《大学英语》课程综合教程教学资源（外刊选读）Financial Times -15-05-25

World Markets STOCK MARKETS May 22 May 15 %Week S&P 500 2126.06 2122.73 0.16 Nasdaq Composite 5089.36 5048.29 0.81 Dow Jones Ind 18232.02 18272.56 -0.22 FTSEurofirst 300 1617.91 1573.09 2.85 Euro Stoxx 50 3679.14 3573.07 2.97 FTSE 100 7031.72 6960.49 1.02 FTSE All-Share 3818.84 3779.96 1.03 CAC 40 5142.89 4993.82 2.99 Xetra Dax 11815.01 11447.03 3.21 Nikkei 20264.41 19570.24 3.55 Hang Seng 27992.83 27286.55 2.59 FTSE All World $ 291.17 291.83 -0.23 CURRENCIES May 22 May 15 $ per € 1.102 1.144 $ per £ 1.550 1.579 £ per € 0.711 0.725 ¥ per $ 121.450 119.300 ¥ per £ 188.277 188.399 € index 85.220 86.206 SFr per € 1.039 1.048 May 22 May 15 € per $ 0.907 0.874 £ per $ 0.645 0.633 € per £ 1.406 1.380 ¥ per € 133.881 136.491 £ index 92.748 91.935 $ index 101.469 99.681 SFr per £ 1.461 1.446 COMMODITIES May 22 May 15 %Week Oil WTI $ 59.94 59.89 0.08 Oil Brent $ 65.54 66.94 -2.09 Gold $ 1204.10 1220.50 -1.34 INTEREST RATES price yield chg US Gov 10 yr 99.26 2.21 0.02 UK Gov 10 yr 99.72 2.03 -0.05 Ger Gov 10 yr 99.03 0.61 -0.03 Jpn Gov 10 yr 99.93 0.41 0.00 US Gov 30 yr 100.38 2.98 -0.01 Ger Gov 2 yr 100.52 -0.24 0.00 price prev chg Fed Funds Eff 0.12 0.11 0.01 US 3m Bills 0.02 0.02 0.00 Euro Libor 3m -0.01 -0.02 0.00 UK 3m 0.57 0.57 0.00 Prices are latest for edition Data provided by Morningstar GEORGE PARKER — POLITICAL EDITOR George Osborne is gearing up for a Treasury study on the economics of British membership of a reformed EU in a re-run of his papers on Scottish independence. Mr Osborne used the Treasury papers on Scotland last year as a base from which to attack the campaign for inde￾pendence, highlighting risks related to the currencyand higher taxes. The chancellor,who believes the Scot￾tish papers helped secure a No vote, is said by Treasury colleagues to be con￾sidering a similar exercise looking at Britain’s relationship with the EU, including the economics of a potential “Brexit”. The move would be contentious. The Scottish National party claimed the Treasury rolein theindependence cam￾paignwas biasedand “completely aban￾doned long-held principles and rules of civil serviceimpartiality”. It comes as the Bank of England is under fire after inadvertently revealing it was secretly assessing the risks of Brexit, prompting calls for it to explain itsactions to parliament. Downing Street has meanwhile announced that 4m EU citizenslivingin Britain will not be allowed to vote in the referendum, a demand of Nigel Farage, UK Independence party leader. How￾ever, Commonwealth and Irish citizens residentin theUKwill be able to partici￾pate. David Cameron, prime minister, and Mr Osborne are hoping to secure reforms of the EU and then make the case for Britain to remain a member of the28-nation bloc. Mr Cameron’s allies say themost pow￾erful argument for stayinginwill be eco￾nomic: that jobs and investment in the UK benefit greatly from being part of a single market of 500m consumers. A Treasury analysis of that relationship, including alternative models if Britain votes to leave, could be an important contribution to the national debate. Supporters of a UK exit will be scepti￾cal of any Treasury assessment that concludes the UK would be better off stayingin theEU. The Treasury said no decisions had been made on what it might do in the course of a referendum campaign. Butit added: “The government is focused on getting the right deal for the UK as part ofa reformedEU. “There should then be an informed debate as that deal is put to the British people.” Downing St spells out rules page 3 Osborne looks to Treasury study of reformed EU as way to scotch ‘Brexit’ © THE FINANCIAL TIMES LTD 2015 No: 38,862 ★ Printed in London, Liverpool, Dublin, Frankfurt, Brussels, Milan, Madrid, New York, Chicago, San Francisco, Washington DC, Tokyo, Hong Kong, Singapore, Seoul, Dubai 9 7 7 0 3 0 7 1 7 6 5 1 7 2 2 Most FTSE 100 boards have fewer than one in four directors who are women, the Professional Boards Forum has found. A government￾commissioned report in 2011 set a target for FTSE 100 boards to be at least a quarter female by the end of this year. Alison Brittain, above, who becomes head of Whitbread in January, will be only the sixth current female FTSE 100 chief executive. Report i PAGE 15 Boards behind target on women directors Briefing i Battle for Time Warner Cable heats up John Malone, US cable tycoon, is locked in a $48bn battle for Time Warner Cable, the second-largest US cable company, against Franco-Israeli billionaire Patrick Drahi of Altice.— WWW.FT.COM/COMPANIES i Tories opt against easier job dismissals The Conservatives have decided against reviving plans to allow businesses to sack employees at will, with a view to wooing blue-collar workers.— PAGE 2 i Migrants face Libya detention ordeal Thousands of African and Arab migrants who are caught by Libyan boat patrols as they attempt to cross the Mediterranean are ending up crammed into one of 22 detention centres. Corruption and abuse are rife in these Libyan prisons for those who await deportation.— PAGE 5 iOil price fall damages small producers The slide in Brent crude prices as triggered a string of bankruptcies, debt defaults and rescue measures to save companies nearing collapse, with almost two dozen oil and gas groups under stress.— PAGE 15 i Pensions role of forex banks questioned US legislators led by Elizabeth Warren are calling for public hearings on whether banks accused of rigging foreign exchange markets should be allowed to manage retirement accounts.— PAGE 15 i European groups in cash pile conundrum European companies find themselves on the horns of a dilemma: they hold high levels of cash on their balance sheets but remain puzzled about how to put it to better use.— PAGE 17 i EM policy makers set for defensive test The prospect of the first rate rise in nearly a decade by the US Federal Reserve is set to test the defensive strategies policy makers in emerging markets have built throughout the era of ultra-low rates.— PAGE 4 Would you be willing to travel to another EU country to receive medical treatment? Source: Eurobarometer published May 2015 Share of respondents who answered ‘yes’ (%) 0 10 20 30 40 50 60 70 Netherlands Denmark Spain Italy EU UK France Finland Germany Datawatch MONDAY 25 MAY 2015 WORLD BUSINESS NEWSPAPER UK £2.50 Channel Islands £2.80; Republic of Ireland €3.00 Subscribe In print and online www.ft.com/subscribenow Tel: 0800 298 4708 Germans and Finns are the least willing of all EU residents to travel abroad for medical treatment, with just 11% and 17% respectively prepared to leave their own country. Conversely, the Dutch and Danes are the most willing to do so KERIN HOPE — ATHENS Greece has again threatened to default on €1.6bninloan repayments due to the International Monetary Fund in June withouta bailout dealwithits creditors. Athens saidit could not afford tomeet its pension and wages bill that month whilealso reimbursing the IMF. “Themoneywon’t be given . . . Itisn’t there to be given,” Nikos Voutsis, the interior minister, told the Greek televi￾sion station Mega. He claimed the EU and IMF were pressing Greece to make unacceptable concessions in the bailout talks in return for unlocking €7.2bn of aid frozen sincelastyear. The warning by Mr Voutsis, one of Prime Minister Alexis Tsipras’s oldest political allies, comes just two weeks afterMrTsiprasmadea similar threatin writing to Christine Lagarde, the IMF managing director. Mr Tsipras said Greece would miss a €750m payment in May. That payment was ultimately met, though only through tapping an emergency account held by the IMF. Athens in effect bor￾rowed IMFassets to repay the fund. Predicting when Athens will run out of cash has proved a fraught affair for eurozone officials, who have been brac￾ing themselves for default sinceMarch. Given the repeated warnings from Greek officials that bankruptcyisimmi￾nent, some officials have begun to disre￾gard such threats, believing Athens is using themasa negotiating tactic. Buta seniorGreekofficialwith knowl￾edge of the government’s funding posi￾tion confirmed that Athens would be unable to make the IMF payments, which fall due in four separate instal￾ments of more than €300m each between June5and June 19. “It’s clear the June payments to the fund can’t be covered without external financing,” the official said. Athens is under pressure to agree to more cuts and reforms to secure the financing. “We won’t accept blackmail that says it’s eitherliquiditywith amemorandum [a bailout programme] or bankruptcy,” MrVoutsis said. The talks have picked up pace in recent days but Chancellor Angela Mer￾kel of Germany warned at last week’s EU summit in Riga that “there is very, veryintensivework to be done”. The government has ruled out a domestic default on payments to Greece’s 2.9m pensioners and 600,000 public sector workers, saying they have first claimonits shrinking resources. Peoplewho have spoken toMrTsipras say he is in a dour mood and willing to acknowledge the serious risk of an acci￾dentin the comingweeks. Oneofficialin contactwithMrTsipras said: “The negotiations are going badly. Germany is playing hard. Even Merkel isn’tasopen to helpingas before.” Athens is particularly worried by the IMF stance and Mr Tsipras has been attempting to convince the US to use its influence on the IMF board to soften the institution’s demands. Additional reporting by Alex Barker inBrussels Wolfgang Münchau page 9 Greece warnsIMF of repayment default unless bailout deal is done 3Interior minister says money ‘isn’t there to be given’ 3Pension and wages bill takes priority Hanergy in big loan deal ahead of share crash Li Hejun, the solar tycoon and control￾ling shareholder in Hanergy Thin Film Power Group, pictured centre, pledged millions of shares in the Hong Kong￾listed company as collateral for a US$200mloanjust beforeits share price crashedlastweek. Theloanis thelatesttoinvolve British Virgin Island entities owned by HTF’s parent Hanergy Group, a Financial Timesinvestigation has found. The Hanergy companies have come under intense scrutiny as HTF has grown at breakneck speed in recent months, propelling its market value to atleast five timesits nearest competi￾tor. FT investigation page 16 Imaginechina/Corbis ‘It’s clear the June payments to the fund can’t be covered without external financing’ Greek official Happy feet Rather a shoe-shiner than a banker — LUCY KELLAWAY, PAGE 12 We are Googled Our Faustian bargain with technology — EDWARD LUCE, PAGE 9 Yes to a revolution Why Ireland’s vote for gay marriage leaves its Church diminished — PAGE 6 MAY 25 2015 Section:FrontBack Time: 24/5/2015 - 20:50 User: summersj Page Name: 1FRONT, Part,Page,Edition: LON, 1, 1

2 ★ † FINANCIAL TIMES Monday 25 May 2015 NATIONAL FINANCIAL TIMES Number One Southwark Bridge, London SE1 9HL Published by: The Financial Times Limited, Number One Southwark Bridge, London SE1 9 HL, United Kingdom. Tel: 020 7873 3000; Fax: 020 7407 5700 Editor: Lionel Barber Subscriptions and Customer service: Tel 0800 028 1407; subscriptions@ft.com; www.ft.com/subscribenow Advertising: Tel: 020 7873 4000; ukads@ft.com Letters to the editor: Fax: 020 7873 5938; letters.editor@ft.com Executive appointments: Tel: 020 7873 4909; www.exec-appointments.com Printed by: St Clements Press (1988) Ltd, London, Newsprinters (Knowsley) Limited, Merseyside and Smurfit Kappa News Press Ld, Kells, Ireland ©Copyright The Financial Times Limited 2015. All rights reserved. Reproduction of the contents of this newspaper in any manner is not permitted without the publisher’s prior consent. ‘Financial Times’ and ‘FT’ are registered trade marks of The Financial Times Limited. The Financial Times adheres to a self-regulation regime under the FT Editorial Code of Practice: www.ft.com/editorialcode Reprints Are available of any FT article with your company logo or contact details inserted if required (minimum order 100 copies). One-off copyright licences for reproduction of FT articles are also available. For both services phone 020 7873 4816, or alternatively, email syndication@ft.com FT Cityline For real time share prices call 0905 817 1690 or go to http://www.ft.com/servicetools/ftmobile/cityline. Calls cost 75p/min. Newspapers support recycling The recycled paper content of UK newspapers in 2013 was 83.5% JOHN MURRAY BROWN Birmingham and its six neighbouring councils will formally bury old rivalries this week, joining forces in the hope of capitalising on the government’s prom￾ise to transfer responsibility for key policiesandbudgets. The leaders of the seven councils, repre￾senting a population of 4m people, will meet tomorrow when they are expected to announce agreement on a new “com￾bined authority” to enable region-wide decision-making on transport, infra￾structureandeconomicregeneration. The next day, the government is expectedtopublishitsCitiesDevolution bill as part of the Queen’s Speech outlin￾ing the legislative programme for the newparliament. The last government had already committed to a modest amount of decentralisation, prodded by Lord Heseltine, the Conservative grandee who in 2012 published a report recom￾mending that £50bn of central govern￾ment spending should be decided locally. Then the Scottish independence ref￾erendum gave the cause of English regional devolution a big push. Greater Manchester has shown the way, setting up a combined authority in 2011 and committing — as a precondition of receiving new powers — to elections for a regional mayor. Other northern cities arefollowingsuit. In the case of the Midlands, however, the dysfunctional state of regional co￾operation has been a big obstacle. This includes deep suspicions of Birming￾ham, a city that dwarfs its neighbours in population,sizeandeconomicclout. Compounding this, some had feared that a directly elected regional mayor would further entrench Birmingham’s influence. “The incentives to get their act together [were] considerable, but there was a real fear that Birmingham would dominate any new arrange￾ment,” said Wyn Grant, of Warwick uni￾versity. Chris Game, lecturer in local govern￾ment at Birmingham university, says the electoral map explains why regional co-operationhasbeendifficult. Even after Conservative advances in the general and local elections, the West Midlands remains dominated by Labour. The party controls Birming￾ham, Wolverhampton, Dudley, Sand￾well and Coventry councils, and no party has overall control of Walsall. Solihull is the only council in the group run by the Tories. It is also a crucial part of any new regional grouping: Birming￾ham airport, the national exhibition centre and much of the greenbelt land that the region might need to develop for housing or industrial use are all in Solihull. Mr Game believes that transport is key to the success of the project. He says the borough is vital for the region’s transport links. As for Coventry, he says it has outperformed Birmingham eco￾nomically in recent years. “It feels it is doing pretty OK outside of a bigger body.” But the council recently said it wouldbacktheplan—ashasSolihull. Announcing the decision last week, Ann Lucas, leader of Coventry council, said: “If we don’t all grow up as politi￾cians, and look to the greater good of the Midlands region, then we are going to be squeezed out, isolated and forgotten. Shameonusallifthathappens.” Forming a combined authority would give the opportunity to transfer power and resources “from Whitehall to the West Midlands — not from Coventry to Birmingham”,sheadded. Bob Sleigh, leader of Solihull, said the move would allow the borough to be part of a high-performing region “that attractssignificantinwardinvestment”. Officials say one of the early tests will be agreeing a name — with smaller councils adamant that “Birmingham” should not be part of it. “People in the Black Country certainly don’t consider themselves to be from Birmingham. Depending on which councils join, I’d like to see it called the West Midlands Combined Authority. I think everyone in the region would be able to relate to that,” said Darren Cooper, leader of Sandwellcouncil. English devolution West Midlands councils set to joinforces on regional policies Fear of Birmingham’s dominance has helped drive regional co-operation HELEN WARRELL — PUBLIC POLICY CORRESPONDENT The Conservative party has decided against reviving plans to allow busi￾nesses to sack employees at will, as it embarks on a second term in govern￾ment with an eye on how to win over blue-collarworkers. During its first term when it was rul￾ing as part of a coalition, Adrian Beecroft, a Conservative donor and venture capitalist, proposed a range of controversial employment law reforms — including the sacking mechanism of “no fault dismissal”. But these were blocked by the party’s Liberal Democrat governingpartners. Then came the Conservatives shock electionvictoryearlierthismonth.Sajid Javid was appointed to the post of business secretary and officials sug￾gested his pro-market, anti-regulatory zeal might prompt him to revisit Mr Beecroft’sproposals. But Mr Javid told the BBC on Sunday thatthiswasnotthecase. Asked if he was planning to use the forthcoming enterprise bill to return to these plans, he said: “No I won’t be look￾ingatthatagain. “What we will be doing though, is lookingat . . . deregulationandtakingit evenfurther,”headded. “During the last parliament, we saved businesses from about £10bn of costs collectively in regulation and I think we candoatleastthatagain.” He added that he wanted to help more small businesses with some of the problems they faced with late pay￾ments. UK small businesses were owed about £30bn, a record high in late pay￾ments he said. The government would set up a small business conciliation service to help tackle the problem, he added. Early in the coalition government, the publication of the Beecroft report caused bitter disagreements between theConservativesandtheLibDems. One of the flashpoints was proposals to allow businesses to dismiss staff with￾out stating a reason, provided they paid compensation. The report suggested that an employer could simply state they were not happy with a worker’s performance and then follow a set process, such as giving notice and paying a defined level of compensation, without the action beingconsideredunfairdismissal. But while the Tories initially cam￾paigned to bring these changes into law, making it easier for businesses to fire staff could now be seen as at odds with the party’s post-election “one nation” message. Over the weekend, David Cameron wrote an article promoting the Conserv￾atives as “the real party of working people”. “Our task five years ago was rescue and recovery; this time it’s renewal — renewing the idea that we are one nation, in which all working people can succeed; people of all backgrounds have social justice; and the ties that bind all partsofournationarestrong.” Employment law Conservatives rule out plan to ease sackings Party decides reforms to help companies fire staff risk alienating workers VANESSA HOULDER AND JANE CROFT HM Revenue & Customs is seeking to appeal to the UK’s highest court after failing in its latest attempt to block a £1bn payout to Littlewoods, the home shoppingcompany. The Court of Appeal last week sided with Littlewoods, owned by the billion￾aire Barclay brothers, in its long-run￾ning legal battle with the Revenue over a demand for compound interest on tax refundsdatingback30years. Giles Salmond, a partner at law firm Eversheds, said the ruling was “a resoundingvictory”forthecompany. Thousands of other companies are pursuing similar claims, pushing up the potential cost of a victory to several billion pounds. The case has aroused controversy because it raises the pros￾pect of a big payout from the public purse at a time of significant spending cuts. The shareholders of Littlewoods are Sir Frederick and Sir David Barclay, the owners of the Ritz hotel and Telegraph Media Group, who have homes in MonacoandtheChannelIslands. The company said that if the claim were successful, the payment would be made to companies that are subject to UK corporate tax, not directly to its shareholders. It said: “In these circumstances the net proceeds will be used for further investment for the benefit of all stake￾holders.” The Revenue said it believed the Court of Appeal decision was “at odds with how parliament intended value added tax law to work, and will now seek leave to appeal to the Supreme Court”. Littlewoods said the court ruling was the “logical consequence” of a historical overpayment after the incorrect collec￾tion of VAT for more than 30 years. Its directors were “duty-bound to ensure that the company and its tens of thou￾sands of current and former employees are not disadvantaged as a result of the overpayment of VAT”, Littlewoods said inastatement The appeal court judges said they were not persuaded that the high court judge who made the original decision “fell into any error on any of the issues whichwehavebeenaskedtodecide”. Littlewoods has already received a refund for £204m of VAT that was wrongly levied between 1973 and 2004 on commissions paid to its agents who distributedmailordercatalogues. It has also received more than £250m of simple interest on the VAT refund, but the company contends it should have received compound interest — charged on interest already earned — insteadofsimpleinterest. The Revenue is also fighting multi￾billion-pound battles on other business tax issues and last year doubled its own estimate of the possible cost of tax litiga￾tionlossesto£29bn. The National Audit Office reported that the increase in the estimate — from £14.5bn to £29.2bn in the year to March 2014 — was “due to a revision of the esti￾mates for cases currently in litigation and taking into account court decisions duringtheyear”. The Revenue has already made provi￾sion for £5.4bn of claims over the next five years relating to legal cases that it expectstolose. VAT refund Revenue takes Littlewoods’ £1bnpayout to highest court SCHEHERAZADE DANESHKHU AND ELIZABETH RIGBY Food and drink companies are fighting back against the threat of government measurestotackleunhealthydiets. Public Health England, the government body, said last week it would announce plans to tackle obesity fairly soon but the industry is keen to head off increased regulation and stick to volun￾tarymeasures. Britvic, the company that makes Fruit Shoot and Robinsons soft drinks, said recently that by 2020 it would cut the number of calories in its soft drinks by 20 per cent. It has already axed full￾sugar Robinsons squash in favour of a versionwithnoaddedsugar. And Action on Sugar, a campaign group, applauded Tesco for its plans to reduce the sugar in its own-label soft drinks by 5 per cent a year. This follows similar moves by other retailers includ￾ingSainsbury’s,theCo-OpandAsda. One in three 10-year-olds are obese or overweight, according to government figures; and in some deprived areas, childhood obesity rates are double that of wealthier parts of the UK. Children also drink more sugary fizzy drinks than other age groups. In countries such as France and Mexico fizzy drinks have beentaxedtodiscourageconsumption. Last year Public Health England com￾missioned the University of Teesside to review the efficacy of a sugar tax, but Downing Street slapped down the new life sciences minister, George Freeman, last week for backing a tax on compa￾niesthatsellunhealthyfood. Downing Street said the prime minis￾ter had no intention of going down this route. “We will continue . . . working with the industry, working with public health bodies.” But some public health groups say the current voluntary arrangementshavefailed. Tam Fry of the National Obesity Forum, a charity, said: “We have such a problem now with childhood obesity that it’s clear the [voluntary arrange￾ments]arenotworking.” Gavin Partington, director￾general of the British Soft Drinks Asso￾ciation, said voluntary arrangements had led to 7 per cent fewer calories in drinkssince2012. MALCOLM MOORE Portsmouth Football Club needed a new place for young players to train. Lanca￾shire Cricket Club wanted to build a hotel at its ground. Surfers in Bristol hoped to dig a huge artificial lake in a fieldoutsidethecity. Theyallturnedtofansforthemoney. As UK banks have withdrawn from lending, sports have had to be more creative about financing developments, and research from the University of Cambridge suggests that there is a large pool of untapped money from support￾ersfortherightdeal. Robert Wardrop, who runs a unit studying alternative finance at Cam￾bridge’s Judge Business School, says it can be challenging for sports franchises to raise traditional bank loans. “I have had bankers say to me that there is a level of reputational risk. If they lend to a sports club and then it all goes wrong, you have a problem with a large fan base.” Instead, crowdfunding via the inter￾net and “mini-bonds” — retail bonds that cannot be resold and are offered in small amounts direct to consumers — arebecomingmorepopular. Mr Wardrop researched the £25m mini-bond launched by the Jockey Club in 2013 to help finance a new stand at Cheltenham racecourse, the first such bondinBritishsport. He found almost all the bondholders were fans of horseracing, their average age was over 60, and they were largely diverting “idle cash from building soci￾etyaccounts”. They were attracted to the 4.75 per cent interest rate and a further 3 per cent that was returned via loyalty points giving discounts on tickets, food and drinkattheclub’sracecourses. “AnimportantoutcomefortheJockey Club is that it has changed the psycho￾logical relationship with the fans. They have had new experiences and they now wantmore,”hesaid. Paul Fisher, managing director of Jockey Club Racecourses, said the loy￾alty scheme was a particular success, and although bank borrowing costs had fallen, the club could sell mini-bonds in futuretodevelopothercourses. Lancashire County Cricket Club used the same tactic last November to raise £3m from a mini-bond with a 5 per cent interest rate and 2 per cent for loyalty points. This month, Wasps rugby club soldouta£35mretailbondindays. MrWardropnotesthatmostinvestors in sports bonds make an “emotional decision” and do not read “the fine print orthefinancials”. In Germany, Hertha Berlin, the foot￾ballclub,wasindeepfinancialproblems in the 1990s but launched a mini-bond in 2004 to raise £6m from fans. “They refinanced it in 2010 and, as long as they can keep kicking it down the road, it is fine, but the capability to repay the bond is unclear. But if it is a small invest￾mentandyouareafan,thenwhynot?” Online crowdfunding for sports projects is also on the rise. The football crowdfunding site Tifosy raised £270,000 last August for a new training academyforPortsmouthFootballClub. When Durham County Cricket Club wanted a new nursery ground, it raised £52,150 through crowdfunding, and Manchester United raised a similar amountforafunctionroom.Thesurfers inBristolraised£219,473fortheirlake. But not all attempts have been suc￾cessful. When the Co-operative Bank withdrew £380,000 of financing from Lincoln City, the club tried to raise money from fans by offering to turn the seats in one of its stands into a giant muralofasecondworldwarbomber. That failed, but the club has now issued 500,000 shares at 50p each and launched a bond that pays interest of 3 percent.Sofarithasraised£160,000. . Obesity Food groups seek to head off regulatory push on health Alternative finance. Sport The going is good to tap thefan base Crowdfunding and retail bonds are an increasingly popular way to raise funds £25m Value of mini-bond launched by Jockey Club in 2013 to help finance a new stand at Cheltenham racecourse, pictured 4.75% Interest rate paid by the Jockey Club, which helped attract those with idle cash in building societies Picture: Alan Crowhurst/Getty Images 30 global locations • www.efginternational.com EFGslogan - 112x50mm - Generic ad - Q - Publication : Financial Times advert 2014 (20.08.2014) A private bank unlike any other. MAY 25 2015 Section:World Time: 24/5/2015 - 18:59 User: holdsworthi Page Name: UKNEWS1, Part,Page,Edition: LON, 2, 1

Monday 25 May 2015 ★ FINANCIAL TIMES 3 NATIONAL FERDINANDO GIUGLIANO AND HELEN WARRELL The Bankof England’s secretive project to assess the economic risks of Britain leaving the EU is likely to come under scrutiny byMPs, after detailswere sent to the pressinerror. As the Labour party called on George Osborne, chancellor, to reveal what he had known of the plans, members of a committee of MPs suggested they would want to probe the BoE’s contingency arrangements for the UK’s in-out vote onEUmembership. Mark Garnier, a former investment banker who sat on the Treasury com￾mittee during the last parliament and is considering a bid to chair it, said the committee would certainly want to call on bank officials to discuss the project. “I think what will definitely happen is that the committee will look into the implications of the EU referendum on thebankingsystem,”hesaid. He added that bank officials would be asked to set out their thinking and explain how details of the plan, Project Bookend, had been emailed to an editor attheGuardiannewspaper. “It would be extraordinary if no one asked, how could the Bank of England get it quite so wrong with a fat finger on anemail,”MrGarniersaid. Andrew Tyrie, the Conservative MP who chaired the committee in the last parliament and is hoping to continue for second term, also indicated the BoE’s EU exit planning would be a key ques￾tionforthecommittee. “In time, the bank will be required to provide a view on how the major. issues of [EU] renegotiation bear on its ability to fulfil its mandate,” hesaid. Chris Leslie, Labour’s shadow chan￾cellor, called on Mr Osborne to reveal whatheknewaboutProjectBookend. “Were the chancellor and the Treas￾ury in on the secret?” he said to the BBC. “If so, when did they know and did they advise the Bank of England to publish it and, if not, are they undertaking their own assessment and will that be pub￾lishedtoo?” The Treasury declined to give any details of communications between the chancellor and the BoE regarding “Brexit”planning. The BoE made contingency plans ahead of Scotland’s independence refer￾endum last year. These were made pub￾lic only in October, a month after the vote, in the minutes from the Septem￾ber meeting of the bank’s Financial Pol￾icyCommittee. The BoE revealed it had planned to pump money into the financial system and to arrange for extra banknotes if there had been a financial panic in responsetoaYesvotetoindependence. Mark Carney, BoE governor, said ahead of the Scottish vote that the bank had emergency plans in place for a Yes vote,butdidnotgiveanydetails. The BoE routinely takes part in war games that simulate the effects of finan￾cial crises or cyber attacks on the UK banking system. However, these are typically one-time exercises, rather than the lengthy analyses that would be involved in a study such as the one aheadoftheScottishreferendum. On Friday, the BoE defended its deci￾sion to undertake work on a possible “Brexit” in secret. The bank said it would be looking into its processes in light of the incident, but declined to say whethertherewouldbeafullinquiry. Book review page 8 EU membership BoEfaces Commons grilling over secret Brexit analysis HELEN WARRELL — PUBLIC POLICY CORRESPONDENT Downing Street has announced that most non-British EU citizens living in the country will be barred from voting in the UK referendum on European membership that has been promised by theendof2017. As the Labour party performed an unexpected U-turn, dropping its oppo￾sition to the vote, government officials confirmed that voting protocols will be based on the general election franchise — which excludes EU citizens — rather than the local elections franchise, which wouldallowEuropeannationalstovote. However, members of the House of Lords and Commonwealth citizens who are resident in the UK and Gibraltar will be permitted to vote. As a result, Mal￾tese and Cypriots living in Britain will participate, as will residents from Ire￾land, a former Commonwealth mem￾ber,butotherEUcitizenswillnot. Nigel Farage, leader of the eurosceptic UK Independence party, has consist￾ently said he does not think the 4m EU citizens living in Britain should be allowed to vote — including his wife, whoholdsaGermanpassport. Downing Street pointed out that no Briton under the age of 58 had been able tohavetheirsayonEUmembership—it waslastputtothevotein1975. “It is time to put this right and to give people the choice — in or out,” one offi￾cial said. “This is a big decision for our country. that’s why we think it’s important that it is British, Irish and Commonwealth citizens that are the oneswhogettodecide.” The prime minister’s drive to speed the legislation needed for a vote through the House of Commons received an unexpected boost over the weekend, after Harriet Harman, Labour’s acting leader,saidherpartywouldsupportit. Under Ed Miliband, Labour had strongly rejected calls for a referendum, but Ms Harman said yesterday: “There does not seem to be the public appetite for us to man the barricades against a referendumthatappears[inevitable]. “We will vote for the bill and then get into the big questions for and against Europe,” she told the BBC’s Andrew Marr. “If you carry on arguing too long about the process, you end up obscuring the very important discussion about the substance.” She made it clear the party had strong viewsaboutthetimingofthevote.“Irre￾spective of which year it is, it’s really importantthatit’snotheldatthetimeof Scottish elections or other elections. It’s a big constitutional issue on its own . . . andneedsthatseparateconsid￾eration,”shesaid. Sajid Javid, the newly-appointed busi￾ness secretary, said yesterday he was confidentMrCameronwouldsecurethe EU reforms he was seeking on issues suchaswelfareandimmigration. “The fact we’re having this referen￾dum . . . Ithinkhelpstoconcentratethe minds of our European partners, so they will take us seriously on these issues,” he said. “We’re not pretending it’s going to be easy, we’re going to need some patience,butIthinkwe’llgetthere.” He added that cutting tax credits and reforming welfare rules to deter EU migrants from coming to the UK would beakeypartofthenegotiationstrategy. The prime minister will now embark on a frenzied week of EU diplomacy, which starts today with a dinner for European Commission president Jean￾Claude Juncker at Mr Cameron’s Cheq￾uers country residence. He will then fly to Copenhagen to see the Danish prime minister on Thursday before travelling to the Netherlands to meet the Dutch prime minister and ending the day with President Hollande in Paris. On Friday, he will meet Polish prime minister Ewa Kopacz in Warsaw before arriving in BerlintoseeChancellorAngelaMerkel. GILL PLIMMER Rail unions will meet on Thursday to decide whether to accept the pay offer that averted the first national train strike for 20 years over the bank holi￾dayweekend. Although leaders of the RMT, TSSA and Unite unions agreed to call off the strike during talks with the conciliation serv￾ice Acas, local union representatives stillneedtoratifytheagreement. The walkout was suspended after Network Rail, which operates UK train infrastructure, made significant conces￾sions, including a 1 per cent increase in paybackdatedtoJanuary1. Some employees will also receive a 1.4 per cent increase from January 1 next year, and another 0.7 per cent rise will be implemented if the unions agree todifferentwaysofworking. The deal averted a strike that would have seen 90 per cent of passenger trainscancelledaswellasallfreighttraf￾fic and some London Underground services that rely on Network Rail sig￾nalling. Originally, workers were offered a £500 bonus but no pay rise this year. Salaries would then have risen only in line with inflation for three years until 2019. The talks come at a time of renewed speculation that the government is con￾sidering overhauling Network Rail, which was, in effect, renationalised last yearwhenits£34bnnetdebtwasshifted backontothepublicbalancesheet. The taxpayer-funded organisation, which controls 20,000 miles of track and 2,500 stations, is investing £25bn to improve the network over the next five years, but has been criticised repeatedly for running behind on projects — such as the electrification of the Great West￾ern and East Midlands railway lines — andmissingtrainpunctualitytargets. Changes could include a break-up of the company along regional lines as well as a reform of the group’s bonus scheme forexecutives. Mark Carne, chief executive of Net￾work Rail, who earns £675,000 a year, forfeited a £30,000 bonus after an out￾cryoverraildisruptionatChristmas. Europe referendum Downing Street spells out rules on who can vote Most non-British EU citizens living in UK will not be eligible to take part Rail Unions to consider pay offer after calling off national strike Old Lady: the BoE routinely takes part in war games that simulate financial crises ‘We’ll votefor the bill and then get into the questions for and against Europe’ Harriet Harman Show of hands: Maltese and Cypriots living in UK will participate — Lynne Cameron/PA

4 ★ FINANCIAL TIMES Monday 25 May 2015 INTERNATIONAL JAMIL ANDERLINI — BEIJING International human rights groups have slammed China’s draft national security law for criminalising free speech and religious practices while granting the ruling Communist party sweeping pow￾erstopunishcriticsanddissenters. The vaguely worded draft law “includes a broad and ill-defined defini￾tion of ‘national security’, and provi￾sions that would allow prosecution of dissenting views, religious beliefs, infor￾mation online, and challenges to China’s ‘cyber sovereignty’,” said Hong Kong￾based group China Human Rights Defenders. Under the new law, crimes that vio￾late national security would include “negative cultural penetration”, threats to “sustainable economic and social development” and violations of “nationalinternetsovereignty”. It also stipulates “obligations to main￾tain national security” for citizens and organisations, both of which could be held legally accountable if they failed to provide “relevant data, information or technical support” to state security, publicsecurityandthemilitary. “Under this law, police would be allowed to charge anybody who refuses to become a police informant or who are seen as associated with those targeted by police, as posing threats to national security,”CHRDsaid. China’s secret police and domestic security services already target peaceful critics of the regime with spurious charges and commit human rights abuses. International rights groups say President Xi Jinping’s administration has orchestrated the most intense crackdown on civil society since the early 1990s and have logged nearly 1,000 people arbitrarily detained for their political views in 2014, nearly the same number as in the previous two yearscombined. In one example, human rights lawyer Pu Zhiqiang was detained a year ago and will soon be charged for making critical remarks on social media about China’s policies towards ethnic minorities and for speaking sarcastically about two senior party officials, according to an indictment circulated this week and confirmedbyMrPu’slawyer. He faces charges of “inciting ethnic hatred” and “picking quarrels and pro￾voking trouble” for posting messages on his microblog account that “openly insulted others”. His actions “damaged social order” and he “should be held criminally responsible”, according to the indictment. If convicted, Mr Pu facesamaximumof10yearsinprison. The charges facing Mr Pu and the draft law make it clear that anyone who offends senior party officials can be per￾secutedandhandedlongsentences. “The vague list of restrictions in the name of national security in this draft will make it impossible for people to know what behaviour is actually pro￾hibited and will allow the authorities to prosecute anyone who essentially crosses their ever moving line of ‘illegal activities’,” said William Nee, for Amnesty International. “It is as much to do with protecting the party and pun￾ishing those that criticise the leadership asaddressingnationalsecurity.” The draft law is open for public com￾ments until June 5 but is likely to be adopted by China’s rubber stamp parlia￾ment,accordingtorightsgroups. Earlier this month, the government also released a draft law on “manage￾ment of foreign non-governmental organisations”. FERDINANDO GIUGLIANO AND JONATHAN WHEATLEY — LONDON Just like footballers before the World Cup final, central bankers in emerging marketsarereadyingthemselvesforthe biggest test of their careers: the first rate increase in nearly a decade by the US FederalReserve. The timing of this momentous event remains uncertain, and disappointing data since the start of the year has made US monetary policy makers more cau￾tious than they were just a few months ago. However, Janet Yellen, Fed chair￾woman, remains confident the econ￾omy will strengthen and rates are likely togoupthisyear. When the Fed eventually moves, economists believe a rate rise is bound to provoke large capital outflows away from Latin America and Asia. This will test the defensive strategies local policy makers have built throughout the long era of ultra-low rates. “I don’t think emerging market central bankers can ever be properly prepared,” said Simon Quijano-Evans, emerging markets ana￾lyst at Commerzbank. “They have accepted that if it does happen, they will justhavetodealwithit.” Their first line of defence includes interest rates, which central bankers can increase to persuade investors to stay put rather than moving their moneytotheUS. The scope for monetary tightening differs across emerging markets: most oil consumers, such as India, have cut interest rates in the past few months, as lower energy prices have pushed down inflation. Meanwhile, other countries such as Brazil have had to increase bor￾rowing costs in a response to soaring inflation. Pressure to raise rates will vary from country to country and will depend on whether the Fed moves in a moderate, clearly-signalled manner or more suddenlyandsurprisingly. “But one thing that stands out,” says Mr Quijano-Evans, “is that some emerg￾ing market central banks will continue to cut rates in spite of the expectation that the Fed will hike in the next six to ninemonths.” While rate increases form the basis of monetary policy makers’ stock response during capital flight, officials have increasingly experimented with lessorthodoxmeasures. These include the accumulation of large foreign exchange reserves, as well as macroprudential tools such as regu￾lating banks’ foreign currency dealings, which some economists believe also act asdefactocapitalcontrols. Since the Asian financial crisis in the late 1990s, emerging markets have cumulated large war chests of reserves, whichnowamountto$7.74tn,according to the International Monetary Fund. Central banks stand ready to deploy them, as they did at the height of the globalfinancialcrisis. Economists are sceptical that using foreign reserves to buy domestic cur￾rency during a sharp sell-off can do muchtostoparout.Investorsknowthat the central bank only has so much for￾eign currency it can use, and can test this limit by continuing to sell and thus putpolicymakersunderpressure. But many central bankers in the emerging world still believe that foreign exchange intervention can help reduce volatility. Policy makers also hope that by signalling a strong determination to act,theycanscareoffspeculators. A more dramatic step would be to introduce capital controls, which limit the ability of foreign investors to pull out their money during a crisis. These measures have been frowned upon by international organisations, but have acquired greater legitimacy since the International Monetary Fund became moreopentotheirusein2012. Countries such as Mexico and Chile have been robust in rejecting such instruments. “I don’t see any major shift to the use of intrusive capital controls,” said Charles Collyns, chief economist at theInstituteofInternationalFinance. However, were the Fed to surprise with a big or sudden movement, econo￾mists believe the cost-benefit analysis could change. “We could see substantial amounts of stress,” said Mr Collyns, “[and] it wouldn’t surprise me if a coun￾try like Turkey, which has already come under a lot of political pressure to cut rates when other central banks are being more cautious, were to resort to macroprudentialmeasures.” International bodies, including the IMF and the Organisation for Economic Cooperation and Development, have been busily discussing their approaches to these measures, as they feel there is insufficient international agreement over what is acceptable. The risk is that individual countries are able to exploit the differences between the positions of thevariousorganisations. Editorial Comment page 9 Beijing clampdown China’s tighter security plans attacked Human rights groups say proposed law changes will further curb free speech Monetary policy. Defensive strategies Emerging markets bracedfor Fed rate rise First increase in nearly a decade will cause large capital outflows, economists warn Monetary measures: oil consumer India has cut interest rates as falling crude prices have pushed down inflation — Divyakant Solanki/EPA A n unlikely buzzword is back in fashion in the top tiers of global financial officialdom: hysteresis. If it catches on, it could have spectacular implications for the eurozone’s monetarypolicymakers. Hysteresis is a concept borrowed from physics. Place a small weight on a metal spring and it will stretch, but then return to its original shape when you remove the weight. If theweightistooheavy,however,themetalwillforeverlose itsspring. When an economy is saddled with recession and a lack of investment the same thing can happen. People can remain out of work for such a long period of time that they lose skills and companies fail to invest in training their staff. That destroys an economy’s ability to grow perma￾nently,evenwhendemandrecovers. At the European Central Bank’s flagship annual confer￾ence in Sintra, Portugal, hysteresis was bothering the minds of assembled central bank governors and promi￾nent academics, reflecting the depth of the impact of the global financial crisis. Especially in its most important cur￾rencyarea. According to their latest projections, the ECB’s econo￾mists think that even when the region’s cyclical recovery is completeanddemandhasreturnedtofullstrength,unem￾ployment will still be at 10 per cent. Taking into account what Tito Boeri, an Italian labour economist, described in Sintra as the eurozone’s “unbearably divergent” unem￾ployment rates, those projections imply that unemploy￾ment will remain well into double digits in economies such asSpainandItaly. The International Monetary Fund’s outgo￾ing chief economist Olivier Blanchard sug￾gested unemployment would remain high even after demand had recov￾ered because the region’s economy had been scarredbyhysteresis. Hysteresis’s first brush with economic fame was in 1986, when it was used by Mr Blanchard and Lawrence Sum￾merstoexplainEurope’slastbrushwithhighjoblessness. But as the Great Moderation took effect in the 1990s and early 2000s, the memories of the devastation caused from bigeconomicshocksdimmed. Thereturnofhysteresisispartofabroaderdebateabout whether we are now in an era of secular stagnation, con￾demned to suffer years of low growth and high unemploy￾ment. The roots of the term — hysteresis comes from the Greekwordsfor“late”and“shortcomings”—hintathowit might change the way monetary policy makers act in future. IfMrBlanchardandothersattheconferencearecorrect, there are two implications. The first is that monetary pol￾icy makers in the eurozone should have acted much faster to counter the weight weighing down the single currency area’s economy. Rather than waiting until January this year to launch its €1.1tn quantitative easing package, the ECB should have launched an aggressive package of gov￾ernmentbondbuyingyearsearlier. Secondly, the presence of hysteresis also creates a more fundamental problem: whether central banks’ mandates are fit for purpose. The ECB’s inflation target of just below 2 per cent is symmetric — in other words central bankers are supposed to pay equal attention to the upside and downside risks to price pressures. But if hysteresis exists, there is an argument for buying insurance against years of highunemployment,evenifthatmeanshigherinflation. That is tough to work into the existing framework. The difficultiesinvolvedindoingsoledMrBlanchardtocallfor the eurozone to move to a dual mandate, like the US Fed￾eralReservetargetinginflationandunemployment. More evidence is needed to know if he is right. One thing was clear: hysteresis is a cancer on economies. The longer you leave it unchecked, the more vicious it becomes. And centralbankersdonotalwayshavetherightmedicine. claire.jones@ft.com GLOBAL INSIGHT PORTUGAL Claire Jones ‘Hysteresis’ returns to Europeas central bank frets over recovery People can remain out of work for such a long period of time that they lose skills Currencies against the dollar Source: Thomson Reuters Datastream Rebased 2010 11 12 13 14 15 40 60 80 100 Brazilian real Russian rouble Turkish lira Indian rupee 120 ‘Police would be allowed to charge anyone who refuses to become an informant’ CHRD ROBIN HARDING — TOKYO Two authors of Japan’s new fiscal strat￾egy have defended the decision to “go for growth” as a way out of the world’s biggest public debt problem. In interviews with the Financial Times, Motoshige Ito and Susumu Takahashi argued it makes sense to assume Abe￾nomics will succeed, rather than doom the stimulus to failure by tightening fis￾calpolicynow. Their comments highlight hopes that escaping deflation will deliver a massive jolt to Japan’s growth prospects, helping to cure chronic budget deficits, and tackling a gross public debt amounting to246percentofannualoutput. “It’s impossible to tackle the fiscal sit￾uation if it doesn’t fit with reviving the economy and ending deflation,” said Mr Takahashi, chairman of the Japan Research Institute, and a member of the government panel that will deliver the newstrategybytheendofJune. The panel includes prime minister Shinzo Abe and five of his cabinet, Bank of Japan governor Haruhiko Kuroda; and four private sector members including Mr Takahashi and Mr Ito, a professor at the University of Tokyo. According to people close to the deliber￾ations, there is tension between the finance ministry, which wants to lock in spending cuts early, and the cabinet office — representing Mr Abe — which is determinednottochokeoffgrowth. The fiscal panel has come under fire for its rosy economic projections: they assume growth of more than 2 per cent a year after 2018, implying that Japan will expand faster than the US, despite its shrinkingpopulation. “Using overly optimistic macroeco￾nomic assumptions as in the ‘revitalisa￾tion’ scenario . . . risks harming confi￾dence in the authorities’ ability to restore fiscal sustainability,” pointed outtheInternationalMonetaryFund. Mr Ito acknowledged the forecasts are “very ambitious” but said it was reason￾able to expect a rise in growth and tax revenuesifJapanescapesdeflation. The basic argument is that years of low demand in Japan have meant little reason to economise on labour. Once wages rise and domestic companies have to compete for workers, it could unleash two decades of pent-up potentialforproductivitygains. “That is actually the chance we have as a country suffering from lack of demandfor20years,”MrItosaid. Japan’s solid growth in output per workerdoesnotimplyalackofroomfor productivity to rise. Low participation intheworkforcemayflattertheproduc￾tivityofthosewhoareinjobs,hesaid. With consumption tax due to rise from 8 per cent to 10 per cent in 2017, and cheery growth forecasts, the fiscal panel needs to save only another 1.6 per cent of gross domestic product to reach a primary balance by 2020. Primary balance means taxes cover spending, beforeinterestpayments. The fiscal panel intends to lay out a schedule of reforms to healthcare spending. Possibilities include strong incentives to use generic drugs and tar￾geting overcapacity in hospital beds — whichencouragesdoctorstofillthem. “So far, when Japan’s tried to restrain healthcare spending, we’ve used a cap. But the effect . . . never lasts,” Mr Taka￾hashi said. “The Abe administration is tryingforstructuralreform.” BothMrTakahashiandMrItosayjust getting to a primary balance is not enough. Instead, Japan needs to get its debt-to-GDPratioonadownwardpath. Public spending will increase sharply after 2025 as the baby boom generation reaches old age. Mr Takahashi said tax rises will then be necessary “but in order to minimise their size we need to controlspendingnow”. Mr Ito said it would take decades of large surpluses to erode existing debt. “Itisnottheissuewearediscussingnow, but in order to decrease the debt-to￾GDP ratio in the long-run . . . there must be more serious discussion of mild inflation—2percentor3percent.” Abenomics Japanese experts defendfiscal strategy of goingfor growth 246% Japan’s gross public debt as a percentage of annual output 2% Annual economic growth after 2018, estimated by fiscal panel MAY 25 2015 Section:World Time: 24/5/2015 - 18:20 User: jamesa Page Name: WORLD1, Part,Page,Edition: LON, 4, 1

Monday 25 May 2015 ★ FINANCIAL TIMES 5 INTERNATIONAL BORZOU DARAGAHI — GASR GARABULI Angesom Taeame’s journey stretched more than 4,000km along treacherous roads manned by unscrupulous bandits and across long desert paths that were little more than scratches in the sand. He then boarded a rickety fishing boat and headed out with dozens of others intoanunpredictableseaforfivehours. Just one hour before he reached Euro￾pean territorial waters, he was caught by the Libyan coastal patrol and brought to Garabuli, a filthy detention centre where he has been locked up for morethanaweek. “[There’s] a lot of itching, there’s a lot of lice on the blankets. So there is a lot of diseasehere.Sowesuffer.Therearealot of sick people sleeping here. We just eat only one spoon and even that is by fight￾ing over it,” said the 24-year-old hospi￾tal worker from Eritrea, where he received a salary equivalent to $40 a month and faced the prospect of being draftedintothearmy. Hundreds of thousands of African and Arab migrants are making their way to Libya in hopes of crossing the Mediterranean and pursuing their lives in Europe or beyond. Some make it. Others perish at sea. If they are caught by Libyan boat patrols or by security forces they are crammed into one of the country’s 22 detention centres, prisons forthosewhoawaitdeportation. At Garabuli, men, women and chil￾dren are stuffed into crammed rooms swirling with flies and gnats. Perhaps 100 people share a single toilet. Men brandishing assault rifles and wearing surgicalmasksguardthem. Originally designed to hold people guilty of passport violations, the deten￾tion centres form part of the Libyan prisonsystem. “There is not yet one real centre that has been built to standard,” admits Col Mohamed Abubreida, of the Libyan interior ministry’s counter-illegal migration division. “All the centres are old and are not meant to be used to housemigrants.” Garabuli, for example, houses nearly 500 migrants and probably should not have more than 200. Feraj Abdullah Abdul-Salaam, deputy director of the facility,hasaskedtheembassiesofthose detained to attend to their citizens. But the diplomatic missions of the countries that produce the bulk of the migrants, Ethiopia, Somalia and Eritrea, “don’t evercomehere”,hesays. International monitors and human rights organisations have for years con￾demned Libya’s detention centres. Cor￾ruption and abuse are widespread and oversight is close to nil, though Libyan officials have tried in recent months to open the facilities to organisations such as the Red Cross and the International Organisation for Migration, and wel￾comedanydonatedreliefsupplies. Last September UN secretary-general Ban Ki-moon described “the lack of an adequate asylum system and a proper protection framework in Libya, coupled with the widespread use of detention in deplorable conditions” as factors driving migrants to take the dangerous boatridetowardItaly. Italy promised five years ago to build model detention centres that Libyans could then replicate, officials in Tripoli say. But the plan came to naught after the armed Nato-backed uprising that overthrew Muammer Gaddafi’s dicta￾torship and subsequent infighting plungedthecountryintochaos. The civil war that has made Libya such a dangerous place has also made it a haven for people smuggling. Libya’s desert borders are wide open, officials concede, and smugglers easily get peo￾pleacross. Life for those who make it as far as Libya — but have yet to get on a boat — is full of potential perils as well. Migrants form a palpable presence in Libyan cit￾iesalongthecoast.Theystandalongside roadways in search of day labour, living with 10 or more others in rented rooms as they hope to earn enough money to payforaspotonaboatacrossthesea. Abduraouf, a day labourer in Tripoli from Togo, said the migrants face con￾stant abuse from their employers. “They promise you $20 for a day and only give you $10,” he says. “There are criminals who rob you. If you are sick or injuredthehospitalswon’ttreatyou.” Those who manage to come up with the$500ormoretoearnaspotonaboat remain inside safe houses waiting for smugglers to gather enough passengers to fill a vessel and tell them when and where and with how much to show up for a ride to the other side of the Medi￾terranean. Many of the migrants say their lives had become so desperate back home that even death in the desert or at sea wasanimprovement. One 25-year-old Eritrean woman said her mother wept for days after she told her she would leave behind her children inAsmaraandmakethevoyage. “Life is very hard in Eritrea,” she says. “Everything is expensive. I can’t afford anything. Food is expensive. Eritrea is a lostcause.” Mariam Mohamed, a 19-year-old from Somalia, said she decided to head for Libya and then Europe to pursue her ambitions after her father passed away andhermotherbecame“lost”. She had been a good student, and learnt English in secondary school, but had no means to pursue her education. “I didn’t have any opportunities,” she says. “I want to finish my education. My dream is to go to Europe and have a beautifullife.” Migrants’ journeys end infilthy, crowded Libyan detention centres Thousands await deportation after hopes of crossing the Mediterranean dashed by security forces DUNCAN ROBINSON — BRUSSELS HENRY FOY — WARSAW The EU will share out up to 40,000 asylum seekers from countries such as Eritrea and Syria as part of its plans to reform Europe’s asylum system in the face of opposition from eastern and central Europeanmember states. Under the proposals, asylum seekers from countries with a 75 per cent suc￾cess rate for applications — such as Syria and Eritrea — will be automatically relo￾cated across the EU whenever the bloc faces an influx of refugees, according to onepersonbriefedonthematter. Asylum seekers from countries with much lower acceptance rates, such as Nigeria — whose citizens are only granted asylum in 30 per cent of cases — will still be dealt with by the member stateinwhichtheyarrive. A diplomatic dust-up erupted this month when the European Commission set out proposalsto force member states to acceptrefugee quotas based on their size and gross domestic product when Europefacedasuddeninflux. Countries such as Italy are braced for a wave of arrivals this summer. Last year, more than 170,000 people made the dangerous Mediterranean crossing with more than 3,000dying in the proc￾ess. Refugee groups expect an even higherfigurethisyear. The asylum reforms are being consid￾ered alongside military proposals aimed at destroying the boats used by people traffickers and stemming the number of peoplemakingthetrip. Some countriesfelt the idea was half￾baked and drawn up without the input ofnationalgovernments.“Thishasbeen done in a way that is completely unpre￾pared,” said one senior eastern Euro￾pean diplomat. “It’s a crazy system that showsthewrongattitudetomigrants.” Poland, Hungary, Slovakia and the Czech Republic, along with the Baltic states, have led the rising chorus of opposition to the proposals, with sup￾portfromRomaniaandBulgaria. “You are not going to resolve this very serious issue in three weeks with proce￾dures that are rushed through in panic mode,” said the diplomat. “[Commis￾sion president Jean-Claude] Juncker is saying he does not really care what the leadersthink.” Germany, France and Italy are under￾stood to be in favour of the asylum pro￾posals, meaning that smaller countries are likely to face intense diplomatic pressure once the proposals are offi￾cially tabled on Wednesday. Britain, Ire￾land and Denmark are all able to opt out ofthescheme,shouldtheywish. Critics argue that hiving off clear-cut asylum cases will leave countries such as Italy — the main arrival country for those crossing the Mediterranean from Libya — having to deal with trickier applicationsandpotentialdeportations. Germany has complained that Italy, in particular, does not process arrivals properly, allowing migrants to make asylumapplicationsinothercountries. ‘There is a lot of disease here. So we suffer. There are a lot of sick people sleeping here’ SIMEON KERR — RIYADH Lines of green Saudi flags hang proudly along Riyadh’s wide highways while screens around the capital broadcast footage on a loop of F-16s flying into combatandmassiveexplosions. Local companies have taken out giant billboards pledging allegiance to the “decisive and determined”King Salman bin Abdulaziz al-Saud, while ordinary Saudis have taken to social media to show their support for the king and the country’smilitarycampaigninYemen. An unprecedented jingoism — hidden for decades — has swept through Saudi Arabia since King Salman ascended to the throne in January and the launch in March of the aerial campaign against ShiaHouthirebels. Although the air strikes have raised international concern and heightened tensions with Iran, its rival for regional dominance, they have been cheered in Saudi by an increasingly nationalist and sectariansentiment. “We are strong again under them,” says Ahmed, a middle-aged Saudi national, pointing approvingly at one of manypostersofKingSalmanflankedby Mohammed bin Nayef, his recently pro￾moted crown prince, and Mohammed bin Salman, his 30-year-old son, deputy heiranddefenceminister. Spearheaded by Mohammed bin Sal￾man, the Yemen campaign embodies what Saudis believe is a new era of deci￾siveness — even if it has so far failed to deliver thepolitical objectives of return￾ingtheoustedpresidenttopower. “The Yemen war seems to be creating a newfound nationalist fervour,” says Jane Kinninmont, deputy head of the Middle East programme at the Chatham House think-tank, who contrasts the mood with the former “period where many Saudis felt militarily impotent and frustrated at the lack of either Saudi or Arab capacity to act militarily — par￾ticularly in Syria. “Thewaris creating a sense that the new leadership is confi￾dent,activeandstrong.” After two decades of cautious reform under the late King Abdullah, who ruled largely by consensus, King Salman’s reignhasbrokenwiththepast. As well as the cabinet shake-up and the Yemen campaign, the king has also overseen the wresting of control of the state-owned oil company from the oil ministry to a council chaired by his son and the introduction of a real estate tax aimingateasingahousingshortage. At the same time, King Salman has also moved quickly to placate the con￾servative strain in Saudi society by pro￾moting hardline clerics and empower￾ingthereligiouspolice. Abdullah Shammari, an analyst and former diplomat, says the new monarch is tapping into the complex societal trends, from tribalism to the Wahhabi strain of Islam, that bind the kingdom together. “King Salman is taking Saudi Arabiabacktothenorm,”MrShammari says. “Reactivating the identity of Wah￾habism controls the country and under￾mines support for al-Qaeda,” he says, disagreeing with those who claim the Saudi purist strain of Islam is the root of growingjihadiextremism. For younger Saudis, however, the most profound shift of the new reign has been to new group leadership closer in agetotheirowngeneration. Mohammed bin Nayef, who is in his 50s, and the 30-year-old Mohammed bin Salman deputised for the king at talks with US President Barack Obama at Camp David this month. As well as the defence brief, Mohammed bin Sal￾man also controls a powerful economic co-ordination body that is seeking to boostefficiencyandintroduce reforms. Western officials and intellectuals worry the range of powers given to the inexperienced prince could signal the endofconsensusleadershipinSaudi. Such concerns, while muted, are also echoed among some Saudi middle classes. “When has such . . . power sur￾rounding one individual worked out well,” says a young Riyadh businessman who declined to give his name. “I don’t seewhyweshouldbeanydifferent.” The royal family’s allegiance council has given majority backing to the appointments of Mohammed bin Nayed and Mohammed bin Salman, meaning there is little other royals can do. Prince Mutaib bin Abdullah, son of the late king who lost out in the royal reshuffles, still controls the powerful national guard. Analysts are now watching for rumoured moves to consolidate the tribal based fighting force within the defence ministry controlled by Moham￾medbinSalman. For now, however, most Saudis seem willing to give the new leadership the benefit of the doubt, given the scale of potentialdomesticchallenges. DAVID KEOHANE AND JAMES CRABTREE — MUMBAI Larger-than-life Indian politician Jay￾alalithaa has been sworn in as chief minister for the fifth time, after being acquitted of corruption charges by an Indian courtthismonth. The former film star — known as “Amma” (or mother) in her home state of Tamil Nadu — sits at the centre of one of India’s highest profile personality cults, becoming one of her country’s most divisive political leaders since first being elected as the state’s chief minis￾terin1991. Jayalalithaa’s reappointment makes herthelatestinaseriesofstate-levelpol￾iticians on India to resurrect their careers in spite of being accused of seri￾ous crimes. Last week, a court in Banga￾lore overturned a conviction from last Septemberinanear20-year-oldcorrup￾tion case, which had seen Jayalalithaa facingapossiblefour-yearjailtermanda decade-longbanfrompolitics. The case symbolises the influence of a coterie of chief ministers from large industrialisedstatessuchasTamilNadu — a power base that grew this year as Narendra Modi, India’s prime minister, moved to increase financial devolution tothestatesfromthecentre. Many of Mr Modi’s most important economic priorities, such as labour market deregulation and the introduc￾tion of nationwide tax reforms, require the co-operation of state political lead￾erssuchasJayalalithaa. The cheers fromher supporters as she travelled to her latest swearing in cere￾mony was a contrast to the tears shed when she was convicted by a court in neighbouring Karnataka, to where her trial was moved for fear a fair judgment could not be brought in Tamil Nadu. Thatruling was brought under a clause of the prevention of corruption act, penalising public servants with assets “disproportionate”totheirlegalincome. And although Jayalalithaa argued she was being framed by her political ene￾mies, she was unable to explain how — after taking a salary of Rs1 a month as chief minister from 1991 to 1996 — she had acquired assets of more than Rs53m, including 750 pairs of shoes, 10,000 saris, gold, silver and various propertiesandcompanies. The judgment shone a light not only on Jayalalithaa’s power in one of India’s most important manufacturing and export hubs, but also on the cult of per￾sonalitythatsupportedher. September’s ruling was reversed by a judgment that cast doubt on some of the evidence, and said the standard for a convictionhadnotbeenmet. Saudi Arabia. Air strikes Yemen offensive sparks jingoisticfervour Houthi campaign embodies what many in Kingdom see as new era of decisive leadership Refugee share-out EU to allot up to 40,000 asylum seekers in reform plan India PoliticianJayalalithaa returns after acquittal over corruption Fanning flames: smoke billows after Saudi strike on a Houthi arms depot Migrants rest in a detention centre close to Benghazi, above. Abuse, corruption and disease are widespread at such facilities. Below, migrants await to disembark from a rescue ship in Messina, Sicily Esam Omran al-Fetori/Reuters/ Giovanni Isolino MAY 25 2015 Section:World Time: 24/5/2015 - 18:14 User: jamesa Page Name: WORLD2, Part,Page,Edition: LON, 5, 1

6 ★ FINANCIAL TIMES Monday 25 May 2015 INTERNATIONAL ANDRES SCHIPANI — BOGOTÁ Juan Manuel Santos, Colombia’s president, has called for the speed￾ing-up of negotiations with Marxist rebels aimed at ending Latin America’s oldestguerrillainsurgency. The announcement comes amid recent attacks by both sides in the five-decade￾long conflict. Last week, an air strike killed over two dozen members of the Revolutionary Armed Forces of Colom￾bia (Farc) in the southwestern region of Cauca. On Saturday, another eight guer￾rillas were killed and yesterday a police officerdiedinabombattack. “We have to make decisions to stop this war as soon as possible and I’m readytoacceleratenegotiationstoreach a final and definitive bilateral ceasefire asquicklyaspossible,”MrSantossaid. Last week, in retaliation for the first attack, the rebels lifted their six-month unilateral armistice. “The suspension of the unilateral ceasefire was not in our sights,” the Farc said in a statement late on Friday, “but the incoherence of San￾tos’governmenthasachievedit.” A month ago Farc killed 11 soldiers, prompting Mr Santos to restart bomb￾ing raids on Farc camps, which he had frozen to help peace talks in Cuba that havegoneonformorethantwoyears. Both sides have agreed on three of the five points in the peace agenda, and sen￾ior security advisers say Farc leaders are aware this is the best chance to end a warthathaskilledmorethan200,000. Cerac,arespectedsecuritythink-tank inBogotá,saidinareport:“Wemaintain our consideration that the negotiation process is irreversible. Notwithstand￾ing, this consideration is subject to the scale and nature of the violence that we willfaceinthenearfuture.” Resumption of Farc hostilities would takeatollonenergyinfrastructure,ana￾lysts say, in an economic blow to Latin America’sfourth-largestoilproducer. Insurgency Colombia’s Santos calls for peace talks to accelerate VINCENT BOLAND — DUBLIN Irish people tend not to go in for social revolutions; they prefer to leave those things to the Americans and the French. In the immortal words of the fictional television priest Father Ted, “Down withthissortofthing.” YettheIrishwokeupyesterdaytofind themselves dominating the world’s news headlines after their resounding endorsement of same-sex marriage, becoming the first country to support it in a popular vote. The scale of the endorsement — 62 per cent of voters said Yes in Friday’s referendum, in an unusually high turnout — has not only surprised the rest of the world, however. IthassurprisedtheIrishthemselves. “We are a small country with a big message,” said Enda Kenny, the prime minister,orTaoiseach. The embrace of same-sex marriage turns on its head the old stereotype of the Irish as a conservative nation where the values of the Catholic church have always set the pace of social change. This has not been true for two decades, but some political and religious leaders may have underestimated the extent of the transformation of Irish society in those years. After the referendum, they will have no choice but to accommodate themselvestoit. The biggest loser from the referen￾dum is the Catholic church. The institu￾tion that more than any other has shaped the cultural and social values of the Republic over nearly a century has seen its authority diminished over the past 20 years after a series of revelations of the sexual abuse of children by priests, and of the way the church cov￾eredupthecrimes. The Irish church’s leadership never fully appreciated how completely it failed many Irish children whose par￾ents were once unquestioning believers in its authority. A lot of the voters who endorsedsame-sexmarriagewerethose now-grown-up children and their friends and families. Only a handful of them might be gay, but the referendum was a rare and collective opportunity to announce the end of an unequal and damagingbalanceofpower. “This marks the end of the narrative of the last 90 years where Irish people were happy to have had their values cre￾atedandpasseddowntothembypeople who claimed to know what was best for them,” says Colm O’Gorman, head of Amnesty International in Ireland, who was a leading Yes campaigner and is a survivorofclericalabuse. Speaking on RTE, a weary-looking Diarmuid Martin, the archbishop of Dublin, acknowledged as much. “It is very clear that if this referendum is an affirmation of the views of young peo￾ple, then the church has a huge task in front of it to find the language to be able to talk to and to get its message across to young people, not just on this issue but ingeneral,”hesaid. There is anotherreason why the Irish embraced same-sex marriage. This is the increased visibility of gay people in Ireland — from sports stars such as Donal Óg Cusack, the hurler, to health minister Leo Varadkar, novelist Colm Tóibín and other public figures such as musiciansandnewsanchors. The gay-rights campaigner Senator David Norris says the Irish have always been more accepting of difference than their leaders. Aodhán Ó’Ríordáin, the equality minister, says voters have “rejected that judgmental, Pharisee mentality that used to tut-tut at people” becausetheyweredifferent. There is no doubt that Irish people are feeling good about themselves after the same-sex marriage referendum. There is now likely to be a scramble among political leaders to claim credit for that feelgood factor — the first time it has been palpable on the streets since the collapse of the Celtic Tiger economy sevenyearsago. All the main parties supported the referendum, although it was the initia￾tive of the Labour party, the junior part￾nerinMrKenny’scentre-rightcoalition, which was seeking an issue to differenti￾ate itself in government. The Taoiseach was initially wary of its implications. With less than a year before the next general election must be held, he may nowbetemptedtoseekanearlypoll. However, his Fine Gael party lost a by￾election in the heartland farming coun￾ties of Carlow and Kilkenny on the same day as the referendum.Voters, it seems, canstrikeintwodirectionsatonce. Referendum. Same-sex union Irish surprise themselves in marriage vote Result undermines stereotype of a conservative nation held in thrall to the Catholic church Irish eyes: People in Dublin react to the news that Ireland has voted to endorse gay marriage Cathal McNaughton/Reuters ‘This is the end of the narrative where the Irish were happy to have their values created by people who claimed to know what was best for them’ JUDE WEBBER — SAN SALVADOR Thirty-five years after the archbishop of San Salvador was gunned down by a rightwing death squad while celebrat￾ing mass, Oscar Romero was formally declareda saint-in-the-making. Amid balloons, banners and a sea of cel￾ebratory T-shirts, some 300,000 pil￾grims gathered under the blazing sun to witness Saturday’s beatification cere￾mony. Many among the congregation felt the honour was long overdue for a priest who had spoken out against the military regime, poverty, social injus￾tice,assassinationsandtorture. On the eve of his murder, Romero uttered the words that many believe sealed his death: “I beg you, I beseech you, I order you in the name of God,” he urged security forces. “Stop the repression.” Butwithanaverageof22deathsaday, and May shaping up to be the most vio￾lent month in a decade, the peace Romero prayed for looks elusive in El Salvador. Violence between two brutal gangs, the Mara Salvatrucha, or MS-13, and Barrio 18, has escalated into what Insight Crime, a consultancy, describes as a “low-intensity war” of ever greater confrontation with security forces since lastyear’scollapseofagangtruce. In a video purporting to be a united message from the two gangs to the gov￾ernment that was aired on social media last month, a masked figure brandish￾ing an AK-47 says they are preparing for “dialogue or war”. For the leftist govern￾ment,whichlastweekdeployedthefirst of its new anti-gang battalions to quell violence, the choice is stark, the black￾clad figure says: “Talks or lead — you decide.” Juan José Valle, a gardener in Altavista, a poor neighbourhood on the outskirts of the capital in the grip of the Barrio 18, says the violence is worse now than during the 12-year civil war that intensified following Romero’s murder, claiming 75,000 lives. “I can’t go to the bakery up there because that’s the other side’s turf,” he says, resigned to being “a prisoner” in his neighbourhood. “If I do, they’llgoaftermychildren.” Like most of the country, the run￾down periphery of San Salvador, where many houses have corrugated tin roofs and lookouts with mobile phonesloiter in side alleys and on street corners, has been carved up by the gangs. They label their territories “letters” — MS — or “numbers”—18. San Salvador has an estimated 20,000 or more gang members, many sucked into crime by the dearth of jobs and opportunities. “Here it’s a crime to be young,” says Berta Alvarez, a shopkeeper in the Villa Lourdes neighbourhood. “It’s only the youngwhodie.” Allegiances can switch within a mat￾ter of streets; the gangs mark their turf withgraffitionvirtuallyallthewallsand bykilling rivalswhodaretoventureinto their territory as well as locals who fail to pay the extortion money, or “rent”, thatthegangsdemand. “You have to see, hear and shut up,” MrVallesays. But some say the state security forces are little better. Alma Elizabeth Gómez, who runs a small shop in Campos Ver￾des, another Barrio 18 bastion, says police threatened her after her daughter reportedastolenphone. “I got a call telling me that if I didn’t hand over $500 that day, they’d kill my children,” she recalls. “It wasn’t the voice of a bicho,” she adds, using the nickname — “bug” — that is commonly used to describe gang members. “It wasn’t their slang. Here, you can’t even trusttheauthorities.” Faced with nearly 2,000 murdersthis year, President Salvador Sánchez Cerén, a former leftist guerrilla leader, has pro￾moted a Safe El Salvador Plan, including social policies. The president has inflamed tensions by moving some sen￾ior gang bosses back to the high security Zacatecoluca prison in the south, dubbed “Zacatraz”, after they were moved to ordinary jails during the truce. But hisstrategy of taking on the gangs may backfire, warns José Miguel Cruz, an expert on gangs at Florida Interna￾tional University. “The anti-gang battal￾ions the government has begun to deploy are a tactic that has failed in the past . . . I don’t think it’s going to work. It’s just going to escalate the conflict with gangs attacking the military and policeofficers,”hesays. Many, like Ms Gómez, one of El Salva￾dor’s growing number of evangelical Christians, believe the answer is in prayer. It is a sentiment shared by Monsignor Rafael Urrutia, who has long pressed the case for beatification of the assassinated archbishop despite Vatican concerns his sympathies were Marxist. Pope Francis finally speeded up the process on his election. “I think the intercession of Msgr Romero can help us reach peace,” he says. El Salvador Pilgrims hail archbishop but gang wars put the peace he diedfor out of reach Catholics celebrate the beatification of the slain Archbishop Romero — AFP/AP 300,000 Number of people who attended Oscar Romero’s beatification 22 Average number of deaths a day in El Salvador MAY 25 2015 Section:World Time: 24/5/2015 - 18:25 User: jamesa Page Name: WORLD3, Part,Page,Edition: LON, 6, 1

Monday 25 May 2015 ★ FINANCIAL TIMES 7 Large parts of the capital, Port-au-Prince, have been rebuilt since the devastating 2010 earthquake, but it is proving more difficult to install the institutions needed to ensure the country’s economic future. By AndrewJack and Andres Schipani Time is running out for Timothée, who stands on the Dominican Republic side of the border bridge at Dajabon, awaiting buyers for the cheap goods in his rickety wheelbarrow. An ethnic Haitian, he was born in the Dominican Republic but has no way to prove it. “I feel Dominican, I am Dominican,” he says. “But soon, I could be left without the little I have and be sent to Haiti because I have none of the documents they ask for.” The two countries on Hispaniola share a tumultuous history, exemplified by the River Massacre flowing beneath him, where bodies were dumped after the killing of thousands of Haitians in 1937. Today, relations between the countries are again straining. The Dominican Republic has long considered anyone born in the country a national. But its Constitutional Court ruled in 2013 that children of immigrants do not qualify. Among those affected are the children of Haitian migrants, some of whom do not speak its national languages of Creole and French. “There are thousands of ethnic Haitians who consider themselves Dominicans but are at risk of becoming stateless,” says Gregoire Goodstein, chief of the International Organisation for Migration in Haiti. The deadline for expulsions is June 17 and up to 220,000 people — among the 800,000 Haitians living in the more prosperous Dominican Republic — are at risk of becoming stateless. Another 300,000 may be expelled as illegals. The government of President Danilo Medina appears to have increased repatriations of people of Haitian descent, says Michel Alcimé, coordinator of Solidarite Fwontalyè, a rights group, pointing to 512 cases in a single day in March. “There have been abuses, flags have been burnt, a murdered Haitian was hanged from a tree,” he says. “There are people adding fuel to the fire with extremist rhetoric.” A potential mass deportation could turn nasty by the hurricane season at the start of the summer, warns Mr Goodstein: “When it floods municipal authorities can hardly accommodate those locally displaced. If we add thousands of migrants forcibly returned from the Dominican Republic, we could face a serious crisis.” Little neighbourly love Dominican Republic set to deport thousands to Haiti A t first glance, the Iron Mar￾ket in Port-au-Prince is a monumenttoarenaissance in Haiti. With its restored Victorian-era brickwork and metal roof shielding dozens of bus￾tling vendors from the sun, it symbol￾isesrenewedenergyandinvestmentina country devastated just five years ago by an earthquake so severe it left 230,000 people dead. Yet the building with four minarets at the heart of the capital also highlights the frailty of the country and its continued dependence onfickleforeigninfluence. Bought in France in the late-19th cen￾tury, the historic structure fell into dis￾repair long before 2010. Restored after the earthquake with an $18m donation from Denis O’Brien, an Irish telecoms entrepreneur, the reopened market was inaugurated in 2011 by former US Presi￾dentBillClinton. Away from the shadow of the beauti￾ful façade however, and despite other signs of progress, Haiti remains one of the poorest countries in the world. A World Bank study in April revealed that a quarter of the 10m population live on lessthan$1.23aday There are, however,signs of fresh eco￾nomic activity and political reform, from the recently opened Marriott Hotel hosting foreign business visitors to higher attendance in newly-built state schools and government subsidies for private ones. They signal substantial evolution since the tremors in 2010 that left 1.5m people homeless and destroyed thousands of buildings across thecity. “This government has made tremen￾dous progress,” says Wilson Laleau, minister of finance since 2011. “In four years, there have been an enormous number of things that have changed. We have built roads, bridges and more than 100 schools. There are projects in every community of the republic. Haiti willre-emerge.” The question for local people, bracing for fresh elections this summer, is not if Haiti can repair the short-term physical damage of the earthquake. Instead they want to know whether it can free itself from the cycle of weakness and depend￾ency that contributedto the devastation of the earthquake in the first place: the decades of neglect, weak institutions andthevagariesofforeigninterference. At the same time Haiti faces waning foreign assistance and competition for investment— including from its north￾ern neighbour Cuba following its rap￾prochementwiththeUS. “What I see is lots of talk and good public relations,” says Robert Maguire, professor of the Practice of Interna￾tional Affairs at George Washington University in the US. “If you look at Haiti’s history, those with economic power have always used it for their own benefit and those with political power haveusedittogetaccesstothestate.” Falling behind One striking contrast is with the Domin￾ican Republic, Haiti’s far richer eastern neighbour,with which it shares the Car￾ibbean island of Hispaniola. While both share a heritage of slavery, dictatorship and instability, the Dominican Republic has emerged as far more prosperous over the past half century.In 1960, Haiti had the same income per capita as the Dominican Republic. Since then, the fig￾ure has trebled for its next door neigh￾bourwhileithashalvedforHaiti. JaredDiamond,aprofessorattheUni￾versity of California, Los Angeles, sug￾gested in his book Collapsethat the dif￾ference is down to geography. Haiti’s greater population density in a smaller space, he argues, combined with lower rainfall, less fertile soil and land more difficult to cultivate, led to greater deforestation and declining agricultural productivity. Others point to history. While the Dominican Republic was a Spanish col￾ony that continued to attract invest￾ment and immigration, Haiti was iso￾lated after its fight for independence from France as the world’s first black state in 1804. Yet it continued to be manipulated by foreign powers, from Paris’s continued demands for debt repayment to more recent military interventionsbytheUS. While the Dominican Republic bal￾anced inward investment with authori￾tarianism, even after the assassination of President Rafael Trujillo in 1961, Haiti fell under the more repressive, inward-looking control of Francois “Papa doc” Duvalier and his son “Baby doc” from 1957 until 1986. Many citi￾zens went into exile, depriving their homeland of talent and energy while creating a thriving 4m-strong diaspora intheUS,CanadaandFrance. The period after Jean-Claude Duval￾lier fled in 1986, was littered with putsches and the overthrow of elected leaders including Jean-Bertrand Aris￾tide, who was twice deposed. Leslie Vol￾taire, a former official in his administra￾tion, says: “We had two centuries of oppression for the majority, followed by two decades [up to the mid-2000s] of liberationwithnoorder.” The diaspora still provides one-fifth of national income through some $2bn in remittances sent home to support families. Foreign assistance provides nearly the same proportion again, over￾shadowing the country’s internally-gen￾erated resources and, say observers, underminingitsgovernancesystems. InJanuary,HaitianspicketedtheClin￾ton Foundation in New York to express frustration at what they see as a lack of progress despite billions of dollars pledged since the earthquake. They argue high-profile projects backed by the Foundation, including the Caracol industrial park and the Marriott hotel, have progressed slowly and favoured foreign investors and the country’s elite morethanitsimpoverishedmajority. “However much foreign assistance pours in, there is little chance of Haiti getting on a solid track unless the state can perform its basic functions,” says Michael Shifter, president of Inter￾American Dialogue, a US think-tank. “It can’t be supplanted by other players, evenwell-intentionedones.” Optimists point to significant progress in Haiti since 2010, not least in infrastructure. In 2011, Michel Martelly, a colourful local singer, became presi￾dent, signalling one of the first peaceful political transitions since Haiti’s inde￾pendence. But his relations with parlia￾ment were tense from the start, with a deadlock on legislative reform that led to the dissolution of the National Assembly last year and rule by presi￾dential decree. New elections have now been scheduled for August and a presi￾dentialraceinOctober. Elsewhere security has been stepped up; there has been active encourage￾ment of tourism and textiles — the country’s main export; and building of roadsandlocalcommunityfacilities. Donor shortage Yet Haiti faces obstacles to future growth. One is identifying fresh sources of income. Its tax base remains low, sup￾port from the diaspora is stagnant and moneyfromdonorsisrunningout. “The international community has moved on to other crises like Ebola so Haiti is no longer a priority,” says Gregoire Goodstein, the local head of mission of the International Organisa￾tionforMigration. Annual aid of $1bn before the earth￾quaketrebledafterwardsbutisnowfall￾ing. Agustín Aguerre, head of the Haiti office of the Inter-American Develop￾ment Bank, says: “Some countries have reduced contributions and it’s getting tougher to get new commitments given other crises and tighter economies. Oth￾ers have commitments until 2020. The big question is what happens in 2021? How do we move from a donor-funded economy to a sustainable one managed andgeneratedbyHaitians?” Missedopportunity The largest single windfall for Mr Mar￾telly has been PetroCaribe, a subsidised oil programme provided by Venezuela since 2008, which has added $400m a year to the government budget. Despite some debt forgiveness in 2010, its struc￾ture means the fall in global oil prices has increased repayment terms for Haiti. But with Venezuela now strug￾gling economically, many believe the programmeisunderthreat. Gregory Brandt, chairman of the Pri￾vate Sector Economic Forum, repre￾senting a number of leading companies, says the country is going backwards: “The image of Haiti has improved over the past five years, but if you scratch beneath the surface we are back [in the same place we were in before]the earth￾quake . . . We had a window of opportu￾nity but now Cuba is opening up, the moneywillflyoverustothere.” At less than $200m a year, foreign investment remains modest and unbal￾anced, blocked by heavy bureaucracy, opaque land ownership, and poor qual￾ity roads, electricity and water supplies. “You have Digicel [a telecoms provider owned by Mr O’Brien], Heineken and SeaA [a Korean textiles plant]. There is no number four [investor],” says one internationalofficial. Mostformalemploymentcomesfrom agriculture and low-paid, unskilled work in textile plants. A significant pro￾portion of the economy is still held in the hands of around a dozen local fami￾lies, who have long been viewed as power brokers influencing policy to limit diversification or competition. There are few foreign bankers and local lendingtermsarehigh. There is scant investment in farming and Haiti, which was once self-reliant for rice, is now dependent on purchases from abroad. Domestic production is also under pressure from cut-price chicken, eggs and other products importedfromtheUSandacrossitsbor￾derwiththeDominicanRepublic. Amore fundamental issue for Haiti is its weak institutions: notably the judici￾ary, and checks and balances on the gov￾ernment, which is widely accused of opacity and corruption. Sophie de Caen, chief of the UN Development Pro￾gramme, says: “Investment needs the ruleoflaw.Thereisalongwaytogo.” “Mr Martelly focused on constructing buildings rather than institutions,” says Mr Voltaire. He points to an unusually frank report released by Haiti’s Public Accounts Chamber, which highlighted a lack of transparency around the distri￾butionofPetroCaribefunds.Italsohigh￾lighted how most construction con￾tracts were awarded by the state to a small group of companies without ten￾ders, and that the work was often not completed. Maryse Narcisse, a politician close to Mr Aristide who plans to stand in the presidential elections, calls the report “alarming” and Mr Martelly’s legacy “catastrophic” for Haitians. She warns: “The new governmentwill face a disas￾troussituation.” Many post-earthquake construction projects remain unfinished. But Lau￾rent Lamothe, who was forced out as prime ministerlast year, argues that his administration did what it could to address themost urgent problems after thedisaster. “You do what you can with what you have. The whole country had crumbled, with no construction in years. It was development on a shoestring,” says Mr Lamothe who is standing forthe presi￾dency.“Institution-buildingtakestime.” Risingfrom the rubble FT BIG READ. HAITI Then and now: The Iron Market in Port-au￾Prince after the 2010 disaster and today — Mario Tama/Getty; Allison Shelley/Getty Caribbean Sea VENEZUELA DOMINICAN REPUBLIC COLOMBIA CUBA PUERTO RICO HAITI JAMAICA 200 km Santo Domingo Port-au￾Prince Migrant remittances Source: World Bank % of GDP, 2013 0 5 10 15 20 Haiti Jamaica São Tome and Principe Dominican Republic St Kitts and Nevis Dominica Grenada St Lucia Antigua and Barbuda Trinidad and Tobago GDP per capita Current $, ’000 0 2 4 6 8 10 12 14 16 1960 70 80 90 2000 13 Haiti Dominican Republic Antigua and Barbuda Caribbean small states Jamaica Latin America & Caribbean Aftershocks The 2010 earthquake left 230,000 people dead and 1.5m homeless — a quarter of the 10m population still live on $1.23 per day Funding battle Haiti faces fresh competition for future investment flows — including from its northern neighbour Cuba Under threat A subsidised oil scheme, PetroCaribe, provided by Venezuela, has added $400m a year to Haiti’s budget but may not be renewed MAY 25 2015 Section:Features Time: 24/5/2015 - 19:22 User: allenk Page Name: BIGPAGE, Part,Page,Edition: LON, 7, 1

8 ★ FINANCIAL TIMES Monday 25 May 2015 Letters MONDAY 25 MAY 2015 Email: letters.editor@ft.com or Fax: +44 (0) 20 7873 5938 Include daytime telephone number and full address Corrections: corrections@ft.com In Samuel Beckett’s play, Endgame, one of the two main charactersis unable to stand up and the other is unable to sit down. As a metaphorfor the lopsided relations between the UK and the EU, it sums up perfectly their inability to see eye to eye. It is not for nothing that the editors of Britain and Europe: The Endgame— An Irish Perspectiveraided Beckett for theirtitle. The authors of this clear￾eyed, comprehensive, historically informed and not entirely unsympathetic set of musings, on why the British are so prickly about the EU and what can be done about it, believe the issue is now so serious that both sides are indeed at the endgame. A referendum on the UK’s membership islikely now that the election is over, with the outcome uncertain. “What’s happening now is not just another episode in the saga but its closing scene,” writes Dáithí O’Ceallaigh, Irish ambassador in London from 2001 to 2007.(His co￾editor, Paul Gillespie, is a former Irish Timesforeign policy editor.) That is a downbeat opening assessment of the prospect of a British withdrawal from the EU. But the authorsjustify it. Britain, they argue, can have one of fourfuture relationships with Europe: fully in, half in, half out and fully out. While the second and third scenarios may be the best achievable in present circumstances, the fourth is more likely than the first. It is a given in this book— and in official circlesin Dublin —that a UK withdrawal from the EU is emphatically not in Irish interests. It could revive the border between the Republic and Northern Ireland — which, while largely symbolic today, is still a legal and political fact. It would complicate trading relations, which are flourishing. It would erect an invisible but awkward barrier between two countries with centuries of cultural, social and other ties. And it could undermine the brittle but enduring peace in the north. The authors’ purpose is to show how the UK and the EU arrived here, and how they can retreat from it. On the latter their argument is that it is worth the EU’s while to make it worth Britain’s while to remain a member, even if a semi-detached one. And Ireland, they argue, can play a critical role in facilitating this outcome. They cite three occasions on which the Irish brokered compromises at European summits that enabled British prime ministers to snatch successfrom the jaws of defeat: for Harold Wilson in 1975; Margaret Thatcher in 1984; and John Major in 1991. Moreover, many EU countries and the Brusselsinstitutions “trust Ireland’s bona fidesin the search for a compromise and would accept its interpretation of UK policy”. Brokering a new relationship between the UK and the EU will be a formidable challenge for Ireland’s diplomatsin London and Brussels. The EU isshrinking to its core in the eurozone, which the UK looks unlikely ever to join. But the authors suggest a strategy: creating complementary “cores” on issues close to UK interests such as capital markets, security and energy. In other words, offer the British incentives to remain in the EU. This raises two questions. Willsuch incentives be enough not just to keep Britain in but to change itsrelations with Brusselsfrom antagonism to constructive engagement? And do the authors overstate their case that Brexit would be a disasterfor Ireland? There are some in Dublin who think England’s latest difficulty will be Ireland’s opportunity— perhaps even reopening the prospect of a united island. The resurgence of the Scottish National party after the UK election suggests that, despite the SNP’s defeat on independence for Scotland, the future of the union is again in question. Scotland leaves the UK and the rump UK is outside the EU. One of the strengths of the Irish position on the UK and Europe, and of this book, is that they give the British a fair hearing. But the authors admit much is uncertain. They raid Beckett(again) for the best way to express this sense of foreboding about something important but unknown, with the exchange between Hamm and Clov, the two characters mentioned above. Hamm asks: “What’s happening?” Clov replies: “Something is taking its course.” Does Prime Minister David Cameron, with his enhanced electoral mandate, have a better answer? A dramatictake onthe prospect of Brexit Book review By Vincent Boland Britain and Europe: Britain and Europ The Endgame An Irish perspective Edited by Dáithí O’Ceallaigh and Paul Gillespie (Institute of International and European Affairs, free download) Well,itwas a niceidea. LastweekUefa, the association of European football governing bodies, signalled it would be watering down the “financialfair play” lawsithasbeen phasinginover the past fewyears. The rules, which limited clubs’ abil￾ity to run at a loss, were aimed at the worthwhile goal of safeguarding their financial resilience.Butwhether or not they actually contributed to that end, they had the serious drawback of entrenchingan existing elite. Someofthe rules, suchasmonitoring of clubs to ensure prompt payment of salaries and taxes, are unobjectionable and should be retained. But when it comes to the strict break-even require￾ments, Uefa is right to pull back from theinitiativeandthinkagain. The principle of the rules was clear. By forcing clubs to break even, they aimed to prevent overspending and putting their solvency in jeopardy. In practice, because they did not count injections of owners’ cash as revenue, they have disadvantaged teams whose benefactorswishto subsidise theirsuc￾cess. Under the rules, Manchester City in the English Premier League and Paris Saint-Germain in the French Ligue 1, bankrolled respectively by the ruling families of the United Arab Emirates and Qatar, have been hit by potentially large fines and restrictions onfieldingplayers. This doesnotmakemuchsense.Uefa can hardly argue that clubs with such beneficent owners are perilously close to financial collapse. Without allowing such injections of cash into previously underperforming teams, football will be only more dominated by elite clubs with an entrenched fan base and mar￾keting income, such as Manchester UnitedandRealMadrid. Manchester United have won the English Premier League a tedious 13 times in its 22 years of operation. Com￾petitionfrom their rivals across townis welcome. One way to have more clubs with self-sustaining revenue models is to allow their owners to invest in their teams. As it happens, the rules apply￾ing to the lower English leagues — which are in fact more susceptible to rogue chairmen overspending and driving clubs into bankruptcy — make more sense. The bottom two leagues of Englishfootball havefor some time had rules preventing clubs from spending more than a certain percentage oftheir turnover on wages. Crucially, however, that turnover can include donations and equity injections. Wealthy owners are thus able to pour money into their outfit to achieve success, enabling the riseof clubslikeFulham. If the football authorities really wanted to promote financial stability and competition, they would need to move towards a model similar to the oval-ball US National Football League. The NFL has strict caps on salary bills, shares revenue between all teams, has no relegation or promotion and gives theworst-performing teams the pick of new players in the subsequent season. But it is a practical impossibility in Europeanfootball,whereitwould have tobeintroducedsimultaneously across all national leagues to prevent one being able to poach allthe best players fromtheothers. It is too late to adopt US-style social￾ism-in-one-sport for European foot￾ball. Nor does Uefa start with a blank slate: itmust take account of the finan￾cial dominance of a small number of elite clubs. Better to accept that the sugar-daddy model of ownership is here to stay and try to foster competi￾tion within it than imposing rules that aim to create stability but in fact merely entrench an elite. The financial fair play rules were well-intentioned buthave seriousdrawbacksin practice. Uefais right towater them down. Uefa’sfinancial fair play rules were well-meaning but misguided A level playing field benefits football’s elite The coming turn in US interest rates may be the most telegraphed in many cycles.Yet for all JanetYellen’s strivings at clarity, the US outlook remains clouded by poor visibility. Last week MsYellen said the Federal Reservewas still likely to raise interest rates this year— possiblyin September—in spite of the sharp slowdown in first-quarter US growth. For one reason or another, including a series of harsh winters, growth in the first three months ofthe year has tended to underperform the rest ofit, often heavily so. TheUS econ￾omy shrank by an annualised 2.9 per cent in the first quarter of 2014 only to rebound in the next three. Hopefully this year’s anaemic 0.2 per cent first quarter expansion will be equally mis￾leading. It would, however, be rash to make assumptions. It is quite possible 2015 will end as it began with US interest rates still on zero. As Ms Yellen put it: “Based on many years of making eco￾nomic projections, I can assure you that any specific projection I write down will turn out to be wrong, per￾hapsmarkedlyso.” Of course, there is a chance her expectations will be wrong on the upside. The Fed is forecasting US growth of 2.5 per cent for the next two years, which is only marginally above the tepid rates achieved since the start of the recovery, which is now about to enter its seventh year. Should unem￾ployment fall to 5per cent bythe endof 2015, wage growth may finally start to pick up, in which case the Fed will probably need to remove the punch bowl. The balance ofrisk is skewed the other way, however. After years of vir￾tually noincome growth,Main Streetis unprepared for positive shocks. It is, for instance, striking that that the US consumer has opted to pocket the recent gains from lower petrol prices rather than boost spending. The same applies to corporateinvestment,which remains disappointingly weak. The US economy’s key growth drivers each seem to be waiting for the other to move first. Investors are reluctant to invest and consumers are hesitant to spend. What will it take to stoke their animalspirits? Ms Yellen’s candour on the limits of what monetary policy can do is also striking. The Fed has kept its pedal to the floor for seven straight years. Yet US growth since the collapse of Leh￾man Brothers in 2008 has consistently undershot previous recoveries. According toHSBC, average US growth in the seven years from the previous peak was 3.5 per cent after 1981, 3.1 per cent after 1990, 2.1 per cent after 2000 and 1.1 per cent since 2007. The direction is unmistakable. Some economists are even talking of a “great reset” that will require the US to adjust downwards to Japan-stylegrowth.That is probably too gloomy. America has repaired its balance sheet far more rapidly than Japan did in 1990s and its demographic outlook is far healthier. The US also remains the mostinnovative economy in theworld. Yet the growth outlook remains checked by a very un-American sense ofpessimism. If, as expected, US growth rebounds in the next twoquarters,MsYellenmay have little choice but to raise rates in September or shortly afterwards. America’s troublingly low labourforce participation rate gives her little lee￾wayto do otherwise. But the turnin the US cycle is likely to be shallow and moderate. It may take years to return to trend interestrates. As Mohammed El-Erian put it, the US is readying for the “loosest tightening in the modern history of central banking”. In an era of tentative forecasts, that is probably as close to certaintyaswewill get. US Fed is wise to keep its options open at a time of very mixed data America’s disappointing economic recovery Sir, Michael Mackenzie is judicious to put dysfunctional cultural norms centre stage of the latest chilling episode of systemic criminality by our global banks(“Light falls on culture of impunity and immunity”, News, May 21). The story unravelling before us is one of criminal minds working together to circumvent and deceive regulatory authorities that would leave any “normal” industry quaking in its boots. That these banks are already regulated to the hilt and that the objective of these crimes was to seek profit at the expense of direct trusting customers, demonstrates how deeply ingrained this criminal culture has become. Like any unwitting victim, one can only imagine the sense of anger and dismay felt among investors. And shareholders, once again, have been given a shrill reminder of the lack of alignment between their own interests and those of the institutions they chose and trusted to represent them. But it is ironic that the biggest victim of these crimes will be the financial system itself that rewards these bankers so handsomely. There are many working in financial services, myself included, who argue that global capital markets have the potential not only to create wealth, opportunity and new markets where there is none, but also to hold the key to tackling some of the most intractable social and environmental issues that humanity faces today. For as long as the “dark underbelly” Mr Mackenzie refers to persists, our otherwise impenetrable argument will never be won. Paul Robinson Chief Executive, Alquity Investment Management London WC2, UK Sir, Martin Arnold sketches how banks brazenly fixed forex and other markets to fleece their clients over five years (“Barclays admits rigging the market”, May 21) and Lex sharply observes that the fines are unlikely to stop risky behaviour(“Bank fines: the wrong reaction”, May 21). Neither commentatorsurmises whetherthe cost of cheating was worth the revenues gained over five years. Does crime pay? Geoffrey Ridley Barrow Hammond, IN, US Banks betray investors as well asfinancial sector COMMENT ON FT.COM The World blog Isis’s takeover of Palmyra evokes mixed emotions among Syrians, says Sam al-Refaie www.ft.com/theworld Café culture in Warsaw, but Michelin starred venues are harder to find Innovation and scale fuel growth in Big Pharma Sir, Andrew Ward’s analysis (“GlaxoSmithKline: Out of step”, May 12) is balanced and spot on. The current strategy to rely on large￾volume commodity products and expect rewardsfrom innovation is not coherent. Especially with the decision to exit the high-demand oncology business. The UK is a leader in oncology research as is evident by work in basic and translationalsciences at Cancer Research UK and the Institute for Cancer Research. They, among others, are the envy of pharmaceutical companies in Europe, US and Japan. GSK has missed the huge, relevant and timely opportunity in its backyard. A large-volume, affordably priced strategy requires scale but an innovative strategy focused on oncology, for example, requires focused and institutional R&D. It is the commodity market that is crowded and price sensitive, not the market for innovation. Therefore to argue that GSK lacks the scale to compete in the oncology market(which is not crowded), but finds strength in vaccines and consumer healthcare, is to miss the point. Accordingly, it is unlikely that GSK’s “fundamental shift” in strategy will lead to a revival of growth. The shift in focusfrom innovative prescription medicines to large markets, and affordably priced products, makes sense if the products represent meaningful clinical differentiation; if not, it is a descent to a generics mindset, not a revenue￾defined turnaround. A company needs scale to compete in global commodity markets but requires innovation to succeed in high-demand markets. And, true innovation can be a successin both. All elementsfor a real revival in growth are in place. Michael Fernandes Managing director, Medbase Chapel Hill, NC, USA The cashless society is hundreds of years away Sir, You report that total cash transactions by consumers and businesses last yearfell below 50 per cent for the first time (“Notes and coins eclipsed by dash for non-cash”, May 21). But using the Payments Council’s own figures and assuming a constant rate of decline, I have calculated that cash will be around until approximately 2353. Cash isfor the most part free to access, easy to use, universally accepted and offers retailers the added benefit of carrying lower processing costs than cards. Like the paperless office, the cashless society is some way off. Paul Adams Chief Executive, Glory Global Solutions London WC2, UK Tough consequences of the pretence on Greece Sir, With Greece on the brink of default (News, May 23), it is time to look for a solution and avoid a Lehman-like financial panic. The financial condition of Greece is not at all different from that of the past few years. The only new factor is that the Greeks chose a government that stopped pretending that it would one day be possible to repay its debt mountain. The solution is obvious: Europe should pretend that Greece never stopped pretending and loan it the money it needs to repay its debt. This would allow the rest of the world to keep on pretending another few years that all isfine. Luk Delboo Horebeke, Belgium European business always suffers from uncertainties Sir, There is much talk about the promised EU referendum causing business uncertainty (The Big Read, May 21). When has business ever been certain? And, if you do not like uncertainty, maybe you should not be in business. Also, is the certainty we have concerning Europe worth having — remember that key European leaders gave us a nightmare called the euro. There was great pressure from “business leaders” to join the euro as it ‘would end uncertainty associated with a fluctuating currency’. Martin Hewes Hewes & Associates Haselmere, Surrey Referendum debate needs fair and clear voices Sir, I am sure I am not alone in thinking the article by Gérard Errera (Comment, May 19)the epitome of clarity, fairness and accuracy. Written in concise English, it is exactly the kind of thing we should have been reading from the UK’s politicians since the moment David Cameron promised the referendum. The anti-Europe lobby will no doubt use the fact that Mr Errera is French as sufficient evidence of bias or wrongheadedness. The rest of us should recognise the piece for what it is: wise words. Reg Green Overijse, Belgium Displays of empathy help defuse a reputational crisis Sir, Your opinion piece on Thomas Cook (Lombard, May 21) was spot on. With the public outrage continuing, with Mumsnet pulling Thomas Cook adverts and a backlash on social media, we see once more the fallout from chief executives who continue to take the advice of their legal teams over and above the communications person sat at the top table. Companies and lawyers may not wish to admit culpability but they can show empathy, the number one rule in dealing with this kind of tragedy. History is littered with companies who have failed altogether or who limp along with damaged reputations and share prices because of the way they are perceived to have managed such situations. The reverse is true forthose who show humanity; Richard Branson is often a case in point. While the communications director is the guardian of the firm’s reputation it is for all the executive to take it seriously and listen to those who offer wise counsel on the issue. Maria Darby-Walker London NW3, UK Regulator’s report on HBOS is long overdue Sir, In December 2012 the Financial Times called the collapse of HBOS “the UK’sforgotten banking disaster”. Two and a half years on from that comment — and nearly six years from the event itself— there is still no sign of the official report from the Financial Conduct Authority on why it happened and who was to blame. The unwillingness of the regulators to examine their own conduct has been marked. Originally the Financial Services Authority, which was the responsible body at the time, intended that its report remain internal. It had to be shamed into agreeing to publish it by the House of Commons Treasury Committee, but that never happened; the FSA was abolished before the report appeared. The FCA, which took over from the FSA, has steadfastly refused to set a date for publication and still declines to do so, hiding behind the so-called “Maxwellisation” process that allows individuals criticised in official reports to hire expensive lawyers to delay publication indefinitely. No such inhibitions held back the Parliamentary Commission on Banking Standards, which is the only organisation to name the guilty men and attempt to draw lessonsfor the future from the debacle. In seven months it produced a report, which was both readable and incisive. Yet it had no power to fine anyone, nor to ban individuals from working in financial services. So we have Mike Ellis, who was finance director of HBOS at the time of itsfailure, being authorised by the FCA to be chairman of Skipton Building Society. Of its £54bn total losses, HBOS lost £7bn on its mortgage book. If before approving Mr Ellis for his present role the FCA satisfied itself that he was not in any way responsible for any of those losses, surely it should publish the evidence? The collapse ofHBOS and the subsequent disastrous takeover by Lloyd’s cost the taxpayer £20bn, money that we are only just recouping now. Some 40,000 employees have lost their jobs and several million shareholders — many employee shareholders or smallsavers who got sharesin the demutualisation of Halifax Building Society — have lost most of their investment. In some cases it was their life savings. They are owed an explanation of what went wrong and who was to blame. Ray Perman Edinburgh EH7, UK Warsaw deprived of a glut of top-end restaurants Sir, as part of the “elite” happening to drive German cars in Poland (“Polish voters poised to punish government that delivered prosperity”, May 21), I would like to regretfully point out that there is only one Michelin-starred restaurant in Warsaw. Even worse: the one in Warsaw is the only one in Poland. Marco Bartolini Milan, Italy

Monday 25 May 2015 ★ FINANCIAL TIMES 9 I t is all up toAlexis Tsiprasnow. The Greek prime minister will decide soon whether or not he wants a deal with his creditors that would allow Athens to service its debt. If he says “no”,Greecewilldefault.Atthatpoint,it is possible the countrywill have to leave theeurozone. What should he do? He will know his own political constraints. I will focus on the economics. The short answer is: if the deal is reasonable, he should accept. So where is the line between reasonable andunreasonable? The rough answer is whatever it takes to end the uncertainty. No investor is going to put their money into Greece so long as there is a threat of Grexit — a Greek exit from the eurozone. For an agreement to be viable, it would need to reduce the probability of Grexit to zero. ness acumen to open up new markets. What is good for Google is good for America—andtheworld. But there are hidden costs. Ponder how Google and Facebook, are interact￾ing with you. In exchange for free social networking, emails, videos, search, sat￾ellite maps and now telephone calls, they are building your profile in ever moregranulardetail. Without really digesting it, we have made a Faustian bargain. They give us free computing power — beyond our wildest imagination — and we reveal ever more about ourselves. The more Google knows about you, the better it teases out preferences you never real￾isedyouhad. It is an asymmetric exchange. Big Data has our profiles but few of us know how extensive that is. It is the informa￾tion equivalent ofWalmart. The big box retailer drove countless Mom and Pop storestothewallbyacquiringevermore pricing leverage. The job losses went deep, and some of the victims were cus￾tomers.Themodelisself-cannibalising. Apply the Walmart example to the data industry. We now receive most of our content for free (like Asterix against the Romans, the FT, among others, is holding out). Producers of content are suffering. By the end of this decade, most of the world’s books will have been uploaded to Google’s online library. The com￾pany’sswayoverourcultureandknowl￾edge will be unprecedented. Should we charge Big Data for our personal data? Jeff Hammerbacher, former head of data at Facebook, said: “The best minds of my generation are thinking about how to make people click ads.” In a par￾allel universe, they might be figuring out something more noteworthy. But what they do brings us untold benefits. Evildoesnotcomeintoit. We should nevertheless embrace the bargain with open eyes. We are not Big Data’s customers but its product. As long as we grasp that we users are also beingused,lettheharvestcontinue. edward.luce@ft.com But there are other sides to this story. The first is that Google’s chief complain￾ants are US companies. This is not a transatlantic spat. It just so happens that Brussels has a tougher competition regime. Yelp, Microsoft, Expedia and others have complained both to Brussels and Washington’s Federal Trade Commis￾sion about Google’s alleged anti-com￾petitive practices. Indeed, in a 2012 report, the FTC’s own staff recom￾mended action on three counts against Google for conduct that had resulted in “real harm to consumers and to innova￾tion”. Google had been presenting con￾tent “scraped” from other sites as its own. It had also been privileging its own commercial sites in search results — a clear conflict of interest. However, the FTC’s commissioners rejected their staff’s conclusions. It might have been different had the probe been carried out by the Department of Justice, as was the case with Microsoft, which was penal￾ised on both sides of the Atlantic more thanadecadeago. Not even Goldman Sachs can match Google’s lobbying clout nowadays. When the report was leaked to the Wall Street Journal in March, Google cajoled the FTC into distancing itself from its ownconclusions. The idea that US regulators had in fact agreed with their EU counterparts was too dangerous. Johanna Shelton, Google’s chief lobbyist, has visited the White House more than 100 times. Eric Schmidt, Google’s chairman, is closer to President Barack Obama than any other business leader. Google even has its own “data diplomacy” outfit, Google Ideas, which is headed by a former state department official. It combines data initiatives against autocracies with busi￾W elcome, customers, to thiscolumn.Iwritearti￾cles and you subscribe to the FT and tell me how wrong I am (to be fair, some of your are kinder). Now, let us imagine you read this piece, or other FT content, for free on Facebook or Google. It is a far sweeter deal, right? You get something for nothing and Big Data can bask in its own beneficence. Apply that to any amount of diverse content. Rarely in the history of human knowledge have so few offered so much tosomanyfornothing. That, at least, is the story most of us have downloaded. In the rare cases where an entity — such as the European Commission, which is probing Google’s alleged abuse of its dominant position — raises objections, the obloquy is instant. Google, the US government and others accuse Brussels of thinly veiled protec￾tionism. If Europe could innovate like the US, perhaps it would spend less time trying to bring others down. There is a reason Google’s motto is “Don’t be evil”. It invests in ways of bringing ever more knowledgetohumankind. Peter Thiel, a co-founder of PayPal, describes Google as a benign monopoly. If it encountered real competition, its research and development budget would vanish — and with it the self-driv￾ing car,wearable computers, “loon bal￾loons” beaming cellular data from the stratosphere and so on. We should appreciate the upside to its dominance. Google’s monopoly returns enable it to fund the equivalent of AT&T’s legen￾dary Bell Labs, or Xerox Park, which made so many breakthroughs. Besides, the data industry’s barriers to entry are low.Thedisrupterscanbedisrupted. It is true that certain countries have mixed feelings and have yet to make up their minds about joining. If it is old￾fashioned geopolitics that is still bother￾ing them, I would suggest they turn to the observation of another respected strategist. In the 1990s, Zbigniew Brzezinski,theformerUSnationalsecu￾rity adviser, compared the world to a grand chessboard and regarded Eurasia as the most important geopolitical cen￾tre.Intriguingly, he envisaged“the inev￾itably emerging transportation network meant to link more directly Eurasia’s richest and most industrious western andeasternextremities”. The proposed Belt and Road initiative has gone way beyond Mr Brzezinski’s prediction. It means more than just a “transportation network” that will bring Europe and Asia ever more closely to each other. It will bring development and prosperity to the whole of Eurasia — andeverycountrywillstandtobenefit. The writer is China’s ambassador to Britain China is also workingwith central and eastern European countries on the pos￾sibility of a new land and maritime cor￾ridor linking the Hungary-Serbia high￾speed railway to the port of Piraeus in Greece. The blueprint and visions for this initiative are a far cry from monop￾oly or dominance. On the contrary, China welcomes contracting and sub￾contracting by all countries as well as effortstobuildfinancingplatforms. One such platform is the Asia Infra￾structure Investment Bank (AIIB), which has attracted much attention recently. Far from being a replacement, the AIIB is a supplement to existing multilateral development institutions. It will operate within the global eco￾nomic and financial framework, and follow established international prac￾tices. The UK’s decision to be the first of the G7 group of developed nations to join the AIIB is commendable and not without reason. It was soon followed by other European countries who also saw thebusinessopportunitiesitoffered. countries along these two routes — from western China to eastern Europe; from SoutheastAsia to east Africa— are gen￾erally in need of economic develop￾ment. The world could help them to develop and once again become a thor￾oughfarelinkingEuropeandAsia. The Belt and Road initiative is China’s idea and everyone’s opportunity. China intends to use its strength in infrastruc￾ture construction and financial resourcestopromotethisproject.When visiting Pakistan last month, President Xi expressed support for an economic corridor between the two countries comprising energy, infrastructure and industrialco-operation. Some question whether thisis a bid by China for greater land and maritime power in response to the US pivot to Asia.Otherswonderwhetheritisdriven by economic self-interest — a bid to off￾set overcapacity at home or to secure a bigger say in the global financial system. What the sceptics fail to see is that the Chinese mind is never programmed around geopolitical or geoeconomic theory. As Confucius said: “He who wants success should enable others to succeed.” And the initiative of “One Belt, One Road”,short for the Silk Road Economic Belt and the 21st-century Maritime Silk Road, is an offer of a ride on China’s economic express train. It is a public product for the good of the whole world. As President Xi Jinping has said, China will co-operate with countries along the route so that everyone will benefitfromitsdevelopment. Historically, there were two trade routes, on land and at sea, extending fromChina all the way to Europe. Goods and ideas flowed both ways. Today, the A century ago, Sir Halford Mackinder, the British geographer and politician credited as the father of western geopolitics, asserted that: “Who rules East Europe commands the Heartland; Who rules the Heartland commands the World Island; Who rules the World Island com￾mandstheWorld.” Mackinder’stheorycaptivatedgener￾ations of geo-strategists who saw Eura￾sia as the “heartland” of the world’s most populous and pivotal region. More recently, however, it has prompted needless scepticism about China’s new Silk Roadinitiative, which will weave its way westwards through Eurasia on both landandonsea. The same applies to the policies needed if Mr Tsipras says “no”. On that day he wouldneedabrillianteconomicplan. So what economic criteria should he applytoevaluateanyoffer? The single most important part of the agreement concerns the fiscal adjust￾ment that Greece’s creditors are asking Athens to undertake. The variable to look out for is theprimary surplus—the fiscal balance before payment of inter￾est on debt: essentially the money a country has for debt servicing. There is no such thing as an objectively right or wrong number. But experience shows that large primary surpluses are politi￾cally unsustainable. It was the unsus￾tainability of the previous agreement between Greece, its European creditors and the International Monetary Fund thatbroughtSyrizatopower. I heard a respected expert on this issue recently proclaim that a primary surplus of 2.5 per cent of gross domestic product would probably work. The Greeks have demanded 1.5 per cent, which is a reasonable opening bid. One of the so-called “non-papers” — the doc￾uments officials leak without leaving fingerprints — that are circulating among the negotiators had mentioned a figure of 3.5 per cent, which strikes me as too high.A primary surplus of 4.5 per cent, as was demanded from 2016 onwards by the previous loan agree￾ment,isplainlyludicrous. Greek economic mismanagement brought about the crisis in 2010, but the creditors are responsible for the current mess by insisting on an economically illiterate adjustment programme. They had not taken into account the fact that Greece is a relatively closed economy. This means that most of its GDP is pro￾duced and consumed at home. If you force such an economy into extreme austerity during a recession, it stays trapped. The key to a Greek economic revival has to be an end to austerity. This is why Grexit is not necessarily a solution, either, since it might bring even more fiscal consolidation. Greece would be cut off from international cap￾italmarketsandunable torunadeficit. What should happen now is what should have happened in 2010 and 2012 when the first and second Greek loan programmes were agreed. Athens should have been allowed to default. Instead, the creditors offered the coun￾try a dangerous pact: we help you roll over the debt; you run excessive pri￾marysurplusesinthefuture. What would happen if Mr Tsipras was presented with such a choice again, and accepted? Greece would survive the summer without default but would require a third programme of financial help partly because its public finances have deteriorated so much since Janu￾ary. The probability that this process will derail at some point ishigh. So is the probabilitythatinvestorsknowthis. This is why I am sceptical about another round of extend-and-pretend dishonesty where governments or banks grant loans in the full knowledge that they will never be repaid It did work once. A year ago, investors were nearly euphoric. Greece regained access to financial markets. Real growth had briefly turned positive. But do they reallythinktheycanrepeatthistrick? I doubt it. I see three plausible recov￾eryscenarios.First,Greecemaysecurea credible deal with a primary surplus demand the right side of crazy. For this to work, such a deal would need the political backing of Mr Tsipras, the Greek parliament and Greek society. It would need to be opposition-proof because the deal still has to stand even if thegovernmentweretochange. A second scenario would be to allow Greece to default on its debt, for credi￾tors to stop any further sovereign trans￾fers and for the eurozone to take over the equity of the Greek banking system. If the Greek banks are no longer owned domestically and guaranteed by the government, there is no way Greece could ever be forced to leave the euro￾zone.Acollapseofthebankingsystemis thereasonGrexitcouldhappen. And, finally, another way to get rid of Grexit fears would be Grexit itself. I would not favour this option. But credi￾tors should know that it is no more irra￾tionalthanimposingfurtherausterity. munchau@eurointelligence.com Big Data’s infinite harvest They give us free computing power and we reveal ever more about ourselves You can fool all of the people some of the time; a year ago, investors were nearly euphoric Take the new Silk Road as an opportunity not a threat OPINION Liu Xiaoming China intends to use its strength in construction and financial resources to promote this project T he conflict at the heart of Germany’s energy policy is coming to a head. Can Ger￾many claim to be an envi￾ronmental leader while still burning more coal than any other devel￾opedcountryapartfromtheUS? The issue is easier to describe than to resolve. Germany has led the EU in adopting “green” policies, including the promotion and subsidy of renewables. Energy consumers, including industry, have tolerated ever-rising energy costs. The process of closing Germany’s nuclear power stations by 2022 has begun. These policies enjoy support across the political spectrum — the Green party won just 7.3 per cent of the vote in the last federal election but green ideas now permeate the thinking of all parties. The coalition between the Christian Democrats and the Social Democrats is committed to reduce emissionsby40percentby2020,70per cent by 2040 and 80 to 95 per cent by 2050. The German approach is being exported to Brussels with a drive under the European Commission to shape an EUenergypolicyalongthe samelines. But the country is not as pure and green as the rhetoric suggests. Emis￾sions have risen over the past three years. Renewables have also grown, but 44 per cent of electricity still comes from coal, in particular carbon-inten￾sive lignite or brown coal; coal-fired power plants account for a third of all emissions. The decision to close the nuclear sector after the Fukushima accident in Japan opened the door to a rise in coal consumption. Between 2011 and 2015,there will be more than 10GW of new coal-fired capacity. Nor has Ger￾many supported the key steps that could cut emissions, such as the estab￾lishmentofaneffectivecarbonprice. Finally, however, the problem is being addressed. The government is applying US-style regulatory tactics to reduce emissions from coal-powered plants by setting ever higher standards. Under the plan announced by Sigmar Gabriel, the economics and energy minister, the rules will eliminate some 22m tonnes of carbon emissions and allow the country tomeetitstargetsfor2020. The question is whether the plan will go through or if Mr Gabriel, whose SPD depends on trade union support, will back down. The opposition isled by the utilities — which are finding it ever harder to justify continued investment in the sector — with strong support from workers particularly in regions such as North Rhine-Westphalia and Saxony, where coal-fired plants are concen￾trated. Three weeks ago, 13,500 people marched through Berlin in defence of brown coal, claiming 100,000 jobs were at risk — a figure Mr Gabriel denies. The opposition has some support in Chan￾cellor Angela Merkel’s CDU party, not least from those who emphasise the cost of the energy transition — €134bn on some recent estimates. As yet no serious politician has been bold enough to chal￾lengethecoreenvironmentalagenda. The argument highlights the green agenda as one of the key faultlines of European politics, one that cuts across traditional dividing lines.In some coun￾tries, such as France and the UK, the main issue is shale gas development; in others it is nuclear power. Climate change is the backdrop butthe issues at stake are also about the immediate local environment. In political terms, the decision on what happens to coal is a crucial test of will between two of the key forces in German society — the green movement on one side and industry and the unions on the other. The momentum that has been with the greens is being tested. The outcome matters beyond Germany. If the measures against coal go ahead there is every chance something similar willbeappliedacrosstheEU.Ifthe trade unions and the utilities win we may be seeing the turning point — the moment at which the green agenda reaches the limits of the possible in terms of the sac￾rifices electorates are prepared to make. The writer is visiting professor and chair of the Kings Policy Institute at Kings College London Germany’s decision on coal brings a clash of wills OPINION Nick Butler The argument highlights the green agenda as one of the key faultlines of European politics The fate of Greece lies in Tsipras’s hands Matt Kenyon Comment AMERICA Edward Luce EUROPE Wolfgang Münchau MAY 25 2015 Section:Features Time: 24/5/2015 - 20:15 User: allenk Page Name: COMMENT, Part,Page,Edition: LON, 9, 1

10 ★ FINANCIAL TIMES Monday 25 May 2015 BUSINESS EDUCATION Cardinals attend the Easter vigil mass given by Pope Francis at St Peter’s Basilica in Vatican City — Franco Origlia/Getty Images The introduction of a business school training course for senior clergy in the Church of England (CoE) has proved controversial, sparking complaints that teaching management techniques would be at the expense of learning pastoral skills, writes Jonathan Moules. In 2014, the CoE worked with Cam￾bridge’s Judge Business School to developaweek-longcoursefordeansof cathedrals and heads of larger churches, teaching skills necessary to better manage their operations, such as reading a balance sheet, strategic plan￾ning and overseeing marketing cam￾paigns. The proposals for the “mini MBA” qualification upset some bishopswhen they were first set out in a report for the church, chaired by Lord Green, former HSBC chairman and a practising Chris￾tian. However, now the first pro￾gramme has finished, many of the 28 people who took part have praised the course, including some who claimtheir initial scepticism about its value was subsequentlyassuaged. Catherine Ogle, dean of Birmingham Cathedral, admits to having had con￾cerns that the teaching would not be put in a theological context, but says theseliftedafterstartingthecourse. “When talking about models for what success looked like, for example, we had to reflect as we went on that we follow a saviour who was not successful in lots of ways in that he didn’t earn much and was a failure in that he died young. The teachers worked with this rather than allowing those views to be subverted,”shesays. Pete Wilcox, dean of Liverpool Cathedral, who helped with the crea￾tion of Lord Green’s report, was already a convert to the merits of formal train￾ing before attending Judge. However, Judge was his first experience of busi￾nessschool. “We are like a small or medium sized enterprise but we need to juggle more things than most businesses,” Mr Wil￾cox says. “That is the beauty of cathe￾drallife.” Liverpool’s cathedral has a turnover in excess of £4m and about 80 people on its payroll. Its activities include a food bank, a volunteer programme for the unemployed and schools out￾reach work, as well as a schedule of daily worship services, all of which require budgeting, planning and mar￾ketingskills,MrWilcoxnotes. “Ask any dean what the deficit is in their training and they will say they find themselves effectively managing a small business and that is where theyknowtheyneedtraining.” Mr Wilcox claims he was particu￾larly impressed with the degree of preparation completed ahead of les￾sons by his tutors at Judge. “The chap who did the session on finance had downloaded our set of cathedral accounts and had created a set of fic￾tional accounts that was credible to useintheclassroom. “Virtually as a mantra, each lec￾turer started by saying I am not an expert in cathedrals or churches so this is going to be a conversation. That established a good learning environ￾ment.” The cost of the CoE training pro￾gramme at Judge has been put at £2m between now and the end of 2016, plus £785,000 a year after that. The first programme, run in March, will now be repeated for a second group of cathedraldeansnextJanuary. Sceptics of Church of England course reappraisetheir views P ope Francis’s clean up of the Catholic Church’s finances is extending far beyond the wallsofVaticanCity. In a first for the Catholic Church, Rome’s Pontifical Lateran Uni￾versity, a hub of teaching for Catholic clergy, has started a course to teach priests and the laity management and financeskills. Organisers say that it is the latest demonstration of Pope Francis’s desire to overhaul Church finances, and the demand forleaders to be better trained to respond to the Church’s economic needs. “The Pope has shone a light on the importance of good management not only at the Vatican Bank but across par￾ishes,” says Charles Zech, faculty direc￾tor for the Center for Church Manage￾ment and Business Ethics (CCMBE) at Villanova School of Business in the US. InpartnersipwiththePontificalLateran University (PUL) in Rome, it is running the programme during the second year of its International School of Pastoral Management. The move follows strides taken by the Church under Pope Francis to shake off a reputation as a murky haven for illicit behaviour from tax evasion to money laundering. Pope Francis has driven reform of the Institute for Religious Works (IOR) — informally known as the Vatican Bank — which has been shrouded in contro￾versy since its founding during the sec￾ondworldwar. His overhaul of the Vatican’s finances has extended from empowering lay spe￾cialists to regulate the city state’s finan￾cial structure and run its bank, to creat￾ing an economic ministry to unify the administration, which has long been characterised by a lack of transparency andcompartmentalisation. Most recently, the Vatican also struck an agreement with Italian authorities to enddecadesofsecretbanking. But church experts say the new course by the PUL is significant because it demonstrates the Pope’s recognition that Church management needs a dra￾matic upgrade at all levels, not just in the Vatican Bank and the Curia. By instructing thePUL to institute this pro￾gramme, he is sending another not-so￾subtle message that finances matter to theVatican. In an investigation that Prof Zech led severalyearsagointoabouthalfofallUS parishes, 85 per cent of them reported finding some embezzlement. Many did a limited audit of their finances, and a fifth of those he surveyed did not do any at all. “It is a huge problem to the credi￾bilityofCatholics,”hesays. The first cohort of students from the PUL began their 15-week programme in February. This will include a week￾long residency at Villanova in April 2016. According to ProfZech,Villanova will provideonlineandin-personeducation, alongside professors from the PUL, to students from around the world. An annual, one-week summer programme will also be established on the US cam￾pus and a series of twice yearly interna￾tional research conferences on church management will take place in Rome andtheUS. A desire to professionalise the admin￾istration of the Church also comes as its leaders in the US and Europe seek to reshape the administration of parishes amidfallingnumbersofpriests. In a move that shook the wider Catho￾lic Church, last year Cardinal Timothy Dolan of New York was forced to merge more than 100 parishes as falling num￾bers of clergy had made them impossi￾bletosustain. As part of the shake-up to allow priests to concentrate on their “day job”, lay managers took over the “temporal” side of church business, leaving it up to theclergytofocusonthespiritualside. For the time being, these lay adminis￾trative roles are often done voluntarily by retirees or as a second career that is usuallylowlypaid. But the professionalisation of the Church’s administration is a trend Prof Zech sees continuing under the guid￾ance of Pope Francis, and also because of the wider modernisation of the Cath￾olic Church and a push for greater transparency. Catholic Church under scrutiny Mission to overhaul clergy finances triggers training, reports Rachel Sanderson Pope Francis has shone a light on the importance of good management across parishes MAY 25 2015 Section:World Time: 24/5/2015 - 18:44 User: tosicc Page Name: BusEd1, Part,Page,Edition: LON, 10, 1