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EUROPE Friday December 21 2012

World Business Newspaper

9 7 7 0 1 7 4 7 3 6 1 5 9

5 1

Dec 20 prev %chg

S&P500 1436.93 1435.81 +0.08

Nasdaq Comp 3039.76 3044.36 -0.15

Dow Jones Ind 13246.25 13251.97 -0.04

FTSEurorst 300 1142.8 1142.13 +0.06

Euro Stoxx 50 2658.3 2654.69 +0.14

FTSE 100 5958.34 5961.59 -0.05

FTSE All-Share UK 3121.27 3122.32 -0.03

CAC 40 3666.73 3664.59 +0.06

Xetra Dax 7672.1 7668.5 +0.05

Nikkei 10039.33 10160.4 -1.19

Hang Seng 22659.78 22623.37 +0.16

FTSE All World $ (u) 225.28 -

COMMODITIES

Dec 20 prev chg

Oil WTI $ Feb 89.98 89.98 -

Oil Brent $ Feb 110.36 110.36 -

Gold $ 1,666.95 1,670.15 -3.21

price yield chg

US Gov 10 yr 98.59 1.78 -0.03

UKGov 10 yr 98.37 1.93 -0.04

Ger Gov 10 yr 100.76 1.42 -0.02

Jpn Gov 10 yr 99.30 0.78 -0.01

US Gov 30 yr 95.81 2.96 -0.03

Ger Gov 2 yr 100.00 0.00 0.01

Dec 20 prev chg

Fed Funds Eff 0.17 0.17 -

US 3m Bills 0.06 0.06 -0.01

Euro Libor 3m 0.12 0.12 -

UK3m 0.57 0.57 -

Prices are latest for edition

Dec 20 prev

$ per € 1.324 1.326

$ per £ 1.626 1.627

£ per € 0.814 0.815

¥ per $ 84.4 84.3

¥ per £ 137.2 137.1

$ index 80.8 80.7

SFr per € 1.207 1.209

Dec 20 prev

€ per $ 0.755 0.754

£ per $ 0.615 0.615

€ per £ 1.228 1.227

¥ per € 111.7 111.7

£ index 83.8 83.7

€ index 91.34 91.49

SFr per £ 1.483 1.484

STOCK MARKETS CURRENCIES INTERESTRATES

World MarketsAustria €3.50 Malta €3.30B ahra in Di n1 .5 Ma ur iti us M Ru 90Belgium €3.50 Morocco Dh40Bulga ria L ev 7. 50 N ethe rlan ds € 3. 50C roat ia Kn 29 Ni geri a Na ira 71 5Cyprus €3.30 Norway NKr30C zec h Rep Kc 120 Oma n OR 1.5 0D en mark D Kr 30 P ak is tan Rup ee 1 30Egypt E£19 Poland Zl 16E st oni a € 4.00 Po rt uga l €3 .5 0Finland €3.80 Qatar QR15France €3.50 Romania Ron17Germany €3.50 Russia €5.00G ib ra lt ar £ 2. 30 Sa ud i A ra bi a R ls 15G re ece €3. 50 S erb ia NewD42 0H un ga ry F t8 80 S lo va k R ep € 3. 50India Rup85 Slovenia €3.50Italy €3.50 South Africa R28Jordan JD3.25 Spain €3.50K azak hs tan U S$ 5. 20 S weden S Kr 34

K en ya K sh s3 00 S wi tzer land S Fr 5. 70Kuwait K WD 1. 50 S yr ia U S$ 4. 74L at vi a L at s3 .9 0 T un is ia D in 6. 50L eb an on L BP 70 00 T ur ke y T L7 .2 5L it hu an ia L ita s1 5 UAE Dh 15. 00L ux em bo ur g € 3. 50 U kr ai ne € 5. 00Macedonia Den220

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© THE FINANCIAL TIMESLIMITED 2012 No: 38,116

Printed in London, Liverpool, Dublin,Frankfurt, Brussels, Stockholm, Milan,Madrid, Malta, Athens, Cyprus, New York,Chicago, San Francisco, Orlando,Washington DC, São Paulo, Tokyo, HongKong, Singapore, Seoul, Abu Dhabi, Sydney,Johannesburg

US banks face sharprise in loan loss coverThe US accounting standardssetter unveiled tough rulesto increase the amount of money banks must set asideto cover soured loans andbonds – with its chairman

hinting reserves might haveto rise 50 per cent. Page 13

Oligarch jail term cutRussian oligarch MikhailKhodorkovsky, an oppositionfigure jailed on tax andfraud charges after hechallenged the Kremlin, willbe freed in 2014 – two yearsearlier than expected – in anact of unprecedentedleniency. Page 5

East cools on euroEnthusiasm for the euro iscooling among the EU’snewest members in easternEurope, with Latvia’s primeminister warning that hiscitizens were turning againstthe single currency. Page 5

US growth boostThe US economy grew3.1 per cent in the thirdquarter, revised figures show– ahead of forecasts andputting it in a strongerposition to withstand anyfiscal cliff shocks. Page 3

BoJ extends stimulusThe Bank of Japan steppedup monetary easing with aY10tn rise in its asset-buying programme and signalledthat it could adopt a higherinflation goal as requestedby prime minister-electShinzo Abe. Page 2; PeterTasker, Page 9

$1bn Trafigura profitCommodities traderTrafigura earned about $1bnfor a second year running,indicating that profitabilityof the houses that dominateraw materials remains highdespite the Chineseslowdown. Page 13

Gloomy year for M&AInvestment banking activity

fees in 2012 fell 7 per centfrom 2011 – making it one of the worst dealmaking yearsin a decade. Page 13; Pent-updemand, Page 15

News Briefing

TOMORROW INFT WEEKENDBrazenly Billy Lucy Kellawaytalks to comedianBilly Connolly about fame, oldage and why heloves a goodswear word

Life & Arts

Momentum addiction hassapped the hedgies’ mojoGillian Tett, Page 24

The ‘4 per cent curse’Has Apple peaked? Analysis, Page 6

By Jamil Anderlini in Handan

Shi Xinwang’s jaw clenchedwith emotion as he describedhow he recently discovered thathis wife was a secret member of “Eastern Lightning”, one of China’s largest doomsday cults.

In his parents’ freezing bed-room cellar in their impover-ished village in central China,he held up a video on his phoneof his five-year-old daughter inhappier times, dancing and per-forming for his wife Xiaowei.

“At first I thought she was

just a normal Christian butfrom the internet I soon learntthat Eastern Lightning is a dan-gerous cult,” Mr Shi says. “Inrecent days she has told me towithdraw all our money andprepare to beg for AlmightyGod’s mercy because the worldwill end [today].”

In desperation he has secretly

informed on her to the Chineseauthorities, which have beenrattled by the cult. A nation-wide crackdown has so far ledto the arrest of about 1000 fol-lowers of the quasi-Christiangroup, which also calls itself theChurch of Almighty God.

Eastern Lightning, one of China’s most aggressive mille-narian sects, believes thatChrist has been reincarnated asa woman in central China and ison a mission to lead the faithfulin a decisive battle to slay the“great red dragon” of the ruling

Communist party.Current and former adherents

told the Financial Times thatthe group had adopted a theorypopularised in the Hollywoodfilm 2012 that says that anancient Mayan calendar pre-dicted that doomsday would falltoday.

Believers expect three days of complete darkness followed by72 days of natural disasters,starting from January 1, thatwill devastate the earth andwipe out all non-believers,whom adherents, among them-selves, refer to as “snakes” and“demons”.

Followers direct recruitmentefforts at disenfranchisedgroups in China’s poorest ruralareas, including undergroundChristian “house churches”deemed illegal by Beijing, andstate-sanctioned Catholic andProtestant congregations.

“The pastor gave a sermon onSunday to warn us all about

this evil cult,” says Han Xiut-ing, 81, an administrator at theofficially sanctioned North Prot-estant Church of Handan, theclosest city to the area whereMr Shi’s wife has been trying toharvest souls in preparation forArmageddon.

“After the service we gatheredtogether and burnt some of [Eastern Lightning’s] pam-phlets.”

In response to questions fromthe FT, Eastern Lightning denied that it was a cult andsaid it was being persecuted by

the Communist party.Eastern Lightning claims to

have millions of followersthroughout the country. Thegovernment and other Christiangroups put their numbers atclose to 1m.

Additional reporting by Gu Yu

China’s ‘610 office’, Page 2

Beijing pre-empts end of the world incrackdown on Eastern Lightning cult

The cult anticipates abattle to slay the‘great red dragon’ ofthe Communist party

ICE in $8.2bn gamble withdeal to buy NYSE Euronext By Philip Staffordin London andArash Massoudi in New York

IntercontinentalExchange hasagreed to buy NYSE Euronext,its 208-year old rival, in a $8.2bndeal that will make the energyand commodities bourse one of the world’s largest derivativesmarkets operators.

The deal, announced yester-day, marks the biggest gambleto date by ICE chief executiveJeff Sprecher, who has long coveted NYSE Liffe, the Euro-pean derivatives exchangeowned by NYSE Euronext.

Last year ICE and NasdaqOMX jointly launched a $11.3bnhostile bid to acquire and breakup NYSE, but abandoned themove after US antitrust bodiesthreatened to sue to block it.

ICE will keep the iconicNYSE building on Wall Streetbut wants to hive off Euron-ext’s cash equities arms, whichinclude the stock exchanges of Paris, Amsterdam, Brussels andLisbon. The company said thatit was exploring a listing of Euronext if market conditions

allowed and European policymakers supported the offering.

The deal will propel ICE, the12-year-old exchange that hasgrown through offering trading in energy, emissions and com-modities, into the trading of listed interest-rate derivatives,the world’s largest asset class.It will also transform ICE intothe third-largest operator of futures exchanges, posing athreat to Deutsche Börse andCME Group.

“Markets have inherentlychanged in the face of theglobal financial crisis,” saidMr Sprecher. “While derivativesmarkets have become more glo-bal . . . many cash and equitymarkets have become moreregional as major Europeanfinancial institutions turnedtheir focus to capital efficiencyand regulatory reform.”

ICE’s ambitious takeover

NYSE share in a mixture of cash and shares. The duo saidthat they would have headquar-ters in Atlanta, where ICE isbased, and New York.

NYSE shareholders will havethe option of either accepting $33.12 in cash per share, taking 0.2581 ICE common shares or amix of $11.27 in cash plus 0.1703ICE common shares, subject toa maximum cash considerationof approximately $2.7bn.

Mr Sprecher will remain chief

executive of the enlarged com-pany while Duncan Niederauer,chief executive of NYSE Euron-ext, will be chief executive of NYSE Group and president of the enlarged company.

Like all other incumbentexchanges, NYSE has seen itsdominant market share andprofits from stock trading eroded in recent years by rivalsoffering faster trading andcheaper prices.

NYSE’s combined share trad-

ing platform accounts for onlyabout a quarter of all US equitytrading, forcing it to focus onEuropean derivatives and IToutsourcing services.

ICE was advised by MorganStanley, and NYSE Euronext byPerella Weinberg Partners andBNP Paribas.

Lex, Page 12Chief’s biggest bet, Page 17NYSE rises, Page 26 www.ft.com/tradingroom

UK bank panel calls for stricter reformsBy Patrick Jenkinsand George Parker in London

The UK risks failing to mendbanking’s broken ethical stand-ards and structure, according toa review of the government’sreform plans by an influentialcross-party commission.

Andrew Tyrie, the Conserva-tive MP who chairs the Parlia-mentary Commission on Bank-ing Standards, said the Liborscandal – which this week sawSwiss bank UBS pay $1.5bn infines to regulators in the US, UKand Switzerland – was just thelatest proof that the banksneeded reining in.

“Investigations into Liborhave exposed a culture of culpa-ble greed far removed from theinterests of bank customers, cor-roding trust in the whole finan-cial sector,” says the commis-sion’s report, published today.

In a 146-page assessment of the government’s planned Vick-ers reforms, the panel endorsesthe central idea that “universal”banks should be made to erect aprotective “ringfence” aroundtheir high-street banking activi-ties. However, it urges GeorgeOsborne, the UK finance minis-ter, to go much further.

“The proposals, as they stand,fal l w el l short o f w ha t i srequired,” it says. “Over time,the ringfence will be tested andchallenged by the banks . . . tosucceed, banks need to be dis-couraged from gaming therules.”

The report argues for an “elec-trified” ringfence, which wouldsee regulators given the powerto force the break-up of a bank,or of the whole sector.

Mr Tyrie’s panel fears thebanks will try to wriggle under,over or around the ringfenceunless it is “electrified”. Heurged the banks to respect therules. “We are saying to theb an ks : h el p u s m ak e t heringfence work. If not the regu-lator may pull you apart.”

The Treasury said it wouldstudy the conclusions carefully.

Editorial Comment, Page 8

comes ahead of a big shake-up of derivatives trading.

In the wake of the financialcrisis, global regulators want topush more of the off-exchangederivatives market on to trans-parent trading venues and havemore deals processed throughclearing houses.

The changes are due to comeinto effect next year in the USand in 18 months in Europe.

Under the terms of the deal,ICE has agreed to pay $33.12 per

Move for larger rival ● Threat to D Börse and CME ● Europe arm to be shed

Other listedUS & European

derivatives

Technology

Other

US & European

cash equities

Market data

Issuer services

ICENYSE Euronext

Crude oil& gas oil

OTC gas

OTC power,oil & otherOTC CDS

Market data

Source: Berenberg BankFT graphic

2011 revenues split (%)

29 25 21

19

1313

9

19

14

8

13 17

Photo: Bloomberg

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8/15/2019 Financial Times Europe December 21

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FINANCIALTIMES I

WORLD NEWS

By James Politiin Washington

The U S economy grewfaster than expected by 3.1per cent in the third quar-ter, according to the latestrevision by the commerce

department, putting it in astronger position to with-stand any shock from thelooming fiscal cliff.

The figure was higherthan the 2.7 per cent annu-alised growth previouslyestimated for the thirdquarter, and far more thanthe 1 per cent growth ratethat was originally calcu-lated by the commercedepartment two monthsago.

The upward revision fol-lowed higher net exports, aswell as support from con-sumer and governmentspending.

Economists were com-forted by the data – whichshowed the US economygrowing at its fastest sincelate 2011 – but cautionedthat it was unlikely to lastlong. “This revision was ahealthy one, driven by finalsales, not inventories,” saidNigel Gault, chief US econo-mist at IHS Global Insight.“But it overstates the econ-omy’s momentum, and weexpect growth of just below1 per cent in the fourthquarter.”

Mr Gault added that theoutcome of talks in Wash-ington to avert the fiscalcliff – a $600bn contractionmade up of tax rises andspending cuts due next year– would be critical for theUS economic outlook.

“The longer the negotia-tions drag on, especially if they extend into January,the more the uncertaintywill hurt consumer andbusiness confidence, andwillingness to spend. Atimely resolution will help

confidence, but we shouldnot expect the economyimmediately to spring tolife,” Mr Gault said.

Last week, the US FederalReserve showed it was notespecially confident in thesustainability of the higher

growth rate seen in thethird quarter. It took theunprecedented step of tying rock-bottom interest ratesto the jobless level, pledg-ing not to raise rates untilthe unemployment ratefalls to 6.5 per cent, as long as inflation does not riseabove 2.5 per cent. The US jobless rate is 7.7 per cent,according to the latest datafor November from thelabour department.

The stronger data ongrowth yesterday cameamid encouraging figuresfrom the housing sector.The pace of existing homesales rose by 5.9 per cent toa three-year high of 5.04munits in November from4.76m units the previousmonth.

“With tightening supplyand improving demand, thefundamentals in the UShousing market are contin-uing to move in a very posi-tive direction,” says MillanMulraine of TD Securities.

“Notwithstanding theseimproving fundamentals,t he h ou si ng r eb ou ndremains vulnerable to anydisruption in the overalleconomic recovery in thenear term, and any misstepon averting the fiscal could jeopardise the positivemomentum in this crucialsector,” he added.

Meanwhile, weekly job-less claims rose by 17,000 to361,000 after a big drop theprevious week.

The more reliable meas-ure of jobless claims, thefour-week moving average,fell to 367,000 as a spike inclaims in response to dis-ruptions related to super-storm Sandy in Novemberdropped out of the series.

“Looking through the vol-

atility, it seems that theunderlying pace of lay-offshas held fairly steady inrecent months,” said econo-mists at RBS in a note.“That is certainly encourag-ing given the pullback incapital spending the lastfew months and the uncer-tainty surrounding the 2013outlook, but as we havesaid repeatedly, it is theslow pace of hiring that ispreventing better improve-ment in the labour market,not the current pace of lay-offs,” they added.

US economy grows quicker han forecast

More at FT.com

● All eyes on Syria2012 was dominated by anelection in the US, aleadership transition inChina and turmoil in the

Middle East. GideonRachman outlines the new year’s big global flashpoints and says the eyesof the world will continueto be on the conflict inSyria in 2013 www.ft.com/2013video

● World podcastThe killing of 26 people,including 20 children, at anelementary school inNewton, has changed

America’s discussion aboutgun control, but will it leadto legislative change? FTwriters discuss the stepsPresident Barack Obamacan take to curb investmentin the gun industry www.ft.com/worldweekly

They are called “modernsporting rifles” in investorpresentations and industrypublications. Among enthu-siasts they are often knownsimply as “black rifles”.

One such semi-automaticrifle, the Bushmaster .223,was used to kill 20 childrenand six adults in Newtown,Connecticut. These weap-ons are now the focus of renewed attempts to imposetighter controls on gunownership in the US.

They are also among thefastest-growing productlines for US gunmakers.

In the 1990s and 2000s, theUS rifle industry had aproblem. Hunting, a tradi-tional core market, was inlong-term decline, as thecountry became more urbanand s uburban.

The number of huntersfell from 16.6m in 1975 to12.5m in 2006, according tothe US Fish & Wildlife Serv-ice.

The answer was for gun-makers to attract a newgeneration of customers

with modern sporting rifles:guns that looked not liketheir fathers’ old bolt-actionrifles, but like the latestmilitary assault weapons.

As the chief executive of Smith & Wesson, one of thelargest manufacturers of the new style of rifle, put itto investors in September,there is an important mar-ket in younger customerswho are “coming of age,very interested in firearms,[and] grew up playing videogames”.

Machismo is an importantpart of the marketing.Bushmaster has been run-ning adverts in men’s mag-azines saying that owning their guns was a way toearn your “man card”.

In a 2010 survey by theNational Shooting SportsFoundation, an industrygroup, 99 per cent of ownerswere men.

Modern sporting rifles

look like combat riflesbecause that is what theywere designed as. Most of the ones sold in the US arebased on the AR-15 design,developed by Armalite forthe US Army i n t he1950s and now produced by

many different manufactur-ers. There is a vigorous cul-ture of blogs and talk-bo ar ds , i ncl ud in g www.ar15.com, “home of the black rifle”, whereenthusiasts discuss equip-ment and swap tips.

Owners generally like toaccessorise their guns,spending hundreds of dol-lars on ext ras such assights, scopes, lights andgrips.

Like other fashionableguns such as the Glock pis-

tol, the AR-15 has alsobecome part of gangster rapculture, name-checked insongs by Tupac Shakur, 50Cent and Lil Wayne.

The results have beenspectacularly successful.Freedom Group, the owner

of Bushmaster rifles, said inits most recent annualreport: “The continuedadoption of the modernsporting rifle has led toincreased growth in thelong-gun market, especiallyw ith a younger demo-

graphic of users and thosewho like to customise orupgrade their firearms.”

Freedom estimated thatwhile total sales of long guns to US consumers roseat an annual rate of just 3per cent during 2007-11,modern sporting rifles grewat an annual rate of 27 percent.

That growth has acceler-ated this year. Smith &Wesson reported its sales of modern sporting rifles hadmore than doubled in thesix months to October com-pared with the equivalentperiod of 2011.

The number of huntersrebounded to 13.7m in 2011.But the NSSF survey foundthat hunting was not theprincipal reason why peopleowned these guns. Targets ho ot in g a nd “ ho medefence” were the most pop-ular reasons, with big gamehunting a distant sixth.

Although not fully auto-matic, AR-15s are capable of rapid fire, and large maga-zines holding 30, 50 or even100 rounds reduce the needto stop and reload.

As a commenter on anonline customer forum for

Walmart, the retail chainwhich is one of the largestsellers of these rifles, put it,they fire “as fast as you canpull the trigger”.

Almost a third of theowners in the NSSF surveysaid they used magazinesholding 30 or more rounds.

The US “assault weap-ons” law that lasted from1994 to 2004, banning salesof large-capacity magazinesand some specified modelsof semi-automatic rifle, hadlarge loopholes that allowedmanufacturers to escape itsrestraints, but is believedby its supporters to havehad some effect on theavailability of these guns.

Their increased popular-ity today means the politi-cal difficulty of reinstating a similar ban may be evengreater now than it wasthen.

See New York Notebook

Gun control measures centre on ‘black rif les’

A Rock RiverArms AR-15 rifle,similar to aBushmaster Getty

99%Percentage of sporting rifleowners who are male

56%Percentage of sportingrifle owners with nomilitary background

13.7mNumber of hunters in 2011,up from 12.5m in 2006

88%Percentage of sporting rifleowners who are educatedto at least college level

Source: National Shooting Sports Foundation

US shootingsReinstating a banon popular assault weapons will bepolitically difficult to achieve, writesEd Crooks

Housing boost: existing homesales hit three-year high

Housing boost: existing homesales hit three-year high

8/15/2019 Financial Times Europe December 21

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FINANCIALTIMES I

By Michael Peel

in Abu Dhabi

Syrian rebels battled regimeforces around the centralcity of Hama yesterday,part of an intensifying cam-paign to capture the crucialroad artery that links thecapital Damascus to the big-gest cities.

Full opposition control of the highway and ruralareas around the histori-cally rebellious Hama andits near southern neighbourHoms would sever linksbetween the regime’s twinstrongholds of centralDamascus and the coastalnorthwest, analysts said.

While President Basharal-Assad’s regime maintainscontrol of large parts of thebiggest cities, the four-dayHama opposition offensiveunderscores how much of the countryside and trans-port links have slipped fromthe government’s grasp.

“If the rebels were to takeH om s a nd H am a, t heregime would effectively becut off from its hinterland,”said Bernard Haykel, pro-fessor of near eastern stud-ies at Princeton University.“That would be a very seri-ous blow.”

Opposition fighters attac-

ked loyalist checkpoints inZughba, Ma’an and otherpro-regime villages in thearea around Hama, accord-ing to the Syrian Observa-tory of Human Rights, aUK-based pro-oppositionmonitoring group. It saidseveral rebel battalionswere involved in the cam-

paign, which had also tar-geted checkpoints on theDamascus-Aleppo roadnorth of Hama, where theSyrian regime killed an esti-mated 20,000 people during a 1982 uprising.

R ebel forces a roundHama were trying to sur-round a military air base

and drive out loyalist mili-tiamen, known as shabbiha,who have been launching attacks from countryside tothe west of the city, saidAbu Malik, an activist whow as in the a rea in thebuild-up to the offensive.

He said opposition fight-ers wanted to take control

of the main north-southroad, to allow direly neededsupplies to be transporteddirectly from the Turkishborder to Hama and eventu-ally Homs, which is Syria’sthird-largest city. “The lineshave to be open to allow

relief to go in,” Abu Maliksaid. “We can’t feed thewhole population by smug-gling things in.”

The contested 50km roadfrom H ama to H oms isimportant to both sides, asHoms is the meeting pointof numerous highways link-ing population centres toDamascus in the south. If rebels were to cut that link,Damascus would be isolatedfrom the north-westernhomeland of the minorityAlawites, who dominate theAssad government.

That would further under-mine the regime and inten-sify fears both of a parti-tioning of the country andof revenge attacks on Alaw-ites by advancing rebelsalready implicated in atroci-ties, analysts said. Scores of Alawites were killed in thevillage of Aqrab last week,in circumstances thatremain unclear.

Battle rages to control Syria artery Rebels fight to seize highway at Hama Countryside slips from regime’s grip

Iran

Western sanctions set off wave of street robberies

Street robberies in Iranhave risen in recentmonths, resdients say, asUS and European sanctionshave taken their toll on theeconomy and purchasingpower has fallen, writes

Najmeh Bozorgmehr inTehran .There are no official

crime figures but Tehranresidents report assaults onfriends, relatives andneighbours. Usually theattackers are young menbearing knives who demandtheir victims hand overmoney or other valuables.

Authorities have soughtto reassure peopleconcerned by the rise incrime. Tehran’s police chief,Hossein Sajedi-Nia, said thismonth more measures werebeing taken to minimisesocial crimes.

Ayatollah Sadegh Amoli-Larijani, the judiciary chief,warned in mid-Decemberthat the death sentenceapplied to robbers armedwith weapons other thanguns. “People’s security ismore essential than bread.”He urged the police to “kick

off a new round of dealingwith hooligans”.

But one video posted onthe internet this month hasfuelled a feeling ofinsecurity. Four men on twomotorbikes – one holding a

knife – stopped in a busystreet and forced a youngman to give them hisbriefcase. They later cut hisface so he could not chasethem. Iran’s police haveidentified the thieves andarrested them.

The rise in crime followsthe fall of the rial’s value by48 per cent this year, afterUS and EU sanctionsaggravated already highinflation and unemployment.Official figures put the risein consumer prices for this year at 26.1 per cent, while youth unemployment standsat 28.6 per cent. Manypeople believe the realfigures are much higher.

“The rise in social crimesshows people feel underenormous economicpressure,” said a seniornon-western diplomat.

In full: www.ft.com/iran

WORLD NEWS

Image rites: rebel fighters remove the portrait of Bashar al-Assad from a military hospital at Halfaya, north of Hama Reuters

It was about time theSyrian regime and thosewho back it recognisedreality.

Nearly two years intothe most violent crisis of the Arab awakening,Russia’s deputy foreignminister Mikhail Bogdanovconceded this month thatan opposition victory couldnot be ruled out. A fewdays later, it was the turnof Farouq al-Sharaa, theSyrian vice-president, tocast doubt on a militarysolution and call for anempowered national unitygovernment.

The shifting balance onthe ground is impossible toignore. Despite PresidentBashar al-Assad’s vastmilitary superiority,Syria’s rebels have madesignificant gains, seizing military bases – togetherwith more sophisticatedweaponry – and forcing theair force to reduce itsbombings of northern areasunder opposition control.

The regime lost much of the countryside long ago.Now its cities too arethreatened, with half of Aleppo in rebel hands,and a new offensive justlaunched to seize Hama.

Fighting in the capitalDamascus has alsointensified, amid forecastsa bloody battle for controlof the city is heating up.

To be sure, the regimestill has important militaryassets. It can fight on andwreak more destruction,but it cannot win orsubdue the rebellion.

Diplomats estimate that

the regime has regroupedas many as 80,000 of itsbest trained forces in andaround Damascus(compared with just a fewthousand inserted by therebels so far). It also stillhas massive land artillerycapability, in addition tothe air force and anarsenal of chemicalweapons that remains aterrifying last resort.

Predictions of imminentregime collapse might beoverstated. But diplomatsand analysts say themounting pressures on MrAssad present a newopportunity to test thediplomatic prospects.

For months, westernpowers sympathetic to theopposition (even if notresponding to dissidents’calls for military support)have been waiting for themoment when the regimefeels sufficiently corneredto sue for peace. Butalthough Damascus andMoscow appear to see themoment is approaching,the parameters of a dealare still unclear and itsviability doubtful.

Salman Sheikh, a formerUN diplomat, now directorof the Brookings DohaCentre, says the sticking point remains the fate of Mr Assad. The Russiansare flying trial balloons, heargues, but still talking

about elections in whichthe Syrian leader wouldstand. The opposition andits supporters, on the otherhand, see his departure asthe prerequisite for apolitical transition.

Vladimir Putin, Russia’spresident, said yesterdaythat the fate of Mr Assadis not what preoccupieshim. Moscow’s concern, heinsisted, was to see anagreement on whathappens next before anychange in the currentorder. The necessity of aninternationally-backedSyrian understanding is allthe more urgent today toprevent what manyanalysts warn could bethe fragmentation of the country in the post-Assad era.

“It has gone beyond theissue of Bashar,” saysSamir al-Taqi, a formerSyrian government adviserwho is a dissident based in

Dubai. “There is apossibility that thesituation gets out of everyone’s hands. Whathappens after Bashar isgone is important in termsof who will listen to whomand who are the forcesthat can be worked with.”

Without a politicalunderstanding backed byregional and internationalpowers, elite troops,overwhelmingly drawn

from the same minorityAlawite community as theAssad family, wouldcontinue to protectthemselves and their areaslong after their leader isgone, says Mr Taqi.

On the other side arerebel factions that holddifferent visions of thefuture. The most fearlessand disciplined militaryforce among them isJabhat al-Nusra, a jihadigroup the US accuses of being an affiliate of al-Qaeda, and whose leaderswant to establish a statebased on strict Islamicprinciples. Between therebels and the regime aremillions of Syrians who aredesperate for the suffering and destruction to end andare likely to be growing tired of both sides in theconflict. Mr Salman agreesthat Syria’s future could beone where militants andwarlords control patchesof territory, with nocentral authority.

“It’s in everyone’sinterest that we start atransition that establishessome order,” he says.

Shifting balance presents newopportunity

‘What happensafter Bashar isgone is importantin terms of whowill listen to whom’

GLOBAL INSIGHT

Roula Khalafin London

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WORLD NEWS

By Charles Cloverin Moscow

Mikhail Khodorkovsky,once Russia’s richest manwho was sent to an Arcticprison camp after he chal-lenged the Kremlin, will befreed in 2014 – two yearsearlier than expected – afterauthorities showed unprece-dented leniency towards theleading opposition figure.

But any hope that Presi-dent Vladimir Putin mightbe about to go soft on hisopponents was swiftlycrushed when prosecutorscharged opposition bloggerand protest leader AlexeiNavalny with fraud andmoney laundering.

Despite the insistence of Russia’s leadership that itdoes not interfere in legalmatters, experts believe nei-ther decision could havebeen taken independentlyof the Kremlin.

The new leniency shownto K hodorkovsky, theformer Yukos chief, “cre-ates a picture of mixed sig-nals” coming from theregime, which has consist-ently tightened the screwsagainst the anti-Kremlinopposition this year, saidMasha Lipman, a politicalanalyst at the Carnegie

Moscow Institute.Since early summer, anumber of repressive meas-ures have been signed into

law and criminal investiga-tions opened against opposi-tion leaders.

“There is no reason todoubt that the arrest of Khodorkovsky and to sen-tence him were decisionstaken at the very top, sothere is also no reason todoubt that the decision toreduce his sentence wasalso taken at the very top,”Ms Lipman said.

The move to reduce thesentences of Mr Khodorko-vsky and his business part-ner Platon Lebedev wasapparently motivated by arecent decision to softenpunishments for the type of economic crimes for whichthey were convicted. Thetwo men deny the charges.

However, during a four-hour press conference byMr Putin, during which helashed out at the “medie-val” treatment of detaineesin the US, Russian federalinvestigators announcedthey would charge Mr Nav-alny and his brother Oleg with fraud and money laun-dering. They accused thebrothers of embezzling Rbs55m ($1.79m) from at ransport company in2008-11, charges that couldcarry a maximum jail sen-tence of 15 years, according to a spokesperson for MrNavalny.

Mr Navalny denied theallegations, describing themon his blog as “blackmail”,and said they were revengefor his taking part in an

unsanctioned protestagainst the Kremlin lastweekend. This is the sec-ond set of formal charges

filed against Mr Navalny,w ho this summer w ascharged with embezzlementand causing more thanRbs1m of damage to a tim-ber company.

Those charges could seeMr Navalny spend 10 years

in jail. Asked at a press con-ference yesterday aboutKhodorkovsky’s earlyrelease, Mr Putin insistedhe had nothing to do withthe decision.

“I am confident that eve-rything will be fine and inaccordance with the law,and Mikhail Borisovich[Khodorkovsky] will befreed,” Mr Putin said. “Godgive him good health.”

It was the first time MrPutin had publicly referredto Khodorkovsky by hisname and patronymic, asign of respect in Russia.

He has in the past pub-licly labelled Khodorko-

vsky a “ th ie f” w ho“must sit in prison”.Vadim Klyugvant,Khodorkovsky’s law-

yer, welcomed the reducedsentence but called MrPutin’s comments “theusual demagoguery”.

Khodorkovsky and Lebe-dev w ere sen tenced toeight-year terms for taxevasion in 2005, and con-victed again of fraud inDecember 2010, with 13-yearprison terms. The sentencesinclude time served sincethey were detained in 2003.

Yesterday’s ruling clearsthe w ay for one o f MrPutin’s fiercest critics towalk free in October 2014;Lebedev will be freed threemonths earlier.

Pouring cold water on the

ruling, however, defencelawyer Yuri Shmidt said hewould not believe it untilKhodorkovsky was released.

“Maybe yet another caseagainst him will appear orsomething else will happen– until the day he leaves thepenal colony it’s too earlyto say,” Mr Shmidt toldReuters.

Khodorkovsky is a contro-versial figure for the opposi-tion, some of whom see himas a symbol of defiance.Others believe he is an oli-garch who lost a clan waragainst Kremlin opponents.

Mr Navalny, on the otherhand, has been at the fore-front of mass protests inMoscow and is seen as acommitted campaigner,although some object to his

nationalist views.

Out sooner, still fighting, www.ft.com/bb

Former ukos chief ins early

release dateKhodorkovsky togo free in 2014Protest leader isaccused of fraud

Mikhail Khodorkovsky listens during a court session in 2010. Below, protest leader Alexei Navalny at a rally this month AFP

By James Fontanella-Khanin Brussels,

Neil Buckley in Londonand Jan Cienski in Warsaw

Enthusiasm for the euro iscooling among the EU’snewest members in easternEurope, as Latvia’s primeminister warned that hisc it izens w ere turning against the single currency.

Valdis Dombrovskis, wholed one of Europe’s tough-est austerity programmes inpart to keep Latvia’s euromembership hopes alive,says he faces a struggle toget the Baltic republic intothe single currency by the2014 target.

“Five years ago before theeurozone crisis everyonewanted to enter the euro,but we weren’t economi-cally ready. Now that weare ready to enter, manyhave become sceptical,”said the centre-right leader.

Interviewed by the Finan-cial Times in Brussels, MrDombrovskis said the gov-ernment was committed to joining in January 2014, butwould have to work hard toget the country on board.

Mr Dombrovskis is some-thing of a “star pupil” inBrussels for adopting harshausterity measures in 2009,in part to keep Latvia’s cur-rency pegged to the euroand preserve its member-ship hopes.

But after its economyshrank 25 per cent peak totrough, it resumed growthlargely without having suf-fered social unrest. Neigh-bouring Estonia, which alsounderwent harsh austeritymeasures and a deep reces-sion, joined the euro lastyear.

The Latvian prime minis-ter said without austeritythe country could not have

met the entry requirementsof low inflation, a budgetdeficit below 3 per cent of gross domestic product, and

government debt below60 per cent.

Bulgaria, which like theBaltic states has pegged itscurrency to the euro for adecade and is one of onlythree EU countries that cur-rently meet the Maastrichtentry criteria in full, hasrecently made clear it hasno short-term plans to movetowards membership.

Boyko Borisov, primem in is te r, t ol d t he F Trecently his governmenthad no plans to join untilthe eurozone crisis wasover. The EU’s poorestcountry should not have tohelp fund bailouts of richerstates, he said.

In Poland, public opposi-tion to euro adoption hasedged up slightly as theeurozone crisis has deep-ened, with a new opinionpol l sponsored by thefinance ministry finding 56per cen t o f Poles w ereagainst joining, up 3 per-centage points from lastyear.

Poland’s government stillinsists it will join once itseconomy meets the entrycriteria and eurozone recon-struction is completed or,as Donald Tusk, prime min-ister, told parliament,“when the eurozone is safefor each of its members”.

The neighbouring Czechgovernment is much lessenthusiastic.

Petr Necas, the premier,has said that his countrywill not join during thisgovernment, whose man-date expires in 2014, and notuntil 2020 at the earliest,subject to approval by a ref-erendum.

Vaclav Klaus, the euro-sceptic Czech president, hascalled the European Stabil-ity Mechanism “a mon-strous and outrageous

thing” and said this monthhe would not sign the EUtreaty amendment creating the eurozone rescue fund.

EU’s newest nations less keen on euro

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popular among Christmas shoppers, butfor every one it sells at the expense ofits larger sibling, margins fall.

Part of the problem is that Applefaces competition from Amazon andGoogle, who sell their $199 tablets atnegligible margins, to drive sales ofcontent or search advertising.

Analysts also fear that Apple’sgradual shift to a more rapidreplacement cycle, to compete with thefast turnover of new devices from

Samsung, Amazon and Google, will alsotake a bite out its profitability, requiringa huge investment in manufacturingand supplies, and shortening the longtail of older, higher-margin devices suchas the iPhone 4 today.

“I think they’re going through a verysignificant change now in terms of

product cycles,” former Apple chiefexecutive John Sculley told CNBC.“Traditionally, Apple introduces productsonce a year; now it’s really introducingproducts twice a year.”

But concerns about iPhone availabilityhave eased in the run-up to Christmasand Apple made good on its promise tolaunch the device in 100 countries bythe year’s end, its fastest rollout yet.Some argue that Apple must release acheaper iPhone to cater to the mass

market, where devices using Google’sAndroid software dominate.“In China, the hot smartphone price

point is Rmb1,000, around $160,before [operator] subsidy,” saysBenedict Evans of Enders Analysis,compared with the iPhone 4’sunsubsidised cost of $400.

Speed read ● Shifting landscape Google andSamsung are catching up with Applein hardware, while cloud services arebecoming more important

● Time for change Tim Cook, Applechief executive, shook up thecompany’s management this year afterthe flawed launch of its Maps app

● Next big thing Some analysts expectApple’s next big product to be ahigh-end TV that would be controlledby gestures and voice recognition

On the webTo read news and analysis on Appleand other technology companies, go to www.ft.com/techhub

ANALYSIS

Technology

It became the world’s most valuable company by being consistently creative in hardware andsoftware – but can Apple find its way through the cloud? By Tim Bradshaw

Innovator’s dilemma

then a TV and back again.Aware of the inroads made by

Google, Microsoft and Amazon, Jobsimpressed the urgency of the transi-tion to becoming a cloud-servicescompany on his biographer, WalterIsaacson. “We need to be the companythat manages your relationship withthe cloud,” he said.

Apple’s share-price peak on Septem-ber 19 happens to have coincided withthe release of iOS 6, the update to itsiPhone operating system that replacedthe popular Google Maps with an infe-rior mapping application of its own.

While Apple’s products have pro-gressed into the cloud, its corporateorganisation has not adapted. Cloud-based services, such as maps and Siri,the iPhone’s virtual assistant, requireconstant tweaks and improvements atthe back-end. But until this autumn,these tasks were overseen by Apple’ssoftware division, which is accus-tomed to big-bang annual updates,such as iOS 6. The perfectionist pri-vate testing and pixel-level tuning that Apple gives to a piece of softwarebefore releasing it requires a very dif-ferent design and development proc-ess to more iterative, feedback-basedservices such as Maps. Yet it took twoyears after iCloud was launched forMr Cook to make the necessarychanges to Apple’s managementstructures in Cupertino.

A shake-up in October led to thedeparture of Scott Forstall, Apple’ssoftware chief. Power shifted towardsSir Jonathan Ive, the British designercredited with creating the unique lookof Apple’s hardware. And responsibili-ties for Maps and Siri were handed toEddy Cue, who runs the iTunes andApp Store units.

The exit of Mr Forstall, who joinedApple when Mr Jobs returned in thelate 1990s, is a big loss to the com-pany, say those who worked for him.Even those who rankled at his aggres-sive management style say that inmany ways he was the closest Applehad to Mr Jobs’ product leadership.

Yet Mr Forstall clashed with SirJonathan, who now has responsibilityfor the look and feel of software inaddition to his hardware role. Rela-tionships that held together under MrJobs frayed under Mr Cook.

Time magazine. “Like no other.”A much discussed idea – a premi-

um-quality Apple TV set – could pro-vide a new leg of growth. Mr Cookhinted to NBC that the TV marketwas now “an area of intense interest”instead of a mere “hobby”. After avisit to Asia, Jefferies analyst PeterMisek reported “several prototypesfloating around” that were controlledby gestures and voice recognition. Itcould launch next autumn. “We thinkit’s vital that it comes,” Mr Miseksaid. “It’s a key linchpin in the home.We think it would act as an ecosystemhalo effect.”

Apple’s App Store and iTunes arevital parts of this ecosystem. One app-market researcher, Distimo, estimatesthat on a typical day, consumerspending on the App Store is $15m,more than four times as much asGoogle Play, its marketplace forAndroid devices – despite the iPhone’smuch smaller share of the handsetmarket. The money spent by Applecustomers on apps makes it less likelythat they will switch to Android,where iPhone apps are incompatible.

But the App Store’s success restsin selling third-party software, muchof which is now available on Googleand Amazon’s platforms. Beyond thecore operating system, Apple’s ownapps and services are less successful;Ping, Apple’s attempt at social net-working within iTunes, was quietlybut ignominiously shut down in Sep-tember. Other parts of Apple’s cloudsuite, such as iMessage, the freetext-messaging service built into iOS,and Game Center, Apple’s social-gaming hub, are prone to bouts of downtime.

Some analysts say these issuesare merely symptomatic of Apple’s rapid growth and can

be fixed with sufficient time,investment and server capacity.“These do not require the applicationof magic,” says Horace Dediu of Asymco, contrasting it with the inno-vation needed to conjure new smart-phones and tablets.

But the concern is more acutebecause of the obvious advantage thatGoogle, which was born online, has incloud services. Patrick Gibson, anindependent app developer and formeriPad engineer, touched a nerve among Apple watchers with a blog postobservation that Google was moving faster. “Google is getting better atdesign faster than Apple is getting better at web services,” he wrote.

Next year, the well-oiled Apple hypemachine will crank up again to pre-pare the way for its latest “revolution-ary” product, be it a new phone, tab-let or TV. Yet after the stratosphericsuccess of the past decade, Apple islooking for new superlatives that canexcite Wall Street as well as the highstreet. Carrying its reputation for per-fectionism into the new era of serv-ices will not be easy.

“Most companies are good at onething. Apple is good at two – hard-ware and software – and that made itthe world’s most valuable company,”says a senior Apple employee who leftthis year. “But it’s struggling withgetting good at the third.”

In the dark? Tim Cook, Apple chiefexecutive, admits the cloud takes hiscompany outside its comfort zone Getty

Apple revenues*

Sources: Thomson Reuters,Citi Research; Strategy Analytics

Forecasts

0

20

40

60

80

0

50

100

150

200

250

2005 08 10 12 15

Annual % change$bn

Apple share priceAgainst competitors ($)

2008 09 10 11 120

100

200

300

400

500

600

700

Apple

Dow Jones 30TechnologyTitans index

Global smartphonemarket share by salesQ3 2012 (% and change since Q3 2011)

33.9

16

5.2

4.84.5

35.5

Samsung+10.5% points

Apple+1.7% points

SonyNo change

HTC-6.0% points

Huawei+0.5% points

Others-6.8% points

* Fiscal years

“Those guys really didn’t like eachother,” says a former senior manager.“Steve kept everyone in line but with-out Steve it got worse and becamevery counterproductive. Credit to Timthat he recognised this.”

Mr Cook also recognised – belatedly– that just as Apple’s best productsblend hardware, software and serv-ices, so too must its teams. He toldBloomberg Businessweek he hadmade the changes to ensure Applewas a “fast-moving, agile companywhere there are no politics, no agen-das . . . These moves take collabora-tion to a whole different level.”

Appointing Sir Jonathan to leaddesign in what one former staffercalls a “very pixel-driven” engineering culture shows that Mr Cook recog-nises he is a “numbers guy”, not

someone with the feel for products of his predecessor. “One of the chal-lenges facing Apple is that if [MrCook] is the brains, where does thesoul come from?” another formeremployee says.

Tony Fadell, who led Apple’s iPoddivision until 2008, says Mr Cook is a“really smart, brilliant guy”, but thatuntil last year “he was always behindthe scenes”. “Steve had a track recordof innovation that allowed him todraw in people when he had some-thing new,” Mr Fadell says. In recentmedia appearances Mr Cook has madegreater moves into the spotlight buthe lacks his predecessor’s magnetism.

Defenders of Mr Cook’s product

nous point to the huge range of newdevices that Apple launched thisautumn, with near simultaneous rede-signs of the iPhone, iPad and iMac.

“This year has been an intenseyear on products,” Mr Cook told

Maybe it’s just the “4 percent curse”. In February

Apple became one of anelite group of companieswhose market capitalisation grew solarge that it made up 4 per cent of thecombined value of the entire S&P 500.Its share price peaked on September19 at $702.10, from which point – likeMicrosoft, General Electric, Cisco andother 4 percenters before it – it fell 25per cent.

This is partly the law of large num-bers: achieving such a great valuationtriggers limits for some fund inves-tors. And, after appreciating by morethan 70 per cent, many shareholders – perhaps fearing new US taxes on divi-dends and capital gains – simplydecided to enjoy their profits.

But for Apple sceptics, the swinging stock-price chart had a differentmeaning: that Apple has peaked.

Some investors are starting to won-der whether Apple’s brilliant secondact – the period of innovation thatdelivered the iPod, iPhone and iPadand made it the world’s most valuablecompany – is coming to an end.

Fourteen months since the death of its founder Steve Jobs, Apple findsitself in a changed technological land-scape. Rivals such as Samsung andGoogle are catching up in the smart-phone and tablet businesses it pio-neered. And the internet and servicesin the “cloud” – whether web-basedapplications such as maps and mes-saging or the ability to synchronisecontent from one device to anotherwirelessly – are becoming just asimportant as shiny hardware.

At similar junctures in the past,Apple has simply produced anotherblockbuster device. But the opportuni-ties to reinvent new products such asphones or personal computers arebecoming harder to identify. A televi-

sion set, seen as the most likely inno-vation to emerge from Apple’s Cuper-tino headquarters next year, isexpected to cost $1,500, not the $400 of an iPad or the $99 consumers can payto get an iPhone – making it harder toimagine as a mass-market product.

The iPhone is expected to bring inrevenues of $80bn this year, withanother $30bn or more from the iPad,making it harder for Apple to come upwith new products big enough tomake a difference. In the meantime,Wall Street is struggling to under-stand how much further the existing products can grow. China and LatinAmerica, the next big untappedmobile-device markets, offer thinnerprofits and tougher competition.

The most wounding criticism lev-elled against Apple is that its innova-tion has become incremental – its lat-est iPhones and iPads looking littledifferent to their predecessors. Thatputs pressure on Apple’s accompany-ing services to dazzle and differentiatefrom its many copycats. The AppStore and iTunes are thriving, still farahead of their competitors.

As its leadership in hardware hascome under pressure, Apple has founditself having to learn the rules of anew game. Its business still revolvesaround drawing customers to storesto buy its latest must-have gadget.But online services are increasinglyimportant in keeping customers loyal,acting as the “glue” that moves per-sonal information and media betweena family of devices and helping to setApple’s portfolio apart.

In the cloud, Apple is operating out-side its comfort zone – something chief executive Tim Cook acknowl-edged when he apologised for itsflawed Maps app in September.

Jobs foresaw the importance of acloud services ecosystem as a way todefend against cheaper competitors.In 2010, when visibly ill, he launchediCloud, declaring it “our next big insight”.

“We are going to demote the PC and

the Mac to be just a device,” he said,“and we are going to move the digitalhub into the cloud.”

The idea was that Apple’s cloudwould allow iPhone owners to floattheir music and apps on to an iPad,

‘Those guys really didn’t like each other.Steve kept everyonein line but withoutSteve it got worse’

Product mix

The iPad mini is hot – but watch the marginsThe hottest thing this Christmasis the iPad mini. But many Wall

Street analysts have been reducingtheir forecasts for Apple’s earningsin recent weeks – in part due to thecheaper device’s popularity.

Some analysts are worried that theheyday of Apple’s growth andprofitability is behind it. “Decelerationfor iPhone sales is a virtual certaintyin the next six to 18 months,” sayanalysts at Citigroup, noting that some

suppliers were reporting lower ordersfrom Apple. This week Citi reduced itsApple earnings forecasts for the nexttwo years by about 15 per cent andnow expect its gross margins to fallfrom 43.9 per cent in the year toSeptember to 39.5 per cent next year.

The new, $329 iPad mini has been

$1,500Expected cost of the Apple televisionlikely to be launched next year

$15mEstimated amount spent in theApp Store on a typical day

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“Without fear and without favour”

Friday December 21 2012

● To contribute please email: letters.editor@ft.com or fax: +44 (0) 20 7873 5938 Include daytime telephone number and full address ● For corrections email: corrections@ft.com

LETTERS

Sleeper spies don’t do electric blankets From Mr Patrick Dransfield

Sir, I greatly enjoy PattiWaldmeir’s “Shanghai Notebook”,and her recent column“Remembrance of things communist”(December 19) regarding copper bedwarmers ( tangpozi ) and electricblankets took me back to my days of living in the tiny Beijing flat of aretired chemistry professor, Song BaiBai, in the summer of 1985.

Prof Song had returned from acomfortable life in America to“rebuild the Chinese nation” in 1949.One of his prized possessions was aUS-manufactured electric blanket.

During the Cultural Revolution (1965-1976), Prof Song and his wife sufferednumerous “struggle sessions”,including a raid on their home byRed Guards, who tore apart hiselectric blanket, believing it to be atransmitting device used by Prof Song to communicate state secrets tohis American masters.

As Ms Waldmeir rightly concludes,“romanticising the revolution is onething and remembering it in ahistorically accurate way is quiteanother”.Patrick Dransfield,Kowloon, Hong Kong

Republicans act as if they had won From Mr Steven M. Clayton.

Sir, Watching the fiscal cliff negotiations is interesting; you

would think that the Republicanswere the ones that won most of theraces on Election Night because theyare the ones making all thedemands.

The election should have taughtthem a lesson that Americans wantthe parties to work together. BarackObama won’t get everything hewants, but neither should the HouseRepublicans. Time to put theAmerican people above party orideology.Steven M. Clayton,Ocean, NJ, US

Stop the press?

Start with people and culture if you want to rein in US guns From Mr Michael J. Feigelson.

Sir, Jacob Weisberg is right to callfor a public health approach to gunviolence, but he doesn’t do justice tothe importance of culture change – an important component of theantismoking strategies he references(“On guns, Obama should followBloomberg’s lead”, Comment,December 19).

As a New Yorker, I found theinconvenience of smoking in the coldwas not enough to make me quit. Itwas the disappointment of a friend’ssix-year-old son and my wife’s lookof disgust when I came to bedsmelling of tobacco. The mayor’srules then made it easier to stayhealthy.

Cure Violence, a Chicago-basednon-governmental organisation, hasshown how to use this kind of thinking to prevent shootings and

killings. They train people who arecredible and well-connected toanticipate and interrupt violentevents. Then, like MichaelBloomberg, they offer help to thosewho want to change and rally thevoice of the community as areminder that violence isunacceptable.

The result? Reductions inshootings and killings of between 41and 73 per cent.

Mr Weisberg’s formula will helpmake things better but, paired witha culture change strategy, we can doeven more to honour the victims of Newtown and the 3,000 Americankids killed by gun violence everyyear.Michael J. Feigelson,Programme Director,Bernard van Leer Foundation,The Hague, The Netherlands

Correction● Due to a production error, it wasincorrectly stated in some editionson December 17 that Lithuania, inan October referendum, rejected aplan for a pan-Baltic railway. In fact,voters rejected one for a nuclearpower plant.

Weapons in the principal’s off ice are not the way forward From Mr George J. Grumbach, Jr.

Sir, Louie Gohmert, a Republicancongressman from Texas, said hewished the Newtown school principalhad had an M4 rifle in her office “so,when she heard gunfire, she pulls itout . . . and takes him out and takeshis head off before he can kill those

precious kids” (“Tougher gun lawdemanded”, report, December 17).Mr Gohmert’s statement revalidatesH.L. Mencken’s aphorism that“Democracy is the theory that thecommon people know what theywant, and deserve to get it good andhard.” We can now look forward to

legislation sponsored by this Solonrequiring that school principals becombat-trained as marksmen withassault rifles as part of their jobqualifications, and be required tokeep such weapons at their schools.George J. Grumbach, Jr,New York, NY, US

Dodd-Frank penalises conf lict mineral probity From Mr Adam Greene.

Sir, Your analysis of the damaging unintended consequences of theDodd-Frank provisions on conflictminerals (“The quest for cleanhands”, December 19) is fullyconsistent with nearly all reportsfrom central Africa, which show thatDodd-Frank has indeed backfired bycreating a de facto embargo anddriving even more of the mineralstrade underground.

Barney Frank is absolutely wrong in saying that the embargo was

caused by uncertainty over Securitiesand Exchange Commission rules. Thetrue cause is the legislation itself,which created huge disincentives tosourcing from the DemocraticRepublic of Congo – in fact, all theSEC rules do is specify how thosedisincentives will work in practice.Rather than encouraging responsiblesourcing from the DRC – the OECDapproach – Dodd-Frank imposessignificant penalties for doing so.

Indeed, the few efforts to sourceresponsibly from the region are

happening in spite of, not because of,Dodd-Frank.

Unfortunately, this situation isunlikely to change as long as theDodd-Frank provisions continue topenalise, rather than encourage,responsible sourcing from theregion.Adam Greene,Vice-President, Labor Affairs andCorporate Responsibility,United States Council for

International Business,New York, NY, US

Press freedom and the constitution From Mr Leo Slaggie.

Sir, William M. Pinzler’s suggestion(December 19) of a confiscatory taxon bullets as a way to control gunsis a useful proposal but not a newone. The late Senator PatrickMoynihan noted that the secondamendment establishes only a rightto keep and bear “arms”, not to keepand bear ammunition. Moynihanproposed banning ammunition toachieve complete gun controlwithout a constitutional problem. Inote along the same lines that thefirst amendment protects only“freedom . . . of the press”. It saysnothing about ink and paper. Thissuggests an entirely constitutionalapproach to control annoying journalism.Leo Slaggie,Falls Church, VA, US

Memo to Mario:cheap funding for Irish homeowners From Mr Conor McCoole.

Sir, Your suggestion that Ireland’sbank bailout debt obligation shouldbe mutualised by transferring it tothe European Stability Mechanism iscommon sense (“Let Irelandsucceed”, editorial, December 19).But spare a thought for hapless

homeowners who purchased theirhomes in the past 10 years. Theyhave suffered numerous blows:austerity, negative equity, falling incomes, higher taxes and mortgageinterest rates that are many timesthe official euro interest rate of 0.75 per cent. The dire consequencesfor the economy are easy to foresee.The damage to household wealth willbe life-long.

Here’s a suggestion for MarioDraghi, the newly minted FTPerson of the Year: considerproviding 20-year, ultra-cheap, fixed-rate funding direct to thosehomeowners suffering negativeequity as a result of purchasing theirown home in the past 10 years.Beneficiaries should be required toprovide evidence of their homepurchase prices on the new Irishproperty price register. Cheapfunding should be limited to 80 percent of the original home purchaseprice, thereby excluding equityrelease loans. Homeowners should beallowed to keep this cheap funding even if they sell and move.

Such a scheme would provide ameasure of direct, targeted relief (and a little peace of mind) tomiddle-class owner-occupiers who aresuffering most of all. It would helpstabilise household wealth, promoteeconomic recovery, reduce loandefaults and strengthen publicacceptance of the troika’s austerityprogramme. And Mr Draghi couldbe our Taoiseach after his stint inthe European Central Bank: “Hail,Mario” the plain people of Irelandwill say!Conor McCoole,Singapore

COMMENT ON FT.COMFT AlphavilleCardiff Garcia: money markets closeto getting unTAGged www.ft.com/alphaville

Material World blogVanessa Friedman: is reality televisiona route to designer success? www.ft.com/materialworld

New York Notebook

At least 20 reasons to impose a gun tax It is a rare corporate press releasethat inspires the reader. But suchwas the case this week when Iperused a statement issued by theprivate equity group CerberusCapital Management.

Cerberus said it would try to sellthe Freedom Group, a collection of leading firearms and ammunitioncompanies that includes Bushmaster,maker of the military-style rifle thatAdam Lanza used last week to kill26 people, including 20 children, atthe Sandy Hook Elementary Schoolin Newtown, Connecticut.

Cerberus said it was “shocked anddeeply saddened by the events”. Butit also described itself as having made a “financial investment” inFreedom six years ago, and that gotme thinking.

For those who do not speak thelingo of Wall Street, investors can beclassified in various ways. “Strategic”investors have a background in thebusinesses in which they invest; bycontrast, “financial” investors justwant a return. By putting itself inthe latter category, it seemed to me

that Cerberus was saying it still didnot see itself as a gunmaker eventhough it had owned many of thebiggest names in the business foryears; for all the private equitygroup cared, it might as well havebeen involved in the production of

lollipops or lingerie.The ability to think in this way

helps to explain why people on WallStreet make the big bucks. It is notnecessarily because they know somuch; it is because their focus is sonarrow. Where other people see asemi-automatic rifle capable of killing 20 children in a matter of minutes, they see a cash flow.

The presence of a Cerberus in thebusiness of selling killing machinessuch as the one that Lanza usedsuggests there is a pretty penny tobe made in this trade. Otherwise,the “financial” folks would besomewhere else – and that has clearimplications for Americans looking for ways to keep their children safe.

As I read the Cerberus statement,it occurred to me that we need asanctions regime that will make itless profitable to sell weapons of mass destruction to civilians. Weshould impose heavy taxes on thesale of every military-style rifle,every automatic handgun, every30-round magazine, and – if legalexperts say it is possible – every TedNugent concert ticket, compact discand eight-track tape (on the groundshe can be seen as the MahmoudAhmadi-Nejad of the gun-clown set).

The policy could be designed tokeep the hunters happy. The goalwould be to discourage the mass

production and aggressive marketing of weapons that can kill largenumbers of people in a short time.We don’t need a business thatproduces the kind of results we sawin Newtown.

By focusing on the profitability of

this weapons trade, gun-controladvocates would also be able toavoid a big historical obstacle: theUS constitution. Its poorly-editedsecond amendment reads: “A wellregulated militia, being necessary tothe security of a free state, the rightof the people to keep and bear arms,shall not be infringed.”

Americans have long arguedabout what this means. For my part,I have trouble seeing how a well-

regulated militia has a place for atwisted soul such as Lanza, or forthat matter, his late mother, whomade sure that there was plenty of whizz-bang weaponry in the homethat she shared with a disturbedchild. But other people disagree and

I suspect that enough of them wearrobes at work to make my thoughtson this question irrelevant.

I would just refer gun-controladvocates to the part of theconstitution that can be their friend:article I, section 8. It says: “TheCongress shall have the power to layand collect taxes, duties, imposts andexcises.” I don’t see where guns orammunition are excluded.

There would be no shortage of good uses for the revenue raised.Given the precarious fiscal situationof the US, I imagine some of themoney would inevitably be puttoward reducing the federal budgetdeficit. But it would only be right touse some of the funds to help thevictims of gun violence and theirfamilies, to buy back guns that arein circulation, or to provide mentalhealth services to all those disturbedyoung men who seem to be festering in our suburban basements.

As for the level of the gun tax, if Ihad my way, it would be crippling – 100 per cent, or 1,000 per cent, of thepurchase price of the kind of rifleLanza used. But again, I can’t seethat happening. A more practicalsuggestion would be to start theadditional tax at 20 per cent – 20 forthe 20 children who died.

gary.silverman@ft.com‘It’s the consumerism I hate’

Gary Silverman

Challenges for Korea’s new leader Park Geun-hye must go beyond vague promises

The quasi-mythical status of SouthKorea’s president-elect Park Geun-hye – her father ruled with anauthoritarian hand until his assas-sination in 1979 – both won andlost her votes in Wednesday’s pres-idential poll against Moon Jae-in,who was imprisoned as a studentprotester. After edging a narrowvictory, Ms Park promised to reachacross this historical divide. Buther presidency must be judged asmuch on the details of her policies,on economic reform above all, ason lofty but vague promises.

The campaign’s theme was “eco-nomic democracy”, in recognitionof the growing dissatisfaction withan economic model based on themighty chaebol conglomerates. Theextreme dominance of manufactur-ing by a handful of big companieswas instrumental in South Korea’sstunning industrialisation. How-ever, continued growth requires amore open economic s tructure.

The chaebol have not spread thewealth equitably. Socially and eco-nomically, Koreans are segregatedby a dual economy with few cov-eted jobs in the chaebol-controlledmanufacturing sector and a swathof unproductive jobs in an under-developed service sector. Fairnessand cohesion aside, the model maynot be nimble enough to do as wellin an economy where value is cre-ated by information and innova-

tion as it did in a simpler indus-trial era. There is too little spacefor entrepreneurs at present. Thisrisks perpetuating the divisionsthat mar the old economic model,while losing the growth that mayonce have redeemed it.

Ms Park vows to enforce compe-tition rules more strictly againstthe chaebol. Equality before thelaw would be a good and overduestart: chaebol leaders tend to be letoff too lightly even for provedfraud. But the new presidentshows signs of too much deferenceto the conglomerates. She hasbacktracked on ending cross-share-holdings that allow founding fami-lies to keep control with verysmall equity stakes. She shouldreconsider.

Though the election focused ondomestic policy, Ms Park also faceschallenges with North Korea. Shecontinues a traditionally toughstance towards Pyongyang. Whileneither that nor the rival “sun-shine policy” ever met with muchsuccess, her demand for “progressin denuclearisation” as a conditionfor talks is sensible. Yet sheshould recall that keeping theNorth engaged in talks lessens thethreat of conflict, even if only mar-ginally. Her political ancestryallows her to trade concessionswith the North in a way other poli-ticians in the South cannot.

Love your gut bugs Bacteria could play a role in the fight against obesity

Biologists are shining a scientificspotlight on previously neglectedinhabitants of our bodies. The100tn bacteria that populate anaverage adult, living mainly in theguts, should be treated with morerespect, recent research shows,because they play a vital role inmaintaining human health.

The latest study by Chinese sci-entists provides new evidence thatthe different types of microbes inthe gut can help to explain whysome people grow fat and othersdon’t. The microbiome, as it isknown, turns out to be a risk fac-tor for obesity, alongside eating too much, exercising too little andhaving the wrong genes. Ourdigestion has evolved to work withthe help of a kilogramme or so of microbes; the way we extract calo-ries from food and how fast ourappetite is satisfied – determinantsof how much weight we put on – depend on the balance between the200 to 300 bacterial species thatlive in a typical human gut.

As several recent studies haveshown, this balance depends criti-cally on what we eat. People living on a modern western diet have avery different microbiome fromtheir pre-industrial ancestors. Anda study of elderly people in Ire-land, published in the journalNature this summer, showed adirect relationship between diet,

bacterial diversity and wellbeing.Although more research is neededto prove the point, evidence isgrowing that a varied diet, includ-ing plenty of unprocessed fruit,vegetables and cereals, promotesthe growth of beneficial bacteria inthe human body – indicating another possible theme for publichealth campaigns.

At the same time scientists atReading University and elsewhereare tak ing a more d irec tedapproach. They are designing andtesting “prebiotic” dietary ingredi-ents to select for a beneficial com-munity of gut bugs that reducesthe risk of obesity and associatedproblems such as diabetes.

Appreciation of the importanceof nourishing a healthy humanmicrobiome should also lendweight to a quite different publichealth campaign: the drive to cutover-prescribing of antibiotics fortrivial or inappropriate infections.Although antibiotics are intendedonly to kill pathogens, there is col-lateral damage to other microbes,upsetting the bacterial balance.

The message for the holidayperiod, as you eat your festivefoods, is to remember that you arefeeding not just yourself but allthe bugs in your body. Treat themto a varied diet – and do not poisonthem with unnecessary medica-tion.

Banking reformCommission points to shortcomings in UK coalition’s bill

When the Parliamentary Commis-sion on Banking Standards was

established in July in response tothe Libor scandal, it was asked tocomment on the government’s pro-posals for banking reform. Thecoalition wanted thoughts by theend of the year so it could feedthem into its banking bill. This isbased on the conclusions of theVickers commission, and recom-mends organising large banks intoretail and capital markets units.

Under Andrew Tyrie, its knowl-edgeable chairman, the commis-sion has long exhibited an inde-pendent streak. Some of the grill-ings it has administered to formerbank chiefs have come closer thanany other post-crunch investiga-tion to achieving the reckoning that might allow people to put thecrisis behind them. But it has alsoworried a government that isunwilling to reopen the Vickersproposals. George Osborne, thechancellor, last month urged thecommission not to “unpick theconsensus” around the bill.

The report does not quite dothat. Nonetheless, it expressesscepticism about the efficacy of theproposals and suggests ways inwhich they could be strengthened.

The concerns are largely sensi-ble. There are, for instance, realquestions about whether theringfence can be enforced between

two types of banking under thesame roof. Incentives to pierce the

fence are impossible to eliminate,making it vulnerable to slips inbankers’ probity or regulators’ per-sistence. The commission is alsoright to fret about the independ-ence of retail subsidiaries withinbanking groups. The risk-taking culture of trading is not only anti-thetical to the conservative valuesthat should govern retail banking;it is also the dominant strain. Sowithin a single organisation theformer is always likely to seepthrough and overwhelm the latter.

The commission’s answer is to“electrify” the fence. This wouldmake it subject to periodic review;impose new legal duties on bankdirectors; and reserve the power,should banks abuse the rules, toenforce full separation. A simplerapproach – and one the FT favours– would be to split banks cleanlyas a first step rather than a back-stop. While this might not avoidthe need for continuing policing, itwould solve the cultural problem.

A split may make it less likelythat banks need to be rescued withtaxpayer money. But, as the reportobserves, it will not rid us of sys-temically significant banks. Theauthorities need the confidenceand tools to take apart a big loss-making bank. This still remainssome way off.

Copper consumers cannot plan while financial sector is distorting the price From Mr Simon Hunt.

Sir, All copper consumers knowthat the officially reported copperprice bears no resemblance to thereal activities of the metal as anindustrial material. The price is

being distorted by the activities of the financial community by buying copper and largely warehousing itoutside the reporting system. Whythen are there a reputed 1m tonnesplus of copper cathode sitting inbonded warehouses in China?

By approving JPMorgan’s copperexchange traded fund (report,December 18), the Securities andExchange Commission has sidedwith the financial community at theexpense of industry. While thetonnages to be held by the bank andwith the probable approval of BlackRock’s copper ETF are inthemselves not large, they can havea significant impact on prices at themargin.

The real issue is this: increasingly,

copper has become an intrinsic partof the money game, just another unitto securitise regardless of the impacton industry. Copper consumers nowsee even more clearly the demise of copper as an industrial metal. The

metal has lost at least 3m tonnes tosubstitution in all its forms over thelast seven years. That figure risksgetting even larger over the nextseven years, not just due totraditional substitution but to theintroduction of new technology.

Copper consumers cannot plan theirfuture on the whims of the financialsector. Globally, including China,they are accelerating their efforts todesign copper out of their systems.Another financial bubble is being built around copper with perhapssome 5m tonnes being held outsidethe reporting system. This bubblelike all others will burst one day.Simon Hunt,Simon Hunt (Strategic Services),Weybridge, Surrey, UK

From Mr Randall Greene.Sir, As a Life Member of the

National Rifle Association, I’dhazard the guess that theorganisation was not immediate inits response to the tragedy inNewtown, Connecticut, in an attemptto allow space for grief and thegathering of facts – a space which,as one can read in the events of thispast week, is of little concern topoliticians.

While some enjoy target-shooting with military-style weapons as sport,a basic tenet of the American psycheis that, when pressed to the extreme,the assurance of domestic security isin the hands of its citizenry – notthe government. Dialling “911” maycatch the culprit, but it’s unlikely toprevent the crime.Randall Greene,White Plains, NY, US

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COMMENT

collided with the uncomfortable factthat the other 26 members are notso keen on the idea. Ms Merkel hasbeen offended by a clumsy attemptto blackmail the eurozone intomaking concessions in return forBritish consent to closer integration.Mr Hollande has already had his fillof perfidious Albion. Mr Cameron isleft promising a referendum thatcould leave Britain stranded on themargins of its own continent.

And finally . . .

Play fair(ish)West and east, north and south,democratic and authoritarian – thebiggest threat to incumbent leadersflows from a growing resentmentabout unfairness. In advancedeconomies, the perception (and oftenthe reality) is that the wealthy havegrabbed all the gains of globalisationwhile the rest have been handed theburden of austerity. If there was asingle spark for the uprisings in theMiddle East it came from popularrage at corruption at every level of society. Mr Xi has warned that graftcould overturn the rule of China’sCommunist party. He is right. Noone expects an egalitarian utopia,but middle classes old and new arelooking with some menace at theprivileges of the 1 per cent.

philip.stephens@ft.com

It is no time to give up on economic liberalismTony Blair and Bill Clinton mayhave come from a different end of the political spectrum, they made noattempt to reverse course. Thetraumatic event was of course thefinancial crisis that broke out in2007-08 and administered a fatal blowto economic liberalism.

Or did it? As far as normal goodsand services are concerned, there is

still a great deal to be said for giving a leading role to prices and profits.But for financial markets economicliberalism, at least in the form wehave known it, has proved fatallyflawed. The tendency of capitalisteconomies to boom and bust isintimately connected with thatfailure. As almost every governmentand central bank is committed to itsreform, I would for the presentconcentrate on other aspects.

The basic case for competitivemarkets is, first, that they provideconsumers with what they wish tohave rather than with what someauthority thinks would be good forthem. Second, they provide someguidance on how goods and servicesshould be produced. It would nothave been sensible to build the GreatWall of China with 21st-century

electronic equipment when therewere millions of underemployedlabourers ready to hand. Thirdly,allowing innovators to keep some of the fruits of their activities mayprovide some incentive to progress.In a priori theory, competitivemarkets do not have to be capitalistones. There have been numerous

blueprints, from market economiesbased on state ownership to workers’co-operatives. But they have notreally got off the ground.

An example of misunderstanding isa book that appeared this year withthe strange title Masters of theUniverse by Daniel Stedman Jones. Itwas about free-market economists,such as Friedrich Hayek and MiltonFriedman and their supposedlymalign influence over governments.

It is very thorough, honest according to its lights, but thoroughlymisleading. For the thinkers inquestion are not just politicians indisguise. So far as they had anoverriding policy or agenda, it was toreduce the influence of coercion inhuman affairs. What they certainlydid not wish to do was to rule theuniverse either directly or through

their political disciples.There are, of course, numerousexamples of market failures. Thereare the famous “externalities”.Factories do not have to pay for thedamage caused by smoking chimneys. Owners of smart frontgardens receive no benefit from theenjoyment conferred on passers-by.

There is also always thetemptation of successful capitalists totry to become monopolists. There arecorrectives using markets and prices.Examples range from the auctioning of planning permits to anti-cartellegislation. Free trade is often themost effective corrective. Above all,however, critics of market failuresare offset by political failures.Governments often have neither theincentive nor the knowledge toimpose effective correctives.

There have beenblueprints for economiesfrom state ownership to workers’ co-operatives.They have not worked

Shale gas exports will benefit America and its alliesAmerica has sufficient resourcesavailable to satisfy domestic needsfor more than 90 years.

America could now become a netexporter of liquefied natural gas by2016. Yet this prospect has arousedconcern among some US industrialenergy users, who are eager to retainthe competitive advantage theycurrently enjoy from low energyprices. The fear is that LNG exportswould lead to higher natural gasprices in the US, even thoughshipping and liquefaction costs meanforeign consumers would always paymore than domestic buyers. Some inUS industry are now opposed to anyLNG exports at all.

We believe, however, that LNGexports can buttress US geopoliticalleadership and trade, while at thesame time continuing to support lowdomestic natural gas prices and arenaissance in domesticmanufacturing. In addition LNGexports offer the potential for lowerglobal carbon emissions.

The US Department of Energy hasconfirmed this view in a new reportexamining the wisdom of exporting LNG. The report, which echoesmany other studies, concludes that

exports would broadly benefit theUS economy with little impact ondomestic natural gas prices. It statesthat LNG exports could generate upto $47bn in new economic activity inthe US by 2020. The more gasexported, the greater the benefits tothe US, the report concluded.

The reason is simple. Today muchnatural gas is flared or shut inbecause there is not a domesticmarket for the gas produced as abyproduct of exploration andproduction of liquid hydrocarbons.By capturing this lost natural gas forexport, the US would ultimatelyreduce price volatility, bolster itslong-term reserves and enable itsnatural gas sector to reach itsgrowth potential.

Meanwhile by becoming anexporter, the US would fill a vital

role for its allies in Europe and Asia,many of which are dangerouslydependent for natural gas on foreignpowers frequently hostile to USinterests. Reliance on Russian gas inUkraine and the EU would be likelyto diminish, for example.

Asian demand for natural gas isgrowing rapidly. In the wake of theFukushima disaster, the need forLNG in Japan, already the world’slargest market has grownconsiderably. China and India, bothheavily dependent on coal to meettheir energy needs, are looking tocapitalise on their own shaleformations but will not be able tomove swiftly enough to meet near-term demand.

The environmental considerationsof these developments are alsoimportant for US policy. Burning natural gas to generate powercreates 50 per cent fewer carbonemissions than burning coal. In theUS carbon emissions fell to 1992levels in the first quarter of 2012,owing mainly to a transition fromcoal to gas. Many developing nations,such as China and India, would liketo follow suit but lack access to theresource. Exports from the US would

help to support this transition tocleaner fuels.

Armed with its new report, as wellas mounting data that affirm thebenefits of natural gas exports, theDoE should approve the applicationspending for LNG export terminals.To date, Sabine Pass in Louisiana isthe only terminal to receive DoEapproval. Ultimately the FederalEnergy Regulatory Commission willdecide which projects are technicallyviable and investors will decidewhether to provide capital, but moregreen lights from the DoE wouldgive US trade partners confidence toadopt natural gas in lieu of higheremitting fuels. It would also affirmAmerica’s commitment to free trade.

After decades of energy insecurity,the US has abundant domesticresources to serve its own naturalgas needs today and far into thefuture. Natural gas exports cannotrevive the US economy alone butthey can help lead us toward a morerobust energy future, a worthy andachievable goal.

The writers were US secretaries of energy under Presidents Bill Clintonand George W. Bush respectively

Bill Richardson andSpencer Abraham

Samuel Brittan

This is a good time to ask whatis left of an outlook known toits enemies as neoliberalismand by at least some of its friends as just economic liberalism. One cannotbe too careful in choice of wording.For neoliberalism was originally the

self-chosen name for a group formed just before the second world wararound the US commentator WalterLippmann and which advocated,among other things, making greateruse of market forces in economicpolicy. It has only more recentlyacquired pejorative associations.

Roughly speaking, the quartercentury after 1945 was not apromising time for economicliberalism – except perhaps in WestGermany where Ludwig Erhard wasthe guiding spirit of the so-calledeconomic miracle. The tide turnedtowards economic liberalism in thelast quarter of the century,symbolised by the leadership of Ronald Reagan and MargaretThatcher in the 1980s. The approachlingered on even after the departureof these charismatic leaders. While

influence has been reduced toobstructionism at the UN. Israel isbeginning to look very much alone.

Do somethingThe most frequently forgotten lessonof politics is that doing nothing is apolicy choice – and one that can beevery bit as risky as being decisive.France’s President Fran ç ois Hollandeis among those who would do well torecognise the dangers of inaction. Myfriends in Paris tell me that thepresident is fully apprised of theurgent need to restore economiccompetitiveness in order to avoid thefate of some of France’s eurozonepartners. So far, however, MrHollande has been content to do notvery much. Change forced by a crisisof confidence in the markets wouldbe altogether more painful – for thepresident and for French voters.

There is a broader lesson here forthe eurozone. Angela Merkel mayhave emerged as Europe’sundisputed leader, but herobsessively cautious approach to theeuro crisis has come with a sizeableprice tag. If the currency now lookssafe, it is because of the activismof the European Central Bank’sMario Draghi. The danger is thatMr Draghi’s audacity has encouragedgovernments – creditors and debtorsalike – to put off again theuncomfortable choices needed toensure sustained recovery.

Walk and . . .Too many leaders think they can doonly one thing at once. Theysuccumb to the politics of either/or.It should be both/and. The messagefrom Washington is that Mr Obamahas set the rebuilding of Americaas the ambition for his second term.Intractable foreign-policy issues – most obviously the stand-off betweenIsrael and the Palestinians – aredestined to remain on the backburner. Didn’t someone once say aUS president should be a