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MOVIE MILESTONE SUZY MENKES A NEW DIRECTION »KATHIMERINI A FRESH ANGLE AFTER‘SIDEWAYS’ INSIDE: Greece’s leading newspaper I English Edition ON JEWELRY PAGE 13 I CULTURE PAGE 9 I SPECIAL REPORT International Heralb Sribune FRIDAY, NOVEMBER 11,2011 THE GLOBAL EDITION OF THE NEW YORK TIMES GLOBAL.NYTIMES.COM W hat banks Pulling back once saw as from brink, safe has now Italy looks to turned toxic a technocrat PARIS ROME Stung in subprime mess, Impasse shows signs lenders saw euro debt of cracking; Berlusconi as a profitable haven exit may be accelerated BY LIZ ALDERMAN BY RACHEL DONADIO AND SUSANNE CRAIG Italy pulled back from the brink Thurs­ As the bets that European banks day as lawmakers seemed poised to wagered on U.S. m ortgage investments usher out Prime Minister Silvio Ber­ went bust a few years ago, bankers piled lusconi and replace his government into what they saw as a safe refuge: with a cabinet of technocrats, most bonds issued by countries in Europe’s likely led by Mario Monti, a former seemingly ironclad monetary union. European Commissioner. Now, the intractable financial and eco- A day after Italian bond yields hit 7.4 percent, raising fears of an Italian de­ NEWS ANALYSIS fault that could tear apart the euro zone and threaten the globed economy, market nomic crisis washing over the Continent pressure eased as it became apparent has turned European sovereign debt in­ there was a break in the political impasse to the new toxic asset, ushering a wave over what comes after Mr. Berlusconi. of uncertainty into the global financial Meanwhile, in Greece — until re­ markets not seen since the demise of the cently Europe’s most closely monitored Wall Street investment firm Lehman sick man — political jockeying over who Brothers more than three years ago. would lead the country ended where it Today, the troubles that ignited in had began, with the selection of Lucas Greece have caught fire in Italy, despite Papademos, a reserved economist and a frantic efforts by European politicians former vice president of the European to contain them. Banks face tens and Central Bank. possibly hundreds of billions of euros in While it was much too soon to predict THE ASSOCIATED PRESS losses on loans to countries that use the the dawn of a new era of politics along James Murdoch in London on Thursday after his second appearance before British lawmakers investigating the phone hacking scandal. Mr. Murdoch largely held to his original account. euro as their currency. They have been the Mediterranean, the trend in both scrambling to reduce their holdings of countries seemed clear: the rise of tech­ an investment that, like triple-A-rated nocrats. Both men are cut from distinctly subprime mortgage bonds, were once different cloth than their immediate pre­ thought to be bulletproof. decessors. Mr. Papademos succeeds the Murdoch son gets a tougher grilling “ When people started buying more scion of a political dynansty, and Mr. European sovereign debt, there was not Monti, if he is named, will replace a flam­ a cloud in the sky,” said Yannis Stourn- boyant billionaire more famous for his escapades than his governance. lu h u o n shockingly uninquisitive or strangely but accused two former underlings, tween Mr. Murdoch and his father, aras, director general of the Foundation cavalier about his corporation’s money. whose accounts directly contradicted Rupert, the company’s chairman. for Economic and Industrial Research The once-unstoppable Mr. Berlusconi During two and a half hours of his, of lying about it. Meanwhile, at least 16 former employ­ in Athens. Now, he said, “ this crisis is had initially pledged to step down as News Corp. deputy chief forensic, skeptical and even rude ques­ Much was riding on how Mr. Murdoch ees have been arrested, including two going to last because the perceptions of soon as the Italian Parliament passed expresses regret for tioning from a parliamentary panel on handled the lawmakers’ questioning, in­ former editors of The News of the World risk have changed dramatically.” austerity measures demanded by the Thursday, Mr. Murdoch, the 38-year-old cluding his personal credibility and the (none has yet been charged) and a How European sovereign debt be­ European Union. But until Thursday things that ‘went wrong’ deputy chief operating officer of News health of the News Corp. media empire. series of executives up the corporate came the new subprime is a story with the timetable was unclear, and it Corp., never wavered from his original The hacking scandal has tarnished the ladder have resigned, including Les many culprits, from the governments seemed that Mr. Berlusconi was hoping BY SARAH LYALL account: that he learned only recently company, forced it to summarily shut Hinton, who was chief executive of Dow that borrowed beyond their means and to buy himself more time. But now, with that phone hacking was widespread at down a newspaper, scuttled its$12 bil­ Jones and publisher of The Wall Street regulators who permitted banks to treat the Italian Senate expected to approve Nothing rattled James Murdoch. Not The News of the World, the company’s lion bid to take over the satellite giant Journal. the bonds as entirely risk free to in­ the measures on Friday and the lower being compared to the boss of a criminal now-defunct tabloid. BSkyB, destroyed its symbiotic rela­ Throughout his appearance at the vestors in the markets, who for too long chamber on Saturday, Mr. Berlusconi is enterprise run on fear and omerta. Not He said he had never misled the com­ tionship with Britain’s political estab­ House of Commons Select Committee, did not make much of a distinction be­ expected to step down by Monday. being accused of being willfully blind, mittee in testimony in July. And he all lishment and added to the strains be- MURDOCH, PAGE 5 tween bonds of troubled economies like ITALY PAGE 4 Greece and Italy and those issued by rock-solid Germany. NEW GREEK PRIME MINISTER NAMED Banks, like others, held to the seem­ The choice of Lucas Papademos, an ingly inviolable belief that countries in economist, came after four days of the euro zone would always pay their often chaotic negotiations, p a g e 4 ‘Oops’ lapse steals the debate bills. But the bankers, critics say in hind­ sight, were too complacent when it came as Republican draws a blank to fundamental risk management and were further encouraged by the pros­ ROCHESTER, MICHIGAN and avoid waste, he listed two but then pect for profit to overlook the perils. was unable to think of the third. Since 2005, European and U.S. banks BY JEFF ZELENY “ Commerce, Education,’’ Mr. Perry have amassed $1.1 billion in fees from AND ASHLEY PARKER said before pausing for an uncomfort­ selling bonds for European govern­ able moment as he looked from side to ments, according to data from Thomson Governor Rick Perry had arrived in side, counting on his fingers and flipping Reuters and Freeman Consulting. That Michigan on a mission to get his candid­ his notes. Then a moderator asked Mr. business enabled these same countries acy back on track, but he left on Thurs­ Perry if he could name the third agency. to grow increasingly indebted in the day after an embarrassing stumble in the “ The third one, I can’t,’ ’ he finally said, past few years. YANNIS BEHRAK1S/REUTERS Republican presidential debate raised a sad look on his face. “ Sorry. Oops.” While many banks turned around and RELIABLE, BUT NOT INSPIRING questions about his candidacy and left The nearly minute-long lapse Wed­ sold this debt to clients, it was also at­ Lucas Papademos can probably Mitt Romney looking increasingly confi­ nesday night was almost immediately tractive for banks to hold the debt on command the trust of Europe, but can dent near the top of the Republican pack. posted on YouTube, and political ana­ BANKS, PAGE 19 he win the trust of Greeks? p a g e 4 Mr. Perry survived the first hour of the lysts declared it deeply damaging, if not debate focusing on the economy without necessarily fatal. One political scientist, EUROPEAN GLOOM ONLY DEEPENS RAY OF HOPE FOR SAVING THE EURO PAUL SANCYA/THE ASSOCIATED PRESS incident, but when he said later that he Larry Sabato of the University of Virgin­ The European Commission warned One expert — George Soros — thinks Governor Rick Perry, left, and Representative Ron Paul during the Republican debate. Mr. planned to eliminate three government ia, said it was one of the worst presiden- Thursday of the possibility of a double­ Europe has the means to resolve the Perry said he would eliminate three government agencies, but he could think of only two. agencies in Washington to save money PERRY, PAGE 8 dip recession. PAGE 18 crisis, Chrystia Freeland writes.PAGE 2 BUSINESS SPORTS W ORLD NEWS Russia passes final W.T.O. test Penn State casualty list grows A.N.C. suspends youth leader U.S. adviser on Mideast to quit The last step in Russia’s bid to join the Joe Paterno, who has the most victories South Africa’s governing party said Dennis B. Ross, an influential adviser #· World Trade Organization came when of any coach in major college football Julius Malema, leader of its youth wing, to President Barack Obama, will the country reached a deal with Georgia history, has been fired by Pennsylvania brought the party into disrepute. PAGE 5 reportedly leave in December, p a g e s tied to commerce with the breakaway State University, and the institution’s PATEK PHILIPPE provinces of Abkhazia and South longtime president has also been GENEVE Ossetia.

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