profit.com.pk Monday, 18 June, 2012

Microsoft usersstruggle with Windows redesign

Page 02

WAll STREET WEEk AHEAD

Greek elections tokeep tensions high

NEW YORK

AGENCIES

the Greek election, that is. One thing is almost certain tocome from the Sunday event, and that is more volatility forU.S. stocks, according to analysts and investors. “i think theS&P futures will see their high or low depending on theoutcome within one hour of the futures’ opening on Sundaynight at 6 p.m. Eastern time,” said Elliot Spar, option marketstrategist at Stifel Nicolaus & Co. Analysts have viewed theGreek election as a potential turning point for Greece, with alleyes on whether voters will favor the leftist Syriza partyopposed to the austerity measures that are part and parcel ofGreece’s international bailout package, or the conservativeNew Democracy, which is committed to upholding terms ofthat agreement. the election, which could result in Greece’seventual departure from the euro zone, is also seen as anotherhurdle for the wider euro zone, which has been embroiled in adebt crisis for well over a year. the rest of the week is notlikely to be any quieter. the Federal Reserve is due to releasea policy statement on Wednesday at the end of its two-daymeeting, and the steady flow of sovereign debt warnings anddowngrades is likely to continue. Central banks from majoreconomies are ready to take steps to calm financial marketsshould the outcome of the Greek elections create a marketstorm. in yet another sign of investor nervousness, the CBOEVolatility index .ViX, Wall Street’s fear gauge, was up formuch of Friday, even as stocks rose, although the ViX finallyclosed lower. Stocks and the ViX typically have an inverserelationship. One likely outcome of the Greek election is thefailure of any party to form a coalition government, saidGregory Peterson, director of investment research atBallentine Partners LLC in Waltham, Massachusetts, whichmanages $3.5 billon. “i think that’s a fairly high probabilityoutcome,” he said. “it’s going to leave a lot of headsscratching, and that’s probably not going to be good for themarket.” A more bearish outcome would be one that presagesan unraveling of the euro zone, said Peterson, whose firmstarting reducing its exposure to European assets “over a yearand a half ago.” Many investors have been trying to preparefor the worst. “People have been hedging their positionsaggressively over the past two weeks heading into thisweekend,” said Alec Levine, derivatives strategist at NewedgeGroup SA in New York. “No matter what happens next week,we will return to a massive game of chicken between thenewly elected Greek government, whoever that may be, andthe EU, specifically Germany.” THE FED AHEAD: Despite the fears, stocks ended theweek on a positive note, marking a second straight week ofgains. the benchmark Standard & Poor’s index .SPX is nowup 6.8 percent for 2012, though still well off its highest levelsof the year. Part of what has spurred optimism for stockinvestors in recent weeks has been the hope that the Fed and

other central banks would act to provide moreeconomic stimulus. there has been continuing

speculation over whether the Fed willengage in a thirdround of quantitative

easing. “We do thinkthat expectations of QE3

will drive the market one wayor the other,” said OmarAguilar, chief

investment officer for

equitiesat Charles

SchwabCorp, in San

Francisco. Butthe fact that

the Fed hasmade norecent

changes topolicy could

mean the economicdata policymakers

are seeing is “not as badas everyone thinks,” said Aguilar.

Weeks of worries over potentialoutcomes of the Greek election haveprompted a number of central banks toprepare for market problems.

LONDON

AGENCIES

With an apparently never-ending series of last-minutesummits and telephone calls,Europe’s leaders and financeministers have held the bloc

together in the face of growing strains be-tween states, a rising political backlash andmarket alarm.

But with hindsight, outsiders say eachmeasure proved too little, too late. US offi-cials in particular complain European lead-ers have either failed to grasp the scale ofthe problem or proved unwilling to counte-nance the awkward political decisions nec-essary to fix it.

As a result, they say, what should havebeen one of the most stable parts of theworld has now become one of the most un-predictable. At one extreme, the euro areamight be about to embark on a journey to-wards further fiscal and political union as analmost totally unitary “super state”. At theother, it could unravel and collapse into anunstable mess of regional rivalry. “From al-most every conversation i’ve had in the lastyear - with Chinese, with indians, with justabout anybody - the message is always thesame,” says Fiona hill, a former senior offi-cer for the US National intelligence Counciland now head of the Europe program atWashington think tank the Brookings insti-tute. “Europe can no longer be trusted. itseems to be moving from being a source ofstability to a driver of instability.”

Long-held certainties were being chal-lenged, she said. Even non-euro memberBritain suddenly appeared at risk of break-ing up, with Scotland due to hold a referen-dum on independence that experts say couldyet go either way. the slow burning eurozone debt and banking crisis is accelerating.Last weekend brought a decision by eurozone political leaders to bail out Spain’sbanks. this weekend Greece holds a parlia-mentary election which many observers fearcould spell the end of its euro membership.Some argue it is too soon to write Europe -or the EU institutions - off altogether. Underforeign policy chief Catherine Ashton, somecredit Europe with making real progress intalks with iran and other powers over the fu-ture of its disputed nuclear program. Buttheir energy for anything beyond their im-mediate problems is seen decidedly limited.

“the Europeans are completely con-sumed with a battle to save the euro zone,”says ian Bremmer, president of political riskconsultancy Eurasia Group. “it’s a deep andongoing crisis bigger than any they’ve expe-rienced in decades... it’s an environmentwhere European leaders could hardly be ex-pected to prioritize anything else.” thatcould leave the continent being increasinglysidelined as emerging powers - not just the

BRiC powers of Brazil, Russia, india andChina but other states such as turkey, in-donesia and South Africa - grow in impor-tance. At the very least, it could underminethe ability of the continent’s leaders to per-suade the rest of the world to take them se-riously on a range of issues, from trade tothe importance of democracy and humanrights. “Europe probably isn’t going to stoppreaching to the rest of the world,” saysNikolas Gvosdev, professor of national secu-rity studies at the US Naval War College.“But it’s much less likely that others aregoing to be inclined to listen.”EUROPE AT CROSSROADS: At theCopenhagen climate summit in 2009, Euro-pean states suffered the indignity of beingoutside the room when the final deal wasstruck between the United States andemerging powers. in the aftermath of theeuro zone crisis, it’s a position Europeanleaders may simply have to get used to.

But for the rest of the world, it’s not justthe continent itself that is rapidly losing itsshine. the whole European political model- generous welfare systems, democratic de-cision-making, closer regional integrationand the idea of a currency union as a stabi-lizing factor - no longer seems nearly as ap-pealing to other, still growing regions.“Europe is at a crossroads, with the very fu-ture of the EU at stake,” says Brahma Chel-laney, professor of strategic studies at NewDelhi think tank the Centre for Policy Re-search. “if the euro dies, it will mark the endof the European experiment in forgingcloser financial and political integration. Butit will also have wider international implica-tions.” Not everyone agrees what those willbe, however. Chellaney argues the demise ofthe euro might help secure the primacy ofthe dollar - and therefore perhaps of theUnited States itself - for years to come.

But others believe a European collapse

would be a sign of things to come for the USas well. Bharat Karnad, a colleague of Chel-laney at the Centre for Policy Research, ar-gues that whatever happens powers such asChina are on the rise and that the West willbe increasingly challenged regardless ofwhat happens to the euro. “the health of theeuro or the EU, for that matter, will have amarginal impact on gold and power that istending any way towards Asia, especiallyChina,” he said. Washington takes the po-tential threat of Europe’s unraveling very se-riously. in the short-term, the Obamaadministration is clearly concerned over theelectoral fallout should the crisis in Europecross the Atlantic before November’s presi-dential election. But in the longer term,whether the euro survives or not US plan-ners are beginning to face up to the fact thatthe continent will likely be poorer andrather more self-centered than Washingtonhad hoped. Washington has long been push-ing European powers to take more respon-sibility for their own immediateneighborhood. While Britain and Francetook the political lead in Libya last year, USDefense Secretary Robert Gates complainedEuropean NAtO forces were in fact almostentirely dependent on US munitions, logis-tics and other backup. But the change in Eu-ropean thinking and the additional defensespending Washington called for now looksall but impossible in this time of austerity.WASHINGTON WORRIED: “it’s doubtfulany future US Defense Secretary is even goingto bother to make that kind of pitch,” saysGvosdev at the US Naval War College. “We’dhoped Europe could take the lead in someparts of North Africa as well as the Balkansand Eastern Europe. that now looks veryunlikely.” US planners were also wakingup to the fact that European stateswere no longer likely to match USdonor pledges when it came tohumanitarian or financial aid forwar zones and troublespots, hesaid. then, there were longerterm strategic concerns.Washington’s military“pivot “ towards Asia,he said, had beenbased in part on theassumption that Eu-rope would remainstable and wealthyand the US nowhad little or noth-ing to worryabout on itsNorth Atlanticflank.

Whether the eurolives or dies, thechaotic way Europehas tackled the crisiscould undermine theregion’s geopoliticalclout for years tocome and leave it at adistinct disadvantagein a rapidly changing world

WHATEVER EURO’SFATE, EUROPE’S REPUTATION SAVAGED

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news02Monday, 18 June, 2012

HANS-WERNER SINN

in blatant violation of the Maastrichttreaty, the European Commission hascome forward with one bailout plan afteranother for Europe’s distressed economies.Now it wants to socialize not only govern-ment debt by introducing Eurobonds, butalso banking debt by proclaiming a “bank-ing union.”

Socializing bank debt is both unjustand will result in a future misallocation ofresources. Socialization of bank debtacross borders implies that a country’s pri-vate borrowing costs are artificially re-duced below market rates, as insurance (inthe form of credit-default swaps) is pro-vided free of charge by other countries.thus, capital flows from the core to the pe-riphery would continue to exceed the opti-mal amount, undermining growth forEurope as a whole.

history offers countless examples ofthe misallocation of resources that can re-sult from socialization of bank debt. Oneis the 1980’s savings and loan crisis in the

United States, which cost US taxpayersmore than $100 billion. Under the um-brella of common deposit insurance, USsavings banks made a “gamble for resur-rection” – borrowing excessively fromtheir depositors and lending the moneyout to risky enterprises, knowing that po-tential profits could be paid out as divi-dends to shareholders while potentiallosses would be socialized. in other words,private profits were generated out of so-cially wasteful activities. And essentiallythe same happened with US subprimemortgage lending and with the Spanishbanking system in the 2000’s. in bothcases, banks took excessive risks in the ex-pectation – eventually vindicated – thatgovernments would bail them out. Span-ish banks speculated on a continuing in-crease in real-estate prices, which wouldbring large capital gains to their cus-tomers. indeed, they often lent homeown-ers more than 100% of the underlyingproperty’s value. to compensate for thedamage that their reckless behaviorcaused, they received €303 billion ($378

billion) in extra credit through target, theEuropean Central Bank’s interbank pay-ment settlement system, and can now ex-pect a further €100 billion in help from theEuropean Financial Stability Facility.Much of this money will never return.

Debt-equity swaps would be a muchbetter way to recapitalize the banks.Rather than imposing the costs of theECB’s and EFSF’s losses on European tax-payers, the banks’ creditors could give upsome of their claims in exchange for re-ceiving shares from the banks’ owners.Debt-equity swaps rescue the banks with-out rescuing their shareholders. ideally,bank creditors would not lose money, be-cause their fixed-interest claims would beconverted into bank shares of similarvalue. this would be the case as long as thebanks’ losses remained smaller than theirequity capital. A true loss would be in-flicted on a bank’s creditors only if thewrite-off losses on toxic mortgage loansexceeded the bank’s equity. But, eventhen, it would be better for creditors tobear the loss than for taxpayers to do so,

because this would encourage more cau-tious lending in the future. Socializingpublic debt is already posing a risk to thestill-stable eurozone countries. to do thesame thing with bank debt could pull hith-erto sound economies into the abyss, be-cause bank’s balance sheets are muchlarger than the volume of governmentdebt. in Spain, the public debt-to-GDPratio is 69%, but the debt of the Spanishbanking system totals 305% of GDP, orabout €3.3 trillion – about as much as thecombined public debt of all five crisis-stricken eurozone countries.

While the enormous volume of thebank debt implies that governmentsshould shy away from socializing bankingrisks, it also suggests that only the banks’creditors could reasonably be asked to footthe bill without being overburdened. in-deed, if, as some believe, only a fraction ofthe banks’ equity is at risk, the potentialdebt-equity swaps would be minuscule.Spanish banks have 7% equity capital onaverage on their balance sheets. thus, adebt-equity swap of less than 7.5% of the

creditors’ investment would be enough tocompensate for the banks’ losses. And,even if the banks’ private depositors,whose claims are 39% of the aggregate bal-ance sheet, were excluded, the debt-equityswap necessary to compensate for a loss ofup to 100% of the equity would be less than12% of the creditors’ investment volume.Debt-equity swaps have been used success-fully in many cases, and they follow fromnormal bankruptcy procedures. Apartfrom avoiding the excess burden and injus-tice of taxation, they also have the benefitof inducing banks’ owners to choose a pru-dent investment strategy, while persuadingcreditors to scrutinize and select carefullythe banks to which they want to lend. thecare taken in augmenting and preservingthe wealth that current generations inher-ited from their ancestors is the ultimatereason for economic growth and capital-ism’s success. Massive government inter-ventions during the crisis haveundermined this principle, and have prob-ably already destroyed much of the inher-ited wealth.

The european Banking union?

SEATTLE

AGENCIES

ThE world’s largest softwarecompany says millions of peo-ple are already using a down-loaded pre-release version ofWindows 8 on PCs, laptops

and touch-devices ahead of its full in-troduction this autumn. At a mediaevent in Los Angeles on Monday, thecompany is expected to discuss its plansto take on Apple inc’s all-conqueringiPad this holiday shopping season.

So far, most reviewers have praisedthe look and feel of the touch-friendly“Metro” style of Windows 8, which isbased on colorful squares, or “tiles,” thatdepict applications such as email, andupdate in real time. But they have alsostressed how difficult it will be for usersto move away from what they know andtrust. “it’s a bit of a struggle for peoplewho are deliberately oriented on a PC,that are used to a mouse feel,” said for-mer Microsoft strategist Al hilwa. Nowan analyst at tech research firm iDC,hilwa has been trying out the latestdemo release for two weeks. “Without atouchscreen, i struggled with a mouse todo certain things,” he said. the newMetro interface only runs programswritten for it, so users have to switchback to the traditional desktop to do cer-tain tasks, like listening to music onApple’s itunes. “the thing that really in-furiates me is that it seems like Metroapps, and apps running in the normaldesktop don’t have any knowledge ofeach other, “ said Forrester Researchanalyst David Johnson. “there’s no easy

way to navigate between them, and i’mnot quite sure why that is.” the latesttest version is not yet finished software.And outside of a few industry testers, noone has tried out Windows 8 on a tabletpowered by ultra-efficient ARM hold-ings chips, which is the closest Microsoftwill come to challenging the iPad. Mi-crosoft is expected to say more aboutthat on Monday, and there is talk that itmight introduce a tablet under its ownbrand name. the company declined tocomment on the reaction to the new sys-tem and its plans for the Monday event.Nevertheless, Microsoft has not per-suaded some of its most loyal users justyet. “Right now, i’m not sold,” said ana-lyst Michael Cherry of Directions on Mi-crosoft, an independent research firmthat focuses on the tech giant.

Cherry said he had persevered withWindows 8 for a few days, but hadproblems setting up email on his testmachine. “i can’t rely on it as a produc-tion tool,” he said. “i can’t switch overyet. At this point, i should be able toleave Windows 7 behind.” A former Mi-crosoft program manager, Cherry wor-ries that the initial complexity of thenew system will prevent it from beingan instant hit, like its predecessor, Win-dows 7. “if a guy who has used Win-dows since Windows 1.0 can’t figure itout, then i’m going to guess there areother people out there who aren’t goingto figure it out,” he said. “We won’t seeline-ups at Best Buy at midnight. i’dlove to see that, but it’s just not there.”JURY DOUBTFUl: Mainstream techreviewers like the Wall Street Journal’sWalt Mossberg or the New York times’

David Pogue have not yet weighed in onthe third and latest “preview” of Win-dows 8, which became publicly availableonline on May 31. the smattering of re-views on tech-centric blogs have gener-ally praised the new look of Windows 8,but almost everyone has stressed howdifficult users will find the switch. “i’vefelt almost totally at sea — confused, par-alyzed, angry, and ultimately resigned tothe pain of having to alter the way i domost of my work,” wrote Farhad Manjoo,technology columnist at online journalSlate, even as he acknowledged that thereis a lot to love about Windows 8. Geek-Wire — Microsoft’s hometown technol-ogy news website in Seattle — was nokinder, featuring a video of one reader’sfather, completely stumped by how to getback to the Start menu. ( ) “Bottom line,i’ve spent the past day feeling lost, and alittle grumpy,” wrote GeekWire’s toddBishop, who has followed the softwarecompany as a reporter for more than adecade. “Microsoft likes to use the words‘fast and fluid’ to describe Windows 8,but two other words keep popping to mymind: ‘New Coke,’” wrote Bishop, refer-ring to Coca-Cola Co’s short-lived at-tempt to reinvent its core product in the1980s. Gizmodo reviewer Mat honanpraised Windows 8’s “subtle elegance”and said the Metro apps were better andeasier to navigate than the last test ver-sion, but added there was nothing that“bowls you over.” ZDNet reviewer EdBott, a previous skeptic of Windows 8,liked the “rich and polished collection ofMetro-style apps,” and was the onlyhigh-profile reviewer with a wholly posi-tive reaction.

As Microsoft Corpprepares to show

the world what itsnew Windows 8

can do on the nextgeneration ofhigh-poweredtablets, initial

reviews of the newoperating system

on existinghardware

underscore thechallenges thecompany faces

with the radicalredesign of its

flagship product

ICCI calls forboosting LSMgrowth for economic revival

ISLAMABAD

INP

Significant growth of Large ScaleManufacturing (LSM) is essential foreconomic development. therefore,Government should devise an economicrevival plan for boosting growth of LSMsector. LSM has shown minor growth of1.02 percent in the first ten months of theongoing financial year 2011-12 over thecorresponding period last year, reflectingoverall weak performance of theeconomy, growth oriented measures wererequired to be taken to pull the ailingindustrial sector out of crisis, Asad Farid,Acting President islamabad Chamber ofCommerce and industry (iCCi) has saidin a statement. he was responding to thereports that the growth of LSM sector hasdrastically reduced by 12 percent in April2012 as compared to the month of March2012 which has showed that LSM hasperformed below its potential.

KCCI feels UNdoesn’t careabout them

KARACHI

ZAIN ALI

Karachi Chamber of Commerce & industry’s(KCCi) President, Mian Abrar Ahmad hasurged the United Nations for positiveconsideration and registration of KCCimembers and Pakistani companies to extendtrade opportunities. in his welcome addressat joint seminar on brainstorming forregistration of Pakistani Companies withUnited Nations being organized by KCCi andUnited Nations Procurement Division atKCCi today to capture the Pakistan’s shareand to further explore trade opportunities, heapprised that Pakistan being member ofUnited Nations, an emerging economy anddeveloping Nation and strong ally on Waragainst terror truly needs specializedinternational assistance with regards to tradeand business. he voiced that in view of thecost with which Pakistan is fighting Waragainst terror as frontline State is much highwith regards to Pakistan’s own resourceswhereas the benefits are being enjoyed allover the World especially by the West,therefore, the West and UN should treatPakistan as a privileged nation in extendingtrade opportunities, free market access andduty concessions to enhance Pakistan’s tradeand so the National GDP.

PRO 18-06-2012_Layout 1 6/18/2012 12:40 AM Page 2

ATHAR ALI KHAN

it is a government’s basic responsibility to pro-vide people with facilities and make the right plan-

ning for it. the budget is a window to thegovernment’s development and welfare preferences

for the masses. Only the budget shows to what extenta government is serious in providing people the rudi-

mentary necessities of everyday life. the Punjab government presented its fifth

budget in the Punjab Assembly. Beingpro-people, balanced and

tax-free, the totaloutlay of the

budgeti s

Rs782.8 billion. Presenting the budget, Finance Min-ister Punjab, Mujtaba Shuja-ur-Rehman, announcedthe Development Policy for the next fiscal year. thebudget includes policies and projects that ensure wel-fare of the masses, greatly improving their standard oflife. Execution of these development policies in the newbudget will usher in an entirely new era of prosperityin the province.

the common man has not been burdened by thebudget in any way, rather measures have been takenfor providing him relief. A record-breaking develop-ment plan of Rs 250 billion has been earmarked. Sub-stantial amounts of funds have been allocated for lessdeveloped areas. Sound steps have been taken for theprogress and welfare of women and employment gen-eration for the youth. Projects have been proposed inthe budget for the betterment of the downtrodden inthe society. Projects to give relief to the common man,such as Ashiana housing Scheme, Educational Endow-ment Fund, interest-free loans for the jobless youth,and Daanish School will continue to help the commonman. Adequate funds have been allocated for theseprojects. By presenting the welfare-oriented, balanced,and tax-free budget, the Punjab government hasproved that PML-N’s sole aim is welfare of themasses. Punjab Chief Minister Shahbaz Sharif de-serves accolades for presenting this budget. An ex-ample has been set for the federal government andother provinces by cutting salaries of provincialministers and members of the Punjab Assembly.By appropriating Rs80 billion for South Punjab,the government has shifted its focus towardsless-developed areas. this is enough to silencethose critics that indulge in the baseless propa-ganda that funds are not spent in South Punjab.the amount set aside for South Punjab is 32percent of the total budget. About Rs14 billionhave been set aside for women’s welfare in thenew budget. Under the Laptop Scheme, prom-ising students will be provided another batchof one lakh 25 thousand laptops worth Rs4billion. Eight Danish Schools are being con-structed in Vihari, Layyah, Lodhran, andBhakkar districts with an amount of Rs 2 bil-lion. All educational institutions charging feeexceeding Rs. 5000/- will reserve 10% seatsfor the poor but promising students.

the budget proposes Rs 34 billion forimplementing pro-poor schemes. the com-pletion of education, health, and infrastruc-ture projects will enable speedy progress inthis field. A number of welfare projects forthe youth have also been started under thisbudget. the internship Programme of Rs 10thousand per month for 50 thousand gradu-ates is a revolutionary step through which theyouth will get the chance of getting profes-

sional training. the announcement of 80thousand new jobs will also benefit the youth

of the province and decrease the level of unem-ployment. the plan to end loadshedding pre-

sented by the Chief Minister Punjab ShahbazSharif is a big step towards industrial develop-ment and prosperity of the common man. thePunjab government has presented a sound pro-gramme and projects to get rid of loadshedding. Asum of Rs 10 billion has been allocated for tackling

the energy crisis in the new budget. the Punjab gov-ernment has devised a comprehensive and effectiveplan of setting up coal-fired power stations of upto500MW at six locations to give uninterrupted powersupply to the industries located in the industrial Es-tates. the private sector will be given ample incentivesto construct power plants. An energy fund is being setup under which prompt payments will be possible topower plants built in the private sector. the Punjabgovernment is also working on the alternative and re-newable forms of energy. A special department for thispurpose will be established in the University of Engi-neering and technology. the Punjab government hadearlier set aside Rs 9 billion but the amount could notincrease energy output considerably due to negativeapproach of the federal government. Another impor-tant characteristic of the Punjab budget is the an-nouncement of the Chief Minister to increase the paycut in the salary of the Punjab cabinet from 25 percentto 30 percent. it has been decided to continue the tra-dition of the chief minister paying from his own pocketfor his entourage on foreign visits. this practice willfurther promote the culture of simplicity. the govern-ment of Punjab has proposed revolutionary steps in thebudget for ensuring availability of comfortable andquality commuting. For this purpose, it has set asideRs 11 billion. the government will import 1200 newbuses during the next year. the Punjab governmenthas continued the pro-people policy by allocating Rs 5billion for providing them free medicines in govern-ment hospitals. Rs 84 billion have been allocated in thenew budget for the health sector as compared with 72billion in the previous budget. that will further im-prove conditions in the health sector. the Punjab ChiefMinister has not ignored the agony of the kidney pa-tients in the new budget. in the next year, anotherRs30 crore will be spent for free dialysis, which is agreat relief to the kidney patients. the Punjab Budget2012-2013 can be regarded as balanced under the cur-rent circumstances because it gives concessions to peo-ple with limited resources while employees’ salariesand retired people’s pensions have been increased.Funds have been allocated in the social sector so thatthe common man has access to safe drinking water,gas, electricity, and other basic necessities of life. De-velopment projects will be completed this year underthe new budget and poor people will be provided im-portant facilities. the Punjab government deservesample praise for presenting a pro-people budget of Rs782 billion and this has been made possible by the un-tiring efforts of the Punjab Chief Minister MuhammadShahbaz Sharif. if the federal government brings thelooted money from Swiss Banks back into Pakistan, itwill not only improve the budget but will also result inmore development work, employment generation, andbigger allocations for improving standard of life of thecommon man. it is the objective of the budget tostrike a balance between earning and spending so thatthe common man gets the much talked about relief. Byallocating sufficient amounts in health and educationsectors the government has proved that it believes inthe service to the people. the Punjab budget 2012-2013 is a true reflection of the people’s desires. to keepthe price of flour stable, Rs27 billion and 50 crore havebeen allocated while Rs 4 billion have been spared assubsidy during the holy month of Ramazan. thesesteps are surely good news for the common man.

Balanced, tax-free and reflectiveof people’s inspirations

news

Monday, 18 June, 2012

03

NOURIEL ROUBINI

Dark, lowering financial and economic clouds are,it seems, rolling in from every direction: the euro-zone, the United States, China, and elsewhere. in-deed, the global economy in 2013 could be a verydifficult environment in which to find shelter. Forstarters, the eurozone crisis is worsening, as theeuro remains too strong, front-loaded fiscal aus-terity deepens recession in many member coun-tries, and a credit crunch in the periphery and highoil prices undermine prospects of recovery. theeurozone banking system is becoming balkanized,as cross-border and interbank credit lines are cutoff, and capital flight could turn into a full run onperiphery banks if, as is likely, Greece stages a dis-orderly euro exit in the next few months.

Moreover, fiscal and sovereign-debt strainsare becoming worse as interest-rate spreads forSpain and italy have returned to their unsustain-able peak levels. indeed, the eurozone may requirenot just an international bailout of banks (as re-cently in Spain), but also a full sovereign bailoutat a time when eurozone and international fire-walls are insufficient to the task of backstopping

both Spain and italy. As a result, disorderlybreakup of the eurozone remains possible. Fartherto the west, US economic performance is weaken-ing, with first-quarter growth a miserly 1.9% –well below potential. And job creation faltered inApril and May, so the US may reach stall speed byyear end. Worse, the risk of a double-dip recessionnext year is rising: even if what looks like a loom-ing US fiscal cliff turns out to be only a smallersource of drag, the likely increase in some taxesand reduction of some transfer payments will re-duce growth in disposable income and consump-tion. Moreover, political gridlock over fiscaladjustment is likely to persist, regardless ofwhether Barack Obama or Mitt Romney wins No-vember’s presidential election. thus, new fights onthe debt ceiling, risks of a government shutdown,and rating downgrades could further depress con-sumer and business confidence, reducing spend-ing and accelerating a flight to safety that wouldexacerbate the fall in stock markets.

in the east, China, its growth model unsustain-able, could be underwater by 2013, as its investmentbust continues and reforms intended to boost con-sumption are too little too late. A new Chinese lead-

ership must accelerate structural reformsto reduce national savings and increaseconsumption’s share of GDP; but divi-sions within the leadership about thepace of reform, together with thelikelihood of a bumpy political tran-sition, suggest that reform willoccur at a pace that simply is notfast enough. the economic slow-down in the US, the eurozone, andChina already implies a massivedrag on growth in other emerg-ing markets, owing to theirtrade and financial links withthe US and the European Union(that is, no “decoupling” has oc-curred). At the same time, the lackof structural reforms in emerging mar-kets, together with their move towardsgreater state capitalism, is hamperinggrowth and will reduce their resiliency. Fi-nally, long-simmering tensions in the MiddleEast between israel and the US on one side and iranon the other on the issue of nuclear proliferation couldreach a boil by 2013. COURTESY: PROJECT SYNDICATE

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