Kiosko.net

E U R O P E Thursday November 20 2008

‘China’s belief in its own Great Power status is real. But so is its lack of
confidence’
David Pilling Comment Page 11
Newspaper of the year

Guru, schmuru We review the world’s worst ever business self­help book Business
Life Page 12
World Business Newspaper

News Briefing
GE offers customers assurance on credit
General Electric is willing to extend more financing to customers of its industrial
businesses next year to help ensure energy, transportation and water projects proceed
even if credit markets remain frozen, the conglomerate’s chief executive said.
Page 15; Circuit
failure, Page 9

Kerviel blames bank Trader wants to question SocGen chairman

BASF to cut output by 25% and slash staff hours
By Gerrit Wiesmann in Frankfurt and Richard Milne in London BASF, the Germany-based
chemicals group, will cut output by 25 per cent and reduce the working hours of 20,000
of its staff for the next two months, as the effects of the credit crunch continue
to affect the real economy. Jürgen Hambrecht, chief executive, said the world’s
largest chemicals group was “preparing for tough times” as he issued BASF’s
second profit warning this year. He warned it was “difficult to foresee” what
2009 would bring given mounting economic woes. Three weeks ago BASF said it was coping
with declining demand and that 2008 sales would top last year’s €57.95bn and
that operating earnings would match 2007’s €7.32bn. But Mr Hambrecht said yesterday
full-year earnings would fall short of last year’s as demand in key markets had
“declined significantly” since late October. Carmakers had cancelled orders at
short notice, he said. Industry experts expected BASF’s move to be a precursor
to a huge bout of restructuring among European companies, including job cuts and
factory closures. “What we heard from BASF, we will hear from a lot of other companies,”
said James Stettler, analyst at Dresdner Kleinwort. “You will see lots more job
cuts earlier than you saw before.” Scott Babka, analyst at Morgan Stanley, said:
“On the way down all these companies will be taking production out of Europe.”
The fallout from collapsing demand in the car sector is also likely to lead to many
more profit warnings. BASF’s shares closed down 14 per cent at €21.84. BASF will
make 80 plants idle and reduce output at another 100, a move that will see one-fifth
of its employees adopt “flexible working time arrangements”. Others to follow
lead, Page 16 BASF’s woes, Page 34

De Villepin faces trial
Dominique de Villepin, former French prime minister, is to stand trial for alleged
involvement in a plot to blacken the name of his rival, Nicolas Sarkozy. Page 5

Obama health choice
US president-elect Barack Obama chose Tom Daschle to be secretary for health and
human services. The former US senate majority leader is expected to spearhead Mr
Obama’s push for universal healthcare reform.Page
4; Energising the economy, Page 11; www.ft.com/obama

ANC battles new rival
The battle between the African National Congress and a powerful breakaway group will
enter the courts today when South Africa’s ruling party will argue that the rival
party’s choice of name breaches copyright and electoral laws.
Page 5

Jerome Kerviel, the Société Générale trader blamed by the bank for a record trading
loss, arrives at the financial investigation unit in Paris yesterday. Mr Kerviel
plans to question the bank’s chairman Daniel Bouton after judges agreed to extend
their investigation into criminal charges against the former trader www.ft.com/socgen
Reuters

Bosnia concerns grow
European, US, Russian and other representatives responsible for preserving the stability
of Bosnia-Herzegovina started talks on whether to replace controls that have kept
order since the 1992-95 civil war. The EU fears Bosnia’s government institutions
may not hold up amid growing political tension and nationalist rhetoric. Page 7

Call for German stimulus
ECB policymaker urges more action Austrian central bank chief speaks out
By Ralph Atkins in Vienna, Tony Barber in Brussels and Bertrand Benoit in Berlin
Germany should launch a much more ambitious economic stimulus package as part of
a concerted European response to the gathering economic crisis, a European Central
Bank policymaker has urged. Ewald Nowotny, Austria’s central bank governor, also
called for an acceleration of eastern European aid programmes in an interview with
the Financial Times, in what amounts to one of the boldest calls yet by a central
banker for more aggressive action at a time when much of the continent is already
in recession. The European Commission is preparing to announce an EUwide economic
recovery programme next Wednesday. EU diplomats said yesterday that the Commission
would invite the 27 EU member states to launch fiscal stimulus packages of their
own, but these would be determined by each government’s budget situation. In line
with Mr Nowotny’s comments, the Commission is expected to propose faster spending
on aid for poorer regions of the EU, especially central and eastern Europe. There
would also be measures for the car and construction industries. However, whatever
is decided must be approved by EU leaders at a meeting on December 11-12. Germany’s
economy minister, Michael Glos, said during a television appearance yesterday that
the 27 states would be each asked to contribute 1 per cent of their gross domestic
product to a growth package that would be worth “about €130bn” overall. The
German government later made it clear that Berlin’s commitment would include measures
the government had already adopted, which it argues amount to €32bn over two years,
or more than 1 per cent of GDP. Mr Nowotny said Germany could afford a growth-boosting
package equivalent to 2 per cent of the country’s gross domestic product – or
about €50bn. “There is really a lot of room for manoeuvre especially in Germany,
so I think you should use it,” he said. At the same time, he suggested European
Union regional aid could be frontloaded in eastern Europe. Compared with other countries
such as France and Italy, Germany’s public sector deficit remains modest as a share
of GDP. In Berlin, however, calls for a bigger fiscal stimulus have prompted warnings
about the rising burden that has already been imposed on public finances by the economic
slowdown. Although there is concern in Berlin at the rapid deterioration of the German
economy, the government is wary of abandoning its budget-balancing plans after having
to postpone its goal for eradicating the federal deficit within two years. There
are also doubts about whether a large-scale fiscal stimulus would boost consumption.
Officials say consumers would be tempted to channel nearly all their additional income
from lower taxes or higher benefits into savings. In private, officials point out
that few European governments apart from the UK have actually delivered on promises
to support their economies in the hope, the officials suggest, that Germany would
move to boost consumption first. Germany’s federal budget deficit could rise to
almost double the government’s original target next year, coalition politicians
warned yesterday. The German parliament’s budget committee is preparing to finalise
a revised draft 2009 budget in the so-called “cleaning session”, an all-day meeting
of MPs and finance ministry officials, today. Vienna favours expansion, Page 2 Editorial
Comment, Page 10 www.ft.com/centralbanks

Fed targets deflation
The Federal Reserve will take every step required to ensure the US does not fall
into deflation, its vice-chairman said as data showed consumer prices fell a record
amount last month.Page 2; Energise economy,
Page 11; Lex, Page 14; www.ft.com/centralbanks

TPG facing China loss
TPG risks losing a substantial investment in a Chinese leasing venture after a dispute
in which the company’s local staff called in police to remove the private equity
firm’s representatives.
Page 15; Tough lessons, Page 18

Japan ex­minister slain
Tokyo tightened security for officials after stabbings left former vice-welfare minister
Takehiko Yamaguchi and his wife dead. The attacks came amid anger over the ministry’s
mishandling of pension records.
Page 6

Seoul food

UN warns of Tehran’s progress in stockpiling enriched uranium
Material could be used to make atom bomb
By Daniel Dombey in Washington and James Blitz in London Iran is forging ahead with
its nuclear programme, the United Nations’ nuclear watchdog reported yesterday,
deepening the dilemma facing US presidentelect Barack Obama over his campaign promise
to engage with Tehran. The latest report by the International Atomic Energy Agency
reveals that Iran is rapidly increasing its stockpile of enriched uranium, which
could be rendered into weapons-grade material should Tehran decide to develop a nuclear
device. The agency says that, as of this month, Tehran had amassed 630kg of low enriched
uranium hexafluoride, up from 480kg in late August. Analysts say Iran is enriching
uranium at such a pace that, by early next year, it could reach break-out capacity
– one step away from producing enough fissile material for a crude nuclear bomb.
“They are moving forward, they are not making diplomatic overtures, they are accumulating
low enriched uranium,” said Cliff Kupchan, an analyst at the Eurasia Group, a risk
consultancy in Washington. “These guys are committed to their nuclear programme:
if we didn’t know that, they just told us again.” The IAEA report also says there
has been a breakdown of communication between the agency and Iran over alleged research
on an atomic weapon. “The Iranians are making good progress on enrichment but there
is absolute stone-walling on past military activities,” said Mark Fitzpatrick of
the International institute for Strategic Studies. “It’s very disappointing.”
The progress chalked up by Iran increases the difficulties for Mr Obama, who campaigned
on promises of talking to America’s enemies, although during the election he scaled
down his initial vow to meet Iran’s leaders to a more general commitment to consider
doing so if it advanced US interests. “Obama faces a real dilemma,” said the
Eurasia Group’s Mr Kupchan. “He must decide whether to pursue diplomacy quickly
in light of rapid Iranian progress or whether to wait in the hope of a more moderate
Iranian leadership after Iran’s June presidential election.” European diplomats
have responded favourably to Mr Obama’s suggestion of US engagement with Iran,
although they are keen to avoid unilateral US actions that would rip up the approach
fashioned by the permanent five members of the UN Security Council and Germany. www.ft.com/iran

London’s Aim falls flat
The boom times have come to a halt for Aim, London’s lightly regulated share market
for smaller companies that elicited envy from rivals in recent years as it attracted
listings from companies worldwide. Page 15;
Markets, Pages 32­34

Argentina air of unease
In a decision likely to intensify investor concerns about Argentina, MPs recommended
the expropriation of Aerolineas Argentinas, the debt-laden flag carrier. Page 4;
www.ft.com/airlines

US rethinks its oil fix
US oil demand has fallen 5 per cent this year, the biggest drop since 1981, say figures
that underline changing attitudes to energy use. Page 4; Double blow
for Syria, Page 5; Commodities, Page 32; www.ft.com/oil

Daewoo Logistics of South Korea said it expected to pay nothing to farm maize and
palm oil in an area of Madagascar half the size of Belgium. The Indian Ocean island
will simply gain employment opportunities from the 99­year lease of 1.3m hectares,
the company said. They emphasised that the aim of the investment was to boost Seoul’s
food security. Report, Page 3 Editorial Comment, Page 10

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World Markets
STOCK MARKETS
Nov 19 Dow Jones Ind Nasdaq Comp S&P 500 FTSEurofirst 300 DJ Euro Sto 50 FTSE 100
8268.64 1433.11 834.44 811.99 2295.36 4005.7 1998.02 3087.89 4354.09 8273.22 12815.80
134.7 prev 8424.75 1483.27 859.12 845.37 2390.10 4208.6 2095.23 3217.40 4579.47 8328.41
12915.89 138.7 %chg -1.85 -3.38 -2.87 -3.95 -3.96 -4.82 -4.64 -4.03 -4.92 -0.66 -0.77
-2.9 Oil Brent $Jan Oil WTI $Dec Gold $ $ per Û $ per £ £ per Û ´ per $ ´ per
£ $ inde

Cover price
CURRENCIES
Nov 19 1.265 1.511 0.837 96.9 146.4 92.3 prev 1.265 1.501 0.843 97.4 146.2 92.3 1.518
Û per $ £ per $ Û per £ ´ per Û £ inde Û inde Nov 19 0.794 0.663 1.194
122.6 82.8 97.4 prev 0.792 0.669 1.187 123.1 82.2 97.5 1.802 Fed Funds Eff Nov 19
52.67 54.76 748.25 prev 51.84 54.39 738.25 chg +0.83 +0.37 +10.00 US 3m Bills Euro
Libor 3m UK 3m US Gov 10 yr UK Gov 10 yr Ger Gov 10 yr Jpn Gov 10 yr US Gov 30 yr
Ger Gov 2 yr

INTEREST RATES
price 102.83 107.38 101.82 100.26 108.33 103.19 Nov 19 0.38 0.10 4.11 4.05 yield
3.41 4.04 3.53 1.47 4.02 2.16 prev 0.37 0.12 4.15 4.05 chg -0.13 -0.05 -0.13 -0.02
-0.13 Ð chg +0.01 -0.02 -0.04 -


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