The Economist - April 28 - 4 May 2012

321 Pages·2009·12.07 MB·English

The world this week
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The world this week

Politics this week
Business this week
KAL's cartoon
Politics this week
François Hollande, the Socialist candidate, topped the first round of France’s
presidential election, with 29% of the vote. Nicolas Sarkozy, the incumbent, got
27%. The pair will contest a second round on May 6th, which Mr Hollande is the
firm favourite to win. Mr Sarkozy set about courting the 18% of voters who
backed the National Front’s Marine Le Pen, while Mr Hollande rattled Germany
by saying that he wanted changes to the euro zone’s fiscal pact. Meanwhile,
Mario Draghi, president of the European Central Bank, called for a “growth
compact”. See article
The government of the Netherlands collapsed after Geert Wilders, a rightwing
populist whose Freedom Party had supported the coalition in parliament,
withdrew from budget talks. Mark Rutte, the prime minister, will stay on in a
caretaker role until early elections in September. See article
Amid huge anti-austerity demonstrations in Prague the Czech government
narrowly avoided a collapse after a junior coalition partner withdrew its support.
Petr Necas, the prime minister, hoped to win a vote of confidence in parliament
with the help of some of his former allies. See article
Yulia Tymoshenko, the imprisoned Ukrainian opposition leader, went on hunger
strike after alleging that she had been beaten and forcibly transferred from prison
to a hospital. Officials denied that violence had been used. Separately, two
opposition political parties said they would join forces in October’s election. See
article
The phone-hacking scandal surrounding News Corporation took a surprising
twist. Testimony from James Murdoch to the Leveson Inquiry, which is
investigating media ethics in Britain, suggested that the office of Jeremy Hunt,
the government’s culture secretary, had improper links with employees of News
Corp during its bid to win full control of BSkyB, a television network. Mr Hunt
denied he had behaved improperly and defied calls for his resignation. See
article
Geir Haarde, a former prime minister of Iceland, was acquitted of charges of
negligence over the 2008 financial crisis. But the judicial panel found him guilty
of not holding enough cabinet meetings. Mr Haarde, who will face no
punishment, called the verdict “absurd”.
Losing its allure
A report by the Pew Hispanic Centre caused a stir by finding that the net
migration flow from Mexico to the United States had dwindled to almost
nothing. Between 2005 and 2010 about 1.4m Mexicans moved to America, but
an equal or possibly higher number left to return to their homeland. The report
came in the same week that the Supreme Court heard arguments on the
constitutionality of Arizona’s crackdown on illegal immigration in 2010. A
ruling is expected during the summer. See article
Mitt Romney came closer to obtaining a majority of delegates for the Republican
presidential nomination by hoovering up the vote in five primaries that were held
this week in the north-east, including Connecticut, New York and Pennsylvania.
Officials in California said that a ballot measure to abolish the death penalty
would be put to voters in November.
John Edwards, who was once the darling of the Democrats’ populist wing, went
on trial for allegedly accepting illegal donations for his presidential campaign
and funnelling them to his mistress at the time. See article
A dicey situation
South Sudan withdrew troops from Heglig, an oilfield in Sudan it had recently
invaded. But both countries are massing troops near the border. Their neighbours
urged restraint. See article
A panel set up to ensure the impartiality of the Kenyan judiciary declared four
senior judges unfit for office. Reform of political and judicial institutions is
meant to prevent a repeat of the post-election violence in 2008.
The authorities in Libya banned all political parties based on religious, ethnic or
tribal allegiance ahead of elections that are likely to take place in June. The
National Transitional Council said that its aim was to preserve “national unity”.
A ceasefire plan drawn up by Kofi Annan, an international mediator, was
partially holding up in Syria. The UN Security Council is sending 300 monitors
to assess the situation. According to activists and rebels, on most days dozens
still die at the hands of government forces. See article
Alternative energies
Spain moved to limit imports of biofuels from Argentina in retaliation for
Argentina’s expropriation of 51% of YPF, an oil company run by Spain’s
Repsol. Spain currently buys some $1 billion a year of Argentine biofuels.
Argentina’s Senate passed the expropriation measure this week, which now
heads to the lower house of Congress.
Eladio Aponte, a former judge in Venezuela, publicly accused the government of
controlling the judiciary and collaborating with drug-traffickers. The country’s
foreign minister denied the charges. See article
The Progressive Conservatives fended off a challenge from the insurgent
Wildrose Alliance in a parliamentary election in Canada’s oil-rich province of
Alberta.
Politics and the law
Pakistan’s supreme court found the prime minister, Yousaf Raza Gilani, guilty
of contempt of court for failing to ask the Swiss authorities to reopen a money-
laundering case against the president, Asif Ali Zadari. However, the court did
not impose any jail time. The opposition called for Mr Gilani’s resignation. See
article
A week after India successfully tested a long-range ballistic missile, Pakistan
conducted a missile test of its own. See article
In Japan Ichiro Ozawa, who leads a powerful faction in the ruling Democratic
Party of Japan (DPJ), was found not guilty of breaking political fund-raising
laws. The court verdict strengthens Mr Ozawa’s hand in his battles over tax with
the prime minister, Yoshihiko Noda.
The road to democratic reform in Myanmar hit a bump when members of Aung
San Suu Kyi’s National League for Democracy party, which won 43 seats in
recent by-elections, refused to take the parliamentary oath unless the wording
was changed. The NLD wants to swear to “respect” the constitution of Myanmar
rather than “safeguard” it. Unless the government agrees, the NLD members
might not enter parliament. See article
Business this week
Walmart saw $17 billion wiped off its stockmarket value after an article was
published in the New York Times alleging that six years ago the company had
learned that its affiliate in Mexico was paying bribes to secure building permits,
but had not pursued a thorough investigation. The retailer said it had taken
“concrete actions” to look into the matter and had created a new office in the
company tasked with complying with America’s Foreign Corrupt Practices Act.
See article
Nestlé, the world’s largest food company, agreed to buy Pfizer’s baby-food
business. After a bidding war with Danone, a French rival, the Swiss company
locked up the deal with a cash offer of $11.9 billion. With 85% of the unit’s
sales coming from emerging markets, the acquisition is key to securing Nestlé’s
position in countries with lots of babies. See article
Doing the double dip
Britain’s economy has returned to recession, as new figures showed the economy
contracting for a second consecutive quarter. The main drag was construction.
George Osborne, the chancellor, reiterated the need to stick with his “credible
plan” for debt reduction. According to a first estimate Spain also fell back into
recession, which was less surprising. See article
Standard & Poor’s changed its outlook on India’s sovereign debt, from stable to
negative. S&P’s current rating for India is BBB-minus, so a downgrade would
put it in “junk” territory. Its slowing growth, high borrowing and large current-
account deficit were all factors in S&P’s decision.
The members of the Federal Open Market Committee appeared more optimistic
about the prospects for economic growth and jobs in America this year than at a
previous meeting in January. However, Ben Bernanke, the chairman of the
Federal Reserve, warned that it is “a little premature to declare victory”. The Fed
has said that it intends to keep interest rates near zero until the end of 2014. But
given the rosier scenario for the economy half of FOMC officials now think
rates will reach at least 1% by then, and some even think they will rise to 2%.
See article
When I’m 64
The main fund paying out Social Security benefits in America will run out in
2033, three years earlier than projected, according to the trustees’ annual report.
The trustees also forecast that Medicare, which provides health care for the
elderly, will go into the red in 2024. But that assumption is based on the cost
savings from payments to doctors that will kick in under Obamacare; if that law
is overturned Medicare could become insolvent much sooner. See article
A former engineer for BP who worked on plugging the flow of oil from the
stricken Macondo well in 2010 was indicted by the American government, in the
first criminal charges to be laid against anyone in relation to the disaster. He is
accused of deleting messages from his phone that suggested oil was gushing out
at a much higher rate than BP was acknowledging at the time. How much oil
actually leaked into the Gulf of Mexico remains contentious as BP’s eventual
fine will be based on the number of barrels spilled.
Apple’s pie gets even bigger
Apple thrilled investors with yet another stellar quarterly earnings report. It sold
35m iPhones in the first three months of the year, almost 90% more than during
the same period last year, and 11.8m iPads, 151% more than a year earlier. Net
profit almost doubled, to $11.6 billion.
At the other end of the smartphone business, Nokia’s credit rating was
downgraded to junk status by Fitch.
Cable & Wireless, a British telecoms company which dates back to the 1860s,
agreed to sell itself to Vodafone for £1 billion ($1.6 billion). In return, the
world’s third-largest telecoms company will get its hands on an international
network spanning 425,000km (264,000 miles) in length. See article
Shareholders in MegaFon, Russia’s second-biggest mobile-phone operator,
agreed to a management reshuffle that gives control of the company to Alisher
Usmanov, one of Russia’s business oligarchs, and paves the way for an IPO in
London.
Facebook revealed that it now has 901m users. But the social-networking firm’s
net profit slipped in the first three months of the year to $205m, down by 12%
from the first quarter of 2011. Revenue grew by 45% to a little over $1 billion,
though this too fell short of expectations. See article
Netflix’s share price took a battering, after it said it expected slower growth in
subscribers signing up to watch movies on its website. Netflix grew rapidly by
pioneering the rental of DVDs through the post. It is now nudging customers to
switch to streaming films online; markets worry that not enough are doing so.