January 15, 2021

Unemployment in Euro Zone Rises to a New High

Mario Draghi, the E.C.B. president, cautioned that, “We haven’t gotten out of the crisis yet.” But he told Europe 1 radio in Paris, “The recovery for the entire euro zone will no doubt begin in the second half of 2013.”

That was a firmer forecast than Mr. Draghi gave earlier last month, when he said only that growth next year would be weak. And it came as separate data indicated that inflation continued to fall, giving the E.C.B. more leeway to pump cash into the economy if needed.

Mr. Draghi’s statement, along with tentative indications that countries like Spain and Portugal are getting a grip on their economic problems, held out hope that a turning point in the euro zone crisis might be on the distant horizon.

“Clear progress is visible in the dismantling of economic imbalances in the euro zone,” economists at the German insurer Allianz said in a note Friday. “The reforms are bearing their first fruits.”

To be sure, many economists remain skeptical. And Mr. Draghi used a separate appearance in Paris on Friday to deliver a lecture on economic competitiveness that, given the setting, could be read as a warning to France, the second-largest economy in the euro zone, after Germany. The country is seen as a risk because of rigid labor regulations and other rules that critics say suppress entrepreneurship.

“It is indeed of utmost importance that national policies continue to focus not only on fiscal measures,” Mr. Draghi said, “but at the same time address key structural problems in labor and product markets.”

Mr. Draghi acknowledged that austerity measures by various governments would inevitably bring “a short-term contraction in economic activity.” But he repeated the central bank’s vow to do “everything necessary” to maintain stability in the euro zone. The central bank has promised to buy debt from countries like Spain in any amount necessary to hold down their borrowing costs, provided they agree to conditions.

The E.C.B. gained a little more maneuvering room for measures to combat the crisis after another report said that inflation in the euro zone declined to 2.2 percent in November from 2.5 percent in October. The E.C.B. seeks to hold inflation to about 2 percent. The falling inflation rate should help mute complaints from the Bundesbank, Germany’s central bank, that E.C.B. measures pose a risk to price stability.

Lower inflation would also make it easier for the E.C.B. to cut its main interest rate, which already stands at a record low of 0.75 percent. But most analysts do not expect a cut next week when the bank holds its monthly monetary policy meeting.

The labor market report Friday underlined the grave effect that the euro zone crisis had had on European society. The jobless rate in the euro zone rose to 11.7 percent in October, breaking the previous record in September of 11.6 percent, the official Eurostat statistical agency reported from Luxembourg.

The jobs market tends to react to underlying economic trends with a time lag, so the rise was not necessarily inconsistent with Mr. Draghi’s prediction of a turnaround next year.

Still, that was probably little consolation to the 18.7 million people in the euro zone who have been classified as jobless.

Spain, struggling with collapse of its real estate sector and painful austerity measures, again led all 27 European Union countries, with a 26.2 percent jobless rate. Greece was in second place with a 25.4 percent rate in August, the latest month for which data were available.

Austria’s 4.3 percent rate was the lowest.

For youth, the unemployment picture was even worse: 23.9 percent of people under 25 in the euro zone are currently defined as unemployed, Eurostat said.

For the entire 27-nation European Union, Eurostat said, the unemployment rate rose to 10.7 percent in October from 10.6 percent a month earlier.

Article source: http://www.nytimes.com/2012/12/01/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss

Economix Blog: Romney’s Tax Bill, European Style

5:46 p.m. | Updated to correct income figure for Liliane Bettencourt.

PARIS — Perhaps it’s no surprise that the Republican presidential candidates Mitt Romney and Newt Gingrich have been so vociferous in warning against what they deride as President Obama’s efforts to turn the United States, as Mr. Romney put it, ‘‘into a European-style welfare state and have government take from some to give to others.’’

Because one thing is for sure: if they lived in Europe, they’d be paying more taxes.

View From Europe

Dispatches on the economic landscape.

We spoke with tax experts in Germany, France and Britain about how much tax they would expect a citizen of their countries to pay on an income similar to Mr. Romney’s. The short answer is, millions more.

None of our tax advisers, all of whom deal with wealthy clients, wanted to be identified, and they cautioned that there was no way to give more than a ballpark estimate without studying Mr. Romney’s tax forms in more detail themselves.

But for the sake of a simple comparison, let’s start with France, which has a top income tax rate of 48 percent, and a capital gains tax rate of 19 percent. (All income is also subject to a 13.5 percent social security tax that helps to pay for things like pensions, unemployment insurance and health care; in the United States, by comparison, the top ordinary income rate is 35 percent and the capital gains rate is 15 percent. Only the relatively small Medicare tax is applied to all earned income, while in 2010 and 2011 Social Security tax applied to only the first $106,800 of wage and salary income.)

In Paris, the hypothetical M. Romney’s effective tax rate would probably have been in the neighborhood of 35 to 40 percent, including the social security tax. While much of his income derived from capital gains, his dividends, interest and income from his private-equity holdings would mostly be taxed at ordinary income rates. At 40 percent, his bill would have been about $8.6 million. (France also gives generous tax credits for large families, but M. Romney’s five children are all adults now, so that would not be of much use.)

In the United States, Mr. Romney paid $3 million in income taxes on his 2010 income of $21.6 million, for an effective rate of 13.9 percent. His Social Security and Medicare tax bills would have been trivial by comparison.

In Britain, income tax rates top out at 50 percent. But most likely, a top London tax lawyer told us, the effective rate would be significantly lower, since Mr. Romney’s income from capital gains would have been taxed at 18 percent to 28 percent.

So, he said, an educated guess would produce an effective tax rate for Mr. Romney of ‘‘probably 30s rather than 40s.’’ At 35 percent, the tax on Sir Mitt’s $21.6 million would add up to about $7.6 million.

In Germany, high-earning workers pay individual income tax rates of up to 45 percent, though our adviser — a lawyer in Frankfurt with a top international firm — noted that an additional ‘‘solidarity surcharge’’ is tacked on top of that for an effective top rate of 47 percent. Mr. Romney, however, would benefit from the lower rate applied to private capital investments: 25 percent, with the solidarity surcharge bringing it up to about 26.4 percent. With most, but not all, of his income treated as capital gains, Herr Romney would probably pay about 30 percent, or $6.5 million.

As for Mr. Gingrich, who paid 32 percent in federal income tax on his $3.14 million in income, he would face mostly ordinary income tax rates in Europe, so he would probably have to fork over about 40 percent of his income if he lived in one of the major European countries.

Of course, many wealthy people find ways to avoid the tax collector (legally and illegally), even in the dreaded European welfare states. Just ask officials in Greece and Italy.

In fact, Mr. Romney may even have competition: Liliane Bettencourt, heiress to the L’Oréal fortune and the richest person in France, made headlines last year with reports that she paid only about 4 percent in taxes on an income of nearly 250 million euros, or $324 million.

After the uproar, Ms. Bettencourt and some other members of the French wealthy elite took a page from Warren Buffett’s book, and asked the government to raise their taxes.


This post has been revised to reflect the following correction:

Correction: January 25, 2012

An earlier version of this post misstated Liliane Bettencourt’s reported annual income. It was in the hundreds of millions of euros, not hundreds of billions.

Article source: http://feeds.nytimes.com/click.phdo?i=8940c13c2558deebf294fc83d58d6252

World Bank Predicts Slower Growth and Urges Precautions

In a report released Tuesday, the Washington-based bank lowered its growth forecasts for high-income and low-income countries, saying it expected the world economy to expand an aggregate 2.5 percent in 2012, down from about 2.7 percent in 2011. In its previous estimate, in June, it forecast growth of 3.6 percent in 2012.

The bank also warned of the continued threat of a global financial shock “similar in magnitude to the Lehman crisis,” because of the possibility that a major European economy could be shut out of the global debt markets. In that case, the bank estimated the damage to the world’s economic growth would rival the recession of 2008 and 2009.

“The largest economy in the world is weakening,” Justin Yifu Lin, the bank’s chief economist, said in an interview, referring to the European Union. “The message for developing countries is to start preparing now.”

The report was issued as forecasters warned of slower growth in the United States. Estimates of the nation’s annual pace of growth reached as high as 4 percent in the final months of 2011. But economists contend the strength came in part from temporary measures, including wholesalers restocking their inventories and consumers saving less and spending more over the holidays.

Economists say they expect many headwinds in early 2012: rising oil prices as the United States and European countries confront Iran; the risk of a tax cut for American wage earners expiring; a strong dollar rendering American exports less competitive; and continued repercussions from the sovereign debt crisis in Europe.

In the report, the biannual Global Economic Prospects, the bank predicted that high-income countries, including the United States, France, Japan and Germany, would grow 1.4 percent in 2012. It forecast a mild contraction of 0.3 percent in the 17 countries that use the euro. Developing countries will grow 5.4 percent, down from a forecast of 6.2 percent in June, the bank said.

The reason for the global slowdown is twofold, said Andrew Burns, head of global macroeconomics at the World Bank and the main author of the report. First, developing countries like Turkey, India, Russia and Brazil were “overheating” in the rebound after the recession and have tightened monetary policy to help curb inflation, he said. Second, he added, the euro zone crisis has frightened investors, and austerity budgets adopted in countries, including Italy and Greece, have weighed on growth.

Mr. Burns said those trends created a “dangerous dynamic,” with the slowdown in emerging economies sapping growth from advanced economies, and the downturn in advanced economies worsening prospects for emerging markets. “The events are feeding off of one another,” he said.

A worst case in Europe could lead to significant hardship for emerging economies, the report said. Commodity prices could fall as much as 24 percent, hurting government revenue in export-dependent nations. Global trade volumes could fall by more than 7 percent. Countries in Central Asia and Eastern Europe would be hit hardest, the bank said.

But even if catastrophe does not occur, growth looks weaker, the bank said. For instance, the World Bank estimates world trade will expand only 4.7 percent in 2012, down from 12.4 percent in 2010.

Last summer, the World Bank noted significant “contagion from Europe to developing countries,” Mr. Burns said. Risk-averse investors slashed financing to emerging markets, with gross capital flows falling to $170 billion in the second half of 2011 from about $309 billion in the same period in 2010. In addition, borrowing costs began to rise in developing countries.

The bank said developing economies should prepare for declining investment from abroad, less-robust exports, and reduced remittances. Governments should rigorously stress test their financial institutions, plan major infrastructure projects to help support demand and ensure the viability of their social safety nets, the report said.

Mr. Lin said advanced economies should consider more immediate fiscal stimulus to support growth, locally and globally. “They need to carry out structural reforms in the long-term,” he said. “But in the short term, they need an intervention to provide a short-term boost to demand.”

He warned that emerging markets have less room for fiscal and monetary stimulus than they did in 2008 and 2009, even though they have more capacity than many developed countries. Many high-income countries, including the United States, are already struggling with heavy debt loads, limiting the possibility of fiscal stimulus. And central banks have already overextended their balance sheets and pushed interest rates close to zero, limiting monetary stimulus, Mr. Burns said in an interview.

The International Monetary Fund, the World Bank’s sister organization, echoed its warnings about the dangers slowing trade and uncertainty about Europe pose to emerging markets.

In a speech Monday, David Lipton, the fund’s first deputy managing director, said there was reason for optimism, given the lessons learned in the 2008 crisis. But, he warned: “Europe could be swept into a downward spiral of collapsing confidence, stagnant growth and fewer jobs. And in today’s interconnected global economy, no country and no region would be immune from that catastrophe.”

The fund is expected to update its World Economic Outlook on Jan. 24. It said it would cut its growth forecast from predictions it issued last September.

World Bank officials emphasized the importance of confidence, given uncertainty about Europe and worries about slowing growth. Mr. Burns said investor sentiment “could have an enormous impact cumulatively.”

Article source: http://feeds.nytimes.com/click.phdo?i=03edb72c48cdd211d1033157208e7071

Wealth Matters: Debating Financial Strategies for the New Year

Republicans and Democrats in the United States seem incapable of agreeing on anything. In Europe, the search for a solution to Greece’s debt problems has been overshadowed by questions about the continued existence of a single currency for the European Monetary Union.

Add at least a half-dozen crucial elections in 2012 — including ones in France, Greece and the United States — and a political transition in China, and pessimism about what lies ahead seems fairly rational.

Yet a year ago, the outlook for 2011 seemed the exact opposite of what the year turned out to be. Economists were raising their growth projections, consumer confidence was improving and a tax-cut compromise in Congress was putting more cash into pocketbooks. An accelerating economic recovery seemed in the offing.

Of course, that was not how the year turned out. Probably the only investors bragging about their returns are the ones who perfectly timed their purchases of United States Treasury bonds and gold — two asset classes that most analysts said were overvalued as 2011 began. (Of course with gold, the people gloating the most are the ones who sold it at its August peak.)

So how should you think about next year? Should you hide for one more year, or charge forward with some sort of plan?

For this week’s column, I asked a group of people whose opinions have impressed me to ponder this conundrum. Next week, I will share some final thoughts and 2012 predictions from the group of five strategists and investors that I have spoken to each quarter. My hope is that in mixing theory and practice, the two columns will offer investors a better sense of both how they should and will act next year.

THE ENVIRONMENT When Standard Poor’s downgraded the credit rating of the United States in August, investors rushed to buy Treasury bonds, the very asset that had just become less creditworthy. This might seem utterly irrational, but it did not surprise Daniel Kahneman, the psychologist who won the Nobel in economic science for work that became the foundation of behavioral economics.

“Treasuries just feel safe,” he said. “When you’re worried, you go to the safe thing. It’s quite a normal reaction.”

I called Mr. Kahneman because I had been reading his new book “Thinking, Fast and Slow” (Farrar Strauss Giroux) and was fascinated by his division of people’s thinking into two systems. System 1 is fast; it’s intuition. System 2 is slower and moderates System 1; it’s the ability to reason.

But what do we do if our System 1 thinks everything looks bleak next year and our System 2 agrees?

“My System 1 also says it is going to be a bad year,” Mr. Kahneman said.

But feeling that does not equate to shunning the market. “I’m not really sure that the situation is very different from what it usually is,” he said. “The same advice about prudence that would carry you in other years would carry you in next year.”

(His greater concern is with what the last three years have done to the general sense of optimism among the young. “That’s a profound change,” he said. “Where that will go, what shape that will take I cannot predict.”)

Practicing a prudent strategy is tougher than it sounds, particularly given the extremes of the last five years. To go from housing and stock markets that were always going up to a housing market that is bumping along the bottom and a stock market that goes up and down seemingly at random is tough to take.

Daniel Egan, head of behavioral finance for the Americas at Barclays Wealth, said that from Jan. 1 to Aug. 1 the Standard Poor’s 500-stock index moved up or down at least 2 percent on 8 percent of trading days. From Aug. 1 to Dec. 20 that number more than tripled, with 27 percent of trading days having moves greater than 2 percent one way or the other. And 13 percent of the days in the second period had swings greater than 3 percent, compared with none in the first period.

“This is the worst kind of environment to attempt market timing in,” Mr. Egan said. “Odds are, you’ll miss the rally when one or more uncertainties — euro, U.S. fiscal policy, U.S. election — resolves itself, leaving you with the volatility but not the return you’d hoped for.”

SIZING THINGS UP One thing behavioral research has shown is that people who lose a lot of money in a particular asset class will often shun it or at least underweight it as an investment in the future.

“Individuals who got burned by T-bills in the 1970s and were burned by inflation underweighted T-bills the rest of their lives,” Mr. Egan said. “2008 being a credit crisis, people are going to have an experiential prejudice against banks for the losses they experienced.”

He added that people who believed real estate was an investment that would always go up were likely to have similar biases.

Assessing these objectively will be crucial for investors who want to make reasoned decisions. Meir Statman, professor of finance at Santa Clara University, said investors needed to step back and think about how the fear of losing even more money was directing their decisions.

“Fear makes us think the world is coming to an end; it makes us think that stocks will never go up and always go down,” he said. “This is where logic is going to have to intrude.”

One helpful tip from Michael Mauboussin, chief investment strategist at Legg Mason Capital Management and the author of “Think Twice: Harnessing the Power of Counterintuition” (Harvard Business Press), was to assess the experts providing the advice and understand the likelihood that their predictions will be right.

“In some realms, experts will predict very well,” Mr. Mauboussin said. “If you turn on the weather, you can be sure if you need an umbrella. When we’re dealing with economic, political and social areas, we cannot predict as well.”

Robert Seaberg, managing director of planning services at Morgan Stanley Smith Barney, advocates that people be a bit more realistic in their thinking about investments.

“The world now is more about risk management than about investing,” Mr. Seaberg said. “Forget the home runs. Guard against the really big losses, and go for singles and doubles. You win more games than you lose.”

ACTION OR INACTION The collective wisdom of this group is almost entirely to take the long view and stay the course next year.

“My advice to individual people is the less attention you pay to this stuff, the better you are going to be,” Mr. Mauboussin said. “You need to have a prudent strategy, a risk tolerance and a time horizon and then don’t get too caught up in it.”

Of course, the long horizon sounds great if you are at the beginning of it. If you are among the baby boomers in retirement or about to be there soon you may scoff at this. But Mr. Statman, who turns 65 this year, said the last thing people of his generation needed to do was try to find a way to get their money back. They need to live with less.

“The saddest stories I read about are of baby boomers trying to recover their losses by going into risky investments, and they end up in Ponzi schemes or very miserable positions,” he said.

As for Mr. Kahneman, he has no plans of adjusting a strategy that has served him well. “I made one big decision, which was how much I want to have in equities and how important it was for me to be protected from inflation,” he said. “Then I leave it to other people. I don’t even want to know how things are going day to day.”

If it’s good enough for a Nobel laureate, it might be good enough for you.

Article source: http://feeds.nytimes.com/click.phdo?i=cad1eb5453fa33a201b041bc1464f123

Germany Calls S.&P. Threat a Spur to Act on Euro

Late Monday, S.P. warned that the ratings of 15 euro zone countries, including Germany and France, were vulnerable to a downgrade. On Tuesday, the agency extended its threat of a possible downgrade to include the top-notch, long-term credit rating on the European Union’s main bailout fund, if any of its gilt-edged guarantors are downgraded.

Though rating agencies have made announcements before previous meetings on the euro debt crisis, Monday’s intervention was dramatic. Market indexes in the euro zone closed down Tuesday, while the yields on German and French bonds rose, a sign of added risk to holders of the securities.

The European commissioner responsible for financial market regulation, Michel Barnier, complained that S.P. had acted without waiting to evaluate the results of the upcoming two-day summit meeting in Brussels.

Jean-Claude Juncker, who heads the group of euro zone finance ministers, added during an interview on German radio, “I have to wonder that this news reaches us out of the clear blue sky at the time of the European summit — this can’t be a coincidence.”

This time S.P.’s downgrade threat was effectively a warning to European leaders of the consequences that would flow from failure to take sufficiently convincing action.

Few now dispute the central thrust of the argument advanced by the rating agency that the economy of the euro zone is deteriorating so rapidly that quick and far-reaching action is required to avert disaster.

“I actually see a positive effect, because now everyone must be aware of how serious the situation is,” Norbert Barthle, the budget spokesman for Chancellor Angela Merkel’s conservative party in Germany, told Reuters.

The German finance minister, Wolfgang Schäuble, called it the “best encouragement” to find a solution.

“The truth is that markets in the whole world right now don’t trust the euro area at all,” he said in Vienna, Bloomberg News reported.

S.P.’s statement will prompt European leaders “to do what we’ve promised, namely to take the necessary decisions step by step and to win back the confidence of global investors,” Mr. Schäuble said.

A report Tuesday from Herman Van Rompuy, president of the European Council, outlined a fast-track option for creating a tighter fiscal framework, or “fiscal compact,” for the 17-country euro zone. This method would rush changes through and avoid the need for time-consuming approval in all 27 E.U. nations.

The hope among many European officials is that an accord along these lines will give the European Central Bank political cover to intervene more aggressively to alleviate the crisis. However it was unclear Tuesday whether the more limited “quick fix” solution — as opposed to a full modification of the E.U. treaty — would allow enough change to satisfy Germany.

Speaking on a visit to Germany, the U.S. Treasury secretary, Timothy F. Geithner, praised recent efforts of European leaders to forge a stronger fiscal union.

“I am very encouraged by the developments in Europe in the past few weeks,” including the reform commitments in Italy, Spain, and Greece, and new steps toward a “fiscal compact,” he said in Berlin.

Asked about an enhanced role for the International Monetary Fund, Mr. Geithner responded that it was playing an important role, and that he expected it to continue to do so. He said the United States continued to support the fund “in the context of the efforts Europeans are making to build a stronger Europe.”

Speaking in Brussels, Mr. Barnier rejected the idea that the S.P. announcement was an act of revenge after the European Commission announced plans last month to tighten regulation of rating agencies.

Article source: http://feeds.nytimes.com/click.phdo?i=c2093d4be911b06bb6a26ac91974b4ec

Leaders Piece Together an Effort to Keep the Euro Intact

Important disagreements persist, and the two primary leaders of the euro zone, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, will meet on Monday in Paris to try to hammer out a joint proposal for the summit meeting. That gathering begins on Thursday evening, and is considered a last chance this year to set the euro right, even as some investors and analysts are beginning to predict its collapse.

“The survival of the euro zone is in play,” one senior European official said. “So far it’s been too little, too late.”

The emerging solution is being negotiated under great pressure from the markets, the banks, the voters and the Obama administration, which wants an end to the uncertainty about the euro that is dragging down the global economy.

In the process, European leaders will begin to change the fundamental structure of the union, creating a form of centralized oversight of national budgets, with sanctions for the profligate, to reassure investors that this kind of sovereign-debt crisis is finally being managed and should not happen again.

The immediate focus of worry is on Italy and Spain, which have been buffeted by market speculation even as they move to fix their economies. That process took an important step on Sunday, as Italy’s cabinet agreed to a package of austerity measures to put the country in line for aid that would improve its financial stability.

The new euro package, as European and American officials describe it, is being negotiated along four main lines. It combines new promises of fiscal discipline that will be embedded in amendments to European treaties; a leveraging of the current bailout fund, the European Financial Stability Facility, to perhaps two or even three times its current balance; a tranche of money from the International Monetary Fund to augment the bailout fund; and quiet political cover for the European Central Bank to keep buying Italian and Spanish bonds aggressively in the interim, to ensure that those two countries — the third- and fourth-largest economies in the euro zone — are not driven into default by ruinous interest rates on their debt.

After consecutive, expensive failures to stabilize the markets and protect the euro, the broad plan emerging this week may have a better chance at succeeding, analysts say, in part because it weaves together measures that deal with the various issues of the euro, particularly the provision of a central authority that can monitor and override national budget decisions if they break the rules.

Still, even if all the parts are agreed upon in the meetings, which are bound to be fraught, the fundamental imbalances in the euro zone between north and south and between surplus countries and debtor ones will not go away. The euro will still be a single currency for 17 disparate nations in the European Union.

One dividing line is that the Germans, along with the Dutch and the Finns, remain adamantly opposed to what some consider the simplest solution: allowing the European Central Bank to become the euro zone’s lender of last resort and to buy sovereign bonds on the primary market, in unlimited amounts. Mrs. Merkel is also dead-set for now against collective debt instruments, like “eurobonds,” that would put taxpayers, particularly German ones, on the hook for the debt of others, which her government regards as illegal.

So Mr. Sarkozy and other European leaders are working on a less elegant and more phased way to create a pool of bailout money that is large enough to convince the markets there is little chance of a default on Italian and Spanish bonds, which should drive down rates to sustainable levels, European and American officials say.

Mrs. Merkel says it is time to get the euro’s fundamentals right. She is insisting on treaty changes to promote more fiscal discipline, including a limit on budget deficits, with outside supervision and surveillance of national budgets before they become dangerous, and clear sanctions for countries that fail to adhere to the firmer rules. Berlin wants the new standards backed up by the European Court of Justice or perhaps the European Commission, with the power to reject budgets that break the rules and return them for revision.

She would like the treaty changes to be accepted by all 27 members of the European Union, but failing that, she said she would accept treaty changes within the euro zone, with other countries who want to join in the future, like Poland, free to commit to the tougher rules now. Many countries, and not only Britain, are opposed to institutionalizing a two- or even three-tier European Union, fearing that their interests will be sacrificed and their voices diminished.

Article source: http://www.nytimes.com/2011/12/06/world/europe/leaders-piece-together-an-effort-to-keep-the-euro-intact.html?partner=rss&emc=rss

Software to Rate How Drastically Photos Are Retouched

“Fix one thing, then another and pretty soon you end up with Barbie,” said Hany Farid, a professor of computer science and a digital forensics expert at Dartmouth.

And that is a problem, feminist legislators in France, Britain and Norway say, and they want digitally altered photos to be labeled. In June, the American Medical Association adopted a policy on body image and advertising that urged advertisers and others to “discourage the altering of photographs in a manner that could promote unrealistic expectations of appropriate body image.”

Dr. Farid said he became intrigued by the problem after reading about the photo-labeling proposals in Europe. Categorizing photos as either altered or not altered seemed too blunt an approach, he said.

Dr. Farid and Eric Kee, a Ph.D. student in computer science at Dartmouth, are proposing a software tool for measuring how much fashion and beauty photos have been altered, a 1-to-5 scale that distinguishes the infinitesimal from the fantastic. Their research is being published this week in a scholarly journal, The Proceedings of the National Academy of Sciences.

Their work is intended as a technological step to address concerns about the prevalence of highly idealized and digitally edited images in advertising and fashion magazines. Such images, research suggests, contribute to eating disorders and anxiety about body types, especially among young women.

The Dartmouth research, said Seth Matlins, a former talent agent and marketing executive, could be “hugely important” as a tool for objectively measuring the degree to which photos have been altered. He and his wife, Eva Matlins, the founders of a women’s online magazine, Off Our Chests, are trying to gain support for legislation in America. Their proposal, the Self-Esteem Act, would require photos that have been “meaningfully changed” to be labeled.

“We’re just after truth in advertising and transparency,” Mr. Matlins said. “We’re not trying to demonize Photoshop or prevent creative people from using it. But if a person’s image is drastically altered, there should be a reminder that what you’re seeing is about as true as what you saw in ‘Avatar,’ ” the science-fiction movie with computer-generated actors and visual effects.

The algorithm developed by Dr. Farid and Mr. Kee statistically measures how much the image of a person’s face and body has been altered. Many of the before-and-after photos for their research were plucked from the Web sites of professional photo retouchers, promoting their skills.

The algorithm is meant to mimic human perceptions. To do that, hundreds of people were recruited online to compare sets of before-and-after images and to determine the 1-to-5 scale, from minimally altered to starkly changed. The human rankings were used to train the software.

His tool, Dr. Farid said, would ideally be a vehicle for self-regulation. Information and disclosure, he said, should create incentives that reduce retouching. “Models, for example, might well say, ‘I don’t want to be a 5. I want to be a 1,’ ” he said.

Yet even without the prod of a new software tool, there is a trend toward Photoshop restraint, said Lesley Jane Seymour, editor in chief of More, a magazine for women over 40.

Women’s magazine surveys, said Ms. Seymour, a former editor of Marie Claire and Redbook, show that their readers want celebrities to “look great but real.”

“What’s terrific is that we’re having this discussion,” she said. But readers, she added, have become increasingly sophisticated in understanding that photo retouching is widespread, and the overzealous digital transformations become notorious, with the before-and-after images posted online and ridiculed.

“Readers aren’t fooled if you really sculpt the images,” Ms. Seymour said. “If you’re a good editor, you don’t go too far these days. If you give someone a face-lift,” she said, adding, “you’re a fool.”

Article source: http://feeds.nytimes.com/click.phdo?i=469a2370a05eb48f8241f455c704e39e

Off the Charts: In Europe, Even the German Powerhouse Is Losing Steam

In the second and third quarters of this year combined, Germany grew at an annual pace of just 1.6 percent. France, the second-largest economy in the euro zone, showed an annual rate of just 0.6 percent over the same six months.

Until recently, the euro zone seemed to be separated into three groups when it came to economic growth. Germany, and a few other Northern European countries, were doing the best, while economies in the peripheral countries were shrinking. In between were countries with moderate rates of growth.

But now it appears the in-between group is faltering, while the peripheral countries continue to struggle. In the third quarter, according to Eurostat, the European statistical agency, Belgium, which had been among the better performers, showed no growth at all. The same was true for Spain, and the Netherlands reported its real gross domestic product declined for the first time since 2009.

The accompanying charts show the change in gross domestic product figures for nine euro countries since the second quarter of 2009, as well as figures for the three largest industrial countries outside the bloc. Germany’s economy is 7.6 percent larger than it was at the bottom, a growth rate more than twice that of France. There is as yet no third quarter estimate for Italy, but its growth rate was tepid even before its borrowing costs began to rise.

One of the few relative bright spots is Ireland, whose economy appears to be finally growing after years of austerity and deflation. But there is no sign of recovery in Portugal, and the Greek economy continues to decline. Greece is not shown in the chart because it is currently unable to produce seasonally adjusted statistics. But Eurostat estimates that the Greek economy was 5.2 percent smaller in the third quarter than it had been a year earlier.

In the early months of recovery, Germany may have benefited from its neighbors’ weaknesses. Its companies were better positioned to export, both within Europe and outside it, thanks in part to Germany’s having held down the growth in labor costs. The euro was also weaker than an independent German mark would have been, providing more help for German exports.

But now it appears that the weakness of its trading partners may be slowing Germany’s economy, at the same time that borrowing costs are rising for those countries. A survey of German analysts this week showed investor expectations for the economy had fallen to the lowest levels since 2008.

The United States economy has grown 5.6 percent from the bottom, for an overall rate of 2.5 percent a year. That may seem good when compared with other countries, but by historical measures it is the weakest recovery since World War II. The economy grew 6.3 percent — a 2.7 percent annual rate — over the nine quarters following the 2001 economic bottom, in what had been the slowest pace until now.

Floyd Norris writes about finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=3ff90e6cff18a5c34e009575c4715ef1

Forecast for Economic Growth in Europe Is Lowered

BRUSSELS — Europe’s economic outlook received a fresh dose of gloom Thursday, when the European Commission warned that the Continent’s economies were stalled and faced the risk of a double-dip recession.

The commission’s latest growth forecasts intensified concerns that, as some members of the euro currency union take tough austerity measures to appease the debt markets, they are stifling any chance for economic growth that might help pull them out of financial distress. The commission predicted that, as a result of the contraction, the region’s government debt levels would edge up next year.

“The recovery in the European Union has now come to a standstill, and there is a risk of a new recession,” Olli Rehn, the European commissioner for economic and monetary affairs, told reporters in Brussels.

“This forecast is in fact the last wake-up call,” he added.

Mr. Rehn, an unflappable Finn who is rarely prone to hyperbole, was not exaggerating. Even Germany, the economic engine of Europe, is now expected to record just 0.8 percent growth in 2012 — more than a percentage point lower than the European Commission predicted in its spring forecast. And none of the euro zone’s other three biggest economies — France, Italy and Spain — are projected to achieve 1 percent growth in 2012.

At the other end of the spectrum lies Portugal, which was forced to ask for a bailout this year and is contracting so fast that it might not be able to meet its financial goals. The new forecast is for Portugal to have negative growth of 3 percent for 2012 — worse than the minus 1.8 percent predicted earlier.

That would rank Portugal at the bottom of the chart, below even Greece, whose economy is expected to shrink by 2.8 percent in 2012.

“The slowdown in economic activity is compounding investors’ concerns about debt sustainability,” said Simon Tilford, chief economist at the Center for European Reform in London. “In the south of Europe we have very high borrowing costs and no economic growth. That’s a lethal combination.”

Italy, for example, risks being forced into a vicious downward cycle if it has to make deep cuts in public spending to meet its creditors’ demands, and the austerity measures plunge the country into a recession that reduces tax revenue, Mr. Tilford said.

Over all, the European Commission’s revised forecast showed growth of only 1.5 percent this year for the 17 nations using the euro, before slumping to 0.5 percent next year.

The commission had previously expected the euro area’s economies to expand 1.6 percent in 2011 and 1.8 percent next year.

Debt levels in the euro area are predicted to increase from an average 88 percent of gross domestic product in 2011 to 90.4 percent in 2012 and 90.9 percent the following year.

The debt of Greece, the region’s outlier, next year is expected to reach a more staggering level than the 162.8 percent of G.D.P. this year. The forecast is for 198 percent of G.D.P. in 2012, and even marginally higher than that the following year.

The next highest debt ratio in the euro zone is Italy’s, at 120.5 percent of G.D.P. — and the sheer size of its debt, 1.9 trillion euros, makes it a much bigger worry for Europe. The commission forecasts growth of only 0.1 percent for Italy in 2012, with its debt ratio remaining stable.

The commission’s report underscores the risk that European leaders have begun to acknowledge in recent months — that austerity measures could send euro zone economies into a downward spiral. To stimulate growth, the European Commission wants to press structural reforms like liberalizing labor markets and relaxing restrictions that can create market inefficiencies.

A separate document prepared before a summit meeting of European Union leaders last month noted that through changes like freeing up services and integrating the energy sector, Europe could add 3 percent of G.D.P. by 2020. But those ideas still face resistance in many euro zone nations and would take years to put in place.

So Mr. Tilford argues that the euro zone’s healthier economies should be stimulating demand.

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Economix Blog: Simon Johnson:Is Europe on the Verge of a Depression, or a Great Inflation?

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Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

The news from Europe, particularly from within the euro zone, seems all bad.

Today’s Economist

Perspectives from expert contributors.

Interest rates on Italian government debt continue to rise. Attempts to put together a “rescue package” at the pan-European level repeatedly fall behind events. And the lack of leadership from Germany and France is palpable – where is the vision or the clarity of thought we would have had from Charles de Gaulle or Konrad Adenauer?

In addition, the pessimists argue, because the troubled countries are locked into the euro, no good options are available. Gentle or even dramatic depreciation of the exchange rate for Greece or Portugal or Italy is not in the cards. As a result, it is hard to lower real wages so as to restore competitiveness and boost trade. This means that the debt burdens for these countries are likely to seem insurmountable for a long time. Hence default and global financial chaos seem likely.

According to the September 2011 edition of the Fiscal Monitor of the International Monetary Fund, 44.4 percent of Italian general government debt is held by nonresidents, i.e., presumably foreigners (see Statistical Table 9), on Page 72). The equivalent number for Greece is 57.4 percent, while for Portugal it is 60.5 percent.

And if you want to get really negative and think the problems could spread from Italy to France, keep in mind that 62.5 percent of French government debt is held by nonresidents. If Europe has a serious meltdown of sovereign debt values, there is no way that the problems will be confined just to that continent.

All of this is a serious possibility – and the lack of understanding at top European levels is deeply worrisome. No one has listened to the warnings of the last three years. Almost all the time since the collapse of Lehman Brothers has been wasted, in the sense that nothing was done to put government finances on a more sustainable footing.

But perhaps the pendulum of sentiment has swung too far, for one simple and perhaps not very comfortable reason.

There is no way to have just a little debt restructuring for Italy. If Italian debt involves serious credit risk – an end to the view that government debt has “no credit risk” and is a “risk-free asset,” with zero probability of default – then all sovereign debt in Europe will need to be repriced downward.

Will Germany will remain a safe haven? Even that is far from clear. According to the I.M.F., gross government debt in Germany will be 82.6 percent of gross domestic product at the end of this year (Statistical Table 7 of the Fiscal Monitor, on Page 70; the net government debt number for 2011, in Statistical Table 8, on Page 71,is 57.2 percent). Reports of German fiscal prudence have been greatly exaggerated.

German policy makers and the German public will not do well in the event of a major sovereign-credit disaster. Credit would tighten across the board. German exports would plummet. The famed German social safety net would come under great pressure.

There is an alternative to a decade of difficult austerity. The Germans could agree to allow the European Central Bank to provide “liquidity” support across the board to the troubled governments.

Many things are wrong with this policy – and it is exactly the kind of moral hazard-reinforcing measure that brought us to the current overindebted moment. None of us should be happy that Europe – and the world – has reached this point.

Among others, the bankers who bet big on moral hazard – i.e., massive government-backed bailouts – are about to win again. Perhaps the Europeans will be tougher on executives, boards and shareholders than the Obama administration was in early 2009, but most likely all the truly rich and powerful will do very well.

But if the German choice is global calamity or, effectively, the printing of money, which will they choose?

The European Central Bank has established a great deal of credibility with regard to keeping inflation at or close to 2 percent. It could probably offer a great deal of additional support – through creating money – without immediately causing inflation. And if the bank is providing a complete backstop to Italian government debt, the panic phase would be over.

None of this is a lasting solution, of course. Europe needs a proper fiscal center – much as the United States needed in 1787 and got under Alexander Hamilton’s policies from 1789. When he became Treasury secretary, the United States was in default and the credit system was almost completely broken. Some centralized tax revenue and control over fiscal deficits are needed.

Silvio Berlusconi stood in the way of all this. Other European leaders would not trust him to tighten Italian fiscal policy. But if he is really gone from power – and we should believe that only when we see it – there is now time and space for Italy to stabilize and, with the right help, find its way back to growth.

Of course, if the European Central Bank provides unconditional financial support to Italian, or other, politicians who refuse to bring their deficits under control, we are heading for another Great Inflation.

Article source: http://feeds.nytimes.com/click.phdo?i=1dcc306e0bb135f227b0bc0d8654efbf