DJIA 13412.55 À 2.35% Nasdaq 3112.26 À 3.07% Stoxx Eur 600 285.33 À 2.02% FTSE 100 6027.37 À 2.
.37 À 2.20% DAX 7778.78 À 2.19%
EUROPE EDITION
Rare Light-Hearted Moment on Syria’s Front Lines
A Syrian rebel keeps his eye on the ball but his weapon in hand amid the ruins of Aleppo during a
break in fighting Wednesday. The civil war has now claimed 60,000 lives, the U.N. says, with dozens
of new deaths reported Wednesday after government airstrikes near Damascus. Article on page 10
Inside
European soccer bosses
are riding a big-money
merry-go-round
Sport .................... 30
Talk gets cheaper,
TV gets smarter
Business ............... 22
A few extra kilos won’t
kill you—really
Personal Journal .. 29
CAC 40 3733.93 À 2.55%
Be a Better Manager in 2013
BUSINESS & FINANCE 19
Portugal Faces Divisions
Over Austerity Budget
BY CARLA CANIVETE
LISBON—Portugal’s presi-
dent sent the 2013 budget to
the country’s highest court
for review, an unusual move
that highlights deepening op-
position to a two-year auster-
ity drive.
President Aníbal Cavaco
Silva, who is the head of state
and like Prime Minister Pedro
Passos Coelho belongs to the
right-of-center Social Demo-
cratic Party, signed the bud-
get bill into law on Monday,
but expressed reservations
the next day. In a televised
address to the nation late
Tuesday, he expressed doubts
about the budget’s “distribu-
tion of sacrifices,” while call-
ing for an end to the “reces-
sionary spiral” the country is
Euro 1.3196 À 0.08%
VOL. XXX NO. 237
THURSDAY, JANUARY 3, 2013
Associated Press
undergoing.
Mr. Cavaco Silva’s decision
to send the budget to the Con-
stitutional Court follows pres-
sure from critics who question
the budget’s fairness, such as
Portugal’s National Association
of Judges, analysts said, and
allows the country to have a
budget in place while the issue
is being resolved.
Mr. Cavaco Silva said late
Tuesday that the “court will
be asked to decide on the con-
formance of the 2013 state
budget with the constitution.”
Elaborating on the move
Wednesday, he said he specif-
ically wants to know whether
the constitution allows for
controversial steps such as
salary cuts for public workers
and pensioners, and a tax sur-
charge on pensions above
Pound 1.6251 g 0.06%
BHR BD 1.50 EGY $1.75(C/V) JOR JD2 KWT KD 1 OMN OR 2 POL ZL 12 QAT QR 14 SAU SR 14 UAE 15 AED
Markets Rally
As Congress
Makes a Deal
BY SARA SJOLIN
AND JONATHAN CHENG
Financial markets surged
world-wide as investors re-
turning from the New Year’s
break cheered a deal in Wash-
ington to avert spending cuts
and tax increases seen as
threatening to cause a U.S. re-
cession.
Investors had been on
edge for weeks, worried that
Congress would fail to agree
on measures to address the
U.S.’s budget deficit, allowing
the austerity measures,
known as the fiscal cliff, to
kick in, hurting an already
fragile global economy.
News late Tuesday that an
agreement had been reached
sent waves of relief through
markets ranging from stocks
to commodities, currencies
and sovereign debt, from Syd-
€1,350 ($1,780) a month—is-
sues that have been raised by
constitutional experts.
There is no specific dead-
line for the court to decide on
the matter. Such a move—
signing off on the budget and
then sending it for constitu-
tional review—has happened
only twice before, in 1992 and
2003.
The move could be a set-
back for Mr. Passos Coelho,
who has struggled to reform
Portugal’s costly welfare state
and improve the competitive-
ness of one of Western Eu-
rope’s poorest countries. The
Socialist Party, the main op-
position group, said Mr. Ca-
Please turn to page 4
 Heard: Who’s afraid of the
Italian elections? .................... 32
Skirting the Cliff
 The agreement’s
messy conclusion......... 6
 Business leaders feel
let down............................ 7
 Where the outcome
leaves the president.. 8
 Editorial: Obama’s bill
comes due...................... 16
 Heard: Watch the debt
ceiling drop.................... 32
ney to London to New York.
The Stoxx Europe 600 in-
dex jumped 5.65 points, or 2%,
to end at 285.33, the highest
closing level since February
2011. In the U.S., the Dow
Jones Industrial Average shot
up 308.41 points, or 2.4%, to
13412.55, its highest close
since Oct. 18.
“We finally have some
short-term certainty, and with
5 of the 5
Top Banks Run
Exadata
Copyright © 2012, Oracle and/or its affiliates. All rights reserved.
£1.70 / €3.20
WSJ.com
so much cash sitting on the
sidelines, doing nothing, peo-
ple are looking for ways to
use their money more produc-
tively,” said Kent Engelke,
chief economic strategist at
Capitol Securities, which
oversees $4 billion in Rich-
mond, Va.
The bill ushers in the big-
gest tax increase in two de-
cades and was passed despite
objections from conservative
Republicans in the House,
who objected to the fact that
it contained no long-term
spending cuts of any signifi-
cance.
In policy terms, it perma-
nently codifies most of the
tax rates that were set only
temporarily in the Bush era.
After years of failed efforts,
the bill permanently keeps the
middle class from being hit by
Please turn to page 26
Fast
Reliable
Secure
oracle.com/exadata
or call 1.800.ORACLE.1
2 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

PAGE TWO

What’s News—
i i i
Business & Finance
n Activity among euro-zone man-
ufacturers continued to shrink in
December, a gauge of activity
showed, as factories across the
currency area’s biggest economies
curbed their output. 4

n The U.K.’s Cameron called on

the G-8 nations to take bold ac-
tion to drive economic growth by
advancing free trade, ensuring tax
compliance and promoting greater
transparency. 4

n Greece’s agreement for public-

sector cutbacks, in a “mobility
scheme,” has sparked an outcry in
a nation where the security of
government jobs has long been
considered inviolable. 5

n The president of Cyprus said

he would refuse any request by in-
ternational lenders to sell off
state-owned companies as part of
an agreement to bail out the cri-
sis-hit country. 5

n Prime Minister Shinzo Abe is

considered a staunch advocate for
Japan’s old-school manufacturers,
a position that is welcomed by
many Japanese executives. 11
Associated Press

n Data show new signs of resil-

ience in Asian economies, as man-
ufacturing in South Korea and Tai-
wan picks up. 12
n A new law in Israel bans mod-
els with a body mass index of less
than 18.5 from appearing in adver-
tisements, again bringing up an
uncomfortable topic for the fash-
ion industry. 13
n New-car registrations fell to a
15-year low in France and hit a re-
cord low in Spain last year, as a
slump in auto demand brought on
by Europe’s economic crisis con-
tinued in December. 19
n Sony, LG and other TV makers
are gearing up to promote “ultra
high-definition” televisions, which
promise four times the resolution
of existing TVs and are likely to
GETTING BACK TO SCHOOL IN NEWTOWN: A man waves to a child Wednesday, the first day of classes after the holiday break for most students in Newtown,
Conn. Classes resume Thursday for students from the town’s Sandy Hook Elementary School—where 20 children and six adults were killed by a gunman on Dec.
14 in the worst attack on a school in U.S. history—at a school in the nearby town of Monroe specially overhauled for them.
be a hot topic at next week’s Con- K.K. may have opened a new ave- Greeks with Swiss bank accounts amounts of cash tucked into wal-
sumer Electronics Show. 20 nue for deal making in Japan. 25 has submitted her resignation as lets, purses and suitcases at air-
adviser to the country’s privatiza- ports across North America. 12
n Zipcar agreed to sell itself to n India’s capital-markets regula- tion agency. 5
auto-rental company Avis for tor is taking steps to tame what n Israel said it has nearly fin-
$12.25 a share, a 49% premium to has been one of the world’s wild- n Karzai is slated to depart Mon- ished a fence along the Egyptian
the car-sharing service’s closing est IPO markets, with plans that day for Washington to meet border, a project that has stopped
price on Monday but a 32% dis- include forcing companies’ found- Obama on a visit that promises the illegal entry of African mi-
count to Zipcar’s IPO price. 21 ers to reimburse small investors talks over the U.S. military pres- grants and lowered the risk of
for some losses. 26 ence in Afghanistan after its man- militant infiltration from the Sinai
n Shell and emergency respond- date ends in 2014 and Kabul’s Peninsula. 13
ers are preparing to send a sal- i i i wish list of military gear. 9
vage crew to an oil rig that ran World-Wide n A faction within Egypt’s Isla-
aground off the coast of Alaska. 22 n Amid a rush of newly affluent mist Nour Party is breaking away,
n The cousin of a former Greek Chinese eager to move money out dividing Egypt’s most conserva-
n In making an unsolicited bid finance minister implicated in a of China, U.S. and Canadian bor- tive politicians just weeks ahead
for Accordia Golf, PGM Holdings scandal over a list of wealthy der officials are seizing large of parliamentary elections. 13

ONLINE TODAY
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THE WALL STREET JOURNAL.
Ivory Coast Stampede Survivors Blame Barricades
Associated Press
ABIDJAN, Ivory Coast—Survivors
of a stampede in Ivory Coast that
killed 61 people, mostly children and
teenagers, after a New Year’s Eve
fireworks display at a stadium said
Wednesday that barricades stopped
them from moving along a main
boulevard, causing the crush.
President Alassane Ouattara or-
dered three days of mourning and
launched an investigation into the
causes of the tragedy. An estimated
50,000 people had gathered in Abi-
djan’s Plateau district to watch the
fireworks.
“Near the Justice Palace we were
L'INVITATION AU VOYAGE - LE LOUVRE - ON LOUISVUITTON.COM
stopped by some people who built
wooden blockades in the street,” 33-
year-old Zoure Sanate said from her
bed in Cocody Hospital. “They told
us we must stay in the Plateau area
until morning. None of us accepted
to stay in Plateau until the morning
for a celebration that ended at
around 1 a.m.” “Then came the
stampede of people behind us,” she
said. “My four children and I were
knocked to the ground. I was hear-
ing my kids calling me, but I was
powerless and fighting against
death. Two of my kids are in hospi-
tal with me, but two others are
missing. They cannot be found.”
Another hospital patient, Bra-
NEWS
hima Compaore, 39, said he too was
caught in the pile of people stopped
by the roadblock.
“I found myself on the ground
and people were walking on me,”
said Mr. Compaore. “I was only
saved by people who pulled me onto
the sidewalk.”
Local newspapers speculated
thieves set up the roadblocks so
that pickpockets could steal money
and mobile phones from the packed-
in people.
Mr. Ouattara pledged to get an-
swers. Some observers wondered
why police didn't prevent the trag-
edy.
“The investigation must take into
account all the testimonies of vic-
tims,” Mr. Ouattara said Wednesday.
“We will have a crisis center to
share and receive information.”
Mr. Ouattara also postponed the
traditional New Year’s receptions at
his residence, which had been
scheduled for Thursday and Friday.
“The situation is deplorable,”
said Thierry Legre, president of the
Ivorian League of Human Rights. “It
is our first tragedy of 2013 but in
2012 we could already see possibil-
ity of such a tragedy because there
are not adequate authorities patrol-
ling our roads and waters.”
Mr. Legre said the New Year’s
stampede “exposes our weak and
Thursday, January 3, 2013 | 3
dysfunctional civil protection sys-
tem. This must be corrected imme-
diately. The government cannot in-
vite people to this kind of public
gathering without taking adequate
precautions to protect their safety
and their lives.”
He called on the government “to
implement measures to avoid such
tragedies in the future by reinforc-
ing the civil protection system.”
The night before the New Year’s
incident, there had been a big con-
cert at the Felix Houphouet-Boigny
Stadium where American rap star
Chris Brown performed. No serious
incidents were reported from that
event.
4 | Thursday, January 3, 2013
A woman looks into garbage containers in downtown Lisbon, the capital, on Wednesday.
Portugal’s Fiscal Divide
Continued from first page
vaco Silva’s announcement is evi-
dence that Mr. Passos Coelho is
“profoundly isolated” in his pro-aus-
terity stance.
The Social Democratic Party—to
which both Mr. Passos Coelho and
Mr. Cavaco Silva belong—said it re-
spected the decision to send the
budget to the court.
In July 2012, the Constitutional
Court ruled that a government plan
to cut public-sector workers’ tradi-
tional extra two months of salary
each year from 2012-14 was uncon-
stitutional. The government then
said it would raise income taxes on
the entire population, while keeping
a cut amounting to one month’s sal-
ary of public-sector workers’ pay.
If the 2013 budget is deemed un-
constitutional, it may complicate the
government’s efforts to reduce the
budget deficit to 4.5% of gross do-
mestic product this year, from an ex-
pected 2012 deficit of 5% of GDP, part
of the commitments included in a
€78 billion bailout agreement with
the European Commission, the Euro-
pean Central Bank and the Interna-
tional Monetary Fund.
U.K. Calls for G-8 Action on Trade, Tax
BY NICHOLAS WINNING
LONDON—U.K. Prime Minister
David Cameron called Wednesday
on the Group of Eight leading na-
tions to take bold action to drive
economic growth across the world
by advancing free trade, ensuring
tax compliance and promoting
greater transparency.
In a letter to fellow G-8 leaders
to mark the start of the U.K.’s year-
long presidency of the group, which
will include a summit in Northern
Ireland in June, Mr. Cameron said it
was clear the world would continue
to face grave economic uncertainty
in 2013.
The first priority would be deal-
ing with challenges at home, but as
leaders of eight countries making up
about half of the world’s economic
output, the steps the G-8 takes by
working together could make a tan-
gible difference, and discussions
should start now, he said.
The G-8 comprises the U.S., Ja-
pan, Germany, France, Italy, Russia,
Budget Battle
Portugal’s president has sent the
2013 budget to the Constitutional
Court for review. Among the
measures in question:
 Elimination of one of 14 annual
salary payments for public workers
 Pension reductions
 Surcharge for pensions over
€1,350 ($1,780) a month
Source: Portugal’s government
The commission had noted the
Portuguese president’s decision but
had no specific comment, said Si-
mon O’Connor, a spokesman for Eu-
ropean Economics Commissioner
Olli Rehn. “The commission very re-
cently set out in detail its views on
the Portuguese economy, including
the outlook for growth and the on-
going consolidation of public fi-
nances,” Mr. O’Connor noted.
Portugal’s 2013 budget includes
€4.3 billion in tax increases on in-
come, capital gains and property, and
Canada and the U.K.
“But to achieve this will require
strong political leadership and
months of detailed policy work from
our teams,” he said. “This G-8 will
not be the kind of summit where we
simply whip out a chequebook at
the 11th hour, pledge some money
and call it a success. What we are
talking about are long-term changes
in our countries and the rules that
govern the relationships between
them.”
Mr. Cameron’s letter to the other
G-8 leaders said there was much to
discuss on trade in the coming year,
including a possible deal between
the European Union and Canada, the
opening of negotiations between the
EU and Japan, and Russia’s second
year of World Trade Organization
membership.
“And, with Europe and America
together accounting for a third of
global trade, perhaps the single big-
gest prize of all would be the begin-
ning of negotiations on an EU-U.S.
trade agreement,” he said.
EUROPE NEWS
Reuters
€1 billion in additional spending cuts
compared with the 2012 budget.
University of Lisbon political an-
alyst António Costa Pinto said he
expects the court to overturn at
least some of the measures in the
budget, but added that the govern-
ment should “easily make the neces-
sary adjustments to the budget.”
However, in the future the gov-
ernment will have to be more care-
ful when applying cuts, Mr. Costa
Pinto said, because opposition par-
ties will be more eager to use the
constitution as a political weapon.
The president, in his most criti-
cal words yet on the austerity push,
said in his address Tuesday that
leading Portuguese companies are
being forced to shut down amid de-
clining demand and that unemploy-
ment is rising amid the recent cuts.
“We have arguments—and we
should use them firmly—to demand
the support of our European part-
ners in a way that will bring a more
harmonious balance between the
consolidation program and economic
growth,” Mr. Cavaco Silva said.
—Ilan Brat in Madrid
contributed to this article.
The British prime minister also
addressed the issue of tax, arguing
that in a globalized world no single
country could tackle tax evasion and
avoidance on its own. The G-8
should lead the way in sharing in-
formation to tackle abuses of the
tax system so that governments can
collect the taxes they are due and
consider strengthening standards,
he said.
“These are complex questions,
and will involve honest and detailed
discussion about the right approach.
But I do believe that as leaders, we
all have a common interest in being
able to tell our taxpayers who work
hard and pay their fair share of
taxes, that we will make sure others
do the same,” he said.
Mr. Cameron also said the G-8
should emphasize transparency, ac-
countability and open government
in its workings with less developed
and emerging economies. This
would include greater transparency
on aid payments and supporting
growth.
Euro-Zone Output
Shrinks on Month;
Ireland Bucks Trend
BY ALEX BRITTAIN
Activity among euro-zone manu-
facturers shrank further in Decem-
ber as factories across the currency
area’s biggest economies cut back
on output, a gauge of activity
showed.
Wednesday’s figures add to evi-
dence that the euro-zone economy
contracted in the fourth quarter and
will continue to struggle in early
2013, at least. Other developments
Wednesday suggested some of the
bloc’s most vulnerable members,
Ireland and Italy, may have passed
their worst point, even as the so-
called core nations lose momentum.
Data company Markit said its
monthly index, based on a poll of
manufacturing purchasing man-
agers, edged down to 46.1 in Decem-
ber from 46.2 in November. The fig-
ure was reduced from its 46.3
preliminary reading last month and
is well below the 50 threshold, sig-
naling a sharp contraction in activ-
ity in December.
“The euro-zone manufacturing
sector remained entrenched in a
steep downturn at the end of the
year,” said Chris Williamson, chief
economist at Markit. “The region’s
recession therefore looks likely to
have deepened, possibly quite sig-
nificantly, in the final quarter.”
The 17 euro-zone nations re-
corded a second straight fall in eco-
nomic output in the third quarter,
meaning they are in recession, based
on a commonly used definition.
Gross domestic product fell 0.1%
in the third quarter, after shrinking
0.2% in April through June.
The bloc’s two biggest econo-
mies, Germany and France, regis-
tered further declines in manufac-
turing, adding to concerns about the
resilience of the euro zone’s stron-
ger northern economies against the
wider downturn.
Germany’s index was revised
down sharply to 46 from the initial
reading of 46.8.
“Even the German industrial sec-
tor—supposedly the hypercompeti-
tive engine of euro-zone growth—
remains deep in recession territory,”
said Jonathan Loynes, chief Euro-
pean economist at Capital Econom-
ics, a consultancy.
In France, registrations of new
cars slumped 14% in 2012 to the
lowest level in 15 years, the automo-
bile manufacturers’ association said.
In Spain, too, registrations fell 13%
on the year.
Developments in Italy and Ire-
land suggested some brighter pros-
pects for the euro-zone economy,
where authorities have struggled to
control the debt crisis that has en-
veloped highly indebted countries,
such as Greece and Portugal, and
threatened to engulf others, includ-
ing Italy.
Italy, the third-largest economy
in the bloc, posted its least-negative
factory activity reading in nine
months. The manufacturing index
rose to 46.7 from 45.1 in November.
New orders, especially those for ex-
port, fell at a lesser rate than in pre-
vious months.
Ireland continued to be the only
euro-zone country measured indi-
vidually by Markit to show month-
to-month growth in manufacturing,
holding above the 50 threshold. Its
index edged down to 51.4 from 52.4.
THE WALL STREET JOURNAL.
Further Decline
Euro-zone manufacturing
Purchasing Managers’ Index
60
CONTRACTING EXPANDING
55
50
45
46.1
40
2011 2012
Source: Markit
Deputy Prime Minister Eamon
Gilmore said on Wednesday that the
country remains on track to exit its
bailout program and get back to
funding itself in financial markets
this year.
Greece showed scant sign of im-
provement, as manufacturing suf-
fered a deeper month-to-month
drop that was by far the most se-
vere of the euro-zone countries. Its
manufacturing index fell to 41.4
from 41.8.
Figures earlier this week from
Greece’s statistics agency showed
retail sales fell 16.8% in October
from the year-earlier month, much
steeper than the 11.8% drop regis-
tered in September.
Germany and France
register declines, adding
to concerns about
northern resilience.
Inflation data showed that while
price growth is relatively subdued
in Germany—holding at around the
European Central Bank’s target
rate—it is much stronger in Spain.
That undermines hopes that the
bloc will be able to swiftly rebalance
to make countries such as Spain
more competitive relative to coun-
tries such as Germany, because high
inflation is likely to make it harder
to suppress wage growth.
Figures from Germany’s statis-
tics bureau Wednesday showed an
annual inflation rate of 2.1% in De-
cember, on a European Union-har-
monized basis. In Spain, the con-
sumer-price index held firm to show
annual growth in prices of 3%, in
EU-harmonized terms.
In Spain, the consumer-price in-
dex held firm to show annual
growth in prices of 3%, in European
Union-harmonized terms.
The ECB aims to keep annual
euro-zone wide inflation a little be-
low 2% on an EU-harmonized basis.
In November, the euro-zone infla-
tion rate was 2.2%.
Austria, another economy that
has remained largely resilient dur-
ing the crisis, suffered a steep rise
in unemployment in December as
unusually cold weather hit the con-
struction sector. The jobless rate
jumped to 8.6% from 7.2% in Novem-
ber.
—Jason Douglas
contributed to this article.
THE WALL STREET JOURNAL. Thursday, January 3, 2013 | 5

EUROPE NEWS

Greece’s Job ‘Mobility’ Has a Downside

BY JAMES ANGELOS certainly result in layoffs, as part of
what he called a German-led eco-
NEA IONIA, Greece—Anastasia nomic war to privatize public serv-
Drakaki got her first job for the mu- ices in Greece.
nicipal government in this Athens Officials in the Greek administra-
suburb after her husband died 13 tive reform ministry said new jobs
years ago, a favor from local offi- would rapidly be found for all sus-
cials, she said, to help her through a pended workers.
difficult time. After the economic crisis here
Ms. Drakaki, now 55 years old, began in 2009, the Greek govern-
said she repaid the gift through ment refused to lay off civil ser-
hard work, most recently as a clerk vants. In early 2012, the government
in the finance department. said it would place 15,000 workers
She is now one of more than in line for layoffs, but didn’t follow
2,000 public workers to have been through. That plan was replaced in
suspended in December, ahead of December by the “mobility scheme.”
25,000 suspensions slated for 2013, The 2,000 workers suspended
under an agreement by Greece to last month were chosen in part be-
secure a €34.4 billion ($45.4 billion) cause they lacked credentials such
loan installment from creditors. as passing a job entrance exam or
In what the government calls a earning a college degree, according
“mobility scheme”—and workers to the administrative reform minis-
call a precursor to layoffs—Ms. try. Most perform clerical jobs.
European Pressphoto Agency

Drakaki and other suspended work- Many received their jobs as favors,
ers will be paid 75% of their wages said Greek officials.
until they are transferred to another How the 25,000 to be suspended
position. this year will be chosen hasn’t been
If another job isn’t found within a determined, the ministry said.
year, they will be dismissed, according Ms. Drakaki was one of 19 work-
to Greece’s agreement with the Euro- ers suspended in Nea Ionia. She
pean Commission, European Central A municipal worker shouted slogans during a demonstration in central Athens last month to protest mass layoffs. called the government “fascistic” for
Bank and International Monetary removing workers without evaluat-
Fund. 892,207 public employees at the end people in the European Union, officials in the city of Trikala in cen- ing their performance. “I’m a good
The agreement sparked an out- of 2010, the ministry said. By 2015, Greeks are the least satisfied with tral Greece barging into municipal employee. People give me compli-
cry in a nation where the security of it projects 695,000. their public administration, accord- offices in November and shutting ments,” she said.
government jobs has long been con- The wave of early retirements has ing to opinion polls. the lights. “You should be ashamed!” The government says it is acting
sidered inviolable. been fueled in part by workers at- However, 22.6% of Greeks with one union member yelled at workers to make the public work force more
Demonstrations by unions and tempting to lock in pensions and jobs work in the public sector, ac- who didn’t immediately stop work- flexible and efficient by placing
public workers are expected to con- other benefits before they are cording to Greek labor-force survey ing and leave as the unions had workers in positions where they are
tinue to challenge the Greek govern- trimmed further by government bud- data; the EU average is 25%, ana- urged. needed.
ment in 2013. Union officials said get cutbacks, said Yannis Monogios, lysts said. Greek municipal workers, to pro- Ms. Drakaki said she uses her
occupations of municipal offices, head of fiscal and monetary policy at “It’s a mistake to believe the test anticipated layoffs, began para- monthly salary to pay her mortgage
rather than formal strikes, are the the Center of Planning and Economic public sector is huge,” said Mr. lyzing local governments in early and help support her daughter’s
preferred manner of protest because Research in Athens. Monogios. The problem with the November by occupying town halls. family. She said she fears she won’t
strikes hit workers wallets. The European Commission said Greek public sector, he added, is In December, protesters dismantled receive another position.
The suspensions are part of a de- the suspensions agreed to in Decem- “not a matter of size,” but “more a barriers around Parliament in Ath- “What will the government gain
mand by Greece’s public creditors ber are intended, as part of a re- matter of productivity.” ens, and stormed toward the en- if they leave all these people with
that the nation overhaul and reduce structuring of the government, to In November, after German trance until riot police stopped commitments and loans?” she said.
its public workforce by at least help tame a public-sector wage bill Chancellor Angela Merkel’s special them. Nea Ionia’s deputy mayor, Gian-
150,000 workers from the end- whose growth was “exceptionally envoy to Greece, Hans-Joachim “We will continue the struggle,” nis Kolmaniotis, said the well-being
of-2010 level by 2015. strong” relative to the euro-zone av- Fuchtel, publicly questioned the Themis Balasopoulos, the leader of of the 19 suspended workers there
The Greek Ministry of Adminis- erage. productivity of Greek government a nationwide union of municipal depends on what happens to them
trative Reform and E-Governance, For decades, Greece’s leading po- workers, an enraged group of dem- workers, said to the protesters next. ”There is no work here, there
which is overseeing the reductions, litical parties doled out public-ser- onstrators in Thessaloniki pelted through a megaphone. “We will not is nothing,” said Mr. Kolmaniotis.
said that goal would be reached vice jobs to loyal supporters, and German Consul Wolfgang Hoelscher- bow to their wretched policies.” “Today, each person who gets dis-
without layoffs, because of attrition the public workforce rapidly became Obermaier with drinks. Mr. Balasopoulos, in an inter- missed, wherever they come from,
and early retirements. Greece had more expensive—though among One Internet video showed union view, said the suspensions would private or public, gets destroyed.”

Greek Official Resigns, Citing Cyprus Resists Privatizing

State Firms for Bailout
Swiss Bank Account Scandal Associated Press republic with such a move,” he said.
Cypriot banks, which took huge
BY ALKMAN GRANITSAS well as those of Italy and Spain. paconstantinou’s relatives—includ- NICOSIA, Cyprus—The country’s losses on bad Greek debt and loans,
The French tax authorities said ing Ms. Papaconstantinou—had president said he would refuse any are estimated to need as much as
ATHENS—The cousin of a former they acquired the list in 2008 when fallen off the list sometime after it request by international lenders to €10 billion ($13.19 billion) in rescue
Greek finance minister implicated in they raided the home of one of the was handed to Mr. Papaconstanti- sell off state-owned companies as money. That is more than half the
a scandal over a list of wealthy former HSBC employees at the re- nou. Prosecutors said the list they part of an agreement to bail out the value of the national economy and
Greeks with Swiss bank accounts quest of the Swiss government. In saw in October had 2,059 names. crisis-hit country. too much for the government to
has submitted her resignation as ad- 2010, the French tax authorities be- Mr. Papaconstantinou, who nego- A draft of the bailout deal by the handle on its own.
viser to the country’s privatization gan distributing a copy of the list, tiated Greece’s first international rescue creditors—the European It would also make the rescue
agency, an official at the agency said which they had kept, to their coun- bailout and presided over the gov- Commission, the European Central one of the largest bank bailouts ever
on Wednesday. terparts in Italy and Spain. All three ernment’s first round of austerity Bank and the International Mone- as a proportion of gross domestic
Eleni Papaconstantinou, who was countries started probes to recover measures, has said he removed no tary Fund—says Cyprus will have to product, second only to the 1997 In-
appointed as a legal consultant to unpaid taxes. names from the list. consider privatizations if its debt is donesian bailout, according to esti-
the agency in September, offered In December, a Spanish court The disclosure this fall that gov- deemed unsustainable. mates by Cyprus’s Central Bank.
her resignation to avoid entangling said it would release an Italian- ernment officials received a list in But Dimitris Christofias said he If the Cypriot government were
the agency in a probe stemming French citizen sought by Swiss po- 2010 that could lead them to poten- won’t consent to privatizations be- to spend the full €10 billion for the
from the so-called Lagarde List, the lice in connection with the theft of tial wealthy tax evaders—and that cause he is “bound” by his party, banks, plus €1.5 billion to cover gov-
official said. Ms. Papaconstantinou banking data, pending a final deci- officials hadn’t pursued these leads AKEL, and by the government. Mr. ernment deficits over the bailout’s
couldn’t be immediately reached for sion on a possible extradition to amid two years of recession and Christofias suggested that should four-year duration, public debt
comment. that country. painful austerity measures—has re- creditors insist on including privati- would rise as high as 140% of GDP.
The list was drawn from data ob- This week, Greece’s government sulted in months of controversy. zations in a deal, the accord would Cypriot authorities contend that
tained by former employees of asked parliament to investigate Ms. Papaconstantinou, an attor- have to wait for the next govern- the banks’ needs are notably less
HSBC’s Geneva branch, who elec- whether ex-Finance Minister George ney by profession, said in her resig- ment to sign it. Cyprus holds presi- than €10 billion. An exact figure on
tronically copied details of 24,000 Papaconstantinou—who was given nation letter that the account she dential elections on Feb. 17 and Mr. the banks’ needs is expected some-
clients, with the aim of selling those the list by former French Finance jointly held with her husband at the Christofias isn’t seeking re-election. time in the middle of this month,
details to European governments Minister Christine Lagarde in Swiss branch of HSBC and identified “I hope that when discussions when international investment firm
trying to track tax evasion among 2010—had tampered with the docu- on the later version of the list, was conclude they won’t ask us to priva- Pimco and auditors Deloitte finish
their citizens, said people familiar ment listing 2,062 Greeks with off- completely legal, the official said. tize state-owned organizations be- looking through the lenders’ books.
with the matter. shore bank accounts. The privatization agency’s board cause if they do, and I want to make Cyprus’ euro-zone partners will
The information wound up in the The move came after prosecutors will meet in coming days to con- this perfectly clear, I have no inten- decide on the country’s bailout deal
hands of French tax authorities, as disclosed that the names of Mr. Pa- sider the resignation. tion to proceed as president of the on Jan. 21.
6 | Thursday, January 3, 2013
Bigger Bite
The bill includes the first major tax increase since 1993.
Effect of major tax provisions on federal revenue as a percentage of GDP in first year after change
2.0%
Tax increases
1.0
0.0
–1.0
Tax cuts
–2.0
–3.0
1950 '51 '66 '68 '69 '71 '75 '76 '77 '78 '80 '81 '82 '83 '84 '86 '87 '90 '93 '97 '01 '02 '03 '04 '05
Average tax increase for selected income levels*
For people
making
$50,001- $100,001- $200,001-
$75,000 $200,000 $500,000
$822 $1,784 $2,711
*Includes effect of letting payroll-tax cut expire
Sources: Treasury Dept. (historical); the legislation
(tax increase); Commerce Dept. (GDP); Tax Policy
Center (average tax increases)
High Earners Face First
Major Tax Rise in Years
BY LAURA SAUNDERS
The bill approved in Congress to
avert the so-called fiscal cliff would
bring the first major tax increase on
high earners in 20 years.
While leaving income-tax rates in
place for most Americans, taxpayers
with more than $400,000 in taxable
income or couples with $450,000
would see the top marginal tax rate
rise to 39.6% in 2013 from 35% in
2012. For income earned below that
level, the 2012 rates would be per-
manently extended.
Taxes on long-term capital gains,
dividends and estates also would
rise for wealthy taxpayers.
The House of Representatives
passed the bill late Tuesday night,
even though some Republicans in
the House said the bill didn’t con-
tain enough government-spending
cuts. The bill had passed early Tues-
day in the Senate.
According to the bill, Americans
at all income levels would see a
two-percentage-point jump in the
employee portion of the Social Se-
curity tax. It will return to 6.2% in
2013 after a stimulus rate of 4.2%
expires.
But most of the changes in the
bill affect high earners. All told,
more than 90% of the tax increases
in the bill would fall on households
with income of $1 million or more,
said economist Roberton Williams
of the Tax Policy Center, a nonparti-
san group in Washington.
For a couple with one child and
$1 million of income, including
$250,000 of itemized deductions,
the tax increase from higher rates
and other provisions taking effect
next year would run almost $37,000
over what they paid in 2012, accord-
ing to estimates made by Dave
Kautter, an official with the Kogod
Tax Center at American University.
“It would be higher if more of
their income is from investments,
both spouses work or they have
more children,” said Mr. Kautter.
The bill includes some less-obvi-
ous tax increases as well. For in-
$500,001-
$1 million
$14,812
The Wall Street Journal
stance, it revives two tax increases
that lapsed in 2010 that will affect a
large number of affluent earners, as
opposed to just those earning mil-
lions of dollars.
One of these tax increases will be
in the form of the personal exemp-
tion phaseout. That provision re-
duces or eliminates the benefit of
the personal exemption. That ex-
emption was $3,800 per person for
most individuals in 2012. The bill
would phase it out for couples with
$300,000 or more of adjusted gross
income, or singles with $250,000.
Another tax increase being re-
vived is the “Pease” provision, a
complex limitation on itemized de-
ductions. The bill would eliminate
up to 80% of deductions for couples
above the $300,000 threshold, and
singles above $250,000.
The provision, named after the
late Rep. Donald Pease (D., Ohio), af-
fects all deductions, including chari-
table donations and mortgage inter-
est.
The formula, in effect, adds
about one percentage point to the
top tax rate, including the top rate
on capital gains, tax experts said. As
a result, “Many people who think
they’ve dodged higher rates will ac-
tually have backdoor tax increases,”
said Mr. Kautter.
For millions of wage earners, the
most immediate effect of the bill
would be the payroll-tax increase,
which would reduce their take-home
pay. For an individual earning the
maximum 2013 cap of $113,700 or
more, the increase would amount to
nearly $200 per month.
Because of all the intricacies in-
volved, it will take up to four weeks
after a law is signed for many work-
ers to know exactly what their 2013
take-home pay will be, according to
Michael O’Toole, an official of the
American Payroll Association, a
group of 21,000 payroll managers.
The 2013 tax-filing season also is
likely to be disrupted by Washing-
ton’s wrangling. Normally it opens
in mid-January, but this year it
might be delayed till mid-February
THE FISCAL DEAL
0.38%
'08 '09 '10 '13
More than
$1 million
$170,341
or later. As a result, many filers
won’t be able to receive tax refunds
as early as they normally do.
“Congress’s delays have pushed
back the repayment of interest-free
loans to the government for millions
of taxpayers,” said Lawrence Gibbs,
a former IRS commissioner now
with the Miller & Chevalier law firm
in Washington, referring to tax re-
funds. The average refund is almost
$3,000, according to IRS data.
The bill would raise rates on
long-term capital gains and divi-
dends for top-bracket taxpayers to
20% for 2013 from 15% in 2012. The
15% rate would continue to apply to
taxpayers in the 25%, 28%, 33% and
35% income tax brackets. People in
the 10% and 15% brackets would
continue to have a zero rate on capi-
tal gains and dividends.
The bill permanently and retro-
actively adjusts the alternative min-
imum tax—originally designed to
limit deductions for the highest
earners—so that millions of middle-
income taxpayers wouldn’t be sub-
ject to it. The current fix expired at
the beginning of 2012.
The estate- and gift-tax exemp-
tion would remain $5 million or
more per individual. But the current
35% top tax rate on amounts above
the exemption would increase to
40% in 2013.
Provisions allowing deductions
for $250 of teachers’ classroom ex-
penses, tuition and related ex-
penses, and state sales taxes in lieu
of state income taxes would be ex-
tended, as would the $100,000 char-
itable donation of IRA assets by ac-
count owners 70 l/2 and older.
The bill would extend for five
years the American Opportunity Tax
Credit. For many taxpayers this dol-
lar-for-dollar credit is worth up to
$2,500 and therefore the most valu-
able education benefit.
The Child Tax Credit and Earned
Income Tax Credit, which are
claimed by many lower-income
workers earning up to about
$50,000, would also be extended by
five years.
Why Washington Accords
Have Become So Difficult
[ Capital Journal ]
BY GERALD F. SEIB
In today’s
Washington, the
two parties have a
hard time even
agreeing to
disagree.
That was the grim picture on
New Year’s Day in a capital still
tied in knots over how to find a
deficit-reduction deal, despite a
full year’s advance warning that
one was absolutely, positively
essential by year’s end.
Even when the contours of a
potential big deal were possible
to see weeks ago, the path to
compromise proved too hard for
President Barack Obama and
Republican House Speaker John
Boehner.
When the two sides lowered
their sights to seek a more
modest deficit-reduction deal,
there still was no solution in
sight—until time ran out on the
year 2012. Then Republicans and
Democrats in the Senate decided
to put aside the things they
couldn’t possibly agree on to
pass a relatively narrow tax bill
that included items each side
could at least live with. But
within hours, even that
minimalist agreement was in
peril in the House.
All of which must leave many
Americans asking a simple
question: Why is this so hard?
There are multiple reasons
that even what seems easy is
hard in Washington right now.
The problems start, of course,
with the basic polarization of not
just Congress but the country.
America is in an unusual political
state, in which the two parties
are quite evenly divided in
power, but far apart
ideologically.
That makes governing
difficult for Mr. Obama, but also
for Mr. Boehner and Senate
Majority Leader Harry Reid, a
Democrat.
Because of the close division
of power, neither side thinks it is
required by the political calculus
to give in to the other. Because
of the wide ideological divide,
neither side finds it easy to split
the difference with the other.
Divisions are present in the
Senate, to be sure, though the
89-8 vote in the wee hours of
New Year’s Day showed that it’s
at least possible to move around
them in that chamber.
In the House, there is almost
no middle ground, and the vote
there Monday night was far more
divided along partisan lines.
Most members come from such
reliably Democratic or
Republican districts that they
simply feel no pressure back
home to compromise with the
other side.
Indeed, in this fall’s election,
125 House members won their
districts with 70% or more of the
vote. Such margins leave House
members thinking they have
their own personal mandates to
stick to their guns.
That kind of polarization only
creates the backdrop for other
problems. Even when the
differences between the two
sides seem relatively small—
THE WALL STREET JOURNAL.
whether, for example, to raise
the top tax rate four percentage
points for families earning more
than $250,000, or whether to
make that income level
$450,000—compromise is
difficult because both sides think
important precedents would be
set. Today’s decisions will set the
backdrop for broader debates on
tax reform and spending later in
the year.
When Republicans agreed to
raise any tax rates at all, for
example, they knew that they
had opened the door for a new
set of arguments about which
rates and at what level. The
question had shifted from
whether to raise rates to how—
and that’s a significant shift.
Similarly, when Mr. Obama
said he could accept the idea of
reducing entitlement costs by
embracing a formula for lowering
cost-of-living increases for Social
Security recipients, he was
setting a precedent as well—a
precedent saying that Democrats
were willing to consider policies
that reduced entitlement
spending not just by holding
down costs but also by reducing
benefits to recipients.
Similarly, both sides have a
sense that the current talks are
establishing something broader
on another front: The debate is
going to help set the tone for the
entire second Obama term.
America is in an unusual
political state, in which
the two parties are quite
evenly divided in power,
but far apart in terms of
their ideologies.
Democrats fear that if the
president gives too much ground
now, he will establish a pattern
in which both parties will enter
future debates expecting him to
give in to Republican
intransigence.
By the same token, Republican
partisans think the GOP needs to
establish now that their party’s
control of the House, amid
Democratic control of the Senate
and the White House, is enough
to give the party significant
leverage for the next couple of
years.
Lurking in the background is
one other factor that makes
compromise increasingly difficult
in the capital. As both states and
congressional districts become
more clearly red or blue—
dominated by Republican voters
and Democratic voters,
respectively—an increasing
number of lawmakers worry less
about a political challenge from
the other party and more about a
primary challenge from a
ideologically driven conservative
or liberal from within the
lawmaker’s own party.
As a result, the more
politically perilous route is to
move to the middle in a
compromise, thereby inviting
that kind of primary challenge,
rather than to stand on firm
ideological ground and be
accused of being too
uncompromising.
THE WALL STREET JOURNAL. Thursday, January 3, 2013 | 7

THE FISCAL DEAL

Proposal’s Economic Grade: Incomplete Obama went about $1 trillion
[ Capital ] toward that in August 2011 by
setting ceilings on the third of
BY DAVID WESSEL federal spending that is
appropriated annually—assuming
The federal- those caps hold.
budget deficit deal That left $3 trillion. Cutting
represents, at through the renewal of tax breaks
best, a messy that no one ever expected to
intermission in the expire, this deal moves an
fiscal-cliff saga. additional $600 billion toward
There are no heroes. There are a the goal by raising taxes on
few tears of relief, but no upper-income Americans. There
celebratory high fives. There is no are no new spending cuts in this
great catharsis. deal. It does nothing to slow the
The provisions range from the growth of federal spending on
first big tax increase in 20 years health care or other benefits, or
to a renewal of a tax break for to shore up the financial footings
profits earned by businesses in of Social Security.
American Samoa. The Committee for a
But contemplate three big Responsible Federal Budget, a
economic questions: What does nonpartisan anti-deficit group,
the deal do to reduce the deficit says the federal debt, which now
in coming years, the supposed amounts to about 73% of the
objective? What does it do for an gross domestic product, the value
economy growing at an of all goods and services
excruciatingly slow pace? And produced in the economy, was on
what does it do to reduce the track to hit 81% of GDP by 2022,
much-decried uncertainty? had Congress extended all the
 The deficit. Basically, this expiring tax cuts and made other
deal would do something but not widely anticipated changes to tax
much to reduce future deficits. and spending laws. The
And it would do nothing to compromise bill would reduce
control spending. For both that, but only to 79% of GDP.
reasons, it ran into opposition That’s double what it was in
among some House Republicans. 2000.
To keep the federal- “This…does not put in place a
government debt as a share of real process to reduce the debt
gross domestic product from down the road,” said Sen. Michael
rising further, Washington began Bennet (D., Colo.), one of eight
2011 needing about $4 trillion in senators to vote against it. Nor
spending cuts and tax increases, does it prepare Americans for the
according to Congressional reality that the next round of
Budget Office estimates. deficit reduction, which will
On an apples-to-apples basis, arrive someday, is likely to mean
Congress and President Barack either higher taxes or lower
A Small Step
The bill would reduce deficits, projected to total $7.9 trillion over 10 years,
by about $650 billion.
$7.9 trillion
Projected total deficits
over 10 years
Assumes extension
of all 2001/2003 tax cuts,
patch for Alternative
Minimum Tax, repeal of the
$1.2 trillion sequester, fix to
cuts in Medicare payments
to doctors and drawdown
of war spending
Source: Committee for a
Responsible Federal Budget
The Wall Street Journal
benefits for the middle class.
 The economy. OK, it could
have been worse. Allowing taxes
on everyone to rise sharply and
allowing all the across-the-board
spending cuts would have
precipitated a recession.
Instead, consumers will have
less to spend as income taxes will
rise on the best-off and payroll
taxes will rise on all workers. (So
much for all that White House
worries about the end to the
payroll-tax holiday boosting taxes
on average by $40 per biweekly
paycheck.) This will be offset, but
only partly, by extending
unemployment benefits and, at a
reduced rate, a tax break for
business investment.
The deal’s net effect is to tap
the brakes in an economy that,
$650 billion
Estimated deficit
reduction
Relative to the
existing policy
despite some welcome signs of
strength in the private sector, is
growing too slowly to bring
unemployment down quickly.
This was the inevitable
consequence of any deficit-
reduction program, but the hope,
now dashed, was that business
and consumer relief at the end of
Washington’s fiscal follies would
trigger all sorts of spending and
investing.
Mohamed El-Erian of bond
manager Pimco puts it this way:
The deal avoids “the more
extreme risks of the fiscal cliff,”
but doesn’t “enhance in any
durable manner the medium-term
economic outlook” nor “provide a
foundation for better economic
governance by Congress.”
 The uncertainty. There is
still plenty left. Some big tax
issues would be settled as
permanently as anything ever is
in Washington, including the top
tax rate, the capital-gains tax rate
and the estate tax. Others, such
as the corporate R&D tax credit,
would be settled only through
year-end 2013. But an awful lot
would be deferred for a couple of
months until Congress, once
again, confronts a vote on raising
the debt ceiling.
A month ago, White House
economic-policy coordinator Gene
Sperling said: “Make no mistake
about it: no budget agreement—
however robust—will provide the
economic certainty and
confidence we aspire to if job
creators, investors and working
families believe that, after we
reach that agreement, just
months down the road, we will
start the next round of debt-limit
debacles.”
But that is exactly what’s
going to happen. Mr. Obama vows
to push for a mix of unspecified
restraints on benefits and tax
increases, this time targeting
deductions, credits and loopholes.
(So much for certainty on taxes.)
Republicans undoubtedly will
push for more spending
restraints.
Another nail-biter over the
debt ceiling appears almost
certain. Even more discouraging
is this: The past two weeks offer
little prospect that the nation’s
political leaders can accomplish
anything as significant, and
urgent, as tax reform or an
overhaul of federal health-
insurance programs.

Among Executives, Frustration Tempers Any Relief

Some corporate leaders are re- omist Lewis Alexander said Tuesday.
lieved lawmakers reached a deal to He expects ”a significant economic
avoid most of the fiscal cliff, but slowdown at the start of the year in
also bemoan a lost opportunity to response to fiscal drag and contin-
ued, contentious fiscal debate."
By Damian Paletta, Many economists predict pain-
James R. Hagerty fully slow growth this year as Wash-
and Sudeep Reddy ington continues the sparring that
has worried investors and busi-
reach a larger deficit-reduction nesses for years. Several project the
package that could have shifted the payroll tax increase alone will shave
focus of many corporations away about a half percentage point off
from Washington’s fiscal dithering. growth this year, a significant dent
Business executives were glad in an economy that has been grow-
Bloomberg News (2)

Congress approved legislation Tues- ing around 2% a year.

day to avert the combined tax in-
creases and spending cuts that likely
would have triggered a recession.
Several also welcomed the raft of cor-
porate tax breaks included in the bill.
But they also expressed frustra-
tion that the deal tees up additional
fiscal battles in coming months over
raising the government’s borrowing
limit and dealing with roughly $110
billion in deferred spending cuts.
“Now we face another fiscal cliff
in two months’ time,” said Alexan-
der Cutler, chief executive officer of
Eaton Corp., a maker of electrical
and hydraulic equipment, with sales
of more than $20 billion a year.
“This virtual rolling-thunder style of
negotiation and lack of progress has
done nothing to reduce uncer-
tainty—uncertainty that continues
to negatively impact investment and
job growth.”
Paul Wichert, vice president of
the machine tools group at Liberty
Diversified International, New Hope,
Minn., said Washington didn’t do
nearly enough to fix tax and spend-
ing problems. “Most business people
will view this as more dysfunction
Executives like Eaton’s Alexander Cutler, left, and Ethan Allen Interiors’ Farooq Kathwari think the fiscal-cliff compromise
leaves too much uncertainty. Says Mr. Cutler: ‘Now we face another fiscal cliff in two months’ time.’
in the legislative process,” he said.
“It only gives us a very short-
term view of the future,” Mr. Wich-
ert said. “As business people we
plan one to three to five years out.
Our political leaders can’t get more
than 90 days resolution without
more stagnation.”
The legislation that passed Tues-
day came after dozens of chief exec-
utives descended on Washington in
the past two months, pleading with
the Democrats and Republicans to
reach a more comprehensive, bipar-
tisan agreement to reduce the defi-
cit with both tax increases and
spending cuts. Their effort fell
short, however, as many of the CEOs
backed away from the talks when
political bickering intensified.
In the end, the deal raised income
and investment taxes on upper-in-
come households and payroll taxes
for workers, extended business-tax
breaks for a year, continued unem-
ployment benefits for a year, and
didn’t include any immediate spend-
ing cuts.
The business-tax breaks include
incentives for research and develop-
ment as well as for investments in
equipment and machinery.
Rob Smith, president and owner
of Acutec Precision Machining Inc.,
a Saegertown, Pa., maker of parts
for aircraft, gas turbines and other
products, said the extension of in-
centives for capital investment was
“very good news.” As a result, he
said, the closely held company,
which has about 320 employees, is
likely to go ahead with about $5
million of spending on new equip-
ment in 2013.
But executives and economists
warned the looming showdown over
the government’s debt ceiling in
February is likely to constrain hiring
and investment in the next few
months. This would only further in-
flame corporate frustration with
Washington after two years of bat-
tles over tax and spending policy.
Farooq Kathwari, chief executive
of Ethan Allen Interiors Inc., a
Danbury, Conn.-based maker and re-
tailer of furniture, called the com-
promise “a short-term fix” and said
“overall the tax increases as pro-
posed make sense.” But he said
Ethan Allen would have to wait for
Washington to deal with the next
fiscal deadline before deciding
whether to make any changes in
capital spending and hiring plans.
The final bill “tackles the easiest
pieces of the cliff and not the bigger
issues of long-term spending and the
debt limit,“ Nomura Securities econ-
The deal comes as the economy
has struggled to gain momentum.
Employment and housing have
shown recent signs of resurgence,
but many companies are holding
back, fearing political fights will ar-
rest the recovery.
Consumers’ confidence in the
economic outlook plummeted in De-
cember as a result of the recent
budget negotiations, following an
earlier slide in business confidence.
Many analysts expect investors,
businesses and some consumers to
remain on edge as the debt-ceiling
battle begins.
“There’s huge amounts of uncer-
tainty, and people don’t know what
will happen with the markets or the
economy,” said Stephen Wiehe, chief
executive of Cary, N.C.-based soft-
ware maker SciQuest Inc. About
half of SciQuest’s clients are in state
government or public universities,
and Mr. Wiehe says he expects the
uncertainty to leave his clients more
cautious in their spending.
—Dana Mattioli
and Spencer E. Ante
contributed to this article.
8 | Thursday, January 3, 2013
Narrow Accord
To Complicate
Obama Agenda
BY COLLEEN MCCAIN NELSON
For President Barack Obama, the
new year was supposed to bring an
end to fiscal-cliff negotiations and
the opportunity to begin work on a
second-term agenda.
But the failure to craft a grand
bargain to address the country’s fis-
cal woes means that contentious
discussions about spending cuts and
the debt ceiling will continue in
2013—potentially diminishing the
time and goodwill Mr. Obama needs
to pursue his policy priorities.
Critics of the budget compromise
already are signaling that hard feel-
ings about this protracted process
could linger, creating an uncertain
path for the president as he tries to
build support for proposals includ-
ing an immigration-law overhaul,
tax-code changes, energy legislation
and other issues.
Still, the White House deal with
Congress appears to have bolstered
Mr. Obama’s position in some ways.
The president won a concession
from Republicans in Congress on a
central tenet of GOP ideology, which
holds that tax rates should never
rise. Moreover, Mr. Obama’s success
on that point came with a flourish—
a show of overwhelming support in
the Senate, on a vote of 89-8.
Conservative opposition in the
House failed to stop the deal, and
that chamber approved the package
late Tuesday.
Speaking minutes after the
House vote, Mr. Obama said:
“Thanks to the votes of Democrats
and Republicans in Congress I will
sign a law that raises taxes on the
wealthiest 2% of Americans while
preventing a middle-class tax hike
that could have sent the economy
Debt and Immigration Top Washington’s 2013 List
BY GERALD F. SEIB
For President Barack Obama, the
2013 to-do list is topped by debt,
immigration and Iran.
Republicans will be worrying
about those things as well, of
course, but they have a more funda-
mental concern: figuring out the
party’s postelection makeover.
Political agendas are fluid and
often driven by events as much as
carefully laid plans. Just one exam-
ple: Before the Newton, Conn.,
shootings in mid-December, gun
control was nowhere on either
party’s list of 2013 issues. Now Mr.
Obama is promising action, and a
vigorous debate seems certain.
Still, there is little doubt over
what the two biggest Washington is-
sues will be at the dawn of 2013.
The year-end negotiations on a new
deficit-cutting plan didn’t really
solve the underlying debt problem;
they mostly set up a debate over a
more detailed plan in 2013.
The refrains will be familiar: Re-
publicans will want more deficit
cuts to come from holding down
spending, Democrats from higher
government revenue. The X factor
will be economic growth in the first
half of 2013, which can do more to
THE WALL STREET JOURNAL.
THE FISCAL DEAL
back into recession.”
Mr. Obama said he would like to
take additional steps to reduce the
nation’s deficit, “with a little bit less
drama, a little less brinksmanship.”
After his speech, Mr. Obama planned
to fly to Hawaii to rejoin his family
on vacation.
Tuesday’s developments not only
suggest that the White House can
strike deals with congressional Re-
European Pressphoto Agency
publicans in what has seemed like
an ossified Washington political cul-
ture, but also that Mr. Obama has
momentum in pursuing his goals.
Mr. Obama appears to have a chan-
nel to negotiate with the GOP, by
having Vice President Joe Biden
work with Senate Minority Leader President Barack Obama and Vice President Joe Biden, shown Monday in Washington, are likely to face obstacles in
Mitch McConnell (R., Ky.). pushing through policy priorities as fiscal issues look set to persist as the new year gets under way.
The cost to Mr. Obama is some
complaining from the political left, day when he held a campaign-style roll out major policy proposals be- ties, said William Galston, a senior
which among other things notes event as the fiscal-cliff deadline fore lame-duck status sets in and fellow at the Brookings Institution
that he has abandoned his campaign loomed and passage of a deal re- passing significant legislation be- and a former policy adviser to Presi-
pledge to raise tax rates on house- mained uncertain. comes a steeper challenge. With that dent Bill Clinton. The past couple of
hold incomes above $250,000 in fa- Sen. John McCain (R., Ariz.) in mind, Mr. Obama has said he months suggest that these aren't the
vor of the negotiated level of called the gathering a “cheerleading would roll out proposals aimed at best of times in Washington, he said.
$450,000 for couples. rally.” Sen. Bob Corker, a Tennessee reducing gun violence and overhaul- “Whatever hope [Mr. Obama]
The White House believes the Republican, accused the president of ing immigration laws early this year. may have had of changing the tone
compromise is a victory for the heckling Congress. The White House view is that Mr. in Washington must have disap-
president. A person familiar with The White House said the ap- Obama would have been ill-posi- peared by now,” he said. “It’s an un-
the discussions noted that Mr. pearance had been long in the works tioned to pass policy priorities if the pleasant discovery that the election
Obama faced determined Republican and was meant to highlight the real- country was still preoccupied with appears to have changed much less
opposition and still managed to world consequences of going over the effects of having gone over the and settled much less than he at
forge an agreement that raises tax the fiscal cliff. fiscal cliff. least hoped.”
rates for the first time in a genera- Rep. Mike Rogers (R., Mich.) said But now, because lawmakers Others are more optimistic,
tion. the president has focused his efforts postponed for two months the though, suggesting that even con-
“The president has delivered on during the past few weeks on railing spending cuts that were set to take tentious issues such as immigration
a major campaign promise and bro- against Congress and Republicans in effect Wednesday, fiscal issues will won’t be as politically perilous as
ken Republicans’ backs on a 20-year particular instead of launching a di- continue to consume much of the raising taxes. Rewriting immigration
pledge” to oppose tax rate increases, alogue. political oxygen in the near future. laws is a complex task, but many Re-
a White House official said. “The president just doesn’t play So will talks about whether to raise publicans and Democrats are moti-
But some Republicans have said well with others,” he said. “I do the nation’s statutory borrowing vated to pass legislation in an effort
that Mr. Obama fouled the water think he’s up for a bumpy road, limit. to appeal to the growing number of
during the fiscal-cliff talks with given his tactics.” Even in the best of times, issues Hispanic voters.
combative, cajoling tactics. The Historically, second-term presi- such as immigration and gun control —Peter Nicholas
president drew Republican ire Mon- dents have had a limited window to are flash points for the political par- contributed to this article.
reduce deficits and ease political more on energy and climate change,
pressures than anything else. but a more pressing problem is Seeking Common Ground
The longer-term question—and Iran’s nuclear program. This may be
it’s a big one—is whether deficit- the year when that bubbling issue Americans are skeptical that Republicans and Democrats can work together
cutting talks evolve into a serious reaches full boil. to tackle the most pressing issues of 2013.
effort to undertake the first broad Israeli officials suggest they
overhaul of the tax system since can’t wait much beyond midyear be- Will the country find the Democrats and Republicans
1986. There’s a consensus in both fore acting to stop Iran from con- in Congress in a period of unity or a period of division?
parties that a tax overhaul that low- tinuing to accumulate enriched ura-
ers corporate and personal tax rates nium that could be turned into 80%
without reducing government reve- material for a bomb. Mr. Obama Division
nue is a good idea. But getting there may have to decide whether to try 60
requires simplifying today’s laby- to hold off the Israelis, endorse a 69%
No data before 2004
rinth of tax deductions and loop- military strike by them, or pre-empt 40 26%
holes—and enduring the flak that Israeli action by ordering a U.S. re- Unity
erupts whenever a special interest’s sponse. 20
tax break is on the block. Prospect: Republicans, meanwhile, enter
uncertain. the new year in a bit of a postelec- 0
Soon, Congress and Mr. Obama tion funk. There is much talk of 1998 2000 2005 2010 2012
also will go to work on that other making the party more welcoming
big domestic priority, an overhaul of to women and minorities, but a Who do you want to see take the lead role in setting policy for the country?
the immigration system. Democrats more tangible question is who will
have been arguing for one for a emerge as the party’s next leaders. 60% 46%
while, though they haven’t really Sen. Marco Rubio wants to lead on
Congress
acted, and Republicans, after getting immigration; Rep. Paul Ryan, the 40
shellacked by Hispanic voters in the 2012 vice-presidential nominee, on
election, now want changes, too. the budget; and former Florida Gov. The president 40%
20
Many details must be worked out, Jeb Bush on education.
but here’s the key one: Will an over- One GOP star, New Jersey Gov.
0
haul provide a path to citizenship Chris Christie, actually faces voters
1998 2000 2005 2010 2012
for illegal immigrants, or merely a in 2013, when he runs for re-elec-
path to legal status, or no legaliza- tion, and the outcome will help de- Source: WSJ/NBC News polls; most recent was of 1,000 adults, including 300 cellphone-only respondents,
tion at all? termine his place in the firmament conducted Dec. 6-9; margin of error: +/-3.1 percentage points The Wall Street Journal
Mr. Obama also would like to do of new stars.
THE WALL STREET JOURNAL.
Afghans Seek More Military Hardware
KABUL—Afghanistan’s military
leaders are preparing a weaponry
wish list ahead of the withdrawal of
most international troops, amid
concerns about the ability of Afghan
forces to take the lead on the coun-
try’s security.
By Nathan Hodge,
Ziaulhaq Sultani
and Habib Khan Totakhil
At the top of the list: more and
Associated Press
better aircraft. As first reported by
The Wall Street Journal, the U.S. Air
Force recently scrapped plans to
equip Afghanistan with a fleet of re-
furbished transport planes, leaving
the Afghan military with a crucial
gap in its ability to move troops and
cargo around the country.
Afghan Defense Minister Bismul-
lah Khan Mohammadi told reporters
at a news conference on Monday in
Kabul that the lack of planes was a
“serious challenge” for the Afghan
military. “Sixteen transport planes
were delivered but they weren’t use-
ful,” he said.
In December the U.S. Air Force
notified Alenia Aermacchi North
America, a unit of the Italian de-
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Afghan National Army recruits practice a house-clearing exercise in 2010.
fense conglomerate Finmeccanica
SpA, that it wouldn’t renew a con-
tract to maintain and support 20 re-
furbished cargo planes for the Af-
ghan military because the company
didn’t deliver enough aircraft in
good working order.
Afghanistan President Hamid
Karzai is heading to Washington
next week to discuss peace negotia-
tions with the Taliban. Mr. Karzai
will also bring up with President Ba-
rack Obama the handover of secu-
WORLD NEWS
rity from NATO to Afghan forces,
training and equipment and the
shape of a U.S.-Afghan agreement
after Washington withdraws most of
its troops.
The cargo-plane development
cast a spotlight on some major
shortfalls in Afghanistan’s military
inventory. For several years, Af-
ghanistan and its international allies
focused mostly on recruitment,
drawing 344,000 new members into
its army and police forces despite
relatively basic equipment. Now, Af-
ghan and coalition officials say the
Afghan military will need new “en-
ablers”—military shorthand for
more high-end military technology—
so Afghan troops can operate with-
out international support.
Maj. Gen. Zahir Azimi, spokes-
man for the Afghan Defense Minis-
try, told the Journal the Afghan mil-
itary was talking with its
international allies about bolstering
its capabilities in several key areas:
air power, fire support, intelligence
technology and equipment to detect
and clear roadside bombs.
Gen. Azimi said the Afghan mili-
tary was in line to receive at least
four C-130 cargo planes from the
U.S.-led International Security As-
sistance Force, but also wants air-
craft for surveillance as well as for
transportation. The Afghan military,
he said, is still dependent on the
U.S.-led coalition for the intelligence
provided by drones and other sur-
veillance equipment.
Countering roadside bombs, Gen.
Azimi added, is a particularly urgent
requirement: Over the past year, he
said, 85% of Afghan troop casualties
were caused by improvised explo-
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Thursday, January 3, 2013 | 9
sive devices, or IEDs. U.S. and coali-
tion troops operate an array of
costly equipment to find and clear
roadside bombs, and the Pentagon
has spent tens of billions of dollars
on specialized vehicles that are bet-
ter able to withstand mine blasts.
“We expect the international
community to consider this issue,”
he said. “The U.S. promised us they
would provide this equipment for
counter-IED, but it is not enough.”
In a news conference on Monday,
Ashraf Ghani, chairman of the Af-
ghan government commission that
is overseeing transition of security
to Afghan control, said Afghan secu-
rity forces are now poised to take
the lead for security in 23 of the 34
Afghan provinces and for 87% of the
Afghan population. At the news con-
ference, top Afghan officials said the
security situation had improved in
areas handed over to Afghan secu-
rity forces.
Taliban spokesman Zabihullah
Mujahid disputed that, saying the
insurgency had “wide areas under
our control” in the countryside.
“Only the district headquarters are
controlled by the government,” he
said.
10 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

WORLD NEWS

Syria Steps Up Attacks; U.N. Revises Toll

BY NOUR MALAS been the country’s two biggest cit- some Syrians to speculate that the casualties late last year, saying the was no immediate confirmation of
ies, Aleppo and Damascus. While government is trying to strengthen intensity and spread of the conflict the number of casualties.
BEIRUT—Syria’s military government forces focused re- its position militarily so it has the was too great to track verifiable in- The airstrike outside Damascus
launched a fresh offensive around sources there, rebels took large upper hand ahead of any possible formation. The organization has was the latest in a string of regime
the country, including an airstrike parts of Idlib and Aleppo province, negotiations. since revised its methodology on attacks that have struck rebels’ mo-
on a gas station outside Damascus and eastern and northeastern Syria. The next phase in the conflict tracking deaths in the conflict. rale, and in some cases thwarted
on Wednesday that killed dozens, More recently, however, rebel could come if and when regime The U.N.’s human rights office in their advances.
damping a recent surge in momen- fighters have begun to complain forces pull out of Aleppo or Idlib— Geneva said the figure was the re- Rebel fighters interviewed
tum for the rebels. they are running out of ammunition. given large parts of both provinces sult of comparing reports from Wednesday blamed the recent set-
Wednesday’s violence came as Regime forces, in turn, appear to are in rebel hands—and whether the seven different sources, including backs on a sudden but severe re-
the United Nations dramatically in- have succeeded in beating rebels battle for Homs heats up again, ac- the Syrian government’s. The list of striction in the flow of funds and
creased the number of people it said back in several locations. cording to Syrian rebels, military an- 59,648 individuals killed between arms from abroad. Rebel command-
had died in the Syrian conflict, say- The government’s latest push alysts and Western diplomats. the start of the uprising on March ers are meeting with officials from
ing it had documented the names doesn’t signal new capability or Until then, rebel and government 15, 2011, and Nov. 30, 2012, includes Saudi Arabia and Qatar—their two
and circumstance of death for some strength, analysts and defectors say, forces are expected to continue to the victim’s first and last names, as main Arab benefactors—in Turkey
60,000 people killed in Syria since from an army that these people have trade gains, street by street, espe- well as the dates and locations of this week to address their military
March 2011. Also Wednesday, the characterized as overstretched. But cially in the big cities. their deaths. needs, according to three rebel com-
family of an American freelance it does appear to suggest the Syrian “It’s definitely not a stalemate,” In Syria, dozens of people were manders involved in the meetings.
journalist, James Foley, said their military is still intact and deter- said Joseph Holliday, a senior re- killed and wounded in a government Rebels have long pleaded for
son had been kidnapped in north- mined to fight on behalf of President search analyst at the Institute for airstrike on a gas station near the more military aid. But they acknowl-
west Syria six weeks ago. Bashar al-Assad’s regime, and un- the Study of War. “It’s just not a capital Damascus. edged earlier this year that light
New regime attacks in and derscores persistent rebel weak- fast-moving, kinetic conflict. It’s a The strike, which was reported weapons were flowing into the coun-
around Homs and Hama—the coun- nesses in coordination and com- low-intensity conflict.” by three activist groups, hit the try through the Turkish border, fa-
try’s third and fourth largest cities, mand. The U.N.’s updated Syrian fatality Nawras Gas Station in Mleiha, east cilitated by Arab Gulf states, and
respectively—expanded the battle- The government offensives also list, at 60,000, well outstripped the of the capital. Video footage that ac- said weapons were coming through
ground for rebel and regime forces. come as both sides are under in- 45,000 people many Syrian antigov- tivists said was from the scene the Jordanian and Lebanese borders
That marks a change in fighting tense international pressure to ne- ernment activist groups had cited as showed charred and dismembered by piecemeal smuggling. They now
since roughly the summer, when the gotiate a political settlement, rather perishing in the 22-month conflict. bodies, as well as black smoke bil- say those pipelines have been re-
main focus of fighting in Syria has than continue to fight it out, leading The U.N. had stopped counting Syria lowing from the gas station. There duced to a trickle.

As Chávez Ails, Economic Issues Take Back Seat

BY DAN MOLINSKI Officials including Finance Minis-
AND KEJAL VYAS ter Jorge Giordani say the country’s
dollar needs are currently being
CARACAS—With Venezuela fo- met, suggesting the government
cused on President Hugo Chávez’s may not see the need for a devalua-
deteriorating health and the possi- tion. Last week, central bank Presi-
bility of new elections if he dies, his dent Nelson Merentes warned
government has held off on address- against “anticipating” any kind of
ing growing strains in the economy, adjustments, saying such policy
threatening a hard landing for who- measures couldn’t be discussed be-
ever ends up in charge of this oil- forehand.
rich South American nation. Already, however, many Venezue-
The difference has grown be- lans have been collecting dollars in
tween what Venezuela’s government a bid to protect their earnings from
takes in and what it spends, accord- any possible devaluation as well as
ing to investment banks, which esti- chronically high inflation, which was
mate the gap at 12% to 20% of an- estimated at 19.9% in 2012, analysts
nual economic output. The estimates say.
vary because Venezuela has many Amid this search for dollars, the
large, off-budget spending items. value of the Strong Bolivar has
The growing deficit raises Vene- plunged in recent months on the
European Pressphoto Agency

zuela’s borrowing costs to a level black market, now being traded at

seen by many economists as unsus- more than 17 per dollar on the street
tainable until the country reins in compared with about 8.5 at the start
spending, gets a boost to its income of 2012, according to locally popular
through higher oil prices, or deval- but unofficial websites that track the
ues its local Strong Bolivar currency rate.
to make it buy more domestically. “The fact of the matter is that
But those plans appear, for now, Venezuelans don’t have faith in their
to be on hold. President Chávez Venezuelans attend a New Year’s Eve currency,” said Mr. Garcia, adding
hasn’t spoken or appeared in public Mass for the health of President Hugo Signs of Weakness that he was advising locals to re-
since the day before his Dec. 11 can- Chávez in Caracas. Venezuela suffers … and Venezuelans are hoarding quest all of the dollars that the gov-
cer surgery in Cuba. His vice presi- from rising costs … dollars to protect their savings. ernment makes available for individ-
dent and chosen successor, Nicolas part amid a surge in government uals per year—which typically
Maduro, said Sunday night that Mr. spending before October’s election— 2012 inflation 19.9% Bolivars per U.S. dollar, 20 means an annual $400 for electronic
Chávez is facing “new complica- a capital infusion that boosted eco- as traded on the purchases and $2,500 for travel.
tions” and that the situation is “deli- nomic growth for the year to an es- black market: 15 “Sadly, right now, we don’t have
cate.” Many in Venezuela take that timated 5.5%, according to the any other legal ways to protect our
to mean their leader is seriously, if Central Bank of Venezuela, and 10 savings,” he said.
not mortally, ill. helped Mr. Chávez handily beat back Mr. Chávez’s government has de-
Mr. Chávez is due to be sworn in Mr. Capriles’s challenge. 5.7%* valued the currency five times in the
5
on Jan. 10. Under Venezuelan law, Addressing the fiscal gap could 2.65% 2.8%* Official rate: 4.3 past decade, the last two occurring
the country must hold elections involve taking politically unpopular 0 close to New Year’s Day, which is
within 30 days if a sitting president measures such as devaluing the Peru Colombia Brazil Venezuela 2012 why many feel the time is ripe for
dies or is incapacitated. A poll would Strong Bolivar, which is tightly con- *Economist consensus another currency adjustment.
likely pit Mr. Maduro against Hen- trolled by the government, fixed at Sources: Governments (inflation); LechugaVerde.com The Wall Street Journal Devaluation fears have seeped so
rique Capriles, the opposition candi- 4.3 per dollar. far into the psyche of Venezuelans
date who challenged Mr. Chávez in Devaluation would help narrow that local media recently offered
October presidential elections. the fiscal shortfall by having the what happens to their leader. economy. Hard currency is needed to tips and checklists on how to handle
“The deterioration of President country’s dollar-based oil income go The Venezuelan government’s do overseas business but is accessi- the expected devaluation. The gov-
Chávez’s health and the possibility further in local currency terms. But books aren’t seen to be in crisis ble only through the government. ernment warns against the media of-
of new presidential elections in 2013 it is also usually widely unpopular mode as are those of many debt- Critics say an insufficient supply of fering such “help,” saying it only
increased the chances that the ad- because it feeds inflation by raising laden euro-zone economies. But the dollars could lead to shortages of leads to more inflation.
justments [including devaluation] the cost of imported goods. increase in the country’s fiscal defi- many basic goods that are shipped While a devaluation could lower
would be delayed,” Barclays invest- Many economists had expected cit and its need to seek financing in from abroad, ranging from baby Venezuela’s borrowing costs in in-
ment bank wrote in a recent re- the government to devalue the cur- through bilateral accords with coun- diapers to foods. ternational markets—which are
search report. It said the timing of a rency shortly after the last election. tries such as China have raised con- “Not making a move will mean among the world’s highest, at about
devaluation or other steps would But given Mr. Chávez’s declining cerns at a time when oil prices have the shortages are going to hit us in 13%—the government has sharply
probably be “influenced by Chávez’s health, many economists say his rul- been high. a way that everyone can feel in the reduced its borrowing in the past
health prospects and the govern- ing United Socialist Party of Venezu- Delays in an exchange-rate ad- upcoming months,” said Henkel Gar- year, selling just $3 billion worth of
ment’s political strategy.” ela is likely to postpone any difficult justment could exacerbate a scarcity cia, a director at local research bonds in 2012 versus a record $17.5
Venezuela’s fiscal gap grew in decisions until it becomes clear of dollars in the import-dependent house Econometrica. billion in 2011.
THE WALL STREET JOURNAL.
Back to the Future
Japan’s new government has promised to boost stimulus that would help heavy industry and construction companies,
and push for monetary-policy easing that would lift financial and real-estate firms.
Nikkei Stock Average,
daily closes
10500
Liberal Democratic
Party wins general
election
10000
9500
9000
8500
Oct. Nov. Dec.
Sources: SIX Financial (index closes); Tokyo Stock Exchange (Topix returns)
Japan’s Big Businesses
Can See Hope in Abe
BY CHESTER DAWSON
TOKYO—Japan’s new prime min-
ister has pledged to “take back’’ the
country to the glory days of the
past. Shinzo Abe’s declaration has
evoked a retro mood—especially in
parts of the business world, where
he has deep links to corporate lead-
ers in smokestack industries.
Many top executives have wel-
comed the Liberal Democratic
Party’s return to power after three
years of rule by the Democratic
Party of Japan, known for its strong
ties to labor. “We are very happy
with the LDP’s campaign pledges,”
Akio Toyoda, president of Toyota
Motor Corp. and head of Japan’s
auto maker association, said last
week. “We have high hopes.”
Mr. Abe, who served a difficult
year as prime minister five years ago,
is considered a staunch advocate for
old-school manufacturers, known as
jukochodai from the Japanese words
for “heavy, thick, long and big.”
Shares of construction firms,
utilities and others have been on a
tear since Mr. Abe’s predecessor,
Yoshihiko Noda, called parliamen-
tary elections in November.
That has helped power a broader
Japanese rally. The Nikkei Stock Av-
erage rose almost 23% in 2012 to a
21-month high, with much of those
gains coming in the last month of
trading. It saw its best annual gain
since 2005.
Some of the surge is because of
Prime Minister Shinzo Abe
December performance of sectors likely to benefit
from stimulus, on Tokyo Stock Exchange
Financials, excluding banks 23.8%
Real estate 23.5
Steel & nonferrous metals 16.4
Banks 15.0
Machinery 13.5
Construction & materials 13.3
Auto & transportation equip. 12.1
Electric appliances &
precision instruments 12.0
Electric power & gas 8.9
Commercial & wholesale trade 7.9
the LDP’s promises. It has vowed to
boost the kind of stimulus spending
that typically helps heavy industry
and construction companies, and to
slash red tape. Exporters would ben-
efit from a weaker yen—another Abe
goal—while business overall hopes to
gain from an end to the gridlock,
given the LDP’s lopsided victory in
the powerful lower house of parlia-
ment.
Some critics, though, wonder how
Mr. Abe will pay for additional stimu-
lus measures with Japan already fac-
ing a crushing debt load as a percent-
age of its gross domestic product.
Even so, Nomura Securities Co.
sees shares of auto makers, cement
producers, general contractors and
utilities among likely winners from
the new government. Goldman Sachs
in a similar Dec. 17 report on “poten-
tial LDP beneficiaries” added big
banks and military hardware makers.
Mr. Abe also has strong relation-
ships with Japan’s captains of in-
dustry. Among his closest confi-
dants are Yoshiyuki Kasai, chairman
of Central Japan Railway Co., and
Fujifilm Holding Corp. Chairman
Shigetaka Komori. Both are active in
business groups such as one called
the Cherry Blossom Association that
stuck by Mr. Abe even when he was
out of power.
Another group is the Shinsei As-
sociation composed of executives
who, like Mr. Abe, graduated from
or are affiliated with Tokyo’s Seikei
University. When Mr. Abe delivered
a speech there in November, he was
welcomed warmly by Kazuo Tsu-
kuda, chairman of leading defense
and power plant contractor Mitsubi-
shi Heavy Industries Ltd. and chair-
man of the school’s board of trust-
ees, one attendee says.
“Mr. Abe has an extensive pipe-
line to corporate Japan,” said Seiji
Mutou, a senior vice president at a
small telecommunications-services
company called Iwatsu Sales Co. and
a member of the Shinsei Association.
Japanese executives are getting
positions on a long-dormant panel
of economic advisers called the
Council on Economic and Fiscal Pol-
icy, which the government is resur-
Associated Press
recting and which Mr. Abe will lead.
On Friday, the government nomi-
nated Mitsubishi Chemical Hold-
ings Corp. President Yoshimitsu Ko-
bayashi and Toshiba Corp.
WORLD NEWS
The Wall Street Journal
President Norio Sasaki to the panel.
In an apparent move to blunt crit-
icism that he is too close to big busi-
ness, Mr. Abe is also reaching out to
heads of new-economy companies
and startups such as Hiroshi Miki-
tani, who runs successful online re-
tailer Rakuten Inc., and is chairman
of a group of IT-related companies.
That lobbying group, called the Japan
Association of New Economy, was
one of the first to be contacted by
the premier after his Dec. 16 election.
Mr. Abe’s choice not to reach out
first to Japan’s leading business
lobby, the Keidanren, was seen
widely as a snub against its chair-
man.
Before the election, Keidanren
head Hiromasa Yonekura had
worked to forge ties with then
Prime Minister Noda, who backed
free-trade initiatives toward which
Mr. Abe was lukewarm. Mr.
Yonekura appeared to be caught off-
guard by Mr. Abe’s landslide victory.
On Thursday, Mr. Yonekura ap-
parently attempted to make amends
with the new government, saying
his comments from November call-
ing Mr. Abe “reckless” weren’t
meant as a character attack, Japa-
nese media reported.
Nuclear energy will pose an early
test to the new government’s busi-
ness stance. CEOs bemoan the halt
of nearly all of the country’s nuclear
reactors after the 2011 Fukushima
Daiichi power-plant disaster, which
has raised costs and cut supplies of
electricity. But public-opinion sur-
veys show that almost half of all
Japanese want to reduce or elimi-
nate nuclear power.
Mr. Abe has hinted he is open to
restarting Japan’s nuclear plants,
most of which have been powered
down, and his party’s electoral land-
slide could make it easier to do so.
That has driven up shares of Japa-
nese utilities, with Fukushima plant
operator Tokyo Electric Power
Co.’s stock jumping almost 36%
since the election.
On Friday, Trade Minister
Toshimitsu Motegi said the govern-
ment would rethink the previous ad-
ministration’s plan to eliminate nu-
clear power by 2040 and consider
lifting a freeze on the construction
of new nuclear plants.
—Kosaku Narioka
contributed to this article.
African Coalition
Halts a Rebel Push
BY ALEXIS FLYNN
JOHANNESBURG—Central Afri-
can Republic President François Boz-
izé has turned to his neighbors for
diplomatic leverage and military
firepower to fend off a rebel ad-
vance—the latest example of African
cooperation to defuse a crisis before
Western powers intervene.
As more foreign troops arrived,
rebel forces advancing on the capi-
tal, Bangui, said Wednesday they
would halt their offensive and in-
stead begin preparing for peace
talks. The statement marked a de-
parture from previous threats to
take the capital and dropped a de-
mand that Mr. Bozizé resign as a
precondition to talks.
Since the offensive began three
weeks ago, the capture of several
key towns by the Seleka rebel coali-
tion has sparked fears that the land-
locked former French colony, known
for its history of coups, military re-
volts and brutal rule, could once
again descend into chaos.
The coalition of different insur-
gent and political groups has at-
tempted to tap into popular frustra-
tions with Mr. Bozizé, who seized
power in a coup in 2003. The coun-
try remains fractured by religious
fault lines and divisions between its
more prosperous south and undevel-
oped, largely Muslim north.
“From today, I have asked our
forces to maintain their positions
because we want to enter talks for a
political settlement,” rebel spokes-
man Eric Massi said from Paris. “Our
partners are discussing proposals to
end the crisis, including a political
transition.”
The shift by rebels—who accuse
Mr. Bozizé of failing to honor previ-
ous accords—came after other Afri-
can countries sent troops to prevent
the overthrow of his government.
A detachment of Gabonese sol-
diers became the latest to fly into
Bangui on Tuesday, joining a 400-
strong contingent from Chad and
120 troops from the Republic of
Congo, who were deployed at the be-
ginning of the week. Cameroon is
expected to send forces by Friday.
The use of African military mus-
cle is a change from the days when
former colonial master France inter-
vened in battles to control Central
African Republic, as it did in 2007
and 1979.
France still has about 600 troops
in the country. President François
Hollande said last week the French
military presence wasn’t aimed at
“protecting a regime,” only its citi-
zens and other interests.
African countries are also using
their collective diplomatic weight in
Chadian troops deployed near Damara, Central African Republic, on Wednesday.
Thursday, January 3, 2013 | 11
an effort to resolve the conflict. Af-
rican Union leaders have praised the
troop deployments to Central Afri-
can Republic as a means to stabilize
the security situation. The AU has
also dispatched a special representa-
tive to Gabon to lay the groundwork
for talks, which could begin as early
as next week.
The collective response in the
Central African Republic follows
other such forays into the conti-
nent’s most intractable crises—with
some successes.
In September, a joint Kenyan and
African Union force struck a blow
against the al Qaeda-linked militia
al-Shabaab, driving it from the So-
malia port city of Kismayo.
More recently, renewed fighting
in the eastern Democratic Republic
of Congo was quickly halted after re-
gional leaders encouraged the peace
talks which are now under way.
Nations across West Africa are
planning to deploy thousands of sol-
diers to northern Mali to help try to
dislodge Islamist fighters linked to
an al Qaeda offshoot, al Qaeda in the
Islamic Maghreb.
Many past African conflicts fes-
tered as African nations struggled to
agree to intervene. In the Ivory
Coast, a disputed election result led
to months of unrest; in Libya, the
African Union, led by South Africa,
refused to recognize rebels attempt-
ing to overthrow the regime of
Moammar Gadhafi. As a result, Af-
rica’s diplomats were shunted aside
while France, the U.S. and other
Western countries took lead roles in
tackling the conflicts.
The standoff between Mr. Bozizé
and the Seleka rebel movement is
likely to be tough. Like other coun-
tries on the resource-rich continent,
Central African Republic is home to
largely untapped diamond and ura-
nium deposits—and entrenched con-
flicts. Most rebels are Muslims from
northern areas marching toward the
predominantly Christian south.
Chad’s forces are deployed in Da-
mara, the last strategic settlement
between the rebels and the capital.
Chad’s President Idriss Déby is an
ally of Mr. Bozizé and head of the
central African regional bloc.
Though some questions persist
over the legitimacy of Mr. Bozizé’s
rule, even after elections in 2005
and 2011, neighbors are keen to pre-
serve regional stability, said Thierry
Vircoulon, Central Africa project di-
rector at the International Crisis
Group. “The African Union doesn’t
want a government to be over-
thrown,” he said. “This is a big test.”
—David Gauthier-Villars in Paris
and Emmanuel Tumanjong in
Douala contributed to this article.
Agence France-Presse/Getty Images
12 | Thursday, January 3, 2013
Chinese Fly With Hidden Cash
Amid a rush of newly affluent
Chinese eager to move money out of
China, U.S. and Canadian border of-
ficials are seizing large amounts of
cash tucked into wallets, purses and
suitcases at airports across North
America.
By Alistair MacDonald,
Paul Vieira
and Will Connors
Officials at Canada’s two busiest
airports—Toronto and Vancouver—
seized around 12.9 million Canadian
dollars ($13.0 million) in undeclared
cash from Chinese nationals from
April 2011 through early June 2012,
according to documents provided to
The Wall Street Journal by the Can-
ada Border Services Agency.
The money, most of it returned
to the owners, represented 59% of
all cash seized at the airports in the
period, according to the data. In the
U.S., Chinese citizens are the top
source of airport cash seizures after
Americans.
In June, a Chinese man touched
down at Vancouver airport with
around $177,500 in cash—mostly in
U.S. and Canadian hundred-dollar
bills, stuffed in his wallet, pockets
and hidden under the lining of his
suit case. Clarence Lo, the Canadian
Border Service officer who found the
cash, said the man told him he was
bringing the money in to buy a
house or a car. He left the airport
with his cash, minus a fine for con-
cealing and not declaring the money.
“He wasn’t very happy,” said Mr.
Lo.
The financial penalty—at 2,500
Canadian dollars, or about $2,500—
was a relatively small price to pay
for successfully evading strict for-
eign-capital controls imposed by
Beijing. China restricts private citi-
zens from taking out more than
$50,000 per individual per year.
While it is hard to enforce these re-
strictions, Chinese authorities are
scrutinizing outgoing private cash
Asian Manufacturing Is Picking Up Steam
BY COLIN NG
SINGAPORE—Asia’s economies
are showing resilience as 2013 gets
under way, with a variety of data in-
dicating manufacturing and growth
are starting to pick up, just as short-
term uncertainty is lifting on the
U.S. fiscal cliff.
Surveys released Wednesday of
purchasing managers in South Ko-
rea, Taiwan and India, following
similar releases from China earlier
in the week, suggest manufacturing
in Asia is gaining steam after a sub-
dued 2012. The news “cements the
idea that Asia has been doing OK de-
spite what is going on in Europe and
the U.S.,” HSBC Asean economist Su
Sian Lim said.
HSBC’s Asian electronics lead in-
dicator for December posted its
highest reading since last March,
suggesting that the electronics-man-
ufacturing cycle is on the mend.
That is a significant development for
countries such as South Korea and
Taiwan, and was reflected in HSBC’s
December Purchasing Managers’ In-
dex for those countries, with the
surveys indicating expansion for the
first time since May.
“Someone has to buy [the elec-
tronics] and it doesn’t seem that the
G-3 [U.S., Europe and Japan] has the
demand,” said Ms. Lim. That sug-
gests Asian domestic consumption is
WORLD NEWS
Money Bags
Cash seized at airports, by countries of origin
Vancouver International Airport*
China 10,100,000 Canadian dollars
Canada
Hong Kong
Iran
South Korea
ALL COUNTRIES
* From April 1, 2011 to June 3, 2012; Note: 1 Canadian dollar = US$1.01
amid a broad anticorruption drive
and as worry grows over the risks
of capital flight.
The money seized at airports
represents just a sliver of private
Chinese money pouring out, but
highlights that Chinese citizens are
turning to one of the oldest and sim-
plest methods to evade those con-
trols: taking cash out in a suitcase.
Transporting large amounts of
cash isn’t necessarily illegal. Travel-
ers must declare cash over $10,000
when they land in Canada or the
U.S. Most undeclared cash is tempo-
rarily seized and subject to fines. If
customs agents believe the cash
comes from illegal activities, the
onus is on the traveler to prove oth-
erwise before it is returned.
In China, violators of Beijing’s
rules on moving out cash are also
subject to fines. From 2007 to 2011,
China’s State Administration of For-
eign Exchange levied such fines to-
taling 1.27 billion yuan ($202 mil-
lion), according to the most recent
data available.
However, among some Canadian
law-enforcement officials, there has
been reluctance to pass on informa-
tion to Chinese peers about sus-
pected illegal money flow.
A spokesman for the Border
Lifting Off | HSBC Purchasing managers’ indexes in selected Asian countries
CHINA
60 60
Expanding
55 55
50 50
Contracting
45 45
40 40
2011 '12
Source: Markit Economics/HSBC
robust, which could help insulate the
region’s manufacturers from further
slowdowns in other parts the world.
HSBC’s PMI for South Korea was
at a seasonally adjusted 50.1 in De-
cember—its highest point since
May—up from 48.2 in November and
47.4 in October. A reading above 50
indicates expansion in manufactur-
ing activity.
Taiwan’s HSBC PMI reading for
December was 50.6, moving into the
expansionary zone from November’s
47.4. The India HSBC PMI reading
rose to 54.7 in December from 53.7
in November.
That followed PMIs from China
earlier in the week, suggesting that
the world’s second-largest economy
U.S. international airports for FY 2011 (ends Sept. 30)
1. U.S.
1,744,000 2. China
909,800 3. Mexico
573,500 4. S. Korea
550,400 5. Indonesia
$14,997,200 ALL COUNTRIES
Source: Canada Border Services Agency; U.S. government
Services Agency declined to say
whether it passed on information
about cash seizures to Chinese au-
thorities.
“The dilemma for law enforce-
ment is whether sharing of intelli-
gence will create hardship for [Chi-
nese] family members,” said Garry
Clement, a former director of the
Royal Canadian Mounted Police’s
money-laundering section. That re-
luctance makes it harder to assess
the legitimacy of Chinese money
coming into Canada, he said.
In June, a Chinese anticorruption
official told the state-run Xinhua
news agency that China would ask
other countries to freeze corrupt offi-
cials’ illicit assets transferred abroad.
A Canadian official said the
country’s Department of Foreign Af-
fairs and International Trade had no
record of such a request.
The Chinese embassies in Ottawa
and Washington didn’t respond to
requests for comment on Chinese
nationals bringing cash to Canada.
China’s State Administration of For-
eign Exchange also didn’t immedi-
ately respond. U.S. customs agencies
didn’t comment directly on cash sei-
zures from Chinese individuals.
There are many legal and illegal
ways of getting cash out of China
INDIA SOUTH KOREA
60
55
50
45
40
2011 '12 2011 '12
continues to rebound despite facing
headwinds from weak conditions
around the world.
HSBC said Monday its China PMI
rose to 51.5 in December from 50.5
in November. On Tuesday, the China
Federation of Logistics and Purchas-
ing said its official manufacturing
PMI for December was unchanged
from November’s 50.6, showing con-
tinued expansion.
Asian shares were higher
Wednesday, bolstered by the data as
well as by news that the U.S. Con-
gress passed legislation late Tuesday
to avert the so-called fiscal cliff. But
the compromise bill left a host of is-
sues unresolved, guaranteeing con-
tinued budget clashes between the
$4,599,600
1,935,400
1,137,400
929,000
669,300
$19,628,900
besides the suitcase, financial-crime
experts say. A common method is
fraudulently manipulating invoices
or other records in order to piggy-
back personal cash on top of legiti-
mate business transactions.
An informal network of money-
transfer middlemen has grown up
around moving cash out of China.
Tony Savino, a Vancouver-based
real estate agent, said he had a Chi-
nese client who used an interna-
tional money-wiring firm to gather
cash sent from family members, in
$10,000 batches, for a condo pur-
chase. Families can also spread out
cash among members. Under the al-
lowed limit, “a family of six, for ex-
ample, could move $300,000 each
year,” said Inspector Jean Cormier,
acting director of a Royal Canadian
Mounted Police unit that specializes
in money laundering.
Some people go as far as getting
a new passport. Mainland investor
Bruce Lee said he became a Hong
Kong citizen two years ago partly
because of the territory’s looser cur-
rency rules. In June, Mr. Lee paid
$400,000 for an island off the coast
of Nova Scotia.
—Lingling Wei
and Charles Forelle
contributed to this article.
TAIWAN
60
55
50
45
40
2011 '12
The Wall Street Journal
parties.
“But for those who can see over
the fiscal cliff, they will see a global
economy in a much healthier posi-
tion than 12 months ago,” Jason
Hughes, head of premium client
management at IG Markets Singa-
pore, said in a note.
“Many of last year’s issues—fears
of a hard landing in China, a euro-
zone collapse and a U.S. economy
slipping back into recession—appear
to be off the table as serious threats
to the anemic global economic re-
covery that started in 2012,” he said.
—Arpan Mukherjee in Wellington
Aries Poon in Taipei
and Kwanwoo Jun in Seoul
contributed to this article.
THE WALL STREET JOURNAL.
WORLD WATCH
 IRAQ
Attacks Leave Five Dead
Iraqi authorities say five people
have been killed in a string of attacks
across the country.
Police officials say that in the first
attack, gunmen early Wednesday
fatally shot a policeman and his
brother, who is a member of an anti-
al-Qaeda group north of Baghdad.
In the western province of Anbar, a
car bomb targeting the house of a
police colonel in Fallujah killed the
officer’s neighbor but left the colonel
unharmed.
Another car bomb struck a group of
Shiite pilgrims heading to the holy city
of Karbala, killing two people.
Hospital officials confirmed the
causalities. All officials spoke on
condition of anonymity because they
weren’t authorized to talk to the
media.
Violence has ebbed in Iraq, but
insurgent attacks are still frequent.
Associated Press
 NORTH KOREA
Google Chairman to Visit
On Mission with Ex-Governor
Google’s executive chairman is
preparing to travel to one of the last
frontiers of cyberspace: North Korea.
Eric Schmidt will be traveling to
North Korea on a private, humanitarian
mission led by former New Mexico
Gov. Bill Richardson that could take
place as early as this month, sources
told The Associated Press on
Wednesday.
The sources, two people familiar
with the group’s plans, asked not to be
named because the visit had not been
made public.
The trip would be the first by a top
executive from U.S.-based Google, the
world’s largest Internet search
provider, to a country considered to
have the most restrictive Internet
policies on the planet.
North Korea is in the midst of what
leader Kim Jong Eun called a modern-
day “industrial revolution” in a New
Year’s Day speech to the nation. He is
pushing science and technology as a
path to economic development for the
impoverished country, aiming for
computers in every school and
digitized machinery in every factory.
While some North Koreans can
access a domestic Intranet service,
very few have clearance to freely surf
the World Wide Web.
It was not immediately clear who
Messrs. Schmidt and Richardson
expect to meet in North Korea, a
country that does not have diplomatic
relations with the U.S.
Associated Press
 INDONESIA
Report Indexes Corruption
Indonesia published a corruption
index indicating the size of the job
facing President Susilo Bambang
Yudhoyono, who was re-elected in
2009 on a platform to combat
rampant graft in the country.
The 2012 anticorrupt behavior
index, published Wednesday by the
country’s statistics agency following a
survey of 10,000 households, was at
3.55 on a scale from zero to five, with
zero meaning “highly permissive
toward corruption” and five meaning
“highly anticorruption.”
It also showed that 32% of people
polled viewed bribing police officers as
normal, while 33% of respondents
considered it normal to give extra
money to civil registry officials.
By Andreas Ismar
and Farida Husna
Online>>
For more breaking news, go to
WSJ.com/World and follow
@wsjworld on Twitter.
THE WALL STREET JOURNAL.
Source: Centers for Disease Control and Prevention (Adult BMI)
Israel’s Resolution:
No More Bony Models
BY RAY A. SMITH
AND CHRISTINA BINKLEY
Israel’s new law banning skinny
models has again brought up an un-
comfortable topic to the table for
the fashion industry, which has long
been criticized for seeming to pro-
mote unnatural thinness as a beauty
standard. And once again, countries
are divided as to how to deal with
the issue of too-skinny models, by
law or with other means.
Israel’s law, which went into ef-
fect Tuesday, bans models with a
body mass index—a calculation
based on height and weight—of less
than 18.5 from appearing in adver-
tisements. According to that BMI
standard, a female model who is 5
feet, 8 inches tall can weigh no less
than 122 pounds.
The law also requires publica-
tions to disclose when they use al-
tered images of models to make the
women and men appear even thin-
ner than they really are.
The law’s supporters in Israel
said they hoped it would encourage
the use of more healthful models in
local advertising.
The skinny model issue has been
a hot button for consumers since
model Kate Moss helped bring in the
“heroin chic” look in the early 1990s.
Criticism has centered on the health
of models as well as on the unhealthy
images being promoted to young
girls in magazines and fashion adver-
tisements. After a number of models
died of anorexia in recent years, pub-
Islamist Split in Egypt Shakes Up Legislative Vote
BY MATT BRADLEY
CAIRO—A faction within Egypt’s
hardline Islamist Nour Party is
breaking away, dividing Egypt’s
most conservative politicians just
weeks ahead of parliamentary elec-
tions that will draft the blueprints
for Egypt’s new Islamist state.
Emad Abdel Ghafour, the former
head of the Nour Party, the main po-
litical representation for the austere,
Saudi-style Salafi Islam, said Tues-
day that he and hundreds of defec-
tors from Nour would form a new
party called “Al Watan” or “Home-
land.”
He also announced an alliance
with a political party led by Hazem
Salah Abu Ismail, a firebrand former
Weight Watching
Minimum weights by height to
avoid an ‘underweight’ body
mass index of under 18.5.
HEIGHT
5 feet, 4 inches
WEIGHT
108 pounds
5'5'' 111
5'6'' 115
5'7'' 118
5'8'' 122
5'9'' 125
5'10'' 129
5'11'' 133
6'0’’ 137
6'1'' 140
lic outcry led authorities in a number
of countries—including Spain and It-
aly—to attempt to regulate models’
weight. The Madrid Fashion Show
bans women whose BMI is below 18.
Milan’s Fashion Week bans models
with a BMI below 18.5.
The U.S. fashion’s industry main
representative, the Council of Fash-
ion Designers of America, has cho-
sen to emphasize guidelines for
healthy conditions. On Tuesday, re-
sponding to news of Israel’s ban,
Steven Kolb, chief executive of the
CFDA, said while he wouldn’t pass
judgment on how other countries
confront the issue, he stressed that
the CFDA has a six-year-old program
aimed at providing healthy environ-
ments for models based on recom-
mendations from nutritionists, eat-
ing disorder specialists and fitness
trainers. “We never had an approach
of mandate or enforce,” he said. “We
create awareness and education.”
Mr. Kolb said there are no plans
to press for a U.S. law banning mod-
els under a certain weight or BMI.
In 2007, the CFDA formed a health
initiative to address, among other
things, whether some models are
unhealthily thin.
The council partnered with the
fashion industry, medical experts
and fitness trainers to form a com-
mittee to propose guidelines that
promote “wellness and a healthier
working environment.”
The guidelines include educating
the industry to identify early-warn-
ing signs of an eating disorder, en-
presidential candidate who com-
mands a loyal— some say fanatical—
following of Islamist activists.
The defections could weaken the
Nour Party ahead of parliamentary
elections, whose results will form
the basis of the new Islamist state.
But they also confer a new politi-
cal legitimacy on Mr. Abu Ismail,
whose rabid populism and extreme
conservatism had isolated him from
even the most conservative of Salafi
politicians.
In bringing Mr. Abu Ismail in
from the political cold, Mr. Ghafour
and his followers are pushing for a
stronger commitment to the impo-
sition of Islamic law that sees little
use for compromise and politicking
with more liberal politicians.
WORLD NEWS
couraging models with eating disor-
ders to get professional help or face
not being able to model again, sup-
plying healthy meals, snacks and
water backstage and at shoots, and
not hiring models under the age of
16 for runway shows and not allow-
ing models under 18 to work past
midnight at fittings or shoots.
“We think this has been success-
ful at creating awareness,” Mr. Kolb
said. He added that the organiza-
tion sends a letter out to the indus-
try every year reminding its mem-
bers of the guidelines. He said that
since the guidelines have been in
effect, the U.S. fashion industry
“has made great strides, particu-
larly around age. We’ve seen a
sharp decrease in underage models
working during fashion week. We
believe in consistent messaging
from the CFDA, not pointing your
finger at someone but a collective
effort by the industry to ensure
healthy working conditions.”
Alexandra Shulman, editor in
chief of British Vogue, wrote a letter
to leading fashion designers in 2009
asking them to make their sample
clothing in larger sizes so maga-
zines could hire larger models to
wear them. A year later, she ex-
pressed disappointment that her ef-
fort had failed to result in changes.
But the efforts to regulate mod-
els’ weight in Spain and Italy have
not resulted in significant changes,
in part because of difficulties in de-
termining reliable methods of mea-
suring weight and health.
Mr. Abu Ismail “offers a more
revolutionary form of Salafism,” said
Shadi Hamid, an expert on Egypt at
the Brookings Doha Center. “It’s a
fundamental difference in how to
practice politics.”
The political machinations came
as the Egyptian pound suffered fur-
ther losses Wednesday and the cost
of insuring Egyptian sovereign debt
against default jumped, as concerns
intensified over the economic and
political turmoil in the country.
Fears of further political unrest
and a disorderly devaluation of the
currency have led Egyptians to
dump the pound and buy dollars. For
its part, the central bank has
abruptly reduced the amount of for-
eign reserves it is willing to sell to
Israel Fence Secures
Unruly Sinai Border
BY JOSHUA MITNICK
TEL AVIV—Israel said it has
nearly finished construction of a
$416 million fence along the Egyp-
tian border, a project that has
stopped the illegal entry of thou-
sands of African migrants and low-
ered the risk of militant infiltration
from the chaotic the Sinai Peninsula.
The construction of the barrier
highlights how the porous but calm
desert frontier that was a dividend
of the Israel-Egypt peace accord be-
came a looming security threat for
the Jewish state because of lax
Egyptian control over militants since
the downfall of President Hosni
Mubarak nearly two years ago.
The or 4.9-meter-high fence in-
cludes barbed wire, surveillance
cameras and radar and stretches 232
kilometers from the Gaza Strip to
just north of Eilat. The fence blocks
the main avenues of border infiltra-
tion, leaving a 13-kilometer moun-
tainous section of for completion
later in 2013, said a defense official.
Before the construction, the bor-
der consisted of a few lines of
barbed wire on by rickety poles.
Israeli Prime Minister Benjamin
Netanyahu has touted the fence in
his re-election campaign as evidence
of his efforts to insulate Israel from
the turmoil of the Arab Spring and
to handle the influx of mostly Eri-
trean and Sudanese migrants, a
problem he has portrayed as a na-
tional-security threat.
Prime Minister Benjamin Netanyahu at a ceremony Wednesday for the fence.
support the national currency, which
fell to its weakest level since No-
vember 2004 and is now down
around 3% in the past week.
The upcoming parliament has a
critical role in deciding Egypt’s Isla-
mist identity. The constitution
passed in a referendum late last
month leaves wide room for legisla-
tors to interpret Islam’s role in the
state, particularly with regards to
the enforcement of public morality.
The dates of the elections haven’t
been announced, but they are legally
required to be held two months after
Egyptians ratified a new Islamist-
friendly constitution last month.
For his part, Mr. Abu Ismail has
advocated for public gender separa-
tion, championed Iran’s Islamist
Thursday, January 3, 2013 | 13
According to Israel government
data, some 2,153 African migrants
entered the country illegally last
January. That number was just 35 in
December, which included the first
week in six years in which there
were zero entries.
“There hasn’t been one infiltrator
who has reached an Israeli city in
seven months,’’ Mr. Netanyahu said
at a ceremony on the border mark-
ing the fence construction.
Israel had planned to seal off the
Sinai border before the Arab Spring
because of the African migrants, but
the project was accelerated after a
deadly cross-border attack by mili-
tants on an Israeli passenger bus
and jeep patrol in August 2011, un-
dermining Israel-Egypt relations.
Israeli security officials warned
that Sinai has increasingly become a
haven for militants from the Gaza
Strip, local Bedouin tribes and
global jihadist groups.
The presence of thousands of Af-
rican migrants has spurred social
tensions in working-class neighbor-
hoods of cities like Tel Aviv.
Israeli human-rights groups,
which say the migrants are seeking
asylum from war and oppressive
home governments, maintain that
Israel still has an obligation to admit
Africans who reach the border fence.
“If a person asks for asylum on
the fence, there is a need to let him
in,’’ said Sigal Rozen, the head of the
Hotline for Migrant Workers. “Of
course, this is not happening.”
Moshe Milner/GPO/Getty Images
state and called for an end to
Egypt’s peace treaty with Israel.
He also commands the loyalty of
thousands of followers, known as
the “Hazemoon,” whose unquestion-
ing obedience frightens many Egyp-
tian liberals. They accuse Mr. Abu Is-
mail of using his expansive ground
force to intimidate opponents.
In recent months, Hazemoon
have surrounded courts, television
stations, newspapers and party of-
fices that have dared challenge the
country’s Islamist government.
Mr. Abu Ismail’s combative poli-
tics could form an important part of
Islamists’ political arsenal during in-
evitable conflicts between the up-
coming parliament and Egypt’s secu-
lar-leaning judiciary.
14 | Thursday, January 3, 2013
U.S.Colleges’HiringSpree
FattensBureaucracy,Tuition
BY DOUGLAS BELKIN
AND SCOTT THURM
Minneapolis
W
hen Eric Kaler became president of
the University of Minnesota in
2011, he pledged to curb soaring
tuition by cutting administrative overhead.
But he hit a snag: No one could tell him ex-
actly what it cost to manage the school.
Like many public colleges, the University
of Minnesota went on a spending spree over
the past decade, paid for by a
steady stream of state money
and rising tuition. Officials
didn’t keep close tabs on their
payroll as it swelled beyond
PRICE OF 19,000 employees, nearly one
ADMISSION for every 3½ students. “The
more questions I asked, the less happy I
was,” Dr. Kaler said.
Many of the newly hired, it turns out,
were doing little teaching. A Wall Street
Journal analysis of University of Minnesota
salary and employment records from 2001
through last spring shows that the system
added more than 1,000 administrators over
that period. Their ranks grew 37%, more
than twice as fast as the teaching corps and
nearly twice as fast as the student body.
Across U.S. higher education, nonclass-
room costs have ballooned, administrative
payrolls being a prime example. The num-
ber of employees hired by colleges and
universities to manage or administer peo-
ple, programs and regulations increased
50% faster than the number of instructors
between 2001 and 2011, the U.S. Depart-
ment of Education says. It’s part of the
reason that tuition, according to the Bu-
reau of Labor Statistics, has risen even
faster than health-care costs.
The University of Minnesota illustrates
the trend. Its main Twin Cities campus had
the largest share of employees classified as
“executive/administrative and managerial”
among the 72 “very-high-research” public
universities in the 2011-12 academic year,
according to data compiled by the U.S. De-
partment of Education. Minnesota officials
say the figures are misleading because not
all schools report administrative spending
the same way.
At Minnesota, tuition and fees for state
residents have more than doubled in a de-
cade, to $13,524. That far exceeds the aver-
age at four-year public colleges of $8,655,
which also represents a doubling, according
to the College Board. Private-college tuition
averages $29,056, but has risen more
slowly.
For students, the effect is striking. In
1975, a University of Minnesota undergradu-
ate could cover tuition by working six hours
a week year-round at a minimum-wage job,
the Journal calculated. Today, a student
would have to work 32 hours at minimum
wage to cover the cost.
Gregory Kiss, a sophomore business ma-
jor, expects to graduate owing more than
$30,000. Trying to economize, he bought a
dining plan that provides only 10 meals a
week.
Mr. Kiss tapped a nerve when he
launched a website listing campus events
where free food was to be had. He has at-
tended lectures about evangelical Christian-
ity, (with free Korean BBQ), cell regenera-
tion (burritos) and something called “the
feast of nations,” which he says was the
tastiest.
“I think it’s a good school and it’s a good
value, but I know I’m going to be paying it
off for a long time,” Mr. Kiss says.
The bureaucracy finds numerous ways to
spend money. Officials have spent millions
THE WALL STREET JOURNAL.
IN DEPTH
planning a not-yet-built residential commu-
nity 32 kilometers from the University of
Minnesota Twin Cities campus designed in
part to showcase sustainable energy and en-
vironmental stewardship.
Administrative employees make up an in-
creasing share of the university’s higher-
paid people. The school employs 353 people
earning more than $200,000 a year. That is
up 57% from the inflation-adjusted pay
equivalent in 2001. Among this $200,000-
plus group, 81 today have administrative ti-
tles, versus 39 in 2001.
Administrators making over $300,000 in
inflation-adjusted terms rose to 17 from
seven.
Many forces besides administrative over-
head add to universities’ cost pressures,
among them health-care and retirement ex-
penses. And among the administrative
spending, some is unavoidable, such as that
owing to federal rules requiring greater
spending to oversee research grants or ac-
commodations for students with disabili-
ties.
Schools also compete—by necessity, they
say—to offer fancier dorms, dining halls,
gyms and other amenities, to raise their
rankings and attract students. “It’s a com-
petitive business, and institutions compete
for students the same way Lexus and Mer-
cedes compete for car buyers,” says Paul
Lingenfelter, executive director of the State
Higher Education Executive Officers Associ-
ation.
To compete, schools have stepped up
borrowing for construction. Total debt at
public four-year colleges more than tripled
between 2002 and 2011, to $88 billion, ac-
cording to the Department of Education. At
the University of Minnesota, the yearly cost
of servicing debt more than doubled to $106
million in that time.
For decades, public universities were
somewhat insulated from financial rigor by
steadily increasing state funding. That has
slowed or stopped in many states in tight
budgetary times. Minnesota’s government in
2011 contributed $570 million to university
operations, which was about the same as in
the 2003-04 school year despite inflation
and roughly 10% increased enrollment.
Higher education now faces pressures
similar to those that reshaped other seg-
ments, Minnesota’s Dr. Kaler says. “You look
at American industry in general—the car in-
University of Minnesota sophomore Gregory Kiss, above, saves by finding events with free food. dustry got comfortable until the Japanese
showed up, the airline industry was com-
fortable until it got deregulated,” he says.
Hire Education “Now it’s higher ed’s turn.”
Academia’s contemplative culture can
Growing spending on administrators in schools such as the University of Minnesota has helped
provide fertile ground for growth in bureau-
push tuition up.
cracy. In a speech after becoming president,
At Minnesota, management costs …while across the U.S., tuition has Dr. Kaler told the story of 33 words in-
outpace teaching costs and enrollment… risen faster than other costs scribed on the auditorium in 1936. It took
the creation of an inscription committee,
Percent rise in executive- Change in costs since 2001 the hiring of an “inscription consultant”—
administrative payroll and teaching 100 % and 12 years—before chisel met stone, he
payroll (adjusted for inflation) and
number of students, 2001-2012
said.
The number of employees at the Univer-
sity of Minnesota with “human resources”
75
or “personnel” in their job title—272—has
Medical increased by a third since the 2004-2005
care academic year, a period during which the
47%
50 enrollment grew approximately 8%.
In its Office of Equity and Diversity, the
number of people with “director” in their ti-
27%
tle grew to 10 in the 2011-2012 school year
25
from just four directors five years earlier,
by a university official’s count.
Consumer Price Index Growth in the diversity office is an at-
Executive Number of Teaching 0 tempt to make the campus “more inclusive
administrative students payroll* '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 and more welcoming to people of different
payroll* backgrounds,” Dr. Kaler says.
* Adjusted for inflation Sources: University of Minnesota, Bureau of Labor Statistics The Wall Street Journal Caution fed bureaucratic growth after
Please turn to next page
THE WALL STREET JOURNAL.
Continued from previous page
the school agreed to pay the federal govern-
ment $32 million in 1998 to settle allega-
tions relating to sales of an unlicensed
transplant drug. The school acknowledged
mismanagement of grant funds, and the Na-
tional Institutes of Health put its grant ap-
plications under special scrutiny, creating
research delays and faculty departures.
To prevent a repeat, officials imposed
“fairly onerous bureaucratic processes,”
said R. Timothy Mulcahy, vice president for
research. He said the university “evolved a
very, very risk-averse, very, very conserva-
tive culture.”
Several years ago, Russell Luepker, a
professor of epidemiology at the school of
public health, sought reimbursement for a
$12 parking bill. The form went from a sec-
retary to the head of his department to an
accountant who entered it in a computer to
a senior accountant responsible for approv-
ing it. Richard Portnoy, chief administrative
officer in the epidemiology department, es-
timates it cost $75 to move the paperwork.
When Dr. Luepker heard of it, he stopped
filing for parking reimbursements.
The Journal, using payroll data provided
by the university, calculated that across all
of the system’s campuses, administrators
consume 24% of the payroll, up from 20% in
2001. Employees who teach, such as profes-
sors, lecturers and instructors, account for
37% of the payroll, down from 39% in 2001,
the Journal calculated.
The university hasn’t maintained a con-
sistent definition of an administrative em-
ployee through the years. The Journal based
its analysis on 151 job titles the university
classified as executive, administrative or
managerial at some point between 2001 and
2012.
To make year-to-year comparison valid,
the Journal included all 151 such job titles
for each year. Likewise, the Journal’s totals
for teaching jobs include all 42 job titles the
university has considered instructional at
some point between 2001 and 2012.
University of Minnesota President Eric Kaler, above center, is tackling costs. Dr. Kaler said he wants to bring discipline, accountability and transparency to the school’s administration.
IN DEPTH
The university said many employees at
the school wear several hats, so that some
who have administrative titles also teach,
and some job titles don’t accurately de-
scribe the work an employee actually does.
In June, the university did its own analy-
sis of compensation, which totals well over
$1 billion a year. One conclusion it reached
was that salary and fringe benefits for those
in “leadership”—previously 6% of the com-
pensation total—had risen to 7% of total
compensation.
A university spokesman, Chuck Tom-
barge, said administrative efforts such as
giving guidance to students do generate
benefits. He pointed to the Twin Cities cam-
pus’s rate of four-year graduation: about
58% in 2008, up from 41% in 2002.
Dr. Kaler, in his inaugural address in Sep-
tember 2011, criticized the costs of “long
meetings, excessive committee deliberations
and endless email chains” that contribute to
a “tangled web of bureaucracy that dogs
us.” He pledged to reduce administrative ex-
penses.
One hurdle: The system’s chief financial
officer, Richard Pfutzenreuter III, says that
while he can track the cost of heating a par-
ticular floor of a building or of serving a
cafeteria meal, he can’t specify elements of
the hierarchy such as how many people re-
port to each manager. The human-resources
system doesn’t track such chain-of-com-
mand information, he said, because “it
wasn’t a priority in the past.”
Streamlining the chain of command has
proved important in controlling costs else-
where. A 2010 analysis of the University of
California Berkeley by Bain & Co. found that
supervisors oversaw an average of 5.1 em-
ployees. The school raised that to 7.1 and
saved $20.5 million annually, says Andrew
Szeri, dean of Berkeley’s graduate division.
Dr. Kaler ordered a review of Minne-
sota’s spending. A survey found that in the
system, which has about 43,800 undergrad-
uates and 68,400 students in all, people
were calling 73 different numbers for help
with computer trouble. He is trying to re-
duce that to one.
Some things the school uses money for
are arguably distant from its teaching mis-
sion. Since 2006, it has spent $10 million on
consultants and others for UMORE Park, a
planned 30,000-resident community that
the university will build on land it has 32
kilometers from the Twin Cities campus.
School officials say the community re-
flects the changing mission of a public uni-
versity in the 21st century. They also say it
will one day yield a large return, partly from
gravel that can be extracted on the land and
sold.
Meanwhile, however, the project is de-
cades from completion but already has four
staff members, including a $171,000-a-year
director.
The University of Minnesota system em-
ploys 139 people in its promotions, market-
ing and communications departments. It
has spent more than $8 million since 2006
on an ad campaign to buff its image. A uni-
versity spokesman said these efforts en-
courage donations that, in part, help fund
scholarships.
When state funding initially grew tighter,
Dr. Kaler’s predecessor, Robert Bruininks,
says he responded with a wide range of
steps that included freezing or reducing sal-
aries, eliminating 14 car allowances, re-
structuring the health-care and retirement
systems and closing dozens of extension-
school offices. Dr. Bruininks said he “re-
duced the number of vice presidents by
three during my last year,” and “we reduced
the number of deans by three in closing and
combining colleges.”
The austerity measures weren’t evenly
distributed. Traditionally, professors who
had temporarily taken administrative roles
but were returning to teaching have been
given a year of paid leave to refresh their
skills. The pay traditionally was not at their
higher administrative level but the aca-
demic level.
Before leaving in 2011, Dr. Bruininks ap-
Thursday, January 3, 2013 | 15
proved more than $2 million of such transi-
tion packages, in some cases at the employ-
ees’ higher administrative salaries.
An uproar that ensued when the Minne-
apolis Star Tribune reported on the pay-
ments in 2012 led the school’s Board of Re-
gents to tighten its oversight of the
packages, diminishing the president’s discre-
tion. Dr. Bruininks said that the dollar
amount was high in part because there were
so many administrators transitioning back
to academia and that the packages were ap-
propriate “to attract and retain leaders in
higher education.”
Dr. Kaler has a salary of $610,000 and
his chief of staff of $195,000. Minnesota’s
governor makes $120,000. Mr. Kaler, 56,
said his pay “is competitive in the market-
place.” He has turned down an $18,000
raise.
Among his efforts to economize, Dr.
Kaler said he recently eliminated the office
of academic administration after its head
took a job elsewhere. He said the move will
cut 5.5 full-time positions, including a se-
nior vice president who earned $300,000-
plus.
Dr. Kaler said he wants to bring disci-
pline, accountability and transparency to
the school’s administration. Fifteen months
into the job, he figures he is about 45% of
the way there.
To Dr. Luepker, in the public-health de-
partment, such goals are up against an in-
stitutional inertia that inhibits the periodic
streamlining common in business. “We es-
tablish things and programs and they never
quite go away,” Dr. Luepker says. “They’re
nice people and they’re colleagues and
they’re good people…but in this environ-
ment, you have to ask, can we continue to
do this?”
Online>>
Compare universities’ administrative costs and
see previous articles in the series at
WSJ.com/PriceOfAdmission.
Jenn Ackerman for The Wall Street Journal
16 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

OPINION: REVIEW & OUTLOOK

Obama’s Tax Bill Comes Due

S
o the U.S. Congress has passed a since 1996, and at a time when business year, but the Sen- petitive and keep
bill to avoid the tax cliff, hallelujah. investment is mediocre. This contrasts ate-White House A Very Taxing New Year growth slower
This is the way to look at it if you with countries like Singapore and the bill is a walking Tax increases that become law in 2013 under the than it might
have a pre-Copernican view of politics Netherlands that compete with the U.S. repudiation of the 2010 Affordable Care Act and the bill that passed have been. As we
where Washington is the center of the for capital and have a capital-gains tax concept. It’s espe- the Senate on Jan. 1 learned in the
economic universe. The better way to see rate of zero. cially embarrass- 1980s and 1990s,
2012 2013
it is that the tax bill on the private, pro- The estate tax deal is a reprieve only ing that Republi- faster growth
ductive part of the economy is now com- compared to the 45% that Mr. Obama cans went along Top personal income tax rate1 35% 41%2 than the anemic
ing due for President Obama’s first-term wanted and the 55% that would have hit with this, given Estate tax 35 403 Obama recovery
spending and re-election. without a deal. Republicans still had to their 2012 cam- 4
is the only real
Capital gains tax 15 23.8
The Senate-White House compromise agree to a rate increase to 40% from 35%, paign support for way to reduce
grudgingly passed by the House is a Belt- and the $5 million exemption is a pittance fewer loopholes Dividend tax 15 23.84 deficits.
way classic: The biggest tax increase in for 50 years of work and thrift. in exchange for Medical device tax 0 2.3 i i i
20 years in return for After paying a lifetime lower rates. We If there is a sil-
Payroll tax 10.4 12.4
spending increases, and all Higher taxes on small of taxes on wages and sal- trust the CEOs ver lining to this
spun for political purposes aries, business and farm who pushed for ObamaCare payroll tax surcharge 0 0.95 fiasco, it is that
as a “tax cut for the mid-
business, special profits and capital gains, these special-in- this may be the
dle class.” But taxes on the favors for wind and Americans who save their terest provisions Notes: 1. Above $400,000 income for singles, $450,000 joint filers;
2. Includes effect of phase out of various deductions; 3. Exemption
high-water mark
middle class were only go- money rather than spend realize they can of $5 million; 4. Includes 3.8% ObamaCare investment income of Mr. Obama’s
ing up on January 1 be-
Hollywood. it get the reward of giving kiss goodbye surtax; 5. Income above $200,000 for singles and $250,000 for joint
redistributionist
filers
cause the politicians had 40% to Uncle Sam. As a their hopes of re- Source: U.S. Senate tax agenda. The
set it up that way, manu- political matter, the GOP ducing the 35% President has had
facturing a fake crisis. The U.S. politicians also gave a big break to Democratic Sena- corporate tax rate unusual leverage
now portray themselves as scrambling tors running in 2014 who would have had any time soon. over Republicans because he just won re-
heroically to save the day by sparing the to defend the 55% rate. Keep in mind that this entire exercise election and because taxes were going to
middle class while raising taxes on small As for small business, the overall tax was also supposed to promote “deficit re- go up even if they did nothing. The GOP
business, investors and the affluent. increase this year is substantial. The new duction.” But the bill’s special-interest fa- wanted to avoid the blame for not sparing
i i i listed top rate of 39.6% doesn’t include vors give away much of the new tax reve- the middle class from the higher rates.
The nearby table shows the taxes that the phaseout of deductions that will take nue that Mr. Obama says he wants, and But we hope the GOP has learned, after
are going up this year. The best that can the actual rate to 41% or so for many tax- the bill’s estimate of $620 billion more two failed attempts, that Mr. Obama is
be said is that Senate Republicans man- payers. Add the ObamaCare surtaxes on revenue over 10 years is probably too not someone with whom it can do a
aged to moderate the increase in the investment income (3.8%) and Medicare high as the rich change their behavior to “grand bargain.” Even as the Senate deal
death tax from what it would have been, (0.9%), as well as the current Medicare avoid the higher rates. was taking shape, Mr. Obama gave a
and to spare some upper middle-class tax of 1.45% (employee share), and the In any event, this bill increases spend- speech literally taunting Republicans for
families from even higher taxes by raising real top marginal tax rate on a dollar of ing by at least $30 billion by extending agreeing to raise tax rates. He also made
the income threshold for the new 39.6% investment income from a bank savings extra jobless benefits for another year. It clear that the price of any future spend-
top rate. But even those families will still or money-market account will be about also postpones for two months the auto- ing cuts or entitlement reform will be an-
see their taxes raised because couples 46%. Throw in state taxes, and the mar- matic spending cuts that were set to be- other tax increase. He doesn’t want to re-
making more than $300,000 will begin to ginal rates in many places will be in the gin this week, so in February we can all form government. He wants to expand it
have their deductions and exemptions mid-50%-or-higher-range. witness the delights of another phony and destroy GOP opposition to his agenda
phased out as their income rises. Meanwhile, even as Democrats claim showdown that will result in more phony in the bargain.
The bill also makes most of the tax these tax rates won’t matter to invest- deficit reduction. Maybe they can com- Having been cornered into letting
provisions (including a fix to the Alterna- ment, Senators stuffed their bill full of bine those with a phony debt-limit fight Democrats carry this special-interest slag
tive Minimum Tax) permanent, which re- tax subsidies for special business inter- too. heap through the House, Speaker John
moves some uncertainty from business ests. The wind tax credit survived (cost: America’s private economy is growing, Boehner should from now on cease all
and investment decisions. So much for $12.1 billion), and so did the tax breaks so perhaps it can absorb these tax shocks backdoor negotiations and pursue regular
the good, or shall we say the less bad, for cellulosic ethanol ($59 million) and and keep moving. The tailwinds from the legislative order. House Republicans
news. the impoverished producers of Hollywood housing recovery and oil and gas revolu- should pursue their own agenda and let
On the other hand, the tax rate on cap- ($248 million). tion are helping, and the stock market is Mr. Obama and Senate Democrats pursue
ital gains will rise to 23.8% (including the Mr. Obama said on New Year’s Eve rising on a tide of easy money. But the theirs. Mr. Obama has his tax triumph.
3.8% ObamaCare surtax), the highest rate that he wants to pursue “tax reform” this higher rates will make the U.S. less com- Let it be his last.

A Wiretapping Miracle
W
ell, not everything President Christmas fiscal cliff chaos, and a broad Hypocrisy aside, the irony is that the consensus about how to protect the U.S.
Obama and the 112th U.S. Con- bipartisan majority defeated multiple imperfect 2008 deal could have stood a from terrorists. If the “Imperial Presi-
gress managed to achieve is so amendments from the civil liberties abso- little scrutiny. The concessions Mr. Bush dency” is only imperial when the Presi-
terrible. With scarcely any notice, much lutists on the left and right such as Ken- was forced to make inserted the special dent is a Republican, at least that doesn’t
less controversy, they did at least pre- tucky’s Rand Paul. FISA court into the wartime chain of represent a real political conviction,
serve one of America’s The bill was then whis- command, requiring the national security merely naked partisanship.
most important post-9/11 With little notice, tled through 73-23 and Mr. agencies in most cases to get judicial per-
antiterror tools. Obama signed it Sunday mission to eavesdrop on even foreign en-
That would be wiretap-
Obama signs a night with no public com- emies. We still don’t know if this new re-
ping, which you may recall terrorist ment other than a one- gime has compromised U.S. intelligence Pepper . . . and Salt
THE WALL STREET JOURNAL
liberals portrayed during
the George W. Bush era as
eavesdropping bill. sentence statement from
the White House press
gathering.
Then again, perhaps it is reassuring
an illegal and unconstitu- secretary indicating that that Mr. Obama endorsed it. As President,
tional license for co-Presi- the bill had been signed. he has turned out to be a fairly ruthless
dent Dick Cheney and his spymasters to Meanwhile, the press corps was wigging antiterror prosecutor and unapologetic
bug the bedrooms of all U.S. citizens. But out about Facebook’s privacy settings. asserter of Presidential powers, including
now Washington has renewed the 2008 This is a turnabout from 2007 and on occasion the office’s inherent Article
amendments to the Foreign Intelligence 2008, when letting U.S. spooks read al II war powers. As a Senator in 2008 com-
Surveillance Act that were due to expire Qaeda emails or listen in on phone calls peting for left-wing votes against Hillary
at the end of 2012, with no substantive that passed through domestic switching Clinton, he promised to filibuster “any
changes and none of the pseudo-apoplexy networks supposedly spelled doom for bill” that granted telecom companies im-
that prevailed during the Bush Presi- the American Republic. Democrats spent munity from lawsuits stemming from
dency. years pretending that Mr. Bush’s eaves- their good faith cooperation with intelli-
In September the House passed the dropping program was “wrong” and “de- gence agencies. He reversed his opposi-
“clean” five-year extension that the structive,” as Attorney General Eric tion once he locked up the Democratic
White House desired, 301 to 118. The Sen- Holder put it at the time, lamenting that nomination.
ate reserved all of a single day of debate “I never thought I would see a President Maybe such amnesia is healthy, to the
on the floor to coincide with the post- act in direct defiance of federal law.” extent it reflects the emerging bipartisan “This is 1,382,285 on my bucket list.”
THE WALL STREET JOURNAL.
Nothing Is Certain Except More Debt and Taxes
BY DAVID MALPASS
Whatever ultimately emerges
from the U.S. fiscal-cliff negotia-
tions, the country will survive. But
the damage can’t be undone. Taxes
are going up for all working Ameri-
cans. And so is the size of govern-
ment.
Businesses have been waiting to
see whether a second Obama
administration will encourage the
U.S. economy. During the fiscal-cliff
negotiations, however, the presi-
dent made clear that his goal isn’t
to get business going again but in-
stead to expand government and
redistribute income. He offered no
real spending cuts and instead used
the year-end deadline to divide
America into classes—to the point
of campaigning on New Year’s Eve
against higher earners. Though the
president talks about fairness, his
policies penalize profit and invest-
ment. This hurts aspiring Ameri-
cans more than it hurts those who
have already made it.
The deal that emerged from the
Senate early Tuesday morning is
being sold as a tax cut for the mid-
dle class, but the expiration of the
two-percentage-point payroll tax
holiday means that working Ameri-
cans’ take-home pay will drop. The
bill reduces the value of tax deduc-
tions for upper incomes and, with
the new open-ended 3.8% Medicare
tax that was enacted under Obama-
Care, income-tax rates on American
families and small business owners
earning over $450,000 have been
pushed above 44%.
The Senate bill makes the tax
code more complex, provides for no
spending cuts and creates four
deadlines—for the debt-limit
increase within weeks, the March 1
automatic spending cuts known as
the sequester, a second sequester
How Capitalism Can Repair Its Bruised Image
BY LYNN FORESTER DE ROTHSCHILD
AND ADAM S. POSEN
One of the alarming effects of
the global financial crisis has been
the widespread erosion of confi-
dence in capitalism itself. Doubt
has grown that capitalist societies
offer everyone as much chance of
success as risk of failure. Better
government policies might help ac-
celerate economic recovery, but
only business itself can restore
faith in capitalism.
The need is acute, because the
general public’s sense of disenfran-
chisement goes well beyond the Oc-
cupy Wall Street movement or pro-
testers on the streets of Athens and
Madrid. A recent poll by the Public
Religion Research Institute found
that 70% of white working-class
Americans, 78% of blacks and 69%
of Hispanics believe that the U.S.
economic system “unfairly favors
the wealthy.” And according to the
latest Pew Research Center Global
Attitudes Project survey, support
for capitalism since the 2007-08 fi-
nancial crisis is down in nine of the
16 countries surveyed, and in
none—not even in thriving China or
Brazil—has support risen.
Businesses can help combat
such views—and help themselves in
the process—by taking specific
steps to make capitalism more in-
Images.com/Corbis
on March 27 (to make up for over-
spending since the first sequester)
and the March 30 expiration of
government spending authority.
These deadlines will keep Washing-
ton negotiations on the front page
for months but with little likelihood
that government will cut programs,
sell assets or downsize the 1,300
federal agencies and commissions.
No wonder many House Republi-
cans balked at what was presented.
The New Year’s Day legislation is
breathtaking in its largess. The
Senate bill extends 52 tax credits,
mostly for one year, ensuring huge
annual lobbying fees and political
contributions. Section 206 provides
a juicy capital-gains tax exemption
for contributions of property for
conservation, meaning wealthy en-
clusive. Yes, “inclusiveness” has
been invoked in pursuit of dubious
social-engineering ends, but in this
case it is appropriate to describe
what businesses can do to better
share the fruits of capitalism with
those who have been excluded.
Companies should invest in
workers and business relationships,
just as they did a century ago in re-
sponse to mounting inequality and
public dissatisfaction. Back then,
Robert Bosch in Germany, William
Hesketh Lever in Britain, and the
Houghton family of Corning Glass
in the United States, among many
other leaders of large companies,
took initiatives in this direction. At
Corning Glass, for instance, the
company in the 1920s took initia-
tives internally and led a broader
business movement to improve
worker safety, provide employee
health insurance, and establish on-
site cafeterias and clinics.
Today, there are three areas
where companies would do well to
turn their attention. First, big busi-
ness can do more to support
smaller enterprises in their supply
and distribution chains.
To encourage small and me-
dium-size businesses on the basis
of their productivity rather than
their experience or size would help
establish the idea that everyone has
a stake in the capitalist system.
OPINION
vironmentalists with extra acreage
will be able to take a tax deduction
for the appreciated property and
have the environmental organiza-
tion preserve it, adding to the value
of the primary property. Section
312 provides faster tax deductions
for “motorsports entertainment
complexes.” Section 317 allows
expensing of film and television
productions, meaning lower taxes
for Hollywood.
The bill devotes much space to
tax credits for government-ap-
proved energy schemes, providing
taxpayer subsidies for energy-effi-
cient new homes, existing homes,
appliances, cellulosic biofuel and
“Indian coal facilities.” Underscor-
ing the complexity of the tax code,
the bill takes seven pages to index
Larger businesses can source from
these smaller enterprises and use
the larger companies’ better finan-
cial access to provide credit to
them. The bigger outfits could also
actively counsel the smaller compa-
nies about best practices and stan-
dards.
With much of the public
disaffected around the world,
large businesses can take
specific steps to show the
virtues of the marketplace.
IBM addressed this issue in
March 2012 through the creation in
of the web-based Supplier Connec-
tion, which allows small and me-
dium enterprises to connect to the
requirements of large companies.
AT&T, J.P. Morgan, UPS, Office De-
pot and Pfizer have all made them-
selves accessible through the Sup-
plier Connection. Large businesses
that invest in this way create a
more reliable business environment
for themselves.
Second, big business can do a
better job of matching workers
with available jobs. This is particu-
larly necessary for younger work-
ers, for whom time out of work
the alternative minimum tax for in-
flation because it takes side trips to
curry favor with the owners of
plug-in electric vehicles and with
first-time home-buyers in the Dis-
trict of Columbia.
The pattern across the devel-
oped world is for politicians to ne-
gotiate with each other and, after
much drama, make the brave deci-
sion to downsize jobs through taxes
and mandates rather than downsiz-
ing government. The U.S. is no dif-
ferent: Whatever tax and spending
decisions Washington makes over
the next few months, the likelihood
is that government will be bigger in
2013 and the fiscal problems even
more urgent.
There has emerged from the U.S.
budget negotiations no process to
cut government programs, limit the
debt or reform the tax code. Many
tax rates have now gone up and
almost no spending restraint has
been implemented, hurting 2013
investment and hiring. Even if the
spending sequester is allowed to
proceed on March 1 or substitutes
are found, the cuts will be a small
fraction of the spending binge in
recent years that left a string of $1
trillion deficits.
The U.S. Congressional Budget
Office scores the Senate bill as add-
ing $4 trillion to the national debt
by 2022. That assumes the seques-
ter or equivalent spending cuts are
fully implemented in March, which
seems unlikely. Some are hoping
that during the coming confronta-
tion over the debt-limit increase
fiscal conservatives will be able to
recover lost ground on spending.
That won’t work, because the debt
limit doesn’t provide much lever-
age.
The debt-limit statute was writ-
ten specifically to make it easier to
increase the debt, not as a way to
does lasting damage. Conversely, a
well-targeted training program or
apprenticeship can nurture employ-
ees for long-term work with their
companies, as well as motivate con-
tinuing learning. Investing in such
programs, either as individual com-
panies or as a federation across an
industry, sends a powerful signal to
a wider range of workers about
where productive career paths lie.
Rolls-Royce has been a leader in
this area. At any time, the company
has almost 900 apprentices work-
ing. And Rolls-Royce is thriving: In
the first half of 2012, the company
reported profits up 7% from a year
ago, with revenues up 5%. Investing
in apprenticeships and other train-
ing programs means a more pro-
ductive and engaged workforce,
and better aligns workers’ motiva-
tions with the success of their em-
ployers.
Third, public corporations
should be reoriented to the longer-
term, with the power of investors
and boards strengthened over man-
agement insiders. Recent years’ fix-
ation on “shareholder value”
proved to be a misnomer—if any-
thing, that phrase often became a
cloak behind which top managers
enriched themselves at the expense
of shareholders, as well as suppli-
ers and employees.
Persuading institutional inves-
Thursday, January 3, 2013 | 17
limit the debt. It should be repealed
and replaced with a law that cuts
spending when there is too much
debt. While Republicans rightly
want to stop the unending growth
in debt, the current debt-limit
statute gives most of the power to
the president, allowing him to shut
down parts of the government and
blame holdouts until he gets
enough votes for more debt.
Rather than rejecting an in-
crease in the debt limit, fiscal con-
servatives should offer a lasting
remedy. This would be a debt-to-
GDP limit that, when exceeded,
would give the president the power
to underspend congressional appro-
priations and to propose fast-track
reductions in entitlements—but
would also require him to make
monthly reports to the public on
excess spending and prohibit raises
for government employees making
over $100,000.
Fighting under the current rules
isn’t working and leaves govern-
ment inexorably bigger. The U.S.
can’t afford this approach. Demo-
graphics are making it harder each
year to restrain spending or win
elections on the platform of limited
government. The rules pit fiscal
conservatives against themselves,
leading to bigger government.
Regardless of how the current
crisis is ultimately resolved, there is
sure to be another. Republicans and
fiscally conservative Democrats
should use every opportunity to
strengthen the framework for
limited government, in order to
restrain federal spending and allow
the private economy to grow.
Mr. Malpass, a deputy assistant
Treasury secretary and legislative
manager for the 1986 Tax Reform
Act in the Reagan administration,
is president of Encima Global LLC.
tors to actively exercise oversight
would be useful—and would reduce
fixations on quarterly results. Uni-
lever has been a corporate leader in
this area, and the Ontario Teachers
Pension Plan has been an exemplar
investor. While better board over-
sight is unlikely to improve support
for capitalism as directly as long-
term investments in suppliers and
workers will, corporate-governance
reform is necessary to make such
investments possible. Arguably, it
was the poor governance practices
of the past decade-plus that led
companies to ignore the common
long-term interests of investors and
of the capitalist system.
Appeals to capitalism’s promise
without business action to deliver
on that promise will be insufficient
to revive confidence in our eco-
nomic system. Fortunately, there
are profitable practical investments
that business leaders can make in
employees and smaller businesses
that will enhance the viability both
of their companies and of capital-
ism as a whole.
Ms. Forester de Rothschild is CEO
of E.L. Rothschild and co-chair of
the Henry Jackson Initiative on In-
clusive Capitalism Task Force. Mr.
Posen is president of the Peterson
Institute for International Econom-
ics and a member of the task force.
18 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

OPINION

Repealing Reagan
who’s who of great American
[ Wonder Land ] companies was born. In Barack
Obama’s first four years, the
BY DANIEL HENNINGER number is about zero (Facebook
emerged in 2004; Twitter in
Legend had it 2007). Well, there’s two that are
in Ohio years ago famous: Solyndra and Fisker.
that when a baby This New Year’s passage of the
boy was born in American Taxpayer Relief Act of
the perennial high- 2012 marks the return of the pro-
school powerhouse gressive tax utopia, with a great
city of Massillon, a small football many Finlandized business inter-
“Credits for certain expenditures
for maintaining railroad tracks.”
A “seven-year recovery period for
motorsports entertainment com-
plexes.” “RIC qualified investment
entity treatment under FIRPTA.”
Hollywood can expense $20 mil-
lion of production costs “incurred
in economically depressed areas
of the U.S.,” which means most of
Manhattan is an “economically
depressed area.” I’ve gotta get in

Time Life Pictures/Getty Images

was placed in the cradle. The kid
knew what was expected of him.
When Ronald Reagan signed the
Tax Reform Act of 1986, Barack
Obama was a 25-year-old commu-
nity organizer in Chicago. Like all
progressives born now in Amer-
ica, the young fella knew what
was expected of him if he got the
chance. Repeal Reagan.
For the past 25 years the
American left has lived and
breathed the political goal of un-
doing the Reagan legacy on taxes
and spending. On Jan. 1, 2013,
they did it. Until 2016, tax reform
is dead.
Reagan’s philosophy was an
anathema to the left. It was Rea-
gan’s novel postwar idea to make
people less enthralled to Wash-
ington and more reliant on their
own ideas and energy. The ‘86 tax
act notably reduced tax rates on
all personal income and on capi-
tal, but famously gutted many
“tax shelters.” The assault on tax
shelters—often promoted by the
pre-Reagan Republicans—was led
by then Ways and Means Chair-
man Dan Rostenkowski, Democrat
of Chicago.
Amid the seven growth years
during the Reagan presidency, a
ests complicit. In the anti-Reagan
model, the favored fish—left-wing
constituencies and bloodless com-
mercial interests—swim through
steams of revenue processed by
the tax code out of the general
fund and back to the favored fish.
After trying for 25 years,
the U.S. left finally unwinds
the Reagan tax legacy.
No real appreciation of the
hellishness of the deals is possi-
ble unless one reads methodically
through the details of the official
“Summary” released New Year’s
Eve. Herewith, a summary of the
Summary, but bear in mind: It
can’t go on. This is a Ponzi
scheme. Bernie Madoff, the big-
gest financial fraud ever, recycled
$65 billion for 30 years. And so a
truth is born: The bigger the pot,
the longer the Ponzi runs. The
Obama Ponzi starts now.
The section titled “Business
Tax Extenders” gets the ink be-
cause it’s so ripe for “Daily
Show” ridicule. Jon Stewart
merely has to read the text:
on this. How about the Walking-
to-Work energy tax credit?
Reading through the list, you
start to feel like a sap. Sure,
broad breaks such as the deduc-
tion on mortgage interest flow to
millions, but a rational working
stiff would throw over his 9 to 9
slog and get into something like, White House signing ceremony for the 1986 tax reform bill.
“Facilities that produce electricity
from wind, closed-loop biomass, interest, school construction fortable there. And they are not
open-loop biomass, geothermal, bonds, a “third child” credit alone.
small irrigation, hydropower, and—why not?—a credit for The bill has $355 billion for
landfill gas, waste-to-energy, and plug-in electric motorcycles. the child tax credit, the sort of
marine renewable facilities are el- The entitlement time bomb expenditure some conservatives
igible for a production tax called Medicare? Still ticking. The like. But then no complaining
credit.” bill’s “Medicare extensions” out- about the rest of it. The anti-Rea-
The “We’re Green!” advertising put new money for “work geo- gan tax model is basically the
slathered everywhere by appli- graphic adjustments,” “super-ru- “Boardwalk Empire” model. You
ance makers and apartment de- ral” ambulance services, “low- can’t pick and choose which heist
velopers is built on tax breaks volume” hospitals, and entities to join. You’re in for all of them.
dug out of the general fund: engaged in “certain activities re- In time, everyone’s a tax gangster.
There’s a $650 million credit for lating to health-care perform- The vote New Year’s night
makers of clothes washers, dish- ance.” came without applause or cheers.
washers and refrigerators. The point of Reaganesque tax Sullen House Democrats voted
The left chokes down this de- and spending reform was to and left. The progressive presi-
graded favor brothel because the cleanse the system. Purge the in- dent boarded Air Force One for a
tax bill includes a mind-boggling evitable, destructive sludge that 5,000-mile flight to his middle-
array of “social” tax breaks. Some slows down an economy. The class vacation in Hawaii. Why
$30 billion to extend unemploy- message of Bowles-Simpson and not? For a nation headed into its
ment insurance, artificial oxygen Domenici-Rivlin was that the time own Bernie Madoff paradise, it all
in a respirator economy. Depen- to do that again had arrived. makes sense.
dent-care credits, adoption cred- We’re sticking with the sludge.
its, credits for tuition and tuition The progressives are more com- Write to henninger@wsj.com

Little Hope for Change in Pyongyang

BY JOHN LEE
In the first public News Year’s
Day address by a North Korean
supreme leader for 19 years, Kim
Jong Eun declared that improving
living standards and building the
economy will be his top two pri-
orities. He urged a “radical turn in
the building of an economic giant
with the same spirit and mettle as
were displayed in conquering
space.”
How seriously should we take
this pronouncement? The focus on
economic growth rather than mili-
tary might is certainly encourag-
ing, and it follows on from a “Ten
Year State Strategy Plan for Eco-
nomic Development” announced
last January.
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However, it’s telling that there
were no details about what form
reform will take. The role of the
military in North Korean politics
and economics has not changed
significantly over the first year of
Kim’s rule. Until that happens, one
should remain skeptical that
change is coming.
It’s worth recalling that North
Korea was not always an eco-
nomic basket case. When China
began its reforms in 1978, North
Koreans were better educated
than their Chinese counterparts
and had a similar GDP per capita
to South Koreans. The country’s
economy was more open than
China’s when measured by inter-
national trade per capita.
Of course, some portion of the
North’s prosperity was due to
subsidies from the Soviet Union.
But after the death of Kim Il
Sung, the turn toward even more
radical autarkism in the form of
the “military first” policy created
calamity. Up to 3.5 million people
out of a population of around 24
million people died of hunger
from 1994-98.
To prevent mass starvation,
Pyongyang now depends on for-
eign aid attained through a com-
bination of bluster, threats and
subsequent (always dishonored)
promises to play by international
rules. Its nuclear weapons and
ballistic missile programs are
closely linked with this extortion-
ist strategy.
Since 1995, North Korea has re- fourth largest in the world.
ceived more than $1 billion in aid But the primary role of the
from America and $4 billion from military in the economy itself
South Korea. Although Beijing is poses the most formidable barrier
opaque about its relations with to reform. The People’s Army is
the hermit kingdom, Chinese the largest, best funded and most
trade statistics suggest that capable institution in North Ko-
Pyongyang has benefited from net rea. For example, it supervises
transfers of approximately $10 bil- and controls the country’s 3,000
lion over the same period. To put cooperative farms. It reserves one
all this in context, North Korea’s quarter of the country’s annual
GDP (measured by purchasing agricultural output for itself,
power parity) is around $40 bil- sending out trucks periodically to
lion each year. carry away as much of the coun-
try’s produce as it deems appro-
priate.
Until the military gives up The military has also earned
control, don’t expect North hundreds of millions of dollars
selling missiles and other weap-
Korea to reform. ons to Iran, Pakistan and Syria. It
now manages almost all of the
country’s major mines, with most
Despite all these transfers, the of the magnesite, zinc, iron and
tragic joke about the North Ko- tungsten going to China. The ex-
rean economy is that it remains a port of minerals to China has in-
planned economy without a plan. creased to around $250 million
At the least, the drive for produc- today from $15 million in 2003.
tion is subordinated to the re- Reform, and a general uplift in
quirements of the regime whose living standards, would require
first priority is to remain in the military to relinquish control
power. of the country’s agricultural and
As in the most brutal dictator- mineral resources. Even returning
ships, the military enjoys too cen- control over these resources to a
tral a role. This is evident in an planned economy with some room
official military budget of about for citizens to engage in profitable
$6 billion each year, with interna- commercial activity could yield
tional analysts putting the figure growth and a substantial increase
closer to $9 billion—at least one- in living standards.
third of government spending. At But with an enormous and
almost 1.2 million active person- hungry army to feed before its
nel, the People’s Army is the own people, and with the coun-
try’s mineral reserves worth an
estimated $5.4 trillion at current
prices, Kim will find it difficult to
change the “military first” policy.
It is also unlikely that North Ko-
rea can exploit its cheap and will-
ing labor and pursue the East
Asian export-dependent approach
to development as long as the
military uses lowly paid soldiers
as workers and crowds out non-
military enterprises. There is even
emerging evidence that a desig-
nated percentage of all revenues
from commercial activity goes
straight to the military, possibly
explaining the discrepancy be-
tween the official military budget
and estimated spend by outside
experts.
On balance, the military seems
to have acquired even greater eco-
nomic relevance since Kim Jong
Eun’s ascension in December 2011.
So while there are glimmers of
hope that the supreme leader
means what he says about reform,
such as activity in the special eco-
nomic zones and the North-South
joint venture Pyonghwa Motors,
until we see signs that the eco-
nomic role of the military is weak-
ening, 2013 doesn’t augur well for
the North Korean people.
Mr. Lee is the Michael Hintze fel-
low and adjunct associate profes-
sor at the Centre for Interna-
tional Security Studies, Sydney
University, and a non-resident
scholar at the Hudson Institute.
Pound/Euro 0.8120 À 0.14% Yen/$ ¥87.10 À 0.56%
Thursday, January 3, 2013
How to Be a Better Boss in 2013
T
he new year has arrived—and
with it, the inevitable wave of
self-improvement plans and
resolutions. Along with pledging to
lose weight or kick a coffee habit,
why not resolve to be a better man-
ager in 2013?
From practicing your job to
avoiding the ‘reply-all’ button, Jour-
nal reporters and management ex-
perts offer tips on how to do it.
Ban ‘Reply to All’
The “reply to all” button is
among the most misused—and re-
viled—pieces of office technology.
At best, an accidental click can lead
to an inbox-clogging chain of mes-
sages. At worst, it can cause a per-
sonal embarrassment before the en-
tire company.
“That button is responsible for
more pain and suffering, except for
the red button that launches the
nukes,” says Nathan Zeldes, a
founder of the Information Overload
Research Group, which studies how
companies manage information.
One solution? Save time and
trouble this year by disabling the
“reply to all” button.
Some companies already do so,
such as data firm Nielsen, which
has been anti-reply-all for several
years. In a 2009 memo, the com-
pany’s chief information officer rea-
soned that doing so will “reduce
non-essential messages in mail-
boxes, freeing up time as well as
server space.” The button remains
“grayed out” on the screens of the
company’s 34,000 employees, al-
though there are workarounds, a
company spokeswoman says.
If your company clings to the re-
ply-to-all option, start the trend on
your own.
Microsoft Corp. offers a free
David Saracino
NoReplyAll add-on to its Outlook
email program, which allows users
to prevent recipients from replying-
all or forwarding the messages.
There is also Reply to All Monitor,
which for $14.95 will send a mes-
sage every time a user clicks reply-
all, asking whether he or she really
want to so do.
The program, made by Sperry
Software, also removes your name
Europe’s Crisis Hits Car Markets in France, Spain
BY DAVID PEARSON
Registrations of new cars fell to
a 15-year low in France and hit a re-
cord low in Spain last year as weak
auto demand amid Europe’s endur-
ing economic crisis continued in De-
cember, raising fears that many of
the region’s car makers face an even
tougher-than-expected year ahead.
Most mass-market car makers in
Europe, such as France’s PSA Peu-
geot-Citroën SA and Italy’s Fiat
SpA, have watched their sales col-
lapse across much of the region as
governments have cut spending and
Global Dow 2043.63 À 2.36% Gold 1687.90 À 0.78% Oil 93.12 À 1.42%
Novartis CEO Joseph Jimenez
On Future of Pharmaceuticals
BUSINESS & FINANCE 23
THE WALL STREET JOURNAL.
from a message’s recipient list so fice counts as “work.” But not all
others can’t reply-all to you, among work is created equal.
other features. There is a difference between
—Rachel Emma Silverman doing things you already know how
to do and doing things that force
Practice the Hard Stuff you to stretch and improve your
For many, time spent at the of- skills, according to psychology pro-
raised taxes to shrink budget defi- ink. Peugeot, General Motors Co.’s
cits. Opel/Vauxhall unit and Ford Motor
Households, worried about rising Co.’s European operation are cutting
unemployment and falling purchas- jobs as they move to reduce output
ing power, have delayed new-car by closing factories. Fiat is stream-
purchases or have opted for less lining its model lineup and betting
costly used vehicles. France is the on exports to keep its factories busy
European Union’s second-biggest in the future.
auto market by sales, and Spain is Data released Wednesday by the
the fifth-biggest. French car manufacturers’ associa-
Faced with mounting losses as tion showed December registrations
their factories operate well below of new cars, a proxy for sales,
full capacity, makers of smaller cars dropped 15% from a year earlier for
aimed at more price-sensitive con- a full-year total of 1.9 million, the
sumers have cast around for new lowest level since 1997. In Spain,
strategies to stem the flow of red new-car registrations declined 13%
3-month Libor 0.30500
Should Investors Be Afraid
Of the Italian Elections?
HEARD ON THE STREET 32
fessor K. Anders Ericsson, who spe-
cializes in performance psychology,
or the study of how people become
good at what they do. A person in a
new job usually spends some time
training to get up to speed, but after
that, his or her abilities tend to pla-
last year to just under 700,000, the
lowest since record-keeping began
in 1989.
France’s economy is stagnating
and isn’t expected to pick up speed
in 2013. Spain’s economy contracted
throughout last year and is expected
to continue to shrink during most of
2013, while the unemployment rate
in the country recently surpassed
25%.
Also hurting car sales is a credit
crunch that intensified last year af-
ter several banks failed.
“It has been a tremendously
tough year,” said Jaume Roura,
10-year Treasury g 23/32 yield 1.839%
europe.WSJ.com
teau, says Mr. Ericsson.
There are ways to get beyond
this plateau—and win promotions
and opportunities. Here are some
suggestions:
Set clear goals slightly beyond
your current abilities and list spe-
cific actions that advance you to-
ward that goal. For example, a ven-
ture capitalist might want to
increase the rate at which calls to
potential investors prompt follow-
up conversations. Specific actions
he or she could take include making
a certain number of these calls each
week using their best pitch.
Those hoping to move beyond
the plateau should also seek feed-
back. Without frank, even harsh,
feedback, progress will likely stall.
The venture capitalist making inves-
tor calls could keep careful notes on
what differentiated the successful
and nonsuccessful calls, or he could
ask a partner at the firm to listen in
and offer thoughts.
Finally, you need to get out of
your comfort zone—not always a
pleasant feeling. If left unchecked,
many workers might reply to emails
all day. But they should learn to
seek out ways to practice skills they
aren’t quite comfortable with, like a
bodybuilder seeks muscle burn.
—Cal Newport. Mr. Newport is an
assistant professor of computer
science at Georgetown University
and the author of “So Good They
Can’t Ignore You.”
Powers of Persuasion
It’s no secret that a successful
manager needs to convince people
to do things. But how?
Steve Martin, a behavior expert
at consulting firm Influence at
Work, has a handful of simple per-
suasion techniques he says he has
used to help large corporations
and government agencies in the
U.K. influence customers and citi-
zens.
Among the strategies, he says,
is to tap into a social norm to cre-
ate consensus. This can move peo-
ple to model their behavior on oth-
ers.
While working with the U.K.’s
Please turn to page 21
chairman of Faconauto, a Spanish
car dealers’ association. “Car deal-
ers are suffering with particular vir-
ulence [from] the lack of economic
activity and the lack of financing,”
he added.
The pain in the European auto
industry is likely to continue. “We’re
very, very worried about 2013,” said
François Roudier, spokesman for the
French auto makers’ association.
Mr. Roudier said he expects the
local market will contract by a few
percentage points this year, with no
signs that household or business
Please turn to page 21
20 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

BUSINESS & FINANCE

Next Step in TV Evolution: ‘Ultra HD’

Sony, Other Manufacturers Set to Push Latest Models That Offer Clearer Images—But Also Higher Price Tags
BY DAISUKE WAKABAYASHI

TOKYO—Persuading consumers to
trade in bulky old-school televisions
for slim, high-definition models was
a huge success story for the TV in-
dustry. Now manufacturers are an-
gling to kick off another buying
spree.
They are gearing up to promote
what the industry calls “ultra high-
definition” televisions, or UHDTVs,
which promise four times the resolu-
tion of existing TVs and are likely to
be a hot topic at next week’s Con-
sumer Electronics Show in Las Vegas.
Such TVs create images using
more than eight million pixels, com-
pared with about two million pixels
of today’s full high-definition televi-
sions. At the moment, however, a ma-
jor obstacle stands between consum-
ers and sharper pictures: price.
Sony Corp. and LG Electronics,
for example, have introduced 84-inch
ultra high-definition sets priced at
$25,000 and $20,000, respectively.
Toshiba Corp. has announced a 55-
inch set in Japan for ¥750,000, or
$8,700. UHDTVs are expensive be-
cause they use a new liquid-crystal-
display panel that requires a greater
Sony/Associated Press

degree of precision from component

manufacturers.
So far, the manufacturing effi-
ciency for such panels is low, but
production quality is expected to im-
prove over time.
The stratospheric price tags—of-
ten the case with new technology—
don’t worry some industry watchers,
who recall that HDTV sets, cellphones
and other products were initially out
of reach of most consumers but be-
came hits as prices declined. In this
case, they add, consumers have come
to appreciate the benefits of higher
resolution on TVs, tablets and smart-
phones.
“If you’re a consumer, you’ll pay
more for a technology that you un-
derstand,” said Paul Gagnon, director
of North American TV research at
NPD DisplaySearch, a research and
consulting firm. “And in the case of
higher resolution, that’s a very easy
thing to understand.”
That said, there are also reasons
for skepticism. Since the HDTV sales
wave crested in the last decade, TV
makers have tried to slow the unre-
lenting fall in prices and profit mar-
gins by introducing premium models
with new technologies such as 3-D or
Web connectivity. Those technologies
have become common features on
mainstream TVs but haven’t reversed
the downward price spiral.
Very little content has been cre-
ated specifically for home viewing on
ultra high-definition televisions.
Meanwhile, early adopters will have
to settle for high-definition footage
that is adapted, or “upscaled,” for the
new sets—though proponents say the
results look better than upscaled pro-
gramming first did on HDTVs.
The new format is arriving as
Sony is pricing its ultra high-definition
sets at $25,000. Above, singer John
Legend performed at a Sony UHDTV
event in November.
consumers clamor for ever-larger
televisions. When the early high-defi-
nition displays hit the market in the
early 2000s, the main class of televi-
sions was around 30 inches in size.
When the bulk of television sizes
shifted to more than 40 inches and
50 inches several years ago, TV mak-
ers introduced full high-definition
displays packing twice as many pix-
els. Now screen sizes are creeping
above 60 and 70 inches, and TV mak-
ers again want to add more.
UHDTVs are also known by the
moniker “4K” for the roughly 4,000
pixels in the screen measured hori-
zontally, which is roughly twice the
resolution.
The greater density allows view-
ers to sit closer without seeing the
effect called pixilation that can ap-
pear at times on lower-resolution
TVs. Also, it may allow viewers to
turn to the television for new pur-
poses, such as reading the news.
“As the trend to larger screen
sizes continues, the ability to make
that picture more and more realistic
from any viewing distance is valu-
able,” said Tim Alessi, director of
new-product development at LG Elec-
tronics USA. “It’s a natural transi-
tion.”
By 2017, NPD DisplaySearch esti-
mates UHDTVs will account for only
ULTRA HD HAS:
24x
MORE PIXELS THAN
STANDARD DEF.
The Next 9x
HIGH- DEF.
Step in TV
Ultra high definition
resolution compared to
earlier TV standards
Source: Industry reports
2% of all LCD TVs sold but will repre-
sent 22% of all televisions over 50
inches in size. (LCD is the current,
widely used technology for TVs.)
Hollywood is beginning to em-
brace 4K video cameras and 4K
movie projectors. Around 60 recent
movies—including the latest James
Bond film, “Skyfall”—have been of-
fered in the higher resolution, but if
a theater doesn’t have the 4K projec-
tor, the movie will look like a regular
HD film.
Sony, which introduced a 4K digi-
tal-video camera last year and con-
trols about 10% of the digital 4K-pro-
jector segment, said it has built up
the industry’s largest database of 4K
video through its work with Holly-
4x
FULL HD
The Wall Street Journal
wood and its early research on the
technology.
“From now on, we’ll continue to
move 4K from professional use to
consumer use by expanding and in-
troducing additional products,” said
Sony Chief Executive Kazuo Hirai at
a news conference in April discussing
Sony’s corporate strategy.
A big question is how quickly tele-
vision manufacturers will bring down
prices. The introduction of full high-
definition televisions in the
mid-2000s provides a model for how
quickly prices can decline. A 40-inch,
high-definition television, which cost
about $4,800 in 2005, sold for about
$560 in 2012, according to NPD Dis-
playSearch.
There should be no shortage of
competing 4K set makers to help
push prices down, at least to judge
by expected activity at the CES.
Westinghouse Digital LLC is plan-
ning to show, besides conventional
sizes, a 110-inch UHDTV set available
for custom order in the first quarter;
pricing hasn’t been announced.
Samsung Electronics Co., Sharp
Corp., and four Chinese manufactur-
ers including Haier Group and
Hisense Group also are expected to
debut ultra high-definition televisions
this year.
While hopes run high, manufac-
turers don’t see UHDTV as a silver
bullet to cure the industry’s ills.
Without changing how consumers
see the television and its value, 4K—
like 3-D before it—may not do much
to help TV makers, said Atsushi Mu-
rasawa, general manager of Toshiba’s
strategic-planning division.
And no one is assuming a surge of
the magnitude that accompanied the
advent of high definition, when reve-
nue from U.S. wholesale sales rose
nearly fourfold between 2003 and
the 2008 sales peak, according to the
Consumer Electronics Association.
“HDTV was like your first love,”
says Gary Shapiro, the group’s presi-
dent and chief executive. “Nothing
will be as good as that.”
—Don Clark
contributed to this article.
 Personal Technology: In 2013, talk
gets cheaper, TV gets smarter......22

Businesses Accordia Golf................25
This index of businesses mentioned in today’s issue AOL................................21
of The Wall Street Journal is intended to include all Apple.............................22
significant reference to companies. First reference to ArcelorMittal................32
Avis Budget Group.......21
the companies appears in bold face type in all articles
except those on page one and the editorial pages. Canada Drugs................29
Catalunya Carsharing...21
Eaton...............................7
Enterprise Holdings......21
Ethan Allen Interiors ..... 7
Fiat................................19
INDEX TO BUSINESSES
Finmeccanica .................. 9
Ford Motor....................19
General Motors.............19
Goldman Sachs Group..25
Google...........................22
Haier Group...................20
Hertz Global Holdings..21
HSBC...............................5
Hyundai Motor..............21
LG Electronics...............20
Microsoft.......................22
Mitsubishi Chemical
Holdings.....................11
Morgan Stanley............21
Nielsen Holdings N.V. .. 19
Noble.............................22
Novartis ........................ 23
PGM Holdings K.K........25
Posco.............................32
PSA Peugeot-Citroën...19
Rakuten.........................11
Renault..........................21
Roche Holding...............29
Royal Dutch Shell.........22 Corrections  Amplifications
Samsung Electronics....20
SciQuest..........................7 Readers can alert the London newsroom of The
Sharp.............................20 Wall Street Journal to any errors in news articles
Sony .............................. 20 by emailing wsjcontact@wsj.com or by calling
Sperry Software...........19 +44 (0)20 7842 9901.
Tokyo Electric Power....11
Toshiba.....................11,20
Toyota Motor................11
University of Volkswagen...................21 Zabeel Investments ..... 24
Minnesota..................14 Westinghouse Digital .. 20 Zipcar ............................ 21
THE WALL STREET JOURNAL. Thursday, January 3, 2013 | 21

BUSINESS & FINANCE

Avis Bids $500 Million Here’s How to Become

For Car-Sharing Zipcar
BY JOHN KELL ability to recruit members in the Avis expects the deal to lower
A Better Boss in 2013
Continued from page 19
tax-collecting service, Mr. Martin
says he saw an increase in the re-
In many cases, the cashier pays
for the free meal, not the com-
pany—an annoying, but effective,
U.S. and Europe led closely held En- the companies’ combined costs by turn rate after enclosing messages reason to self-monitor.
Car-sharing service Zipcar Inc. terprise Holdings Inc. and Hertz $50 million to $70 million a year. such as, “nine out of 10 people in You might think that paying
changed the car-rental business, but Global Holdings Inc. to offer com- Mr. Nelson said the synergies were Britain pay their tax on time,” on for better performance would ac-
its hourly rentals to young and ur- peting car-sharing services. tied to three components: lower tax forms. complish more than red phones or
ban customers proved a lousy busi- A year ago, the company ac- fleet costs, better fleet utilization Mr. Martin adds that managers lunch bills. If Kayak had paid de-
ness. quired a majority stake in Spain’s and increased revenue by targeting can use a “test and learn” ap- velopers to find bugs, they likely
The Cambridge, Mass.-based Catalunya Carsharing SA, known as corporate clients, one-way rentals proach to determine social norms. would have found them, but maybe
company signed up more than Avancar, which operates a fleet of and airport bookings. Start with small groups or loca- not in the way managers want.
760,000 members since its founding vehicles in Barcelona and Sant Cu- Mr. Nelson said Zipcar utilization tions, test messages and see The grandfather of a friend
in 2000 but struggled to post a con- gat del Valles. Earlier it entered the is low during weekdays but spikes whether there is a social norm to likes to give the (likely apocry-
sistent profit. On Wednesday, Zipcar U.K. market with an acquisition of during weekends, resulting in excess tap into. phal) example of a general in the
agreed to sell itself to Avis Budget Streetcar, London’s largest car club. fleet vehicles during the week that Another strategy: Frame a czarist Russian Army who tried to
Group Inc. for about $500 million, Zipcar sales have notched dou- often aren’t used. Avis, meanwhile, choice as leading to a potential fight the flea problem among his
or $12.25 a share, well above its re- ble-digit percentage gains in each has utilization that peaks during the loss rather than a gain. This can troops by offering a per-flea
cent trading price but below its ini- quarter since the company went midweek commercial-travel period create a sense of stress—and help finder’s fee.
tial-public-offering price. public in 2011, as membership and and has excess capacity on the managers get things done. But he got even bigger infesta-
Avis’s bid is a 49% premium to usage increased and the company weekends. Mr. Martin describes a study in tion, as the hairiest soldiers culti-
the car-sharing-network operator’s entered new markets in the U.S. and The deal would allow Avis to re- which a group of executives were vated scores of fleas to sell to
Monday close on the Nasdaq Stock abroad. duce the number of cars at Zipcar presented a proposal for an IT comrades, allowing everyone to
Market but a 32% discount to Zip- But sales growth has slowed and locations during the week, but also project. Twice as many in the profit from the bounty.
car’s $18 IPO price. Zipcar went profitability has been a greater chal- to use Avis’s excess weekend inven- group approved the proposal if the In the same way, if you pay
public in April 2011 and shot as high lenge for Zipcar. which posted tory to meet Zipcar’s strong week- company was predicted to lose software programmers to find
as $31.50 in its debut. But the losses each year since it was end demand. $500,000 if the proposal weren’t bugs in their programs, you may
shares have never closed above $30, founded. That trend was poised to Avis expects Zipcar to increase accepted, compared with a sce- end up with a similar bug infesta-
and have languished below $10 since end in 2012, when a strong third- its adjusted earnings in the second nario that predicted that the proj- tion. Everyone likes a bonus.
the company posted second-quarter quarter report in November led Zip- year after the deal closes, which is ect would lead to profits of The important piece is having
results last August. car to indicate it was on track to re- targeted for the spring. Avis also $500,000. some empathy, or a window into
The deal would vault Avis ahead cord a full year of profitability. backed its 2012 guidance. Lastly, Mr. Martin says that fa- what motivates others. Sometimes,
of its peers in the niche hourly When Zipcar went public, its big- Zipcar board has unanimously vorable outcomes almost double a bonus may work best. But other
rental market, which has grown to gest investors included former AOL backed the deal, and shareholders when we identify common ground times, it could be a big red phone.
nearly a $400 million business in chief Steve Case’s investment firm, representing about 32% of the with the other party in a negotia- —Ray Fisman and Tim Sullivan.
the U.S., Avis said. Revolution Partners, which owned shares outstanding have agreed to tion. Find similarities between you Mr. Fisman is the Lambert Family
“I’ve been somewhat dismissive about 20% of Zipcar as of August. vote in its support. and your customer—such as the Professor of Social Enterprise and
of car sharing in the past,” Avis Mr. Case is on Zipcar’s board. The agreement prohibits Zipcar car you drive or the age of your co-director of the Social
Chief Executive Ron Nelson said The Zipcar bid potentially is from seeking any other bids and has kids—and express them before you Enterprise Program at the
during a conference call. “But what Avis’s largest deal since it spent set the termination fee at $16.8 mil- start negotiating with them over a Columbia Business School. Mr.
I’ve come to realize is that car shar- roughly $1 billion in October 2011 to lion. contract or a price. Sullivan is the editorial director of
ing, particularly on the scale that take full control of Avis Europe. Avis Zipcar may provide information “Influence isn’t an art,” says Harvard Business Review Press.
Zipcar has achieved and will also had sought to acquire Dollar and hold talks with a third party Mr. Martin. My advice would be to Their book, “The Org: The
achieve, is complementary to our Thrifty, though it later backed away that makes an unsolicited acquisi- learn the science.” Underlying Logic of the Office,”
traditional business.” from an extended bidding war with tion proposal. But Avis has three —Parminder Bahra publishes on Jan. 8.
Zipcar shares were up 48% at Hertz, which closed on its acquisi- business days to adjust terms of its
$12.22 at midday on Wednesday. tion of Dollar Thrifty late last year. agreement if Zipcar’s board deter- Learn to Be Annoying Redo Your To-Do List
Avis was up 4.6% at $20.74, also on Mr. Nelson said Avis could help mines another proposal constitutes About every third visitor to You probably use some version
the Nasdaq market. Zipcar achieve better profitability a superior bid. Kayak.com’s “contact us” page en- of a to-do list to keep track of ev-
Zipcar has said the car-sharing by leveraging Avis’s fleet and infra- —Melodie Warner counters a phone number. Calling erything you need to do. Such lists
market could reach $10 billion in structure, as well as offer more ve- and David Benoit it sets off a big red phone in the seem like a good idea, but they
North America, Europe and Asia. Its hicles during peak rental periods. contributed to this article. travel company’s software engi- merely catalog tasks—and don’t
neering office, where it is an- help you accomplish them.
swered by a developer who likely Decades of research on goal

French, Spanish Car Markets Hit

would rather be doing almost any-
thing else.
The travel website’s managers
say the calls keep developers in
Continued from page 19 touch with the site and help re-
confidence will recover any time solve bugs quickly. The exercise
soon. also shows the value of annoyance
Indeed, some industry experts as a management tool.
reckon European car sales might Employees often wish managers
never return to levels seen during were a little more understanding,
the previous decade because of but people tend to associate the
changing consumer habits in a satu- idea of “understanding” with
rated market. “nice.” A little well-directed pain
“Europe may face a ‘car-less’ re- can be a good thing in getting
covery in the next decade, with stag- workers to focus on the tasks they
nant vehicle sales even when the might otherwise choose to forget,
[macro-economic situation] im- and to increase productivity.
European Pressphoto Agency
pursuit shows that when it comes
to execution, there are two major
pitfalls that keep us from doing
the things we intend to do.
First, we aren’t specific enough
about what exactly needs to hap-
pen—the actions we must take to
reach our goals.
If your goal is to make a good
impression on your boss, you must
break that down into component
actions, such as arranging a
weekly meeting or turning in re-
ports on time.
The second problem—which
lists don’t solve—is finding oppor-
tunities to take action. Achieving

proves,” said Morgan Stanley ana- Given that developers often any goal means grabbing hold of
lyst Stuart Pearson in a recent re- prefer programs to people, Kayak these opportunities before they
search note. founder Paul English says, making slip through your fingers. One so-
Peugeot and French rival Renault them deal directly with customers’ lution: If-then planning.
SA halted production for at least two questions drove them nuts. Not only decide what you need
weeks over the Christmas period to Once they heard the same com- to do, but also decide when and
prevent a buildup in inventory of fin- plaint two or three times, the en- where you will do it, in advance.
ished vehicles. Renault cars outside one of the company’s Paris dealerships last month gineers tended to stop and fix the The general format of an if-then
“The production figures for the code. As an added bonus, after tak- plan looks like this: If — occurs,
last quarter of 2012 won’t look at all plunged 32% in December and 25% to make inroads into Europe’s major ing his turn on customer-service then I will —.
good,” Mr. Roudier said. over the full year. markets, with its new registrations duty, an engineer can pass the With each action on your to-do
Peugeot posted a 14% fall in its Evaporating demand for new cars in France up 33% in December and phone—along with its grating list, add a when and where. You
registrations for December, and the in France caught up with Germany’s 28% for all of 2012. ring—down the line for someone can transfer your to-do list to your
company’s 2012 tally declined 18% Volkswagen AG, Europe’s biggest Hyundai sold more cars in France else to deal with. calendar if you prefer—just make
from 2011. auto maker by sales, whose broad than Fiat. A Hyundai spokesman at- Other companies have found sure that you pair what you need
Renault’s registrations declined model lineup and strong finances tributed the steep countercyclical novel ways to annoy workers into to do with details about when and
27% in France in December, with the have enabled it to gain market share gains to the launch of 10 new models better performance. For instance, where you’ll do it.
total for the full year off 22%. But in Europe at the expense of its over the past two years as well as some cafes, including the chain Au —Heidi Grant Halvorson. Ms.
Renault’s budget brand Dacia bene- smaller, unprofitable competitors. three face-lifts of existing vehicles. Bon Pain, promise customers a free Grant Halvorson is Associate
fited in a sense from the crimped fi- Volkswagen’s registrations shrank The young product lineup “is attrac- meal if the cashier fails to provide Director of the Motivation Science
nances of French households. Its 20% in December and 5.1% for the tive to consumers against the de- a receipt. It’s a way of making cus- Center at Columbia Business
sales were down just 4.4% in Decem- full year. pressed economic backdrop,” he said. tomers ensure the cashier records School. She is the author of
ber and 9.2% for the full year, while In contrast, South Korean auto —Christopher Bjork in Madrid the transaction rather than pock- “Succeed” and “Nine Things
the Renault brand’s registrations maker Hyundai Motor Co. continued contributed to this article. eting the cash. Successful People Do Differently.”
22 | Thursday, January 3, 2013
2013: Talk Gets Cheaper, TV Gets Smarter
BY WALTER S. MOSSBERG
Personal technology never
stops changing. Some new prod-
ucts and services are game chang-
ers, like Apple’s iPhone and iPad.
Others are clever twists or refine-
ments, like each
PERSONAL successive version
TECHNOLOGY of Google’s An-
droid platform,
which gets better and better. Oth-
ers are bold gambles, like Micro-
soft’s new Windows 8, which
hopes to combine both a tablet
experience and a traditional PC
environment in one operating sys-
tem. But there’s always something
new, from large companies and
small ones.
So here are a few things con-
sumers will likely see in technol-
ogy in 2013. Many of these began
to take shape in the past year, but
will be stronger trends in the new
year.
Tablets vs. PCs
While the iPad line, including
the new Mini, continues to domi-
nate the tablet market, Android-
based tablets are finally gaining
traction. But the bigger story is
that tablets will continue to erode
the role of laptop PCs.
Consumers are using tablets
for more and more tasks formerly
performed by laptops. Traditional
computers aren’t going away—
they still do certain tasks, like
heavy content creation, better
than tablets. But consumers seem,
at the very least, to be replacing
their laptops less often and spend-
ing discretionary funds on tablets,
which are gradually replacing an-
other device: the dedicated e-
reader. Many analysts had ex-
Cheap Talk: Republic Wireless offers the
Defy XT with a $19 unlimited plan.
Shell to Send Salvage Crew to Rig Off Alaskan Isle
BY BEN LEFEBVRE
Royal Dutch Shell PLC and
emergency responders are prepar-
ing to send a salvage crew to an oil
rig that ran aground this week off
the southern coast of Alaska, a com-
pany spokesman said Wednesday.
Cold weather and high waves
had prevented the salvage crews
from boarding the Kulluk, a drilling
rig owned by Shell and operated by
Switzerland-based contract driller
Noble Corp., which struck Sitkalidak
Island, an uninhabited area about
300 miles southwest of Anchorage
in the Gulf of Alaska near the Pacific
Ocean, late Monday.
Aerial inspections would run
BUSINESS & FINANCE
pected Windows 8 to halt or
reverse this trend, and it may yet
do so. But early indications aren’t
encouraging for that outcome.
Integrating Hardware
And Software
Meanwhile, another big trend
is emerging: Apple’s model of one
company making the entire de-
vice—hardware, operating system,
core apps and an online ecosys-
tem—is beginning to take hold
elsewhere. In October, Microsoft
unveiled its first computer, the
Surface tablet. The company will
Apple
follow it up as soon as this month
with a second, more powerful ver-
sion. I wouldn’t be surprised if
Microsoft also made its own
smartphone this year.
Google is also moving in Ap-
ple’s direction. It now sells three
devices—a smartphone and two
tablets—under its Nexus brand.
These products are built by part-
ner companies, but designed by
Google. Now that Google owns its
own hardware company, Motorola
Mobility, I expect it to get deeper
into the integrated model. Motor-
ola, freshly stocked with former
Google executives, is reported to
be building advanced new hard-
ware devices tightly integrated
with Android.
Rethinking Television
Samsung and others already
make TVs that can connect to the
Internet, and stream Internet
video and run tablet-type apps,
without any special set-top box.
But I find them clumsy, and their
“smart TV” functions haven’t
taken off with consumers yet. This
may be the year they do.
The biggest expectation is that
Richer Music: The $700 Astell & Kern AK100 plays
much higher fidelity digital music.
throughout Wednesday to inspect
the rig, Shell and the U.S. Coast
Guard said. The weather had cleared
enough that emergency responders
would soon be able to board the
Kulluk and assess whether the rig
had borne significant damage, Shell
spokesman Scott Scheffler said.
The rig, which until late last year
had been drilling the tops of explor-
atory wells in the Alaskan Arctic,
has inches-thick steel walls to ward
against punctures, but it lacks
equipment to propel itself through
choppy seas. The rig was carrying
151,000 gallons of diesel fuel and lu-
bricants used for its own operation.
The Kulluk has experienced trou-
ble since Friday, when the tug boat
Apple’s television interface
Apple, which has been working
hard on the problem, will finally
unveil its long-rumored TV this
year, with the goal of greatly sim-
plifying the TV and smoothly
melding Internet and cable con-
tent. Many, including me, thought
it might appear in 2012, but the
company reportedly ran into diffi-
culties in negotiating with media
companies for content rights.
Meanwhile, Apple’s tiny, $99 Ap-
ple TV box, while still a relatively
small seller, is gaining popularity,
partly because the company has
built into its laptops, tablets and
phones a feature called AirPlay
which can use an Apple TV box to
wirelessly stream audio and video
to a TV.
Cheaper Smartphones
and Plans
Smartphones are everywhere
in the developed world, but most
Body Checks: The Basis, part of the crop of new
wristband monitors, measures resting heart rate.
pulling the rig toward Seattle for
maintenance experienced engine
failure during a storm near Kodiak,
leaving the rig adrift. Other tug
boats arrived Sunday but by the fol-
lowing day were fighting 35- to 45-
foot seas and 50-knot winds. Tow
cables repeatedly slipped from the
Kulluk, and the rig crashed into the
island’s shore late Monday. All crew
had been earlier evacuated.
The accident gives ammunition
to critics of Arctic drilling, who
have said the region’s extreme
weather and remoteness make the
chances of an oil spill or worker in-
juries too high. Although the Kulluk
now appears unlikely to spill fuel
into the waters, the accident raises
are still expensive—around $200
after a carrier subsidy that re-
quires a two-year contract. And
the monthly service fees can eas-
ily approach or exceed $100, espe-
cially if you use a lot of data,
which is the very essence of a
smartphone’s purpose.
There are already some smart-
phones, usually older, less capable
or less popular models, available
for $99 or $49 or even free with a
contract. But I expect to see bet-
ter smartphones at lower prices in
2013, especially those running the
dominant Android platform, and
the handsome, but low-selling
Windows Phone platform from Mi-
crosoft.
In addition, some companies
are beginning to offer really cheap
monthly plans. One example: Re-
public Wireless, which offers un-
limited voice, text and data for
$19 a month on a small, Android
phone, the Motorola Defy XT, us-
ing older software that has been
modified to make voice calls
where possible over Wi-Fi instead
of a costlier carrier network.
Costlier, Better Music Players
Audiophiles and recording art-
ists have never much liked the
compressed music files that now
fill every iPod and smartphone.
They complain that the richness
of the original recording is lost
because the song files are opti-
mized for minimum space and
download time, and because they
are often made from CDs, not
from the master studio tapes.
So in 2013, there will be a push
to sell a new kind of portable mu-
sic player that can handle high
quality music. The Korean elec-
tronics company, iRiver, has intro-
fears that despite costly precautions
a working rig in the future could be
forced adrift and spill petroleum in
an area not easily accessible to
cleanup crews. Shell has paid $292
million since 2006 to outfit the Kul-
luk so it could operate in Arctic con-
ditions between July and October.
“It’s clear from multiple inci-
dents that oil companies cannot cur-
rently drill safely in the foreboding
conditions of the Arctic, and drilling
expansion could prove disastrous
for this sensitive environment,” Rep.
Ed Markey (D., Mass.) said in a
statement Wednesday.
The Kulluk had been on its way
to Seattle for maintenance work,
Shell said in a statement Monday.
THE WALL STREET JOURNAL.
duced the Astell & Kern AK100, a
$700 player that can play much
higher fidelity digital music. The
legendary rocker Neil Young is
backing a second venture, Pono,
which is doing something similar.
In addition to the price, there’s
another downside: The files can
be 10 to 20 times as large as stan-
dard digital songs, so many fewer
tracks fit in a given amount of
memory.
Fitness and Health Monitors
In 2012, sensor-packed wrist-
bands like the Nike+ FuelBand and
the Jawbone Up were introduced
to measure how many steps peo-
ple take in a day, how well they
sleep, and other indicators of
health and fitness. I expect this
trend to continue in 2013, in dif-
ferent forms and with more so-
phisticated sensors. One new
product, the Basis, is a watch with
sensors on the back that measures
resting heart rate. All of these de-
vices tie into mobile apps or Web-
based dashboards to track prog-
ress and offer advice.
Internet-Controlled
Everything
Another trend I expect to see
in 2013 is an expansion of apps
and devices that let people wire-
lessly control many everyday ob-
jects, from light bulbs to appli-
ances, using low-powered
networks and smartphones or tab-
lets. And we’ll likely see more
smart devices with such intelli-
gence built in, similar to the Nest
intelligent thermostat, which is
Wi-Fi powered.
These are just a few of the
trends likely to mark the con-
sumer tech landscape in 2013.
Others will also be prominent,
most notably the continued reli-
ance on the cloud, or remote serv-
ers, to store content and work col-
laboratively. One thing is sure:
There are certain to be develop-
ments that will surprise us all,
and can’t be forecast here.
Find all of Walt Mossberg’s col-
umns and videos at the All Things
Digital website, walt.allth-
ingsd.com. Email him at moss-
berg@wsj.com.
The Year Ahead>>
Scan this code to
watch a video on
what’s ahead for
tech in 2013, or
see it at WSJ.com/
PersonalTech.
The rig’s grounding didn’t affect
drilling operations and doesn’t in-
volve any possibility of crude-oil re-
lease, Shell said that day.
Shell used the Kulluk and an-
other rig, Noble’s Discoverer, to be-
gin drilling exploratory wells in the
Arctic Ocean off Alaska’s northern
coast last year, the first such opera-
tions in U.S. Arctic waters in more
than two decades.
Shell said it would invest $5 bil-
lion to explore for oil and gas in the
Arctic, but the project has been rid-
dled with accidents and missed
schedules. In July, the Discoverer
slipped its moorings while anchored
off the Alaskan coast and narrowly
missed crashing into the shore.
THE WALL STREET JOURNAL.
Novartis Pitch
Is About More
Than the Pills
BY MARTA FALCONI
Swiss drug maker Novartis AG is
struggling with a raft of challenges,
shared across the industry. Its best-
selling drug Diovan, which treats
high blood pressure, has lost patent
protection and the number of new
products coming out of its labs seems
too small to offset the sales lost to
cheaper copycat products. Making
matters worse, cash-strapped govern-
ments in Europe are negotiating hard
to keep a lid on prices.
So it is probably a
good thing that Jo-
seph Jimenez, who
took over as CEO in
2010, thrives on com-
petition. Trained as a competitive
swimmer during his university
years, the 51-year-old American en-
joys a fast-paced environment. His
previous experience in the consumer
goods industry, including H.J. Heinz
Co., also came in handy for the top
job at Novartis. Mr. Jimenez, who
had no scientific background when
he started, took a crash course on
the pharmaceutical business, sitting
down every morning with company
scientists to learn about Novartis’s
drugs, their discovery and develop-
ment, and the diseases they treat.
Mr. Jimenez recently sat down
with The Wall Street Journal at the
Novartis campus in Basel to discuss
how he tackles some of these chal-
lenges. Edited excerpts:
WSJ: What changes have you made
since joining Novartis?
Mr. Jimenez: I reduced the amount of
time we spent on internal processes
to spend more time externally with
our customers, with regulators and
with payers. People would spend time
writing very large Power Point pre-
sentations rather than talking to pay-
ers or helping regulators understand
what we were doing at Novartis.
WSJ: Were there other important
changes?
Mr. Jimenez: I also started to shift
our business away from a transac-
tional model that was focused on
physically selling the drugs to deliv-
ering an outcome-based approach to
add value beyond just the pill. I re-
ally believe that in the future, com-
panies like Novartis are going to be
paid on patient outcomes as op-
posed to selling the pill.
WSJ: Can you give an example?
Mr. Jimenez: We have seen a high
level of interest from European
countries in such an arrangement
for our bone drug Aclasta. Let’s take
a patient who suffered a hip frac-
ture after having been treated with
Aclasta—we would reimburse this
patient for related expenses. It’s not
quite a guarantee that you’re not
going to have a [health issue] if you
are infused with Aclasta but it is a
move down that path of being paid
for the positive outcome as opposed
to just the individual transaction.
WSJ: Why are you so confident that
this is the direction the pharmaceu-
tical industry will take?
Mr. Jimenez: Think about the driving
forces. Many health-care systems
around the world are under intense
Thursday, January 3, 2013 | 23
MARKETS
financial pressure and would prefer
to pay for a patient who is actually
Elisabeth Real for The Wall Street Journal
getting a result and feeling better.
You are seeing more and more pay-
ers moving down the path of want-
ing to reimburse for an outcome.
WSJ: How are you dealing with cur-
rent issues, such as price pressure?
Mr. Jimenez: In Europe particularly,
price pressure has intensified be-
cause of the debt crisis. Health-care
systems around Europe are cutting ‘In the future, companies like Novartis are going to be paid on patient outcomes as opposed to selling the pill,’ says
pharmaceutical prices pretty dra- Joseph Jimenez, the Novartis CEO. He says the European debt crisis has intensified price pressures.
matically. We have engaged those
governments and shown them that
by making arbitrary cuts they are ADVERTISEMENT
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limiting access to these drugs. We
don’t stop delivery of lifesaving
drugs, but price cuts create a disin-
centive for us to build sales force.
AUCTIONS BUSINESS OPPORTUNITIES
WSJ: What else do you do?
Mr. Jimenez: We show payers that
our drugs can lower total health-   
care costs. Pharmaceuticals are gen-        
    
  
erally just 10% of the total health-     
care cost. That means that 90% is  0. 1 
  - 
hospitalization, physician costs,        
       
nursing costs. Many times our drugs                    
prevent people from going into the                     ! 
      "           
hospital, and so we encourage health !   "  #$         #
systems to look at the entire cost
        $% & '( ) (     
      % $* +, -
before deciding where to cut.              . '/ % .011112344.1.02 .011112544.1.02
We are also focusing our R&D          
0 $6 ( ( %&'(%'%)(% 7 ( %&'(%'%)(% 7
money on drugs that have delivered        
       
'/ .111 % +&$'- .111 %+&$'-
against the highest unmet medical 8'  %&')('%)(*  %&')('%)(*
         7 .911  +&$'- 7 .911  +&$'-
need. If you have a drug that is going : '/ &/ .11114 / &/ .11114 /
  
to change patients’ lives, those coun- 8' ( 8$ .;1 8$ .;1
tries in Europe will reimburse it. 3 / !& )&')('%)(* 7 ..11 % )&')('%)(* 7 .311 %
'&< +&$'- +&$'-
BUSINESS OPPORTUNITIES 5 '/ 8 %+')('%)(* %+')('%)(*
WSJ: Any recent successes with that 6' 7 .511 %+&$'- 7 .511 %+&$'-
strategy? = '/ %+')('%)(* %+')('%)(*
&< 7 .5:1 % +&$'- 7 .=11 %+&$'-
Mr. Jimenez: We just got Gilenya—
'    "   ! >"    +!>- "  
our new drug for multiple sclero-          ', -.'/. 
sis—approved and reimbursed in   './.'/'  " % ?2.4..4003393.90031..33 
Greece. The government recognized (@ 4?2.4..40013.0.3   # " 4 7 "  %"%
< +  " -
that this—a pill rather than an in-
jection—was a breakthrough ther-
apy. Many times if you come out
with a me-too drug there isn’t as
much need to reimburse it.
WSJ: So you have a strategy for Eu-
rope, but growth seems to be else-
where.
Mr. Jimenez: We are looking at tradi-
tional growth markets like China, Rus-
sia, Brazil and India. But we also be-
lieve that Africa, particularly sub-
Saharan Africa, is going to be a very à As with all investments,
strong growth market. Maybe not in appropriate advice should
the next five years but five to 15 years. be obtained prior to
WSJ: Are you thinking of any spe- entering into any
cific country? binding contract. à
Mr. Jimenez: Countries like Tanzania,
Kenya, and Nigeria, whose econo-
mies are growing 5% to 7%. These CAPITAL AVAILABLE
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24 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

BUSINESS BRIEFS BUSINESS & FINANCE

 FINANCE
CVC acquires Italy’s Cerved
Private equity company CVC
Capital Partners acquired Italian
business information provider Cerved
for €1.13 billion ($1.49 billion),
according to a press release
Wednesday.
CVC acquired the company from
fellow private equity funds Bain
Capital and Clessidra.
Cerved owns and manages a
database of corporate and financial
information on Italian companies and
banks. Revenues in 2012 were €292
million, the release said.
Credit Suisse, Deutsche Bank and
HSBC have provided committed
financing for the transaction.
Serena Ruffoni
 AUTOS
Hyundai Downbeat for Year
Hyundai Motor Group forecast its
slowest global sales growth in a
decade for this year, citing the
sluggish global economy, capacity
constraints and an expected recovery
by Japanese auto makers.
Hyundai Motor Co. and affiliate Kia
Motors Corp., which together form the
world’s fifth-biggest car maker by
sales, on Wednesday predicted a
combined 4.1% increase in global sales
this year to 7.41 million vehicles. That
would be the group’s lowest rate since
2003 and half of last year’s growth for
a group that has been one of the
world’s fastest-growing auto makers in
recent years.
“We expect market conditions at
home and abroad to be very tough in

Justin Cook for The Wall Street Journal

 ENERGY
E.ON Sells Part of KET Stake
German utility E.ON AG said
Wednesday it has agreed to sell a
large part of its stake in one of its
regional energy providers to a
consortium of municipalities for about
€500 million, or $660 million.
The group of municipalities, known
as Kommunaler Energiezweckverband
2013 because of the European debt
crisis and a slowing global economy,”
Chairman Chung Mong-koo said in an
annual speech at the group’s
headquarters in southern Seoul.
Car makers have grappled with the
weak global economy for several
years. But Hyundai is expected to face
a new challenge this year from
Japanese auto makers, amid signals Contractors huddle as a paint crew works during renovations at a PNC Bank office in Raleigh, N.C. The lender is
that Tokyo will weaken the yen to expanding in the U.S. Southeast through the purchase of the unprofitable U.S. retail unit of Royal Bank of Canada.

PNC’s Southern Lesson

Thueringen, or KET, will acquire 43% of
E.ON Thueringer Energie and as part
of the deal will assume about €400
million in shareholder loans to the
regional utility.
support the domestic economy. A
weaker yen makes vehicles built in
Japan more price competitive abroad.
Kyong-Ae Choi

Covers Football Colors

With the sale of the stake, E.ON
has achieved more than €15 billion in
asset disposals a year earlier than
planned. E.ON, which late last year
indicated it would consider more
divestitures, said Wednesday that it
might sell its remaining 10% stake in
Thueringer Energie “shortly.”
The company has sold a string of
assets—including a stake in Russia’s
natural gas giant Gazprom OAO, its
regulated U.S. business and its gas
pipeline company Open Grid Europe—
as it aims to cut debt and refocus its
business following an accelerated exit
from nuclear power in its home
market.
Thueringer Energie is based in the
eastern German town of Erfurt and
supplies residential, commercial and
industrial customers in Thuringia and
parts of Saxony and Saxony-Anhalt
with electricity, natural gas and district
heat. The company also supplies more
than 25 municipal utilities with
electricity for their customers. Its
subsidiary Thueringer Energienetze
operates a power grid of about 39,000
kilometers, or 24,230 miles, and a gas
grid of more than 6,000 kilometers in
Thuringia.
Jan Hromadko
ADVERTISEMENT
 RESOURCES
India Ponders Gold Tax Rise
India’s government may again raise
import taxes on gold in an effort to
curb demand for the metal, one of the
biggest contributors to the country’s
widening current-account deficit.
“We may be left with no choice but
to make it a little more expensive to
import gold,” Finance Minister P.
Chidambaram said at a media briefing
Wednesday. “This matter is under the
government’s consideration.” He didn’t
say what steps the government is
considering, but two finance ministry
officials said the government may
raise the import tax on gold to 5%
from 4% within a week, and to 6% in
the federal budget, which is usually
presented toward the end of February.
India is the world’s largest
consumer of gold, and an estimated
60% to 65% is bought as jewelry.
Prasanta Sahu, Biman Mukherji
and Rajesh Roy
Online>>
For more breaking news, go to
WSJ.com/Business and follow
@wsjbusiness on Twitter.
BY ROBIN SIDEL
RALEIGH, N.C.—Executives at
PNC Financial Services Group Inc.
knew expanding into the U.S. South-
east would bring challenges. But
they didn’t expect the color of one
of their debit cards to cause one of
the hiccups.
Soon after the Pittsburgh com-
pany arrived in the region following
a March acquisition, some fans of
the University of Alabama’s Crimson
Tide football team grumbled that
PNC’s orange-and-blue debit cards
reminded them of archrival Auburn
University.
“Orange just doesn’t sell in Tus-
caloosa,” said Lou Cestello, PNC’s
regional president for the South-
east. The bank started offering debit
cards featuring an American flag in-
stead.
It is one of the many lessons
PNC has learned since buying the
unprofitable U.S. retail unit of Royal
Bank of Canada for $3.45 billion, a
deal that gave PNC the fifth-largest
U.S. branch network, with 2,887 of-
“We’re not underestimating the
degree of difficulty to pull this off,
but the opportunity to substantially
grow the company organically, with
the people we now have on the
ground, is huge,” Bill Demchak, PNC
president, said in a recent presenta-
tion to investors.
PNC has quietly been one of the
banking industry’s most aggressive
buyers over the past decade, scoop-
ing up banks that pushed it west
and south from its roots. The RBC
deal was PNC’s seventh acquisition
in eight years, including the take-
over of flailing National City Corp.
of Cleveland at the height of the fi-
nancial crisis in 2008.
PNC is the nation’s seventh-larg-
est bank, with $300 billion in assets
and a presence in 19 states. The RBC
deal gave PNC an additional $19 bil-
lion of deposits, $16 billion of loans
and branches in North Carolina,
South Carolina, Florida, Alabama,
Georgia and Virginia.
PNC has quietly been one
credit and sees signs that the new
bank is on the right track.
“It is important to me that they
know who Jill Heath is and who
Mulkey Engineering is,” she said.
But PNC faces intense competi-
tion in the new markets from banks
ranging from behemoths Wells
Fargo and Bank of America Corp. to
the likes of North State Bank, a
seven-branch subsidiary of North
State Bancorp.
PNC laid off roughly 650 employ-
ees, or 13% of the RBC workforce, as
a result of the RBC deal. PNC execu-
tives said that those numbers could
have been far larger if the RBC busi-
ness had been acquired by a bank
that already had a presence in the
region.
Since March, PNC has eliminated
about one-third of 1,000 bank jobs in
Rocky Mount, a city of 57,000 that is
about an hour east of Raleigh. Some
of those back-office jobs have been
moved to other cities; some have
been eliminated altogether.
“Any loss of jobs in a community
of our size is significant,” said Wil-

Legal Notices
fices.
Expanding via acquisition is one
of the few ways a bank can pump up
profit amid low interest rates, tepid
INTERNATIONAL NOTICES loan demand and costly new regula-
tions. But such deals are notoriously
difficult because judging a rival’s
   loan book and customer relation-
         ! ships is difficult for even the most
"  # $%&'() seasoned banker.
"  ) The RBC deal brought PNC a
mountain of bad loans and a slew of
*
technology and financial products
   +  ',& "-)
 ./  + 0+ that weren’t as advanced as those
* +/ +  ($'$ offered by competitors Wells Fargo
& Co. and BB&T Corp., according to
  +/ *  people familiar with the RBC opera-
  # $$$$'" ) tions.
Now, the bank is trying to bol-
ster the RBC branches’ perform-
  12 34 1 /   *   +/  ance—and to prove its commitment
 *   5 *      
to places like Rocky Mount, N.C.,
# $$$$'" )   2 2   +4  1  1
  1 61   7 8   1 !
which has lost hundreds of jobs
since PNC moved in. The company is
* 1 7   8  ($'7 working with a local community col-
lege to sponsor a program that in-
1    2    troduces students to financial serv-
       ices and trains them for bank-teller
and collections jobs.
of the banking industry’s
most aggressive buyers
over the past decade.
PNC has moved 150 employees
into the Southeast, sometimes
teaming up with former RBC bank-
ers who know the region but are
less familiar with PNC’s wealth-
management and other financial
products. It also is sprucing up the
RBC branches and has introduced its
well-regarded mobile-banking prod-
ucts to retail customers.
For small- and medium-business
customers, some of whom were frus-
trated by RBC’s lack of financial prod-
ucts, the bank has introduced a busi-
ness-to-business payment card that
helps with billing and accounting.
Jill Heath, president and chief
executive of Mulkey Inc., a Raleigh
civil-engineering firm, was an RBC
customer since 2010 and hadn’t
heard of PNC. Since then, she has
renegotiated the company’s line of
liam Carver, president of Nash Com-
munity College in Rocky Mount.
To help ease the blow, PNC has
teamed up with the school to offer a
weeklong program that trains local
residents for jobs in the banking in-
dustry. Graduates are guaranteed an
interview with PNC.
Paula Fryland, who is PNC’s new
regional president for the eastern
Carolinas, spends much of her time
promoting the bank. That means let-
ting customers know that she re-
cently bought a house in Raleigh,
which was the corporate headquar-
ters of the RBC operations in the U.S.
She also spends time pressing
the flesh around the area—from
hosting a lunch for a regional ac-
counting firm to attending a fund-
raising gala for a local hospital. And
she has learned to stay out of the ri-
valries between the basketball
teams of Duke University, University
of North Carolina and North Caro-
lina State University.
“I’m trying to stay on the side-
lines and support them all,” she said
with a laugh.
THE WALL STREET JOURNAL. Thursday, January 3, 2013 | 25

MARKETS

Is Japan Ready for a Hostile-Deal Era?

Unsolicited Bid for Golf-Course Operator May Succeed, but Such Takeovers Appear Far From Becoming Routine
BY KANA INAGAKI and institutional customers that billion in the year to March this ful hostile takeovers there’s tremen-
tend to put long-term business in- year, almost five times PGM’s net dous value to be realized,” Mr.
A rare unsolicited-takeover bat-
Taking Over terests before concerns about the profit of ¥2.3 billion for the fiscal Eadon-Clarke said. “On the other
tle in Japan is drawing the scrutiny Number of hostile takeover share price. Until the bid, Accordia’s year through December 2011. hand, it’s been waiting to be real-
of bankers, as they watch whether bids compared with all Through shares had been down 25% over the To persuade shareholders not to ized for decades.”
hostility could replace the bows and takeover bids in Japan November past two years. sell to PGM, Accordia fired back by The country’s first all-domestic
firm handshakes that characterize 100 “If PGM does succeed, it sets a raising its annual dividend forecast takeover battle dates to 2000, when
the domestic deals precedent for similar companies de- Yoshiaki Murakami, a former trade
DEAL market. 80 fined by relatively new listings and ministry official, attempted, and
Total
JOURNAL The courtship be- relatively young shareholder bases,” The hostile takeover failed, to win a controlling stake in
60
tween two golf- Hostile said Peter Eadon-Clarke, head of real-estate firm Shoei Co. Several
course operators at the center of Asian economics at Macquarie Secu- offer by PGM Holdings deals have since collapsed, including
40
the saga began like most other po- rities. represented a 54% Oji Paper Co.’s bid for smaller rival
tential tie-ups in Japan. PGM Hold- 20 PGM’s ¥81,000-per-share bid Hokuetsu Paper Mills Ltd. in 2006,
ings K.K. attempted to consolidate represented a 54% premium to Ac- premium to Accordia’s and New York investment fund Steel
with Japan’s No. 1 golf-course oper- 0 cordia’s three-month average share three-month average Partners Japan Strategic Fund’s at-
ator, Accordia Golf Co., last Janu- ’91 2001 '11 price. In Tokyo trading Friday, Ac- tempts to buy both Sapporo Hold-
ary, but talks foundered. Source: Recof Corp. cordia closed at ¥80,400, up 51% share price. ings Ltd. and Bull-Dog Sauce Co. in
Then PGM went hostile. In mid- The Wall Street Journal from Nov. 15, when PGM announced 2007.
November, it launched a ¥42.5 bil- its bid after the market closed. The What is needed to open up Ja-
lion (US$490 million) unsolicited of- market has been closed since then. to ¥5,500 per share from ¥1,600 and pan’s M&A market to unsolicited
fer to buy up to 50.1% of Accordia takeover of the golf-course operator PGM President Arihiro Kanda, announcing a targeted payout ratio bids, says Toshiaki Oguchi, a repre-
directly from shareholders. PGM is successful, it would be an excep- who was an Accordia executive until of 90% beginning in the fiscal year sentative director at the Japanese
was set up by Dallas-based private- tion. Bankers say it is unclear if May 2011, said in November that a starting April 2013. unit of U.K.-based investment group
equity firm Lone Star Funds in 2001 PGM’s bid will succeed, especially combined company would have an Daiwa Securities Group Inc. is Governance for Owners LLP, is suc-
and listed its shares in 2005, while since it is difficult to predict how edge in a market where interest in advising Accordia, while Mita Secu- cessful takeovers by well-known
Accordia was launched by Goldman individual investors, who make up golf has declined as the economy rities Co. and Barclays PLC are ad- Japanese executives.
Sachs Group Inc. in 2003. It went around 40% of Accordia’s sharehold- slowed in recent years. vising PGM. “There needs to be some kind of
public in 2006. ers, will respond. PGM’s offer is On Dec. 3, Accordia said it “sin- Ultimately, even if PGM’s bid for discipline imposed on the market
“Takeover bids are a common open until Jan. 17. cerely urges all shareholders to not Accordia succeeds, Japan is unlikely such as hostile takeovers so that
practice overseas, so we thought The gambit could prove a win- subscribe to the tender offer” be- to welcome hostile deals as a regu- companies do not ignore sagging
‘why not’ in Japan,” PGM spokes- ning one, however, because Accordia cause PGM wasn’t paying enough, lar practice. share prices,” said Mr. Oguchi. He
woman Tomoko Thompson said. doesn’t have a stable base of and cited its higher earnings levels. “If we ever do get an active mar- declined to comment specifically on
But observers say even if the friendly shareholders such as banks Accordia logged a net profit of ¥11.3 ket for corporate control or success- the PGM bid for Accordia.

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Leverage GH USD OT OT GGY 12/14 USD NS.00 7.1 8.1 -0.1
Pictet-Emerging Markets-P USD GL EQ LUX 01/02 USD 536.92 1.7 14.2 -6.7
MultiAdv Arb CHF Hdg OT OT JEY 12/14 CHF NS.00 3.6 3.4 -0.3 Pictet-Eu Equities Sel-P EUR EU EQ LUX 12/31 EUR 489.54 20.6 21.7 2.9
MultiAdv Arb EUR Hdg OT OT JEY 12/14 EUR NS.00 3.9 3.8 0.5 Pictet-EUR Bonds-P EU BD LUX 12/31 EUR 461.21 13.7 13.7 7.6
MultiAdv Arb GBP Hdg OT OT JEY 12/14 GBP NS.00 4.3 4.2 0.6 Pictet-EUR Bonds-Pdy EU BD LUX 12/31 EUR 306.04 13.7 13.7 7.6
n BANC INTERNACIONAL D'ANDORRA. BANCA MORA.
MultiAdv Arb S EUR OT OT JEY 12/14 EUR 118.41 5.3 5.2 1.8 Pictet-EUR Corporate Bonds-P EU BD LUX 12/31 EUR 172.76 14.2 14.2 6.3
Avgd. Meritxell 96, Andorra la Vella. Andorra. Ph. +376.884884 www.bibm.ad MultiAdv Arb S GBP OT OT JEY 12/14 GBP 124.60 5.7 5.6 2.0 Pictet-EUR Corporate Bonds-Pdy EU BD LUX 12/31 EUR 104.73 14.2 14.2 6.3 n YUKI MANAGEMENT & RESEARCH
Andfs. Anglaterra UK EQ AND 11/16 GBP 8.47 2.8 3.6 14.9
MultiAdv Arb S USD OT OT JEY 12/14 USD 135.34 5.6 5.5 1.9 Pictet-EUR High Yield-P EU BD LUX 12/31 EUR 198.52 25.5 25.5 7.8
Andfs. Borsa Global GL EQ AND 12/28 EUR 5.91 4.2 5.0 -5.7
Andfs. Emergents GL EQ AND 11/02 USD 14.77 -20.4 -19.2 -4.7 MultiAdv Arb USD OT OT JEY 12/14 USD NS.00 4.2 4.1 0.6 Pictet-EUR High Yield-Pdy EU BD LUX 12/31 EUR 91.01 25.5 25.5 7.8
Pictet-Europe Index-P EUR EU EQ LUX 12/31 EUR 121.29 18.2 18.2 3.6 n YMR-N Series
Andfs. Espanya EU EQ AND 12/28 EUR 10.33 1.3 3.6 -5.1
Andfs. Estats Units US EQ AND 12/28 USD 16.12 9.7 10.5 0.7
n HSBC Uni-folio Pictet-European Sust Eq-P EUR EU EQ LUX 12/31 EUR 156.77 14.5 15.6 2.2 YMR-N Growth Fund JP EQ IRL 12/28 JPY 8678.00 12.9 15.0 -4.0
Andfs. Europa EU EQ AND 12/28 EUR 6.35 7.4 9.1 -7.0 Asian AdbantEdge EUR OT EQ JEY 12/14 EUR NS.00 -0.1 -0.4 -6.0 Pictet-Glo Emerging Debt-P USD GL BD LUX 12/31 USD 328.03 16.3 16.3 11.7
Andfs. Franca EU EQ AND 12/28 EUR 9.12 15.8 18.1 -2.1 Asian AdvantEdge OT EQ JEY 12/14 USD NS.00 0.8 0.7 -5.3 Pictet-Glo Emerging Debt-Pdy USD GL BD LUX 12/31 USD 184.20 16.3 16.3 11.6 n Yuki 77 Series
Andfs. Japo JP EQ AND 12/28 JPY 469.85 17.9 18.6 -2.7 Emerg AdvantEdge OT EQ JEY 09/28 USD 151.22 3.4 -2.4 -5.5 Pictet-Greater China-P USD AS EQ LUX 01/02 USD 390.80 2.1 23.2 -1.3
JEY Pictet-Indian Equities-P USD EA EQ LUX 01/02 USD 314.80 2.1 25.2 -14.1 Yuki 77 General JP EQ IRL 12/28 JPY 5268.00 13.4 15.0 -4.5
Andfs. Plus Dollars US BA AND 10/22 USD 9.66 2.3 3.0 6.2 Emerg AdvantEdge EUR OT EQ 09/28 EUR 82.99 2.8 -3.0 -5.9
Andfs. RF Dolars US BD AND 12/28 USD 12.22 5.4 5.6 1.8 Europ AdvantEdge EUR OT EQ JEY 06/30 EUR 127.84 -3.4 -1.3 2.2 Pictet-Japan Index-P JPY JP EQ LUX 01/02 JPY 8731.47 0.0 21.2 -1.0
Pictet-Japanese Eq Opp-P JPY JP EQ LUX 01/02 JPY 4742.85 0.0 21.6 1.8 n Yuki Asia Umbrella Series
Andfs. RF Euros EU BD AND 12/28 EUR 11.56 4.8 4.9 2.9 Europ AdvantEdge USD OT EQ JEY 06/30 USD 135.07 2.0 4.3 5.1
Andorfons EU BD AND 12/28 EUR 15.30 5.3 5.3 3.2 Pictet-Japanese Eq Sel-I JPY JP EQ LUX 01/02 JPY 7900.24 0.0 21.6 -0.2 Yuki Rebounding Gro Fd JP EQ IRL 12/28 JPY 9157.00 12.9 14.3 NS
Real AdvantEdge EUR OT OT JEY 04/30 EUR 104.69 1.3 -9.5 -1.9
Andorfons Alternative Premium GL EQ AND 11/30 EUR 93.81 0.6 0.0 -2.8 Pictet-Japanese Eq Sel-P JPY JP EQ LUX 01/02 JPY 7519.84 0.0 20.8 -0.8
Real AdvantEdge USD OT OT JEY 04/30 USD 105.31 1.5 -8.8 -1.7
Andorfons Mix 30 EU BA AND 12/28 EUR 9.82 5.4 5.7 -0.1 GGY
Pictet-Pac (ExJpn) Idx-P USD AS EQ LUX 01/02 USD 349.47 2.0 27.2 5.2 n Yuki Chugoku Series
Trading AdvantEdge OT OT 12/14 USD 144.17 -4.0 -4.1 -1.9 Pictet-Piclife-P CHF OT OT LUX 12/31 CHF 836.14 8.6 8.6 2.9
Andorfons Mix 60 EU BA AND 12/19 EUR 8.96 4.4 7.1 -2.5 Trading AdvantEdge EUR OT OT GGY 12/14 EUR 130.33 -4.1 -4.2 -1.8 Yuki Chugoku Jpn Gen JP EQ IRL 12/28 JPY 6198.00 14.7 16.4 -3.9
Pictet-Premium Brands-P EUR OT EQ LUX 12/31 EUR 104.95 20.3 20.3 5.9
Trading AdvantEdge GBP OT OT GGY 12/14 GBP 139.15 -3.7 -3.8 -1.7 Pictet-Russian Equities-P USD EE EQ LUX 12/31 USD 65.74 16.3 16.3 -10.2 Yuki Chugoku JpnLowP JP EQ IRL 12/28 JPY 6417.00 2.7 3.6 -9.4
n CG Portfolio Fund Ltd
NAV OT OT CYM 12/14 GBP 25249.51 6.6 6.7 8.8 Pictet-Security-P USD GL EQ LUX 12/31 USD 132.69 16.2 16.2 2.4
n HSBC Trinkaus Investment Managers SA Pictet-Short-T Money Mkt CHF-P CH MM LUX 12/31 CHF 124.29 0.0 0.0 0.1 n Yuki Hokuyo Japan Series
n CHARTERED ASSET MANAGEMENT PTE LTD - TEL NO: 65-6835-8866 E-Mail: funds@hsbctrinkaus.lu Pictet-Short-T Money Mkt CHF-P dy CH MM LUX 12/31 CHF 91.22 0.0 0.0 0.1 Yuki Hokuyo Jpn Gen JP EQ IRL 12/28 JPY 4116.00 15.3 16.6 -2.3
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: cam@cam.com.sg Telephone: 352 - 47 18471 Pictet-Short-T Money Mkt EUR-P OT OT LUX 12/31 EUR 137.80 0.2 0.2 0.5 Yuki Hokuyo Jpn Inc JP EQ IRL 12/28 JPY 4722.00 13.5 14.7 -3.3
CAM-GTF Limited OT OT MUS 12/21 USD 396660.89 29.1 29.4 -1.9 HSBC Trinkaus Golden Opportunities OT OT LUX 12/28 USD 129.27 3.0 2.6 -3.6 Pictet-Short-T Money Mkt EUR-Pdy OT OT LUX 12/31 EUR 95.60 0.2 0.2 0.5 Yuki Hokuyo Jpn Sm Cap JP EQ IRL 12/28 JPY 5215.00 25.8 27.8 3.1
Prosperity Return Fund A JP BD LUX 12/17 JPY 9464.94 10.5 9.8 -0.3 Pictet-Short-T Money Mkt USD-P OT OT LUX 12/31 USD 132.07 0.4 0.4 0.3
n Citadele Prosperity Return Fund B OT OT LUX 12/17 JPY 8447.62 22.7 19.8 -0.3 Pictet-Short-T Money Mkt USD-P dy OT OT LUX 12/31 USD 84.33 0.4 0.4 0.3 n Yuki Mizuho Series
Republikas square 2a, Riga, LV-1522, Latvia Prosperity Return Fund C OT OT LUX 12/17 USD 90.40 13.7 11.4 0.5 Pictet-Small Cap Europe-P EUR EU EQ LUX 12/31 EUR 627.47 27.5 27.5 2.5
Citadele Eastern Europ Bal EU BD LVA 12/28 EUR 16.20 16.0 16.1 1.1 Pictet-Sov. ST Money Mkt-P EUR OT OT LUX 12/31 EUR 102.87 -0.1 -0.1 0.2 Yuki Mizuho Gen Jpn III JP EQ IRL 12/28 JPY 3219.00 -3.9 -2.8 -11.0
Prosperity Return Fund D OT OT LUX 12/17 EUR 134.01 26.6 27.8 12.6
Citadele Eastern Europ Bd EU BD LVA 12/28 USD 19.82 15.0 15.2 7.1 Pictet-Sov. ST Money Mkt-P USD OT OT LUX 12/31 USD 101.95 0.2 0.2 0.1 Yuki Mizuho Jpn Dyn Gro JP EQ IRL 12/28 JPY 3750.00 12.5 14.1 -7.3
Renaissance Hgh Grade Bd A JP BD LUX 12/17 JPY 10404.61 18.1 17.8 2.9
Citadele Russian Eq EE EQ LVA 12/28 USD 22.41 16.6 16.6 -7.9 Pictet-Sov. ST Money Mkt-Pdy EUR OT OT LUX 12/31 EUR 99.96 -0.1 -0.1 0.2 Yuki Mizuho Jpn Exc 100 JP EQ IRL 12/28 JPY 6159.00 15.6 17.0 -1.8
Renaissance Hgh Grade Bd B JP BD LUX 12/17 JPY 9198.54 29.0 26.5 2.6
Pictet-Sov. ST Money Mkt-Pdy USD OT OT LUX 12/31 USD 99.96 0.2 0.2 0.1 Yuki Mizuho Jpn Gen JP EQ IRL 12/28 JPY 7688.00 11.0 12.5 -5.3
Renaissance Hgh Grade Bd C JP BD LUX 12/17 USD 97.84 19.5 17.7 3.3
n DJE INVESTMENT S.A. Renaissance Hgh Grade Bd D JP BD LUX 12/17 EUR 107.96 16.7 18.5 3.4 Pictet-Timber-P USD GL EQ LUX 12/31 USD 131.60 29.5 29.5 5.2 Yuki Mizuho Jpn Gro JP EQ IRL 12/28 JPY 5352.00 9.3 11.2 -7.5
Pictet-USA Index-P USD US EQ LUX 12/31 USD 119.92 14.8 14.8 7.8 Yuki Mizuho Jpn Inc JP EQ IRL 12/28 JPY 6955.00 12.5 13.8 -3.8
internet: www.dje.lu email: info@dje.lu phone:+00 352 269 2522 0 fax:+00 352 269 25252
DJE Real Estate P OT OT LUX 01/02 EUR 5.13 0.2 -5.0 -8.1 Pictet-USD Government Bonds-P US BD LUX 12/31 USD 593.66 2.3 2.3 5.3 Yuki Mizuho Jpn Lg Cap JP EQ IRL 12/28 JPY 4386.00 13.0 14.2 -6.1
DJE-Absolut P OT OT LUX 01/02 EUR 237.72 1.3 17.6 1.1 Pictet-USD Government Bonds-Pdy US BD LUX 12/31 USD 389.99 2.3 2.3 5.3 Yuki Mizuho Jpn LowP JP EQ IRL 12/28 JPY 10167.00 9.1 9.7 -5.4
DJE-Alpha Glbl P OT OT LUX 01/02 EUR 174.31 1.3 10.2 -5.5 Pictet-Water-P EUR OT OT LUX 12/31 EUR 167.19 13.6 13.6 5.0 Yuki Mizuho Jpn PGth JP EQ IRL 12/28 JPY 6257.00 11.2 12.8 -7.5
DJE-Div& Substanz P EU EQ LUX 01/02 EUR 254.14 0.4 14.0 1.1 Pictet-World Gvt Bonds-P USD OT OT LUX 12/31 USD 186.69 1.3 1.3 4.1 Yuki Mizuho Jpn SmCp JP EQ IRL 12/28 JPY 6820.00 19.2 20.5 -0.7
DJE-Gold&Resourc P OT EQ LUX 01/02 EUR 173.18 1.7 -6.4 -15.7 Pictet-World Gvt Bonds-Pdy USD OT OT LUX 12/31 USD 140.73 1.3 1.3 4.1 Yuki Mizuho Jpn Val Sel AS EQ IRL 12/28 JPY 5090.00 18.0 19.5 -4.5
DJE-Renten Glbl P EU BD LUX 01/02 EUR 151.21 0.0 9.3 4.8
n POLAR CAPITAL PARTNERS LIMITED
LuxPro-Dragon I AS EQ LUX 07/20 EUR 144.57 -8.5 5.0 7.6 n MP ASSET MANAGEMENT INC.
LuxPro-Dragon P AS EQ LUX 07/20 EUR 140.29 -8.8 4.4 7.0 International Fund Managers (Ireland) Limited PH - 353 1 670 660 Fax - 353 1 670 1185
Tel: + 386 1 587 47 77 Global Technology OT EQ IRL 12/31 USD 17.27 11.3 11.3 -1.7
LuxTopic-Aktien Europa EU EQ LUX 01/02 EUR 19.31 -0.4 14.9 3.3 MP-BALKAN.SI EE EQ SVN 08/12 EUR 19.29 -1.9 -8.4 -10.9
LuxTopic-Pacific OT OT LUX 01/02 EUR 21.24 23.4 24.3 0.1 Japan Fund USD JP EQ IRL 12/28 USD 17.84 4.4 7.1 -1.4
MP-TURKEY.SI OT OT SVN 12/31 EUR 48.73 57.4 57.4 3.1
Polar Healthcare Class I USD OT EQ IRL 12/31 USD 18.20 25.2 25.2 16.5 n OTHER FUNDS
Polar Healthcare Class R USD OT EQ IRL 12/31 USD 17.93 24.7 24.7 16.0 For information about these funds, please contact us on Tel: +44 (0) 207 842 9694/9633
n HERMITAGE CAPITAL MANAGEMENT LTD. Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 NS 1.3 -4.4
Tel: +7501 258 3160 www.hermitagefund.com n Hemisphere Management (Ireland) Limited
The Hermitage Fund GL EQ JEY 03/12 USD 963.12 4.5 105.6 -23.2
Discovery USD A GL OT CYM 12/31 USD 101.35 NS NS NS n WINTON CAPITAL MANAGEMENT LTD
Elbrus USD A OT OT CYM 10/31 USD 10.48 NS NS NS Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301
n HORSEMAN CAPITAL MANAGEMENT LTD. Winton Evolution EUR Cls H GL OT CYM 11/30 EUR NS.00 -9.6 -7.2 -1.5
Europn Conviction USD B EU EQ CYM 12/07 USD 155.30 6.6 5.6 6.7
T: +44(0)20 7838 7580, F: +44(0) 20 7838 7590, www.horsemancapital.com Europn Forager USD B EU EQ CYM 11/30 USD 278.27 10.6 10.4 7.4 Winton Evolution GBP Cls G GL OT CYM 11/30 GBP NS.00 -9.3 -6.8 -1.5
Horseman EurSelLtd EUR EU EQ GBR 11/30 EUR 252.32 26.7 23.8 8.2
GBR
n MERIDEN GROUP Latin America USD A GL EQ CYM 06/30 USD NS.00 NS NS NS Winton Evolution USD Cls F GL OT CYM 11/30 USD NS.00 -9.5 -7.1 -1.6
Horseman EurSelLtd USD EU EQ 11/30 USD 252.32 17.5 15.0 5.0 Paragon Limited USD A EU EQ CYM 12/31 USD NS.00 12.7 12.7 14.2 VGB
Tel: + 376 741 175 Fax: + 376 741 183 Email: meriden@meriden-ipm.com Winton Futures EUR Cls C GL OT 11/30 EUR 228.05 -4.9 -3.3 2.6
Horseman Glbl Ltd EUR GL EQ CYM 11/30 USD 440.47 16.1 16.9 4.9 UK Fund USD A OT OT CYM 04/13 USD 157.94 1.8 NS NS
Antanta Combined Fund EE EQ AND 12/28 USD 262.59 -14.5 -13.8 -22.3 Winton Futures GBP Cls D GL OT VGB 11/30 GBP 247.25 -4.6 -3.0 2.6
Horseman Glbl Ltd USD GL EQ CYM 11/30 USD 440.47 16.1 16.9 4.9 VGB
Antanta MidCap Fund EE EQ AND 12/28 USD 398.87 -18.5 -15.6 -32.6 Winton Futures JPY Cls E GL OT 11/30 JPY 15834.65 -5.4 -4.0 1.7
n PT CIPTADANA ASSET MANAGEMENT VGB
n HSBC ALTERNATIVE INVESTMENTS LIMITED Meriden Opps Fund GL OT AND 12/26 EUR 25.35 -11.3 -11.4 -24.4 Winton Futures USD Cls B GL OT 11/30 USD 809.62 -4.8 -3.3 2.4
Meriden Protective Div GL EQ AND 11/24 EUR NS.00 -2.8 NS NS
Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com
T +44 20 7860 3074 F + 44 20 7860 3174 www.hail.hsbc.com Indonesian Grth Fund GL EQ BMU 12/27 USD 179.22 -0.4 -1.6 0.8

INDICES
HSBC ALTERNATIVE STRATEGY FUND
Special Opp EUR OT OT GGY 12/14 EUR NS.00 16.5 17.5 6.2
Special Opp Inst EUR OT OT GGY 03/31 EUR 88.51 0.7 -0.3 13.3
Special Opp Inst USD OT OT GGY 12/14 USD NS.00 17.8 19.0 7.2
Special Opp USD OT OT GGY 12/14 USD NS.00 17.0 18.1 6.5 NAV ——————%RETURN ——————
FUND NAME GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR
n HSBC Portfolio Selection Fund
GH Fund CHF Hdg OT OT GGY 12/14 CHF NS.00 3.7 4.1 0.0
n Pictet Funds (Europe) SA, ROUTE DES ACACIAS 60, CH-1211 GENEVA 73 n ARIX ABSOLUTE RETURN INVESTABLE INDEX
GH Fund EUR Hdg (Non-V) OT OT GGY 12/14 EUR 127.83 4.1 4.5 NS n THE NATIONAL INVESTOR
GH Fund GBP Hdg OT OT GGY 12/14 GBP NS.00 4.6 5.1 1.1 Feri Institutional Advisors, www.feri.de
Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae ARIX Composite Gross USD OT OT GBR 12/31.00 USD1474.27 4.8 4.8 0.0
GH Fund Inst USD OT OT GGY 12/14 USD NS.00 5.1 5.7 1.7 Pictet-Agriculture-P EUR OT OT LUX 12/31 EUR 147.04 13.4 13.4 -2.5 MENA Special Sits Fund OT OT BMU 11/29 USD 1035.69 5.0 5.8 -3.8
Data as shown is for information purposes only. No offer is being made by Morningstar, Ltd. or this publication. Funds shown aren’t registered with the U.S. Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents
except as noted. Prices are in local currencies. All performance figures are calculated using the most recent prices available. 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price.

For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com
26 | Thursday, January 3, 2013
Wild East
India’s biggest initial public offerings since 2007
COMPANY
Coal India
DATE
10/25/10
Reliance Power 1/21/08
DLF 6/18/07
NHPC 8/17/09
Bharti Infratel 12/17/12
Adani Power 8/3/09
Sources: Dealogic; Bharti Infratel
In IPO Cleanup, India
Weighs a Refund Plan
BY SHEFALI ANAND
AND SUDEEP JAIN
MUMBAI—India’s capital-mar-
kets regulator is taking steps to
tame what has been one of the
world’s wildest IPO markets, with
plans including forcing companies’
founders to reimburse small inves-
tors for some losses.
The goal is to convince investors
that the stock market is a safe place
for their savings. In the first 11
months of 2012, investors pulled out
a net total of nearly $2 billion from
equity mutual funds, which are used
mainly by individuals.
“There was a feeling in this
country that many IPOs are manipu-
lated,” U.K. Sinha, chairman of the
Securities & Exchange Board of In-
dia, said in an interview.
While all IPOs can be volatile, In-
dian IPOs had been particularly wild
on their first day of trading. In
some cases in 2011, shares jumped
as much as 100% from the issue
price, giving rise to suspicions
about price manipulation. Critics
say that some traders used a classic
“pump-and-dump” technique, push-
ing up volume to attract other in-
vestors, who drove up share prices
only to sell afterwards, sending
stocks plummeting.
SEBI moved to make day trading
more difficult and costly during the
first 10 days after a listing. Before
February, day traders could offset
their intraday purchases and sales
against each other, paying their bro-
ker a net amount at the end of the
day. Purchases and sales now must
be settled separately, requiring in-
vestors to tie up more capital.
This rule is applicable to IPOs
raising 2.5 billion rupees, or around
$46 million, or less, which com-
priseda majority of the IPOs in India
in the last two years.
A separate new rule also limits a
stock’s movement on the first day of
trading to a narrow band.
The most controversial regula-
tion is still in the proposal stage. In
September, SEBI proposed a rule
that would provide refunds, to in-
vestors who apply, for up to 50,000
rupees in IPOs that fall sharply.
The refund would be given if the
stock fell more than 20% from its is-
sue price within three months of
listing, even as the broader market
was stable or rising. If the broad
market was also falling, the refund
would occur if the stock lost 20 per-
centage points more than the mar-
ket.
INDUSTRY
Mining
VALUE
$3.44 billion
PERCENTAGE CHANGE
IPO to day 1
40%
Utility,
2.96 –17%
Energy
Real Estate,
Property
2.26 8.6%
Utility,
1.25 1.9%
Energy
Telecom 0.76
Utility,
0.73 0.1%
Energy
The company’s founders, or con-
trolling shareholders, would have to
buy the investors’ shares back with
their own money, without drawing
on company funds.
Bankers say the rule, if imple-
mented, could make some compa-
nies rethink their plans to sell
shares for funds. “Trying to give
some sort of protection...is in prin-
ciple against the spirit” of equity
markets, said K. Srinivas, founder of
Mumbai investment bank Saffron
Capital Advisors Pvt.
But Mr. Sinha, chairman of the
regulator, doesn’t think the rule
would have a major impact on the
IPO market. The refunds would be
capped at 5% of the IPO’s total size,
he said.
SEBI has yet to decide whether
to make this proposal a rule. There
is no timetable for a decision.
Less than 5% of India’s house-
hold savings of around $300 billion
are invested in stocks and mutual
funds, according to India’s central
bank, depriving companies of a huge
pool of potential funding for invest-
ments. Indians have typically pre-
The goal is to convince
investors that the stock
market is a safe place for
their savings.
ferred to put their money in gold
jewelry and real estate. Some inves-
tors moved into stocks after mar-
kets began to boom in 2005, but a
collapse in prices after 2008, allega-
tions of wrongdoing and a number
of IPOs that fell sharply after listing
have turned many investors off.
Several stocks listed in the fall of
2011 had particularly large price
fluctuations on the first day of trad-
ing, sparking investigations by SEBI.
In late September 2011, shares of PG
Electroplast Ltd., a maker of elec-
tronic components, were issued at
210 rupees and rose to 484 rupees
within a few hours of listing on the
National Stock Exchange. But over
the next week, the shares lost more
than half their value, dropping back
to 212 rupees, according to SEBI. In
October 2011, shares of information-
services provider Taksheel Solutions
Ltd. lost 62% of their value on the
day they listed, closing at 55.85 ru-
pees.
SEBI said it had found evidence
of share-price manipulation, among
MARKETS
IPO to date
48%
–78%
–58%
–34%
–13% –10%
–46%
The Wall Street Journal
other violations of securities rules,
by these firms. In an order in late
2011, SEBI barred both companies
indefinitely from raising fresh eq-
uity capital from the securities mar-
ket.
Kuntal Kar, PG Electroplast’s
compliance officer, denied that the
company or its founders were in-
volved in any wrongdoing, and said
that the company is considering its
legal options. Taksheel didn’t re-
spond to requests for comment.
Individual investors remain wary
of equities. India’s benchmark
Sensex gained 26% in 2012, but re-
mains near where it traded at the
end of 2007, leaving many investors
without gains.
An IPO in December by Bharti In-
fratel Ltd., the telecom-tower arm of
Bharti Airtel, raised $756 million,
largely from institutional investors,
making it India’s biggest IPO in two
years. Retail investors bought only
20% of the stock that was available
to them, and shares fell 13% on Fri-
day, their trading debut.
India’s government is trying to
woo individuals. In September, the
finance ministry announced a tax
break for small investors who are
investing in equities.
Mr. Sinha, a former mutual-fund
manager, hopes a less volatile IPO
market will help attract investors.
In October, SEBI announced new
rules under which it can turn down
IPOs if it finds companies have
made inadequate financialdisclo-
sures, or haven’t clearly defined
how they plan to use the funds. In-
vestment banks working on IPO
deals now have to declare the price
performance of all deals they have
worked on, a move aimed at sham-
ing banks with a poor record.
In general, investment bankers
welcome steps that could help ener-
gize India’s IPO market. But Not all
the regulator’s moves have been
well received.
Venky Panchapagesan, a finance
professor at the Indian Institute of
Management Bangalore, wrote to
SEBI last year that regulators else-
where in the worldtake action only
when declines following IPOs are
caused by wrongdoing.
“SEBI is abandoning its responsi-
bilities to detect fraud and has de-
cided to penalize all firms whether
they committed fraud or not,” Mr.
Panchapagesan said in the letter.
Mr. Sinha denied the regulator
was trying to fix prices. “The basic
idea is to force realistic pricing,” he
said.
THE WALL STREET JOURNAL.
Deal in U.S. Congress
Cheers World Markets
Continued from first page many’s DAX rose 2.2% to 7778.78.
the alternative minimum tax, a France’s CAC-40 gained 2.6% to
1960s levy intended only for Amer- 3733.93.
ica’s wealthiest. In the U.S., the Standard & Poor’s
At the same time, the bill defers 500-stock index gained 2.5% to
some of America’s toughest spend- 1462.42 and the Nasdaq jumped 3.1%
ing problems—in particular the bal- to 3112.26.
looning cost of health care—and it Haven investments such as U.S.
doesn’t come close to the kind of $4 Treasury debt, which have been
trillion deficit-reduction deal the supported by concern over the fiscal
country’s leaders had hoped to ne- cliff, lost ground. Benchmark 10-
gotiate. By some estimates, it would
year notes dropped 23/32 in price
cut the deficit by $600 billion over to yield 1.839%. The 30-year bond
10 years. fell 1 26/32 to yield 3.046%.
“This is a very small deal— Yields on 10-year Spanish and
they’re truly ‘kicking the can down Italian government debt fell to their
the road,’” said Milton Ezrati, senior lowest levels since March 2011 and
economist and market strategist at December 2010, respectively.
Lord Abbett. “We’re hardly out of The euro initially rallied, rising
the woods here, and the idea of a well above $1.32, but slipped back
‘grand bargain’ is almost a laugh- to $1.3170 by late afternoon in New
able phrase at this point.” York, down from $1.3195 late Mon-
Continued wrangling between day. “FX markets are much less en-
Democrats and Republicans remains thused than equities about the cliff”
a near certainty. deal, said Boris Schlossberg, manag-
In two months, $110 billion in ing director of currency strategy for
spending cuts delayed by Tuesday’s BK Asset Management.
package will again kick in unless a Mining stocks, whose perform-
new agreement is reached. At the ance is closely tied to the overall
same time, the U.S. will need to in- economy, posted sharp gains in Eu-
crease its borrowing limit, a change rope, getting an extra boost from
that can only be made by Congress. the news about manufacturing ac-
“We still have upcoming chal- tivity in China. The Stoxx 600 index
lenges with the debt limit debate, for basic resources rose 4.6%.
but a lot of people left the stock In London, Evraz and Glencore
market, and they need to come both soared 7.2%.
back,” said Michael Strauss, chief in- Copper futures in New York rose
vestment strategist at Commonfund, to the highest level in nearly 11
in Wilton, Conn. weeks. The copper contract for
Markets took off. In Australia, March delivery rose 8.35 cents, or
where the economy depends on de- 2.3%, to settle at $3.736 a pound on
mand for natural resources, and the Comex division of the New York
thus global economic growth, the Mercantile Exchange.
S&P/ASX 200 rose 1.2% to 4705.90, Oil, another commodity that
aided by news Tuesday that China’s marches to the economic drum, rose
manufacturing sector expanded for as well. Nymex oil for February de-
the third month in a row. livery gained $1.30 a barrel, or 1.4%,
Markets in Tokyo and China to $93.12.
were closed for holidays, but Hong Banks, yet another economically
Kong stocks surged 2.9% to sensitive sector, also rallied. Shares
23311.98, the best day of trading of Barclays gained 5% in London,
since September, when the U.S. Fed- while Spain’s Banco Popular Espa-
eral Reserve announced more quan- ñol SA added 6% and Société Gé-
titative easing. nérale rose 5.3% in Paris.
The U.K.’s FTSE 100 index ad- —Nina Bains, Janet Hook and
vanced 2.2% to 6027.37, its highest Daniel Inman contributed
close since July 2011, while Ger- to this article.
Fund Scorecard
Global Emerging Markets Bond
Funds dedicated to fixed income securities issued in emerging market countries Most
funds will invest in several currencies or countries. Ranked on % total return (dividends
reinvested) in Euros for one year ending January 02, 2013
Leading 10 Performers
FUND FUND LEGAL % Return in $US **
RATING * NAME FUND MGM'T CO. CURR. BASE YTD 1-YR 2-YR 5-YR
NS Ashmore EM Ashmore Investment NOKLUX 32.13 32.13 NS NS
Debt I NOK Management Limited
NS ING (L) ING TFI S.A. PLNPOL 32.36 30.78 10.63 NS
Globalny Dlugu Korp A
NS KBC Delta KBC TFI S.A. PLNPOL 26.96 25.19 NS NS
NS GMO Emerging GMO USDIRL 23.50 23.50 16.99 11.34
Country Debt Investment
NS Aberdeen Aberdeen Unit GBPGBR -0.23 23.11 NS NS
EmergingMarketsBondAAcc Trust Managers Limited
NS Ashmore EM Northern Trust EURLUX 22.43 22.43 12.16 7.00
Debt R EUR Luxembourg Mgmt Com S.A.
NS Sparinvest Sparinvest S.A. EURLUX 22.10 22.10 10.18 NS
SICAVEMCorpValBdEURR
NS JPM EM Corp JPMorgan Asset EURLUX 21.45 21.45 6.31 NS
Bd Port II A Div EUR Hdg Mgmt (Europe) S.a.r.l.
NS Ashmore EM Northern Trust USDLUX 20.89 20.89 8.99 NS
Corporate Debt I USD Luxembourg Mgmt Com S.A.
NS Invesco Invesco Global EURLUX -0.01 20.07 NS NS
EmergingMarketCorpBdA€Hdg Asset Management Limited
NOTE: Changes in currency rates will affect performance and rankings. Source: Morningstar, Ltd
KEY: ** 2YR and 5YR performance is annualized 1 Oliver’s Yard, 55-71 City Road
NA-not available due to incomplete data; London EC1Y 1HQ United Kingdom
NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001
THE WALL STREET JOURNAL. Thursday, January 3, 2013 | 27

GLOBAL MARKETS LINEUP

Major stock market indexes Stock indexes from around the world, grouped by region. Shown in local-currency terms.
PREVIOUS SESSION PERFORMANCE PREVIOUS SESSION PERFORMANCE
Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk. Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.
EUROPE Stoxx Europe 600 285.33 5.65 2.02% 2.0% 15.4% Spain IBEX 35 8447.6 280.10 3.43% 3.4% -3.2
Stoxx Europe 50 2621.78 44.16 1.71 1.7 9.7 Sweden OMX Stockholm 351.52 7.58 2.20 2.2 14.5
Euro Zone Euro Stoxx 267.59 6.75 2.59 2.6 16.0 Switzerland SMI 6822.44 Closed ... 14.9
Euro Stoxx 50 2711.25 75.32 2.86 2.9 14.4 Turkey ISE National 100 79642.08 1433.64 1.83 1.8 55.1
Austria ATX 2476.24 75.03 3.12 3.1 30.9 U.K. FTSE 100 6027.37 129.56 2.20 2.2 8.2
Belgium Bel-20 2515.27 39.46 1.59 1.6 19.0 ASIA-PACIFIC DJ Asia-Pacific 134.64 1.36 1.02 1.1 11.8
Czech Republic PX 1066.0 27.31 2.63 2.6 17.0 Australia SPX/ASX 200 4705.90 57.00 1.23 1.2 12.4
Denmark OMX Copenhagen 461.96 9.44 2.09 2.1 28.0 China CBN 600 20794.07 Closed ... 6.8
Finland OMX Helsinki 6006.08 204.79 3.53 3.5 12.2 Hong Kong Hang Seng 23311.98 655.06 2.89 2.9 24.5
France CAC-40 3733.93 92.86 2.55 2.6 15.9 India Sensex 19714.24 133.43 0.68 1.5 24.1
Germany DAX 7778.78 166.39 2.19 2.2 31.9 Japan Nikkei Stock Average 10395.18 Closed ... 22.9
Hungary BUX 18487.51 314.31 1.73 8.9 8.9 Singapore Straits Times 3201.74 34.66 1.09 1.1 18.1
Ireland ISEQ 3456.20 59.53 1.75 1.8 19.1 South Korea Kospi 2031.10 34.05 1.71 1.7 8.8
Italy FTSE MIB 16893.39 620.01 3.81 3.8 12.0 AMERICAS DJ Americas 378.03 6.94 1.87 1.9 14.8
Netherlands AEX 350.21 7.50 2.19 2.2 10.5 Brazil Bovespa 62646.38 1694.30 2.78 2.8 10.4
Norway All-Shares 501.47 10.95 2.23 2.2 13.3 Mexico IPC 44224.01 518.18 1.19 1.2 18.5
Poland WIG 48107.89 647.30 1.36 1.4 28.0 Note: Americas index data are as of 3:00 p.m. ET. Sources: SIX Financial Information; WSJ Market Data Group
Portugal PSI 20 5812.10 156.95 2.78 2.8 3.6
Russia RTSI 1526.98 Closed ... 10.5

Dow Jones Indexes MSCI indexes

Price-to- Price-to-
Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars) Dividend earnings PERFORMANCE (euros) PERFORMANCE (U.S.dollars) Developed and emerging-market regional and country indexes
yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk. yield* ratio* Dows Jones Index Last Daily 52-wk. Last Daily 52-wk. from MSCI Barra as of January 02, 2013
2.48% 17 Global TSM 2716.54 1.89% 13.9% Turkey Titans 20 -c 733.80 1.87% 63.6% 991.60 1.86% 58.1% Price-to- LOCAL-CURRENCY
2.43 21 Global Dow 1449.80 1.67% 8.1% 2038.50 2.10 10.9 5.97% 14 Global Select Div -d 197.80 1.69 7.2 224.09 2.12 9.9 Dividend earnings PERFORMANCE
yield ratio Morgan Stanley Index Last Daily YTD 52-wk.
2.41 15 Global Titans 50 201.10 1.57 9.1 198.86 1.99 11.9 5.70 14 Asia/Pacific Select Div -d 330.20 1.09 16.6
2.80% 14 ALL COUNTRY (AC) WORLD* 339.79 -0.01% ...% 13.4%
2.94 18 Europe TSM 2802.25 2.42 17.5 4.27 14 U.S. Select Dividend -d 419.55 1.89 8.6
2.80 14 World (Developed Markets) 1,338.55 ... ... 13.2
2.49 18 Developed Markets TSM 2664.56 1.87 13.9 1.96 16 Islamic Market 2343.56 1.96 11.0
2.60 15 World ex-EMU 163.53 ... ... 12.6
2.49 12 Emerging Markets TSM 4340.37 2.08 13.8 2.06 15 Islamic Market 100 2217.40 1.51 7.9 2512.40 1.94 10.7
2.70 15 World ex-UK 1,339.17 ... ... 13.4
3.03 14 Africa 50 913.70 1.78 17.1 767.76 2.20 20.1 Islamic Turkey -c 1874.50 0.94 43.1 4348.74 0.94 38.3
3.40 14 EAFE 1,604.15 -0.01 ... 13.6
3.35 9 BRIC 50 434.40 2.25 3.8 548.35 2.68 6.4 2.67 17 Sustainability 969.50 1.77 9.8 1083.67 2.20 12.6
2.70 12 Emerging Markets (EM) 1,055.76 -0.05 0.1 15.2
3.41 12 GCC 40 579.00 0.98 1.5 486.57 1.41 4.1 3.09 22 Brookfield Infrastructure 2232.70 1.58 9.1 2818.18 2.01 11.9
3.70 13 EUROPE 96.31 ... ... 13.4
2.15 17 U.S. TSM 15135.01 2.02 14.6 1.29 18 Luxury 1548.70 1.61 23.2 1738.29 2.03 26.3
3.90 13 EMU 157.21 ... ... 17.2
Kuwait Titans 30 -c 193.47 1.01 3.6 UAE Select Index
3.70 14 Europe ex-UK 100.94 ... ... 15.8
RusIndex Titans 10 -c 3937.50 3.46 13.0 6509.72 2.48 9.6 DJ-UBS Commodity 145.50 0.14 -5.6 139.85 0.56 -3.2
4.80 10 Europe Value 96.98 ... ... 11.5
*Fundamentals are based on data in U.S. dollar. Footnotes: a-in US dollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET. Source: S&P DowJones Indices 2.60 17 Europe Growth 92.18 ... ... 14.9
2.90 224 Europe Small Cap 199.86 ... ... 23.8
Cross rates U.S.-dollar and euro foreign-exchange rates in global trading 3.70 6 EM Europe 310.45 ... ... 17.9
3.80 11 UK 1,747.16 ... ... 5.9
USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD 3.60 14 Nordic Countries 172.85 ... ... 16.8
Australia 0.9532 1.5491 1.0401 0.1470 0.0316 0.1720 0.0109 0.2565 1.2579 0.1686 0.9668 ... 3.60 5 Russia 766.86 ... ... 5.1
Canada 0.9859 1.6023 1.0758 0.1520 0.0327 0.1779 0.0113 0.2653 1.3010 0.1744 ... 1.0343 3.20 15 South Africa 1,011.22 ... ... 20.6
Denmark 5.6536 9.1879 6.1689 0.8716 0.1873 1.0199 0.0649 1.5211 7.4605 ... 5.7343 5.9311 3.00 13 AC ASIA PACIFIC EX-JAPAN 466.28 -0.05 0.1 18.7
Euro 0.7578 1.2315 0.8269 0.1168 0.0251 0.1367 0.0087 0.2039 ... 0.1340 0.7686 0.7950 2.20 24 Japan 530.30 ... ... 18.9
Israel 3.7167 6.0402 4.0555 0.5730 0.1232 0.6705 0.0427 ... 4.9046 0.6574 3.7698 3.8991
2.90 11 China 62.83 ... .. 18.7
Japan 87.0954 141.5423 95.0337 13.4269 2.8861 15.7124 ... 23.4335 114.9321 15.4054 88.3396 91.3705
1.30 16 India 770.40 0.81 0.8 28.9
Norway 5.5431 9.0083 6.0483 0.8545 0.1837 ... 0.0636 1.4914 7.3147 0.9805 5.6223 5.8152
1.10 10 Korea 579.96 ... ... 11.7
Russia 30.1779 49.0433 32.9285 4.6523 ... 5.4442 0.3465 8.1195 39.8231 5.3378 30.6090 31.6592
3.50 21 Taiwan 276.64 ... ... 8.8
Sweden 6.4866 10.5417 7.0779 ... 0.2149 1.1702 0.0745 1.7453 8.5598 1.1473 6.5793 6.8050
Switzerland 0.9165 1.4894 ... 0.1413 0.0304 0.1653 0.0105 0.2466 1.2094 0.1621 0.9296 0.9615
2.20 15 US BROAD MARKET 1,607.90 ... ... 13.9
U.K. 0.6153 ... 0.6714 0.0949 0.0204 0.1110 0.0071 0.1656 0.8120 0.1088 0.6241 0.6455 1.60 23 US Small Cap 2,354.31 ... ... 16.3
U.S. ... 1.6251 1.0911 0.1542 0.0331 0.1804 0.0115 0.2691 1.3196 0.1769 1.0143 1.0491 3.20 16 EM LATIN AMERICA 3,797.80 ... ... 5.4
Source: ICAP Plc. *Twenty-three developed and 26 emerging markets Source: MSCI Barra

Taiwan dollar 38.281 0.02612 29.010 0.03447

Commodities Prices of futures contracts with the most open interest Currencies London close on Jan. 2
Thailand baht 40.036 0.02498 30.339 0.03296
EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia Per In Per In
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange; AMERICAS Per euro In euros U.S. dollar U.S. dollars EUROPE Per euro In euros U.S. dollar U.S. dollars
NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe
Year Year Argentina peso-a 6.4967 0.1539 4.9232 0.2031 Euro zone euro 1 1 0.7578 1.3196
ONE-DAY CHANGE
Commodity Exchange Last price Net Percentage high low Brazil real 2.6978 0.3707 2.0444 0.4892 1-mo. forward 0.9997 1.0003 0.7576 1.3200
Corn (cents/bu.) CBOT 689.50 -8.75 -1.25% 707.25 687.75 Canada dollar 1.3010 0.7686 0.9859 1.0143 3-mos. forward 0.9992 1.0008 0.7572 1.3206
Soybeans (cents/bu.) CBOT 1391.75 -17.75 -1.26 1,435.00 1,386.25 Chile peso 626.02 0.001597 474.40 0.002108 6-mos. forward 0.9984 1.0016 0.7566 1.3218
Wheat (cents/bu.) CBOT 754.75 -23.25 -2.99 788.00 752.50 Colombia peso 2325.29 0.0004301 1762.10 0.0005675 Czech Rep. koruna-b 25.195 0.0397 19.093 0.0524
Live cattle (cents/lb.) CME 132.650 0.350 0.26% 135.900 123.800 Ecuador US dollar-f 1.3196 0.7578 1 1 Denmark krone 7.4605 0.1340 5.6536 0.1769
Cocoa ($/ton) ICE-US 2,250 14 0.63 2,710 2,065 Mexico peso-a 16.8397 0.0594 12.7611 0.0784 Hungary forint 291.39 0.003432 220.81 0.004529
Coffee (cents/lb.) ICE-US 148.80 5.00 3.48 249.00 141.25 Peru sol 3.3682 0.2969 2.5525 0.3918 Norway krone 7.3147 0.1367 5.5431 0.1804
Sugar (cents/lb.) ICE-US 19.70 0.19 0.97 25.13 18.31 Uruguay peso-e 25.270 0.0396 19.150 0.0522 Poland zloty 4.0708 0.2457 3.0848 0.3242
Cotton (cents/lb.) ICE-US 75.49 0.35 0.47 98.50 66.85 U.S. dollar 1.3196 0.7578 1 1 Russia ruble-d 39.823 0.02511 30.178 0.03314
Rapeseed (euro/ton) LIFFE 447.75 -8.50 -1.86 466 446
Venezuela bolivar 5.74 0.174206 4.35 0.229885 Sweden krona 8.5598 0.1168 6.4866 0.1542
Cocoa (pounds/ton) LIFFE 1,428 -7 -0.49 1,440 1,420
ASIA-PACIFIC Switzerland franc 1.2094 0.8269 0.9165 1.0911
Robusta coffee ($/ton) LIFFE 1,943 19 0.99 1,947 1,908
Australia dollar 1.2579 0.7950 0.9532 1.0491 1-mo. forward 1.2087 0.8274 0.9159 1.0918
Copper ($/lb.) COMEX 3.7325 0.0800 2.19 4.02 3.29 1-mo. forward 1.2608 0.7932 0.9554 1.0467 3-mos. forward 1.2075 0.8282 0.9150 1.0929
Gold ($/troy oz.) COMEX 1688.00 12.20 0.73 1,801.50 1,538.10
3-mos. forward 1.2663 0.7897 0.9596 1.0421 6-mos. forward 1.2053 0.8296 0.9134 1.0948
Silver ($/troy oz.) COMEX 31.045 0.818 2.71 37.43 26.40
6-mos. forward 1.2745 0.7846 0.9658 1.0354 Turkey lira 2.3474 0.4260 1.7789 0.5622
Aluminum ($/ton) LME 2,128.00 56.50 2.73 2,128.00 2,128.00
China yuan 8.2267 0.1216 6.2342 0.1604 U.K. pound 0.8120 1.2315 0.6153 1.6251
Tin ($/ton) LME 24,345.00 940.00 4.02 24,345.00 24,345.00
Hong Kong dollar 10.2281 0.0978 7.7508 0.1290 1-mo. forward 0.8121 1.2314 0.6154 1.6250
Copper ($/ton) LME 8,112.00 182.00 2.30 8,112.00 8,112.00
India rupee 71.4570 0.0140 54.1500 0.0185 3-mos. forward 0.8123 1.2311 0.6155 1.6246
Lead ($/ton) LME 2,390.50 48.50 2.07 2,390.50 2,390.50
Indonesia rupiah 12734 0.0000785 9650 0.0001036 6-mos. forward 0.8126 1.2307 0.6158 1.6240
Zinc ($/ton) LME 2,118.00 54.00 2.62 2,118.00 2,118.00
Nickel ($/ton) LME 17,500 340 17,500 17,500 Japan yen 114.93 0.008701 87.10 0.011482 MIDDLE EAST/AFRICA
1.98
1-mo. forward 114.91 0.008703 87.07 0.011484 Bahrain dinar 0.4975 2.0102 0.3770 2.6527
Crude oil ($/bbl.) NYMEX 92.84 1.02 1.11 109.43 80.09
3-mos. forward 114.85 0.008707 87.04 0.011490 Egypt pound-a 8.4334 0.1186 6.3908 0.1565
Heating oil ($/gal.) NYMEX 3.0421 0.0103 0.34 3.3346 2.5557
RBOB gasoline ($/gal.) NYMEX 2.7989 0.0372 1.35 2.9297 2.1980 6-mos. forward 114.77 0.008713 86.97 0.011498 Israel shekel 4.9046 0.2039 3.7167 0.2691
Natural gas ($/mmBtu) NYMEX 3.261 -0.104 -3.09 4.0490 3.0520 Malaysia ringgit-c 4.0058 0.2496 3.0356 0.3294 Jordan dinar 0.9362 1.0681 0.7095 1.4095
Brent crude ($/bbl.) ICE-EU 112.24 1.13 1.02 112.90 111.27 New Zealand dollar 1.5840 0.6313 1.2003 0.8331 Kuwait dinar 0.3708 2.6968 0.2810 3.5587
Gas oil ($/ton) ICE-EU 942.25 15.25 1.65 949.00 938.25 Pakistan rupee 128.563 0.0078 97.425 0.0103 Lebanon pound 1987.27 0.0005032 1505.95 0.0006640
Philippines peso 53.906 0.0186 40.850 0.0245 Saudi Arabia riyal 4.9490 0.2021 3.7504 0.2666
Sources: SIX Financial Information; WSJ Market Data Group
Singapore dollar 1.6104 0.6210 1.2204 0.8194 South Africa rand 11.2118 0.0892 8.4963 0.1177
South Korea won 1403.47 0.0007125 1063.55 0.0009403 United Arab dirham 4.8471 0.2063 3.6731 0.2722
WSJ.com Follow the markets throughout the day with updated stock quotes, news and
>>
commentary at WSJ.com. Also, receive email alerts that summarize the day’s trading in Europe a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate.
and Asia. To sign up, go to WSJ.com/email. Source: ICAP Plc.
28 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

BLUE CHIPS & BONDS

Below, a look at the Dow Jones Stoxx Dow Jones Industrial Average P/E: 15
Major players & benchmarks 50, the biggest and best known
companies in Europe, including the U.K. LAST: 13412.55
YEAR TO DATE:
s 308.41, or 2.35%
s 308.41, or 2.4%
Stoxx Europe 50: Wednesday's best and worst... OVER 52 WEEKS s 994.13, or 8.0%

Previous
close, in STOCK PERFORMANCE
Company Country Industry Volume local currency Previous session YTD 52-week
14000
Anglo American PLC United Kingdom General Mining 4,149,313 2,004 5.78% 5.78% -15.8%
Rio Tinto United Kingdom General Mining 5,572,564 3,691 5.11 5.11 18.1 50–day
Barclays United Kingdom Banks 59,199,623 275.60 5.03 5.03 56.5 moving average 13500
t
Banco Bilbao Vizcaya Argn Spain Banks 60,286,952 7.29 4.70 4.70 8.3
BNP Paribas France Banks 3,604,846 44.46 4.40 4.40 45.1
13000

ABB Switzerland Industrial Machinery 3,272,898 18.75 -1.06% -1.06% 6.1

High
British American Tobacco United Kingdom Tobacco 2,893,570 3,091 -0.96 -0.96 1.2 12500
Roche Holding Part. Cert. Switzerland Pharmaceuticals 721,555 184.00 -0.92 -0.92 15.6 Close
UBS Switzerland Banks 6,027,451 14.27 -0.70 -0.70 27.6 Low
12000
Zurich Insurance Group Switzerland Full Line Insurance 278,608 243.40 -0.57 -0.57 14.5

...And the rest of Europe's blue chips 11500

5 12 19 26 2 9 16 23 30 7 14 21 28
Latest, Latest, Oct. Nov. Dec.
in local STOCK PERFORMANCE in local STOCK PERFORMANCE
Company/Country (Industry) Volume currency Latest YTD 52-week Company/Country (Industry) Volume currency Latest YTD 52-week Note: Price-to-earnings ratios are for trailing 12 months
BHP Billiton 5,041,549 2,209 3.71% 3.71% 17.6% Siemens 2,940,780 83.80 1.95% 1.95% 9.7%
United Kingdom (General Mining) Germany (Diversified Industrials) DJIA component stocks
Deutsche Bank 5,917,902 34.16 3.67 3.67 15.3 Vodafone Group 86,898,829 157.45 1.94 1.94 -12.0
Germany (Banks) United Kingdom (Mobile Telecommunications) Volume, CHANGE
Stock Symbol in millions Latest Points Percentage
Allianz SE 1,981,426 108.30 3.34 3.34 42.3 Deutsche Telekom 14,382,870 8.76 1.87 1.87 -2.9
Germany (Full Line Insurance) Germany (Mobile Telecommunications) AT&T T 32.0 $34.85 1.14 3.38%
Banco Santander S.A. 53,165,715 6.33 3.26 3.26 8.2 E.ON SE 10,045,142 14.35 1.85 1.85 -16.6 Alcoa AA 17.9 8.95 0.27 3.05
Spain (Banks) Germany (Multiutilities) AmExpress AXP 4.7 58.54 1.26 2.20
ING Groep 20,737,174 7.28 3.13 3.13 27.8 GlaxoSmithKline 6,458,304 1,359 1.76 1.76 -7.7 BankAm BAC 210.5 11.98 0.37 3.19
Netherlands (Life Insurance) United Kingdom (Pharmaceuticals)
Boeing BA 3.8 76.87 1.51 2.00
Daimler 4,720,976 42.60 3.10 3.10 17.1 Diageo 3,190,176 1,818 1.71 1.71 29.2
Germany (Automobiles) United Kingdom (Distillers & Vintners) Caterpillar CAT 10.2 93.41 3.80 4.24
ENI 11,170,723 18.90 3.05 3.05 15.0 GDF Suez 4,157,737 15.82 1.54 1.54 -25.7 Chevron CVX 4.3 109.82 1.68 1.55
Italy (Integrated Oil & Gas) France (Multiutilities) CiscoSys CSCO 30.4 20.23 0.58 2.95
HSBC Hldgs 18,048,934 665.70 2.91 2.91 35.6 BP PLC 17,137,254 431.30 1.53 1.53 -6.3 CocaCola KO 17.7 37.47 1.22 3.35
United Kingdom (Banks) United Kingdom (Integrated Oil & Gas)
Disney DIS 9.6 50.87 1.08 2.16
BASF 3,250,775 73.18 2.85 2.85 30.3 H&M Hennes & Mauritz B 2,395,382 227.90 1.51 1.51 3.0
Germany (Commodity Chemicals) Sweden (Apparel Retailers) DuPont DD 5.5 45.69 0.71 1.59
Telefon L.M. Ericsson B 7,493,233 66.80 2.61 2.61 -5.1 Unilever CVA 4,400,705 29.19 1.23 1.23 9.8 ExxonMobil XOM 10.9 88.28 1.73 1.99
Sweden (Telecommunications Equipment) Netherlands (Food Products) GenElec GE 35.3 21.26 0.27 1.29
Reckitt Benckiser Grp 790,925 3,975 2.47 2.47 25.0 Unilever 1,762,388 2,392 1.10 1.10 10.6 HewlettPk HPQ 44.4 15.00 0.75 5.26
United Kingdom (Nondurable Household Products) United Kingdom (Food Products)
HomeDpt HD 7.3 63.22 1.37 2.22
Total 5,127,884 39.98 2.47 2.47 -0.4 L'Air Liquide 790,171 96.01 1.01 1.01 -0.9
France (Integrated Oil & Gas) France (Commodity Chemicals) Intel INTC 38.9 21.27 0.65 3.15
Anheuser-Busch InBev 1,724,170 67.35 2.45 2.45 45.3 BG Grp 6,890,680 1,022 0.94 0.94 -25.8 IBM IBM 3.2 195.54 3.99 2.08
Belgium (Brewers) United Kingdom (Integrated Oil & Gas) JPMorgChas JPM 25.9 44.51 0.84 1.93
Moet Hennessy Louis Vuitt 737,152 142.15 2.41 2.41 28.2 Imperial Tobacco Grp 1,585,228 2,385 0.51 0.51 -2.1 JohnsJohns JNJ 8.8 70.60 0.50 0.71
France (Clothing & Accessories) United Kingdom (Tobacco) McDonalds MCD 5.8 89.92 1.72 1.94
Standard Chartered 3,273,036 1,610 2.32 2.32 14.3 National Grid 4,442,751 706.50 0.50 0.50 13.0 Merck MRK 13.0 41.13 0.19 0.46
United Kingdom (Banks) United Kingdom (Multiutilities)
SAP 3,638,604 62.08 2.29 2.29 48.4 Financiere Richemont 672,756 71.40 0.35 0.35 50.3 Microsoft MSFT 41.9 27.43 0.72 2.70
Germany (Software) Switzerland (Clothing & Accessories) Pfizer PFE 26.5 25.82 0.74 2.93
Sanofi SA 2,358,355 73.00 2.26 2.26 29.9 Bayer 3,506,502 71.97 0.11 0.11 39.7 ProctGamb PG 7.6 69.11 1.22 1.80
France (Pharmaceuticals) Germany (Specialty Chemicals) 3M MMM 2.3 94.39 1.54 1.66
Telefonica S.A. 21,038,999 10.48 2.15 2.15 -23.3 Royal Dutch Shell A 2,352,096 2,124 0.07 0.07 -10.4 TravelersCos TRV 1.9 72.64 0.82 1.13
Spain (Fixed Line Telecommunications) United Kingdom (Integrated Oil & Gas)
UnitedTech UTX 3.6 83.65 1.64 2.00
AstraZeneca 2,395,096 2,969 2.05 2.05 -0.2 Nestle 3,304,568 59.60 -0.42 -0.42 10.4
United Kingdom (Pharmaceuticals) Switzerland (Food Products) UtdHlthGp UNH 4.3 54.28 0.04 0.07
Tesco 18,592,029 342.75 2.01 2.01 -15.0 Novartis AG 2,183,853 57.45 -0.43 -0.43 7.0 Verizon VZ 13.0 44.10 0.83 1.93
United Kingdom (Food Retailers & Wholesalers) Switzerland (Pharmaceuticals) WalMart WMT 8.7 69.02 0.79 1.16
Sources: SIX Financial Information Source: WSJ Market Data Group

Credit derivatives
Tracking Spreads on credit derivatives are one way the market rates
creditworthiness. Regions that are treading in rough waters
Credit-default swaps: European companies
At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and

credit can see spreads swing toward the maximum—and vice versa.
Indexes below are for five-year swaps.
how much a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives a
sense which way the market was moving yesterday.

markets & Markit iTraxx Indexes

Index: series/version
Europe: 18/1
Mid-spread,
in pct. pts.
1.17
Mid-price
99.18%
Coupon
0.01%
SPREAD RANGE, in pct. pts.
since most recent roll
Maximum Minimum
1.41 1.09
Average
1.25
Showing the biggest improvement...
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day
And the most deterioration
CHANGE, in basis points
Yesterday Yesterday Five-day 28-day

dealmakers Eur. High Volatility: 18/1

Europe Crossover: 18/1
Asia ex-Japan IG: 18/1
1.74
4.83
1.13
96.59
100.70
99.38
0.01
0.05
0.01
2.11
5.81
1.43
1.63
4.45
1.07
1.91
5.12
1.21
THOMSON REUTERS
GROUP
Nielsen
37
75
–1
–2
...
1
...
...
Syngenta
Sunrise Comms Hldgs
VIRGIN MEDIA Fin
43
431
229
2
16
6
17
11
2
–10
...

6
Bay Landbk Giroz 96 –2 –2 –10
Japan: 18/1 1.60 97.20 0.01 2.27 1.57 1.93 mmO2 61 2 1 2
Danske Bk 129 –2 –1 –10
Note: Data as of January 1 Schaeffler Fin 460 11 14 17
ACE 53 –1 1 –7
In percentage points ATLANTIA 217 5 4 –5
Spreads Erste Group Bk 157 –2 ... –19
Index roll Utd Utils 105 2 3 –11
Rhodia –1
Spreads on five- Europe Sub Financials 4.00
66 –2 –3
Vinci 125 2 2 ...
year swaps for t BAWAG 201 –1 –4 –6
3.00 BASF 55 1 1 –2
corporate debt; Contl 193 –1 3 6
Heineken 72 1 2 1
based on Markit 2.00 Skandinaviska Enskilda 105 –1 ... –10
Banken Source: Markit Group
iTraxx indexes. t
1.00
Europe Senior Financials
0
July Aug. Sept. Oct. Nov. Dec.
Behind Europe's deals: Bank revenue rankings, European
2012 Behind every IPO, bond offering, merger deal or syndicated loan is one or more investment banks. Here are
Source: Markit Group investment banks ranked by year-to-date revenues from recent deals.
PERCENTAGE OF TOTAL REVENUE
Revenue, Equity Debt Mergers &
in millions share capital markets capital markets acquisitions Loans
Deutsche Bank $1,142 7.3% 17% 35% 32% 16%
JPMorgan 995 6.3 18 37 29 16
Goldman Sachs 819 5.2 14 33 46 7
Bank of America Merrill Lynch 746 4.8 23 29 36 12
Credit Suisse 727 4.6 30 31 29 10
WSJ.com>> Barclays 718 4.6 15 53 22 10
Follow the markets throughout the day, with updated
Morgan Stanley 668 4.3 20 31 42 6
stock quotes, news and commentary at WSJ.com.
UBS 598 3.8 26 33 35 6
BNP Paribas 586 3.7 12 49 17 21
Also, receive emails that summarize the day’s trading in
Europe and Asia. To sign up, go to WSJ.com/Email. Source: Dealogic
THE WALL STREET JOURNAL. Thursday, January 3, 2013 | 29

PERSONAL JOURNAL: HEALTH

A Few Extra Kilograms Won’t Kill You—Really

BY MELINDA BECK BMI is calculated by dividing
weight in kilograms by height in
In a finding that could under- meters squared. Someone who is
mine many New Year’s resolutions, 1.8 meters tall and about 82 kilo-
a new government study in the U.S. grams would have a BMI of 24.4,
shows that people who are over- considered normal; at 90 kilo-
weight are less likely to die in any grams, his BMI would be 27.1, or
given period than people of normal slightly overweight, and at 104 ki-
weight. Even those who are moder- lograms, his BMI of 30 would be
ately obese don’t have a higher- considered obese.
than-normal risk of dying. Other experts said the study un-
Being substantially obese, based derscores that BMI is an inexact
on measure called body mass in- measure of health—largely because
dex, or BMI, of 35 and higher, does it doesn’t differentiate between fat
raise the risk of death by 29%, re- and muscle mass. Many athletes
searchers found. are technically obese, based on
But people with a BMI of 25 to BMI, even though they are ex-
30—who are considered over- tremely fit.
weight—have a 6% lower risk of Nor does BMI assess how fat is
death than people whose BMI is in distributed, which experts say may
the normal range of 18.5 to 25, ac- be more important than total fat
cording to the study, published overall. Excess belly fat seems to
Agence France-Presse/Getty Images

Wednesday in the Journal of the be particularly toxic, while extra fat

American Medical Association. in the buttocks and legs may have
People who had a BMI of 30 to a protective effect, research sug-
35—considered the first stage of gests.
obesity—had a 5% lower risk of dy- Doctors at the Mayo Clinic in
ing, but those figures weren’t con- Rochester, Minn., recently found
sidered statistically significant. that among 14,000 people, those
Still, health experts said that with a normal BMI, but a high
people shouldn’t treat the new waist-to-hip ratio, were the most
study as a license to eat more. A study says overweight people have lower-than-normal death risks. Above, a Maryland spin class. likely to die of cardiovascular dis-
“That would be a mistake—and ease during the 14-year follow-up,
this study did show an increase in very important for your health.” weight is associated with height- are very consistent across all dif- even more than those in obese
mortality for people who are The new report is the latest, ened risk of heart disease, Type 2 ferent ages and continents,” said ranges. “BMI gives the same value
obese,” said Thomas Frieden, direc- and largest, to document what sci- diabetes and several cancers that lead author Katherine Flegal, a se- to good fat, bad fat and muscle,
tor of the U.S. Centers for Disease entists call the “obesity paradox.” in turn raise the risk of premature nior scientist at the CDC. She and it doesn’t make a lot of sense
Control and Prevention, which con- Other studies have shown that peo- death. stressed that the study looks at all to mix all those things together,”
ducted the study. “I don’t think ple with heart disease, diabetes CDC researchers analyzed 97 causes of mortality, not overall said Francisco Lopez-Jimenez, a
anyone would disagree with the ba- and other chronic health conditions studies involving nearly three mil- health risks. “This is not meant to preventive cardiologist at Mayo,
sic fact that being more physically tend to live longer if they carry ex- lion people and 270,000 deaths suggest that the conventional wis- who wasn’t involved in the CDC
active and eating a healthier diet is cess kilograms even though excess around the world. “The findings dom is wrong,” she said. study.

Counterfeiting of Cancer Medicines Is on the Rise

BY JEANNE WHALEN U.S. Food and Drug Administration ical Supplies, a Briton named Pe- The SFDA and China’s Ministry
AND BENOÎT FAUCON later warned dozens of doctors ter Gillespie, was sentenced to of Public Security didn’t respond
that they might have purchased eight years in prison in 2011 for to requests to comment for this
The fake Avastin that surfaced the fakes from distributors owned counterfeiting-related offenses in- article.
in the U.S. in 2012 grabbed head- by Canada Drugs, a Winnipeg In- cluding conspiracy to defraud. Fake cancer drugs coming out
lines, but it was just one example ternet pharmacy company. The U.K. tried to recall the bo- of China have been found to con-
of a growing problem in the phar- The fakes contained starch, gus cancer drugs, along with fake tain everything from harmless pla-
maceutical world: the rise of coun- salt, cleaning solvents and other schizophrenia and heart-disease cebo ingredients to potentially
terfeit cancer drugs. chemicals and none of the genuine medications also sold by Mr. Gil- harmful material to some of the
Fake versions of costly cancer drug’s active ingredient, bevaci- lespie, but was unable to account active ingredients in the genuine
medicines have appeared in in- zumab, according to Roche Hold- for 700,000 doses that already drugs, said Novartis’s Mr. Jackson.
creasing numbers in Asia and the ing AG, Avastin’s manufacturer. had reached pharmacies and pa- The counterfeit Casodex that
Middle East in recent years and The FDA declined to comment tients. reached the U.K. contained 50% to
occasionally in Europe and the on the investigation of the matter, A Chinese national named 80% of the active ingredient in the
U.S. In 2011, cancer drugs ranked which it is leading, citing a policy Kevin Xu was responsible for sell- legitimate product, along with
eighth among the top 10 types of against discussing continuing ing the counterfeits, according to “unknown impurities,” the MHRA
drugs targeted by counterfeiters, probes. Roche declined to com- the MHRA. Mr. Xu was later said.
Associated Press

according to the Pharmaceutical ment on the possible origins of caught attempting to sell the same The regulator didn’t respond to
Security Institute, an industry- the counterfeits. types of counterfeits to under- questions about whether the fakes
funded group; five years ago, they Canada Drugs executives didn’t cover federal agents in Houston had harmed any patients.
weren’t on the list at all. respond to a request to comment. and in 2009 was imprisoned in the Chinese patients have been
Authorities have seized some The company’s employees previ- Counterfeiters are targeting cancer U.S. for distributing counterfeit particularly vulnerable to the
of the fakes in warehouses or ously acknowledged in interviews drugs, including Avastin, above. and misbranded pharmaceuticals. counterfeits.
shipping containers before they that they shipped the fake drug Simeon Wilson, global security In 2010, 80 patients taking part
reached patients. But other coun- but said they didn’t know it was said Andrew Jackson, head of director at AstraZeneca, said the in a clinical trial in Shanghai de-
terfeits have turned up in pharma- counterfeit. global security at Novartis. “The company now has four staffers in veloped acute inflammation of the
cies and hospitals, in one case in- The fake Avastin found in the industry is obviously looking at China dedicated to hunting down eye after doctors inadvertently
juring 80 patients in Shanghai. U.S. is just a small part of the this more rigorously than ever be- counterfeit factories. The investi- gave them counterfeit Avastin, ac-
Counterfeiters are targeting global trafficking in counterfeit fore....I suspect that the bad guys gators assemble evidence of al- cording to a 2011 report in the
cancer drugs because of the big cancer drugs. A police raid in the have clocked onto the huge profits leged wrongdoing and give it to New England Journal of Medicine.
profits to be made. While pills Chinese city of Guangzhou in 2011 that can be made.” Chinese police for enforcement ac- According to the Shanghai gov-
such as Viagra, long a favorite of netted 23 million tablets of a vari- The most serious case yet to tion. ernment, 17 of the patients re-
the counterfeit trade, cost about ety of counterfeit drugs, including hit Europe involved fakes of Astra- “When we do it, and do it quired surgery to fix the problem.
$15 to $20 a tablet, a 400-milli- bogus copies of the generic Zeneca PLC’s prostate-cancer drug properly, the Chinese authorities The fake Avastin vials contained
gram vial of the injectable drug breast-cancer drug tamoxifen, ac- Casodex, which reached U.K. phar- have never turned us down,” he saline that was contaminated with
Avastin costs about $2,400. cording to Chinese law-enforce- macies in 2007. said. bacterial endotoxin, the Shanghai
Many of the fake cancer drugs ment documents. The counterfeits were made in Still, in the southern manufac- government said.
seized in recent years were pro- In March 2010, customs offic- China, and sent through Hong turing city of Guangzhou alone, In 2011, 11 people were con-
duced in China, where weak regu- ers in Malta seized a cargo of Kong, Singapore and Belgium be- where many of the Chinese-made victed of making and selling the
lation and rapid industrialization counterfeit Gleevec, Novartis AG’s fore reaching the U.K., where a lit- fakes originate, there are “thou- counterfeits, including Wu Guo-
have helped counterfeiting flour- leukemia drug, according to An- tle-known wholesaler called Con- sands and thousands” of counter- song, a counterfeiter from Hei-
ish. Law-enforcement authorities thony Busuttil, director of en- solidated Medical Supplies feiting companies operating, he longjiang province identified by
investigating the origins of the forcement for Maltese customs. repackaged the tablets in French said. authorities as the group’s ring-
counterfeit Avastin found in the He declined to comment on where packaging and sold them to unsus- Some making counterfeit medi- leader.
U.S. in 2012 have considered China the fakes came from or where pecting wholesalers and pharma- cation are licensed as chemical He got a prison sentence of
as a possible source. they were being shipped. cies, according to the U.K.’s Medi- manufacturers, which means they two years and 10 months.
The fake Avastin traveled “There’s been an increase I’d cines and Healthcare products aren’t subject to regulation or in- —Lilian Lin
through Turkey and the U.K. be- say in the last five to six years” in Regulatory Agency, or MHRA. spections by China’s State Food and Christopher Weaver
fore reaching the U.S. market. The the counterfeiting of cancer drugs, The head of Consolidated Med- and Drug Administration. contributed to this article.
30 | Thursday, January 3, 2013 THE WALL STREET JOURNAL.

SPORT

Bosses Ride Big-Money Merry-Go-Round

European Soccer Spotlight in 2013 Will Switch From Player Transfers to Managers on the Move
BY JOSHUA ROBINSON charge of the Barcelona B team, a
reserve side used as a feeder to the
Pep Guardiola hasn’t managed a main squad. In Guardiola’s single
top-flight game in more than seven season there, Barcelona B played in
months. Since last summer, he has the fourth tier of Spanish soccer.
preferred to bask in the anonymity And whereas Mourinho has won
of New York, far from the stress of titles in Portugal, England, Italy, and
Barcelona and the European soccer Spain, Guardiola’s staggering array
rumor mill. Yet, 3,000 miles away, of 14 major trophies all came with
his stock continues to skyrocket. Barcelona.
Part of that is down to his talent, “I can’t distinguish Guardiola
but also the accidentally brilliant from Barcelona, but I certainly can
timing of his sabbatical. Due to an distinguish Mourinho from the clubs
unprecedented set of circum- he’s managed,” Szymanski said.
stances—some coincidental, some “We’ve got far more data on which
evolutionary, and some just mis- to evaluate Mourinho. Guardiola,
guided—2013 is set to be the year he’s just the risky bet, isn’t he? He
that high-profile managerial moves might be a good bet. But whatever
eclipse anything the player transfer he is, he’s definitely going to be
market can produce. riskier than Mourinho as an alterna-
At least three of the top clubs in tive.”
the world (Manchester City, Chelsea, Some would even argue that
and Real Madrid) are widely ex- Guardiola was less an innovator
pected to be hunting for new man- than a custodian in charge of mak-
agers. Manchester United could be ing sure the club didn’t waste its
nosing around for the right candi- wealth of talent, though that might
date to replace the 71-year-old Alex be taking it too far. Certainly, Guar-
Ferguson, should he retire this sum- diola put his mark on the club. Ac-
mer. And, at the same time, conve- cording to Graham Hunter’s 2012
niently, some of the world’s most book, “Barça: The Making of the
highly regarded managers could also Greatest Team in the World,” he
be on the market. tweaked the culture, increasing the
Madrid’s José Mourinho is be- focus on fitness, using harsher disci-
lieved to be preparing a return to pline, and cutting loose some of the
the English Premier League, while locker room’s more divisive figures.
Guardiola can seemingly write his “Little details matter a lot now
own ticket back to Europe. and psychologically, we are under-
The speculation only intensified going a master’s degree with Pep,”
over the past couple of weeks as Xavi said at the time, according to
Guardiola returned to Spain for the Hunter. “Everything is controlled
holidays. Reports citing the usual and well prepared. We spend a lot
nebulous spate of friends and insid- of time on strategy, tactics and how
ers have had him meeting with the opponent is going to play
Manchester United manager Fergu- against us.”
European Pressphoto Agency

son to discuss succeeding him at But it’s unclear whether or not

Old Trafford, agreeing to a deal with those methods are what set Guardi-
Chelsea owner Roman Abramovich, ola apart. The players who came to
and conspiring with Manchester define his era—the Barcelona trinity
City to take over from current man- of Lionel Messi, Andres Iniesta and
ager Roberto Mancini next year. Xavi—were already at the club when
Virtually the same headlines ex- he took over. And La Masia, the
ist for Mourinho. It all depends on Pep Guardiola gets a big farewell from his Barcelona players at their Camp Nou stadium in May 2012. club’s famed youth academy, had
which ones you choose to believe. been drilling its pupils in the foun-
Guardiola, meanwhile, has yet to slow year too: Abramovich only accurate predictor of performance sea’s squad, only “a real dope” could dation of tiki-taka, Barcelona’s
make any public statements of in- parted ways with one manager, so that, essentially, any performance fail there.) brand of quick passing and intricate
tent. Carlo Ancelotti, and hired another, above or below the expected result “But obviously,” Szymanski movement, since Guardiola played
What is certain is that Guardiola, Andre Villas-Boas. (And it doesn’t can be attributed to the manager. added, “there is a minority. And there as a teenager.
Mourinho and the like are going to include the cost of a new manager’s Szymanski has found that most people like Ferguson and [Arsenal Meanwhile, his record in the
be expensive. Data on manager sala- squad reshuffling and potential managers “don’t offer anything in manager Arsene] Wenger are in that transfer market, a good indicator of
ries are sketchy and rarely publi- signings.) Now, between the firing addition to the value of the team,” minority of managers who did add a manager’s acumen, was no better
cized, so it’s difficult to say whether of Villas-Boas, the promotion and he said in a telephone interview this something above and beyond. But than mixed. The club spent almost
these pay packets are exploding in subsequent firing of Roberto week. Just look at Chelsea: the most there are very few managers who $500 million on players throughout
the same way player salaries did a Di Matteo, and the appointment of successful period in the big-spend- have done it consistently with dif- his tenure, but for every Dani Alves,
Rafa Benitez as interim manager, ing club’s history has been an eight- ferent teams.” the brilliant Brazilian full-back,
the 2012 figure could be even year spell overseen by nine different Guardiola isn’t one of them yet. there were flops like Alexander
What is certain is that higher. managers. (Queen’s Park Rangers When Barcelona appointed him in Hleb, Henrique, and the $20 million
“But there are not that many manager Harry Redknapp joked this 2008 at age 37, the extent of his Brazilian forward Keirrison—he
Guardiola, Mourinho clubs in the position of a Chelsea week that, with the players in Chel- managerial résumé was one year in never played a game for Barcelona.
and the like are going or a Manchester City where money For every David Villa, there was a
is no object,” said Dan Jones, head disappointment like Dmytro
to be expensive. of the Sports Business Group at Chygrynsky.
Deloitte. Perhaps most important is the
Even so, with more owners get- question of whether tiki-taka can
decade ago. But Pluri, a consultancy ting used to the idea of spending translate elsewhere. Would it work
based in Brazil, estimated recently money on managers as freely as at a club that didn’t have Messi,
that Mourinho is the highest-paid they do on players, it isn’t just the Xavi, and Iniesta to execute it?
manager in the world, earning some deep-pocketed giants shelling out Roma had hoped to import the
$20 million a year. If that figure is fortunes. In 2011, for instance, the philosophy when it hired Luis En-
correct, it would put him on par exceptional costs in relation to man- rique who, like Guardiola, had
with many of the richest players in agerial changes at mediocre Aston played for Barcelona and only ever
Europe. Villa came to more than $18 million, managed Barcelona B. The experi-
More accurately, Deloitte’s break- according to Deloitte. ment failed miserably and Enrique
down of Chelsea’s 2011 financial re- The problem is that research walked away after Roma finished
port reveals just how much some suggests most teams would be bet- seventh.
clubs are prepared to invest in their ter off spending the extra cash on Guardiola seemed to understand
European Pressphoto Agency

management. That year, the club’s players. this risk, too, early in his tenure,
staff costs included roughly $24 mil- Stefan Szymanski, a professor of and long before he had begun con-
lion in termination payments made sports management at the Univer- sidering options beyond Camp Nou.
to managers and coaching staff, plus sity of Michigan and a co-author of “The key to all this is that we
an additional $21 million “in rela- Soccernomics, has examined the dif- have fantastic footballers,” Guardi-
tion to changes in the first team ficult question of how to assess the ola said, according to Hunter. “No
management structure,” according impact of soccer managers. He ar- coach, least of all me, works mira-
to Deloitte. That might have been a gues that a team’s payroll can be an Real Madrid manager José Mourinho is reported to earn $20 million a year. cles.”
THE WALL STREET JOURNAL. Thursday, January 3, 2013 | 31

OFF THE WALL

In College Football, Contesting Who’s No. 1

BY RACHEL BACHMAN

The University of Alabama

football team boasted six national
championships when Wayne
Atcheson took over as the school’s
sports-information director in
1983. Within three years, the
Crimson Tide had five more titles.
What Mr. Atcheson did to ex-
pand Alabama’s haul wasn’t ille-
gal, miraculous or even unique,
though it has stoked a fiery de-
bate. He simply exhumed the titles
from dusty record books and
added them to the school’s foot-
Mike Bennett/Lighthouse Imaging

ball press guide, instantly enshrin-

ing them.
Major-college football is un-
usual among American sports in
that for most of its history it had
no playoff, no Super Bowl, to de-
termine a champion—just a hand-
ful of exhibition-like postseason
bowl games. Many of the nation’s
top teams didn’t play one another,
leaving open the perennial ques-
tion: Which was the nation’s best?
That void spawned dozens of
sportswriter and coaches’ opinion
polls and opaque mathematical
“systems,” each crowning its own
champion. Some titles were so du-
bious the winners themselves
didn’t bother to claim them.
But the explosion of college
football games on TV has intensi-
fied interest in the counting of na- a case with the other 10 titles
tional championships. Hence, Mr.
Atcheson’s reclamation of Ala-
bama’s nearly forgotten early
20th-century titles. The advent of
an actual championship game af-
ter the 1998 season has only ag-
gravated disputes about the rela-
tive worth of teams’ claimed
titles—the Tide’s in particular.
“There was a time when you
could seemingly go through the
drive-through at McDonald’s in Al- came in 1941. That year, the Tide
Notre Dame displays 11 banners and 11 rings for the 11 national football championships it claims. Interest in national championships has surged in the U.S.
the team takes to the stadium on
game day. A flag for each title
flaps outside Bryant-Denny Sta-
dium. In anticipation of a Jan. 7
victory, souvenir shops such as
Red Elephants in Decatur, Ala.,
have ordered hats proclaiming
the 15th title.
In South Bend, Ind., a crystal
football signifying Notre Dame’s
last title team, in 1988, sparkles in
noted at the base of it. Eleven
championship rings glisten in a
display case in the locker room,
and a banner for each title hangs
from the concrete ceiling of the
tunnel the Irish take to the field.
Notre Dame spokesman John
Heisler said that in claiming titles,
“We’ve probably been pretty con-
servative over the course of time.”
Alabama’s most disputed title
finished 11-0 and ranked No. 1 in
the AP poll—and also claim that
year’s title.
As the sport approaches its
first-ever playoff, a four-team ver-
sion that launches in 2014, inter-
est in national championships has
surged—and along with it the
number of teams claiming retroac-
tive titles.
In 2004, the University of
Southern California claimed the
1939 national title—it now counts
a total of 11—based on a single
syndicated ranking system com-
piled at the time by a University
of Illinois economics professor.
This year, Texas A&M Univer-
sity and the University of Minne-
sota claimed championships for
long-departed teams. Texas A&M
added the 1919 and 1927 titles, tri-
pling its previous title total, and
Minnesota added the 1904 title to
climb to seven overall.
They owe their championships
in part to Richard Billingsley, a
football enthusiast in Oklahoma
who developed one of the mathe-
matical systems now used to de-
termine the top-ranked teams for
today’s Bowl Championship Series. Mr. Finebaum, the radio host. “But
Back in the 1990s, Mr. Billingsley
applied his system to teams from
the past, and quietly deemed sev-
eral schools champions for sea-
sons hardly anybody remembered.
Mr. Billingsley even persuaded the
NCAA to include his historical
championships in its Football Re-
cords book.
That book lists 21 titles
awarded to Notre Dame by vari-
ous polls and services, and 18 for
Alabama. But the argument rages
on.
“I would tend to give the Irish
the edge in legitimate titles,” said
then again, I would never say that
out loud in Alabama.’’

abama and pick up a national ti-
tle,” says Paul Finebaum,
the host of an Alabama-
based college-football ra-
dio show. “ ‘I’ll have a Big
Mac, large fries, a Coke
ARE YOU A
finished third in its conference,
losing to Mississippi State
and Vanderbilt. A single
syndicated ranking sys-
tem named Alabama
champion.

SALES STAR?
and a national title.’ ” Even Kirk McNair,
At the same time, Mr. founder and editor of
Finebaum adds, “There ’Bama Magazine, calls the
are few subjects in Ala- ’41 title the “worst one in
bama that will get you America.” But once Ala-
tossed out of a bar bama started publicizing
quicker than saying some its title haul, “you were
of Alabama’s 14 national kind of locked into it,” IF SO, WE WANT YOU ON OUR TEAM.
titles are illegitimate.” Mr. McNair said. Do you want a career where your talents can shine? Do you have the
As Notre Dame and Al- Wayne Atcheson Tide fans contend that
business know-how and technical background to increase adoption of
abama, two of college their count is missing at
football’s most-decorated least one title. In 1966, our products by institutional customers? Are you engaging, confident
programs, prepare to meet in Mi- Alabama was a two-time defend- and results-driven?
ami for the national championship ing national champion and fin-
game on Jan. 7, one of the oldest ished 11-0. Notre Dame and Michi-
and most Byzantine arguments in gan State were both undefeated IF THIS IS YOU, WE’D LOVE TO MEET YOU.
all of sports has been powerfully but played to a 10-10 score in East Dow Jones seeks the best salespeople. If you’re as dynamic, innovative,
reanimated. Alabama claims 14 Lansing, Mich., when Irish coach and ambitious as we are, we’d like you on our team. Help us sell the
national titles, while Notre Dame Ara Parseghian chose to run out
counts 11 of its own. There were the clock rather than risk a loss. products and services that are the foundation from which the world’s
actually two years—1930 and Sports Illustrated’s Dan Jenkins business does business. Powered by The Wall Street Journal, our trusted
1973—when both the Crimson wrote that the Irish had “tied one content impacts more than 42 million people worldwide.
Tide and the Fighting Irish de- for the Gipper.”
clared themselves champions. The Tide finished No. 3 in the
There is no final arbiter in the AP poll behind No. 1 Notre Dame
debate. The sport’s governing and No. 2 Michigan State, both of
body, the National Collegiate Ath- which claim that title. Some theo-
letic Association, keeps a list of rized that voters were protesting
annual champions awarded by the state of Alabama’s anti-inte- FOR MORE INFORMATION AND TO APPLY:
various polls and ranking systems gration stance, said Keith Dunna-
but insists it isn’t definitive. For vant, author of a book about that http://dowjones.com/careers/joinourteam
1981, the NCAA Football Records season called “The Missing Ring,”
book lists six national champions. and of a coming biography on for-
“I have to keep stressing that the mer Notre Dame quarterback Joe
NCAA does not name a national Montana.
champion,” spokesman Cameron Alabama gained a measure of
Schuh said. justice in 1973. The Tide claimed
These aren’t just paper claims, the title based on the respected
either. In Tuscaloosa, Ala., each coaches’ poll taken before the
©2012 Dow Jones & Company, Inc. All rights reserved. 3DJ505
title is etched on a granite plaque Sugar Bowl, a game Alabama lost
on the Walk of Champions that (24-23) to Notre Dame. The Irish
32 | Thursday, January 3, 2013
Email: heard@wsj.com
Who’s Afraid of the Italian Elections?
If a week is a long time in poli-
tics, then eight weeks in Italian
politics is an eon.
Italian elections are due Feb.
24-25. Christmas week already of-
fered a wave of activity from out-
going Prime Minister Mario Monti,
who first unveiled his agenda for
Italy and then said he would head
a centrist alliance of parties in a
bid to remain premier. That has
raised the political stakes, and
there is time enough for plenty of
surprises. Ultimately, though, it
has probably increased the chances
that the Italian election delivers a
market-friendly outcome.
True, opinion polls suggest Mr.
Monti is a long way from winning
the election. The left-wing Demo-
cratic Party headed by Pier Luigi
Bersani is comfortably in front,
with the support of more than 30%
Ceiling Could Drop on Cliff Celebration
One battle has ended, but the
broader war will grind on. Financial
markets threw a belated New Year’s
party Wednesday after Tuesday’s
late passage of legislation to fore-
stall the U.S.’s “fiscal cliff.” The cele-
bration looks premature.
Most immediately, the cliff
agreement pertains only to those tax
increases and spending cuts that
took effect on Jan. 1—and didn’t
completely address all of them. It
merely postponed for two months,
for example, some of the spending
cuts that could lead to sharp cut-
backs in military spending.
Moreover, it doesn’t address the
debt ceiling, the statutory cap on
government borrowing without fur-
ther congressional approval. The
government on New Year’s Eve hit
the current ceiling of $16.394 tril-
lion, the Treasury Department said.
Some cash-management maneu-
vers will enable the Treasury to keep
the government functioning for
about two more months without
congressional action. But that only
ensures further political warfare,
which will quickly loom over mar-
kets. Without agreement on the ceil-
ing, the U.S. risks defaulting on its
HEARD ON THE STREET
FINANCIAL ANALYSIS & COMMENTARY
of voters. But his entry into the
race may draw votes away from
Silvio Berlusconi, the former prime
minister whose decision to pull
support for Mr. Monti’s techno-
cratic government spooked mar-
kets briefly in December and
whose return could trash confi-
dence in Italian assets.
A higher vote for centrist par-
ties under Mr. Monti—at about 10%
before he said he would run—could
give a center-left coalition a major-
ity in Italy’s upper house of Parlia-
ment, making it easier to pass leg-
islation. That would put Mr. Monti
in a strong position to play a role
in the next government, a reassur-
ing development for markets even
if he isn’t prime minister.
Mr. Monti’s agenda also sup-
ports the idea of a center-left co-
alition. It reiterates the need to
Unhappy Memory
S&P 500 amid last debt-ceiling
battle in 2011
1400
1300
1200
1100
1000
J A S O N D
Source: WSJ Market Data Group
The Wall Street Journal
debt and the government could face
a shutdown.
Granted, any agreement is better
than none from the markets’ point
of view. And it may raise hopes that
Congress and the White House can
use this to build toward a larger
“grand compromise” related to an
overhaul of the tax system as well as
changes to programs like Medicare
and Social Security. But that is still
an elusive, and pressing, goal. The
The Quiet Italian
Yield on Italian 10-year
government bond
7%
6 with the Democratic Party.
5 strong start to 2013, with the Mi-
4 Italian yields falling below 4.3% for
3 years.
2010 ’11 ’12 ’13
Source: FactSet The Wall Street Journal
continue fiscal consolidation and
sets out a strategy to reduce debt,
which in the second quarter of
cliff agreement offered little to ad-
dress the country’s long-term debt
issue. Debt over the next 10 years as
a percentage of GDP won’t rise as
quickly as if all the Bush-era tax cuts
had been extended, but it will still
rise. Limiting that increase will de-
pend largely on whether the U.S.
economy will grow quickly enough
in coming years.
On that front, with taxes on
wealthier Americans rising and the
temporary payroll-tax cut expiring,
the cliff agreement will act as a fis-
cal drag. Goldman Sachs economists
estimate it could reduce growth by
about 1.5 percentage points in 2013.
Confidence, and in turn growth,
could suffer even more if the debt-
ceiling debate comes anywhere close
to resembling the debilitating battle
over this issue in summer 2011.
Further complicating matters:
The ceiling potentially gives Repub-
licans more leverage in negotiations
with President Obama, even though
he has said he won’t negotiate.
The fiscal uncertainty that hung
over markets into the close of 2012
may have momentarily abated. But it
will last well into the new year.
—David Reilly
2012 stood at 126% of gross domes-
tic product.
But it also focuses strongly on
Europe, a line likely to appeal to
Mr. Bersani, who also is pro-Euro-
pean. Against that, Mr. Monti’s de-
sire for further reforms to labor
markets, making firing and hiring
easier, will be a bone of contention
Italian bonds and stocks made a
lan bourse up 3.8% and 10-year
the first time in more than two
Investors should beware becom-
ing complacent about Italian risk.
Still, Mr. Monti’s actions should
boost the chances of continued re-
form in Italy, supporting bonds es-
pecially.
—Richard Barley
OVERHEARD
Stocks soared Wednesday. Page-
views at mutual-fund websites
probably marched higher, too.
An analysis of Vanguard retire-
ment accounts, for 2007 and 2008,
shows investors are far more likely
to log into their accounts when the
stock market was doing well. It’s an
example of what economist George
Loewenstein and Duane Seppi of
Carnegie Mellon call the ostrich ef-
fect: Like fair-weather sports fans,
investors are more interested in
their portfolios when stocks are up.
There are some exceptions.
Messrs. Loewenstein and Seppi,
working with Columbia Graduate
School of Business economist Na-
chum Sicherman and Vanguard re-
searcher Stephen Utkus, found
that during the worst of the 2008
financial crisis, log-ins picked up.
And over the entire two-year pe-
riod, investors who had no equity
exposure in their retirement ac-
counts were more likely to log in
when the stock market was down.
It’s easier to keep up with the
Joneses when the Joneses aren’t
doing so hot.
THE WALL STREET JOURNAL.
WSJ.com/Heard
ArcelorMittal
Takes Less Iron
In Its Diet
The year has barely begun, but it
already is an improvement on 2012
for ArcelorMittal. The world’s larg-
est steel producer by output has
sold a 15% stake in its Canadian
iron-ore operations to a consortium
led by Korea’s Posco for $1.1 billion.
That will help Arcelor reduce its
$23.2 billion of net debt, while keep-
ing 85% ownership of one of its bet-
ter-performing assets. Arcelor’s
shares duly rose 4.9% Wednesday.
The deal halts a recent run of
poor news. Arcelor recorded a $709
million net loss in the third quarter
of 2012, and cut its annual dividend.
In December, it said it would take a
$4.3 billion write-down tied to its
European business, where steel de-
mand fell 8% in 2012. Last year, all
three big credit-rating firms down-
graded Arcelor’s debt to “junk.”
To address its weakness, Arcelor
has sacrificed part of a strength.
Iron-ore prices may have come off
the boil, but it is still a profitable
business. Mining generated just 6%
of Arcelor’s revenue in the first nine
months of 2012, but 24% of earnings
before interest, taxes, depreciation
and amortization. Selling even part
of this business can’t have been an
easy step to take. But there is a
pressing need to reduce leverage.
Unless Arcelor keeps net debt below
3.5 times Ebitda, the company could
breach debt covenants on a $10 bil-
lion credit line by the end of June.
And Arcelor has achieved a de-
cent price, implying its Canadian as-
set is worth $7.3 billion in total. As-
suming long-term iron-ore prices at
$85 a ton, that is a considerable pre-
mium to its $4 billion net present
value, according to Macquarie esti-
mates. The deal also includes sales
agreements with Posco and China
Steel Corp., guaranteeing Arcelor
customers for its iron ore.
Arcelor still faces plenty of chal-
lenges, not least reducing capacity
in Europe’s struggling steel market
in the face of political opposition.
Wednesday’s deal suggests it has
other levers to pull in the meantime.
—Andrew Peaple