TUESDAY 24 MAY 2016 WORLD BUSINESS NEWSPAPER EUROPE

Learning curve Iraqi battleground Farewell China The future of education is online Why fighting Isis may be the easy bit My accidental Americans head JOHN THORNHILL, PAGE 9 BIG READ, PAGE 7 home — PATTI WALDMEIR, PAGE 8

Viacom power PHILIPPE DAUMAN’S LAWSUIT: SHARI REDSTONE’S SPOKESMAN: Briefing ‘Mr Redstone is being ‘It is absurd for anyone to struggle heads i US tax crackdown scuppers $8bn deal manipulated by his daughter accuse Shari of manipulating A US crackdown on tax inversions has prompted CF Industries and its smaller Dutch-listed rival OCI to the courts . . . she has taken over his life’ her father’ to scrap their $8bn deal because it “materially reduced” the value of a planned tie-up.—PAGE13 A fierce succession struggle over the media empire controlled by 92-year-old i Brazil warning on fiscal time bombs Sumner Redstone is heading for the Former central bank chief and founding partner of courts after two of his once most trusted one of the country’s biggest hedge funds Arminio lieutenants filed a lawsuit challenging Fraga has warned that the new government’s plans their abrupt removal from the Redstone for pensions and education are “explosive”.—PAGE6 family trust, which will manage his companiesafterhisdeath. i Obama lifts Vietnam arms embargo Philippe Dauman and George The US president has used his visit to Abrams, formerly Viacom chief execu- Hanoi to announce that the US has tive and director, claimed Mr Redstone, ended a 50-year arms embargo on who controls the movie and television communist Vietnam, the latest push group, was being manipulated by his to oppose Chinese territorial daughter Shari Redstone. Their lawsuit ambitions in Asia’s seas.—PAGE4 alleged that Mr Redstone was suffering from “dementia, loss of memory,apathy i Osborne in fresh warning on Brexit and depression”. A spokesman for The UK finance minister has warned that if Britain Mr Redstone said the claims were false. votes to leave the EU more than 500,000 jobs will Report page 15 The suit filed by Philippe Dauman, left, alleges that Shari Redstone is manipulating her 92-year-old father, Sumner — FT Montage be lost, wages will fall, inflation will rise and sterling will drop sharply — PAGE 4; JANAN GANESH, PAGE 9 i Isis kills 148 in strikes at Assad territory The Islamist militants have claimed responsibility for rare attacks on Syrian cities in Bashar al-Assad’s stronghold that will spark fears over his ability to Investors signal Bayer’s $62bn shield nearby Russian assets.— PAGE 2; BIG READ, PAGE 7 i Chinese university protests intensify Protests against changes to China’s university admission system have spread to a fourth province as access to education emerges as a key concern for offer for Monsanto is not enough the country’s emerging middle classes.—PAGE4 i Journalists scoop payout in Argus sale 3 3 US investment group General Atlantic’s move for a Deal would be biggest all-cash takeover Latest attempt at blockbuster tie-up in sector controlling stake in Argus has taken dozens of the London-based energy reporting group’s journalists GUY CHAZAN — BERLIN However, Morningstar analyst Jeffrey nationcouldgivethetwogreatercontrol vide the advanced products to make to the brink of becoming multimillionaires.—PAGE14 JAMES FONTANELLA-KHAN — NEW YORK $122 ARASH MASSOUDI — LONDON Stafford said the fact Monsanto first saw over farmers’ supply chains. thatincreasepossible. the proposal on May 10 and had yet to Bayer said it had offered to buy Mon- Price per share Mr Baumann said a tie-up would be Investors are signalling that Bayer will respond could mean the board was santo for $122 per share, a 37 per cent offered by Bayer an “extraordinary fit”,bringing together for Monsanto Datawatch have to increase its $62bn offer for Mon- “seriously considering the deal”. premium to its undisturbed share price Monsanto’s genetically-modified seeds santo if the German group is to win Falling commodity prices and slump- onMay9.Thebidvaluesthecompanyat and Bayer’s crop protection products, the US agribusiness and complete the ing farm incomes have driven a wave of $62bn including net debt of about $9bn, with sales far exceeding those of their UK voter concerns British concern biggestall-cashtakeoveronrecord. consolidation in the agribusiness sector and would overtake the purchase of 4.7% nearest rival, the merged Syngenta and What do you see as the most about the EU is at A combination between the two over the past few months, with Dow InBevbyAnheuser-Buschin2008asthe ChemChina. important issues? its highest level Fall in Bayer’s 50 this century. At would create the world’slargest supplier Chemical and Dupont joining up in a largest all-cash deal if completed, share price But Mr Baumann has failed to con- of seeds and agricultural chemicals, at a $130bn merger and ChemChina buying according to Dealogic. It would also be vince all of Bayer’s investors. The com- Immigration 30 per cent, it is yesterday 40 the third most time when the sector is being reshaped Syngenta for $43bn. A tie-up between the biggest foreign takeover by a Ger- pany’s shares have fallen 12. 5 per cent 30 important issue by a wave of blockbuster deals. Bayer and Monsanto would leave Ger- man company. sinceThursdaywhenitconfirmedithad behind the NHS Monsanto declined to comment on many’s BASF as the only outlier going Bayer chief executive Werner Bau- made a bid for the US seed giant, amid 20 and immigration. the offer, which many analysts expect it solo in the industry. mann, who took the reins less than a concernsaboutthecostofadeal. Tories and the Europe 10 to reject as too low. The US company’s But any takeover of Monsanto is likely month ago, said farmers needed to Additional reporting by David Lynch over-55s are most shares were trading up 5.27 per cent at to invite scrutiny from antitrust regula- boost productivity 60 per cent to feed a in Washington and Lindsay Whipp 0 likely to say it is $106.79 by early afternoon in New York, tors in Washington, Brussels and else- world population projected to reach in Chicago 2000 05 10 16 the biggest issue significantly below Bayer’s offer price. where. Analysts say there is no signifi- 10bn by 2050. A combined Bayer- Lex page 12 Source: Ipsos Mori Sample = 1,000 British adults facing the country Bayer’ssharescloseddown4.7percent. cant revenue overlap but that a combi- Monsanto would, he said, be able to pro- Bidyettogrowpage 15 Austria resists rightwing surge as Hofer suffers wafer thin presidential defeat

RALPH ATKINS — VIENNA France and the Netherlands, forcing EU porting the thousands of refugees seek- leaders to re-examine their tactics. ing asylum in Europe. Most passed A rightwing nationalist conceded “The fact that he came within a through Austria and on to Germany. But defeat by the narrowest of margins in whisker of becoming head of state is a the strain on Austria’s infrastructure Austria’s presidential elections yester- huge deal,” said Heather Grabbe, an and voters’ fears that the government day, a near miss that highlighted how expert on populism at the European had lost control forced a reversal. Gangs keep tight grip on the immigration crisis has thoroughly University Institute in Florence. Conceding defeat on Facebook, life and death in El Salvador upendedEurope’spolitics. Mr Hofer’s campaign promised better Mr Hofer thanked supporters and said Analysis i PAGE 6 Norbert Hofer, the Freedom party can- border security as well as tougher con- their campaign efforts were an “invest- didate who ran on an “Austria first” trols on immigration and asylum seek- ment in the future”. manifesto, was defeated by Alexander ers. He played on fears that Austria had Mr Van der Bellen, an economics pro- Austria €3.60 Macedonia Den220 Van der Bellen, a Green politician who lost control of thousands of refugees fessor whose parents were refugees Bahrain Din1.7 Malta €3.50 Belgium €3.60 Morocco Dh43 took 50.3 per cent of the votes, accord- passing through the country as they fled from the Soviet Union, campaigned for Bulgaria Lev7.50 Netherlands €3.60 Croatia Kn27.50 Nigeria Naira715 ing to official results. The race was too wars in countries such as Syria. anopenAustriawithstrongEUties. Cyprus €3.50 Norway NKr34 Czech Rep Kc100 Oman OR1.50 close to call after Sunday’s voting and He was “someone who softens the His wafer-thin victory followed a Denmark DKr32 Pakistan Rupee 280 Egypt E£20 Poland Zl 18 Mr Hofer lost by just 31,026 votes after very harsh message of the Freedom campaign portraying him as a concilia- Finland €4.10 Portugal €3.50 France €3.60 Qatar QR15 postalballotswerecountedyesterday. party”, said Thomas Hofer, political tory alternative to the “authoritarian” Germany €3.60 Romania Ron17 Gibraltar £2.70 Russia €5.00 Mainstream parties in other Euro- analyst in Vienna. “It wasn’t only the Freedom party and somebody who Greece €3.50 Saudi Arabia Rls15 Hungary Ft990 Serbia NewD420 pean countries have shunned the Free- anti-refugee message. It was also an would present a more acceptable face to India Rup195 Slovak Rep €3.60 dom party, which was founded in the anti-establishmentmessage.” the world. Italy €3.50 Slovenia €3.50 Kazakhstan US$5.50 Spain €3.50 1950s by former Nazis. But similar par- Initially, Austria sided with Angela Analysis page 2 Kenya Kshs300 Sweden SKr37 Kuwait KWD1.50 Switzerland SFr5.90 ties have led recent opinion polls in Merkel, the German chancellor, in sup- Heather Grabbe page 9 Latvia €6.99 Tunisia Din7.50 Lebanon LBP7500 Turkey TL10 Lithuania €4.30 UAE Dh15.00 Luxembourg €3.60 Subscribe In print and online World Markets www.ft.com/subscribetoday STOCK MARKETS CURRENCIES INTEREST RATES email: [email protected] Tel: +44 20 7775 6000 0D\ SUHY FKJ 0D\ SUHY 0D\ SUHY SULFH \LHOG FKJ Fax:+442078733428 6 3    SHUé   éSHU   86*RY\U    1DVGDT&RPSRVLWH    SHUe   eSHU   8.*RY\U    © THE FINANCIAL TIMES LTD 2016 'RZ-RQHV,QG    eSHUé   éSHUe   *HU*RY\U    No: 39,171 ★ )76(XURILUVW    gSHU   gSHUé   -SQ*RY\U    (XUR6WR[[    gSHUe   eLQGH[   86*RY\U    Printed in London, Liverpool, Glasgow, Dublin, )76(    éLQGH[   LQGH[   *HU*RY\U    Frankfurt, Brussels, Milan, Madrid, New York, Chicago, San Francisco, Washington DC, Orlando, )76($OO6KDUH    6)USHUé   6)USHUe   SULFH SUHY FKJ Tokyo, Hong Kong, Singapore, Seoul, Dubai &$&    COMMODITIES )HG)XQGV(II    ;HWUD'D[    0D\ SUHY FKJ 86P%LOOV    2 1 1LNNHL    2LO:7,    (XUR/LERUP    +DQJ6HQJ    2LO%UHQW    8.P    )76($OO:RUOG    *ROG    3ULFHVDUHODWHVWIRUHGLWLRQ 'DWDSURYLGHGE\0RUQLQJVWDU

9 7 7 0 1 7 4 7 3 6 1 2 8 2 ★ FINANCIALTIMES Tuesday 24 May 2016

INTERNATIONAL

Baltimore riots Hofer’sdefeat spares EU leaders US officer cleared in dilemma of far-right head of state Freddie Gray death in Populist forces on the rise while mainstream parties struggle as electoral landscape shifts custody case

COURTNEYWEAVER —WASHINGTON Apoliceofficerinvolvedinthearrestof Freddie Gray has been found not guilty of all charges, a year after the young African-American’s death in police custody sparked the worst riots in Bal- timore since the 1968 assassination of MartinLutherKing. Edward Nero, the officer, was acquitted after being charged with second- degreeintentionalassault,twocountsof misconduct in office and reckless endangerment. He was one of six officers charged over the 25-year-old’s death, which prompted questions over the fairness of the US criminal justice system in rela- tiontoAfrican-Americans. Gray died from spinal cord injuries sustained while in custody.Three of the officerschargedinhiscaseareblackand threearewhite. Mr Nero, who is white, is the second officertostandtrialinthecase.Thetrial ofthefirstofficer,WilliamPorter,ended inahungjuryandmistrial. Prosecutors had focused their case against Mr Nero on his role in putting Alexander Norbert Grayintoapolicevanwithoutstrapping him into a seatbelt — a move they said Van der Bellen Hofer led to fatal injuries. They also argued Greens Freedom party that Mr Nero had detained Gray ille- gally, a move they said amounted to assault. 50.3% 49.7% Gray became a symbol for the inequi- ties of the US criminal justice system and alleged routine police brutality RALPHATKINS —VIENNA them against Poland — although it has second round of French elections in Florian Wieser/Filip duce serious reforms has increased,” towards African-Americans. In the age ALEXBARKER —BRUSSELS hadlittlesuccesssofar. 2002. But in a departure from the Aus- Singer/EPA said Franz Schellhorn, director of of smartphones, such incidents have A narrow defeat for Norbert Hofer, the The Austrian contest has drawn par- trian contest, he was thrashed by his AgendaAustria,athink-tank. increasinglybeencapturedoncamera. far-right candidate in Austria’s presi- ticular attention in France. Opinion opponent, Jacques Chirac, who secured In his first comments as president- In2014thecityofFerguson,Missouri, dential election, came as a relief to polls have all suggested that Marine Le morethan82percentofthevote. designate, Mr Van der Bellen struck a was the scene of months of riots after a manyAustrianandtoEUleadersrecoil- Pen, the far-right leader of France’s Alexander Van der Bellen’smove into moreconciliatorytone,sayinghewould whitepoliceofficershotMichaelBrown, ing at the thought a far-right head of National Front party, would qualify for Vienna’s Hofburg palace could increase act “above politics” and seek a “con- an unarmed black teenager. That stateinEurope. the second round run-off, leaving main- political tensions in Austria if he seeks structive” relationship with the officer, Darren Wilson, was exonerated But the thin margin of his defeat pro- streampartiesscramblingtopickcandi- to create a rival power centre to the gov- government. of any wrongdoing in Brown’s death vides the latest evidence of the rapidly datesabletosnatchsecondplace. ernmentandparliament. Thehigh-stakesdramainanAustrian both by a grand jury and by the Depart- shifting electoral landscape across the Ms Le Pen’s father made it into the “Pressureonthegovernmenttointro- presidential election, which usually mentofJustice. continent — where mainstream parties passes unnoticed to the outside world, Another case was the death of Eric are struggling to retain power and illib- has challenged the country’sreputation Garner in New York, who died after eral,populistforcesareontherise. Arriving to cheers from supporters in prevent a Freedom party candidate forpoliticalpredictability. being put into a chokehold by a police Other European far-right politicians Vienna’s 18th-century baroque becoming chancellor. Gerhart Holzinger, head of Austria’s officerwhosuspectedhewassellingcig- have not yet come as close to power as Auersperg palace late on Sunday night, The two candidates presented constitutionalcourt,saidyesterdaythat arettesillegally. the Freedom party. But it is possible Alexander Van der Bellen looked an contrasting programmes. The Freedom infuturepostalvotesshouldbecounted The mothers of both Garner and to trace an arc of illiberal politics unlikely “comeback kid”. party is protectionist and nationalist. Mr on election day to avoid a power vac- Brown have become campaigners for through Poland, Hungary (and to some Economics The 72-year-old economics professor Van der Bellen favoured free trade — uum. “Waiting 24 hours unnecessarily Hillary Clinton, the Democratic candi- extent) Slovakia and Austria that and former Green party member, is no and would increase the pressure on the isdemocraticallyworrisome,”hesaid. date, who has promised to curb police stretchesfromtheBalticSeatothegate- professor natural politician. During the campaign government to implement reforms that Mr Hofer’s campaign played on fears brutality and reform the criminal jus- wayoftheBalkans. who erased he was often hesitant, and generally less boost growth and unemployment, said aboutIslamicinfluenceoverculture.He ticesystemifelected. Mr Hofer’s loss has, nonetheless, a ballot dynamic, than his younger rival, Norbert Franz Schellhorn, director of the Agenda also sought to address concerns about In the wake of yesterday’s verdict, sparedEUleadersanawkwarddilemma deficit Hofer. Mr Van der Bellen appeared as if Austria think-tank. the Freedom party’s heritage by por- local officials appealed for calm in the onhowtodealwithamemberstatewith he would have been more at home in a “Austria is an open economy, so I traying it as pro-Israeli. The former air- hope of avoiding violence and looting of adirectlyelectedfar-rightpresident. lecture theatre. think a lot of businesses would not be craft technician, who has walked with a the kind that gripped Baltimore after Austria’s rightwing politics have pre- Still, he managed to erase a too upset with Van der Bellen as cane since a paragliding accident, saw Gray’sdeath. sented a conundrum for fellow EU 14-percentage-point deficit from the president,” he said. supportsurgeforaprogrammeaimedat “This is our American system of jus- members in the past. Other countries first round ballot in April to defeat Mr Still, like Mr Hofer, Mr Van der Bellen upending the two-party system and tice and police officers must be afforded gave Vienna the diplomatic cold shoul- Hofer in what became Europe’s most has said he would not sign the protectingAustrianjobs. the same justice system as every other der in 2000 after the Freedom party, closely watched election. Transatlantic Trade and Investment He was “someone who softens the citizen in this city, state and country,” which was founded by former Nazis in In the final weeks of his campaign, Mr Partnership (TTIP), a proposed EU-US very harsh message of the Freedom said Stephanie Rawlings-Blake, mayor the 1950s, entered government under Van der Bellen’s message was clear: trade pact — for environmental reasons. party”, said Thomas Hofer, political ofBaltimore. JörgHaider. whatever they thought of his politics, In contrast to the Eurosceptic Mr analyst in Vienna. “It wasn’t only the Local authorities were prepared to Many observers have said that Austrians should vote for him to prevent Hofer, however, Mr Van der Bellen’s pro- anti-refugee message. It was also an combat potential unrest after the ver- approach—erectingaso-called“cordon the Freedom party taking control of the EU stance is more in line with the anti-establishmentmessage.” dict, she said. “We will protect our sanitaire” — served only to fan national- Hofburg palace, the official home of the conventional thinking of both the Social Initially, Austria sided with German neighbourhoods,ourbusinessesandthe istsentimentinAustria. Austrian president. Democratic and People’s party thinking. chancellor Angela Merkel in supporting peopleofourcity.” The political context has changed in The choice, said Mr Van der Bellen, Mr Van der Bellen was an economics the thousands of refugees seeking asy- MrNeroalsofacesaninternalinvesti- the EU since then, with illiberal and whose parents were refugees from the professor for almost 30 years at Vienna lum in Europe. Most passed through gation by the Baltimore police depart- nationalist politicians on the rise in Soviet Union, was between a co- university and spokesman for the Green Austria on their way to Germany or ment, which has not reached its muchofEurope. operative president and the Freedom party for 11 years. “I stand for an Austria otherdestinationssuchasSweden.Nev- conclusion. UnderEUrules,countriescanbepun- party’s “authoritarian style”. that supports and promotes friendly co- ertheless the strain on Austria’s infra- His five colleagues face separate trials ished for breaching democratic stand- Although Austria’s presidency is a operation at home but above all in structure and voters’ fears that the gov- that are scheduled to take place in the ards. Indeed the rules were revamped largely ceremonial position, Mr Van der Europe,” he said during the campaign. ernment had lost control over the next five months, with the final one due andtheEuropeanCommissionistesting Bellen said he would use it to try to Ralph Atkins in Vienna inflowsforcedapolicyreversal. tobegininmid-October.

Syria MAKE A SMART INVESTMENT Subscribe to the FT today at ft.com/subscription Death toll mounts after Isis attacks Assad’scoastal heartland

ERIKASOLOMON —BEIRUT dent’s Alawite minority, consider apos- erated into a multi-sided civil war. Sec- ians. Already on the verge of collapse tates by hardline Islamist groups and tarian tensions have long been part of because of continued clashes, the cease- Isis has claimed responsibility for a jihadigroups. the backdrop of the civil war because fire includes only pro-Assad forces and string of explosions in the Syrian YesterdayIsissaiditsattacks“hitAla- much of Syria’s ruling circle is Alawite Syrian rebel groups that agreed to the

015 coastal cities of Tartus and Jableh that

NOVEMBER 7 2 NOVEMBER witegatheringsinTartusandJableh”. in a country that is majority Sunni truce. Jihadi forces such as Isis and al- killed at least 148 people, a rare attack The strikes in the heavily fortified Muslim. Qaeda’sSyrianaffiliate,Jabhatal-Nusra, in President Bashar al-Assad’s coastal area have shaken an area largely Groups such as Isis try to exacerbate wereexcluded. stronghold. untouched by the five-year civil war. these tensions. After the attack Isis sup- Facebook pages for Tartus residents FINANCIAL TIMES Spain; Fabripress, C/ Zeus 12, Polígono Industrial Meco- 1 Southwark Bridge, R2, 28880 Meco, Madrid. Legal Deposit Number Four blasts hit Jableh and three hit Compared with the rest of Syria, the portersonTwitterlaunchedthehashtag urged locals to donate blood for the London SE1 9HL (Deposito Legal) M-32596-1995; Publishing Director, Tartus, capital of Tartus province. At Mediterranean coastal region, particu- “IntheheartlandoftheNusayris”,using dozens of people wounded in the

Lionel Barber; Publishing Company, TheROLLING Financial IN THE DEEP Times Subscriptions & Customer service: Limited, registered office as above. Local Representative least two of the attacks were carried out larly Tartus, has flourished economi- aderogatoryArabictermforAlawites. attacks. Explosions hit car garages in

Tel: +44 207 775 6000, [email protected], office; C/ Infanta Maria361_Cover.PRESS.indd Teresa 1 4, bajo 2, 28016, Madrid.21/10/2015 10:51 by suicide bombers, according to the callyduringtheconflict. The attacks will raise questions about both cities, and a hospital and an elec- www.ft.com/subscribetoday ISSN 1135-8262.. Advertising: UAE; Al Nisr Publishing LLC, P.O.Box 6519. Dubai. Editor UK-based Syrian Observatory for What began as a revolt against four the ability of a US-Russian brokered tricityofficeinJableh. Tel: +44 20 7873 3794 [email protected], in Chief: Roula Khalaf. Origin of publication, twofour54, HumanRights. decades of Assad family rule has degen- “cessation of hostilities” to protect civil- The attacks came two days after Isis [email protected] Media Zone, Abu Dhabi. Letters to the editor: France; Publishing Director, Dominic Good, 40 Rue La The blasts will raise concerns about released an audio statement believed to Fax: +44 20 7873 5938, Boetie, 75008 Paris, Tel. +33 (0)1 5376 8256; Fax: +33 (01) the Syrian regime’s ability to protect be the voice of its spokesman Abu [email protected] 5376 8253; Commission Paritaire N° 0909 C 85347; ISSN Isis control Syrian regime 100km Executive appointments: 1148-2753. areas where Moscow’s assets are based. Mohammed al-Adnani. Isis typically Tel: +44 20 7873 4909 Turkey; Dunya Super Veb Ofset A.S. 100. Yil Mahallesi Isis support www.exec-appointments.com 34204, Bagcilar- Istanbul, Tel. +90 212 440 24 24. Russia’s newly built Hmeimim air base TURKEY givesaspeechbeforeIslam’sholymonth isnearJableh,andTartusisalsohometo of Ramadan, which begins this year on Published by: The Financial Times Limited, 1 Southwark ©Copyright The Financial Times 2016. Bridge, London SE1 9HL, United Kingdom. Tel: +44 20 Reproduction of the contents of this newspaper in any aRussiannavalbase. June6,callingforattackstobelaunched. 7873 3000; Fax: +44 20 7407 5700. Editor: Lionel Barber. manner is not permitted without the publisher’s prior A video from the Syrian state news In an address to “the soldiers of Belgium; BEA Printing sprl, 16 Rue de Bosquet, Nivelles consent. ‘Financial Times’ and ‘FT’ are registered trade Jableh 1400. marks of The Financial Times Limited. agency, Sana’a, showed crowds gather- SYRIA the caliphate and their supporters” Germany; Dogan Media Group, Hurriyet AS Branch Germany, An der Brucke 20-22, 64546 Morfelden - The Financial Times adheres to a self-regulation regime ing around the charred remains of cars Tartus abroad the spokesman said: “With Walldorf. Responsible Editor, Lionel Barber. Responsible under the FT Editorial Code of Practice: in Jableh as sirens sounded in the dis- God’s permission you will make it a for advertising content, Dominic Good. www.ft.com/editorialcode Italy; Poligrafica Europa, S.r.l, Villasanta (MB), Via Enrico tance. According to agencies, 48 people Damascus IRAQ month of calamity for the non-believers Mattei 2, Ecocity - Building No.8. Milan. Reprints are available of any FT article with your were killed in Tartus and 100 in Jableh, everywhere.” He also criticised the US- Owner, The Financial Times Limited; Rappresentante e company logo or contact details inserted if required Direttore Responsabile in Italia: I.M.D.Srl-Marco Provasi - (minimum order 100 copies). part of Mr Assad’s home province of Russian ceasefire efforts, accusing both Via G. Puecher, 2 20037 Paderno Dugnano (MI), Italy. One-off copyright licences for reproduction of FT articles Latakia. countries of doing little to stop regime Milano n. 296 del 08/05/08 - Poste Italiane SpA-Sped. in are also available. Abb.Post.DL. 353/2003 (conv. L. 27/02/2004-n.46) art. 1 For both services phone +44 20 7873 4816, or email The provinces of Tartus and Latakia Explosions in the city of Jableh JORDAN air strikes and sieges that have left up to .comma 1, DCB Milano. [email protected] are home to a large portion of the presi- yesterday killed 100 people Source: Institute for the Study of War 5mpeopleatriskofstarvation.

MAY 24 2016 Section:World Time: 23/5/2016 - 19:02 User: owendavid Page Name: WORLD1 USA, Part,Page,Edition: EUR, 2, 1 Tuesday 24 May 2016 ★ FINANCIAL TIMES 3

INTERNATIONAL IMF stands firm on Athens debt and urges cap on interest rates Move risks requiring other eurogroup members to plug yet more Greek gaps

ALEX BARKER — BRUSSELS the IMF telling the Europeans what to SHAWN DONNAN — WASHINGTON do on their own debt. [Yet] in the whole The International Monetary Fund con- document there is no word on what fronted Germany over Greece’s unsus- to do with the IMF debt.” tainable debt burden yesterday, issuing In its publicly released paper, the IMF a bleak assessment of its financial gave little hint of compromise on its core future just as eurozone finance minis- assessment of the Greek economy, con- ters prepared for a crunch meeting on cluding in its debt sustainability paper debt relief. that the bailout programme’s 3.5 per As detailed talks begin today to cent surplus target was overambitious resolve a long-running stand-off with and unrealistic. Berlin, the IMF signalled it would be “In all key policy areas — fiscal, finan- standing its ground, calling for Euro- cial sector stability, labour, product and pean creditors to forgo any Greek debt service markets — the authorities’ cur- payments until 2040 and, most contro- rent policy plans fall well short of what versially, to fix interest rates at 1.5 per would be required to achieve their cent over that time in a move that could ambitious fiscal and growth targets,” require other eurogroup members to IMF staff wrote. plug yet more Greek gaps in the future. Most contentiously for Germany, the While officials involved in the talks IMF called for a more “plausible” sur- were upbeat about a deal taking shape plus target of 1.5 per cent, supple- that could be completed today, negotia- mented by extensive debt relief. A large tors have dug in on specifics. Some euro- part of that debt relief would come from zone officials are disappointed that fixing interest on all eurozone loans A protester said. “This would clearly be highly con- and could require European institutions Greece’srescuein2018. Christine Lagarde, the IMF managing until 2040 at current market rates of burns a fake troversial among member states in view to forgo any interest on Athens’ debts Wolfgang Schäuble, the German director and a key figure in brokering about1.5percent. €100 banknote of the constraints — political and legal — until 2050. finance minister, wants to avoid taking previous political deals over Greece, will IMF and eurozone officials have said during a on such commitments within the cur- One live option remains the possibil- any big concessions or changes to the beinKazakhstanandunabletoattend. the market for long-term fixed rate demonstration rency union.” ity of drastically scaling back the IMF’s Bundestag before the 2017 federal Analysts said the move to release the paper could not absorb the €200bn of against a new The IMF also warned that “even exposure to Greece, potentially through elections. paper ahead of today’s eurogroup meet- debt that would have to be refinanced at package of tax under the proposed debt restructuring an EU buyout of up to €14bn in IMF The IMF did open some ground for a ing was controversial but also a sign of that rate, meaning eurozone countries rises and scenarios, [Greece’s] debt dynamics bailout loans. Such a move could lower compromise. Its paper called for “an the pressure Ms Lagarde and the IMF’s would need to offer a fiscal subsidy that reforms in remain highly sensitive to shocks” and the debt- sustainability bar on future upfront unconditional component to staff were under from its non-European Germany insists would be contrary to Athens — Michalis that European creditors could be forced IMF loans. But even after a buyout debt relief” to reassure markets. But members to abide by the fund’s rules EUtreaties. Karagiannis/Reuters to make even greater concessions Greece might struggle to meet the IMF’s given Greece’s patchy reform record, and not to grant Athens or its European “The fixing of the interest rates would down the line. normal lending standards, especially in the IMF said it “understands and sup- creditorsspecialtreatment. in effect require a commitment by A modest slip in Greece’s long-run morepessimisticeconomicscenarios. ports” the eurozone’s desire to “make “It is very provocative,” said Andrea member states to compensate the economic growth from 1.5 per cent to While Berlin is open to the idea of an further relief contingent on programme Montanino, a former Italian representa- [European Stability Mechanism] for the 1 per cent would yield a “downside sce- IMF buyout, it wants the commitment implementation”.Its main stipulation is tive to the IMF who is at the Washing- losses associated with fixed interest nario” that would make both its debt to be tied to conditions that Athens that any conditions should end in 2018, ton-based Atlantic Council. “You have rates on Greek loans,” the IMF paper and gross financing needs “unstable” must fulfil, and only made at the end of apositionthatsitsuneasilywithBerlin. 4 ★ FINANCIALTIMES Tuesday 24 May 2016

INTERNATIONAL

Southeast Asia Referendum Vote to leave US ends 50-year Vietnam arms embargo EU could cost

ObamausesHanoivisitto states considered their shared aim of TranDaiQuang,Vietnam’spresident, party general secretary to visit the have allowed for closer co-operation 800,000 UK checking Beijing more important than thanked his US counterpart for lifting WhiteHouselastyear. withJapan. strengthenlinksinfaceof mutualsuspicions. theembargo. The rise of China has hastened a thaw The scrapping of the Vietnam arms China’sregionalambitions AUS“pivottoAsia”comesafteralong Mr Obama said the US and Vietnam in US-Vietnam relations that began in embargo, which had been partly lifted jobs, claims journeyfromtheSoutheastAsianwarof had “developed a level of trust and co- earnest when Bill Clinton’s administra- in 2014, is unlikely to lead Hanoi to MICHAELPEEL —BANGKOK the1960sand1970sthatpittedcommu- operation”. tion ended a long-running US trade lobby for large orders of heavy weapons chancellor nist North Vietnam against Washington Yesterday’s announcement came embargoin1994. straightaway. The US has ended a 50-year arms emb- anditssouthVietnameseallies. after news that the US was in talks to Fears are rising in Vietnam and other Insteadtargetsintheshorttermcould argo on communist Vietnam in the lat- “The end of the arms embargo indi- positionmilitaryequipmentinVietnam Asian countries about Beijing’s growing include radar systems, patrol boats and GEORGEPARKERANDCHRISGILES estpushtostrengthenoppositiontoChi- cates a stronger rapprochement bet- forthefirsttimesinceSaigonfellin1975 militaryanditseffortstoclaimdisputed other items that would improve Viet- LONDON neseterritorialambitionsinAsia’sseas. ween the two former enemies,” said Le totheNorth. territory by building islands in the nam’sability to monitor and maintain a George Osborne, the UK chancellor of Barack Obama used yesterday’s first HongHiep,aresearchfellowattheInsti- Landmarks in Hanoi, where the region’sseaways. presenceinimportantseaways. the exchequer, has warned that if Brit- full day of a visit to Hanoi, the Vietnam- tute of Southeast Asian Studies, a Singa- announcement was made, include Those worries have given the US Analysts said the government in ain votes to leave the EU more than ese capital, to announce that the US was porethink-tank. the imposing mausoleum of Ho Chi the chance to strengthen security rela- Hanoi would be wary of antagonising 500,000 jobs will be lost, wages will lifting the weapons sales ban and hoped “The relationship between Hanoi and Minh, founder of the Vietnamese Com- tionships in states in strategic points China, on which Vietnam depends fall, inflation will rise and sterling for growing co-operation between the Washington is now fully normalised, munist party and inspiration of the aroundAsia. heavily for imports. The neighbours willdropsharply. twocountries’militaries. and they are more ready now to step up North’swareffort. US aircraft and ships have returned have a complex relationship, which Analysts said the US president’s deci- their strategic co-operation, especially The US president’s Southeast Asian on a semi-permanent basis to the includes political and cultural ties as Launching an official report on the sion to sweep away this “lingering ves- in the South China Sea, where their trip comes after Nguyen Phu Trong Philippines for the first time in more well as formal partnerships relating to impactofBrexit,MrOsborneandDavid tigeofthecoldwar”wasasignthatboth interestsconverge.” became the first Vietnam Communist than two decades, while new guidelines militaryandciviliansecurity. Cameron, prime minister,added that in the worst-case scenario, more than 800,000 jobs would be at risk if the UK decided to break with the EU in its June 23referendum. Their claim that Britain would face a “DIYrecession”isthelatestinaseriesof warnings from the Remain campaign which is basing its appeal to voters on argumentsofeconomicself-interest. Mr Cameron and his colleagues hope such warnings will counter the Leave campaign’scasethatdeparturefromthe EUisessentialtocontrolimmigration. Britain was still emerging from the shadow of a recession, the prime minis- ter said, and voting to leave the EU would be the “self-destruct option”, plunging the economy into a year-long contraction. The report on the short term impact of Brexit, compiled by the UK Treasury, argued that leaving the EU would depresshouseholdspending,becauseof fears for the economy’s future, damp growth because of increased uncer- tainty, and probably reduce corporate spending and investment as markets becamemorevolatile. Iain Duncan Smith, a leading figure in the Leave camp, said the report was biased and the Treasury had handed overforecastingtoanindependentbody becauseitsrecordwassowoeful. The Treasury’s latest findings — its second and final report on Brexit — fol- low its assessment last month of the Centre of attention: Barack Obama is welcomed by local residents as he leaves a traditional Vietnamese restaurant in Hanoi yesterday — EPA/STR long-term risks, which concluded that the average household would be £4,300 worseoffby2030ifBritainlefttheEU. According to the main scenario in the latest Treasury analysis, gross domestic Diplomacy. Obama gesture product would be 3.6 per cent lower after two years than if Britain stayed in the EU. Inflation would be 2.3 per cent higher, unemployment 520,000 Hiroshima visit sparks anger in Seoul higher, wages 2.8 per cent lower, house prices 10 per cent lower, sterling down 12 per cent and public borrowing would increaseby£24bn. ernment’sintention of portraying Japan Abe, the Japanese prime minister, on pain of Korean citizens. In its letter, the Demonstrations have already been Undera“severeshock”scenario,GDP S Korea fears US leader’s trip merely as a victim,” the group said in a Friday. The visit will be the first by a SouthKoreangroupaskedMrObamato stagedontheisland.TakeshiOnaga,the would be 6 per cent lower, inflation will be used to depict wartime letteraddressedtoMrObama. sitting US president. “I know as some- payrespectsatamonumentintheHiro- prefectural governor, has demanded to 2.7 per cent higher, unemployment ThegrowingSouthKoreanbacklashis bodywhohasnowsatinthispositionfor shima Peace Memorial Park dedicated meet Mr Obama, saying Okinawans 820,000 higher, wages 4 per cent lower, Japan ‘merely as a victim’ just the latest sign of the political risks thelastsevenandahalfyearsthatevery to the tens of thousands of Korean “can’tcontaintheiremotions—theyare house prices 18 per cent lower, sterling posed by the historic visit, with the US leader makes very difficult decisions, victims. abouttoexplode”. 15 per cent lower and borrowing president forced to balance sensitivities particularly during wartime,” Mr About 70,000 South Koreans — A final possible flashpoint will occur £39bnhigher. ROBINHARDING —TOKYO SONGJUNG-A —SEOUL over wartime wounds that have not Obamasaid. 50,000 in Hiroshima and 20,000 in when all the G7 leaders visit the Ise However, the model used by the fully healed with the rise of a new Seoul’s concern is not about the Nagasaki — were killed or affected by shrine — the most sacred site in Japan’s Treasury has wide margins of uncer- Barack Obama’s planned trip to Hiro- regional power in Beijing that is unset- decision to use the bomb but rather the atomic attacks, according to the Shinto religion — on Thursday. tainty and Mr Duncan Smith pointed shima, a gesture aimed at reconcilia- tlingpostwaralliances. that the focus on Japan’s suffering group. Although there has been little contro- out that it made no assessment of the tion, has sparked dissension in South Underscoring the overlapping sensi- from the nuclear attacks ignores the Evan Medeiros, managing director at versy over Ise so far, Michael Cucek, an risks to Britain of staying in a failing EU. Korea, Washington’s other main East tivities, Mr Obama, who will be in Japan Eurasia Group, who stepped down last adjunct professor at Waseda University “It’s prudent to look at what could hap- Asia ally,where fears are mounting that to attend the G7 summit, will face year as Mr Obama’s chief Asia adviser, in Tokyo, says the visit has political pen in the worst case but it is also pru- the US president will endorse a version renewed protests in the southern island saidthatwhileMrObamacouldmanage significance. dent to look at the worst case of remain- of wartime history that presents Japan ofOkinawaaftertheallegedmurderofa this with a carefully worded statement IseisthehouseshrineofJapan’simpe- ing,”hesaid. asavictim. 20-year-old woman, whose body was at Hiroshima combined with bilateral rial family and Mr Abe has taken to vis- Although Vote Leave has criticised A South Korean group representing foundlastweek. diplomacy,“wewillhavetoseeifheand itingiteveryyear.MrCucekarguesheis the methodology of what it calls Hiroshima survivors argues that tens of US Marines have been based there hisdiplomaticteamcanpullthisoff”. using it as an alternative to the contro- “Project Fear”,it concedes that the first thousands of their countrymen were since the end of the second world war — MrObamamustalsocontendwiththe versialYasukunishrineinTokyo,which Treasury report on the long-term risks exposedtotheUSnuclearattacksonthe to the anger of Okinawans — and a murder of Rina Shimabukuro, an office commemorates Japan’s war dead, ofBrexitresonatedwithvoters. city and the southern port of Nagasaki former Marine has been arrested over workerfromUruma,acityonOkinawa. includingwarcriminals. The Brexit campaign tried to divert because they had been conscripted by thekilling. The incident has fuelled tension over “It’sa way to honour the imperial leg- attentionfromtheeconomybyfocusing the Japanese military or forced into Speaking in an interview with the the US military presence on Okinawa, acy without the South Koreans and Chi- onimmigration,producingapostersug- hardlabour. Japanese broadcaster NHK, Mr Obama bringingbackdarkmemoriesofaninci- nesebeingabletoreact,”saidMrCucek. gesting that Turkey would join the EU “WehopethatyourvisittoHiroshima said he would not be apologising when A memorial in Hiroshima to Korean dent in 1995 in which three US Marines “It’s all dog-whistle politics to Mr Abe’s andtriggeranewwaveofmigration. will not be used to further the Abe gov- he visited Hiroshima alongside Shinzo conscripts killed by the atomic bomb rapeda12-year-oldgirl. rightwingbase.” Janan Ganesh page 9

Higher education Flight MH17 China university quota cuts prompt protests Russia and Putin face lawsuit over downed jet

TOMMITCHELL —BEIJING gaokao. The education ministry had particularly unfair given the central JAMIESMYTH —SYDNEY intended to be “a deterrent or punish- who fired it. Ukraine and western ordered universities in many populous government’s effort to merge Hebei, ment for undesirable conduct”, which experts have blamed Russian-backed ProtestsagainstchangestoChina’suni- Relatives of victims of the Malaysian provinces to reduce such quotas and Beijing and a third city, Tianjin, into an Mr Skinner alleged had been perpe- rebels for firing the missile but Russia versity admission system spread to a airliner shot down over Ukraine in July increase access for non-local students, integratedregionwith110mpeople. tratedbyRussiaandMrPutin. hasblamedUkrainianforces. fourth province yesterday as authori- 2014 are suing Russia and President sparkingthebacklash. “Parents in Baoding are making their The shooting down of flight MH17, Mr Skinner, who has worked on com- ties scrambled to contain growing Vladimir Putin over alleged involve- Internet censors have taken down voices heard,” the protesters said, during a conflict between Ukrainian pensation claims lodged by families anger over one of the most important mentintheincident. social media posts and online discus- according to the Weibo post. “You talk forces and Russian-backed rebels, against Libya following the Lockerbie issues for the emerging middle class: sions about the reforms and protests. about integration . . . so why are you so LHD, an Australian law firm, said yes- disaster, said it was clear that without accesstohighereducation. One posting on WeChat, the most popu- crueltoHebeistudents?” terday it had filed a lawsuit at the Euro- Mr Putin’s permission a Buk missile According to a post on the Weibo mes- lar messaging app, called on parents in A parent in Hunan said: “When you pean Court of Human Rights seek- Flight MH17: would not have crossed the border into Ukraine and saging service, parents gathered outside southern Hunan to join a protest sched- are hungry,you ship our food to Beijing. ing damages of $10m per passenger in western experts Ukraine. “That doesn’t simply happen the education bureau in Baoding, Hebei uledfortoday. When you are thirsty, you transfer our relation to the downing of the jet in pro- blamed Russian- in Russia unless it is cleared all the way province,todemand“fairness”andthat In an open letter to the state council, water to Beijing. Why won’t you allow Russian rebel-held territory, which backed rebels for tothetop,”hesaid. the education ministry scrap plans to parents in Henan complained about ourchildrentostudyinBeijing?” killedall298passengersonboard. firing the missile Russia said on Sunday it did not have reduce the number of places reserved alleged discrimination for places at the The education ministry could not be “We have submitted almost 2,000 any information about the compensa- forlocalapplicants. most sought-after institutions, such as reachedforcomment. pages of documentary evidence which prompted the UN to issue a resolution tionclaim. Thisfollowedprotestsattheweekend Peking university in Beijing. According A municipal education bureau in indicate that Russians were present, condemningthe“tragicloss”oflivesand LastyearMoscowvetoedaUNresolu- by hundreds of residents in Zhengzhou, to the letter, reported by the South Henan said local students would “bene- Russian heavy military equipment was callingforanindependentinvestigation. tion that sought to establish an inde- capital of Henan province. In recent China Morning Post, Peking accepted fit from the adjusted college entrance present; it was photographed, wit- Two-thirds of the 298 victims on the pendent tribunal to prosecute people weeks parents have taken to the streets oneoutofevery8,900Henanapplicants examprogramme”. nessed, videoed and geo-located to the flight between Amsterdam and Kuala responsible for downing the jet. An ofcitiesinHubeiandJiangsuprovinces. in2013,comparedwithoneoutofevery A statement by the Puyang govern- area where the missile was fired from,” LumpurwereDutch.Therestwerefrom investigation by Dutch criminal prose- Like their state-run counterparts in 325fromBeijing. ment said: “We hope parents will not saidJerrySkinner,counselwithLHD. Australia,Malaysiaandothernations. cutorshasyettoconclude. the US, Chinese universities reserve a Thatcomplaintwasechoedyesterday believe online rumours. Everyone cares He told Australian radio the lawsuit In a report last year the Netherlands Russia has offered $50m to help cap- percentage of places for students from by parents protesting in Baoding, an aboutfaireducationandwewilltakethe was filed on behalf of 33 next of kin of safety board concluded that the aircraft ture those behind a terror attack on an theirhomeprovinces,allocatedthrough industrial city a few hours’ drive from issuetooursuperiors.” seven families from Australia, New Zea- had been felled by a Russian-made sur- Egyptian jet in October that killed 224, a gruelling annual exam known as the thecapital.Theysaidtheimbalancewas AdditionalreportingbyWanLi land and Malaysia. The action was face-to-air Buk missile but did not say mainlyRussianholidaymakers.

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MAY 24 2016 Section:Ad Page Time: 23/5/2016 - 14:40 User: leej Page Name: AD FT, Part,Page,Edition: USA, 5, 1 6 ★ FINANCIALTIMES Tuesday 24 May 2016

INTERNATIONAL

Fiscal crisis Brazil warned of ‘explosive’ build-up of public debt

Education and pension gross domestic product to the budget in very realistic,”said Henrique Meirelles, If other liabilities were included, such points of GDP, which means it will The impeachment of Ms Rousseff — a thenextdecade,headded.“Ifyoudothe thenewfinanceminister. as loans to state governments that are have to find 5-6 percentage points of leader who oversaw a 4 per cent con- plans must be reversed, arithmetic,it’sexplosive.” Mr Fraga, who co-founded Gávea struggling with the recession and the GDP in cuts to public expenses or new traction of the economy last year — had says ex-central bank head The Temer government is trying to Investimentos and worked with global likelyneedtorecapitalisePetrobras,the taxrevenues. been done in accordance with the con- refloat a sinking economy after the sus- financier George Soros, helped the state-owned oil company, public debt Brazilhascreatedalawthatenvisages stitution,headded. JOELEAHY —SÃOPAULO pension of President Dilma Rousseff in opposition during the election cam- wouldriseto75-80percentofGDP,said a doubling of spending on education to The functioning of Brazil’s institu- an impeachment process this month. paign in 2014. He said the budget chal- MrFraga. 10percentofGDPover10years. tions, in which the police and prosecu- Brazil’snewgovernmenturgentlyneeds Among the priorities is resolving a lenge facing the interim government Meanwhile the pension system is tors exposed government corruption to defuse fiscal “time bombs” that budgetary mess created during her five was difficult even before accounting for expected to grow in cost by 7 per cent of while the Supreme Court ensured that threaten an already strained national years in power. Ms Rousseff is being the potentially explosive issues of edu- Education and GDPoverthenextdecade. the impeachment was conducted pension spending budget,accordingtoArminioFraga,the impeached on charges of manipulating cationandpensions. ‘doesn’t add up’, Together these two sources of addi- according to the rules, “bodes very well former central bank governor and the public accounts to disguise the dete- Ms Rousseff was running a 2 per cent says Arminio tional spending would add up to 12 per- for our future”, said Mr Fraga. “I do founding partner of one of the country’s rioratingstateofpublicfinances. primary fiscal deficit, so in effect the Fraga, who worked centage points of GDP to the budget at a think once this goes through we are biggesthedgefunds. The interim government has government was borrowing money with George Soros time when the government is struggling likelytohaveadifferentBrazil.” The administration of Michel Temer, announced a new target for the 2016 from the markets to meet its interest tocomeupwithsavings. Mr Temer has published a policy doc- interim president, would have to central government primary budget payments. Together with interest pay- “With 6 per cent real rates and a pri- Brazil’s pension system is generous, umentforsolvingthecrisis,“ABridgeto reverse a planned increase in spending deficit — before interest payments — ments that are among the highest in the mary deficit, [gross debt] grows very allowing for early retirement, indexing the Future”, which lays out market- on education and growth in the pension that was worse than economists had world—thebenchmarkrateis14.25per fast, so from there to 90 per cent is just pensions to the minimum wage, and friendly ideas. “He has support and he system, said Mr Fraga at a conference in expected at R$170bn ($48bn), or about cent — the budget deficit was about 10 a couple of stops on the debt subway.” even permitting some inheritance of got there through legitimate means,” NewYork. 2.7 per cent of GDP. Ms Rousseff’shigh- per cent. Gross public debt rose from To stabilise the debt, the Temer gov- pensions. “It just doesn’t add up,” Mr said Mr Fraga. “As a Brazilian I can only If not these two areas of spending estestimatehadbeen74percentlower. 51.7 per cent of GDP in 2013 to 66.5 per ernment would need to begin posting a Fraga said, referring to the education hope that he can go to work and get would add up to 12 percentage points of “This is a target that we judge to be centlastyear. primary fiscal surplus of 3-4 percentage bill and trends in the pension system. someofthisdone.”

Central America. Killings PMI Eurozone El Salvador declares bloody war on gangs growth slows to lowest in Attempt to reduce savage turf 16 months battles has led to fears over trigger-happy security forces CLAIREJONES —FRANKFURT Growth in the eurozone appears to be JUDEWEBBER —MEXICOCITY slowing after a rapid recovery at the One woman’s body, her wrists and feet start of the year, according to a closely tied,dumpedinablackbag;aman,pos- watchedpoll. sibly hanged, bundled in sheets and The purchasing managers’ index, stuffed into a suitcase; a dead gang compiled by Markit, the data provider, member. and used by officials to monitor the The newspaper coverage of this grisly directionofeconomicactivity,dippedto pre-dawn death toll around the country a 16-month low of 52.9 in May — from ononedaythisweekwasmatter-of-fact. 53inApril. Savage turf battles between gangs have While PMI remains above the 50 level made murder mundane in El Salvador, that marks an expansion in activity,the which last year supplanted Honduras as downward trend raises doubts about thehomicidecapitaloftheworld. the strength of the recovery in the 19- Now the government, which credits membersinglecurrencyarea. its tough anti-gang task forces in masks The data are based on surveys of vari- for helping cut the murder rate by ables such as output, new orders and 42 per cent in April compared with employmentatthousandsofcompanies March, has promised to bring the gangs and show new business growth at its totheirkneesinayear. lowestsincethebeginningoflastyear. It is a tall order: the Mara Salvatrucha In contrast the eurozone’stwo biggest and Barrio 18 gangs, declared terrorist economies, France and Germany, have groups by the Supreme Court last year, put in relatively strong recent perform- have some 60,000 members. Even ances. The disparity potentially indi- national police chief Howard Cotto has cates diverging fortunes of the region’s admitted that as fast as the men on El core and peripheral economies such as Salvador’s100 most wanted list are cap- Italy,SpainandGreece. turedorkilled,otherswillfilltheirshoes. Stephen Brown, European economist “We can’t go on tolerating these 42% tolerance to gangs, Raúl Mijango, the contact with gangs ahead of the 2014 On the move: betweenwhatishappeningnowandtwo at Capital Economics, said the data pro- groups . . . we have to lay siege to them, Fall in the murder former congressman who talked the presidential election — raising suspi- gang members years ago is that the state is in the posi- vided “little evidence that another pursuethemandbringthemdown.This rate in April from imprisoned bosses into the truce, was cions, which they deny, that they were are transferred tion of strength and not the gangs, strong quarter of growth was on the is the mission we have in the next 12 March, according this month himself arrested, accused of courtingorbuyingthegangvote. to prison in San because they are using violence in the cardsinthesecondquarter”. months,” Oscar Ortiz, the vice-presi- to the government getting them perks including prosti- Now El Salvador has another prob- Salvador in streets, with few limits, to hit them However, the figures underestimated dent,saidthismonth. tutes, cable television, video games, lem: trigger-happy security forces. Last March. Below: . . . it’s like some sort of scorched earth the pace of expansion recorded in the ItssuccessisnotjustaSalvadoreanbut 60,000 dancers and 1,605 boxes of fried yearthegovernmentsaidpolicewhofelt a member of the policyinsomeareas.” first quarter. In March Markit’s econo- a regional issue. With scant prospects in Number of chicken. Mr Mijango defended the threatened could shoot gang members special forces Itisafragilesituation.Oneaidworker mistsestimatedgrowthfortheperiodof a country with low growth and rising members the Mara perks as necessary to get the gang lead- “with no fear of suffering conse- tackling the with long experience of working in El 0.3 per cent, lower than the 0.5 per cent debt, young people face a stark choice: Salvatrucha and ersonsideandsaidheactedwiththefull quences”. Critics say they have taken gangs — Fred Ramos/ Salvador feared that with jailed bosses figure recorded by Eurostat, the Euro- gang membership or a trek to enter the Barrio 18 gangs, knowledgeofthethengovernment. thatedicttoheart. Washington Post/Getty now held incommunicado, the gangs’ peanCommission’sstatisticsbureau. declared terrorist USwiththeprospectofbeingsenthome. groups by the Analystsseethearrestasadistraction David Morales, El Salvador’s human “mad young guns” could become more In France activity rose in May at its Violence took root in the country in Supreme Court after recordings published by respected rights ombudsman, says security forces radical, leading to violence rising again. fastestinsevenmonths,asrapidgrowth the 1990s precisely when thousands of last year online news site El Faro showed both killed 13 in two shoot-outs last year, And that has heartbreaking conse- in the dominant service sector offset a Salvadoreans who joined gangs in Los government and opposition figures in including four teenagers, the youngest quences. The collapse of the truce was declineinmanufacturing. Angeles after fleeing their country’s aged15.Inall,hehasreceivedreportsof followed by record numbers of unac- “There are signs of improving life in 1980-92civilwarweredeported. 5,500 30 cases of alleged murders, with 100 companied children fleeing to the US in the ‘core’ countries of France and Ger- Despite the government’s iron-fisted Estimated number victimssincethegangcrackdownbegan 2014,believingtheywouldbeallowedto many, led mainly by their service sec- of lives saved GUATEMALA tactics,therecentfallinhomicidesowes during a gang truce lastyear. reunite with family members. From tors, as manufacturing continued to much to a self-imposed gang ceasefire between March Thegovernment’stacticsarepopular October 2015 to March 2016, there struggle,” said Chris Williamson, chief agreed in late March — a reminder of 2012 and late 2013 HONDURAS in a country terrorised by violence, were 11,000 apprehensions of Sal- economistatMarkit. how murders halved during a truce whereextortionofshopkeepers,bus vadorean children and their fami- “Elsewhere the rate of expansion from March 2012 until late 2013, which driversandotherlocalsisthegangs’ lies trying to cross into the US, slowed to its weakest for almost one- savedanestimated5,500lives. main income. It is “an ugly,informal more than three times the rate in and-a-half years. The survey paints a After that collapsed, killings climbed San Salvador tax system supported at gunpoint”, the same period last year, accord- pictureofaregionstuckinalow-growth again. Last year the murder rate surged according to Geoff Thale at advocacy ingtothePewResearchCenter. phase, managing to eke out frustrat- 70 per cent to 6,670 compared with EL SALVADOR group the Washington Office on Latin Mauricio Hernández, a taxi driver in ingly modest output and employment 2014,makingthetinyCentralAmerican America. the capital, San Salvador, sees little gains despite various European Central country of 6m the most murderous As Héctor Silva, a Salvadorean hope. “These gangs are like octopuses, Bankstimulus‘bazookas’,acompetitive peacetimeplaceonearth. scholarattheAmericanUniversityin they have tentacles everywhere,” he exchange rate and households benefit- km Underscoring the government’s zero Washington, puts it: “The difference said.“It’sverydifficulttoendthis.” ingfromfallingprices.”

South Africa Monetary policy Prosecutor under fire in Zuma corruption case Kenya cuts interest rates as inflation falls

JOSEPHCOTTERILL —JOHANNESBURG for the prosecutor’s independence and minister, was about to be arrested in JOHNAGLIONBY —NAIROBI raised 150bp at the June and July meet- The broader economy is also per- needed “the decision of an appeal connection with allegations that a unit ingsofthebank’sMPC. forming well. Over the past month the South Africa’s national prosecutor Kenya, one of the best-performing court”. A filing had been made to the of the tax authority illegally spied on JohnAshbourne,atCapitalEconomics governmenthasannouncedthatin2015 has said he will appeal against a court economies in sub-Saharan Africa, yes- SupremeCourtofAppeal,headded. senior officials. Mr Gordhan was head of inLondon,saidthemovewas“notunju- gross domestic product grew 5.6 per order to revive corruption charges terday unexpectedly cut its bench- The opposition Democratic Alliance, thetaxauthorityatthetime. stified” since Kenya, a net oil importer, cent, up from 5.3 per cent in 2014. against President Jacob Zuma that mark interest rate by 100 basis points whichhaspursuedlegalactionforyears The reports triggered a sharp drop in has bucked the sub-Saharan Africa Kenya’seconomyisoneofthefewinthe weredroppedsevenyearsago. to 10.5 per cent amid falling inflation over the decision to drop the charges, therandlastweek. trend of slowing growth and rising infla- region that grew faster last year than in anda“strong”outlookforgrowth. The decision will rekindle controversy said the appeal was a “blatant delaying Mr Abrahams said “no charges of tion.Butheadded:“Ithoughttheymight 2014. The government expects growth dogging the ruling African National tactic” and the prosecutor’s office was espionage” against Mr Gordhan were Analysts had expected the central bank have waited a few more months to see toaccelerateto6.1percentthisyear. Congress over its support for the scan- “preoccupied with protecting President being investigated and he would not be to keep rates unchanged for several that the falling inflation was a trend and Thiscontrastssharplywithsub-Saha- dal-prone president, two months before Zumaatallcosts”. arrested. “The NPA is not filthy or cor- more months, citing uncertainty in the not[ablip]foracoupleofmonths.” ran Africa more broadly. Earlier this local elections that could threaten its Mr Abrahams “categorically” denied rupt as some politicians would have you global economy, particularly the threat Inflation fell to 5.3 per cent in April month the International Monetary control of key cities for the first time that the NPA was trying to delay the believe,”hesaid. of the UK leaving the EU and the possi- from 6.5 per cent in March, well within Fund revised down its forecast for sinceapartheidendedin1994. case, saying he wanted it “resolved as Mr Zuma has always denied the cor- bilityofanotherUSraterise. thegovernment’stargetrange.TheKen- regionalgrowthin2016to3percent. North Gauteng high court ruled last soonaspossible”. ruption charges, which were dropped Patrick Njoroge, central bank gover- yan shilling has remained stable this The MPC cited the stabilisation of the month that a 2009 decision to drop 783 The Supreme Court could refuse to after recorded conversations emerged nor,saidafterameetingoftheMonetary year, supported by a narrower current bankingsectorafterthemidsizedChase counts of fraud, racketeering and cor- hear the appeal, and Mr Abrahams did suggesting political interference in the Policy Committee that “the global econ- account deficit driven by cheaper oil Bank was put into receivership last ruptionagainstMrZuma,whowaspres- not rule out going to the Constitutional originalprosecution. omy has weakened in recent months” imports, improved earnings from tea monthasanotherreasonforoptimism. ident of the ANC at the time, had been Court. The Constitutional Court ruled in butthattherewas“spaceforaneasingof and horticulture exports and strong Mr Njoroge said in the short term he “irrational”andheshouldfacethem. Fears have been growing over the March that Mr Zuma had violated the monetary policy while continuing to diaspora remittances. These have was concerned about the UK’s referen- Yesterday Shaun Abrahams, head of politicisationofSouthAfrica’spoliceand constitution by failing to pay back tax- anchorinflationexpectations”. helped boost foreign exchange reserves dumonEUmembershipbecausetheEU, theNationalProsecutingAuthority,said prosecution services, especially since payers’ money spent on his private The benchmark rate has been at to $7.7bn, equivalent to five months of and especially the UK, was a big market the ruling raised constitutional issues reports that Pravin Gordhan, finance Nkandlaresidence. 11.5 per cent since last year, when it was importcover,upfrom$7.4bninMarch. forKenyanflowersandvegetables.

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FTBIGREAD. MIDDLEEAST

Isis has lost territory in Iraq and Syria but military success is disguising a larger problem for the coalition, with regional politics proving far more difficult to overcome than the Islamist group on the battlefield. By Erika Solomon and Geoff Dyer

Conflict zones From Mosul to Raqqa and the ‘Manbij pocket’

TURKEY TURKEY Main players 20km Forces fighting the jihadis

Al-Sharkrak Iraqi Armed Forces — Iraqis lost faith Kurdish YPG forces are in their national military, dominated by massed in this area the country’s Shia about 13km north-east majority, after they of Ain Issa, poised to beat a hasty retreat Ankara wants a presence in the area Ain Issa move on Raqqa north of Mosul to counter the Kurdish when Isis began its Isis has heavily fortified blitz across northern forces of the PKK and YPG that cross the town north of Raqqa SYRIA the territory from Sinjar to eastern Syria Iraq in June 2014. The where the Arab rebel US is retraining units to try and get group Thuwar Raqqa is Telskuf also located them ready for the fight. Hashad al-Shaabi — Shia militia, also The Peshmerga is based 30km north of Mosul. It SYRIA says it has a right to advance towards the city's known as Popular Mobilisation Forces, north-east to seize control of Kurdish and Christian formed to fight Isis in the summer of areas they say belong in Iraqi Kurdistan Raqqa 2014 but are now taking on a life of their own, with their leaders gaining Sinjar political and military power. Sunnis fear This area, 100km west of Mosul, houses Ba’ashiqah them as a sectarian force that has bases belonging to both the Peshmerga committed abuses against their and the PKK plus its affiliate groups Turkey moved materiel and minority population. fighting in the area. Turkey and the manpower into a base 20km Kurdistan Workers’ party (PKK) — 20km Peshmerga worry that the PKK may north-east of Mosul and has kept Originally from Turkey’s southeastern advance toward Mosul them there despite Baghdad Kurdish region, the PKK has fought a publicly calling for a withdrawal. On 30-year war with Ankara for Kurdish Mosul the base Turkey is also training a 20km TURKEY autonomy. It has bases inside the Iraqi militia called the Hashd al-Watani Isis and Syrian rebel groups Tal Afar Kurdistan region, where it has been IRAQ (National Mobilisation Forces), set are involved in intense fighting Isis. Branded a terrorist group up by the province's former fighting leading to towns Jarabulus regularly switching hands by Turkey, the US and the EU. governor Atheel al-Nujaifi and People’s Protection Units (YPG) — rejected by parts of the Baghdad Syrian Kurdish militia that is seen as a government Al-Rai sister group or descendant of the PKK, Azaz Mregel with which it maintains strong Jarez Manbij operational and ideological links. It is the most effective US ground partner Makhmour in the anti-Isis campaign in Syria. The headquarters of the US-led coalition campaign for Manbij pocket Tishrin Peshmerga — Kurdish paramilitary Mosul is 60km south of the city. At least 5,000 Iraqi troops Dam forces of the semi-autonomous are based there, along with allied Sunni tribesmen who Kurdistan Regional Government in Aleppo have formed a unit of the Popular Mobilisation Forces. This northern Iraq. is also the site where Shia militia would like to enter the Syrian rebels — Syrian opposition campaign, despite objections by the Sunni community Al-Safirah forces that emerged from the 2011 revolt against President Bashar al- Assad. They are a fractious force of countless groups with different patrons, most of them backed by SYRIA Turkey and Gulf states. Several groups deemed ideologically “moderate” have US backing.

ooking at a map of northern the area under the cover of explosions, hostilities are surging across northern Iraq, it can easily appear as if sending thousands of refugees fleeing Syria, leading to fierce battles around the Isis forces holding the city towards Turkey. Since then, this west- Aleppo, often prodded by Turkey, of Mosul are highly vulnera- ern corner of the Manbij pocket has whichwantsrebelstoweakenthePKK’s ble. To the west, militias are The factions behind been stuck in a tug of war between Isis sister force. This fighting will be hard to Lready to advance. To the north, south andSyrianrebels. extinguishevenifIsisisdefeated. and east, army and paramilitary troops Western forces have a more capable “It is just one of those things where areascloseas20kmaway. ally nearby eager to do the job: the Peo- you have to accept the consequences Yet even as these troops seem within ple’s Protection Units, known by their that go along with what you’re doing,” touching distance, they are a long way Kurdish acronym YPG, the Syrian affili- saysPhilipGordon,formerseniordirec- from retaking Mosul. What the maps do the fight against Isis ate of the PKK. The YPG has chipped tor for the Middle East at the White not show are the bitter rivalries, politi- away at Isis territory under coalition air House. “I don’t think the Kurds are the cal ambitions and regional power strug- cover, retaking nearly all Kurdish areas recipe for either forcing change in gles behind the forces gathered around putesunresolved,someoffensivescould ish official says. “I’m not sure how they native who works at Al-Mesbar Center ofeasternSyria. Damascus or taking Raqqa and stabilis- Iraq’s second-largest city, hindering do more harm than good by reintroduc- candoit.” in Dubai, warn that planners must not TheUSsaysithastriedtoattractArab ingtheeastofthecountry.Soevenifitis what will be one of the most important ing the same political and sectarian ten- Thestrugglesarebeingfoughtagainst forget the needs of Mosul residents. She rebels to ally with the YPG under the useful in some ways, it doesn’t solve the campaignsinthewaragainstthejihadis. sionsthathelpedIsistakeroot. a backdrop of political and economic says the city may be easier to take than banneroftheSyrianDemocraticForces, overallproblem.” “If you think there is some grand plan “Wecouldprobablymovefaster,”says crisis in Baghdad. Haidar al-Abadi, expected — western officials have been hoping this could create a force more The coalition is trying to implement a forthis—well,thereisnoplan,”saysone a senior US official. “But we don’t want prime minister,is trapped between pro- bracingthemselvesformassivedestruc- committed to fighting Isis than ousting plan to choke Raqqa by taking the sur- Iraqisecurityofficial. to have a victory today and then a testers demanding a crackdown on cor- tion. But to keep Mosul residents Mr Assad. But most Arab rebels, who rounding area but it still needs a bigger In the two years since Isis shocked the month later we see that we planted the ruption and an elite reluctant to give up onside,thecoalitionmustsendinforces have strong links with Turkey,are wary Arab force to hold those towns. Wash- worldbyseizingMosulandlargeswaths seeds for the next Isil”,using an alterna- a sectarian patronage system that has theytrust. of joining saying they get second-class ington recently deployed 250 more US of Syria and Iraq, the US-led coalition tiveacronymforthegroup. enriched them since the 2003 US inva- “Whether we like it or not, Mosul is statustothefavouredKurdishforces.. troops to bolster Syrian forces fighting battling the group has made progress. The anti-Isis coalition’s campaign sion. Predominantly Shia protesters very tied to Turkey. It’s where their With Turkey fighting the PKK on its Isis. Isis has lost 46 per cent of its Iraqi terri- hinges on retaking three areas: Mosul in stormed the Green Zone and ransacked roots are. I’m not saying people are own soil, the US-Kurdish alliance is “We are like people walking barefoot tory and 16 per cent of its holdings in Iraq, Raqqa in Syria and the so-called parliament in April and clashes on Fri- more loyal to Turkey, but right now, straining American co-operation with on a burning surface,” says one com- Syria, according to the Pentagon, faster Manbij pocket near the Turkish border. day left at least four dead. Kurdish par- they are in an identity crisis and they Ankara. At the same time, many rebel mander of the Thuwar Raqqa brigade, than US officials had thought likely. Each area highlights a jumble of inter- ties are now boycotting parliament feel closer to places like Aleppo [in groups are still focused on their war an Arab rebel group that is part of the ests now proving more difficult to navi- arguingitisillegitimate. with the Assad regime that foreign pow- SDF.“Itisaforcedmarriage.” ‘Someofthesegroupswere gatethanthebattlefielditself. “Usually, Abadi would call the com- ers say only a settlement in Geneva can Some Syrian opposition figures who manding officer up north every day but end. As peace talks and a partial cease- once considered joining forces with the notco-ordinatingwitheach Iraq’ssecondcity he is completely focused on this mess in fireflounder,thatstilllooksfaroff. SDF are now opposed, suspecting that Iraq is divided between a Shia Arab parliament,” says Mohammed Tamim, Rebels in the area are also riven with the US and Russia, are working towards other.Sohowcantheyagree majority that dominates the govern- a Sunni MP.“This [crisis] is hurting our rivalries between those groups closer to a deal to leave Mr Assad in power. “The onthesamepointofattack ment, a marginalised Sunni Arab securitynowaswell.” Turkey and those allied to Washington. goalnowisjusttoholdoutuntilthenext minority that wants more power and an The KRG is reluctantly hosting 5,000 Among US-backed groups, there are [US] administration,”one Syrian oppo- ordefence?’ ethnic Kurdish minority dreaming of Iraqi Army troops at a base south of even differences between those backed sitionadvisersays. independence. Conditions around Mosul, but the Kurds merely watched by the Pentagon’s “Train and Equip” In Mosul, residents are wary of the Recent momentum has lulled many Mosul reflect that tension. But on top of when those troops failed in early scheme, and those from an older CIA forces trying to liberate them, fearing regional players into a sense of confi- that, an intra-Kurdish rivalry has attempts to advance. Other groups are programme. theywillbeblamedfortheIsistakeover. dence,almostasifthewarwasover. emerged as well as a proxy struggle eager to step in, most notably the thou- “The result is that some of these “SayingtheyarefromMosulnowmakes “Everyone has forgotten about Isis,” betweenTurkeyandIran. sands strong Shia volunteer forces groups are not coordinating with each them guilty by association,” says Ms says one UN official in Iraq. “They are Mosul lies in the Nineveh Plains, part known as the Hashd al-Shaabi, or Popu- other,” one rebel leader says. “So how Aqeedi,theIraqiacademic. busy positioning themselves for the war of the so-called disputed areas, where lar Mobilisation Forces. Prominent in A Syrian Democratic Forces fighter can they agree on the same point of Such tension could leave room for Isis afterIsisinstead.” the central government and the semi- the recovery of Tikrit from Isis last year during a battle for an Isis-held town attackordefence?” to exploit. That seems to be the strategy Theregionalshake-upIsiscreatedhas autonomous Kurdistan Regional Gov- Mr Abadi has promised the group a role itisalreadypursuinginBaghdad,where unlocked opportunities to grab new ter- ernmentareeagertostakeaclaim.They inanyassaultonMosulbutKurdishand Syria] and Ankara than they do to [the HittingIsisathome car bombs have killed 200 people over ritory or reassert spheres of influence. remain in an uncomfortable alliance to Sunnileadershavevowedtostopthem. southernIraqicityof]Basra,”shesays. The potential for Kurdish-Arab tension thepast10days,mostlyinShiadistricts. These ambitions not only hamper the retake territories from Isis that they Turkish forces are, meanwhile, build- All this makes any timeline for retak- is especially evident in the coalition’s There has been no outbreak of sectar- unfinished conflict, they have sparked themselvesarefightingover. ing up a base north of Mosul, raising the ing the city in 2016 seem optimistic, the effortstorecaptureRaqqa,whichisseen ian conflict yet but anger at the govern- fears of sectarian bloodshed and “The US is leading the mobilisation ire of Baghdad and its patron Iran. Kurdish official says: “If they’re lucky, as the most vulnerable to an offensive. mentisrising.“Thedynamicsthatledto regionalproxywarstocome. efforts and have to find forces accepta- Mosul was a hub for Turkish commer- maybenextyear.” Residents say speculation is rising of an Isil are still there,” the Kurdish official Today it is politics, not military mat- ble to Baghdad and Erbil [the KRG’s cial and intelligence operations before imminentattackinthearea. says.“There’sbeennochange.” ters, that is delaying the most critical main base] and everyone else,”a Kurd- the Isis takeover. Apresencethere FromAl-RaitoJarablus Demographically, Raqqa is over- battles against Isis — such as in Mosul, would also give Ankara a foothold Tensionisalsopresentinanareaknown whelminglyArab.ButonlytheKurdish- the jihadi group’s largest city, or its de between territories used by the Kurdis- as the Manbij Pocket, a 90km strip of dominated SDF is within range of the facto capital Raqqa in Syria. In a sign of tan Workers’ party (PKK), a group Tur- land along the Turkey-Syria border SyriancityanditsArabforcesarefew. the tension, Baghdad at the weekend key and the US considers terrorist and stretching from the village of Al-Rai to “Ifwe’repurelytalkingcities,Raqqais announced a campaign to retake the with which the former has fought a 30- the town of Jarablus, and southward easiertotake[thanMosul],”aseniorUS town of Falluja, a move that could year insurgency. To Turkey’s dismay, towards cities such as Manbij. As the official says. “But the composition of a threatenUSeffortstofocusonMosul. the PKK now has an arc of influence jihadi group’s last crossing zone into holding force there is much harder to Losing ground Isis has lost 46 per cent The risk of prolonged war has serious from northern Iraq right across the bor- Turkey,itoffersagatewaytoEurope. come up with. I don’t think it would of the territory it controlled in Iraq implications for the region and beyond. dertoitssistergroupinSyria. “Manbij is there for the taking,” says make sense to take a city and then leave after its takeover in 2014 It leaves millions across Syria and Iraq Local PKK affiliates, with the sus- Aaron Stein at the Atlantic Council. it — we’ve learned in the past [in Iraq homeless and displaced at a time when pected backing of Iran are also jockey- “The only reason Manbij and Jarablus andAfghanistan]whatthatmeans.” Military targets The anti-Isis campaign world powers are keen to stem the flow ing for a role in the Mosul offensive. The arestillinIsishandsispolitical.” Critics say the sections of the Obama hinges on retaking Mosul, Raqqa and a ofrefugeestowardsEurope.Italsocom- move is alarming Ankara and the KRG, The problem lies with the rivalries administration that have been the big- 90km area on the Syria-Turkey border plicatesthepeaceprocessforSyria. which fears that the PKK could try to between coalition partners. In recent gest proponents of the US-Kurdish alli- US officials say preparations to retake seize the Sinjar region north-west of weeks, Turkish and coalition-backed ance, including parts of the military, Wider struggle The military battle is keytargetslikeMosulhavebeenincred- Anti-government protests over Mosul. Amid the political chaos, aca- Syrian rebels captured al-Rai. But the have failed to realise just how damaging being fought against a backdrop of ibly hard. With so many political dis- corruption in Baghdad last Friday demics like Rasha al-Aqeedi, a Mosul triumph evaporated as Isis recaptured that focus has become. Arab-Kurdish economic and political crisis in Iraq

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Reading the numbers for Anti-elitism is fuelling a populist insurgency UK airport expansion Sir, Philip Stephens is right to point out Sir, I believe the challenge to the pay decent wages on which families That insurgency began assembling (FT.com, May 15) that the Airports Labour vote over the longer term is can be raised. for battle in the UK at the last general Commission’s numbers do not add up. greater than Jim Pickard reports Donald Trump is completing election. Nearly 1m one-time Labour An FOI request of the Department for (“Immigration worries leave Labour President Ronald Reagan’s strategy voters supported the UK Independence Transport has revealed arithmetic divided on Europe”,May 21). There of decoupling blue-collar Democratic party. Labour is now wholly errors and omissions in the is at long last a determined revolt in the voters by giving them hope in the represented by a leadership from the commission’s final report. Even on its west by blue-collar voters and their Republican camp. A careful choice by frontline of blue-collar constituencies, own assumptions, the commission’s TUESDAY 24 MAY 2016 families against them bearing the pain Mr Trump of a tough female running but remains as deaf as any Blairite figures miscount international traffic to for the rich elite’s insistence on mate will put the kibosh on Hillary to the totally justifiable revolt that is and from the UK under airport unfettered globalisation and open Clinton’s attempts to win the White girding up its loins for battle. Labour’s expansion, particularly in the case of borders. House, as he leads what is now inability to respond to this insurgency Heathrow expansion (overstating by That strategy has put China into pole a fast-moving insurgency vote. Bernie vote is handing over the future of 4.2m international passengers in position for the next stage of world Sanders, even more hopefully, shows Britain’s political centre-left for Ukip 2030). Once corrected, it becomes history. And this cavalier transfer of it is possible to take richer people to decide. clear that long-haul travel to and from The gig economy needs a economic power to the east has distressed by these impacts of Frank Field MP the UK is the same under Gatwick decimated too much of the economic globalisation, on the insurgency House of Commons, expansion as it is under Heathrow basis of western economies’ ability to journey. London SW1, UK expansion, with 61m passengers in new bargain for workers 2030. This is directly at odds with the commission’s conclusions. Senator Warren offers a framework to update employment laws Savers can be forced to Rules on pension ‘rescue As for economic analysis, it is now also clear that the commission did not America’s middle class is losing online platforms mainly to help them fund public sector deficit plans’ are unclear prepare its economic case in ground. Wage stagnation, economic weather a dip in their regular earnings Sir, In John Plender’s excellent “Why Sir, You report that two years ago the accordance with the Treasury/DfT insecurity and rising inequality have — as an alternative to cutting spending governments are caught in a double Pensions Regulator rejected a “rescue guidelines, as it should. The becomethedefiningissuesofthepresi- orrunningupdebts. bind over public debt” (Markets plan” from Sir Philip Green for the BHS commission suggests that the capital dential campaign. Yet as politicians There is anecdotal evidence that Insight, May 18) he concludes that pension scheme, which could have left costs of the schemes are not relevant to search for a response, they must also competition is already helping to there is no escape from “sky-high debt- some scheme members better off (May the economic analysis and that the grapple with the changing nature of improve conditions, since workers are to-GDP ratios” because disciplined 20). Under the plan, members could growth enjoyed by competitor nations employment. The “fight for $15”, the freetojoinmorethanoneplatformand austerity leads to nominal gross have chosen to transfer to a new should all be treated as a benefit to the nationwide campaign for a big rise in areincreasinglymigratingtothosethat domestic product growing slower than scheme with lower pensions than UK if they use London as a transit the federal minimum wage, is of little offerbetterterms. the debt and its servicing, while pro- promised, but higher than the Pension point. Correcting for these invalid relevance to the growing numbers However, there is a need for policy- growth policies and inflation make the Protection Fund compensation, with a assumptions — as indeed the working without the traditional rela- makers to provide a level playing field servicing cost unaffordable. But there company controlled by Sir Philip’s government is required to do if it is to tionship of employer and employee in and to ensure that the changing nature is one escape route: rob more from family injecting some cash into the new have a sound basis for its decision theso-calledgigeconomy. ofworkdoesnoterodelivingstandards savers. That is, deficit-financed pro- scheme. making — shows that Gatwick has the Enter Elizabeth Warren, the left- or fray the social safety net when it growth policies combined with greater Precise details are, understandably, strongest economic case under all the leaning senator named in some quar- comes to health, pension and job secu- financial repression similar to wartime, sketchy, especially how much cash was commission’s traffic scenarios. tersasapotentialrunningmateforHil- rity. As Ms Warren points out, these forcing savers to fund the public sector involved, but the report fails to answer As for its assumptions, in July last lary Clinton. In a speech last week, the problems apply not just to gig workers, deficit at ever lower real interest rates. some obvious questions of principle: year the commission projected Gatwick former Harvard academic set out a but also to temporary, contract and Mr Plender refers to how Britain which part of pension legislation allows would reach 40m passengers by 2024. framework to “rethink the basic bar- part-timeworkers,especiallyinsectors managed to escape debt of 260 per cent this to happen? Is this a tried and Sir Howard Davies is right to note that gain for workers” and ensure that a suchasretailorconstruction. of GDP after the Napoleonic wars via Gaining access to capital can be tested mechanism for pension some projections may turn out to be majority can share the benefits of tech- The challenge is not to regulate the deflationary growth (while continuing another reason to manage holdings schemes, which the regulator has wrong (Letters, May 17) but starting nological change. Her intervention is a gig economy, but to ensure that all to pay positive real interest rates). It actively. On the flipside, buyers are already approved, or something out with an error will make that thought-provoking one that could workersenjoybasicprotections. should be noted that at the time Britain attracted to secondaries for visibility entirely new? If there are other possibility a certainty. Gatwick passed guide the debate in many developed Ms Warren outlines four areas for briefly debated a 10 per cent haircut on and quality returns. examples, how was BHS different? the 41m mark last weekend. economiesfacingthesamedilemma. action. First, she wants to make it eas- the debt, but instead returned to the In 2015, secondary transactions Any implication that the regulator Nick Dunn She resists the temptation to demon- ierforallworkerstopaysocialsecurity gold standard in 1821, inducing completed were worth between $30bn rejected Sir Philip’s offer capriciously Chief Financial Officer, ise the online platforms that have contributions and buy insurance confidence in the debt holders, but for and $40bn, mirroring the deal flow in and that things would have been very Gatwick airport, W Sussex, UK become a focus of fears over job secu- againstdisabilityorillness,aswellasto a number of years most of the tax 2014. This demonstrates a consistent different had it been just a bit more rity, epitomised by the ride-sharing accrue credits for at least some paid revenue was spent on debt servicing. demand among institutional investors helpful, strikes me as misleading. Why wind and solar farms company Uber and its rivals. This bal- leave. Second, she argues that health Welfare spending was postponed for to have the option of secondary You also say that the regulator would anced appraisal of their business and pension benefits should belong to decades, and half the banks in the liquidity for their private equity not comment, but you do not point out push power prices down modeliswelcome. workers and should follow them no country went bust. That may not be an investments. that the Pensions Act 2004 makes it a Sir, Your article implies that wind and It is true that Uber’s offer of cheap matter what their employment status. acceptable policy today. It is, therefore, bizarre to use the criminal offence for it to disclose any solar farms depress power prices abundance depends on low wages for Third, she underlines the need to John Gent story of one allegedly fraudulent information obtained “in the exercise because they are subsidised (May 21). drivers, who are held to be independ- streamline and enforce existing labour Doctoral candidate, individual to frame an analysis of what of its functions which relates to the This is not the case. The reason for ent contractors and so enjoy none of laws to stop employers exploiting London School of Economics, is in practice a well-functioning, open business or other affairs of any person”, wind and solar farms as well as nuclear theprotectionsofemployees. loopholes. Finally, she stresses the Kingston upon Thames, Surrey, UK and accessible market. By doing so you punishable by a fine or prison sentence power plants producing power even at However, the fact that online plat- need for collective bargaining for all describe hundreds of public pension of up to two years. This allows zero prices is that their marginal cost in forms can attract workers in large workers — unions, historically intent Private equity’s secondary funds, financial institutions, sovereign companies to give their version of the short run is zero as they have no numbers despite relatively unappeal- on protecting insiders, need to bear wealth funds, family offices, as well as events, knowing the regulator is forced meaningful fuel costs. Wind and solar, ing conditions is an indictment of the someresponsibility. market is legitimate many other organisations, as operating to remain silent. but not nuclear plants, can easily labourmarketinmanyofthecountries This is an agenda that policymakers Sir, Your correspondent Sujeet Indap in the “dark crevice of Wall Street”. John Ralfe adjust their output. It is unclear where where they operate. In France, many inmanycountrieswoulddowelltopay (“Buyout firms’ secondary market is of The bottom line: market participants John Ralfe Consulting, the “distortion” lies. The wholesale Uber drivers come from the deprived heed to. The rise of the gig economy prime concern”,May 17) paints a false view the private equity marketplace as Nottingham, Notts, UK power market is a competitive one banlieues and say that discrimination offers new opportunities that many picture of what is a well-established, mature, legitimate and essential. where new entrants with lower prevents them finding mainstream people are keen to take up. The task transparent, highly functioning and Benoit Verbrugghe ‘Loincloth strategy’ strips marginal costs cut profits for old power employment. In the US, a study by nowistoallowthemtodosowitharea- sustainable aspect of the private equity Head, Ardian USA, plants. Conventional plants might not JPMorgan found that people used sonabledegreeofsecurity. market: namely secondaries. New York, NY,US away the pomposity like this but it is in consumers’ interest The funds of funds world has grown Sir, I was surprised to see that and delivers the price reductions a beyond the need for financial Hope for London’s young “loincloth strategy” is appearing in competitive market should deliver. institutions to respond to regulatory Lucy Kellaway’s Guffipedia. The image Niels Kroninger pressures and divest themselves of Sir, The Financial Times reports that is striking (although I would agree with Managing Director, some or all of their private equity David Cameron and George Osborne Lucy that it is not necessarily one you Green Hedge Energy UK, portfolios. Every robust market needs hope the Treasury warning of an would wish to be struck by), the phrase London W1, UK a second-hand function for trading. immediate hit to jobs, interest rates crisp, clear in its meaning, original and South Africa’s plans for With more than $4tn of assets and house prices will be the clinching free from the taint of management allocated to private equity, investors argument for undecided voters in the consultants’ pomposity. Even better, Correction predictably need a marketplace to sell EU referendum (“Brexit shock will there is no dreadful clichéd sporting its first ‘black bank’ private equity holdings to second-hand trigger year-long recession, Treasury metaphor lurking to depress the cTherehasbeena$100bnriseinthe players, just as they expect for their warns voters”,23 May). It may well be productive units, sorry, co-leaders, in pasttwomonthsinthevalueofChina’s Regulators must look carefully at the implications of Absa purchase stock and bond portfolios. the determining factor, but not their daily toil. It is a phrase I will use loan-for-bondsswap,notitsdebt-for- Sellers are motivated by a number of necessarily as they wish. I imagine whenever appropriate, so my thanks to equityswapasincorrectlystatedinan Black economic empowerment has progresstowardscreatingamoreequal rational reasons to tap into the there are many young Londoners who the Guffipedia for bringing it to my articleonMay23.Underthescheme, been an important goal for South society has given rise to populists such marketplace. Movements in exchange would welcome lower house prices. attention. bankstradeshort-termloanstolocal Africa since the end of apartheid in as Julius Malema with radical agendas, rates, stock market indices or oil prices Paul Barrett Gavin Reid governmentcompaniesinexchangefor 1994. The aim has been to give the including the expropriation of white- can all create a need to rebalance. London SW4, UK Singapore bondswithlongermaturities. country’s disadvantaged majority a owned corporations. His ideas are bigger stake in the economy. Yet steadilygainingground. despite the policy’s mixed record, peo- There are, however, valid reasons to ple within the ruling African National worry about a politically connected A little more than 16 years ago, a Mandarin and will really miss the stash of fireworks with which to risk Congress could be planning a radical takeover of Absa, which is one of the A valedictory to newborn infant was left by the side of chance to practise her tones back blowing their arms off at lunar new departure. most important suppliers of capital to a Chinese road in winter, and thus home, and the third says she “never year. That is something they wouldn’t A plan under consideration by the the South African economy. There are my daughters’ began my love affair with her, and really left America in the first place”. get back home. Public Investment Corporation (PIC), questions about superimposing social with her homeland. I will not reveal which of us is which. My goal was to give them access to the state pension fund, would see the objectives on to financial criteria when birthplace It hasn’t all been unadulterated bliss But I sometimes think the most the culture, the values, and most of all acquisition of a controlling stake in directing pensioners’ savings or the in either of my relationships — that Chinese person in our family is the language that goes along with the Absa, one of the country’s biggest capital of depositors. The risk is even with my adopted Chinese daughter lily-white, Italo-German-Swiss- faces they were born with. banks, to create a majority black- greaterwhenitinvolvesaneconomyas Grace (and her Chinese sister Lucy), American me. I think I have done that, but only owned institution backed by powerful riddled with patronage as the country and with the country that could not My kids might be Chinese by time will tell whether doing so has investors. hasbecome. keep them. But I am in this for the birth but by temperament they are bred in them an enduring love for Doingmoretoraiseuptheblackpop- It may be that South African capital- long haul: Grace and Lucy, now 16 and 100 per cent American teen, by which their motherland — or put them off it ulation is a prerequisite for the coun- ists are simply too risk averse or 15, are my forever children. And I mean they think Mom is never right forever. try’s future stability, and the govern- myopic to invest in value adding China will forever be their about anything. So they were never But at 15 and 16, the choice is theirs ment is right to push for it. Despite all projects put to them by smaller enter- motherland. particularly onboard with us now. I have finished trying to teach the promise of 1994, there has been no prises run by black entrepreneurs. But However many times they may re-enacting the Chinese version of them how to be Chinese in China. Now great entrepreneurial lift off. For the there are other mechanisms the gov- renew their American passports, Roots. But when we arrived, they were it’s time for them to teach themselves majority of the population, livelihoods ernment could use to remedy this situ- however many US elections they vote only 7 and 8 — still young enough to to be Chinese in America. I am not have yet to improve to any meaningful ation. The state could, for instance, in, however many US driver’s licences drag around from the dog-eating sure I envy them that prospect, at extent. establish its own national investment they will procure, a part of them will provinces of the south to the ice a time when ethnicity is such a But intervening to place Absa in the bank with a mission to seek out and be forever China. And a part of me will castles of the north, hoping that a Trump-touchy subject but I am quite hands of a select group of individuals backsuchprojects. Shanghai be, too. flavour of their homeland would certain they don’t want my advice on and institutions is not the best way of Assumingitinvestedwisely,thisnew I moved our family to China in 2008 sink deep into their bones, by how to manage it. changing that. South Africa’s third- financial institution would then earn Notebook to honour that Chinese part of all of osmosis. And then very soon they will be all largest bank by market capitalisation, superior returns, demonstrating to the us. Lucky for me, the Financial Times With hindsight, it might have been grown up and living in a two-power presently controlled by the UK’s Bar- private sector the value of what it was by Patti Waldmeir had offered me a job in Shanghai that better to skip the trip, when they were world where they will have a foot in clays,isscarcelyabasketcaserequiring missingouton. made this possible. And thus began 10 and 11, to that town in Guizhou each camp. Maybe they will thank me a new business model. The decision to This is a delicate time for the coun- the great Waldmeir Sinicisation province where every restaurant for that; maybe they will hate me for sell it, along with the rest of the African try. Black economic empowerment is project. My plan was to take two kids serves only dog meat. Grace hid in the it, or maybe they just plain won’t care. assets in its portfolio, has more to do under fire for fostering cronyism and who became accidental Americans in car the whole time and Lucy has never Perhaps I will be long gone by the time with Barclays’ balance sheet than corruption by allowing a small politi- the instant that I adopted them, and let me forget that the first thing she they even make up their minds about Absa’sperformance. cally-connected elite to prosper while teach them how to be Chinese in saw, upon entering Xiao Hong’s dog all this. Maybe these two lost In theory, the “black bank” envis- bringing no appreciable benefit to the China. It seemed like such a good idea diner, was a wok full of simmering daughters of China will only grow into aged by PIC, with backing from the disadvantaged. While PIC has a record at the time. puppy paws. Sometimes I took the their Chineseness over decades. ANC,wouldhelptoremedycontinuing as a responsible investor, it could Now, eight years later, our family is cultural authenticity thing a step too But it won’t take me that long: social injustice by investing more emerge as the sleeping partner in any heading back to America, each to a far, and few Chinese eat dog these already there is a corner of my foreign proactively than other banks in small empowermentdealtoacquireBarclays greater or lesser degree a Sinophile. days anyway. heart that will be forever China. I only black-owned enterprises that have Africa. Fortunately, the regulators in After so many years in China, one of I might have had more luck in hope that I won’t always be the most beenstarvedtodateofcredit. South Africa, whose approval would be us has lost her taste for American teaching them to love China if I had Chinese member of the family. Such an ambition is understandable required, remain independent. They food, distinctly preferring noodles to stuck to bribing them with dumplings, — certainly from a political perspec- should bear in mind how much is burgers; another loves speaking bootleg DVDs and their own private [email protected] tive. Public frustration with the slow atstake.

MAY 24 2016 Section:Features Time: 23/5/2016 - 19:03 User: provans Page Name: LEADER USA, Part,Page,Edition: USA, 8, 1 Tuesday 24 May 2016 ★ FINANCIALTIMES 9 Comment

Brexiters’ insouciance is the privilege of the rich Mainstream parties always

POLITICS referendum. They have peddled too wastakenasproofofthetriflesatstake. on that margin but most people know who cannot lose their jobs shrugging at dark a view of how Britain is run to slide Callthiswhatitis:elitism.Peoplewho someone who does. Leavers have half a percentagepointsofGDPhereandthere lose in a race Janan back into public life with a straight face work in and around politics are mostly point about the Remain firmament. It will stick in the mind. Mostly drawn after defeat. What minister could serve screened from the vicissitudes of the really is a mountain range of dignitaries fromtheright,theyresemblenothingso to the right Ganesh a state he says is a racket? How can a economy.AnMP,peer,adviser,column- and industrialists. But being of the elite much as the rich Londoners who voted commentator appraise week-by-week ist or think-tanker has job security and, is not prima facie evidence of elitism. It forthefar-leftJeremyCorbynasLabour politics if the whole superstructure is if it fails, an escape hatch to the public is not Ms Lagarde or the CBI who seem party leader because “winning isn’t eve- rigged? Still, watch them do it. Only a relations sector. In Westminster, the happy to brook a short sharp shock to rything”.If you are poor enough to taste few Leavers are credulous conspiracy crash did not happen. Any post-exit the economy as the tactical price of a government policy, winning elections OPINION he man who runs the theorists who squirrel away tinned food recession would not happen there loftier cause. It is not the Davos crowd really is everything. If your next con- National Health Service andthinkbitcoin,thatEsperantoofcur- who talk of a slightly smaller economy tract hinges on economic calm, a down- Heather said on Sunday that a Brit- rencies, will take off any day now. Most in 14 years’ time as a near-victimless turn this year is not just a detour on the Grabbe ish exit from the EU would just use anti-elitism as a tactic to mobi- The Leave campaigners’ outcome. (Which, given the rising pop- waytonationaldestiny. disrupt his work. Simon lisevoters.Theinsincerityisalltheirs. ulation,itcertainlywouldnotbe.) Thereisaclassofpeopleinpoliticsfor TStevens is, according to Leavers with no Andso,whenyouthinkaboutit,isthe droll routine is all the What damns the Leavers is not their the frisson of belief, for communion ustria is the taboo-breaker prior interest in him, a government elitism. A Treasury report puts the worse for their pose belief that the Treasury forecast is with the like-minded, for anything but in European politics. By stoogeandprovenadministrativeklutz. short-term cost of exit at 3.6 per cent or wrong. It is the hint they give off that the tedious amelioration of material life coming within a whisker of There is bespoke invective for any more of gross domestic product. When as underdog yeomen they do not really mind if it is right. for most people. There are Remainers making Norbert Hofer the third party who speaks against their such forecasts are made, Leave’stechni- They can live with a recession if they who think household finances too taw- first far-right European cause, always on the theme of elite col- cal rebuttal is less telling than its indif- either. There is something of the must. If others cannot, well, nobody dry a theme for a campaign that should Ahead of state since the war, voters there lusion.ThegovernoroftheBankofEng- ference to whatever smaller setbacks it gung-ho general billeted miles from the said the path to freedom is lined with major on European civilisation and the have normalised the Freedomparty, land? Goldman Sachs puppet. Big busi- concedeswouldoccur. frontline in the Leave campaign’s cherry blossom. Their nonchalance is epicsweepofhistory. whose revisionism and anti-Semitism ness? Gluttons at the trough. As for the With noble candour, some admit that untroubled contemplation of an eco- all the worse for their pose as underdog But many more Leavers think like used to be considered unacceptable. International Monetary Fund’s Chris- exit would bring a quick downturn and, nomic downturn. Insouciance is a rich yeomen, a droll routine that has cabinet this. For them, economics is a vulgar The victory of Alexander Van der Bel- tine Lagarde, she was put up to it by perhaps, marginally slower long-term man’sprivilege. members and an Etonian former mayor reason to support a political proposi- len, the Green party candidate, is not a Treasury back-scratchers. No one, in growth. When a survey by the CBI, the For the rest of the country, small of London deploring the “establish- tion, even theirs. Principle trumps all. cause for complacency. The size of the this desert of goodwill, is credited with employers’ organisation, said the econ- movements in economic output trans- ment”, presumably while buffing each Theysayitbecausetheycanaffordto. vote for Mr Hofer will benefit other par- sincerity. omy by 2030 would be a few percentage late into jobs lost or created, pay rises other’sbrassnecks. ties, such as the National Front in Leavers had better win next month’s points smaller outside the EU than in, it given or withheld. Not everybody lives As a picture of decadence, politicos [email protected] France, that are pursuing a strategy of “decontamination”. Even if Mr Hofer had won, other EU governments would have done little morethanwringtheirhands.Ostracism is no longer an option. Much has changed since 2000, when other mem- ber states cold-shouldered a coalition government that included the Freedom Trump’s retreat party, then under the leadership of Jörg Haider. Many prime ministers are look- inganxiouslyovertheirshouldersatthe rise of populism. Few, though, are keen to use EU mechanisms to tackle from American breaches of values or threats to the rule of law lest they should fall foul of such measuresinthefuture. Some mainstream politicians argue that“keepcalmandcarryon”isthebet- ter strategy. Fiery populists tend to lose greatness theirnerveundertheconstraintsofgov- ernment. Once in power in the Austrian province of Carinthia, Haider adopted mainstream policies and his party lost FOREIGN AFFAIRS In Asia, Mr Trump would stand US credibility after a corruption scandal. policy on its head. America’s approach Populist parties currently in coalition to the rise of China has been based on governments in Belgium and Finland Gideon economic openness, combined with Rachman security alliances designed to balance growing Chinese power. Mr Trump Austria’s experience wants to reverse these priorities. He has talked about imposing swinging tariffs shows that the politics on Chinese goods. But he has also of fear can quickly onald Trump loves to say sounded very sceptical about America’s that he will “make America two most important treaty alliances in get out of control great again”. But Mr EastAsia,withJapanandSouthKorea. Trump’s foreign policy MrTrump’sprioritiesprobablysound tionalsupportforEuropeanintegration, aMuslim.IftheRepublicansweregenu- Traditionally, American leaders have havenotkepttheirwilderpromises. ideas actually amount to a like common sense to many US voters, suggestingthatitwouldbeagoodideaif inely to attempt to ban Muslims from madeafetishofUS“credibility”ininter- In a climate of crisis around migra- Dheadlong American retreat from “great- who regard it as much more important Britain voted to leave the EU. Mr entering the US, even temporarily, that nationalaffairs.Theybelievethatglobal tion,however,theopensocietyisthreat- ness”ontheworldstage. to safeguard American jobs from Chi- Trump’sscepticism about alliance com- would create a huge diplomatic issue security can only be guaranteed if ened not only by extremist parties get- The all-but-anointed Republican can- nese competition than to protect Japan mitments extends to Nato, which he with countries such as the UK and potential adversaries believe that ting into power but also by mainstream didate for the US presidency essentially and South Korea from potential attack. sees as a bad deal for America. Combine France, which could not accept such America’s military commitments are ones reinforcing the same xenophobic wantsAmericatoresignfromtheroleof In reality, Mr Trump’s promised diplo- that with his admiration for Vladimir frank discrimination against millions of utterlyreliable.ThatiswhyMrObama’s logic.RecenteventsinAustriashowthat global policeman. Any such decision matic revolution in Asia would have Putin and you have a formula for a radi- theircitizens. failure to enforce his red line against thepoliticsoffearcanquicklyrunoutof would have profound implications. The malign consequences that wouldswiftly cally different US approach in the The“Muslimban”wouldobviouslygo Syria’s use of chemical weapons in 2013 control. After all, it was mainstream world’ssecurity system is based around be felt back home. A Trump-inspired region. Mr Trump could take America down even worse in the Middle East, wasfelttobesuchabigdeal. parties that agreed bilateral deals with aseriesofAmerican“redlines”andalli- trade war would be seen as a threat to back to the isolationism of the 1930s, where Trumpism would promise a fur- MrTrump,however,hasmadeitclear thecountry’sBalkanneighbourstokeep ances. But if the US starts pulling back the prosperity and stability of China. If when the US was reluctant to counte- ther deterioration in US regional power. that he wants America to become more out migrants. The governing coalition from its international role, other pow- thiswerecombinedwithaweakeningof nancesecuritycommitmentsinEurope. ManyofAmerica’sMiddleEasternallies unpredictable. In his writings on busi- has drastically restricted the right of ers, in particular China and Russia, will US security guarantees to its Asian The structural damage that Mr regardBarackObama,theUSpresident, ness, he has extolled the virtues of mak- asylum, in contravention of the Geneva movetofillthevacuum. allies, China could well respond aggres- Trump would do to the western alliance as feckless and unreliable — and some ingextravagantdemandsorpromisesas Convention, according to the European Mr Trump’s promised America-first sively. The tense shadowboxing in the wouldbecompoundedbytheharmthat may hope that Mr Trump would be an an opening bid, before eventually find- CommissionandtheUN. trade protectionism could trigger a East and South China seas between he would inflict on America’s image in improvement. But they would be disap- ing a compromise. This approach might The logic taking hold across Europe is worldwide recession and undermine China, the US and Japan could escalate Europe. Mr Trump has already engaged pointed. Mr Trump’s scepticism about work well in real estate. But it is poten- that we must turn inwards and build the globalised trading system that gives intosomethingmuchmoreserious. inanintermittentpublicrowwithSadiq US alliance commitments, combined tially a formula for disaster in interna- higher fences, physical and virtual, to countries an incentive to co-operate The implications of Mr Trump’s pro- Khan, the new mayor of London, who is with wild promises to grab Middle East- tional politics, where America’s friends ward off external threats. Following the ratherthancompete. nouncementsonEuropearenolesspro- ernoil,arenotaformulafortherestora- and foes should believe that the US says migrant crisis and terrorist attacks in Tounderstandthefullimplicationsof found. They threaten to gravely weaken tionofAmericanregionalleadership. what it means, and means what it says. Paris and Brussels, the centre ground of Trumpismunleashed,lookatthreecru- the western alliance that has guaran- If the US pulls back from its Ofcourseitishardtoknowhowmuch Anything else could prompt dangerous European politics has moved to the cialregions—Asia,EuropeandtheMid- teed security in Europe since the end of of what Mr Trump says he actually miscalculations by US rivals, leading to right. By making migration policy a dle East. It is also important to under- the second world war. For decades, US global role, other powers, means and how much is campaign rhet- uncertainty, instability — and, ulti- security issue, mainstream parties are stand how Mr Trump’s dealmaking policy to Europe has been based on the particularly China and oric or random musing. But that, in mately,war. reinforcingtheideathatpopulationsare approach to diplomacy would create twin pillars of Nato and the EU. But Mr itself, points to another big problem vulnerabletoforeignintruders. dangerousinternationaluncertainty. Trump has abandoned America’s tradi- Russia, will fill the vacuum withhisapproachtotheworld. [email protected] Nativism of this sort has implications not only for immigration and asylum policy. A rightwing populism that por- trays all forms of interdependence as a threat, rather than as the best form of security, threatens economic integra- The second renaissance will be digitised tion,too:fromtheEuropeansinglemar- ket to international trade. It also affects societies. When mainstream politicians jointhexenophobicchorus,theyunder- TECHNOLOGY and is spending a further $100m on a almostadecadeagoandthedisappoint- course providers, have learnt to make study published in 2015 by the Harvard mine anti-racist norms and encourage new school in San Francisco. There are mentthatrapidlyfollowed. shorter, punchier videos, mixing them BusinessReview. prejudice. severalironiesinaFrenchentrepreneur The online experience, they say, can upwithtestsandchallengestokeepstu- Even though the dropout rates are Does doing so bring them electoral John teaching Silicon Valley geeks how to neverreplacethepersonalrelationships dents engaged. Some courses, such as high, the absolute number of people rewards? It is very hard to outflank the Thornhill code. forged between teachers and students, Ecole 42, offer blended learning, com- who finish programmes is remarkable. far right by being more extreme. Voters Mr Niel argues that smartly designed andthenetworksofcontactsthatcanbe biningthephysicalandvirtualworlds. Morethan2.1mcourseshavebeencom- prefer firebrands over flip-floppers, as online courses are more effective than developed. The completion rate for Several Moocs are also closely linked pleted through Coursera, one of the Werner Faymann discovered last week traditional classroom teaching meth- someMoocsisaslowas4percent. to the demands of employers and the leading providers, as of April 2015. when he was pressed into resigning as ods. Students learn best by pursuing But EdTech may finally be coming of needs of individuals for life-long learn- Many students are from academically Austria’schancellor. ith no teachers, timeta- online projects by themselves and by age for three main reasons: product, ing. Udacity has designed courses with or economically disadvantaged back- The only way to counter the appeal of bles, or exams, Ecole 42 interacting with each other. Peer-to- companies, such as AT&T and Google, grounds. Fortress Europe is to make the case for is a strange kind of edu- peer lending may be going through a offering nano-degrees. For some of IanGoldin,co-authoroftheAgeofDis- opennessasthebestformofsecurity.Of cational institution, rough patch, but peer-to-peer learning There are several ironies in these courses it even refunds students covery,believesweareenteringaneraof course, it takes a brave politician to open 24 hours a day, may be on the rise. “We are preparing their fees if they do not find a job on the mass production of ideas, or a Sec- explain that large-scale migration is the Wsevendaysaweek.Studentsshuffleinto peopletolearntogether,”hesays. a French entrepreneur graduation.“Itisnotclearthattheexist- ond Renaissance. Higher education has new normal, requiring better integra- this tech-enabled school whenever they EdTech, as it has inevitably become teaching Silicon Valley ing universities are the right places to already exploded in China and India, tion policies rather than more fences. wantandworkashardastheyneed. known, is certainly an increasingly createeducation,”MrThrunsays. and the internet will provide near-uni- But the alternative is to give in to the Isthisthefutureofeducation? active field for investment. EdSurge, a geeks how to code The second advantage of online edu- versal, virtual access to some of the politics of fear, which will not save old Xavier Niel, the French internet and company which tracks such things, cation is how cheap it is compared with world’sbestteachers.Byhiscalculation, partiesfromoblivion. telecoms billionaire who founded the counted 161 investments in EdTech cost,andaccessibility. mostdegreesfromestablisheduniversi- the number of people alive today with a Austria’s most important lesson for coding school for young adults in Paris around the world totalling $1.59bn dur- Sebastian Thrun, who runs the Udac- ties. With US student debt now topping degree is greater than the total number Europe is that, even if mainstream par- in 2013, certainly thinks so. He chose ingthefirsthalfof2015alone. ity online university, says there was a $1.2tn that appeal is becoming increas- of degrees awarded before 1980. “If you ties collude in trashing humanitarian the school’s number for a reason. As Some traditionalists scoff at online goodreasonwhyfirst-generationMoocs inglyglaring. believe in the random distribution of values and undermining the rule of fans of Hitchhikers’ Guide to the Galaxy education, saying it can only ever serve did so badly: “They were a lousy prod- Third, the spread of the internet talent then we can discover a lot more international law,they still lose power if know, 42 is the answer to the ultimate the needs of the few and that, anyway, uct.” Sticking a random academic in around the world is leading to the smart people out there,”he says. It may their candidates have no positive vision question of life, the universe and every- we have been here before. They point to frontofavideocamerainadimlylituni- democratisation of higher education. seem difficult to believe at times, but tooffer. thing. So sure is Mr Niel that he has theinitialeuphoriathatgreetedthecre- versity hall for an hour was unlikely to More than 25m enrolled for a Mooc our planetisgrowingsmarter. found the answer that he is committed ation of massive open online courses stimulateastudent’ssynapses. from one of the leading providers over The writer is a fellow at the European to funding Ecole 42 for the next decade (Moocs) by several leading universities Udacity, and many other online the past three years, according to a [email protected] UniversityInstitute

MAY 24 2016 Section:Features Time: 23/5/2016 - 18:34 User: provans Page Name: COMMENT USA, Part,Page,Edition: USA, 9, 1 10 ★ FINANCIALTIMES Tuesday 24 May 2016

BUSINESSLIFE

I am probably not the only BT Time measure — which lurched short-term financial outcomes. Trimming the customer who gave a small fist-pump downwards last year — and a Introducing more targets that affect Art of persuasion on learning that Gavin Patterson, the “perception” survey comparing what chief executives’ pay merely confuses BT CEO’sbonus telecoms group’s chief executive, customers think of BT and its rivals. the way they are motivated and blunts missed out on part of his bonus last BT is not alone in tying senior the incentive. Verbs and why the marketing will not fix its year after failing to meet customer executive incentives to customer At BT, the amount of the chief gerund is so effective service targets. satisfaction. TIAA-CREF, the US ‘ executive’s pay affected by a poor More poor service You do not need to know the details financial services company, uses Net service record is comparatively small. SAM LEITH of my recent complaint to the former Promoter scores (based on questions targets Mr Patterson may have “lost” UK monopoly. It is enough to say that such as “would you recommend this £290,000 of potential bonus, but the what started as an attempt to avoid company?”) as one way of shaping affecting pain will be dulled by total paying BT a trivially small amount of leaders’ pay. pay just remuneration of £5.4m — £800,000 money escalated into an hours-long Elsewhere, incentives that oblige more than the year before. litany of calls to several departments, front-line workers to focus on how confuse The more important point, though, is online and off, and culminated in the customers feel are clearly useful. the way that any chief executive who fails to offer that I would get the service in Privately owned Enterprise Rent-A-Car provide adequate customer service question free for a year as a gesture of built its entire culture on a homegrown bosses are ought to suffer, whether or not his pay goodwill. A gesture that was then measure of customer satisfaction. motivated is directly linked to it, because the rudely curtailed as the line dropped. GlaxoSmithKline started tying company as a whole will suffer. For the fifth time. incentives for sales staff to measures AO World is an interesting Bloomberg So if Mr Patterson loses £10 for every such as patient focus and counterpoint. When the UK online minute I and others spend on hold, I understanding of the customer, appliance retailer came to market in A note on verbs. In the Art No accident, perhaps, that should be the first to applaud. Except I dropping sales targets that had dragged 2014, its prospectus mentioned of Persuasion column a these verbs are either in the don’t think that linking his annual some employees into illegal marketing customer service 63 times. Delivery fortnight ago I discussed imperative mood (a bonus directly to customer service is of drugs in the US. teams hand over a form asking you to how you make the reader’s command) or the present any more meaningful or useful than Customer service incentives can ’ assess how they did, even as they are (or listener’s) life easier if, in tense. the gesture the company made to stop distort behaviour, too, though. plumbing in your new dishwasher. But any given sentence, you A problem with verbs is me from setting fire to an old telephone Beneficiaries game the numbers or senior executives have no explicit keep your subject as close to that they locate things in directory and stuffing it through the focus obsessively on specific goals, to customer service requirement in their your verb as possible and time and space: if something letterbox at BT headquarters. the exclusion of equally important but compensation policy. They got no put them both up front. It has happened, or is Shackling the boss to customer unspecified ways of helping clients. bonus for 2014, because they missed bears further exploration. happening now, by Andrew Hill service sends a good message to One part of my odyssey through BT’s “stretching profit targets”. Many of us will have been implication it may not customers and to staff. It tells them Mr many call centres involved an When your entire business depends taught two things about continue to do so. Onmanagement Patterson is aware of the problem and exchange with an employee who on satisfying the customer — and verbs. The first is old- So one usage in particular is working to solve it. (As he told me insisted she had to call within a week to whose does not? — it is unnecessary to fashioned grammatical intrigues me, because it last year: “We won’t be satisfied until check if my complaint was resolved, be explicit about it in bonus targets. It advice: every sentence must seems to solve this problem. we’re number one [for service]”.) even though it was inconvenient for is going to take more than a tweak to have a main verb. Is that “Delivering quality first” is a It also gives the chief executive an me. I had a strong sense she was trying the CEO’s incentives to solve BT’s true? Not exactly. At least BBC Trust slogan. If it additional reason to keep an eye on to meet an internal target. problem of persistent poor service. informally, many short sounds like anodyne various gauges of customer service, on Plenty of studies show that sentences go without. You business-blurb, that may which he relied last year for 25 per cent executives behave in odd, even illegal, [email protected] would be hard pushed to just be the temper of the of his bonus. They include a Right First ways when their bonuses are tied to Twitter: @andrewtghill make the case that “Drat!” is times: that subjectless “-ing” a sentence and that “Rats!” form of slogan is ever more is not. It is true, though, that widely used. almost all sentences have a This is what I’ve come to main verb — and that think of as the “marketing arguing at the margins gerund” — though, about whether something is technically, it’s a present a sentence or a fragment is a participle. game for scholars. This odd construction The second piece of seems to be almost unique advice about verbs is to the strapline-writing stylistic: it is that they are community. “action-words” and that they Why is it so popular? My Nicolas Petrovic tells give any sentence its electric hunch is that it is an elegant, Sarah Gordon about the jolt of energy. Any number if slightly cheesy, way of of style guides enjoin you to having your cake and eating levels of co-operation and use “strong” and “vigorous” it. It puts, right up front in liaison needed to run verbs, to avoid “weak” your slogan, a strong and passive constructions and to action-filled verb but it also trains under the Channel beware turning verbs into makes it sound almost nouns. stative (describing a state of hen Nicolas Petrovic As always, this is too being rather than an action). turned up at business categorical. But there is The participle cues us to school in 2003 to study something to it. If you turn understand the verb as an for an MBA, he found your verb into a noun, you ongoing thing. The that his group for the need to find another verb to delivering is not a thing that Wwhole course was chosen by a computer take its place — and you will has been done, that’s tobe“asdysfunctionalaspossible”. often end up with muddy occasionally done or that Insead, based near Paris, had devised sentences where a weak will be done — rather, it is a team of two women and three men — main verb is buried in the implied the delivering is among them a New York investment middle: “The prompt continuous. Here is the banker, a South Korean state banker, implementation of the dynamism of a strong verb, a German engineer and a Swedish reconstruction programme with the changeless stasis of diplomat — including Mr Petrovic, a is crucial to value-building the verb to be. Frenchman. going forwards.” Who knows? If “You had to make it work,” he says. There is nothing like the Ozymandias had rebranded “Butitwasreallyhard.” chilly wind of the market for — “Sneering with cold It was good preparation for the next sorting out grammar. If you command” — that statue stageofhiscareer:tomovetoLondonto look at the most memorable might still be standing. Then join Eurostar, which runs trains advertising slogans, it is again . . . between Britain, France and Belgium. striking how many are verb- BeforeInsead,hehadworkedinTaiwan first. “Just do it.” “Think [email protected] for Compagnie Générale des Eaux, and On board for Eurostar’s different.” “I’m lovin’ it.” “Got spent 10 years at SNCF, the French milk?” “Melts in your The writer is the author of nationalrailwaycompany.Hestartedat mouth . . . ” “Tastes so ‘You Talkin’ to Me?’ Rhetoric Eurostar as director of customer serv- good . . . ” “Enjoy . . . ” from Aristotle to Obama ice, taking over as chief executive in 2010. journey across cultures Eurostar is almost the definition of a Great place to meet cross-cultural company. Set up by the French, Belgian and British govern- ments in 1994, it was run as three sepa- Nicolas Petrovic are also too quickly attributed to differ- French language component. It also out French custom and passport checks Ground Support, New York rate corporate entities, managed by the at St Pancras encesinnationality,hesays. sends drivers into English schools to inLondon,andBritishchecksinFrance. nationalrailcompanyineachcountry. International: Mr Petrovic says he may soon ask the teachFrenchconversation. Otherconcernsarewhetherthenumber “Weco-operated, and communicated he would like his board to undertake the cross-cultural Eurostar has changed the way people ofworkersintheCity,whoaccountfora but it did not work well,” Mr Petrovic directors to have training programme that Eurostar pro- think about the relationship between significant number of weekday passen- says. Indeed, Eurostar did not make its the same vides to new joiners across the com- theUKandcontinentalEurope,saysMr gers, would shrink, as well as the fate of first net profit until 2011, a year after it training pany, from senior management to train Petrovic, and brought Paris and London the big French and British expatriate wasunifiedintoasinglecompany. programme on drivers and hospitality staff. A three- closerintheir“mentalmap”. communitiesinLondonandParis. Since the UK sold its stake in 2014, cultural hour session covers topics such as “cul- The ease of the journey between the Britain “turning its face away from Eurostar has been owned by SNCF,Bel- awareness as tural baggage, concepts of culture, per- two capitals, which comprises the bulk Europe”, he says “for a lot of people, gium’s SNCB, Quebec’s pension fund, employees ceptions, challenging areas and cultural of Eurostar journeys, has led businesses wouldbelikeabreak-up”. and Hermes, a UK infrastructure fund. Charlie Bibby awareness levels”, and tries to help to set up in both cities, Mr Petrovic says, Mr Petrovic is well placed to measure Its 16-strong board, which is headed by employeesdeveloptheskillstocommu- and commute between them. Sixty per the emotional as well as the practical ef- British woman Clare Hollingsworth, is nicateeffectivelywithstrangers. cent of Eurostar’s customers during the fects of Britain leaving the EU. Born in Where 399 West Broadway WiFi Yes mainly British and French but also Eurostar asks employees every year week travel on business. It will be laying Paris to a French mother and Yugoslav includesBelgian,CanadianandAustral- to rate its cultural awareness and diver- on special trains for the Uefa European father, he has lived in London for 12 Plug sockets Yes Espresso $3.25 ian members. The executive manage- sity; the latest score was a “very strong” Championship,thefootballtournament years, although he frequently travels to Open 7am-8pm; Sat-Sun 8am-8pm Privacy AEEEE mentteamisequallydiverse. 73 per cent. Senior executives are thatkicksoffnextmonth. hishomecountry,inparttovisithisson. MrPetrovicseesthesizeanddiversity assessed on ability to overcome cross- If Britain left the EU after the referen- As he says: “Adivorce can be handled in of the board as an indicator of success — culturaltasks. dum in June, Mr Petrovic says, that ease differentways.” Ground Support exemplifies mind people lingering. “so many people want to join it” — and One of Eurostar’s main challenges of travel would not be lost. However, he Eurostar has had time to contemplate what SoHo has become. This work-oriented crowd says the cultural differences are a remains finding more non-French staff is vehemently opposed to the UK leav- the possibility of Britain voting Out. But Shopping bags, briefcases rarely takes selfies or food strength. “French and British people, who speak the language well. The com- ingtheblocandreelsoffthebenefitsthe it has also had unwelcome recent expe- and backpacks slide neatly pictures, as is the norm with when they work together,they are com- pany’sworking language is English, and EU has brought to Eurostar’s opera- rience of dealing with the effects of by patrons’ feet, as fashion many of the other nearby plementary. The British are very prag- 850 of its 1,700 employees are based at tions, such as standardised technical shock events. Terror attacks in Paris types mix with laptop- restaurants, although the matic, very good financially — and they theheadquartersnearStPancras. requirementsandanindependentregu- and then Brussels, as well as the intensi- carrying marketers, digital quality of the coffee, are more empowering, they give away To address this, Eurostar has its own lator. “There is no upside [to Brexit] for fication of the migrant crisis in Calais consultants and start-up pastries and sandwiches — responsibility more easily,” he says. language training school, teaching Eurostarandanumberofrisks.” suppressed passenger numbers to just founders. Previously, it was the latter are made in house “The French are more structured, they mainly French. Its planned customer Inpracticalterms,hesays,thebiggest over 10m, with none of the expected artists who occupied the daily — certainly warrant it. liketoplan25yearsahead,”headds. service apprenticeships will include a question would be the ability to carry increaseon2014. local lofts. The café has an industrial But Mr Petrovic, speaking at Euro- Although terror attacks resulted in a The café is a popular look, with communal picnic star’s headquarters next to St Pancras bigdropinbookingsandjourneysinthe place for an informal bench tables, tree stump International station, does not play Eurostar controversially ordered 10 have free WiFi,” tweeted one traveller immediateaftermath,numbersrecover meeting amid this stools and a metal bar, all down the challenges of either the own- Updates trains from German supplier Siemens in this month. But another tweeted: “The quickly, Mr Petrovic says. “Business microcosm of SoHo’s media enclosed by whitewashed ershiporthestaffstructure. on track 2010 and a further seven in 2014, rather only place on Eurostar’s new trains comes back first, then leisure. The last and tech crowds. Positioned walls displaying “I enjoy having a diverse team. But than “buying French” from Alstom. It was where I can get a reliable phone/WiFi one to come back is always [travellers between a number of train photographs with a cycling the short-term effect can be tough,” he a “tough decision” that was taken after a signal? Deep in the Chunnel. #travel from] outside Europe. But within 12 lines, Ground Support is an motif around the perimeter. says. “At first everyone is very polite — German “robust process” of evaluation, says Mr #irony #tech.” months[theeffect]hasdisappeared.” easy stop for many on their As for hearing yourself but they don’t really engage, they don’t trains and Petrovic. “We are a private business To finance the €1bn fleet renewal, Earlier,thefinancialcrisishadledtoa way to or from the office or speak, the white noise of listenandactuallyunderstand.” trying to maximise value for our Eurostar borrowed a hefty €500m, big push to attract leisure travellers for those escaping from any meetings mixes with the The main problem is, unsurprisingly, free WiFi shareholders,” he adds tartly. although Mr Petrovic says it is not highly from outside Europe. With non-Euro- of the three nearby WeWork music — typically rock language and culture; British senior The first of the new trains came into geared. pean travellers making up about 15 per co-working spaces. leaning — which gives a executives had to be told not to talk service on the Paris-London route, with Its private ownership means Eurostar cent of all journeys, compared to less Unlike other SoHo cafés, it sense of privacy despite about television programmes they had interiors designed by Pininfarina of Italy. releases little financial information. In than 4 per cent before the crisis, there is has plenty of seating, an there actually being none. watched or to tell in-jokes, because “it Among the trains’ innovations are power 2015, revenues were £821m, down more need than ever to enhance the outdoor area, internet made the others feel excluded”. But at sockets at each seat and WiFi. slightly on 2014, and underlying net ability of Eurostar staff to interact access and the staff don’t Alyssa Zeisler the same time, genuine disagreements “Woohoo! The new @Eurostar trains profit was £55m. adeptlywithstrangers.

MAY 24 2016 Section:Features Time: 23/5/2016 - 17:19 User: provans Page Name: BizLife, Part,Page,Edition: USA, 10, 1 Tuesday 24 May 2016 ★ FINANCIALTIMES 11

ARTS

of cannon-ball smoke as Basilio. THEATRE Janis Kelly turns Berta’s little aria into a Campingitup show-stopper. Blue/Orange Aboveall,conductorEnriqueMazzola Young Vic, London gets Rossini’smusic to sizzle. No slouch- aaaae ing, no lingering here and there — just intheEnglish razor-sharp playing from the London Sarah Hemming Philharmonic Orchestra at helter- skelter speeds. That, at least, keeps a A slight whiff of disinfectant hangs in smileonone’sface. the air, one of the small touches that countryside The revival of the 2011 production of underpin this fizzing revival of Joe Pen- Die Meistersinger is Glyndebourne at its hall’s 2000 Blue/Orange with a sombre default position: only intermittently note of the reality of being institutional- inspiring,butdeluxeinthequalityofits ised. The scintillating, quick-fire drama OPERA musical and theatrical preparation. The plays like a verbal boxing match. Two performance rises to its highest level white psychiatrists spar over a black Glyndebourne festival opening whenever Gerald Finley’s beautifully patient, trading clinical and ethical East Sussex, UK sung Sachs and the exemplary musi- punches over his fitness to leave hospi- aaaae ciansoftheLPOareworkingtogetherto tal. Matthew Xia’s staging revels in its conjure the poetry and emotional depth daring wit and theatricality (the play Richard Fairman attheheartoftheopera. observes the classical unities of place, For the rest, David McVicar’s colour- timeandaction)butitalsoremindsyou Weather permitting, a walk in the gar- ful, too-camp-by-half production pro- of its painful relevance. The Young Vic’s denisobligatorybeforetheopera.Afew vides a showcase for some well- production, 16 years after the play was years ago, in Britain, that could only observed portrayals. Jochen Kupfer’s written, makes its points about under- have meant Glyndebourne. Now there pompous young popinjay of a resourcinghitharderthanever. are multiple choices for country-house Beckmesser, not the usual caricature, is Christopherisayoungblackmanwho opera in the UK, with yet another festi- a particular success. Amanda Majeski is was sectioned after “doing something val preparing to open next summer. a lovely, silvery-voiced Eva. Hanna funnyinthemarket”.His28daysareup Who could have predicted this explo- Hipp’s well-sung Magdalene is nicely and it’s time to leave. A senior psychia- sion of activity — the most expensive of complemented by David Portillo’slively trist decides that Christopher is fit to go, art forms thriving, away from London David. Michael Schade gets through the arguing that his behaviour may be con- andunfundedbythepublicpurse? Prize Song unscathed, but his tight, ditioned by his culture, rather than any The Christie family, who founded forced tenor makes an unhappy match mental illness. Besides, they need the Glyndebourne, must need a sense of for the romantic Walther. Michael beds.Theoptions—institutionalcareor humour to see these upstarts taking Güttler,takingoverfromtheindisposed return to a hostile home life — look their formula and rebranding it in their Robin Ticciati, wields the conductor’s bleak. What follows is a bruising ding- own image. Perhaps that is why so batonwithasafepairofhands. dong between two doctors, roving into many of the operas in this year’sfestival Ideally, Wagner asks for more, but medicalethics,institutionalisedracism, arecomedies. there is enough to justify reasonable cultural norms and even what consti- The opening weekend paired two contentment on the way out. The belly tutes sanity and who defines it. The fact classics, the most Italian and most Pure farce: with the Rossini. Annabel Arden, in ning joke that never produces a laugh. laughs will have to wait for later in this that Christopher sees oranges as blue German of them all: Rossini’s Il barbiere Danielle de charge of Glyndebourne’s new produc- What fun there is comes from a well- seasonofcomedies. becomes key, not just to his case but to di Siviglia and Wagner’s Die Meistersinger Niese and Björn tion, has tried to balance tradition with chosen cast. At the top of the class is the play’s far-reaching consideration of von Nürnberg. The Rossini is pure farce, Bürger in ‘Il giving the opera a new look. The style is Björn Bürger’s ace Figaro, sung with Glyndebourne festival continues to August subjectivityandperception. with none of the human warmth and barbiere di semi-abstract, mixing some modern brilliance, precision and a non-stop 28, glyndebourne.com Xia’s production is beautifully depth that Mozart brought to the same Siviglia’. Right: dress with old costumes and dances of cheery grin, as if it is all no effort at all. pitched, nerve-janglingly on the edge of characters in Le nozze di Figaro. That Luke Norris and Seville. Blue-and-white Moorish tiles Danielle de Niese is a Rosina of irre- what is comically acceptable. David follows later in the season, a chance to David Haig in decorate the walls. Rosina twirls fla- pressible energy and sparkly, racing Haig’s Robert is all soothing platitudes compareandcontrast. ‘Blue/Orange’ — menco flourishes. Dancers enact sym- semiquavers, not all of them even in and sudden ruthlessness. Luke Norris’s There is not much a director can do Bill Cooper; Johan Persson bolic bullfights at crucial moments. The tone. An extra aria is added for her in Bruce, the junior doctor,begins fired up endmixisarichpaella,gaudyandwear- Act 2. Taylor Stayton’s Count Almaviva with idealism and unravels into a shak- ingly fussy,though certainly not lacking conversely slides over the coloratura ingwreck.StuckbetweenthemisDaniel ARTS VIDEO inenergy. andloseshisbigaria(whichisoftencut) Kaluuya’s superb, vulnerable Christo- As Tate Modern, the world’s most-visited Is it funny? Yes, but not as funny as at the end. At this stage of his career one pher: joking and relaxed one moment, museum of modern and contemporary it should be. Arden plays down the would have thought the loveable jumpy and incoherently enraged the art, prepares to open a £260m traditional business in the main comic Alessandro Corbelli might have run out next. His plight is increasingly distress- extension, FT critic Edwin Heathcote scenes with the drunken soldier and of rubber-faced comic expressions as ing as we realise how poor his options explores the new building with its the bogus music teacher, leaving them put-upon Dr Bartolo, but he is as inven- areandhowfragilehiswellbeing. architect, Jacques Herzog both to fall flat. Removal men coming tive as ever. Christophoros Stamboglis ft.com/new-tate in and out with harpsichords is a run- booms mightily and rouses a cloud ToJuly2,youngvic.org

TheDevilwearscowboyboots

century rock ’n’ roll, her music provides Patrick Page’s cowboy-boot-wearing MUSICTHEATRE both an intellectual and visceral thrill. Hades steals the show with gruff Here, one feels, is someone who has charisma and a gravelly voice reminis- Hadestown memorised the entire American song- cent of Tom Waits. The Devil gets the New York Theatre Workshop book,beenawardedanA+forherthesis bestlineshere. aaaee onmusicology,andyetretainedthesoul By contrast, Nabiyah Be’s Eurydice of a true artist. Only occasionally does comesacrossasacipher—sweet,ingen- Max McGuinness she veer off into Coldplayish wailing or uous, and devoid of any sense of agency. Norah Jones-esque elevator jazz in a set Damon Daunno’s Orpheus is similarly Hadestown is a theatrical adaptation of listcomprisingmorethan30numbers. guileless. He also struggles vocally with Vermont-born singer-songwriter Anaïs Staged in-the-round in the intimate themusic’sfalsettopassages.Butthere’s Mitchell’s 2010 album of the same setting of the New York Theatre perhaps little either can do in the face of name, based on the myth of Orpheus Workshop, Mitchell’s “folk opera” their story’sinherent limitations, which and Eurydice, here transplanted to the features strong performances from occupies only a few pages in Virgil and Depression-era South. Blending folk, Chris Sullivan as a hoboish Hermes and Ovid. Abstracted from such larger country, jazz, blues, gospel and mid- Amber Gray as a seductive Persephone. works, it’s a fairly thin tale (boy meets girl, loses her, finds her, then loses her again), which is why Tennessee Williams added oodles of melodrama to his 1957 play Orpheus Descending (anobviousinfluencehere). Mitchell’s version cleverly evokes the “satanic mills” of industrialisation and the lonely romance of the railroads, but it’s not quite enough to pad out the story for two hours. As directed and co-developed by Rachel Chavkin, Hadestown thus feels more like a semi- staged concert (albeit an entertaining one) than a fully developed work of musical theatre. The ending in particu- lar fails to extract much pathos from Orpheus’s fatal backward glance. Eury- dice just walks back downstairs as if she’s changed her mind. Then again, as in Paradise Lost, who’d want to leave the Devil’sparty?

Gruff charisma: Patrick Page in Anaïs Mitchell’s folk opera — Joan Marcus ToJuly3,nytw.org

detailsinthenotes:thattheprotagonist’s Li Xiuying’s shimmeringly lyrical CLASSICALMUSIC husband was murdered by an official account of poet Yu Youren’s nostalgia- during the Cultural Revolution. With no tinged text became one of the evening’s Beijing Modern Music Festival mention that driving the official insane few moments of conventional beauty. NCPA Concert Hall, Beijing byherwailswasthewidow’sonlychance Winterreise (1999), by the evening’scon- aaaee for revenge, there was little point to the ductor José Serebrier, was a virtuoso piece’sunrelentingunpleasantness. exercise in creative plagiarism, borrow- Ken Smith YeGuohui’sASightofMainland(2011) ing from “almost every composer but alternated bombast and tenderness Schubert”,asthenotesexplained,avoid- Since its inception 12 years ago, the Bei- with precious little in between. Soprano ing postmodern “channel-changer” jing Modern Music Festival has evolved aesthetics by smoothly recontextualis- from a comparatively modest affair at ingitspartsintoacoherentwhole. the Central Conservatory of Music into Compared with the evening’s other a national-level event. This year it works, John Corigliano’s Clarinet Con- opened on Sunday with each piece con- certo(1977),inthesecondhalf,waspos- sciouslytrainedonthepast. itively monumental. In contrast to Lin’s Despite occasional slips in pitch and anti-virtuosity in Xiaoxiang, clarinettist rhythm, the Beijing Symphony Orches- Michael Collins tore into the opening tra revealed a keen sensitivity to timbre cadenzas like a man possessed. Sere- right from the opening Xiaoxiang, a sax- brier deftly led his forces through con- ophone concerto reorchestrated from a siderable gradations in dynamics and 2009 electro-acoustic piece by the texture, inspiring some effective string Chinese-American composer Lei Liang. playinginthecentralElegy,andmaking Soloist Chien-Kwan Lin often used his fine use of acoustical space in the con- mouthpiece to mimic folk reed-playing cludingAntiphonalToccata. and funeral wailing. But Xiaoxiang suf- fered from the censorship of salient Deft touch: José Serebrier conducts bmmf.ccom.edu.cn,chncpa.org

MAY 24 2016 Section:Features Time: 23/5/2016 - 17:24 User: abrahamr Page Name: ARTS INT, Part,Page,Edition: USA, 11, 1 12 ★ FINANCIALTIMES Tuesday 24 May 2016

Loan to moan Leveraged loan issuance has fallen sharply since peaking in 2013. Bank regulators have cracked down on the riskiest loans backing LBO transactions, which created an opportunity for institutions such as Jefferies and Nomura who are out of reach of the US bank regulators. The fall in loans has also resulted from fewer private equity deals occurring because valuations have been expensive and strategic buyers have been aggressive Twitter: @FTLex Email: [email protected] US leveraged loan issuance US LBO loan bookrunner $bn 2012 Market 2015 Market 600 share share China cement: year was 2bn tonnes, compared with 1 Credit Suisse 10% Barclays 9% Negative yields: output of 1.3bn. So, despite an increase 500 weighed down in cement output of 13 per cent in the 2 RBC Capital Markets 10% Jefferies Finance LLC 8% go to the mattresses four months to April, prices over the 3 Deutsche Bank 8% Credit Suisse 7% In the three years to 2013, China same period actually dropped one- 400 As long as there are mattresses to hide consumed more concrete than the US tenth. They look likely to keep sinking. 4 General Electric Capital 8% Deutsche Bank 6% notes in, the case for sub-zero returns used in the 20th century, according to will be difficult. With Goldman Sachs’ the academic Vaclav Smil. China’s 300 5 Barclays 8% RBC Capital Markets 6% help, Deposit Insurance Corp of Japan economic growth has since slowed. Oil: 6 Goldman Sachs 7% Morgan Stanley 5% has issued notes yielding below zero. Cement demand will never be as strong 200 Pay ¥100.45 today and two years later again. There remains, however, enough drill pickle 7 Bank of America Merrill Lynch 6% Nomura Holdings 4% you get ¥100 back, with just ¥0.20 in cement-making capacity in China to fill coupons as recompense: Japan’s first 8 UBS AG BMO Capital Markets the peak appetite. If it is to earn Billions, a television drama about hedge 100 6% 4% sub-zero corporate primary issue. positive economic returns, the industry funds, portrays a Manichean struggle 9 Jefferies Finance LLC 5% Citigroup 4% But whatever market or issuer, it is has no choice but to shrink. between insider-trading cheats and 0 the same mystery. Why would an Chinese cement companies know research-focused worthies. Commodity 10 Morgan Stanley 5% Goldman Sachs & Company 4% investor in possession of their senses this and believe that consolidation is traders looking for an edge must 2011 12 13 14 15 happily receive less than they put in? the answer. The market may concur. sometimes wonder if anything works. FT graphic Sources: S&P LCD; Thomson Reuters One rationale is the appreciating Yesterday, shares in West China Take oil. Historically high Opec currency. A dollar buys ¥109.60 today, Cement rose nearly 6 per cent on news production and full inventories are If success has many fathers, company that, post-financing, had from the Federal Reserve Bank of just 105.60 for delivery in two years. that a sufficient majority of option both negative for market direction — regulators — when it comes to the total debt of 6 times its earnings before New York. Yet the guidelines are just This observation merely bumps the holders had agreed to an acquisition by yet the bulls are winning. Three of the decline in risky merger lending — interest, tax, depreciation and a part of the story. Frothy valuations, mystery forward, though. A currency largest listed Chinese peer, Anhui top five commodity markets this year probably think of themselves as the amortisation. By 2015, when the cheap investment grade credit and that keeps its value is a sign of failing Conch Cement. The deal should have are oil-related. big daddy. In 2013, the three primary guidelines were properly enforced, big general choppiness in junk finance monetary stimulus. Anyone buying the government’s blessing, too. Last Part of this must be put down to overseers of banks in the US banks such as JPMorgan Chase and markets all favoured corporate negative yielding debt is betting on a week, the State Council reiterated its expectations. Even if Opec production published guidance on limiting the Bank of America were often already buyers over private equity funds, contradiction: the central bank desire for a more concentrated is at 10 year highs, US shale crude most questionable leveraged loans passing on debt-heavy deals that they which tend to pile on more debt. continually buying such debt, but the industry. It wants the top 10 players to output — a key factor in the supply (junk paper used to finance would have happily underwritten in Jefferies, Macquarie and Nomura trillions so printed failing to depreciate control three-fifths of capacity by shock before the price top in summer buyouts). After some false starts, the another era. have paid a price for filling the gap. the yen. This does not feel safe. 2020. This is even less radical than it 2014 — peaked early last year. guidance has shown its teeth and the In the absence of the Wall Street All have announced retrenchments sounds. HSBC points out that the top Furthermore, some Opec producers, volume of perilous loans has shrunk heavyweights, institutions that did not in the US. No matter. New private Bayer: sellers abound 10 cement producers already such as Nigeria and Venezuela, have considerably in recent years. But take deposits and thus fell outside the debt funds, also outside regulators’ controlled 54 per cent of the market as curtailed their own flows. Do the whether the rules caused the dip, and purview of bank regulators — Jefferies, ambit, are popping up. They cater to of the end of 2015. Nor will mergers maths, as Goldman Sachs repeatedly what their impact on the financial Macquarie, Nomura — stepped in to institutional investors starved for Bayer’s annual report states that the achieve what the industry needs most: does, and global crude supply will fall system has been, remain opaque. finance many of the big leverage deals. yield. The Fed has noted that some of main parameters used to manage the outright reduction in supply. this quarter by about half a million The regulators offered several In the aggregate, leveraged loan these firms enhance their firepower group “are the cash value added and Consolidation has been showcased barrels per day. That is the most since criteria for what constituted a risky volume fell sharply after the guidance to fund risky deals by borrowing cash flow return on investment”.In the elsewhere. Last July European giants 2011 and the first decline that has been leveraged debt but, ultimately, the came into effect both in absolute and from — oops — big banks. Paternity papers relating to its $122 per share bid Holcim and Lafarge merged to become seen in three years. rule of thumb became a loan to a relative terms, according to research aside, success can be fleeting. for Monsanto, shareholders are instead the world’s largest cement producer. A supply squeeze then? Not so fast. promised accretion in earnings per Economies of scale did not spare the US shale oil regions might have one last share and likely upward re-rating. merged entity from having to burst of life left. A lot of onshore wells Alarm bells are ringing; its shares are announce a reduction in capex by in the key regions — Permian, Bakken, margin. And the higher oil rallies, the part, have attracted historically. technology to Tribune in return for down 14 per cent in just over a week. November. Despite expected savings of Eagle Ford and Niobrara — were drilled more likely it is that drilling will Tribune favours this approach as it more shares. Now $15 a share for It is offering a $14bn premium over $1.6bn by 2017, and anticipated but not fully completed, the last stage resume in the US. attempts to fight off a bid from control no longer looks like a dead Monsanto’s undisturbed equity value, improved pricing power, the maiden before the well can produce oil. While Gannett, a bigger rival. certainty. all in cash. It expects cost savings of set of results highlighted the need to there is usually some lag between Gannett’s recent bid for Tribune of Tribune believes that it can reinvent $1.5bn a year within three years. Taxed conserve free cash flow. drilling and completion, Rystad Energy Newspaper wars: $15 a share is a 99 per cent premium to itself as a digital media and marketing and capitalised, they are worth perhaps HeidelbergCement has been faring far notes that uncompleted wells have Tribune’s price before the fireworks titan but it needs more time to do so. It $10bn. If Monsanto forces a higher better. It has, at last, digested its own trebled to 2,300 in a year. private eyes began a month ago. Gannet points out further suggests that its stock price is offer, that gap will widen; at $125 a overblown 2007 acquisition. No guesswork is needed for these that Tribune sold 17 per cent of itself — artificially depressed — and Gannett is share, the shortfall approaches $6bn. Enthusiasts for a cyclical China trade sites. The oil is there. Were all of these The valuation page in investment along with the right to appoint several exploiting that. Not everyone agrees. Bayer has historically struggled to might point to a near-term pickup completed, as much as 1m barrels per bankers’ pitch books often shows a directors — to its new chairman at One large Tribune investor, Oaktree generate returns on invested capital from stimulus-led demand. Last week, day of supply could return. Some US series of bars indicating how much a $8.50 per share in February. Surely Capital with 14 per cent, favours that exceed the cost of that capital. the government said it would spend explorers, such as Concho Resources, company may be worth. One bar is offering almost twice as much for the negotiations with Gannett. Managers have promised this deal will nearly 7 per cent of gross domestic have even announced increases in new based on discounting future cash flows. entire company should be fair? Hostile takeovers always feature lots do so within three years. Shareholders, product ($722bn) on infrastructure rig counts recently. If there is a doubt, Another arrives at a price based on the Until yesterday, investors might have of tough talk. The winning side is facing a cash call of over €13bn, are projects over the next three years. it is whether enough oil workers can be valuations of publicly traded peers. agreed. But Tribune has announced almost always the one that puts the big right to be concerned. Construction activity has improved as found to finish the wells. Many investors think the most that biotech billionaire Patrick Soon- money where its mouth is. On that housing starts have rebounded. Yet It may seem petty to worry about a important metric is the “private Shiong has bought a 13 per cent stake basis, Gannett was in a strong position supply is more than adequate to satisfy small fraction of the 35bn barrels market” benchmark: the valuations (in at $15 a share. He too will get a seat on to take Tribune. That is trickier now a Lex on the web For notes on today’s breaking more demand. Fitch Ratings points out consumed annually as adding to terms of price-to-cash-flow multiple) the board. In a separate deal, Mr Soon- Tribune ally has appeared and reset stories go to www.ft.com/lex that clinker production capacity last supply. But markets work at the that other businesses, sold in whole or Shiog licensed artificial intelligence the valuation benchmark.

1020 Today’stemperatures HIGH Abu Dhabi Sun 40 Malta Sun 24 HIGH 24 Amsterdam Cloudy 14 Manila Thunder 33 AnkaraFair 19 Miami Cloudy 30 12 8 8 Athens Sun 26 Milan Sun 25 21 Bahrain Sun 39 MontrealSun 28 Barcelona Sun 22 MoscowShower 21 15 Beijing Sun 30 Mumbai Fair 34 1020 BelfastSun 17 Munich Rain 11 15 Belgrade Shower 20 NaplesFair 21 Berlin Thunder 25 NewYork Shower 22 14 25 20 5 Brussels Cloudy 16 NiceSun 22 18 Budapest Thunder 20 Nicosia Sun 28 1010 14 13 CairoSun 29 Oslo Rain 12 LOW Cardiff Sun 18 Paris Fair 17 17 20 ChicagoCloudy 26 Prague Thunder 19 15 25 1010 Cologne Rain 15 Reykjavik Drizzle 10 LOW Copenhagen Sun 22 RigaFair 23 21 17 Delhi Sun 39 Rio Cloudy 23 22 19 DubaiSun 37 Rome Sun 21 1010 Dublin Sun 15 SanFrancisco Cloudy 18 21 Edinburgh Cloudy 12 SingaporeFair 34 20 26 21 Frankfurt Rain 15 Stockholm Sun 24 24 26 28 Geneva Fair 16 StrasbourgCloudy 15 HamburgRain 18 SydneySun 21 Helsinki Sun 24 To kyoSun 28 27 26 25 24 25 16 Hong Kong Fair 29 To rontoSun 27 Istanbul Sun 25 Vancouver Cloudy 18 35 Lisbon Fair 20 Vienna Rain 15 Wind speeds in KPH London Fair 18 Warsaw Sun 25 Forecastsby LosAngelesCloudy 20 Washington Fair 28 Wind speed LuxembourgCloudy 14 Zagreb Shower 17 in KPH Madrid Fair 26 Zurich Cloudy 15

CROSSWORD No. 15,248 Set by HAMILTON  ACROSS DOWN 1 Enemy captured sailors’ pad, 1 Jeweller who was known as a  shattering false hopes and good egg? (7) expectations (5,8) Tender embrace for Scotsman   2 9 Clown is expert in no time, returning for a spell in the which isn’t special (7) background (3,6) 10 Bigwigs have Reg thrown out of 3 Fixes and marks locations (5)   stagecraft school (3,4) 4 Make notes on ornamentation, 11 Loads of paper (5) discounting minor repair (8) 12 One’s going places with time for 5 Fight fish clinging to hook     composer, vigilant at heart (9) without starting to grimace (6) 13 A long time heading off 6 Knowing ring has it but circle  philanthropist gripping broken doesn’t! (2,3,4) rein (8) 7 Deception over stealing    15 Runner eating lunch at first is graduate correspondence (5)  seen to be on course (6) 8 Central courts cover confident 18 Fuzzy George is wet . . . . (6) cupidinous capitalist! (6)    19 . . . . but the fat Duke is fantastic! 14 Not one idiot in US city is a (8) lightweight (9) 22 Certain since recording that 16 The cheek of it – Pip can fly off   some of it is fake (9) (9) 24 Introducing this animal, 17 Generate fresh drink (5,3) primarily inhabiting Central 18 Questions the king’s America (5) misfortunes (6)  25 Eyeing up Heather, who’s 20 “Dress will detract from the always in (7) man” says Spooner (7) 26 Novice grounded, getting an E 21 Extent to which outside line is in the end (not D) (7) no good to horses at the start JOTTER PAD 27 Will one’s services be needed (6) after watching horror movie? 23 Costly pickle (5) (13) 24 Indian police HQ in Elizabethan armoury (5) Solution to Saturday’s prize puzzle on Saturday June 4 Solution to yesterday’s prize puzzle on Monday June 6 Winners’ names will be printed in Weekend FT

MAY 24 2016 Section:FrontBack Time: 23/5/2016 - 19:20 User: marais Page Name: 1BACK, Part,Page,Edition: EUR, 12, 1