Wall Street Journal số ra ngày 24/2/2014

Wall Street Journal số ra ngày 24/2/2014

VOL XXXII NO 17 MONDAY, FEBRUARY 24, 2014

use of Swiss insurance ucts to determine if they havebeen used to hide assets, sig-naling a potential new direc-tion in the U.S legal crack-down on tax evasion in theAlpine country, according topeople with knowledge of thematter

prod-The U.S Justice ment and the Internal Reve-

Depart-nue Service are looking at theuse of private placement lifeinsurance, or PPLI, a productthat meshes banking and in-surance by linking the value

of a client’s policy to assetsheld in a Swiss bank account,these people say

Swiss insurers offering theproduct, which can be used

legally by Americans to defer

sought to reduce ties to U.S.clients At least three big in-surers say they aren’t accept-ing new U.S clients In De-

cember, Swiss Life Holding

AG returned funds to dreds of Americans who hadinvested in PPLI policies.Those policies were linked to

hun-accounts at Bank Frey & Co.

AG, which is among a number

of Swiss banks that have closed being under criminalinvestigation in the U.S forallegedly aiding tax evasion,according to people familiarwith the matter

dis-Bank Frey ceased tions last year, after one of itsexecutives and an attorneywho directed clients to thebank were indicted for alleg-

opera-Please turn to page 20

Telecoms Step Up Fight OverNet-NeutralityRules

nications companies in Europeand the U.S are escalating abattle with technology compa-nies over requirements to

BARCELONA—Telecommu-treat all ternet traffic

data-hungryWeb services explodes

A group of Europe’s

Deutsche Telekom AG and France’s Orange SA, is fight-

ing provisions in a proposedEuropean law aimed at enforc-ing net neutrality, or the openInternet, a principle that In-ternet providers shouldn’t dis-

criminate against traffic fromparticular sources

“We fear that, if the mostrestrictive views on open In-ternet prevail, there will be asignificant reduction of users’

choice,” said Luigi bardella, head of Europeantelecom trade group ETNO,whose members have beenlobbying ahead of a vote inEurope’s Parliament on Mon-day European telecom execu-tives fear that some amend-ments to the proposed lawwould cripple efforts to rollout new services

Gam-In the U.S., telecoms arelikely to push the FederalCommunications Commission

to allow them to charge somewebsites to deliver content athigher quality The regulator

is expected to propose newnet-neutrality rules this year,after a federal appeals court

in January tossed out the bulk

of the commission’s trality rules

net-neu-Friction between tech andtelecom companies on bothsides of the Atlantic is rising,

as they wrangle over how to

through the world’s networks

The question of who will payfor upgrades is becomingmore acute as a tsunami ofmobile devices, from phones

to cars, threatens to swamp

Please turn to page 17

gov-but insisted funds wouldcome only with pledges of amajor economic overhaul

European officials said atrade-and-aid deal with Eu-rope, that former PresidentViktor Yanukovych walkedaway from in November, trig-gering turmoil on the streets

in Ukraine, could also be suscitated and signed with anew government as early asnext month

re-Kiev was calm on Sunday,the day after parliamentvoted to remove the presidentand set new presidential elec-tions for May 25

The European Union’s eign-policy chief, CatherineAshton, canceled a trip toAsia and decided to travel toUkraine on Monday morningfor two days of talks

for-“She is expected to meetkey stakeholders and discussthe support of the EuropeanUnion for a lasting solution tothe political crisis and mea-sures to stabilize the eco-nomic situation,” a statementsaid

An EU official said a mit with Ukraine could beconvened as early as nextmonth, during which thestalled trade deal with thecountry could be signed

sum-That pact could come with

a large aid package that couldexceed the almost €20 billion($27.5 billion) over sevenyears that officials previouslysignaled the EU executive wasconsidering “This is now avery conservative estimate,”

the official said “Given thecurrent circumstances, we ex-pect member states to givemuch more We hope to havemore news on this in the nextdays.”

“This can all happen veryquickly, provided the politicalsituation in the country con-tinues to develop in the rightdirection,” the official said

Russia will delay a ised bailout of Ukraine afterthe dramatic collapse of thegovernment in Kiev over theweekend but the InternationalMonetary Fund could help thecountry return to financialstability, Russia’s finance min-ister said Sunday

prom-“The political situationthere has changed dramati-cally Now we must wait until

a new government is formedbefore a decision can bemade” about promised aidfrom Russia, Finance MinisterAnton Siluanov said on thesidelines of a financial lead-

ers’ meeting here

Mr Siluanov also appeared

to open the door to backing

an IMF bailout, the tive financing proposal toRussian aide pushed by the

alterna-EU and the U.S

“The fund has the ence of supporting countries

experi-in difficult situations…andthey have a well-elaboratedset of tools to help in suchcases,” he said through an in-terpreter when asked if Rus-sia would back an IMF loan

“Naturally, the IMF ence could help.”

experi-German foreign ministerFrank-Walter Steinmeier saidthat a bankrupt Ukrainewould be too big a burden forRussia or the EU to bear Hesaid German Chancellor An-gela Merkel had spoken toRussian President VladimirPutin about “how to stabilizeUkraine economically.” Hesaid he would go to Washing-ton this week to talk with theIMF about the issue

Ms Merkel’s spokesmansaid the two leaders agreedthat Ukraine needed a work-ing government and shouldpreserve its territorial integ-rity

The EU’s trade chief, Karel

Please turn to page 6

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HEARD ON THE STREET

AXA Goes Beyond

Its French Heritage

Being French isn’t the bestway to attract investors rightnow, given macroeconomicconcerns around the Gallic

nation Insurer AXA’s answer

is, thus, to become lessFrench

The company, whose nesses are spread roughlyevenly among life insurance,general insurance and assetmanagement, now generatesless than a quarter of itsearnings from its home coun-try AXA has instead beenmoving more vigorously intoemerging markets, making ac-quisitions in China and Co-

busi-lombia in the past year

The strategy seems to beworking Rising revenue fromits high-growth markets wasone reason why AXA’s earn-ings rose 14% last year In itslife-insurance arm, AXA alsohas been skewing its productmix more toward health andprotection products That hashelped widen its operatingmargin on new business to35% last year from 22% in

2010

Even a €170 million ($234million) charge in its U.S

business, related to highermortality rates among mid-dle-age men, couldn’t derailAXA With interest rates ris-ing, the company expects thepressure on its U.S variableannuities business to ease in

2014

Costs are coming down,too AXA now reckons it canachieve annual savings of €1.7billion by 2015, up from itsprevious €1.5 billion target

And with its net debt down to24% of debt and equity com-bined, AXA’s balance sheet ishealthier than it has been for

some time

The company raised itsdividend by 13% for 2013 andnow pays out 40% of its earn-

ings to shareholders

Still, investors are provinghard to please Sure, AXA’sshares are up 45% in the past

12 months But it still trades

at only nine times expectedearnings in 2014

That is a discount to

com-parable German insurer anz, which has a similar busi-

Alli-ness mix but trades at 9.7times Even troubled U.K in-

surer Aviva trades at 11.1

times expected earnings,while emerging-market-heavy

Prudential trades at 17.2

times, according to FactSet

That suggests AXA still issuffering from a perceptionthat it is too heavily exposed

to France’s slow-expandingeconomy If it keeps deliver-ing solid results like those in

2013, investors’ minds should

be put at rest

—Andrew Peaple

For Big Oil, a Return to Returns

Lee Raymond must be

feel-ing vindicated

As Steve Coll tells in his

book “Private Empire: Exxon

Mobil and American Power,”

the former chief executive of

the oil giant pushed Wall

Street to focus on a particular

ratio when judging the

indus-try: return on capital

em-ployed

Reporting results recently,

two of Europe’s major oil

companies concurred,

high-lighting return on average

Dutch Shell said its return

relative to peers should be

the primary way shareholders

assess its progress Norway’s

Statoil pledged to keep its

re-turns steady at last year’s

level of about 12%

Major oil companies invest

huge amounts of capital in

multidecade projects So it

makes sense to measure how

efficiently profits are being

extracted from that capital

over time The measure

im-proves with better margins

and deteriorates when capital

is tied up in unprofitable

businesses or being spent on

vast developments that aren’t

yet making money

The return of returns

should please energy

inves-tors But even with the proval of a former CEO nick-named “Iron Ass,” investorsshouldn’t follow it slavishly

ap-The European sector’s turns have fallen from an av-erage of 19% in 2008 to 8%

re-last year, according to man Sachs U.S rivals, led byExxon Mobil, have placedmore emphasis on return oncapital employed Despite alsoseeing their returns fall in re-cent years, their stocks havegenerally traded at a premium

Gold-to the Europeans’ Greaterconfidence that returns have

at least stabilized shouldboost the latter Indeed,Shell’s multiple of forwardearnings has jumped to 11.3

times, topping Chevron’s.

But a laserlike focus on turns can generate its own

Exxon’s experience is tive It was conservative oninvestment during the firstdecade of this century, mak-ing for industry-leading re-turns that peaked at 34% in

illustra-2008

But it also meant thatExxon underinvested in itsupstream reserves It finallyaddressed this in 2010 withthe poorly timed purchase ofXTO Energy and a big in-

crease in capital expenditures

The result: Return on capitalwas just 18.5% last year, ac-

cording to ISI Group

also are under pressure to selltheir more mature assets But

as the carrying value of those

is largely depreciated, theirreturns can be among thehighest in a big oil company’sportfolio In the aftermath of

the Macondo disaster, BP

shed $40 billion in “noncore”

assets, with a return north of50%

It also pays to be wary ofmetrics promoted by execu-

tives For the major oil panies, falling levels of unpro-

projects start up, after years

of high spending, should ter returns in coming years

flat-Moreover, while investorscare about the long term, theyalso want their investments

to perform well in the hereand now

So Statoil’s moderated bition on production growthalongside its returns pledgecould prove more attractive

am-to invesam-tors than Shell’s centration on return on capi-

con-tal employed alone

Besides communication,there is also an operationallever major oil companies canpull to alleviate the tensionbetween short- and long-termgoals: shale projects Theirdevelopment is measured inmonths rather than years

Ideally, a company can invest

in big projects underpinninglong-term production whilealso developing shale re-sources to smooth the cycle of

investment and returns

Of the big companies,Chevron appears best placed

in this regard Its NorthAmerican shale liquids re-source base, as opposed tolower-value natural gas, tops

10 billion barrels, the highest

of any big oil company, cording to Edward Westlake

ac-at Credit Suisse

That offers a good basis to

quickly and help offset cerns about Chevron’s biggermultiyear projects, such asthe overbudget Gorgon lique-fied-natural-gas development

con-in Australia Fcon-indcon-ing religion

on returns is so much easierwhen you can answer inves-tors’ prayers a little more

quickly than your rivals

—Helen Thomas and Liam Denning

Economy Gives Fed Cold Shoulder

There has been a chill overthe economy recently, and notall of it is about the weather

The recent run of nomic data has been disap-pointing The latest reports

eco-on jobs, retail sales and tory output have fallen short

fac-of estimates

Last week came readingsindicating New York-areamanufacturing weakened thismonth, that the number ofnew homes on which groundwas broken fell sharply inJanuary and that January’ssales of previously owned

homes slipped

At least some of this ness has to do with what hasbeen one of the coldest andsnowiest winters in years In-deed, minutes of the FederalReserve’s January policy-set-ting meeting released lastweek show officials suggest-ing December’s lackluster jobsreport “may have been ananomaly, perhaps importantly

weak-reflecting bad weather.”

The minutes show cials’ overall view of the econ-omy was sanguine, with thestrong impression that itwould take a clear weakeningfor them to veer from cuttingbond purchases by $10 billionwhen they next meet in

offi-March

Laying all of the blame forthe weakness at the feet ofOld Man Winter is a bit prob-lematic The January employ-ment report released a weekafter the Fed meeting showed

job gains below economists’

expectations, even though theLabor Department’s surveyperiod for its payroll countfell during a relatively warmspell J.P Morgan Chase econ-omist Michael Feroli pointsout that the weakness in theJanuary retail-sales report in-cluded sales at Internet and

which usually do well duringbad weather

So the economy is

weather woes Probably it isjust getting some paybackfrom a strong fourth quarter

But there is also the chancethat once again, an economythat looked like it had finallyachieved a sustainable recov-

ery is stumbling instead

That last possibility sets

up financial markets for what

could prove to be a trying riod, with the Fed unlikely tochange course amid naggingdoubts about the economy’s

pe-strength

And given that Februaryhas been a rather wintrymonth, uncertainty aboutwhat is going on with theeconomy may only continue

The February employmentreport, for example, will bethe last one the Fed sees be-fore its March meeting Thejobs count will be based onhow many people were onemployer payrolls during thepay period that included Feb

12 According to the NationalClimatic Data Center, averagetemperatures during the cal-endar week that included the12th were 18 degrees lowerthan a year earlier in NewEngland, 19 degrees lower inthe Upper Midwest and 20degrees lower in the Northern

Rockies and Plains

It may not be until theMarch employment reportcomes out, in early April, be-fore there is a relatively cleanlook at how the job market isfaring The same is true ofother closely watched eco-

nomic indicators

That leaves the Fed likely to waver in its plan tokeep scaling back its bond-buying program But it willalso create a situation inwhich investors’ belief thatthe economy will do betterthis year than last starts to

Source: Federal Reserve The Wall Street Journal

Making Trouble

Monthly change inmanufacturing production

1.0

–1.0–0.50

0.5

%

’142013

–0.8%

Risks Around

China’s Sinopec

China bulls see signs of a

revamp in a plan for the

country’s top refiner by

ca-pacity to shed part of its

gas-station business to

pri-vate investors But is Beijing

really opening up that

mar-ket or just finding another

way for the public to fund

its energy policy?

Chemical, or Sinopec, plans

to sell up to 30% of its retail

arm Like much in China

these days, this could partly

be a property play

Broker-age CLSA, applying a simple

average of 500 yuan ($82) a

square foot, posits that the

land beneath Sinopec’s

sta-tions could be worth nearly

$1 trillion, some 10 times

Sinopec’s market

capitaliza-tion and equivalent to a

third of the entire Hong

Kong stock market’s value

A fantastical sum, but it

suggests the business is

un-dervalued to some extent It

enjoys stable margins and

contributes roughly 40% of

Sinopec’s operating profits

Sinopec’s stock soared on

the news Thursday, before

slipping a little Friday

But there is likely more

going on here than just a

simple corporate

divest-ment Sinopec, which is

nority shareholders

Sinopec hasn’t spelledout its plans But havingjoined in the foreign-expan-sion push by China’s state-backed oil firms, the risk isthat it overpays for new oilreserves It could also beproblematic if Sinopec rein-vests any proceeds from adivestiture in developing its

own oil fields

Sinopec is at least cepting the need to raisemoney Capital spending anddividends outpaced operat-ing cash flow by about $9billion last year, according toSanford C Bernstein But aretail deal could involve sac-rificing a cash cow And mi-nority investors risk losingout if the proceeds go to-ward foreign resource deals

ac-—Abheek Bhattacharya

Slippery

Exxon Mobil’s and RoyalDutch Shell’s return on

average capital employed

The Wall Street Journal Sources: the companies; ISI Group

40

0102030

%

’09

’08 ’10 ’11 ’12 ’13

Exxon Mobil Shell

Shell gas station in San Francisco

PAGE TWO

BEIJING—When China’s leaderswanted to give a boost to thedomestic semiconductor industrylast year, a big state-ownedelectronics company scooped upsmaller privately owned chip-design and chip-making firms

Beijing followed the samescript to get control of thesprawling, polluting rare-earthsindustry: A big state-ownedcompany purchased nine firms inDecember that mine the mineralsused in such strategic industries

as defense andtelecommunications

Expect China’s leaders to insist

on a big state role in sectors theydeem strategic when the officialslay out their economic plans forthe coming year at a session of thecountry’s largely toothlesslegislature

On the one hand, China haspledged to dismantle some state-owned monopolies so they operate

by market principles and pay moredividends to fund social spending

But on the other, China specialistssay the state may actually end upwith more influence over theeconomy in coming years, at least

in areas considered central toChina’s core interests

“Beijing has been unable tocontrol strategic sectors in whichlocally owned SOEs [state-ownedenterprises] or private firmspredominate because of localgovernment backing, so Beijinghas promoted consolidationcampaigns,” where large state-owned firms acquire othercompanies, says Scott Kennedy, aChina expert at Indiana University

Potent forces push against thebreakup of monopolies Chinacontinues to encourage jumbo-sizestate-owned companies to competeinternationally, as it has in thepast decade, especially in the oiland mining industries State-owned firms have becomepowerful enough politically toresist efforts to close them TheCommunist Party also has beenlooking to tighten—not ease—

control over state-owned firms sothey carry out its priorities

In 2009, for instance, whenBeijing ordered a surge in lending

to combat the global financialcrisis China’s largest bank,

Industrial & Commercial Bank of China Ltd., lagged behind its

competitors in ramping up lendingbecause it worried about creatingbad debt—a problem that nowhaunts the Chinese financialsector Even so, ICBC’s chairman,Jiang Jianqing, was the only head

of the top four state-owned banks

to not get a promotion last year,which banking officials say wasmeant as a signal to put theparty’s priorities ahead of profits

The Peterson Institute forInternational Economics estimatesstate-controlled firms account forabout 25% of China’s industrialoutput, though other analysts saystate-owned enterprises control aneven larger share of the economy

The top 100 or so state-ownedfirms dominate critical industries,including banking,

telecommunications, steel,transportation and electricity Butthere are about 100,000 others,owned by provinces and cities,that compete with privatecompanies in a wide range ofindustries including real estateand hotels

China’s effort to whittle downthe number of SOEs halted duringthe global financial crisis thatbegan in 2008 and hasn’t resumed,according to a research paper bythe Paulson Institute, a China-focused think tank in Chicago

Local governments formedcompanies to borrow money andbuild real-estate developments andinfrastructure as part of Beijing’sstimulus plan

“Local governments don’t want

to lose the benefits from theircontrol of local SOEs,” said XuanXiaowei, an SOE specialist at theDevelopment Research Center, aprominent Chinese think tank

“The control gives them power[and] local income.”

But competitors inside andoutside of China complain thatstate firms have specialadvantages, including subsidiesand easy access to bank loans One

of China’s largest, China

Nonferrous Mining Corp.,

acknowledged as much in its 2012prospectus, noting “we enjoygovernmental support andpreferential treatment in creditborrowing from [Chinese] banksand [in] tax payment.”

The U.S has been using annualeconomic negotiations with China

to try to persuade Beijing toreduce the SOEs’ advantages

There have been some signs ofmovement in that direction

Last week, two big state-ownedfirms agreed to sell minority

stakes in areas traditionally limits to private investment,including domestic oil-refiningmarketing and distribution

off-Chinese banking regulators alsohave begun to approve smallprivately owned banksBut China’s view of whatconstitutes commercial operationsmay be different from whatinternational competitors areseeking Chinese officials point toSingapore’s big sovereign-wealth

fund, Temasek Holdings Pte Ltd.,

as a model Temasek buys stakes

in companies, including controllinginterests, and its fund managerslook to improve corporateprofitability and efficiency

China’s Communist Party plays

a far more intimate role in owned firms The party puts inplace the top managers at thebiggest firms and installs a partysecretary, whose job is to makesure party directives are followed

state-Companies hold “study sessions”

to figure out how to carry outparty priorities The heads of localSOEs are often appointed by localparty officials

Having party-appointedTemasek-style asset managersclosely oversee the companies,rather than Beijing regulators whosometimes see themselves ascompany allies, could give thestate a stronger hand in corporateaffairs

China’s Big State Firms Gain Clout in Key Sectors

[ The Outlook ]

B Y B OB D AVIS

Party Power China's state-owned firms are less profitable than privately owned ones,

but account for a large, though, declining share of China's economy

Share of gross industrial output from Chinese government–owned enterprises Return on assets of Chinese government–owned and private enterprises

60%

20304050

’95

1990 2000 ’05 ’10

20

051015

Business & Finance

n Greece was due to resume

talks with a troika of

interna-tional inspectors, with the

gov-ernment hoping for a deal that

would unlock a fresh aid tranche

but without new cutbacks 4

n The fashion world’s race to

reach ultrarich shoppers is

leav-ing some of Italy’s vaunted

leather and garment

manufactur-ers high and dry 15

n Big European wireless

pro-viders are racing to roll out

no-roaming-fee packages as the

EU is set to further reduce fees

that have long angered

travel-ers across the continent 17

n Discovery Communications

is preparing a bid for U.K

broadcaster Channel 5, as the

U.S cable-channel owner looks

to continue its rapid growth in

international markets 18

n Coca-Cola Iberian and its

workers appear likely to wind

up in court over a dispute about

plant closures and job cuts 19

n Samsung announced the

re-lease of its Gear 2

smart-watch, running on the

com-pany’s fledgling Tizen

operating system 17

World-Wide

n European antitrust

authori-ties closed a seven-year tigation into energy subsidies

inves-for Spanish industry 3

n Thousands of protesters in

Venezuela hit the streets urday to express frustration

Sat-with the government 8

n Two people were killed and

dozens were injured after anexplosion near an antigovern-

ment rally site in Bangkok 9

n Thousands rallied in Hong

Kong to protest what they see

as waning press freedoms 9

n Al Qaeda’s top emissary

was killed in Syria in a suicideblast blamed on a rebelliousoffshoot of the group, signaling

a violent power struggle withinthe extremist organization

n Japanese police were

inves-tigating the apparent ism of books in Tokyo publiclibraries related to the story

vandal-of Anne Frank

n North Korea said it

“cate-gorically rejects” a recent U.N

report that accused the gime of widespread crimesagainst humanity

re-What’s News—

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THE WINTER OLYMPICS

Once Again, Canada Rules The Rink

SOCHI, Russia—Canada can revel

in its role as the world’s hockey perpower

su-The nation on Sunday became thefirst team since the Soviet Union towin back-to-back gold medals inmen’s hockey, defeating Sweden 3-0

in the last event of the Sochi pics Canada’s men have now wonthree of the past four Olympic men’sgold medals The Canadians didn’tallow a goal in their last two gameshere, including a 1-0 shutout of theU.S in the semifinals

Olym-Earlier in the week, the Canadianwomen’s team won its fourthstraight Olympic gold in an overtimevictory against the U.S

Asked after the game whetherCanada had just fielded the greatesthockey team in history, general man-ager Steve Yzerman squirmed Some

of the legendary Russian nationalteams of the 1970s and 1980s mighthave been as good, he said “It is thebest defensive team Canada has everput on ice,” he added

In Sochi, Canada shook whatseemed to be the last thing holding

it back from truly dominating thehockey world: a historic inability towin outside North America Its lastOlympic gold outside Canada or theU.S came in the 1952 Oslo games

Canada’s last twowins were in SaltLake City andVancouver, where the teams played

on NHL-sized rinks, rather than ger international ice

big-Players on Sunday tried to scribe the pressure they felt to re-peat after the victory at home inVancouver 2010

de-“We knew the whole country iswatching, you make one mistake andyou are a goat for the rest of yourlife,” said defenseman Duncan Keith

In these Games, Canada managed

to break away from what has been acompetitive pack ever since the in-troduction of National HockeyLeague players to the Olympics in1998

In 2010, the U.S beat Canada in apreliminary round and then took thegold-medal game to overtime ThisGames, when the two teams met inthe semifinals, the U.S never got afoothold offensively in the 1-0 loss

In the 2006 Torino Games, Russiaeliminated Canada in the semifinals

In Sochi, Team Russia, which opted

to stock half its team with playersfrom its own pro league, went out inthe quarterfinals to the Finnish teamthat eventually took out the U.S

Another hockey power, the CzechRepublic, has struggled to replenish

its talent pool The Czechs won thefirst Olympic hockey tournament inwhich NHL pros participated But inSochi, the team relied on an aging

trio of veteranforwards who canstill make bigplays: Petr Nedved, a 42-year-oldwho last wore an NHL uniform in2008; the New Jersey Devils’ PatrikElias; and the Devils’ legendaryJaromir Jagr, who was competing inhis fifth Olympics

Canada came in the favorite and,after looking shaky in a close gameagainst underdog Latvia, looked im-possible to beat after Sochi was ademonstration of Canada’s hockeydepth Two of the team’s scoringstars, Sidney Crosby and JonathanToews, didn’t have a goal in thetournament before Sunday’s game

Both scored on Sweden

Canada was helped in the gameagainst Sweden by the absence oftwo key players Swedish forwardNicklas Backstrom failed a dopingtest and was a late scratch Swedishteam officials said Backstrom testedpositive for a substance found in anallergy medication that he has takenfor years Forward Henrik Zetterbergwas also out because of a back in-jury

Sweden coach Par Marts said ing the players hurt the team, but hewent to lengths to say Canada won

los-on its suffocating defense and quent attacks on goal

fre-“Canada is the better team,” hesaid “We spent very little time inour own zone.”

Canada’s first goal came fromToews 12:55 into the first period, as

he positioned himself in front of thegoal just in time for a pass by JeffCarter

Canada stepped up itsforecheck—a critical weapon in itsvictory over the U.S.—in the second

period, and it showed At one pointLundqvist lost the puck in front ofgoal, but was saved by a quick whis-tle Canada later had back-to-backbreakaways stopped by scramblingSwedes

But Sweden couldn’t hold offCanada Crosby, who scored thegame-winning overtime goal againstthe U.S in 2010 to win gold, scoredCanada’s second goal with four min-

utes left in the second period.Canada’s Chris Kunitz made it3-0 midway through the third period

on a turnover forced by Crosby

As the clock wound down, agroup of Canadian athletes sang

“O Canada.”

Canada’s men’s and women’steams swept gold in the only twohead-to-head team sports at theWinter Games, hockey and curling

B Y S HARON T ERLEP

Canada’s Jonathan Toews vies for the puck with Sweden’s Alexander Steen.

Brilliant fireworks explode in the sky over the Olympic Park during the closing ceremony for the Sochi Olympic Winter Games on Sunday night.

EU Closes Probe of Spanish Subsidies

BRUSSELS—European antitrustauthorities have quietly closed aseven-year investigation into energysubsidies for Spanish industry, amove that potentially saves localcompanies billions of euros as thecountry tentatively emerges from adeep recession

In a short notice on its websitedated Feb 4, the commission saidMadrid’s decision to set artificiallylow electricity prices for industrialcompanies in 2005 “does not consti-tute aid.” The full reasoning behindthe decision wasn’t yet available,said the notice, which wasn’t ac-companied by the customary newsrelease

The decision means Spain’s largeand midsize industrial companieswon’t have to pay back money tocompensate for artificially low en-ergy tariffs they enjoyed in 2005that created a €3.8 billion ($5.22 bil-lion) deficit in Spain’s electricitysystem

The deficit was to be financed by

a new electricity surcharge paid byall Spanish consumers over 14 years

When the commission launched

its investigation in January 2007under former competition chief Nee-lie Kroes, it warned that the low en-ergy prices might have provided

“significant amounts of operatingaid” to Spanish industry, therebydistorting competition

“Generally, EU law accepts thatsmall businesses and householdscan benefit from regulated tariffs,but bigger companies should pur-chase energy on the free market,”

said Steven Verschuur, a lawyerwith Clifford Chance in Brusselswho specializes in competition law,state aid and public procurement

Spanish electricity companiesmight also have made an “abnormalprofit” as they were overcompen-sated by the government for the lowenergy prices, the commission said

at the time

It was also concerned that onlySpain’s electricity incumbents wereallowed to provide the low regu-lated tariffs, which may have pre-vented new electricity suppliersfrom entering the country

A spokesman for the commissionsaid it couldn’t establish that busi-ness users received an advantagebecause free-market prices through-

out 2005 were “broadly in line”

with the regulated tariffs But hedidn’t explain why, if this was thecase, power companies were incur-ring huge losses before compensa-tion He added that the compensa-tion paid to electricity providerscouldn’t be considered an advan-tage

He stressed that Spain abolishedregulated tariffs for business users

in 2009

Legal experts said the lack of apublic announcement on the casewas “unusual” and “astonishing,”

particularly as it comes two monthsafter the commission opened a simi-lar investigation into energy subsi-dies in Germany

“The commission’s decision not

to publish a press release in thiscase is astonishing because it’s clearthat this case would have been in

the public interest in the context ofthe ongoing investigation in Ger-many,” said Martina Maier, a lawyerwith McDermott Will & Emery inBrussels

It is also unusual to close a mal state-aid investigation afterseven years, an “exceptionally long”

for-time, because the commission onlylaunches such probes if it thinks ithas a strong case, Ms Maier said

“It looks a bit odd,” said Mr schuur

Ver-A spokesman for the commissionsaid it doesn’t publish news releasesfor all decisions, “especially for pos-itive decisions…or with old caseswhich are not of high relevance to-day.”

He said the investigation inSpain had “nothing to do” with theinvestigation concerning Germany

which acts as the bloc’s antitrustregulator, has significantly morediscretion than U.S antitrust au-thorities because it acts as investi-gator, prosecutor and judge

The commission’s decision mayhave been influenced by the weakeconomic backdrop in Spain, said

Mr Verschuur The country emerged

from a two-year recession last yearbut is expected to post economicgrowth of just 0.2% this year, and itsunemployment rate is likely to re-main above 25% until at least 2017,according to the International Mon-etary Fund

“There is a tendency for thecommission to be more considerate

of the industrial implications behindits cases,” Mr Verschuur said.Another possibility is that thecommission closed the case afterSpain’s government amended itslegislation to Brussels’ satisfaction,

he said

Madrid announced an overhaul

of its energy sector last summeraimed at tackling an accumulated

€30 billion electricity-tariff deficitthat has arisen from the wide gapbetween the price paid by consum-ers and the power companies’ costs.The overhaul was a key demand

of the so-called troika—the sion, the European Central Bank andthe International Monetary Fund—which oversaw the €42 billion bail-out of Spain’s financial sector thatwas agreed in 2012

commis-—Ilan Brat contributed to this article.

HEARD ON THE PITCH SPORTS

Growing Pains for Barça’s Martino

New Coach Experiences Sting of High Expectations in First Year at Major Club

If Barcelona coach Gerardo

“Tata” Martino was a masochist,

he would have enjoyed surfing the

local papers on his smartphone

Sunday morning

“You don’t win anything like

this” was the headline in the

Bar-celona daily Sport “Barça loses its

head and half the league” titled La

Vanguardia Other Catalan papers

described Saturday’s performance

in the 3-1 away defeat to Real

So-ciedad as “horrible” and “awful.”

And yet, 72 hours earlier, he

was, if not quite the toast of

Cata-lonia, at least a savvy manager

ca-pable of handling a turn-key

oper-ation like Barcelona The club was

in a three-way tie with Atlético

Madrid and Real Madrid at the top

of Spain’s Liga and had already

ad-vanced to the Spanish Cup final

On Tuesday, it traveled away to

Manchester City in the Champions’

League, arguably the toughest test

faced by any of the seeded teams

in the Round of 16, and emerged

with a 2-0 victory in which it

looked dominant

We know fans and media can be

fickle, but why the 180-degree turn

after a single defeat? Especially at

“La Real’s” Anoeta stadium, a place

where Barcelona had not won a

league match since May 2007?

There are multiple answers and

most center around Martino

For a start, his team selection

seemed to indicate he treated the

trip to San Sebastián like an ing to a semi-professional side inthe early rounds of the cup Hemade six changes from the teamthat faced Manchester City, includ-ing three of the back four and itshowed Barcelona suffered numer-ous defensive meltdowns and couldeasily have conceded five or sixagainst the young, aggressive Real

out-Sociedad team

He also tinkered with a midfieldthat ordinarily includes one ball-winner (Sergio Busquets) and twocreative players (usually two out

of Cesc Fàbregas, Xavi and AndrésIniesta) Instead, he played AlexSong in a defensive position along-side Busquets and Iniesta, whichended up making Barça’s vaunted

possession more sterile

Managers need to rotate theirsquads to keep everyone fresh Butit’s fair to question Martino’s judg-ment in a game like this, whenBarcelona’s next game wasn’t untilMarch 2, in ten days’ time, and at

home to little Almería

Then there’s the broader curity that comes from realizingthat in the past seven leaguegames, arch-rival Real Madridgained 19 points to Barça’s 11,leapfrogging the Catalans in the

Rosell was forced to resign after itemerged the player cost some

€29.1 million ($40 million) morethan originally stated and that thefee included a $55 million paymentmade directly to a company con-

trolled by the player’s father

That’s when nerves set in Andthat’s when a big-name boss withlots of sporting capital can make adifference in terms of dealing withmedia and fans Martino, on theother hand, got himself ejected athalf-time of the Real Sociedad

heading into the job, both had longand close associations with theclub, either as coaches, players or

both

The choice of Martino at timesfelt as if it could be explained intwo ways First, as a means of ap-peasing Lionel Messi, the club’sstar player, who, like the manager,hails from Rosario, Argentina Andsecond, in the belief that this issuch a well-oiled, über-juggernaut

of a club, that it didn’t require ahigh-profile pedigreed boss—with

a huge long-term contract and jor transfer damands—as much as

ma-it needed a basic, nuts-and-boltsguy who could keep the stars

happy

In some ways, the decision wasvindicated, because despite theChicken Little routine in the localmedia, the sky really isn’t fallingover the Camp Nou Barça is still

in the running for all three majortitles this season And Messi, aftermissing nearly two months withinjury is once again firing, withseven goals in his past five games

across all competitions

Yet you wonder if a managerwith more experience—both Euro-pean and Barcelona-specific—andmore gravitas on this side of thepond (local media can be rathersnobby when it comes to SouthAmericans) might be better suited

to ride out certain storms Thecurrent one may be in a teacup but

if not handled properly, can brewinto something bigger

Liverpool beat Swansea 4-3 onSunday to maintain its Premier

League title challenge thanks totwo goals each from Daniel Stur-

ridge and Jordan Henderson

The goals took Liverpool’s tally

in the Premier League this season

to 70, overtaking Manchester City

as the top scorers, and left thefourth-place team just four points

behind league-leader Chelsea

However, manager BrendanRodgers refused to be drawn on

Liverpool’s title hopes

“I think for us, we’re ing on our performance,” Rodgers

concentrat-said “We’re just concentrating onwinning games No one is really

talking about us for the title way Everything now is about Chel-

any-sea, Manchester City and Arsenal.”

Sturridge’s first came in thethird minute when he received a

through ball from Raheem Sterlingbefore rounding Swansea goal-

keeper Michel Vorm and firing into

an open goal The striker then vided the assist for Henderson to

pro-double Liverpool’s lead in the 20thfrom the edge of the area

Jonjo Shelvey pulled one backfor Swansea against his former

club three minutes later with along-range strike that went in off

the crossbar He held his arm up inapology to his former club, a ges-

ture that received applause fromthe Liverpool fans

But the home supporters wereshocked into silence soon after

when Wilfried Bony equalized inthe 27th minute, with his header

from Jonathan De Guzmán’s freekick taking a slight deflection off

lev-being fouled by Skrtel

Suárez went close to restoringLiverpool’s lead but Vorm saved

well when one-on-one with thestriker before De Guzmán nearly

gave Swansea the lead when heshot just wide from a free kick

Henderson struck the winner inthe 74th after receiving a pass

from Suárez His initial shot wasparried by Vorm but the forwardreacted quickly to poke the ball in

from close range

Sunday’s other two PremierLeague matches ended with 1-0

scores, as Norwich defeated ham and Newcastle beat Aston Villa

Totten-—Associated Press

HEARD ON THE PITCH

Associated Press

Jordan Henderson celebrates after scoring his second goal Sunday.

Greece Plans to Resume Talks With Bailout Troika

ATHENS—Greece was set to

re-sume protracted talks with a troika

of international inspectors Monday,

as the government aims for a deal

that would unlock a fresh tranche of

aid—but without painful new

cut-backs ahead of local elections this

spring

The talks, which have dragged on

since September, come amid signs

Greece has surpassed budget and

economic targets set by its

credi-tors, potentially strengthening

Ath-ens’s negotiating position and easing

the need for politically contentious

austerity measures in the months

ahead

Instead, the inspectors are likely

to focus on the need for further

structural reforms Greece must take,

such as steps to liberalize the

coun-try’s hidebound economy, in which aweb of red tape and other restric-tions continue to hobble businessand investment Other items on theagenda include moves to overhaulGreece’s labor market, and plans tofurlough and fire thousands of pub-lic-sector workers

The goal, according to both thegovernment and the so-called troika

of inspectors—which represent theEuropean Commission, the Interna-tional Monetary Fund and the Euro-pean Central Bank—is to concludenegotiations before a March 10meeting of euro-zone finance minis-ters, who will judge Greece’s reformprogress to date and decide whether

it has done enough to receive freshaid By late May, Athens must makegood on debt payments totalingsome €9.3 billion ($12.8 billion)

“We are working very hard in

or-der to be ready,” Greek Finance ister Yannis Stournaras told journal-ists Saturday after briefing PrimeMinister Antonis Samaras on thestatus of the talks “We still have anumber of open issues, but I believethat by the next Eurogroup—wedon’t have any margin beyond that—

Min-we will need to have finished.”

For months, the on-and-off-againtroika review has become boggeddown in a dispute over the issue offurther austerity measures thatGreece must take to meet its budgettargets this year Until recently, thetroika insisted Athens find roughly

€2 billion in further budget cuts ortax increases to meet its fiscal goalsthis year, plus several billion euros

in additional austerity measures tomeet fiscal goals in 2015 and 2016

Since then, data showing Greecewith a surprise €1.5 billion budget

surplus last year—a year ahead ofschedule and far better than ex-pected—appears to have addressed

at least some of the troika’s previousconcerns

Likewise, government data showthat Greece has also met its target

to slash its bloated public-sectorpayroll by 150,000 workers, twoyears ahead of schedule As of theend of December, the public sectoremployed just shy of 636,000 peo-ple, according to the country’s ad-ministrative reform ministry, a de-cline of more than 200,000 workerssince the start of the crisis fouryears ago

Since 2010, Greece has securedtwo international bailouts worth

€240 billions in exchange for taking tens of billions of euros inausterity measures to fix its financesand restructure its economy But the

under-reforms have come at a cost:

Greece’s economy has shrunk bymore than a quarter from its peak in

2008, while unemployment hassoared to a staggering 28% of theworkforce This year, the economy isforecast to show only an anemic re-covery—after six years in reces-sion—with more robust growth onlyexpected from next year

The country’s two-way coalitiongovernment—made up of the con-servative New Democracy and thesocialist Pasok parties—warns thatunpopular cutbacks could threatenits narrow three-seat majority inGreece’s parliament Dual local andEuropean Parliament elections inMay, when the opposition left-wingSyriza party is expected to take alead, have reawakened fears of polit-ical instability, which could jeopar-dize Greece’s frail recovery

Mr Renzi may consider histiming is propitious

After all, he already has hiselectoral reform deal with Mr

Berlusconi His proposed laborreforms are similar to thoseattempted by former PrimeMinister Mario Monti, which werelargely scuttled by Mr Renzi’sparty

Meanwhile, a detailed plan for

€32 billion ($44 billion) ofspending cuts will land onincoming Economy Minister PierCarlo Padoan’s desk this week,drawn up by former InternationalMonetary Fund director of fiscalaffairs Carlo Cottarelli And Mr

Renzi’s plans for publicadministration reform shouldappeal to supporters of the

populist Five Star Movement

Indeed, its leader, Beppe Grillo,accused him of stealing hispolicies

But this is just a start Mr

Renzi will need to be much bolder

to pull Italy out of the mire Tohave any chance of success, threethings are required

First, he must convince Italians

of the need for reform Italy

stands out among euro-zonecrisis-hit countries for itsreluctance to recognize that itsmisfortunes are largelyhomegrown, preferring to blameoutside forces, whether Germany,Brussels or the financial markets

In the past five years, Italy hasswung from being one of the mostpro-European countries to one ofthe least Mr Renzi has sometimes

appeared to pander to thispopulism with talk of the need toimplement reforms so that “wecan tell Europe what we wantrather than Europe tell us what todo.” Yet all the recent evidencefrom the euro crisis suggests thatreforms are most likely to besuccessful when there is a strongdegree of domestic commitment

His second challenge will be to

face down the vested intereststhat have blocked previous efforts

to reform Italy These include thetrade unions, the Confindustriabusiness lobby, the CatholicChurch, the foundations thatcontrol much of the bankingsector, the civil service,professional guilds and the justicesystem Corruption, cronyism,corporatism and rent-seeking are

endemic

Mr Renzi’s record in Florence,where he privatized the busservice in the face of unionopposition, is encouraging But hehas no government experience atthe national level; successfulreform will depend on politicalskill as much as political will

Thirdly, he needs time Theconventional wisdom is thatreforms are very hard to deliverwith a coalition government—

particularly grand coalitions ofthe left and right—or in theabsence of market or externalpressure, or without a clearelectoral mandate

But it is easy to find exceptions

to each of these rules What isharder is identify is anysignificant reform delivered by agovernment within a year of anelection That’s hardly surprisingsince reform in the short-terminvariably creates more losersthan winners

It was only after elections inthe U.K., Spain, Ireland, Portugaland Greece that those countriesembarked on major reformprograms France’s PresidentFrançois Hollande wouldn’t beembarking on his new reformprogram now if he didn’t still havethree years before he needs toface the voters again In contrast,

it was the prospect of imminentelections that put paid to thereform ambitions of Mr Letta and

Mr Monti

Mr Renzi has been criticizedfor stating that he wants thisgovernment to serve until thecurrent parliament ends in 2018rather than to push for elections

in 2015 In reality, Mr Renzi haslittle option but to try to keep hiscoalition together if he is to avoidhis reform program rapidlyrunning into the political sand,with dire consequences for Italy’seconomy—not to mention his owncareer

But Mr Renzi must operatewithin the constraints of thecurrent constitution with theadded disadvantage that he isn’teven a member of Parliament Tokeep his coalition together, hispolitical skills will need to beevery bit as formidable as hissupporters say they are And thensome

This wasn’t how Matteo Renzi’s

destiny was supposed to unfold

For years, admirers of the

newly installed Italian prime

minister have gushed about his

energy, his ability and his supreme

Renzi swept to power on a tide of

popular support to revitalize the

economy and public life

But there have been no

elections, only a palace coup

Having dispatched the former

prime minister and his party

colleague, Enrico Letta, with

remarkable ruthlessness, Mr

Renzi starts work this week with a

similar cabinet, the same coalition

and the same parliament Polls

suggest voters are unimpressed

To be fair, Mr Renzi knows

that his career now depends on

delivering the reforms that he

says Italy needs and which he

accused Mr Letta of failing to

deliver His decision to force out

Mr Letta was a calculated risk,

says Roberto D’Alimonte,

professor of politics at Rome’s

Luiss University and an adviser to

Mr Renzi

Mr Renzi’s original plan had

been to support Mr Letta until his

government had put in place a

new voting system and reformed

the senate At that point, the

country could hold elections,

which he hoped would result in a

Democratic Party majority

government led by himself

But this was likely to take at

least a year because senate

reform—essential to secure the

support of Forza Italia, the main

opposition party led by former

Prime Minister Silvio Berlusconi—

requires constitutional change

Mr Renzi calculated that he

couldn’t afford to wait for a year

As other crisis countries started

to recover, Italy was falling

further behind and voters were

getting frustrated Forcing early

elections in the absence of

electoral reform was also out of

the question That left Plan C—

ousting Mr Letta and becoming

Italy’s new prime minister, Matteo Renzi, leaving a church near Florence Sunday, a day after he was sworn in.

BOOKS War on Our Shores

This year is the centennial of thestart of World War I, and there will

no doubt be an outpouring of booksassaying the conflict, particularlythe carnage on the Western Front

Howard Blum’s riveting and turbing “Dark Invasion” examines aless devastating but still ruthlesscampaign: the Germans’ ingeniousespionage operations in the UnitedStates during the years when Presi-dent Woodrow Wilson earnestlytried to maintain the nation’s neu-trality

per-The Germans were convincedthat they had the right and duty to

wage covert war in the UnitedStates because American neutralitywas hypocritical and dangerous tothe Fatherland Although the U.S

would theoretically trade with anynation, the powerful British navythwarted the Central Powers, Ger-many and its allies, from receivingAmerican munitions and othergoods Thus, for all practical pur-poses, the U.S was supplying onlythe Allied powers with war mate-riel Germany felt compelled to doeverything it could to preventAmerican provisions from reachingthe Allies The instrument of thisstrategy was Abteilung IIIB, “thelargest and most efficient intelli-gence organization in the world,”

commanded by the coldly proficientMaj Walter Nicolai

Nicolai and his two main tives in the U.S., Ambassador Jo-hann Heinrich von Bernstorff andnaval Capt Franz von Rintelen, had

opera-to establish a spy operation fromscratch, but they were munificentlyfunded, had a great deal of author-ity from Kaiser Wilhelm II’s govern-ment and could seek assistance fromwithin certain groups in the U.S

One such group consisted of Germanmerchant sailors who had been in-terned when war commenced Thesesailors weren’t part of the Germannavy, but many wished they were

And they were free to go where theywanted in the U.S Another groupwas German-Americans: “Over eightmillion people—nearly a tenth ofAmerica’s entire population—hadbeen born in Germany or had a Ger-man parent,” Mr Blum notes Fi-nally, there were 4.5 million Irish-Americans, many of whom, theGerman spies believed, harbored anintense animosity for the British As

it happened, Irish-American dores played an important role inthe German plans, aiding in efforts

steve-to sabotage shipping

Many of the German operatives

in the U.S., particularly vonRintelen, though espionage ama-teurs, became exceedingly adept atspycraft Their intrigues took them

to New York, Baltimore, New leans, San Francisco (major port cit-ies) and Washington, D.C Agents se-creted small bombs equipped withdelayed-action fuses onto Allied-bound ships When the vessels ex-ploded at sea, it was impossible todetermine whether the explosionswere accidental or deliberate InJuly 1916, Black Tom, “the largestmunitions and gunpowder shippingcenter in America,” located in JerseyCity, N.J., was sabotaged; the result-ing blast blew out windows at theNew York Public Library across theHudson River in Manhattan

Or-And there was the bizarre ErichMuenter While a graduate student inGerman at Harvard in 1906, he hadpoisoned his wife He eluded arrestand created a new life: He took thename Frank Holt, remarried, andtaught and worked on a doctoral the-sis at Cornell When World War I be-gan, he decided to help Germany, hisnative country There apparently is

no incontrovertible evidence that he

became an agent for German gence, but Mr Blum makes a persua-sive case that he did We do knowthat in 1915, while the Senate was out

intelli-of session, he planted a bomb in theU.S Capitol outside the vice presi-dent’s office; it exploded but didn’tkill anyone Two days later, hestalked J.P Morgan Jr in his Long Is-land mansion and shot him twice be-cause of the financier’s pro-Alliedsympathies Morgan survived andpinned Holt to the floor “like a mas-sive boulder” while his butler beatthe intruder with a lump of coal Holtwas taken into custody, but he diedunder mysterious circumstances inhis jail cell

Perhaps the most sinister ofAbteilung IIIB’s plots was its intro-duction of germ warfare into the U.S

A German agent, a physician namedAnton Dilger, smuggled samples ofanthrax and glanders—a disease thatinfects mainly horses, donkeys andmules—into the country and set up alaboratory in Maryland The aim was

to kill livestock in transit to the lies, but there was, as we would nowsay, collateral damage—human be-ings: at least one death in New YorkCity, at least four in Virginia

Al-German intelligence was, indeed,formidably resourceful at carrying

out clandestine warfare, but theywere helped by the fact that the U.S

was appallingly unprepared Americadidn’t even have a law outlawing es-pionage until 1917, when the nationentered the war That legislation, Mr

Blum writes, “made it a specificcrime to spy on or to interfere withAmerican military operations.” Untilthen, spies could only be arrested ifthey were caught in the act of sabo-taging a target or well along in theirpreparations to do so The two fed-eral civilian law-enforcement agen-cies were, for too long, of little use

They were either limited in their risdiction (the Secret Service) or hadfeeble police powers (the Bureau ofInvestigation)

ju-And so by default nage fell to the New York Police De-partment’s Bomb and NeutralitySquad Its leader, Capt Thomas J

counterespio-Tunney, and the three men he chose

to help him foil German subversionare the heroes of “Dark Invasion,”

and I will grant that they were asbrave, dedicated and indefatigable as

Mr Blum depicts them But theydidn’t have the training or equip-ment to carry out counterintelligenceagainst a canny foe, and their suc-cesses were few Moreover, some ofthose successes were the result of in-

formation provided by Britain It wasthe British who informed the StateDepartment and the NYPD that Ger-many had initiated sabotage activi-ties in the U.S., and it was the Britishwho first tipped off Tunney that vonRintelen was a spy

I have only two complaintsabout “Dark Invasion.” The bookends rather abruptly, with Amer-ica’s entry into the war (One reasonPresident Wilson went to war washis disgust with German espionage.)

It would have been interesting tolearn about German spying andAmerican counterintelligence dur-ing the ensuing years It is alsofrustrating that Mr Blum doesn’tdiscuss how Germany’s espionageaffected the European conflict Butoverall, “Dark Invasion” is well-re-searched and written, and it main-tains a fairly high level of suspense,which is difficult to bring off in abook about historical events

“Dark Invasion” also raises a ing issue, which was probably inevi-table considering its subject matter

vex-Mr Blum makes a mild attempt todemonstrate a nexus between thefight against Abteilung IIIB’s opera-tions and America’s current struggleagainst terrorism (Tunney is de-scribed as “for all practical purposesthe first head of Homeland Secu-rity.”) I am dubious Terrorism is notthe same as espionage practiced bygovernments One doesn’t have toadmire what the German spies did toacknowledge that they weren’t ter-rorists—and, to his credit, I don’t be-lieve that Mr Blum ever designatesthem as such They were patrioti-cally loyal to a nation and had ra-tional motives, and while they un-derstood that many of their schemesmight result in deaths, their primarygoal, apart from the J.P Morgan inci-dent, was to destroy things, not peo-ple Terrorism, today, confronts uswith new problems, and new tac-tics—shrewder, more sophisticatedtactics than those wielded by Tun-ney—are required to neutralizethem

Mr Schneider reviews books for newspapers and magazines.

After the Deluge

On the night of Dec 25, 1999, amassive storm tore through the gar-dens of Versailles, destroying morethan 18,000 trees and renderingnearly all 2,100 acres of the groundsimpassable Heavy equipment and acontingent of French soldiers weresummoned to help clear paths andcarry away debris, an operation thatrequired weeks to complete Duringthis time, the gardens—a site of rec-reation, contemplation and immensepride for the French public—wereclosed to visitors, while scenes of thedevastation led the nightly news

Alain Baraton, the gardener inchief at the palace, directed thecleanup as well as the subsequentrestoration efforts More trees havebeen planted at Versailles since thestorm of 1999 than were planted inthe previous two centuries, and themain vistas now look closer to theway they were intended than at anytime since the French Revolution Mr

Baraton interweaves the story of thegardens’ rebirth with that of his life

and career—tossing in anecdotesfrom the history of the palace forgood measure—in “The Gardener ofVersailles,” his charming, albeitsometimes breezy, memoir

Mr Baraton began his career atVersailles in the summer of 1976 as aseasonal ticket-taker The chief gar-dener—a one-eyed, beret-wearing ex-trovert named Mr Choron—took aliking to the young horticulture-school graduate and offered him ajob as an “apprentice gardener’s as-sistant.” This lowly position requiredlong hours of manual labor but camewith free lodging on the palacegrounds, a perk that Mr Baraton en-joys to this day (He now resides inquarters that once housed Molière.)Working his way up through theranks, Mr Baraton quickly learnedthe foibles of Versailles’s staff—whodrank too much, who skimmed fromthe till, who had an eye for the la-dies—as well as the habits of “theregulars,” visitors who made the gar-dens a second home These includedjoggers who kept clockwork hours,married couples who bickered baro-quely, delusionals who believed theywere Marie Antoinette or MadamePompadour, and the so-called elegantwoman, who had a weakness for dis-porting herself naked in the woods

Upon his elevation to gardener inchief, Mr Baraton resolved to com-bine the best of the old horticulturalmethods with the most promising ofthe new, restoring the principal fea-tures of the gardens in accordancewith the original plan by famed land-scape architect André le Nôtre(1613-1700) while experimenting withwildflowers and untamed grasses onthe ancillary lawns But even in hisexalted position, Mr Baraton has en-countered some frustrations, amongthem the infernal convolutions ofFrench bureaucracy: Hiring a tempo-rary worker “necessitates filling outnearly forty pages of paperwork.”

Mr Baraton is delightful when scribing his daily routines—he talks

de-to his trees and has pet names formany of them—and as a writer he is

a master of what might be termedthe inarguable Gallic utterance(translated here by Christopher BrentMurray) “A garden’s capacity for in-spiring romance,” he informs us,

“should be a criterion for evaluation

in terms of horticultural excellence.”

His reasoning is obscure, but if oneimagines his assertion delivered inthe plummy voice of Maurice Cheva-lier, it grows curiously convincing

Less satisfactory is Mr Baraton’saccount of Versailles’s history, which

is too haphazard to be useful and issometimes preposterous He suggeststhat, under Louis XIV, Pierre CharlesL’Enfant, “the architect who wouldlater construct Washington, DC,” wasentrusted with enforcing a strictbuilding code on the town of Ver-sailles so that all structures wouldharmonize with the palace AlthoughL’Enfant grew up at Versailles, wherehis father was employed as a painter

of historical scenes, and may havedrawn on the town’s plan in formu-lating the radial layout of Washing-ton’s streets, he wasn’t born until

1754, by which time Louis XIV waslong dead

Another defect of the book—and aserious one given the beauty of thesubject—is the lack of photos Read-ers looking for an authoritative his-tory might try Michel Baridon’s “AHistory of the Gardens of Versailles”(2008) and, for splendid illustrations,Pierre-André Lablaude’s “The Gar-dens of Versailles” (1995) But for ahands-on perspective and sheer fun,

Mr Baraton can’t be beat

during World War I.

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BOOKS

A Father Against the Fatherland

The socially conformist thing to

do for a man of

distinction—journal-ist, filmmaker, author of the

best-sell-ing first postwar German biography

of Hitler, eventually co-editor of the

Frankfurter Allgemeine Zeitung—

would have been to recount the

his-tory of his own distinguished career

Instead Joachim Fest (1926-2006)

chose to write “Not I,” a colorful and

dramatic account of his childhood

and youth in the nonconformist

fam-ily that made him what he became

His is a stable upbringing in an

unstable age, a time paradoxically of

“troubles lived through but hardly

noticed”—the crisis of the Weimar

Republic, the rise of Nazism As a

small child, growing up in a

comfort-able Berlin neighborhood, he only

gradually realizes what the outside

world is doing to his family, what

“politics” is It’s not something for

him, his big brother Wolfgang told

him “I’m political too,” the

7-year-old cries, frustrated at being left out

It isn’t yet safe for him to eat at

“sec-ond supper,” a family occasion that

acquires an almost ritual ring After

the youngest children have dined, the

parents and their friends have

seri-ous discussions about the darkening

situation A small child might in allinnocence let slip something saidthere Under a tyranny, even your

own constitute a risk

The family lives under a shadow

Their dissent is no secret Father hadbeen a member of the Reichsbanner,the organization in which his Catho-lic Centre Party had joined with lib-erals and Social Democrats to defendthe republic against Communists andNazis It’s not every school headmas-ter who gets involved in street fightsand comes home bloody, as JohannesFest did But after 1933 he was aheadmaster no longer, suspended in-definitely by the new political mas-ters The family’s status and incomewere lost, their lives transformed

Grandfather had to come out of tirement to earn a bit for them Fa-ther never worked again The Nazisdid try to cajole him back into teach-ing, since any observable dissent wasbad publicity They even offered ac-celerated promotion if he would out-wardly conform He remained firm

re-Family tension became palpable

Mother, bearing the brunt of ened family circumstances, asks Fa-ther if he might not compromise

strait-Weren’t lies always the resort of the

“little people”? He replies: “We aren’tlittle people.” It is one of the maximsthat guided the conduct of Fest’s fa-ther and a few friends (The title ofhis son’s memoir comes from a Gos-pel passage that he would oftenquote, Peter promising Jesus: “Even

if all others fall away—not I.”) Therewere some Germans who made surethat they were carrying something inboth hands when they went out intothe street, the only plausible groundfor not giving the required “Heil Hit-ler” salute to anyone they met ButFest’s father goes out resolutely

empty-handed

“Keep your head down,” Johannes

told his family, “but don’t let it makeyou smaller.” Young Joachim didn’talways listen A classmate reportshim for carving a Hitler caricature onhis desk (He has been scribblingthem on surfaces all over town.) As aconsequence, he is removed from theschool; his brothers too The episode

is just one instance of an dence akin to his father’s

indepen-The friends of the Fests—theynow became former friends—andmany neighbors and acquaintancesfell by the wayside, even without be-ing keen Nazis Only one of the 12families in the apartment block was

in the party The rest merely wentalong as things changed, driftingdeeper into acquiescence, making ex-cuses even as stable social and politi-cal structures fell apart in the name

of a new “people’s community.” TheNazis, after all, were formally the le-gitimate government, however brutaltheir conduct of affairs—from therealm of international diplomacy tothe arbitrary laws that replaced jus-tice down to the small changes in ev-eryday life, the swindles and favorit-

ism of party members

By recording these small changes,Joachim Fest creates a picture of howthe one-party state operated on anintimate level, and exerted its un-breakable grip It recalls the bleak ac-count of incremental misery in VictorKlemperer’s diaries of the period Awoman sees a Jewish-looking man inthe street not wearing a star, pursuesand denounces him There are firstrumors and then reliable evidence of

atrocities

Anti-Semitism had considerablymore popular resonance than manyother Nazi policies, such as the cam-paign for “Lebensraum” in the east

How many Germans would havewanted to up sticks and resettlesomewhere on the vast Russianplains? As for Jewish Germansthemselves, even after Kristallnachtthere were those who waited for theNazi “phase” to pass Their trust in

a culture that had produced Kant,Goethe, Schiller, Lessing and Bee-thoven, a culture into which theyfelt they had assimilated, meantthat they delayed escape too long

When, in the early 1940s, theyoung Fest experiences a perform-ance of Beethoven’s opera “Fidelio,”

a work amazingly not banned by theregime, the mentor who introduceshim to it enthuses over the finaltrumpet call that heralds the prison-ers’ liberation But it was difficult atthe time to have faith in heroic happyendings For the mature Fest, thetrumpet call only rings out clear in

1989, at the fall of another tyranny

By an apt coincidence, the Nazisurrender in 1945 would be signed

at Karlshorst, the part of Berlinwhere the Fest family lived It waslittle consolation that Nazismhadn’t lasted One son had beenkilled through the negligence of asuperior officer Fest had lostfriends Father had been called upand taken prisoner on the EasternFront He returned from the SovietUnion a depleted man Not broken,though There was enough of theold independent spirit left that hewould not let himself be put on apedestal as one of the few whodidn’t swim with the Nazi tide Hecouldn’t stomach all the hollowmoralizing and retrospective righ-teousness (When a tyranny col-lapses, suddenly everybody “hadbeen against it” all along.) He evendisapproves of his son’s developingcareer as an analyst of the Nazipast, a “gutter subject” not deserv-ing to be dignified with study, so farremoved from Fest’s youthful ambi-tion of becoming a Renaissancescholar For himself, Johannes Festwas content to say: “I made a lot ofmistakes, but I didn’t do anythingwrong.” For the Germany of thoseyears, it was a substantial claim

—Mr Reed is Taylor Professor Emeritus of German at Oxford

and the author of “Thomas Mann:

The Uses of Tradition.”

When Bloodletting Wasn’t Enough

During the 19th century, the

medical marketplace expanded

dra-matically, and ordinary

practitio-ners were faced with a plethora of

alternative systems vying for

pa-tients’ custom Proponents touted

the efficacy of wild herbs, cold

baths, phrenological diagnosis and

hypnotism In earlier centuries,

in-dividuals who had offered such

treatments could be dismissed as

“quacks” by members of the

fac-ulty Spurred by the rise of

con-sumer society in the 1800s,

advo-cates of alternative approaches

began to band together and

be-come less easy to dismiss They

also aped the regulars by setting

up schools, arguing for legal rights,

founding journals and pursuing

other hallmarks of

professionaliza-tion Even as regulars were trying

to establish standards of training

and ethical behavior, advocates of

different medical cosmologies

posed serious threats to the

medi-cal tradition that had evolved since

antiquity

Erika Janik’s “Marketplace of the

Marvelous: The Strange Origins of

Modern Medicine” surveys these

al-ternative approaches, which, she

notes, seem less outlandish in the

context of the “heroic” remedies (so

called for their severity) of the era,

such as bloodletting, blistering and

purgatives Some of these tive systems were indigenous toAmerica, but some were importedfrom Europe Among the latter werehomeopathy (which employed reme-dies whose active ingredients werediluted to infinitesimal concentra-tion), hydropathy (which empha-sized water applied internally andexternally), phrenology (which pur-ported to discern a patient’s intelli-gence and character from the shape

alterna-of his skull) and the hypnotic ulation of “animal magnetism”

manip-known as mesmerism

Each method found fertile soilwhen imported to the U.S., wherethey competed with regular medicinebut also with native systems, includ-ing osteopathy and chiropractic (Al-though osteopathy and chiropracticboth involve spinal manipulation, theformer has a richer theory of diseaseand has become more integratedwith regular medicine than chiro-practic, which still focuses on thespine.) Ms Janik offers full and fairaccounts of the origins, rationalesand fortunes of these alternativepractices, as well as a brief analysis

of Mary Baker Eddy’s Christian ence, which held that disease was an

Sam-the common plant Lobelia inflata

(sometimes known as Indian bacco) and to ground chili peppers

to-Cold causes disease, he believed, andthese ingredients helped warm a suf-

ferer The self-taught Thomson gan treating his family and a fewfriends, but his success encouragedhim to expand his operations Hisbooks and pamphlets, which cele-

be-brated his remedies in rhyme lia was “first rate to cure in all cases

(Lobe-of fevers / But is hated and feared bythe regular deceivers”), widened hisreputation, and he claimed to offereverything one needed to treat one’sfamily for a single payment of $350

in today’s dollars (Permission totreat others was available at addi-

tional cost.)

Thomsonism, sometimes calledbotanical medicine, enjoyed muchpopularity for several decades Itsclaims to the contrary, however,

taking Lobelia was no gentle

op-tion: It was a vigorous purge, andthe fad began to fade as side ef-fects became worrisome Thom-son’s followers (of which therewere many) gradually began tocombine his increasingly rigid sys-tem with elements taken from ei-ther regular medicine or other al-

ternative cosmologies

The pattern of Thomsonism wasrepeated in other systems: A dy-namic founder becomes increasinglyprotective of his ideas—Thomsonpatented his system—but is unable

to prevent splinter groups from ing established This happened withhomeopathy, chiropractic and oste-opathy, where rival groups with dif-ferent agendas soon replaced earlyorthodoxy These three groups differfrom Thomsonism in that they havesurvived, even flourished, but thestructure of theme and variations

be-has persisted

The issue of longevity is mental to the relative status of thesecompeting systems of healing (whichare generally dignified with thephrase “complementary medicine” inBritain) Why do some survive, sometransmute (such as hydropathy, now

funda-a routine pfunda-art of rehfunda-abilitfunda-ation cine in the form of therapeuticbaths), and some disappear? Ms

medi-Janik is cagey here She clearly hassympathy for alternative medicinewhile at the same time seriously con-sidering the placebo effect, which is

clearly an important part of mosthealer-patient encounters

The author makes a good casethat any sensible person in the 19thcentury could have taken these alter-native systems seriously The thera-peutic options of ordinary doctorswere pretty limited, even if it is acaricature to assume that practitio-ners routinely subjected their pa-tients to harsh heroic remedies nomatter the symptoms For most con-ditions, a patient might be at least aswell off with a herbalist, hydro-pathist or homoeopathist I am lessconvinced by her argument thatthese systems contain the “strangeorigins” of modern medicine Some-times the connection seems to be theemphasis on temperance, diet andother features of modern “lifestyle”

medicine that were often emphasized

by alternative healers but on whichthey hardly had a monopoly Ms

Janik’s more specific claim that dropathy’s advocacy of good hy-giene provided the foundation forpublic health campaigns” is fanciful

“hy-to say the least

Perhaps the most significant ture in all histories of healing—regu-lar or not—is the fact that most ill-ness is self-limited We generally getbetter no matter what is done to orfor us When I was in medical schoolhalf a century ago, I was taught that

fea-if you treat a cold, it will get better

in a week If you don’t treat it, it willlast seven days I hope they teach

this still

—Dr Bynum is professor emeritus

of the history of medicine at University College, London.

B Y T . J . R EED

B Y W ILLIAM B YNUM

Not I

By Joachim Fest

Other Press, 427 pages, $16.95

Marketplace of the Marvelous

By Erika Janik

Beacon, 337 pages, $28.95

PATENT NONSENSE An ad for

‘Complete Female Remedy.’

‘Keep your head down,’

Johannes Fest told his

family, ‘but don’t let it

make you smaller.’

UKRAINE IN CRISIS

Turmoil Called ‘Major Defeat’ for Russia

MOSCOW—The dramatic

col-lapse on Saturday of the authority

of pro-Russian President Viktor

Yanukovych in Ukraine looks like a

major reversal for the Kremlin,

pull-ing Russia’s southern neighbor

to-ward Europe just weeks after it

ap-peared Moscow had succeeded in

drawing Kiev back into its embrace

“This is a major defeat,” said a

senior Kremlin adviser, adding that

the events of the last 24 hours

bit-terly remind Russian officials of the

2004 Orange Revolution, when Mr

Yanukovych saw his fraud-tainted

election victory overturned after

massive street protests brought a

pro-western government to power

“We made the same mistakes

again” this time, said the Kremlin

adviser, who spoke on condition of

anonymity “For us, the conclusion

is that the West succeeded in

engi-neering a coup d’état.”

Just what Russia’s reaction to

this apparent setback would be

wasn’t immediately clear Western

officials seemed to be going out of

their way not to provoke Moscow

Some Kremlin aides in recent weeks

had suggested Moscow could

inter-vene to protect pro-Russian regions

if Ukraine were to slide into civil

war, but there is been no indication

of high-level Kremlin support for

such a move

A pro-European government in

Kiev, however, could find itself

un-der heavy economic pressure from

the Russians, who are a major fuel

supplier and trade partner “They

have a lot of economic levers they

can pull,” said Steven Pifer, a former

U.S ambassador to Kiev

Analysts also warned that a

ma-jor setback in Ukraine could provoke

the Kremlin to crack down further

on opponents at home, as it did

af-ter the Orange Revolution, which

Russian officials perceived as a

western-orchestrated takeover

Many in the Kremlin continue to

believe the West is seeking to

engi-neer the same kind of revolution in

Russia, advisers say “This is just

the start of a major battle in the

post-Soviet space,” said one,

refer-ring to the latest events in Kiev

Russian officials fumed publicly

on Saturday, as news of the matic reversal in Kiev spilled out,and the Ukrainian parliament, whichhad swung behind the opposition,voted to remove Mr Yanukovychfrom office and call new electionsfor May

dra-Even Mr Yanukovych’s politicalallies voted for the measures, asgovernment authority melted away

on the streets and protesters tookover Mr Yanukovych left the capitalfor his political heartland in the east

of the country and denounced theday’s events as a “coup d’état,” but

he seemed powerless to stop them

By evening, the political nemesis

Mr Yanukovych had tion leader and former Prime Minis-ter Yulia Tymoshenko—had been re-leased from prison and was cheered

jailed—opposi-by thousands of demonstrators onKiev’s main square

Russian Foreign Minister SergeiLavrov worked the phones with his

European and U.S counterparts, cording to statements from his min-istry, telling them that “illegal ex-tremist groups” had taken controlover Kiev He called on his partners

ac-to pressure the opposition inUkraine to return to the terms ofthe European-brokered politicalcompromise signed on Friday, whichcalled for Mr Yanukovych to remain

in office until new presidential tions late in the year But westerncapitals seemed unsympathetic,moving instead to work with thenew opposition-led government

elec-Meantime, Russian PresidentVladimir Putin was silent on theevents in Ukraine on Saturday But

he did issue a series of statementscongratulating Russia’s Olympicteam members on winning medals

at this month’s Winter Games in theRussian city of Sochi

State television also focused onOlympic triumphs And in reports ofevents in Ukraine, program anchorsused grave tones “Extremists have

taken over in Kiev and the westernregions of the country,” said one onRossiya-24, a state news channel

When a Russian correspondent

in Kiev described the “holiday-likeatmosphere” among opposition sup-porters on the capital’s main square,known as Maidan, the anchorquickly ended the live report, inton-ing, “the way Maidan looks now, it’snot the best place to spend time.”

Mr Putin, however, has comefrom behind before in this unex-pected geopolitical struggle overUkraine, a country the size ofFrance that is crucial to his ambi-tions to build a Moscow-led bloc offormer Soviet states

Three months ago, Mr ovych was on the verge of signing atrade and political partnership withthe European Union that had beenyears in the making and would haveposed a major obstacle to Mr Pu-tin’s plans Instead, under heavypressure from the Kremlin, Mr

Yanuk-Yanukovych reversed course at the

last minute and pledged closer ties

to Moscow, which in turn offered

$15 billion in desperately neededloans as well as discounts on vitalnatural-gas supplies

When Mr Yanukovych’s face set off substantial street pro-tests in Kiev, the Kremlin accusedthe West of fomenting the demon-strations and supporting ultrana-tionalist radicals And when theUkrainian president offered conces-sions to the opposition last month,Moscow responded by suspendingthe release of the much-neededloans to Kiev

about-As late as Thursday, when bloodyfighting between police and demon-strators in Kiev had riveted interna-tional attention, Russian Prime Min-ister Dmitry Medvedev warnedUkraine’s government against be-having “like a doormat that peoplewipe their feet on.”

Foreign Minister Lavrov blastedthe EU for calling on Mr Yanuk-ovych to agree to early elections

But that is just what Mr ovych agreed to in Friday’s deal,along with constitutional changesthat would reduce presidential pow-ers in favor of the parliament Healso agreed to the formation of anew coalition government thatwould likely to be led by his pro-Eu-ropean opponents

Yanuk-But protesters proved unwilling

to wait for new elections and Mr

Yanukovych fled the capital late onFriday

The Twitter feed of Alexei kov, chairman of the InternationalAffairs Committee in Russia’s parlia-ment, on Friday called the situation

Push-“an ideal scenario for an OrangeRevolution.” Hours earlier, it hadsaid: “The West is giving Yanuk-ovych a final push It’s not just amatter of Ukraine on its own Theultimate goal, if you remove all thechaff, is to bring NATO closer to theborders of Russia.”

On Saturday, Mr Pushkov’s ter feed noted that Mr Yanukovychhad fled the capital and protesterswere roaming through his un-guarded residence outside the capi-tal “A pathetic end for a president,”

West Readies Aid as Ukraine Prepares for New Course

De Gucht, said Sunday he was

confi-dent the trade pact would be signed

“I believe that yes, they (the

Ukrai-nians) are going to sign that deal,"

Mr De Gucht told Sky News

televi-sion

He gave no details on timing

“First we need a government for

that, and it has to take a democratic

decision and it has to be in a stable

situation.”

EU countries would need to give

the green light to signing the trade

accord, an EU official said, though

this could be done rapidly by

tele-phone, or during an EU foreign

min-isters’ meeting in Brussels

Ukraine’s negotiations with the

IMF would be expected to proceed

in tandem with the preparations for

the trade accord

“We need to have established

government and guarantees in place

to make sure that EU taxpayers’

money won’t be wasted,” the official

said

In Sydney, IMF Managing

Direc-tor Christine Lagarde said economic

reforms “need to be started at

least” in order for the international

community to help The fund wants

Continued from first page a hefty, but phased-in rise in natural

gas prices, a currency depreciation,and significant cuts in the govern-ment’s budget, all of which are po-litically controversial

U.S Treasury Secretary JacobLew also said Ukraine’s next govern-ment needs to commit to economicrestructuring if it wants help fromthe U.S “We’ve been very clear thatthere needs to be stability in Ukraineand a willingness to undertake thekind of reforms they need to maketheir economy work,” he told report-ers after the G-20 meeting

Ukraine’s parliament voted toformalize the interim transfer ofpresidential power to the newlyelected parliament speaker Olek-sandr Turchynov, the first deputychairman of the Batkivshchynaparty Mr Turchynov called the cur-rent economic situation in the coun-try “catastrophic” at a parliamentsession on Sunday, Interfax newsagency reported

“Yanukovych’s governance hasdriven Ukraine’s economy to a ca-tastrophe There are absolutely nofunds on the treasury’s accounts

There are colossal problems withthe pension fund You see what’s go-

ing on with the national currency,the banking system,” he said

The whereabouts of Mr ovych were unknown Sunday, theday after he left the capital as pro-testers took control of the city cen-ter

Yanuk-Acting Interior Minister ArsenAvakov on Sunday told reportersthat the president’s plane was de-

nied permission to take off Saturdaynight in the eastern city of Donetsk

“He then got in a car and fled in anunknown direction,” said Mr Ava-kov, according to the Interfax newsagency

Mr Yanukovych on Saturdayvowed to remain in power, even ashis political allies abandoned him indroves In an interview with a TV

station in Kharkiv in the easternportion of the country, he de-nounced the events in Kiev as a

“coup d’état” that he blamed on

“bandits.”

With the future leadership of thecountry still to be determined bynew elections, former PresidentYulia Tymoshenko is consideredlikely to make a bid to regain herformer office Ms Tymoshenko wasreleased from prison Saturday as Mr

Yanukovych’s government crumbled

A senior German official saidChancellor Merkel had spoken to thefreshly released Ms Tymoshenko onSunday morning and urged her toprotect the integrity of her country,

to reach out to the Russian-speakingregions and to work to federate theformer opposition

Ms Merkel, according to the ficial, greeted Ms Tymoshenko withthe words “welcome to freedom.”

of-She also invited the ailing nian politician to undergo medicaltreatment in Germany if she wished

Ukrai-to, the official said

—Ian Talley, Bertrand Benoit, Nick Winning, James Marson and

Alexander Kolyandr contributed to this article.

A protester poses in a bathtub Saturday at the residence of Mr Yanukovych.

We All Have To?

The problem: Every night, yourworkaholic boss is still glued tothe computer when you need toleave How to go home withoutlooking like a slacker?

Should you sneak out, hoping

to avoid a six o’clock showdown in

the hall? Guiltily ogize, promising to be

apol-on email all night? Orjust walk straight to-ward the door in the most profes-sional way you can?

Many hard-working employeeshave an even harder-working bosswho toils late into the night Ca-reer coaches and employees whohave been there say the first pri-ority should be conveying that youare still working hard—and good

at your job That requires nicating clearly and frequentlyabout your progress and results

commu-Ideally, you want to figure outwhat the boss really needs and de-liver it consistently enough thatyour hours become a non-issue

Many employees assume agers value people for workingday and night, and workplacetrends support that belief: Two-thirds of workers are putting inmuch longer hours on the job thanfive years ago, according to a poll

man-of 325 employees last fall by RightManagement, Milwaukee, a talentand career-management company

But before you get too hung up

on work hours, check your sumptions about what the bosswants, says Cali Williams Yost,chief executive officer of Flex +Strategy Group, a Madison, N.J.,training and consulting firm Man-agers work long hours for a vari-ety of reasons: It may be a per-sonal habit or preference, orperhaps they just don’t want to gohome “People make way too manyguesses about managers’ expecta-tions that are just wrong,” Ms

as-Yost says

Bosses are often taken aback

by employees’ focus on theirschedules Betty Enyonam Kuma-hor often works 14-hour days,emailing and calling contactsaround the world “My teams

started tracking how many hoursthey thought I slept each night,based on my email ‘send’ times,”

says Ms Kumahor, a regionalmanaging director in Atlanta forThoughtWorks, a software-devel-opment company “They asked mejokingly, ‘Do you ever sleep?’ ” Sheassured employees she would stopsending so many late-night andearly-morning emails so theydidn’t have to extend their hours

to respond

When managers focus on ployees’ work hours, they are of-ten looking for reassurance onother fronts: that their subordi-nates are meeting deadlines; thatthey can be reached when needed,and that they aren’t creating extrawork for colleagues, Ms Yost says

em-Rich Gee’s boss on a former jobtook him aside and criticized himfor leaving the office at 5 p.m.,says Mr Gee, a Stamford, Conn.,executive coach The manager ac-knowledged that Mr Gee wasmeeting deadlines and deliveringgood work; he arrived at the office

at 6:30 a.m., two hours before hisco-workers The boss seemed ner-vous, however, that Mr Geewouldn’t be available whenneeded Mr Gee said he could bereached 24/7 by cellphone, andpointed out that he always re-sponded quickly to emergency re-quests

He continued to leave the fice at 5 p.m., but updated hisboss often on his progress and re-sults and checked in every eveningbefore he left In time, he says, hisboss “saw that it wasn’t hoursthat mattered—it was how hard Iworked.”

of-One key to Mr Gee’s solution:

healthy communication ees should sit down with theirbosses and ask them to define jobobjectives and time lines forreaching them, says Pat Katepoo,the Kaneohe, Hawaii-based owner

Employ-of WorkOptions, a consulting firm

Then “look for natural times tocommunicate about your progress,when you have a staff meeting oryou’re walking by or writing anemail,” says Ms Katepoo

There are many ways to project

B Y S UE S HELLENBARGER

Do Pitch In When You Can

Even if you choose not to match your boss’s long hours every night, it’s wise to work late during crises or when a major project deadline is looming Hint: Extra evening hours may gain more recognition

than extra hours at dawn in an empty office.

Whining that you’re working too hard won’t

go over well with the boss or colleagues.

If you want to discuss your hours with your boss, start on a positive note, and propose solutions that reflect your boss’s

needs, too.

bone Nobody wants to hear that.”

In some professions, workinglong hours is unavoidable Certainfirms’ cultures breed intense com-petition and long hours amongnew hires, says Julie Cohen, aPhiladelphia career and personalcoach Others have unwritten cul-tural rules, such as, “Nobodyleaves the office before the bossleaves,” she says It is wise toprove yourself on the job for atleast six months and ask a mentorfor advice before exploringshorter hours, Ms Cohen says

“You might be stepping into aminefield if you don’t understandthe ins and outs of the organiza-tion.”

To get the most out of a tiation about hours, Mr Melchersays, think in advance about theboss’s needs, and bring specificsdocumenting your own perform-ance Start on a positive note,talking about what’s going well.Ask what the boss expects of em-ployees when it comes to workhours and responding to email Topropose solutions, Mr Melcherrecommends the “yes…and” tech-nique: Affirm the boss’s point, andthen state your own For example:

nego-“Yes, I want you to be able to rely

on me after hours And since Ihave young twins, it is important

to me to be home between 5:30p.m and 8 p.m and spend thattime with family I could respond

to you between 9 p.m and 11 p.m.How does that sound?”

Such conversations can open adialogue—or expose a brick wall.When project manager AshantiStanford raised the issue with aboss at a previous job, the man-ager rolled her eyes and sighed

“The expectation was, ‘I have towork these hours, so why are youcomplaining?’ ” Ms Stanford says.She has since moved on to a jobwith better hours

noticed than those who work 7a.m to 5 p.m Executive coachMichael Melcher was told in a pre-vious job at an investment bankthat “I wasn’t working longenough hours,” he says “I startedcoming in later and staying later,”

he says “A couple of months later,

my boss said, ‘It hasn’t gone ticed that you’re putting in addi-tional hours.’ ”

unno-Faking a presence at the office,however, doesn’t work Throwingyour coat over your chair as if youjust stepped away, then leaving forthe day, is likely to backfire, Ms

Yost says Colleagues will “thinkyou’re there and run around likecrazy people trying to find you.”

Another nonstarter, says Mr

Melcher, an executive coach withNext Step Partners, New York, is

“being a whiny complainer, with alot of exasperated sighs, sayingyou’re working your fingers to the

a hard-working image If a ager speaks about a project in anintense, focused way, answer withsimilar intensity, acknowledgingits importance and repeating thedeadline, says Anne Brown, an ad-vertising executive who has writ-ten about how young employeescan deal with workaholic bosses in

man-a book, “Grman-ad to Greman-at,” man-and on man-awebsite she co-founded, Grad-toGreat Manage time well in one-on-one meetings, moving quicklythrough your agenda, adds Ms

Brown, of Kansas City, Mo And, ofcourse, be prepared to work longhours during a crisis or busy sea-son, or when a major projectdeadline is looming

In some cases, shifting yourwork hours can help At compa-nies where managers focus on facetime, employees who work 10 a.m

to 8 p.m.—when more people arepresent—are more likely to get

Do Check Your Assumptions About

What the Boss Wants

Those predawn emails may reflect your boss’s personal habits, rather than an expectation that everyone work then To find out, ask a mentor for advice or have a broader conversation with your boss about how you’re doing and what she expects.

New View Into Fed’s Response

To 2008 Crisis

Two days after U.S officials cided to let Lehman Brothers col-lapse in September 2008, and justbefore the Federal Reserve unleashed

de-a torrent of progrde-ams to bolster thefinancial system, central-bank offi-cials were still struggling to graspthe magnitude of the calamity thathad hit the economy

“I think that our policy is lookingactually pretty good,” Fed ChairmanBen Bernanke said of the level of in-terest rates at a closed-door Fed pol-icy meeting on Sept 16, 2008, ac-cording to transcripts of its policymeetings that were released Fridayafter the traditional five-year lag

Officials decided at the meeting

to hold interest rates steady at 2% Itwas one of Mr Bernanke’s last mo-ments of passivity in the financialcrisis

As he spoke, the Fed was movingahead with plans to help bail outAmerican International Group Inc.,the large failing insurer seen as cru-cial to the financial system Withindays Mr Bernanke and Treasury Sec-retary Henry Paulson would go toCongress and make an urgent pleafor a bank-bailout plan By year-end,the Fed chairman had pushed a still-hesitant central bank toward an un-precedented experiment with easy-money policies aimed at reviving theeconomy

The Fed transcripts, 1,865 pagesdocumenting one of the most turbu-lent economic times in the nation’shistory, covered eight formal and sixemergency policy meetings the cen-tral bank conducted in 2008 Theyprovide the most complete view yetinto developments inside the nation’scentral bank as the financial crisisworsened and threatened to plungethe U.S into another Great Depres-sion

Among their revelations: Mr nanke and his Fed colleagues spentmuch of the year scrambling to catch

Ber-up with worsening financial turmoiland economic conditions, sometimesmoving aggressively only to be sur-prised when conditions deterioratedagain

Officials acted boldly in January

2008, but spent much of the springand summer hamstrung by uncer-tainty, disagreement and an unex-pected inflation jump In the monthsafter that September meeting, Mr

Bernanke transformed from mannered former professor into anaudacious crisis manager, pushingfor more-aggressive policies and ar-guing more forcefully with other offi-cials

mild-Sometimes gallows humor carriedthem through difficult decisions

“An accounting joke concerningthe balance sheets of many financialinstitutions is now making therounds,” Janet Yellen, then president

of the Federal Reserve Bank of SanFrancisco, said at one point “On theleft-hand side, nothing is right; and

on the right-hand side, nothing isleft.”

Ms Yellen, who became Fedchairwoman on Feb 1, emerges in thetranscripts as a loyal ally of Mr Ber-nanke She was often prescientlyworried about unfolding develop-ments, and among the first to call a

recession, but in some instances shewas wrong about how the crisiswould play out and in others unpre-pared to push Mr Bernanke any fur-ther than he was ready to go

On Jan 9, he convened an scheduled conference call to discussthe worsening economic outlook withcolleagues He had staff circulate adraft policy announcement in caseofficials wanted to cut rates that day

un-“I have become increasingly cerned that our policy rate is toohigh to fully address the downsiderisks to growth,” he told his col-leagues

con-Fed officials held off from acting

at that meeting, but then raced tocut rates less than two weeks later inanother unscheduled meeting “Weare behind the curve,” Mr Bernankesaid at the unscheduled Jan 21 meet-ing, at which the Fed cut its bench-mark short-term interest rate bythree-fourths of a percentage point

to 3.5% “We need to do something.”

Ms Yellen backed him “The risk

of a severe recession and credit crisis

is unacceptably high,” she said ByMarch she said she suspected a re-cession had already begun

At another meeting in January,

Mr Bernanke lamented, “during thepast few months I think a perceptionhas developed that we are tentativeand indecisive and are not communi-cating clearly enough to the marketsand to the public.”

Exchanges between officials gotoccasionally testy, especially after

Mr Bernanke’s decision to help J.P

Morgan Chase & Co finance the cue buyout of Bear Stearns in mid-March

res-On April 29, then-New York FedPresident Timothy Geithner rebukedDallas Fed President Richard Fisherfor pondering whether the Fedshould try to engineer a strongerdollar with tight credit policies “Thisspeculation is perilous,” said Mr

Geithner, who sometimes sparredwith the Fed’s wing of policy

“hawks” who opposed easy-moneypolicies Mr Geithner, who later wasnamed Treasury secretary, warned itwas too hard to try and maneuverthe currency given the circum-stances

A day later, Philadelphia Fed ident Charles Plosser, another hawk,exchanged sharp words with Mr

Pres-Geithner about interest-rate policy

“Excuse me,” Mr Plosser said to Mr

Geithner “Make sure that you sayyou’re speaking for yourself, not for

me, in terms of how I think aboutpolicy.”

In June, Mr Bernanke gentlychastised Mr Fisher for votingagainst a decision to keep interestrates steady in the face of rising in-flation The Fed acknowledged in itsstatement it was alert to inflationrisks, as Mr Fisher wanted, but healso wanted a rate hike “I’m disap-pointed that President Fisher is go-ing to vote against his own lan-guage,” Mr Bernanke said

Amid the jousting, some Fed cials became convinced after theBear Stearns buyout that the worstwas over Frederic Mishkin, a Fedgovernor, said in April that it lookedlike the financial system had “turnedthe corner.”

offi-Ms Yellen often weighed in with

warnings of risks to the economyfrom increasing financial strain But

in the summer, as commoditiesprices soared, driving inflation tem-porarily higher, she misstepped, sug-gesting the Fed was more likely toraise interest rates than lower them

in the months ahead

“Our next move on the funds rate

is likely to be up, and the question iswhen,” she said at a June 25 meet-ing, at which officials decided to holdinterest rates steady at 2% “I wouldenvision beginning to remove policyaccommodation toward the end ofthis year.”

Outside of the Fed, however,events were spiraling out of control

Government officials had begun rying about the rapidly deterioratinghealth of mortgage giants FannieMae and Freddie Mac LehmanBrothers was struggling in its efforts

wor-to raise capital

Mr Bernanke wasn’t comfortable

“I agree certainly that the crisis mosphere that we saw in March hasreceded markedly, but I do not yetrule out the possibility of a systemicevent,” he said at the June meeting

at-“We have considerable concernsabout Lehman Brothers, for exam-ple.”

In July, as the financial systemteetered, officials looked on as theconsumer-price index shot up to 5.5%

from a year earlier, pushed up bysoaring commodities prices

At the Sept 16 meeting, the Fedagain decided to keep its short-terminterest rate steady at 2% Mr Ber-nanke said the Fed didn’t haveenough information at that pointabout the fallout from Lehman’s col-lapse to justify cutting interest rates

“It is simply premature,” he said

Ms Yellen went along with Mr

Bernanke’s decision at the Septembermeeting to keep rates steady, but shewarned: “I am very concerned aboutdownside risks to the real economyand think that inflation risk is dimin-ished.”

Other Fed officials were deeplyworried

“We took a calculated bet,” ton Fed President Eric Rosengrensaid of the decision to allow LehmanBrothers to fail “If we have a run onthe money-market funds or if thenongovernment tri-party repo mar-ket shuts down, that bet may notlook nearly so good.”

Bos-Two days later, as markets wentinto a tailspin and the Fed moved tobail out AIG, Messrs Bernanke andPaulson went to Congress and urgedlawmakers to support a bailout forthe U.S banking system

By year-end the Fed had cut terest rates to near zero, announcedplans to start buying government-backed mortgage-backed securities,and set up programs to prop upmoney-market funds and the com-mercial-paper market and individualbanks such as Citigroup Inc

in-A more combative Fed chairmanalso had laid the groundwork for ma-jor shifts in the Fed’s approach tomonetary policy, abandoning incre-mental interest-rate cuts and movingtoward a range of unconventionalnew policies including bond-buyingprograms that would become his sig-nature over the next five years

“We are at a historic juncture—

both for the U.S economy and forthe Federal Reserve,” Mr Bernanketold his colleagues at a Dec 16 meet-ing when the Fed cut rates to nearzero “The financial and economiccrisis is severe despite extraordinaryefforts not only by the Federal Re-serve but also by other policy makershere and around the world With re-spect to monetary policy, we are atthis point moving away from thestandard interest rate targeting ap-proach and, of necessity, moving to-ward new approaches.”

When challenged by others, the

normally placid Fed chairman pushedback

“You must be thinking whetherthis means that in every moderate-sized recession henceforth we’ll viewthe Federal Reserve’s best policy…”Richmond Fed President JeffreyLacker started in one exchange

Mr Bernanke cut him off “It’s not

a moderate recession, and it’s not anormal financial downturn,” he said

In a speech Friday, after the lease of the transcripts, Mr Lackerargued further against the Fed’s “im-pulse to intervene” throughout thefinancial crisis Financial instabilitywas worsened, he said, by expecta-tions in the markets that the Fedwould always provide a backstop

re-Mr Bernanke, looking back on thecrisis era last month at an interview

at the Brookings Institution, scribed the September period as themost intense for him in the crisis “Iwas so absorbed in what was hap-pening and trying to find a response

de-to it,” he said He likened it de-to a carwreck “You’re mostly involved intrying to avoid going off the bridge;and then later on you say, ‘Oh, myGod.’ ”

He said the Fed’s actions, alongwith the bank bailouts and fiscalstimulus, halted the crisis

—Victoria McGrane, Ben Leubsdorf, Michael S Derby and Pedro Nicolaci da Costa contributed to this article.

B Y J ON H ILSENRATH

Fed Chairwoman Janet Yellen, right, emerges in the 2008 transcripts, as a loyal ally of former Fed Chairman Ben Bernanke, above.

can see spreads swing toward the maximum—and vice versa

Indexes below are for five-year swaps

Markit iTraxx Indexes SPREAD RANGE, in pct pts.

Mid-spread, since most recent roll Index: series/version in pct pts Mid-price Coupon Maximum Minimum Average

for corporatedebt; based on

Markit iTraxxindexes

In percentage points

7.00 5.00 3.00 1.00 –1

15000

HighClose

Low

50–daymoving average

t

Stoxx Europe 50: Friday's best and worst

Previous close, in STOCK PERFORMANCE

Company Country Industry Volume local currency Previous session YTD 52-week

And the rest of Europe's blue chips

Latest,

in local STOCK PERFORMANCE Company/Country (Industry) Volume currency Latest YTD 52-week

United Kingdom (Banks)

Royal Dutch Shell A 8,753,998 2,216 0.93 2.5 3.7

United Kingdom (Integrated Oil & Gas)

United Kingdom (Pharmaceuticals)

Schneider Electric 1,924,203 65.89 0.76 3.9 16.3

France (Electrical Components & Equipment)

Roche Holding Part Cert. 2,737,516 266.70 0.64 7.0 27.6

United Kingdom (Integrated Oil & Gas)

Zurich Insurance Group 681,351 266.00 0.53 2.9 4.9

Switzerland (Full Line Insurance)

Italy (Integrated Oil & Gas)

Moet Hennessy Louis Vuitt 827,158 137.45 0.22 3.7 5.3

France (Clothing & Accessories)

British American Tobacco 4,154,972 3,155 0.10 -2.6 -8.3 United Kingdom (Tobacco)

France (Commodity Chemicals)

Anheuser-Busch InBev 1,456,943 74.07 0.05 -4.1 6.9 Belgium (Brewers)

United Kingdom (Food Products)

UBS 13,741,051 18.51 9.4 23.6 Switzerland (Banks)

Germany (Banks)

Financiere Richemont 1,820,610 88.05 -0.06 -0.8 18.1 Switzerland (Clothing & Accessories)

Credit Suisse Group AG 5,985,562 28.08 -0.07 3.0 8.1 Switzerland (Banks)

BASF 2,385,640 82.17 -0.09 6.0 10.6 Germany (Commodity Chemicals)

Germany (Diversified Industrials)

United Kingdom (Pharmaceuticals)

Banco Bilbao Vizcaya Argn 13,744,392 8.90 -0.24 -0.5 22.1 Spain (Banks)

ABB 9,796,822 22.29 -0.27 -5.1 5.0 Switzerland (Industrial Machinery)

Banco Santander S.A. 33,164,739 6.48 -0.29 0.6 18.1 Spain (Banks)

United Kingdom (Multiutilities)

Standard Chartered 8,533,245 1,316 -0.30 -3.2 -24.4 United Kingdom (Banks)

Sources: SIX Financial Information

DJIA component stocks

Volume, CHANGEStock Symbol in millions Latest Points Percentage

Source: WSJ Market Data Group

Credit-default swaps: European companies

Atitsmostbasic,thepricingofcredit-defaultswapsmeasureshowmuchabuyerhastopaytopurchase-andhow much a seller demands to sell-protection from default on an issuer's debt The snapshot below gives a

sense which way the market was moving yesterday

Showing the biggest improvement

CHANGE, in basis points Yesterday Yesterday Five-day 28-day

And the most deterioration

CHANGE, in basis points Yesterday Yesterday Five-day 28-day

Source: Markit Group

BLUE CHIPS & BONDS

Below, a look at the Dow Jones Stoxx

50, the biggest and best knowncompanies in Europe, including the U.K

Behind every IPO,follow-on or

convertible equityoffering is one or

more investmentbanks At right,

investment bankshistorical and

year-to-daterevenues from global

equity-capital-market(ECM) deals

Source: Dealogic

75%

15

50 10

25 5

0 0

n Equity capital markets n Debt capital markets (both in billions, left axis)

ECM as a percentage of total

(right axis)

t

Venezuela Protesters Maintain Pressure

Opposition Groups Say Food Shortages and Soaring Inflation Contribute to Antigovernment Sentiment

CARACAS—Tens of thousands of

protesters in Venezuela hit the

streets Saturday to express

mount-ing frustration with the

govern-ment, adding momentum to a wave

of demonstrations that have

se-verely tested President Nicolás

Ma-duro since the start of the month

Former presidential candidate

Henrique Capriles called for the

march in Caracas, and stepped into

the void left after the arrest of

Leo-poldo López, the opposition leader

who had been organizing protests

Mr López faces some 10 years in

prison for allegedly causing the

vio-lence on Feb 12 that led to the

death of three protesters after an

antigovernment march through the

center of the capital

Opposition leaders have said that

militant government supporters

were responsible for the bloodshed

At least eight people have been

killed since mid-February and

doz-ens of others injured Opposition

sympathizers estimate the number

of dead and injured as much higher

The latest victim was Geraldine

Moreno, 22 years old, who died

Sat-urday from a head injury she

sus-tained days before from a rubber

bullet fired as security forces

dis-persed protesters in central

Cara-bobo state, local media said

On Friday night, Santiago

En-rique Pedroza, 29 years old, was

killed in Caracas after riding his

mo-torcycle into a wire strung across a

street, government officials said

Mr Capriles, the governor of the

state of Miranda who narrowly lost

to Mr Maduro in elections last

April, had seemed reluctant to

en-dorse the marches because of theirlack of specific goals and potentialfor unruliness He has since sought

to channel the discontent on thestreet into a more organized move-ment, he said

“There are a million reasons toprotest But, if you don’t like hate,you don’t respond with hate,” said

Mr Capriles “The protests can’t be

to turn this into a war,” he added incomments to cheering supporters

Mr Capriles went on to call Mr duro “an error of history.”

Ma-The rallies began earlier thismonth in the border state of Táchira

to protest the rampant crime thathas made Venezuela one of the mostdangerous nations in the world

They quickly spread to other citiesand issues, including an economythat has buckled under an inflationrate of 56%, among the highest inthe world

“There’s no clear north for theprotests but people are tired of los-ing friends to crime, of the short-ages of basic goods in the super-

market and inflation,” said DiegoScharifker, a public official andmember of Mr Capriles’s JusticeFirst party

“The reason that these protestshave lasted so long has been be-cause this is beyond the oppositionversus the government The country

is in a crisis with problems thattranscend politics,” he said

Many of the demonstrators are

so young that they have known onlyChavismo, the ruling system namedafter the late President Hugo Chávez

who came to power in February

1999 and transformed Venezuelainto a Socialist state closely aligned

to Communist Cuba They havespent their formative years listening

to lofty Chavismo rhetoric—only tosee their prospects dim as the coun-try sinks further into economic cri-sis

At the same time, ment demonstrators rallied acrosstown in Caracas in a march forwomen in support of peace called by

pro-govern-Mr Maduro He mocked pro-govern-Mr Caprilesfor his alleged timidity in the face ofstreet violence that the governmenthas blamed on far-right fascistgroups funded by Washington andBogota

“There is a coup under way and

an international campaign againstVenezuela,” Mr Maduro said The 51-year-old president also criticized U.S

Secretary of State John Kerry for suing a statement Friday expressingconcern over the escalating protests

is-in the South American country

It was a concern “that John Kerrykeeps sticking his nose in the affairs

of Venezuela,” Mr Maduro said toapplause The president has calledfor more rallies in the coming days

Since the bloody Feb 12 march,state security forces and govern-ment opponents, made up mostly ofuniversity students, have squaredoff just about every day, with stu-dents blocking streets with burningtrash after nightfall and soldiers fir-ing tear gas and rubber bullets

Free speech advocates have alsoaccused the government of silencingmedia outlets and cutting off access

to the Internet Government officialshave denied any attempt to quashdissent in the media or online

Stalled State Spending Saps Mexican Economy

MEXICO CITY—Paul Noriega’s

travails reflect what went wrong

with Mexico’s economy last year His

company, a cleaning-products

sup-plier whose main clients are public

hospitals, was stalled for months,

sales fell by half and some workers

were laid off

The reason: government

spend-ing didn’t flow for much of the year

“We hadn’t lived anything like

this in the last 12 years,” says Mr

Noriega, a young Mexican

business-man who runs the firm with his

fa-ther “Orders from the IMSS [the

so-cial security system] suddenly

plummeted We had to tighten our

belts and use our savings to survive.”

Massive delays in government

spending are one of the reasons

be-hind Mexico’s poor performance last

year Latin America’s second-largest

economy expanded just 1.1% in 2013,

the statistics agency said Friday,

which translates into the creation of

around 200,000 new jobs in a

coun-try of 112 million people

The growth data poured cold

wa-ter on the optimism with which

President Enrique Peña Nieto began

his administration in December

2012 Instead of the 3.5% growth

initially expected in his first year in

office, it was the slowest growth

since the 2009 recession

Mr Peña Nieto has attributed the

economic downturn mainly to the

change of administration and weak

export demand north of its border

“The U.S recovery wasn’t as strong

as expected, and that affected thedynamism of our own exports Andthen we have the turnover in gov-ernment: as happens every sixyears, the rhythm of spendingchanges,” Mr Peña Nieto said in aninterview this week

Other factors also determinedMexico’s sluggish performance,economists say

The construction sector fell intorecession due in part to the unsus-tainable pile of debt at the country’sbiggest housing construction compa-nies The lack of natural-gas supplies

in some regions also dented activity

And many investors postponed sions until seeing the final outcome

deci-of Mr Peña Nieto’s economic reforms

in energy and telecommunications,

which passed Congress last year

“Definitely, it was the perfectstorm,” said Jonathan Heath, an in-dependent economist who hasworked for Mexico’s statistics agency

But some analysts say the ernment’s initial optimism andbadly handled spending also had acrucial impact

gov-“The government asked Congressfor a balanced budget in 2013 whenthe global economy was still fragile

That was a mistake because it volved a contraction of spendingcompared to the previous year,” saidGerardo Esquivel, an economist atthe Colegio de México university

in-Last year was a busy one for nance Minister Luis Videgaray andhis team Some of the key officials

Fi-appointed at the finance ministry, cluding the deputy finance ministerand the deputy minister of spending,lacked any experience in the federal-government machinery Also, workingout complex banking and tax over-hauls took up much of their time, ac-cording to several senior governmentofficials who asked not to be named

in-Several ministries with cant budgets, such as the transportministry, or SCT, took a long time tostart up Regional delegates of theSCT, who are in charge of speeding

signifi-up infrastructure projects and ders, weren’t named until April, ac-cording to the government officials

ten-By May, the economic slowdownwas already evident The govern-ment slashed its GDP forecast three

times last year: first to 3.1%, then to1.8%, and finally to 1.3%

Spending delays were starting tohave notable side effects: suppliersweren’t paid on time, and new ten-ders were postponed For Mr

Noriega, the businessman, the datahad a bitter effect “By midyear, wehad the warehouses full of stockwaiting to be sold,” he says

The Finance Ministry startedwork over the summer on a requestfor Congress to approve a smallbudget deficit for 2013 and a widerone for 2014 to support economicgrowth through additional publicspending—financed with more debtand new taxes

From September, governmentspending accelerated, supported inpart by the reconstruction effortsafter several major storms hit thecountry, and by the end of the yearthe budget had been fully executed

But the harm to the economy wasalready done The October-Decemberperiod didn’t see a recovery, growingjust 0.2% from the previous quarter

For 2014, Mr Peña Nieto expects theeconomy to expand an above-consen-sus 3.9%, although many analysts areseeing a weak first quarter

Mr Heath, the economist, said theimpact of the new spending will takesome time to be felt “The new taxeshave also created uncertainty and arealready hurting household consump-tion and business confidence.”

Mr Noriega doesn’t see light atthe end of the tunnel yet “As of to-day, we haven’t seen any improve-ment in activity,” he says

B Y J UAN M ONTES

WORLD NEWS

Brake on Growth

Delays in public spending contributed to Mexico’s sluggish 2013 performance

Change in government spending in the first year

of a new administration Quarterly gross domestic product, change from a year earlier

Change from previous year (January-June)

Ernesto Zedillo

1995President

%

2012 20132011

4th quarter+0.7%

Major stock market indexes Stock indexes from around the world, grouped by region Shown in local-currency terms

Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk.

EUROPE Stoxx Europe 600 336.09 1.31 0.39% 2.4 % 16.5 %

Stoxx Europe 50 2961.11 12.36 0.42 1.4 12.5

Euro Zone Euro Stoxx 320.66 1.23 0.39 2.0 20.8

Euro Stoxx 50 3131.67 10.08 0.32 0.7 19.1 Austria ATX 2663.27 23.87 0.90 4.6 10.0 Belgium Bel-20 3019.44 13.47 0.45 3.3 18.4 Czech Republic PX 1046.06 10.01 0.97 5.8 4.6 Denmark OMX Copenhagen 637.23 5.75 0.91 12.6 29.5 Finland OMX Helsinki 7522.51 50.30 0.67 2.5 19.8 France CAC-40 4381.06 25.57 0.59 2.0 18.2 Germany DAX 9656.95 38.10 0.40 1.1 26.0 Hungary BUX 18110.98 14.45 0.08 -2.4 -4.0 Ireland ISEQ 5004.85 18.57 0.37 10.3 35.5 Italy FTSE MIB 20391.90 -60.38 -0.30% 7.5 25.6 Netherlands AEX 400.36 1.60 0.40 -0.4 17.8 Norway All-Shares 611.86 2.04 0.33 1.5 18.1 Poland WIG 53400.11 433.09 0.82 4.1 16.2 Portugal PSI 20 7228.49 52.55 0.73 10.2 18.2

Region/Country Index Close Net change Percentage change Yr.-to-date 52-wk Russia RTSI 1315.54 12.39 0.95% -8.8 -15.2 Spain IBEX 35 10071.00 8.80 0.09 1.6 23.1 Sweden OMX Stockholm 434.08 1.99 0.46 2.5 15.5 Switzerland SMI 8431.78 48.53 0.58 2.8 11.6 Turkey BIST 100 63885.62 204.6 0.32 -5.8 -15.8

ASIA-PACIFIC DJ Asia-Pacific TSM 1415.91 16.29 1.16 -2.3 4.2 Australia SPX/ASX 200 5438.70 26.40 0.49 1.6 8.4 China Shanghai Composite 2113.69 -25.09 -1.17% -0.1 -8.7 Hong Kong Hang Seng 22568.24 174.16 0.78 -3.2 -0.9 India S&P BSE Sensex 20700.75 164.11 0.80 -2.2 7.2 Japan Nikkei Stock Average 14865.67 416.49 2.88 -8.8 30.6 Singapore Straits Times 3099.93 13.29 0.43 -2.1 -5.7 South Korea Kospi 1957.83 27.26 1.41 -2.7 -3.0

AMERICAS DJ Americas 463.23 -0.69 -0.15 -0.5 18.2 Brazil Bovespa 47380.24 91.63 0.19 -8.0 -16.4 Mexico IPC 39724.58 70.35 0.18 -7.0 -9.5

Note: Americas index data are as of 5:00 p.m ET Sources: SIX Financial Information; WSJ Market Data Group

Cross rates U.S.-dollar and euro foreign-exchange rates in global trading

USD GBP CHF SEK RUB NOK JPY ILS EUR DKK CDN AUD Australia 1.1160 1.8557 1.2554 0.1706 0.0314 0.1835 0.0109 0.3185 1.5316 0.2052 1.0028

2.50 17 World (Developed Markets) 1,656.02 -0.06 -0.3 17.8 2.40 17 World ex-EMU 201.53 -0.13 -0.5 17.5 2.40 17 World ex-UK 1,665.17 -0.07 -0.5 18.3

3.30 17 Nordic Countries 206.22 -0.24 2.2 13.4 3.70 4 Russia 765.59 -0.11 -3.4 -4.7 3.00 18 South Africa 1,123.10 -1.55 -1.3 11.8 3.00 13 AC ASIA PACIFIC EX-JAPAN 456.31 0.87 -2.5 -4.6 1.80 16 Japan 736.82 -1.96 -8.5 27.0 3.40 9 China 59.78 -1.17 -5.3 -8.7 1.50 16 India 791.72 -0.83 -3.1 1.6 1.20 10 Korea 558.08 -0.89 -5.3 -1.4 2.90 16 Taiwan 298.68 -0.87 -1.3 5.9 1.90 19 US BROAD MARKET 2,105.99 -0.68 0.0 24.3 1.50 30 US Small Cap 3,259.37 -1.04 1.0 30.3 3.20 14 EM LATIN AMERICA 2,925.79 -0.01 -8.6 -25.7

S&P Dow Jones Indices

Turkey Titans 20 -c 651.38 0.18% -15.5%

U.S Select Dividend -d 1205.92 -0.17 16.0 1237.94 0.07 21.1

GLOBAL MARKETS LINEUP

WSJ.com >> Follow the markets throughout the day with updated stock quotes, news and commentary at WSJ.com Also, receive email alerts that summarize the day’s trading in Europe and Asia To sign up, go to WSJ.com/email.

Commodities Prices of futures contracts with the most open interest

EXCHANGE LEGEND: CBOT: Chicago Board of Trade; CME: Chicago Mercantile Exchange; ICE-US: ICE Futures U.S.MDEX: Bursa Malaysia

Derivatives Berhad; LIFFE: London International Financial Futures Exchange; COMEX: Commodity Exchange; LME: London Metals Exchange;

NYMEX: New York Mercantile Exchange;ICE-EU: ICE Futures Europe *Data as of February 20, 2014

Soybeans(cents/bu.) CBOT 1360.00 12.25 0.91% 1,361.50 1,247.50

Wheat(cents/bu.) CBOT 606.00 -7.50 -1.22 617.75 553.75

Live cattle(cents/lb.) CME 141.625 -0.250 -0.18 143.200 135.375

Cocoa($/ton) ICE-US 2,940 -36 -1.21 3,002 2,636

Coffee(cents/lb.) ICE-US 169.00 -0.45 -0.27 177.50 112.50

Sugar(cents/lb.) ICE-US 17.10 0.41 2.46 17.14 14.92

Cotton(cents/lb.) ICE-US 88.40 0.75 0.86 89.67 82.60

Rapeseed(euro/ton) LIFFE 392.25 3.25 0.84 394 349

Cocoa(pounds/ton) LIFFE 1,849 -10 -0.54 1,871 1,674

Robusta coffee($/ton) LIFFE 1,955 -4 -0.20 2,019 1,575

Copper($/lb.) COMEX 3.2575 -0.0035 -0.11 3.4110 3.1775

Silver($/troy oz.) COMEX 21.865 0.148 0.68 22.015 19.030

Aluminum($/ton)* LME 1,761.00 -9.50 -0.54 1,813.00 1,686.50

Copper($/ton)* LME 7,132.00 -49.00 -0.68 7,422.00 7,051.00

Nickel($/ton)* LME 14,305 -220 -1.51 14,730 13,425

Crude oil($/bbl.) NYMEX 102.16 -0.59 -0.57 103.29 91.48

Heating oil($/gal.) NYMEX 3.0397 -0.0437 -1.42 3.0901 2.8758

RBOB gasoline($/gal.) NYMEX 3.0009 -0.0201 -0.67 3.0394 2.7831

Natural gas($/mmBtu) NYMEX 4.985 0.129 2.66 5.0140 3.8580

Brent crude($/bbl.) ICE-EU 109.76 -0.54 -0.49 110.82 104.75

Gas oil($/ton) ICE-EU 928.25 -9.25 -0.99 943.75 893.75

Sources: SIX Financial Information; WSJ Market Data Group

Currencies London close on Feb 21

EUROPE Per euro In euros U.S dollar U.S dollars

Euro zone euro 1 1 0.7287 1.3724

Saudi Arabia riyal 5.1468 0.1943 3.7503 0.2666

South Africa rand 15.0168 0.0666 10.9423 0.0914

United Arab dirham 5.0406 0.1984 3.6730 0.2723

a-floating rate b-financial c-government rate c-commercial rate d-Russian Central Bank rate.

Source: ICAP Plc.

Blast Kills Two Near Thai Rally

BANGKOK, Thailand—Two ple were killed and dozens were in-jured in a blast near an antigovern-ment rally site in Thailand’s capitalSunday

peo-Security forces are investigatingthe cause of the explosion that oc-curred in a busy shopping neighbor-hood that is popular with foreignvisitors

Police officials told reporters theblast appeared to have been caused

by a grenade in an area near whereprotesters have been camped formonths in a bid to unseat PrimeMinister Yingluck Shinawatra Thetwo fatalities were a woman in her40s and a 4-year-old boy

The explosion comes a day afterattackers in a pickup truck fired on

a political rally in Trat province,some 300 kilometers, or 180 miles,east of Bangkok, and threw explo-sive devices into the crowd, killing

at least one person, including a year-old girl

5-Police Lieutenant ThanabhumNewanit said the Saturday attack

took place at a market in Khao ing district

Sam-Many of the people injuredweren’t participating in the rally, in-cluding the child who was killed

Television footage showed turned stools next to abandonedfood carts, shell casings on theground and victims crowded into alocal hospital

over-Drive-by shootings and bomb tacks have plagued political protestshere in recent months as antigov-ernment demonstrators step uptheir campaign to force the resigna-tion of Ms Yingluck, Thailand’selected leader

at-With King Bhumibol Adulyadejnow 86 years old and entering thetwilight of his reign, the protesterswant an unelected council to takepower and introduce politicalchanges to curb the influence of pop-ulist leaders such as Ms Yingluckand especially her brother, formerleader Thaksin Shinawatra, who wasousted in a military coup in 2006

In the past three months, 18 ple have been killed in the violence

peo-Ms Yingluck is pushing back

against legal challenges to her ernment On Thursday she defended

gov-a progrgov-am to support rice pricesthat so far has incurred paper losses

of as much as $8 billion In a ment on her Facebook page, shesaid there was no corruption associ-ated with the program, and that itwas designed to help raise the stan-dard of living in rural areas

state-Thailand’s National tion Commission has said it wouldcharge Ms Yingluck for mismanage-ment in connection with the pro-gram

Anti-Corrup-If Ms Yingluck is found guilty ofmismanagement she will be sus-pended from duty and face an im-

peachment trial in Thailand’s tially elected Senate

par-Concerns are growing over howthe mass-membership “Red Shirts”

movement will react if Ms Yingluck

is removed from office, especially asantigovernment protesters managed

to block the completion of nationalelections on Feb 2

The group was formed in the termath of the 2006 coup, andbroadly supports the Shinawatraclan and their populist policies

af-After a pro-Thaksin governmentwas removed from power for allegedelection violations, tens of thou-sands of Red Shirt members con-verged on Bangkok in 2010 to de-mand a new vote, occupying much

of the city center for nearly twomonths

More than 90 people were killed

in clashes between protesters andsecurity forces, the vast majority ofthem Red Shirt members Key RedShirt leaders have warned that thegroup could again march on Bang-kok if Ms Yingluck is overthrown

—Warangkana Chomchuen contributed to this article.

B Y J AMES H OOKWAY

Thai police officers inspect the site of an explosion during an antigovernment protest at Khao Saming district, of Trat province on Sunday.

Hong Kong Rally Defends Press Freedom

Thousands of residents in HongKong rallied Sunday to protestwhat they see as waning press free-doms in this Chinese city

According to organizers, morethan 6,000 demonstrators—includ-ing reporters, college students andretirees—rallied under blue skies

by the edge of Victoria Harbour

Police put the number at closer to2,200 at its height Crowd esti-mates from police and organizersusually vary widely in Hong Kong

The rally is part of continuedunease in Hong Kong about the in-fluence of mainland China, whichcontrols the former British colonyunder a one-country, two-systems

agreement In a report earlier thismonth, the Committee to ProtectJournalists said that Hong Kong’straditionally freewheeling presswas under attack, citing past vio-lent incidents against the pro-de-mocracy newspaper Apple Daily,and rising rates of self-censorship

Karen Kwok, a cable-televisionreporter at the rally who attendedalongside at least 10 colleagues, saidthe future of freedoms “depends onwhat kind of fight we put up.”

“If we don’t speak up, of course

it will only get worse,” she said, asshe stood before a wall of blue rib-bons that protesters had tied to thefence surrounding the govern-ment’s office

A government spokesman said

the city was committed to ing to guard freedom of speech andfreedom of the press, as the twoare “major elements in sustainingHong Kong’s status as an interna-tional metropolis.”

continu-Hong Kong’s global dom ranking this month slippedthree places to No 61 this year, ac-cording to the Paris-based Report-ers Without Borders Anger inHong Kong has also been simmer-ing since the start of the year overthe ousting of a top editor at thewell-regarded Ming Pao newspaper,which many staff believed was po-litically motivated

press-free-One local magazine reporterwho marched on Sunday said hebelieved Chinese authorities were

increasing pressure on Hong Kongpublications as calls for politicalreform mount in advance of 2017,the year that Beijing has said is theearliest local residents can begindirectly electing their leader

In particular, he said, he hadbeen personally pressured by hiseditors to ensure that any printreferences to “Occupy Central”—aplan to occupy the city’s financialdistrict to demand full universalsuffrage—were accompanied bylanguage emphasizing the poten-tially destructive impact of such amovement

“I definitely see more ship,” said the reporter, who de-clined to be named out of fear ofjeopardizing his job

censor-B Y T E- P ING C HEN

WORLD NEWS

G-20 Sets Multi-Year Economic Growth Plan

SYDNEY—Finance leaders fromthe world’s biggest economies calledfor support from central banks andprivate-sector infrastructure spend-ing to help spur growth, reverting

to the global economy’s playbook ofrecent years in an effort to safe-guard a fragile recovery

Group of 20 officials ended theirsummit this weekend saying theywould look to boost world growth

by more than $2 trillion over thenext few years under a strategycrafted by the International Mone-tary Fund Officials spent the week-end exploring ways to navigate theglobal economy’s choppy waters asthe U.S ends its easy-money poli-cies, emerging markets try to sub-due volatile capital flows and theeuro zone attempts to avert growth-killing deflation

Under the G-20 plan, advancedeconomies would continue withtheir easy-money policies whileemerging markets would seek to re-structure their economies and tameinflation In addition, governmentseverywhere would be expected tochannel private-sector finance intonew infrastructure projects.The IMF, which expects growth

of 3.7% this year and 3.9% in 2015,says its plan would add half a per-centage point to global growth an-nually over the coming four years.The finer points will be hammeredout in the run-up to the G-20 lead-ers’ November summit

But if past efforts of the G-20 areany guide, investors should tempertheir hopes The group’s previousattempts to spur growth have fallen

by the wayside, undermined by therealities of domestic and interna-tional politics

The G-20’s latest push forgrowth faces similar challenges Theworld’s third-largest economy, Ja-pan, is already struggling to imple-ment structural reforms, such asopening industries to competition.That has placed a greater burden foreconomic adjustment on the centralbank, whose stimulus policies havedevalued the yen and cheapened itsexports at the expense of countriessuch as the U.S and South Korea

“The depreciation of the yen willgreatly affect the Asian economy,”South Korean Finance MinisterHyun Oh-seok said on the sidelines

of the meeting “The negative pact will expand and further affectKorea’s exports.” The G-20’s reformsare likely to run into difficulties,too, in dozens of developing coun-tries that are in election years.The strategy comes as the globaloutlook remains murky While theU.S., Europe and Japan appear to beimproving, output in the largestemerging-market countries is slack-ening In the aftermath of the globalfinancial crisis, developing countriesled growth

im-The G-20 is now relying on theU.S., Japan and the euro zone tokeep the cash spigots open whilegovernments elsewhere undertakemeasures to reduce public debt andmake their economies more compet-itive The G-20’s final communiquéalso highlights agreement amongcentral banks to communicate theirstimulus-exit strategies clearly and

as demonstrators step up their campaign.

Europe ex-UK Small/Mid-Cap Equity

Funds that invest primarily in the equities of small- and mid-cap companies incontinental Europe At least 75% of total assets are invested in equities Ranked on %

total return (dividends reinvested) in Euros for one year ending February 21, 2014

Leading 10 Performers

RATING* NAME FUND MGM'T CO CURR BASE YTD 1-YR 2-YR 5-YR

Growth Ord Investors

EuropeanSmallerCompOrd Investment Mgmt Inc.

EuropeanSmlrComsIAcc Management Limited

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SmallerCompaniesAAcc Management (UK) Ltd.

EuropeanSmCosAcc Trusts Limited

Assets Ord Management PLC

StarsEuropeex-UKAcc

Opportunities Acc Managers Limited

Small Companies Managers Limited NOTE: Changes in currency rates will affect performance and rankings Source: Morningstar, Ltd

KEY: ** 2YR and 5YR performance is annualized 1 Oliver’s Yard, 55-71 City Road

NA-not available due to incomplete data; London EC1Y 1HQ United Kingdom

NS-fund not in existence for entire period www.morningstar.co.uk; Email: mediaservice@morningstar.com

Phone: +44 (0)203 107 0038; Fax: +44 (0)203 107 0001

MARKETS

Fund Scorecard

Swiss Insurance Is Targeted

In U.S Tax-Evasion Probe

edly helping Americans avoid taxes

The bank said in November it had

“verified the tax compliance of allits U.S clients,” and has since been

in the process of shutting down

Swiss Life, which like many Swiss nancial firms is now eager to limitexposure to Americans, used the op-portunity to scuttle the shared PPLIpolicies rather than locate a newbank to house the attached assets,

fi-these people say

Swiss Life is the biggest Swissinsurer offering PPLI, though notthe only one Some of the people fa-miliar with the situation say U.S au-thorities have collected data on theuse of PPLI by Americans, thoughthe issue has taken a back seat tothe continuing probe of Swiss

banks

Just as Swiss banks have drawnlegal inquiries, “the same thingcould happen, certainly, with the in-surance companies,” said GideonRothschild, an attorney with Moses

Fro-ness

PPLI policies are generally a ful way for clients to defer taxes onwealth as it grows But policies can

law-be problematic for their owners andcarriers if they haven’t been set up

in compliance with tax laws in a ent’s home country, or if they are

cli-loaded with undeclared assets

The bulk of the 19.3 billion Swissfrancs ($21.7 billion) in assets undercontrol at Swiss Life’s Internationalunit in 2012—prior to the Bank Freypurge—was linked to PPLI About4%, or around 770 million francs,was attributable to Americans, ac-

cording to Mr Frowein

Mr Frowein said while Swiss Lifehas “been continuously reducing ex-posure to U.S persons” where itcan, it is confident there are no is-sues with the American PPLI ac-counts that remain “There is noreason for us to resign from the

The Swiss banks that partner onPPLI once happily accommodatedwealthy U.S clients, but have morerecently jettisoned Americans toavoid drawing unwanted attentionfrom the Justice Department Unlikebanks, insurers are contractuallybound to hold policies and pay outfor a specific event, such as death

Only an unusual circumstance lows an insurer to prematurely

al-dump a PPLI policy

Hundreds of Swiss banks haveapplied to a U.S program in whichthey exchange information aboutdealings with Americans for guaran-tees they won’t be prosecuted In-surers aren’t able to participate in

the program

The Justice Department has saidthat about a dozen banks are al-

ready under investigation

Swiss Life began offering PPLI in

2004 Assets under administrationballooned to more than eight billionfrancs by 2008 from 200 millionfrancs in 2005 In 2007, Swiss Lifeadded a number of U.S clientsthrough the purchase of insurerCapitalLeben, just as dealings withAmericans were poised to become

subject to greater scrutiny

In 2009, the Justice Department

fined UBS AG $780 million for

help-ing Americans evade taxes, kickhelp-ingoff the broader clampdown on Swiss

banking

Mr Frowein says Swiss Lifestopped taking American clients in

2012 Zurich Insurance Group AG

says it hasn’t accepted Americanssince its PPLI business began in

2009, while a spokesman for insurer

Baloise Holding AG said it stopped

taking American clients under a

2010 company directive The Baloisespokesman said the firm doesn’t be-lieve it necessary to “actively wind

down” U.S policies

Swiss Life has bulked up on pliance over the years to help itavoid undeclared assets, Mr Fro-wein said, and requires clients to

com-declare their tax status

Still, Mr Frowein said, “If youwant to do a transaction with us, Ihave no possibility to check and

prove your tax declaration.”

Investors Like the View in Europe

omy has resumed expanding

Infla-tion remains low and growth tepid,

paving the way for easy

central-bank policy that many investors

be-lieve will likely buoy share prices

That backdrop contrasts with the

U.S., where the economy appears on

more solid footing but the Federal

Reserve has been paring back the

monthly bond purchases that many

investors say contributed to the

re-cord-setting 2013 rally

Monetary policy in the U.S “will

likely be something of a headwind

for equities,” said Jamie Doyle,

manager of the International Value

Fund at Los Angeles-based

Cause-way Capital Management, which has

$28 billion in assets under

manage-ment and has a large portfolio of

European shares “But that’s not

go-ing to be a factor in Europe.”

Many portfolio managers are

seeking out the biggest names of

the European corporate world,

say-ing valuations make them a bargain

compared with top U.S companies

“You can find several world-class

companies in Europe that have

de-pressed prices because of the

re-gion,” said Charles Shriver, portfolio

manager of the $63 million T Rowe

Price Group Global Allocation Fund

“But they are top-tier global

corpo-rations.”

That fund counts oil company

Royal Dutch Shell and German

pharmaceuticals company Bayer AG

among its top holdings

favor-ites include Atos SA, a French nology-services company, and Sopra

tech-Group, a tech consultancy.

At Causeway, Mr Doyle likes the

Anglo-Dutch consumer giant lever NV for its strong global expo-

Uni-sure and a dividend yield, reflectingthe annual payout as a share of the

recent stock price, of 3.8%

That dividend payment is part ofwhat makes Unilever a better buy

than its American peer Procter &

Gamble Co., which pays a 3.1%

divi-dend, Mr Doyle said

“Unilever trades at a discountwith a higher dividend yield,” Mr

Doyle said The discount appears inthe price-to-earnings ratios of thetwo companies Procter & Gambleshares are trading at 20.85 timesthe company’s earnings over thepast 12 months, compared with

16.73 for Unilever

But with many European stockmarkets up 20% or more in the pastyear, the bargains that have at-tracted bottom-fishers are harder to

find, many investors say

Shares in the Stoxx Europe 600index are trading at 21.5 times thenext 12 months’ expected earnings,above its average of 18.2 since 2003,

according to Barclays

“There is a bit of a risk in coreEurope that people think there ismore value than there really is,”

said Michael Gavin, head of asset location for the Americas at Bar-

al-clays

At the same time, the region’srecovery remains fragile, raisingrisks for companies that benefitfrom consumer spending, such asUnilever An initial reading onfourth-quarter euro-zone gross do-mestic product showed modest im-provement, but the result remainswell below the pace needed to make

a dent in near record-high ployment

unem-Inflation unexpectedly fell inJanuary, prompting calls for the Eu-ropean Central Bank to provide ad-ditional stimulus to prevent defla-tion, which could knock the region’s

fragile recovery off course

“It isn’t all wine and roses,” Mr

Doyle said “Europe has beenthrough an enormous dislocationand continues to struggle with a

number of challenges.”

Some say that means tiltingportfolios toward countries most

badly affected by the debt crisis

The BlackRock International portunities Fund has looked to thehardest-hit sectors within thosecountries The Irish building com-

Op-pany Kingspan Group PLC and

Dutch international employment

services company Randstad ing NV, which has a strong presence

Hold-in SpaHold-in and Greece, were two ofthe fund’s recent buys They havesoared 60% and 46% over the past

year, respectively

The peripheral European nationsare “where the opportunities are

leading us,” Mr Hart said

Sources: EPFR Global (flows); Barclays (P/E ratio); WSJ Market Data Group The Wall Street Journal

Popular Destination

U.S investors are flocking to Europe, drawn by an improving economic outlook, expectations of easy central-bank policy

and a perception that bargains are easier to find over there

Western European stock fund flows,

monthly Stoxx Europe 600 P/E ratio 52-week performance

%

’142013

S&P 500

Stoxx Europe 600

30

0510152025

2010

SEC Will Test Larger ‘Tick’ Increments

WASHINGTON—Securities and

Exchange Commission Chairman

Mary Jo White said the agency

plans to implement a test program

to trade stocks in wider increments,

like nickels, to determine whether

such a change would make it easier

for investors to trade some shares

Weeks earlier, the SEC’s investor

advisory committee recommended

against implementation of such a

program because of concern it could

increase the cost of trading

In a speech in Washington on

Friday, Ms White said she planned

to push forward a pilot program

that “would widen the quoting and

trading increments and test, among

other things, whether a change like

this improves liquidity and market

quality.”

Phasing out trading in penny

in-crements has long been championed

by some lawmakers, smaller

invest-ment banks and stock exchanges,

who say trading in wider bands

would make it easier and more itable to trade shares of smallercompanies, as well as lessen volatil-ity The SEC’s pilot program wouldmove the trading of some stocks tobigger “tick” sizes after more than a

prof-decade of penny increments

Critics are worried about creasing the cost of trading by forc-ing traders to potentially pay more,

in-or sell fin-or less, than they would der penny trading Some also doubtthe measure would improve capital

un-raising for smaller companies

U.S exchanges and regulatorsare embroiled in an industrywidedebate about how such a pilot pro-gram would work The plan hasbacking on Wall Street, includingfrom stock-exchange operators such

as Nasdaq OMX Group Inc., though

some bigger banks and retail kerages, who often trade in incre-ments smaller than pennies in pri-vate venues known as “dark pools,”

bro-have asked for any test to be limited

in scope SEC officials have beenworking with exchanges on the de-

velopment of the plan

The details are still under sideration, according to people fa-miliar with the discussions The SEChas asked the stock exchanges—in-cluding NYSE Euronext, Nasdaq,

con-BATS Global Markets Inc and rect Edge Holdings LLC—to work

Di-together on rules, the people said

The SEC would review, and possiblyvote on, the rules before they are

implemented

By referring to both “quotingand trading,” Ms White suggestedthat the SEC didn’t want to see pri-vate venues executing trades insmaller increments than exchangesare required to list prices Some bigbanks and retail brokerages have ex-pressed concern that cutting outthose venues would harm investors

The U.S Houses passed a bill thismonth that would force the SEC tocreate an optional five-cent or 10-cent increment for companieswhose market capitalization is un-der $750 million, an experiment thatwould last for five years However, acompanion bill hasn’t been pro-

posed in the Senate

B Y T ELIS D EMOS

A ND S COTT P ATTERSON

For Defying Village Rules,

A Penalty of Rape in India

Councils Illegally Enforce Traditional Rules, Showing Limits of New Legislation Meant to Protect Women

When the elders in this small Hindu

farming village discovered lastmonth that a local woman in-tended to marry a Muslim, their reactionwas swift and savage

The village chief and 12 others draggedthe 20-year-old woman to a shed and gang-raped her, the local police allege She andher suitor were then tied to a tree over-night, witnesses say, and the village councilfined them the next day

Such rough justice is common acrosswide swaths of rural India, where localleaders often ignore the law to enforce tra-ditional social norms that run counter tomore-liberal views now gaining ground inIndia’s cities

More than a year after the December

2012 fatal gang rape of a student on a NewDelhi bus, which shocked India and drewglobal attention, the Subalpur case showsthe limits of new legislation aimed at pro-tecting women in the face of deep culturalresistance

The woman reported the gang rape topolice Her alleged attackers—their lawyersays they are innocent—are in jail Still,her family fears retaliation from villagers

“Her entire life has been ruined,” hermother says “Maybe the best thing to dowas to keep quiet.”

For hundreds of millions of women inIndia’s impoverished countryside, conser-vative local leaders and informal villagecouncils have long dictated everythingfrom whom they can marry to what theycan wear

These informal councils, which are arate from state-sanctioned local govern-ments, can’t legally rule on village disputes

sep-or other matters of law But the penaltiesthey illegally impose can range from finesand ostracism to forced marriage, rape anddeath

“Urban India is changing But our lages remain centuries behind,” says Sham-ina Shafiq, a member of India’s NationalCommission for Women Local councils are

vil-“one of the biggest stumbling blocks in theroad to progress for women.”

In 2012, an informal village council inUttar Pradesh state proposed that only ar-ranged marriages be permitted and thatsingle women be barred from having cell-phones or wearing jeans Central-govern-ment officials condemned that move P

Chidambaram, home minister at the time,told reporters in 2012 that “there is noplace for such diktats in a democratic soci-ety.”

But the government has struggled tocurb the extralegal councils Authoritiessay it is hard to gather statistics about thecouncils’ actions because villagers gener-ally don’t report them to outsiders

In response to widespread reports oftorture by the councils, the Law Commis-sion of India in 2012 drafted legislation toclamp down on them, but Parliament hasyet to consider it

Men can be victims, too Police in than state say a man from the state filed acomplaint late last year alleging that vil-lagers held him in a cage in neighboringHaryana state for three months and sod-omized him in retribution for his elopingwith a married Haryana woman Rajasthanpolice say they transferred the case to thevillage where the alleged attack happened;

For information about listing your funds, please contact: Lauren Berkemeyer tel: +44 20 7572 2102; email: lauren.berkemeyer@dowjones.com

Data as shown is for information purposes only No offer is being made by Morningstar, Ltd or this publication Funds shown aren’t registered with the U.S Securities and Exchange Commission and aren’t available for sale to United States citizens and/or residents except as noted Prices are in local currencies All performance figures are calculated using the most recent prices available 12-month and 2-year returns may be calculated over 11- and 23-month periods pending receipt and publication of the last month end price.

INDICES

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Feri Institutional Advisors, www.feri.de

ARIX Composite Gross USD OT OT GBR 01/31.00 USD1603.76 0.1 5.8 6.1

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Andfs Borsa Global GL EQ AND 02/20 EUR 6.66 0.1 10.3 5.0 Andfs Emergents GL EQ AND 11/02 USD 14.77 -20.4 -19.2 -4.7

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Citadele Eastern Europ Bal EU BD LVA 02/20 EUR 16.49 -0.5 0.7 5.8 Citadele Eastern Europ Bd EU BD LVA 02/20 USD 20.28 -0.5 1.3 5.9 Citadele Russian Eq EE EQ LVA 02/20 USD 19.75 -12.1 -15.5 -7.3

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DJE Real Estate P OT OT LUX 02/21 EUR 4.31 -0.7 -8.0 -7.2

DJE-Alpha Glbl P OT OT LUX 02/21 EUR 187.39 -3.6 7.0 5.6 DJE-Div& Substanz P OT OT LUX 02/21 EUR 279.52 -1.2 6.4 8.8 DJE-Gold&Resourc P OT EQ LUX 02/21 EUR 132.90 9.6 -12.7 -17.0 DJE-Renten Glbl P EU BD LUX 02/21 EUR 150.23 1.0 2.7 4.4

LuxTopic-Aktien Europa EU EQ LUX 02/21 EUR 20.31 -0.3 5.4 4.7 LuxTopic-Pacific OT OT LUX 02/21 EUR 19.70 -1.2 -8.8 0.1

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Winton Evolution EUR Cls H GL OT CYM 01/31 EUR NS.00 -3.1 7.2 1.5 Winton Evolution GBP Cls G GL OT CYM 01/31 GBP NS.00 -3.1 7.6 1.9 Winton Evolution USD Cls F GL OT CYM 01/31 USD NS.00 -3.1 7.6 1.8 Winton Futures EUR Cls C GL OT VGB 01/31 EUR 245.63 -2.4 3.8 0.9 Winton Futures GBP Cls D GL OT VGB 01/31 GBP 267.48 -2.4 4.1 1.3 Winton Futures JPY Cls E GL OT VGB 01/31 JPY 17199.60 -2.3 4.4 1.0 Winton Futures USD Cls B GL OT VGB 01/31 USD 876.58 -2.4 4.2 1.2

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Pictet-Envir Megatr Sel-P EUR OT OT LUX 02/20 EUR 121.96 0.7 12.0 10.0 Pictet-Eu Equities Sel-P EUR EU EQ LUX 02/20 EUR 538.12 -1.7 6.2 9.2 Pictet-EUR Bonds-P EU BD LUX 02/20 EUR 475.19 2.3 3.5 6.2 Pictet-EUR Corp Bds Ex Fin-P EU BD LUX 02/20 EUR 132.69 1.4 3.4 4.7

Pictet-EUR Corporate Bonds-P EU BD LUX 02/20 EUR 178.54 1.3 3.8 6.3

Pictet-EURGovernmentBonds-P EU BD LUX 02/20 EUR 138.74 2.2 4.5 5.8 Pictet-EUR High Yield-P EU BD LUX 02/20 EUR 222.05 2.0 11.0 13.3

Pictet-EUR Inflation Lkd Bds-P EU BD LUX 02/20 EUR 116.55 0.5 -2.2 0.9 Pictet-EUR SM-Term Bds-P EU BD LUX 02/20 EUR 132.11 0.5 2.2 2.6 Pictet-EUR ST High Yld-P EU BD LUX 02/20 EUR 115.85 0.8 6.1 7.3 Pictet-Euroland Index-P EUR EU EQ LUX 02/20 EUR 115.68 1.6 22.2 15.8 Pictet-Europe Index-P EUR EU EQ LUX 02/20 EUR 147.92 2.0 18.0 14.3

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BUSINESS & FINANCE

Coke Bottler and Unions Clash in Spain

MADRID—Coca-Cola Co.’s

Span-ish bottler and its unions seemheaded to court over the company’splan to close plants and cut jobs in adispute that illustrates the persis-tence of labor strife in Spain despite

a nascent recovery from a deep cession

re-Coca-Cola Iberian Partners is freeunder Spanish law to impose a re-structuring plan in the next 15 days,after failing to reach agreement withunions by last Friday’s deadline on itsplan to shut down four of 11 plantsand cut or relocate about 30% of itsworkforce

Formed by the merger of severalbottlers a year ago, Coca-Cola Iberiansaid it had no choice but to overhaulits labor force because of overcapac-ity in its production lines and a re-cession-weakened consumer market

“If it doesn’t go ahead with this ganization, the situation of the com-pany will be unsustainable in the me-dium term,” a company official said

reor-Union leaders have said theywould sue if Coca-Cola seeks to im-pose the cuts, and analysts expect thecase to wind up in the courts

The dispute, which has featuredstrikes, street protests and threat-ened boycotts of Coca-Cola products,

has played out against some tively good news in the long-de-pressed Spanish job market Spainposted seasonally adjusted jobgrowth in the fourth quarter of 2013,

rela-a first in nerela-arly six yerela-ars

But with unemployment still ering around 26%, unions have dug intheir heels against Coca-Cola’s plansand found political allies in areas af-fected by the proposed plant closings

hov-The regional government of Asturias,where a bottling plant would be shutunder the restructuring, said that it

would no longer accept Coca-Cola’ssponsorships of sporting events Inthe Madrid region, where a plant insuburban Fuenlabrada is slated to beclosed, unions have called for a boy-cott, making signs reading: “IfMadrid doesn’t produce, Madriddoesn’t consume.”

Unions say the company’s plan torelocate several hundred workers isunfeasible and an indirect way ofeliminating their positions

Coca-Cola and the unions wereunable to reach agreement even

though the company shifted its nal plan from layoffs to voluntarybuyouts for the more than 700 work-ers, out of a total workforce of about4,000, who would lose their jobs Thecompany also sweetened severancepackages to include one-time pay-ments of €10,000 ($13,738), plus 45days’ pay for each year worked

origi-In justifying the plant closings,Coca-Cola Iberian says 11 plants forSpain are too many By comparison,more-populous France has threeplants In addition, the Spanishplants operate at half of their capac-ity, the company says

The company adds that ity has fallen by 43% and production

profitabil-by 20% since 2009 Despite labor-lawchanges aimed at cutting costs andimproving flexibility in hiring, Spainstill lags behind in international com-petitiveness, company officials say

The company says about 25% ofSpanish bars and restaurants buybeverages from outside the country,where prices are lower

It is understandable that Cola Iberian would want to stream-line operations after the merger, saidSandalio Gomez, a labor-relationsspecialist at Spain’s IESE BusinessSchool “Each plant they had hadbeen planned as a separate entity andeach bottler wanted to be better andbigger than the other,” he said “So

Coca-now when you combine them in aweak market, you have big overca-pacity.”

But he faults the company forfumbling the union negotiations andthe public-relations battle over theclosings “I’m not sure if it’s thestrength of the unions as much as theweakness of the company,” Mr.Gomez said A company official faultsthe unions for failing to come upwith any constructive counterpropos-als, and for ignoring the interests ofrank-and-file workers

Mr Gomez and other analystssaid the unions risk overplaying theirhand by turning down Coca-Cola’sbuyout plan It is possible that anagreement approved by a court might

be less advantageous to workers thanthe one the unions have turneddown, these analysts said Spanishmedia reports indicated that in someplants there are disagreements be-tween workers who would have ac-cepted Coca-Cola’s deal, and thosepressing for a better one

Subalpur, in West Bengal state, is agrain-farming village of roughly 30 familiesabout 200 kilometers from the nearest city,Kolkatạ The closest police station is about

20 kilometers away in the town of Labpur

Late one afternoon last month, theyoung woman’s boyfriend arrived at herhome in the village and proposed to heraround sundown, according to the woman’spolice complaint She agreed

A village leader saw the man, a Muslim,enter the house, villagers say, and word ofhis engagement to the Hindu woman soonspread

Later that evening, community leadersburst into the home—a one-room dwellingplastered with Bollywood movie posters andportraits of Hindu gods—the woman said in

a complaint filed with police in Labpur,which has jurisdiction over Subalpur

The village chief “directed” villagers to

“enjoy” the woman as punishment, ing to her allegations in a police report,which was reviewed by The Wall StreetJournal The chief, Balai Mardi, allegedlyjoined in the rape, police saỵ

accord-The next morning, police and witnesses

in the village say, elders met in the square

to pass judgment on the couple, who weretied to a nearby palm treẹ They imposed an

$800 fine on the couple for deciding tomarry outside the communitỵ

Dozens of villagers, children in tow,watched the proceedings, the witnesses saỵ

A half-dozen village residents the Journalinterviewed in the days after the alleged as-sault either deny there was a rape or saythey were sleeping and don’t know whathappened Most express approval for thecouncil’s finẹ

“I think it’s a very lenient punishmentfor the crime they committed,” says LalKisku, a miđle-aged village man, of thefinẹ He says he suspects the woman fakedthe rapẹ She “should have been prepared toface the consequences of having relationswith a man outside her communitỵ”

One of the woman’s brothers took her tothe Labpur police station by bicyclẹ Policethere say her blouse was torn, she wasbruised and her underwear was stainedwith semen when she arrived

Police arrested 13 men, including the lage chief, on suspicion of participating inthe alleged gang rapẹ All remain in custody,but none have been charged In India, policetypically have at least two months to pre-pare a charge sheet; suspects are rarelycharged during that period

vil-Police decline to make the men availablefor interviews Dilip Ghosh, the lawyer forthe men, says they were framed

Debasis Ghose, the police inspector vestigating the attack, says that villagers inthe area seldom come to the police, prefer-ring to handle their affairs based on conser-vative moral codes handed down over gen-erations

in-“These people have no idea about theirrights, about the universe outside their vil-

lage,” Mr Ghose says “The word of the lage elders is often the last word on anymatter.”

vil-Rape victims can’t be identified by nameunder Indian law without their permission

The woman declines through her mother tocomment Her mother asks that her nameand her daughter’s not be used

Police in cities point to recent shifts insex-crime-reporting statistics as evidencethat public dialogue has rapidly altered howurban victims perceive themselves, particu-larly in the wake of the 2012 bus gang rape

in India’s capital

In Delhi, more than 1,500 rapes were ported in 2013, up from 706 in 2012 Ha-

re-rassment reports jumped fivefold from

2012 Delhi police say the increase isn’t due

to rising crime rates, but to women’s found willingness to report abusẹ

new-In the countryside, it is a different storỵ

Villagers in the same district as Subalpursay at least two similar attacks took place

in recent years

Late last year in Gobra, a village not farfrom Subalpur, a teenage girl was raped fordating a man from another community, resi-dents there saỵ The village chief says heisn’t aware of any such attack

No one has registered a formal plaint regarding the alleged attack, local po-lice saỵ They say the woman’s family left

com-the village, restraining any efforts to duct a probẹ

con-The second assault was in Battala, a lage about 80 kilometers from Subalpurwhere electricity arrived only two yearsagọ One day in August 2010, Sunita Mur-mur, then 15, says her Muslim boyfriendwas visiting her Hindu home when localleaders barged in and dragged her outsidẹ

vil-“Village leaders asked me to forget him,”says Ms Mumur, now 19 “I said I couldn’t.”About a dozen men, acting on the villagechief’s orders, stripped her naked and pa-raded her around the village as punishmentfor dating a Muslim, she says

“I shrieked and shouted,” Ms Murmursays “But nobody—not even one person—came forward to help They all seemed to beenjoying the show.”

Ms Murmur says the men marched herthrough three villages before dumping her,naked and alone, on a nearby mountain Shesays she was “scared for my family” sonever approached the policẹ

Many villagers took mobile-phone videos

of the assault, she says After at least one ofthe videos surfaced later that month in thelocal news media, police investigated thematter and arrested 11 men, charging themwith molestation, court documents show.The men, free on bail, couldn’t be lo-cated for comment Some villagers say theyhaven’t seen them there for months A trial

in the case is pending in West Bengal statẹSeveral residents of Ms Murmur’s vil-lage confirm her account but say they won’ttestifỵ “Everyone knows about this,” says avillage woman “But we don’t want to getourselves involved,” she says “You neverknow—tomorrow the men may come afterour families.”

Informal village councils have been a gal quandary for some timẹ In a 2006 rul-ing in favor of a couple tortured for marry-ing outside their community, India’sSupreme Court said the village councils’practice of taking the law into their ownhands is “wholly illegal and has to be ruth-lessly stamped out.”

le-In a similar 2011 judgment, the SupremeCourt said: “It is time to stamp out thesebarbaric, feudal practices which are a slur

on our nation.”

But with no new laws to curb councils,

“how can you expect people’s mind-sets tochange when the law itself hasn’t,” says Re-hana Adib, head of Astitva, a nonprofit thatfights for women’s rights in rural Indiạ

“Because there is no real law, people, cially the illiterate masses, don’t find any-thing wrong with what their local leaderssaỵ”

espe-Rural sex-crime victims continue to beostracized and often are blamed for attacks,she says “Sometimes, they fear for theirfamilies Other times, they fear they would

be shunned if they speak up.”

The Subalpur woman’s family, under lice protection in a neighboring town, saythey fear retribution “We will be killed if

po-we go back,” says Sital Murmu, one of thewoman’s brothers

The police and family say they don’tknow where the woman’s fiancé is

The mother, sobbing, says she regretsher daughter’s decision to go to the policẹ

“Who will ever want to marry her now?”

*Alleged murders and suicides stemming from dowry disputes Source: National Crime Records Bureau The Wall Street Journal

India’s Women Report More Abuse

A growing debate in India over women’s rights comes as national data show that more complaints of physical and sexual violence in many categories are being lodged with the police each year

SEXUALHARASSMENT

100,000

025,00050,00075,000

RAPEKIDNAPPING AND

Sunita Murmur, above, was paraded naked at age 15 for dating an outsider, in the village of Battalạ

Police inspect the site in January of the alleged rape in Subalpur, which was ordered by village elders.

Discovery Readies Bid For ỤK.’s Channel 5

Discovery Communications Inc ispreparing a bid for ỤK broadcasterChannel 5, according to people fa-miliar with the matter, as the ỤS

cable-channel owner looks to tinue its rapid growth in interna-

con-tional markets

Channel 5, an over-the-air caster owned by British business-man Richard Desmond, has sent po-tential buyers a prospectus that sets

broad-a Feb 27 debroad-adline for initibroad-al offers

The document values the channel at

£700 million ($1.16 billion), ing to one of the people, equivalent

accord-to 10 times its expected fiscal-yearearnings before interest and taxes

The broadcaster airs general tertainment shows, including a host

en-of ỤS.-produced shows, such as thecrime drama “NCIS” and the cablescience-fiction series “Falling Skies.”

Discovery, whose channels clude Discovery Channel, AnimalPlanet and TLC, has been as aggres-sive as any ỤS media company inpursuing growth overseas, where ithas launched its own channel andacquired others as the ỤS pay-TVmarket has saturated It bought acontrolling stake in sports-TV chan-nel Eurosport last month, and it pre-viously acquired TV networks inNorway, Sweden, Denmark and Fin-land through a deal with ProSieben-

in-Sat.1 Media AG

Discovery currently operatessome 200 channels world-widẹ Itsinternational operations are power-ing the company’s profit growth:

Operating income at Discovery’s ternational channels rose 20% in thefourth quarter of 2013, comparedwith a 5% increase at its ỤS net-

didn’t elaboratẹ

A joint Discovery-BSkyB bidwould bring together companiesbacked by cable pioneer John Mal-one, who owns a 29.5% voting stake

in Discovery, and Rupert Murdoch,

whose media conglomerate 21st Century Fox Inc owns 39.1% of

BSkyB (21st Century Fox and WallStreet Journal owner News Corpwere part of the same company until

last Junẹ)The two moguls have clashed in

the past and are competitors in theỤK Mr Malone’s European cable-distribution outfit, Liberty GlobalPLC, last year bought Virgin Media,which competes with BSkyB in theỤK.’s pay-TV and broadband mar-kets Liberty Global also has beenbuying up other cable assets across

the continent

In the ỤS., Mr Malone’s LibertyMedia Corp was recently thwarted

in its attempt to expand in cablẹ

Liberty-backed Charter cations Inc sought a takeover of

Communi-Time Warner Cable Inc., but cast Corp came in with a signifi-

Com-cantly higher offer

The Financial Times earlier ported that Discovery and BSkyBwere in talks to team up on a bid for

re-Channel 5

Mr Desmond bought Channel 5,which airs the reality show “BigBrother,” for £103.5 million in July

2010 from pan-European caster RTL The new owner pledged

broad-£1.5 billion investment over the nextfive years into programming andcontent, while other costs were

taken out

Channel 5—part of a family ofchannels that includes 5USA—is one

of many media assets owned by Mr

Desmond His Northern & Shell Group also owns four ỤK newspa-

pers, celebrity magazines and astake in Internet-television service

YouView

The group also has diverse ests in TV, print, distribution, in-vestment and propertỵ In January,

inter-Mr Desmond hired Barclays PLC to

run the sale of Channel 5 after ceiving two approaches in the previ-ous year, according to a person fa-

re-miliar with the matter

“The economics for television are

a lot more confident than they werethree or four years ago,” said theperson, citing an improving adver-tising market and trans-Atlantic in-

terest in European mediạ

Channel 5 was launched in 1997

as the fifth national terrestrial vision network in the ỤK It had aviewing share of 4.4% in Januaryacross all ỤK terrestrial and satel-lite channels, according to data fromthe Broadcasters’ Audience Research

Netflix Agrees to Pay Comcast for Speed

Netflix Inc has agreed to pay Comcast Corp to ensure Netflix

movies and television shows streamsmoothly to Comcast customers, alandmark agreement that could set aprecedent for Netflix’s dealings withother broadband providers, people

familiar with the situation said

In exchange for payment, Netflixwill get direct access to Comcast’sbroadband network, the people said

The multiyear deal comes just 10days after Comcast agreed to buy

Time Warner Cable Inc., which if

approved would establish Comcast

as by far the dominant provider ofbroadband in the ỤS., serving 30

million households

For months Netflix and Comcasthave been in a standoff over Netflix’srequest that Comcast connect to Net-flix’s video distribution network free

of chargẹ But Comcast wanted to bepaid for connecting to Netflix’s spe-cialized servers because of the heavyload of traffic Netflix would send intothe cable operator’s network Under

the deal, Netflix won’t be able toplace its servers inside Comcast’sdata centers, which Netflix hadwanted Instead, Comcast will con-nect to Netflix’s servers at data cen-ters operated by other companies

Netflix Chief Executive Reed tings decided to strike the deal afterNetflix saw a deterioration in stream-ing speeds for Comcast subscribers

Has-According to Netflix data published

in January, the average speeds ofNetflix’s prime-time streams to Com-cast subscribers had dropped 27%

since October Mr Hastings didn’twant streaming speeds to deterioratefurther and become a bigger issue for

customers, the people said

During this period, Netflix was

us-ing Internet miđlemen Cogent munications as a “primary” route

Com-into Comcast, a person familiar withthe matter has said That connectionwas starting to become over-whelmed, leading to slower Netflixstreams for Comcast Internet users,people familiar with the matter said

At the same time, Comcast sented Netflix with more attractive

pre-deal terms than the operator hadbeen offering, the people said Thedeal spans several years Netflix wasaiming for a long-term deal to makesure its projected traffic growthwouldn’t put it at a disadvantage,one of the people said The connec-tion is a so-called “paid peering”

deal, which connects Netflix’s work to Comcast’s directlỵ Netflixwas previously using several miđle-men to access Comcast’s network

net-Mr Hastings and Comcast CEOBrian Roberts came to a frameworkfor an agreement at a meeting atthe Consumer Electronics Show inJanuarỵ Final details were workedout over the past two days, one of

the people said

The deal could force Netflix’shand in its standoff with other ma-jor ỤS broadband providers, in-

cluding AT&T Inc., Verizon munications Inc and Time Warner

Com-Cable, all of whom have also fused to connect with Netflix’s serv-ers without compensation Netflix’sstreams with Verizon in particularhave gotten worse in recent months

re-B Y S HALINI R AMACHANDRAN

BUSINESS & FINANCE

Fading Out: Italy’s

Garment Know-How

profits, have been hiring their own

artisans and snapping up the best

suppliers The companies are looking

to consolidate their orders into just a

few, bigger suppliers to save costs

and nail down the craftsmen

Last year, LVMH bought cashmere

maker Loro Piana for €2 billion ($2.7

billion) Other fashion houses are

building their own capacitỵ France’s

Hermès International SA is doubling

production at a tannery it owns in

northern Italỵ

But the suppliers that don’t

cap-ture the eye of the big brands are

scrambling to stay afloat They are

often too small to sustain the high

la-bor and energy costs in Italỵ The

en-ergy bill for small Italian companies

is about 70% higher than the

Euro-pean average, according to an Italian

association of small businesses Cgia

Mestrẹ

These small suppliers are also

starved of the capital needed to

in-vest in the technology that will

guar-antee the highest quality demanded

by big brands G Tosi, a small leather

tannery that supplied Gucci and

Prada, went bankrupt in 2012 after

high costs and declining orders

over-whelmed it Owner Raffaele Orsi said

he is now trying to recapture the

high end, but is struggling to invest

enough to meet top brands’ quality

requirements

But Loro Piana, which was

ex-pected to achieve sales of €700

mil-lion in 2013 when LVMH bought it,

has invested in machines to raise

workers’ productivity without

hurt-ing qualitỵ The company said new

technology allows one of the

com-pany’s workers to produce around

100 meters of fabric in less than an

hour compared to just two meters in

the 1990s

Pressure to keep up has pushed

many over the brink About 150, or

nearly one-eighth, of companies in

It-aly’s Biella area, renowned for its

wool and cashmere, have closed in

the last four years

About half of the more than

28,000 garment jobs in Varese in

northern Italy disappeared between

2001 and 2011, according to the local

union of entrepreneurs

Antonella Martinetto, owner of a

small Turin-based company that is

one of the few making labels and

suf-fer when big clients, such as Hugo Boss, canceled part of their orders.

Hugo Boss, which still makes some ofits top-quality products in Italy,moved part of the orders it hadplaced with Ms Martinetto’s com-pany to Germany, where production

point.”

Competition from low-cost tries is also nipping at the heels of It-aly’s luxury manufacturers Turkeyand Romania have raised their qual-ity enough to draw the eye of some

coun-big brands Prada SpA produces

some of the shoes for its Miu Miuline in Romaniạ Chinese manufactur-

ing of textiles is also improving

Other manufacturers are ing by launching their own brands,even if it risks drawing the ire oftheir big fashion clients, in order tocapture more of the value that ends

respond-up in the pockets of big brands andretailers

Pambianco, an Italian consultingfirm, estimates that only 15% of theluxury products’ retail price is thecost of the product itself, which ispaid to manufacturers, while the restgoes to brand owners and retailers

Menswear maker Caruso, whichmakes suits for the likes of ChristianDior, has launched its own brand and

is even opening stores PiacenzaCashmere, a 300-year-old woolmaker in Biella, has launched a men’scollection and will soon expand to

women’s wear

Others, such as Vitale BarberisCanonico, another wool maker inBiella, which supplies Zegna, Armaniand Ralph Lauren, are investing heav-ily to reposition themselves as sup-

pliers of the top brands

But the demise of so many facturers leaves Italy at the risk oflosing the fine skills that have beenpassed down for generations “It’s adisaster not only for the individualcompanies but for the country,” saidMichele Bocchese, president for theVeneto textile sector of Confindus-triạ “If we don’t stop this trend, we’ll

manu-end up losing our know-how.”

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OPINION: REVIEW & OUTLOOK

A week of carnage in Kiev has ended

with Ukraine’s president in flight

from the capital and a shaky peace

in the city’s main square The spoilers

who could still try to break things up are

what’s left of a discredited Ukrainian

re-gime and Moscow.

In talks Friday mediated by three EU

foreign ministers, with a Russian envoy

on hand, President Viktor Yanukovych

agreed to stop the violence, share power

and hold early elections The deal was

al-ready being revised by the end of the

weekend, though if something like it holds

it will mean a victory for democratic

forces and a blow to Mr Yanukovych’s

pa-tron in the Kremlin, Vladimir Putin.

i i i

Later on Friday, the Ukrainian

parlia-ment unanimously restored the 2004

con-stitution, which curtails presidential

pow-ers In a dramatic reversal, Mr.

Yanukovych lost control over the

cham-ber, which on Friday also voted to release

the former prime minister, Yulia

Tymosh-enko, who was jailed on politically

trumped-up charges in 2011 His riot

po-lice, which a day before used live

ammu-nition against civilians, withdrew from

the capital’s center.

Under the terms of the EU-brokered

deal, the new “national unity”

govern-ment is to be created within 10 days to

work out other constitutional changes to

strengthen Ukraine’s democracy

Presi-dential elections previously scheduled for

2015 are to be held before the end of the

year By Saturday, however, parliament had opted to remove Mr Yanukovych from office and named an interim Presi- dent, Oleksandr Turchinov, an ally of Ms.

Tymoshenko Mr Yanukovych reappeared

in the eastern Ukrainian city of Kharkiv to insist he would not resign his office and denouncing the upris- ing as a “coup d’etat.”

The agreement also calls for an investigation into the violence in Kiev and the restoration of an indepen- dent prosecutor, which spells legal trouble for Mr Yanukovych and his interior minister (who was ru- mored late Friday to have fled to Belarus).

It’s not surprising, but it is revealing, that

Mr Putin’s envoy refused to join the EU ministers in signing the accord.

The turnaround in Kiev was sudden but costly More than 100 people were killed after snipers, police and Yanuk- ovych thugs opened fire on anti-govern- ment protesters hunkered down around Kiev’s Independence Square, known as the Maidan Ukraine had never seen such bloodshed in 22 years of independence.

After the worst clashes on Thursday, the U.S and EU, after weeks of dithering, im- posed sanctions Cracks in the regime opened wide enough to make Friday’s deal possible.

Mr Yanukovych enriched himself and his family since taking power in 2010, but his popularity has been plummeting West-

ern sanctions and the scenes of civil war in central Kiev prompted his allies in the busi- ness elite and his party to abandon him.

Members of the ruling Party of Regions broke away to form a new faction and con-

demn the violence in liament The mayor of Kiev, also a Yanukovych ally, left the party on Thursday in protest The army chief, Gen Volodymyr Zaman, re- signed his post as well, tell- ing a television interviewer that he wasn’t willing to follow orders to turn the military against the Maidan.

par-The immediate test will be menting the agreement Mr Yanukovych has broken previous promises to the op- position, and his speech Saturday, in which he called the demonstrations

imple-“banditism,” hardly signalled tion The demonstrators won’t likely leave the Maidan as long as he keeps power During funeral services on Friday for Thursday’s victims, several speakers rejected any deal that didn’t include the president’s immediate resignation What began in November as a protest against President Yanukovych’s turn away from Europe and toward Russia has become a nationwide movement for wholesale democratic change.

concilia-President Putin staked a lot on the Maidan’s defeat and pushed Mr Yanuk- ovych to end the protests by force The climbdown in Kiev won’t sit well in Mos-

cow, which still has numerous means to stabilize Ukraine Foreign Minister Sergei Lavrov this weekend called the victors in Kiev “thugs” and “armed extremists and pogromists.” On the weekend Moscow said

de-it would delay the $15 billion financial out it offered the Yanukovych government.

bail-The Russians may try to stoke ist fires in eastern, Russian-speaking Ukraine, and the Crimean Peninsula is an- other possible flashpoint The Russian Black Sea Fleet is based in this ethnically majority Russian appendage in southern Ukraine, and local politicians have a habit

separat-of calling for Moscow’s intervention The Kremlin used similar cries to invade Geor- gia in 2008.

i i i

Last week we called the EU “hopeless”

on Ukraine, but with Friday’s deal we’ll gladly give its leaders some credit The

EU and the U.S now have a second chance

to make up for their inattention of the last six months.

A new government in Kiev will need substantial financial aid to support a credible reform program and to weather Russian attacks on the economy Ukraine deserves a clearer path into the EU and NATO, the clubs of prosperous free Eu- rope, if that’s what its people want As Mr.

Putin realized, Ukraine is the crossroads between a free and an authoritarian Eu- rope Friday’s agreement is a possible breakthrough for democracy and freedom

in this strategic corner of Europe, but the struggle isn’t over.

be truly said about Facebook’s

mind-bending $19 billion

pur-chase of WhatsApp is that Alexander

Graham Bell had it right the first time:

There’s money to be made in the

hu-man species’ irrepressible need to chat

with each other over long distances.

Beyond that reality, virtually

every-thing about the purchase is off the

charts.

With a valuation of $19 billion,

What-sApp, founded five years ago, is worth more than food giant ConAgra Foods, whose market cap is $12.27 billion Con- Agra employs 26,000 people What- sApp? Apparently it takes only 55 peo- ple to run the modern $19 billion company As to what WhatsApp does, even press reports described it as “a kind of replacement for text messag- ing.”

We’ll leave the financial analysis to the analysts, who admit this deal chal-

lenges traditional metrics For now, tention should be paid to the astonish- ing phenomenon of how WhatsApp came to life.

at-Its 37-year-old co-founder, Jan Koum,

is a Jewish refugee from Ukraine cally, his parents there rarely talked on the phone for fear it was tapped At age

Ironi-16, Mr Koum moved to Mountain View, California, with his mother Fast for- ward 15 years, and Mr Koum is hired as

an engineer at Yahoo Fast forward 12

years and with Brian Acton they create WhatsApp in 2009 Then Facebook buys them for $19 billion.

We write often in these columns that the U.S economy needs more of what Lord Keynes called “animal spirits.”

We’ll learn in time if this acquisition makes financial sense It makes very clear, though, that the tremendous cre- ative drive that gave us Mr Bell’s tele- phone company is up and running in

Mr Koum’s billions of messages.

R epublicans are often first in line to

vote for farm subsidies But when

it comes to lending U.S farmers a

hand by modernizing the country’s

guest-worker program, many hide in the corn

stalks A new study quantifies the costs of

the GOP’s immigration duck.

The American Farm Bureau Federation

commissioned independent economists to

analyze how immigration reform would

effect farm production and food prices.

Their conclusion is that any fix that

doesn’t expand the legal pathways for

im-migrants to enter and work in the U.S.

will cost farmers and consumers a bundle.

About half of the country’s 1.1 million

hired farm hands are estimated to be

un-documented, largely because the current

H-2A visa program is a bureaucratic

night-mare The Labor Department is slow to

process visa applications, so farmers often

don’t get the labor they need in time for

harvest—if workers show up at all Guest workers also aren’t allowed to change jobs

or stay in the country for more than a year.

Thus many simply overstay and become legal In 2010 a labor shortage cost more than $320 million in farm losses.

il-An enforcement-only approach to migration would further shrink the supply

im-of farm hands, thereby driving up labor costs The study finds that farmers would have to raise wages to $26.57 per hour from an average today of $10.80 to re- place undocumented workers.

Higher wages sound great, assuming enough Americans would pick berries and tomatoes But they haven’t in the past.

More likely is that many of these jobs would vanish as farmers grew less, moved production overseas, or shifted to crops that can be harvested with machines.

The study also examines the effects of legalizing 11 million undocumented immi-

grants coupled with tougher enforcement.

The impact on farmers is only slightly less destructive since undocumented immi- grants once legalized would move to more attractive jobs in other industries That’s what happened after the 1986 reform that legalized illegals without offering new op- portunities for guest workers.

Within five years of legalization, the study predicts that at least half of the country’s undocumented workers would leave agriculture Farmers would have to raise wages to between $14.04 and $18.25

an hour to attract domestic workers, suming they could still get them, which would cause their incomes to drop by be- tween 7% and 14% and food prices to rise

as-by 2% to 3%.

The only reform alternative in the study that wouldn’t harm farmers and consumers is a redesigned guest-worker program The study proposes that the

new visa be renewable after three years, allow workers to change employers and

be available to dairy farmers and ers This is similar to provisions that passed the Senate.

ranch-However, the Senate bill also restricts farm guest workers to 337,000 over five years, which would only meet about two- thirds of farmers’ needs A farm guest- worker bill that passed the House Judiciary Committee last summer would do better, though it invites political tinkering by al- lowing the Agriculture Secretary to lower, but not raise, its 500,000 cap on visas.

Republicans have killed immigration reform for now, but the Farm Bureau study shows that in the real economy it’s still needed The irony is that many Re- publicans who support handouts to farm- ers oppose reforms that wouldn’t cost taxpayers a dime and would help the economy.

Breakthrough in Ukraine

$19 Billion and Change

Fruits of Immigrant Labor

Support for Russia’s man in Kiev crumbles after this week’s violence, but Putin could still meddle.

MOBILE WORLD CONGRESS

Europe’sTelecomFirms RetreatonRoamingFees

The European Union is on course

to further reduce many of the phone roaming fees that have longangered travelers across the Conti-nent

cell-But many of Europe’s biggestcarriers—some of which havestaunchly opposed the reductions—

are now racing to roll out ing-fee packages in an effort to lock

no-roam-in customers before the changes gointo effect in July

Some smaller companies had ready eliminated roaming fees orslashed them dramatically, agreeingwith consumer-rights groups andregulators

al-They also say there is profit to bemade by getting people to use theirphones everywhere

By offering more no-roaming-feepackages, major carriers hope apickup in traffic will help make upsome of the expected lost revenue

“We are working to transform adirect loss into an indirect gain,”

said Yves Martin, the head of

roam-ing for French carrier Orange SA.

“But it won’t compensate the wholeloss.”

Like elsewhere in the world, rope’s 500 million citizens typicallypay extra to use their phones when-ever they cross national borders Butwith 28 countries making up the Eu-ropean Union, that can mean roam-ing fees for even short trips

Eu-“I’m only traveling one hour, and

I’ve got three different tariffs,” saidHans Similon, a senior executive atBelgian budget carrier Mobile Vi-kings, describing a recent trip hetook through the Netherlands andGermany Fees can be as high as 24European cents (33 U.S cents) aminute, but had been as high as €5($6.85) a minute before the EUstarted reining them in several yearsago

The EU first capped roamingcharges in 2007, and has reducedthem every year since This sum-mer’s reduction will be the last un-der existing rules Europe’s parlia-ment and member states arecurrently reviewing new legislationthat could ban fees for receivingcalls while abroad

Roaming charges account for tween 5% and 12% of European car-rier revenue, with margins oftenhigher than 60%, according to bro-kerage Oddo Securities

be-Orange, the French carrier andone of the biggest critics of the EUrules, has started waiving someroaming fees for customers who

spend more than €30 a month Itplans to expand this throughout theyear in a bid to increase roamingtraffic

In Germany, E-Plus, owned by

Dutch group KPN NV, now lets

cus-tomers purchase a no-roaming-feeplan for a flat rate of €3 a month

Vodafone PLC has a similar deal.

In many cases, budget operatorssuch as Sweden’s Comviq, VikingCo

NV’s Mobile Vikings and Iliad SA’s

Free of France are leading the no-feepush, forcing larger rivals like Or-ange to follow suit in a market al-ready caught up in price wars

Comviq, the low-cost brand of

Sweden’s Tele2 AB, offers Swedish

subscribers unlimited calls, ing, and one gigabyte of data traffic

messag-in all EU countries, for €55 a month

Comviq thinks it can make up nue on additional usage, once cus-tomers stop worrying about roamingfees

reve-“Seven out of 10 people turn offroaming abroad,” said Comviq ChiefExecutive Magnus Larsson “That isnot how it is supposed to be.”

By Frances Robinson,

Ruth Bender

and Manuela Mesco

The Most You Will Pay When Roaming in the EU

EU maximum rates as of July 1 of each year (excluding VAT)

The Wall Street Journal Source: European Commission Note: $1 = 73 euro cents

80 euro cents

0204060

29 24 19

Carriers Escalate Net-Neutrality Fight

mobile networks

The tension is on display thisweek here, where the telecom andtech worlds are gathering for the an-nual Mobile World Congress exhibi-tion Telecom executives are ex-pected to discuss their concernsabout proposed net-neutrality rules

in closed-door meetings on Monday

The rest of the gathering is more

of a showcase for Silicon Valley One

of the most-anticipated events is

Monday’s address by Facebook Inc.

Chief Executive Mark Zuckerberg

A central issue in the trality dispute is where to draw theline between the broader Internetand private services that telecomoperators offer

net-neu-Telecoms say they should be free

to set aside part of their ture to sell advanced services, such

infrastruc-as high-quality video, from lar technology or content compa-nies The telecoms say doing sowouldn’t mean blocking other pro-viders and that the phone companieshave no interest in keeping theirsubscribers from content they want

particu-But tech companies and interest groups say that such planscould lead to a two-tiered Internet,with some types of content available

public-at top speed, but other content ting slow service if providers are un-able to pay up

get-“Skype and other online appshave been experiencing arbitrary re-strictions of use for some time now,”

said Jean-Jacques Sahel, policy rector for Europe, Middle East and

di-Africa at Microsoft Corp., which

owns the video-chat app “To ensurethat these bad practices stop andthe Internet does not become a dirtroad, we need clear rules.”

In recent years, the telecom dustry has pushed for companiesthat generate large amounts of traf-

in-fic, such as Google Inc.’s YouTube,

to pay for carrying traffic above acertain level

Netflix Inc recently struck a deal

with Comcast Corp to pay the cable

company to ensure that Netflix’scontent streams smoothly The dealallows Netflix to connect directlywith the cable company’s network,instead of through middlemen Theso-called paid-peering arrangementwith Comcast, which isn’t subject tonet-neutrality rules, shows that car-riers are getting traction in their ef-forts to get paid for handling thegrowing Internet traffic

Now the mobile Internet is coming more of a hot spot in thenet-neutrality debate In the U.S.,wireless has been largely excludedfrom net-neutrality rules becausebandwidth is more limited and thenetworks are more fragile But the

be-Continued from first page mobile Web is becoming more

im-portant Europe’s proposed ruleswould make no distinction betweenmobile and fixed Internet

Wireless data traffic is ing Mobile data traffic increased81% world-wide last year to 18 timesthe size of the entire Internet in

skyrocket-2000, according to Cisco Systems

Inc By 2018, global mobile data fic is expected to increase by morethan a factor of 10, Cisco said.Telecoms in Europe and the U.S.are tiptoeing toward offering ad-vanced services from some tech andcontent companies, saying itshouldn’t raise net-neutrality con-cerns In Germany, DeutscheTelekom offers to bundle music-streaming service Spotify for €10($14) a month on users’ bills, ex-empting the service from caps onwireless data usage, after which us-ers would face reduced speeds

traf-“I think it is correct that weshould be able to give to certain cus-tomers or certain services whichhave a higher level of urgency orperformance need, a better service

than others,” said Vodafone Group

PLC CEO Vittorio Colao

In the U.S., AT&T Inc this year

became the first telecom to offer asponsored data service that wouldallow content companies to pay forthe data consumed by users access-ing their websites or mobile apps,although no major content produc-ers have signed up

A T-Mobile US Inc venture,

Go-Smart Mobile, last year said it wouldallow customers to access Facebookfree even if they weren’t paying for

a data plan And FreedomPop, which

resells Sprint Corp.’s service, says it

is assembling a “walled garden” ofmobile apps that subscribers can ac-cess free Seven companies haveagreed to pay FreedomPop to partic-ipate in the service, which is ex-pected to be available this year.Many people in the business ex-pect that, despite the battles, a two-speed Internet is likely to become areality—as will capacity concerns

“You’re going to see more fightsover this,” said David Heard, head ofthe mobile business for network-testing firm JDS Uniphase Corp

“But when someone’s willing to payfor something, how can you holdthat back?”

—Thomas Gryta in Barcelona and Frances Robinson in Brussels contributed to this article.

Samsung Unveils Tizen-Based Watch

BARCELONA—Samsung

Elec-tronics Co announced the release

of its Gear 2 smartwatch, running

on the company’s own Tizen ing system

operat-The smartwatch represents adelicate balance the mobile-devicemaker is weighing as it promotesthe nascent operating system while

continuing to rely on Google Inc.’s

Android operating system to powerSamsung’s best-selling products

Kicking off the annual MobileWorld Congress here with the firstsignificant product rollout, Samsungsaid its new smartwatch will come

in two models, including a priced version with no camera func-tion The device is part of the com-pany’s efforts to “lead innovation inthe wearable market,” J.K Shin, thehead of Samsung’s mobile-communi-cations business, said in a preparedstatement on Sunday

lower-The Gear 2 is a successor to anAndroid-powered watch that theSouth Korean company released lastSeptember The new watch will fea-ture a slightly faster processor and

a more powerful battery that sung said would allow for two tothree days of typical usage

Sam-Samsung said that the second

generation of its smartwatch wouldhelp better “reflect modern trends,”

for example, moving the camerafrom the strap onto the main body

of the watch

The mobile-device maker is

de-veloping Tizen with Intel Corp and

telecommunications companies such

as Japan’s NTT DoCoMo Inc and France’s Orange SA In recent

months they have said that theywould release a smartphone runningTizen, though the system has ap-peared commercially only on some

Samsung cameras

Samsung has struggled with backs to Tizen, such as delayedproduct releases and the exit ofsome of its carrier partners

set-Google and Samsung both havebenefited from their partnership onAndroid and continue to rely heavily

on one another Samsung has usedAndroid software as a selling pointfor the company’s devices, helpingthe company dominate globalsmartphone sales Samsung ac-counted for 31% of smartphone ship-ments last year, more than double

the share for No 2 Apple Inc.,

ac-cording to consulting firm IDC ple’s iPhone uses the company’s iOSoperating system

Ap-In a sign of their mutual dence, Google and Samsung lastmonth signed a licensing deal thatcovers the companies’ existing pat-ents as well as those to be filed overthe next 10 years

depen-Samsung “has a commitment tosupport multiple platforms to offerconsumers more choices and we willcontinue to collaborate closely withGoogle,” the South Korean companysaid

Google didn’t reply to requestsfor comment

—Rolfe Winkler in San Francisco contributed to this article.

Online >>

Follow live coverage of Mark Zuckerberg’s address Monday at 6 p.m CET, and get the latest news from the conference, at WSJ.com/MobileWorld.

The Ukrainian government’s as-sault on protesters in Kiev’s Inde-pendence Square over the past 48 hours shocked Europe and the world The turmoil is also forcing both the European Union and the United States to re-examine some

of their deepest assumptions about foreign policy in the post Cold War environment

The Ukrainian crisis started last fall, when EU ministers thought Ukraine was about to sign

an Association Agreement that would have begun the process of economic integration between Eu-rope’s second-largest country and the European Union This would have been a decisive step for Ukraine Long hesitating between Moscow and Brussels, Ukraine would have seen the Association Agreement put it firmly on a Western path That Ukrainian President Viktor Yanukovych, whose political support is rooted

in the Russia-leaning half of the country, seemed prepared to take this step was particularly signifi-cant It looked as if both halves of Ukraine had reached a consensus that the future lay with the West

But the diplomats in Brussels and Washington forgot to factor one man into their calculations

For Russia’s President Vladimir Pu-tin, the prospect that a united Ukraine might desert Russia and join Europe is completely unaccept-able Mr Putin saw the West’s overtures to Ukraine as an existential threat to Russia’s great power status and his own political position Sensing that the West was unprepared and unfocused, he moved quickly and effectively to block the wedding by offering Mr

Yanukovych $15 billion to leave the Europeans standing at the altar

European diplomats were flum-moxed Far from anticipating Pu-tin’s intervention, they thought

Mr Yanukovych was hungry enough for an EU agreement that they could force him to free his imprisoned political rival, Yulia Tymoshenko, as the price of the trade deal These days, nothing much is heard about Ms

Tymoshenko—who was jailed in

2011 on charges of abusing power and embezzlement, after what many observers say was a politi-cized process—and the Europeans are scrambling, in their slow and bureaucratic way, to sweeten their offer and lure Ukraine back to the wedding chapel

Washington was no better pre-pared Between pivoting to Asia and coping with various crises in the Middle East, the Obama admin-istration hadn’t deigned to engage seriously until Mr Putin knocked the EU plan off course

Inside Ukraine, Mr Yanuk-ovych’s reversal on Europe broke the fragile national consensus Few countries had as wretched a 20th century as Ukraine World War I, the Russian Civil War, the mass starvation and political purges of the Stalin era, the genocidal vio-lence of World War II: wave after wave of mass death rolled over the land The western half of the coun-try sees Moscow as a hostile, rapa-cious power and believes—cor-rectly—that Mr Putin’s vision for their country will involve the loss

of democratic freedoms and de-stroy any hope of establishing the rule of law and transparent institu-tions, or of joining the EU

The eastern half is not so sure

Trade and cultural connections

with Russia are stronger than they are with Europe, and while the EU

is a good market for Ukrainian raw materials, Russia is willing to buy Ukrainian manufactured and con-sumer goods that Europe doesn’t much want

Meanwhile, given Ukraine’s tor-mented history and the post-Soviet legacy of criminal oligarchs and corruption, the country’s weak in-stitutions lack the legitimacy and

perhaps the competence to manage deep conflicts like the one now shaking the nation Political move-ments in both halves of the coun-try have ties to shady figures, and the horrors of the past have left a residue of ethnic hatreds and con-spiracy theories on both sides of the current divide

For Mr Putin, this is of little moment With Ukraine, Russia can

at least aspire to great power status and can hope to build a power cen-ter between the EU and China that can stand on something approach-ing equal terms with both If, on the other hand, the verdict of 1989 and the Soviet collapse becomes final, Russia must come to terms with the same kind of loss of empire and stature that Britain, France and Spain have faced Mr Putin’s stand-ing at home will be sharply, and perhaps decisively, diminished

Both the EU and the U.S made a historic blunder by underestimating Russia’s reaction to the Ukrainian

trade agreement Mr Putin cannot let Ukraine slip out of Russia’s sphere without throwing everything

he has into the fight As I wrote last fall, the EU brought a baguette to a knife fight, and the bloody result is

on the streets of Kiev

The policy of detaching Ukraine from Russia should either have been pursued with enormous de-termination and focus—and an irresistible array of economic and political instruments of persua-sion—or it should not have been pursued at all While Mr Putin and the Ukrainian government have turned a problem into a crisis, some responsibility for the deaths in Ukraine lies at the doors of those who blithely embarked on a dan-gerous journey without assessing the risks

Neither the American policy makers nor the European ones who stumbled into this bear trap are stu-pid, but this episode is confirma-tion that the problem that has haunted Western statesmanship since 1989 is still with us Both President Obama and the many-headed collection of committees that constitutes the decision-mak-ing apparatus of the EU believe that the end of the Cold War meant an end to geopolitics

This helps explain why American diplomacy these days is about order and norms The objectives are global: an environmental climate treaty, the abolition of nuclear weapons, the creation of new global governance mechanisms like the G-20, the further expansion of free trade agreements, and so on When the U.S voices its objections—to Bashar Assad’s slaughter in Syria, say, or to the Ukrainian crackdown this week—they are stated in terms

of global norms And so U.S

diplo-macy with Russia has focused on or-der-building questions like nonpro-liferation, while gravely

underestimating the degree to which Russia’s geopolitical interests conflict with those of the U.S This is not so much an intellec-tual error as a political miscalcula-tion For American and European policy makers, the 1989 geopolitical settlement of the Cold War seemed both desirable and irreversible Powers like Russia, China and Iran, who might be dissatisfied with ei-ther the boundaries or the legal and moral norms that characterized the post-Cold War world, lacked the power to do anything about it This outlook is Francis Fukuyama’s “The End of History” on steroids: Human-ity had not only discovered the forms of government and economic organization under which it would proceed from here on out, it had found the national boundaries and the hierarchy of states that would last indefinitely

Mr Putin is a master of a game that the West doesn’t want to play, and as a result he’s won game after game with weak cards He cannot use smoke and mirrors to elevate Russia back into superpower rank, and bringing a peaceful Ukraine back into the Kremlin’s tight em-brace is also probably beyond him But as long as the West, be-guiled by dreams of win-win solu-tions, fails to grapple effectively in the muddy, zero-sum world of clas-sic geopolitics, Mr Putin and his fellow revisionists in Beijing and Tehran will continue to wreak havoc with Western designs

Mr Mead is a professor of foreign affairs and humanities at Bard College and editor at large of the American Interest.

B Y W ALTER R USSELL M EAD

Putin Knows History Hasn’t Ended

Obama might like to pretend that geopolitics don’t matter, but the slaughter in Kiev shows how mistaken he is.

Thorold Barker, Editor,

Europe, Middle East & Africa

Bruce Orwall, Senior Editor, Europe Gren Manuel, Executive Editor, Europe Terence Roth, Managing Editor, Europe Brian M Carney, Editorial Page Editor Lauren Berkemeyer, Marketing Kate Dobbin, Communications Florence LeFevre, Institutional Sales Europe Michael Lloyd, Institutional Sales U.K.

Jonathan Wright, Circulation Sales Kelly Leach, Publisher

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© 2014 Dow Jones & Company All Rights Reserved

CORRECTION

Francois Hollande is the Presi-dent of France A Feb 20 edi-torial misstated his position

Sen John McCain took to the Senate floor on Feb 12 to shine a bright light on the plight of the Syr-ian people and its consequences He had with him a sample of unforget-table images, 55,000 photographs in all, of the brutalities inflicted on 11,000 detainees of Bashar Assad’s regime Reflections of the Balkan horrors of the 1990s—evidence of torture, starvation, systematic rape and slaughter

“We must not look away,” Mr

McCain said Failure to

“acknowl-edge through our sense of revul-sion that what is happening in Syria today,” he said, would be “a stain on the collective conscience

of moral peoples everywhere.”

It will be said of President Barack Obama when he leaves office that he kept the U.S out of the Syrian ordeal But at what price? Even the architects of his Syria policy now acknowledge its utter failure With more than 130,000 dead and millions dis-placed, it is too late for dissimula-tion and doublespeak

Much was made of the deal struck in September with Russian cooperation to remove Assad’s chemical weapons But at a Feb 11 news conference with French Pres-ident François Hollande, Mr

Obama said the “state of Syria itself is crumbling That is bad for Syria It is bad for the region It is bad for global national security.”

He also said that Russia, along with Iran, was obstructing U.N Se-curity Council action to aid Syria’s starving civilians

Director of National Intelligence James Clapper, at a Feb 4 House Intelligence Committee hearing, connected the dots for Syria ob-servers, saying that Assad had grown stronger over the past year

“by virtue of his agreement to re-move the chemical weapons.”

After crossing Mr Obama’s “red

line” last summer by slaughtering civilians with chemical weapons, Assad has become a partner in a disarmament effort whose pace he alone dictates All the assumptions

of a policy of indifference and abdication stand exposed

The jihadists have fulfilled our worst fears: More than 20,000 of them, from lands as far away as

Russia’s North Caucasus, have made their way to Syria They come bearing the message that the world powers took no interest in the fate of a tormented population, and the feckless diplomacy of the past three years lent credence to their worldview

And still, in the face of the mas-sacres and the barrel bombs and the denial of food to besieged cit-ies, the policy of indifference holds Grant Mr Obama his due:

The bet he made that he could ride out the outrage has been vindi-cated It was 30 months ago that

he called on Bashar Assad to step aside, and two years ago that a

se-nior State Department official compared his regime to a “dead man walking.” No such luck: The Syrian despot held his ground He was on his turf, he outplayed the U.S and its “lead from behind”

tactics, the outrage that could have devastated his regime never mate-rializing Evil is attentive, and for-ever alert

If Washington and its allies wanted some small evidence of suc-cess, Assad was willing to oblige He would dispatch to United Nations

“peace talks” in Geneva an assort-ment of goons and regime opera-tives who delighted in mocking the proceedings If necessity required a modicum of cooperation on a U.N

effort to bring aid to the besieged city of Homs, he was willing to play the game After agreeing to a temporary cease-fire earlier this month to permit the delivery of food and medicine and the evacu-ation of the wounded and starv-ing, he continued attacks on the rebels and rounded up hundreds of the U.N evacuees

More brutality was promised

“We are all waiting for the blue ones to leave,” said a regime operative, referring to the blue-helmeted U.N personnel Ratko Mladic, herding thousands to their death in Srebrenica, a generation ago, under the gaze of United Na-tions peacekeepers, was more

cir-cumspect

In reckoning with the evils of the Syrian regime, American power was either nạve or willfully indifferent The House of Assad and its ruling cabal have behind it nearly five decades of violence and subterfuge After five years, they have taken the measure of Mr Obama: For a fleeting moment, they feared that American power could decapitate their regime Once spared, they grew embold-ened, openly defying the will of the U.S and U.N

In the Geneva talks that ended

on Saturday, the Assad regime said any “peace” or “power-sharing” agreement would not include the dictator standing down The fence-sitters in Syria’s neighborhood could be forgiven the conclusion that Bashar Assad’s reign will out-last the presidency of Mr Obama That would be a stain indeed

Mr Ajami, a senior fellow at Stan-ford’s Hoover Institution, is the au-thor, most recently, of “The Syrian Rebellion” (Hoover Press, 2012).

B Y F OUAD A JAMI

Obama’s Syria Debacle Laid Bare

When the president leaves office, it will be said that he kept us out of that

war But at what price?

21st Century Fox 18

UBS 20

Unilever N.V 20

Verizon Communications 18

Viber Media 16

Vodafone 16,17 WhatsApp 16

Telefonica 16

TeliaSonera 15

Temasek Holdings 2

Time Warner Cable 18

T-Mobile US 16,17 Tom Ford International 15 Twitter 6

NTT DoCoMo 17

Orange 1,15,17 Prada S.p.A 18

Procter & Gamble 20

Prudential 28

Rakuten 16

Randstad Holding N.V 20

Republic Wireless 16

Royal Dutch Shell 20

Samsung Electronics 16,17 Scratch Wireless 16

Sopra Group 20

Sprint 16,17 Swiss Life Holding 1

Tele2 17

Telecom Italia 16

Fund 4

Kingspan Group 20

KPN 17

Lenovo Group 16

Liberty Global 18

Liberty Media 18

Loro Piana 18

LVMH Moet Hennessy Louis Vuitton 15

Microsoft 16,17 Mobistar 15

Nasdaq OMX Group 20

Netflix 16,17,18 News Corp 18

Nokia 16

Northern & Shell Group 18

Exxon Mobil 28

Facebook 16,17 G Tosi 18

Google 16,17 Hermes International 18

Hon Hai Precision Industry 16

HTC 16

Huawei Technologies 16

Hugo Boss 18

Iliad 17

Industrial & Commercial Bank of China 2

Intel 17

International Business Machines 16

International Monetary China Nonferrous Mining 2

China Petroleum & Chemical 28

Cisco Systems 15,16,17 Coca-Cola 19

Cogent Communications Group 18

Comcast 17,18 Deutsche Telekom 1

Direct Edge Holdings 20

Discovery Communications 18

EE 16

European Central Bank 4

European Commission 4

European Parliament 4

Allianz 28

Apple 16,17 Atos S.A 20

AT&T 17,18 Aviva 28

AXA S.A 28

Bank Frey 1

Barclays 18

BATS Global Markets, 20

Bayer 20

Belgacom 15

BP 28

British Sky Broadcasting Group 18

Charter Communications 18

Chevron 28

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MOBILE WORLD CONGRESS

BARCELONA—The telecom

industry is getting ready for its

biggest get-together of the year

Meanwhile, it’s never been less

clear what it means to be a

mobile-phone company

Case in point: Facebook Inc.’s

$19 billion acquisition of

mobile-messaging service WhatsApp The

startup, just a few years old, has

already captured an enormous

share of texting traffic, a function

that once was entirely the

preserve of traditional wireless

companies

WhatsApp’s 450 million users

may already be sending more texts

than all users of carrier-based

SMS, or short-message service,

combined, according to

telecommunications analyst

Benedict Evans of Andreessen

Horowitz He puts the total at

roughly 18 billion texts a day and

rising quickly Researchers at

technology-research company

Ovum, meanwhile, expect SMS

traffic to peak this year at around

21 billion a day

Facebook itself is a giant

communication network with

about a billion active monthly

mobile users world-wide Rakuten

Inc., a Japanese e-commerce

company, said earlier this month

that it was paying $900 million to

buy WhatsApp competitor Viber

Media Inc.

So mobile-phone companies

aren’t about texting anymore How

about calling? Developments on

that front aren’t any more

enlightening

Around the world, 100 million

people have installed

Internet-based calling service Skype just on

phones powered by Google Inc.’s

Android software That’s more

subscribers than Sprint Corp and

T-Mobile US Inc have combined.

Olaf Swantee, chief executive

officer of U.K mobile carrier EE,

said Skype, which claims 300

million connected users a month,

is the most-used communication service on his company’s network

Google’s Hangouts app also allows users to make phone calls

with just a data connection

Companies like Republic Wireless

and Scratch Wireless, meanwhile,

are wireless carriers without a single cell tower Both offer

cellular plans that run over Wi-Fi networks Republic’s service starts

at $5 a month; Scratch’s is free

Traditional carriers that used

to worry about being squeezed out

of the market for add-on services like music and video are now

gradually losing their grip on what once were core functions Some

companies don’t mind so much as they shift to charging for data

traffic like video In the end, though, carriers are finding it

harder to be more than just the

“dumb pipe” hooking users up to the services they actually want

The ambiguity of just what is a

“mobile” company is highlighted

by the keynote speakers at the Mobile World Congress, which

drew 72,000 people to Barcelona last year and starts on Monday

Facebook CEO Mark Zuckerberg will be there WhatsApp’s CEO Jan

Koum, International Business Machines Corp CEO Virginia

Rometty and Cisco Systems Inc.

CEO John Chambers will also be there

The phone companies that actually build the pipes and cell

antennas that make mobile communications possible will

attend and make presentations, too But this year, the growing role

of Web-based services will be the elephant in the room

One result is that traditional telcos are more keen than ever to

find ways to charge Internet-based

companies, like Netflix Inc.,

Google and Facebook, more for the traffic they generate

In the U.S., carriers notched a big win earlier this year when a

federal court shot down the Federal Communications

Commission’s attempt to enforce net neutrality principles that

require equal treatment of traffic

as it flows over the so-called last mile of carriers’ networks to

subscribers

The FCC has unveiled plans to try again to prevent carriers from

blocking or unreasonably discriminating against traffic

Regulators are also addressing the issue anew in Europe

The Week Ahead looks at coming corporate events.

Mobile Carriers Face Unclear Call

[ The Week Ahead ]

B Y R YAN K NUTSON

Microsoft Makes Push

On Phones

BARCELONA—Microsoft Corp is

pushing more manufacturers to make less expensive Windows-based smartphones, in a bid to boost sales

of an operating system that still lags

far behind those of Google Inc and Apple Inc.

The Redmond, Wash., company said Sunday that it is broadening the number of makers of Windows phones, working with companies

in-cluding Lenovo Group Ltd and Hon Hai Precision Industry Co., the

world’s largest contract manufac-turer by revenue

Speaking at a news conference ahead of the opening of the Mobile World Congress in Barcelona, Micro-soft executives said the company will also lower the hardware re-quirements for the Windows Phone operating system, to support cheaper internal chips, fewer but-tons and less built-in memory, to al-low for cheaper devices for

emerg-ing markets

“We’re open for business on Windows Phone for anyone who wants to build a Windows Phone,”

said Nick Parker, who oversees Mi-crosoft’s relationships with makers

of gear running Windows

Microsoft has been trying for years to break into the smartphone market, but currently only about 4%

of smartphones sold run Windows Phone—trailing far behind Google’s Android and Apple’s iOS mobile

op-erating systems

Microsoft is under pressure to offer phones at lower price points to sell into the lower end of the mar-ket Until now, the main makers of

Windows phones have been Nokia Corp., HTC Corp., Huawei Technol-ogies Co and Samsung Electronics

Co

Microsoft declined to say when any of the new manufacturers would release Windows phones, or whether

it would lower the license fees its charges per phone to boost appeal

“We have to be market competi-tive, but we don’t discuss OEM pric-ing,” Mr Parker said, using the

manufacturers

Microsoft struck a €5.4 billion ($7.4 billion) deal last year to buy Nokia’s cellphone business and li-cense its patents But so far Nokia’s Windows phones haven’t been inex-pensive enough to compete with sub-$100 Android phones in emerg-ing markets Despite the Microsoft acquisition, Nokia itself plans to un-veil a smartphone running a modi-fied version of Android on Monday

morning

B Y S AM S CHECHNER

A ND S VEN G RUNDBERG

Europe Struggles to Catch Up With U.S on 4G Investment

work “I hardly even get 3G most of

the time.” Mobistar didn’t

immedi-ately return calls seeking comment

More recently, carriers in Europe

have ramped up their spending, and

are expected to top out at around $2

billion a year by 2015, largely

catch-ing up to North American spendcatch-ing,

according to consultancy Infonetics

France’s Bouygues Telecom last

year switched on its 4G services in

France, having spent €1.5 billion

equipment Vodafone PLC, flush

with cash after agreeing to sell its Verizon Wireless stake, has prom-ised its own spending spree—com-mitting to invest £3 billion ($4.99 billion) through 2016 upgrading its European mobile networks It doesn’t break out how much will go

to 4G systems

“We’re still waiting for Vodafone

to make its move,” said Ericsson’s

Mr Wibergh

In Italy, the deployment of fourth-generation data networks didn’t begin in earnest until last year, when the nation’s four main operators in the country, led by

Telecom Italia SpA and Vodafone,

began installing antennas through-out the country

Telecom Italia says its 4G net-work now covers half of the Italian population Its goal is to reach 80%

of the population within two more years

In Spain, 4G connections are available in big cities like Madrid and Barcelona But Spanish opera-tors’ focus has recently been on im-proving margins, battered in the

re-cent downturn Telefĩnica SA, the

largest Spanish operator, says it re-mains committed to a 4G rollout in

the long term

—Simon Zekaria in London, Frances Robinson in Brussels and David Román in Madrid contributed to this article.

Since former Federal Reserve

Chairman Ben Bernanke uttered

the word “taper” in June 2013,

emerging-market stocks and

currencies have taken a beating It

is not clear why talk of (thus far)

modest reductions in the Fed’s

large-scale asset-purchase

pro-gram should have had such big

re-percussions outside the United

States The best economic

explana-tion is that capital has been

flow-ing out of emergflow-ing markets in

an-ticipation of future rises in U.S

interest rates, of which the taper is

a harbinger While plausible, that

cannot be the whole story

For it is not only U.S monetary

policy that is being tapered Even

more significant is the “geopolitical

taper.” By this I mean the

funda-mental shift we are witnessing in

the national-security strategy of the

U.S To see the geopolitical taper at

work, consider President Obama’s

comment last Wednesday on the

horrific killings of protesters in the

Ukrainian capital, Kiev The

presi-dent said: “There will be

conse-quences if people step over the line.”

No one took that warning

seri-ously—Ukrainian government

snip-ers kept on killing people in

Inde-pendence Square regardless The

world remembers the red line that

Mr Obama once drew over the use

of chemical weapons in Syria

and then ignored once the line had

been crossed

The origins of America’s

geopo-litical taper as a strategy can be

traced to the confused

foreign-pol-icy decisions of the president’s first

term The easy part to understand

was that Mr Obama wanted out of

Iraq and to leave behind the

minimum of U.S commitments

Less easy to understand was his

policy in Afghanistan After an ternal administration struggle, theresult in 2009 was a classic bu-reaucratic compromise: There was

in-a “surge” of in-additionin-al troops, in-companied by a commitment tobegin withdrawing before the last

ac-of these troops had even arrived

Having passively watched whenthe Iranian people rose up againsttheir theocratic rulers beginning in

2009, the president was caught offbalance by the misnamed “ArabSpring.” The vague blandishments

of his Cairo speech that year offered

no hint of how he would respondwhen crowds thronged TahrirSquare in 2011 calling for the ouster

of a longtime U.S ally, the Egyptiandictator Hosni Mubarak

Mr Obama backed the ment led by Mohammed Morsi,after the Muslim Brotherhood wonthe 2012 elections Then the presi-dent backed the military coupagainst Mr Morsi last year OnLibya, Mr Obama took a back seat

govern-in an govern-international effort to oustMoammar Gadhafi in 2011, but ap-parently wasn’t in the vehicle at allwhen the American mission atBenghazi was attacked in 2012

Syria has been one of the greatfiascos of post-World War IIAmerican foreign policy WhenPresident Obama might have inter-vened effectively, he hesitated

When he did intervene, it wasineffectual The Free Syrian Army

of rebels fighting against theregime of Bashar Assad has not

been given sufficient assistance tohold together, much less to defeatthe forces loyal to Assad The presi-dent’s non-threat to launch air-strikes—if Congress agreed—

handed the initiative to Russia

Last year’s Russian-brokeredagreement to get Assad to handover his chemical weapons is beinghonored only in the breach, asSecretary of State John Kerryadmitted last week

The result of this U.S inaction

is a disaster At a minimum,130,000 Syrian civilians have beenkilled and nine million driven fromtheir homes by forces loyal to thetyrant At least 11,000 people havebeen tortured to death Hundreds

of thousands are besieged, theirsupplies of food and medicine cutoff, as bombs and shells rain down

The scale of the strategic U.S

failure is best seen in the statisticsfor total fatalities in the region theBush administration called the

“Greater Middle East”—essentiallythe swath of mainly Muslim coun-tries stretching from Morocco toPakistan In 2013, according to theInternational Institute of StrategicStudies, more than 75,000 peopledied as a result of armed conflict

in this region or as a result of rorism originating there, the high-est number since the IISS ArmedConflict database began in 1998

ter-Mr Obama’s supporters likenothing better than to portray him

as the peacemaker to George W

Bush’s warmonger But it is now

al-most certain that more people havedied violent deaths in the GreaterMiddle East during this presidencythan during the last one

In a January interview with theNew Yorker magazine, the presi-dent said something truly stun-ning “I don’t really even needGeorge Kennan right now,” he as-serted, referring to the late Ameri-can diplomat and historian whoseinsights informed the foreign pol-icy of presidents from FranklinRoosevelt on Yet what Mr Obamawent on to say about his self-as-sembled strategy for the MiddleEast makes it clear that a GeorgeKennan is exactly what he needs:

someone with the regional tise and experience to craft a credi-ble strategy for the U.S., as Kennandid when he proposed the “contain-ment” of the Soviet Union in thelate 1940s

exper-So what exactly is the dent’s strategy? “It would be pro-foundly in the interest of citizensthroughout the region if Sunnisand Shiites weren’t intent on kill-ing each other,” the president ex-plained in the New Yorker “And al-though it would not solve theentire problem, if we were able toget Iran to operate in a responsiblefashion you could see an equi-librium developing between Sunni,

presi-or predominantly Sunni, Gulfstates and Iran.”

Moreover, he continued, if only

“the Palestinian issue” could be

“unwound,” then another “newequilibrium” could be created, al-lowing Israel to “enter into even aninformal alliance with at least nor-malized diplomatic relations” withthe Sunni states The president hasevidently been reading up aboutinternational relations and hasreached the chapter on the “bal-ance of power.” The trouble withhis analysis is that it does not ex-plain why any of the interestedparties should sign up for his bal-ancing act

As Nixon-era Secretary of StateHenry Kissinger argued more thanhalf a century ago in his book “AWorld Restored,” balance is not anaturally occurring phenomenon

“The balance of power only limits

the scope of aggression but doesnot prevent it,” Dr Kissingerwrote “The balance of power isthe classic expression of the lesson

of history that no order is safewithout physical safeguardsagainst aggression.”

What that implied in the 19thcentury was that Britain was the

“balancer”—the superpower thatretained the option to intervene inEurope to preserve balance Theproblem with the current U.S geo-political taper is that PresidentObama is not willing to play thatrole in the Middle East today Inhis ignominious call to inaction onSyria in September, he explicitlysaid it: “America is not the world’spoliceman.”

But balance without an enforcer

is almost inconceivable Iranremains a revolutionary power; ithas no serious intention of giving

up its nuclear-arms program; thetalks in Vienna are a sham Bothsides in the escalating regional

“Clash of Sects”—Shiite andSunni—have an incentive to in-crease their aggression becausethey see hegemony in a post-American Middle East as an attain-able goal

Maybe, on reflection, it is not aKennan that Mr Obama needs, but

a Kissinger “The attainment ofpeace is not as easy as the desirefor it,” Dr Kissinger once ob-served “Those ages which in ret-rospect seem most peaceful wereleast in search of peace Thosewhose quest for it seems unendingappear least able to achieve tran-quillity Whenever peace—con-ceived as the avoidance of war—

has been the primary objective the international system has been

at the mercy of [its] most ruthlessmember.”

Those are words this president,

at a time when there is muchruthlessness abroad in the world,would do well to ponder

Mr Ferguson is a history sor at Harvard and a senior fellow

profes-at Stanford University’s Hoover Institution His most recent book

is “The Great Degeneration” guin Press, 2013).

(Pen-During theSochi Olympics,

Vladimir Putin has

received a lot of

grief about the

state of the rule of

law in Russia He’s not alone

Highly advanced countries have

problems with the rule of law

too—because of their need to

maintain relations with Putin’s

Russia

Example: the United Kingdom,

on whose soil an unprecedented

act of small-scale nuclear

terror-ism was committed in the 2006

murder by polonium poisoning of a

Russian dissident and author,

Alex-ander Litvinenko

A trail of highly radioactive

polo-nium across London wherever

An-drei Lugovoi, a former KGB agent

and now a member of the RussianDuma, happened to be visiting washard to ignore Mr Lugovoi wouldeventually be charged with the kill-ing, though the Kremlin has refused

to extradite him and Mr Lugovoidenies the accusation

Britain’s government has peared less enthusiastic to explorewho ordered the assassination orsupplied the esoteric murderweapon In the latest development,the coroner in charge of the case,Sir Robert Owen, has taken tocomplaining in court that the gov-ernment of Prime Minister DavidCameron is preventing him fromconsidering evidence that, in hiswords, “establishes a prima faciecase as to the culpability of theRussian state.”

ap-OK, Russia is a nuclear power

Mr Putin is a necessary if fractiouspartner for many things Westerngovernments want to do, includingprotect a lucrative BP oil venturethat was threatened with prosecu-

tion over a “tax” matter in themiddle of the Litvinenko row

But what of the dead author’sapparent offense? He wrote a bookabout the September 1999 apart-ment block bombings in Moscowand other cities, blamed on Chechenterrorists, that abruptly stopped af-ter residents in the city of Ryazancaught federal security agentssneaking sacks of explosive andbomb parts into the basement of abuilding, in what the Kremlin laterclaimed was a training exercise

Almost 15 years later, many perts have come to believe Lit-vinenko was right The bombings,which killed nearly 300 Russians,were a state provocation designed

ex-to propel an unknown security reaucrat, Mr Putin, into the presi-dency to protect the outgoingYeltsin circle from a corruption in-vestigation The New York Review

bu-of Books, not normally a fan bu-ofHoover Institution writings, said a

2012 book by Hoover scholar John

Dunlop provided an ing case.” The late Boris Bere-zovsky, the billionaire Yeltsinbacker who took credit for recruit-ing Mr Putin in the first place,held a press conference to endorsethe charge Polls show a sizeableminority of Russians believe it

“overwhelm-And yet have you heard, evenleaked, a U.S intelligence opinionabout whether the murderous ter-rorist attacks were in fact engi-neered by Mr Putin’s own support-ers to assure his rise? You haven’t

And that alone is an amazing tament to Western governments’

tes-need to bury certain facts of Mr

Putin’s presidency

Look, we’re sure nobody in theU.S government feels especiallyclean about the lengths to whichthe West has gone to preserve Mr

Putin as an acceptable partner,least of all President Obama, lastseen patting a Putin factotum onthe sleeve and asking him to as-sure his master that more “flexibil-

ity” would be forthcoming after

Mr Obama’s re-election in 2012

For one thing, Mr Putin’s hosting

of this month’s games wouldhardly be conceivable if Westerngovernments hadn’t long ago ad-opted the habit of ignoring the im-plications of Ryazan

But is it smart? Mr Putin rose bypushing an older mentor into invisi-ble retirement; so did Saddam Hus-sein Mr Putin started a war inChechnya Saddam started a warwith Iran Each regime becameknown for the violence that befellits critics and opponents Saddambecame such a power unto himselfthat his final miscalculation was allbut inevitable—albeit much fostered

by Russian advice that America’s vasion threat was a bluff

in-Who knows in what context itmight occur (Ukraine comes tomind), but Mr Putin would by nowhave every excuse for a similarmiscalculation that could cost Rus-sia and the world dearly

America’s Global Retreat

Revisiting a Pre-Olympic Murder

B Y N IALL F ERGUSON

Never mind the Fed’s

taper, it’s the U.S.

geopolitical taper that

is stirring world anxiety.

Monday, February 24, 2014 THE WALL STREET JOURNAL. europe.WSJ.com

Discovery Prepares to Submit Bid For Richard Desmond’s Channel 5

BUSINESS & FINANCE 18

For Big Oil Companies,

A Return To Returns

HEARD ON THE STREET 28

The View

In Europe Looks Good

To Investors

U.S fund managers are ering their passion for Europe—andnot just as a vacation destination

rediscov-Since the start of the year, ican investors have ramped up theirbets on European stocks, spurred on

Amer-by a brightening economic outlookand low interest rates

The continent’sstock markets be-came a favoreddestination lastyear as the region emerged from abruising recession This year, withU.S stock indexes treading water af-ter a rip-roaring 2013, interest inEuropean stocks has grown further,fund managers say

Investors have sent $24.3 billioninto European equity funds this yearthrough Feb 19, according to fundtracker EPFR Global U.S stockfunds have seen $5 billion in out-flows

In the exchange-traded-fundworld, three of the top four stock-based funds in terms of investor in-flows in 2014 are the VanguardFTSE Europe, the iShares MSCIEMU and the Vanguard FTSE Devel-oped Markets ETFs—all of whichhave heavy exposure to Europe Thethree have seen a combined $4.23billion in new money this year,while $19.1 billion has flowed out ofthe largest U.S stock ETF, the SPDRS&P 500 fund

Blue-chip companies from France

to the Netherlands are getting aclose look from some managers,while other bargain-minded inves-tors are focusing on so-called pe-ripheral nations such as Ireland, It-aly, Spain and Portugal, whosemarkets were hard hit following theEuropean debt crisis of 2011

“Some of the best, cheaper sets are in the periphery of Europe,”

as-said Nigel Hart, manager of theBlackRock International Opportuni-ties Fund, which has $3.5 billion un-der management

The Stoxx Europe 600 index is

up 2.4% this year, compared with a0.7% decline in the S&P 500 index ofU.S companies and a 2.9% drop inthe 30-stock Dow Jones IndustrialAverage

While the so-called core of rope has recovered most of its re-cession-era losses, the peripherystill has a way to go Share indexes

Eu-in SpaEu-in and Italy remaEu-in belowtheir peaks heading into the globalfinancial crisis of 2008, whilebroader European gauges and thosecovering the U.S have recoveredthose peaks

Many European nations arestruggling with high unemploymentand slack demand for goods andservices, but the euro zone’s econ-

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B Y K AITLYN K IERNAN

Europe Lags Behind U.S on 4G

STOCKHOLM—On the barren land of Ưja, on the outskirts of thiscity’s archipelago, Torbjưrn Johans-son is on the front lines of Europe’seffort to make up ground lost to theU.S in cellphone-network invest-ment

is-Mr Johansson, a network

con-tractor for Swedish carrier

Telia-Sonera AB, is testing new

fourth-generation network antennas on theisland—part of the company’s three-year, 15 billion Swedish kronor ($2.3billion) push to upgrade its network

Swedish carriers are aiming toeventually blanket 90% of the coun-try’s landmass in 4G By next year,the companies say, 99% of Sweden’spopulation—which lives mostly incities or other urban areas—willhave 4G, which offers up to 10 timesfaster data speeds, compared witholder network technology

“I’ve got more work than I canhandle,” Mr Johansson said

Sweden and some of its navian neighbors are rare excep-tions in Europe, enjoying 4G cover-age on a par with the super-connected U.S For much of the rest

Scandi-of Europe, network investment bycarriers has lagged behind NorthAmerica and has just barely out-paced investment across Asia

It is a far cry from just over adecade ago, when Europe led theway in mobile connectivity TheContinent’s big players quicklyagreed on a standard technologyand invested heavily in networks tosupport that

Spending on the latest 4G works on both sides of the Atlantickicked off at about the same time,around 2009 But investment in Eu-rope—in the depths of the globaleconomic crisis and on the precipice

net-of its worst recession since WorldWar II—never came close to NorthAmerica

That has translated into a big

discrepancy in 4G availability Cisco

Systems Inc., a U.S network

com-pany, said it estimates that a ter of all North American mobile de-vices were connected to the

quar-country’s 4G network last year InWestern Europe, only 2% of mobiledevices were connected to 4G net-works

Europeans, as a result, are

con-suming considerably smalleramounts of mobile data, comparedwith their U.S counterparts Ciscosaid average Western Europeansconsumed 717 megabytes of traffic amonth this year, half the quantityconsumed by North Americans Eu-ropean consumers’ average dataconnection speeds are also muchlower

Europe remains “between oneand two years behind” the U.S., interms of its 4G rollout, said JohanWibergh, who heads the networkunit of Ericsson, the world’s largestsupplier of network equipment

It wasn’t just economic hardtimes that stood in the way of Eu-rope’s network build-out The morethan two dozen countries that make

up the European Union have takenlonger to issue spectrum needed todeploy the technology And thewider European telecom market ismade up of more than a hundredoperators, many of whom aren’tlarge enough to muster the sizablefunds needed to make the invest-ment A crazy quilt of regulationshave also stymied quick networkrollouts

Strict environmental rules inBrussels, the seat of the EU andhome to diplomats from around theworld, slowed the rollout of the net-work there, for instance Last year,Neelie Kroes, European commis-sioner for the digital agenda,tweeted, “Back in #Brussels and the3G (never mind the #4G!) so bad Ihave to write this on my adviser’sphone Frustrating Avoidable.”

Proximus, the mobile unit of

Bel-gacom SA, Belgium’s biggest carrier,

said last month it would offer itscustomers 4G access at no extracost, including in Brussels ManyBrussels residents still aren’t satis-fied

“What 4G?” said Felicity Raikes,

an EU interpreter, who uses French

carrier Orange SA’s Mobistar

net-Please turn to next page

B Y S VEN G RUNDBERG

Seeking a Connection

Mobile providers in Europe, the Middle East and Africa havehistorically lagged behind those in North America in 4G investment,though they are expected to catch up in the coming years

Estimated annual expenditure on 4G hardware

in North America and EMEA

Sources: Infonetics; Bloomberg News (photo) The Wall Street Journal

2009 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17

$2.5

0.5 0

1.0 1.5 2.0 billion

2009 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 5

0 5 0

2009 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 5

0 5 0

North America EMEA

Nor EME PROJECTIONS

A Vodafone store in London

Italy’s Garment Know-How Is Fading Out

MILAN—The fashion world’s race

to reach ultrarich shoppers is ing some of Italy’s vaunted leatherand garment manufacturers highand dry

leav-A sharp split is dividing Italy’sluxury manufacturing base Thewinners are enjoying rich new con-tracts or even being purchased, as

fashion heavyweights such as LVMH

Moët Hennessy Louis Vuitton SA

are increasingly eager to scoop upthe best Italian manufacturers

But the losers are struggling tosurvive, overwhelmed by the samefactors devouring other Italian man-ufacturing strongholds, like steel,autos and appliances: their smallsize, high labor and energy costs,falling domestic demand and com-petition from low-cost countries It-

aly’s leather and clothing segmentsalone lost 20% and 15% of produc-tion, respectively, since 2007, ac-cording to business organizationConfindustria

More than 500 textile companiesshut down last year, and textilesales are down 13% in five years,said trade association Sistema ModaItalia

Fashion houses have long turned

to Italy’s skilled artisans to producesoft leather bags, finely cut suitsand dresses, and rich cashmere ac-cessories For instance, Italian woolcraftsmen train for years learninghow to finish a cashmere garment,learning how to wash and treat thewool—a process known as folla-tura—so that the matting is justright Overtreating could break fab-rics, causing significant financialloss for a firm That’s why such

skills are critical in handling cious fabrics such as vicuđa, one ofthe rarest and most expensive wools

pre-on the market

Italy has thousands of such sans, very often niche players spe-cializing in specific skills such astanning leather or making silkprints As a result, Italian crafts-manship is a major draw for the big-gest spenders in luxury, such as Chi-nese and Russian buyers

arti-“We’re convinced that Italy hasthe best quality,” said Domenico De

Sole, chairman of Tom Ford

Inter-national, which produces its

expen-sive men’s suits in Italy “But there’salso a marketing factor there Peo-ple just love a ‘Made in Italy’ label.”Luxury heavyweights, who arepushing harder into the higher-pricedproducts that garner the biggest

Please turn to page 18