The Irish Independent reports that Irish bank stocks tumbled for the third session in a row yesterday amid mounting concerns about the tough stance the European Commission is taking on banks in receipt of state aid.
Shares in Allied Irish Banks plunged 11.9pc yesterday to €1.85, while Bank of Ireland tumbled 25pc to €1.65, making it the worst hit financial stock in western Europe.
AIB has lost a quarter of its value since Dutch financial giant ING was ordered by Brussels on Monday to sell off its insurance business in return for €10bn of state aid. Bank of Ireland's value has slid by over a third since then.
"The scale of the requirements placed on ING seems to have taken the markets by surprise, which has impacted sentiment toward other banks,"said Anna Lalor, an analyst at Goodbody Stockbrokers.
Irish banks shares have been among the best performers this year. "They were always going to be worst-hit when the market succumbed to a bout of profit-taking," Kevin McConnell, head of research at Bloxham said.
EU competition commissioner Neelie Kroes is making a concerted effort to rein in banks previously considered "too big to fail" as she comes to the end of her tenure.
Dealers said the market was also concerned about whether the EC would give the go-ahead for the National Asset Management Agency (NAMA) to pay above market value for loans it is taking over, as planned.
Finance Minister Brian Lenihan compounded the banks' loosing streak by telling the Dail yesterday that the transfer of the biggest loans into the 'bad bank' could be delayed until January.
The more drawn-out the process, the longer it will take for the banks to be paid -- making it more difficult for them to extend credit to the beleaguered economy.
Bank of Ireland, Allied Irish Banks and Anglo Irish Bank, meanwhile, will all have submitted restructuring plans to Brussels by the end of next month as a result of their combined €11bn recapitalisation by the State this year. Industry sources say the Commission is likely to review all three together before coming back to the Government with a response next February.
The Irish Independent also reports that the Department of Finance appears to have done a volte-face on plans for a three-way merger of the country's smallest lenders, with Permanent TSB finding itself left out in the cold as talks begin between EBS and Irish Nationwide.
Sources say that tentative discussions have opened between the top brass of the two building societies in recent weeks, under the watchful eye of the department. No corporate advisers have been brought in at this stage.
All parties are mindful of the fact that a massive capital hole will be triggered in Nationwide's reserves as it starts the transfer of €8.3bn of risky property assets to the National Asset Management Agency (NAMA) in the coming months.
Finance Minister Brian Lenihan has estimated that the five lenders that will be part of the 'bad bank' will have to discount the value of loans by an average of 30pc before the transfer.
However, observers believe that Nationwide's writedowns could be closer to 35pc-38pc, leading to a capital shortfall of over €1bn to be picked up by taxpayers.
Capital
Well-placed government sources say the hope is that EBS, which will need a €300m state cash injection as it transfers €800m of loans to NAMA, will reach a deal with Nationwide before the latter's capital gap comes to a head early next year as auditors sign off on the society's 2009 figures.
They said that the department would be happy just to see a bilateral merger between the building societies.
"You're looking more at a 'mini-mutual' at this stage than the 'super-mutual' that had been mooted,"said one source.
Still, sources cautioned that a subsequent tie-up with Permanent TSB could not be ruled out if its absence from the party turned out to be a deal-breaker for either of the other two.
The development will come as a surprise to Irish Life & Permanent (IL&P), which is in the middle of overhauling its corporate structure with a view to spinning off its weak Permanent TSB unit in anticipation of pushing it into an industry-wide merger.
IL&P has never openly acknowledged that it is keen to do a deal, but previous conversations with government officials led to speculation that Permanent TSB and the State could each end up owning 40pc-45pc of the combined entity, with the rest left in the hands of the two building societies.
The Irish Times reports that a separate company will buy and manage Nama’s debts to avoid a breach of EU rules
Private investors will own more than half of Nama’s (National Asset Management Agency) property loans, but the taxpayer will guarantee 95 per cent of their purchase price, under the scheme that the Government intends using to keep the €50 billion liability off the State’s books.
Once it is established, Nama, the agency that will take control of Irish banks’ property-backed loans, will create a separate company – known as a special purpose vehicle (SPV) – to buy and manage the debts.
Private investors will own 51 per cent of the SPV in return for a €51 million investment. Nama will own the remaining 49 per cent in return for investing €49 million, giving the SPV €100 million in capital.
The mechanism will allow the Government to exclude Nama’s €50 billion-plus liability from the national debt, and avoid a serious breach of the EU’s stability and growth pact, which limits the amounts that euro-zone states can borrow relative to the size of their economies.
The SPV will be a separate entity to Nama and will have its own board, although this will include representatives of the asset management agency.
According to a Government memo circulated to the Dáil this week, Nama will have a veto over all of the SPV board’s decisions. This is because the Government is guaranteeing 95 per cent of the €54 billion in bonds that the State will provide to purchase the banks’ property loans.
A Department of Finance spokesman explained yesterday that there will be other checks and balances to safeguard the taxpayers’ and State’s interests, but added that the detail of these will be worked out when the SPV itself is established. This will not happen until the Oireachtas passes the Nama legislation.
Although the Government’s memo indicates that private investors will be represented on the SPV’s board, the department’s spokesman said that this may not necessarily happen.
Private investors have to own more than half the SPV – and thus its assets – in order to comply with EU guidelines that will allow the Government to exclude Nama’s liabilities from the national debt.
It is not clear just who the private investors will be, but the department indicated yesterday that the cash is likely to come from the financial markets. Its spokesman said that it is not possible to say whether any group, including the Irish banks who will benefit from Nama, can be specifically included or excluded.
If the property loans can be managed profitably, then Nama and the private backers will be paid a yearly dividend, tied to returns from Irish Government bonds. Once the entire operation is finished, the SPV will be wound up. The Government’s memo says that the investors, that is Nama and the private backers, will only be repaid their €100 million if the resources are there.
If the loans are ultimately profitable, they will be repaid their capital plus 10 per cent – €10 million – once the SPV is wound up. This means that the private backers will be repaid their €51 million, plus €5.1 million, plus any dividends they will have received along the way. Any further profits over and above these amounts will be returned to the exchequer.
However, if the property loans are not profitable, Nama and the private investors will lose their €100 million.
When it first proposed establishing Nama in April, the Government believed that the State would have to account for the €50 billion Nama liabilities on its own balance sheet.
However, after lobbying from the German and French governments, the EU Commission and its statistics agency, Eurostat, came up with guidelines that would allow member states take liabilities related to schemes to rescue their banks off their balance sheets.
A French rescue agency, known as SFEF, which has issued close to €500 billion in bonds this year, is using a similar mechanism to the Nama SPV.
A Eurostat letter to Bill Keating, a director of the Central Statistics Office (CSO), confirms that the mechanism proposed by the Government complies with the guidelines that the EU has set out. The Department of Finance warns that this is just a preliminary finding, but it does not believe that Eurostat’s final decision will differ greatly.
The department’s spokesman stressed yesterday that the Government is not trying to “disguise” the debt by taking it off the State’s balance sheet. “We are still saying upfront that the liability is there,” he said.
The Irish Times also reports that the rate of decline in retail sales is levelling off, but consumers are spending the least amount per transaction in more than two years, according to the latest review of the retail sector by Retail Excellence Ireland (REI).
The average transaction value of consumers’ purchases was €45.64 in the third quarter, down from €66.74 this time last year, according to REI. It said the lower spending was the result of both falling prices and more cautious consumers.
The organisation, which includes more than 580 retail companies representing 8,500 stores (around a third of all retail stores in Ireland), said the timing of the Budget, which is scheduled for December 9th, later than is usual, would have a likely negative impact on shopper spending over the valuable Christmas period.
This, in turn, would have serious consequences for the retail industry, it warned.
“The unpalatable announcements expected in the December Budget are likely to kill consumer spend over Christmas,”said REI chief executive David Fitzsimons.
“Consumer sentiment is already poor, but people are now living in fear of what proposed cuts lie ahead in December and as a result, they are very nervous about spending what little cash they currently have at their disposal,”he said.
“Many retailers have been simply trying to make it through to Christmas and in many cases, their survival is dependent on a strong festive trading period. It is imperative that the Government approach the Budget in terms of what can be done to improve consumer confidence and stimulate spending.”
According to REI figures, like-for-like retail sales – sales in existing stores – in the third quarter fell 16.5 per cent compared to the same period in 2008.
Menswear continues to be the worst performing category of sales, REI said, with sales plummeting almost 24 per cent year-on-year. Giftware, homeware, footwear and jewellery also continued to fare badly.
However, sales are now stabilising on a quarterly basis, with average retail sales per square foot up 7 per cent on the last quarter.
Rent costs as a percentage of sales is also falling, REI said.
The cost of rent as a percentage of sales fell from an average of 13 per cent in the second quarter to 11 per cent in the third, but REI said this was still higher than the norm of 8.5 per cent in other European states.
“The good news from these results is that the rate of decline appears to be levelling off for 2009, with July in particular holding up comparatively well,” said Mr Fitzsimons.
The Irish Examiner reports that schools look set to close and other public services set to be thrown into chaos after all the public service unions agreed to ballot for a day of action on Tuesday, November 24.
If union members vote in favour of strike, the bulk of the country’s 310,000 public servants, including teachers, nurses and civil servants will down tools in protest at plans to cut the public sector pay bill by 6.5%.
The decision to press ahead with the action, which was sought by the country’s largest solely public service union, IMPACT, was made as the unions met with the Government to open formal discussions on its intention to reduce the €20 billion public sector wage bill by €1.3bn.
The unions have argued that, if that reduction were to be found purely through cuts to core pay, it would entail each member of the public service facing an average of 13.5% pay cut this year when added to the 7% cut introduced through the pension levy.
The Government has said it will not be dissuaded from saving €4bn from its exchequer spending this year and have said that, as well as axing €1.3bn from the public service wage bill, it wants to secure a further €1.3bn through social welfare cuts and the rest through other cuts in public services.
Public service unions have now issued a statement of intent, by announcing a day of action on November 24, but have made it clear they will only press ahead if the Government persists with plans to cut their members’ take-home pay.
While Taoiseach Brian Cowen and a host of his ministers have spent a number of weeks indicating pay cuts were their preferred method of making the savings, over the last few days that position has softened.
The Taoiseach has said the Government will consider reform rather than pay cuts if the end savings are the same. In that regard, public service unions were yesterday told that if they can generate alternative proposals for savings, the Government will consider them.
Union sources predicted there could be considerable "toing and froing" between the social partners for up to two weeks as proposals are put forward by unions, the Government and other social partners. It is, therefore, highly unlikely there will be any decisive action taken before the end of this week, especially as Mr Cowen will be attending the European Council in Brussels today and tomorrow.
However, while previous talks between the social partners have been drawn out for long periods, union sources are now adamant that, if nothing is agreed by mid-November, the crippling strike action will go ahead.
General secretary of the Irish Nurses Organisation Liam Doran said the opening session of talks between unions and Government had been "difficult".
Mr Doran made it clear that there could be no interference with frontline workers’ pay and allowances.
The Financial Times reports that the Galleon hedge fund at the centre of an insider trading scandal paid hundreds of millions of dollars a year to its Wall Street banks and in return regularly received market information that would not have been disclosed to most investors, executives familiar with the matter say.
A person familiar with Galleon, whose founder, Raj Rajaratnam, was charged with insider trading this month, said it paid about $250m to its banks last year. Executives who dealt with the fund said it paid more in fees and other charges during the boom years of this decade.
Morgan Stanley, which counted Galleon as one of its top-five hedge fund clients, and Goldman Sachs were Galleon’s top providers of hedge-fund services – or prime brokerage.
Galleon, which had about $7bn in assets at its peak, paid large amounts to banks because it specialised in short-term trading strategies, which put its officials in close contact with Wall Street traders and salespeople. As it grew, the hedge fund became known for pushing its contacts at banks for hints about market developments such as big buy and sell orders.
Although bank policies often prohibit employees from divulging specific information about orders, executives who dealt with Galleon said it regularly received “colour” on market developments, frequently delivered in Wall Street slang. One example would be traders discussing a “page one seller” of shares – a reference to the first page of the Bloomberg list of top holders of listed companies.
One executive who dealt with Galleon said: “They wanted anything the public did not have. They got various pieces and put them together and that was their edge.” A former Goldman executive who provided services to funds including Galleon said: “They were tough and aggressive. They cared about short-term returns and cared a lot about the impact of their trading and the costs. They expected a lot of market information.”
Market “colour” has not usually figured in insider-trading enforcement. Prosecutions – including the charges in the Galleon case – have focused on leaked corporate information.
“There is a big distinction between information from corporate issuers and information from elsewhere, and information about companies and about the market,”said David Moody, a New York securities lawyer.
However, market participants say the Galleon case could have a chilling effect on the distribution of market “colour” – possibly affecting other hedge funds that trade frequently to make quick returns. “High-velocity hedge funds aren’t really about investing,” said one hedge fund founder. “It is a cat and mouse kind of thing, a game.”
Goldman, Morgan Stanley and a Galleon representative declined to comment.
The FT also reports that Angela Merkel’s second term as German chancellor began under a cloud on Wednesday as a band of MPs from her coalition declined to back her appointment and critics within her party renewed criticism of her plans for €24bn in tax cuts.
On a day meant to celebrate her victory in last month’s elections, Ms Merkel also came under attack for agreeing to address the US Congress ahead of the new parliament in Berlin. In a rare honour for a German chancellor, Ms Merkel is expected to deliver a speech to the US Congress next Tuesday, a week before she is due to address the Bundestag lower house.
Frank-Walter Steinmeier, Ms Merkel’s former vice-chancellor and now parliamentary leader of the Social Democratic opposition, said he was “astonished and shocked” by the decision, while Renate Künast, the Green floor leader, said it expressed “contempt vis-à-vis the Bundestag”.
Thomas de Maizière, Ms Merkel’s former chief-of-staff and now the interior minister, called the criticism “sour grapes”, pointing to the chancellor’s busy schedule. Ms Merkel has just been in Paris for a dinner with Nicolas Sarkozy, the French president. She then travels to the European Union summit in Brussels, before flying on to Washington.
But there were also signs that not everyone within her coalition government was content.
In a secret vote, seven members from Ms Merkel’s coalition parties in parliament’s newly elected lower house did not vote for her, while another two did not show up at all. She still received 323 votes, 11 more than the majority needed.
The chancellor is also facing growing criticism at home and abroad for her decision to forge ahead with income tax and corporate tax cuts worth €24bn ($35bn, £21bn) a year, despite a record federal deficit which is likely to top €90bn next year.
Among the Merkel allies growing uneasy about the economic policy course of the new government are the influential state premiers from her Christian Democratic Union, whose regional governments will bear the burden of some of the tax cuts. The regions have been hit hard by the economic downturn, since they are highly reliant on the local business tax for their revenues.
Horst Köhler, Germany’s president and a CDU member, said on Wednesday that the new government should “work towards the goal of reducing state debt”.
Werner Schnappauf, managing director of the mighty BDI industry federation, traditionally seen as friendly to the CDU, wrote in an internal note that his organisation would “urge the government to abide in its work by the basic principles of sensible fiscal policy and encourage sustainable growth and employment”.
“The coalition agreement should have included at least hints about future saving measures,” Mr Schnappauf wrote.
Abroad, Jean-Claude Juncker, chairman of the 16-country Eurogroup of finance ministers, added his voice to the critics. He told Handelsblatt, the German newspaper: “The consolidation elements are under-represented in the coalition agreement and there is an excessive focus on expansionary measures.”
The New York Times reports that Sanjay Jha’s honeymoon as co-chief executive at Motorola lasted just a few minutes into his first meeting with employees in 2008.
“Why should we trust you?” one employee blurted. The frustration was understandable. Motorola, which pioneered cellphones and built such consumer favorites as the StarTac and the Razr, had not had a hit phone in years, and a succession of leaders could not find one.
Mr. Jha, 46, an engineer who worked his way up at Qualcomm from a chip designer to the No. 3 executive, answered the challenge, saying employees should not take him on faith but watch what he did.
Mr. Jha recalled in a recent interview that he had hoped, at a minimum, that his talk“gave the team general comfort I wasn’t a huckster.”
He knew he had to act fast to slash costs and prune dozens of phones based on dead-end technology that simply were not profitable. That made the last several months of 2008 a financial disaster — losses doubled as sales fell by a third.
Mr. Jha also knew he had only a year to deliver new handsets that could go head to head with Apple’s iPhone if he had any hope of retaining the trust of Motorola’s employees, investors and customers — not to mention its board, which had lured him with an enormous grant of stock and options.
“If I didn’t have smartphones in the market for Christmas of ’09, this business wouldn’t have a runway,” he said.
Mr. Jha does not have Motorola flying again, but he at least has it poised for a takeoff. On Wednesday, Verizon Wireless introduced Motorola’s new Droid smartphone, which is nearly as thin as an iPhone but with a bigger screen and a slide-out keyboard. T-Mobile has started selling another Motorola smartphone called the Cliq.
“Motorola is a different place than it was a year ago,” said Paul E. Cole, T-Mobile’s vice president for product development. “Sanjay has done a spectacular job.”
Looking back, Mr. Jha said that Motorola was in worse shape than he knew when he took the job, largely because of a dysfunctional management culture that missed the shift in consumer preferences from phones intended primarily for talking to those that do nearly everything a computer can do. The company’s engineering talent, which had once developed great phones, remained intact, he said.
As luck would have it, one of those engineers, Rick Osterloh, grabbed Mr. Jha just as he stepped off the stage at that first town meeting in August 2008. Mr. Jha had mentioned Google’s Android operating system for smartphones. Mr. Osterloh rushed the stage to tell him he was working on an Android phone in Motorola’s Silicon Valley outpost that would bring together text messages, e-mail and social-network updates.
By the end of that week, Mr. Osterloh was sitting on the corporate jet, flying with Mr. Jha back to California and explaining the Android concept in detail. A few days later, the top dozen members of Mr. Osterloh’s group assembled in a conference in Motorola’s office in Sunnyvale, Calif., to review the work done so far. The four-hour meeting was scheduled for 6 p.m., a shock for Motorola’s 9-to-5 culture. And Mr. Jha had not only asked for the PowerPoint of the presentation in advance, he had read all 100 slides and asked such detailed questions that the presenters had had to produce 20 more slides.
“He was able to understand what we were doing at such a detailed level. I was very impressed,” Mr. Osterloh said.
Mr. Jha was just as impressed with Mr. Osterloh’s unit. “Very quickly, I figured out they knew how to write software,” Mr. Jha said. “It felt like a team that would execute.”
In the weeks after, as Mr. Jha scrutinized Motorola’s other product groups, he often had the opposite reaction. At another meeting that ran late into the night, he discovered that the group making phones with Nokia’s Symbian operating system was staffed almost entirely by outside contractors. The entire project appeared to lack coordination and it was constantly months late in delivering phones. “They were fixing the same bug three or four times,” he said. “It was the contractors run amok.” Even worse, Motorola was not making money on its Symbian phones.
Mr. Jha soon decided to axe the entire Symbian product line as well as phones using several other operating systems. He wanted to simplify product development to standardize on one or two core systems. It came down to a Microsoft Windows mobile operating system and Android. When Microsoft said that a crucial release of its mobile operating system would be delayed, Mr. Jha gave Microsoft the stiff arm and bet on Android.
At the same time, Mr. Jha had to pick which microprocessors and radio chips would be at the core of its new line. This forced him to choose between chips made by the division he had run at Qualcomm and a custom design Motorola had been developing with Texas Instruments.
“This was very hard for me,” Mr. Jha said. “I was very strongly associated with the Qualcomm chip.” He spurned his former employer.
In the fall of 2008, Mr. Jha received an e-mail from Verizon, asking for ideas for a “long ball play for the fourth quarter” of 2009, Mr. Jha recalls. That meant a smartphone that could take on the iPhone. He flew to the carrier’s headquarters in Basking Ridge, N.J., bringing with him models of several of the company’s latest designs. Verizon executives seemed partial to one thin, angular handset that had been designed in London. Even without a firm order, Mr. Jha immediately assigned Iqbal Arshad, who had been the project manager for the Verizon version of the Razr, to transform the mockup into a smartphone Verizon could sell a year later.
“Sanjay said ‘Burn the ships and focus on Android,’ ” Mr. Arshad recalled. That meant rearranging the existing, tightly packed interior to accommodate the larger chips needed to connect to Verizon’s network. Meanwhile the phone’s overall design needed to be exciting enough to go head-to-head with the iPhone.
They found a way to fit a slide-out keyboard into a phone that was only 1.5 millimeters thicker than the iPhone. And they used a 3.7-inch touch screen, noticeably bigger than the 3.5-inch screen on the iPhone. To take advantage of the higher resolution of that screen, Motorola, working with Google, developed new software that would support high-definition video and 3-D graphics.
Motorola’s Droid is the first phone to use the latest release of Android, called Éclair, which features free turn-by-turn directions from Google and sophisticated speech recognition. The biggest problem was the balance between design, which was once a Motorola hallmark, and the phone’s performance. “When you are trying to make something small and powerful, everything is a tradeoff,” Mr. Osterloh explained. “You have to iterate the design thousands of times to get it right.”
Even a small change, like the color of the paint, means that the design of the several radio antennas embedded into the phone’s case have to be rearranged.
Verizon worried that the angular design of what was to be the Droid appealed more to men than women. Motorola quickly rounded some of the phone’s edges and added a rubberized backing to create a softer feel.
By March, T-Mobile had placed a firm order for the social-networking phone that it would name the Cliq. But Verizon was still skeptical, remembering many times in the past when Motorola had missed important deadlines. So Mr. Jha hand-delivered a working prototype to Lowell C. McAdam, the chief executive of Verizon Wireless. A few weeks later, e-mail messages started arriving with purchase orders from Verizon for what it decided to call the Droid.
Mr. Jha was back on stage Wednesday morning, this time at a news conference to formally introduce the Droid, which will go on sale next week for $199.
Analysts in the audience said that the Droid, which will be backed by the biggest ad campaign by Verizon Wireless, is a crucial milestone in Motorola’s recovery.
“To be able to come out with a sexy flagship device that is getting so much promotion from Verizon and really shows off their hardware skills — it looks like their bet on Android is going to pay off,” said Avi Greengart, the research director for consumer devices at Current Analysis. “If they hadn’t delivered something like this, they’d be out of business.”
The NYT also reports that as Angela Merkel begins her second term as chancellor of Germany, her government is promoting a novel way to help embattled newspaper and magazine publishers manage the transition to a digital future.
The new governing coalition, led by Ms. Merkel’s Christian Democrats and including the Free Democratic Party, has pledged to create a new kind of copyright to protect online journalism. The goal is to level the playing field with Internet companies like Google, which German publishers accuse of exploiting their content to build lucrative businesses without sharing the rewards.
“The Internet cannot be a copyright-free zone,” the coalition says in a document setting out its policies.
Supporters of the proposal include Hubert Burda Media, a magazine publisher, and Axel Springer, owner of the newspapers Bild and Die Welt, who say it could be employed to help build new online business models. Analysts say it might allow them to try to claim royalties for the use of their content by Google or other online “aggregators” of news, for example.
But the plan is raising hackles on the Internet, where opponents say an extension of copyright law runs counter to the spirit of openness that characterizes the Web. The government, they say, has succumbed to lobbying by big publishing interests that are fighting a rear-guard action against technological changes.
The proposal “has no value for our society,” said Markus Beckedahl, a blogger based in Berlin and advocate of an unfettered Internet. “It only has value for publishers who see a threat from the democratization of the media.
“This debate is happening only because German publishers have failed to build successful business models on the Internet,”he said.
State intervention in the media is a sensitive topic in Germany because of memories of the Nazis’ control of the press during the Third Reich. Direct financial subsidies, which keep some newspapers alive in France and other European countries, would be out of the question, German publishers say.
Amid concerns about privacy and access to information, the new government has rejected one copyright-enforcement approach embraced in France and Britain: cutting off the Internet access of persistent pirates of online music and movies. Ms. Merkel’s coalition instead calls for greater cooperation between rights holders and Internet service providers to try to solve the piracy problem.
But her government has endorsed a more aggressive approach to the challenges facing the news media. As in other countries, meager revenue from newspaper Web sites shows no sign of compensating for losses from falling ad sales and declining readership of print editions.
“Freedom of information is important,”said Burkhard Schaffeld, corporate counsel for the German Newspaper Publishers Association. “But quality journalism costs money. There is no fundamental right to information for free on the Internet.”
The government’s proposal, championed by Culture Minister Bernd Neumann, would give publishers a so-called neighboring right, something that music labels and movie houses already enjoy.
Details of how the proposal would work have not been spelled out, but publishing executives say one possibility would be to require a license for any commercial use of published material online. That might include Web sites that post articles from other sources, assuming they sell advertising.
A new agency, modeled on the music and book industries’ royalty collection societies, could be created to gather and distribute the fees, publishing executives add.
Private, noncommercial use of news articles would remain unrestricted under the proposals publishers are discussing.
Opponents of the plans say the distinction between commercial and private use would be difficult to define, making enforcement of the plan a challenge. Many bloggers, for example, sell advertising and have commercial ambitions, while others blog chiefly for their own gratification, even if their comments are available for all the world to read. Would they have to pay for borrowing from online newspapers content?
Even Google, a highly commercial company that generates the vast majority of its revenue from advertising, does not sell ads on its European Google News sites, which collect blurbs from news articles and provide links to the sites from which they originated. Google did not reply to a request for comment.
The company has also faced objections to its news service from publishers elsewhere in Europe. Newspapers in Belgium, for instance, have been involved in a long legal battle to win damages from the company, after suing to get it to remove links to their content on Google News.
Publishers say it is not clear when legislation to implement the German government’s proposal might be introduced. Publishers are still negotiating with journalists’ unions on a plan to present to the government, and not all journalists are in favor of the idea.
“Copyright must not be misused as a lever to protect outdated distribution methods and to secure new business and licensing models,”a group of prominent journalists wrote in an “Internet manifesto” that appeared this summer, after publishers proposed the new copyright.
Publishers say they understand that the Internet is different, but that they are tired of watching others make money from their content online. “This is simply one part of the media’s effort to survive in a new kind of economy,” said Stefan Söder, a lawyer for Hubert Burda Media, a magazine publisher based in Munich. “Obviously everyone wants access to free and unlimited information, but if everyone has that, then there is no way to pay for the production of it.”
