Know The Laws, Know Your Rights: Europe

Lawyers and technologists face many challenges from the proliferation of Big Data, and one of the most pressing is data privacy. Governments and businesses collect massive amounts and many types of data in ways seemingly unimaginable just a few years ago.

Sunday, September 15, 2013

Off the Charts: Investors in Europe See a Glass Half Full and Rising

Or at least investors seem to believe they are.

A survey of investor sentiment in the euro zone this month moved into positive territory for the first time since the summer of 2011. European stocks have been rising for more than a year, with bank stocks leading the way. The yields on Spanish and Italian government bonds — which were more than five percentage points higher than German bonds’ last summer — now have spreads half that level.

It was last summer that the European Central Bank took steps to get needed cash into the hands of banks, ending the immediate fears of a collapse of the euro zone. But much remains to be done.

The German elections next weekend have delayed a lot of decisions. The widespread assumption is that Angela Merkel will remain chancellor, but it is not clear if the current coalition with the Free Democrats will be able to survive. If not, she may have to turn to the opposition Social Democrats and try to form a grand coalition.

There is also wide speculation about the health of European banks. In the summer of 2012, the European Central Bank took steps to provide low-cost loans to banks to buy bonds issued by their own governments, and some did, particularly in Italy and Spain.

When there are new stress tests next year — conducted for the first time in the same way in all countries across the euro zone — some analysts fear that banks may be forced to hold more capital if they have such bonds. Conceivably, such a requirement may lead the banks to sell such bonds, driving prices down and yields up and damaging the confidence that has been growing.

But none of that has so far held back investor enthusiasm. An index of European bank stocks, shown in the accompanying chart, is up by almost half since the end of 2011, although it remains more than 60 percent below its 2007 peak.

The Sentix measure of investor confidence in the euro countries climbed into positive territory this month for the first time since 2011, and it did so largely because of optimism for the future. The measure is based on questions asked of investors, and it now finds institutional investors more confident than retail investors.

Sentiment regarding current conditions has risen, but it is still negative, according to the survey. But when investors were asked about conditions six months from now, the level of optimism has risen to the highest level since the spring of 2006, well before the recession.

It may be noted that all this enthusiasm has come despite continuing declines in gross domestic product in many countries in the zone, and despite high levels of unemployment. To some extent, it no doubt both reflects the improvements in the stock and bond markets and is a cause of them.

Does all this show foolish complacency? Or does it reflect an awareness that the worst is over for the peripheral countries in the euro zone, with recovery on the horizon? By next summer, we may have the answer.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

This article has been revised to reflect the following correction:

Correction: September 14, 2013

An earlier version of this article incorrectly identified the German party that formed a coalition with the Christian Democrats, Angela Merkel’s party. The coalition is with the Free Democrats, not the Liberal Democrats.

Wednesday, September 4, 2013

No Bounce for Europe in Rebound by Germany

FRANKFURT — Whenever Germany thrived, so did the rest of Europe. But that long-held belief is being questioned by its neighbors, which see evidence that the country is taking off without them.

Despite Berlin’s hefty financial support of the euro zone’s more beleaguered members in the last few years, the economic crisis has corroded commercial ties between Germany and the rest of Europe. Countries like Italy and Spain no longer have the purchasing power they once did, and they trade less with Germany because of it.

Greece, the most distressed country in Europe, is now little more than a German rounding error. German exports to Greece plunged 40 percent from 2008, while Germany imported 9 percent less from Greece. Last year, Greece ranked 44th among German trading partners, just behind Vietnam.

No wonder German companies, cheered on by the government of Chancellor Angela Merkel, have turned their attention to faster-growing places like Asia or the United States.

“Right now it’s a decoupling story rather than a helping-hand story,” said Carsten Brzeski, a senior economist at the Dutch bank ING.

It is not simply an economic issue, but a geopolitical one.

Ms. Merkel is running for re-election this month in a campaign in which one of the few debating points is how many more financial handouts Germany will give to its weaker neighbors. She has made a conscious effort of building closer ties with bigger and faster-growing markets like China. If the Merkel government succeeds in making Germany a bigger global player through trade and investment policy, it not only insulates Germany from European structural woes but also ensures that it remains a global economic force in its own right.

For the rest of the euro zone and the larger European Union, however, unity depends on the sustained energy and commitment of Germany, the wealthiest and most powerful member. The more that Germany sees its long-term interests lying outside Europe, the less certain the future of the entire European project.

“Germany is less willing to play ball,” said Stefano Micossi, director general of Assonime, an Italian business group and research organization. Rather than pulling together, he said, European leaders have been “falling back to mutual mistrust and national solutions.”

On Tuesday, the Organization for Economic Cooperation and Development said that even as Germany resumed growth, the euro zone’s most vulnerable countries were unlikely to follow until sometime next year. European banks remain weak, the group said, while lending — usually considered a prerequisite for economic growth — continues to decline.

The euro zone’s economic future remains heavily dependent on Germany, the biggest market for products like shoes from Italy or Ford minivans made in Spain. German companies like Linde, a large supplier of gases for use in industry and health care, are major employers in Southern Europe.

But Linde’s big growth this year was in the United States, where sales rose 58 percent in the third quarter, to $2.6 billion, thanks to the purchase of Lincare, a company that supplies oxygen to patients in their homes.

The United States has also become a hot market for German companies like Voith, a maker of industrial equipment, which said last month that it expected to profit from a new law intended to encourage construction of hydroelectric power plants. Voith issued a statement calling the new law “terrific news” — no surprise considering that the company is one of the world’s largest suppliers of hydropower equipment.

In addition, China has become the most important market for Volkswagen, which sold 1.5 million cars there in the first six months of this year, more than in Western Europe. Volkswagen is also putting renewed emphasis on North America. In 2011, it opened a factory in Chattanooga, Tenn., that contributed to a 10 percent increase in American sales through June from a year earlier.

Sunday, September 1, 2013

Tourists Wary of Turmoil in the Middle East Are a Boon to Southern Europe

Call it an alternative financial bailout.

As Europe’s peak holiday season draws to a close, Spain and the other countries of Southern Europe hit hardest by the euro debt crisis are reaping the benefits of increased tourism.

Anita Bürgler, a 43-year-old Swiss kite-surfing fanatic, chose this resort town on the Strait of Gibraltar to spend her first-ever Spanish holiday. She heard it has some of the strongest winds in Europe.

In Tarifa, she found the wind-swept coastline that she expected. It might have been just a bit crowded for her taste. The shore is, she said last week, “just very busy, with too many other surfers to really enjoy myself.”

So she and her 45-year-old partner, Urs Baur, who also had never vacationed in Spain, spent much of their two-week holiday enjoying other activities that included whale watching, hiking and a day trip to the picturesque town of Ronda.

But Tarifa has not necessarily seen the last of Ms. Bürgler this year. She said she was almost certain to cancel her annual kite-surfing winter holiday to Egypt’s Red Sea, booked for November, because of security concerns. Instead, she will consider another visit to Tarifa, whose waters will be colder but far less crowded than in August.

Indeed, political turmoil elsewhere around the Mediterranean has benefited Europe’s southern coast. Last week, an association of entrepreneurs in the Canary Islands, the Spanish archipelago off West Africa, forecast that before the end of the year, their region would welcome an additional quarter-million people who had initially planned to escape Europe’s winter cold by vacationing in Egypt but now planned to go elsewhere in response to the military takeover and rioting.

Spain has perhaps been the main tourism beneficiary of the repercussions of events in the Arab world and Turkey, according to travel experts and early estimates. Tourists visiting Spain spent 32 billion euros, about $42 billion, in the first seven months of the year, up 6 percent from 2012 (including spending on transportation), according to data released last Tuesday by Spain’s tourism ministry.

Tourist spending is a small fraction of the $1.3 trillion Spanish economy, but it is a financial bright spot for a country that has not had many in recent years. In the first seven months of 2013, Spain welcomed a record 34 million foreigners, a rise of 4 percent from a year earlier.

British visitors accounted for almost a quarter of the total. But the strongest percentage rises came from tourists from Russia, up more than 30 percent, to 840,000, and the Nordic countries, increasing 18 percent to 2.9 million.

Many analysts now expect the number of foreign tourists visiting Spain in 2013 to breach 60 million for the first time, besting the record of 59.2 million visitors in 2007.

Demand has been strong enough that in some countries, hotels have been able to raise prices. Jürgen Ringbeck, who oversees the transport, tourism and travel practice at the management consulting firm Booz & Company in Germany, said it was striking how far “the Spanish market has been able to capture more demand even by increasing prices.” He said the average cost of a Spanish hotel room had climbed more than 20 percent since 2009, reaching about $70 a night on average this year, which is also above the precrisis level of $67.

“The pricing power of the Spanish market is surprisingly strong,” Mr. Ringbeck said, “which shows that operators have really understood that their major competitors in North Africa are no longer in a position to be very attractive.”

Not all the South European travel markets have pricing power. Greek operators have opted for more aggressive pricing and more package holidays than in the past, said Mr. Ringbeck, who estimated that Greece’s hotel prices were down around 10 percent from last year.

Niki Kitsantonis contributed reporting from Athens and Elisabetta Povoledo from Rome.

Number of Jobless People Declines Slightly in Europe

PARIS — While unemployment remained at record levels in percentage terms, the actual number of jobless people in the euro zone fell slightly in July, according to data published on Friday, offering fresh evidence that Europe’s struggling economy was taking tentative steps toward a recovery.

The tiny improvement in employment — which came alongside declining inflation and a survey showing improved confidence among European consumers and business managers — was welcomed as additional evidence that the worst of the region’s downturn was probably over. Still, officials and economists cautioned that the economic health of Europe remained fragile and the pace of recovery highly uneven within the region, underscoring the challenge for policy makers and central bankers.

“The recent improvements are minimal,” said Laszlo Andor, the European Union’s commissioner for employment. “This is no time for celebration or complacency.”

The jobless rate in the 17 countries that share the euro was 12.1 percent in July, adjusting for seasonal effects, according to a report from Eurostat, the European Union statistics agency. That figure has remained unchanged for several months. A year earlier, it was 11.5 percent.

Eurostat estimated that 19.2 million people in the euro area were jobless in July, 15,000 fewer than in from June.

For all 28 countries in the European Union, the number of unemployed fell by 33,000, to 26.7 million, for a rate of 11 percent. The European bloc expanded from 27 members to 28 on July 1, when Croatia joined.

Joblessness in the euro zone has been marching higher almost without interruption for more than five years, declining only briefly at the beginning of 2011. The July data showed the first back-to-back monthly decline in the number of jobless since April 2011.

But while some countries, like Germany, Austria and the Netherlands, have managed to weather the crisis with relatively little human cost, their Southern European neighbors — crippled by the euro zone’s debt crisis — still confront devastating levels of joblessness, particularly among the young.

“Against the background of what we’ve seen over last 18 months, yes, this is good news,” Carsten Brzeski, an economist at ING Bank in Brussels, said of the employment figures. “But tell that to the people who are still unemployed in places like Spain.”

The figures released on Friday again demonstrated the large disparity in growth and unemployment rates.

Unemployment in Germany stood at 5.3 percent in July, while Austria’s rate was 4.8 percent — less than one-fifth the levels recorded in Greece and Spain.

Andrea Broughton, principal research fellow at the Institute for Employment Studies in Brighton, England, emphasized the high levels of youth unemployment in many parts of Europe. In Greece, where the jobless rate is already among Europe’s highest at nearly 28 percent, youth unemployment was 62.9 percent in May, the latest month available for that country. In Spain and Croatia, more than half the young people remain out of work.

Nonetheless, Mr. Brzeski of ING said there were growing signs that Europe’s downturn had bottomed out and that structural reforms introduced in Spain, Portugal and other pockets of Europe’s “periphery” had begun to bear fruit.

He pointed to the European Commission survey of business and consumer confidence for August, which was also released on Friday, showing that optimism among company managers had reached its highest level in two years.

“Unit labor costs in many peripheral countries really have been improving,” he said. There was a nascent sense among businesses in those countries, he added, that “finally, something has been done and it’s showing some effect.”

The confidence survey, conducted by the executive agency of the European Union, showed that sentiment was improving not only in relatively healthy economies like Germany and the Netherlands but also in Italy and Spain, which have been among the hardest hit by the downturn.

The index of sentiment within the euro zone, based on factors including business orders, industrial confidence and hiring plans, rose 2.7 points to 95.2, the European Commission said. Across the European Union, the measure rose 3.1 points to 98.1.

Consumer confidence also improved, thanks mainly to brighter expectations about the economic situation over the next 12 months. Expectations about employment, however, remained unchanged.

Europe’s stagnant economy continued to keep a lid on prices. Eurostat on Friday forecast that annual consumer price inflation would decline to 1.3 percent in August from 1.6 percent a month earlier, largely because of a drop in energy prices.

This low-inflation trend, economists said, provides useful ammunition to the European Central Bank, which remains reluctant to raise its benchmark interest rate from a record low of 0.5 percent.

“As long as inflation remains well behaved and clearly below 2 percent,” Mr. Brzeski said, “I think the E.C.B. can sit very comfortably where it is right now.”

Thursday, August 8, 2013

DealBook: Bankers’ Pay Deferrals Are Tougher in Europe

Monday, August 5, 2013

Off the Charts: Jobs Recovery in Europe Is Also Painfully Slow

The decline was not large — 24,000 jobs, or 0.1 percent of the 19.3 million people out of work in May. But it was the first month in more than two years that there had been a decline.

Some, but not all, of that decline was in Germany, where unemployment has been falling even as it rose in other countries. Other euro zone countries that reported declines during the month were Austria, Finland, Ireland, Italy, Portugal, Slovenia and Spain. Two of the 17 countries in the zone, Estonia and Greece, have yet to report.

The accompanying charts show how the number of people unemployed has risen or fallen since March 2008, the month that overall unemployment in the euro zone hit its recent low. The charts also show the trends in two major countries outside the zone, Britain and the United States, where unemployment had bottomed out earlier. In the United States, the low was reached in October 2006, more than a year before the recession officially began.

It should be noted that the number of unemployed workers does not exactly equate to the number of people without jobs, which may be changing at a faster or slower rate. Discouraged workers who conclude they cannot get a job can drop out of the labor force, and thus not be counted. But when things begin to improve, those people can begin to search for employment and be newly counted among the unemployed.

Perhaps the most striking thing about the charts is how little improvement there has been in most of the countries shown. Germany is the striking exception to that, of course, and the number of unemployed in the United States has been falling steadily, if slowly, since 2010. On Friday, the government reported that the American unemployment rate fell to 7.4 percent in July, the lowest since December 2008. The number of people out of work in Britain fell in 2012 but has stabilized in recent months.

Among the most troubled countries in the euro zone, only in Ireland has there been a significant decline in the number of unemployed workers, although the figure remains nearly one and a half times as high as it was in 2008. In Greece, the number out of work appeared to stabilize late last year, but it began to rise again this year and was at the highest level yet in April, the last month for which data was available.

Perhaps the most extraordinary development has been in the Netherlands, where the number of unemployed workers has begun to rise rapidly after rising relatively slowly early in the credit crisis. Nonetheless, the latest unemployment rate for the Netherlands is only 6.8 percent, a figure that is lower than that of either the United States or Britain and about half the rate in Ireland.

For some countries, the reported unemployment rates remain very high. Although the number of unemployed workers in Portugal was reported to have fallen in both May and June, the unemployment rate remains at 17.4 percent, not far below the high of 17.8 percent reached in April. In neighboring Spain, two months of falling unemployment have reduced the rate by only 0.2 percentage points, to 26.3 percent. At least Spain no longer ranks as having the highest unemployment rate in the euro zone, as it did at the end of 2012. Greece, at 26.9 percent at last report, has regained that unfortunate position.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Sunday, July 28, 2013

Europe and China Agree to Settle Solar Panel Fight

The settlement essentially involves setting a fairly high minimum price for sales of Chinese-made solar panels in the European Union to try to prevent them from undercutting European producers. Those producers accused Chinese manufacturers of benefiting from enormous loans from state-owned banks and other government assistance that enabled them to charge prices that would otherwise be uneconomical.

“We have found an amicable solution that will result in a new equilibrium on the European solar panel market at a sustainable price level,” Karel De Gucht, the European trade commissioner, said in a statement.

The deal immediately met with ferocious criticism from the European manufacturers that had filed the complaint, and it complicates a similar dispute between the United States and China.

Mr. De Gucht’s decision in June to carry out his threat to impose tariffs on solar panels from China generated significant fears within the union about retribution from China. Chancellor Angela Merkel of Germany called for further negotiations to avoid harm to German exporters. European importers of solar products from China also opposed the tariffs.

At the time, Mr. De Gucht said he had been left with no choice but to impose the tariffs since his investigators found a systematic effort by Chinese companies to sell solar panels in Europe below the cost of making them, a practice known as dumping.

On Saturday, officials at the European Commission said they could not give details of the deal, including the price that Chinese exporters would pay to sell their panels in Europe, until the arrangement had been formally approved by the commission. But a European Union official, who spoke on condition of anonymity because the deal had not yet been formally approved, said the two sides had agreed to a minimum price of 0.56 euros per watt (74 cents), which would base any potential surcharge on the amount of electricity generated by each imported panel.

The European solar manufacturers who lobbied for tougher action against the Chinese exporters on Saturday promised to sue over the settlement.

The agreement “is contrary in every respect to European law,” said Milan Nitzschke, the president of EU ProSun, an industry group. A minimum price of 0.55 to 0.57 euros was at the level of “the current dumping price for Chinese modules,” the group said in a statement.

The arrangement would cover exports from 90 of about 140 Chinese exporters that were examined during the investigation, and that represent 60 percent of the panels sold in Europe, the government official said. Those 90 companies would no longer face tariffs that were put in place in June. Chinese exporters that did not agree to the terms will still face tariffs that are set to rise to 47.6 percent on Aug. 6 from the current level of 11.8 percent, the official said.

The Chinese government hoped from the start of the trade case with the European Union for a negotiated settlement instead of a legal battle. This deal comes as a relief, said He Weiwen, the co-director of the China-United States-European Union Study Center at the China Association of International Trade in Beijing.

The European settlement with Beijing in some ways complicates a similar dispute between the United States and China. The United States Commerce Department imposed final anti-dumping and anti-subsidy tariffs last spring on imports of solar panels from China. China responded on July 18 that it was preparing to impose tariffs of more than 50 percent on polysilicon, the main material for solar panels, on imports from the United States and South Korea.

The United States began trying in early summer to arrange a comprehensive deal among Beijing, Brussels and Washington that would set new global trade arrangements for solar panels in exchange for the removal of the American tariffs and the preliminary European tariffs. But faced with a complex process in the United States for removing tariffs once the Commerce Department has made them final, the European Union pushed ahead with its own negotiations with China, a Senate aide with detailed knowledge of the issue said on Friday.

“The administration has been doing the right thing on this, pushing for talks and trying to get a joint settlement with Europe, but the Europeans have not had the same attitude and instead are pursuing talks with China independently of the U.S., which has stalled progress on U.S.-China talks,” said the aide, who spoke anonymously because of the diplomatic sensitivity of the issue.

The Office of the United States Trade Representative, which is part of the White House, had no immediate response to the European deal, which was announced shortly before dawn in Washington.

Solar panels represent more than 6 percent of China’s exports to the Continent, making them one of the largest Chinese exports to the European Union. In 2011, Chinese exports of panels and their main components to the European Union were worth about 21 billion euros or $27.4 billion.

China grew from a tiny player in the global solar panel market five years ago to the world’s dominant producer now through a program of enormous lending by state-owned banks and a wide variety of manufacturing incentives by local and provincial governments. That has allowed Chinese producers to drive down the price of panels by three-quarters over the same period.

But Chinese manufacturers have expanded faster than the market, and the largest of them now face severe financial difficulties.

James Kanter reported from Brussels and Keith Bradsher from Hong Kong.

Wednesday, July 24, 2013

McDonald's Signals Weak 2013 as U.S. Rivals, Europe Economy Bite

The world's biggest restaurant chain by sales reported a lower-than-expected quarterly profit and said it expects global same-restaurant sales in July to be relatively flat, sending its shares down almost 3 percent in midday trading.

"Based on recent sales trends, our results for the remainder of the year are expected to remain challenged," Chief Executive Don Thompson said in a statement.

Wall Street analysts had expected McDonald's business to pick up in the middle of this year as food inflation and other pressures ease.

"I would have liked to have seen them be a little more positive on things," Edward Jones analyst Jack Russo said.

The latest quarterly results from the seller of Big Mac hamburgers, french fries and Happy Meals heaps pressure on Thompson, who was promoted to the CEO position in July 2012, when the chain was enjoying a multi-year run of rising sales and profits.

Still, Russo said Wall Street would likely give the well-regarded McDonald's CEO a pass for a bit longer: "I don't see an operator in the United States or Europe really tearing it up."

Graphic on McDonald's results: http://link.reuters.com/xut79t

In the second quarter ended June 30, global sales at McDonald's restaurants open at least 12 months rose 1 percent, in line with analysts' expectations.

McDonald's said second-quarter same-restaurant sales in the United States were up 1 percent, missing the average analysts' forecast of a 1.5 percent increase.

The company is fighting to boost sales as smaller U.S. rivals such as Wendy's Co and Burger King Worldwide Inc debut attention-grabbing food, like bacon sundaes and limited-time offers.

Shares of McDonald's were trading at down 2.8 percent at $97.45, while stock in Wendy's was up 1.1 percent at $6.76.

Wendy's, known for its thick Frosty shakes and square hamburgers, recently launched a Pretzel Bacon Cheeseburger that appears to be chain's best-selling new product in at least a decade.

"This pressure on McDonald's could last over the third quarter as a whole, and perhaps beyond, if Wendy's adds its Pretzel Bacon Cheeseburger as a permanent menu item - which looks increasingly likely," Janney Capital Markets analyst Mark Kalinowski said.

McDonald's, which still dominates the fast-food industry, has been offering late-night breakfasts, tweaking other menus and advertising value-priced meals to bring in more traffic.

The chain said its indulgent new line of Quarter Pounder hamburgers - including a bacon habanero ranch version - have performed well. It recently axed lackluster sellers like premium Angus burgers and its Fruit & Walnut Salad while also catching up with rivals by introducing an egg white version of its popular McMuffin breakfast sandwich.

In Europe, same-restaurant sales were down 0.1 percent in the quarter - the third consecutive quarter of declining sales in the region. In the Asia/Pacific, Middle East and Africa (APMEA) region, second-quarter sales fell 0.3 percent.

Analysts polled by Consensus Metrix had forecast declines of 0.1 percent in Europe and 0.2 percent in APMEA. They expect Wendy's to report a 1.1 percent gain in second-quarter sales.

McDonald's second-quarter net income rose 3.7 percent to $1.40 billion, but earnings per share of $1.38 missed analysts' estimate by 2 cents, according to Thomson Reuters I/B/E/S.

Nevertheless, McDonald's executives said the chain is gaining share in the so-called informal eating out category, which is dominated by fast-food operators. Still, they warned that significant coupon and voucher discounting is keeping them from raising prices to offset higher costs.

Bill Smead, a portfolio manager at the Smead Value Fund in Seattle, holds shares in McDonald's and is betting the iconic and well-run chain will see better days ahead.

The company is in a normal down cycle after benefiting when the global recession forced cash-crunched diners to trade down to McDonald's from pricier chains to save money. It also got a big bump from profit-boosting new drinks like lattes and smoothies, he said.

"McDonald's is an emotional and legal addiction in many cases. You went there, your kids go there, your grandkids go there," Smead said.

(Reporting by Siddharth Cavale in Bangalore and Lisa Baertlein in Los Angeles; Editing by Saumyadeb Chakrabarty, Robin Paxton and Sofina Mirza-Reid)

Wednesday, July 3, 2013

DealBook: Europe Accuses 13 Banks of Blocking Entrants to Default Swaps Market

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Sunday, June 23, 2013

Unable to Reach Deal, Europe Plans New Talks on Bank Rescues

“We ran out of time,” Michael Noonan, the Irish finance minister, told reporters as he left the meeting here. “There are still core issues outstanding, so we’ll need a full meeting next week, and there’s no guarantee it will reach conclusion.”

Diplomats said the next attempt to reach a deal was scheduled for Wednesday — a day before the leaders of the European Union’s 27 member states gather for a summit Brussels, their last scheduled meeting before the summer. The leaders had been expected to endorse the finance ministers’ decision.

The failure to reach a deal could further unsettle investors who were already jittery about the lingering recession in the euro zone, turbulence on global markets, renewed political instability in Greece, and hints that Cypriot leaders were balking at their bailout agreement.

The marathon effort, involving 18 hours of talks beginning Friday morning, was aimed at breaking the so-called doom loop, in which struggling governments take their states deeper into debt to save their banking systems, only to face sky-high sovereign borrowing costs.

The rules would specify the order in which investors and creditors have to absorb losses so taxpayers do not have to bear the burden.

A deal could also help prevent a recurrence of the chaos that ensued during a bailout for Cyprus in March, when governments and international lenders argued over how to impose losses on investors in the country’s troubled banks.

The tools would become important building blocks in the future for a possible banking union, which includes a single supervisor under the European Central Bank overseeing about 150 of the bloc’s largest lenders. It is supposed to go into force in the middle of next year.

A day earlier, as part of the effort to address the banking issue, the 17 ministers from the euro area agreed to allow a rescue fund, the European Stability Mechanism, or E.S.M., to pump money directly into failing banks during the second half of next year.

But on the second day of talks, as ministers from the 10 remaining non-euro countries in the European Union joined the meeting, there was a deadlock over how to stop disorderly bank bailouts from turning into national fiascos.

One of the most sensitive issues was a divide between countries using the euro, and those remaining outside the single currency, was where losses should fall when banks fail, said Mr. Noonan. “Those countries which aren’t in the euro need greater flexibility because they haven’t access” to the shared rescue fund.

France and Germany, which are both members of the euro group of countries, were also divided on that issue. France sought more leeway to access the shared European mechanism while Germany resisted, said diplomats who spoke on condition of anonymity.

The German stance, which was shared by the Dutch, underlined how some northern European countries want to ensure that bank bailouts remain a national responsibility as much as possible, and how they remain determined to resist creating a lender of last resort that could expose them to losses incurred by other parts of the bloc.

For much of the day, ministers were divided over how, and whether, to allow countries discretion to protect certain classes of creditors.

The worry among some countries like Britain was that automatic losses for some creditors could set off fears of losses at other institutions, which could start bank runs. But countries like Spain wanted to ensure that bank investors do not flee to more prosperous countries like Germany, where mechanisms for resolving bank problems might be better capitalized and could be used to shield creditors from losses.

A proposal put forward by the Irish delegation during the negotiations would have given countries the flexibility to choose where losses would fall, as long as 8 percent of a failing bank’s total liabilities were wiped out first.

But that proposal failed to gain sufficient traction. Sweden protested that the figure was too high. The Dutch and the Germans said the Irish figure was too low, and they complained it still could induce risky behavior if bankers were overly confident of relying on mechanisms like national bailout funds to come to their rescue.

Friday, June 21, 2013

U.S. and Europe to Start Ambitious but Delicate Trade Talks

Mr. Obama said that the first round of talks would begin next month in Washington between the United States and the 27-nation Europe Union. “The U.S.-E.U. relationship is the largest in the world — it makes up almost half of global G.D.P.,” Mr. Obama said, referring to gross domestic product. “This potentially groundbreaking partnership would deepen those ties.”

But President François Hollande of France expressed disbelief at comments José Manuel Barroso, the European Commission president, made over the weekend. In an interview, Mr. Barroso had criticized as “reactionary” France’s insistence on protecting its film and television industries as a condition of supporting the trade negotiations.

“I do not want to believe that the president of the European Commission could have made the statements about France, or even about the artists, that were made,” Mr. Hollande said, according to the Web sites of several French news organizations.

Mr. Hollande did not appear in a media tent here at the Lough Erne Resort when Mr. Obama and Mr. Barroso — with Herman Van Rompuy, president of the European Council, and David Cameron, the British prime minister — announced the timing of the trade negotiations. French reporters said Mr. Hollande was busy preparing for his meeting with President Vladimir V. Putin of Russia.

Aside from trade, the two-day Group of 8 meeting was likely to be dominated by the civil war in Syria. Other financial issues on the agenda were measures to clamp down on tax evasion and the legal ruses multinational companies use to limit their tax liabilities.

Mr. Cameron, the host of the meeting, was by far the most effusive of the leaders who spoke about their trade ambitions. “We’re talking about what could be the biggest bilateral trade deal in history, a deal that would have a greater impact than all the other trade deals on the table put together,” he said.

A trade pact between the United States and the European Union has long been an ambition of policy makers. According to the European Commission, the executive arm of the bloc, such a deal would allow European companies to sell an additional 187 billion euros, $250 billion, worth of goods and services a year to the United States.

The angry French response highlighted the delicacy of the negotiations, which will aim to reduce trans-Atlantic tariffs and streamline regulations to stimulate economic growth in the United States and Europe.

Last Friday, after a campaign by French artists and politicians, European Union trade ministers agreed to accede to France’s demands to protect the audiovisual sector.

In his interview after the agreement, Mr. Barroso said France’s Socialist government was advocating an “anti-globalization agenda” that was “completely reactionary.”

Mr. Barroso’s comments were described as “scandalous and dangerous” in a statement on Monday from the French Socialist Party.

In addressing reporters on Monday, Mr. Barroso took no questions and did not comment on the French reaction.

Speaking in Brussels, Olivier Bailly, a spokesman for the European Commission, said that Mr. Barroso’s comments had referred not to the French government but to those who had “made personal attacks” against him before the negotiations. Mr. Bailly did not identify them.

In response to the French objections, some Europeans worry that the United States will seek to exclude financial services from the talks, reducing their scope significantly.

Mr. Obama acknowledged those concerns. “There are going to be sensitivities on both sides,” he said. “There are going to be politics on both sides. But if we can look beyond the narrow concerns to stay focused on the big picture — the economic and strategic importance of this partnership — I’m hopeful we can achieve the kind of high-standard, comprehensive agreement that the global trading system is looking to us to develop.”

This article has been revised to reflect the following correction:

Correction: June 17, 2013

Because of an editing error, an earlier version of this article stated incorrectly the timing of an interview with José Manuel Barroso. The interview was on Friday before trade ministers agreed to accede to France’s demands to protect the audiovisual sector, not after the agreement.

Wednesday, June 19, 2013

Europe Fines Drug Companies for Delaying Generics

On Wednesday, the European Commission fined a Danish pharmaceutical company and a number of generic producers a total of 146 million euros, or $195 million.

The commission said that Lundbeck of Denmark colluded with companies like Ranbaxy of India and Merck of Germany in 2002 and 2003 to delay market entry of a less expensive generic version of a blockbuster antidepressant called citalopram. Joaquín Almunia, the European commissioner for competition, said that Lundbeck also destroyed significant quantities of the low-cost version of the drug.

“All this occurred at the expense of patients who were deprived of access to cheaper medicines,” Mr. Almunia said at a news conference on Wednesday. “It also harmed our public health systems, who for a longer period had to artificially bear the costs of an expensive medicine and one of the most widely prescribed antidepressants.”Lundbeck said it had done nothing wrong and would appeal the decision. “The company acted transparently and in good faith in trying to protect our patents,” Lundbeck said in a statement. “Upon entering the agreements, they were all reviewed by external antitrust experts.”

The case mirrors a decision on Monday by the United States Supreme Court, which empowers the Federal Trade Commission to sue drug makers that engage in so-called pay-for-delay tactics. The Supreme Court decision is likely to increase the number of generic drugs, in that way benefiting consumers. The F.T.C. said that pay-for-delay deals cost Americans $3.5 billion a year in higher drug prices.

Many European governments with socialized medical systems buy or help to pay for prescription drugs used by citizens, which means that the blocking of generics affects those nations’ budgets. Mr. Almunia said that when generic versions of citalopram became available in Britain, during the second half of 2004, prices there dropped by 90 percent.

The scale of savings in Britain helped to ensure that “public health systems can remain economically sustainable in these times of difficult budgetary constraints,” Mr. Almunia said. Peter Kaplan, a Federal Trade Commission spokesman, would not comment on the European decision, but he indicated that officials had been coordinating on the issue of drug pricing. “F.T.C. staffers have had productive policy discussions with their counterparts in the E.U. on the pay-for-delay issue, which is a longstanding enforcement priority at the F.T.C.,” Mr. Kaplan said.

Similarly, European Union officials said their decision on Wednesday was not timed to follow the Supreme Court case.

Early this year, the commission accused the drug giants Johnson & Johnson and Novartis of colluding to delay the availability of a generic version of fentanyl, a drug often used to ease severe pain. A year ago, the commission accused the French pharmaceutical company Servier and competitors of delaying the generic entry of perindopril, a cardiovascular medicine. And in 2011, the commission opened an investigation into whether the American pharmaceutical company Cephalon and the generic maker Teva of Israel hindered the entry of the generic version of modafinil, used for the treatment of certain types of sleeping disorders.

Those cases still are pending.

In the Lundbeck case, Mr. Almunia’s office said that various generic makers colluded with the Danish company, agreeing to not enter the market in return for “substantial payments and other inducements from Lundbeck amounting to tens of millions of euros.” Commission officials said that they had found documents referring to a “ ‘club’ being formed and ‘a pile of $$$’ to be shared among the participants.”

The European Commission fined Lundbeck 93.8 million euros, which amounts to roughly 4.6 percent of its 2012 sales. The regulator can fine companies up to 10 percent of annual sales.

Tuesday, May 28, 2013

Europe and China Trade Talks End Bitterly

The European Union accuses Chinese firms of selling solar panels below cost in Europe, a practice known as dumping, and has already proposed antidumping tariffs of nearly 50 percent on Chinese solar panel shipments. That is one of the largest categories of Chinese exports to Europe and worth about $27 billion a year.

But Germany’s economy minister said that his country had informed the European Commission, which is the executive branch of the European Union, that it opposed proceeding with the solar panel tariffs. If a majority of the European Union’s 27-member states oppose tariffs during the current consultation period, then the commission could be forced to abandon the tariffs. But that could risk undermining the commission’s long-term ability to negotiate trade deals on behalf of the bloc.

Zhong Shao, China’s vice minister of commerce and chief international trade representative, denounced the European Commission for not reaching a deal at the talks, which were held in Brussels.

The commission’s plan to impose tariffs on Chinese solar panels starting on June 6, together with the commission’s preparations to begin a similar trade case against Chinese exports of wireless communications gear, “would seriously hurt the Chinese industries and workers concerned and seriously sour the climate on bilateral trade and economic engagement,” he said in a statement.

He added, “Such practices of trade protectionism are not acceptable to China,” and asked that the European Union delay the tariffs.

European officials have said repeatedly that they face statutory deadlines for actions in trade cases and have little or no discretion to delay action.

The commission has been discussing the tariffs with member governments; Germany, with large exports to China that could be vulnerable to retaliation by Beijing in any broader trade conflict, has been particularly vocal in calling for a negotiated deal.

Karel De Gucht, the European Union’s trade commissioner, issued an unusually blunt complaint late Monday that China was bypassing the European Union’s leaders by going to member governments. Mr. De Gucht “also made it very clear to the vice minister that he was aware of the pressure being exerted by China on a number of E.U. member states,” said John Clancy, Mr. De Gucht’s spokesman.

Mr. Clancy added, “It is the role of the European Commission to remain independent, to resist any external pressure and to see the ‘big picture’ for the benefit of Europe, its companies and workers based upon the evidence alone.”

The United States has already imposed antidumping and antisubsidy tariffs totaling about 30 percent on Chinese solar panels. The Obama administration has recently decided to seek its own negotiated settlement with China to replace the tariffs. Such a settlement could take the form of setting high minimum prices for Chinese exports to the United States, a ceiling on the volume of exports, or both.

While Washington, Brussels and Beijing are all saying now they want a negotiated settlement, Chinese solar companies and their many local government patrons are divided on what a settlement should look like.

James Kanter contributed reporting from Brussels.

Wednesday, May 15, 2013

Europe Raids Oil Companies in Price Manipulation Inquiry

Investigators descended on some European offices of BP, Royal Dutch Shell and Platts, a division of the McGraw-Hill Companies that specializes in providing pricing for the oil industry. European authorities are looking into whether the companies may have “colluded in reporting distorted prices” in an effort “to manipulate the published prices of a number of oil and biofuel products.”

All of the companies said they were cooperating with the inquiry.

Shell said it was “assisting the European Commision in an enquiry into trading activities.” A spokesman said that the company’s offices in Rotterdam and London were “visited.”

Platts said that the European Commission had “undertaken a review” at its offices, at Canary Wharf in London. The raiders also visited BP’s oil trading operations on the lower floors of the same building. BP said in a statement the the company was “subject to an investigation.”

Regulators in Europe and the United States have long been worried about the system by which oil and gas prices are set, which can affect the prices consumers pay as well as costs for airline and trucking companies. The concerns reached a frenzied pitch in 2008 when oil prices hit record highs and then quickly plunged. Lawmakers in the United States and elsewhere questioned whether the prices were being distorted.

Authorities are focused in part on the price reporting system for oil and other petroleum products, which is dominated by a small group of companies like Platts. Such companies determine prices by polling traders and using other industry data.

In recent years, Platts has instituted a so-called electronic window through which a significant amount of oil is traded these days. At the end of the day, Platts determines prices based on the trades that go through this system, rather than by simply relying on polling companies.

There are concerns in the industry that companies could distort the prices through a blizzard of last-minute trades. “If you want access to liquidity you are forced to use the window,” said a senior oil trader. But he also said that the window, in theory, should be more accurate than prices determined just by polling traders because the prices were determined by actual trades.

The benchmarks, notably Brent crude, are enormously influential. Much of the world’s oil, particularly outside of the United States, is priced in relation to Brent, which is made up of a basket of North Sea crudes. These benchmarks are also often used in the large futures and derivatives markets.

As production in the North Sea has dwindled, the Brent price has been based on lower volumes of oil, prompting fears that it could be manipulated, possibly by the major players in the region. The Brent price is actually determined through assessing prices of a blend of four North Sea crudes.

In recent years, various regulatory agencies have investigated price setting but seem to have come up with little evidence of manipulation. People in the industry say, however, that the controversy around both oil and gas prices has made companies increasingly reluctant to supply prices for fear of becoming the targets of regulators or lawsuits.

In 2010, the Group of 20 economically most developed nations asked the International Organization of Securities Commissions to look into the potential for manipulation and whether tighter regulation was needed. After a two-year investigation, the price reporting agencies last fall agreed to adopt a series of principles to deal with conflicts of interests and other issues.

An 18-month trial period is under way. Compliance is to be monitored by an independent auditor. If the companies don’t go along, regulators may bar them from providing pricing benchmarks to exchanges, which is a source of revenue.

This article has been revised to reflect the following correction:

Correction: May 14, 2013

An earlier version of this article misstated the day of the raid. It was Tuesday, not Thursday.

Monday, May 6, 2013

In Europe, Growing Concern Slovenia Is Next to Need Bailout

The rewards of success included an imposing mountainside retreat and frequent mention of his name as a possible future finance minister of this small, idyllic Alpine country.

Now, though, Mr. Kordez stands convicted of forgery and abuse of office for financial dealings as Merkur struggled under a mountain of debt.

“My mistake and the mistake of the banks was to vastly underestimate the risk,” Mr. Kordez, 56, said in a recent interview at his home near the picturesque town of Bled, with a view of Slovenia’s highest peak. He awaits a decision later this month on an appeal of his conviction, which could send him to prison for five years.

As fears grow that Slovenia could follow Cyprus and become the sixth euro zone country to seek a bailout, his rise and fall have come to symbolize the way easy and cheap credit, combined with Balkan-style crony capitalism and corporate mismanagement, fueled a banking crisis that has unhinged a country previously praised as a regional model of peaceful prosperity.

The recent bailout of Cyprus at a cost of €10 billion, or $13 billion, which included stringent conditions forcing losses on bank depositors, has focused minds in Ljubljana, the Slovenian capital. Slovenia’s struggling banking sector is saddled with about €6.8 billion worth of nonperforming loans, about one-fifth of the national economy. Slovenia is now in recession, and the gloom across the euro zone shows little sign of abating. A European Commission forecast released Friday said that France, Spain, Italy and the Netherlands — four of the five largest euro zone economies — will be in recession through 2013.

Last Thursday, Slovenia bought time by borrowing $3.5 billion on international markets. That was two days after Moody’s Investors Service cut the country’s credit rating to junk status, citing the banking turmoil and a deteriorating national balance sheet. Analysts said the bond sale would probably enable the government of the new prime minister, Alenka Bratusek, to stay afloat at least through the end of the year.

The Cypriot debacle has shown how bailing out even a small country can damage the credibility of the euro currency union. But Slovenia, with two million people, insists that it is not Cyprus and will not seek emergency aid.

“For the time being, I have a sound sleep,” Ms. Bratusek, the 42-year-old prime minister, said in a recent interview.

This week, on Thursday, Ms. Bratusek, only a little more than a month in office, is expected to present a financial turnaround plan to the European Commission, the executive arm of the European Union. She said that privatizing Slovenia’s largely state-owned banking sector was a priority, along with creating a “bad bank” to take over nonperforming loans.

Her government, she said, will also unveil plans by July to sell the country’s second-largest bank, Nova Kreditna Banka Maribor, along with two large state companies that she declined to specify. The sales could raise up to €2 billion, she said.

Ms. Bratusek, who once headed the state budget office at the Finance Ministry, said Slovenia’s government debt, which analysts say rose from about 54 percent of gross domestic product to around 64 percent with last week’s bond sale, still ranked at the lower end of that scale in the euro area.

But the 6 percent interest rate Slovenia offered on the 10-year bonds in last week’s debt sale, at a time when some euro zone countries are enjoying historically low borrowing costs — Germany’s equivalent bond is trading below 1.2 percent — might only add to the country’s financial problems.

Mujtaba Rahman, director of Europe at Eurasia Group, a political risk consulting firm, said the new financing could backfire if it lulled the government into laxity about making vital structural changes.

“The new financing was not a vote of confidence in the Slovenian government or in the economy, but rather reflects investors attracted by high bond yields,” Mr. Rahman said. “A bailout could still prove inevitable.”

What went wrong in Slovenia? The country, wedged between Italy, Austria, Hungary and Croatia, was considered the most promising among the 10 new European Union entrants when it joined in 2004. That was 13 years after it declared independence from Yugoslavia, avoiding a bloody Balkan war that had swept up other countries in the region.