September 16, 2019

Advertising: Automotive Industry Ad Campaign Focuses on Young Drivers

The shift in attitudes is being spurred by technology, in that many younger consumers are more interested in the newest smartphone or tablet than in the newest sedan or T-top. The cooling of the love affair between youths and cars could jeopardize billions of dollars in automotive sales — and billions of dollars in advertising spending in the automotive category, which is typically the largest category when United States ad expenditures are tallied each year.

“The digitalization of our world, mobile phones and social media have allowed a certain level of independence,” said Loren Angelo, general manager for brand marketing at Audi of America in Herndon, Va., part of Volkswagen. “That’s what the automobile used to provide.”

Data shows that significantly fewer young consumers today are getting driver’s licenses compared with a decade ago, he said.

Although the brand’s core buyers are in their 30s and 40s, Mr. Angelo said, Audi of America seeks to offer products that “teens would aspire to” — among them the Audi A3, a smaller, entry-level sedan, and the Audi R8 sports car.

“To keep relevant conversations going” with younger potential customers, he added, “we want to keep the brand on the cutting edge” through technological innovations like LED headlights and using social media as a communications tool.

Doug Murtha, vice president at Scion, the youth-focused brand from the Toyota Motor Sales U.S.A. division of Toyota, said, “Some things have changed in the world, and we have to acknowledge that.”

Still, Mr. Murtha said he thought any flagging of interest among millennials was more likely attributable to their shaky finances than to their ability “to socialize from their bedrooms, so they don’t need transportation to the mall.”

To reach Generation Y, he said, Scion is taking “a very subtle selling approach” typified by “creating a lot of content like documentary-style films and free music” and making it available on a special Web site, ScionAV.com (“AV” standing for “audiovisual”), separate from the regular Scion Web site, scion.com.

Another example of a youth-centric initiative is Toyota’s decision to buy, for the first time, advertising space in Teen Vogue magazine, owned by the Condé Nast Publications division of Advance Publications. The ads will bear the Toyota logo and the brand’s current marketing theme, “Let’s go places,” but they will not be promoting entry-price cars like the Toyota Yaris or the Prius C.

Instead, the ads, scheduled to begin appearing in the May issue of Teen Vogue, will encourage teenage girls and their mothers to pledge to “Arrive in style” and be safe drivers by signing the so-called Toyota Mutual Driving Agreement and avoiding distractions like calls, e-mails and text messages when behind the wheel. The initiative, to be formally announced on Tuesday, will also include video clips; a presence in social media, highlighted by a Twitter hashtag, a section of the Teen Vogue Web site; events; and a contest.

As the mother of a teenager who turned 16 last week, Marjorie Schussel, corporate marketing manager at Toyota Motor North America, said, “I’m one of the millions of parents across the country concerned with this issue.”

“Teen Vogue is the perfect platform to amplify this message with teen girls in a fun and engaging way,” she said.

As for any diminution in interest in cars among millennials, “the reality is we know they’re all going to drive at some point,” Ms. Schussel said. “And when they do drive, they need to be as safe as possible.”

The “Arrive in style” initiative is in addition to Toyota efforts that include Web sites devoted to teenage drivers and how they drive. The campaign is being created by Teen Vogue and an agency that works for Toyota, the Dentsu America unit of Dentsu.

While some teenagers might be less interested in cars than their older siblings or parents, said Scott Daly, executive media director at Dentsu America in New York, “Teen Vogue thinks its audience is interested and thinks it’s an important issue to its audience, and that gives it a little more credibility.”

The budget for the “Arrive in style” campaign, scheduled to appear through February 2014, is estimated at $2 million. It includes 13 ad pages in Teen Vogue and Toyota’s becoming a sponsor of the magazine’s second annual Back-to-School Saturday, a national shopping promotion.

“Amy Astley and I were talking about important initiatives we could get behind,” said Jason Wagenheim, vice president and publisher of Teen Vogue in New York, referring to the magazine’s editor in chief. “One of the most important issues today facing our audience, millennials, is distracted driving and the dangers it causes.”

He added, “We decided to approach one automaker partner, and went to Toyota first because of its history in driver education, in the teen new-driver segment in particular.”

It is not lost on Mr. Wagenheim that, as he put it, “teens are much more likely to be distracted drivers, or be a passenger in a car with someone who is not focused on the road, because they’re so connected” — and, by the same token, that a serious side effect of today’s teenagers’ being “so hyperconnected” is distracted driving.

Article source: http://www.nytimes.com/2013/03/29/business/media/automotive-industry-ad-campaign-focuses-on-young-drivers.html?partner=rss&emc=rss

Johnson & Johnson Ordered to Pay $8.3 Million in Hip Implant Case

The 12-member panel, however, declined to issue punitive damages, saying the company’s DePuy orthopedics unit, which made and marketed the all-metal device, did not act with fraud or malice. The implant, known as the Articular Surface Replacement, or A.S.R., was recalled in mid-2010.

In a statement, the company described the verdict as “mixed” and said that it planned to appeal the damage award. It disputed the finding by the jury that the A.S.R. was defectively designed.

It was impossible to say what the verdict, which came in a Los Angeles state court, would mean for other A.S.R.-related cases. A trial on a second lawsuit is scheduled to begin Monday in Chicago, with other cases expected to proceed later this year.

In its decision, the panel ordered Johnson Johnson to pay the case’s plaintiff, a retired Montana prison guard, Loren Kransky, $338,000 to cover his medical expenses. It also ordered him to be paid $8 million to cover his pain and emotional suffering.

Some lawyers and industry analysts have estimated that the suits ultimately would cost Johnson Johnson billions of dollars to resolve.

Thousands of the individual cases have been consolidated into a large proceeding in a Federal District Court in Ohio and a resolution of that action could provide a framework for settling the bulk of the cases and determining awards to patients.

The A.S.R. belonged to a class of once widely used hip replacements whose cup and ball components were both made of metal.

It was first sold by DePuy in 2003 outside the United States for use in an alternative hip replacement procedure called resurfacing. Two years later, DePuy started selling another version of the A.S.R. for use in the United States in standard hip replacements that used the same cup component as the resurfacing device.

However, the A.S.R.’s design caused the cup and ball to strike against each other as a patient moved, resulting in the shedding of metallic debris. That debris inflamed and damaged tissue and bone, causing pain and, in some cases, permanent injuries to patients.

Today, all-metal hips like the A.S.R. are rarely used by surgeons because most models suffered from similar problems. But data from orthopedic registries suggests that the A.S.R. was far worse than many competing products.

An internal Johnson Johnson document introduced at the Los Angeles trial estimated that close to 40 percent of patients who received an A.S.R. will need to undergo a second operation within five years of the first to have the implant removed and replaced. In a recent filing with the Securities and Exchange Commission, Johnson Johnson said that there are 10,750 A.S.R. lawsuits.

Traditional artificial hips, which are made of metal and plastic, are expected to last 15 years or more before needing to be replaced, and the normal replacement rate for early unexpected failures is about 5 percent after five years.

The lawsuit heard in Los Angeles was not originally scheduled to be the first over the A.S.R. but it was moved up because Mr. Kransky was found to have terminal cancer. Before the start of the Los Angeles trial, which began in late January, Mr. Kransky’s lawyers had not expected him to live through it.

Internal Johnson Johnson documents that became public during the trial indicated that company executives were told by surgeons, who were also paid consultants to the device maker, that the design of A.S.R. was flawed. In addition, some surgeons also urged the device maker to slow sales of the implant or stop them completely, records show.

In the case, evidence was also presented that showed that Johnson Johnson considered redesigning the A.S.R. to reduce its problems, but then abandoned the project because the implant’s sales did not justify the costs of the redesign. One of the DePuy executives involved in that decision was Andrew Ekdahl, who now heads Johnson Johnson’s orthopedics division.

Johnson Johnson executives like Mr. Ekdahl have said throughout the A.S.R. episode that they acted responsibly and moved to recall the device in 2010 when data from an orthopedic registry in Britain showed that its failure rate was higher than normal.

Before reaching its verdict Friday, the jury that heard Mr. Kransky’s case deliberated for more than five days. Mr. Kransky’s lawyers, citing what they described as the unethical behavior of DePuy executives in failing to warn doctors and patients of the device’s defects, asked jurors to punish Johnson Johnson by awarding their client $36 million to $144 million. Jurors declined to do so.

Nonetheless, lawyers representing Mr. Kransky hailed the verdict.

“This is a victory for Mr. Kransky and thousands of other badly damaged A.S.R. patients who have yet to get their day in court,” Brian Panish, one of Mr. Kransky’s lawyers, said in a statement. “Jurors across the country will return similar verdicts until J.J. takes full responsibility.”

A DePuy spokeswoman, Lorie Gawreluk, said in the company’s statement that it planned to appeal Friday’s verdict, contending that the A.S.R.’s design was not defective.

Article source: http://www.nytimes.com/2013/03/09/business/johnson-johnson-must-pay-in-first-hip-implant-case.html?partner=rss&emc=rss

Republicans Tell F.C.C. Not to Give Away Airwaves

WASHINGTON – House Republicans warned the Federal Communications Commission on Wednesday against giving away scarce airwaves that it could auction to telecommunications companies for use in mobile broadband.

The remarks, which came at a hearing by a House communications subcommittee, took direct aim at one of the top priorities of Julius Genachowski, the F.C.C. chairman: to expand the availability of unlicensed airwaves, or spectrum, in order to open up congested mobile broadband networks and for Wi-Fi hot spots.

In September, the F.C.C. proposed freeing up as much as 12 megahertz of spectrum for those unlicensed uses. The unlicensed space on the electromagnetic spectrum would also be used as “guard bands,” which border segments of airwaves that are used by cellphone companies, broadcasters and other communications entities, in order to limit interferences from other nearby users.

“Unlicensed spectrum has a powerful record of driving innovation, investment and economic growth – hundreds of billions of dollars of value creation for our economy and consumers,” Mr. Genachowski told the committee on Wednesday.

But Representative Greg Walden, an Oregon Republican who is chairman of the subcommittee on communications and technology, said that the law that gave the F.C.C. the ability to conduct “incentive auctions” of newly available spectrum required “maximizing the proceeds from the auction.”

For maximum proceeds, guard bands should be no larger than necessary, Mr. Walden said, adding that the 6 megahertz size proposed by the F.C.C. is unnecessarily fat. As proposed, the airwaves set aside for unlicensed use could forgo $7 billion to $19 billion in potential proceeds, Mr. Walden said.

At least $5 billion of auction proceeds are proposed to be used to help build a nationwide public safety communications network for first responders.

“I support the use of unlicensed spectrum to foster innovation” for relief of congested broadband, Mr. Walden said. “What I cannot support,” he added, “is the unnecessary expansion of unlicensed spectrum in other bands needed for licensed services, especially at the expense of funding for public safety.”

The F.C.C.’s five commissioners, all of whom testified before the subcommittee Wednesday, are split 3-2 along party lines over the issue of unlicensed spectrum. Commissioner Robert M. McDowell, a Republican, said he believed it is “premature” for the commission to reserve newly available airwaves for unlicensed use.

Instead, the commission should conduct further work on its current policy – setting aside the “white spaces” between broadcast television channels for unlicensed use, he said.

“At this early stage in the incentive auction process,” Mr. McDowell said, “it is not apparent that we should stop the progress well under way in the TV white spaces arena to create a solution for a problem – an alleged shortage of unlicensed spectrum in lower spectrum bands – that may never exist.”

The F.C.C.’s plans for unlicensed spectrum received support from Democrats on the subcommittee, including Representative Henry A. Waxman, a California Democrat. Mr. Waxman said issues of how unlicensed spectrum would be set aside and used were settled during its negotiations on the Public Safety and Spectrum Act, which was enacted earlier this year.

“I am troubled by attempts by some to re-litigate issues that were resolved earlier this year, when the bill passed Congress with widespread support,” Mr. Waxman said.

Article source: http://www.nytimes.com/2012/12/13/business/republicans-tell-fcc-not-to-give-away-airwaves.html?partner=rss&emc=rss

DealBook: Standard Chartered’s Shares Rally on Settlement

8:32 a.m. | Updated

LONDON – Investors in Standard Chartered breathed a collective sigh of relief on Wednesday.

The positive reaction came after the British bank agreed to a $340 million fine related to charges that it had laundered hundreds of billions of dollars in money with Iran and lied to regulators.

The agreement ends speculation that Standard Chartered might lose its New York State banking license. The bank’s top executives had been expected to defend its actions in a hearing on Wednesday, which was postponed after the settlement was announced.

Standard Chartered, which mainly operates in fast-growing emerging markets, has had a New York office since 1976. That office primarily operates a dollar-clearing business, processing around $190 billion a day for clients from around the world.

Standard Chartered may still face a combined fine from other American regulatory authorities of around $360 million, according to analysts’ estimates. Yet the agreement with the New York State Department of Financial Services has drawn a line under many of the accusations.

A Standard Chartered bank in London.Facundo Arrizabalaga/European Pressphoto AgencyA Standard Chartered bank in London.Peter Sands, the chief executive of Standard Chartered, flew to New York to negotiate over the weekend with state regulators.Shawn Thew/European Pressphoto AgencyPeter Sands, the chief executive of Standard Chartered, flew to New York to negotiate over the weekend with state regulators.

“We have sought to act in the best interests of our shareholders, clients, customers and staff,” Peter Sands, the bank’s chief executive, said in a memo to employees late on Tuesday, whose contents was confirmed by a company spokesman. “There are many reasons why firms settle such agreements.”

The British bank and the New York regulator had been at loggerheads over the level of money laundering activity at the firm.

New York authorities had claimed that Standard Chartered schemed for nearly a decade with Iran to hide 60,000 transactions worth $250 billion from regulators. The bank has maintained that the transaction value of the laundering activities had totaled only $14 million.

“Whilst disproportionate, the settlement protects shareholder and customer interests against the regulatory assault,” Ian Gordon, a banking analyst at Investec in London, said in a research note to investors. “In our view, Standard Chartered has acted with pragmatism and integrity in the face of extreme provocation.”

Shares in Standard Chartered rose around 5 percent, to £14.26, or $22.37, in afternoon trading in London on Wednesday, though the stock is still down 9 percent from when the money laundering charges were announced this month. Its shares had dropped as much as 25 percent — the sharpest one-day decline in more than two decades — a day after the charges were made public on Aug. 6.

By agreeing to a $340 million settlement, the British bank is also unlikely to experience an additional major decline in its share price, according to Cormac Leech, a banking analyst at Liberum Capital in London, who expects the stock to rise to £15.30 in the near term.

Mr. Leech said in a research note to investors on Wednesday that “the relatively small” $340 million settlement suggested a “significant moderation in attitude” by New York regulators.

Standard Chartered is not the first European bank to face money-laundering charges.

The British bank HSBC has set aside $700 million to cover the potential fines, settlements and other expenses related to charges by United States authorities. The Dutch bank ING also agreed to a $619 million fine in June for processing financial transactions for Cuban and Iranian companies.

Article source: http://dealbook.nytimes.com/2012/08/15/standard-chartereds-shares-rally-after-settlement/?partner=rss&emc=rss

New Models of Hip and Knee Implants Not Better, Study Finds

The study, which draws on data from Australia’s orthopedic registry, covered implants introduced from 2003 to 2007 and was published this week. The findings are significant for patients in the United States because many of the new designs, like so-called metal-on-metal hips, are widely used here. Those implants, which have both a ball and cup made of metal, are expected to fail prematurely in tens of thousands of patients rather than lasting 15 years or more as artificial joints are supposed to do.

The Australian study showed that not a single new artificial hip or knee introduced over a recent five-year period was any more durable than older ones. In fact, 30 percent of them fared worse.

The Australian study concluded that both patients and taxpayer-financed health care programs were paying a high cost because surgeons were using newly designed implants, introduced with little test data, over existing designs that had track records.

“Not only has the introduction of this technology been potentially detrimental to patient care, but the current approach may be an important driver of increased health care costs,” the review concluded.

Dr. Stephen E. Graves, the director of the Australian registry and a co-author of the study, said he believed that surgeons, hospitals and regulators should closely look at the review’s results. In the case of the all-metal hips, some experts say they believe that replacing them may cost companies, insurers and taxpayers billions of dollars.

“There needs to be a careful re-evaluation of current deficiencies in regulation,” Dr. Graves said in a recent e-mail.

The Australian review is part of a special issue of a medical journal, The Journal of Bone and Joint Surgery, devoted to studies that examine the benefits and the limitations of orthopedic registries. While America does not have a registry, the Food and Drug Administration is financing efforts to see whether data from sources like overseas databases and registries run by hospitals here can be used to better monitor device performance.

Many experts argue that such efforts are essential because 700,000 Americans undergo hip or knee replacement every year, and that number is expected to increase sharply as the population ages.

In a registry, information about a patient is entered into a database when he or she receives an implant. Then, when that patient undergoes surgery again to replace that device, more data is added. By looking at large numbers of patients followed in a registry, researchers can tell whether certain device models are failing prematurely at significantly higher rates.

But researchers in England, which has a registry, pointed out in another article in the same medical journal that a product-related disaster had likely already occurred before it was detected in a such a database. As a result, some experts say they believe that there must be greater scrutiny of implants either before or after they go on the market to detect problems earlier.

Another review in the same issue found that the results of published studies that accompany the introduction of new implants could bear little resemblance to registry findings about a device’s success once it went into broader use.

That problem occurs, the review by Australian researchers found, because surgeons involved in the original published reports are often involved in its development and may have a financial stake in them. In addition, such reviews tend to be short term.

Some surgeons say they believe that one type of all-metal implant known as a resurfacing device is permitting some patients to remain more active. However, data indicates that such benefits are limited to one group of patients, namely larger, middle-aged men.

This month, bipartisan legislation was introduced in the Senate that could force manufacturers to track the performance of implants like artificial hips after they have been approved for sale. Proponents of the bill acknowledge that the measure faces an uphill fight.

Both device producers and their allies in Congress have maintained that any additional F.D.A. regulations would slow the development and marketing of innovative products that benefit patients. For his part, Dr. Graves, the Australian official, said he believed that such arguments were misleading.

“The purpose of regulation is not to impede innovation but to ensure safety and effectiveness of medical devices,” he stated. “This protects patients, but it also protects companies.”

Article source: http://feeds.nytimes.com/click.phdo?i=2ec292aa0b22873b3c2cd93f3be388af

Study Finds Failings in Some State Economic Programs

And are the jobs any good?

Economic development programs cost states and cities billions of dollars a year, but many programs require little if any job creation, fewer than half call for wage standards, and fewer than a quarter require the companies to provide health care for their workers, according to a study of program requirements scheduled to be released Wednesday by Good Jobs First, a nonprofit research organization that tracks corporate subsidies. Some merely require companies to invest in plants or new equipment, which could actually enable them to reduce their head counts.

States’ desperation to hold on to jobs was vividly illustrated this week in Illinois, which is so short of money that it has been unable to pay its bills on time in recent years. After Sears and the Chicago Mercantile Exchange were courted by other states, the Illinois Legislature passed large tax breaks to keep them where they are, over the objections of protesters who unfurled a “Stop Corporate Extortion” banner in the Illinois House chamber on Monday.

The new tax breaks will save Sears — which got a big retention package just over 20 years ago, when it left the Sears Tower in Chicago for suburban Hoffman Estates — an estimated $15 million a year. They will save the state’s financial exchanges an estimated $85 million a year.

Such deals are hardly unusual. Companies routinely seek tax breaks to relocate or to stay put. But the new report found that many states lack safeguards to make sure that the money they give companies creates long-lasting, well-paying jobs.

“We hope that states will fix their rules to make sure that their programs are creating lots of jobs, and good jobs, with wages tied to the economy and with health care, so companies aren’t getting paid to pull wages down,” said Greg LeRoy, the executive director of Good Jobs First, who added that such deals should be watched even more closely in a downturn. “There’s a real tension between economic development spending and the maintenance of vital services.”

States rarely have accurate measures of how many jobs such programs create, but they are discovering that many such programs fail to live up to their billing. Pennsylvania found in a 2009 legislative report that many business in its Keystone Opportunity Zone program “are not creating jobs or generating capital investment.” A recent study that New Jersey commissioned of its Urban Enterprise Zone program found that the $2.17 billion it spent over six years had produced “limited economic impact.” New York changed its old Empire Zone program, which was supposed to give tax breaks to companies to create jobs in poor areas, after auditors found that some businesses had received tax breaks but lost jobs, while others were being rewarded for hiring in wealthier areas.

“Over time, the programs get deregulated in ways that make them windfalls instead of incentives,” Mr. LeRoy said.

The new report singled out some states for praise. Nevada and North Carolina’s programs were applauded for having strong wage standards, requirements that employers provide health coverage and pay part of the premium, and requirements that subsidized facilities stay open for a set period of time.

Other programs were criticized for their lax safeguards, with programs in Washington D.C., Alaska and Wyoming singled out as having some of the weakest requirements.

With stubbornly high unemployment rates bedeviling states and little new investment, companies find themselves aggressively courted. Chiquita, the banana giant, plans to leave its Cincinnati headquarters for Charlotte, N.C., which lured it with incentives valued at some $22 million.

Tax breaks in the name of economic development were an explanation given last week when another study found that some Fortune 500 companies had paid no state corporate income taxes in recent years. But no governor wants to see jobs flee.

After Illinois lawmakers passed tax breaks for Sears and the Chicago Mercantile Exchange — as part of a package that also cut taxes for the working poor — Gov. Pat Quinn, a Democrat, defended the move. “Every state in the union has, on the books, tax incentive measures that have been passed by their legislatures to try and get jobs from another state, and other businesses from another state,” he said Tuesday.

Article source: http://feeds.nytimes.com/click.phdo?i=9a19f02df4c0b7b19c443aa09b89d915

Japan Offers Help to Pay Plant Victims

The move would save the plant’s operator, Tokyo Electric Power, from financial collapse. But the plan would require the company to repay in full all payments due to victims of the accident. The company had hoped that payouts might be capped.

About 200,000 residents as well as factories, farmers and fishermen in the area, are expected to file compensation claims totaling billions of dollars.

“We must makes sure that the compensation is adequate, but we must also keep the financial burden on the public to a minimum,” Finance Minister Yoshihiko Noda told reporters.

Executives at Tokyo Electric Power and government officials have been wrangling for weeks over who should pay for the accident at Fukushima. The government, in particular, has wanted to prevent the company from raising electricity rates to pay for compensation claims, in effect passing on the accident’s costs to its customers.

But Prime Minister Naoto Kan also said this week that the state, which has long promoted nuclear energy, should assume some responsibility. The plan needs to be approved by the nation’s divided parliament to go into effect.

The plan calls for the government to issue special-purpose bonds to help finance a plan that would pay out compensation, according to a statement issued by the Trade Ministry. Other utilities in Japan would be required to contribute to the fund, which would also act as an insurance body to cover any future nuclear accidents, the statement said.

Tokyo Electric Power, known as Tepco, would be required to pay back the fund over time. But the fund would ensure that the utility is able to make sufficient investments to provide electricity for the Japanese capital and surrounding regions, where it holds a near monopoly.

At the same time, Tepco would be required to make aggressive cost cuts, like selling real estate and other assets, the ministry statement said.

The company said this week that eight top executives, including its president, Masataka Shimizu, would indefinitely receive no pay, and other directors would have their salaries slashed by 60 percent. The utility has pledged to sell 500 billion yen ($6.17 billion) worth of assets.

A supervisory body would effectively take control of all major management decisions, and make sure that profits, excluding vital investment in infrastructure, be set aside for victims, the Nikkei newspaper reported. The plan asks that Tepco make no dividend payments to shareholders until compensation payments are complete, the Nikkei said.

Still, by rescuing the company from what could have been crippling claims, the plan provides a degree of protection to holders of Tepco shares and bonds, circumventing chaos in financial markets. The company’s shares have lost three-quarters of their value since the crisis began.

Tepco raised about 2 trillion yen from financial institutions in March, but much of that will go toward decommissioning the damaged reactors.

Article source: http://www.nytimes.com/2011/05/13/business/global/13tepco.html?partner=rss&emc=rss

News Analysis: In Portugal Crisis, Worries on Europe’s ‘Debt Trap’

So far the markets have taken Europe’s third successive sovereign financial crisis in stride. But many economists are a good deal more alarmed, most notably because the bailout formula European leaders keep applying to their most indebted member nations shows no signs of working.

Greece, Ireland and now almost certainly Portugal have access to hundreds of billions of dollars in emergency European aid to help them avoid defaulting on their debt. But the aid is really just more loans, and the interest rates the countries are paying, if a little lower than what the private market would charge, are still crushingly high. Their pile of debt gets bigger with every passing day.

Moreover, the price of these loans has been a commitment to slash government spending far more drastically than domestic leaders would have the desire or the political power to accomplish on their own. And for countries that depend a good deal on government spending to generate growth, rapid decreases in spending have meant sustained economic stagnation or outright recession, making every dollar of debt that much harder to pay back.

Economists call this “the debt trap.” Escape from the trap generally requires devaluation of the currency, which cannot happen among countries that use the euro as their common currency, or strong economic growth, which none of the three have, or some kind of bankruptcy process, which all three forswear. Add to that the likelihood that all three countries will continue to have unstable governments until they figure a way out, and Europe’s financial crisis has no end in sight.

“What has been missing, in the debate about how countries can restore their finances to some kind of sustainability, is the limit of how much they can cut in a period of austerity,” said Simon Tilford, chief economist for the Center for European Reform in London. “There is a limit of how much any government can cut back spending and survive politically unless there is a light at the end of the tunnel, a route back to economic growth.”

The problems of the weaker countries are not just sovereign debt, but also lack of competitiveness, both in Europe and the larger world. Without the nations restoring competitiveness and selling more goods abroad, which can only come through a longer-term process of reducing wages and taxes to spur private sector investment, economists are not optimistic about prospects for new growth soon.

The crisis in Portugal also raises new questions about whether the European Union will come to grips with the other side of its crisis, which are the banks. Banks in well-off countries like Germany, France and the Netherlands, as well as Britain, hold a lot of Greek, Portuguese and Irish debt. And if these countries cannot pay their debts, they would have to reschedule them, reduce them or default, causing a major banking crisis in the rest of Europe.

That reckoning would require governments to ask their taxpayers to recapitalize the banks, which is exactly what political leaders are afraid to do.

“We have a banking crisis interwoven with a sovereign debt crisis,” Mr. Tilford said. “Europe needs to address both, and it needs to acknowledge that the banking sectors of creditor countries — especially Germany — are not now in a position to handle restructuring and default, and that governments will have to pump money into the banks to recapitalize them.”

In essence, Mr. Tilford said, it is the taxpayers of Greece, Ireland and Portugal who are bailing out German, French and British taxpayers and depositors — not the other way around. The indebted countries are not really getting bailouts, he said, “but loans at high interest rates.” For there to be a real bailout, he said, there would have to be a default.

António Nogueira Leite, a former Portuguese secretary of the treasury and an adviser to the center-right opposition, said that the bailout packages “don’t really take into account the arithmetic of the debt.” The experiences of Greece and Ireland show, he said, “that once austerity sets in, the country doesn’t generate the means to be able to pay for the already incurred debt.”

The Economist magazine this week, in an article about Greece’s problems, said, “The international plan to rescue Greece is instead starting to paralyze it.”

Stephen Castle contributed reporting from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=e06487f3b3750405cc42b592826ee982