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FRIDAY 20 SEPTEMBER 2019 WORLD BUSINESS NEWSPAPER UK £2.90 Channel Islands £3.20; Republic of Ireland €3.


Seeing red The Netflix script Gillian Tett

Australia’s climbing ban on sacred Can the king of binge keep its rich The repo rate panic shows global
Uluru is overdue — NOTEBOOK, PAGE 12 rivals at bay? — BIG READ, PAGE 11 financial machine is misfiring — PAGE 13

Saudi Arabia ‘bullies’ wealthy Briefing

i Dovish BoE votes to keep rates on hold

families to pump cash into oil IPO

The Bank of England has struck a dovish tone on
Brexit jitters after voting unanimously to keep rates
on hold at 0.75 per cent, raising the prospect it might
seek to cut them if uncertainty persisted.— PAGE 2

i Kier £245m loss sparks financial worry

The contractor has plunged to a £245m loss, amid
3 Magnates targeted were locked up in Ritz 3 Pressure to hit Crown Prince’s $2tn valuation concerns over its financial position, and said it had
“experienced a difficult year” after launching a
£250m rights issue in December 2018.— PAGE 20
i Juncker holds out Brexit olive branch
Jean-Claude Juncker, European
Saudi Arabia is pressuring wealthy fam- Commission president, has
ilies to buy in to the initial public offer- hinted at a Brexit deal, saying
ing of its state oil group, as part of a plan he was ready to scrap the Irish
to achieve the $2tn valuation coveted by “backstop” if there was a viable
Crown Prince Mohammed bin Salman. alternative.— PAGE 3
Eight people familiar with the talks
said they were part of a plan to build i Fed skirts round difficult decisions
confidence in the Saudi Aramco deal, The Federal Reserve has revealed deep divisions
which has been rocked by last week- within the central bank over whether the US
end’s attacks on Saudi Arabia’s oil infra- economy needs more monetary easing and whether
structure. Four people said the aim was it needs to expand its balance sheet.— PAGE 6
to “strong arm”, “coerce” or “bully”
some of the wealthiest families in the i Airbnb set to go public next year
kingdom to become cornerstone inves- The rental platform, valued at $31bn in its most
tors in what has been billed as the recent funding round, has ended speculation about
world’s biggest IPO. when it would float on the stock exchange by
Many of the families targeted had announcing it plans to go public next year.— PAGE 18
members previously imprisoned in Riy-
adh’s Ritz-Carlton hotel in 2017 and i OECD warns of trade tension impact
2018, in what the government billed as a Leading economies must ease trade tensions and
crackdown on corruption. Some told act decisively to avoid a low-growth trap from
relatives and friends they were tortured. which escape would be difficult, the Paris-based
Most were later freed after they reached organisation has warned.— PAGE 6
financial settlements with the state.
Those pressured over Saudi Aramco i Gantz spurns coalition offer in Israel
include Alwaleed bin Talal, the once Benny Gantz has rejected a request to form a
flamboyant billionaire who was held in coalition led by Benjamin Netanyahu, prime
the Ritz-Carlton for more than three minister, making another election appear
months. Many of his assets remain fro- Saudi Arabia’s government. “He is now being encour- on wealthy families in the kingdom, Saudi Aramco stock. “And why not?” likely.— PAGE 4; EDITORIAL COMMENT, PAGE 12
zen in Saudi Arabia, and people familiar Crown Prince aged to do his patriotic duty for the king- which one person familiar with the mat- one banker said. “[They] can’t access
with the talks said it has been suggested Mohammed dom,” the adviser said. “But there is a ter said originated with Saudi Arabia’s those funds in any case.”
he should use them to buy into the IPO. bin Salman limit on how patriotic he wants to be.” government rather than the company. The plan is to list up to 3 per cent of Datawatch
Prince Alwaleed’s investment vehicle welcomes The pressure on local families shows The $2tn valuation placed on Aramco Aramco in Riyadh, including the por-
Kingdom Holding did not respond to a Pakistan’s prime the lengths the kingdom is going to in an by Prince Mohammed is said to have tion allocated to cornerstone investors
request for comment. minister Imran effort to launch the IPO, three years slowed down the listing process last year such as the wealthy families, which Gimme shelter The population
Dozens of the wealthiest Saudi fami- Khan in Jeddah, after it was first announced. It also because of fears it would embarrass the would raise $60bn for the kingdom. Estimates of people experiencing of homeless
lies have been approached, said a Saudi Saudi Arabia, shines an uncomfortable spotlight on royal — who is the de facto ruler of the Big investors in the region, including homelessness in the US (’000) people in the US
financier, who maintained that the pres- yesterday western bankers who have flocked to country — if it could not be achieved. Abu Dhabi and Kuwait, were also tar- Unsheltered Sheltered increased slightly
sure was not overt. “It’s a big bunch Saudi Royal Court/Reuters
Riyadh to win roles advising Saudi Ara- Some banks with roles on the IPO this geted, said two people briefed on the 600 for the second
500 year in a row in
from among the top 50,” he said. mco or leading the placement. month told Saudi officials they could hit IPO process. One person suggested that
400 2018 to 552,830.
As part of the campaign, one Saudi Saudi Aramco declined to comment. a $2tn valuation, according to multiple wealthy families in Egypt and Lebanon
300 The rise
Arabian business magnate has been The government did not respond to a people familiar with the process. Many with ties to the Saudi royals would also is attributed
tapped for as much as $100m, according request for comment. analysts think a valuation of $1tn-$1.5tn be approached. “Some will find it more directly to an
to one of his advisers. The businessman, JPMorgan, Goldman Sachs, Morgan is more realistic. difficult to say no than others,” he said, increase in the
who was detained in the Ritz, had earlier Stanley and Credit Suisse are among One Saudi family approached by their describing Riyadh’s approach as a mix of 2007 09 11 13 15 18
number of
settled with the authorities, handing western banks set to promote the IPO to relationship manager at a lender was “cajoling and bullying”. Source: US Department of Housing and
over assets and paying a monthly instal- investors in coming weeks. It is not clear told its assets frozen during the Ritz- Additional reporting by Arash Massoudi Urban Development individuals.
ment to repay his alleged debt to the if they are aware of the pressure placed Carlton affair could be transferred into Lex page 14

UK police chiefs train elite Hong Kong

officers as trust crumbles in city force
HELEN WARRELL — LONDON group of academics and former chief Police commissioner, and Mark Rowley,
officers to Hong Kong for a week of former national counterterror chief.
British police chiefs are training an teaching in December but is considering The course is based on policing theory
elite cadre of Hong Kong officers to whether it is safe to make the trip. There rather than practical techniques, and is
boost professionalism in their ranks, as are also questions over whether stu- rooted in the British culture of policing
Constitution tested by the Asian financial hub’s force faces dents will be released from duties to by consent. This includes conceptual
prorogation case fierce criticism for its handling of attend training if the protests continue. discussions of issues such as public
pro-democracy protests in the city. The course is a branch of the Cam- order and managing peaceful protest.
Anti-Brexit campaigner Gina Miller bridge Institute of Criminology’s Police “A core part of what we’re trying to
arrives at the Supreme Court for the The University of Cambridge course has Executive Programme, which is open to teach is police legitimacy,” said
final day of the case into the decision been running for two years but has mid-ranking officers from all over the Lawrence Sherman, who chairs the
by the government to prorogue acquired new significance following world. However, under a 2016 agree- programme. “What’s going on now in
parliament. Next week Boris Johnson, anger at Hong Kong police tactics in ment with the Hong Kong police train- Hong Kong is a strong demonstration of
prime minister, will find out if the court managing clashes with demonstrators. ing college, the university opened a pro- how police risk being put in a position
believes the extraordinary claim that Three months after the protests gramme for its officers, which involves where they can’t remain neutral.”
he lied to the Queen and unlawfully began, officers are using water cannon, two weeks of training in the Asian city as Trust in the Hong Kong police force
suspended parliament to push through tear gas and rubber bullets against civil- well as a summer school in the UK. The has tumbled in the wake of the protests.
a no-deal. The case has shone a light ians, some of whom have hurled petrol first cohort from Hong Kong began A survey by the Chinese University of
on the fragile balance between the bombs. Protesters have also been training more than two years ago. Hong Kong this month found 48 per
executive and the judiciary. beaten by police, with videos of the con- During the summer school, students cent of people gave the force 0 out of 10,
Analysis i PAGE 3 flict going viral on social media. attend lectures by high-ranking officers or a rating of “no trust at all”, compared
The university was planning to send a such as Ian Blair, former Metropolitan with 6.5 per cent before the protests.

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2 ★ FINANCIAL TIMES Friday 20 September 2019


Monetary policy National security

BoE holds rates but raises prospect of cut Rightwing

Dovish central bank cites generated inflationary pressure would
be reduced”.
ward interest rate markets still expect
UK interest rates to drift a little lower,
But these BoE commitments were
downgraded with new comments, sug-
The MPC assessment of the economic
outlook was weaker than in August, but
‘entrenched uncertainty’
and feeble global growth
The BoE would normally be expected
to cut rates if domestic inflation per-
with a fall to 0.5 per cent a year ahead.
The MPC kept most of its language
gesting the MPC was beginning to worry
it might have to cut rates to stop infla-
it expected the UK to avoid a recession.
Members blamed the US-China trade
sisted below its 2 per cent target and
underlying economic growth was, as the
bank put it, only “slightly positive”.
identical to recent meetings, when it
also left monetary policy unchanged. It
said in a no-deal Brexit that interest rate
tion from falling too far below target.
For the first time, the minutes recog-
nised a third outcome if Brexit uncert-
war for curbing global growth and forc-
ing other central banks to loosen mone-
tary policy. MPC members said “under-
terror threat
The Bank of England struck a dovish Allan Monks, UK economist at JPMor- movements “would not be automatic ainty continued and the political clim- lying [UK] growth has slowed, but
tone on interest rates yesterday, raising gan, said the MPC had performed a and could be in either direction”, but ate remained turbulent. The MPC said: remains slightly positive, and a degree HELEN WARRELL
the prospect it might seek to cut them if dovish shift. “It shows the BoE is laying many MPC members have said a cut to “The longer those uncertainties persist, of excess supply appears to have opened
Brexit uncertainty persisted in a weak the ground for a November forecast stimulate demand would be more likely particularly in an environment of wea- up within companies”. Rightwing extremism is the fastest-
global economy. downgrade and the introduction of new than a rise to guard against inflationary ker global growth, the more likely it is The BoE said that Chancellor Sajid growing terrorist threat in Britain,
The bank’s Monetary Policy Commit- policy guidance [in November] which pressures arising from weaker sterling. that demand growth will remain below Javid’s spending review, which raised accounting for a third of all big plots
tee voted unanimously to keep rates on would then open the door to a potential Members also maintained their posi- potential, increasing excess supply. public borrowing, was likely to increase foiled in the past two years, say the
hold at 0.75 per cent and for the first easing over the next six months.” tion that if a smooth Brexit became “In such an eventuality, domestically gross domestic product by 0.4 per cent police.
time said if there was “entrenched un- Sterling was little changed against the more likely, “gradual” and “limited” generated inflationary pressures would over the whole of the next three years.
certainty” over Brexit, “domestically dollar and the euro on the news and for- rate rises may still probably be needed. be reduced,” it added. OECD warning page 6 Neil Basu, head of counterterror polic-
ing, said while Islamist terrorism still
represents the largest threat by volume,
there has been a notable escalation in
extreme rightwing activity, sometimes

Medieval find involving individuals as young as 14.

According to the police, seven of the
22 plots foiled since March 2017 have
Gilded Christ been linked to far-right ideologies, and
10 per cent of the 800 live terror investi-

returns to York gations are linked to rightwing terror-

ism compared with 6 per cent two years
ago. Meanwhile, far-right referrals to
the government’s Prevent anti-radicali-
An 800-year-old Christ figure that sation programme have nearly doubled
once adorned a York abbey was to 18 per cent between 2016 and 2018.
returned to the city yesterday after “It’s small but it’s my fastest-growing
nearly two centuries. problem,” Mr Basu said yesterday.
The gilded and enamelled figure, “When nearly a third of the plots foiled
made in Limoges, France, in the 13th by police and security services since
century, was found in 1826 in the 2017 relate to rightwing ideology, it lays
ruins of St Mary’s Abbey, York. It bare why we are taking this so seri-
then disappeared for nearly 100 ously . . . as a proportion of our overall
years before resurfacing in a German threat it’s definitely increasing, whereas
private collection in the 1920s. It is the Islamist threat is staying the same,
one of few religious artefacts to have albeit at a very high level.”
survived Henry VIII’s dissolution of The turning point in police efforts to
the monasteries in the 1530s. combat rightwing extremism came in
Lucy Creighton, pictured, the December 2016, when the Home Office
Yorkshire Museum’s curator of designated National Action, a neo-Nazi
archaeology, said: “It is an incredibly group, a proscribed organisation. This
rare and extremely valuable find. It is was the first far-right group to have
a real thrill to be able to put it on been banned in the UK since the British
display just a stone’s throw from Union of Fascists in 1940. The proscrip-
where it would have been on show tion has led to a series of court cases
800 years ago.” PA resulting in 13 convictions of National
Action members. Last year, MI5, the
Danny Lawson/PA
Security Service, stepped up its involve-
ment in investigating rightwing terror.
Mr Basu said extreme far-right action
Business plan. Cobham concerns was proving difficult to disrupt because
perpetrators often self-radicalise online

Cabinet plans more liberal takeover regime outside EU

using a vast range of materials. While
some extremists appeared to have been
inspired by mainstream media reports,
others had retreated from social media
platforms such as Twitter and Facebook
people at the top of the cabinet, they Since the enterprise act became law, from £70m to £1m in two areas: Hammond and business secretary Greg to more secure parts of the internet and
Opportunity perceived for believe in free markets and openness.” there have been 17 public interest advanced technology and certain civil- Clark. invitation-only chat rooms.
more open approach to But Mrs Leadsom’s intervention in US investigations, but none of the deals was ian and military goods subject to export “At a time when we were carrying out “People are radicalised in days or
private equity firm Advent Interna- blocked. controls. Brexit and trying to sound business- weeks,” the counterterror chief said.
overseas purchases of assets tional’s planned takeover of Cobham is a The probes included 10 based on Then Mrs May’s government friendly, it just sent out the signal that “The lone actor threat is the biggest
reminder of the political sensitivities national security grounds, of which announced plans for an even more we were closed, rather than being an problem.” He added that perpetrators of
surrounding deals that raise national eight were cleared, including GE’s pur- interventionist approach on foreign open society,” said one former govern- radical rightwing ideology “are very 21st
AND SYLVIA PFEIFER security implications. chase of Smiths Aerospace in 2007. takeovers. ment figure. “The PM was very, very, century internet-savvy people”.
The prime minister now faces a tricky The other two — the proposed takeo- In a national security and investment very keen on it personally.” Planned methods of attack frequently
When business secretary Andrea Lead- decision on whether to push ahead with ver of UK satellite company Inmarsat by white paper, Mrs May proposed that Mr Johnson’s government, which is drew inspiration from jihadist plots, and
som announced an investigation into plans unveiled last year by Mrs May that dealmakers should notify the govern- keen to present “Global Britain” as more included knives, improvised explosive
the proposed foreign takeover of would give the government far greater ment of any transaction that raises open for business after Brexit, must now devices and firearms. Young people and
defence company Cobham, it raised powers to prevent foreign purchases of
‘If you look at the people potential national security concerns — decide whether to implement the white those with mental health issues are par-
fears the government was shifting security-sensitive British assets. at the top of the cabinet regardless of its size. paper. More broadly, the government is ticularly vulnerable to becoming radi-
towards a protectionist stance. The legislative framework for govern- UK officials said the proposals were working on a post-Brexit competition calised, Mr Basu said.
But allies of Mrs Leadsom insisted her ment intervention in proposed acquisi-
they believe in free focused on China, which has in recent and state aid regime. Matthew Feldman, director of the
request yesterday to the competition tions of UK companies by overseas buy- markets and openness’ years raised its overseas dealmaking. Britain needs clear rules on takeovers Centre for Analysis of the Radical Right,
regulator to probe the £4bn deal did not ers is contained in the 2002 Enterprise They added the plans could involve and state aid after leaving the EU. “We said identifying dangerous rightwing
herald a more interventionist govern- Act, which gives ministers the power to a consortium involving US and Cana- the government examining about 200 can’t have a situation where we make extremists presented new challenges for
ment position — far from it. block deals on public interest grounds. dian entities, and Cobham — are live cases each year, with about 50 subjected decisions on what appears to be a ran- police who have spent the past two dec-
Instead members of Boris Johnson’s The Competition and Markets investigations. to intervention or blocking. At present dom basis,” said one official. ades focusing on radical Islam.
cabinet are gearing up for what they see Authority can step in if a merger creates Last year Mrs May’s government only a handful of cases are referred to But the UK’s ability to tread a com- In particular, the potential pool of
as the opportunity for a more open a group with a 25 per cent market share, overhauled existing rules amid con- the competition regulator each year, pletely new path outside the EU will be extremists was far larger. “As a Muslim
approach to overseas companies pur- or one with turnover of more than cerns that sensitive UK technology with rarely more than one on national circumscribed. in Britain, the US or Germany, you are
chasing UK assets after Brexit. £70m. Meanwhile, the government can assets could fall into the hands of foreign security grounds. The World Trade Organization has already a minority,” Prof Feldman said.
“If anything we’re likely to be more intervene when a deal is deemed to raise regimes with potentially hostile inten- Mrs May, who took a keen personal rules on state aid and Britain would face “What if you’re looking for 15-25-year-
liberal,” said one official, making a com- “public interest” concerns in one of tions. interest in the white paper, ran into problems in negotiating a post-Brexit old white men? That isn’t 5 per cent,
parison with former prime minister three areas — national security, media The threshold under which ministers opposition from senior ministers trade deal with the EU if its industries that’s a much higher proportion of your
Theresa May’s stance. “If you look at the plurality and financial stability. could intervene in a merger was cut including the then chancellor Philip were being cosseted by the state. country.”

Declining readership Consumer spending

Subscribe to the FT today at Google to set up digital news Drop in online shopping
FRIDAY 31 MARCH 2017 WORLD BUSINESS NEWSPAPER UK £2.70 Channel Islands £3.00; Republic of Ireland €3.00
sites with regional publisher knocks August retail sales
Trump vs the Valley A Five Star plan? Dear Don...
Tech titans need to minimise Italy’s populists are trying to woo May’s first stab at the break-up
political risk — GILLIAN TETT, PAGE 13 the poor — BIG READ, PAGE 11 letter — ROBERT SHRIMSLEY, PAGE 12

HMRC warns Lloyd’s of Brussels Insurance market

to tap new talent pool with EU base
UK £3.80; Channel Islands £3.80; Republic of Ireland €3.80

customs risks THE END

i US bargain-hunters fuel Europe M&A
Europe has become the big target for cross-border

market that is increasingly dominated the most to the fall in August, following
dealmaking, as US companies ride a Trump-fuelled HOW DRIVERLESS

being swamped
equity market rally to hunt for bargains across the


i Report outlines longer NHS waiting times

A report on how the health service can survive
more austerity has said patients will wait longer for
non-urgent operations and for A&E treatment while AMERICAN WAY OF LIFE Censors and sensitivity
by Brexit surge
some surgical procedures will be scrapped.— PAGE 4

by Google and Facebook. Between 2005 the boost from an Amazon promotion in
i Emerging nations in record debt sales Warning: this article may be

Developing countries have sold record levels of

government debt in the first quarter of this year,
upsetting — LIFE & ARTS

Google is investing “several million dol- UK retail sales fell in August as online
taking advantage of a surge in optimism toward
emerging markets as trade booms.— PAGE 15

3 Confidence in IT plans ‘has collapsed’

Credit Suisse Art of persuasion Mystery deepens
i London tower plans break records
A survey has revealed that a
How To Spend It
and 2018, the UK lost 245 local news July. The contraction reverses the
3 Fivefold rise in declarations expected
JAMES BLITZ — WHITEHALL EDITOR adjust its negotiation position with the
record 455 tall buildings are
planned or under construction
in London. Work began on
over disputed painting of Jane Austen
engulfed in
EU, a Whitehall official said. “If running almost one tower a week

lars” into a joint venture with a local shopping contracted, reversing the
A computer system acquired to collect our own customs system is proving during 2016.— PAGE 4
duties and clear imports into the UK much harder than we anticipated, that
may not be able to handle the huge ought to have an impact on how we i Tillerson fails to ease Turkey tensions
surge in workload expected once Britain press for certain options in Brussels.” The US secretary of state has failed to reconcile

fresh tax probe

outlets, according to the Press Gazette, a expansion in the previous two months.
leaves the EU, customs authorities have In a letter to Andrew Tyrie, chairman tensions after talks in Ankara with President Recep
admitted to MPs.
HM Revenue & Customs told a parlia-
of the Commons treasury select com-
mittee, HMRC said the timetable for
Tayyip Erdogan on issues including Syria and the
extradition of cleric Fethullah Gulen.— PAGE 9
Chic new lodgings
mentary inquiry that the new system
needed urgent action to be ready by
delivering CDS was “challenging but
achievable”. But, it added, CDS was “a i Toshiba investors doubt revival plan
in Scotland

news publisher, its first such project boost from big sales promotions in July
March 2019, when Brexit is due to be complex programme” that needed to be In a stormy three-hour meeting, investors accused MAGAZINE
completed, and the chair of the probe linked to dozens of other computer sys- managers ofhaving an entrenched secrecy culture
said confidence it would be operational tems to work properly. In November, 3 UK, France and Netherlands swoop
and cast doubt on a revival plan after Westinghouse
in time “has collapsed”. HMRC assigned a “green traffic light” to filed for Chapter 11 bankruptcy protection.— PAGE 16
3 Blow for bid to clean up Swiss image

news industry magazine. August’s fall in retail sales “tempers

Setting up a digital customs system CDS, indicating it would be delivered on
has been at the heart of Whitehall’s time. But last month, it wrote to the i HSBC woos transgender customers
Brexit planning because of the fivefold committee saying the programme had TheRALPH
bank hasATKINSunveiled
— ZURICHa range of gender-neutral it followed “a strategy offull client tax
increase in declarations expected at been relegated to “amber/red,” which DUNCAN
titles such asROBINSON — BRUSSELS
“Mx”, in addition to Mr, Mrs, Misscompliance”
or but was still trying to
British ports when the UK leaves the EU. means there are “major risks or issues Ms, in a move to embrace diversity and cater togather the information about the probes.

FINANCIAL TIMES outside the US, as the Silicon Valley and raising concerns about the resil-
About 53 per cent of British imports apparent in a number ofkey areas”. Credit
needs Suisse hascustomers.
of transgender been targeted by
— PAGE 20 HM Revenue & Customs said it had
come from the EU, and do not require HMRC said last night: “[CDS] is on sweeping tax investigations in the UK, launched a criminal investigation into
checks because they arrive through the track to be delivered by January 2019, France and the Netherlands, setting suspected tax evasion and money laun-
single market and customs union. But and it will be able to support frictionless back Switzerland’s attempts to clean up dering by “a global financial institution

Media experts have argued that the third-quarter growth prospects given
Theresa May announced in January that international trade once the UK leaves its image as a tax haven. and certain ofits employees”. The UK
Brexit would include departure from
both trading blocs. HMRC handles 60m
declarations a year but, once outside the
customs union, the number is expected
the EU . . . Internal ratings are designed
to make sure that each project gets the
focus and resource it requires for suc-
cessful delivery.”
Terror attacks inwith
co-operating western Europe after
offices in London, Paris and Amsterdam
were contacted
Highlighted attack byOthers

Reproduction of the contents of this newspaper in

The Swiss bank said yesterday it was tax authority added: “The international
notably the message
— of this investigation sends a clear
that there is no hiding place for
massacre bythose seeking to evade tax.”
local officials
The lure of the exotic
Robin Lane Fox on the flair

giant ramps up support for an industry ience of consumer spending.

“concerning client tax matters”. Anders BreivikDutch in prosecutors, who initiated the
to hit 300m.
The revelations about the system,
HMRC’s letters to the select commit-
tee, which will be published today, pro- AFP Norway, the
Dutch authorities said their counter- action, said they seized jewellery, paint- of foreign flora — HOUSE & HOME
parts in Germany wereBrussels attacks in Paris
also involved, ings and gold ingots as part of their

Bracken House, 1 Friday Street, London EC4M 9BT.

called Customs Declaration Service, are vide no explanation for the rating Lloyd’s of London chose Brus- insurers to follow. Most of the EU, with Dublin and Luxem-

any manner is not permitted without the publisher’s

while Australia’s revenue department and Nice, and the while French officials said their
likely to throw a sharper spotlight on change, but some MPs believe it was sels over “five or six” other business written in Brussels bourg thought to be more likely Norway Brussels suicide
said it was investigating a Swiss
Nice bank. investigation had revealed “several

subsequent decline in reporting on pub- that consumers have been the strongest
whether Whitehall can implement a caused by Mrs May’s unexpected deci- cities in its decision to set up an will be reinsured back to the homes for the industry. But Paris bombings — have
host of regulatory regimes — in areas sion to leave the EU customs union. EU base to help deal with the syndicates at its City of London Mr Nelson said the city won on The inquiries threaten to undermine thousand” bank accounts opened in
bucked the trend
ranging from customs and immigration Timetable & Great Repeal Bill page 2 expected loss of passporting headquarters, pictured above. its transport links, talent pool efforts by the country’s banking sector Switzerland and not declared to French
of generally low
to agriculture and fisheries — by the Scheme to import EU laws page 3 rights after Brexit. The Belgian capital had not and “extremely good regula- to overhaul business models and ensure tax authorities.
fatalities from
time Britain leaves the EU. Editorial Comment & Notebook page 12 John Nelson, chairman of the been seen as the first choice for tory reputation”. customers meet international tax The Swiss attorney-general’s office
Sources: Jane’s Terrorism and Insurgency Centre terror incidents in

it has been accused of wiping out.

requirements following a US-led clamp- western Europesaid it was “astonished at the way this
Problems with CDS and other projects Philip Stephens & Chris Giles page 13 centuries-old insurance mar- London’s specialist insurance Lex page 14
essential to Brexit could force London to JPMorgan eye options page 18 ket, said he expected other groups after the UK leaves the Insurers set to follow page 18
billions of dollars in fines.

prior consent.
down on evaders, which resulted in operation has been organised with the
deliberate exclusion of Switzerland”. It
The probes risk sparking an interna- demanded a written explanation from
tional dispute after the Swiss attorney- Dutch authorities.

City watchdog sends a clear message as

lic matters in small and midsized com- The volume of sales fell 0.2 per cent sector of the economy”, said Howard
general’s office expressed “astonish- In 2014, Credit Suisse pleaded guilty
ment” that it had been left out of the in the US to an “extensive and wide-
actions co-ordinated by Eurojust, the ranging conspiracy” to help clients THE RISE
Escape OF
the taper ECO-GLAM
Published by: The Financial Times Limited,
banker loses job over WhatsApp boast
EU’s judicial liaison body.
Credit Suisse, whose shares fell 1.2 per

subject ofinvestigations in the Nether-

lands, France and the UK. The bank said in Paris
evade tax. It agreed to fines of $2.6bn.
Additional reporting by Laura Noonan in
cent yesterday, identified itself as the Dublin, Caroline Binham and Vanessa
Houlder in London, and Michael Stothard
Austen’s descendants insist the Rice portrait depicts her as a girl — see magazine Bridgeman Art Library
How high earners can evade
a pension headache — FT MONEY

The venture, called Project Neon, will be munities has contributed to feelings of compared with the previous month, the Archer, chief economic adviser at EY
LAURA NOONAN — DUBLIN Berrys after discussions with regulators. media at work, but banks are unable to

Bracken House, 1 Friday Street,

Christopher Niehaus, a former Jeffer- ban people from installing apps on their

Shutdown risk as border

wall bid goes over the top
A boastful WhatsApp message has cost
a London investment banker his job
and a £37,000 fine in the first case of
regulators cracking down on commu-
nications over Facebook’s popular
chat app.
ies banker, passed confidential client
information to a “personal acquaint-
ance and a friend” using WhatsApp,
according to the FCA. The regulator said
Mr Niehaus had turned over his device
to his employer voluntarily.
private phones.
Andrew Bodnar, a barrister at Matrix
Chambers, said the case set “a precedent
in that it shows the FCA sees these mes-
saging apps as the same as everything
Brussels takes toughTimes’ and ‘FT’ are registered trade marks
stance on Brexit
with Spain handed veto over Gibraltar
390_Cover_PRESS.indd 1 19/01/2017 13:57

London EC4M 9BT. Congressional Republicans seeking to The FCA said Mr Niehaus had shared Information shared by Mr Niehaus

of The Financial Times Limited.

fully funded by Google but controlled by disenfranchisement that have fuelled Office for National Statistics said yester- item club. In the second quarter, the UK
avert a US government shutdown after The fine by the Financial Conduct confidential information on the messag- included the identity and details of a
April 28 have resisted Donald Trump’s Authority highlights the increasing ing system “on a number of occasions” client and information about a rival of ALEX BARKER — BRUSSELS ambitious trade and airline access deals. mise. If Britain wants to prolong its
attempt to tack funds to pay for a wall problem new media pose for companies last year to “impress” people. Jefferies. In one instance the banker GEORGE PARKER — LONDON Gibraltar yesterday hit back at the status within the single market after
on the US-Mexico border on to that need to monitor and archive their Several banks have banned the use of boasted how he might be able to pay off STEFAN WAGSTYL — BERLIN clause, saying the territory had “shame- Brexit, the guidelines state it would
stopgap spending plans. They fear staff’s communication. new media from work-issued devices, his mortgage if a deal was successful. The EU yesterday took a tough opening fully been singled out for unfavourable require “existing regulatory, budgetary,
that his planned $33bn increase in Several large investment banks have but the situation has become trickier as Mr Niehaus was suspended from Jef- stance in Brexit negotiations, rejecting treatment by the council at the behest of supervisory and enforcement instru-

Tel: 020 7873 3000 defence and border spending could

force a federal shutdown for the first
time since 2013, as Democrats refuse
banned employees from sending client
information over messaging services
including WhatsApp, which uses an
banks move towards a “bring your own
device” policy. Goldman Sachs has
clamped down on its staff’s phone bills
feries and resigned before the comple-
tion of a disciplinary process.
Jefferies declined to comment while
Living wage rise to pile
pressure on care services
Britain’s plea for early trade talks and
explicitly giving Spain a veto over any
arrangements that apply to Gibraltar.
Spain”. Madrid defended the draft
clause, pointing out that it only reflected
“the traditional Spanish position”.
ments and structures to apply”.
Mr Tusk wants talks on future trade
to begin only once “sufficient progress”

Archant, the Norwich-based publisher populist movements in countries such day. Economists polled by Reuters had economy contracted 0.2 per cent, rais-
to accept the proposals. encryption system that cannot be as iPhone-loving staff spurn their work- Facebook did not respond to a request Senior EU diplomats noted that has been made on Britain’s exit bill and
US budget Q&A and accessed without permission from the issued BlackBerrys. for comment. About 2.3m people will benefit from European Council president Donald Mr Tusk’s text left room for negotiators citizen rights, which Whitehall officials
Trump attack over health bill i PAGE 8 user. Deutsche Bank last year banned Bankers at two institutions said staff Additional reporting by Chloe Cornish today’s increase in the national living Tusk’s first draft of the guidelines, to work with in coming months. Prime believe means simultaneous talks are
WhatsApp from work-issued Black- are typically trained in how to use new Lombard page 20 wage to £7.50 per hour. But the rise which are an important milestone on minister Theresa May’s allies insisted possible if certain conditions are met.

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drawal terms.
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was “within the parameters of what we
were expecting, perhaps more on the
Boris Johnson, the foreign secretary,
reassured European colleagues at a
Nato summit in Brussels that Mrs May
had not intended to “threaten” the EU
when she linked security co-operation

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St Clements Press (1988) Ltd, London, Newsprinters news outlets will be self-sustaining. pass on its readers’ data, the situation three months to August with online persistent bleak picture. Not only did
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Friday 20 September 2019 ★ FINANCIAL TIMES 3


case presents
historic test
of constitution
Political battle spills over to the palace and
the courts, setting scene for grand finale
GEORGE PARKER AND JANE CROFT strike down primary legislation. By con-
trast, parliament is supreme, but the
Boris Johnson will find out early next Supreme Court can declare a govern-
week if the Supreme Court believes the ment decision-making process unlawful
extraordinary claim that he lied to the and remit back to ministers to remake.
Queen and unlawfully suspended par- In Downing Street the mood was ini-
liament for five weeks to allow him to tially confident that the 11 justices
push through a hard no-deal Brexit. would not venture into the political
It is a sign of how Brexit has distorted quagmire of Brexit. But now there are War games: announced by the sovereign in the ble of defending their rights without ‘There’s allies believe that apart from a victory,
Britain’s ramshackle unwritten consti- growing fears that the Supreme Court Boris Johnson, House of Lords on October 14. resorting to the courts, but added that the best outcome would be a ruling that
tution and political norms that the prin- will give an unwelcome verdict in the arrives by But few at Westminster believed that this was not possible if Mr Johnson had probably the prorogation of parliament was justi-
cipal witness taking on the prime minis- prorogation case. Mr Johnson, who is helicopter to Mr Johnson’s unusually long proroga- closed down the House of Commons. some 16th ciable, or within the judges’ right to
ter in this unprecedented case was John planning to attend the UN General visit troops on tion was anything other than an attempt Mr Johnson, using prerogative powers review, but that the prime minister had
Major, a Conservative predecessor. Assembly in New York next week, is Salisbury Plain by the prime minister to stop MPs inherited from medieval monarchs, century law taken the decision lawfully.
In a written statement to the court, Sir braced for a bumpy foreign trip. yesterday. He is debating Brexit at a crucial time ahead argues he is within his rights to suspend about what “That would be a bit worrying,
John told the 11 Supreme Court judges “I think we are going to lose,” said one in the sights of of “Brexit day” on October 31. parliament. But Brexit has also embold- because it would see judges enter the
that Mr Johnson’s decision to suspend — minister. As for whether Mr Johnson Edward Garnier, The prime minister, who refused to ened parliament to flex its muscles over happens if political arena and question the use of
or prorogue — parliament for five weeks lied to the Queen, the minister joked: below, acting for provide a witness statement to back up the executive. John Bercow, the Com- you give the royal prerogative,” said one govern-
was “substantially motivated” by his “There’s probably some 16th century John Major his claim that he was behaving with mons Speaker, has bent the rules to ment insider. It would also imply the
desire to stifle debate on Brexit. law about what happens if you give bad Ben Stansall/PA complete propriety, in effect stands allow MPs to take over the parliamen- bad advice court could intervene next time Mr
The case has put the spotlight on the advice to the monarch.” accused of lying to the Queen about the tary order paper to pass laws to tell Mr to the Johnson tried a similar manoeuvre.
fragile and uncodified triangular bal- The highest court has been hearing real reason for the long prorogation. Johnson how to handle Brexit. But there are fears the Supreme Court
ance of power in Britain between the appeals on two contradictory rulings by Lord Garnier noted the government’s With both sides stretching constitu- monarch’ could rule that not only was the suspen-
executive, in the shape of 10 Downing courts in England and Scotland over argument that MPs were perfectly capa- tional convention to breaking point, it sion of parliament justiciable, but that
Street, parliament, and the judiciary. whether Mr Johnson acted lawfully in was inevitable that before long the judi- Mr Johnson’s decision was legally defec-
“A lot of how the constitution has suspending parliament for five weeks ciary would be asked to act as referee, tive. Parliament would probably have to
developed over time has been a series of until October 14. The London High dragging the judges into politics. be reconvened, perhaps immediately,
fudges,” said Edward Garnier, Sir John’s Court ruled that it did not have the And if that was not enough, the Queen although the government has indicated
barrister. More prosaically, it consists of authority to review such a case, while has been pulled into the fray. Although it might try a further suspension.
a series of laws and non-legal conven- Scotland’s highest court not only she was bound by convention to agree to The most disastrous outcome would
tions built up over centuries. decided that it could pass judgment, but Mr Johnson’s request to suspend parlia- be for the court to side with the Scottish
The rules have generally worked over that Mr Johnson had acted unlawfully. ment, she will not be amused if the justices and conclude they did not
time, largely due to a sense of fair play, The prime minister told the monarch Supreme Court finds she was asked to believe Mr Johnson’s explanation of his
but Brexit has changed the game. The he wanted to suspend parliament so do so under false pretences. actions at all. “Johnson lied to Queen”
Supreme Court has more limited pow- that he could prepare a new legislative The events in the Supreme Court this headlines would be guaranteed to
ers than its US counterpart, which is the programme. This package of draft bills, week have been watched with growing appear in every newspaper.
guardian of the US constitution and can contained in the Queen’s Speech, will be alarm in Downing Street. Mr Johnson’s Philip Stephens page 13

Backstop impasse

Juncker raises hopes of Brexit deal

SAM FLEMING AND JIM BRUNSDEN land with EU agriculture and food rules. legally operable guarantee against the
“It is the basis of a deal. It is the start- return to a hard Irish border.
ing and the arrival point,” he told Sky However, he has sent Brussels three
Jean-Claude Juncker, European Com- News, while cautioning that any solu- informal discussion papers — known in
mission president, has opened the door tion must protect the EU’s internal mar- Brussels jargon as “non papers” — set-
to a possible Brexit deal, saying he is ket “in its entirety”. ting out ideas for avoiding customs and
ready to scrap the controversial Irish Any solution had to be as robust as the regulatory checks on the border.
“backstop” if Boris Johnson comes up backstop, said Mr Juncker. “If the objec- They include proposals for an “all Ire-
with a viable alternative. tives are met — all of them — we don’t land” regulatory regime for agriculture
and food, with a mix of technology and
Mr Juncker’s comments yesterday were trusted trader schemes to avert customs
a clear invitation to the UK to come up
If the objectives are met — checks at the border.
with new ways of achieving the aims of all of them — we don’t Stephen Barclay, Brexit minister, will
the backstop — which seeks to avoid a be in Brussels today for talks with EU
hard Irish border — following warnings
need the backstop’ negotiator Michel Barnier.
from EU politicians that talks were Jean-Claude Juncker Leo Varadkar, Irish prime minister,
floundering. said: “I think the rhetoric has tempered,
He was explicit that Brussels was need the backstop.” The UK prime min- the mood music is good.”
ready to rewrite the most sensitive parts ister responded by telling Channel 4 Democratic Unionist leader Arlene
of the Brexit deal it agreed with Mr John- News: “Now that is progress because Foster said on Wednesday her party was
son’s predecessor Theresa May, con- they weren’t saying that a month ago.” prepared to accept Northern Ireland-
firming a marked softening of the EU’s EU officials cautioned that the two only solutions, provided they did not
position from this summer, when it said sides remained far apart and that the infringe the region’s constitutional sta-
that the withdrawal agreement was not window to reach a deal ahead of the tus within the UK. The prime minister
up for renegotiation. scheduled Brexit date of October 31 was held “positive” talks on the phone with
Crucially, Mr Juncker said he was short. Mr Juncker on Wednesday evening, said
open to British suggestions that a hard Mr Johnson has yet to produce Downing Street.
Irish border could be averted by con- detailed proposals to replace the back- Additional reporting by Mehreen Khan in
ducting customs and regulatory checks stop and the ideas he has floated do not Strasbourg, Daniel Dombey in Madrid and
elsewhere and by aligning Northern Ire- come close to meeting EU demands for a Arthur Beesley in Dublin

Bilateral ties

Japan trade accord becomes post-EU priority

JAMES BLITZ agreement with Japan as soon as possi- ment was that UK authorities would
ble,” Ms Truss is expected to say. find it hard to negotiate deals with large
The UK is to make a trade deal with
Sam Lowe, a trade expert at the Cen- economies simultaneously.
Japan one of its priorities after Brexit,
tre for European Reform, a think-tank, Boris Johnson, prime minister, has
putting it on a par with the need to
said the UK’s new commitment to try to played down the prospect of a quick
make similar pacts with the EU and US.
get a fully-fledged free trade agreement trade deal with the US, despite recent
Until now, the principal post-Brexit with Japan made sense. “Until now the positive noises from US president Don-
trade goal in talks with the Japanese UK has been talking up the need to ald Trump.
government has been to “roll over” the secure FTAs with Australia and New “The US and EU were always going to
existing trade relationship which Brit- Zealand, but Japan is a much bigger be top priorities for an FTA but they will
ain has with Japan as an EU member. economy and matters a lot more. take up pretty much all the negotiating
However, Japan has long resisted this “Politically, it’s also important for the bandwidth the UK has,” said Mr Henig.
“copy and paste” approach, believing it UK to show Japan that it’s a top priority “Now they are putting Japan in the top
can secure far better trade terms from in trade relations. The Japanese are furi- three. I’m not sure it’s realistic.”
the UK than it did in talks with the much ous over Brexit and see it as a betrayal of Japan is the world’s third-largest eco-
larger EU when it secured a bilateral trust after decades of Japanese invest- nomy and last year trade between the
Japan-EU trade treaty. ment in the UK economy,” he said. UK and Japan was worth £29.5bn, up by
As a result, Liz Truss, international He added it would be difficult for both over 8 per cent on 2017. It is estimated
trade secretary, is drawing what some countries to make quick progress on a that there are nearly 1,000 Japanese
experts believe is the inevitable conse- trade deal. “Japan is quite protectionist companies based in the UK, employing
quence, declaring in Tokyo that Britain and it will want to reduce the amount of more than 150,000.
wants to sign a new deal with Japan as access the UK has to the Japanese econ- To pave the way for such an FTA, the
soon as possible. omy, especially in agriculture.” DIT will today launch an online “call for
“Businesses should be reassured that David Henig, a former Department of input”, asking UK companies to tell the
there is huge political will on both sides International Trade official, said one of government what their priorities are for
to begin negotiating a new free trade the problems raised by the announce- a future trade relationship with Japan.
4 ★ FINANCIAL TIMES Friday 20 September 2019


Israeli election Corruption

Gantz rejects Netanyahu-led coalition plea Romania’s

ousted fraud
Rebuff hardens political It was the first salvo in the months-
long process of public posturing and
refuses my call to meet,” Mr Netanyahu
wrote on Twitter. “Gantz, my offer that
election, a sentiment echoed by his
rightwing, pro-settlements allies but
A hearing on October 3 on whether
Mr Netanyahu should be indicted on
stalemate that threatens
to force a third poll
back-room negotiations that follows
each Israeli election, as parties cobble
the two of us meet stands. It’s what the
public expects of us.”
did not address the elephant in the room
— Mr Gantz has said repeatedly he pre-
corruption charges provides both lever-
age and breathing space for Mr Gantz.
to be top EU
together unwieldy coalitions in a frac-
tured electoral landscape.
Earlier yesterday Mr Netanyahu said
Mr Netanyahu had spent the entire
election campaign warning that only a
fers a unity government, but only if Mr
Netanyahu steps down.
Despite lagging behind Blue and
His public pledge to run a clean govern-
ment was backed by a vow not to sup-
port Mr Netanyahu for prime minister if
Benny Gantz, whose centre-right coali- the election result made clear Israel had White, Mr Netanyahu has appeared in he is under indictment. Mr Netanyahu
tion narrowly topped the polls in Israel’s no choice but to accept a unity govern-
Gantz has repeatedly said charge of coalition talks by getting a has denied all the charges against him. MICHAEL PEEL — BRUSSELS
elections, has rejected a request from ment, publicly acknowledging for the he prefers a unity signed pledge from all the rightwing The rightwing bloc also includes two VALERIE HOPKINS — BUDAPEST
Prime Minister Benjamin Netanyahu to first time that he would be unable to parties that they remain united in a 55- parties that loathe one of Mr Gantz’s
consider joining a coalition that would form the rightwing coalition he pledged
government, but only if seat bloc, and by continuing to demon- partners, Yair Lapid, who runs the more
EU ambassadors have backed Laura
Kovesi of Romania to head a prosecu-
return the four-time premier to office. to his voter base. Mr Netanyahu steps down ise the successful Joint List of Arab par- middle-class, secular wing of the Blue tor’s office in what supporters see as a
Yesterday’s rebuff to Mr Netanyahu With 97 per cent of the vote from ties, which won 13 seats, as dangerous and White party. It is unlikely the two big step in the fight against creeping
from the leader of the seven-month-old Tuesday’s elections counted, Mr Netan- rightwing government could defend partners for his rivals. groups could resolve their differences to authoritarianism in several central and
Blue and White party has deepened a yahu’s Likud fell behind the centre-right Israel, but with only 55 seats won collec- Reuven Rivlin, Israel’s president, has sit in a unity government, having spent eastern European states.
political crisis that threatens to force Blue and White party by two seats in the tively by the traditional rightwing bloc, yet to make a decision on who he will years demonising each other as threats
Israel into a third election this year. 120-member Knesset, the second time he is now attempting to ensure he officially appoint to lead coalition nego- to Israeli democracy. Envoys from all but five of the 22 voting
Mr Gantz, a former head of Israel’s this year Israeli voters have delivered secures a record fifth premiership, even tiations, a process that can take more But with no clear path for his party to member states endorsed Ms Kovesi in
military, said he would not consider a an unclear mandate. if in alliance with a party he has derided than a month. Mr Netanyahu failed to claim the premiership, Mr Gantz must an indicative poll yesterday, opening the
so-called unity government unless Mr “I was surprised and disappointed by as weak and unpatriotic. clinch a majority during coalition talks consider ways to avoid a third election. way for her formal endorsement for the
Netanyahu stepped aside. the fact that, as of now, Benny Gantz still He dismissed the possibility of a third in April, and parliament was dissolved. Editorial Comment page 12 high-profile European job after the gov-
ernment in Bucharest last year ousted
her as national anti-corruption head.
Her candidacy to become the EU’s
first chief public prosecutor stalled this

Denisovan year, when she won the backing of the

European Parliament but was opposed
by a plurality of EU countries, including
Digital link to her own, in favour of a French candi-
date. Paris relented in July and agreed to

prehistoric life leave a clear run for Ms Kovesi, who

needs the backing of member states and
the newly elected parliament.
Ms Kovesi won plaudits at home and
in other European capitals for her
Researchers from Hebrew University five-year tenure leading Romania’s anti-
of Jerusalem yesterday unveiled the corruption directorate, which secured
artistic rendering of the head and convictions against ministers, MPs and
face of a 13-year-old girl from the mayors. Liviu Dragnea, the head of the
little-known prehistoric human ruling Social Democrat party when Ms
species, Denisovan, ancient relatives Kovesi was forced from office, was jailed
of the Neanderthals. in May for three and a half years in a
They reconstructed the skeleton of corruption case.
a prehistoric human using DNA The decision to back Ms Kovesi was a
found in a bone from the little finger “great boost to the social activism and
of a girl who died 70,000 years ago. the anti-corruption, anti-government
DNA could indicate the movement and to the justice system
Denisovan’s dark skin, eyes and hair, itself, which has been under constant
but by mapping gene activity attack” from Bucharest, said Oana
patterns, researchers could infer how Popescu, a former Romanian state sec-
the species stood out anatomically retary for European affairs and director
from modern humans or of the GlobalFocus Center think-tank.
Neanderthals. Ms Kovesi will become one of the
They identified 56 traits, most in highest-profile EU officials from eastern
the skull, that differed. Europe in the next commission.
“It turns out,” said genetics “In a field that is really of paramount
professor Liran Carmel, that “we are importance to the EU, which is rule of
all very similar”. Reuters, Jerusalem law, it gives a strong signal that where
there is merit, where there is good work
Ammar Awad/Reuters being done in central and eastern
Europe, that we can get a position,” said
Ms Popescu.
Environmental policy During the nomination process, Ms
Kovesi faced a number of obstacles from

Trump threatens to throttle California emissions drive Bucharest. After her ousting as chief
prosecutor in July 2018, she was twice
put under investigation in a move her
supporters said was politically moti-
vated. In March, she was summoned for
KIRAN STACEY — WASHINGTON emissions standards, accusing the state homelessness in cities such as San Fran- tions from some of its rich inhabitants. Washington and act on what many see hours of questioning on the day the
of what they called political over-reach. cisco. Louise Renne, San Francisco’s former as national issues. California is due to European Parliament was to vote on her
Donald Trump said yesterday his Elaine Chao, the transport secretary, London Breed, San Francisco’s mayor, city attorney, said: “California has very enact a new data privacy law in January, candidacy.
administration would revoke Califor- told reporters: “No state has the author- called the comments “ridiculous”. wealthy donors, both Republicans and which is likely to force US companies to Starting in 2017, Romania’s Social
nia’s legal authority to set its own vehi- ity to opt out of the nation’s rules, and no “San Francisco has a combined sewer Democrats. We are used to Republican comply with rules akin to those set by Democrat-led government passed a
cle emissions standards, during a two- state has the right to impose its policies politicians coming asking for money, the General Data Protection Regulation number of reforms decriminalising cor-
day fundraising visit to the state. on the rest of the country.” even if they also like to use its perceived in the EU. ruption, which prompted the largest
It was the latest step in a long-running Xavier Becerra, California’s attorney-
‘We are used to Republican liberalism to stir up their own base.” Meanwhile, state attorneys-general demonstrations since the fall of com-
conflict between the White House, general, has promised to file a lawsuit to politicians . . . [using the The fights over pollution are not the across the country have announced that munism in 1989 and contributed
which is seeking to retract Obama-era stop the action, saying on Wednesday: first policy disputes between Demo- they are planning to launch antitrust to clashes with Brussels.
rules toughening fuel standards for car- “We’re prepared to lead, we’re prepared
state’s] perceived liberalism cratic legislators in California and the investigations into both Facebook and Some elements of the reforms have
makers, and California, which has to fight. We’ll do what we must.” to stir up their own base’ administration. In March, Mr Trump Google, the tech groups, while federal been annulled, but Ms Popescu said not
promised to keep them in place. But Matthew Leopold, general coun- attacked Gavin Newsom, the state’s gov- officials at the Department of Justice enough had been done and that the
Even though Ford, BMW, Volkswagen sel at the Environmental Protection system, one of the best and most effec- ernor, over the latter’s announcement of and the Federal Trade Commission run DNA, the anti-corruption body Ms
and Honda, the big manufacturers, have Agency, said: “We are ready to defend tive in the country, that ensures that all a moratorium on the death penalty, parallel inquiries. Kovesi once led, would step up its inves-
said they back the tougher rules, the our interpretation on withdrawal [of the debris that flows into storm drains are while California has also filed a number Jack Citrin, a political science profes- tigation of high-level officials.
administration has insisted they should waiver]. We are very confident the filtered out at the city’s wastewater of lawsuits against Mr Trump’s policies, sor at the University of California, said: “Since Ms Kovesi left, the DNA
be withdrawn on a national level to help courts will view that favourably.” treatment plants,” she said. especially on immigration. “When national legislation is very diffi- haven’t really had any high-profile cases
bring down the price of new cars. Mr Trump has also promised to take The pattern is familiar for a president Experts say the clashes are becoming cult, especially after the 2108 election or prosecuted any visible people in the
After tweets from the president, his action against California over water pol- who has frequently attacked California more frequent as large and powerful [which split Congress between Republi- current or past government . . . the vote
officials yesterday fleshed out their plan lution, alleging that used needles were while in office, painting it as a bastion of states such as New York and California cans and Democrats], there is a kind of in her favour is a victory for the anti-cor-
to bar California from enacting higher being washed up in the ocean because of liberal values, while also seeking dona- decide to override political inertia in void which states can then act in.” ruption energy,” she added.

Climate cost

Trump vs the Valley


Tech titans need to minimise

political risk — GILLIAN TETT, PAGE 13
A Five Star plan?

Italy’s populists are trying to woo

the poor — BIG READ, PAGE 11
UK £2.70 Channel Islands £3.00; Republic of Ireland €3.00

Dear Don...
May’s first stab at the break-up
Green reforms challenge Germany’s will to stay in the black
HMRC warns
UK £3.80; Channel Islands £3.80; Republic of Ireland €3.80 SATURDAY 1 APRIL / SUNDAY 2 APRIL 2017

Lloyd’s of Brussels Insurance market

to tap new talent pool with EU base HOW DRIVERLESS
customs risks
i US bargain-hunters fuel Europe M&A
Europe has become the big target for cross-border

dealmaking, as US companies ride a Trump-fuelled
equity market rally to hunt for bargains across the
being swamped ROAD
i Report outlines longer NHS waiting times

private “climate foundation” that would at all. For months, economists have their charging points, and a reduction in
A report on how the health service can survive
more austerity has said patients will wait longer for Censors and sensitivity

by Brexit surge
non-urgent operations and for A&E treatment while
some surgical procedures will be scrapped.— PAGE 4

i Emerging nations in record debt sales

Developing countries have sold record levels of
Warning: this article may be
government debt in the first quarter of this year,
taking advantage of a surge in optimism toward

Credit Suisse Art of persuasion Mystery deepens

make interest-free loans to companies been arguing it is too restrictive, and VAT on train tickets.
emerging markets as trade booms.— PAGE 15

3 Confidence in IT plans ‘has collapsed’ i London tower plans break records

A survey has revealed that a over disputed painting of Jane Austen How To Spend It

For years, a commitment to balanced

3 Fivefold rise in declarations expected record 455 tall buildings are

engulfed in
planned or under construction
JAMES BLITZ — WHITEHALL EDITOR adjust its negotiation position with the in London. Work began on
EU, a Whitehall official said. “If running almost one tower a week

and households to help reduce their should be loosened to allow the huge Olaf Scholz, finance minister, has
A computer system acquired to collect our own customs system is proving during 2016.— PAGE 4
duties and clear imports into the UK much harder than we anticipated, that
may not be able to handle the huge
surge in workload expected once Britain
ought to have an impact on how we
press for certain options in Brussels.”
fresh tax probe
i Tillerson fails to ease Turkey tensions
The US secretary of state has failed to reconcile Chic new lodgings

budgets has lain at the heart of German

leaves the EU, customs authorities have In a letter to Andrew Tyrie, chairman tensions after talks in Ankara with President Recep
admitted to MPs.
HM Revenue & Customs told a parlia-
of the Commons treasury select com-
mittee, HMRC said the timetable for
Tayyip Erdogan on issues including Syria and the
extradition of cleric Fethullah Gulen.— PAGE 9
in Scotland
mentary inquiry that the new system delivering CDS was “challenging but MAGAZINE

emissions. Endowed with €5bn in state investment needed to modernise crum- insisted the entire package, which could
needed urgent action to be ready by achievable”. But, it added, CDS was “a i Toshiba investors doubt revival plan
March 2019, when Brexit is due to be complex programme” that needed to be 3 UK, France and Netherlands swoop
In a stormy three-hour meeting, investors accused
completed, and the chair of the probe linked to dozens of other computer sys- managers ofhaving an entrenched secrecy culture
said confidence it would be operational tems to work properly. In November, 3 Blow for bid to clean up Swiss image
and cast doubt on a revival plan after Westinghouse

economic policy.
in time “has collapsed”. HMRC assigned a “green traffic light” to filed for Chapter 11 bankruptcy protection.— PAGE 16
Setting up a digital customs system CDS, indicating it would be delivered on RALPH ATKINS — ZURICH it followed “a strategy offull client tax
has been at the heart of Whitehall’s time. But last month, it wrote to the i HSBC woos transgender customerscompliance” but was still trying to
Brexit planning because of the fivefold committee saying the programme had The bank has unveiled a range of gender-neutral gather information about the probes.

funds and a yearly government grant of bling infrastructure. cost €8bn to €10bn a year until 2023,
increase in declarations expected at been relegated to “amber/red,” which Credit
titles suchSuisse
as “Mx”,has been targeted
in addition by Miss or
to Mr, Mrs, HM Revenue & Customs said it had
British ports when the UK leaves the EU. means there are “major risks or issues Ms,sweeping
in a move tax
embrace diversity in the
cater to launched
the a criminal investigation into
About 53 per cent of British imports apparent in a number ofkey areas”. France
needs and the Netherlands,
of transgender customers.— setting
PAGE 20 suspected tax evasion and money laun-
come from the EU, and do not require HMRC said last night: “[CDS] is on back Switzerland’s attempts to clean up dering by “a global financial institution
checks because they arrive through the track to be delivered by January 2019, its image as a tax haven. and certain ofits employees”. The UK
single market and customs union. But and it will be able to support frictionless The Swiss bank said yesterday it was tax authority added: “The international
Theresa May announced in January that international trade once the UK leaves co-operating with authorities after its reach of this investigation sends a clear
offices in London, Paris and Amsterdam message that there is no hiding place for
The lure of the exotic
Brexit would include departure from the EU . . . Internal ratings are designed
Terror contacted by local
in western Europe officials those— seeking to evade tax.” Robin Lane Fox on the flair

But Berlin’s obsession with the schwarze €1bn, it would also finance itself “The problem with the debt brake is it will be paid for without additional bor-
both trading blocs. HMRC handles 60m to make sure that each project gets the Recent attacks
“concerning client tax matters”. notably the 2011 Dutch prosecutors, who initiated the
declarations a year but, once outside the
customs union, the number is expected
focus and resource it requires for suc-
cessful delivery.” Dutch authorities
Highlighted attack said their counter-
Others massacre by action, said they seized jewellery, paint- of foreign flora — HOUSE & HOME
to hit 300m. HMRC’s letters to the select commit- parts in Germany were also involved, ingsinand gold ingots as part of their
Anders Breivik
The revelations about the system, tee, which will be published today, pro- AFP while Australia’s revenue department Norway, theprobe; while French officials said their
called Customs Declaration Service, are vide no explanation for the rating Lloyd’s of London chose Brus- insurers to follow. Most of the EU, with Dublin and Luxem- said it was investigating a Brussels
Swiss bank. investigation had revealed “several
attacks in Paris
The inquiries threaten to undermine and Nice, and the
thousand” bank accounts opened in
likely to throw a sharper spotlight on change, but some MPs believe it was sels over “five or six” other business written in Brussels bourg thought to be more likely Norway Brussels suicide
efforts by the Paris country’s banking sector Switzerland and not declared to French
whether Whitehall can implement a caused by Mrs May’s unexpected deci- cities in its decision to set up an will be reinsured back to the homes for the industry. But Nice bombings —
to overhaul business models and ensure taxhave

Null, or “black zero”, is increasingly through “civic bonds” offering a guaran- incentivises politicians to find clever rowing. Officials said some money
host of regulatory regimes — in areas sion to leave the EU customs union. EU base to help deal with the syndicates at its City of London Mr Nelson said the city won on
customers meet internationalbucked tax the trend The Swiss attorney-general’s office
ranging from customs and immigration Timetable & Great Repeal Bill page 2 expected loss of passporting headquarters, pictured above. its transport links, talent pool of generally low
requirements following a US-led clamp- said it was “astonished at the way this
to agriculture and fisheries — by the Scheme to import EU laws page 3 rights after Brexit. The Belgian capital had not and “extremely good regula- fatalities from
down on evaders, which resulted in operation has been organised with the
time Britain leaves the EU. Editorial Comment & Notebook page 12 John Nelson, chairman of the been seen as the first choice for tory reputation”. Sources: Jane’s Terrorism and Insurgency Centre terror incidents in
billions of dollars in fines. deliberate exclusion of Switzerland”. It
western Europe
Problems with CDS and other projects Philip Stephens & Chris Giles page 13 centuries-old insurance mar- London’s specialist insurance Lex page 14 The probes risk sparking an interna- demanded a written explanation from
essential to Brexit could force London to JPMorgan eye options page 18 ket, said he expected other groups after the UK leaves the Insurers set to follow page 18 tional dispute after the Swiss attorney- Dutch authorities.
general’s office expressed “astonish- In 2014, Credit Suisse pleaded guilty
ment” that it had been left out of the in the US to an “extensive and wide-
Escape the taper trap

bumping up against an even more press- teed return of 2 per cent. would come from the existing energy
actions co-ordinated by Eurojust, the ranging conspiracy” to help clients

City watchdog sends a clear message as EU’s judicial liaison body.

Credit Suisse, whose shares fell 1.2 per
evade tax. It agreed to fines of $2.6bn.
Additional reporting by Laura Noonan in
cent yesterday, identified itself as the Dublin, Caroline Binham and Vanessa
How high earners can evade
banker loses job over WhatsApp boast subject ofinvestigations in the Nether-
lands, France and the UK. The bank said in Paris
Houlder in London, and Michael Stothard
Austen’s descendants insist the Rice portrait depicts her as a girl — see magazine Bridgeman Art Library
a pension headache — FT MONEY

ing imperative — the generational chal- Some have questioned the wisdom of and climate funds, special pots of
LAURA NOONAN — DUBLIN Berrys after discussions with regulators. media at work, but banks are unable to

A boastful WhatsApp message has cost

Christopher Niehaus, a former Jeffer-
ies banker, passed confidential client
ban people from installing apps on their
private phones. Brussels takes tough stance on Brexit
with Spain handed veto over Gibraltar
a London investment banker his job information to a “personal acquaint- Andrew Bodnar, a barrister at Matrix
and a £37,000 fine in the first case of ance and a friend” using WhatsApp, Chambers, said the case set “a precedent
Shutdown risk as border regulators cracking down on commu- according to the FCA. The regulator said in that it shows the FCA sees these mes-
wall bid goes over the top Mr Niehaus had turned over his device saging apps as the same as everything

Some estimates
nications over Facebook’s popular
chat app. to his employer voluntarily. else”.

lenge of climate change. such a scheme when investors are will- money earmarked for green schemes
Congressional Republicans seeking to The FCA said Mr Niehaus had shared Information shared by Mr Niehaus ALEX BARKER — BRUSSELS ambitious trade and airline access deals. mise. If Britain wants to prolong its
avert a US government shutdown after The fine by the Financial Conduct confidential information on the messag- included the identity and details of a GEORGE PARKER — LONDON Gibraltar yesterday hit back at the status within the single market after
April 28 have resisted Donald Trump’s Authority highlights the increasing ing system “on a number of occasions” client and information about a rival of STEFAN WAGSTYL — BERLIN clause, saying the territory had “shame- Brexit, the guidelines state it would
attempt to tack funds to pay for a wall
on the US-Mexico border on to
problem new media pose for companies
that need to monitor and archive their
last year to “impress” people.
Several banks have banned the use of
Jefferies. In one instance the banker
boasted how he might be able to pay off
The EU yesterday took a tough opening
stance in Brexit negotiations, rejecting
fully been singled out for unfavourable
treatment by the council at the behest of
Spain”. Madrid defended the draft
supervisory OF instru-
and enforcement
ments and structures to apply”.
require “existing regulatory, budgetary,

stopgap spending plans. They fear staff’s communication. new media from work-issued devices, his mortgage if a deal was successful.
that his planned $33bn increase in
defence and border spending could
Several large investment banks have
banned employees from sending client
but the situation has become trickier as
banks move towards a “bring your own
Mr Niehaus was suspended from Jef-
feries and resigned before the comple-
Living wage rise to pile
pressure on care services
Britain’s plea for early trade talks and
explicitly giving Spain a veto over any
arrangements that apply to Gibraltar.
clause, pointing out that it only reflected
“the traditional Spanish position”.
Mr Tusk wants talks on future trade
to begin only once “sufficient progress”
put the final cost
Today, Angela Merkel’s government ing to pay for the privilege of lending to which have built up reserves of €7bn.
force a federal shutdown for the first information over messaging services device” policy. Goldman Sachs has tion of a disciplinary process. Senior EU diplomats noted that has been made on Britain’s exit bill and
time since 2013, as Democrats refuse including WhatsApp, which uses an clamped down on its staff’s phone bills Jefferies declined to comment while About 2.3m people will benefit from European Council president Donald Mr Tusk’s text left room for negotiators citizen rights, which Whitehall officials
to accept the proposals. encryption system that cannot be as iPhone-loving staff spurn their work- Facebook did not respond to a request today’s increase in the national living Tusk’s first draft of the guidelines, to work with in coming months. Prime believe means simultaneous talks are
US budget Q&A and accessed without permission from the issued BlackBerrys. for comment. wage to £7.50 per hour. But the rise which are an important milestone on minister Theresa May’s allies insisted possible if certain conditions are met.
will pile pressure on English councils, the road to Brexit, sought to damp Brit- that the EU negotiating stance was Boris Johnson, the foreign secretary,

of meeting
Trump attack over health bill i PAGE 8 user. Deutsche Bank last year banned Bankers at two institutions said staff Additional reporting by Chloe Cornish
WhatsApp from work-issued Black- are typically trained in how to use new Lombard page 20 which will have to pay care workers a ain’s expectations by setting out a largely “constructive”, with one saying it reassured European colleagues at a
lot more. Some 43 per cent of care “phased approach” to the divorce proc- was “within the parameters of what we Nato summit in Brussels that Mrs May


staff — amounting to 341,000 people ess that prioritises progress on with- were expecting, perhaps more on the had not intended to “threaten” the EU
aged 25 and over — earn less than the drawal terms. upside”. when she linked security co-operation

will adopt sweeping measures designed Germany: government bonds maturing They also noted that some proposals
390_Cover_PRESS.indd 1 19/01/2017 13:57
Subscribe In print and online World Markets new living wage and the increase is The decision to add the clause giving British officials admitted that the EU’s after Brexit with a trade deal.
expected to cost councils’ care services Spain the right to veto any EU-UK trade insistence on a continuing role for the Reports & analysis page 3 £360m in the coming financial year. deals covering Gibraltar could make the European Court of Justice in any transi- Jonathan Powell, Tim Harford &
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300-year territorial dispute between
Madrid and London an obstacle to
tion deal could be problematic.
Brussels sees little room for compro-

World Markets
Man in the News: David Davis page 11
Henry Mance page 12
Germany’s 2030
to ensure Germany meets its 2030 car- in 10 years now yield minus 0.5 per cent. — higher taxes on domestic flights and
FTSEurofirst 300 1500.72 1493.75 0.47 ¥ per $ 111.295 111.035 ¥ per € 119.476 119.363 Jpn Gov 10 yr 100.45 0.06 0.00
No: 39,435 ★ Euro Stoxx 50 3481.67 3475.27 0.18 ¥ per £ 139.035 137.822 £ index 76.705 76.951 US Gov 30 yr 100.14 2.99 0.01
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0.932 US Gov 10 yr
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carbon reduction
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have put the final price tag at €40bn. the idea of the civic bonds short shrift. revenue for the treasury and cut the bill.
But evidence is mounting of the con- But Philipp Steinberg, head of economic ways around it,” said Christian Oden- Money would also flow from emissions
Morning briefing. Midday analysis. Mobile updates. Subscribe to tortions the government will have to go policy at the economics ministry, dahl, chief economist at the Centre for trading and the auctioning of emissions
the FT and you’re better informed all day. through to square its hawkish stance on defended the 2 per cent figure, saying European Reform. allowances to energy companies.
deficit spending with the huge cost of there was a “political argument” for Mr Altmaier’s climate foundation is Yet Mr Scholz has also made clear that
With newspaper delivery, you start the day prepared.* With, the climate package. Some of the ideas such a high return. just the latest example — though offi- the package will hurt. “You can’t have
you’re on top of the news throughout the day. And with mobile put forward for resolving this dilemma “You are ensuring more public partic- cials say the idea is unlikely to gain full climate action at zero cost,” he said.
and tablet access, you’re up to speed wherever you are. have left experts scratching their heads. ipation in the fight against climate cabinet approval today. Financing the new policies while
The latest proposal was floated this change,” he said. The centrepiece of the climate change sticking to balanced budgets could
month by Peter Altmaier, the econom- Yet Mr Altmaier’s idea would never package is instead likely to be a plan to prove an almost impossible balancing
ics minister and a close Merkel ally. He have seen the light of day were it not for expand Germany’s national emissions- act. For some it highlights the absurdity
Visit envisages a new type of “civic bond” for Germany’s “debt brake”. This constitu- trading system to cover the transport of sticking so slavishly to the black zero.
fighting climate change, with one tional rule limits the federal govern- sector and heating of buildings. “Everyone knows it will probably be
important feature: it would not show up ment’s structural deficit to 0.35 per cent Other policies under consideration killed off one day,” said Mr Odendahl.
*Terms and conditions can be found at in Germany’s debt statistics. of gross domestic product and bars Ger- include a big expansion of public trans- “But no one wants to be the one holding
The bonds would be issued by a many’s 16 regions from running deficits port, new subsidies for electric cars and the smoking gun.”
Friday 20 September 2019 FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Friday 20 September 2019


Deeply divided Fed attempts to do no harm

Central bank puts off questions on stimulus and balance sheet expansion to stop further disruption in money markets
Jim Bullard of St Louis — wanted a larger talks. From the second-quarter report argument. Trade rhetoric has deterio- term loans that the Fed uses to drive and it certainly is now. Again, we’ll be
one. “The main tension the Fed faces is on gross domestic product, Mr Powell rated since the last meeting. But the down borrowing rates. The Fed had not looking carefully in the coming days.”
At their September meeting, Federal the economy has not really slowed,” said cited business investment numbers, committee made minimal changes to its used the facility in 10 years. But the committee and Mr Powell did
Reserve policymakers sent a message: Ashok Bhatia, a deputy chief invest- which contracted slightly. statement, and projections showed no The simplest explanation for the dis- not commit to asset purchases to
first do no harm. The Fed’s rate-setting ment officer at Neuberger Berman. The Asked about a paper by the Fed’s consensus on any more rate cuts ruptions is that when banks do not have increase reserves, or even to a more per-
committee on Wednesday cut interest unemployment rate remains at 40-year Board of Governors that found as much through to the end of 2020. “There is not enough reserves at the Fed that they can manent repo facility, as some analysts
rates 25 basis points, as expected. lows. Consumer spending remains as a whole percentage point of drag in enough of a consensus for [Mr Powell] use to easily lend each other money, had predicted. “I am disappointed,” said
Thereafter a deeply split central bank strong. People have jobs and are buying GDP growth by the end of 2020 from short-term borrowing costs can spike. Priya Misra, head of rates strategy at TD
pushed back decisions on whether the things, the two necessary conditions for trade uncertainty, Mr Powell praised the Mr Powell noted this week’s market Securities, “but think that the Fed just
US economy needed more monetary a thriving economy. research, and said other papers had
‘It’s a $22tn economy. disruptions, and said the Fed expected needs to do more work on this issue.”
easing to cope with trade tensions — and One group at the Fed wanted to be found similar results. But he said preci- To try to isolate the short-term interest rates to rise briefly, She believed the Fed would know
on whether it will need to expand its bal- pre-emptive, said Mr Bhatia. Another sion was still difficult. “There’s real but the jump had been “a stronger enough by its October meeting to com-
ance sheet to prevent further disruption group was arguing nothing had hap- uncertainty around these effects. It’s a
effects of certain things response than certainly we expected”. mit to buying more assets.
in the money markets. pened yet. “That tension is why we’ve $22tn economy. To try to isolate the is very challenging’ He conceded, in code, that bank For now, the committee has offered
“When the direction is relatively ended up at 25 basis points,” he said. The effects of certain things is very challeng- reserve levels might have been too low. small, technical fixes to give it a little
clear, it’s relatively easy to reach una- sticking point, he said, was trade. ing, but we do the best we can.” to commit to a clear path,” said Krishna Asked whether reserve levels were ade- more room to manage short-term inter-
nimity,” said Jay Powell, Fed chairman. In both his prepared remarks and his Mr Bullard has been openly worried Memani, vice-chairman of investments quate, he said: “We’ve always said the est rates. So until October, it will remain
“This is a time of difficult judgments, as answers to reporters, Mr Powell went about the effects of trade uncertainty. at Invesco. “Therefore he is trying to level is uncertain.” He even hinted at a a time of difficult judgments and the Fed
you can see, disparate perspectives.” into more detail on the real, observable He wanted a 50bp cut. There appears to thread a needle.” solution. When the Fed buys assets, it will wait and see. Andy Richman, direc-
By “disparate perspectives” he meant effects that drawn-out trade negotia- have been an argument in the commit- The Fed offered a similar response to credits banks with reserves. “It is cer- tor of fixed income at SunTrust Advi-
there had been three dissents at the tions have had on business investment. tee over whether the Fed can know the disruptions in the short-term fund- tainly possible that we will need to sory Services, called this “Powell’s
meeting. Two Fed presidents — Kansas The Fed had been hearing from busi- enough about the future effects of trade ing markets earlier in the week that had resume the organic growth of the bal- conundrum”: there are real, visible
City’s Esther George and Boston’s Eric ness owners that they had delayed uncertainty to act decisively on it now. prompted the New York Fed to dust off ance sheet earlier than we thought,” he risks. But everything looks fine now.
Rosengren wanted no cut at all. One — investments as they waited out trade Mr Bullard seems to have lost that its “repo” facility, a way of making short- said. “That’s always been a possibility Gillian Tett page 13

Trade tensions

OECD warns leading economies of low-growth trap and cuts forecasts

Rate moves How central banks compare
The world’s leading economies need to
ease trade tensions and act decisively UK
to prevent a descent into a low-growth
Bank of England left rates at 0.75 per
trap from which it would be difficult to
cent but held out the prospect of cuts
escape, the OECD has warned.
if Brexit uncertainty persisted in a
Labelling the economic outlook as weak global economy
“increasingly fragile and uncertain”, the HELD
Paris-based international organisation
forecast yesterday that Britain would
fall into recession if it left the EU with- Japan
out a deal and eurozone growth would Bank of Japan kept overnight interest
slow to close to zero. rates at minus 0.1 per cent but also
Evidence was accumulating that the hinted at action next month if global
effects of trade tensions were greater economic weakness persisted
than previously thought, the OECD said,
urging all countries to stop erecting tit-
for-tat trade barriers and to fight the
economic slowdown with a fiscal stimu-
lus, where public finances allowed. Norway
Central banks are responding to slow- Norges Bank, an outlier among central
ing economic growth by easing policy. banks, raised rates 25 basis points
After the Federal Reserve cut rates on to 1.5 per cent but said global
Wednesday, the Bank of England struck uncertainties “worries us”
a dovish tone — even as it held rates RAISED
steady — raising the prospect for the
first time that it might seek to cut rates if
Brexit uncertainties persisted in a weak
global economy. Switzerland
Indonesia’s central bank yesterday Swiss National Bank kept key rate at
cut rates while the Bank of Japan, minus 0.75 per cent but lowered
though holding its benchmark policy growth expectations and reduced
rate at minus 0.1 per cent, hinted at inflation forecast
potential action next month. HELD
Norway’s central bank swam against
the tide with a further rate rise but indi-
cated this could be its last amid the glo- Going down: Bruno Le Maire, French finance min- forecasts for almost all countries it impose tariffs on European car imports. ‘The danger courages businesses to invest,” the
bal shift towards easing. The Swiss the Fed’s ister, said yesterday in Paris “budgetary examined, cutting its global growth pro- “The speed that trade tensions are OECD said. It said companies would not
National Bank, meanwhile, held rates decision to cut a policy had to take over from the mone- jection for 2019 by 0.3 percentage points materialising is worrying,” she said, is that we want to invest in the uncertain climate.
steady even as it slashed its growth fore- quarter point tary policy of central banks which today to 2.9 per cent, the weakest perform- adding the effects “can be seen in how get into a Economists fear manufacturing woes
cast for the year. from rates is is approaching its limit”. ance since the 2008-09 financial crisis. trade [volume] growth has collapsed”. could soon spread to consumer spend-
The OECD praised central banks’ seen on the floor He made the comments as France and With little improvement foreseen in The forecasts suggest US economic vicious ing, bogging down the services sector
action in loosening monetary policy fur- of the New York Germany unveiled a common strategy 2020 and big forecast downgrades, growth will slow from 2.9 per cent in circle of and the global economy in a low-growth
ther to stimulate growth, while warning Stock Exchange to tackle slowing growth, leaning on OECD chief economist Laurence Boone 2018 to 2 per cent in 2020, Chinese rut. In Britain, Ms Boone said if the UK
Europe and Japan “have limited scope on Wednesday structural reforms, debt reduction and said: “The danger is that we get into a growth will decline from 6.6 per cent lower trade left the EU without a deal, “there was a
to ease monetary policy further but may Justin Lane/EPA- “strong public investment where possi- vicious circle of lower trade [and] to 5.7 per cent over the same period and [and] high probability we get into recession”.
face a renewed need to do so”. ble”. However, while the finance minis- investment and higher uncertainty.” the eurozone will see its growth rate The UK forecast for 2020 suggests
To make policy stimulus more effec- ters of the two countries attempted to She blamed multiple trade tensions, almost halve to 1 per cent. “Collective investment only 0.9 per cent growth even if the
tive, it called for governments to raise present a united front, Mr Le Maire said from the US and China’s battle over tar- effort is urgent to halt the build-up of and higher country secures a deal; if Britain crashes
public capital spending in countries that a debate remained about how quickly iffs to skirmishes between South Korea trade-distorting tariffs and subsidies out, the forecast is for a contraction of
had low deficits, low debt and an invest- the strategy would be implemented. and Japan on crucial goods for technol- and to restore a transparent and pre- uncertainty’ 1 per cent in that year alone.
ment backlog. The OECD downgraded the economic ogy supply chains and the US threats to dictable rules-based system that en- Additional reporting by David Keohane

Federal Reserve Eurozone

US money market pressure eased for third day Muted take-up by banks for ECB cheap loans
ADAM SAMSON — LONDON deliver as substantial a policy easing as “They should walk in on Monday and MARTIN ARNOLD — FRANKFURT council meeting — lowering the poten- a carry trade by earning 0.5 per cent on
some investors had anticipated. say they are doing a $100bn, 10-day The European Central Bank’s offer of tial interest rate to minus 0.5 per cent money borrowed at negative interest
The Federal Reserve intervened in US Several strategists at major banks that operation, then we aren’t going to be cheap money for eurozone banks has and extending the maturity from two to rates from the ECB and depositing the
money markets for the third day in a act as trading counterparties for the Fed talking about this after quarter end,” turned out to be a damp squib, after the three years. money back at the central bank for free.
row yesterday as calls grew for the cen- said the central bank should pump said one banker. region’s lenders took up only €3.4bn of That may have left banks without Marco Valli, chief European econo-
tral bank to open a more permanent more regular bursts of funding into the In particular, some bankers have the loans on offer — a fraction of the enough time to apply for the new loans, mist at UniCredit, said the low demand
facility to ease pressure on a pivotal system. This is particularly important highlighted the end of September, demand seen in previous auctions. some analysts said. for loans yesterday “should not be con-
part of the financial system. before the end of financial quarters and which is typically a more strained time Frederik Ducrozet, a strategist at sidered a signal that there is no demand
years, analysts said, because of the risk for the repo market as banks pull back Analysts said the unexpectedly low for these loans — we expect many more
The New York Fed injected $75bn in of further bouts of cash outflows spark- and reduce the size of their balance take-up in the first auction of the ECB’s banks will apply for them next time”.
overnight cash into the short-term lend- ing renewed market dislocations. sheets ahead of an important regulatory latest targeted longer-term refinancing
‘Most banks were likely Eurozone lenders are due to repay
ing market, and its auction was oversub- Bankers and investors have called for reporting date on the last day of the July operation (TLTRO) reflected last- to wait for the next €32bn of loans from the previous
scribed for the second straight day, with the Fed to launch a “term” repo facility to September quarter. minute changes to their terms and the TLTRO scheme next week.
banks demanding almost $84bn. through which it could lend cash for as Bankers and investors said earlier in tactical advantages that banks may see
operation in December’ “The result will be a net withdrawal of
It activated its repo operation on long as two weeks, to ensure players in the week that no one in the market was in waiting until the next round. Frederik Ducrozet, Pictet TLTRO liquidity on the date of settle-
Tuesday for the first time since 2008 the market have the money they need willing to lend cash until after the end of The TLTRO is the ECB’s third pro- ment,” said Mr Ducrozet. “We’re not
after technical factors sent a vital meas- until after the end of the quarter has the quarter. gramme of cheap funding to banks, Pictet Wealth Management, said the sure this was the plan.”
ure of overnight funding costs surging. passed. “Right now there is so much uncer- which aims to stimulate more lending. take-up was “shockingly weak”, but Some ECB officials believe the low
On Wednesday it ran the operation tainty,” said Scott Skyrm, a repo trader Lenders qualify for the loans at negative added “most banks were likely to wait take-up may also be because the bank-
again as markets remained strained. at Curvature Securities. “No one wants rates from the central bank if they meet for the next operation in December”. ing system is already flush with liquid-
The central bank’s policy rate to be the first one to buy something at certain overall lending targets. It was A delay in applying may suit some ity. After the last TLTRO auction, euro-
climbed above policymakers’ target on 2.5 per cent and then they could come in relaunched by the ECB as part of a wider banks because the ECB recently intro- zone banks held €761bn of cheap loans.
Tuesday and receded back to the very the next day and rates are at 5 per cent.” package of monetary easing announced duced a so-called tiering system that Jack Allen-Reynolds, senior Europe
upper end of the targeted range on Banks are also concerned about the last week, which included cutting the will exempt part of lenders’ excess res- economist at Capital Economics, esti-
Wednesday, according to figures pub- possibility that more cash could ebb central bank’s deposit rate further into erves from the negative interest charged mated that banks had capacity to add an
lished yesterday — a sign of how tense from the repo market over the coming negative territory and restarting its on deposits held at the central bank. extra €430bn of the cheap loans before
markets remain, even amid the Fed’s week as the US Treasury continues to bond-buying programme. Lenders with spare capacity to take hitting a cap of 30 per cent of their eligi-
interventions. build its own cash reserves. At the previous TLTRO auction in advantage of this exemption, many in ble lending book. He added that he
Yesterday’s third repo auction came a JPMorgan analysts warned this week March 2017, 474 banks bid for €233.5bn Italy and other southern European doubted there would be a big impact on
day after the Federal Open Market Com- the ructions of the past few days may be of loans. This time only 28 lenders bid countries, are likely to wait until the lending growth or borrowing costs and
mittee cut interest rates by 25 basis “a prequel to what could come at year- for €3.4bn of loans. tiering system is introduced at the end said they would not “significantly affect
points, in a move that some analysts The New York Fed injected $75bn end when US banks significantly reduce The ECB sweetened the terms of the of October, according to analysts. economic growth”.
dubbed a “hawkish cut” as it did not into the short-term lending market their footprint in the money markets”. new TLTRO at last week’s governing This would allow them to benefit from Editorial Comment page 12
Friday 20 September 2019 FINANCIAL TIMES 7
8 ★ FINANCIAL TIMES Friday 20 September 2019


Trudeau apologises for racist make-up Edward

Political adversaries seize more than a month to go before the optimism and “doing politics differ- ‘I shouldn’t Mr Trudeau’s political brand has been
October 21 federal election. Polls yester- ently”. tarnished in the past year over allega-
on 2001 image during have done
close election campaign
day gave Mr Trudeau a narrow lead over
Andrew Scheer, his main rival, whom he
has accused repeatedly of allowing
Women filled half the posts in his cab-
inet, in which a wide range minorities
were also represented. In 2016 Mr Tru-
that. I
tions he and his top officials tried to
pressure Jody Wilson-Raybould, former
attorney-general, to allow SNC-Lavalin,
Trump’s strategy on
JASON KIRBY — TORONTO intolerance in his Conservative party.
Mr Trudeau also admitted he had per-
deau joked he had more Sikh members
than Narendra Modi, India’s prime min-
should have
the engineer, to avoid criminal charges.
After being found in breach of conflict
China means that
Canada’s prime minister has apologised
for wearing brownface make-up to an
Arabian Nights-themed gala when he
formed the Jamaican folk song Day-O
while wearing blackface make-up in a
high school talent show.
Mr Scheer said he was “extremely
shocked and disappointed”, adding that
better. And
of interest rules by the federal ethics
commissioner, Mr Trudeau said he took
“responsibility” for his actions but dis-
everyone’s a loser
was a teacher in 2001, admitting it was Asked if he had considered resigning wearing brownface was an “act of open
I’m sorry’ puted some conclusions.
racist behaviour. for the photo, Mr Trudeau said he took mockery and racism” and was “just as Justin Trudeau Mr Trudeau took “full responsibility”

Justin Trudeau, who is battling for re- “responsibility” for his actions but racist in 2001 as it is in 2019”. in 2017 after the ethics commissioner he phrase “new cold war” should never have
election, issued the apology aboard his would be “asking Canadians to forgive” Jagmeet Singh, leader of the New found him in breach of the same rules been coined. Nothing in the original stand-off
campaign plane after Time magazine him. Democratic party and Canada’s first when he failed to properly clear a Barba- between the Soviet Union and the US could
published the yearbook image. “It was something that I didn’t think non-white federal party chief, said the dos vacation with the Aga Khan, the bil- prepare the global economy for what Donald
“I dressed up in an Aladdin costume was racist at the time but now I recog- photo was “troubling” and “insulting”. lionaire religious leader. Trump is demanding of his country’s trading
and put make-up on,” said Mr Trudeau, nise it is something that is racist.” “What does that say about what he He came under further criticism partners. Moscow and Washington existed in separate
47, who attended the gala when he was Yesterday Global News in Canada thinks about people who, because of the more recently for what he said was orbits. Now the rest of the world is being asked to make a
29 and teaching at the private West published what it said was a third colour of their skin, face challenges and being “more enthusiastic about cos- choice between China and the US, two intimately entwined
Point Grey Academy in Vancouver. instance of Mr Trudeau appearing to barriers and obstacles?” he said. tumes than is sometimes appropriate”. economies. Nor does the label “trade war” begin to capture
“I shouldn’t have done that. I should wear racist make-up, in an undated There was a “pattern of behaviour” in This may have been a reference to a the dimensions of what this implies.
have known better. And I’m sorry,” said video reportedly shot in the 1990s. which Mr Trudeau in public “seems family trip to India last year when he The US’s partners are being pressured to eject Huawei,
the leader of the Liberal party. Mr Trudeau was elected in 2015 after really nice, really warm” but behind appeared in a series of local outfits that China’s leading telecoms equipment supplier, from their
The image came to light with a little a campaign that emphasised tolerance, closed doors it was a different story. were mocked by Indian commentators. 5G networks. But Mr Trump’s all-or-nothing ultimatum is
by no means confined to Huawei. Almost every Chinese
product is under suspicion of concealing the so-called
Manchurian chip — backdoor technology that can lie dor-
mant until activated. Israel, for example, is being asked to
Trade war. Manufacturing dump a Chinese construction group that is deepening the
port of Haifa. It is also under pressure to cut ties with

Car seat maker falls victim to US tariffs another Chinese contractor building a metro in Tel Aviv.
Barring commodities such as soyabean or pork, the
internet of things makes almost every product a potential
dual-use technology in a future US-China conflict. They
used to say ploughshares could be converted into swords,
and vice versa. How about refrigerators? Or children’s
White House anti-Beijing stance toys? Once you start down the road of excluding anything
with Chinese-embedded chips, it is hard to know where to
has hit Britax, which relies on stop. The line between legitimate national security con-
imports to remain competitive cerns and outright paranoia is perilously thin.
That line was obliterated at a conference in Paris this
JAMES POLITI — WASHINGTON week with the mislead-
ingly dull title “interna-
As Donald Trump launched his trade tional co-operation on
The line between
war with China in early 2018, Britax, artificial intelligence”. In legitimate security
one of America’s best-known child car reality, the gathering —
seat brands, stepped up production in co-hosted by the Wash-
concerns and
the US, convinced that the White House ington-based Atlantic outright paranoia
was committed to encouraging US man- Council — was the first
ufacturing. effort to stimulate talks
is perilously thin
Such confidence did not last. After between the US and
being battered by tariffs on some of the China on the future of AI, which covers pretty much the
imported parts for its US-assembled car future of everything, including warfare.
seats, the company is now pleading for a A White House official, whom I cannot name under the
reprieve and warning that as a last gathering’s “Chatham House rule”, opened by declaring
resort it might be forced to close its US that the US would not co-operate with China on AI while it
operations, possibly shifting them to remained authoritarian. Companies around the world had
China. to choose between two AI systems, said the official. One,
“We’re being significantly penalised,” led by the US, was based on trust and openness. The other,
said Robert McCutcheon, president of China, was closed and “malicious”. The latter exported
the Americas for Britax, whose US man- “authoritarian software” to every continent.
ufacturing hub is in Fort Mill, a fast- A Chinese official responded by saying that the US killed
growing town in South Carolina. innocent civilians in Iraq and Afghanistan. “Nobody is per-
“If you back up and think about it, our fect in human rights,” he said. The exchange almost ended
incentive now would be to move our the conference before it began. It offered a troubling fore-
production back overseas . . . and that’s taste of how much could go wrong between the world’s two
not something we want to do.” great powers. The French co-hosts could only make for-
Britax, and its roughly 300 jobs in lorn pleas for dialogue.
Fort Mill, near the border with North It is an open question whether Mr Trump will agree to a
Carolina, have fallen into a bizarre and Unseated: tive, for an exemption from the tariffs for tariff relief, but those deadlines have China would be a very real safety risk,” ceasefire with China in their trade war over the coming
ironic trap when it comes to Mr Trump’s import tariffs for the company in a letter on Septem- slipped as the US administration strug- Ms Trofe said. weeks. Worries about his re-election prospects in 2020
trade war with Beijing. Beginning in have affected ber 10. gles to keep up with the demand. Britax, which was founded in the UK suggest Mr Trump might go for some kind of truce. Such a
September 2018, the company faced a Britax’s If no long-term deal was reached with “We unfortunately don’t have any in the 1930s, established its US division deal could even include a brief reprieve for Huawei. Quite
10 per cent tariff on the textiles it uses to manufacturing Beijing, he said, exclusions would be real insight into how the USTR or the in the 1970s and is now owned by Nordic how he would sell that one to the increasingly hawkish
cover its car seats, which moved up to hub in Fort Mill, necessary to “prevent further harm”. current administration is making deci- Capital, a Swedish private equity firm. It bipartisan voices back home is another matter. Democrats
25 per cent after talks between the two South Carolina, The letter revealed the unease with sions on what should be excluded versus is awaiting with trepidation a decision would be sure to attack him for folding too cheaply. Mr
countries broke down in May. above. US trade which many in Mr Trump’s own party, not,” said Lisa Trofe, managing director on its tariff-exemption request, mirror- Trump’s short-term actions are unpredictable.
Starting this month, it was hit by representative even in deeply Republican regions, are of the Juvenile Products Manufacturers ing a broader trend of US manufacturers But his larger China strategy is unchanging. It is hard to
another layer of levies, worth 15 per Robert struggling to contain the fallout from Association, which represents child dependent on Chinese imports that are overstate its radicalism. Over the past 40 years, the US has
cent, on metal products such as har- Lighthizer, the trade war, even if they continue to safety companies in the US. grappling with huge uncertainty about taken a “win-win” approach to China. The more it could be
nesses and buckles, also used in Britax below — Logan Cyrus support the US president. For example, high chairs were exclu- their future. bound into the global economy, the freer its political sys-
car seats. In a business with relatively “The tariffs have affected just about ded from the tariffs, but cribs were not. “We’re just very cautious now about tem would become. Reality has belied that theory. China is
low profit margins, that was damaging every industry we talk to,” Mr Norman Mr Trump has repeatedly encouraged making further investments now considerably less free today than it was in 2001 when it
enough. But the pain for Britax was said. While many businesses agreed US companies to cut their ties with Chi- because we’re just trying to sort out joined the World Trade Organization. Its social credit sys-
compounded by the fact its main com- with the concept of confronting China’s nese suppliers to avoid tariffs, but that is where this is going to go,” Mr McCutch- tem, which ranks citizens based on their behaviour, offers
petitors have been importing finished unfair trade practices, “their ox is get- easier for some manufacturers than eon said. “It just changes on a weekly an Orwellian vision of how people can be controlled by
car seats directly from China, tariff- ting gored”. He added: “I feel strongly others. Britax has explored the idea, but basis.” authoritarian software. Yet its economy is about three
free, due to an exemption allowed by that when companies don’t have an it would be expensive and time- Disappointment with the policies and times larger than it was then.
the office of the US trade representative alternative to make the product — don’t consuming, lasting up to two years, decisions on trade coming out of Wash- Mr Trump is thus turning that strategy on its head. We
for some, but not all, safety products. have an alternate source — they ought to because of the extra certifications and ington is palpable. Mr McCutcheon said have moved from a “win-win” US vision of globalisation to
“This administration’s focus is to pro- get some relief.” crash-testing needed to change parts. it is “hard for us to believe” the “win-lose”. In fact, what Mr Trump is pursuing is closer to
tect American manufacturing jobs, but The USTR did not respond to a “It has taken decades to build the rela- “branches of government” want Britax “lose-lose” — everybody loses if globalisation goes into
Britax is a prime example of a company request for comment on the tionships, to build the level of trust, to to head towards the most “draconian reverse. Under Mr Trump’s plan, the US ultimately wins
being punished for doing the right Britax case and Mr Nor- ensure that all of the entities in China option” of shutting US production. because it would lose more slowly than China. The Paris AI
thing,” said Ralph Norman, a man’s letter. Mr Light- who are the supply-chain production Mr Norman said he is doing what he gathering was supposed to be about the implications of
Republican in the US House of hizer has until the partners really have what they are doing can to help, but realises there may not machine learning. A century after the first world war, what
Representatives from the area, middle of next week down to a science. We’re hearing all of be a quick fix. “I think the president’s it highlighted was the urgent need for human learning.
as he appealed to Robert Light- to respond to the our members say that trying to move doing the right thing, it’s just going to
hizer, the US Trade Representa- company’s petition manufacturing or production outside hurt for a while.”

Cross-border relations

North Korean defectors claim Seoul is silencing their criticism in push for rapprochement
EDWARD WHITE AND KANG BUSEONG weapons has also included efforts to flurry of summitry between Mr Moon and media executives to use the formal Reporters with two state-backed such as loudspeaker broadcasting and
silence critics and shift public focus and Mr Kim, he was “permanently title of “chairman” when talking pub- news organisations said there were no distributing leaflets along the border.
Joo Yang once hid in a bunker for stor- from problems such as human rights struck from the list” of guest contribu- licly about Mr Kim. For North Koreans editorial directives to reject critics of the Activists have floated balloons with
ing kimchi, Korean fermented cabbage, abuses in North Korea. tors with most state-backed media. who fled, the request is offensive. Kim regime or promote Mr Moon’s pol- leaflets and radios into North Korea for
to evade detection before fleeing across Seoul said South Korea “guaranteed “I used to be on [state-linked televi- “He’s a murderer. He’s not a ‘Mr Kim’,” icy of engagement. years. Ms Scholte said enforcement of
the North Korean border to China. press freedom” and officials had not sion news] almost every day, but sud- said Yeonmi Park, a defector and now a The complaints come as hopes rise the new policy was “very disturbing and
made any requests to media, universi- denly since March [2018], they stopped US author and human rights activist. that Donald Trump, US president, will continues to be a problem”.
Years later, as she built a life in Seoul, ties or other public institutions related calling me,” he said. “The [presidential] restart talks with Mr Kim, even though Another North Korean defector said
speaking about her experiences and to North Korean issues. Critics, how- Blue House might have put pressure on some experts warn that overtures to he worked with Seoul on radio broad-
helping other defectors share their sto- ever, dispute this. Suzanne Scholte, those broadcasters, or they became too him have yielded little. Human rights casts targeting North Korean soldiers
ries helped to support herself and shed chair of North Korea Freedom Coalition, loyal to the government.” groups say Mr Moon’s government has near the border area for three years but
light on life in the communist country. a US non-government organisation, said Ms Yang, who had run a consultancy also cracked down on groups trying to his role was discontinued in 2018. Los-
But multiple defectors and human the change in approach was “definitely helping other escapers find paid speak- counter Pyongyang’s propagandists by ing the work was galling, he adds, as he
rights activists have said that paid coming from the government”. ing work, is one of several defectors to sending factual information and cul- was inspired to defect in 2009 after lis-
speaking opportunities for North She added: “It is having a chilling allege that officials requested that North tural content into North Korea. tening to similar broadcasts for years.
Korean escapers have disappeared over effect, not only on our awareness and Koreans not speak publicly about South Korean officials said the gov- Thae Yong-ho, a former envoy to the
the past two years while President Moon understanding of North Korea, but it is human rights and focus on “good ernment had asked groups to stop dis- UK, who in 2016 became the highest-
Jae-in has sought rapprochement with also really painful and economically things” about their former home coun- tributing information but insisted that ranking North Korean diplomat to
dictator Kim Jong Un. devastating to the defectors.” try. Last December a contract with a the move was in accord with the 2018 defect, said disseminating information
The allegations raise questions over Ahn Chan-il, a Seoul-based defector state-linked organisation was cut short. Panmunjom Declaration. The pact, to younger North Koreans was “very
whether Mr Moon’s policy of engage- and commentator on North Korea, Several North Koreans and academics North Korea leader Kim Jong Un, signed by Mr Kim and Mr Moon, inc- important” in spurring people to reject
ment with Mr Kim to abandon nuclear believes that from early 2018, ahead of a say they have been directed by officials left, with South Korea’s Moon Jae-in luded a pledge to “stop all hostile acts” the state’s ideological control.
Friday 20 September 2019 FINANCIAL TIMES 9
10 ★ FINANCIAL TIMES Friday 20 September 2019


Cultural subtleties
with global appeal
Lulu Wang was told her Chinese-American family drama ‘The
Farewell’ would be ‘niche’ — now it’s a hit. Rebecca Liu meets her
‘I didn’t know a niche,” she recalls. But when nudged to

hen Lulu Wang’s father herself in six years earlier — even down whether to make changes that might help broaden
first read her script for to the sham marriage. She had emi- laugh or cry’: its appeal, such as softening characters
The Farewell, a film grated to Miami from Beijing with her Lulu Wang, to make them nicer, she held firm.
based on a real-life saga parents when she was six years old, and photographed For Wang, it was not about making
involving a sham wed- the experience felt like a clash between for the FT by the film with the broadest appeal but
ding in their family, he was uncertain. her American values and those of her Amara Eno. the one that was truest to her story. “If
“He was like, ‘Yeah, it’s really accurate,’” extended family. She remembers think- Above: somebody made a suggestion that was
Wang remembers. But that accuracy ing: “This is so crazy. This is a story I Awkwafina, not accurate to my experience or to my
created doubts: “You didn’t dramatise need to tell.” It was the ever-changing centre, in family, I could immediately identify it.”
it more. Why would anybody want to cocktail of conflicting emotions that ‘The Farewell’ The success of The Farewell has reaf-
see this?” made the experience feel exceptional: “I firmed her instincts. “It’s been really
I am speaking to Wang in a brightly lit didn’t know whether to laugh or to cry. I magical to see it resonate with so many
conference room in London on the first felt empathy for all the family members, people because it has enabled me to
day of her month-long European press but I also saw the absurdity of the situa- trust my gut,” she says. It has touched
tour. After wide releases in the US and tion.” Yet when it came time to revisit audiences in the Chinese diaspora, but
Australia, and contrary to her father’s this experience as a film-maker, Wang also many others with no Asian back-
fears, the film has attracted sizeable felt it was important not to approach it ground. People from all over the world
audiences. It is currently the highest have come to Wang with their own expe-
earning movie per theatre in North riences of immigration. “It makes you
America this year, surpassing Marvel’s
‘I like stories that wonder: what other myths are we inad-
Avengers: Endgame, and won the Audi- explore a question vertently believing in, and [how are
ence Award at Sundance London in they] shaping our culture?”
June. Though Wang, who is 36, has been rather than ones that Wang notes that specificity in story-
working as a writer and film-maker in
Los Angeles for more than a decade,
provide answers’ telling is something that is now discour-
aged, for fear of alienating audiences.
receiving acclaim for her debut feature Colleagues in the industry have been
Posthumous (2014) and short film Touch like a strict recreation of her life. The their choices. As a conduit between two explained to her,” Wang observes. “[It’s] cautioned by executives against being
(2015), The Farewell has catapulted her result is a mix of fiction and non-fiction. cultures who tries to do justice to both, an immersive experience.” On a meta- too specific about the race, sexual orien-
into the mainstream. The Farewell defies easy categorisa- Wang suggests, Billi could be a stand-in level, this also offers the audience a les- tation and political beliefs of their char-
The Farewell begins with Billi (actress tion. Much like Wang’s own swings for every immigrant caught between son on the relativity of their beliefs. acters. But The Farewell celebrates spe-
and rapper Awkwafina in her first lead- between sadness and laughter, the film two worlds. Someone might not explain things to cificity. It tests, rather than shies away
ing dramatic role), a down-on-her-luck delivers moving scenes of love and grief Hollywood films about non- you because they don’t see their lives as from, the audience’s ability to sit with
millennial writer in New York, discover- but is also dotted with light humour American cultures can sometimes feel worthy of explanation, Wang points out: different points of view, and empathise
ing that her beloved grandmother — Nai about the lengths people go for their more like sociological explainers of a “They don’t know what’s different.” with characters they may at first
Nai, in Mandarin — has been diagnosed loved ones. Rather than making any broad community rather than narrow The Farewell almost didn’t get made. find unrelatable.
with late-stage cancer and only has a judgment on whether her family’s deci- stories centred around specific charac- Early potential investors struggled to see I ask Wang whether she was con-
few months to live. Her parents are pre- sion was right or wrong, Wang is more ters. Cultural differences are explained the film’s appeal to either American or cerned that audiences would struggle to
paring to fly back to their hometown, interested in showing why they did what from the outset, and the audience is gen- Chinese audiences; Wang eventually move from confusion to compassion. “If
the Chinese city of Changchun, to say they did. “I like stories that explore a tly guided through anything that might found producers after sharing her story you write from a place of empathy,” she
their goodbyes. Billi wants to join them, question rather than ones that provide seem unfamiliar. The Farewell strays on NPR’s radio show This American Life in replies, “if you’re creating these charac-
but there’s a catch: no one plans to tell answers,” she says. from this approach. Local customs, such 2016. Did she ever feel the need to make ters with no distance, then the audience
Nai Nai about her terminal illness. In Wang’s films we are often invited to as drinking games and wedding celebra- the film more Hollywood-friendly? is actually not distanced from the char-
Instead, the family is arranging a fake see the different emotions and perspec- tions, are shown as they are, leaving “People told me throughout that to acters.” We learn, she adds, to love these
wedding between Billi’s cousin and his tives simultaneously circulating in a room for viewers to understand them make such a specific film — not about characters regardless of who we are, and
girlfriend that will double as a send-off scene. In The Farewell Billi goes from for themselves — or not. Asians, not about Americans, but specif- ultimately: “We see ourselves in them.”
for the beloved matriarch. finding the entire scheme ridiculous to “I wanted the audience to experience ically the Asian-American experience,
It is a situation that Wang found having compassion for her family and it the way that Billi does; things aren’t that it would be limiting and it would be ‘The Farewell’ is in UK cinemas from today

The power of ordinary, messy lives

looks set to be bought by a developer.
THEATRE A parallel narrative is that of Beth, who
is fighting for custody of her young
Sarah daughter. But mostly Zeldin, as previ-
ously, works through accumulation of
Hemming detail and through texture: we watch
characters stack chairs, queue for food,
put out biscuits.
Gradually you become invested in

tatistics can tell a story. But these characters and aware of what this
drama can get under the skin shabby place means to them. For Ber-
of that story. Alexander Zel- nard (Alan Williams), a chronically
din’s Faith, Hope and Charity lonely old man, it is company; for Beth
(at the National’s Dorfman and her 16-year-old son (brilliantly
Theatre) does precisely that. A quietly played by Susan Lynch and Bobby Stall-
devastating, gently funny and beauti- wood), it is a haven; for Mason, a well-
fully delivered piece of theatre, it shows meaning, awkward ex-offender (excel-
us what it means to be one of those sta- lent Nick Holder) who arrives to lead
tistics. It’s one of several new shows in the choir, it is a new start. Its loss will hit
London that build on the empathy cen- them hard. Empathy: Alan Williams in
tral to drama to lend a voice to those Some might object that the National ‘Faith, Hope and Charity’
who are rarely heard. Theatre staging such work amounts to a
The statistics behind Faith, Hope and sort of “poverty porn”: a chance for picture of a rapidly changing country.
Charity are stark. In 2018, the Joseph wealthy people to wring their hands. I’d We see ministers embracing a new ethos
Rowntree Foundation found that one- argue the contrary: one of the many of economic prosperity; we see medical
fifth of the UK population were living roles of the National is as a publicforum experts pressured into meeting targets;
in poverty. In the past five years the to highlight and discuss matters of we see poor farmers thrilled at a chance
use of food banks has risen by 73 per national import. And, crucially, these to buy the trappings of western life —
cent. Government cuts to welfare pay- characters have dignity: they are not trainers, blenders, karaoke machines —
ments and local councils have hit the just victims, but ordinary, messy people and we see a huge tragedy unfolding.
poorest hardest. pulling together a rough community of In the late 1980s, local governments
A columnist can describe the impact support. This is a deeply moving and established for-profit blood plasma col-
of that; a dramatist can show you. In compassionate play about basic human lection centres in rural China. Success
Faith, Hope and Charity, as in the two ear- kindness and the significance to us all of bred rapid growth — and with it unsafe
lier parts of his austerity trilogy (Beyond the fabric of society. AAAAE practices. Again, Ya-Chu Cowhig peers
Caring, about zero-hours contracts, and In Faith, Hope and Charity we never behind statistics to unpick the queasy
Love, about homelessness), Zeldin see the figures of authority making mix of pressure, fear and greed that led
invites you into the world of one small the decisions or those implementing to contaminated blood being traded and
group of people living within this them — we only see the people living the spread of HIV. At the heart of her
threadbare system. The result is often with those decisions. Frances Ya-Chu play is Yin Yin, based on the real-life
surprisingly funny — one of the hall- Cowhig, in The King of Hell’s Palace (at whistleblower Dr Wang Shuping (who
marks of Zeldin’s plays — but ultimately the Hampstead Theatre), takes a very now lives in the US), an expert in infec-
enraging and moving. different approach. tious diseases who tries to alert the
We are in a church-hall-become- In unpacking the true story of the authorities to the unfolding disaster.
community centre where volunteer spread of HIV in 1990s China, she cre- It’s great to see such an ambitious play
Hazel (a superb, understated perform- ates an epic drama and a panoramic opening Roxana Silbert’s inaugural sea-
ance from Cecilia Noble) cooks a free son as artistic director here. That very
weekly lunch from food bank dona- ambition, however, holds the play back
tions, followed by a choir session for to some extent. In covering so much
anyone willing to sing. The very fabric of ground, it often sketches in characters
Natasha Jenkins’ set tells its own story: and relies on chunks of exposition-
the utilitarian furniture; the tired decor; heavy dialogue to move the story along.
the abandoned instruments that speak A versatile cast double up impressively
of a bygone era. (neatly emphasising the fact that the
Zeldin embraces the audience in this separate worlds depicted are in fact
world, leaving the houselights on intertwined), but it’s hard for them to
throughout and sending characters to find any real subtlety in their charac-
sit alongside the spectators from time to ters. Even so, this is a gripping and
time. Former prime minister David sobering story, pinned down in Michael
Cameron famously said of austerity, Boyd’s fluid production by a perform-
“We’re all in this together”: a statement ance of quiet integrity from Celeste Den
that this show disproves while at the as Yin Yin. AAAEE
same time making it briefly the case.
There is a rough story arc: the hall’s ‘Faith, Hope and Charity’ to October 12
chequered life (itself a mini social his- ‘The King
tory) is about to take a new turn — with Ambitious: Tuyen Do in ‘The King of Hell’s Palace’ to October 12
the council unable to pay for repairs, it of Hell’s Palace’
Friday 20 September 2019 ★ FINANCIAL TIMES 11


Its content-driven subscriber model has served it well despite accumulating high levels of debt. But with
a string of wealthy rivals entering the market, the streaming service is beginning to look vulnerable.
By Anna Nicolaou and Fan Fei

n a sunny midsummer
weekend in Los Angeles,
Netflix turned the Santa
Monica pier — one of the
city’s busiest tourist desti-

How will the Netflix story end?

nations — into a three-dimensional
marketing blitz, transforming it into the
fictional 1980s Indiana town where its
hit show Stranger Things is set. The 110-
year-old structures were dressed up to
mimic the show’s location; the Ferris
wheel was flashing eerie red lights over
the Pacific Ocean. The night before,
there had been a full marching band for
a lavish premiere party.
The marketing push illustrated how
critical the show is to the subscription-
reliant digital streaming service. The
July 4 arrival of the third series of
Stranger Things was the “biggest content
drop” of 2019 for Netflix, says Bernstein
analyst Todd Juenger. “If any one piece
of content would make a difference on
[subscriber additions], that should be
the one,” he adds.
He was right. Global subscriber num-
bers spiked in the first two weeks of July.
Unfortunately for Netflix it was two
weeks too late.
In the quarter to the end of June the
company lost subscribers in the US —
126,000 of them — for the first time
since 2011. Equally worrying, outside
the US the company signed up only
2.8m subscribers — about half of what
Netflix had predicted. The market
wiped $17bn off Netflix’s stock value
overnight, emphasising the brutal cor-
relation between new subscribers and
stock market value.
The company is predicting 7m new
subscribers in the third quarter. But the
dramatic fall in the second quarter —
even before the arrival of greater com-
petition from the likes of Apple later this
year — has cast doubt over whether the
company that successfully took on the
Hollywood hierarchy is as invincible as
it previously seemed.
“The next best thing to success in Hol- Never-ending costs $13 a month. Apple will charge $5 a banker. “For the next year, Netflix was idiot in Economics 101 can tell you that’s Notice, a Dwayne Johnson action film. A
lywood is schadenfreude,” says a senior blockbuster? month and Disney $7 a month for their gobbling up everything . . .[it became] not a good proposition,” he says, adding few weeks later, it signed a $200m deal
executive at an independent film studio Netflix’s global services. ‘the only game in town’.” that there is “no real precedent for with the Game of Thrones creators for
who has worked with Netflix on TV subscriber Traditionally Netflix’s strategy has On occasions the streaming service this . . . it’s kind of weirdly new”. future productions.
projects. “There is no better sport. It numbers spiked been to outspend rivals, but it may have offered between 30 and 50 per cent Most of that growth in TV series has Interactive
might even eclipse your own success.” in the first two met its match in Apple, the second-rich- higher prices than competitors such as come from the streaming services, pre- What will Netflix Streaming faith
Wall Street is now seeking evidence as weeks of July est company in the world. Two years ago HBO, Showtime and Starz, according to dominantly Netflix. Some of Holly- be worth in Netflix thrived during a period of easy
coming years?
to whether this miss was a blip or a after the release Netflix was caught up in a bidding war people familiar with these deals. The wood’s most talented executives and Calculate it for money and a stock market rally. But
trend. The stock market has become of the latest with the iPhone maker for The Morning structure of them also stood out. While creatives have in recent years been yourself at: recessionary fears have roiled markets
“addicted” to Netflix’s subscriber series of Show, a comedy-drama television series traditional networks typically paid on lured by the company from other stu-
recently, and critics believe that a credit
growth, says Aswath Damodaran, a ‘Stranger with a star-studded cast led by Jennifer delivery of the show, Netflix preferred dios, with the promise of eye-popping valuingnetflix crunch would dent its debt-driven
finance professor at New York univer- Things’, above. Aniston and Reese Witherspoon. to stretch payments out over time, pay cheques. model. The company admitted as much
sity's Stern School of Business who But the service “The deal kept going back and forth which was accepted because it was pay- But at the start of this year, whispers in its annual statement, warning that
closely follows the company. faces intense between Netflix and Apple,” says one ing such a premium, according to peo- spread of budget cuts. Marketing spend- “our streaming obligations include large
“For a decade, [Netflix has] spent competition person involved in the talks. Ultimately ple familiar with the deals. ing was trimmed to make more space multiyear commitments”, and that “as a
more and more money on content to get from the likes of the producers decided to sell it to Apple This turned out to be an effective result we may be unable to react to any
users and increase market capitalisa- Apple TV, right for more than $300m, in part because liquidity strategy because Netflix’s debt downturn in the economy . . . by reduc-
tion, and it worked,” he says. “But the they felt the iPhone maker would give it and liabilities are spread out over years, ing our obligations in the near term”.
question is: how do you get off this a bigger marketing push. and much of it is not on the balance Analysts and investors still believe in
treadmill? At some point spending 75 “On Netflix it would be one of their sheet but rather listed as “contractual the Netflix model. More than 80 per cent
per cent of every dollar on content won’t many great shows. But on Apple it obligations”. In addition to its $10.4bn in of stock analysts rate the company as a
be sustainable. The next year is going to would be the first big marquee show on long-term debt, at the end of last year buy. Even after the loss of subscribers in
be the big challenge.” its new service,” says the person. Netflix also owed another $19bn in obli- the second quarter, Ben Swinburne,
Despite this, several former Netflix gations and an additional $2bn-$5bn in head of media research at Morgan
Screen revolutionaries employees say there is little concern “unknown” spending — money commit- Stanley, says Netflix is still on course for
Netflix spearheaded a streaming revo- internally about the looming competi- ted over the next five years to pay for a record year of subscriber additions.
lution that changed the way we watch tion. “There was never any fear that new shows, and to license the rights to Analysts, on average, project that
TV and films. As cable TV lost subscrib- we’re in trouble,” says one former mar- existing TV and movies over multiyear cash flow will break even in 2023 as sub-
ers, Netflix gained them, putting it in a keting executive, who left the company contracts. scribers and margins improve. “They’re
category with Facebook, Amazon and in the spring. “Every quarter felt like a In the meantime rival streaming serv- balancing growth versus investment
Google as one of the adored US tech year in which Disney and Fox weren’t in ices such as Hulu, Amazon and Apple and we understand that. It’s quite
stocks that led a historic bull market.
The company spends more than 70
‘We have the game. The feeling was that we are
leap years ahead. And it’s kind of true.”
have become more aggressive in acquir-
ing content, giving producers options for Netflix’s content budget. “You would
expensive to create so much content,”
says S&P analyst Jawad Hussain. How-
per cent of revenues on content. Ana- [doubled Wooing the producers
beyond Netflix. And bankers are begin- hear it a lot in conversations and in $10.4bn ever, he warns: “In 2020, if we don’t see a
lysts estimate that would give it a budget ning to question whether Netflix will meetings. Money needed to be shifted material improvement in cash flow defi-
of more than $15bn this year — more the number Netflix first invaded US living rooms need to change its funding model to con- into tent pole [blockbuster] films,” says
Netflix’s long-term
debt at the end of cit, that would be a worrying sign.”
than any other media company. Yet Net- of series] with its video streaming in 2007. But it tinue winning projects because Apple, one former executive who left this sum- 2018. It also owes
$19bn in ‘contractual
Mr Hussain expects Netflix to issue at
flix projects it will spend $3.5bn more would take another six years before it Amazon and Hulu pay on delivery. mer. Netflix has also sliced its budget for least $3bn in debt next year to comforta-
than it will generate in cash in 2019, from seven made a big splash with its own shows. The streaming wars have spawned a direct digital advertising of films.
obligations’ and has
$2bn-$5bn set aside bly cover its costs.
while promising that this mismatch will The company paid $100m for two sea- phenomenon known as “Peak TV”, with Netflix declined to comment, but It does have levers that it can pull.
narrow over time.
years ago, sons of the political thriller House of bankers saying there has not been as someone close to it says the company is
for new shows
More than 70 per cent of its long-term
This rate of cash burn means the com- and we Cards, which debuted in 2013 to wide- much capital in Hollywood since the experimenting with its promotional $400m debt is not due for at least five years,
pany has to repeatedly tap debt markets spread acclaim, putting Netflix on the mid-2000s, when private equity firms strategy and plans are likely to change which in theory would give it time to
to pay for its content and make other haven’t map with audiences and Hollywood. were jumping to finance feature films. with the imminent arrival of a new chief
In deals signed with
the producers of adjust its spending if there were to be a
debt repayments. It relies on the faith of grown the House of Cards was instructive for how But some observers believe this is not marketing officer, Jackie Lee-Joe, who Game of Thrones downturn. However, a pullback on con-
investors to fuel the machine, studi- Netflix would approach deals for years sustainable. “Five years from now, there joined from BBC Studios. and to make the film tent also runs the risk of losing subscrib-
ously raising more junk-rated debt audience at to come. The strategy was to spend big will not be as many TV series being When it comes to content, however, Red Action ers — Netflix blamed its second quarter
roughly every six months to help to outbid rivals, usually committing to made, I promise you,” says Jonathan there is little evidence that Netflix is numbers on a weak content slate.
finance its splurge on content. all. That’s full global rights for series without ask- Taplin, an Oscar-nominated film pro- tightening its purse strings. The week >80% Optimists point to the group’s global
Netflix has taken on the vast majority
of its $12bn in long-term debt in the past
not a good ing for a pilot. The deal “changed the
whole landscape for how TV was cre-
ducer. “We have [doubled the number
of series] from seven years ago, and we
before the announcement that it had
lost subscribers in the US, Netflix agreed
Stock analysts who
rate the company as
reach. It is betting its future on an
expansion outside the US, where it has
three years as it almost doubled its glo- proposition’ ated”, says one veteran Hollywood haven’t grown the audience at all. Any to spend about $200m to make Red a buy already attracted 60m subscribers. The
bal subscriber base to 150m. In an envi- company is investing heavily in content
ronment of historic low interest rates, Netflix spent big to outbid competitors, with debt quickly stacking up Investors are nervous after in places like India and Malaysia, with a
investors searching for yield have focus on local-language programming.
happily gobbled up Netflix bonds.
Liabilities ($bn) Stranger Friends contraction in US subscribers However, the economic prospects in
Many of the big legacy media compa- Selected Netflix commissions/purchases Things One-year renewal Change in paid US Netflix these territories are weaker. Netflix sub-
nies initially surrendered their cata- customers from previous share price scriptions in India start at the equiva-
2002 03 04 2005 06 07 08 09 2010 11 12 13 14 2015 16 17 2018 quarter (m)
logues to Netflix in return for royalty lent of $3 a month, compared with its
payments. But the streaming service, DVD rental era Streaming video era Red Notice 400 cheapest plan in the US which is three
anticipating that its rivals would fight film ($200m) times that, resulting in thinner margins
back, began building its own catalogue 30 By 2006, Netflix had over 6m It would take six years before the
compared with its US business.
subscribers and made a small profit company pushed into original Sense8 The
before these shows disappeared from its Marco Crown Current liabilities 2.5 Netflix most recently raised debt in
on nearly $1bn in annual revenue content
platform. 25 Polo 300 April to a rapturous reception, selling
“People wondered why they were Non-current $2.2bn in 10-year notes in an auction
House of Cards liabilities 2.0
paying so much, but in hindsight it now 20 (first original content commission: that was three times oversubscribed.
looks smart,” says a senior film and tele- $100m for first two seasons) Based on its previous schedules, it
vision banker. “They were building a Long-term debt 1.5 200 would next be expected to tap investors
15 Orange is the New Black
following [ahead of] an arms race.” in October.
Marvel TV series
Today Netflix faces an onslaught of 1.0 For now the stock market appears to
competition in the market it invented. Includes debt 100 be siding with the critics. Netflix’s
After years of false starts, Apple is plan- for content that shares have sunk further since its July
ning to launch a streaming service in 5 Off-balance will air in years 0.5 First drop in subscribers in slide, touching an eight-month low that
sheet liabilities its core market since 2011
November, as is Disney — with AT&T’s to come values the company at $127bn.
WarnerMedia and Comcast’s NBCUni- 0 0 0 “They have to reframe the story,” says
Q4 17 Q2 18 Q4 18
versal to follow early next year. After 2002 03 04 2005 06 07 08 09 2010 11 12 13 14 2015 16 17 2018 Q2 19 NYU’s Mr Damodaran. “If they have a
raising prices in the US earlier this year, Q3 17 Q1 18 Q3 18 Q1 19 couple more bad quarters, the market
Sources: CapitalIQ; FT research Sources: Bloomberg; Moffett Nathanson
a standard Netflix subscription now will tell the story for them.”
12 ★ FINANCIAL TIMES Friday 20 September 2019

Include daytime telephone number and full address
If you are not satisfied with the FT’s response to your complaint, you can appeal
to the FT Editorial Complaints Commissioner:

Stability is required for capitalism to thrive South Korea needs to

overcome its debt aversion
I view your editorial on South Korea
Everything Martin Wolf writes about climate change, demographic trends This stability has been lost. (September 19) as one of the fairer
rentier capitalism (The Big Read, and information technology that is Without it, the investment required assessments of its new fiscal policy.
“Saving capitalism from the rentiers”, disrupting the workplace, and conflicts to lift more boats is massively With this rather bold fiscal stimulus
September 18) looks to be on target, in places as different as Afghanistan, discouraged. So bankers and other package it is successfully avoiding the
but he misses one important factor Myanmar, Ukraine, Venezuela and financial wizards invest in short-term trap of doing “too little, too late” that
contributing to today’s suboptimal Yemen. activities with few broad social led, for example, to the “two lost
performance in the leading capitalist The post-second world war benefits. decades” in Japan. However, it cannot
FRIDAY 20 SEPTEMBER 2019 countries: uncertainty. political system produced a degree of Lex Rieffel pay enough heed to ensuring that the
The elites in these countries surely stability throughout the cold war era Non-resident Senior Fellow, money is spent timely for the right
bear some of the blame for this that was sufficient to provide Brookings Institution, people and in the right place for
uncertainty, but the bigger sources are confidence in long-term investment. Washington, DC, US maximum effect.
Fiscal policy can become even

Netanyahu’s winning Further pointers for

curbing the rentiers
The cattle industry cannot
keep us all carnivores
bolder, as and when deemed necessary.
It can also be supported by monetary
policy as the Bank of Korea still has a

streak may be over Martin Wolf’s excellent Big Read

(September 18) flags two factors
I refer to your article of September 17
regarding attempts by several US states
little room for a rate cut or two.
Strong public support is also crucial
for continuing confidently with a bold
fuelling rentier capitalism that merit to fence in the fast-growing alternative fiscal policy until a sure sign of
Israel needs government and leadership with a less divisive tone much greater concern — excessive meat industry (“US cattle states seek to recovery from slowdown is observed.
credit growth and the tax-deductibility rein in substitute meat labelling”). Koreans, however, believe that keeping
Israel’s second general election this of Palestinians embittered by dispos- of interest on debt when calculating What they are really doing is a fiscal debt low at or below 35 per cent
year has still to yield a conclusive session — a recipe former premiers corporate tax liabilities. promoting the alternative and of GDP is a golden rule and are thus
result. But it looks as though it may end Ehud Barak and Ehud Olmert have lik- Interest deductibility incentivises highlighting the growing redundancy of overly concerned that the stimulus
the winning streak of four-times prime ened to an apartheid state that would excessive leverage, which while their cattle and chicken industries. package will make the nation’s debt out
minister Benjamin Netanyahu, whose squander Israel’s legitimacy. boosting share prices that determine a The surest sign of a new product’s of control. Your editorial therefore
ever more desperate attempts to cling A Blue and White-led coalition, with substantial portion of executive substitutability for existing products is offers some peace of mind for Koreans
to power are poisoning public life in a Mr Gantz working towards what he compensation increases a company’s when incumbents try to have it who need to break free from the
deeply divided society. says is a “broad unity government”, is vulnerability to business downturns. banned, relabelled or heavily preoccupation that “debt is bad”.
Mr Netanyahu’s rightwing Likud likely not so much to change policy as Excessive leverage has been further regulated, or otherwise work hard to I hope Germany will duly consider
party is marginally trailing the centre- to lower the volume of this debate. It incentivised by central banks driving stymie its market entry. As with many your and my friendly advice because
right Blue and White coalition led by may prove less fissile and more stable interest rates to extremely low levels forms of attack, attempts to block new the negative spillovers to its neighbours
Benny Gantz, the former army chief. than the irredentist and religious right. across the entire yield curve. Negative ‘It’s all in Boris Johnson’s head’ competition are, on the surface, and around the world cannot be kept at
The prime minister and his far-right The far-right Yamina (Rightwards) rates make matters worse. displays of market strength but bay by its fiscal philosophy,
and ultraorthodox allies are well shy of party, for example, a Netanyahu ally To save capitalism from the rentiers, beneath the surface they can be nationalism, protectionism and
a majority in the Knesset, however. that won seven seats, split in three only policymakers must end tax-law percentage of GDP — and fiscal burden symptomatic of an underlying and unilateralism.
Israel’s president, Reuven Rivlin, may an hour after the polls closed. favouritism of debt over equity while are at all-time highs, with taxes rising perhaps fundamental weakness — ie Kyungjin Song
give Mr Gantz the first shot at assem- A broad coalition, particularly with central bankers must become more (from €39bn in 2015 to €44bn in 2018) inferior product. Seoul, South Korea
bling a government. That would put in the militantly secular Mr Lieberman as cognisant of the economic distortions faster than meagre salaries. Slovakians, Plant-based burgers taste just as
play the plan floated by Avigdor Lie- kingmaker instead of the influential caused by their interest rate Estonians and Lithuanians have higher good, are healthier for people and are A climate Comsat could
berman, former foreign and defence bloc vote of the religious right, would manipulations. purchasing power than the Portuguese much healthier for the planet. Over the
minister, for a grand coalition enfold- curb the religious fundamentalism and Bert Ely since 2018, according to Eurostat, long term, I expect the cattle industry serve the rest of us
ing Blue and White, a Likud somehow subsidised privileges of the ultraortho- Ely & Company Inc, while Portugal is dropping, to have about as much success keeping Bill Gates tells us to stop wasting our
shorn of Mr Netanyahu, and his own dox. The exclusion of the far-right Alexandria, VA, US approaching the EU’s lowest. Projected us all carnivores as the tobacco time eliminating fossil fuel stocks from
secular rightist Yisrael Beiteinu (Israel would also scupper plans to weaken the growth in 2019 gross domestic product industry has had keeping us all hooked our portfolios (September 18). We
Our Home) party. judiciary, an ambition of Yamina Portuguese deserve a clear is 1.7 per cent. In 2018 growth was half on cigarettes. should, instead, invest our money in
Mr Netanyahu will appear early next leader Ayelet Shaked, Mr Netanyahu’s that of some Balkans and Baltic Patrick Neill the disruptive technologies that will
month before Israel’s attorney-general, former justice minister. vision of country’s future nations. Portugal is Eurostat’s second Bahrain solve our problems.
who will decide whether to indict him Another significant outcome is the The possibility of a 0 per cent budget least appealing country to immigrants, All well and good for Bill Gates. He
on three charges of corruption. Not just performance of the unified Arab Joint deficit in Portugal shines so “bright” worse than Poland or Romania. High HKEX established Hong and his fellow billionaires have access
his political future but his immunity List, which came third in this election that it looks like “hope” for Europe, emigration masks unemployment. to all those private placements that
from prosecution is at stake. He has no — with Arab voters goaded to the polls such is the FT’s judgment on the Other than riding on the fading Kong as a financial centre finance disruptive technologies, and I
plans to go quietly. by the prime minister’s shrill demoni- “sound policies” of the present improvements, ECB debt, housing and Philip Bowring’s letter in the Financial suspect inventors go to them directly.
Continuing his campaign to vilify sation. The Arab bloc will almost cer- government in Lisbon (FT View, tourism temporarily diverted from Times on September 18 blaming recent Given the importance of climate
Israel’s Arab citizens, a fifth of the pop- tainly stay out of government, as it August 26). You should not be fooled north Africa, the government has unrest in Hong Kong on the failures of change, the need to get everyone on
ulation, as fifth columnists trying to always has, but could now win a stake twice. The FT once praised former neither the vision nor reforms to avoid Hong Kong Stock Exchanges and board and involved, and the huge
destroy the Jewish state, he now says — in governance — with the possibility prime minister José Sócrates in 2007, decline. Yet, some are tricked by the Clearing could not be further from the amount of money required, I would
without any evidence — that Arab vote- Ayman Odeh, the Joint List leader, with his then minister of internal possibility of a 0 per cent deficit, truth. suggest a different model: state-
fraud stole the election and may have might even become the first Arab administration António Costa, for the fuelled by a net negative 1.2 per cent of HKEX has played a pivotal role in sponsored climate funds in which
cost Likud two seats. This is dangerous leader of the opposition in the Knesset. low deficit, assuming “reforms” would GDP in public investment in 2016 (still shaping the region’s capital markets. It everyone, including small investors,
stuff. The last votes, however, are still be made. The reforms were eventually the EU’s worst) according to the IMF, has helped to bring prosperity to Hong could invest regularly. A climate
Mr Netanyahu has become a liability being counted in a very tight contest. implemented after the 2011 bailout by jeopardising long-term financing, the Kong and, underpinned by the rule of Comsat, maybe? I could buy the shares
to Israel and its democracy. As well as This is not a resounding defeat for Mr the European troika. safety of infrastructure and public law, it has made Hong Kong Asia’s for my grandchildren, and tell them
his Arab-baiting before the election, he Netanyahu. With the raucousness of Portuguese suffering was rewarded: health. We, the industrious Portuguese premier financial centre. that, like Bill Gates, I did my part.
pledged to annex all Jewish settlements the election over, the back room deal- economic indicators turned positive in people, demand accountability for As a former HKEX government- Leonard Hyman
and the Jordan Valley in the occupied ing and jostling for power is just start- 2015, vices seemed gone and reforms illusionist politicians squandering our appointed independent non-executive Sleepy Hollow, NY, US
West Bank. That would end any hope of ing. It may all hang on whether the sustainable. Then came Mr Costa who, country. director I was always extremely proud
an independent Palestinian state, and attorney-general decides to proceed despite losing elections to the Pedro Caetano of the way the company embraced Euro’s worth has not been
saddle future Israeli generations with with prosecuting Israel’s longest- government which oversaw reforms, Abingdon, Oxfordshire, UK integrity, neutrality and the highest
the permanent subjugation of millions serving leader, Benjamin Netanyahu. became prime minister by purging pro- standards of governance. At no time sold to German savers
reformists in his Socialist party. He Preparing for the during my tenure was my own While I agree with Philip Stephens’
brought to cabinet former colleagues of independence challenged, nor was it argument (Opinion, September 13)
Mr Sócrates, who is facing charges of intergalactic delegation possible during my service to discern that Germany is the biggest beneficiary
corruption but denies any wrongdoing, Anjana Ahuja states that contacting who on the board were government or of European integration and the euro, I
plus their spouses and children. Such extraterrestrial aliens would be a shareholder approved directors. suspect that German industry and its

Eurozone banks need to clan politics undermined reforms,

reverting to a business-as-usual
environment, with troika reforms
massive mistake (Opinion, September
17), claiming that “the history of
explorers pinpointing distant lands is
HKEX’s recent move to buy LSE
Group reflects Hong Kong’s continued
international ambitions and as
shareholders have benefited more
directly from membership of the euro
(and its more competitive exchange

be part of the solution requiring qualifications and scrutiny in

government appointments
undermined. The unskilled posed as
one of plunder and conquest”. We have
literally broadcast our existence by
radio and television to the nearby stars
geopolitics becomes evermore
challenging what we need is more
connectivity, more neutrality and less
rate compared to a hypothetical D-
Mark which would have risen on the
back of German exports) and know it,
“industrial managers”. Incompetence and planets. Let’s face it, any alien ill-informed hyperbole. whereas successive German
If the ECB is serious about stimulus, it must consider lenders’ profits shows; in 2017 the area burnt by forest civilisation in our vicinity with the John Harrison governments have added to Helmut
fires was higher than that of the rest of technological ability and political will Former Independent Non-Executive Kohl’s “original sin” by failing to
Mario Draghi’s swansong decision last tries with negative rates, the ECB is to Europe combined, and 114 people died. to travel here is already on its way, and Director, HKEX, explain persuasively to German
week to revive the European Central exempt a tier of deposits — six times The public debt — €252bn in May we should at least be ready for them. Independent Non-Executive Director, workers and savers the euro’s benefits.
Bank’s quantitative easing programme more than those held for reserve 2019, still the EU’s third worst despite Peter Slessenger Cathay Pacific Airways, Stephen C Capsaskis
and cut the interest paid to negative 0.5 requirements. They will earn zero tiny improvements if measured in Reading, Berkshire, UK Hong Kong Athens, Greece
per cent had been widely feared by the instead. Previously only the reserves
eurozone’s beleaguered banks. escaped the negative rate.
No wonder. Lenders hold about €2tn Bankers dispute how much benefit
of deposits at the ECB — and every 0.1
per cent move further into negative
this “tiering” will bring. In Deutsche’s
case an estimated one-third of its Indigenous I don’t have a head for heights, but
even if I did, I wouldn’t climb Uluru.
And in recent years, less than a fifth of
tourists have chosen to clamber up
expectancy 10 years lower and
unemployment rates three times
territory wipes €2bn off their income.
The 6.1 per cent return on equity of the
€100bn deposits will qualify for the
zero per cent dispensation. The rest are people assert The majestic, rust-coloured sandstone
rock, a symbol of Australia, is a sacred
Uluru, most instead opting to walk
around it or take an educational or
higher than the rest of the population.
Successive governments have failed
eurozone banks last year (less than half
the tally of US rivals) masks particular
weakness in the region’s largest econ-
subjected to the more penal negative
rate — and now with an open-ended
timeframe. The ECB previously pro-
their rights site for the Anangu — the local
Aboriginal people who have
advocated a climbing ban for decades.
storytelling tour.
But not all visitors are sensitive to
traditional owners’ concerns. A
to recognise Aboriginal people in the
constitution, a document that enables
states to discriminate against
omy, Germany, where banks made just
2.4 per cent. Only Greece was weaker.
jected that rates would turn positive in
2022. Morgan Stanley estimates a
over Uluru Ahead of a permanent climbing
ban coming into force next month,
French-born exotic dancer performed
a striptease on the rock in 2010, and
indigenous people on the basis of race.
And when indigenous leaders
About 95 per cent of the banks’ boost to average eurozone bank earn- there has been a jump in the Sam Newman, an Australian sports gathered at Uluru in May 2017 to
aggregate deposits with the ECB are ings of 2 per cent — hardly enough to number of people seeking an personality, hit a golf ball off the top propose modest reform proposals that
technically surplus to reserve require- revive fortunes. A targeted pile of new Instagram moment on the summit. in the same year. Tourists even relieve they had worked on for years, it took
ments — the amount they must keep cheap ECB funding for lending, the so- Recent photographs showing long themselves on Uluru, causing the Conservative government just
with the central bank for safety rea- called TLTRO3 programme, is helpful. lines of visitors snaking up the sides pollution and erosion. three months to reject them.
sons. When interest rates are low or But it does little for banks in big econo- of Uluru have raised unsettling Pauline Hanson, the former chip This is why many Aboriginal people
negative, it seems illogical to hold more mies with plentiful funding. questions about the cultural shop owner turned far-right politician, view the climbing ban as an important
than the bare minimum. Eurozone Understandably, banks are clamour- insensitivity of foreign tourists and visited Uluru last month to warn the act of self-determination — just as the
banks have little choice. A separate set ing for more mitigation. Raising the the failure of some white ban would cost jobs and likened the formal handing back of Uluru to the
of liquidity regulations — set by global six-times multiple of reserves that are Australians to respect the wishes of decision to closing Bondi beach. But Anganu in 1985 represented a high
rulemakers and overseen by the ECB’s accorded relief from negative rates is indigenous people. her efforts to stoke opposition flopped point for their struggle for land rights.
prudential arm — prescribe how much one idea. Switzerland has just raised its “It is an extremely important place, when she was filmed getting stuck There are better ways to experience
cash or other liquid funding a bank exemption from 20 to 25 times. In not a playground or theme park like while attempting to climb the rock. outback Australia and its indigenous
must hold on its balance sheet. Japan, 95 per cent of central bank Disneyland,” said Sammy Wilson, an Safety is another concern of the culture than climbing all over it. By
In the good old days of “normal” deposits are shielded. Banks are also Aboriginal elder, when the ban was Anangu. Since the 1950s, at least 36 far, the most interesting experiences
rates, a bank might have held a large
chunk of that in domestic government
lobbying to reduce the equity capital
they must attribute to certain kinds of Australia announced two years ago.
“If I travel to another country and
people have died on the rock, which
stands taller than the Eiffel Tower and
I’ve had in Australia have been while
learning about Aboriginal culture
bonds. In the inverted world of QE, it is
more economical for a French or Ger-
loans, particularly those granted to
small and medium-sized businesses. Notebook there is a sacred site, an area of
restricted access, I don’t enter or
is treacherous to climb due to the
extreme heat in Australia’s “Red
during visits to Kakadu National Park
or Sydney’s Yabun Festival. Foraging
man bank to prefer the ECB’s negative This is partly about self-interest, climb it, I respect it.” Centre”. for bush tucker with an Aboriginal
interest rate of 0.5 per cent to a minus which the ECB should not indulge. It by Jamie Smyth Uluru carries great spiritual and In a nation where the voices of guide, who can serve up a delicious
0.68 per cent yield on a two-year must weigh issues of safety and sound- cultural significance for the Anangu Aboriginal people are rarely heard, meal of green ants and barramundi
French Treasury or minus 0.73 per cent ness: capital requirements are risk- people, who are part of the world’s the decision by the Uluru-Kata Tjuta (Asian sea bass), is just one of the
on a Bund. The fact that BNP Paribas based for a reason. But there is a genu- oldest surviving civilisation, which National Park board to implement the highlights available to travellers.
and Deutsche Bank are by far the big- ine question of balance here. If the ECB dates back 60,000 years. It continues request of the traditional owners for a Climbing boots are not required to
gest depositors at the ECB (holding is serious about stimulating the econ- to be used for traditional ceremonies climbing ban is a symbolic moment. experience the wonders of Australia’s
€114bn and €100bn respectively, omy — the very reason it relaunched by Aboriginal people, even though it is A legacy of land dispossession and indigenous culture. An open mind and
according to analysts at Morgan QE — then accompanying that policy one of the nation’s most popular the forced removal of children from respect for the world’s oldest
Stanley) partly reflects their scale but with measures to get the banks work- tourist attractions. aboriginal families have taken a heavy civilisation is all that is required for
also how unappealing their domestic ing as part of the stimulus effort is logi- Signs at the rock ask tourists to toll on indigenous communities. the trip of a lifetime.
government debt now is. cal. For too long the eurozone’s banks respect the wishes of traditional Aboriginal people are among the most
There was a sop in Mr Draghi’s have been part of the problem, rather owners and not climb the structure. marginalised in society, with life
announcement. Emulating other coun- than part of the solution.
Friday 20 September 2019 ★ FINANCIAL TIMES 13

Repo markets mystery reminds us we are flying blind Something
is seriously
night borrowing rates in the repurchase
or repo market, where traders do short-
cided with Monday’s $54bn settlement
of Treasury coupons, creating more
machine mesh. That is partly because
“money markets have been and are now
presumed to be sufficient to absorb
unexpected market shocks.
awry in the
term deals to swap Treasuries for cash,
suddenly rose to 10 per cent, up from
their normal levels of 2-2.5 per cent.
demand for cash. The resulting squeeze
may have been exacerbated by an addi-
tional dash for funding among players
changing quickly in response to regula-
tory, technology and business model
incentives”, as Mr Potter put it.
This calculation was always a guess,
not scientific projection, since the Fed
has never before unleashed QE — or
world of work
Repo rates declined after the New hit by the unexpected surge in oil prices A decade of extraordinary monetary tried to unwind it. And, as Lorie Logan
York branch of the Fed pumped $75bn due to the drone strike in Saudi Arabia. policy experiments has left the system of the New York Fed said in 2017, you
into the markets for three days running. The other bit of good news is that Fed badly distorted. Thus the Fed is now like only truly know that a reserve buffer has EMPLOYMENT
But conditions remain jittery. After all, officials seem ready to offset these tem- a pilot flying a plane with an engine that run out when rates spike.

hat the heck happened? the last time we experienced this scale of porary problems by employing “flexi- has been stealthily remodelled. Neither The best guess now is that $300bn is
That is a question many gyrations in repo rates was the 2008 the passengers nor the pilot knows how not big enough. “The Fed is learning as it
market participants financial crisis. the engine’s shifting cogs might affect goes,” explains BMO Capital Markets. Coyle
are asking about events
this week at the US
So should investors worry? Yes — and
no. One piece of good news about this
The more QE reshapes the controls during a wave of turbu-
lence, because there is little historical
Although Fed officials will probably
introduce new tools to create additional
Federal Reserve. week’s events is that the movements global finance, the greater precedent. safety buffers, JPMorgan fears that “this
the risk that the machine

But the confusion is not due to the were not sparked by the same issues in Take the matter of bank reserves. sort of volatility will only persist” given he California Senate passed
issue that was supposed to grab head- the 2008 panic, namely a fear of finan- Quantitative easing earlier this decade all the structural changes under way. a law last week requiring
lines — namely Wednesday’s announce- cial collapse. Instead, the trigger unexpectedly misfires caused an explosion in the level of This is unnerving. But the bigger platforms such as Uber and
ment on interest rates. That storyline is appears to be due to “temporary mis- reserves that private banks place on point that investors need to understand Lyft to treat their drivers as
clear (ish): although the Fed cut its core matches in the demand for funding and bility when needed”, as Simon Potter, deposit with the Fed, hitting a peak of is this: the more that QE (and its partial employees. Efforts in legis-
policy rate by 25 basis points, officials availability of cash”, as JPMorgan then a senior official at the New York $2.9tn in 2014. Since the Fed started reversal) reshapes global finance, the latures and courts in other states and
also signalled their reluctance to cut explained to its clients in a note. Fed, noted last year. This nimble and rolling back QE a couple of years ago, greater the risk that the cogs in the countries are under way to achieve the
rates again too soon while growth is More specifically, American compa- creative approach is another contrast to those reserves have shrunk to $1.3tn as machine unexpectedly misfire. That is same result.
strong. That is sensible, predictable and nies typically need around $100bn of 2008 — and very welcome. of this summer. Until recently, Fed offi- no reason to panic. But central bank In the UK, a report by Robert Skidel-
readily understandable. cash to pay tax bills on September 15, But here is the bad news: the fact that cials thought that was enough cash to pilots — like investors — are learning on sky, commissioned by Labour’s shadow
Instead the development that is sow- which prompts big withdrawals from a “temporary” cash squeeze created so keep the system running smoothly. the job. Better hope they stay com- chancellor, John McDonnell, recom-
ing shock and confusion is related to the the money market funds that are an much drama shows that neither the Fed Although $1tn in reserves are tied up by pletely alert. mended a government job guarantee
normally arcane matter of financial increasingly crucial pillar of the repo nor investors completely understand regulatory and liquidity requirements, and a 35-hour week in the public sector
plumbing. At the start of the week, over- markets. This year, this outflow coin- how the cogs of the modern financial the remaining $300bn “buffer” was as a lever for improving conditions in
private sector employment.
It is widely recognised that something
is fundamentally awry with the world of
work. Some people are well-paid — too

Johnson’s lies
well-paid, even — and have intrinsically
rewarding work, yet have to work long
hours with never-off email. Others have
too-long hours in badly paid casualised
work, not just on digital platforms and
in their warehouses but also in shops

plunge Britain and fast food outlets, as cleaners and

minicab drivers, and in some “white col-
lar” sectors such as the media. Yet oth-
ers have too little work, or short-term
contracts. Then there is the looming

into a morass
insecurity posed by automation.
Technology, deregulation, the decline
of unions, and the profound reshaping
of business all lie behind this unsatisfac-
tory state of affairs. And it seems inevi-
table that policymakers will respond,
given that the provision of some mini-
mum economic security is at the core of
between mendacity and integrity. Such the modern state.
POLITICS is the dark morass into which Mr John- One challenge for policy is the
son’s government has fallen in pursuit of absence of the statistics that would paint
Philip his obsession to meet the Brexit dead-
line. When MPs were sent home from
Stephens Westminster for five weeks until mid-
October, the official story was that the
Technology, the decline of
government needed time to draw up a unions and the reshaping
new legislative programme. Three sen- of business all lie behind

hat will she be thinking ior Scottish judges concluded that this
when he next tips up was deliberate subterfuge: Mr Johnson’s this state of affairs
at Buckingham Palace? real objective was to frustrate the efforts
Queen Elizabeth II is of MPs to block his path to a no-deal Court to argue that the prorogation was mendacious, and borderline racist, Dry constitutional debates about the a detailed portrait of the modern labour
Britain’s longest reign- Brexit. The suspension, the court ruled, an abuse of power. Mr Cameron, who claim that just about the entire popula- respective authority of the government, market. In the UK, the number of peo-
ing monarch. As titular head of state, was therefore unlawful. bears much of the responsibility for the tion of Turkey would soon be heading parliament and the judiciary matter. ple on zero-hours contracts and the
she has granted regular weekly “audi- The High Court in London took a dif- present mess, due to his reckless deci- for Britain if it voted to remain in the EU. And the frantic back-stabbing among number describing themselves as
ences” to her prime ministers for 67 ferent tack. It declined to comment one sion to call the EU referendum in 2016, Mr Gove has since been given the job of senior Tories speaks volumes about the agency workers have both increased
years. There have been 14 in all — the way or the other on whether Mr Johnson has used the publication of his memoirs overseeing Brexit preparations. Con- truly sorry condition of British Conserv- substantially during the past decade,
first, Winston Churchill, the latest, Boris had told the truth. Instead, the English to launch a series of broadsides against temptuous in 2016 of the views of atism. Neither should obscure the big- although they amount together to about
Johnson. The Queen has not divulged a judges said they were being asked to Mr Johnson’s habitual lying. “experts” worried about the costs of ger picture of the damage being inflicted 6 per cent of the workforce in employ-
word from these private encounters. determine matters beyond their compe- The present prime minister and Brexit, he is as dismissive now of advice on the nation’s democracy. ment. Self-employment accounts for a
Now she hears that, just two months in tence. It was not for the court to decide his fellow Brexiter Michael Gove, Mr from his officials about the serious risks The lying reveals a profound disdain further 15 per cent of the total.
office, Mr Johnson has been lying to her. on a matter that they deemed to be Cameron charges, quite simply “left of a no-deal departure from the EU. for the traditions, institutions and laws However, it is not clear that all those
It is a fair guess that one or two others essentially political. the truth at home” during the 2016 At this point, some may be tempted to that sustain Britain’s parliamentary working via digital platforms or with
among the 14 may have occasionally It has been left to the UK Supreme referendum campaign. Back then the shrug. Put lying to the Queen to one side ecosystem. Whitehall officials say rules agencies would record themselves in the
shaded the truth. I wonder if Anthony Court to make a definitive ruling. The three politicians were pals. Mr Cameron and fear and loathing among politicians of proper behaviour are simply torn up. categories captured by the statistics.
Eden was entirely honest about the Suez prime minister’s desperate hope is that now says Mr Johnson never even in the same party is hardly new. As for “We can do as we please”, runs the Nor do we know how many people have
debacle? Mr Johnson, though, has put a majority of the 11 chief justices take believed in Brexit. He embraced the Mr Johnson’s lies, well, no one trusts pol- refrain in Downing Street. second jobs, or are working more or
himself in a class of his own. He stands the non-justiciable path set out by the Eurosceptic cause purely to advance his iticians. What matters is that the gov- Mr Johnson’s public refusal to say he fewer hours than they would like, or
charged by three senior judges with pre- English court. The damage has been consuming personal ambition by win- ernment gets on with Brexit, even if it will uphold the law in all circumstances how this affects younger people.
meditated deception in persuading the done. You will not find a soul in the long ning favour among Tory Brexiters. Mr means crashing out of the EU. underpins this contempt. If the govern- It is probably safe to say at least one-
Queen to suspend parliament so he can corridors of Whitehall who believes Gove, Mr Cameron adds, promoted the As for shutting down parliament, ment can cheat, it will; Mr Gove’s pref- quarter of the workforce is not in a tradi-
force through Britain’s departure from that the prime minister they are sworn well, MPs were obstructing what Brexit- erence for “listening to the people” over tional full-time and/or permanent job
the EU on October 31. to serve is telling the truth. ers have solemnly declared to be “the reasoned argument speaks to the same with an employer, and the proportion
This prime minister, of course, is no Two former Conservative prime min- There is not a soul in the will of the people”. This, of course, is tilt towards demagogy. Strip democracy could be higher among younger age
stranger to mendacity. But lying to Her isters — John Major and David Cameron just another falsehood. Of those who of trust, self-restraint and shared truths groups. The challenge is that so much
Majesty? Deceiving someone so widely — have joined those accusing Mr John- long corridors of Whitehall voted in the 2016 referendum, some and what remains is a majoritarianism government social policy — and so
respected around the world for her pro- son of seeking to suppress parliamen- who believes the prime 52 per cent backed Leave. Of those elig- of the mob. much collective organisation through
bity and commitment to public service? tary debate. Sir John is among those who ible to vote, the proportion was 37 per unions — is delivered through the tradi-
It is hard to think of a sharper collision made submissions to the Supreme minister is telling the truth cent — scarcely the will of the people. tional “job”. Although it has been clear
for more than 20 years that the social
means of giving people enough eco-
nomic security need to change, what we
have had instead is states and busi-

Reasons for moderate optimism about Greece nesses trying to pass the responsibility
to each other — with individual workers
caught in the middle.
Many governments have also been
increasing their reliance on conven-
highest level since 2000. Elections in party did not win a single seat in the July quality of Greek democracy depends on conditions are now improving. Domes- tional employment contracts for social
EUROPE July produced a comfortable parliamen- elections. So far from being an awkward more than regular free parliamentary tic private depositors, who withdrew policy delivery, such as limits on hours
tary majority for New Democracy, a partner for its EU and Nato allies, elections. No less important is the inde- their money in a panic when Syriza’s worked, health coverage, welfare bene-
Tony conservative party committed under Greece is rightly regarded as a pole of pendence of public institutions, such as early recklessness threatened to tip fits and so on. While unionisation has
Barber prime minister Kyriakos Mitsotakis to a
well-designed programme of economic
stability in the turbulent Balkans and
eastern Mediterranean.
the judiciary and central bank, which
came under pressure when Syriza held
Greece out of Europe’s currency union,
have returned some €12.3bn to the
declined in many countries, unions for
the most part have remained focused on
reform, fiscal responsibility and admin- It is important not to paint everything power. Likewise, Mr Mitsotakis must banks since the start of 2018. the status of the “job” in their campaign-
istrative modernisation. in rosy colours. Greece’s return to two- not relax in his efforts to overhaul the Mr Mitsotakis’s government has ing — hence the drive in California and
New Democracy’s victory repre- party politics is a positive development public sector, an area of concern to the made a promising start by announcing elsewhere to have non-standard jobs

en years ago Greece sented the delayed revenge of the Greek insofar as it avoids the kind of political foreign creditors and investors whose corporate tax cuts and other measures legally deemed to be standard jobs.
plunged into a debt crisis bourgeoisie against the Syriza party, support will be essential to drive for- aimed at improving the investment cli- Lord Skidelsky is right to argue that a
that threatened to sweep which came to power in January 2015 as ward Greece’s economic recovery. mate. These include going ahead with public sector job and conditions guaran-
away much of the political,
social and economic
the most radical leftist government seen
in a European democracy since the sec-
Victory for conservatives It is unfortunate that this recovery is
beginning just when the global economy
the long-delayed €8bn Hellinikon
project to redevelop the area around the
tee can shape private sector practice by
improving workers’ labour market
progress achieved after democracy ond world war. However, even critics of represents the delayed is running into headwinds. Even before former Athens international airport. options. However, the real need is for
replaced military dictatorship in 1974.
The economy shrank by a quarter,
Alexis Tsipras, Mr Mitsotakis’s prede-
cessor, ought to acknowledge that some
revenge of the bourgeoisie these clouds appeared on the horizon,
however, Greece was not rebounding
Provided that Mr Mitsotakis sticks to
his reform plans, Greece’s eurozone
some institutional innovation. This
could come from unions, seeking to
unemployment soared and Greece of the credit for Greece’s recovery goes against the radical left from the debt crisis with the vigour of creditors should offer a helping hand by enhance the bargaining power of gig
came close to crashing out of the euro- to the Syriza leader, who eventually other stricken eurozone economies lowering the targets for primary fiscal workers. It could involve new forms of
zone. The crisis tore at the fabric of soci- swallowed the medicine prescribed by fragmentation visible elsewhere in the such as Ireland, Portugal and Spain. One surpluses required of the government collective action, such as the sharing of
ety and demolished one of the two polit- Greece’s creditors. EU. However, Greece’s old two-party reason is that the Syriza government since the country left its third bailout salary information among Microsoft
ical parties that had alternated in power The most impressive aspect of system, which pitted New Democracy made too little progress in attracting programme last year. It is in everyone’s employees in a private Facebook group.
since the return of civilian rule. Greece’s return to stability is the resil- against the Pasok socialist party, was foreign direct investment and complet- interest that Greece should put itself on Change will come: the world of work is
Today, on the face of things, the emer- ience of its democracy. Many outsiders notorious for clientelism and corrup- ing the privatisation of state assets. a sustainable path of higher long-term not working for too many people. But it
gency is over and the outlook is bright. claimed, at the height of the crisis, that tion. It is vital that these deeper currents A second factor is the fragility of growth. A mutually reinforcing mix of will not take the shape of a return to the
The authorities have lifted capital con- Greece was at risk of succumbing to of Greek public life do not reproduce Greece’s banks. By the middle of this Greek reform and creditor assistance is past.
trols, imposed four years ago. Greece’s rightwing extremism and even becom- themselves in a system now dominated year, they were burdened with about the best way to get there.
10-year bond yield touched an all-time ing unmoored from the western alliance by New Democracy and Syriza. €85bn in non-performing loans. To The writer is Bennett Professor of Public
low in July. Consumer confidence is at its system. Yet the far-right Golden Dawn As in other European countries, the some extent, however, liquidity Policy at the University of Cambridge
14 ★ FINANCIAL TIMES Friday 20 September 2019

Brexit/City jobs: iffy on the Liffey

The number of London finance staff facing possible transfers to continental Europe has fallen since the UK’s
referendum on EU membership. Forecasts for job losses could prove over-pessimistic. But even small
reductions in the City could mean proportionately larger gains in rival finance hubs.

Twitter: @FTLex Jobs that could relocate from London to Europe Estimates of job losses
Number (’000)* Number (’000)

13 London Stock Exchange**

humbled tech giants WeWork, Uber EY**
Saudi Aramco IPO: and SoftBank. One way or another, the 12 Oliver Wyman upper bound Alibaba/Tencent:
squeeze wheeze same fate awaits Saudi Aramco. FT research information insurrection
Sometimes it is better to admit that 11 Oliver Wyman lower bound
Markets have a reputation for you were wrong than to compound 0 20 40 60 80 100 “Mustn’t pry” is not a phrase much
encouraging inequality. But the price your error. 10 Relocation destinations uttered by Chinese officials. They want
discovery mechanism is a great to add credit histories to their data on
leveller, in its way. Take Saudi Aramco, 9 Universal/investment banks/brokerages Private equity Chinese citizens. The real surprise is
the world’s largest oil company. The Wealth and asset managers Retail banks the refusal of Tencent and Alibaba to
Saudi government wants to list the
RingCentral: 8 Insurers and insurance brokerages FinTechs help. For investors, it is just another
group at a valuation of $2tn. Many hot lines Dublin
political complication to a previously
pundits — including Lex — have said 7 clean proposition: two enterprising
that is too high. A scheme to prove Strange jeopardy imperils the business Luxembourg tech companies exploiting the fast
them wrong looks doomed to failure. researched by a journalist using its 6 Frankfurt growth of the world’s largest nation.
Obstreperous foreign investors are product. Lex deployed RingCentral’s 2017 18 19 Paris The People’s Bank of China launched
unlikely to buy into a float at $2tn. internet phone service in an effort to * EY survey of announcements by companies moving or considering moving jobs
credit scoring agency Baihang last year
Saudi Aramco hopes wealthy local call this hot Californian start-up. to mainland Europe ** Euro clearing shift
Other with grand plans to overtake Tencent’s
families will be more accommodating. Following a recorded message, the line FT graphic Sources: EY Financial Services Brexit Tracker; FT research 0 10 20 30 40 and Alibaba’s platforms. Its aim was to
If these cornerstone investors bought went dead. Automation has its draw- rank 460m Chinese who lack formal
and held a small proportion of shares — backs. Countervailing advantages, Predicting Brexit is for mugs. The total that “could” relocate was still nears. Pessimistic projections of job credit histories. The two have declined
which would be listed but illiquid on including low costs, mean RingCentral London’s financial traders prefer only 7,000, according to its survey of losses could prove pertinent. Oliver to share loans data.
the Riyadh stock market — Saudi is thriving, even as some users fume. binary outcomes with ascribable 222 large financial services firms. That Wyman says its worst case could take The rebellious response is out of
leaders could claim their overcooked The group swaps computer-enabled probabilities. Prime minister Boris was even lower than the 12,500 years to transpire, and depends on character. Alibaba is helping build an
estimate was right all along. headsets for landlines. This is a Johnson says the UK will leave the EU foreseen six months after the 2016 political,regulatoryand tax decisions. Orwellian social credit system. This
Wealthy Saudis might consider it sensible switch — if calls get through. on October 31 “do or die”. But with or referendum, when hopes were high of a Staff may just be cut, not relocated. uses data to rank how obedient citizens
wise to participate — some spent an Many workers are mobile these days. without a deal? On good relations or super-soft Brexit in which cross-border Banks have awaited events before are. The government has Tencent on
enforced stay in a luxury hotel during a For $19.99 per employee per month, bad? Ipso facto, City job loss activities would scarcely be affected. committing. Bank of America Merrill the choke chain as represented by
tax shakedown in 2017. But the ploy is RingCentral offers voice, video and projections are equally perilous. What’s wrong with Frankfurt, Paris Lynch has been among the most Beijing’s approvals system for
a flawed one, for a couple of reasons. messaging services that can be routed Except maybe they will be less or Dublin? The city on the Liffey has engaged, adding 400 jobs in Paris. computer games. The resistance of
First, it would not raise much money, via smartphones or PCs. The cloud- dramatic than feared. been the top destination for banks For now EU clients can still choose to Tencent and Alibaba reflects heavy
at least by the gargantuan standards of based service is cheaper than on-site Back in 2016, consultants Oliver movingoperations,EY says. Frankfurt’s trade through London or Paris. The investment in credit scoring systems.
the Saudi oil industry. The kingdom hardware required for traditional Wyman suggested up to 75,000 job pocket-sized [river] “Main-hattan” former’s deeper financial market The PBoC shut these down by revoking
originally hoped to list 5 per cent of private branch exchange systems. losses in a worst-case scenario. Mark skyline has attracted investment liquidity makes for better pricing. their licences last year.
Saudi Aramco, totting up to $100bn, These can cost $1,000 per person. Carney, Bank of England governor, bankers. London’s scale means a small The latter is better for under- US data barons dream wistfully of
four times the size of a world-record Created by Vlad Shmunis, who is has quoted similar figures. loss of market share there can mean employed staff on long lunch breaks. the irresistible sales pitches they could
fundraising from Alibaba five years chief executive and chairman, Yesterday, however, consultants at proportionately bigger gains elsewhere. Relocating staff is costly. Reversals make if they could trawl freely through
ago. Placing about 3 per cent on the RingCentral’s real aim is to take on EY reported that only about 1,000 But a trickle of jobs leaving London would be costlier still, especially if customers’ credit scores, transaction
Riyadh market with local tycoons and $210bn telecoms company Cisco. His invest-ment bank jobs have been could turn into an exodus. Brexit un- bankers’ desire to live in Frankfurt records, social media posts and
institutional investors leading the premise is people hate their old desk relocated to other parts of Europe. certainty has risen as the leaving date has been underestimated. browsing histories. That prize is within
charge would require investors to pony phones and will swap them for voice- the grasp of Alibaba and Tencent in
up $60bn. Demanding any more from over-internet protocol technology China. The WeChat app even gives
wealthy families after the confiscation withoutthe hardware.Threebull points Tencent facial recognition data.
of more than $100bn of their assets support RingCentral’s investment case. performance of video conferencing country’s next-generation 5G network the state-owned carriers is weak. First- The battle with the PBoC is not one
sounds like a stretch. Never mind that First, its subscription model yields company Zoom, which has more than with rival China Unicom to reduce half revenues fell as new subscriber Alibaba and Tencent can win. Building
the Saudi exchange is tiny, with a total recurring revenues. Second, VoIP is doubled since listing in April. costs. Investors have pushed up growth slowed and Beijing pushed for a $1tn AI industry is a key front in
market cap of less than $500m. expected to grow from a $20bn market RingCentral will remain a hot stock, shares. China Unicom has gained price cuts. China Mobile, a third China’s tech war with the west.
The second difficulty is that the float, to a $55bn industry by 2025, according particularly if it can swap hot lines for 12 per cent since rumours first telecoms group, has revised down its The value of data is multiplied by
much-delayed as Saudi Arabia seeks a to Global Markets Insights. Third, sporadic failed connections. surfaced in mid-August. 5G spending forecast for this year by aggregation. The more of it Alibaba
friendly venue, is supposed to reduce companies are spending more on cloud Gains for the telcos will be at the 38 per cent in the span of two months. and Tencent surrender to the state,
the nation’s dependence on oil, whose services. The total will exceed $1tn this expense of 5G equipment makers. The Network sharing would drastically the less justification foreign investors
value is slowly being eroded by climate year, according to International Data. biggest loss would be for Huawei, the cut overall spending. China Unicom have for regarding them as
change. That would require foreign RingCentral’s share price has Huawei/5G: world’s largest telecoms gear maker, expects to save more than $38bn. independent businesses.
investors to participate more outshone the broader market. After which the US sees as a security threat. For Huawei, this translates to about This poses two problems. First, the
meaningfully than anticipated. As soon listing in 2013 at $13, the stock trades pincer punishment Becoming one of the first 5G-enabled half of the expected orders for its prospects of the companies outside
as they did, the “down round” would at $131, up more than 60 per cent over countries is a priority for China. The equipment business. This brings in China will be damaged if the US classes
slash the value of Saudi Aramco. one year. The group has a habit of Huawei’s new phone, the Mate 30, is new network would speed up the about 40 per cent of total sales. Foreign them as a security threat. Second,
Saudi ruler Mohammed bin Salman outperforming its own forecasts. billed as its smartest yet. The handset internet for 713m smartphone users, boycotts mean its home market has owning the shares — directly, or via
has gilded himself into a corner. A Revenue growth is strong as it signs compensates for a lack of Google apps giving China an edge in hot sectors become critical. intermediaries such as SoftBank,
quasi-private deal in Saudi Aramco up ever larger clients. The company with 5G capability. But the new such as artificial intelligence and Huawei has sustained little damage Prosus or Naspers — may raise ethical
would prove nothing, except that he expects revenue to top $877m this year standard is proving less of a fillip for self-driving cars. from sanctions, if published numbers objections. The volatile shares trade at
has been obdurate and badly advised. — 30 per cent growth on the previous Huawei’s business selling network But telcos baulked at the projected are true. Collaboration between big over 25 times forward earnings. They
The market, which is indifferent to year. The enterprise-tech industry is equipment at home in China. costs of 5G, which rose as high as Chinese customers may now hurt the are well below all-time highs. They are
the pride of powerful men, has already on the rise. See the spectacular China Telecom plans to build the $120bn over three years. Cash flow of business more than US hostility could. becoming riskily politicised.

CROSSWORD C stands for the same word

Spanish district (9)
3 French novelist’s C, initially seen
No. 16,277 Set by WANDERER ACROSS in beach area (5)
1 Explorer primarily in Antarctica, 4 C in French inn, keeping cool (9)
        sick if such a C (7) 5 C of élite group (5)
5 Drinks with county teams’ wingers 6 Colleague ordering tea cosies
(7) (American not English) (9)
9 See 27 7 Muslim ruler stuck up in tree,
10 Mild or bitter to a novel degree in methinks (5)
Israeli town (9) 8 C of 5 across, roughly (7)
11 Yellow secretion from nipples, as 14 C can dry out, leading to public
  first bits of milk sometimes this C, outburst (3,3,3)
possibly (9) 16 C in C, one wearing a sort of green
12 C of fossil fuel? That’s about right (9)
(5) 17 System for naming notes taken
     13 Instrument Yes then used, after on Irish hill showing gas-emitting
twice dropping Ecstasy (5) volcanic vent (9)
15 Not willing to compromise, lacking 18 Dressed in 5 down C (7)
   knowledge en route? (2,7) 20 C, crossover actor/director (7)
18 Mouldy lemon? Each one can 22 C slightly, as part of getting
change its C (9) exasperated (5)
19 Sacré bleu! Wrong cab’s gone off 23 Japanese elder statesmen
    for mathematician (5) appearing regularly in green (or
21 Shop displaying five scores by the not) (5)
Gunners (3,2) 24 C of raging 4, after a dodgy run-
23 Old man in dull and boring C, by out (5)
Vandyke? (9)
25 Religious leader serving once, Solution 16,276
innit? (8,1) 3 2 : ' ( 5 0 2 1 . ( <
  26 Wanderer had a house somewhere 6 $ ( 1 2 ( 3
in the US (5) / 2 5 ( / ( , 2 % ( / , 6 .
$ 7 & * / ' * 1
27, 9 Forty-one? Eve’s knackered from 8 1 , ) 2 5 0 , 1 ) ( 5 1 2
time to time (5,2,5) * $ 0 $ 8 $ :
JOTTER PAD 28 C of space-time, extremely lurid + $ / 9 ( 7 , 0 ( / , 0 , 7
(7) 7 , ( +
( 1 7 5 $ 1 & ( ' 6 8 & 5 (
DOWN 5 ( % $ ( $ 5
1 Woolly tuft of hair in which , / / 1 ( 6 6 / ( 6 2 7 + 2
flerovium is found? That’s not 1 $ 7 7 / 7 : 3
right (7) * $ 9 2 7 7 ( , 0 , 7 $ 7 (
, 2 $ 2 1 / 6
2 Welsh band in state of stupor, ( 9 ( 5 < 0 $ 1 - $ & .
getting lost for a short time in
Friday 20 September 2019 ★ 15

Quick returns China Inc’s global Reality bites Silicon Valley can no longer
spending spree goes into reverse — PAGE 17 play by its own rules — RICHARD WATERS, PAGE 16

KPMG to cut a third of admin jobs Tail

3 Big Four accounting firm in cost-cutting drive 3 Partners face loss of personal assistant
own expenses as part of the changes. to “refocus” the firm by investing in its their number dwindled with increases
Secretaries who keep their jobs will have audit business and changing its govern-
Secretaries in technology over the past decade. Stafford
KPMG UK is planning to make redun- their title changed to “executive assist- ance structure. who keep Grant Thornton cut 60 marketing and
dant about a third of its 630 administra- ant”, according to a person close to Several professional services firms their jobs communications roles this year after
tive assistants in a wave of cost-cutting KPMG. The person said the firm would have slashed administrative and sup- poor 2018 financial results. It is not only money markets dealing with the fallout of
at the Big Four accounting firm. create 24 new support roles in its port roles to cut costs in recent years. will have KPMG, whose profits rose by 18 per whipsawing prices this week.
Personal assistants have contacted Birmingham office, where it runs an Law firms including Allen & Overy, Her- their title cent to £356m last year, has been bat- The New York Federal Reserve offered a huge injection
other professional services firms seek- administrative function, as part of the bert Smith Freehills and Freshfields tling to defend its reputation after issues of cash for a third day in a row yesterday, to try to steady
ing alternative work in recent weeks as restructuring. have shrunk their expensive London changed to including scrutiny over its audit work the repurchase or “repo” market. But the moves are not
they are worried about their careers, KPMG said: “We are not taking these offices by moving entire administrative ‘executive for the collapsed outsourcer Carillion, a just relevant for short-term deals to swap Treasuries for
according to managers at other firms. steps lightly, but we believe the pro- functions to other cities including Bel- corruption scandal in South Africa, and cash; they have implications for the big, global effort to
With between 200 and 250 adminis- posed structure will enable us to deliver fast and Manchester. assistant’ a series of partner exits. move off the Libor lending rate by the end of 2021.
trative support staff expected to leave, the best possible experience for our cli- EY this summer restructured its mar- Tim Howarth, head of financial serv- Regulators including the New York Fed feel that the old
some partners — particularly in non- ents. We are now in the process of con- keting unit, although only a handful of ices consulting, was forced to leave after Libor benchmark has outlived its usefulness because it
client facing roles — will no longer have sulting with affected staff on the plans.” jobs were cut. A senior manager at EY a disciplinary process over his use of represents markets that barely trade. The new bench-
access to a personal assistant. Partners The person added the restructuring said each of its secretaries usually WhatsApp, followed by the exits of two marks will instead be based on real-world transactions.
are also being encouraged to file their was part of an 18-month plan by KPMG worked for two or three partners after senior members of his team. The US’s proposed alternative, known as Sofr, is based in
part on repo rates. And as repo rates shot higher this week,
so did Sofr, from 2.43 per cent to 5.25 per cent.
So was it wise to base an alternative Libor on a market
that can behave as capriciously as this?
Late on Wednesday, the committee in charge of Sofr cir-
Bigger apple culated a memo to banks, insurers and asset managers,
New York supplants pointing out that the new
benchmark uses an average
London as top hub of overnight rates that is
Was it wise
smoothed out over time. The to base an
committee noted that a
London has slipped further behind New three-month average of Sofr
alternative Libor
York in a ranking of the world’s financial rose just two basis points on a market that
centres amid extended uncertainty over over rates last week. The
the UK’s relationship with the EU. committee understands that
can behave so
New York claimed the top spot from daily rates are volatile, it capriciously?
London last year, ending the city’s said; indeed Sofr had
five-year stint as the premier financial dropped back to 2.55 per cent on Wednesday.
capital, according to an index compiled Bankers may understand the mechanics but that might
by consultancy Z/Yen. Although there not hold for customers, who may be wary of explanations
has not been the exodus of finance jobs of how charts containing sudden spikes are not a problem.
predicted after the Brexit vote, groups Moreover, this week’s move is not a one-off. In December
have been reluctant to invest while they the repo rate suddenly rocketed in its single biggest per-
lack clarity on how to do business. centage rise in 20 years. And not all money market rates
That has been a boon to other moved at the same time — Libor, for example, was flat.
European cities, including Frankfurt, This suggests that repo has a liquidity problem. The
Amsterdam and Paris, which have market is an interface between broker dealers, the borrow-
attracted groups that need to set up EU ers and various institutions — banks, clearing houses,
headquarters in anticipation of Britain hedge funds and others.
leaving the EU. Paris and China’s But there are blockages that prevent money moving
financial centres are on track to overtake around efficiently. For example, a regional bank may have
London in the next two years. Paris has an account with the Fed but it cannot directly access the
jumped more than 10 places in the latest repo market, which may offer more competitive rates,
index, making it the fourth-highest because it does not have the requisite connections to desig-
ranked European city after London, nated broker-dealers.
Zurich and Frankfurt. Banks also face limits on the extent to which they can
Miles Celic, chief executive of support their own broker-dealer businesses by moving
TheCityUK lobby group, said the index cash around. If liquidity is trapped when it is most needed,
“sends a warning signal to Europe about it is likely there will continue to be more irregular spikes.
the growing global dominance of Asian Finally, the Fed’s first intervention in a decade raises
and North American financial centres.” another question: is the repo rate a true market rate, if it
Cat Rutter Pooley can be managed at a central bank’s discretion?
Political news pages 2&3 Global regulators’ target to have most of the financial
Lex page 14 system weaned off Libor soon was already looking tough.
This week’s events have only added to the problems.

Ryanair shareholders protest against

potential bonus of €99m for O’Leary
ARTHUR BEESLEY The vote was non-binding but repre- One top 20 investor told the Financial
sented the most significant protest yet Times it had voted against the remuner-