything useful to stem the crisis in the latest of their interminable summits? Their compactanow called the atreaty on stability, co-ordination and governance in the Economic and Monetary Uniona, has as its main aim the imposition of balanced-budget rules on members. This may be a useful discipline in good times. But many worry that, at a time of widespread crisis, such pro-cyclical rules risk imposing too much austerity too widely, thus darkening the spectre of recession and making it even harder to balance budgets. This may explain why leaders suddenly want to be seen talking about their plan (declaration is here in PDF) for growth and jobs, particularly in tackling the problem of youth unemployment.
Nevertheless, Angela Merkel, the German chancellor who had pushed hard for the treaty, hailed it as a great success. Many others, however, dismiss the compact with so much faint praise. aIt is an important distractiona, says one diplomat. aIt has gone from damaging to merely useless,a says a member of the European Parliament. Even Mario Monti, these days everybodyas favourite Italian, judged the compact little more than aa decorative songbirda.
By contrast the two issues that could affect the course of the euro-zone debt crisis in the coming weeksathe fate of Greece and the possibility of creating a bigger firewallawere for the most part ignored or relegated to side-meetings. With Greece and its private creditors still negotiating the scale of haircuts to be imposed on bondholders, this may have been too delicate a time for leaders to discuss Greece. A statement from the euro zone says little that is new.
Moreover, Mrs Merkel was keen to dampen emotions after her officials floated the idea of placing the country under a commissar with the power to reject Greek budgets.When asked about such a prospect, Mrs Merkel expressed afrustrationa with Greeceas lack of compliance with its austerity-and-reform programme, but backed away from imposing such a draconian loss of sovereignty on Greece. President Nicolas Sarkozy of France, for his part, said “there is no question of placing Greece under tutelage.a
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THIS grotesque map of the world, depicting Europe as a bloated balloon, caught my eye this week, and powerfully illustrates one of the factors in Europe’s debt crisis. It depicts the countries of the world sized according to the amount of government spending*. that they spend on social protection, from pensions to health, education and unemployment benefits.
In the words of the World Bank, which published it in a report issued this week (“Golden Growth: Restoring the lustre of the European Economic model”, here), Europe is the world’s alifestyle superpowera. As opposed to America, which spends almost as much as the rest of the world put together on defence, Europe spends more than the rest of the globe combined on social policies.
In many ways this is an admirable aspect of Europe’s economic model, which combines high living standards with high standards of social welfare. The trouble is, such spending is helping to bankrupt governmentsanot least because those very same caring policies ensure that Europeans live longer, requiring more expenditure on health care and the payment of pensions for more years.
Anybody who wants to understand the strengths and weaknesses of European economies in this time of crisis would do well to read the report (the overview is here).
THIS will be my last blog post this year. But although Charlemagne is taking a break, the EU machinery, perhaps unusually, is working overtime over the festive season. It is trying to gift-wrap the new treaty that leaders agreed to draw up over the head of Britain’s prime minister, David Cameron. My piece this week on the British row argues that the bust-up could yet go either way: towards a progressive deterioration in relations that might ultimately see Britain leave the union, or towards a reconciliation that sets aside the rancour of the night of December 8th-9th. The past few days have seen evidence of both possibilities. First there was the war of words started by French leaders as they openly incited markets and credit-rating agencies against Britain, arguing that perfidious Albion was more deserving of a downgrade than France. For two countries with similar debt levels, Britain has a higher budget deficit and is running higher inflation. The difference is that the Bank of England, unlike the European Central Bank, acts as the lender of last resort to the sovereign, so investors are less worried about losing the face value of their bond. The French charge was led by the central-bank governor, Christian Noyer, and quickly followed up by FranASSois Fillon, the prime minister, and FranASSois Baroin, the finance minister. Even the daily Le Monde seemed surprised by the vehemence of the attack, asking “what has bitten the French government?” The answer, it seems, is the need to prepare the country for the imminent loss of its AAA rating.
In an effort to stabilise the euro zone,France, Germany and 21 other countries have decided to draft their own treaty to impose more central control over national budgets. Britain and three others have decided to stay out. In the coming weeks, Britain may find itself even more isolated. Sweden, the Czech Republic and Hungary want time to consult their parliaments and political parties before deciding on whether to join the new union-within-the-union. So two decades to the day after the Maastricht Treaty was concluded, launching the process towards the single European currency, the EU’s tectonic plates have slipped momentously along same the fault line that has always divided itathe English Channel. Confronted by the financial crisis, the euro zone is having to integrate more deeply, with a consequent loss of national sovereignty to the EU (or some other central co-ordinating body); Britain, which had secured a formal opt-out from the euro, has decided to let them go their way. Whether the agreement does anything to stabilise the euro is moot. The agreement is heavily tilted towards budget discipline and austerity. It does little to generate money in the short term to arrest the run on sovereigns, nor does it provide a longer-term perspective of jointly-issued bonds. Much will depend on how the European Central Bank responds in the coming days and weeks. As the dinnertime negotiations stretched into the wee hours of Friday morning, leaked drafts of a communiquA(c) indicate that the summiteers intend to agree to a afiscal compacta to ensure the stability of the euro zone. These words matter: they are the same ones that Mr Draghi had used a few days earlier in a Delphic judgmentthat many interpreted to mean that he would intervene more heavily in the bond markets, once the politicians had delivered a more credible system to impose budget discipline. The leaders seemed to be appealing directly to Mr Draghi to deploy the abig bazookaa, which only he controls, to protect big and vulnerable sovereigns like Italy and Spain. So is salvation at hand? Not quite.
That deal envisaged tougher monitoring of countriesa budgets and economic policies, and a rapid amendment to the European Union’s treaties. Many thought treaty change was unnecessary but went along for Mrs Merkel’s sake. Sounds familiar, no? That is because, a year on, aMerkozya, as the Germano-French duo are now known, are once again pushing for a toughening-up of controls on national budgets and yet another revision to the treaties. At a summit in Paris today the two leaders announced they would aforce-marcha the euro zone towards stricter rules to ensure that a debt crisis could never happen again. They will submit proposals for a new treaty on Wednesday and, if they cannot secure agreement from all 27 EU members, they declared they were ready to push ahead with a separate agreement among the 17 members of the euro zone. That risks isolating Britain, as well as the nine other non-euro states. Treaty change is no more popular than it was in Deauville, not even among euro-zone members. But at a summit of European leaders in Brussels starting on Thursday the chances are that some form of treaty revision will grudgingly be agreed, because Mrs Merkel wants it so badly. But in many ways, the new proposals undo the bargain at Deauville, which, many think, helped worsen the crisis. Since then Ireland and Portugal have been bailed out; Greece has sought a second rescue programme; contagion has spread to Italy and Spain; and the prime ministers of Italy and Greece have been replaced by technocrats.
THE two speeches in two days by Nicolas Sarkozy and Angela Merkel reveal the many differences between them ahead of next week’s European summit. I give a brief analysis in my earlier post. What follows is a more detailed exegesis (a link to Sarkozy’s speech in French is here and a PDF Merkel’s address in German is here): Sarkonomics and the origin of the crisis The French president offers a strange bit of Sarkonomics to explain that the crisis was caused by external forces a the unregulated globalisation of trade and finance a of which France is essentially a victim. Financial globalisation established itself to compensate artificially the ravages that [trade] liberalisation without rules caused in the economies of developed countries. It was necessary so that the surplus of some could finance the deficits of others. It was necessary so that debt could compensate for the unacceptable fall in living standards of households in developed countries. It was necessary to finance a social model that was crumbling beneath deficits. It was ineluctable so that financial capital could seek elsewhere the profits that it could no longer hope to gain in developed countries. Thus was established a gigantic machine to create debt. Mr Sarkozy says France cannot be blamed for the troubles it faces because other rich countries are in trouble too; yet he does not explain why some developed countries (Germany and several Nordic states, for example) have survived the crisis better than France despite the infernal debt machine. Later on, Mr Sarkozy says France has to cut back on state expenditure to preserve its destiny (this was tricky for him, as he had vowed three years earlier in Toulon not to conduct a policy of auterity) Mrs Merkel, for her part, does not speak much of great uncontrollable forces unleashed by laissez-faire capitalism. Instead she emphasises the responsibility of individual states. The problem, in her view, is that countries have broken fiscal rules, and there has been nobody to enforce the limits on deficits and debt. IT SEEMS odd, at first sight, to see the markets taking so much hope from two speeches in two days – one by France’s President Nicolas Sarkozy and the other by Germany’s Chancellor Angela Merkel – that revealed more differences than agreement on how to resolve the euro zone’s debt crisis. Perhaps it is the fact that both say the European Union’s treaties should be changed, and any agreement on any subject is good news. Or perhaps it is the hope that, whatever they say in their opening bids, they will come up with enough of a deal at the next European summit on December 8th-9th to allow the European Central Bank to deploy its abig bazookaa. Then again, markets have often rallied ahead of summits in the expectation of an agreement, only to be disappointed within days, or even hours, of the latest half-step being announced. Neither Mr Sarkozy nor Mrs Merkel offered any real detail of what should be included in a revision of the treaties. But even their vague outlines reveal contrasting philosophies. I give a fuller analysis of the speeches in the next post (here). In summary: - Mr Sarkozy places the emphasis on asolidaritya among European states (ie, joint Eurobonds, and no defaults or debt-restructuring after Greece), while Mrs Merkel gives priority to budgetary discipline and rules. - Mr Sarkozy wants to create a hard core of euro-zone countries within the European Union; Mr Merkel wants to include as many non-euro states as possible - Mr Sarkozy wants to Europe to integrate through the action of leaders (reproducing France’s presidential system, with lots of discretion for the executive); Mrs Merkel favours more independent institutions like the European Commission and the European Court of Justice (more akin to Germany’s federal structure, which retricts politicians’ leeway) NICOLAS Sarkozy is causing a big stir after calling on November 8thfor a two-speed Europe: a afederala core of the 17 members of the euro zone, with a looser aconfederala outer band of the ten non-euro members. He made the comments during a debate with students at the University of Strasbourg. The key passage is below (video here, starting near the 63-minute mark) You cannot make a single currency without economic convergence and economic integration. It’s impossible. But on the contrary, one cannot plead for federalism and at the same time for the enlargement of Europe. It’s impossible. There’s a contradiction. We are 27. We will obviously have to open up to the Balkans. We will be 32, 33 or 34. I imagine that nobody thinks that federalismatotal integrationais possible at 33, 34, 35 countries. So what one we do? To begin with, frankly, the single currency is a wonderful idea, but it was strange to create it without asking oneself the question of its governance, and without asking oneself about economic convergence. Honestly, it’s nice to have a vision, but there are details that are missing: we made a currency, but we kept fiscal systems and economic systems that not only were not converging, but were diverging. And not only did we make a single currency without convergence, but we tried to undo the rules of the pact. It cannot work. There will not be a single currency without greater economic integration and convergence. That is certain. And that is where we are going. Must one have the same rules for the 27? No. Absolutely not [...] In the end, clearly, there will be two European gears: one gear towards more integration in the euro zone and a gear that is more confederal in the European Union. “THE IMF will never be big enough to save the euro zone.a That is how one IMF official dismissed the idea that the fund would help put up a firewall to protect the euro zone. It could help, obviously, but in the end salvation was for the euro zone to figure out for itself. With Greece potentially facing a default and exit from the euro in the coming weeks, euro-zone countries have been working to build up their rescue fund, known as the European Financial Stability Facility, though financial engineering that might expand it to about a!1 trillion. But without the full power of the European Central Bank, which is not allowed to lend to states, this is not enough to save a country like Italy, should it collapse in the bond markets (see my previous post)
Though yields on its bonds have soared alarmingly, Italy has not had to seek a bail-out (not yet anyway). And in an attempt to ensure it does not succumb, bringing down the euro with it, it has been placed under a special preventive regimeaplaced on probation to ensure it implements the many promises it made to carry out reforms designed to promote growth and balance the budget by 2013.
SOME European delegates walking around the G20 summit in Cannes can be seen sporting an unusual badge: Groupe de Francfort. The Frankfurt Group, or GdF for short, is the latest addition to the proliferation of international political groups, the G7, G8 and the G20, among many. Consisting of the leaders of Germany, France, the Eurogroup of finance ministers, the European Central Bank, the European Commission and the International Monetary Fund, the F-team has quickly established itself as the cluster managing the euroas crisis. It has no legal structure or secretariat, but it is now the core within Europeas core.
THE BEACHFRONT of Cannes is deserted. The streets are still. The city is quiet, apart from the rumbling of journalists pulling their rolling bags and motorcades whisking G20 leaders to and from their hotels. One can almost hear the scraping of shovels as European leaders rushed to fill the sandbags in the hope of surviving the impending explosion in Greece, perhaps followed by Italy (see earlier post).
FOR MOST of the first day of the G20 summit in Cannes, the worldas most important leaders have been mere spectators to the political drama in Athens that could determine the fate of the euro zone, and of the world economy. Forget the financial-transaction tax. Forget the regulation of commodity prices. Forget the call to ensure that the worldas poorest do not suffer twice, once because of their wretchedness and twice because rich-world aid budgets are cut. These things and more will be mentioned in the final communiquA(c). The most burning issue is the fate of the euro.
aI HAVE never failed to make the grade,a says Silvio Berlusconi after being summoned before headmasters of the euro zone for a beating. aI was convincing.a But Angela Merkel of Germany and Nicolas Sarkozy of France thought differently. When asked whether Italy’s prime minister had reassured them about doing his homework to draw up a plan to bring down Italy’s vast debt and implement structural reforms, Mrs Merkel and Mr Sarkozy first hesitated, then looked at each other and, finally, smirked knowingly. (video clip here, in French) aHow to put it?a started Mr Sarkozy, aWe have confidence in the sense of responsibility of all of Italy’s political, financial and economic authorities.a Mrs Merkel chipped in: aIt was a meeting among friends.a It was anything but friendly. Rarely has a member of the euro zoneaand a founding member of the European integration project, no lessabeen chastised so publicly. But in many ways, the euro-zone debt crisis is now all about Italy. In discussions all weekend, including at two European summits, leaders worked on drawing up a package deal to save the euro that should be concluded in another round of summits on Wednesday. All three of the main issuesathe fate of Greece, the afirewall” to prevent contagion and the recapitalisation of Europe’ banksarevolved in some ways around Italy: if Greece’s debt is restructured, will the markets then turn on Italy, the next most-indebted state in the euro zone? If so, is the new firewall big enough to protect Italy? And does the plan to strengthen banks with fresh capital, so that they can withstand the loss of value of their bond holdings, not place an unfair burden on Italy, whose banks hold vast amounts of depreciated Italian debt? Earlier this summer, when Italian bonds started to collapse, the European Central Bank (ECB) had quietly told Mr Berlusconi to push through reforms in exchange for the ECB’ intervention to buy Italian bonds, so holding down Italy’s borrowing costs. But once the most acute market pressure was relieved, Mr Berlusconi began to backtrack on his austerity measures, to the fury of Germany. At the summit, Mr Berlusconi was told bluntly to go away and come back in three days’ time with a credible plan to reform his country. aThere is no question of appealing for solidarity from partners if those whom we assist do not themselves make the efforts necessarya declared Mr Sarkozy. Herman Van Rompuy, president of the European Council (who presided over the summits), later repeated the point, saying acertain countriesa had to make acommitmentsa about future reform. Or else, what? asked journalists. aThey WILL make commitments,a replied Mr Van Rompuy, curtly. The Italian prime minister, through, is unrepentant. Like every practiced school miscreant, he has an excuse for everything. No structural reforms? His partners in the Northern League prevented a reform of pensions. Now he would urge the league’s boss, Umberto Bossi, to abide by proposals to have a uniform retirement age of 67 across the euro zone. Was Mr Sarkozy not furious with Italy? Well, the French president’s attitude to Italy was coloured by his understandable annoyance about the allocation of seats at the ECB. Having supported an Italian, Mario Draghi, to succeed Jean-Claude Trichet as the bank’s president, France had demanded that the Italian member of the ECB’s six-man executive board, Lorenzo Bini-Smaghi, should step down early to make way for a Frenchman. But Mr Bini-Smaghi had declined to listen to pleas to avoid a casus belli between Italy and France, despite the offer of prestigious jobs back home (though not the job he wanted, ie, to become governor of the Bank of Italy). aSarkozy was annoyed,a admitted Mr Berlusconi. aThere has been a clash on this question of Bini-Smaghi, for which I bear no responsibility. At a certain point I told him [Sarkozy]: ‘What can I do? Shall I kill him? I don’t think so.’a Mr Berlusconi is always great with the one-liners. But his buffoonery is wearing thin on the rest of the euro zone. THE big blanks left in the draft of the euro summit communiquA(c) that was doing the rounds on October 20th said it all. (PDF is here) Amid the self-congratulatory verbiage about how the euro zone had taken aunprecedented steps to combat the effects of the worldwide financial crisisa, the document was silent on all the most important elements of the much-promised acomprehensive solutiona to the euro’s debt crisis: how to strengthen monitoring of Greece’s derailing adjustment programme; how much of a haircut to impose on private holders of Greek debt; how to boost the power of the bail-out fund to protect Spain and Italy; and how to recapitalise Europe’s most fragile banks. These voids were due to be filled in a weekend marathon of meetings in Brussels. Finance ministers would gather on October 21stand 22nd. Then the leaders would hold twin summits on October 23rd, first of all the European Union’s 27 members, followed by a gathering of the 17 leaders of the euro zone. At the end of it all there would be, as Nicolas Sarkozy and Angela Merkel promised in Berlin a fortnight earlier, a aglobal packagea that would prove to the world that the euro zone could deal with its problems. aYou should know that France and Germany have perfectly common positions on all the issues,a Mr Sarkozy had declared at the time, comically refusing to give any detail of what that the accord consisted of. (Transcript here, in French) The disagreement between the French president and the German chancellor became ever more apparent as the days went by. Mrs Merkel started to play down the prospect of a comprehensive resolution of the crisis, saying there would be no magic wand. A rushed visit by Mr Sarkozy to Frankfurt to meet Mrs Merkel and other key figures, apparently leaving his wife, Carla Bruni, to give birth to their baby daughter on her own, does not seem to have unblocked the positions. On October 20th, the climate of discord seemed to grip even the troika of technical experts assessing the Greek programme. Reports emerged of disagreement between the IMF and the European Commission over their estimates of Greece’s ability to bring down its debt; the IMF thinks the commission is being too optimistic. A draft of the troika’s report (PDF is here) spoke of the country’s debt dynamics being aextremely worryinga. But the key section in the report setting out the figures was left blank. Reports started circulating of the Franco-German disagreement being so bad that the summit might have to be delayed. This was quickly denied. But asked whether there might have to be an additional summit next week, a senior EU official said vaguely: aIs there life after death?a Yes there is, at least when it comes to euro-zone summits. As the summit of October 23rdgives up the ghost, another one is already being born. A statement (Word file is here), from the ElysA(c)e Palace said the French and German leaders were determined to draw up aa global and ambitious solutiona to the crisis. After a adeep examinationa of the issues on the 23rd, the statement said, there would be a new summit to be held by October 26th, at the latest. The charitable view of the mess is that Mrs Merkel needs time to consult the Bundestag on changes to the bail-out fund. Moreover, given the poor state of Greece’s reform programme, more time is needed to negotiate with Greece’s private sector a greater reduction of its debt than agreed in July. The cynical view is that there is a perfect disagreement between Paris and Berlin. Details of the latest state of play are summed up here. In short, the summit to resolve the crisis is, itself, in crisis.
Correction: This blog post briefly, and mistakenly, referred to “London” rather than “Berlin” in the last paragraph. Mr Sarkozy then flew to Frankfurt to attend another parturition. The mother is called Europa, nicknamed euro. And we already know the name of her bundle: Comprehensive Solution. It is the third such offspring this year, and the latest labour promises to be the hardest. There is every sign that the babe, if it is not still-born, will be a disappointing runt. While baby Sarkozy’s arrival happened discreetly, there were lots of relatives on hand to wait for Comprehensive Solution. Europa’s labour coincided with the retirement ceremony of a favourite uncle, Jean-Claude Trichet, who does something in banking and offered a few cautionary words about necessity being the mother of procreation. Given the risky birth, everybody left the party in silence. But the relatives will gather again in Brussels tomorrow, and the day after tomorrow and the day after that for a great family Council. The godmother, Angela Merkel, has already told the world to expect a sickly, cursed child: aAll of the sins of omission and commission of the past cannot be undone by waving a magic wand…. This is going to be a long and arduous road.a The birth of Comprehensive Solution involves a delicate operation to remove a putrid boil in Europa’s nether regions. The condition is called aGreek debta and the euphemism for the medical procedure to excise it is aapplying a haircuta. It is more like amputation. And not even the financial doctors know if it will stop the infection, or cause it to spread throughout Europa’s body. It was only a few days ago that Nicolas and Angela had promised the world the birth of a Saviour, who would protect Europa from the wild bond-raiders come from the forests. But the more the experts have studied foetus, the more it seemed to be not quite right. It was supposed to develop two strong legs, with a!2 trillion worth of muscle, to hold up Europa. But now it looks like it will have no more than a!1 trillion, ie, one leg. And Comprehensive Solution was supposed to have two strong hands (to hold the purses of Europa’s bankers). These were reckoned to weigh in at a!200 billion. But further inspection puts them at less than a!100 billion, ie, barely one hand. Having indulged in fiscal promiscuousness well into adulthood, old Europa lacks the strength to bring forth a healthy child. Nicolas still hopes for a miracle. He is back in Paris with Carla and the baby girl. But he knows his family’s fate depends on the survival of Comprehensive Solution. Come the family Council in Brussels on Sunday, everybody will sing the praises of Comprehensive Solution. But word of its horrible condition is spreading through the souks, where traders see it as a bad omen. And through the gloom of the forest, one can already catch the glint of the bond-raiders sharpening their swords. THIS is a long post, and a diversion from my usual EU- and euro-related concerns. But until recently I was writing about cybersecurity, and it does matter to the security of Europe, as the cyberattacks on Estonia in 2007 demonstrate. So here goes… Later today (Thursday) Britain’s foreign secretary, William Hague, will take questions from the public via Twitter on the London conference on cyberspace that he is organising for next month. As a journalist, I cannot help but feel that this a bit of a stunt: communicating in 140 remotely typed characters, the questioner has little chance of putting a politician on the spot. Still, I suppose one should not criticise ministers for trying to communicate with the public. The subject is serious, however. More and more people and devices are being hooked up to the internet. One debate concerns the future governance of the internet: should it be directed by governments, or should it be left to the private sector to develop inventively (and somewhat anarchically)? The Economist recently ran an account of the debate (here) and expressed its view in a leader (here). To judge from Mr Hague’s tweets, he agrees with us. Inevitably, given the pervasiveness of information technology, cyberspace is also becoming a question of security. After land, sea, air and space, cyberspace is now the fifth dimension of warfare. Could a country launch a crippling attack from cyberspace, say to knock out the electricity grid of a rival state, or snarl up the logistical chain of its armed forces? The answer is: maybe. For those that want to get up to speed, a good place to start is my Economist cover story on cyberwar last year (here), and the accompanying leader (here). In America, especially, cyberspace is rising up the scale of national-security threats. Britain, too, is tooling up for defence (and offence) in and through cyberspace. In the rest of Europe the debate perhaps centres more on questions of data privacy. On all sides of the Atlantic, however, cybercrime is endemic. A Google News search for acyber attacka throws up recent news of a threat by hackers to knock out the New York Stock Exchange on October 10th, a report on a new centre to defend America’s critical infrastructure, speculation about the cause of the failure of Bank of America’s online banking service, and demands by Congress for America to respond firmly to apredatorya cyberespionage by China. Ahead of the London conference, the Ditchley Foundation in Britain gathered senior officials, industry experts and NGOs at its Oxfordshire retreat to discuss how best to balance the benefits of an open internet with the need for action to protect the electronic commons. I was asked to sum up the debate. These were my thoughts, tidied up and edited where necessary for clarity and discretion: THE words of one senior participant still resonate: “It’s so big it does my head in.” At every turn this weekend, we have run into the problem of definitions: what is it that we are dealing with? It is not because cyberspace it is distant or foreign, but because it is all around us and we are part of it. As with the Supreme Being, we can only talk about it in metaphors. Some have invoked the language of nuclear deterrence, others of biological weapons, others have spoken of crime, others of public health. Some talk of the Law of the Sea. One breakout group reports: “We are in a swamp where we need to make polders.” Some of the questions that came up: - Is this millennial change, or perhaps just decennial? - We don’t know how big the problem is - We don’t know what to protect - The discussion on critical infrastructure is a bit like a Monty Python scene: “So, apart from e-mail, Skype, Facebook, iPads, iPhones, drains, water, electricity and air-traffic control, what has cyberspace ever done for us?” We don’t know what is critical, and what is critically critical. What depends on cyber (eg, the financial sector). And how does cyber depend on non-cyber (eg, the grid)? - We cannot count the cost of cybersecurity. We cannot insure against losses. And we cannot sue for negligence Everybody here seemed to quote their children. So are we the right people to be discussing this? What is cyberspace? aIt’s stuff,a says one participant, quoting his kids Why is it so hard to understand?….
THROUGH the crisis, European taxpayers have bailed out first the banks, and then busted states. So it is little wonder that many governments are reluctant to consider either of the main options to end the euro-zone crisis: opening up the wallet (by enlarging the euro-zone rescue fund), or letting others borrow oneas credit-card (issuing joint Eurbonds). Germany and France want somebody else to start paying. And who better to punish than the reckless bankers and speculators who, in their view, caused the trouble in the first place? The idea of imposing a financial transaction tax (FTT) has been around since the start of the crisis, indeed for several decades since it was mooted by the late Nobel laureate, James Tobin. But has faced a seemingly insurmountable problem: in a globalised connected financial world, a financial tax has to be global if markets are not simply to shift their operations to where they will not be taxed. As Timothy Geithner, Americaas Treasury Secretary, repeated to European finance ministers in a less-than-cordial encounter (see previous posting) in the Polish city of Wroclaw this week, the United States opposes the FTT on the grounds that it would raise the cost of capital and weaken the already-fragile economic recovery. Undeterred, Germany and France last week called for the tax to be imposed by the European Union alone (see joint letter from the German and French finance ministers here). The European Commission is also supporting the idea, and will unveil proposals in the coming weeks. Michel Barnier, commissioner for the single market, said his proposals would be atechnically simple, economically bearable by the financial sector, financially productive and politically justa. He gave no figures for how much money could be raised. Supporters of a more localised FTT would argue that this is an opportunity for Europe to show the way in taking action that is both moral and remunerative. As with emissions-trading to curb climate change, others will follow. Indeed, European officials are already arguing over who should take the proceeds of an FTT: national exchequers, the European Union or a special-purpose European fund to deal with future banking collapses? Even so, the idea is running into the firm objections of, among others, Britain. Jacek Rostowski, the Polish finance minister who holds the rotating presidency, said the EU was avery, very divideda on the issue when it was discussed in Wroclaw. In any case, he said, anobody expects this element to be crucial in our attempt to stabilise the situation, both fiscally and financially.a In other words, the FTT is not worth the trouble it would cause. Thus the idea that gathered strength yesterday: a financial transaction tax within the 17 countries of euro zone. aIam sure that if itas impossible at the worldwide level, weall need to organise that in the European Union, or at least in the euro zone.a To reduce the risk of avoidance, he said, an FTT in the euro zone would have to be imposed at a lower rate than a global tax. In an interview, his German counterpart, Wolfgang SchA$?uble, supported the idea. One might question whether an FTT in an ever-smaller geographical area makes sense, particularly given that it excludes London, Europeas main financial centre. The pony-tailed Swedish finance minister, Anders Borg had some words of caution: We have substantial experience in Sweden. Basically most of our derivative and bond trading went to London during the years we had a financial transaction tax. So if you donat get a solution that is universal it is very likely to be detrimental for European financial markets. And from the Swedish perspective, we cannot foresee that we would introduce such a tax in our system again. The idea of an FTT at 17 raises another intriguing question: might it become the first fracture in the EU from the move to integrate the euro zone to confront its debt crisis? An FTT is no longer a question of monitoring budgets and maintaining fiscal discipline, but a move to integrate taxation, which in turn influences the EUas single market. Britain may consider a FTT at anything other than the global level to be self-defeating. But what of a common base for corporate tax in the euro zone? Even if British tax rates are lower, a simplified and uniform system for calculating and paying corporate tax in the much of the European market may prove attractive to some companies. Such issues worry British officials. But for now the greater alarm is over a collapse of the euro, so the British have become among the loudest cheerleaders for euro-zone integration. aTime is running out,a said George Osbone, Britainas Chancellor of the Exchequer. aThey have got to get a grip and deliver a solution to the uncertainty in the markets.a If the ordinary citizen has to pay tax on a daily financial transaction, like buying a toothbrush, there can be little moral argument against taxing financial transactions. But at a time of crisis, the question is an FTT might actually worsen the crisis. Might a euro-area FTT not weaken the euro areaas banks? After all, the IMF is urging governments urgently to recapitalise their banks – not to draw money out off them – to halt the spread of contagion from their exposure to the sovereign debt of vulnerable European countries. Two French banks were downgraded this week due to their exposure to Greek debt It would not be the first time that Germany and others, in taking aim at the bankers, shoot themselves in the foot. The demand that the financial sector pay for a share of the second bail-out of Greece (which has not yet been approved) caused delay, destabilised the markets and had to be buttressed by offers of government cash to protect the European Central Bank and Greek institutions. It raised comparatively little money. If the euro zone believed the creditors should take the hit, it should have allowed a proper restructuring of Greeceas unsustainable debt. Instead it came up with a fudge that did more harm than good. The resentment of bankers, and the desire to protect the taxpayer is understandable. But the grudging and erratic response of the euro zoneas governments has been as much part of the problem as of the solution. The citizen will be placed at ever greater risk unless the crisis is tamed quickly. To do that, two destabilising feedback loops have to be broken. The first is between collapsing banks and collapsing treasuries; the other is between panicking markets and hesitating governments. An EU or euro-area FTT helps with neither. For now, it is a distraction – and could make things worse. AMERICA’S Transportation Security Administration is expanding its programme to pre-screen certain passengers and speed them through airport security a bit faster. The TSA has been working to make airports easier for certain pre-screened passengers for years now. But this latest expansion suggests that the programme could finally attain real scale and have an impact on the lives and commutes of a significant number of business travellers. Over the course of 2012, the agency plans to extend its “Pre-Check” programme to 28 of America’s busiest airports, including all three of Washington, DC’s major airports, Dulles, BWI, and Reagan; New York City’s LaGuardia and JFK airports; Philadelphia, San Francisco, and even Chicago’s giant O’Hare. Previously, the pre-check programmeawhich allows passengers to keep their shoes, belts and sweaters on and their bag of liquids and their laptop in their bagawas only available at seven US airports. The TSA says that 336,000 passengers “have already been screened through a TSA PreaaC/ lane,” but that’s not a particularly large number compared with the millions of passengers most large airports handle in the course of a year. The airports that will be included by the end of this year handle a huge chunk of US domestic flights. Many more business travellers will have access to the pre-check programme, which can significantly speed up the security process. You do have to be an elite frequent flyer on Alaska Airlines, American Airlines, Delta Air Lines, United Airlines or US Airways, but I would wager that many American business travellers already are. (You could also be a member of the US government’s “trusted traveller” programme, which has the added is bonus of speeding up border crossings.) After Prea (a trial for any typist) expands to Washington’s airports, I will sign up, test it out and report back. In the meantime, FareCompare’s Rick Seaney has a pretty positive review. MARTIN O’MALLEY, the Democratic governor of Maryland and former mayor of Baltimore, is sometimes spoken of as a contender for his party’s presidential nomination in 2016. It’s probably to Mr O’Malley’s advantage that David Simon, the creator of the legendary HBO police seriesThe Wire, has argued that Mr O’Malley is one of the inspirations for the show’s character Tommy Carcetti, a Baltimore city councilman who eventually becomes mayor of the city and governor of the state. But presidential speculation and parallels to fictional politicians aren’t the only things putting Mr O’Malley in the national spotlight these days. He’s drawing praise from the left for planning to increase Maryland’s petrol tax. In America, petrol taxes are often earmarked to pay for road, highway and other infrastructure improvements. But like many states, Maryland does not index its petrol tax to inflation, so over time, the real value of the tax has fallen. Mr O’Malley’s plan would phase in a 6% sales tax on top of the existing 23.5 cents-per-gallon tax and gradually replenish Maryland’s Transportation Trust Fund. The governor also wants to make it harder for future lawmakers to remove money from the trust fund to pay for other priorities or fill budget gaps. Public-transport advocates, environmentalists wanting higher taxes so people will drive less, and lefty bloggers all seem happy with the plan. But Mr O’Malley’s proposal has even drawn praise from the New York Timeseditorial board, the institutional voice of a certain subset of America’s centre-left. Why the hooting and hollering? America’s liberals are happy to finally see some politician, anywhere, argue for new, broad-based taxes to pay for government priorities. Even Barack Obama says he only wants to tax the rich. Mr O’Malley’s tax would hit everyone who drives. Don’t think that this signals the end to America’s tax revoltafar from it. But Mr O’Malley makes a compelling case for why reinvestment might require more broad-based tax increases. America’s infrastructure is crumbling. It will cost money to fix itaand delaying maintenance and postponing key projects will only cost taxpayers more in the long run. But now, even as regional airlines continue to phase out their older turboprops, a new generation of planes with propellers is taking off. ATR, a European maker of turboprops that is jointly owned by Airbusas parent EADS and Finmeccanica of Italy, had a record year last year, winning firm orders for 157 planes and options for a further 79. Like Airbus and Boeing it now has an order book stretching years ahead. And like the bigger planemakers it is ramping up its output to meet the demand: in 2005, the turbopropas darkest hour, ATR made just 15 of them. Last year it made 53, this year it is aiming to make more than 70, and in 2014 it wants to turn out 85. ATRas big order from Kingfisher seems to have gone pear-shaped in recent weeks as the Indian airlineas financial troubles have worsened. But this week the planemaker signed a big deal with Wings Air of Indonesia, which will eventually have a fleet of 60 ATR turboprops, of which 40 will be its latest model, the 72-600 (pictured), which seats up to 74.
ZURICH has replaced Tokyo as the most expensive city in the world, according to the latest survey of the Worldwide Cost of Living from the Economist Intelligence Unit. Today’s chart of the day contains a pretty graphic and an explanation. THE ECONOMIST has longaccepted the scientific consensus that the world is warming and that this warming is being caused by carbon-dioxide emissions from human activity. Climate scientists generally believe that avoiding potentially catastrophic warming will require massive cuts in emissions. The world has generally failed to agree on such cuts, and The Economist now believes “a dash to stay under 2AdegC [of average temperature increase] is no longer plausible.” Some scientists and activists believe that a concentration of over 350 parts-per-million of carbon dioxide in the atmosphere could lead to feedback loops (the release of methane from Arctic permafrost, for example) that could make warming almost impossible to stop. But the Intergovernmental Panel on Climate Change believes the right number is 450 ppm. Achieving that target, as David Roberts of the environmental news website Grist explained last year, is a “gobsmackingly gargantuan challenge”: It turns out, to get on a trajectory to hit 450 ppm, weare going to need to turn off most of our fossil fuel energy, end deforestation, and build about 11.5 new terawatts of clean energy capacity by 2033 (30 years out from the 2003 baseline). Mr Roberts goes on to highlight a series of remarkable charts and graphs from Saul Griffith, an inventor. Mr Griffith estimates that, in order to meet the 450 ppm target, the world will have to build 100 square metres of photovoltaic solar cells (with 15% efficiency and good siting, naturally) every second for the next 25 years. Also, one 100m diameter wind turbine every five minutes and one 3-gigawatt nuclear plant every week. The list goes on. You can see why The Economist is pessimistic about avoiding2AdegC of warming. Joe Romm, a prominent (and controversial) American climate activist, asks an important question: what will happen to air travel if we do eventually decide to (or have to) drastically cut carbon emissions? Clearly, jet-fuel-powered air travel would have to be reduced, and would become more expensive. Will more airlines try biofuels? That’s certainly been a result of the European Union’s emissions-trading scheme. It’s worth noting that applying even the EU’s modest (when compared with what the likes of Mr Roberts and Mr Griffith are calling for) emissions limits to airlines has been deeply controversial. But even biofuels are of somewhat dubious environmental benefit. It’s a vexing problem. My favourite vision (although I pray it doesn’t come true… and don’t really expect it to) of the future of air travel is from Paolo Bacigalupi, whose novel The Windup Girl won the Hugo and Nebula awards, the highest honours in science fiction, after it was published in 2009. Mr Bacigalupi’s book takes place in 23rd-century Thailand, after Earth has been ravaged by the destructive consequences (notably huge floods and massive crop failures) of catastrophic climate change. In Mr Bacigalupi’s world, airshipsaor zeppelins, if you preferarule the skies. Air travel is slower, more dangerous, and a lot more expensive than it is now. Whatever you think of the science of climate change, I think we can all agree we don’t want that. TWO pieces in this week’s Economist merit particular attention from aviation enthusiasts. “Fasten your seat belts” examines plans for the privatising of Guarulhos, SAPSo Paulo’s main international airport, together with two other facilities. And in the Business section, a correspondent in Hong Kong considers China’s objections to the European Union’s plan for controlling greenhouse-gas emissions from aeroplanes. But there are few positive signs for Eastern Europe’s older airlines. Slovakia has a high LCC penetration because it abandoned its flag carrier in 2007. Lithuania did the same thing two years later, while Latvia clung onto its national airline, but only by marketing it as a pseudo-LCC with pan-Baltic aspirationsabaffling analysts, and perhaps government financiers, in the process. Poland and Romania seem no more confident in their flag carriers, beating paths to Turkey, Qatar and the United Arab Emirates for financial backing and feed-in traffic. While none would admit it, they are all perilously close to their own Malev moment. Malev itself stopped flying after its suppliers, spooked by an EU ruling that the airline return $390m in state aid, demanded up-front payment for their services. However, this was much more than a cashflow problem. Hungary, like others, was styling itself as an upcoming East-to-West hub. It had noticed that the Gulf’s three big carriersaEmirates, Etihad and Qatar Airwaysawere scooping up intercontinental traffic at an extraordinary pace. It had noticed, too, the response of the legacy carriers in Western Europe. Nursing hangovers from years of operational profligacy, they had retreated to their hubs and were abandoning routes to Eastern Europe. Hungary needed to hit back. Malev’s strategy was to develop its home base (Budapest Liszt Ferenc airport) as a regional hub with spokes extending across Europe, sustained by transit traffic from its partners in the oneworld alliance and elsewhere. The model was remarkably similar to the ones currently pursued by Poland, Romania, Slovenia and the Czech Republicaall of whom want to become the region’s dominant hub. But while axing unprofitable long-haul routes was sensible, Malev found it no easier making money in the short-haul sector. The Hungarian market is simply too small, saddling operators with low occupancy rates and punishingly high overheads. Whenever a new route became viable it was swooped on by LCCs like Wizz Air. Sadly, the contraction of Malev’s route network is now being mimicked across the region. TAROM, the Romanian flag carrier, has also scrapped long-haul routes, leaving it with less capacity than the three LCCs parked up at Bucharest’s secondary Baneasa airport. Flight movements in Ukrainian airspace have increased six-fold since 1993, and yet traffic among domestic operators has only doubled. LOT, the Polish flag carrier, may have fared better, preserving long-haul connections and inching closer to a deal with Turkish Airlines. But Istanbul, like its insatiable Gulf rivals, is spoilt for choice. It has also been courted by Slovenia’s Adria Airways, Bosnia and Herzegovina’s B&H Airlines, and CSA Czech Airlines. Even if there is room for another European hub connecting Asia to the Americas, the trouble is everyone wants it on their turf. Hanging a 40,000-foot curtain DESPITE hostility from many foreign governments and airlines the European Union last month went ahead and introduced a requirement for airlines to buy permits to cover the carbon-dioxide emissions of all flights into and out of European airports,including the portion of those flights that is outside EU airspace. China was one of the states most vehemently opposed to Europe’s unilateral imposition of this “carbon tax” and today the Chinese official news agency Xinhua said the government had banned the country’s airlines both from buying permits and from adding supplements to their ticket prices to cover their cost. In theory the EU could now ban Chinese airlines from European airspace, possibly triggering a horrendous global trade war. But in practice the airlines have until early next year to account for this year’s emissions, so there is still plenty of time for negotiation. It will be interesting to see who blinks first. No doubt the Chinese airlines will in public uphold the party line, and continue to protest at being included in Europe’s emissions-trading scheme (ETS). However, they may privately be looking with envy at the rest of the world’s carriers, which are free to start adding ETS surcharges to their ticket prices. To explain why, here are some rough calculations that Andrew Charlton of Aviation Advocacy, a consultancy, has made about Ryanair’s new ETS supplement of 25 euro-cents per passenger per flight.
GULLIVER isn’t normally prone to posting cover images from publications other than The Economist, but last week’s Bloomberg Businessweek effort deserves comment. Also, Josh Tyrangiel, the magazine’s editor, saysthe cover is a tribute to “Marvin Gaye, Airplane, and vintage Economist” (the second cover here is probably the one he was thinking about). Phwoar! In case you don’t get it, or can’t see the image due to some sort of naughty-content blocker, Businessweek‘s cover shows two aeroplanes, one Continental-branded and one United, “getting it on”. It’s quite clever, if a bit fratty. The cover story isn’t bad either. But the Atlantic Wire takes readers where they most want to go: inside the design process that led to this image. Here’s how Richard Turley, Businessweek‘s creative director, explained it: Generally speaking it’s just me and Josh Tyrangiel, the editor. We’re generally very informal. I don’t know if you know the geography of the office but we sit literally opposite each other and that enables us to talk and not to have meetings. The cover conversations happen quite quickly. Sometimes that’s a product of our proximity. Sometimes we just email a bit and say something and come up with an idea. Josh comes up with a lot of the cover ideas. It was Josh who said, “How about planes having sex for the cover?” And I was like “YES.” Now you know. The Economist called the United-Continental merger “less exciting than it sounds“, which is almost too good to be true. I can only assume our follow-up will say the merger is also less exciting than Businessweek makes it look. Gawker‘s Ryan Tate is a bit more critical of Businessweek’s design. GULLIVER often coversweird and dangerous things that people try to bring on planes. But this week in Fort Lauderdale, Florida, a Transportation Security Administration (TSA) employee found something particularly strange in a checked bag. Sitting in a diver’s suitcase, encased in coral, was a late-18th-century cannonball. You might not think a cannonball that’s been underwater for several centuries would be dangerous, but the TSA disagrees. Here’s the agency’s blogger-cum-spokesman, Bob Burns: It was determined that the coral covered cannonball was explosively viable which triggered an evacuation of the checked baggage area and a visit from a TSA explosives specialist and a Broward County bomb tech. Cannonballs found on the ocean floor can retain their explosives and have been known to detonate on their own. The bomb tech took possession of the item for further identification, diagnostics, and safe disposal. Nearly 300 people were affected by the resulting delays. The TSA was probably right in this case. I’m surprised anyone would think that the agency would allow the bringing of any sort of explosive device, even a centuries-old one, onto a plane. It seems crazy to imagine that an 18th-century cannonball might still explode, but absent more information, I’m not going to second-guess the people charged with evaluating the safety of such things. I’m interested to find out how the diver in question obtained the cannonball. But the broader issue is that he probably had several better options for getting his prize home. As Lifehacker notesin its “Top 10 Ways to Travel Smarter and Cheaper” (which Gulliver wholeheartedly recommends), you can often ship souvenirs home in the post. Even if the postal service, Federal Express or UPS wouldn’t take the cannonball, the diver probably could have hired a courier to bring it home for him. That would cost a pretty penny, but at least he’d still have it. After all, archaeologists and museums have to have some way to get cannonballs and the like back to their facilities for study. I suspect “in their checked baggage, without notifying the airline or TSA” isn’t the best option. Viktor Orban, the prime minister, said that restarting Malev was anot impossiblea. Earlier this week the airlineas boss had used the same half-hearted phrase to express his hopes of reviving takeover talks with the Chinese state owners of Hainan Airlines. However, in the absence of a deep-pocketed rescuer, the loss of confidence an airline suffers on grounding its planes tends to prove fatal. Especially when, as in this case, stronger rivals immediately swoop in to grab its customers. Ryanair, which only ten days ago had announced plans to open five new routes out of Budapest airport, said on Friday that it would increase that to 31 routes, basing a fleet of brand-new Boeing 737-800s at Budapest from February 17th. Likewise Wizz Air, a Hungarian low-cost carrier, also said it would expand its Budapest schedules to fill the gaps left by Malev.
A COLLEAGUE travelled through India recently on the world’s eighth-longest train ride. Four days on the Vivek Express took him from Dibrugarh, a scruffy town in a remote corner of Assam, down to the southernmost tip, at Kanyakumari. Fellow passengers, of course, offer the most. A companion in your correspondentas cabin, who boarded in Dibrugarh, rides all the way south to Kerala. He calls himself Mr Kamil, tells stories of being a trader in coconuts and asmall thingsa, and of roaming the country for work over the past 27 years. After so long on the rails, he says he has learned much about his homeland. Such as? aIndiaa, he leans over to reveal, ais very, very biga. WHAT happens when you step off a plane in a foreign country and immigration officials refuse to let you in? If youare Christopher Johnson, a Canadian journalist living in Japan whose story earned a great deal of interest recently, you end up on a flight to Vancouver after a rather harrowing experience in the basement of Narita airport. The Japanese authorities refused to discuss the circumstances of Mr Johnsonas deportation when contacted by The Economist, but the countryas immigration service emerges with little credit for the manner of the deportation, even if the reasons for it are still murky. Moving on to the point of this post, I want to research a wider piece on the way immigration officials in the developed world treat arriving foreigners whom they donat want to allow in. More specifically, I would like to hear what happens when the foreigners being turned away reckon they have the right (and the correct paperwork) to be allowed in. If this has happened to you, please do share details of what happened in the comments or by email, if you want some privacyaand I may follow some stories up. Iad like to know what reasons were given for the denial of entry, how you were treated, why you think you were treated in this manner, and what the short- and long-term outcomes were. EASYJET, Europe’s second-largest discount airline, surprised analysts last week by posting better-than-expected results for the fourth quarter of 2011. Revenue rose 16.7% to APS763m ($1.19 billion) and passenger numbers increased over 8% to nearly 13m. Revenue per seat, an industry benchmark, was up 7.7%. As Reuters notes, much of the growth was driven by business travel: Last year, easyJet agreed a string of deals aimed at giving it a larger share of the business travel market. The airline said some 200,000 more business passengers flew with the carrier in the quarter year-on-year, despite a general decline in business travel. That seems like good news for the airline and Carolyn McCall, who took over as CEO in March 2010. And it’s not surprising that business travel is at least partially driving easyJet’s better resultsamany airlines are dependent on business travel for their bottom lines. But all is not well at easyJet: Stelios Haji-Ioannou, who founded the company and still owns the plurality of its shares, is not happy. He says easyJet has exaggerated how much business-travel bookings have helped it, and argues that the airline is paying its executives far too much. Mr Haji-Ioannou has been battling easyJet’s board for yearsain addition to the pay dispute, he’s also upset about its aeroplane-acquisition strategy. The Guardian (which is owned by a company that Ms McCall once ran) has one of the better explanations of Mr Haji-Ioannou’s complaints about executive pay: The easyGroup entrepreneur, who has waged an on-off conflict with the carrier over a range of subjects since 2008, said directors were in line for share awards of around APS8m over the next three years. The shares were issued to 10 executives under the company’s long term incentive plan this month and will pay out if the airline meets what Stelios described as a “phoney” return on capital employed (ROCE), a measure of how efficiently a business invests its capital. “The gravy train has gone wild at EZJ … we must stop it,” said Stelios. He believes the way easyJet calculates ROCE delivers a figure three times higher than the rate of return using a different method of calculation. As you can see, even one of the better explanations of the issue leaves much open to dispute. But this much seems clear: ongoing boardroom chaos can’t possibly be good for easyJet. Stock-price increases in recent weeks are a sign the markets think the company was undervalued. But turmoil at the top will eventually trickle down, and three years is a long time for a board to bicker, especially so publicly. As The Economist wrote when this fight first broke out in 2008, “There is never a good time to have a full-blown boardroom brawl in public.” It’s past time for Mr Haji-Ioannou and the rest of the board to sort out their differences. It’s hard to imagine easyJet’s other shareholders are thrilled about the company continuing to be an object of media drama. AN ARTICLE in this week’s Economist looks at Boeing and its struggles to fill its orders. At Boeingas Renton factory near Seattle the existing version of the 737 is now being turned out at a record rate of 35 a month, after a recent speeding-up of the two assembly lines. At the front of assembly line number one, a plane destined for flydubai, an airline that canat afford capital letters, is ready to roll. Behind it is the latest addition to Ryanairas huge fleet of 737s, which has just had its engines fitted. Next, a Korean Air plane which is about to receive rows of seats; then an Azerbaijan Airlines jet, its toilet cubicles lined up alongside ready for installation. The plan is to increase the production rate further, to 42 a month by 2014. Fortunately, there is space to squeeze a third assembly line into the giant hangar. (Photo credit: AFP) AS RICK SANTORUM is now the national front-runner for the Republican nomination, his candidacy has renewed some evergreen questions about social conservatism in America, and specifically the question of why America is so much more socially conservative than comparable liberal democracies. Over the weekend, the Wall Street Journal‘s James Taranto wrote upan interview with Jeffrey Bell, author of the forthcoming “The Case for Polarized Politics”, on this topic. This bit caught my eye: The roots of social conservatism, [Bell] maintains, lie in the American Revolution. “Nature’s God is the only authority cited in the Declaration of Independence… The usual [assumption] is, the U.S. has social conservatism because it’s more religious… My feeling is that the very founding of the country is the natural law, which is God-given, but it isn’t particular to any one religion… If you believe that rights are unalienable and that they come from God, the odds are that you’re a social conservative.” Both men, however, are conflating two claims, that rights are unalienable and that they come from God. As a descriptive matter, it probably is true that, as Mr Bell says, the majority of people who hold both of those beliefs are social (religious) conservatives. It is also true that the concepts are connected in the Declaration of Independence, as quoted above. They are, however, conceptually distinct claims. To say that rights are God-given is to offer a comment about their source. To say that rights are unalienable is to say something about the status of those rights, and I don’t think it follows that unalienable rights are unalienable because of their source. The Declaration of Independence certainly doesn’t go that far. Indeed, if we wanted to be historicalabout this, its principle author, Thomas Jefferson, would have contemplated a number of intellectual antecedents, many of which made similar assertions about rights without reference to any Creator. This being America, however, the history of the document doesn’t create its own obligations. The source of American obligations, rights and responsibilities is the supreme law of the land, which is the constitution, not the Declaration. Mr Bell is correct to say that the roots of American social conservatism lie in the revolutionary eraabut the causal connection runs in both directions. As Ramesh Ponnuru explains at Bloomberg View, the American constitution “presupposes cultural traits that are not found everywhere”: The more a constitution limits a government, the more a society needs to rely on voluntary associations to solve or manage problems. Those associations are easier to form in high-trust societies than in places where nobody trusts anyone outside the extended family. In other words, revolutionary America was sceptical of government and comparatively trusting of the “voluntary associations” of civil society, including churches. Accordingly, the American constitution established conditions in which the rights and responsibilities of government are structurally limited relative to the rights and responsibilities of non-governmental actors. That gave rise to a kind of feedback loop: as Americans have been inclined to rely on their family, or their church, or other manifestations of their community, they have been more inclined to defend those institutions against real or perceived interference by the government. The stakes are simply higher than they are in systems that have instituted a stronger state. (For a take on how this plays out in western Europe, see our colleague Bagehot, in what was my favourite Economist blog post of all of 2011.) If that process tracing is correct, then it stands to reason that America would be relatively socially conservative, and that its political system would yield candidates like Mr Santorum. (Photo credit: AFP) DIANE RAVITCH, the education-reform advocate famous for having long advocated chartered schools and centralised assessment of teachers only to turn against both reforms in the past few years, has a post at the New York Review of Books railing against New York’s new testing standards. The state moved last week to conduct a centralised assessment of all public-school teachers on the basis of whether they have improved student performance year to year, and to fire teachers who fail to do so. New York had to make this move to meet criteria for the $700m it will receive under the federal Race to the Top programme. Ms Ravitch contends it’s a disaster because it’s actually based on standardised test scores, rather than “other measures, such as classroom observations by principals, independent evaluators, and peers, plus feedback from students and parents”, even though those latter measures are supposed to count for 60% of a teacher’s rating. [O]ne sentence in the agreement shows what matters most: aTeachers rated ineffective on student performance based on objective assessments must be rated ineffective overall.a What this means is that a teacher who does not raise test scores will be found ineffective overall, no matter how well he or she does with the remaining sixty percent. In other words, the 40 percent allocated to student performance actually counts for 100 percent. Two years of ineffective ratings and the teacher is fired. …This is madness. The tests have some value in measuring basic skills and rote learning, but their overuse distorts education. No standardized test can accurately measure the quality of education. My instinctive reaction is to agree, on a personal-experience level; I’ll get to the data later.Basically, I’ve always been very good at taking standardised tests, and my experience has been that my scores on such tests are very imperfectly correlated with how much I’ve learned in a class or how good my teacher was. It now seems that this talent has been passed to the next generation: in her most recent report card, my daughter came home with decent grades in each subject, and straight A’s on the standardised tests that the government uses to judge student progress and teacher performance. What do those high test scores tell me about the quality of my daughter’s teacher? Next to nothing. Given the top-flight standardised scores and the okay grades, I think he’s probably underperforming, failing to get her to develop to potential; she’s scatterbrained (also runs in the family) and forgets to study for her geography tests. But what does it tell my teacher? Simple. If he’s being evaluated on his ability to improve his class’s performance on standardised tests, then his number one priority has nothing to do with improving his teaching. It is to make sure he gets my daughter (and the other kids like her in her cohort) in his classroom next year. This is where that dataMs Ravitch cites comes in. It shows that using standardised progress metrics to judge teacher performance is grossly unreliable. Four education researchers (Linda Darling-Hammond and Edward Haertel ofStanford,Audrey Amrein-Beardsley ofArizona State, andJesse Rothstein of UCBerkeley) found that teachers’ “value added” in improving students’ standardised test scores could vary dramatically from year to year based on the tests used and the composition of their classes. Here’s an especially interesting finding: One study that found considerable instability in teachersa value-added scores from class to class andyear to year examined changes in student characteristics associated with the changes in teacherratings.After controlling for prior test scores of students and student characteristics, the studystill found significant correlations between teachersa ratings and their studentsa race/ethnicity,income, language background, and parent education. Figure 2 illustrates this finding for anexperienced English teacher in the study whose rating went from the very lowest category in oneyear to the very highest category the next year (a jump from the 1st to the 10th decile). In thesecond year, this teacher had many fewer English learners, Hispanic students, and low-incomestudents, and more students with well-educated parents, than in the first year. It’s possible to exaggerate these sorts of findings. Obviously, standardised tests can help identify poor teachers who ought to be fired. Earlier in the paper, the researchers note that in a study of performance in 2001 and 2002, of the lowest-scoring 20% of teachers in the first year, just a quarter of them were still in the lowest 20% the following year. But if anything, this ought to strengthen the case for getting rid of teachers who stay in that lowest-scoring group year after year.* At 75% mobility, assuming the movement in and out of the lowest group is random, then after two years of evaluation, just 6% of teachers will have been in the lowest 20% both years; after three years, just over 1% of teachers will have failed to move out of the group. This isn’t sufficient reason to fire themaroll a die and you’ll get similar resultsabut assuming there is some connection between teacher quality and failure to improve standardised scores, several years of scores should serve as a good guide to which teachers deserve close scrutiny. Two years, however, seems clearly insufficient to serve as a hard-and-fast reason to fire someone. And this is where Ms Ravitch’s conclusion is important: “Of course, teachers should be evaluated. They should be evaluated by experienced principals and peers… Those who canat teach and canat improve should be fired.” If the current trend continues, she writes, No student will be left untested. Every teacher will be judged by his or her studentsa scores. Cheating scandals will proliferate. Many teachers will be fired. Many will leave teaching, discouraged by the loss of their professional autonomy. Who will take their place? Will we ever break free of our national addiction to data? It is possible to encourage excellence in an organisation, even a large one such as a public-school system, without relying on statistical performance metrics. It is a matter of culture and vitality. But that sort of excellence is hard to measure; it’s hard to know whether you have it, how to get it, or what exactly you’re missing. In “Seeing Like a State“, James Scott writes of how modern governments are driven to implement rational, uniform metrics by the need of the sovereign for “legibility” of the territory they govern, and of how these metrics then distort and sometimes destroy the societies they measure. In America, the people are the sovereign, and it is our own fury at our underperforming school systems, and our inability to understand what we’re doing wrong, that is driving our increasing desire to compile stats on our teachers and fire the ones who don’t meet the cut-off. * Wait. No it shouldn’t! It occurs to me that I’ve made an error in statistical thinking that Daniel Kahneman would probably slap me for: the fact that a large number of people move in and out of a group tells us nothing about the characteristics of those who remain in the group. It just tells us that there won’t be very many of them. As I say five seconds later, if you have people roll a die three times you’ll find that less than 0.5% of them get a 6 each time. That doesn’t tell you anything about the people who do. What you need to look at is the predictive power of being in the group once for being in the group again, and for that you need to run the experiment for more than two years so you can do some regressions. JONATHAN HAIDT, a professor of psychology at the University of Virginia, and one of our most original and stimulating thinkers about the psychology of politics, discusses some recent research on deep-seated human intuitions about distributional fairness. The gist of the experiments with three-year-olds and ropes and cups of marbles which Mr Haidt discusses is that the impulse to equalise unequal shares is activated only when the kids sense that marble production is the consequence of joint effort. “[T]he ‘share-the-spoils’ button is not pressed by the mere existence of inequality”, Mr Haidt notes. “It is pressed when two or more people collaborated to produce a gain. Once the button is pressed in both brains, both parties willingly and effortlessly share.” Mr Haidt then turns to Barack Obama’s statement about fairness that I considered in a recent post: So now letas look at a key line in President Obamaas State of the Union address: awe can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules.a The president is making three arguments about fairness in this one sentence, but do any of them press the ashare-the-spoilsa button? If you think that the economy is like a giant marble dispenser with a single rope, then youad probably agree that if everyone does their afair sharea and pulls on the rope as hard as they can, then everyone is entitled to a afair sharea in the nationas wealth. But do Americans perceive the economy as a giant collaborative project? Mr Haidt surmises that Americans of earlier generations, who experienced the Great Depression and the second world war and the cold war together did see their political economy as “a vast and sustained communal pull”. This kept the collective “share-the-spoils” button pressed, Mr Haidt suggests, perhaps accounting for the low-inequality “great compression” decades of the mid-20th century. But it would appear that over the past few decades of rising inequality the national finger has come off the national button. Mr Obama’s approach, Mr Haidt argues, isn’t helping: Unfortunately, President Obama promised he would not raise taxes on anyone but the rich. He and other Democrats have also vowed to aprotect seniorsa from cuts, even though seniors receive the vast majority of entitlement dollars. The president is therefore in the unenviable position of arguing that weare in big trouble and so a small percentage of people will have to give more, but most people will be protected from sacrifice. This appeal misses the shared-sacrifice button completely. It also fails to push the share-the-spoils button. When people feel that theyare all pulling on different ropes, they donat feel entitled to a share of other peopleas wealth, even when that wealth was acquired by luck. It’s worth emphasising that, in any case, tax progressivity is not avery effective spoils-sharing mechanism, as this chart from Lane Kenworthy’s canonical post on the subject illustrates: Rich countries that succeed in achieving low levels of inequality do so by taxing the whole population rather more heavily than in America, usually through relatively regressive consumption taxes, and then transferring a relatively generous portion of tax revenues to those near the bottom of the income distribution. American inequality is so high not because its taxes aren’t progressive enough. It’s so high because middle-class Americans are taxed too lightly to finance really serious progressive transfers. And this is why I’m sceptical of Mr Haidt’s prescription to Democrats: If the Democrats really want to get moral psychology working for them, I suggest that they focus less on distributive fairnessawhich is about whether everyone got what they deservedaand more on procedural fairnessawhich is about whether honest, open and impartial procedures were used to decide who got what. If thereas a problem with the ultra-rich, itas not that they have too much wealth, itas that they bought laws that made it easy for them to gain and keep so much more wealth in recent decades. Again, suppose significant inequality-reduction requires government taking a higher percentage of overall GDP in taxes, in large part through higher taxes on the middle class. It’s hard to see how emphasising the procedural unfairness of the “ultra-rich” rigging the rules to their benefit would help make the American middle class more amenable to paying more in taxes. Indeed, an emphasis on the idea that the rich have benefitted from rigged rules would seem to encourage a sense that the rich have more than they deserve and should pay more back into the systemaat least until fairness is restored to the rules of the game. As far as I can tell, Mr Obama has immunised all but the rich from higher taxes because he is focused on procedural injustice. The reason this won’t in the end lead to more equal spoils sharing is that it encourages the sense that the middle class has been unfairly exploited by the rule-rigging ultra-rich, which I would think is anathema to the goal of getting the middle class to sign on to a heavy consumption tax. As a philosophical matter, I believe that we ought to worry primarily about procedural fairness. But procedural fairness is not entirely independent of distributional concerns. Procedural liberal philosophers, such as the late John Rawls, decry large inequalities in wealth not because such unequal patterns of holdings are inherently objectionable, but because unequal economic power translates into unequal political power, rendering unfair the procedures of democratic decision-making which ultimately determine the rules of the game. The ultra-rich are able to “buy laws” that work to their exclusive advantage because they have too much wealth. That’s the idea, anyway. But if, as a matter of fact, high American inequality is a consequence not so much of rigged rules that benefit the rich, but because of a general failure to tax the middle-class at a level sufficient to finance significantly equalising progressive transfers, then ultra-rich rule-rigging would seem to be orthogonal to the real question: why the middle-class median voter won’t support higher taxes to fund a more egalitarian welfare state. I think part of the answer is that huge numbers of middle-class Americans think downward redistribution from the middle to lower class is unfair precisely because the relatively poor are not perceived to be pulling their weight in the collaborative endeavour of American society. I had this context in mind when looking at Marcus’s widely cited paper, “Moral Dilemmas and Consistency”. She argues that moral dilemmas are real (as opposed to an accidental outcome of our failure to develop an internally consistent moral outlook), and that although we may be tempted to try to break through a dilemma by asserting more certainty than we actually feelain other words, by asserting that there is no real problem, only an incomplete understandingathat’s an ultimately unsatisfying shortcut. With regard to abortion, for example, she notes that people marshal a variety of arguments, some of which reference competing claims (such as the right of the fetus to live, or the right of a woman to control her own body), and some of which make prima facie claims (such as that a fetus is not a human, or that it is). She continues: What all the arguments seem to share is the assumption that there is, despite uncertainty, a resolution without residue; that there is a correct set of metaphysical claims, principles, and priority rankings of principles which will justify the choice. Then, given the belief that one choice is justified, assignment of guilt relative to the overridden alternative is seen as inappropriate, and feelings of guilt or pangs of conscience are viewed as, at best, sentimental. But as one tries to unravel the tangle of arguments, it is clear that to insist there is in every case a solution without residue is false to the moral facts. I think she’s on to something here. Our desire for things to be morally clear-cut often exceeds the degree to which they are clear-cut. Individuals have varying degrees of awareness and acceptance of this. Some will accept that the dilemma exists and is difficult, although that doesn’t tell us much about how they will respond; some will try to avoid the dilemma as far as possible; others are willing to get their hands dirty. People with a higher threshold for doubt, however, will push back by doubling down on the prima facie claims (“But a fetus is/is not a person!”). In American politics, it’s the latter group of people who typically seek access to the system. A person who believes the prima facie claim is more likely to be an activist than someone who’s a little more iffy. You hardly ever see interest groups coalescing around the fact that the members have conflicting intuitions, and asking the candidates to pledge that they will remain agnostic about an issue because we’re really not sure and it’s not necessarily our place to judge. This might be one of the reasons why American political rhetoric tends to be overheated or slightly paranoid. The good news is that the more temperate heads haven’t disappeared. They’re just not so likely to turn up on talk radio. IN THE video clip my colleague posted of Paul Ryan arguing with Tim Geithner, Mr Ryan points to the inexorable rise in US government debt starting in 2023 projected by the administration’s proposed budget and warns incredulously, “That’s Europe.” I’m having trouble thinking of another statement that is so wrong in so many different ways. The European Union has lower government debt levels than America. Gross government debt in the 27 nations of the EU was 80% of the region’s GDP at the end of 2010; in America gross federal debtat the end of 2010 was 94% of GDP. Furthermore, government debt is growing more slowly as a percentage of GDP in the EU than in America, because pretty much every nation in the EU is implementing austerity measures. The general government deficit in the EU-27 in 2010 was 6.6% of GDP. In America the federal deficit in 2010 was 9% of GDP. Mr Ryan clearly thinks Europe is an economic basket case. Obviously, there is a grave economic crisis underway in the euro zone, and many European countries’ economies contracted in the fourth quarter of 2011 while America’s grew solidly. But it makes no sense to attribute the EU’s poor relative economic performance to higher debt levels or higher deficits, because the EU has lower debt levels and lower deficits.The euro-zone crisis is in fact largely due to persistent current-account imbalances between member economies caused by differences in competitiveness, and the unwillingness of the more competitive countries to subsidise the less competitive countries, as would happen between states in America. But regardless of what you think the cause of the euro-zone crisis is, it doesn’t make sense to attribute it to phenomena that don’t exist, or to warn that America is in danger of becoming Europe if it keeps running such high deficits when in fact the way for America to become Europe would be to immediately and drastically cut its deficits. Moreover, as my colleague explains, the reason the Obama administration’s budget shows projected debt levels curving inexorably upwards after 2023 is pretty much entirely because of health-care expenses on Medicare and Medicaid. Medicare and Medicaid expenses will start to blow out the US government’s budget from 2023 due to the impact of baby-boom retirees and the explosive growth in medical costs in America. Will this make America more like Europe? No. European countries do not spend more on government-provided health care than America does. They spend less. In 2009, according to OECD data, the US government spent $3,800 per citizen on health care. The German government spent $3,242. The French government spent $3,100. The British government spent $2,935. America is richer and should be able to afford more, but even as a percentage of GDP, US government spending on health care is comparable: 8.3% in America to 8.9% in Germany, 9.2% in France and 8.2% in Britain. And what of those wastrel Italians? They spent…7.2% of GDP. (In America, unlike Europe, government spending amounts to less than half of total spending on health care; when you add in private spending, America spent 17.2% of GDP on health care in 2009, while rich European countries were in the 11-12% range. And unlike rich European countries, we don’t cover anywhere near all of our citizens. But that’s a different subject.) Not only that, US government health-care spending is rising faster than European government health-care spending. It’s rising faster even measured as a percentage of GDP. From 2001-2009, US government health-care spending went from 6.3% to 8.3%. In Germany it went from 8.3% to 8.9%, in France 8.1% to 9.2%, in Italy 6.1% to 7.2%. Only in Britain, where New Labour launched a deliberate campaign to grow the National Health Service to levels more comparable to other wealthy economies, did spending rise faster than in America, from 5.8% to 8.2%. Again, because America’s long-term debt problems are driven by government health-care spending, we would be in better shape if we looked more like Europe, not less. I don’t expect Paul Ryan to conclude from all this that the reason why Europe is in a recession is that they’re not doing enough deficit spending and loose monetary policy to stimulate their economy, and that it’s a good thing America has run massive deficits for the past three years or we might not be seeing the cautious recovery we’re seeing. It would be nice if he did conclude this, because it’s true, but I don’t expect him to. But I do think he ought to stop waving at a fantastic vision of a Europe that doesn’t exist when he needs a bogeyman for whatever point he’s trying to score in an argument. WE HERE at DiA left it to our colleagues at Free exchange to break down Barack Obama’s budget this week. And they’ve done a fine job (see here and here), so consider this an addendum to their coverage. Yesterday James Pethokoukis of the American Enterprise Institute highlighted an interesting chart which, it might surprise you to know, came from the president’s budget. The chart is too obvious to be terrifying. That change in the slope of the debt-to-GDP curve starting in 2022 is caused by America’s increasing number of retirees and the rising cost of health care. There’s nothing original in noting that Medicare, Medicaid and Social Security are the main drivers of America’s long-term debt problem. But there it is in stark relief. And on Thursday it ledto this entertaining exchange between Tim Geithner and Paul Ryan. Mr Geithner’s comments suggest that the administration is taking a two-track approach to America’s debt problem. The first track involves whittling down America’s short-term deficit to reasonable levels. So the budget released on Monday reduces the deficit to 2.8% of GDP by 2019, and maintains that level for the rest of the ten-year window. As my colleague notes, “That’s close to primary balanceathe government’s books would nearly balance net of interest costs.” Not bad, but it’s on the second track that the administration really disappoints. That track involves dealing with America’s out-of-control spending on entitlements, and this year’s budget largely avoids the problem. Hence, you get Tim Geithner telling Paul Ryan that the administration doesn’t have a definitive solution, “we just don’t like yours”. And it didn’t like the one put forward by its own deficit commission. Which leaves Mr Pethokoukis to conclude that “Obama has no interest in being Clinton 2.0, the Debt Cutting President. He wants to be FDR 2.0, the Expanding Welfare State President.” Actually, it seems he wants to be both.Mr Pethokoukis forgets that Mr Obama pursued a grand bargain with John Boehner that would’ve raised taxes and cut the safety net. And he forgets that Mr Obama’s largest new programme, health-care reform,was fully paid for (and then some). Moreover, in the early days of Obamacare there was a real effort to include significant cost-cutting measures in the final bill. The Republicans, in turn, demagogued the issue, alluding to death panels and forsaken seniors. Still today the president is paying a price, as Mitt Romney nonsensically criticises him for ignoring America’s “entitlement crisis” while “cutting Medicare benefits for seniors”.But I imagine if Mr Obama does win re-election, making the electoral ramifications of his actions a second thought, and the economy stays healthy,he’ll push to curb entitlement spending, and put Republicans on the spot. I could be wrong, but there seems to be just as much evidence pointing to Mr Obama as being Clinton 2.0 as FDR 2.0. And I think Mr Obama’s team realises that if another Democratic president embraces the mantle of fiscal responsibility, the party will have earned ownership of the issue for some time to come. THIS is a short response to my colleague’s excellent post arguing that we could redress the sense of humiliation and cognitive dissonance induced by America’s current social-insurance systems if we turned them into forced savings programmes. He writes: [A] system which relies primarily on intra-personal transfers better suits America’s ingrained ethos of individual responsibility and would thus help resolve the cognitive and emotional dissonance created by the status-quo system. We will never be Danes and we might as well accept it. As of a few years ago this seemed like a pretty solid argument, setting aside the immense practical problems of making the transition from, say, Social Security to private accounts (ie, taxpayers having to pay double while the switch is underway, first to pay for their parents and then to save for themselves). The basic shape of the problem is: 1. People don’t (or can’t) save enough for their own retirement, and are too reluctant to pay for medical insurance because they underestimate the likelihood they will need care. 2. One way to provide everyone with the needed guarantee of minimal savings and medical insurance is through taxes and government. This has the advantages of being simple and efficient, and providing bargaining power for medical care. 3. Another way to provide everyone with the needed guarantees is to legally require them to save enough and to purchase medical insurance. This has the advantage of giving people a sense of self-reliance and control, as my colleague writes. 4. Either route should in principle be feasible; the latter one still requires subsidies for the poor, but might be more appealing to conservatives. What threw a wrench into that concept was the furious right-wing turn against health-insurance mandates over the past three years. The conservative justification of health-insurance mandates offered by Mitt Romney is perfectly correct. People have an obligation to pay for the risk that they may become ill, be unable to pay for treatment, and force society to incur the cost. But that view is now anathema among conservatives. The idea that the government can order citizens to purchase insurance is now viewed as more intrusive, more of a government overreach, than the old-fashioned systems where the government taxes people to provide social insurance. This is evident in the lawsuit scheduled to be heard by the Supreme Court charging that ObamaCare’s insurance mandate is unconstitutional. Nobody today argues that Medicare is unconstitutional; indeed, a large proportion of the conservatives who believe that health-insurance mandates are unconstitutional also rail against Barack Obama for proposing to cut Medicare expenditures. Obviously much of this is the effect of partisanship. Republicans invented the health-insurance mandate, it jibes well with their support of Chilean-style defined-contribution universal pension plans, and they would probably still be backing a universal health-insurance scheme based on individual mandates today if only a Democratic administration had not made the fatal mistake of actually implementing one. Nonetheless, the conflict demonstrates that government-mandated social insurance is apparently just as likely to be seen as a jackbooted fascist programme of socialist control as any old-fashioned tax-and-redistribute social-insurance programme, for those who are likely to see things this way. Maybe we should admit that we are not Danes. But I think we’re also going to have to admit that, in the real world, we grew up with Social Security, Medicare and Medicaid and we’ll probably die with them, and probably the biggest step we’ll see in our lifetimes towards the sort of intra-personal transfer programme my colleague envisions is ObamaCare. Which, obviously, hasn’t done anything to assuage the sensitivities of those who don’t like interpersonal transfers. Far from it. MY COLLEAGUE wrote a post the other day asking why people object to development. His view is that they do so too often. Our first question should be: is there some very compelling reason not to allow private actors to engage in mutually beneficial transactions? If a developer wants to buy a piece of land and erect a tall building on it, because he is confident that various tenants will be willing to pay him enough money to use the space to cover his costs, isn’t that alone a good reason to start with the assumption that the deal should go forward? I have nothing like my colleague’s level of expertise in urban-planning issues. But I do have an experience that may be relevant: in addition to having lived in development-wary American cities like New York City and Washington, DC, I have also lived in the very development-friendly city of Hanoi, Vietnam. One reason Hanoi is so development-friendly is that outside of the very small historically-protected “Ancient Quarter” (pho co), there are effectively no legal tools with which any urban dweller can block their neighbour from doing anything they want to with their property. Should a landowner wish to erect a 12-storey apartment building in a neighbourhood built as a village, served only by motorbike-width alleyways too narrow for a car to squeeze through, let alone a fire truck, there is nothing to prevent him from doing so. Moreover, should he wish to build that apartment building at 6am on Sunday, there is no way to get him to stop. There are most likely no noise-pollution regulations on the books; if there are, they will be laughed away by the builders; and, since someone erecting a 12-storey apartment building in a pricey neighbourhood is quite likely to be well connected with gangsters, trying to take this argument any further is not advisable. Hanoi, then, is in many ways a fair test case of what happens when you let any landowner build whatever they want to on their urban property. In many ways, here’s what happens: your neighbourhood goes down the tubes. I’m not talking about the obvious fire-safety-type drawbacks of Hanoi-type of development. Clearly nobody is arguing that America should let people build without adequate fire access, sewers, and so on. These are obvious negative externalities, and the pro-development advocates in any discussion will always allow that regulation of this sort is necessary. And I’m only partly talking about what Kevin Drum thinks are the overwhelming reasons for opposition to development: antipathy to traffic, congestion and noise. What I’m talking about is this: in many cases, allowing unlimited rapid development leads to the annihilation of the very characteristics that made a neighbourhood such a desirable location in the first place. My colleague notes the type of distortion created by the fact that residents tend to experience neighbourhoods as a set of aesthetic exteriors, and thus undervalue all of the things that are or could be going on inside the buildings one might put on a given property. This is true; but it’s also true that if you want to live in a neighbourhood, you probably want to live there because of all those other buildings you now see there. Which means that the demand for the buildings which a developer might put up in a neighbourhood is to a great extent a positive externality generated by the existing neighbourhood. Yet every new developer who moves in, tears something down, and builds something new runs the risk of demolishing a bit of what made the neighbourhood attractive. Any given project is unlikely to have that effect, but the accumulation of thousands of them might. For example, does this look like an attractive neighbourhood? Would you want to build something here? How about this? The specifics of this comparison introduce other complications: the development in the second image required state land grants and rights of way. But the private villa owners of Nghi Tam are also busy tearing down their own houses and building taller, uglier buildings as fast as they can. The result will be that the neighbourhood loses its colour, and stops being the charming and attractive place that drew the buyers and renters of those villas in the first place. I’m fairly convinced this is what would happen on the Upper West Side of New York as well, if every owner of a brownstone were permitted to do whatever they wanted with their property. It wouldn’t be pretty. JACK HITT had a wonderful, chilling piece on “This American Life” a couple of weeks back, about Alabama’s immigration law, a subject we’ve written about before. Mr Hitt calls laws such as this a “third way”, between those who want to create a pathway to citizenship for illegal immigrants, and those who want to chuck everybody out. The part of the piece you may have heard before (especially if, ahem, you’ve been reading us) concerns the unintended consequences of the law: the burden placed on police officers, the frightening away of foreign investment, businesses deciding to locate elsewhere, fruit rotting in the field, Latino children being kept home from school. David Bronner, who runs the state’s retirement system, claims that a Spanish bank cancelled an $80m office tower in Birmingham, while Chinese owners of a new copper mine in southern Alabama were reconsidering. The chief of police in Tuscaloosa, where the law ensnared a German Mercedes-Benz executive, all but called it a waste of his time and resources, which of course it is: there is actual crime, the kind that hurts people, in his city. Gerald Dial, the Republican Senate whip, helped shepherd the bill through Alabama’s legislature; now he says he would support repealing it. All of that is old news. The chilling part comes from interviews with Latinos in Alabama. A woman called Carolina complains that clerks at Wal-Mart refused to give her money that her mother had transferred to heramoney she used to get just by showing ID and typing in a PIN numberaunless she proved she was in the country legally. She also said the Wal-Mart cashiers refused to sell her groceries without proof of her legal status. Wal-Mart is a private business; they are not bound by Alabama’s immigration law to check customers’ legal status, and yet their clerks seem only too happy to do so, knowing that those to whom they deny service are hardly in a position to go to the police. Then there is the provision of the law making contracts with illegal immigrants unenforceable in court; employers have used that provision to deny payment for services rendered. Others, says Mr Hitt, “said they’ve created an underground railroad of information about sympathetic folks.” Yes, it’s 2012, and Alabama is still forcing a group of its most vulnerable citizens to rely on an underground railroad. Defenders of the law may claim such attitudes are themselves a regrettable, unintended consequence. They are not. They are, to use a phrase well on its way to cliche status, a feature, not a bug. If the goal is “self-deportation”, then anything is fair. The idea is to make life so intolerable for illegal immigrants that they simply leave; anything to further that goal must be worthwhile. Mr Hitt asks Kris Kobach, the law’s creator, whether he accepts that it has unleashed some ugly racial attitudes in Alabama. His response is revealingly blithe: “You can’t legislate what is in people’s hearts. And if people have those twisted ideas of the world and have those ill feelings toward people who have a different skin colour, I don’t think you can say that the law has caused that. And I don’t think you can say that the law can ultimately stop that.” Well, no. But laws can certainly encourage such bigotry, by implicitly encouraging the citizenry to pick on one class of people: in this case, Latinos. Yes, we know Mr Kobach insists the law targets illegal immigrants of any shade, but as the women interviewed by Mr Hitt can testify, we also know how it is applied in practice.” This post has been edited and updated to reflect breaking news. ASSUMING they are substantially authentic, the trove of confidential documents from the Heartland Institute, a libertarian think tank based in Chicago, leaked to the blogosphere on February 14th provide an interesting view of one of Americas more prominent agents of climate-change scepticism. The documents were first published on the DeSmogBlog, which claimed to have got them from a Heartland insider. They have since been gleefully scoured by various online newspapers and bloggers, including the Carbon Brief, which have highlighted the following alleged revelations. aC/ The Heartland Institute provides $300,000 a year in stipends to the climate-sceptical Nongovernmental International Panel on Climate Change (NIPCC), apparently to help it question and counter the conclusions of the Intergovernmental Panel on Climate Change. The NIPCC, which holds regular shindigs for sceptical scientists in New York and Washington, claims to be an international panel of nongovernment scientists and scholars who have come together to understand the causes and consequences of climate change. aC/ The Heartland Institute is considering paying a sometime consultant for the Department of Energy up to $100,000 a year to produce teaching materials designed to spread climate-change scepticism.David Wojick is a consultant with the Office of Scientific and Technical Information at the department in the area of information and communication science. He was allegedly hired to write modules, for $5,000 apiece, that could fit into the existing science curriculum in such a way as to stress doubts over the basic verities of climate science. On February 15th the Heartland Institute claimed that, of eight allegedly leaked documents, one was a fake and the others had been obtained through deception. It did not dispute the authenticity of the remaining seven documents, but said it was still looking into whether they might have been aaltereda. Meanwhile the gleeful greens said they were sticking to their story. They noted that the instituteas plans for a sceptical curriculum were also mentioned in its allegedly leaked budget document and had been confirmed by Mr Wojick. Similarly, the budget document confirmed the instituteas donations to the NIPCC and other sceptical scientists. In addition to these plums, the leaked trove (uncertainties admitted) provides some more predictable details on the instituteas finances. It suggests that this was expected to be a bumper year, with funding expected to rise by 70% in 2012, to $7.7m. They also refer to an open-handed anonymous donor, who provided $8.6m to the institute for work on climate change between 2007 and 2011. The greens are inevitably drawing comparisons between this trove and the revelation of e-mails from climatologists at Britain’s University of East Anglia, which suggested they had sometimes taken steps to disguise their adjustments of inconvenient palaeo-data. Known as climategate, that was a great embarrassment for the scientists involved. Worse, the alleged sloppiness with data referred to in the emails was ludicrously inflated by many sceptics to call into question the basic verities of climate science. Affording the same status to the publishing of the Heartland Institute’s alleged tawdry secrets would be unwise. But it certainly looks embarrassing for the institute. Update: Peter Gleick, a well-known climate analyst at the Pacific Institute and outspoken critic of climate sceptics, has admitted to soliciting the documents referenced above under a false identity. As Andrew Revkin of the New York Times says, “Gleick has admitted to an act that leaves his reputation in ruins and threatens to undercut the cause he spent so much time pursuing.” That last assertion comes in an op-ed Mr Romney wrote for the Detroit Newstoday. And it’s not untrue, per se. The candidate was born in Detroit, though he grew up in Bloomfield Hills, one of America’s wealthiest cities. He probably cheered for the Tigers as a kid, but his position has since evolved. And cars may really be “in my bones”, as he claims, but he advocated letting Detroit go bankruptin 2008. The purpose of Mr Romney’s op-ed is to clarify his position on the auto bail-out ahead of Michigan’s primary on February 28th. And the piece rivals Cirque du Soleil in its display of contortions. Mr Romney seems loth to gush about the success of the bail-out, noting only the good news that “Chrysler and General Motors are still in business”. He certainly doesn’t mention that 2011 was the best year for America’s carmakers since the financial crisis, with each of the big three turning a solid profit. But he does imply that this achievement is a result of his own advice. “The course I recommended was eventually followed”, Mr Romney writes. As with much of Mr Romney’s excessive rhetoric, there is some truth to this statement. Following the bail-outs, the president eventually forced Chrysler and GM into bankruptcy, a step Mr Romney thought should occur naturally. And the government oversaw painful restructurings at both companies, which were largely in line with Mr Romney’s broad suggestions. But the course Mr Romney recommended in 2008 began with the government stepping back, and it is unlikely things would’ve turned out so well had this happened. Free-marketeers that we are, The Economist agreed with Mr Romney at the time. But we later apologised for that position.”Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk”, we said. But “given the panic that gripped private purse-strings…it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended.”Even Ford, which avoided bankruptcy, feared the industry would collapse if GM went down. At the time that seemed like a real possibility. The credit markets were bone-dry, making the privately financed bankruptcy that Mr Romney favoured improbable. He conveniently ignoresthis bit of history in claiming to have been right all along. In other areas of his op-ed Mr Romney is more accurate. Unions did win some special favours in the bail-out deals, though they are not as egregious as the candidate claims. For example, a health fund for retired workers was unfairly favoured over secured bondholders at Chrysler. But an issue like that is unlikely to resonate in Detroit. So Mr Romney must find a way to re-write history, lest he fall further behindRick Santorum in hisstate of birth. Mr Santorum didn’t support the auto bail-out either, but he evinces a genuine compassion for blue-collar workers. And he didn’t pen an op-ed predicting,”If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.” That’s a difficult statement to walk back. (Photo credit: AFP) I’M GLAD Charlemagne summarised the appeal of the idea of a “Hamiltonian moment” to many European politicians these days, because it helped me process something that happened a couple of weeks ago that otherwise would have seemed extremely weird. Towards the end of a meeting with the Dutch parliament’s finance committee, Olli Rehn, the soft-spoken Finnish guy who is currently the EU’s Commissioner for Economic and Financial Affairs, suddenly launched into an extended rant about Alexander Hamilton and Thomas Jefferson. This seemed particularly odd because since the ratification last fall of the “six-Pack” of reforms strengthening European fiscal and policy integration, Mr Rehn, as unassuming as he may seem, now more or less wields the power to reject the budget of any state in Europe. So he’s a very powerful guy. In fact, today Mr Rehn appeared before the European Parliament in Strasbourg to announce, for the first time, which EU countries aren’t making the grade. The occasion was the presentation of the European Commission’s first-ever “Alert Mechanism Report on Macro-economic Imbalances“, ie economies that are listing so heavily for one reason or another (international indebtedness, trade deficits, etc) that they need to start bailing and plugging holes, lest they soon need injections of ballast. Twelve countries ended up on the list:Belgium, Bulgaria, Denmark,Spain, France, Italy, Cyprus, Hungary, Slovenia, Finland, Sweden and Britain. There had been widespread fear in Germany and the Netherlands that they might be placed on a “structural imbalance” list for running high trade surpluses, rather than deficits. But it appears this isn’t going to happen just yet. Anyway, what does a guy like Mr Rehn get out of the debate in 1791 between Hamilton and Jefferson over whether or not the nascent federal government should assume the Revolutionary War-era debts of the several American states? Well, I’m not really sure I understand it just yet. The general thrust seems to be that he sides with Hamilton because his advocacy of federal centralisation of the national finances laid the groundwork for economic dynamism in America, much as a Brussels-based commissioner like Mr Rehn would hope that centralisation of Europe’s finances would lead to economic dynamism in the EU. The funny thing, though, is that the actual mission he’s been charged with doesn’t seem to be doing what Hamilton did. To a great extent, after all, the macroeconomic “imbalances” of individual European states are part of the process of European integration. Insisting that every European state’s economy rest on its own foundations seems to some extent like a mission to fight EU integration, not facilitate it. In America, states can “balance their budgets” only because the great majority of spending (on national defence, social insurance, and infrastructure) has been assumed by the federal government. Then again, maybe that’s exactly what Mr Rehn would like to see happen. What I’d like to see happen is for European politicians to talk a whole lot more about Alexander Hamilton, Thomas Jefferson, Ben Franklin and, heck, maybe Betsy Ross and Sacagawea for good measure. It’s fun to hear “James Madison” pronounced with a Finnish accent. Here, meanwhile, is a great rap video about Alexander Hamilton. Page took 4 seconds to load. JavaScript News on Finance Corey K Katir Brings You News on Economy, Stock Market, Banking, Mortgage, and Finance Corey K Katir Background Mr. Katir's education and experience background are diverse and are, mainly, in engineering, business management, marketing and behavioral sciences. In Mr. Katir's MBA courses, Mr. Katir was introduced to the field of behavioral sciences and he truly enjoyed it and found an intellectual home. Then Mr. Katir taught himself in the field of social relations and found himself increasingly drawn to the psychology of human motivation and entrepreneurship. Mr. Katir is proud of this diverse background and he genuinely admires many who do and did the same. Let's look at some of these ingenious minds. The poet E. E. Cummings was also a painter; Sir Ronald Ross was a physician, scientist, composer, and poet but best known for his work on malaria; Sofya Kovalevskaya, the renowned mathematician, was also a playwright. These and many others like them may have excelled precisely because they brought their past training to bear on their creative pursuits and vice versa. Except for the work of Eric Von Hippel, Mr. Katir research has shown a lack of intellectual interest in the field of entrepreneurship. Economists have also contributed relatively little to the debate about how the economy generates successful small businesses. It has long been noted that economics textbooks largely ignore the role of the entrepreneur and say little about the formation of the small enterprises that provide the beginnings of giant corporations. There are research on arts and creativity but not entrepreneurship and especially innovations in electronic industry and computers either. Mr. Katir is determined to make his own contributions. Mr. Katir says "I have personally witnessed innovations, creativity, entrepreneurship on a daily basis in many semiconductor and electronic companies in Silicon Valley". "I know the joy of creativity and the process of innovations and I sincerely hope I can pass it on." It is important to recognize both the obvious strengths intelligence provides and some of its tremendous dangers. Those who become strongly identified with, and attached to, their intelligence can suffer from a big ego trap. It is important to recognize that many other qualities of mind reflect nobility and beauty of character much more than intelligence. Generosity, love, compassion, creativity or devotion do not depend on a high IQ. Corey K Katir Corey K Katir (Inventor of Back Up Sensors standard on BMW, Mercedes, Ford, and GM Cars and InfoUpdater.com News Script. An example of InfoUpdater news script is shown below. Mr. Katir holds a patent for the Back Up Sensors and currently applying for patent for InfoUpdater News Script) Let's start with some trugaredd The Welsh language word trugaredd comes from the root word caru, meaning "to love." But because it includes a sense of kindness and unfailing affection, it is often translated "mercy," or "loving-kindness." Self criticism brings with it the opposite of trugaredd: attitudes of self-denigration, and self-loathing. It undermines the motivation to be kind and the capacity to be available to others. The mindfulness approach invites people to explore a different way in which they relate to themselves and their world, with a quality of attention that has trugaredd about it. The most satisfying connections are those when you completely see through other people, their emotional awareness and you share yours with their awareness. Some people are very skilled at this that they can detect another person's unspoken pain, happiness, cues and then refer to it compassionately or properly. This must be your aim to foster better emotional communication by developing better listening and observation skills. In our today's society people feel lonely despite their closeness to many people in their lives, lovers, friends, family, spouses, and coworkers. Why? The answer is that the connection exists, but it is not at the level of shared awareness and emotional connection inside each other consciousness. Scientists believe self disclosure or allowing others to see right into your awareness is the most profound solution to a genuine relatedness or connection. This is mainly done by sharing the most inner and most guarded feelings with others. Corey K. Katir has an excellent SEO background. To improve rankings, Mr. Corey K. Katir has used Link Building with more focus on back links with related keywords as anchors. Mr. Corey K. Katir has submitted Press Releases, Video, and Articles. Since Mr. Corey K. Katir has experience in video editing, Mr. Katir creates the videos. Mr. Corey K. Katir has created short articles and submitted them to article directories for back links and traffic. Mr. Corey K. Katir has written and posted blogs to the industry related web pages. Mr. Corey K. Katir has also created Social Media campaigns and Facebook applications. Mr. Corey K. Katir has Set-up Facebook business pages, Twitter, and Linkedin. Mr. Corey K. Katir has developed and implemented a process to track, listen, and engage with the customer through channels such as Yelp to solicit review. Mr. Corey K. Katir has excelled in software architecture design geared toward the Internet. For SEM, Mr. Katir had budgets close to $5000 per day for more than 800 keywords. Mr. Corey K. Katir has used Pay-Per-Click campaigns such as Google Adwords and MSN. Mr. Katir tracked performance by using Google Analytics. Mr. Corey K. Katir has analyzed data, created charts, and reports based on Google analytics. Mr. Katir also writes product specifications for Internet Marketing Tools. His recent creative accomplishments are: Content Related News and Advertising: http://www.infoupdater.com Google Page Rank of 5 Real Estate Marketing Tool for Lead Capture explained at http://www.leadcaptureform.com/ Google Page Rank of 4 PHP News Delivery for enriching content and also SEO: http://www.news4websites.com/ Google Page Rank of 4 All of Craig's List Search: http://www.allcraigssearch.com/index.php (New Website) Health, Science, and Technology translated to Portuguese website; http://www.noticiassaude.com/ Google Page Rank of 4; Mr. Katir can translate any website to any language using Systran Translation software. Personal News Website: http://www.coreykatir.com Google Page Rank of 4 For complex design of databases, php architecture, or other more complex designs for your clients' websites, Mr. Katir can help. Mr. Corey K. Katir has access to a team of software engineers that can deliver very sophisticated software in India and Pakistan. Mr. Katir manages the project and design the system architecture and write specifications before coding begins. His software team is experts in: C#, C, C++, iphone APPS, AJAX, .NET, XML, SOAP, Flash, Flash Games, LAMP, PHP, PERL, SQL, JQuery, Java, Magento [shopping cart], Joomla, WordPress, Drupal, HTML/XHTML, Graphic Design, Web Design, and CSS. If you are interested to know more about SEO and Google White Hat Optimization, please visit his web page at: http://www.infoupdater.com/Google_Analysis.html. To be nobly wrong is more virtuous than to be meanly right. (Thomas Paine) Although we say that mountains belong to the country, actually, they belong to those who love them. EIHEI DOGEN Mr. Corey K Katir created the system architecture and the content for www.infoupdater.com, and www.iconocast.com that received more than 250,000 unique visitors per day using Google Approved Search Engine Optimization (SEO) Strategies. (2001-2010). Corey Katir has more than 14 years of Product Creation, Innovation, Software Architecture Design, Technical Writing, Marketing, Market Research, Search Engine Optimization (SEO), and Product Management experiences. (1986-2010) Mr. Katir designed three products from an original self-sketch on a restaurant napkin, including patented and manufactured the well known Ultrasonic-Back-Up-Sensor system that is now standard on every new luxury car and perhaps hopefully exists in your car today. Mr. Katir negotiated the assignment of the patent to Winner International, the manufacturer of the Club anti-theft device on steering wheels. (1989 -1996) Mr. Katir is skilled in Social Media Marketing, and FaceBook. He is familiar with Conversation Mining Services such as Andiamo (Ranks Authority), Onalytica (Influence Monitor Service), Radian6 (Blog Monitoring) and Umbria (Conversation Analysis). Mr. Katir is passionate for Marketing, Power Team Building, Training & Public Speaking, New Business Development, Branding and Corporate Identity, Market & Competitive Analysis, Trade Show Development-Presentation. Corey K Katir Believes in: Mr. Katir holds MBA, Master in Electrical Engineering, BA Economics, BS Electrical Engineering; Specialties • Mr. Katir has strong passions for innovations, product marketing, management, market research, technical writing, and Internet applications.
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WE JOURNALISTS are probably too bleary-eyed after a sleepless night to understand the full significance of what has just happened in Brussels. What is clear is that after a long, hard and rancorous negotiation,at about 5am this morningthe European Union split in a fundamental way.
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AT LEAST there is hope. Grim-faced European leaders gathered in Brussels on December 8thfor their summit to save the euro with the news that Pope Benedict XVI was praying to the Virgin Mary for the sake of Italy and Europe. He should also spare a prayer for Mario Draghi, the president of the European Central Bank.
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ANGELA MERKEL and Nicolas Sarkozy have come a long way since their walk along the seafront at Deauville in October last year. That meeting produced a compromise that, some hoped, held the promise of resolving the euro zoneas debt crisis.
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- Mr Sarkozy urges the European Central Bank to act; Mrs Merkel is jealous of guarding its independence
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FIRST Greece. Next Italy? Troubled euro-zone countries get bail-out money with conditions and strict monitoring by the International Monetary Fund (IMF). But at the G20 summit that concluded in Cannes today, the troubled euro zone got no more money (more on this in my next post), and Italy was placed under IMF monitoring.
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NICOLAS Sarkozy attended two births today. The first, in Paris, concluded happily when his wife, Carla Bruni, brought into the world a baby girl. She is the French president’s fourth child, and the second for his spouse. The infant’s name has not been confirmed.
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From economist.com
From economist.com
From economist.com
IN THE early 2000s it looked a safe bet that the turboprop was on its way out, as far as airlines were concerned. Planes with jet engines were faster, more comfortable and somehow more modern-looking than ones with whirly things on the wings. Embraer, Brazilas aircraftmaker, stopped making its EMB-120 BrasAlia and went over entirely to producing jets.
From economist.com
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From economist.com
THE grounding of Malev, Hungaryas national carrier, shows once again how Eastern European countries are struggling to fly their flags around the world. According to a report from CAPA, Hungary is now expected to follow Slovakia in switching to a predominantly low-cost carrier (LCC) market. The report notes that, prior to Malev’s bankruptcy, LCCs accounted for just 24% of capacity in Hungary, compared with more than 70% for its neighbour to the north. That figure shot up to 40% overnight, and with Ryanair circling covetously above will only rise further.
The options on the table for Eastern Europe’s flag carriers are worryingly limited. Let’s generously presume two succeed in their stated hub goals, securing catchment areas large enough to hoover up transit traffic from bordering countries. What, then, of the rest? The transport ministers of Latvia, Lithuania and Estonia recently mulled over one solutionaa shared Baltic carrier for all three countries, akin to Scandinavia’s SAS or Central America’s TACAabut their plan quickly hit political rocks. A wider point-to-point alliance across the entire bloc would be even harder to negotiate. And in its absence, notwithstanding modest operational gains from new regional jets, the LCC vultures will continue circling. The next time you complain about your American or Western European legacy airline, spare a thought for those who face the real prospect of flying with Ryanair as their national carrier.
From economist.com
From economist.com
From economist.com
From economist.com
THE future of Malev, Hungaryas 66-year-old national flag-carrier, has looked bleak since the European Commission ruled last month that government aid it had received between 2007 and its renationalisation in 2010 was illegal and must be repaid. The deeply indebted airline had no way of paying the money back and indeed was relying on continuing state backing to keep going while a buyer was sought. Early on Friday it ceased flying after the governmentawhich is suffering a debt crisis of its ownadecided to stop financing it.
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This is similar to what Mr Santorum has been saying on the campaign trail. He argues that the constitution should be read “in the context of” the Declaration. The latter document refers to God-given rightsait says that all men “are endowed by their Creator with certain unalienable Rights”aand therefore, in Mr Santorum’s view, the entire American experiment is predicated on religious belief.
From economist.com
From economist.com
From economist.com
THE American philosopher Ruth Barcan Marcus died on Sunday. Although best known as a logician, she did a lot of work in moral philosophy, and her work on moral dilemmas is worth revisiting. This month has seen a surge in political rhetoric over values, particularly in relation to abortion, with each side apparently feeling that the other is being largely unreasonable. Some social liberals feel that social conservatives are actually opposed to women’s health, rights and autonomy; some social conservatives feel that liberals don’t care about families or children, at least not when such concerns are inconvenient. You can find a bit of bad faith on both extremes, as a moderate on either side of the line would probably agree that there is some room for reasonable people to reasonably disagree.
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ONE of Mitt Romney’s problems is that he lays it on too thick. He’s not just a conservative, he’s a “severe conservative”. He feels your pain because he too is “unemployed”. And he understands America’s car industry because he’s a Tigers-cheering motorhead, a true “son of Detroit”.
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A News Blog about Motorcycle Accident Attorneys Orange County. Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property. The term is most commonly used to refer to a type of tort lawsuit alleging that the plaintiff’s injury has been caused by the negligence of another, but also arises in defamation torts. The most common types of personal injury claims are road traffic accidents, accidents at work, tripping accidents, assault claims, accidents in the home, product defect accidents (product liability) and holiday accidents. The term personal injury also incorporates medical and dental accidents (which lead to numerous medical negligence claims every year) and conditions that are often classified as industrial disease cases, including asbestosis and peritoneal mesothelioma, chest diseases (e.g., emphysema, pneumoconiosis, silicosis, chronic bronchitis, asthma, chronic obstructive pulmonary disease, and chronic obstructive airways disease), vibration white finger, occupational deafness, occupational stress, contact dermititis, and repetitive strain injury cases. If the negligence of another party can be proved, the injured party may be entitled to monetary compensation from that party. In the United States, this system is complex and controversial, with critics calling for various forms of tort reform. From: Motorcycle Accident Attorneys Orange County. Attorneys and lawyers often represent clients on a “contingency basis,” in which the attorney’s fee is a percentage of the plaintiff’s eventual compensation, payable when the case is resolved. Oftentimes, having an attorney becomes essential because cases become extremely complex, such as in medical malpratice cases. From: Motorcycle Accident Attorneys Orange County.
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