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→  aprile 15, 2015


Sir,
No doubt, “if Greece does fall out of the euro, it will also fall out of Europe”, as Philip Stephens writes (“Europe faces more than a Greek tragedy”, April 10). No doubt, “the failure of the euro would mark the failure of Europe”. But there is no link between the two statements, namely that Greece falling out of the euro marks the failure of the euro. This would be the case should it happen for economic reasons: too high the cost, too vague the reforms, too big the risk. As a consequence the euro would not be perceived any more as a monetary union, but as a fixed exchange rate area, the markets would soon attack the weakest countries, the spread would rise, sooner or later there would be a second Greece.

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→  aprile 10, 2015


by Philip Stephens

The pilgrimage of Greek prime minister Alexis Tsipras to Moscow told a tale of two tragedies. One, perilously close to the denouement, is about Greece’s uncertain place in the family of European nations; the other, still unfolding but with a storyline that foretells a calamitous final act, is about the future not just of the euro but of European integration.
Predictably enough, the Greek prime minister was feted by Vladimir Putin. The Russian president’s revanchist aggression in Ukraine has left his regime more vulnerable than anyone in the Kremlin would dare admit. Mr Putin badly needs to weaken the EU sanctions regime. Shared Orthodox Christianity, an air of leftist nostalgia in Athens and, above all, Greece’s desperate isolation make it an ideal target for Moscow’s strategy of divide and rule.

It is harder to see what Mr Tsipras gains beyond a few warm words to cheer his supporters at home. The promise of a gas pipeline years hence? Any aid on offer from Moscow would be minuscule relative to funds from the EU and the International Monetary Fund. There is nothing Mr Putin could do that would make leaving the euro any less painful.

The other day I heard Yanis Varoufakis explain how Greece had ended up here. The finance minister’s is a story fluently told — of US backing for the colonels, of the havoc wreaked on industry by the free trade rules of the EU, of the Brussels funding that bankrolled clientelist politics in Athens and of how cheap euros created a ruinous bubble.

There are elements of truth in this; and Mr Varoufakis is right when he says the present debt burden is unsustain­able. Missing from the narrative, though, is any sense that Greece must make its own choices. That, whatever the sins of others, only Athens can decide whether Greece prospers as a modern democracy or whether it slips back into the shadows of the Balkans.

The omission, and the implicit rebuke to outsiders who do not feel bound by ballots cast by Greeks, is at the heart of what so frustrates Athens’ partners. This is not just about the Germans, even if Wolfgang Schäuble, Berlin’s finance minister, foolishly lends credibility to the idea. Mr Tsipras is isolated among fellow debtors as much as creditors. What unites them is a demand that Athens produce a plausible plan to reform the Greek state — to modernise its administration and politics as much as its economy. Such a plan would transform the mood of negotiations.

Mr Putin’s preference is otherwise. A collapse in Greek living standards would leave it ripe for the coercion and subversion that are Russia’s trademarks in an effort to expand its influence and control in southeastern Europe. The Russian president already has Hungary’s prime minister Viktor Orban in his breast pocket. His agents are working hard — exploiting Russia’s energy monopoly, buying politicians, bribing officials and taking stakes in financial institutions — to promote instability across the Balkans.

Yet talk to finance ministers and central bankers across the rest of Europe and the mood is one of fatalism. They will tell you that the eurozone would withstand Greece’s departure. This is not 2008, or even 2012, they say. Governments have put in place the mechanisms to deal with crises. Some sound as if they believe that, freed from the vicissitudes of Greek politics, the euro would be stronger in the long run.

In a narrow sense they may be right, though I would not bet on it. But Greece is a distorting prism. Its sequential crises have bred complacency by distracting from the profound structural flaws and political challenges that still imperil the euro. Making monetary union work demands more than proficient crisis management.

Spring has seen a burst of sunshine in the European economy. The European Central Bank’s quantitative easing is having an effect. Growth has picked up a little. Yet it is a delusion to think that the euro is in safe harbour. Fiscal and financial union are at best half-completed, and the political threat to the euro continues to grow.

National politicians refuse to admit the supranational imperatives of the project they are pledged to safeguard. And a return to growth rates of 1 or even 2 per cent will not be enough to restore the euro’s legitimacy among the angry voters who are turning to populist movements of right and left.

In 2012, European leaders defied the markets by summoning up the political resolve needed to save the single currency. They have since lost the will to sustain it. Greece may not bring down the euro; the existential threat lies in the more generalised failure of nerve and leadership.

So it is, too, in the relationship with Moscow. The biggest danger to Europe comes not from the forays of Mr Putin’s rusting aircraft carrier, or his cold war-vintage nuclear bombers, or from Soviet-style subversion in some of the darker corners of the continent.

No, the real weakness lies in a European mindset that prefers to temporise and equivocate than to confront Mr Putin head on. Mr Tsipras’s visit may have held up a mirror to Greece’s troubles. But it also offered a reflection of diffidence and division across Europe. If Greece does fall out of the euro it will also fall out of Europe. And the failure of the euro would mark the failure of Europe. What unites these twin tragedies is the stubborn reluctance of the authors to rewrite the endings.

→  febbraio 3, 2015


by Martin Wolf

Maximum austerity and minimum reform have been the outcome of the Greek crisis so far. The fiscal and external adjustments have been painful. But the changes to a polity and economy riddled with clientelism and corruption have been modest. This is the worst of both worlds. The Greek people have suffered, but in vain. They are poorer than they thought they were. But a more productive Greece has failed to emerge. Now, after the election of the Syriza government, a forced Greek exit from the eurozone seems more likely than a productive new deal. But it is not too late. Everybody needs to take a deep breath.
The beginning of the new government has been predictably bumpy. Many of its domestic announcements indicate backsliding on reforms, notably over labour market reform and public-sector employment. Alexis Tsipras, the prime minister, and Yanis Varoufakis, the finance minister, have ruffled feathers in the way they have made their case for a new approach. Telling their partners that they would no longer deal with the “troika” — the group representing the European Commission, the European Central Bank and International Monetary Fund — caused offence. It is also puzzling that the finance minister thought it wise to announce ideas for debt restructuring in London, the capital of a nation of bystanders.
More significant, however, is whether Greece will run out of money soon. Most observers believe that Greece could find the €1.4bn it needs to pay the IMF next month even if the current programme were to lapse at the end of February. A more plausible danger is that Greek banks, vulnerable to runs by nervous depositors, would be deprived of access to funds from the European Central Bank. If that were to happen, the country would have to choose between constraining depositors’ access to their money and creating a new currency.
As Karl Whelan, Irish economist, notes, the ECB is not obliged to cut off the Greek banks. It has vast discretion over whether and how to offer support. The fundamental issue, he adds, is not whether Greek government securities are judged in default, since Greek banks do not rely heavily upon them.
Far more important are bonds the banks themselves issue, which are guaranteed by the Greek government. The ECB has stated it will no longer accept such bonds after the end of February, the date of expiry of the EU programme. If the ECB were to stick to this, it would put pressure on the Greek government to sign a new deal. But this government might well refuse. In that case the ECB might cut off the Greek banks.
This game of chicken could drive the eurozone into an unnecessary crisis and Greece into meltdown before serious consideration of the alternatives. The government deserves the time to present its ideas for what it calls a new “contract” with its partners. Its partners surely despise and fear what Mr Tsipras stands for. But the EU is supposed to be a union of democracies, not an empire. The eurozone should negotiate in good faith.
Moreover, the ideas presented on the debt are worth considering. Mr Varoufakis recognises that partner countries will not write down the face value of the debt owed to them, however absurd the pretence may be. So he proposes swaps, instead.
A growth-linked bond (more precisely, one linked to nominal gross domestic product) would replace loans from the eurozone, while a perpetual loan would replace the ECB’s holdings of Greek bonds. One assumes the ECB would not accept the latter. But it might accept still longer-term bonds instead. GDP-linked bonds are an excellent idea, because they offer risk-sharing. A currency union that lacks a fiscal transfer mechanism needs a risk-sharing financial system. GDP-linked bonds would be a good step in that direction.
Many governments would oppose anything that looks like a sellout to extremists. The Spanish government is strongly opposed to legitimising the campaign of its new opposition party, Podemos, against austerity. Nevertheless, Greece and Spain are very different. Spain is not on a programme and owes much of its debt to its own people. It can justify much of its policy mix in its own terms, without having to oppose a new agreement for Greece.
Two crucial issues remain. The first is the size of the primary fiscal surplus, now supposed to be 4.5 per cent of GDP. The government proposes 1.0 to 1.5 per cent, instead. Given the depressed state of the Greek economy, this makes sense. But it also means Greece would pay trivial amounts of interest in the near term.
The second issue is structural reform. The IMF notes that the past government failed to deliver on 13 of the 14 reforms to which it was supposedly committed. Yet the need for radical reform of the state and private sector no doubt exists.
One indication of the abiding economic inefficiency is the failure of exports to grow in real terms, despite the depression.
Indeed, Greece faces far more than a challenge to reform. It has to achieve law-governed modernity. It is on these issues that negotiations must focus.
So this must be the deal: deep and radical reform in return for an escape from debt-bondage.
This new deal does not need to be reached this month. The Greeks are right to ask for time. But, in the end, they need to convince their partners they are serious about reforms.
What if it becomes obvious that they cannot or will not do so? The currency union is a partnership of states, not a federal union. Such a partnership can only work if it is a community of values. If Greece wants to be something quite different, that is its right. But it should leave. Yes, the damage would be considerable and the result undesirable. But an open sore would be worse.
So calm down and talk. Let us all then see whether the talk can become action.

→  gennaio 28, 2015


by Martin Wolf

Sometimes the right thing to do is the wise thing. That is the case now for Greece. Done correctly, debt reduction would benefit Greece and the rest of the eurozone. It would create difficulties. But these would be smaller than those created by throwing Greece to the wolves. Unfortunately, reaching such an agreement may be impossible. That is why the belief that the eurozone crisis is over is mistaken.
Nobody can be surprised by the victory of Greece’s leftwing Syriza party. In the midst of a “recovery”, unemployment is reported at 26 per cent of the labour force and youth unemployment at over 50 per cent. Gross domestic product is also 26 per cent below its pre-crisis peak. But GDP is a particularly inappropriate measure of the fall in economic welfare in this case. The current account balance was minus 15 per cent of GDP in the third quarter of 2008, but has been in surplus since the second half of 2013. So spending by Greeks on goods and services has in fact fallen by at least 40 per cent.

Given this catastrophe, it is hardly surprising that the voters have rejected the previous government and the policies that, at the behest of the creditors, it — somewhat halfheartedly — pursued. As Alexis Tsipras, the new prime minister, has said, Europe is founded on the principle of democracy. The people of Greece have spoken. At the very least, the powers that be need to listen. Yet everything one hears suggests that demands for a new deal on debt and austerity will be rejected more or less out of hand. Fuelling that response is a large amount of self-righteous nonsense. Two moralistic propositions in particular get in the way of a reasonable reply to Greek demands.
The first proposition is that the Greeks borrowed the money and so are duty bound to pay it back, how ever much it costs them. This was very much the attitude that sustained debtors’ prisons.
The truth, however, is that creditors have a moral responsibility to lend wisely. If they fail to do due diligence on their borrowers, they deserve what is going to happen. In the case of Greece, the scale of the external deficits, in particular, were obvious. So, too, was the way the Greek state was run.

The second proposition is that, since the crisis hit, the rest of the eurozone has been extraordinarily generous to Greece. This, too, is false. True, the loans supplied by the eurozone and the International Monetary Fund amount to the huge sum of €226.7bn (about 125 per cent of GDP), which is roughly two-thirds of total public debt of 175 per cent of GDP.
But this went overwhelmingly not to benefiting Greeks but to avoiding the writedown of bad loans to the Greek government and Greek banks. Just 11 per cent of the loans directly financed government activities. Another 16 per cent went on interest payments. The rest went on capital operations of various kinds: the money came in and then flowed out again. A more honest policy would have been to bail lenders out directly. But this would have been too embarrassing.

As the Greeks point out, debt relief is normal. Germany, a serial defaulter on its domestic and external debt in the 20th century, has been a beneficiary. What cannot be paid will not be paid. The idea that the Greeks will run large fiscal surpluses for a generation, to pay back money creditor governments used to rescue private lenders from their folly is a delusion.
So what should be done? The choice is between the right, the convenient and the dangerous.
As Reza Moghadam, former head of the International Monetary Fund’s European department, argues: “Europe should offer substantial debt relief — halving Greece’s debt and halving the required fiscal balance — in exchange for reform.” This, he adds, would be consistent with debt substantially below 110 per cent of GDP, which eurozone ministers agreed to in 2012. But such reductions should not be done unconditionally.
The best approach was set out in the “heavily indebted poor countries” initiative of the IMF and the World Bank, which began in 1996. Under this, debt relief is granted only after the country meets precise criteria for reform. Such a programme would be of benefit to Greece, which needs political and economic modernisation.

The politically convenient approach is to continue to “extend and pretend”. Undoubtedly, there are ways of pushing off the day of reckoning still further. There are also ways of lowering the present value of interest and repayments without lowering the face value.
All this would allow the eurozone to avoid confronting the moral case for debt relief for other crisis-hit countries, notably Ireland. Yet such an approach cannot deliver the honest and transparent outcome that is sorely needed.
The dangerous approach is to push Greece towards default. This is likely to create a situation in which the European Central Bank would no longer feel able to operate as Greece’s central bank. That then would force an exit. The result for Greece would certainly be catastrophic in the short term.

My guess is that it would also reverse any move towards modernity for a generation. But the damage would not just be to Greece. It would show that monetary union in the eurozone is not irreversible but merely a hard exchange-rate peg.
That would be the worst of both worlds: the rigidity of pegs, without the credibility of a monetary union. In every future crisis, the question would be whether this was the “exit moment”. Chronic instability would be the result.
Creating the eurozone is the second-worst monetary idea its members are ever likely to have. Breaking it up is the worst. Yet that is where pushing Greece into exit might lead. The right course is to recognise the case for debt relief, conditional on achievement of verifiable reforms. Politicians will reject the idea. Statesmen will seize upon it. We will soon know which of the two they are.

→  novembre 19, 2014


by Tim Bradshaw and Hannah Kuchler

Uber has moved to head off further criticism about how it handles the huge trove of personal data that it holds on its customers’ locations and trips, after facing questions over how its employees access individuals’ information.
Emil Michael, Uber’s senior vice-president of business, sparked controversy this week after he was quoted as saying that the company should consider hiring private investigators to launch a smear campaign against critical journalists.

The comments were first reported by Buzzfeed, which also alleged that an Uber manager had accessed one of its journalist’s customer profiles on the car-hailing service, without her permission.

Other reporters have also voiced concerns that they could be targeted based on their usage of the app.

“Several Uber employees have warned me that Uber execs might look into my travel logs,” said Ellen Cushing, a reporter for San Francisco magazine, who wrote a recent profile of Uber.

In a blogpost, Uber played down those allegations, which could see the company – recently valued at $17bn and currently in talks to raise more than $1bn in new funding – run foul of data protection laws.

“Uber has a strict policy prohibiting all employees at every level from accessing a rider or driver’s data,” the company said on Tuesday afternoon. “The only exception to this policy is for a limited set of legitimate business purposes. Our policy has been communicated to all employees and contractors.”

Some examples of “legitimate” uses include responding to customer service inquiries, fraud monitoring and troubleshooting technical bugs, Uber’s blogpost said.

Uber’s privacy policy states that the company “may use your personal information or usage information that we collect about you” for unspecified “internal business purposes” and “inclusion in our data analytics”.

Even after a customer cancels their account, their location and trip history data can be stored “as needed” for legal, security or operational purposes, Uber’s privacy policy says.

Two months ago, attention was drawn to Uber’s ability to zoom in on individual customers’ activity by Peter Sims, a San Francisco-based author and former venture capitalist, who discovered that his Uber ride across Manhattan had been watched simultaneously on a map at a company launch event in Chicago.

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November 19, 2014 2:05 am
Uber tries to head off privacy criticism
Tim Bradshaw in San Francisco and Hannah Kuchler in New York

Uber Technologies Inc. signage stands inside the company’s office©Bloomberg
Uber has moved to head off further criticism about how it handles the huge trove of personal data that it holds on its customers’ locations and trips, after facing questions over how its employees access individuals’ information.
Emil Michael, Uber’s senior vice-president of business, sparked controversy this week after he was quoted as saying that the company should consider hiring private investigators to launch a smear campaign against critical journalists.
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The comments were first reported by Buzzfeed, which also alleged that an Uber manager had accessed one of its journalist’s customer profiles on the car-hailing service, without her permission.
Other reporters have also voiced concerns that they could be targeted based on their usage of the app.
“Several Uber employees have warned me that Uber execs might look into my travel logs,” said Ellen Cushing, a reporter for San Francisco magazine, who wrote a recent profile of Uber.
In a blogpost, Uber played down those allegations, which could see the company – recently valued at $17bn and currently in talks to raise more than $1bn in new funding – run foul of data protection laws.
“Uber has a strict policy prohibiting all employees at every level from accessing a rider or driver’s data,” the company said on Tuesday afternoon. “The only exception to this policy is for a limited set of legitimate business purposes. Our policy has been communicated to all employees and contractors.”
Some examples of “legitimate” uses include responding to customer service inquiries, fraud monitoring and troubleshooting technical bugs, Uber’s blogpost said.
Uber’s privacy policy states that the company “may use your personal information or usage information that we collect about you” for unspecified “internal business purposes” and “inclusion in our data analytics”.
Even after a customer cancels their account, their location and trip history data can be stored “as needed” for legal, security or operational purposes, Uber’s privacy policy says.
Two months ago, attention was drawn to Uber’s ability to zoom in on individual customers’ activity by Peter Sims, a San Francisco-based author and former venture capitalist, who discovered that his Uber ride across Manhattan had been watched simultaneously on a map at a company launch event in Chicago.

“I’ve given up on being able to trust the company,” Mr Sims wrote in a widely circulated blogpost this September about the alleged incident, which he said happened in 2011.

Uber has tried to quell growing discontent among some reporters and customers in the aftermath of Mr Michael’s comments, which are just the latest in a string of incidents that has prompted criticism of its corporate ethics.

In an interview with the Financial Times on Tuesday, David Plouffe, Uber’s senior vice-president of policy and strategy, said the company had a “great story to tell” about creating jobs, reducing drink driving and improving cities’ transportation.

“That’s where we need our focus to be in terms of talking about our company,” he said. “The less we get in our own way, the better off we’ll be.”

Nonetheless, some security analysts remain concerned about how Uber stores and uses information on its millions of customers, many of whom use the app several times a month to travel to or from their homes.

Davi Ottenheimer, senior director of trust at EMC, the IT firm, and an expert in encryption, said Uber had a “huge metadata issue” as it could see who moved where and when.

“You don’t realise when you step into that car that they are looking at everything – I mean everything, building profiles of you,” he said. Even though the data are officially “anonymous”, if an Uber user frequently goes to the same address, such as their home or office, they could be identified based on that information, he added.

“I don’t think anybody realises that we’re far away from an app that gives you privacy in a way that taxis give you your privacy,” he said.

Describing the Uber screens that show cars moving around a live map, he said: “They call it the ‘God view’ . . . They think they are God.”

→  novembre 18, 2014


Jean-Claude Juncker has not had an easy start as European Commission president. When he was nominated five months ago, a handful of EU leaders raised questions about the ability of the former Luxembourg prime minister to meet the demand of many Europeans that the EU must change. Now he is being forced to fend off criticism over the way the Grand Duchy became a tax haven for leading multinationals during his long tenure as its premier and finance minister.
Luxembourg’s status as a tax shelter may not be news. But Mr Juncker’s role in the Grand Duchy’s tax dealings has been thrust into the spotlight following the leaking of a trove of documents revealing special tax arrangements between Luxembourg and 340 multinationals, including Pepsi, Ikea and JPMorgan. The files show how secret deals with Luxembourg between 2002 and 2010 saved these companies from paying billions of dollars in tax in countries where they do business.

These disclosures come at an embarrassing time for Mr Juncker. Across the EU, there is public indignation at the way multinationals have shuffled profits across borders to avoid paying tax. In the year before he took office, the commission responded by launching probes into companies suspected of benefiting from such arrangements – including at least two in Luxembourg, Amazon and Fiat’s financial arm.
Last weekend’s G20 summit highlighted the awkwardness of the situation. In Brisbane, Mr Juncker endorsed plans to crack down on multinational tax avoidance – including the introduction of transparency measures that he spent years blocking within the EU while running Luxembourg. The incongruity led one NGO to quip that putting him in charge of efforts to combat tax avoidance was like placing Dracula in charge of a blood bank.
Mr Juncker has been damaged by the scale of tax avoidance on his watch. These wounds need not be mortal. The commission president acknowledges that he was “politically responsible for what happened in each and every corner” of Luxembourg when premier. But he also insists that the tax authorities in the Grand Duchy were “autonomous.” No “smoking gun” has yet been produced showing he broke EU law.
Still, Mr Juncker must act to restore public confidence. As commission president, he oversees the officials investigating the tax incentives that Luxembourg offered to Amazon and Fiat. Their inquiries are examining whether those companies effectively received a form of illegal state aid.
Although Mr Juncker says he will allow these inquests to continue without hindrance under the new competition commissioner, Margrethe Vestager, he has so far refused to recuse himself formally from participating in the commission’s final judgments. Mr Juncker should think again. He should make a clean break and officially hand over all oversight for the probes to Frans Timmermans, his deputy.
Mr Juncker should also step back from involving himself as far as possible in policy discussions on tax transparency. The commissioner in charge of these matters is France’s Pierre Moscovici. Mr Juncker should let him take the lead on all matters relating to tax, including in forums such as the G20.
Mr Juncker has more than enough to do. He is leading a vital initiative to boost investment in the EU’s struggling economy. He needs time to settle into the job. Nonetheless, he should acknowledge Luxembourg’s increasingly toxic reputation within the EU for tax avoidance. Mr Juncker would enhance his authority if he were to put himself at arm’s length from the commission’s activities in this field.