Britain – Closed For Business

Sunset over Tripoli

 

Tripoli

From the perspective of Tripoli, which hosts this week a huge construction and building trade fair that has attracted 427 foreign companies drawn from 26 countries, UK Foreign Secretary William Hague would seem to have a point when urging British businesses to “worker harder” to compete against overseas rivals for deals.

Of those 427 foreign companies participating in Libya Build 2012, not one – yes, you read that right – not a single one is from Britain. Not that the U.S. has distinguished itself either, the business of America is apparently not business, when it comes to Libya at the moment.

Hague’s comments about the need for British business to get stuck in – an updating of Norman Tebbit’s “get on yer bike” remark — hasn’t gone down well with British business.

Former CBI director general Lord Digby Jones, who served in the Brown government as a trade minister, lashed out Hague, complaining on BBC Radio 4 about the weakening of his former department, UK Trade & Investment. “To absolutely decimate that and cut it and then stand up and say ‘come on, get on and do it’, that’s a bit rich.”

But Libya Build 2012 organizers don’t blame the UK embassy in Tripoli or UK Trade & Investment for the non-show of British business. They say that British diplomats were highly supportive and that the 4-day exhibition was well marketed in the UK.

“I was surprised at the lack of take-up by British firms,” says Rania Mohamad, head of international sales for Libya Build 2012. “What we heard was that they were anxious about the security situation.”

Not that nervousness – and believe me it is misplaced when it comes to Tripoli – deterred the more robust Italians or French. There are 134 Italian companies here – from large construction concerns to small furniture businesses and environmental solutions firms.

According to Maria Carmela Ottaviano, head of special projects at the Italian Institute for Foreign Trade, Italy’s trade promotion agency, Italian exhibitors were keen to maintain good commercial ties between Italy and Libya that were fostered by Silvio Berlusconi.

The Italians have two pavilions exclusively for their own use and were so over-subscribed that some exhibitors from Italy have had to take refuge in other pavilions – there are 35 pavilions in all covering 17,000 square meters.

A saleswoman for an Italian manufacturer of security doors told me that they had not done work in Libya before the toppling of Col. Gaddafi but that they were keen to test the waters. She praised the Italian promotion agency for playing a big role – from helping with transportation to visa facilitation and with translation services.

The French have not been shy either to explore opportunities in Libya’s new business environment, nor to remind Libyans of France’s support for their “Arab Spring.”

There are more than 40 French companies exhibiting as well as wheeling and dealing at Libya Build 2012.

“I am very surprised at the absence of British and American firms here,” said Audrey Corriger, an export specialist with Chambon, a manufacturer of factory tools for assembly-line woodcutting and wood-design. “We are hoping to find an importer for our machines,” she says. Chambon hasn’t worked in Libya before, although it has in other North African countries.

“We decided to test the waters,” she says. She admitted that they had wondered if this would be premature to be doing ahead of the assembly elections slated for June 19 but they decided “you can never promote too early.”

Chambon is hoping also to capitalize on French support for the rebels. “As Sarkozy was so supportive of the revolution, we hope this will benefit us.”

Apparently, however, David Cameron’s backing for the overthrow of Gaddafi didn’t strike British firms as a selling point.

Some 632 companies in all are taking part in Libya Build 2012. There are large contingents from Turkey, Tunisia, Egypt and UAE, which is fielding 110 companies. Tiny Malta has its own pavilion where 40 companies are showcasing their products, from lifts and electromechanical systems, to construction materials and furniture and fittings.

“Maybe it was a bit far for the British to travel,” mused Corriger.

Bush/Romney: Bring It On!

I would have thought Obama advisers would be saying, “bring it on” to the thought of George W. Bush campaigning actively for Mitt Romney. They should be so lucky.

As Karen Tumulty reports in the Washington Post this morning, Obama’s predecessor in the Oval Office has offered his endorsement of Romney but in as low a key way as possible. On Tuesday an ABC crew caught up with the former President as he was entering an elevator and elicited from Bush the comment, “I’m for Romney.”

He has no plans apparently to get out there on the campaign. His absence will be helpful to the GOP candidate. A presence on the hustings would certainly complicate things for Romney.

In a February poll by Quinnipiac University, 51 percent of respondents said Bush is more to blame for the horrible economy than Obama, while only 35 percent said Obama is.

 

Franco-German First Date

At least she didn’t slap him. The “first date” between new French President and German Chancellor didn’t go that well. Angela Merkel just wanted a gentle encounter, a get-to-know-each-other meeting: she said as much at the opening of their joint press conference in Berlin.

Francois Hollande, on the other hand, was full of ardor — after all he had rushed from the great city of romance, Paris, to see her.  And he lay siege immediately, seeking to conquer Frau Merkel with a passionate outline of the kind of Europe he wants to share with her.

She took it well, but with a slightly sour look on her face, maintaining, in short, that they would have lots to discuss. Indeed.

No Squaring The Circle

The following three things do not cohere – they are unworkable.

1. German Chancellor Angela Merkel’s insistence that there can be no going back on the pledges Greece made to get the second tranche of bailout money earlier this year.

2. The wish of 70 percent of Greeks to stay within the eurozone while at the same time failing to provide a working majority for a coalition government pledged to abide by the commitments made to secure the second tranche of bailout money.

3. Abiding by the pledges made to Greece’s European partners and the International Monetary Fund and being able to grow and cut the public debt.

In short, something has to give and the myth that Greece can possibly repay all that it owes,  ever – currently 161 percent of GDP – has to be dispelled. If it isn’t, then contagion will spread and the export market Germany needs to remain prosperous is going to disappear. And no amount of media commentary about disciplined, hardworking Germans and work-shy, lazy Greeks is going to square the circle.

Risk? What Risk?

J.P. Morgan Chase has hardly helped itself or other major banks in convincing a skeptical public or regulatory-inclined politicians of the argument that too much regulation is being imposed on them. J.P. Morgan has shot itself in the foot with its spectacular after-hours announcement on Thursday that a trader had lost the bank more than $2 billion with bets on complex investments.

The bank’s CEO, Jamie Dimon, has been highly outspoken recently in condemning the increasingly intrusive regulations politicians have imposed on the banks in the wake of the 2007/8 financial crash. He, along with Barclays chief executive Bob Diamond, are furious over new financial rules being drawn up to curb the reckless risk-taking that spawned the crisis, claiming they are expensive and smothering the banks in red tape.

In a 38-page letter recently to shareholders, Dimon lambasted the regulations for slowing lending at ‘the wrong time’ and saying they were ‘not intelligent design’. (See my April 10 Daily Mail article)

He argued that new regulations are causing staggering compliance costs. On top of that, he and other bankers have warned that a looming fall-off in bank profits is likely when regulators implement a ban on proprietary trading by the banks under new regulations.

Some analysts have estimated compliance costs for the U.S. banking sector could cost about $4bn a year.

And some academics have agreed with the bankers, arguing that the Dodd-Frank Act – named after its two main authors, Congressman Barney Frank and Senator Chris Dodd – has moved too far from its original objective to prevent another financial crash. At 848 pages, Dodd-Frank affects almost every aspect of America’s financial services industry – from fair access to credit for consumers to the trading of complex derivatives and reporting executive pay.

For example, John Cochrane, a professor of finance at the University of Chicago, maintains that the legislation has become too heavy-handed. “Everything under the sun gets regulated, with no attempt to measure benefits or costs,” he has maintained.

But the revelation of the $2billion loss is going to make it much harder for the bankers to beat back the regulators.

Noting that Dimon had claimed that compliance costs were going to cost J.P. Morgan upward of $400 million, Frank said in a statement “J.P. Morgan Chase, entirely without any help from the government, has lost, in this one set of transactions, five times the amount they claim financial regulation is costing them.”

He added: “The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today.”

What is astonishing is that the bank – arguably one of the best run in the U.S. – did not pick up the risky bets until way too late. But also it is disturbing that regulators didn’t notice either.

No doubt U.S. lawmakers are going to probe what failed at the bank and why as well as to question regulators about what went wrong on their side. Any hopes the banks may have harbored of reducing the regulatory burden and of convincing the public that they can be trusted would seem now to misplaced.

Infantile Expansionary Contraction?

Democracy is about elections and we might not always like how people cast their votes but to dismiss their choices as “infantile” strikes me as high-handed — and in the case of the elections recently in Europe mistaken.

In the wake of the elections in four European countries – the UK, France, Italy and Greece — many Conservative commentators have been on their high horse. Of course, on the left their counterparts have been on braying form when some humility may have been in order, after all traditional left parties also bear a fair share of responsibility for the debt disaster that’s struck Europe.

As far as many Conservative commentators are concerned the narrative is this: Europeans displayed an astonishing lack of adult seriousness by either voting for fringe parties as in Italy or Greece or for the traditional left in France and the UK. By voting the way they did they displayed “wishful thinking” and ignored economic realities. Only by backing parties that are supportive of German-dictated austerity would they have shown they were serious.

And the fringe leaders are all lumped together regardless.

Anne Applebaum writing in Slate Magazine, for instance, argues that the fringe parties are “anti-European, anti-globalization, and anti-immigration. Their leaders, in the words of a French friend, want to ‘withdraw from the world.’”

And she added: “Above all, they are anti-austerity: They hate the budget cuts that they believe were imposed on their national governments by outsiders in the international bond market and by their own membership in the euro currency zone. Never mind that those same national governments had created the need for austerity by overspending and over-borrowing, or in some cases—most notably Greece—by funding vast, unaffordable and corrupt state bureaucracies over many decades.”

Well, the budget cuts were in a sense imposed by outsiders and in Italy and Greece the parties most responsible for over-spending and over-borrowing were the hardest hit in the elections – in Greece the two mainstream parties that have dominated politics there for the last 35 years, and in Italy the center-right parties that were in the coalition governments of Silvio Berlusconi.

In the UK, the local elections success of Labor, the party responsible for the country’s economic mess, can partly be put down to a series of poor decisions and cock-ups by the coalition government and to a general feeling in the country that “we aren’t all it together”.

In Italy and Greece, voters turned to fringe parties to express their distrust of the center. The traditional left did well in Italy but not as well as it should have given the circumstances. It didn’t do so because of the scandals that have hit some prominent leftwing politicians.

And it isn’t clear to me that Italian voters who backed the movement of Beppe Grillo, the comic-turned-blogger activist, were expressing anti-European, anti-globalization or anti-immigration positions.

True, Grillo wants Italy to drop the euro and re-introduce the lira, but is that what was uppermost in the mind of voters when they backed the comedian’s Cinque Stella movement? Of the more the more than 20 people who voted for Cinque Stella who I have spoken with in the last few days not one of them mentioned dropping the euro as Italy’s currency. Nor are any of them anti-immigrant and none of them were anti-European.

They say they voted for Cinque Stella to record a protest against many things – from the corruption of the mainstream parties of both the center left and center right to Silvio Berlusconi’s disastrous stewardship of the country and to the fat-cat Italian parliamentarians, the highest paid lawmakers in Europe.

And none of them were that critical of caretaker premier Mario Monti or his efforts to reduce the public debt or implement structural reform, including changes that would open up the country’s rigid labor market.

Monti’s government is a technocratic one and he and his government were not standing in the local elections. Interestingly, despite the pain Monti is causing people with cuts, reductions in pensions, etc, he has high popularity ratings in the opinion polls of more than 50 percent.

While all of my Cinque Stella voters had questions about austerity and the cuts – from the timing of them to where the cuts are being applied – they all accepted that Italy has to reduce its public debt, improve competitiveness and cutback on the country’s bloated public sector.

And why in the world would they vote for Berlusconi’s party or the Northern League, his onetime coalition partners, when they accept change has to take place?

After all Berlusconi implemented scant reform when he had the opportunity to do so and under his rule, Italy grew at an anemic annual rate of one third of 1 per cent and dropped further down league tables for economic freedom and competitiveness and media freedom. Under Berlusconi, there was a resurgence of the Mafia and increased public corruption. During his tenure his coalition partners approved 18 pieces of legislation that sought to protect his own personal business interests and to provide him with legal immunity for wrongdoing. Is that center-right record one that deserved to be rewarded? Would the voters in Italy have shown more adult seriousness by voting for the center-right?

Brendan O’Neill writing in Spiked in an article headlined “Posturing against austerity: an infantile disorder” strikes the same kind of notes as Applebaum, first misunderstanding that the Grillo vote was a protest one and not one aimed at the Monti government and then arguing that elsewhere the leftwing groups that made electoral gains are driven by a desire to avoid reality.

He wrote: “The alarming thing about Hollande and Alexis Tsipras, the comparatively youthful leader of Greece’s Coalition of the Radical Left, is that they are being treated seriously despite the fact that they, too, are a bit of a joke, a comedic interlude in mainstream politics who offer little, if anything, in the way of an alternative.”

Pairing Hollande with Tsipras seems a tad odd. The latter is far to the left of Hollande and has declared the recovery blueprint approved by the European Union and the International Monetary Fund (IMF) as “null and void” while the new French President has talked only of renegotiating the EU fiscal compact his predecessor, Nicolas Sarkozy, signed.

Hollande is an experienced and mainstream politician and arguably his vagueness during the election campaign on the details of what he would do in office is a reflection of political wisdom – he has avoided over-selling presumably in order to try to lower the expectations of his supporters. He has given himself room for maneuver. He has committed to balancing government spending and borrowing by 2017, avoided making commitments to increase public sector employment beyond education and even with his pledge to hire 60,000 additional teachers he has stressed that this will not be done overnight.

In short, it strikes me that voters on the whole in Italy, Greece and France turned to what they had on hand to punish the mainstream parties responsible for the economic mess while at the same time registering as best they could their opinion that the current approach to dealing with the crisis isn’t working. Is that infantile posturing?

Of course, the voters aren’t alone in being critical of the current austerity tactic. They have plenty of fellow-conspirators – to name a few, the International Monetary Fund; the Italian Premier; the President of the European Central Bank, Mario Draghi; the Financial Times economics columnist Martin Wolf; and The Economist magazine – hardly a bunch of leftwing or fringe loonies. They all argue for blending public debt reduction with growth measures.

Take what The Economist wrote in last week’s edition. “Germany will find itself isolated. It has pushed austerity too far and too fast. The myth of an expansionary fiscal contraction, the idea that deficit cutting would boost growth, has been largely dispelled. The latest evidence is that in a downturn the multiplier effect of fiscal tightening can lead to a deeper recession, making it even harder to cut the deficit.”

Or consider what Martin Wolf wrote in a column this week. “The fact that the policy for dealing with it (the crisis) has been such a disaster – sending unemployment figures through the roof and magically increasing budget deficits – only hastens the final act of this drama: the possibility that Greece will default, leave the euro and increase the contagion in Spain and Italy.”

Wolf argues that German Chancellor Angela Merkel will have little choice but to agree to some changes to the fiscal compact and to soften austerity in its current form. “Whether it is renegotiated, modified or supplemented with a growth pact is a matter of words.” And she has little choice not only because the economic realities demand it but the voters fired a warning shot.

 

 

 

 

 


Parlez Vous Francais, Mr President?

President Barack Obama better brush up on his French: Francois Hollande acknowledges in an interview with Slate magazine that he speaks English, “but a French president has to speak French!”

The two leaders are due to meet at Camp David on May 18 and 19 at the G8 Summit, although the White House has invited the French President for a bilateral meeting in Washington DC beforehand.

Asked if a leader should understand the main language of international diplomacy, i.e. English, Hollande responds: “he needs to understand it and to be able to have unmediated exchanges with his interlocutors” but adds that he is “attached to the French language.”

On other fronts, the U.S. and French presidents may have much in common. He notes: “We have similarities on the economic level.” By this he presumably means their shared opposition to the idea that deficit cutting can boost growth. Although it is doubtful whether Obama will want to get two kisses on his cheek from a French President who is a declared “Socialist” — that would be a godsend for the folks at Fox News!

He praises Obama in the interview, saying, “the Democratic administration’s choices in terms of foreign policy showed serious and beneficial changes compared with the preceding one.”

And he mentions he has no wish to make life harder for Obama with an upcoming election: “I intend to assert France’s independence without making Barack Obama’s task any more difficult. For example, I will maintain the position I had during my campaign of a pullout of French troops from Afghanistan by the end of 2012, in agreement with our allies.”

What will he push at Camp David? There are hints. He says “convertibility of the Chinese currency should have been discussed at the G20” earlier this year and he argues that reform of the international monetary system must be “a priority.” He shares his predecessor’s tough line on Iran and the development of a nuclear weapon but appears to see some room for maneuver in terms of negotiation.

 

Banking Regulations: Too Costly Or Needed To Curb Reckless Behavior?

Bankers are claiming on both sides of the Atlantic that post-financial crisis regulations are far too complex and costly. Are they right? Or are the new regulations needed to stop a repeat of the 2008 crash? I consider those questions in the Daily Mail.

Yes, Precisely

 More Budget woes for Britain’s Coalition government. Tory MP David Ruffley on the BBC today warned that “pensioners are going to be bellyaching about this for a while. The grey vote is powerful and [Osborne] could have thought better of it and found the money elsewhere.”

According to the Daily Mail, the Chancellor, George Osborne, blames the Liberal Democrats for the row over the “granny tax” on the grounds that if they hadn’t leaked all the popular measures before the Budget, then no one would have paid much attention to the phasing out of the age-related tax allowance. Keep telling yourself that George.

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