October 28, 2021

French Relish Cycle of Scandals Featuring Sarkozy-Era Officials

Those inquiries, which prompt sometimes delicious and humiliating leaks, very often go nowhere, lost in a thicket of appeals and denials, with not quite enough evidence to indict the key figures involved.

France is in the midst of another cycle of scandals, most of them concerning central figures in the presidency of Nicolas Sarkozy, who lost his bid for re-election a year ago to the Socialist candidate, François Hollande. Nearly every week there are new revelations about Mr. Sarkozy or his former top lieutenants, including his good friend, consigliere, former chief of staff and former interior minister, Claude Guéant, and now even Christine Lagarde, the former finance minister.

The Lagarde case, which involves a dispute over the sale of a company, is particularly interesting for the rest of the world, since she is the well-liked managing director of the International Monetary Fund. She was chosen two years ago to replace the scandal-prone Dominique Strauss-Kahn, another former French finance minister. The case is particularly interesting for the French, too. Although Ms. Lagarde served Mr. Sarkozy, both her top aide then, Stéphane Richard, now head of France Télécom (soon to be renamed Orange), and the larger-than-life character at the center of the case, Bernard Tapie, were Socialists.

While a clear indication of the intimacy among France’s elite, no matter their political allegiance, the Lagarde case has put the Hollande government in a quandary. While Mr. Tapie’s critics dismiss him as an avaricious renegade, Ms. Lagarde has kept a vital international job in French hands and Mr. Richard is supported by both his board and by the government, which owns a significant stake in the company.

Mr. Tapie came from a modest background to become an actor, television star, racecar driver, politician, government minister, businessman and owner of one of France’s great soccer teams, Olympique de Marseille, which got him a jail term when he was found guilty of bribing opposing players. He also owned Adidas.

But in 1992, while in government, he asked the bank Crédit Lyonnais to sell Adidas, which it did for his minimum price, while concealing that it sold the company to itself. It then resold Adidas, making a profit of more than $500 million. Mr. Tapie later sued the bank, and when Mr. Sarkozy became president, Ms. Lagarde agreed to a three-judge arbitration panel to settle the long case. In July 2008 the panel awarded Mr. Tapie $528 million.

The accusation is that Mr. Sarkozy and his aides arranged the outcome, in part through the chairman of the panel, Pierre Estoup, now 86, as part of a deal with Mr. Tapie. What Mr. Tapie provided to Mr. Sarkozy in this version is not clear, but Ms. Lagarde and Mr. Richard have been interrogated in the case, and there are suggestions that Mr. Guéant was involved; he is expected to be questioned soon.

Ms. Lagarde has said that she did nothing wrong, and in testimony leaked to Le Monde suggested that Mr. Richard handled the matter and kept information from her. She is judged so far to be just a witness in the case, not a suspect, unlike Mr. Richard — who also denies wrongdoing.

But Le Monde recently published a handwritten letter from Ms. Lagarde addressed to Mr. Sarkozy, undated and possibly unsent, seized by the police when they raided her home in March over the Tapie case. The letter, leaked to embarrass Ms. Lagarde, in five points promises loyalty to Mr. Sarkozy, vows that she will do whatever he thinks needs to be done for as long as he wants to employ her, and asks for his advice, support and counsel. Written in the familiar “tu” form, it is signed, “with my immense admiration, Christine L.”

If nothing else, the letter is an indication of the sycophancy surrounding the republican imperium of the French presidency, especially under Mr. Sarkozy.

Mr. Guéant, who was widely feared as Mr. Sarkozy’s enforcer, is also being investigated over receipt of a $650,000 wire from a foreign bank. He says the money was for the sale of two paintings that experts say would not be worth nearly that much, and which he did not register.

Article source: http://www.nytimes.com/2013/06/23/world/europe/french-relish-cycle-of-scandals-featuring-sarkozy-era-officials.html?partner=rss&emc=rss

French Court Orders Lagarde to Appear in Tapie Case

PARIS — A French court has ordered Christine Lagarde, the managing director of the International Monetary Fund, to appear at a hearing next month connected to an investigation of her handling of a financial scandal when she was the French finance minister.

On Thursday, Ms. Lagarde’s lawyer confirmed the court summons, which was first reported late Wednesday by the news Web site Mediapart.

The investigation, which has included a police raid of Ms. Lagarde’s Paris apartment last month, concerns her decision in 2007 to refer to an arbitration panel a decades-old dispute between a wealthy friend of France’s president at the time, Nicolas Sarkozy, and the state-owned bank Crédit Lyonnais. The panel ultimately brokered a settlement that awarded the Sarkozy friend, Bernard Tapie, the flamboyant former owner of the Olympique Marseille soccer team, about $580 million, including interest.

The court’s summons of Ms. Lagarde could lead to the opening of a formal investigation of her role in the affair. But in France, being placed under formal investigation does not necessarily lead to charges and does not imply a presumption of guilt.

Ms. Lagarde has repeatedly denied any wrongdoing in the Tapie matter and has expressed her willingness to cooperate with the investigation.

Asked about the Tapie affair at a news conference at the opening of the World Bank and I.M.F. spring meetings, Ms. Lagarde said that she had known of the possibility of being interviewed by the investigative commission since 2011.

“There is nothing new under the sun,” Ms. Lagarde said, dismissing any concerns about the investigation or its bearing on her position at the head of the fund. “I will be very happy to travel for a couple days to Paris,” she said, adding that it would not change her focus or attention on her job. “I look forward to it.”

In a statement Thursday, Ms. Lagarde’s lawyer, Yves Repiquet, said the Court of Justice of the Republic — a special court that investigates allegations of misconduct by government ministers — had scheduled a hearing for the end of May, although he did not indicate a precise date.

“This hearing will be Mrs. Lagarde’s first opportunity to provide the investigative commission with information that will demonstrate that there is no basis to find fault with her actions,” Mr. Repiquet said.

A spokesman for the court did not respond to a request for comment.

The court is seeking to determine whether Ms. Lagarde was complicit in the misuse of public money in what critics say was an overly generous arbitration award to Mr. Tapie, a former Socialist politician who switched allegiance in 2007 to support Mr. Sarkozy’s center-right party, Union for a Popular Movement.

The dispute involved a loan of 1.6 billion French francs that Mr. Tapie that took out from Crédit Lyonnais to buy the distressed Adidas sports empire in 1989. Unable to keep up with the interest payments, Mr. Tapie converted his bank debt into shares of Adidas, which Crédit Lyonnais later sold in 1993 for more than the value of the loan. Mr. Tapie accused the bank of cheating him.

Mr. Sarkozy, when he became president in 2007, suggested that the Finance Ministry — which had been overseeing the dispute and was led by Ms. Lagarde — move the case to arbitration.

In a French television interview in January, Ms. Lagarde said that referring the dispute to arbitrators was “the best solution at the time.”

The I.M.F. has until now declined to comment on the French case, although officials have said the fund’s board was aware of the possibility of French legal proceedings against Ms. Lagarde before its decision to appoint her as managing director in 2011. Ms. Lagarde requested at the time that her right to diplomatic immunity in the case be waived to allow her to participate in her defense.

Annie Lowrey contributed reporting from Washington.

Article source: http://www.nytimes.com/2013/04/19/business/global/french-court-orders-lagarde-to-appear-in-tapie-case.html?partner=rss&emc=rss

I.M.F. and Europe Set Strict Terms for Cyprus

The other 9 billion euros, or $11.6 billion, of the bailout is to come from the other 16 euro zone countries whose approval is still required.

“This is a challenging program that will require great efforts from the Cypriot population,” Christine Lagarde, the managing director of the I.M.F., said in a statement issued by the fund, which is based in Washington.

The commitment comes after the completion of a memorandum of understanding the fund has drafted with Cyprus and the other two international organizations involved in the bailout, the European Central Bank and the European Commission.

Though it has not yet been made public, officials say the agreement includes budget cuts, the privatization of state-owned assets and other conditions Cyprus must meet.

It was another dose of strong medicine for Cyprus, which agreed last month to restructure an outsize banking sector by forcing huge losses on bondholders and big depositors in the country’s two biggest lenders.

Officials from the Cypriot government, which still needs its Parliament’s approval of the terms of the deal, sought to put a positive spin on the deal.

“This is an important development which brings a long period of uncertainty to an end,” Christos Stylianides, a government spokesman, said in a statement made available on Wednesday.

The bailout agreement “should have taken place a lot sooner, under more favorable political and financial circumstances,” said Mr. Stylianides, who was apparently referring to infighting in Cyprus about responsibility for the debacle.

Before the deal, the Cypriot economy was expected to shrink 3.5 percent this year, with unemployment hitting nearly 14 percent. Now, under the strict bailout measures, some experts predicted the economy could contract 5 percent or more, sending unemployment even higher.

The memorandum will not be made public before euro zone governments review it, Olivier Bailly, a spokesman for the European Commission, said at a news conference on Wednesday. Euro finance ministers will hold an informal meeting next week in Dublin, where they might give their backing, Mr. Bailly said.

Full legal approval, though, is expected only after the Parliaments in some euro area countries like Finland and Germany vote on the deal. If those approvals are completed by the end of month, Mr. Bailly said, Cyprus could receive its first aid payment in May.

The Cypriot authorities on Tuesday described elements of the agreement that they said were favorable.

Mr. Stylianides, the Cypriot spokesman, said the deal safeguarded important parts of the economy by keeping potentially valuable offshore deposits of natural gas under Cypriot jurisdiction, and by winning two more years, until 2018, to hit deficit targets and carry out privatizations.

Mr. Stylianides also said the government saved the jobs of contract teachers and of 500 civil servants, and had overcome demands by the international lenders to tax dividends.

But the memorandum could be hotly contested by the Cypriot Parliament, where many lawmakers have criticized the measures that already have been taken, like capital controls — tight restrictions on transfers and withdrawals of money — that threaten to make a bleak economic outlook even worse.

In a change partly aimed at easing those tensions, the government on Tuesday appointed a new finance minister, Harris Georgiades, to succeed Michalis Sarris, who resigned. Mr. Sarris has been criticized at home and abroad for his handling of the crisis.

Mr. Georgiades, who had been the deputy finance minister, said on Wednesday that capital controls would be lifted “gradually” and that the country would meet all of its bailout targets.

Over the course of the negotiations, the spotlight fell on whether the monetary fund was being too forceful in pressing for the country to quickly reduce its debt and impose losses on bank shareholders and big depositors. The approach strained relations with the European Commission, which had concerns about the confidence-sapping effects that such aggressive measures might have on other countries.

In an apparent show of unity on Wednesday, Ms. Lagarde jointly issued a statement with Olli Rehn, the European commissioner for economic and monetary affairs, pledging to “stand by Cyprus and the Cypriot people in helping to restore financial stability, fiscal sustainability and growth to the country and its people.”

The monetary fund’s share of the package for Cyprus was smaller than in some previous arrangements for countries like Greece. But Mr. Bailly, the commission spokesman, said it did not signal a change in policy.

The sums given by the fund depend on the “specific situation” in each country, he said, adding that the billion-euro, three-year loan for Cyprus was unanimously agreed upon by the I.M.F., the European Commission and the European Central Bank.

Ms. Lagarde said Cyprus needed to make substantial spending cuts “to put debt on a firmly downward path,” including in areas like social welfare programs. But she said the plan sought to be evenhanded.

“The fiscal and financial policies of the program seek to distribute the burden of the adjustment fairly among the various segments of the population and to protect the most vulnerable groups,” she said.

More than 95 percent of account holders at Laiki Bank, which will be closed under the plan, and at Bank of Cyprus, which is being restructured, were fully protected, she said.

The main fiscal measures, she said, included raising the country’s corporate income tax rate to 12.5 percent from 10 percent.

Article source: http://www.nytimes.com/2013/04/04/business/global/imf-to-contribute-1-billion-euros-to-cyprus-bailout.html?partner=rss&emc=rss

Showdown Looms Over Cyprus Bailout Deal

BRUSSELS — Finance ministers from euro area countries arrived here Friday as a showdown loomed with the International Monetary Fund over the size of a rescue deal for Cyprus seen as critical to the stability of the single currency.

The talks could stretch into the weekend, with finance ministers expected to seek to keep a lid on the overall costs of the rescue plan and with Christine Lagarde, the president of the I.M.F., expected to push for a deal that is generous enough to enable Cyprus eventually to pay the money back.

The Cypriot authorities want a plan that ensures that the island remains attractive to investors, who include many Russians with large deposits in the country’s banks.

Arriving at the meeting, Ms. Lagarde was blunt about the need for ministers to agree to a realistic package of measures. “All I know is that we don’t want a Band-Aid,” she said. “We want something that lasts, something that is durable and that will be sustainable.”

The key to a breakthrough is finding a way to bring down the size of any bailout package, estimated at about €17 billion, or $22 billion. That is a small amount compared with the rescue deal for Greece, but almost as much as Cyprus’s gross domestic product, which is about €18 billion.

European governments and the I.M.F. were expected to structure a bailout so that creditors including the European Central Bank reached a deal closer to a figure between €10 billion and €13 billion.

Jeroen Dijsselbloem, the president of the Eurogroup, which gathers finance ministers from countries in the euro zone, refused to speculate about the size of the deal as he arrived on Friday.

“I know what my main goals are,” said Mr. Dijsselbloem, adding that they were to make “sure that there is stability in the euro zone and that there is a new sustainable growth path possible for Cyprus.”

The most contentious issue is whether to force Cypriot depositors to take losses — perhaps in the form of a one-off tax on their holdings — in order to make the country’s debt more manageable. The Cypriot authorities have condemned any such initiatives on the grounds that they would do lasting damage to their financial services sector.

The other elements of a deal could involve Cyprus raising its low corporate tax rate, privatizing state assets and overhauling its banks to ensure that they are not havens for money laundering. Yet another factor is whether Russia will agree to lower the interest rate on a loan worth €2.5 billion it has already made to Cyprus.

Mujtaba Rahman, a senior analyst with the Eurasia Group, a political risk research and consulting firm, said it was likely that countries like Germany and Finland would ultimately reach a deal with the I.M.F.

“The fact is that some governments in the north of Europe need the I.M.F. also to be contributing money to Cyprus in order to convince their parliaments to give approval to a deal,” Mr. Rahman said.

The ferocious debate over how much pressure to put on euro area countries in difficulty stepped up a notch on Friday after it emerged that Mario Monti, the outgoing prime minister of Italy, suggested that the demands placed on him to tighten his country’s finances had been unfair.

In a letter sent Thursday to other E.U. leaders at the start of a two-day summit meeting here on the economy, Mr. Monti wrote that Italy “has been delivering on all the policy objectives” set out by the Union. But, in a thinly veiled reference to Spain, Portugal and Greece, he wrote that other countries “have been given extra time to reach their budgetary objectives.”

Italian voters weary of the E.U.-mandated austerity measures rejected Mr. Monti in an election last month.

Article source: http://www.nytimes.com/2013/03/16/business/global/showdown-looms-over-cyprus-bailout-deal.html?partner=rss&emc=rss

U.N. Agency Warns of Rising Unemployment

PARIS — More than 197 million people worldwide are jobless, and an additional 39 million have simply given up looking for work, a United Nations agency said on Monday, warning that government budget-balancing was hurting employment and would probably lead to more job losses soon.

With global growth stalling five years after the financial crisis upended much of the world economy, the number of jobless is expected to rise by 5.1 million this year, to more than 202 million, the International Labor Organization said in a special report. And it predicted there would be a further three million newly jobless people next year.

High unemployment rates in the developed world — 7.8 percent in the United States, 11.8 percent in the euro zone — weigh on demand and hold back economic growth. Global gross domestic product will probably expand about 3.6 percent this year, the International Monetary Fund said in October, below its previous forecast.

Addressing the issue of unemployment last Thursday, the I.M.F.’s managing director, Christine Lagarde, urged governments to focus on “growth that can actually deliver jobs.”

“We stopped the collapse,” Ms. Lagarde said during a news conference in Washington, warning about the risks to growth posed by complacency in Europe and difficult budget negotiations in the United States. “We should avoid the relapse, and it’s not time to relax.”

The International Labor Organization found that macroeconomic imbalances “have been passed on to the labor market to a significant degree.” With aggregate demand weakening, employment “has been further hit by fiscal austerity programs in a number of countries, which often involved direct cutbacks in employment and wages, directly impacting labor markets.”

More troubling, it said, was that while governments had sought to counter the effects of the financial crisis with fiscal stimulus, later austerity measures in some countries appeared to be reinforcing the downturn.

The effects of the recession in Europe are being felt elsewhere through “a spillover effect,” the organization found, mostly through the mechanism of reduced demand for foreign goods, but also in the form of volatile capital inflows in places like Latin America and the Caribbean. These forces have left policy makers with difficult choices about how to keep soaring currencies in check without strangling economic growth.

The agency said that it was common for the rate of job creation to be slow after a financial crisis, but that there had been “a short-lived respite” for developed countries beginning in 2010. That period has now ended, and once again “further job restructuring is likely before a stronger rebound can be expected in labor markets.”

More people were simply leaving the job market altogether, particularly in the developed world, with labor force participation rates falling “dramatically,” it said, “masking the true extent of the jobs crisis.”

The ratio of employment-to-population ratio has fallen as much as four percentage points or more in some areas, it noted, and even where jobless rates have eased, the participation rate “has not yet recovered.”

The labor organization also spotlighted youth unemployment, noting that there were 73.8 million young people unemployed worldwide. It estimated that an additional half million would join the ranks of the jobless this year. The youth unemployment rate, now 12.6 percent, will probably rise to 12.9 percent by 2017, the agency said.

“The crisis has dramatically diminished the labor market prospects for young people,” the agency said, “as many experience long-term unemployment right from the start of their labor market entry, a situation that was never observed during earlier cyclical downturns.”

The agency said employment tapered off in 2011 before turning negative in 2012, with four million people added to global unemployment rolls last year.

But even countries in which jobless rates have not risen “often have experienced a worsening in job quality,” the organization said.

Article source: http://www.nytimes.com/2013/01/22/business/global/un-agency-warns-of-rising-unemployment.html?partner=rss&emc=rss

Kostas Vaxevanis, Cleared of Privacy Violations, Faces Retrial

The publisher, Kostas Vaxevanis, who owns and edits Hot Doc, a respected investigative magazine, was acquitted of misdemeanor charges by a judge on Nov. 1 after publishing what he called the Lagarde list — a list of account holders given to Greek authorities in 2010 by Christine Lagarde, when she was the French finance minister.

The case shone a light on the Greek authorities’ failure to effectively crack down on widespread tax evasion and fueled a debate over media freedom and personal privacy laws. Now, Mr. Vaxevanis is to be retried in a higher-level misdemeanor court on the same charges, and faces a two-year prison sentence if he is found guilty.

The Athens public prosecutor’s office found the judge’s verdict in Mr. Vaxevanis’s case to be “legally mistaken” and wants it re-examined, a court official said, adding that a date for a retrial had yet to be set.

“Such appeals by the prosecutor are not unusual, particularly in cases where personal privacy are concerned,” said Aristides Hatzis, a professor of law at the University of Athens, attributing the two-week delay between the verdict and the appeal to “standard judicial bureaucracy.”

During the trial, the prosecutor, Iraklis Pasalidis, accused Mr. Vaxevanis of “turning the country into a coliseum” by defaming people without determining their guilt. The publisher had countered that the names of bank account holders were not private and that the Lagarde list was “not a legal issue but a very important social and political one.”

In a Twitter post on Friday, Mr. Vaxevanis said, “While society demands disclosure, they cover up.”

Article source: http://www.nytimes.com/2012/11/17/world/europe/kostas-vaxevanis-cleared-of-privacy-violations-to-be-retried.html?partner=rss&emc=rss

In Greece, Taking Aim At Wealthy Tax Dodgers

LONDON — As controversy swirls around the failure of former Greek finance ministers to investigate a list of 2,000 suspected tax dodgers, the current government in Athens is taking a hard look at the foreign assets of those people and thousands of others.

In recent weeks, tax experts at Greece’s finance ministry have been scrutinizing the finances of about 15,000 Greeks to see if money they have sent abroad in the past three years — about $5 billion in all — exceeds the declared wealth on their tax returns, government officials say.

The government of Prime Minister Antonis Samaras is intent on cracking down on wealthy tax evaders as it tries to quell mounting public anger over a slate of austerity measures that the Greek Parliament last week passed by a thin margin. Early Monday, the government won approval for its 2013 budget, which, due in part to persistent tax evasion, must rely on a punishing mix of spending cuts and indirect tax increases to meet targets set by the country’s creditors.

The emergence of the “Lagarde list” of 2,000 individuals with overseas bank accounts — named after a list given to the Greek government in 2010 by Christine Lagarde, then the French finance minister and now head of the International Monetary Fund — and the failure of previous governments to act on it has outraged a generation of austerity-weary Greeks. It highlights as well a longstanding societal fissure between those forced to absorb an ever-increasing tax burden and those who escape the duty by sending money overseas.

The 15,000 names under investigation have been narrowed down from a master list of about 54,000 individuals. One might call it a Lagarde list on steroids — an up-to-date roster of lawyers, bankers, doctors, merchants and even farmers who for decades now have made up the cream of Greece’s tax-avoiding crop.

In the 2013 budget, the government forecasts 44 billion euros in tax revenues, the lowest figure since pulling in 42.3 billion euros in 2006.

While much of the blame for the lower intake can be directed at the economic collapse, the fact that revenues continue to decline three years into an austerity program in which improved tax collection has topped the reform agenda underscores the depth of the problem.

The government isn’t projecting how much the tax push might raise, and many citizens are skeptical that Greek officials will suddenly wrest billions from wealthy scofflaws.

But the initiative could not come at a more crucial moment. Having just barely secured parliamentary support for new austerity measures, in the coming weeks Greece must persuade its creditors to release 31 billion euros in fresh bailout loans or face bankruptcy.

At the root of the decline in tax collection has been the capital flight of Greece’s tax base.

Friedrich Schneider, an economics professor at Johannes Kepler University in Linz, Austria, estimates that about 120 billion euros in Greek assets lie outside the country, representing an extraordinary 65 percent of the country’s overall economic output. The assets abroad include bank deposits, real estate holdings and untaxed business income.

A frequent adviser to European governments and international financial institutions, Mr. Schneider says that 70 billion euros is in Switzerland, about 20 billion euros is in Britain, with the rest spread out in other places like the United States, Singapore and offshore tax havens like the Cayman Islands.

“All the rich people have sent their money out of the country,” said Mr. Schneider, who is perhaps the foremost expert on tax evasion and shadow economies in Europe. “That is why we have such unequal burden-sharing, with the average Greek having lost 40 percent of their income after taxes, while the wealthy have their money outside of Greece.”

The solution, as Mr. Schneider sees it, is not to heap more taxes on the country’s evaporating tax base or to use legal threats to pursue the offshore cash. Instead, he suggests a tax amnesty in which all outside money would be invited back — with no questions asked — and be subject to a flat tax of 15 to 20 percent.

Article source: http://www.nytimes.com/2012/11/12/business/global/greece-renews-struggle-against-tax-evasion.html?partner=rss&emc=rss

I.M.F. Reduces Estimates for Global Growth

Releasing quarterly updates of three reports on the outlooks for the economy, debt and global financial stability, the fund cut its estimates of global growth this year to 3.25 percent, from the 4 percent it forecast in September, on “sharply escalated” risks emanating from Europe.

In light of that market uncertainty and sluggish growth, the fund is seeking to raise up to $500 billion in additional lending capacity. It is also calling on the European Union to expand its bailout fund to at least $1 trillion from its current capacity of 440 billion euros, or about $570 billion, according to a person with knowledge of the negotiations.

José Viñals, director of the I.M.F.’s monetary and capital markets department, told reporters that the fund sought to build a “global firewall” — both to help ease the euro crisis and to ensure that no bystanders to it find themselves locked out of the global financing markets.

In a speech in Berlin on Monday, Christine Lagarde, managing director of the fund, said: “The longer we wait, the worse it will get. The only solution is to move forward together.” She call on the world to help bolster the I.M.F.’s resources and on Europe to bolster its own. “The world must find the political will to do what it knows must be done.”

In its quarterly update, the fund said that “risks to stability have increased, despite various policy steps to contain the euro area debt crisis and banking problems.”

The I.M.F. cited continued high financing costs for European countries and weakness in European banks as two risks that had the capability to intensify each other and lead to “sizable contractions” in economic activity.

Other risks include investor fear over the debts of big countries like the United States and Japan, a “hard landing” in emerging economies and spiraling oil prices as the European bloc and the United States confront Iran.

The fund cut its growth forecasts for every region in the world, as well as for trade and commodity prices. The fund now estimates that Europe will experience a mild 0.1 percent contraction — down from a September forecast of 1.4 percent growth — with a sharper contraction of 0.5 percent among the 17 countries that use the euro currency and deeper recessions in Italy and Spain. It also cut its estimate of global trade volumes.

The I.M.F. did not change its growth forecast for the United States, however. Speaking with reporters, Olivier Blanchard, the fund’s chief economist, said that the “good and bad news” about the American economy were “more or less canceling each other” out: The country’s economic growth is now self-sustaining, but a Europe in recession and a slowdown in emerging-markets promise to weigh on the United States in 2012.

The fund also made a stark warning about the safety of the American financial system. The fund said that “potential spillovers” from the euro area crisis might “include direct exposures of U.S. banks to euro-area banks, or the sale of U.S. assets by European banks.”

In recent months, American regulators and policy makers have played down such risks, pointing to sharply reduced exposure to Europe among money-market funds and investment banks.

The I.M.F. also warned that the United States might turn to austerity budgeting too soon, imperiling its own recovery. Carlo Cottarelli, the director of the fiscal affairs department, cited such premature fiscal tightening as a “concrete risk.” He noted that the steep, automatic budget cuts put into place by Congress last year would lead to the biggest hit to spending in four decades. He called for a more “gradual decline in the deficit.”

The same advice applies to the rest of the world, the fund said. Mr. Cottarelli warned that “both too little and too much adjustment will be bad for growth. Both extremes will be bad for growth.” The main risk is that too many countries will cut their budgets too deeply, too soon, sapping demand from the still-weak global economy.

Mr. Viñals, the director of the I.M.F.’s monetary and capital markets department, acknowledged that bond yields had declined in Europe in recent weeks. But he warned it “should not be taken for granted, as some sovereign debt markets remain under stress and bank funding markets are on life support by the European Central Bank.”

Banks should continue to deleverage, the fund said, adding that they should do so by raising funds, rather than reducing credit and thus hampering economic activity.

Article source: http://feeds.nytimes.com/click.phdo?i=807f1c7a0e415b8150875230af923623

Permanent Rescue Fund Seems Nearer in Europe

The ministers backed efforts by Greece to keep the interest rate on newly issued bonds below 4 percent, Jean-Claude Juncker, who represents the 17 nations using the euro currency, told a news conference. That is below the level offered by bondholders in exchange for their current holdings of Greek debt.

“The negotiations will have to be resumed on that point as we don’t have a final picture,” said Mr. Juncker, referring to the interest rate on Greek debt.

At stake is the need to pare Greek debt to levels where the country can conclude a bailout with the European Union and the I.M.F. that would give it the cash it needs to repay loans coming due in March and, officials hope, allow Athens to finance its needs through 2013. Without such a package, Greece could be faced with a chaotic default that would further destabilize the rest of the euro zone.

Efforts to address another aspect of the region’s debt crisis took a step forward late Monday, as ministers made progress toward establishing a permanent rescue fund, the European Stability Mechanism.

Olli Rehn, the European Union’s commissioner for economic and monetary affairs, said the ministers were able to complete most of the details of the permanent fund, which should be “in place and operational” by July after member states ratify the agreement.

Setting up a permanent fund and giving it adequate financial firepower is a priority for European leaders including Chancellor Angela Merkel of Germany and for officials like Christine Lagarde, the head of the I.M.F.

An obstacle to establishing the fund was cleared on Monday night when ministers found a way to ease concerns in Finland, one of the contributing nations, that it would not incur additional liabilities without prior consent.

Earlier Monday, Ms. Lagarde suggested that the 440 billion-euro European Financial Stability Facility, a temporary bailout fund established in 2010, could be rolled into the 500 billion-euro permanent fund.

The fund is expected to be less exposed to downgrades by ratings agencies than the existing European Financial Stability Facility.

“I am convinced that we must step up the fund’s lending capacity,” to help defend “innocent bystanders” elsewhere in the world who are hurt by the euro contagion, Ms. Lagarde said. “A global world needs global firewalls.”

Mrs. Merkel said that she wanted to see the new fund put into operation quickly. She also said Germany was willing to speed up its share of payments.

Despite continuing concerns about Greek debt, the euro strengthened to an almost three-week high against the dollar after the French finance minister, François Baroin, said in Paris that negotiations with Athens were making “tangible progress.”

Evangelos Venizelos, the Greek finance minister, said as he arrived in Brussels that Greece was ready to complete a private sector debt swap “on time.”

Private sector bondholders are seeking yields of nearly 4 percent, but Greece, as well as Germany and the I.M.F., argue that a yield closer to 3 percent is necessary to give the restructuring a serious hope of success. With the talks at an impasse, the pressure is now mounting on finance ministers to push for a solution.

Reinforcing the need for a deal, Mrs. Merkel said she wanted an agreement “soon enough that no new bridge loan whatsoever will be needed” for Greece.

Even as ministers prodded financiers to do their part to ease the crisis in the euro zone, the I.M.F. pressed European governments to bolster the bailout funds available for euro zone countries so that the region’s problems could be contained.

Ms. Lagarde called on European leaders to complement the “fiscal compact” they agreed to last month with some form of financial risk-sharing. She mentioned bonds backed by debt securities issued by the euro zone or a debt-redemption fund as possible options.

While the sense of crisis has ebbed and markets have calmed since the European Central Bank last month announced longer-term refinancing operations to inject nearly 490 billion euros of liquidity into the banking system, analysts say the central bank has only bought time for leaders to put the 17-country currency bloc on firmer footing.

Without more such actions from governments and the central bank to reassure financial markets, Ms. Lagarde said, “countries like Italy and Spain, that are fundamentally able to repay their debts, could potentially be forced into a solvency crisis by abnormal financing costs.”

Ms. Lagarde also called for more fiscal integration among euro members, saying, “it is not tenable for 17 completely independent fiscal policies to sit alongside one monetary policy.” She called for new measures to increase the sharing of risk, including possibly jointly issued euro area debt instruments, or, as Germany has proposed, a debt redemption fund.

The monthly meeting of the ministers in Brussels came at a time of widespread gloom about the broad European economy. Austerity budgets in the euro zone are reducing demand and weighing on growth.

Even Germany, where factories are bustling, is feeling the effects. The Federal Statistical Office said last month that the German economy probably contracted by about 0.25 percent in the fourth quarter of 2011 from the previous three months.

The economy of Spain, which is struggling with an unemployment rate of more than 20 percent, may contract about 1.5 percent this year, the Bank of Spain estimated.

James Kanter reported from Brussels and David Jolly from Paris. Reporting was contributed by Melissa Eddy in Berlin and Landon Thomas Jr. in London.

Article source: http://feeds.nytimes.com/click.phdo?i=7c394878aef5de3e4e76a8874494edde

DealBook Column: 2011’s Best and Worst in the Financial World

Katy Perry, an artist with EMI, which was sold last year, performing in Buenos Aires.Victor R. Caivano/Associated PressKaty Perry, an artist with EMI, which was sold last year, performing in Buenos Aires.

Please, please take your seats.

Thank you once again for coming to DealBook’s annual closing dinner, where we toast and roast the world of finance — and look ahead to the new year.

We moved this year’s dinner from its usual spot in Manhattan to Paris so Nicolas Sarkozy and Angela Merkel (or Merkozy, as you know them) could attend, given their newfound influence on the markets and the global economy.

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We thought of holding our gathering in Berlin, but then realized this might be the last year we’d be able to do Paris while France still has its AAA credit rating. Christine Lagarde, managing director of the International Monetary Fund, also pointed out that Société Générale could use the extra A.T.M. fees from all of you withdrawing tip money for the coat check.

Not everyone could make it. We mailed Jon Corzine several invitations, but initial reports indicated they were accidentally commingled with his holiday cards. He now says he misplaced the invitations completely and has “no idea” where they could be.

Silvio Berlusconi originally R.S.V.P.’ed “yes” when he saw the menu, but backed out when he learned that “16-year-old Caol Ila” was a single-malt whisky.

But it’s nice to see that so many of you could attend. The seating chart was a bit challenging. Jamie Dimon, chief executive of JPMorgan Chase, is sitting next to Paul Volcker. They’ve agreed to take any discussion of the Volcker Rule outside.

I placed Lloyd Blankfein next to Mark Zuckerberg to ease the underwriting pitch for Facebook’s planned I.P.O. in 2012. I overheard Mr. Zuckerberg ask Mr. Blankfein what holiday gifts he had given his children. Then Mr. Zuckerberg added, “I’m not making small talk, Lloyd — it’s literally the only piece of your personal data I don’t have.”

By the way, Mr. Blankfein, the celebrity chef Mario Batali is graciously catering our dinner and has assured me that blood-sucking squid is not on the menu. I should also note that Mr. Batali has volunteered his services, perhaps to atone for declaring in 2011 that “the ways the bankers have kind of toppled the way money is distributed and taken most of it into their hands is as good as Stalin or Hitler and the evil guys.” Mario is preparing tagliatelle ai funghi e pancetta, which roughly translates to “please don’t put my restaurants out of business.”

I was hoping to invite some leaders of Occupy Wall Street to provide a little balance, but I still don’t know who’s in charge.

Finally, Andrew Mason of Groupon is here. It’s hard to overstate how big a year it was for Mr. Mason. His company went public, he became a billionaire and the daily coupon deals phenomenon he pioneered has seemingly swept the nation. Even his tablemate, Brian Moynihan, chief executive of Bank of America, is getting into the Groupon spirit with an offer of his own: three shares for the former price of one!

And now, on to the toasts and roasts of 2011:

T-Mobile BlackBerry phones. ATT's giant deal for T-Mobile fell apart last year.Andrew Harrer/Bloomberg NewsT-Mobile BlackBerry phones. ATT’s giant deal for T-Mobile fell apart last year.

BIGGEST LOSER ATT’s attempted $39 billion acquisition of T-Mobile may have been the worst merger idea of 2011. Both sides claim the regulatory winds shifted in Washington after the deal was announced. But anyone who was paying even a whiff of attention knew from Day 1 that regulators would block it.

Many have credited T-Mobile’s parent, Deutsche Telekom, and its legal team for walking away with a breakup fee worth about $6 billion. But T-Mobile winds up the biggest loser. The sour regulatory mood will make it harder for T-Mobile to pursue a deal with Sprint, which had been circling the company before ATT arrived. T-Mobile and Sprint are both in worse positions than they were a year ago; both companies have lost customers, and Sprint has a lot less money to spend on an acquisition.

As for Randall Stephenson, ATT’s chief, while the dead deal was clearly a mistake at least it was a relatively cheap one, costing the company only about two months’ worth of cash flow.

BIGGEST WINNER (FOR NOW) Richard Handler, the chief of Jefferies Company, probably deserves a pat on the back — and a double shot of that Caol Ila. He had a tough 2011.

His firm skirted a run on the bank after the collapse of MF Global put the spotlight on Jefferies as the American investment house most vulnerable to European sovereign debt. A credit rating downgrade only fanned the flames. But Mr. Handler stood firm, issuing lengthy denials of virtually any speculation that emerged. And he reduced the firm’s exposure to European sovereign debt by half just to prove to the market that he could. He had little choice, but so far, it’s been a winning strategy. Stay tuned for 2012.

THE RATINGS AGENCIES I’ve invited Douglas Peterson, the newly installed president of Standard Poor’s Ratings Services, mainly because the firm — and its industry peers — performed so miserably. You’re new, Mr. Peterson — you just came over from Citigroup, where you were chief operating officer — so we’ll let you eat with us this time.

But do take note: until the week before the collapse of MF Global, your peer agencies were giving that firm an investment-grade credit rating. As usual, the big ratings agencies did not sound the alarms until long after the fire was raging out of control. In S. P.’s case, it kept an investment-grade rating on MF Global until it filed for bankruptcy protection.

Remember Enron? A.I.G.? S. P. rated those companies with just as much insight. And Mr. Peterson, your firm’s downgrade of the United States last summer seemed aimed more at generating media attention and headlines than helping investors understand the risks of investing in United States Treasury securities. If anything, the downgrade proved how irrelevant the ratings agencies have become: Treasuries have since rallied.

So that you can gain a fuller appreciation of the anger the American public harbors for your firm and industry, I seated you next to Michael Moore, who recently said on Twitter: “Pres Obama, show some guts arrest the CEO of Standard Poors.”

CONSUMER ‘PROTECTION’ I invited both Elizabeth Warren and Richard Cordray to make a point: the bankers in this room waged a successful campaign to keep Ms. Warren from running the Consumer Financial Protection Bureau in 2011. That, in turn, led President Obama to nominate Mr. Cordray, who was rejected by Republicans, again at the behest of Wall Street.

Whether either was the right person for the post is almost irrelevant. What’s clear is that Wall Street is doing everything it can to keep the agency from being able to do its job, and that’s a shame.

Even if you think the financial industry is overregulated or you don’t like the agency’s governance structure, all this political maneuvering sends an awful message to the public: Wall Street banks are actively trying to stymie a start-up agency charged with protecting consumers’ money.

SLEEPER DEAL OF 2011 The sale of EMI Publishing for $2.2 billion to a group led by Sony was hardly the biggest deal of the year, but it might have been the most interesting and undercovered transaction of 2011.

Consider this: EMI’s recorded music unit — the sexy part of the business that produces albums by the likes of Katy Perry and Coldplay — was sold on the same day for $1.9 billion to the Universal Music Group, a division of the French conglomerate Vivendi.

That means the typically boring publishing business, which deals with song copyrights, was sold for more, and it went to a Sony-led group that included boldface-name investors like the media mogul David Geffen; the estate of Michael Jackson; Blackstone’s GSO Capital Partners unit; Mubadala, the investment arm of Abu Dhabi; and Jynwel Capital of Malaysia.

The transaction was orchestrated by Robert Wiesenthal, chief financial officer of the Sony Corporation of America, demonstrating that in this age of digital media uncertainty, the predictable fee stream of a homely business like music publishing has a higher value than an ego-driven trophy asset like music recording.

Watch for more deals of this sort in 2012.

Theodore Forstmann, a pioneer in private equity, died in November after a battle with brain cancer.Jamie Mccarthy/Getty Images For The Promotion FactoryTheodore Forstmann, a pioneer in private equity, died in November after a battle with brain cancer.

REMEMBERING TEDDY Finally, let’s have a brief moment of silence for Theodore Forstmann, one of the pioneers of the private equity business, who died in November after a battle with brain cancer.

In an often-scorned industry, he embodied its best parts. Bold, often brash, sometimes difficult, he was ultimately an entrepreneur’s entrepreneur. And he was introspective enough to have serious doubts about the use of leverage and speak out publicly about it. Most important of all, he donated much of his fortune to underprivileged children.

I’d be remiss if I did not also mention another industry legend who died in 2011: F. Warren Hellman, co-founder of Hellman Friedman, the West Coast buyout firm that once owned Levi Strauss Company and Nasdaq. He, too, gave away much of the “2 and 20” he made.

At a time when the “1 percent” is being ridiculed as selfish and greedy, it is worth remembering the enormous good Mr. Forstmann and Mr. Hellman accomplished. I attended Mr. Forstmann’s funeral and was struck less by the Masters of the Universe in the pews than by the dozens of schoolchildren in attendance — most of them recipients of scholarships financed by Mr. Forstmann.

Article source: http://feeds.nytimes.com/click.phdo?i=2083af78c7bec8bd283ed8b88812fa12