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EUROPE
Friday June 22 2012
The bank that broke Spain
Behind the scenes at Bankia. Analysis, Page 7
Shell or Greenpeace?
Meet the brand­jackers
Business Life, Page 10
World Business Newspaper
Stress test
data seek to
ease Madrid
bailout fears
Historic moment
Suu Kyi addresses UK parliament
TOMORROW IN
FT WEEKEND
Summer Food
Special
From Rowley
Leigh’s secret
Riviera and pick of
the best French
recipes, to al fresco
treats from top
chefs
Life & Arts
ECB boost via loosening of collateral rules
By Victor Mallet in Madrid
and Ralph Atkins in Frankfurt
make greater use of asset-
backed securities when drawing
ECB funds. The move – coming
as European authorities and
Madrid draw up their plans to
recapitalise the country’s banks
– will help to offset a possible
liquidity squeeze caused by
downgrades by credit rating
agencies.
The decision by the ECB’s 22-
strong governing council is part
of a wide-ranging review of col-
lateral rules aimed at ensuring
liquidity continues to flow to
sound eurozone banks – and to
reduce its reliance on external
bodies such as Standard &
Poor’s and Moody’s.
Oliver Wyman and Roland
Berger, the consultancies, con-
ducted separate “stress tests” on
Spain’s banks, looking at 14
banking groups that make up 90
per cent of the system.
Oliver Wyman said the banks
needed between €16bn and
€25bn over the next three years
under the “base scenario” using
current estimates of economic
developments, and between
€51bn and €62bn in a “stressed
scenario” involving economic
shrinkage of 4.1 per cent this
year and steep falls in the prices
of property and land.
Roland Berger’s calculations
came up with a shortfall of
€25.6bn in normal circum-
stances and €51.8bn in the
“stressed” conditions, for which
it described the assumptions as
“harsh”.
Additional reporting by Peter
Spiegel in Luxembourg
Spain has sought to ease inves-
tors’ fears that it needs a sover-
eign bailout by publishing two
“stress tests” showing its banks
need between €16bn and €62bn
in new capital.
These estimates fall well
below the sum of up to €100bn
that Spain requested for its
financial system from its euro-
zone
News Briefing
Xstrata­Glencore
merger plan hits flak
A UK investor group hit at
Xstrata’s plan to pay £173m
to retain senior management
if a merger with Glencore
goes through.
Page 13
Islamist protest call
The Muslim Brotherhood,
which claims victory in
the Egyptian presidential
election, called for
demonstrations.
Page 5;
www.ft.com/arabprotests
US­Japan naval drills
Naval exercises involving the
US, Japan and South Korea
began in waters near China
and the Korean peninsula.
Report and Mure Dickie, Page 6
Syrian pilot defects
As violence continued in
Syria, a fighter pilot flew his
aircraft to Jordan and was
granted political asylum.
Page 5; www.ft.com/syria
China headwinds
China’s manufacturing sector
slowed further in June and
the weakness is likely to
drag on.
Page 3; China
investment: Lex, Page 12
Bali bomb sentence
An Indonesian court handed
Umar Patek, 45, 20 years for
helping make two bombs
that killed 202 people in the
2002 bombing.
Page 6
Dissident freed
China artist Ai Weiwei’s
house arrest ended but he
could face charges of bigamy
and pornography.
Page 6
Uruguay drug plan
Montevideo proposes to
legalise marijuana, putting
production and distribution
in the hands of the state.
Page 4
Gehry’s $58m flats
Each of 12 Frank Gehry-
designed Hong Kong flats is
set to be priced at HK$450m.
Page 3; Property predators:
www.ft.com/moscowraids
The concise Castro
Fidel Castro, hitherto known
for his verbosity, has begun
penning pithy,
haiku
-like
‘capsules of wisdom’.
Page 4
partners
earlier
this
month.
Fernando Restoy, deputy gov-
ernor of the Bank of Spain, said
the numbers were “a long way
from the maximum that the
eurogroup agreed to make avail-
able to Spain”. He added that
the needs were focused on four
groups already assisted by the
state Fund for Orderly Bank
Restructuring (Frob), including
Bankia, the group of seven cajas
that is being nationalised by the
government after requesting
an extra €19bn in emergency
capital.
“The three biggest groups in
the country don’t need assist-
ance in the form of new capital,
even in the stressed scenario,”
he said in a reference to
Santander, BBVA and Caixa-
bank.
The European Central Bank,
meanwhile, is expected to give
Spanish banks a much-needed
boost with a significant loosen-
ing of rules on collateral
required to obtain its liquidity,
which could be followed by
steps to reduce the role of credit
rating agencies.
The concession, which could
be announced as early as today,
would allow Spanish banks to
Aung San Suu Kyi, Myanmar opposition leader and former political prisoner, mingles with guests following her address to both UK
houses of parliament in London yesterday, becoming the first non­head of state to do so
www.ft.com/uk
PA
Romney in pitch to Hispanic vote
By Richard McGregor
in Washington
Mexico as well as increasing
the number of officers on the
ground.
The White House’s announce-
ment on Friday caught the
Romney campaign unawares
and pulled the rug from under
the Republican senator from
Florida, Marco Rubio, who was
preparing a bill for Congress
containing similar measures.
“Some people have asked if I
will let stand the president’s
executive action,” Mr Romney
said. “The answer is I will put
in place my own long-term
solution that will replace and
supersede the president’s tem-
porary measure.”
Mr Romney added that Mr
Obama had failed to push for
comprehensive
reform when Democrats con-
trolled both houses of Congress
from 2008 to 2010 and was “tak-
ing your vote for granted”.
Hispanics consistently sup-
port Mr Obama by a margin of
more than two to one in polls,
and could prove to be a pivotal
voting block in a number of key
swing states.
But many reliable Republican
voters, especially white blue-
collar males and the Tea Party,
are strongly against any con-
cessions that would allow ille-
gal immigrants to gain citizen-
ship.
In a finely balanced speech,
Mr Romney softened the tough
rhetoric he used against illegal
immigration in the Republican
primaries, when he said that
illegal immigrants should “self-
deport” and then queue up to
enter the US legally.
Mr Romney emphasised two
reforms – handing permanent
residency to anyone who gains
an advanced degree at US uni-
versity and giving priority for
green cards to reunite families
“living under the one roof”.
He will also make an excep-
tion for illegal immigrants who
had served “honourably” in the
military whom he said had
earned the right to citizenship.
Mr Rubio blamed Mr Obama
for the demise of his proposed
reforms, saying the president
“had injected election year
politics into an issue which I
think we had been making
progress on”.
Mitt Romney has launched an
effort to win over Hispanic vot-
ers who overwhelmingly favour
Barack Obama by promising to
push for “long-term” immigra-
tion reform should he win the
2012 US presidential election.
But in the speech to Hispanic
leaders in Orlando, Florida, Mr
Romney stopped short of
endorsing Mr Obama’s decision
to allow children brought into
the country illegally to normal-
ise their status and gain work
permits.
The presumptive Republican
nominee also said he supported
the completion of a “high-tech”
fence to secure the border with
Rescue fund legal threat, Page 2
Analysis, Page 7
Michel Barnier, Page 9
immigration
Pakistan crisis deepens as ruling
party withdraws PM candidate
Twist warning
By Rahul Jacob in New Delhi
and Farhan Bokhari in Islamabad
tions across the country over
the past week. Given the chaos
surrounding the selection proc-
ess, he or she will also be under
great pressure to call early elec-
tions ahead of March 2013, when
the term of the parliament ends.
“The government is increas-
ingly losing control over Paki-
stan and has few options but to
go for early elections,” said
Hasan Askari Rizvi, a political
commentator. “Pakistan is very
unsettled.”
The PPP moved quickly to
nominate Qamar Zaman Kaira,
the information minister, as an
alternative candidate. Party
members said Raja Pervez
Ashraf, the water and power
minister, was also a contender.
The national assembly will
choose the next prime minister
today. Observers said that the
PPP-led coalition had enough
votes safely to elect whichever
candidate it chose, but the dis-
missal of Mr Gilani and the flip-
flops on Mr Shahabuddin’s can-
didacy had badly hurt its image.
The case against Mr Sha-
habuddin involves two pharma-
ceutical companies that alleg-
edly used government contacts
to import large quotas of ephe-
drine. The companies have
denied doing anything illegal.
It is not clear what prompted
the anti-narcotics force, which
issued the warrant against Mr
Shahabuddin, to act on the eve
of his appointment. The force is
headed by a serving major gen-
eral in Pakistan’s military,
which has previously clashed
with president Asif Ali Zardari’s
government over issues such as
co-operation with the US.
Mr Gilani was removed from
office on a charge of contempt
of court relating to his adminis-
tration’s refusal to comply with
a
Pakistan’s ruling party with-
drew its candidate for prime
minister after a warrant was
issued for his arrest by an anti-
narcotics agency, deepening the
country’s political crisis.
Makhdoom Shahabuddin was
first pick of the Pakistan Peo-
ple’s party to replace Yusuf
Raza Gilani, who stepped down
after the Supreme Court dis-
qualified him as a member of
parliament on Tuesday. Within
an hour of Mr Shahabuddin’s
nomination, however, an arrest
order was issued in a case
linked to drug import decisions
he made as health minister.
Pakistan’s next prime minis-
ter will face an array of chal-
lenges ranging from strained
relations with the US to a
severe electricity shortage that
has sparked violent demonstra-
The US Federal Reserve’s
decision to extend Operation
Twist will reduce liquidity in the
short­term funding market that
helps facilitate smooth trading
of US government bonds,
traders have warned. The Fed’s
$267bn extension of the Twist
until the end of the year
means the central bank will
no longer buy newly issued
government bonds at US
Treasury auctions.
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FRIDAY JUNE 22 2012
WORLD NEWS
Legal move threatens EU rescue fund
Eurozone
divided
on terms
of Athens
bailout
German court asked
to halt ratification
ESM scheduled to
take effect in July
exchange for new measures
to boost economic growth
and progress towards a
European financial transac-
tion tax.
The court challenge by
the radical Left Party
underlines the key role of
the Karlsruhe court in
shaping Germany’s
response to the eurozone
crisis. It follows similar
appeals in 2010 to block dis-
bursement of emergency
loans to Greece and the
launch of the eurozone’s
temporary bailout fund, the
European Financial Stabil-
ity Facility.
On those occasions, the
court rejected applications
for injunctions ruling that
any delay would cause
greater damage to Germany
than a temporary constitu-
tional infringement. It then
took the court over a year
to hear arguments and then
ultimately ruled in favour
of both bailout initiatives.
Similarly,
likely to reject an injunc-
tion to stop the launch of
the ESM while it assesses
its legality, but it could still
take a few weeks even to
reach that decision on the
injunction.
The ESM is due to come
into effect at the beginning
of July and could have been
immediately tapped to fund
a bailout of Spain’s banks,
although ratification may
also be delayed by a week
in Italy. The fiscal compact
is meant to come into force
on January 1.
Angela
lor, thrashed out a deal
with opposition leaders in
talks in her office in Berlin.
It will allow the Bundestag
to vote on June 29 –
although Joachim Gauck,
German president, will not
sign the bills into law until
the court decides.
In Berlin yesterday, oppo-
sition leaders claimed a sig-
nificant victory with the
agreement over the ESM,
forcing Ms Merkel to adopt
a more pro-active policy to
boost economic growth and
commit herself to fight for
the FTT.
Wolfgang Schäuble,
finance minister, has
warned that opposition to
the FTT from the UK, and
eurozone members such as
Ireland, Finland and the
Netherlands, could scupper
a deal. But Germany will
push for a tax to be agreed
among the minimum
legally possible – nine of
the 17 eurozone members.
The compromise will
force Ms Merkel to fly home
from the European summit
in Brussels on June 29 to
attend a special session of
the Bundestag, to report on
her success in getting an
active growth plan agreed,
and
She was forced to negoti-
ate with the opposition
because the fiscal compact
is a treaty to change the
German
constitution
and
therefore
requires
a
two-
thirds
majority
in
parlia-
By Gerrit Wiesmann and
Quentin Peel in Berlin
ment.
Ms Merkel will also have
to win the same majority in
the Bundesrat from the 16
federal states and further
talks will take place to win
their backing on Sunday.
They are concerned that the
pact
Merkel,
chancel-
By Peter Spiegel
in Luxembourg
Hopes of launching the
eurozones’s permanent res-
cue fund in the first days of
July suffered a blow yester-
day when one of Germany’s
opposition parties said it
would ask the country’s
highest court to suspend
ratification while deciding
whether
Debt crisis weighs on Germany
Eurozone finance ministers
sparred over whether to
allow more time for Greece
to hit tough deficit targets
mandated in its €174bn bail-
out, with representatives
from most triple-A northern
countries vowing no leeway
while the French minister
indicated his government
was open to such a shift.
The diverging stands,
articulated by ministers as
they gathered in Luxem-
bourg for their first meeting
since the weekend vote in
Greece, suggested divisions
were deepening among
eurozone capitals in
advance of an expected
request by the new Greek
government to extend their
programme by two years.
Under the terms of the
current bailout, Greece
must make another €11.7bn
in austerity measures over
of the next two years, and
the focus of the debate is
expected to centre on
whether those cuts can be
spread over a longer period.
Pierre Moscovici, French
finance minister, said the
election of a government
led by Antonis Samaras,
head of the centre-right
New Democracy party that
backed the bailouts’ terms,
meant Europe should show
more understanding of the
Greek plight.
“We know that it means
that Greece will have to
respect its commitments,”
Mr Moscovici said. “But it
also means that Europe has
to be sensitive to the feel-
ings of the Greek people,
and take measures to help
the country achieve growth.
Efforts must be made, but
at the same time we have to
create conditions for hope.”
The French government
has shown little reluctance
to challenge Germany, Fin-
land, Austria and the Neth-
erlands over the way they
have tackled the eurozone
crisis, and his remarks were
in sharp contrast to minis-
ters from those countries.
Jan Kees de Jager, Dutch
finance minister, said there
was no alternative to “hard,
painful reform” in Greece,
while his Austrian counter-
part, Maria Fekter, said she
expected little flexibility.
“We will have to see how
much time Greece missed
due to its election cam-
paign,” she said. “If it missed
too much, Greece will have
to work even harder.”
Some EU officials have
said the Greek programme
could be put back on a real-
istic track by giving Athens
more time to hit its budget
targets and adding about
€20bn to the bailout, but
new money is anathema in
Germany and in the Nether-
lands, which is in the mid-
dle of a national election
where anti-bailout parties
are gaining in the polls.
Other officials have sug-
gested Greece could be
helped by cutting rates on
bailout loans and extending
the repayment period, with-
out the politically difficult
decision to award more aid.
The eurozone is stuck firmly
in a sharp economic
contraction, with the
region’s escalating debt
crisis hitting Germany with
increasing severity,
according to a closely
watched survey,
writes
Ralph Atkins in Frankfurt
.
Purchasing managers’
indices for the 17­country
region in June showed
private sector activity
shrinking at the same pace
as in May, which was the
fastest in almost three
years. But Germany’s
economy, which has so far
saved the eurozone from
recession, suffered a
significant deterioration,
especially in its
manufacturing sector –
indicating its exporters were
being affected by gloomier
global conditions.
“The downturn is
gathering pace and
spreading across the
region,” warned Chris
Williamson, chief economist
at Markit, which produces
the survey. The latest
results suggested companies
were “preparing for
conditions to worsen in the
coming months, with the
darker outlook often
attributed to uncertainty
caused by the region’s
ongoing economic and
political crisis”.
One bright spot was a rise
in the French purchasing
managers’ indices.
The weak readings
increase the pressure on
policy makers for fresh
measures to boost growth.
will
restrict
their
budget powers.
Failure to reach agree-
ment would have been a
humiliation for the chancel-
lor, who has insisted that
her eurozone partners all
adopt the fiscal compact –
including a constitutional
“debt brake” enforcing a
balanced budget – in some
cases
it
complied
with
the constitution.
The legal move overshad-
owed an agreement
between Germany’s govern-
ment and most opposition
parties clearing the way for
parliamentary approval by
the
against
their
better
end
of
June
of
the
judgment.
€500m
European
Stability
In full: www.ft.com/world
Analysis, Page 7
Philip Stephens, Page 9
Mechanism
and
the
EU’s
wider
agreement
on
new
fiscal
compact
in
the
court
is
the FTT.
Euro 2012
No political
goal, say
footballers
“It is true there’s a crisis,
but our idea is to play to
put a smile on people’s
faces back home,” says
Dimitris Salpingidis, a
striker for the Greek
national football team.
Greece’s players are
careful to dismiss
suggestions they might be
heading for a grudge
match against Germany
today in the quarter­finals
of the Euro 2012
championship,
writes
Kerin Hope in Athens
.
“We came here to play
football not politics,” says
Costas Katsouranis, the
Greece captain.
Indeed, Greek footballers
are sometimes mocked in
the media for their
“Germanophilia”, since
many young players aspire
to join German teams. Five
members of the Greece
squad are current or past
players for Bundesliga
clubs.
German culture is
associated with footballing
organisation and success,
says Alexander Kitroeff, a
Greek sports historian,
citing Greece’s victory in
Euro 2004 under the
German coach Otto
Rehhagel. “That feeling is
too strong to be offset by
anti­German views
triggered by the economic
crisis,” Mr Kitroeff says.
Franz Beckenbauer, a
German footballing legend,
warns that Greece’s
performance is “on the
up”. And Mr Rehhagel
says it would be wrong to
write them off. They “fight
with passion and stand
with confidence”, he says.
One line of thinking
holds that Greece has
been strengthened by Mr
Rehhagel’s Germanic
reforms. “[Greece] are
masters of efficiency,”
says Thomas Mueller, the
German midfielder. Even
the German government
could warm to that.
All smiles: Antonis Samaras waves to supporters in Athens last week. There are doubts about the longevity of his coalition government
Reuters
Greek premier’s political judgment in focus
general election because of
fears that the hard-left Syr-
iza coalition would put
Greece on a collision course
with international lenders,
sending the country crash-
ing out of the euro.
New Democracy won by a
better-than-expected margin
of almost 3 per cent – a
result that also thwarted
plans by Greek business
leaders to oust Mr Samaras
from the party leadership in
favour of a younger, less
nationalistic successor.
Yet Mr Samaras’s pledge
to form a slimmed down,
non-partisan cabinet of
technocrats has already
fallen through. Yesterday
he announced an old-style
government packed with
conservative party loyalists.
“It is hard to see this as a
government that can
last . . . [The new cabinet]
another disappointing per-
formance by Samaras,” said
Thanos Veremis, a veteran
analyst and historian.
Mr Samaras, a member of
Greece’s US-educated elite,
has failed to live up to
expectations on previous
occasions. Indeed, he gained
a reputation for slippery
political manoeuvring and
questionable judgment soon
after he was appointed
Greece’s youngest foreign
minister in the early 1990s.
As the Yugoslav conflict
widened, he claimed to back
European initiatives to pro-
mote security in the Bal-
kans, yet vetoed interna-
tional recognition of the
small, vulnerable republic
of Macedonia under that
name, claiming it could rep-
resent a threat to Greece.
He supported the pro-mar-
ket reforms of Constantine
Mitsotakis, a conservative
premier in whose govern-
ment he served. But in 1993
he led a backbench rebel-
lion that brought down the
administration.
much of the following dec-
ade in political isolation – a
period that friends say left
deep psychological scars.
Mr Samaras seized an
unexpected opportunity to
make a political comeback
in the mid-2000s, first as a
centre-right member of the
European parliament, then
as culture minister in the
conservative government of
Costas Karamanlis, whom
he succeeded as leader of
New Democracy in 2009.
When the socialist gov-
ernment agreed to a first
bailout in 2010, Mr Samaras
refused
sensible choice was to back
the bailout and oppose
some measures,” said an
aide. “Mr Samaras decided
to do the opposite, condemn
the bailout but back a cou-
ple of reforms, a move that
obviously
ties with a number of lead-
ers. But many of those ties
have been strained and, in
some cases, badly damaged
by what many in Brussels
and Berlin view as political
gamesmanship over the
past year, where Mr
Samaras is viewed as
putting his own ambitions
ahead of national interests.
The relationship has still
not recovered from his
repeated resistance to pub-
licly back February’s sec-
ond €174bn Greek bailout,
where he left eurozone
finance ministers dangling
for weeks before grudgingly
committing his party to an
outline deal.
“There is a general sense
around Europe, when you
talk to leaders, they ask: is
there anyone in Greece we
can trust to rise above
party politics?” said one EU
official. “[Mr Samaras] is
not the worst example, but
he’s difficult to pin down.”
Profile
The prime minister
has failed to live up
to expectations in
the past, write
Kerin Hope
and
Peter Spiegel
infuriated
our
creditors.”
Mr Samaras’s critics ques-
tion his decision to seek an
early election as the price of
supporting a coalition gov-
ernment led by Lucas
Papademos, a technocrat
and former European Cen-
tral Bank vice-president,
which oversaw a successful
partial debt restructuring in
February.
“His insistence on hold-
ing elections could turn out
to be a major historical mis-
judgment,”
Antonis Samaras this week
achieved a life-long ambi-
tion to become Greece’s
prime minister, but only
after agreeing to share
power with two small
leftwing parties in what is
likely to be a fragile coali-
tion.
Few analysts in Athens
are betting the 61-year-old
conservative leader will be
able to stay the two-year
course he has charted for
his new government.
Voters rallied to Mr
Samaras’s New Democracy
party
to
back
it.
“The
‘Hard to see this as
a government that
can last . . . another
disappointing
performance . . .’
one
of
Mr
Samaras’s advisers said.
Many senior European
officials remain wary of the
new Greek prime minister.
His long tenure in Greek
politics has produced close
at
last
Sunday’s
He
spent
Italy’s north struggles to recover from quake damage
Many of its businesses were
already struggling with for-
eign competition – some
now worry that the quakes
might be their death knell.
The five multinationals
that dominate the local
economy say they want to
stay in Mirandola – on con-
dition that Italy’s public
administration pays the
€700m it owes to companies
in the region.
“We don’t just want to
hear that they will pay; we
want actual dates and we
want to see the money,”
says Giuliana Gavioli, tech-
nical director for B. Braun
Avitum Italy, a unit of Ger-
many’s B. Braun. “We are
not
goods from a warehouse on
the verge of collapse. The
company has placed 200
employees on temporary
leave, while the remaining
staff are housed in tents
and shipping containers.
Roberto Ganzerli, Miran-
dola’s city councillor in
charge of the economy, sits
in an improvised office in a
school in one of the tent
cities set up to house those
who cannot return to their
homes. One of his priorities
is to save the town centre,
off limits since the earth-
quakes, by turning the
main square into a tempo-
rary shopping centre with
shipping containers func-
tioning as stores. “It’s a
stopgap measure, but it
would keep the town centre
alive,” Mr Ganzerli says.
Mirandola is one of a
dozen towns seeking to
make a comeback, made all
the more difficult because
39 of the 43 churches in the
area are damaged, destroy-
ing a traditional reference
point for Italian towns.
“The social fabric has
been damaged, and getting
that repaired is a prerequi-
site to getting the economy
back on its feet,” says
Michele Camurati, emer-
gency manager for the Red
Cross in Emilia-Romagna.
In Finale Emilia, 20km
farther east, an eerie silence
hangs over the town, also
off limits to all but emer-
gency personnel. Debris
from buildings lines the
streets; the town’s theatre,
in front of a partially col-
lapsed castle, announces
the programme for the
evening of May 19, the day
before the first quake.
The half-collapsed cathe-
dral faces a wine shop,
where a 1967 Barolo stands
intact amid shattered bot-
tles of wine.
But Angelo Testi’s bakery
has just reopened – the first
sign of economic life return-
ing to Finale Emilia. There
are no customers in sight,
but he is all smiles. “Some-
body had to make the first
move and that’s what I’m
doing here,” he says. “First,
communions have been put
off because of the quakes,
but sooner or later people
will have to reschedule”.
Although the government
has put aside €2.5bn for the
quake-affected area, there is
concern that money alone
will not be enough.
“It would be a mistake for
companies to take the gov-
ernment money and recre-
ate the same situation they
had before the quakes,”
says Carlo Bassoli of Inoci,
a Mirandola company that
sells biomedical products to
Italian hospitals. “They
were having trouble com-
peting before, and it is only
going to get worse unless
there is the will to change.”
In Mirandola, Mr Ganzerli
has a grand vision for his
town. The tragedy has pre-
sented “an extraordinary
opportunity”, he claims.
“We have the possibility to
be the Berlin of Emilia-Ro-
magna,” he says, invoking
the rebuilding of the Ger-
man city after its destruc-
tion in the second world war.
“You get out of a major cri-
sis by thinking big.”
Earthquakes
Emilia­Romagna
region is fighting
to repair its towns,
economy and
social fabric,
writes
Eric Sylvers
Number One Southwark Bridge, London SE1 9HL
SUBSCRIPTIONS AND CUSTOMER
SERVICE:
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“Mirandola doesn’t kneel,”
announces a banner hang-
ing on a fence blocking
access to the heavily dam-
aged historic centre of this
small town near the epicen-
tre of last month’s earth-
quakes in northern Italy.
Mirandola is home to
Europe’s largest concentra-
tion of biomedical compa-
nies; this area of Emilia-Ro-
magna north of Bologna
accounts for about 1 per
cent of Italy’s economic out-
put. The earthquakes killed
27 people and injured hun-
dreds, while official figures
put the damage from the
earthquakes at about €5bn.
But the town is also cop-
ing with tremors from the
financial earthquake that is
rocking
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Bergamo
Brescia
asking
for
anything
Milan
Venice
that is not ours.”
B. Braun Italy, with
annual sales of about €50m,
is owed €18m by Italian
government bodies. The
public health service in
Naples is more than four
years late on its payments,
Ms Gavioli says.
But the immediate prob-
lem is damage from the
quakes. Outside the com-
pany’s Mirandola factory, a
robot is working to rescue
Venic
Finale
Emilia
Cremona
Mirandola
Ferrara
Bologna
EMILIA-ROMAGNA
Rave
La Spezia
SAN
MARINO
Ligurian
Sea
Arezzo
Livorno
ITALY
Siena
Mirandola is one of several
towns seeking a comeback
A
southern
Europe.
100 km
  FINANCIAL TIMES
FRIDAY JUNE 22 2012
★
3
WORLD NEWS
Rooms with a view test limit of property market
the start of the year.
A worse than expected
slowdown on the Chinese
mainland coupled with the
fallout from the eurozone
crisis mean that most ana-
lysts are predicting prices
will start to fall in the sec-
ond half of the year. The
city’s incoming chief execu-
tive has also vowed to
increase the supply of mass-
market housing, which is
expected to push down
prices after rising 80 per
cent since 2009.
“We hear a lot of people
saying that only prices in
the mass market will come
down because of the supply
issue. But you cannot
decouple the luxury end
from the rest of the market.
How much a first-time
buyer pays will affect a
chain of three to four other
[more upmarket] transac-
tions,” says Andrew Law-
rence, head of Hong Kong
property research at Bar-
clays Capital.
Beijing’s 2008 $4tn stimu-
lus package unleashed the
first big wave of mainland
property investors looking
for big ticket items to park
their assets.
The following year, 50 to
60 per cent of new luxury
properties were bought by
mainland Chinese inves-
tors, says Ricky Poon, exec-
utive director of residential
sales at Colliers. In 2009,
average prices for luxury
apartments rose 45 per cent
from 2008, compared with a
27 per cent rise in mass-
market properties.
While the government
provides no official figures,
anecdotes abound of main-
land billionaires paying
cash for multiple units in
new luxury apartment
blocks near Kowloon Sta-
tion – a popular area for
those who shuttle fre-
quently across the border.
But that has changed
since the beginning of the
year, when a combination
of a credit crunch in the
mainland and a sharp fall-
off in demand for Chinese
exports have seen their
participation in the new-
build luxury market plunge
to about 30 per cent, says
Mr Poon.
That is in line with a
slowdown in other sectors
highly dependent on the
disposable income of
China’s wealthiest: revenue
growth in Macau casinos
has fallen to just 7 per cent
in May compared with a 42
per cent full-year growth in
2011, while luxury spending
in Hong Kong and China is
also seeing slower growth.
Mainland buyers are also
venturing further afield for
bargains. A recent report
found that purchases by
non-local Chinese of luxury
properties in New York had
risen 88 per cent from 2010
and accounted for $9bn of
sales in the year to March.
Mr Lawrence, among the
most bearish analysts on
Hong Kong property prices,
fears there could be as
much as a 30 per cent fall in
prices across all sectors by
2013. But he estimates that
prices in the luxury hous-
ing market will slip only
10-15 per cent at the most.
Sales representatives of
Swire Property deny that
the design of the Opus show
flat – plenty of chandeliers
and a kitchen featuring lots
of silver – is meant to
appeal to the flamboyant
tastes of nouveau riche
mainland Chinese buyers.
But the fate of Opus –
which has units for sale and
for rent – is still likely to lie
in the hands of investors
from north of the border.
“Here, you are talking
about the ultra-luxury end
of the market and only
mainland Chinese billion-
aires who have done an IPO
of their own companies are
likely to pay for these,”
says Mr Lawrence.
One agent says there is
interest in Opus but that it
is out of reach for some of
his clients. “A mainland cli-
ent of mine was bowled
over by that view. After all,
you just don’t get a harbour
view like that in mainland
China. He would pay $38m
for it, but no more, so he
walked away.”
Hong Kong
Apartments will
cost around $58m
each despite signs
of slowing demand,
write
Enid Tsui
and
Rahul Jacob
The views it offers across
Hong Kong’s famous har-
bour are stunning but it is
the price tag attached to the
city’s newest luxury apart-
ment block that is creating
the bigger stir.
Each of the 12 Frank
Gehry-designed apartments
in the Opus development is
expected to be priced by
developer Swire Properties
at more than HK$450m
($58m), a record even in a
city where the average
home price was the highest
in the world last year.
At an estimated $9,000 per
square foot, Opus aspires to
be in the same league as
ultra-luxury developments
in London and Manhattan
such as One Hyde Park and
15 Central Park West.
But these are inauspi-
cious times to test the lim-
its of Hong Kong’s luxury
property market which for
several years has relied on
demand from mainland Chi-
nese. According to property
agents there have been far
fewer mainland Chinese
buyers in Hong Kong since
Tall order: with such a high price the fate of the Frank Gehry­designed Opus development is likely to rest in the hands of rich mainland Chinese
Bloomberg
China output
Poor manufacturing data add to concerns for contracting economy
Through the roof
Hong Kong domestic property
prices (index 2005=100)
China’s manufacturing sector
slowed further in June and a
decline in new orders shows
that the weakness is likely to
drag on, according to a
survey released yesterday,
writes Simon Rabinovitch
in Beijing
.
HSBC said its Chinese
purchasing managers’ index
was on track to fall to 48.1
in June from 48.4 in May,
which would mark a
seven­month low. In dipping
further below the 50
threshold, the flash figure,
which is the earliest piece of
monthly economic data for
China, indicates a steepening
contraction of activity.
The data added to
concerns about the health of
the Chinese economy, with
the benchmark stock index
in Shanghai finishing down
1.4 per cent.
The government has
already started to shift its
policy stance to stimulate
the economy, though it has
moved only cautiously so far
because officials believe that
growth, while weak, is not
collapsing.
Virtually every component
of the PMI survey, from
manufacturing output to
stocks of finished goods,
pointed in a negative
direction. But the declines
were nowhere near as
severe as late 2008, when
the global financial crisis
erupted.
Qu Hongbin, HSBC chief
economist for China, said:
“With external headwinds
remaining strong, exports
are likely to decelerate in
the coming months. The
sharp fall of prices and
moderation of new orders
suggest weak domestic
demand, posing destocking
pressures for Chinese
manufacturers.
“All will likely weigh on the
jobs market. As such, we
expect more decisive policy
stimulus to reverse the
growth slowdown.”
Earlier in June the central
bank cut interest rates for
the first time in nearly four
years and many analysts
expect at least one more
rate cut this year. Along with
monetary easing, the
government has also started
to accelerate approvals for
new public investment
projects, providing a fiscal
boost for the economy.
Yet officials have insisted
that China will not launch a
large stimulus, as it did in
late 2008.
Reports in Chinese media
indicate that bank lending
has been strong in the first
half of June, which would be
a sign that the government’s
efforts to keep growth on
track have been gaining
traction.
220
200
180
160
140
120
100
80
60
2000 02 04 06 08 10
12
Source: Hong Kong census and statistics dept
  4
★
FINANCIAL TIMES
FRIDAY JUNE 22 2012
WORLD NEWS
Snarl­ups deal blow to Rio+20
Court decision
on unions
rocks Obama’s
funds potential
‘Outrageous’ hotel
rates deter delegates
Fears over ability to
host 2016 Olympics
US delegation, was due to
speak on Tuesday at a con-
ference in Copacabana co-
hosted by Eduardo Paes,
Rio mayor, and Michael
Bloomberg, New York City
mayor. Ms Jackson, admin-
istrator of the Environmen-
tal Protection Agency, got
so stuck in the city’s
chronic traffic that she
missed the event. Her
speech was read out by
another EPA official.
But the problems began
well before the start of the
summit. When official dele-
gations went to book rooms
for Rio+20 – named because
it comes 20 years after Rio
hosted the 1992 UN earth
summit – they were con-
fronted with hotel price-
gouging.
A government-appointed
travel agent in charge of
bookings told delegations
they not only had to pay
rates of $600 and more per
night but they had to stay
for at least 10 days.
A European Parliament
delegation decided to can-
cel, some poorer country
leaders shied away and
media organisations down-
scaled their planned cover-
age.
“They blocked the rooms
and started charging outra-
geous prices,” one summit
official with knowledge of
the preparations said of the
official travel agent.
He said bad press forced
the Brazilian government to
order the travel agent and
hotels to lower their prices
and promise to reimburse
those who had been over-
charged. Such problems
may have hurt attendance.
Just five weeks ago, the
guest list was looking good.
The names of 83 heads of
state, 44 heads of govern-
ment and four vice-presi-
dents were down for the
three-day conference, which
ends today.
But internal UN figures
seen by the Financial Times
show that by Wednesday,
that list of 131 leaders had
shrunk to just 95, fewer
than some had expected for
what has been billed as the
biggest summit the UN has
ever held.
There are no doubt many
reasons for why the num-
bers fell, from the eurozone
crisis that kept many Euro-
pean leaders at home, to the
US presidential election, to
the stalled negotiations on
what the conference would
actually produce.
Brazilian officials say
they are confident the
traffic and accommodation
problems surrounding
Rio+20 will be solved by the
time of the Olympics.
“None of the infrastruc-
ture plans in Rio were
planned for this confer-
ence,” said Ambassador
André Corrêa do Lago of
the foreign ministry, Bra-
zil’s chief negotiator at
Rio+20. “It is all planned for
2014 and 2016, so nothing is
in place yet.”
No World Cup football
games will be played near
the RioCentro Convention
Centre where Rio+20 is
being held, an aide added.
And Brazil plans to increase
the supply of rooms in the
hotel industry, which has
suffered from a lack of
investment in recent dec-
ades.
But others warned the
government needed to learn
from this event. “If this is a
kind of learning curve,
that’s OK, but they keep
saying everything is perfect
when it isn’t,” said the sen-
ior summit official.
Still, some of the sum-
mit’s minor logistical
snafus have been entertain-
ing. When Zimbabwe’s Rob-
ert Mugabe began to speak
at the opening session of
the conference, the some-
times erratic English trans-
lation on convention centre
screens briefly described
him as the president of the
“Republic of O.J. Simpson”.
By Pilita Clark and Joe
Leahy in Rio de Janeiro
By Stephanie Kirchgaessner
in Washington
For a city preparing to host
the 2016 Olympics and some
of the 2014 World Cup
games, this week’s UN
Rio+20 earth summit has
shone a sometimes unflat-
tering light on its hotel and
transport networks.
Traffic jams have snarled
up the city in spite of the
government’s declaration of
a school holiday during the
event.
Lisa Jackson, one of the
most senior members of the
members of planned politi-
cal spending. This gives the
non-union workers the
chance to decline to pay for
the portion of dues related
to political activity.
In a 2005 incident at the
heart of the case, the SEIU
sent a letter to employees –
after releasing a Hudson
notice – that announced a
25 per cent increase in dues
to fund political activity.
The SEIU ultimately paid a
full refund to employees
who sued the union, and
argued that it should be
allowed to reimburse non-
members for fees used for
political purposes after the
expenditures were made.
But the majority of jus-
tices disagreed.
“Under the first amend-
ment, when a union
imposes a special assess-
ment or dues increase lev-
ied to meet expenses . . . it
The US Supreme Court
dealt a blow to government
labour unions when it ruled
in a seven-to-two decision
that public sector employ-
ees who opted not to join a
union could not be forced to
pay for political activity.
This could create new
legal barriers for unions’
fundraising efforts, further
diminishing one of Barack
Obama’s important Demo-
cratic allies in a difficult
election year.
The US president and his
supporters are likely to be
outspent by Mitt Romney,
his Republican rival.
The ruling follows a
defeat in Wisconsin, when
unions failed to unseat
Scott Walker, the state’s
governor, in a recall elec-
tion that was initiated by
unions after Mr Walker
sought to curb some collec-
tive bargaining rights of
public sector unions.
The Supreme Court said
public sector workers who
did not join unions could
still be compelled to pay
union dues, because of the
benefits they received from
collective bargaining. But a
majority of justices said the
unions had to give adequate
notice to non-members of
fees related to political
activity, and allow non-
members to object to such
payments if they desired.
One union official said it
would not be difficult to
adjust to the new require-
ment, but the decision was
“very upsetting” because it
was another example of
attacks on unions.
“The funny thing is that I
did not see the Supreme
Court address the rights of
shareholders and corpora-
tions,” said Eliseo Medina
from the Service Employees
International Union (SEIU).
Companies did not have to
secure passive investors’
permission before using cor-
porate funds to pay for cam-
paign activity.
The case centres on the
use of “Hudson notices”, in
which a union alerts non-
Subsidies dry up
US median household
income
Soyabean harvest in Illinois:
pressure to cut support for a
booming sector led
lawmakers to eliminate a
scheme worth $5bn in direct
payments to farmers
$ ’000
Farmers
US
90
80
AP
70
‘[A union] may not
exact any funds
from non­members
without their
affirmative consent’
60
50
40
30
20
10
0
2000
02
04
06
08
10
must provide a fresh notice
and may not exact any
funds from non-members
without their affirmative
consent,” the majority
found. This decision was
written by Justice Samuel
Alito, who was nominated
to the court by George W.
Bush, the previous presi-
dent.
The decision was praised
by the Romney campaign.
Two of the court’s liberal
justices, Sonia Sotomayor
and Ruth Bader Ginsburg,
agreed with the majority
but said the decision went
too far when it forced pub-
lic sector unions to have
non-members actively
“opt-in” to pay the political
dues. Usually, the onus has
been on non-members to
“opt-out” of such fees.
Two other justices,
Stephen Breyer and Elena
Kagan, disagreed with the
majority.
US individuals receiving
food stamps
Million
46
44
42
40
38
36
34
32
30
Oct
2008
2009
2010
2011
Mar
2012
Source: USDA
Senate takes step to farm subsidy reforms
planted crop or not – that
became a poster child for
excessive spending.
In addition, Republicans
and Democrats approved
further cuts to agricultural
commodity subsidy, conser-
vation and food stamp
expenditures – including
limits on help for wealthy
farmers – for a total of
$23bn in savings for the US
government over the next
decade. The bill, which
moves to the House of Rep-
resentatives, could give the
US the higher ground in its
talks with trading partners
that have demanded cuts to
US farm subsidies.
“The fact that they are
going to get it done is a
significant step forward,”
says Bill Reinsch, president
of the National Foreign
Trade Council, which is
campaigning for a revival of
multilateral trade talks.
“The US stepped up. Now I
would ask the European
Union: what are you going
to do?”
But the details of the leg-
islation, as approved by the
Senate, could be harder
rather than easier for the
US to defend abroad. While
direct payments and other
subsidies have been
scrapped, US farmers will
still benefit from a govern-
ment safety net in the form
of expanded government
crop insurance through a
“shallow loss programme”
that would help guarantee
certain farmers’ revenues.
While direct payments are
considered the most blatant
form of subsidy, that also
makes them the most trans-
parent, placing them in the
World Trade Organisation’s
“green box” of permitted
support plans. But the crop
insurance scheme could be
placed in the WTO’s “amber
box” of trade distorting sub-
sidies subject to certain lim-
its, analysts say. “The new
hand with which they give
is more distorting than the
previous one,” says Sallie
James, a trade policy ana-
lyst at the libertarian Cato
Institute. “These people are
not serious about reform.”
Brazil is among the coun-
tries that will be watching
closely how the bill moves
through the House, since it
has been mired in a long
dispute with Washington
over US cotton subsidies.
“The hope is that there
have been enough changes
to the cotton programme
that the Brazilians will be
OK with it,” says Mary Kay
Thatcher, senior director of
congressional relations at
the American Farm Bureau.
The US agricultural lobby
knew that, given the good
fortunes of the industry, it
was in the crosshairs after
new US budgetary restraint.
It made an early effort with
lawmakers to support mod-
est cuts in order to preserve
protection for farmers.
“[The agriculture commit-
tee] is the only committee
that is reauthorising a bill
and putting some of the
savings towards deficit re-
duction,” Ms Thatcher says.
Overall, the cost of the
bill, which will last five
years, is almost $1tn, the
majority of it to come from
ballooning spending on food
stamps. The legislation in
the Senate makes small
reforms to the food stamp
programme, but lawmakers
in the House may seek
more. The path to passage
in the House is not clear.
Although the chairman of
the agriculture committee
has vowed to move forward
with it, Eric Cantor, the
majority leader, suggested
it was time for a “pause”.
Still, getting to this point
has not been without the
usual congressional and
lobbying drama. The bill
pitted Midwestern corn and
soyabean farmers, who
were satisfied with the shift
towards crop insurance,
against southern peanut
and rice farmers, who
fought harder for direct
payments and target prices.
Meanwhile, John McCain,
the Republican senator from
Arizona, attracted attention
when he railed against
some measures in the bill.
So despite the encourag-
ing direction in this farm
bill, Mr Reinsch of the
NFTC also adds: “You know
the farmers: they’re not
going to be high and dry.
They never are.”
Agriculture bill
Fresh legislation
could give the US
the higher ground
in talks with world
trade partners,
writes
James Politi
Expletives ruling
favours networks
By Emily Steel in New York
Fox, owned by News
Corp, and ABC, owned by
Disney, said they were
pleased with the court’s
decision.
Robert McDowell, a
Republican member of the
commission, said the
agency would “expedi-
tiously implement” the
court’s decision and “get
back to work” to process its
backlog of indecency com-
plaints. That backlog
includes nearly 1.5m com-
plaints, some that date back
to 2003.
“We owe it to the Ameri-
can public and the broad-
cast licensees involved to
carry out our statutory
duties with all deliberate
speed,” Mr McDowell said.
Legal experts said the
Supreme Court decision left
much to be determined on
broader freedom of speech
issues.
Fox said that “the govern-
ment must tread carefully
with regard to matters
implicating speech, and we
hope in the future broad-
casters will have the ability
to rely on a governmental
review process that takes
careful account of the
important constitutional
principles at stake”.
In a concurring opinion,
Justice Ruth Ginsburg
noted the authority for the
FCC to regulate such cases
“bears reconsideration”.
“Technology has elimi-
nated whatever justification
there may once have been
for providing less first
amendment protection to
broadcast than other
media,” said Steven Sha-
piro, legal director of the
American Civil Liberties
Union. “It has become com-
monplace for the same TV
show to be shown on broad-
cast TV, replayed on cable,
and streamed on the inter-
net. It makes no sense to
apply different first amend-
ment rules depending on
whether the viewer chooses
to turn on her television set
or computer.”
In a rare burst of biparti-
sanship, the Senate was
poised yesterday to approve
its version of a five-year
farm bill, a $1tn piece of leg-
islation that defines the
relationship between the US
government and agriculture.
In some ways, this year’s
effort marks the end of an
era. Amid pressure to cut
support for one sector of
the economy that has been
booming, lawmakers elimi-
nated a controversial
scheme worth $5bn in direct
payments to farmers –
regardless of whether they
US television networks won
a limited victory yesterday
in a Supreme Court ruling
that the Federal Communi-
cations Commission failed
to provide fair notice to Fox
and ABC before punishing
them for broadcasting so-
called “fleeting expletives”.
But the court skirted the
underlying free speech
questions at stake, includ-
ing whether the FCC has
the power to regulate inde-
cency that is broadcast over
the air.
At issue were expletives
uttered by singer Cher and
celebrity Nicole Richie dur-
ing the 2002 and 2003 live
broadcasts of the
Billboard
Music Awards
show on Fox.
Both remarks were
unscripted. The third inci-
dent involved a 2003 episode
of the ABC police drama
NYPD Blue
that showed the
naked buttocks of an adult
female character for about
seven seconds as well as the
side of her breast.
After those incidents, the
FCC issued a new order
that declared such “fleeting
expletives” punishable.
That order came in a deci-
sion when the FCC sanc-
tioned NBC for an incident
when singer Bono said an
obscene word during the
2003 Golden Globe Awards.
The FCC later concluded
that the prior Fox and ABC
broadcasts violated that
new standard.
The court overturned the
FCC’s punishment based on
the fifth amendment’s due
process clause.
“The commission failed to
give Fox or ABC fair notice
prior to the broadcasts in
question that fleeting exple-
tives and momentary
nudity could be found
actionably indecent,” Jus-
tice Anthony Kennedy
wrote in the court opinion.
“Regulated parties should
know what is required of
them so they may act
accordingly.”
‘The new hand
with which they
give is more
distorting than
the previous one’
Uruguay fights crime with
move to legalise cannabis
Thoughts of Castro
Cubans baffled by Fidel’s Haiku
By Jude Webber
in Buenos Aires
already decriminalised in
Uruguay, one of Latin
America’s least socially
conservative countries,
and even the Archbishop
of Montevideo, Nicolás
Cotugno, is in favour of ini-
tiatives to legalise cannabis
cultivation for personal use.
The issue of legalisation
has entered the US election
campaign as a growing
number of voters approve of
the move and Colorado, a
state that could be key to
Barack Obama’s re-election
hopes, prepares for a ballot
on ending prohibition.
It has been raised else-
where in drugs-blighted
Latin America but most
initiatives to date have
been from rightwing or cen-
tre-right governments.
Felipe Calderón, who is
battling Mexico’s ruthless
drugs cartels, has talked of
seeking “market alterna-
tives”, which commentators
take to mean legalisation.
President Juan Manuel
Santos, in cocaine-produc-
ing Colombia, has called for
legalisation to help combat
the traffic of hard drugs, as
has Guatemala’s president,
Otto Pérez Molina.
In Britain, the govern-
ment has moved in the
opposite direction, upgrad-
ing cannabis to a class B
from a class C drug in 2008.
Uruguay’s proposal has
to be approved by
Congress but Julio Calzada,
secretary-general of the
National Drugs Board, said:
“We have hopes that legis-
lators from all four parties
[represented in Congress]
can support this measure.”
If so, marijuana would
join other state monopolies,
including in the oil and gas,
telecoms and electricity and
utilities sectors.
Mr Calzada said Uruguay
would grow the cannabis
but had not yet decided
where it would be sold. The
drug would likely be
restricted to Uruguayans
“so as not to fuel drug
tourism”, he added.
transmit the modest
understandings I have
acquired during long
years, and which I
consider useful for Cuban
officials responsible for
the production of food-
stuffs that are essential to
our people’s lives”.
A European diplomat
remarked: “I think Fidel’s
run out of ink.”
Mr Castro’s offering this
week touched on religion
and science. The latter
“tries to explain the laws
that govern the universe.
At this moment, you can
see it is expanding, a
process that began approx-
imately 13.7bn years ago”.
One state worker said:
“I don’t understand what
he wants to say.”
Mr Castro’s subjects
have also included yogis,
fruit trees and politics.
Rob Sequin, publisher of
HavanaJournal.com,
quipped that Cuba’s ex-
president “wants to sur-
pass Ashton Kutcher” –
referring to the US actor
who in 2009 became the
first person with more
than 1m Twitter followers.
Some fear Mr Castro is
seeking a new platform
from which to attack mar-
ket reforms, led by his
younger brother Raúl, the
current president.
“He has decided it’s
time to join the reform
debate that is raging
behind the scenes, and
that’s not good,” said a
local economist.
Marc Frank
Ex­president has swapped
verbosity for cryptic
comments on everything
from religion to reform
Uruguay’s leftist govern-
ment has announced plans
to legalise marijuana in an
attempt to halt rising crime.
The announcement, by
the government of veteran
former rebel leader José
Mujica, would put produc-
tion and distribution to reg-
istered users in the hands
of the state.
“We think the prohibition
of certain drugs is creating
more problems for society
than the drugs themselves,”
Eleuterio Fernández Huido-
bro, defence minister, said,
presenting the measure as
part of a broader crime-
fighting plan.
The government believes
legalising cannabis will
undermine a business
worth $75m a year and stop
people buying from dealers
pushing harder drugs such
as “paco”, an addictive by-
product of cocaine-making.
Marijuana possession is
The famously verbose
Fidel Castro has begun
writing 150 to 250-charac-
ter notes in the cryptic
style of the Haiku poem,
leaving many readers
scratching their heads.
“I’ve read them, but
honestly don’t understand
the majority. I’m left wait-
ing for something more,”
said Pedro Martinez, a
businessman.
The change in the 85-
year-old revolutionary
leader’s communication
style has been abrupt. He
wrote an essay-length
“reflection” in state media
on June 9 about the US
use of military drones.
But only the next day
he wrote his first Twitter-
like “capsule” of wisdom,
saying he was trying “to
  FINANCIAL TIMES
FRIDAY JUNE 22 2012
★
5
WORLD NEWS
Syrian jet pilot defects to Jordan
Egypt Islamists
call for protests
Kingdom grants
political asylum
Jordan’s stance on
neighbour tested
avoid any move that would
drag the kingdom into the
Syrian conflict.
That position will now be
tested, as Jordanian policy
makers weigh their
response to the Syrian
defection.
On the one hand, Amman
will be deeply reluctant to
antagonise the regime in
Damascus, but Jordan will
also want to avoid upset-
ting countries such as
Saudi Arabia and Qatar,
which support the Syrian
rebels but which also pro-
vide critical financial sup-
port for Jordan.
According to diplomats
and officials in Amman, the
Jordanian regime is worried
in particular about the
emergence of a hardline
Islamist government in
Damascus should the cur-
rent leadership fall.
The fear is that this
would encourage Jordan’s
own Islamist political party,
the main opposition force,
to take a more aggressive
stance on political reform –
possibly scuppering Jor-
dan’s stated plan for a slow,
incremental move towards
greater political freedom.
By Heba Saleh in Cairo
people to protests in Cairo.
The official election results
were due on Thursday but
have been postponed while
the electoral commission
considers reports of irregu-
larities presented by both
candidates.
The deeply-polarised soci-
ety waits to find out if its
next leader will be Mr
Morsi, or Ahmed Shafiq, a
former military man
embodying the army-led
establishment that has
ruled Egypt since 1952. Both
men have already claimed
narrow victories.
“Doctor Morsi is the pres-
ident, there is no doubt
about it,” said Mourad Ali,
a spokesman for Mr Morsi.
“All that is happening now
is manipulation.”
Last week, a court
ordered the dissolution of
the Islamist-dominated par-
liament. As polling ended
the ruling generals
announced a redrawing of
the political rules clearly
designed to limit the pow-
ers of the future president.
Islamists claiming victory
in Egypt’s presidential elec-
tion have called on their
supporters to join protests
against the ruling military
council as the country nerv-
ously awaits the announce-
ment of the final results.
The Muslim Brotherhood,
which claimed a narrow
victory for Mohamed Morsi,
its presidential candidate,
has called on its followers
to take part in “popular
events” aimed at forcing
the country’s military rul-
ers to withdraw a series of
measures extending their
powers.
Brotherhood supporters
are expected to stage pro-
tests in Cairo’s Tahrir
Square on Friday. The
group’s members and ultra-
conservative Salafis, have
joined young secular activ-
ists in an “open ended”
sit-in in the square aimed at
pressing the ruling generals
to rescind the measures.
The Brotherhood is Eg-
ypt’s largest political organ-
isation, and can mobilise
hundreds of thousands of
By Abigail Fielding­Smith in
Beirut and agencies
A Syrian fighter pilot flew
his aircraft to Jordan and
requested political asylum
yesterday, raising worries
that the turmoil in Syria
could spill over into the
Hashemite kingdom.
Samih Maaytah, Jordan’s
information minister, told
the Financial Times the
MiG-21 aircraft landed in
Jordan yesterday morning.
Jordanian state media later
said that the pilot’s request
for political asylum had
been granted.
Syrian state media said
that communications were
lost with an aircraft flown
by Colonel Hassan Hama-
deh at 10.34am during a
training flight near the Jor-
danian border.
The defence ministry,
quoted by Reuters,
described Col Hamadeh as a
“traitor” and said it was in
Syrian troops carry coffins of comrades killed in fighting. Thousands of personnel are said to have defected
AFP
contact with Jordanian
authorities to retrieve the
aircraft.
Violence continued in
Syria yesterday, with Inter-
national Committee of the
Red Cross (ICRC) aid work-
ers forced to suspend an
attempt to evacuate injured
people and civilians from
the battle-torn central city
of Homs because of shoot-
ing.
The ICRC said on
Wednesday that both sides
had agreed to a pause in
fighting to facilitate the
humanitarian effort.
Thousands of personnel
are reported to have
defected from the Syrian
army, but this is the first
time an aircraft has been
taken abroad. The Syrian
regime has not yet used
fighter jets in its military
campaigns against opposi-
tion areas, however, and
analysts say it is not clear
what the impact of the
defection will be.
“It is not necessarily the
case that others will follow
and that it will have a dom-
ino effect on the higher
level ranks of the military,”
said Emile Hokayem of the
International Institute for
Strategic Studies. “The real
story is about Jordan here
and how difficult it is going
to be to manage its rela-
tions with Syria.”
Although it was the first
Arab state to call for
Bashar al-Assad to resign as
Syrian president, Jordan
views the escalating tur-
moil in its neighbour as a
critical threat to its prized
political stability, and has
long been determined to
Podcast: www.ft.com/world­
weekly
Unease rises as
fighting moves
into Damascus
or too afraid to speak. Her
house was crammed and
was without air-condition-
ing much of the time,
because of the power cuts
still plaguing the city as it
approaches the height of
summer. “I will leave the
rest for you to imagine,”
she said.
While central Damascus
is generally calm, sporadic
mysterious bomb attacks
have added to people’s
unease at what is going on
around them. Some streets
near security headquarters
are permanently blocked off
and barriers go up around
others at night, part of the
changing geography of
conflict in one of the Arab
world’s
Assad opposition
Anxious residents
in the capital are
starting to question
whether anyone can
stop the conflict,
writes
Michael Peel
Tucked discreetly in a cor-
ner of a Damascus grocery
store, a small television
flickered with news from
Saudi Arabia’s al-Arabiya
channel – a brave choice in
conflict-racked Syria and its
anxious capital.
Tuning into a station
funded by the Saudi govern-
ment, which is opposed to
President Bashar al-Assad,
sent a clear political mes-
sage, although the shop-
keeper seemed more
despairing than angry when
he spoke of the latest vio-
lence in his country.
“It’s the same thing: kill-
ing all the time,” he said.
“There is nothing in our
hands any more.”
As world powers’ efforts
to end Syria’s bloody crisis
have faltered, central
Damascus has become a
place where a little-changed
veneer of everyday ordinari-
ness hides growing fear,
heightened by a sense that
most
historic
capitals.
Brief protests are regu-
larly reported in some dis-
tricts, never strong enough
to threaten the regime’s
grip but sufficiently resil-
ient to defy efforts to crush
them. Outside a large
mosque in Qaboun, a loyal-
ist had seemingly made a
forlorn effort to reverse the
meaning of a piece of anti-
Bashar graffiti – “We don’t
love you” – by painting
over the “don’t”.
Other forms of civil diso-
bedience in the capital have
been on the rise, including
two strikes by merchants in
the past few weeks, the first
after the massacre of 108
people in the central village
of Houla. One businessman
claimed 80 per cent of shops
had shut in a landmark
show of solidarity.
In those parts of Damas-
cus where there is still a
sense of normality, it often
has a surreal quality. At the
hotel where UN monitors
mill around waiting to be
redeployed, house music
was pumping from the pool
area, where young Syrians
in swimsuits partied as a
Russian woman with long
blonde hair danced on a
small podium.
“What can we do in this
situation?” asked one regu-
lar of the hotel bar upstairs.
“We have to try to forget.”
Government figures say
the military action in the
Damascus suburbs is tar-
geted at armed opposition
members operating there.
Jihad Makdissi, a foreign
ministry spokesman, called
on peaceful regime oppo-
nents in the capital – some
of them scarred by decades
of persecution – to de-
nounce the use of violence
in their cause.
“The intellectuals can’t
hide for ever,” he said.
“They should be more cou-
rageous.”
Back in the grocery store,
the shopkeeper had little
hope that anyone in Syria
or outside would help
deliver peace any time
soon, with the west’s oppo-
sition to Mr Assad nullified
by Russia and China’s sup-
port for him. While the
world argued, he said, Syria
faced a future of deepening
conflict in which those
without guns had no say.
“Syria is like a football
stadium,” he said. “All the
big countries are playing
in it.”
‘We hear shelling
every night – tac
tac tac. Syria is at
war: same as Iraq,
same as Yemen’
the armed opposition is
bringing its fight to the
capital.
Faced by fighting on their
doorstep, a grounded UN
peacekeeping mission and
the simple exhaustion of 15
months spent in tense polit-
ical limbo, some residents
of the capital are starting to
question whether anyone
has the ability or will to
stop the deadly drift
towards ever-widening war.
“In a few months . . . no
one will care about Syria,”
lamented a drawn-looking
businessman, his stress evi-
dent in the smoky fug and
full ashtray in his office. “It
will become another Iraq or
another Palestine.”
Almost a week after
unarmed UN peace moni-
tors suspended patrols
because of concerns about
their own security, violence
has flared around the coun-
try, including the suburbs
of the capital.
Damascus residents say
they hear bombardments by
loyalist forces – sometimes
lasting hours – in suburbs
such as Douma and Qud-
saya. “We hear shelling
every night – tac tac tac,”
said a man who lives close
to a restive area. “Syria is
at war: same as Iraq, same
as Yemen.”
One young woman said
her family was now hosting
more than two dozen rela-
tives who had fled the sub-
urbs, with many of the chil-
dren either crying non-stop
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