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Cameron demands Indiaopens up economy to City
DAVID Cameron yesterday called onIndia to open up its economy toBritish banks and insurers, in returnfor relaxing UK visa rules for execu-tives from the subcontinent.But the Prime Minister faced diffi-culty as he waded into the debateover two troubled defence contractsand tried to convince India to handmajor infrastructure contracts toBritish businesses.“Britain is an open economy and we encourage that investment,”Cameron said in New Delhi. “I think,in return, we should be having a con- versation about opening up theIndian economy, making it easier todo business here, allowing insuranceand banking companies to do moreforeign direct investment.” The Prime Minister is in the coun-try with a 100-strong trade delega-tion, as well as four ministers andnine MPs, in the hope of boosting business links with one of the world’s fastest growing economies. Yesterday he unveiled plans toallow Indians to receive a same-day visa if they want to visit the UK on business by streamlining the exist-ing bureaucracy-heavy process.However large state-backed con-tracts remain the top prize. Cameroncontinues to argue that India shouldreconsider its decision to order 126
Employers work to avoid Obamacare
US companies that employ millions ofworkers are considering cutting theirhours or paying fines rather thanenrolling staff in health insurance plansunder Barack Obama’s landmarkhealthcare law. Employers are concernedthat the law increases the cost of insuringlow-wage employees on existing plans,partly by broadening their benefits, aswell as requiring companies to insureworkers not previously covered. Thepenalty for not providing coverage is$2,000 (£1,292) per worker.
EasyJet risks row with founder
EasyJet is weighing an aircraft order thatwould eventually return its fleet to onecomposed entirely of Boeing jets, a movethat could raise tensions with the low-costcarrier’s founder, Sir Stelios Haji-Ioannou,who believes the group already has toomany aircraft.
Dublin faces suits over liquidation
Ireland faces a raft of potential lawsuitsand a possible constitutional challengeover its decision to liquidate one of itsfailed banks as part of a deal torestructure €28bn (£24.2bn) in bankdebts.
Austerity bites in Year of the Snake
A clampdown on bribery and extravagancehas also applied the brakes to Chinese retailsales. Despite being in the critical new yearspending period, they grew last week attheir weakest pace for four years.
Push for Republic to return to founder
Carl Brewins, the founder of Republichas won support from Denmark in hisattempt to reclaim the failed fashionchain, which has 121 stores, out ofadministration.
Arms sales fall as BAE slips in league
Pressure on the global defence industrywas laid bare as arms sales fell for the firsttime since the mid 1990s, while BAESystems slipped from second to third in aleague table of the biggest arms makers.
Royal Mint strikes coin in India
The Royal Mint’s gold Sovereigncommemorative coins will be struck inIndia for the first time in nearly a century.The Royal Mint has licensed MMTC-PAMPto strike and market the Sovereign.
German recovery hinges on Eurozone
German Economy Minister Philipp Röslerwarned that the return to strong growth inEurope’s largest economy later this yeardepends on stabilisation of the Eurozone.
Hugo Chávez Returns to Venezuela
Venezuela President Hugo Chávez made asurprise return home yesterday after morethan two months in Cuba for treatment ofcancer, a move that is unlikely to quellspeculation that his health could force himfrom office after 14 years as premier.
TOP EUROCRATS yesterday cameout against the historic budgetdeal that would cut the limit ontheir spending for the first time. All 27 premiers of the EU’sconstituent states came to anagreement on a packagepencilling in €908.4bn (£784.3bn)of spending between 2014 and2020, with a limit of €960bn.This is down from the €994bnlimit in the previous seven year budget cycle, and from the €1.05trillion eurocrats had originally demanded.But senior figures in the three biggest parties in the EuropeanParliament, whose approval isneeded to pass the long-termplans, slammed the proposals,despite recession and austerity across Europe.Hannes Swoboda, who leadsthe second-biggest faction in thechamber, called the proposals“unacceptable”. Guy Verhofstadt,president of a liberal coalition,and Joseph Daul, chairman of the biggest bloc, the EuropeanPeople’s Party, joined the chorusof parliamentary displeasure.The budget deal was hailed as ahistoric victory for UK PrimeMinister David Cameron, at atime when his authority is beingquestioned by his own party, which trails Labour in the polls.
MEPs hit out atreduction to EUbudget ceiling
Prime Minister David Cameron is in talks with Indian prime minister Manmohan Singh
BY BEN SOUTHWOODBY JAMES WATERSON
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NCE again, Britain is about toshoot itself in the foot. Thelatest proposals from Brussels –this time, to impose a cap on bank bonuses – look like they may shortly be nodded through, withGeorge Osborne seemingly toofrightened by anti-City sentiment to block them. Bonuses may have to beno more than 100 per cent or at most200 per cent of base pay, though thedevil will be in the detail.Before I tell you why I think this lat-est EU plan is bonkers, bad for the UK, bad for jobs, bad for London, bad fortax receipts and bad for the stability of the financial system, let me remindreaders of what reforms I do support.Prior to 2007, profits were privatised but risks nationalised, with anappalling regulatory model eliminat-ing some core market disciplines butreplacing them with nothing.
Brussels’ plans to cap bonuses will be a disaster for London
TUESDAY 19 FEBRUARY 2013
Some of the extensive reforms sincethen have been good, including therequirements to hold more capitaland liquidity (though some of thechanges have been too quick).Pay is rightly now structured differ-ently, with bonuses deferred to alignshareholder interests with staff com-pensation and to allow banks to can-cel payouts if they turn out to have been based on false or excessively hopeful accounting. We still urgently need proper resolution mechanismsand specially tailored bankruptcy rules to allow even the largest banksto be wound down without destroy-ing the overall economy or triggeringa Lehman-style panic in the event of failure, protecting depositors but wip-ing out bondholders, shareholdersand senior staff. There should never be any more taxpayer bailouts.But the bonus cap plan is wrong. Itinvolves the biggest violation of theright of companies and employees tofreely determine pay since the priceand wage controls of the 1970s, huge-ly distorting price signals. What willstart with banks will end up beingapplied to everybody.It wrongly assumes that successshould not be rewarded – of course, badly designed contracts can incen-tivise bad outcomes, but the chal-lenge is to design contracts properly and put in place strict monitoring sys-apply these rules globally, whichmeans they will become utterly uncompetitive in overseas locations.Some UK and EU universal banks may have to quit investment banking alto-gether. It may even make more sense,under these rules, for the likes of Barclays to float their investment bank in New York and move as many bankers out of the EU as possible.Given all of this, I have two ques-tions: why are so many City firms stillso keen on the EU, given its apparentdetermination to inflict as muchharm as possible on London; and why is the industry so shy at making itscase publicly and on the record, giventhat so many of its staff are about tosuffer the consequences?It’s truly baffling.tems to prevent unintended conse-quences – such as excessive risks,Libor-style fraud, or other improper behaviour motivated by the hope of making higher bonuses. It’s not rock-et science to design a system that works; yet the EU wishes to throw outthe baby with the bath water. The cap will lead to further boosts to base pay, increasing fixed costs andrisk. When business volumes drop,the only answer will be to sack peo-ple, rather than cutting bonuses. Thisis tricky and will further increasecyclical risks for the banking system. A banker at a US, Singapore, Swissor Tokyo branch of a large non-EU bank will be able to earn a large bonus, but not those in the Londonoffice. People doing the same job, inthe same team and performing iden-tically will be paid differently. Britishor European banks will be forced toFrench-built Rafale fighter jets infavour of the part-British Eurofighter, which he calls “a superior aircraft”.It appears that the UK is just as likely to lose a major defence contract withthe Indian government. On Friday New Delhi said it wanted to cancel a£480m deal to buy a dozen helicoptersfrom Anglo-Italian business AgustaWestland, which has a majormanufacturing base in Yeovil, overallegations of bribery which haveresulted in the arrest of the company’schief executive Bruno Spagnolini. The Prime Minister insisted the man-ufacturer was an “excellent company who make brilliant helicopters” andsaid Britain’s Serious Fraud Office would decide whether to investigatethe allegations.Cameron also said he wanted British businesses to help develop the corridor between Mumbai and Bangalore, as wants the rules on the operations of foreign chains to be relaxed –pavingthe way for businesses such as Tesco toexpand in the country.Representatives of major firms suchas BP, BAE Systems and the LondonStock Exchange are also on the trip.
WHAT THE OTHER PAPERS SAY THIS MORNING
Oscar Pistorius back in court
South African athlete Oscar Pistoriusis due back in court today to apply forbail after being charged withmurdering his girlfriend. Model ReevaSteenkamp was found shot dead in hisPretoria home in the early hours of lastThursday. Police say Steenkamp waskilled by more than one gunshot, thatPistorius, 26, was the only suspect andneighbours heard earlier disturbances.Pistorius stated he disputes the charge“in the strongest possible terms.”
Greece fails to cut state payroll
Greece yesterday refused to firealmost 1,900 civil servants earmarkedfor possible dismissal, despitepromising foreign lenders it wouldseek to cut the public payroll. Workerswere put last year into a “labourmobility” scheme, meaning theywould receive about two thirds oftheir salary and be dismissed within 12months if no other public sector jobswere found for them. Yesterday aGreek ministry found 2,400 vacancies.
Spain to take over small lender
The Spanish authorities will take amajority stake of 65 per cent in small,unlisted lender BMN after a cashinjection and the conversion of sharesinto capital, a source said yesterday. Ina statement to the Spanish stockexchange regulator released earlier onMonday, BMN had said the country'sbank restructuring fund would convert€915m (£788.7m) in preference sharesinto capital as well as fully subscribe acapital increase of €730m.
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