New Europe Print Edition Issue 966

Kingpin Saudi Arabia, Iran settle over oil output cap |Page 13

NEWEUROPE19th Year of Publication | Number 966 | December 18 - 24, 2011| € 3.50 www.neurope.eu

IN THIS ISSUE EU PolicyCompetition Summit highlights needfor stricter antitrust practices|Page 5EU presents 2050 energyroadmap|Page 13

EU-WorldHunger will rise if EUinks trade deal with India|Page 4

Iraq's minorities need action from EU|Page 11

Energy & ClimateGazprom: No New Year's gifts for Ukraine|Page 13Poland suspends plan to sell offLithuania’s Orlen Lietuva|Page 22

Country newsAbbas meets Sarkozy in Paris|Page 17IMF calls for faster reforms, laying offGreek state workers|Page 23Bulgarian State Railways Operatorfinds it hard to pay salaries|Page 24

Russian billionaire to run against Putin|Page 31

Editorial & OpinionObama channels Clinton on the economy but will it work the secondtime?|Page 6Confidence or confidence trick?|Page 8Letter from Santa|Page 9Really splendid, indeed!|Page 10Ukraine on the Edge|Page 28

At the close of the EU-Russia Summit on15 December, President Dmitry Medvedevsaid that Russia is “ready to invest all finan-cial means to back the European economyand the Eurozone".

Medvedev added that Russia "is ready tolook at and consider other measures ofsupport" as well as International MonetaryFund (IMF)-controlled aid, currentlybeing discussed by finance ministers fromaround the globe. Medvedev said Russiawanted to see the European Union "pre-served as a powerful political and econom-ic force" and the euro "preserved as one ofthe most important reserve currencies".

Earlier in the day, an aide to RussianPresident Arkady Dvorkovich said thatRussia will give at least $10 billion to theIMF to help support the struggling eurocurrency. “We are ready to contribute ourpart via the IMF. We are committed to doit. Ten billion dollars is the minimum com-mitment,” Dvorkovich added.

In opening remarks, Medvedev said "it isno secret" that the EU is Russia's majoreconomic partner and that Moscow is wor-ried about the euro's troubles. Russiaexports more to the EU than to any othermarket, and Russia is the EU's third-largest trading partner, with total trade

amounting to around €245bn. Russia isalso the EU's most important source ofenergy imports, accounting for nearly aquarter of its natural gas consumption and30% of its oil.

Other major issues included visa liberal-isation and the contentious Russian elec-tion. Advances towards visa-free traveldepend on the implementation of a num-ber of common steps, such as introducingbiometric passports and reducing illegalimmigration. The EU also told Russia torun transparent March elections to replaceMedvedev.

Medvedev pledges support for EU ditches election criticism

·Page 14

Russia backs the euro

Russia's President Dimitry Medvedev, centre, told European Council President Herman Van Rompuy, left, and European Commission President Jose Manuel Barroso that Russia wantedto see the euro "preserved as one of the most important reserve currencies". |EPA/MIKHAIL KLIMENTYEV/RIA NOVOSTI/KREMLIN POOL

Faustian Dreamer Page 15

HUMAN RIGHTSOne year has passed since the fraudulentpresidential election in Belarus after whichincumbent, authoritarian PresidentLukashenka was declared as the winnersays Thomas Hammarberg ·Page 7

ENERGYThree competing pipelines in the EU’sSouthern Gas Corridor will have topainfully wait until March 2012 forAzerbaijan’s decision on the export routefor its gas to Europe ·Page 12

DEMOCRACYThe Lisbon Treaty included the setting upof a European Citizen's Initiative, andafter several battles in the EuropeanParliament, the initiative is set to start on 1April 2012 ·Page 11

EU POLICYThe financial world appears at present tobe very sceptical about the effectiveness ofthe Eurozone's plans to straighten up itssovereign-debt problems

·Page 3

ARTS & CULTURE

ANALYSIS Page 2 | New Europe NEW EUROPEDecember 18 - 24, 2011

NE 15 YEARS AGOCommission President, Jose Barroso reacts to news that another summit is planned for January.|EPA

The Shooting Gallery

Towards the end of 1996, almost all central European economies and Russia showed good potential for medium term growth,having left behind them the initial problems of passing from the centrally planned economy to the market led one. Foreign invest-ments were flooding in, targeting mainly the ailing infrastructures in all kinds of utilities. All that growth in the emerging mar-kets was expected to also help the developed economies, by creating vibrant new export markets and increasing overall trade.That is why stock exchanges in Western Europe and the US were having good times towards the end of December 1996. True,later developments did not let down the western multinationals, opening for them new horizons. The good news for centralEurope also paved the way for eight countries to later join the European Union, having first being integrated in the NATOstructures.

ECB’s role after the EU deal

Over the past two weeks, New Europe has maintained that theEuropean Central Bank (ECB) will be the key player in anyattempt by politicians to straighten up the Eurozone's debtproblems. The agreement by the 26 EU members, excludingBritain, to support the Franco-German proposal for extensivechanges to the way that the Eurozone functions, with the cre-ation of a much stronger fiscal and economic union, will havecritical and positive repercussions in the medium term. As far as the short term is concerned, last week’s EuropeanCouncil, again with the exemption of Britain, agreed to onlyslightly increase the dowry of the European StabilityMechanism (ESM) to €500 billion when it comes into forcetowards the middle of 2012, from the €400bn already pledgedby the now-operational European Financial Stability Facility(EFSF), plus another €200bn from the Eurozone’s 17 centralbanks, which will be transferred to the IMF. This additional €200 billion is also meant to be used as a finan-cial aid for European countries in distress. Given, however, thata large part of the EFSF funds are already being used to sup-port the three programme Eurozone countries, namely Greece,Portugal and Ireland, the rest of the available resources will befar from enough to support Italy and Spain, if they need finan-cial backing next year. In light of this, the markets believe and financial realitydemands that the ECB should undertake the task of support-ing liquidity and keep interest rates and yields at reasonable lev-els in the Italian and Spanish government debt markets. Thisintervention will provide indirect support to the correspondingtreasuries, but mostly it will aim to prevent the potential prob-lems of Italian and Spanish debt from spreading to other sec-ondary and primary bond markets, for example in Belgium andAustria or even in France and Germany.By the same token, the ECB will make life easier for Rome andMadrid, just by keeping interest rates and yields on their bondsat reasonable levels in the secondary markets. In so doing, how-ever, the ECB will support these governments in their efforts tosell new bonds in the primary markets, thus indirectly helpingthem counter their fiscal problems, contrary to the ECB'sstatutes, which forbid direct aid to governments. However, ECB Governor Mario Traghi said last week that the“ECB is here”, when asked if an agreement for a stricter fiscalunion will open the way to increased monetary authorities'interventions in the secondary debt markets.Now, given that the plans for a closer fiscal and economic unionare in place, voted for by 26 EU leaders on the 9 December EUSummit and set to be accomplished before the end of March2012, the way appears to be open for more ECB buying in thesecondary debt markets. But this will not be an all-out intervention – it will be calculat-ed to keep interest rates and yields of national debt paper at ‘rea-sonable’ levels. But what is ‘reasonable’? Seemingly not enoughfor the markets, given that all the major European boursesopened on Monday 12 December in the red.

How much?As things stand, the ECB would choose a yield and interest rateposition to support mainly the Italian and Spanish long termdebt paper, which is at around 6.5-7%. However, this is tanta-mount to the ECB arbitrarily selecting a “reasonable” yield forthose bonds. In reality, it is a trade-off between keeping thebonds tradable and their markets liquid, while continuing toexert pressure on the relevant governments to continue takingausterity measures to reduce fiscal deficits and debts. However, the setting of this interest rate/yield is a political deci-sion, which must be served by the relevant governments with-out them participating in the procedure, at least not openly.Obviously, this will be the job of the Frankfurt Group. So, in theshort term, we will be seeing Italian and Spanish bonds oscil-lating around those yields, with financial markets simply tryingto cope with the new environment.

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ISSN number: 1106-8299

By Dionyssis Kefalakos

ANALYSISNew Europe |Page 3NEW EUROPE

December 18 - 24, 2011

With the euro below 130 American cents(the lowest parity for the European moneywith the dollar since January this year) andalmost all major stock markets in the red allalong this past week (more so in Europe), thefinancial world appears at present to be verysceptical about the effectiveness of theEurozone's plans to straighten up itssovereign-debt problems. On top of thisdifferences between Paris and Berlin, on howto better counter the debt crisis still appear tobe widening rather than shrinking. As thatwas not enough there is very limited progressin negotiations between the Greekgovernment and its bank lenders to concludethe much advertised agreement over thePrivate Sector Involvement (PSI) in thecountry's debt ‘haircut’, while Athens seemsquite incapable of controlling its fiscal deficits,with this year's gap threatening to be largerthan in 2010. Sadly enough the Greekgovernment is not putting the needed effortsto reduce the always growing country's publicsector and deficits. There is information thatmore people are being hired in the state sectorof the economy during 2011.

The EU26 agreementAs for the EU26 agreement, the leadership

of the European Union, as expressed byEuropean Council President Herman VanRompuy and European Commission JoséManuel Barroso, seem to be worried aboutthe legal base of the new Fiscal Treaty to beagreed on an intergovernmental base betweenthe 26 member states. The critical factor inthis affair remains that British PrimeMinister David Cameron is insisting on hisdecision not to make things easier for 26other member states.

The ECBThe only positive signs for the European

Union have come from the European CentralBank's careful interventions in the secondarymarkets for Italian and Spanish bonds, withresults in supporting their prices despite thelimited character of the central bank'sspending. Stocks however continued losingground all this week despite the fact, as istraditional towards the end of the year, shareprices have rallied somewhat, so their holderscan write better values in their books andportfolios at the year's end.

Global gloomAll in all, the world’s economic climate is

becoming more gloomy as the northernhemisphere goes deeper into the 2011-2012winter season, with all the major developedeconomies on this side of the globe eitherstagnant or barely growing. In its latest reportthe OECD, the developed countries’economic spearhead organisation, hasdegraded both its estimates for achievementsmade during 2011 and prospects for 2012.

The problem is that both potential sources

of growth in the developed world, privateconsumption and public spending, are in agloomy state, with their agents being over-indebted and ‘on a diet’ to reduce theunbearable weight of their obligations.Incidentally the business sector, mainly largemultinationals, is awash with cash but do notseem inclined to invest it, at least not in largeenough quantities to change the globaleconomy’s overall climate. Obviously, they arenot seeing demand coming for their products.At the same time, the major banking firms inthe US and Europe are absorbed inrecapitalising themselves to make up for thelosses after the big meltdown in theAmerican credit sector or are preparingcushions for possible losses in Europe, to saynothing about the potential increases in theirobligations for more own capital (followingthe Basel II agreement) to the tune of 9% ontheir assets.

This issue, however, appears to becontroversial, with the Anglo-Americanfinancial industry strongly opposing anymajor increases in bank reserves and Europeat the other end of the spectrum ready tointroduce new legislation over the comingmonths to impose more prudent practices onthe banking industry. Obviously, less risk-taking by banks means less profit for theirshareholders and fewer bonuses for theirdealers and managers, but will also meanfewer risks of a future credit crisis. There arevoices in mainland Europe saying that dealersof complex financial products such asderivatives and credit default swaps shouldleave the banking industry completely andfind employment in the private financialsector where they belong. However, all thisneeds to be discussed and decided upon bythe political establishment, but very fewrepresentatives seem to favour toughdecisions for the financial sector.

The crucial question remains the regulatoryframework of functioning of the financialsystem in general and the banking industry inparticular. Presently the Anglo-American

banking groups have recovered from the creditmelt down of the 2008, using zero cost loansfrom the the Fed and the Bank of Englandalong with state subsidies of hundreds ofbillions. In this way they recapitalise themselvesrather quickly. The New York and Londonfinancial sectors function as nothing hashappened (business as usual) and the bankingsector is using again the “casino” recipe toproduce new profits, this time with public

money. Both the US and Britain still produce alarge part of their GNP in the financial sector,thus making politicians very hesitant to touchit. Even the American President BarackObama who got elected on a ticket to controlWall Street, is now counting on the New Yorkbanking industry to finance his re-election. Inthis side of the Atlantic Ocean things are a bitdifferent. Banking is not the absolute ruler ofthe Eurozone.

It may be true that Deutsche Bankparticipates wholeheartedly in the London andNew York feast, but the welfare of theEurozone is still based mainly inmanufacturing and the real economy in bothits major economies Germany and France.That is why even within Germany there is aclear distinction between the two sides; thebankers in one side of the fence and the rest ofthe society on the other. That is why Berlindecided to ask banks to participate in alleviatingthe Greek debt burden, by accepting a 50%haircut. In Britain and the US banks weretotally protected from such 'ideas'. In any casethis is where the western financial systemstands now and the division of interests remainsso wide that it is almost impossible to predictthe future. Very probably the financial industrywill win, with manufacturing exiled to thedeveloping world and financial bubblesbecoming a standard phenomenon in theAtlantic economic volume.

ECONOMY

The EU26 Summit decision was not enough

European Council President Herman Van Rompuy during a news conference at the end of a two-day EU

head of states summit, in Brussels, Belgium.|EPA/OLIVIER HOSLET


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Page 4| New Europe NEW EUROPE

ANALYSISDecember 18 - 24, 2011

A new negotiations round was concluded on 13 De-cember in Athens between the Greek government andthe representatives of its private creditors, aka banks,over the application of the Private Sector Involvement(PSI) in cutting down the country’s debt, namely adebt ‘haircut’.Under the general terms of the European Council’s 26October Agreement, the PSI will contain a 50% re-duction of the debt to be included in the agreementand the lenders receive 35% of the value of new bondsguaranteed by the European Financial Stability Facil-ity, presently carrying a triple-A rating, plus 15% incash, and the interest rate on the new bonds cannot behigher than the average interest rate of Greek bondsat present. It must be remembered that the exchange is optionalfor lenders - negotiations cover the terms and the pro-cedure of the swaps and the interest rate of the newbonds. According to the representatives of the twosides, the latest offer by the banks is closer to what theGreek government had originally proposed. The Greektreasury has offered a 4.5% interest rate on the newbonds to banks, while the banks themselves had beenasking for around 7.5-8%. The truth is, however, that the Greek bonds that thelenders now hold are valued in the secondary market ataround 40-50% of their nominal value, and the banksthat will not participate in the PSI may end up hold-ing worthless paper. In any case, there is informationthat the banks are quite willing to participate in theswap, but the issue of interest rates is crucial. In anycase, it seems that the interest rate gap between whatthe Greek government is offering and what the bankscan accept has decreased, but none of the negotiatorsare giving any hints as to exactly what happened on 13December. Well-informed market sources in Athens say that thereis now large-scale buying and selling of Greek debts inthe secondary market, with buyers acquiring bonds atdiscounts as large as 60% off nominal values, hopingto exchange them with triple-A rated bonds guaran-teed by the EFSF, plus a portion in cash, thus makinga good, quick profit – sellers include large Europeanbanks that have decided to write off a large part of theirGreek bond portfolio. Negotiations are expected to beconcluded during January 2012 and the swap to be re-alised before the end of March. Government sources say that the Greek treasury ex-pects participation by banks with a nominal worth ofbonds of €205bn in the PSI scheme – the Greek gov-ernment is represented in the negotiations by FinanceMinister Evagelos Venizelos, while lenders’ interestsare being taken care of by the International Instituteof Finance, under its President Charles Dalara. Given however that the Greek banks are the largestholders of the country's sovereign debt parer, they willalso suffer the largest losses if they participate in the PSI.Incidentally according to well informed sources inAthens those lenders are quite ready to fully participatein the Greek “haircut”, not to be seen avoiding to helptheir home market solve its over-indebtedness problem.Understandably there is a special arrangement in theBank of Greece amounting to €30bn, for the recapitali-sation of the Greek commercial banks after the PSI isconcluded. The question is however if this recapitalisa-tion will be realised with common or preferred stock. Inthe first case the ownership of those banks will be trans-ferred to the public entity which is going to buy the newstocks. And who knows if in the future this authoritywould not decides to sell those stocks not to the presentowners of the banks, but to others. This seems to be amajor problem in realising the PSI.


Better offerfor the Greek‘haircut’

Ten years ago, the tobacco industrywas formally identified as the enemy.The World Health Assembly ap-proved a resolution stating that ciga-rette makers have operated with “theexpress intention of subverting the roleof governments” in implementingpolicies designed to reduce cancerdeaths.

An illustration of just how danger-ous that industry is came in February2010, when Philip Morris Interna-tional sued Uruguay over graphic newhealth warnings on cigarette packets.Philip Morris was able to take this ac-tion under the provisions of an invest-ment treaty between Uruguay andSwitzerland. Like many similar agree-ments, that one allows corporations totake an entire nation to court if theyencounter obstacles perceived as dam-aging to their profitability.

This kind of litigation could becomecommonplace if Karel de Gucht, theEU’s trade commissioner, has his way.

He appears determined to seize onprovisions in the Lisbon treaty thatgive the European Commission re-sponsibility for negotiating investmentdeals with foreign countries. India islikely to be a test case. De Gucht ishoping that he will wrap up talks on afree trade agreement with New Delhithis coming February. According to apaper drawn up by EU officials, suchan agreement “shall provide for theprogressive abolition of restrictions oninvestment, with the aim to ensure thehighest level of market access and pro-vide protection for investors and in-vestments of both parties.”

In other words, de Gucht wantsclauses in the agreement that wouldallow corporations sue India or the EUin the way that Philip Morris is suingUruguay. The recent history of invest-ment treaties has shown that becausethey allow for company-state arbitra-tion, health, environmental or labourstandards can be challenged on thegrounds that they restrict investment.Vattenfall, the Swedish firm, is invok-ing a 1994 energy treaty to sue Ger-many over its decision to abandonnuclear power.

Philip Morris, incidentally, views theEU-India trade talks as an opportu-nity to make a killing (literally).

I have seen a copy of a letter sent tothe European Commission in March2010 signed by Kristof Doms fromPhilip Morris’ Brussels office and JackBowles, who represents British Amer-ican Tobacco, Imperial Tobacco and

Japan Tobacco International. The twomen lamented that India is a “virtuallyclosed market” because it applies hightaxes on imported cigarettes. “In orderto open the Indian market for ciga-rettes manufactured in the EU,” thedespicable duo urged the Commissionto insist on a free trade agreement thatwould remove all import duties theynow have to pay in India.

Irrespective of whether these ped-dlers of disease get their way, there arestrong reasons to fear that a free tradeagreement will harm India’s poor.

Karel de Gucht and his team shouldread two important new documents.

The first one is a report published bythe UN’s working group on humanrights in India earlier this month. Itgives an overview of the human rightssituation in India, stating that theplanned free trade agreements threat-ens the rights to health, food and workfor much of the population. Whilethat comment is directed at India’strade agreements in general, the reportzooms in on the one under negotiationwith the EU, predicting it “would cuttariffs to zero for key sectors that sup-port many producers and workers,thus exposing them to highly compet-itive international markets.”

The second paper de Gucht shouldstudy is a “right to food impact assess-ment” on the likely consequences of atrade agreement between the EU andIndia. It was prepared by the ThirdWorld Network, an Indian veterinaryorganisation called Anthra and theGerman anti-poverty group Misereor,among others.

This study emphasises that de Guchtis under a legal obligation to respecthuman rights. Despite its numerousflaws, the Lisbon treaty does at least re-

quire that trade policy upholds rights ofboth a social and economic nature and acivil and political one.

So when trade with India is beingdiscussed, de Gucht is obliged to recallthat India is not simply a land with 55dollar billionaires, it also has an esti-mated 224 million people living inchronic hunger. One of the enormousparadoxes of India is that food pro-ducers are themselves frequently vul-nerable to food deprivation. About70% of Indians depend on agricultureas their primary source of livelihood.

The impact assessment indicatesthat India’s dairy and poultry farmerswould struggle to cope if they had tocompete with cheap imports of Euro-pean meat and milk products. Suchfarmers typically have to borrow forfeed and other essentials and pay backtheir loans at high interest rates, mak-ing them dependent on getting rea-sonable prices. Women involved insmall-scale agriculture would have tocut down on vital sources of nutritionlike rice if their incomes were to de-cline, the assessment stated.

De Gucht is hoping that India’smiddle class will flock to supermarketsowned by Carrefour and Tesco as a re-sult of a free trade agreement. Thosesupermarkets tend to favour better-offfarmers when buying food, meaningthat they will bring no benefit toIndia’s poor. And the arrival of giantstores will surely be bad news for thefamily-run shops and street hawkersthat form the backbone of the Indianeconomy.

Christmas is supposed to be a sea-son for caring. As de Gucht tucks intohis Yuletide dinner, I hope he will feelsome remorse about the suffering he istrying to inflict on India.

European Trade Commissioner Belgian Karel de Gucht gives a news conference on Trade Strategy forEurope 2020 at the European Commission headquarters in Brussels, Belgium.|EPA/OLIVIER HOSLET

EU-INDIA TRADE

Hunger will rise if EU inkstrade deal with India

By David Cronin

The two-day Competition Summit, heldin Brussels and organised and producedby Premier Cercle, on 1 and 2 Decemberbrought together policy makers and in-dustry heads to discuss an array of issuesdealing with competition law and indus-try compliance. It raised awareness to EUauthorities as to what was needed to goforward and emphasised the need tofocus on the many unanswered questionsconcerning antitrust practices in Europe.

This event marked the second timethat the Summit has been held to tackleantitrust issues. The Summit attractedmany notable keynote speakers, such asCompetition Commissioner JoaquínAlmunia, Senior Director of Cartels andCriminal Enforcement at the OFT AliNikpay, General Court Judge SantiagoSoldevila Fragoso, and former Com-missioner of the FTC ProfessorWilliam Kovacic. The Summit's goalsechoed the goals it has set out in thepast: how does the EU enforce anti-trust legislation, especially in a times ofsuch economic crisis? By looking at over70+ case studies regarding illegal com-petitive practices, the speakers dealt withissues that followed three 'streams', an-titrust compliance, merger control, andhorizontal agreements.

With a more open and competitiveEurope viewed as the key to economicstability, finding a proper way to enforcecompetition laws was at the forefront ofthe debate. Almunia said in his openingspeech: “Although the European Com-mission has proposed many measures tocontain the immediate effects of the cri-sis, I believe that the core of our actionshould remain the pursuit of sustainablegrowth in an open, innovative and inte-

grated internal market.” He argued thatcompetition policy has a heightened rel-evance in the current stage of the financialand economic crisis: “The most urgenttask is boosting investors’ confidence inthe sovereign debt and in the euro. To re-verse the trend, we will have to mobiliseall our resources and use a broad array ofpolicies. [...] As the crisis – in its differentforms – continues to beleaguer us, com-petition policy remains of crucial impor-tance.”

He continued: “Competition policy isabsolutely crucial in this respect. Our con-trol of competition in the internal marketand the initiatives that we take to updateand improve our policies are crucial toboost economic efficiency and promoteinnovation.”

During the panel discussions, casestudies, such as the Microsoft web brows-ing case, were examined to illustrate theneed for stricter control of competition.The Associate General on antitrust forMicrosoft Jean Yves-Art spoke on Mi-crosoft and the EU's cooperation gener-ally in multiple jurisdictions, andspecifically, in tweaking its technology sothat consumers could use the browser oftheir choice in an easier way. His speechwas supported by Almunia, who high-lighted the positive impact that a jointEU-Microsoft venture had been in in-creasing competition amongst internetbrowsers.

Another noteworthy discussion tookplace on horizontal agreements and in-formation sharing by competitors. Whatwas reiterated by the panel, which in-cluded General Counsel for Star AllianceServices and the Director of Legal Affairsof SFR, was that the main competitionlaw concern arises when the nature of theinformation exchanged between current

or potential competitors makes it easierfor them to predict each others' behaviourand adjust their own accordingly. The keywas to know when 'enough' becomes 'toomuch'. It was discussed that the age of thedata, the extent to which it is aggregated(i.e. anonymised) and the frequency of ex-change are key. Nevertheless, companieshad to make clear boundaries as to whatinformation is off-limits and what can betransferred to each other and internally.

Reactions from the industry leadersthat attended the event were on the wholepositive. Estee Lauder Companies Inc.Senior Vice President and Deputy Gen-eral Counsel Louis Schapiro told NewEurope: “The Competition Summitbrought together top private sector legaland government affairs professionals whoengaged in a very high level of debate onthe current significant competition issues.The debate and interchange would havebeen enhanced, in my view, had moreworking-level members of the nationalcompetition authorities participated.”

Nevertheless, the success of this eventwas emphasised by Almunia at the end ofthe two days by looking at the correlationbetween fair competition and the successof Europe's economy: “There is not amoment to lose. The euro and the inter-nal market have made us a force to bereckoned with on the global stage and –once again – they must be our main en-gines of growth and the pillars of ourprosperity.” With Summits like this fo-cusing on competition law, finding solu-tions for fair and robust competitionbecomes more of a reality than just theory.

Stratis G. Camatsos is a New York qual-ified attorney and on the Roll of Solicitorsin England and Wales. He holds twoLLMs in European law and U.S. law.

ANALYSISNew Europe | Page 5

NEW EUROPEDecember 18 - 24, 2011

Using open innovationfor IP collaboration

On 6-9 December, Brussels was the sight for the IP Weekand Open Innovation conference, produced and organ-ised by Premier Cercle, and gathered a wide array of in-dustry representatives with policy makers discussing anddebating many issues dealing with intellectual propertyand the open innovation business model. It raised aware-ness to EU authorities, as well as to the industry itself, onthe issues faced by business with their intellectual propertyand using the open innovation licensing system, as well asthe legal problems and solutions involved.The event was marked as a platform for industry leadersto share their ideas on the vertical and cross-industry chal-lenges. The conference attracted many notable attendeessuch as WIPO Director General Dr. Francis Gurry,Deputy Director General for DG Internal Market andServices Pierre Delsaux, President of the EPO BenoîtBattistelli, and USPTO Director David Kappos. Thegoals set out to bring to the forefront the issue of open in-novation and the way it can be favourably used by com-panies in times of such an economic downturn, and thebalance to be found between litigation and sharing. Bylooking at and discussing over 70+ open innovation busi-ness models, the speakers dealt with issues that followeda common theme of industry challenges and IP strategies,with the last day having workshops with a focus on patentsystems and investment and IP.During the panel discussions, common themes arose con-cerning the challenges faced of the open innovation par-adigm and the integration of internal and externalinnovation, which included maximisation of internal in-novation, incorporation of external knowledge, and moti-vation to continue this type of business model. MicrosoftCOO of European Affairs and Associate General Coun-sel Ronald Zink spoke on Microsoft's shift to open inno-vation and reiterated that IP gives a company themechanisms to share; it is a form of currency. Addition-ally, he said that to find solutions, one cannot go at it alone.Carrying this sentiment was Rambus' Vice-President andChief IP counsel Wayne Sobon on a question about in-corporation of external knowledge and the motivation tocontinue the paradigm, he replied that if the companydoes not offer the best technology for licensing, then yourcompany will not make any money. Of course, SMEs were also represented there. The mes-sage relayed to the bigger players was that gaining IPrights is expensive and the only thing that these compa-nies can do is to use open innovation and collaborate, solarger companies should be more open to it. Nevertheless,Mike Sax of Sax.net drove home that idea that for SMEs,it is important to recognise what is your core IP; the thingthat makes you different from the competitors in order tobe able to entice the larger companies to collaborate.Reactions from the industry leaders that attended theevent were on the whole positive. Unilever Vice President,Global Head of Patents Matt Goodwin told New Eu-rope: “The presentations and panel discussions were stim-ulating, and at times, provocative. We heard some ideasthat challenge traditional notions of how we create themost value from IP. However, for me, the most enjoyableaspect of this or any conference is the breaks, when I con-nect interact on a casual basis with other attendees.” Nevertheless, the event was gave a precursor as what wasin-store for open innovation in the IP sector. Althoughthere exists different models for open innovation, thereare still some challenges to be solved. However, withevents like this focusing on IP and open innovation, find-ing solutions for consumers and companies alike usingnon-traditional methods becomes more of a reality thanjust left to ideas.

BUSINESS

Competition Summit highlightsneed for stricter antitrust practices

European Competition affairs Commissioner, Spanish, Joaquin Almunia gives a speech.|EPA/OLIVIER HOSLET

By Stratis G. Camatsos

By Stratis Camatsos

Page 6 | New Europe NEW EUROPE


European Ombudsman P. NikiforosDiamandouros has called on the Eu-ropean Food Safety Authority(EFSA) to strengthen its rules andprocedures in order to avoid potentialconflicts of interest in 'revolving door'cases. This follows a complaint froma German NGO, alleging thatEFSA failed to address a conflict ofinterest arising from the move of an

EFSA Head of Unit to a biotech-nology company.

In March 2010, a German NGOturned to the Ombudsman, com-plaining that EFSA did not ade-quately address a potential conflictof interest concerning the move ofthe Head of EFSA's GeneticallyModified Organisms (GMO) Unitto a biotechnology company in

2008. According to the com-plainant, there was a conflict of in-terest because the former EFSAstaff member could influenceEFSA's decisions for the benefit ofthe biotechnology company inquestion, which is a leading com-pany in the genetic engineering ofplants. The NGO was particularlyconcerned that the move took place

less than two months after the for-mer staff member in question hadleft EFSA, without a 'cooling off 'period. After his investigation, theOmbudsman concluded thatEFSA had not carried out as thor-ough an assessment of the allegedpotential conflict of interest as itshould have, and recommendedthat EFSA strengthen its rules and

procedures. He called on EFSA toimprove the way it applies its rulesand procedures in future 'revolvingdoor' cases. As a general matter, theOmbudsman also pointed out thatnegotiations by a serving memberof staff concerning a future jobwhich could amount to 'revolvingdoors' would themselves constitutea conflict of interest.

FOOD

Ombudsman calls on EFSA to strengthen conflict-of-interest rules

In Kansas last week, President Obama laid outthe economic brief for his reelection. Its sub-stance plainly recalls the program Bill Clintonoffered in 1992. Both plans are built aroundnew public commitments to education, R&Dand infrastructure, some fiscal restraint to fi-nance the public investments and unleash moreprivate investment, plus some modest redistri-bution of the tax burden from working fami-lies to the wealthy. This formula still strikes theright notes politically, at least for those whoaren’t diehard, pre-New Deal conservatives. Buteconomically, this mainstream approach willface much greater hurdles today.

Most of the President’s conservative criticshave focused on his call for more revenues fromaffluent Americans, starting with a surtax onmillionaires. In fact, congressional Republicansnot only have rejected the surtax; they’ve alsosuggested that they might hold payroll tax re-lief hostage until Obama agrees to make theBush upper-end tax cuts permanent. It’s a bluff,and not a very good one: The GOP will stopthe surtax on the rich, but they cannot be seenat the same time as raising taxes on everyoneelse. Whether or not Bush’s largesse for upper-income Americans survives will turn on who isinaugurated in January 2013.

This tax debate may pack a good politicalpunch for Obama; but in the end, it doesn’thave much economic significance. Yes, a highermarginal rate, in itself, would have negative ef-fects. But in the real world, a higher rate neveroperates by itself. The additional revenues mayhelp bring down interest rates by reducingdeficits and so spur business investment, as theydid under Clinton. Or the same revenues couldhelp finance public investments that makebusinesses more efficient and productive. Andthe truth is, the adverse effects of a higher taxrate on the wealthy, by itself, fall somewhere be-tween quite weak and very weak. What else canan economist infer from strong growth in the1950s when the top rate exceeded 90 percent,quickening growth in the 1990s after Clintonhiked the top rate, and more tepid growth afterBush cut the top rate?

The harder and more important issue iswhether the combination of more public in-vestment and smaller deficits, which worked so

well for Clinton, will make much differencetoday. Like Clinton in 1992, Obama last weekcalled for more federal dollars in the three spe-cific areas that can boost productivity andgrowth in every industry, and which businessestend to shortchange. This covers worker edu-cation and training, basic research and devel-opment, and transportation infrastructure. Thetheory, confirmed by the boom of the latter1990s, is that these factors help make businessesmore efficient and their workers more produc-tive. Together, those gains translate into higherincomes and stronger business investment, es-pecially if businesses don’t have to compete withWashington for capital to invest. And all of thatshould produce stronger growth, more jobs, anda much-sought-for virtuous circle.

The catch lies in jobs and wages. If the pub-lic investments allow businesses to becomemore efficient and productive, but those invest-ments do not lead to higher incomes and morejobs, the only result will be higher profit mar-gins. The whole virtuous circle will slow downor even stall out, much like what happenedonce the 2009 stimulus ran its course. In the1990s, the strategy worked like a charm, be-cause U.S. companies still responded to highergrowth and productivity with strong job cre-ation and wage increases. But those connectionshave weakened badly since then.

Consider the following. The Bush expansion

from 2002 to 2007 saw GDP grow by an aver-age of 2.7 percent a year, 30 percent slower thanthe 3.5 percent annual gains for a comparableperiod in the 1990s, say 1993 to 1998. Butwhile the number of private sector jobs grew bymore than 18 percent from 1993 to 1998, thisrate fell to less than 6 percent from 2002 to2007, a two-thirds decline from the earlier pe-riod . Even worse, the connection between pro-ductivity and wage gains broke down evenmore. In the 1990s, productivity grew 2.5 per-cent per-year, and average wages increasednearly in lock-step, by 2.2 percent a year. Ingrim contrast, productivity grew 3 percent ayear from 2002 to 2007 while the average wagedidn’t go up at all.

Clinton’s program could take strong job cre-ation and wage gains virtually for granted. Pres-ident Obama’s program will have to addressthese issues head on, and in ways that might at-tract some bipartisan support. Obama will alsohave to contend with additional hurdles, in-cluding the persistent economic drag from thefinancial crisis and, perhaps, from anotherround triggered by Europe’s faltering sovereigndebt.

Here are three ways to begin.First, while the President’s temporary payroll

tax cut for workers provides some welcomestimulus, reducing the tax burden that falls di-

rectly on job creation on a permanent basis —the employer side of the payroll tax — would bemore powerful economically. We could cutemployer payroll taxes in half, for example, andreplace the revenues with a new carbon fee ongreenhouse gases. In the bargain, the UnitedStates also would become the world’s leadingnation in fighting climate change.

To address stagnating wages as well as slowjob growth, the President should recast histraining agenda as a new right. Most jobs today— and virtually all positions very soon — re-quire some real skills with computers and otherinformation technologies. All working Amer-icans should have the opportunity to upgradetheir IT skills, year after year. They could havethat, and at modest cost to taxpayers, if Wash-ington will give community colleges new grantsto keep their computer labs open and staffed atnight and on weekends, so any American canwalk in and receive additional IT training forfree.

Finally, U.S. multinationals have lobbied fu-riously, without success, for a temporary tax cuton profits they bring back from abroad. Givethem what they want, if they will give the econ-omy what it needs. We could let U.S. multina-tionals bring back, say, 50 percent of theirforeign profits at a lower tax rate if, and only if,they expand their U.S. work forces by 5 percent.A 6 percent increase in a company’s U.S. work-ers would entitle them to bring back 60 percentof those profits at a lower tax rate, and on up toa 10 percent job increase and 100 percent offoreign profits.

That’s what it will take, just to begin, for aneconomically-powerful program of public in-vestment and fiscal restraint to work its magicthis time.

Dr. Robert J. Shapiro is Co-founder and Chair-man of Sonecon, llc. In addition to chairingSonecon, Dr. Shapiro is also a Senior Fellow ofthe Georgetown University School of Business,advisor to the International Monetary Fund,director of the Globalization Center at NDN,chairman of the U.S. Climate Task Force, co-chair of America Task Force Argentina, and adirector member of the Ax:son-Johnson Foun-dation in Sweden. From 1997 to 2001, Dr.Shapiro was U.S. Under Secretary of Com-merce for Economic Affairs

US President Barack Obama (C-R) and Former President Bill Clinton (C-L) tour a 'trophy' office space

building and speak about job creation and energy efficiency in Washington.|EPA/Olivier Douliery

By Dr Robert J. Shapiro

ECONOMY

Obama channels Clinton on the economybut will it work the second time?

One year has passed since the fraudu-lent presidential election in Belarusafter which incumbent PresidentLukashenka was declared as the win-ner. Ninety percent of the electoratehad taken part and eighty percent ofthem had voted for him, according tothe official results.

Thousands of people took part in theprotest demonstrations in Minsk in theevening of the election day 19 Decem-ber. They were met with indiscriminateand disproportionate use of force by thepolice, and no less than 700 demon-strators were arrested. Most of themwere sentenced in summary trials tofines or administrative arrests for five tofifteen days.

A core group of prisoners faced crim-inal charges for having organised “massdisorder”. Among them were some op-position candidates in the elections.Andrei Sannikov was sentenced to fiveyears in prison under a strict regime,Dmitri Uss to five and a half years andNikolai Statkevich to six years.

There were reports that some ofthem had been ill-treated. The harass-ment has continued after the trials. Ihave received credible informationabout repeated threats against themand refusal to provide urgent healthcare.

In particular, human rights defendersin Minsk are worried about DmitriDashkevich, a leader of the organisa-tion Young Front, whose health deteri-orated following a hunger strike, andwho has reportedly not been given ad-equate medical care.

Prisoners are moved around betweeninstitutions or declared not availablewhen lawyers and family members seekto use their right to visit them in prison.Lawyers who have taken up their caseshave been disbarred and deprived of thepossibility to represent people in courtproceedings.

At the same time, human rightsgroups have been put under systematicsurveillance and pressure. The widely-respected Ales Bialiatski, chairman ofthe Human Rights Centre “Viasna”and Vice President of the InternationalFederation for Human Rights, was ar-rested in August and has now been sen-tenced to four and a half yearsstrict-regime imprisonment, confisca-tion of property and a heavy fine equiv-alent to more than 50 000 euros. Thereare other stark signs of pressure uponthe Human Rights Centre “Viasna”,whose deputy chair is facing trial andwhose premises may also be confis-cated.

During its fifteen years of existence

“Viasna” has assisted thousands of vic-tims of human rights violations andtheir families. This has obviously irri-tated the authorities, and “Viasna” hasbeen deprived of its status as a regis-tered organisation since 2003, despitethe opinion expressed in 2007 by theUN Human Rights Committee thatthe Belarus authorities had violated the“Viasna” members’ right to freedom ofassociation. This development meantthat “Viasna” would not be able to havea bank account in the country.

Instead it opened accounts in Lithua-nia and Poland to which foreign sup-porters and sister organisations coulddonate funds. This became known tothe Belarusian security service agency,KGB, and was used against Bialiatski ina politically-motivated show trialmarred by breaches of national law andinternational standards, and with a clearintention to hinder human rights pro-tection activities.

The right to access funding is pro-tected in international and regionalhuman rights accords. The UN Dec-laration on Human rights Defendersstates that everyone has the right to“solicit, receive and utilize resources forthe express purpose of promoting andprotecting human rights and funda-mental freedoms through peacefulmeans”.

Instead the Belarusian National As-sembly has now adopted an amend-ment to the Law on PublicAssociations which prohibits Belaru-sian NGOs from keeping funds inbanks or other institutions abroad. Theamended Criminal Code criminalisesthe acceptance of foreign donations ‘inviolation of the Belarusian law’.

These legislative amendments havemet with widespread concern, which isalso reflected in a recently-published

opinion of the Council of Europe’sVenice Commission, of which Belarusis an associate member. According tothat body, it is unacceptable from thestandpoint of democratic principles andhuman rights to criminalise civil soci-ety efforts to have an impact on its ownconditions and future.

Other laws have also been amendedand can be used to prevent unwantedcivil society activities. The freedom ofpeaceful assembly has been further re-stricted and any kind of public gather-ing planned in advance can beconsidered as a violation of the law if itdoes not have official permission.

Vague new formulations have beenintroduced in the criminal code about“espionage”, which human rights ac-tivists fear might be used to prosecutedissemination of facts about the humanrights situation. Another significant de-cision by the parliament was to amendthe Law on State Security Agencies,expanding powers of the KGB.

Meanwhile, two further death sen-tences have been pronounced in Be-larus - following proceedings whichreportedly did not respect fair trial stan-dards - in spite of the repeated appealsfrom abroad against such cruel and in-human punishment.. Nowadays, execu-tions do not take place in any otherEuropean state.

Belarus is the only country in Europewhich has not qualified to join theCouncil of Europe and its humanrights record for the past year haspushed the prospect of membershipfurther into the future. I doubt this iswhat eighty percent of the Belarusianpeople really want.

Thomas Hammarberg in Commis-sioner for Human Rights, Council ofEurope



Coupling inthe boudoir

In an already much lampooned bit of rhetoric, the IrishPrime Minister, Enda Kenny, told the citizens of his coun-try that “difficult decisions are never easy”. It was a mag-nificent tautology, said during his pre-budget televised‘state of the nation’ address to the Irish people, the sameone where he assured everyone that they were not to blamefor Ireland’s current economic woes, which left a bitter tastewith most, although more than a few bankers and propertydevelopers were undoubtedly grateful for the absolution.As predicted, the Irish budget, tortuously spread out overtwo days, was indeed horrendous, amounting, through acombination of tax increases and cuts in public expenditure,to a €3.8bn “adjustment”, to use the current euphemism.Ireland and its finances are, of course, under the watchfuleye of the EU right now; a fact that raises the hackles ofisolationists and idealists from both right and left. The lat-ter may have a point; it was the failure of capitalism, andthe casino-driven policies of the Irish political class, thatcrashed the once high-flying economy, but their paranoiaand belligerence sits uncomfortably with the crusty rem-nants of the once-detached isle. European dissatisfaction,it seems, is always drawn from extremes, and with theprospect of another referendum, these two uneasy bedfel-lows may once again find themselves coupling in theboudoir. The prospect on a referendum over proposed new treatychanges to manage fiscal governance is already rearing itshead, in the letter pages, opinion columns and also throughthe government. Finance Minister Michael Noonan hassubtly warned of recent obligations to Europe, and the pos-sibility of a UK-style snubbing if a treaty referendum wasindeed put to, and rejected by, the people.At least one legal opinion has suggested a referendum canbe avoided. Writing in the Irish Times, Ronan McCrea,who lectures on EU and constitutional law at UniversityCollege London said that “the Government’s ratificationof last week’s pact merely requires it to introduce measuresinto national law that reflect the obligations already im-posed by EU treaties that were previously ratified by thepeople”.“In the light of this lack of clarity in relation to the legal sit-uation, the Government should legislate for the measuresagreed last week. While a court challenge to such legisla-tion would be inevitable, the Government may well win.Such an outcome would be good for our political system aswell as our economic future. Referendums are, quite sim-ply, a horrendous way to take political decisions. Clear-cut,stand-alone issues such as the death penalty or the per-missibility of divorce can usefully be debated and decidedby popular vote. Complex multifaceted proposals such as abudget or the Lisbon Treaty cannot.”It is all debatable, of course, but it is true that the Irishgovernment fears a referendum right now; recent resultshaven’t gone smoothly, and now, with a population stungby austerity measures, and the recent household chargescheme doingnothing to endure the government to thegeneral public, it is in something of a bind. It can’t le-gitimately claim to be a bulwark against Europe whilecollaborating on long-term financial planning. Likewiseit can’t alienate the sensitivities of the powerful centralfiscal powers. The popular sentiment appears to be outside its grasp.Right now, scaremongering seems to be the best bet.

[email protected]

EVERYTHING BUT ARMS POLITICS

A year after Lukashenka’s declaredvictory: Increased repression

A Belarussian human rights activist Ales Bialiatski waves from a cage in a court room during a court

session in Minsk, Belarus.||EPA/TATYANA ZENKOVICH

By Thomas Hammarberg

By Cillian Donnelly



The IntelligentUniversity

People need different answers to different problems. In acomplex time of crisis, the Intelligent University must bea platform of change, where knowledge and creativity cre-ate new solutions of value to a more demanding market.The Intelligent University promotes a permanent com-petiuve approach to innovation and at the same time de-velops new social ideas that promote a differentintegration of people in different global contexts. The In-telligent University is by no doubt one of the keys for anew agenda we want for our society. The Intelligent University allows people to know whothey are and have a strong commitment with the valuesof freedom, social justice and development. This is thereason to believe that a new standard of Democracy, morethan a possibility, is an individual and collective necessityfor all of us, effective global citizens. Habermas is morethan ever present – the difference of this new world willbe in the exercise of the capacity of the individual partic-ipation as the central contribution to the reinvention ofthe collective society. The Intelligent University in an Open Space where col-laboration and participation are the drivers of a new wayof communication. In this way it´s essential to learn thelessons that more than ever emerge from a world that istrying to rebuild its competitive advantage and to rein-vent its effective place in a complex and global networkof relations. In the New Global Economy and InnovationSociety, people and companies have a central role to playtowards a new attitude connected with the creation ofvalue and focus on creativity. The Intelligent University is a permanent commitmentbetween the local and the global. The Intelligent Uni-versity must confirm itself as an “enabler actor” in a verydemanding world, introducing in the society and in theeconomy a capital of trust and innovation that is essen-tial to ensure a central leadership in the future relationsbetwen the different social and economic players. Thesenew actors should be more and more global, capable ofdriving to the social matrix a unique dynamic of knowl-edge building and selling it as a mobile asset on the globalmarket. The Intelligent University is also an effective actor of per-manent social integration. The Intelligent Universitymust know how to integrate in a positive way most of thecitizens that want to develop new ideas. Social cohesionis done with the constructive participation of the citizensand it is more and more necessary an effective attitude ofmobilization for this effort. A positive integrative policyis a signal that the different actors have a common roadto follow in the future.This is the time of the Intelligent University. The Intel-ligent University is effectively constructed by all the ac-tors in a free and collaborative strategic interaction. TheIntelligent University is the answer of its teachers andstudents. An active commitment, in which the focus inthe participation and development of new competences,on a collaborative basis, must be the key of the difference.This is purpose of the Intelligent University.

Francisco Jaime Quesado is the General Manager of theInnovation and Knowledge Society in Portugal, a publicagency with the mission of coordinating the policies forInformation Society and mobilizing it through dissemi-nation, qualification and research activities. It operateswithin the Ministry of Science, Technology and HigherEducation

New Europe content partner

LONDON - Whilst it is important tobe clear and honest, it is also imperativethat our leaders understand that whatthey say and how they say it are ab-solutely vital to the attitude of con-sumers, investors and of coursecompanies. If we don’t have confidence,then we don’t spend as much and com-panies don’t invest as much. Thus thecomments from Mervyn King, Gover-nor of the Bank of England may beheartfelt on his part, and may also betrue, but potentially are having a greatereffect than he may have intended. Nowlet’s be clear, I am not asking anyone tobe telling lies or in any way to be mis-leading people, but our leaders need tobe very cognisant of not just what theysay but how they say it.

For example just the other week hecame out with the phrase that theworld faced “an exceptionally threaten-ing environment” that could “spiral”into a systemic financial crisis. Ofcourse this could occur under certaincircumstances but if our leaders, alongwith our media, keep highlighting thedarkest of outcomes, we have to thenbeware that we don’t turn it into a self-fulfilling prophesy. We all need to see alight at the end of the tunnel – withoutlight there is just gloom!

The comments I hear from the CBIand many other industry bodies seem tobe being interpreted by the media aswholly negative, when in fact this is instark contrast to the reality I am findingthroughout the United Kingdom. I can’trecall the last time I came across a busi-ness saying that its outlook was awful andunless things changed they were doomed– instead I find that many have, as manysmaller companies do, adjusted andchanged to circumstances because theyhave to survive. They are smaller, leaner,skinnied down, but surviving and someare even doing quite well.

The common theme is often thatthey have remained clear of the banksand are largely financing themselves inany way they can. Many would like togrow, but know that the cost and relia-bility of much finance is uncertain andunattractive. Now add to that the de-pressing words of the Governor of theBank of England, and that is just a fur-ther erosion to the necessary confidencethat is required by anyone running acompany to make the decision to invest.

Usurers and Fences! It was the head-line I had been dreading but expecting,“millions drawn into short term pay dayloans”. Earlier this year I wrote aboutthese sharks masquerading as responsi-

ble lenders. These usurers, often ex-ported from the USA, claim that theyare providing a service that preventspeople otherwise falling into the handsof loans sharks – oh yeah? I see, so thatif I don’t sell you ketamine then a drugdealer will? Does that make it accept-able? Of course not. Perhaps our politi-cians could turn their attention span(limited though it may be) to turningfinancial regulation and control to thisarea. I remember when I had shorttrousers that we used to have the Con-sumer Credit Act, which capped inter-est rate levels, but that seems to havegone by the board or seemingly had itsteeth removed. So is a rate of 4000%per annum acceptable?

It is interesting to note that ofcourse all three Abrahamic religionsban such behaviour, but now in oursecular society have we dropped allsuch inhibitions?

Reaction has been a shrug of shoul-ders from some, saying “what can wedo?” And the answer is a lot. Everythingfrom the use of local credit unions tobetter, to some, or even any, financialeducation would make a significant dif-ference – but above all what is our fi-nancial regulation industry going to doabout it – now!

Oh and let me add in the cash forgold vendors and the cash for mobilephone schemes. This is just a glorifiedlicence to go and “obtain” said articlesin any way you can and send them tothese people without any issue of own-ership or responsibility. I think I re-member that this used to be calledfencing goods! Perhaps we have justreinvented the old “market overt” sys-tem which used to operate at variousmarkets, so long as it was still night and

dawn had not broken – and then own-ership could pass legitimately.

And finally, hatching eggs, scratchingaround the coop and roosting on abeam with the rest of the hens are greathabits for chickens, but rather unusualfor an eight month old male rabbit.

The confused bunny came as a freegift to Ville Kuusinen's home, when hebought nine Silkie hens and a roosterfrom a farm.

The Kuusinens and their three chil-dren live on a small island in Velkuasome 210 kilometres northwest ofHelsinki.

"When I went to the hen house, Inoticed he was sitting on the eggs.Later I watched through the windowhow he jumped on the beam, failed,tried again and with a lot of practiceeventually he stayed up there," Kuusi-nen told Reuters.

Otto does not like to sit on laps or eatcarrots like most pet rabbits. The rabbit,who has lived with chickens all his life,prefers chicken feed and runs with thechickens outdoors and sometimes playswith them by jumping over them.

"For the chickens he is one of them.He often sits on the beam between thehens and under their wings", Kuusinensaid.

But he said Otto's rabbity instinctsstill take over when a visitor steps intothe hen house. He runs away and hides,but can be lured out with raisin buns.Well can’t we all.

P.S. Apparently there has been a newinnovation for all Geordies – the New-castle App – the iPet.

Justin A. Urquhart Stewart is the Di-rector of Seven Investment Manage-ment Limited in London

ECONOMY

Confidence or confidence trick?

Credit where cerdit is due? Mervyn King, governor of the Bank of England.|EPA/CHRIS RATCLIFFE

By Justin A. Urquhart StewartBy Francisco Jaime Quesado



CAMBRIDGE – Early last month, agroup of students staged a walkout inHarvard’s popular introductory eco-nomics course, Economics 10, taughtby my colleague Greg Mankiw. Theircomplaint: the course propagates con-servative ideology in the guise of eco-nomic science and helps perpetuatesocial inequality.

The students were part of a growingchorus of protest against modern eco-nomics as it is taught in the world’sleading academic institutions. Eco-nomics has always had its critics, ofcourse, but the financial crisis and itsaftermath have given them fresh am-munition, seeming to validate long-standing charges against theprofession’s unrealistic assumptions,reification of markets, and disregardfor social concerns.

Mankiw, for his part, found theprotesting students “poorly informed.”Economics does not have an ideology, heretorted. Quoting John Maynard Keynes,he pointed out that economics is amethod that helps people to thinkstraight and reach the correct answers,with no foreordained policy conclusions.

Indeed, though you may be excusedfor skepticism if you have not im-mersed yourself in years of advancedstudy in economics, coursework in atypical economics doctoral programproduces a bewildering variety of pol-icy prescriptions depending on thespecific context. Some of the frame-works economists use to analyze theworld favor free markets, while othersdon’t. In fact, much economic researchis devoted to understanding how gov-ernment intervention can improveeconomic performance. And non-eco-nomic motives and socially cooperativebehavior are increasingly part of whateconomists study.

As the late great international econo-mist Carlos Diaz-Alejandro once put it,“by now any bright graduate student, bychoosing his assumptions….carefully,can produce a consistent model yieldingjust about any policy recommendationhe favored at the start.” And that was inthe 1970’s! An apprentice economist nolonger needs to be particularly bright toproduce unorthodox policy conclusions.

Nevertheless, economists get stuckwith the charge of being narrowly ide-ological, because they are their ownworst enemy when it comes to apply-ing their theories to the real world. In-stead of communicating the fullpanoply of perspectives that their dis-cipline offers, they display excessiveconfidence in particular remedies –often those that best accord with their

own personal ideologies.Consider the global financial crisis.

Macroeconomics and finance did notlack the tools needed to understandhow the crisis arose and unfolded. In-deed, the academic literature waschock-full of models of financial bub-bles, asymmetric information, incen-tive distortions, self-fulfilling crises,and systemic risk. But, in the yearsleading up to the crisis, many econo-mists downplayed these models’ les-sons in favor of models of efficient andself-correcting markets, which, in pol-icy terms, resulted in inadequate gov-ernmental oversight over financialmarkets.

In my book The Globalization Para-dox, I contemplate the followingthought experiment. Let a journalist callan economics professor for his view onwhether free trade with country X or Yis a good idea. We can be fairly certainthat the economist, like the vast major-ity of the profession, will be enthusiasticin his support of free trade.

Now let the reporter go undercoveras a student in the professor’s advancedgraduate seminar on internationaltrade theory. Let him pose the samequestion: Is free trade good? I doubtthat the answer will come as quicklyand be as succinct this time around. Infact, the professor is likely to bestymied by the question. “What doyou mean by ‘good?’” he will ask. “Andgood for whom?”

The professor would then launchinto a long and tortured exegesis thatwill ultimately culminate in a heavilyhedged statement: “So if the long listof conditions I have just described aresatisfied, and assuming we can tax thebeneficiaries to compensate the losers,freer trade has the potential to increaseeveryone’s well-being.” If he were in anexpansive mood, the professor mightadd that the effect of free trade on an

economy’s growth rate is not clear, ei-ther, and depends on an altogether dif-ferent set of requirements.

A direct, unqualified assertion aboutthe benefits of free trade has now beentransformed into a statement adornedby all kinds of ifs and buts. Oddly, theknowledge that the professor willinglyimparts with great pride to his ad-vanced students is deemed to be inap-propriate (or dangerous) for thegeneral public.

Economics instruction at the under-graduate level suffers from the sameproblem. In our zeal to display the pro-fession’s crown jewels in untarnishedform – market efficiency, the invisiblehand, comparative advantage – we skipover the real-world complications andnuances, well recognized as they are inthe discipline. It is as if introductoryphysics courses assumed a world with-out gravity, because everything becomesso much simpler that way.

Applied appropriately and with ahealthy dose of common sense, eco-nomics would have prepared us for thefinancial crisis and pointed us in theright direction to fix what caused it.But the economics we need is of the“seminar room” variety, not the “rule-of-thumb” kind. It is an economicsthat recognizes its limitations andknows that the right message dependson the context.

Downplaying the diversity of intel-lectual frameworks within their owndiscipline does not make economistsbetter analysts of the real world. Nordoes it make them more popular.

Dani Rodrik, Professor of Interna-tional Political Economy at HarvardUniversity, is the author of The Glob-alization Paradox: Democracy and theFuture of the World Economy.Copyright: Project Syndicate, 2011.www.project-syndicate.org

President George W. Bush (R) walks down a dirt road to a press briefing with Treasury Secre-tary John Snow (L), Economic Advisor N. Gregory Mankiw (2nd,L) and Labor SecretaryElaine Chao, 13 August 2003 on his ranch in Crawford, Texas.|EPA/MIKE THEILER

By Dani Rodrik

Letterfrom Santa

Dear All,First of all, Christmas is postponed, probably until Q2in 2012. The reason is that we’ve all been waiting forthe markets to quiet down so I can shuffle some fundsaround before we can get into serious toy production.What? You’re surprised? Of course I need hard cash toget this show on the road, did you really think I financeit all with magic beans? Stability bonds?And another thing. There’s going to be a deliverycharge. Normally a bit of pie and whisky is a suitabletrip for my chimney acrobatics, but as things are tight,you want to leave around €20 per kid with the booze.Oh, and no cheap supermarket stuff. A single malt iswhat’s required, or at a push, some Wild Turkey. It’spurely medicinal and helps keep the cold out while I’mriding the jetstream.I’m also going to tighten up the rules on who’s beennaughty. Frankly, being a kind old soul, I let a lot of stuffslide, you know the minor bits of trouble they all getinto, thinking it was all part of growing up, but the fis-cal situation means that I’m going to be applying thenaughtiness criteria a lot more strictly. Be prepared forit. Leave a folder of supporting evidence by the bedside,it will save time.Of course some things change. I might pop over Italy.I’ve avoided it for several years after Berlusconi sug-gested I should visit his party after I’d finished myrounds. Very nice it was too, a BBQ, lots of ladies andsambuca . Left the sled outside and went back to checkon it a few hours later. One reindeer missing. The littleswine had taken one of my finest sleigh pullers andcooked him.Poor little Bunga Bunga, he was a favorite of mine. ForBerlusconi to BBQ him was bad, to then feed him tome was very bad, but to then go on and name his sor-did little gatherings after sweet little Bunga Bunga isjust grotesque. I’ve not been back since. I would go andsee Mario Monti, but, well, what do you buy the manwho has… nothing?The other big news is that I’m leaving the North Pole.It’s melting and I’d rather not take the chance that I’llbe spending the New Year watching my home melt. Wehad a group of slightly too shiny young things lookingthe place over for signs of global warming, wanting to“make observations on climate change.” Got ‘emsmashed on home brew vodka (aka Santa’s LittleHelper), got the elves to strip them down to their un-derwear and left them on a small iceberg. They lookedlike Smurfs as they drifted off. Not too sure where, ex-actly. Let’s say it’s a pretty good bet that they’re head-ing south.So are we all. Watching a Herzog film about Antarctica,with the elves and a few drinks, we were stunned to seethe South Pole base. Now, we kind of knew that ourplace was going a bit downhill, but when we saw thatbase, we all looked at each other and thought. “Nice.We’ll have it.” Already occupied? No problem. I’ve beenshowing the elves John Carpenter’s remake of ‘TheThing’. They’re finding it inspirational…I reckon they’ll have it cleared in a few days.

[email protected]

CONSTRUCTIVE AMBIGUITY

By Andy Carling

ECONOMICS

Occupy the Classroom?



British Prime Minister David Cameron shothimself into his own foot when demanding to beallowed to continue spinning the virtual realitycasino's wheel in "the City". The Europeanpartners may reconsider returning British goldreserves at a favourable rate should Mr Cameronwish to repatriate the assets the government ofAnthony Blair had lodged with the EuropeanCentral Bank (ECB) in 1998 in an attempt tohave a foot in the door. About Two Thirds ofBritish gold reserves where brought to Frankfurtat a much lower rate than what it would beworth today.

But, if Great-Britain is going to continue tocause huge economic damage to other EUmember state's economy by upholding anunsustainable 'business model' one may think inother capital cities that one should return thegold at the 1998 rate and not at today's rate andby this compensate the loss of ecomomiccapacity created by the financial excesses of "TheCity"

As the Anglo-Saxon model is based on the socalled Hedge Funds Industry that generatesmoney out of hot air and uses such funds to buy-up real economy enterprises across the world,one may understand that some countries do notlike to see their industries become subject totakeovers financed by virtual money

Germany only very late, under Social

Democratic Chancellor Gerhard Schröder,allowed British and American Hedge Funds tooperate in it’s territory.

France has always been guided byprotectionism.

Especially in the UK this money – spinning“industry” has advanced to the major businessand has successively replaced the manufacturingand innovative industries in Great-Britain.

Instead of producing industries, physicallabour and manufacturing entities, nowadays‘smart, young, urban, professionals’ generate

money without working or without any relevantmanufacturing being involved. No sweat, noblood. It is comfortable for a nation to lay backand print money while others still work andproduce the goods one can import, but it is nota model for the future. In fact, since the RomanEmpire, no such system survived in history forlong. The decline comes along with a risingbrutality, barbarism and degeneration

Hedge Funds existed in various forms inhistory, but in 1966 they were given their name.Until the end of 2007, the year when the finalcollapse of our financial system becameirreversible, all 9,000 Hedge Funds gambledwith about $2.7 trillion.

The top 100 of these betting offices flip oversome $1.8 trillion every day. Most of the HedgeFunds only exist for a few years, more than 60%of them disappear within 3 years.

Among the biggest and most well-known arethe British MAN Group, JP Morgan AssetManagement and Goldman Sachs AssetManagement and are directly linked to thebroker houses of the same name.

The underlying idea of the hedging is to buyundervalued commercial paper and tosimultaneously borrow overvalued and to sellthose after a certain time.

These transactions can be reversed after aspecific time-span making it possible for theHedge Fund to generate profit entirelyindependently from the development at thestock market.

Over the decades since 1949, when the firstof these transactions had been observed byFortune Magazine, this method has been refinedand become ever more sophisticated.

But, the speculation is still kind of the same.The classical sense of the term “Hedging”

doesn’t really apply anymore as it used to be asecuritized transaction in which the currencyexchange risk was eliminated by buying a certaincurrency at a fixed price in the future

Today’s Hedge Funds don’t securitize orinsure anything but speculate at the very edge.The effects are usually enhanced by enormousamounts of capital from outside the company, inmost cases borrowed funds.

In 1998, the Long Term CapitalManagement (LTCM) Hedge Fund collapsedas the relation between capital stock and loanshas been 1:20.

In reality LTCM controlled $5 billion, buttraded for $125 billion. When a miss-speculation hit the fund the entire global financesystem suddenly was at risk

The two Hedge Funds which sank theInvestment Bank Bear Stearns worked with aratio of 1:30 meaning that for every dollar oftheir own capital an additional $30 of externalfunds were raised.

By employing this tool smallest changes inrates could make huge profits. LTCM indeedmanaged to realize 40% annual return oninvestment at the beginning.

Usually, Hedge Funds have a certainpreference which they speculate in, like so called‘Global Macro Funds’ which are betting onchanges in the macro-economic field, such asrising or falling exchange rates or thedevelopment of interest rates or Hausse or Baisseat the stock market, or even a crash.

Even with the latter, a lot of money can beearned as we could observe in Summer 2007when the “Lahnde Capital” hedge fund whichhad speculated on a devaluation of the sub-prime mortgage papers, so called “Asset BackedSecurities” (ABS) that ruined many other HedgeFunds, miraculously made a 1000% profit.

It is vitally important to bet on somethingunpredictable, go against the tide and by thismaximize the profit. Or lose, phenomenally, too.It is like on a black jack or roulette table. Bettingon horses is safer as one could at least observethe previous races and conclude from theperformance of horse and jockey what thepossible result could be

But to conclude, that after a rally at the stockmarkets, a period of slower growth would followcould be fatally wrong.

It could be the opposite which we haveobserved during the dotcom bubbles of theClinton-Gore years and the real estate hype thatabsorbed a lot of the liquidity when the Clinton-Gore bubbles burst in the wake of September11. The next bubble that has been created wasthe alternative energy hype for which theClimate Change talk of EU Commission andmember state governments provided for theperfect backdrop. Of course Climate Change isa real threat but one should also look at whobenefits from such a hype.

It is remarkable for UK Independence Partyleader Nigel Farage, once a boy of "The City"himself, to advocate British independence andone may ask what it shall be based on as apartfrom investment banking there is not much leftin Great-Britain which could feed its citizens.

The new British government under PrimeMinister David Cameron is now confrontedwith the fall out of Thatcherism and it will beinteresting to watch how the Tories and LiberalDemocrats will solve the crisis.

Ralph T. Niemeyer is the Editor-in-Chief ofEUchronicle ([email protected])

A pedestrian walks past a store offering a sale in central London, Britain.|EPA/ANDY RAIN

POLITICS

Really splendid, indeed!Who is going to feed the Great-British when “The City” stops spinning the Wheel of Fortune?!

By Ralph T. Niemeyer

When people are kidnapped in Kirkuk they dis-appear. Some do return to their families after largeransoms are paid while others become the victimsof their kidnappers. Bombings are a daily occur-rence and no one knows the target of two terror-ists that accidently killed themselves assembling abomb on Sunday. It is no wonder that the Turk-men community of Kirkuk and other so-calleddisputed areas are under siege. Many are search-ing either for a way out or the support at homeand abroad needed to sustain their centuries-oldcommunities that, like others, have been rockedby the instability that is only now beginning toebb from Iraq. As many of my colleagues that dealwith Iraq have agreed, the European Union has toplay a more joined-up and constructive role in Iraqas the United States draws down its forces beforeexiting completely on 31 December 2011. Todate I have not seen the signs that this is happen-ing. This sentiment is shared amongst colleagues,civil society, and observers from all manner ofbackgrounds, party, and experience.

The EU’s delegation within Iraq remains woe-fully small, under-resourced, and under-staffed.More worrying is the complacent, or at worst dis-engaged, attitude that seems to characterise theapproach to Iraq from the European Commis-sion, and newly formed EEAS. The EU has pro-jected itself as an international actor and has been

believed, especially by those that follow it fromafar, and in this I include Kirkuk.

Kirkuk reflects many of the gnawing deficien-cies within Iraq today. The 2005 constitution hasstill to be formally adopted, a process for normal-ising relations between communities remains dor-mant, and all the while demographic change,dislocation and insecurity is eating away at Turk-men communities, livelihoods and futures as thecity’s cultural fabric is eroded bomb by bomb.Every week Turkmen professionals, includingmuch needed doctors, are leaving after facing

death threats, intimidation or discrimination inthe workplace. Their children have limitedprospects with little if any tuition in their mothertongue, excluded from state jobs, and with no signsthat the thousands of property claims will be re-solved soon.

But when the Subcommittee on HumanRights convened on 5 December 2011 it did sowith a clear desire – to raise awareness of the sit-uation facing the Turkmen of Iraq and to makethe first step in identifying the action that should– and can – be taken to safeguard the future of

Iraq’s communities, of which Turkmen are thethird largest. It was a meeting believe strongly hasbeen long overdue and the interest from colleaguesand the public was a demonstration of the Euro-pean Parliament acting in concert with the realinterests of policy makers and European citizens.

The message from invited academics was alsoclear, namely that the situation in Kirkuk is acuteand the risks are real. In identifying the dangers,the existing and mostly failed initiatives to solvethem, and drawing comparisons I believe we arecloser to understanding one of the world’s mostcomplex conflicts. We cannot pretend that a so-lution is easy or imminent but we know that timeis running. The coming year will be a time whenmy colleagues and I intend to support the discus-sions into community security, property repara-tions, multi-lingual education, confidence buildingmeasures, and parliamentary capacity buildingneeded to help make a solution realisable. TheEuropean institutions must be part of this and Ihope to bring to their attention the realities facingTurkmen and their neighbours today.

Soon a new year will be dawning for the EU inIraq and with new years should come resolutions.The EU has to resolve to demonstrate its com-mitment to the people of Iraq as a whole and tothe Turkmen especially. As a community theTurkmen have been listening to the EU makepromises for too long and for almost a decade theyhave seen nothing. That must change in 2012.

EU WORLDNew Europe | Page 11NEW EUROPE

December 11 - 17, 2011

IRAQ

Iraq's minorities need action from EUNo easy solution, but time is running out

An Iraqi man inspects the damage at a Christian Catholic Church after double attacks in central Kirkuk,

northern Iraq on 15 August 2011.|EPA/KHALIL AL-A'NEI

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By Metin Kazak MEP

The Lisbon Treaty included thesetting up of a European Citizen’sInitiative, and after several battlesin the European Parliament, theinitiative is set to start on 1 April2012. Under the proposal, citizenswho acquire a million signatories toa petition could have their chosenissue debated at Commissionerlevel, if they successfully navigatethe process. However, there is crit-icism that a system conceived toallow serious proposals by citizenshas become a complex and poten-tially costly process that is beyondthe resources of ordinary citizens,leaving it open to the charge that,in reality, it can only be used by lob-byists and international civil soci-ety organizations.There are, of course, limitations onwhat the people are allowed topresent before the great and thegood. Questions about Strasbourgare out, despite an earlier campaignachieving far more than the millionsignatories, on the grounds that it“does not fall within the frameworkof the Commission’s powers.” Afair point, it might be argued, butnot a good sign, if an issue of greatconcern amongst Europeans is tobe ignored.To even begin an initiative, is be-

yond the reach of ordinary citizens.The first step is to form a ‘CitizensCommittee’ of seven people fromseven different member states.Then the proposal has to be regis-tered with the European Commis-sion, who will also provide softwareto aid the online signatories. Thenthe organizers have to set up theirsecure online systems and havethem verified by the member statethat is holding the data.Then there is a 12 month periodfor collecting a million supporters.Then the various member stateswhose citizens have signed have tobe verified. Once you get throughall this the Commission will dis-cuss the proposal. If you’re lucky,the masters of Berlaymont may‘adopt a communication’.Too little, too slowIt is no mean achievement for theCommission to bring about theECI, having to address concernsand national law, but since the ideawas first adopted internet tech-

nologies and companies havemoved at great speed, leaving theECI looking slow and cumber-some.Today, for most individuals andgroups looking to build support fora cause, Facebook is the obviousplatform. Setting up a dedicatedFacebook group for a proposalwould be much simpler and farcheaper than the ECI. It would notbe too difficult to let Europeansjoin or ‘like’ such a group, and thereare other advantages, such as theability to share information and de-velopments and add discussions.Another alternative, although notas popular as the social network, isGoogle +.Not only is technology movingfaster than the EU institutions andthe Commission has designed asystem that is in all respects infe-rior to the potential solutions thatsocial media companies could, ifasked, produce.What future for the ECI?

Although some organizations andinstitutions are publicallyfavourable to the ECI, privately,they are alarmed and have dramat-ically lowered their expectations.Off the record, people will describethe initiative as ‘a lobbyists initia-tive’ or ‘NGO initiative’, privatelyconfessing that a system designedto bring individual citizens intopolicy making will only produceproposals from what one persondescribed as ‘the usual suspects’.The first person to announce thatthey would look to launching aninitiative, on the proposed financialtransaction tax, was MartinSchultz, leader of the SocialistGroup in the parliament and soonto be president.Others looking at initiatives are thelarge NGOs, such as Greenpeace,who showed their ability to mobi-lize across Europe by presenting amillion signatures against geneti-cally modified crops, from all 27member states a year ago. This was

disallowed because it came toosoon. Business is also looking atlaunching initiatives and severallobbyists are briefing clients.The ECI was a noble attempt toincrease ‘direct democracy’ to theunion, but it moved too slowly, istoo confined to the ‘business asusual’ methodology and has ig-nored dramatic developments ininternet technology.It is hard to see how it can attainthe lofty goals it set itself.The public are also becoming ac-tive in ways that make the ECI ir-relevant. The ‘Occupy’ movementhas spread from the Sahel to thecities of the world, calling for afairer world. While many are criti-cal of ‘clicktivism’, the signing ofonline petitions, often with littlethought or understanding, thosecamping out all over the world arepart of something global, not amere region and are looking to cre-ate a fundamental change, throughdialogue, collective decision mak-ing and reaching out.This could be the start of a newway of doing politics. The ECI, incomparison, looks like the last gaspof an outdated system, one that isnot capable of meeting the realitiesof today, or tomorrow.

DIRECT DEMOCRACY

The April fool initiativeCitizens initiative to start on 1 April 2012

The meeting of the supervisorycouncil of Trans Balkan Pipeline, theproject company for the constructionof Burgas-Alexandroupolis oilpipeline, has been cancelled atGreece’s request, Transneft officialIgor Demin was quoted as saying bythe press. The meeting was sched-uled for 14 December 14.

Bulgarian Deputy Prime Ministerand Finance Minister SimeonDyankov has said his governmentmade a decision to strap the project,because it deems it economically un-profitable.

Igor Demin said Transneft had re-ceived Bulgaria’s official statement on12 December. Greece was notified ofthe withdrawal, too. "Because we aretalking of dissolving an inter-gov-ernment agreement, Transneft willhave to receive directions from theRussian cabinet on what actions to

undertake and there are a number ofpossibilities - liquidation, freeze, orcontinuing work without Bulgaria,"Diomin said

The 280-kilometre pipeline,planned to link the Black Sea port ofBurgas to Alexandroupolis on theAegean Sea, is designed to transport35 million tonnes of oil a year.

Bulgaria broke the news about thecancellation of the oil pipeline proj-ect on 7 December. Djankov saidBulgaria would seek a termination ofthe trilateral intergovernmentalagreement by mutual consent. If therequest was rejected, Bulgaria wouldwithdraw from the oil pipeline proj-ect in 12 months, Djankov added,stressing that the country would notincur sanctions with the step. In1994, Greece, Bulgaria and Russiasigned an agreement for constructionof the pipeline.

Djankov claimed that the motivebehind the government's decision towithdraw from Burgas-Alexan-droupolis was that the project was fi-nancially and economically unsoundand could not be implemented underthe terms of the 2007 agreement.Previously Bulgarian had cited envi-ronmental concerns.

On 9 December, Bulgaria’s Min-ister of Economy, Energy andTourism Traicho Traikov said thatthe main reason for Bulgaria's deci-sion to quit the Burgas-Alexan-droupolis pipeline is that the initialplan for the financing of the projectfell through. "First there was talk of apartnership involving shares of 1/3for each of the parties with guaran-teed oil supplies and project financ-ing. Then it turned out that theproject would be half-owned by Rus-sia, while the other half would be for

Bulgaria and Greece, in order to se-cure oil deliveries. Later on it ap-peared that even this could notguarantee the economic feasibility ofthe scheme and that it could not bebuilt using project financing," privateTV station Nova TV quoted Traikovas saying. He made it clear that Bur-gas-Alexandroupolis was a transit,rather than an energy project forBulgaria, and that it had to be con-sidered from a risk-benefit perspec-tive. On 9 December, the “strong andpermanent commitment” of theGreek and Russian governments wasreaffirmed at a meeting in Athensbetween Greece’s Deputy Environ-ment, Energy and Climate ChangeMinister Yannis Maniatis and Russ-ian ambassador VladimirChkhikvishvili. The Russian ambas-sador told New Europe later thesame day that he was surprised by

Bulgaria’s decision because the proj-ect is good for everybody, includingRussia, Bulgaria, Greece, the rest ofEurope and the United States. “Butwe will survive. There are plenty ofroutes for Russian oil,”Chkhikvishvili said.

Meanwhile, Itar-Tass reported thatBulgarian President Georgi Par-vanov criticised the government fora hasty withdrawal from the trilateralBurgas-Alexandroupolis oil pipelineproject, describing the government'sdecision as "emotional". "Bulgaria'sdecision to pull out of the Burgas-Alexandroupolis oil pipeline projectwas not made as a result of seriousand substantive discussions amongexperts, but is rather emotional. If wedo not want this oil pipeline to runthrough our country, it will be builtelsewhere," the president said at apress conference on 10 December.

Three competing pipelines in the EU’sSouthern Gas Corridor will have topainfully wait until March 2012 for Azer-baijan’s decision on the export route for itsgas to Europe. Azeri state energy companySOCAR had previously hoped that the de-cision would be announced before the endof 2011.

But SOCAR Rovnag Abdullayev told re-porters on 12 December that "a detailed re-view of submitted proposals is under wayright now. It's likely that this process willcontinue until the first quarter of 2012".

The Interconnector Turkey-Greece-Italy(ITGI), Trans Adriatic Pipeline (TAP) andNabucco are vying for gas supplies from thesecond phase of Azerbaijan's massive ShahDeniz gas field. One more option is apipeline from Turkey to the Romania-Hun-gary border proposed by BP days before adeadline for the groups to submit bids, ac-cording to reports.

“It’s definitely hard to judge at this pointwhat will actually be the final set up interms of gas delivery from Azerbaijan,”Pavel Sorokin, an oil & gas analyst atMoscow’s Alfa Bank said. “There is clearlynot enough gas for all three independentprojects and at this point it’s actually evenhard to fill up either of those projects sothere are a lot of variables that have to comein place before a final decision is made,” headded.

TAP Spokeswoman Lisa Givert toldNew Europe on 12 December that the TAPproject is on track as planned. “TAP’s

schedule remains in line with that of theShah Deniz Consortium’s development ofthe Shah Deniz II project and will be readyto receive first gas end of 2017,” Givert saidfrom Baar, Switzerland.

Abdullayev dismissed speculation that theEU-backed Nabucco pipeline was not anoption any more. "Nabucco as well as TAPand ITGI is under consideration," he said.Nabucco has a capacity of 31 billion cubic

metres – around three times more thanITGI or TAP. When the second phase ofShah Deniz comes on stream, 16bn cubicmetres of gas per year will be produced peryear, of which 6bn cubic metres will be ex-ported to Turkey and 10bn via Turkey toEurope.

“The Nabucco timeline is supply drivenand therefore depends also on the decisionof the Azeris,” the spokesman of Vienna-

based Nabucco Gas Pipeline InternationalGmbH, Christian Dolezal, told New Eu-rope on 13 December.

Sorokin said that the biggest challengethat Nabucco is facing is securing gas sup-plies. “There are a lot of unknowns andthere is still no commitment for full vol-umes which Nabucco can transfer, makingthe project challenging. That’s a very bigquestion that has been there since the startof Nabucco discussions. I mean it was ini-tially a politically-driven project rather thaneconomically and there was always the issueof supply for the project. Now with Turk-menistan re-orienting towards China, thereis a big question of whether Nabucco canactually be filled up."

Nabucco is also facing competition fromRussia’s South Stream gas pipeline, whichplans to transport Russian natural gas toEurope by passing through Turkish territo-rial waters. South Stream “in a way” is un-dermining Nabucco’s chances, the AlfaBank oil & gas analyst said. “South Streamalways made much more sense versusNabucco,” Sorokin said, adding that on astandalone basis its economic attractivenesscan also be questioned.

He said that there was a supply base forSouth Stream: "Nabucco was a politically-driven project in an attempt to diversifyaway from Russian supply but one whichhad little resource backing because it relieson resource supply of gas from third parties,without firm contracts in place and it stilldoesn’t so whether there is still the possibil-ity that it will get through and secure gas isdifficult to say at this point.”

ENERGY & CLIMATE

Page 12 |New Europe NEW EUROPEDecember 18 - 24, 2011

The Shah Deniz gas platform in the Caspian. When the second phase of Shah Deniz comes on stream, 16billion cubic metres of gas per year will be produced per year, of which 6bn cubic metres will be exported toTurkey and 10bn via Turkey to Europe.

ENERGY|BURGAS-ALEXANDROUPOLIS

Transneft mulls actions after Bulgaria withdraws from oil pipeline

ENERGY|GAS

Azerbaijan delays gas decision as Southern Corridor competition heats up

By Kostis Geropoulos

ENERGY & CLIMATENew Europe|Page 13NEW EUROPE

December 18 - 24, 2011

On 15 December, European Union Energy CommissionerGuenther Oettinger laid out the bloc’s latest road map, sug-gesting that in order to achieve its goal almost all of Europe'senergy production will need to be carbon-free by 2050. “It’smore or less the same if we go for business as usual or for moreambitious scenarios which involve a lot of renewables,” Oet-tinger told a news conference. “It’s sensible to invest now.” Oet-tinger said.

The commissioner also said that if “we’re going to end upwith zero by 2050, then we must have a realistic interim (re-newables) target by 2030”. “It may be that in two years’ time, wehave to lay down figures for this, or it may be that we lay downconditions, for example CCS (carbon capture and storage), hesaid. “In 2014, we want to establish what must be achieved by2030.”

The Energy Roadmap 2050 presents various scenarios out-lining the consequences of a carbon free energy system and thepolicy framework needed to reach the established long-term

target of reducing CO2 emissions by 80-95% below 1990 lev-els by 2050. Nuclear energy, it says, will remain an importantpart of Europe's power generation mix.

The European Commission also endorsed natural gas as anessential element in the energy mix. “The Trans-AdriaticPipeline (TAP) welcomes the 2050 Energy Roadmap and isconvinced that natural gas – the cleanest of all fossil fuels – willcontribute towards reducing carbon emissions. Yet, the chal-lenges of gas supply diversification and energy security are stillto be tackled, Kjetil Tungland, Managing Director of theTrans-Adriatic Pipeline, said in an e-mailed statement.

Anne Brunila, Executive Vice President, Corporate Rela-tions and Sustainability at Fortum Corporation that is devel-oping CO2-free energy solutions, said it is important that theEU develops a coherent forward looking vision and strategy onhow to reach the 2050 de-carbonisation target. The CO2 re-duction target should be the key driver of future policies,” shesaid.

ENERGY|CO2

EU presents 2050 energy roadmap

Kingpin Saudi Arabia, Iran settleover oil output cap

On 14 December, the Organization of Petroleum Ex-porting Countries (OPEC) sealed its first new pro-duction ceiling since 2008, in an agreement that settlesa six-month-old argument over output levels. In June,OPEC ministers did not reach an agreement but lastWednesday (14 December) they went out of their wayto show that there are united and there is no majordisagreement.OPEC agreed on a supply target of 30 million barrelsdaily. It did not discuss individual national quotas.“We're not going to bypass it, we're going to adhere toit,” said OPEC Secretary General Abdullah al-Badri ofthe new limit. Current production, reported by second-ary sources, is probably around 30.5 million barrels perday so it means that in January they will have to reduceproduction. “They reached an agreement. They all haveto reduce their production by 400,000-500,000 barrelsper day, which is a reasonable one,” Manouchehr Takin,Senior Petroleum Upstream Analyst with the Centre forGlobal Energy Studies (CGES) in London, told NewEurope on 15 December.Higher supply from OPEC -- mostly from Saudi Arabia,the United Arab Emirates and Kuwait -- has kept oilprices under control as Riyadh strives to help boostgrowth around the world. Asked if the output levels arefirmly in Saudi Arabia's favour, London's Seven Invest-ment Management Limited Director Justin A. UrquhartStewart told New Europe on 15 December that, “Saudiwanted it to go a bit further and the Iranians wanted alittle bit less so it ’s somewhere in between. Saudi hadtheir way with it and it ’s showing their ability andstrength. However, I think we should be wary of what’shappening in the area, we had the tests earlier this weekfrom the Iranians to see if they could close the Straits ofHormuz and we’re going to be seeing some more ex-pressions of political muscle coming out of Iran over thenext months, so, yes, Saudi got their way on this, but Idon’t think Iranians are going to be rolling over anytimesoon,” Urquhart Stewart said, referring to the exercises toclose the world's most important oil-shipping lane in thePersian Gulf.Oil producers would also have to cut back production tomake room for rising Libyan output. Production fromLibya is increasing. “It’ll take some time to get back to areasonable level but also tied to that was demand in theWest coming down a bit. It will be interesting to see ifdemand in the East equally comes down, if China isslowing, but I don’t expect that to have too much of animpact immediately,” Urquhart Stewart said. OPECcountries did not decide how much each country shouldproduce under the new ceiling. There are no constraintson Iraq and Libya. What is implied from the statementsis that Saudi Arabia, Kuwait and the UAE, which in-creased their production most in order to compensate forthe loss of Libya, should gradually lower their produc-tion as Libya’s output increases. But Saudi Oil MinisterAli al-Naimi said Riyadh would do it according to themarket. “If the price is below $100 a barrel they will allsell as much as they can,” Takin said.

[email protected] on twitter @energyinsider

ENERGY INSIDER

Ukraine has long been seeking to alterthe terms of the 2009 gas deal it signedwith Russia. The deal ties the price of gasto oil prices, which have risen stronglysince 2009, boosting Ukraine's gas bill.The contract says Ukraine must importno less than 33 billion cubic metres ofgas from Russia. Kiev insists on reduc-ing both the price and the volume of gasimports.

Ukrainian Premier Mykola Azarovhas stated that Kiev is ready to pay $400per 1,000 cubic metres of gas if it fails toagree with Moscow on better terms ofgas supplies. "If we have to pay $400 forgas, we will pay it – we have no otherchoice," Azarov told reporters in Kiev on13 December. The government cannotdelay the drafting of the 2012 nationalbudget anymore, because it has to beadopted by the New Year, he said.Azarov added that Ukraine-Russia ne-gotiations had been going on in Moscowfor two days.

Gazprom CEO Alexei Miller an-nounced earlier last week, however, that"no New Year presents" should be ex-pected in bilateral talks on the reductionof the price for Russian natural gas.

Kommersant business daily reportedon 13 December that Gazprom mightlower the gas price for Ukraine to $210-220 per 1,000 cubic metres if Kiev soldpart of its gas transportation system toMoscow. A similar scheme was adoptedby the gas monopolist in early Decem-ber, when it announced that it took con-trol of Beltransgaz as part of a revisedenergy deal with Belarus. The Ukraine-Russia deal would exclude Europeanparticipation. Miller met Ukrainian En-ergy Minister Yury Boiko on 12 De-cember, Gazprom said in a statement.

Joint control of the transit pipelines,which carry Russian gas to Europe

through the territory of the former So-viet republic, is seen as a way to precludetheir use as a bargaining chip in priceconflicts between Russia and Ukraine,which depends on Russia for almost allof its gas.

Direct European participation in apipeline deal had appeared possible.Azarov said earlier they had discussed a40-40 division of control between Rus-sia and Ukraine, with a European entityas a third party.

Russia annually pumps about 100 bil-lion cubic meters of gas to Europeancountries via Ukraine, which makes up80% of its total gas supplies to Europe.

Meanwhile, Naftogaz Deputy CEOVadym Chuprun was quoted as sayingby the press that Ukraine needs guar-antees from Russia and the EU regard-ing gas transit across Ukrainianterritory. "It is impossible to preserveand maintain our gas transport systemwithout Russian gas. Our nationalproperty - Ukraine's gas transport sys-tem - must be preserved, so it needsguaranteed volumes of gas. We needguarantees from Russia and from theEuropean Union," Chuprun said. Henoted that it was possible to use the

Ukrainian gas transport system in fullwith the trilateral participation ofUkraine, Russia and Europe. "It can beused only at the trilateral level, withRussia being a supplier, Ukraine a tran-sit country, and the European Unionbeing a consumer, on such a solidbasis," Chuprun said.

He also said that the construction ofgas pipelines bypassing Ukraine - NordStream and South Stream - posed a di-rect threat to Ukraine's transit potential."We are surprised that European officialshave not responded to [the constructionof] South Stream or Nord Stream. Andsilence is a sign of consent. This is a se-rious signal to Ukraine. This is a directthreat to Ukraine's gas transport system,"he said.

Chuprun said the Ukrainian gastransport system had a unique potentialand that it was economically moreprofitable than the construction ofpipelines bypassing Ukraine. "The costof [the construction of ] South Streamis $27 billion. For the sake of momen-tary gain, in order to get lower gasprices, certain EU countries forget thatin five years they will have to pay forthis," he said.

ENERGY|GAS

Gazprom: No New Year'sgifts for Ukraine

Gazprom headquarters in Moscow. The Russian gas giant might lower the gas price for Ukraine ifKiev sold part of its gas transportation system to Moscow, according to reports. |EPA/SERGIE CHIRIKOV

By Kostis Geropoulos

EU WORLDPage 14 | New Europe


Mikhail Prokhorov, one of Russia'srichest tycoons and New Jersey Netsbasketball team owner, who an-nounced his candidacy to run againstRussian Prime Minister VladimirPutin in the March 2012 presidentialelection, said on 15 December that

his first move if elected will be to par-don jailed tycoon Mikhail Khodor-kovsky. “The first decision will be ahumanist one – I will pardonKhodorkovsky,” Prokhorov told re-porters at a Thursday press confer-ence in Moscow. “The YUKOS case

is one of the most outstanding casesin Russia in recent years. Russian au-thorities charged the managers of thethen-largest oil company in thecountry with a number of financialcrimes. After this, YUKOS wentbroke and its assets were passed to

the state-owned company Rosneft,”Prokhorov said.

Russian Human Rights activistswelcomed Prokhorov’s initiative.

“This strengthens Prokhorov’s po-sitions in the eyes of democraticallyinclined voters and in my eyes as

well,” said Lyudmila Alekseyeva, thehead of the Moscow HelsinkiGroup. Prokhorov said he would alsoallow free registration of oppositionparties and restore popular electionsof provincial governors if he winsMarch's vote.

EU-RUSSIA|HUMAN RIGHTS

Prokhorov vows to pardon Khodorkovsky if elected president

At the close of a two-day EU-Russia summiton 15 December, President Dmitry Medvedevsaid that Russia is “ready to invest all financialmeans to back the European economy and theeurozone".

Medvedev said that Russia "is ready to lookat and consider other measures of support" aswell as International Monetary Fund (IMF)-controlled aid, currently being discussed by fi-nance ministers from around the globe.Medvedev said Russia wanted to see the Eu-ropean Union "preserved as a powerful polit-ical and economic force" and the euro"preserved as one of the most important re-serve currencies".

Earlier in the day, an aide to the Russianpresident, Arkady Dvorkovich said that Russiawill give at least $10 billion to the IMF to helpsupport the struggling euro currency. “We areready to contribute our part via the IMF. Weare committed to do it. Ten billion dollars is theminimum commitment,” Dvorkovich said.

In opening remarks, Medvedev said "it is nosecret" that the EU is Russia's major economicpartner and that Moscow is worried about theeuro's troubles. Russia exports more to the EUthan to any other market, and Russia is theEU's third-largest trading partner. Total tradeamounts to €245 billion. Russia also is the EU'smost important source of energy imports, ac-counting for nearly a quarter of its natural gasconsumption and 30% of its oil.

On 16 December, Russia was expected tosign in Geneva its World Trade Organization(WTO) accession, 18 years in the making, andMedvedev added that this development "couldactivate" an EU-Russia co-operation agree-ment long left on the starting blocks.

The 28th EU-Russia summit in Brusselsgathered European Council President Her-man Van Rompuy, European CommissionPresident Jose Manuel Barroso, foreign affairschief Catherine Ashton and Energy Com-missioner Guenther Oettinger. Medvedevwas joined by Foreign Minister Sergei Lavrovand Economic Development and TradeMinister Elvira Nabiullina.

Other major issues included visa liberali-sation and the contentious Russian election.Advances towards visa-free travel dependon the implementation of a number ofcommon steps such as introducing biomet-ric passports and preventing illegal migra-tion. "This decision has clear potentialbenefits to our citizens and for people-to-

people contacts," Barroso said. "But this willprobably not happen next year."

The EU also told Russia to run transparentMarch elections to replace Medvedev. The up-coming election to replace the outgoing Russ-ian president has come under scrutinyfollowing the allegations of fraud and proteststhat greeted Russian parliamentary electionsearlier in December. Tens of thousands of Rus-sians protested in Moscow on 10 Decemberand on previous days calling for the election tobe rerun after widespread allegations the votewas rigged to favour the ruling United Russiaparty. Russian Prime Minister Vladimir Putinis expected to return to the presidency despitea reduced majority after these polls.

Meanwhile in Moscow, Putin deflected op-position allegations that fraud helped his rul-ing party win a parliamentary election, sayingthe result reflected the views of the population.In his annual televised call-in question-and-answer session he also shrugged off the biggestopposition protests of his 12-year rule, sayingthey were permissible if they remained peace-ful and within the law.

"From my point of view, the result of theelection undoubtedly reflects public opinion inthe country," Putin said. "I am proposing andasking for the installation of web cameras at all

the polling stations in the country," he said.Putin noted that mainly active youngsters

who are capable of voicing their stance clearlyparticipated in the rallies. “I am glad about that.And if that is the result of ‘Putin’s regime, it’sgood, I don’t see anything outrageous aboutthat,” he said.

He went on to say that during the OrangeRevolution in Ukraine, some Russian oppo-sition members were official counsellors ofthe then-President Viktor Yushchenko andare currently “transferring this practice toRussian soil.”

Putin also commented on the dismissal offormer finance minister Aleksey Kudrin ear-lier this year. When asked whether he will in-clude Kudrin in the government if hebecomes president, he said, “AlekseyLeonidovich Kudrin never left my team. Heis my long-standing friend.” “Such people asKudrin are always needed, both in the actualand future government. We’ll find a place forhim,” he added.

At the EU-Russia summit in Brussels, VanRompuy urged Moscow to maintain moderni-sation "based on democratic values, built on amodern economy and ensuring further politi-cal reforms". He praised Russia for letting in500 international election observers to the par-

liamentary polls, but "concerned at irregulari-ties" reported by these observers, underlinedthat "we hope Russia will cooperate" again "toensure the smooth monitoring of the presiden-tial elections".

Medvedev said the EU should consider itsown problems. “The decision of the EuropeanParliament with regard to our elections – I haveno comment on this,” Medvedev told the pressconference. "These are our elections, and theEuropean Parliament has no relationship tothem. [The EP resolutions] mean nothing tome," he was quoted as saying by the press. Hesaid Russian-speaking minorities in some EUcountries face discrimination, adding: "We can-not turn a blind eye to that."

On 14 December, European parliamentspeaker Jerzy Buzek called for new free and fairelections and a probe into reports of fraud andintimidation. "The voice of the people protest-ing on the streets for more than one week mustbe heard," Buzek said.

Ahead of the summit another potential ir-ritant to the relations was removed when theEuropean Commission came to an agree-ment with the Russian government on themanner of ensuring passage to a convoy ofhumanitarian aid from Russia destined forKosovo Serbs.

EU-RUSSIA|SUMMIT

Russia backs the euro, ditches EU election criticism

Russia's President Dimitry Medvedev, European Council President Herman Van Rompuy and Commission President Jose Manuel Barroso pictured at the start ofthe EU-Russia summit, at the European Union Council headquarters, in Brussels, 15 December 2011. |BELGA PHOTO KRISTOF VAN ACCOM

ARTS & CULTURENew Europe | Page 15


Pursuing a career as a high-level professional classicalmusician is definitely an ob-stacle course. At 24, Geor-

gian-born Khatia Buniatishvili hasaccumulated enough successes togranther admission into the closed circle ofinternational concert pianists. Afterstarting the piano under the instruc-tion of her mother at age 3, Khatia at-tended the Tbilisi Central Music School,before entering the Tbilisi State Con-servatory. At the 2003 Piano Compe-tition in Tbilisi, she met OlegMaisenberg who advised her to trans-fer to Vienna’s Academy for Music andthe Performing Arts. She later wonawards at prestigious competitions likethe Arthur Rubinstein InternationalPiano Competition (2008), collaboratedwith BBC orchestras as a BBC NewGeneration Artist (2009), participatedat high profile music festivals like Ver-

bier and appeared with some of theworld’s most distinguished orchestras.The whole was crowned by the recentsigning of an exclusive worldwide con-tract with Sony Classical, which re-leased her first album entirelydedicated to Franz Liszt (1811-1886),her favorite composer.

Incidentally, 2011 was marked bythe celebration of the 200th anniversaryof the birth of the Hungarian-borngenius pianist and composer.

We met charming Khatia Buni-atishvili during her short stay inGreece, after performing Lizst’s Sonatain B minor and Mephisto Waltz No.1,Chopin Scherzos 1,2 & 3 and 3 parts ofStravinsky’s piano version of Petrushkaat the Athens Concert Hall.

L.K: What does the life of a youngconcert pianist ‘sound’ like?

K.B:Well, at the moment I perform

about 90-100 recitals a year. The pianois an instrument that is ‘self-sufficient’,which means that I mostly play solorecitals. Being a concert pianist ismainly about constant traveling, seeingdifferent halls, hotels, airports, and in away leading a solitary life. Fortunately, Imeet many people, essentially fellowmusicians and conductors, when I per-form with orchestras around the worldand have the opportunity to share mo-ments with others through music.

L.K: Your album refers to the Faus-tian myth, an old German legend thathas inspired literature, poetry, operaand music for over four centuries! It’sa dark, romantic theme par excellence!Berlioz, Gounod, Boito, Spohr andBusoni, all contemporaries or stu-dents of Liszt but even Stravinsky orProkofiev, his Russian ‘heirs’ of the fol-lowing generation, created their ownversion of Faust. What does the Faus-tian myth symbolize for you?

K.B: Actually, the First MephistoWaltz was based on a Faustian poem,which was originally written in Ger-man by the Hungarian writer NikolausLenau in 1836. Liszt was a true inno-vator and one of the first to believe thatmusic and the use of bold soundscould describe moods, plots and ab-stract ideas as well as words or imagescould. As an unequalled master oftechnique, his experimentations led tothe discovery and use of new ‘dramatic’sound effects, completely revolution-izing the musical perception of whatwas harmonious/disharmonious aswell as pushing the limits of what wasphysically possible at the keyboard.The Mephisto Waltz musically ex-presses lust, seduction, madness, sus-

pense, greed, excess and excitement.Mephisto’s devilish satisfaction con-trasts the delicate voice of poor littleMarguerite, the fresh and innocentvoice of love, and the desperate, search-ing voice of Faust. All three charactersare intertwined in a single piece andmay reflect the complex, doubting na-ture of the artist.

L.K: Your technique is amazing !Any thoughts on composing?

K.B: Thank you! My first finished‘composition’ was inspired by a Geor-gian folk rhythm and I played it lastnight as an Encore! I was reallytouched because there were manycompatriots in the audience who rec-ognized the tune and brought me

flowers at the end of the recital. Besidesthat, I recently got a proposal to com-pose a soundtrack for a documentaryfilm…I might try because I’m alwaysexcited about new projects.

L.K: Apart from music, do youhave time for other activities?

K.B: Yes! Reading has always beenmy second passion– if I were to namemy favourite authors, I’d certainlymention Dostoyevsky and ThomasMann as well as Georgian writerGrigol Robakidze, of course. I am alsovery attracted to video art, as I came upwith the idea of a promotional videofor my CD, which was filmed inHamburg. Louise Kissa

[email protected]

Louise Kissa with Khatia Buniatishvili, December 2011photo: Basilhs Zampikos

Khatia Buniatishviliphoto: Esther Haase

© Sony Music

Portrait of Franz Liszt

Franz Hanfstaengl, 1858'Mephistopheles flying over Wittenberg'

Litograph by Eugène Delacroix, 1828

'Goethe's Faust'

Richard Roland Holst, 1918

Faustian DreamerEXCLUSIVE INTERVIEW: KHATIA BUNIATISHVILI

ARTS & CULTUREPage 16 | New Europe


Spain – Barcelona - ADNGaleria - until 31 January2012ADN Galeria will open onNovember 25th the soloshow Hellraiser by KendellGeers, curated by Pierre-Olivier Rollin, director ofB.P.S.22 in Charleroi, Bel-gium, and ADN Galeria.Kendell Geers' work for-mulates a critical and icon-oclast standpoint almost

atypical in the contempo-rary artistic landscape. Asthe main line in his work,the notion of power comesout in representations thatdeal directly or t h imetaphorically with issueslike violence, religion, moral,sex, discipline and fear.Geers undermines the sys-tem of values set by ourWestern society and harshlyreveals some aspects that are

usually left in the dark:struggles for power, racism,coercion, injustice, exploita-tion of the weakest, feignedpuritanism.Far from the moralist, right-thinking tone that charac-terizes the so-called"political art", Geers pres-ents himself instead as a"terrorealist" (according tohis own formula) who inde-cently exposes the realitywithout distorting ideologi-cal filters. He doesn't hesi-tate to use forms andexpressions which provokefor their violence and theirauthoritarian or sexist char-acter to unsettling the idealsof racial, ideological or reli-gious purity. While relyingon recurrent visual motivesand humble materials(glasses stick on various sup-ports, statues wrapped intothe adhesive tape used bythe police to circumscribecrime areas, black paintingor ink dripping, constructionmaterials), Geers' works ap-pear like signs that interfereand destabilize a systemwhich legitimacy is based onthe tacit omission of its dys-functions.

Kendell Geers - Hellraiser -Dibujos

Snapshot -Painters and photography 1888-1915The Netherlands - Amsterdam - Van Gogh Museum – until 8 January 2012The invention in 1888 of the first manageable, easy-to-use camera for amateurs made spontaneous pho-tography possible: the snapshot was born. Theenthusiastic users of the earliest amateur cameras in-cluded many artists. What role did photography play in their lives and howdid it influence their work? The exhibition Snapshot.Painters and Photography, 1888-1915 sheds a light onthis creative process, presenting 220 photographs and70 paintings, prints and drawings from seven artists.The painters George Hendrik Breitner, Pierre Bon-nard, Maurice Denis, Henri Evenepoel, Henri Rivière,Felix Vallotton and Edouard Vuillard latched onto thisnew possibility. Their intimate, personal snaps providea broader picture of their time, and make it clear howphotography and painting interacted.Building pits and family photosThe seven artists mainly took photographs of whatthey found interesting; it was only later that theysometimes included these things in their artistic work.Breitner, for example, took pictures of urban renewalin Amsterdam, and Rivière recorded the building ofthe Eiffel Tower. Bonnard, Denis, Valloton and Vuil-lard regularly produced family photos, portraits andphotographs of one another. The living-room photographs of Evenepoel provide agreat picture of everyday life towards the end of the19th century.

Félix Vallotton - Red Room, Etretat, 1899, Oil on board 49,2 x51,3 cm, The Art Institute of Chicago, Bequest of Mrs. CliveRunnels, Photography: The Art Institute of Chicago

United Kingdom – London - PippyHouldsworth Gallery - until 14 January 2012Pippy Houldsworth launches a major newgallery space in London's West End on 17November 2011. Building on the success ofthe last twelve years during which time thegallery showed artists such as Franz Acker-mann, Matthew Ritchie, Louisa Lambri,André Cadere, and Glenn Brown, PippyHouldsworth will continue to show innova-tive and critically relevant work, building onits stable of artists, whilst also focusing on sig-nificant group exhibitions. The new galleryspace is located on Heddon Street, an areaknown for its contemporary art galleries.Pippy Houldsworth Gallery has been de-signed by acclaimed architecture and designstudio, Simon Dance Design, who through

subtle combinations of natural and interiorlighting has created a quiet backdrop and asensitive focus for the presentation of artwork.Simon Dance Design has also created aunique microproject space, consisting of afloating white cube set within a black verticalopening. This space will affirm the mission ofthe gallery to engage in new conversationswith a number of international artists throughshowcasing cutting-edge contemporary art ina unique and challenging format. Artists willbe invited to respond in a site-specific way tocreate a unique small-scale artwork for thecube. In the main gallery space, Ursa Major,a solo exhibition by Neil Farber, celebrates theimagination, energy and unique quality of thenew programme at Pippy HouldsworthGallery.

Germany – Essen - Galerie Neher GmbH & Co. KG -until 27 January 2012Artists of the exhibition:Piero Dorazio • Lyonel Feininger • Conrad Felixmüller •Adolf Richard Fleischmann • Günther Förg • RaimundGirke • George Grosz • Erich Heckel • Karl Hofer • ErnstLudwig Kirchner • Adolf Luther • Heinz Mack • AugustMacke • Georg Meistermann • Otto Modersohn • PaulaModersohn-Becker • Otto Mueller • Emil Nolde • LieselOppel • Hrmann Max Pechstein • Max Peiffer-Waten-phul • Otto Piene • Otto Ritschl • Christian Rohlfs • KarlSchmidt-Rottluff • Siegward SprotteThe exhibition catalogue with 46 works reproduced andinterpreted by Dr. Andrea Fink-Belgin, Dr. AndreasGabelmann, Dr. Eva Müller-Remmert und ChristaNeher is available in Europe for 20 Euro transport costsincluded / worldwide mailing with prepaiment of 25 Euro.

Autumn / Winter 2011,Art of the 20th Century

Kendell Geers

[email protected]

Neil Farber - Ursa Major

Neil Farber, Interpretive Schooling 2011 mixed media on birch 76.2 x 101.6cm

Karl Schmidt-Rottluff - "Herbst am Vietzker See" (autumn atthe lake Vietzker), 1926 watercolour and Indian ink on paper,

FRANCE · GERMANY· SPAIN · PORTUGALNew Europe | Page 17THE EUROPEAN UNION

December 18 - 24, 2011

On 13 December, French PresidentNicolas Sarkozy met Palestinian Au-thority President Mahmoud Abbas atthe Elysee Palace in Paris after sym-bolically hoisting the Palestinian flagat the headquarters of UNESCO, at aceremony marking Palestine’s admis-sion to the UN cultural and educationbody. "This is truly a historic mo-ment," Abbas said during the cere-mony attended by about 50 guests."This admission is a first recognitionof Palestine. I hope that this will be agood omen for Palestine's admissionto other international organizations,"he added. The Palestinians previouslyhad observer status in UNESCO.Sarkozy had at first opposed the UN-ESCO bid but later oversaw France’ssurprise ‘yes’ vote.

French officials said the backing wasa result of strong "public opinion" in

favour of Palestinian membership. France, however, does not support full

admission to the United Nations.Sarkozy is currently recommendingthat the Palestinian Authority ask theUN General Assembly to raise Pales-tine’s status from "observer" to some-

thing higher, as an alternative to fullmembership. But Abbas thankedFrance for its support and declined tocomment on the criticisms. Abbas saidhe and Sarkozy would discuss the Se-curity Council and General Assemblyoptions.

Abbas meets Sarkozy in ParisFRANCEDIPLOMACY

EON, Germany's biggest power supplier, has taken a charge ofsome €3 billion due to the diminished value of its assets be-cause of the dim economic outlook in southern Europe, TheLocal reported on 13 December. "In connection with thepreparation of 2011 annual report, EON has identified a groupwide impairment charge of approximately €3bn," the groupsaid in a statement late last Monday.

"In Italy and Spain a more pessimistic view on long-termpower prices, regulatory interventions and reduced load hoursfor gas and coal power stations, lead to a total impairmentcharge of €2.1bn, mainly on spread generation assets in bothcountries," it said. "Further impairment charge has been iden-

tified in Hungary and Slovakia with respect to spread genera-tion assets as well as in Central Europe, mainly in Benelux.""The impairments reduce the group's net income," it said, with-out elaborating.

EON added that there was no impact on adjusted earningsbefore interest and taxes (EBIT) and adjusted group net in-come. "Furthermore, the impairments are not cash effective ei-ther," it stressed. In November EON said that its profits fellsharply in the first nine months -- to €864 million in the pe-riod from January to September from €3.522bn a year earlier -- owing to the shutdown of power plants as part of Germany'spolicy to abandon nuclear energy.

EON takes €3bn charge as prospects dimGERMANYENERGY

FRANCE|ENERGYAreva to cut up to 1,500 jobs in GermanyFrance's state-controlled nuclear giant Areva announced planson 13 December to cut jobs and suspend projects around theworld as part of a five-year turnaround plan, aimed at return-ing to profit after posting a massive financial loss in 2011, Eco-nomic Times reported. Areva's new chief executive, LucOursel, told a meeting of financial analysts that Areva plans tocut up to 1,500 jobs in Germany and has suspended a con-troversial nuclear enrichment plant project in Idaho in the U.S.in a bid to offset losses this year that could reach €1.6 billion.Oursel said that the German job cuts were necessary follow-ing the German government's decision to shut down eightnuclear reactors and progressively phase out the remainingnine reactors between 2015 and 2022. Germany represents sixper cent of Areva's order book of €44bn. At the same timeAreva is suspending a number of projects around the globe, in-cluding the Eagle Rock Enrichment Facility near Idaho Falls.Areva won a U.S. license to build and operate the planned $3billion gas centrifuge uranium enrichment plant in Idaho inOctober, a key step in the company's plans to expand produc-tion of nuclear fuel in the United States.

GERMANY|BANKINGCommerzbank in talks on new state aidThere are reports that German bank Commerzbank and theGerman government have been in talks for several days overpossible state aid, RTE Ireland reported on 13 December.The Reuters news agency quoted sources as saying that theaim was to reach an agreement in principle by Christmas.While Commerzbank, 25%-owned by Germany, wants toavoid state aid, it needs to find € 5.3 billion in capital by mid-2012 to meet European Banking Authority capital rules.Since Germany's second-largest bank raised € 5.3bn fromshareholders in June, write-downs on Greek sovereign debtand tougher capital rules have eroded its capital cushion.

GERMANY|ENERGY Germany installs millionth solar power systemGermany has installed its one millionth solar photovoltaic(PV) connected to the power grid, said the German Solar In-dustry Association (BSW-Solar), it was reported on 13 De-cember. “When photovoltaics first took off in Germany andthe 1000-roof programme was launched in the fall of 1990,nobody expected that we would already reach the one-mil-lion-system mark by 2011,” saod Klaus Töpfer, former FederalMinister for the Environment and current Executive Direc-tor of the Institute for Advanced Sustainability Studies(IASS). “Photovoltaics have developed dynamically and be-come a key pillar of the energy supply,” added GuntherCramer, President of the German Solar Industry Association.

SPAIN|ADVERTISINGUsers happy with new TV advertising regulations The Communication Users Association (AUC) of Spainviewed the new television advertising regulations as positiveafter these were unveiled by the authority last week. Onceenacted, these regulations are expected to contribute towardsthe development of the audiovisual communication generallaw which would control the advertising segment of televi-sion. AUC views this development as a positive one for usersas it would provide better legal security to the advertisers,channels and in the end to the viewers since it clarifies a lotof the ambiguities within the law.

French President Nicolas Sarkozy, left, escorts Palestinian President Mahmoud Abbas after their meetingat the Elysee Palace in Paris, France, 13 December 2011. |EPA/IAN LANGSDON

Rajoy: Austerity alone cannot uproot problemSpanish prime minister-elect MarianoRajoy told party leaders in Madrid thathis cabinet would push for structural re-forms within the country’s economicstructure. Rajoy noted that the currentausterity measures will remain in placeas that’ the primary toll in combatingthe slump. Rajoy asserted in his speechthat the landslide victory his side has

enjoyed against the socialists carried aclear message that Spain wants a strongand durable economy and is uninter-ested to follow its EU peers like Greece,Ireland and Portugal. Rajoy praised theECJ’s recent decisions on tackling thetoxic-assets problem in Europe butstressed that the relief wouldn’t be con-sistent if the nation itself would fail to

guarantee a as stable and sustainableeconomic growth. This would come“from our capacity to do our homework,controlling the public deficit and debtas well as private debt,” Rajoy said. Spainstill needs to finance itself this year andnext, a task that’s currently difficult todo at a “reasonable” cost, the premier-elect said.

SPAINECONOMY

Those planning a holiday on a route served by TAP AirPortugal should reschedule their tour because the serviceof the carrier looks set to hit a hump, news agencies re-ported. Local reports revealed last week that pilots of theairline decided to stick to their to-do list of staging astrike from 3 to 6 January after staging a similar strikefrom 9 to 12 December. Members of the Civil AviationPilots' Union decided to stage the strikes after talks with

Portugal's national airline failed. TAP Air Portugal re-ported nearly 100,000 reservations for the 9-12 Decem-ber period. According to the union, which represents 718of TAP Air Portugal's nearly 800 pilots, it wants itsmembers to take part in the decision making process toprivatise the government-run airline. The union alsowants the airline to fully comply with the rules of thelabour contract.

TAP Air Portugal pilots to strikePORTUGALAIRLINES INDUSTRY

AUSTRIA · SLOVENIA · ITALY · MALTANew Europe | Page 18 THE EUROPEAN UNIONDecember 18 - 24, 2011

AUSTRIA|BUSINESSThe sweet smell of successManner will invest several millions into the expan-sion of one of its factories, Austrian Independent re-ported. The chocolate and confectionarymanufacturer said it planned to increase the size ofits factory in Vienna’s Hernals district. The projecthas a volume of €30 million, according to the Vi-enna-based manufacturer of Manner Schnittenhazelnut cream wafers and other well-known sweets.Manner operates three factories. All of them are situated in Austria. Apart from theViennese plant, the family business also manages afactory in the Lower Austrian town of Wolkersdorfand a facility in Perg, Upper Austria. Mannerachieved a turnover of €158.5 million last year, upfrom €155.4 million in 2009. Around half of itsturnover of 2010 was generated in other EuropeanUnion (EU) countries. 45% of turnover came fromsales in Austria. Manner recently increased its con-sumer prices. Manner argued the decision by makingaware of "dramatic" cost developments. The enterprise, which laid off 48 staff in 2009, hasbeen challenged by rising prices for sugar, cocoabeans, flour and other ingredients for years. Thecompany has around 700 employees. Its turnoverrose by 10.3% from the first nine months of 2010 tothe same period in 2011 to €122.2 million. Mannerwas established in 1890. News that it plans to carryout a € 30-million expansion project at its Viennesefactory came on the heels of reports that Austrianshad to spend 7.1% more on the same commonweekly shopping products in September of this yearthan in September 2010.

SLOVENIA|ITRoyalton Capital Investorspick IUS SoftwareRoyalton Capital Investors II LP, a private equityfund, announced that it acquired in a proprietarytransaction via IUS Legal and Business SolutionsBV, its Dutch holding company, an indirect stake of70% of IUS Software d.o.o., Slovenia’s leading on-line information provider to legal and business pro-fessionals, Balkans reported.The purchase of IUS marks Royalton’s first invest-ment in Slovenia and its third acquisition in Cen-tral and Eastern Europe this year. Established in1989, IUS Software d.o.o. was founded by AntonTomazic. The IUS Group operates in Ljubljana andZagreb offering a full range of on-line services,through its legal, finance and tax portals, to profes-sionals in Slovenia and Croatia. The IUS Group employs 70 people, and, in 2011,serviced over 12,000 customers in both countries.Royalton acquired shares from Koinon NV, STJ Ltd,and Anton Tomazic, who reduced his shareholdingto 10%. As part of the transaction, Royalton fundeda capital increase to give the group sufficient capitalto make acquisitions in other selected markets. Since2004, IUS has been managed by Tomaz Iskra whowill continue as shareholder and CEO. Tomaz Iskra said:“We have established IUS as themarket standard in Slovenia and already have a 35%share of the Croatian market. With support fromRoyalton, we are ready to go to the next stage, andaccelerate our international expansion.” RoyaltonCapital Investors II LP is a private equity fund fo-cused on making private equity investments in theEU accession countries of Central and Eastern Eu-rope. The fund was established in 2007.

Malta’s industrial production increased marginally in October,the latest set of data from the Maltese National Statistics Of-fice (NSO) showed last week. The NSO figures showed in-dustrial production in the island nation increased by 0.6%year-on-year in October.

The office said that 104.4 points were recorded for Malta’sindustrial production in October this year whereas for the cor-responding month of 2010, 103.8 points were registered. Thesurge was principally attributed to the 12.0% increase in cap-ital goods to 105.6 points over the 94.2 points recorded in2010. Intermediate goods and energy rose by 0.3% and 1.4%

respectively while consumer goods fell by 3.1%. The manufacture of computer, electronic and optical

products increased by 0.1% on the NACE division leveland further increases were registered in the manufactureof textiles, printing and reproduction of recorded media,manufacture of chemicals and chemical products, othermanufacturing and electricity, gas, steam and air condi-tioning supply. In contrast, the manufacture of food prod-ucts, wearing apparel, basic pharmaceutical products andpreparations, rubber and plastic products -- all registereddeclines in annual comparison.

Malta’s industrial production inches ahead MALTAINDUSTRY

The General Workers’ Union or GWUlast week voiced its discontent over thenew policies adopted by the current AirMalta management saying these aremostly nepotistic and tailored to servethe management’s goal of offloading thepayroll.

GWU said that the management istrying to accommodate “well knownpersons” in the restructuring exercise tofacilitate the terminations. The union

was quoted as having explained to thelocal media that the principle to be fol-lowed is ‘last in -- first out’ and the man-agement has taken to issuingapplications for so-called “new” gradeswhich actually have long existed at AirMalta, especially in ground handling.According to GWU officials, all that themanagement is doing is to replace thenomenclature of the grades involved, toplace well known people in them. The

union declared that it would not acceptany dismissal notices if not issued ac-cording to what the law said. Corre-spondence had already been exchangedbetween the union, the Air Malta man-agement and Malta’s Finance MinisterTonio Fenech on the subject. Air Maltaalready declared in a recent statementthat it would launch its voluntary re-dundancy and early retirement schemesshortly.

Favoritism up under new Air Malta Management, union saysMALTAAVIATION

Tough times for financiers as Italian banks must raise capital.| EPA/MATTEO BAZZI

The new set of regulations proposed bythe European Banking Authority(EBA) calling on banks for increasingcapital met a sizeable hurdle last weekfrom Italy. Italy's banking association(ABI) which already had announcedthey were opposed to these new rules,last week declared that they would con-test the EBA demands to the maximumpossible extent.

“The European Banking Authoritymeasures are a great mistake that maycause a credit crunch and hurt the econ-omy,” the association’s ChairmanGiuseppe Mussari was quoted as hav-ing said in Rome last week in localmedia. “We will use all instrumentsavailable under the Italian and Euro-pean law to oppose them,” he declared.

Earlier an ABI statement announcedthat it might seek legal remedy againstEBA over the capital-raising measures.The comments came in reaction toEBA’s demand calling on the Europeanbanks to raise €114.7 billion in new cap-ital to withstand writedowns caused bythe area's sovereign-debt crisis.

Italy's top five lenders are now re-quired to boost capital by €15.4bn, upfrom €14.8bn estimated in the previousround of stress tests in October. Of that,the biggest Italian bank UniCredit SpAshould arrange for €8bn in additionalcapital, the second most among Euro-pean banks.

That October estimate put the figureat €7.4bn. Banca Monte dei Paschi diSiena SpA's shortfall rose to €3.3bn

from €3.1bn. Unione di Banche ItalianeScpA needs €1.4bn and Banco Popo-lare SC €2.7bn, according to the EBA.Intesa Sanpaolo SpA, the second largestbank in the country, is the only Italianbank under review that doesn't need ad-ditional capital, the regulator said.

“Our initiative is to protect the na-tional interest, not the banks' interests,”Mussari said. According to EBA, thenew funding would be necessary to pro-tect the banking industry as also theeconomy as a whole which has been se-verely contaminated by the sovereigndebt crisis. That hitherto had alreadypushed the yield on the country's 10year bond above the 7% threshold thatled Greece, Ireland and Portugal to seekbailouts.

ABI oppose EBA decision ITALYBANKING

Richard Branson’s Virgin Atlantic kept up the pressure on rivalBA in the battle for ownership of Lufthansa-owned BMI,Breaking News reported.

International Airlines Group (IAG), parent company ofBritish Airways and Iberia, reached a deal to buy BMI lastmonth but Virgin has remained in the race by signing a “termsof agreement” contract with Lufthansa.

This means that Virgin will be able to start due diligenceand analyse BMI’s books to find out what the acquisitionwould involve. In the battle over BMI’s coveted take-off andlanding slots at Heathrow, Virgin is hoping to stop BA’sowner gaining more dominance and having an even greaterpresence on the runways of the busy hub. If the BA dealgoes ahead it would mean that IAG owns more than half ofHeathrow’s landing slots, a move that angers Virgin andother rivals. Although reports said the offer made by Virginof around £50 million is half that of the IAG offer, Bran-son’s airline is hoping that the regulatory scrutiny that wouldaccompany a BA-BMI merger will make it more attractiveto Lufthansa. Virgin’s bankers are understood to be arguingthat Lufthansa would be better off doing a cheaper deal withVirgin as it would be much quicker than a sale to IAG whichwould involve competition regulators.

If IAG is successful in its bid, the acquisition of BMI wouldsignificantly strengthen its position at Heathrow, giving it anadditional 8% of Heathrow slots, bringing its total to more than50% and therefore inviting scrutiny from regulators. Virgin andIAG’s interest in BMI show that the two airlines are undeterredby BMI’s losses as it struggles to cope with the economic down-turn and as people opt for lower-cost airlines such as easyJet andRyanair. Lufthansa took control of the British airline when itschairman, Michael Bishop, sold his shares for £220 million twoyears ago. The airline lost €154 million in the first nine monthsof this year and its total losses this year are likely to far exceed last

year’s €145 million, despite the airline downsizing by about athird. A deal would help Virgin build a European feeder net-work for its long-haul operations based at Heathrow.

If the deal goes ahead, Virgin would be able to co-ordinate itsschedules with BMI so that passengers flying from regionalcities could transfer to long-haul Virgin flights in Heathrow,potentially increasing footfall on flights significantly. Lufthansadeclined to comment further on the future of BMI.

UK · BELGIUM · NETHERLANDS · LUXEMBOURGNew Europe| Page 19

THE EUROPEAN UNIONDecember 18 - 24, 2011

Dutch manufacturers realised a turnover growth of nearly7% in October 2011 compared with twelve months previ-ously. This is half the turnover growth of September, whenit was over 13%. Prices of manufactured products were morethan 8% higher than in October 2010, Statistics Nether-lands reported.

Although the sector petroleum, chemical, rubber and plas-tic products saw turnover grow by 11%, factory gate pricesrose by 16%. The transport equipment sector realised 5%

more turnover, just as the sector basic metals and metal prod-ucts. Turnover in the food sector was 6% up, with higherfood prices accounting entirely for the increase. Turnovergenerated in the sector electrical engineering and machinerywas around the level of twelve months previously.

Sales on the export market were 6% higher in October; saleson the domestic market grew by 8 percent. For the first timein almost two years, turnover growth on the export marketwas smaller than turnover growth on the domestic market.

Manufacturing turnover growth halvedTHE NETHERLANDS BUSINESS

NETHERLANDS|ECONOMY

DNB: economy will come to a virtual halt in 2012Due to indefinite outcome of the European debt crisis whichis generating extremely large uncertainties, it is projected thatthe Dutch economy will come to a virtual halt next year:GDP growth will fall to 0.2% and unemployment will riseto 5.3% in 2012. However, economic developments dependon the course of the European debt crisis. If the crisis is tack-led quickly and decisively, a restoration in confidence maygive the economy a positive boost, shows data in new half-yearly forecast by Dutch Central Bank ‘De NederlandscheBank’ (DNB). Growth in Dutch GDP (gross domesticproduct) over 2011-2013 will be much lower than expecteda half-year ago. DNB foresees growth of 1.4% in 2011, butin the second half of this year the economy enters a techni-cal recession (two quarters with negative growth). In 2012growth will dwindle to almost nothing (0.2%). GDP growthmay subsequently pick up cautiously to 1.3% in 2013. Un-employment will rise to 5.3% next year and to almost 6% in2013. The more sombre growth prospects result from thelower growth in world trade and the increased loss of confi-dence among enterprises and consumers. Households tendto save more because their financial situation is deteriorating,notably through declining house prices.

BELGIUM|BANKING

Government Debt amounts to €361.95 billionThe Belgian Federal Government Debt amounted to€361.95 billion as of end November 2011. Debt issued ortaken over by the federal government amounted to €361.56billion and the institutions for which the federal governmentsupports the debt service registered a debt of €0.38 billion.In net terms (i.e. deducting financial deposits and invest-ments, as well as securities owned by the Treasury), the Fed-eral Government Debt amounted to €346.96 billion.

UK|GAMBLING

Betfair first-half profits climb 43%Online betting exchange Betfair has reported a big increasein profits for the six months to the end of October, RTE Ire-land reported. It said underlying profits after tax rose by 43%compared with a year earlier to £20.6 million. Betfair said itscore revenue was £170.3 million, with stronger growth of12% in its second financial quarter, helped by the start of thefootball season. It said revenue in the third quarter was 13%ahead of a year earlier. CEO David Yu said mobile bettinghad continued to grow strongly in the first half, with doublethe number of mobile bets placed compared with the sameperiod last year. He said Betfair planned to launch a newsite in the New Year, which would reduce maintenance costs.Yu said he would be stepping down at the end of this month,with Stephen Morana becoming interim CEO.

UK|MEDIA

Pearson sells FTSEstake to LSEBritish publishing group Pearson is to sell its 50% stake inthe FTSE International group to the London Stock Ex-change for £450 million as part of its drive to focus on newsand analysis and away from data, RTE Ireland reported on12 December. The LSE said it would fund the deal from ex-isting resources and said it would enable it to further expandinto indices, data and analytics and create new opportuni-ties for LSE's listed derivatives trading business. In 2010,FTSE reported total revenues of almost £100 million andtotal core earnings of £40 million.

Virgin keeps up pressure over BMIUNITED KINGDOMAVIATION

The European Banking Authority andNational Bank of Belgium announcedthat the Brussels-based provider ofbanking and insurance services KBCBank (on a consolidated level) alreadymeets 9% Core Tier-1 threshold.

Following completion of the capitalexercise conducted by the EuropeanBanking Authority, in close cooperationwith the National Bank of Belgium, theexercise has determined that KBC Bankalready meets the 9% Core Tier 1 ratioafter the removal of the prudential filterson sovereign assets in the Available-for-Sale portfolio and prudent valuation ofsovereign debt in the Held-to-

Maturity and Loans and receivablesportfolios, reflecting market prices at endSeptember. KBC Bank will continue toensure that appropriate capital levels aremaintained.

The capital exercise proposed by theEBA and agreed by the Council on 26October 2011 requires banks tostrengthen their capital positions bybuilding up a temporary capital bufferagainst sovereign debt exposures to re-flect current market prices. In addition, itrequires them to establish a buffer suchthat the Core Tier 1 capital ratio reachesa level of 9% by the end of June 2012.The amount of any final capital short-

fall identified is based on September2011 figures. The amount of the sover-eign capital buffer will not be revised.

71 banks across Europe, includingKBC Bank, were subject to the capitalexercise whose objective is to create anexceptional and temporary capital bufferto address current market concerns oversovereign risk and other residual creditrisk related to the current difficult mar-ket environment. This buffer would ex-plicitly not be designed to cover losses insovereigns but to provide a reassuranceto markets about banks’ ability to with-stand a range of shocks and still main-tain adequate capital.

KBC Bank meets 9% Core Tier-1 thresholdBELGIUMBANKING

Sir Richard Branson takes off.| EPA/DEAN LEWINS

POLAND · HUNGARY · CZECH REPUBLIC Page 20 |New Europe THE EUROPEAN UNIONDecember 18 - 24, 2011

With the Christmas shopping rush, more Czechs are turningto the internet and cross-border deals. Consumer advocates saythat the sales exodus is prompted by poor quality goods on salein the republic and lower prices.

Ondřej Tichota, spokesman for the European ConsumerCenter told Prague Post, “For shopping online, electronics area good example of where to find lower prices for the samegoods that one can buy in Czech shops," adding that, "Germantraders are also said to provide a wider range of choice when itcomes to clothing, for example."

One more incentive is the avoidance of import duties. InApril, a new 20% tax on imports from non-EU countries val-ued at more than €22 was introduced.

Although domestic online shopping is just 2% of all pur-chases, compared to an EU average of 9%, there are signs of asurge in ordering goods abroad. Czech postal and customs of-ficials say that their offices are backed up with goods purchasedonline from other nations. The officials report that many ofthese items have falsified paperwork, intended to avoid duties.

"The trend in undervalued shipments is about 50 percent ofthose shipped from the United States and 90 percent of thoseshipped from China," said Martina Kaňková, spokeswomanfor the General Directorate of Customs. The number of sus-picious packages sent for examination has increased by 300%.

According to a survey from GE Money Bank, around 30percent of Czechs go shopping in neighboring countries,mostly Germany, but also Poland, Austria, and even furtherafield to Hungary. Czech Railways (ČD) has added a numberof booster and Advent trains to Dresden for shoppers that in-crease daily passenger loads by the hundreds during the holi-day season, said ČD spokesman Radek Joklík.

"During the Christmas period, the number of passengersgoing between Liberec and Dresden increases by tens of per-centage points compared to normal operation," he said.

Shoppers look for bargains abroadCZECH REPUBLIC RETAIL POLAND|TRADE

Exports and Imports upAccording to the information released by the NationalBank of Poland (NBP) on the balance of payments in Oc-tober 2011, exports rose by 3.7% as compared to October2010. Import growth was even weaker, posting an increaseof 2.7%. The volume of the imports of goods ( €12,609million) continued to exceed that of exports ( €11,957 mil-lion). Trade in services declined for a subsequent time. Ex-ternal revenues of Polish service providers declined by 7.7%as compared to October 2010, and the imports of servicesdecreased by 19.7%. The balance of trade in services re-mained positive and reached €401 million. The negativeincome balance of €1,242 million was affected, among oth-ers, by foreign investors’ income on their direct investmentsin Poland totalling €815 million, of which dividends paidout to them in the amount of €106 million, reinvested prof-its in the amount of 564 million euro and interest on debtinstruments in the amount of €145 million. The negativecurrent account balance stood at €1,622 million and wasslightly lower than the year before. The inflow of foreigndirect investment to Poland resulted in a positive FDI bal-ance of €1,490 million. On the other hand, the balance offoreign portfolio investment was slightly negative.

HUNGARY|AUTOS

State acquires majority stake inRaba in public purchase offerThe Hungarian National Assets Management Company(MNV) raised its stake in vehicle and vehicle parts makerRaba to 73.84% in a public purchase offer ended last Mon-day, National Development Ministry state secretary JanosFonagy said, Budapest Business Journal reported. MNV’svoting rights in Raba rose to 76.97%, Fonagy said. Thetransaction must still be approved by the EU’s competitionauthority. The public purchase offer started on 11 No-vember. The state held a combined 16.15% of Raba shareswhen it made the offer.

HUNGARY|BUSINESS

Hubner Hungary expandsGerman-owned transport industry supplier Hubner Hun-gary is undertaking a €10 million expansion that will makeit the parent company’s most important production unit,managing director Ingo Heerdt said at a press conference inNyiregyhaza, the site of the plant, on 14 December, Bu-dapest Business Journal reported. Hubner Hungary willbuild an 8,000 sq m production hall and expand its existinghall at a cost of €5 million, Heerdt said. It will spend another€ 5 million to install the latest production technology, headded. The company will make 170 new hires by the firsthalf of next year, he said. The expansion is expected to boostannual revenue of the unit from €27 million to €35 million.

CZECH REPUBLIC|LABOUR

Steel staff shockedto lose jobsArcelorMittal Ostrava is planning to lay off 10% of theirworkforce, some 600 workers from their Czech plants be-cause of “a prolonged period of uncertainty.” According tothe company, excess supply and lower demand is loweringprices. "Only the most efficient operations with the lowestcost and best service to customers will survive - those thatcan compete even when the market is down," Tapas Ra-jderkar, ArcelorMittal Ostrava's chief executive officer toldPrague Post. "ArcelorMittal needs to improve productiv-ity significantly to remain competitive in these challeng-ing times."

Audi expansion generates HUF 50 bln of orders for building sectorGerman carmaker Audi’s Hungarian unit has so far signedmore than HUF 50 billion of orders with Hungarian build-ing companies on the construction of a big addition at its plantin Gyor (NW Hungary), Audi’s managing director for finan-cial affairs in Hungary Johannes Roschek said, Budapest Busi-ness Journal reported.

The unit has so far signed contracts worth €200 million forthe €900 million capacity expansion, and the majority werewith Hungarian companies, Roschek said.

About 70 Hungarian companies supply the unit in the area

of engines and parts, but the start of production at the newcapacity from 2013 will draw foreign suppliers to Hungarytoo, he said. Audi is in talks with the Hungarian governmentand the local council of Gyor on establishing a suppliers park,but a decision on a location has still not been taken, he added.

The revenue and profit of the unit this year will be an-nounced by the parent company in March, but it is certainthat this year was better than last, Roschek said. Profit is ex-pected to be similar to last year’s, he added.

Audi Hungaria had revenue of €4.77 billion in 2010.

HUNGARYAUTOS

A ceremony to hand over to Poland anew batch of NATO files covering theperiod of 1980-1984 was held on 13December, during the opening of theexhibition ‘Poland – a Long Journey toFreedom’ at the NATO Headquartersin Brussels. The documents will behanded over to Undersecretary of StateBogusław Winid who will representForeign Minister Radosław Sikorski.

The process of declassifying NATOarchival documents on the introductionof the Martial Law in Poland began inAutumn 2010 at the initiative of For-

eign Minister Radosław Sikorski. Thefirst portion of materials was made pub-lically available and handed over toPoland at the ceremony attended byMinister Sikorski on 18 July at theNATO Headquarters in Brussels. Itwas then that Minister Sikorski ap-pealed to NATO to continue to declas-sify the files from other archivalcollections so that in December—30years since the introduction of the Mar-tial Law—a conference of historianscould be organized along with an exhi-bition about this tragic event.

To implement Minister Sikorski’svision, the NATO archival section, incooperation with the Polish Perma-nent Representation to NATO andthe Foreign Ministry’s Archives andInformation Management Bureau,prepared an exhibition along with ascientific conference, to be attended bysome of the leading historians fromPoland (prof. Andrzej Paczkowski)and the US (Vojtech Mastny of theWoodrow Wilson International Cen-ter for Scholars and Mark Kramer ofHarvard University).

NATO files on the Martial Law handed over to PolandPOLANDHISTORY

Parcels are packed at the logistics centre of Amazon in Bad Hersfeld,

Germany, 20 December 2010. Amazon installed 3,000 additional

staff members to cope with up to 1.7 million orders for the Christ-

mas sales.| EPA/UWE ZUCCHI

SWEDEN · DENMARK · FINLAND· IRELANDTHE EUROPEAN UNION

New Europe | Page 21

December 18 - 24, 2011

Fortum, Seabased to begin construction of wave power parkFinnish utility Fortum has signed a contract withSeabased AB for the construction of a joint wave powerpark in Sotenas, Sweden, The Company reported.

After completion, the wave power park will be theworld’s largest, full-scale demonstration project of itskind. The total investment for the project is about €25million, of which Fortum's share is about half.

Seabased, will start serial production of buoys, gen-erators, substations and converters in the first half of2012 at a factory to be established in the Lysekil mu-nicipality in Sweden.

The firms aim for marine installation of the first 42wave power buoys and related equipment during au-tumn and winter of 2012. Phase-two installations are

planned to take place after a research period of aboutone year. Upon completion, the wave power park in-stalled in a half a sq km area will consist of 420 buoys,with a total output of about 10MW. The plant isscheduled for completion in 2014-2015. The SwedishEnergy Agency has decided to grant investment sup-port for the project.

Furthermore, Fortum is also participating in theFinnish Waveroller development project, in which waveenergy is converted into electricity close to the shore.

Fortum's operations focus on the Nordic countries,Russia, Poland and Baltic Rim area. In the future, theintegrating European and fast-growing Asian energymarkets provide additional growth opportunities.

ENERGY SWEDEN

FINLAND|BUSINESS

Fortum sets up shop in FranceFinnish utility Fortum said in a statement that itwould establish a French subsidiary in order to bid forhydroelectric concession renewals and to develop wavepower in cooperation with French government-con-trolled warship builder DCNS, News room Finlandreported. "Fortum aims to play a significant part in thenext generation renewable energy system, and FortumFrance will lead our efforts to develop French powerbusiness in the long term," Matti Ruotsala, a Fortumexecutive, said in the statement. Fortum's operationsfocus on the Nordic countries, Russia, Poland andBaltic Rim area. In the future, the integrating Euro-pean and fast-growing Asian energy markets provideadditional growth opportunities. In 2010, Fortum’ssales totalled €6.3 billion and comparable operatingprofit was €1.8 billion. The Company employs ap-proximately 10,500 people. The Finnish governmentowns more than half of the shares in Fortum.

FINLAND|BUSINESS

Paper cutsFinnish paper and board maker M-real cut its final-quarter profit guidance and said it would launch tem-porary layoff talks spanning about 1,200 workers inFinland, News room Finland reported on 9 Decem-ber. "Long-term demand and profitability outlook forboard continues to be good, but M-real will in theshort-term prepare for low delivery volumes by en-abling temporary layoffs at the Finnish mills," MikkoHelander, the managing director of M-real, said in thestatement.

SWEDEN|JOBS

Wave goodbye to 115 jobsNew Wave Group, SE, the Swedish developer of prod-ucts for corporate promotions, gifts and home fur-nishings, plans to cut 115 jobs, starting in first-half2012, it was reported on 12 December. The move willsave about 24 million Swedish crowns ($3.6 million) ayear, the company said The cuts, set for Orrefors, Kostaand Afors, Sweden, will come mostly in production,New Wave said. The cuts stem from weaker sales atthe Orrefors Kosta Boda glassware operations, NewWave said.

DENMARK|ENERGY

Vestas grabs 96MW in SwedenDenmark's Vestas , the world's biggest maker of windturbines, Vestas has received an order for 32 V112-3.0MW turbines from Stena Renewable to be installedat the Lemnhult project in Sweden. The 96MW proj-ect will see turbine delivery and installation from Au-gust 2012, according to Vestas, and is scheduled to becompleted in April 2013. Vestas Northern Europepresident Klaus Steen Mortensen said: “Stena Renew-able is a very important partner for us in the Scandi-navian region and we are very pleased they haveselected us as supplier for this project in Lemn-hult.“Stena Renewable managing director GoranDanielsson said the Lemnhult wind farm is Stena’slargest investment so far. He said: "With almost270GWh of yearly production, corresponding to 70%of total power demand in Vetlanda, the plant makesVetlanda a leading renewable energy supplier amongSweden’s municipalities.”Vestas delivered its first turbinesto Stena Renewable in 2006.

Ryanair has announced the openingof its 49th European base at Palmaairport in Majorca, Breaking Newsreported on 13 December.

It will open in March next yearwith four aircraft based at the airportoperating 47 routes, 17 of which arenew.

The no-frills airline says it will de-liver 2.8 million passengers annuallyand sustain 2,800 Spanish jobs.

The airline will open 17 new routesfrom Palma to destinations includingCork, Maastricht and Stockholm.

Ryanair also on 13 December an-nounced that it was to cut by 50% thelevel of its summer 2012 services toand from Alicante.

The airline blamed move, whichfollows a 50% cut in its winter serv-ices from the Spanish airport, on theAENA Alicante airport authority'sinsistence that it used "unnecessary"airbridges and pay €2 million per yearin airbridge charges.

"As a result of these 2012 cutbacks,Ryanair’s annual traffic at Alicantewill fall from 3.5 million in 2010/11to 2 million in 2011/12, with the lossof 6 based aircraft, 18 routes and1,500 jobs at Alicante," the airline

claimed. "These cuts will reduce AENA Al-

icante’s revenues by some €30 million

p.a. solely because of its attempt toimpose €2 million in unnecessary air-bridge fees on Ryanair."

Ryanair announces new Palma baseIRELANDAVIATION

Members of the UNITE union at theEBS Building Society have votedoverwhelmingly to take strike actionduring Christmas week, RTE Irelandreported on 13 December.

The union said 98% of the 84% ofUNITE's 300 members who votedbacked taking action in a row over thewithholding of a "13th month" pay-ment. UNITE later said strike actionwould take place on 20 December. Itsmembers will hold a one-day strikewith pickets at the EBS head office

on Burlington Road, and branches atthe Square shopping centre in Tal-laght and on William Street in Lim-erick. Previous week, EBS offeredstaff interest-free loans to compensatethem for non-payment of the tradi-tional Christmas payment worth amonth's salary.

Staff wERE told that they wouldnot receive the payment because ofrules governing AIB - which mergedwith EBS in July. The Department ofFinance has said no new bonuses are

to be paid at banks.The union is angry that the pay-

ment has been paid only to manage-rial staff this year. It said they had theoption to change the structure of theirpay package some years ago, but thesame offer was never made to staff.

EBS had said the payment tolower-paid staff was not pensionable,but managers' payment was part oftheir salary, which they could chooseto have paid over 12 or 13 months,but not a bonus.

EBS faces one-day strike over paymentIRELANDFINANCE

Iberia bound? Ryanair director Michael O'Leary lifts a girl in bikini during the presentation of the Ryanaircalendar in Berlin.| EPA/MARCEL METTELSIEFEN

LATVIA · LITHUANIA · ESTONIA · SLOVAKIA

Page 22 | New Europe THE EUROPEAN UNIONDecember 18 - 24, 2011

SLOVAKIA|ENERGYURSO says household gas prices will increase Gas prices for Slovak households will rise by an averageof 5.53% in 2012, Jozef Holjencík, the head of the Of-fice for Regulation of the Network Industries (URSO),said, Slovak spectator reported on 15 December. "For thetariff group of consumers using gas for cooking only, thisrepresents an increase of € 1.60 per year. For the group ofconsumers who use gas also for heating water, the an-nual payment will go up by € 29.40 and for those whouse gas also for heating, the increase represents growth of€ 66 per year," Holjencík stated. The announced gasprices will cover only part of the costs of the gas utilitySlovensky Plynarensky Priemysel (SPP), said itsspokesman Ondrej Sebesta. "This means that the com-pany is expecting a loss in the regulated segments in 2012again. The loss generated in the regulated segments ofgas sales in 2011 will reach several dozens of millions ofeuro," said Sebesta.

SLOVAKIA|TELECOMSOrange and Slovak Telekom pay for frequency licencesMobile phone operators Orange Slovensko and SlovakTelekom have made their one-off payments to extend theirmobile communication licences for ten more years, RomanVavro, the spokesman for Slovakia’s TelecommunicationsOffice (TO), said, Slovak spectator reported on 13 Decem-ber. Orange paid € 40.686 million on 9 December whileSlovak Telekom paid € 47.766 million on 5 September. Themoney is considered revenue to the state budget and the li-cense extensions were initially issued to the operators in thesummer. "Slovak Telekom's Board has decided that com-pany will make use of relevant procedural actions in order tohave the Telecommunications Office decisions examined,by which it decided to prolong the validity of licenses for useof frequencies," ST’s spokesman Andrej Gargulak said. Theonly possibility to review the authority's decision, accordingto lawyers approached by SITA, is by filing an action beforea court.

SLOVAKIA|AUTO INDUSTRYVW to make large investment in Bratislava plantThe Bratislava-based factory of German carmaker Volk-swagen plans to enhance its welding capacities with aninvestment worth € 1.1 billion, Slovak spectator reportedon 13 December. After the investment is completed, thecompany should be able to weld 1,100 chasses per dayand employ 1,200 people, the Sme daily wrote.

SLOVAKIA|DEBTParliament approves debt brake lawA Constitutional Law on Budgetary Responsibility, or so-called debt brake law, was passed in parliament on 8 De-cember, with 146 out of 147 MPs present voting in favour;only independent MP Anna Belousovova abstained, Slo-vak spectator reported previous Friday. The new legisla-tion sets up an independent Board for BudgetaryResponsibility that will oversee the government's compli-ance with budgetary objectives, the TASR newswire wrote.In addition, it stipulates the maximum level of public fi-nance debt and measures that will have to be appliedshould public debt reach certain levels. The debt thresholdfor public finances will be set at 60% of GDP initially andwill be lowered gradually to 50% after 2017.

On 14 December, Poland’s TreasuryMinister Mikolaj Budzanowski indi-cated that the time is not right for dis-posing Lithuanian refinery OrlenLietuva as the ongoing mayhem wouldmake it difficult for big investors totake some big buying decision. ThePolish government is PKN Orlen’sprinciple stakeholder. Orlen Lietuvahas 200,000 barrels per day capacity.

Earlier reports revealed that the Pol-ish refiner was poised to offload theLithuanian arm.

However, Budzanowski said beforethe treasury commission of the lowerhouse of parliament last week that “theproject for PKN Orlen to exit fromMazeikiu is suspended”. The ministeradded, however, that such move mayagain be initiated in the future depend-

ing on contemporary market situation.Budzanowski reminded that the deci-sion to sell Mazeikiu “belongs to PKNOrlen's shareholders”. “It is they whomust evaluate this investment,” theminister said, adding: “However it isnot a good time to carry out this type ofdisinvestment.” The Polish treasury,PKN's single largest shareholder, re-tains a 27.5% stake.

Poland suspends plan to sell off Orlen Lietuva

LITHUANIAENERGY

Data from the State Employment Agency of Latvia lastweek showed that new jobs are still scarce in the Balticcountry though compared to some of its EU peers – it’sstill way ahead. The data showed registered unemploy-ment rate in Latvia at the end of November stood at11.5%, at the same level of the previous month.

Altogether, 130,240 people were counted to be regis-tered as unemployed with the employment agency'sbranches, compared to 130,541 at the beginning of No-vember. The highest unemployment rate was in LatgaleProvince (19.7%), whilst the lowest was in Riga Region

(8.5%). The unemployment rate in Vidzeme Province wascounted at 12.9%, in Zemgale Province at 12.5%, and inKurzeme Province at 12%. Among the cities, Rezekne hadthe highest unemployment rate of 18%, while the lowestunemployment rate was in Riga (8%).

Meanwhile, Latvia’s industrial production output surgedby 5.1% year-on-year in October, Eurostat data showed.Its Baltic peers, both Lithuania and Estonia, trailed Latviain the month. Lithuania’s industrial production output in-creased by 1.4% on year in October and for Estonia, thegrowth was by 2.3%.

Not much employment generating in Latvia

LATVIA LABOUR

The export reliance of the Estonian economy is set to bringhome the affects of the Euroarea turmoil, the latest forecastfrom auditing company Ernst & Young (E&Y) indicated. Inline with the lowered outlook for the debt-crisis bitten Eu-roarea, E&Y now expects Estonia's economic growth to belower than its previous forecast. This time, E&Y has put the

forecast for Estonia’s economic growth in 2012 at 2.5 % --down from 3.8% projected in E&Y’s autumn forecast. How-ever, the E&Y forecast was more optimistic than Bank of Es-tonia's 1.9%, revealed on 14 December but lower than thefinance ministry's 3% forecast on the basis of which the 2012state budget was compiled.

ESTONIAECONOMY

Ernst & Young sees lower growth prospect

The small lumber port in Skulte, 50 kilometres north of Riga. It used to be a shipyard and before World War II it became a port for fishing boats. Newjobs are still scarce in Latvia. |EPA/AFI

GREECE · CYPRUSNew Europe | Page 23THE EUROPEAN UNION

December 18 - 24, 2011

On 14 December, the International Mon-etary Fund (IMF) increased its pressureon Greece, urging the debt-ridden coun-try to accelerate reforms that are behindschedule in most areas, saying delays arestalling recovery from years of recession.

Poul Thomsen, deputy director of theIMF's European department, saidAthens could not rely on more tax in-creases and blunt across-the-boardspending cuts, but needed to look at"taboos" that could include laying offmore state workers. “There is no moreroom for across-the-board expenditurecuts in wages and pensions,” Thomsen,who heads the IMF's mission to Greece,told a conference in Athens. “Greeceneeds to consider moving more aggres-sively in closing down redundant stateenterprises and may have to accept re-dundancies. I can’t see how Greece cantackle fiscal problems without address-ing these taboos.”

Greece’s Prime Minister Lucas Pa-pademos noted that both fiscal consolida-tion and structural reforms are needed inorder to improve the investment climateand to create the conditions for economicrecovery. He said Greece's recession wouldbe worst in 2011, and the economy couldreturn to growth in 2013. But he cau-tioned that Greece's future in the Euro-pean Union depended on makingprogress with reforms.

The IMF expects the Greek economyto contract by 6% in 2011 and by 3% in2012. Papademos said the governmentwould focus on reforming the notoriouslyinefficient public administration andboosting the banking sector's capital andliquidity base.

“The recession surpasses any peacetimeperiod,” Greece’s Finance Minister Evan-gelos Venizelos said at the conference. Onthe issue of structural changes, he said that“we have already delayed too much and

we must move with maximum possiblespeed to get the best possible results”.

Nevertheless, IMF spokesman DavidHawley said in a briefing with reportersin Washington on 15 December that theFund is “satisfied” that Greece is “under-taking policies that are in compliance withwhat it’s agreed”. The IMF approved apayment of €2.2 billion to Greece on 5December as part of a joint programmewith the European Union. That followeda 30 November agreement by euro-areafinance ministers on a €5.8bn loan toGreece under last year’s bailout. Plans toprivatise state assets are advancing, though“difficult market conditions and technicaldelays” prevented any sales during thethird quarter.

Meanwhile, the Greek government'sbudget deficit is expected to be equivalentto around 10% of gross domestic productthis year, above an already revised target ofaround 9% of GDP.

GREECEECONOMY

Unemployment in Greece, which is facing a fifth year of re-cession, hit a record high this summer despite a rise intourism, data showed on 15 December. Construction com-panies, manufacturers, retailers and wholesalers have beenparticularly hard hit, shedding nearly 180,000 jobs in the lastyear alone as tax hikes and spending cuts have weighed on aneconomy facing a fifth year of recession in 2012. Unemploy-ment jumped to 17.7% in the third quarter from 16.3% inthe previous three-month period, the Greek statistics servicesaid -- the highest quarterly unemployment rate recordedsince the series started in 1998.

As austerity and recession squeeze employers, the Interna-tional Monetary Fund (IMF) forecasted in a report last week

that jobless numbers would keep rising over the next two yearsto peak at 19.5% in 2013, versus 7.7% in 2008.

The rising numbers of shops and businesses firing staff orshutting down makes it harder for the government to collecttaxes and plug the budget gap, raising the risk that even fur-ther measures may be necessary.

Unemployment will slowly start decreasing from 2014 butwill still stand at just over 13% in 2020, the IMF said.

On 15 December, Greek civil servants walked off the jobfor three hours to protest austerity measures that include pen-sion and salary cuts and the suspension of tens of thousandsof workers on partial pay. Pensioners marched through cen-tral Athens to protest outside Parliament.

Unemployment at record high this summer GREECELABOUR

CYPRUS|DIVIDED ISLANDDowner: UN wants to see whole process go forwardDescribing the meeting between the leaders of the twocommunities in Cyprus on 12 December as “unsuccessful”and unproductive, the UN Secretary-General's Special Ad-visor on Cyprus, Alexander Downer, noted they “need to beworking hard to make sure that not just the leaders’ meet-ings are more productive but that the whole process goesforward a bit better than it is at the moment.” He wasspeaking to the press after his meeting with CyprusDemetris Christofias at the Presidential Palace on 13 De-cember. Asked about the ideas he mentioned and how willthose speed up the process, Downer said that “it is not aquestion of speed, it is a question of success, isn’t it? It does-n’t matter whether it is fast or slow, it matters that there aregradual convergences. We had discussed some things thatthe two sides will be doing over the next few weeks, andhopefully, by the time we get to Greentree, we will have alot more to show than what we have at the moment”. In-vited to comment on Britain’s position with regard to theresolution on UNFICYP by the Security Council, Downersaid that “I don’t have any opinion at all about this. This isentirely a matter for the Security Council, it is not a mat-ter for the Secretary- General or for me and we are not partof the negotiation ... we just do what the Security Councilasks us to do, we don’t tell the Security Council what theyshould put in their resolutions”.

CYPRUS|DIPLOMACYNicosia and Sofia to strengthen relationsDuring an official visit to Sofia on 13 December, CyprusForeign Minister Erato Kozakou-Marcoullis and her Bul-garian counterpart Nickolay Mladenov highlighted the ex-cellent level of bilateral relations between Cyprus andBulgaria and vowed to boost them further. Before themeeting, the two Foreign Ministers signed a Memoran-dum of Understanding for the exchange of officers of theirDiplomatic Services. In the framework of the dialogue forthe enlargement of the EU, the Western Balkans, EU-Turkey relations as well as Turkey’s threats against the sov-ereign right of Cyprus to search for hydrocarbon reservesin its Exclusive Economic Zone were discussed. Cyprus’preparation for the assumption of the Presidency of theCouncil of the EU in the second semester of 2012 was alsodiscussed at the talks. They also discussed developments inthe Southern Neighbourhood as well as the next steps inhandling the crisis in the eurozone.

CYPRUS|BANKINGCyprus Central Bank, Dubai’s DFSA sign MoU The Central Bank of Cyprus and the Dubai FinancialServices Authority (DFSA) recently concluded a Memo-randum of Understanding (MoU). The two sides expressedtheir mutual interest and willingness in promoting furtherthe bilateral ties in the domain of supervision of credit in-stitutions. The MoU has been signed by DFSA Chief Ex-ecutive Paul Koster and Central Bank of Cyprus GovernorAthanasios Orphanides. The MoU adopts the basic prin-ciples of cooperation between supervisory authorities, asformulated by the Basel Committee on Banking Supervi-sion. The MoU outlines the general framework of mutualco-operation and exchange of information between the twosupervisory authorities, for the purpose of facilitating theperformance of their supervisory function as well as for theeffective supervision and regulation of credit institutionswith a cross border presence, in accordance with the re-spective national laws and regulations.

Greece's Prime Minister, Lucas Papademos and German Chancellor Angela Merkel chat during a round table at the start of the meeting the second day of theEU heads of states council, in Brussels, Belgium, 9 December 2011. On 15 December, Papademos noted that both fiscal consolidation and structural reformsare needed in order to improve the investment climate and to create the conditions for economic recovery. |EPA/OLIVIER HOSLET

IMF calls for faster reforms,laying off state workers

BULGARIA · ROMANIAPage 24 | New Europe THE EUROPEAN UNIONDecember 18 - 24, 2011

Some 166 passenger trains will "freeze"at the railway stations in the days beforeand during Christmas if the strike in theBulgarian State Railways (BDZ) con-tinues, news agencies reported. UsuallyBDZ usually increases the number oftrains for Christmas. "It is not certain atall that the trains will reach their finaldestinations. The Bulgarians must knowwell that the trains will be stopped be-tween 08:00 a.m. and 04:00 p.m. andcannot rely on them at all," Nova Tele-vision quoted BDZ Holding CEO Yor-dan Nedev as saying.

The BDZ Passenger Transport isstuck in an extremely difficult situationdue to trade unions. The losses for thecompany from the strike now total 2.5million levs, which hampers the pay-

ment of salaries. However on 14 December, the BDZ

management claimed in a statement thatthe strike had collapsed, with only 17workers striking in the entire country. Itsaid it was considering restoring the op-eration of the trains in the 8 am – 4 pminterval.

The syndicates have been quick toblame the management of a strike"lockout", with union leader PetarBunev saying that the striking com-mittees across the country are still dis-cussing how to react, and whether theywould resume their strike once theBDZ management starts running therespective trains again, news agencyNovnite reported. "Where can westrike right now – they have terminated

the operation of the trains," Bunevasked, cited by BGNES.

BDZ keeps claiming that the strike isillegal because of the new train schedulethat entered into force as of 11 Decem-ber 11. The BDZ management says thearbitrary decisions of the strike commit-tees and striking workers, deemed by thelatter agreements for transport servicesof the population in times of strike, aremade and issued on the base of the oldschedule.

The labour unions are adamant thestrike will continue until an agreementis reached with the BDZ management.They demand the signing of a classlabour contract under the same parame-ters as before the announced start of thereform.

State Railways Operator finds it hard to pay salaries

BULGARIATRANSPORT

The credit profile of Romanian naturalgas transmission operator (TSO)S.N.T.G.N. Transgaz S.A could weakenowing to the company's involvement inNabucco project, Standard & Poor'sRatings Services said in its statement.Transgaz is one of the six shareholdersin Nabucco gas pipeline project, whichis designed to transport gas from theCaspian region and Middle East to theEuropean countries.

The other project's partners include

the Austrian OMV, Hungarian MOL,Bulgarian Bulgargaz, Turkish Botas andthe German RWE. Each of participantshas equal share to the amount of16.67%. The estimated cost of the proj-ect is €7.9 billion. The shareholders willinvest 30% of total cost of the project, therest 70% will be paid owing to loans.

"If the project goes ahead, it couldsubstantially impair Transgaz' financialrisk profile in the absence of tangiblestate support," S&P said. "This will,

however, depend on Transgaz' commit-ment, and the size and type of its poten-tial financing for the project, S&P reportread. Standard & Poor's lowered its localcurrency long-term corporate credit rat-ing on Transgaz to BB+ from BBB-, fol-lowing a similar action on the localcurrency long-term sovereign credit rat-ing on Romania (foreign currencyBB+/Stable/B; local currency BB+/Sta-ble/B). The BB+ foreign currency ratingwas affirmed.

Nabucco could impair Transgaz credit profile, S&P saysROMANIAENERGY

Bulgarians ranked as the poorest citizens of the EU in 2010, ac-cording to Eurostat data. In 2010 the GDP per capita in Bul-garia was 55% below the average for the EU and the actualconsumption was about 60% under the average. In comparison,the GDP per capita in most of the rest of the EU membersvaries between 44% and 271% of the EU average.

Romania was also at the bottom of the ranking with a rate of

51% of the EU average. The GDP indicator for Greece was90%, 80% for Portugal, 65% for Hungary and 100% for Spain.The GDP per capita in the two largest EU economies, Franceand Germany, stood at 108% and 118%, respectively. Eurostatalso published a report on individual consumption, which re-flects the situation of households, with Bulgaria again recordingthe lowest rate among EU countries, of 42% the EU average.

Bulgarians ranked as the poorest citizens of the EUBULGARIALABOUR

ROMANIA|TELECOMS

Vodafone Romania kicks off store revamping processTelecom operator Vodafone Romania, second largest onthe local market in terms of revenues and number ofcustomers, has kicked off a programme to revamp itsstores, in which the company will invest between €5 mil-lion and 10mn, Business Review reported on 13 De-cember. The new concept of the stores was made byGrey Worldwide and Trans Form, an architecture com-pany from Cluj, having been applied to two stores inBucharest, located on Stefan cel Mare Blvd. and Pante-limon Road, according to Ziarul Financiar. Vodafone’smain competitors, Orange and Cosmote, have also pre-viously revamped their stores. Vodafone Romania CEOInaki Berroeta said: “We do have a program to revampour stores. We have actually started to do that and soonwe will unveil the first branch, which is going to be com-pleted by the end of this month. It’s not just one, thereare a few of them, but one of them will be in Bucharest.”

ROMANIA|LOAN

European Investment Bank to lend Romania €800mnThe European Investment Bank (EIB) will continue togive Romania loans next year – of about €800 million. Aquarter of the amount will support commercial banks,said Milena Messori, the head of EIB’s office in Roma-nia, Romania Insider reported on 13 December. “We al-ready have a couple of projects, we work with the mostimportant banks in Romania, and this will continue.The credit lines are EIB’s means of support for smalland medium enterprises. We offer credit lines to banksand banks give loans to small and medium enterprises,”said Messori. The infrastructure and energy sectors willbe among the beneficiaries. “It is important to attractforeign direct investments, and to do this, Romanianeeds to develop its infrastructure – highways, roads, en-ergy,” Messori added.

ROMANIA|HEALTH

Romgermed to open 250-bed private hospital next yearRomanian private medical care company Romgermedwill open the ambulatory outpatient clinic of itsRomgermed Hospital at the end of January 2012, fol-lowing an investment of €1 million, Romania Insiderreported on 12 December. The entire hospital, whichwill have some 250 beds, will require an investment of€20mn. It will be located in a renovated building onCalea Plevnei, where Romgermed already opened a lab,a €0.5mn project.

ROMANIA|BUSINESS

Romania to issue 5-year visasfor Turkish business peopleRomania will grant five-year visas to Turkish businesspeople, part of a package of measures aiming to facilitateTurkish investments in the country, according to Ro-manian president Traian Basescu, Romania Insider re-ported on 12 December. Basescu was on an official tripto Turkey, where he would attend a Romanian – Turk-ish business forum in Istanbul last Tuesday. Turkey isRomania’s fifth biggest trade partner. There are 6,000Turkish companies active in Romania. The $10 billiontrade threshold could soon be achieved, according to theTurkish Foreign Affairs Ministry’s estimates in Augustthis year.

A passenger walks by during a general strike of the workers of the Bulgarian State Railways (BDZ) at the main train station in Sofia, Bulgaria,24 November 2011. |EPA/VASSIL DONEV

NORWAY · ICELAND · SWITZERLANDNew Europe | Page 25PARTNERS

December 18 - 24, 2011

Aker Solutions moves northAs the chase for oil and gas moves further north, the oil serv-ices industry follows. Aker Solutions has announced plans toestablish a large engineering office in Tromso as part of thecompany's Northern Norway strategy, Norway Post reported.

The new office will gather knowledge and expertise relatedto the northern region. It will become involved in engineeringand maintenance and modification projects on the entire Nor-wegian continental shelf and abroad, and be an integral part ofAker Solutions' international competence network.

"We believe in the reserves potential on the Norwegian con-tinental shelf and in the Arctic. If the marked continues to de-velop positively and we are successful in our efforts to win workwith customers in the region, we believe that we will have asubstantial engineering hub in the North with 2-300 employ-ees in three to five years," said executive chairman of Aker So-lutions, Oyvind Eriksen.

The establishment of the Tromso office is part of Aker So-

lutions' overall strategy to increase the company's footprint inthe northern regions of Norway, driven by an increasing num-ber of interesting field development opportunities offshorenorthern Norway and in the Barents Sea.

Elsewhere in northern Norway, Aker Solutions is in theprocess of building up a subsea service base - housing engi-neers, technical staff and field operators - in Hammerfest tosupport the Goliat subsea field development. Aker Solutionshas also recently acquired the Narvik-based well technologybusiness X3M Invent. Aker Solutions is also considering es-tablishing an engineering office in Sandnessjøen to supportthe company's modifications and operations services business.

Aker Solutions today has offices and operations in the fol-lowing Norwegian locations: Arendal, Asker, Bergen,Egersund, Fornebu, Hammerfest, Horten, Kristiansand, Kris-tiansund, Lier, Midsund, Moss, Narvik, Oslo, Porsgrunn, Sta-vanger, Trondheim and Ågotnes.

NORWAYENERGY

Swatch switch watch workings for rivals

Starting 1 January, though, the com-pany will begin to cut back, and possi-bly eventually end, its sales of the innerworkings to competitors to concentrateon producing watches with higherprofit margins and to make sure it hasenough supplies on hand for its ownbrands, including Longines, Omega,Tissot and Breguet, Economic Timesreported.

The Swatch Group may be bestknown for its playful, plastic watches.But it also produces mechanical move-ments and other watch componentsthat it sells to most of its rival timepiecemakers.

Swatch's move, which was approvedby Switzerland's competition authority,is being challenged in court by ninewatch companies, many of them smalland without the financial wherewithal

to produce their own movements. The plaintiffs predict that several

companies will disappear becausethey have few other options for theparts, which must come fromSwitzerland to keep the lucrative"Swiss made" label. They also arguedthat if Swatch goes through with itswithdrawal, the result could be aswrenching to the Swiss watch indus-try as the arrival of Japanese digitalwatches, which almost led to the in-dustry's collapse in the 1970s.

The dispute is fanning resentment ofSwatch's clout and size in an industrythat is showing exceptional strength, asdemand from Asians who want tocommunicate their wealth and tasteovercome the worldwide economicdownturn and the strong franc.

"A lot of companies will cease to

exist while Swatch, the monopolyoperator, will simply get stronger,"said Peter Stas, the Dutch co-ownerof Frederique Constant, an inde-pendent watch company in Genevathat is one of the plaintiffs.

Stas acknowledged that it would havebeen nearly impossible for him to startin watch-making 23 years ago withoutaccess to Swatch's production platform.

Swatch's revenue last year of 6.44 bil-lion Swiss Francs, or about $6.95 bil-lion, makes it by far the world's largestwatchmaker.

The company insisted that its goal isnot to strangle competitors. And it ar-gued that its withdrawal will require ri-vals to raise their spending onmanufacturing, thereby strengtheningthe quality and competitiveness of theSwiss watch sector as a whole.

SWITZERLANDBUSINESS SWITZERLAND|IT

Infosys signs multi-yearcontract with Syngenta AGInfosys, India’s renowned IT Company, has signed a multi-year Transformation and Business IT services contract withSwitzerland-based Syngenta AG, one of the world's leadingagribusiness companies, Economic Times reported. Infosyswill consolidate Syngenta's Global Business IT services land-scape under a single shared services engagement, the com-pany said in a release last Monday. The engagement wouldenable Syngenta to roll out standardised processes, platforms,tools and ways of working across 90 countries, it said. Ad-ditionally, Infosys would set up a Business Architecture serv-ice to advise Syngenta on its future IT and process roadmap,acting as a key player in bridging the gap between businessstrategy and execution, Infosys said.

SWITZERLAND|RETAIL

Satisfying sweet tooth tobecome more expensiveThe world’s largest chocolate producer, Barry Callebaut,predicted that the price of chocolate will continue to risein the coming years, Swiss Info reported. The head of theZurich-based company, Jurgen Steinemann, said the cocoasupply has not been able to keep up with global demand.“If we don’t have any cocoa in the long-term, than we willnot be able to produce chocolate,” he said. Steinemann saidthis would lead to higher prices for the next three to 15years. Callebaut wants to work with cocoa growers to in-crease the size of the harvest without expanding existingplantations. A different planting method, including im-proved training for farmers, different seeds and the use offertiliser would enable the growers to double the amount,the chocolate chief added.

NORWAY|SHIPPING

PM opens Norwegian shipping centre in PerthOn his visit to Australia, Prime Minister Jens Stoltenbergprevious Friday opened the new Norwegian Farstad Ship-ping Offshore Simulation Centre in Perth, Norway Postreported. The centre is the world's largest and most ad-vanced offshore simulation centre for marine operations. “The opening of Farstad Shipping Offshore SimulationCentre is a milestone to Farstad Shipping. The centre isnot only a major investment in our employees' skills andsafety, but also a proof of the knowledge possessed by theNorwegian maritime industry, said Chief Executive Offi-cer of Farstad Shipping, Karl-Johan Bakken. The Simu-lation centre is a result of close interaction betweenmultiple actors in the maritime cluster in the western partof Norway. Strong maritime traditions and a local cultureof commitment to innovation, research and developmenthas created the foundation for global efforts. Farstad Ship-ping said in a press release that the centre is crucial inachieving Farstad Shipping's goal of zero harm to people,environment and equipment.

ICELAND|EU

Progress on membershipThere has been progress towards Iceland’s EU accessionnegotiations, with ministers approving the completion offour policy areas; Company Law; Enterprise and Industry;Trans-European Networks -- concerning infrastructure -- and Judiciary and Fundamental Rights. There are 35 pol-icy ‘chapters’ that need to be completed, bringing Icelandiclaw into line with EU law. One further chapter wasopened, Financial and Budgetary Provisions.

Clock this.| EPA/DIEGO AZUBEL

CROATIA · ALBANIA · SERBIA · BOSNIAPage 26|New Europe CANDIDATESDecember 18 - 24, 2011

ALBANIA|CORRUPTION

OSCE urges Albania to combat corruptionThe OSCE Ambassador in Tirana Eugen Wolfarthrecently urged the government of Albania to take atough stance against corruption starting with high of-ficials. The ambassador said that corruption is seri-ously hampering the efforts of the country inaccession to the European Union, AENews reported.According to Wolfarth, immunity for high-level pub-lic officials, including judges, remains a barrier for anefficient and successful investigation of corruptioncases. A recent report from Transparency Interna-tional stated that the corruption level in Albania haddeclined.

SERBIA|EU

Any further delay in EU accessionwill sink Serbia into nationalismIn a recent interview to Frankfurter AllgemeineZeitung, Serbian President Boris Tadic said that EUmembership is strategic goal of the country just asSerbia's European orientation should be of strategicimportance to the EU, Beta news agency reported. He recalled that Serbia has met all earlier conditionsin the EU accession process, taking on great politicalresponsibility and also facing a great personal risk.However any further delay and new conditions in theEU accession process would trigger new wave of po-litical instability, added the President. He also saidthat Serbia, and the Western Balkans alongside it,could once again sink into the darkness of national-ism and intolerance. Tadic warned that if Serbia is keep outside EU thenthe special system of values used to define Europe asa community will be mere illusion of the eternal pol-itics of the big and the small. In a text entitled “Serbia at a European Crossroads”,Tadic said, “The question arises why Serbia is beingpushed to the sidelines of contemporary historicalprocesses and why the enormous political efforts, un-dertaken in order to make a clean break with the poli-cies which led to the wars in the former Yugoslavia,are in advance condemned to failure and defeat? Willthis not be too big a trial for the Serbian society andthe fledgling Serbian democracy.” “Today more thanever, it is obvious that Serbia's European integrationprocess depends not only on the readiness and abilityto complete the social and economic reforms underway in the country, but also on to what extent the EUis ready to complete, in the foreseeable future, its mis-sion of establishing a zone of peace, prosperity andstability on the whole European continent,” the pres-ident explained. He stressed that regardless of when Serbia and Eu-rope will be ready for one another, Serbia will keepup the pace of social, political and economic reforms.Tadic recalled that the European Commission alsopositively assessed Serbia's reform efforts and results.The Serbian president admitted that Kosovo was cur-rently Serbia's biggest challenge, adding that Serbiawould not recognize the unilaterally declared inde-pendence of its southern province. The president saidthat the government however wish for a solution forthe issue of Kosovo whether it will one day become anEU member or not, because the country does notwant another unresolved conflict in the Balkans. “Theidea of greater Europe goes beyond the current 27member states. Europe will not be complete withoutthe Western Balkans, and that is not possible with-out a European, democratic and prosperous Serbia atits center,” Tadic concluded.

Croatia to join EU in 2013At a recent EU General Affairs Coun-cil meeting it was announced that Croa-tia’s admission to the European Unionhas been approved. Croatia is expectedto join the EU on 1 July 2013, Javno re-ported. It should be recalled that earlythis month MEPs approved Croatia'saccession as the 28th member of theEU. Parliament gave its consent toCroatia’s EU membership, as requiredby the treaties, in a vote at a recent ple-nary session.

The European Parliament has voted564 to 38 to allow Croatia accession tothe EU provided it makes progress inkey areas including LGBTI rights. If itmeets these benchmarks, Croatia couldbecome the 28th EU member state asearly as July 2013. In a report adoptedby Parliament on 1 December EUmember states called on Croatia, “to im-plement the anti-discrimination legisla-tion and resolutely to address cases ofhate crime, hate speech, racial threatsand intolerance directed against ethnicand LGBT minorities.”

The report also expressed deep con-cern over violent attacks on Split Pridein June this year and called on Croatianauthorities to prosecute those responsi-ble. The Council welcomed the com-pletion of the work on the AccessionTreaty at the General Affairs meeting.Accession negotiations were closed on30 June. The Council also noted withsatisfaction the positive Opinion of theCommission of 12 October 2011, and

the European Parliament's consent of 1December 2011. The spokesperson saidthat Croatia’s EU accession “sends apositive signal to the whole Balkan re-gion.” The EU’s envoy to Croatia, PaulVandoren, said that the country wouldjoin the EU even if it fails to fulfill its re-maining obligations, most notably pri-vatizing its loss-making shipyards. Theenvoy added that EU would continuemonitoring the country's judiciary re-forms, fight against corruption and re-structuring of the shipbuilding industry.

Meantime, MEPs also invite Croatiato combat the aforesaid challenges. They

urge Croatia to step up its efforts toprosecute war crimes, comply with allInternational Criminal Tribunal recom-mendations for the former Yugoslaviaand encourage the return of warrefugees, especially Serbs. They also callon Croatia to continue making struc-tural reforms to its economy, stimulateemployment by reviving the labour mar-ket and pursue fiscal consolidation inorder to boost competitiveness. MEPs’salso welcomed Croatia’s EU accessionand urged the country to turn out forthe EU referendum and vote for the ac-cession treaty.

CROATIAEU

According to an analysis by the Bosn-ian Chamber of Commerce, the Bosn-ian agrofood industry risks collapse withCroatia’s entry into the EuropeanUnion on July 1, 2013, Fars news agencyreported.

The analysis states that local enter-prises - and especially agrofood oneswill lose their most important foreignmarket since they will no longer be ableto export to the nearby country undercurrent conditions, and especially notmilk, meat and other products of an an-imal origin. The document claims thatBosnian authorities should adopt urgentmeasures and approve the law on a sys-tem of state subsidies as well as to ensurein the process of labour adjustment andsupport funds for enterprises and thecompetent institutions, first of all by set-ting up EU-recognised, in accordancewith European standards.

Officials in Sarajevo want to establisha state agriculture ministry, but politi-cians from Republika Srpska (RS) say itis not necessary, claiming that certainfunctions will be taken from RS to the

state level, and in turn weaken the entity.EU officials reiterated it is necessary toestablish one "address" with whichBrussels will be able to communicate.Currently in BiH, there are 12 agricul-ture, ten cantonal and two entity min-istries. The result is an administrativechaos for agricultural policies and au-thorisations. Experts evaluated theaforesaid problems is the least BiH willface as Croatia enters the EU. The realbarriers to be faced by the domesticmanufacturers will include an insuffi-cient number of equipped border cross-ings, under-equipped analysislaboratories, and lack of licenses, whichare required for exported goods to enterthe EU market. Zeljko Marijan, direc-tor of the Livno dairy, says his companyhas already begun to search for othermarkets. "Over 60% of our products areexported to Croatia. We will lose amajor market due to our tough policy,"Marijan said.

The UNDP believes it is shocking noone warned BiH farmers and manufac-turers about the looming risks. "For ex-

ample, you produce dry meat. To exportto Croatia you will have to go to Croa-tia to analyse the product in their labo-ratories and obtain a license from theirgovernment. This is a major expenseand time loss. That is not how the tradeprocess works," Nedim Catovic, thehead of UNDP in BiH said. He addedthat BiH currently does not fulfill theEU conditions for trade, which singalsthat BiH manufacturers and farmerswill not be able to export products suchas milk and meat products to Croatia.

Snezana Stankovic, a Banja Luka-based economics expert, said that thetwo basic problems will be productquality and quantity. "Our laboratoriesfor testing food do not meet the EUstandards. Croatia is one of the mostimportant markets for BiH and thisproblem will escalate when Croatia en-ters the EU," Stankovic said. IvanaSucic, the director of the CroatianAgency for Trade Policy and Interna-tional Relations announced that Croa-tia will cancel all of its free tradeagreements after EU accession.

Croatia in EU triggers problem for Bosnian producersBOSNIA RELATIONS

Coratia's president Ivo Josipovic and Croatia's Prime Minister, Jadranka Kosor pictured during a

meeting to sign the accession treaty for Croatia to join the European Union, at the EU headquar-

ters in Brussels.| BRUNO FAHY

Speaking at the opening of the TurkishInnovation Conference in Istanbul,Turkish President Abdullah Gul saidthe country needs to expedite efforts inorder to boost research and development(R&D) investments, to realise the goalsin innovation stipulated in the govern-ment's 2023 vision, Zaman reported.

The conference being held for thefirst time this year was attended by someleading foreign and local figures fromthe technology industry. The Presidentsaid that as part of long-term plans,Turkey has set a target to increase theshare of R&D investments to 3% ofGDP by 2023, the centennial of thefounding of the Republic of Turkey.Last year the share of funds allocatedfrom Turkey's gross domestic product(GDP) to R&D investments went upto 0.85% from 0.4% in 2003.

According to observers, the “psycho-logical barrier” is the level of 1 % alloca-tion from the GDP to R&D beforegrowth in Turkey's R&D would accel-erate. In the medium run, Turkey is try-ing to earmark 2% of its GDP forR&D, as seen in many developed coun-tries. Gul stressed that the country isbound to develop its innovation capac-ity, a major step before the countrycould minimize its current account

deficit (CAD) and increase the com-petitive power of its entrepreneurs inglobal markets. He noted that Turkey islagging behind a desired level of devel-opment in R&D but he was pleased tosee involvement of more entrepreneurs,scientists and NGOs engaged in R&Dstudies in Turkey than in the past.

He called on the government to en-courage more healthy cooperation be-tween the non-financial sector and theuniversities which in turn played a vitalrole in paving new horizons for Turkey’s

R&D studies. Recalling that Turkey in-vested more than $5 billion on R&Dactivities in 2010, three times the figurein 2000, Gul said: “We are expecting tosurpass even the level of R&D invest-ments in developed economies by2023.” He said he is confident that cur-rent developments in R&D will yieldfruitful results in coming decade as henoted the number of personnel em-ployed in R&D in Turkey increased to82,000 while the number of researchersand scientists was 64,000 as of last year.

TURKEY · FYROM · MONTENEGRO

New Europe |Page 27CANDIDATESDecember 18 - 24, 2011

MONTENEGRO|AIRLINES INDUSTRYMontenegro, US sign Open Skies agreementRepresentatives of Montenegro and the United States re-cently inked in Podgorica an open-skies agreement aiming toliberalise air services of the US and Montenegrin air carriers,Montenegro Times reported. Under the terms of the agree-ment, both countries can fly from, to, as well as beyond eachother’s territories, with no restrictions regarding the type ofaircraft, the frequency of flights and prices. Ray LaHood, theUS Transportation Secretary, said that an open market forthese services would set the stage for trade and travel betweenMontenegro and the United States. For the first time Mon-tenegro has signed this type of agreement with US. The pre-vious aviation agreement (between Yugoslavia and the UnitedStates) governed air rights between Montenegro and the US.

MONTENEGRO|EU AFFAIRS Accession negotiations to kick off in June 2012Montenegro will likely start EU accession negotiations nextyear, in June. The European Commission will be monitor-ing the country’s reforms and the fight against organisedcrime, corruption and implementation of the rule of law inMontenegro, Montenegro Times reported. Montenegro wasgranted an EU candidate country status on 18 December2010. European Council President Van Rompuy said theauthorities in Montenegro had launched many internal re-forms that had to be completed. The report of the EuropeanCommission on Montenegro’s integration process isfavourable, but EU member states say that Montenegro’sprogress in implementation of reforms should be evaluatedprior the start of accession negotiations. The fight againstcorruption, fundamental human rights, dealing with organ-ized crime and implementation of the rule of law are themost important processes that should be monitored andevaluated. The accession negotiations framework should beprepared, and once the EC gets the green light, accessionnegotiations should start.

FYROM|BUSINESSEconomy ministry spurs firms to be innovativeAt a recent meeting, FYROM’s Minister of Economy ValonSaracini said enterprises with competitive and innovativeproducts can face the crisis. The government is communi-cating with the entrepreneurs taking into account their de-mands to boost innovation, MRTOnline reported. Theministries of economy and education are implementing anactive policy to encourage companies to be more innovative."With innovative products we can become competitive onglobal markets. I call on the companies to try and be morecompetitive and more innovative in order to face their com-petition, otherwise the crisis will consume them," the min-ister noted. He stressed that the economy of the country issmall and is nearly 60% open for export intended for the Eu-ropean market. As a result it is doubtful that the country willstay unaffected to the crisis in the European Union. Theminister pointed out the importance of innovation whichcan help FYROM to stand on firm grounds. He said that ef-forts will be taken to establish a community comprising ofgovernment-universities and business for projects and activ-ities for economic development. Minister of Education andScience Pance Kralev said the ministry aims to include theacademic community into the development of a dialoguewith the business community. He said that the scientific po-tential of the country lays a solid foundation for co-operationand establishment of future innovative policies. Currently,0.3% of country's GDP was singled out for scientific and re-search activities.

Turkish President Abdullah Gul delivers a speech during the opening session of the 4th World Pol-icy Conference in Vienna, Austria, 9 December 2011. Gul said recently that the country needs toexpedite efforts in order to boost research and development investments. |EPA/HERBERT PFARRHOFER

Economists had recently warned that inflation in Turkey willwitness nearly two digit figure. Records showed that infla-tion in the country went up to 9.5% last month from a pre-vious 6.7% in the earlier month, Zaman reported.

The main reason for the rise in inflation is the hike in foodand clothing prices, increase in special consumption tax ontobacco, cars and mobile phones and rise in import taxes. TheCentral Bank of Turkey a 1.73% rise in the consumer priceindex (CPI) for November and predicted that the figures onthe index will continue to increase in December. Accordingto the central bank, changes in the price of unprocessed fooditems caused the rise in the CPI.

The bank stated, "The annual inflation rate is predicted tocontinue its rise within the expected limits for December due

to the base effect on the prices of unprocessed food items." InNovember, there was a 30 liras rise in civil servants' salariesand pensions because of the high inflation figures. It is ex-pected that a rise in inflation for December will be reflectedin these payments again.

Data released by the Turkish Statistics Institute (TurkStat)last month showed that Turkey's inflation has demonstrateda sharp increase starting in the second quarter. The base ef-fect on prices of processed food items and the weakening ofthe Turkish lira are cited as the major factors behind the in-creasing inflation. The base effect from hikes in the privateconsumption tax (OTV) on certain products in October,along with rising prices for crude oil in global markets, areresponsible for the high figures this November.

Inflation nears double digits

TURKEYECONOMY

The European bank for Reconstructionand Development recently announced a$50 million loan to Turkish producer ofacrylic fiber, Aksa Akrilik Kimya SanayiA.S (AKSA), a press release read. Thefund will be tapped to increase the com-pany’s operational efficiency by optimis-ing production processes and reducingoperational costs at AKSA’s plant in

Yalova, in north-western Turkey. Overall$60mn would be required in the im-provements of the plant.

EBRD fund will enable Aksa to im-plement measures which would improveits environmental performance and helpachieve best international practices inplant and worker safety, as well as riskmanagement. The project will help Aksa

to reduce its carbon footprint and set im-proved standards in Turkish industry andat same time spur others to achieve sim-ilar standards. Speaking during a loansigning ceremony, Alain Pilloux, EBRDManaging Director for Industry, Com-merce and Agribusiness said that theBank is committed supporting energyefficiency finance programmes in Turkey.

EBRD offers loan to acrylic fiber producer Aksa

TURKEYBUSINESS

Gul: Turkey needs to workhard to meet 2023 goals

TURKEYRESEARCH & DEVELOPMENT

UKRAINE · MOLDOVA · BELARUSPage 28 |New Europe NEIGHBOURHOODDecember 18 - 24, 2011

BELARUS|SPACE

Belarusian satellite to be launched next yearBelarus' Earth-imaging satellite is expected to be launchedinto orbit in the first half of 2012, the deputy chairman ofthe Belarusian National Academy of Sciences, Pyotr Vit-syaz, told reporters in Minsk on 14 December. He said thatexperts were testing the equipment. "After failed launchesthat happened in Russia, a decision was made to double-check everything. Double-checking is better than havingdoubts," Vitsyaz said, adding that a date for the launch of thesatellite into orbit would be set as soon as the tests werecompleted. "We have decided that even if there is the slight-est complaint about the spacecraft's performance it will notbe launched," he said. The Belarusian satellite was initiallyexpected to be launched in the first quarter of 2011.

BELARUS|EU AFFAIRS

EU to keep pressure on Belarusian authoritiesThe European Union should continue pressure on theBelarusian authorities to put an end to reprisals in thecountry, Catherine Ashton, the EU`s high representativefor foreign affairs and security policy, said at a meeting atthe European Parliament on 13 December. Ashton ex-pressed regret about the recent prison sentence passed onprominent Belarusian rights activist Ales Byalyatski, whoshe said had been imprisoned for helping distribute EUsupport to civil society. “We have made it clear that weabsolutely must see the release and the rehabilitation ofthe political prisoners,” she said. “That means enablingpeople to go back to the lives they had, including stand-ing for elections and participating in political life. We willcontinue to work down that track.”

MOLDOVA|POLITICS

Transdniestria election heads for a second roundPresidential elections in Moldova’s breakaway region ofTransdniestria are set for a second round run-off after earlyresults showed no candidate would win more than 50% ofthe vote, RIA Novosti reported. Ex-parliament speakerYevgeny Shevchuk leads Supreme Council speaker AnatolyKaminsky by 38.5% to 26.5%. Current Transdniestria leaderIgor Smirnov has garnered 24.8% of the vote. The Russian-speaking region gained de facto independence fromMoldova in 1992. It is seeking full independence butMoldova says it is only prepared to allow autonomy.Moldova and Transdniestria on 1 December held their firstofficial meeting in six years under the auspices of the Or-ganization for Security and Cooperation in Europe(OSCE) and involving envoys from Russia, Ukraine, theU.S. and the EU. The next meeting is scheduled for Febru-ary 2012.

MOLDOVA|POLITICS

Communist supporters protest in ChisinauSome 15,000 Communist Party supporters have demon-strated in Moldova to demand the resignation of the gov-ernment. Mostly elderly protesters in Chisinau called forthe resignation of Prime Minister Vlad Filat and the gov-erning Alliance for European Integration. Moldova, a coun-try of 4.1 million people, is one of Europe's poorest with anaverage monthly salary of €200. Some 600,000 Moldovanswork abroad. The pro-European government has been inpower since July 2009 when the Communists lost an elec-tion in the former Soviet nation.

VIENNA – Seven years ago,Ukraine’s Orange Revolution in-spired hope that the country wasmoving towards genuine democracy.Since then, democratic freedomshave been curtailed, the formerprime minister and co-leader of therevolution, Yulia Tymoshenko, hasbeen imprisoned, and President Vik-tor Yanukovych’s regime has becomeinternationally isolated. Ukraine isunravelling.

Today, a small group of oligarchsclustered around Yanukovich havecaptured power. They manipulateelections, control the media, and areshaping the country’s institutions tofurther their own business interests.Condemnation by the West has hadno impact. So long as they controlthe country’s industries and naturalresources, they will maintain theirgrip on power – the approach per-fected by their role model, formerItalian Prime Minister Silvio Berlus-coni. Whatever one thinks of Ty-moshenko, she was not imprisonedfor any ostensible crimes she com-mitted while in power. She is inprison because she lost that power.This sets a dangerous precedent, forit creates a powerful incentive – win-ner takes all, loser goes to prison –for ruthlessness.

It is difficult to predict how Ty-moshenko’s case will play out –whether Yanukovych will succumbto pressure from the EuropeanUnion and the United States to re-lease her, or to the forces that wantto exclude her from politics forever.Until recently, Ukrainian leaderswere accustomed to more efficientmeans than prison for dealing withinconvenient opponents. In 2000, forexample, the journalist GeorgiyGongadze was kidnapped and be-headed after publishing online re-ports about high-level governmentcorruption. During the ensuing in-vestigation, former Interior MinisterYuriy Kravchenko died of two gun-shots to the head hours before hewas to testify.

Perhaps Tymoshenko herself didnot understand how sharply hercountry had turned away from dem-ocratic norms when she mockedYanukovych and her opponents dur-ing her trial. Indeed, her first briefimprisonment in 2001 furnished herwith political capital and pushed herinto the democratic opposition’sfront ranks.

Perhaps Yanukovych himself didnot foresee the consequences of Ty-moshenko’s arrest, trial, and impris-onment. Some Ukrainian conspiracy

theorists – of whom there is noshortage – maintain that Yanukovichwas tricked by skillfully preparedmisinformation provided by the of-ficials around him.

If the EU refuses to sign an Asso-ciation Agreement with Ukraine atthe upcoming Ukraine-EU summitin Kyiv on 19 December because ofTymoshenko’s imprisonment, thedamage to the country will be vastand enduring. But, with every monththat Tymoshenko spends in jail –more than three so far – her martyr-dom grows, making it harder forYanukovych to free her. Yanukovychhas become hostage to a situationthat he created – and thus has donenothing to extricate himself from it.

Russia’s then-president, VladimirPutin, put himself in an analogousbind in 2003 with the arrest of theoil oligarch Mikhail Khodorkovsky.At the time, Khodorkovsky was thewealthiest man in Russia and anopen critic of the Russian govern-ment, so his arrest triggered a stormof international protest. LikeYanukovych, Putin is under pressurefrom the West to release his oppo-nent, but the political risk is toogreat.

Yanukovych’s goals are unclear. Hedoes not respond to European pres-sure, even though Ukraine wouldgain political leverage from closerEU ties. Perhaps he simply dislikesthe EU because it applauded his de-feat in the Orange Revolution, andbecause he makes embarrassinggaffes whenever he goes there.

Then again, perhaps he haslearned from Belarusian PresidentAlexander Lukashenko that the EUhas little influence over non-EUcountries’ internal politics. At thefirst positive sign from Belarus, the

EU forgives and forgets. Indeed,even without a positive signal fromUkraine, the European Parliamenthas recommended that negotiationson the Association Agreementbegin.

Generally, Yanukovych’s foreignpolicy appears reactive. In 2010, forexample, he bowed to Putin’s pres-sure to extend the Russian lease onnaval facilities in Crimea to 2042,whereas Tymoshenko and otherspointed to the treaty’s unconstitu-tionality.

Yanukovych also underminedUkraine’s geopolitical strength vis-à-vis Russia by rejecting NATO’s invi-tation to join in 2010. Even if theKremlin is not particularly happywith the planned EU-Ukraine Asso-ciation Agreement, it has little rea-son to worry as long as Yanukovychremains a weak president in a di-vided country.

Ukraine is thus becoming a dan-gerous mix of authoritarianism andcorrupt capitalism. In Belarus, an im-poverished Lukashenko increasinglyresorts to brute force to maintain hisrule – breaking up peaceful demon-strations, imprisoning political op-ponents, and terrorizing theintelligentsia. Compared to him,Berlusconi is a shining example ofgood government. But, asYanukovych and his backers are wellaware, Berlusconi is gone, andLukashenko is not.

Tatiana Zhurzhenko is a politicalscientist at the University of Vienna.Her most recent book is Borderlandsinto Bordered Lands: The Geopoli-tics of Identity in Post-SovietUkraine. Copyright: Project Syndicate, 2011.www.project-syndicate.org

Ukraine on the Edge UKRAINEPOLITICS

A supporter of former Ukrainian Prime Minister and opposition leader Yulia Tymoshenkoholds her portrait during a protest near the Kiev's appeal court in Kiev, Ukraine, 14 Decem-ber 2011. |EPA/SERGEY DOLZHENKO

By Tatiana Zhurzhenko

KAZAKHSTAN · TAJIKISTAN · TURKMENISTANNew Europe | Page 29NEIGHBOURHOOD

December 18 - 24, 2011

Amendments to the Labor Code of the Republic of Tajik-istan were recently initiated by deputies Sabohat Mukumovaand Merojiddin Hakimov. The deputy colleagues approvedthe amendment at the third session of the MajlisiNamoyandagon of the fourth convocation of Majlisi Oli ofTajikistan, Asia-Plus reported.

Commenting on this issue, Mukumova said that ac-cording to the additions to the Labour Code, employersin Tajikistan, irrespective of their ownership, are prohib-ited to employ citizens without a written employmentcontract for a period of one year. “Today our country ispracticed hiring for one, two, three months and without awritten contract, which leads to the violation of civilrights, in particular, to leave, welfare payments, to pay forsick leave”, noted Mukumova. Addressing the deputies,the Minister of Labour and Social Protection of Tajik-

istan Mahmadamin Mahmadaminov said that there areabout two million people were provided with jobs, ofwhich over 50% are women.

"Basically, the majority of working people in the private sec-tor have a problem with getting holidays, dismissal from workwithout explanation, but after the adoption of amendmentsto the LC within a year no one has the right to dismiss work-ers without holding the appropriate certification or on the con-clusion of the medical commission" the Minister added.While speaking on the issue of dismissal of citizens, DeputyShodi Shabdolov said that the leaders not only of private com-panies but also government agencies abused their authority.

The author of amendments replied the leader of the CPTthat the Labour Code of the country defines the payment forovertime working hours, work on weekends or holidays atdouble rate.

Labour contracts must be for minimum of 1 yearTAJIKISTANLABOUR

China will launch a communicationssatellite for Turkmenistan with itsLong March-3B carrier rocket in2014, the Chinese launch contractorsaid. To this effect China Great WallIndustry Corporation (CGWIC)signed a contract with the FrenchThales Alenia Space, Turkmenistan.rureported.

The satellite will be Turkmenistan'sfirst communications satellite. It willbe sent into orbit at the Xichang Satel-lite Launch Centre in southwestChina's Sichuan province, based onthe SPACEBUS 4000C2 platformmade by Thales Alenia Space France(TASF). Carrying a Ku-bandtransponder, the satellite is designed toweigh about 4.5 tonnes with a life spanof 15 years.

The communications satellite isscheduled to be launched from Xin-chang space launching site by Chang

Zheng-3B rocket-carrier in 2014.Asthe only Chinese company engaged ininternational commercial satellitelaunching services, CGWIC, a sub-

sidiary of the China Aerospace Scienceand Technology Corporation, haslaunched 38 foreign satellites since1990.

China to launch Turkmen comsatTURKMENISTAN SPACE

Grigory Marchenko, Kazakhstan’s chief banker recently an-nounced at a meeting in Almaty that the country’s NationalBank managed to entice foreign investors to one of the threelargest pension funds in the country, the State AccumulationPension Fund (SAPF), Gazeta.kz reported.

It was reported that three potential investors are interestedin purchasing SAPF pension savings fund. GrigoryMarchenko, Chairman, National Bank of Kazakhstan said,“There are three potential investors for SAPF. The tenderprocess is not formalized, because they are studying the situa-tion and two groups have come here. The third hasn’t arrivedyet since they are having meetings and they are collecting in-formation about us.” He added one of them will reach a finaldecision but said it was too early to speak on the details.

In addition an Asian investor also expressed interest to takepart as a strategic investor in the SAPF fund. A month earlier,the National Bank purchased almost 10% of the state-ownedpension fund from EBRD and became a 100 percent share-holder of SAPF. This Jeanery Kazakhstan’s superannuation

funds could have faced a difficult scenario as it was reported thatthe portfolio of fund shareholders was limited to 25% by legis-lation. This norm had to be canceled since this is a specific andtherefore narrow market. Marchenko said that the Nationalbank has agreed on a three-stage approach with the banks, pen-sion funds and the Financial Stability Council. Now, this normwill be specified in the law, which provides for 25% being ownedby one entity. The Bank is moving in this direction gradually.

According to the country’s chief banker, there’s a rollercoaster remaining in the international currency market butyield no impact on the national currency rate of Kazakhstan.The tenge has appreciated by 0.1% in a month. Marchenkoinformed that exporters, banks, and people purchase some ofUS dollars just in case. So there are two trends overlappingeach other entailing a situation of full stability in the foreign ex-change market. He said that the bank is pleased with this sit-uation as there is no particular strengthening and weakeningand there are two trends and the exchange rate forms in an in-dependent manner.

Investors to buy stake in SAPFKAZAKHSTAN FINANCE

TAJIKISTAN|DEVELOPMENT

World Bank complete visit to TajikistanThe World Bank Director for Strategy and Operationsfor the Europe and Central Asia Region, TheodoreAhlers, recently concluded his visit to Tajikistan. Theaim of the visit was to review the progress under theCountry Partnership Strategy with the Government ofTajikistan, including areas for future priority support,press release issued by the World Bank Tajikistan Coun-try Office said. The team of experts from the Bank had ameeting with the President of Tajikistan, the Prime Min-ister, other government officials, donors and civil societyrepresentatives. They discussed the partnership betweenthe World Bank and Tajikistan. The Bank is currentlyfinancing 16 projects in Tajikistan totaling $212 millionwhich focus on agriculture and rural development (38percent), energy and water (33 percent), education, healthand social protection (26 percent), and economic policyreform (3 percent). The World Bank, a developmentpartner of Tajikistan for quite a long time has so far pro-vided $640 million in grants and concessional credits overthe last 15 years. The midpoint of the 2010-2013 Coun-try Partnership Strategy provides an opportunity for aprogress review. Next year the Bank is considering somefinancial projects for $50-60 million. The aim of theaforesaid projects is energy loss reduction, municipal in-frastructure development, farm restructuring and landregistration, private and financial sector development, andeconomic policy reform. Priorities were also discussedfor allocating additional funding through 2014. The en-ergy situation in Tajikistan was also an issue at the meet-ing as the country is suffering from energy shortageproblems. The Bank is currently preparing a power sup-ply options study for Tajikistan. The Bank is also willingto support other priority measures such as Norak hydro-electricity power plant (HPP) rehabilitation, a winter en-ergy management plan, advisory support on electricityexport, and scaling-up the Dushanbe metering program.

TURKMENISTAN|GOVERNANCE

Former minister alleges lack of democracyEx-Turkmen Culture and Tourism Minister GeldimuratNurmuhammedov recently slammed Turkmenistan for lackof democracy in Ashgabat. The former Turkmen cultural of-ficial said that the ill-named Democracy Party, only one partyin Turkmenistan lingers in the country which is used as toolto play a trick during elections, Turkmensitan.ru reported. He said, “If someone wants to set up a political party today,there is no legislation for doing so," he said. "There are peo-ple who want to create a party. But they are told by the Mejlisthat 'there is no law on establishing political parties.” It was re-ported that few weeks back President Gurbanguly Berdy-mukhamedov's pocket parliamentarians have been trying toshow the public in state-controlled media interviews that theywill have "democratic" elections apprantly open to free nom-inations. Lack of enabling legislation for parties is reported inthe country. This is one pre-requisite in a country where theconstitutional norms for freedom of association are not upheldand there's no independent judiciary to enforce them. Theprospect for registering citizens' nominations groups in theabsence of parties is within grasp but such registration will bejudged by local officials and several barriers will probably pre-vent the emergence of truly independent alternative candi-dates. A few years back, the government of Uzbekistanpermitted half dozen other parliamentarian parties beside theruling party to register, although they are under obvious statecontrol. However no such effort was taken by the Turkmengovernment despite claims by the president that he wouldgive a green signal for a second, agricultural party to comeinto effect.

Turkmenistan President Kurbanguly Berdymukhamedov (L) shakes hands with Chinese pre-

mier Wen Jiabao in Beijing, China.| EPA/DAVID GRAY

UZBEKISTAN · AZERBAIJAN · KYRGYZSTANPage 30| New Europe

NEIGHBOURHOODDecember 18 - 24, 2011

Chaarat Gold’s report updates on Tulkubash projectChaarat Gold, an exploration and devel-opment company operating in the Kyr-gyz Republic announced that itsTulkubash project is on target for pro-duction in 2013 and that its gold re-source there went up by 56% to 501,000ounces at 2.92 grams per tonne, newsagencies reported. Chaarat, whose proj-ects are located on the highly-prospec-tive Tien Shan Gold Belt area of CentralAsia, added that significant potential tofurther upgrade its resource and reserveat Tulkubash had been identified.

Chaarat said that during the 2011 ex-ploration season work was focused onimproving the resource and generatingreserves from the “open pittable” sectionof the Central Tulkubash section of theore body, yielding impressive outcome.This helped improve Chaarat’s under-standing of the Tulkubash project to theextent that it now believes that the re-source may have the capability of sup-porting production at a rate of 2,500tonnes per day. Chaarat said further drill results to the

south and north of the zone indicatethat the reserve can be increased signif-icantly. The strike extension and thegeometry of the pit mean productioncan be increased without changing thestrip ratio and without interrupting themining activities. It was reported last month that drillingresults in the Tulkubash zone suggestthat the mineralised zone extends by afew kilometres due north and that thisextension should make it possible to sig-nificantly increase production.

KYRGYZSTANMETALS

KYRGYZSTAN|POLITICSPresident calls on party to form governmentKyrgyzstan's President Almazbek Atambayev recentlyurged the minority Social Democratic Party to form anew coalition government and act for the welfare of thepeople, Irinnews.org reported. Such a move would re-store political normalcy to the struggling Central Asiannation. Members of the incoming coalition have gainedleast seats in parliament but earned support from formerparty leader Atambayev. It should be noted that fewweeks back the SDPK pulled out of the fractious three-party coalition due to disagreements on judicial, politicaland economic reforms.

AZERBAIJAN|INDEPENDENCEUNDP, SAM access Azeri economic developmentThe Centre for Strategic Studies (SAM) and UnitedNations Development Programme (UNDP), recentlyorganised an international conference on 'Twentieth an-niversary of independence: successes and challenges onthe path of forming progressive, just and dynamic state',news agencies learnt from UNDP’s Azerbaijan Office.MPs, governmental officials, diplomats, representativesof media organisations participate in the event. Speakingat the conference, President of the UNDP’s AzerbaijanOffice Fikret Akcura said that after independence, Azer-baijan has provided its development in all spheres. Akcuranoted since 2000, that social welfare of people increasesby 14% each year and in 2006, the economic growthreached 35%, which proves the development of the coun-try. He stressed one of the biggest feat of Azerbaijan is re-duction in poverty level from 50% to 10% and severalmeasures were adopted to ensure people with food secu-rity and high-quality drinkable water. The office presi-dent noted that gender equality is also at high level inAzerbaijan and 18% of MPs is aware of it. However theUNDP envoy said that Azerbaijan’s biggest problem isNagorno-Karabakh conflict and in this regard he saidthat the international community has failed to do muchto resolve the problem. Akcura expressed hope that soona solution to the conflict would be found. In his speech,Head of the Presidential Administration RamizMehdiyev said that the 20 years are a very small periodfrom the point of view of establishment and developmentof the state. He mentioned that the reforms were imple-mented as well as great work was conducted in Azerbai-jan after restoration of state independence. Thegovernment develops new development strategy and ispresently at the new phase of the development strategy.

UZBEKISTAN|AIDIFC helps financial institutions support SMEsThe International Finance Corporation (IFC), a mem-ber of the World Bank Group in collaboration withSAIPRO Information Rating Agency launched a sem-inar in Uzbekistan, Uzbekreport.com reported. Such amove is part of IFC’ strategy to help financial institutionsin the country to improve their credit underwriting prac-tices, facilitating lending to entrepreneurs and businesses,especially the small and medium enterprises that drivethe country’s economy. The event garnered over 70 par-ticipants from the financial industry. The aim of the sem-inar is to train banks on how to use automation, scoring,and credit bureaus in their loan operations. “This initia-tive is an important next step following Uzbekistan’s newlaw on credit information exchange, which was adoptedin October 2011 with IFC’s support,” said Ravshan Dju-raev, general director of SAIPRO.

The Central Bank of Azerbaijan (CBA) Chairman ElmanRustamov recently urged for additional sources to financemortgage crediting, news agencies reported. He explained thatalthough funds allocated for mortgage crediting financing fromthe country’s state budget for 2012 exceed previous years’ in-dexes, the CBA will seek for additional sources to cover de-mand for mortgage. According to Rustamov, additional fundscan be drawn from commercial banks on the line of their mort-

gage programmes both from domestic and foreign financialinstitutions. It was reported that work is also underway on sim-plification of conditions and reduction of interest rateson mortgage crediting. Rustamov stressed that the process ofinterest rates reduction is still ongoing and in post-crisis eramore considerable reduction of interest rates is required in orderto reduce the capital in price for economy diversification andbanks are the main capital sources.

Baku seeks for additional financing of mortgage creditingAZERBAIJANBANKING

A round table investment and tourismpotential of Uzbekistan was recently or-ganised by the Embassy of Uzbekistan inGermany in conjunction with the Associ-ation of Economic Consuls of theBerlin/Brandenburg region and BerlinOffice of Senior Expert Service (SES),Uzbekreport.com reported.

The participants at the event comprisedof representatives of the expert-analytical,scientific, business, public circles andmedia of Germany.

The participants were acquainted withinformation on the achievements ofUzbekistan since independence, the mod-ern socioeconomic development,favourable conditions for foreign investorsand potential joint investment projects, aswell as purpose of the State programme“Year of small business and entrepreneur-ship”. Various examples of the successfulco-operation between Uzbekistan andGerman companies in trade and invest-ment were also discussed. Several Germanfirms MAN, Knauf, Claas operate in themarket of Uzbekistan. A presentation ofthe tourist potential of Uzbekistan wasalso made at the event.

In addition possibilities of cooperationin the tourism sector, including such proj-ects as "mega-info-tours", as well as im-provement of the country's tourisminfrastructure were also discussed. Thepresident of the Association of EconomicConsuls of the Berlin/Brandenburg re-

gion (AEC) noted that the associationsupports the German entrepreneurs inforging contacts with their Uzbek part-ners which in turn would further enhancetrade and economic, financial and invest-ment co-operation. Special emphasis wasalso paid to the development of joint proj-ects and their implementation, imple-mentation of import-export operations,international logistics, tourism and otherareas of co-operation.

DB-Mobility Networks Logistics con-sultant at the German railway concern

Deutsche Bahn, Reiner Rodig, presentedin detail the present structure of the trans-port and logistics units of German Rail-ways DB Schenker, its activities in theCommonwealth of Independent States(CIS) and Baltic countries.

The SES office in Berlin said that theexperts of the organisation actively pro-mote small and medium-sized businessesand public utilities in countries with tran-sition economies, using advanced innova-tive technology of firms and companies ofGermany.

Investment and tourism potential presented in Berlin

UZBEKISTANTOURISM

The Chor-Su market in Tashkent. Germany and Uzbekistan discussed co-operation intourism. |BELGA PHOTO OLIVIER MATTHYS

RUSSIA · GEORGIA · ARMENIANew Europe |Page 31NEIGHBOURHOOD

December 18 - 24, 2011

On 12 December, Mikhail Prokhorov,the billionaire who owns shares in amajor gold mining company and anarray of other ventures in Russia as wellas the New Jersey Nets basketball fran-chise in the United States, said that hewould run against Vladimir Putinfor president in 2012. However,Prokhorov remained tepid and vaguein his criticism of Putin and his UnitedRussia party, which were lambastedby tens of thousands of middle-classprotesters on 10 December at the biggestopposition rally in Moscow since 1993."I've made probably the most serious de-cision of my life: I'm running for presi-dent," Prokhorov said as he opened hissnap news conference.

Prokhorov declared himself a "cham-pion of the middle class" and said he wasalready working to create a grassrootspolitical party to counter "populist tricks"and promote open dialogue within civilsociety. He said that he would unveil hispolitical agenda after he registered ascandidate.

Prokhorov also pledged to build a newpolitical party “from scratch.”

He did not rule out the possibility ofcooperation with Russia’s former financeminister Alexei Kudrin, who earlier toldthe Vedomosti daily newspaper that he isin contact with Prokhorov about thepossible establishment of a new politicalparty.

The businessman however dismissedthe claims that he had discussed his pres-idential ambitions with the Kremlin.Asked whether he had met with Presi-dent Dmitry Medvedev or Putin,Prokhorov said he “had not met either.”

Given Prokhorov’s public argumentswith the Kremlin in the lead up to theKremlin elections, his participation maylend some credibility to the process. Also,Prokhorov’s candidacy may actually help

Putin since the more candidates runagainst the Russian premier, the less thechance of any one of them has to con-solidate enough votes to seriously chal-lenge the former KGB agent.

Putin’s spokesman Dmitry Peskov saidafter Prokhorov’s statement that Putinwas aware of the businessman’s ambi-tions. “Any person whom the constitu-tion and law allows to run for presidenthas the right to do so. This situation isnot surprising,” Peskov said withoutelaborating on Putin’s reaction aboutProkhorov’s statement.

Meanwhile on 13 December,Medvedev convened the first session ofRussia's newly-elected parliament de-spite a wave of protests over alleged fraudthat helped the ruling party cling on toits majority. Medvedev told the heads ofparliament's four factions in a specialmeeting that the first session will be heldon 21 December even while checks intovarious vote-fixing reports continue.

"Today I am signing a decree for the firstsession of the Duma to be held on De-cember 21," Medvedev said. "Far fromeveryone is happy with the election re-sults ... but that is always the case." Thedecision ends any opposition hopes offorcing the authorities to call a re-run ofa 4 December vote that handed Putin'sruling United Russia part a slim major-ity, despite sharply reduced support.

Medvedev promised to push aheadwith political reforms before leaving of-fice in March after just one term. "Wemust take new decisions, take more de-cisive steps to remove barriers on politi-cal activity. ... And what is mostimportant for our country, (we must)bridge the gap between various socialgroups and government institutions."United Russia is expected cede controlof 14 of parliament's 29 committees -- astep aimed at giving the three nominallyopposition parties in parliament astronger voice.

Mikhail Prokhorov, one of the owners of the New Jersey Nets, stands outside of a hotel following anNBA board of governors meeting in New York, New York, US, on 20 October 2011. Media reportsstate on 12 December that Prokhorov announced that he will run for the Russian Presidency againstPrime Minister Vladimir Putin in the March 2012 elections. |EPA/JUSTIN LANE

RUSSIAPOLITICS GEORGIA|EU AFFAIRS

Baramidze: EU membership not relevant nowAt a recent meeting, Georgian Vice Prime Minister GiorgiBaramidze spoke on Georgia’s ties with international organ-isations and mentioned that due to serious security issuesGeorgia would become a NATO member earlier than amember of the EU, The Messenger reported. He said thatGeorgia was named a NATO aspirant country for the firsttime. Georgia, which has been proactively seeking NATOmembership since a coup in 2003, was included on the listduring a recent meeting of NATO foreign ministers thatopened on in Brussels. “Georgia was for the first time men-tioned among NATO aspirant nations,” said Baramidze, whois also minister for European integration. The minister saidthe new status means that Georgia has the same membershipinstruments as these countries adding, that NATO welcomesreforms in aspirant countries and supports their continua-tion. The minister made it clear that Georgia’ EU accessionnot relevant for now. “At the moment, it EU membership isnot relevant, we are not talking about entry in the medium-term, at least for three to five years,” Baramidze said.

GEORGIA|AIRLINES INDUSTRYAlitalia to start service to TbilisiAlitalia, Italy’s largest air company, recently announced plansto open regular flights from Rome to Tbilisi in forthcomingsummer season. Alitalia took the decision after long and ef-ficient negotiations with the managing company of the Tbil-isi International Airport, TAV Georgia, The Messengerreported. Italy’s largest and world’s 19th largest company isexpected to operate at least two flights per week. Ticket pricesare not certain yet, but shall be finalised within a few months.With the fleet of 150 airplanes, Alitalia performs flights to 28local and 62 international destinations in 41 countries world-wide and soon Georgia will be added to this list. The initia-tive is a new Georgian step towards tourism development.Speaking of the significance of the flight, TAV Georgia’sGeneral Manager Mete Erkal said that the direct Rome-Tbilisi flight will strengthen the trade-commercial ties be-tween the two countries as well as boost the possibility ofGeorgian travellers roam around many countries worldwide.

ARMENIA|ECONOMYNational Assembly approves budget for 2012 Armenia’s state budget for 2012, backed by 66 parliamentdeputies and rejected by two others, was recently approvedby the National Assembly. The budget initiated by Armen-ian Prime Minister Tigran Sarkisian’s cabinet envisages ahike in tax revenues questioned by the Armenian govern-ment’s tax collection agency, Armenia Liberty.org reported.Most of the deputies representing the opposition Dashnak-tsutyun and Zharangutyun parties boycotted the vote. Bothparties slammed the government as according to them thebudget outlines a very modest rise in social spending plannedin 2012. The budget states that the government can spend1.04 trillion drams, up by about 5% from this year’s level. Itsbudgetary revenues are projected to reach 911.6 billiondrams. The resulting budget deficit is to be equivalent to3.1% of gross domestic product (GDP), down from about anexpected 4% this year. To that end, the State Revenue Com-mittee (SRC) will have to collect 101bn drams in additionaltaxes, duties and social security payments in 2012. The gov-ernment based its budgetary targets on the assumption thatthe Armenian economy will grow by 4.2% in 2012. Ac-cording to head of the SRC, Gagik Khachatrian, this tax tar-get seems unrealistic. However, Sarkisian and FinanceMinster Vache Gabrielian have dismissed Khachatrian’sviews as null.

Russian billionaire to run against Putin

Russian gas monopoly Gazprom is set to get tax breaks for oilexported from its Prirazlomnoye field in the Arctic offshore,the government said.

A government commission recommended taxing oil exportsfrom Prirazlomnoye at the discounted rate used for some east-ern Siberian and Caspian oil, according to a statement.

Gazprom plans to start production at Prirazlomnoye inthe first quarter of 2012, with peak production seen at120,000 barrels per day in years to come. Russia's total off-shore hydrocarbon resources are estimated at over 100 bil-lion tonnes of oil equivalent, according to Russia’s NaturalResources Ministry.

RUSSIAENERGY

Gazprom to get oil tax breaks in Arctic

Russian gas monopoly Gazprom and oilgiant Rosneft, which are state-run com-panies, and the country’s largest private oilcompany LUKoil top the list of Russians'employment preferences, according to apoll conducted by the All-Russian Public

Opinion Centre (VTsIOM), cited byRIA Novosti. Wages were the main crite-ria for the respondents’ preferences, fol-lowed by such criteria as the companies’ability to honour obligations to their staffand their benefits packages. “By most in-

dicators, the most attractive employerswere raw material sector companies(Gazprom, Rosneft and LUKoil). Interms of labour remuneration, the rating’sleader is Gazprom,” the pollster said in astatement.

RUSSIALABOUR

Russians want to work for Gazprom, Rosneft, LUKoil

KASSANDRAKarl-Theodor zu Guttenberg is advisingCommissioner Kroes on the digital agenda.What better person to discuss copyright issues!

Page 32 | New EuropeDecember 18 - 24, 2011

[email protected]

Once Upon A Time in Brussels...

Follow me on twitter @Kassandra_NE

Summit spat bad timingfor all concerned

EPA|OLIVIER HOSLETT

UK Prime Minister David Cameron'sveto last week has given the normallyalready patriotic UK press much am-munition with which to come out withall guns blazing.And aren't they just loving it; but, un-like the first law of Alistair Campbell,ie bury bad news on a day when everynews outlet is concentrated on a sin-gle subject (9/11, the death of PrincessDiana etc), the European Commissionsomehow decided it was a good ideato publish proposals on EU civil serv-ice (‘Eurocrat’) salaries, while at thesame time the UK press was takingaim at Brussels.And although some have presentedthe proposals as ‘EU to tightenstaffers' belt’, the reaction by UKtabloids is not hard to imagine. Eventhe traditional and conservative Ger-

man Frankfurter Allgemeine Zeitungwrote that 'The fat cats of Brussels'have made a symbolic gesture, but willstill be drinking wine whereas every-one else in Europe is resigned todrinking water. So, the tabloids willhave to top this, and I am sure thatthey will.If the turnout at the planned staffdemonstration on 14 December out-side the European Commission'sheadquarters in Brussels, the Berlay-mont, is limited - judging by theweather it will be - this will stimulatethe appetite of the UK press evenmore.'Timing is of the essence', it seems isnot exactly a Commission, nor indeedan EU civil service, credo.But what the Commission proposesis in fact a mild step back for her civil

service, but probably seen throughGreek, Portuguese and Irish civilservice glasses it will still be judgedas being very generous. And this willnot escape the attention of thosewho believe that those working toundermine British sovereignty (asEU civil servants do, after all) shouldnot be pampered. The fact that, evenwith the present albeit generous payconditions the EU civil service it stillhas trouble recruiting people in theUK, Germany and Scandinaviancountries will be happily ignored, Iam sure.Still, the Commission's timing is to beadmired. Perhaps now would be agood time to also present a financialtransactions tax aimed at the City oroutlaw cricket for being too compli-cated and boring.

Ho Ho Ho!

Bulgarian MEP, Slavi Binev wins the prize for ‘Most AyranChristmas Card’ this year. Binev, was cruelly described by onerecipient of the festive greeting as ‘Bulgaria’s Tony Soprano.In his message, the far right deputy says, “I wish all in 2012to fill the number of dwarves, and for the Snow Whites – tofind Santa Claus with a very biiig bag… full of presents!”

Which is the most lax institution?Former ALDE leader is determined to find out.There’s the old saying that politicians and civil servantsare ‘full of it’. But who holds the most of ‘it’? We may soonfind out.Angered by the European Food Safety Authority (EFSA)ruling that prunes do not have a laxative effect on con-sumers, Sir Graham Watson MEP issued a challenge, "Ihave invited the Commissioner responsible for health andconsumer policy, John Dalli, to a prune eating contest tosee for himself."Sadly, the Commissioner declined, otherwise we could haveenjoyed a remarkable ‘media opportunity’ as they call it, andcould have decided that most difficult of post-Lisbon ques-tions, which institution is ‘full of it’.

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