19 SEPTEMBER 2011
Greece bracesfor more cuts
GREECE was bracing itself yesterday as the government pledged to taketough action to avoid default follow-ing an emergency cabinet meeting.Prime Minister George Papandreoucancelled a visit to the US to hold themeeting, a day before EU andInternational Monetary Fund inspec-tors hold a conference call withfinance minister Evangelos Venizelosto hear how Greece will plug this year’s budget shortfall.But Papandreou did not announceany specific new austerity measureslast night that some had expected aspart of the conditions attached to thenext tranche of Greece’s bailout. The
8bn (£6.96bn) loan install-ment forms part of a
110bn bailoutsecured last year, which Greece needs by October before it runs out of money.Paymaster nation Germany yester-day exerted pressure on Greece to faceup to its financial responsibilities.German finance minister WolfgangSchaeuble told Bild am Sonntag:“Membership in a monetary union isan opportunity, but also a heavy bur-den. Measures for alignment are very difficult. The Greeks must decide whether they want to bear this bur-den.”He added that Greece must prove itis living up to its existing austerity plan before the IMF loan will bereleased.Reports in Greek newspapersclaimed that the government hasoffered to cut 20,000 more public sec-tor jobs in order to get its hands onthe next payment.But as Greece’s finances headedtowards dire straits, Germany voted tomove towards the political left.Germany’s Social Democrats beatChancellor Angela Merkel’s conserva-tives in a regional vote in Berlin yester-day, handing Merkel her sixthelection defeat this year ahead of akey Eurozone vote in parliament intwo weeks’ time.Merkel’s centre-right coalition suf-fered a further setback when their junior coalition partners at thenational level, the Free Democrats,failed to clear the five per cent thresh-old needed to win seats – for the fifthtime this year. Their eroding support could desta- bilise Merkel’s coalition, analysts warned. The G20 is due to meet on Thursday and Friday in a bid to stop the bur-geoning debt crisis centred aroundGreece spilling out to imperil banksaround the world.
Poverty of debate is holding us back
IT is obvious that companies need to work harder to make sure that alltheir employees deliver the goods. This must apply to everybody, includ-ing CEOs, who are hired by sharehold-ers to maximise their value. They should be paid a lot if they do well andfired without massive payoffs if they fail. It should be written into contractsthat rewards incurred for profits thatturned out to be little more than amirage can be clawed back. It should be made as easy as possible for share-holders in a Plc to rein in their CEOs if they are doing badly; capitalism only works when owners are able to, anddo, exercise their property rights.But by the same token, successful business leaders who create billions in value should not be criticised for earn-ing a lot. The aim must be to alignincentives with performance, root outrewards for failure, make sure highpay is approved by shareholders, andimprove corporate governance – notembrace the failed egalitarian policiesof the past. This should not be about“curbing” pay – it should be aboutcurbing undeserved pay, as deter-mined by the owners of the business.It is a shame, therefore, that every-thing Vince Cable touches becomes anexercise in class war and inflamingsentiment against “fat cats”. The goodnews is that a lot (though not all) of his proposals are sensible; as ever, theproposed action doesn’t match therhetoric. But the damage caused eachtime politicians such as Cable deliber-ately stir up envy and anti-businesssentiment is huge; it keeps erodingsupport for capitalism and makes itharder to have a constructive discus-sion on how to reform the system tomake it better and to create more wealth for as many people as possible. This poverty of debate is why
is today launching The Forum, anew daily comment section in ournewspaper (see p24-25) and on our website. Our aim is to help debate,inform and provide a platform for voices interested in building astronger, more prosperous free mar-ket economy. We will be inviting arange of guest contributors to pen arti-cles for this section, including com-mentators, City figures, analysts,think-tankers, economists, businessleaders, and MPs; crucially, we are alsokeen to publish the best articles,emails and tweets from readers. TheCity and Westminster are now talkinga completely different language; TheForum will help bridge the gap. Weare grateful to CityJet, the airline, forsponsoring our new pages. Today’s contributions include a col-umn by Ed Balls, the shadow chancel-lor, telling us why he thinks GeorgeOsborne is wrong; a provocative com-mentary by Sam Bowman, a brilliant young writer, on why we need morecapitalism, not less; and a pithy op-ed by Michael Bear, the Lord Mayor of theCity of London, on three policies hethinks would help the Square Mile. We also have a short, tweet-lengthnote by Alan Miller, one of London’stop fund managers, arguing thatexchange traded funds were wrongly blamed for the trading scandal thathas cost UBS $2.3bn. Last but not least, we have a short tweet arguing that theeuro must be saved. You may not agree with some or allof these views. Neither do I. But that isthe whole point. The Forum is aboutdebating and discovering the solu-tions that will help us return to sus-tainable growth, create jobs,strengthen the market economy, boost personal freedom and help build a better world. Do join in.
email@example.com Follow me on Twitter: @allisterheathGreek finance minister Evangelos Venizelos speaks after an unscheduled cabinet meeting
NEWS | IN BRIEF
United Tech eyeing Goodrich
US diversified manufacturer UnitedTechnologies Corp is exploring atakeover of aerospace companyGoodrich but the two sides are not yetclose to a deal, according to a source.Reports last week said UnitedTechnologies was lining up $10bn to$20bn in financing for a US acquisitionthat could shape up as its biggesttakeover in a decade. A move by UnitedTech could mark the start of a moreaggressive phase of consolidation in theaerospace sector to prepare for cuts indefence spending in the United Statesand Europe.
Bank chief: Italy may default
Italy cannot rule out the risk of defaultthough it can weather the crisis if itseconomy returns to growth, the head of Italy's largest retail bank IntesaSanpaolo was quoted as saying yester-day. "We should know the risk of defaultis there," Corrado Passera told Italiantelevision channel La7, news agenciesreported. "We shouldn't take it forgranted that we can make it withoutcourageous choices," he said, citing highpublic debt and low economic growth.
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FEARS OVER RETREAT ON VOLCKERBANK RULES
The Volcker rule, which bans US banks from trading for their ownaccount, is set to include exemptionsthat some officials fear will weakenits impact, people familiar with thesituation have warned. In the wake of UBS’s $2.3bn (£1.4bn) loss last week,alleged to have been caused by theactions of a lone trader, proponentsof a tough rule to constrain banks’proprietary trading are concernedthat dangerous activity will continueunder the guise of customer-relatedtransactions.
LOGJAM FOR LISTINGS IN US CREATESLONGEST WAITING LIST SINCE 2007
A logjam of US initial public offeringshas stretched to its longest in four years while the number of companies withdrawing deals has increased. Anxiety over the Eurozone debt crisisand the economic slowdown has hitequity fundraising, dashing hopes of a revival that followed strong debutsfor internet companies such asLinkedIn and Pandora.
LLOYD’S BRACED FOR RECORD £1.5BNHIT
Lloyd’s of London looks set to reportlosses of more than £1.5bn on Wednesday, its worst first-half loss onrecord, after a strong of disasters leftthe insurance market facing estimat-ed claims of $3.8bn (£2.4bn). London-listed insurer with operations atLloyd’s have already reported hefty first-half losses on the back of a six-month period that made 2010 themost expensive for natural catastro-phes on record.
NAILS INC POLISHES PERFORMANCE
Nails Inc, the privately owned nail barand nail polish brand, has tripledprofits, showing that women aresplashing out on brightly colourednails despite the economic climate.
JOBS AND GROWTH STIFLED BYFAILED PLANNING LAWS
Britain’s “creaking” planning systemis driving investors away and threat-ening economic recovery, a group of leading businessmen declare today. They have thrown their weight behind ministers’ controversial plan-ning reform, arguing that it is vital tosimplify the process in favour of new retail, technology and pharmaceuti-cal ventures. In a letter to The Times,they say that the changes — bitterly opposed by countryside groups andenvironmentalists — are essential toproviding jobs and growth.
LONDON HAS AN OFFICE BLOCK GLUT –BUT IS IT BOOM OR BUST?
Research by The Times shows thatmore than £5bn of office property isup for sale in the City and Canary Wharf. More than a fifth has come tomarket in the past ten days.
HORNBY TO USE PRINCE HARRY MODELFOR BRITISH ARMY IN AFGHANISTAN
Hornby, the toy train and model com-pany, is to bring out a range of tanks,helicopters and soldiers based on theBritish Army in Afghanistan next year, with one of the plastic soldiers mod-elled on Prince Harry. The range of models on a 1:48 scale include six dif-ferent soldiers on patrol and will besold under the Airfix brand.
IKEA FOUNDER PLEDGES £1BN TOCHARITY FOLLOWING NAZI PASTREVELATIONS
IKEA’s billionaire founder IngvarKamprad has pledged £1bn to charity in a move which follows revelationsabout his Nazi past. The 85-year-old businessman has instructed the IKEA foundation, which has owned thecompany since 1982, to more thandouble its charitable spending to closeto £100m a year.
SAMSUNG COUNTERSUES APPLE INAUSTRALIA
Samsung Electronics widened a glob-al patent dispute with Apple by filinga countersuit in Australia, while alsoappealing a key ruling in Germany. The South Korean company said ithas filed a lawsuit in Australia alleg-ing Apple’s iPhone and iPad 2 tablet violate a number of wireless-technol-ogy patents held by Samsung.
THAI AIRWAYS TO SCRAP JOINTVENTURE WITH TIGER AIRWAYS
Thai Airways International PCLChairman Ampon Kittiampon saidthe carrier is scrapping its plan toestablish a low-cost airline withSingapore’s Tiger Airways Holdings.But Tiger Airways Chief ExecutiveChin Yau Seng said Thai Airways hasinformed the Singapore-based low-cost carrier there is no change in thestatus of their joint venture.
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