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Wall Street Journal số ra ngày 24/2/2014
DJIA 16103.30 g 0.19% Nasdaq 4263.41 g 0.10% Stoxx Eur 600 336.09 À 0.39% FTSE 100 6838.06 À 0.37% DAX 9656.95 À 0.40% CAC 40 4381.06 À 0.59% Euro 1.3724 À 0.24% Pound 1.6628 g 0.06% Knowing When to Work Late PERSONAL JOURNAL 23 EUROPE EDITION VOL XXXII NO 17 $1.75 (C/V) - KES 250 - NAI 375 - £1.70 WSJ.com MONDAY, FEBRUARY 24, 2014 BRUSSELS—European governments, reacting to fastmoving events in Ukraine and the ouster of its president, revived plans to offer a large aid package to the country— but insisted funds would come only with pledges of a major economic overhaul By Vanessa Mock, Stephen Fidler and Andrea Thomas European officials said a trade-and-aid deal with Europe, that former President Viktor Yanukovych walked away from in November, triggering turmoil on the streets in Ukraine, could also be resuscitated and signed with a new government as early as next month Kiev was calm on Sunday, the day after parliament voted to remove the president and set new presidential elections for May 25 The European Union’s foreign-policy chief, Catherine Ashton, canceled a trip to Asia and decided to travel to Ukraine on Monday morning for two days of talks “She is expected to meet key stakeholders and discuss the support of the European Union for a lasting solution to the political crisis and measures to stabilize the economic situation,” a statement said An EU official said a summit with Ukraine could be convened as early as next month, during which the stalled trade deal with the country could be signed That pact could come with a large aid package that could exceed the almost €20 billion ($27.5 billion) over seven years that officials previously signaled the EU executive was considering “This is now a very conservative estimate,” the official said “Given the current circumstances, we expect member states to give much more We hope to have more news on this in the next days.” “This can all happen very quickly, provided the political situation in the country continues to develop in the right direction,” the official said Russia will delay a promised bailout of Ukraine after the dramatic collapse of the government in Kiev over the weekend but the International Monetary Fund could help the country return to financial stability, Russia’s finance minister said Sunday “The political situation there has changed dramatically Now we must wait until a new government is formed before a decision can be made” about promised aid from Russia, Finance Minister Anton Siluanov said on the sidelines of a financial lead- ers’ meeting here Mr Siluanov also appeared to open the door to backing an IMF bailout, the alternative financing proposal to Russian aide pushed by the EU and the U.S “The fund has the experience of supporting countries in difficult situations…and they have a well-elaborated set of tools to help in such cases,” he said through an interpreter when asked if Russia would back an IMF loan “Naturally, the IMF experience could help.” German foreign minister Frank-Walter Steinmeier said that a bankrupt Ukraine would be too big a burden for Russia or the EU to bear He said German Chancellor Angela Merkel had spoken to Russian President Vladimir Putin about “how to stabilize Ukraine economically.” He said he would go to Washington this week to talk with the IMF about the issue Ms Merkel’s spokesman said the two leaders agreed that Ukraine needed a working government and should preserve its territorial integrity The EU’s trade chief, Karel Please turn to page Ukraine’s turmoil poses a defeat for Russia Opinion: Putin knows that history hasn’t ended .13 Telecoms Step Up Fight OverNet-NeutralityRules BY SAM SCHECHNER AND RYAN KNUTSON BARCELONA—Telecommunications companies in Europe and the U.S are escalating a battle with technology companies over requirements to treat all InMOBILE ternet traffic WORLD equally, as CONGRESS growth in data-hungry Web services explodes A group of Europe’s biggest telecoms, including Deutsche Telekom AG and France’s Orange SA, is fighting provisions in a proposed European law aimed at enforcing net neutrality, or the open Internet, a principle that Internet providers shouldn’t dis- criminate against traffic from particular sources “We fear that, if the most restrictive views on open Internet prevail, there will be a significant reduction of users’ choice,” said Luigi Gambardella, head of European telecom trade group ETNO, whose members have been lobbying ahead of a vote in Europe’s Parliament on Monday European telecom executives fear that some amendments to the proposed law would cripple efforts to roll out new services In the U.S., telecoms are likely to push the Federal Communications Commission to allow them to charge some websites to deliver content at higher quality The regulator is expected to propose new net-neutrality rules this year, after a federal appeals court in January tossed out the bulk of the commission’s net-neutrality rules Friction between tech and telecom companies on both sides of the Atlantic is rising, as they wrangle over how to divide responsibility—and profits—from the vast amounts data coursing through the world’s networks The question of who will pay for upgrades is becoming more acute as a tsunami of mobile devices, from phones to cars, threatens to swamp Please turn to page 17 Netflix agrees to pay Comcast for speed 18 Getty Images West Readies Aid as Ukraine Regroups A young girl draped in a Ukrainian flag lays flowers for antigovernment demonstrators killed in clashes with police in Kiev Deposed President Viktor Yanukovych is said to have left Kiev for an eastern stronghold as the country’s parliament voted in an interim president and set new elections Inside U.S Tax Probe Looks At Swiss Insurance BY JOHN LETZING Early doubts over whether Italy’s new leader, Matteo Renzi, can fulfill his promises Europe File Why investors are keen on European stocks Business 15 AXA’s strategic shift into emerging markets Heard 28 ZURICH—U.S authorities are scrutinizing Americans’ use of Swiss insurance products to determine if they have been used to hide assets, signaling a potential new direction in the U.S legal crackdown on tax evasion in the Alpine country, according to people with knowledge of the matter The U.S Justice Department and the Internal Revenue Service are looking at the use of private placement life insurance, or PPLI, a product that meshes banking and insurance by linking the value of a client’s policy to assets held in a Swiss bank account, these people say Swiss insurers offering the product, which can be used legally by Americans to defer taxes, have nonetheless sought to reduce ties to U.S clients At least three big insurers say they aren’t accepting new U.S clients In December, Swiss Life Holding AG returned funds to hundreds of Americans who had invested in PPLI policies Those policies were linked to accounts at Bank Frey & Co AG, which is among a number of Swiss banks that have disclosed being under criminal investigation in the U.S for allegedly aiding tax evasion, according to people familiar with the matter Bank Frey ceased operations last year, after one of its executives and an attorney who directed clients to the bank were indicted for allegPlease turn to page 20 | Monday, February 24, 2014 AM IM UK SW FR IT SP TK BR PL IS AE THE WALL STREET JOURNAL GR PAGE TWO What’s News— i i i i i i Business & Finance World-Wide n Greece was due to resume talks with a troika of international inspectors, with the government hoping for a deal that would unlock a fresh aid tranche but without new cutbacks n European antitrust authorities closed a seven-year investigation into energy subsidies for Spanish industry n The fashion world’s race to reach ultrarich shoppers is leaving some of Italy’s vaunted leather and garment manufacturers high and dry 15 n Big European wireless providers are racing to roll out noroaming-fee packages as the EU is set to further reduce fees that have long angered travelers across the continent 17 n Discovery Communications is preparing a bid for U.K broadcaster Channel 5, as the U.S cable-channel owner looks to continue its rapid growth in international markets 18 n Thousands of protesters in Venezuela hit the streets Saturday to express frustration with the government n Two people were killed and dozens were injured after an explosion near an antigovernment rally site in Bangkok n Thousands rallied in Hong Kong to protest what they see as waning press freedoms n Al Qaeda’s top emissary was killed in Syria in a suicide blast blamed on a rebellious offshoot of the group, signaling a violent power struggle within the extremist organization n Coca-Cola Iberian and its workers appear likely to wind up in court over a dispute about plant closures and job cuts 19 n Japanese police were investigating the apparent vandalism of books in Tokyo public libraries related to the story of Anne Frank n Samsung announced the release of its Gear smartwatch, running on the company’s fledgling Tizen operating system 17 n North Korea said it “categorically rejects” a recent U.N report that accused the regime of widespread crimes against humanity “A magnificent location for uniquely-inspiring luxury retreats.” Forbes Travel Guide RESORT • SPA • DRIVEN EXPERIENCES 855-520-3378 gatewaycanyons.com Party Power China's state-owned firms are less profitable than privately owned ones, but account for a large, though, declining share of China's economy Share of gross industrial output from Chinese government–owned enterprises Return on assets of Chinese government–owned and private enterprises 60% 20% 50 15 40 10 30 20 Private Government owned 1990 ’95 2000 ’05 ’10 1996 2000 Sources: CEIC; National Bureau of Statistics of China ’05 ’10 ’12 The Wall Street Journal China’s Big State Firms Gain Clout in Key Sectors [ The Outlook ] BY BOB DAVIS BEIJING—When China’s leaders wanted to give a boost to the domestic semiconductor industry last year, a big state-owned electronics company scooped up smaller privately owned chipdesign and chip-making firms Beijing followed the same script to get control of the sprawling, polluting rare-earths industry: A big state-owned company purchased nine firms in December that mine the minerals used in such strategic industries as defense and telecommunications Expect China’s leaders to insist on a big state role in sectors they deem strategic when the officials lay out their economic plans for the coming year at a session of the country’s largely toothless legislature On the one hand, China has pledged to dismantle some stateowned monopolies so they operate by market principles and pay more dividends to fund social spending But on the other, China specialists say the state may actually end up with more influence over the economy in coming years, at least in areas considered central to China’s core interests “Beijing has been unable to control strategic sectors in which locally owned SOEs [state-owned enterprises] or private firms predominate because of local government backing, so Beijing has promoted consolidation campaigns,” where large stateowned firms acquire other companies, says Scott Kennedy, a China expert at Indiana University Potent forces push against the breakup of monopolies China continues to encourage jumbo-size state-owned companies to compete internationally, as it has in the past decade, especially in the oil and mining industries Stateowned firms have become powerful enough politically to resist efforts to close them The Communist Party also has been looking to tighten—not ease— control over state-owned firms so they carry out its priorities In 2009, for instance, when Beijing ordered a surge in lending to combat the global financial crisis China’s largest bank, Industrial & Commercial Bank of China Ltd., lagged behind its competitors in ramping up lending because it worried about creating bad debt—a problem that now haunts the Chinese financial sector Even so, ICBC’s chairman, Jiang Jianqing, was the only head of the top four state-owned banks to not get a promotion last year, which banking officials say was meant as a signal to put the party’s priorities ahead of profits The Peterson Institute for International Economics estimates state-controlled firms account for about 25% of China’s industrial output, though other analysts say state-owned enterprises control an even larger share of the economy The top 100 or so state-owned firms dominate critical industries, including banking, telecommunications, steel, transportation and electricity But there are about 100,000 others, owned by provinces and cities, that compete with private companies in a wide range of industries including real estate and hotels China’s effort to whittle down the number of SOEs halted during the global financial crisis that began in 2008 and hasn’t resumed, according to a research paper by the Paulson Institute, a Chinafocused think tank in Chicago Local governments formed companies to borrow money and build real-estate developments and infrastructure as part of Beijing’s stimulus plan “Local governments don’t want to lose the benefits from their control of local SOEs,” said Xuan Xiaowei, an SOE specialist at the Development Research Center, a prominent Chinese think tank “The control gives them power [and] local income.” But competitors inside and outside of China complain that state firms have special advantages, including subsidies and easy access to bank loans One of China’s largest, China Nonferrous Mining Corp., acknowledged as much in its 2012 prospectus, noting “we enjoy governmental support and preferential treatment in credit borrowing from [Chinese] banks and [in] tax payment.” The U.S has been using annual economic negotiations with China to try to persuade Beijing to reduce the SOEs’ advantages There have been some signs of movement in that direction Last week, two big state-owned firms agreed to sell minority stakes in areas traditionally offlimits to private investment, including domestic oil-refining marketing and distribution Chinese banking regulators also have begun to approve small privately owned banks But China’s view of what constitutes commercial operations may be different from what international competitors are seeking Chinese officials point to Singapore’s big sovereign-wealth fund, Temasek Holdings Pte Ltd., as a model Temasek buys stakes in companies, including controlling interests, and its fund managers look to improve corporate profitability and efficiency China’s Communist Party plays a far more intimate role in stateowned firms The party puts in place the top managers at the biggest firms and installs a party secretary, whose job is to make sure party directives are followed Companies hold “study sessions” to figure out how to carry out party priorities The heads of local SOEs are often appointed by local party officials Having party-appointed Temasek-style asset managers closely oversee the companies, rather than Beijing regulators who sometimes see themselves as company allies, could give the state a stronger hand in corporate affairs SUBSCRIBE TODAY CALL +44 (0) 20 3426 1313 VISIT wsjeuropesubs.com/wsje THE WALL STREET JOURNAL EUROPE (ISSN 0921-99) 222 Grays Inn Road, London, WC1X 8HB FOR ISSUES RELATED TO SERVICE: CALL +44 (0) 20 3426 1313 EMAIL subs.wsje@dowjones.com WEB service.wsje.com Advertising Sales worldwide through Dow Jones International Frankfurt: 49 69 29725 390; London: +44 20 7573 4060; Paris: 331 40 17 17 01 Printed in Belgium by Concentra Media N.V Printed in Germany by Dogan Media Group / Hürriyet A.S Branch Germany Printed in Switzerland by Zehnder Print AG Wil Printed in the United Kingdom by Newsprinters (Broxbourne) Limited, Great Cambridge Road, Waltham Cross, EN8 8DY Printed in Italy by Telestampa Centro Italia s.r.l Printed in Spain by Bermont S.A Printed in Israel by Jerusalem Post Group Printed in Turkey by Dunya Super Veb Ofset A.S Printed in Poland by Polskapresse Printing Division Registered as a newspaper at the Post Office Trademarks appearing herein are used under license from Dow Jones & Co ©2013 Dow Jones & Company All rights reserved Editeur responsable Tracy Corrigan M-17936-2003 Registered address: Avenue Cortenbergh 60, 1040 Brussels, Belgium THE WALL STREET JOURNAL Monday, February 24, 2014 | EUROPE NEWS EU Closes Probe of Spanish Subsidies BY TOM FAIRLESS BRUSSELS—European antitrust authorities have quietly closed a seven-year investigation into energy subsidies for Spanish industry, a move that potentially saves local companies billions of euros as the country tentatively emerges from a deep recession In a short notice on its website dated Feb 4, the commission said Madrid’s decision to set artificially low electricity prices for industrial companies in 2005 “does not constitute aid.” The full reasoning behind the decision wasn’t yet available, said the notice, which wasn’t accompanied by the customary news release The decision means Spain’s large and midsize industrial companies won’t have to pay back money to compensate for artificially low energy tariffs they enjoyed in 2005 that created a €3.8 billion ($5.22 billion) deficit in Spain’s electricity system The deficit was to be financed by a new electricity surcharge paid by all Spanish consumers over 14 years When the commission launched its investigation in January 2007 under former competition chief Neelie Kroes, it warned that the low energy prices might have provided “significant amounts of operating aid” to Spanish industry, thereby distorting competition “Generally, EU law accepts that small businesses and households can benefit from regulated tariffs, but bigger companies should purchase energy on the free market,” said Steven Verschuur, a lawyer with Clifford Chance in Brussels who specializes in competition law, state aid and public procurement Spanish electricity companies might also have made an “abnormal profit” as they were overcompensated by the government for the low energy prices, the commission said at the time It was also concerned that only Spain’s electricity incumbents were allowed to provide the low regulated tariffs, which may have prevented new electricity suppliers from entering the country A spokesman for the commission said it couldn’t establish that business users received an advantage because free-market prices through- out 2005 were “broadly in line” with the regulated tariffs But he didn’t explain why, if this was the case, power companies were incurring huge losses before compensation He added that the compensation paid to electricity providers couldn’t be considered an advantage He stressed that Spain abolished regulated tariffs for business users in 2009 Legal experts called the lack of a public announcement ’unusual.’ Legal experts said the lack of a public announcement on the case was “unusual” and “astonishing,” particularly as it comes two months after the commission opened a similar investigation into energy subsidies in Germany “The commission’s decision not to publish a press release in this case is astonishing because it’s clear that this case would have been in the public interest in the context of the ongoing investigation in Germany,” said Martina Maier, a lawyer with McDermott Will & Emery in Brussels It is also unusual to close a formal state-aid investigation after seven years, an “exceptionally long” time, because the commission only launches such probes if it thinks it has a strong case, Ms Maier said “It looks a bit odd,” said Mr Verschuur A spokesman for the commission said it doesn’t publish news releases for all decisions, “especially for positive decisions…or with old cases which are not of high relevance today.” He said the investigation in Spain had “nothing to do” with the investigation concerning Germany The European Commission, which acts as the bloc’s antitrust regulator, has significantly more discretion than U.S antitrust authorities because it acts as investigator, prosecutor and judge The commission’s decision may have been influenced by the weak economic backdrop in Spain, said Mr Verschuur The country emerged from a two-year recession last year but is expected to post economic growth of just 0.2% this year, and its unemployment rate is likely to remain above 25% until at least 2017, according to the International Monetary Fund “There is a tendency for the commission to be more considerate of the industrial implications behind its cases,” Mr Verschuur said Another possibility is that the commission closed the case after Spain’s government amended its legislation to Brussels’ satisfaction, he said Madrid announced an overhaul of its energy sector last summer aimed at tackling an accumulated €30 billion electricity-tariff deficit that has arisen from the wide gap between the price paid by consumers and the power companies’ costs The overhaul was a key demand of the so-called troika—the commission, the European Central Bank and the International Monetary Fund— which oversaw the €42 billion bailout of Spain’s financial sector that was agreed in 2012 —Ilan Brat contributed to this article WELCOME TO OUR WORLD w CHRONOMAT 44 FLYING FISH BREITLING.COM | Monday, February 24, 2014 THE WALL STREET JOURNAL EUROPE NEWS EUROPE FILE | By Simon Nixon This wasn’t how Matteo Renzi’s destiny was supposed to unfold For years, admirers of the newly installed Italian prime minister have gushed about his energy, his ability and his supreme political skills Despite his age—at 39, he is Italy’s youngest-ever leader—they were convinced that it was only a matter of time before Mr Renzi swept to power on a tide of popular support to revitalize the economy and public life But there have been no elections, only a palace coup Having dispatched the former prime minister and his party colleague, Enrico Letta, with remarkable ruthlessness, Mr Renzi starts work this week with a similar cabinet, the same coalition and the same parliament Polls suggest voters are unimpressed To be fair, Mr Renzi knows that his career now depends on delivering the reforms that he says Italy needs and which he accused Mr Letta of failing to deliver His decision to force out Mr Letta was a calculated risk, says Roberto D’Alimonte, professor of politics at Rome’s Luiss University and an adviser to Mr Renzi Mr Renzi’s original plan had been to support Mr Letta until his government had put in place a new voting system and reformed the senate At that point, the country could hold elections, which he hoped would result in a Democratic Party majority government led by himself But this was likely to take at least a year because senate reform—essential to secure the support of Forza Italia, the main opposition party led by former Prime Minister Silvio Berlusconi— requires constitutional change Mr Renzi calculated that he couldn’t afford to wait for a year As other crisis countries started to recover, Italy was falling further behind and voters were getting frustrated Forcing early elections in the absence of electoral reform was also out of the question That left Plan C— ousting Mr Letta and becoming European Pressphoto Agency Renzi’s SkillsNeed toLiveUp toBilling Italy’s new prime minister, Matteo Renzi, leaving a church near Florence Sunday, a day after he was sworn in prime minister without an election—as the least bad option But can Mr Renzi succeed where Mr Letta failed? He has already set out a bold agenda for his first 100 days, including electoral reform, labor reform, tax reform and an overhaul of the public administration Mr Renzi may consider his timing is propitious After all, he already has his electoral reform deal with Mr Berlusconi His proposed labor reforms are similar to those attempted by former Prime Minister Mario Monti, which were largely scuttled by Mr Renzi’s party Meanwhile, a detailed plan for €32 billion ($44 billion) of spending cuts will land on incoming Economy Minister Pier Carlo Padoan’s desk this week, drawn up by former International Monetary Fund director of fiscal affairs Carlo Cottarelli And Mr Renzi’s plans for public administration reform should appeal to supporters of the populist Five Star Movement Indeed, its leader, Beppe Grillo, accused him of stealing his policies But this is just a start Mr Renzi will need to be much bolder to pull Italy out of the mire To have any chance of success, three things are required First, he must convince Italians of the need for reform Italy appeared to pander to this populism with talk of the need to implement reforms so that “we can tell Europe what we want rather than Europe tell us what to do.” Yet all the recent evidence from the euro crisis suggests that reforms are most likely to be successful when there is a strong degree of domestic commitment His second challenge will be to Mr Renzi knows that his career now depends on delivering the reforms that he says Italy needs and which he accused Mr Letta of failing to deliver stands out among euro-zone crisis-hit countries for its reluctance to recognize that its misfortunes are largely homegrown, preferring to blame outside forces, whether Germany, Brussels or the financial markets In the past five years, Italy has swung from being one of the most pro-European countries to one of the least Mr Renzi has sometimes face down the vested interests that have blocked previous efforts to reform Italy These include the trade unions, the Confindustria business lobby, the Catholic Church, the foundations that control much of the banking sector, the civil service, professional guilds and the justice system Corruption, cronyism, corporatism and rent-seeking are endemic Mr Renzi’s record in Florence, where he privatized the bus service in the face of union opposition, is encouraging But he has no government experience at the national level; successful reform will depend on political skill as much as political will Thirdly, he needs time The conventional wisdom is that reforms are very hard to deliver with a coalition government— particularly grand coalitions of the left and right—or in the absence of market or external pressure, or without a clear electoral mandate But it is easy to find exceptions to each of these rules What is harder is identify is any significant reform delivered by a government within a year of an election That’s hardly surprising since reform in the short-term invariably creates more losers than winners It was only after elections in the U.K., Spain, Ireland, Portugal and Greece that those countries embarked on major reform programs Frances President Franỗois Hollande wouldnt be embarking on his new reform program now if he didn’t still have three years before he needs to face the voters again In contrast, it was the prospect of imminent elections that put paid to the reform ambitions of Mr Letta and Mr Monti Mr Renzi has been criticized for stating that he wants this government to serve until the current parliament ends in 2018 rather than to push for elections in 2015 In reality, Mr Renzi has little option but to try to keep his coalition together if he is to avoid his reform program rapidly running into the political sand, with dire consequences for Italy’s economy—not to mention his own career But Mr Renzi must operate within the constraints of the current constitution with the added disadvantage that he isn’t even a member of Parliament To keep his coalition together, his political skills will need to be every bit as formidable as his supporters say they are And then some Greece Plans to Resume Talks With Bailout Troika BY NEKTARIA STAMOULI ATHENS—Greece was set to resume protracted talks with a troika of international inspectors Monday, as the government aims for a deal that would unlock a fresh tranche of aid—but without painful new cutbacks ahead of local elections this spring The talks, which have dragged on since September, come amid signs Greece has surpassed budget and economic targets set by its creditors, potentially strengthening Athens’s negotiating position and easing the need for politically contentious austerity measures in the months ahead Instead, the inspectors are likely to focus on the need for further structural reforms Greece must take, such as steps to liberalize the coun- try’s hidebound economy, in which a web of red tape and other restrictions continue to hobble business and investment Other items on the agenda include moves to overhaul Greece’s labor market, and plans to furlough and fire thousands of public-sector workers The goal, according to both the government and the so-called troika of inspectors—which represent the European Commission, the International Monetary Fund and the European Central Bank—is to conclude negotiations before a March 10 meeting of euro-zone finance ministers, who will judge Greece’s reform progress to date and decide whether it has done enough to receive fresh aid By late May, Athens must make good on debt payments totaling some €9.3 billion ($12.8 billion) “We are working very hard in or- der to be ready,” Greek Finance Minister Yannis Stournaras told journalists Saturday after briefing Prime Minister Antonis Samaras on the status of the talks “We still have a number of open issues, but I believe that by the next Eurogroup—we don’t have any margin beyond that— we will need to have finished.” For months, the on-and-off-again troika review has become bogged down in a dispute over the issue of further austerity measures that Greece must take to meet its budget targets this year Until recently, the troika insisted Athens find roughly €2 billion in further budget cuts or tax increases to meet its fiscal goals this year, plus several billion euros in additional austerity measures to meet fiscal goals in 2015 and 2016 Since then, data showing Greece with a surprise €1.5 billion budget surplus last year—a year ahead of schedule and far better than expected—appears to have addressed at least some of the troika’s previous concerns Likewise, government data show that Greece has also met its target to slash its bloated public-sector payroll by 150,000 workers, two years ahead of schedule As of the end of December, the public sector employed just shy of 636,000 people, according to the country’s administrative reform ministry, a decline of more than 200,000 workers since the start of the crisis four years ago Since 2010, Greece has secured two international bailouts worth €240 billions in exchange for undertaking tens of billions of euros in austerity measures to fix its finances and restructure its economy But the reforms have come at a cost: Greece’s economy has shrunk by more than a quarter from its peak in 2008, while unemployment has soared to a staggering 28% of the workforce This year, the economy is forecast to show only an anemic recovery—after six years in recession—with more robust growth only expected from next year The country’s two-way coalition government—made up of the conservative New Democracy and the socialist Pasok parties—warns that unpopular cutbacks could threaten its narrow three-seat majority in Greece’s parliament Dual local and European Parliament elections in May, when the opposition left-wing Syriza party is expected to take a lead, have reawakened fears of political instability, which could jeopardize Greece’s frail recovery THE WALL STREET JOURNAL Monday, February 24, 2014 | Our graduates go places Northeastern University graduates achieve their career goals because a Northeastern education is like no other Experiential learning, centered on our signature co-op program, gives our students opportunities to put classroom learning to work with more than 2,900 employers around the world Northeastern students graduate with professional skills, savvy, and confidence, prepared for a lifetime of success northeastern.edu 90% 87% 51% of our students are employed full time or enrolled in graduate school within nine months of graduation of those who are employed are working in jobs related to their major field of study of our graduates receive at least one job offer from a previous cooperative education employer | Monday, February 24, 2014 THE WALL STREET JOURNAL UKRAINE IN CRISIS Turmoil Called ‘Major Defeat’ for Russia MOSCOW—The dramatic collapse on Saturday of the authority of pro-Russian President Viktor Yanukovych in Ukraine looks like a major reversal for the Kremlin, pulling Russia’s southern neighbor toward Europe just weeks after it appeared Moscow had succeeded in drawing Kiev back into its embrace “This is a major defeat,” said a senior Kremlin adviser, adding that the events of the last 24 hours bitterly remind Russian officials of the 2004 Orange Revolution, when Mr Yanukovych saw his fraud-tainted election victory overturned after massive street protests brought a pro-western government to power “We made the same mistakes again” this time, said the Kremlin adviser, who spoke on condition of anonymity “For us, the conclusion is that the West succeeded in engineering a coup d’état.” Just what Russia’s reaction to this apparent setback would be wasn’t immediately clear Western officials seemed to be going out of their way not to provoke Moscow Some Kremlin aides in recent weeks had suggested Moscow could intervene to protect pro-Russian regions if Ukraine were to slide into civil war, but there is been no indication of high-level Kremlin support for such a move A pro-European government in Kiev, however, could find itself under heavy economic pressure from the Russians, who are a major fuel supplier and trade partner “They have a lot of economic levers they can pull,” said Steven Pifer, a former U.S ambassador to Kiev Analysts also warned that a major setback in Ukraine could provoke the Kremlin to crack down further on opponents at home, as it did after the Orange Revolution, which Russian officials perceived as a western-orchestrated takeover Many in the Kremlin continue to believe the West is seeking to engineer the same kind of revolution in Russia, advisers say “This is just the start of a major battle in the post-Soviet space,” said one, refer- Associated Press BY GREGORY L WHITE Demonstrators in Kiev on Sunday use sledgehammers to demolish the letters on a monument dedicated to KGB officers ring to the latest events in Kiev Russian officials fumed publicly on Saturday, as news of the dramatic reversal in Kiev spilled out, and the Ukrainian parliament, which had swung behind the opposition, voted to remove Mr Yanukovych from office and call new elections for May Even Mr Yanukovych’s political allies voted for the measures, as government authority melted away on the streets and protesters took over Mr Yanukovych left the capital for his political heartland in the east of the country and denounced the day’s events as a “coup d’état,” but he seemed powerless to stop them By evening, the political nemesis Mr Yanukovych had jailed—opposition leader and former Prime Minister Yulia Tymoshenko—had been released from prison and was cheered by thousands of demonstrators on Kiev’s main square Russian Foreign Minister Sergei Lavrov worked the phones with his European and U.S counterparts, according to statements from his ministry, telling them that “illegal extremist groups” had taken control over Kiev He called on his partners to pressure the opposition in Ukraine to return to the terms of the European-brokered political compromise signed on Friday, which called for Mr Yanukovych to remain in office until new presidential elections late in the year But western capitals seemed unsympathetic, moving instead to work with the new opposition-led government Meantime, Russian President Vladimir Putin was silent on the events in Ukraine on Saturday But he did issue a series of statements congratulating Russia’s Olympic team members on winning medals at this month’s Winter Games in the Russian city of Sochi State television also focused on Olympic triumphs And in reports of events in Ukraine, program anchors used grave tones “Extremists have taken over in Kiev and the western regions of the country,” said one on Rossiya-24, a state news channel When a Russian correspondent in Kiev described the “holiday-like atmosphere” among opposition supporters on the capital’s main square, known as Maidan, the anchor quickly ended the live report, intoning, “the way Maidan looks now, it’s not the best place to spend time.” Mr Putin, however, has come from behind before in this unexpected geopolitical struggle over Ukraine, a country the size of France that is crucial to his ambitions to build a Moscow-led bloc of former Soviet states Three months ago, Mr Yanukovych was on the verge of signing a trade and political partnership with the European Union that had been years in the making and would have posed a major obstacle to Mr Putin’s plans Instead, under heavy pressure from the Kremlin, Mr Yanukovych reversed course at the last minute and pledged closer ties to Moscow, which in turn offered $15 billion in desperately needed loans as well as discounts on vital natural-gas supplies When Mr Yanukovych’s aboutface set off substantial street protests in Kiev, the Kremlin accused the West of fomenting the demonstrations and supporting ultranationalist radicals And when the Ukrainian president offered concessions to the opposition last month, Moscow responded by suspending the release of the much-needed loans to Kiev As late as Thursday, when bloody fighting between police and demonstrators in Kiev had riveted international attention, Russian Prime Minister Dmitry Medvedev warned Ukraine’s government against behaving “like a doormat that people wipe their feet on.” Foreign Minister Lavrov blasted the EU for calling on Mr Yanukovych to agree to early elections But that is just what Mr Yanukovych agreed to in Friday’s deal, along with constitutional changes that would reduce presidential powers in favor of the parliament He also agreed to the formation of a new coalition government that would likely to be led by his pro-European opponents But protesters proved unwilling to wait for new elections and Mr Yanukovych fled the capital late on Friday The Twitter feed of Alexei Pushkov, chairman of the International Affairs Committee in Russia’s parliament, on Friday called the situation “an ideal scenario for an Orange Revolution.” Hours earlier, it had said: “The West is giving Yanukovych a final push It’s not just a matter of Ukraine on its own The ultimate goal, if you remove all the chaff, is to bring NATO closer to the borders of Russia.” On Saturday, Mr Pushkov’s Twitter feed noted that Mr Yanukovych had fled the capital and protesters were roaming through his unguarded residence outside the capital “A pathetic end for a president,” it said West Readies Aid as Ukraine Prepares for New Course a hefty, but phased-in rise in natural gas prices, a currency depreciation, and significant cuts in the government’s budget, all of which are politically controversial U.S Treasury Secretary Jacob Lew also said Ukraine’s next government needs to commit to economic restructuring if it wants help from the U.S “We’ve been very clear that there needs to be stability in Ukraine and a willingness to undertake the kind of reforms they need to make their economy work,” he told reporters after the G-20 meeting Ukraine’s parliament voted to formalize the interim transfer of presidential power to the newly elected parliament speaker Oleksandr Turchynov, the first deputy chairman of the Batkivshchyna party Mr Turchynov called the current economic situation in the country “catastrophic” at a parliament session on Sunday, Interfax news agency reported “Yanukovych’s governance has driven Ukraine’s economy to a catastrophe There are absolutely no funds on the treasury’s accounts There are colossal problems with the pension fund You see what’s go- ing on with the national currency, the banking system,” he said The whereabouts of Mr Yanukovych were unknown Sunday, the day after he left the capital as protesters took control of the city center Acting Interior Minister Arsen Avakov on Sunday told reporters that the president’s plane was de- nied permission to take off Saturday night in the eastern city of Donetsk “He then got in a car and fled in an unknown direction,” said Mr Avakov, according to the Interfax news agency Mr Yanukovych on Saturday vowed to remain in power, even as his political allies abandoned him in droves In an interview with a TV European Pressphoto Agency Continued from first page De Gucht, said Sunday he was confident the trade pact would be signed “I believe that yes, they (the Ukrainians) are going to sign that deal," Mr De Gucht told Sky News television He gave no details on timing “First we need a government for that, and it has to take a democratic decision and it has to be in a stable situation.” EU countries would need to give the green light to signing the trade accord, an EU official said, though this could be done rapidly by telephone, or during an EU foreign ministers’ meeting in Brussels Ukraine’s negotiations with the IMF would be expected to proceed in tandem with the preparations for the trade accord “We need to have established government and guarantees in place to make sure that EU taxpayers’ money won’t be wasted,” the official said In Sydney, IMF Managing Director Christine Lagarde said economic reforms “need to be started at least” in order for the international community to help The fund wants A protester poses in a bathtub Saturday at the residence of Mr Yanukovych station in Kharkiv in the eastern portion of the country, he denounced the events in Kiev as a “coup d’état” that he blamed on “bandits.” With the future leadership of the country still to be determined by new elections, former President Yulia Tymoshenko is considered likely to make a bid to regain her former office Ms Tymoshenko was released from prison Saturday as Mr Yanukovych’s government crumbled A senior German official said Chancellor Merkel had spoken to the freshly released Ms Tymoshenko on Sunday morning and urged her to protect the integrity of her country, to reach out to the Russian-speaking regions and to work to federate the former opposition Ms Merkel, according to the official, greeted Ms Tymoshenko with the words “welcome to freedom.” She also invited the ailing Ukrainian politician to undergo medical treatment in Germany if she wished to, the official said —Ian Talley, Bertrand Benoit, Nick Winning, James Marson and Alexander Kolyandr contributed to this article THE WALL STREET JOURNAL Monday, February 24, 2014 | U.S NEWS New View Into Fed’s Response To 2008 Crisis Two days after U.S officials decided to let Lehman Brothers collapse in September 2008, and just before the Federal Reserve unleashed a torrent of programs to bolster the financial system, central-bank officials were still struggling to grasp the magnitude of the calamity that had hit the economy “I think that our policy is looking actually pretty good,” Fed Chairman Ben Bernanke said of the level of interest rates at a closed-door Fed policy meeting on Sept 16, 2008, according to transcripts of its policy meetings that were released Friday after the traditional five-year lag Officials decided at the meeting to hold interest rates steady at 2% It was one of Mr Bernanke’s last moments of passivity in the financial crisis As he spoke, the Fed was moving ahead with plans to help bail out American International Group Inc., the large failing insurer seen as crucial to the financial system Within days Mr Bernanke and Treasury Secretary Henry Paulson would go to Congress and make an urgent plea for a bank-bailout plan By year-end, the Fed chairman had pushed a stillhesitant central bank toward an unprecedented experiment with easymoney policies aimed at reviving the economy The Fed transcripts, 1,865 pages documenting one of the most turbulent economic times in the nation’s history, covered eight formal and six emergency policy meetings the central bank conducted in 2008 They provide the most complete view yet into developments inside the nation’s central bank as the financial crisis worsened and threatened to plunge the U.S into another Great Depression Among their revelations: Mr Bernanke and his Fed colleagues spent much of the year scrambling to catch up with worsening financial turmoil and economic conditions, sometimes moving aggressively only to be surprised when conditions deteriorated again Officials acted boldly in January 2008, but spent much of the spring and summer hamstrung by uncertainty, disagreement and an unexpected inflation jump In the months after that September meeting, Mr Bernanke transformed from mildmannered former professor into an audacious crisis manager, pushing for more-aggressive policies and arguing more forcefully with other officials Sometimes gallows humor carried them through difficult decisions “An accounting joke concerning the balance sheets of many financial institutions is now making the rounds,” Janet Yellen, then president of the Federal Reserve Bank of San Francisco, said at one point “On the left-hand side, nothing is right; and on the right-hand side, nothing is left.” Ms Yellen, who became Fed chairwoman on Feb 1, emerges in the transcripts as a loyal ally of Mr Bernanke She was often presciently worried about unfolding developments, and among the first to call a recession, but in some instances she was wrong about how the crisis would play out and in others unprepared to push Mr Bernanke any further than he was ready to go On Jan 9, he convened an unscheduled conference call to discuss the worsening economic outlook with colleagues He had staff circulate a draft policy announcement in case officials wanted to cut rates that day “I have become increasingly concerned that our policy rate is too high to fully address the downside risks to growth,” he told his colleagues Fed officials held off from acting at that meeting, but then raced to cut rates less than two weeks later in another unscheduled meeting “We are behind the curve,” Mr Bernanke said at the unscheduled Jan 21 meeting, at which the Fed cut its benchmark short-term interest rate by three-fourths of a percentage point to 3.5% “We need to something.” Ms Yellen backed him “The risk of a severe recession and credit crisis is unacceptably high,” she said By March she said she suspected a recession had already begun At another meeting in January, Mr Bernanke lamented, “during the past few months I think a perception has developed that we are tentative and indecisive and are not communicating clearly enough to the markets and to the public.” Exchanges between officials got occasionally testy, especially after Mr Bernanke’s decision to help J.P Morgan Chase & Co finance the rescue buyout of Bear Stearns in midMarch On April 29, then-New York Fed President Timothy Geithner rebuked Dallas Fed President Richard Fisher for pondering whether the Fed should try to engineer a stronger dollar with tight credit policies “This speculation is perilous,” said Mr Geithner, who sometimes sparred with the Fed’s wing of policy “hawks” who opposed easy-money policies Mr Geithner, who later was named Treasury secretary, warned it was too hard to try and maneuver the currency given the circumstances A day later, Philadelphia Fed President Charles Plosser, another hawk, exchanged sharp words with Mr Geithner about interest-rate policy “Excuse me,” Mr Plosser said to Mr Geithner “Make sure that you say you’re speaking for yourself, not for me, in terms of how I think about policy.” In June, Mr Bernanke gently chastised Mr Fisher for voting against a decision to keep interest rates steady in the face of rising inflation The Fed acknowledged in its statement it was alert to inflation risks, as Mr Fisher wanted, but he also wanted a rate hike “I’m disappointed that President Fisher is going to vote against his own language,” Mr Bernanke said Amid the jousting, some Fed officials became convinced after the Bear Stearns buyout that the worst was over Frederic Mishkin, a Fed governor, said in April that it looked like the financial system had “turned the corner.” Ms Yellen often weighed in with Fed Chairwoman Janet Yellen, right, emerges in the 2008 transcripts, as a loyal ally of former Fed Chairman Ben Bernanke, above warnings of risks to the economy from increasing financial strain But in the summer, as commodities prices soared, driving inflation temporarily higher, she misstepped, suggesting the Fed was more likely to raise interest rates than lower them in the months ahead “Our next move on the funds rate is likely to be up, and the question is when,” she said at a June 25 meeting, at which officials decided to hold interest rates steady at 2% “I would envision beginning to remove policy accommodation toward the end of this year.” Outside of the Fed, however, events were spiraling out of control Government officials had begun worrying about the rapidly deteriorating health of mortgage giants Fannie Mae and Freddie Mac Lehman Brothers was struggling in its efforts to raise capital Mr Bernanke wasn’t comfortable “I agree certainly that the crisis atmosphere that we saw in March has receded markedly, but I not yet rule out the possibility of a systemic event,” he said at the June meeting “We have considerable concerns about Lehman Brothers, for example.” In July, as the financial system teetered, officials looked on as the consumer-price index shot up to 5.5% from a year earlier, pushed up by soaring commodities prices At the Sept 16 meeting, the Fed again decided to keep its short-term interest rate steady at 2% Mr Bernanke said the Fed didn’t have enough information at that point about the fallout from Lehman’s collapse to justify cutting interest rates “It is simply premature,” he said Ms Yellen went along with Mr Bernanke’s decision at the September meeting to keep rates steady, but she warned: “I am very concerned about downside risks to the real economy and think that inflation risk is diminished.” Other Fed officials were deeply worried “We took a calculated bet,” Boston Fed President Eric Rosengren said of the decision to allow Lehman Brothers to fail “If we have a run on the money-market funds or if the nongovernment tri-party repo market shuts down, that bet may not look nearly so good.” Agence France-Presse/Getty Images; Associated Press (above) BY JON HILSENRATH Two days later, as markets went into a tailspin and the Fed moved to bail out AIG, Messrs Bernanke and Paulson went to Congress and urged lawmakers to support a bailout for the U.S banking system By year-end the Fed had cut interest rates to near zero, announced plans to start buying governmentbacked mortgage-backed securities, and set up programs to prop up money-market funds and the commercial-paper market and individual banks such as Citigroup Inc A more combative Fed chairman also had laid the groundwork for major shifts in the Fed’s approach to monetary policy, abandoning incremental interest-rate cuts and moving toward a range of unconventional new policies including bond-buying programs that would become his signature over the next five years “We are at a historic juncture— both for the U.S economy and for the Federal Reserve,” Mr Bernanke told his colleagues at a Dec 16 meeting when the Fed cut rates to near zero “The financial and economic crisis is severe despite extraordinary efforts not only by the Federal Reserve but also by other policy makers here and around the world With respect to monetary policy, we are at this point moving away from the standard interest rate targeting approach and, of necessity, moving toward new approaches.” When challenged by others, the normally placid Fed chairman pushed back “You must be thinking whether this means that in every moderatesized recession henceforth we’ll view the Federal Reserve’s best policy…” Richmond Fed President Jeffrey Lacker started in one exchange Mr Bernanke cut him off “It’s not a moderate recession, and it’s not a normal financial downturn,” he said In a speech Friday, after the release of the transcripts, Mr Lacker argued further against the Fed’s “impulse to intervene” throughout the financial crisis Financial instability was worsened, he said, by expectations in the markets that the Fed would always provide a backstop Mr Bernanke, looking back on the crisis era last month at an interview at the Brookings Institution, described the September period as the most intense for him in the crisis “I was so absorbed in what was happening and trying to find a response to it,” he said He likened it to a car wreck “You’re mostly involved in trying to avoid going off the bridge; and then later on you say, ‘Oh, my God.’ ” He said the Fed’s actions, along with the bank bailouts and fiscal stimulus, halted the crisis —Victoria McGrane, Ben Leubsdorf, Michael S Derby and Pedro Nicolaci da Costa contributed to this article | Monday, February 24, 2014 THE WALL STREET JOURNAL WORLD NEWS Venezuela Protesters Maintain Pressure Opposition Groups Say Food Shortages and Soaring Inflation Contribute to Antigovernment Sentiment CARACAS—Tens of thousands of protesters in Venezuela hit the streets Saturday to express mounting frustration with the government, adding momentum to a wave of demonstrations that have severely tested President Nicolás Maduro since the start of the month Former presidential candidate Henrique Capriles called for the march in Caracas, and stepped into the void left after the arrest of Leopoldo López, the opposition leader who had been organizing protests Mr López faces some 10 years in prison for allegedly causing the violence on Feb 12 that led to the death of three protesters after an antigovernment march through the center of the capital Opposition leaders have said that militant government supporters were responsible for the bloodshed At least eight people have been killed since mid-February and dozens of others injured Opposition sympathizers estimate the number of dead and injured as much higher The latest victim was Geraldine Moreno, 22 years old, who died Saturday from a head injury she sustained days before from a rubber bullet fired as security forces dispersed protesters in central Carabobo state, local media said On Friday night, Santiago Enrique Pedroza, 29 years old, was killed in Caracas after riding his motorcycle into a wire strung across a street, government officials said Mr Capriles, the governor of the state of Miranda who narrowly lost to Mr Maduro in elections last April, had seemed reluctant to en- Associated Press BY EZEQUIEL MINAYA Surrounded by clouds of tear gas, a protester throws a rock at riot police during a protest in Caracas on Saturday dorse the marches because of their lack of specific goals and potential for unruliness He has since sought to channel the discontent on the street into a more organized movement, he said “There are a million reasons to protest But, if you don’t like hate, you don’t respond with hate,” said Mr Capriles “The protests can’t be to turn this into a war,” he added in comments to cheering supporters Mr Capriles went on to call Mr Maduro “an error of history.” The rallies began earlier this month in the border state of Táchira to protest the rampant crime that has made Venezuela one of the most dangerous nations in the world They quickly spread to other cities and issues, including an economy that has buckled under an inflation rate of 56%, among the highest in the world “There’s no clear north for the protests but people are tired of losing friends to crime, of the shortages of basic goods in the super- market and inflation,” said Diego Scharifker, a public official and member of Mr Capriles’s Justice First party “The reason that these protests have lasted so long has been because this is beyond the opposition versus the government The country is in a crisis with problems that transcend politics,” he said Many of the demonstrators are so young that they have known only Chavismo, the ruling system named after the late President Hugo Chávez who came to power in February 1999 and transformed Venezuela into a Socialist state closely aligned to Communist Cuba They have spent their formative years listening to lofty Chavismo rhetoric—only to see their prospects dim as the country sinks further into economic crisis At the same time, pro-government demonstrators rallied across town in Caracas in a march for women in support of peace called by Mr Maduro He mocked Mr Capriles for his alleged timidity in the face of street violence that the government has blamed on far-right fascist groups funded by Washington and Bogota “There is a coup under way and an international campaign against Venezuela,” Mr Maduro said The 51year-old president also criticized U.S Secretary of State John Kerry for issuing a statement Friday expressing concern over the escalating protests in the South American country It was a concern “that John Kerry keeps sticking his nose in the affairs of Venezuela,” Mr Maduro said to applause The president has called for more rallies in the coming days Since the bloody Feb 12 march, state security forces and government opponents, made up mostly of university students, have squared off just about every day, with students blocking streets with burning trash after nightfall and soldiers firing tear gas and rubber bullets Free speech advocates have also accused the government of silencing media outlets and cutting off access to the Internet Government officials have denied any attempt to quash dissent in the media or online Stalled State Spending Saps Mexican Economy BY JUAN MONTES MEXICO CITY—Paul Noriega’s travails reflect what went wrong with Mexico’s economy last year His company, a cleaning-products supplier whose main clients are public hospitals, was stalled for months, sales fell by half and some workers were laid off The reason: government spending didn’t flow for much of the year “We hadn’t lived anything like this in the last 12 years,” says Mr Noriega, a young Mexican businessman who runs the firm with his father “Orders from the IMSS [the social security system] suddenly plummeted We had to tighten our belts and use our savings to survive.” Massive delays in government spending are one of the reasons behind Mexico’s poor performance last year Latin America’s second-largest economy expanded just 1.1% in 2013, the statistics agency said Friday, which translates into the creation of around 200,000 new jobs in a country of 112 million people The growth data poured cold water on the optimism with which President Enrique Peña Nieto began his administration in December 2012 Instead of the 3.5% growth initially expected in his first year in office, it was the slowest growth since the 2009 recession Mr Peña Nieto has attributed the economic downturn mainly to the change of administration and weak export demand north of its border “The U.S recovery wasn’t as strong as expected, and that affected the dynamism of our own exports And then we have the turnover in government: as happens every six years, the rhythm of spending changes,” Mr Peña Nieto said in an interview this week Other factors also determined Mexico’s sluggish performance, economists say The construction sector fell into recession due in part to the unsustainable pile of debt at the country’s biggest housing construction companies The lack of natural-gas supplies in some regions also dented activity And many investors postponed decisions until seeing the final outcome of Mr Peña Nieto’s economic reforms in energy and telecommunications, which passed Congress last year “Definitely, it was the perfect storm,” said Jonathan Heath, an independent economist who has worked for Mexico’s statistics agency But some analysts say the government’s initial optimism and badly handled spending also had a crucial impact “The government asked Congress for a balanced budget in 2013 when the global economy was still fragile That was a mistake because it involved a contraction of spending compared to the previous year,” said Gerardo Esquivel, an economist at the Colegio de México university Last year was a busy one for Finance Minister Luis Videgaray and his team Some of the key officials appointed at the finance ministry, including the deputy finance minister and the deputy minister of spending, lacked any experience in the federalgovernment machinery Also, working out complex banking and tax overhauls took up much of their time, according to several senior government officials who asked not to be named Several ministries with significant budgets, such as the transport ministry, or SCT, took a long time to start up Regional delegates of the SCT, who are in charge of speeding up infrastructure projects and tenders, weren’t named until April, according to the government officials By May, the economic slowdown was already evident The government slashed its GDP forecast three Brake on Growth Delays in public spending contributed to Mexico’s sluggish 2013 performance Quarterly gross domestic product, change from a year earlier Change in government spending in the first year of a new administration President Ernesto Zedillo 1995 Change from previous year (January-June) –15% +0.7% Vicente Fox 2001 7% Felipe Calderón 2007 Enrique Pa Nieto 2013 4th quarter 5% 5.5% –4.4% Source: Mexico’s Finance Ministry (spending); Mexico’s Statistics Agency 2011 2012 2013 The Wall Street Journal times last year: first to 3.1%, then to 1.8%, and finally to 1.3% Spending delays were starting to have notable side effects: suppliers weren’t paid on time, and new tenders were postponed For Mr Noriega, the businessman, the data had a bitter effect “By midyear, we had the warehouses full of stock waiting to be sold,” he says The Finance Ministry started work over the summer on a request for Congress to approve a small budget deficit for 2013 and a wider one for 2014 to support economic growth through additional public spending—financed with more debt and new taxes From September, government spending accelerated, supported in part by the reconstruction efforts after several major storms hit the country, and by the end of the year the budget had been fully executed But the harm to the economy was already done The October-December period didn’t see a recovery, growing just 0.2% from the previous quarter For 2014, Mr Peña Nieto expects the economy to expand an above-consensus 3.9%, although many analysts are seeing a weak first quarter Mr Heath, the economist, said the impact of the new spending will take some time to be felt “The new taxes have also created uncertainty and are already hurting household consumption and business confidence.” Mr Noriega doesn’t see light at the end of the tunnel yet “As of today, we haven’t seen any improvement in activity,” he says THE WALL STREET JOURNAL Monday, February 24, 2014 | WORLD NEWS G-20 Sets Multi-Year Economic Growth Plan Reuters BY IAN TALLEY AND JAMES GLYNN Thai police officers inspect the site of an explosion during an antigovernment protest at Khao Saming district, of Trat province on Sunday Blast Kills Two Near Thai Rally BY JAMES HOOKWAY BANGKOK, Thailand—Two people were killed and dozens were injured in a blast near an antigovernment rally site in Thailand’s capital Sunday Security forces are investigating the cause of the explosion that occurred in a busy shopping neighborhood that is popular with foreign visitors Police officials told reporters the blast appeared to have been caused by a grenade in an area near where protesters have been camped for months in a bid to unseat Prime Minister Yingluck Shinawatra The two fatalities were a woman in her 40s and a 4-year-old boy The explosion comes a day after attackers in a pickup truck fired on a political rally in Trat province, some 300 kilometers, or 180 miles, east of Bangkok, and threw explosive devices into the crowd, killing at least one person, including a 5year-old girl Police Lieutenant Thanabhum Newanit said the Saturday attack took place at a market in Khao Saming district Many of the people injured weren’t participating in the rally, including the child who was killed Television footage showed overturned stools next to abandoned food carts, shell casings on the ground and victims crowded into a local hospital Drive-by shootings and bomb attacks have plagued political protests here in recent months as antigovernment demonstrators step up their campaign to force the resignation of Ms Yingluck, Thailand’s elected leader With King Bhumibol Adulyadej now 86 years old and entering the twilight of his reign, the protesters want an unelected council to take power and introduce political changes to curb the influence of populist leaders such as Ms Yingluck and especially her brother, former leader Thaksin Shinawatra, who was ousted in a military coup in 2006 In the past three months, 18 people have been killed in the violence Ms Yingluck is pushing back against legal challenges to her government On Thursday she defended a program to support rice prices that so far has incurred paper losses of as much as $8 billion In a statement on her Facebook page, she said there was no corruption associated with the program, and that it was designed to help raise the standard of living in rural areas Drive-by shootings and bomb attacks have plagued political protests as demonstrators step up their campaign Thailand’s National Anti-Corruption Commission has said it would charge Ms Yingluck for mismanagement in connection with the program If Ms Yingluck is found guilty of mismanagement she will be suspended from duty and face an im- peachment trial in Thailand’s partially elected Senate Concerns are growing over how the mass-membership “Red Shirts” movement will react if Ms Yingluck is removed from office, especially as antigovernment protesters managed to block the completion of national elections on Feb The group was formed in the aftermath of the 2006 coup, and broadly supports the Shinawatra clan and their populist policies After a pro-Thaksin government was removed from power for alleged election violations, tens of thousands of Red Shirt members converged on Bangkok in 2010 to demand a new vote, occupying much of the city center for nearly two months More than 90 people were killed in clashes between protesters and security forces, the vast majority of them Red Shirt members Key Red Shirt leaders have warned that the group could again march on Bangkok if Ms Yingluck is overthrown —Warangkana Chomchuen contributed to this article Hong Kong Rally Defends Press Freedom BY TE-PING CHEN Thousands of residents in Hong Kong rallied Sunday to protest what they see as waning press freedoms in this Chinese city According to organizers, more than 6,000 demonstrators—including reporters, college students and retirees—rallied under blue skies by the edge of Victoria Harbour Police put the number at closer to 2,200 at its height Crowd estimates from police and organizers usually vary widely in Hong Kong The rally is part of continued unease in Hong Kong about the influence of mainland China, which controls the former British colony under a one-country, two-systems agreement In a report earlier this month, the Committee to Protect Journalists said that Hong Kong’s traditionally freewheeling press was under attack, citing past violent incidents against the pro-democracy newspaper Apple Daily, and rising rates of self-censorship Karen Kwok, a cable-television reporter at the rally who attended alongside at least 10 colleagues, said the future of freedoms “depends on what kind of fight we put up.” “If we don’t speak up, of course it will only get worse,” she said, as she stood before a wall of blue ribbons that protesters had tied to the fence surrounding the government’s office A government spokesman said the city was committed to continuing to guard freedom of speech and freedom of the press, as the two are “major elements in sustaining Hong Kong’s status as an international metropolis.” Hong Kong’s global press-freedom ranking this month slipped three places to No 61 this year, according to the Paris-based Reporters Without Borders Anger in Hong Kong has also been simmering since the start of the year over the ousting of a top editor at the well-regarded Ming Pao newspaper, which many staff believed was politically motivated One local magazine reporter who marched on Sunday said he believed Chinese authorities were increasing pressure on Hong Kong publications as calls for political reform mount in advance of 2017, the year that Beijing has said is the earliest local residents can begin directly electing their leader In particular, he said, he had been personally pressured by his editors to ensure that any print references to “Occupy Central”—a plan to occupy the city’s financial district to demand full universal suffrage—were accompanied by language emphasizing the potentially destructive impact of such a movement “I definitely see more censorship,” said the reporter, who declined to be named out of fear of jeopardizing his job SYDNEY—Finance leaders from the world’s biggest economies called for support from central banks and private-sector infrastructure spending to help spur growth, reverting to the global economy’s playbook of recent years in an effort to safeguard a fragile recovery Group of 20 officials ended their summit this weekend saying they would look to boost world growth by more than $2 trillion over the next few years under a strategy crafted by the International Monetary Fund Officials spent the weekend exploring ways to navigate the global economy’s choppy waters as the U.S ends its easy-money policies, emerging markets try to subdue volatile capital flows and the euro zone attempts to avert growthkilling deflation Under the G-20 plan, advanced economies would continue with their easy-money policies while emerging markets would seek to restructure their economies and tame inflation In addition, governments everywhere would be expected to channel private-sector finance into new infrastructure projects The IMF, which expects growth of 3.7% this year and 3.9% in 2015, says its plan would add half a percentage point to global growth annually over the coming four years The finer points will be hammered out in the run-up to the G-20 leaders’ November summit But if past efforts of the G-20 are any guide, investors should temper their hopes The group’s previous attempts to spur growth have fallen by the wayside, undermined by the realities of domestic and international politics The G-20’s latest push for growth faces similar challenges The world’s third-largest economy, Japan, is already struggling to implement structural reforms, such as opening industries to competition That has placed a greater burden for economic adjustment on the central bank, whose stimulus policies have devalued the yen and cheapened its exports at the expense of countries such as the U.S and South Korea “The depreciation of the yen will greatly affect the Asian economy,” South Korean Finance Minister Hyun Oh-seok said on the sidelines of the meeting “The negative impact will expand and further affect Korea’s exports.” The G-20’s reforms are likely to run into difficulties, too, in dozens of developing countries that are in election years The strategy comes as the global outlook remains murky While the U.S., Europe and Japan appear to be improving, output in the largest emerging-market countries is slackening In the aftermath of the global financial crisis, developing countries led growth The G-20 is now relying on the U.S., Japan and the euro zone to keep the cash spigots open while governments elsewhere undertake measures to reduce public debt and make their economies more competitive The G-20’s final communiqué also highlights agreement among central banks to communicate their stimulus-exit strategies clearly and in a timely fashion 10 | Monday, February 24, 2014 THE WALL STREET JOURNAL IN DEPTH For Defying Village Rules, A Penalty of Rape in India Councils Illegally Enforce Traditional Rules, Showing Limits of New Legislation Meant to Protect Women BY PREETIKA RANA Subalpur, India Associated Press W Thirteen men, including those in custody, above, are suspected of gang-raping a Hindu woman in the farming village of Subalpur in West Bengal state hen the elders in this small Hindu farming village discovered last month that a local woman intended to marry a Muslim, their reaction was swift and savage The village chief and 12 others dragged the 20-year-old woman to a shed and gangraped her, the local police allege She and her suitor were then tied to a tree overnight, witnesses say, and the village council fined them the next day Such rough justice is common across wide swaths of rural India, where local leaders often ignore the law to enforce traditional social norms that run counter to more-liberal views now gaining ground in India’s cities More than a year after the December 2012 fatal gang rape of a student on a New Delhi bus, which shocked India and drew global attention, the Subalpur case shows the limits of new legislation aimed at protecting women in the face of deep cultural resistance The woman reported the gang rape to police Her alleged attackers—their lawyer says they are innocent—are in jail Still, her family fears retaliation from villagers “Her entire life has been ruined,” her mother says “Maybe the best thing to was to keep quiet.” For hundreds of millions of women in India’s impoverished countryside, conservative local leaders and informal village councils have long dictated everything from whom they can marry to what they can wear These informal councils, which are separate from state-sanctioned local governments, can’t legally rule on village disputes or other matters of law But the penalties they illegally impose can range from fines and ostracism to forced marriage, rape and death “Urban India is changing But our villages remain centuries behind,” says Shamina Shafiq, a member of India’s National Commission for Women Local councils are “one of the biggest stumbling blocks in the road to progress for women.” In 2012, an informal village council in Uttar Pradesh state proposed that only arranged marriages be permitted and that single women be barred from having cellphones or wearing jeans Central-government officials condemned that move P Chidambaram, home minister at the time, told reporters in 2012 that “there is no place for such diktats in a democratic society.” But the government has struggled to curb the extralegal councils Authorities say it is hard to gather statistics about the councils’ actions because villagers generally don’t report them to outsiders In response to widespread reports of torture by the councils, the Law Commission of India in 2012 drafted legislation to clamp down on them, but Parliament has yet to consider it Men can be victims, too Police in Rajasthan state say a man from the state filed a complaint late last year alleging that villagers held him in a cage in neighboring Haryana state for three months and sodomized him in retribution for his eloping with a married Haryana woman Rajasthan police say they transferred the case to the village where the alleged attack happened; 14 | Monday, February 24, 2014 THE WALL STREET JOURNAL OPINION From L to R: AFP/Getty Images; Bloomberg (2); Getty Images (2) America’s Global Retreat BY NIALL FERGUSON Since former Federal Reserve Chairman Ben Bernanke uttered the word “taper” in June 2013, emerging-market stocks and currencies have taken a beating It is not clear why talk of (thus far) modest reductions in the Fed’s large-scale asset-purchase program should have had such big repercussions outside the United States The best economic explanation is that capital has been flowing out of emerging markets in anticipation of future rises in U.S interest rates, of which the taper is a harbinger While plausible, that cannot be the whole story For it is not only U.S monetary policy that is being tapered Even more significant is the “geopolitical taper.” By this I mean the fundamental shift we are witnessing in the national-security strategy of the U.S To see the geopolitical taper at work, consider President Obama’s comment last Wednesday on the horrific killings of protesters in the Ukrainian capital, Kiev The presi- Never mind the Fed’s taper, it’s the U.S geopolitical taper that is stirring world anxiety dent said: “There will be consequences if people step over the line.” No one took that warning seriously—Ukrainian government snipers kept on killing people in Independence Square regardless The world remembers the red line that Mr Obama once drew over the use of chemical weapons in Syria and then ignored once the line had been crossed The origins of America’s geopolitical taper as a strategy can be traced to the confused foreign-policy decisions of the president’s first term The easy part to understand was that Mr Obama wanted out of Iraq and to leave behind the minimum of U.S commitments Less easy to understand was his The president, flanked by his foreign-policy team: Chuck Hagel, Susan Rice, Joe Biden and John Kerry policy in Afghanistan After an internal administration struggle, the result in 2009 was a classic bureaucratic compromise: There was a “surge” of additional troops, accompanied by a commitment to begin withdrawing before the last of these troops had even arrived Having passively watched when the Iranian people rose up against their theocratic rulers beginning in 2009, the president was caught off balance by the misnamed “Arab Spring.” The vague blandishments of his Cairo speech that year offered no hint of how he would respond when crowds thronged Tahrir Square in 2011 calling for the ouster of a longtime U.S ally, the Egyptian dictator Hosni Mubarak Mr Obama backed the government led by Mohammed Morsi, after the Muslim Brotherhood won the 2012 elections Then the president backed the military coup against Mr Morsi last year On Libya, Mr Obama took a back seat in an international effort to oust Moammar Gadhafi in 2011, but apparently wasn’t in the vehicle at all when the American mission at Benghazi was attacked in 2012 Syria has been one of the great fiascos of post-World War II American foreign policy When President Obama might have intervened effectively, he hesitated When he did intervene, it was ineffectual The Free Syrian Army of rebels fighting against the regime of Bashar Assad has not been given sufficient assistance to hold together, much less to defeat the forces loyal to Assad The president’s non-threat to launch airstrikes—if Congress agreed— handed the initiative to Russia Last year’s Russian-brokered agreement to get Assad to hand over his chemical weapons is being honored only in the breach, as Secretary of State John Kerry admitted last week The result of this U.S inaction is a disaster At a minimum, 130,000 Syrian civilians have been killed and nine million driven from their homes by forces loyal to the tyrant At least 11,000 people have been tortured to death Hundreds of thousands are besieged, their supplies of food and medicine cut off, as bombs and shells rain down The scale of the strategic U.S failure is best seen in the statistics for total fatalities in the region the Bush administration called the “Greater Middle East”—essentially the swath of mainly Muslim countries stretching from Morocco to Pakistan In 2013, according to the International Institute of Strategic Studies, more than 75,000 people died as a result of armed conflict in this region or as a result of terrorism originating there, the highest number since the IISS Armed Conflict database began in 1998 Mr Obama’s supporters like nothing better than to portray him as the peacemaker to George W Bush’s warmonger But it is now al- most certain that more people have died violent deaths in the Greater Middle East during this presidency than during the last one In a January interview with the New Yorker magazine, the president said something truly stunning “I don’t really even need George Kennan right now,” he asserted, referring to the late American diplomat and historian whose insights informed the foreign policy of presidents from Franklin Roosevelt on Yet what Mr Obama went on to say about his self-assembled strategy for the Middle East makes it clear that a George Kennan is exactly what he needs: someone with the regional expertise and experience to craft a credible strategy for the U.S., as Kennan did when he proposed the “containment” of the Soviet Union in the late 1940s So what exactly is the president’s strategy? “It would be profoundly in the interest of citizens throughout the region if Sunnis and Shiites weren’t intent on killing each other,” the president explained in the New Yorker “And although it would not solve the entire problem, if we were able to get Iran to operate in a responsible fashion you could see an equilibrium developing between Sunni, or predominantly Sunni, Gulf states and Iran.” Moreover, he continued, if only “the Palestinian issue” could be “unwound,” then another “new equilibrium” could be created, allowing Israel to “enter into even an informal alliance with at least normalized diplomatic relations” with the Sunni states The president has evidently been reading up about international relations and has reached the chapter on the “balance of power.” The trouble with his analysis is that it does not explain why any of the interested parties should sign up for his balancing act As Nixon-era Secretary of State Henry Kissinger argued more than half a century ago in his book “A World Restored,” balance is not a naturally occurring phenomenon “The balance of power only limits the scope of aggression but does not prevent it,” Dr Kissinger wrote “The balance of power is the classic expression of the lesson of history that no order is safe without physical safeguards against aggression.” What that implied in the 19th century was that Britain was the “balancer”—the superpower that retained the option to intervene in Europe to preserve balance The problem with the current U.S geopolitical taper is that President Obama is not willing to play that role in the Middle East today In his ignominious call to inaction on Syria in September, he explicitly said it: “America is not the world’s policeman.” But balance without an enforcer is almost inconceivable Iran remains a revolutionary power; it has no serious intention of giving up its nuclear-arms program; the talks in Vienna are a sham Both sides in the escalating regional “Clash of Sects”—Shiite and Sunni—have an incentive to increase their aggression because they see hegemony in a postAmerican Middle East as an attainable goal Maybe, on reflection, it is not a Kennan that Mr Obama needs, but a Kissinger “The attainment of peace is not as easy as the desire for it,” Dr Kissinger once observed “Those ages which in retrospect seem most peaceful were least in search of peace Those whose quest for it seems unending appear least able to achieve tranquillity Whenever peace—conceived as the avoidance of war— has been the primary objective the international system has been at the mercy of [its] most ruthless member.” Those are words this president, at a time when there is much ruthlessness abroad in the world, would well to ponder Mr Ferguson is a history professor at Harvard and a senior fellow at Stanford University’s Hoover Institution His most recent book is “The Great Degeneration” (Penguin Press, 2013) Revisiting a Pre-Olympic Murder [Business World] BY HOLMAN W JENKINS, JR During the Sochi Olympics, Vladimir Putin has received a lot of grief about the state of the rule of law in Russia He’s not alone Highly advanced countries have problems with the rule of law too—because of their need to maintain relations with Putin’s Russia Example: the United Kingdom, on whose soil an unprecedented act of small-scale nuclear terrorism was committed in the 2006 murder by polonium poisoning of a Russian dissident and author, Alexander Litvinenko A trail of highly radioactive polonium across London wherever Andrei Lugovoi, a former KGB agent and now a member of the Russian Duma, happened to be visiting was hard to ignore Mr Lugovoi would eventually be charged with the killing, though the Kremlin has refused to extradite him and Mr Lugovoi denies the accusation Britain’s government has appeared less enthusiastic to explore who ordered the assassination or supplied the esoteric murder weapon In the latest development, the coroner in charge of the case, Sir Robert Owen, has taken to complaining in court that the government of Prime Minister David Cameron is preventing him from considering evidence that, in his words, “establishes a prima facie case as to the culpability of the Russian state.” OK, Russia is a nuclear power Mr Putin is a necessary if fractious partner for many things Western governments want to do, including protect a lucrative BP oil venture that was threatened with prosecu- tion over a “tax” matter in the middle of the Litvinenko row But what of the dead author’s apparent offense? He wrote a book about the September 1999 apartment block bombings in Moscow and other cities, blamed on Chechen terrorists, that abruptly stopped after residents in the city of Ryazan caught federal security agents sneaking sacks of explosive and bomb parts into the basement of a building, in what the Kremlin later claimed was a training exercise Almost 15 years later, many experts have come to believe Litvinenko was right The bombings, which killed nearly 300 Russians, were a state provocation designed to propel an unknown security bureaucrat, Mr Putin, into the presidency to protect the outgoing Yeltsin circle from a corruption investigation The New York Review of Books, not normally a fan of Hoover Institution writings, said a 2012 book by Hoover scholar John Dunlop provided an “overwhelming case.” The late Boris Berezovsky, the billionaire Yeltsin backer who took credit for recruiting Mr Putin in the first place, held a press conference to endorse the charge Polls show a sizeable minority of Russians believe it And yet have you heard, even leaked, a U.S intelligence opinion about whether the murderous terrorist attacks were in fact engineered by Mr Putin’s own supporters to assure his rise? You haven’t And that alone is an amazing testament to Western governments’ need to bury certain facts of Mr Putin’s presidency Look, we’re sure nobody in the U.S government feels especially clean about the lengths to which the West has gone to preserve Mr Putin as an acceptable partner, least of all President Obama, last seen patting a Putin factotum on the sleeve and asking him to assure his master that more “flexibil- ity” would be forthcoming after Mr Obama’s re-election in 2012 For one thing, Mr Putin’s hosting of this month’s games would hardly be conceivable if Western governments hadn’t long ago adopted the habit of ignoring the implications of Ryazan But is it smart? Mr Putin rose by pushing an older mentor into invisible retirement; so did Saddam Hussein Mr Putin started a war in Chechnya Saddam started a war with Iran Each regime became known for the violence that befell its critics and opponents Saddam became such a power unto himself that his final miscalculation was all but inevitable—albeit much fostered by Russian advice that America’s invasion threat was a bluff Who knows in what context it might occur (Ukraine comes to mind), but Mr Putin would by now have every excuse for a similar miscalculation that could cost Russia and the world dearly Pound/Euro 0.8253 À 0.31% Yen/$ ¥102.72 À 0.39% Global Dow 2464.83 À 0.33% Gold 1323.90 À 0.52% Oil 102.20 g 0.54% Discovery Prepares to Submit Bid For Richard Desmond’s Channel BY KAITLYN KIERNAN U.S fund managers are rediscovering their passion for Europe—and not just as a vacation destination Since the start of the year, American investors have ramped up their bets on European stocks, spurred on by a brightening economic outlook and low interest rates The continent’s ABREAST OF stock markets beTHE MARKET came a favored destination last year as the region emerged from a bruising recession This year, with U.S stock indexes treading water after a rip-roaring 2013, interest in European stocks has grown further, fund managers say Investors have sent $24.3 billion into European equity funds this year through Feb 19, according to fund tracker EPFR Global U.S stock funds have seen $5 billion in outflows In the exchange-traded-fund world, three of the top four stockbased funds in terms of investor inflows in 2014 are the Vanguard FTSE Europe, the iShares MSCI EMU and the Vanguard FTSE Developed Markets ETFs—all of which have heavy exposure to Europe The three have seen a combined $4.23 billion in new money this year, while $19.1 billion has flowed out of the largest U.S stock ETF, the SPDR S&P 500 fund Blue-chip companies from France to the Netherlands are getting a close look from some managers, while other bargain-minded investors are focusing on so-called peripheral nations such as Ireland, Italy, Spain and Portugal, whose markets were hard hit following the European debt crisis of 2011 “Some of the best, cheaper assets are in the periphery of Europe,” said Nigel Hart, manager of the BlackRock International Opportunities Fund, which has $3.5 billion under management The Stoxx Europe 600 index is up 2.4% this year, compared with a 0.7% decline in the S&P 500 index of U.S companies and a 2.9% drop in the 30-stock Dow Jones Industrial Average While the so-called core of Europe has recovered most of its recession-era losses, the periphery still has a way to go Share indexes in Spain and Italy remain below their peaks heading into the global financial crisis of 2008, while broader European gauges and those covering the U.S have recovered those peaks Many European nations are struggling with high unemployment and slack demand for goods and services, but the euro zone’s econPlease turn to page 20 HEARD ON THE STREET 28 THE WA L L STR E ET JOU RNAL europe.WSJ.com Europe Lags Behind U.S on 4G BY SVEN GRUNDBERG STOCKHOLM—On the barren island of Öja, on the outskirts of this city’s archipelago, Torbjörn Johansson is on the front lines of Europe’s effort to make up ground lost to the U.S in cellphone-network investment Mr Johansson, a network contractor for Swedish carrier TeliaSonera AB, is testing new fourthgeneration network antennas on the island—part of the company’s threeyear, 15 billion Swedish kronor ($2.3 billion) push to upgrade its network Swedish carriers are aiming to eventually blanket 90% of the country’s landmass in 4G By next year, the companies say, 99% of Sweden’s population—which lives mostly in cities or other urban areas—will have 4G, which offers up to 10 times faster data speeds, compared with older network technology “I’ve got more work than I can handle,” Mr Johansson said Sweden and some of its Scandinavian neighbors are rare exceptions in Europe, enjoying 4G coverage on a par with the superconnected U.S For much of the rest of Europe, network investment by carriers has lagged behind North America and has just barely outpaced investment across Asia It is a far cry from just over a decade ago, when Europe led the way in mobile connectivity The Continent’s big players quickly agreed on a standard technology and invested heavily in networks to support that Spending on the latest 4G networks on both sides of the Atlantic kicked off at about the same time, around 2009 But investment in Europe—in the depths of the global economic crisis and on the precipice of its worst recession since World War II—never came close to North America That has translated into a big A Vodafone store in London Seeking a Connection Mobile providers in Europe, the Middle East and Africa have historically lagged behind those in North America in 4G investment, though they are expected to catch up in the coming years Estimated annual expenditure on 4G hardware in North America and EMEA $2.5 billion 2.0 1.5 Nor North America EME EMEA 1.0 0.5 PROJECTIONS 2009 ’10 ’11 ’12 Sources: Infonetics; Bloomberg News (photo) discrepancy in 4G availability Cisco Systems Inc., a U.S network company, said it estimates that a quarter of all North American mobile devices were connected to the ’13 ’14 ’15 ’16 ’17 The Wall Street Journal country’s 4G network last year In Western Europe, only 2% of mobile devices were connected to 4G networks Europeans, as a result, are con- suming considerably smaller amounts of mobile data, compared with their U.S counterparts Cisco said average Western Europeans consumed 717 megabytes of traffic a month this year, half the quantity consumed by North Americans European consumers’ average data connection speeds are also much lower Europe remains “between one and two years behind” the U.S., in terms of its 4G rollout, said Johan Wibergh, who heads the network unit of Ericsson, the world’s largest supplier of network equipment It wasn’t just economic hard times that stood in the way of Europe’s network build-out The more than two dozen countries that make up the European Union have taken longer to issue spectrum needed to deploy the technology And the wider European telecom market is made up of more than a hundred operators, many of whom aren’t large enough to muster the sizable funds needed to make the investment A crazy quilt of regulations have also stymied quick network rollouts Strict environmental rules in Brussels, the seat of the EU and home to diplomats from around the world, slowed the rollout of the network there, for instance Last year, Neelie Kroes, European commissioner for the digital agenda, tweeted, “Back in #Brussels and the 3G (never mind the #4G!) so bad I have to write this on my adviser’s phone Frustrating Avoidable.” Proximus, the mobile unit of Belgacom SA, Belgium’s biggest carrier, said last month it would offer its customers 4G access at no extra cost, including in Brussels Many Brussels residents still aren’t satisfied “What 4G?” said Felicity Raikes, an EU interpreter, who uses French carrier Orange SA’s Mobistar netPlease turn to next page Italy’s Garment Know-How Is Fading Out BY MANUELA MESCO Loro Piana The View In Europe Looks Good To Investors 10-year Treasury À 6/32 yield 2.734% For Big Oil Companies, A Return To Returns BUSINESS & FINANCE 18 Monday, February 24, 2014 3-month Libor 0.23485 A craftsman of Loro Piana—now a unit of LVMH—makes a leather bag MILAN—The fashion world’s race to reach ultrarich shoppers is leaving some of Italy’s vaunted leather and garment manufacturers high and dry A sharp split is dividing Italy’s luxury manufacturing base The winners are enjoying rich new contracts or even being purchased, as fashion heavyweights such as LVMH Moët Hennessy Louis Vuitton SA are increasingly eager to scoop up the best Italian manufacturers But the losers are struggling to survive, overwhelmed by the same factors devouring other Italian manufacturing strongholds, like steel, autos and appliances: their small size, high labor and energy costs, falling domestic demand and competition from low-cost countries It- aly’s leather and clothing segments alone lost 20% and 15% of production, respectively, since 2007, according to business organization Confindustria More than 500 textile companies shut down last year, and textile sales are down 13% in five years, said trade association Sistema Moda Italia Fashion houses have long turned to Italy’s skilled artisans to produce soft leather bags, finely cut suits and dresses, and rich cashmere accessories For instance, Italian wool craftsmen train for years learning how to finish a cashmere garment, learning how to wash and treat the wool—a process known as follatura—so that the matting is just right Overtreating could break fabrics, causing significant financial loss for a firm That’s why such skills are critical in handling precious fabrics such as vicuña, one of the rarest and most expensive wools on the market Italy has thousands of such artisans, very often niche players specializing in specific skills such as tanning leather or making silk prints As a result, Italian craftsmanship is a major draw for the biggest spenders in luxury, such as Chinese and Russian buyers “We’re convinced that Italy has the best quality,” said Domenico De Sole, chairman of Tom Ford International, which produces its expensive men’s suits in Italy “But there’s also a marketing factor there People just love a ‘Made in Italy’ label.” Luxury heavyweights, who are pushing harder into the higher-priced products that garner the biggest Please turn to page 18 16 | Monday, February 24, 2014 THE WALL STREET JOURNAL MOBILE WORLD CONGRESS Mobile Carriers Face Unclear Call [ The Week Ahead ] BARCELONA—The telecom industry is getting ready for its biggest get-together of the year Meanwhile, it’s never been less clear what it means to be a mobile-phone company Case in point: Facebook Inc.’s $19 billion acquisition of mobilemessaging service WhatsApp The startup, just a few years old, has already captured an enormous share of texting traffic, a function that once was entirely the preserve of traditional wireless companies WhatsApp’s 450 million users may already be sending more texts than all users of carrier-based SMS, or short-message service, combined, according to telecommunications analyst Benedict Evans of Andreessen Horowitz He puts the total at roughly 18 billion texts a day and rising quickly Researchers at technology-research company Ovum, meanwhile, expect SMS traffic to peak this year at around 21 billion a day Facebook itself is a giant communication network with about a billion active monthly mobile users world-wide Rakuten Inc., a Japanese e-commerce company, said earlier this month that it was paying $900 million to buy WhatsApp competitor Viber Media Inc So mobile-phone companies aren’t about texting anymore How about calling? Developments on that front aren’t any more enlightening Around the world, 100 million people have installed Internetbased calling service Skype just on phones powered by Google Inc.’s Android software That’s more subscribers than Sprint Corp and T-Mobile US Inc have combined Olaf Swantee, chief executive officer of U.K mobile carrier EE, said Skype, which claims 300 Anastasia Vasilakis BY RYAN KNUTSON million connected users a month, is the most-used communication service on his company’s network Google’s Hangouts app also allows users to make phone calls with just a data connection Companies like Republic Wireless and Scratch Wireless, meanwhile, are wireless carriers without a single cell tower Both offer cellular plans that run over Wi-Fi networks Republic’s service starts at $5 a month; Scratch’s is free Traditional carriers that used to worry about being squeezed out of the market for add-on services like music and video are now gradually losing their grip on what once were core functions Some companies don’t mind so much as they shift to charging for data traffic like video In the end, though, carriers are finding it harder to be more than just the “dumb pipe” hooking users up to the services they actually want The ambiguity of just what is a “mobile” company is highlighted by the keynote speakers at the Mobile World Congress, which drew 72,000 people to Barcelona last year and starts on Monday Facebook CEO Mark Zuckerberg will be there WhatsApp’s CEO Jan Koum, International Business Machines Corp CEO Virginia Rometty and Cisco Systems Inc CEO John Chambers will also be there The phone companies that actually build the pipes and cell antennas that make mobile communications possible will attend and make presentations, too But this year, the growing role of Web-based services will be the elephant in the room One result is that traditional telcos are more keen than ever to find ways to charge Internet-based companies, like Netflix Inc., Google and Facebook, more for the traffic they generate In the U.S., carriers notched a big win earlier this year when a federal court shot down the Federal Communications Commission’s attempt to enforce net neutrality principles that require equal treatment of traffic as it flows over the so-called last mile of carriers’ networks to subscribers The FCC has unveiled plans to try again to prevent carriers from blocking or unreasonably discriminating against traffic Regulators are also addressing the issue anew in Europe The Week Ahead looks at coming corporate events Europe Struggles to Catch Up With U.S on 4G Investment Continued from previous page work “I hardly even get 3G most of the time.” Mobistar didn’t immediately return calls seeking comment More recently, carriers in Europe have ramped up their spending, and are expected to top out at around $2 billion a year by 2015, largely catching up to North American spending, according to consultancy Infonetics France’s Bouygues Telecom last year switched on its 4G services in France, having spent €1.5 billion ($2.06 billion) for licenses and equipment Vodafone PLC, flush with cash after agreeing to sell its Verizon Wireless stake, has promised its own spending spree—committing to invest £3 billion ($4.99 billion) through 2016 upgrading its European mobile networks It doesn’t break out how much will go to 4G systems “We’re still waiting for Vodafone to make its move,” said Ericsson’s Mr Wibergh In Italy, the deployment of fourth-generation data networks didn’t begin in earnest until last year, when the nation’s four main operators in the country, led by Telecom Italia SpA and Vodafone, began installing antennas throughout the country Telecom Italia says its 4G network now covers half of the Italian population Its goal is to reach 80% of the population within two more years In Spain, 4G connections are available in big cities like Madrid and Barcelona But Spanish operators’ focus has recently been on improving margins, battered in the recent downturn Telefónica SA, the largest Spanish operator, says it remains committed to a 4G rollout in the long term —Simon Zekaria in London, Frances Robinson in Brussels and David Román in Madrid contributed to this article Microsoft Makes Push On Phones BY SAM SCHECHNER AND SVEN GRUNDBERG BARCELONA—Microsoft Corp is pushing more manufacturers to make less expensive Windows-based smartphones, in a bid to boost sales of an operating system that still lags far behind those of Google Inc and Apple Inc The Redmond, Wash., company said Sunday that it is broadening the number of makers of Windows phones, working with companies including Lenovo Group Ltd and Hon Hai Precision Industry Co., the world’s largest contract manufacturer by revenue Speaking at a news conference ahead of the opening of the Mobile World Congress in Barcelona, Microsoft executives said the company will also lower the hardware requirements for the Windows Phone operating system, to support cheaper internal chips, fewer buttons and less built-in memory, to allow for cheaper devices for emerging markets “We’re open for business on Windows Phone for anyone who wants to build a Windows Phone,” said Nick Parker, who oversees Microsoft’s relationships with makers of gear running Windows Microsoft has been trying for years to break into the smartphone market, but currently only about 4% of smartphones sold run Windows Phone—trailing far behind Google’s Android and Apple’s iOS mobile operating systems Microsoft is under pressure to offer phones at lower price points to sell into the lower end of the market Until now, the main makers of Windows phones have been Nokia Corp., HTC Corp., Huawei Technologies Co and Samsung Electronics Co Microsoft declined to say when any of the new manufacturers would release Windows phones, or whether it would lower the license fees its charges per phone to boost appeal “We have to be market competitive, but we don’t discuss OEM pricing,” Mr Parker said, using the acronym for original equipment manufacturers Microsoft struck a €5.4 billion ($7.4 billion) deal last year to buy Nokia’s cellphone business and license its patents But so far Nokia’s Windows phones haven’t been inexpensive enough to compete with sub-$100 Android phones in emerging markets Despite the Microsoft acquisition, Nokia itself plans to unveil a smartphone running a modified version of Android on Monday morning INDEX TO BUSINESSES Businesses This index of businesses mentioned in today’s issue of The Wall Street Journal is intended to include all significant reference to companies First reference to the companies appears in bold face type in all articles except those on page one and the editorial pages Allianz 28 Apple 16,17 Atos S.A 20 AT&T .17,18 Aviva 28 AXA S.A 28 Bank Frey Barclays .18 BATS Global Markets, 20 Bayer 20 Belgacom .15 BP 28 British Sky Broadcasting Group 18 Charter Communications 18 Chevron .28 China Nonferrous Mining China Petroleum & Chemical 28 Cisco Systems 15,16,17 Coca-Cola .19 Cogent Communications Group 18 Comcast 17,18 Deutsche Telekom Direct Edge Holdings 20 Discovery Communications 18 EE 16 European Central Bank European Commission European Parliament Exxon Mobil 28 Facebook 16,17 G Tosi 18 Google 16,17 Hermes International 18 Hon Hai Precision Industry 16 HTC 16 Huawei Technologies 16 Hugo Boss 18 Iliad 17 Industrial & Commercial Bank of China Intel .17 International Business Machines 16 International Monetary Fund Kingspan Group 20 KPN 17 Lenovo Group 16 Liberty Global .18 Liberty Media 18 Loro Piana 18 LVMH Moet Hennessy Louis Vuitton 15 Microsoft 16,17 Mobistar 15 Nasdaq OMX Group 20 Netflix .16,17,18 News Corp 18 Nokia 16 Northern & Shell Group 18 NTT DoCoMo .17 Orange 1,15,17 Prada S.p.A 18 Procter & Gamble .20 Prudential 28 Rakuten .16 Randstad Holding N.V 20 Republic Wireless .16 Royal Dutch Shell .20 Samsung Electronics 16,17 Scratch Wireless 16 Sopra Group 20 Sprint 16,17 Swiss Life Holding .1 Tele2 17 Telecom Italia .16 Corrections Amplifications Readers can alert the London newsroom of The Wall Street Journal to any errors in news articles by emailing wsjcontact@wsj.com or by calling +44 (0)20 7842 9901 Telefonica 16 TeliaSonera 15 Temasek Holdings Time Warner Cable 18 T-Mobile US 16,17 Tom Ford International 15 Twitter 21st Century Fox 18 UBS 20 Unilever N.V 20 Verizon Communications 18 Viber Media 16 Vodafone 16,17 WhatsApp 16 THE WALL STREET JOURNAL Monday, February 24, 2014 | 17 MOBILE WORLD CONGRESS Europe’sTelecomFirms Carriers Escalate Net-Neutrality Fight RetreatonRoamingFees By Frances Robinson, Ruth Bender and Manuela Mesco But many of Europe’s biggest carriers—some of which have staunchly opposed the reductions— are now racing to roll out no-roaming-fee packages in an effort to lock in customers before the changes go into effect in July Some smaller companies had already eliminated roaming fees or slashed them dramatically, agreeing with consumer-rights groups and regulators They also say there is profit to be made by getting people to use their phones everywhere By offering more no-roaming-fee packages, major carriers hope a pickup in traffic will help make up some of the expected lost revenue Carriers in Europe are racing to roll out noroaming-fee packages “We are working to transform a direct loss into an indirect gain,” said Yves Martin, the head of roaming for French carrier Orange SA “But it won’t compensate the whole loss.” Like elsewhere in the world, Europe’s 500 million citizens typically pay extra to use their phones whenever they cross national borders But with 28 countries making up the European Union, that can mean roaming fees for even short trips “I’m only traveling one hour, and The Most You Will Pay When Roaming in the EU EU maximum rates as of July of each year (excluding VAT) Data 80 euro cents 60 Voice Calls Made (per minute) Voice Calls Received (per message) (per mb) ’12 ’13 ’14 ’12 ’13 ’14 (per minute) SMS 70 45 40 29 20 20 ’12 ’13 ’14 ’12 24 ’13 19 ’14 Source: European Commission Note: $1 = 73 euro cents I’ve got three different tariffs,” said Hans Similon, a senior executive at Belgian budget carrier Mobile Vikings, describing a recent trip he took through the Netherlands and Germany Fees can be as high as 24 European cents (33 U.S cents) a minute, but had been as high as €5 ($6.85) a minute before the EU started reining them in several years ago The EU first capped roaming charges in 2007, and has reduced them every year since This summer’s reduction will be the last under existing rules Europe’s parliament and member states are currently reviewing new legislation that could ban fees for receiving calls while abroad Roaming charges account for between 5% and 12% of European carrier revenue, with margins often higher than 60%, according to brokerage Oddo Securities Orange, the French carrier and one of the biggest critics of the EU rules, has started waiving some roaming fees for customers who The Wall Street Journal spend more than €30 a month It plans to expand this throughout the year in a bid to increase roaming traffic In Germany, E-Plus, owned by Dutch group KPN NV, now lets customers purchase a no-roaming-fee plan for a flat rate of €3 a month Vodafone PLC has a similar deal In many cases, budget operators such as Sweden’s Comviq, VikingCo NV’s Mobile Vikings and Iliad SA’s Free of France are leading the no-fee push, forcing larger rivals like Orange to follow suit in a market already caught up in price wars Comviq, the low-cost brand of Sweden’s Tele2 AB, offers Swedish subscribers unlimited calls, messaging, and one gigabyte of data traffic in all EU countries, for €55 a month Comviq thinks it can make up revenue on additional usage, once customers stop worrying about roaming fees “Seven out of 10 people turn off roaming abroad,” said Comviq Chief Executive Magnus Larsson “That is not how it is supposed to be.” Samsung Unveils Tizen-Based Watch BARCELONA—Samsung Electronics Co announced the release of its Gear smartwatch, running on the company’s own Tizen operating system The smartwatch represents a delicate balance the mobile-device maker is weighing as it promotes the nascent operating system while continuing to rely on Google Inc.’s Android operating system to power Samsung’s best-selling products Kicking off the annual Mobile World Congress here with the first significant product rollout, Samsung said its new smartwatch will come in two models, including a lowerpriced version with no camera function The device is part of the company’s efforts to “lead innovation in the wearable market,” J.K Shin, the head of Samsung’s mobile-communications business, said in a prepared statement on Sunday The Gear is a successor to an Android-powered watch that the South Korean company released last September The new watch will feature a slightly faster processor and a more powerful battery that Samsung said would allow for two to three days of typical usage Samsung said that the second Samsung Electronics BY JONATHAN CHENG The Gear smartwatch runs on Samsung’s Tizen operating system generation of its smartwatch would help better “reflect modern trends,” for example, moving the camera from the strap onto the main body of the watch The mobile-device maker is developing Tizen with Intel Corp and telecommunications companies such as Japan’s NTT DoCoMo Inc and France’s Orange SA In recent months they have said that they would release a smartphone running Tizen, though the system has appeared commercially only on some Samsung cameras Samsung has struggled with setbacks to Tizen, such as delayed product releases and the exit of some of its carrier partners Google and Samsung both have benefited from their partnership on Android and continue to rely heavily on one another Samsung has used Android software as a selling point for the company’s devices, helping the company dominate global smartphone sales Samsung accounted for 31% of smartphone shipments last year, more than double the share for No Apple Inc., according to consulting firm IDC Apple’s iPhone uses the company’s iOS operating system In a sign of their mutual dependence, Google and Samsung last month signed a licensing deal that covers the companies’ existing patents as well as those to be filed over the next 10 years Samsung “has a commitment to support multiple platforms to offer consumers more choices and we will continue to collaborate closely with Google,” the South Korean company said Google didn’t reply to requests for comment —Rolfe Winkler in San Francisco contributed to this article mobile Web is becoming more important Europe’s proposed rules would make no distinction between mobile and fixed Internet Wireless data traffic is skyrocketing Mobile data traffic increased 81% world-wide last year to 18 times the size of the entire Internet in 2000, according to Cisco Systems Inc By 2018, global mobile data traffic is expected to increase by more than a factor of 10, Cisco said Telecoms in Europe and the U.S are tiptoeing toward offering advanced services from some tech and content companies, saying it shouldn’t raise net-neutrality concerns In Germany, Deutsche Telekom offers to bundle musicstreaming service Spotify for €10 ($14) a month on users’ bills, exempting the service from caps on wireless data usage, after which users would face reduced speeds “I think it is correct that we should be able to give to certain customers or certain services which have a higher level of urgency or performance need, a better service than others,” said Vodafone Group PLC CEO Vittorio Colao In the U.S., AT&T Inc this year became the first telecom to offer a sponsored data service that would allow content companies to pay for the data consumed by users accessing their websites or mobile apps, although no major content producers have signed up A T-Mobile US Inc venture, GoSmart Mobile, last year said it would allow customers to access Facebook free even if they weren’t paying for a data plan And FreedomPop, which resells Sprint Corp.’s service, says it is assembling a “walled garden” of mobile apps that subscribers can access free Seven companies have agreed to pay FreedomPop to participate in the service, which is expected to be available this year Many people in the business expect that, despite the battles, a twospeed Internet is likely to become a reality—as will capacity concerns “You’re going to see more fights over this,” said David Heard, head of the mobile business for networktesting firm JDS Uniphase Corp “But when someone’s willing to pay for something, how can you hold that back?” —Thomas Gryta in Barcelona and Frances Robinson in Brussels contributed to this article Online>> Follow live coverage of Mark Zuckerberg’s address Monday at p.m CET, and get the latest news from the conference, at WSJ.com/MobileWorld Bloomberg News The European Union is on course to further reduce many of the cellphone roaming fees that have long angered travelers across the Continent Continued from first page mobile networks The tension is on display this week here, where the telecom and tech worlds are gathering for the annual Mobile World Congress exhibition Telecom executives are expected to discuss their concerns about proposed net-neutrality rules in closed-door meetings on Monday The rest of the gathering is more of a showcase for Silicon Valley One of the most-anticipated events is Monday’s address by Facebook Inc Chief Executive Mark Zuckerberg A central issue in the net-neutrality dispute is where to draw the line between the broader Internet and private services that telecom operators offer Telecoms say they should be free to set aside part of their infrastructure to sell advanced services, such as high-quality video, from particular technology or content companies The telecoms say doing so wouldn’t mean blocking other providers and that the phone companies have no interest in keeping their subscribers from content they want But tech companies and publicinterest groups say that such plans could lead to a two-tiered Internet, with some types of content available at top speed, but other content getting slow service if providers are unable to pay up “Skype and other online apps have been experiencing arbitrary restrictions of use for some time now,” said Jean-Jacques Sahel, policy director for Europe, Middle East and Africa at Microsoft Corp., which owns the video-chat app “To ensure that these bad practices stop and the Internet does not become a dirt road, we need clear rules.” In recent years, the telecom industry has pushed for companies that generate large amounts of traffic, such as Google Inc.’s YouTube, to pay for carrying traffic above a certain level Netflix Inc recently struck a deal with Comcast Corp to pay the cable company to ensure that Netflix’s content streams smoothly The deal allows Netflix to connect directly with the cable company’s network, instead of through middlemen The so-called paid-peering arrangement with Comcast, which isn’t subject to net-neutrality rules, shows that carriers are getting traction in their efforts to get paid for handling the growing Internet traffic Now the mobile Internet is becoming more of a hot spot in the net-neutrality debate In the U.S., wireless has been largely excluded from net-neutrality rules because bandwidth is more limited and the networks are more fragile But the Major content providers haven’t signed up for AT&T’s sponsored data service 18 | Monday, February 24, 2014 THE WALL STREET JOURNAL BUSINESS & FINANCE Continued from page 15 profits, have been hiring their own artisans and snapping up the best suppliers The companies are looking to consolidate their orders into just a few, bigger suppliers to save costs and nail down the craftsmen Last year, LVMH bought cashmere maker Loro Piana for €2 billion ($2.7 billion) Other fashion houses are building their own capacity France’s Hermès International SA is doubling production at a tannery it owns in northern Italy But the suppliers that don’t capture the eye of the big brands are scrambling to stay afloat They are often too small to sustain the high labor and energy costs in Italy The energy bill for small Italian companies is about 70% higher than the European average, according to an Italian association of small businesses Cgia Mestre These small suppliers are also starved of the capital needed to invest in the technology that will guarantee the highest quality demanded by big brands G Tosi, a small leather tannery that supplied Gucci and Prada, went bankrupt in 2012 after high costs and declining orders overwhelmed it Owner Raffaele Orsi said he is now trying to recapture the high end, but is struggling to invest enough to meet top brands’ quality requirements But Loro Piana, which was expected to achieve sales of €700 million in 2013 when LVMH bought it, has invested in machines to raise workers’ productivity without hurting quality The company said new technology allows one of the company’s workers to produce around 100 meters of fabric in less than an hour compared to just two meters in the 1990s Pressure to keep up has pushed many over the brink About 150, or nearly one-eighth, of companies in Italy’s Biella area, renowned for its wool and cashmere, have closed in the last four years About half of the more than 28,000 garment jobs in Varese in northern Italy disappeared between 2001 and 2011, according to the local union of entrepreneurs Antonella Martinetto, owner of a small Turin-based company that is one of the few making labels and rib- bons for luxury brands, began to suffer when big clients, such as Hugo Boss, canceled part of their orders Hugo Boss, which still makes some of its top-quality products in Italy, moved part of the orders it had placed with Ms Martinetto’s company to Germany, where production costs less “I don’t even cover costs for some part of the production chain,” said Ms Martinetto, who still has orders from top-end brands “But I keep on going because I love my job and I hope to see an improvement at some point.” Competition from low-cost countries is also nipping at the heels of Italy’s luxury manufacturers Turkey and Romania have raised their quality enough to draw the eye of some big brands Prada SpA produces some of the shoes for its Miu Miu line in Romania Chinese manufacturing of textiles is also improving Other manufacturers are responding by launching their own brands, even if it risks drawing the ire of their big fashion clients, in order to capture more of the value that ends up in the pockets of big brands and retailers Pambianco, an Italian consulting firm, estimates that only 15% of the luxury products’ retail price is the cost of the product itself, which is paid to manufacturers, while the rest goes to brand owners and retailers Menswear maker Caruso, which makes suits for the likes of Christian Dior, has launched its own brand and is even opening stores Piacenza Cashmere, a 300-year-old wool maker in Biella, has launched a men’s collection and will soon expand to women’s wear Others, such as Vitale Barberis Canonico, another wool maker in Biella, which supplies Zegna, Armani and Ralph Lauren, are investing heavily to reposition themselves as suppliers of the top brands But the demise of so many manufacturers leaves Italy at the risk of losing the fine skills that have been passed down for generations “It’s a disaster not only for the individual companies but for the country,” said Michele Bocchese, president for the Veneto textile sector of Confindustria “If we don’t stop this trend, we’ll end up losing our know-how.” ADVERTISEMENT Legal Notices BANKRUPTCIES Discovery Readies Bid For U.K.’s Channel BY AMOL SHARMA AND SIMON ZEKARIA Discovery Communications Inc is preparing a bid for U.K broadcaster Channel 5, according to people familiar with the matter, as the U.S cable-channel owner looks to continue its rapid growth in international markets Channel 5, an over-the-air broadcaster owned by British businessman Richard Desmond, has sent potential buyers a prospectus that sets a Feb 27 deadline for initial offers The document values the channel at £700 million ($1.16 billion), according to one of the people, equivalent to 10 times its expected fiscal-year earnings before interest and taxes The broadcaster airs general entertainment shows, including a host of U.S.-produced shows, such as the crime drama “NCIS” and the cable science-fiction series “Falling Skies.” Discovery, whose channels include Discovery Channel, Animal Planet and TLC, has been as aggressive as any U.S media company in pursuing growth overseas, where it has launched its own channel and acquired others as the U.S pay-TV market has saturated It bought a controlling stake in sports-TV channel Eurosport last month, and it previously acquired TV networks in Norway, Sweden, Denmark and Finland through a deal with ProSiebenSat.1 Media AG Discovery currently operates some 200 channels world-wide Its international operations are powering the company’s profit growth: Operating income at Discovery’s international channels rose 20% in the fourth quarter of 2013, compared with a 5% increase at its U.S networks One option Discovery is exploring is a joint bid with U.K satelliteTV provider British Sky Broadcasting Group PLC, one of the people said Another person familiar with the talks said the potential sale has attracted much interest, including from other U.S media operators, but didn’t elaborate Reuters Fading Out: Italy’s Garment Know-How Richard Desmond, shown in 2012 His Channel Five values itself at £700 million A joint Discovery-BSkyB bid would bring together companies backed by cable pioneer John Malone, who owns a 29.5% voting stake in Discovery, and Rupert Murdoch, whose media conglomerate 21st Century Fox Inc owns 39.1% of BSkyB (21st Century Fox and Wall Street Journal owner News Corp were part of the same company until last June.) The two moguls have clashed in the past and are competitors in the U.K Mr Malone’s European cabledistribution outfit, Liberty Global PLC, last year bought Virgin Media, which competes with BSkyB in the U.K.’s pay-TV and broadband markets Liberty Global also has been buying up other cable assets across the continent In the U.S., Mr Malone’s Liberty Media Corp was recently thwarted in its attempt to expand in cable Liberty-backed Charter Communications Inc sought a takeover of Time Warner Cable Inc., but Comcast Corp came in with a significantly higher offer The Financial Times earlier reported that Discovery and BSkyB were in talks to team up on a bid for Channel Mr Desmond bought Channel 5, which airs the reality show “Big Brother,” for £103.5 million in July 2010 from pan-European broadcaster RTL The new owner pledged £1.5 billion investment over the next five years into programming and content, while other costs were taken out Channel 5—part of a family of channels that includes 5USA—is one of many media assets owned by Mr Desmond His Northern & Shell Group also owns four U.K newspapers, celebrity magazines and a stake in Internet-television service YouView The group also has diverse interests in TV, print, distribution, investment and property In January, Mr Desmond hired Barclays PLC to run the sale of Channel after receiving two approaches in the previous year, according to a person familiar with the matter “The economics for television are a lot more confident than they were three or four years ago,” said the person, citing an improving advertising market and trans-Atlantic interest in European media Channel was launched in 1997 as the fifth national terrestrial television network in the U.K It had a viewing share of 4.4% in January across all U.K terrestrial and satellite channels, according to data from the Broadcasters’ Audience Research Board Netflix Agrees to Pay Comcast for Speed BY SHALINI RAMACHANDRAN Netflix Inc has agreed to pay Comcast Corp to ensure Netflix movies and television shows stream smoothly to Comcast customers, a landmark agreement that could set a precedent for Netflix’s dealings with other broadband providers, people familiar with the situation said In exchange for payment, Netflix will get direct access to Comcast’s broadband network, the people said The multiyear deal comes just 10 days after Comcast agreed to buy Time Warner Cable Inc., which if approved would establish Comcast as by far the dominant provider of broadband in the U.S., serving 30 million households For months Netflix and Comcast have been in a standoff over Netflix’s request that Comcast connect to Netflix’s video distribution network free of charge But Comcast wanted to be paid for connecting to Netflix’s specialized servers because of the heavy load of traffic Netflix would send into the cable operator’s network Under the deal, Netflix won’t be able to place its servers inside Comcast’s data centers, which Netflix had wanted Instead, Comcast will connect to Netflix’s servers at data centers operated by other companies Netflix Chief Executive Reed Hastings decided to strike the deal after Netflix saw a deterioration in streaming speeds for Comcast subscribers According to Netflix data published in January, the average speeds of Netflix’s prime-time streams to Comcast subscribers had dropped 27% since October Mr Hastings didn’t want streaming speeds to deteriorate further and become a bigger issue for customers, the people said During this period, Netflix was using Internet middlemen Cogent Communications as a “primary” route into Comcast, a person familiar with the matter has said That connection was starting to become overwhelmed, leading to slower Netflix streams for Comcast Internet users, people familiar with the matter said At the same time, Comcast presented Netflix with more attractive deal terms than the operator had been offering, the people said The deal spans several years Netflix was aiming for a long-term deal to make sure its projected traffic growth wouldn’t put it at a disadvantage, one of the people said The connection is a so-called “paid peering” deal, which connects Netflix’s network to Comcast’s directly Netflix was previously using several middlemen to access Comcast’s network Mr Hastings and Comcast CEO Brian Roberts came to a framework for an agreement at a meeting at the Consumer Electronics Show in January Final details were worked out over the past two days, one of the people said The deal could force Netflix’s hand in its standoff with other major U.S broadband providers, including AT&T Inc., Verizon Communications Inc and Time Warner Cable, all of whom have also refused to connect with Netflix’s servers without compensation Netflix’s streams with Verizon in particular have gotten worse in recent months THE WALL STREET JOURNAL Monday, February 24, 2014 | 19 BUSINESS & FINANCE Coke Bottler and Unions Clash in Spain BY MATT MOFFETT AND ANA GARCIA Agence France-Presse/Getty Images MADRID—Coca-Cola Co.’s Spanish bottler and its unions seem headed to court over the company’s plan to close plants and cut jobs in a dispute that illustrates the persistence of labor strife in Spain despite a nascent recovery from a deep recession Coca-Cola Iberian Partners is free under Spanish law to impose a restructuring plan in the next 15 days, after failing to reach agreement with unions by last Friday’s deadline on its plan to shut down four of 11 plants and cut or relocate about 30% of its workforce Formed by the merger of several bottlers a year ago, Coca-Cola Iberian said it had no choice but to overhaul its labor force because of overcapacity in its production lines and a recession-weakened consumer market “If it doesn’t go ahead with this reorganization, the situation of the company will be unsustainable in the medium term,” a company official said Union leaders have said they would sue if Coca-Cola seeks to impose the cuts, and analysts expect the case to wind up in the courts The dispute, which has featured strikes, street protests and threatened boycotts of Coca-Cola products, Employees of bottler Coca-Cola Iberian demonstrated in Madrid last week has played out against some relatively good news in the long-depressed Spanish job market Spain posted seasonally adjusted job growth in the fourth quarter of 2013, a first in nearly six years But with unemployment still hovering around 26%, unions have dug in their heels against Coca-Cola’s plans and found political allies in areas affected by the proposed plant closings The regional government of Asturias, where a bottling plant would be shut under the restructuring, said that it NAV GF AT LB DATE CR NAV n ALEXANDRA INVESTMENT MANAGEMENT AlexandraConvertibleBondFundI,Ltd.(ClassA) OT OT VGB 08/31 USD 2155.22 —%RETURN— YTD 12-MO 2-YR NS NS NS n BANC INTERNACIONAL D'ANDORRA BANCA MORA Avgd Meritxell 96, Andorra la Vella Andorra Ph +376.884884 www.bibm.ad Andfs Anglaterra Andfs 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Special Opp Inst EUR Special Opp Inst USD Special Opp USD OT OT OT OT OT OT OT OT GGY GGY GGY GGY n HSBC Portfolio Selection Fund GH Fund CHF Hdg GH Fund EUR Hdg (Non-V) GH Fund GBP Hdg GH Fund Inst USD GH FUND S EUR OT OT OT OT OT OT OT OT OT OT now when you combine them in a weak market, you have big overcapacity.” But he faults the company for fumbling the union negotiations and the public-relations battle over the closings “I’m not sure if it’s the strength of the unions as much as the weakness of the company,” Mr Gomez said A company official faults the unions for failing to come up with any constructive counterproposals, and for ignoring the interests of rank-and-file workers Union leaders said they would sue if Coca-Cola seeks to impose the cuts Mr Gomez and other analysts said the unions risk overplaying their hand by turning down Coca-Cola’s buyout plan It is possible that an agreement approved by a court might be less advantageous to workers than the one the unions have turned down, these analysts said Spanish media reports indicated that in some plants there are disagreements between workers who would have accepted Coca-Cola’s deal, and those pressing for a better one INTERNATIONAL INVESTMENT FUNDS Advertisement FUND NAME would no longer accept Coca-Cola’s sponsorships of sporting events In the Madrid region, where a plant in suburban Fuenlabrada is slated to be closed, unions have called for a boycott, making signs reading: “If Madrid doesn’t produce, Madrid doesn’t consume.” Unions say the company’s plan to relocate several hundred workers is unfeasible and an indirect way of eliminating their positions Coca-Cola and the unions were unable to reach agreement even though the company shifted its original plan from layoffs to voluntary buyouts for the more than 700 workers, out of a total workforce of about 4,000, who would lose their jobs The company also sweetened severance packages to include one-time payments of €10,000 ($13,738), plus 45 days’ pay for each year worked In justifying the plant closings, Coca-Cola Iberian says 11 plants for Spain are too many By comparison, more-populous France has three plants In addition, the Spanish plants operate at half of their capacity, the company says The company adds that profitability has fallen by 43% and production by 20% since 2009 Despite labor-law changes aimed at cutting costs and improving flexibility in hiring, Spain still lags behind in international competitiveness, company officials say The company says about 25% of Spanish bars and restaurants buy beverages from outside the country, where prices are lower It is understandable that CocaCola Iberian would want to streamline operations after the merger, said Sandalio Gomez, a labor-relations specialist at Spain’s IESE Business School “Each plant they had had been planned as a separate entity and each bottler wanted to be better and bigger than the other,” he said “So GGY GGY GGY GGY CYM 12/31 03/31 03/28 12/31 01/31 01/31 01/31 01/31 01/31 EUR EUR USD USD CHF EUR GBP USD EUR 122.21 88.51 123.18 129.13 125.95 140.23 154.96 133.63 156.05 14.2 0.7 4.2 14.0 0.5 0.5 0.5 0.6 0.6 NS NS NS NS NS NS 14.2 -0.3 18.5 14.0 Antanta Combined Fund Antanta MidCap Fund Meriden Opps Fund Meriden Protective Div EE EE GL GL EQ EQ OT EQ AND AND AND AND 01/24 01/24 02/05 11/24 USD USD EUR EUR 207.19 373.49 22.68 NS.00 -1.3 3.5 0.0 -2.8 -19.3 -7.3 -11.2 NS -10.9 -7.6 -17.5 -11.6 -11.0 NS 17.0 13.3 10.6 17.3 6.7 6.3 6.9 7.3 7.7 6.1 6.0 6.7 7.0 7.2 n Pictet Funds (Europe) SA, ROUTE DES ACACIAS 60, CH-1211 GENEVA 73 Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com Pictet-Abs Ret Gl Div-P EUR Pictet-Agriculture-P EUR Pictet-Asian Eq ExJpn-P USD Pictet-Asian Loc Cur Dbt-P USD Pictet-Biotech-P USD GL OT LUX OT OT LUX OT OT LUX AS BD LUX OT EQ LUX 02/20 02/20 02/21 02/21 02/20 EUR EUR USD USD USD 113.57 150.16 180.64 143.52 648.09 -0.3 -1.8 -1.9 0.7 17.0 -3.7 -1.8 0.2 -7.1 66.5 -0.9 3.4 1.7 -2.0 43.2 FUND NAME NAV GF AT LB DATE CR Pictet-Brazil Index-P USD Pictet-CHF Bonds-P Pictet-China Index-P USD Pictet-Clean Energy-P USD Pictet-Digital Comm-P USD Pictet-Eastern Europe-P EUR Pictet-Em Corp Bds-P USD Pictet-Em Loc Curr Dbt-P USD Pictet-Em Mkts Hgh Div-P USD Pictet-Em Mkts Index-P USD Pictet-Em Mkts Sust Eq-P USD Pictet-Emerging Markets-P USD Pictet-Envir Megatr Sel-P EUR Pictet-Eu Equities Sel-P EUR Pictet-EUR Bonds-P Pictet-EUR Corp Bds Ex Fin-P Pictet-EUR Corporate Bonds-P Pictet-EUR Government Bonds-P Pictet-EUR High Yield-P Pictet-EUR Inflation Lkd Bds-P Pictet-EUR SM-Term Bds-P Pictet-EUR ST High Yld-P Pictet-Euroland Index-P EUR Pictet-Europe Index-P EUR Pictet-European Sust Eq-P EUR Pictet-Generics-P USD Pictet-Glo Bds Fundamental-P USD Pictet-Glo Em Currencies-P USD Pictet-Glo Emerging Debt-P USD Pictet-Glo Megatrend Sel-P USD Pictet-Greater China-P USD Pictet-High Dividend Sel-P EUR Pictet-India Index-P USD Pictet-Indian Equities-P USD Pictet-Japan Index-P JPY Pictet-Japanese Eq Opp-P JPY Pictet-Japanese Eq Sel-P JPY Pictet-Latam Index-P USD Pictet-Latin Am Loc Curr Dbt-P USD Pictet-Pac (ExJpn) Idx-P USD Pictet-Piclife-P CHF Pictet-Premium Brands-P EUR Pictet-Quality Gl Eq-P USD Pictet-Russia Index-P USD Pictet-Russian Equities-P USD Pictet-Security-P USD Pictet-Short-T Money Mkt CHF-P Pictet-Short-T Money Mkt EUR-P Pictet-Short-T Money Mkt JPY-P Pictet-Short-T Money Mkt USD-P Pictet-Small Cap Europe-P EUR Pictet-Sov ST Money Mkt-P EUR Pictet-Sov ST Money Mkt-P USD Pictet-Timber-P USD Pictet-US Eq Grwth Sel-P USD Pictet-US Eq Value Sel-P USD Pictet-US High Yield-P USD Pictet-USA Index-P USD Pictet-USD Government Bonds-P Pictet-USD Short Mid-Term Bds-P Pictet-Water-P EUR Pictet-World Gvt Bonds-P EUR PTR-Banyan-P USD PTR-Corto Europe-P EUR PTR-Kosmos-P EUR PTR-Mandarin-P USD OT CH AS OT OT EU OT OT GL GL GL GL OT EU EU EU EU EU EU EU EU EU EU EU EU OT OT OT GL GL AS OT EA EA JP JP JP GL OT AS OT OT GL EE EE GL CH OT OT OT EU OT OT GL US US US US US US OT OT OT OT OT OT OT BD EQ OT EQ EQ OT OT EQ EQ EQ EQ OT EQ BD BD BD BD BD BD BD BD EQ EQ EQ EQ OT OT BD EQ EQ OT EQ EQ EQ EQ EQ EQ OT EQ OT EQ EQ EQ EQ EQ MM OT OT OT EQ OT OT EQ EQ EQ BD EQ BD BD OT OT OT OT OT OT LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX LUX 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/21 02/20 02/20 02/21 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/21 02/20 02/20 02/21 02/21 02/21 02/21 02/20 02/20 02/21 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/20 02/19 02/20 02/20 02/21 USD CHF USD USD USD EUR USD USD USD USD USD USD EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR USD USD USD USD USD USD EUR USD USD JPY JPY JPY USD USD USD CHF EUR USD USD USD USD CHF EUR JPY USD EUR EUR USD USD USD USD USD USD USD USD EUR EUR USD EUR EUR USD NAV 62.58 465.82 99.64 86.67 210.54 316.45 100.51 174.11 105.79 232.37 90.40 492.53 121.96 538.12 475.19 132.69 178.54 138.74 222.05 116.55 132.11 115.85 115.68 147.92 188.49 211.01 128.37 103.98 308.19 210.16 384.40 129.23 80.31 302.53 12597.94 6984.85 10651.71 71.97 134.51 362.07 902.96 122.95 123.16 74.33 60.48 167.62 124.25 137.73 10127.91 132.31 855.44 102.68 102.02 150.94 172.59 186.42 145.11 157.05 579.35 125.80 198.22 132.33 96.03 130.05 106.88 104.09 Data provided by: —%RETURN— YTD 12-MO 2-YR -8.7 1.1 -5.4 1.5 2.0 -8.3 0.8 -2.6 -5.9 -5.1 -6.6 -5.3 0.7 -1.7 2.3 1.4 1.3 2.2 2.0 0.5 0.5 0.8 1.6 2.0 2.3 10.6 0.3 -1.0 0.4 3.1 -4.2 0.5 -3.6 0.0 -6.4 -6.8 -7.7 -8.4 -0.3 0.8 0.4 -3.4 -0.5 -9.9 -11.3 1.6 0.0 0.0 0.0 0.0 4.1 0.0 0.0 0.2 1.9 -0.2 1.5 -0.3 1.4 0.2 1.2 2.6 -6.4 3.7 0.5 -2.0 -24.2 1.4 -4.0 29.9 36.7 -14.9 -2.0 -14.3 -9.0 -9.5 -12.5 -7.7 12.0 6.2 3.5 3.4 3.8 4.5 11.0 -2.2 2.2 6.1 22.2 18.0 16.6 34.6 -3.9 -4.6 -4.4 24.5 -0.8 11.5 -10.0 -2.6 28.7 28.2 26.0 -22.0 -14.9 0.2 4.4 11.8 15.5 -13.1 -11.8 19.0 0.0 0.0 0.0 0.2 28.6 -0.1 0.1 7.9 32.6 21.0 5.9 23.3 -1.4 0.3 11.4 -2.5 -8.8 14.4 1.2 6.5 -21.0 2.5 1.4 12.8 22.1 -5.2 NS -4.7 NS -3.7 NS -4.4 10.0 9.2 6.2 4.7 6.3 5.8 13.3 0.9 2.6 7.3 15.8 14.3 13.1 24.1 -1.1 -1.4 3.2 18.1 3.0 12.4 -5.7 -3.7 24.6 26.8 23.5 -15.1 -7.3 7.9 6.5 11.9 NS -8.7 -7.5 14.9 0.0 0.0 0.0 0.2 23.1 -0.1 0.1 14.7 18.9 15.1 8.4 17.8 0.2 0.3 11.2 -2.9 -4.5 16.3 1.6 4.4 n POLAR CAPITAL PARTNERS LIMITED International Fund Managers (Ireland) Limited PH - 353 670 660 Fax - 353 670 1185 Global Technology Japan Fund USD Polar Healthcare Class I USD Polar Healthcare Class R USD OT JP OT OT EQ EQ EQ EQ IRL IRL IRL IRL 02/20 02/21 02/20 02/20 USD USD USD USD 23.48 21.27 33.49 32.84 2.8 -5.8 18.1 18.0 29.5 13.4 69.9 69.2 15.1 6.8 46.6 46.0 FUND NAME NAV GF AT LB DATE CR NAV n Hemisphere Management (Ireland) Limited Discovery USD A Elbrus USD A Europn Conviction USD B Europn Forager USD B Latin America USD A Paragon Limited USD A UK Fund USD A GL OT EU EU GL EU OT OT OT EQ EQ EQ EQ OT CYM CYM CYM CYM CYM CYM CYM 12/31 01/31 01/31 01/31 06/30 12/31 04/13 USD USD USD USD USD USD USD 101.35 10.10 161.54 324.09 NS.00 NS.00 157.94 —%RETURN— YTD 12-MO 2-YR NS NS 0.3 2.6 NS 12.7 1.8 NS NS 1.1 11.7 NS 12.7 NS NS NS 5.3 11.9 NS 14.2 NS n PT CIPTADANA ASSET MANAGEMENT Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com Indonesian Grth Fund GL EQ BMU 02/19 USD 154.09 13.0 -16.5 -10.2 1127.97 1372.98 10.69 1.1 6.0 17.3 5.8 28.6 84.6 6.7 18.4 52.3 13464.00 -6.4 37.6 28.2 n THE NATIONAL INVESTOR PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae MENA Special Sits Fund MENA UCITS Fund UAE Blue Chip Fund OT OT OT OT BMU 01/31 USD OT IRL 02/13 USD OT ARE 02/13 AED n YUKI MANAGEMENT & RESEARCH n YMR-N Series YMR-N Growth Fund JP EQ IRL 02/21 JPY n Yuki Asia Umbrella Series Yuki Rebounding Gro Fd n Yuki Mizuho Series Yuki Mizuho Jpn Dyn Gro Yuki Mizuho Jpn Inc Yuki Mizuho Jpn Lg Cap Yuki Mizuho Jpn LowP Yuki Mizuho Jpn Val Sel JP EQ IRL 02/21 JPY 16443.00 -4.6 51.1 36.1 JP JP JP JP AS EQ EQ EQ EQ EQ 5741.00 10017.00 6190.00 18483.00 9092.00 -6.7 -4.0 -8.1 -6.3 -4.9 36.4 27.0 25.7 49.8 51.2 27.1 22.4 19.5 35.6 39.7 IRL IRL IRL IRL IRL 02/21 02/21 02/21 02/21 02/21 JPY JPY JPY JPY JPY n OTHER FUNDS For information about these funds, please contact us on Tel: +44 (0) 207 842 9694/9633 Medinvest Plc Dublin OT EQ IRL 09/30 USD NS.00 n WINTON CAPITAL MANAGEMENT LTD Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301 Winton Evolution EUR Cls H Winton Evolution GBP Cls G Winton Evolution USD Cls F Winton Futures EUR Cls C Winton Futures GBP Cls D Winton Futures JPY Cls E Winton Futures USD Cls B GL GL GL GL GL GL GL OT OT OT OT OT OT OT CYM CYM CYM VGB VGB VGB VGB 01/31 01/31 01/31 01/31 01/31 01/31 01/31 EUR NS.00 GBP NS.00 USD NS.00 EUR 245.63 GBP 267.48 JPY 17199.60 USD 876.58 NS 1.3 -4.4 -3.1 -3.1 -3.1 -2.4 -2.4 -2.3 -2.4 7.2 7.6 7.6 3.8 4.1 4.4 4.2 1.5 1.9 1.8 0.9 1.3 1.0 1.2 INDICES FUND NAME NAV ——————%RETURN —————— GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR n ARIX ABSOLUTE RETURN INVESTABLE INDEX Feri Institutional Advisors, www.feri.de ARIX Composite Gross USD OT OT GBR 01/31.00 USD1603.76 0.1 5.8 6.1 NAV OT CYM 06/07.00 GBP25839.68 5.3 10.9 9.8 n CG Portfolio Fund Ltd OT 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 20 | Monday, February 24, 2014 THE WALL STREET JOURNAL MARKETS Popular Destination U.S investors are flocking to Europe, drawn by an improving economic outlook, expectations of easy central-bank policy and a perception that bargains are easier to find over there Western European stock fund flows, monthly Stoxx Europe 600 P/E ratio 52-week performance $20 billion 30 25% 25 20 20 15 15 10 10 5 0 –5 10 –10 –20 2008 ’09 ’10 ’11 ’12 ’13 ’14 2010 ’11 ’12 ’13 ’14 Sources: EPFR Global (flows); Barclays (P/E ratio); WSJ Market Data Group S&P 500 Stoxx Europe 600 2013 ’14 The Wall Street Journal Investors Like the View in Europe Continued from page 15 omy has resumed expanding Inflation remains low and growth tepid, paving the way for easy centralbank policy that many investors believe will likely buoy share prices That backdrop contrasts with the U.S., where the economy appears on more solid footing but the Federal Reserve has been paring back the monthly bond purchases that many investors say contributed to the record-setting 2013 rally Monetary policy in the U.S “will likely be something of a headwind for equities,” said Jamie Doyle, manager of the International Value Fund at Los Angeles-based Causeway Capital Management, which has $28 billion in assets under management and has a large portfolio of European shares “But that’s not going to be a factor in Europe.” Many portfolio managers are seeking out the biggest names of the European corporate world, saying valuations make them a bargain compared with top U.S companies “You can find several world-class companies in Europe that have depressed prices because of the region,” said Charles Shriver, portfolio manager of the $63 million T Rowe Price Group Global Allocation Fund “But they are top-tier global corporations.” That fund counts oil company Royal Dutch Shell and German pharmaceuticals company Bayer AG among its top holdings In the technology sector, favorites include Atos SA, a French technology-services company, and Sopra Group, a tech consultancy At Causeway, Mr Doyle likes the Anglo-Dutch consumer giant Unilever NV for its strong global exposure and a dividend yield, reflecting the annual payout as a share of the recent stock price, of 3.8% That dividend payment is part of what makes Unilever a better buy than its American peer Procter & Gamble Co., which pays a 3.1% dividend, Mr Doyle said “Unilever trades at a discount with a higher dividend yield,” Mr Doyle said The discount appears in the price-to-earnings ratios of the two companies Procter & Gamble shares are trading at 20.85 times the company’s earnings over the past 12 months, compared with 16.73 for Unilever But with many European stock markets up 20% or more in the past year, the bargains that have attracted bottom-fishers are harder to find, many investors say Shares in the Stoxx Europe 600 index are trading at 21.5 times the next 12 months’ expected earnings, above its average of 18.2 since 2003, according to Barclays “There is a bit of a risk in core Europe that people think there is more value than there really is,” said Michael Gavin, head of asset allocation for the Americas at Barclays At the same time, the region’s recovery remains fragile, raising risks for companies that benefit from consumer spending, such as Unilever An initial reading on fourth-quarter euro-zone gross domestic product showed modest improvement, but the result remains well below the pace needed to make a dent in near record-high unemployment Inflation unexpectedly fell in January, prompting calls for the European Central Bank to provide additional stimulus to prevent deflation, which could knock the region’s fragile recovery off course “It isn’t all wine and roses,” Mr Doyle said “Europe has been through an enormous dislocation and continues to struggle with a number of challenges.” Some say that means tilting portfolios toward countries most badly affected by the debt crisis The BlackRock International Opportunities Fund has looked to the hardest-hit sectors within those countries The Irish building company Kingspan Group PLC and Dutch international employment services company Randstad Holding NV, which has a strong presence in Spain and Greece, were two of the fund’s recent buys They have soared 60% and 46% over the past year, respectively The peripheral European nations are “where the opportunities are leading us,” Mr Hart said SEC Will Test Larger ‘Tick’ Increments BY TELIS DEMOS AND SCOTT PATTERSON WASHINGTON—Securities and Exchange Commission Chairman Mary Jo White said the agency plans to implement a test program to trade stocks in wider increments, like nickels, to determine whether such a change would make it easier for investors to trade some shares Weeks earlier, the SEC’s investor advisory committee recommended against implementation of such a program because of concern it could increase the cost of trading In a speech in Washington on Friday, Ms White said she planned to push forward a pilot program that “would widen the quoting and trading increments and test, among other things, whether a change like this improves liquidity and market quality.” Phasing out trading in penny increments has long been championed by some lawmakers, smaller investment banks and stock exchanges, who say trading in wider bands would make it easier and more profitable to trade shares of smaller companies, as well as lessen volatility The SEC’s pilot program would move the trading of some stocks to bigger “tick” sizes after more than a decade of penny increments Critics are worried about increasing the cost of trading by forcing traders to potentially pay more, or sell for less, than they would under penny trading Some also doubt the measure would improve capital raising for smaller companies U.S exchanges and regulators are embroiled in an industrywide debate about how such a pilot program would work The plan has backing on Wall Street, including from stock-exchange operators such as Nasdaq OMX Group Inc., though some bigger banks and retail brokerages, who often trade in increments smaller than pennies in private venues known as “dark pools,” have asked for any test to be limited in scope SEC officials have been working with exchanges on the development of the plan The details are still under consideration, according to people familiar with the discussions The SEC has asked the stock exchanges—including NYSE Euronext, Nasdaq, BATS Global Markets Inc and Direct Edge Holdings LLC—to work together on rules, the people said The SEC would review, and possibly vote on, the rules before they are implemented By referring to both “quoting and trading,” Ms White suggested that the SEC didn’t want to see private venues executing trades in smaller increments than exchanges are required to list prices Some big banks and retail brokerages have expressed concern that cutting out those venues would harm investors The U.S Houses passed a bill this month that would force the SEC to create an optional five-cent or 10cent increment for companies whose market capitalization is under $750 million, an experiment that would last for five years However, a companion bill hasn’t been proposed in the Senate Swiss Insurance Is Targeted In U.S Tax-Evasion Probe Continued from first page edly helping Americans avoid taxes The bank said in November it had “verified the tax compliance of all its U.S clients,” and has since been in the process of shutting down Swiss Life, which like many Swiss financial firms is now eager to limit exposure to Americans, used the opportunity to scuttle the shared PPLI policies rather than locate a new bank to house the attached assets, these people say Swiss Life is the biggest Swiss insurer offering PPLI, though not the only one Some of the people familiar with the situation say U.S authorities have collected data on the use of PPLI by Americans, though the issue has taken a back seat to the continuing probe of Swiss banks Just as Swiss banks have drawn legal inquiries, “the same thing could happen, certainly, with the insurance companies,” said Gideon Rothschild, an attorney with Moses & Singer LLP A Justice Department spokeswoman declined to comment, as did a spokesman for the IRS Nils Frowein, chief executive of Swiss Life’s International unit, says the company hasn’t been contacted by U.S authorities regarding its PPLI business PPLI policies are generally a lawful way for clients to defer taxes on wealth as it grows But policies can be problematic for their owners and carriers if they haven’t been set up in compliance with tax laws in a client’s home country, or if they are loaded with undeclared assets The bulk of the 19.3 billion Swiss francs ($21.7 billion) in assets under control at Swiss Life’s International unit in 2012—prior to the Bank Frey purge—was linked to PPLI About 4%, or around 770 million francs, was attributable to Americans, according to Mr Frowein Mr Frowein said while Swiss Life has “been continuously reducing exposure to U.S persons” where it can, it is confident there are no issues with the American PPLI accounts that remain “There is no reason for us to resign from the contracts,” he said The Swiss banks that partner on PPLI once happily accommodated wealthy U.S clients, but have more recently jettisoned Americans to avoid drawing unwanted attention from the Justice Department Unlike banks, insurers are contractually bound to hold policies and pay out for a specific event, such as death Only an unusual circumstance allows an insurer to prematurely dump a PPLI policy Hundreds of Swiss banks have applied to a U.S program in which they exchange information about dealings with Americans for guarantees they won’t be prosecuted Insurers aren’t able to participate in the program The Justice Department has said that about a dozen banks are already under investigation Swiss Life began offering PPLI in 2004 Assets under administration ballooned to more than eight billion francs by 2008 from 200 million francs in 2005 In 2007, Swiss Life added a number of U.S clients through the purchase of insurer CapitalLeben, just as dealings with Americans were poised to become subject to greater scrutiny In 2009, the Justice Department fined UBS AG $780 million for helping Americans evade taxes, kicking off the broader clampdown on Swiss banking Mr Frowein says Swiss Life stopped taking American clients in 2012 Zurich Insurance Group AG says it hasn’t accepted Americans since its PPLI business began in 2009, while a spokesman for insurer Baloise Holding AG said it stopped taking American clients under a 2010 company directive The Baloise spokesman said the firm doesn’t believe it necessary to “actively wind down” U.S policies Swiss Life has bulked up on compliance over the years to help it avoid undeclared assets, Mr Frowein said, and requires clients to declare their tax status Still, Mr Frowein said, “If you want to a transaction with us, I have no possibility to check and prove your tax declaration.” Fund Scorecard Europe ex-UK Small/Mid-Cap Equity Funds that invest primarily in the equities of small- and mid-cap companies in continental Europe At least 75% of total assets are invested in equities Ranked on % total return (dividends reinvested) in Euros for one year ending February 21, 2014 Leading 10 Performers FUND FUND RATING * NAME 4 3 4 FUND MGM'T CO LEGAL CURR BASE TR European Henderson Global GBPGBR Growth Ord Investors JPMorgan JP Morgan GBPGBR EuropeanSmallerCompOrd Investment Mgmt Inc Ignis Ignis Asset GBPGBR European SmlrComs I Acc Management Limited Invesco Cont Invesco Global USDIRL European Sm Cp Eq A Asset Management Limited JPM Europe J.P Morgan Asset GBPGBR Smaller Companies A Acc Management (UK) Ltd Schroder Schroder Unit GBPGBR European Sm Cos Acc Trusts Limited European F&C Asset GBPNLD Assets Ord Management PLC Digital J.Chahine Capital EURLUX Stars Europe ex-UK Acc IP European Invesco Fund GBPGBR Opportunities Acc Managers Limited IP European Invesco Fund GBPGBR Small Companies Managers Limited NOTE: Changes in currency rates will affect performance and rankings KEY: ** 2YR and 5YR performance is annualized NA-not available due to incomplete data; NS-fund not in existence for entire period YTD % Return in $US ** 1-YR 2-YR 5-YR 8.44 54.05 37.32 24.33 3.48 52.84 29.93 23.94 6.96 44.18 33.40 27.58 7.37 39.69 31.53 36.13 4.43 36.93 22.65 19.70 5.09 35.30 25.06 21.41 5.43 35.10 38.05 29.51 5.78 32.93 27.84 22.42 3.99 31.52 23.76 30.74 5.45 31.06 22.43 25.11 Source: Morningstar, Ltd Oliver’s Yard, 55-71 City Road London EC1Y 1HQ United Kingdom www.morningstar.co.uk; Email: mediaservice@morningstar.com Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001 THE WALL STREET JOURNAL Monday, February 24, 2014 | 21 GLOBAL MARKETS LINEUP Major stock market indexes Stock indexes from around the world, grouped by region Shown in local-currency terms PERFORMANCE Percentage change Yr.-to-date PREVIOUS SESSION Region/Country Index Close Net change EUROPE Stoxx Europe 600 336.09 1.31 2.4% 0.39% 52-wk 16.5% Region/Country Russia PERFORMANCE Percentage change Yr.-to-date -8.8 0.95% PREVIOUS SESSION Index RTSI Close 1315.54 Net change 12.39 10071.00 8.80 434.08 1.99 Stoxx Europe 50 2961.11 12.36 0.42 1.4 12.5 Spain IBEX 35 Euro Zone Euro Stoxx 320.66 1.23 0.39 2.0 20.8 Sweden OMX Stockholm Euro Stoxx 50 3131.67 10.08 0.32 0.7 19.1 Switzerland SMI 8431.78 48.53 Austria ATX 2663.27 23.87 4.6 10.0 Turkey BIST 100 63885.62 204.6 0.32 Belgium Bel-20 3019.44 13.47 3.3 18.4 U.K FTSE 100 6838.06 25.07 0.37 ASIA-PACIFIC DJ Asia-Pacific TSM 1415.91 16.29 Czech Republic PX Denmark OMX Copenhagen Finland 0.90 0.45 1046.06 10.01 0.97 5.8 4.6 637.23 5.75 0.91 12.6 29.5 Australia SPX/ASX 200 5438.70 OMX Helsinki 7522.51 50.30 0.67 2.5 19.8 China Shanghai Composite 2113.69 -25.09 France CAC-40 4381.06 25.57 0.59 2.0 18.2 Hong Kong Hang Seng 22568.24 DAX 9656.95 38.10 1.1 26.0 India S&P BSE Sensex 20700.75 BUX 18110.98 14.45 -2.4 -4.0 Japan Nikkei Stock Average 14865.67 Ireland ISEQ 10.3 35.5 Singapore Straits Times 3099.93 FTSE MIB 7.5 25.6 South Korea Kospi 1957.83 27.26 Netherlands AEX Norway All-Shares Poland 18.57 -60.38 0.37 -0.30% 1.6 8.4 -0.1 -8.7 0.78 -3.2 -0.9 0.80 -2.2 7.2 -8.8 30.6 0.49 -1.17% 2.88 -2.1 1.41 -5.7 -2.7 0.43 -3.0 1.60 0.40 -0.4 17.8 AMERICAS DJ Americas 463.23 -0.69 -0.5 18.2 611.86 2.04 0.33 1.5 18.1 Brazil Bovespa 47380.24 91.63 0.19 -8.0 -16.4 53400.11 433.09 Mexico IPC 39724.58 70.35 0.18 -7.0 -9.5 7228.49 PSI 20 52.55 0.82 4.1 16.2 0.73 10.2 18.2 Note: Americas index data are as of 5:00 p.m ET S&P Dow Jones Indices Price-toDividend earnings yield* ratio* S&P Dow Jones Index 2.45%18.52 2.99 17.72 3.05 13.47 3.17 19.15 2.39 19.37 2.99 13.07 3.33 18.44 3.24 21.17 3.80 17.32 3.61 8.55 1.93 19.85 7.9 4.2 400.36 WIG Portugal 5004.85 20391.90 11.6 -15.8 -2.3 1.16 13.29 Italy 0.08 2.8 1.3 416.49 0.40 23.1 15.5 -5.8 0.58 164.11 Hungary 0.46 174.16 Germany 1.6 2.5 0.09 26.40 52-wk -15.2 Sources: SIX Financial Information; WSJ Market Data Group MSCI indexes PERFORMANCE (euros) Last Daily 52-wk Global TSM Global DOW Global Titans 50 Dev Europe TSM Developed Markets TSM S&P BMI Emg Markets S&P Europe 350 S&P Euro Europe Dow BRIC 50 U.S TSM Kuwait Titans 30 -c -0.15 1688.53 222.94 0.09% 13.2% -0.15 8.1 1368.93 1359.89 1428.21 363.00 0.34 16.5 0.40 21.5 0.48 17.1 0.31 -14.4 PERFORMANCE (U.S.dollars) Last Daily 52-wk 3225.57 2464.83 228.86 3470.80 3255.10 245.26 1688.09 1699.45 2084.83 475.69 19384.39 205.25 0.33% 0.33 0.08 0.64 0.32 0.63 0.58 0.64 0.72 0.55 -0.13 0.05 Price-toDividend earnings yield* ratio* S&P Dow Jones Index 15.9% 18.2 12.9 22.9 18.7 -8.0 21.4 26.6 22.3 -10.7 22.6 4.7 6.35%14.98 6.71 14.35 3.29 29.14 2.16 19.16 2.50 17.18 3.29 21.22 3.97 22.93 1.94 13.55 Developed and emerging-market regional and country indexes from MSCI as of February 21, 2014 PERFORMANCE (euros) PERFORMANCE (U.S.dollars) Last Daily 52-wk Last Daily 52-wk Turkey Titans 20 -c Global Select Div Asia/Pacific Select Div U.S Select Dividend -d S&P Glb Nat Resources Islamic Market Islamic Market 100 Islamic Turkey -c Sustainability Europe S&P Glb Infrastructure Luxury DJ-UBS Commodity -p 214.51 277.34 1205.92 1996.87 2547.99 110.41 1504.43 1773.34 118.29 651.38 0.43% 8.4% 252.33 -0.04 326.24 -9.9 -0.17 16.0 1237.94 -0.01 -5.9 2726.98 2757.32 -0.09 12.0 2997.18 3954.01 0.32 15.0 166.81 0.04 2335.74 6.6 0.01 12.3 2066.43 0.25 133.69 -2.4 0.18% 0.67 0.20 0.07 0.23 0.18 0.15 0.30 0.55 0.27 0.24 0.25 -15.5% 13.3 -6.0 21.1 -1.7 16.0 17.0 -7.8 20.1 11.3 17.3 -2.2 Price-toDividend earnings yield ratio MSCI Index LOCAL-CURRENCY Last 405.18 PERFORMANCE Daily YTD 52-wk 2.50% 16 MSCI ACWI* 2.50 17 World (Developed Markets) 1,656.02 -0.06 -0.3 2.40 17 World ex-EMU -0.13 -0.5 17.5 2.40 17 World ex-UK 1,665.17 -0.07 -0.5 18.3 3.10 16 EAFE 1,908.56 0.70 -0.4 13.1 2.70 11 Emerging Markets (EM) 950.62 0.89 -5.2 -11.1 201.53 0.04% -0.8% 14.1% 17.8 3.30 16 EUROPE 114.18 -0.04 1.8 15.4 3.20 18 EMU 199.64 0.39 1.0 19.9 17.0 USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN 1.8 0.06 2.6 16.5 21 Europe Growth 107.77 -0.15 1.1 14.2 23 Europe Small Cap 273.63 -0.12 5.0 33.1 EM Europe 258.88 -0.03 -5.7 -17.2 13 UK 3.30 AUD -0.16 116.42 3.70 U.S.-dollar and euro foreign-exchange rates in global trading 122.46 Europe Value 3.60 Cross rates Europe ex-UK 13 2.40 Source: S&P Dow Jones Indices 18 2.30 *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 p.m.ET 3.20 4.20 17 Nordic Countries 2,008.69 0.8 8.1 -0.24 2.2 13.4 -4.7 Australia 1.1160 1.8557 1.2554 0.1706 0.0314 0.1835 0.0109 0.3185 1.5316 0.2052 1.0028 3.70 765.59 -0.11 -3.4 Canada 1.1128 1.8504 1.2519 0.1701 0.0313 0.1830 0.0108 0.3176 1.5272 0.2047 0.9972 3.00 18 South Africa 1,123.10 -1.55 -1.3 11.8 Denmark 5.4377 9.0419 6.1171 0.8311 0.1530 0.8942 0.0529 1.5518 7.4625 4.8863 4.8725 3.00 13 AC ASIA PACIFIC EX-JAPAN 456.31 0.87 -2.5 -4.6 Euro 0.7287 1.2116 0.8197 0.1114 0.0205 0.1198 0.0071 0.2080 0.1340 0.6548 0.6529 Israel 3.5041 5.8266 3.9418 0.5356 0.0986 0.5762 0.0341 4.8088 0.6444 3.1487 3.1398 Japan 102.7175 170.7992 115.5507 15.6992 2.8909 16.8912 29.3139 140.9655 18.8898 92.3018 6.0811 10.1117 6.8409 0.9294 0.1711 0.0592 1.7355 8.3455 1.1183 5.4645 1.80 35.5317 59.0822 39.9709 5.4306 5.8430 0.3459 10.1402 48.7623 6.5343 31.9287 6.5429 10.8795 7.3603 0.1841 1.0759 0.0637 1.8672 8.9792 1.2032 5.8794 0.8889 1.4781 0.1359 0.0250 0.1462 0.0087 0.2537 1.2199 0.1635 0.7988 U.K 0.6014 0.6765 0.0919 0.0169 0.0989 0.0059 0.1716 0.8253 0.1106 0.5404 1.6628 1.1249 0.1528 0.0281 0.1644 0.0097 0.2854 1.3724 0.1839 0.8986 Source: ICAP Plc Commodities Currencies Prices of futures contracts with the most open interest EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange; NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of February 20, 2014 ONE-DAY CHANGE Commodity Exchange Last price Net Percentage Corn (cents/bu.) Soybeans (cents/bu.) Wheat (cents/bu.) Live cattle (cents/lb.) Cocoa ($/ton) Coffee (cents/lb.) Sugar (cents/lb.) Cotton (cents/lb.) Rapeseed (euro/ton) Cocoa (pounds/ton) Robusta coffee ($/ton) Copper ($/lb.) Gold ($/troy oz.) Silver ($/troy oz.) Aluminum ($/ton)* Tin ($/ton)* Copper ($/ton)* Lead ($/ton)* Zinc ($/ton)* Nickel ($/ton)* Crude oil ($/bbl.) Heating oil ($/gal.) RBOB gasoline ($/gal.) Natural gas ($/mmBtu) Brent crude ($/bbl.) Gas oil ($/ton) CBOT CBOT CBOT CME ICE-US ICE-US ICE-US ICE-US LIFFE LIFFE LIFFE COMEX COMEX COMEX LME LME LME LME LME LME NYMEX NYMEX NYMEX NYMEX ICE-EU ICE-EU 459.25 1360.00 606.00 141.625 2,940 169.00 17.10 88.40 392.25 1,849 1,955 -3.00 12.25 -7.50 -0.250 -36 -0.45 0.41 0.75 3.25 -10 -4 3.2575 1324.50 21.865 1,761.00 23,000.00 7,132.00 2,143.00 2,035.50 14,305 -0.0035 7.60 0.148 -9.50 -175.00 -49.00 -30.00 -36.50 -220 102.16 3.0397 3.0009 4.985 109.76 928.25 -0.59 -0.0437 -0.0201 0.129 -0.54 -9.25 -0.65% 0.91% -1.22 -0.18 -1.21 -0.27 2.46 0.86 0.84 -0.54 -0.20 463.00 1,361.50 617.75 143.200 3,002 177.50 17.14 89.67 394 1,871 2,019 414.50 1,247.50 553.75 135.375 2,636 112.50 14.92 82.60 349 1,674 1,575 3.4110 3.1775 1,332.40 1,203.70 22.015 19.030 1,813.00 1,686.50 23,175.00 21,410.00 7,422.00 7,051.00 2,242.00 2,097.50 2,110.00 1,964.00 14,730 13,425 -0.11 0.58 0.68 -0.54 -0.76 -0.68 -1.38 -1.76 -1.51 -0.57 -1.42 -0.67 2.66 -0.49 -0.99 Year low 103.29 3.0901 3.0394 5.0140 110.82 943.75 91.48 2.8758 2.7831 3.8580 104.75 893.75 Sources: SIX Financial Information; WSJ Market Data Group 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 and Asia To sign up, go to WSJ.com/email India 791.72 -0.83 -3.1 1.6 10 Korea 558.08 -0.89 -5.3 -1.4 16 Taiwan 298.68 -0.87 -1.3 5.9 19 US BROAD MARKET 2,105.99 -0.68 0.0 24.3 30 US Small Cap 3,259.37 -1.04 1.0 30.3 14 EM LATIN AMERICA 2,925.79 -0.01 -8.6 -25.7 *Twenty-four developed and 21 emerging markets Source: MSCI London close on Feb 21 AMERICAS Year high -8.7 16 1.50 0.8960 27.0 -5.3 3.20 0.5389 U.S -8.5 -1.17 1.90 0.7965 -1.96 59.78 2.90 5.8627 Switzerland 736.82 China 1.20 31.8381 Russia Sweden Japan 1.50 5.4490 16 3.40 92.0398 Norway Russia 0.23 206.22 Per euro In euros Argentina peso-a Per U.S dollar In U.S dollars EUROPE Per euro In euros Per U.S dollar In U.S dollars 1.3724 10.7336 0.0932 7.8213 0.1279 Euro zone euro 1 0.7287 Brazil real 3.2350 0.3091 2.3573 0.4242 1-mo forward 1.0000 1.0000 0.7287 1.3723 Canada dollar 1.5272 0.6548 1.1128 0.8986 3-mos forward 1.0000 1.0000 0.7287 1.3724 761.65 0.001313 555.00 0.001802 Chile peso Colombia peso Ecuador US dollar-f Mexico peso-a 2803.58 0.0003567 2042.89 0.0004895 6-mos forward 0.9999 1.0001 0.7286 1.3725 Czech Rep koruna-b 27.387 0.0365 19.956 0.0501 1.3724 0.7287 1 Denmark krone 7.4625 0.1340 5.4377 0.1839 18.2173 0.0549 13.2744 0.0753 Hungary forint 310.41 0.003222 226.18 0.004421 Peru sol 3.8569 0.2593 2.8104 0.3558 Norway krone 8.3455 0.1198 6.0811 0.1644 Uruguay peso-e 30.848 0.0324 22.478 0.0445 Poland zloty 4.1520 0.2408 3.0254 0.3305 U.S dollar 1.3724 0.7287 1 Russia ruble-d 48.762 0.02051 35.532 0.02814 8.71 0.114751 6.35 0.157480 Sweden krona 8.9792 0.1114 6.5429 0.1528 Switzerland franc 1.2199 0.8197 0.8889 1.1249 Venezuela bolivar ASIA-PACIFIC Australia dollar 1.5316 0.6529 1.1160 0.8960 1-mo forward 1.2197 0.8199 0.8887 1.1252 1-mo forward 1.5345 0.6517 1.1181 0.8944 3-mos forward 1.2190 0.8203 0.8883 1.1258 1.2179 0.8211 0.8875 1.1268 2.9910 0.3343 2.1795 0.4588 3-mos forward 1.5410 0.6489 1.1229 0.8906 6-mos forward 1.5503 0.6450 1.1296 0.8852 Turkey lira U.K pound China yuan 6-mos forward 8.3601 0.1196 6.0918 0.1642 0.8253 1.2116 0.6014 1.6628 Hong Kong dollar 10.6439 0.0940 7.7559 0.1289 1-mo forward 0.8255 1.2114 0.6015 1.6625 India rupee 85.0863 0.0118 62.0000 0.0161 3-mos forward 0.8259 1.2108 0.6018 1.6617 11709 0.0000854 6-mos forward 0.8265 1.2099 0.6022 1.6605 2.6524 Indonesia rupiah Japan yen 16068 0.0000622 140.97 0.007094 102.72 0.009735 1-mo forward 140.95 0.007095 102.70 0.009737 MIDDLE EAST/AFRICA Bahrain dinar 0.5174 1.9327 0.3770 3-mos forward 140.90 0.007097 102.67 0.009740 Egypt pound-a 9.5538 0.1047 6.9616 0.1436 6-mos forward 140.82 0.007101 102.61 0.009745 Israel shekel 4.8088 0.2080 3.5041 0.2854 Malaysia ringgit-c 4.5196 0.2213 3.2933 0.3036 Jordan dinar 0.9717 1.0291 0.7081 1.4123 New Zealand dollar 1.6571 0.6035 1.2075 0.8282 Kuwait dinar 0.3871 2.5835 0.2821 3.5455 Pakistan rupee 143.995 0.0069 104.925 0.0095 Lebanon pound Philippines peso 61.163 0.0163 44.568 0.0224 Saudi Arabia riyal 5.1468 0.1943 3.7503 0.2666 Singapore dollar 1.7392 0.5750 1.2673 0.7891 South Africa rand 15.0168 0.0666 10.9423 0.0914 United Arab dirham 5.0406 0.1984 3.6730 0.2723 South Korea won 1471.78 0.0006794 1072.45 0.0009324 Taiwan dollar 41.613 0.02403 30.323 0.03298 Thailand baht 44.652 0.02240 32.537 0.03073 2063.21 0.0004847 1503.40 0.0006652 a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate Source: ICAP Plc 22 | Monday, February 24, 2014 THE WALL STREET JOURNAL BLUE CHIPS & BONDS Major players & benchmarks Dow Jones Industrial Average Below, a look at the Dow Jones Stoxx 50, the biggest and best known companies in Europe, including the U.K LAST: 16103.30 YEAR TO DATE: OVER 52 WEEKS Stoxx Europe 50: Friday's best and worst Volume Previous close, in local currency 317,280,613 236.50 STOCK PERFORMANCE Previous session Company Country Industry Vodafone Group United Kingdom Mobile Telecommunications Total France Integrated Oil & Gas 6,464,467 45.60 Telefon L.M Ericsson B Sweden Telecommunications Equipment 8,006,420 82.90 1.34 Daimler Germany Automobiles 3,286,237 67.13 1.30 Novartis AG Switzerland Pharmaceuticals 10,171,417 73.85 YTD 52-week 3.01% -0.2% 2.4 5.7 6.7 16500 16200 50.5 3.7 s 2,102.73, or 15.0% Close Low 22.5 5.6 t 29.93, or 0.19% t 473.36, or 2.9% High 47.8% 1.58 P/E: 16 15.8 1.10 Germany Full Line Insurance 1,569,801 129.10 -0.50% -1.0 23.9 United Kingdom Distillers & Vintners 3,765,554 1,895 -0.47 -5.3 -2.8 BHP Billiton United Kingdom General Mining 10,648,661 1,970 -0.45 5.4 -6.1 Lloyds Banking Group PLC United Kingdom Banks 99,885,106 80.79 -0.42 2.4 49.7 Glencore Xstrata PLC United Kingdom General Mining 35,102,241 339.05 -0.41 8.4 -8.5 t Allianz SE Diageo 15900 15300 .And the rest of Europe's blue chips Company/Country (Industry) Volume Barclays 42,026,628 United Kingdom (Banks) Royal Dutch Shell A 8,753,998 United Kingdom (Integrated Oil & Gas) AstraZeneca 2,412,650 United Kingdom (Pharmaceuticals) Schneider Electric 1,924,203 France (Electrical Components & Equipment) Roche Holding Part Cert 2,737,516 Switzerland (Pharmaceuticals) Nestle 11,307,731 Switzerland (Food Products) Sanofi SA 2,561,665 France (Pharmaceuticals) Deutsche Telekom 9,753,164 Germany (Mobile Telecommunications) 5,448,906 BG Grp United Kingdom (Integrated Oil & Gas) Zurich Insurance Group 681,351 Switzerland (Full Line Insurance) BP PLC 39,490,300 United Kingdom (Integrated Oil & Gas) Unilever CVA 4,440,706 Netherlands (Food Products) AXA 8,832,753 France (Full Line Insurance) HSBC Hldgs 38,628,445 United Kingdom (Banks) SAP 2,240,912 Germany (Software) ENI 10,549,860 Italy (Integrated Oil & Gas) Moet Hennessy Louis Vuitt 827,158 France (Clothing & Accessories) Rio Tinto 5,753,356 United Kingdom (General Mining) Bayer 1,271,254 Germany (Specialty Chemicals) Tesco 17,015,067 United Kingdom (Food Retailers & Wholesalers) 15600 50–day moving average 15000 Latest, in local currency STOCK PERFORMANCE Latest YTD 52-week 258.00 1.08% -5.1% -15.8% 2,216 0.93 2.5 3.7 4,028 0.79 12.7 38.4 65.89 0.76 3.9 16.3 266.70 0.64 7.0 27.6 66.00 0.61 1.1 3.4 74.00 0.58 -4.0 3.9 12.28 0.57 -1.2 52.0 1,102 0.55 -15.1 -4.4 266.00 0.53 2.9 4.9 501.70 0.43 2.8 13.3 28.60 0.42 -2.3 -3.3 19.62 0.33 -2.9 47.8 654.20 0.32 -1.2 -8.7 58.09 0.31 -6.8 -2.5 17.36 0.23 -0.7 0.22 3.7 5.3 3,601 0.21 5.6 2.3 101.40 0.20 -0.5 38.9 335.15 0.19 0.2 Volume ING Groep 11,255,993 Netherlands (Life Insurance) BNP Paribas 2,927,111 France (Banks) 10,362,177 Telefonica S.A Spain (Fixed Line Telecommunications) Reckitt Benckiser Grp 1,183,546 United Kingdom (Nondurable Household Products) British American Tobacco 4,154,972 United Kingdom (Tobacco) L'Air Liquide 935,403 France (Commodity Chemicals) Anheuser-Busch InBev 1,456,943 Belgium (Brewers) Unilever 2,679,187 United Kingdom (Food Products) 13,741,051 UBS Switzerland (Banks) Deutsche Bank 4,379,532 Germany (Banks) Financiere Richemont 1,820,610 Switzerland (Clothing & Accessories) Credit Suisse Group AG 5,985,562 Switzerland (Banks) BASF 2,385,640 Germany (Commodity Chemicals) Siemens 1,789,850 Germany (Diversified Industrials) GlaxoSmithKline 8,964,722 United Kingdom (Pharmaceuticals) Banco Bilbao Vizcaya Argn 13,744,392 Spain (Banks) ABB 9,796,822 Switzerland (Industrial Machinery) Banco Santander S.A 33,164,739 Spain (Banks) National Grid 9,127,093 United Kingdom (Multiutilities) Standard Chartered 8,533,245 United Kingdom (Banks) -0.7 137.45 Company/Country (Industry) -10.3 22 29 Latest, in local currency STOCK PERFORMANCE Latest YTD 52-week 10.55 0.19% 4.4% 0.19 3.5 38.0 11.36 0.18 -4.0 19.7 4,980 0.10 3.9 11.4 3,155 0.10 -2.6 -8.3 98.67 0.09 -4.0 10.0 74.07 0.05 -4.1 6.9 2,439 0.04 -1.7 -6.7 18.51 9.4 23.6 35.23 -0.06 1.6 -0.7 88.05 -0.06 -0.8 13 20 27 Jan 10 17 18.1 -0.07 3.0 -0.09 6.0 -0.20 -4.5 21.0 1,681 -0.21 4.3 14.7 8.90 -0.24 -0.5 22.1 22.29 -0.27 -5.1 5.0 6.48 -0.29 0.6 18.1 833.50 -0.30 5.8 17.9 1,316 -0.30 -3.2 Volume, in millions AT&T AmExpress Boeing Caterpillar Chevron CiscoSys CocaCola Disney DuPont ExxonMobil GenElec GoldmanSachs HomeDpt Intel IBM JPMorgChas JohnsJohns McDonalds Merck Microsoft Nike B Pfizer ProctGamb 3M TravelersCos UnitedTech UtdHlthGp Verizon VISA ClA 10.6 94.85 Symbol T AXP BA CAT CVX CSCO KO DIS DD XOM GE GS HD INTC IBM JPM JNJ MCD MRK MSFT NKE PFE PG MMM TRV UTX UNH VZ V 19.1 3.8 5.2 5.2 9.2 31.2 19.4 8.2 4.9 11.2 37.0 2.6 7.6 30.2 5.7 16.8 7.3 5.3 11.6 37.7 4.4 18.4 8.1 2.6 1.9 3.6 4.5 58.1 2.3 WMT 9.0 Stock 8.1 82.17 -24.4 Sources: SIX Financial Information Tracking credit markets & dealmakers Credit derivatives Spreads on credit derivatives are one way the market rates creditworthiness Regions that are treading in rough waters can see spreads swing toward the maximum—and vice versa Indexes below are for five-year swaps Markit iTraxx Indexes Index: series/version Mid-spread, in pct pts Mid-price Europe: 20/1 Eur High Volatility: 20/1 Europe Crossover: 20/1 Asia ex-Japan IG: 20/1 Japan: 20/1 SPREAD RANGE, in pct pts since most recent roll Maximum Minimum Average Coupon Feb 14 21 CHANGE Percentage Latest Points $32.80 88.75 128.28 97.50 112.68 22.13 37.18 80.13 64.87 95.03 24.94 164.50 77.74 24.42 182.79 57.61 91.52 96.45 56.03 37.98 76.48 31.46 77.97 131.57 83.79 115.38 73.81 47.27 223.36 –0.38 –0.26 –1.28 0.58 –1.92 –0.17 –0.12 0.94 –0.48 –0.34 –0.18 0.26 –0.32 –1.47 0.03 –0.20 0.70 0.22 0.23 0.90 –0.09 0.05 0.01 –0.02 0.33 0.33 –0.85 –0.10 –1.15% –0.29 –0.99 0.60 –1.68 –0.76 –0.32 1.19 –0.73 –0.36 –0.72 0.34 –1.29 –0.80 0.05 –0.22 0.73 0.39 0.61 1.19 –0.29 0.06 0.01 –0.02 0.29 0.45 –1.77 –0.04 73.12 –0.40 –0.54 Source: WSJ Market Data Group 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 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 Showing the biggest improvement And the most deterioration CHANGE, in basis points CHANGE, in basis points 0.74 101.21% 0.01% 1.04 0.69 0.81 1.09 99.59 0.01 1.61 1.01 1.23 Nokia 181 –11 –28 –18 Fresenius 98 2.80 109.50 0.05 4.08 2.74 3.25 UPC Hldg 297 –10 –45 –49 SABMiller 63 3 10 SAFEWAY 159 29 54 Bay Landbk Giroz 100 Yesterday Yesterday Five-day 28-day 1.40 98.19 0.01 1.57 1.24 1.38 IMPERIAL Chem Inds 0.79 101.01 0.01 0.97 0.68 0.82 Norske Skogindustrier Note: Data as of February 20 In percentage points Spreads Spreads on five-year swaps for corporate debt; based on Markit iTraxx indexes 31 DJIA component stocks WalMart 28.08 24 Note: Price-to-earnings ratios are for trailing 12 months 70.7% 58.63 Dec 7.00 Index roll Europe Crossover Europe Senior Financials t t 5.00 3.00 JTI UK Fin Region Sicily Yesterday Yesterday Five-day 28-day 25 –1 –1 2272 –51 –235 –283 32 –1 –1 METRO 121 5 248 –4 Rio Tinto 92 –2 –2 Portugal Telecom Intl Fin 309 11 LADBROKES 333 11 31 INEOS GROUP Hldgs 81 –1 –1 –12 ageas 111 –2 –2 293 –5 –38 –49 ThyssenKrupp 248 –6 –2 97 –1 –28 –53 Utd Utils 119 4 VIRGIN MEDIA Fin ISS Glob Source: Markit Group 1.00 –1 Sept Oct Nov Dec Jan Feb 2014 2013 Source: Markit Group WSJ.com>> Follow the markets throughout the day, with updated stock quotes, news and commentary at WSJ.com Also, receive emails that summarize the day’s trading in Europe and Asia To sign up, go to WSJ.com/Email Behind global deals: Bank revenues from equity capital markets Behind every IPO, follow-on or convertible equity offering is one or more investment banks At right, investment banks historical and year-to-date revenues from global equity-capital-market (ECM) deals n Equity capital markets n Debt capital markets (both in billions, left axis) ECM as a percentage of total 15 75% (right axis) t 10 50 25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Dealogic THE WALL STREET JOURNAL Monday, February 24, 2014 | 23 PERSONAL JOURNAL BY SUE SHELLENBARGER The problem: Every night, your workaholic boss is still glued to the computer when you need to leave How to go home without looking like a slacker? Should you sneak out, hoping to avoid a six o’clock showdown in the hall? Guiltily apolWORK & ogize, promising to be FAMILY on email all night? Or just walk straight toward the door in the most professional way you can? Many hard-working employees have an even harder-working boss who toils late into the night Career coaches and employees who have been there say the first priority should be conveying that you are still working hard—and good at your job That requires communicating clearly and frequently about your progress and results Ideally, you want to figure out what the boss really needs and deliver it consistently enough that your hours become a non-issue Many employees assume managers value people for working day and night, and workplace trends support that belief: Twothirds of workers are putting in much longer hours on the job than five years ago, according to a poll of 325 employees last fall by Right Management, Milwaukee, a talent and career-management company But before you get too up on work hours, check your assumptions about what the boss wants, says Cali Williams Yost, chief executive officer of Flex + Strategy Group, a Madison, N.J., training and consulting firm Managers work long hours for a variety of reasons: It may be a personal habit or preference, or perhaps they just don’t want to go home “People make way too many guesses about managers’ expectations that are just wrong,” Ms Yost says Bosses are often taken aback by employees’ focus on their schedules Betty Enyonam Kumahor often works 14-hour days, emailing and calling contacts around the world “My teams Don’t Fake It started tracking how many hours they thought I slept each night, based on my email ‘send’ times,” says Ms Kumahor, a regional managing director in Atlanta for ThoughtWorks, a software-development company “They asked me jokingly, ‘Do you ever sleep?’ ” She assured employees she would stop sending so many late-night and early-morning emails so they didn’t have to extend their hours to respond When managers focus on employees’ work hours, they are often looking for reassurance on other fronts: that their subordinates are meeting deadlines; that they can be reached when needed, and that they aren’t creating extra work for colleagues, Ms Yost says Rich Gee’s boss on a former job took him aside and criticized him for leaving the office at p.m., says Mr Gee, a Stamford, Conn., executive coach The manager acknowledged that Mr Gee was meeting deadlines and delivering good work; he arrived at the office at 6:30 a.m., two hours before his co-workers The boss seemed nervous, however, that Mr Gee wouldn’t be available when needed Mr Gee said he could be reached 24/7 by cellphone, and pointed out that he always responded quickly to emergency requests He continued to leave the office at p.m., but updated his boss often on his progress and results and checked in every evening before he left In time, he says, his boss “saw that it wasn’t hours that mattered—it was how hard I worked.” One key to Mr Gee’s solution: healthy communication Employees should sit down with their bosses and ask them to define job objectives and time lines for reaching them, says Pat Katepoo, the Kaneohe, Hawaii-based owner of WorkOptions, a consulting firm Then “look for natural times to communicate about your progress, when you have a staff meeting or you’re walking by or writing an email,” says Ms Katepoo There are many ways to project Throwing your coat over your chair as if you are there but just stepped away for a minute could backfire if you really leave Colleagues might waste valuable time running around trying to find you Illustrations by Linzie Hunter When the Boss Works Late, Do We All Have To? Do Pitch In When You Can Even if you choose not to match your boss’s long hours every night, it’s wise to work late during crises or when a major project deadline is looming Hint: Extra evening hours may gain more recognition than extra hours at dawn in an empty office a hard-working image If a manager speaks about a project in an intense, focused way, answer with similar intensity, acknowledging its importance and repeating the deadline, says Anne Brown, an advertising executive who has written about how young employees can deal with workaholic bosses in a book, “Grad to Great,” and on a website she co-founded, GradtoGreat Manage time well in oneon-one meetings, moving quickly through your agenda, adds Ms Brown, of Kansas City, Mo And, of course, be prepared to work long hours during a crisis or busy season, or when a major project deadline is looming In some cases, shifting your work hours can help At companies where managers focus on face time, employees who work 10 a.m to p.m.—when more people are present—are more likely to get Do Check Your Assumptions About What the Boss Wants Those predawn emails may reflect your boss’s personal habits, rather than an expectation that everyone work then To find out, ask a mentor for advice or have a broader conversation with your boss about how you’re doing and what she expects noticed than those who work a.m to p.m Executive coach Michael Melcher was told in a previous job at an investment bank that “I wasn’t working long enough hours,” he says “I started coming in later and staying later,” he says “A couple of months later, my boss said, ‘It hasn’t gone unnoticed that you’re putting in additional hours.’ ” Faking a presence at the office, however, doesn’t work Throwing your coat over your chair as if you just stepped away, then leaving for the day, is likely to backfire, Ms Yost says Colleagues will “think you’re there and run around like crazy people trying to find you.” Another nonstarter, says Mr Melcher, an executive coach with Next Step Partners, New York, is “being a whiny complainer, with a lot of exasperated sighs, saying you’re working your fingers to the Don’t Complain Whining that you’re working too hard won’t go over well with the boss or colleagues If you want to discuss your hours with your boss, start on a positive note, and propose solutions that reflect your boss’s needs, too bone Nobody wants to hear that.” In some professions, working long hours is unavoidable Certain firms’ cultures breed intense competition and long hours among new hires, says Julie Cohen, a Philadelphia career and personal coach Others have unwritten cultural rules, such as, “Nobody leaves the office before the boss leaves,” she says It is wise to prove yourself on the job for at least six months and ask a mentor for advice before exploring shorter hours, Ms Cohen says “You might be stepping into a minefield if you don’t understand the ins and outs of the organization.” To get the most out of a negotiation about hours, Mr Melcher says, think in advance about the boss’s needs, and bring specifics documenting your own performance Start on a positive note, talking about what’s going well Ask what the boss expects of employees when it comes to work hours and responding to email To propose solutions, Mr Melcher recommends the “yes…and” technique: Affirm the boss’s point, and then state your own For example: “Yes, I want you to be able to rely on me after hours And since I have young twins, it is important to me to be home between 5:30 p.m and p.m and spend that time with family I could respond to you between p.m and 11 p.m How does that sound?” Such conversations can open a dialogue—or expose a brick wall When project manager Ashanti Stanford raised the issue with a boss at a previous job, the manager rolled her eyes and sighed “The expectation was, ‘I have to work these hours, so why are you complaining?’ ” Ms Stanford says She has since moved on to a job with better hours 24 | Monday, February 24, 2014 THE WALL STREET JOURNAL BOOKS Not I By Joachim Fest Other Press, 427 pages, $16.95 BY T.J REED The socially conformist thing to for a man of distinction—journalist, filmmaker, author of the best-selling first postwar German biography of Hitler, eventually co-editor of the Frankfurter Allgemeine Zeitung— would have been to recount the history of his own distinguished career Instead Joachim Fest (1926-2006) chose to write “Not I,” a colorful and dramatic account of his childhood and youth in the nonconformist family that made him what he became His is a stable upbringing in an unstable age, a time paradoxically of “troubles lived through but hardly ‘Keep your head down,’ Johannes Fest told his family, ‘but don’t let it make you smaller.’ noticed”—the crisis of the Weimar Republic, the rise of Nazism As a small child, growing up in a comfortable Berlin neighborhood, he only gradually realizes what the outside world is doing to his family, what “politics” is It’s not something for him, his big brother Wolfgang told him “I’m political too,” the 7-yearold cries, frustrated at being left out It isn’t yet safe for him to eat at “second supper,” a family occasion that acquires an almost ritual ring After the youngest children have dined, the parents and their friends have serious discussions about the darkening situation A small child might in all innocence let slip something said there Under a tyranny, even your own constitute a risk The family lives under a shadow Their dissent is no secret Father had been a member of the Reichsbanner, the organization in which his Catholic Centre Party had joined with liberals and Social Democrats to defend the republic against Communists and Nazis It’s not every school headmaster who gets involved in street fights and comes home bloody, as Johannes Fest did But after 1933 he was a headmaster no longer, suspended indefinitely by the new political masters The family’s status and income were lost, their lives transformed Grandfather had to come out of retirement to earn a bit for them Father never worked again The Nazis did try to cajole him back into teaching, since any observable dissent was bad publicity They even offered accelerated promotion if he would outwardly conform He remained firm Family tension became palpable Mother, bearing the brunt of straitened family circumstances, asks Father if he might not compromise Weren’t lies always the resort of the “little people”? He replies: “We aren’t little people.” It is one of the maxims that guided the conduct of Fest’s father and a few friends (The title of his son’s memoir comes from a Gospel passage that he would often quote, Peter promising Jesus: “Even if all others fall away—not I.”) There were some Germans who made sure that they were carrying something in both hands when they went out into the street, the only plausible ground for not giving the required “Heil Hitler” salute to anyone they met But Fest’s father goes out resolutely empty-handed “Keep your head down,” Johannes Reprinted with permission from Other Press A Father Against the Fatherland REFUSENIKS Joachim Fest (far right) with his family in the last photograph taken together His brother Wolfgang (in glasses) would die in battle in 1944 told his family, “but don’t let it make you smaller.” Young Joachim didn’t always listen A classmate reports him for carving a Hitler caricature on his desk (He has been scribbling them on surfaces all over town.) As a consequence, he is removed from the school; his brothers too The episode is just one instance of an independence akin to his father’s The friends of the Fests—they now became former friends—and many neighbors and acquaintances fell by the wayside, even without being keen Nazis Only one of the 12 families in the apartment block was in the party The rest merely went along as things changed, drifting deeper into acquiescence, making excuses even as stable social and political structures fell apart in the name of a new “people’s community.” The Nazis, after all, were formally the legitimate government, however brutal their conduct of affairs—from the realm of international diplomacy to the arbitrary laws that replaced justice down to the small changes in everyday life, the swindles and favorit- ism of party members By recording these small changes, Joachim Fest creates a picture of how the one-party state operated on an intimate level, and exerted its unbreakable grip It recalls the bleak account of incremental misery in Victor Klemperer’s diaries of the period A woman sees a Jewish-looking man in the street not wearing a star, pursues and denounces him There are first rumors and then reliable evidence of atrocities Anti-Semitism had considerably more popular resonance than many other Nazi policies, such as the campaign for “Lebensraum” in the east How many Germans would have wanted to up sticks and resettle somewhere on the vast Russian plains? As for Jewish Germans themselves, even after Kristallnacht there were those who waited for the Nazi “phase” to pass Their trust in a culture that had produced Kant, Goethe, Schiller, Lessing and Beethoven, a culture into which they felt they had assimilated, meant that they delayed escape too long Marketplace of the Marvelous By Erika Janik Beacon, 337 pages, $28.95 BY WILLIAM BYNUM During the 19th century, the medical marketplace expanded dramatically, and ordinary practitioners were faced with a plethora of alternative systems vying for patients’ custom Proponents touted the efficacy of wild herbs, cold baths, phrenological diagnosis and hypnotism In earlier centuries, individuals who had offered such treatments could be dismissed as “quacks” by members of the faculty Spurred by the rise of consumer society in the 1800s, advocates of alternative approaches began to band together and become less easy to dismiss They also aped the regulars by setting up schools, arguing for legal rights, founding journals and pursuing other hallmarks of professionalization Even as regulars were trying to establish standards of training and ethical behavior, advocates of different medical cosmologies posed serious threats to the medical tradition that had evolved since antiquity Erika Janik’s “Marketplace of the Marvelous: The Strange Origins of Modern Medicine” surveys these alternative approaches, which, she notes, seem less outlandish in the context of the “heroic” remedies (so called for their severity) of the era, such as bloodletting, blistering and purgatives Some of these alternative systems were indigenous to America, but some were imported from Europe Among the latter were homeopathy (which employed remedies whose active ingredients were diluted to infinitesimal concentration), hydropathy (which emphasized water applied internally and externally), phrenology (which purported to discern a patient’s intelligence and character from the shape of his skull) and the hypnotic manipulation of “animal magnetism” known as mesmerism Each method found fertile soil when imported to the U.S., where they competed with regular medicine but also with native systems, including osteopathy and chiropractic (Although osteopathy and chiropractic both involve spinal manipulation, the former has a richer theory of disease and has become more integrated with regular medicine than chiropractic, which still focuses on the spine.) Ms Janik offers full and fair accounts of the origins, rationales and fortunes of these alternative practices, as well as a brief analysis of Mary Baker Eddy’s Christian Science, which held that disease was an illusion entirely Ms Janik notes that many of these systems explained all ailments as a function of a single cause Samuel Thomson developed a brand of herbalism that gave pride of place to the common plant Lobelia inflata (sometimes known as Indian tobacco) and to ground chili peppers Cold causes disease, he believed, and these ingredients helped warm a suf- Getty Images When Bloodletting Wasn’t Enough PATENT NONSENSE An ad for ‘Complete Female Remedy.’ ferer The self-taught Thomson began treating his family and a few friends, but his success encouraged him to expand his operations His books and pamphlets, which celebrated his remedies in rhyme (Lobelia was “first rate to cure in all cases of fevers / But is hated and feared by the regular deceivers”), widened his reputation, and he claimed to offer everything one needed to treat one’s family for a single payment of $350 in today’s dollars (Permission to treat others was available at additional cost.) Thomsonism, sometimes called botanical medicine, enjoyed much popularity for several decades Its claims to the contrary, however, taking Lobelia was no gentle option: It was a vigorous purge, and the fad began to fade as side effects became worrisome Thomson’s followers (of which there were many) gradually began to combine his increasingly rigid system with elements taken from either regular medicine or other alternative cosmologies The pattern of Thomsonism was repeated in other systems: A dynamic founder becomes increasingly protective of his ideas—Thomson patented his system—but is unable to prevent splinter groups from being established This happened with homeopathy, chiropractic and osteopathy, where rival groups with different agendas soon replaced early orthodoxy These three groups differ from Thomsonism in that they have survived, even flourished, but the structure of theme and variations has persisted The issue of longevity is fundamental to the relative status of these competing systems of healing (which are generally dignified with the phrase “complementary medicine” in Britain) Why some survive, some transmute (such as hydropathy, now a routine part of rehabilitation medicine in the form of therapeutic baths), and some disappear? Ms Janik is cagey here She clearly has sympathy for alternative medicine while at the same time seriously considering the placebo effect, which is When, in the early 1940s, the young Fest experiences a performance of Beethoven’s opera “Fidelio,” a work amazingly not banned by the regime, the mentor who introduces him to it enthuses over the final trumpet call that heralds the prisoners’ liberation But it was difficult at the time to have faith in heroic happy endings For the mature Fest, the trumpet call only rings out clear in 1989, at the fall of another tyranny By an apt coincidence, the Nazi surrender in 1945 would be signed at Karlshorst, the part of Berlin where the Fest family lived It was little consolation that Nazism hadn’t lasted One son had been killed through the negligence of a superior officer Fest had lost friends Father had been called up and taken prisoner on the Eastern Front He returned from the Soviet Union a depleted man Not broken, though There was enough of the old independent spirit left that he would not let himself be put on a pedestal as one of the few who didn’t swim with the Nazi tide He couldn’t stomach all the hollow moralizing and retrospective righteousness (When a tyranny collapses, suddenly everybody “had been against it” all along.) He even disapproves of his son’s developing career as an analyst of the Nazi past, a “gutter subject” not deserving to be dignified with study, so far removed from Fest’s youthful ambition of becoming a Renaissance scholar For himself, Johannes Fest was content to say: “I made a lot of mistakes, but I didn’t anything wrong.” For the Germany of those years, it was a substantial claim —Mr Reed is Taylor Professor Emeritus of German at Oxford and the author of “Thomas Mann: The Uses of Tradition.” clearly an important part of most healer-patient encounters The author makes a good case that any sensible person in the 19th century could have taken these alternative systems seriously The therapeutic options of ordinary doctors were pretty limited, even if it is a caricature to assume that practitioners routinely subjected their patients to harsh heroic remedies no matter the symptoms For most conditions, a patient might be at least as well off with a herbalist, hydropathist or homoeopathist I am less convinced by her argument that these systems contain the “strange origins” of modern medicine Sometimes the connection seems to be the emphasis on temperance, diet and other features of modern “lifestyle” medicine that were often emphasized by alternative healers but on which they hardly had a monopoly Ms Janik’s more specific claim that “hydropathy’s advocacy of good hygiene provided the foundation for public health campaigns” is fanciful to say the least Perhaps the most significant feature in all histories of healing—regular or not—is the fact that most illness is self-limited We generally get better no matter what is done to or for us When I was in medical school half a century ago, I was taught that if you treat a cold, it will get better in a week If you don’t treat it, it will last seven days I hope they teach this still —Dr Bynum is professor emeritus of the history of medicine at University College, London THE WALL STREET JOURNAL Monday, February 24, 2014 | 25 BOOKS Dark Invasion By Howard Blum Harper, 474 pages, $27.99 BY HOWARD SCHNEIDER This year is the centennial of the start of World War I, and there will no doubt be an outpouring of books assaying the conflict, particularly the carnage on the Western Front Howard Blum’s riveting and perturbing “Dark Invasion” examines a less devastating but still ruthless campaign: the Germans’ ingenious espionage operations in the United States during the years when President Woodrow Wilson earnestly tried to maintain the nation’s neutrality The Germans were convinced that they had the right and duty to Germany waged a ruthless campaign of bombing and sabotage inside the U.S during World War I wage covert war in the United States because American neutrality was hypocritical and dangerous to the Fatherland Although the U.S would theoretically trade with any nation, the powerful British navy thwarted the Central Powers, Germany and its allies, from receiving American munitions and other goods Thus, for all practical purposes, the U.S was supplying only the Allied powers with war materiel Germany felt compelled to everything it could to prevent American provisions from reaching the Allies The instrument of this strategy was Abteilung IIIB, “the largest and most efficient intelligence organization in the world,” commanded by the coldly proficient Maj Walter Nicolai Nicolai and his two main operatives in the U.S., Ambassador Johann Heinrich von Bernstorff and naval Capt Franz von Rintelen, had to establish a spy operation from scratch, but they were munificently funded, had a great deal of authority from Kaiser Wilhelm II’s government and could seek assistance from within certain groups in the U.S One such group consisted of German merchant sailors who had been interned when war commenced These sailors weren’t part of the German navy, but many wished they were And they were free to go where they wanted in the U.S Another group was German-Americans: “Over eight million people—nearly a tenth of America’s entire population—had been born in Germany or had a German parent,” Mr Blum notes Finally, there were 4.5 million IrishAmericans, many of whom, the German spies believed, harbored an intense animosity for the British As it happened, Irish-American stevedores played an important role in the German plans, aiding in efforts to sabotage shipping Many of the German operatives in the U.S., particularly von Rintelen, though espionage amateurs, became exceedingly adept at spycraft Their intrigues took them to New York, Baltimore, New Orleans, San Francisco (major port cities) and Washington, D.C Agents secreted small bombs equipped with delayed-action fuses onto Alliedbound ships When the vessels exploded at sea, it was impossible to determine whether the explosions were accidental or deliberate In July 1916, Black Tom, “the largest munitions and gunpowder shipping center in America,” located in Jersey City, N.J., was sabotaged; the resulting blast blew out windows at the New York Public Library across the Hudson River in Manhattan And there was the bizarre Erich Muenter While a graduate student in German at Harvard in 1906, he had poisoned his wife He eluded arrest and created a new life: He took the name Frank Holt, remarried, and taught and worked on a doctoral thesis at Cornell When World War I began, he decided to help Germany, his native country There apparently is no incontrovertible evidence that he Corbis Images War on Our Shores SABOTAGE The aftermath of the 1916 explosions at the Black Tom munitions depot became an agent for German intelligence, but Mr Blum makes a persuasive case that he did We know that in 1915, while the Senate was out of session, he planted a bomb in the U.S Capitol outside the vice president’s office; it exploded but didn’t kill anyone Two days later, he stalked J.P Morgan Jr in his Long Island mansion and shot him twice because of the financier’s pro-Allied sympathies Morgan survived and pinned Holt to the floor “like a massive boulder” while his butler beat the intruder with a lump of coal Holt was taken into custody, but he died under mysterious circumstances in his jail cell Perhaps the most sinister of Abteilung IIIB’s plots was its introduction of germ warfare into the U.S A German agent, a physician named Anton Dilger, smuggled samples of anthrax and glanders—a disease that infects mainly horses, donkeys and mules—into the country and set up a laboratory in Maryland The aim was to kill livestock in transit to the Allies, but there was, as we would now say, collateral damage—human beings: at least one death in New York City, at least four in Virginia German intelligence was, indeed, formidably resourceful at carrying out clandestine warfare, but they were helped by the fact that the U.S was appallingly unprepared America didn’t even have a law outlawing espionage until 1917, when the nation entered the war That legislation, Mr Blum writes, “made it a specific crime to spy on or to interfere with American military operations.” Until then, spies could only be arrested if they were caught in the act of sabotaging a target or well along in their preparations to so The two federal civilian law-enforcement agencies were, for too long, of little use They were either limited in their jurisdiction (the Secret Service) or had feeble police powers (the Bureau of Investigation) And so by default counterespionage fell to the New York Police Department’s Bomb and Neutrality Squad Its leader, Capt Thomas J Tunney, and the three men he chose to help him foil German subversion are the heroes of “Dark Invasion,” and I will grant that they were as brave, dedicated and indefatigable as Mr Blum depicts them But they didn’t have the training or equipment to carry out counterintelligence against a canny foe, and their successes were few Moreover, some of those successes were the result of in- formation provided by Britain It was the British who informed the State Department and the NYPD that Germany had initiated sabotage activities in the U.S., and it was the British who first tipped off Tunney that von Rintelen was a spy I have only two complaints about “Dark Invasion.” The book ends rather abruptly, with America’s entry into the war (One reason President Wilson went to war was his disgust with German espionage.) It would have been interesting to learn about German spying and American counterintelligence during the ensuing years It is also frustrating that Mr Blum doesn’t discuss how Germany’s espionage affected the European conflict But overall, “Dark Invasion” is well-researched and written, and it maintains a fairly high level of suspense, which is difficult to bring off in a book about historical events “Dark Invasion” also raises a vexing issue, which was probably inevitable considering its subject matter Mr Blum makes a mild attempt to demonstrate a nexus between the fight against Abteilung IIIB’s operations and America’s current struggle against terrorism (Tunney is described as “for all practical purposes the first head of Homeland Security.”) I am dubious Terrorism is not the same as espionage practiced by governments One doesn’t have to admire what the German spies did to acknowledge that they weren’t terrorists—and, to his credit, I don’t believe that Mr Blum ever designates them as such They were patriotically loyal to a nation and had rational motives, and while they understood that many of their schemes might result in deaths, their primary goal, apart from the J.P Morgan incident, was to destroy things, not people Terrorism, today, confronts us with new problems, and new tactics—shrewder, more sophisticated tactics than those wielded by Tunney—are required to neutralize them Mr Schneider reviews books for newspapers and magazines The Gardener of Versailles By Alain Baraton Rizzoli, 290 pages, $26.95 BY JONATHAN LOPEZ On the night of Dec 25, 1999, a massive storm tore through the gardens of Versailles, destroying more than 18,000 trees and rendering nearly all 2,100 acres of the grounds impassable Heavy equipment and a contingent of French soldiers were summoned to help clear paths and carry away debris, an operation that required weeks to complete During this time, the gardens—a site of recreation, contemplation and immense pride for the French public—were closed to visitors, while scenes of the devastation led the nightly news Alain Baraton, the gardener in chief at the palace, directed the cleanup as well as the subsequent restoration efforts More trees have been planted at Versailles since the storm of 1999 than were planted in the previous two centuries, and the main vistas now look closer to the way they were intended than at any time since the French Revolution Mr Baraton interweaves the story of the gardens’ rebirth with that of his life Upon his elevation to gardener in chief, Mr Baraton resolved to combine the best of the old horticultural methods with the most promising of the new, restoring the principal features of the gardens in accordance with the original plan by famed landscape architect André le Nôtre (1613-1700) while experimenting with wildflowers and untamed grasses on the ancillary lawns But even in his exalted position, Mr Baraton has encountered some frustrations, among them the infernal convolutions of French bureaucracy: Hiring a temporary worker “necessitates filling out nearly forty pages of paperwork.” Mr Baraton is delightful when describing his daily routines—he talks to his trees and has pet names for many of them—and as a writer he is a master of what might be termed the inarguable Gallic utterance (translated here by Christopher Brent Murray) “A garden’s capacity for inspiring romance,” he informs us, “should be a criterion for evaluation in terms of horticultural excellence.” His reasoning is obscure, but if one imagines his assertion delivered in the plummy voice of Maurice Chevalier, it grows curiously convincing Less satisfactory is Mr Baraton’s account of Versailles’s history, which Corbis Images After the Deluge and career—tossing in anecdotes from the history of the palace for good measure—in “The Gardener of Versailles,” his charming, albeit sometimes breezy, memoir Mr Baraton began his career at Versailles in the summer of 1976 as a seasonal ticket-taker The chief gardener—a one-eyed, beret-wearing extrovert named Mr Choron—took a liking to the young horticultureschool graduate and offered him a job as an “apprentice gardener’s assistant.” This lowly position required long hours of manual labor but came with free lodging on the palace grounds, a perk that Mr Baraton enjoys to this day (He now resides in quarters that once housed Molière.) Working his way up through the ranks, Mr Baraton quickly learned the foibles of Versailles’s staff—who drank too much, who skimmed from the till, who had an eye for the ladies—as well as the habits of “the regulars,” visitors who made the gardens a second home These included joggers who kept clockwork hours, married couples who bickered baroquely, delusionals who believed they were Marie Antoinette or Madame Pompadour, and the so-called elegant woman, who had a weakness for disporting herself naked in the woods ORANGERIE Citrus trees at Versailles planted in boxes that are moved inside in winter is too haphazard to be useful and is sometimes preposterous He suggests that, under Louis XIV, Pierre Charles L’Enfant, “the architect who would later construct Washington, DC,” was entrusted with enforcing a strict building code on the town of Versailles so that all structures would harmonize with the palace Although L’Enfant grew up at Versailles, where his father was employed as a painter of historical scenes, and may have drawn on the town’s plan in formulating the radial layout of Washington’s streets, he wasn’t born until 1754, by which time Louis XIV was long dead Another defect of the book—and a serious one given the beauty of the subject—is the lack of photos Readers looking for an authoritative history might try Michel Baridon’s “A History of the Gardens of Versailles” (2008) and, for splendid illustrations, Pierre-André Lablaude’s “The Gardens of Versailles” (1995) But for a hands-on perspective and sheer fun, Mr Baraton can’t be beat —Mr Lopez is editor-at-large of Art & Antiques 26 | Monday, February 24, 2014 THE WALL STREET JOURNAL SPORTS HEARD ON THE PITCH Liverpool Maintains Pace in Premier League Liverpool beat Swansea 4-3 on Sunday to maintain its Premier League title challenge thanks to two goals each from Daniel Sturridge and Jordan Henderson The goals took Liverpool’s tally in the Premier League this season to 70, overtaking Manchester City as the top scorers, and left the fourth-place team just four points behind league-leader Chelsea However, manager Brendan Rodgers refused to be drawn on Liverpool’s title hopes “I think for us, we’re concentrating on our performance,” Rodgers said “We’re just concentrating on winning games No one is really talking about us for the title anyway Everything now is about Chelsea, Manchester City and Arsenal.” Sturridge’s first came in the third minute when he received a through ball from Raheem Sterling before rounding Swansea goalkeeper Michel Vorm and firing into an open goal The striker then provided the assist for Henderson to double Liverpool’s lead in the 20th from the edge of the area Jonjo Shelvey pulled one back for Swansea against his former club three minutes later with a long-range strike that went in off the crossbar He held his arm up in apology to his former club, a gesture that received applause from the Liverpool fans But the home supporters were shocked into silence soon after when Wilfried Bony equalized in the 27th minute, with his header from Jonathan De Guzmán’s free kick taking a slight deflection off Martin Skrtel Sturridge gave Liverpool a 3-2 lead at halftime when he headed in from close range in the 36th minute after a Luis Suárez cross had found him unmarked Swansea leveled soon after the interval though when Bony scored a penalty after being fouled by Skrtel Suárez went close to restoring Liverpool’s lead but Vorm saved well when one-on-one with the striker before De Guzmán nearly gave Swansea the lead when he shot just wide from a free kick Henderson struck the winner in the 74th after receiving a pass from Suárez His initial shot was parried by Vorm but the forward reacted quickly to poke the ball in from close range Sunday’s other two Premier League matches ended with 1-0 scores, as Norwich defeated Tottenham and Newcastle beat Aston Villa —Associated Press Associated Press HEARD ON THE PITCH Barcelona forward Lionel Messi reacts after Real Sociedad scores a goal during their Spanish Liga match on Saturday, won by Real Sociedad 3-1 Growing Pains for Barỗas Martino New Coach Experiences Sting of High Expectations in First Year at Major Club BY GABRIELE MARCOTTI If Barcelona coach Gerardo “Tata” Martino was a masochist, he would have enjoyed surfing the local papers on his smartphone Sunday morning “You don’t win anything like this” was the headline in the Barcelona daily Sport Barỗa loses its head and half the league titled La Vanguardia Other Catalan papers described Saturday’s performance in the 3-1 away defeat to Real Sociedad as “horrible” and “awful.” And yet, 72 hours earlier, he was, if not quite the toast of Catalonia, at least a savvy manager capable of handling a turn-key operation like Barcelona The club was in a three-way tie with Atlético Madrid and Real Madrid at the top of Spain’s Liga and had already advanced to the Spanish Cup final On Tuesday, it traveled away to Manchester City in the Champions’ League, arguably the toughest test faced by any of the seeded teams in the Round of 16, and emerged with a 2-0 victory in which it looked dominant We know fans and media can be fickle, but why the 180-degree turn after a single defeat? Especially at “La Real’s” Anoeta stadium, a place where Barcelona had not won a league match since May 2007? There are multiple answers and most center around Martino For a start, his team selection seemed to indicate he treated the trip to San Sebastián like an outing to a semi-professional side in the early rounds of the cup He made six changes from the team that faced Manchester City, including three of the back four and it showed Barcelona suffered numerous defensive meltdowns and could easily have conceded five or six against the young, aggressive Real Sociedad team He also tinkered with a midfield that ordinarily includes one ballwinner (Sergio Busquets) and two creative players (usually two out of Cesc Fàbregas, Xavi and Andrés Iniesta) Instead, he played Alex Song in a defensive position alongside Busquets and Iniesta, which ended up making Barỗas vaunted possession more sterile Managers need to rotate their squads to keep everyone fresh But it’s fair to question Martino’s judgment in a game like this, when Barcelona’s next game wasn’t until March 2, in ten days’ time, and at home to little Almería Then there’s the broader insecurity that comes from realizing that in the past seven league games, arch-rival Real Madrid gained 19 points to Barỗas 11, leapfrogging the Catalans in the table Plus, on Thursday, a Spanish court named the club as a suspect in a tax-fraud investigation over the transfer of Brazilian forward Neymar this past summer This came after club president Sandro Rosell was forced to resign after it emerged the player cost some €29.1 million ($40 million) more than originally stated and that the fee included a $55 million payment made directly to a company controlled by the player’s father That’s when nerves set in And that’s when a big-name boss with lots of sporting capital can make a difference in terms of dealing with media and fans Martino, on the other hand, got himself ejected at half-time of the Real Sociedad game We know fans and media can be fickle, but why the 180-degree turn after a single defeat? At times like these you question the wisdom of his appointment The 51-year-old Argentine was a respected coach when he was picked to replace the ill Tito Vilanova, but also one who had never worked in Europe While he enjoyed a solid five-year stint as coach of the Paraguayan national team, he had never worked at a club comparable in size to Barcelona It’s true that neither of Barca’s previous two title-winning managers—Vilanova and Pep Guardiola—had much of a track record heading into the job, both had long and close associations with the club, either as coaches, players or both The choice of Martino at times felt as if it could be explained in two ways First, as a means of appeasing Lionel Messi, the club’s star player, who, like the manager, hails from Rosario, Argentina And second, in the belief that this is such a well-oiled, über-juggernaut of a club, that it didn’t require a high-profile pedigreed boss—with a huge long-term contract and major transfer damands—as much as it needed a basic, nuts-and-bolts guy who could keep the stars happy In some ways, the decision was vindicated, because despite the Chicken Little routine in the local media, the sky really isnt falling over the Camp Nou Barỗa is still in the running for all three major titles this season And Messi, after missing nearly two months with injury is once again firing, with seven goals in his past five games across all competitions Yet you wonder if a manager with more experience—both European and Barcelona-specific—and more gravitas on this side of the pond (local media can be rather snobby when it comes to South Americans) might be better suited to ride out certain storms The current one may be in a teacup but if not handled properly, can brew into something bigger Associated Press Jordan Henderson celebrates after scoring his second goal Sunday THE WALL STREET JOURNAL Monday, February 24, 2014 | 27 THE WINTER OLYMPICS Once Again, Canada Rules The Rink SOCHI, Russia—Canada can revel in its role as the world’s hockey superpower The nation on Sunday became the first team since the Soviet Union to win back-to-back gold medals in men’s hockey, defeating Sweden 3-0 in the last event of the Sochi Olympics Canada’s men have now won three of the past four Olympic men’s gold medals The Canadians didn’t allow a goal in their last two games here, including a 1-0 shutout of the U.S in the semifinals Earlier in the week, the Canadian women’s team won its fourth straight Olympic gold in an overtime victory against the U.S Asked after the game whether Canada had just fielded the greatest hockey team in history, general manager Steve Yzerman squirmed Some of the legendary Russian national teams of the 1970s and 1980s might have been as good, he said “It is the best defensive team Canada has ever put on ice,” he added In Sochi, Canada shook what seemed to be the last thing holding it back from truly dominating the hockey world: a historic inability to win outside North America Its last Olympic gold outside Canada or the U.S came in the 1952 Oslo games Canada’s last two wins were in Salt Lake City and Vancouver, where the teams played on NHL-sized rinks, rather than bigger international ice Players on Sunday tried to describe the pressure they felt to repeat after the victory at home in Vancouver 2010 “We knew the whole country is watching, you make one mistake and you are a goat for the rest of your life,” said defenseman Duncan Keith In these Games, Canada managed to break away from what has been a competitive pack ever since the introduction of National Hockey League players to the Olympics in 1998 In 2010, the U.S beat Canada in a preliminary round and then took the gold-medal game to overtime This Games, when the two teams met in the semifinals, the U.S never got a foothold offensively in the 1-0 loss In the 2006 Torino Games, Russia eliminated Canada in the semifinals In Sochi, Team Russia, which opted to stock half its team with players from its own pro league, went out in the quarterfinals to the Finnish team that eventually took out the U.S Another hockey power, the Czech Republic, has struggled to replenish (Top to bottom) Reuters; Agence France-Presse/Getty Images BY SHARON TERLEP Brilliant fireworks explode in the sky over the Olympic Park during the closing ceremony for the Sochi Olympic Winter Games on Sunday night its talent pool The Czechs won the first Olympic hockey tournament in which NHL pros participated But in Sochi, the team relied on an aging trio of veteran forwards who can still make big plays: Petr Nedved, a 42-year-old who last wore an NHL uniform in 2008; the New Jersey Devils’ Patrik Elias; and the Devils’ legendary Jaromir Jagr, who was competing in his fifth Olympics Canada came in the favorite and, after looking shaky in a close game against underdog Latvia, looked impossible to beat after Sochi was a demonstration of Canada’s hockey depth Two of the team’s scoring stars, Sidney Crosby and Jonathan Toews, didn’t have a goal in the tournament before Sunday’s game Both scored on Sweden Canada was helped in the game against Sweden by the absence of two key players Swedish forward Nicklas Backstrom failed a doping test and was a late scratch Swedish team officials said Backstrom tested positive for a substance found in an allergy medication that he has taken for years Forward Henrik Zetterberg was also out because of a back injury Sweden coach Par Marts said losing the players hurt the team, but he went to lengths to say Canada won on its suffocating defense and frequent attacks on goal Canada’s Jonathan Toews vies for the puck with Sweden’s Alexander Steen “Canada is the better team,” he said “We spent very little time in our own zone.” Canada’s first goal came from Toews 12:55 into the first period, as he positioned himself in front of the goal just in time for a pass by Jeff Carter Canada stepped up its forecheck—a critical weapon in its victory over the U.S.—in the second period, and it showed At one point Lundqvist lost the puck in front of goal, but was saved by a quick whistle Canada later had back-to-back breakaways stopped by scrambling Swedes But Sweden couldn’t hold off Canada Crosby, who scored the game-winning overtime goal against the U.S in 2010 to win gold, scored Canada’s second goal with four min- utes left in the second period Canada’s Chris Kunitz made it 3-0 midway through the third period on a turnover forced by Crosby As the clock wound down, a group of Canadian athletes sang “O Canada.” Canada’s men’s and women’s teams swept gold in the only two head-to-head team sports at the Winter Games, hockey and curling 28 | Monday, February 24, 2014 Email: heard@wsj.com THE WALL STREET JOURNAL HEARD ON THE STREET FINANCIAL ANALYSIS & COMMENTARY Lee Raymond must be feeling vindicated As Steve Coll tells in his book “Private Empire: Exxon Mobil and American Power,” the former chief executive of the oil giant pushed Wall Street to focus on a particular ratio when judging the industry: return on capital employed Reporting results recently, two of Europe’s major oil companies concurred, highlighting return on average capital employed Royal Dutch Shell said its return relative to peers should be the primary way shareholders assess its progress Norway’s Statoil pledged to keep its returns steady at last year’s level of about 12% Major oil companies invest huge amounts of capital in multidecade projects So it makes sense to measure how efficiently profits are being extracted from that capital over time The measure improves with better margins and deteriorates when capital is tied up in unprofitable businesses or being spent on vast developments that aren’t yet making money The return of returns should please energy inves- tors But even with the approval of a former CEO nicknamed “Iron Ass,” investors shouldn’t follow it slavishly The European sector’s returns have fallen from an average of 19% in 2008 to 8% last year, according to Goldman Sachs U.S rivals, led by Exxon Mobil, have placed more emphasis on return on capital employed Despite also seeing their returns fall in recent years, their stocks have generally traded at a premium to the Europeans’ Greater confidence that returns have at least stabilized should boost the latter Indeed, Shell’s multiple of forward earnings has jumped to 11.3 times, topping Chevron’s But a laserlike focus on returns can generate its own peculiarities Fittingly, Exxon’s experience is illustrative It was conservative on investment during the first decade of this century, making for industry-leading returns that peaked at 34% in 2008 But it also meant that Exxon underinvested in its upstream reserves It finally addressed this in 2010 with the poorly timed purchase of XTO Energy and a big in- Risks Around China’s Sinopec China bulls see signs of a revamp in a plan for the country’s top refiner by capacity to shed part of its gas-station business to private investors But is Beijing really opening up that market or just finding another way for the public to fund its energy policy? China Petroleum & Chemical, or Sinopec, plans to sell up to 30% of its retail arm Like much in China these days, this could partly be a property play Brokerage CLSA, applying a simple average of 500 yuan ($82) a square foot, posits that the land beneath Sinopec’s stations could be worth nearly $1 trillion, some 10 times Sinopec’s market capitalization and equivalent to a third of the entire Hong Kong stock market’s value A fantastical sum, but it suggests the business is undervalued to some extent It enjoys stable margins and contributes roughly 40% of Sinopec’s operating profits Sinopec’s stock soared on the news Thursday, before slipping a little Friday But there is likely more going on here than just a simple corporate divestment Sinopec, which is about 75% state-owned, is essentially a strategic arm of the Chinese government One possibility is that Beijing is opening oil retail to competition But this remains to be seen If new investors end up simply owning a minority stake in the overall retail division, Sinopec will still enjoy its dominance And what Sinopec does with any windfall might end up furthering Beijing’s energy policies rather than rewarding minority shareholders Sinopec hasn’t spelled out its plans But having joined in the foreign-expansion push by China’s statebacked oil firms, the risk is that it overpays for new oil reserves It could also be problematic if Sinopec reinvests any proceeds from a divestiture in developing its own oil fields Sinopec is at least accepting the need to raise money Capital spending and dividends outpaced operating cash flow by about $9 billion last year, according to Sanford C Bernstein But a retail deal could involve sacrificing a cash cow And minority investors risk losing out if the proceeds go toward foreign resource deals —Abheek Bhattacharya Slippery Exxon Mobil’s and Royal Dutch Shell’s return on average capital employed 40% 30 Exxon Mobil Getty Images For Big Oil, a Return to Returns Shell 20 10 ’08 ’09 ’10 ’11 ’12 ’13 Sources: the companies; ISI Group The Wall Street Journal crease in capital expenditures The result: Return on capital was just 18.5% last year, according to ISI Group Meanwhile, companies also are under pressure to sell their more mature assets But as the carrying value of those is largely depreciated, their returns can be among the highest in a big oil company’s portfolio In the aftermath of the Macondo disaster, BP shed $40 billion in “noncore” assets, with a return north of 50% It also pays to be wary of metrics promoted by execu- Shell gas station in San Francisco tives For the major oil companies, falling levels of unproductive capital as new projects start up, after years of high spending, should flatter returns in coming years Moreover, while investors care about the long term, they also want their investments to perform well in the here and now So Statoil’s moderated ambition on production growth alongside its returns pledge could prove more attractive to investors than Shell’s concentration on return on capital employed alone Besides communication, there is also an operational lever major oil companies can pull to alleviate the tension between short- and long-term goals: shale projects Their development is measured in months rather than years Ideally, a company can invest in big projects underpinning long-term production while also developing shale resources to smooth the cycle of investment and returns Of the big companies, Chevron appears best placed in this regard Its North American shale liquids resource base, as opposed to lower-value natural gas, tops 10 billion barrels, the highest of any big oil company, according to Edward Westlake at Credit Suisse That offers a good basis to expand output relatively quickly and help offset concerns about Chevron’s bigger multiyear projects, such as the overbudget Gorgon liquefied-natural-gas development in Australia Finding religion on returns is so much easier when you can answer investors’ prayers a little more quickly than your rivals —Helen Thomas and Liam Denning Economy Gives Fed Cold Shoulder There has been a chill over the economy recently, and not all of it is about the weather The recent run of economic data has been disappointing The latest reports on jobs, retail sales and factory output have fallen short of estimates Last week came readings indicating New York-area manufacturing weakened this month, that the number of new homes on which ground was broken fell sharply in January and that January’s sales of previously owned homes slipped At least some of this weakness has to with what has been one of the coldest and snowiest winters in years Indeed, minutes of the Federal Reserve’s January policy-setting meeting released last week show officials suggesting December’s lackluster jobs report “may have been an anomaly, perhaps importantly reflecting bad weather.” The minutes show officials’ overall view of the economy was sanguine, with the strong impression that it would take a clear weakening for them to veer from cutting bond purchases by $10 billion when they next meet in March Laying all of the blame for the weakness at the feet of Old Man Winter is a bit problematic The January employment report released a week after the Fed meeting showed job gains below economists’ expectations, even though the Labor Department’s survey period for its payroll count fell during a relatively warm spell J.P Morgan Chase economist Michael Feroli points out that the weakness in the January retail-sales report included sales at Internet and other nonstore retailers, which usually well during bad weather So the economy is experiencing more than just weather woes Probably it is just getting some payback from a strong fourth quarter But there is also the chance that once again, an economy that looked like it had finally achieved a sustainable recovery is stumbling instead That last possibility sets up financial markets for what Making Trouble Monthly change in manufacturing production 1.0% 0.5 –0.5 –1.0 –0.8% 2013 Source: Federal Reserve The Wall Street Journal ’14 could prove to be a trying period, with the Fed unlikely to change course amid nagging doubts about the economy’s strength And given that February has been a rather wintry month, uncertainty about what is going on with the economy may only continue The February employment report, for example, will be the last one the Fed sees before its March meeting The jobs count will be based on how many people were on employer payrolls during the pay period that included Feb 12 According to the National Climatic Data Center, average temperatures during the calendar week that included the 12th were 18 degrees lower than a year earlier in New England, 19 degrees lower in the Upper Midwest and 20 degrees lower in the Northern Rockies and Plains It may not be until the March employment report comes out, in early April, before there is a relatively clean look at how the job market is faring The same is true of other closely watched economic indicators That leaves the Fed unlikely to waver in its plan to keep scaling back its bondbuying program But it will also create a situation in which investors’ belief that the economy will better this year than last starts to buckle —Justin Lahart WSJ.com/Heard AXA Goes Beyond Its French Heritage Being French isn’t the best way to attract investors right now, given macroeconomic concerns around the Gallic nation Insurer AXA’s answer is, thus, to become less French The company, whose businesses are spread roughly evenly among life insurance, general insurance and asset management, now generates less than a quarter of its earnings from its home country AXA has instead been moving more vigorously into emerging markets, making acquisitions in China and Colombia in the past year The strategy seems to be working Rising revenue from its high-growth markets was one reason why AXA’s earnings rose 14% last year In its life-insurance arm, AXA also has been skewing its product mix more toward health and protection products That has helped widen its operating margin on new business to 35% last year from 22% in 2010 Even a €170 million ($234 million) charge in its U.S business, related to higher mortality rates among middle-age men, couldn’t derail AXA With interest rates rising, the company expects the pressure on its U.S variable annuities business to ease in 2014 Costs are coming down, too AXA now reckons it can achieve annual savings of €1.7 billion by 2015, up from its previous €1.5 billion target And with its net debt down to 24% of debt and equity combined, AXA’s balance sheet is healthier than it has been for some time The company raised its dividend by 13% for 2013 and now pays out 40% of its earnings to shareholders Still, investors are proving hard to please Sure, AXA’s shares are up 45% in the past 12 months But it still trades at only nine times expected earnings in 2014 That is a discount to comparable German insurer Allianz, which has a similar business mix but trades at 9.7 times Even troubled U.K insurer Aviva trades at 11.1 times expected earnings, while emerging-market-heavy Prudential trades at 17.2 times, according to FactSet That suggests AXA still is suffering from a perception that it is too heavily exposed to France’s slow-expanding economy If it keeps delivering solid results like those in 2013, investors’ minds should be put at rest —Andrew Peaple ... 1503.40 0.0006652 a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate Source: ICAP Plc 22 | Monday, February 24, 2014 THE WALL STREET JOURNAL BLUE CHIPS & BONDS... from a previous cooperative education employer 6 | Monday, February 24, 2014 THE WALL STREET JOURNAL UKRAINE IN CRISIS Turmoil Called ‘Major Defeat’ for Russia MOSCOW—The dramatic collapse on... program would work The plan has backing on Wall Street, including from stock-exchange operators such as Nasdaq OMX Group Inc., though some bigger banks and retail brokerages, who often trade