The Irish Independent reports that Ireland will have to work hard to retain its edge and must improve its infrastructure and research, the chief economist with a major European think-tank said yesterday.
Simon Tilford, of the London-based Centre for European Reform (CER), which ranks EU member states in terms of their performance in meeting the targets for productivity in the so-called Lisbon process, said he would still bet on Ireland being the fastest growing of the western European EU states between now and 2020.
Ireland improved its position from eighth to sixth in the most recent ranking, based largely on strong economic growth, high levels of investment and the strong rise in employment.
Weakness
However, Mr Tilford warned the country had significant weaknesses.
He told the American Chamber of Commerce in Ireland's spring business lunch that one such weakness is the low level of spending on research and development.
"At just 1.3pc of GDP, this is much lower than in other wealthy member states. There is also insufficient competition in some markets, such as telecoms, and there is the issue of general infrastructure weaknesses," he said.
"I'm not just talking about the transport network, but also things like telecom services. A country that fails to ensure the rapid roll-out of super-fast telecoms will put its service sector at a potentially serious disadvantage," he added.
Irish productivity growth will have to be strong to offset rising costs in Ireland compared with other EU countries.
"The authorities here will have to work hard to retain the country's edge," Mr Tilford said.
Paul Rellis, president of the American Chamber of Commerce in Ireland, called for a 'Yes' vote in the forthcoming referendum on the Lisbon Treaty (not to be confused with the Lisbon process).
"We should embrace the possibilities of the future, rather than living in fear of events which might never come to pass," he said.
In the past two years, GDP growth in Europe outstripped that in the US and some eight million jobs were created.
"This shows the strength of the EU marketplace and the benefits which emerge when the EU states work together to achieve common goals," Mr Rellis said.
The Irish Independent also reports Independent News & Media (INM) has spent $7.5m on its first foray into the Indonesian media market through the purchase of a 20pc stake in Abdi Bangsa TBK.
It is understood that the all-cash consideration for the publisher of Indonesia's highest circulating daily newspapers will be partly via a share rights placement as well as through the purchase of stock from existing shareholders to bring the INM stake up to 20pc.
Abdi Bangsa publishes daily newspaper Republika and is listed on the Jakarta Stock Exchange. It also has interests in online publishing, radio, magazines and books, as well as outdoor advertising.
Its main shareholder is Mahaka Media/Erick Thohir, who will retain a 52pc stake in the enlarged capital structure of the publisher. The Republic of Indonesia, with a population of more than 225 million people, is the world's fourth most populous country.
The move extends INM's reach further across the globe on top of its presence in markets including Ireland, Australia, India, New Zealand, South Africa and the UK.
INM, which publishes this newspaper, also publishes over 200 newspaper and magazine titles with a weekly audience of more than 100 million people.
This includes the world's largest read newspaper, Dainik Jagran, in India.
The group also has extensive online, radio and outdoor advertising assets in markets ranging from Hong Kong to Africa.
The biggest shareholder is Sir Anthony O'Reilly, who holds just under 28pc of the group. Sir Anthony and associated parties hold 29.4pc in the group.
The Irish Times reports that Irish Stock Exchange (ISE) chief executive Deirdre Somers has welcomed the departure of Jim Flavin from DCC to the extent that it "brings closure" to speculation on the matter, but declined to say if it was appropriate for him to remain executive chairman for as long as he did. Ms Somers, who has run the exchange since last July, also said that the owners of contracts for difference (CFDs) should be obliged, in the same way as the holders of common shares, to declare their stake in a firm once it is acquired.
On Mr Flavin's resignation from DCC on Tuesday after a new legal manoeuvre by corporate enforcer Paul Appleby, Ms Somers said it would be inappropriate for her to make a public statement on a matter that the exchange investigated.
"What I am primarily concerned about is the perception of this market and the integrity of this market, and therefore to the extent to which the resignation yesterday brings closure to a matter that has led to protracted debate and speculation in the market, then that is a good thing."
On CFDs, derivative instruments that enable investors to take positions in companies without declaring their stake, she said the rules should be changed as soon as possible and noted that the financial regulator was already examining that question.
"Owners of shares are subject to very clear transparency requirements around who owns those shares, what is the holding of those shares, and when they're building a stake it's very obvious. None of those apply to CFDs and they should."
She said the ISE had not ruled out participation in the consolidation of international stock exchanges. However, she said a reconfiguration of the ownership of the ISE, which is jointly controlled by seven Irish stockbrokers, was "nowhere near a priority" at the moment.
"Any alliances going forward that the stock exchange will consider we will do hopefully from a position of control, and we will do it where we believe that it complements what we want to do and it delivers a dynamic or a synergy that we can't deliver on our own."
Asked about the sharp fall in Irish shares since the peak reached in February 2007, Ms Somers said it would not be appropriate for her to "call the market" in any way.
However, she noted "a very strongly-held belief that there is an Irish impact at the moment that has nothing to do with the companies themselves".
She wants to develop the ISE's international business and improve the standing of its brand in the domestic market.
DCC declined to say if it had agreed a severance deal with Mr Flavin, whose overall pay in the year to March 2007 was €1.52 million. His current one-year contract was scheduled to run to July.
The Irish Times also reports that the company behind the failed Irish franchise of furniture retailer Habitat does not have enough assets to pay its unsecured creditors or its full borrowings from Bank of Scotland (Ireland), according to the estimated statement of its financial affairs.
Conai Designs (Ireland), which is in receivership, has assets of €2.35 million, according to a document circulated at its creditors’ meeting yesterday.
But a bill of €627,899 to its preferential creditors and a debt of €2.25 million to Bank of Scotland (Ireland) means its accounts show an estimated deficiency in shareholders’ funds of €2.13 million. Unsecured creditors are owed a total of €1.43 million.
George Maloney of Baker Tilly Ryan Glennon, the appointed receiver of Conai Designs, took control of the assets of the company last week.
No Habitat customers were present at the creditors’ meeting in Dublin yesterday. Habitat UK has said it will honour all outstanding customer orders placed with Conai Designs, which went into voluntary liquidation and closed its stores in Dublin and Galway earlier this month.
The business was owned by retailer Malcolm Brighton, a Londoner who acquired Habitat’s Irish franchise in 2002 from the foundation that owns the commercial interests of Ikea-founder Ingvar Kamprad and his family.
In 2005, Habitat spent more than €2.5 million fitting out its Dublin store. But the company ran into trouble when sales collapsed due to the downturn in the housing market and the wider economic slowdown, which meant consumers were reluctant to spend money on big-ticket items. It also faced competition from cheaper retailers, such as Ikea’s store outside Belfast.
Conai Designs’ list of unsecured creditors shows Habitat UK is the creditor that is owed the most, with a sum of €558,343 owed to the company. Mr Brighton is owed €150,530. AIB is owed €158,037, while the company also owes €187,000 in respect of leases.
Among the preferential creditors, who will eventually be repaid from the sale of its assets, Habitat employees are owed a total of €52,293 and the Revenue Commissioners are owed a VAT bill of €318,000. Dublin City Council is owed rates of €89,093, while Galway City Council is owed €28,643.
The Irish Examiner reports that Taoiseach Brian Cowen has given the strongest signal yet that the Government is readying for a tough budget as he prepares for spending cuts.
Mr Cowen warned “temporary adjustments” may be on the way as the economy tightens and ministers prepare for the annual fight for the money available in December.
“We have to manage the economy prudently in the interests of the country and any temporary adjustments to avoid permanent damage to the economy have to be considered,” he said referring to the build-up to the budget.
He added that people realised Ireland could not be “immune from adverse developments taking place internationally”.
Mr Cowen also made it clear plans for current spending would need to be “moderated” in light of the downturn in economic growth.
“You have both capital and current expenditure to contend with in terms of your budgetary approach and I’ve been making it clear that with the rate of growth our current expenditure would obviously have to moderate in the context of tax revenues not being as buoyant as they previously were,” he said.
However, he said growth rates for the lifetime of the National Development Plan (NDP) to 2013 could pick-up once the next two slow years have been passed.
Finance Minister Brian Lenihan insisted big infrastructural projects would not be hit by the downturn, but also had a gloomy message regarding the Budget.
“The budgetary position this year will not be as favourable or as rosy as it has been in recent years. Obviously tough decisions will have to be taken by the Government,” he said.
Fine Gael education spokesman Brian Hayes accused the Government of “lying” about the NDP and said the Taoiseach, the Finance Minister and Education Minister Batt O’Keeffe had given different answers over whether €252 million promised for school computers in the NDP was a firm commitment or an “aspiration”.
“At least one of the trio of Mr Cowen, Mr Lenihan and Mr O’Keeffe is lying. They must clarify who is lying and who is telling the truth,” he said.
Meanwhile, the Taoiseach indicated a new core leadership for the public services needed to be head-hunted to drive reform.
The Financial Times reports that prosecutors raided the Bonn headquarters of Deutsche Telekom on Thursday as part of a probe into possible criminal actions by former executives during an alleged spying campaign targeting directors and journalists three years ago.
Public prosecutor Friedrich Apostel said former chairman Klaus Zumwinkel, ex-chief executive Kai-Uwe Ricke, and six employees past and present were “within the scope” of an inquiry to establish if charges will follow.
Mr Ricke, chief executive until late 2006, could not be reached. But he has in recent days repeatedly denied any knowledge of wrongdoing in various German media. He has admitted leaks were an issue for management.
Mr Zumwinkel’s spokesman on Thursday referred to a statement issued on Tuesday in which Mr Zumwinkel, chairman until the start of this year, said that “any alleged data gathering happened without [his] agreement”.
The prosecutors’ move is another blow to Mr Zumwinkel, once one of the pillars of the German corporate establishment. He quit his Deutsche Telekom post in February after being named a suspect in a tax-evasion case.
People close to the matter said the raid on Deutsche Telekom’s headquarters was meant to produce more potential evidence. The company’s current management had passed files to the authorities two weeks ago.
Deutsche Telekom admitted on Saturday it had passed on to authorities allegations that staff had ordered the monitoring of phone bills to trace leaks in 2005 and 2006. The suspicion that the former state telecoms group might have breached stringent privacy laws has scandalised the nation. Deutsche Telekom officials fear damage to the brand just as the group is managing to stem a recent flight by clients to cheaper rivals.
Mr Ricke’s successor, René Obermann, has denied any knowledge of wrongdoing and on Saturday pledged “complete clarification” of the alleged events.
Europe’s largest telecoms group said Mr Obermann had already rooted out what he deemed improper practices in 2007, but had not informed the victim of the very spying case that had spurred the internal restructuring.
Mr Obermann’s decision had “not been an easy one”, the group said. But he had agreed with then-chairman Mr Zumwinkel that informing the victim – a journalist – or contacting prosecutors could harm internal measures.
Deutsche Telekom said it only informed the victim, Reinhard Kowalewsky, who works for Capital magazine, this month after being confronted by “new, broader and graver accusations” and they were published in Der Spiegel magazine only days later.
“Withholding the information was not illegal,” Winfried Seibert, Mr Kowalewsky’s lawyer, told the FT. “But it doesn’t say much for Deutsche Telekom’s sensitivity towards its victims if it divulges information only after public pressure.”
The FT also reports that Germany’s remarkable labour market recovery has halted, with the first rise in unemployment for more than two years adding to evidence that still-robust economic growth across the eurozone could fizzle.
The 4,000 increase in seasonally adjusted unemployment in Europe’s largest economy surprised economists, who had forecast a 25,000 fall. It suggested Germany’s strong economic performance may be reaching a plateau.
To date, the European Central Bank has seen no dramatic deceleration in underlying eurozone economic growth, which helps explains why it has kept interest rates on hold at 4 per cent since last June. Its relative optimism is likely to have been boosted by figures showing eurozone lending to business increased by an annual rate of 14.9 per cent in April, scarcely changed from the record 15 per cent in March.
The ECB last night warned signs were emerging that people expect eurozone inflation rates to rise. Strong monetary and credit growth pointed to inflation danger ahead.
The monthly ECB bulletin added: “There has been little evidence that the financial market turmoil has strongly influenced the overall dynamics of money and credit expansion.” It was also revealed the bank has been considering how to improve its monetary analysis.
But the ECB has acknowledged eurozone growth is likely to weaken in coming months. Separately, the European Commission reported its “economic sentiment” indicator for the 15-country region in May unchanged from April’s 97.1 points. But that was still below the indicator’s long-term average and details of the survey showed confidence had fallen sharply in France to the lowest level for three years.
Confidence among consumers weakened across the eurozone, probably reflecting inflation fears and soaring oil prices.
In Germany, the steady fall in unemployment from a peak of more than 5m in March 2005 had raised hopes the economic recovery in Europe’s largest economy would become less dependent on exports.
Analysts said the latest data was difficult to interpret, coming after a surprisingly steep fall in joblessness throughout the first quarter.
“Given that business surveys are still signalling robust job growth, we would argue most of the relative weakness is simply a correction,” said Dirk Schumacher at Goldman Sachs, which had forecast a 10,000-strong fall in unemployment.
Frank Weise, head of the Federal Labour Agency, which published the latest jobless figures, added the small rise in unemployment “should not be interpreted as the first sign of a slow-down in the labour market”.
The agency blamed mainly statistical effects and changes in the law for May’s increase.
The seasonally corrected figures, it said, were distorted by unseasonably warm weather in winter while changes in the legal status of jobseekers aged more than 58 alone accounted for a 10,000 increase in the unemployed.
The mild weather meant fewer jobs had been lost during the winter than formerly, resulting in a lower reduction in spring unemployment, the agency said.
The New York Times reports that for years, scientists have had a straightforward idea for taming global warming. They want to take the carbon dioxide that spews from coal-burning power plants and pump it back into the ground.
President Bush is for it, and indeed has spent years talking up the virtues of “clean coal.” All three candidates to succeed him favor the approach. So do many other members of Congress. Coal companies are for it. Many environmentalists favor it. Utility executives are practically begging for the technology.
But it has become clear in recent months that the nation’s effort to develop the technique is lagging badly.
In January, the government canceled its support for what was supposed to be a showcase project, a plant at a carefully chosen site in Illinois where there was coal, access to the power grid, and soil underfoot that backers said could hold the carbon dioxide for eons.
Perhaps worse, in the last few months, utility projects in Florida, West Virginia, Ohio, Minnesota and Washington State that would have made it easier to capture carbon dioxide have all been canceled or thrown into regulatory limbo.
Coal is abundant and cheap, assuring that it will continue to be used. But the failure to start building, testing, tweaking and perfecting carbon capture and storage means that developing the technology may come too late to make coal compatible with limiting global warming.
“It’s a total mess,” said Daniel M. Kammen, director of the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley.
“Coal’s had a tough year,” said John Lavelle, head of a business at General Electric that makes equipment for processing coal into a form from which carbon can be captured. Many of these projects were derailed by the short-term pressure of rising construction costs. But scientists say the result, unless the situation can be turned around, will be a long-term disaster.
Plans to combat global warming generally assume that continued use of coal for power plants is unavoidable for at least several decades. Therefore, starting as early as 2020, forecasters assume that carbon dioxide emitted by new power plants will have to be captured and stored underground, to cut down on the amount of global-warming gases in the atmosphere.
Yet, simple as the idea may sound, considerable research is still needed to be certain the technique would be safe, effective and affordable.
Scientists need to figure out which kinds of rock and soil formations are best at holding carbon dioxide. They need to be sure the gas will not bubble back to the surface. They need to find optimal designs for new power plants so as to cut costs. And some complex legal questions need to be resolved, such as who would be liable if such a project polluted the groundwater or caused other damage far from the power plant.
Major corporations sense the possibility of a profitable new business, and G.E. signed a partnership on Wednesday with Schlumberger, the oil field services company, to advance the technology of carbon capture and sequestration.
But only a handful of small projects survive, and the recent cancellations mean that most of this work has come to a halt, raising doubts that the technique can be ready any time in the next few decades. And without it, “we’re not going to have much of a chance for stabilizing the climate,” said John Thompson, who oversees work on the issue for the Clean Air Task Force, an environmental group.
The fear is that utilities, lacking proven chemical techniques for capturing carbon dioxide and proven methods for storing it underground by the billions of tons per year, will build the next generation of coal plants using existing technology. That would ensure that vast amounts of global warming gases would be pumped into the atmosphere for decades.
The highest-profile failure involved a project known as FutureGen, which President Bush himself announced in 2003: a utility consortium, with subsidies from the government, was going to build a plant in Mattoon, Ill., testing the most advanced techniques for converting coal to a gas, capturing pollutants, and burning the gas for power.
The carbon dioxide would have been compressed and pumped underground into deep soil layers. Monitoring devices would have tested whether any was escaping to the atmosphere.
About $50 million has been spent on FutureGen, about $40 million in federal money and $10 million in private money, to draw up preliminary designs, find a site that had coal, electric transmission and suitable geology, and complete an Environmental Impact Statement, among other steps.
But in January, the government pulled out after projected costs nearly doubled, to $1.8 billion. The government feared the costs would go even higher. A bipartisan effort is afoot on Capitol Hill to save FutureGen, but the project is on life support.
The government had to change its approach, said Clarence Albright Jr., the undersecretary of the Energy Department, to “limit taxpayer exposure to the escalating cost.”
Trying to recover, the Energy Department is trying to cut a deal with a utility that is already planning a new power plant. The government would offer subsidies to add a segment to the plant dedicated to capturing and injecting carbon dioxide, as long as the utility bore much of the risk of cost overruns.
It is unclear whether any utility will agree to such a deal. The power companies, in fact, have been busy pulling back from coal-burning power plants of all types, amid rising costs and political pressure. Utility executives say they do not know of a plant that would qualify for an Energy Department grant as the project is now structured.
Most worrisome to experts on global warming, the utilities have recently been canceling their commitments to a type of plant long seen as a helpful intermediate step toward cleaner coal.
In plants of this type, coal would be gasified and pollutants like mercury, sulfur and soot removed before burning. The plants would be highly efficient, and would therefore emit less carbon dioxide for a given volume of electricity produced, but they would not inject the carbon dioxide into the ground.
But the situation is not hopeless. One new gasification proposal survives in the United States, by Duke Energy for a plant in Edwardsport, Ind.
In Wisconsin, engineers are testing a method that may allow them to bolt machinery for capturing carbon dioxide onto the back of old-style power plants; Sweden, Australia and Denmark are planning similar tests. And German engineers are exploring another approach, one that involves burning coal in pure oxygen, which would produce a clean stream of exhaust gases that could be injected into the ground.
But no project is very far along, and it remains an open question whether techniques for capturing and storing carbon dioxide will be available by the time they are critically needed.
The Electric Power Research Institute, a utility consortium, estimated that it would take as long as 15 years to go from starting a pilot plant to proving the technology will work. The institute has set a goal of having large-scale tests completed by 2020.
“A year ago, that was an aggressive target,” said Steven R. Specker, the president of the institute. “A year has gone by, and now it’s a very aggressive target.”
The NYT also reports that dropping the curtain on 85 years of Wall Street history, shareholders of Bear Stearns voted Thursday to support the troubled investment bank’s controversial, government-backed merger with JPMorgan Chase.
The result, announced at a 10 a.m. meeting at Bear’s headquarters at 383 Madison Avenue, marked the end of Bear as an independent firm. But the outcome reflected less an embrace of the deal by bruised investors than the stark reality that the $10-a-share price was the best option available.
More than two months after the terms were struck in mid-March, Bear Stearns, which opened in 1923, is now part of JPMorgan. The tally in support of the merger was 84 percent, Bear Stearns said. The deal will close Friday at midnight.
Outside Bear’s glittering headquarters, now owned by JPMorgan, a carnival-like atmosphere — laden with gallows humor — prevailed. Former employees mingled in the street commiserating and scribbling comments on a large portrait of James E. Cayne, the former chief executive of Bear Stearns, whom many blame for the firm’s fall.
Entrepreneurs hawked T-shirts with pictures of Mr. Cayne playing a violin on the 19th hole of a golf course.
Inside the building, however, the mood was somber, if not tearful — a stark contrast to the angry sentiments of Bear employees and shareholders in mid-March, most of whom felt that that Bear, known as the scrappiest firm on Wall Street, could have survived if it had been given earlier access to Federal reserves credit lines.
The new entity will be much leaner, reflecting the view of James S. Dimon, the chief executive officer of JPMorgan, that Wall Street will remain in a funk for some time. The deal bolsters JPMorgan’s commodities and energy operations and will give it a stronger foothold in the prime brokerage business if it regains the many customers who fled Bear Stearns.
But Bear’s balance sheet is rife with financial landmines, and with market conditions worsening, JPMorgan executives have cut hundreds of more jobs than they had anticipated. About 7,500 Bear Stearns bankers have lost their jobs, along with as many as 3,500 employees of JPMorgan.
Mr. Cayne, on his second to last day as chairman of Bear, presided over the meeting at the firm’s auditorium, which was filled with more than 400 employees. Sitting next to him was Alan D. Schwartz, Bear’s chief executive.
Mr. Cayne, who joined the firm in 1969 and lost more than $900 million in the firm’s collapse, had been conspicuously absent in March, when Mr. Dimon presided over a stormy meeting in the same location.
The gathering was very much a Bear Stearns affair, with Mr. Dimon in Italy meeting clients and no other top JPMorgan operating executives attending. Mr. Cayne’s presence was a powerful reminder to the Bear Stearns community that the fight was finished.
“I have no anger, only regret,” Mr. Cayne said, as he departed from the script of his prepared remarks. “Fourteen thousand families were affected. I personally apologize. I feel an enormous amount of pain and management feels an enormous amount of pain.”
The audience of Bear employees, directors and investors, many of whom Mr. Cayne has known for years and who lost large parts of their savings and fortunes, received his remarks in dead silence.
“That which does not kill you makes you stronger,” he added. “And at this point we are all like Hercules.”
Again, his words were met with silence.
“JPMorgan is a great organization,” he concluded. “There are better days ahead.”
And then the meeting, which lasted no more than 10 minutes, was over and Bear’s employees headed quietly off to work.
