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EUROPE
Wednesday November 7 2012
The cull to come
Restructuring investment banks, Page 15
Political risk and its
economic consequences
Sebastian Mallaby, Page 9
World Business Newspaper
Wanted: a president to put
can­do spirit back in the US
Deadline
for Greek
bailout
overhaul
News Briefing
BHP starts search for
Kloppers successor
BHP Billiton has begun its
search for an eventual
successor to chief Marius
Kloppers as global mining
faces a period of significant
leadership change.
Page 13
Rajoy rescue poser
Mariano Rajoy, Spanish
prime minister, said he
would not request a
sovereign bailout unless he
knew by how much it would
lower his country’s
borrowing costs.
Page 2
Putin axes reformist
Anatoly Serdyukov, Russia’s
reforming defence minister,
was sacked by Vladimir
Putin amid allegations of
corruption and rumours of
an extramarital affair.
Page 2
UK in Assad exit call
David Cameron, British
prime minister, said
President Bashar al-Assad
should be allowed safe
passage from Syria if it
would end the bloodshed
that has killed more than
30,000 people.
Page 3
Ankara offer to Kurds
Turkey has promised to
allow use of Kurdish
languages in court as it tries
to quell a mass prison
hunger strike.
Page 3
Kiev election rerun
Ukraine approved repeats of
last week’s elections in five
seats after opposition groups
alleged fraud in more than a
dozen – a move that raises
further questions about the
fairness of the parliamentary
polls
. www.ft.com/europe
JPMorgan in SEC talks
JPMorgan is in advanced
talks to agree a settlement
with the Securities and
Exchange Commission over
allegations of misconduct in
its handling of mortgage-
backed securities.
Page 13
Time Warner push
Time Warner is eyeing
acquisitions of pay-TV
networks and free-to-air
broadcasters as it plans to
expand its $3bn international
TV networks arm.
Page 13;
Time Warner tunes in, Page 16
Wang’s hopes in peril
Concessions made by Wang
Yang – the top official in
China’s southern Guangdong
province – to end unrest
could scupper his hopes of
promotion to the country’s
top decision-making body.
Page 6; Notebook, Page 8
Aung San party split
A group has broken away
from Aung San Suu Kyi’s
National League for
Democracy opposition party
in Myanmar amid turmoil in
the movement and criticism
of its leaders.
Page 6
Jakarta price controls
Indonesia plans to rebuild a
food price-setting body
dismantled after the Asian
financial crisis amid claims
of corruption, inefficiency
and monopoly abuses.
Page 3
By Peter Spiegel in Brussels
and Kerin Hope in Athens
Lionel Barber
Washington
Eurozone leaders have given
themselves three weeks to final-
ise an overhaul of Greece’s bail-
out programme, requiring par-
liamentary backing in creditor
countries that are sceptical
about reducing Athens’ interest
rate burden.
But eurozone approval, which
officials hope will be completed
in time to release a long-delayed
€31.3bn aid payment to Athens
on November 27, will only be
granted if the Greek parliament
agrees to new austerity meas-
ures in a hotly contested vote
scheduled for tonight. “We have
to back these measures, we are
already committed to imple-
menting them,” Yannis Stour-
naras, finance minister, said.
“They are tough but the alterna-
tive is a disorderly default.”
If Athens wins the vote and
passes a new 2013 budget on
Sunday, eurozone finance minis-
ters are expected to approve the
interest rate cuts on Monday,
starting a two-week clock for
legislative
There have been lower and
meaner presidential election
campaigns: Richard Nixon’s
“amnesty, abortion and acid”
jibe against George McGovern
in 1972 comes to mind. Even so,
this was a gruelling and ill-
tempered contest. Yesterday,
however, under clear blue skies
in the nation’s capital, voters
finally
had
their
chance
to
speak.
The victor in the 2012 election
faces an immediate test of lead-
ership, not merely to overcome
the divisions between Demo-
crats and Republicans that
have largely paralysed Wash-
ington. The greater challenge is
how
to
rekindle
a
spirit
of
can-do
optimism
in
a
nation
beaten
down
by
the
global
financial crisis.
“What America needs right
now is confidence,” says a Wall
Street chief executive. “All the
ingredients are in place for a
recovery but we need predicta-
bility and strong executive lead-
ership.”
This year’s election will be
remembered largely as a refer-
endum on economic manage-
ment, if not an entire philoso-
phy of government.
Having inherited an economy
in meltdown, Barack Obama
spurned regressive tax cuts and
deregulation and resorted to
government borrowing and
state intervention on a level not
seen since the 1930s. Like Fran-
klin Roosevelt, Mr Obama
sought to save capitalism from
itself.
Four years on, house prices
have stopped falling and the US
consumer is spending again.
But despite a 12.7 per cent year-
to-date rise in the S&P stock
market index, the feelgood fac-
tor is missing and business is
holding back on investment. By
some calculations, US corpora-
tions have $1,700bn of cash on
their balance sheets waiting to
be spent.
approval
in
seven
national capitals.
The interest-rate cut is the
most contentious part of a
multi-pronged package being
negotiated by the troika of the
International Monetary Fund,
the European Commission and
the European Central Bank to
reduce Greece’s debt – projected
to peak at 192 per cent of eco-
nomic output in 2014 – and
could prompt debates in some
parliaments where support for
more Greek aid is most tenuous.
Under the €174bn bailout pro-
gramme, Greece’s interest rate
is set at 150 basis points above
interbank lending rates. The EU
said it was considering cutting
the premium to 80bp.
Greece’s benchmark 10-year
bond yesterday climbed the
most in two months to trade at
32.9 cents in the euro.
Additional reporting by Robin
Wigglesworth in London
Getty
Many blame the corporate
investment strike on the “fiscal
cliff”, the medium-term US
budget crisis. Without a resolu-
tion by January 1, automatic
spending cuts and tax rises will
take place, which could plunge
the US back into recession.
“The problem is that the US
is growing at only 1.5 to 2 per
cent,” says the chief executive
of a big US bank.
“We’re not used to this grind.
We need a change in the
growth pattern, creating jobs in
construction
impossible to break down the
Republican wall of opposition
on Capitol Hill. His ground-
breaking bill on healthcare
reform passed without a single
GOP vote.
Mr Obama lacked the seduc-
tive power of a Bill Clinton or
the towering authority of a
Lyndon Johnson. His cold logic
won few close friends on Capi-
tol Hill, where congressmen
and senators are more suscepti-
ble to the politics of the pork
barrel, a healthy dose of flat-
tery and a good Cuban cigar.
On foreign affairs, the agenda
is no less pressing or daunting.
At some point over the next
four years, the president will
have to make a fateful choice
over how to deal with Iran’s
ambitions to build a nuclear
bomb. Western intelligence esti-
mates Tehran is at least a year
away from building a weapon,
and any attempt to manufac-
ture one would be detectable.
This implies an opportunity
for diplomatic negotiations, eco-
nomic sanctions and/or prepa-
ration for a US-led military
strike against Iranian installa-
tions in 2013-14. Mr Obama
(who blinked first on the exten-
sion of Israeli settlements on
Continued on Page 4
and
retraining
workers.”
What makes investors doubly
nervous is the combination of
the “fiscal cliff” and a return of
Europe’s sovereign debt crisis,
triggered by an upsurge in bor-
rowing
costs
for
Spain
and
Italy.
In the post-election lame-duck
session of Congress, the stand-
off between Democrats and
Republicans risks replaying the
crisis of summer 2011. At that
time, Congress delayed raising
the debt ceiling and the US was
stripped of its coveted triple A
rating, seemingly the guarantee
of its superpower status.
Mr Obama, cool and cerebral
compared to his predecessor
George W. Bush, found it nigh
‘All the ingredients
are in place for a
recovery but we need
strong leadership’
Wall Street chief executive
For the latest
results, news and
analysis visit
ww.ft.com/
uselection
Key vote, Page 2
Exasperated allies, Page 7
Blog: www.ft.com/theworld
Activist investor Peltz gives French
food for thought with Danone deal
Business break
By Dan McCrum in New York
the ability of outspoken inves-
tors to change the direction and
share price of large companies.
Danone investors have seen
no return over five years with
dividends largely offsetting an
almost 20 per cent decline in the
share price. After a profit warn-
ing this summer, the shares –
which closed down nearly 1 per
cent yesterday at €48.13 – are
trailing the wider food sector.
Franck Riboud, Danone’s
chief executive since 1996, has
reshaped the group to focus on
yoghurt, bottled water and baby
and medical nutrition.
His €13.4bn purchase of baby
foodmaker Numico in 2007 left
the group burdened with debt,
and Danone was forced to issue
equity to pay down borrowing
during the financial crisis.
While Danone this year
announced a stock buyback,
investors have remained con-
cerned about its use of capital.
Mr Peltz is supportive of Mr
Riboud and plans to seek discus-
sions with the company, accord-
ing to people close to the situa-
tion. He is expected to call for
improvements such as improv-
ing operating margins to 15.1
per cent by 2015, and the return
of excess cash flow in the form
of share buybacks.
Mr Peltz plans to bring atten-
tion to the undervalued com-
pany, rather than call for radi-
cal action, the people said.
Trian
Activist investor Nelson Peltz
has for the first time taken his
fight to France after acquiring a
stake
in
Danone,
one
of
the
country’s
best-known
compa-
nies.
The move will pit Trian, the
US investment firm cofounded
by Mr Peltz, against the French
business establishment and a
shareholder base that has tradi-
tionally resisted Anglo Saxon-
style activism.
Trian has bought a 1 per cent
stake in the French food group,
worth about €300m, according
to people familiar with the situ-
ation. Mr Peltz is expected today
to call for the yoghurt maker to
cut costs and be more disci-
plined with its use of cash.
As with the recent involve-
ment of activist Bill Ackman at
consumer goods group Procter
& Gamble, the move will test
François Hollande’s Socialist
government finally responded
to months of pressure from
business for urgent action to
address France’s sliding
industrial competitiveness by
announcing a €20bn tax break
for companies. The measure
fell short of the €30bn
‘competitiveness shock’
recommended by Louis Gallois,
former head of aerospace
group EADS.
declined
to
comment
while
Danone
could
not
be
Separate section
The Connected Business
Relationships in the C­suite set
to change
reached for comment.
Trian made its name calling
for restructurings at food manu-
facturers such as Heinz, where
Mr Peltz fought a proxy battle
in 2006 and still sits on the
board, as well as at Kraft and
Cadbury, the UK confectioner
the US group acquired.
Additional reporting by Sche-
herazade Daneshkhu in Paris
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FINANCIAL TIMES
WEDNESDAY NOVEMBER 7 2012
WORLD NEWS
Hollande gives business a break
Mild­mannered
politician upsets
Greek apple cart
aheadof keyvote
Seeking to stop the slide
Tax relief
President unveils
€20bn measure
to boost French
companies and
jobs, writes
Hugh Carnegy
Labour costs
Relative to eurozone (rebased)
110
France
105
Despite the split, most
observers expect the reform
package to squeak through
parliament by a handful of
votes, even if Democratic
Left’s 16 lawmakers abstain
as planned and half a dozen
rebels in the Panhellenic
Socialist Movement (Pasok)
carry out their threat to
vote against it.
A 48-hour general strike
that began yesterday shut
down government offices
and public transport, but
only about 15,000 anti-aus-
terity protesters marched to
parliament – about half the
number that turned out at
two previous walkouts over
the past month – suggesting
that resignation may be
replacing popular anger.
Yet Mr Kouvelis’s out-
burst threatens to curtail
his party’s role in govern-
ment, as well as his own
political career. Until his
throwback moment, Mr
Kouvelis was seen as the
frontrunner to succeed
Karolos Papoulias in the
mostly ceremonial role of
president, with the backing
of coalition partners.
Now advisers to Mr
Samaras are briefing on a
government reshuffle after
the parliamentary vote, in
Fotis Kouvelis
Austerity stance by
the left­of­centre
leader threatens his
party’s coalition
role and his career,
writes
Kerin Hope
100
François Hollande’s Social-
ist government finally
responded yesterday to
months of pressure from
business for urgent action
to address France’s sliding
industrial competitiveness
by announcing a €20bn tax
break for companies.
The measure fell short of
the €30bn “competitiveness
shock” recommended by
Louis Gallois, former head
of aerospace group EADS,
in his government-commis-
sioned report on the issue
published on Monday.
But the scale of the tax
credit – the main feature
among 35 measures set out
by prime minister Jean-
Marc Ayrault – belied spec-
ulation the Gallois report
would be “buried”. The gov-
ernment is under pressure
from the left not to give in
to special pleading by the
business community for a
reduction in France’s high
labour costs.
The pressure of fast-rising
unemployment, running at
10 per cent, and the threat
of recession next year
appeared to overcome gov-
ernment reticence.
Pierre Moscovici, finance
minister, said the measures
would lead to the creation
of 300,000 jobs over five
years and would add half a
percentage point to annual
growth over the same
period. “It is a moment of
truth,” he said. “It is a step
no French government has
taken before.”
Laurence Parisot, head of
the Medef employers’ feder-
ation which has led the
campaign for a big cut in
labour costs, said the pro-
posals were “good and sig-
nificant”. She said Medef
wanted the government to
go further, with labour
costs needing to fall by
€70bn to match Germany.
But she told the FT: “For
the first time the French
government has admitted
clearly and unambiguously
that there is a problem of
cost competitiveness. This
is truly an important
moment for our economy.”
However, the government
avoided a direct cut in
heavy social welfare levies
on employers and employ-
ees that Mr Gallois said
should be slashed. It post-
poned reform of the financ-
ing of the convoluted wel-
fare system until next year.
The measures “do not go
to the heart of the problem,
as they fail to tackle the
high level of social security
95
Germany
90
85
2000
04 06 08 10
12
Source: Thomson Reuters Datastream
Until two weeks ago Fotis
Kouvelis seemed the least
likely of Greece’s fractious
left-of-centre politicians to
provoke a possible upset in
a crucial parliamentary
vote today on the latest
bailout package.
The mild-mannered
leader of the Democratic
Left party had often helped
patch up differences
between the conservative
and socialist leaders of
Greece’s coalition govern-
ment as they hammered out
details of a €13.8bn package
of medium-term spending
cuts and tax rises de-
manded by international
creditors as the price of
resuming funding to Greece.
But Mr Kouvelis, a suc-
cessful property lawyer,
suddenly broke ranks with
his coalition partners over
two minor labour market
reforms in the package,
insisting that workers’
rights would be “effectively
extinguished” if the meas-
ures were adopted.
“Social cohesion is
already under pressure, and
weakening workers’ rights
to the extent the bill pro-
poses will not contribute to
boosting growth or competi-
tiveness,” the 64-year-old
said, unexpectedly staking
out a position reflecting his
party’s ideological roots
before it split from the com-
munists in the early 1990s.
He was referring to a pro-
posal to scrap the 10 per
cent salary increase granted
to workers when they mar-
ried, and to exclude non-un-
ion members from collec-
tive wage agreements –
measures demanded by the
EU and International Mone-
tary Fund in order to main-
tain competitiveness gains
of the past three years.
Exasperated by the for-
merly co-operative Mr Kou-
velis’s refusal to reverse his
stance, Antonis Samaras,
the conservative premier,
overrode him, announcing
that time had run out and
the package was going
immediately to parliament
for approval.
€10bn
Tax credit for business in
2013, followed by €5bn in
each of the next two years
6%
Reduction in labour costs
as a result of tax credits
€10bn
Additional public spending
cuts over 2014­15
20%
New base rate of VAT – up
from 19.6%.
‘He earlier accepted
a much tougher
measure then
faltered over a
couple of details’
Boost for industry: a worker
at one of France’s Peugeot
Citroën plants
Bloomberg
contributions that represent
the bulk of the tax wedge
on labour,” said Tullia
Bucco, an economist at
UniCredit
Instead, the government
will hand businesses a
€10bn tax credit in 2013
with a further €5bn in each
of the following two years,
adding up to a permanent
€20bn tax break – the equiv-
alent of 1 per cent of gross
domestic product.
The tax credit, set against
employment and available
to lossmaking as well as
profitmaking companies,
will apply to all businesses,
not just exporters. The ben-
efits must be used to boost
investment and employ-
ment, not to fund dividends
or share buybacks.
Mr Ayrault said the tax
credits amounted to a 6 per
cent cut in labour costs,
among the highest in
Europe and blamed by
employers for undermining
their ability to compete
internationally, especially
with their German rivals.
They
financed by €10bn in addi-
tional public spending cuts
over 2014-15, yet to be speci-
fied, on top of savings
already planned from next
year. The government has
been under pressure, this
week by the International
Monetary Fund, to make
deeper cuts in public spend-
ing, which accounts for 56
per cent of GDP.
The remainder of the cost
will be covered by a rise in
value added tax and envi-
ronmental taxes. The base
rate of VAT will rise to 20
per cent from 19.6 per cent,
with a further rise in a
reduced rate, mainly for
restaurants, to 10 per cent
from 7 per cent at present.
This was something of an
embarrassing reversal by
Mr Hollande who earlier
ditched a plan bequeathed
by his centre-right predeces-
sor for an across-the-board
rise in VAT of 1.6 percent-
age points in return for cuts
in employer social charges.
But Mr Ayrault said the
measures were a “major
and decisive” step towards
a “new French model” to
make the economy “more
competitive” and able to
deliver “more solidarity”.
The strategy was to move
industry up the value chain
to higher-quality products,
as Germany had achieved.
Mr Gallois said the pro-
posals, which include many
of his recommendations on
boosting investment, skills
and the strength of small
and medium-sized busi-
nesses, showed the govern-
ment had “understood the
measure of the problem”.
It remained unclear, how-
ever, how far the govern-
ment was prepared to go in
pursuing deeper structural
reforms in areas such as the
rigid labour market, as
demanded by business lead-
ers and international insti-
tutions. The IMF warned on
Monday that France risked
further loss of its competi-
tive edge if it did not keep
pace with reforms under
way in Italy and Spain.
Rajoy pledge on rescue request
The Spanish prime minister
said he would not request a
sovereign bailout unless he
knew how far his country’s
borrowing costs would fall
as a result, increasing the
prospect of a stand­off
between Mariano Rajoy and
expectant financial markets
that have all but priced in a
rescue request,
writes
Miles Johnson in Madrid
.
“If we remain with the
same borrowing costs, then
there is no sense,” Mr
Rajoy said yesterday. He
said a decision to request a
rescue from European
bailout funds, which would
then likely trigger a bond
buying programme from the
European Central Bank, was
“exclusively” his to take.
“How far will the risk
premium fall [with a
rescue]? If it stays at 400
basis points and does not
drop to 200 basis points,
that is not the same thing,”
he said.
The ECB has repeatedly
said it would not set an
explicit yield target in the
event of a bond­buying
programme.
Over the past month,
some senior members of
the Spanish government
have begun to view a
rescue request positively,
provided no new conditions
are attached, but Mr Rajoy
in public has continued to
argue that no decision
needs to be taken quickly.
Spain’s borrowing costs
compared with Germany’s
have fallen from euro­era
highs since the ECB
outlined a mechanism
through which it could
return to buying up
Madrid’s debt. But this debt
has begun to inch higher
as investors worry that Mr
Rajoy will opt to delay a
decision for as long as
possible.
which Democratic Left’s
representatives could be
replaced by pro-Europe
technocrats. Mr Kouvelis
has one minister and two
deputy ministers in the gov-
ernment, plus people in sen-
ior administrative posts.
“The Democratic Left
leadership has been trying
to row back as the vote
approaches, sending mes-
sages that they will con-
tinue to support the govern-
ment, but it could well be
too late,” said a conserva-
tive adviser.
Mr Kouvelis has back-
tracked, saying his party
will support the govern-
ment in a separate parlia-
mentary vote on Sunday to
approve a tough austerity
budget for 2013. He has per-
suaded Antonis Roupaki-
otis, the justice minister
who enjoys Democratic Left
support, to support both
packages after threatening
to withhold his signature.
Several disgruntled Dem-
ocratic Left members have
criticised their leader’s
stance – even though the
party’s central committee
backed him by a two-thirds
majority – hinting that, like
Evangelos Venizelos, Pasok
leader, he may soon face a
leadership challenge.
“Fotis showed inconsist-
ency by accepting earlier a
much tougher measure, a
three-year freeze on mini-
mum wages, then faltered
over a couple of details,”
said a party veteran. “This
is a time for pragmatism,
not outdated ideology.”
In full: www.ft.com/spain
Editorial Comment, Page 8
Gerard Errera, Page 9
will
be
partly
Putin sacks defence minister amid
claims of corruption and an affair
By Charles Clover
in Moscow
defence industries, offended
by his uncompromising
fight against inflated prices
for hardware.
He has also been criti-
cised by Russia’s generals
for seeking to get rid of the
draft and transform the mil-
itary from an army depend-
ent on conscripts into a vol-
unteer force, part of a wide-
ranging reform pushed by
Mr Putin.
“Mr Serdyukov controlled
at least a quarter of our
budget and of course there
are a lot of people who
wanted a share of that pie,”
independent defence ana-
lyst Thomas Golts told
Reuters. Russia spent $44bn
on its military in 2010,
according to the Centre for
Analysis of Strategies and
Technologies.
Dmitry Trenin, director of
the Moscow Carnegie
Center, a think-tank, said:
“He is the one who really
launched
reforms off the zero point
where they had been stuck
for 20 years. But he made
few friends in the defence
establishment with these
reforms.” His departure
“puts a question mark over
these reforms”.
A catalyst for the sacking
may have been an affair Mr
Seryukov was reportedly
conducting with the former
head of the defence minis-
try’s property department,
Yevgenia Vasiliyeva.
Over the past week, Mos-
cow tabloids have carried
lurid details of the scandal,
which they said had appar-
ently angered Viktor Zub-
kov, a former prime minis-
ter and the father of Mr Ser-
dyukov’s wife.
“This [Zubkov] is a guy
who Putin cannot refuse,”
said Yulia Latynina, a polit-
ical journalist. “Serdyukov
was effectively told: ‘We are
starting this case against
you
found in Ms Vasilieva’s
apartment’, and when Putin
told him ‘Work with the
investigators’ this trans-
lated into ‘Work things out
with your father-in-law’.”
Analysts said, however,
that an official of Mr Serdy-
ukov’s stature could not
have been brought down by
minor scandals unless it
had been sanctioned by
someone high up. Mr Serdy-
ukov is one of three offi-
cials, including Mr Putin,
who carries the “nuclear
briefcase” with the strategic
missile launch codes.
“The people who pushed
him out were using this
investigation as a vehicle to
get rid of him,” said Mr
Trenin. “In my opinion it
was a combination of things
that piled up. But it was
Zubkov’s influence that did
him in. Without that, he
would have been able to
control the damage by drop-
ping a few people.”
Mr Serdyukov will be
replaced by Sergei Shoigu,
former minister of emer-
gency services and current
governor of Moscow prov-
ince.
●
Gazprom has significantly
cut its gas price to Poland,
in the latest sign that the
Russian gas monopoly’s
cherished link of gas prices
to the price of oil is being
eroded,
write FT reporters
.
Poland’s PGNiG, the
country’s leading gas sup-
plier, and Gazprom said
they had signed a deal that
would reduce contract
prices after “taking into
account
Russia’s reforming defence
minister fell victim to a
high-level power struggle
when he was fired by Presi-
dent Vladimir Putin yester-
day over allegations of cor-
ruption and amid rumours
about his private life.
“In order to create condi-
tions for an objective inves-
tigation into all matters, I
have decided to free defence
minister [Anatoly] Serdyu-
kov of his post,” Mr Putin
said.
Last month investigators
raided the offices of Obo-
ronservis, a state-owned
defence company where Mr
Serdyukov was chairman of
the board until 2011, prob-
ing the disappearance of
Rs3bn ($95m) allegedly
involving real estate sales.
Mr Putin reportedly con-
vinced Mr Serdyukov –
defence minister for more
than five years – to stay on
in his new cabinet in May,
despite his desire to leave
the post. But the president
has now sacked a key
reformer whom he previ-
ously backed to the hilt.
Mr Serdyukov has been
under pressure from Rus-
sia’s powerful defence
establishment as a result of
policies he has undertaken
in the sector since 2007.
He won praise as one of
the few effective reformers
in the Russian government,
carrying out a wide-ranging
restructuring of the Rus-
sian military. But he also
made enemies among
vested interests in Russia’s
Kouvelis: says his party will
back another austerity vote
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President Vladimir Putin and Anatoly Serdyukov inspect
troops at the Victory Day parade in Moscow last May
current
market
prices” of gas.
AFP
  FINANCIAL TIMES
WEDNESDAY NOVEMBER 7 2012
★
3
WORLD NEWS
Cameron backs safe exit for Assad
Shake-up plan
Concern rises at move to
unite fractious opponents
certainly not offering him
an exit plan to Britain but
if he wants to leave, he
could leave, that could be
arranged.”
British officials made
clear that Mr Cameron’s
comments, which came in
answer to a specific ques-
tion about Mr Assad’s
future, should not be seen
as any indication that an
exit plan for the Syrian
leader was being conceived
or favoured.
“The UK is not making an
offer,” said the Foreign
Office. “We have been clear
that Assad should face jus-
tice and that it is for the
Syrian people, including the
opposition, to decide the
details of a transition
including the options for
Assad.
“The longer the killing
goes on, the fewer options
Assad will have.”
However, British officials
acknowledged that if Mr
Assad’s departure were
plotted by Russia or by an
Arab nation, this would not
be a bad thing for Syria.
The officials insisted that
the UK, under these circum-
stances, would still do its
best to get justice for those
killed by the Assad regime.
Mr Cameron’s comments
were criticised by Amnesty
International. “Instead of
talking about immunity
deals for President Assad,
David Cameron should be
supporting efforts to ensure
that he faces justice, ideally
at the International Crimi-
nal Court at The Hague,”
the rights group said.
“After Syrian government
forces have indulged in a
massive campaign of indis-
criminate bombings, mass
round-ups and torture,
there should be no question
of Bashar al-Assad escaping
justice with a cosy deal of
this kind.”
The prime minister ruled
out arming the Syrian
rebels, saying Britain had
to obey international law
but
UK’s PM seeks to
end Syria slaughter
Proposal criticised
by rights groups
The leader of the Syrian
National Council said that
its role should remain key
in any shake-up of the
opposition, raising concerns
for the viability of a US-
backed initiative to bring
Syria’s fractious opposition
groups under a common
leadership,
writes Abigail
Fielding-Smith in Beiru
t.
The SNC has been widely
criticised for infighting and
failing to connect with
groups inside Syria, and the
US has thrown its support
behind plans put forward by
SNC member Riad Seif to
absorb the group into a
new, more broad-based
body. Opposition groups are
due to discuss the plan in
Doha tomorrow.
SNC chief Abdulbasit
Seyda yesterday told a
gathering of the group
ahead of the meeting that
they would go into the
discussions with an open
mind, but cautioned that
“any action that targets the
SNC, with or without
realising it, will extend the
life of the regime”.
Mr Seif’s initiative is
thought to envisage only 15
seats for the SNC out of a
50-member council.
Meanwhile, in Syria,
gunmen shot dead the
brother of the country’s
parliament Speaker in
Damascus, according to
state media. Mohammed
Osama Laham, brother of
Jihad Laham, was killed in
the Midan neighbourhood
as he drove to work, state
news reported.
The assassination came
just days after a pro-regime
actor was murdered.
Mohammed Rafeh, a
prominent actor who had
spoken publicly in support
of the regime, was buried
on Monday.
According to the Syrian
Observatory for Human
Rights, a pro-opposition
monitoring group based in
the UK, he was assassinated
by rebels.
Activists claimed he was
an informant, the
Observatory said. There
have been several
assassinations of figures
associated with the regime
in the capital, though many
of these have been military
or security officials.
By Hannah Kuchler and
James Blitz in London
David Cameron, Britain’s
prime minister, said yester-
day that President Bashar
al-Assad should be allowed
safe passage out of Syria if
it would end the bloodshed
that has left more than
30,000 people dead.
In comments that were
criticised by some human
rights groups, Mr Cameron
said during a trip to Saudi
Arabia that he would prefer
to see Mr Assad face justice
for his bloody repression of
Syrian rebels.
But he also said that it
“could be arranged” for Mr
Assad to flee the country
and
would
increase
its
humanitarian help.
“I am very frustrated that
we can’t do more,” he said.
“This is an appalling
slaughter that is taking
place in our world today –
40,000 lives lost already and
you can see, on your televi-
sion screens, night after
night, helicopters, aero-
planes belonging to the
Assad regime pounding his
own country and murdering
his own people.”
potentially
escape
international justice.
“Of course I would favour
him facing the full force of
the international law and
justice for what he’s done,”
Mr Cameron said in an
interview with the Al-Ara-
biya satellite station. “I am
Rebel fighters in Aleppo shelter from artillery fire during clashes with regime forces
AP
Turkey offers
Kurds greater
legal rights
By Daniel Dombey
in Istanbul and Funja Guler
in Ankara
joined the strike this week
and that eight MPs would
join if concrete steps were
not taken.
Many analysts have long
identified the Kurdish con-
flict, in which 30,000-40,000
people have died over the
past three decades, as the
country’s biggest political
problem.
It has taken on added
urgency this year, as the
PKK, or Kurdistan Workers
party, which is internation-
ally classified as a terrorist
organisation, has stepped
up attacks to levels not
seen since the 1990s.
The emergence of de facto
autonomous Kurdish rule
in northern Syria and the
ever greater self-confidence
of the Kurdish region of
northern Iraq are seen as
bolstering the ambitions of
Turkey’s own, more numer-
ous Kurds in their push for
greater self-rule.
The hunger strike began
in September, with strikers
calling for the right to use
Kurdish in schools as well
as the courtroom and more
lenient conditions for
Abdullah Ocalan, the PKK
leader, held in solitary con-
finement. Mr Ocalan is vili-
fied as a terrorist chief by
most of the country. But
many Kurds identify him as
the leader of their people.
●Prosecutors in Turkey
have asked for prison sen-
tences of thousands of years
for
Turkey sought to head off a
spiralling political crisis
yesterday by promising
greater legal rights for
Kurdish defendants, amid
fears that more prisoners
could join a mass hunger
strike that has shaken the
government.
The move to allow people
in court cases to defend
themselves in Kurdish lan-
guages, spoken by up to a
fifth of the population,
came as Kurdish politicians
warned that thousands
more prisoners could join a
hunger strike in which
more than 600 detainees are
already taking part.
As the strike has dragged
on for more than 50 days,
doctors warned that some
participants could die
within days. “Even as we
tell them to end terrorism
and give up guns, they hug
death and blood all the
closer,” said Recep Tayyip
Erdogan, Turkey’s prime
minister, referring to the
Kurdish party backing the
strikers. “Isn’t it unjust to
force people who are
already in prison to go on
hunger strike?”
The government said Mr
Erdogan had ordered the
justice ministry to proceed
with the new law permit-
ting the use of Kurdish in
court – one of the strikers’
central demands – following
up on a promise made by
the ruling party congress in
September.
The initiative was wel-
comed by members of the
Kurdish bloc in parliament
as a sign of good intentions,
Sirri Sureyya Onder, an
MP for the Kurdish Peace
and Democracy party, said
thousands of prisoners had
four
former
senior
Israeli commanders.
The prosecution revolves
around the Israeli Defence
Force’s 2010 storming of the
Mavi Marmara ship where
nine Turkish activists were
killed. The Israeli govern-
ment denounced the court
case as a “political puppet-
show”.
Additional reporting by
Tobias Buck in Jerusalem
Indonesia plans to
control food prices
By Ben Bland in Jakarta
The move comes as the
world economy suffers its
third agricultural commodi-
ties price shock in five
years, after the crisis of
2007-08, a spike in prices in
2010-11 and the current rise
in grain costs.
Agricultural experts say
the proposal defies a pledge
by Asia-Pacific leaders to
promote “open and trans-
parent market mecha-
nisms” and that it would
hinder rather than help
Indonesia’s goal of achiev-
ing food security.
Sutarto Alimoeso, head of
Bulog, told the Financial
Times the move had been
accelerated by the summer
drought in the US, which
drove soyabean prices to a
record high. Consumers
were hit hard because soya-
bean-based tofu is a staple
food in Indonesia.
Additional reporting by
Javier Blas in London
Indonesia is planning to
rebuild a powerful food
price-setting body disman-
tled after the Asian finan-
cial crisis amid allegations
it was corrupt, inefficient
and abused its monopoly.
Under the dictatorship of
General Suharto, the
Bureau of Logistics (Bulog)
controlled prices for nine
food staples in the world’s
fourth most populous coun-
try. Most of its powers were
taken away at the behest of
the International Monetary
Fund when it bailed out
Indonesia after the 1997-98
financial crisis that led to
Suharto’s downfall.
As part of protectionist
policies, the government
wants Bulog again to set
minimum farm and maxi-
mum consumer prices for
staples such as rice, soy-
beans, corn and meat.
4
★ †
FINANCIAL TIMES
WEDNESDAY NOVEMBER 7 2012
US ELECTION
The long road to the White House
Jan 10
Mitt Romney
wins the New
Hampshire primary by
a comfortable margin
May 14
Obama
campaign launches its
big gambit, a huge ad
blitz attacking Bain
Capital and aiming to
define Mr Romney as
a rich plutocrat
Jul 20
Mr Romney's
refusal to release more
than one year of his tax
records leads to attacks
by the Obama campaign.
He releases tax return
details in September
Jul 23
Mr Romney
suggests that comments
made by Mr Obama – ‘If
you’ve got a business – you
didn’t build that. Somebody
else made that happen’ –
are ‘un-American’
Aug 11
Mr Romney
announces Paul
Ryan as his
vice-presidential
running-mate
Aug 27-30
At the
Republican
convention, Clint
Eastwood has a
conversation
onstage with an
empty chair
Sep 11
An attack on
the US consulate in
Benghazi kills
Christopher Stevens,
US ambassador to
Libya
Sep 13
The US Federal
Reserve launches a third
round of quantitative
easing (QE3), under
which it will buy $40bn
of mortgage-backed
securities a month
Oct 29
Hurricane Sandy
hits the US east coast. Both
candidates suspend their
campaigns. Afterwards Mr
Obama inspects New
Jersey coastline with
Governor Chris Christie
Jan
May
Jun
Jul
Aug
Sep
Oct
Nov
Jan 31
Mr Romney,
tacking to the right,
wins the Florida
primary and becomes
the presumptive
nominee
Jun 5
Scott Walker,
Wisconsin’s Republican
governor, convincingly
defeats the Democrats
and unions in a recall
election
Jun 15
Barack
Obama announces
that the US will no
longer deport
young people who
entered the
country illegally
with their parents
Jun 28
US
Supreme Court
rules for Mr
Obama on
healthcare
Jul 26
Mr Romney
gets into a spat with
David Cameron, the UK
prime minister, over
London’s readiness to
host the Olympics
Aug 19
Todd Akin,
the Republican
Senate candidate
for Missouri, says
in an interview
that women who
are subject to
‘legitimate rape’
do not usually
become pregnant
Sep 4-6
At the
Democratic
convention, Bill Clinton
defends Mr Obama’s
economic record in a
rousing speech
Sep 17
Video clips
emerge in which
Mr Romney says
Mr Obama can
count on the
support of 47 per
cent of Americans
– ‘people who pay
no income tax’
Oct 3
Mr Romney
dominates the
first presidential
debate
Nov 2
Data from
non-farm payrolls show
that US economy added
171,000 jobs in October.
The unemployment rate
inches up to 7.9%
FT Graphic
Main photo: Getty
A triumph of strategy, money and theatre
Even as they expressed
confidence that Mr Obama
would win, the trio
appeared exhausted at the
end of a long campaign, at
last able to wind down, and
philosophical that every-
thing was now in the hands
of voters.
Mr Obama and Mitt Rom-
ney’s policies and political
personalities grabbed most
headlines on the campaign
trail. But elections are also
a volatile mix of staff, strat-
egy, logistics, money and
theatre, all fine-tuned for
each battleground state.
For challengers such as
Mr Romney, the election
meant running two cam-
paigns over two years, first
to win over Republicans for
the party’s nomination, and
then to take on Mr Obama
for the presidency.
For Mr Obama, election
preparations had overwhel-
med the business of govern-
ment by August last year,
after he gave up on reach-
ing any entente with con-
gressional Republicans.
Along the way, each can-
didate’s every move, to the
left or the right, on multiple
issues, has been amplified
in real time in a Twitter-
driven media that can lift
and then write off the
chances of both sides, often
on the same day.
The campaigns them-
selves have to try to rise
above that noise and exe-
cute their strategies in the
face of media maelstroms,
and change direction when
their plans do not work.
“Campaigns are long.
People forget that,” said
Stuart Stevens, Mr Rom-
ney’s chief strategist, just
after perhaps his candi-
date’s best moment, the
first debate against Mr
Obama in Denver in Octo-
ber. “It’s hard to become
the president of the United
States. And it should be.”
Mr Romney learnt some
lessons from his first run at
the presidency, in the 2008
election, when he spent mil-
lions of his own dollars and
still lost the nomination to
John McCain.
In the early days of the
2012 race, he kept his hand
in his pocket in the bell-
wether caucuses of Iowa, a
state where he laid out
more than $10m in 2008 and
lost. This time, he came out
of the contest even with
Rick Santorum.
But this time there were
other issues extending
beyond single contests such
as Iowa. Mr Romney was
running in an avowedly
more conservative Republi-
can party than in 2008 and
he struggled for months to
shrug off his mantle of
“moderate Mitt”, a legacy of
tacking to the left to
become governor of Massa-
chusetts, a largely Demo-
cratic state.
Some of the shifts he
made have haunted him in
his contest with Mr Obama.
To fend off Rick Perry, the
Texas governor who has
long had to deal with secu-
rity along his state’s border
with Mexico, Mr Romney
ran far to the right on
immigration.
That still was not enough
for the Tea Party. For
months, Mr Romney could
never get above 30 per cent
support levels with conserv-
ative voters. All manner of
rivals, from former House
Speaker Newt Gingrich to
businessman Herman Cain,
topped
ten, the adverts launched in
May attacking Mr Romney’s
stewardship of the firm he
founded, Bain Capital, may
be recorded as the turning
point.
The Obama campaign,
and outside groups support-
ing the president, painted
Mr Romney as an out-of-
touch plutocrat who would
govern for the 1 per cent.
The spots were especially
effective in Ohio, where Mr
Obama has consistently
polled better among blue-
collar whites, a core Repub-
lican constituency, than he
has elsewhere.
By the final weeks of the
campaign, when anyone
turning on their television
in Ohio would be seeing
scores of political commer-
cials in succession, such
advertising would never
have had the same impact.
“That money spent early
was money well spent.
Later, it would have had
5 per cent of the impact,”
said a longtime Democratic
strategist.
The damage done to Mr
Romney was compounded
by leaked comments he
made to a $50,000-a-head
fundraiser in Florida in
April, when he said that the
47 per cent of Americans
who did not pay federal
income taxes considered
themselves “victims” and
deserving of handouts.
But Mr Romney turned
the election round in 90
minutes, at the first presi-
dential debate, when he
confounded his caricature
and totally dominated a list-
less Mr Obama. The race
was tight from then on.
A wild card remained the
Hispanic vote. Mr Romney
was never able to make his
way back after his right
turn on immigration, some-
thing Mr Obama exploited
by announcing an executive
decision allowing some
young Hispanics to apply
for temporary work visas.
But the Hispanic vote
would be decisive only if
they turned out in higher
numbers than usual. It was
one of the many questions
that could be answered only
once all the ballots are
counted.
Campaign verdict
The rivals sought
to rise above the
Twitter­driven
maelstrom to play
the long game, says
Richard McGregor
On a chilly Monday morn-
ing, on the election’s eve,
an unusual Zen-like calm
seemed to descend on three
of Barack Obama’s most
battle-hardened advisers.
As they waited for the
president to take the stage
with Bruce Springsteen in
Madison, Wisconsin, David
Axelrod, David Plouffe and
Robert Gibbs, veterans of
Mr Obama’s 2008 run, spoke
sentimentally of their can-
didate, their friendships
and the small rituals
observed on voting day.
“All rituals will be
observed,” said Mr Gibbs, of
Mr Obama’s insistence that
he get in a game of basket-
ball yesterday in Chicago,
as voting was under way.
the
conservative
rankings.
It was not until the Flor-
ida primary in February,
with the help of blanket
advertising from outside
campaign groups, that Mr
Romney crushed Mr Ging-
rich and firmed up as the
presumptive nominee.
Mr Obama’s advisers,
meanwhile, had begun
researching Mr Romney in
readiness for the presiden-
tial election. Their most
important finding – that the
public did not know much
about the former private
equity executive – was one
they quickly set about tack-
ling. When the history of
the 2012 campaign is writ-
More at
www.ft.com/uselection
tallies, plus post­election
commentary from
Edward Luce
●
Video
Lionel Barber, FT editor,
analyses the election
outcome from Washington
www.ft.com/video
●
America decides
Follow our rolling
coverage as America
goes to the polls.
Live blog of events
as they happen, picture
slideshow, interactive results
map, with ‘vote slider’
showing the two candidates’
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Business blog
We are witnessing a perfect
antithesis of those who
believe in intuition and
those who trust in data.
But which will win?
www.ft.com/business
Flood of ‘independent’ funding raises stakes
Wanted: return
of ‘can­do’ spirit
asking supporters to give as
little as $3.
But the most significant
difference is the unprece-
dented amount of cash
raised and spent by outside
– and ostensibly independ-
ent – groups. The CRP pre-
dicts that together they will
have spent more than
$970m. About $300m of that
comes from “social welfare”
groups that do not disclose
their donors.
The financial floodgates
were opened in 2010, when
the Supreme Court ruled
that political groups could
accept unlimited amounts
of money from donors such
as companies or unions, on
the condition they did not
co-ordinate with the candi-
dates’ official campaigns.
Known as the “Citizens
United” ruling, this paved
the way for Republican-al-
lied “super-political action
committees” such as Cross-
roads, established by Bush
aide Karl Rove, and related
groups like Americans for
Prosperity, backed by the
conservative
Super-Pacs have also
cropped up to back Demo-
cratic causes – notably Pri-
orities USA, which supports
the president’s re-election –
but their fundraising has
paled in comparison with
the Republican groups.
Shifts in campaign spend-
ing were already noticeable
years before the Citizens
United decision.
George W. Bush was the
first candidate to decline
public funding – in the 2000
primaries – while Mr
Obama in 2008 became the
first candidate to forgo pub-
lic money for the campaign
proper. In between, groups
that supported Mr Bush’s
campaign spent as much as
$50m against Democratic
candidate John Kerry in the
summer of 2004. Still, back
then, Democratic-allied
groups such as the Media
Fund and Americans Com-
ing Together were out-
spending Republican ones
by three-to-one. Billionaire
George Soros gave more
than $20m to groups sup-
portive of Mr Kerry.
But this is the first time
that neither candidate has
taken money from the pres-
idential campaign fund, the
taxpayer-funded silo for the
general election, and the
first presidential race since
the creation of super-Pacs.
“Now politicians realise
that they can make so
much more money than
they would get from public
funding, this is going to be
standard practice in the
future,” Mr Allison says.
Since he began his cam-
paign in April 2011, Mr
Obama has raised nearly
$1bn, while Mr Romney
amassed more than $825m.
But this flood of money,
into both the official cam-
paigns and the outside com-
mittees, has changed the
nature of the race this year.
During the Republican
primaries, outside groups
helped struggling candi-
dates that would otherwise
have been forced to with-
draw – notably Rick Santo-
rum and Newt Gingrich –
stay in the race. But the
groups have also taken on
much of the burden of nega-
tive advertising, helping the
candidates’ campaigns keep
their hands cleaner.
“Super-Pacs were able to
sustain candidates and
essentially take care of
their advertising,” says
Anthony Corrado, a cam-
paign finance expert at
Colby College in Maine.
SNL Kagan, a media anal-
ysis group, estimates that
television advertising will
total $2.6bn this year, a
whopping 68 per cent
increase over 2008, with
most of it concentrated in
the nine swing states.
The super-Pacs have also
helped Mr Romney counter
Mr Obama’s famed fund-
raising abilities. “Over the
summer, the Obama cam-
paign was outspending the
Romney effort by two to
one but the field was
largely levelled by the inde-
pendent groups,” he said.
While many of the groups
set up in 2004 disappeared
immediately after that elec-
tion – such as the Swift
Boat Veterans who sank Mr
Kerry’s campaign – the new
generation of outside
groups have greater poten-
tial lifespans. Mr Corrado
said: “We are seeing groups
that will be active in 2014
and 2016, operating as par-
allel campaigns.”
Super­Pacs
Continued from Page 1
paign. In fact, Mr Bush’s
presidency was dominated
by national security.
In the next four years,
barring an unforeseen
external crisis, Americans
are likely to be preoccupied
by economic insecurity as
they struggle to maintain
their pre-eminence in a glo-
bal economy where
advanced knowledge is
widespread and low-cost
labour readily available.
Yet the US is, in many
respects, in far better shape
By Anna Fifield in Boston
the West Bank) forced his
nemesis Benjamin Netan-
yahu to blink on threats to
take unilateral military
action ahead of the 2012
election.
Intelligence insiders are
betting on some form of dip-
lomatic overture from the
next administration to test
the Supreme Leader Ayatol-
lah Khamenei’s intentions
in 2013, especially given
that the firebrand president
Mahmoud Ahmadi-Nejad is
due to step down next year.
Elsewhere in the Middle
East, the next president
must deal with the unfold-
ing drama of the Arab
spring. And then there is
China. In the last four years
the US belatedly executed a
pivot towards Asia, partly
to counter Beijing’s rising
power, if not exactly to rep-
licate the “containment”
strategy successfully pur-
sued against Soviet Russia.
Rising nationalism cou-
pled with territorial dis-
putes in the South China
sea are the immediate
threat; but the next admin-
istration will also be wor-
ried about the decline of
Japan, squeezed like a nut
in a nutcracker between
low-cost China and the
ruthless competitive might
of South Korea.
Twenty-four years ago, as
the cold war drew to a
close, James A. Baker, the
canny Treasury secretary
and future secretary of
state, coined the phrase
“economic insecurity” as
the signature tune of
George H.W. Bush’s cam-
If the 2012 presidential elec-
tion campaign has been
notable for one thing, it is
money.
From the Republican pri-
maries to the battle
between President Barack
Obama and Mitt Romney,
more than $3bn has been
spent on the race for the
White House. Add in the
congressional campaigns
and total election spending
this year will hit a record
$6bn, the Center for Respon-
sive Politics estimates.
“Money has played a tre-
mendous role in this cam-
paign – the candidates have
spent an amazing amount
of time raising money, and
right up to the last minute,”
says Bill Allison of the Sun-
light Foundation, a Wash-
ington-based group that
monitors money in politics.
Even on the eve of the
election, both the Obama
and Romney campaigns
were sending out emails
Americans are
likely to be
preoccupied by
economic
insecurity
2012 campaign in numbers
$970m
Estimated amount spent
by independent donors
$1bn
Funds raised by
Barack Obama
$2.6bn
Estimated amount spent
on television advertising
$825m
Funds raised by
Mitt Romney
than Europe. Thanks to the
Bush and Obama adminis-
trations, it has recapitalised
its banking system. The
shale gas revolution is dra-
matically lowering energy
costs and ushering in a
manufacturing renaissance.
To the south, low-cost Mex-
ico is increasingly competi-
tive vis a vis China; to the
north lies energy-rich Can-
ada. “I am incredibly bull-
ish on America,” concludes
the Wall Street CEO.
And so, after the heat of
the campaign, both victor
and defeated might remem-
ber that no solutions are
perfect but no challenge
inherently insurmountable
in the next four years for
the US, still the most pow-
erful nation on earth.
industrialist
Koch brothers.
Superstorm Sandy
Special buses and emergency provisions allow displaced residents to vote
Residents displaced by last
week’s Hurricane Sandy
voted yesterday thanks to
specially organised buses
and emergency election
provisions, as the New York­
New Jersey region braced
itself for a fresh storm,
writes Robert Wright in
New York
.
Andrew Cuomo, New York
state governor, signed an
executive order ruling on
Monday that New York
residents of what had been
declared disaster areas could
vote in the presidential and
Senate elections in any New
York state polling station.
The order covers residents
in New York City, as well as
neighbouring Nassau,
Rockland, Suffolk and
Westchester counties. Chris
Christie, New Jersey’s
governor, said on Saturday
that displaced residents, as
well as emergency workers,
would be able to vote by
email or fax.
Both states allowed the
measures as thousands
remained in temporary
shelters following the storm.
The recovery effort was
further complicated by the
approach of a new storm
expected to bring high
winds, rain and coastal
flooding to already
devastated areas today.
Mr Cuomo has ordered
insurance companies to
accept photographs of
ruined property as proof of
their loss ahead of the new
storm. The order was
intended to reduce the risk
of further damage if the new
storm hit the piles of ruined
property outside victims’
homes waiting for inspection
by insurance companies.
Some conservatives
attacked Mr Cuomo for
potentially facilitating voter
fraud through his order,
which allows people to vote
by “affidavit ballot” – after
swearing that they are
registered to vote in the
state. Those voting outside
their home district will be
able to vote only in the
presidential elections and
Senate elections but not for
US representatives.
Civil rights groups had
urged the governor to take
the step to ensure that
those displaced would retain
the right to vote.
  FINANCIAL TIMES
WEDNESDAY NOVEMBER 7 2012
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