Speculators are back in the news, at least in Spain. Could there be something behind the claim by José Blanco, Spain’s development minister, of a conspiracy by international markets to bring down the euro? Frankly, no.

What there is, though, is valid concern among some serious investors that regulators could step in to help save the euro. The spread over German Bunds of Greek, Spanish, Portuguese, Irish and Italian CDS has soared as investors use the CDS to bet against the price of the bonds (CDS= credit default swaps, labelled financial weapons of mass destruction by Warren Buffett, and the Monster that ate Wall Street by Newsweek. They are basically a side bet on the performance of a bond, a type of insurance policy which pays out if the company or country which issued it defaults).

Take the parallel with the banks. US regulators ignored CDS when they stepped in to stop shorting of bank equities in 2008. But in the UK, the FSA banned all forms of shorting - including taking net short CDS positions.

Could something similar be done to try to rescue Europe’s struggling periphery? It doesn’t seem that likely that the British, and certainly not the Americans, would want to step in. After all, there are valid reasons to be worried, as the countries being hit are all in deep financial trouble and have no opportunity to devalue.

But the risk is there. One manager of a big hedge fund told me he closed out all his short positions on the euro and eurozone government bonds to avoid being caught out by any action - even though he knew this would mean missing out on profits.

“There’s a chance of a regulatory backlash,” he told me. Continue reading "The euro’s WMD danger to hedge fund “especuladores”"

As if cutting the chief executive’s bonus to a measly $9m and cancelling the entire fourth-quarter bonus for its staff (poor dears) wasn’t enough, Lucas van Praag, chief flak at Goldman Sachs, is now resorting to writing op-eds attacking its critics.

Has he lost his beautifully cynical touch? Or is he a must-read at the Huffington Post? Judge for yourself in his point-by-point denial of Sunday’s New York Times story, which put Goldman in the frame for the failure of AIG.

How do you say “conspiracy theory” in Spanish? Ah yes, teoría de la conspiración. José Blanco, Spain’s development minister and the man delegated to explain to London investors on Monday why they should stick with the country’s bonds, thinks there is a conspiracy by financial markets and the international media to take down the euro.

So my colleague Izabella Kaminska pointed out on Alphaville. And the Spanish media went bonkers, because the FT had (quite wrongly) already become the focus of their story about Elena Salgado, the economy minister, visiting London. Here’s El Mundo:

‘FT’ se burla de la ‘paranoia’ de Blanco mientras Salgado da explicaciones sobre España

ABC:

El Financial Times llama «paranoico» al Gobierno el día que recibe a Salgado

And Nueva Tribuna:

FT llama “paranoico” al Gobierno español

Expansión was more rational, treating the story as a minor item, while bloggers - and, for poor Izabella, angry Spanish readers - poured out their scorn at the capitalist system, as exemplified by the FT and the “especuladores” in the bond markets.

They need to pull themselves together. The media is just carrying the message of the markets here: bond buyers see a risk that Spain’s budget plan is not going to be enough to stabilise the deficit and cut borrowing. The Spanish press should be telling their readers the government needs to explain better how it will enforce its cost-cutting plans (the markets remain sceptical given the risk of provoking serious political opposition by doubling up the recession), rather than attacking the international media.

Still, at least the level of outrage helps explain why the Spanish (and perhaps the Portuguese) governments are so touchy about being lumped in with Greece in a certain unfortunate acronym.

Like many other native English-speakers, I was brought up on the stories of heroic undercover operations behind enemy lines in Nazi-occupied Europe - inevitably with the help of resourceful French partisans. It is tempting to apply the same terms to other guerrilla groups resisting occupation, even when their cases - such as Palestine - are quite different.

But rather than get into the rights and wrongs of armed resistance, I’ve been thinking about the practical alternative: peaceful protest. A large grouping of Palestinians and supporters issued a call for “BDS” - boycott, divestment, sanctions - five years ago, as part of an effort to move from suicide bombings and missiles to create a civil resistance movement. They have not ended the cycle of attack and counter-attack, and Israel attributes the lower level of suicide attacks and missiles to its wall, or “security fence”, and to the invasion of Gaza.

What is interesting, though, is what the peaceful protest is supposed to achieve. Here’s what Mustafa Barghouthi, a Palestinian MP and supporter of the movement, told me on Monday:

People need a positive message to support. We don’t just need sympathy from the world - we need to give the world something to support.

He argues that peaceful resistance can attract international support and so pressure Israel; he would prefer the US simply to dictate to Israel a settlement, but has given up hope that Barack Obama will do so. There is, after all, already the beginnings of US pressure with the formation of J-Street, a moderate Jewish lobby in Washington, while several foreign companies and even some governments (such as Norway, via a pension fund) divested in the wake of the Gaza invasion.

Barghouthi also thinks peaceful protest can win support within Israel, as moderates are likely to be attracted by the movement - even if some in the settler lobby would prefer to see Palestinians ejected from the West Bank altogether (Prime Minister Benjamin Netanyahu’s Likud wants them have limited self-rule, but no sovereignty).

There are three potential negative scenarios which would render peaceful protest pointless:

1. Israel has little to lose from peaceful protest. According to Barghouthi, exports from Israel to the Palestinian territories, excluding East Jerusalem, total $2.6bn. Out of its $57bn or so of exports in 2008, that matters - but not enough. Israel has rebuilt its economy since the Intifada so it no longer relies on Palestinian workers, so it could just shrug and ignore peaceful protestors.

Barghouthi accepts part of this point, but says the economic lever he wants to push is not just the domestic one, but also international: hence the call for a boycott. Furthermore, he points out, Israelis are not devoid of morals, so it is worth making efforts to win their sympathy - which won’t be done through violence.

2. The international media lose interest as soon as there are no deaths; this is compounded by well-funded pro-Israeli propaganda groups, particularly in the US and UK. If there is no coverage of the terrible conditions under which Palestinians are living, everyone will just be relieved that there are no deaths and ignore them.

There are already signs of this. Most of the sypathetic coverage of Palestinians tends to focus on specific acts of oppression against individuals (such as the confiscation of their homes), or cases of obvious abuse by Israeli forces. More general difficulties creating resentment, such as settler-only roads and the wall, get little coverage.

3. Peaceful protest in the past has been brutally suppressed; for every success (Mahatma Gandhi or the US civil rights movement) there is a failure (Burma or the US anti-Vietnam war movement, for example) which leads to (sometimes heroic) suffering for its supporters.

Israel already looks like it is going down the route of brutal suppression. West Bank protesters are regularly harassed, arrested and/or beaten up by Israeli soldiers - just this week the offices of the (peaceful) Stop the Wall campaign were raided. The process appears to be a repeat of tactics of massive over-reaction used for 30 years, according to Neve Gordon.

So what chance is there? Barghouthi remains hopeful. “If we reach a point where the price of sustaining occupation and oppression is so high, then even Netanyahu will change,” he says.

International boycotts have had an effect in the past; South Africa was badly hit under apartheid by consumer-led boycotts. And if a mass peaceful movement could be created - it is unclear so far how much grassroots support there is in the West Bank - it could provide a basis for peaceful parties with a proper political base able to give Israel the negotiating partner it needs to reach any form of peace agreement.

But these are big ifs. Unless Israel is pressured by the governments of the US, on which it relies financially, or Europe, a big enough trade partner to have an effect, it seems to me the most likely outcome is for Israel to carry on with its current approach of settlement expansion and suppression of Palestinians regardless of protests. I just don’t see enough evidence of mainstream outrage in western countries at the plight of the Palestinians for the boycott campaign to really get off the ground.

Barghouthi thinks a peaceful protest movement is the only remaining option:

Is there any other way for us except accepting to be slaves of occupation for the rest of our lives? No.

But he compares the movement to Gandhi and Nelson Mandela; Mandela, it should be remembered, led a bombing campaign against the apartheid South African government because he became convinced that peaceful attempts would fail.

The danger is that protesters follow Mandela and take up arms. Tragically for both sides, that will mean another generation of Palestinians being brought up on Boy’s Own-style stories of futile killing of Israelis - and peace prospects retreating ever further.

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Mary Riddell, Trust is in tatters and the best we can hope for is transparency

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From the FT’s comment section:
Gideon Rachman: Oranges and lemons in Ukraine
Philip Stephens: It is too soon for Cameron’s Tories to panic
Jeffrey Garten: The US can no longer go it alone with China
Richard Reeves: Labour’s Puritans should let us live our lives
Michael Skapinker: Staff ownership can save a company’s soul
Editorial: Japan’s debt woes are overstated
Editorial: Ukrainian U-turn?
Editorial: Election deadlock
Global Insight: Geoff Dyer, Sabre-rattling at Washington risks opening Pandora’s box
Market Insight: Paul J. Davies, Do not pay the ferryman until he securitises your risk factor
Notebook: Brian Groom, Cheers for industry’s posthuman captains
Lex: The agenda-setting column on business and finance

The start of work on an expensive new headquarters often marks the high tide for a company, from Time Warner and the New York Times through Volkswagen (with its VW Autostadt) and others.

So it is appropriate that it was only in December that the European Central Bank announced plans to press ahead with a new €500m HQ. The headquarters curse has already hit: the break-up of the eurozone headed by the ECB has become the subject of frenetic discussions following the financial crisis in Greece and the spread of worries to Spain and Portugal. The value of the single currency has plunged from an 18-month peak of $1.50, almost exactly on the day of the HQ announcement, to $1.37. Hedge funds have record levels of short positions betting on further declines, as the Greek financial crisis infects Spain and Portugal.

Many outside the single currency region are gloating, highlighting the unsustainable pressures caused by putting countries with such different performances as Greece and Germany under the same monetary regime. They are wrong to do so: the crisis may be bad for the euro but that is bad news for competitors, such as the US and UK, too.

In effect, prices of exports to the eurozone countries have risen about 9% since December. The new weakness of the euro will hinder the growing US export machine, and stamp on the green shoots of manufacturing confidence in Britain. In the race to export themselves back to health, Britain and America just lost their advantage. The only consolation is that the euro is reversing some of its gains, and had been a lot weaker a year ago.

How to tell when a state is not yet fully confident in the financial markets: it blames the international media reporting on its financial problems for the financial problems themselves.

Italy has long rated the opinions of the FT’s Lex column as newsworthy items in themselves. And a Portuguese minister went on the record last year to attack a Lex headline, of all things (Pigs in muck, which suggested Spain, Greece, Portugal and Italy risked “turning into bacon”). Now the Spanish are getting worried. Two TV crews camped outside the FT’s London offices this morning in an attempt to intercept Elena Salgado, the economy minister, who was due to meet reporters and editors - which they see as an effort to give the FT a dressing down for being “muy crítico” of Spain (the crews stood outside the front door while the Spanish car arrived at the back, so they had to run to get distance shots).

How is it newsworthy that she’s visiting journalists? Well, the Spanish papers are running it as one of their main stories, on the basis that the FT has raised the possibility of Spain having to leave the eurozone (although today Lex raised the idea that Germany could solve the problems in the single currency region by leaving).

What would be newsworthy would be for her to summon Paul Krugman, the New York Times columnist. He identified Spain, rather than Greece, as the eurozone’s weak link last week, prompting Salgado to lash out:

The economy minister denied Spain was a risk to the euro and criticised foreign analysts such as Nobel Prize-winning economist Paul Krugman, who this week said Spain was the euro zone’s “biggest trouble spot”, and foreign media for being too harsh on Spain.

“Maybe there is a lack of comprehension about what the euro means for our economies,” Salgado said on Spanish radio

Ironic that this came shortly after Krugman was being approvingly quoted by José Sócrates, prime minister of Portugal - caught alongside Spain in the unfortunate acronym wars - for saying “deficits saved the world”.

My guess as to why the FT is the target today: the real news is that Salgado is meeting London’s investors in Spain’s sovereign debt in an effort to convince them that the government’s much-criticised plan to cut the budget deficit is enough to avoid a full-blown Greek-style crisis. But the embassy didn’t want to upset these talks by having film crews show her walking into a fund manager such as Pimco, as it would set the discussions off on the wrong note. So instead they leaked the time of her meeting at the FT to give them something to film and talk about.

Luckily for the embassy, the TV crews I chatted with were utterly unaware that they had the wrong target: they thought it was a major event to have a government minister visit a newspaper office, rather than the everyday occurrence it is.

Perhaps there is a real story, though: Salgado cried off at the last minute, sending her officials instead. Spin this in two ways and it is interesting (although note I have no evidence for either - perhaps she’s washing her hair):

1. She’s deliberately snubbing the FT as punishment

2. The crisis is so bad she hasn’t got time to see the FT

So far it is unclear whether the Spanish press has picked one of these stories.

EDIT: Having cried off, she then turned up anyway. Good news for the Spanish economy? Bad news? Or just that it didn’t take as long as she thought to catch up on the market’s negative reaction to the country’s plan to borrow nearly €77bn this year ?