A Place in the Auvergne, Monday, 22nd December 2008

'The Day the Earth Stood Still': It's the apocalypse, hee-hee, ho-ho

Reviewed by A.O. Scott
Monday, December 22, 2008
The Day the Earth Stood Still
Directed by Scott Derrickson
Long after we are gone, science fiction movies about our impending extinction will instruct whoever comes next that we were a strange, neurotic species indeed. We could not - cannot - get enough of fantasies of destruction, meant at once to inflame and soothe our fear of vanishing altogether, whether through war, ecological catastrophe, disease or alien invasion.
We know we have it coming, and a movie like "The Day the Earth Stood Still," either in its 1951 version or in the "reimagining" which began its worldside release this month, invites us to feel fleetingly bad about that even as we are encouraged to laugh it off. The laughter - at the earnest reckoning occasioned by a weary-looking extraterrestrial and his giant robot; at the panic and distress their visit provokes - serves as a necessary balm. Like other overwhelming emotions, the fear of apocalypse becomes more palatable when it is turned into camp.
The old "Day," made early in the atomic age, has long inspired this kind of laughter. It has also, in part because of its expressive, shadowy black-and-white cinematography, retained a measure of haunting, unsettling weirdness.
Any hope that the new "Day," directed by Scott Derrickson from a script by David Scarpa, might also someday rise above its pulpy, corny, somber silliness rests mainly on the shoulders of Keanu Reeves.
Those shoulders are perfect for filling out a dark, narrow suit, just as Reeves's deadpan basso and permanently perplexed features make him an ideal Klaatu, as the space visitor is called. Klaatu's job is to assist, calmly and methodically, in the extermination of the human race, a task he tries, with evident fatigue, to explain to his hysterical, violent would-be victims.
Only one will listen: Dr. Helen Benson, played with a bit too much ennui by Jennifer Connelly. Helen, an expert in astrobiology, is part of a team of scientists taken into government custody by force when a giant orb seems about to crash into the Earth. Instead it lands in Central Park, disgorging that giant metal Cyclops robot (a near replica of the one from the earlier movie) and poor Klaatu.
The secretary of defense (Kathy Bates) responds with military force, which only speeds the process of humanity's annihilation and demonstrates that our executioners may have a point. We're such a brutal, dumb, incorrigible life form that the only way the planet can survive is if we're no longer on it. (In 1951 the case against us was mainly pacifist. Now the anti-militarism has a more urgent and explicit ecological dimension.) A metastasizing swarm of metal bugs - the best special effects in a movie that often looks cheap and bedraggled - is dispatched to eat us and everything we've made, or at least everything on the New Jersey Turnpike.
But wait, Helen pleads. We can change! To provide evidence of this transformative potential she takes Klaatu to see her mentor, Professor Barnhardt (John Cleese), a scientist who listens to Bach and was awarded a Nobel Prize for "altruistic biology." Apparently this is the Swedish Academy's euphemism for pimping: The good doctor's advice to Helen about how to approach Klaatu is to "persuade him not with your reason, but with yourself."
Still, any movie that awards a former Monty Python cast member a Nobel Prize in anything cannot be all bad. And "The Day the Earth Stood Still" could be worse. Its scenario and many of its scenes feel ripped off rather than freshly imagined - why do aliens always seem to end up in New Jersey? - and the relationship between Helen and her stepson, Jacob (Jaden Smith), does not quite add the necessary element of heart-tugging sentiment.
After "Wall-E" and "I Am Legend" and the dozens of apocalypse flicks since the last "Day the Earth Stood Still" we can surely do better. Even Klaatu looks bored and distracted, much as he did back when we knew him as Neo.

0430

Bulgarian winemakers pin hopes on quality
Reuters
Tuesday, December 23, 2008
By Tsvetelia Ilieva
Bulgaria's economy is fast losing steam, exports are shrinking and corruption is threatening the European Union aid that has underpinned growth. But the Todoroff winery has a strategy.
"We expect a collapse which we will try to overcome with high-quality wine," says its manager Kiril Izmirov.
Wines from the Balkan country have been known more for quantity than quality, and Bulgaria now accounts for only 0.6 percent of world production.
Boutique wineries such as Todoroff, which have made use of European Union funds in the past five years to recast Bulgaria's reputation, hope a mix of Thracian mystery and top-quality grapes from one of the world's oldest winemaking regions will help.
Perched on the hillsides of what was once the heart of ancient Thrace, Todoroff includes a chic hotel that offers body therapy based on grape products. Its bet is that consumers will keep drinking wines and, even if overall prices come down, good quality at a reasonable price can survive.
Financial problems and an economic slump in Bulgaria's main export markets -- Russia, Britain, Poland and Germany -- are likely to reduce sales abroad by about 30 percent this year, says Radoslav Radev, managing director at Vinimpex, Bulgaria's biggest wine exporter, controlled by Belvedere of France.
Tighter credit has cramped the wine industry's investment plans globally and consumption of expensive drinks has suffered. Analysts say demand generally will remain high, however, and financial turmoil opens the way to consolidation and efficiency.
"The view is that consumers would not walk away from wine because it is considered by many as a luxury for the masses," said Arend Heijbroek, a wine analyst at Dutch Rabobank.
"The overall demand will remain roughly the same. We will not see an enormous drop in volumes that consumers are buying
but they may cut down the prices," he added.
Bulgarian industry officials say mass producers, mainly former state-owned wineries now in private hands, will suffer most from the slowdown because of a drastic drop in demand from Russia, which takes 80 percent of total exports.
"The exports for Russia have almost halted," said Yordan Vutchkov, a member of the supervisory board of the national vine and wine chamber. "Buyers are not placing new orders as they cannot get credits."
The chamber expects a further 20 percent drop in total exports for 2009.
ANCIENT GLORY
Todoroff -- created in 1945 in the southern hamlet of Brestovitsa and then nationalized during the communist era -- said its sales had been unchanged for the first nine months at 1.45 million levs (640,000 pounds).
The winery, which is listed on the Sofia bourse, said surging credit and labour costs are starting to have an effect.
But the nearly 300 boutique wineries that have sprung up in the small Black Sea nation, competing in wine with neighbouring Greece and Romania, have made good use of EU farm aid and foreign investment to replant weed-choked vineyards.
"The boutique wineries are the future," said Alexander Kanev, executive director of Bessa Valley, funded by German Count Stephan von Neipperg, who also owns six wine cellars in Bordeaux.
"There will always be people ready to pay for exclusive wine," said Kanev, adding his company had increased sales so far this year.
Analyst Heijbroek agreed: "The road forward for Bulgaria is to search for authentic varieties and increase the quality of these wines. Because there is always a demand for something really unique."
Bulgaria's winemaking roots date back to the Thracians who inhabited the territory as early as 2000 BC. Their thick, sweet, red wines were praised by Greek poet Homer and cherished throughout the ancient world.
Under communism Bulgaria became the world's sixth-largest producer in the 1970s, shipping more than one million bottles a day to the Soviet bloc and smaller quantities to Western Europe and the United States.
Cheap, low-quality wine still dominates -- bottles are widely sold for less than two or three euros at home and wholesale exports to Russia fetch less than one euro per litre.
The transition to a market economy and farming neglect in the 1990s have caused total annual exports to shrink to about 1.2 million hectolitres from more than 4.0 million in the 1980s.
AUTHENTIC VARIATIES
Now, producers can tap a 3.2 billion euro EU-backed farm program through to 2013.
Officials and winemakers hope the corruption that prompted Brussels to freeze more than half a billion euros in farm and road aid to Bulgaria this year will not affect future projects, as Sofia steps up the fight against fraud and graft.
"These funds will almost completely protect them," said Deputy Agriculture Minister Dimitar Peichev.
Todoroff is among boutique wineries that have used EU money to achieve recognition for their efforts to promote labels made of native grapes at world wine fairs.
The winery, which this autumn picked its first crop of the Mavrud variety from 30 newly planted hectares, has won a place in the Top 100 of respected U.S. magazine Wine&Spirits with its Mavrud 2003 Galeria.
Mavrud dates back to the Thracians and has a deep ruby colour, an aroma of berries and soft tannins.
Another winery in the region shares the same approach, and has planted about 150 hectares with Mavrud and native Rubin vines.
"There is cabernet and cabernet sauvignon all over the world," said Yordan Stefanov, executive director of Vinzavod Asenovgrad. "We have to find a way to promote our varieties on the global market. That will certainly increase our chances."
(Additional reporting by Anna Mudeva; Editing by Anna Mudeva and Sara Ledwith)

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Fading Austrian towns look east for revival
Reuters
Monday, December 22, 2008
By Sylvia Westall
Wolfsthal, about 50 km (30 miles) from Vienna, is the end of the line.
When the train from the Austrian capital pulls into this silent village on Austria's eastern border with Slovakia, only a trickle of people alight and head home past a closed cafe and empty football pitch.
Many of its young people have been drawn to Vienna in search of work, leaving a dwindling, predominantly older population.
But some small towns like this have seen a glimmer of new life since the European Union's Schengen zone expanded a year ago, allowing passport-free travel to and from eastern Europe. By offering cheap land and easy development, they have been tempting young Slovakians to move in.
Most Austrians were hostile towards the Schengen expansion last December: 60 percent opposed the move on security grounds at the time, said market research group OGM. Now some towns hope to become quasi-suburbs of the Slovakian capital Bratislava which is just a 20-minute drive away.
"We started to clear spaces for building because it was very important for the village that we could change the make-up of our population," Wolfsthal Mayor Gerhard Schoedinger told Reuters.
"When the people came, land was bought, and the price of land started to rise, there was an uncomfortable feeling among some people. But...when people could put a face to them, most of the reluctance went away."
Schoedinger, who is married to a Slovakian whom he met while he was working as a border guard, said those who move in are educated to university level and an asset.
Dennis Span has bought some land in Hainburg, a pretty Austrian town down the road from Wolfsthal, after finding it hard to get planning permission in Slovakia.
The 31-year-old Dutch systems engineer currently lives in Bratislava with his wife, who works for an information technology company.
"The main reason is the price in relation to the quality," he said. "We couldn't wait any more and there are lots of good reasons to move to Austria. The services are much better, the infrastructure is very different than in Slovakia and a small town is much more comfortable."
Hainburg sold 53 land plots this month, with three-quarters going to buyers from across the border.
"The main reason for this is that property in Austria is cheaper than around Bratislava, but better legal protection as well as schools and kindergartens also play a big role," said Erich Rieder, the town's administrator.
ARE YOU LOCAL?
Some town authorities have been working hard on cross-border ties. Wolfsthal's school gives Slovak lessons and holds joint cultural events, Hainburg welcomes Slovakian health workers into its clinics and care homes.
More Slovakians are also shopping across the border in Austrian discount stores, where they find a better, cheaper range of goods than at home, Hainburg's Rieder said.
The Austrian government says it does not have figures to show the economic impact, but in terms of population growth, the Schengen expansion could already be having an effect.
From January to October the number of Slovaks living in Austria rose by 11 percent, faster than previously, while the Hungarian and Czech populations rose 7 percent each according to preliminary data. The number of all foreigners moving to Austria grew by 2 percent over the same period.
Some welcome the influx to the Alpine republic, which like many countries in western Europe must contend with an ageing population and a shortage of skilled workers.
Economic bodies last month called for increased migration of workers, especially in the face of the economic crisis.
"In such times the economy needs highly skilled forces to trigger incentives for growth," Martin Gleitsmann of the Austrian chambers of commerce was quoted as saying by Austrian media at a presentation on the issue.
Some have called for a points system to fast-track work permits for skilled migrants.
"We must finally wake up and realise that Austria is a country of immigration," said industrialist Georg Kapsch at the presentation, estimating Austria needs 20,000-40,000 foreign workers each year.
WARM WELCOME?
But in a country where anti-immigration far-right parties won nearly a third of the vote in September's national elections, such talk is controversial.
Freedom, the main far-right party, has called for a halt to immigration and a ministry for repatriating foreigners, although it reserves its sharpest language for those of Turkish origin.
The mainstream conservatives have also tried to appeal to the right, insisting that German and a good understanding of Austrian "values" be preconditions to immigration.
In Wolfsthal, some are guarded about efforts to attract foreigners.
"Things have definitely changed here," said Mario Leskovits, a 27-year-old Austrian bartender who hopes more young Slovakians will boost the numbers on his football team. "I now have Slovakian neighbours and we get on fine."
But he notes that not everyone is as enthusiastic.
"Some families integrate well, others don't. They keep to themselves or don't always speak German. Some people don't like it because they are buying land in the village and it is expensive for young people to do the same."
Other border towns are not encouraging immigration from the east.
In Deutschkreutz, a market town near the Hungarian border which deployed a private frontier patrol a year ago, the number of foreign children entering local schools has been a problem, according to the far-right mayor.
But the interior minister expects around 1,500 temporary Austrian troops guarding the Hungarian and Slovakian borders will step down by the end of 2009, as they're no longer needed.
"It has only taken a year to prove that neither Austria nor other countries need worry about new dangers from the expansion," Hungarian Ambassador Istvan Horvath said last month.
(Editing by Sara Ledwith)

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New Israeli crossings said hurting Palestinian trade
Reuters
Monday, December 22, 2008
JERUSALEM: A new network of crossing points for Palestinian goods, built into Israel's barrier in and around the occupied West Bank, may hurt exports, not facilitate them as Israel claims, the World Bank said on Monday.
Israel will require all Palestinian commercial traffic to move through these crossing points once the barrier, made up of concrete walls and wire fences, is completed, the international lending agency said in a report.
Contrary to Israeli assertions that the crossings will allow the Israeli army to ease the movement of people and goods within the West Bank, the World Bank said internal restrictions have only increased and the new system has the potential to become "another serious constraint to Palestinian businesses."
David Craig, the World Bank's director in the West Bank and the Gaza Strip, said Palestinian economic growth hinged on the private sector being able to boost exports. "The new restrictions ... undermine this goal," he said.
Israel says its West Bank barrier, condemned by a 2004 World Court ruling as illegal, is meant to keep out suicide bombers.
Palestinians call it collective punishment and a land grab that denies them territory that they want for a future state.
At the new crossing points, trucks on the Palestinian side transfer their goods to trucks on the Israeli side, back-to-back. Israel uses a similar system along its border with the Hamas-ruled Gaza Strip, which faces severe shortages of many goods because of an Israeli-led blockade.
The World Bank said the back-to-back system would create added delays and uncertainties for Palestinian businesses already hamstrung by Israel's network of hundreds of checkpoints, roadblocks and other barriers in the West Bank.
Israel said it was committed to expanding the new facilities as necessary to ensure there are no queues and that all vehicles move through the crossing points within 30 to 60 minutes.
Limited Palestinian exports from the West Bank mostly travel through Israeli ports to destinations abroad. Israel does not allow exports from the Gaza Strip, citing Hamas control on the Palestinian side of the crossing points.
"As long as the internal barriers exist and exports and imports are forced to go through a system of back-to-back transfer, the Palestinian private sector is unlikely to prosper," the World Bank said.
An increasingly attractive alternative to Israeli ports would be Palestinian exports through Jordan, including the sea port of Aqaba, the report said.
But that would require Israel to make changes at the Allenby Bridge crossing point in the Jordan Valley to accommodate more shipments, the World Bank said.
(Writing by Adam Entous; Editing by Sami Aboudi)

In Zimbabwe, survival lies in scavenging
By Celia W. Dugger
Monday, December 22, 2008
NZVERE, Zimbabwe: Along a road in Matabeleland, barefoot children stuff their pockets with corn kernels that have blown off a truck as if the brownish bits, good only for animal feed in normal times, were gold coins.
In the dirt lanes of Chitungwiza, the Mugarwes, a family of firewood hawkers, bake a loaf of bread, their only meal, with 11 slices for the six of them. All devour two slices except the youngest, age 2. He gets just one.
And on the tiny farms here in the region of Mashonaland, once a breadbasket for all of southern Africa, destitute villagers pull the shells off wriggling crickets and beetles, then toss what is left in a hot pan. "If you get that, you have a meal," said Standford Nhira, a spectrally thin farmer whose rib cage is etched on his chest and whose socks have collapsed around his sticklike ankles.
The half-starved haunt the once bountiful landscape of Zimbabwe, where a recent United Nations survey found that 7 in 10 people had eaten either nothing or only a single meal the day before.
Still dominated after nearly three decades by their authoritarian president, Robert Mugabe, Zimbabweans are now enduring their seventh straight year of hunger. This largely man-made crisis, occasionally worsened by drought and erratic rains, has been brought on by catastrophic agricultural policies, sweeping economic collapse and a governing party that has used farmland and food as weapons in its ruthless — and so far successful — quest to hang on to power.
But this year is different. This year, the hunger is much worse.
The survey conducted by the United Nations World Food Program in October found a shocking deterioration in the past year alone. The survey, recently provided to international donors, found that the share of people who had eaten nothing the previous day had risen to 12 percent from zero, while those who had consumed only one meal had soared to 60 percent from only 13 percent last year.
For almost three months, from June to August, Mugabe banned international charitable organizations from operating, depriving more than a million people of food and basic aid after the country had already suffered one of its worst harvests.
Mugabe defended the suspension by arguing that some Western aid groups were backing his political rival, Morgan Tsvangirai, who bested him at the polls in March but withdrew before a June 27 runoff. But civic groups and analysts said Mugabe's real motive was to clear rural areas of witnesses to his military-led crackdown on opposition supporters and to starve those supporters.
The country's intertwined political and humanitarian crises have become ever more grave — with a cholera epidemic sweeping the nation, its health, education and sanitation systems in ruins and power-sharing talks at an impasse. Meanwhile, Mugabe has blamed Western sanctions, largely aimed at senior members of his government, for the country's woes.
His information minister even charged last week that Britain, Zimbabwe's former colonial ruler, had started the cholera outbreak — spread by water contaminated with human feces — as an act of "biological chemical war force," a charge widely derided as paranoid or cynical.
But for all Mugabe's venom toward the West, a central paradox rests at the heart of his long years in power. It was the failed policies of Mugabe and his party, ZANU-PF, including their calamitous seizure of commercial farms, that made this nation so utterly dependent on aid from the European and American donors he so reviles. And the same applies to Western leaders: Despite their scathing denunciations of him, it is their generous donations that have helped him survive by preventing outright famine among his people.
"You're acting to save lives, knowing that by doing so you are sustaining this government," said one aid agency manager, speaking on condition of anonymity for fear of reprisals. "And unfortunately, ZANU-PF is good at exploiting this humanitarian imperative."
American-financed charities and the World Food Program have been feeding millions of Zimbabweans since late 2002, at a cost of $1.25 billion over the years. After a slow start this year because of the aid suspension, the United States and the United Nations are feeding almost half of Zimbabwe's population this month.
But the World Food Program is short of nearly half the food needed for January, said Richard Lee, a spokesman.
"You're not looking at mass starvation yet," said Sarah Jacobs, of Save the Children, adding that without an urgent infusion of food, "we may be reporting an even scarier, more horrible situation by January."
No food aid has reached the village of Jirira in Mashonaland, near Harare, the capital. So each morning, people rise before the sun and stumble from their huts, beneath the arching canopy of a starry sky, to fill metal pails with the small, foul-smelling hacha fruit. Those who arrive as dawn breaks find the fruit has already been picked clean.
The sweet, fibrous, yellow pulp of the fruit has become the staple of the villagers' diet. The fruit is now infested with tiny brown worms. Nevertheless, the women peel it, crush it and soak it in water. Some of the worms float to the surface and can be skimmed off. The mashed ones they eat.
Parents search for other sources of food as well. Bengina Muchetu tries to quiet her 2-year-old daughter Makanaka's pangs with a dish of tiny, boiled wild leaves.
Maidei Kunaka grinds the animal feed she earns in exchange for her labor on a nearby ostrich farm — an unappetizing amalgam of wheat, soy bean, sand and what she calls "green stuff" — to nourish her three children.
"It's not tasty, but we at least have something in our stomachs," she said.
Villagers around here date the onset of Zimbabwe's decline to the year 2000. It was then that Mugabe first felt the sting of political defeat, when a referendum that would have given him greater executive powers was defeated.
He took his vengeance, unleashing veterans of Zimbabwe's liberation war and gangs of youth to invade and occupy highly mechanized, white-owned commercial farms that were then the country's largest employer and an engine of export earnings. In time, thousands of farms were taken over. Farm workers and their families — about 1 million people altogether — lost their jobs and homes, according to a 2008 study by Zimbabwean economists for the United Nations Development Program.
Land redistribution often turned into a land grab by the political elite, and frequently poor farmers who received land did not get necessary support. The annual harvest of corn, the main staple food, has fallen to about a third of its previous levels, the Development Program reported.
The narrow roads that threaded this part of Mashonaland used to be lined with beautifully tended farms, residents say. Now, much of the land is overgrown with grasses. Trees sprout in the fields.
In Nzvere, a group of scrawny men sat under a Musasa tree, rolling cigarettes in bits of newspaper and chewing over the central fact of life in rural Zimbabwe: It is impossible to make a living as a farmer anymore.
In the 1990s, these men said, they harvested a cornucopia of vegetables on their small farms and sold the surplus in Harare. Now their land doesn't yield nearly as much. With the formerly white-owned, large-scale farms no longer productive, the economies of scale that kept prices low for hybrid seed and fertilizer are gone. These small farmers cannot afford the higher prices.
The dollars and cents of farming simply do not add up, they said. The government monopolizes the buying and selling of corn through the Grain Marketing Board. With inflation running officially at hundreds of millions of percent, anything the board pays them is worthless by the time they get it out of the bank.
The farm redistribution has done them no good, they said, instead benefiting those who helped the governing party grab the land. Even when food aid has come, only those in the governing party hierarchy have gotten any, the farmers said.
So they have become scavengers, living off the land and surviving on field mice and wild fruit, white ants and black beetles.
The story is much the same in Jirira. Hacha fruit has mostly sustained the villagers, but soon the season will be over. And then what? "Only God knows what will happen," Mapisa said.
The suffering is not limited to the countryside.
This month, the Mavambo Trust, a small charitable group that works in a suburb of Harare, had its Christmas party, with a lavish feast of cornmeal porridge, chicken, vegetables and soft drinks. It was ample for 250 children, but more than 500 showed up. As word spread, famished children arrived early in the morning to wait by the steaming, fragrant pots of food. "So many came we couldn't even shut the gates," said Sister Michael Chiroodza, a Catholic nun.
Mavambo also runs a daily lunchtime feeding program for children on the grounds of a Catholic church. One recent afternoon, Annah Chakaka drifted into the church courtyard with her orphaned grandsons, Bhekimuzi, 13, and Bekezela, 10. They had come to beg for cornmeal to take home.
The boys, their handsome faces chiseled by hunger, said they do little now but help their grandmother with chores — fetching water, washing clothes, sweeping the floor. That, and hunting for food. They usually walk three miles to a muhacha tree to collect its hacha fruit.
But on this morning, Chakaka said it had been difficult to wake the boys. They just lay there, too weak to get up. "Today we were just too hungry to look for wild fruit," she said.
They drifted from the church's courtyard as they had come, empty-handed.

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Living with the U.S. airline bag fee
By Susan Stellin
Tuesday, December 23, 2008
Americans seem to be enamored of change these days. And despite the cries of protests when airlines started charging for checked luggage, it seems baggage fees are a change we can live with after all.
For business travelers, especially, the fees have been less of a headache than many expected.
"Business travelers tend to be among those that are more likely to qualify for exemptions, either through premium status or traveling on a full-fare ticket," said Tim Smith, a spokesman for American Airlines, who added that the new policy has caused few bumps.
"By all accounts it's gone smoother than we anticipated," he said. "Our biggest concern was that we might see people trying to take things that were inappropriate as carry-ons, but it hasn't been a big problem."
About half of American's domestic passengers check luggage. But the average number of checked items has fallen from 1.2 per customer to less than one bag, mostly due to fewer people checking two bags, Smith said.
Luggage fees have settled at around $15 for the first checked bag and $25 for the second one, each way.
Most airlines waive their luggage fees for elite frequent fliers, passengers in first or business class, customers who purchase full-fare economy tickets and those traveling on government or military fares.
In addition, Continental gives customers who use its co-branded Chase credit and debit cards one free checked bag, and that benefit is extended to anyone listed in the same reservation as the card holder who checks in at the same time.
Other airlines offer discounts to passengers who pay their luggage fees online: Spirit Airlines gives $10 off the first checked bag to those who prepay on its Web site, while United is offering a 20 percent discount on its first bag fee to customers who pay online through Jan. 31, 2009.
So far, Alaska Airlines, JetBlue and Virgin America are among the holdouts that still allow passengers one free checked bag, while Southwest still allows two free checked items.
But passengers who do not fall into any of the privileged categories can still avoid fees. How?
Travel light.
As obvious as it sounds, traveling light — the old-fashioned obsession of many a frequent flier to reduce frustration — can reduce fees as well. Some frequent fliers have gotten packing light down to a science.
"I had a trip to Germany and I was very proud of myself because I was able to do it with just a carry-on," said Brian Lynch, who works for a manufacturer based in Elmsford, New York
Since he has elite status, Lynch's packing light has nothing to do with fees, but with fear. In 2004, his checked luggage was lost 17 times.
"I applied to the Guinness Book of World Records," he said. "But I didn't get it because until I recognized that this was an amusing pattern I didn't save any of the receipts."
Although he always got his luggage back, he became a convert to the carry-on-only credo.
Like many of his breed, he dreaded that the new luggage charges would cause cabin chaos but he hasn't experienced that problem.
"Maybe the airlines have just insulated their best customers," he said.
Perhaps not all their best customers. Nick Pandher, who works in sales for a technology company near Los Angeles, disagrees.
"The overheads are really crowded," he said. "I've seen many flights where they're ready to close the door but they have to deal with bags."
Pandher said he travels with only a carry-on, packing half the clothes he needs and relying on laundry services to get through longer trips.
He also avoids checking the demonstration kit he takes to client meetings, opting to ship it rather than dealing with the airport hassle and airline fees — which can be $100 or more extra for an oversize or overweight bag.
"We just use FedEx now," he said. "It's $200 but we don't have to worry about it getting there or schlepping it through the airport."
Indeed, the slow handling of checked luggage seems to be more of a deterrent than the fees, which most business travelers can put on their expense accounts anyway.
"If they're going to charge people to check baggage, they need to guarantee some kind of timeliness," Pandher said.
Another frustration for passengers is increased scrutiny of the number and size of carry-on bags.
Brian Warner and his wife were passing through security at San Francisco International Airport in November when an employee — who was not wearing an airline or Transportation Security Administration uniform — asked his wife to prove her rolling suitcase was within the size limit by placing it in a metal template.
"It had inches to spare," Warner said. "It was mildly annoying."
Although he and his wife would be exempt from baggage charges because of their elite status and would sometimes prefer to check luggage, they generally don't, as a result of having waited 45 minutes at the baggage carousel in Seattle.
"We've traveled as long as a month just with carry-ons," he said. "We'll go to those lengths just to avoid checking because of those nightmares."
Warner said he has also seen more jockeying for carry-on space, an observation that Corey Caldwell, a spokeswoman for the Association of Flight Attendants, confirmed.
"We are hearing anecdotally from our flight attendants that there are more bags coming into the cabin with the new fees," she said. "It's definitely an issue. Flight attendants have to work harder to make sure that they fit in the overhead bins."

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Forest plan in Brazil bears the traces of an activist's vision
By Alexei Barrionuevo
Monday, December 22, 2008
RIO DE JANEIRO: Twenty years ago, a Brazilian environmental activist and rubber tapper was shot to death at his home in Acre State by ranchers opposed to his efforts to save the Amazon rain forest.
After his death at age 44, Francisco Alves Mendes, better known as Chico, became a martyr for a concept that is only now gaining mainstream support here: that the value of a standing forest could be more than the value of a forest burned and logged in the name of development.
This month, Brazil took what environmentalists hope will be a big step forward in realizing Mendes's vision. The government of President Luiz Inácio Lula da Silva introduced ambitious targets for reducing deforestation and carbon dioxide emissions in a nation that is one of the world's top emitters of this heat-trapping gas.
The plan promises to make Brazil a more influential player in global climate-change discussions, helping to push the United States and the European Union to agree to emissions cuts and head off the adverse effects of climate change. It could also encourage more pledges from wealthy countries seeking to essentially pay Brazil to preserve the forest for the good of all humanity.
But some environmentalists question whether the new targets, which would reduce Brazilian deforestation by 72 percent by 2017, are achievable in a country that has shown few signs of adjusting its development model as a major food provider to the world, especially in the midst of a global economic crisis.
To achieve the first phase of planned cuts, Brazil would have to reduce deforestation next year by 20 percent, to less than 4,000 square miles. That would be the lowest amount per year ever recorded in Brazil, said Paulo Adario, the Amazon campaign director for Greenpeace in Brazil.
Brazil's economy is centered on the export of agricultural products, like soybeans and beef, and commodities like iron ore.
"The Brazilian model is to be the food supplier to the world and a big supplier of ethanol," Adario said. "The economy will continue to move in the same basic direction. There is no magic in Brazil."
Up until now, Brazil's economic choices have driven much of the deforestation in the Amazon, he said. In the late 1960s and the 1970s, the military government encouraged landless families to settle in the region. Road-building, land speculators and ranchers followed, and the forests fell at a quickening pace.
The burning and decomposition of trees produce carbon dioxide, a greenhouse gas.
Mendes organized tappers to confront crews and flew abroad to confront lenders paying for roads. His efforts to stop logging in an area planned for a forest reserve led to his death. Since his killing, on Dec. 22, 1988, more than 20 reserves have been created, protecting more than eight million acres.
Mendes was an early advocate of the idea that people who live in the forest could create livelihoods from sustainable forest resources, rather than the one-time economic benefit of cutting down trees. Carbon financing, the compensation of forest dwellers for pursuing sustainable industries, would provide an added incentive, which is vital given the uncertain markets for natural rubber and other non-timber forest products.
"The notion that we in the north will help pay for that climate service is an important development and represents the mainstreaming of the concept that Chico Mendes and those like him were pioneers in creating," said Richard Moss, the head of climate change programs at the World Wildlife Fund in Washington.
The killings of Mendes and of Sister Dorothy Stang, a 73-year-old Catholic nun who was gunned down in 2005 for speaking out against logging in the Amazon, ratcheted up international pressure on Brazil to find ways to limit forest clearing without sacrificing development.
"Brazil was always on the defensive when it came to the question of climate change," said Carlos Minc, Brazil's environment minister. "And now it has completely changed, passing a bolder plan than India and China."
Minc said the plan would help meet a demand of some of the more developed countries, including the United States, which has said it would not agree to firm emissions targets until less-developed countries that produce significant amounts of greenhouse gases do the same.
Deforestation produces more than a fifth of human-generated carbon dioxide by some estimates. Some 75 percent of Brazil's carbon dioxide emissions come from deforestation, Minc said.
Brazil's plan would sharply slice those emissions, reducing them by some 4.8 billion tons by 2018. Some environmentalists contend that deals involving compensation for forest protection could weaken climate agreements in many ways. They also say the plan leaves the most difficult targets to the government that will follow da Silva's. His term ends in 2010.
Still, it is viewed by some scientists and climate experts as major step forward. "For the first time we have out in the open very clear goals for reduction in deforestation," said Walter Vergara, the lead climatologist for Latin America at the World Bank.
The global recession could end up being a godsend by lowering demand for agricultural goods.
But it could also slow the flow of technology needed to make industries more efficient and limit pledges from foreign governments like Norway, Sweden and Germany, whose payments would help preserve the forest. So far, those countries have not suggested that they would reduce their contributions, Minc said.
"The global recession and the climate crisis don't necessarily have to be adversaries, with one competing for the resources of the other," Minc said.

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U.S. environmental groups sue over mining rule
The Associated Press
Monday, December 22, 2008
WASHINGTON: Environmentalists sued the Bush administration on Monday, trying to stop the Environmental Protection Agency from changing a U.S. rule they say keeps mining waste from entering mountain streams.
"The notion that coal mining companies can dump their wastes in streams without degrading them is a fantasy that the Bush administration is now trying to write into law," said Judith Petersen of Kentucky Waterways Alliance, one of the groups that sued in U.S. District Court in Washington.
At issue is mountaintop mining, in which forests are clear cut and holes are drilled to blast apart rock. Massive machines then scoop coal from the exposed seams. The rock and dirt left behind is dumped into adjacent valleys, changing the natural shape of the earth, lowering the height of the mountain and covering streams.
Current policy says land within 100 feet (30 meters) of a stream cannot be disturbed by mining unless a company can prove it will not affect the water's quality and quantity. The new regulation would allow mining that would alter a stream's flow as long as any damage to the environment is repaired later.
Opponents want a federal judge to overturn or delay the new regulation.
"This is among the eleventh hour land mines planted by the Bush administration that an EPA headed by Lisa Jackson stands to inherit," Earthjustice lawyer Jennifer Chavez said, referring to President-elect Barack Obama's pick to head the agency. "We are doing what we can to make it easier for the incoming administration to undo the damage wrought by the last one and restore our nation's commitment to protecting the waters and summits" of the Appalachian mountains.
The U.S. Office of Surface Mining said on Dec. 12 that where excess soil, coal remnants and other material can be disposed of has received conflicting interpretations by courts in recent years.
"We believe that the new rule is consistent with a key purpose of the Surface Mining Law, which is to strike a balance between environmental protection and ensuring responsible production of the coal essential to the nation's energy supply," said C. Stephen Allred, assistant secretary of the Interior, Land and Minerals Management, in announcing the change.
Mining industry groups, though, argue the rule change has been in the works for years, and would change very little over how mountaintop removal mining is done.
"There's been an enormous amount of overreaction to this," West Virginia Coal Association President Bill Raney said Monday. "They're trying to make it something that it truly is not."
EPA spokesman Jonathan Shradar said the agency "approved the new rule because it strengthens the environmental review required for mining activities and reduces potential adverse effects to water quality and fish and wildlife resources."
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On the Net:
EPA "stream buffer zone" regulation: http://www.epa.gov/EPA-IMPACT/2008/December/Day-12/i29150.htm
Environmental groups lawsuit: http://www.earthjustice.org/library/legal_docs/sbz-rule-final-complaint-12-1
9.pdf

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Seattle sees most snow in a decade
By William Yardley
Monday, December 22, 2008
SEATTLE: December means darkness in this Northwest city. Combine the clouds with the rain and with the fact that Seattle receives less winter daylight than most other cities in the United States and the sum of it all can seem like concentrated gloom.
Yet on Sunday, the first full day of winter, much of the city was instead a bright white blur. Snow fell, recoating the streets with as much as eight fresh inches after a week of wintry weather that has closed schools, canceled flights and defied expectations. And more snow is in the forecast.
"We've got to write this one down," said Kate Allyn, a 40-year resident, standing at the top of Phinney Ridge, a neighborhood in north Seattle that, like many others in this hilly city, became a miniature mountain playground over the weekend. "We're used to 45 degrees and drizzle. We usually get our snow by driving 45 minutes to the mountains."
It has been at least a decade since Seattle has seen such snow, and temperatures in the teens have been in record territory. On Sunday, children as well as people in their 40s zoomed down slopes on sleds and snowboards.
"Nobody's panicking," said Marty Spiegel of Greenwood True Value Hardware. "Though there was some disappointment that we sold out of sleds."
Of course, in a city of transplants, there was no shortage of seen-it-all folks from snowier climes who mocked how snow brings Seattle to a standstill. A favorite punch line was the Seattle Public Schools, which canceled classes Wednesday on the mere threat of more snow. None fell that day.
And not every image was a postcard. Two charter buses carrying about 80 students slid through a barrier above Interstate 5 on Friday, coming dangerously close to crashing down on the highway. No one was injured.
The precision of the forecasting was a popular topic. Clifford Mass, a professor of atmospheric sciences at the University of Washington, fielded hundreds of queries on his weather blog.
"Several of you commented about the nature of the snow last night," Mass wrote Sunday morning. "Most of you are used to the large, dendritic crystals that fall when temperatures are near freezing." He added, "Last night, you got to enjoy the type of snow they get in colder climates."
Elsewhere in the nation, weekend storms knocked out power to thousands of customers and created hazardous conditions for holiday travelers. Gusty winds in the Midwest, where wind chills dipped to minus 30, produced whiteouts that contributed to at least two vehicle pileups, The Associated Press reported, and blizzard warnings were issued for parts of Maine.









Électricité de France wins approval to buy British Energy
Bloomberg News
Monday, December 22, 2008
BRUSSELS: Électricité de France, the world's biggest operator of nuclear power plants, won conditional approval Monday from the European Commission to buy British Energy Group for £12.5 billion, allowing the French utility to become the largest power producer in Britain.
Approval of the $18.5 billion deal is dependent on EDF's agreement to sell two nonnuclear power plants in Britain, electricity in the British wholesale market and land on which a new reactor can be built, the commission, the antitrust regulator of the 27-nation European Union, said in a statement.
The French state-controlled utility agreed in September to buy British Energy, the largest electricity producer in Britain, and gain control of eight atomic stations. The purchase would add commercial clients to the five million households supplied by EDF's British unit and allow the company to build at least four new-generation Evolutionary Power Reactors in Britain.
The British prime minister, Gordon Brown, is seeking to expand nuclear power to replace aging generators, cut energy imports and lower carbon dioxide output. Britain this year passed a law requiring that by 2050, CO2 emissions must be reduced 80 percent from 1990 levels.
The terms of the EU endorsement "will make the deal more expensive for EDF because it will get less existing generating capacity, but this was to be expected," Alicia Carrasco, an analyst at Standard & Poor's, said by telephone. "When EDF decided to buy British Energy it was looking for future growth in nuclear power in the U.K." Some 77 percent of French electricity is generated by EDF's 58 reactors in the country.
"Although the combined entity would not have extremely high market shares, the commission found during its investigation that the transaction, as initially notified, would have been likely to raise serious competition concerns in four main areas," the commission said.
The decision is conditional upon EDF's commitment to divest the 790-megawatt gas-fired Sutton Bridge plant, owned by EDF Energy, and another at Eggborough, a 1,960-megawatt coal-fired station owned by British Energy. Bondholders have an option they can exercise next year, which they got as part of a 2002 deal that prevented British Energy from collapsing.
The EU was concerned that the merged company might "withdraw electricity supplies from the market in order to increase price," according to the statement. That "would have led to a reduction of liquidity which could have had negative effects in both the wholesale and the retail supply markets."
EDF confirmed plans to sell the two power stations and 5 to 10 terawatt-hours of electricity a year from 2012 to 2015.
"The European Commission's decision marks a major step toward the conclusion of the acquisition of British Energy," EDF said, adding that it expected the takeover to become effective "in early January 2009."
The EU also asked EDF to unconditionally divest a site potentially suitable for building a new nuclear station located at either Dungeness or Heysham in Britain, and to end one of the merged entity's three grid-connection agreements with National Grid at Hinkley Point in southwest England.
The commission expressed concern that there were a "limited number of sites" for new atomic generators and "high concentration" in ownership. "British Energy owns many of the sites likely to be suitable" for new nuclear plants while EDF owns critical land at two such locations, it said.

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Russia seeks a leading role among exporters of natural gas
Bloomberg News
Monday, December 22, 2008
MOSCOW: Prime Minister Vladimir Putin will host energy ministers from the world's largest exporters of natural gas on Tuesday in Moscow as Russia seeks to take a leading role among producers of the fuel.
Putin, who turned Gazprom into a global energy company during his presidency, is scheduled to open the Gas Exporting Countries Forum. The forum is expected to agree on a charter transforming it from a loose, consultative body into a formal organization with a permanent secretariat.
The annual meeting was delayed several times amid reports that member nations disagreed over the future role of the group. Western consumer countries have warned against the formation of a cartel modeled after the Organization of Petroleum Exporting Countries. The Gas Forum has 14 members, including Iran, Algeria and Qatar, which are also members of OPEC.
"Maybe it's a bright image, but the mechanisms of OPEC can't be used on the gas market," Alexander Medvedev, Gazprom's chief of exports, said last week. "In this case, it's not necessary to make comparisons."
Russia supplies a quarter of European gas through pipelines. As demand grows for liquefied natural gas - gas chilled to a liquid for transport by tanker - a global market is forming that reduces the importance of pipelines and encourages spot trades.
Gazprom plans to start loading its first LNG cargo in February, opening up new markets for Russian gas in Japan, South Korea and North America. Gazprom, a state-run company, formed a "gas troika" in October with Qatar and Iran for joint exploration and production projects. Together, the three countries hold more than half of the world's gas reserves.
Four cities are vying to be the home of the Gas Forum's permanent secretariat, Medvedev said. St. Petersburg will compete with Algiers, Tehran and Doha, Qatar, he said.
The Gas Exporting Countries Forum held its first meeting in Tehran in 2001. The last ministerial meeting was held in Doha in April 2007.
During his presidency, from 2000 to May this year, Putin consolidated state control over the country's oil and natural gas industry, with Gazprom as the flagship for Russia's new economic might. The company, based in Moscow, is pursuing projects from Libya and Vietnam to Alaska and Bolivia.
After oil prices started tumbling from a record in July, a Putin deputy, Igor Sechin, began pushing for closer coordination with OPEC, of which Russia is not a member.GDF seeks pipeline stake
Gazprom said Monday that GDF Suez, the French utility, had expressed interest in taking a minority stake in the Nord Stream natural gas pipeline, which is to run from Russia to Germany, Reuters reported from Moscow.
Gazprom said that such proposals had been made while its chief executive, Alexei Miller, met with GDF Suez executives on Monday in Paris, where GDF is based. GDF Suez plans to buy as much as 2.5 billion cubic meters, or 88 billion cubic feet, of natural gas per year from Nord Stream, which is being built by Gazprom, the German companies BASF and E.ON and the Dutch company Gasunie.

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Australia General Motors unit to build small car






Stella McCartney sets up shop at Paris's Palais Royal
By Jessica Michault
Monday, December 22, 2008
PARIS: The shops of the Jardins du Palais Royal got a new neighbor this month. Now the antique stores, art galleries and toy shops will have a fashion maverick and rock royalty among the owners. The designer Stella McCartney has opened her first Paris flagship store in one of the cobblestone galleries that surround the tranquil tree-lined square.
Although located in the heart of the city, the Palais Royal, built by Cardinal Richelieu in the early 17th century, is not a luxury destination in the way that Avenue Montaigne or Rue Saint Honoré are for customers of high-end fashion. And that is why McCartney decided it was the right spot for her seven-year-old brand.
"We are more of a brand to be discovered by people and I think Palais Royal has just the right balance" of being known to Parisians and also getting "a little tourist action as well," said the designer as she gazed out of the windows of her new store.
Having just arrived from Tokyo where she opened another flagship store in the trendy Aoyama neighborhood, McCartney said she was feeling a bit overwhelmed. In addition of the Paris and Tokyo shops, she now has flagship stores in New York and London
The inside of the Paris store has a very different look than that of McCartney's other locations. There is a cool, modern feel with an undercurrent of femininity, but nothing is overtly girly. The light Japanese ash wood walls, cut in a book-matching style, catch what little light there is in the receded Palais Royal galleries and warm up the space. The tactile ceramic tiles used for display counters were designed by McCartney and three sculptural brass columns of shimmering metal that the designer calls "rain units" are used as clothing racks.
"I always like to keep little secret surprises and hide them in the changing rooms," said McCartney. This means galloping horses, a lifelong love of the designer, sculpted from layers of recycled cardboard, or the names of her kids carved into the paneling, which is reminiscent of the Shel Silverstein book "The Giving Tree."
The opening of two new stores in a time of economic crisis could be a worry for most brands. But McCartney is hopeful that in the hard times to come the added value of buying from a luxury company that is environmentally and animal friendly will give customers another reason to choose her brand.
The Stella McCartney store is situated near the end of the Palais Royal galleries at number 114-121 Galerie de Valois.

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From a hinterland, Hmong forge a home
By Simon Romero
Monday, December 22, 2008
CACAO, French Guiana: Ly Dao Ly gazed at the jungle beyond his groves of tropical fruit trees, rambutan and cupuaçu, on a recent afternoon. Under the equatorial sun, his thoughts drifted to the setting for the secret war in Southeast Asia that forced him to flee to this remote French outpost decades ago.
"Sometimes I imagine that I am seeing the mountains of Laos in those green hills," said Ly, 50, a farmer and baker who was born into the Hmong, the mountain tribe that waged a CIA-backed guerrilla war against the Communist Pathet Lao in Laos in the 1960s and 1970s.
Made into cold-war castoffs when the Communists won that proxy war in 1975, more than 100,000 Hmong (pronounced MONG) refugees were resettled around the world in places like St. Paul; Fresno, California; Thailand; France; Australia; and — quietly, but successfully — this former prison colony on South America's northeastern hump.
Since arriving more than 30 years ago, the Hmong, who account for only about 1.5 percent of French Guiana's 210,000 people, have thrived. Once penniless, the refugees and their families produce up to 80 percent of the fruit and vegetables sold in this overseas French department, which must import other food at a high cost from mainland France or Brazil.
"If it were not for the Hmong, we joke that we would starve in this strange place," said Mariangela Bragance, a former municipal council member for Kourou, a nearby city kept afloat by the satellite-launching activities at the Guiana Space Center.
Long viewed as outcasts in Laos and other parts of Southeast Asia, the Hmong here are known for their success, on display in their large homes with new Peugeot and Toyota pickup trucks parked outside. Their nearly homogenous enclaves in Cacao and two other villages, Javouhey and Régina, are unlike anywhere else on this continent.
Walking Cacao's dirt roads one hears mostly Hmong, interspersed with a bit of French. Some women wear sarongs. Merchants sell tapestries depicting the saga that led them to this jungle, after treks in the mid-1970s to Thai refugee camps from their mountain homeland in Laos, a former French colony.
"Our philosophy was to use our human capacity to support ourselves," said Ly Chao, 62, a Hmong agronomist who was one of the founders of the settlements here in the 1970s.
France gambled that the Hmong refugees, some of whom were living in French cities, could successfully develop a hinterland that had repelled earlier colonization efforts. "The gamble worked because after all the years of war we were ready to do something else," said Ly, the agronomist. "We were even ready to work the soil."
The first Hmong arrived from France in 1977 and were greeted with protests from the Creoles, an ethnic group descended from African slaves, who chafed at what was viewed as preferential treatment for a new ethnic group in an impoverished area. French authorities initially gave each Hmong a few dozen francs a day on which to survive.
The settlers pooled those payments to buy fertilizer and tractors. Slowly, after years of labor, the Hmong became self-sufficient. They now grow large quantities of previously scarce vegetables, like lettuce, and tropical varieties of fruit like cupuaçu, which is oblong, has a white pulp and is found in the Amazon basin.
Eventually, the tensions subsided. "The Hmong largely kept to themselves and were allowed to acculturate on their own terms," said Patrick Clarkin, an anthropologist at the University of Massachusetts, Boston, who studies the Hmong of French Guiana.
While the Hmong maintain ties with relatives abroad, they emphasize their own place in the diaspora. For instance, they refer to Hmong in the United States as Vang Pao Hmong, a nod to the influence wielded there by Vang Pao, 79, the exiled general in California who is facing charges in the United States of plotting to overthrow the Laotian government.
And academic studies have shown the Hmong here to have more robust physical health and less pessimism about their circumstances than their brethren in the United States, where some Hmong communities have had difficulty adapting to cities or suburbs and have been plagued by suicides and health problems.
"We miss Laos, of course, and I have a brother who says it is pleasant to live in Omaha," said Ly May Ha, 50, Ly Dao Ly's wife. Together they bake croissants and baguettes for sale in Cacao as the sun rises over the village each day. Later, they tend their orchards and pens filled with peccaries, a wild pig-like animal that is a delicacy here.
"Our life is in this place," she said, "where we are free to be ourselves."
The rhythms of existence here seem far removed from the cities where many Hmong have settled in the United States or France. On the weekends, young Hmong play pétanque, a game that, like bocce, consists of pitching metal balls at a target. Older men, sipping bottles of Heineken, boast of jungle hunts for peccaries and tapirs.
As in any small village, some younger Hmong complain of boredom and isolation. Hmong Lee, 40, who moved to mainland France for 10 years before returning, decided to settle for something between the farm founded by his parents and the bustle of a European city. He now works at a furniture store in the capital, Cayenne.
"This isn't Paris," he said, speaking about this obscure corner of South America. "But then again, who wants Paris when the sun shines here and we're free to be Hmong?"




Parents of China quake victims file lawsuit
By Edward Wong
Monday, December 22, 2008
DEYANG, China: A group of parents whose children were among the 127 killed in the collapse of an elementary school during the May earthquake that devastated western China have confirmed that they filed a lawsuit against government officials and a construction contractor. The lawsuit is the first filed by grieving and angry parents who say shoddy construction cost the children their lives.
Radio Free Asia reported the lawsuit in early December, but China's official news media have not mentioned it. This weekend, the parents confirmed the filing in telephone interviews. They said the court has yet to tell them whether it will hear the case.
The lawsuit was filed on Dec. 1 in a court here in the city of Deyang, in Sichuan Province, the region hit hardest by the May 12 earthquake, which left 88,000 people dead or missing. Up to 10,000 schoolchildren were killed as some 7,000 classrooms and dormitory rooms collapsed across the quake zone, according to government estimates.
In the following weeks, parents took to the streets in towns across Sichuan to demand that local officials investigate the construction of the schools.
In some cases, crying parents were taken away by riot police officers. Later in the summer, local governments promised compensation payments to parents if they signed agreements stating they would no longer demand investigations or complain about school construction.
The parents who filed the lawsuit on Dec. 1 are the fathers and mothers of children who died in the collapse of No. 2 Primary School in the town of Fuxin, where at least 127 students were killed. Many of the parents signed the compensation agreements, but some decided in the fall to go ahead with the lawsuit. The lawsuit names as defendants the town government of Fuxin; the education department of the nearby city of Mianzhu; the school principal; and the company that built the school.
Chen Xuefang, one of the plaintiffs, said that the parents were demanding compensation equivalent to $19,000 per child. Over the summer, the local government had offered parents the equivalent of $8,800 in cash and several thousand more dollars in postretirement pension payments if they agreed to drop the issue of the collapsed schools.
Zheng Rongqiong, whose 10-year-old daughter was among those killed at Fuxin No. 2, said that parents of 57 children were taking part in the lawsuit.
Officials from the city of Deyang, which oversees the administration of Mianzhu, have been pressing the parents to drop the lawsuit, she said, but the parents have refused.
Some parents have declined to join the lawsuit because they believe there is little or no chance of winning, and money spent on lawyers will be wasted, said Zheng, 35. The plaintiffs have contributed nearly $150 each to help pay for the travel expenses of a lawyer from Shanghai who has agreed to represent them.
Over the summer, many and possibly all of the parents now involved in the lawsuit signed the local government's agreement demanding silence in exchange for compensation payments, Zheng said. Some parents expressed dissatisfaction with the outcome and said they might file a formal petition with the central government in Beijing despite having signed the agreement.
"We hope that once we win this lawsuit, it will point out all the people responsible for the deaths of our children," Zheng said.
An official at the Mianzhu Education Department said Monday that he was aware of the lawsuit, but declined to discuss it over the telephone. A woman at the offices of the town government of Fuxin said by telephone that she had no immediate response to the suit.
In legal cases that involve politically sensitive issues, judges and lawyers in China often come under great pressure from government officials to keep the cases from going forward.
One parent said a court official met with several parents on Dec. 8 to say that the court would not accept the case. But the court has yet to give a formal answer.
In similar legal action, parents in three provinces filed lawsuits this fall against dairy companies after tens of thousands of children across China fell ill and at least four died from drinking milk and baby formula tainted with a toxic chemical called melamine.
Although local officials had been involved in covering up the poisonings, judges have so far declined to hear any lawsuits. After the earthquake, the central government assigned a committee of experts to look into the school collapses, but the committee has yet to issue a final report. In September, an official from the committee, Ma Zongjin, said at a news conference in Beijing that a rush to build schools during the Chinese economic boom might have led to shoddy construction that resulted in the student deaths. He said more than 1,000 schools had one of two major flaws — they were built on the earthquake fault line or they were poorly constructed.
Government officials at all levels have tried to suppress discussion of the school collapses. A documentary that asks tough questions about a school collapse in the rural town of Muyu, in northern Sichuan, has attracted intense scrutiny from the central government.
The director, Pan Jianlin, showed the film, "Who Killed Our Children?" at the Pusan International Film Festival in South Korea in late October. Afterward, he told Reuters, people contacted his relatives and friends to urge that they press him to stop his work.

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Pig that survived earthquake inspires Chinese
By Mark McDonald
Monday, December 22, 2008
HONG KONG: A pig that survived on charcoal and rainwater for 36 days while trapped under earthquake debris has been voted China's most inspirational animal for 2008, according to state media.
The 7.9-magnitude quake that struck Sichuan Province on May 12 collapsed schools, bridges, dams, houses - and a farm shed that trapped the pig. When it was finally rescued June 17, the animal was a mere slip of a thing at 50 kilograms, or 110 pounds, down from its pre-quake weight of 150 kilograms.
The farmers who owned the pig sold him for $430 to Fan Jianchuan, the owner of a private museum in the ancient town of Anren, near the city of Chengdu. Fan put the plucky survivor into a livestock exhibit at the museum and gave him a new name - Zhu Jianqiang, meaning Strong-Willed Pig. Fan also took out a 10-year life insurance policy on the pig, who became a nationwide media sensation.
Fan, a real estate developer, started his museum in 2005 to commemorate Chinese troops who fought the Japanese in World War II. But he has since added other patriotic and inspirational exhibits, including a memorial to the Sichuan earthquake victims. Among the items on display - a dusty school backpack, a stuffed green frog, a photograph of a dead child's hand still gripping a pen.
The star attraction, however, has been Strong-Willed Pig.
He was voted China's most inspirational animal in a poll on the online forum Red Net, according to the state newspaper China Daily. The other spots in the top 10 went to six dogs, a bird, a turtle and a cat. This was the second straight victory for a pig: Last year's winner was a sow that fought off a butcher trying to slaughter its "husband."
It seems, however, that Strong-Willed Pig has not handled his celebrity very well. One of his handlers, quoted by the newspaper, said the pig has become cranky, fat and lazy, unwilling even to walk around his pen or raise its snout for pictures.
The pig, the handler said, "has developed a temper that many of its fans may not want to see."

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China seeks 3.6 million quilts for quake survivors
Reuters
Monday, December 22, 2008
BEIJING: Quake survivors living in prefabricated housing in China's mountainous Sichuan province need 3.6 million quilts and the same number of cotton-padded clothes to survive the winter, state media said on Monday.
More than 80,000 people were killed in the May 12 disaster, with millions now living in resettlement sites surrounded by the rubble of their old homes and facing a colder winter than normal.
"Weather experts have forecast that temperatures in the quake-hit areas will be 0.5 degree Celsius to 1 C lower than usual. The areas are likely to get more rain, snow and frost too," the China Daily said, quoting provincial government officials.
The temperature was 4 C (39 Fahrenheit) on Monday while the temperature in the Chinese capital, Beijing, in the north, was well below freezing.
The quake damaged the homes of more than 3.5 million families in rural areas, where Spartan coal-pellet heating is the norm.
"Though many of these families have been moved to proper structures, about 530,000 of them will have to stay in prefabricated houses this winter," the newspaper said.
(Reporting by Nick Macfie)





Is Putin getting an opening to return as president?
By Clifford J. Levy
Monday, December 22, 2008
MOSCOW: The Kremlin's plan to extend the term of the Russian presidency to six years from four years received final legislative backing on Monday, but speculation over what the change meant for Vladimir Putin's future showed no signs of abating.
Both Putin, the prime minister and former president, and his protégée, President Dmitri Medvedev, have said the longer term is intended to strengthen the presidency. In recent weeks, they have both brushed aside questions about whether its real goal is to pave the way for Putin to return to the presidency relatively soon.
The speculation is that Medvedev would resign in the coming months and cede the post to Putin, who could then serve for six years.
On Monday, after the upper house of Parliament acted on the constitutional revision, the chamber's speaker, Sergei Mironov, a close Putin ally, also sought to dampen questions about the proposal.
"The fact that these changes are being carried out in the first year of a presidency and of a Parliament," Mironov said, "indicates that they are not opportunistic, not occurring because of impending elections and not aimed at specific people. They respond to a request of Russian society for the stability of government and political development."
Medvedev introduced the proposal in November, only six months after taking office. He also called for increasing the term of members of Parliament to five years from four years. Medvedev was elected president with the endorsement of Putin, who was barred by the Constitution from running for a third consecutive presidential term.
The two have been ruling as a tandem, though Putin is widely considered Russia's paramount leader.
The Kremlin pushed Medvedev's proposal assertively, and it encountered little opposition as it was approved by Parliament and regional legislatures.
Still, people in political circles have continued to debate it, in part because Medvedev introduced it so soon after taking power. The conjecture has only deepened with the financial crisis, which has touched off a wave of capital flight from the country, reversing years of strong growth when the price of oil was high.
The prime minister, rather than the president, has traditionally received the blame in Russia in times of national distress, and some analysts have said Putin would prefer not to continue in the job for that reason during the financial crisis.
"The goal of the 'amendments' special operation was to rescue the national leader from the prime minister's responsibility for the state of economy and give him a chance to dance at the new old post," Andrei Piontkovsky, a Kremlin critic, wrote on Monday in Grani.ru, an online journal.
Anti-graft laws advance
Senators passed anti-corruption laws proposed Monday by Medvedev, but some lawmakers expressed doubts that the measures would be successful after being watered down, Reuters reported from Moscow.
Corruption is widespread in Russia and many Russians mistrust the state.
The anti-corruption bill, approved earlier by the State Duma, the lower house of Parliament, was backed by 139 members of the upper house, or Federation Council. One senator voted against and two abstained.
Some senators, usually loyal to the president, said the changes offered few weapons for fighting graft.

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European security agency must end mission in Georgia
By Ellen Barry
Monday, December 22, 2008
MOSCOW: The Organization for Security and Cooperation in Europe must end its 16-year mission in Georgia early next year because it is unable to resolve a deadlock with Russia, one of its member states, over whether to treat the separatist enclaves of South Ossetia and Abkhazia as sovereign nations.
At a meeting Monday at OSCE headquarters in Vienna, Russia's envoy to the organization refused to extend the Georgia mission, which expires Dec. 31, unless members agreed that South Ossetia and Abkhazia were separate countries. Though Russia is the only one of the organization's 56 member states that has formally recognized the enclaves, the organization works by consensus.
In an interview, the Russian ambassador to the organization, Anvar Azimov, called his counterparts in the OSCE "inflexible and unconstructive" for refusing to join Russia in recognizing the enclaves.
"In my opinion, my colleagues do not want to recognize an evident fact," he said. "Sooner or later, they will understand that this is the reality. The train has gone, and the process is irreversible."
The decision prompted furious reactions from fellow diplomats and the Georgian authorities. Since 1992, the organization has operated a mission focused on the Georgian-Ossetian conflict, and its staff has grown to around 200. For years, the mission oversaw negotiations between clashing sides in South Ossetia, and it now includes 28 trained military monitors and sponsors various human rights and democracy-building programs.
Julie Finley, the U.S. envoy to the group, said the move would undermine stability throughout the Caucasus, a region where multiple ethnic conflicts risk erupting into all-out war.
"I'm fascinated by the fact that a so-called power chooses to be the only oarsman in the boat that doesn't put an oar in the water," she said. "If you're big, you're big, and you demonstrate your bigness by being constructive."
"I don't think you would find this behavior today out of the leadership of China," she added. "What are these people thinking?"
After war broke out in South Ossetia in August, the OSCE's military monitors were barred by Russian and Ossetian authorities from working inside South Ossetia. Instead, they have patrolled outside its boundaries, together with 200 unarmed civilian monitors from the European Union, often parking their conspicuously flagged vehicles in the tense space between Georgian and Ossetian checkpoints.
In an attempt to bridge the diplomatic gap, Finland proposed parallel, independent Georgian field offices in Tskhinvali, South Ossetia's capital, and Tbilisi, Georgia's capital, but Russia could not accept the linkage. Azimov said that Russia had put forward its own compromise - a three-month extension of the mandate that made it clear South Ossetia and Abkhazia were not part of Georgia - but that Western governments had rejected the idea.
Aleksi Harkonen, the Finnish ambassador to the group and head of Finland's OSCE chairmanship task force, said the closure of the mission would leave the EU - in which Russia has no voice - as the primary international body monitoring the cease-fire.
"We have told the Russians to think twice," he said, but without success. "They have a policy line where they really don't care how much they isolate themselves."
The mission will begin the closure process in January against the protests of Georgian authorities, who say an international presence is important to preventing further conflict.
"This action is just another illustration of Russia's challenge to Georgia's sovereignty and challenge to international institutions and international law and order" said Giga Bokeria, deputy foreign minister of Georgia. "They basically just don't want to have an international presence on the ground. They don't want anyone outside to monitor their activities."Russia plans arms buildup
Russia plans a huge increase in its weapons procurement for three years beginning in 2009, with 300 tanks, 14 warships and almost 50 airplanes, a senior government official said Monday, Reuters reported from Moscow.
The official, Vladislav Putilin, deputy head of the military-industrial commission, said after a cabinet meeting that the government planned to allocate 4 trillion rubles, or about $142 billion, to bankroll equipment purchases to modernize its armed forces.
The move comes after Russia's five-day war with Georgia in August. Russia won, but the conflict exposed a Soviet-style army with obsolete equipment, poorly coordinated command, outdated communications and a lack of spy drones and high-precision bombs.
Defense Minister Anatoly Serdyukov afterward touted a military overhaul - Russia's most radical since the end of World War II - aiming to turn the army into a smaller, but more mobile and better-equipped force.






Toyota expects first operating loss in 70 years
By Martin Fackler
Monday, December 22, 2008
TOKYO: Toyota Motor announced Monday that it expected its first loss in 70 years in its core vehicle-making business, underscoring how pain from the current economic crisis was spreading across the global auto industry.
Analysts said the fact that Toyota was stumbling, even with its stable of fuel-efficient models, pointed to still harder times ahead for other automakers, especially those like the Big Three in the United States, which have depended on the gas guzzlers that have fallen out of favor.
Toyota also did not project the number of cars it expected to sell in the new year, as it normally does in December, which analysts said further highlighted the industry's uncertain future.
With about $18.5 billion in cash and relatively little debt, Toyota is still in far better shape to weather the downturn than the U.S. automakers General Motors and Chrysler, which received $17.4 billion in emergency loans Friday from Washington.
Still, analysts said Toyota's downward revision, its second in two months, underscored the way the worst financial crisis since the Great Depression was threatening even the healthiest auto companies. While GM, Ford Motor and Chrysler have been hit particularly hard, their global counterparts in Asia, Europe and the United States will all start reporting losses as well, analysts said.
Analysts said they expected next year to be even more painful for the industry than this one, amid forecasts that the global economy would continue to slide until at least the summer. This could cause a shakeout, driving cash-strapped weaker companies into the arms of a smaller number of bigger, richer players.
"It is just a matter of time before all major automakers are losing money," said Koji Endo, an auto analyst in Tokyo for Credit Suisse Securities. "And things will just get worse next year, when companies start losing money for the second consecutive year."
On Monday, Toyota said it expected a loss during the current fiscal year of ¥150 billion, or $1.66 billion, from its auto operations. Toyota said that would be its first operating loss since 1938, a year after the company was founded.
A loss this year would also be a huge reversal from the ¥2.3 trillion in operating profit Toyota earned in the past fiscal year.
Toyota, the Japanese auto giant that has been neck and neck with GM for the status of the largest vehicle maker in the world, said it still expected to eke out a narrow net profit of ¥50 billion for its group, which also includes the automaker Daihatsu and the truck maker Hino. Toyota did not specify what accounted for the net profit, but it could be because of investments not included in the core business performance reflected in operating income.
Toyota, which just a few months ago seemed unstoppable after eight consecutive years of record profits, said it had suffered from plunging vehicle sales, not only in North America but even in once-promising emerging markets, which many had hoped would prove immune to the U.S. malaise.
"The change in the world economy is of a magnitude that comes once every hundred years," Toyota's president, Katsuaki Watanabe, said at a news conference in Nagoya, Japan, near the company's Toyota City headquarters. "We are facing an unprecedented emergency."
Watanabe said the company would respond by suspending investment in new plants, including the delay of a new factory in Mississippi announced last week, and by moving some production lines to single shifts. The company has even unplugged electric hand dryers at some offices in an effort to cut costs.
In Japan, this could lead to a realignment of the eight automakers in the country. They are globally competitive but have begun feeling increasing pain from the global downturn.
On Monday it was becoming clearer that automakers worldwide were sharing the pain.
The two South Korea carmaking affiliates, Hyundai Motor and Kia Motors cut their joint 2008 sales forecast by 12.5 percent and said they would freeze pay for managers amid slumping vehicle demand. Separately, Ssangyong Motor, also of South Korea, said it might not be able to meet its December payroll on time.
Europe has not been immune to the pain.
Last week, the Italian automaker Fiat extended its program of temporary plant closures in Italy by two months into February. Fiat acknowledged this month that its car business needed a partner to survive the economic crisis.
PSA Peugeot Citroën, the top French carmaker, has temporarily halted production in dozens of factories across the country in recent weeks.
Autos sold in Europe by American carmakers are slumping more than their rivals, as consumers fear their manufacturers might not survive. In November, the European sales of GM fell 39 percent and those of Chrysler fell 56 percent.
For Japanese carmakers, the biggest sales drops have come in the United States, traditionally the Japanese companies' most profitable market. After years of increasing market share at the Big Three's expense, Japanese companies are experiencing sharply lower sales. In November, Toyota's U.S. sales dropped 33.9 percent and Honda Motor's 31.6 percent, faring just slightly better than GM, which had a 41 percent decline.
Sales are also down in their home market, both because of the crisis and longer-term demographics in rapidly aging Japan. Last week, an industry group said that new car sales in Japan would fall below five million vehicles next year for the first time in 31 years.
Japanese automakers have responded by cutting global production by 2.2 million vehicles during the current fiscal year. They have also cut profit forecasts, laid off workers and delayed investment in new factories.
Last week Honda, Japan's second-largest carmaker, cut its profit forecast for the current fiscal year by two-thirds. The company's president, Takeo Fukui, spoke of an "abrupt change" in the conditions facing the global industry, a "severe business environment" and a "sharp sales downturn" since mid-September.
The auto slowdown has worsened an increasingly nasty recession in Japan's export-dependent economy, the world's largest after the United States. On Monday, the Finance Ministry in Japan said exports had plunged 26.7 percent in November, the largest drop in 28 years, to push the nation into a rare trade deficit for the month.
The financial turmoil has also hurt Japanese carmakers by driving up the value of the yen, which has jumped some 25 percent since last summer. A higher yen makes Japanese autos and other products more expensive overseas.
On Monday, Toyota cited the currency as one reason for revising its forecast. Analysts say Toyota has been seen as the most vulnerable of Japan's big automakers because it had been investing heavily in new products, including a full-sized pickup truck for the U.S. market, just when auto sales started to fall.
"They've caught the same cold that Detroit has caught," said Christopher Richter, a senior analyst in Tokyo at Calyon Capital Markets Asia. "Everything is going wrong for Toyota this year."
On Monday, Toyota also lowered its worldwide vehicle sales forecast for the current fiscal year, which ends March 31, to 7.54 million vehicles, far below the 8.9 million vehicles it sold last year. It said the decline would be particularly large in the United States, where it expected to sell 2.17 million vehicles this fiscal year, down from 2.96 million last year.

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U.S. shares turn lower amid quiet trading
Woolworths closing all of its stores

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In Madoff's wake, scrutiny of accounting firms
By Michael J. de la Merced
Monday, December 22, 2008
As more details unfurl in the Bernard Madoff fraud case, so do the lawsuits. And the big accounting firms, which oversaw many of the feeder funds that funneled billions of dollars into what prosecutors describe as the largest Ponzi scheme ever perpetrated, are likely to be among the defendants.
Though Bernard L. Madoff Investment Securities itself was audited by small firms, questions are arising over how major firms like PricewaterhouseCoopers and KPMG overlooked several red flags related to the operations over a number of years. The big accounting firms are likely to face queries about why they gave their seal of accounting to the astoundingly steady positive returns booked by a fund manager whose investment strategy was nearly completely opaque.
One investor in a feeder fund, New York Law School, has already sued BDO Seidman, the auditor of one of its money managers, arguing that the firm failed to notice warning signs related to the $50 billion scandal.
The district attorney for Rockland County, New York, Thomas Zugibe, has also begun inquiries into Friehling & Horowitz, the three-person accounting firm that provided services to Madoff's firm. Many have asked how a company as small as Friehling — a three-employee firm based in New City, New York, that occupies a 13-foot-by-18-foot storefront space in an office plaza — could have handled an operation as large as Bernard L. Madoff Investment Securities. Friehling & Horowitz is also the subject of a preliminary ethics investigation by the American Institute of Certified Public Accountants started after the scandal broke.
Another small accounting firm, Sosnik Bell, handled paperwork for investors in Madoff's firm, according to Clusterstock, a financial news blog. Sosnik Bell, based in Fort Lee, New Jersey, processed forms for these investors, and then forwarded its work to the investors' own accountants. Executives from Sosnik Bell could not be reached for comment.
A more lucrative place for victims of the fraud, however, are at the giant accounting firms that audited the investment managers who directed money into Madoff's firm.
In several other fraud cases, accounting firms, which are responsible for scrutinizing the financial underpinnings of companies, have become targets for investor lawsuits. Ernst & Young paid $300 million to settle a lawsuit filed by Cendant related to fraud at one of the conglomerate's subsidiaries. It had earlier paid $335 million to settle a lawsuit filed by Cendant shareholders.
Also last year, Pricewaterhouse agreed to pay $225 million to settle auditing malpractice claims tied to the Tyco scandal, which saw the convictions of top executives for grand larceny, conspiracy and securities fraud. Pricewaterhouse's payment amounted to about 7 percent of total amount paid in Tyco lawsuits.
But the Madoff case presents an unusual situation, said Scott Berman, a partner at the law firm Friedman Kaplan Seiler & Adelman who represents investors in several feeder funds. Previous cases focused on the auditors of the firm at the center of the scandal, not the auditors of investment managers one rung removed.
"I expect that this is an issue that has not been litigated before," Berman said.
With many of the feeder funds' managers having taken losses from their own personal exposure to Madoff's firm, the accounting firms may be a likely target for investors seeking to recoup at least some of their money.
PricewaterhouseCoopers was the main auditor for Sentry, the largest fund run by Fairfield Greenwich Group, the $14.1 billion investment manager that has lost the most money so far in the Madoff scandal. The accounting firm was tasked with minding Sentry, which had about $7.5 billion invested in Madoff's firm.
"The company has not yet settled on a legal strategy," said a Fairfield spokesman, Thomas Mulligan.
A spokesman for PricewaterhouseCoopers, Mike Davies, said, "No claim has been asserted against the PWC member firm in relation to Madoff, and we know of no valid basis for any claim."
The lawsuit by New York Law School, filed in federal court in New York last week, names J. Ezra Merkin, the money manager who placed $3 million of the school's money into Madoff's firm. But it also sues BDO Seidman, the American arm of BDO International and the auditor for one of Merkin's funds, Ascot Partners.
In its lawsuit, New York Law School said that BDO Seidman had "utterly failed" in its auditing of Ascot Partners. The lawsuit says that BDO Seidman failed to flag Ascot's reliance on a single money manager, Madoff, as well as Madoff's reliance on Friehling & Horowitz.
BDO Seidman has said that it never audited Madoff's firm, just Merkin's, and that its audits of Ascot Partners "conformed to all professional standards."
Berman, however, said the firm had a duty to dig deeper. "I don't think that they can simply, blindly accept what Madoff did without doing their own auditing work," he said.

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Hedge fund's gains from Madoff are under scrutiny
By Alex Berenson and Eric Konigsberg
Tuesday, December 23, 2008
NEW YORK: Since Bernard Madoff was arrested less than two weeks ago in connection with a $50 billion Ponzi scheme, Fairfield Greenwich Group has portrayed itself as an unwitting victim of the fraud, the biggest of Madoff's many losers.
Clients of Fairfield, a secretive hedge fund advisory company based in Connecticut, lost $7.3 billion to Madoff's fund. Prosecutors say the fund was a Ponzi scam that depended on new investment money to make payments on earlier investments. But for Fairfield, working with Madoff was hugely profitable.
Internal documents from Fairfield show that the firm took more than $500 million in fees since 2003 alone from the money it placed with Madoff. Nearly all those fees went to a handful of Fairfield executives, including Walter Noel, Fairfield's founder, who used the money to build a glamorous life, splitting his time among homes in New York, Connecticut, Florida and the Caribbean.
As it raised money all over the world, Fairfield also made detailed pledges about how it would monitor and track Madoff's investments, the documents show. Now, investors and regulators are sure to ask whether Fairfield made good on those promises, or whether it was a facilitator of the Madoff scandal as well as a victim.
Similar questions may arise for the dozens of banks and hedge funds around the world that reaped extraordinary fees for steering investments to Madoff over the past decade. None of them, however, earned more from their Madoff business than Fairfield did during the firms' 20-year relationship.
Fairfield promised its investors that money could not be moved from its accounts with Bernard L. Madoff Investment Securities without two signatures. It said that it would independently calculate the value of the funds it invested at Madoff's firm at least once a week. It promised to reconcile statements from individual trades with Madoff's custodial records.
It is not clear what Fairfield did to make good on those pledges.
A spokesman for Fairfield, Thomas Mulligan, offered a statement characterizing the firm as a victim of Madoff.
"Fairfield Greenwich Group is in the process of gathering and reviewing all of the factual information relevant to its having been defrauded by Bernard Madoff," Mulligan said in the written statement. "It made efforts to verify the information it received from Madoff."
"Following its review, Fairfield Greenwich expects to be in a position to provide more specifics," he said.
Mulligan also said that Fairfield Greenwich, and its partners, had about $60 million invested with Madoff.
That sum, while significant, is less than 1 percent of the overall amount that the firm placed with Madoff, and barely 10 percent of the fees that Fairfield had reaped since 2003 from its client investments with Madoff.
Fairfield raised money for Madoff mainly through a fund called Fairfield Sentry, which supposedly had $7 billion in assets by 2007.
As it sought new investors for Fairfield Sentry, Fairfield highlighted its close control over the fund and the protections it would provide investors.
In a "due diligence questionnaire" made available to potential investors in Sentry, Fairfield promised that it was calculating the value of Sentry's assets weekly and monthly. It also said Citco Fund Services, an independent hedge fund administrator based in the Netherlands, was separately calculating the value of Sentry's assets each month.
Further, Fairfield promised that both it and Citco were double-checking the monthly statements it received from Madoff's firm against records of the assets in the fund. To prevent unauthorized stock trades or the unauthorized removal of cash from Sentry's accounts, "the movement of cash among the Fund's accounts requires two signatures," Sentry said.
Mulligan did not respond to questions about whether Madoff could have moved money or securities out of Fairfield Sentry's accounts without its approval. Reached Friday, a manager at Citco Fund Services in Amsterdam asked for questions via e-mail, then did not respond to them.
Another document, this one prepared in 2007 as Fairfield Greenwich considered selling itself in what at the time was a very rich market for hedge-fund advisory companies, shows just how much money it had made from its relationship with Madoff.
According to the document, Fairfield generated $250 million in revenue and $200 million in profit for the year that ended Sept. 30, 2007. Nearly 65 percent of that money came from fees on Sentry, and nearly all the profits were distributed among the firm's 21 partners.
Fairfield's employees were also lavishly compensated, with at least four receiving more than $5 million in pay.
In early 2008, several private equity and investment firms were approached by Fairfield about purchasing a share of the company. A partner of one that considered buying a stake that he estimated was between one-third and one-half of Fairfield - the firm was valuing itself somewhere between $1 billion and $1.5 billion - said that he had been scared off about 20 minutes into his initial meeting with a team of Fairfield managers.
"They were just incredibly squishy and vague, even during the warm-up," said the prospective buyer, who spoke on condition of anonymity because of a nondisclosure agreement with Fairfield. "I asked them to tell me about the manager of the fund Sentry feeds into, and I was told, 'We don't really talk about him."'
Like Madoff's firm, Fairfield was at least in part a family business. Four of Noel's sons-in-law worked at Fairfield. But unlike Madoff, Fairfield's partners, led by Noel, were not shy about spending their money and taking a high profile in wealthy New York society circles.
"The last few years, they really made a play to be a part of that New York-Southampton social axis," David Patrick Columbia, the editor of NewYorkSocialDiary.com, said of Noel and his family. "It happened so fast that you really noticed them."
Noel, whose primary residence and office remain in Greenwich, Connecticut, has at least five luxury homes. Along with his Greenwich house, whose value has been estimated at $4.2 million, he has homes in Southampton, New York, and Palm Beach, Florida. And since 2000, the Noels have also maintained an apartment in New York. The combined value of those homes is more than $20 million.

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With Stevens's fall, pipeline for lobbyists shutting off
By David D. Kirkpatrick
Monday, December 22, 2008
WASHINGTON: Until recently, there were few better ways to start a lobbying career than by leaving the office of Senator Ted Stevens of Alaska.
With 40 years of seniority on important Senate committees, Stevens, a Republican, wielded unrivaled power over industries like fishing, forestry, communications, aviation and the military, steering billions each year to pet Alaskan projects like Eskimo whaling, missile defense and even salmon-based dog treats called Yummy Chummies.
His power made his good will a valuable commodity on K Street, where many lobbying firms are located. During the past five years, just nine lobbyists and firms known primarily for their ties to Stevens reported over $60 million in lobbyist fees, not including other income for less direct "consulting." The most recent person to leave his staff to become a lobbyist reported fees of more than $800,000 in just the last 18 months.
So when Alaskan voters narrowly rejected Stevens's bid for re-election last month, just days after a jury convicted him of federal ethics violations, it was in some ways like the closing of the plant in a company town.
"It is sort of a miasma of 'Wow, no Ted Stevens tomorrow?' " said Ronald Birch, Stevens's first chief of staff and the informal dean of what might be called the Stevens lobby.
Birch was the first person to open a Washington office specializing in lobbying the senator, and one of his partners is the senator's brother-in-law, William Bittner, who has shared a series of profitable real estate investments with Stevens as well.
Although his law firm has a big practice in Anchorage, Birch said, "I would be Pollyannaish if I didn't think some of our clients would say 'Thank you very much, we are going to go find Obama's new best friend.' "
Others turned to dark humor, lashing out at the voters who cut off the main wellspring of the political pork that Alaskans — and their lobbyists — have enjoyed for so long. "They don't understand the connection between Ted and the way of life they have come to take for granted," read one e-mail message circulating among former Stevens staff members on K Street. "For those of us long on the dole, the coming reality will take some getting used to."
Through a spokesman, Stevens declined to comment. He will be succeeded in January at the start of the new Congress by a Democrat, Mark Begich.
Stevens's former aides are hardly the only Washington lobbyists to rise and fall with a single congressional patron. Representative John Dingell, the powerful Michigan Democrat first elected in 1955, long sustained a coterie of lobbyists sometimes known as the Dingell Bar. They, too, are feeling the pinch at the moment from his recent loss to Representative Henry Waxman, Democrat of California, of the gavel as chairman of the House Energy and Commerce Committee.
But Stevens — Alaska's "Uncle Ted" — is in a class by himself. For most of the last decade he was a dominant voice on both the Senate appropriations and commerce committees, which govern federal spending and business regulation. He had formed such a tight alliance with Senator Daniel Inouye of Hawaii, a Democratic counterpart on both panels — they called each other "brother" or sometimes "co-chairman" — that their influence barely waned when one or the other party lost power.
"One of the things that made a Stevens lobbyist so valuable is that he could deliver," said Ross Baker, a political scientist at Rutgers who studies the Senate. "When somebody who had his ear said something would happen, it usually happened. You could really trade on it. It was the coin of the realm."
Stevens's preference for one lobbyist over another was big news in industry trade publications, and he did not hesitate to exert his influence.
When his friend and former aide Mitch Rose was angling for a job as president of the National Association of Broadcasters three years ago — one of the loftiest perches on K Street, which had paid its previous occupant more than $1 million a year — Stevens and his staff all but threatened to shut out any other hires. "Regardless of what the NAB does or doesn't do, Senator Stevens's go-to guy on broadcasting issues will still be Mitch Rose," a top Stevens aide, Lisa Sutherland, told the Capitol Hill newspaper Roll Call, warning that Rose's rival "starts with a serious handicap, not knowing the issues and not knowing the people."
When the group passed over Rose nonetheless, Stevens toasted his protégé to a room of communications industry lobbyists at a start-up party for his new one-man lobbying shop. Bolstered by the endorsement, Rose reaped more than $1.2 million in lobbying fees over the next nine months, according to his filings.
And what of the discussed boycott? To maintain an open line to Stevens, the association hired Sutherland, who left Stevens not long after delivering those warnings to open her own one-woman consulting and lobbying shop, Creative Government Solutions. After working for Stevens for more than 20 years, virtually her entire career, she has reported nearly $900,000 in lobbying fees over the last 18 months, including more than $200,000 in fees from the broadcasters. Other clients include Motorola, U.S. Telecom and the National Business Aviation Association, all with important interests before Stevens.
Sutherland, who declined to comment, is married to a lobbyist, Scott Sutherland. He works for the hunting and conservation group Ducks Unlimited, for which Stevens has allocated more than $3 million in federal spending since 2005 to map Alaskan wilderness. A spokesman for the organization said the project and its financing had nothing to do with the Sutherlands' marriage.
Rose, who worked for Senator Bob Dole for four years before spending nine years with Stevens, noted that he had broadened his contacts on Capitol Hill by spending six years as a lobbyist with the Walt Disney Company immediately after leaving Stevens's office in 2000. "When I was at Disney we dealt with a lot of people," Rose said. "Stevens was only a part of it."
Earl Comstock, a lobbyist and former Stevens staff member known for his close ties to the senator, represents a mixture of telecommunications and fishing companies as well as Alaskan concerns like Alaska Eskimo Whaling Commission, the Charter Halibut Task Force and the city of Kodiak.
Stevens's departure "certainly isn't helpful," Comstock said. "But I am not an access lobbyist. I am an issues lobbyist," Comstock continued, saying clients hired him because of his policy expertise.
Sometimes, Comstock explained, his job was to translate clients' arguments into the terms of most interest to the senator: the sometimes-parochial interests of Alaska. "Part of the reason why someone might hire me is to help them figure out a way to say, 'Even though this is not directly an Alaskan issue, here is why you ought to be interested,' " Comstock said.
Stevens "was progressively parochial," Rose agreed. "If you were rolling out a new wireless technology, 'Could it be demoed in Alaska?' That was always the catechism," he said. (The mobile phone service in Alaska is remarkably good, several mayors said.)
Critics have charged that Stevens assisted his aides-turned-lobbyists with federal money in more direct ways, too. He earmarked money to buy a property in Seward owned by one, to build a bridge connecting Anchorage to properties owned by two and to help the brother of a former aide-turned-lobbyist start the Arctic Paws salmon dog treat business. "We have Ted Stevens to thank for it," the brother, Brett Gibson, told The Associated Press in an interview about his business.
Several clients represented by Stevens specialists said that they had hired their lobbyists only for their policy expertise, without regard to connections. But some acknowledged privately that they were rethinking their lobbying contracts now that Stevens is leaving the Senate.
"The word I would use is access," said Mayor Bruce Botelho of Juneau, explaining his city's decision to hire a former Stevens aide, John Roots, to lobby the senator on its behalf. As for whether the city would retain Roots after Stevens had gone, Botelho added, "I am not prepared to say."
( Roots said he did not expect his business to suffer, emphasizing that he had not worked for Stevens since 1995.)
Jim Whitaker, the mayor of the borough of Fairbanks, said his municipality currently retained two lobbying firms, Birch's firm and another called Blue Water Strategies, because of their ties to Stevens. He had observed the cluster of Stevens-related Washington lobbyists and considered it "something to take advantage of," he said. But Whitaker is considering discontinuing those contracts. "I have thought about it," he said. "I am in a wait-and-see mode."





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Cheney defends Bush and derides Biden
By Rachel L. Swarns
Monday, December 22, 2008
WASHINGTON: Vice President Dick Cheney, in a television interview, defended the White House's use of broad executive powers during the last eight years, saying he believed that historians would ultimately look favorably on the Bush administration's efforts to keep the nation safe.
Cheney said the Bush White House had been justified in expanding executive authority across a broad range of policy, including the war in Iraq, treatment of terrorism suspects and the domestic wiretapping program. And he said the president "doesn't have to check with anybody" - not Congress, not the courts - before launching a nuclear attack to defend the nation "because of the nature of the world we live in" since the terrorist strikes of Sept. 11, 2001.
The vice president also sharply criticized Vice President-elect Joseph Biden Jr., offering a pointed response when asked about Biden's plans to operate differently from him as vice president and about a remark by Biden during the vice-presidential debate that Cheney had been "the most dangerous vice president we've had in American history."
"If he wants to diminish the office of vice president, that's obviously his call," Cheney said of Biden in an interview on "Fox News Sunday." He added that President-elect Barack Obama "will decide what he wants in a vice president. And apparently, from the way they're talking about it, he does not expect him to have as consequential a role as I have had during my time."
It was the second interview that the normally media-averse vice president granted in a week, just short of a month before he and Bush are to leave office. Cheney's unapologetic tone was in marked contrast to that in several recent interviews in which he has been reflective, expressing regrets about his failure to win passage of immigration legislation and to change the tone of the debate in Washington.
When asked about another comment Biden made during the vice-presidential debate, Cheney said the vice president-elect "can't keep straight which article of the Constitution provides for the legislature, which provides for the executive."
There is ample historical precedent, Cheney said, for the Bush administration's policies.
"If you think about what Abraham Lincoln did during the Civil War, what FDR did during World War II," Cheney said, referring to Franklin Roosevelt by his initials. "They went far beyond anything we've done in a global war on terror. But we have exercised, I think, the legitimate authority of the president under Article II of the Constitution as commander in chief in order to put in place policies and programs that have successfully defended the nation."
Cheney also said the Supreme Court was "wrong" to override the Bush administration's initial policy of detaining terrorism suspects without granting them access to the protections of the Geneva Convention or granting them the right to challenge their detention.
And he said he strongly disagreed with Bush's decision to fire Donald Rumsfeld as defense secretary, saying, "he did a good job for us."
"I did disagree with that decision," Cheney said. "The president doesn't always take my advice."
In a separate interview on "This Week" on ABC on Sunday, Biden described his approach to the vice presidency, saying his primary role would be to offer Obama what he described as "the best, sagest, most accurate, most insightful advice."
The vice president-elect said he would "restore the balance" to the office, and he offered his own critical assessment of Cheney, saying the vice president's recommendations to Bush on the war and counterterrorism issues were "not healthy for our foreign policy, not healthy for our national security."
"His notion of a unitary executive, meaning that, in time of war, essentially all power, you know, goes to the executive, I think is dead wrong," Biden said.
"I think it caused this administration, in adopting that notion, to overstep its constitutional bounds, but, at a minimum, to weaken our standing in the world and weaken our security," he said.
Biden said the information that he had been given in daily intelligence briefings had only strengthened his belief that Bush and Cheney had mishandled counterterrorism policy.
Biden said that he was still committed to closing the U.S. prison at Guantánamo Bay, Cuba, and that he remained critical of the Bush administration's surveillance and detention programs, saying, "we have created, not dissuaded, more terrorists, as a consequence of this policy."

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COLUMNIST
Paul Krugman: Life without bubbles
Monday, December 22, 2008
America.
Whatever the new administration does, we're in for months, perhaps even a year, of economic hell. After that, things should get better, as President Barack Obama's stimulus plan - O.K., I'm told that the politically correct term is now "economic recovery plan" - begins to gain traction. Late next year the economy should begin to stabilize, and I'm fairly optimistic about 2010.
But what comes after that?
Right now everyone is talking about, say, two years of economic stimulus - which makes sense as a planning horizon. Too much of the economic commentary I've been reading seems to assume, however, that that's really all we'll need - that once a burst of deficit spending turns the economy around we can quickly go back to business as usual.
In fact, however, things can't just go back to the way they were before the current crisis. And I hope the Obama people understand that.
The prosperity of a few years ago, such as it was - profits were terrific, wages not so much - depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn't coming back, the spending that sustained the economy in the pre-crisis years isn't coming back either.
To be more specific: the severe housing slump we're experiencing will end eventually, but the immense Bush-era housing boom won't be repeated. Consumers will eventually regain some of their confidence, but they won't spend the way they did in 2005-2007, when many people were using their houses as ATMs, and the savings rate dropped nearly to zero.
So what will support the economy if cautious consumers and humbled homebuilders aren't up to the job?
A few months ago a headline in the satirical New York City newspaper The Onion, on point as always, offered one possible answer: "Recession-Plagued Nation Demands New Bubble to Invest In." Something new could come along to fuel private demand, perhaps by generating a boom in business investment.
But this boom would have to be enormous, raising business investment to a historically unprecedented percentage of GDP, to fill the hole left by the consumer and housing pullback. While that could happen, it doesn't seem like something to count on.
A more plausible route to sustained recovery would be a drastic reduction in the U.S. trade deficit, which soared at the same time the housing bubble was inflating. By selling more to other countries and spending more of our own income on U.S.-produced goods, we could get to full employment without a boom in either consumption or investment spending.
But it will probably be a long time before the trade deficit comes down enough to make up for the bursting of the housing bubble. For one thing, export growth, after several good years, has stalled, partly because nervous international investors, rushing into assets they still consider safe, have driven the dollar up against other currencies - making U.S. production much less cost-competitive.
Furthermore, even if the dollar falls again, where will the capacity for a surge in exports and import-competing production come from? Despite rising trade in services, most world trade is still in goods, especially manufactured goods - and the U.S. manufacturing sector, after years of neglect in favor of real estate and the financial industry, has a lot of catching up to do.
Anyway, the rest of the world may not be ready to handle a drastically smaller U.S. trade deficit. As my colleague Tom Friedman recently pointed out, much of China's economy in particular is built around exporting to America, and will have a hard time switching to other occupations.
In short, getting to the point where our economy can thrive without fiscal support may be a difficult, drawn-out process. And as I said, I hope the Obama team understands that.
Right now, with the economy in free fall and everyone terrified of Great Depression 2.0, opponents of a strong federal response are having a hard time finding support. John Boehner, the House Republican leader, has been reduced to using his Web site to seek "credentialed American economists" willing to add their names to a list of "stimulus spending skeptics."
But once the economy has perked up a bit, there will be a lot of pressure on the new administration to pull back, to throw away the economy's crutches. And if the administration gives in to that pressure too soon, the result could be a repeat of the mistake FDR made in 1937 - the year he slashed spending, raised taxes and helped plunge the United States into a serious recession.
The point is that it may take a lot longer than many people think before the U.S. economy is ready to live without bubbles. And until then, the economy is going to need a lot of government help.

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EDITORIAL
The printing press cure
Monday, December 22, 2008
The Federal Reserve as much as admitted last week that lowering the benchmark interest rate - even to zero - would not be powerful enough medicine to revive today's ailing economy. And so it has opted for the printing-press cure, pledging for the foreseeable future to pump vast sums into banks, other financial firms, businesses and households.
Economic history - of the Great Depression of the 1930s and Japan's "lost decade" in the 1990s - suggests that the Fed is doing the right thing. Confronted then, as now, with the twin scourges of deepening recession and incipient deflation, governments did more damage with too little intervention than they would have done with too much.
But that doesn't make such intervention "good." It's a big and unfortunate risk in itself.
Flooding the economy with freshly printed money may prevent a self-reinforcing downward spiral. But it may cause trouble long after the present danger has passed. One reason is that it could cause inflation later. In a worst-case scenario, inflation, or the fear of inflation, could dissuade foreign investors, who finance the United States' debt, from buying and holding dollars. That, in turn, could provoke a disorderly decline in the currency, sending prices and interest rates sharply higher.
For the Fed, engineering the new rescue programs is a technical challenge. It will have to be remarkably deft in draining the system of excess dollars in a timely way. It will also need to be vigilant for signs that the dollar is being unduly pressured, and be prepared to react.
For Barack Obama, the challenge is one of leadership. As president, Obama will have to convey optimism without overpromising. He will have to inspire confidence, even in the absence of a dramatic turnaround which is simply not in the cards. To his credit, Obama has already warned the American people that conditions will get worse before they get better.
In the attempt to make them better, the first question facing the next administration is the size of the stimulus. The latest numbers are in the $700 billion range. The economy certainly needs the help, but Obama officials will have to be mindful of the possible long-term negative effects of their outsized borrowing.
They must also ensure that the money is not misused to benefit high-income constituents. To jump-start the economy requires getting money to those who will spend it rapidly and in full. That includes unemployed workers, low- and middle-income families and state and local governments.
The stimulus package must also be accompanied by a foreclosure prevention measure. In the campaign, Obama favored amending the law so that bankrupt homeowners could have their mortgages reworked under court protection. That would let many people keep their homes without burdening taxpayers with the cost of the loan modifications. But Obama has not yet given details about his next moves. If bankruptcy reform is not an immediate plan, he should target the next $350 billion installment of the $700 billion bailout fund on foreclosure prevention.
While Obama must continue to level with the American people - the economy is unlikely to turn up until 2010 at the earliest, and even then will probably rebound slowly - his near-term moves will go a long way toward making the burdens yet to come more bearable.


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COLUMNIST
Philip Bowring: Free trade under threat
Monday, December 22, 2008
HONG KONG: China, almost as much as the U.S., may hold the key to whether the global recession leads to a vicious cycle of protectionism and contracting trade.
The world is unlikely to experience anything approximating the two-thirds shrinkage in trade seen between 1930 and 1933. For one, manufacturing systems are now much more integrated across borders and international investments so important that there is scant large corporate interest in protectionism. Another is that Smoot-Hawley, the mother of self-defeating protectionist measures that proliferated in the 1930s, is still viewed across the globe as a warning.
Nonetheless, the recent arrival of China as a major player in global trade raises new issues. We do not need a Smoot-Hawley to bring about a sustained contraction in trade any more than that legislation was solely to blame in the 1930s.
China's role now is probably even more important than its trade volumes - large as they are - suggest. Here is why.
Just like the U.S. in 1930, China has massive foreign-exchange reserves and starts the recession in a very strong trade position. Thus, at the broadest level, Beijing has least excuse for measures to protect local employment by artificially curtailing imports. Indeed, China has, in theory at least, the most leeway to stimulate domestic demand and imports.
So far, such stimulation appears to be its principle response - but that will not be easy for structural reasons. Failure to get quick results could easily lead to protectionist responses, of which some glimpses have already emerged.
Competitive devaluations are perhaps the most dangerous. These measures start in Asia and eventually lead to formal trade barriers as protection against "unfair" trade practices. The post-September rise of the dollar against the Chinese yuan and most other Asian currencies (excluding the yen) caused concerns that the region would attempt to sustain exports with currency manipulation. In an unusually tart comment, the Asian Development Bank warned countries against buying dollars to depreciate domestic currencies. Some Asian currency declines have reversed, nonetheless the Asian instinct for currency undervaluation to boost exports is alive and well. China matters particularly because other countries such as Malaysia, Thailand and Taiwan have taken to following its lead.
China also has an effect on other developing countries. China hitherto has been willing to cut tariffs unilaterally rather than on a horse-trading basis. But one result is that many actual levels are below the maximum under its World Trade Organization agreements. Thus it can increase them without breaking rules. Other countries are in a similar position but China is crucial because its liberalization went too fast and far.
India, Brazil and Russia have to greater or lesser degrees followed China on the liberalization path but now find that commodity exports are dropping dramatically while their domestic industries remain under pressure from Chinese imports. For the time being, protectionist measures by such nations have been isolated and industry-specific but more barriers will probably rise, particularly if China continues to run massive surpluses with them. In turn, these may provoke copy-cat moves by trade partners in regional arrangements.
Pressures from China's own companies are another danger. China's leadership and senior bureaucrats recognize how much it has benefited from trade and investment liberalization - 30 years of which were celebrated last week. But much of the benefit is perceived to have gone to foreign-invested firms that account for about 50 percent of exports rather than to the big quasi-state enterprises catering largely to the domestic market. They have more inclination toward protectionism and are also the recipients of cheap credit and subsidies that make them targets for foreign anti-dumping actions.
Support for freer trade is also waning at the political level. Worker layoffs have been particularly acute in low-tech manufacturing industries in southern China. A government that places social stability above all else will give the back seat to the longer-term benefits of foreign trade. Meanwhile, Chinese losses on its investments in once revered U.S. financial houses have soured the Chinese on Western-made rules and foreign advice. China is also understandably reluctant to see the yuan value of its dollar holdings continue to fall.
China may even have to rethink the value of its trade relations with Asian neighbors. The collapse in Western demand has exposed the fact that much intra-regional trade was in components for finished products sold in the West. Questions will be asked about whether it really makes sense to invest much political capital in regional trade liberalization.
These dangers to free trade do not add up to a repeat of the 1930s, but they all need watching.

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Rich-poor gap worries Chinese planners
By Alan WheatleyReuters
Monday, December 22, 2008
BEIJING: Yu Yongding, an economics professor in Beijing, recalled the other day that the well-off Chinese he used to come across at plush hotels overseas were mainly Taiwanese. Today, they are more likely to be mainlanders.
"I don't know how they get so rich!" Yu exclaimed. "Income distribution is very problematic in this country."
And it is a problem that is set to get even worse. As long as the rising tide of economic growth was lifting all boats, the widening gap between rich and poor was generally tolerable. Now, as the economy turns down sharply, tensions are mounting, to the evident discomfort of China's leadership.
Zhou Tianyong, a researcher at the Central Party School in Beijing, said a surge in unemployment next year and an increasingly skewed distribution of wealth "through theft and robbery" could test the party's grip on power. "This is extremely likely to create a reactive situation of mass-scale social turmoil," Zhou wrote this month in the China Economic Times.
During the past 30 years of market reforms, China has done a remarkable job of lifting hundreds of millions of people out of poverty. But some people have done better - much better - than others.
In 1985, urban Chinese earned 1.9 times as much as people in the countryside, which is home to 60 percent of the population. By last year, they earned 3.3 times as much - a ratio that rises to between 5 and 6 if unequal access to basic public services is taken into account, according to the United Nations' latest Human Development Report for China.
China is not alone. The Gini coefficient, a commonly used measure of inequality, has risen in two-thirds of developing Asian countries since the early 1990s, the Asian Development Bank calculates.
If income were distributed perfectly equally, the coefficient would be zero; if all income were in one person's hands, it would be one.
China's Gini coefficient stood at about 0.30 in the late 1970s but had risen to about 0.45 in 2005.
And now comes the financial meltdown, which is already taking a toll on poorer workers with low wages and casual contracts. In recent weeks millions of migrant workers have been streaming back to their villages from shuttered factories in eastern China.
"Those people who are at the bottom of the income and wage hierarchy will be hit much more than those who are the top," said Gyorgy Sziraczki, a researcher at the International Labor Organization in Bangkok.
"So it's very likely that the current crisis will bring increasing wage and income inequalities in the coming two to three years," he said.
What is to be done? Some governments were stirring even before the financial tsunami struck.
Hong Kong introduced a voluntary minimum wage for selected low-wage jobs two years ago to protect the working poor. It proved ineffective, so the government now plans a universal statutory minimum wage.
Strengthening other labor market policies could also mitigate income inequalities. Malaysia, for instance, has announced retraining grants, something South Korea introduced - along with unemployment insurance - after the Asian financial crisis a decade ago.
"What we learned was that one of the preconditions for having a prescription for the crisis was to strengthen the social safety net," said Kim Choong Soo, South Korea's ambassador to the Organization for Economic Cooperation and Development in Paris.
Researchers say the imperative for Beijing is for a big increase - and better distribution - of spending on health, education and pensions.
According to Chinese research cited by the United Nations, between 30 and 40 percent of the urban-rural income gap can be explained by unequal access to such public service. That is because government outlays on things like schools and clinics amount to a subsidy for consumers, who would otherwise have to dig more deeply into their own pockets.
Strengthening public services would also dovetail with the declared intent of several governments, including China's, to increase domestic demand and rely less on exports and related investments.
"If many countries head in the direction of more balanced growth in the future, that could have a positive impact on income inequalities," said Sziraczki, the ILO researcher.


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German economy expected to contract 2.7% in 2009

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City offers snapshot of troubles across U.S.
By Peter S. Goodman
Monday, December 22, 2008
COLUMBIA, South Carolina: Even before the job fair opens, the line snakes into the parking lot of the state fairground, a muted parade of lives derailed by layoffs.
"It kills me, it eats me up inside," said Raymond Vaughn, who has been out of work for seven months, since he lost his job as a window installer. His fiancée now pays the bills. "I go into this fantasy world where I'm like, 'I'm in the wrong life, and I'm actually a millionaire.'
"It really bothers me I can't do the things I'd like for her. Sometimes you get where you feel less than a man."
As the U.S. economy sinks deeper into one of the more punishing recessions since the Great Depression, frustration and fear color the national conversation.
This city in the center of South Carolina is an ideal listening post, a modern-day Middletown. According to a range of indicators assembled by Moody's Economy.com - including job growth and change in household worth - this metropolitan area came closer than any other to being a microcosm of the country over the past decade.
This is now an unfortunate distinction. Some 533,000 jobs disappeared from the U.S. economy in November, the worst month since 1974.
In South Carolina, a government panel is predicting that the state's unemployment rate could reach 14 percent by the middle of next year.
No speculative real estate bubble can explain what is happening in this metropolitan area of roughly 700,000 people. Neither the brick Georgian homes in the city's core nor the ranch-style houses on the suburban fringes rose or fell much in value. The financial wizards of Wall Street seem far from the palmetto-dotted campus of the University of South Carolina and the domed State Capitol downtown.
Yet as the toll continues to mount from an era of financial recklessness - as banks cut credit from households and businesses, reinforcing austerity - the damage has spread to Columbia, choking economic activity from shopping malls to factories.
"This was not of our doing," said Doug Woodward, an economist at the University of South Carolina. "We just got swept up in the crisis of confidence."
The Carolinas may conjure up thoughts of textile mills and tobacco fields, but Columbia has a diverse economy. The state government is a major employer. So is the university, along with hospitals and banks. The Fort Jackson army base employs 9,200 people. United Parcel Service has a regional hub here. Michelin operates a tire factory next door in Lexington County. Computer Science Corp. develops software north of the city.
Early in the year, layoffs were concentrated among factory and warehouse workers.
"Now, they run the gamut," said Jessica Horsely, a case manager at the local employment office. "You see a heightened sense of desperation. People are just grasping for anything."
President-elect Barack Obama has pledged to spend as much as $775 billion on his economic plan, including infrastructure projects like bridges, roads and classrooms, to put people back to work.
The mayor of Columbia, Bob Coble, is consumed with capturing some of those dollars for his city. He has assembled a list of ready-to-go projects totaling $140 million that he said could generate construction jobs and propel further economic development.
Coble, a Democrat who has been mayor for 18 years, has in mind the redevelopment of North Main Street, a bedraggled corridor of hard-luck retailers that lacks sidewalks in many spots, with exposed power lines dipping down to cracked pavement. That project is already under way, putting down sidewalks and burying power lines in a $19 million first phase. An additional $54 million could complete it.
Similar projects have restored shine to Columbia's downtown, which was in a similar state of decay a decade ago, and nurtured the Vista neighborhood, a collection of brick warehouses transformed into trendy eateries.
The mayor has also been focused on expanding the so-called Innovista project, a campus developed by the university centered on research in areas like hydrogen-powered fuel cells and biotechnology.
The aim is to cluster research labs, private companies and condominiums.
"This will be a once-in-a-generation opportunity to transform a city with projects that have been on the books," the mayor said over breakfast at a Sheraton hotel that recently opened downtown. The building was once home to a bank, and its original vault has become a cozy martini bar. "These are not bridges to nowhere."
Yet questions confront the notion of putting people to work through federal largess. The governor of South Carolina, Mark Sanford, a Republican, has been an ardent opponent of federal aid for states, branding it pork-barrel spending. If the money is delivered to state agencies like the Department of Transportation, which has its own list of priorities, Columbia might end up disappointed.
Despite the attractiveness of Main Street, new sidewalks have drawn few retailers. North Main Street runs through a largely poor area, making it even less likely that improvements will attract business.
Meanwhile, the recession intensifies.
At the state fairgrounds, Lori Harris, 47, waited for the job fair to open. A year has passed since she graduated from college with an associate degree in medical assisting, yet she said she has been unable to find a decent job.
Harris previously ran her own house-painting company, but opted for a more stable career in a growing field. She saw an ad for the degree program on television: "Come become a medical assistant!"
Such talk seems farcical now. She is paying $95 a month toward $23,000 in student loan debt. She is living with her boyfriend, who is supporting her, not always cheerfully. She has no health insurance and cannot see a specialist for a torn rotator cuff and recently applied for food stamps.
"I tried to better myself," she said, "and I'm getting nowhere."
She was offered one job, as a medical technician dispensing pills to patients. The pay was $7.50 an hour.
She wondered if her age explained the rejections. Or her Boston accent. Or the smell of her cigarette-smoking.
As the doors opened, people filed in quietly, entering a dark warehouselike space with concrete floors.
"You want a job that makes you smile," proclaimed a placard at a booth for Wendy's, the fast food chain. Another sign advertised the benefits for counter workers, among them: "free uniforms."

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Obama announces task force to assist middle-class families
By Jeff Zeleny
Monday, December 22, 2008
KAILUA, Hawaii: President-elect Barack Obama on Sunday announced the creation of a task force to bolster the standard of living of middle-class and working families in America, tapping Vice President-elect Joseph Biden Jr. to lead the effort with four members of the cabinet.
"Our charge is to look at existing and future policies across the board and use a yardstick to measure how they are impacting the working- and middle-class families," Biden said in a statement on Sunday. "Is the number of these families growing? Are they prospering?"
The effort, which is called the White House Task Force on Working Families, is intended to focus on improving education and training for working Americans as well as protecting incomes and retirement security of the middle class. The group, officials said, will work with labor and business leaders.
The task force is the first discrete assignment for Biden. He said the Obama administration would measure the success of its economic policy by whether the middle class was growing and prospering. Other members of the group include the secretaries of labor, education, commerce, and health and human services, as well as the top economic advisers to the president.
As Obama opened the first full day of his holiday vacation in his native Hawaii, the effort was announced by transition officials in Washington. The president-elect did not speak about the plan, as he spent the day out of public view with his family and a small group of friends from Chicago who are accompanying him in Hawaii.
"My administration will be absolutely committed to the future of America's middle-class and working families," Obama said in a statement, repeating a central tenet from his presidential campaign. "They will be front and center every day in our work in the White House, and this task force will be one vehicle we will use to ensure that we never forget that commitment."
With the president-elect on vacation, Biden took a leading role for the coming administration, making his first appearance since the election on a Sunday morning news program. In an interview on "This Week" on ABC, Biden said the economy was in sharper decline than he had assumed. "President-elect Obama and I know the economic health of working families has eroded, and we intend to turn that around," he said. "We've got to begin to stem this bleeding here and begin to stop the loss of jobs in the creation of jobs."
During the campaign, Obama often derided the blue-ribbon panels and commissions that administrations sometimes form. But the working families task force, his advisers said, was more substantive because it included members of the cabinet who have the president's ear and the authority to carry out proposals.


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The richest fictional characters
By David M. Ewalt and Michael Noer
Forbes.com
Monday, December 22, 2008
The Standard & Poor 500 is down about 40 percent over the last 12 months. There have been nearly 190,000 layoffs at America's 500 largest companies in just the last six weeks. And the U.S. government is spending a trillion dollars to keep the economy afloat.In Pictures: The Forbes fictional 15
Times are tough - even if you're imaginary.
This year's edition of the Forbes Fictional 15, our annual listing of fiction's richest, features significant turnover and turmoil. More than half of last year's members fell off the list, and those who remain are poorer on average; 12 months ago, you needed at least $1.3 billion to make the cut. This year, you only need $800 million.
Economic woes thrust a new member of the Fictional 15 to the top spot: Uncle Sam, the 232-year-old former frontiersman and U.S. Army recruitment officer. This American icon is enjoying a second act on Wall Street, thanks to his contrarian strategy of investing exclusively in companies on the brink of bankruptcy. His infinite net worth can be attributed to his crafty purchase of the U.S. Mint in 1792; this guy can print his own cash.
Last year's richest fictional character, Scrooge McDuck, fell to second place, with a net worth of $29.1 billion. But don't feel bad for the quacking Croesus; the record-high price of gold increased his fortune significantly. McDuck's bottom line was also buoyed by his penny-pinching ways and lack of charitable giving.
Third place Richie Rich wasn't as lucky. "The richest kid in the world" saw his net worth tumble from $16.1 billion to $12.3 billion thanks to ill-timed investments in Web 2.0 start-ups. But despite these setbacks, Rich continues to make splashy charitable donations, including airdropping cans of foie gras onto starving Kurdish villages and leaving $1 million tips for waitresses.
Eight former billionaires dropped off the list, including Willy Wonka, whose candy company was hit hard by the rising cost of cocoa beans. Dark wizard Lucius Malfoy lost big investing in cauldron derivative swaps. And Princess Peach, heir to the Mushroom Kingdom, fled abroad after a revolution toppled her regime. Peach is reportedly in close consultation with advisers, hoarding fire flowers and invincibility stars, and plotting return to power.
Shifting fortunes caused some members to return to the list. Corporate raider Gordon Gekko (No. 4, net worth $8.5 billion) is widely credited on Wall Street for creating collateralized debt obligations. He fell off the list in 2005 after being convicted of insider trading and securities fraud. Now out of prison, Gekko shorted the S&P 500 and bank stocks near their peak. Conspicuously seen celebrating at Manhattan restaurant the night Lehman Brothers collapsed, he's quoted as saying, "Greed is good...for me, not them!"
Not all of our new members are from planet Earth. Jabba The Hutt (No. 5, $8.4 billion) oversees a massive crime syndicate in the Outer Rim Territories, controlling gunrunning, extortion and the Kessel spice trade. This morbidly obese billionaire employs an elite staff of bounty hunters, assassins and ne'er-do-wells; associates say he "has no use for smugglers who drop their shipments at the first sign of an Imperial cruiser."
This year, the Fictional 15 also features a listing of the world's most expensive fictional homes. These properties span the real estate gamut from Tony Stark's sweet bachelor-pad in "Iron Man" ($50.8 million) to Tara ($17.2 million), the antebellum plantation from "Gone with the Wind." The source material was equally varied, ranging from videogames (Croft Manor from "Tomb Raider," $46.1 million) to literature (Jay Gatsby's West Egg mansion from "The Great Gatsby," $42.5 million).
To qualify for the Fictional 15, we require that candidates be an authored fictional creation, a rule which excludes mythological and folkloric characters. They must star in a specific narrative work or series of works. And they must be known, both within their fictional universe and by their audience, for being rich. Net worth estimates are based on an analysis of the fictional character's source material, and valued against known real-world commodity and share price movements. In the case of privately held fictional concerns, we sought to identify comparable fictional public companies. All prices are as of market close, Dec. 17, 2008.
We reserve the right to bend or break any of our own rules. And, yes, we know Uncle Sam is folkloric.

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An American holiday tour goes from quaint to over-the-top
By Neil Genzlinger
Monday, December 22, 2008
NEW YORK: December visits to the great Gilded Age mansions, so lovely in their holiday finery, have always been two-way conversations between you and the ghosts of those who once lived there. "Fabulous," you would say. "I am so jealous." And the ghosts would cockily respond, "Oh yeah; the only thing better than having money is showing it off."
But this December, with economic calamity all around us, you may find the conversations running a bit differently. "Fabulous," you'll still say, "but I am so glad I don't own this colossal maintenance nightmare." And the ghosts, having been reminded like the rest of us that ostentation can be fleeting, are a bit chastened as you walk through their homes and hear about how they lived.
"Perhaps the 60 floral arrangements a day were a bit much," Frederick Vanderbilt may whisper in your ear as the tour guide leads you through his 54-room mansion in Hyde Park, New York. In Baltimore at the Evergreen Museum, former home of the Garrett family, Alice Whitridge Garrett may confess, "We're not particularly proud of the 23-karat-gold toilet seat." And at Lyndhurst in Tarrytown, New York, was that an ever-so-faint "I'm sorry" that just escaped the lips of Jay Gould, whose financial manipulations sometimes cost others their life savings?
Such, at least, were the spectral murmurings I heard on recent visits to five mansions that are marking the holidays with special decorations and programs. The conversations between me and the ghosts weren't all gloom and contrition; the serene beauty of these places still warms the soul, and in the angel-filled murals at Staatsburgh in the Hudson Valley and the stained-glass religious scenes at Glencairn near Philadelphia there is a sense of reverence just right for the season. Yet with opulence at its all-time uncoolest right now, the Christmas mansion tour doesn't feel as benign as it once did.
My first stop was at Staatsburgh, the former home of Ogden and Ruth Mills: 79 rooms worth of white rectangularity.
Ogden was a financier whose father, Darius Ogden Mills, made big money in banking, railroads and mining; Ruth was a daughter of the prominent Livingston family. When she inherited the Staatsburgh property, the 25-room home on the site was deemed inadequate. By 1896 the couple had remade it into the fortress we see now.
In the entryway, a glorious 25-foot, or 7.6-meter, Christmas tree is in place, enfolded by a staircase. Smaller Christmas trees also adorn the house, and, as in all the mansions, good taste reigns. No wire-frame reindeer or giant inflatable Santas here.
I paused in the lavishly set dining room, pondering the incongruity of beauty that is also a burden. On the table was a centerpiece so big that monkeys could live in it. It was Ruth Mills' ghost, I think, who, slightly embarrassed, whispered to me, "Next year we're going with something smaller."
A few miles south is the Vanderbilt Mansion, another rectangular giant with a river view, owned by the National Park Service. The dark woods of the interior nicely set off the Christmas trees and other decorations, and (as at Staatsburgh and Lyndhurst) there are plenty of angels on hand for the holidays, in the ceiling murals.
The house, my tour guide said, is small by Vanderbiltian standards: It would fit in one wing of Biltmore in North Carolina, she said. That was home to George and Edith Vanderbilt. The Hyde Park mansion, completed in 1898, was the country estate of Frederick and Louise. Frederick, who died in 1938, was apologetic as the guide pointed out various extravagances. The walls of his study, for instance, are covered with a 17th-century Belgian tapestry. "If I had it to do over again, it'd be paint," he said. "Probably a semigloss."
Farther south on Route 9 in the Hudson Valley is Lyndhurst, built in 1838 and owned successively by a mayor of New York (William Paulding) and a prosperous merchant (George Merritt). The house, though, is most identified with Jay Gould, often labeled one of the era's foremost robber barons, who bought it in 1880.
Lyndhurst, acquired in 1961 by the National Trust for Historic Preservation, is a castlelike feast for the eyes, and inside, the Christmas decorations include delightful scenes invoking classic children's stories. One, in an upstairs bedroom, tweaks Gould himself, specifically his attempt to corner the gold market in 1869: It depicts the Rumpelstiltskin tale about spinning straw into gold.
"God, I hate that display," Jay, who died in 1892, confided to me as we took in the sunset from his backyard. It's fashionable these days for market manipulators to apologize for ruining lives, and Jay grudgingly did.
Any regrets about the extravagances of Lyndhurst in this time of renewed austerity? "Hey, I didn't build the place, remember," he said.
From Tarrytown it was south to Bryn Athyn, Pennyslvania, in Philadelphia's northern suburbs, the site of another building that prompts comparisons to European castles: Glencairn. It is the former home of Raymond and Mildred Pitcairn, 90-plus rooms in a Romanesque style, complete with tower.
Glencairn is not a true Gilded Age mansion - that would be Cairnwood next door, home to John Pitcairn (1841-1916), Raymond's father, who made his turn-of-the-century millions in plate glass and other industries. Raymond, an amateur architect, began construction of Glencairn in 1928. He also collected many of the artworks it contains, incorporating ancient reliefs right into the walls.
Much of the art on permanent display carries a religious theme (both John and Raymond Pitcairn were strong supporters of the General Church of the New Jerusalem, a Swedenborgian denomination), so Christmas can be found here any day of the year - in a Madonna-and-child window, a 13th-century relief depicting the adoration of the Magi. But seasonal displays are on view now as well, like a four-panel stained-glass rendering of the Nativity story by Lawrence Saint.
From Bryn Athyn it was south to Johns Hopkins University in Baltimore, where the 48-room Garrett Mansion has since 1990 been the Evergreen Museum, devoted to the family's art collection. It's quite a display: Vuillard and Picasso and Degas on the walls; miniatures from Asia in display cases; Tiffany hanging from the ceilings. ("That upstairs hallway with five Tiffany chandeliers in rapid succession?" Alice's ghost whispered to me. "Today I'd go with those fluorescent energy-saving bulbs.")
For the holidays it's all supplemented with appealing decorations, beginning with a one-horse open sleigh at the entrance. Best touch: a Christmas tree decorated entirely in kitchen utensils.
But nothing on this lively tour tops the gold toilet seat. "I know, I know," sighed Alice, whose husband, T. Harrison Garrett, was given the house by his railroad-magnate father. "It's over the top. But everyone who comes here still asks to see it."


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Biden defends expanded U.S. recovery plan
By Jackie Calmes and Brian Knowlton
Monday, December 22, 2008
WASHINGTON: Vice President-elect Joseph Biden Jr. defended on Sunday plans for an expanded economic recovery plan against charges it would unwisely inflate the national deficit, saying bluntly that the incoming administration's first and most urgent goal was "keeping the economy from absolutely tanking."
Faced with worsening forecasts for the economy, President-elect Barack Obama is expanding his economic recovery program and will seek to create or save 3 million jobs in the next two years, up from a goal of 2.5 million jobs set just last month, several advisers to Obama said Saturday.
Obama and Biden had spoken during the presidential campaign of a stimulus plan worth perhaps $150 billion to $200 billion. Now, Biden confirmed: "There's going to be real significant investment, whether it's $600 billion, or more or $700 billion. The clear notion is, it's a number no one thought about a year ago."
What had changed, he said on ABC's "This Week," was that "the economy is in much worse shape than we thought." He said that economists of all stripes agreed that "the scope of this package has to be bold; it has to be big."
Yet, even Obama's more ambitious goal would not fully offset as many as 4 million jobs that some economists are projecting might be lost in the coming year, according to the information he received from advisers in the past week. That job loss would be double the total this year and could push the nation's unemployment rate past 9 percent if nothing were done.
The new job target was set after a meeting last Tuesday in which Christina Romer, who is Obama's choice to lead his Council of Economic Advisers, presented information about previous recessions to establish that the current downturn was likely to be "more severe than anything we've experienced in the past half-century," according to an Obama official familiar with the meeting.
Officials said they were working on a plan big enough to stimulate the economy but not so big to provoke major opposition in Congress. Obama's advisers have projected that the multifaceted economic plan would cost $675 billion to $775 billion. It would be the largest stimulus package in memory and would most likely grow as it made its way through Congress, although Obama has secured Democratic leaders' agreement to ban spending on pork-barrel projects.
Biden said, as Obama has before, that the plan will aim not just to create jobs, but to do so in ways that will benefit the country over the long term. Examples, he said, would be inbuilding a "smart" nationwide electric grid that makes it easier to transmit wind- and solar-generated energy; or in transferring medical data from paper to electronic form, with near-term costs but long-term savings.
For now, the vice president-elect said, the urgent goal was "to stem this bleeding" in jobs; the fast-rising deficit would be dealt with later.
The message from Obama was that "there was not going to be any spending money for the sake of spending money," said Lawrence Summers, who will be the senior economic adviser in the White House.
Mark Zandi, chief economist of Moody's Economy.com, who was an adviser to Senator John McCain's presidential campaign, said, "My advice is, err on the side of too big a package rather than too little." In an interview, Zandi, who lately has advised Democratic leaders in Congress, also said he would probably soon raise his own recommendation of a $600 billion stimulus.
Besides new spending, the Obama plan would provide tax relief for low-wage and middle-income workers of roughly $150 billion, Democrats familiar with the proposal said. The government would probably reduce the withholding of income or payroll taxes so that most workers received larger paychecks as soon as possible in 2009, an Obama adviser said.
The sorts of jobs Obama would propose to create involve construction work on roads, mass transit projects, weatherization of government buildings and installation of information technology in medical facilities, among others.
The outlines for Obama's emerging plan, which he is developing in consultation with Congress, including some Republicans, were mostly settled last Tuesday when he met for four hours with economic and policy advisers. Obama and his family left Saturday for a two-week vacation in Hawaii, his native state, but the advisers will take his guidance — including instructions to be "bolder," according to one — and complete a draft in time for his return on Jan. 2.
The new Congress convenes on Jan. 6. The House and Senate, with larger Democratic majorities, will work to pass a bill for Obama to sign shortly after his inauguration, on Jan. 20.
The Obama blueprint covers five main areas of spending and tax breaks: health, education, infrastructure, energy, and support for the poor and the unemployed.
Summers said the president-elect set short- and long-term themes in choosing the plan's components: "Creating jobs for people who need them, and doing things that need to be done to lay the foundation for an economy that works for middle-class families."
At the meeting on Tuesday, Romer also laid out recommendations from private sector analysts and liberal to conservative economists for a government stimulus that ranged from $800 billion to $1.3 trillion over two years. Those consulted included Martin Feldstein, a conservative economist and longtime Republican presidential adviser, who is at the low end, and Lawrence Lindsey, a Federal Reserve governor and Bush administration economist, who has recommended up to $1 trillion.
Even before the election, Feldstein was publicly arguing that whoever was elected should immediately begin working with Congress on a big spending package. Since then, Feldstein has also been revising his assessment upward as the economy weakened further. "Without action," he wrote in an e-mail exchange, "the economy will continue to decline rapidly."
Many decisions about the details have not been made, or are tentative pending consultations with Congress. Several hundred billion dollars could go to states and cities to finance public works and subsidize their health and education programs so that local governments do not have to raise taxes and cut essential programs, steps that would be counterproductive economically.
The Obama team has a list of $136 billion in infrastructure projects from the National Governors Association that consists mostly of transit construction but also includes port expansions and renewable energy programs. For education, besides money to build and renovate schools, Obama will call for money to train more teachers, expand early childhood education and provide more college tuition aid.
Federal money to local governments would come with a "use it or lose it" clause under Obama's plans, advisers say. The president-elect will also propose to direct some money to public and private partnerships for major projects like a national energy grid intended to harness alternative energy sources such as wind power.
For those "most vulnerable" because of the recession, as the Obama team describes the needy and jobless population, the president-elect will propose expanding the length of unemployment compensation, as well as food aid and additional support.
With millions more Americans losing their health care coverage, either through job losses or because they can no longer afford to pay for insurance, Obama will propose major new spending to subsidize states' share of Medicaid and their children's health programs, and to expand health care coverage for those who lose insurance from their employers.
Obama plans a down payment on his campaign promise to help pay for hospitals and other medical providers to computerize their health records to save billions in paperwork and administrative costs. He might also propose subsidies to train more nurses, both to create jobs now and address a looming shortage in the health professions.
Obama has spoken in recent days with the Senate majority leader, Harry Reid, and the House speaker, Nancy Pelosi. Last week, Reid's office sent an e-mail message to senators saying that in conversations with the Obama transition team, "we have communicated our willingness to work within these parameters as closely as possible and urge all offices to do the same."

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Australian companies feeling credit crunch
By Sonali Paul and Cecile LefortReuters
Monday, December 22, 2008
MELBOURNE: The credit crunch is likely to get worse before it gets better for Australian companies, as foreign lenders retreat and Australian banks keep tighter control over whom they lend to.
The top Australian banks are all gearing up to shoulder a bigger lending burden, having raised about $14 billion in debt and equity over the past three months, seeing opportunities as foreign banks step back.
Australian and New Zealand companies have more than $24 billion in debt due in 2009 within the realm rated by Standard & Poor's, which includes the global miner Rio Tinto.
Rio Tinto, with $8.9 billion due, and the coal-to-groceries conglomerate Wesfarmers, with 3.5 billion Australian dollars, or $2.4 billion, due, make up about half the total refinancing need.
"Those refinancing pressures are building," said Anthony Flintoff, S&P's senior director of corporate ratings in Australia.
The rating agency warns that while the need is not too large in 2009, the burden will be much bigger in 2010, as a lot of debt that was refinanced this year will come due, as will leveraged buyout debt from three to six years ago.
"You've got these coincident factors that are going to make that the really difficult year, if conditions remain as they are," Flintoff said.
Bank executives say that depending on how sharply foreign lenders pull back, Australian banks will be hard-pressed to fill the breach. That would force more Australian companies to raise equity, cut capital spending or cut dividends.
"We've seen more foreign banks withdrawing from business lending" because "foreign bank head offices dictate capital allocation," said Paul Dowling, principal analyst at the Sydney-based banking research firm East & Partners.
"Domestic banks will not be able to take up that slack entirely," he said, adding that Australian banks were already under pressure to supply credit.
The property sector and businesses exposed to discretionary consumer spending might be most vulnerable.
"Foreign banks have sizable exposure to real estate, and if they decided to pull back from that sector, it would be a challenge," said Joseph Healy, executive general manager for business and private banking at National Australia Bank.
In the retailing sector, Wesfarmers is considered to be facing the most pressure, having bought the major Australian supermarket group Coles and the retailers Target, Kmart and Officeworks for 19 billion Australian dollars at the top of the market last year.
If it runs into problems refinancing its debt, it might have to cut capital spending, which would set back its turnaround plan for the Coles business and clip earnings growth in turn. It is also vulnerable on coal earnings, which are expected to slide in 2009.
The company has indicated it wants to tap the Eurobond market for as much as €3 billion, or $4.2 billion, but analysts say that's dicey.
"The private placement market, the U.S. bond market, Euro market - who knows which will be the first or the deepest to start to accommodate some of these companies?" Flintoff said.
In the property sector, groups with stronger balance sheets should be able to raise capital, but not the weaker trusts.
"The property sector was one of the first sectors to feel the pullback from foreign banks," said Linda Laznik, treasurer at the embattled real estate investment trust GPT Group. "The loan market has been dead for a long time. You can't get money. No one will lend."
"There aren't that many alternatives," she said. "The only one is equity raising, and that's why everyone has been turning to it in the last month or so."
Stockland Group, one of the largest Australian property trusts, has yet to feel the impact of a foreign lending retreat. It recently refinanced 350 million Australian dollars with a foreign bank, said its managing director, Matthew Quinn. But Stockland, like other companies, has already turned to the share market for funds and shored up its balance sheet further this week, flagging a cut in its dividend.
And when will foreign banks come back to ease the pressure? "We don't see them coming back for new business until the second half of 2010," said Dowling of East & Partners.
Cecile Lefort reported from Sydney.

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A word insolvent companies avoid
By Noam Cohen
Monday, December 22, 2008
Perhaps I am like the person who hears the fire truck at night and has to follow to see what's going on. I am a journalist, after all.
Last week, I typed in the Web address: www.madoff.com. When I got there, all that was left of the Web site for Bernard L. Madoff Investment Securities were charred embers. And a note tacked onto a rickety door frame from the authorities ordering the place shuttered. (It was, in fact, a hyperlink to a PDF of a court order, but you get the drift.)
This online glimpse of the decline of a prominent investment firm that the authorities say defrauded its clients out of billions of dollars seemed, oddly enough, to bring back the early days of the Internet when — as the saying went — a Web site was a front porch for the public.
Today's commercial Web sites with Flash animation and sophisticated, interactive software are much more like billboards, sales catalogs and cashier lanes than front porches. Yet when a company experiences tough times, its Web site can lose some its just-so veneer and offer important insights about how, or if, new management intends to move forward.
The Bear Stearns Web site, for example, is still alive and kicking, though it does usher you toward its new parent company, JPMorgan Chase, while the word "strength" dominates the middle of the page.
The Web site for Commerce Bank has vanished entirely; type in its address and you arrive at TD Bank's Web site. The Lehman Brothers site today is plain and gray — it links to Barclays, which bought its North American assets, and to the Lehman bankruptcy proceedings, as well as other companies that bought pieces of the firm.
Using a database of large commercial bankruptcy filings compiled by Professor Lynn LoPucki of the University of California at Los Angeles Law School, I was able to visit the Web sites of more than 20 companies that sought bankruptcy protection this year. While at nearly all of them you would be hard-pressed to find the B-word anywhere near their front pages, many provide a handsome button or tab under the word "reorganization."
Pilgrim's Pride, a food processing company with a cute-as-a-button Web site, uses the reorganization header, but appears to be alone in writing in clear print, "On Dec. 1, 2008, Pilgrim's Pride Corporation voluntarily filed for relief under Chapter 11 of the U.S. Bankruptcy Code."
A pair of home builders, Kimball Hill Homes and Tousa, while avoiding the word "bankruptcy," had a prominent tab or button linking to information about their reorganization plans. At the Tousa Web site, for example, the page is full of guidance about Chapter 11 for customers, investors and suppliers.
By contrast, and more typically, are the sites for retail outlets like Circuit City, the electronics chain, or Bally Total Fitness, where you have to burrow very deeply to find any mention of the companies' financial condition.
Then there is the case of the retail chain Linen 'N Things, which has a banner at the top of the page that reads, "Going Out of Business! Our Last Holiday Season!"
Though the public has become more accustomed to the idea of bankruptcy and how it can be used to keep a business running, several business experts said, it is impossible to deny that the mention of bankruptcy can scare away the public. Using the term carries risks, especially in businesses that want to maintain a good relationship with customers.
But, these experts pointed out, ignoring a bankruptcy filing entirely carries risks as well by appearing to be desperate or lamely trying to pull a fast one on your customers.
To a public relations executive with an Internet bent like Matthew Harrington of Edelman, there is also an ethical obligation.
"If it is going to be addressed in a public way, don't hide it on the Web site," he said. "It doesn't need to be there forever, but there should be an acknowledgment of it somewhere on the home page."
Beyond showing respect for your customers, for businesses that use the Internet to deal with suppliers there are also benefits to telling your story in your own words to help the business operate smoothly.
In many ways, the term reorganization does the trick nicely — a word that signals to suppliers and investors what's happened and the company's future plans. But while the strategies would seem to indicate forethought by companies in bankruptcy, in fact there is a danger that they could neglect the Web site in the rush of other concerns.
Frederick Felman, the chief marketing officer for MarkMonitor, which provides online brand protection for companies, said a company's online presence was valuable, often worth millions, and had to be looked after in the chaos of a bankruptcy filing. "Don't forget about it," he said. "You wouldn't forget that you have $3 million in stock in a retail chain going bankrupt. You'd work out the deals that make sense."
A case in point is the Sharper Image, which was bought in auction in May as part of strategy to close all of its stores and leverage the brand's reputation through licensing.
Customers going to the site today will see a stripped-down single page with a note, "New site coming soon, for further information please e-mail us."

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Judge OKs Lehman settlement with Barclays and JPMorgan
Reuters
Monday, December 22, 2008
By Emily Chasan
A U.S. bankruptcy judge approved a settlement calling for $1.27 billion (£857 million) in cash plus securities with a face value of $5.7 billion to be transferred to Barclays in connection with its purchase of the core U.S. brokerage business of Lehman Brothers Holdings.
The settlement relates to fund transfers made the week of September 15 to keep Lehman's brokerage business operating while the parent company filed for Chapter 11 bankruptcy.
U.S. Bankruptcy Judge James Peck approved the settlement on Monday and said the Lehman creditors committee could conduct further inquiries into the agreement if it chose.
"This settlement represents a significant benefit to (Lehman Brothers) and is the right thing to do," Peck said, citing representations made by lawyers for JPMorgan Chase & Co , Barclays, Lehman and the Federal Reserve Bank of New York in court on Monday.
The securities being transferred, many of them mortgage-backed securities, have declined substantially from their original value, lawyers for the various parties said in court. They declined to give the current value of the securities.
According to court papers, the $7 billion in cash and securities stemmed from a sum Barclay's had expected to receive after loaning $45 billion to the Lehman brokerage business on September 18, two days before the court approved its purchase of the unit.
The broker-dealer needed the funds to guarantee its short-term obligations. It had been given assistance earlier that week from the New York Fed, which made a short-term loan worth $46.22 billion to Lehman.
Barclays had expected $49.7 billion to be returned to it from Lehman as part of its loan, but only $42.7 billion could be transferred before the court ordered the liquidation of Lehman's brokerage business.
The securities and cash will come from Lehman Brothers Inc accounts at JPMorgan Chase & Co , according to court papers. JPMorgan has agreed to release liens it has on those accounts. Lehman Brothers Inc is the brokerage business that is being liquidated by a trustee to facilitate the transfer of customer accounts to Barclays and other parties.
Harvey Miller, a lawyer representing bankrupt Lehman Brothers Holdings, told the court that the brokerage's former parent company did not object to the settlement and that it would spare the company significant future litigation.
(Reporting by Emily Chasan; editing by John Wallace)



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New Zealand GDP drops by most in 8 years

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Caterpillar to cut its managers' pay
The Associated Press
Tuesday, December 23, 2008
Caterpillar Inc., the mining and construction equipment maker, said Monday that it would cut executive compensation by up to 50 percent next year because of weakening global demand.
Pay for senior managers also will be reduced next year by 5 to 35 percent, the company said. Other management and support staff members will see a reduction of up to 15 percent.
Caterpillar, based in Peoria, Illinois, said the cuts reflected planned reductions in its incentive program and equity-based compensation. It has instituted a hiring freeze and plans to suspend merit increases for managers and support employees.
American-based management and support employees were also being offered incentives to leave voluntarily, the company said. Eligible employees have until Jan. 12 to join the program.
"We understand these decisions will disrupt the lives of many of our employees and their families, and we regret the need to take these steps," the chief executive, James Owens, said in a statement.
The announcement was the latest cost-cutting measure by the company, which has laid off employees and cut contract workers in response to the global economic turmoil that has hurt demand for its products.
The company said Monday that it would continue to carry out cost-saving measures, including temporary factory shutdowns and more layoffs as needed.

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Some U.S. employers avoid layoffs with other cuts
By Matt Richtel
Tuesday, December 23, 2008
Even as layoffs reach historic levels, some employers in the United States have found an alternative to slashing their work forces. They're nipping and tucking instead.
A growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations and voluntary or enforced furloughs, along with wage freezes, pension cuts and flexible work schedules. These employers are still cutting labor costs, but hanging onto the labor.
In some cases, workers are even buying in. Witness the unusual suggestion made in early December by the chairman of the faculty senate at Brandeis University, who proposed that the school's 300 professors and instructors give up 1 percent of their pay.
"What we are doing is a symbolic gesture that has real consequences - it can save a few jobs," said William Flesch, an English professor.
He said more than 30 percent had volunteered for the pay cut, which could save at least $100,000 and prevent layoffs for several employees. "It's not painless, but it is relatively painless and it could help some people," he said.
Some of these cooperative cost-cutting tactics, though not unique to this downturn, are effectively democratizing the cost-cutting process.
More broadly, the reasons behind the steps - and the rationale for the sharp growth in their popularity in just the past month - reflect the peculiarities of this recession, its sudden deepening and the changing dynamics of the global economy.
Companies trimming their work forces say this economy plunged so quickly in October that they do not want to prune too much, lest it should just as suddenly roar back. They also say they have been so careful about hiring and spending in recent years - particularly in the past 12 months - that highly productive workers, not slackers, remain on the payroll.
At some companies, employees are supporting the indirect wage cuts - at least for now. The downturn hit so hard, with its toll felt so widely through hits on pensions and retirement plans and with the future so murky, that employers and even some employees say it is better to accept minor cuts than risk more draconian steps.
The rolls of companies nipping at labor costs with measures less drastic than wholesale layoffs include Dell (extended unpaid holiday), Cisco (four-day year-end shutdown), Motorola (salary cuts), Nevada casinos (four-day workweek), Honda (voluntary unpaid vacation time) and The Seattle Times (a week of unpaid furlough for 500 workers, for a saving of $1 million). There are also numerous midsize and small companies trying such tactics.
To be sure, these efforts are far less widespread than layoffs, and outright pay cuts still appear to be rare. Over all, the average hourly pay of rank-and-file workers - who make up about four-fifths of the work force - rose 3.7 percent between November 2007 and last month, according to the latest Labor Department data.
Watson Wyatt, a consulting firm that tracks compensation trends, published survey data last week that found that 23 percent of companies planned layoffs in the next year, down from 26 percent that said in October that they planned such action.
Companies seem particularly determined to find alternatives to layoffs in this recession, said Jennifer Chatman, a professor at the Haas School of Business at the University of California, Berkeley.
"Organizations are trying to cut costs in the name of avoiding layoffs," she said. "It's not just that organizations are saying, 'We're cutting costs,' they're saying, 'We're doing this to keep from losing people."'
She said the tactic builds long-term loyalty among workers who are not laid off and spares the company from having to compete again to hire and train anew.
That was part of the thinking at Global Tungsten & Powders, a metal plant in Towanda, Pennsylvania, whose business has dropped 25 percent in a year. The company has already cut overtime and travel, as well as purchases of office supplies and equipment. It is now encouraging its 1,000 workers to take unpaid furloughs to stave off deeper cuts.
"We have a very skilled and competent work force and the last thing we want to do is lose them when we're assuming this economy is going to come back," said Craig Reider, the company's director of human resources. Workers, he said, are buying into the concept.
"In this holiday season, many employees want to support our efforts here to minimize costs," he said.
In San Francisco, a Web design firm called Hot Studio laid off a handful of workers when the dot-com bubble burst in 2000. But the company's owner, Maria Guidice, said the tactic had been painful, and she did not want to repeat it. This time, her first step is to take away bonuses - for the first time in the company's 12-year history - and instead give people paid time off over the holidays.
"In 2000, it was like 'cut the heads,"' she said of the ethos of the era. This time, she says, it feels different. "Our No. 1 priority is to keep people employed and to do that we're going to bank the money and keep it for when we need it," she said, adding, "I know some people are super bummed, but they understand we're trying to keep the work force intact."
Several employees at Hot Studio said they did not mind the policy. "People feel they'd much rather have a job in six months than get a bonus right now," said Jon Littell, a Web designer.
The magnanimous feeling will probably pass, said Truman Bewley, an economics professor at Yale who has studied what happens to wages during recessions. If the sacrifices look as though they are going to continue for many months, he said, some workers will grow frustrated, want their full compensation back and may well prefer a layoff that creates a new permanence.
"These are feel-good, temporary measures," he said.
But John Challenger, chief executive of Challenger, Gray & Christmas, a company that tracks layoffs, said employers were being driven now not by compassion but by hard calculations based on data they had never had before. More than ever, he said, companies have used technology to track employee performance and productivity, and in many cases they know that the workers they would cut are productive ones.
"So companies know that when they're cutting an already taut organization, they're leaving big gaps in the work force," he said.
At Pretech, a concrete manufacturer in Kansas City, Kansas, that has not had a layoff in 15 years, part of the rationale is pride. The company has cut overtime, traded a $5,000 holiday party for an employee-only barbecue lunch, and trimmed its pipe-making operation to four days from five, which allows it to save on heating and electrical costs.
Business is down sharply in some of the company's divisions, but Pretech is also transforming to take on more work making concrete for infrastructure jobs, like the kind the government might support through stimulus efforts, said the company's co-owner, Bob Bundschuh.
He said employees seemed to embrace the changes, knowing that a small sacrifice in overtime pay could preserve their jobs and the health insurance benefits that go with them.
"We're optimistic about the future," he said, adding that he thought things could turn around in six months. If so, "We want our guys to stay around because they're good guys and they work hard."

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Hyundai Motor cuts hours further on weak sales



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Slumping markets put dent in takeover fees for banks
By Michael FlahertyReuters
Monday, December 22, 2008
HONG KONG: Fees from mergers and acquisitions, a major source of revenue for investment banks, are down by one-third this year, after plunging global markets crippled financing for takeovers and led to the collapse of a record number of deals.
The picture for the fees in the first half of next year is not looking any brighter, investment bankers say, as few see any real recovery in global markets soon.
Private equity buyers are still mainly on the sidelines, unable to get loans for big deals.
In a sign of the times, the revenue from fees for advising buyers and sellers of distressed companies and corporate restructurings is expected to increase as tough economic times continue.
That activity will keep fees flowing into banks, though the size of deals in this category are typically smaller than those reaped in heavy takeover periods.
"There is no single geography left untouched," said Matthew Hanning, Asia-Pacific head of mergers and acquisitions and corporate advisory at UBS. "Any entity anywhere with debt maturing may potentially be faced with liquidity issues. And if they are, then M&A is likely to become one of their strategic options."
In addition to distressed deals, countries like China and Japan are likely to feed the flow of deals, as companies there with large cash reserves have shown an increasing appetite for overseas acquisitions.
Any way the 2008 results for merger and acquisition fees are viewed, however, presents a grim picture of the current takeover climate.
Global merger and acquisition fees have fallen 32 percent this year to $34.2 billion, according to calculations by Thomson Reuters and Freeman & Co.
Goldman Sachs earned the most in these fees, according to the data, taking in $1.58 billion. JPMorgan ranked second with $1.32 billion and UBS third with $1.1 billion. Goldman raked in nearly $3 billion last year in these fees, data show.
The fee results are seen by some as more important than the overall advisory rankings, because fees translate into actual revenues for the banks. It is fairly common to get credit but no money for advising on a deal.
Yet fee rankings are also inexact, because most agreements are negotiated in private. Freeman & Co. says it uses a proprietary algorithm to tally fees that are not disclosed.
For banks helping to sell a company, an upfront fee is usually paid, plus fees for completing the deal. Advisers defending against an offer earn a payout if the hostile bidder fails.
For firms advising buyers, some upfront fees may be negotiated, but in most cases bankers get the lion's share of their fees if their clients complete the takeover. Closing fees are, on average, about 1 percent of the total transaction.
More takeover offers fell apart this year than ever before.
Advisers for BHP Billiton's failed hostile offer for its rival, Rio Tinto, were on the losing end of the largest ever withdrawn merger.
The all-share bid lost about two-thirds of its value in the months before it collapsed but was still worth $66 billion when BHP pulled out last month.
According to Thomson Reuters and Freeman, based on the peak offer, BHP's advisers were expected to receive a total of $140 million in fees, an estimate that includes upfront and closing fees. They likely made only between $10 million and $15 million.
Merger and acquisition fee totals are down 40 percent in the United States, 34 percent in Europe, and 11 percent in Asia, excluding Japan.
"Compared to other areas, like the debt and equity markets, deals and fees in the M&A space are holding up fairly well," said Hanning, of UBS, who is based in Hong Kong.
For involvement on any Asian deal outside of Japan, UBS ranked No. 1, with estimated fees of $120 million on 52 deals, according to calculations by Thomson Reuters and Freeman.
Asia, however, is the region most in need of merger and acquisition fees to make up for lost revenue from equity capital market deals.
Equity capital markets in Asia in the last two years generated about 70 percent of banking fees. By comparison, such deals in the United States generated about 25 percent of the fee pool, while mergers and acquisitions made up about 50 percent, Freeman says.
Equity capital market activity is all but dead around the globe, as investors are unwilling to put money into initial public offerings or other types of equity issuances, with a few exceptions.
In Asia, Credit Suisse ranked second in mergers and acquisitions with $109.9 million in fees on 58 deals, and JPMorgan third with $108.7 million on 42 deals. Morgan Stanley, ranked first last year, fell to sixth place with $101.4 million in fees on 54 deals, according to Thomson Reuters and Freeman.

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Investors tiptoe back into stocks
By Natsuko Waki
Reuters Monday, December 22, 2008
LONDON: Global investors lifted their equity holdings for the second month running in December and sold bonds, thanks to signs of stabilizing stock markets and tumbling government bond yields, Reuters polls showed Monday.
Surveys of 44 leading investment houses in the United States, Japan, continental Europe and Britain showed an average mixed-asset portfolio holding 56 percent in stocks, up from 54.8 percent in November. However, it still remained below the long-term average holding of almost 60 percent.
Bond holdings fell to 33 percent in December from 34.3 percent the previous month, above the long-term average of around 32 percent.Cash rose to 5.4 percent from 5.3 percent.
A rise in the respondents' equity holdings comes as world stocks, measured by MSCI, rose nearly 20 percent after hitting a five-and-a-half-year low on Nov. 21.
A worldwide round of central bank interest rate cuts and the introduction of stimulus packages in major developed and emerging economies have helped convince many investors that stock markets might bottom before long, or have already done so.
"We expect stock prices to rise, bolstered by various countries' measures to deal with the financial system and boost their economies," said Yuichi Kodama, senior economist at Meiji Yasuda Life in Tokyo.
A recent investor rush into safer government bonds, especially in the United States, pushed short-term yields below zero and long-term yields to multi-decade lows. This is also encouraging fund managers to move back into risky assets.
"Treasuries are the latest bubble," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management. "Given the low yield levels today - macro concerns as well as liquidity preferences - government notes are overpriced. We see a market correction on the horizon."
U.S. fund managers raised their stock holdings in December, reversing sales a month earlier during a hedge-fund-driven sell-off.
The 12 fund management companies in the United States poll had 61.9 percent of their assets in equities in December, up from 60.9 percent in November on a like-for-like basis.
These firms decreased their bond holdings to 29.6 percent in December from 30.4 percent the previous month, while holding 2.9 percent of their assets in cash.
Continental European fund managers raised their equity holdings to a four-month high and cut bond holdings.
The 11 investment houses in the poll cut bond holdings to 37.6 percent from a 21-month high of 39.5 percent in November.
Allocation to equities rose for the second straight month to 46.3 percent, its highest since August. Cash holdings rose to 5.9 percent from 4.3 percent.In Britain, fund managers raised stocks to 63 percent of their portfolios while they cut back on bonds to 22.7 percent. Cash dipped to 7.5 percent.
"Many of the building blocks for a recovery in financial markets are falling into place," said Andrew Milligan, head of global strategy for Standard Life Investments. "
There is considerable value in a number of asset classes, bonds and equity, even parts of commercial property."
Japanese fund managers also raised their global stock weighting. The average stock allocation for 12 fund managers rose to 52.8 percent in December, from 52.3 percent in November, which had matched a three-year low hit in October.
Bond allocations ticked down to 42.2 percent in December from 42.3 percent last month. Cash also fell to 5.1 percent from 6.1 percent.
The weighting for U.S. and Canadian shares rose to 47.3 percent from 44.9 percent, while those for euro zone equities also rose to 14.5 percent from 13.1 percent.
Within bonds, the weighting for the euro zone rose to 39.7 percent - its highest level since 40.2 in April 2004 - from 39 percent, on the view that the euro zone still had a lot of room left for more rate cuts, compared to other areas.
The weighting for U.S. bonds fell to a six-month low of 29.6 percent from 30.4 percent, partly on worries about a further decline in the dollar.

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Breakingviews.com: Game changes for hedge funds
Monday, December 22, 2008
Hedge funds have suffered a shakeout in 2008. The average hedge fund fell almost 20 percent, according to Hedge Fund Research. No fund has yet required a bailout. But many won't be around in the new year, and those that have survived are battered and bruised. Hedge fund managers must accept that the industry won't be quite the same again.Here are six changes they need to prepare for:Liquidity is the new watchword. Like investment banks, hedge funds didn't think much about the structure of their financing during the boom times. But a flood of redemption requests in late 2008, just as they were struggling with illiquid markets and scarce credit, caught them out. Many hedge funds annoyed their investors by blocking withdrawals. In the future, funds that invest in illiquid assets will need to lock in their investors longer. And those wishing to give investors regular access to their money will have to focus on liquid markets.Fees will face greater scrutiny. The archetypal hedge fund charges 2 percent of assets and skims off 20 percent of investment gains, the longstanding "2-and-20" structure. But some funds have had to offer breaks on fees lately to persuade investors not to take their money out. Investors will be more selective and are likely to put downward pressure on fees. All the same, it is probably too soon to sound a Last Post bugle call for 2-and-20.High-water marks will blur. A hedge manager who loses money normally has to get the fund back up to its previous high for each investor, the so-called high-water mark, before the investor has to pay any more performance fees. Broadly speaking, a fund that is down 20 percent from its peak and has a standard high-water mark mechanism would need to deliver returns of 25 percent before getting back to its high-water mark and earning performance fees again on further gains.That prospect is daunting. It can leave hedge funds short of cash and their employees wondering where their bonuses will come from. Some managers will throw in the towel. This is why some already use a modified mechanism allowing them to earn reduced performance fees on gains even before they have recouped earlier losses in full. Expect more funds to adopt similar policies.Regulation will intensify. Many hedge funds, including big names like the Citadel Investment Group, have had a horrid 2008. But unlike the banking sector, they have not needed bailouts. That doesn't, however, mean hedge funds will escape tighter regulation. Big losses, excess leverage, unexpected curbs on investor withdrawals and the impact of short-selling on fragile markets make hedge funds easy targets for a crackdown.Regulators also missed warning signs surrounding Bernard Madoff, who is accused of running a Ponzi scheme that cost investors as much as $50 billion. His investment operation appeared like a hedge fund in that it was private and he purportedly traded options as well as stocks. Watchdogs and investors will, therefore, share a desire for greater disclosure, so long as it is meaningful. The challenge will be in writing sensible regulations that can be applied across a diverse industry.Concentration will accelerate. Consolidation among hedge funds was under way before the pain of 2008. Hedge funds are set to start the new year managing little more than half the nearly $2 trillion in investors' money that they held earlier in 2008. Only a handful of top performers - like Paulson & Co., which oversees $36 billion - are bigger than they were a year ago. Smaller firms, many of which have lost money and become smaller still, will be vulnerable to closure and consolidation. Funds under management will become increasingly concentrated among larger hedge funds, which are favored by institutional investors and in some cases have achieved better investment performance than their rivals.Unleveraged returns should improve. The credit boom allowed funds to prosper even if their investment strategy was simply to use borrowed money to amplify tiny returns. But a smaller hedge-fund industry operating in a deleveraged financial world should be able to find more opportunities to make decent returns without exploiting leverage.That's another way of saying that after a rotten year, stable and committed hedge funds should be able to do well again. That's cold comfort for those who have lost big. But it suggests that some in the industry will live to fight another day. - Richard Beales

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Buffeted "quants" are still in demand
Reuters
Monday, December 22, 2008
By Phil Wahba
Last week, New York University and Carnegie Mellon sent a new class of math whizzes out into a profession that is both blamed for the financial collapse and charged with preventing it happening again.
Many of these so-called quantitative analysts, or "quants," graduating from elite financial engineering courses will end up writing computer programs that handle an ever greater share of market trading.
Because some of their mathematical models failed to take into account factors that later turned out to be crucial, quants have been blamed for compounding risk and exacerbating the crash in financial markets.
But far from going into decline, those with financial engineering degrees are still in demand as hedge funds and banks seek ways to measure previously unforeseen risks and factor them into their models.
The profession's reputation took a beating in August 2007, when some quant funds -- which try to beat the market by crunching vast amounts of data at lightning speed -- lost a third of their value in a matter of days.
Many blamed the math commandos for failing to factor in extreme events, in this case unprecedented numbers of home mortgage foreclosures.
Critics and practitioners alike agree they need to improve their modelling, and that begins at the elite financial engineering programs, which have come to be known as "quant farms."
Both New York University and Carnegie Mellon University in Pittsburgh, which between them minted about 100 new quants this month, have tweaked their curricula, lest their graduates miss another brewing disaster.
Meanwhile, at Columbia University, the masters of financial engineering program has tried to give its students a wider view of the market outside mathematical models, said program director Emanuel Derman.
"You have to understand you are dealing with people and markets, and they don't respond the way physical systems do," said Derman, a former managing director at Goldman Sachs .
PLUS CA CHANGE
As the mortgage crisis gathered steam last year and financial markets became volatile, quant funds, which make up about 7 percent of the hedge fund universe, were caught flat-footed.
To raise cash, they started selling stocks, which created unusual moves in stock prices, throwing other quant models off. Finally, the selling snowballed into a full market panic.
"Before you know it, you have a chain reaction and the whole market dives on the basis of what amounts to a mathematical prediction," said Peter Morici an economics professor at the University of Maryland.
"You create a mathematical herd. That's why so often these schemes based on math models end in tears."
Among those in tears were investors in Goldman Sachs' Global Opportunities Fund, which lost a third of its value, or $1.8 billion, in a single week in August 2007. Other big quant funds also haemorrhaged that month.
In his book "A Demon of Our Own Design," published in April 2007, hedge fund manager Richard Bookstaber made the case that financial innovation actually adds to risk because it fails to take emotion into account.
The models increasingly assume rational behaviour, instead of the way humans really behave, he wrote.
Some institutional investors have said quants become too enamoured of their creations to notice when they turn into mathematical Frankensteins, especially in new, untested markets such as securities based on bundled mortgages.
"They get caught up in their religion -- they keep going merrily along on autopilot," said Matt McCormick, an analyst and portfolio manager with Bahl & Graynor Investment Counsel in Cincinnati. "There's no substitution for grey hair and your gut when you see valuations that are out-of-whack."
Nassem Taleb, a former trader who wrote the best seller "Black Swan: The Impact of the Highly Improbable," is even more outspoken. "Quants and quant programs are dangerous to society," he said.
The failure last year to foresee that subprime borrowers might default on their mortgages is only the latest example of mathematical models that rule out possible sets of circumstances because they were highly unusual.
In 1998, Connecticut hedge fund Long-Term Capital Management collapsed because its mathematical model failed to foresee the Russian debt crisis.
"And LTCM was constructed by Nobel laureates," Morici said.
Those laureates, Robert Merton and Myron Scholes, along with Fischer Black, are considered the fathers of quantitative analysis for the Black-Scholes model, developed in 1973, for predicting option prices.
That model has underpinned countless portfolio management strategies, including portfolio insurance, which combines options and market indices to protect a portfolio's value, and which some blame for worsening the spiral that led to the 1987 market crash.
In that episode, critics charged, the model failed to factor in the difficulty of selling stocks as required by the strategy. As selling grew harder, more stocks were sold, feeding the panic.
But defenders of the profession say at least some of the criticism should be directed at the fund managers who come up with the strategies, rather than the quants who implement them.
And, as long as the strategy is working, no one wants to question it.
"It's an arms race where no one has an incentive to pull back on their own," said Andrew Lo, director of the Massachusetts Institute of Technology's Laboratory for Financial Engineering, another quant farm.
"When people are making money, it's virtually impossible to get them to take their hand out of the fire."
TWEAKING CURRICULUM
Quant farms started appearing at leading engineering schools in the United States in the mid 1990s, with Carnegie Mellon first out of the gate with its master's in computational finance in 1994.
Now there are more than 20 programs from Cornell University in Ithaca, New York, to University of California at Berkeley.
Abroad, they have sprouted at schools such as HEC Montreal, City University in London and Bocconi University in Milan.
"Quants need to question their own assumptions," said Gregg Berman, co-head of RiskMetrics Group's risk management business and a former quant. "Unfortunately in quantitative finance, there are many who come from a schooling that's very theoretical."
One suggestion he has is to teach students more about how interconnected the various players in finance are. "We have to understand how contagion can spread between strategies. Risk management should not be divorced from investment management."
New York University, for example, is planning to introduce more classes aimed at reducing mispricings, which have wreaked havoc with models. It will also beef up its teaching of "crash risk," said Petter Kolm, the quant program's deputy director.
Kolm defends this field of study against critics.
"Quant finance is bringing a scientific method into finance," he said. "Fifty years ago it was more of an art, more about a qualitative assessment and experience, and now it's a more vigorous framework."
TIGHT JOB MARKET
The bloodbath on Wall Street has dimmed the job prospects of the new batch of baby quants leaving programs this month.
"This is the toughest market I've ever seen," said Rick Bryant, executive director of the quant program at Carnegie Mellon. "Right now we're 69 percent placed."
Columbia and NYU are seeing the same thing.
"The job situation is going to be worse for a while, that's for sure," said Columbia's Derman. "Historically, quants have worked at investment banks, and in the past few months there has been a mass evaporation of investment banks."
Kolm said about 55 percent of half of New York University's class of 2008 has been placed. Normally that rate would be between 80 and 90 percent at this point.
But that's not to say there are no high-paying jobs waiting for them.
"Risk management is still a growth area, and pension funds, hedge funds and mutual funds are still looking for talent," Carnegie Mellon's Bryant said.
Some jobs, such as those in investment banks' structured credit desks, are largely gone, but there are areas where quants remain in high demand. Such as hedge funds.
"If they've survived, they're hiring and are looking for people to who can sniff through the toxic waste and price CDOs (collateralized debt obligations)," Bryant said.
Even the former investment banks are still hiring for certain jobs, he said. For example, one student has been hired by Morgan Stanley to price and assess counterparty risk, something that was "hardly on anyone's radar last year."
For all the lashing the profession has taken, it is still hard to get into.
Columbia admits only about 10 percent of students who apply and the schools collectively only churn out about 2,000 new quants per year worldwide.
Bryant said his graduates from 2007 commanded a mean base salary of $96,000, with an large majority getting signing bonuses that averaged $37,000.
Listings at the job search site quantfinancejobs.com shows how well paid they continue to be. One New York based electronic trading fund last week was advertising for a quant trader for between $150,000 and $500,000, while a London-based hedge fund was offering between 90,000 pounds and 200,000 pounds for a PhD quant trader.
"The quest for the holy grail goes on," Bryant said. "People will continue to try to beat the market using quantitative models and the latest technology."
(Reporting by Phil Wahba; Editing by Eddie Evans)


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Shopper numbers fall over weekend
Industrial orders plunge in Europe
Japanese exports fell at record pace in November



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China fights "Mafia-style" gangs as crisis bites
Reuters
Monday, December 22, 2008
BEIJING: China plans to set up a new police division to combat growing Mafia-style gang violence as the global financial crisis bites and millions find themselves out of work, state media said on Monday.
Police were keeping "a close eye" on crimes stemming from unemployment as falling demand from overseas leads to the closure of factories, especially in the once-booming south, a senior official from the Ministry of Public Security was quoted as saying.
"Murder, rape, robbery, kidnapping, assault ... they dare do anything," an unidentified director of the ministry's organized crime investigation division was quoted as saying. "Gang-related crimes have become a threat to our social stability and the economy."
At least four million migrant workers have lost jobs in the cities. Urban unemployment is running at 9.4 percent, double the official figure, the Chinese Academy of Social Sciences (CASS) estimated last week.
On top of that, more than six million students will try to enter China's workforce next year, half a million more than last year.
"Tremendous economic and social changes that the country is going through are behind gang crimes," Liang Huaren, a professor in criminal law at China University of Political Science and Law, was quoted by the China Daily as saying.
"The large number of laid-off workers and migrants, as well as the widening gap between the rich and the poor, are also the reasons."
(Reporting by Beijing newsroom; Editing by Nick Macfie)

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Aeroflot flight lands in Athens after bomb threat
Reuters
Monday, December 22, 2008
By Lefteris Papadimas
An Aeroflot flight from Athens to Moscow turned back in midair on Monday after receiving an anonymous bomb threat, but no explosives were found after police searched the plane in the Greek capital.
The Airbus A-319 carrying 49 passengers had been flying for around an hour when officials at Athens' Eleftherios Venizelos International Airport ordered it to turn back.
"An unknown man called and said there was a bomb on the Aeroflot plane headed from Athens to Moscow," a Greek civil aviation official told Reuters.
"We told the pilot to return to Athens for the appropriate checks. The plane was near the border with Turkey at the time."
Passengers were quickly disembarked from the flight and police conducted a thorough search but failed to find any explosives.
An airport official told Reuters that the aircraft will fly to Moscow later today.
(Additional reporting by Tatiana Fragou in Athens and Moscow bureau)

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Private colleges worry about a dip in enrollment
By Tamar Lewin
Monday, December 22, 2008
First came the good news for St. Olaf College: early-decision applications were way up this year.
Now comes the bad news: the number of regular applications is way down, about 30 percent fewer than at this time last year.
"To be quite honest, I don't know how we'll end up," said Derek Gueldenzoph, dean of admissions at the college, in Northfield, Minnesota. "By this time last year, we had three-quarters of all our applications. The deadline's Jan. 15. If what we've got now is three-quarters of what we're going to get, we're in big trouble. But if this turns out to be only half, we'll be fine."
Not all private colleges are reporting fewer applications this year. Even in the Midwest and Pennsylvania, where most colleges seem to have dwindling numbers, some are getting more applications than ever. Still, in a survey of 371 private institutions released last week by the National Association of Independent Colleges and Universities, two-thirds said they were greatly concerned about preventing a decline in enrollment.
Getting exactly the right enrollment — always a tricky proposition — is especially crucial for small colleges with tuition-driven budgets. One case in point came last month, when Beloit College in Wisconsin announced it would eliminate about 40 positions because 36 fewer students than expected had enrolled. The college has about 1,300 students and gets three-quarters of its $55 million budget from tuition.
Admissions officers nationwide point to several possible reasons for the drop in applications. Some students have pared their college lists this year. Many more are looking at less-expensive state universities. Many institutions accepted more students under binding early-decision programs, and each such acceptance drains off an average of 8 to 10 regular-decision applications. And some experts suspect that students are delaying their college plans.
The deadline at most colleges is still a few weeks off, so a last-minute flood of applications could raise the numbers to last year's level. But admissions officers say they are not counting on that.
"I've been doing this a long time, and I don't remember a year when applications started out behind and didn't end up behind," said Steve Thomas, director of admissions at Colby College in Waterville, Maine, where early-decision applications were higher than usual but regular applications are running about 14 percent behind.
At Gettysburg College in Pennsylvania, where early-decision applications were up, regular applications are down about 15 percent, said Gail Sweezey, the director of admissions.
"One thing that's happened this year is that there's all this talk, and one-sided media stories, about how private colleges are unaffordable," Sweezey said. "It's become almost viral that there's no loans, that schools are having problems. The truth is that a lot of private colleges have more financial aid available this year, but there's lots of misinformation out there. And my guidance counselor friends tell me students may be applying to fewer places and turning to their state university, which will be at capacity."
If some private colleges are grappling with the specter of too few applications, public universities and community colleges are having the opposite problem — more students at a time when their state financing is being slashed.
In California and Florida, some public institutions have been forced to cap enrollment. And even in states like Pennsylvania, where the number of high school graduates is declining, applications to public universities are growing.
"We have 47,971 applications as of now, compared to 45,760 at this time last year," said Anne Rohrbach, executive director of undergraduate admissions at Pennsylvania State University. "We've been making offers since October, and we've already had 1,638 students say yes, compared to 1,096 at this time last year."
Generally, Ivy League universities with generous aid packages to low- and middle-income families have as many applicants as ever — and even more applying for financial aid.
"We had 27,462 applications last year, and we've been running almost exactly on last year's pace," said William Fitzsimmons, dean of admissions at Harvard College, which has eliminated early decision. "More students are applying for financial aid. It's a significant increase, four full percentage points ahead of last year."
Yale received 5,556 applications this year, 14 percent more than last year, for its nonbinding single-choice early action program, said Jeffrey Brenzel, the dean of admissions, who added that regular applications were running higher, too.
Dartmouth has more applications than ever, early and regular, as do Duke University, the University of Denver and the University of Rochester.
Jonathan Burdick, the dean of admissions and financial aid at Rochester, said the school's reputation for generous merit aid helped draw applicants.
"This is a time when families may be looking at options that are less costly," Burdick said. "There are a lot of families who may make $180,000 to $200,000 but can't afford $50,000 a year and might apply to a Rochester, where merit aid this year can be as much as $14,000."
Many selective private colleges say fewer applications are no problem.
"We're down about 16 percent now, and I think we'll be down 10 to 15 percent at the end, Jan. 1," said Monica Inzer, the dean of admission and financial aid at Hamilton College in Clinton, New York. "If our acceptance rate goes up a little, that's O.K."
Mark Hatch, vice president for enrollment management at Colorado College, said he expected to have about 5 percent fewer applicants this year and took a similar view.
"We admitted 26 percent last year, and if it's 31 percent this year, we'll make more people happy," Hatch said. "I think the economic uncertainty has families, even families of means, telling their children to round out their college lists with state universities. This year, families want two safety nets, one for the first hurdle, admission, and one for affordability. Anecdotally, I've noticed a lot of parents this year listing their occupation as unemployed."
At many colleges, financial aid requests are up significantly. At Connecticut College, for example, 42 percent of the accepted early-decision students applied for financial said, compared with 34 percent last year — and 36 percent qualified for aid, compared with 24 percent last year.
This has been a particularly difficult year for small private colleges that accept a majority of their applicants.
Stephen MacDonald, the president of Lebanon Valley College in Annville, Pennsylvania, where applications are down about 15 percent, is taking steps to lure more students, including adding lacrosse for men and women and hiring a prominent coach, which he thinks will attract 20 to 25 students.
"We've also increased our scholarship award to children of alums, from $500, which is a nice gesture, to $2,500 a year, which is more than a gesture," MacDonald said.
"We could still end up down 3 percent, which could sting," he said. "This is a time when schools like ours, private liberal arts colleges that don't have a big name, are in a potentially dangerous realm."







India gives Pakistan letter said to be gunman's
By Somini Sengupta
Monday, December 22, 2008
NEW DELHI: India on Monday gave Pakistan what it called proof of Pakistani involvement in last month's terrorist attacks in Mumbai. The move built public pressure on India's neighbor, where the senior-ranking member of the American military arrived for talks for the second time since the attacks.
The Indian Foreign Ministry announced late Monday that it had given Pakistani officials here what it described as a letter from the lone surviving attacker. In the letter, the Indian ministry said, the gunman, Muhammad Ajmal Kasab, said he and his nine accomplices were "from Pakistan." India did not make the specific contents of the letter public.
Pakistan's Foreign Ministry acknowledged receipt of the letter, saying only that "the contents of the letter are being examined." The government in Islamabad, Pakistan's capital, has denied any links to the terrorist attacks and pressed India to offer proof. American officials have in turn pressed Pakistan to do more to crack down on terrorist groups operating within its territory.
India and the United States have attributed the three-day attack on India's financial capital to Lashkar-e-Taiba, a banned group based in Pakistan that has fought Indian forces in Indian-controlled Kashmir for years.
The attacks killed 163 victims, and 9 of the assailants, and have raised tensions between India and Pakistan. A scheduled cricket match between them has been canceled and peace talks, including a planned expansion of trade, have been suspended. Pakistan has arrested several members of the banned group, but it said it would not turn over fugitives and suspects wanted in the Mumbai or previous attacks in India to the Indian authorities.
On Monday, the Indian foreign minister, Pranab Mukherjee, said that New Delhi was prepared to act against Pakistan, even if other nations were not. "While we continue to persuade the international community and Pakistan, we are also clear that ultimately it is we who have to deal with this problem," he said.
Mukherjee has said India does not plan to go to war, but he maintained that it had not ruled out any options. "Pakistan's response so far has demonstrated their earlier tendency to resort to a policy of denial and to seek to deflect and shift the blame and responsibility," he said.
Pakistan's prime minister, Yousaf Raza Gilani, repeated that his country did not invite war either but was prepared to respond.
"If war is imposed upon us, the whole nation would be united and the armed forces are fully capable of safeguarding and defending the territorial integrity of the country," the state-run Associated Press of Pakistan said.
The United States has sought to cool tempers in Islamabad and New Delhi. Secretary of State Condoleezza Rice visited both capitals in the immediate aftermath of the attacks, as did the chairman of the Joint Chiefs of Staff, Admiral Mike Mullen.
On Monday, a statement from the American Embassy in Islamabad said Mullen had met with the leaders of the Pakistani Army and spy agency, commending the arrests of the Lashkar leaders and urging them to "prosecute the cases fully and transparently." He encouraged them "to use this tragic event as an opportunity to forge more productive ties with India and to seek ways in which both nations can combat the common threat of extremism together," the statement said.
Pakistan and India have fought three wars since being carved out of British India in 1947.

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India says Pakistan shifting Mumbai blame
Reuters
Monday, December 22, 2008
By Bappa Majumdar and Zeeshan Haider
India accused Pakistan on Monday of trying to shift blame for the Mumbai attacks and demanded it do more to dismantle militant networks, while a top U.S. commander landed in Islamabad for more talks.
As tension between the nuclear-armed neighbours simmered, Pakistani Prime Minister Yousaf Raza Gilani said the armed forces were fully capable of defending the country and the people would be united if war was imposed.
India and the United States have blamed Pakistan-based militant group Lashkar-e-Taiba (LeT) for last month's attacks which have provoked a sharp rise in rhetoric between the nuclear-armed neighbours who have fought three wars since 1947.
Pakistan denies any links to the assault on India's financial heart, which killed 179 people, blaming "non-state actors," and has promised to cooperate in investigations. However, Pakistan says India has provided no evidence for it to investigate.
"Pakistan's response so far has demonstrated their earlier tendency to resort to a policy of denial and to seek to deflect and shift the blame and responsibility," Indian Foreign Minister Pranab Mukherjee said.
Mukherjee reiterated that India was keeping all its options open after the Mumbai attacks, comments the Indian media have widely interpreted to mean that a military response was still possible. Mukherjee said that was not his intent.
Amid the war of words, the Pakistani air force conducted an exercise, causing delay to two civilian flights in the eastern city of Lahore, said Muhammad Latif, a spokesman for Pakistan International Airlines.
A Pakistani air force spokesman would only say the air force had "enhanced its vigilance" in view of the situation.
Gilani said Pakistan's desire for peaceful coexistence should not be taken as weakness.
"However, if war is imposed upon us the whole nation would be united and the armed forces are fully capable of safeguarding and defending the territorial integrity," Gilani's office quoted him as telling Pakistan's high commissioner to India.
LETTER FROM GUNMAN
On Sunday, Mukherjee said India had given Pakistan specific evidence about who was behind the Mumbai attacks, including intercepted satellite telephone conversations and an account given by the lone surviving gunman, Ajmal Amir Kasab.
A Pakistani spokesman said India had provided no evidence and the only information it was getting was through the media.
"We are doing our own investigation but it can go only so far because we do not have anything from the scene of the crime, we do not have anything from India," said Pakistani Foreign Ministry spokesman Mohammad Sadiq.
The Indian foreign ministry later said it had handed a letter written by Kasab to Pakistan's acting high commissioner in New Delhi in which Kasab said he and the nine gunmen killed in the siege were all from Pakistan.
Kasab had also asked to meet Pakistani diplomats.
Some Indian analysts said they feared the stridency of the Indian reaction might be painting Pakistan into a corner.
"We should have given Pakistan more time and by making the kind of remarks we have made, we have taken away any other option. We have spoken too soon and too loosely," New Delhi political commentator Prem Shankar Jha told Reuters.
The U.S. Joint Chiefs of Staff chairman, Admiral Mike Mullen, arrived in Pakistan for his second visit since the attacks for talks on "regional issues," a U.S. embassy spokesman said.
Early this month, Mullen urged Pakistan to investigate all links to Mumbai and to broaden its campaign against militants.
Sadiq said Pakistan was doing everything possible: "We have done more than what is required by the U.N. Security Council."
A U.N. Security Council committee this month added four Lashkar leaders to a list of people and groups facing sanctions for ties to al Qaeda or the Taliban.
LeT was set up to fight Indian rule in Kashmir and has been linked by U.S. officials and analysts to Pakistan's powerful Inter-Services Intelligence military spy agency, who they say use it as a tool to destabilise India.
The U.N. sanctions also covered what the committee said was a new alias for Lashkar-e-Taiba -- the Jamaat-ud-Dawa (JuD). Lashkar was banned in Pakistan in 2002.
Pakistan has detained scores of militants and shut offices and frozen the assets of the JuD which says it is an Islamic charity with no Lashkar connection.
In response to the attack, India has imposed a "pause" on a nearly five-year old peace process, that had brought better ties, and cancelled a cricket tour of Pakistan.
(Writing by Paul Tait, Editing by Robert Birsel and Ralph Boulton)

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OPINION
From Munich to Mumbai
By Ami Pedazhur
Monday, December 22, 2008
AUSTIN, Texas:
Now that India and the world are over the initial shock of the terrorist attacks last month in Mumbai, efforts to understand what happened and prevent future calamities are being hampered in ways familiar to Israelis like myself, who have lived through far too many such events: pointless efforts to place blame, and a failure to put the attacks in the proper historical context.
First, contrary to much punditry in India and the West, these attacks did not indicate the emergence of a new form of terrorism.
Actually, after decades in which terrorism had evolved mostly in the direction of suicide bombings, Mumbai was a painful reminder of the past.
The multiple hostage-takings and shootings, carefully planned and executed, were a throwback to the wave of hijackings and hostage situations that were the trademark of terrorists in the Middle East from the 1960s until the 1980s.
Like the Mideastern terrorists, those in Mumbai created a drama by aiming at high-profile targets - the hotels that are hubs for Western tourists and businessmen. They knew that viewers around the world would be glued for days to the constant stream of images on their TV and computer screens.
In addition, the fact that most of the Mumbai terrorists landed from the sea was another ugly flashback. For years, terrorists favored arriving at Israel's beaches on speed boats to take hostages in residential neighborhoods.
One of the most notorious perpetrators was Samir Kuntar, who in 1979 led a group of terrorists to the beach of Nahariya and shot a police officer and a civilian, Danny Haran, before smashing the skull of Haran's 4-year-old daughter, Einat. Kuntar was released this year from Israel in a prisoner exchange, and in Damascus was awarded the Syrian Order of Merit.
From a counterterrorism perspective, the events in Mumbai were even more worrisome. Though they did not detonate explosive belts, the attackers were truly suicide terrorists. They did not take their hostages for the purpose of negotiations, and it is quite clear that they did not hope to leave the scene alive. They also created chaos by attacking several locations at once.
When terrorists have the advantage of surprise, it really does not matter how well trained the counterterrorism forces are. It takes a long time to figure out what is going on, to gather tactical intelligence and to launch a counterattack.
No one should be aware of these facts more than the Israelis who in the 1970s endured a series of similar, albeit less sophisticated attacks.
Hence, I have been very surprised to hear Israeli security experts criticizing the Indian response. These experts probably forgot the devastating civilian death tolls of the attacks in Maalot in 1974 (22 Israeli high school students killed), at the Coastal Road in 1978 (37 murdered, including 13 children) and at Misgav Am in 1980 (two kibbutz members killed, one an infant). These incidents all illustrated the extreme difficulty of rescuing hostages even when the attacked state has highly trained forces and a lot of experience.
Yes, Israel has had a few successes that have been glorified around the world. The most famous were the raids on hijacked planes in Lod, Israel, in 1972 and at Entebbe, Uganda, in 1976. But these two airport rescues cannot be compared with the events in Mumbai.
The Israeli successes were due mainly to the fact that the terrorists were interested in negotiating, giving security forces the opportunity to gather intelligence, devise a rescue plan and take the hijackers by surprise. Hostages and rescuers were killed in both cases. Yet no security experts argued at the time that the Israeli forces were inadequately prepared or failed in their execution.
It is clear that the Indian security forces made some mistakes. However, mistakes are inherent in such crises. At the same time, given the complex nature of the attacks, it seems likely the death toll could have been much higher. After the initial confusion, the Indians seem to have done a thorough job of gathering intelligence and carefully planning their counterattacks. The execution itself was careful and thorough.
Israel and India both face a lasting terrorism challenge. Yet, if I was asked to give India policy recommendations, I would be extremely cautious about advocating the Israeli approach. Protecting a huge multiethnic, multireligious country like India is far more challenging than securing a rather homogeneous, tiny state like Israel.
Just to illustrate, Israel's airport security is rightly considered to be a model for the world. However, the Israeli security establishment took years and experienced a number of direct attacks on travel hubs before it slowly introduced its impressive security measures. That Israel has only one major international airport - Ben-Gurion, near Tel Aviv - made the process much easier. And so far, Israel has not been able to tightly secure more challenging targets like train and bus systems.
The Israeli experience teaches that countering terrorism is a long and frustrating process of trial and error. Terrorists are fast to respond to new obstacles.
For example, the security barrier erected after the start of the second intifada in 2000 has brought a sharp decline in the number of suicide attacks. But Hamas adapted quickly: Suicide bombers have been replaced by rockets. While the number of casualties caused by the rockets is significantly lower, I am not convinced that residents of the towns near Gaza feel any safer.
The Mumbai attacks showed just how difficult it is for large, multiethnic states to protect themselves against terrorism, something Americans have known well since 9/11. There is certainly much for New Delhi and Washington to learn from the Israeli experience, but there is no one-size-fits-all solution. While Israel has much to be proud of in how it has handled terrorism, it also has much to be humble about.A
mi Pedazhur, a professor of Middle Eastern studies at the University of Texas at Austin, is the author of the forthcoming book "The Israeli Secret Services and the Struggle Against Terrorism."

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Missiles are said to kill 8 in northwest Pakistan
The Associated Press
Monday, December 22, 2008
DERA ISMAIL KHAN, Pakistan: Suspected U.S. missile strikes killed eight people Monday in northwest Pakistan, where al-Qaida and Taliban leaders are believed hiding, officials and witnesses said.
The identities of those killed in the two attacks — the latest in a stepped up American campaign in the lawless region close to the Afghan border — were not immediately known.
Meanwhile, the government said an al-Qaida-linked terror group was suspected of helping carry out the September suicide attack on the Marriott Hotel in Islamabad.
Interior Ministry chief Rehman Malik's charge against Lashkar-e-Jhangvi was the first time Pakistan has blamed a specific group for the bombing, which killed more than 50 people.
Monday's missiles struck about 5 miles (8 kilometers) apart just south of Wana, the main town in the South Waziristan tribal area, said local security official Bakht Janan. A house and a vehicle were destroyed in the attacks, which killed four people in each location, he said.
Witnesses told The Associated Press that an anti-aircraft gun mounted on a vehicle fired on one of the drones before it launched a missile.
The U.S. has carried out more than 30 missile strikes since August in Pakistan's lawless, semiautonomous tribal areas, targeting al-Qaida and Taliban militants blamed for attacks in Afghanistan.
While the missile strikes have killed scores of militants, Pakistan has criticized them as an infringement of its sovereignty and say it undermines its own battle against extremism.
Most of the missiles are believed launched from unmanned spy planes that take off from Afghanistan. Washington rarely confirms or denies the attacks and has pushed Islamabad to crack down on militants in the tribal areas.
The U.S. Embassy in Islamabad said Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, was in Pakistan Monday to meet with senior government officials.
Mullen arrived from Afghanistan, where he said the U.S. would send up to 30,000 additional troops to the country by summer to fight the resurgent Taliban.
Pakistan has arrested three people in the Sept. 20 Marriott truck bombing, but no one has been formally charged.
Malik told lawmakers that assailants packed explosives into the truck in Jhang town in Punjab province, south of Islamabad. He said the plot was "assisted" by Lashkar-e-Jhangvi, but gave no more details on its involvement.
Lashkar-e-Jhangvi is a Sunni Muslim militant group accused of killing hundreds of minority Shiites across Pakistan. Experts say in recent years it has formed links with al-Qaida. The group has been accused of attacks again Westerners in Karachi and two assassination attempts against former Pakistani President Pervez Musharraf in 2003.
Also Monday, Interior Ministry spokesman Shahidullah Baig said an investigation was launched into the theft of a large cache of weapons seized after last year's army assault on the Red Mosque, which left scores of occupying militants dead. The mosque was historically used as a jumping off point for militants en route to the fight in Kashmir.
Shahidullah Baig said 10 police officials, including the head of the Aapbara police station where the weapons were stored, had been arrested.
"The weapons have gone missing from the store, and it was learned recently that it has been happening in phases," Baig said.
He would not specify what was missing, but police seized assault rifles, pistols, hand grenades, rockets, rocket launchers and machine guns after the mosque assault in July 2007, a watershed moment in the country's struggle against militancy.


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NATO to engage Afghan tribes in Taliban fight
Reuters
Monday, December 22, 2008
By Golnar Motevalli
While U.S. forces prepare to send up to 30,000 more troops to Afghanistan, behind the scenes Afghan government officials are working to engage tribal elders as a way of undermining the growing influence of Taliban insurgents.
Engaging with leaders in rural areas of Afghanistan is part of a new NATO and U.S. strategy in Afghanistan; to promote traditional methods of local rule and undercut the lawlessness that feeds in the strengthening Taliban insurgency.
"The only way you can bring peace and stability to this country is to revive the traditional rule of people within the community in governance and security," Barna Karimi, deputy minister for policy at the Interdependent Directorate of Local Governance (IDLG) said.
The IDLG is an Afghan government department which leads community outreach to elders in rural areas of Afghanistan where their word is respected and often determines local law.
Using shuras -- meetings of tribal leaders -- the IDLG wants power-brokers in remote areas to cherry-pick civilians for jobs in the Afghan National Army and Afghan National Police.
"This shura will sign a memorandum of understanding on how the government should work and how the community should help the government not to shelter insurgents in their houses, not to feed them, not to house them, not to help them," Karimi said.
The commander of NATO and U.S. troops in Afghanistan, U.S. General David McKiernan recommended the plan in Washington last month as a way of improving government effectiveness at a local level in a country which has little history of central rule.
"What they are talking about is empowering local militias and what they are focussed on is money, development, training and governance," said a Brussels-based NATO diplomat.
TRIBAL RULE
The plan is one plank of the "clear, hold and build" strategy that General David Petraeus employed with success in Iraq and now as overall commander of Afghanistan is likely to recommend to President-elect Barack Obama in a forthcoming strategic review.
McKiernan spoke of providing the local shuras with "the wherewithal, the authority and some resources" to help provide security, but said the plan was different to the so-called the Awakening Councils, that turned their guns on al Qaeda in Iraq.
By helping to provide security at a local level, the shuras could take some of the pressure off Afghan forces while the U.S. military works on nearly doubling the Afghan army to some 134,000 and reforming the notoriously corrupt police.
The plan is to be implemented first of all on a trial basis, focussing on areas along the key highway from the capital Kabul to Kandahar, the main city in the south, NATO officials said.
But McKiernan, like other officials, has avoided talk of arming militias, an idea fraught with problems in Afghanistan where long-standing, complex ethnic, tribal and local rivalries often pit one village, valley, tribe or region against another.
"There's a lot of inter-fighting and internal disagreements between local tribes," Afghan parliamentarian Shukria Barakzai told Reuters. "They will start to abuse the same weapons they are responsible for ... It's a big threat to the community."
The extent to which the local shuras would be allowed to arm their communities is currently being debated by the Afghan government and the NATO-led force.
Afghan President Hamid Karzai said this week that arming militias would be a "disaster."
"Getting weapons in Afghanistan is not a problem, everybody is armed," the Brussels-based NATO diplomat said.
"I've not heard about anyone talking about giving them weapons and a lot of people talking about not giving them weapons," the diplomat said.
(Editing by Valerie Lee)


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U.S. awards GD and Northrop submarine deal
Reuters
Tuesday, December 23, 2008
By Andrea Shalal-Esa
The U.S. Navy awarded a $14 billion (9.4 billion pound) contract to General Dynamics Corp and Northrop Grumman Corp for eight Virginia-class submarines, the Pentagon announced on Monday.
The multiyear contract will mean the production of one submarine in 2009, one in 2010 and two submarines in each of the following three years, the government said.
The production schedule and design changes shaved 20 percent off the acquisition costs, and give contractors more stability in their business outlooks, the Navy said.
General Dynamics, based in Falls Church, Virginia, is the lead contractor on the nuclear-powered submarines, but construction is shared equally with Northrop, which is based in Los Angeles.
"It brings stability to the submarine program, to our work force and to the shipbuilding supplier industrial base for the next decade," Matt Mulherin, general manager of Northrop's shipyard in Newport News, Virginia, said in a statement.
General Dynamics does its submarine work at its Electric Boat shipyard in Groton, Connecticut
The vessels are designed for a range of missions such as anti-submarine and surface ship warfare, delivering special operation forces, intelligence and surveillance.
"By providing money over a period of several years, it becomes easier for the contractor to plan ahead and cut the cost of each vessel," said Loren Thompson, defence analyst with the Lexington Institute in Virginia.
He said the multiyear contract would help reassure shipyard workers in New England and Virginia "that their jobs will exist five years from today."
Ronald O'Rourke, analyst with the nonpartisan Congressional Research Service, said the Navy already had 10 of the new attack submarines in service or under construction, and the new orders would bring the total to 18.
Overall, the Navy has said it plans to build 30 of the Virginia-class submarines.
(Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn, Toni Reinhold)



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Question of semantics on troop withdrawal: How many is 'all'?
By Elisabeth Bumiller
Monday, December 22, 2008
WASHINGTON: It is one of the most troublesome questions right now at the Pentagon, and it has started a semantic dance: What is the definition of a combat soldier? More important, when will all U.S. combat troops withdraw from the major cities of Iraq?
The short answers are that combat troops, defined by the military as those whose primary mission is to engage the enemy with lethal force, will have to be out of Iraqi cities by June 30, 2009, the deadline under a recently approved status-of-forces agreement between the United States and Iraq.
The long answers open up some complicated, sleight-of-hand responses to military and political problems facing President-elect Barack Obama.
Even though the agreement with the Iraqi government calls for all U.S. combat troops to be out of the cities by the end of June, military planners are now quietly acknowledging that many will stay behind as renamed "trainers" and "advisers" in what are effectively combat roles. In other words, they will still be engaged in combat, just called something else.
"Trainers sometimes do get shot at, and they do sometimes have to shoot back," said John Nagl, a retired lieutenant colonel who is one of the authors of the U.S. Army's new counterinsurgency field manual.
The issue is a difficult one for Obama, whose campaign pledge to "end the war" ignited his supporters and helped catapult him into the White House. But as Obama has begun meeting with his new military advisers - the top two, Defense Secretary Robert Gates and Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, are holdovers from the Bush administration - it has become clear that his definition of ending the war means leaving behind many thousands of U.S. troops.
One reason is that Obama is facing rapidly approaching, and overlapping, withdrawal deadlines, some set by the Bush administration and the Iraqis, and some set by him.
After June 2009 looms May 2010, 16 months after Obama's inauguration, the month he set during the campaign to have U.S. combat forces out of Iraq entirely. Next comes December 2011, the deadline in the status-of-forces agreement to have all U.S. troops out of Iraq.
"If you're in combat, it doesn't make any difference whether you're an adviser: You're risking your life," said Andrew Krepinevich, a military expert at the Center for Strategic and Budgetary Assessments, a research group. "The bullets don't have 'adviser' stenciled on some and 'combat unit' on another."
There are 146,000 U.S. troops in Iraq, including service and support personnel. General Ray Odierno, the top commander in Iraq, declined to tell reporters earlier this month how many of them might remain in cities after the June 2009 deadline and said the exact number still had to be negotiated with the Iraqi government.
But some experts, like Michael O'Hanlon, a senior fellow in military strategy at the Brookings Institution, argue that roughly 10,000 U.S. troops should remain in Baghdad after next June, with thousands more in other cities around the country.
For his part, Odierno made clear that the Iraqis still needed help - and that the United States would hardly disappear. "What I would say is, we'll still maintain our very close partnership with the Iraqi security forces throughout Iraq, even after the summer," he said.
Military officials say they can accomplish that by "repurposing" whatever combat troops remain. From the military's point of view, a combat soldier is not so much what he is called but what he does.
For example, in an area south of Baghdad once called the "triangle of death" because of the Sunni insurgents there, a combat brigade of 4,000 to 5,000 soldiers of the 101st Airborne Division has been replaced with what the U.S. Army calls a transition task force of 800 to 1,200 troops with the mission to train and advise the Iraqi Army.
Although the Americans still have the task, among other duties, of calling in airstrikes if Iraqi patrols get in trouble, Nagl, a fellow with the Center for a New American Security, a research group, argued that the new role for U.S. troops represented more than a semantic difference.
"It's no longer Americans providing the muscle," he said. "Now it's Iraqi patrols with a small group of American advisers tucked inside."

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Charges dismissed in Iraq against ministry detainees
By Campbell Robertson and Suadad al Salhy
Monday, December 22, 2008
BAGHDAD: The Ministry of the Interior released a statement on Monday detailing the charges against its officials who were detained last week in a security crackdown.
The officials were under suspicion of making fake badges and identification cards, the statement said, that provided access to the Interior Ministry building, which the statement described as a target of terrorist attack.
At first the investigation was an internal matter overseen by the interior minister, but Prime Minister Nuri Kamal al-Maliki later expanded the investigation beyond the ministry and created a committee that included a judge.
The judge dismissed the charges and ordered the detainees released, the statement said, but it gave no further explanation. The status of the detainees, said to number 24 by the ministry, remains unclear, though a ministry official said Monday that they were still in custody.
Sherwan al-Waili, the minister of national security, mostly echoed the account in the Interior Ministry's statement in an interview in his office. But he added that "in this case specifically" the detainees were not being investigated for affiliation with Al Awda, a banned political party related to Saddam Hussein's Baath Party, which ruled Iraq for 35 years. Asked if there was an investigation at the ministry that did involve illicit Awda connections, Waili declined to comment further.
This directly contradicts statements by the interior minister, Jawad al-Bolani, who said that the inquiry was about a terrorist operation against the ministry as well as ties to Al Awda.
Waili said the interior minister had been fully aware of all the charges throughout the investigation, but Bolani said in an interview on Friday that the most serious charges came as a surprise to him. Waili also said that government investigators had given Bolani the forged badges and identification cards for forensic analysis but that the minister had done nothing with them.
The Interior Ministry has been a source of anxiety for the Maliki government for a number of reasons. It has a history of being associated with the Islamic Supreme Council of Iraq, a powerful Shiite party that is a rival to the Dawa party of the prime minister and that pushed for Bolani's candidacy for interior minister in 2006. Bolani also created his own party, the secular Iraqi Constitutional Party, though he said he relinquished his leadership position when he became the interior minister.
Also on Monday, a special session of Parliament was called to vote on the dismissal of the Parliament speaker, Mahmoud al-Mashhadani. After a rowdy session of Parliament last week at which he was accused of hurling serious insults, Mashhadani resigned but then later rescinded his resignation.
While there appears to be significant support for his dismissal, the vote was postponed to give party leaders time to discuss their options, including who would replace him, said Ahmed Abdulsattar, a member of Tawafiq, Mashhadani's own bloc.
"As Tawafiq, we suggested him to be speaker, and we've supported him twice before in the same kind of crisis," said Abdulsattar, who added that other lawmakers said they would boycott the Parliament if Mashhadani remained speaker. This time, he said, "we've reached a dead end."
Also in Parliament, a vote on a resolution that would allow British, Australian and other foreign troops to stay on Iraqi soil after the end of the year was postponed until the issue with the speaker is worked out.
Meanwhile, the trial of Muntader al-Zaidi, the reporter who was arrested for throwing his shoes at President George W. Bush last week, was scheduled to begin on Dec. 31 at the Central Criminal Court of Iraq, one of his brothers said. The Central Criminal Court is a special court set up to address serious criminal charges. The lawyers for Zaidi are trying to transfer the case to another court, said the brother, Maytham al-Zaidi.
In a television interview on Sunday, another of the reporter's brothers said Zaidi had been tortured while being held.
But Abdulsattar al-Berikdar, the spokesman of the Supreme Judicial Council, said Zaidi "did not ask to be submitted to a medical committee and did not tell the judge that he was tortured or register a complaint against anyone." The spokesman added, "If he had, then of course the court would take the suitable procedure."

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Some Arab women find freedom in the skies
By Katherine Zoepf
Monday, December 22, 2008
ABU DHABI, United Arab Emirates: Marwa Abdel Aziz Fathi giggled self-consciously as she looked down at the new wing-shaped brooch on the left breast pocket of her crisp gray uniform, then around the room at the dozens of other Etihad flight attendants all chatting and eating canapés around her.
It was graduation day at Etihad Training Academy, where the national airline of the United Arab Emirates holds a seven-week training course for new flight attendants. Downstairs are the cavernous classrooms where Fathi and other trainees rehearsed meal service plans in life-size mockups of planes and trained in the swimming pool, where they learned how to evacuate passengers in the event of an emergency landing over water.
Despite her obvious pride, Fathi, a 22-year-old from Egypt, was amazed to find herself here.
"I never in my life thought I'd work abroad," said Fathi, who was a university student in Cairo when she began noticing newspaper advertisements recruiting young Egyptians to work at airlines based in the Gulf. "My family thought I was crazy. But then some families don't let you leave at all."
A decade ago, unmarried Arab women like Fathi, working outside their home countries, were rare. But just as young men from poor Arab nations flocked to the oil-rich Gulf states for jobs, more young women are doing so, sociologists say, though no official statistics are kept on how many.
Flight attendants have become the public face of the new mobility for some young Arab women, just as they were the face of new freedoms for women in the United States in the 1950s and 1960s. They have become a subject of social anxiety and fascination in much the same way.
The dormitory here where the Etihad flight attendants live after training looks much like the city's many 1970s-style office blocks, its windows iridescent like gasoline on a puddle. But there are three security guards on the ground floor, a logbook for sign-ins and strict rules. Anyone who tries to sneak a man back to one of the simply furnished two-bedroom suites that the women share may be dismissed, even deported.
In the midst of an Islamic revival across the Arab world that is largely being led by young people, gulf states like Abu Dhabi — which offer freedoms and opportunities nearly unimaginable elsewhere in the Middle East — have become an unlikely place of refuge for some young Arab women. And many say that the experience of living independently and working hard for high salaries has forever changed their ambitions and their beliefs about themselves, though it can also lead to a painful sense of alienation from their home countries and their families.
At almost any hour of the day or night, there are a dozen or more young women with identical rolling suitcases waiting in the lobby of their dormitory to be picked up for work on Etihad flights. Though several are still drowsily applying makeup — and the more steady-handed have perfected a back-of-the-bus toilette that takes exactly the length of their usual ride to Abu Dhabi International Airport — they are uniformly well ironed and blow-dried. Those with longer hair wear black hair-ties wrapped around meticulously hair-netted ponytails. They wear jaunty little caps with attached gauzy scarves that hint at hijab, the head coverings worn by many Muslim women. Like college students during exams, all of them gripe good-naturedly about how little they have slept.
There are exclamations of congratulation and commiseration as the women learn friends' assignments. Most coveted are long-haul routes to places like Toronto and Sydney, Australia, where layovers may last many days, hotels are comfortable and per diem allowances from the airline to cover food and incidentals are generous. Short-haul flights to places like Khartoum, Sudan, are dreaded: more than four hours of work, followed by refueling, a new load of passengers, an exhausting late-night return flight to Abu Dhabi and the shuttle bus back to the dormitory tower with its vigilant guards.
Upstairs, scrubbed of their thick, professional makeup, most of the women look a decade younger. They seem to subsist on snack food: toast made, Arabic-style, by waving flaps of pita over an open flame; slivers of cheap, oversalted Bulgarian cheese; the Lebanese date-filled cookies called ajweh; pillowy rolls from a local Cinnabon outlet that one young Syrian flight attendant proclaimed herself addicted to (an expression she used with self-conscious delight, a badge of newfound worldliness).
They watch bootlegged DVDs — "Desperate Housewives," "Sex and the City" — bought on layovers in Bangladesh and Indonesia. They drift along the tiled floors between their rooms in velour sweatpants and fuzzy slippers, and they keep their voices low: someone is always trying to catch a wink of sleep before her flight.
A Lonely Existence
It is a hushed, lonely and fluorescent-lighted existence, and it is leavened mostly by nights out dancing. Despite the increasing numbers of women moving to the gulf countries, the labor migration patterns of the last 20 years have left the Emirates with a male-female ratio that is more skewed than anywhere else in the world; in the 15-to-64 age group, there are more than 2.7 men for every woman.
Etihad flight attendants are such popular additions to Abu Dhabi's modest hotel bar scene that their presence is encouraged by frequent "Ladies' Nights" and cabin-crew-only drink discounts. It is almost impossible for an unveiled woman in her 20s to go to a mall or grocery store in Abu Dhabi without being asked regularly, by grinning strangers, if she is a stewardess.
One evening last fall, an Egyptian flight attendant for Etihad with dyed blond hair and five-inch platform heels led a friend — a 23-year-old Tunisian woman wearing a sparkly white belt who said that she had come to the Emirates hoping to find work as a seamstress — up to the entrance of the Sax nightclub at the Royal Meridien Hotel.
Just inside, in the bar area, several young Emirates men in white dishdashas were dancing jerkily to deafening club music.
Clutching her friend by the elbow, the Egyptian woman indicated one of the bouncers. "Isn't he just so yummy?" she shrieked. The bouncer, who had plainly heard, ignored her, and the women filed past. Despite appearances, explained the Egyptian flight attendant — who asked not to be named because she was not authorized by Etihad to speak to the news media — sex and dating are very fraught matters for most of the young Arab women who come to work in the Emirates.
Some young women cope with their new lives away from home by becoming almost nunlike, keeping to themselves and remaining very observant Muslims, she said, while others quickly find themselves in the arms of unsuitable men. "With the Arabic girls who come to work here, you get two types," the Egyptian woman said. "They're either very closed up and scared and they don't do anything, or else they're not really thinking about flying — they're just here to get their freedom. They're really naughty and crazy."
Treated Like a Heroine
Rania Abou Youssef, 26, a flight attendant for the Dubai-based airline, Emirates, said that when she went home to Alexandria, Egypt, her female cousins treated her like a heroine. "I've been doing this for four years," she said, "and still they're always asking, 'Where did you go and what was it like and where are the photographs?' "
Many of the young Arab women working in the Gulf take delight in their status as pioneers, role models for their friends and younger female relatives. Young women brought up in a culture that highly values community, they have learned to see themselves as individuals.
For many families, allowing a daughter to work, much less to travel overseas unaccompanied, may call her virtue into question and threaten her marriage prospects. Yet this culture is changing, said Musa Shteiwi, a sociologist at Jordan University in Amman. "We're noticing more and more single women going to the gulf these days," he said. "It's still not exactly common, but over the last four or five years it's become quite an observable phenomenon."
Unemployment levels across the Arab world remain high. As the networks of Arab expatriates in the gulf countries become stronger and as cellphones and expanding Internet access make overseas communication more affordable, some families have grown more comfortable with the idea of allowing daughters to work here. Some gulf-based employers now say they tailor recruitment procedures for young women with Arab family values in mind. They may hire groups of women from a particular town or region, for example, so the women can support one another once in the gulf. "A lot of girls do this now because this has a reputation for being very safe," said Enas Hassan, an Iraqi flight attendant for Emirates. "The families have a sense of security. They know that if their girls start flying they won't be thrown into the wide world without protection."
A Feeling of Displacement
Yet not everyone can make peace with life in the United Arab Emirates, the young flight attendants say. Even the landscape — block after sterile block of hotels and office buildings with small shops and takeout restaurants on their lower floors — can contribute to a feeling of displacement. Nearly all year long, for most of the day, the sunlight is bright white, so harsh that it obliterates all contrast. Despite vigilant watering, even the palm trees on roadsides look grayish and embattled.
Some of the young women tell stories of fellow flight attendants who have simply slipped onto planes to their home countries and run away, without giving notice to the airline.
The most successful Arab flight attendants, they say, are often those whose circumstances have already placed them somehow at the margins of their home societies: young immigrant women who are supporting their families after the death of a male breadwinner, for example, and a handful of young widows and divorced women who are eventually permitted to work overseas after their prospects of remarriage have dimmed.
Far more than other jobs they might find in the gulf, flying makes it difficult for Muslim women to fulfill religious duties like praying five times a day and fasting during Ramadan, the Egyptian attendant noted. She said she hoped to wear the hijab one day, "just not yet." A sense of disconnection from their religion can add to feelings of alienation from conservative Muslim communities back home. Young women whose work in the gulf supports an extended family often find, to their surprise and chagrin, that work has made them unsuitable for life within that family.
"A very good Syrian friend of mine decided to resign from the airline and go back home," the Egyptian flight attendant said. "But she can't tolerate living in a family house anymore. Her parents love her brother and put him first, and she's never allowed out alone, even if it's just to go and have a coffee."
"It becomes very difficult to go home again," she said.

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Back on the map: Tangier is a crossroads of history and hedonism
By Gisela Williams
Monday, December 22, 2008
TANGIER: Dusk was falling on Tangier, and small cliques of nattily dressed expats were sipping mint tea and socializing on the top floor of the Hotel Nord-Pinus, a sumptuous riad-style guesthouse in the Casbah. A gentle sea breeze wafted through the arched doorways and filled the stylish lounge, decorated with embroidered Moroccan pillows and modern photography, with an air of exclusivity.
Down the street, a different scent drifted from the fabled Café Hafa, once the haunt of Beat poets and musicians like the Rolling Stones. Two dozen young men were sitting on battered folding chairs, several discreetly smoking kif - tobacco blended with hashish.
This Moroccan port has always been a city of extremes - a surreal crossroads where Northern Africa meets Europe, the Mediterranean meets the Atlantic Ocean, and hedonism and history seem to intermix.
But while the gritty authenticity of Tangier is still there, a new generation of artists and expats is giving this fabulously shabby port a new shine.
In the heady years after World War II, when Tangier was still in diplomatic limbo as an International Zone, its craggy shores became a gay-friendly haven for spies, globe-trotting businessmen, beatniks in exile and eccentric foreigners. This is where William S. Burroughs wrote the bulk of "Naked Lunch," which marks its 50th anniversary next year, and where Paul Bowles completed his haunting and existential cult classic, "The Sheltering Sky."
As recently as the last decade, Tangier was still considered a down-on-its-luck town riddled with drugs and hustlers. But while sleazy dives, decayed buildings and dark alleys can still be found, a stylish new Tangier has emerged, fueled by royal investments and a thriving arts community. There are now renovated architecture gems like the '40s Cinemathèque de Tanger, quirky boutiques loaded with one-of-a-kind objects, and cafés that draw a sophisticated but idiosyncratic crowd.
That crowd today includes the model Jacquetta Wheeler; Bruno Frisoni, the designer for Roger Vivier; and the French writer Bernard-Henri Lévy, who recently bought a starkly modern house next door to the Café Hafa.
Much of Tangier's renaissance can be traced back to Morocco's young king, the 45-year-old Mohammed VI. Unlike his father - the late King Hassan II who ruled Morocco for 38 years and was said to have despised Tangier - the new king is an enthusiastic champion.
Instead of an urban wasteland, he sees Tangier as a cultural and commercial gateway between Africa and Europe. The young king installed Mohamed Hassad, a forward-thinking politician known for turning around Marrakesh, as the governor of the Tangier region. The king was also the driving force behind Tanger Med, a giant new cargo port whose administrative center was designed by the French architect Jean Nouvel. Also in the works is a high-speed train network that would cut the travel time between Tangier and Marrakesh to less than three hours.
Despite the changes, the surreal jumble of Escheresque alleyways, crooked white facades and shady courtyards that make up Tangier's historic heart hasn't changed since Bowles wrote "Without Stopping," his 1972 autobiography that recounts his itinerant love affair with North Africa.
In it, Bowles described Tangier as "rich in prototypal dream scenes: covered streets like corridors with doors opening into rooms on each side, hidden terraces high above the sea, streets consisting only of steps, dark impasses, small squares built on sloping terrain so that they looked like ballet sets designed in false perspective, with alleys leading off in several directions; as well as the classical dream equipment of tunnels, ramparts, ruins, dungeons and cliffs."
And the slightly sinister and exotic underbelly that inspired Burroughs' "Naked Lunch" is still found at places like Café Hafa and Café Central, a faded coffeehouse in the seedy but always buzzing Petit Socco square, where everyone seems to have something to hustle among the fin-de-siècle facades.
But there is also a glamorous new side to Tangier, where socialites air-kiss by the palm-lined swimming pool at La Villa Josephine, a lavish hillside retreat. Or where coiffed ladies nibble on prawn cocktails at the restaurant of the Le Mirage resort, built on a cliff overlooking an expanse of caramel-colored sand.
On a breezy Friday afternoon last summer, Le Mirage was filled with wealthy Moroccans, bronzed European families and ladies dressed in Palm Beach whites and peacock-colored caftans. They sat on a portico-shaded terrace, exchanging gossip about other expats and recent trips to Marbella, Spain. Burroughs wouldn't have lasted two minutes in this crowd.
"There's a wonderful term in ornithology that is perfect for the kind of people that end up here," said Elena Prentice, an American painter and philanthropist who lives in Tangier. "They are called accidentals, birds that end up in an area they don't really belong.
Everyone in Tangier is some form of accidental."

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OPINION
How to win Islam over
By Olivier Roy and Justin Vaisse
Monday, December 22, 2008
During the presidential campaign, Barack Obama said he would convene a conference of Muslim leaders from around the world within his first year in office.
Recently aides have said he may give a speech from a Muslim capital in his first 100 days. His hope, he has said, is to "make clear that we are not at war with Islam," to describe to Muslims "what our values and our interests are" and to "insist that they need to help us to defeat the terrorist threats that are there." This idea of trying to reconcile Islam and the West is well-intentioned, of course. But the premise is wrong.
Such an initiative would reinforce the all-too-accepted but false notion that "Islam" and "the West" are distinct entities with utterly different values. Those who want to promote dialogue and peace between "civilizations" or "cultures" concede at least one crucial point to those who, like Osama bin Laden, promote a clash of civilizations: that separate civilizations do exist. They seek to reverse the polarity, replacing hostility with sympathy, but they are still following Osama bin Laden's narrative.
Instead, Obama, the first "post-racial" president, can do better. He can use his power to transform perceptions to the long-term advantage of the U.S. The page he should try to turn is not that of a supposed war between America and Islam, but the misconception of a monolithic Islam being the source of the main problems on the planet: terrorism, wars, nuclear proliferation, insurgencies and the like.
This will be an uphill battle, since this view of a monolithic, dangerous Islam has gained wide acceptance. Whether we're talking about civil war in Iraq, insurgency in Afghanistan, unrest in Kashmir, conflict in Israel-Palestine, nuclear ambitions in Iran, rebellion in the Philippines or urban violence in France, people routinely - but wrongly - single out Islam as the explanation, rather than nationalism or separatism, political ambitions or social ills. This in turn reinforces the idea of a global struggle.
Even the recent attacks in Mumbai, India, cannot be seen primarily through the prism of religion. What the terrorists and supporters of Lashkar-e-Taiba, the Pakistani militant group believed to have carried out the attacks, have achieved is to make normal relations between India and Pakistan impossible for the foreseeable future. Such groups have always used regional conflicts like that in Kashmir to hold on to power.
Islam explains very little. There are as many bloody conflicts outside of regions where Islam has a role as inside them. There are more Muslims living under democracies than autocracies. There is no less or no more economic development in Muslim countries than in their equivalent non-Muslim neighbors. And, more important, there exist as many varieties of Muslims as there are adherents of other religions. This is why Obama should not give credence to the existence of an Islam that could supposedly be represented by its "leaders."
Who are these leaders anyway? If Obama picks heads of state, he will effectively concede bin Laden's point that Islam is a political reality. If he picks clerics, he will put himself in the awkward position of implicitly representing Christianity - or maybe secularism. In any case, he would meet only self-appointed representatives, most of them probably coming from the Arab world, where a minority of Muslims live.
And such a conference would have negative effects for Western Muslims. By lending weight to the idea of a natural link between Islam and terrorism, it would reinforce the perception that they constitute a sort of foreign body in Western societies.
Most Western Muslims want first and foremost to be considered as full citizens of their respective Western country, not part of any diaspora. And most of them share the so-called Western values.
If the idea of a Muslim summit meeting should be dropped, then what should Obama do?
No more - but also no less - than carrying out the ambitious program he put forward during the campaign: closing the prison at Guantánamo Bay, withdrawing from Iraq, banning torture, pushing for peace in the Middle East and so forth.
These are not in any sense concessions to "Islam," but on the contrary a reassertion that American values are universal and do not suffer any kind of double standard, and that they could be shared by atheists, Christians, Muslims and others.
Obama should also put more faith in the capacity of the rest of the world to recognize that America has turned the page on eight catastrophic years. After all, Americans have just elected a president whose middle name is Hussein. That name goes a long way with many Muslims.

Olivier Roy is a visiting professor at the University of California at Berkeley. Justin Vaisse is a senior fellow at the Brookings Institution.

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Five convicted of conspiracy to attack U.S. base
Reuters
Monday, December 22, 2008
By Jon Hurdle
Five men were convicted on Monday of conspiracy to kill U.S. soldiers in a planned attack on an Army base in New Jersey that prosecutors described as a bid to wage Islamist holy war against America.
The U.S. attorney said he would seek life sentences for the five foreign-born defendants, who were also found not guilty on charges of attempted murder after an eight-week trial.
Prosecutors had told the court the defendants were inspired by al Qaeda. Defence attorneys had argued that while the men talked the talk of militancy, it was all bravado and they had no real intention of carrying out the attack on Fort Dix army base, which was never executed.
Family members and defence lawyers said they believed the verdicts were influenced by suspicion of Muslims since the September 11 al Qaeda attacks.
The defendants, all born outside the United States, are ethnic Albanian brothers Shain, Dritan and Eljvir Duka who together ran a roofing business in Cherry Hill, New Jersey; Serdar Tatar, a convenience store clerk who was born in Turkey; and Mohamad Shnewer, a Jordanian-born taxi driver from Philadelphia. They are aged 23 to 30.
Acting U.S. Attorney Ralph Marra said prosecutors will press for sentences of life in prison without the possibility of parole. Sentencing was set for April 22-23.
Dritan and Shain Duka were also found guilty of possessing weapons to be used in the planned attack.
The five defendants smiled as they entered the court but did not react visibly when the verdicts were read. Defence lawyers said they would consider an appeal after sentencing.
FBI MOLES TAPED PLOTTERS
The men were arrested in May 2007 after a 14-month investigation in which two people working for the FBI infiltrated the group and obtained hundreds of hours of audio and video recordings of the men plotting an attack.
The probe was launched when an electronics store clerk went to the police after being asked by one of the men to copy a tape containing scenes of militants firing guns into the air.
As well as planning to attack Fort Dix, about 40 miles (65 km) east of Philadelphia, prosecutors said the men discussed attacks on other military targets including Dover Air Force Base in Delaware and the U.S. Coast Guard in Philadelphia.
Serpil Tatar, sister of defendant Serdar Tatar, called the conviction "a big lie" that had undermined her faith in the United States. She denied her brother was a terrorist, saying: "My brother was crying for the people who died on September 11."
Attorney Richard Sparaco said Tatar's Muslim religion "seriously counted against him" in the trial.
Michael Riley, attorney for Shain Duka, said there was a danger people would accept the government's charges of terrorism too readily in the wake of the September 11 attacks.
"We can't accept whatever our government says at face value," Riley said.
Jurors said they did not reach their verdict lightly.
"This has been one of the most difficult things that we have ever had to do," the members of the sequestered jury said in a statement read to the court by U.S. District Judge Robert Kugler after six days of deliberations.
Marra rejected defence family claims the men were manipulated by FBI informants into plotting the attack and denied they were convicted because of their religion or ethnicity. "The verdict was based solely on the words and actions of these defendants," he said.
(Editing by Mohammad Zargham and Cynthia Osterman)



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OPINION
A little respect
By Abubakar N. Kasim
Monday, December 22, 2008
TORONTO:
If Santa Claus were ever to pay me a visit and grant me a wish, I would reply with one word: respect.
I would wish that society at large would show some respect toward me and my faith.
I am judged negatively whenever someone of my faith is accused of committing a crime.
I am viewed as an enemy within, a home-grown fanatic whom everyone should guard against.
I am harassed at the boarding gate when I leave the country, as if I was going to an Al Qaeda convention.
I am also bullied by the customs and immigration officers when I come back home, as if I don't belong here.
I am pulled aside for extra inspections, as if I was carrying instructions on making weapons of mass destruction.
I am told repeatedly to tell the real truth about what I am bringing with me that I have not declared.
When a crime occurs where a Muslim is the primary suspect, I am asked to issue a statement in the strongest possible terms against terrorism and to dissociate myself from the crime. Whatever language I use in my denunciation, I am told is not enough and I must do more.
On the day after the crime, the headline reads: "Moderate Muslims Fail To Speak Up," even though I have spoken and have condemned the crime.
When I try to access my own money, the bank teller reminds me of the seriousness of money laundering.
A bank supervisor recently alleged that my signature did not match the signature they had in my file. I emptied my wallet and showed all my identifications, to no avail.
Although I have lived in Canada for more than a decade and have been working hard to pay taxes and make ends meet, I am still viewed as a foreigner who belongs somewhere else.
A colleague at the airport where I work asked me recently, "Why did you choose Canada, a Christian country, and did not go to your own people instead?"
Another coworker said the other day that she cannot tolerate seeing Muslim women covering up. "I feel the urge to remove the piece of rag by force," she said. "Why in the world would she hide her beauty?" she added.
Another airline employee suggested that we should stop Muslim women from entering the country if they choose to wear the hijab.
I cried like a child when a friend said that the only way the world can solve the problem of terrorism is to nuke the Muslim world. Only then will the planet live in real peace, he said.
It is deeply troubling to see how Muslims are treated in society. While I was having dinner at work, my colleagues next to me were discussing the shooting death right after the Sept. 11 tragedy of a Sikh man in the United States who was thought to be a Muslim. One of the people involved in the conversation blamed the murderer for not doing his homework in making sure that the person he was targeting was a real Muslim. The people in the cafeteria did not find the statement troubling and they all laughed approvingly.
We are reminded - again and again - that freedom of expression has limits. But when the same freedom involves the dehumanization of Muslims, it has no limit.
I don't think I am asking too much if I expect some respect from my fellow countrymen.
I might have some lunatics in my midst but who doesn't? If Christians are not held responsible for the death and destruction their co-religionist George W. Bush caused in Iraq, why should I be held responsible for the acts of a few mad men who might create mayhem in the name of my faith?
Abubakar N. Kasim is a freelance writer based in Toronto, working as a customer service representative for a major airline.

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OPINION
Let Russia stop Iran
By Oded Eran, Giora Eiland and Emily B. Landau
Monday, December 22, 2008
Tel Aviv: Nine months have passed since the UN Security Council approved its most recent resolution imposing sanctions on Iran. That resolution, like its two predecessors, has failed to deter Tehran, which will soon be in a position to create a working nuclear weapon. Western intelligence establishments estimate that date as not later than mid-2010.
The problem with any Security Council resolution is that Russia and China, two of the five permanent members, have refused to adopt biting measures. Without tougher sanctions, there is no hope that Iran will reconsider its determination to make a bomb and finally begin to negotiate seriously with the West. Sanctions that would hurt Iran, like an embargo on its imports of gasoline, could deter Tehran from pursuing the bomb.
The key to a tougher Security Council resolution is Russia, and this provides an opening for Barack Obama. After taking office, he should offer Moscow a grand bargain. For its part, the United States would suspend or even cancel its plans to set up the missile defenses in Eastern Europe that the Kremlin adamantly opposes, and also adopt a more cautious stance as far as admitting into NATO the countries that Russia views as part of its zone of influence.
Russia's side of the bargain would be to join in the West's tougher stance against Iran's nuclear military program and to stop supplying Iran with conventional weapons, many of which then find their way to Hezbollah in Lebanon and other militant groups in the region.
If Russia were to support much stronger economic pressure on Iran, Obamacould proceed on a double track: first to put the threat of military intervention back on the table, but also to offer to conduct direct talks with Iran without preconditions. What would be asked of Tehran initially would be a gesture of good faith: It would, three months after the start of the negotiations, have to make an implicit commitment to halt its enrichment activities. (Tehran would not be required to make a public declaration, which it fears would make it look weak in the eyes of its populace and its neighbors.)
Negotiations would have to deal with issues that go beyond the nuclear file. Iran views itself as a regional power, proud of its history, its rich culture and its military and technological capacity.
The dialogue would involve the Persian Gulf security situation in general, the future of the American presence in Iraq, Syria's role in Lebanon, and efforts to settle the unrest in Afghanistan and Pakistan.
If such a three-way deal could be pulled off, everyone wins with very little loss of face. The United States would gain a leading role in the international arena, reversing years of questionable Bush administration decisions. And, as it claims the missile defense system is intended primarily to defend against an Iranian nuclear attack, the deal would obviate its need.
Russia would give up its weapons sales and some commercial sales to Iran, but there is much more profit for Moscow to be made trading with a respectable Iran than a pariah state. The American reversal on missile defense would be portrayed as a victory for Prime Minister Vladimir Putin, and Moscow would gain international respectability by helping to avert the serious crisis that would occur should Iran develop the bomb.
Iran, in exchange for relinquishing its nuclear dreams, would avoid painful sanctions, be readmitted to the international community and eventually gain the economic and political benefits of being recognized as a regional power.
Unless something changes the dynamic soon, Iran will become a nuclear power, which will put the Obama administration in a terrible bind. Not only would it complicate America's projects in Iraq and Afghanistan, it would also certainly derail any peace negotiations among Israel and its Palestinian and Syrian neighbors.
The United States and Israel will both welcome new political leadership next year. We hope that the new prime minister of Israel can see the wisdom of such a deal among America, Iran and Russia, and persuade Obama that it could transform the Middle East and the entire international scene. The alternative is more stalemate and an Iran that grows more menacing by the day.

Oded Eran is the director of the Institute for National Security Studies. Giora Eiland, a retired major general in the Israeli Army, and Emily B. Landau are senior research associates at the institute.

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Russia denies selling missile system to Iran
By Michael Schwirtz and Nazila Fathi
Monday, December 22, 2008
MOSCOW: Russia is not selling Iran an advanced air-defense system, Russia's agency for monitoring international defense cooperation said in a statement on Monday, refuting claims by an Iranian official reported Sunday that the system was already being delivered.
"Military-technical cooperation with Iran is conducted on a planned basis corresponding with agreements signed earlier and in observance of all international obligations," the agency, the Federal Military and Technical Cooperation Service, said in a statement posted on its Web site.
"Information that has appeared in several media outlets about deliveries of the S-300 anti-aircraft system to Iran does not correspond to reality," the statement said.
The S-300, called the SA-20 in the West, is a surface-to-air missile system that can track aircraft and fire at them from more than 100 miles away.
Iran's IRNA news agency on Sunday quoted the Iranian official, Esmail Kosari, deputy head of Parliament's Commission for Foreign Affairs and National Security, as saying, "After a few years of talks with Russia, now the S-300 system is being delivered."
Russia's main weapons exporter, Rosoboronexport, said in a statement on Monday that Russia supplies Iran only with defensive weapons and weapons systems, including the Tor-M1 anti-aircraft system.
"Russia conducts military-technical cooperation with Iran in strict compliance with the international commitments of the Russian Federation according to current non-proliferation regimes, and cannot be a source of concern for other countries," the statement on the company's Web site says.
In September, amid reports that a deal on the sale of the weapons system was near, a Russian Foreign Ministry spokesman, Andrei Nesterenko, denied that Russia would sell the missile system to Iran. "We do not intend to supply those types of armaments to countries in the region," he was quoted as saying in the semiofficial Fars news agency of Iran.
Israeli officials have long lobbied to prevent Russia from selling the system to Iran. On Sunday, Yigal Palmor, a spokesman for Israel's Foreign Ministry, said a senior Russian official had told Israel that the new report about delivery of the S-300 was false. Prime Minister Ehud Olmert of Israel asked the Kremlin this autumn not to go ahead with the sale.
In the IRNA report on Sunday, Kosari referred to Israeli efforts to prevent the arms sale, saying that Israel could not damage relations between Russia and Iran.

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Tehran says it's getting missiles
By Nazila Fathi
Monday, December 22, 2008
TEHRAN: An Iranian official said Russia had started delivering an advanced air-defense system to Iran, despite earlier denials by Russia that a deal had been reached, the official IRNA news agency reported Sunday.
The official, Esmail Kosari, the deputy head of Parliament's Commission for Foreign Affairs and National Security, was quoted by IRNA as saying, "After a few years of talks with Russia, now the S-300 system is being delivered."
The S-300, called the SA-20 in the West, is a surface-to-air missile system that can track aircraft and fire at them from more than 100 miles away.
In September, amid reports that a deal was near, a Russian Foreign Ministry spokesman, Andrei Nesterenko, denied that Russia would sell the missile system to Iran. "We do not intend to supply those types of armaments to countries in the region," he was quoted as saying in the semiofficial Fars news agency of Iran.
The Interfax news agency reported that the Russian Foreign Ministry had said it was "investigating" the Iranian reports.
Israeli officials have long lobbied to prevent Russia from selling the system to Iran. On Sunday, Yigal Palmor, a spokesman for Israel's Foreign Ministry, said a senior Russian official had told Israel that the new report about delivery of the S-300 was false. Prime Minister Ehud Olmert asked the Kremlin this fall not to go ahead with the sale.
In the IRNA report on Sunday, Kosari referred to Israeli efforts to prevent the arms sale, saying that Israel could not damage relations between Russia and Iran.

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Germany considers taking released Guantánamo prisoners
The Associated Press
Monday, December 22, 2008
BERLIN: Germany is considering taking released inmates from the U.S.-run Guantánamo Bay prison camp who refuse or cannot return to their home countries when it finally closes down, officials said Monday.
The foreign minister, Frank Walter Steinmeier, has asked officials to look into the legal, political and practical aspects of accepting former inmates, a ministry spokesman, Jens Plötner, said Monday. Steinmeier then plans to discuss the issue with his European Union counterparts at a meeting in January.
The prison camp, at a U.S. Navy base in Cuba, has attracted widespread international criticism, and Chancellor Angela Merkel of Germany has long advocated closing it. President-elect Barack Obama has also made closure a priority.
Plötner said that taking released inmates to Germany would need to be discussed with the new Obama administration, which takes office Jan. 20.
Steinmeier "has made clear that he does not want to see the plan to close Guantánamo fail due to the need to find somewhere for those prisoners who cannot return to their home countries," Plötner said at a news conference.
Officials did not specify what the status of the former inmates would be if they were accepted in Germany.
According to the United Nations, there are about 250 inmates in Guantánamo, and human rights campaigners have said 40 to 50 of them could face persecution if they were deported to their home countries.
Merkel's spokesman, Thomas Steg, said Germany would not accept prisoners if conditions were attached.
"One thing is clear: The Americans cannot ask for any special terms - no other agreements, swaps or other strings attached," Steg told reporters.
Last week, the U.S. defense secretary, Robert Gates, asked that plans be updated for closing Guantánamo in case Obama requested it soon after taking power.
Obama has provided few details about his plans. He has suggested that some prisoners could be prosecuted in federal courts. Those men could be held in federal or military prisons. But the Obama transition office has not offered details of where the remainder might be held.
Portugal has said it is willing to resettle some detainees and has urged other European countries to help.
"The time has come for the European Union to step forward," Portugal's foreign minister, Luís Amado, said in a letter to other European ministers released Dec. 11.


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Iraqi who threw shoes at Bush was tortured, his brother says
By Timothy Williams
Monday, December 22, 2008
BAGHDAD: The television reporter who threw his shoes at President George W. Bush was burned by a cigarette in the hours after his arrest on Dec. 14 and was beaten so badly by Iraqi security personnel that one of his teeth was knocked out, the reporter's brother said Sunday after a visit to the jail.
The reporter, Muntader al-Zaidi, 29, has been jailed since hurling his shoes at Bush during a news conference here last week. Zaidi has not been formally charged, but he faces up to seven years in prison if convicted of the crime of aggression against a foreign leader during an official visit.
A spokesman for Prime Minister Nuri Kamal al-Maliki did not return phone calls seeking comment on Sunday about the allegations, but the Maliki government previously denied that Zaidi had been mistreated while in custody.
It was Maliki's security detail that detained Zaidi after he hurled his shoes. Zaidi was seen being beaten before he was pulled from the room where the news conference by Bush and Maliki was held.
On Sunday before the torture allegations were made public, Maliki said that he had received a letter from Zaidi saying that a terrorist had persuaded him to throw the shoes.
"A person urged him to commit this act, and this person is known to us as a person who beheads people," Maliki said, without divulging the person's name.
Zaidi's family has maintained that he was acting out of his own frustration with the American invasion.
The visit by one of Zaidi's brothers was the first by either a relative or a lawyer that the reporter had been allowed since being jailed. He has not been seen publicly since his arrest.
During an interview broadcast Sunday on Al Baghdadia, the Cairo-based satellite television network for which Zaidi works, his brother Uday, 33, said that Zaidi had been stripped to his underwear before being placed in a cell and tortured during the 24-hour period after his arrest.
"He told me he was sleeping on the floor of the cell when a very large man came in and dumped cold water on him and began hitting him with a thick cable," Uday al-Zaidi said in the TV interview.
He said his brother had told him that he was brutally beaten by several men and burned on his right ear by a cigarette. Uday al-Zaidi said that on Sunday his brother had bruises on his face, stitches on the bridge of his nose and swelling in his legs, arms and hands.
His jailers had periodically demanded that he state in a videotaped confession that he had been ordered to commit the act by enemies of the prime minister, Uday al-Zaidi said his brother had told him.
Uday al-Zaidi said his brother had said: "After the torture and the cold-water shower, I told them to bring me a blank sheet of paper and I would sign it, and they could write whatever they wanted. I am ready to say I am a terrorist or whatever you want."
But Muntader al-Zaidi told his brother that the men had stopped beating him and did not force him to write or sign anything. The journalist said that a letter to the prime minister written by him from jail expressing regret for the attack had not been coerced, his brother said. It was unclear if this was the same letter Maliki referred to.
Uday al-Zaidi said his brother told him that he had bought the shoes — used — at a market in Cairo.
Meanwhile, leaders of the blocs in Parliament reached consensus on Sunday on a resolution that would allow troops from Britain, Australia and other countries to operate on Iraqi soil after the end of the year.
The resolution grants the Iraqi government the authority to set the terms for the presence of those troops, as long as they are to be out of Iraq by the end of July, said Taha Diraa, a lawmaker from the Islamic Supreme Council of Iraq, a leading Shiite party.
Parliament is scheduled to vote on the resolution on Monday.
Iraqi lawmakers are also considering whether to strip Mahmoud al-Mashhadani, the speaker of Parliament, of his position. Lawmakers said that Mashhadani was considered a histrionic man who was often brusque with those with whom he disagreed, and that he had insulted members of Parliament on Wednesday at a rowdy session dealing with the bill governing foreign troops.
If the vote passes, Mashhadani will keep his seat in Parliament but lose the speaker's post. It is one of the most prominent positions in the Iraqi government now held by a Sunni.

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December 31 trial date for Iraqi shoe-thrower
Reuters
Monday, December 22, 2008
By Ahmed Rasheed
The Iraqi reporter who threw his shoes at U.S. President George W. Bush and called him a "dog" will stand trial on December 31, a court official said on Monday.
TV journalist Muntazer al-Zaidi is charged with "assaulting a foreign head of state visiting Iraq," said Abdul Satar Birqadr, spokesman for Iraq's High Judicial Council.
"The Criminal Court has set a date for trial on December 31 and a three-judge panel will run the hearings," he said.
"The case is not complicated and I expect it won't take a great deal of time to reach a ruling," he said, adding that it was up to the court to determine a sentence.
U.S.-backed Prime Minister Nuri al-Maliki has condemned Zaidi's actions but he will likely not want to alienate Zaidi's many supporters, particularly as he and other politicians weigh their parties' odds in provincial elections next month.
The defendant's lawyer said his client had been severely beaten following the shoe-throwing incident at a December 14 news conference in Baghdad, but Zaidi's brother said the reporter would do the same again if he had the chance.
Uday al-Zaidi said his brother had told an investigative judge on Sunday that he had expected to be shot after hurling his first shoe.
But when that did not happen, "'that gave me time to throw the second (shoe),'" Zaidi quoted his brother as saying. "'If the clock were turned back, I'd do the same thing over again.'"
The trial of Zaidi, whose actions struck a chord among those who blame Bush for the horrific bloodshed unleashed by the 2003 U.S.-led invasion of Iraq, will likely be closely watched.
In an unusual move that may reflect the sensitivity of the case for Maliki, Iraqi authorities will give the media full access to the trial.
Zaidi, who visited his brother for over an hour at an undisclosed location where he is being held in Baghdad's heavily fortified Green Zone, said that "the signs of torture were clear on (Muntazer al-Zaidi's) face and his body."
He said the reporter has a tooth missing, his nose was injured and there were bruises on his arms and legs.
Zaidi's brothers have previously said he suffered a broken arm but in recent days have retracted those allegations.
Uday al-Zaidi said his brother had been tortured into telling the authorities that someone persuaded him to throw his shoes at Bush. Maliki referred on Sunday to an alleged accomplice or instigator as someone known for cutting off heads but did not elaborate.
The prime minister has sought to soothe outcry over the reporter's fate. He met praised the Iraqi media when he met journalists on Sunday, pledging justice would run its course -- even if that meant Zaidi went free.
(Additional reporting by Waleed Ibrahim; Writing by Missy Ryan; Editing by Jon Boyle)


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Syrian leader says direct talks with Israel are possible
Reuters
Monday, December 22, 2008
DAMASCUS: President Bashar al-Assad of Syria said Monday that indirect talks his country has held with Israel could move to direct talks and conclude with a peace deal.
"If this foundation is successful then direct negotiations would represent a successful phase and then naturally, peace would be achieved," he was quoted by Syria's official SANA news agency as saying.
Assad, whose country has held four indirect rounds of talks with Israel in Turkey this year, said he hoped the administration of President-elect Barak Obama would help by actively pursuing peace in the Middle East.
"It is natural that at a later stage we would move to the phase of direct talks," he said. "We cannot achieve peace through indirect negotiations only."
Assad likened the indirect talks, suspended since September's resignation of Israeli Prime Minister Ehud Olmert, to laying down the foundations of a building.
He said UN Security Council resolutions should be the basis for any talks.
Indirect talks between Syria and Israel have focused on the disposition of the fertile Golan Heights. Israel captured the plateau in the 1967 Middle East war and annexed it more than a decade later - a move unanimously rejected as null by the United Nations Security Council.
The two countries held almost 10 years of direct talks under U.S. supervision that collapsed in 2000 over the scope of a proposed Israeli withdrawal from the Golan Heights.
But the two countries resumed indirect talks this year following Turkish mediation. Assad's comments coincided with a visit to Ankara by Olmert, now caretaker prime minister.
Assad said he hoped there would be no war in the Middle East under the incoming U.S. administration.
"We hope that this administration works seriously, practically and realistically towards achieving peace in our region," he said, adding, however, that Obama's first priority would have to be Iraq.













In parts of Eastern Europe, mentally ill kept under wraps
By Matthew Brunwasser
Monday, December 22, 2008
PRAVDA, Bulgaria: Across the former Soviet bloc, many mentally ill are without rights as a result of unrevised rules in place before free markets and democracy started taking hold, according to human rights groups.
The name of this isolated spot in the lush Danube plains means justice or, carried over from Russian, it means truth. Little of either definition has penetrated the local care home for men with mental disorders, a bleak establishment most easily reached by a bone-jarring six-hour ride from Sofia, the capital.
In the Communist era, this is where authorities hid the mentally ill from public view. Today, the small complex of scrappy, two-story buildings is still a favored destination for city folk to send away mentally ill relatives - and not worry about hearing from them again.
All across the former Soviet bloc, the laws governing guardianship mostly date back to the Communist era. In the tumult of the two decades since free markets and imperfect democracy took hold in Eastern Europe, these are among the few unrevised rules, and hundreds of thousands of people are without rights as a result, according to human rights groups.
A two-year study of guardianship systems in eight countries completed early this year by the Mental Disability Advocacy Center in Budapest found jail-like regimes for patients suffering from a wide range of mental disabilities, from mental illness to intellectual disability. The center, a privately funded nongovernmental organization, estimates that one million people live under guardianship in Eastern and Central Europe and the former Soviet Union and are subject to "significant, arbitrary and automatic" violations of human rights.
Guardianship involves the transfer of legal capacity from one individual to another. Across Eastern Europe, laws deprive mentally ill adults of all rights to make decisions, regardless of their differing abilities. Guardians decide where they live, how to spend their money, how they use their property rights or access courts, and even determine their relationships. Often, they use their powers to send them to large state institutions forever.
Guardianship laws in Bulgaria and across the region provide no effective oversight of guardians who assume control of their wards' property or bank accounts, the Budapest center found.
"We call it civil death," said Victoria Lee, a human rights lawyer at the Mental Disability Advocacy Center. "Once you are under guardianship, that's it. You basically become a non-person. These guardianship systems have no safeguards."
Since the law assumes that guardians act in the best interest of their wards, there are no legal mechanisms to prevent them from neglecting responsibilities or seeking financial gain. While the directors of social care institutions are required by Bulgarian law to submit yearly audits of their wards' finances, for example, the fine for failing to do so is 0.20 Bulgarian levs, or about 14 U.S. cents.
Chaotic legislation, unclear standards and ineffective judiciaries in some countries in Eastern Europe mean that it is relatively easy for a family member to convince a judge that someone with a mental illness or intellectual disability should be placed under guardianship - simply because a family member wants control over assets.
"It's not for riches," said Aneta Genova, a lawyer from the Bulgarian Helsinki Committee, an international human rights group, representing several wards at Pravda. "It's usually for little things, like using a room in an apartment, or renting or selling a property."
Some countries are trying to change the system. In Hungary, for instance, the draft civil code being considered by Parliament has introduced supported decision-making.
With guardianship, "it's easy to get in, but almost impossible to get out," said Oliver Lewis, executive director of the Mental Disability Advocacy Center. "The law should provide support for people who need assistance, not remove their rights altogether."
Legal appeals to remove guardianship and restore legal capacity can lead to "Kafka-like" situations, Lewis said, because in many countries in Eastern Europe the procedures require the consent of the guardian. "Often the guardians don't want the people to appeal, because it is in their financial interest to have the person remain under their guardianship."
The director of the Pravda home, Beyti Hussein, testifies to the abandonment and helplessness of the residents under his care. He said this was aggravated by their inability to make decisions themselves.
"In most cases, people are sent here in order to not bother their families," Hussein said, noting that 57 of the 70 men in the center were under total guardianship and only 4 were from the region. "At the same time, the families use their properties and don't want to have anything to do with them or accept any responsibilities."
Hussein said a typical story was one about identical twin brothers, Kiril and Metodi Mitsev, 46. They have schizophrenia and came to Pravda in 2000. Their brother Julian, appointed their guardian by a court, has never visited. And because his permission is required for them to travel, they are not allowed to leave the area except on group excursions led by the home.
According to documents kept by the home, the brothers own shares in two buildings and land in Kyustendil, southwest of Sofia, as well as an apartment in Sofia. Their only income is about 40 Bulgarian levs per year from their elderly father's pension.
"I can't say why he doesn't come," Metodi said of his brother Julian. "But my father says, 'You can't count on your brother."'
Neither Mitsev brother seemed to know about guardianship when questioned about the issue. They know only that they feel powerless.
"These people are resigned to their fate," said Stoyanka Dimitrova, a social worker at the home. "There is no one to protect them and no one to show them how to claim what is rightfully theirs."
Metodi does the talking for the brothers. His gregariousness balances Kiril's introversion. The front of Metodi's blue denim shirt is monogrammed. He said he had to constantly counter his brother's desire for them to dress alike.
"If we were closer to Sofia it would be easier to visit our father and we could find a lawyer," Metodi said. Their father is too old to make the long trip to Pravda. Changing homes would require the consent of their guardian.
"A lot of years have gone by," Metodi said, staring off pensively into the plains surrounding the home. "We are far away from the city and miss civilization. We have no girlfriends here. I miss taking getaways."




Germany tracing artwork and its Nazi past
By Judy Dempsey
Monday, December 22, 2008
STUTTGART: This industrial southwestern city is often considered the heart of German engineering and entrepreneurial elan. Rebuilt after the Allied bombing raids in 1945, it reflects the Swabian region, known to this day as a home of hard work, thrift and industriousness.
But there is another aspect to this almost ascetic region. Stuttgart has a spectacular art museum, with a wonderful 20th-century collection. Paintings by the German modernists are here, including Franz Marc's "Kleine blaue Pferde" and Lyonel Feininger's "Barfüsserkirche."
These two paintings, however, are just some of the tens of thousands of art works in the country's museums that have become caught up in the seemingly never-ending consequences of Germany's Nazi past. Big galleries and museums are being inundated with claims by lawyers representing the descendants of persecuted and murdered German Jews.
The lawyers claim that art owned by Jews had been seized or sold under duress before 1945. After the war, many of these paintings resurfaced in auction rooms, private collections or museums. Sixty years later, critics say that German museums have been extremely reluctant to give back art acquired under dubious circumstances.
The issue has become deeply emotional among museum directors, lawyers and the descendants of Jews because it captures the difficulties in dealing with what was until recently a little known - or, at least, little discussed - aspect of Germany's past.
"This is about dealing with a miserable part of our history, which some of the museums would prefer not to confront: how museum directors collaborated with the Nazi regime," said Monika Tatzkow, a lawyer who specializes in property claims.
In June 1937, Hitler ordered museums to get rid of any paintings that contained "German degenerate art since 1910." Thousands of avant-garde paintings, many by Jewish artists or owned by Jews, were removed from museums. Some were stolen or put into safekeeping. Others were sold - probably below the market value - by Jewish families desperate to obtain visas to escape Nazi Germany.
After the war, the German government was slow to address the issue of restitution. During the 1950s, it compensated some of the owners or their descendants, but the numbers and sums were insignificant. The issue then slumbered for decades.
It was not until 1998, when the government attended a seminal conference in Washington devoted to returning art to the descendants of Nazi victims, that it began to take the issue seriously. Despite some misgivings from the Foreign Ministry in Berlin that there would be an avalanche of new claims for restitution, Germany, along with 43 other countries, agreed that any art works confiscated during the Nazi era were to be searched for, identified and the rightful heirs determined. Then, "a fair and just solution" would be reached with the heirs.
Last week, the issue bubbled to the forefront once more. Art directors, lawyers and Jewish descendants attended a government-sponsored conference in Berlin to assess the results of the 1998 Washington conference, and the consensus emerged that Germany was still lagging behind other countries.
"The German government has taken very positive steps, but we are disappointed with the approach of most of the museums," said Gideon Taylor, executive vice president of the nongovernmental Conference on Jewish Material Claims against Germany, a group dating to the 1950s. "Many of the German museums have been very slow to carry out the provenance research which is necessary for there to be a fair and just claims process and, as importantly, an open and proper accounting of history."
There is no single explanation for this failure. Some museum directors say they lack sufficient staff or funds to undertake the research. Others fear that if they establish the provenance, or legal ownership, they could end up giving back many paintings, leaving several museums bereft of prestigious collections. And if they tried to buy them back, they complain that they would have to compete with big auction houses and could not outbid private collectors or dealers.
"Whatever the reasons for this foot dragging, what is at issue is the past, namely how the museum directors complied with Hitler's decree," Tatzkow said. "Those same directors were reinstated after 1945. The museums have been reluctant to deal with restitution in any serious way because they are afraid it would show just how complicit, how 'brown,' the directors were in banning those works of art."
Sean Rainbird, director of Stuttgart's Staatsgalerie, is cooperating with a new, state-backed, public Internet database that attempts to trace the ownership history of the paintings. He is also digging through archives in Stuttgart to establish how the museum obtained works banned by the Nazis that made their way onto the market after 1945.
"There is the issue of enforced transactions of every sale of every Jewish collection that happened during the Nazi times," said Rainbird, a former curator of the Tate Modern in London. "There were cases where individuals were allowed to take their collections out of the country, and there were some dealers, in a gesture of solidarity, who helped them and were dealing with them in an honest way.
"The issue is establishing a legal situation with title," he added. "Some archives were lost, some receipts were lost. It is very complicated."
Despite such difficulties, Rainbird has made it his priority to trace the ownership titles of many of his contemporary German paintings. Indeed, the museum recently returned Paul Klee's "Rhythm of the Windows" (1920), which it then bought back for more than €2 million, or $2.8 million. As for the Marc and Feininger paintings, their future has yet to be resolved.
"The Marc came to us from a collection in 1978," Rainbird said.
By now, museums are coming under political pressure from the federal government, even if it means muddying the question of ownership. "There is the political impulse from Berlin that one should return paintings to the original owners without finding out all the details, or the circumstances, for instance, if any of these paintings had been legitimately acquired," Rainbird said.
It is as if the German government wants to be rid of the problem once and for all. In an ideal world, that attitude would not be proper, either. But faced with the reluctance of many museum directors, such political pressure may be necessary to redress some of the injustices of the past.

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LETTER
The public memory
Regarding the article "Purging history of Stalin's terror" (Nov. 27): Memory is a central terrain on which democracies are constructed, negotiated and secured for the future. The inextricable relationship between history and human rights is increasingly being recognized by local and international bodies.
During its recent bid to enter the European Union, Turkey's refusal to take responsibility for the Armenian genocide was judged as a key indicator of its commitment to human rights.
Truth and Reconciliation Commissions in half a dozen countries, from South Africa to Peru, have mandated spaces for remembering and confronting the most difficult aspects of their nations' histories, recognizing this as a fundamental requirement of an open society.
All governments must be held accountable for maintaining open access to their pasts.
This is not a simple matter of whether an archive is open or closed. Democratizing history - and using history to sustain a healthy democracy - requires public forums for people to wrestle with their pasts, in all its glories and dishonors.
Erasing the memory of past political repression and the resistance against it lays a strong foundation for cultures of repression today.
Creating ongoing spaces for debate on all aspects of the past and its implications for a ever shifting present reality, on the other hand, can build a popular culture of democratic engagement. Every nation's treatment of its past needs to be taken seriously as a bellwether for its commitment to human rights.
Liz Sevcenko, New York

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In case of war with China, Japan wanted U.S. to deploy nuclear weapons
The Associated Press
Monday, December 22, 2008
TOKYO: The longest-serving prime minister of Japan, who also was a Nobel Peace laureate, asked the United States in 1965 to deploy nuclear weapons against China if war broke out between the Asian rivals, according to newly declassified government files obtained by Kyodo news agency.
On his first trip to Washington as the Japanese leader, Eisaku Sato told Defense Secretary Robert McNamara that U.S. military forces could launch a nuclear attack on China by sea if needed, Kyodo said Monday.
Under its post-World War II Constitution, Japan renounces war as a sovereign right and prohibits the use of force in international conflicts.
The new details of Sato's discussions with the United States reveal a more complicated picture behind his strong public stance against nuclear weapons as well as his intense distrust of China.
His comments came a day after his talks with President Lyndon Johnson on Jan. 12, 1965, during which he sought to reconfirm a U.S. promise to defend Japan under the U.S.-Japan security treaty, according to Kyodo. The documents show that Johnson assured the Japanese leader of Washington's commitment to the pact.
China triggered Japanese and U.S. concerns about the country's emergence as a nuclear power after Beijing tested its first atomic bomb, on Oct. 16, 1964.
Sato, in office from 1964 to 1972, also told McNamara that although Japan was technically capable of building atomic weapons, it had no intention of doing so, according to documents that were routinely declassified by the Japanese Foreign Ministry after 30 years, and obtained by Kyodo.
The Chinese Ministry of Foreign Affairs did not immediately respond to a request for comment.
It was Sato who introduced in 1967 Japan's "Three Non-Nuclear Principles," which has guided the country's nuclear policy since then. The resolution, approved by Parliament in 1971, states that Japan will not own or make nuclear weapons, nor permit them into Japanese territory. Japan also joined the Nuclear Nonproliferation Treaty during the time Sato was prime minister.
His efforts were recognized by the Nobel committee in 1974, when he shared the Peace Prize with the Irish human rights advocate Sean MacBride.
Sato's attitude toward the Chinese was frosty at best. Japan and China never established diplomatic relations during Sato's eight years in office, with Tokyo calling for Beijing to first recognize Taiwan.
Japan is the only country to have undergone a nuclear attack. The United States dropped separate atomic bombs on Hiroshima and Nagasaki in the waning days of World War II.
The current U.S.-Japan security treaty, signed in 1960, obliges both countries to "maintain and develop" their ability to defend against armed aggression and to cooperate if Japan came under attack.

Decapitated soldiers blow to Mexico
Reuters
Monday, December 22, 2008
By Mica Rosenberg
Mexican President Felipe Calderon vowed on Monday not to back down from the fight against powerful drug cartels who decapitated eight soldiers in the most serious blow to the army in a 2-year-old offensive.
Police found the beheaded and tortured bodies tied up in the city of Chilpancingo, about an hour north of Acapulco, during the weekend.
The heads were stuffed in a black plastic bag and tossed outside a shopping centre with a note saying, "For every one of us you kill, we are going to kill 10," Mexican media reported.
An ex-police commander, also without a head, was found with the soldiers.
The gruesome attack was the worst against the army since Calderon deployed some 45,000 troops to take on drug gangs after coming to office in 2006.
"We are committed to this fight with all of its consequences," Calderon said at an event honouring a military hero. "We will not stand down and there will be no truce with enemies of the state," he said.
Calderon's assault against drug gangs has netted several major smugglers wanted in the United States, but violence in Mexico has worsened. More than 5,300 people have died this year, over twice as many as in 2007, as traffickers fight each other and the government over drug smuggling routes.
Washington, which has promised Mexico hundreds of millions of dollars in aid to buy equipment and provide security training, now sees Mexican cartels as its No. 1 drug threat.
It was not clear which faction was behind the beheadings. The main drug gangs are the Gulf cartel from northeastern Mexico and a federation of smugglers run out of the northwestern state of Sinaloa by Mexico's most wanted man, Joaquin "Shorty" Guzman.
The violence threatens to scare away investors and hit Mexico's economy, already shaky from the global financial crisis.
Mexican cartels are increasingly taking the place of the Colombian organisations who once ruled the international cocaine trade. Colombians have ceded many traditional trafficking routes to the United States to the Mexican gangs, preferring lower profile roles or focussing on Europe.
"There are no drug trafficking organisations left in Colombia that think they can go toe-to-toe with the nation-state; the cartels up in Mexico actually think that they can," a senior Drug Enforcement Administration official based in Colombia told Reuters.
Calderon deployed the soldiers to fight organised crime in part because they are seen as less corrupt than police.
But military men from generals to foot soldiers have said they too are being offered thousands of dollars to turn a blind eye to shipments or call off anti-drugs operations.
(Additional reporting by Miguel Angel Gutierrez, editing by Patricia Zengerle)

Book Reviews: 'Peripheral Vision'
Reviewed by Maria Russo
Monday, December 22, 2008

BOOKS Peripheral Vision
By Patricia Ferguson.
366 pages. Other Press. $24.95.
The unexpected misery of having it all - the husband, the baby, the wished-for fancy career - is a phenomenon with a growing literary trail. In the United States, the problems presented by the modern female high-functioner tend to be the territory of memoirists and manifesto writers: Leslie Bennetts, Judith Warner, Caitlin Flanagan, Linda Hirshman. But in Britain, it's fiction writers who have been probing the situation. In a way that makes more sense: What ails the privileged contemporary daughters of feminism is so subtle and multifaceted, rooted in such a mash-up of internal and external forces, that the novel may be the ideal way to capture it. The results can be humorous and slight (Allison Pearson) or humorous and deep (Helen Simpson) or visceral and disturbing (Rachel Cusk), but at the very least they omit the phrase "work-life balance." To the list of fiction-writing British explorers of the modern feminine condition add Patricia Ferguson, a former nurse and midwife whose sixth book, "Peripheral Vision," is both cheerful and emotionally wrenching.
Ferguson begins by introducing Sylvia Henshaw, an eye surgeon in her early 30s who is accomplished, attractive and at war with herself. In the aftermath of an emergency C-section, she finds she can't connect to her much older husband or her "unbearably fragile" baby. "The glorious relief, two months later, of going back to work!" Diagnosis: Acute high-achieveritis, postpartum variety. Body torn in two, heart like a stone, future obliterated.
Prognosis: Not fatal. So don't let on. Do you want them to think you're a freak of womanhood? Sylvia's predicament is the heart of the novel, but it's just the entry point into an ambitious narrative that jumps back and forth in time, with a cast of characters, both men and women, whose connections aren't fully revealed until the end.
Back in the 1950s there's Iris, a beautiful young nurse whose capacity for nurture masks a crippling emotional wound from her childhood.
There's Iris's patient George, whose eye was mutilated in a household accident. There's George's mother, Ruby, who's pulled herself up after a deprived childhood and will never forgive herself for what she let happen to her only child. There's heedless Rob, training to be a surgeon and in love with Iris, though his snobbish mother is aghast at her commonness. In the mid-1990s, we have Sylvia and Adam, who fell for Sylvia after his wife left him for a younger man. And then there's Sylvia's childhood friend Will, an actor whose best years appear to be behind him as he cares for his dying mother.
Ferguson uses her medical background not just to believably depict her characters' working lives but often to crawl inside their skin. No doubt the eyeball and its ailments have never been presented in such smooth and friendly prose. The same goes for Ferguson's straightforward and compassionate descriptions of maternity wards and aging and dying bodies. As horrific as some of her images are, there's no McEwanesque lurking revulsion. The eye surgery play-by-play ends up being so absorbing that you're ready to forgive the obviousness of the novel's overarching metaphor: the contingency of vision, the trouble we so often have seeing what's right in front of us.
Clearly, Ferguson understands that our physical and emotional lives aren't separate. "All the while she is entirely absorbed," reads one passage, describing Sylvia's bliss as she operates. "Her heartbeat is slow. All the processes of her body are calmed. Within she feels the great lively peace of creativity." Soon, though, she must face the long drive home - "which is not long enough" - and her waiting baby.
For while Sylvia's work brings her immense satisfaction, she is a novice in the more inchoate realm of love.
If sexual love takes Iris's life toward a tragic turn while it only detours Sylvia's, that difference is mainly the result of the progress women made in the second half of the 20th century. And if that progress has also created, in Sylvia, for example, new kinds of problems, "Peripheral Vision" makes it clear that compared with what women in the 1950s were up against, these problems are more readily solved.

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Vanity is so last year
By Natasha Singer
Monday, December 22, 2008
With hindsight, the first decade of this century may come to be viewed as the era of the mass medicalization of attractiveness.
The advent of cosmetic Botox in 2002 posited the eradication of wrinkles as an affordable luxury amid a booming economy.
On American television, reality shows like "Extreme Makeover" and "Dr. 90210" normalized vanity medicine, making cosmetic operations seem cuddly and carefree. Meanwhile, lenders rushed in to offer specialized lines of credit for cosmetic procedures.
And, somewhere along the way, the body became the new attire, a mutable status symbol subject to trends in proportion, silhouette, technology and disposable income.
But now, will financial hardship demote the pursuit of physical perfection?
Will the vogue for a smoothed face in which only the mouth moves, or a mix-and-match body of mature breasts atop boyish hips become outmoded? Will aesthetic values loosen up, allowing the occasional wrinkle to take on a certain measure of authenticity?
"There comes a point when you are putting too much time and money into your vanity," said Peri Basel, a practice consultant in Chappaqua, New York, who advises cosmetic doctors on marketing strategies.
"For me, the vanity issue is: Where does it stop? If you are going for buttock implants, do you really need that?"
Indeed, a few indicators suggest that financial constraints are beginning to interrupt the narrative of better living through surgery - at least temporarily. Sixty-two percent of plastic surgeons who responded to a recent questionnaire from the American Society of Plastic Surgeons said they had performed fewer procedures in the first half of this year compared with the same period last year, according to the latest anecdotal information from the group.
At the society's annual meeting last month in Chicago, some prominent surgeons said they had openings and for the first time agreed to negotiate fees with patients.
More recently, a quarterly earnings statement from Mentor Corporation, a breast implant manufacturer, reported that the number of breast implants sold in the United States decreased 5 percent during the three months ending Sept. 26 over the same period last year. In the last month, two manufacturers of cosmetic medical devices have closed.
"In Orange County, where plastic surgery is a part of their culture, doctors told me business is down 30 to 40 percent," said Thomas Seery, the president of realself.com, a site devoted to reviewing vanity-medicine procedures. "That tells me something is fundamentally changing there."
Even a few celebrities, those early adopters of appearance technology, have started to deride the plasticized look that sometimes accompanies cosmetic interventions, a harbinger perhaps of a new climate of restraint in which overt augmentation seems like bad taste.
Call it a Botox backlash. Last month in interviews with different magazines, the actresses Courteney Cox and Lisa Rinna said they did not like the look of excessive facial injections.
"It's not that I haven't tried Botox - but I hated it," Cox said in an interview in Marie Claire. "You know you've messed up when people who are close to you say, 'Whoa, what are you doing?"'
Academics who study body image and body modification said it was too soon to know how financial constraints might alter attitudes toward beauty maintenance.
But several researchers forecast how consumers might reappraise the idea of appearance upkeep in light of basic needs, family obligations, romantic aspirations, professional status and personal values.
Although a recession may propel some people to seek more procedures, many consumers will reduce or forego cosmetic treatments, they said.
In uncertain times, people tend to re-evaluate their priorities, dismissing aspirational purchases as frivolous, said Victoria Pitts-Taylor, a professor of sociology at Queens College and the Graduate Center of the City University of New York. She is the author of "Surgery Junkies: Wellness and Pathology in Cosmetic Culture."
"Cosmetic surgery is going to become the new SUV, something that you can do without, that is less justifiable for you and your family," Pitts-Taylor said.
Cosmetic surgery has weathered other cataclysms. For example, consumers cut back on beauty operations after the terrorist attacks of 2001, a year in which procedures like liposuction, tummy tucks, nose jobs and eye-lid procedures declined, according to estimates from the American Society of Plastic Surgeons.
Pitts-Taylor predicted that cosmetic procedures would experience a resurgence when the economy eventually recovers. "It is absurd to suggest that cosmetic surgery is dead or will not be used by the middle class in the future," she said.
Doctors and manufacturers are counting on it.
On Dec. 1, Johnson & Johnson said it planned to buy Mentor Corporation, the breast implant manufacturer, for about $1.1 billion.

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Book Reviews:

Reviewed by Maria Russo

Monday, December 22, 2008

Roads to Quoz
An American Mosey
By William Least Heat-Moon
581 pages. Little, Brown & Company. $27.99.
Few people, aside from truckers, semi-well-known country singers, and maybe a few highway-obsessed hobbyists, have been to as many places in the United States of America as William Least Heat-Moon. He refers to himself, justly, as "an elder of the road." His book "Blue Highways" (1982), which he began in a van on the day his wife and his job left him, is in a lot of ways synonymous with the transcendent experience of the American road trip, a luxury-condo-free view that Lewis and Clark might have discovered if they had traveled by Airstream rather than canoe. A quarter- century later, the very phrase "blue highways" is still shorthand for those mini-nirvanas, those epiphanylike road moments that, in Heat-Moon's latest book, "The Road to Quoz," he now refers to by the disused word quoz (rhymes with schnoz): "a noun, both singular and plural, referring to anything strange, incongruous or peculiar; at its heart is the unknown, the mysterious."
"I'm speaking about a quest for quoz," he writes as he sets off, "of which I'll say more as we go along, but until then, you might want to see Quoz as a realm filled with itself as a cosmos is with all that's there, not just suns and planets and comets, but dust and gas, darkness and light and all we don't know, and only a fraction of what we can imagine."
"The Road to Quoz" is not one long road trip, but a series of shorter ones, taken over the past few years: a circumnavigation of Maine's North Woods by car; a trip along the coast from Baltimore to Florida by boat; and a voyage in Idaho's Bitterroot Mountains by rail bike (a bicycle retooled to cruise along abandoned railroad tracks), on which, Heat-Moon writes, "the movement was that in a dream where gravity doesn't exist."
Though the trips are short, the book feels long, in part because the author defiantly refuses to offer any kind of thesis: he praises quilts, moseying precisely at moments where we start wondering where we're headed. He gestures toward various schemas, but his point is serendipity and joyous disorder. "A genuine road book should open unknown realms in its words as it does in its miles," he writes.
Sometimes the moseying leads to lovely moments. On a bluff at the end of the Ouachita River, in Louisiana, the author's wife says, "I wish somebody would come along." Enter Tuffy Parish, a retired rope-company worker, who takes them to a little spot the locals use to meditate on the river's end, where they stand quietly. Seeing Heat-Moon's notebook, Parish says, "You put in how we take care of the end of the river." Sometimes this sort of trip leads to wonderful people: Jack Kerouac must be happy in his Buddhist Catholic afterlife to know that the guy taking care of the 120-foot-long scroll manuscript for "On the Road" is an ancient text-loving Buddhist Hoosier named Jim Canary, who has been waived through by excited airport security officials who mistook it for the Dead Sea scrolls.
The road almost inevitably tricks a road-book author into adding sentences he will one day wince at, having only imagined they were good, like a mirage. The difference between "Blue Highways" and "The Road to Quoz" is that the author has gone from what feels like a love of the road to a love-hate of it, or at least an impatience with aspects that are unavoidable, such as other people. The road gets to all of us, especially after thousands and thousands of miles. But in the end, it's best not to let the road get your quoz out of joint.

Suspected arms dealer testifies in Thailand
The Associated Press
Monday, December 22, 2008
BANGKOK, Thailand: A Russian businessman dubbed the "Merchant of Death" for allegedly arming dictators and guerrillas sought Monday to prevent his extradition to the U.S., telling a Thai court he was not involved in a scheme to sell weapons to Colombian rebels.
Viktor Bout, a former Soviet air force officer, has long been linked to some of Africa's most notorious conflicts, allegedly supplying arms to former Liberian dictator Charles Taylor and Libyan leader Moammar Gadhafi.
He has repeatedly denied any involvement in illicit activities and has never been prosecuted, despite being the subject of U.N. sanctions and a travel ban.
The U.S. is seeking Bout's extradition on charges he conspired to sell millions of dollars worth of weapons, including 100 surface-to-air missiles and armor-piercing rockets to leftist rebels.
The 41-year-old Russian — who was purportedly the model for the arms dealer portrayed by Nicolas Cage in the 2005 movie, "Lord of War" — was arrested in March during a sting operation in which undercover U.S. agents posed as rebels from the Revolutionary Armed Forces of Colombia, known by its Spanish acronym, FARC.
The leftist group, which has been fighting Colombia's government for more than four decades, is listed by the U.S. as a terror group.
But on Monday, dressed in an orange prison uniform with shackles around his ankles, he told the court he was set up by the Americans.
"I never met anyone from FARC. I've never talked to anyone from FARC," Bout told the court. "I didn't do anything wrong in Thailand."
U.N. reports have said Bout parlayed his contacts in the post-Soviet arms industry into a weapons-dealing business, setting up a network of more than 50 aircraft around the world to supply arms that fueled a litany of conflicts, mostly in Africa.
The U.N. suspects his clients included Taylor, Gadhafi, the late dictator Mobutu Sese Seko of Zaire, now known as Congo, and both sides of the civil war in Angola.
The world body imposed a travel ban on him that accused him of supporting efforts by Taylor's regime in Liberia to destabilize neighboring Sierra Leone.
Bout scoffed at the U.N. allegations on Monday, telling the court that his aviation business only shipped "legal items."
"The U.N. is not a court," he said, his voice rising as he waved his hands in the air. "It is a group of countries and it doesn't have the capacity to check what I send on my planes."
The extradition hearing has drawn an unusually vigorous response from Russia, according to Douglas Farah, who wrote the 2007 book on Bout, "Merchant of Death: Money, Guns, Planes, and the Man Who Makes War Possible." The co-author of the book, Stephen Braun, is an editor at the Washington bureau of The Associated Press.
Farah said the Russian government has run sympathetic stories in government media about Bout and lobbied senior Thai officials for his release. Two officials from Russia's Embassy in Thailand were in court on Monday.
The Duma, or lower house of parliament, has also issued a statement calling for him to be returned to Russia.
"The Russians have made great efforts to get him out beyond what they would do for a normal Russian citizen," Farah said. "Over the years, he's been incredibly useful to the Russian intelligence apparatus particularly in delivering weapons to states such as Iran and their proxies in Lebanon."
Farah said the Russian government is concerned that he could reveal details about his dealings with Moscow were he to be put on trial in the United States.
"I think they would prefer to have him back in Moscow under their control than having him testify in open court in the United States," Farah said.
Facing the judges in a wooden chair on Monday, Bout often appeared agitated as he detailed his arrest and nine-month detention in a Bangkok prison. But at one point, he turned and flashed a victory sign and smiled at his mother, who along his wife attended the hearing.
Bout testified that he came to Bangkok "to relax" and meet with several Thai executives "who wanted to purchase airplanes."
"I did not commit any terrorist acts," Bout said.
Bout and his attorneys offered up a laundry list of reasons he should be set free: The arrest warrant was flawed. He committed no crime in Thailand. The United States had no business prosecuting him. He is a victim of worsening relations between the United States and Russia.
Bout faces charges in the United States of conspiring to kill Americans, conspiring to kill U.S. officers or employees, conspiring to provide material support to terrorists and conspiring to acquire and use an anti-aircraft missile. He could face a maximum penalty of life in prison if convicted.
The extradition hearing will continue Tuesday and is expected to finish this week. A ruling is not immediately expected.

Sudan man accused of aiding Darfur war crime court
Reuters
Monday, December 22, 2008
KHARTOUM: A Sudanese man appeared in court Monday accused of working to overthrow the state by passing on documents about a Darfur war crimes suspect to the International Criminal Court.
Lawyers said Mohamed Alsary Ibrahim was the first person in Sudan to be prosecuted for cooperating with the ICC and faces death by hanging if convicted.
An officer from Sudanese military intelligence told Khartoum north court Ibrahim offered to pay a contact $10,000 (£6,750) for documents that might incriminate a government minister wanted for masterminding a series of atrocities in Darfur.
The intelligence officer, Omar Abdel, said Ibrahim had been trying to find documents to "fabricate a relationship" between Ahmed Haroun, Sudan's state minister for humanitarian affairs, and the "Janjaweed," pro-government militias accused of war crimes in Darfur.
The ICC has already issued arrest warrants for Haroun and a Darfur militia leader. Sudan, which is not a signed-up member of the international court, has refused to hand them over.
In July, the ICC's chief prosecutor also asked judges to issue a warrant for Sudanese president Omar Hassan al-Bashir, accusing him of orchestrating genocide in the region.
Sudanese government officials have repeatedly described the ICC as a tool of western powers bent on overthrowing the Khartoum government.
International experts estimate the war in Darfur has killed some 200,000 people and driven 2.5 million from their homes since mostly non-Arab rebels took up arms against the government in 2003.
Khartoum mobilised mostly Arab militias to crush the revolt and denied accusations that mass killings and rapes took place during the counter-insurgency.
CASH FOR DOCUMENTS
Abdel told the Khartoum court Monday Ibrahim had been offered money in exchange for incriminating documents by a group of Sudanese and Jordanian nationals, all with joint U.S. citizenship, that he had met during a trip to Dubai.
Abdel said Ibrahim approached an officer in Sudan's Popular Police Force in June and asked him to get hold of a bundle of documents on training camps run by the organisation in Darfur.
At the height of the Darfur conflict, Haroun was state minister in the Ministry of Interior, a body with responsibility for Sudan's police forces.
The ICC indictment against Haroun accuses him of funding and visiting camps in Darfur used for the training and arming of government-backed militias. Haroun denies all the charges.
Abdel, answering questions from defence and prosecution lawyers, said the police officer tipped off military intelligence about Ibrahim's request. Officers set up a sting operation and arrested Ibrahim the next day, he added.
Abdel said officers found evidence Ibrahim had already emailed a number of documents to his Sudanese-American contacts, who had specifically asked him for documents the ICC could use.
Ibrahim faces seven charges under Sudanese criminal law including working to overthrow the constitutional government, waging war against the state, dealing with an enemy country, spying and passing on confidential military documents. Lawyers, speaking on condition of anonymity, said people convicted of the first two charges faced the death penalty.
The case was due to continue Tuesday.
(Reporting by Khaled Abdelaziz, writing by Andrew Heavens; editing by Tim Pearce)

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Sudan asks U.N. for aid for at least 18,000 refugees
Reuters
Monday, December 22, 2008
CAIRO: At least 18,000 Eritrean and Somali refugees have arrived in Sudan since the start of the year, and the government is struggling to provide them with aid, a Sudanese government official was quoted as saying on Monday.
The official, quoted by the Egyptian state news agency MENA, said the United Nations had not done enough to help Sudan cope with the influx. "What aid has arrived is modest compared to the number of refugees," the Commissioner for Refugees in Sudan, Mohammed Ahmed al-Aghbash, told MENA, putting the number of Somali refugees at around 5,000.
Somalia is mired in anarchy and Eritrea is still recovering from decades of war.
A human rights group criticised Egypt this week for giving Eritrean authorities access to refugees who may fear persecution by their government, while denying the UN refugee agency access to those same refugees.
The Sudanese government has called on the United Nations to provide urgent aid for the refugees.
(Writing by Alastair Sharp, editing by Tim Pearce)

Six Russians killed in Egyptian bus accident
Reuters
Monday, December 22, 2008
ISMAILIA, Egypt: Six Russian tourists were killed and 17 others were injured Monday when their bus overturned between two Egyptian resorts in the Sinai peninsula, police sources said.
The bus was travelling from Dahab on the east coast of the peninsula to Sharm el-Sheikh at the southern tip and overturned about 10 km (six miles) south of Dahan, they said.
The injured include Russians and other unidentified nationalities, they added.
It is the third time in four months that an Egyptian bus carrying tourists has overturned with fatal results. Seven Belgians were killed in one accident in October and three Italians when a bus overturned in September.
(Writing by Jonathan Wright)

The war against Christmas toys
By Alex Beam
Monday, December 22, 2008
MEANWHILE
Ah, Christmastime. Store tramplings, nervous breakdowns, prickly clumps of holly showing up where you least expect them. And the annual, mindless War on Toys. It makes a fella feel gosh-darned sentimental.
Every year, like clockwork, the family of Boston lawyer Edward Swartz stages a holiday-time press conference, decrying the "10 most dangerous toys" in the stores. Every year, like beaten, groveling, guileless dogs, the media give the Swartz's outfit, World Against Toys Causing Harm (WATCH), free publicity for its dubious claims. That must be because there is so little happening in the world.
This year is no exception. WATCH "fearlessly exposed potentially dangerous toys to the general public," the nonprofit's Web site proclaims.
What are the 10 toys to avoid this Christmas? Beware the Play-a-Sound Book with Cuddly Pooh! Shun the Spiderman Adjustable Toy Skates! For heaven's sakes, don't let your children play with Kenscott's 4-foot-wide inflatable Giga Ball! "Children as young as 4 years old are encouraged to 'crawl inside' this colorful inflatable ball, in order to 'spin, tumble, [and] bounce,"' the Swartzes write, adding: "WATCH out!"
The Giga Ball sounds like a lot of fun, I suggest to James Swartz, director of WATCH and son of the founder. "Of course they are fun. We don't dispute that," he says. "Our point there is that people should at least think about how it can be used in the real world."
To be fair, the Swartzes aren't the only killjoys roaming the aisles. For a number of years, US PIRG (Public Interest Research Group) has been staging its own Christmastime publicity-gathering enterprise, "Trouble in Toyland." It publishes a slightly shorter list of hazardous toys - e.g., Littlest Pet Shop, a lead key chain that would be a bad idea to swallow - and warns: "Simply because a toy does not appear on this list does not mean that it is safe."
One can never be too vigilant. Given that the Swartzes have been putting on their little charade since 1973, and given that the Consumer Product Safety Commission has been regulating and recalling hazardous toys for well over 30 years, is it just possible that toys are safer now?
"There has been a lot of progress made in terms of awareness," Swartz says, "but toys are just as dangerous. A lot of the same type of hazards appear on the shelves over and over again. There is a lot of work to be done."
There is so much work to be done that a few years ago the Swartzes decided to sink their hooks into summer as well. "Summer itself is a time of outdoor fun and activity but also of peril," is the WATCH-word. So they have laid on an additional press event bewailing the many hazards that await children during the dangerous months of unsupervised leisure: campfires, water guns, tipping soccer goals, trampolines, and...bleachers. "Between 1980 and 2003, 19 people died from injuries sustained after falling from bleachers," their Web site states.
But aren't these people mostly drunk, adult, Red Sox fans? There's nothing in this data that refers to children. "Whether they are children or not, there are still summer safety issues," Swartz says. Something tells me he doesn't want to hear about my trips to New Hampshire to buy slingshots for my sons.
A more welcome, albeit short-lived, Christmastime tradition was the full-page ad that the Greenwich, Connecticut-based rich guy Ray Dalio took out in major newspapers decrying Yuletide commercialism. "No sooner does Thanksgiving end, than the loathsome shopping season begins - a monthlong compulsion to buy something, anything, for anyone," read Dalio's ad in last year's Boston Globe, Wall Street Journal, Chicago Tribune and other papers.
In lieu of mobbing the malls, Dalio urged you to "give people donations to their favorite charity. And request that they give donations to your favorite charities. A lot more money would go to people who need it."
Dalio, a Harvard Business School grad who captains the hedge fund Bridgewater Associates, spent $2 million on his "redefining Christmas" campaign last year. This year, not so much. Instead of newspaper ads, "they opted for radio," publicist Marianne O'Hare tells me. "They had limited money to spend." Dalio commissioned six 15-second radio spots to run on some nationally syndicated shows and bought some sponsorship messages on National Public Radio.
Of the switch from newspaper to radio, O'Hare tells me: "Don't take it personally." But I do.

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Holiday countdown for luxury at a bargain
By Jessica Michault
Monday, December 22, 2008
PARIS: The clock is ticking for those still looking for their last few holiday gifts. The two remaining shopping days before Christmas can be a nightmare in which the desire just to have something, anything, to scratch another name off the list can be overpowering. The result is often fewer thoughtful gifts and more a hodgepodge of sometimes costly items. Budget is key this season. Top fashion houses are stocking some lower priced items in hopes that their names will appear under the tree.
Under €100
The Marc by Marc Jacobs line has a number of fun items for under €100, or $143. White rain boots for €5, a heart mirror for €5, a skull pin for €9 and a quilted satin Bowler bag for €20 are just a few of the items on offer. Viktor and Rolf teamed up with Swarovski to create a line of jewelry that includes a striking striped petal ring for €50. And their "No" bracelet in black or red patent leather goes for €95. Gucci has a gift that gives back: the Tattoo Heart Collection gives 25 percent of the sales of each product to Unicef. The line includes a €65 white, scented candle and a Fendi comb in a handy, candy-colored leather container for €100.
From €100 to €300
Prada's key chains in the form of a monkey or teddy bear at €120 are sure pleasers. Jil Sander's exotic leather bracelets cost between €100 and €150 each. Wonder Woman inspired the large comic book tote designed by Diane von Fürstenberg, at €140. The woman who has everything might try a pair of Tom Ford tanning bed eyeglasses rimmed in pink gold for €140. Gloves make a great holiday gift and Causse has a number of high fashion designs that fit in this price bracket, including a pair of old-school-style mittens in gold leather and trimmed in white wool for €207. Gifts from Dior Homme include a set of rectangular cufflinks paved in Swarovski crystal for €210 and a buttonhole butterfly pin in white or mother of pearl for €300, could do the trick for a husband or boyfriend.
From €300 to €500
Roberto Cavalli's decorative locket necklaces in the form of hearts have a little mirror hidden inside, making them both pretty and practical at €365. Look no further than Christian Lacroix for a brooch that goes with everything. The designer has a number of models in his collection that cost between €300 and €400 each. From Celine comes a number of accessories designed for a weekend getaway to the mountains. A pair of white "Après-Ski" boots trimmed in fox fur for €395 is a great warm-up for any winter wardrobe. With or without snow they look chic. An iconic enamel bracelet from Hermès could satisfy almost anyone. Prices range from €303 for the slimmest version to €460 for the extra large. Finally, for the artist in the family there is Caran d'Ache's 20th anniversary box of Supracolor pencils. Decorated in the colorful sketches of Alber Elbaz, who uses his pencils to create fashion designs for the house of Lanvin, €495.

U.S. newspaper shuns Web, and thrives
By David Carr
Monday, December 22, 2008
With 2008 drawing to a brutal close on the media beat — bankruptcies, daily newspapers that are no longer daily, magazines that are downsizing into brochures — a little ray of light appeared in my e-mail inbox. It was from a newspaper owner, of all people.
Into the teeth of a historic recession, the newspaper had just published the biggest issue in its history. The product is double-digit profitable, and it has been growing at a clip of about 10 percent a year since it was founded in 1999, right about the time the Web was beginning to put its hands around print's neck.
Finally, I thought, a story about a print organization that has found a way to tame the Web and come up with a digital business approach that could serve as a model. Except that TriCityNews of Monmouth County, New Jersey, is prospering precisely because it aggressively ignores the Web. Its Web site has a little boilerplate about the product and lists ad rates, but nothing more. (The address is trinews.com, for all the good it will do you.)
"Why would I put anything on the Web?" asked Dan Jacobson, the publisher and owner of the newspaper. "I don't understand how putting content on the Web would do anything but help destroy our paper. Why should we give our readers any incentive whatsoever to not look at our content along with our advertisements, a large number of which are beautiful and cheap full-page ads?"
Other publications much larger than TriCityNews have been wondering about pumping resources into a medium that does not seem to show a promise of returns any time soon.
Writing in The New York Observer, John Koblin pointed out that when Forbes, Portfolio and Fortune went through recent retrenchments, the Web staffs were hit the hardest. That may be just an old print reflex, but there is a rational argument to be made that the part of the apparatus that has a working business model, declining or not, should receive the resources.
At a time when Web entrepreneurs like Nick Denton of Gawker Media are predicting a 40 percent decline in Web display advertising, it's probably not a great time to be indexing into the Web either.
And there are signs that the free ride for consumers may be coming to an end. I started getting notices to renew my subscription to The Wall Street Journal and its Web site and waited, as I have in the past, for the deeply discounted offer. It never came. And according to company statements in October, paid subscriptions for The Journal's Web site were up more than 7 percent from a year ago.
A few caveats before we turn back the clock on publishing history. TriCityNews employs 3.5 people (the half-time employee handles circulation), has a print run of 10,000, and has a top line that can be written in six figures. Still, by setting rates low almost 10 years ago and never raising them or offering a Web option, Jacobson has built a reliable cadre of advertisers who call for ads, sign up for full pages, and pay in advance. There are no people working for sales commissions.
Editorially, the newspaper is boosterish — "we want people to think of Asbury Park as the center of the universe," he said — with notes of skepticism typical of alternative weeklies. There are six columnists in addition to the full-time staff, and they write with a mix of attitude and reporting that Jacobson describes as a "plog," a blog on paper.
The low cost of entry on the advertising side means that almost anyone — a bar, a retailer, a gym — can afford a full-page ad, and the preponderance of them leads to an elegant-looking product.
"I don't allow our name to be used on any kind of content on the Web — not bulletin boards or listings or anything," Jacobson said. "I don't want anybody to connect The TriCityNews and the Internet. I don't want anything that detracts from the paper and the presence of those big, beautiful full-page ads."
Unlike other alt weeklies that borrowed heavily and consolidated newspapers in the hopes of creating a rolled-up Web product, Jacobson prefers to publish in a medium that pays for itself.
Creative Loafing, a chain of weeklies based in Tampa, Florida, bought up The Washington City Paper and The Chicago Reader and moved aggressively to invest editorial resources online. The chain filed for bankruptcy in September.
And Jacobson is more than happy to be known as the Fred Flintstone of the publishing world. "There may come a time when the Web is all there is, and we will try to adapt," he said, "and if we don't, well, hey, we had a great run. But right now, the Web makes no business sense for us."
Many people would tell, and in fact have told, Jacobson that he was bound to go the way of the eight-track tape, but from what he has seen, there are a lot of routes to obsolescence.
He said that as a consumer, he's not a print snob; in fact, he no longer buys the physical version of newspapers he once did. "I just get on the Web site, I look at what I need to and I never look at the ads," he said.
There is no doubt that readers benefit in all sorts of ways from digitized journalism and searchable listings online, but that ease of use has not been accruing to the benefit of the publications that provide that information, or very often, their advertisers.
When it comes to brand advertising, print has a strong track record. Advertisers like the analog presentation in TriCityNews for the same reason they come back in droves to Vogue.
Jacobson, 47, is a former lawyer and politician — he was a New Jersey assemblyman in the '90s — who started The TriCityNews in January 1999 with $15,000 he had won in a personal injury lawsuit. The company is called Limited Risk Inc.
"Right after we started, the dot-com bust happened and we have been running scared ever since. We live off the land and run it very lean," he said. "There is no debt, our office in downtown Asbury Park is very small, and we have never raised our rates, so people tend to stick with us regardless of what is happening in the economic cycle."
The three full-time employees met for their annual Christmas dinner the other night.
"All of us," Jacobson said, "are pretty happy with our lifestyles — I was able to quit practicing law quite a few years ago — and are thankful that we seem to have secure jobs and what seems to be a good future in a pretty tough industry."

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In Denver, a Web site tries to save a newspaper
By Dan Frosch
Monday, December 22, 2008
DENVER: On Dec. 13, a group of staff members from The Rocky Mountain News gathered at the downtown Denver Press Club and agreed that they would no longer stand idle as their beloved paper careened closer and closer to a dire fate.
And they decided to use the Internet — widely credited with hastening the demise of newspapers — to get the job done.
The paper, known informally as The Rocky, had recently been put up for sale, with the distinct possibility it could close next year. The group of about 30 met for two hours trying to figure out how they could save one of Colorado's oldest businesses, which has been churning out news here since before the Civil War. "The overall attitude at the meeting was that they weren't going to sit around and do nothing," said David Milstead, the paper's finance editor.
In what staff members said was possibly the first effort of its kind, they decided to start a Web site, iwantmyrocky.com, so that readers could voice their support for the paper and The Rocky's own employees could publicly make the case for its survival.
"Our thinking is twofold," said John Ensslin, a longtime reporter and the group's spokesman. "We want to drive home how bereft our customers would feel if The Rocky would go away. And beyond that, we want to show any other person that acquiring The Rocky would be a valuable asset."
According to Scripps, The Rocky, a tabloid, has a full-time editorial staff of 199 and a weekday circulation of 225,000, compared with a decade ago when there were 210 full-time editorial staffers and a weekday circulation of 325,000.
Barely a week before the Web site appeared, Rich Boehne, president and chief executive of the E. W. Scripps Company, had told a stunned newsroom on Dec. 4 that the company's flagship paper, beset by $11 million in losses in nine months this year, was up for sale. If nobody bought the Rocky by mid-January, Boehne said Scripps would consider closing the paper.
For months, Denver had been filled with with rumors that one of the city's two dailies, The Rocky or The Denver Post, would go under. After about a century of hardscrabble competition, the papers had begun a joint operating agreement in 2001, splitting business and production costs but keeping separate newsrooms.
Even with the agreement, The Rocky and The Post, owned by William Dean Singleton's MediaNews Group, still slugged it out for bragging rights on coverage, with The Rocky garnering Pulitzer Prizes in 2006 for feature writing and photography.
But this year, as the newspaper market continued to deteriorate, talk that Scripps was trying to unload The Rocky became louder. At one point, there were whispers that the paper would shut down immediately after the Democratic National Convention left town in late August. Even so, when the news came down from Scripps, many staff members were shocked.
"I am beyond stunned," said the veteran political reporter Lynn Bartels. "To me, what happened was literally like a ship capsizing in the middle of the night."
For Bartels, the Web site represents a final plea for help.
The site says staff members want to "preserve and protect" the legacy of The Rocky and "fight for the jobs of more than 200 Coloradans and the many others that would be affected by the newspaper's closure." It also urges readers to write to Scripps and Colorado's congressional delegation.
In the site's first posting, the Rocky columnist Mike Littwin wrote: "We meet in this strange place in a noble effort to save The Rocky Mountain News. And if we can't save The Rocky, we can, at minimum, make some noise before we go."
So far, hundreds of people have posted comments.
Though he is not part of the group who started the site, The Rocky's editor, publisher and president, John Temple, praised it and pointed out that the newspaper's own Web page now links to the site.
"I think it's great that people are taking it into their own hands and trying to have an impact on their own future, and I support that," Temple said. "Obviously, people are concerned, and what the Web site reflects is their wanting to have influence and impact and to take action."
In the meantime, staff members are intent on drawing attention to the plight of The Rocky or perhaps, as Littwin muses on the site, "the odd billionaire to join our cause."
Bartels put it this way: "The Titanic may be going down, but at the very least, we have to try to save some furniture and fashion a lifeboat."

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One man's vision for newspapers' future, as insulation
By Ian Austen
Monday, December 22, 2008
OTTAWA: The Canadian ad agency Taxi has developed a program for clothing homeless people that relies on an industry suffering hard times of its own: newspapers.
This winter the Salvation Army is distributing 3,000 jackets in Canada that were envisioned, executed and donated by the ad agency. The secret ingredient for warmth is shredded newspapers.
"There are ironies to this," said Steve Mykolyn, the executive creative director in Taxi's Toronto office. "We create lots of newspaper ads. And while we hope people read them, we can now say without a doubt our advertising works. It works as insulation."
The jacket's creation dates back to 2007. Mykolyn said he was challenged by his teenage son to consider the situation of homeless people who live near their downtown home. By coincidence, at that time Taxi was soliciting projects from employees to mark its 15th anniversary.
Cyclists in the Tour de France slip newspapers under their jerseys on mountain summits to reduce the chill on subsequent descent, and Mykolyn learned from researchers that cellulose insulation, common in homes, is often made from recycled newspaper.
After enlisting Lida Baday, a prominent Canadian fashion designer, to design a jacket lined with multiple pockets for holding shredded paper, Mykolyn tested the concept by spending eight hours in an industrial freezer.
Once infused with newsprint, the jacket proved so warm that Mykolyn had to remove one of the two sweaters he wore, "and I learned that it's very boring standing in a cold space for a long time."
The jackets, which are also waterproof, have been given a brand name, 15 Below — the temperature in Celsius at which Toronto begins to issue cold weather alerts, equal to 5 degrees Fahrenheit. But they bear only a tiny logo so people are not stigmatized for wearing the coats.
Taxi paid for the initial run of jackets with money that would otherwise have gone to small Christmas gifts for clients and suppliers. (In lieu of a gift, they received a newspaper wrapped in a note about the jackets.)
Along with the Salvation Army, Taxi is trying to find a larger corporate sponsor to keep the program running. The jacket's future, Mykolyn added, hinges on another factor as well.
"It really does require that newspapers stay in business," he said.

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NYT says Paris mayor letter slamming Kennedy a fake
Reuters
Monday, December 22, 2008
By Claudia Parsons
The New York Times has identified as fake a letter it published on Monday that denounced Caroline Kennedy's bid to become a U.S. senator and was attributed to the mayor of Paris.
Kennedy, the daughter of slain U.S. President John F. Kennedy, has been touring New York state in recent days to drum up support for her bid for the U.S. Senate seat of Hillary Clinton, who has been nominated secretary of state.
The letter signed by Paris Mayor Bertrand Delanoe said Kennedy's bid to fill Clinton's senate seat was "surprising and not very democratic, to say the least."
"We French have been consistently admiring of the American Constitution, but it seems that recently both Republicans and Democrats are drifting away from a truly democratic model," the letter said, describing Kennedy's bid as "in very poor taste."
"This letter was a fake," the Times said in an editor's note on its Web site later on Monday. It said the letter had been e-mailed to the paper and that staff sent an e-mail back to the mayor to verify it, but did not hear back.
"At that point, we should have contacted Mr. Delanoe's office to verify that he had, in fact, written to us," the paper said. "We did not do that."
It said the Times had expressed its regrets to Delanoe and the paper was reviewing its procedures to verify letters.
Interest in Kennedy, 51, seeking the Senate seat has been enhanced by her family's status as an American political dynasty. One of her uncles, Robert F. Kennedy, was a senator from New York who was running for president when he was assassinated in 1968. Another uncle, Sen. Ted Kennedy of Massachusetts, is one of the most powerful members of the Senate.
The fake letter was the latest embarrassment for a paper that saw its reputation hammered in 2003 when national reporter Jayson Blair resigned after fabricating quotes, falsifying datelines and using material from other newspapers.
(Editing by Doina Chiacu)

House prices forecast to fall 10% in Britain
Published: December 22, 2008
LONDON: House prices in Britain will fall 10 percent next year as banks rein in mortgage lending and buyers are deterred by the economic slowdown, a leading property researcher forecast Monday.
Hometrack acknowledged that because of the market turmoil it was not as sure about its prediction as in previous years, but the fact it has published one at all bucks a trend among British research groups who have abandoned house price estimates because of market volatility.
"It is harder to forecast," Richard Donnell, Hometrack's director of research, said. "This is a central forecast, but the range is getting wider." He could not specify how much wider the range was for 2009 than it had been in previous years.
Hometrack said its central forecast was for house prices to fall a further 10 percent in 2009 and 3 percent in 2010 - on top of a decline of 9 percent in 2008 - making the peak to trough fall in real estate prices of about 22 percent. It did not give a monetary figure prediction.
The real estate research company expects repossessions will reach a near record high of 70,000 next year as homeowners struggle to make mortgage payments during a recession. That is up from 45,000 in 2008, and close to the highest level ever recorded by Hometrack - of 75,500 in 1991, when the country was last in a recession.
Unlike Hometrack, Nationwide, Halifax and the Council of Mortgage Lenders have all decided not to publish a house price forecast for 2009.
Halifax said it will not publish estimates because it is in the middle of being taken over by Lloyds TSB Group, and so does not think it is appropriate to publish independent figures which could be at odds with Lloyds's view of the market.
The other two researchers cited market volatility as the reason for canceling their usual annual forecasts.
"Because things are moving so rapidly, we think it would add to the confusion by putting too much emphasis on a number that could change quickly," said Sue Knight, a spokeswoman for Nationwide.
Nationwide has published annual forecasts every year since 1988, except in 1992 and 1993 when the last British house price slump was at its worst.
Nationwide said prices would be pushed down by a combination of banks' unwillingness to lend amid the financial crisis and the fact that buyers would be few and far between because of rising unemployment and a shrinking economy.
It did not make a forecast for house values but predicted that net mortgage lending would grow just 15 billion pounds in 2009 - down from 39 billion pounds in 2008 and 107 billion pounds in 2007.
"It's an incredibly volatile environment," said Sarah Robson, spokeswoman for the Council of Mortgage Lenders, "and it's incredibly difficult to publish a forecast on house prices in this environment."

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Pound hits new low vs FX basket
Reuters
Monday, December 22, 2008
LONDON: The pound fell to a record low on a trade-weighted basis and hovered near an all-time trough against the euro on Monday on the view that UK interest rates will fall further in the new year.
The euro came close to Thursday's record high of 95.56 pence, keeping high the prospect that the two currencies could soon hit parity, while the pound fell more than 1 percent against the dollar.
In an otherwise quiet day for news, sterling came under selling pressure as Bank of England policymakers said monetary policy alone may not be enough to shield the UK economy from the effects of the financial crisis.
"The market has it in for the pound at the moment," Standard Bank head of G10 currency research Steve Barrow said.
The pound fell to 75.8 on a trade-weighted basis, the lowest on daily records held by the Bank that go back to 1990.
At 3:17 p.m., the euro gained 1.6 percent to 94.75 pence, close to a record high of 95.56 pence hit on Thursday.
The pound lost 1 percent against the dollar to $1.4755, having earlier hit $1.4688, its lowest in more than a week.
Bank deputy Governor John Gieve on Monday told the BBC that that UK required a new instrument to manage the economy. Writing in a UK newspaper, fellow policymaker Tim Besley said a "raft of essential policy measures" other than monetary policy were needed.
The currency has been battered by the prospect of interest rates falling further in the UK than in the euro zone, where rates are at 2.5 percent, and worries about a sharply slowing UK economy.
UK rate futures indicate that a cut of 50 basis points from 2.0 percent in January is largely priced into the market, with more cuts likely in February and March.
"If the ECB continues to resist pressure to cut rates then this will keep upside pressure on euro/sterling," Standard Bank's Barrow said.
While recent comments from Bank policymakers have suggested that UK interest rates could fall to near zero, European Central Bank policymakers have given no hint of euro zone rates falling this far.
ECB Executive Board member Lorenzo Bini Smaghi warned about the risks of monetary policy being too lax, according to Rome daily Il Messaggero, while fellow board member Juergen Stark said he saw no risk of deflation.
The belief that rates will keep dropping significantly is expected to ensure continued downward pressure on the pound going into the new year, with many analysts predicting that parity against the euro is in sight.
"It seems only a matter of time before the euro gets to parity (with the pound)," James Hughes, market analyst at CMC Markets said.
(Reporting by Jessica Mortimer)

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Bank says rate cuts cannot end crisis
Reuters
Monday, December 22, 2008
LONDON: Monetary policy alone cannot help the economy avoid some of the worst consequences of the global credit crunch, two key members of the Bank of England's Monetary Policy Committee (MPC) said on Monday.
Sir John Gieve, the Bank's deputy governor, said Britain needed some form of new instrument which would be more effective in managing the economy.
Referring to interest rates as "a blunt instrument," Gieve said authorities needed "to complement interest rates... with something which is more financial sector specific."
"We need to develop some new instruments, which sit somewhere between interest rates, which affect the whole economy... and individual supervision and regulation of individual banks," he told the BBC.
"We need to develop something which bridges that gap and directly addresses the financial cycle and prevents the financial cycle and the credit cycle getting out of hand."
The official interest rate, set by the Bank of England, has been cut three times since October, 3 percentage points in all, and is now at a post-war low of 2 percent.
Tim Besley, another member of the Bank's MPC, wrote in the Daily Mail newspaper that interest rates alone were not enough to bring Britain's flagging economy back to life.
"A raft of essential policy measures, beyond what the MPC can do, continues to be targeted towards returning the banking system to normal functioning," he wrote. "This remains a high priority."
"There is no quick or easy fix for where we are now. What we need is a measured approach, combining policies that deal with the challenges collectively.
The Bank of England announces its next interest rate decision on January 8. Many economists expect it to cut rates to as low as 1 percent following the decisions by the U.S. Federal Reserve and the Bank of Japan to cut their rates to close to zero this month.
The BBC said Gieve also cast doubt on the quality of the financial institutions now in British public ownership -- Northern Rock and Bradford & Bingley.
"There are some books -- Northern Rock, Bradford & Bingley -- which clearly have a level of defaults in them. (I'm) not quite sure how that will balance out against the residual of the capital," he said.
(Reporting by Kate Kelland and David Milliken, editing by Tomasz Janowski)

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