Monthly Archives: February 2013

Monti casts his vote in this week’s Italian parliamentary elections.

Just 48 hours after receiving a drubbing at the polls, outgoing Italian prime minister Mario Monti came to Brussels and delivered his first major address since the election, in which he issued a dire warning to other leaders attempting to reform their countries in the midst of a deepening recession: what just happened to me can happen to you.

Monti’s remarks, which appeared off the cuff, came at the end of a detailed review of Italian and EU competition policy as part of a conference Thursday hosted by Joaquin Almunia, one of Monti’s successors as EU competition commissioner.

Monti warned that because economies take a long time to grow after implementing tough austerity and economic reform measures, public opinion quickly turns against the policies and the result is “the coming up of political forces that, of course, oppose the right policies” – a not-so-veiled reference to the Five Star Movement of Italian populist Beppe Grillo, which well outpolled Monti’s coalition in this week’s vote.

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  • Bankers’ bonuses are to be capped at two times salary and banks will be subject to a strict transparency regime.
  • Switzerland will hold a referendum on a package of strict curbs on executive pay put forward by entrepreneur Thomas Minder, who spoke to the FT about his proposals.
  • The Turkish government is negotiating with jailed Kurdish leader Abdullah Ocalan in an effort to end a conflict that has claimed 35,000 lives in the past three decades, but doubts linger about whether a historic deal is within reach.
  • If you’ve been using your iPad as a babysitter only to find that your child has managed to rack up a steep bill for a children’s games and apps, never fear – Apple is offering a refund.
  • The Obama administration is shifting policy on Syrian rebels. It will help with training and “nonlethal assistance” – vehicles, communications equipment and night vision gear.
  • China’s defence ministry claims that rather than being the perpetrator of hacking incidents, China is the victim: “According to the IP addresses, the Defence Ministry and China Military Online websites were, in 2012, hacked on average from overseas 144,000 times a month, of which attacks from the U.S. accounted for 62.9 percent.”
  • China’s burgeoning tomato-growing industry is troubling traditional tomato-growing countries like Italy.

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Politicians the world over have huffed and puffed about excessive pay at banks since 2008. While remuneration curbs were put in place, nothing fundamentally challenged bank operations, or their ultimate flexibility to reward staff. The European Parliament has bucked that trend with the mother of all bonus clampdowns. Here are five key questions on the cap: how it works, how you can avoid it, whether it will really pass and what it means for Britain and the City.

1. How is the cap calculated and applied?

The bonus text runs to just half a side of A4. The core measure is a mandatory 1:1 ratio on fixed/variable pay is applied to all EU banks and subsidiaries around the world, as well as non-EU banks operating in Europe. This ratio can rise to 2:1 with a 66 per cent shareholder vote, with a quorum of more than 50 per cent. If turnout is lower, the majority must be 75 per cent. Up to a quarter of the variable pay can be paid in long term instruments (deferred for more than five years), which track the health of a bank and can be clawed back. The value is discounted at a rate set by the European Banking Authority, which must take account of inflation and risk. Some details still need to be fleshed out. But MEPs predicted that even with the discount the maximum ratio would be closer to 2:1 than 3:1.

2. Are there any loopholes?

There are always loopholes. The question is whether it would make a material difference and allow banks to operate relatively unscathed. The obvious one is just raising fixed pay, but it has obvious shortcomings. The incentives for long term pay within the cap will likely be aggressively used. But even with the most banker-friendly discount rate calculation the ratio will not move much above 3:1. Other points of vulnerability could be the definition of fixed pay: could some of that effectively be a bonus? How the rules apply outside the EU and to non-EU institutions will also be important in determining whether bankers can be shuffled around the world to avoid the restrictions. Finally there is talk of some banks taking legal action against the provisions, but there will surely be a public relations downside to that.

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I am flying back from the US tonight. And I must say that I’m rather grateful that I am travelling before Friday. That is the day when sequestration – automatic cuts to US government spending – kicks in. One of the areas that is likely to be hit first is air travel – with predictions that there will be cut-backs in staff on air-traffic control, security lines and customs and immigration. To be fair, it is unlikely that those cuts will be felt as soon as this weekend. But nobody is quite sure – so it’s probably best to be getting out of the country, before the lines get too long. Read more

Instability rules in Italy
Italian national elections have ended in chaos and the voters’ message is that they are tired of austerity and the political elite. The country faces a hung parliament after votes were split between a former comedian, an ex-prime minister who faces corruption charges, and the centre-left, who won narrowly in the lower house. Mario Monti, the technocratic prime minister who was appointed 15 months ago, came a distant fourth place. In this podcast, Guy Dinmore, Rome correspondent, Peter Spiegel, Brussels bureau chief, and Ferdinando Giugliano, leader writer, join world news editor Shawn Donnan to discuss the unfolding drama, which could take weeks to resolve.

Peña Nieto: taking on the old guard (Getty)

Elba Esther Gordillo encapsulates everything that is wrong with the “old Mexico”. The optimistic view of her arrest on Tuesday night, after the 68-year old union leader decamped from a private flight from San Diego, is that it shows what the “new Mexico” might become – a country where nobody is untouchable and the rule of law reigns. The cynical view is that it shows the government of Enrique Peña Nieto pursuing Mexican politics-as-usual: anyone who gets in the president’s way will be metaphorically decapitated and their head stuck on a pike as a warning to others.

Either way, Gordillo, a.k.a. “La Maestra”, is one of the most loathsome figures in Mexican politics. The head of the 1.5m teachers union, the largest in Latin America, has long been a byword for corruption, influence peddling and old-school clientelist politics. Yet although accusations have been brought against her before, no charges have ever been pressed. Now, they have. Read more

  • Tony Barber argues that a decontamination of Italian politics must come before economic salvation, and the two issues should never be separated.
  • Clown-turned-politician Francisco Everardo Oliveira Silva was elected into the Brazilian congress with a record number of votes in 2010. However, the joy of his campaign has given away to a weariness of the politician’s life: “You pass whole days here doing nothing, just waiting to vote on something while people argue and argue.”
  • “Enemy-initiated attacks” in Afghanistan have stayed constant from 2011 to 2012. The reported 7 per cent drop was actually the result of a clerical error.
  • Is it a bird? Is it a plane? No, it’s a barrel full of pork that no longer exists. The Washington Post reports on the tiny local airports in the US that attract plenty of federal spending, but very few planes.
  • Tunisians and Egyptians have to fight for their right to do the Harlem Shake.

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Iran's representatives led by their top nuclear negotiator Saeed Jalili (back 4th L) take part in talks on Iran's nuclear programme in the Kazakh city of Almaty on February 27, 2013 (ILYAS OMAROV/AFP/Getty Images)

Talks in Almaty on February 27 (AFP/Getty Images)

The latest meeting between Iran and world powers to try and resolve the dilemma over the Iranian nuclear programme is over. And once again, a shaft of light has emerged that will lead some to hope that military action over the Iranian programme might be averted.

After two days of talks in the freezing city of Almaty in Kazakhstan, Iran has told the US and five other world powers that it is prepared to hold a couple more meetings in March and April to try to resolve international concerns that it wants a nuclear bomb.

That said, few will want to overplay the significance of this move. Here are three reasons why many western diplomats will be cautious. Read more


(AFP/Getty Images)

Beppe Grillo, the big winner of Italy’s 2013 election, first rose to fame in the 1970s as an irreverent, foul-mouthed comedian with corruption of all kinds in his sights. Read more

By Julia Zhu in London

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Two interesting trends that have shown up in the data from Italy’s election today.

1) The preliminary election results among the nearly 3.5 million Italian voters living abroad show a very different picture from the results within Italy.

chart created by Valentina Romei

The austerity measures and market-friendly stance of the ex-Prime Minister Mario Monti managed to convinced over 27 per cent of the votes of Italians living in Europe and in North and Central America, where his movement came in second after Pier Luigi Bersani’s Democratic Party (PD). Within Italy, fewer than one in ten Italians voted for him.

Meanwhile, the comedian-turned-political leader Beppe Grillo successfully won over Italians in the plazas where he held numerous rallies, but it appears that his anti-establishment message was not heard so sympathetically by Italians around the world. Read more

Italy ‘s parliamentary elections ended in political deadlock on Monday night with little hope of a clear majority. Join the FT as it covers the unfolding political and economic drama. By Lina Saigol.


Making sure the world gets the message – Graffiti on a wall in Livorno, Italy

Political deadlock and impending chaos, a rejection of EU-driven austerity, and market uncertainty are the main three themes in the media commentary on the Italian election that had yet to be declared on Tuesday morning.

“The reality is that Italy today is almost ungovernable,” writes Fabrizio Goria on Linkiesta, a news website. “And it will not take long for the markets to react.”

The headline in La Repubblica , the leading centre-left daily, doesn’t really need translating:

Italia ingovernabile: Senato spaccato, Grillo primo partito

“An ungovernable country,” concludes Massimo Razzi inside. “Politically, but also technically. With few ways out given the almost unworkable or numerically insufficient alliances.” Read more

By Gideon Rachman

The success of a book can sometimes tell you as much about the times as about the book itself. That may be the case with Why Nations Fail, which was published last year to great acclaim from reviewers and prize juries, and even compared to Adam Smith’s Wealth of NationsRead more

Mario Monti exits a voting booth on February 24 (AFP/Getty)

Mario Monti exits a voting booth on February 24 (AFP/Getty)

Paul Krugman has got in early to comment on the political demise of Mario Monti – who now seems certain to trail in fourth in the Italian elections. According to Krugman, Monti’s reputation for wisdom is wildly overblown. On the contrary, he more or less deserves his fate because he was “in effect, the proconsul installed by Germany.”

Worse, according to Krugman, Monti’s policies did not even work. As in the rest of southern Europe, the economy has shrunk and so debt-to-GDP ratios have risen. There was only one “piece of good news” in the Monti era – that “bond markets have calmed down.” However, Monti cannot claim the credit even for this, because it is “largely thanks to the stated willingness of the ECB to step in and buy government debt when necessary.”

As ever, with Krugman, the argument is forcefully made. But it misses out a crucial stage in the argument and therefore unfairly denigrates the role of Monti in stabilising the Italian economy. Remember, when Monti came to power, the steady rise in the interest rates that Italy was having to pay to finance its debt was eating up more and more of the Italian budget. There was a real prospect that Italy might simply be unable to finance itself through the bond markets – and that might have sparked a terminal crisis in the euroRead more

Italians cast their ballots in a tight election, with Brussels, Berlin and the markets looking on. By Tom Burgis, Lina Saigol, Ben Fenton and Shannon Bond with contributions from FT correspondents across Italy and beyond. All times are GMT. 

On this, the final day of polling in Italy’s 2013 election, we thought it would be worth highlighting five blog posts from the FT that will help provide the context you need to understand the results when they eventually emerge…

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French President Francois Hollande after a press conference with Greece's Prime Minister Antonis Samaras on February 19 (AP Photo/Thanassis Stavrakis, Pool)

(AP Photo/Thanassis Stavrakis, Pool)

Listening to François Hollande’s comments on his flying visit to Greece earlier this week was like hearing a reprise of his electoral campaign, in which he promised to lead a European-wide fight against austerity.

In Athens, Hollande praised the Greek government and said that, for Greece – “The next phase is one of growth and creating jobs, not more sacrifices.” Sadly, although there are signs that private-sector investment in Greece is picking up, there is also certainly more austerity and more job cuts to come, in the public sector.

President Hollande was only in Athens briefly, and so is hardly likely to be held to account for his remarks in Greece. What is more problematic is that the latest figures suggest that he will be unable to hold off the drive for more austerity back home in France. Economic growth is down and the French economy may even shrink in 2013 – compared to the Hollande administration’s initial projection of growth of 0.8%. Partly as a result, France is going to miss its target of getting the country’s deficit below the EU-mandated 3%. Read more

By Julia Zhu in London

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