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Knowing When to Work Late
PERSONAL JOURNAL 23

EUROPE EDITION

VOL. XXXII NO. 17

$1.75 (C/V) - KES 250 - NAI 375 -

£1.70

WSJ.com

MONDAY, FEBRUARY 24, 2014

BRUSSELS—European governments, reacting to fastmoving events in Ukraine and
the ouster of its president, revived plans to offer a large
aid package to the country—
but insisted funds would
come only with pledges of a
major economic overhaul.
By Vanessa Mock,
Stephen Fidler and
Andrea Thomas

European officials said a
trade-and-aid deal with Europe, that former President
Viktor Yanukovych walked
away from in November, triggering turmoil on the streets
in Ukraine, could also be resuscitated and signed with a
new government as early as
next month.
Kiev was calm on Sunday,
the day after parliament
voted to remove the president
and set new presidential elections for May 25.
The European Union’s foreign-policy chief, Catherine
Ashton, canceled a trip to
Asia and decided to travel to
Ukraine on Monday morning
for two days of talks.
“She is expected to meet
key stakeholders and discuss
the support of the European
Union for a lasting solution to

the political crisis and measures to stabilize the economic situation,” a statement
said.

An EU official said a summit with Ukraine could be
convened as early as next
month, during which the
stalled trade deal with the
country could be signed.
That pact could come with
a large aid package that could
exceed the almost €20 billion
($27.5 billion) over seven
years that officials previously
signaled the EU executive was
considering. “This is now a
very conservative estimate,”
the official said. “Given the
current circumstances, we expect member states to give
much more. We hope to have
more news on this in the next
days.”
“This can all happen very
quickly, provided the political
situation in the country continues to develop in the right
direction,” the official said.
Russia will delay a promised bailout of Ukraine after
the dramatic collapse of the
government in Kiev over the
weekend but the International
Monetary Fund could help the

country return to financial
stability, Russia’s finance minister said Sunday.
“The political situation
there has changed dramatically. Now we must wait until
a new government is formed
before a decision can be
made” about promised aid
from Russia, Finance Minister
Anton Siluanov said on the
sidelines of a financial lead-

ers’ meeting here.
Mr. Siluanov also appeared
to open the door to backing
an IMF bailout, the alternative financing proposal to
Russian aide pushed by the
EU and the U.S.
“The fund has the experience of supporting countries
in difficult situations…and
they have a well-elaborated
set of tools to help in such
cases,” he said through an interpreter when asked if Russia would back an IMF loan.
“Naturally, the IMF experience could help.”
German foreign minister
Frank-Walter Steinmeier said
that a bankrupt Ukraine
would be too big a burden for
Russia or the EU to bear. He
said German Chancellor Angela Merkel had spoken to
Russian President Vladimir

Putin about “how to stabilize
Ukraine economically.” He
said he would go to Washington this week to talk with the
IMF about the issue.
Ms. Merkel’s spokesman
said the two leaders agreed
that Ukraine needed a working government and should
preserve its territorial integrity.
The EU’s trade chief, Karel
Please turn to page 6
 Ukraine’s turmoil poses a
defeat for Russia........................6
 Opinion: Putin knows that
history hasn’t ended...............13

Telecoms Step Up Fight
OverNet-NeutralityRules
BY SAM SCHECHNER
AND RYAN KNUTSON

BARCELONA—Telecommunications companies in Europe
and the U.S. are escalating a
battle with technology companies over requirements to
treat all InMOBILE
ternet traffic
WORLD
equally,
as
CONGRESS
growth

in
data-hungry
Web services explodes.
A group of Europe’s biggest telecoms, including
Deutsche Telekom AG and
France’s Orange SA, is fighting provisions in a proposed
European law aimed at enforcing net neutrality, or the open
Internet, a principle that Internet providers shouldn’t dis-

criminate against traffic from
particular sources.
“We fear that, if the most
restrictive views on open Internet prevail, there will be a
significant reduction of users’
choice,” said Luigi Gambardella, head of European
telecom trade group ETNO,
whose members have been
lobbying ahead of a vote in
Europe’s Parliament on Monday. European telecom executives fear that some amendments to the proposed law
would cripple efforts to roll
out new services.
In the U.S., telecoms are
likely to push the Federal
Communications Commission
to allow them to charge some
websites to deliver content at
higher quality. The regulator

is expected to propose new
net-neutrality rules this year,

after a federal appeals court
in January tossed out the bulk
of the commission’s net-neutrality rules.
Friction between tech and
telecom companies on both
sides of the Atlantic is rising,
as they wrangle over how to
divide
responsibility—and
profits—from
the
vast
amounts
data
coursing
through the world’s networks.
The question of who will pay
for upgrades is becoming
more acute as a tsunami of
mobile devices, from phones
to cars, threatens to swamp
Please turn to page 17

 Netflix agrees to pay
Comcast for speed................. 18

Getty Images

West Readies Aid as Ukraine Regroups

A young girl draped in a Ukrainian flag lays flowers for antigovernment demonstrators killed in
clashes with police in Kiev. Deposed President Viktor Yanukovych is said to have left Kiev for an
eastern stronghold as the country’s parliament voted in an interim president and set new elections.

Inside

U.S. Tax Probe Looks
At Swiss Insurance
BY JOHN LETZING

Early doubts over
whether Italy’s new
leader, Matteo Renzi,
can fulfill his promises
Europe File ............ 4
Why investors are keen
on European stocks
Business ................ 15
AXA’s strategic shift
into emerging markets
Heard .................... 28

ZURICH—U.S. authorities
are scrutinizing Americans’
use of Swiss insurance products to determine if they have
been used to hide assets, signaling a potential new direction in the U.S. legal crackdown on tax evasion in the
Alpine country, according to
people with knowledge of the
matter.
The U.S. Justice Department and the Internal Revenue Service are looking at the

use of private placement life
insurance, or PPLI, a product
that meshes banking and insurance by linking the value
of a client’s policy to assets
held in a Swiss bank account,
these people say.
Swiss insurers offering the
product, which can be used

legally by Americans to defer
taxes,
have
nonetheless
sought to reduce ties to U.S.
clients. At least three big insurers say they aren’t accepting new U.S. clients. In December, Swiss Life Holding
AG returned funds to hundreds of Americans who had
invested in PPLI policies.
Those policies were linked to
accounts at Bank Frey & Co.
AG, which is among a number
of Swiss banks that have disclosed being under criminal
investigation in the U.S. for
allegedly aiding tax evasion,
according to people familiar
with the matter.
Bank Frey ceased operations last year, after one of its
executives and an attorney
who directed clients to the
bank were indicted for allegPlease turn to page 20

2 | Monday, February 24, 2014

AM

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UK

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TK BR

PL

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THE WALL STREET JOURNAL.

GR

PAGE TWO

What’s News—
i

i

i

i

i

i

Business & Finance

World-Wide

n Greece was due to resume
talks with a troika of international inspectors, with the government hoping for a deal that
would unlock a fresh aid tranche
but without new cutbacks. 4

n European antitrust authorities closed a seven-year investigation into energy subsidies
for Spanish industry. 3

n The fashion world’s race to
reach ultrarich shoppers is leaving some of Italy’s vaunted
leather and garment manufacturers high and dry. 15
n Big European wireless providers are racing to roll out noroaming-fee packages as the
EU is set to further reduce fees
that have long angered travelers across the continent. 17
n Discovery Communications
is preparing a bid for U.K.

broadcaster Channel 5, as the
U.S. cable-channel owner looks
to continue its rapid growth in
international markets. 18

n Thousands of protesters in
Venezuela hit the streets Saturday to express frustration
with the government. 8
n Two people were killed and
dozens were injured after an
explosion near an antigovernment rally site in Bangkok. 9
n Thousands rallied in Hong
Kong to protest what they see
as waning press freedoms. 9
n Al Qaeda’s top emissary
was killed in Syria in a suicide
blast blamed on a rebellious
offshoot of the group, signaling
a violent power struggle within
the extremist organization.

n Coca-Cola Iberian and its
workers appear likely to wind
up in court over a dispute about
plant closures and job cuts. 19

n Japanese police were investigating the apparent vandalism of books in Tokyo public
libraries related to the story
of Anne Frank.

n Samsung announced the release of its Gear 2 smartwatch, running on the company’s fledgling Tizen
operating system. 17

n North Korea said it “categorically rejects” a recent U.N.
report that accused the regime of widespread crimes
against humanity.

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for uniquely-inspiring
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Party Power

China's state-owned firms are less profitable than privately owned ones,
but account for a large, though, declining share of China's economy.

Share of gross industrial output from Chinese
government–owned enterprises

Return on assets of Chinese government–owned and
private enterprises

60%

20%

50

15

40

10

30

5

20

0

Private

Government owned
1990

’95

2000

’05

’10

1996

2000

Sources: CEIC; National Bureau of Statistics of China

’05

’10

’12

The Wall Street Journal

China’s Big State Firms
Gain Clout in Key Sectors
[ The Outlook ]
BY BOB DAVIS
BEIJING—When China’s leaders
wanted to give a boost to the
domestic semiconductor industry
last year, a big state-owned
electronics company scooped up
smaller privately owned chipdesign and chip-making firms.
Beijing followed the same
script to get control of the
sprawling, polluting rare-earths
industry: A big state-owned
company purchased nine firms in

December that mine the minerals
used in such strategic industries
as defense and
telecommunications.
Expect China’s leaders to insist
on a big state role in sectors they
deem strategic when the officials
lay out their economic plans for
the coming year at a session of the
country’s largely toothless
legislature.
On the one hand, China has
pledged to dismantle some stateowned monopolies so they operate
by market principles and pay more
dividends to fund social spending.
But on the other, China specialists
say the state may actually end up
with more influence over the
economy in coming years, at least
in areas considered central to
China’s core interests.
“Beijing has been unable to
control strategic sectors in which
locally owned SOEs [state-owned
enterprises] or private firms
predominate because of local
government backing, so Beijing
has promoted consolidation
campaigns,” where large stateowned firms acquire other
companies, says Scott Kennedy, a

China expert at Indiana University.
Potent forces push against the
breakup of monopolies. China
continues to encourage jumbo-size
state-owned companies to compete
internationally, as it has in the
past decade, especially in the oil
and mining industries. Stateowned firms have become
powerful enough politically to
resist efforts to close them. The
Communist Party also has been
looking to tighten—not ease—
control over state-owned firms so
they carry out its priorities.
In 2009, for instance, when
Beijing ordered a surge in lending
to combat the global financial
crisis. China’s largest bank,
Industrial & Commercial Bank of
China Ltd., lagged behind its

competitors in ramping up lending
because it worried about creating
bad debt—a problem that now
haunts the Chinese financial
sector. Even so, ICBC’s chairman,
Jiang Jianqing, was the only head
of the top four state-owned banks
to not get a promotion last year,
which banking officials say was

meant as a signal to put the
party’s priorities ahead of profits.
The Peterson Institute for
International Economics estimates
state-controlled firms account for
about 25% of China’s industrial
output, though other analysts say
state-owned enterprises control an
even larger share of the economy.
The top 100 or so state-owned
firms dominate critical industries,
including banking,
telecommunications, steel,
transportation and electricity. But
there are about 100,000 others,
owned by provinces and cities,
that compete with private
companies in a wide range of
industries including real estate
and hotels.
China’s effort to whittle down
the number of SOEs halted during
the global financial crisis that
began in 2008 and hasn’t resumed,
according to a research paper by
the Paulson Institute, a Chinafocused think tank in Chicago.
Local governments formed
companies to borrow money and
build real-estate developments and
infrastructure as part of Beijing’s

stimulus plan.
“Local governments don’t want
to lose the benefits from their
control of local SOEs,” said Xuan
Xiaowei, an SOE specialist at the
Development Research Center, a
prominent Chinese think tank.
“The control gives them power
[and] local income.”
But competitors inside and
outside of China complain that
state firms have special
advantages, including subsidies
and easy access to bank loans. One
of China’s largest, China
Nonferrous Mining Corp.,
acknowledged as much in its 2012
prospectus, noting “we enjoy
governmental support and
preferential treatment in credit
borrowing from [Chinese] banks
and [in] tax payment.”
The U.S. has been using annual
economic negotiations with China
to try to persuade Beijing to
reduce the SOEs’ advantages.
There have been some signs of
movement in that direction.
Last week, two big state-owned
firms agreed to sell minority

stakes in areas traditionally offlimits to private investment,
including domestic oil-refining
marketing and distribution.
Chinese banking regulators also
have begun to approve small
privately owned banks
But China’s view of what
constitutes commercial operations
may be different from what
international competitors are
seeking. Chinese officials point to
Singapore’s big sovereign-wealth
fund, Temasek Holdings Pte. Ltd.,
as a model. Temasek buys stakes
in companies, including controlling
interests, and its fund managers
look to improve corporate
profitability and efficiency.
China’s Communist Party plays
a far more intimate role in stateowned firms. The party puts in
place the top managers at the
biggest firms and installs a party
secretary, whose job is to make
sure party directives are followed.
Companies hold “study sessions”
to figure out how to carry out
party priorities. The heads of local
SOEs are often appointed by local
party officials.

Having party-appointed
Temasek-style asset managers
closely oversee the companies,
rather than Beijing regulators who
sometimes see themselves as
company allies, could give the
state a stronger hand in corporate
affairs.

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THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 3

EUROPE NEWS

EU Closes Probe of Spanish Subsidies
BY TOM FAIRLESS

BRUSSELS—European antitrust
authorities have quietly closed a
seven-year investigation into energy
subsidies for Spanish industry, a
move that potentially saves local
companies billions of euros as the
country tentatively emerges from a
deep recession.
In a short notice on its website

dated Feb. 4, the commission said
Madrid’s decision to set artificially
low electricity prices for industrial
companies in 2005 “does not constitute aid.” The full reasoning behind
the decision wasn’t yet available,
said the notice, which wasn’t accompanied by the customary news
release.
The decision means Spain’s large
and midsize industrial companies
won’t have to pay back money to
compensate for artificially low energy tariffs they enjoyed in 2005
that created a €3.8 billion ($5.22 billion) deficit in Spain’s electricity
system.
The deficit was to be financed by
a new electricity surcharge paid by
all Spanish consumers over 14 years.
When the commission launched

its investigation in January 2007
under former competition chief Neelie Kroes, it warned that the low energy prices might have provided
“significant amounts of operating
aid” to Spanish industry, thereby
distorting competition.
“Generally, EU law accepts that
small businesses and households
can benefit from regulated tariffs,
but bigger companies should purchase energy on the free market,”
said Steven Verschuur, a lawyer
with Clifford Chance in Brussels
who specializes in competition law,

state aid and public procurement.
Spanish electricity companies
might also have made an “abnormal
profit” as they were overcompensated by the government for the low
energy prices, the commission said
at the time.
It was also concerned that only
Spain’s electricity incumbents were
allowed to provide the low regulated tariffs, which may have prevented new electricity suppliers
from entering the country.
A spokesman for the commission
said it couldn’t establish that business users received an advantage
because free-market prices through-

out 2005 were “broadly in line”
with the regulated tariffs. But he
didn’t explain why, if this was the
case, power companies were incurring huge losses before compensation. He added that the compensation paid to electricity providers
couldn’t be considered an advantage.
He stressed that Spain abolished
regulated tariffs for business users
in 2009.

Legal experts called the
lack of a public
announcement ’unusual.’
Legal experts said the lack of a
public announcement on the case
was “unusual” and “astonishing,”
particularly as it comes two months

after the commission opened a similar investigation into energy subsidies in Germany.
“The commission’s decision not
to publish a press release in this
case is astonishing because it’s clear
that this case would have been in

the public interest in the context of
the ongoing investigation in Germany,” said Martina Maier, a lawyer
with McDermott Will & Emery in
Brussels.
It is also unusual to close a formal state-aid investigation after
seven years, an “exceptionally long”
time, because the commission only
launches such probes if it thinks it
has a strong case, Ms. Maier said.
“It looks a bit odd,” said Mr. Verschuur.
A spokesman for the commission
said it doesn’t publish news releases
for all decisions, “especially for positive decisions…or with old cases
which are not of high relevance today.”
He said the investigation in
Spain had “nothing to do” with the
investigation concerning Germany.
The European Commission,
which acts as the bloc’s antitrust
regulator, has significantly more
discretion than U.S. antitrust authorities because it acts as investigator, prosecutor and judge.
The commission’s decision may
have been influenced by the weak
economic backdrop in Spain, said

Mr. Verschuur. The country emerged

from a two-year recession last year
but is expected to post economic
growth of just 0.2% this year, and its
unemployment rate is likely to remain above 25% until at least 2017,
according to the International Monetary Fund.
“There is a tendency for the
commission to be more considerate
of the industrial implications behind
its cases,” Mr. Verschuur said.
Another possibility is that the
commission closed the case after
Spain’s government amended its
legislation to Brussels’ satisfaction,
he said.
Madrid announced an overhaul
of its energy sector last summer
aimed at tackling an accumulated
€30 billion electricity-tariff deficit
that has arisen from the wide gap
between the price paid by consumers and the power companies’ costs.
The overhaul was a key demand
of the so-called troika—the commission, the European Central Bank and
the International Monetary Fund—
which oversaw the €42 billion bailout of Spain’s financial sector that
was agreed in 2012.
—Ilan Brat
contributed to this article.

WELCOME TO OUR WORLD

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CHRONOMAT 44
FLYING FISH

BREITLING.COM


4 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

EUROPE NEWS
EUROPE FILE | By Simon Nixon

This wasn’t how Matteo Renzi’s
destiny was supposed to unfold.
For years, admirers of the
newly installed Italian prime
minister have gushed about his
energy, his ability and his supreme
political skills.
Despite his age—at
39, he is Italy’s
youngest-ever
leader—they were
convinced that it
was only a matter

of time before Mr.
Renzi swept to power on a tide of
popular support to revitalize the
economy and public life.
But there have been no
elections, only a palace coup.
Having dispatched the former
prime minister and his party
colleague, Enrico Letta, with
remarkable ruthlessness, Mr.
Renzi starts work this week with a
similar cabinet, the same coalition
and the same parliament. Polls
suggest voters are unimpressed.
To be fair, Mr. Renzi knows
that his career now depends on
delivering the reforms that he
says Italy needs and which he
accused Mr. Letta of failing to
deliver. His decision to force out
Mr. Letta was a calculated risk,
says Roberto D’Alimonte,
professor of politics at Rome’s
Luiss University and an adviser to
Mr. Renzi.
Mr. Renzi’s original plan had
been to support Mr. Letta until his
government had put in place a
new voting system and reformed
the senate. At that point, the

country could hold elections,
which he hoped would result in a
Democratic Party majority
government led by himself.
But this was likely to take at
least a year because senate
reform—essential to secure the
support of Forza Italia, the main
opposition party led by former
Prime Minister Silvio Berlusconi—
requires constitutional change.
Mr. Renzi calculated that he
couldn’t afford to wait for a year.
As other crisis countries started
to recover, Italy was falling
further behind and voters were
getting frustrated. Forcing early
elections in the absence of
electoral reform was also out of
the question. That left Plan C—
ousting Mr. Letta and becoming

European Pressphoto Agency

Renzi’s SkillsNeed toLiveUp toBilling

Italy’s new prime minister, Matteo Renzi, leaving a church near Florence Sunday, a day after he was sworn in.
prime minister without an
election—as the least bad option.
But can Mr. Renzi succeed

where Mr. Letta failed?
He has already set out a bold
agenda for his first 100 days,
including electoral reform, labor
reform, tax reform and an
overhaul of the public
administration.
Mr. Renzi may consider his
timing is propitious.
After all, he already has his
electoral reform deal with Mr.
Berlusconi. His proposed labor
reforms are similar to those
attempted by former Prime
Minister Mario Monti, which were
largely scuttled by Mr. Renzi’s
party.
Meanwhile, a detailed plan for
€32 billion ($44 billion) of
spending cuts will land on
incoming Economy Minister Pier
Carlo Padoan’s desk this week,
drawn up by former International
Monetary Fund director of fiscal
affairs Carlo Cottarelli. And Mr.
Renzi’s plans for public
administration reform should
appeal to supporters of the

populist Five Star Movement.

Indeed, its leader, Beppe Grillo,
accused him of stealing his
policies.
But this is just a start. Mr.
Renzi will need to be much bolder
to pull Italy out of the mire. To
have any chance of success, three
things are required.
First, he must convince Italians
of the need for reform. Italy

appeared to pander to this
populism with talk of the need to
implement reforms so that “we
can tell Europe what we want
rather than Europe tell us what to
do.” Yet all the recent evidence
from the euro crisis suggests that
reforms are most likely to be
successful when there is a strong
degree of domestic commitment.
His second challenge will be to

Mr. Renzi knows that his career now depends on
delivering the reforms that he says Italy needs and
which he accused Mr. Letta of failing to deliver.
stands out among euro-zone
crisis-hit countries for its
reluctance to recognize that its
misfortunes are largely

homegrown, preferring to blame
outside forces, whether Germany,
Brussels or the financial markets.
In the past five years, Italy has
swung from being one of the most
pro-European countries to one of
the least. Mr. Renzi has sometimes

face down the vested interests
that have blocked previous efforts
to reform Italy. These include the
trade unions, the Confindustria
business lobby, the Catholic
Church, the foundations that
control much of the banking
sector, the civil service,
professional guilds and the justice
system. Corruption, cronyism,
corporatism and rent-seeking are

endemic.
Mr. Renzi’s record in Florence,
where he privatized the bus
service in the face of union
opposition, is encouraging. But he
has no government experience at
the national level; successful
reform will depend on political
skill as much as political will.
Thirdly, he needs time. The

conventional wisdom is that
reforms are very hard to deliver
with a coalition government—
particularly grand coalitions of
the left and right—or in the
absence of market or external
pressure, or without a clear
electoral mandate.
But it is easy to find exceptions
to each of these rules. What is
harder is identify is any
significant reform delivered by a
government within a year of an
election. That’s hardly surprising
since reform in the short-term
invariably creates more losers
than winners.
It was only after elections in
the U.K., Spain, Ireland, Portugal
and Greece that those countries
embarked on major reform
programs. Frances President
Franỗois Hollande wouldnt be
embarking on his new reform
program now if he didn’t still have
three years before he needs to
face the voters again. In contrast,
it was the prospect of imminent
elections that put paid to the
reform ambitions of Mr. Letta and

Mr. Monti.
Mr. Renzi has been criticized
for stating that he wants this
government to serve until the
current parliament ends in 2018
rather than to push for elections
in 2015. In reality, Mr. Renzi has
little option but to try to keep his
coalition together if he is to avoid
his reform program rapidly
running into the political sand,
with dire consequences for Italy’s
economy—not to mention his own
career.
But Mr. Renzi must operate
within the constraints of the
current constitution with the
added disadvantage that he isn’t
even a member of Parliament. To
keep his coalition together, his
political skills will need to be
every bit as formidable as his
supporters say they are. And then
some.

Greece Plans to Resume Talks With Bailout Troika
BY NEKTARIA STAMOULI

ATHENS—Greece was set to resume protracted talks with a troika
of international inspectors Monday,

as the government aims for a deal
that would unlock a fresh tranche of
aid—but without painful new cutbacks ahead of local elections this
spring.
The talks, which have dragged on
since September, come amid signs
Greece has surpassed budget and
economic targets set by its creditors, potentially strengthening Athens’s negotiating position and easing
the need for politically contentious
austerity measures in the months
ahead.
Instead, the inspectors are likely
to focus on the need for further
structural reforms Greece must take,
such as steps to liberalize the coun-

try’s hidebound economy, in which a
web of red tape and other restrictions continue to hobble business
and investment. Other items on the
agenda include moves to overhaul
Greece’s labor market, and plans to
furlough and fire thousands of public-sector workers.
The goal, according to both the
government and the so-called troika
of inspectors—which represent the
European Commission, the International Monetary Fund and the European Central Bank—is to conclude
negotiations before a March 10
meeting of euro-zone finance ministers, who will judge Greece’s reform
progress to date and decide whether
it has done enough to receive fresh

aid. By late May, Athens must make
good on debt payments totaling
some €9.3 billion ($12.8 billion).
“We are working very hard in or-

der to be ready,” Greek Finance Minister Yannis Stournaras told journalists Saturday after briefing Prime
Minister Antonis Samaras on the
status of the talks. “We still have a
number of open issues, but I believe
that by the next Eurogroup—we
don’t have any margin beyond that—
we will need to have finished.”
For months, the on-and-off-again
troika review has become bogged
down in a dispute over the issue of
further austerity measures that
Greece must take to meet its budget
targets this year. Until recently, the
troika insisted Athens find roughly
€2 billion in further budget cuts or
tax increases to meet its fiscal goals
this year, plus several billion euros
in additional austerity measures to
meet fiscal goals in 2015 and 2016.
Since then, data showing Greece
with a surprise €1.5 billion budget

surplus last year—a year ahead of
schedule and far better than expected—appears to have addressed
at least some of the troika’s previous

concerns.
Likewise, government data show
that Greece has also met its target
to slash its bloated public-sector
payroll by 150,000 workers, two
years ahead of schedule. As of the
end of December, the public sector
employed just shy of 636,000 people, according to the country’s administrative reform ministry, a decline of more than 200,000 workers
since the start of the crisis four
years ago.
Since 2010, Greece has secured
two international bailouts worth
€240 billions in exchange for undertaking tens of billions of euros in
austerity measures to fix its finances
and restructure its economy. But the

reforms have come at a cost:
Greece’s economy has shrunk by
more than a quarter from its peak in
2008, while unemployment has
soared to a staggering 28% of the
workforce. This year, the economy is
forecast to show only an anemic recovery—after six years in recession—with more robust growth only
expected from next year.
The country’s two-way coalition
government—made up of the conservative New Democracy and the
socialist Pasok parties—warns that
unpopular cutbacks could threaten
its narrow three-seat majority in
Greece’s parliament. Dual local and

European Parliament elections in
May, when the opposition left-wing
Syriza party is expected to take a
lead, have reawakened fears of political instability, which could jeopardize Greece’s frail recovery.


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 5

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6 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

UKRAINE IN CRISIS

Turmoil Called ‘Major Defeat’ for Russia
MOSCOW—The dramatic collapse on Saturday of the authority
of pro-Russian President Viktor
Yanukovych in Ukraine looks like a
major reversal for the Kremlin, pulling Russia’s southern neighbor toward Europe just weeks after it appeared Moscow had succeeded in
drawing Kiev back into its embrace.
“This is a major defeat,” said a
senior Kremlin adviser, adding that
the events of the last 24 hours bitterly remind Russian officials of the
2004 Orange Revolution, when Mr.
Yanukovych saw his fraud-tainted

election victory overturned after
massive street protests brought a
pro-western government to power.
“We made the same mistakes
again” this time, said the Kremlin
adviser, who spoke on condition of
anonymity. “For us, the conclusion
is that the West succeeded in engineering a coup d’état.”
Just what Russia’s reaction to
this apparent setback would be
wasn’t immediately clear. Western
officials seemed to be going out of
their way not to provoke Moscow.
Some Kremlin aides in recent weeks
had suggested Moscow could intervene to protect pro-Russian regions
if Ukraine were to slide into civil
war, but there is been no indication
of high-level Kremlin support for
such a move.
A pro-European government in
Kiev, however, could find itself under heavy economic pressure from
the Russians, who are a major fuel
supplier and trade partner. “They
have a lot of economic levers they
can pull,” said Steven Pifer, a former
U.S. ambassador to Kiev.
Analysts also warned that a major setback in Ukraine could provoke
the Kremlin to crack down further
on opponents at home, as it did after the Orange Revolution, which
Russian officials perceived as a

western-orchestrated takeover.
Many in the Kremlin continue to
believe the West is seeking to engineer the same kind of revolution in
Russia, advisers say. “This is just
the start of a major battle in the
post-Soviet space,” said one, refer-

Associated Press

BY GREGORY L. WHITE

Demonstrators in Kiev on Sunday use sledgehammers to demolish the letters on a monument dedicated to KGB officers.
ring to the latest events in Kiev.
Russian officials fumed publicly
on Saturday, as news of the dramatic reversal in Kiev spilled out,
and the Ukrainian parliament, which
had swung behind the opposition,
voted to remove Mr. Yanukovych
from office and call new elections
for May.
Even Mr. Yanukovych’s political
allies voted for the measures, as
government authority melted away
on the streets and protesters took
over. Mr. Yanukovych left the capital
for his political heartland in the east
of the country and denounced the
day’s events as a “coup d’état,” but
he seemed powerless to stop them.
By evening, the political nemesis

Mr. Yanukovych had jailed—opposition leader and former Prime Minister Yulia Tymoshenko—had been released from prison and was cheered
by thousands of demonstrators on
Kiev’s main square.
Russian Foreign Minister Sergei
Lavrov worked the phones with his

European and U.S. counterparts, according to statements from his ministry, telling them that “illegal extremist groups” had taken control
over Kiev. He called on his partners
to pressure the opposition in
Ukraine to return to the terms of
the European-brokered political
compromise signed on Friday, which
called for Mr. Yanukovych to remain
in office until new presidential elections late in the year. But western
capitals seemed unsympathetic,
moving instead to work with the
new opposition-led government.
Meantime, Russian President
Vladimir Putin was silent on the
events in Ukraine on Saturday. But
he did issue a series of statements
congratulating Russia’s Olympic
team members on winning medals
at this month’s Winter Games in the
Russian city of Sochi.
State television also focused on
Olympic triumphs. And in reports of
events in Ukraine, program anchors
used grave tones. “Extremists have

taken over in Kiev and the western
regions of the country,” said one on
Rossiya-24, a state news channel.
When a Russian correspondent
in Kiev described the “holiday-like
atmosphere” among opposition supporters on the capital’s main square,
known as Maidan, the anchor
quickly ended the live report, intoning, “the way Maidan looks now, it’s
not the best place to spend time.”
Mr. Putin, however, has come
from behind before in this unexpected geopolitical struggle over
Ukraine, a country the size of
France that is crucial to his ambitions to build a Moscow-led bloc of
former Soviet states.
Three months ago, Mr. Yanukovych was on the verge of signing a
trade and political partnership with
the European Union that had been
years in the making and would have
posed a major obstacle to Mr. Putin’s plans. Instead, under heavy
pressure from the Kremlin, Mr.
Yanukovych reversed course at the

last minute and pledged closer ties
to Moscow, which in turn offered
$15 billion in desperately needed
loans as well as discounts on vital
natural-gas supplies.
When Mr. Yanukovych’s aboutface set off substantial street protests in Kiev, the Kremlin accused
the West of fomenting the demonstrations and supporting ultranationalist radicals. And when the
Ukrainian president offered concessions to the opposition last month,

Moscow responded by suspending
the release of the much-needed
loans to Kiev.
As late as Thursday, when bloody
fighting between police and demonstrators in Kiev had riveted international attention, Russian Prime Minister Dmitry Medvedev warned
Ukraine’s government against behaving “like a doormat that people
wipe their feet on.”
Foreign Minister Lavrov blasted
the EU for calling on Mr. Yanukovych to agree to early elections.
But that is just what Mr. Yanukovych agreed to in Friday’s deal,
along with constitutional changes
that would reduce presidential powers in favor of the parliament. He
also agreed to the formation of a
new coalition government that
would likely to be led by his pro-European opponents.
But protesters proved unwilling
to wait for new elections and Mr.
Yanukovych fled the capital late on
Friday.
The Twitter feed of Alexei Pushkov, chairman of the International
Affairs Committee in Russia’s parliament, on Friday called the situation
“an ideal scenario for an Orange
Revolution.” Hours earlier, it had
said: “The West is giving Yanukovych a final push. It’s not just a
matter of Ukraine on its own. The
ultimate goal, if you remove all the
chaff, is to bring NATO closer to the
borders of Russia.”
On Saturday, Mr. Pushkov’s Twitter feed noted that Mr. Yanukovych
had fled the capital and protesters

were roaming through his unguarded residence outside the capital. “A pathetic end for a president,”
it said.

West Readies Aid as Ukraine Prepares for New Course
a hefty, but phased-in rise in natural
gas prices, a currency depreciation,
and significant cuts in the government’s budget, all of which are politically controversial.
U.S. Treasury Secretary Jacob
Lew also said Ukraine’s next government needs to commit to economic
restructuring if it wants help from
the U.S. “We’ve been very clear that
there needs to be stability in Ukraine
and a willingness to undertake the
kind of reforms they need to make
their economy work,” he told reporters after the G-20 meeting.
Ukraine’s parliament voted to
formalize the interim transfer of
presidential power to the newly
elected parliament speaker Oleksandr Turchynov, the first deputy
chairman of the Batkivshchyna
party. Mr. Turchynov called the current economic situation in the country “catastrophic” at a parliament
session on Sunday, Interfax news
agency reported.
“Yanukovych’s governance has
driven Ukraine’s economy to a catastrophe. There are absolutely no
funds on the treasury’s accounts.
There are colossal problems with
the pension fund. You see what’s go-

ing on with the national currency,

the banking system,” he said.
The whereabouts of Mr. Yanukovych were unknown Sunday, the
day after he left the capital as protesters took control of the city center.
Acting Interior Minister Arsen
Avakov on Sunday told reporters
that the president’s plane was de-

nied permission to take off Saturday
night in the eastern city of Donetsk.
“He then got in a car and fled in an
unknown direction,” said Mr. Avakov, according to the Interfax news
agency.
Mr. Yanukovych on Saturday
vowed to remain in power, even as
his political allies abandoned him in
droves. In an interview with a TV

European Pressphoto Agency

Continued from first page
De Gucht, said Sunday he was confident the trade pact would be signed.
“I believe that yes, they (the Ukrainians) are going to sign that deal,"
Mr. De Gucht told Sky News television.
He gave no details on timing.
“First we need a government for
that, and it has to take a democratic
decision and it has to be in a stable
situation.”
EU countries would need to give
the green light to signing the trade

accord, an EU official said, though
this could be done rapidly by telephone, or during an EU foreign ministers’ meeting in Brussels.
Ukraine’s negotiations with the
IMF would be expected to proceed
in tandem with the preparations for
the trade accord.
“We need to have established
government and guarantees in place
to make sure that EU taxpayers’
money won’t be wasted,” the official
said.
In Sydney, IMF Managing Director Christine Lagarde said economic
reforms “need to be started at
least” in order for the international
community to help. The fund wants

A protester poses in a bathtub Saturday at the residence of Mr. Yanukovych.

station in Kharkiv in the eastern
portion of the country, he denounced the events in Kiev as a
“coup d’état” that he blamed on
“bandits.”
With the future leadership of the
country still to be determined by
new elections, former President
Yulia Tymoshenko is considered
likely to make a bid to regain her
former office. Ms. Tymoshenko was
released from prison Saturday as Mr.
Yanukovych’s government crumbled.

A senior German official said
Chancellor Merkel had spoken to the
freshly released Ms. Tymoshenko on
Sunday morning and urged her to
protect the integrity of her country,
to reach out to the Russian-speaking
regions and to work to federate the
former opposition.
Ms. Merkel, according to the official, greeted Ms. Tymoshenko with
the words “welcome to freedom.”
She also invited the ailing Ukrainian politician to undergo medical
treatment in Germany if she wished
to, the official said.
—Ian Talley, Bertrand Benoit, Nick
Winning, James Marson and
Alexander Kolyandr
contributed to this article.


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 7

U.S. NEWS

New View Into
Fed’s Response
To 2008 Crisis
Two days after U.S. officials decided to let Lehman Brothers collapse in September 2008, and just
before the Federal Reserve unleashed

a torrent of programs to bolster the
financial system, central-bank officials were still struggling to grasp
the magnitude of the calamity that
had hit the economy.
“I think that our policy is looking
actually pretty good,” Fed Chairman
Ben Bernanke said of the level of interest rates at a closed-door Fed policy meeting on Sept. 16, 2008, according to transcripts of its policy
meetings that were released Friday
after the traditional five-year lag.
Officials decided at the meeting
to hold interest rates steady at 2%. It
was one of Mr. Bernanke’s last moments of passivity in the financial
crisis.
As he spoke, the Fed was moving
ahead with plans to help bail out
American International Group Inc.,
the large failing insurer seen as crucial to the financial system. Within
days Mr. Bernanke and Treasury Secretary Henry Paulson would go to
Congress and make an urgent plea
for a bank-bailout plan. By year-end,
the Fed chairman had pushed a stillhesitant central bank toward an unprecedented experiment with easymoney policies aimed at reviving the
economy.
The Fed transcripts, 1,865 pages
documenting one of the most turbulent economic times in the nation’s
history, covered eight formal and six
emergency policy meetings the central bank conducted in 2008. They
provide the most complete view yet
into developments inside the nation’s
central bank as the financial crisis
worsened and threatened to plunge

the U.S. into another Great Depression.
Among their revelations: Mr. Bernanke and his Fed colleagues spent
much of the year scrambling to catch
up with worsening financial turmoil
and economic conditions, sometimes
moving aggressively only to be surprised when conditions deteriorated
again.
Officials acted boldly in January
2008, but spent much of the spring
and summer hamstrung by uncertainty, disagreement and an unexpected inflation jump. In the months
after that September meeting, Mr.
Bernanke transformed from mildmannered former professor into an
audacious crisis manager, pushing
for more-aggressive policies and arguing more forcefully with other officials.
Sometimes gallows humor carried
them through difficult decisions.
“An accounting joke concerning
the balance sheets of many financial
institutions is now making the
rounds,” Janet Yellen, then president
of the Federal Reserve Bank of San
Francisco, said at one point. “On the
left-hand side, nothing is right; and
on the right-hand side, nothing is
left.”
Ms. Yellen, who became Fed
chairwoman on Feb. 1, emerges in the
transcripts as a loyal ally of Mr. Bernanke. She was often presciently
worried about unfolding developments, and among the first to call a

recession, but in some instances she
was wrong about how the crisis
would play out and in others unprepared to push Mr. Bernanke any further than he was ready to go.
On Jan. 9, he convened an unscheduled conference call to discuss
the worsening economic outlook with
colleagues. He had staff circulate a
draft policy announcement in case
officials wanted to cut rates that day.
“I have become increasingly concerned that our policy rate is too
high to fully address the downside
risks to growth,” he told his colleagues.
Fed officials held off from acting
at that meeting, but then raced to
cut rates less than two weeks later in
another unscheduled meeting. “We
are behind the curve,” Mr. Bernanke
said at the unscheduled Jan. 21 meeting, at which the Fed cut its benchmark short-term interest rate by
three-fourths of a percentage point
to 3.5%. “We need to do something.”
Ms. Yellen backed him. “The risk
of a severe recession and credit crisis
is unacceptably high,” she said. By
March she said she suspected a recession had already begun.
At another meeting in January,
Mr. Bernanke lamented, “during the
past few months I think a perception
has developed that we are tentative
and indecisive and are not communicating clearly enough to the markets
and to the public.”
Exchanges between officials got

occasionally testy, especially after
Mr. Bernanke’s decision to help J.P.
Morgan Chase & Co. finance the rescue buyout of Bear Stearns in midMarch.
On April 29, then-New York Fed
President Timothy Geithner rebuked
Dallas Fed President Richard Fisher
for pondering whether the Fed
should try to engineer a stronger
dollar with tight credit policies. “This
speculation is perilous,” said Mr.
Geithner, who sometimes sparred
with the Fed’s wing of policy
“hawks” who opposed easy-money
policies. Mr. Geithner, who later was
named Treasury secretary, warned it
was too hard to try and maneuver
the currency given the circumstances.
A day later, Philadelphia Fed President Charles Plosser, another hawk,
exchanged sharp words with Mr.
Geithner about interest-rate policy.
“Excuse me,” Mr. Plosser said to Mr.
Geithner. “Make sure that you say
you’re speaking for yourself, not for
me, in terms of how I think about
policy.”
In June, Mr. Bernanke gently
chastised Mr. Fisher for voting
against a decision to keep interest
rates steady in the face of rising inflation. The Fed acknowledged in its
statement it was alert to inflation

risks, as Mr. Fisher wanted, but he
also wanted a rate hike. “I’m disappointed that President Fisher is going to vote against his own language,” Mr. Bernanke said.
Amid the jousting, some Fed officials became convinced after the
Bear Stearns buyout that the worst
was over. Frederic Mishkin, a Fed
governor, said in April that it looked
like the financial system had “turned
the corner.”
Ms. Yellen often weighed in with

Fed Chairwoman Janet Yellen, right,
emerges in the 2008 transcripts, as a
loyal ally of former Fed Chairman Ben
Bernanke, above.
warnings of risks to the economy
from increasing financial strain. But
in the summer, as commodities
prices soared, driving inflation temporarily higher, she misstepped, suggesting the Fed was more likely to
raise interest rates than lower them
in the months ahead.
“Our next move on the funds rate
is likely to be up, and the question is
when,” she said at a June 25 meeting, at which officials decided to hold
interest rates steady at 2%. “I would
envision beginning to remove policy
accommodation toward the end of
this year.”
Outside of the Fed, however,
events were spiraling out of control.
Government officials had begun worrying about the rapidly deteriorating

health of mortgage giants Fannie
Mae and Freddie Mac. Lehman
Brothers was struggling in its efforts
to raise capital.
Mr. Bernanke wasn’t comfortable.
“I agree certainly that the crisis atmosphere that we saw in March has
receded markedly, but I do not yet
rule out the possibility of a systemic
event,” he said at the June meeting.
“We have considerable concerns
about Lehman Brothers, for example.”
In July, as the financial system
teetered, officials looked on as the
consumer-price index shot up to 5.5%
from a year earlier, pushed up by
soaring commodities prices.
At the Sept. 16 meeting, the Fed
again decided to keep its short-term
interest rate steady at 2%. Mr. Bernanke said the Fed didn’t have
enough information at that point
about the fallout from Lehman’s collapse to justify cutting interest rates.
“It is simply premature,” he said.
Ms. Yellen went along with Mr.
Bernanke’s decision at the September
meeting to keep rates steady, but she
warned: “I am very concerned about
downside risks to the real economy
and think that inflation risk is diminished.”
Other Fed officials were deeply
worried.

“We took a calculated bet,” Boston Fed President Eric Rosengren
said of the decision to allow Lehman
Brothers to fail. “If we have a run on
the money-market funds or if the
nongovernment tri-party repo market shuts down, that bet may not
look nearly so good.”

Agence France-Presse/Getty Images; Associated Press (above)

BY JON HILSENRATH

Two days later, as markets went
into a tailspin and the Fed moved to
bail out AIG, Messrs. Bernanke and
Paulson went to Congress and urged
lawmakers to support a bailout for
the U.S. banking system.
By year-end the Fed had cut interest rates to near zero, announced
plans to start buying governmentbacked mortgage-backed securities,
and set up programs to prop up
money-market funds and the commercial-paper market and individual
banks such as Citigroup Inc.
A more combative Fed chairman
also had laid the groundwork for major shifts in the Fed’s approach to
monetary policy, abandoning incremental interest-rate cuts and moving
toward a range of unconventional
new policies including bond-buying
programs that would become his signature over the next five years.
“We are at a historic juncture—
both for the U.S. economy and for

the Federal Reserve,” Mr. Bernanke
told his colleagues at a Dec. 16 meeting when the Fed cut rates to near
zero. “The financial and economic
crisis is severe despite extraordinary
efforts not only by the Federal Reserve but also by other policy makers
here and around the world. With respect to monetary policy, we are at
this point moving away from the
standard interest rate targeting approach and, of necessity, moving toward new approaches.”
When challenged by others, the

normally placid Fed chairman pushed
back.
“You must be thinking whether
this means that in every moderatesized recession henceforth we’ll view
the Federal Reserve’s best policy…”
Richmond Fed President Jeffrey
Lacker started in one exchange.
Mr. Bernanke cut him off. “It’s not
a moderate recession, and it’s not a
normal financial downturn,” he said.
In a speech Friday, after the release of the transcripts, Mr. Lacker
argued further against the Fed’s “impulse to intervene” throughout the
financial crisis. Financial instability
was worsened, he said, by expectations in the markets that the Fed
would always provide a backstop.
Mr. Bernanke, looking back on the
crisis era last month at an interview
at the Brookings Institution, described the September period as the
most intense for him in the crisis. “I
was so absorbed in what was happening and trying to find a response

to it,” he said. He likened it to a car
wreck. “You’re mostly involved in
trying to avoid going off the bridge;
and then later on you say, ‘Oh, my
God.’ ”
He said the Fed’s actions, along
with the bank bailouts and fiscal
stimulus, halted the crisis.
—Victoria McGrane,
Ben Leubsdorf,
Michael S. Derby
and Pedro Nicolaci da Costa
contributed to this article.


8 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

WORLD NEWS

Venezuela Protesters Maintain Pressure
Opposition Groups Say Food Shortages and Soaring Inflation Contribute to Antigovernment Sentiment

CARACAS—Tens of thousands of
protesters in Venezuela hit the
streets Saturday to express mounting frustration with the government, adding momentum to a wave
of demonstrations that have severely tested President Nicolás Maduro since the start of the month.
Former presidential candidate
Henrique Capriles called for the

march in Caracas, and stepped into
the void left after the arrest of Leopoldo López, the opposition leader
who had been organizing protests.
Mr. López faces some 10 years in
prison for allegedly causing the violence on Feb. 12 that led to the
death of three protesters after an
antigovernment march through the
center of the capital.
Opposition leaders have said that
militant government supporters
were responsible for the bloodshed.
At least eight people have been
killed since mid-February and dozens of others injured. Opposition
sympathizers estimate the number
of dead and injured as much higher.
The latest victim was Geraldine
Moreno, 22 years old, who died Saturday from a head injury she sustained days before from a rubber
bullet fired as security forces dispersed protesters in central Carabobo state, local media said.
On Friday night, Santiago Enrique Pedroza, 29 years old, was
killed in Caracas after riding his motorcycle into a wire strung across a
street, government officials said.
Mr. Capriles, the governor of the
state of Miranda who narrowly lost
to Mr. Maduro in elections last
April, had seemed reluctant to en-

Associated Press

BY EZEQUIEL MINAYA

Surrounded by clouds of tear gas, a protester throws a rock at riot police during a protest in Caracas on Saturday.
dorse the marches because of their
lack of specific goals and potential
for unruliness. He has since sought
to channel the discontent on the
street into a more organized movement, he said.
“There are a million reasons to
protest. But, if you don’t like hate,
you don’t respond with hate,” said
Mr. Capriles. “The protests can’t be
to turn this into a war,” he added in
comments to cheering supporters.
Mr. Capriles went on to call Mr. Maduro “an error of history.”

The rallies began earlier this
month in the border state of Táchira
to protest the rampant crime that
has made Venezuela one of the most
dangerous nations in the world.
They quickly spread to other cities
and issues, including an economy
that has buckled under an inflation
rate of 56%, among the highest in
the world.
“There’s no clear north for the
protests but people are tired of losing friends to crime, of the shortages of basic goods in the super-

market and inflation,” said Diego
Scharifker, a public official and
member of Mr. Capriles’s Justice

First party.
“The reason that these protests
have lasted so long has been because this is beyond the opposition
versus the government. The country
is in a crisis with problems that
transcend politics,” he said.
Many of the demonstrators are
so young that they have known only
Chavismo, the ruling system named
after the late President Hugo Chávez

who came to power in February
1999 and transformed Venezuela
into a Socialist state closely aligned
to Communist Cuba. They have
spent their formative years listening
to lofty Chavismo rhetoric—only to
see their prospects dim as the country sinks further into economic crisis.
At the same time, pro-government demonstrators rallied across
town in Caracas in a march for
women in support of peace called by
Mr. Maduro. He mocked Mr. Capriles
for his alleged timidity in the face of
street violence that the government
has blamed on far-right fascist
groups funded by Washington and
Bogota.
“There is a coup under way and
an international campaign against
Venezuela,” Mr. Maduro said. The 51year-old president also criticized U.S.

Secretary of State John Kerry for issuing a statement Friday expressing
concern over the escalating protests
in the South American country.
It was a concern “that John Kerry
keeps sticking his nose in the affairs
of Venezuela,” Mr. Maduro said to
applause. The president has called
for more rallies in the coming days.
Since the bloody Feb. 12 march,
state security forces and government opponents, made up mostly of
university students, have squared
off just about every day, with students blocking streets with burning
trash after nightfall and soldiers firing tear gas and rubber bullets.
Free speech advocates have also
accused the government of silencing
media outlets and cutting off access
to the Internet. Government officials
have denied any attempt to quash
dissent in the media or online.

Stalled State Spending Saps Mexican Economy
BY JUAN MONTES

MEXICO CITY—Paul Noriega’s
travails reflect what went wrong
with Mexico’s economy last year. His
company, a cleaning-products supplier whose main clients are public
hospitals, was stalled for months,
sales fell by half and some workers
were laid off.

The reason: government spending didn’t flow for much of the year.
“We hadn’t lived anything like
this in the last 12 years,” says Mr.
Noriega, a young Mexican businessman who runs the firm with his father. “Orders from the IMSS [the social security system] suddenly
plummeted. We had to tighten our
belts and use our savings to survive.”
Massive delays in government
spending are one of the reasons behind Mexico’s poor performance last
year. Latin America’s second-largest
economy expanded just 1.1% in 2013,
the statistics agency said Friday,
which translates into the creation of
around 200,000 new jobs in a country of 112 million people.
The growth data poured cold water on the optimism with which
President Enrique Peña Nieto began
his administration in December
2012. Instead of the 3.5% growth
initially expected in his first year in
office, it was the slowest growth
since the 2009 recession.
Mr. Peña Nieto has attributed the
economic downturn mainly to the
change of administration and weak
export demand north of its border.
“The U.S. recovery wasn’t as strong

as expected, and that affected the
dynamism of our own exports. And
then we have the turnover in government: as happens every six
years, the rhythm of spending

changes,” Mr. Peña Nieto said in an
interview this week.
Other factors also determined
Mexico’s sluggish performance,
economists say.
The construction sector fell into
recession due in part to the unsustainable pile of debt at the country’s
biggest housing construction companies. The lack of natural-gas supplies
in some regions also dented activity.
And many investors postponed decisions until seeing the final outcome
of Mr. Peña Nieto’s economic reforms
in energy and telecommunications,

which passed Congress last year.
“Definitely, it was the perfect
storm,” said Jonathan Heath, an independent economist who has
worked for Mexico’s statistics agency.
But some analysts say the government’s initial optimism and
badly handled spending also had a
crucial impact.
“The government asked Congress
for a balanced budget in 2013...when
the global economy was still fragile.
That was a mistake because it involved a contraction of spending
compared to the previous year,” said
Gerardo Esquivel, an economist at
the Colegio de México university.
Last year was a busy one for Finance Minister Luis Videgaray and
his team. Some of the key officials

appointed at the finance ministry, including the deputy finance minister
and the deputy minister of spending,
lacked any experience in the federalgovernment machinery. Also, working
out complex banking and tax overhauls took up much of their time, according to several senior government
officials who asked not to be named.
Several ministries with significant budgets, such as the transport
ministry, or SCT, took a long time to
start up. Regional delegates of the
SCT, who are in charge of speeding
up infrastructure projects and tenders, weren’t named until April, according to the government officials.
By May, the economic slowdown
was already evident. The government slashed its GDP forecast three

Brake on Growth

Delays in public spending contributed to Mexico’s sluggish 2013 performance
Quarterly gross domestic product, change
from a year earlier

Change in government spending in the first year
of a new administration
President
Ernesto Zedillo
1995

Change from previous year (January-June)

–15%

+0.7%

4

Vicente Fox
2001

7%

Felipe Calderón
2007
Enrique Pa Nieto
2013

4th quarter

5%

5.5%
–4.4%

Source: Mexico’s Finance Ministry (spending); Mexico’s Statistics Agency

3
2
1
0

2011

2012

2013
The Wall Street Journal

times last year: first to 3.1%, then to
1.8%, and finally to 1.3%.
Spending delays were starting to
have notable side effects: suppliers
weren’t paid on time, and new tenders were postponed. For Mr.
Noriega, the businessman, the data
had a bitter effect. “By midyear, we
had the warehouses full of stock
waiting to be sold,” he says.
The Finance Ministry started
work over the summer on a request
for Congress to approve a small
budget deficit for 2013 and a wider
one for 2014 to support economic
growth through additional public
spending—financed with more debt
and new taxes.
From September, government
spending accelerated, supported in
part by the reconstruction efforts
after several major storms hit the
country, and by the end of the year
the budget had been fully executed.
But the harm to the economy was
already done. The October-December
period didn’t see a recovery, growing

just 0.2% from the previous quarter.
For 2014, Mr. Peña Nieto expects the
economy to expand an above-consensus 3.9%, although many analysts are
seeing a weak first quarter.
Mr. Heath, the economist, said the
impact of the new spending will take
some time to be felt. “The new taxes
have also created uncertainty and are
already hurting household consumption and business confidence.”
Mr. Noriega doesn’t see light at
the end of the tunnel yet. “As of today, we haven’t seen any improvement in activity,” he says.


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 9

WORLD NEWS

G-20 Sets
Multi-Year
Economic
Growth Plan

Reuters

BY IAN TALLEY
AND JAMES GLYNN

Thai police officers inspect the site of an explosion during an antigovernment protest at Khao Saming district, of Trat province on Sunday.

Blast Kills Two Near Thai Rally
BY JAMES HOOKWAY

BANGKOK, Thailand—Two people were killed and dozens were injured in a blast near an antigovernment rally site in Thailand’s capital
Sunday.
Security forces are investigating
the cause of the explosion that occurred in a busy shopping neighborhood that is popular with foreign
visitors.
Police officials told reporters the
blast appeared to have been caused
by a grenade in an area near where
protesters have been camped for
months in a bid to unseat Prime
Minister Yingluck Shinawatra. The
two fatalities were a woman in her
40s and a 4-year-old boy.
The explosion comes a day after
attackers in a pickup truck fired on
a political rally in Trat province,
some 300 kilometers, or 180 miles,
east of Bangkok, and threw explosive devices into the crowd, killing
at least one person, including a 5year-old girl.
Police Lieutenant Thanabhum
Newanit said the Saturday attack

took place at a market in Khao Saming district.
Many of the people injured
weren’t participating in the rally, including the child who was killed.
Television footage showed overturned stools next to abandoned

food carts, shell casings on the
ground and victims crowded into a
local hospital.
Drive-by shootings and bomb attacks have plagued political protests
here in recent months as antigovernment demonstrators step up
their campaign to force the resignation of Ms. Yingluck, Thailand’s
elected leader.
With King Bhumibol Adulyadej
now 86 years old and entering the
twilight of his reign, the protesters
want an unelected council to take
power and introduce political
changes to curb the influence of populist leaders such as Ms. Yingluck
and especially her brother, former
leader Thaksin Shinawatra, who was
ousted in a military coup in 2006.
In the past three months, 18 people have been killed in the violence.
Ms. Yingluck is pushing back

against legal challenges to her government. On Thursday she defended
a program to support rice prices
that so far has incurred paper losses
of as much as $8 billion. In a statement on her Facebook page, she
said there was no corruption associated with the program, and that it
was designed to help raise the standard of living in rural areas.

Drive-by shootings and
bomb attacks have
plagued political protests
as demonstrators step up

their campaign.
Thailand’s National Anti-Corruption Commission has said it would
charge Ms. Yingluck for mismanagement in connection with the program.
If Ms. Yingluck is found guilty of
mismanagement she will be suspended from duty and face an im-

peachment trial in Thailand’s partially elected Senate.
Concerns are growing over how
the mass-membership “Red Shirts”
movement will react if Ms. Yingluck
is removed from office, especially as
antigovernment protesters managed
to block the completion of national
elections on Feb. 2.
The group was formed in the aftermath of the 2006 coup, and
broadly supports the Shinawatra
clan and their populist policies.
After a pro-Thaksin government
was removed from power for alleged
election violations, tens of thousands of Red Shirt members converged on Bangkok in 2010 to demand a new vote, occupying much
of the city center for nearly two
months.
More than 90 people were killed
in clashes between protesters and
security forces, the vast majority of
them Red Shirt members. Key Red
Shirt leaders have warned that the
group could again march on Bangkok if Ms. Yingluck is overthrown.
—Warangkana Chomchuen
contributed to this article.

Hong Kong Rally Defends Press Freedom
BY TE-PING CHEN

Thousands of residents in Hong
Kong rallied Sunday to protest
what they see as waning press freedoms in this Chinese city.
According to organizers, more
than 6,000 demonstrators—including reporters, college students and
retirees—rallied under blue skies
by the edge of Victoria Harbour.
Police put the number at closer to
2,200 at its height. Crowd estimates from police and organizers
usually vary widely in Hong Kong.
The rally is part of continued
unease in Hong Kong about the influence of mainland China, which
controls the former British colony
under a one-country, two-systems

agreement. In a report earlier this
month, the Committee to Protect
Journalists said that Hong Kong’s
traditionally freewheeling press
was under attack, citing past violent incidents against the pro-democracy newspaper Apple Daily,
and rising rates of self-censorship.
Karen Kwok, a cable-television
reporter at the rally who attended
alongside at least 10 colleagues, said
the future of freedoms “depends on
what kind of fight we put up.”

“If we don’t speak up, of course
it will only get worse,” she said, as
she stood before a wall of blue ribbons that protesters had tied to the
fence surrounding the government’s office.
A government spokesman said

the city was committed to continuing to guard freedom of speech and
freedom of the press, as the two
are “major elements in sustaining
Hong Kong’s status as an international metropolis.”
Hong Kong’s global press-freedom ranking this month slipped
three places to No. 61 this year, according to the Paris-based Reporters Without Borders. Anger in
Hong Kong has also been simmering since the start of the year over
the ousting of a top editor at the
well-regarded Ming Pao newspaper,
which many staff believed was politically motivated.
One local magazine reporter
who marched on Sunday said he
believed Chinese authorities were

increasing pressure on Hong Kong
publications as calls for political
reform mount in advance of 2017,
the year that Beijing has said is the
earliest local residents can begin
directly electing their leader.
In particular, he said, he had
been personally pressured by his
editors to ensure that any print
references to “Occupy Central”—a

plan to occupy the city’s financial
district to demand full universal
suffrage—were accompanied by
language emphasizing the potentially destructive impact of such a
movement.
“I definitely see more censorship,” said the reporter, who declined to be named out of fear of
jeopardizing his job.

SYDNEY—Finance leaders from
the world’s biggest economies called
for support from central banks and
private-sector infrastructure spending to help spur growth, reverting
to the global economy’s playbook of
recent years in an effort to safeguard a fragile recovery.
Group of 20 officials ended their
summit this weekend saying they
would look to boost world growth
by more than $2 trillion over the
next few years under a strategy
crafted by the International Monetary Fund. Officials spent the weekend exploring ways to navigate the
global economy’s choppy waters as
the U.S. ends its easy-money policies, emerging markets try to subdue volatile capital flows and the
euro zone attempts to avert growthkilling deflation.
Under the G-20 plan, advanced
economies would continue with
their easy-money policies while
emerging markets would seek to restructure their economies and tame
inflation. In addition, governments
everywhere would be expected to
channel private-sector finance into

new infrastructure projects.
The IMF, which expects growth
of 3.7% this year and 3.9% in 2015,
says its plan would add half a percentage point to global growth annually over the coming four years.
The finer points will be hammered
out in the run-up to the G-20 leaders’ November summit.
But if past efforts of the G-20 are
any guide, investors should temper
their hopes. The group’s previous
attempts to spur growth have fallen
by the wayside, undermined by the
realities of domestic and international politics.
The G-20’s latest push for
growth faces similar challenges. The
world’s third-largest economy, Japan, is already struggling to implement structural reforms, such as
opening industries to competition.
That has placed a greater burden for
economic adjustment on the central
bank, whose stimulus policies have
devalued the yen and cheapened its
exports at the expense of countries
such as the U.S. and South Korea.
“The depreciation of the yen will
greatly affect the Asian economy,”
South Korean Finance Minister
Hyun Oh-seok said on the sidelines
of the meeting. “The negative impact will expand and further affect
Korea’s exports.” The G-20’s reforms
are likely to run into difficulties,
too, in dozens of developing countries that are in election years.

The strategy comes as the global
outlook remains murky. While the
U.S., Europe and Japan appear to be
improving, output in the largest
emerging-market countries is slackening. In the aftermath of the global
financial crisis, developing countries
led growth.
The G-20 is now relying on the
U.S., Japan and the euro zone to
keep the cash spigots open while
governments elsewhere undertake
measures to reduce public debt and
make their economies more competitive. The G-20’s final communiqué
also highlights agreement among
central banks to communicate their
stimulus-exit strategies clearly and
in a timely fashion.


10 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

IN DEPTH

For Defying Village Rules,
A Penalty of Rape in India

Councils Illegally Enforce Traditional Rules, Showing Limits of New Legislation Meant to Protect Women
BY PREETIKA RANA

Subalpur, India

Associated Press

W

Thirteen men, including those in custody, above, are suspected of gang-raping a Hindu woman in the farming village of Subalpur in West Bengal state.

hen the elders in this small Hindu
farming village discovered last
month that a local woman intended to marry a Muslim, their reaction
was swift and savage.
The village chief and 12 others dragged
the 20-year-old woman to a shed and gangraped her, the local police allege. She and
her suitor were then tied to a tree overnight, witnesses say, and the village council
fined them the next day.
Such rough justice is common across
wide swaths of rural India, where local
leaders often ignore the law to enforce traditional social norms that run counter to
more-liberal views now gaining ground in
India’s cities.
More than a year after the December
2012 fatal gang rape of a student on a New
Delhi bus, which shocked India and drew
global attention, the Subalpur case shows
the limits of new legislation aimed at protecting women in the face of deep cultural
resistance.
The woman reported the gang rape to
police. Her alleged attackers—their lawyer
says they are innocent—are in jail. Still,

her family fears retaliation from villagers.
“Her entire life has been ruined,” her
mother says. “Maybe the best thing to do
was to keep quiet.”
For hundreds of millions of women in
India’s impoverished countryside, conservative local leaders and informal village
councils have long dictated everything
from whom they can marry to what they
can wear.
These informal councils, which are separate from state-sanctioned local governments, can’t legally rule on village disputes
or other matters of law. But the penalties
they illegally impose can range from fines
and ostracism to forced marriage, rape and
death.
“Urban India is changing. But our villages remain centuries behind,” says Shamina Shafiq, a member of India’s National
Commission for Women. Local councils are
“one of the biggest stumbling blocks in the
road to progress for women.”
In 2012, an informal village council in
Uttar Pradesh state proposed that only arranged marriages be permitted and that
single women be barred from having cellphones or wearing jeans. Central-government officials condemned that move. P.
Chidambaram, home minister at the time,
told reporters in 2012 that “there is no
place for such diktats in a democratic society.”
But the government has struggled to
curb the extralegal councils. Authorities
say it is hard to gather statistics about the
councils’ actions because villagers generally don’t report them to outsiders.
In response to widespread reports of
torture by the councils, the Law Commission of India in 2012 drafted legislation to

clamp down on them, but Parliament has
yet to consider it.
Men can be victims, too. Police in Rajasthan state say a man from the state filed a
complaint late last year alleging that villagers held him in a cage in neighboring
Haryana state for three months and sodomized him in retribution for his eloping
with a married Haryana woman. Rajasthan
police say they transferred the case to the
village where the alleged attack happened;


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 11

IN DEPTH
India’s Women Report More Abuse

A growing debate in India over women’s rights comes as national data show that more complaints of physical and sexual violence in many categories are being lodged with the police each year.
KIDNAPPING AND
ABDUCTIONS

CRUELTY BY
HUSBANDS AND
RELATIVES

100,000

MOLESTATION

RAPE

DOWRY DEATH*

SEXUAL
HARASSMENT

75,000

75%

50,000

33%

Change, 2008-12

17%

13%

1%

28%

25,000

0

'08

'09

'10

'11

'12

'08

'09

*Alleged murders and suicides stemming from dowry disputes.

'11

'12

'08

'09

'10

'11

'12

'08

'09

'10

'11

'12

'08

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Source: National Crime Records Bureau

Police inspect the site in January of the alleged rape in Subalpur, which was ordered by village elders.
lage,” Mr. Ghose says. “The word of the village elders is often the last word on any
matter.”
Rape victims can’t be identified by name
under Indian law without their permission.
The woman declines through her mother to
comment. Her mother asks that her name
and her daughter’s not be used.
Police in cities point to recent shifts in
sex-crime-reporting statistics as evidence
that public dialogue has rapidly altered how
urban victims perceive themselves, particularly in the wake of the 2012 bus gang rape
in India’s capital.
In Delhi, more than 1,500 rapes were reported in 2013, up from 706 in 2012. Ha-

rassment reports jumped fivefold from

2012. Delhi police say the increase isn’t due
to rising crime rates, but to women’s newfound willingness to report abuse.
In the countryside, it is a different story.
Villagers in the same district as Subalpur
say at least two similar attacks took place
in recent years.
Late last year in Gobra, a village not far
from Subalpur, a teenage girl was raped for
dating a man from another community, residents there say. The village chief says he
isn’t aware of any such attack.
No one has registered a formal complaint regarding the alleged attack, local police say. They say the woman’s family left

(Top to bottom) Associated Press; Preetika Rana/The Wall Street Journal

police in the village say they haven’t received the transfer request.
Women are the most common target of
the village councils, say women’s rights
groups, and the Subalpur case illustrates
the extent to which the councils still dominate rural women’s lives.
Subalpur, in West Bengal state, is a
grain-farming village of roughly 30 families
about 200 kilometers from the nearest city,
Kolkata. The closest police station is about
20 kilometers away in the town of Labpur.
Late one afternoon last month, the
young woman’s boyfriend arrived at her
home in the village and proposed to her
around sundown, according to the woman’s
police complaint. She agreed.
A village leader saw the man, a Muslim,

enter the house, villagers say, and word of
his engagement to the Hindu woman soon
spread.
Later that evening, community leaders
burst into the home—a one-room dwelling
plastered with Bollywood movie posters and
portraits of Hindu gods—the woman said in
a complaint filed with police in Labpur,
which has jurisdiction over Subalpur.
The village chief “directed” villagers to
“enjoy” the woman as punishment, according to her allegations in a police report,
which was reviewed by The Wall Street
Journal. The chief, Balai Mardi, allegedly
joined in the rape, police say.
The next morning, police and witnesses
in the village say, elders met in the square
to pass judgment on the couple, who were
tied to a nearby palm tree. They imposed an
$800 fine on the couple for deciding to
marry outside the community.
Dozens of villagers, children in tow,
watched the proceedings, the witnesses say.
A half-dozen village residents the Journal
interviewed in the days after the alleged assault either deny there was a rape or say
they were sleeping and don’t know what
happened. Most express approval for the
council’s fine.
“I think it’s a very lenient punishment
for the crime they committed,” says Lal
Kisku, a middle-aged village man, of the

fine. He says he suspects the woman faked
the rape. She “should have been prepared to
face the consequences of having relations
with a man outside her community.”
One of the woman’s brothers took her to
the Labpur police station by bicycle. Police
there say her blouse was torn, she was
bruised and her underwear was stained
with semen when she arrived.
Police arrested 13 men, including the village chief, on suspicion of participating in
the alleged gang rape. All remain in custody,
but none have been charged. In India, police
typically have at least two months to prepare a charge sheet; suspects are rarely
charged during that period.
Police decline to make the men available
for interviews. Dilip Ghosh, the lawyer for
the men, says they were framed.
Debasis Ghose, the police inspector investigating the attack, says that villagers in
the area seldom come to the police, preferring to handle their affairs based on conservative moral codes handed down over generations.
“These people have no idea about their
rights, about the universe outside their vil-

'10

Sunita Murmur, above, was paraded naked at age 15 for dating an outsider, in the village of Battala.

'10

'11

'12

'08

'09

'10

'11

'12

The Wall Street Journal

the village, restraining any efforts to conduct a probe.
The second assault was in Battala, a village about 80 kilometers from Subalpur
where electricity arrived only two years
ago. One day in August 2010, Sunita Murmur, then 15, says her Muslim boyfriend
was visiting her Hindu home when local
leaders barged in and dragged her outside.
“Village leaders asked me to forget him,”
says Ms. Mumur, now 19. “I said I couldn’t.”
About a dozen men, acting on the village
chief’s orders, stripped her naked and paraded her around the village as punishment
for dating a Muslim, she says.
“I shrieked and shouted,” Ms. Murmur
says. “But nobody—not even one person—
came forward to help. They all seemed to be
enjoying the show.”
Ms. Murmur says the men marched her

through three villages before dumping her,
naked and alone, on a nearby mountain. She
says she was “scared for my family” so
never approached the police.
Many villagers took mobile-phone videos
of the assault, she says. After at least one of
the videos surfaced later that month in the
local news media, police investigated the
matter and arrested 11 men, charging them
with molestation, court documents show.
The men, free on bail, couldn’t be located for comment. Some villagers say they
haven’t seen them there for months. A trial
in the case is pending in West Bengal state.
Several residents of Ms. Murmur’s village confirm her account but say they won’t
testify. “Everyone knows about this,” says a
village woman. “But we don’t want to get
ourselves involved,” she says. “You never
know—tomorrow the men may come after
our families.”
Informal village councils have been a legal quandary for some time. In a 2006 ruling in favor of a couple tortured for marrying outside their community, India’s
Supreme Court said the village councils’
practice of taking the law into their own
hands is “wholly illegal and has to be ruthlessly stamped out.”
In a similar 2011 judgment, the Supreme
Court said: “It is time to stamp out these
barbaric, feudal practices which are a slur
on our nation.”
But with no new laws to curb councils,
“how can you expect people’s mind-sets to
change when the law itself hasn’t,” says Rehana Adib, head of Astitva, a nonprofit that

fights for women’s rights in rural India.
“Because there is no real law, people, especially the illiterate masses, don’t find anything wrong with what their local leaders
say.”
Rural sex-crime victims continue to be
ostracized and often are blamed for attacks,
she says. “Sometimes, they fear for their
families. Other times, they fear they would
be shunned if they speak up.”
The Subalpur woman’s family, under police protection in a neighboring town, say
they fear retribution. “We will be killed if
we go back,” says Sital Murmu, one of the
woman’s brothers.
The police and family say they don’t
know where the woman’s fiancé is.
The mother, sobbing, says she regrets
her daughter’s decision to go to the police.
“Who will ever want to marry her now?”


12 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

OPINION: REVIEW & OUTLOOK

Breakthrough in Ukraine

A

week of carnage in Kiev has ended

with Ukraine’s president in flight
from the capital and a shaky peace
in the city’s main square. The spoilers
who could still try to break things up are
what’s left of a discredited Ukrainian regime and Moscow.
In talks Friday mediated by three EU
foreign ministers, with a Russian envoy
on hand, President Viktor Yanukovych
agreed to stop the violence, share power
and hold early elections. The deal was already being revised by the end of the
weekend, though if something like it holds
it will mean a victory for democratic
forces and a blow to Mr. Yanukovych’s patron in the Kremlin, Vladimir Putin.
i

i

i

Later on Friday, the Ukrainian parliament unanimously restored the 2004 constitution, which curtails presidential powers. In a dramatic reversal, Mr.
Yanukovych lost control over the chamber, which on Friday also voted to release
the former prime minister, Yulia Tymoshenko, who was jailed on politically
trumped-up charges in 2011. His riot police, which a day before used live ammunition against civilians, withdrew from
the capital’s center.
Under the terms of the EU-brokered
deal, the new “national unity” government is to be created within 10 days to
work out other constitutional changes to
strengthen Ukraine’s democracy. Presidential elections previously scheduled for
2015 are to be held before the end of the

year. By Saturday, however, parliament ern sanctions and the scenes of civil war in
had opted to remove Mr. Yanukovych central Kiev prompted his allies in the busifrom office and named an interim Presi- ness elite and his party to abandon him.
dent, Oleksandr Turchinov, an ally of Ms.
Members of the ruling Party of Regions
Tymoshenko. Mr. Yanukovych reappeared broke away to form a new faction and conin the eastern Ukrainian
demn the violence in parSupport for Russia’s liament. The mayor of Kiev,
city of Kharkiv to insist he
would not resign his office man in Kiev crumbles also a Yanukovych ally, left
and denouncing the upristhe party on Thursday in
after this week’s
ing as a “coup d’etat.”
protest. The army chief,
The agreement also calls
Zaman, reviolence, but Putin Gen. Volodymyras well, tellfor an investigation into
signed his post
could still meddle.
the violence in Kiev and the
ing a television interviewer
restoration of an indepenthat he wasn’t willing to
dent prosecutor, which
follow orders to turn the
spells legal trouble for Mr. Yanukovych military against the Maidan.
and his interior minister (who was ruThe immediate test will be implemored late Friday to have fled to Belarus). menting the agreement. Mr. Yanukovych
It’s not surprising, but it is revealing, that has broken previous promises to the opMr. Putin’s envoy refused to join the EU position, and his speech Saturday, in
ministers in signing the accord.
which he called the demonstrations
The turnaround in Kiev was sudden “banditism,” hardly signalled conciliabut costly. More than 100 people were tion. The demonstrators won’t likely
killed after snipers, police and Yanuk- leave the Maidan as long as he keeps
ovych thugs opened fire on anti-govern- power. During funeral services on Friday
ment protesters hunkered down around for Thursday’s victims, several speakers

Kiev’s Independence Square, known as the rejected any deal that didn’t include the
Maidan. Ukraine had never seen such president’s immediate resignation. What
bloodshed in 22 years of independence. began in November as a protest against
After the worst clashes on Thursday, the President Yanukovych’s turn away from
U.S. and EU, after weeks of dithering, im- Europe and toward Russia has become a
posed sanctions. Cracks in the regime nationwide movement for wholesale
opened wide enough to make Friday’s democratic change.
deal possible.
President Putin staked a lot on the
Mr. Yanukovych enriched himself and Maidan’s defeat and pushed Mr. Yanukhis family since taking power in 2010, but ovych to end the protests by force. The
his popularity has been plummeting. West- climbdown in Kiev won’t sit well in Mos-

cow, which still has numerous means to destabilize Ukraine. Foreign Minister Sergei
Lavrov this weekend called the victors in
Kiev “thugs” and “armed extremists and
pogromists.” On the weekend Moscow said
it would delay the $15 billion financial bailout it offered the Yanukovych government.
The Russians may try to stoke separatist fires in eastern, Russian-speaking
Ukraine, and the Crimean Peninsula is another possible flashpoint. The Russian
Black Sea Fleet is based in this ethnically
majority Russian appendage in southern
Ukraine, and local politicians have a habit
of calling for Moscow’s intervention. The
Kremlin used similar cries to invade Georgia in 2008.
i

i

i

Last week we called the EU “hopeless”
on Ukraine, but with Friday’s deal we’ll
gladly give its leaders some credit. The
EU and the U.S. now have a second chance
to make up for their inattention of the
last six months.
A new government in Kiev will need
substantial financial aid to support a
credible reform program and to weather
Russian attacks on the economy. Ukraine
deserves a clearer path into the EU and
NATO, the clubs of prosperous free Europe, if that’s what its people want. As Mr.
Putin realized, Ukraine is the crossroads
between a free and an authoritarian Europe. Friday’s agreement is a possible
breakthrough for democracy and freedom
in this strategic corner of Europe, but the
struggle isn’t over.

$19 Billion and Change

W

e guess the one thing that can
be truly said about Facebook’s
mind-bending $19 billion purchase of WhatsApp is that Alexander
Graham Bell had it right the first time:
There’s money to be made in the human species’ irrepressible need to chat
with each other over long distances.
Beyond that reality, virtually everything about the purchase is off the
charts.

With a valuation of $19 billion, What-

sApp, founded five years ago, is worth
more than food giant ConAgra Foods,
whose market cap is $12.27 billion. ConAgra employs 26,000 people. WhatsApp? Apparently it takes only 55 people to run the modern $19 billion
company. As to what WhatsApp does,
even press reports described it as “a
kind of replacement for text messaging.”
We’ll leave the financial analysis to
the analysts, who admit this deal chal-

lenges traditional metrics. For now, attention should be paid to the astonishing phenomenon of how WhatsApp
came to life.
Its 37-year-old co-founder, Jan Koum,
is a Jewish refugee from Ukraine. Ironically, his parents there rarely talked on
the phone for fear it was tapped. At age
16, Mr. Koum moved to Mountain View,
California, with his mother. Fast forward 15 years, and Mr. Koum is hired as
an engineer at Yahoo. Fast forward 12

years and with Brian Acton they create
WhatsApp in 2009. Then Facebook buys
them for $19 billion.
We write often in these columns that
the U.S. economy needs more of what
Lord Keynes called “animal spirits.”
We’ll learn in time if this acquisition
makes financial sense. It makes very
clear, though, that the tremendous creative drive that gave us Mr. Bell’s telephone company is up and running in
Mr. Koum’s billions of messages.

Fruits of Immigrant Labor

R

epublicans are often first in line to
vote for farm subsidies. But when
it comes to lending U.S. farmers a
hand by modernizing the country’s guestworker program, many hide in the corn
stalks. A new study quantifies the costs of
the GOP’s immigration duck.
The American Farm Bureau Federation
commissioned independent economists to
analyze how immigration reform would
effect farm production and food prices.
Their conclusion is that any fix that
doesn’t expand the legal pathways for immigrants to enter and work in the U.S.
will cost farmers and consumers a bundle.
About half of the country’s 1.1 million
hired farm hands are estimated to be undocumented, largely because the current
H-2A visa program is a bureaucratic nightmare. The Labor Department is slow to
process visa applications, so farmers often
don’t get the labor they need in time for

harvest—if workers show up at all. Guest
workers also aren’t allowed to change jobs
or stay in the country for more than a year.
Thus many simply overstay and become illegal. In 2010 a labor shortage cost more
than $320 million in farm losses.
An enforcement-only approach to immigration would further shrink the supply

of farm hands, thereby driving up labor
costs. The study finds that farmers would
have to raise wages to $26.57 per hour
from an average today of $10.80 to replace undocumented workers.
Higher wages sound great, assuming
enough Americans would pick berries and
tomatoes. But they haven’t in the past.
More likely is that many of these jobs
would vanish as farmers grew less, moved
production overseas, or shifted to crops
that can be harvested with machines.
The study also examines the effects of
legalizing 11 million undocumented immi-

grants coupled with tougher enforcement.
The impact on farmers is only slightly less
destructive since undocumented immigrants once legalized would move to more
attractive jobs in other industries. That’s
what happened after the 1986 reform that
legalized illegals without offering new opportunities for guest workers.
Within five years of legalization, the
study predicts that at least half of the
country’s undocumented workers would
leave agriculture. Farmers would have to
raise wages to between $14.04 and $18.25
an hour to attract domestic workers, assuming they could still get them, which
would cause their incomes to drop by between 7% and 14% and food prices to rise
by 2% to 3%.
The only reform alternative in the
study that wouldn’t harm farmers and

consumers is a redesigned guest-worker
program. The study proposes that the

new visa be renewable after three years,
allow workers to change employers and
be available to dairy farmers and ranchers. This is similar to provisions that
passed the Senate.
However, the Senate bill also restricts
farm guest workers to 337,000 over five
years, which would only meet about twothirds of farmers’ needs. A farm guestworker bill that passed the House Judiciary
Committee last summer would do better,
though it invites political tinkering by allowing the Agriculture Secretary to lower,
but not raise, its 500,000 cap on visas.
Republicans have killed immigration
reform for now, but the Farm Bureau
study shows that in the real economy it’s
still needed. The irony is that many Republicans who support handouts to farmers oppose reforms that wouldn’t cost
taxpayers a dime and would help the
economy.


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 13

OPINION

Putin Knows History Hasn’t Ended
BY WALTER RUSSELL MEAD
The Ukrainian government’s assault on protesters in Kiev’s Independence Square over the past 48

hours shocked Europe and the
world. The turmoil is also forcing
both the European Union and the
United States to re-examine some
of their deepest assumptions about
foreign policy in the post Cold War
environment.
The Ukrainian crisis started
last fall, when EU ministers
thought Ukraine was about to sign
an Association Agreement that
would have begun the process of
economic integration between Europe’s second-largest country and
the European Union. This would
have been a decisive step for
Ukraine. Long hesitating between
Moscow and Brussels, Ukraine
would have seen the Association
Agreement put it firmly on a
Western path. That Ukrainian
President Viktor Yanukovych,
whose political support is rooted
in the Russia-leaning half of the
country, seemed prepared to take
this step was particularly significant. It looked as if both halves of
Ukraine had reached a consensus
that the future lay with the West.
But the diplomats in Brussels
and Washington forgot to factor
one man into their calculations.

For Russia’s President Vladimir Putin, the prospect that a united
Ukraine might desert Russia and
join Europe is completely unacceptable. Mr. Putin saw the West’s
overtures to Ukraine as an
existential threat to Russia’s great
power status and his own political
position. Sensing that the West
was unprepared and unfocused, he
moved quickly and effectively to
block the wedding by offering Mr.

Yanukovych $15 billion to leave the
Europeans standing at the altar.
European diplomats were flummoxed. Far from anticipating Putin’s intervention, they thought
Mr. Yanukovych was hungry
enough for an EU agreement that
they could force him to free his
imprisoned political rival, Yulia
Tymoshenko, as the price of the
trade deal. These days, nothing
much is heard about Ms.
Tymoshenko—who was jailed in
2011 on charges of abusing power
and embezzlement, after what
many observers say was a politicized process—and the Europeans
are scrambling, in their slow and
bureaucratic way, to sweeten their
offer and lure Ukraine back to the
wedding chapel.
Washington was no better prepared. Between pivoting to Asia

and coping with various crises in
the Middle East, the Obama administration hadn’t deigned to engage
seriously until Mr. Putin knocked
the EU plan off course.
Inside Ukraine, Mr. Yanukovych’s reversal on Europe broke
the fragile national consensus. Few
countries had as wretched a 20th
century as Ukraine. World War I,
the Russian Civil War, the mass
starvation and political purges of
the Stalin era, the genocidal violence of World War II: wave after
wave of mass death rolled over the
land. The western half of the country sees Moscow as a hostile, rapacious power and believes—correctly—that Mr. Putin’s vision for
their country will involve the loss
of democratic freedoms and destroy any hope of establishing the
rule of law and transparent institutions, or of joining the EU.
The eastern half is not so sure.
Trade and cultural connections

with Russia are stronger than they
are with Europe, and while the EU
is a good market for Ukrainian raw
materials, Russia is willing to buy
Ukrainian manufactured and consumer goods that Europe doesn’t
much want.
Meanwhile, given Ukraine’s tormented history and the post-Soviet
legacy of criminal oligarchs and
corruption, the country’s weak institutions lack the legitimacy and

Obama might like to pretend

that geopolitics don’t matter,
but the slaughter in Kiev
shows how mistaken he is.
perhaps the competence to manage
deep conflicts like the one now
shaking the nation. Political movements in both halves of the country have ties to shady figures, and
the horrors of the past have left a
residue of ethnic hatreds and conspiracy theories on both sides of
the current divide.
For Mr. Putin, this is of little
moment. With Ukraine, Russia can
at least aspire to great power status
and can hope to build a power center between the EU and China that
can stand on something approaching equal terms with both. If, on the
other hand, the verdict of 1989 and
the Soviet collapse becomes final,
Russia must come to terms with the
same kind of loss of empire and
stature that Britain, France and
Spain have faced. Mr. Putin’s standing at home will be sharply, and
perhaps decisively, diminished.
Both the EU and the U.S. made a
historic blunder by underestimating
Russia’s reaction to the Ukrainian

trade agreement. Mr. Putin cannot
let Ukraine slip out of Russia’s
sphere without throwing everything
he has into the fight. As I wrote last
fall, the EU brought a baguette to a

knife fight, and the bloody result is
on the streets of Kiev.
The policy of detaching Ukraine
from Russia should either have
been pursued with enormous determination and focus—and an
irresistible array of economic and
political instruments of persuasion—or it should not have been
pursued at all. While Mr. Putin and
the Ukrainian government have
turned a problem into a crisis, some
responsibility for the deaths in
Ukraine lies at the doors of those
who blithely embarked on a dangerous journey without assessing
the risks.
Neither the American policy
makers nor the European ones who
stumbled into this bear trap are stupid, but this episode is confirmation that the problem that has
haunted Western statesmanship
since 1989 is still with us. Both
President Obama and the manyheaded collection of committees
that constitutes the decision-making apparatus of the EU believe
that the end of the Cold War
meant an end to geopolitics.
This helps explain why American
diplomacy these days is about order
and norms. The objectives are
global: an environmental climate
treaty, the abolition of nuclear
weapons, the creation of new global
governance mechanisms like the

G-20, the further expansion of free
trade agreements, and so on. When
the U.S. voices its objections—to
Bashar Assad’s slaughter in Syria,
say, or to the Ukrainian crackdown
this week—they are stated in terms
of global norms. And so U.S. diplo-

macy with Russia has focused on order-building questions like nonproliferation, while gravely
underestimating the degree to
which Russia’s geopolitical interests
conflict with those of the U.S.
This is not so much an intellectual error as a political miscalculation. For American and European
policy makers, the 1989 geopolitical
settlement of the Cold War seemed
both desirable and irreversible.
Powers like Russia, China and Iran,
who might be dissatisfied with either the boundaries or the legal and
moral norms that characterized the
post-Cold War world, lacked the
power to do anything about it. This
outlook is Francis Fukuyama’s “The
End of History” on steroids: Humanity had not only discovered the
forms of government and economic
organization under which it would
proceed from here on out, it had
found the national boundaries and
the hierarchy of states that would
last indefinitely.
Mr. Putin is a master of a game

that the West doesn’t want to play,
and as a result he’s won game after
game with weak cards. He cannot
use smoke and mirrors to elevate
Russia back into superpower rank,
and bringing a peaceful Ukraine
back into the Kremlin’s tight embrace is also probably beyond him.
But as long as the West, beguiled by dreams of win-win solutions, fails to grapple effectively in
the muddy, zero-sum world of classic geopolitics, Mr. Putin and his
fellow revisionists in Beijing and
Tehran will continue to wreak
havoc with Western designs.

Mr. Mead is a professor of foreign
affairs and humanities at Bard
College and editor at large of the
American Interest.

Obama’s Syria Debacle Laid Bare
BY FOUAD AJAMI
Sen. John McCain took to the
Senate floor on Feb. 12 to shine a
bright light on the plight of the Syrian people and its consequences. He
had with him a sample of unforgettable images, 55,000 photographs in
all, of the brutalities inflicted on
11,000 detainees of Bashar Assad’s
regime. Reflections of the Balkan
horrors of the 1990s—evidence of
torture, starvation, systematic rape
and slaughter.

“We must not look away,” Mr.
McCain said. Failure to “acknowl-

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edge through our sense of revulsion that what is happening in
Syria today,” he said, would be “a
stain on the collective conscience
of moral peoples everywhere.”
It will be said of President
Barack Obama when he leaves
office that he kept the U.S. out of
the Syrian ordeal. But at what
price? Even the architects of his
Syria policy now acknowledge its

utter failure. With more than
130,000 dead and millions displaced, it is too late for dissimulation and doublespeak.
Much was made of the deal
struck in September with Russian
cooperation to remove Assad’s
chemical weapons. But at a Feb. 11
news conference with French President Franỗois Hollande, Mr.
Obama said the “state of Syria
itself is crumbling. That is bad for
Syria. It is bad for the region. It is
bad for global national security.”
He also said that Russia, along
with Iran, was obstructing U.N. Security Council action to aid Syria’s
starving civilians.
Director of National Intelligence
James Clapper, at a Feb. 4 House
Intelligence Committee hearing,
connected the dots for Syria observers, saying that Assad had
grown stronger over the past year
“by virtue of his agreement to remove the chemical weapons.”
After crossing Mr. Obama’s “red

line” last summer by slaughtering
civilians with chemical weapons,
Assad has become a partner in a
disarmament effort whose pace he
alone dictates. All the assumptions
of a policy of indifference and
abdication stand exposed.
The jihadists have fulfilled our

worst fears: More than 20,000 of
them, from lands as far away as

When the president leaves
office, it will be said that he
kept us out of that
war. But at what price?
Russia’s North Caucasus, have
made their way to Syria. They
come bearing the message that the
world powers took no interest in
the fate of a tormented population,
and the feckless diplomacy of the
past three years lent credence to
their worldview.
And still, in the face of the massacres and the barrel bombs and
the denial of food to besieged cities, the policy of indifference
holds. Grant Mr. Obama his due:
The bet he made that he could ride
out the outrage has been vindicated. It was 30 months ago that
he called on Bashar Assad to step
aside, and two years ago that a se-

nior State Department official
compared his regime to a “dead
man walking.” No such luck: The
Syrian despot held his ground. He
was on his turf, he outplayed the
U.S. and its “lead from behind”
tactics, the outrage that could have

devastated his regime never materializing. Evil is attentive, and forever alert.
If Washington and its allies
wanted some small evidence of success, Assad was willing to oblige. He
would dispatch to United Nations
“peace talks” in Geneva an assortment of goons and regime operatives who delighted in mocking the
proceedings. If necessity required a
modicum of cooperation on a U.N.
effort to bring aid to the besieged
city of Homs, he was willing to
play the game. After agreeing to a
temporary cease-fire earlier this
month to permit the delivery of
food and medicine and the evacuation of the wounded and starving, he continued attacks on the
rebels and rounded up hundreds of
the U.N. evacuees.
More brutality was promised.
“We are all waiting for the blue
ones to leave,” said a regime
operative, referring to the bluehelmeted U.N. personnel. Ratko
Mladic, herding thousands to their
death in Srebrenica, a generation
ago, under the gaze of United Nations peacekeepers, was more cir-

cumspect.
In reckoning with the evils of
the Syrian regime, American
power was either naïve or willfully
indifferent. The House of Assad
and its ruling cabal have behind it
nearly five decades of violence and

subterfuge. After five years, they
have taken the measure of Mr.
Obama: For a fleeting moment,
they feared that American power
could decapitate their regime.
Once spared, they grew emboldened, openly defying the will of the
U.S. and U.N.
In the Geneva talks that ended
on Saturday, the Assad regime said
any “peace” or “power-sharing”
agreement would not include the
dictator standing down. The fencesitters in Syria’s neighborhood
could be forgiven the conclusion
that Bashar Assad’s reign will outlast the presidency of Mr. Obama.
That would be a stain indeed.

Mr. Ajami, a senior fellow at Stanford’s Hoover Institution, is the author, most recently, of “The Syrian
Rebellion” (Hoover Press, 2012).

CORRECTION
Francois Hollande is the President of France. A Feb. 20 editorial misstated his position.


14 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

OPINION

From L to R: AFP/Getty Images; Bloomberg (2); Getty Images (2)

America’s Global Retreat
BY NIALL FERGUSON
Since former Federal Reserve
Chairman Ben Bernanke uttered
the word “taper” in June 2013,
emerging-market stocks and
currencies have taken a beating. It
is not clear why talk of (thus far)
modest reductions in the Fed’s
large-scale asset-purchase program should have had such big repercussions outside the United
States. The best economic explanation is that capital has been flowing out of emerging markets in anticipation of future rises in U.S.
interest rates, of which the taper is
a harbinger. While plausible, that
cannot be the whole story.
For it is not only U.S. monetary
policy that is being tapered. Even
more significant is the “geopolitical
taper.” By this I mean the fundamental shift we are witnessing in
the national-security strategy of the
U.S. To see the geopolitical taper at
work, consider President Obama’s
comment last Wednesday on the
horrific killings of protesters in the
Ukrainian capital, Kiev. The presi-

Never mind the Fed’s
taper, it’s the U.S.
geopolitical taper that
is stirring world anxiety.

dent said: “There will be consequences if people step over the line.”
No one took that warning seriously—Ukrainian government snipers kept on killing people in Independence Square regardless. The
world remembers the red line that
Mr. Obama once drew over the use
of chemical weapons in Syria . . .
and then ignored once the line had
been crossed.
The origins of America’s geopolitical taper as a strategy can be
traced to the confused foreign-policy decisions of the president’s first
term. The easy part to understand
was that Mr. Obama wanted out of
Iraq and to leave behind the
minimum of U.S. commitments.
Less easy to understand was his

The president, flanked by his foreign-policy team: Chuck Hagel, Susan Rice, Joe
Biden and John Kerry.
policy in Afghanistan. After an internal administration struggle, the
result in 2009 was a classic bureaucratic compromise: There was
a “surge” of additional troops, accompanied by a commitment to
begin withdrawing before the last
of these troops had even arrived.
Having passively watched when
the Iranian people rose up against
their theocratic rulers beginning in
2009, the president was caught off
balance by the misnamed “Arab
Spring.” The vague blandishments
of his Cairo speech that year offered
no hint of how he would respond

when crowds thronged Tahrir
Square in 2011 calling for the ouster
of a longtime U.S. ally, the Egyptian
dictator Hosni Mubarak.
Mr. Obama backed the government led by Mohammed Morsi,
after the Muslim Brotherhood won
the 2012 elections. Then the president backed the military coup
against Mr. Morsi last year. On
Libya, Mr. Obama took a back seat
in an international effort to oust
Moammar Gadhafi in 2011, but apparently wasn’t in the vehicle at all
when the American mission at
Benghazi was attacked in 2012.
Syria has been one of the great
fiascos of post-World War II
American foreign policy. When
President Obama might have intervened effectively, he hesitated.
When he did intervene, it was
ineffectual. The Free Syrian Army
of rebels fighting against the
regime of Bashar Assad has not

been given sufficient assistance to
hold together, much less to defeat
the forces loyal to Assad. The president’s non-threat to launch airstrikes—if Congress agreed—
handed the initiative to Russia.
Last year’s Russian-brokered
agreement to get Assad to hand
over his chemical weapons is being
honored only in the breach, as

Secretary of State John Kerry
admitted last week.
The result of this U.S. inaction
is a disaster. At a minimum,
130,000 Syrian civilians have been
killed and nine million driven from
their homes by forces loyal to the
tyrant. At least 11,000 people have
been tortured to death. Hundreds
of thousands are besieged, their
supplies of food and medicine cut
off, as bombs and shells rain down.
The scale of the strategic U.S.
failure is best seen in the statistics
for total fatalities in the region the
Bush administration called the
“Greater Middle East”—essentially
the swath of mainly Muslim countries stretching from Morocco to
Pakistan. In 2013, according to the
International Institute of Strategic
Studies, more than 75,000 people
died as a result of armed conflict
in this region or as a result of terrorism originating there, the highest number since the IISS Armed
Conflict database began in 1998.
Mr. Obama’s supporters like
nothing better than to portray him
as the peacemaker to George W.
Bush’s warmonger. But it is now al-

most certain that more people have

died violent deaths in the Greater
Middle East during this presidency
than during the last one.
In a January interview with the
New Yorker magazine, the president said something truly stunning. “I don’t really even need
George Kennan right now,” he asserted, referring to the late American diplomat and historian whose
insights informed the foreign policy of presidents from Franklin
Roosevelt on. Yet what Mr. Obama
went on to say about his self-assembled strategy for the Middle
East makes it clear that a George
Kennan is exactly what he needs:
someone with the regional expertise and experience to craft a credible strategy for the U.S., as Kennan
did when he proposed the “containment” of the Soviet Union in the
late 1940s.
So what exactly is the president’s strategy? “It would be profoundly in the interest of citizens
throughout the region if Sunnis
and Shiites weren’t intent on killing each other,” the president explained in the New Yorker. “And although it would not solve the
entire problem, if we were able to
get Iran to operate in a responsible
fashion . . . you could see an equilibrium developing between Sunni,
or predominantly Sunni, Gulf
states and Iran.”
Moreover, he continued, if only
“the Palestinian issue” could be
“unwound,” then another “new
equilibrium” could be created, allowing Israel to “enter into even an
informal alliance with at least normalized diplomatic relations” with
the Sunni states. The president has
evidently been reading up about
international relations and has

reached the chapter on the “balance of power.” The trouble with
his analysis is that it does not explain why any of the interested
parties should sign up for his balancing act.
As Nixon-era Secretary of State
Henry Kissinger argued more than
half a century ago in his book “A
World Restored,” balance is not a
naturally occurring phenomenon.
“The balance of power only limits

the scope of aggression but does
not prevent it,” Dr. Kissinger
wrote. “The balance of power is
the classic expression of the lesson
of history that no order is safe
without physical safeguards
against aggression.”
What that implied in the 19th
century was that Britain was the
“balancer”—the superpower that
retained the option to intervene in
Europe to preserve balance. The
problem with the current U.S. geopolitical taper is that President
Obama is not willing to play that
role in the Middle East today. In
his ignominious call to inaction on
Syria in September, he explicitly
said it: “America is not the world’s
policeman.”
But balance without an enforcer

is almost inconceivable. Iran
remains a revolutionary power; it
has no serious intention of giving
up its nuclear-arms program; the
talks in Vienna are a sham. Both
sides in the escalating regional
“Clash of Sects”—Shiite and
Sunni—have an incentive to increase their aggression because
they see hegemony in a postAmerican Middle East as an attainable goal.
Maybe, on reflection, it is not a
Kennan that Mr. Obama needs, but
a Kissinger. “The attainment of
peace is not as easy as the desire
for it,” Dr. Kissinger once observed. “Those ages which in retrospect seem most peaceful were
least in search of peace. Those
whose quest for it seems unending
appear least able to achieve tranquillity. Whenever peace—conceived as the avoidance of war—
has been the primary objective . . .
the international system has been
at the mercy of [its] most ruthless
member.”
Those are words this president,
at a time when there is much
ruthlessness abroad in the world,
would do well to ponder.

Mr. Ferguson is a history professor at Harvard and a senior fellow
at Stanford University’s Hoover
Institution. His most recent book
is “The Great Degeneration” (Penguin Press, 2013).

Revisiting a Pre-Olympic Murder
[Business World]
BY HOLMAN W. JENKINS, JR.
During the
Sochi Olympics,
Vladimir Putin has
received a lot of
grief about the
state of the rule of
law in Russia. He’s not alone.
Highly advanced countries have
problems with the rule of law
too—because of their need to
maintain relations with Putin’s
Russia.
Example: the United Kingdom,
on whose soil an unprecedented
act of small-scale nuclear terrorism was committed in the 2006
murder by polonium poisoning of a
Russian dissident and author, Alexander Litvinenko.
A trail of highly radioactive polonium across London wherever Andrei Lugovoi, a former KGB agent

and now a member of the Russian
Duma, happened to be visiting was
hard to ignore. Mr. Lugovoi would
eventually be charged with the killing, though the Kremlin has refused
to extradite him and Mr. Lugovoi
denies the accusation.
Britain’s government has appeared less enthusiastic to explore

who ordered the assassination or
supplied the esoteric murder
weapon. In the latest development,
the coroner in charge of the case,
Sir Robert Owen, has taken to
complaining in court that the government of Prime Minister David
Cameron is preventing him from
considering evidence that, in his
words, “establishes a prima facie
case as to the culpability of the
Russian state.”
OK, Russia is a nuclear power.
Mr. Putin is a necessary if fractious
partner for many things Western
governments want to do, including
protect a lucrative BP oil venture
that was threatened with prosecu-

tion over a “tax” matter in the
middle of the Litvinenko row.
But what of the dead author’s
apparent offense? He wrote a book
about the September 1999 apartment block bombings in Moscow
and other cities, blamed on Chechen
terrorists, that abruptly stopped after residents in the city of Ryazan
caught federal security agents
sneaking sacks of explosive and
bomb parts into the basement of a
building, in what the Kremlin later
claimed was a training exercise.

Almost 15 years later, many experts have come to believe Litvinenko was right. The bombings,
which killed nearly 300 Russians,
were a state provocation designed
to propel an unknown security bureaucrat, Mr. Putin, into the presidency to protect the outgoing
Yeltsin circle from a corruption investigation. The New York Review
of Books, not normally a fan of
Hoover Institution writings, said a
2012 book by Hoover scholar John

Dunlop provided an “overwhelming case.” The late Boris Berezovsky, the billionaire Yeltsin
backer who took credit for recruiting Mr. Putin in the first place,
held a press conference to endorse
the charge. Polls show a sizeable
minority of Russians believe it.
And yet have you heard, even
leaked, a U.S. intelligence opinion
about whether the murderous terrorist attacks were in fact engineered by Mr. Putin’s own supporters to assure his rise? You haven’t.
And that alone is an amazing testament to Western governments’
need to bury certain facts of Mr.
Putin’s presidency.
Look, we’re sure nobody in the
U.S. government feels especially
clean about the lengths to which
the West has gone to preserve Mr.
Putin as an acceptable partner,
least of all President Obama, last
seen patting a Putin factotum on
the sleeve and asking him to assure his master that more “flexibil-

ity” would be forthcoming after

Mr. Obama’s re-election in 2012.
For one thing, Mr. Putin’s hosting
of this month’s games would
hardly be conceivable if Western
governments hadn’t long ago adopted the habit of ignoring the implications of Ryazan.
But is it smart? Mr. Putin rose by
pushing an older mentor into invisible retirement; so did Saddam Hussein. Mr. Putin started a war in
Chechnya. Saddam started a war
with Iran. Each regime became
known for the violence that befell
its critics and opponents. Saddam
became such a power unto himself
that his final miscalculation was all
but inevitable—albeit much fostered
by Russian advice that America’s invasion threat was a bluff.
Who knows in what context it
might occur (Ukraine comes to
mind), but Mr. Putin would by now
have every excuse for a similar
miscalculation that could cost Russia and the world dearly.


Pound/Euro 0.8253 À 0.31%

Yen/$ ¥102.72 À 0.39%

Global Dow 2464.83 À 0.33%

Gold 1323.90 À 0.52%

Oil 102.20 g 0.54%

Discovery Prepares to Submit Bid
For Richard Desmond’s Channel 5

BY KAITLYN KIERNAN

U.S. fund managers are rediscovering their passion for Europe—and
not just as a vacation destination.
Since the start of the year, American investors have ramped up their
bets on European stocks, spurred on
by a brightening economic outlook
and low interest rates.
The continent’s
ABREAST OF stock markets beTHE MARKET came a favored
destination
last
year as the region emerged from a
bruising recession. This year, with
U.S. stock indexes treading water after a rip-roaring 2013, interest in
European stocks has grown further,
fund managers say.
Investors have sent $24.3 billion
into European equity funds this year
through Feb. 19, according to fund
tracker EPFR Global. U.S. stock
funds have seen $5 billion in outflows.
In the exchange-traded-fund
world, three of the top four stockbased funds in terms of investor inflows in 2014 are the Vanguard
FTSE Europe, the iShares MSCI

EMU and the Vanguard FTSE Developed Markets ETFs—all of which
have heavy exposure to Europe. The
three have seen a combined $4.23
billion in new money this year,
while $19.1 billion has flowed out of
the largest U.S. stock ETF, the SPDR
S&P 500 fund.
Blue-chip companies from France
to the Netherlands are getting a
close look from some managers,
while other bargain-minded investors are focusing on so-called peripheral nations such as Ireland, Italy, Spain and Portugal, whose
markets were hard hit following the
European debt crisis of 2011.
“Some of the best, cheaper assets are in the periphery of Europe,”
said Nigel Hart, manager of the
BlackRock International Opportunities Fund, which has $3.5 billion under management.
The Stoxx Europe 600 index is
up 2.4% this year, compared with a
0.7% decline in the S&P 500 index of
U.S. companies and a 2.9% drop in
the 30-stock Dow Jones Industrial
Average.
While the so-called core of Europe has recovered most of its recession-era losses, the periphery
still has a way to go. Share indexes
in Spain and Italy remain below
their peaks heading into the global
financial crisis of 2008, while
broader European gauges and those
covering the U.S. have recovered
those peaks.

Many European nations are
struggling with high unemployment
and slack demand for goods and
services, but the euro zone’s econPlease turn to page 20

HEARD ON THE STREET 28

THE WA L L STR E ET JOU RNAL.

europe.WSJ.com

Europe Lags Behind U.S. on 4G
BY SVEN GRUNDBERG

STOCKHOLM—On the barren island of Ưja, on the outskirts of this
city’s archipelago, Torbjưrn Johansson is on the front lines of Europe’s
effort to make up ground lost to the
U.S. in cellphone-network investment.
Mr. Johansson, a network contractor for Swedish carrier TeliaSonera AB, is testing new fourthgeneration network antennas on the
island—part of the company’s threeyear, 15 billion Swedish kronor ($2.3
billion) push to upgrade its network.
Swedish carriers are aiming to
eventually blanket 90% of the country’s landmass in 4G. By next year,
the companies say, 99% of Sweden’s
population—which lives mostly in
cities or other urban areas—will
have 4G, which offers up to 10 times
faster data speeds, compared with
older network technology.
“I’ve got more work than I can

handle,” Mr. Johansson said.
Sweden and some of its Scandinavian neighbors are rare exceptions in Europe, enjoying 4G coverage on a par with the superconnected U.S. For much of the rest
of Europe, network investment by
carriers has lagged behind North
America and has just barely outpaced investment across Asia.
It is a far cry from just over a
decade ago, when Europe led the
way in mobile connectivity. The
Continent’s big players quickly
agreed on a standard technology
and invested heavily in networks to
support that.
Spending on the latest 4G networks on both sides of the Atlantic
kicked off at about the same time,
around 2009. But investment in Europe—in the depths of the global
economic crisis and on the precipice
of its worst recession since World
War II—never came close to North
America.
That has translated into a big

A Vodafone store in London

Seeking a Connection

Mobile providers in Europe, the Middle East and Africa have
historically lagged behind those in North America in 4G investment,
though they are expected to catch up in the coming years.
Estimated annual expenditure on 4G hardware
in North America and EMEA

$2.5 billion
2.0
0
1.5
5

Nor
North America
EME
EMEA

1.0
0
0.5
5

PROJECTIONS

0
2009

’10

’11

’12

Sources: Infonetics; Bloomberg News (photo)

discrepancy in 4G availability. Cisco

Systems Inc., a U.S. network company, said it estimates that a quarter of all North American mobile devices were connected to the

’13

’14

’15

’16

’17

The Wall Street Journal

country’s 4G network last year. In
Western Europe, only 2% of mobile
devices were connected to 4G networks.
Europeans, as a result, are con-

suming
considerably
smaller
amounts of mobile data, compared
with their U.S. counterparts. Cisco
said average Western Europeans
consumed 717 megabytes of traffic a
month this year, half the quantity
consumed by North Americans. European consumers’ average data
connection speeds are also much
lower.

Europe remains “between one
and two years behind” the U.S., in
terms of its 4G rollout, said Johan
Wibergh, who heads the network
unit of Ericsson, the world’s largest
supplier of network equipment.
It wasn’t just economic hard
times that stood in the way of Europe’s network build-out. The more
than two dozen countries that make
up the European Union have taken
longer to issue spectrum needed to
deploy the technology. And the
wider European telecom market is
made up of more than a hundred
operators, many of whom aren’t
large enough to muster the sizable
funds needed to make the investment. A crazy quilt of regulations
have also stymied quick network
rollouts.
Strict environmental rules in
Brussels, the seat of the EU and
home to diplomats from around the
world, slowed the rollout of the network there, for instance. Last year,
Neelie Kroes, European commissioner for the digital agenda,
tweeted, “Back in #Brussels and the
3G (never mind the #4G!) so bad I
have to write this on my adviser’s
phone. Frustrating. Avoidable.”
Proximus, the mobile unit of Belgacom SA, Belgium’s biggest carrier,
said last month it would offer its

customers 4G access at no extra
cost, including in Brussels. Many
Brussels residents still aren’t satisfied.
“What 4G?” said Felicity Raikes,
an EU interpreter, who uses French
carrier Orange SA’s Mobistar netPlease turn to next page

Italy’s Garment Know-How Is Fading Out
BY MANUELA MESCO

Loro Piana

The View
In Europe
Looks Good
To Investors

10-year Treasury À 6/32 yield 2.734%

For Big Oil Companies,
A Return To Returns

BUSINESS & FINANCE 18

Monday, February 24, 2014

3-month Libor 0.23485

A craftsman of Loro Piana—now a
unit of LVMH—makes a leather bag.

MILAN—The fashion world’s race
to reach ultrarich shoppers is leaving some of Italy’s vaunted leather
and garment manufacturers high
and dry.
A sharp split is dividing Italy’s
luxury manufacturing base. The
winners are enjoying rich new contracts or even being purchased, as
fashion heavyweights such as LVMH
Moët Hennessy Louis Vuitton SA
are increasingly eager to scoop up
the best Italian manufacturers.
But the losers are struggling to
survive, overwhelmed by the same
factors devouring other Italian manufacturing strongholds, like steel,
autos and appliances: their small
size, high labor and energy costs,
falling domestic demand and competition from low-cost countries. It-

aly’s leather and clothing segments
alone lost 20% and 15% of production, respectively, since 2007, according to business organization
Confindustria.
More than 500 textile companies
shut down last year, and textile
sales are down 13% in five years,
said trade association Sistema Moda
Italia.
Fashion houses have long turned
to Italy’s skilled artisans to produce
soft leather bags, finely cut suits

and dresses, and rich cashmere accessories. For instance, Italian wool
craftsmen train for years learning
how to finish a cashmere garment,
learning how to wash and treat the
wool—a process known as follatura—so that the matting is just
right. Overtreating could break fabrics, causing significant financial
loss for a firm. That’s why such

skills are critical in handling precious fabrics such as vicuña, one of
the rarest and most expensive wools
on the market.
Italy has thousands of such artisans, very often niche players specializing in specific skills such as
tanning leather or making silk
prints. As a result, Italian craftsmanship is a major draw for the biggest spenders in luxury, such as Chinese and Russian buyers.
“We’re convinced that Italy has
the best quality,” said Domenico De
Sole, chairman of Tom Ford International, which produces its expensive men’s suits in Italy. “But there’s
also a marketing factor there. People just love a ‘Made in Italy’ label.”
Luxury heavyweights, who are
pushing harder into the higher-priced
products that garner the biggest
Please turn to page 18


16 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

MOBILE WORLD CONGRESS

Mobile Carriers Face Unclear Call
[ The Week Ahead ]
BARCELONA—The telecom
industry is getting ready for its
biggest get-together of the year.
Meanwhile, it’s never been less
clear what it means to be a
mobile-phone company.
Case in point: Facebook Inc.’s
$19 billion acquisition of mobilemessaging service WhatsApp. The
startup, just a few years old, has
already captured an enormous
share of texting traffic, a function
that once was entirely the
preserve of traditional wireless
companies.
WhatsApp’s 450 million users
may already be sending more texts
than all users of carrier-based
SMS, or short-message service,
combined, according to
telecommunications analyst
Benedict Evans of Andreessen
Horowitz. He puts the total at
roughly 18 billion texts a day and
rising quickly. Researchers at
technology-research company
Ovum, meanwhile, expect SMS
traffic to peak this year at around
21 billion a day.

Facebook itself is a giant
communication network with
about a billion active monthly
mobile users world-wide. Rakuten
Inc., a Japanese e-commerce
company, said earlier this month
that it was paying $900 million to
buy WhatsApp competitor Viber
Media Inc.
So mobile-phone companies
aren’t about texting anymore. How
about calling? Developments on
that front aren’t any more
enlightening.
Around the world, 100 million
people have installed Internetbased calling service Skype just on
phones powered by Google Inc.’s
Android software. That’s more
subscribers than Sprint Corp. and
T-Mobile US Inc. have combined.
Olaf Swantee, chief executive
officer of U.K. mobile carrier EE,
said Skype, which claims 300

Anastasia Vasilakis

BY RYAN KNUTSON

million connected users a month,
is the most-used communication

service on his company’s network.
Google’s Hangouts app also
allows users to make phone calls
with just a data connection.
Companies like Republic Wireless

and Scratch Wireless, meanwhile,
are wireless carriers without a
single cell tower. Both offer
cellular plans that run over Wi-Fi
networks. Republic’s service starts
at $5 a month; Scratch’s is free.
Traditional carriers that used

to worry about being squeezed out
of the market for add-on services
like music and video are now
gradually losing their grip on what
once were core functions. Some
companies don’t mind so much as
they shift to charging for data
traffic like video. In the end,
though, carriers are finding it
harder to be more than just the
“dumb pipe” hooking users up to
the services they actually want.
The ambiguity of just what is a
“mobile” company is highlighted
by the keynote speakers at the
Mobile World Congress, which

drew 72,000 people to Barcelona
last year and starts on Monday.
Facebook CEO Mark Zuckerberg
will be there. WhatsApp’s CEO Jan
Koum, International Business
Machines Corp. CEO Virginia
Rometty and Cisco Systems Inc.
CEO John Chambers will also be
there.
The phone companies that
actually build the pipes and cell
antennas that make mobile
communications possible will
attend and make presentations,
too. But this year, the growing role
of Web-based services will be the
elephant in the room.
One result is that traditional
telcos are more keen than ever to
find ways to charge Internet-based
companies, like Netflix Inc.,
Google and Facebook, more for the
traffic they generate.
In the U.S., carriers notched a
big win earlier this year when a
federal court shot down the
Federal Communications
Commission’s attempt to enforce
net neutrality principles that
require equal treatment of traffic

as it flows over the so-called last
mile of carriers’ networks to
subscribers.
The FCC has unveiled plans to
try again to prevent carriers from
blocking or unreasonably
discriminating against traffic.
Regulators are also addressing
the issue anew in Europe.
The Week Ahead looks at coming
corporate events.

Europe Struggles to Catch Up With U.S. on 4G Investment

Continued from previous page
work. “I hardly even get 3G most of
the time.” Mobistar didn’t immediately return calls seeking comment.
More recently, carriers in Europe
have ramped up their spending, and
are expected to top out at around $2
billion a year by 2015, largely catching up to North American spending,
according to consultancy Infonetics.
France’s Bouygues Telecom last
year switched on its 4G services in
France, having spent €1.5 billion

($2.06 billion) for licenses and
equipment. Vodafone PLC, flush
with cash after agreeing to sell its
Verizon Wireless stake, has promised its own spending spree—committing to invest £3 billion ($4.99

billion) through 2016 upgrading its
European mobile networks. It
doesn’t break out how much will go
to 4G systems.
“We’re still waiting for Vodafone
to make its move,” said Ericsson’s
Mr. Wibergh.

In Italy, the deployment of
fourth-generation data networks
didn’t begin in earnest until last
year, when the nation’s four main
operators in the country, led by
Telecom Italia SpA and Vodafone,
began installing antennas throughout the country.
Telecom Italia says its 4G network now covers half of the Italian
population. Its goal is to reach 80%
of the population within two more
years.

In Spain, 4G connections are
available in big cities like Madrid
and Barcelona. But Spanish operators’ focus has recently been on improving margins, battered in the recent downturn. Telefónica SA, the
largest Spanish operator, says it remains committed to a 4G rollout in
the long term.
—Simon Zekaria in London,
Frances Robinson in Brussels
and David Román in Madrid
contributed to this article.

Microsoft
Makes Push
On Phones
BY SAM SCHECHNER
AND SVEN GRUNDBERG

BARCELONA—Microsoft Corp. is
pushing more manufacturers to
make less expensive Windows-based
smartphones, in a bid to boost sales
of an operating system that still lags
far behind those of Google Inc. and
Apple Inc.
The Redmond, Wash., company
said Sunday that it is broadening
the number of makers of Windows
phones, working with companies including Lenovo Group Ltd. and Hon
Hai Precision Industry Co., the
world’s largest contract manufacturer by revenue.
Speaking at a news conference
ahead of the opening of the Mobile
World Congress in Barcelona, Microsoft executives said the company
will also lower the hardware requirements for the Windows Phone
operating system, to support
cheaper internal chips, fewer buttons and less built-in memory, to allow for cheaper devices for emerging markets.
“We’re open for business on
Windows Phone for anyone who
wants to build a Windows Phone,”
said Nick Parker, who oversees Microsoft’s relationships with makers
of gear running Windows.

Microsoft has been trying for
years to break into the smartphone
market, but currently only about 4%
of smartphones sold run Windows
Phone—trailing far behind Google’s
Android and Apple’s iOS mobile operating systems.
Microsoft is under pressure to
offer phones at lower price points to
sell into the lower end of the market. Until now, the main makers of
Windows phones have been Nokia
Corp., HTC Corp., Huawei Technologies Co. and Samsung Electronics
Co.
Microsoft declined to say when
any of the new manufacturers would
release Windows phones, or whether
it would lower the license fees its
charges per phone to boost appeal.
“We have to be market competitive, but we don’t discuss OEM pricing,” Mr. Parker said, using the acronym for original equipment
manufacturers.
Microsoft struck a €5.4 billion
($7.4 billion) deal last year to buy
Nokia’s cellphone business and license its patents. But so far Nokia’s
Windows phones haven’t been inexpensive enough to compete with
sub-$100 Android phones in emerging markets. Despite the Microsoft
acquisition, Nokia itself plans to unveil a smartphone running a modified version of Android on Monday
morning.

INDEX TO BUSINESSES
Businesses

This index of businesses
mentioned in today’s
issue of The Wall Street
Journal is intended to
include all significant
reference to companies.
First reference to the
companies appears in
bold face type in all
articles except those
on page one and the
editorial pages.

Allianz...........................28
Apple........................16,17
Atos S.A........................20
AT&T.........................17,18
Aviva ............................. 28
AXA S.A........................28
Bank Frey........................1
Barclays.........................18
BATS Global Markets,..20
Bayer.............................20
Belgacom.......................15
BP..................................28
British Sky Broadcasting
Group..........................18
Charter
Communications........18
Chevron.........................28

China Nonferrous
Mining..........................2
China Petroleum &
Chemical .................... 28
Cisco Systems .... 15,16,17
Coca-Cola.......................19
Cogent Communications
Group..........................18
Comcast ................... 17,18
Deutsche Telekom..........1
Direct Edge Holdings ... 20
Discovery
Communications........18
EE..................................16
European Central Bank .. 4
European Commission....4
European Parliament......4

Exxon Mobil..................28
Facebook .................. 16,17
G Tosi............................18
Google......................16,17
Hermes International...18
Hon Hai Precision
Industry ..................... 16
HTC................................16
Huawei Technologies....16
Hugo Boss.....................18
Iliad ............................... 17

Industrial & Commercial
Bank of China..............2
Intel...............................17
International Business
Machines....................16
International Monetary

Fund ............................. 4
Kingspan Group............20
KPN ............................... 17
Lenovo Group................16
Liberty Global...............18
Liberty Media ............... 18
Loro Piana.....................18
LVMH Moet Hennessy
Louis Vuitton.............15
Microsoft..................16,17
Mobistar........................15
Nasdaq OMX Group......20
Netflix.................16,17,18
News Corp.....................18
Nokia.............................16
Northern & Shell
Group..........................18

NTT DoCoMo.................17
Orange...................1,15,17
Prada S.p.A...................18
Procter & Gamble.........20
Prudential ..................... 28

Rakuten.........................16
Randstad Holding N.V..20
Republic Wireless.........16
Royal Dutch Shell.........20
Samsung
Electronics............16,17
Scratch Wireless .......... 16
Sopra Group..................20
Sprint....................... 16,17
Swiss Life Holding.........1
Tele2..............................17
Telecom Italia...............16

Corrections  Amplifications
Readers can alert the London newsroom of The
Wall Street Journal to any errors in news articles
by emailing or by calling
+44 (0)20 7842 9901.

Telefonica......................16
TeliaSonera...................15
Temasek Holdings..........2
Time Warner Cable ...... 18
T-Mobile US.............16,17
Tom Ford International 15
Twitter............................6

21st Century Fox..........18
UBS ............................... 20
Unilever N.V..................20

Verizon
Communications........18
Viber Media .................. 16
Vodafone..................16,17
WhatsApp.....................16


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 17

MOBILE WORLD CONGRESS

Europe’sTelecomFirms Carriers Escalate
Net-Neutrality Fight
RetreatonRoamingFees
By Frances Robinson,
Ruth Bender
and Manuela Mesco

But many of Europe’s biggest
carriers—some of which have
staunchly opposed the reductions—
are now racing to roll out no-roaming-fee packages in an effort to lock
in customers before the changes go
into effect in July.
Some smaller companies had already eliminated roaming fees or
slashed them dramatically, agreeing
with consumer-rights groups and
regulators.

They also say there is profit to be
made by getting people to use their
phones everywhere.
By offering more no-roaming-fee
packages, major carriers hope a
pickup in traffic will help make up
some of the expected lost revenue.

Carriers in Europe are
racing to roll out noroaming-fee packages.
“We are working to transform a
direct loss into an indirect gain,”
said Yves Martin, the head of roaming for French carrier Orange SA.
“But it won’t compensate the whole
loss.”
Like elsewhere in the world, Europe’s 500 million citizens typically
pay extra to use their phones whenever they cross national borders. But
with 28 countries making up the European Union, that can mean roaming fees for even short trips.
“I’m only traveling one hour, and

The Most You Will Pay When Roaming in the EU
EU maximum rates as of July 1 of each year (excluding VAT)
Data

80 euro cents
60

Voice Calls
Made

(per minute)

Voice Calls
Received

(per message)

8

(per mb)

7

5

9

8

6

’12

’13

’14

’12

’13

’14

(per minute)

SMS

70
45

40

29
20

20
0

’12

’13

’14

’12

24

’13

19

’14

Source: European Commission Note: $1 = 73 euro cents

I’ve got three different tariffs,” said
Hans Similon, a senior executive at
Belgian budget carrier Mobile Vikings, describing a recent trip he
took through the Netherlands and
Germany. Fees can be as high as 24
European cents (33 U.S. cents) a
minute, but had been as high as €5
($6.85) a minute before the EU
started reining them in several years
ago.
The EU first capped roaming
charges in 2007, and has reduced
them every year since. This summer’s reduction will be the last under existing rules. Europe’s parliament and member states are
currently reviewing new legislation
that could ban fees for receiving
calls while abroad.
Roaming charges account for between 5% and 12% of European carrier revenue, with margins often
higher than 60%, according to brokerage Oddo Securities.
Orange, the French carrier and
one of the biggest critics of the EU
rules, has started waiving some
roaming fees for customers who

The Wall Street Journal

spend more than €30 a month. It
plans to expand this throughout the
year in a bid to increase roaming
traffic.
In Germany, E-Plus, owned by
Dutch group KPN NV, now lets customers purchase a no-roaming-fee
plan for a flat rate of €3 a month.
Vodafone PLC has a similar deal.
In many cases, budget operators
such as Sweden’s Comviq, VikingCo
NV’s Mobile Vikings and Iliad SA’s
Free of France are leading the no-fee
push, forcing larger rivals like Orange to follow suit in a market already caught up in price wars.
Comviq, the low-cost brand of
Sweden’s Tele2 AB, offers Swedish
subscribers unlimited calls, messaging, and one gigabyte of data traffic
in all EU countries, for €55 a month.
Comviq thinks it can make up revenue on additional usage, once customers stop worrying about roaming
fees.
“Seven out of 10 people turn off
roaming abroad,” said Comviq Chief
Executive Magnus Larsson. “That is
not how it is supposed to be.”

Samsung Unveils Tizen-Based Watch
BARCELONA—Samsung Electronics Co. announced the release
of its Gear 2 smartwatch, running
on the company’s own Tizen operating system.
The smartwatch represents a

delicate balance the mobile-device
maker is weighing as it promotes
the nascent operating system while
continuing to rely on Google Inc.’s
Android operating system to power
Samsung’s best-selling products.
Kicking off the annual Mobile
World Congress here with the first
significant product rollout, Samsung
said its new smartwatch will come
in two models, including a lowerpriced version with no camera function. The device is part of the company’s efforts to “lead innovation in
the wearable market,” J.K. Shin, the
head of Samsung’s mobile-communications business, said in a prepared
statement on Sunday.
The Gear 2 is a successor to an
Android-powered watch that the
South Korean company released last
September. The new watch will feature a slightly faster processor and
a more powerful battery that Samsung said would allow for two to
three days of typical usage.
Samsung said that the second

Samsung Electronics

BY JONATHAN CHENG

The Gear 2 smartwatch runs on
Samsung’s Tizen operating system.
generation of its smartwatch would
help better “reflect modern trends,”

for example, moving the camera
from the strap onto the main body
of the watch.
The mobile-device maker is developing Tizen with Intel Corp. and
telecommunications companies such
as Japan’s NTT DoCoMo Inc. and
France’s Orange SA. In recent
months they have said that they
would release a smartphone running
Tizen, though the system has appeared commercially only on some

Samsung cameras.
Samsung has struggled with setbacks to Tizen, such as delayed
product releases and the exit of
some of its carrier partners.
Google and Samsung both have
benefited from their partnership on
Android and continue to rely heavily
on one another. Samsung has used
Android software as a selling point
for the company’s devices, helping
the company dominate global
smartphone sales. Samsung accounted for 31% of smartphone shipments last year, more than double
the share for No. 2 Apple Inc., according to consulting firm IDC. Apple’s iPhone uses the company’s iOS
operating system.
In a sign of their mutual dependence, Google and Samsung last
month signed a licensing deal that
covers the companies’ existing patents as well as those to be filed over
the next 10 years.
Samsung “has a commitment to

support multiple platforms to offer
consumers more choices and we will
continue to collaborate closely with
Google,” the South Korean company
said.
Google didn’t reply to requests
for comment.
—Rolfe Winkler in San Francisco
contributed to this article.

mobile Web is becoming more important. Europe’s proposed rules
would make no distinction between
mobile and fixed Internet.
Wireless data traffic is skyrocketing. Mobile data traffic increased
81% world-wide last year to 18 times
the size of the entire Internet in
2000, according to Cisco Systems
Inc. By 2018, global mobile data traffic is expected to increase by more
than a factor of 10, Cisco said.
Telecoms in Europe and the U.S.
are tiptoeing toward offering advanced services from some tech and
content companies, saying it
shouldn’t raise net-neutrality concerns. In Germany, Deutsche
Telekom offers to bundle musicstreaming service Spotify for €10
($14) a month on users’ bills, exempting the service from caps on
wireless data usage, after which users would face reduced speeds.
“I think it is correct that we
should be able to give to certain customers or certain services which
have a higher level of urgency or
performance need, a better service

than others,” said Vodafone Group
PLC CEO Vittorio Colao.
In the U.S., AT&T Inc. this year
became the first telecom to offer a
sponsored data service that would
allow content companies to pay for
the data consumed by users accessing their websites or mobile apps,
although no major content producers have signed up.
A T-Mobile US Inc. venture, GoSmart Mobile, last year said it would
allow customers to access Facebook
free even if they weren’t paying for
a data plan. And FreedomPop, which
resells Sprint Corp.’s service, says it
is assembling a “walled garden” of
mobile apps that subscribers can access free. Seven companies have
agreed to pay FreedomPop to participate in the service, which is expected to be available this year.
Many people in the business expect that, despite the battles, a twospeed Internet is likely to become a
reality—as will capacity concerns.
“You’re going to see more fights
over this,” said David Heard, head of
the mobile business for networktesting firm JDS Uniphase Corp.
“But when someone’s willing to pay
for something, how can you hold
that back?”
—Thomas Gryta in Barcelona
and Frances Robinson in Brussels
contributed to this article.

Online>>

Follow live coverage of Mark
Zuckerberg’s address Monday at 6
p.m. CET, and get the latest
news from the conference, at
WSJ.com/MobileWorld.

Bloomberg News

The European Union is on course
to further reduce many of the cellphone roaming fees that have long
angered travelers across the Continent.

Continued from first page
mobile networks.
The tension is on display this
week here, where the telecom and
tech worlds are gathering for the annual Mobile World Congress exhibition. Telecom executives are expected to discuss their concerns
about proposed net-neutrality rules
in closed-door meetings on Monday.
The rest of the gathering is more
of a showcase for Silicon Valley. One
of the most-anticipated events is
Monday’s address by Facebook Inc.
Chief Executive Mark Zuckerberg.
A central issue in the net-neutrality dispute is where to draw the
line between the broader Internet
and private services that telecom
operators offer.
Telecoms say they should be free
to set aside part of their infrastructure to sell advanced services, such

as high-quality video, from particular technology or content companies. The telecoms say doing so
wouldn’t mean blocking other providers and that the phone companies
have no interest in keeping their
subscribers from content they want.
But tech companies and publicinterest groups say that such plans
could lead to a two-tiered Internet,
with some types of content available
at top speed, but other content getting slow service if providers are unable to pay up.
“Skype and other online apps
have been experiencing arbitrary restrictions of use for some time now,”
said Jean-Jacques Sahel, policy director for Europe, Middle East and
Africa at Microsoft Corp., which
owns the video-chat app. “To ensure
that these bad practices stop and
the Internet does not become a dirt
road, we need clear rules.”
In recent years, the telecom industry has pushed for companies
that generate large amounts of traffic, such as Google Inc.’s YouTube,
to pay for carrying traffic above a
certain level.
Netflix Inc. recently struck a deal
with Comcast Corp. to pay the cable
company to ensure that Netflix’s
content streams smoothly. The deal
allows Netflix to connect directly
with the cable company’s network,
instead of through middlemen. The
so-called paid-peering arrangement
with Comcast, which isn’t subject to
net-neutrality rules, shows that carriers are getting traction in their efforts to get paid for handling the

growing Internet traffic.
Now the mobile Internet is becoming more of a hot spot in the
net-neutrality debate. In the U.S.,
wireless has been largely excluded
from net-neutrality rules because
bandwidth is more limited and the
networks are more fragile. But the

Major content providers haven’t signed up for AT&T’s sponsored data service.


18 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

BUSINESS & FINANCE

Continued from page 15
profits, have been hiring their own
artisans and snapping up the best
suppliers. The companies are looking
to consolidate their orders into just a
few, bigger suppliers to save costs
and nail down the craftsmen.
Last year, LVMH bought cashmere
maker Loro Piana for €2 billion ($2.7
billion). Other fashion houses are
building their own capacity. France’s
Hermès International SA is doubling
production at a tannery it owns in

northern Italy.
But the suppliers that don’t capture the eye of the big brands are
scrambling to stay afloat. They are
often too small to sustain the high labor and energy costs in Italy. The energy bill for small Italian companies
is about 70% higher than the European average, according to an Italian
association of small businesses Cgia
Mestre.
These small suppliers are also
starved of the capital needed to invest in the technology that will guarantee the highest quality demanded
by big brands. G Tosi, a small leather
tannery that supplied Gucci and
Prada, went bankrupt in 2012 after
high costs and declining orders overwhelmed it. Owner Raffaele Orsi said
he is now trying to recapture the
high end, but is struggling to invest
enough to meet top brands’ quality
requirements.
But Loro Piana, which was expected to achieve sales of €700 million in 2013 when LVMH bought it,
has invested in machines to raise
workers’ productivity without hurting quality. The company said new
technology allows one of the company’s workers to produce around
100 meters of fabric in less than an
hour compared to just two meters in
the 1990s.
Pressure to keep up has pushed
many over the brink. About 150, or
nearly one-eighth, of companies in Italy’s Biella area, renowned for its
wool and cashmere, have closed in
the last four years.
About half of the more than

28,000 garment jobs in Varese in
northern Italy disappeared between
2001 and 2011, according to the local
union of entrepreneurs.
Antonella Martinetto, owner of a
small Turin-based company that is
one of the few making labels and rib-

bons for luxury brands, began to suffer when big clients, such as Hugo
Boss, canceled part of their orders.
Hugo Boss, which still makes some of
its top-quality products in Italy,
moved part of the orders it had
placed with Ms. Martinetto’s company to Germany, where production
costs less.
“I don’t even cover costs for some
part of the production chain,” said
Ms. Martinetto, who still has orders
from top-end brands. “But I keep on
going because I love my job and I
hope to see an improvement at some
point.”
Competition from low-cost countries is also nipping at the heels of Italy’s luxury manufacturers. Turkey
and Romania have raised their quality enough to draw the eye of some
big brands. Prada SpA produces
some of the shoes for its Miu Miu
line in Romania. Chinese manufacturing of textiles is also improving.
Other manufacturers are responding by launching their own brands,
even if it risks drawing the ire of
their big fashion clients, in order to

capture more of the value that ends
up in the pockets of big brands and
retailers.
Pambianco, an Italian consulting
firm, estimates that only 15% of the
luxury products’ retail price is the
cost of the product itself, which is
paid to manufacturers, while the rest
goes to brand owners and retailers.
Menswear maker Caruso, which
makes suits for the likes of Christian
Dior, has launched its own brand and
is even opening stores. Piacenza
Cashmere, a 300-year-old wool
maker in Biella, has launched a men’s
collection and will soon expand to
women’s wear.
Others, such as Vitale Barberis
Canonico, another wool maker in
Biella, which supplies Zegna, Armani
and Ralph Lauren, are investing heavily to reposition themselves as suppliers of the top brands.
But the demise of so many manufacturers leaves Italy at the risk of
losing the fine skills that have been
passed down for generations. “It’s a
disaster not only for the individual
companies but for the country,” said
Michele Bocchese, president for the
Veneto textile sector of Confindustria. “If we don’t stop this trend, we’ll
end up losing our know-how.”

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BANKRUPTCIES

Discovery Readies Bid
For U.K.’s Channel 5

BY AMOL SHARMA
AND SIMON ZEKARIA

Discovery Communications Inc. is
preparing a bid for U.K. broadcaster
Channel 5, according to people familiar with the matter, as the U.S.
cable-channel owner looks to continue its rapid growth in international markets.
Channel 5, an over-the-air broadcaster owned by British businessman Richard Desmond, has sent potential buyers a prospectus that sets
a Feb. 27 deadline for initial offers.
The document values the channel at
£700 million ($1.16 billion), according to one of the people, equivalent
to 10 times its expected fiscal-year
earnings before interest and taxes.
The broadcaster airs general entertainment shows, including a host
of U.S.-produced shows, such as the
crime drama “NCIS” and the cable
science-fiction series “Falling Skies.”
Discovery, whose channels include Discovery Channel, Animal
Planet and TLC, has been as aggressive as any U.S. media company in
pursuing growth overseas, where it
has launched its own channel and
acquired others as the U.S. pay-TV

market has saturated. It bought a
controlling stake in sports-TV channel Eurosport last month, and it previously acquired TV networks in
Norway, Sweden, Denmark and Finland through a deal with ProSiebenSat.1 Media AG.
Discovery currently operates
some 200 channels world-wide. Its
international operations are powering the company’s profit growth:
Operating income at Discovery’s international channels rose 20% in the
fourth quarter of 2013, compared
with a 5% increase at its U.S. networks.
One option Discovery is exploring is a joint bid with U.K. satelliteTV provider British Sky Broadcasting Group PLC, one of the people
said.
Another person familiar with the
talks said the potential sale has attracted much interest, including
from other U.S. media operators, but
didn’t elaborate.

Reuters

Fading Out: Italy’s
Garment Know-How

Richard Desmond, shown in 2012. His Channel Five values itself at £700 million.
A joint Discovery-BSkyB bid
would bring together companies
backed by cable pioneer John Malone, who owns a 29.5% voting stake
in Discovery, and Rupert Murdoch,
whose media conglomerate 21st
Century Fox Inc. owns 39.1% of
BSkyB. (21st Century Fox and Wall
Street Journal owner News Corp

were part of the same company until
last June.)
The two moguls have clashed in
the past and are competitors in the
U.K. Mr. Malone’s European cabledistribution outfit, Liberty Global
PLC, last year bought Virgin Media,
which competes with BSkyB in the
U.K.’s pay-TV and broadband markets. Liberty Global also has been
buying up other cable assets across
the continent.
In the U.S., Mr. Malone’s Liberty
Media Corp. was recently thwarted
in its attempt to expand in cable.
Liberty-backed Charter Communications Inc. sought a takeover of
Time Warner Cable Inc., but Comcast Corp. came in with a significantly higher offer.
The Financial Times earlier reported that Discovery and BSkyB
were in talks to team up on a bid for
Channel 5.
Mr. Desmond bought Channel 5,
which airs the reality show “Big
Brother,” for £103.5 million in July

2010 from pan-European broadcaster RTL. The new owner pledged
£1.5 billion investment over the next
five years into programming and
content, while other costs were
taken out.
Channel 5—part of a family of
channels that includes 5USA—is one
of many media assets owned by Mr.

Desmond. His Northern & Shell
Group also owns four U.K. newspapers, celebrity magazines and a
stake in Internet-television service
YouView.
The group also has diverse interests in TV, print, distribution, investment and property. In January,
Mr. Desmond hired Barclays PLC to
run the sale of Channel 5 after receiving two approaches in the previous year, according to a person familiar with the matter.
“The economics for television are
a lot more confident than they were
three or four years ago,” said the
person, citing an improving advertising market and trans-Atlantic interest in European media.
Channel 5 was launched in 1997
as the fifth national terrestrial television network in the U.K. It had a
viewing share of 4.4% in January
across all U.K. terrestrial and satellite channels, according to data from
the Broadcasters’ Audience Research
Board.

Netflix Agrees to Pay Comcast for Speed
BY SHALINI RAMACHANDRAN

Netflix Inc. has agreed to pay
Comcast Corp. to ensure Netflix
movies and television shows stream
smoothly to Comcast customers, a
landmark agreement that could set a
precedent for Netflix’s dealings with
other broadband providers, people
familiar with the situation said.
In exchange for payment, Netflix

will get direct access to Comcast’s
broadband network, the people said.
The multiyear deal comes just 10
days after Comcast agreed to buy
Time Warner Cable Inc., which if
approved would establish Comcast
as by far the dominant provider of
broadband in the U.S., serving 30
million households.
For months Netflix and Comcast
have been in a standoff over Netflix’s
request that Comcast connect to Netflix’s video distribution network free
of charge. But Comcast wanted to be
paid for connecting to Netflix’s specialized servers because of the heavy
load of traffic Netflix would send into
the cable operator’s network. Under

the deal, Netflix won’t be able to
place its servers inside Comcast’s
data centers, which Netflix had
wanted. Instead, Comcast will connect to Netflix’s servers at data centers operated by other companies.
Netflix Chief Executive Reed Hastings decided to strike the deal after
Netflix saw a deterioration in streaming speeds for Comcast subscribers.
According to Netflix data published
in January, the average speeds of
Netflix’s prime-time streams to Comcast subscribers had dropped 27%
since October. Mr. Hastings didn’t
want streaming speeds to deteriorate
further and become a bigger issue for
customers, the people said.

During this period, Netflix was using Internet middlemen Cogent Communications as a “primary” route
into Comcast, a person familiar with
the matter has said. That connection
was starting to become overwhelmed, leading to slower Netflix
streams for Comcast Internet users,
people familiar with the matter said.
At the same time, Comcast presented Netflix with more attractive

deal terms than the operator had
been offering, the people said. The
deal spans several years. Netflix was
aiming for a long-term deal to make
sure its projected traffic growth
wouldn’t put it at a disadvantage,
one of the people said. The connection is a so-called “paid peering”
deal, which connects Netflix’s network to Comcast’s directly. Netflix
was previously using several middlemen to access Comcast’s network.
Mr. Hastings and Comcast CEO
Brian Roberts came to a framework
for an agreement at a meeting at
the Consumer Electronics Show in
January. Final details were worked
out over the past two days, one of
the people said.
The deal could force Netflix’s
hand in its standoff with other major U.S. broadband providers, including AT&T Inc., Verizon Communications Inc. and Time Warner
Cable, all of whom have also refused to connect with Netflix’s servers without compensation. Netflix’s
streams with Verizon in particular
have gotten worse in recent months.

THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 19

BUSINESS & FINANCE

Coke Bottler and Unions Clash in Spain

BY MATT MOFFETT
AND ANA GARCIA

Agence France-Presse/Getty Images

MADRID—Coca-Cola Co.’s Spanish bottler and its unions seem
headed to court over the company’s
plan to close plants and cut jobs in a
dispute that illustrates the persistence of labor strife in Spain despite
a nascent recovery from a deep recession.
Coca-Cola Iberian Partners is free
under Spanish law to impose a restructuring plan in the next 15 days,
after failing to reach agreement with
unions by last Friday’s deadline on its
plan to shut down four of 11 plants
and cut or relocate about 30% of its
workforce.
Formed by the merger of several
bottlers a year ago, Coca-Cola Iberian
said it had no choice but to overhaul
its labor force because of overcapacity in its production lines and a recession-weakened consumer market.

“If it doesn’t go ahead with this reorganization, the situation of the company will be unsustainable in the medium term,” a company official said.
Union leaders have said they
would sue if Coca-Cola seeks to impose the cuts, and analysts expect the
case to wind up in the courts.
The dispute, which has featured
strikes, street protests and threatened boycotts of Coca-Cola products,

Employees of bottler Coca-Cola Iberian demonstrated in Madrid last week.
has played out against some relatively good news in the long-depressed Spanish job market. Spain
posted seasonally adjusted job
growth in the fourth quarter of 2013,
a first in nearly six years.
But with unemployment still hovering around 26%, unions have dug in
their heels against Coca-Cola’s plans
and found political allies in areas affected by the proposed plant closings.
The regional government of Asturias,
where a bottling plant would be shut
under the restructuring, said that it

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n CHARTERED ASSET MANAGEMENT PTE LTD - TEL NO: 65-6835-8866 E-Mail:
Fax No: 65-6835 8865, Website: www.cam.com.sg, Email: Telephone: 352 - 47 18471
CAM-GTF Limited

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Republikas square 2a, Riga, LV-1522, Latvia

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The Hermitage Fund

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-33.0

n HORSEMAN CAPITAL MANAGEMENT LTD.
T: +44(0)20 7838 7580, F: +44(0) 20 7838 7590, www.horsemancapital.com n MERIDEN GROUP
Horseman EurSelLtd EUR EU EQ GBR 01/31 EUR
349.13
4.3
31.3
29.1 Tel: + 376 741 175 Fax: + 376 741 183 Email:
Horseman EurSelLtd USD
Horseman Glbl Ltd EUR
Horseman Glbl Ltd USD

EU EQ GBR 01/31 USD
GL EQ CYM 01/31 USD
GL EQ CYM 01/31 USD

349.13
577.71
577.71

NS
NS
NS

n HSBC ALTERNATIVE INVESTMENTS LIMITED
T +44 20 7860 3074 F + 44 20 7860 3174 www.hail.hsbc.com
HSBC ALTERNATIVE STRATEGY FUND
Special Opp EUR
Special Opp Inst EUR
Special Opp Inst USD
Special Opp USD

OT
OT
OT
OT

OT
OT
OT
OT

GGY
GGY
GGY
GGY

n HSBC Portfolio Selection Fund
GH Fund CHF Hdg
GH Fund EUR Hdg (Non-V)
GH Fund GBP Hdg
GH Fund Inst USD
GH FUND S EUR

OT
OT
OT
OT
OT

OT
OT
OT
OT
OT

now when you combine them in a
weak market, you have big overcapacity.”
But he faults the company for
fumbling the union negotiations and
the public-relations battle over the

closings. “I’m not sure if it’s the
strength of the unions as much as the
weakness of the company,” Mr.
Gomez said. A company official faults
the unions for failing to come up
with any constructive counterproposals, and for ignoring the interests of
rank-and-file workers.

Union leaders said they
would sue if Coca-Cola
seeks to impose the cuts.
Mr. Gomez and other analysts
said the unions risk overplaying their
hand by turning down Coca-Cola’s
buyout plan. It is possible that an
agreement approved by a court might
be less advantageous to workers than
the one the unions have turned
down, these analysts said. Spanish
media reports indicated that in some
plants there are disagreements between workers who would have accepted Coca-Cola’s deal, and those
pressing for a better one.

INTERNATIONAL INVESTMENT FUNDS

Advertisement
FUND NAME

would no longer accept Coca-Cola’s
sponsorships of sporting events. In

the Madrid region, where a plant in
suburban Fuenlabrada is slated to be
closed, unions have called for a boycott, making signs reading: “If
Madrid doesn’t produce, Madrid
doesn’t consume.”
Unions say the company’s plan to
relocate several hundred workers is
unfeasible and an indirect way of
eliminating their positions.
Coca-Cola and the unions were
unable to reach agreement even

though the company shifted its original plan from layoffs to voluntary
buyouts for the more than 700 workers, out of a total workforce of about
4,000, who would lose their jobs. The
company also sweetened severance
packages to include one-time payments of €10,000 ($13,738), plus 45
days’ pay for each year worked.
In justifying the plant closings,
Coca-Cola Iberian says 11 plants for
Spain are too many. By comparison,
more-populous France has three
plants. In addition, the Spanish
plants operate at half of their capacity, the company says.
The company adds that profitability has fallen by 43% and production
by 20% since 2009. Despite labor-law
changes aimed at cutting costs and
improving flexibility in hiring, Spain
still lags behind in international competitiveness, company officials say.
The company says about 25% of

Spanish bars and restaurants buy
beverages from outside the country,
where prices are lower.
It is understandable that CocaCola Iberian would want to streamline operations after the merger, said
Sandalio Gomez, a labor-relations
specialist at Spain’s IESE Business
School. “Each plant they had had
been planned as a separate entity and
each bottler wanted to be better and
bigger than the other,” he said. “So

GGY
GGY
GGY
GGY
CYM

12/31
03/31
03/28
12/31
01/31
01/31
01/31
01/31
01/31

EUR
EUR
USD

USD

CHF
EUR
GBP
USD
EUR

122.21
88.51
123.18
129.13
125.95
140.23
154.96
133.63
156.05

14.2
0.7
4.2
14.0
0.5
0.5
0.5
0.6
0.6

NS
NS

NS

NS
NS
NS

14.2
-0.3
18.5
14.0

Antanta Combined Fund
Antanta MidCap Fund
Meriden Opps Fund
Meriden Protective Div

EE
EE
GL
GL

EQ
EQ
OT
EQ

AND
AND
AND
AND

01/24
01/24
02/05
11/24

USD
USD
EUR
EUR

207.19
373.49
22.68
NS.00

-1.3
3.5
0.0
-2.8

-19.3
-7.3
-11.2
NS

-10.9
-7.6

-17.5

-11.6
-11.0
NS

17.0
13.3
10.6
17.3

6.7
6.3
6.9
7.3
7.7

6.1
6.0
6.7
7.0
7.2

n Pictet Funds (Europe) SA, ROUTE DES ACACIAS 60, CH-1211 GENEVA 73
Tel: + 41 (58) 323 3000 Web: www.pictetfunds.com
Pictet-Abs Ret Gl Div-P EUR
Pictet-Agriculture-P EUR
Pictet-Asian Eq ExJpn-P USD
Pictet-Asian Loc Cur Dbt-P USD
Pictet-Biotech-P USD

GL OT LUX

OT OT LUX
OT OT LUX
AS BD LUX
OT EQ LUX

02/20
02/20
02/21
02/21
02/20

EUR
EUR
USD
USD
USD

113.57
150.16
180.64
143.52
648.09

-0.3
-1.8
-1.9
0.7
17.0

-3.7

-1.8
0.2
-7.1
66.5

-0.9
3.4
1.7
-2.0
43.2

FUND NAME

NAV
GF AT LB DATE CR

Pictet-Brazil Index-P USD
Pictet-CHF Bonds-P
Pictet-China Index-P USD
Pictet-Clean Energy-P USD
Pictet-Digital Comm-P USD
Pictet-Eastern Europe-P EUR
Pictet-Em Corp Bds-P USD
Pictet-Em Loc Curr Dbt-P USD
Pictet-Em Mkts Hgh Div-P USD
Pictet-Em Mkts Index-P USD
Pictet-Em Mkts Sust Eq-P USD
Pictet-Emerging Markets-P USD
Pictet-Envir Megatr Sel-P EUR
Pictet-Eu Equities Sel-P EUR

Pictet-EUR Bonds-P
Pictet-EUR Corp Bds Ex Fin-P
Pictet-EUR Corporate Bonds-P
Pictet-EUR Government Bonds-P
Pictet-EUR High Yield-P
Pictet-EUR Inflation Lkd Bds-P
Pictet-EUR SM-Term Bds-P
Pictet-EUR ST High Yld-P
Pictet-Euroland Index-P EUR
Pictet-Europe Index-P EUR
Pictet-European Sust Eq-P EUR
Pictet-Generics-P USD
Pictet-Glo Bds Fundamental-P USD
Pictet-Glo Em Currencies-P USD
Pictet-Glo Emerging Debt-P USD
Pictet-Glo Megatrend Sel-P USD
Pictet-Greater China-P USD
Pictet-High Dividend Sel-P EUR
Pictet-India Index-P USD
Pictet-Indian Equities-P USD
Pictet-Japan Index-P JPY
Pictet-Japanese Eq Opp-P JPY
Pictet-Japanese Eq Sel-P JPY
Pictet-Latam Index-P USD
Pictet-Latin Am Loc Curr Dbt-P USD
Pictet-Pac (ExJpn) Idx-P USD
Pictet-Piclife-P CHF
Pictet-Premium Brands-P EUR
Pictet-Quality Gl Eq-P USD
Pictet-Russia Index-P USD

Pictet-Russian Equities-P USD
Pictet-Security-P USD
Pictet-Short-T Money Mkt CHF-P
Pictet-Short-T Money Mkt EUR-P
Pictet-Short-T Money Mkt JPY-P
Pictet-Short-T Money Mkt USD-P
Pictet-Small Cap Europe-P EUR
Pictet-Sov. ST Money Mkt-P EUR
Pictet-Sov. ST Money Mkt-P USD
Pictet-Timber-P USD
Pictet-US Eq Grwth Sel-P USD
Pictet-US Eq Value Sel-P USD
Pictet-US High Yield-P USD
Pictet-USA Index-P USD
Pictet-USD Government Bonds-P
Pictet-USD Short Mid-Term Bds-P
Pictet-Water-P EUR
Pictet-World Gvt Bonds-P EUR
PTR-Banyan-P USD
PTR-Corto Europe-P EUR
PTR-Kosmos-P EUR
PTR-Mandarin-P USD

OT
CH
AS
OT
OT
EU
OT

OT
GL
GL
GL
GL
OT
EU
EU
EU
EU
EU
EU
EU
EU
EU
EU
EU
EU
OT
OT
OT
GL
GL
AS
OT
EA
EA
JP
JP
JP

GL
OT
AS
OT
OT
GL
EE
EE
GL
CH
OT
OT
OT
EU
OT
OT
GL
US
US
US
US
US
US
OT
OT
OT
OT
OT
OT

OT
BD
EQ
OT
EQ
EQ
OT
OT
EQ
EQ
EQ
EQ
OT
EQ
BD
BD
BD
BD
BD
BD
BD
BD
EQ
EQ
EQ
EQ
OT
OT
BD
EQ

EQ
OT
EQ
EQ
EQ
EQ
EQ
EQ
OT
EQ
OT
EQ
EQ
EQ
EQ
EQ
MM
OT
OT
OT
EQ
OT
OT
EQ
EQ
EQ
BD
EQ
BD
BD

OT
OT
OT
OT
OT
OT

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX
LUX

02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/21
02/20
02/20
02/21
02/20
02/20
02/20
02/20

02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/21
02/20
02/20
02/21
02/21
02/21
02/21
02/20
02/20
02/21
02/20
02/20
02/20
02/20
02/20
02/20

02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/20
02/19
02/20
02/20
02/21

USD
CHF
USD
USD
USD
EUR
USD
USD
USD

USD
USD
USD
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
USD
USD
USD
USD
USD
USD
EUR
USD
USD
JPY
JPY
JPY
USD
USD

USD
CHF
EUR
USD
USD
USD
USD
CHF
EUR
JPY
USD
EUR
EUR
USD
USD
USD
USD
USD
USD
USD
USD
EUR
EUR
USD
EUR
EUR
USD

NAV
62.58

465.82
99.64
86.67
210.54
316.45
100.51
174.11
105.79
232.37
90.40
492.53
121.96
538.12
475.19
132.69
178.54
138.74
222.05
116.55
132.11
115.85
115.68
147.92
188.49
211.01
128.37
103.98
308.19
210.16
384.40

129.23
80.31
302.53
12597.94
6984.85
10651.71
71.97
134.51
362.07
902.96
122.95
123.16
74.33
60.48
167.62
124.25
137.73
10127.91
132.31
855.44
102.68
102.02
150.94
172.59
186.42
145.11
157.05
579.35
125.80
198.22

132.33
96.03
130.05
106.88
104.09

Data provided by:

—%RETURN—
YTD 12-MO 2-YR
-8.7
1.1
-5.4
1.5
2.0
-8.3
0.8
-2.6
-5.9
-5.1
-6.6
-5.3
0.7
-1.7
2.3
1.4
1.3
2.2
2.0
0.5

0.5
0.8
1.6
2.0
2.3
10.6
0.3
-1.0
0.4
3.1
-4.2
0.5
-3.6
0.0
-6.4
-6.8
-7.7
-8.4
-0.3
0.8
0.4
-3.4
-0.5
-9.9
-11.3
1.6
0.0
0.0
0.0
0.0

4.1
0.0
0.0
0.2
1.9
-0.2
1.5
-0.3
1.4
0.2
1.2
2.6
-6.4
3.7
0.5
-2.0

-24.2
1.4
-4.0
29.9
36.7
-14.9
-2.0
-14.3
-9.0
-9.5
-12.5
-7.7
12.0

6.2
3.5
3.4
3.8
4.5
11.0
-2.2
2.2
6.1
22.2
18.0
16.6
34.6
-3.9
-4.6
-4.4
24.5
-0.8
11.5
-10.0
-2.6
28.7
28.2
26.0
-22.0
-14.9
0.2
4.4
11.8
15.5

-13.1
-11.8
19.0
0.0
0.0
0.0
0.2
28.6
-0.1
0.1
7.9
32.6
21.0
5.9
23.3
-1.4
0.3
11.4
-2.5
-8.8
14.4
1.2
6.5

-21.0
2.5
1.4
12.8
22.1
-5.2

NS
-4.7
NS
-3.7
NS
-4.4
10.0
9.2
6.2
4.7
6.3
5.8
13.3
0.9
2.6
7.3
15.8
14.3
13.1
24.1
-1.1
-1.4
3.2
18.1
3.0
12.4
-5.7
-3.7
24.6
26.8

23.5
-15.1
-7.3
7.9
6.5
11.9
NS
-8.7
-7.5
14.9
0.0
0.0
0.0
0.2
23.1
-0.1
0.1
14.7
18.9
15.1
8.4
17.8
0.2
0.3
11.2
-2.9
-4.5
16.3
1.6
4.4

n POLAR CAPITAL PARTNERS LIMITED
International Fund Managers (Ireland) Limited PH - 353 1 670 660 Fax - 353 1 670 1185
Global Technology
Japan Fund USD
Polar Healthcare Class I USD
Polar Healthcare Class R USD

OT
JP
OT
OT

EQ
EQ
EQ
EQ

IRL
IRL
IRL
IRL

02/20
02/21
02/20
02/20

USD
USD

USD
USD

23.48
21.27
33.49
32.84

2.8
-5.8
18.1
18.0

29.5
13.4
69.9
69.2

15.1
6.8
46.6
46.0

FUND NAME

NAV
GF AT LB DATE CR

NAV

n Hemisphere Management (Ireland) Limited
Discovery USD A
Elbrus USD A
Europn Conviction USD B
Europn Forager USD B
Latin America USD A
Paragon Limited USD A
UK Fund USD A

GL
OT
EU
EU
GL
EU
OT

OT
OT
EQ
EQ
EQ
EQ
OT

CYM
CYM
CYM
CYM
CYM

CYM
CYM

12/31
01/31
01/31
01/31
06/30
12/31
04/13

USD
USD
USD
USD
USD
USD
USD

101.35
10.10
161.54
324.09
NS.00
NS.00
157.94

—%RETURN—
YTD 12-MO 2-YR
NS

NS
0.3
2.6
NS
12.7
1.8

NS
NS
1.1
11.7
NS
12.7
NS

NS
NS
5.3
11.9
NS
14.2
NS

n PT CIPTADANA ASSET MANAGEMENT
Tel: +6221 25574 883 Fax: +6221 25574 893 Website: www.ciptadana-asset.com
Indonesian Grth Fund

GL

EQ BMU 02/19 USD

154.09

13.0

-16.5

-10.2

1127.97
1372.98
10.69

1.1
6.0
17.3

5.8
28.6
84.6

6.7
18.4
52.3

13464.00

-6.4

37.6

28.2

n THE NATIONAL INVESTOR
PO Box 47435, Abu Dhabi, UAE Web:www.tni.ae
MENA Special Sits Fund
MENA UCITS Fund
UAE Blue Chip Fund

OT
OT
OT

OT BMU 01/31 USD
OT IRL 02/13 USD
OT ARE 02/13 AED

n YUKI MANAGEMENT & RESEARCH
n YMR-N Series
YMR-N Growth Fund

JP

EQ IRL 02/21 JPY

n Yuki Asia Umbrella Series
Yuki Rebounding Gro Fd

n Yuki Mizuho Series
Yuki Mizuho Jpn Dyn Gro

Yuki Mizuho Jpn Inc
Yuki Mizuho Jpn Lg Cap
Yuki Mizuho Jpn LowP
Yuki Mizuho Jpn Val Sel

JP

EQ IRL 02/21 JPY

16443.00

-4.6

51.1

36.1

JP
JP
JP
JP
AS

EQ
EQ
EQ
EQ
EQ

5741.00

10017.00
6190.00
18483.00
9092.00

-6.7
-4.0
-8.1
-6.3
-4.9

36.4
27.0
25.7
49.8
51.2

27.1
22.4
19.5
35.6
39.7

IRL
IRL
IRL
IRL
IRL

02/21

02/21
02/21
02/21
02/21

JPY
JPY
JPY
JPY
JPY

n OTHER FUNDS
For information about these funds, please contact us on Tel: +44 (0) 207 842 9694/9633
Medinvest Plc Dublin

OT EQ IRL 09/30 USD

NS.00

n WINTON CAPITAL MANAGEMENT LTD
Tel: +44 (0)20 7610 5350 Fax: +44 (0)20 7610 5301
Winton Evolution EUR Cls H
Winton Evolution GBP Cls G
Winton Evolution USD Cls F
Winton Futures EUR Cls C
Winton Futures GBP Cls D
Winton Futures JPY Cls E
Winton Futures USD Cls B

GL

GL
GL
GL
GL
GL
GL

OT
OT
OT
OT
OT
OT
OT

CYM
CYM
CYM
VGB
VGB
VGB
VGB

01/31
01/31
01/31
01/31
01/31
01/31
01/31

EUR
NS.00
GBP
NS.00
USD
NS.00
EUR
245.63
GBP
267.48
JPY 17199.60
USD
876.58

NS

1.3

-4.4

-3.1
-3.1
-3.1
-2.4
-2.4
-2.3
-2.4

7.2

7.6
7.6
3.8
4.1
4.4
4.2

1.5
1.9
1.8
0.9
1.3
1.0
1.2

INDICES
FUND NAME

NAV
——————%RETURN ——————
GF DATE CR NAV 1-WK 1-MO 1-Q 1-YR 2-YR

n ARIX ABSOLUTE RETURN INVESTABLE INDEX
Feri Institutional Advisors, www.feri.de
ARIX Composite Gross USD OT

OT GBR 01/31.00

USD1603.76

0.1

5.8

6.1

NAV

OT CYM 06/07.00

GBP25839.68

5.3

10.9

9.8

n CG Portfolio Fund Ltd
OT

Data as shown is for information purposes only. No offer is being made by Morningstar, Ltd. or this publication. Funds shown aren’t registered with the U.S. Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents
except as noted. Prices are in local currencies. All performance figures are calculated using the most recent prices available. 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price.

For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email:


20 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

MARKETS
Popular Destination
U.S. investors are flocking to Europe, drawn by an improving economic outlook, expectations of easy central-bank policy
and a perception that bargains are easier to find over there.

Western European stock fund flows,
monthly

Stoxx Europe 600 P/E ratio

52-week performance

$20 billion

30

25%

25

20

20

15

15

10

10

5

5

0

0

–5

10
0
–10
–20
2008 ’09

’10

’11

’12

’13

’14

2010

’11

’12

’13

’14

Sources: EPFR Global (flows); Barclays (P/E ratio); WSJ Market Data Group

S&P 500

Stoxx Europe 600
2013

’14
The Wall Street Journal

Investors Like the View in Europe

Continued from page 15
omy has resumed expanding. Inflation remains low and growth tepid,
paving the way for easy centralbank policy that many investors believe will likely buoy share prices.
That backdrop contrasts with the
U.S., where the economy appears on
more solid footing but the Federal
Reserve has been paring back the
monthly bond purchases that many
investors say contributed to the record-setting 2013 rally.

Monetary policy in the U.S. “will
likely be something of a headwind
for equities,” said Jamie Doyle,
manager of the International Value
Fund at Los Angeles-based Causeway Capital Management, which has
$28 billion in assets under management and has a large portfolio of
European shares. “But that’s not going to be a factor in Europe.”
Many portfolio managers are
seeking out the biggest names of
the European corporate world, saying valuations make them a bargain
compared with top U.S. companies.
“You can find several world-class
companies in Europe that have depressed prices because of the region,” said Charles Shriver, portfolio
manager of the $63 million T. Rowe
Price Group Global Allocation Fund.
“But they are top-tier global corporations.”
That fund counts oil company
Royal Dutch Shell and German
pharmaceuticals company Bayer AG
among its top holdings.

In the technology sector, favorites include Atos SA, a French technology-services company, and Sopra
Group, a tech consultancy.
At Causeway, Mr. Doyle likes the
Anglo-Dutch consumer giant Unilever NV for its strong global exposure and a dividend yield, reflecting
the annual payout as a share of the
recent stock price, of 3.8%.
That dividend payment is part of
what makes Unilever a better buy
than its American peer Procter &

Gamble Co., which pays a 3.1% dividend, Mr. Doyle said.
“Unilever trades at a discount
with a higher dividend yield,” Mr.
Doyle said. The discount appears in
the price-to-earnings ratios of the
two companies. Procter & Gamble
shares are trading at 20.85 times
the company’s earnings over the
past 12 months, compared with
16.73 for Unilever.
But with many European stock
markets up 20% or more in the past
year, the bargains that have attracted bottom-fishers are harder to
find, many investors say.
Shares in the Stoxx Europe 600
index are trading at 21.5 times the
next 12 months’ expected earnings,
above its average of 18.2 since 2003,
according to Barclays.
“There is a bit of a risk in core
Europe that people think there is
more value than there really is,”
said Michael Gavin, head of asset allocation for the Americas at Barclays.

At the same time, the region’s
recovery remains fragile, raising
risks for companies that benefit
from consumer spending, such as
Unilever. An initial reading on
fourth-quarter euro-zone gross domestic product showed modest improvement, but the result remains

well below the pace needed to make
a dent in near record-high unemployment.
Inflation unexpectedly fell in
January, prompting calls for the European Central Bank to provide additional stimulus to prevent deflation, which could knock the region’s
fragile recovery off course.
“It isn’t all wine and roses,” Mr.
Doyle said. “Europe has been
through an enormous dislocation
and continues to struggle with a
number of challenges.”
Some say that means tilting
portfolios toward countries most
badly affected by the debt crisis.
The BlackRock International Opportunities Fund has looked to the
hardest-hit sectors within those
countries. The Irish building company Kingspan Group PLC and
Dutch international employment
services company Randstad Holding NV, which has a strong presence
in Spain and Greece, were two of
the fund’s recent buys. They have
soared 60% and 46% over the past
year, respectively.
The peripheral European nations
are “where the opportunities are
leading us,” Mr. Hart said.

SEC Will Test Larger ‘Tick’ Increments
BY TELIS DEMOS
AND SCOTT PATTERSON

WASHINGTON—Securities and
Exchange Commission Chairman
Mary Jo White said the agency
plans to implement a test program
to trade stocks in wider increments,
like nickels, to determine whether
such a change would make it easier
for investors to trade some shares.
Weeks earlier, the SEC’s investor
advisory committee recommended
against implementation of such a
program because of concern it could
increase the cost of trading.
In a speech in Washington on
Friday, Ms. White said she planned
to push forward a pilot program
that “would widen the quoting and
trading increments and test, among
other things, whether a change like
this improves liquidity and market
quality.”
Phasing out trading in penny increments has long been championed
by some lawmakers, smaller investment banks and stock exchanges,
who say trading in wider bands

would make it easier and more profitable to trade shares of smaller
companies, as well as lessen volatility. The SEC’s pilot program would
move the trading of some stocks to
bigger “tick” sizes after more than a
decade of penny increments.

Critics are worried about increasing the cost of trading by forcing traders to potentially pay more,
or sell for less, than they would under penny trading. Some also doubt
the measure would improve capital
raising for smaller companies.
U.S. exchanges and regulators
are embroiled in an industrywide
debate about how such a pilot program would work. The plan has
backing on Wall Street, including
from stock-exchange operators such
as Nasdaq OMX Group Inc., though
some bigger banks and retail brokerages, who often trade in increments smaller than pennies in private venues known as “dark pools,”
have asked for any test to be limited
in scope. SEC officials have been
working with exchanges on the development of the plan.

The details are still under consideration, according to people familiar with the discussions. The SEC
has asked the stock exchanges—including NYSE Euronext, Nasdaq,
BATS Global Markets Inc. and Direct Edge Holdings LLC—to work
together on rules, the people said.
The SEC would review, and possibly
vote on, the rules before they are
implemented.
By referring to both “quoting
and trading,” Ms. White suggested
that the SEC didn’t want to see private venues executing trades in
smaller increments than exchanges
are required to list prices. Some big
banks and retail brokerages have expressed concern that cutting out
those venues would harm investors.
The U.S. Houses passed a bill this

month that would force the SEC to
create an optional five-cent or 10cent increment for companies
whose market capitalization is under $750 million, an experiment that
would last for five years. However, a
companion bill hasn’t been proposed in the Senate.

Swiss Insurance Is Targeted
In U.S. Tax-Evasion Probe

Continued from first page
edly helping Americans avoid taxes.
The bank said in November it had
“verified the tax compliance of all
its U.S. clients,” and has since been
in the process of shutting down.
Swiss Life, which like many Swiss financial firms is now eager to limit
exposure to Americans, used the opportunity to scuttle the shared PPLI
policies rather than locate a new
bank to house the attached assets,
these people say.
Swiss Life is the biggest Swiss
insurer offering PPLI, though not
the only one. Some of the people familiar with the situation say U.S. authorities have collected data on the
use of PPLI by Americans, though
the issue has taken a back seat to
the continuing probe of Swiss
banks.
Just as Swiss banks have drawn
legal inquiries, “the same thing
could happen, certainly, with the insurance companies,” said Gideon

Rothschild, an attorney with Moses
& Singer LLP.
A Justice Department spokeswoman declined to comment, as did
a spokesman for the IRS. Nils Frowein, chief executive of Swiss Life’s
International unit, says the company
hasn’t been contacted by U.S. authorities regarding its PPLI business.
PPLI policies are generally a lawful way for clients to defer taxes on
wealth as it grows. But policies can
be problematic for their owners and
carriers if they haven’t been set up
in compliance with tax laws in a client’s home country, or if they are
loaded with undeclared assets.
The bulk of the 19.3 billion Swiss
francs ($21.7 billion) in assets under
control at Swiss Life’s International
unit in 2012—prior to the Bank Frey
purge—was linked to PPLI. About
4%, or around 770 million francs,
was attributable to Americans, according to Mr. Frowein.
Mr. Frowein said while Swiss Life
has “been continuously reducing exposure to U.S. persons” where it
can, it is confident there are no issues with the American PPLI accounts that remain. “There is no
reason for us to resign from the

contracts,” he said.
The Swiss banks that partner on
PPLI once happily accommodated
wealthy U.S. clients, but have more
recently jettisoned Americans to
avoid drawing unwanted attention

from the Justice Department. Unlike
banks, insurers are contractually
bound to hold policies and pay out
for a specific event, such as death.
Only an unusual circumstance allows an insurer to prematurely
dump a PPLI policy.
Hundreds of Swiss banks have
applied to a U.S. program in which
they exchange information about
dealings with Americans for guarantees they won’t be prosecuted. Insurers aren’t able to participate in
the program.
The Justice Department has said
that about a dozen banks are already under investigation.
Swiss Life began offering PPLI in
2004. Assets under administration
ballooned to more than eight billion
francs by 2008 from 200 million
francs in 2005. In 2007, Swiss Life
added a number of U.S. clients
through the purchase of insurer
CapitalLeben, just as dealings with
Americans were poised to become
subject to greater scrutiny.
In 2009, the Justice Department
fined UBS AG $780 million for helping Americans evade taxes, kicking
off the broader clampdown on Swiss
banking.
Mr. Frowein says Swiss Life
stopped taking American clients in
2012. Zurich Insurance Group AG

says it hasn’t accepted Americans
since its PPLI business began in
2009, while a spokesman for insurer
Baloise Holding AG said it stopped
taking American clients under a
2010 company directive. The Baloise
spokesman said the firm doesn’t believe it necessary to “actively wind
down” U.S. policies.
Swiss Life has bulked up on compliance over the years to help it
avoid undeclared assets, Mr. Frowein said, and requires clients to
declare their tax status.
Still, Mr. Frowein said, “If you
want to do a transaction with us, I
have no possibility to check and
prove your tax declaration.”

Fund Scorecard
Europe ex-UK Small/Mid-Cap Equity
Funds that invest primarily in the equities of small- and mid-cap companies in
continental Europe. At least 75% of total assets are invested in equities. Ranked on %
total return (dividends reinvested) in Euros for one year ending February 21, 2014

Leading 10 Performers
FUND FUND
RATING * NAME

3
4
4
3

2
3
4
3
4
2

FUND MGM'T CO.

LEGAL
CURR. BASE

TR European
Henderson Global
GBPGBR
Growth Ord
Investors
JPMorgan
JP Morgan
GBPGBR
EuropeanSmallerCompOrd Investment Mgmt Inc.
Ignis
Ignis Asset
GBPGBR
European SmlrComs I Acc Management Limited
Invesco Cont
Invesco Global
USDIRL
European Sm Cp Eq A Asset Management Limited
JPM Europe

J.P. Morgan Asset
GBPGBR
Smaller Companies A Acc Management (UK) Ltd.
Schroder
Schroder Unit
GBPGBR
European Sm Cos Acc Trusts Limited
European
F&C Asset
GBPNLD
Assets Ord
Management PLC
Digital
J.Chahine Capital
EURLUX
Stars Europe ex-UK Acc
IP European
Invesco Fund
GBPGBR
Opportunities Acc Managers Limited
IP European
Invesco Fund
GBPGBR
Small Companies Managers Limited

NOTE: Changes in currency rates will affect performance and rankings.
KEY: ** 2YR and 5YR performance is annualized
NA-not available due to incomplete data;
NS-fund not in existence for entire period

YTD

% Return in $US **
1-YR 2-YR 5-YR

8.44 54.05 37.32 24.33
3.48 52.84 29.93 23.94
6.96 44.18 33.40 27.58
7.37 39.69 31.53 36.13
4.43 36.93 22.65 19.70
5.09 35.30 25.06 21.41
5.43 35.10 38.05 29.51
5.78 32.93 27.84 22.42
3.99

31.52 23.76 30.74

5.45 31.06 22.43 25.11

Source: Morningstar, Ltd
1 Oliver’s Yard, 55-71 City Road
London EC1Y 1HQ United Kingdom
www.morningstar.co.uk; Email:
Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 21

GLOBAL MARKETS LINEUP
Major stock market indexes

Stock indexes from around the world, grouped by region. Shown in local-currency terms.
PERFORMANCE
Percentage change
Yr.-to-date

PREVIOUS SESSION

Region/Country

Index

Close

Net change

EUROPE

Stoxx Europe 600

336.09

1.31

2.4%

0.39%

52-wk.
16.5%

Region/Country
Russia

PERFORMANCE
Percentage change
Yr.-to-date
-8.8
0.95%

PREVIOUS SESSION

Index
RTSI

Close
1315.54

Net change
12.39

10071.00

8.80

434.08

1.99

Stoxx Europe 50

2961.11

12.36

0.42

1.4

12.5

Spain

IBEX 35

Euro Zone

Euro Stoxx

320.66

1.23

0.39

2.0

20.8

Sweden

OMX Stockholm

Euro Stoxx 50

3131.67

10.08

0.32

0.7

19.1

Switzerland

SMI

8431.78

48.53

Austria

ATX

2663.27

23.87

4.6

10.0

Turkey

BIST 100

63885.62

204.6

0.32

Belgium

Bel-20

3019.44

13.47

3.3

18.4

U.K.

FTSE 100

6838.06

25.07

0.37

ASIA-PACIFIC

DJ Asia-Pacific TSM

1415.91

16.29

Czech Republic

PX

Denmark

OMX Copenhagen

Finland

0.90
0.45

1046.06

10.01

0.97

5.8

4.6

637.23

5.75

0.91

12.6

29.5

Australia

SPX/ASX 200

5438.70

OMX Helsinki

7522.51

50.30

0.67

2.5

19.8

China

Shanghai Composite

2113.69

-25.09

France

CAC-40

4381.06

25.57

0.59

2.0

18.2

Hong Kong

Hang Seng

22568.24

DAX

9656.95

38.10

1.1

26.0

India

S&P BSE Sensex

20700.75

BUX

18110.98

14.45

-2.4

-4.0

Japan

Nikkei Stock Average

14865.67

Ireland

ISEQ

10.3

35.5

Singapore

Straits Times

3099.93

FTSE MIB

7.5

25.6

South Korea

Kospi

1957.83

27.26

Netherlands

AEX

Norway

All-Shares

Poland

18.57
-60.38

0.37
-0.30%

1.6

8.4

-0.1

-8.7

0.78

-3.2

-0.9

0.80

-2.2

7.2

-8.8

30.6

0.49
-1.17%

2.88

-2.1
1.41

-5.7

-2.7

0.43

-3.0

1.60

0.40

-0.4

17.8

AMERICAS

DJ Americas

463.23

-0.69

-0.5

18.2

611.86

2.04

0.33

1.5

18.1

Brazil

Bovespa

47380.24

91.63

0.19

-8.0

-16.4

53400.11

433.09

Mexico

IPC

39724.58

70.35

0.18

-7.0

-9.5

7228.49

PSI 20

52.55

0.82

4.1

16.2

0.73

10.2

18.2

Note: Americas index data are as of 5:00 p.m. ET.

S&P Dow Jones Indices
Price-toDividend earnings
yield*
ratio* S&P Dow Jones Index

2.45%18.52

2.99 17.72
3.05 13.47
3.17 19.15
2.39 19.37
2.99 13.07
3.33 18.44
3.24 21.17
3.80 17.32
3.61 8.55
1.93 19.85

7.9
4.2

400.36

WIG

Portugal

5004.85
20391.90

11.6
-15.8

-2.3

1.16

13.29

Italy

0.08

2.8
1.3

416.49

0.40

23.1
15.5

-5.8

0.58

164.11

Hungary

0.46

174.16

Germany

1.6
2.5

0.09

26.40

52-wk.
-15.2

Sources: SIX Financial Information; WSJ Market Data Group

MSCI indexes

PERFORMANCE (euros)
Last
Daily 52-wk.

Global TSM
Global DOW
Global Titans 50
Dev Europe TSM
Developed Markets TSM
S&P BMI Emg Markets
S&P Europe 350
S&P Euro
Europe Dow
BRIC 50
U.S. TSM
Kuwait Titans 30 -c

-0.15

1688.53
222.94

0.09% 13.2%
-0.15
8.1

1368.93
1359.89
1428.21
363.00

0.34 16.5
0.40 21.5
0.48 17.1
0.31 -14.4

PERFORMANCE (U.S.dollars)
Last
Daily
52-wk.

3225.57
2464.83
228.86
3470.80
3255.10

245.26
1688.09
1699.45
2084.83
475.69
19384.39
205.25

0.33%
0.33
0.08
0.64
0.32
0.63
0.58
0.64
0.72
0.55
-0.13
0.05

Price-toDividend earnings
yield*
ratio* S&P Dow Jones Index

15.9%
18.2
12.9
22.9
18.7

-8.0
21.4
26.6
22.3
-10.7
22.6
4.7

6.35%14.98
6.71 14.35
3.29 29.14
2.16 19.16
2.50 17.18
3.29 21.22
3.97 22.93
1.94 13.55

Developed and emerging-market regional and country indexes
from MSCI as of February 21, 2014

PERFORMANCE (euros) PERFORMANCE (U.S.dollars)
Last
Daily
52-wk.
Last Daily 52-wk.

Turkey Titans 20 -c
Global Select Div
Asia/Pacific Select Div
U.S. Select Dividend -d

S&P Glb Nat Resources
Islamic Market
Islamic Market 100
Islamic Turkey -c
Sustainability Europe
S&P Glb Infrastructure
Luxury
DJ-UBS Commodity -p

214.51
277.34
1205.92
1996.87
2547.99
110.41
1504.43
1773.34
118.29

651.38
0.43% 8.4% 252.33
-0.04
326.24
-9.9
-0.17 16.0
1237.94
-0.01
-5.9 2726.98
2757.32
-0.09 12.0

2997.18
3954.01
0.32 15.0
166.81
0.04
2335.74
6.6
0.01
12.3 2066.43
0.25
133.69
-2.4

0.18%
0.67
0.20
0.07
0.23
0.18
0.15
0.30
0.55
0.27
0.24
0.25

-15.5%
13.3
-6.0
21.1

-1.7
16.0
17.0
-7.8
20.1
11.3
17.3
-2.2

Price-toDividend earnings
yield
ratio MSCI Index

LOCAL-CURRENCY
Last

405.18

PERFORMANCE

Daily

YTD

52-wk.

2.50% 16

MSCI ACWI*

2.50

17

World (Developed Markets) 1,656.02 -0.06

-0.3

2.40

17

World ex-EMU

-0.13

-0.5

17.5

2.40

17

World ex-UK

1,665.17 -0.07

-0.5

18.3

3.10

16

EAFE

1,908.56

0.70

-0.4

13.1

2.70

11

Emerging Markets (EM)

950.62

0.89

-5.2

-11.1

201.53

0.04% -0.8%

14.1%
17.8

3.30

16

EUROPE

114.18 -0.04

1.8

15.4

3.20

18

EMU

199.64

0.39

1.0

19.9
17.0

USD

GBP

CHF

SEK

RUB

NOK

JPY

ILS

EUR

DKK

CDN

1.8

0.06

2.6

16.5

21

Europe Growth

107.77

-0.15

1.1

14.2

23

Europe Small Cap

273.63

-0.12

5.0

33.1

6

EM Europe

258.88 -0.03

-5.7

-17.2

13

UK

3.30

AUD

-0.16

116.42

3.70

U.S.-dollar and euro foreign-exchange rates in global trading

122.46

Europe Value

3.60

Cross rates

Europe ex-UK

13

2.40

Source: S&P Dow Jones Indices

18

2.30

*Fundamentals are based on data in U.S. dollar. Footnotes: a-in US dollar. b-dividends reinvested. c-in local currency. Note:All data as of 2 p.m.ET.

3.20
4.20

17

Nordic Countries

2,008.69

0.8

8.1

-0.24

2.2

13.4
-4.7

Australia

1.1160

1.8557

1.2554

0.1706

0.0314

0.1835

0.0109

0.3185

1.5316

0.2052

1.0028

...

3.70

4

765.59

-0.11

-3.4

Canada

1.1128

1.8504

1.2519

0.1701

0.0313

0.1830

0.0108

0.3176

1.5272

0.2047

...

0.9972

3.00

18

South Africa

1,123.10

-1.55

-1.3

11.8

Denmark

5.4377

9.0419

6.1171

0.8311

0.1530

0.8942

0.0529

1.5518

7.4625

...

4.8863

4.8725

3.00

13

AC ASIA PACIFIC EX-JAPAN 456.31

0.87

-2.5

-4.6

Euro

0.7287

1.2116

0.8197

0.1114

0.0205

0.1198

0.0071

0.2080

...

0.1340

0.6548

0.6529

Israel

3.5041

5.8266

3.9418

0.5356

0.0986

0.5762

0.0341

...

4.8088

0.6444

3.1487

3.1398

Japan

102.7175

170.7992

115.5507

15.6992

2.8909

16.8912

...

29.3139

140.9655

18.8898

92.3018

6.0811

10.1117

6.8409

0.9294

0.1711

...

0.0592

1.7355

8.3455

1.1183

5.4645

1.80

35.5317

59.0822

39.9709

5.4306

...

5.8430

0.3459

10.1402

48.7623

6.5343

31.9287

6.5429

10.8795

7.3603

...

0.1841

1.0759

0.0637

1.8672

8.9792

1.2032

5.8794

0.8889

1.4781

...

0.1359

0.0250

0.1462

0.0087

0.2537

1.2199

0.1635

0.7988

U.K.

0.6014

...

0.6765

0.0919

0.0169

0.0989

0.0059

0.1716

0.8253

0.1106

0.5404

...

1.6628

1.1249

0.1528

0.0281

0.1644

0.0097

0.2854

1.3724

0.1839

0.8986

Source: ICAP Plc.

Commodities

Currencies

Prices of futures contracts with the most open interest

EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia
Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;
NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of February 20, 2014
ONE-DAY CHANGE
Commodity
Exchange
Last price
Net
Percentage

Corn (cents/bu.)
Soybeans (cents/bu.)
Wheat (cents/bu.)
Live cattle (cents/lb.)
Cocoa ($/ton)
Coffee (cents/lb.)
Sugar (cents/lb.)
Cotton (cents/lb.)
Rapeseed (euro/ton)
Cocoa (pounds/ton)

Robusta coffee ($/ton)
Copper ($/lb.)
Gold ($/troy oz.)
Silver ($/troy oz.)
Aluminum ($/ton)*
Tin ($/ton)*
Copper ($/ton)*
Lead ($/ton)*
Zinc ($/ton)*
Nickel ($/ton)*
Crude oil ($/bbl.)
Heating oil ($/gal.)
RBOB gasoline ($/gal.)
Natural gas ($/mmBtu)
Brent crude ($/bbl.)
Gas oil ($/ton)

CBOT
CBOT
CBOT
CME
ICE-US
ICE-US
ICE-US
ICE-US
LIFFE
LIFFE
LIFFE
COMEX
COMEX

COMEX
LME
LME
LME
LME
LME
LME
NYMEX
NYMEX
NYMEX
NYMEX
ICE-EU
ICE-EU

459.25
1360.00
606.00
141.625
2,940
169.00
17.10
88.40
392.25
1,849
1,955

-3.00
12.25
-7.50
-0.250

-36
-0.45
0.41
0.75
3.25
-10
-4

3.2575
1324.50
21.865
1,761.00
23,000.00
7,132.00
2,143.00
2,035.50
14,305

-0.0035
7.60
0.148
-9.50
-175.00
-49.00
-30.00
-36.50
-220

102.16
3.0397

3.0009
4.985
109.76
928.25

-0.59
-0.0437
-0.0201
0.129
-0.54
-9.25

-0.65%
0.91%
-1.22
-0.18
-1.21
-0.27
2.46
0.86
0.84
-0.54
-0.20

463.00
1,361.50
617.75
143.200
3,002
177.50

17.14
89.67
394
1,871
2,019

414.50
1,247.50
553.75
135.375
2,636
112.50
14.92
82.60
349
1,674
1,575

3.4110
3.1775
1,332.40 1,203.70
22.015
19.030
1,813.00 1,686.50
23,175.00 21,410.00
7,422.00 7,051.00
2,242.00 2,097.50
2,110.00 1,964.00
14,730
13,425

-0.11
0.58
0.68
-0.54
-0.76
-0.68
-1.38
-1.76
-1.51
-0.57
-1.42
-0.67
2.66
-0.49
-0.99

Year
low

103.29
3.0901
3.0394
5.0140
110.82
943.75

91.48
2.8758
2.7831

3.8580
104.75
893.75

Sources: SIX Financial Information; WSJ Market Data Group

WSJ.com>>

Follow the markets throughout the day with updated stock quotes, news and
commentary at WSJ.com. Also, receive email alerts that summarize the day’s trading in Europe
and Asia. To sign up, go to WSJ.com/email.

India

791.72

-0.83

-3.1

1.6

10

Korea

558.08 -0.89

-5.3

-1.4

16

Taiwan

298.68

-0.87

-1.3

5.9

19

US BROAD MARKET

2,105.99 -0.68

0.0

24.3

30

US Small Cap

3,259.37

-1.04

1.0

30.3

14

EM LATIN AMERICA

2,925.79

-0.01

-8.6

-25.7

*Twenty-four developed and 21 emerging markets

Source: MSCI

London close on Feb. 21

AMERICAS
Year
high

-8.7

16

1.50

0.8960

27.0

-5.3

3.20

0.5389

U.S.

-8.5

-1.17

1.90

0.7965

-1.96

59.78

2.90

5.8627

Switzerland

736.82

China

1.20

31.8381

Russia
Sweden

Japan

9

1.50

5.4490

16

3.40

92.0398

Norway

Russia

0.23

206.22

Per euro

In euros

Argentina peso-a

Per
U.S. dollar

In
U.S. dollars

EUROPE

Per euro

In euros

Per
U.S. dollar

In
U.S. dollars

1.3724

10.7336

0.0932

7.8213

0.1279

Euro zone euro

1

1

0.7287

Brazil real

3.2350

0.3091

2.3573

0.4242

1-mo. forward

1.0000

1.0000

0.7287

1.3723

Canada dollar

1.5272

0.6548

1.1128

0.8986

3-mos. forward

1.0000

1.0000

0.7287

1.3724

761.65

0.001313

555.00

0.001802

Chile peso
Colombia peso
Ecuador US dollar-f
Mexico peso-a

2803.58 0.0003567

2042.89 0.0004895

6-mos. forward

0.9999

1.0001

0.7286

1.3725

Czech Rep. koruna-b

27.387

0.0365

19.956

0.0501

1.3724

0.7287

1

1

Denmark krone

7.4625

0.1340

5.4377

0.1839

18.2173

0.0549

13.2744

0.0753

Hungary forint

310.41

0.003222

226.18

0.004421

Peru sol

3.8569

0.2593

2.8104

0.3558

Norway krone

8.3455

0.1198

6.0811

0.1644

Uruguay peso-e

30.848

0.0324

22.478

0.0445

Poland zloty

4.1520

0.2408

3.0254

0.3305

U.S. dollar

1.3724

0.7287

1

1

Russia ruble-d

48.762

0.02051

35.532

0.02814

8.71

0.114751

6.35

0.157480

Sweden krona

8.9792

0.1114

6.5429

0.1528

Switzerland franc

1.2199

0.8197

0.8889

1.1249

Venezuela bolivar
ASIA-PACIFIC
Australia dollar

1.5316

0.6529

1.1160

0.8960

1-mo. forward

1.2197

0.8199

0.8887

1.1252

1-mo. forward

1.5345

0.6517

1.1181

0.8944

3-mos. forward

1.2190

0.8203

0.8883

1.1258

1.2179

0.8211

0.8875

1.1268

2.9910

0.3343

2.1795

0.4588

3-mos. forward

1.5410

0.6489

1.1229

0.8906

6-mos. forward

1.5503

0.6450

1.1296

0.8852

Turkey lira
U.K. pound

China yuan

6-mos. forward

8.3601

0.1196

6.0918

0.1642

0.8253

1.2116

0.6014

1.6628

Hong Kong dollar

10.6439

0.0940

7.7559

0.1289

1-mo. forward

0.8255

1.2114

0.6015

1.6625

India rupee

85.0863

0.0118

62.0000

0.0161

3-mos. forward

0.8259

1.2108

0.6018

1.6617

11709 0.0000854

6-mos. forward

0.8265

1.2099

0.6022

1.6605
2.6524

Indonesia rupiah
Japan yen

16068 0.0000622
140.97

0.007094

102.72

0.009735

1-mo. forward

140.95

0.007095

102.70

0.009737

MIDDLE EAST/AFRICA
Bahrain dinar
0.5174

1.9327

0.3770

3-mos. forward

140.90

0.007097

102.67

0.009740

Egypt pound-a

9.5538

0.1047

6.9616

0.1436

6-mos. forward

140.82

0.007101

102.61

0.009745

Israel shekel

4.8088

0.2080

3.5041

0.2854

Malaysia ringgit-c

4.5196

0.2213

3.2933

0.3036

Jordan dinar

0.9717

1.0291

0.7081

1.4123

New Zealand dollar

1.6571

0.6035

1.2075

0.8282

Kuwait dinar

0.3871

2.5835

0.2821

3.5455

Pakistan rupee

143.995

0.0069

104.925

0.0095

Lebanon pound

Philippines peso

61.163

0.0163

44.568

0.0224

Saudi Arabia riyal

5.1468

0.1943

3.7503

0.2666

Singapore dollar

1.7392

0.5750

1.2673

0.7891

South Africa rand

15.0168

0.0666

10.9423

0.0914

United Arab dirham

5.0406

0.1984

3.6730

0.2723

South Korea won

1471.78 0.0006794

1072.45 0.0009324

Taiwan dollar

41.613

0.02403

30.323

0.03298

Thailand baht

44.652

0.02240

32.537

0.03073

2063.21 0.0004847

1503.40 0.0006652

a-floating rate b-financial c-government rate c-commercial
rate d-Russian Central Bank rate.
Source: ICAP Plc.


22 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

BLUE CHIPS & BONDS

Major players & benchmarks

Dow Jones Industrial Average

Below, a look at the Dow Jones Stoxx
50, the biggest and best known
companies in Europe, including the U.K.

LAST: 16103.30
YEAR TO DATE:
OVER 52 WEEKS

Stoxx Europe 50: Friday's best and worst...

Volume

Previous
close, in
local currency

317,280,613

236.50

STOCK PERFORMANCE
Previous session

Company

Country

Industry

Vodafone Group

United Kingdom

Mobile Telecommunications

Total

France

Integrated Oil & Gas

6,464,467

45.60

Telefon L.M. Ericsson B

Sweden

Telecommunications Equipment

8,006,420

82.90

1.34

Daimler

Germany

Automobiles

3,286,237

67.13

1.30

Novartis AG

Switzerland

Pharmaceuticals

10,171,417

73.85

YTD

52-week

3.01%

-0.2%
2.4

5.7

6.7

16500

16200

50.5

3.7

s 2,102.73, or 15.0%

Close
Low

22.5

5.6

t 29.93, or 0.19%
t 473.36, or 2.9%

High

47.8%

1.58

P/E: 16

15.8

1.10

Germany

Full Line Insurance

1,569,801

129.10

-0.50%

-1.0

23.9

United Kingdom

Distillers & Vintners

3,765,554

1,895

-0.47

-5.3

-2.8

BHP Billiton

United Kingdom

General Mining

10,648,661

1,970

-0.45

5.4

-6.1

Lloyds Banking Group PLC

United Kingdom

Banks

99,885,106

80.79

-0.42

2.4

49.7

Glencore Xstrata PLC

United Kingdom

General Mining

35,102,241

339.05

-0.41

8.4

-8.5

t

Allianz SE
Diageo

15900

15300

...And the rest of Europe's blue chips
Company/Country (Industry)

Volume

Barclays
42,026,628
United Kingdom (Banks)
Royal Dutch Shell A
8,753,998

United Kingdom (Integrated Oil & Gas)
AstraZeneca
2,412,650
United Kingdom (Pharmaceuticals)
Schneider Electric
1,924,203
France (Electrical Components & Equipment)
Roche Holding Part. Cert.
2,737,516
Switzerland (Pharmaceuticals)
Nestle
11,307,731
Switzerland (Food Products)
Sanofi SA
2,561,665
France (Pharmaceuticals)
Deutsche Telekom
9,753,164
Germany (Mobile Telecommunications)
5,448,906
BG Grp
United Kingdom (Integrated Oil & Gas)
Zurich Insurance Group
681,351
Switzerland (Full Line Insurance)
BP PLC
39,490,300
United Kingdom (Integrated Oil & Gas)
Unilever CVA
4,440,706

Netherlands (Food Products)
AXA
8,832,753
France (Full Line Insurance)
HSBC Hldgs
38,628,445
United Kingdom (Banks)
SAP
2,240,912
Germany (Software)
ENI
10,549,860
Italy (Integrated Oil & Gas)
Moet Hennessy Louis Vuitt
827,158
France (Clothing & Accessories)
Rio Tinto
5,753,356
United Kingdom (General Mining)
Bayer
1,271,254
Germany (Specialty Chemicals)
Tesco
17,015,067
United Kingdom (Food Retailers & Wholesalers)

15600

50–day
moving average

15000

Latest,
in local
currency

STOCK PERFORMANCE
Latest
YTD 52-week

258.00

1.08%

-5.1%

-15.8%

2,216

0.93

2.5

3.7

4,028

0.79

12.7

38.4

65.89

0.76

3.9

16.3

266.70

0.64

7.0

27.6

66.00

0.61

1.1

3.4

74.00

0.58

-4.0

3.9

12.28

0.57

-1.2

52.0

1,102

0.55

-15.1

-4.4

266.00

0.53

2.9

4.9

501.70

0.43

2.8

13.3

28.60

0.42

-2.3

-3.3

19.62

0.33

-2.9

47.8

654.20

0.32

-1.2

-8.7

58.09

0.31

-6.8

-2.5

17.36

0.23

-0.7

0.22

3.7

5.3

3,601

0.21

5.6

2.3

101.40

0.20

-0.5

38.9

335.15

0.19

0.2

Volume

ING Groep
11,255,993
Netherlands (Life Insurance)
BNP Paribas
2,927,111
France (Banks)
10,362,177
Telefonica S.A.
Spain (Fixed Line Telecommunications)
Reckitt Benckiser Grp
1,183,546
United Kingdom (Nondurable Household Products)
British American Tobacco

4,154,972
United Kingdom (Tobacco)
L'Air Liquide
935,403
France (Commodity Chemicals)
Anheuser-Busch InBev
1,456,943
Belgium (Brewers)
Unilever
2,679,187
United Kingdom (Food Products)
13,741,051
UBS
Switzerland (Banks)
Deutsche Bank
4,379,532
Germany (Banks)
Financiere Richemont
1,820,610
Switzerland (Clothing & Accessories)
Credit Suisse Group AG
5,985,562
Switzerland (Banks)
BASF
2,385,640
Germany (Commodity Chemicals)
Siemens
1,789,850
Germany (Diversified Industrials)
GlaxoSmithKline

8,964,722
United Kingdom (Pharmaceuticals)
Banco Bilbao Vizcaya Argn
13,744,392
Spain (Banks)
ABB
9,796,822
Switzerland (Industrial Machinery)
Banco Santander S.A.
33,164,739
Spain (Banks)
National Grid
9,127,093
United Kingdom (Multiutilities)
Standard Chartered
8,533,245
United Kingdom (Banks)

-0.7

137.45

Company/Country (Industry)

-10.3

22 29

Latest,
in local

currency

STOCK PERFORMANCE
Latest
YTD 52-week

10.55

0.19%

4.4%

0.19

3.5

38.0

11.36

0.18

-4.0

19.7

4,980

0.10

3.9

11.4

3,155

0.10

-2.6

-8.3

98.67

0.09

-4.0

10.0

74.07

0.05

-4.1

6.9

2,439

0.04

-1.7

-6.7

18.51

...

9.4

23.6

35.23

-0.06

1.6

-0.7

88.05

-0.06

-0.8

13

20 27

3
Jan.

10

17

18.1

-0.07

3.0

-0.09

6.0

-0.20

-4.5

21.0

1,681

-0.21

4.3

14.7

8.90

-0.24

-0.5

22.1

22.29

-0.27

-5.1

5.0

6.48

-0.29

0.6

18.1

833.50

-0.30

5.8

17.9

1,316

-0.30

-3.2

Volume,
in millions

AT&T
AmExpress
Boeing
Caterpillar
Chevron
CiscoSys
CocaCola
Disney
DuPont
ExxonMobil
GenElec
GoldmanSachs
HomeDpt
Intel
IBM
JPMorgChas

JohnsJohns
McDonalds
Merck
Microsoft
Nike B
Pfizer
ProctGamb
3M
TravelersCos
UnitedTech
UtdHlthGp
Verizon
VISA ClA

10.6

94.85

Symbol

T
AXP
BA
CAT
CVX
CSCO
KO
DIS
DD
XOM

GE
GS
HD
INTC
IBM
JPM
JNJ
MCD
MRK
MSFT
NKE
PFE
PG
MMM
TRV
UTX
UNH
VZ
V

19.1
3.8
5.2
5.2
9.2
31.2
19.4
8.2
4.9
11.2

37.0
2.6
7.6
30.2
5.7
16.8
7.3
5.3
11.6
37.7
4.4
18.4
8.1
2.6
1.9
3.6
4.5
58.1
2.3

WMT

9.0

Stock

8.1

82.17

-24.4

Sources: SIX Financial Information

Tracking
credit
markets &
dealmakers

Credit derivatives
Spreads on credit derivatives are one way the market rates
creditworthiness. Regions that are treading in rough waters
can see spreads swing toward the maximum—and vice versa.
Indexes below are for five-year swaps.
Markit iTraxx Indexes
Index: series/version

Mid-spread,
in pct. pts.
Mid-price

Europe: 20/1
Eur. High Volatility: 20/1
Europe Crossover: 20/1
Asia ex-Japan IG: 20/1
Japan: 20/1

SPREAD RANGE, in pct. pts.
since most recent roll
Maximum Minimum

Average

Coupon

Feb.

7

14

21

CHANGE
Percentage

Latest

Points

$32.80
88.75
128.28
97.50
112.68
22.13
37.18
80.13
64.87
95.03
24.94

164.50
77.74
24.42
182.79
57.61
91.52
96.45
56.03
37.98
76.48
31.46
77.97
131.57
83.79
115.38
73.81
47.27
223.36

–0.38
–0.26
–1.28
0.58
–1.92
–0.17
–0.12
0.94
–0.48
–0.34
–0.18

...
0.26
–0.32
–1.47
0.03
–0.20
0.70
0.22
0.23
0.90
–0.09
0.05
0.01
–0.02
0.33
0.33
–0.85
–0.10

–1.15%
–0.29
–0.99
0.60
–1.68
–0.76
–0.32
1.19
–0.73
–0.36
–0.72

...
0.34
–1.29
–0.80
0.05
–0.22
0.73
0.39
0.61
1.19
–0.29
0.06
0.01
–0.02
0.29
0.45
–1.77
–0.04

73.12

–0.40

–0.54

Source: WSJ Market Data Group

Credit-default swaps: European companies
At its most basic, the pricing of credit-default swaps measures how much a buyer has to pay to purchase-and
how much a seller demands to sell-protection from default on an issuer's debt. The snapshot below gives a

sense which way the market was moving yesterday.

Showing the biggest improvement...

And the most deterioration

CHANGE, in basis points

CHANGE, in basis points

0.74

101.21%

0.01%

1.04

0.69

0.81

1.09

99.59

0.01

1.61

1.01

1.23

Nokia

181

–11

–28

–18

Fresenius

98

5

4

7

2.80

109.50

0.05

4.08

2.74

3.25

UPC Hldg

297

–10

–45

–49

SABMiller

63

3

3

10

SAFEWAY

159

8

29

54

Bay Landbk Giroz

100

4

6

8

Yesterday Yesterday Five-day 28-day

1.40

98.19

0.01

1.57

1.24

1.38

IMPERIAL Chem Inds

0.79

101.01

0.01

0.97

0.68

0.82

Norske Skogindustrier

Note: Data as of February 20

In percentage points

Spreads
Spreads on
five-year swaps
for corporate
debt; based on
Markit iTraxx
indexes.

31

DJIA component stocks

WalMart

28.08

24

Note: Price-to-earnings ratios are for trailing 12 months

70.7%

58.63

Dec.

6

7.00

Index roll
Europe Crossover
Europe Senior Financials

t

t

5.00
3.00

JTI UK Fin
Region Sicily

Yesterday Yesterday Five-day 28-day

25

–1

–1

...

2272

–51

–235

–283

32

–1

–1

2

METRO

121

5

1

5

248

–4

3

7

Rio Tinto

92

3

–2

–2

Portugal Telecom Intl Fin

309

11

6

3

LADBROKES

333

11

8

31

INEOS GROUP Hldgs

81

–1

–1

–12

ageas

111

–2

–2

2

293

–5

–38

–49

ThyssenKrupp

248

8

–6

–2

97

–1

–28

–53

Utd Utils

119

4

1

4

VIRGIN MEDIA Fin
ISS Glob

Source: Markit Group

1.00
–1

Sept. Oct. Nov. Dec. Jan. Feb.
2014
2013
Source: Markit Group

WSJ.com>>

Follow the markets throughout the day, with updated

stock quotes, news and commentary at WSJ.com.

Also, receive emails that summarize the day’s trading in
Europe and Asia. To sign up, go to WSJ.com/Email.

Behind global deals: Bank revenues from equity capital markets
Behind every IPO,
follow-on or
convertible equity
offering is one or
more investment
banks. At right,
investment banks
historical and
year-to-date
revenues from global
equity-capital-market
(ECM) deals

n Equity capital markets n Debt capital markets (both in billions, left axis)

ECM as a percentage of total

15

75%

(right axis)
t

10

50

5

25

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

0
2014

Source: Dealogic


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 23

PERSONAL JOURNAL

BY SUE SHELLENBARGER

The problem: Every night, your
workaholic boss is still glued to
the computer when you need to
leave. How to go home without
looking like a slacker?
Should you sneak out, hoping
to avoid a six o’clock showdown in
the hall? Guiltily apolWORK & ogize, promising to be
FAMILY
on email all night? Or
just walk straight toward the door in the most professional way you can?
Many hard-working employees
have an even harder-working boss
who toils late into the night. Career coaches and employees who
have been there say the first priority should be conveying that you
are still working hard—and good
at your job. That requires communicating clearly and frequently
about your progress and results.
Ideally, you want to figure out

what the boss really needs and deliver it consistently enough that
your hours become a non-issue.
Many employees assume managers value people for working
day and night, and workplace
trends support that belief: Twothirds of workers are putting in
much longer hours on the job than
five years ago, according to a poll
of 325 employees last fall by Right
Management, Milwaukee, a talent
and career-management company.
But before you get too hung up
on work hours, check your assumptions about what the boss
wants, says Cali Williams Yost,
chief executive officer of Flex +
Strategy Group, a Madison, N.J.,
training and consulting firm. Managers work long hours for a variety of reasons: It may be a personal habit or preference, or
perhaps they just don’t want to go
home. “People make way too many
guesses about managers’ expectations that are just wrong,” Ms.
Yost says.
Bosses are often taken aback
by employees’ focus on their
schedules. Betty Enyonam Kumahor often works 14-hour days,
emailing and calling contacts
around the world. “My teams

Don’t Fake It

started tracking how many hours
they thought I slept each night,

based on my email ‘send’ times,”
says Ms. Kumahor, a regional
managing director in Atlanta for
ThoughtWorks, a software-development company. “They asked me
jokingly, ‘Do you ever sleep?’ ” She
assured employees she would stop
sending so many late-night and
early-morning emails so they
didn’t have to extend their hours
to respond.
When managers focus on employees’ work hours, they are often looking for reassurance on
other fronts: that their subordinates are meeting deadlines; that
they can be reached when needed,
and that they aren’t creating extra
work for colleagues, Ms. Yost says.
Rich Gee’s boss on a former job
took him aside and criticized him
for leaving the office at 5 p.m.,
says Mr. Gee, a Stamford, Conn.,
executive coach. The manager acknowledged that Mr. Gee was
meeting deadlines and delivering
good work; he arrived at the office
at 6:30 a.m., two hours before his
co-workers. The boss seemed nervous, however, that Mr. Gee
wouldn’t be available when
needed. Mr. Gee said he could be
reached 24/7 by cellphone, and
pointed out that he always responded quickly to emergency requests.
He continued to leave the office at 5 p.m., but updated his
boss often on his progress and results and checked in every evening

before he left. In time, he says, his
boss “saw that it wasn’t hours
that mattered—it was how hard I
worked.”
One key to Mr. Gee’s solution:
healthy communication. Employees should sit down with their
bosses and ask them to define job
objectives and time lines for
reaching them, says Pat Katepoo,
the Kaneohe, Hawaii-based owner
of WorkOptions, a consulting firm.
Then “look for natural times to
communicate about your progress,
when you have a staff meeting or
you’re walking by or writing an
email,” says Ms. Katepoo.
There are many ways to project

Throwing your coat over your chair as if you
are there but just stepped away for a minute
could backfire if you really leave. Colleagues
might waste valuable time running around trying
to find you.

Illustrations by Linzie Hunter

When the Boss
Works Late, Do
We All Have To?

Do Pitch In When You Can

Even if you choose not to match your boss’s long hours every night, it’s wise to work late during
crises or when a major project deadline is looming. Hint: Extra evening hours may gain more recognition
than extra hours at dawn in an empty office.
a hard-working image. If a manager speaks about a project in an
intense, focused way, answer with
similar intensity, acknowledging
its importance and repeating the
deadline, says Anne Brown, an advertising executive who has written about how young employees
can deal with workaholic bosses in
a book, “Grad to Great,” and on a
website she co-founded, GradtoGreat. Manage time well in oneon-one meetings, moving quickly
through your agenda, adds Ms.
Brown, of Kansas City, Mo. And, of
course, be prepared to work long
hours during a crisis or busy season, or when a major project
deadline is looming.
In some cases, shifting your
work hours can help. At companies where managers focus on face
time, employees who work 10 a.m.
to 8 p.m.—when more people are
present—are more likely to get

Do Check Your Assumptions About
What the Boss Wants

Those predawn emails may reflect your boss’s
personal habits, rather than an expectation that
everyone work then. To find out, ask a mentor for

advice or have a broader conversation with your
boss about how you’re doing and what she expects.

noticed than those who work 7
a.m. to 5 p.m. Executive coach
Michael Melcher was told in a previous job at an investment bank
that “I wasn’t working long
enough hours,” he says. “I started
coming in later and staying later,”
he says. “A couple of months later,
my boss said, ‘It hasn’t gone unnoticed that you’re putting in additional hours.’ ”
Faking a presence at the office,
however, doesn’t work. Throwing
your coat over your chair as if you
just stepped away, then leaving for
the day, is likely to backfire, Ms.
Yost says. Colleagues will “think
you’re there and run around like
crazy people trying to find you.”
Another nonstarter, says Mr.
Melcher, an executive coach with
Next Step Partners, New York, is
“being a whiny complainer, with a
lot of exasperated sighs, saying
you’re working your fingers to the

Don’t Complain

Whining that you’re working too hard won’t
go over well with the boss or colleagues.

If you want to discuss your hours with your
boss, start on a positive note, and
propose solutions that reflect your boss’s
needs, too.

bone. Nobody wants to hear that.”
In some professions, working
long hours is unavoidable. Certain
firms’ cultures breed intense competition and long hours among
new hires, says Julie Cohen, a
Philadelphia career and personal
coach. Others have unwritten cultural rules, such as, “Nobody
leaves the office before the boss
leaves,” she says. It is wise to
prove yourself on the job for at
least six months and ask a mentor
for advice before exploring
shorter hours, Ms. Cohen says.
“You might be stepping into a
minefield if you don’t understand
the ins and outs of the organization.”
To get the most out of a negotiation about hours, Mr. Melcher
says, think in advance about the
boss’s needs, and bring specifics
documenting your own performance. Start on a positive note,
talking about what’s going well.
Ask what the boss expects of employees when it comes to work
hours and responding to email. To
propose solutions, Mr. Melcher
recommends the “yes…and” technique: Affirm the boss’s point, and

then state your own. For example:
“Yes, I want you to be able to rely
on me after hours. And since I
have young twins, it is important
to me to be home between 5:30
p.m. and 8 p.m. and spend that
time with family. I could respond
to you between 9 p.m. and 11 p.m.
How does that sound?”
Such conversations can open a
dialogue—or expose a brick wall.
When project manager Ashanti
Stanford raised the issue with a
boss at a previous job, the manager rolled her eyes and sighed.
“The expectation was, ‘I have to
work these hours, so why are you
complaining?’ ” Ms. Stanford says.
She has since moved on to a job
with better hours.


24 | Monday, February 24, 2014

THE WALL STREET JOURNAL.

BOOKS

Not I
By Joachim Fest
Other Press, 427 pages, $16.95

BY T.J. REED
The socially conformist thing to
do for a man of distinction—journalist, filmmaker, author of the best-selling first postwar German biography
of Hitler, eventually co-editor of the
Frankfurter Allgemeine Zeitung—
would have been to recount the history of his own distinguished career.
Instead Joachim Fest (1926-2006)
chose to write “Not I,” a colorful and
dramatic account of his childhood
and youth in the nonconformist family that made him what he became.
His is a stable upbringing in an
unstable age, a time paradoxically of
“troubles lived through but hardly

‘Keep your head down,’
Johannes Fest told his
family, ‘but don’t let it
make you smaller.’
noticed”—the crisis of the Weimar
Republic, the rise of Nazism. As a
small child, growing up in a comfortable Berlin neighborhood, he only
gradually realizes what the outside
world is doing to his family, what
“politics” is. It’s not something for
him, his big brother Wolfgang told
him. “I’m political too,” the 7-yearold cries, frustrated at being left out.
It isn’t yet safe for him to eat at “second supper,” a family occasion that
acquires an almost ritual ring. After
the youngest children have dined, the
parents and their friends have serious discussions about the darkening

situation. A small child might in all
innocence let slip something said
there. Under a tyranny, even your
own constitute a risk.
The family lives under a shadow.
Their dissent is no secret. Father had
been a member of the Reichsbanner,
the organization in which his Catholic Centre Party had joined with liberals and Social Democrats to defend
the republic against Communists and
Nazis. It’s not every school headmaster who gets involved in street fights
and comes home bloody, as Johannes
Fest did. But after 1933 he was a
headmaster no longer, suspended indefinitely by the new political masters. The family’s status and income
were lost, their lives transformed.
Grandfather had to come out of retirement to earn a bit for them. Father never worked again. The Nazis
did try to cajole him back into teaching, since any observable dissent was
bad publicity. They even offered accelerated promotion if he would outwardly conform. He remained firm.
Family tension became palpable.
Mother, bearing the brunt of straitened family circumstances, asks Father if he might not compromise.
Weren’t lies always the resort of the
“little people”? He replies: “We aren’t
little people.” It is one of the maxims
that guided the conduct of Fest’s father and a few friends. (The title of
his son’s memoir comes from a Gospel passage that he would often
quote, Peter promising Jesus: “Even
if all others fall away—not I.”) There
were some Germans who made sure
that they were carrying something in
both hands when they went out into

the street, the only plausible ground
for not giving the required “Heil Hitler” salute to anyone they met. But
Fest’s father goes out resolutely
empty-handed.
“Keep your head down,” Johannes

Reprinted with permission from Other Press

A Father Against the Fatherland

REFUSENIKS Joachim Fest (far right) with his family in the last photograph
taken together. His brother Wolfgang (in glasses) would die in battle in 1944.
told his family, “but don’t let it make
you smaller.” Young Joachim didn’t
always listen. A classmate reports
him for carving a Hitler caricature on
his desk. (He has been scribbling
them on surfaces all over town.) As a
consequence, he is removed from the
school; his brothers too. The episode
is just one instance of an independence akin to his father’s.
The friends of the Fests—they
now became former friends—and
many neighbors and acquaintances
fell by the wayside, even without being keen Nazis. Only one of the 12
families in the apartment block was
in the party. The rest merely went
along as things changed, drifting
deeper into acquiescence, making excuses even as stable social and political structures fell apart in the name
of a new “people’s community.” The

Nazis, after all, were formally the legitimate government, however brutal
their conduct of affairs—from the
realm of international diplomacy to
the arbitrary laws that replaced justice down to the small changes in everyday life, the swindles and favorit-

ism of party members.
By recording these small changes,
Joachim Fest creates a picture of how
the one-party state operated on an
intimate level, and exerted its unbreakable grip. It recalls the bleak account of incremental misery in Victor
Klemperer’s diaries of the period. A
woman sees a Jewish-looking man in
the street not wearing a star, pursues
and denounces him. There are first
rumors and then reliable evidence of
atrocities.
Anti-Semitism had considerably
more popular resonance than many
other Nazi policies, such as the campaign for “Lebensraum” in the east.
How many Germans would have
wanted to up sticks and resettle
somewhere on the vast Russian
plains? As for Jewish Germans
themselves, even after Kristallnacht
there were those who waited for the
Nazi “phase” to pass. Their trust in
a culture that had produced Kant,
Goethe, Schiller, Lessing and Beethoven, a culture into which they
felt they had assimilated, meant
that they delayed escape too long.

Marketplace of the Marvelous
By Erika Janik
Beacon, 337 pages, $28.95
BY WILLIAM BYNUM
During the 19th century, the
medical marketplace expanded dramatically, and ordinary practitioners were faced with a plethora of
alternative systems vying for patients’ custom. Proponents touted
the efficacy of wild herbs, cold
baths, phrenological diagnosis and
hypnotism. In earlier centuries, individuals who had offered such
treatments could be dismissed as
“quacks” by members of the faculty. Spurred by the rise of consumer society in the 1800s, advocates of alternative approaches
began to band together and become less easy to dismiss. They
also aped the regulars by setting
up schools, arguing for legal rights,
founding journals and pursuing
other hallmarks of professionalization. Even as regulars were trying
to establish standards of training
and ethical behavior, advocates of
different medical cosmologies
posed serious threats to the medical tradition that had evolved since
antiquity.
Erika Janik’s “Marketplace of the
Marvelous: The Strange Origins of
Modern Medicine” surveys these alternative approaches, which, she
notes, seem less outlandish in the
context of the “heroic” remedies (so
called for their severity) of the era,
such as bloodletting, blistering and

purgatives. Some of these alternative systems were indigenous to
America, but some were imported
from Europe. Among the latter were
homeopathy (which employed remedies whose active ingredients were
diluted to infinitesimal concentration), hydropathy (which emphasized water applied internally and
externally), phrenology (which purported to discern a patient’s intelligence and character from the shape
of his skull) and the hypnotic manipulation of “animal magnetism”
known as mesmerism.
Each method found fertile soil
when imported to the U.S., where
they competed with regular medicine
but also with native systems, including osteopathy and chiropractic. (Although osteopathy and chiropractic
both involve spinal manipulation, the
former has a richer theory of disease
and has become more integrated
with regular medicine than chiropractic, which still focuses on the
spine.) Ms. Janik offers full and fair
accounts of the origins, rationales
and fortunes of these alternative
practices, as well as a brief analysis
of Mary Baker Eddy’s Christian Science, which held that disease was an
illusion entirely.
Ms. Janik notes that many of
these systems explained all ailments
as a function of a single cause. Samuel Thomson developed a brand of
herbalism that gave pride of place to
the common plant Lobelia inflata
(sometimes known as Indian tobacco) and to ground chili peppers.
Cold causes disease, he believed, and

these ingredients helped warm a suf-

Getty Images

When Bloodletting Wasn’t Enough

PATENT NONSENSE An ad for
‘Complete Female Remedy.’
ferer. The self-taught Thomson began treating his family and a few
friends, but his success encouraged
him to expand his operations. His
books and pamphlets, which celebrated his remedies in rhyme (Lobelia was “first rate to cure in all cases
of fevers / But is hated and feared by
the regular deceivers”), widened his
reputation, and he claimed to offer
everything one needed to treat one’s
family for a single payment of $350
in today’s dollars. (Permission to
treat others was available at additional cost.)

Thomsonism, sometimes called
botanical medicine, enjoyed much
popularity for several decades. Its
claims to the contrary, however,
taking Lobelia was no gentle option: It was a vigorous purge, and
the fad began to fade as side effects became worrisome. Thomson’s followers (of which there
were many) gradually began to
combine his increasingly rigid system with elements taken from either regular medicine or other alternative cosmologies.
The pattern of Thomsonism was
repeated in other systems: A dynamic founder becomes increasingly

protective of his ideas—Thomson
patented his system—but is unable
to prevent splinter groups from being established. This happened with
homeopathy, chiropractic and osteopathy, where rival groups with different agendas soon replaced early
orthodoxy. These three groups differ
from Thomsonism in that they have
survived, even flourished, but the
structure of theme and variations
has persisted.
The issue of longevity is fundamental to the relative status of these
competing systems of healing (which
are generally dignified with the
phrase “complementary medicine” in
Britain). Why do some survive, some
transmute (such as hydropathy, now
a routine part of rehabilitation medicine in the form of therapeutic
baths), and some disappear? Ms.
Janik is cagey here. She clearly has
sympathy for alternative medicine
while at the same time seriously considering the placebo effect, which is

When, in the early 1940s, the
young Fest experiences a performance of Beethoven’s opera “Fidelio,”
a work amazingly not banned by the
regime, the mentor who introduces
him to it enthuses over the final
trumpet call that heralds the prisoners’ liberation. But it was difficult at
the time to have faith in heroic happy
endings. For the mature Fest, the
trumpet call only rings out clear in

1989, at the fall of another tyranny.
By an apt coincidence, the Nazi
surrender in 1945 would be signed
at Karlshorst, the part of Berlin
where the Fest family lived. It was
little consolation that Nazism
hadn’t lasted. One son had been
killed through the negligence of a
superior officer. Fest had lost
friends. Father had been called up
and taken prisoner on the Eastern
Front. He returned from the Soviet
Union a depleted man. Not broken,
though. There was enough of the
old independent spirit left that he
would not let himself be put on a
pedestal as one of the few who
didn’t swim with the Nazi tide. He
couldn’t stomach all the hollow
moralizing and retrospective righteousness. (When a tyranny collapses, suddenly everybody “had
been against it” all along.) He even
disapproves of his son’s developing
career as an analyst of the Nazi
past, a “gutter subject” not deserving to be dignified with study, so far
removed from Fest’s youthful ambition of becoming a Renaissance
scholar. For himself, Johannes Fest
was content to say: “I made a lot of
mistakes, but I didn’t do anything
wrong.” For the Germany of those
years, it was a substantial claim.

—Mr. Reed is Taylor Professor
Emeritus of German at Oxford
and the author of “Thomas Mann:
The Uses of Tradition.”

clearly an important part of most
healer-patient encounters.
The author makes a good case
that any sensible person in the 19th
century could have taken these alternative systems seriously. The therapeutic options of ordinary doctors
were pretty limited, even if it is a
caricature to assume that practitioners routinely subjected their patients to harsh heroic remedies no
matter the symptoms. For most conditions, a patient might be at least as
well off with a herbalist, hydropathist or homoeopathist. I am less
convinced by her argument that
these systems contain the “strange
origins” of modern medicine. Sometimes the connection seems to be the
emphasis on temperance, diet and
other features of modern “lifestyle”
medicine that were often emphasized
by alternative healers but on which
they hardly had a monopoly. Ms.
Janik’s more specific claim that “hydropathy’s advocacy of good hygiene . . . provided the foundation for
public health campaigns” is fanciful
to say the least.
Perhaps the most significant feature in all histories of healing—regular or not—is the fact that most illness is self-limited. We generally get
better no matter what is done to or
for us. When I was in medical school
half a century ago, I was taught that
if you treat a cold, it will get better

in a week. If you don’t treat it, it will
last seven days. I hope they teach
this still.
—Dr. Bynum is professor emeritus
of the history of medicine at
University College, London.


THE WALL STREET JOURNAL.

Monday, February 24, 2014 | 25

BOOKS

Dark Invasion
By Howard Blum
Harper, 474 pages, $27.99
BY HOWARD SCHNEIDER
This year is the centennial of the
start of World War I, and there will
no doubt be an outpouring of books
assaying the conflict, particularly
the carnage on the Western Front.
Howard Blum’s riveting and perturbing “Dark Invasion” examines a
less devastating but still ruthless
campaign: the Germans’ ingenious
espionage operations in the United
States during the years when President Woodrow Wilson earnestly
tried to maintain the nation’s neutrality.
The Germans were convinced

that they had the right and duty to

Germany waged a ruthless
campaign of bombing and
sabotage inside the U.S.
during World War I.
wage covert war in the United
States because American neutrality
was hypocritical and dangerous to
the Fatherland. Although the U.S.
would theoretically trade with any
nation, the powerful British navy
thwarted the Central Powers, Germany and its allies, from receiving
American munitions and other
goods. Thus, for all practical purposes, the U.S. was supplying only
the Allied powers with war materiel. Germany felt compelled to do
everything it could to prevent
American provisions from reaching
the Allies. The instrument of this
strategy was Abteilung IIIB, “the
largest and most efficient intelligence organization in the world,”
commanded by the coldly proficient
Maj. Walter Nicolai.
Nicolai and his two main operatives in the U.S., Ambassador Johann Heinrich von Bernstorff and
naval Capt. Franz von Rintelen, had

to establish a spy operation from
scratch, but they were munificently
funded, had a great deal of authority from Kaiser Wilhelm II’s government and could seek assistance from
within certain groups in the U.S.

One such group consisted of German
merchant sailors who had been interned when war commenced. These
sailors weren’t part of the German
navy, but many wished they were.
And they were free to go where they
wanted in the U.S. Another group
was German-Americans: “Over eight
million people—nearly a tenth of
America’s entire population—had
been born in Germany or had a German parent,” Mr. Blum notes. Finally, there were 4.5 million IrishAmericans, many of whom, the
German spies believed, harbored an
intense animosity for the British. As
it happened, Irish-American stevedores played an important role in
the German plans, aiding in efforts
to sabotage shipping.
Many of the German operatives
in the U.S., particularly von
Rintelen, though espionage amateurs, became exceedingly adept at
spycraft. Their intrigues took them
to New York, Baltimore, New Orleans, San Francisco (major port cities) and Washington, D.C. Agents secreted small bombs equipped with
delayed-action fuses onto Alliedbound ships. When the vessels exploded at sea, it was impossible to
determine whether the explosions
were accidental or deliberate. In
July 1916, Black Tom, “the largest
munitions and gunpowder shipping
center in America,” located in Jersey
City, N.J., was sabotaged; the resulting blast blew out windows at the
New York Public Library across the
Hudson River in Manhattan.
And there was the bizarre Erich

Muenter. While a graduate student in
German at Harvard in 1906, he had
poisoned his wife. He eluded arrest
and created a new life: He took the
name Frank Holt, remarried, and
taught and worked on a doctoral thesis at Cornell. When World War I began, he decided to help Germany, his
native country. There apparently is
no incontrovertible evidence that he

Corbis Images

War on Our Shores

SABOTAGE The aftermath of the 1916 explosions at the Black Tom munitions
depot
became an agent for German intelligence, but Mr. Blum makes a persuasive case that he did. We do know
that in 1915, while the Senate was out
of session, he planted a bomb in the
U.S. Capitol outside the vice president’s office; it exploded but didn’t
kill anyone. Two days later, he
stalked J.P. Morgan Jr. in his Long Island mansion and shot him twice because of the financier’s pro-Allied
sympathies. Morgan survived and
pinned Holt to the floor “like a massive boulder” while his butler beat
the intruder with a lump of coal. Holt
was taken into custody, but he died
under mysterious circumstances in
his jail cell.
Perhaps the most sinister of
Abteilung IIIB’s plots was its introduction of germ warfare into the U.S.
A German agent, a physician named

Anton Dilger, smuggled samples of
anthrax and glanders—a disease that
infects mainly horses, donkeys and
mules—into the country and set up a
laboratory in Maryland. The aim was
to kill livestock in transit to the Allies, but there was, as we would now
say, collateral damage—human beings: at least one death in New York
City, at least four in Virginia.
German intelligence was, indeed,
formidably resourceful at carrying

out clandestine warfare, but they
were helped by the fact that the U.S.
was appallingly unprepared. America
didn’t even have a law outlawing espionage until 1917, when the nation
entered the war. That legislation, Mr.
Blum writes, “made it a specific
crime to spy on or to interfere with
American military operations.” Until
then, spies could only be arrested if
they were caught in the act of sabotaging a target or well along in their
preparations to do so. The two federal civilian law-enforcement agencies were, for too long, of little use.
They were either limited in their jurisdiction (the Secret Service) or had
feeble police powers (the Bureau of
Investigation).
And so by default counterespionage fell to the New York Police Department’s Bomb and Neutrality
Squad. Its leader, Capt. Thomas J.
Tunney, and the three men he chose
to help him foil German subversion
are the heroes of “Dark Invasion,”

and I will grant that they were as
brave, dedicated and indefatigable as
Mr. Blum depicts them. But they
didn’t have the training or equipment to carry out counterintelligence
against a canny foe, and their successes were few. Moreover, some of
those successes were the result of in-

formation provided by Britain. It was
the British who informed the State
Department and the NYPD that Germany had initiated sabotage activities in the U.S., and it was the British
who first tipped off Tunney that von
Rintelen was a spy.
I have only two complaints
about “Dark Invasion.” The book
ends rather abruptly, with America’s entry into the war. (One reason
President Wilson went to war was
his disgust with German espionage.)
It would have been interesting to
learn about German spying and
American counterintelligence during the ensuing years. It is also
frustrating that Mr. Blum doesn’t
discuss how Germany’s espionage
affected the European conflict. But
overall, “Dark Invasion” is well-researched and written, and it maintains a fairly high level of suspense,
which is difficult to bring off in a
book about historical events.
“Dark Invasion” also raises a vexing issue, which was probably inevitable considering its subject matter.
Mr. Blum makes a mild attempt to
demonstrate a nexus between the
fight against Abteilung IIIB’s operations and America’s current struggle

against terrorism. (Tunney is described as “for all practical purposes
the first head of Homeland Security.”) I am dubious. Terrorism is not
the same as espionage practiced by
governments. One doesn’t have to
admire what the German spies did to
acknowledge that they weren’t terrorists—and, to his credit, I don’t believe that Mr. Blum ever designates
them as such. They were patriotically loyal to a nation and had rational motives, and while they understood that many of their schemes
might result in deaths, their primary
goal, apart from the J.P. Morgan incident, was to destroy things, not people. Terrorism, today, confronts us
with new problems, and new tactics—shrewder, more sophisticated
tactics than those wielded by Tunney—are required to neutralize
them.
Mr. Schneider reviews books for
newspapers and magazines.

The Gardener of Versailles
By Alain Baraton
Rizzoli, 290 pages, $26.95
BY JONATHAN LOPEZ
On the night of Dec. 25, 1999, a
massive storm tore through the gardens of Versailles, destroying more
than 18,000 trees and rendering
nearly all 2,100 acres of the grounds
impassable. Heavy equipment and a
contingent of French soldiers were
summoned to help clear paths and
carry away debris, an operation that
required weeks to complete. During
this time, the gardens—a site of recreation, contemplation and immense
pride for the French public—were

closed to visitors, while scenes of the
devastation led the nightly news.
Alain Baraton, the gardener in
chief at the palace, directed the
cleanup as well as the subsequent
restoration efforts. More trees have
been planted at Versailles since the
storm of 1999 than were planted in
the previous two centuries, and the
main vistas now look closer to the
way they were intended than at any
time since the French Revolution. Mr.
Baraton interweaves the story of the
gardens’ rebirth with that of his life

Upon his elevation to gardener in
chief, Mr. Baraton resolved to combine the best of the old horticultural
methods with the most promising of
the new, restoring the principal features of the gardens in accordance
with the original plan by famed landscape architect André le Nôtre
(1613-1700) while experimenting with
wildflowers and untamed grasses on
the ancillary lawns. But even in his
exalted position, Mr. Baraton has encountered some frustrations, among
them the infernal convolutions of
French bureaucracy: Hiring a temporary worker “necessitates filling out
nearly forty pages of paperwork.”
Mr. Baraton is delightful when describing his daily routines—he talks
to his trees and has pet names for
many of them—and as a writer he is

a master of what might be termed
the inarguable Gallic utterance
(translated here by Christopher Brent
Murray). “A garden’s capacity for inspiring romance,” he informs us,
“should be a criterion for evaluation
in terms of horticultural excellence.”
His reasoning is obscure, but if one
imagines his assertion delivered in
the plummy voice of Maurice Chevalier, it grows curiously convincing.
Less satisfactory is Mr. Baraton’s
account of Versailles’s history, which

Corbis Images

After the Deluge

and career—tossing in anecdotes
from the history of the palace for
good measure—in “The Gardener of
Versailles,” his charming, albeit
sometimes breezy, memoir.
Mr. Baraton began his career at
Versailles in the summer of 1976 as a
seasonal ticket-taker. The chief gardener—a one-eyed, beret-wearing extrovert named Mr. Choron—took a
liking to the young horticultureschool graduate and offered him a
job as an “apprentice gardener’s assistant.” This lowly position required
long hours of manual labor but came
with free lodging on the palace
grounds, a perk that Mr. Baraton enjoys to this day. (He now resides in
quarters that once housed Molière.)

Working his way up through the
ranks, Mr. Baraton quickly learned
the foibles of Versailles’s staff—who
drank too much, who skimmed from
the till, who had an eye for the ladies—as well as the habits of “the
regulars,” visitors who made the gardens a second home. These included
joggers who kept clockwork hours,
married couples who bickered baroquely, delusionals who believed they
were Marie Antoinette or Madame
Pompadour, and the so-called elegant
woman, who had a weakness for disporting herself naked in the woods.

ORANGERIE Citrus trees at Versailles planted in boxes that are moved inside in
winter.
is too haphazard to be useful and is
sometimes preposterous. He suggests
that, under Louis XIV, Pierre Charles
L’Enfant, “the architect who would
later construct Washington, DC,” was
entrusted with enforcing a strict
building code on the town of Versailles so that all structures would
harmonize with the palace. Although
L’Enfant grew up at Versailles, where
his father was employed as a painter
of historical scenes, and may have
drawn on the town’s plan in formulating the radial layout of Washington’s streets, he wasn’t born until

1754, by which time Louis XIV was
long dead.
Another defect of the book—and a

serious one given the beauty of the
subject—is the lack of photos. Readers looking for an authoritative history might try Michel Baridon’s “A
History of the Gardens of Versailles”
(2008) and, for splendid illustrations,
Pierre-André Lablaude’s “The Gardens of Versailles” (1995). But for a
hands-on perspective and sheer fun,
Mr. Baraton can’t be beat.
—Mr. Lopez is editor-at-large of
Art & Antiques.