The Palestinians cannot be hammered into submission
By Philip Stephens
Copyright The Financial Times Limited 2010
Published: June 3 2010 21:11 | Last updated: June 3 2010 21:11
http://www.ft.com/cms/s/0/a3936062-6f3d-11df-9f43-00144feabdc0.html
Benjamin Netanyahu’s government sees the world through the prism of force. Only when Israel’s enemies have been crushed will it contemplate talking to them. Power has thus become the enemy rather than an instrument of peace. A rhetorical willingness to negotiate has been emptied of meaning.
This week’s attack on the flotilla of ships carrying humanitarian aid to Gaza fits a familiar pattern. The killing of nine activists by the commandos who boarded the Turkish-flagged lead ship was doubtless unintentional. But the nature of the raid testified to a deep contempt on the part of the Israeli administration for the norms of international behaviour.
The incident has brought back into focus a choice that the international community – above all the US and Europe – would rather put to one side. Israel’s friends can continue to wring their hands in half-condemnation of its military excesses while doing little to advance negotiations with the Palestinians. Or they can set out the terms of a settlement that would guarantee Israel its security and the Palestinians a state.
At first glance, the most startling thing about the assault on the aid convoy was that it was so badly bungled. Yet even that was not entirely surprising. The days when Israel’s military was lauded for precision as well as prowess have long passed. Recent wars in Lebanon and Gaza have been military failures and public relations disasters. The assassination in Dubai of a Hamas leader exposed the carelessness as much as the ruthlessness of Israel’s secret services.
The international outrage at this week’s incident has rightly focused attention on the blockade by which Israel has imprisoned 1.5m Palestinians in the crowded strip of land that is Gaza.
The suffering inflicted by this collective confinement has been well documented by the United Nations and by aid agencies. Palestinians are denied vital medical supplies as well as adequate food and water. An embargo on building materials means that neighbourhoods reduced to rubble during the 2008-09 invasion remain just that – rubble.
The blockade has left Israel in breach of yet another UN resolution and, even before this week, had severely damaged its most important regional relationship. Israel’s ties with Turkey long represented an important strategic bridge to the Muslim world. The bridge has been blown up by the deaths and injuries inflicted on Turkish citizens.
All this, of course, will have made it harder for the US and its allies to secure support in the UN Security Council for more sanctions against Iran. Mr Netanyahu says Tehran’s nuclear ambitions pose a mortal threat to the region. His treatment of Palestinians weakens efforts to curb the Iranian programme.
For what? The punishment of civilians in Gaza in the name of self-defence is nothing if not self-defeating. Its principal purpose is political – to show Mr Netanyahu’s domestic constituency that Hamas is being “punished” for its imprisonment of an Israeli soldier.
To the contrary, Hamas is strengthened by the siege. It continues to get weapons through the tunnels on the Egyptian side of the border. It has been gifted a stranglehold over the economy of Gaza and has seen its political legitimacy rise among Palestinians radicalised by their misery.
None of this is to side with those who want to wage war against Israel; rather it is to point out the consequences of Mr Netanyahu’s policy. To quote Hillary Clinton, the US secretary of state: the blockade is “unsustainable and unacceptable”. William Hague, Britain’s foreign secretary, tellingly has chosen the same phrase, arguing the restrictions are inimical to Israel’s security.
But wait, I hear Israeli officials say. The international community should recognise the distinction Israel makes between the Palestinian Authority on the West Bank and Hamas in Gaza. Mr Netanyahu would open talks tomorrow with Mahmoud Abbas, the Palestinian president. Hamas refuses to accept the existence of the state of Israel.
These things are true as far as they go. Mr Netanyahu has been dragged, albeit kicking and screaming, into signing up for a two-state solution. But talks are not the same as negotiations.
Mr Netanyahu’s refusal, in spite of intense pressure from the US administration, to halt the colonisation of the West Bank and East Jerusalem speaks to a mindset that views talks as a substitute for, rather than a path to, a peace accord. So too does the heavy emphasis he invariably places on the suffocating control Israel would exercise over any Palestinian state.
Barack Obama has persevered with the effort to get Mr Netanyahu and Mr Abbas to the table. Senator George Mitchell, the US special envoy, shuttles between the two sides in so-called proximity talks.
But the US administration has refused thus far publicly to acknowledge what its senior officials privately concede: that those elements of Hamas willing to forsake violence cannot be excluded from an eventual Middle East settlement.
For its part Mr Netanyahu seems indifferent to isolation – to the fact that by frustrating Israel’s friends it gives succour to its enemies. He appears oblivious to the reality that Israel is weakened by a reflex resort to force; and that his intransigence offers cover to those Palestinians who refuse to renounce violence.
The options of the US and Europe are limited in such circumstances, though they should certainly step up their demands that Israel respect international law. Beyond that, Mr Obama should test the intentions of Hamas – above all the willingness of its leadership to put aside violence. Ostracising Palestinian militants merely provides them with an excuse not to confront such choices.
Most importantly, Washington and its European allies must be ready to put before the UN the outlines of a peace settlement. There would be few surprises in such a document – the basic architecture of two states based around 1967 borders with a shared capital in Jerusalem has not changed in decades.
It is time, though, for Israel’s friends to set out the terms formally and to embed them in a UN resolution. I fear Mr Netanyahu is unlikely to grasp the damage done to Israel’s interests by its shoot-first policy. But there will come a time when Israel has a government that recognises the self-defeating futility of indiscriminate force.
philip.stephens@ft.com
More columns at www.ft.com/philipstephens
Friday, June 4, 2010
Google to hand over intercepted data
Google to hand over intercepted data
By Maija Palmer and Lionel Barber in London
Copyright The Financial Times Limited 2010
Published: June 3 2010 23:04 | Last updated: June 3 2010 23:04
http://www.ft.com/cms/s/2/db664044-6f43-11df-9f43-00144feabdc0.html
Google will begin handing over to European regulators the rogue data it intercepted from private WiFi internet connections within the next two days, in an effort to defuse growing controversy over its latest privacy blunder.
Eric Schmidt, chief executive, said the world’s largest internet company would hand over information initially to the German, French and Spanish data protection authorities. Germany is considering a criminal investigation into the practice. Google faced a stand-off with Hamburg privacy authorities last week over whether it would be legal to hand over the rogue data. It now appears willing to reach a compromise.
The company will also publish the results of an external audit into the practice, in which cars photographing streets for Google’s Street View service ended up also collecting snippets of personal information from unsecured WiFi networks.
Mr Schmidt admitted he could not rule out the possibility that personal data such as bank account details were among the data collected.
“We screwed up. Let’s be very clear about that,” Mr Schmidt said. “If you are honest about your mistakes it is the best defence for it not happening again.”
Mr Schmidt also said the company would conduct an internal review into all its privacy practices, checking all of the codes related to collecting data. It will reveal the results of this within the next month.
There is also an internal investigation being conducted against the male software engineer responsible for the rogue code, which was in “clear violation” of Google’s rules.
Mr Schmidt believes transparency will help it regain user trust. However, he was adamant that the company culture, which allows engineers freedom to create new products and services, would not change.
The “20 per cent time” during which employees are allowed to pursue their own projects, for example, will remain in place and there is no plan for an overall audit of these schemes.
“It would be a terrible thing to put a chilling effect on creativity,” Mr Schmidt said.
He said it was not clear whether the rogue Street View code, which one of its engineers devised while driving around the Stanford University campus checking for WiFi connections, was a “20 per cent time” project. He is also convinced that Google’s mission to index all the world’s information is valid.
“You are better off having a company operating on a set of principles, that you can at least model, than a political process, which clearly does not produce rational outcomes,” Mr Schmidt said.
Google also faced privacy concerns over the launch of its Buzz social networking service earlier this year, and over a recent hacker attack on its computer systems. However, Mr Schmidt said data retained by Google was more secure than that kept by individuals and companies on their own computer systems.
By Maija Palmer and Lionel Barber in London
Copyright The Financial Times Limited 2010
Published: June 3 2010 23:04 | Last updated: June 3 2010 23:04
http://www.ft.com/cms/s/2/db664044-6f43-11df-9f43-00144feabdc0.html
Google will begin handing over to European regulators the rogue data it intercepted from private WiFi internet connections within the next two days, in an effort to defuse growing controversy over its latest privacy blunder.
Eric Schmidt, chief executive, said the world’s largest internet company would hand over information initially to the German, French and Spanish data protection authorities. Germany is considering a criminal investigation into the practice. Google faced a stand-off with Hamburg privacy authorities last week over whether it would be legal to hand over the rogue data. It now appears willing to reach a compromise.
The company will also publish the results of an external audit into the practice, in which cars photographing streets for Google’s Street View service ended up also collecting snippets of personal information from unsecured WiFi networks.
Mr Schmidt admitted he could not rule out the possibility that personal data such as bank account details were among the data collected.
“We screwed up. Let’s be very clear about that,” Mr Schmidt said. “If you are honest about your mistakes it is the best defence for it not happening again.”
Mr Schmidt also said the company would conduct an internal review into all its privacy practices, checking all of the codes related to collecting data. It will reveal the results of this within the next month.
There is also an internal investigation being conducted against the male software engineer responsible for the rogue code, which was in “clear violation” of Google’s rules.
Mr Schmidt believes transparency will help it regain user trust. However, he was adamant that the company culture, which allows engineers freedom to create new products and services, would not change.
The “20 per cent time” during which employees are allowed to pursue their own projects, for example, will remain in place and there is no plan for an overall audit of these schemes.
“It would be a terrible thing to put a chilling effect on creativity,” Mr Schmidt said.
He said it was not clear whether the rogue Street View code, which one of its engineers devised while driving around the Stanford University campus checking for WiFi connections, was a “20 per cent time” project. He is also convinced that Google’s mission to index all the world’s information is valid.
“You are better off having a company operating on a set of principles, that you can at least model, than a political process, which clearly does not produce rational outcomes,” Mr Schmidt said.
Google also faced privacy concerns over the launch of its Buzz social networking service earlier this year, and over a recent hacker attack on its computer systems. However, Mr Schmidt said data retained by Google was more secure than that kept by individuals and companies on their own computer systems.
US manufacturers cautious on recovery
US manufacturers cautious on recovery
By Hal Weitzman in Chicago and Jeremy Lemer
Copyright The Financial Times Limited 2010
Published: June 3 2010 23:39 | Last updated: June 3 2010 23:39
http://www.ft.com/cms/s/0/5c0964e4-6f5b-11df-9f43-00144feabdc0.html
When Boeing, the world’s second biggest aircraft-maker, announced this year that it planned to increase production of its 777, 747 and 737 models ahead of schedule, it was a positive sign for global industrial demand.
Randy Tinseth, vice-president of marketing for Boeing’s commercial arm, deemed 2010 “the year of overall economic recovery” and said the company was anticipating greater customer demand for aircraft.
Yet, as it readies itself for the production increases, Boeing is not only holding off on hiring significant numbers of new employees, it is completing a job-cutting plan that will see the company shed more than 10,000 positions – the vast majority of them in the US.
As the US releases closely watched non-farm payroll figures on Friday, companies such as Boeing which are cutting jobs are likely to appear the exception. Economists expect the report to show that the US economy added more than 500,000 jobs in May, a sharp increase on the 290,000 jobs that were added in April.
While much of the rise relates to a one-off increase in hiring of census workers by the US government, the manufacturing sector is expected to add some 30,000 new jobs. Manufacturing has played a critical role in job creation as the recovery has started to establish itself more firmly in the US.
Since December 2009, the sector has helped lead the way for the broader economy, rebounding sharply and adding a little more than 100,000 jobs out of a total increase of about 573,000.
Yet if Boeing – one of the US’s biggest manufacturers and exporters – is being cautious, it suggests that the industrial sector may not be able to bear the job-creation expectations that have been thrust upon it.
“It is difficult to imagine the pace of downsizing slowing even further, considering that the economy, while recovering, is still in a relatively fragile state,” said John Challenger, chief executive officer of Challenger, Gray and Christmas, the placement company.
One factor that may restrain hiring in the manufacturing sector is greater productivity. Non-farm productivity rose at an annualised rate of 3.6 per cent in the first quarter, better than the 2.5 per cent increase most economists had expected. “Companies continue to squeeze quite a bit of output from only small increases in hours worked,” observed analysts at Goldman Sachs.
Boeing’s reluctance to wade into the hiring pool stems in part from productivity improvements resulting from capital investment and evolving production techniques, said Tim Healy, a company spokesman.
Other manufacturers have used the recession to reassess the global distribution of their workforce. Caterpillar, the world’s biggest manufacturer of earth-moving equipment, shed 19,000 full-time positions and 18,000 contract-worker jobs last year. This year, it has announced a plan to hire back 9,000 workers, but two-thirds of them will be outside the US, in markets such as Asia and Latin America, which have driven demand for its products.
As that experience suggests, much of manufacturing’s recent strength has been built on sales abroad. The export component of the Institute for Supply Management’s manufacturing index climbed to its highest reading in two decades in May. “This is good news for manufacturers since manufacturing dominates US exports [59 per cent] and more than a quarter of manufacturing employment is supported by exports,” said David Huether, chief economist at the National Association of Manufacturers.
However, the US export drive could be damped by contracting European demand and a possible slowdown in Chinese industrial demand.
Back in the US, some stimulus spending is starting to be exhausted, while the recently expired new homebuyers’ tax credit is expected to retard growth in new home sales.
Industrial hiring is starting again from a low base. Since the start of the recession, US manufacturers have cut more than 2m factory jobs. Many will never be replaced. Mr Huether believes that only 30 per cent will come back over the next six years. IHS Global Insight, a research company, predicts that perhaps half of the lost jobs may return.
But even if growth and job creation in manufacturing – in the US and elsewhere – slows somewhat, most economists expect the trend to continue. JP Morgan estimates global industrial production will grow at an annualised rate of 6 per cent in the next quarter.
By Hal Weitzman in Chicago and Jeremy Lemer
Copyright The Financial Times Limited 2010
Published: June 3 2010 23:39 | Last updated: June 3 2010 23:39
http://www.ft.com/cms/s/0/5c0964e4-6f5b-11df-9f43-00144feabdc0.html
When Boeing, the world’s second biggest aircraft-maker, announced this year that it planned to increase production of its 777, 747 and 737 models ahead of schedule, it was a positive sign for global industrial demand.
Randy Tinseth, vice-president of marketing for Boeing’s commercial arm, deemed 2010 “the year of overall economic recovery” and said the company was anticipating greater customer demand for aircraft.
Yet, as it readies itself for the production increases, Boeing is not only holding off on hiring significant numbers of new employees, it is completing a job-cutting plan that will see the company shed more than 10,000 positions – the vast majority of them in the US.
As the US releases closely watched non-farm payroll figures on Friday, companies such as Boeing which are cutting jobs are likely to appear the exception. Economists expect the report to show that the US economy added more than 500,000 jobs in May, a sharp increase on the 290,000 jobs that were added in April.
While much of the rise relates to a one-off increase in hiring of census workers by the US government, the manufacturing sector is expected to add some 30,000 new jobs. Manufacturing has played a critical role in job creation as the recovery has started to establish itself more firmly in the US.
Since December 2009, the sector has helped lead the way for the broader economy, rebounding sharply and adding a little more than 100,000 jobs out of a total increase of about 573,000.
Yet if Boeing – one of the US’s biggest manufacturers and exporters – is being cautious, it suggests that the industrial sector may not be able to bear the job-creation expectations that have been thrust upon it.
“It is difficult to imagine the pace of downsizing slowing even further, considering that the economy, while recovering, is still in a relatively fragile state,” said John Challenger, chief executive officer of Challenger, Gray and Christmas, the placement company.
One factor that may restrain hiring in the manufacturing sector is greater productivity. Non-farm productivity rose at an annualised rate of 3.6 per cent in the first quarter, better than the 2.5 per cent increase most economists had expected. “Companies continue to squeeze quite a bit of output from only small increases in hours worked,” observed analysts at Goldman Sachs.
Boeing’s reluctance to wade into the hiring pool stems in part from productivity improvements resulting from capital investment and evolving production techniques, said Tim Healy, a company spokesman.
Other manufacturers have used the recession to reassess the global distribution of their workforce. Caterpillar, the world’s biggest manufacturer of earth-moving equipment, shed 19,000 full-time positions and 18,000 contract-worker jobs last year. This year, it has announced a plan to hire back 9,000 workers, but two-thirds of them will be outside the US, in markets such as Asia and Latin America, which have driven demand for its products.
As that experience suggests, much of manufacturing’s recent strength has been built on sales abroad. The export component of the Institute for Supply Management’s manufacturing index climbed to its highest reading in two decades in May. “This is good news for manufacturers since manufacturing dominates US exports [59 per cent] and more than a quarter of manufacturing employment is supported by exports,” said David Huether, chief economist at the National Association of Manufacturers.
However, the US export drive could be damped by contracting European demand and a possible slowdown in Chinese industrial demand.
Back in the US, some stimulus spending is starting to be exhausted, while the recently expired new homebuyers’ tax credit is expected to retard growth in new home sales.
Industrial hiring is starting again from a low base. Since the start of the recession, US manufacturers have cut more than 2m factory jobs. Many will never be replaced. Mr Huether believes that only 30 per cent will come back over the next six years. IHS Global Insight, a research company, predicts that perhaps half of the lost jobs may return.
But even if growth and job creation in manufacturing – in the US and elsewhere – slows somewhat, most economists expect the trend to continue. JP Morgan estimates global industrial production will grow at an annualised rate of 6 per cent in the next quarter.
Microsoft chief defends Windows’ future
Microsoft chief defends Windows’ future
By Joseph Menn in Los Angeles
Copyright The Financial Times Limited 2010
Published: June 3 2010 20:17 | Last updated: June 3 2010 20:17
http://www.ft.com/cms/s/2/2660b22c-6f3b-11df-9f43-00144feabdc0.html
Steve Ballmer, chief executive of Microsoft, on Thursday gave a spirited defence of the software company’s strategy and the future of its Windows operating system, following an assertion from Steve Jobs earlier in the week that personal computers that run it are in permanent decline.
Responding to the declaration made on Tuesday by the Apple founder, that the PC era was drawing to a close, Mr Ballmer admitted that the world of computers was changing rapidly, but said there would continue to be general purpose computers for many years: “They will continue to be the mass populariser of things people want to do with their information.
“The PC as we know it will continue to morph,” Mr Ballmer said during an on-stage interview.
“Some will have a keyboard, some won’t have a keyboard.”
Mr Ballmer’s comments at the D: All Things Digital conference outside Los Angeles were delivered on the same stage where Mr Jobs struck a responsive chord among those attending when he contended that the iPad tablet computer, powerful smartphones and other devices would far surpass desktop and laptop PCs.
Mr Ballmer, who also conceded that Microsoft had “missed a cycle” on mobile phones, sought to broaden the definition of a PC to include tablets. He added that Windows would be increasingly modified and optimised for various functions and different types of hardware.
“To a man with a hammer, every problem looks like a nail,” he said. “We have our hammer [with Windows],” while Apple had its own hammer with the iPhone operating system that it was expanding to support the iPad.
In fact, he argued that Apple’s push for that operating system meant that its own Mac computer would fade away.
“It’s not about Mac and PC any more, it will be about the thing that replaces the Mac,” he said. “The race is on.”
Mr Ballmer said he was disappointed that his company’s software was only the fifth most popular for smartphones, but said the rapid changes in leadership in that industry meant that Microsoft had a good opportunity to come back.
The next mobile version of Windows is to be released for the holiday season, and Mr Ballmer said last month he would assume direct supervision of the company’s phone and entertainment divisions.
Mr Ballmer also took a swing at Google’s dual efforts to expand in phones with its Android operating system, and to more powerful devices with the nascent Chrome operating system.
“Having two things is not an aid” to developers, he said. “Make a bet, tell people what you believe in and go do it.”
By Joseph Menn in Los Angeles
Copyright The Financial Times Limited 2010
Published: June 3 2010 20:17 | Last updated: June 3 2010 20:17
http://www.ft.com/cms/s/2/2660b22c-6f3b-11df-9f43-00144feabdc0.html
Steve Ballmer, chief executive of Microsoft, on Thursday gave a spirited defence of the software company’s strategy and the future of its Windows operating system, following an assertion from Steve Jobs earlier in the week that personal computers that run it are in permanent decline.
Responding to the declaration made on Tuesday by the Apple founder, that the PC era was drawing to a close, Mr Ballmer admitted that the world of computers was changing rapidly, but said there would continue to be general purpose computers for many years: “They will continue to be the mass populariser of things people want to do with their information.
“The PC as we know it will continue to morph,” Mr Ballmer said during an on-stage interview.
“Some will have a keyboard, some won’t have a keyboard.”
Mr Ballmer’s comments at the D: All Things Digital conference outside Los Angeles were delivered on the same stage where Mr Jobs struck a responsive chord among those attending when he contended that the iPad tablet computer, powerful smartphones and other devices would far surpass desktop and laptop PCs.
Mr Ballmer, who also conceded that Microsoft had “missed a cycle” on mobile phones, sought to broaden the definition of a PC to include tablets. He added that Windows would be increasingly modified and optimised for various functions and different types of hardware.
“To a man with a hammer, every problem looks like a nail,” he said. “We have our hammer [with Windows],” while Apple had its own hammer with the iPhone operating system that it was expanding to support the iPad.
In fact, he argued that Apple’s push for that operating system meant that its own Mac computer would fade away.
“It’s not about Mac and PC any more, it will be about the thing that replaces the Mac,” he said. “The race is on.”
Mr Ballmer said he was disappointed that his company’s software was only the fifth most popular for smartphones, but said the rapid changes in leadership in that industry meant that Microsoft had a good opportunity to come back.
The next mobile version of Windows is to be released for the holiday season, and Mr Ballmer said last month he would assume direct supervision of the company’s phone and entertainment divisions.
Mr Ballmer also took a swing at Google’s dual efforts to expand in phones with its Android operating system, and to more powerful devices with the nascent Chrome operating system.
“Having two things is not an aid” to developers, he said. “Make a bet, tell people what you believe in and go do it.”
G20 to delay tough bank regulations
G20 to delay tough bank regulations
By Chris Giles in Busan
Copyright The Financial Times Limited 2010
Published: June 4 2010 12:59 | Last updated: June 4 2010 15:14
http://www.ft.com/cms/s/0/17d4ae9e-6fcb-11df-8fcf-00144feabdc0.html
Group of 20 finance ministers are set to delay the implementation of tougher regulations for the world’s banks as splits emerge over the scope of the new regulations.
Officials and ministers from the G20 group of industrialised nations, meeting in Busan, South Korea, acknowledged there were still big differences on the “Basel III” proposals that are due to be finalised by November. The disagreements cover the scale, scope and timing of the increases in capital and liquidity banks will be required to hold, as well as the leverage they will be allowed.
In response to the splits, the UK and the US are offering to delay the implementation of the Basel reforms in a bid to ensure that the principles do not get watered down.
Speaking on the sidelines of the G20 finance ministers meeting, George Osborne, the UK chancellor of the exchequer, said: “One of the things I will be pressing for is that the agreements that were reached last year on capital, leverage and liquidity are now concluded. We want an end to the uncertainty.”
An aide to the chancellor said the UK was adamant that there needed to be no dilution of the principle that common equity should form the basis of new capital rules and other forms of hybrid capital should not be allowed to count, under those new rules, as being the same.
But the aide added that if this was agreed, it would be possible to have a discussion over the transition period before banks were required to meet the new standards.
The UK’s position chimes with that of the US and Canada. Jim Flaherty, Canadian Finance minister, said: “Some would like a shorter period [of transition], some would like a longer period. I think that can be worked out over time”.
On Wednesday, Tim Geithner, US Treasury secretary, said: “It is perfectly reasonable to use transition periods to make it easier for countries to adjust to what we believe should be a substantially more demanding, more ambitious set of constraints on leverage”.
Christine Lagarde, French finance minister, denied that France is trying to delay the process and said she hoped the reforms would be completed on schedule. But hinting at the disagreements on issues of substance on the definition of capital, she added: “We have to do a quality technical appraisal on the subject that is too complicated to be rushed through.”
Some G20 officials privately complain that France and Germany are seeking to reopen arguments thought to be settled last year in a bid to dilute capital requirements for their banks by allowing them to include deferred tax assets and minority interests in tier one capital.
The Basel rules were originally expected to be phased in by the end of 2012, but sources familiar with the discussions said that the latest idea was that the new rules were likely to be put in place between 2014 and 2016.
Another G20 source said that the transition period did not matter much because once the new regulations were agreed, banks would come under enormous pressure to meet them quickly or explain why they could not, even if the formal transition was much longer.
The new rules were always going to be phased in and Nout Wellink, chairman of the Basel Committee on Banking Supervision, told the Financial Times last month that a longer-phase-in period might be needed to minimise disruption.
Banks are actively preparing to launch a large lobbying effort in the coming week to press their case for less stringent regulations, arguing that great economic harm would result from too stringent rules.
The banks’ analysis is not accepted by regulators with Stephen Cecchetti, the chief economist of the Bank for International Settlements, telling the FT last week that their “doomsday scenarios” were based on their assuming “the maximum impact of the maximum change with the minimum behavioural change”.
The splits within advanced countries about capital and liquidity requirements is repeated in the discussions over new levies on banks, which have been pushed back for lack of a consensus.
More countries are joining Canada in its rejection of the idea of a banking levy. Pranab Mukherjee, India’s finance minister, said: “Regulated mechanisms instead of taxing the banking system is better.”
Additional reporting by Christian Oliver in Busan
By Chris Giles in Busan
Copyright The Financial Times Limited 2010
Published: June 4 2010 12:59 | Last updated: June 4 2010 15:14
http://www.ft.com/cms/s/0/17d4ae9e-6fcb-11df-8fcf-00144feabdc0.html
Group of 20 finance ministers are set to delay the implementation of tougher regulations for the world’s banks as splits emerge over the scope of the new regulations.
Officials and ministers from the G20 group of industrialised nations, meeting in Busan, South Korea, acknowledged there were still big differences on the “Basel III” proposals that are due to be finalised by November. The disagreements cover the scale, scope and timing of the increases in capital and liquidity banks will be required to hold, as well as the leverage they will be allowed.
In response to the splits, the UK and the US are offering to delay the implementation of the Basel reforms in a bid to ensure that the principles do not get watered down.
Speaking on the sidelines of the G20 finance ministers meeting, George Osborne, the UK chancellor of the exchequer, said: “One of the things I will be pressing for is that the agreements that were reached last year on capital, leverage and liquidity are now concluded. We want an end to the uncertainty.”
An aide to the chancellor said the UK was adamant that there needed to be no dilution of the principle that common equity should form the basis of new capital rules and other forms of hybrid capital should not be allowed to count, under those new rules, as being the same.
But the aide added that if this was agreed, it would be possible to have a discussion over the transition period before banks were required to meet the new standards.
The UK’s position chimes with that of the US and Canada. Jim Flaherty, Canadian Finance minister, said: “Some would like a shorter period [of transition], some would like a longer period. I think that can be worked out over time”.
On Wednesday, Tim Geithner, US Treasury secretary, said: “It is perfectly reasonable to use transition periods to make it easier for countries to adjust to what we believe should be a substantially more demanding, more ambitious set of constraints on leverage”.
Christine Lagarde, French finance minister, denied that France is trying to delay the process and said she hoped the reforms would be completed on schedule. But hinting at the disagreements on issues of substance on the definition of capital, she added: “We have to do a quality technical appraisal on the subject that is too complicated to be rushed through.”
Some G20 officials privately complain that France and Germany are seeking to reopen arguments thought to be settled last year in a bid to dilute capital requirements for their banks by allowing them to include deferred tax assets and minority interests in tier one capital.
The Basel rules were originally expected to be phased in by the end of 2012, but sources familiar with the discussions said that the latest idea was that the new rules were likely to be put in place between 2014 and 2016.
Another G20 source said that the transition period did not matter much because once the new regulations were agreed, banks would come under enormous pressure to meet them quickly or explain why they could not, even if the formal transition was much longer.
The new rules were always going to be phased in and Nout Wellink, chairman of the Basel Committee on Banking Supervision, told the Financial Times last month that a longer-phase-in period might be needed to minimise disruption.
Banks are actively preparing to launch a large lobbying effort in the coming week to press their case for less stringent regulations, arguing that great economic harm would result from too stringent rules.
The banks’ analysis is not accepted by regulators with Stephen Cecchetti, the chief economist of the Bank for International Settlements, telling the FT last week that their “doomsday scenarios” were based on their assuming “the maximum impact of the maximum change with the minimum behavioural change”.
The splits within advanced countries about capital and liquidity requirements is repeated in the discussions over new levies on banks, which have been pushed back for lack of a consensus.
More countries are joining Canada in its rejection of the idea of a banking levy. Pranab Mukherjee, India’s finance minister, said: “Regulated mechanisms instead of taxing the banking system is better.”
Additional reporting by Christian Oliver in Busan
Worries over Hungary drive forint to one-year low
Worries over Hungary drive forint to one-year low
By Neil Buckley, East Europe editor
Copyright The Financial Times Limited 2010
Published: June 4 2010 15:19 | Last updated: June 4 2010 15:19
http://www.ft.com/cms/s/0/467b07dc-6fe1-11df-8fcf-00144feabdc0.html
Hungary’s currency fell to a one-year low against the euro on Friday after a senior official warned for the second time in two days about the weakness of its economy and public finances.
The forint fell about 2 per cent after Peter Szijjarto, a spokesman for prime minister Viktor Orban, was quoted by news agencies as saying Hungary’s economy was in a grave situation and that a default was a possibility.
The currency extended its falls on Thursday following comments from Lajos Kosa, a vice-president of the ruling Fidesz party, that Hungary was in danger of suffering a Greek-style crisis.
Hungarian shares fell and spreads on five-year credit default swaps widened sharply after the new comments on Friday.
Investors were mystified by the signals coming from the Fidesz government, which is expected to unveil findings from a fact-finding committee on the state of the economy this weekend, followed by an economic action plan.
According to existing official figures, Hungary’s debt totalled 78 per cent of gross domestic product last year. That was little above the European Union average of 74 per cent and well below Greece’s three-digit total.
The Fidesz government, however, has called into question the previous administration’s fiscal figures and accused it of lying about the true state of the economy.
Mr Kosa’s remarks on Thursday, though they unsettled markets, were viewed by many as a verbal slip. But the refusal by the prime minister’s spokesman to distance himself from the earlier comments caused widespread consternation.
They came as investors were already anxious about the health of European banks and a weaker-than-expected US jobs report.
“The new [Hungarian] government needs to think a bit more clearly about communication with the market,” said Tim Ash, global head of emerging market research at Royal Bank of Scotland. “You simply cannot talk like this in these markets.”
The prime minister’s spokesman warned that Hungary’s budget deficit might be deeper than previously assumed, saying this year’s target of a budget deficit of 3.8 per cent of GDP was not credible.
By Neil Buckley, East Europe editor
Copyright The Financial Times Limited 2010
Published: June 4 2010 15:19 | Last updated: June 4 2010 15:19
http://www.ft.com/cms/s/0/467b07dc-6fe1-11df-8fcf-00144feabdc0.html
Hungary’s currency fell to a one-year low against the euro on Friday after a senior official warned for the second time in two days about the weakness of its economy and public finances.
The forint fell about 2 per cent after Peter Szijjarto, a spokesman for prime minister Viktor Orban, was quoted by news agencies as saying Hungary’s economy was in a grave situation and that a default was a possibility.
The currency extended its falls on Thursday following comments from Lajos Kosa, a vice-president of the ruling Fidesz party, that Hungary was in danger of suffering a Greek-style crisis.
Hungarian shares fell and spreads on five-year credit default swaps widened sharply after the new comments on Friday.
Investors were mystified by the signals coming from the Fidesz government, which is expected to unveil findings from a fact-finding committee on the state of the economy this weekend, followed by an economic action plan.
According to existing official figures, Hungary’s debt totalled 78 per cent of gross domestic product last year. That was little above the European Union average of 74 per cent and well below Greece’s three-digit total.
The Fidesz government, however, has called into question the previous administration’s fiscal figures and accused it of lying about the true state of the economy.
Mr Kosa’s remarks on Thursday, though they unsettled markets, were viewed by many as a verbal slip. But the refusal by the prime minister’s spokesman to distance himself from the earlier comments caused widespread consternation.
They came as investors were already anxious about the health of European banks and a weaker-than-expected US jobs report.
“The new [Hungarian] government needs to think a bit more clearly about communication with the market,” said Tim Ash, global head of emerging market research at Royal Bank of Scotland. “You simply cannot talk like this in these markets.”
The prime minister’s spokesman warned that Hungary’s budget deficit might be deeper than previously assumed, saying this year’s target of a budget deficit of 3.8 per cent of GDP was not credible.
China’s Military an Obstacle to Improving Relations, Gates Says
China’s Military an Obstacle to Improving Relations, Gates Says
By THOM SHANKER
Copyright by The New York Times
Published: June 4, 2010
http://www.nytimes.com/2010/06/05/world/asia/05gates.html?hpw
WASHINGTON — China’s military is blocking efforts to improve ties with the United States that are growing more positive in other areas, particularly on political and economic issues, Defense Secretary Robert M. Gates said Friday.
“Nearly all of the aspects of the relationship between the United States and China are moving forward in a positive direction, with the sole exception of the military-to-military relationship,” Mr. Gates told reporters traveling with him to an Asian security conference in Singapore. He suggested that the military was out of step with the political leadership in Beijing.
Mr. Gates had also considered stopping in Beijing on this trip, making good on an invitation issued by Chinese military leaders who visited Washington last winter. But the invitation was canceled, or at least put on hold.
“We’d been hearing hints, in sort of sideline comments, that the visit was not likely to take place for some weeks,” Mr. Gates noted. “I’m disappointed only in the sense that I think that a more open dialogue with the Chinese about our military modernization programs, about our strategic view of the world, is a constructive and helpful thing in a relationship between two great nations.”
The Chinese military is especially outraged by a decision made early this year by the Obama administration to move forward with billions of dollars in arms sales to Taiwan, which China views as renegade province.
Mr. Gates is set to deliver the keynote address to the security conference on Saturday, and in previewing his comments, he noted, “As I’ll say in my speech, the Taiwan arms sales issue is far from new in this relationship.”
American arms sales to Taiwan approved by both the Bush and Obama administrations “were carefully calibrated to keep them on the defensive side,” Mr. Gates said.
He noted that those weapons deals had “not inhibited the development of the political and economic relationship.”
“If they want to single out the military side of the relationship as the place where they want to play this out, then so be it,” he said. “But it has not impeded the development of the relationship in other areas.”
Aubrey Belford contributed reporting from Singapore.
By THOM SHANKER
Copyright by The New York Times
Published: June 4, 2010
http://www.nytimes.com/2010/06/05/world/asia/05gates.html?hpw
WASHINGTON — China’s military is blocking efforts to improve ties with the United States that are growing more positive in other areas, particularly on political and economic issues, Defense Secretary Robert M. Gates said Friday.
“Nearly all of the aspects of the relationship between the United States and China are moving forward in a positive direction, with the sole exception of the military-to-military relationship,” Mr. Gates told reporters traveling with him to an Asian security conference in Singapore. He suggested that the military was out of step with the political leadership in Beijing.
Mr. Gates had also considered stopping in Beijing on this trip, making good on an invitation issued by Chinese military leaders who visited Washington last winter. But the invitation was canceled, or at least put on hold.
“We’d been hearing hints, in sort of sideline comments, that the visit was not likely to take place for some weeks,” Mr. Gates noted. “I’m disappointed only in the sense that I think that a more open dialogue with the Chinese about our military modernization programs, about our strategic view of the world, is a constructive and helpful thing in a relationship between two great nations.”
The Chinese military is especially outraged by a decision made early this year by the Obama administration to move forward with billions of dollars in arms sales to Taiwan, which China views as renegade province.
Mr. Gates is set to deliver the keynote address to the security conference on Saturday, and in previewing his comments, he noted, “As I’ll say in my speech, the Taiwan arms sales issue is far from new in this relationship.”
American arms sales to Taiwan approved by both the Bush and Obama administrations “were carefully calibrated to keep them on the defensive side,” Mr. Gates said.
He noted that those weapons deals had “not inhibited the development of the political and economic relationship.”
“If they want to single out the military side of the relationship as the place where they want to play this out, then so be it,” he said. “But it has not impeded the development of the relationship in other areas.”
Aubrey Belford contributed reporting from Singapore.
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