Financial Times UK - 08 01 2020

2020·8.79 MB·English

NEWSPROVIDEROFTHEYEAR
WEDNESDAY 8 JANUARY 2020 UK£2.90ChannelIslands£3.20;RepublicofIreland€3.20
Called to account After Saatchi Farming in Detroit
It’s time to end Big Four’s consulting Downfall of the once mighty An unlikely pursuit amid America’s
days ad agency urban decay
— JANE FULLER, PAGE 11 —BIG READ, PAGE 9 —NOTEBOOK, PAGE 10
Central banks low on ammunition
Briefing
iPMwarnedagainsthaltingHS2railline
to fight recessions, warns Carney
WestMidlandsmayorAndyStreethaswarnedBoris
JohnsonnottotakenewToryvotersforgrantedby
scrappingtheHS2high-speedrailschemefrom
Londontothenorth.
—PAGE2
iSoleimanifuneralstampedekills56
Morethan50peoplewerekilledinastampedeamid
3 Outgoing BoE chief fears liquidity trap 3 Aligning with EU financial rules ‘not desirable’
funeralproceedingsinIranforQassemSoleimanias
DonaldTrump’shandlingofthefalloutopeneda
Pentagonrift.
—REPORTS&ANALYSIS,PAGE4
LIONELBARBERANDCHRISGILES
iBarclaysfacesclimateresolutionatAGM
Theglobaleconomyisheadingtowards Activistshareholdershavefiled
a“liquiditytrap”thatwouldundermine alandmarkresolutioncalling
centralbanks’effortstoavoidafuture onthebanktopublishaplanto
recession,accordingtoMarkCarney, phaseoutfinancingofenergy
governoroftheBankofEngland. companiesnotalignedwiththe
Inawide-ranginginterviewwiththe Parisclimategoals.
—PAGE18
FinancialTimes,theoutgoinggovernor
warnedthatcentralbankswererunning iHackersdemandransomfromTravelex
outoftheammunitionneededtocom- Policehavelaunchedaninvestigationintoacyber
batarecession. attackontheworld’sbiggestretailcurrencydealer
A liquidity trap occurs in the rare afterhackersdemandedaransomtostopthem
occasionswhenmonetarypolicyloses frompublishingsensitivecustomerdata.
—PAGE13
alleffectivenesstomanageeconomic
swings and looser policy does not iSánchezconfirmedinhistoriccoalition
encourageanyadditionalspending. ParliamenthasconfirmedSocialistPedroSánchez
“It’sgenerallytruethatthere’smuch asprimeministerbyawafer-thinmargin,ushering
lessammunitionforallthemajorcen- inthefirstcoalitionsincethe1975returnof
tralbanksthantheypreviouslyhadand democracyinSpain.
—PAGE7
I’moftheopinionthatthissituationwill
persistforsometime,”hesaid. iABInBevtoreplacefinancechief
Thatmeanttherewasaneedtolook ThebrewerofBudweiserandStellaArtoisissetto
for supplements to monetary tools, replaceFelipeDutra,itslong-servingchieffinancial
includinginterestratecuts,quantitative officer,asitseekstoreviveitsfortunesandshare
easingandguidanceonfutureinterest price.AdecisioncouldcomeinFebruary.
—PAGE14
rates,hesaid.
“Ifthereweretobeadeeperdown- iSlimpickingsforGoldmanretailunit
turn, [that requires] more stimulus TheUSbankhasrevealedthatitsconsumerarm
thanaconventionalrecession,thenit’s generated3percentofpre-taxearningsinthefirst
notclearthatmonetarypolicywould ninemonthsof2019,highlightingtheWallStreet
havesufficientspace.” group’srelianceonitstraditionalbusiness.
—PAGE13
Despite concern over a potential
downturnMrCarneywasoptimisticfor
the City’s prospects after Brexit. He
Datawatch
madecleartherewasnopointinLon- MarkCarney Christine Lagarde, in recommending toolsinhisarmoury.TheBankofEng- London could profit from the “huge
don,asaworldfinancialcentre,beinga saystheCity thatgovernmentsconsiderfiscalpolicy landcouldstillcutinterestratesfrom commercialopportunity”ofhelpingto
rule-takerfromBrussels. couldprofit tools,suchastaxcutsorpublicspending 0.75percenttoclosetozeroand“sup- financeandaccelerateactiontomiti- UK going green Morepeopleare
Heurgedthegovernmenttoavoid fromhelpingin increaseswhentacklingadownturn. plementmonetarypolicywithmacro- gateglobalwarming—althoughherec- % likely to take action to reduce willingtotake
aligningitsfinancialregulationswith thefightagainst However, Mr Carney accepted “it’s prudential tools” by relaxing banks’ ognisedthatthefinancialsectorwasnot their carbon footprint in 2020 fewerflightsin
thoseintheEUinthehopeofbetter globalwarming not[centralbankers’]jobtodofiscal capitalrequirementstoenablethemto asubstituteforeffectivepoliciesatthe Recycle more ordertoreduce
tradetermsafterBrexit. CharlieBibby policy”. lendmore. nationalandinternationallevel. Use energy- theircarbon
“Itisnotdesirableatalltoalignour Thegovernorsaidthatmonetarypol- MrCarneypredictedthattheCityof HepredictedthattheCitymightben- efficient products footprintthanare
approaches,totieourhandsandtoout- icywasnotyetaspentforceinternation- efitfromfinancingthetransitiontoa Fly less willingtoadopt
ameat-freediet.
sourceregulationandeffectivelysuper- ally,withUSandeurozoneinterestrate ‘Ifthereweretobeadeeper low-carboneconomyinplaceofsome Bseucyo entdhhicaanldly -cmloathdees/ Cuttingasingle
visionoftheworld’sleadingcomplex cutslastyearencouragingborrowing EUactivity.
4,000-mileflight
downturn,it’snotclear Drive less
financial system to another jurisdic- andspending. “Thishappenstobeahugecommer- isgaugedtosave
tion,”hesaid. “We’restartingtoseethatstimulus thatmonetarypolicy cialopportunityfortheCityofLondon Change diet thesameamount
Mr Carney echoed other central flowtotheglobaleconomy.” andtheUKfinancialsectorwritlarge.” 0 20 40 60 asnoteating
wouldhavesufficientspace’
bankers,suchastheEuropeanCentral Heinsistedthathewasnotleavinghis Historicmissionpage3 Sources: YouGov; Shame Plane meatforayear
Bank’sMarioDraghiandhissuccessor, successor,AndrewBailey,withoutany MartinSandbupage11
Woodford and partner’s shared £14m
in dividends angers trapped investors
OWENWALKER moralandsustainableformofcapital- unlistedcompaniesandhardertosell,
ismbutthisisthepolaropposite,”he areyettobedetermined.
NeilWoodfordandhisbusinesspart-
said.“Isuspecttheonlyreasonwedon’t LukeHildyard,directoroftheHigh
nershared£13.8mindividendsinhis
haveaFredGoodwinrepeatscenarioof PayCentre,saiditwas“fairlyastonish-
company’slastfullfinancialyear,even
publicdisgraceisthatlegislatorsaretoo ingthattheWoodforddirectorsarestill
asinvestorsdeserteditsfundsbecause
Gaymayorquarrelturns focusedonBrexit.Shame.” abletoopenlytakemillionsoutofafund
ofchronicunderperformance.
ThepairrecentlytravelledtoChinato thathaslostmillionsforitsclients”.
spotlightonCitygrandees
Theformerstarinvestor,whoisinthe courtinterestforanewbusiness,having Headded:“Saversmakeinvestments
InterviewquestionsaskedofTim processofwindinguphiscompanywith seenUKinvestorsdeserttheonce-feted knowingtheelementofriskinvolved
Hailes,whowouldhavebeenthefirst askeletonstaff,receivedtwo-thirdsof fundmanagerindroves. but there clearly needs to be much
openlygaypersontobelordmayorof the final dividend payment, which Mr Woodford’s company managed strongerregulationtoensurethatfund
London,havesparkedarowoverthe bringsthetotalpersonallyreapedbyMr £15bnatitspeakbutsufferedheavy managerscan’trakeinlucrativefeesfor
wayinwhichgrandeesawardthe WoodfordandCraigNewmanto£112m withdrawalsinitsfinaltwoyearsand disastrousperformance.”
830-year-oldtitle.Hewasaskedhow since2014. was forced to suspend the Equity Woodfordsaid:“Theaccountsrelate
hewouldpreventthemayoraltyfrom At least 300,000 investors remain Incomefundlastyear,causingEurope’s tothefinancialyearbeforetheEquity
being‘hijacked’bythegaycommunity. trapped in Mr Woodford’s flagship biggestinvestmentscandalforadecade. Incomefundwassuspended.Wecan
MrHailespassedtheinterviewbut Equity Income fund, which was sus- EquityIncomeinvestorsaredueto confirmthatthepartnersdidnottake
deferredhiscandidacyafterfearsover pendedinJune.Oneinvestorstuckin receivejustoverhalftheirmoneyback anyprofitsorincomeduringthefund’s
hiscapacitytocommithimselftothe thefundsaidthepaymentstoMrWood- this month, with 56 per cent of the suspension,norwasanymanagement
postalongsideadirectorship. fordandMrNewmanwere“rewardfor stricken fund’s assets sold by Black- feeearnedfrommanagingWoodford
ReportiPAGE2 absoluteandabjectfailure”. Rock.Buttheprospectsfortheremain- PatientCapitalTrust.”
“UKsocietyiscryingoutforamore ing assets, which are smaller and Lombardpage18
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JANUARY 8 2020 Section:FrontBack Time: 7/1/2020 - 20:30 User: nick.miller Page Name: 1FRONT, Part,Page,Edition: LON, 1, 1
2 ★ FINANCIAL TIMES Wednesday8January2020
NATIONAL
City of London High-speed railway
Gay row prompts lord mayor review PM warned
of Midlands
hammer blow
Questionsoncandidate’s wonthepost,accordingtotwopeople itytocommithimselftotherolealong- men,havepromptedanexternalreview least eight of them are Freemasons. if HS2 ditched
familiarwiththeprocess.MrHailesdid sideanewcompanydirectorship. byheadhuntersSaxtonBampfylde.City TwoseniorfiguresintheCLCcriti-
sexualityputspotlighton
notrespondtorequestsforcomment. Thelordmayorisanunpaidpostpro- AMfirstreportedthereview. cisedthequestionsaskedofMrHailes.
secretiveselectionprocess RebeccaHilsenrath,chiefexecutive motingtheinterestsoftheCityrather “Thewholeprocessisnotverysatis- “Questions about sexuality, gender
attheEqualityandHumanRightsCom- factory. There are lots of nods and andmaritalstatusarecompletelyunac-
mission,said:“Itisdifficulttoseewhy ‘Wouldtheyhaveasked winks,”saidapersonfamiliarwiththe ceptable,”saidoneofthepeople.The JIMPICKARD
CATRUTTERPOOLEY
suchaquestionwasnecessaryandit process.Recommendationswereputto other said the City “has a duty to CHIEFPOLITICALCORRESPONDENT
ANDPATRICKJENKINS thesameofanyonefrom
could open the interviewer up to a the25aldermenthismonthbutarenot enshrineequalitieslawintoitspeople Boris Johnson has been warned by
Questionsaskedofagaycandidatein potentialdiscriminationclaim.Would otherprotectedgroups?’ expectedtobemadepublic.Candidates policies,yetthis...secretjobinterview WestMidlandsmayorAndyStreetnot
hisinterviewstobelordmayorofLon- theyhaveaskedthesameofanyone mustbedrawnfromthealdermen. wouldsuggestithasfailedtodoso”. totakenewToryvotersintheEnglish
donhavesparkedarowovertheprocess fromotherprotectedgroups?” Equalityandrightscommission Theprocesshasledtoasuccessionof TheCLCsaid:“Anyallegationthata region for granted by scrapping the
bywhichaclutchofCitygrandeesdeter- MrHaileswasalsoaskedintheinter- heterosexual,white,malelordmayors, mayoralcandidatewasblockedonthe HS2high-speedrailschemefromLon-
minewhoholdsthe830-year-oldtitle. viewhowhewouldmakeupforhislack thananadministrativerole.Butitis contributingtotheperceptionthatthe grounds of sexuality is completely dontothenorth.
TimHailes,whowouldhavebeenthe ofa“consort”,thepartnerwhoaccom- highly prestigious, coming with the Cityisanoldboys’club.Therehave untrueandwithoutfoundation...The
first openly gay person to hold the paniesalordmayoronofficialduties. palatialresidenceofMansionHouse. beenmorelordmayorsfromthefamily CityofLondonCorporationiscommit- MrStreetsaidcancellationwouldbea
office,wasaskedin2018howhewould MrHailespassedtheinterviewbut Concernsabouttheopaqueselection of the incumbent, William Russell tedtoensuringtherearenobarriersto “hammerblow”totheeconomyofthe
preventtheone-yearmayoraltybeing deferredhiscandidacyafterconcerns process,runbyacommitteeoftheCity (five),thanfemalelordmayors(two). anymemberofourcommunitystand- WestMidlands,fromwhichitcouldtake
“hijacked”bythegaycommunityifhe wereraisedbythepanelabouthisabil- ofLondonCorporation’sCourtofAlder- Justfourofthealdermenarewomen;at ingfortheelectedofficeoflordmayor.” decadestorecover.
“Residentsacrosstheregion,manyof
whom voted Conservative in last
month’s general election, are all too
Diplomacy. Special relationship awareofthis,”hepointedout.
Mr Johnson is poised to decide on
whether to accept the recommenda-
Iran crisis sets Johnson first foreign policy test
tionsofDouglasOakervee,formerchair
ofHS2,whosereportwillbepublished
inthecomingweeks.
Despiteconcernsoverrisingcostsand
delays,MrJohnsonisexpectedtopress
aheadwiththeproject.
Primeministerhastomanage MrStreetwaspartofthepanelthat
advisedtheOakerveereview,whichis
unpredictableTrumpwhile
expectedtorecommendseveralmodest
stayingclosetoEUallies waystocutcostsfromtheproject.
Themayorisfacingare-electioncon-
testinMay,whenmayoralelectionswill
LAURAHUGHESANDHELENWARRELL
alsotakeplaceinGreaterManchester,
BorisJohnsonisfacinghisfirstbigfor- Liverpool,theTeesValleyandLondon.
eignpolicycrisisashegrappleswith TheformermanagingdirectorofJohn
howtorespondtoescalatingtensions Lewissaidhehadalwaysbelievedthe
betweentheUSandIranfollowingthe newraillinewas“missioncritical”to
assassinationofIranianmilitarycom- theregionherepresents.
manderQassemSoleimani. “Sincereviewingalltheevidencemy
USPresidentDonaldTrump’sunpre- positionhasonlyhardened—HS2could
dictablebehaviourposesachallengefor makeorbreakthefutureoftheWest
theprimeminister,whoisanxiousto Midlands,”hestressed.
maintaintheUK’s“specialrelationship” ThecostestimateforHS2hasbal-
withWashingtonandstrikeafreetrade loonedinrecentyears,withthepricetag
dealwithitsallyasitpreparestoleave jumpingbynearly£30bnlastsummer.
theEU. At the same time the government
But Mr Johnson must also work admittedthatthesecondphase—Bir-
closelywithFranceandGermanytotry minghamtoLeedsandManchester—
to keep alive the nuclear deal that wouldcomeinuptosevenyearslate,
Tehran signed with world powers in withacompletiondateofupto2040.
2015—fromwhichtheUSwithdrewin Thefirstphase,LondontoBirming-
2018. ham,isscheduledtofinishin2031,five
TheUKgovernmenthascalledfor yearslate.YetMrStreetarguedthatthe
ade-escalationoftensionswithIranto projectwouldstillbringsignificanteco-
avertaconflagrationintheMiddleEast, nomic benefits to the Midlands and
buthasalsogivenimplicitsupporttoMr northernEngland.
Trump’sactions. Theprimeministerhelpedbuildhis
“Thegovernmentarecaughtonthe 80-seat majority in part thanks to a
hornsofadilemma,”warnedJackStraw, hugestretchofnewvotersintheWest
aLabourformerforeignsecretary. Anger: ingitstroopsoutofIraq,describingthe Washingtontotrytorepairthedamage ‘Thisisa explorethepossibilityoftheUKandEU Midlands, he said. “They are now
“WeneedtostayclosetoAmerica,but demonstrators letterasa“draft”anda“mistake”. causedtothewesternalliancebythe usingbackchannelstoworkwithIran. expectinghimtodeliveronhispromise
testof
itisatestforBorisJohnson,whohasto protestoutside MrJohnsonhasbeencriticisedfor assassination and to attempt to per- “ItcouldmarkamomentwhenIran torebalancetheeconomyandpowerup
manageanunpredictableandunruly theUSembassy maintaining a low profile since the suade the Trump administration to whether realisesthatthecostofitscurrentpolicy ourregion.Thefirstclearanddecisive
ally,aswellasdoinghisbesttoprotect inLondonatthe assassination. Although it took place “de-escalate”thesituation. istoohighandit’stimetochangethe step that can be taken to fulfil that
Boriscan
Britishinterests,notleastthesafetyof weekend.Below, onFriday,hedidnotreturnfromhis “ThiscurrentcrisiswithIrancrystal- policy of death and terrorism and promiseistobackHS2.”
ourtroopsanddiplomats,andstayas BorisJohnson newyearbreakintheCaribbeanuntil lisesthedifficultiesintheemergenceof takea instead [its policy] becomes one of Theprojectwouldcreatetensofthou-
close as possible to Germany and GarethFuller/PA Sunday. post-BrexitBritain:youhavetheUStak- engagement,”hesaid. sandsofjobsintheWestMidlandsas
hard-nosed
France.” Yesterdayhechosenottoattendthe ingthemselvesintoacrisisinwhich MrTugendhatalsourgedMrJohnson wellastensofthousandsofnewhomes,
WithoutaclearideaofUSstrategy, House of Commons to update MPs, theyarebeingstrategicallyfoolishjust viewof toworkwithotherallieswhohaveinter- heargued.
British officials are being forced to instead dispatching Ben Wallace, atthetimewhentheprimeministeris estsaroundtheregion,includingJapan MrOakervee’sreportisexpectedto
what’s
respondtoeventswithoutwarning. prompting accusations from Labour steppingoutaloneintheworld,without andChina,totrytodefusethesituation. suggestcuttingthenumberofhourly
Mr Johnson was given no advance leaderJeremyCorbynthathewas“hid- Europe,”saidProfessorMichaelClarke, reallyinthe MeanwhiletheForeignandCommon- trainsfromamaximumof18to14and
noticeofthedronestrikethatkilled ingbehindhisdefencesecretary”. former director of the Royal United wealthOfficehasbeguntheprocessof makingprivatedeveloperscontribute
national
Soleimani,despitethepresenceinIraq MrWallacewasforcedtodefendMr ServicesInstitute. recruitinganewUKambassadortothe moretowardsthecostofbuildingsta-
ofhundredsofBritishtroopson Johnson,tellingMrCorbynthat“fun- “WecanberightonIraqandstillhold interest’ US.DowningStreetsaidanadverthad tions.However,hehasrejectedtheidea
atrainingmissionandthou- nilyenoughthePMisrunningthecoun- tradetalkswithAmerica,it’snotoneor beenplacedonthecivilservicejobspor- ofcuttingbacktheeasternlegofthe
sandsofUKcontractors. try”.HetoldtheCommonsthat“urgent the other. This is a test of whether talandapplicantswouldgothroughthe £88bnproject’ssecondphase,fromBir-
OnMonday,aleakedletter action”hadbeentakentomoveBritish Boris can take a hard-nosed view “normalpractice”. minghamtoLeeds,accordingtoaleak
bythecommanderofUS “non-essentialpersonnel”from ofwhat’sreallyinthenationalinterest Theannouncementendedpersistent ofanearlydraftbeforeChristmas.
forces in Iraq indicated Baghdad. orwhetherhe’sgoingtotakeasenti- rumoursthatMrJohnsoncouldappoint Heisalsothoughttohaveruledout
that the military was MikePompeo,USsecre- mentalview. anambassadorfromoutsidethecivil theideaofendingthelineatOldOak
making preparations for taryofstate,hasaccused “Thedifficultyisthatwedifferwith servicetoreplaceKimDarroch,who Common in west London instead of
withdrawal. This caused European allies of not theminourviewsoftheworldandthat’s wasforcedtoquitlastyearafterhiscriti- EustonintheheartofLondon.
confusion and “consterna- being“helpfulenough”. along-termissue.” calcommentsaboutMrTrumpmadeit MrStreetadmittedthatthegovern-
tion”acrossWhitehall,accordingto This week Dominic TomTugendhat,anMPandformer intothepublicdomain. mentneededtogettogripswiththe
insiders. Raab,theforeignsecre- chair of parliament’s foreign affairs AdditionalreportingbyJimPickard project’scostsandtimeline,butargued
TheUSwasforcedtodenyitwaspull- tary, is travelling to committee, urged Mr Johnson to Trump-Pentagonriftopenspage4 thattheissuescouldbe“rectified”.
Regulatory divergence
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GEORGEPARKER—LONDON swappinga“Rolls-Royce”tradedealfor andotherskilledworkersrisklosing ingStreettoday,andthattheintention
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JANUARY 8 2020 Section:World Time: 7/1/2020 - 19:56 User: david.owen Page Name: UKNEWS1, Part,Page,Edition: LON, 2, 1
Wednesday8January2020 ★ FINANCIAL TIMES 3
NATIONAL
Outgoing governor reflects on historic mission
Carney’s term at BoE coloured by financial crisis, pressures of Brexit and realisation of need to combat climate change
LIONELBARBERANDCHRISGILES
MarkCarney’sofficeepitomiseswhat Timeline
theBankofEnglandgovernorhascalled
themanagementchallengeofmoving
from Canada to bring the institution
intothe21stcenturyand“fixthebank, CalmonBrexit,mixed
fixthefinancialsystemandsecurethe
messagesonrates
recovery”.
Historyandmodernitylivingcheek
byjowlcannotbemissedinthispartof MarkCarneyarrivedinLondonin2013
thebank.An18thcenturytableinhis witha£250,000housingallowance
officecontrastswiththeday’sfinancial andareputationasthe“rockstar”of
figuresontwohugescreensonhiswork centralbanking.Ashistenureatthe
desk,anagedimitationCanalettopaint- BankofEnglanddrawstoanend,here
ingofLondonhangsawkwardlyonthe aresomemomentshewillbe
wallnexttoadigitalimageofVenice, rememberedfor.
enclosedinanantiquegoldframe.
The serenity of the BoE courtyard Beingtheonlygrown-upintheroom
outsidehisroomsisremotefromthe aftertheBrexitvote
bustleofLondon’sfinancialdistrictout- Whileministerswenttogroundonthe
sidethemainwalls. morningaftertheBrexitreferendumin
Ithasbeentheunexpecteddevelop- June2016,MrCarneyappearedon
mentsinthemodernworldingeneral, televisiontoreassurepeoplethe
andinparticularinpolitics,thathave financialsystemwasstrongenoughto
markedMrCarney’stenure.Whenhe withstandthestress.ButMrCarney
wasappointed,Britainwasconvulsedin wasalsoaccusedofpeddlingthe
argumentsoverwhetheritwasheading government’slineonBrexit,firstfor
foratriple-diprecession,butsoonthese warningofthelikelydamageitwould
questions of whether demand and dototheeconomy,andlaterfor
spendingwereadequatenolongerdom- insistingaBrexitdealwouldleadtoa
inatedmonetarypolicyasexpected. reboundininvestment.
Demandcamebackin2013justashe
tookuphispositionandthemainques- Givingmixedmessagesonrates
tionscircledaroundunexpectedmove- Soonaftertakinguphispost,Mr
mentsinsupply—howmanypeople Carneyintroduced“forwardguidance”,
couldbeemployedwithoutinflationris- usingittogiveaclearsteerthat
ingandhowmuchtheywouldproduce interestrateswouldnotriseuntil
everyhourofwork. unemploymentfelltoacertainlevel.
“There was this big supply uncer- ButtheBoEwasrepeatedlysurprised
tainty—historicallysupplyhadbeen byhowlowunemploymentcouldfall
relativelypredictable,”hesaid,leading withoutstokinginflation,andMr
to “a different recovery in many Carneywassaddledwiththe
respects”thanhadheandothershad reputationasan“unreliableboyfriend”,
expected. afterhintingatraterisesthatdidnot
“Thestrengthofthelabourmarket materialise.
stands out,” he added, pointing to
recordemploymentand“wagegrowth Scotchingtheideaofasharedpound
returningtohistoricaverages”. withScotland
TheMonetaryPolicyCommitteealso Beforethe2014independence
referendum,MrCarneyarguedthatan
‘It’sabitFukuyamaesque independentScotlandwouldnotbe
abletosharetheUKcurrencywithout
tothinkwe’vereached
deferringtoWestminsteronfiscal
theendofmonetary policyandbankingregulation.The
ScottishNationalparty’sinabilityto
policyhistory’
explainhowacurrencyunionmight
workwasabigweaknessinitsfailed
hadtograpplewithstructuraldifficul- campaign.
tiessuchasanearstagnationinproduc- Flyingtheflag: themonetarysystem,asinthecasein Francis Fukuyama: “It’s a bit Fuku- ‘Idon’t throughcapitalratiosorotheruseof
tivity measured by output per hour MarkCarney,in thecurrencychoiceintheScottishref- yamaesquetothinkwe’vereachedthe prudentialpolicytoshiftincentives”. Reininginthehousingmarket
thinkthe
workedcomparedwithpre-crisisaver- hisoffice,says erendum or certain forms of Brexit, endofmonetarypolicyhistory.” ThegovernorwillreturntoCanadain AnotherCarneyinnovationwasthe
ageannualgrowthratesaround2per lifeintheUK which would have had a material Onclimatechangeanditspotential financial thesummerandinthemeantimehas useofnew“macroprudential”powers
cent.“It’ssafetosay[productivity]has hasbeena impact on the financial sector if it threatstotheinsuranceindustryorto takenupaUNroleasspecialenvoyfor topreventacreditboom.InJune2014,
sector
beenweakforalongtimeandacontin- ‘pleasure’ weren’tpreparedandinthosecases,yes, banksthatmighthavefinanceddirty climate action and finance until the theBoEannouncedacaponrisky
ualdisappointment,”hesaid. CharlieBibby wehadtotakeaction.” assetsthatbecomeworthless,MrCar- shouldbe NovemberclimatesummitinGlasgow. mortgagelending.Thebank’sactions
Amidtheseeconomicuncertainties, NotingthepreparatoryworktheBoE neywasevenmoredismissiveofcritics Whenhereturns,hesaidhewouldgo havenotsolvedtheUK’shousing
orwillbea
themaintaskoftheBoE,accordingto forcedonthefinancialsystem,hesaid sayinghestrayedbeyondhismandate. homewithfondmemoriesofan“amaz- problems,butsomepolicymakers
thegovernor,wastofinishcorereforms thebank“hadtodomorethanpraythat “Anybodywhosaysthatdoesn’tknow substitute ingcountry.There’sthediversityofthe thinkmacroprudentialtoolscould
totheglobalfinancialsystemandreact theissuewillbeaddressed”. thebreadthofthepowersoftheBankof culturalactivitieshere,thehistoryand becomeimportantinstabilisingthe
forclimate
appropriatelytothepoliticalupheavals Headdedthatpartofthereasonhe England,”thegovernorsaid. thehumour.Thisisafantasticplace.It’s economyinaneraofultra-lowrates.
oftheScottishandBrexitreferendums hadagreedtostayonwastofacethe Buthewasclearthatthefinancialsec- policy’ apleasuretoliveintheUKinthe21st
andthechallengesofclimatechange. consequencesofano-dealBrexitrather torcouldnotmitigateglobalwarming century.” Linkingthefightagainstclimate
MrCarneyinsistedthatratherthan thansaying“don’tworry,it’llbefine,I’m aloneandwithoutwideragreementsto ButfrustrationsofUKlifeinthecross- changetofinancialstability
be too political as his predecessor goingbacktoCanada,goodluck”. limittheproblemandactiontoenforce hairsofpolarisedpoliticaldebatewill Since2015,MrCarneyhasurgedthe
MervynKinghadsuggested,theBoE HealsocalledontheTreasurytoper- targets. alsohaunthiminthesearchforanew financialsectortodomoretoreport
hadtogetinvolvedbecauseitnowhada formaperiodicreviewofthemonetary “I don’t think the financial sector job.“Thisroleisjustmuchmorepublic ontherisksclimatechangeposesto
dutytopreservefinancialstabilityand framework,whichwaslastundertaken shouldbeorwillbeasubstituteforcli- thanthesameroleinCanada,”saidMr theirbusiness.Althoughhesaysthere
thecentralbankcouldnotjusthopefor whenhestartedasgovernorin2013, matepolicy,”hesaid.Addingitcould Carney. “You’re just always in pub- arelimitstocentralbanks’rolein
thebest. andpromisedbeforetheendof2019. onlyamplifywiderenvironmentalpol- lic...you’renotalwaysperformingbut curbingemissions,theyareseenas
“It’sadifferentthingwhensomething Sayinganotherreviewwas“sensible”, icyaction,hesaid:“Idon’tthinkthatcli- you’realwaysinpublic.It’snicetobein importantactorsinchanginginvestor
directlyaffectsthefinancialsystemor hereferredtotheUSpoliticalscientist matepolicyshouldberunbystealth private.” behaviour.DelphineStrauss
Departmental spending Disguised employment
Johnson review to prioritise investment in poorer regions Business demands delay
to freelance tax reforms
JIMPICKARD teria,suchasnarrowingtheregional economicreturnsbasedon“grossvalue lation,highpropertypricesandproduc-
CHIEFPOLITICALCORRESPONDENT productivitygaporimprovingthewell- added” criteria. Economists have tivejobs.
BorisJohnsonhaslaunchedareviewof beingofpeopleinlow-incomeareas. argued that this methodology allows The government has not yet add-
departmentalspendingtoensurethat According to the Treasury’s Green officialstoconsiderissuessuchasthe ressedthequestionofwhetherthecon- EMMAAGYEMANG seriesofroundtablemeetingshostedby
“everypenny”isjustifiedasheseeksto Book,whichprovidesguidancetooffi- widersocialbenefitsofprojectsbutstill sequenceofitsnewpolicywouldbeto Businessgroupshavecriticisedplans governmentwithbusinessgroups,free-
tilt government investment towards cials when appraising investment favourssouth-eastEnglandfortrans- haltorfreezeprojectsinthrivingmetro- foragovernmentreviewintoconten- lancersandotherstakeholders.
deprivedregionsoutsideLondon. projects,theyusuallyhavetomaximise portprojectsbecauseofitsdensepopu- politanareassuchasLondon,Bristol tious tax changes starting in April, Jesse Norman, financial secretary,
andManchesterinordertofreecashfor said:“Werecognisethatconcernshave
which will affect hundreds of thou-
Theprimeministertoldthecabinetyes- elsewhere. been raised about the forthcoming
sandsofcontractorsandcompanies.
terdaythattheTreasury-drivenreview Swissgathering levelofrepresentation.Theprime Thespendingreviewdoesnothavea reforms.”
wouldreflecttheprioritiesofthenew ChancellorheadstoDavos ministerwillbefocusedondelivering targetforfinancialsavingsoranyspe- Underchangestotheoff-payrollrules, The review fulfils a promise Sajid
government,whichreturnedtopower onourdomesticpriorities.” cificparameters.Onegovernmentfig- knownasIR35,alllargeandmedium- Javid,thechancellor,madeduringthe
despiteministerialban
last month after seizing dozens of NewsofMrJohnson’ssupposed ure said the initiative would prompt sizedUKcompanieswillberequiredto electioncampaign.ButTejParikh,chief
formerLabourseats,predominantlyin Davos“ban”wasreceivedwithraised “howlsofprotest”fromsomeinterested assesstheemploymentstatusofcon- economistattheInstituteofDirectors,
northernEngland. ChancellorSajidJavidissettoattend eyebrowsattheTreasurywhenitwas parties seeking to protect certain tractorstheyuse,totacklewhatHM said the reforms should be delayed to
Thereview,whichisexpectedtotake theWorldEconomicForuminDavos announcedbeforeChristmas.The schemes,butaddedthatitwasneces- Revenue & Customs calls “disguised givecompaniesmoretimetoplan.
sixtoninemonths,willexaminehun- thismonth,inspiteofanapparentban chancellortraditionallytravelstothe sary.“Aretheywastingmoney?Ifso, employment”. Headded:“It’snotimmediatelyclear
dredsofschemesandwillbeoverseen byBorisJohnsononministers Swissresorttomeetpolicymakersand let’sgetridofthem,”hesaid. Thisiswhenworkerswhobillfortheir howanynewstepstosmooththeproc-
bySajidJavid,thechancellor,andRishi attendingthe“champagne”eventwith businessleaders. EfficiencyreviewsofWhitehallhave services via limited companies are esscouldtakeeffectintimeforApril.
Sunak,chiefsecretarytotheTreasury. theglobalelite. MrJavid,aformerinternational beenastapleofsuccessivegovernments treated like they are self-employed, Firms and contractors have already
Cabinetministerswillberesponsiblefor MrJohnson’sallieshadsaidbefore bankerwhowasearningmorethan overthepasttwodecades.Themost despiteineffectbeingemployees.Asa beenimpairedbytheloomingdeadline
identifyinginappropriateorunneces- Christmasthatministerswouldnot £3mayearatDeutscheBankbefore recentonewasinitiatedbyTheresaMay resulttheyandtheirhiringcompanies andlackofclarityaroundtherules.”
saryprojectsintheirdepartments. attendtheeventintheSwissAlps, becominganMPin2010,isunlikelyto in2017andsawministerstrytofind typicallypaylowertaxes. AnnieGascoyne,directorofeconomic
Number10insistedthattheattempt arguingthatitwasatoddswiththe feeloutofplaceattheeventrunning £3.5bnofsavingsin2019and2020in Thereformshaveangeredbusiness policyattheCBI,welcomedthereview
to “root out waste” did not reflect a prioritiesoftheprimeministeras fromJanuary21-24.Thechancellor’s ordertoreinvest£1bnelsewhere. groupsandfreelancers,whosayitwill into what she termed a “complex and
returntothe“austerity”yearsofthe leaderofa“people’sgovernment”. officedidnotdenythatMrJavid In 2010, David Cameron commis- increaseredtapeandwarncompanies costly”policybutalsocalledforadelay.
Torygovernmentthatbeganadecade OneseniorToryfiguresaid:“Our wouldbeattending,butsaidthathis sionedPhilipGreen,theretailtycoon,to havenothadenoughtimetoprepare Thatcallwasechoedbybodiessuch
ago and was more about rethinking focusisondeliveringforthepeople, travelplans“werenotyetconfirmed”. conductanefficiencyreviewofspend- duetoalackofgovernmentguidance. astheAssociationofTaxationTechni-
priorities. notchampagnewithbillionaires.” MrJohnson’srefusaltoattendthe ing,inparticularonproperty,contracts Thefinallegislationtobringthepolicy cians(ATT)andtheInstituteofChart-
MrJavidisdrawingupnewspending ButtheedictwillnotapplytoMr Davoseventechoestheposition andprocurement. intoforcehasyettobepublished. eredAccountantsinEnglandandWales.
rulesaheadofhisBudgetinMarchthat JavidandConservativeofficialshave adoptedbyUSpresidentDonald Previously,theLabourgovernment YesterdaytheTreasurylauncheda JonStride,co-chairoftheATTtechnical
wouldrefocusinvestmentfromaffluent admittedthatMrJohnsonagreedhis Trump’snewadministration. commissionedtworeviewsintoWhite- reviewintoimplementationoftheref- steeringgroup,saidthetimeframewas
south-east England and towards less chancellorcouldtraveltoDavosfor Lastyear,JohnMcDonnell,the hall efficiency in 2004. The Lyons ormsto“addressconcernsfrombusi- “overlyoptimistic”.Headdedthatthe
prosperouspartsofthecountry. thegatheringoftheworld’sfinancial socialistshadowchancellor,wentto review made suggestions for moving nessesandaffectedindividuals”. financebill,whichwillincludethelegis-
UnderhisplantheTreasurywouldbe elitelaterthismonth. Davostogainpublicityforhisplanto civil servants out of London to save Itwillconcludebymid-Februaryand lationrelatingtothereforms,willprob-
lessfocusedonboostingoverallnational OneallyofMrJohnsonsaid:“Itwas tackle“rigged”financialmarkets. moneywhiletheGershonreviewcame determineifmoreisneededtoensure ablybepublishedatthesametimeas
economicgrowthandinsteadwouldbe decidedthatthiswastheappropriate GeorgeParker upwithefficiencymeasurestocutcivil “thesmoothandsuccessfulimplemen- theBudgetonMarch11;threeweeks
urgedtogivegreaterweighttoothercri- servicenumbers. tationofthereforms”.Itwillconsistofa beforethereformsaretotakeeffect.
JANUARY 8 2020 Section:World Time: 7/1/2020 - 19:56 User: david.owen Page Name: UKNEWS2, Part,Page,Edition: LON, 3, 1
4 ★ FINANCIAL TIMES Wednesday8January2020
INTERNATIONAL
General’s killing Burial
Rift opens between Trump and Pentagon Stampede on
fourth day
of military
Militaryuneasyatpossible abide by the laws of armed conflict, Tension between the White House yes,we’vegotalotofvulnerabilitiesout cificknowledge”ofthelegaljustifica-
expulsionfromIraqand whichprohibittargetingsuchsites. anddefencedepartmentisontherise, therebecauseofthetroops,”saidone tion for the strike, he was sure the chief’s funeral
MarkMilley,thechairmanofthejoint according to four former officials in formerPentagonofficial. Trumpadministrationwouldhavecon-
threattoIranculturalsites chiefsofstaff,wasalsoforcedtoadmit touchwithseniorleadershipatthePen- “EventhoughMilleyandEsperare ductedathoroughreview.
kills dozens
thatadraftletterpennedbyasenior tagon.Someweresurprisedbythedeci- more closely aligned with Trump on Mr Trump’s tweets suggesting that
militarycommanderinIraqpointingto siontostrikeSoleimaniinthefirstplace policythan[formerUSdefencesecre- theUSmighttargetculturalsitesstruck
KATRINAMANSONANDJAMESPOLITI
preparationsforafullwithdrawalof taryJim]Mattiswas,alladministration anerveatthePentagonbecausedoing
WASHINGTON
ANDREWENGLAND—LONDON troopsfromthecountryhadbeencircu- ‘Weareseeingagreat officialsfindthemselvesdancingonthe sowouldviolateinternationallawsof
DonaldTrump’shandlingofthefallout latedinerror,asignoffranticcontin- headofapinwhenthepresidentwants armedconflict,bywhichtheUShas NAJMEHBOZORGMEHR—TEHRAN
dealoffrustrationand
fromhisstrikeagainstIraniangeneral gency planning in response to Mr to take strong action,” said Guy vowedtoabide.AviolationbyWashing- MICHAELPEEL—BRUSSELS
QassemSoleimanihascreatedtension Trump’ssuddenescalationoftensionin confusionbecauseTrump Snodgrass,aformerspeechwritertoMr toncouldhurtitseffortstopersuade Morethan50peoplewerekilledina
with Pentagon officials who are theMiddleEast. Mattis. othercountriestolivebythesamerules. stampedeonthefourthdayoffuneral
doesnotabidebyrules’
respondingtofearsofanexpulsionof “Whatweareseeingisagreatdealof ThePentagondidnotimmediately RobertO’Brien,MrTrump’snational proceedingsforQassemSoleimanias
troops from Iraq and the threat of frustration and confusion because respondtoreportsoftensionbetween security adviser, has defended the foreignministersfromtheUK,Ger-
bombingculturalsitesinIran. Trumpdoesnotabidebyrulesandpro- andwaryofitsconsequences,according thedefencedepartmentandtheWhite attackonSoleimanionthegroundsthat manyandFrancemetinBrusselsfor
TheuneasewithintheUSmilitary cedures,”saidMichaelRubin,aresident totheseformerofficialsandmultipleUS House. he was plotting to kill a significant emergencytalksontheIrancrisis.
waslaidbareonMondayasMarkEsper, scholar at the American Enterprise mediareports. MrTrump’sseniornationalsecurity numberofAmericandiplomatsandsol-
defence secretary, contradicted Mr Institute, a conservative think-tank. “There has been divided counsel leadership will face further scrutiny diers“inthecomingdays”,accordingto Themournerswhowerecrushedwere
Trump’scalltotargetculturallysignifi- “Wehaveapotentialstrategicgain[with insidethe[defencedepartment]over todaywhentheybrieftheSenateonthe commentsonFoxNews. amonghundredsofthousandsofpeople
cantsitesinresponsetoanyretaliation Soleimani’s killing], but the political killingSoleimaniforalongtime,but intelligencethatledtothestrike.Mike But some in the military fear that whogatheredattheIranianmilitary
fromTehranforthestrikeonSoleimani. bunglingoftheaftermaththreatensto probablythemajorityviewhasbeen Pompeo,USsecretaryofstate,saidyes- the consequences were not fully chief’shometownofKerman,wherehe
MrEspersaidinsteadthattheUSwould stripawaytheadvantage”. don’tpokethehornet’snest,because terdaythatwhilehedidnothave“spe- considered. istobeburied.Localofficialssaidthe
deathsof56peopleandinjuriestomore
than200forcedthepostponementof
theburial.
Middle East. Soleimani assassination Soleimani’sassassinationinaUSair
strikelastweekhasprovokedanout-
pouringofgriefinIranunseensincethe
Iran’s desire for revenge tempered by fear of war
deathofAyatollahRuhollahKhomeini,
leaderoftheIranrevolution,in1989,
andpushedtheIslamicRepublictothe
brinkofall-outconflictwiththeUS.
Iran has promised to retaliate and
pulledbackfromallitscommitments
EvenhardlinerssayTehran
underthe2015nuclearaccord.
muststrikebackbutavoida Diplomats and analysts think it is
increasingly likely the UK, Germany
full-blownconflictwiththeUS andFrance,theEuropeansignatoriesto
theaccordtheUSabandonedin2018,
willtriggerthedisputeresolutionmech-
NAJMEHBOZORGMEHR—TEHRAN anisminthedeal,whichcouldresultin
AsmillionsofIranianspouredontothe thereimpositionofUNsanctions.
streetsofTehrantomournthedeathof Europeanobserverssaythedispute
militarycommanderQassemSoleim- process, which can be stretched out,
ani,thecountry’ssupremeleader,Ayat- mightprovidealastopportunitytosave
ollah Ali Khamenei, faced a difficult thedealbyallowingafinalchancefor
question: how to satisfy the Islamic diplomacy and thereby avoiding the
regime’sdesireforrevengefortheUS snapbackofsanctions.
killing,whileavoidingawar. HeikoMaas,Germany’sforeignmin-
Duringfourdaysofmourning,huge ister,saidtheEuropeansbelievedthe
crowdshavedemandedretributionfor agreementwasimportantbut“wouldn’t
theassassinationlastweekoftheirmost just stand by and watch” as Iran
revered military leader. Publicly, the announced its withdrawal. “We can’t
regimehasissuedbellicosestatements. shrugoffannouncementsthatcommit-
Butinprivate,evenhardlinershavesaid mentsarenolongerbeingmet,”hesaid.
Tehranmuststrikebackbutavoida ButrelationsbetweenIranandthe
full-blownconflict. Europeanpowersarefraying.Iran’sfor-
“We cannot ignore this aggression eign ministry summoned the UK
easilyandhavetopreventtheUSfrom ambassador over the British govern-
repeating its rogue behaviour,” said ment’spublicstanceonSoleimani’skill-
Hamid-RezaTaraghi,apoliticianclose ing,whiletheUKsaiditwasmoving
toIran’shardlineforces.“Butourstrat- non-essentialstaffoutofBaghdadin
egyisretaliationinsuchawaythatwe neighbouring Iraq because of height-
donotgotoawar.” enedsecurityworries.
WashingtonandTehranhavebeen Concerns about a deterioration in
engaged in a game of brinkmanship securityinIraqandpotentialretaliatory
sincetheUSwithdrewfromtheIranian attacks by Tehran on foreign assets
nucleardealin2018.InJune,Iranshot United:Iranian emotions and the expediency of the regionisnotlittleandshouldnotbe ‘Iranand oftheimmediatepressuretoactand thereareincreasing.
downaUSdroneandthenseizedaBrit- lawmakersraise politicalsystemwhichisnottomili- underestimated,”theinsidersaid.“Itis “putofftheriskofwar”,thepolitician JensStoltenberg,theNatosecretary-
theUShave
ish-flaggedtankerinJuly.InSeptember, theirhandsto tarilyretaliate.” similartothemonthsbeforetheIslamic said. general, spoke by phone with Adel
itwasblamedbyWashingtonforair voteyesterday Iran’s immediate response is more revolutionwhenImamKhomeini[the neverbeen BrigadierGenEsmailGhaani,Soleim- Abdul Mahdi, Iraq’s prime minister,
strikesagainstSaudiArabia’sbiggestoil inparliament likelytoincludeeffortstoreduceUS founderoftherevolution]hadonesim- ani’ssuccessorasheadoftheQudsforce afterthemilitaryalliancesuspendedits
thisclose
installation. forabill influenceintheMiddleEastinother pleslogan‘Shahmustgo’andheleft.” of the Iranian Revolutionary Guard, trainingmissioninthecountry.
Buttheeliminationofaseniormili- designatingall ways,analystsandregimeinsiderssaid. MrTaraghi,thehardlinepolitician, toawar’ saidonMondayIranwouldremovethe MrStoltenberg“conveyedthatAllies
tary commander in targeted US air USforcesas Tehranhasalreadypulledbackfromall suggestedthattheUSalsowantedto USfromtheregion“invarioussteps”. havecalledforrestraintandde-escala-
strikeswasanunexpectedandunprece- ‘terrorists’ its commitments under the 2015 avoidawar.“IfTrumpwereseriousin The period of mourning is now tion,andforIrantorefrainfromfurther
dentedescalationthatmeansTehran IcanaNewsAgency/AFP/ nuclearaccordandonSundayexercised histhreats,whyhashesent16coun- expectedtocontinueforlongerafter provocations”,Natosaid.
mustproceedmorecarefully,Iranian GettyImages itsinfluenceinIraq’sparliamenttohelp tries’representativestobegusnottohit mournerswerecrushedtodeathyester- Itaddedthatthealliancewaspre-
analystssaid.Thepreviousbrinkman- passavotetoexpelUSforcesfromthe back?”hesaid. dayinthecityofKerman,wherehuge pared to resume training when condi-
shipwasbasedonacalculationthat countryinretaliationfortheairstrikes. IfIrandoesretaliatewithforce,itwill crowds prevented Soleimani’s burial tionspermitted,astheworkwascrucial
DonaldTrumpdidnotwantanother Iran’sparliamentpassedabillyesterday dosodirectlyandnotthroughitsprox- fromtakingplace. to help local forces counter interna-
warintheMiddleEast. toincreasethebudgetoftheQudsforce iesinthelikesofLebanon,Iraq,Syriaor Morethan50peoplewerekilledand tionalterroristgroupsincludingIsis.
NowtheUSpresidenthasthreatened by€200moverthenexttwomonths. Yemen,MrTaraghiadded.“Theirdeci- 200injuredinthestampede,according Germanyalsoreducedthepresenceof
to hit more than 50 targets in Iran, Thevotewasnon-bindingbutifIran siontoretaliateistheirs.Wewillneedto tolocalauthorities. itsowntroopsinIraq,moving35sol-
includingculturalsites,iftheIslamic couldforcetheUSoutofIraq—where actourselves,separatefromthem.” Ultimately, the decision on how to diers from Baghdad yesterday and a
republicretaliates. theAmericanshaveinvestedhundreds Pro-reformforcesinIranwarnthat respondwillfalltothesupremeleader. military base north of the capital to
“Thisextremelycomplicatedsitua- of billions of dollars since ousting anyretaliationistooriskywithunpre- “My father believed obeying the KuwaitandJordanonMondaynight.
tion is not only a dilemma for the SaddamHusseinin2003—itwouldbe dictableconsequences. supremeleader’sabsoluteauthorityis Themovewasduetothe“temporary
supremeleaderbutthewhole[Iranian] consideredabigvictoryforIranianfor- “IranandtheUShaveneverbeenthis thepre-requisitetopiety,”Soleimani’s cessationofthetrainingmissionandthe
system,”saidoneIraniananalyst,who eign policy, according to one regime closetoawar,”saidonereformistpoliti- daughter,Zeinab,toldmourners.“We currentsecuritysituation”,theGerman
askednotbeidentified.“Iranianleaders insider. cian.The“massivefunerals”ofthelast will sacrifice ourselves, so that you defenceministrysaid.
are stuck between addressing public “Iran’s call for the US to leave the fewdayswouldhopefullyreleasesome [Khamenei]donotfeelalone.” AdditionalreportingbyTobiasBuck
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MSubASwTFw©NPFCTrorhetostdftUTCaAaSwwaooiukoiohintlTwvtncnemro:p:Syowhtrtaarkube0faeoHa3ncergtpfeet.bdr,wmfiuuc89ehgmosltlEHttgnhruc,is,0l.er2n4tchpatocacaSp.eii,edF0so8fnnb3feaLBpUUdptrseIagegntmsco5rpN2shtaiSStiudtsneo.eKFib9old/ct★sanAt-pldoaetrosgsahM28awvaodonentruneeNQcn0eneaagolgn4tnabesckbm,Ccl&n1,v,dli7peexIrLsosS3okMIenoeR0ciAscdiiriAv,srcnnosroirrhvef8eeldaogina,uL$gitapribuepspsWensapm3snnbtoretp,TpuronDa3erddMnkdosoohoelbsIsbKdiaroesaoeMhlarncepe,lnnvndmiildwwaG,tDntacsweErSsoetgli.aenilnsoasoend.StrtnshposocdT,nhracfgoNLusnburoairahoannlnTbeegttyr,DwsleotwddgDaiDheCtt,dsylofuosoDhler,YoTcerbeO2wifuoekdorereaot0brriuiunifPaklfantnloeau1niim,Alnrrgno7dawsrrs,GdlpfettapioEto’nes,ll8reSSNDFEFFCXNHFLJAaarncTAptsWbauiiennhTTTTu&TtEieheAAcannaiorasihukaSSSSLrtOPbfnsSNcgcCaocwhenaUkordcEEEEEdoffe tgCal oueeatoe5brN tu 4anrRahSuJ1AA r Ki.0vsD’Satn0arlonlqIatytsA0mfiell o0odeaseioFllDeMnass 0pd- ecoCpfid£neWxmtSxrnEeirAtNAoearepoxbogonhndftisRas3oeRe Omdtu utpmai.t5nrIglnsr7K ynimoTrw03lOsltppoed,ltdbeEm0ns0aiWHoWo NiToncpw0$ncyhtsr0fSOrvuAilhhmgvrhtihsoamo0MeeNgnteoeoeyaycavohrhiPumsefistk—iecBtenentlsSdttsaeniiramFiAOevAngitsDtpenwaamFieNophmgpoUeefkcs2112ipirroptrnBnp—n2513745dnt0294eeosMorm2a3954300mlL7203.t,tmobsama9ks6008618tan0560IhLsewt7Nbneiowh5201919sr3631e-edOas ha........t3i.... 9aons9776506fce3420nsshgsNt0eo9e3427214a8329nyiikstsifiiaoDrnoraneuckbc’cilnrsOcdnga2112hgeneaahs2513745o0294eriNCdrnfn2tc3844300cn6223pmisruh9v6997716bor5019okncegphoo71735319s9372eaeBpanmsarro.m.......pi....ec7ea1572780s3040nvAalsstdht3vl3557204s2085uasmhceniinuajteicclo%eobaineh----vaouneck00000000e0000si ncbdegeer........fsr....ts--tt24204140h8300140978190762g$$£¥¥€SCCOOGaBiiaaMtcilnbibdcaF UOoiipppppiasnenollnorlcsrnuaRe eeMlseeeeet aWBssddprgfBeCTScnhRnirwurrrrrvcttMrom eeP oe$TeErhNa€£€$£fihbisetkyteixrOrInsNvryhyy chn rmdaped€e$msiDtdCeeaseipose eknaee$IsFmIBim11r”tTnaeEhniaMrnnetdk8s13eacCISlfdod1101Eate9irto19atagptemlapWtiAd....So.ipisu..-re0280cv0b20ourllata laoo37456olhr4k,“93soaeonaloasy“049996lwo55yifdevtBipahonfttitmrnet11rrcihiitoitenarnako8rosn13drfoiwywNrpes1101dl9coaem17snogva.rp....sd.Mur..o0280niFr3aai08hyonrtensehe17467mn7es32GCruMdswlitadr25162sh2ev s“52aMduniu.55aAr4”vsaotiadNpaso02nsnsff8”omrsc€£€¥£$Setl. ..urebt.u329Fai dniito8apeTppppiisisebkon0nn28rrbsae0stdnmsteeee epr“h,hsddpa-nruciearrrrhowfiiobaukeenei noaeor$$£€fftsaolpxxrofndrriyvguins merno£noot’linw. uesaeeseenh1rfntWSte11nglre2.dtpmhMgSh7ot10s45rshu5dttha0011ho6pae9492aachtey1ireles.....c..rhr..i9812gadoc7.a46ci55oduaea 1mris3q3064c0u73la14etnrhv0uitess02144k5Jd66oudslsetcwehesuvraeiire11Aasleoasist7ffbon10oivssich%o0011etrep6nr93-nraiwaeeip10e0a.....erl..na9812cca9kpso39igr..tw.lrsffs48h1nd3053d5es”e63sst----f,,.348g06581v30IUUGJUGFUEUPNpreueeSKSSKifALCeitpiscJFmbbhfTcndrh rrn noeeieGG3aoG3llE oaraoi hodGGsGFsirmrffms ecRAIJMgoo oiLntecmaadunaeoooevinEvvdlchvimire eennsbn”vvemvBiunff aSp rofbot13i1 .artbd s oiltTd12o1atiadolg00eee0mfiaNslotrbot0 e0 Msaae rr y rReaordeyy3anryE i aeosreiymnytpnsAmirrtdrmffpddtteagrrpreh w.kTfhdsdilholwsapsapeosEehtIror,dga BratchiSnneewossdofnnieeduiigpaorteropewdiaesft.ooesihoikdincoflisosdismrnnige,w2nnld.arnttittnbsoe0mieadmnehhahnaihuterneneseeeigra,iadtrandtsgysactbFresibltshuibabteyapasCtwo1111tayssteopdmalr99aC0000nA-nDpppelafb0000o88r0002oinhaarrocks....ben..esr....iiacet673386sn4415lccnocareinso6846ey78egsbee6548 saadpeemdteusdeatorabso“MsetCcstretupmvdl.aheorcehoiedt--dpytrep2010200000vpeehraeeeiuat........e..s tranfdse3320967373rNeteoncalrn sr8916968456odeirbrbvsMoostifiiypaeycnelhauve mmMsewbqatanhlamthdoyul.h--ophltkrea00000000J00einccereeefolo........in..ueiF00000000hhn00tnAeilssiffffxao00100000r31eggggsrt---tstar inRSwTFw©NPFCTrorheAwwwlsaLptne£AawaooiuokiontlTwxgn3ce:b:yanihtawitrdalrkbp60weeoH3lvgoiaffgmfe.adc,w0edfu89poeulstEHthyilryc,is—,0om.iin4ttnch2olcv’Stt.,ssFerw0sofno5e32aLBieirageIingintsmod6rp.uinNn2.a£3ilugn.mlKFSrbi9c/ncms7★Atltdrwerhossorow8.ahoadoPo5euneesNeanmnepuAlga0s4ctabasvocm,C,uneGog,oi7eeILcssevsSgMpIonrts0EcieeociATevns4neinteotripnm8eel4roiagia,L3rtnrbclopgWnanep—ichopenpnpr,TontdartMwunoaaohgeoisoIEieryoseunMhltareie,nrnflhaid3wrGc,lneciwceE.nrrgSn4eitglbeailaBnedSasal1tnestriioso,s,uat’nsng0elNnLutnoiechtoecocl0nTeegwaos,DwritnwDcfra0seDprfCh,doioaeoulDtva,YcterplbiuO2yhusoafkslilaoterr0ebrcnerieareecikoviloloeaasc1rnnir,inimenvp7sersin,l.dtlislsgacheio,ne,ese MBeaETwta“edSd3SSNDFEFFCXNHFAGSTsBwhTTTTu&TteAipTxrspaai0oireELruhukhaSSSSrntOPnsTarseCwahEapOikaoEr0EEEErdesn igaCta ’ed5wl XFh u i4arlcsoaRtSJk1AAa - 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Mnuchin,USTreasurysecretary,had sanctionsplan“unfriendly,inappropri- FrancewantstheEUtohavearobust
“agreedtoredoubletheeffortinthe ateandillegitimate”andsaidFrance responsetoanyfurtherUStradesanc-
Morning briefing. Midday analysis. Mobile updates. Subscribe to
comingdaystofindacompromiseon would react and take its case to the tions,butisconcernedaboutGermany’s
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digital tax in the framework of the WorldTradeOrganizationifthenew vulnerabilitytomeasurestargetingthe
With newspaper delivery, you start the day prepared.* With FT.com, OECD”.Theyareduetomeetagainat tariffswereimposed. crucialmotorindustry.“Germanylives
you’re on top of the news throughout the day. And with mobile theWorldEconomicForuminDavos “Wewouldenterintoatradeconflict interror,inpanic,aboutmotorindustry
and tablet access, you’re up to speed wherever you are. laterthismonth. betweentheUnitedStatesandEurope,” sanctions,”theofficialsaid.“Wemustn’t
Mr Le Maire was speaking after a saidMrLeMaire.“Isthatwhatwewant? letourselvesbeledbythenosebythe
meetinginPariswithPhilHogan,the Noonewantstheretobeatradeconflict Americans.”
EU’s new trade commissioner, who ...It’snotevenaFrenchproblem,it’sa DuringahearinginWashingtonyes-
described digital taxation as “a very moregeneralproblembetweentheUS terday,representativesfromindustries
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majorboneofcontentionwiththeUS”. andEurope.” includingwineretailers,cookwareman-
MrHogansaid:“Wewilllookatall Attheendoflastyear,theUSreversed ufacturers and handbag importers
*Terms and conditions can be found at www.ft.com/subscribenow possibilitiesifanytariffsormeasures itspreviousstanceonthemultilateral BrunoLeMaire:USplan‘unfriendly, warnedthattheproposedtariffscould
areimposedbytheUnitedStates.The negotiations at the OECD, with Mr inappropriateandillegitimate’ crippletheirbusinesses.
JANUARY 8 2020 Section:World Time: 7/1/2020 - 19:12 User: david.owen Page Name: WORLD1, Part,Page,Edition: LON, 4, 1
Wednesday8January2020 ★ FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Wednesday8January2020
INTERNATIONAL
Venezuela
Maduro takes advantage of duelling Chaos erupts
in Congress as
legislatures with move against Guaidó rival factions
claim right to
presidency
Ousting of National Assembly’s head prompts fears of further opposition persecution
GIDEONLONG—CARACAS ‘Themore GIDEONLONG—CARACAS
Guaidóis Venezuelan opposition leader Juan
Venezuela’sparallelpoliticaluniverses
Guaidóyesterdayreclaimedhispostas
havejustgotmorecomplicated. weakened,
thelegitimateheadofCongressand
Forthepastyear,twomen—Nicolás
themore vowedtocontinuehisfighttounseat
Maduro and opposition leader Juan
PresidentNicolásMaduroandreturn
Guaidó—haveclaimedtobethecoun- his
thecountrytodemocracy.
try’slegitimatepresident.
leadership
Since 2017 the country has had two InchaoticscenesincentralCaracas,Mr
congresses:thedemocraticallyelected willbe Guaidó and dozens of his legislators
National Assembly and the National forcedtheirwaythroughaheavysecu-
questioned
ConstituentAssembly,whichwassetup rity cordon around the ornate gold-
thatyearbyMrMadurotocementhis internally’ domedCongressbuilding.
griponpower. Theyburstthroughthewoodendoors
Now,theNationalAssemblyhastwo ofthechamber,forcingpoliceofficersto
rivalpresidentsinMrGuaidóandLuis scatterandrun,andtooktheirseats,
EduardoParra,arebeloppositionlegis- singing the national anthem as Mr
latorwhoclaimedtheroleinchaotic Guaidó,whoisrecognisedbytheUSand
proceedingsonSunday. morethan50othernationsasVene-
zuela’srightfulpresident,assumedthe
WhydidSunday’svotematter?
presidential chair. He was sworn in,
MrGuaidó’sclaimtobethelegitimate holdinguphisrighthandandpledging
interim president of Venezuela was “inthenameofVenezuela”tocontinue
basedentirelyonthefactthatheheaded fulfillinghisresponsibilitiesasself-de-
theassembly.Accordingtothegovern- claredinterimpresident“andsearchfor
ment,henownolongerdoes,sohis asolutiontothecrisis”.
claimtothepresidencyismoretenuous Theythenvotedtorecognisehimas
thanever.AccordingtoMrGuaidó,heis thepresidentofCongressforanother
stillthepresidentofbothcongressand Defiant:Juan year.Outside,pro-governmentsupport-
thecountry. Guaidópushes ersharassedandrobbedjournalistswho
hiswaypast weretryingtogetintoCongress.
Whathappensnext?
securityforces Atonepoint,thelightsandmicro-
Itisunclear.TheNationalAssemblysat togainaccessto phonesfailedinsidethechamber,justas
yesterday and, amid chaotic scenes, theNational MrGuaidówasspeaking.
both pretenders to the presidency Assemblyin Earlier,hisrivalforthepresidencyof
appeared. Mr Parra held a session Caracas theassembly,LuisEduardoParra,had
attended by pro-government law- yesterday.Luis heldasessioninfrontofahalf-empty
makers,butMrGuaidólaterforcedhis EduardoParra, chamber, and was recognised as the
wayintothechamberalongwithhis belowleft,was assembly’s new head by pro-govern-
supporterstoclaimhewastherightful electedheadof ment lawmakers. By the time Mr
president. theassembly Guaidóandhissupportersforcedtheir
onSunday wayintothechamber,MrParrahad
WhoisLuisEduardoParra?
CristianHernandez/AFP/Getty gone.
UntilDecember,MrParrawasalittle- MrGuaidóhascampaignedtoremove
knownlegislatorfromthesmallcoastal present. Risa Grais-Targow, Latin theNationalAssemblyontheshoulders events. Tellingly, even Mexico and MrMadurofromofficeafterthesocial-
stateofYaracuy.Hewasamemberof AmericadirectoratEurasiaGroup,said: ofsupporterswaspotent—itsuggested Argentina,withleftistgovernmentsthat istleaderclaimedvictoryinanelection
PrimeroJusticia,oneofthemainparties “Madurowillprobablyusetheduelling amanwhowantedtoseedemocracy mighthaveexpressedsomesympathy regardedasillegitimatebytheopposi-
inMrGuaidó’scoalition.Butaninvesti- legislaturestoincreasepersecutionof respected. for the Maduro regime, chastised it. tionandhumanrightsobservers.
gativejournalismwebsiteaccusedhim theopposition,luremorelawmakersto Inthelongerterm,though,hemay Russiawasalmostaloneinrecognising He has served as president of the
andseveralotherpoliticiansofcorrup- his camp and move towards fresh struggletomaintainthatmomentum, MrParra’selectionaslegitimate. NationalAssemblyforthepastyearand
tion. assemblyelectionsonhisownterms.” and Mr Parra’s defection, along with ElliottAbrams,theUSspecialrepre- wasexpectedtobere-electedonSun-
PrimeroJusticiaopenedaninvestiga- Thoseelectionsareduetobeheldthis thoseofotherrebeldeputies,showshis sentative for Venezuela, suggested day.Hetriedtoscalerailingsoutsidethe
tionandMrParrawaskickedoutofthe year.ButSunday’smovewasagamble coalitionisvulnerable. WashingtonwouldpunishMrMaduro building,butwasblocked,withseveral
party.Withlittletolose(andperhaps forMrMaduro.Itmadehimlooklikea “EvenifGuaidópreserveshisinterna- withmoresanctions.ButwithUSand other legislators, from entering Con-
withanaxetogrind)heagreedtochal- classicLatinAmericandictator,shut- tionallegitimacy,theregimewillcon- world attention on the Middle East, gress.MrParraclaimedtobethenew
lengeMrGuaidóinSunday’svote, tingdownademocraticallyelectedpar- tinuetopushtheoppositionleaderto thosesanctionswouldbemodest. presidentafterclaimingtohavewonthe
withthesupportofpro-govern- liamentandstoppingelectedpoliticians the margins domestically,” predicted “Thisisthecostofhavingstirredup voteof81membersoftheassembly.
ment legislators and disgrun- doingtheirjob. Teneo, a consultancy. “The more conflictwithIran,”saidDavidSmilde,a USsecretaryofstateMikePompeoon
tledmembersoftheopposi- Guaidóisweakened,themorehislead- VenezuelaexpertatTulaneUniversity Mondaydescribedthevoteas“farcical”
AndforGuaidó?
tion. ershipwillbequestionedinternally.” intheUS. andcondemned“theformerMaduro
In the short term, Mr Guaidó seems “ItisabsorbingtheattentionoftheUS regime”forgoingagainstthewillofthe
Whatdoesthismeanfor Whathasbeentheinternational
reinvigorated after a difficult end to andtheEUandtheywillprobablydoas NationalAssembly.
Maduro? response?
2019inwhichhispopularitywanedand littleaspossiblewithVenezuela.This AttemptslastyearbyNorwaytobro-
Mr Maduro was quick to wel- cracks opened in his coalition. He TheUS,EU,OrganizationofAmerican wasundoubtedlypartofthecalculation kertalksbetweenthegovernmentand
come Mr Parra’s election, even receivedthebackingof100law- StatesandtheGroupofLima,aregional oftheMadurogovernmentinundertak- the opposition came to nothing, and
though it clearly broke National makersinanimpromptuparlia- groupingofmostbigcountriesinthe ingsuchabrazenpowergrab.Theysaw Venezuelanshavegrowndisenchanted
Assemblyrules.Therewasnolegalquo- mentary session on Sunday Americas,reiteratedtheirsupportfor anopportunitycreatedbytheUSstrike withthepoliticalprocess.
rum,novotecountandtheheadofthe evening. And the image of him MrGuaidóandcondemnedtheMaduro againstIranandquicklytookit.” Around4.5mVenezuelanshavefled
assembly — Mr Guaidó — was not beingcarriedaloftyesterdayinto governmentfororchestratingSunday’s AdditionalreportingbyKatrinaManson theircountryoverthepastfouryears.
Governmentspending.Presidentialrestraint Sheremetyevo
Chinese tourism surge boosts Moscow airport
Flat growth tests Mexico’s Mr Austerity
MAXSEDDON—MOSCOW expectedtotop$1bn.Asmanyas70per ness partner, Arkady Rotenberg, a
“Theydon’tknowhowtospend,soit’s financialcrisesinthe1980sand1990s centoftax-freereceiptshandedoutat childhoodjudosparringpartnerofPres-
Investoruncertaintyover Withanewrunwayoperationalanda
betterthattheydon’t,”saidValeriaMoy, hurtMexicansthathewasdetermined Russia’sairportsgotoChinesecitizens. identVladimirPutin,ownstheremain-
gleamingnewinternationalterminal
LópezObrador’spoliciesis headofMéxico¿cómovamos?,athink- nottorepeathistory. Sheremetyevo,Moscow’slargestair- ing35percentoftheholdingcompany,
openingthismonth,Moscow’sSher-
tank,sayingthepresident’spriorities Hescathinglyreferredtothemarket- port, is looking to capitalise on that whilethegovernmentownstheother
emetyevoairporthassetanambitious
addingtoaslowingeconomy “won’t provide the structural change drivenpoliciesofthepastfourdecades growth. Signs and announcements are 30.5percentoftheairport.
targettodoubletrafficto100mpassen-
thiscountryneeds.Sensibleinfrastruc- asMexico’sfailed“neoliberalperiod”, inMandarinthroughout,whileduty- SincetakingoverSheremetyevo,Mr
gersayear.
ture spending and improving confi- becauseoframpantcorruptionanda freestoresacceptpopularChinesepay- Ponomarenko has overseen a $2.5bn
JUDEWEBBER—MEXICOCITY dence,Idon’tseethatanywhere.” yawning social divide between the Nearlyhalfaresettocomefromroutes ment methods, including UnionPay infrastructure upgrade that includes
Inhisfirstyearinoffice,Mexicanpresi- Thebusinesssectorisbendingover country’srichnorthandpoorsouththat thatwereuntilonlyrecentlyanafter- cardsandonlinesystemsWeChatPay twonewpassengerterminals,acargo
dentAndrésManuelLópezObradorhas backwardstobefriendlytothegovern- hesaidtheyspawned. thought: connecting flights between andAlipay. terminalandatrainundertherunway
provedacontradiction:apopulistwho mentandhaspledgedtoinvestinan “Ithinkhewilltrytomaintainfiscal EuropeandAsia,boostedbybreakneck Morethan2.3mChinesetouristsflew linkingthemtotheexistingterminals.
doesnotliketospend. ambitious infrastructure programme disciplineandwhenthatisn’tpossible, growthintourismfromChina. intoSheremetyevoin2019,including InadditiontoChinesetourism,Mr
Hisfrugaladministrationlostthou- that Gabriel Lozano, chief Mexican hecanalwaysblametheprivatesector Theweakrouble—currentlytrading 1.26mwhotransferredviatheairport. Ponomarenko sees transfer traffic
sandsofseasonedstaffbecauseofwage economist at JPMorgan, said looked orratingagencies,”saidMrLozano. at62tothedollar,lessthanhalfitsvalue Sheremetyevo,whichoffersflightsto29 betweenEuropeandChinaaskeyto
cutsdesignedtofreeupcashtoplough “interesting,afteradismalyear”. The president has accused rating fiveyearsago—hasmadeRussiaoneof Chinesecities,expectstheirnumberto growingpassengerflows.
intosocialprogrammes.Theinexperi- Butpublicaswellasprivateinvest- agenciesofremainingquietwhenMex- thetopthreedestinationsworldwidefor growby30percentayearintheyearsto Theairporthasdoubleditsshareof
encednewteamhasbeenslowtodis- icowasrackingupdebtandturninga Chinesetourists,Russianofficialssay. come. transfer traffic between Europe and
burseeventhescantfundsavailable. blind eye to corruption, adding that StateagencyRosturizmestimatedmore “Wethinkthatwe’reonlyjustgetting Chinato10percentinthelasthalf-dec-
Investors,worriedaboutthedirection 65 6.2 theywerewrongtobecriticalnowthat than2mChinesetouristsvisitedRussia started growing Chinese passenger adeandintendstocompetewithmore
% %
ofpolicy,havealsobeenrestrained. thestatewasfinallyaddressingprob- lastyearcomparedwithjust158,000a flows,”AlexanderPonomarenko,Sher- establishedhubs.
LópezObrador’s Fallinsalestax
As a result, the economy has lemsbypumpingmoneyintostateoil decadeago. emetyevochairman,toldtheFTinan Moscow’sattractivenessasatransfer
approvalratings collectioninfirst
screeched to a halt: zero growth is —offaFebruary 9monthsbecause companyPemex. “Theroubledevaluationafter2014, interview. hubandtouristdestinationhasseen
expectedthisyearafter2percentlast peakof81percent ofslowdown ButPemexisexpectedtosufferasec- Moscow’seffortstosimplifytheprocess Mr Ponomarenko and his business severalforeigncompaniestakesharesin
year.ButMrLópezObradorprideshim- onddowngradetojunkstatusinthefirst for Chinese tour groups to get visas partner,AlexanderSkorobogatko,own Russianairportsinrecentyears.Qatar
selfonhisobstinacyandwillnotaban- mentisneeded—andthegovernment halfasaresultofabusinessplanthe togetherandactivemarketingbyRus- a65percentstakeinSheremetyevo’s Airwaysisintalkstoconcludethepur-
donhigherpensions,grantsforunem- hasseena2.5percentdropinincome marketbelievesisunrealistic,declining siantourismfirmshavecontributedto holding company, which owns about chaseofa25percentstakeinMoscow’s
ployedyoungpeopleorhiscontrover- tax revenue and a 6.2 per cent fall outputand$100bnindebt. the trend,” said Alexander Gabuev, two-thirdsoftheairport.Anotherbusi- Vnukovobytheendof2019,whilethe
sialrefinery,airportandtrainprojects. in sales tax collection in the first Pemexisheavilyreliantonstatesup- chairoftheRussiaintheAsia-Pacific QatarInvestmentAuthorityandGer-
Thatcouldstrainhiscommitmentto nine months because of the slowing portandanalystssaiditneededeven programme at the Carnegie Moscow many’sFraportarepartofasyndicate
maintaining strict fiscal discipline in economy. moreinvestmentthanthegovernment Centre. thatownsPulkovoairportinStPeters-
Latin America’s second-biggest econ- “Private investment will remain hadsofarmadeavailablebecauseofits “Russiahasalsoallowedmoreflights burg.
omy.Sowill2020betheyearMexico’s defensive and public investment will strainedfinances.APemexdowngrade, fromregionalChineseaircompaniesto Mr Ponomarenko said he and his
MrAusterityturnsspendingtapson? remainsubduedbecauseofalackofrev- therefore, could trigger a sovereign Moscow,whichhelpstoturntheRus- partnerswereconsideringsellinga30
“Abandoning fiscal restraint is not enuesandthenatureoftheprojects downgrade,althoughMexico’scoveted siancapitalintoanairhubforEurope- percentstakeinSheremetyevoinorder
necessarilyinevitableifhandoutsand theyarechoosing,”saidMrCervera. investmentgraderatingisnotatrisk. boundChinesetourism.” toraisefundstobuyoutthegovern-
socialprogrammeskeephimpopular,” Evenwithoutincomeconstraints,Mr SlowerUSgrowthin2020willhurt DespiteoutcriesfromRussia’sculture ment’sstakeshouldRussiaexercisea
saidAlonsoCervera,chiefeconomistfor LópezObrador’scommitmenttodeliver Mexico,whichhasintegratedmanufac- ministry that Chinese tourists were putoption.“Wedon’tthink[Chinese
LatinAmericaatCreditSuisse. a primary surplus while not raising turingsupplychainswithitstoptrading swampingpopularStPetersburgtourist tourismhas]peakedyet,”hesaid.
Indeed,MrLópezObrador’sapproval taxesordebtrevealsaprudentstreakat partner,but“Pemexistheweakpoint”, sites,theirbigspendingmakestheman “Evenif[China’sgrowthslowsdown],
ratingsremainenviablyhigh—65per oddswithhisleftwingnationalistdis- saidMsMoy.Economistsareconcerned attractiveproposition.TheaverageChi- it’llonlygoup,becauseit’scheaperfor
cent,accordingtoOraculus,apollof course. by weakening midterm growth pros- nesetouristspends$700onatripto ChinesetouriststogotoRussiathan
polls—albeitoffapeakof81percentin Peoplewhohaveknownhimfordec- pects,fiscaldeteriorationandaworsen- Russia,accordingtothecentralbank, Sightseeing:Chinesetouristsenjoya anywhereelse.”
February. adessaidhewassoshockedbyhow ingsecuritycrisis. while total spending for 2019 is guidedwalkthroughcentralMoscow InsideBusinesspage14
JANUARY 8 2020 Section:World Time: 7/1/2020 - 19:11 User: david.owen Page Name: WORLD2, Part,Page,Edition: LON, 6, 1
Wednesday8January2020 ★ FINANCIAL TIMES 7
INTERNATIONAL
GLOBAL INSIGHT
Parliamentary vote
SAN DIEGO
Sánchez to head Spanish coalition
Brendan
Greeley
Socialistpartyandfar-left ofpoliticalinstabilityinwhichSpain monthsagoonlythroughwinningavote ‘Youarethe ofdeputies,meaningthattotakeoffice
heldfourgeneralelectionsandlackeda ofnoconfidenceinthepreviouscentre- thegovernmentrequiredtheabsten-
Podemosjoinforcesafter stronggovernment. rightadministration. Trojan tionsoftheERC,thebiggestpro-inde- Central banks lack the
slimvictoryforpremier “Thereareonlytwooptions:eithera Butthetinymarginindicatedthenew horse pendence Catalan party, and of EH
progressive coalition or a continuing administration’s limited room for Bildu,aBasquesecessionistparty.
‘bazooka’ to fire up
[being
impasseforSpain,”hesaid,ashecalled manoeuvre, while the angry debate TheCatalanindependencedisputeis
DANIELDOMBEY—MADRID
ontherighttoaccepttheresultofthe highlightedtheincreasingpolarisation used]to themostdivisiveissueinSpanishpoli-
Spainwillhaveacoalitiongovernment last,inconclusiveelectioninNovember, ofSpanishpolitics. ticstoday.MrSánchezhadsoughtto economic growth
destroy
forthefirsttimeinitsmodernhistory— whentheSocialistscamefirstbutfellfar In bad-tempered exchanges right- avoidbothacoalitionwithPodemosand
includingministersfromthefar-left— shortofanoverallmajority. wingpoliticiansroundedonMrSánchez thestate’ relyingontheCatalanandBasquesepa-
after parliament confirmed Pedro Thenewadministration—whichwill forhisrelianceonCatalanandBasque ratists.
Sánchezasprimeministerbyawafer- bethefirsttoincludeCommunistminis- separatistsinyesterday’svote. PabloCasado, Butheconcludedhehadnoalterna-
thinmargin. terssincethe1936-39civilwar—plans “You are the Trojan horse [being People’sparty tiveafterthefailureofhisgambitoftrig- O verthepastyear,USFederalReserveofficials
Yesterday’s167-165vote,whichcame toincreasetaxesonbigcorporations, used]todestroythestate,”saidPablo leader geringNovember’selection,whichleft havebecomeincreasinglyopenaboutwhat
afterafuriousdebateinthecountry’s bolster collective bargaining, reduce Casado,theleaderofthecentre-right theSocialistswithahandfulofseats monetary policy cannot do for economic
chamberofdeputies,pavesthewayfor carbonemissionsandcombatgender- People’sparty. fewerthanbefore. growth.InNovember,forexample,Fedchair
MrSáncheztobeswornintodayatthe basedviolence. “Ifyousatisfythedemandsofyour Yesterday’svoteonlytookplaceafter JayPowellsuggestedthatCongressshould
headofacoalitionofhisSocialistsand Thevoteisapersonalachievement partnersagainstthesystem,Spainwill weeks of negotiations between the considerwaystohelptrainworkersormakeiteasierfor
theradicalleftPodemosmovement. for Mr Sánchez, who had previously bebroken.Ifyoudonot,theywillthrow SocialistsandtheERC,inwhichthesep- womentostayinthelabourforce.
Inacombativespeechaheadofthe tried and failed to win parliament’s youontothestreet.” aratistpartypromiseditsabstentionin FormerFedchairsJanetYellenandBenBernankehave
vote, Mr Sánchez portrayed the new backingtoformagovernmentinboth TheSocialistsandPodemoshaveonly returnforaroadmapforfuturenegotia- nowsentanothermessagetoCapitolHill:shouldadown-
governmentasabreakwithfouryears 2016and2019.Hecametopower18 155membersofthe350-seatchamber tionsoverCatalonia. turncome,theFedmightnotbeabletohandleitalone.
“Althoughmonetarypolicyhasameaningfulroletoplay
infuturedownturns,it'sunlikelytobesufficientinthe
yearsahead,”MsYellentoldaneconomists’conferencein
SanDiegoonSunday.
Syria
Mr Powell has pleaded for structural policies that
increaseAmerica’sabilitytogrowoverthelongterm
Putin pays regardlessoftheupsanddownsofthebusinesscycle.Ms
YellenandMrBernanke,bycontrast,areconcernedabout
cyclicalpolicies—waystorespondtoarecession.
surprise visit
Thisisbecauseofthedecreasedscopeformonetary
stimulus.TheUS’snaturalrateofinterest—anestimateof
whatinterestrateswouldbewithoutanyinterventions
fromcentralbanks—isstillhigherthanthoseofEurope
andJapan,accordingtoestimatesbytheNewYorkFed,
Russia’sPresidentVladimirPutin, reflectinghigherUSeconomicgrowth.Butoverthepast
centreleft,visitstheeighthcentury severaldecadesthenaturalratehasdroppedfrom3.7per
UmayyadMosqueintheoldcityof centin1980to0.6percentattheendof2019.
DamascusyesterdaywithSyrian Toencouragelendinginadownturn,theFedcandrag
counterpartBasharal-Assad,centre interestratesbelowtheirnaturallevel.Butwiththenatu-
right,duringasurprisetripfor ralratealreadyperilouslyclosetozero,thereislittleroom
bilateraltalks.ItwastheRussian left.
leader’sfirstvisitsince2017. InSanDiegoMrBern- TheFedcandrag
Twoyearsago,MrPutindeclared ankesaidtheFed’salter-
interestratesbelow
Moscow’smissioninSyria nativetools,suchasasset
accomplished.Hisarrivalreinforced purchases and forward theirnaturallevel,
hissupportfortheSyrianpresident, guidance, were robust
butthisisalready
astheirjointmilitariescontinuedto butaddedawarning:if
poundthelastbastionsofresistance thenaturalrateofinter- closetozero
inthenorth-westernIdlibprovince. estfallstoolow,thetools
are less effective. That
would mean “a more central role for fiscal policy in
Sana/Reuters
respondingtoeconomicslowdowns”,hesaid.
Ms Yellen and Mr Bernanke urged Congress to
Profile. Luo Huining strengthenautomaticstabilisers—programmessuchas
unemploymentinsurancethatkickinduringarecession.
“It’ssomethingCongresscoulddobeforethenextreces-
China’s enforcer sends message to Hong Kong
sion,andIbelieveshoulddo,”saidMsYellen.
HélèneReyoftheLondonBusinessSchoolpointedout
thatgovernmentspendingisevenmoreeffectiveduringa
downturn,whenprivatespendingcollapses.
“Wedohavesometools,butindeedtheyhavebeen
inglylostpatiencewithitsofficialsfol- party lines. Wang Zhimin, Mr Luo’s theNationalPeople’sCongress,China’s stretched,”shesaid.“Fiscalpolicycoulddoalot.”
Appointmentofhardliner
lowingmorethanninemonthsofoften predecessor,hadnoneofhishigh-level legislator,apositionnormallyreserved Economistspuzzleoverwhathasbeendraggingthenat-
viewedasshiftinBeijing violentprotestsintheAsianfinancial experience. forseniorofficialsover65.Hisswiftpro- uralratedown,andhaveformulatedtwoexplanations.
hub, the final straw being the huge Thesymbolismofinsertingsucha motionhastakenmanybysurprise. Thefirstisthatlabourforcesindevelopedeconomies
approachtocity’sproblems defeatforpro-Beijingcandidatesindis- powerfulfigureintotheterritory’scrisis “BythestandardsoftheChinesesys- aregrowingolder—therearefewerworkersandahigher
trictcouncilelectionsinNovember. hasnotbeenlostonHongKongerswho tem,thisisaverylast-minutedecision,” savingsrateastheyprepareforretirement.Moresavings
Analystssaytheappointmentofsuch jokeabouthimbeingtheirnew“party said Ryan Manuel, China expert at chasingfewerinvestmentsdrivesreturnsdown.
CHRISTIANSHEPHERD—BEIJING ahigh-levelofficialmarksashiftinBei- secretary”,themostseniorofficialin LuoHuining: researchfirmOfficialChina. Thesecondisthatproductivityisnotgrowingasquickly
SUE-LINWONG—HONGKONG
jing’sapproachtoHongKongthatcould mainlandChinesehierarchies. thesymbolism TheabruptaxingofMrWangwasa asitusedto,whichdampsgrowthandopportunitiesfor
LuoHuininghasarecordofusinghard- accelerateitsreformtimetableforeve- Inhisfirstspeechaftertakingupthe ofinsertingsuch signofBeijing’sdissatisfactionwiththe investment.
linetacticstoresolvetoughproblems rythingfromthecity’snationalsecurity postonMonday,MrLuosaidhelooked apowerful way the demonstrations had been TheFedcannotdomuchabouteither.BenjaminFried-
fortheChineseCommunistparty. lawstoitseconomyandeducationsys- forwardtoworkingwithCarrieLam, figureintothe allowedtoescalate,accordingtopeople man,aneconomistatHarvard,saidtheFedcannotmake
Incoal-producingShanxiprovincehe tem. HongKong’schiefexecutive,andher territoryhasnot who speak regularly to the liaison industry more innovative or educate workers, which
helpedrootoutcorruptofficialswith Suchapushwouldputhimonacolli- government to “guarantee that beenloston office. wouldimproveproductivity.Thedropinthenaturalrate
tiestothepowerfulaideofformerpresi- sion course with the territory’s pro- [China’s] constitution and [Hong HongKongers Itwouldbe“naive”toconsideraper- “may or may not be fixable, and it’s not the Federal
dentHuJintao.Andbeforethathespent democracy camp and demonstrators Kong’s] Basic Law are fully imple- sonnelswapenoughtofixthedeep- Reserve’sjobtofixit”,hesaid.
morethanadecadeinQinghai,birth- whofearshrinkingcivilliberties. mentedinHongKong”. rootedproblemswithBeijing’sattempts ThiswillmaketheFed’sjobevenharderwheneconomic
placeoftheDalaiLama,wherealong- AppointingMrLuoisthe“biggestpol- “Hewassuccessfulincleaningupthe togoverninHongKong,accordingto conditionsworsen.“Wejusthavelessroomtomanoeu-
sideeffortstorevivethelocaleconomy icy adjustment the party centre can mess in Shanxi,” said Willy Lam, Samson Yuen, a political scientist at vre,”saidMaryDaly,presidentoftheSanFranciscoFed,in
he further tightened restrictions on make,giventheyareunwillingtogivein adjunct professor at the Centre for Lingnan University in Hong SanDiego.
TibetanBuddhistcommunities. totheHongKongpeople’sdemands”, ChinaStudiesattheChineseUniversity Kong.“It’s...aninstitutionalproblem Intheusuallyunderstatedworldofmonetarypolicy,
Butuptonowthelittleknown65- saidWuQiang,aformerpoliticslec- of Hong Kong. And because he has thatcannotbefixedbyoneperson,”he expressionsofconcernsuchasthisarenotablyexplicit.
year-oldhasoperatedawayfromthe tureratTsinghuaUniversityinBeijing. alreadyreachedretirementageandis said. “Theycan’tannouncetooloudlytheyhavenotoolsleft,”
limelight.Hiselevationtotheroleof Beijing has traditionally appointed notseekingpromotion,hewillhave“no ButforMrWuthearrivalofBeijing’s saidRaghuramRajan,formergovernoroftheReserve
Beijing’smaninHongKonghasmoved up-and-comingcareerbureaucratsas qualmsaboutcarryingoutBeijing'sdra- enforcerisultimatelyasignthatthe BankofIndia,nowattheUniversityofChicagoBooth
himcentrestageinthebiggestpolitical directoroftheCentralLiaisonOffice— conianorders”,MrLamadded. partyremains“unwillingtogiveinto SchoolofBusiness.“Partofthemagicofcentralbankingis
crisisonChinesesoilindecades. Beijing’sdefactoembassyinHongKong A week before being sent to Hong theHongKongpeople’sdemands”. topretendyouhaveabazookabehindyourback.”
Ithasalsotriggeredquestionsover —andtheyhavetendedtobeviewedas Kong,MrLuowasappointedtoafinan- AdditionalreportingbyNicolleLiuinHong
whatBeijingplansnextafteritseem- functionaries who parroted official cialandeconomicscommitteeunder KongandQianerLiuinShenzhen [email protected]
Corporation tax windfall Price growth
Public spending debate looms over Ireland election campaign Eurozone inflation picks up
thanks to Christmas shoppers
ARTHURBEESLEY—DUBLIN Corporation tax revenues now taxreceiptsmaybeatriskfromchanges That is set to become an election
accountformorethan18percentofall tointernationaltaxpolicy,tradeten- issue.Irishpoliticiansarebracingforan
Ireland faces a general election this
taxreceiptsandareskewedtowardsa sionsandindustryandcompany-spe- electioninspring,summerorevenin
yearwithitseconomyinthebestshape
small number of large companies: the cificrisks. February,afterBorisJohnson’sUKelec- MARTINARNOLD—FRANKFURT ECB’scoreobjectiveforinflationtobe
sincethefinancialcrisis,boostedby
10biggestcontributorspayhalfoftotal Oneexampleistheforthcomingclo- tionwinlatelastyearliftedtheBrexit- below but close to 2 per cent, the
Google,AppleandotherUStechand Strong pre-Christmas consumer
receiptsbetweenthem. sureofthe“doubleIrish”loopholethat relateduncertaintythathaskeptLeo Decemberrisetakesthepressureoffthe
pharma companies whose tax pay- spending in the eurozone helped to
The business tax surge has been allows international companies to Varadkar’s minority government in centralbanktocutinterestratesfurther
ments have transformed its public boost inflation to a six-month high,
attributedtorisingcorporateprofitabil- reducethetaxtheypayontheirglobal power,proppedupbyavotingpactwith inthenextfewmonths.
finances. addingtosignsthattheregion’secon-
ityandUStaxchangesthatmadeit operations.LastweekoneofIreland’s FiannaFáil,thelargestoppositionparty. “Thiswillpleasethemorehawkish
omyhasstabilisedinrecentmonths.
Butquestionsoverthesustainabilityof attractiveforAmericangroupstoshift Withtheelectioncampaignwillcome membersoftheECB’sgoverningcouncil
thissurgeincorporationtaxreceiptsare intellectualpropertyassetstoIreland, inevitablequestionsoverwhatthenext Consumerpricesrose1.3percentin andlowersthechancethatpolicymak-
set to overshadow the campaign, in whosecorporatetaxrateisalow12.5 €10.9 10 governmentshoulddotoensuremore December from the year before, up ersareforcedintofurtherlooseningin
bn
whichallpartieswillcomeunderpres- percent. housing is built and to improve the from1percentinNovember,according thenextfewmonths,”saidJackAllen-
Corporationtax Companiesthat
surefromvoterstoboostspendingto However,ministershavewarnedthis healthservice,whichareMrVaradkar’s toaflashestimatefromEurostat.The ReynoldsatCapitalEconomics.
revenuesin2019, contributetohalf
address a chronic housing crisis and isunlikelytolast;financeministerPas- upfromjust ofIreland’stotal weakestspots.HisFineGaelparty’srep- risewasinlinewiththeaveragefore- A further boost to inflation could
healthcarefailings. chalDonohoesaidinarecentspeech €4.6bnin2014 corporationtax utationforfiscalcompetencehasalso castsofeconomists,saidaReuterspoll. comefromrisingoilprices,whichhave
Datapublishedlastweekshowedthat thatcorporatetaxrevenuesmightbegin takenahitduetolargecostincreaseson Excludingthemorevolatileareasof risen about 5 per cent to hit three-
Ireland’spublicfinancesdeliveredasur- todropassoonasnextyear. largestcorporationtaxpayers,Google, hospitalandruralbroadbandprojects. energyandfood,alcoholandtobacco, month highs above $70 a barrel in
plusof€1.5bnin2019,or0.4percentof “Thereisabroadconsensusthatfur- disclosedthatithadoverhauleditstax AlthoughMrVaradkarhaspromised price growth was unchanged from recentdaysonfearsabouttensioninthe
grossdomesticproduct;onlythesecond therinternationaltaxreformeffortsare structure,movingintellectualproperty incometaxcutsandapublicsectorpay Novemberat1.3percent.Thehighest MiddleEastaftertheUSassassinationof
time since the financial crisis it has neededinordertoaddressthetaxchal- totheUSbeforetheloophole’sclosureat rise,hehasinsistedthat“theoverriding inflationwasinSlovakia,theNether- anIraniangenerallastweek.
takeninmoremoneythanitspent. lengesarisingfromthedigitalisationof theendof2020. commitmentwillbetoruna[budget] lands, Lithuania and Latvia, where EconomistsatMorganStanleysaida
Corporationtaxrevenuesgrew4.8per theeconomy,”hesaid.“Changeiscom- MrDonohoehaspre-emptivelyscaled surplus”.Thetaoiseachhasalsosaidhe pricesrose2percentormore. sustainedriseinBrentcrudepricesof
centyearonyearto€10.9bn,beating ingandchangeswillhaveanimpacton backIreland’spublicspendinggrowth, willnotcuttaxesifthereisadeficit. Thefiguresarewelcomenewsforthe more than $10 a barrel “could bring
eventhemostoptimisticgovernment bothoureconomicmodel—ourability settingoutplanstoachieveabudget MrDonohoesaysheisweddedtopol- EuropeanCentralBank,whichinSep- headline inflation temporarily to
forecastsandcappingfiveyearsofstel- toattractinwardinvestment—andon surplusofatleast1percentofGDPby icyprudence.ButtheFiscalAdvisory tembercitedconcernaboutfallinginfla- around1.8percentbyend-2020”.
largrowthfromjust€4.6bnin2014.The ourrevenuestream.” 2022andarguingthatmaintaininga Councilhascriticisedthegovernment tionasitsmainreasonforcuttinginter- However,theyaddedthattheECB
total tax haul was a record €59.3bn, TheIrishFiscalAdvisoryCouncil,a surplusoverthemediumtermisthe fordeployingtheunexpectedgrowthin estratesandrestartingitsquantitative waslikelytolookpastanyvolatilityin
almostdoublethe€31.8bnreceivedin statutorybudgetwatchdog,haswarned best way to counter the risk of falling corporationtaxreceiptstofundpersist- easing(QE)bondpurchaseprogramme. energypricesandfocusoncoreinflation
2010,theworstyearofthecrisis. that€2bnto€6bnofIreland’scorporate businesstaxrevenues. entcurrentspendingoverruns. Whilethefiguresremainbelowthe initsrate-settingdecisions.
JANUARY 8 2020 Section:World Time: 7/1/2020 - 19:09 User: david.owen Page Name: WORLD3, Part,Page,Edition: LON, 7, 1
8 ★ FINANCIAL TIMES Wednesday8January2020
ARTS
Marriage of beauty and technology
ANewYorkexhibitioncelebratesanerawhenscientifictools
andgadgetsweremadewithexquisitecare.ByAriellaBudick
I sing to you of a marvellous scenesillustratingthewayancientgods,
machine—acasenolargerthana heavenly bodies and patient experi-
snuffbox, its interior encrusted mentscanjointogethertoturnbase
withtinydabsofgold,silver,and metalsintogold.
substances of surpassing rarity Noactivitywastoomundanetobe
suchasyttrium.Thismiraculousvessel ennobledbyingenuityandtaste.Sure,a
containstheworld’sentirestoreofwis- scribecouldworkonascarredwooden
dom.Atatouch,itsummonsthemost plank,butasovereign’sthoughtswould
illustriousmusicianstoaprivateper- besharpenedbyawood-and-ivorywrit-
formance,unfurlsbawdyscenesorlofty ingboxintricatelyinlaidwithpolyhe-
tragedyinatheatretinyenoughtofitin drons. Drinking brought forth lavish
thepalmofone’shand.Itcalculatesthe Bohemiantankardsdesignedtokeep
motionofthestars,plotsacoursetoany wigpowderfromdustingone’sbeer,and
port, translates any text (ancient or awroughtirontrickchairthatimmobi-
modern)andbringstidingsfromdistant lised a victim until he had guzzled objectsthatareatonceadvanced,inter-
landswithinmomentsoftheiroccur- enoughtoearnhisfreedom—agizmo changeableandlargelyunadorned,and
rence.Thismagiccasketconfersonits thatofferedliberationthroughlibation. we’rebarelyawareofwho,precisely,
bearer knowledge that the greatest Atamoreadvancedlevelofpartying, reaps the information they generate
emperorsofyorecouldonlydreamof. anearly17th-centuryautomatonclock aboutwhatwedo,howwethinkand
Theonlycatch:I’vegotone,you’vegot fromAugsburgfeaturesDianaatopher wherewego.Inthepre-industrialage,
one,andsodoeseverytiredcommuter chariot,drawingabow.Whenitwasin however, sophisticated devices, with
packedintoyoursubwaycar.Aninstru- theirwondrousspringsandwhispering
mentthatwouldoncehaveconferred gears,weremadetobeadmired,thebet-
majestyandpowernowmakesyoujust tertoappreciatethediscriminatingper-
anotherschnookwithasmartphone. son who had paid for them. Every
TheMetropolitanMuseum’sexhibi- machinewasakindofperformance—
tionMakingMarvelscarriesusbackto specifically,apowerplay.
a time, roughly the 16th through to Thatfactgivestheexhibitionanirre-
the18thcenturies,whentoolsofscien- sistibletheatricalquality,whichisonly
tificinquirywerealsoobjectsofbeauty, occasionallyexplicit.Inthe18thcen-
usuallyfabricatedforprinces.Costly, tury,stageproductionsoftenreliedon
rare, spectacularly engineered and elaboratehydraulicsystemstowhipup
exquisitelydecorated,eachhadaspe- storms,transformdayintonight,and
cificjob;togethertheyaddedtohuman- launchdeitiesintoflight.Countrypal-
ity’s understanding of how nature acesboastedwizardlywaterworks.The
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Some were frivolous (Leonardo da Junebugautomaton(c.1600) Above:equationclock(1591).Aboveright:thedraughtsman-writer(c.1800)couldreproducedrawingsandpoems delights, including a pair of mid-
Vincidesignedawoodenlionthatroars, 18th-centurymechanicalpaintingsthat
which unfortunately could not be full working order, the contraption wasthepipeorgan,whichfusedtech- wearingblackgloves)turnthekeyand automatons,fountainsandothergadg- flipthroughvariousscenes.
roundedupfortheoccasion).Others wouldrollacrossatabletop,drawnby nology,prayerandaestheticexcitement flipaswitch:thelittlemusicianslaunch etsamountedtoanintra-Europeancon- Butnotallthatglistersisbold.Several
werelethal(gildedgunner’slevelsmade head-bobbingleopards,whilethegod- intoonesonorouspackage.Noteventhe intoastatelywhirlandthemechanism testofprestige,gloryandtechnological showpieces, for all their silver and
thejobofdecimatingacitywithcannon dess rolled her eyes. The chariot Methastheresourcestoimport,say,the soundsawheezypolyphonicdance. command. As every schoolchild and whimsy,sufferfromaninefficiencythat
fire more efficient) or mysterious (a stopped,thearrowflew,andtheperson 18,000-pipe behemoth from the St Princes were doers. They operated touristwhovisitstheRoyalObservatory stillbedevilstoday’srobots:theylook
“mechanicalparadox”makesawheel ithithadtoknockbackadrink. Stephen’s Cathedral in Passau, Ger- lathesthatspunivoryblocksaround inGreenwichlearns,theBritishempire greatanddolittle.Now,asthen,ittakes
appeartorollupanincline).Stillothers Beautyandsciencedidnotbelongto many,butitdoeshaveanastonishing whilefixedbladesshavedthemintoele- wasbuiltonclocks.Accuratetimekeep- anawfullotoffinickyhumanlabour
representedaquasi-mysticalfaithinthe separatecategories:preciousgemsthat miniatureorchestrawithaclockanda gantcylindersorelaborateshapes.John ingallowednavigatorstocalculatelon- beforeyoucangetaninanimateobject
marriageoftechnologyandcosmology. setoffashapelyclaviclealsohintedat troupeoftinyplayers,builtinAugsburg William, a 17th-century elector pala- gitude,increasingthelikelihoodthata toperformaprettydumbtaskwitheven
Augustus,electorofSaxony,possesseda mysteries stored deep in the earth. in 1625. A short video demonstrates tine,workedunderthetutelageofthe shipwouldhitthecontinentitwasaim- a modicum of elegance. A thin line
chest-likealchemicalfurnace.Itssteel Amongthegrandestandmostcomplex whathappenswhenyou(well,notyou, ivory-turningmasterGeorgSteinerto ingfor. dividesawefromsilliness.
walls,trimmedinbrass,bearengraved apparatusesofEnlightenmentEurope but a designated automaton-handler produceamagnificentlyloopycupand Today, technological puissance is
cover,whichsitsonabaselikeaspiral ofteninvisible.Ordinarypeoplecarry ToMarch1,metmuseum.org
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Ourconstant,connnected, intoachair—inthe24/7Beijingvideo RomanSigner’svideoofhimselftossing
effectsstudiowhereheworked.People andturninginbed,whileasmalldrone
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veryfunnyvideoofMarkZuckerberg— warning:amongmanywalk-ininstalla-
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intractableofelements:time. Rut Blees Luxemburg’s time-lapse where blue LED lights hypnotically
InafascinatingexhibitionatSomer- photographofaLondonhigh-riseblock countdownfromninetoone.
setHouse,24/7:Awake-upcallforour at night, its windows perpetually AlexandraDaisyGinsberg’s“Machine
non-stop world, time is an essential glowingwiththelightofmyriadscreens, Auguries”isasoundworkthatblissfully
theme.And,often,theenemy:Marcus the24/7cultureoperatingacrossdis- recreatesthepealingbirdsongofthe
Coates’s film “Self-Portrait As Time” traction, entertainment, irregular dawnchorus—blissfully,thatis,until
(2016)showstheartist’sfingernudging work patterns or simply our fear of werealisethatshehasmechanically
thesecondhandonhiswatchforward, beingunconnected. reproduced sounds of birds whose
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theforcethatisinfactcontrollinghim. wetalk,write,tweetabout... sleep. andlightpollution.Eventhenatural
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human life and the relentless, glo- messagesthatcontainthewordssleep is a little like the phenomenon it
balised,digitisedworldwehavemade. andsleeplessness,alternatingwithdig- describes:dauntinglybusy,sendingus
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ismandtheEndsofSleep,inwhichhe
arguesthatcapitalismis“pushingus
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Here, in Alan Warburton’s “Sprites
I-IV”,aseriesoflenticularprintsshow
variousmiserableversionsoftheartist
desperately attempting to sleep —
curledunderneathhisdesk,scrunched
Wednesday8January2020 ★ FINANCIAL TIMES 9
FT BIG READ. ADVERTISING
MauriceSaatchi’sexitfromM&Coveranaccountingscandalendedaninfluentialandlong-lastingalliance.
Broughtlowbyatouchofhubris,hisformercolleaguesmustnowregainthetrustofclientsandinvestors.
ByAlexBarker
A bust-up in adland
T heyearwas1995andthe ‘Everything whatwentwrong,accordingtoseveral AdamCrozier,theformerheadofITV cost recognition, a figure raised to MauriceSaatchi,
Saatchibrothers,oncelords witnesses.Butitwasmorethanjusta television;andSteveHilton,theDown- £11.6minDecemberinlightofanear- left,departed
hadgoneso
ofglobaladvertising,were spectacularboardroombust-up.With ing Street adviser turned Fox News complete PwC review. The hit was fromtheagency
pitchingtoresurrecttheir wellforso characteristicbrio,theSaatchiresign- anchor. Sir Martin once described equivalenttoathirdofadjustedpre-tax thathehelped
careersafterbeingousted ationendedpossiblythemostinfluen- Saatchi&Saatchiasthemosteffective profitslastyear. found,leaving
longwe
from the firm that bore their name. tial and long-lasting partnership in agencyhehadeverseen:“Wewerein Theblowtoconfidencewasdramatic. (fromleft)
BritishAirwaysexecutivesarrivedata thoughtwe modern advertising, one that held thecoupbusiness.” SinceAugusttheM&Csharepricehas DavidKershaw, NosediveM&CSaatchi’sshareprice
swishMayfairbuilding.Butallwasnot couldwalk togetherforthebestpartofhalfacen- AnacquisitionspreemadeSaatchi& fallen by more than two-thirds to JeremySinclair tumbledafteraccountingscandals
whatitseemed. turybeforebeingbroughtlowbyfearof Saatchi Europe’s biggest agency by around105p,halfitsboardhasresigned andBill wereuncoveredinAugust
MauriceandCharleshadborrowed onwater. failure,atouchofhubrisandtheper- turnoverin1981,andthebiggestinthe andtheFinancialConductAuthority, Muirheadto
theofficefromafriend,shippinginart Thenthe sonalwrenchofabereavement. worldby1986.TheSaatchiexpenses— theUK’smarketwatchdog,islookingat pickupthe ‘Regrets,Maurice’LordSaatchiwalked
andstaffforthedaytogiveitsome Thethreeamigos,though,arestick- anddebtpile—grewjustasfast.The its disclosures. The group’s market pieces outoftheagencyinDecemberafter
Saatchisparkle.Inthepitchroomitself godslooked ing with the firm: Mr Sinclair, the brothers’ reputation was compared valueisdownto£108m;onpaper,since FTmontage;GettyImages; sidingwiththenon-executives
was an even more far-fetched sight: 73-year-oldcreativeforceofthepart- with “Howard Hughes or one of the August,thefourfoundingpartnershave RexFeatures;Jason
downand Alden/Eyevine
threeman-shapedcardboardcutouts. nership, as executive chairman; the de Medicis” in the New York Times. lostabout£10meach. Leanerandmeaner?Aswellasclients
Thepropsweretheso-called“three decided, chiefexecutiveMrKershaw,theyoung- Peakexuberancecamewithatiltatbuy- Theproblemswerelongingestation. andinvestors,itmustalsoconsolidate
amigos”—JeremySinclair,DavidKer- “thoseboys sterofthegroupat65;andexecutive ingMidlandBankin1987. M&C had a difficult 2018 audit and tieswithitsentrepreneurialnetwork
shawandBillMuirhead—fellowexiles director Mr Muirhead, an Australian “Everythinghadgonesowellforso KPMGflaggedsomeincreasedrisks.It
fromSaatchi&Saatchiandpartnersin needcutting who first started working with the long we thought we could walk on lateremergedthatfourUKsubsidiaries
thenewbreakawaySaatchiventure. Saatchibrothersin1969aged23. water,”saidLordSaatchiin2001.“Then —includingLIDA,amarketingagency privategrief,”saysonesupporterofthe
downto
Stuck on “gardening leave”, which Onerivaladexecutivesaystheglobal the gods looked down and decided, —misrepresentedaccountsoverseveral non-executives.
meantintheorytheywerenotsupposed size”’ M&Cagencynetwork,madeupofentre- ‘thoseboysneedcuttingdowntosize’.” years,withrevenuesbookedtooearly The executives vehemently deny
tobeinvolvedinthepitch,thetriohad preneurswhopart-ownthe141compa- M&Cwastheatonement.TheGolden and costs underplayed. Mr Kershaw renegingontheprocess,tellingfriends
recordedavideofortheairlineexecu- nies,sometimesfeltlikethefounders SquareofficesinLondon’sSohowere saysthemotivationwas“coveringfail- Below:M&C the claim is “absolute bollocks”. Their
tives.Inittheytorearoundafieldon “werelivingtheirpastglorywhileother paintedstarkwhite.Therewastobe ureandwantingtoplease”ratherthan Saatchi’s preference,forlegalreasons,wasforthe
tractors,wearinghugesombreros,and peopleweredoingallthework”.Succes- no debt, and only organic growth “gettingrich”. headquartersin probe to start after PwC finished its
withMrSinclairchewingonaRomeoy sionquestionshavebeenraisedfor15 through“afederationofentrepreneurs” The August turmoil also triggered London.Below- reviewofaccounts.Cruciallytheyalso
Julietacigar.Thechutzpahwasclassic years.Butthefinancialstormhasonly (typicallywitha20percentstakein somethinginLordSaatchi.Thepeer left:Margaret wantedtheauditcommittee—madeup
Saatchi,whatbiographerAlisonFend- strengthenedthepartners’resolveto theirbusinesses).Thecreativemantra: hadstruggledwithgriefsincethedeath Thatcher’s1979 ofthethreeindependentdirectors—
leycalledtheexecutives’modusoper- holdonandsteadytheship. “Brutalsimplicityofthought.” ofhiswife,thenovelistJosephineHart,a election held to account for mistakes. “They
andi:“Promiseanythingnowandwork Nowthequestioniswhetheratrio CharlesSaatchicausedanearlyrow decadeago.Hemadealmostdailyvisits campaign wantedtocontroltheinvestigationinto
outhowitcanbeachievedlater.” that helped sell Margaret Thatcher, by overspending on flowers, then theculpable,”MrSinclairwroteinthe
It did the trick. BA moved from ConcordeandSilkCutcigarettestothe steppedbackfromM&Ctoconcentrate Telegraph.“Perhapsnotsurprisingbut
Saatchi&Saatchi,anera-definingad worldcanagainreinventthemselves— onart.Buttheotherfouractedasequal certainly not acceptable...So they
agencyforcompaniesandpoliticians andthebruisedSaatchibrand—inthe partners,withavetoondecisions.Their walkandtheytalk.”
alikethatbecametheworld’sbiggest faceofadversity.“Wewillsticktogether, seventhfloorofficewasdesignedtobe Twootherissuescameintothefight.
beforethebrotherswereejectedina sortthisoutandthenwewillworkto openplan,andsecret-free.Untilitsflo- Thefirstweresizeablebonusespaidto
boardroom coup. With BA onboard, findsuccessors,”saysMrSinclair.“The tationin2004,therewerenooutside senior managers of M&C businesses,
overnight the new business — M&C thingIlove...isthemodelofindivid- investorstoaccommodate. basedonthemisstated2018results.The
Saatchi—hadafootholdintheglobalad ual entrepreneurs. I’m convinced The creative agency M&C Saatchi non-executive side wanted them
market.“Iwasgenuinelyinterestedto becauseitisthefuture.Iwouldhatethe LondongrewtobecomeBritain’sthird adjusted. The executives, citing legal
see whether lightning would strike model to die because of a financial biggestbybillingin2007,withpromi- advice,saidonlyvoluntarymeasures
£11.6m
twice,”saysMrSinclair.“Ithinkitdid.” screw-up.” nentcampaignsfortheBritishArmy werepossible.
Thatgoesforthegoodandthebad. andCarlsberg.Theywerealsoinvolved ThesecondwasM&C’scashposition.
Accountingerrors Inthecoupbusiness
Almost25yearson,M&CSaatchiisin fromM&CSaatchi’s in the Remain campaign during the Daysbeforethewalkout,theboardwas
crisis,tornapartbyanaccountingscan- basicrevenue,the WhatmadetheearlySaatchi&Saatchia Brexitreferendum.Butitsimportance warnedthecofferswererunninglow—a
dal,boardroomintrigueandanother equivalentofathird successwasbrazenself-confidence(the haswaned—itisnolongerinthetop10 situation now addressed with new
extraordinarySaatchiexit.Theparal- ofadjustedpre-tax “nothingisimpossible”motto),aknack —whiletheM&Cnetworkspreadinto financing.Butforthenon-executives
profits
lelswithSaatchi&Saatchiarenothard forpublicity(thebrothersannounced thewiderworldofmarketing,working whoapproveddividendincreasesbased
tospot. theirarrivalin1970withafull-page onloyaltycards,sportssponsorshipand to his wife’s grave at their house in ‘Thisisa on over-optimistic assurances over
105p
Likeinthe1990s,theM&CSaatchi Timesad)andanonconformiststreak handlinginfluencersonYouTube.Its Sussex—“inrainandsnowIgo”—often finances,itmayhavebeenafinalstraw.
holding
financeswereruntothebrinkandits M&CSaatchi’sshare (nopotentialclientwasoff-limits). footprintof2,500staffcovers25coun- takinghisgrapefruitbreakfasttoeat AftersometestymeetingsinNovem-
sharepricehastumbled.OnemoreLon- price,whichhas Theydidsomegroundbreakingcor- triesand141companies. besideher. company. ber, the non-executives demanded a
don-based advertising business has fallenbytwo-thirds porateads.ButitwasThatcher’s1979 Hubris crept in. An annual report Apartfromattendingboardmeetings, leadershipshake-upbutgotnowhere.
sinceAugust What[the
Saatchi on the nameplate, but no election campaign that really cut publishedlastMaycrowed:“Whilstit he had faded from the business and ToMrSinclair’ssurprise,onDecember
Saatchiinthebuilding.Withahintof through. After the release of their mightbetooearlytosaywe’vecracked expressedaninterestinsellingup;he founders] 10thethreenon-executivesandLord
141
relish,DavidHerro,aUSinvestorwho “LabourIsn’tWorking”poster,then- it,itdoesseemthestrategyisproving approachedPublicischairmanMaurice Saatchiarrivedtohandoverresignation
havein
battledtheSaatchisinthe1990s,says: Numberof chancellor Denis Healey accused the itself...Thismustbehowitfelttobe Lévyatleastoncetogaugehisinterestin letters.“Isaid,‘Couldyoudelayfora
“What we are seeing today [at M&C companiesM&C Saatchis of “selling politics like soap pioneers and discoverers of a virgin buying M&C. But once the accounting commonis monthforthesakeofthecompany?’
Saatchi]isnotasurprisetome.” Saatchihasas powder”.Itmadetheirname. land.Menandwomenwithideas,ambi- problemsarose,LordSaatchiwassud- Theyrefused,”saysMrSinclair.“Iwent
unfettered
clients,covering
Thereisonebigdifference.Thistime Thebusinesswasamagnetfortalent. tionandavisioncanstrikegold.” denlybusyquestioningtheM&Cmodel, andpressedtheliftbutton.”
marketing,loyalty
Lord Maurice Saatchi sided with the AlumniincludeMartinSorrell,thefin- Severalbiginvestorsseethetrioasthe itsfinancesandthedividend,whichhad power, LordSaatchi’sdeskinGoldenSquare
cards,sports
non-executivedirectors,whohavecriti- sponsorshipand ancierwhobuiltWPPintotheworld’s brandandtheglueforthenetwork.But increasedyearonyearforadecade. hatredof isnowempty;hehasyettopickuphis
cisedthewayhisformerpartnersran YouTube biggestadvertisinggroup;TimBell,the someex-boardmembersare,inhind- Managementsawoneoftheirown,on belongings.Eventuallythe“threeami-
thebusiness.OnaDecemberafternoon, influencers latePRexecutiveandThatcherspinner; sight, less convinced. “The entrepre- anexecutivesalary,challengingthem being gos” will hand the reins to the loyal
hewalkedoutwithM&CSaatchi’sthree neursareinthebusinessbutnotonthe like a non-executive. Board tensions managersbeneaththem,someofwhom
challenged,
independentboardmembers,across- board,”saysone.“Thisisaholdingcom- rose, culminating in November and havebeenwithM&Csinceitslaunch.
section of Britain’s establishment: pany...What[thefounders]havein Decemberwithbitter,shouty,paper- and Beforethen,thebigchallengeisturn-
Michael Dobbs, a Conservative peer commonisunfetteredpower,hatredof wavingrows,andthemasswalkout.At ingaroundM&Candregainingthecon-
arrogance’
whowroteHouseofCards;MichaelPeat, beingchallenged,andarrogance.” issuewasanaccountabilityreview—an fidenceoftheirentrepreneurs,clients
aknightwhoonceservedastheQueen’s inquiryintowhatwentwrong,whowas andinvestors.Theplanistoquickly
Scrutinyoverresponsibility
treasurer; and Lorna Tilbian, a City toblame,andhowtoavoidarepeat. replacetheboardandrevamptheUK
adviserandmediaindustryfinancier. The wheels came off on a Tuesday, The non-executive directors felt armso,inMrKershaw’swords,itis
Hisone-sentenceresignationletterto August 6. The M&C finance director they had agreement over a process, “leaner,meanerandfitforpurpose”.
his lifetime colleagues was signed: MickeyKalifawalkedintoseehischief reportingtothem,whichtheyclaimthe The Saatchi “boys”, as they were
“Regrets,Maurice”. executive and said: “It’s good you’re executivesbacktrackedon.Tothenon- known,areonceagainbettingonrest-
sittingdown.”Hehadfoundaccounting executiveside,itencapsulatedadeeper lessreinvention.“Thismodelmakesit
Abruisedbrand
errors so big the M&C results would malaise:denialofmanagementrespon- mucheasierforustogetintonewthings
The bad-tempered dispute was over havetobecorrected. sibilityforsomechronicproblems. quicker,”MrKershawadds.“That’sthe
M&C’sfinancialhealth,theroleofinde- Withindays,thecompanydisclosed “Sinclair and Kershaw had disdain fuel,that’sthestrategy.Investinnew
pendent directors and the blame for errorsof£6.4mfrombasicrevenueand fornon-executivesintrudingontheir channelsandremake.”
JANUARY 8 2020 Section:Features Time: 7/1/2020 - 17:37 User: dana.prince Page Name: BIG PAGE, Part,Page,Edition: LON, 9, 1
10 ★ FINANCIAL TIMES Wednesday8January2020
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Slow growth requires a particular cure UShasbeenrunning
thelargestKeynesian
experimentinthe
Havinghadtheprivilegeofdirecting Youreditorialisnotclearonwhether productive(publicandprivate)
historyoftheworld
thefiscalaffairsdepartmentoftheIMF youarerecommendingfiscaldeficits investments.Itisnaivetobelievethat
fortwodecades,Icouldnotagreemore alsotodealwithlowgrowthrates,on simplyrunning(larger)fiscaldeficits Iamwritinginresponsetoyour
thatactivefiscalpolicyshouldbepart thegroundsthatinterestratesarelow. willgeneratethosekindofstructural editorial“Activefiscalpolicymustbe
ofa“newnormal”andthatitshould Inrecentyearsthatkindoffiscalpolicy policiesandthosekindofproductive partofanewnormal”(January6),and
playanimportantcountercyclicalrole hasnotbeenusedbecausetherehave investmentsinmanycountries, assumethatyourviewsapplytoUSas
(editorial,January6).Ialsoagreethat notbeenrealrecessionssincetheGreat includingEUcommissionerPaolo wellasEUpolicymakers.
“theidealpolicywouldbefiscally Recessionof2007-09. Gentiloni’sown.Allthelargecountries WhiletheFederalReservehas
WEDNESDAY8JANUARY2020
neutral”.Thelatterhasalwaysmeant Youseemtoberecommending (withthetrivialexceptionofGermany) increaseditsbalancesheetfourfoldin
thatbudgetarydeficitswouldbe (larger)fiscaldeficitsasacureforslow arealreadyrunninglargefiscaldeficits, thepastdecadeviaquantitativeeasing,
promotedduringrecessionsand growthandnotjustforrecessions.Slow intheabsenceofrecessions. thefiscalpolicymachinehasbeenin
budgetarysurpluseswheneconomic growthcanbecuredbytrulyefficient VitoTanzi overdrive,too.Theoutstandingdebtof
Britain’s defence strategy
growthispositive. structuralpolicies,andbytruly Bethesda,MD,US ourgovernmentwasapproximately
$10tnin2008,buthasgrowntoalmost
$23tn,increasingwellafterthe
needs a reality check Investorshavenotnoticed whingeingfromtheirPRand downturnhadbeenalleviated.Ifail
misinformationmachineblamingall tounderstandhowanyonecannotsee
thatthe‘game’ischanging
Scotland’sillsonWestminster. thisasthelargestKeynesian
Itishardtoreconcilethepushbysome However,therealityisthatinthekey experimentinworldhistory.Wehave
Reformofthemilitaryandhowitprocuresequipmentislongoverdue investmentcompaniesforchief areasthepeopleofScotlandmostcare runmassivefiscaldeficits(under
executivestopurchasemoresharesin about,healthandeducation,there BarackObamaandDonaldTrump)
Thephrase“GlobalBritain”hasbeen manyofthe138F-35fighterjetsitorigi- thecompaniestheymanage(“Pressure continuestobechronic andcutcorporatetaxes(President
usedtimeandagainbyNumber10asit nallysaidwouldflyfromtheships.Mis- forUKchiefstoincreaseskininthe mismanagementfromtheScottish Trump)tomaintaintheillusionof
hastriedtodefinetheUK’soverseas takesweremadenotjustbytheMoD game”,FTfm,January6),withthe government,resultinginpoor prosperity.
ambitionsafterBrexit.Itmayhavea butbyeveryoneinvolved.Theadmi- moodgrowingawayfromshareholder outcomesforpatientsandchildrenfar Ibelievethatactivefiscalpolicyis
certainringtoitbutasastrategyitis ralssharesomeoftheblame.AsIran’s valueastheprimary(oronly) belowthatoftherestoftheUK. aliveandwellandhasindeedcreateda
woefullylacking.Theunfoldingcrisis seizureofaUKtankerlastJulyunder- corporatepurposetowardsbroader TheneedfortheScottish “newnormal”,butonethatrequires
intheMiddleEast,sparkedbyAmer- lined,thenavyurgentlyneedsmore societalandstakeholderinterests. governmenttotakeresponsibilityfor thesamelevelofdysfunctionalpolicy
ica’s assassination of Iran’s leading frigates and destroyers, capable of Therelativelyrecentfashionfor thesedevolvedissuesisparamountand tomaintainthestatusquo.
militaryfigure,isapoignantreminder defendingshipping.Itdoesnotneed linkingexecutivecompensationto shouldbetheirnumberonepriority, Unfortunately,thisactivefiscalpolicy
thatanewglobalpresencerequiresa symbolsofpowerlikeaircraftcarriers. stockpriceshasalreadycontributedto nottheirfixationwithanunwanted hasbeenjustaspresentasmonetary
newdefenceandsecuritystrategy. Therehasbeenspeculationthatone significantdestructionofsocietal anduneconomicideologyof policyoverthepastdecade,regardless
DominicCummings,theprimemin- ofthecarrierscouldbemothballedor value,environmentaldegradation, independence. ofwhichpoliticalpartycontrolsthe
ister’schiefadviser,hasthreateneda sold.Defenceexpertsrightlyargueit increasingshort-termism,shrinking GeorgeRenouf separatebranchesofgovernment.
shake-upoftheMinistryofDefence wouldmakenosensetorelinquishthe businessinvestmentrelativetoshare ‘Itoldyouitwasadeepfake’ Keillour,Perthshire,UK MarkASherman
afterconcernsithaswastedbillionsin capabilitynow.Theyarestillvaluable buybacksanddividendpayouts,and SanFrancisco,CA,US
Ifyou’rerichenoughyou
purchasingequipment.Reformofpro- assets and are most likely to be long-termdamagetoshareholder
Banks—trytomanage
curementisaprioritybutitshould deployedaspartofaninternational interests.Wehavenowreachedthe chairsarecheapandbreakeasily. cancircumventthelaw
only be one aspect of the strategic alliancewiththeUSorFrance.Assuch, stagewhereequitymarketsnolonger Finally,thebathrooms.Imagine yourownbalancesheets
defencereviewthathasbeenpromised Britain’scarrierscoulddeployUSor performtheirfunctionoffinancing hostingadayworkshopwith10people CarlosGhosn’sjumpingbailand
byBorisJohnson.Eversincethe2016 Frenchplanes.Alliancesarepartofthe industryandtherealeconomy.Rather, fromatopclientandexplainingthat abscondingfromJapantellsusone Yourreport“Fedaimstostopanother
Brexitreferendumlittlethoughthas futureforapost-BrexitBritain.There industryisexpectedtofunnelever thereisonlyonepassthatwillallow thing:thatmastersoftheuniverse, yearofgrimrepo”(January3)refersto
beengiventowhatBritain’snational alsoneedstobeadebateabouttherole moreofitsprofitsawayfromthereal themtousethetoilet.It’sawkwardfor whohaveaccumulatedwealthfar bankinsiderssayingthatrecurrent
interestsshouldbeafteritleavesthe ofthearmyastheprospectoflarge economyandtotheworldoffinance. everyone,andmakesthemfeelasif beyondthatwhichordinarymortals bankreserveshortagesarethefaultof
EuropeanUnion.Astrategicdefence landwarsdiminishesandrecruitment Theworldisupsidedown. theyareatschoolagain,askingthe couldhopetoachieveoverseveral newbankregulationsintroducedafter
reviewmuststartbysettingoutclearly is under strain. A smaller, well- Investorsarerightthatmanagement teacheriftheycangotothetoilet. lifetimes,havethemeansto thehugeinvestmentoftaxpayers’
wheretheseinterestslie.Onlythencan equipped army could be effective if shouldhavemore“skininthegame”, Also,WeWork’sWiFipassword circumventthelawatwill. moneyinthebankrescuesof2008.
thegovernmentdeterminewhatBrit- deployedintargetedinterventionsbut butitseemsthatsomehavefailedeven appearstobethesameglobally—not AccordingtoForbesthereareamere Amongotherthings,theseincreased
ain’sdefencecapabilitiesshouldbe— material cuts would break up the tonoticethatthenatureofthegame thesafestapproach. 32billionairesinJapan(by liquidityrequirements.
andhowthesemightfitintothecoun- traditionoftheregimentalsystem. itselfischanging,andthatdoubling AnneShreiner comparison,thatparagonofequality Neverisitwhisperedthatthe
try’scontinuingmembershipofNato. MrCummingsrightlywantstoshift downonstock-basedincentivesisthe LondonSW1,UK Swedenhas33).Workinginthat excessiveneedforFedreposisbecause
Agoodstartingpointwouldbeto thebalanceofinvestmentfromlegacy lastthinganyofusneed. limitingenvironment,theJapanese bankscan’tproperlymanagetheirown
Ibegtodisagree
acceptthatBritain’smilitaryambitions platformslikethecarrierstoareasof Wehavepreviouslyarguedthatitis authoritieswereobviouslyunprepared balancesheets,justastheycouldn’tin
have, for too long, been laced with cyber security, drones and space. foolishtobelieveitcanbeleftto fortheonslaughtbyatycoon,known therun-uptothefinancialcrisis.Then
nostalgiaforpastglory.TheUKisno Therewillstillthoughbeaneedfor shareholderstodrivereformof BillMichael,chairmanofKPMG,says forhisfocusedmindandwho,when itwasmortgagesandmortgage-backed
pocketsuperpower,capableofdomi- aircraft,tanksandships.Dreadnought, corporatepractices,sincetheywill hewantstostampoutthe“corrosive” confrontedwitha$1mbillbytheUS securities;now,apparently,itistheir
nance in every field from nuclear the nuclear deterrent renewal pro- naturallybedrivenbytheirownshort- mentalitythatmakinglargeamounts SecuritiesandExchangeCommission liquidassets.
submarinestoinfantrypower.Itdoes gramme,swallowsalargechunkofthe terminterests.Thislatestsalvoproves ofmoneytrumpsgoodbehaviour tosettlefraudcharges,couldeasily Yourreportalsosuggeststhatbanks
not have the resources; the latest budgetbutisvitaltonationalsecurity. thepoint. (report,January6). coughupthatamount. havegoneintohigher-risk,lower-
assessmentofthedefenceministry’s TheMoD’sprocurementmethodsmust DrJoeZammit-Lucia “Thatmentalityhasexistedforyears MakotoHonjo liquidity,longer-termloanstomaintain
equipmentbudgetforecastsa£15bn becomemoreefficient.Betterquality Founder, acrossthewholemarket,”hesays. Tokyo,Japan theirprofitsand,mayIadd,topump
affordabilitygapoverthenextdecade. andbetterpaidpersonnelarekey— RADIX, Noithasn’t. upthecurrentstockmarketbubble.
Theyounghavenoidea
TheRoyalNavy’stwonewaircraft andwouldhelpcivilservantstostand LondonSW1,UK MarkBogard Somethingofamysteryiswhatever
carriers have come to symbolise all uptoindustrytoreducecosts. ChiefExecutive, ofwhatprivacymeans hashappenedtothediscountwindow?
Onlyonetoiletpass?
thatiswrongwithBritain’sunrealistic Apost-BrexitBritainmustretainthe FamilyBuildingSociety, Inthe“olddays”,banksshortof
and poorly executed military ambi- toolstodefenditsinterests.Itwillalso Givemeabreak Epsom,Surrey,UK EmmaMartins,theUK’sdata reserveswouldgotothewindow.But
tions:atacombinedcostof£6.2bnthey havetosustainmilitaryandindustrial protectioncommissioner,saysthatthe thenofcoursetheFedmightaskto
Majoritysupportkeeping
aredoubletheiroriginalestimateand tieswithEurope,whileworkingwitha I’veworkedinmanyWeWorklocations conversationaboutourdatamust inspecttheirbalancesheets.Under
weredeliveredyearslate.Evenworse, maverickAmericanpresident.Above inLondonandSanFrancisco, themarriagegoing involveusall(Letters,January3). presentcircumstancesofbubbly
thegovernmentcannotaffordtobuyas all,itwillhavetobenimble. employedbymajorcorporationsthat Agoodstartingpointwouldbeto financethisstillseemslikeagoodidea.
tookspaceinorderto“innovate”.I JasonRoseclaims(Letters,January2) educateeveryone,andespecially Inthemeantimeaspikeinreporates
couldnotagreemorewithJudith thattheScots’feelingofbeingtrapped millennialsandthegenerationafter, wouldteachbanksthelessontogeton
Evans’analysis“Noisy,impersonaland inaforcedmarriagehasneverbeen abouttheneedforprivacy.Fewhave withthebusinessofbankingwithout
cramped:thedarksideofhipoffice stronger.Thepoliticalrealityfirmly anyconceptofwhatprivacymeansand whatamountstogovernment(Fed),
design”(January6). disprovestheassertion. justhowmuchtheyaredisclosing no-questions-asked,lowinterestrate
A political experiment
Inclient-facingroles,Ioftenneeded Theresultsoftherecentelectionare whentheypostonsocialmedia, subsidies.Anditwouldalsoundothis
tobeonthephone,whichgarneredme clear.Ofthosethatvoted,45percent perhapsbecausetheirmantraisto newversionoftheGreenspanputthat,
dirtylookswhenthephone“booths” votedforapartythathasamanifesto shareandhopefullyfind“friends” likelasttime,isnotgoingtoendwell.
unfolds on the Danube
(akaclaustrophobiccupboards)were pledgetobreakuptheUnion,and55 wherevertheyare,fromrestaurantsto PaulHallwood
unavailable.Whennotonthephone, percentforpartiesthathavepledged airports.Thisisastepchangefrom ProfessorofEconomics,
thesheervolumeofnoiseforcedmeto tokeepitintact.Thatseemsarather earliergenerationswhoprizedprivacy UniversityofConnecticut,US
listentomusic,whichmademelook overwhelmingmajorityinfavourof andrealfriends.
Austria’sconservative-GreencoalitionmayholdlessonsforGermany unapproachable.I’verecentlybeen keepingthemarriagegoing. PerhapsacopyofShoshanaZuboff’s
diagnosedwithADHDwhichmakes Thisisanotherexampleofthe TheAgeofSurveillanceCapitalismshould OPINIONONFT.COM
Under the Habsburg empire, the orityofEuropeanvotersdonotyearn evenmoresenseofwhyIcouldn’tfocus ScottishNationalpartytryingtomake becompulsoryreadingforusall, Noeasywaytoreformourinstitutions
abbreviation“k.u.k.”stoodforkaiser- forthesimplisticnostrumsofextreme intheseenvironments. apoliticalclaimoftherebeing“aclear especiallyschoolchildren. Oldhandorfresheye?MichaelSkapinker
lichundköniglich,orimperialandroyal. nationalists, protectionists and anti- Ergonomically,they’realsovery messagesentScotland”.Itissimplynot DrMonicaSeeley askshowwevalueknowledgeandexperience
www.ft.com/opinion
Intoday’sAustria,itstandsforSebas- establishmentpopulists.Rather,they poor:thedesksdon’tmove,andthe true.Therewillinevitablybemore Bournemouth,Dorset,UK
tianKurz,theconservativechancellor wantasensiblemixtureofwelfarecap-
re-electedinSeptember,andWerner italism, controlled globalisation and
Kogler,leaderoftheGreenparty,who effortstotackleclimatechange.
How to farm
ishisvice-chancellor. The two parties’ joint programme BrittanyBraddlivesofftheland, foodtotheurbandesert.Atatime her,theheaterhadnotyetbeen
Austria’snewcoalitiongovernment, hasencouragingfeatures.Itforesees withoutrunningwater,gasormains when“farmtotable”andlocalfood turnedonfortheseason.Wesat
your way to a
which took office yesterday, is an balanced budgets, debt reduction, electricity,smackinthemiddleofone movementshavebeengrowing outsideinfreezingsleet:hardlythe
experimentalblendofrightwingeco- incometaxcutsandmeasuresaimedat ofthebiggestcitiesinAmerica. aroundtheglobe,allthatlandhas bestadvertisementforlivingnearly
nomicandculturalpolicieswithpro- creatingacarbon-neutraleconomyby future beyond Shegrowsherownfood,gathers helpedDetroitemergeasoneofthe offthegridinoneoftheworld’smost
gressive environmentalism. It will 2040.Itisdeplorable,however,thatMr rainwater,usesacompostingtoilet mostactivecentresforurban storiedcities.
setafascinatingpotentialprecedent Kurz’spartyhasinsistedontwounnec- urban blight andmakescandlesfromthewaxof agricultureintheUS. ButMsBraddsayshomesteading
forotherEuropeancountries,notably essary,intolerantproposals—forthe herveryownbees—intheinnercity CarolynDimitri,anexpertonurban isn’tjustsomecrazydreamofhers.“A
Germany. It is to be hoped that preventivecustodyofasylumseekers ofDetroit,acitysodevastatedby agricultureatNewYorkUniversity, lotofwhatIdoisnotbychoice,Idon’t
Austria’s modern version of “k.u.k.” deemedapotentialthreat,andforan urbanblightthatsectionsofithave says:“Thebiggestbarriertosettingup havefamilythatisgoingtosupport
doesnotsufferthesamediscreditthat expandedbanongirls’headscarves. simplyrevertedtonature. anyfarmislandaccessandDetroit meinsomeotherendeavour,Idon’t
tarnishedthiscombinationofletters Austria’spoliticalexperimentcannot DetroitwasoneofAmerica’smost hasalotofemptyland.Detroit haveabigbankroll.”MsBradd,whois
acenturyagoduringthefinalyearsof serveinallrespectsasamodelforGer- prosperouscitieswhenIwasborn definitelyhasanadvantage.” anativeDetroiter,saysshetriedother
HabsburgruleinVienna. many.TheGreensareverymuchthe thereinthemid-1950s.BythetimeI Brightmoorwasbuiltinthe1920sto neighbourhoodsbut“Ikeptgetting
The conservative-Green coalition is juniorpartnerinViennaandwillnot leftforcollegein1973,ithadbeen providelow-costhousingforaninflux pricedout,becauseofthe
welcome for three reasons. First, it holdmajorministriessuchasfinance writtenofffordead.Theautoindustry ofAppalachianworkersforthecity’s gentrificationofDetroit”.
demonstrates that Austria is not andforeignaffairs.Bycontrast,any hadlargelylefttown,and then-thrivingautofactories.Bythe “I’dliketohaverunningwaterbutI
trappedin“grandcoalitions”between coalitionbetweenGermany’sChristian discriminatoryhome-ownershiplaws timeMsBraddmovedtherenearlya can’taffordit,”shesays,adding“you
the conservative People’s party and DemocratsandGreenswouldprobably hadhelpedtraptheAfrican-American centurylater,shewasabletobuya havetohaveplumbingandIdon’t
SocialDemocrats,thedefaultoption bemorebalancedinnature,reflecting poorintheinnercity.Areassuchas derelicthomefor$500,andseveral haveplumbing”andshewouldhave
Detroit
ofnationalpoliticsaftertherestoration eachparty’selectoralstrength. Brightmoor,whereMsBradd plotsoflandforbetween$100and topayacitydepositof$3,000tostart
ofAustriansovereigntyin1955.Asin ButiftheGreensweretooccupythe homesteads,slidintodysfunction. $600perplot,enoughtoputtogether service.
Notebook
Germany,wherethreeofthelastfour foreignministryandotherhigh-level Butnow,halfacenturylater,the 1.5acresoffarmlandwheresheraises Thecityhasplanstoreviveareas
governmentshavebeen“grandcoali- posts, they would need to be more sheerscaleofBrightmoor’s producefromtomatoestocollard likeBrightmoor:maybehomesteading
tions”, this formula, applied for too hard-headed about the realities of byPattiWaldmeir devastation—vasttractsofthearea greens,aubergines,nasturtiums, willbepartoftherevivalstoryofa
long,turnsintoarecipefordebilitating power. Germany is Europe’s largest havebeenlevelledinblightremoval— blackcurrantsandelderberries. post-industrialDetroit.GaryWozniak,
squabbles, stale policies and rising economybuttheGreensresistraising hasgiventheareaanunexpected Everyyear,sheasksherneighbours chiefexecutiveofoneofthefew
publicsupportforrightwingpopulism. defenceexpenditure,whichistoolow, advantage:plentyofemptylandthat whatcropstheywanthertoplant,and commercialurbanfarmsinDetroit,
Second,itisgoodthatMrKurzhas toNato’stargetof2percentofgross canbeusedtogrowthefreshfoods thendepositslargebagsoffree saysthecityhassomuchvacantland
steeredclearofthefar-rightFreedom domesticproduct.Thepartyappears thatoftenaren’tavailableinlocal produceontheirdoorsteps.She thatitmightbeabletofarmasmany
party(FPO),withwhichheformeda more sceptical of military missions shops. donatessometoprovidemealsatthe as5,000acrescommercially.
governmentfromDecember2017to abroad than it was in the days of Detroit’snewlyresurrected localBrightmoorArtisans’Collective, Ormaybeurbanfarmingwillprove
June2019.Duringthese18monthsthe JoschkaFischer,Germany’sfirstGreen downtownandmidtownareasboast sellssomeatpop-upfarmers’ apassingphase.There’sonethingfor
FPOrevealeditselftobeunfitasaparty foreignministerfrom1998to2005. someofthetrendiestandmost markets,andkeepstheresttoeat. sure:thepeoplewhobuiltthe
ofgovernmentandearnedAustriathe AsinAustria,theGreensaredeserv- creativerestaurantsanywhereinthe Sheandherpartnerliveina“tiny neighbourhoodacenturyagonever
distrustofitsEUallies.Iteventually edlypopularfortheirideasonclimate US.Butoutsideitscore,largepartsof house”thatMsBraddbuiltherself. imaginedafutureofhappy
triggeredthecoalition’scollapseina change.ButGermanyhaslongneeded thecityareconsidered“fooddeserts” Theyrunoneextensioncordfroma pastoralism.IttookpeoplelikeMs
sordidscandalaboutthehypothetical tostepupitsgameonsecurityand —placeswhereshopsdon’tsellgood derelicthomeontheproperty,to Braddtocomeupwithsucha
exchangeofgovernmentcontractsfor defencepolicy.BeforethenextBun- qualityfreshproduce.MsBradd,27, powerastringoffairylights,asingle pioneeringidea.
Russianfinancialandpoliticalsupport. destag election, due by September andotherBrightmoorhomesteaders electricburner,amini-fridgeanda
Third,thecoalitionontheDanube 2021,theGermanGreensoughttogive aretryingtodotheirbittobringgood smallheater.ButthedaythatIvisited [email protected]
willtestthepropositionthatthemaj- thismattersomeseriousattention.
JANUARY 8 2020 Section:Features Time: 7/1/2020 - 18:22 User: alistair.hayes Page Name: LEADER, Part,Page,Edition: LON, 10, 1