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Worry for Italy Quickly Replaces Relief for Spain

VENICE — Concerns grew on Monday that Italy could be the next victim of Europe’s financial infection, leading nervous investors to sell Italian stocks and bonds and damping euphoria over a weekend deal to bail out Spain’s banks.

Italian officials privately expressed concern that the 100 billion euros, or $125 billion, that Europe pledged to Spanish banks might not stop the troubles from spreading.

Italy’s main stock index was Europe’s worst performer on Monday, a day when United States stocks were also dragged down and investors flocked yet again to the safe harbor of American and German government bonds. Even the Italian prime minister, Mario Monti, a European technocrat who came to office after the euro crisis forced out Silvio Berlusconi last November, has begun to acknowledge the dangers posed to his country’s 1.56-trillion-euro economy ($1.95 trillion).

The main fear is that Italy cannot grow its way out of arecession fast enough to pay a mountainous national debt. Other concerns include the fact that Italy, with the third-largest euro zone economy after those of Germany and France, will have to shoulder a large portion of the bailout bill even as it grapples with its own sharp economic downturn.

Because Italy does not have enough economic growth to generate the money itself, the government will probably have to borrow it at high interest rates, adding to an already heavy debt load.

“There is a permanent risk of contagion,” Mr. Monti told an economics conference near Venice over the weekend, speaking by telephone. “That is why strengthening the euro zone is of collective interest.”

Prices of Italy’s government bonds reached their lowest level in months. Investors apparently found little assurance that the euro currency union was any closer to solving its underlying problems — not with parliamentary elections in Greece this weekend that could determine whether the currency union is strong enough to retain its weakest members.

Investor euphoria in Europe over the Spanish bailout deal Monday morning was short-lived, giving way to an essentially flat day on many European stock markets. But Italy’s benchmark index was the Continent’s worst performer, ending down 2.8 percent.

Italian 10-year government bonds dropped in value for a fourth consecutive trading session. The yield — a measure of the government’s borrowing costs and of investors’ perception of risk — climbed 0.26 of a percentage point Monday to just over 6 percent. That is the highest level since January and a level that Italy could not afford for long.

The Spanish government’s 10-year bond yield also rose, closing up 0.30 of a percentage point, to 6.466 percent.

“There’s no doubt contagion will come to Italy,” Daniele Sottile, a managing partner at the financial advisers Vitale & Associati in Milan, said at the same conference, which was convened by the Council for the United States and Italy on an island near Venice. “It’s proof that the European mechanisms designed to stop the crisis are not working.”

Sergio Marchionne, the chief executive of both Fiat and Chrysler, was more blunt at the conference. “Somebody better do something before we get to the point of no return,” he said.

Although Mr. Monti, a former European commissioner, has a reputation as a skilled leader trusted by international officials, he faces a host of problems at home.

Few question Mr. Monti’s competence: Within the first six weeks of coming to power, he managed to pass more economic measures than Italy had in a decade, including increasing the retirement age, raising property taxes, simplifying the operation of government agencies and going after tax evaders. Still pending are economic changes meant to spur growth, including an effort to overhaul Italy’s inflexible labor rules.

But Mr. Monti’s government is also shackled by a legacy of political unwillingness to make painful changes.

As a result, “market attention looks set to shift to Italy,” Commerzbank analysts wrote Monday in a note to clients. Combined with weak growth, they said, the difficulties Mr. Monti faces in getting lawmakers to make economic changes mean “it may be just a matter of time before Italy also seeks help.”

Italy’s dominant political parties, the center-right People of Liberty and the center-left Democratic Party, are participating in Mr. Monti’s government but are averse to being too closely associated with the tough measures he has already put in place and the others he is still pushing for. Some opposition parties have been pressing for new elections to be held before Mr. Monti’s term ends in 2013.

Since Mr. Monti came to power, the Italian economy — like most of those in Europe — has grown weaker. It is expected to contract 1.5 percent this year and increase just 0.5 percent in 2013. Italian banks have sharply curtailed lending, pushing thousands of small and midsize Italian businesses into bankruptcy.

Italy’s unemployment rate has marched above 10 percent, well above Germany’s 5.4 percent, according to Eurostat, the European Union’s statistical agency.

Its government debt, already at 120 percent of gross domestic product, will almost certainly continue to rise, especially if Italy must pay a larger portion of the bill for shoring up the monetary union. In many respects, Italy is still better off than Spain and the three other bailout recipients — Greece, Ireland and Portugal. Its annual budget deficit has shrunk to 2.8 percent of G.D.P., which is down from 4.2 percent a year earlier and below the 3 percent level required by the euro union.

Italy has Europe’s second-largest manufacturing and industrial base, after Germany’s, and is one of the biggest export-oriented economies in the euro zone. “Made in Italy” is still a valuable brand the world over, led by icons like Ferrari cars, Gucci handbags and Ducati motorcycles. The country is also filled with state-owned assets like power companies and the national postal service that could bring in billions of euros should the government manage to privatize them.

Despite recent downgrades by the ratings agency Moody’s Investors Service, Italian banks are relatively sound — at least compared with Spain’s — because they are not saddled with bad debts from a real estate bubble. And even though the Italian government issues more bonds than any other euro zone country, the Italian public owns about half that debt, meaning banks are less vulnerable to fluctuations in the bonds’ value than banks in Spain, which are heavily invested in their government’s risky bonds.

Even so, deposits have been fleeing Italian banks for havens in Switzerland, according to several bankers at the weekend conference, on concern that Mr. Monti will raise taxes for the wealthy and as a hedge if the euro zone economy takes a turn for the worst.

Contagion is as much about fear as economic fundamentals, which is why if Mr. Monti cannot muster the political backing soon to push through his changes, there is a widespread assumption that the crisis will quickly breach Italy’s borders.

“Monti has a good agenda, and has clear in his mind what should be done for Italy,” said Cinzia Alcidi, a research fellow at the Center for European Policy Studies in Brussels. But his approach is that of a technocrat, “and when it is confronted with political and social reality, that makes things more difficult.”

Across Italy’s political spectrum, support for Mr. Monti has been tepid. But many observers agree that any attempt to hold early elections would be disastrous, blocking Mr. Monti’s efforts at change and thrusting Italy back into political mayhem. It is unlikely that any other party or coalition would receive enough support to govern comfortably.

“The good news” said Sergio Fabbrini, director of the school of government at Luiss Guido Carli University in Rome, is that Italy has veered away from becoming a “failed state in Europe” because of Mr. Monti.

The bad news, he said, is that Italy’s embedded politicians have still not acknowledged the reasons for Italy’s problems. “And when the quality of the political elite is as low as it is in Italy, or in Greece, it is difficult to create the structural conditions for growth.”

Via Nytimes

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Geopolitics with Robert D. Kaplan: Is Greece European?

Greece is where the West both begins and ends. The West — as a humanist ideal — began in ancient Athens where compassion for the individual began to replace the crushing brutality of the nearby civilizations of Egypt and Mesopotamia. The war that Herodotus chronicles between Greece and Persia in the 5th century B.C. established a contrast between West and East that has persisted for millennia. Greece is Christian, but it is also Eastern Orthodox, as spiritually close to Russia as it is to the West, and geographically equidistant between Brussels and Moscow. Greece may have invented the West with the democratic innovations of the Age of Pericles, but for more than a thousand years it was a child of Byzantine and Turkish despotism. And while Greece was the northwestern bastion of the anciently civilized Near East, ever since history moved north into colder climates following the collapse of Rome, the inhabitants of Peninsular Greece have found themselves at the poor, southeastern extremity of Europe. 

Modern Greece in particular has struggled against this bifurcated legacy. In an early 20th century replay of the Greco-Persian Wars, Greece’s post-World War I military struggle with Turkey led to a signal Greek defeat and as a consequence, more than a million ethnic Greeks from Asia Minor escaped to Greece proper, further impoverishing the country. (This Greek diaspora in Asia Minor was a massive source of revenue until the Greeks were expelled.) Not only did World War I have a bloody and epic coda in Greece, so did World War II, which was followed by a civil war between rightists and communists. Greece’s ultimate escape from the Warsaw Pact was a rather close-run affair: again, the effect of Greece’s unstable geographical location between East and West.


Read more at Stratfor.com

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I.M.F. Releases Report Early to Push Spain to Accept a European Bailout

BRUSSELS — In an apparent bid to raise pressure on Spain to accept a European bailout for its wobbly banks, the International Monetary Fund announced the banks would need nearly $50 billion in extra capital just to guard against a deepening of the country’s economic crisis.

The release of the estimate Friday night, several days early, came hours before finance ministers from the 17 euro zone countries were holding a conference call to try to persuade the Spanish government to swallow its pride and ask for help.

Officials have said the bailout being discussed was at least $100 billion, according to a person with knowledge of the negotiations, and is meant to provide enough of a cushion to reassure jittery markets. The I.M.F. estimate did not include costs associated with the need for banks to restructure, or to book losses on loans. Those costs would drive up the needed infusion of cash to as much as 100 billion euros, or about $125 billion, according to estimates by private firms.

 Spain’s euro-zone partners have been pushing the government in Madrid to bolster the country’s fragile banking system ahead of elections in Greece next week — the outcome of which could further destabilize the shared currency. European officials hope an infusion of cash for Spain will strip some uncertainty from the markets, which will be roiled enough if the Greek election ushers in a government that upends the country’s bailout agreement.

In what some have seen as a game of brinkmanship, however, Prime Minister Mariano Rajoy of Spain has delayed seeking outside help, trying to use the fear of economic contagion to get financial aid under better terms than those that Greece, Ireland and Portugal received when they were bailed out.

Spanish officials had been saying they first wanted to review audit by the I.M.F., as well as ones by two independent consulting firms, whose first results are not due until June 21. Spain wants to avoid a repeat of the miscalculation of the problems at Bankia, a giant Spanish mortgage lender that was nationalized last month because of the growing number of bad loans on its books.

The I.M.F.’s early release of its report was a sign of the urgency felt in Europe. It estimated the banks would need to raise at least 37 billion euros, or about $46 billion.

“The extent and persistence of the economic deterioration may imply further bank losses,” Ceyla Pazarbasioglu, deputy director of the fund’s monetary and capital markets department, said in a statement. “Full implementation of reforms as well as establishing a credible public backstop are critical for preserving financial stability going forward.”

Spanish banks are struggling with significant losses in their real estate loan portfolios, and they have been hurt by the country’s broader economic malaise, which has helped push Spain’s borrowing costs close to record highs.

On Friday, President Obama urged European leaders to stabilize their financial sector and end their long-simmering sovereign debt crisis.

“These decisions are fundamentally in the hands of Europe’s leaders, and fortunately they understand the seriousness of the situation and the urgent need to act,” Mr. Obama said at a news conference. “They’ve got to stabilize their financial system. And part of that is taking clear action as soon as possible to inject capital into weak banks.”

The Obama administration is concerned continued upheaval in Europe will further destabilize the world economy, hurting the United States and the administration’s chances for re-election.

In a speech in New York on Friday, Christine Lagarde, the managing director of the I.M.F., warned that global economic conditions had again deteriorated, with growth and financial stability at stake. Tensions are “now threatening the very existence of the European project,” Ms. Lagarde said.

The person close to the talks among euro zone officials said on Friday that they wanted Madrid to ask for help “pre-emptively,” allowing Europe to contain the problem now, with details of the package to be worked out later.

Since the start of the euro debt crisis more than two years ago, three governments — in Greece, Ireland and Portugal — have had to request bailouts. And those came with stringent budget and spending conditions imposed by the European Commission, the European Central Bank and the International Monetary Fund. Those conditions have caused political upheaval in Greece, where the Coalition of the Radical Left, or Syriza, the party led by Alexis Tsipras, has vowed that if it comes to power it will refuse to live up to the nation’s bailout terms.

But Spain may be able to avoid the strict fiscal oversight that Greece had to accept. The euro zone’s bailout fund was empowered last year to make loans to governments for the specific purpose of recapitalizing banks, with the conditions and payback terms focused largely on the financial sector and not the government’s fiscal autonomy.

In another concession to make the move more palatable to Madrid, the I.M.F. would not be called in to help oversee the program, according to one of the people close to the discussions. Instead, the European Banking Authority would take its place, this person said. That, too, would give a bailout more of a bank focus, rather than the sort of broader jurisdiction over government finances that the I.M.F. typically demands.


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Something’s Rotten in Athens

Just when you think Greece’s financial implosion can’t get any worse, a new wrinkle emerges to further frighten observers worried about the country’s prospects. On Tuesday, the New York Times warned that dwindling tax proceeds could quickly leave the country out of cash, and headlines continue to blare that Greece’s “agony” won’t end with new elections on June 17. Greek voters face a choice between harsh austerity measures being imposed in exchange for a financial bailout or facing the bleak possibility of leaving the eurozone entirely.  

Thirty percent of Athens shops have closed. On some streets, half the shops are shuttered. The commercial sector is in the grip of a closure epidemic which is spreading like a contagious disease. And in the heart of central Athens, a stone’s throw from the city’s glorious ancient sites, the tragic face of today’s Greece is on display. Here, we look at the human toll taken by the country’s shocking downturn in a series of photographs taken in Athens on May 22-25, 2012.

Above, heroin addicts inject drugs behind the Athens Cultural Center on Akademias Street in central Athens.ImageImageImage

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Greece Warns of Going Broke as Tax Proceeds Dry Up

ATHENS — As European leaders grapple with how to preserve their monetary union, Greece is rapidly running out of money.

Government coffers could be empty as soon as July, shortly after this month’s pivotal elections. In the worst case, Athens might have to temporarily stop paying for salaries and pensions, along with imports of fuel, food and pharmaceuticals.

Officials, scrambling for solutions, have considered dipping into funds that are supposed to be for Greece’s troubled banks. Some are even suggesting doling out i.o.u.’s.

Greek leaders said that despite their latest bailout of 130 billion euros, or $161.7 billion, they face a shortfall of 1.7 billion euros because tax revenue and other sources of potential income are drying up. A wrenching recession and harsh budget cuts have left businesses and individuals with less and less to give for taxes — and growing incentive to avoid paying what they owe.

The budget gap is widening as the so-called troika of lenders — the International Monetary Fund, the European Central Bank and the European Commission — withholds 1 billion euros in bailout money earmarked for government financing while it waits to see whether new leaders elected June 17 will honor Greece’s commitments.

Even if the troika delivers that money, Greece will struggle to cover its obligations. It underscored a harsh reality that is playing out in other troubled euro zone economies. Prolonged austerity is making it harder, not easier, for governments like Greece to become self-reliant again.

A top Spanish official acknowledged on Tuesday that Spain could not readily return to the markets to raise money because investors are demanding such high rates, highlighting how the debt crisis is spreading to larger economies in Europe.

Chancellor Angela Merkel of Germany said a day earlier that European leaders needed to find a way to create the political union that the world is looking for to complement their monetary union. European officials took a small step in that direction Tuesday by proposing a central authority for banking regulation, which would require countries to give up a bit of cherished sovereignty.

An essential element of Greece’s recovery plan has been to collect more taxes from a population that has long engaged in tax avoidance. The government is owed 45 billion euros in back taxes, tax officials in Athens said, only a fraction of which will ever be recovered.

To understand the difficulty, just talk to Nikos Maitos, a longtime official in Greece’s financial crimes investigation unit.

When he and a team of inspectors recently prowled the recession-hit island of Naxos for tax evaders, a local radio station broadcast his license plate number to warn residents.

“One repercussion of the crisis is that people are harder to find,” Mr. Maitos, an imposing, burly man, said last week in his sweltering office on the edge of Athens. “And when you do find them, they don’t have money.”

Even tax collectors, who have had to take large pay cuts, find that budget reductions make it hard to pay for the gasoline needed to reach their targets.

“After two and a half years of austerity, it’s really a difficult time to bring in revenue,” said Harry Theoharis, a senior official in the Greek Finance Ministry who helps oversee the country’s tax payment system. “You can’t keep flogging a dead horse.”

Salaries and pensions in the private and the public sectors have been cut by up to 50 percent, leaving Greece 495 million euros short of its revenue targets in the four months ended in April, according to the Greek Finance Ministry. With less cash, consumers have curbed spending, leading thousands of taxpaying businesses to fail.

Income expected from a higher, 23 percent value-added tax required by the bailout agreement has fallen short by around 800 million euros in the first four months of 2012. That is partly because cash-short businesses that were once law-abiding have started hiding money to stay afloat, tax officials said.

Greece’s General Accounting Office said recently that the state collected 25 percent less revenue in May than it did a year earlier. And the state has had to slash its goal of raising 50 billion euros from privatizations to just 3 billion euros as foreign investors lose interest.

That has left a caretaker government scrambling for a Plan B. One thought is to take billions of euros reserved for recapitalizing Greek banks, which have suffered from a flight of deposits amid political uncertainty and fears that Greece may abandon the euro for its own currency. But using that money would require the troika’s approval. Other notions, like i.o.u.’s and scrip, so far are only that — ideas.

To some extent, government officials said the tax-avoiding mentality is starting to change amid an aggressive enforcement campaign aimed at 500 wealthy individuals and companies, including former ministers and heads of state agencies and enterprises. People took notice in April when a former defense minister was arrested on charges of corruption and making false declarations related to his income and taxes.

“They are awed when they see inspectors now because of recent cases showing people will be prosecuted or made to pay,” Mr. Maitos said.

Tax collectors got another potential lift recently when the government started enforcing a 1995 law that gives them access to bank accounts of suspected tax evaders.

But Nikos Lekkas, a top official at the financial crimes agency where Mr. Maitos works, said Greek banks had obstructed nearly 5,000 requests for account data since 2010.

“The banks delay sending the information for 8 to 12 months,” he said. “And when they do, they send huge stacks of documents to make it confusing. By the time we can follow up, much of the money has already fled.”

In the past two years, the agency managed to assess back taxes worth 650 million euros on 210 of the cases, he said. But only 65 percent could be collected.

One challenge lies in what Mr. Lekkas calls the big fish — 18,300 offshore businesses belonging to wealthy Greek individuals and companies. Authorities are trying to trace the owners through property records, and they recently seized several large properties linked to offshore companies whose owners owe tens of millions of euros to the state.

That leaves collectors having to go after mostly smaller tax evaders, often with mixed results.

During a surveillance trip on the resort island of Santorini, Mr. Maitos said he and two colleagues observed a gas station owner insisting on cash-only transactions to avoid declaring taxes. When confronted, the man lashed at them with a bullwhip while cursing the state for taking his money.

Officials said things might improve drastically once Greece’s entire tax system is computerized, a move that is supposed to be completed by the end of this year.

Charalambos Nikolakopoulos, the head of the Greek tax collectors’ union, said there was no need for outsiders to straighten things out.

“Yes, we need change,” Mr. Nikolakopoulos said. “But things will only improve in Greece when we get a stable government that will impose its political will.”

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CEO: Apple will ‘double down’ on product secrecy

RANCHO PALOS VERDES, Calif. – Tim Cook shares at least one thing in common with the late Steve Jobs, the man he replaced last year as Apple’s CEO: a strong belief in keeping product development to close to the vest. At the D10 conference, where Cook took the stage for his first in-depth public interview since taking the helm, he announced that Apple would “double-down” on (product) secrecy.

Indeed, Cook stayed true to his word during the interview conducted by All Things D’s Walt Mossberg and Kara Swisher— he wouldn’t spill the beans on any of the products Apple might introduce in a couple of weeks at its World Wide Developers Conference (WWDC).

But Cook did weigh in on a number of topics, from what he learned from his predecessor to his thoughts on Apple TV.

And in the very definition of understatement, Cook said of Apple, “we’ve had a few decent quarters.” (Apple reported record quarterly profits in March. Net profit for the quarter rose 94% year over year.)

Here are edited highlights from Cook’s appearance:

On being CEO. “It’s an absolute incredible time to be at Apple. I’m loving every minute of it…Never have I seen the things I can’t talk about today — the juices are flowing and we have some incredible things coming out.” Working at Apple, Cook said, is “my oxygen.”

On the iPad and tablets. “I’ve never seen a product in technology that consumers loved pretty instantly and business loved and education loved and people of all ages loved. I think we’re in the first inning on the iPad. It’s only been two years.

I really believe that the tablet market will eventually surpass the PC market. Everybody at the beginning kind of laughed that off and said no way. Today I think there’s a lot more believers. I would guess there’s a lot of people in this audience that use their iPads a lot more than they use their computers. And I know I do that. And I love the Mac. We didn’t invent the tablet market. We invented the modern tablet. In my view the tablet and the PC are different. Products are about tradeoffs. The more you look at a tablet as a PC the more the baggage of the past affects the product (negatively).

I don’t see the tablet replacing the need for all PCs or all Macs. What I see is the tablet for some people takes over what the PC was about for them.

On the death of Jobs and his impact. “I learned a lot from Steve. It was absolutely the saddest days of my life (when he passed away.)

As some point late last year somebody shook me and said, ‘it’s time to get on.’ That sadness was replaced by this intense determination to continue the journey. I learned that focus is the key not just in running a company but in your personal life as well. He also taught me that the joy is in the journey. And he taught all of us that life is fragile.

Another thing that Steve taught us was not to focus on the past. Steve told me when he called me to his home to talk about being CEO…he told me (he) witnessed what happened at Disney when Walt passed away. He said people would go to meetings and all sit around and talk about what Walt would have done. And he looked at me with those intense eyes and he told me to never do that, to never ask what he would do — just do what’s right.”

Steve was a genius and a visionary. I never really viewed my role was to replace him. He was irreplaceable. Steve was an original and I don’t think there’s another one of those being made. I never felt the weight of trying to be Steve. I am who I am…and focused on being a great CEO at Apple.

If (Steve) were sitting here he would tell you that one person can’t do it all. You could have an “S” on your chest and a cape on your back and not be able to do everything. He brought in great people and set a standard. His legacy was in leaving that foundation.

Patent wars among Apple, Samsung, Google: Is it a problem for innovation? “It’s a pain in the ass. We can’t take all of our energy, all of our care, and finish the painting and have someone else’s name on it. We can’t have that. The worst thing in the world that can happen to you if you’re an engineer and you’ve given your life to something is for someone to rip it off and put their name on it. ”

The TV business. It’s not a fifth leg of the stool. It’s not the same market size as the phone business or the Mac business or the music business or the tablet business. But last year we sold 2.8 million Apple TVs. This year just in the first six months we sold 2.7 million. This is an area of intense interest for us. And so we’re going to keep pulling this string and see where it takes us. I think many people would say this is an area in their life they’re not really pleased with. It’s an interesting area.

Right now our contribution is Apple TV.

(When asked about whether Apple is making a TV set.) “You were right, I’m not going to tell you.”

“We would look not just at this (TV) area but other areas (and) we would ask can we control the key technology? Can we make a significant contribution far beyond what others have done in this area? Can we make a product that we all want? We think we’re reasonably good proxies for others. Those are things we would ask about any new product category.”

Among other subjects Cook touched on: he said he didn’t think Apple has to own a content business. He said Apple didn’t look at buying Instagram before Facebook’s acquisition. And while he wouldn’t rule anything out, Cook says he is not looking at any big acquisitions right now.

Cook said Apple has to be social but doesn’t have to own a social network. Twitter is deeply integrated into its iOS mobile operating system and OS X Mountain Lion, the newer version of the Mac software that is coming this summer.

He named Bobby Kennedy and Martin Luthor King as two of his heroes, and said Disney’s Bob Iger, who sits on Apple’s board, is one of the CEOs that he admires.

And he recalled the time in 1998 when Jobs tried to woo him to Apple from Compaq, he had no intention of joining. Cook fielded a number of calls from recruiters and finally agreed to meet with Jobs. He flew out on the redeye on a Friday night for a meeting the next morning. “The honest to God truth is that five minutes into the conversation I wanted to join Apple…He painted a story, a strategy that he was taking Apple deep into consumer at a time that I knew that other people were doing the exact opposite. I never thought following the herd was a good strategy. You’re destined to be average at best. I saw brilliance in that.”

Cook resigned from Compaq immediately.


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Europe’s biggest fear

It’s been a week since shares in Bankia plummeted on reports, later denied, that customers were pulling deposits out of the Spanish lender. Fears of a full-scale bank run in Greece have not yet materialised. But the possibility of a deposit run in Europe’s peripheral states is still very much alive. It is also the thing that policymakers are least prepared for. 

As with most aspects to the euro crisis, the usual answers are not much help. One tactic is to show customers the money. Old hands of emerging-market bank runs talk of how they used to pile cash up in full view of panicking customers so that they could see how well stocked the banks were with money. The equivalent now is to let the central bank provide enough liquidity that the ATMs always spit out cash. But if the idea is to get your hands on euros today in case of a currency redenomination tomorrow, then you will still want it out of the bank and under the mattress.

Another response to runs is to calm worries about the solvency of specific institutions by beefing up the scale of deposit guarantees. In the first phase of the crisis, which now seems almost innocent in its simplicity, that is what governments did. But that makes the problem worse, not better, if government solvency is at the root of the problem.

The logical solution, as we argue this week, is to set up a joint deposit-guarantee scheme, in which euro-zone states pool resources to provide credible reassurance that depositors across the zone will get their money back, up to a harmonised threshold of €100,000 ($125,000). To get around the redenomination risk, the guarantee would have to be a promise to repay the original value of the deposit in euros.

The problem, as analysts have noted this week, is that even if the political will to realise this end existed (which is highly questionable), it would take a long time to negotiate an agreement. There are all sorts of fiddly details for Eurocrats to get their teeth into. Should the scheme be prefunded? Should depositors be preferred creditors, or behind the ECB in the queue? What supervisory arrangements are needed to ensure that creditor nations have sufficient oversight of the deposit-taking institutions they now insure in peripheral countries? And that is before you get into the rigmarole of ratifying agreements.

The trouble with this is that there is a horrible, insoluble mismatch between the timescales to which Europe’s policymakers work and the timescale of a bank run. A run is most likely within the next few weeks. And if a run starts, Europe’s governments will have to reassure within a matter of hours. You might just about get a communiqué from Brussels in that timeframe, but could it really reassure when so many questions are unanswered?

If it does not, then the run will continue until such time as the banks close their doors to further withdrawals or the central banks have satisfied depositors’ demand for cash. The former means trapping depositors inside a system they do not trust. The latter means providing liquidity to a banking system that has been abandoned by its own citizens. It would be hard to come back from either position.

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Greek election: Far-left seeks anti-austerity coalition

Syriza leader Alexis Tsipras. Photo: 7 May 2012

The leader of Greece’s far-left is to try to form a government after parties backing an international bailout deal failed to assemble a coalition.

Alexis Tsipras aims to put together a cabinet that will reject austerity measures imposed as part of the deal.

But analysts also say his attempts, following Sunday’s poll, are likely to fail to achieve the necessary numbers.

Voters in Greece, France and Italy have all largely swung in favour of anti-austerity candidates this week.

In Greece, both the centre-right New Democracy and former coalition partners Pasok, the traditional parties of power, saw their support drain away in favour of radical parties on the left and right.

France’s President-elect, Socialist Francois Hollande, said in his victory speech that he would seek an alternative to austerity.

And partial results from local elections in Italy suggest a marked swing away from mainstream parties. An anti-euro protest movement led by comedian Beppe Grillo made significant inroads in Parma and Genoa.

Reacting to the election results, German Chancellor Angela Merkel said austerity measures were “not negotiable” and described Greece’s reforms as of “utmost importance”.

Markets slumped following the election results in France and Greece, but largely recovered later. The Athens stock exchange, however, had plunged 6.67% by the end of Monday.

In return for two EU/IMF bailouts worth a total of 240bn euros (£190bn; $310), Greece agreed to make deep cuts to pensions and pay, raise taxes and slash thousands of public sector jobs.

Numbers game

Mr Tsipras, who heads the Syriza group, will on Tuesday be officially given three days to negotiate a coalition by President Karolos Papoulias.

The 38-year-old party leader has already promised to stitch together a left-wing cabinet to reject the “barbaric” measures associated with the bailout deal.

“We will exhaust all possibilities to reach an understanding, primarily with the forces of the left,” Mr Tsipras said.

But the numbers just do not seem to add up, the BBC’s Matthew Price in Athens says.

Earlier on Monday, New Democracy leader Antonis Samaras admitted he had failed to find a coalition cabinet, stressing that his party had done “everything possible” to form a government.

“I tried to find a solution for a government of national salvation, with two aims: for the country to remain in the euro and to change the policy of the bailout by renegotiation,” he said in a televised address.

“We directed our proposal to all the parties that could have participated in such an effort, but they either directly rejected their participation, or they set as a condition the participation of others who did not accept.”

If Mr Tsipras fails to clinch a coalition deal, the mandate then passes to Pasok leader and ex-finance minister Evangelos Venizelos.

Mr Venizelos said Syriza and the smaller leftist party of Fotis Kouvelis should be involved in any new coalition.

“It is necessary for the government of national unity to include all the forces that have a pro-European outlook,” Mr Venizelos said. “The minimum level of agreement is that Greece remains in the euro.”

Snap elections will be called if no agreement is found, with analysts saying the polls could be held in the summer.

Despite emerging as the biggest party, New Democracy’s support slipped from 33.5% in the last election to less than 19% on Sunday.

Support for the centre-left Pasok, which also supported the austerity measures, plummeted from 43% to just over 13%.

Syriza took 16.8%, while fellow anti-bailout party, the ultra-nationalist Golden Dawn, won almost 7%.

The financial chaos has sparked huge social unrest, and led to a deep mistrust of the parties considered to be the architects of austerity.

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Facebook IPO: How could privacy concerns affect revenue? – Washington Post

Now that Facebook has set its share prices, valuing the company between $77 billion and $96 billion, the question is whether it will be able to convince investors that it’s got a sustainable business model, can keep growing and find new ways to generate revenue.

And because advertising revenue is such a big part of Facebook’s business model, user privacy will have to be a major consideration for potential investors.

“If you use Facebook, you’re the product, not the customer,” said Bill Kerrigan, chief executive of the privacy company Abine, in an interview with The Washington Post. “The company’s financial success requires it to collect more personal information and make available to advertisers.”

Facebook itself is clearly aware of how important it is to keep up a good reputation on privacy, especially after settling with theFederal Trade Commission over complaints that it was making data public without user permission.

In the list of risk factors that the company has put in its S-1 filing, the company has listed that “changes in user sentiment” about the network’s “privacy and sharing, safety security or other factors” could have a bad effect on the company and its revenue.

As the company continues to build upon its vision of becoming a platform for application developers and other Web services, it will have to carefully consider how best to protect privacy. More partnerships with third-parties can lead to more revenue, but it also means that users will be sharing more information about themselves through apps.

That’s not inherently a bad thing — Facebook is a sharing platform, after all — but it does open up more potential for consumer confusion about managing their privacy settings. Users can manage their app settings through Facebook’s privacy menu. But many skip over or may simply not understand the data sharing terms they agree to when they use their Facebook account to log into an app such as Draw Something or Spotify.

recent study from Consumer Reports found that — based on extrapolated data from around 1300 Facebook-using households surveyed for the group’s “State of the Net” report — 13 million of the site’s 900 million users (150 million in the U.S.) said they still have never set or didn’t know about the social network’s privacy tools.

That group is shrinking as awareness about the company’s data use policies grows, said Kerrigan. According to his metrics, the only thing that’s growing faster than Facebook is the user group managing privacy.

In fact, a February study from New York University Polytechnic of 1.4 million Facebook users found that 12 percent of Facebook users hid personal information such as their age or hometown in 2010. By 2011, that number had jumped to 33 percent, according to a reportfrom TechJounal. And in February, the Pew Internet and American Life Project found that 58 percent of Facebook users have made their profiles private to friends.

Kerrigan said that Facebook users’ tendency to make more information private and to be more concerned with learning how the social network collects and uses data leads to a “natural tension point, between user privacy and Facebook’s future success.”

Xavier Le Hericy, Director, Security & Privacy at Webtrends, said that he believes Facebook will be able to adjust to navigate those challenges. “Facebook has proven to that it can adjust quickly to a changing landscape and is very responsive to user feedback on privacy. Maybe it’s because of the software engineering roots of the company, but Facebook carries the engineering concept of agile development to the business level. I wouldn’t discount their ability to keep adjusting as they’ve done so far.”

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Highlights of De Hoeksteen April 27 – May 2012

Performance of artist Jolanda Jansen

Journalist Rosario Hernandez and Freddy Galeano (De Hoeksteen Team) During CableCasting


Interview with Director of the CCV Utrecht Province Onno Peer by Willem Lust.


Performance of artist Carlos Llavata


Stevens Gallery exhibitions live


Live Interview with the Museum of Contemporary Art of Bogota, Colombia.


Interview with Sebastiaan Capelle by Francois Engers


Martin Verbeert interviewed by Robert Paques


Eric van der Burg interviewed by Tom Compaijen


Live online performance of Colombian Artist Kai Steamer (Miguel Angel Montoya)


Colombian artist Alejandro Ramirez interviewed by Els van der Plas


Owners of Qlick Editions Gallery Esther Munsters and Fleur Shekel interviewed by Francis Beukeveld


Designer Interviewed by Els van Der Plas

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Filed under Amsterdam, crossmedia, digitalTV, Journalism, television, TV, Uncategorized