new europe print edition issue 965

Bulgaria dashes Trans-Balkan oil pipe dreams |3

NEWEUROPE19th Year of Publication | Number 965 | December 11 - 17, 2011| € 3.50 www.neurope.eu

IN THIS ISSUE EU PolicyThe evils of Europe’s overcrowded prisons|Page 4Barroso urges restraint in cutting innovation funding|Page 8

EU-WorldHuawei heralds its arrival in 'EU district'and cements its presence in Brussels|Page 6Human Rights and development in the wake of the Arab Spring|Page 11Election washout for United Russia: Are voters fed up with Putin? |Page 14

Energy & ClimateMayors gather to promote sustainable energy|Page 10Planet of the Millennium|Page 12Rosneft, TNK-BP see more Venezuelan oil|Page 13

Country newsMoody's downgrades 3 French banks|Page 17Delhaize plans 450 new stores|Page 19Hellenic Asset Fund launches tender for old Athens airport|Page 23Sofia says South Stream of national importance|Page 24Kiev can pay for Russian gas in rubles|Page 28Clinton, Westerwelle criticise Russian election|Page 31

Editorial & OpinionKeep the IMF out of Europe|Page 7Think positive says Google chief|Page 9Cyprus at the crossroads|Page 10

Britain becomes sub-marginal, after the last EUSummit on Thursday and Friday 8 and 9December which reshaped geo-economic direc-tions of the European continent with the accel-eration of the fiscal union. Indeed, such processincludes, among others, reinforced regulation andsupervision, at European level.

The attempts of David Cameron and the Cityof London to block financial supervision and thestrengthening of the Eurozone have dramatical-ly failed and have left the United Kingdomalone, trailing behind developments. This newsituation, brings to an end a 30-year undisputedBritish domination in Europe’s finances, intensi-fied in the last decade, blocking the EuropeanUnion to advance towards a European systemfor banking supervision, something which if itwere introduced a decade ago, the current

Eurozone crisis would have been avoided to itslargest part.

So far, Great Britain, in order to facilitate theCity of London, a complex of “nothing” tradingcompanies profiting from the lack of any super-vision of the European financial markets, hadappointed the key ranking Commission officialin the Internal Market Department with directintervention of Downing Street to the Presidentof the European Commission. These high rank-ing Commission officials have been for the lastten years responsible for the protection and sta-bility of the common European currency, andwas the “antithesis” of the system as coming froma country, which does not participate in the Euroand wants to abolish it.

Finally, thanks to the intelligent moves ofInternal Market Commissioner Michel Barnier,

the terms of the game turned upside down, andDavid Cameron found himself outside themainstream of the financial European makingwhile the role of Britain in the banking mattersof Europe, will be marginal.

In this context, it must be added that the cru-cial error which led to the loss of Brussels fortressso far dominated by the City of London, was thewithdrawal of the British Conservatives from theEuropean People’s Party, the biggest and mostinfluential political platform in Brussels. Indeed,only from within the EPP Tories could have suc-cessfully lobbied for their case. Needless to saythat any attempt of the British Conservatives toreturn to EPP, will prove only a futile exercisesince the Franco-German watch dogs at the gateof Rue de Commerce are standing-by disallow-ing any intrusion.

European Peoples' Party takes revenge on UK Conservatives

·Pages 2, 4, 5

EU saves euro ditches London

The British Prime Minister was the only EU leader to oppose changing the European Union Treaty to save the euro. The other 26 leaders expressed full support to the Eurozone.

Secrets and Silence Page 16

INTERVIEWWeekly columnist and former editor-in-chief for The Observer Will Hutton talksto New Europe about the crash in theEurozone and what Europe should we bedoing over the next 12 months

·Page 5

HUAWEIHuawei President Leo Sun and Vice-President Tony Graziano talk to NE aboutthe (ICT) solutions provider's goals andobjectives are as regards the Europeanmarket ·Page 6

KASSANDRABulgaria is one of the few member stateswith great potential for development, yet itcannot take full advantage of the opportu-nities offered by its integration intoEuropean structures. ·Page 3

ARTS & CULTURE

WORLD ENERGY·Inside

EUROPENEW

MIDDLE EAST

ANALYSIS | New Europe NEW EUROPEDecember 11 - 17, 2011

NE 15 YEARS AGOElio Di Rupo was not allowed into the EU Summit because nobody believed Belgium had a prime minister.|BELGA/BRUNO FAHY

The Shooting Gallery

In 1996 Boris Yeltsin was re-elected as President of Russia for another term. The passage from the centrally planed economy tothe a market led, organised productive machine was still languishing and privatisations favoured the oligarchs connected to theKremlin apparatchiks. The country was at the crossroads. Corruption was increasing and basic household supplies were a luxu-ry for the vast majority of citizens in this huge and richly endowed country, while a tiny minority was happily exploiting every-thing. No wonder that the the return to communism was appearing like an obvious policy line. President Yeltsin needed a sec-ond round in order to win his new term in the top job with 53.8% of the votes, with Gennady Zyuganov getting 40,3%.

Rating agency intervenesin reshaping Eurozone

Last week only minutes after French President Nicolas Sarkozyand German Chancellor Angela Markel had concluded theirpress conference in Paris on Monday 5 December, havingannounced their long-term plans to counter the Eurozone sov-ereign- debt crisis, US ratings agency Standard & Poor’s (S&P)revealed that they had placed the credit-worthiness of 15Eurozone member states, including Germany and France on“negative watch”. This means that over the next 90 days allthose countries, practically the entire Eurozone, including theEuropean Financial Support Facility, the EU mechanism tohelp banks and governments in distress, could loose their cur-rent credit ratings. It seemed rather a somewhat political intervention by S&Pahead of the European Council on 8-9 December, at whichBerlin and Paris were expected to try convincing at least their17 euro area peers, if not all 27 members of the Union, tochange the EU Treaty and introduce automatic sanctions fornational budget deficits that are in excess of the 3% GNPthreshold. In reality the intervention of S&P in this procedurewas like an attempt to exert pressure on the European Counciland unduly influence its decisions. Actually a number of majorpolitical figures of Eurozone said that this was a straightfor-ward support for those who wanted the Council of heads ofstates and governments to follow certain lines. And all that at a crucial time when Merkel and Sarkozy embarkupon the difficult task to change the Treaty of Lisbon, meant tobe a major change in the workings of the Union, placing fiscaldeficits in the same centrally controlled package as monetaryaffairs, thus linking these two crucial chapters of economic pol-icy, at least within the Eurozone. In this way, the Eurozone will cover the economic policy vacu-um that is currently threatening to destroy the monetary zone,by creating central control over fiscal deficits and state borrow-ing. The intervention of S&P in this procedure can be inter-preted as 'pointing the finger' at the 27 EU leaders, informingthem that the credit-worthiness of the entire Eurozone willprobably be degraded, even including countries that have hadno previous problems whatsoever in honouring their debts.S&P obviously considers that Germany's credit- worthinesscould have been undermined if the Eurozone countries haddecided to guarantee each other’s debts, which no longer thecase; Merkel and Sakorzy were adamant about rejecting aEurobonds solution, but the American agency has neverthelessnow cast a shadow on the Eurozone's credit-worthiness.Seemingly, S&P wants to appear tough in its judgements, afterhaving been previously heavily criticised concerning its relaxedattitude, such as awarding a triple-A rating to US real- estatesafeguarded toxic loans. S&P is also under examination by theAmerican Securities and Exchange Commission for possibleinsider trading related to the agency's downgrading of the USin summer.In any case, the EU 27 leaders will convene this week to try andconvince the markets that the Eurozone will take effective mea-sures to straighten out its problems with sovereign debts. If the Merkel-Sarkozy proposal goes through, and so far there isno indication for the contrary, the Eurozone will actually create askeleton ‘finance ministry’, with the task not of conducting every-day business, but rather as a watchdog over the member states’ fis-cal deficits. Automatic ‘punishments’ for national-budget sinnerswill not be easily avoided. To this effect, a majority of more than80% of Council votes will be required – as a result, Eurozone willhave not only a common monetary policy run by the EuropeanCentral Bank, but also a finance ministry, which has made itsabsence conspicuous during the past two years.

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ISSN number: 1106-8299

By Dionyssis Kefalakos

Bulgaria is one of the few memberstates with great potential for devel-opment, yet it cannot take full ad-vantage of the opportunities offeredby its integration into Europeanstructures. Indeed, despite the factBulgaria should be one of the majorreceivers of EU funds, the countrylies between being a net receiver (ac-cording to the government) or a netcontributor (according to the opposi-tion). In practical terms, this meansthat despite the country’s great po-tential of receiving significant fund-ing from the European Unionprogrammes, it is a loser in real terms.The reasons for this include a lack oftechnical knowledge as to how toprepare proposals and how to draftterms of reference for tenders, as wellas the transparency of such proce-dures that is needed for the Europeanservices to assess the practices of agood and honest administration.

During the past month, New Europehas twice referred to Bulgaria’s pooradministrative practices: 30 October,‘Traps and pitfalls for Borisov’ and 13November ‘Conflict of interest: Bul-garia sets new record’ which wereviewed with much scepticism inBrussels’ corridors of power.

In our articles, we specifically referredto two important issues – the viola-tion of the EU internal market andcompetition rules in the case ofSopharma Pharmaceuticals and the

privatisation of the Municipal Bankof Sofia. Sopharma appears to be atypical case of violation of Articles102 (Dominant Position) and 107(State Aid) of the EU Treaty, whilethe case of the Municipal Bank pri-vatisation may fall under internalmarket rules as regulated by Direc-tives 2004/17 and /18. Both compa-nies, Sopharma and the privatizedbank, belong to Ognyan Donev.There is a lot more to be said onthese two cases, but one thing at atime…

This week, we focus on certain prac-tices concerning public procurementsin Bulgaria which, when assessed inBrussels, add to both Bulgaria and theBorisov government’s negative image.When Boyko Borisov came to powerin July 2009, Brussels and memberstates enthusiastically received him, asthey had previously associated him

with transparency and anti-corrup-tion. However, with cases such asthose cited above ongoing, the initialenthusiasm at a European level is fad-ing away. Among other examples thisis reflected in the participation of theEU in co-financed projects, which,compared with neighbouring Greeceremain low. Subsidies for Greece arenow set to 95% (because of the crisis),In 2006, with no crisis in sight andonly because of the credibility of the-then new government under KostasKaramanlis EU co-financing wasraised from 40% to 80%, thus allowingGreece to absorb more than €25 bil-lion, that was the entire remainingamount of Community SupportFramework III, contrary to the expec-tations of the previous government,which had, as its best-case scenario, toabsorb €8 billion.

The Bulgarian government now has

a good chance to increase EU co-fi-nancing participation, but hard workon the transparency front is required,as well as maximisation of the supportof the European People’s Party (EPP),which is the most influential politicalplatform in Brussels. We should notlose sight of the fact that, on the eveof Borisov election in 2009, thanks tothe political intervention of the EPPparty, the European Commission re-leased some €500 million inEuropeanpayments to Bulgaria,which had beenblocked by OLAF.

The case of malpractice in publicprocurement, which we will outlinehere, concerns the grotesque circum-vention of Public Procurement rules(Directives 2004/17 and /18) with anon-transparent, ‘photographic’terms of reference issued by Alexan-drovska Hospital for the procure-ment of equipment producingradioactive isotopes used by graphicdiagnostic scanners (PET) in Sofiaand Varna. As for transparency, thePublic Procurement Directives seekto base procurement on that princi-ple. Transparency increases pricecompetition among suppliers, but theincreased competition may drivedown prices to a level where poorquality or predatory pricing becomesa concern. Thus, non-transparencynot only violates the above Directivesbut also could be a competition con-cern under Article 102 of the Treaty.

So far, radioactive isotopes are importedinto Bulgaria from Hungary and Aus-tria. The unit price paid by the Bulgar-ian state is around 2,500 Lev, followinga reduction of 500 Lev imposed re-cently by the government,but the priceof producing locally will drop to 800Lev, the difference being due to trans-port costs. Currently, Bulgaria paysaround 8m Lev per year; therefore, thedecision to produce radioactive isotopesin Bulgaria was correct. The terms oftenders, however, were not.

Without going too much into detail,the terms of reference for this tenderprovide that the bidders must have alicence for producing medicines andalso that the bidders must have anauthorisation by a cyclotrons pro-ducer. In Bulgaria, only one companyhas such an authorisation, Sopharmato which the licence was granted byGeneral Electric, an American com-pany noted in the past for doing easybusiness with the Bulgarian healthministry, since procurements specifi-cations were seemingly very muchbased on its templates.

The combination of the two basic re-quirements of the tender specificationsby the Alexandrovska Hospital moti-vated the Centre for the Protection ofthe Rights in Healthcare (CPRH) tofile, a couple of weeks earlier, a com-plaint to the Sofia prosecutor (registra-tion number 11333), requesting that acriminal investigation be opened.

KASSANDRASome summit press conferences after the all

night session were not attended by everyone as

some were asleep as Sarkozy flew by

December 11 - 17, 2011 | NE | Page [email protected]

Once upon a time in Brussels...

Follow me on twitter @Kassandra_NE

The distinguished EuropeanConservatives & ReformistsGroup (ECR) MEP and De-velopment Committee ViceChairman Nirj Deva hasjoined the race to be presi-dent of the European Parlia-ment.

In a letter to MEPs he setout his case as “a neutral,friendly, experienced speakerof the parliament, not a polit-ical president”. He also asks:“Why Deva?” and replys thathis qualifications are as being:“Inclusive, non-partisan, mul-ticultural, international statureand respect”.

The letter concentratessolely on China, with whichhe expounds on the impor-tance of dialogue. In themailout, he also includes a

copy of a book he wrote onthe workings of the Parlia-men, in Chinese, adding thathe hopes MEPs “will enjoylooking at, if not reading, thebook”.

So far, according to a nomi-nation form received by NewEurope (pictured), some of hissupporters would appear to bean unusual bunch. The sevensignatories to his form thusfar are:

Bruno Gollnisch: FrontNational

Phillip Claeys: Vlaams Be-lang

Oreste Rossi: Lega NordNick Griffin: British Na-tional PartyDimitar Stoyanov: Bulgar-ian Attack PartySlavi Binev: Bulgarian

Andreas Molzer: AustrianFreedom PartyIt is encouraging to see so

many MEPs of this calibreput their long-standing con-cerns on immigration andethnic minorities aside to sup-port Deva.

ECR spokesman JamesHoltum told New Europe:"He was nominated by theECR Group, which fully sup-ports him. Not by the list ofpeople you allege. In these cir-cumstances the piece is ex-tremely misleading,defamatory and factually inac-curate."

A Conservative source alsotold New Europe that theywere unaware of the existenceof the nomination form inquestion.

EUROPEAN PARLIAMENT

Nirj Deva aims for Presidencyand makes some new friends

Petty interests downgrade image of Bulgaria and Borisov

Bulgaria's Prime Minister Boyko Borisov

Never say Deva: MEP Nirj Deva's nomination form for the position of EuropeanParliament president

| New Europe NEW EUROPE

ANALYSISDecember 11 - 17, 2011

After long hours' of discussion that started late on 8 De-cember lasted until the early hours of 9 December and re-sumed during the afternoon, the 26 EU leaders, at theexemption of the British PM David Cameron, reachedagreement on how to help Eurozone create a stronger fis-cal union. French President Nicolas Sarkozy and GermanChancellor Angela Merkel, aided by European CouncilPresident Herman van Rompuy, proposed changes to theEU Treaty to provide for closer fiscal union, at least for the17 member states of Eurozone. Now, instead of this, theEurozone countries will go for a fiscal IntergovernmentalAgreement for a closer union, along with any other EUcountry willing to join, and there are already nine that haveindicated willingness to do so - but not Britain.It was British Prime Minister David Cameron who vetoeda change in the European Treaty, saying that he believedthe financial heart of Britain in the City of London wouldbe undermined by such a change.However, well-informed sources in London said thatCameron could not sanction a change to the EU Treatywithout first putting it to a referendum, because within hisown Conservative party there are many Eurosceptic mem-bers already asking for a referendum on Britain's EU mem-bership who, given the chance for a change to the Treaty,would have their chance to promote such a referendum,which Cameron does not want.

Now what?In any case, the Franco-German proposal did not gothrough and now the 17 countries of the Eurozone plusnine more, except Britain will go for a new Intergovern-mental Agreement to create this stronger fiscal and eco-nomic union to save the euro. Nicolas Sarkozy and Hermanvan Rompuy have both said that this stronger fiscal andeconomic union will go ahead with the 17 countries of theEurozone plus Denmark, Poland, Bulgaria, Romania,Hungary and two of the Baltic Republics (the third onebeing a member of the Eurozone) plus Sweden and theCzech Republic . Sarkozy, speaking in the early hours of 9December, appeared very critical of “our British friends”, ashe put it, saying that the 17 Eurozone countries plus the 9others would nevertheless go ahead and create the Inter-governmental Agreement between them before the end ofMarch 2012 to provide a strong fiscal and economic unionwithin the EU.

ESM and IMFApart the Intergovernmental Agreement, it was also agreedthat the European Support Mechanism, which is to replacethe EFSF during 2012 acting as a permanent rescue mech-anism for Eurozone countries with liquidity problems, willbe provided with €500 billion, €100bn more than the ex-isting resources of the EFSF. Eurozone leaders also agreedto examine the possibility of lending, on a bilateral basis,some €200bn to the International Monetary Fund, throughtheir national central banks, without the intervention of theECB. This is a new option for a deeper involvement by theIMF in rescuing Eurozone members in the future - obvi-ously, if this goes through, the IMF will be involved in sup-porting Italy and Spain if they need financial assistance alsousing resources from outside Europe, as was the case someweeks ago with Russia stating its willingness to help Euro-zone, but only through the IMF.

'The 17'Early on 9 December, the 17 Eurozone leaders aided bythe 9 others at the exemption of David Cameron, issued astatement saying that they were moving towards a strongfiscal and economic union, setting the permitted upper limitfor structural government deficits at 0.5% of annual GNP.This restriction on deficits will be introduced in the Euro-zone member states' constitutions.Markets did not show disapproval on Friday morning,which is perhaps understandable as they awaiting furtherdetails to be released on 9 December and during the week-end - the crucial test will come next week.

By Dionyssis Kefalakos

Eurozone+9forge new EU alliance withoutBritain

Without any audible fanfare, the Eu-ropean Union took a significant leapthis month towards a common systemof criminal law. By 5 December, itsgovernments were supposed to imple-ment a 2008 decision requiring each ofthem to recognise judgments deliveredin another EU state. In principle, thiswill make it easier to extradite prison-ers. In practice, it could make it easierfor human rights to be abused.

This move follows the ill-conceivedintroduction of a European arrest war-rant. Around the time of the 11 Sep-tember 2001 attacks, the arrest warrantwas touted as a necessary weapon inGeorge W Bush’s “war on terror”.There appeared to be an understand-ing then that warrants would be re-stricted to serious offences. Yet someEU governments have sought extradi-tion for every conceivable misde-meanour.

Poland is addicted to issuing cross-border arrest warrants and has seen fitto do so in cases where the offence wasno more serious than the theft of adessert (I kid you not). Although thePolish authorities have been rapped onthe knuckles by Scotland Yard, theLondon police headquarters, for issu-ing a large number of trivial extradi-tion requests, it appears that they arestill dishing out warrants in a trigger-happy manner. The latest data collatedby the Union’s Council of Ministersindicates that Poland issued 3,753warrants for the arrest of suspects inother EU countries during 2010. Ad-mittedly, that is a slight decline on2009, when the corresponding figurewas 4,844.

Yet the 2010 numbers still show thatPoland retains its lead. Its nearest rivalGermany issued 2,096 European ar-rest warrants last year.

The Polish authorities have nothingto be proud of. The Committee forthe Prevention of Torture (CPT),which belongs to the 47-countryCouncil of Europe, recently publishedthe results of its probe into Poland’sdetention facilities. It criticised thecells managed by police in the south-ern city of Rybnik for being “poorlyventilated, dirty, smelly and badlymaintained.”

The CPT did not mince its wordswhen referring to the conditions inwhich children were kept in Bedzinand Katowice, where they were forcedto remain in their pyjamas throughoutthe day. No outdoor exercise was al-lowed in Bedzin, while it Katowice

outdoor sport was only allowed in thesummer. “Such a state of affairs is notacceptable,” the committee stated.

Reading the graphic description ofthe Rybnik cells reminded me of ameeting I had last year with a Dutch-man who went through a hellish expe-rience after Poland demanded hisextradition. Robert Hörchner was heldfor a number of months in a prison inBydgoszcz, a northern Polish citywhere he once worked. I felt queasy ashe told me of how there was a constantstench of urine and faeces in the cellhe shared with eight or nine others, allof whom had to use the same toilet.Going out to an exercise yard did notgive him much respite: it was infestedwith rats.

Hörchner insisted that he was inno-cent of the allegations against him:that cannabis was grown on a propertyhe leased. I believe that he told me thetruth. But even if I had doubts, I wouldstill query why he was extradited. Havethe Polish police not got somethingmore to worry about than the cultiva-tion of weed?

I was astonished to learn that 21%of the 643,000 people in the EU’s pris-ons have not actually been convictedof a crime. Instead, they are in pre-trialdetention.

The widespread use of pre-trial de-tention contravenes the EuropeanPrison Rules, to which all of theUnion’s states are nominally commit-ted. They emphasise that imprison-ment should be a last resort.

Viviane Reding, the EU’s justicecommissioner, promised during 2010to put pressure on all EU governmentsto live up to their responsibilities onimproving prison conditions. Herpledge is commendable, yet I’m notholding my breath. Most, if not all, ofthe centre-right parties that dominate

Europe’s governments have a narrowfocus on law and order. While ananalysis by the Quaker Council onEuropean Affairs has indicated thatmany justice ministries are amenableto exploring community service andother alternatives to detention, con-vincing entire governments to changetheir ways will not be easy. (I certainlydon’t wish to sound despondent; vig-orous human rights activism hasnotched up many triumphs in thepast).

Another frightening statistic is that19 Council of Europe countries haveprison capacity rates of more than90%. According to the Jean-MarieDelarue, the controller-general for de-tention facilities in France, someFrench prisons have occupation ratesexceeding 200%.

The London-based group Fair Tri-als International has estimated thatpre-trial detention costs the EU’s gov-ernments a total of €4.8 billion peryear.

Just as building more roads is an en-vironmentally destructive response totraffic congestion, building more jailswould be a socially destructive re-sponse to prison overcrowding. In2006, Scotland’s inspector for prisonslisted “nine evils” of overcrowding;among them were that prison staffwere unable to devote sufficient care tomentally ill detainees; a build-up intension; a deterioration in food qual-ity and; competition for sources of ed-ucation and entertainment.

None of those evils could be consid-ered necessary. If the EU wants tohave a common system of criminaljustice, the major flaws in the deten-tion policies of its governments shouldbe remedied. A good first step wouldbe to make pre-trial detention the ex-ception, not the rule.

Off the cuff?| LUC CLAESSEN

HUMAN RIGHTS

The evils of Europe’s overcrowded prisons

By David Cronin

ANALYSISNew Europe |NEW EUROPE

December 11 - 17, 2011

We’re approaching 2012 with the gravest con-cerns about the Eurozone and austerity. Whatshould we be doing over the next 12 months?

Well, there’s what should happen, what willhappen and what might happen.

What might happen is that there’s anotherfudge between Angela Merkel and PresidentSarkozy, that the markets don’t believe there’sgoing to be a fiscal compact, that Mario Draghican’t buy eurobonds on the secondary market. Inthat case, it may be that a number of Europeanbanks unable to organise liquidity before theyearend on December 31st, for the year that’scoming, may require bailout and that could pre-cipitate capital flight, the domino effect. We’re po-tentially two or three weeks away from the end ofthe euro. This is very, very perilous. That’s whatmight happen.

What I think will happen, is that there will bea treaty change, a minor change. There will besome measures to assure the German public thatItaly, Spain and France are serious about takingausterity and the ECB will start to buy debt andthe euro will survive. The danger of that is that theEurozone will be plunged into a very severe eco-nomic stagnation. You can see where the nationalelectorate in Italy, Portugal, Spain, Greece, France,all getting more and more concerned about theprospect for jobs and I think that whether therewill be sufficient support for the European proj-ect in mainland Europe as a consequence of thesemeasures is the $64,000 question.

What should happen, is that Europe is en-cumbered by too much private debt. There’s toomuch private debt in relation to Europe’s GDP.What Europe needs, what Germany will neveraccept, is five or six years of inflation. What Europeneeds is five or six years of inflation around 6%.We need the ECB should set up target for thegrowth of money GDP in the Eurozone of 6% to8% and for it to organize monetary policy to or-ganize money growth at that level, which willmake the private debt supportable. That wouldallow countries like Ireland, Spain to stay in theEurozone. That should happen, but it won’t hap-pen. I think the decisions to be taken in the nextfew days and weeks are fundamental and I fearthat the fudge, or economic impossibilism in Eu-rope and that we may watch the European proj-ect crack up. I am very, very concerned.

There seems to more of a drift between theEuropean leaders and the people, with techno-cratic governments coming in. Is politics break-ing down?

Look, to get out of the crisis with the Eurozoneintact requires either banks to forgive debt or thereto be inflation. These are two very difficult thingsfor politicians to say. Banks aren’t strong enough tand there’s a prohibition on inflation by the Ger-man public, so Europe’s leaders are stuck betweena rock and a hard place. What you want is someinspirational leadership to say, ‘we want five years,in which we will take inflation, after that we willgo back to price stability. You have to have vision-aries who can see through the current crisis. IsSarkozy a visionary? Could Merkel say that, could

the SDP, Mario Monti?They can’t say things that have to be said and

they can’t acknowledge the severity of the plight.The idea that Europe is going to spend the nextten or fifteen years paying off the debt from thelast fifteen years is unsupportable. It’s not going totake place, so we’re putting Europe at risk throughembracing an impossible economic policy.

If there was a crash in the Eurozone,what would be the consequences on theglobal economy?

If the euro crashes, and what would trigger thecrash might be either Ireland, Portugal or Greeceleaving the Eurozone. That will create capitalflight from other countries who will fear that theircountries will leave the Eurozone. You would havea domino of bank collapses in Europe that, I think,will lead to GDP falls in Europe of between 5%and 10% in both 2012 and 2013.

The American banking system is very precar-ious, as overstretched as the European bankingsystem, it would be profoundly badly affected, anddon’t think that Chinese banks are strong. Chi-nese banks are in many respects weaker thatAmerican or European banks and the weaknessin the global banking system will go straight intoChina, just as it did during the Asian financial cri-sis and you had to have the recapitalization ofbanks that, by today’s standards, were hardly over-stretched at all. By comparison Chinese banks arethree times the size they were in 1998, when theyhad to be bailed out then.

This would be a global crisis and the events ofthe next few weeks is profound. The situation isincredible in my view.

We’re told innovation can get us out of thecrisis

I am pessimistic, short term. There’s eithergoing to be debt deflation and deep recession orthere’s going to be inflation. One of those thingsis going to have to happen to get us out of the cri-sis. Looking beyond that, beyond the next fewyears, I am optimistic about Europe’s capacity toinnovate. That is the only way forward. When youget to the frontier of technology, which is wheremost European countries are. It’s not discretionaryfiscal policy or monetary policy that generates

growth, it is a commitment to innovate and Eu-rope has to create its own innovation eco-system,suited to the needs of each member state. The jobof the European Commission is to ensure there’san overriding carapace that frames this. There maybe some aspects that are pan-European and thebudget has to reflect this.

It is ridiculous that 90% of the budget forstructural funds goes to agriculture. We need athird of it supporting a pan-European innova-tion eco-system

Can the whole be greater than the sum of itsparts?

Absolutely. You get in a virtuous circle. Onceyou get slow growth and depression, you get mar-ginal cash flows, that will support high risk things,get harder to allocate in a downward spiral. Youhave to find ways of triggering high innovationthat gets you in an upward spiral. That’s what theEuropean Commission can do.

What about switching of social security bene-fits to pay for labour, or subsidise work?

I’m in favour of flexicurity, but serious flexicurity.There’s a new social settlement in Europe. Wewant adaptable workforces and promise workingclass Europeans that there is a promise of work.For that you have to invest in their skills andpromise that the capacity to migrate from theirplace of work with reasonable levels of take homepay, so they can survive periods of unemployment,to have the state acting as America did in the1930s, as the employer of last resort. These thingsare pivotal.

The quid pro quo for that is that we need tomake hiring someone not like marrying someone.Work contracts in some parts of Europe make itharder to lose some people than divorce your part-ner. That is a crazy situation for a capitalist econ-omy to get into, so we need to have flexibility butto provide working class Europeans some secu-rity and that way of framing things as a work bar-gain is the way to go.

Will Hutton talking to New Europe

By Andy Carling

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ECONOMY

Will Hutton on the 27 states we’re inand the only way out



One cannot deny the fact that Chinesecompanies are looking to Europe to in-vest and expand their business. One ofthese, Huawei – leading global informa-tion and communications technology(ICT) solutions provider – establishedtheir presence in Europe by formallyopening up their Brussels office and Eu-ropean Affairs Department in the Eu-ropean village. New Europe attended theopening ceremony and sat down withPresident Léo Sun and Vice-PresidentTony Graziano to see what the com-pany’s goals and objectives are as regardsthe European market.

New Europe: Please give our readers asmall introduction of yourselves...Léo Sun: I worked for the companyfor 11 years and arrived in Europe 8years ago. I have seen the develop-ment of the company in Europe, andwhen I arrived, there was no morethan 50 persons working for it, andtoday there are 5,800 people. I wasthe country manager in France beforecoming to Brussels, and in May, I wasassigned to come to Brussels and setup the office which we will be inau-gurating today.Tony Graziano: I only joined Huaweiearlier this year but I have been inBrussels for 13 years. Prior to comingto Huawei, I was the Director ofPublic Affairs at Digital Europe.Prior to coming to Brussels in 1998, Iwas working as a design engineer andproject manager for a Japanese com-pany, but as a profession, I came topublic affairs later in my career.

Huawei seems to focus on ideas like

‘customer centric innovation’ and‘end-to-end business advantages’.Could you describe what these meanto the company?LS: End-to-end approach is a little biteasier to describe. We build mobile andfixed networks for operators – i.e. infra-structure solutions. We address the en-terprise business and consumer devices.Therefore, we can address all kinds ofneeds and usage of information in thecommunication sectors.Regarding customer centric innova-tion, it is at the top of our company’sculture and spirit. Basically, we aredriven by customer needs and mak-ing the customer satisfied with oursolutions. This is instilled in all prac-tices of the company, from R&D toservices to marketing.TG: I think it should also be stressedhow our company is structured: wenow have more than 120,000 em-ployees and 44% of those are specifi-cally devoted to R&D andinnovation. This is the ethos of ourcompany. The R&D is focused onmeeting the needs of our customers.This has been a winning formula forHuawei and the consumer.

What was the driving force behindopening the office in the ‘Europeandistrict’, close to the Institutions?What does Huawei want to achieve?LS: Our team is independent and ismanaged directly by the headquartersin China. Our main purpose is tobuild a strategic relationship with theEuropean Union and its industries.This office was established in the midof 2011, and we have already beenwelcomed by Brussels. We are happyto be here and to contribute as aleader in our industry. I am quite con-

fident about the future of the devel-opment of this relationship.

Earlier this year, Huawei announcedan earnings increase of 30% in 2010.In such turbulent economic times,where does the company’s success lieto withstand this downturn?LS: It is difficult to explain thegrowth, but in general, the economiccrisis didn’t bring a direct impact toour sectors. Our sectors are generallystill growing, especially the productsfocused on the internet and smart-phone devices, generating growth inthe industry. We also provide qualityfor our services. Overall, the industryis quite healthy.At the end of our talk, President Sunleft with a final thought on Huaweiand Europe: “Despite all the issues sur-rounding the economic crisis, the com-pany is very confident about Europe.It is taking Europe as the most strate-gic market to invest in, and we aregoing to continue our investment andcommitment to Europe.” Vice-Presi-dent Graziano added: “There is astrong commitment from the companyand in the coming year, you will hearmore and more about Huawei and ourplans for investment. There is an ap-proved plan for the importance of theEuropean market. We believe in Eu-rope and this will definitely result in anincrease in employment.”Needless to say, the event was a suc-cess, and Huawei made its mark byannouncing to Europe that it washere and ready to build a strong re-lationship, and become an impor-tant strategic partner. Moreimportantly, I left there beginningto understand what Huawei had al-ready understood.

Huawei European Affairs Department President, Léo Sun, addresses attendees at opening ceremony in the Brussels office, near the EU dis-

trict, on 8 December.

By Stratis Camatsos

INTERVIEW

Huawei heralds its arrival in 'EU district'and cements its presence in Brussels

Advertisers know about the weakness of human nature.Every year, the run up to the end of year holiday is sys-tematically filled with temptation: festive food andbooze, gluehwein and gateaux. From the producer, tothe distributor, to the shop, to our shopping bag; in acommercial world, it’s all just a question of supply anddemand.In the criminal world, the imperative is just the same.From cocaine and heroin out of farmers’ fields to themethampehtamine and ecstasy cooked up in labs, thedrugs trade is just as much a commercial enterprise asany other: goods moving from the point of productionto markets in the same way as their legal equivalents.Since the first opium wars between China and theBritish Empire at beginning of the 18th century, thesupply lines for drugs have been a matter of interna-tional concern. The drugs may now be different, butthe demand remains and the rewards for meeting it aresubstantial; equal to one per cent of the global econ-omy, according to the UN. While criminals are cream-ing off the money, users are paying the price in terms offatalities and ruined health. The bill paid by society incrime, absenteeism and health costs adds up to billionsof Euros a year.Attempts to reduce drugs use at European level werespearheaded 30 years ago when French PresidentGeorge Pompidou, brought together seven countriesto form the group which now carries his name. Thefirst anti-drugs body to use a multi-disciplinary ap-proach to prevention, treatment, law enforcement andtrafficking, it has succeeded in breaking down barriersbetween professionals who are making a difference ina war where there are no easy wins.As Europe has opened up, the challenges have multi-plied. A Europe without borders makes it easier formodern criminals to traffic their wares along the so-called “Balkan route” from Asia, with corruption pro-viding a major stumbling block to anti-drugs action.Since joining the EU in 2007, both Romania and Bul-garia have failed to convince EU peers that their anti-corruption reforms are effective, blocking their chancesof entering Schengen. Experts at a Pompidou Groupconference in Ljubljana this week could help to resolveboth problems by bringing fresh ideas to the table. Atthe same time a study of drug use in Albania, Bosniaand Herzegovina, “the former Yugoslav Republic ofMacedonia”, Montenegro, Serbia and Kosovo willhopefully pinpoint problem areas that will lead to bet-ter targeted services.The best news of all in the Group’s fight against drugsis a new wave of enlargement that will coincide withthe conference. Morocco has just joined, and Monacowill come into the fold at the conference; there are highhopes that Montenegro, Moldova and Ukraine will alsosign up. Discussions are underway with Albania,Bosnia and Herzegovina and Georgia: importantcountries for developing balanced policies in SouthEast Europe, a vulnerable region for drug use and a pri-mary transit zone for heroin towards Western Europe.With their joint commitment to block the supplyroutes, the Pompidou Group is now set to be at its mostpowerful in beating the drug traffickers and helpingthe drug users.

New Europe content partner

Cutting the routesthat feed Europe’s

drugs’ tradeBy Gutenberg

BUENOS AIRES – A short-lived rumorrecently suggested that the InternationalMonetary Fund was putting together a€600 billion ($803 billion) package forItaly to buy its new government about 18months to implement the necessary ad-justment program. Except for the magni-tude of the package, this sounds nodifferent from a standard IMF adjustmentprogram – the kind that we are accus-tomed to seeing (and criticizing) in the de-veloping world. But there is one crucialdifference: Italy is part of a select club thatdoes not need outside rescue funds.

So far, programs for the eurozone pe-riphery have been spearheaded and largelyfinanced by European governments, withthe IMF contributing financially, butmainly acting as an external consultant –the third party that tells the client the nastybits while everyone else in the room staresat their shoes. By contrast, the attempt tocrowd multilateral resources into Europewas made explicit by eurozone financeministers’ call in November for IMF re-sources to be boosted – preferably throughdebt-generating bilateral loans,– so that itcould “cooperate more closely” with theEuropean Financial Stability Facility. Thatmeans that the short-lived story of Italy’sjumbo IMF package, which was to befunded largely by non-European money,can be regarded as a game changer: whileItaly may never receive such a package, Eu-rope, it seems, is determined to resolve itsproblems using other people’s money.

There are at least three reasons why theIMF should resist this pressure, and ab-stain from increasing its (already extremelyhigh) exposure to Europe.

First, and most obviously, Europe al-ready has its own in-house lender of lastresort. The European Central Bank can

make available all the euros needed tobackstop Italy’s debt. And printing themwould only offset, through mild inflation,the effects of the otherwise Draconian rel-ative price adjustment that is taking placeunder the corset of the common currency.So it is puzzling that some observers havesaluted the IMF’s involvement as a virtu-ous effort by the international communityto bring the listing European ship to port.Why should the IMF (or, for that matter,the international community) do for Eu-rope what Europe can but does not wantto do for Italy? Why should internationalmoney be mobilized to pay for Europeangovernance failures?

And if, as appears to be the case, Ger-many is playing a dangerous game ofchicken with some of its eurozone part-ners, why should the cost be shifted to theIMF for the benefit of Europe’s largestand most successful economy? Lettingthe ECB off the hook in this mannerwould simply validate for Europe as awhole the same moral hazard feared byGerman and other leaders who opposeECB intervention. The second reason toavoid IMF intervention in Europe is thatlending to a potentially insolvent countryhas serious implications for the Fund. Forstarters, taking the IMF’s preferred-cred-itor status at face value, an IMF loanwould entail substituting its “non-de-faultable” debt for “defaultable” debt withprivate bondholders, because the Fund’smoney is used primarily to service out-standing bonds. As a result, a group oflucky bondholders would be bailed out atthe expense of those that became juniorto IMF debt and remained highly ex-posed to a likely restructuring. Since a“haircut” can be imposed only on what-ever is left of the defaultable private debt,the larger the IMF share, the deeper thehaircut needed to restore sustainability.

For the same reason, IMF loans can bea burdensome legacy from a market per-spective. Because they represent a massivesenior claim, they may discourage new pri-vate lending for many years to come.

This brings us to the third reason whythe IMF should stay out of Europe’s crisis:what if Fund seniority fails? The implicit

preferred-creditor status is based on cen-tral-bank practices that establish that thelender of last resort is the “last in and firstout.” It is this seniority that enables theIMF to limit the risk of default so that itcan lend to countries at reasonable interestrates when nobody else will. This workswhen the IMF’s share of a country’s debtis small, and the country has sufficient re-sources to service it.

But seniority is not written in stone:poor economies that are unable to repayeven the IMF are eligible for debt reduc-tion under the Heavily Indebted PoorCountries program, and 35 have received itsince the program was established in 1996.What would happen if, in five years, Italywere heavily indebted to the IMF? Whatif private debt represented a share so smallthat no haircut would restore sustainability,forcing multilateral lenders to pitch in withsome debt relief?

The IMF’s seniority is an unwrittenprinciple, sustained in a delicate equilib-rium, and high-volume lending is testingthe limit. From this perspective, the pro-posal to use the IMF as a conduit for ECBresources (thereby circumventing restric-tions imposed by European Union’streaties), while providing the ECB withpreferred-creditor status, would exacerbatethe Fund’s exposure to risky borrowers.This arrangement could be seen as an un-warranted abuse of Fund seniority that, inaddition, unfairly frees the ECB from theneed to impose its own conditionality onone of its members. It makes little sense forthe international community to assumethat unnecessary risk. Let us hope that theIMF’s non-European stakeholders will beable to contain the pressure. The solutionfor Europe is not IMF money, but its own.

Mario I. Blejer is a former governor of theCentral Bank of Argentina and formerDirector of the Center for Central Bank-ing Studies at the Bank of England. Ed-uardo Levy Yeyati is Professor ofEconomics at Universidad Torcuato DiTella and Senior Fellow at The BrookingsInstitution.Copyright: Project Syndicate, 2011.www.project-syndicate.org

ANALYSISNew Europe |

NEW EUROPEDecember 11 - 17, 2011

When twotribes go to war

There was a mild panic in the corridors of the Euro-pean Council this week. Word had it that Herman VanRompuy’s performance evaluation had got out. Thepresident of the European Council, whose two-and-a-half year term of office is up in mid 2012, but whois seeking to go on for a second term, had been hop-ing to discreetly present his credentials to the 27 headsof state in an attempt to secure the full five-year al-lowable reign. Events took over, however.As it turned out, the evaluation was not leaked to thepress, as (by accounts, stoney-faced) staff had momen-tarily feared. However, his thoughts on the future ofthe European Union, in particular, the single currency,did make their way to the press. Amazingly, one of hisideas was that a two-tier Europe could emerge; aschism between those in and out of the Euro. It wasneither an original or provocative suggestion, but,coming as it did from one of the heads of the institu-tions, it amounted to some kind of admission that allis not well in the family.Subsequently, of course, this has all become apparent.The fall-out from the heads of sate summit, whichlasted long into the wee small hours of 9 December,was exactly that. Europe is officially split; and just like1940, it is Britain against the rest, only with DavidCameron instead of Winston Churchill.All but one of the EU’s 27 member states agreed totighter economic integration, with the UK holdingout. It may be a one-sided split, but its a rift nonethe-less. According to crowing media reports, LithuanianPresident, Dalia Grybauskaite, even suggested that theUK was out of the European decision-making process,somewhat of an exaggeration. But the fact remains,nine non-Eurozone countries, including the curmud-geonly pair of Sweden and Denmark, have agreed togo with the gang. The UK, it appears, has no friendsleft, leaving the prime minister isolated, and his tac-tics questioned.But a full treaty change, one of Van Rompuy’s scenar-ios, is also out of the question; injured Cameron wouldwield his country’s veto, pleasing, if no one else, hisbackbenchers. Which leaves the possibility for anotherpresidential suggestion, a treaty change for the 17 (butleaving the way open for the others). Can the Euroznecome to an agreement on budgets and fiscal policy?With a certain amount of bullying by the Franco-Ger-man chimera, Merkozy, it is possible.Both the leaders of France and Germany are underelectoral pressure. Sarkozy will be the first to face theelectorate, and he is banking on Europe, or at least hissaving of it, as his bid for a further term. Cameron,who has already pledged to keep the UK in the Euro-pean Union, much to the chagrin of his domestic crit-ics, right now appears to be on a losing streak. If theprecious City of London comes under serious threat, if,as the prime minister claims, from current EU fiscalpolicy, then that rumoured challenge to his leadershipmight actually materialise.Despite the, in some quarters, mouth-wateringprospect of another Anglo-French barney, this is un-likely; ‘better the devil’, as the old saying goes. And soto a second term for Van Rompuy.

[email protected]

EVERYTHING BUT ARMS ECONOMY

Keep the IMF out of Europe

Herman Van Rompuy, president of the European Council, (L) listens as Christine Lagarde, managing director of the International Monetary Fund (IMF),

(C) speaks with Jose Manuel Barroso, president of the European Commission.|EPA/CHRIS RATCLIFFE

By Mario Blejer & Eduardo Levy Yeyati

By Cillian Donnelly



There was disagreement at the 2011 Innovation Conven-tion about India's ability to innovate and become a worldeconomic power.

Innovation Advisor to India's Prime Minister SamPitroda argued India was well on its way to becoming aglobal power mostly through government sponsored re-search and development investments.

“Our commitment to growth is absolutely clear,” Pitrodasaid when discussing a new $1 billion fund to boost inno-vation in India.

Pitroda said the new fund will mostly be spurred by pri-vate investment, but was jump started with a $100 millioncontribution from the Indian government.

Despite the good feelings and confidence shown byPitroda, Chair of the Big Innovation Centre Will Huttonwas not buying India's growth.

“It will be difficult for India and China to become num-

ber one economy without solving soft infrastructure andholding some of the Western enlightenment values,” Hut-ton said.

India is currently the world's fourth largest economy witha GDP over $4 trillion. Pitroda said the growth in India'seconomy to date can be largely attributed to large internalmarket demand. Pitroda added India's government has cur-rently been focusing on “reducing disparity” in their popu-lation. Despite Hutton's concerns, Pitroda pointed toIndia's projected growth rate of 8-10% per year over thenext two decades suggesting India will continue upwardsinto the ranks of elite economies.

The discussion of India's economic future came as theEuropean Union hosted a convention on Innovation. Onething Pitroda and Hutton did agree on, is the importantplace innovation has in a society.

“Innovation is the embrace of the new,” Hutton said.

INNOVATION

India's innovation: promising or falling behind?

Innovation is in the Air

The European Comission presented the NewAgenda Horizon for Innovation that stresses the ideathat Europe must regain its Internal CompetitiveAdvantage focused on a more effective attitude to-wards the creation of added value in the competitiveglobal market. The primal vision for this new hori-zon is centered in innovation and it is essential thatthe different actors understand the key message thatcomes from this new agenda of change. Innovation isin the air and the time is for believing in the future.Innovation is a new solution to Europe. ReinventingEurope and giving the European Actors (States,Universities, Enterprises, Civil Society) the oppor-tunity of developing new challenges focused on in-novation and creativity is in a large sense giving acentral contribution to a New Global Order. TheReinvention of Europe is the reinvention of its peo-ple and institutions. An active commitment, in whichthe focus in the participation and development ofnew competences, on a collaborative basis, must bethe key of the difference. These are the lessons wereally need from the a new agenda for europe. In the New Global Economy and Innovation Soci-ety, we need a new attitude connected with the cre-ation of value and focus on creativity. In a time ofchange, this message can´t wait. Europe must con-firm itself as an “enabler actor” in a very demandingworld, introducing in the society and in the economya capital of trust and innovation that is essential toensure a central leadership in the future relationswith America and the more and more dynamic de-veloping world. The actors from Europe should bemore and more global, capable of driving to the so-cial matrix a unique dynamic of knowledge buildingand selling it as a mobile asset on the global market. We need a Europe of Innovation. Where people knowwho they are and have a strong commitment with thevalues of freedom, social justice and development. Thisis the reason to believe that a new standard of Democ-racy in Europe, more than a possibility, is an individualand collective necessity for all of us, effective Europeancitizens. Habermas is more than ever present – the dif-ference of Europe will be in the exercise of the capac-ity of the individual participation as the centralcontribution to the reinvention of the collective society.This is a process that is not determined by law. It is ef-fectively constructed by all the actors in a free and col-laborative strategic interaction.In a certain sense, we need a new third way for Europe.When Anthony Giddens spoke about this specialglobal capacity of creating a new commitment betweenthe Europeans toward the challenge of the future, hewas in fact speaking about this commitment with aNew Democracy in Europe. Based in new standards ofSocial Innovation, this kind of New Third Way is aboveall the confirmation that in Europe the individual per-formance in a complex society is possible, desirable andabove all necessary for the future

Francisco Jaime Quesado is the General Manager ofthe Innovation and Knowledge Society in Portugal,a public agency with the mission of coordinating thepolicies for Information Society and mobilizing itthrough dissemination, qualification and research ac-tivities. It operates within the Ministry of Science,Technology and Higher Education

New Europe content partner

European Commission PresidentJose Manuel Barroso warned that in-novation and research fundingshould be spared from austerity in aspeech at the 2011 Innovation Con-vention.

Barroso said cuts to research anddevelopment could have disastrousconsequences for the Europeaneconomy, despite growing pressurefor tough austerity measuresthroughout the EU.

“We need fiscal consolidation, butsmart fiscal consolidation … cuttingspending in innovation and educa-tion would not be smart,” Barrososaid.

European Commissioner for Inno-vation Maire Geoghegan-Quinnsaid Europe needed “growth, growthand more growth,” to escape the cri-sis. Geoghegan-Quinn added theCommission is on target to have 3%of EU funding dedicated to researchand development by 2020.

Barroso reflected concerns thatEurope is falling behind in educa-tion and in innovation. One area ofconcern is higher education, whereonly 26% of the EU workforce has adegree.

The Commission estimates that35% of European jobs in 2020 willrequire higher education degrees,creating a skilled labor shortage.

Barroso also pointed out that Eu-rope lacks “young” innovators such asthose found in the United States.Over half of US entrepreneurs areyounger than 30, while in Europeonly 20% are younger.

“We need to do more, better andfaster,” Barroso said.

Specifically, he called for the com-pletion of the single market and theestablishment of a community patentsystem, which would streamline thepatent process for all member states.

“Frankly, after 30 years of discus-sion it is time to get communitypatent approved,” Barroso said.

Some however doubt the Com-mission’s ability to spur growth andinnovation. Michael O’Leary, CEOof Ryanair, Europe’s largest passen-ger airline, lobbed heavy criticism to-wards their innovation policy.O’Leary told a group of entrepre-neurs that he was “nervous they werebrought to Brussels where the sparkof innovation is dulled” and advisedthem to “get the hell out of Brussels.”

O’Leary pointed to his ongoingbattles with the Commission over hislow-cost no frills airline as a reasonfor reduced economic growth, accus-ing them and national governmentsof subsidizing higher-cost carriers.

“Low prices beat high prices everytime, unless you’re the EuropeanCommission”, O’Leary said.

O’Leary also provided his views onthe current euro zone crisis sayingthe key to solving it lies with inno-vation not a summit of political lead-ers in Brussels.

The 2011 Innovation Conventionis a gathering of entrepreneurs andinnovators sponsored by the Com-mission.

The convention features work-shops, keynote speakers, and displayson science and innovation.

INNOVATION

Barroso urges restraint in cutting innovation fundingBut Ryanair chief advises entrepreneurs to get out of Brussels

Ryanair chief, Michael O'Leary speaking at the Innovation Conventioneuropean |union/scorpix

By Jordan ShapiroBy Francisco Jaime Quesado

ANALYSIS

New Europe | NEW EUROPE

December 11 - 17, 2011

Fresh from a meeting with European Commission’s com-petition commissioner, Joaquín Almunia, Google’s chair-man, Eric Schmidt spoke at the Innovation convention,where he said, "There's is sort of a tone here, and the toneit's just pessimistic,” adding that “instead of complainingall the time, which all of us like to do and I certainly liketo do, instead let's spend our time solving the problem ina permanent way. If we do, I think that not only will Eu-rope thrive, but I think the whole world will thrive."

Schmidt gave an optimistic view, “You could signifi-cantly change the future of Europe by virtue of a focus oninnovation, entrepreneurship, making sure it's possible toget these businesses created, getting everything inter-connected.”

The speech was the first time a head Googler has vis-ited Brussels, but Schmidt was keen to appear euro-friendly, explaining that he had spent time in Italy andhad also visited the continent on many occasions, saying,“I understand Europe as much as any American can.” Hecontinued praising Europe, saying the continent will getthrough the current crisis by innovating.

“There are no local dramas or problems,” he said,adding that “we’re in a multipolar world and every deci-sion has to be thought of in a global context.” Schmidtexplained that “there are two separate worlds, the physi-cal and cyberspace, which has slightly different rules,”and “as the two worlds merge, each gets better as theybegin to overlap.”

He advocated a change in approach for policy makers,asking them to “embrace data driven decision making,”adding that, “governments should be about outcomes, notprocess.” He advocated open data, saying that if the datawas made available people would use it in interestingways and “don’t even think of regulating data.”

He also said that patents should not be for blocking

innovation and criticized firms who aggressively persuepatent infringements, often as ‘trolling’.

In his vision of the future “the world requires collegelevel education” from the workforce, but one question re-mained; what happens to people without a degree?

european union/scorpix

The end of days

Some see the signs of approaching doom in the Mayancalendar, others by finding hidden formulas in the eso-teric, but I had it easy. The sign of the approaching apoc-alypse arrived in my inbox. Now, I get industrial quantitiesof crap, but some stand out. For example, anything with‘Save The Date’ in the subject gets deleted, because theynever contain a date worth saving.But I had a shiver of repulsion when I saw one,‘STORY IDEA: Phone Apps Help Famous Faces toMonetize on Their Fame.’ There is just so much, sowrong in that, I had to face my fears and open the email.It did not disappoint. It did, however, anger, infuriateand disgust. I’ll make a serious point later, but we needsome context first.The email was a pretty rubbish pitch that answered aquestion nobody cares about. Apps are used by businessand marketers. “Can the same strategy be harnessed forthose whose only product is their fame?” According totheir CEO “the answer is an exuberant yes!” Then we getthe big news. They’ve signed up a reality TV star, a thingnamed Snooki from something called Jersey Shore.So, I ran through the listings of the satellite TV andfound it in one of the channels that mainly runsblack and white films and made for TV movies, a ver-itable graveyard of quality. I only watched a couple ofminutes before losing the will to live. Dear God it isawful stuff and it’s not the one thing it claims to be,real. It’s scripted and performed like the world’s worstschool play and is obviously as fake as the tans. In factthe tanning is so overblown, one can only wonder ifthe whole thing is some sort of twisted tribute toRobert Kilroy-Silk.With this app – a mindblowing 50mb download – I can“Snookify Me!” If I wanted to do that, I could captureher essence by strapping a couple of bags of silicon tomy chest, paint myself orange, dip my head in a bucketof botox and finally, the most important part, blow mybrains out. That would do it.But that is not the most disturbing bit of PR. Last week, the European Central Bank issued a promovideo celebrating 10 years of the Euro. This cringewor-thy bit of overpriced fluff isn’t just bad, it is a spectacu-larly poor timing. It is simply incredible that nobodythought, ‘hang on, should we just hold this back for awhile?’That’s not all, apart from this video explaining the suc-cess of the Euro and helpfully, reminding the Greeksthat they must hand in their Drachmas by 28 Februarynext year, there is a competition, called Euro RunChampionship 2012.You don’t have to be a communication mastermind torealize that the words ‘Euro’ and ‘run’ shouldn’t be putnext to each other in the present climate.Whilst the Brussels bubble might wince slightly at theineptness, the world beyond would watch with shockand awe. The only possible outcome of exposing thisnonsense to the general public would be to cause a cat-astrophic loss of faith in the banking institution. Theone bright light is that the ECB is going to hold an‘Open Day’ sometime “in the second quarter of 2012”.The Occupy Frankfurt camp, outside the ECB wouldcertainly be keen to visit, but would anyone else?I think someone’s Snookified the ECB.

[email protected]

CONSTRUCTIVE AMBIGUITY

By Andy Carling

INNOVATION

Think positive says Google chiefEurope suffering from “Winter gloom”

Fashion designer Dame VivienneWestwood called for Europeans totake a stand on climate change whilespeaking at the 2011 Innovation Con-vention.

Westwood implored a return to cul-ture and a love of art in order to com-bat what she has dubbed the mostpressing matter facing humanity.

“Culture is the antidote to propa-ganda,” Westwood said will discussingthe lack of information and acceptanceof drastic climate change.

Westwood said the world needs toturn towards the arts in order to turnaway from a culture of “consumerism”,which she believes has led to climatechange. This culture she says has pre-vented real reforms on the climatechange front.

“There is non-stop distraction, ifyour held is full of rubbish then noth-ing else can go in,” Westwood said.

Westwood has taken the effortagainst climate change into her ownhands through her fashion. Earlier thisyear, she partnered with the UnitedNations to design a tee shirt promot-

ing the growth of forests in Europe.Saving the rainforests has become a

priority of Westwood, who estimatesit would only cost €30 billion a year,ever year, to keep them intact. It is notonly money though that could save theworld's forests.

In order achieve the culture changeshe advocates, Westwood turns to an-cient China for inspiration.

“Chinese culture is the greatestthing that has happened to our world… It was a sustainable society,” shesaid. Closing out the call for action,Westwood encourages everyone to en-gage in the climate change front andto make a difference.

“Inform yourself, if you think differ-ently you will behave differently,” shesaid.

CLIMATE CHANGE

Westwood calls for culture to combat climate change

european union/scorpix



Mayors from 44 nations gatheredin Brussels this week to sign theCovenant of Mayors, a commit-ment to build an energy efficientand sustainable future for theircitizens. This has now been signedby 3,000 Mayors, representing 130million people.

As part of the initiative, localauthorities agree to compile abaseline emissions inventory andto formulate a Sustainable EnergyAction Plan (SEAP) – a compre-hensive overview of key sustain-able energy actions – within theyear following their signature ofthe Covenant. As of July 2011,more than 700 SEAPs have been

formally submitted.A comprehensive support frame-

work has been put in place to helpsignatories develop their action

plans. In addition to the Covenantof Mayors Office (CoMO) – which

provides administrative, promo-tional and technical assistance – re-gions, provinces and networks oflocal authorities also lend invaluablesupport to signatories as CovenantCoordinators and as Supporters. Atpresent, 140 of these regional andlocal actors are working togetherwith signatories, strengthening themulti-level governance process ofthe Covenant of Mayors.

Those local authorities who failto deliver on their commitmentsare suspended from the initiativeuntil the necessary progress hasbeen made. To date, 72 signatorieshave been suspended from theCovenant.

REGIONS

Mayors gather to promote sustainable energy

What the Arab geographer Al-Muqaddasinoted a thousand years ago still holds truetoday: “The island of Qubrus is in the power ofwhichever nation is overlord in these seas.”However, there seems to be some disagreementas to who is overlord. Turkey considers theEastern Mediterranean as ‘mare nostrum’ andTurkey’s transport, maritime andcommunications minister, Binali Yıldırım, hasmade it clear that no project in this region canbe formed and run without Turkey’s consent.Nevertheless, the Republic of Cyprus hasexercised its sovereign right to exploit itsoffshore natural resources and has agreed withLebanon, Egypt and Israel to delimit theirrespective Exclusive Economic Zones. Despitewidespread international support for RoC’sexercise of its rights, Turkey has sent a researchvessel into Cypriot territorial waters escortedby Turkish warships and in Septemberconcluded a continental shelf delimitationagreement with the Turkish Republic ofNorthern Cyprus, a political entity onlyrecognized by Turkey.

In November the Turkish minister forenergy, Taner Yıldız, announced that theTurkish Petroleum Corporation was ready tostart drilling for oil and natural gas inFamagusta in Northern Cyprus.

In the RoC’s EEZ an American company,Noble Energy, began drilling in Block 12 (theAphrodite field) in September, and inNovember Noble Energy announced that theblock would yield between 3 and 9 trillion cubicfeet of gas with a 60 percent probability ofsuccess. 16 trillion cubic feet have beendiscovered in the adjacent Israeli block(Leviathan). According to the US GeologicalSurvey there are 1.7 billion barrels ofrecoverable oil and 122 trillion cubic feet of

recoverable gas in the Levant Basin betweenCyprus and Israel. By comparison all the EUcountries combined hold 86.2 trillion cubic feetof gas. In geopolitical terms this is a real gamechanger and as one EU diplomat put it: “themost importance change to the geopoliticalsignificance of this part of the world since theSuez Canal”.

New strategic allianceThe Republic of Cyprus has now announced

a second round of licensing, which opens up foran interesting strategic perspective. Until thediscovery of natural gas Cyprus was off theUSA’s radar screen. Not any longer. There arenow signs of a strategic alliance between threeof the major protagonists in the region. Greece,Cyprus and Israel. Greece has confirmed itslong-standing defence pact with Cyprus and inthe past year has upgraded its relations withIsrael. The deputy foreign ministers of Greece

and Israel recently confirmed that their twocountries have common strategic interests inenergy and energy security and a trilateralmemorandum of understanding betweenGreece, Israel and Cyprus concerning naturalgas is expected to be signed soon. In Novembera joint military exercise between the Greek andIsraeli air force took place in southern Israel.

Last month an official visit to Cyprus byIsraeli President Shimon Peres was concludedby the signing of three agreements and amemorandum of understanding. There havealso been joint aerial manoeuvres between thetwo countries. And in an interview with theGreek Cypriot daily Phileleftheros the Cypriotdefence minister mentioned that agreementsrelated to defence cooperation and securitywere underway.

Israel and TurkeyRelations between Turkey and Israel have

since May last year been bedevilled by the MaviMarmara incident, when nine activists in a so-called aid flotilla to Gaza were killed by Israelicommandos. The UN’s Palmer Report foundIsrael’s blockade to be legal but that the IDFhad reacted with excessive force. However,Israel’s refusal to issue an apology and paycompensation has been met by a third demandfrom Turkey - the recognition of Hamas.

The resulting standoff has frozen relationsbetween the two former allies but it is hopedthat the appointment of David Meidan, themediator in the Shalit swap, might lead to athaw. In 2007 Turkish and Israeli officials heldinitial talks on constructing a 460 km.

oil and gas pipeline from Ceyhan to Haifa.Now Turkey’s minister for energy, Taner Yıldız,has said that Turkey will not allow Israel toexport natural gas to Europe through Turkey.

There is another major player, Russia, whichhas also had a long-standing alliance withCyprus and has ruled out any recognition of aTurkish state in Northern Cyprus.

The economy of Greek Cyprus isunderpinned by Russian investment and a recentloan of €2.5 billion might save Cyprus from theembarrassment of an EU bailout. Russia is oneof Turkey’s major trading partners and suppliesTurkey with natural gas through the BlueStream project. Turkey’s role as a regional energyhub would also be threatened by an alliancebetween Cyprus and Israel but the openquestion is what action Turkey can and will take.In view of the fact that reunification talks in NewYork in mid-January are expected to end with adeadlock, menfaat (mutual benefit) might act asa greater incentive.

Robert Ellis is a regular commentator onTurkish affairs and advisor to the EFD’s TurkeyAssessment Group in the EuropeanParliament.

Cypriot President Demetris Christofias (L) shaking hands with Turkish Cypriot leader Dervis Eroglu (R),

during a meeting in the framework of direct talks at the United Nations Protected Area in Nicosia,

Cyprus,7 October 2011.|EPA/CYPRIOT PRESS OFFICE

POLITICS

Cyprus at the crossroadsBy Robert Ellis

There are moments in history when each of usis called upon to declare where we stand. I be-lieve this is one of those moments. Over thepast year, in Tunis, Cairo, Madrid, New Yorkand hundreds of other cities and towns acrossthe globe, the voice of ordinary people has beenraised, and their demands made clear.

They want human beings at the centre of oureconomic and political systems, a chance formeaningful participation in public affairs, a dig-nified life and freedom from fear and want. Re-markably, the spark that lit the fire of the ArabSpring, which would eventually spread to citiesacross the globe, was the desperate act of a sin-gle human being who, repeatedly denied themost basic elements of a life of dignity, set him-self alight, and, in doing so, declared that a lifewithout human rights, is not a life at all. But thedry kindling of repression, deprivation, exclu-sion, and abuse had been piling up for years, inTunisia, across the region, and beyond.

The actions, omissions, excesses and abdica-tions of the governments of the region werecertainly at the centre. And the actions of pow-erful states outside the region in propping upauthoritarian regimes, and pursuing destructivepolicies of self-interest that fostered repression,impunity, conflict, and economic exploitationalso played a key role.

But, at the international level, the assessmentsprovided by financial institutions and develop-ment agencies in the lead-up to the ArabSpring are also illuminating: Tunisia, it was said,showed “remarkable progress on equitablegrowth, fighting poverty, and achieving goodsocial indicators.” It was “on track” to achievethe Millenium Development Goals. It was “farahead in terms of governance, effectiveness, ruleof law, control of corruption and regulatoryquality.” It was “one of the most equitable soci-eties” and “a top reformer.” Overall, we weretold, “the development model that Tunisia haspursued over the past two decades has servedthe country well.” Yet, at the same time, UNand civil society human rights monitors werepainting a picture of excluded and marginal-ized communities, imposed indignities, and adenial of economic and social rights. We heardof inequality, discrimination, lack of participa-tion, absence of decent jobs, absence of labourrights, political repression, and denial of free as-sembly, association, and speech.

We found censorship, torture, arbitrary de-tention, and the lack of an independent judici-ary. In sum, we heard of fear and want. Yet,somehow, this side of the equation carried verylittle sway in our development analysis. This isnot to say that the development analysis was allwrong, or the data inaccurate. The problem wasthat the analytical lens was often too narrow,and sometimes simply pointing the wrong way.Clearly, it was not fixed squarely on freedomfrom fear and want – at least not for the ma-jority. Instead, it was focused too narrowly ongrowth, markets, and private investment, withrelatively little attention to equality, and virtu-ally none to civil, political, economic and socialrights.

Even where attention was directed at theMillennium Development Goals, this providedonly a very narrow set of economic and socialindicators, none of them rights-based, all ofthem with low quantitative thresholds, noneguaranteeing participatory processes, and noneaccompanied by legal accountability.

Essentially, the analysts did not get the an-swers wrong, they just never asked many of themost important questions. And this policy my-opia has been repeated in countries north andsouth, where political leaders seem to have for-gotten that health care, education, housing, and

the fair administration of justice are not com-modities for sale to the few, but rather rights towhich all are entitled without discrimination.Anything we do in the name of economic pol-icy or development should be designed to ad-vance these rights and, at the very least, should

do nothing to undermine their realisation. When the Universal Declaration of Human

Rights was adopted on 10 December 1948, theframers warned that “it is essential, if man is notto be compelled to have recourse, as a last resort,to rebellion against tyranny and oppression, thathuman rights should be protected by the rule oflaw.” The Declaration laid out the rights nec-essary for a life of dignity, free from fear andwant— from health care, education, and hous-ing, to political participation and the fair ad-ministration of justice. It said that these rightsbelong to all people, everywhere, and withoutdiscrimination. Today, on the streets of ourcities, people are demanding that governmentsand international institutions make good onthis promise, with their demands streamed livevia internet and social media.

Ignoring these demands is no longer an op-tion. Rather, governments and international in-stitutions should follow their lead by making adramatic policy shift toward the robust integra-tion of human rights in economic affairs and de-velopment cooperation, and by adopting humanrights law as the basis for governance at home,and the source of policy coherence across the in-ternational system. This is our mandate for thenew millennium. This is the Tunis imperative.

Navi Pillay, United Nations High Commissioner for Human Rights

EU WORLDNew Europe | NEW EUROPE

December 11 - 17, 2011

THE TUNIS IMPERATIVE

Human Rights and developmentin the wake of the Arab Spring

A Jordanian demonstrator shouts anti-government slogans during a protest near Al-Hussein Grand

mosque, in Amman, Jordan, on 07 October 2011.|EPA/JAMAL NASRALLAH

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By Navi Pillay

Green CapitalThe European Commission will hand over the title of European Green Capitalfrom Hamburg to Vitoria-Gasteiz in Brussels on Thursday, 15 December 2011.Today three out of four Europeans live in towns and cities. Urban areas concentratemost of the environmental challenges facing our society but also bring togethercommitment and innovation to resolve them. The European Green Capital Awardhas been conceived to promote and reward these efforts.

To attend, please register at http://www.euconf.eu/egc/en/registration/index.html

DURBAN, SOUTH AFRICA - It be-comes more and more obvious that the cli-mate change hype, although officially beingthe underlying reason along with the dra-matic climatic calamity owed to waste of re-sources going along with wantondestruction of natural habitats only servedtwo purposes, firstly the revival of the nu-clear energy and secondly to have an excuseto dictate to emerging economies not togrow too fast while the trade off of carbonemission credits plunders the developingcountries once more in a kind of neo-colo-nial style.

To achieve the first goal seems to be moredifficult as it has suffered kind of a backlashafter the Fukushima meltdown.

It is a bit like when the West told Presi-dent Gorbachev to introduce perestroikaand democracy along with the opening ofthe Soviet market and the Berlin wall and atthe same time demand that he should do itslowly as if he could dismantle the wallbrick by brick.

For 40 years we told the East Asian coun-tries to introduce western life style and freemarket capitalism and then tell them to doit slowly. That’s what COP 15 was aboutand that is what COP 17 is about.

It is the clash between China and theWest but also an awakening of the emerg-ing markets that rub their eyes in disbeliefas they are being told by the North thattheir industrial development was not in linewith emission reduction targets.

The UN’s conference in Durban revealsthat one can not solve the problem of ‘Cli-mate Change’ without seriously debatingthe economic model our world is made runby these days.

This leads us to the fundamental questionwhether the economic model, the profitbased production and it’s shareholder capi-talism is still sustainable.

Resource management has to berethought but an economy that only pro-duces for profit and not for the actual de-mand is not sustainable.

Instead of long lasting high quality prod-ucts our industries produce an incredibleamount of trash because the highest profitrates are being achieved with an ever fasterturnover.

This wastes resources.On top of that, the EU Commission con-

tinues with the absurd subsidization ofmajor corporations that would hardly needstate aid but who are benefiting by both theownership of vast farm land that drawshuge amounts of tax payer’s money while atthe same time the distribution channelswith major retailers are eliminating any se-rious competition.

Food safety and democracy go together.As long as the food production is only di-rected to satisfying the rich North one cannot speak of a fair distribution of wealth.

We feed fish to fish to make Sardines be-come Salmon and in topping every think-able perversity livestock that consumesgrain to cows to get filet mignon on theplate that the better off in the rich countriescan afford.

But, by this we are shrinking the supplyand although there would be sufficient mar-ket demand but as the majority of citizenson this planet is living below the povertyline one can not make profit on supplyingfood for those of us who go hungry.

To ask this question, the UN are notbrave enough as this would ultimately leadto the abolishment of shareholder capital-ism and a closing down of the Wall Streetcasino. The UN did better to listen to the“Occupy” activists as these seem to have un-derstood what is at stake.

But, this will be the only democratic wayto save this planet’s climate.

It is not true that the declining wealth ofthe majority in industrialised nations wouldat least be compensated by an increasedwealth for vast populations in other parts ofthe world, i.e. emerging markets.

This is the mantra of the globalisation-ideologists which the Swiss Sociologist andformer UN rapporteur Jean Ziegler hadcalled a major scam as also in the develop-ing countries and emerging markets onlythe top 1% really benefit from the new pro-ductivity and new wealth.

A small, compared with the size of thepopulation, middle class profits unless itjeopardises it like it happened in the SouthEast Asian crisis in 1997 but the vast ma-jority of the population is being sidelined.

The bulk of the capital that is streaminginto those countries is invested on a shortterm basis and is subject to immediate with-

drawal should the profit rate not increasesteadily.

Usually such a retracting mechanism de-stroys more than what it previously had en-couraged. Even foreign direct investmentsof the major multinationals, their takeoversand job transfers into low-wage zones donot create a lot of wealth on a local level es-pecially because of the terribly low level ofsocial purchasing power and net wages andcorporate tax rebates blackmailed from therespective government.

Very often existing and long time estab-lished ‘home-grown’ structures are being de-stroyed while the local suppliers andmanufacturers are being ruined.

In reality there has never been such glob-alisation of the world economy that has al-ways been advocated. Instead of that there isa globally distributed small segment of busi-ness in which the major corporations,banks, insurance companies and distribu-tion agents as well as retailers conspire inorder to cut deals for themselves and by thisto create wealth for those who manage tobe part of it.

For the majority of the population the sit-uation deteriorates and leads to despair.

The gulf has become wider by “globalisa-tion” not narrower. In about 81 countries ofthis planet the per capita income has de-clined sharply between 1992 and 2002while life expectancy took a dive, too.

The discrepancies between top and bot-tom of the poorer societies had grown big-ger, too. Whereas the poorest 20% of theplanet’s population had accounted for ashare of 2.3% of World GDP, it is todayonly 1.4%.

In 2009 for the first time in mankind’shistory more than a billion people were

starving. Since 1945 about 600 million peo-ple died of hunger, ten times more than theWWII – toll.

In addition to that in wars more peopledie through weapons than by starvation.The goal of the UN’s “Millennium Sum-mit” to halve the amount of hungry peoplecould very cynically be understood in a waythat the wars do the job.

The EU’s export to APC and developingcountries is massively subsidised and by thisundermines the agricultural competition inthose countries. On top of that, industri-alised countries subsidise their agriculturalsectors with 1 billion Dollars per day andcreate dumping situations on the worldmarket.

It is a known fact that receivers of EUfunds through the “Common AgriculturalPolicy (CAP)” for farming are foremostmajor corporations, but also rich private in-dividuals. Parallel to this, the 2011 GlobalHunger Index reveals that 26 countries havelevels of hunger that are "Extremely Alarm-ing" or "Alarming".

Moreover, the EU is robbing the westernSahara region of the fruits of the sea by theimplementation of the “Fisheries Agree-ment” with Morocco that neglects Sahar-wian people completely while oppressingthe population in the Western Sahara.

Human Dignity dies when each andevery move of a person has to be efficient,economically justifiable and sustainable.Where only profit maximisation rules, thereis no room for Democracy. The ‘survival-of-the-fittest – credo’ is the opposite ofFreedom and Equality.

Ralph T. Niemeyer is the Editor-in-Chiefof EUchronicle ([email protected])

Energy & Climate

|New Europe NEW EUROPEDecember 11 - 17, 2011

Young boys collect rubbish to sell to re-cycling companies on a major refuse dump in Johannesburg, South Africa. Delegates from 195 countries gathered in Durban,South Africa, for the 17th Conference of Parties of the United Nations Framework Convention on Climate Change (COP 17) in which climate change andamongst other topics, re-cycling were discussed. |EPA/KIM LUDBROOK

CLIMATE|CO2

Planet of the Millennium United Nation’s COP 17 – climate change tourism hardly covers up neo-colonialism

By Ralph T. Niemeyer

ENERGY & CLIMATENew Europe|NEW EUROPE

December 11 - 17, 2011

The Trans Adriatic Pipeline (TAP), project that will transportgas from the Caspian region via Greece and Albania and acrossthe Adriatic Sea to Southern Italy and further into WesternEurope, has signed a co-operation agreement with the Alban-ian Immovable Property Registration Office in Tirana, thecompany said in a press release on 9 December. The agree-ment enables TAP to establish, enhance and update cadastraldata (property ownership, boundaries, and usage) within TAP’spipeline corridor in Albania.

TAP requires information on land ownership in theproposed pipeline corridor and around planned pipelinecompressor stations, so that TAP can start direct negotia-tions on TAP’s access to land along the pipeline withrightful owners. The correct data on legal owners willallow TAP to conduct this process in a transparent andfair way, according to the requirements of the EuropeanBank for Reconstruction and Development (EBRD), thepress release read.

According to the agreement, the Albanian ImmovableProperty Registration Office will give TAP access to the exist-ing cadastral data. TAP, in turn, will support establishing, up-dating and enhancing this data by collecting and providinginformation on property boundaries, ownership, rights and

usage in areas which the pipeline will cross. TAP will use thetechnical requirements elaborated by the Albanian authoritiesin cooperation with the World Bank and the EBRD and willengage closely with all stakeholders during the data gatheringprocess.

“It is a big achievement because it enables TAP to start landaccess work in Albania. It is extremely important to have cor-rect data on the rightful owners and users of land, so that ne-gotiations on easement and relevant compensation can beorganised in a transparent and legal way, and so that the con-cerns of all stakeholders are fairly addressed,” TAP’s CountryManager in Albania Albert Haak said.

The section of TAP in Albania will be approximately 200kilometres in length. It will extend from the Albanian-Greekborder in the east to Fier in the west. The pipeline will cross143 cadastral zones in Albania.

“TAP has also initiated a similar co-operation with theCadastre authorities in Greece in order to have access to all theland needed for the project before construction begins,” saidKai Schmidt-Soltau, TAP's Senior Advisor for Land Accessand Corporate Social Responsibility.

TAP’s shareholders are EGL of Switzerland (42.5%), Nor-way’s Statoil (42.5%) and E.ON Ruhrgas of Germany (15%).

ENERGY|GAS PIPELINE

TAP inks deal to identify Albanian landowners

Bulgaria dashes Trans-Balkan oil pipe dreams

Hi, the Energy Insider here, I have beenwriting this column for five years now butthe Trans-Balkan oil pipeline project, aimedat taking Russian crude through Bulgaria’sterritory to Greece, has been 15 years in themaking. Transneft, Russia’s state-run oilpipeline operator and the main shareholderin the joint venture, envisages a connectionbetween the Bulgarian seaports of Burgas with Greece’s Alexan-droupolis, bypassing the crowded Bosporus.The project suffered many delays and problems over the years,some outlined in this column (The Trans-Balkan Oil PipelineBlues, 15 November 2009; A tale of the Dardanelles, Russian oiland a pipeline: The Final Episode, 8 March 2007). However, on7 December 2011, Bulgaria’s Finance Minister Simeon Djankovdealt the project another blow, saying after a Cabinet session thatSofia decided to abandon the pipeline because it was not eco-nomically viable. "Bulgaria proposes the tripartite intergovern-mental agreement for the oil pipeline to be cancelled by mutualconsent," Djankov was quoted as saying by the press. "In line withthe analyses on the Burgas-Alexandroupolis oil pipeline, it can-not be carried out under the terms of the agreement signed in2007," he said, referring to the pipeline deal signed by Bulgaria,Greece and Russia in Athens under the presence of VladimirPutin, then Russian president, Kostas Karamanlis and SergeyStanishev, Greece and Bulgaria’s prime ministers at the time.A Greek government source told New Europe on 8 Decemberthat “Greece will not back down.” He reminded that this is not thefirst case in which Bulgaria has expressed reservations about theproject, but noted that previously Sofia’s objections focused onenvironmental concerns and not on the economic viability of thepipeline.Greece’s Environment, Energy and Climate Change Ministrytold New Europe that by noon on 9 December it had not beenofficially notified by Bulgaria regarding the reports that it plansto withdraw from the project. Greek Deputy Minister YiannisManiatis and Russian ambassador to Greece VladimirChkhikvishvili discussed the latest developments from Bulgariaand reconfirmed their countries’ “joint commitment” to the proj-ect, the ministry told New Europe. Athens and Moscow notedthe “discontinuity” from the Bulgarian side, reminding that inNovember Bulgaria's Environment Ministry technically ap-proved the Environmental Impact Assessment submitted byTrans-Balkan Pipeline, the Bulgarian-Greek-Russian companyset up to construct and run the oil pipeline.On 8 December, Maniatis said in an e-mailed statement thatBurgas-Alexandroupolis remains a strategic project for Greeceand European energy security, adding that Athens will continuepromoting the environment studies in local communities that wasagreed during the last Greek and Bulgarian meeting.The Greek government source told New Europe that the latestreports that Bulgaria is withdrawing from the project may be an-other chapter in the hapless path of the oil pipeline. “Shouldn’tthere be firstly an official move from the Bulgarian side, someoneto pick up the phone and inform: ‘Gentlemen, we have reachedour final decision and we will notify you in writing. There is astrange game being played, possibly reaching further ... Is this de-cision, which was apparently reached by the [Bulgarian] cabinet,ultimate, final and irreversible? Is it a negotiation card in order toget more benefits? Is there something else going on?” he asked.

[email protected] on twitter @energyinsider

ENERGY INSIDER

Russia’s Rosneft and Anglo-Russianventure TNK-BP plan to increasetheir activities in Venezuela. On 8December, following a meeting be-tween Russian Prime MinisterVladimir Putin and Venezuelan VicePresident Elias Jaua, Rosneft andPetroleos de Venezuela S.A. signed atentative memorandum of under-standing for the joint development ofthe Carabobo-2 block in the Andeannation’s Orinoco Belt, the world’slargest oil reserve.

The president of the Russian stateoil company, Eduard Khudainatov,and Venezuelan Energy MinisterRafael Ramirez, who is also presidentof state-owned PDVSA, signed thejoint-venture deal. According to Ros-neft sources, the company will acquirea 40% stake in the new joint venturefor $1.1 billion, while PDVSA willhave the remaining 60% interest. Theagreement also calls for constructionof a 10-million-tonne-per-year refin-ery to improve the quality of theheavy crude destined for export. TheCarabobo-2 project, which comprisesthe Karabobo-2 North andCarabobo-4 West blocks, has a com-bined acreage of 342 square kilome-tres and is estimated to hold 40billion barrels of reserves, Rosneftsaid in a press release. “This tentativeMOU is a major step in globalizingRosneft’s business,” Khudainatov wasquoted as saying in the release. “IfRosneft joins the project, it will gainaccess to the rich deposits of the

Orinoco Petroleum Belt, a resourcebase that could become an importantdriver of additional growth in thecompany’s output after 2015 andtransform Rosneft into a major playerin this very promising region of LatinAmerica.”

Meanwhile, Anglo-Russian ven-ture TNK-BP announced plans toincrease oil production from fields inVenezuela to 120,000 barrels per dayby 2012. Petromonagas, a joint ven-ture between TNK-BP andVenezuelan state-oil companyPetroleos de Venezuela, said by thefirst quarter of next year, productioncould increase 10,000 barrels per dayto 120,000 barrels per day. TNK-BP

said it aims to dig 54 new wells anddispatch seven drilling rigs during itscurrent program in Venezuela.Jerome Auzenne, technical directorfor TNK-BP Venezuela Holding,said the success of the upcomingdrilling period would determine"project economics" for the opera-tion. "Our synergy with the partnersand establishment of good businessrelations will permit Petromonagasand TNK-BP Venezuela to continuegrowing and developing efficiently,"he added. TNK-BP is Russia's thirdlargest oil company that is owned ona parity basis by BP and AAR con-sortium (Alfa Group/Access Indus-tries/Renova).

ENERGY|OIL

Rosneft, TNK-BP see more Venezuelan oil

Russian Prime Minister Vladimir Putin, right, shakes hands with Venezuelan Vice-President EliasJaua Milano during their meeting in Moscow, Russia, 8 December 2011. |EPA/ALEXEY DRUGINYN/RIA NOVOSTI

By Kostis Geropoulos

EU WORLD

| New EuropeNEW EUROPEDecember 11 - 17, 2011

Russian gas monopoly Gazprommay produce 510 billion cubicmetres of gas this year, Nail Ga-farov, deputy head of the pro-duction department, was quotedas saying on 9 December.

Next year’s production may

reach 528 billion cubic metresdepending on the markets and a“cold winter,” Gafarov told re-porters in Moscow.

Gazprom, the world’s biggestgas producer, has changed itsproduction target for this year

several times amid oscillatingdemand in Europe, its key sourceof revenues, as foreign con-sumers rushed in to store morefuel at the beginning of the yearin anticipation of price hikes.Gazprom has defended its long-

term contracts in which the priceis pegged to the crude oil and re-fined oil products price with alag of six to nine month.

Gazprom plans to launch itshuge Bovanenkovo field in thesecond quarter of 2012. The

company also expects to increaseits gas exports to Europe nextyear to 164 billion cubic metresfrom 151-152 billion cubic me-tres seen this year thanks in nosmall part to newly launchedNord Stream pipeline.

EU-RUSSIA|GAS

Gazprom sees gas output at 510bn cubic metres in 2011

United Russia may lack serious oppositionbut the poor showing of Russia’s rulingparty in the 4 December parliamentaryelections has weakened Prime MinisterVladimir Putin, who will face voters inMarch in a presidential election.

The Central Election Commission saidthe United Russia was set to have 238deputies in the 450-seat State Duma afterthe vote on 4 December, compared with315 seats in the current lower house. Theparliamentary elections were widely seen asa test of Putin’s personal popularity.

Maria Lipman, of the Carnegie Endow-ment for International Peace in Moscow,told New Europe on 5 December thatPutin, who suffered his worst election set-back since he came to power 12 years ago,now faces a negative trend in public opin-ion. “He’s still, of course, the most popularpolitician in the country - by far the mostpowerful figure,” Lipman said. “However, hecertainly looks weakened by the decreasedresults of United Russia and he is now fac-ing a negative trend in public opinion.There is a lot of defiance among the peopleand the vote for United Russia showedthis.”

It seems that Putin needs to do some-thing to reconsolidate his power after suchan obvious poor showing of United Russia.The coming three months will be crucial forthe former KGB agent - he wants to avoida similarly slender victory in March whichwould seem a vote of no-confidence inPutin's formal return to the Kremlin.

“Will he be able to actually break thetrend and somehow remind the nation orattract the nation once again? It’s not quiteclear what he is going to do to sort of dis-tance himself from United Russia, to showthat he is different, that he is offering some-thing new,” the Carnegie expert said.

“He is weakened by the reduced showingof United Russia. Of course he is. He is for-merly the leader of the party and there is ageneral trend in public opinion to defy thetrend, to defy the authorities and especiallysince this mode of defiance was reflected inthe election results,” Lipman added.

On 24 September, Putin told the congressof Russia's ruling party in Moscow that hewould hand his job as prime minister to

President Dmitry Medvedev in 2012 andthat his protégé would lead the Russianparty into the election. It has all been goingwrong for United Russia since then.

“[Medvedev’s] popularity dwindled and helooks increasingly a weaker figure, certainlydoes not look presidential, it seems like peo-ple no longer remember very well that he isstill the president of the country. It may beeven argued that seeing United Russia on de-cline, Putin preferred to have Medvedev asthe leader, not himself. It was obvious thatMedvedev cannot give a boost to the party.Putin was seen as a leader who can actuallyreinforce his popularity and Medvedev cer-tainly not, so when he [Medvedev] was putat the head of the list it was obvious that theparty would not do better, maybe even doworse,” Lipman added.

Putin is credited for bringing stability toRussia after the chaos in the years that fol-lowed the collapse of the Soviet Union in1991. However, the fact that Putin andMedvedev had agreed to swap jobs nextyear was the final straw for many Russianvoters. Some have about had it with Putin’scontinued rule. “People who came to thepolls to do just anything in order to under-mine the positions of United Russia are

now reinvigorated and this is a negativetrend for Putin as well who is facing anelection,” according to Lipman.

Despite reports of electoral fraud, Russia’sparliamentary election showed that peoples’sentiments made a difference. “If you lookat the advanced constituencies, the urban,modernised Russians, I think there was arise in civic responsibility because peoplechose to come to the polls rather than stayhome and ignore this election as somethingfarcical with preordained results and thisbore fruit,” Lipman continued. “However,those forces and figures that the Kremlindeems unwelcome have been barred fromtaking part in this election this time as wellas in previous occasions. Many among thedisgruntled constituencies did not have aparty that they would rather vote for; theycertainly found a party they wanted to voteagainst. Then their choice varied from tear-ing the ballot, from taking the ballot homewith them, to voting for just any party re-gardless of its name or what it stood for,only if it was not United Russia.”

Lipman noted that the Kremlin still hasthe control over the entry to the political field.“The next election is in five years and the un-desired have been barred so all that’s left to

those forces is the extra parliament activities.The Kremlin had gotten rid, had margin-alised and discredited, pushed aside all thefigures that were deemed unwelcome becausethey could probably present danger.”

Asked if Putin can reverse the corruptionand declining economy trend, Lipman toldNew Europe that the trend of unaccount-ability that breeds corruption and empow-erment of bureaucracy was all of Putin’smaking, adding that the elimination of po-litical competition resulted in this lack ofunaccountability. “It was his system that hecreated. And he is not the kind of personwho can dismantle this system, it should besomebody else. He cannot undermine thevery political elites that owe their perks andtheir positions of power and property tohim. This is what their loyalty is based on,that they can be assured of immunity.

"The current elite consist of people whoowe to Putin or his regime their position ofpower and property. How can he possiblyundermine the very people who are thesource of his support? The unaccountabil-ity is the very foundation of his regime. Theloyalty of the bureaucracy relies on they canget away with sometimes unlawful behav-iour and sometimes worse.”

RUSSIA|POLITICS

Election washout for United Russia: Are voters fed up with Putin?

Russian President Dmitry Medvedev, left, and Prime Minister Vladimir Putin speak while visiting the United Russia party's headquarters in Moscow, Russia, 4 De-cember 2011. |EPA/YURI KOCHETKOV/POOL

By Kostis Geropoulos

CAMBRIDGE – Asia’s return to the cen-ter of world affairs is the great power shiftof the twenty-first century. In 1750, Asiahad roughly three-fifths of the world’spopulation and accounted for three-fifthsof global output. By 1900, after the Indus-trial Revolution in Europe and America,Asia’s share of global output had shrunk toone-fifth. By 2050, Asia will be well on itsway back to where it was 300 years earlier.

But, rather than keeping an eye on thatball, the United States wasted the firstdecade of this century mired in wars inIraq and Afghanistan. Now, as US Secre-tary of State Hillary Clinton put it in a re-cent speech, American foreign policy will“pivot” toward East Asia.

President Barack Obama’s decision torotate 2,500 US Marines through a base innorthern Australia is an early sign of thatpivot. In addition, the November Asia-Pa-cific Economic Cooperation meeting, heldin Obama’s home state of Hawaii, pro-moted a new set of trade talks called theTrans-Pacific Partnership. Both events re-inforce Obama’s message to the Asia-Pa-cific region that the US intends to remainan engaged power.

The pivot toward Asia does not meanthat other parts of the world are no longerimportant; on the contrary, Europe, for ex-ample, has a much larger and richer econ-omy than China’s. But, as Obama’snational security adviser, Tom Donilon, re-cently explained, US foreign policy overthe past few years has been buffeted by thewars in Iraq and Afghanistan, concernsabout terrorism, nuclear-proliferationthreats in Iran and North Korea, and therecent Arab uprisings. Obama’s Novembertrip to Asia was an effort to align US for-eign-policy priorities with the region’slong-term importance.

In Donilon’s words, “by elevating thisdynamic region to one of our top strategic

priorities, Obama is showing his determi-nation not to let our ship of state bepushed off course by prevailing crises.” TheObama administration also announcedthat, whatever the outcome of the defense-budget debates, “we are going to make surethat we protect the capabilities that weneed to maintain our presence in the Asia-Pacific” region.

Obama’s November trip was also a mes-sage to China. After the 2008 financial cri-sis, many Chinese expressed the mistakenbelief that the US was in terminal decline,and that China should be more assertive –particularly in pursuing its maritime claimsin the South China Sea – at the expense ofAmerica’s allies and friends. DuringObama’s first year in office, his adminis-tration placed a high priority on coopera-tion with China, but Chinese leadersseemed to misread US policy as a sign ofweakness. The administration took atougher line when Clinton addressed theSouth China Sea question at the Associa-

tion of Southeast Asian Nations meetingin Hanoi in July 2010. Chinese PresidentHu Jintao’s subsequent official visit toWashington in January 2011 was success-ful, but many Chinese editorialists com-plained that the US was trying to “contain”China and prevent its peaceful rise.

China’s anxiety about a supposed UScontainment policy is on the rise again,now that Clinton is insisting that thecountry’s maritime disputes with its neigh-bors be placed on the agenda at next year’sEast Asia Summit in Manila, which willbe attended by Obama, Hu Jintao, andother regional leaders.

But American policy toward China isdifferent from Cold War containment ofthe Soviet bloc. Whereas the US and theSoviet Union had limited trade and socialcontact, the US is China’s largest overseasmarket, welcomed and facilitated China’sentry into the World Trade Organization,and opens its universities’ gates to 125,000Chinese students each year. If current US

policy towards China is supposed to beCold War-style containment, it seems un-usually warm.

The Pentagon’s East Asia Strategy Re-view, which has guided American policysince 1995, offered China integration intothe international system through trade andexchange programs. Although the UShedged its bet by simultaneously strength-ening its alliance with Japan, this does notconstitute containment. After all, China’sleaders cannot predict their successors’ in-tentions. The US is betting that they willbe peaceful, but no one knows. A hedge ex-presses caution, not aggression.

American military forces do not aspireto “contain” China in Cold War fashion,but they can help to shape the environ-ment in which future Chinese leadersmake their choices. I stand by my testi-mony before the US Congress of 1995 inresponse to those who, even then, wanted apolicy of containment rather than engage-ment: “Only China can contain China.”

If China becomes a bully in the Asia-Pa-cific region, other countries will join theUS to confront it. Indeed, that is why manyof China’s neighbors have strengthenedtheir ties with the US since 2008, whenChina’s foreign policy became more as-sertive. But the last thing the US wants isa Cold War II in Asia.

Whatever the two sides’ competitive po-sitions, Sino-American cooperation on is-sues like trade, financial stability, energysecurity, climate change, and pandemicswill benefit both countries. The rest of theregion stands to gain, too. The Obama ad-ministration’s pivot towards Asia signalsrecognition of the region’s great potential,not a clarion call for containment.

Joseph S. Nye, a former US assistant secre-tary of defense, is a professor at Harvardand the author of The Future of Power.Copyright: Project Syndicate, 2011.www.project-syndicate.org

EU WORLDNew Europe | NEW EUROPE

December 11 - 17, 2011

The European People's Party (EPP)has strongly condemned the Ukrain-ian authorities, leading to uncertaintyover EU-Ukraine co-operation fol-lowing the latest developments in thecase of former prime minister YuliaTymoshenko.

During the EPP Congress on 7December, President WilfriedMartens announced that the partywould object to the signing of theAssociation Agreement withUkraine until Yulia Tymoshenko

is released. EPP Secretary-Gen-eral Antonio López Istúrizslammed the Ukrainian authori-ties and the regime of PresidentViktor Yanukovych over its crack-down of the political opponents.

The special guest speaker at theEPP Congress was the daughter ofthe former Ukrainian prime minis-ter Eugenia Carr-Tymoshenko, whoinformed delegates about the currentsituation of the ‘Orange Revolution’leader.

Carr-Tymoshenko said that hermother's condition was rapidly dete-riorating and that she had not beenallowed to be examined by her doc-tors.“Ukraine is moving towards aKGB society,” Carr-Tymoshenkosaid, accusing Yanukovych of usingSoviet methods to fight political op-ponents. She added that the opposi-tion was a victim of "Yanukovych'spolitical terror".

However, she added that hermother “behind three rows of prison

bars has been more free” than hercaptors.

In the latest exercise of a dubiousjustice, Tymoshenko was accused ofother counts of possible embezzle-ment and the district court in Kievordered “detention as preventativemeasure”, without her leaving theprison cell.

In response to these developments,EPP Congress adopted an urgentresolution condemning the actions ofthe regime in Kiev and fully sup-

porting Yulia Tymoshenko in her or-deal.

After the European Parliamentapproved the signing of the agree-ment with Ukraine, it remains tobe seen how the latest develop-ments in the Tymoshenko casewill influence the EuropeanCouncil, or if EPP leaders willstay true to their pledge not toproceed with the AssociationAgreement until the former primeminister is released from prison.

DIPLOMACY

EU-Ukraine co-operation in doubt

POLITICS

Obama’s Pacific Pivot

US President Barack Obama (L) waves as he stands with Hu Jintao, China's president, ahead of the first

working session for the Group of 20 (G20) Cannes Summit at the Palais des Festivals, in Cannes, France, 3

November 2011.|EPA/Chris Ratcliffe

By Joseph S. Nye

ARTS & CULTURE | New Europe

NEW EUROPEDecember 11 - 17, 2011

Germany – Berlin - HamishMorrison Galerie - until 17December 2011Hamish Morrison Galerie isvery pleased to present CaféRaduga, the second soloshow by Russian artist An-drey Klassen.

Andrey Klassen, born in1984, works almost exclu-sively with ink on paper,moving between drawingand painting. His colours areendless shades between blackand white. The artist's pri-mary interest is to breathe life

into his stories. Apparentlyeffortlessly, he subjects a widerange of different ink tech-niques to this goal. Withgreat ease, Klassen finds theright shades of grey for hisvaried scenes, playing virtu-osically with different per-spectives, submerging hisfigures and creatures some-times into darkness, some-times into a half-shadow, orbathing them in light. Evenabstract compositions, fol-lowing a certain dream logic,are easily integrated into hisworks.The creatures and situationsthat Klassen creates aredrawn from a wide range ofsources: mythology, film, lit-erature, fairytales, the every-day, art history, nature,religions, and not leastamorous entanglements. Hesucceeds in representing thevariety and confusion of lifewithout interpreting oranalysing. His works com-municate a tragic but hu-morous embodiment of theFlaubertian 'past that plaguesus, a present that eludes us,and a future that remains un-certain'.

Andrey Klassen - Café Raduga

Vermeer’s Women: Secrets and SilenceUnited Kingdom – Cambridge - The Fitzwilliam Museum – until 15 January 2012A new exhibition on the 17th-century Dutch master Jo-hannes Vermeer will explore the mysterious appeal of thewomen in his paintings. Vermeer’s Women: Secrets andSilence features 28 works by master painters of theDutch Golden Age and four iconic works by Vermeer,including The Lacemaker from the Musée du Louvre inParis, on show in the UK for the first time. Women are one of the key subjects in Vermeer’s works:whether gazing out wistfully at the viewer, or focusingon an activity with an almost eerie calm, they possess apowerful allure. This exhibition at the Fitzwilliam Mu-seum is the first to focus on Vermeer’s domestic interi-ors and, by examining them in the context of paintingsby other Dutch Golden Age masters, explores theenigma of these women who seem crystallised in a mo-ment in time.The vivid realism of these paintings provides a remark-able window into the private world of women in the17th-century Dutch Republic. These scenes about the home seem hauntingly familiareven today: from the meditative calm of needlework,playing music, reading or simply daydreaming to suchmundane domestic activities as cooking, shopping, wash-ing and dressing, minding children, gossiping and eaves-dropping. Often framed with a painted window or doorway, theviewer has the impression of having stumbled upon aprivate moment hidden behind closed doors.

Johannes Vermeer (1632-1675), The Lacemaker (c.1669-70).Oil on canvas, 24 x 21 cm. Musée du Louvre, Paris © Réuniondes Musées Nationaux/ Gérard Blot

France – Paris - Musée Rodin - 18 November2011 to 1st April 2012At over 60, Rodin embarked upon a true careeras a drawer. He had always drawn, but thedrawings that date from after 1890 can be con-sidered the last manifestation of his genius.Drawing every day from a live model, his pas-sion resulted in a collection of nearly 7,000pages, brought together almost in its entirety atthe Musée Rodin. Starting in 1903, the mu-seum organized several exhibitions devoted ex-clusively to the body of his works in drawing.The Musée Rodin’s ambition is to reconnectwith the richness and the breadth of these ex-hibitions, allowing the public to discover thislittle-known aspect of his talent.Through the reconstitution of the major iden-tifiable series (little drawings in ink and water-

color from the years 1890-1895; the Psyches;the Women in Peignoir; the CambodianDancers; the shaped and shaded drawings ofaround 1910; the last drawings, splashed withcolor, to name just a few), certain themes andcharacteristics of the artist’s drawings are ex-plored, such as the practice of drawing and theimportance of the form that is changed, cor-rected, erased, cut up, folded in two; the masteryof the continuous and synthetic line; the rela-tionship of body to space; and, finally, thefemme fatal or the sexual bodies. The proposedsequence of the exhibition will end with Rodin’sfinal drawings, which demonstrate the extraor-dinary tension the artist introduced betweenthe naturalism of a drawing, capturing a ges-ture, a movement in all its immediacy, and theincreasing independence of line and color.

Netherlands – Amsterdam - Ellen de Bruijne Projects -until 24 December 2011The interior is not defined by a continuous enclosure ofwalls but by the folds, twists and turns in an often dis-continuous ornamental surface. Referring to the architectGottfried Semper, who reversed the hierarchical orderwhere cladding is secondary to structure, Katrin Mayer'swork deals with spatial textures in a notion of having dis-cursive layers of interiors within its interiors. Seeing Do-lores as a curated insert within a gallery structure shedevelops a specific texture that reflects on the term ofmasking.Katrin Mayer (DE) lives and works in Berlin. She stud-ied visual art in Hamburg where she also was a fellow ofthe post-graduate program Deconstruction and Design:Gender.

Telling Textures / Dolores

Andrey Klassen, Side Door, 2011,Tusche auf Papier / Ink onPaper, 165 x 122 cm

[email protected]

Capturing the modelRodin 300 drawings 1890-1917

Auguste Rodin Femme nue dans ses voiles © Musée Rodin - Photo : Jean de Calan

Katrin Mayer

FRANCE · GERMANY· SPAIN · PORTUGAL

New Europe | THE EUROPEAN UNIONDecember 11 - 17, 2011

On 9 December, Moody's InvestorsService downgraded the debt of BNPParibas, Societe Generale, and CreditAgricole. Ratings agency cited deterio-rating liquidity and funding conditionsfor its dedcision. Moody's cut its ratingson the long-term debt of BNP andCredit Agricole by one notch to Aa3,concluding reviews that began in Juneand were continued in September. Soci-ete Generale's long-term debt was cut byone notch to A1.

The move highlights the continuingdifficulties faced by French banks be-cause of the European sovereign debtcrisis. All of the downgraded banks re-main dependent on wholesale moneymarkets that have become constrainedsince the summer, making funding moreexpensive and harder to access.

BNP Paribas, SocGen and CréditAgricole have all said repeatedly thatthey can reach the new capital levels

without turning to investors or the gov-ernment for cash.

However, Moody's said that imple-menting these plans could be tough."Given the broader deleveraging effortsbeing undertaken by banks in Franceand elsewhere, there is an increasing riskthat a lack of market appetite for assets

might result in a less-than-expectedbalance-sheet reduction, or sales at de-pressed prices," it said. "This couldmean that the deleveraging plan ulti-mately falls short of its objectives and/ordoes not succeed in improving capital-isation due to higher-than-anticipatedlosses."

Moody's downgrades 3 banks

FRANCEBANKING

On 7 December, Germany’s BASF said it was to open a newoffice in Nairobi, Kenya, to serve customers in East Africaand Sub-Sahara. “Africa is a huge continent with a wealth ofraw materials and a growing population. At the same time, thedynamically growing economy has enormous potential forBASF. Through establishing a stronger local presence we willbe able to even further support our customers and to enhanceBASF's market position,” said Jacques Delmoitiez, President,responsible for BASF's business in Europe, the Middle Eastand Africa. The company’s target is to more than double sales

in Africa by 2020. Its sales, excluding oil and gas, were around€1 billion in 2010. The sale of innovative construction chemicals for the boom-ing construction industry in the urban areas of East Africa isone of the main focuses of activity, as is the distribution ofcrop protection products that increase crop yields. At the sametime, BASF is expanding its business in the consumer sectorwith products such as ingredients for personal care productsand laundry detergents as well as pharmaceutical ingredients.

BASF increases its presence in African markets

GERMANYCHEMICALS

SPAIN|ENERGYBayWa & Wirsol see solarpark in January 2013 Munich-based BayWa AG which has been building the€150 million project in northwest of Alicante in a joint ven-ture with German solar project developer Wirsol, said in arecent statement that it was expecting complete commis-sioning of the park in January 2013 with a nominal output of70MW. Once completed, this facility would be the largest ofits kind in Spain and one of the five largest solar parks in thewhole world. Solar irradiation in Alicante is 40% higher thanin Germany. “On this basis, the solar park can supply around130,000 people with environmentally friendly power,” KlausJosef Lutz, CEO of BayWa AG, said in the statement. AndraOechsler, managing director of Wirsol Spain, described thecurrent development as a source of great opportunities for thecountry and stressed that in the midst of Spain’s economicreorientation, solar energy has the potential to become oneof the largest branches of the industry.

SPAIN|LABOURBBVA offloads 150 employees from its payrollThe second biggest Spanish lender Banco Bilbao VizcayaArgentaria SA (BBVA) last week revealed its decision ofshedding 4% of the staff employed in its wholesale bankingdivision. In real terms, that would see 150 BBVA employeeslosing their job to compensate for the bank’s reduced businesslevels. Such a move was apprehended early in line with thebank’s slowed performance. Profit from BBVA’s wholesalebanking unit fell 13% in the first nine months of the yearfrom the same period of 2010, the bank said in October.

FRANCE|LABOURAXA German unit to cut 1,600 jobs by 2015French insurer AXA plans to cut 1,600 jobs in Germany by2015 out of a total of 9,000 to reduce costs and become morecompetitive in the face of tough pricing conditions, a com-pany spokesman said on 5 December, Economic Times re-ported. AXA is aiming to reduce its cost base by € 220million ($ 295.47 million) in Germany by 2015, or 320 mil-lion including inflation, the spokesman for AXA Germanysaid, adding that the company was moving towards moreautomation. "Whether we grow or not, we must becomemore efficient in order to maintain our competitive posi-tion," Frank Keuper, head of AXA in Germany, said. AXAhas an agreement until 2014 not to make compulsory lay-offs in Germany and is in talks with the works council there,the spokesman added.

GERMANY|SOFTWARESAP acquires SuccessFactors for $ 3.4 blnGerman software giant SAP said it is paying $ 3.4 billion toacquire SuccessFactors, a software company specialising inhuman resources tasks, The Local reported on 4 December.The $3.4bn deal should help the German company catchup on cloud computing, the rapidly growing sector wheredata and processes are hosted remotely on the Internet. Thedeal calls for subsidiary SAP America Inc to pay $40 pershare in cash for SuccessFactors. That is a 52% premium overSuccessFactors' closing stock price of $ 26.25. The deal isexpected to close in the first quarter of 2012. SAP AG is oneof the world's biggest business software makers. The Ger-man company's specialty is business applications, such asthose used for payroll and managing relationships with cus-tomers and suppliers.

A branch of French bank BNP Paribas, Paris. On 9 December, Moody's downgraded the debt of BNPParibas, Societe Generale, and Credit Agricole. |EPA/IAN LANGSDON

Venezuela keen to strengthen ties with SpainVenezuela is keen to strengthen itsties with Spain and is eager to buildthe bilateral relationship based onmutual respect, Venezuela’s Ambas-sador to Spain, Bernardo Alvarez,said last week. Alvarez made thecomments at the Spanish city ofCadiz, where he participated in thedelivery of the Yekuana patrol boat.

Alvarez announced that the govern-ment of President Hugo Chavezwants to "update" its political rela-tionship with the new Spanish ad-ministration. "This is the core of ourmessage, particularly when a changeof government has started in thiscountry," Alvarez said in Cadiz. TheYekuana PC-23 is the first Navy pa-

trol boat to monitor the exclusiveeconomic zone. Alvarez said theVenezuelan government supports a"bilateral political dialogue" in orderto increase economic and trade co-operation. "Having a good trade andeconomic relationship is not possibleif you do not have a good political re-lationship," he stressed.

SPAINDIPLOMACY

The Portuguese central bank reported last week citingthe latest available data from the European Banking Au-thority (EBA) that the banks of the country would lag byan estimated €6.95 billion in meeting EBA’s recapitali-sation target. EBA's recapitalisation plan requires banksto maintain a Core Tier 1 capital ratio of 9% after ad-justing the values of their government bond portfolios toreflect market prices. Altogether, 71 European bankshave to demonstrate they are adequately capitalised aspart of a "capital exercise." As of September-end, four of

Portugal's largest banks reported shortfalls. These include Banco Comercial Portugues SA (by

€2.13bn), Banco BPI SA (by €1.389bn), Espirito Santo Fi-nancial Group SA, the holding company of Banco EspiritoSanto SA (by €1.597bn), and state-owned Caixa Geral deDepositos SA (by €1.834bn). Espirito Santo Financial Groupalso reported a separate shortfall for its banking unit of €810million. The country's total shortfall is down from a com-bined €7.8bn capitalisation shortfall reported when the cap-ital exercise was last completed in October.

Banks face €6.95 billion shortfall

PORTUGALBANKING

AUSTRIA · SLOVENIA · ITALY · MALTANew Europe | THE EUROPEAN UNIONDecember 11 - 17, 2011

AUSTRIA|BUSINESS

Porr profit alertAustria’s third-biggest construction company has warnedits shareholders of potential losses, Austrian Independentreported. Porr AG announced it might suffer a loss of €70to €80 million before tax by the end of this year. The firmsaid it was challenged by write-offs in Eastern European(EE) countries like Hungary and Romania where state-owned institutions failed to pay for assignments. Porr ex-plained that "intense negotiations" about a continuation ofpayments had not born any fruit to this point. The Vienna-based enterprise stressed that it could give a "stable" long-term outlook despite the latest difficulties in EE – but alsowarned that it was still difficult to determine the severity ofthe Eurozone’s debt crisis effects on the real economy. Porrachieved orders worth €2.4 billion in the third quarter of2011, 36.6% more than in the same time span of last year.A spokesman for the company, which is headed by Karl-Heinz Strauss, explained that Porr benefited from increaseddemand for its services abroad since the volume of domes-tic assignments declined by 0.3% to €1.277 billion. Porrhas around 11,000 employees. It is the country’s third-busiest building firm behind market leader Strabag SE andAlpine Bau AG (Alpine).

SLOVENIA|BUSINESS

Builder Gradis Ljubljanafiles for receivershipBuilder Gradis Ljubljana, a part of the troubled constructiongroup Primorje, has filed for receivership at the LjubljanaDistrict Court, the group said, adding that some of the com-pany's 80 workers would be employed within the group,while others would have to be let go, Invest Slovenia reported.‘’Gradis Ljubljana, like the other construction companies inSlovenia, has found itself in a desperate situation because ofthe economic crisis,’’ Primorje said, explaining that Gradishad had blocked bank accounts, which prevented it fromconducting day-to-day business. The group moreover saidthat it would treat the workers' unpaid wages and holiday al-lowances as priority claims, while it regretted that some of theworkers would have to be laid off. Primorje had informedthe unions before filing for receivership and would continueinforming them about the receivership proceedings and re-employing workers. According to the data from the Agencyfor Public Legal Records and Related Services (AJPES),Gradis posted more than €1.5 million in net loss in 2010,while it had still generated € 57,000 in net profit in 2009.

MALTA|ECONOMY

Producer prices for agricultural output fallDuring the third quarter, producer prices for agriculturaloutput went down by 7%, while input prices added 13.6%when compared to the corresponding period last year. Theindex declined from 119.75 points in the third quarter of2010 to 111.32 points in the corresponding quarter thisyear, Malta’s National Statistics Office reported. A drop of29.7% was registered in the fresh vegetables price index, re-sulting from a general increase in the supply of fresh veg-etables in the third quarter. Lower producer prices wererecorded for water melons (-57.8%), sugar melons (-56.9%)and tomatoes (-19.1%). On the other hand, the price ofonions rose by 61.8%. During the period under review, thefruit price index declined by 7.4%. This was mainly due toa decrease in prices fetched for peaches (-53.5%). The an-imal slaughtering index went up by 1.8% over the com-parative period as higher prices were registered for cows(+14.8%) and bulls (+13.1%). Similarly, the animal productsindex rose by 11.7% on account of higher producer pricesfetched for milk (+16.6%) and eggs (+1.5%).

Spar Austria head Gerhard Drexel hasvowed to keep focusing on organic prod-ucts due to the strong demand for thesupermarket’s own Natur Pur range,Austrian Independent reported.

Drexel said that his supermarketchain’s Natur Pur portfolio had achievedtwo-digit growth rates each year since itsintroduction. The businessman claimedthe sale of organic vegetables, dairy prod-ucts and pasta was not affected by po-tential effects of the crisis. He saidcustomers were appreciating the oppor-

tunity to buy organically produced foodbecause of the small difference in priceto regular products.

Analysis agency RegioPlan said inSeptember that the turnover with salesof organic food and non-food productsof this kind increased by 20% from 2009to the next year to €1.05 billion. Regio-Plan officials said the range of organicproducts had improved in Austria in thepast years. They also explained that thegeneral price level of these items had de-creased because of the rising number of

discounters starting the sale of organicfruit, sweets and bread.

Drexel also underlined that all itemssold as part of Spar Austria’s S-Budgetrange were of the utmost quality.

Spar Austria also considered buildingup a network of small shops called SparTo Go. The initiative is seen as theSalzburg-based company’s response tosimilar projects of rivals such as Billa andTesco. Spar Austria has so far consideredmanaging megastores in the country asits main priority.

Spar goes organicAUSTRIA

RETAIL

Slovenian casino operator HIT pre-sented on 2 December plans for a newtourism centre near Nova Gorica (W)by 2019, after a joint venture in a majorgaming centre project with US casinooperator Harrah's was shelved in 2008,Invest Slovenia reported.

The new € 700 million - €1 billiontourism project gives gaming less than3% in terms of the space used.

HIT chairman Drago Podobnik saidthe centre would be built with partnersat one of six possible locations near theSlovenian-Italian border on 120 hectaresof land, of which 70 hectares would beused for a golf course and an apartmentvillage.

The tourism centre is further to in-clude a hotel, a wellness centre, a casino,restaurants, a multi-purpose hall forevents, a congress centre, a disco, agallery, a shopping centre, a cinema mul-

tiplex, a water park and an amusementpark.

This will be an attractive and majorachievement for all of Europe in termsof size, the variety and quality of services,said Podobnik, adding that the centrewas conceived as a sustainably-orientedall-in-one tourism area.

The boss of Slovenia's biggest gamingcompany stressed that the centre wouldhave a positive effect on the entireSlovenian tourism sector.

Some 2,600 visitors a day are expectedat the planned centre on average and thecasino is expected to have around twomillion visitors a year and the water andamusement parks a million.

The tourist centre is to employ some1,500 people and HIT expects an addi-tional 400 will be needed for accompa-nying activities.

Talks between HIT and Harrah's

Entertainment on the planned gamingresort that was to include

15-20% of casino space, were brokenoff in April 2008 over the partners' fail-ure to agree on the ownership and man-agement structures, although the projecthad strong support in the Sloveniangovernment.

HIT announced then that it wouldpursue the project even without Har-rah's, however the company has not re-vealed any partners for its revised andre-launched project.

The company posted revenues of €118.5 million in the first ten months of2011, which is around 1% less thanplanned, and a pre-tax profit of € 4.2million. HIT's casinos recorded 1.08million visitors in the first ten months ofthe year and its hotels recorded almost122,000 overnight stays, which is some10% more year-on-year.

SLOVENIA LEISURE

HIT, HIT Hurrah!

Organic food is crisis proof for Spar.| SPAR

Workers at consumer goods giant Unilever are finalising plansfor their first ever strike as part of a widespread day of actionover pensions, Breaking News reported on 7 December.

More than 2,500 employees at sites across the country wouldwalk out for 24 hours last Friday and mount picket lines in areasincluding Port Sunlight on the Wirral, Purfleet in Essex, Man-chester, Gloucester, Burton-on-Trent and Chester.

Unions said the strike would hit production of Unilever’sbrands including Dove, Marmite, PG Tips, Pot Noodle andHellmans Mayonnaise.

The dispute is over plans to axe the company’s final salarypension scheme from next summer, which unions said will slash

the retirement income of thousands of staff by up to 40%.Jennie Formby, Unite national officer, said: “Thousands of our

members will walk out on Friday to show their disgust atUnilever’s unacceptable attack on their pensions.

“This is a disgraceful incidence of a wealthy global companyusing the recession as cover to raid the pensions of the less well-off.

“Unite is demanding that Unilever reconsiders its plans. Thecompany is being driven by nothing other than wanton greed,putting its profit and shareholders first at the expense of the staffwho have worked so hard to make Unilever the global moneymaker it is today.”

UK · BELGIUM · NETHERLANDS · LUXEMBOURG

New Europe|

THE EUROPEAN UNIONDecember 11 - 17, 2011

According to the Poverty Survey 2011(Armoedesignalement 2011) publishedby the Statistics Netherlands (CBS) andthe Netherlands Institute for Social Re-search/SCP, in 2010, the Dutch economyrecovered somewhat from the deep reces-sion. However, this was not translated intoa reduced risk of poverty. 529,000 Dutchhouseholds (almost 1.1 million persons)were living below the low-income thresh-old in that year; that is equivalent to 7.7%of the total Dutch population, the sameas in 2009.

According to the modest but adequatecriterion, the proportion of people affectedby poverty rose from 6.1% to 6.5%. In

2009 this equated to 960,000 people (liv-ing in 447,000 households); in 2010 thishad increased to one million persons(462,000 households).

The share of households living on a lowincome for four years or longer showed aslight fall in 2010 compared with 2009(2.4% versus 2.6%). Measured using themodest but adequate criterion, the pro-portion of people in long-term povertyincreased slightly (+0.1 percentage point).

The forecasts suggest that the propor-tion of households living below the lowincome threshold will increase by 0.4 per-centage points in both 2011 and 2012.Taken over both years together, this

means an increase of almost 60,000households. This will take the number oflow-income households in 2012 to an es-timated 588,000 (8.5%).

Based on the modest but adequate cri-terion, the number of people in poverty isprojected to increase by more than 70,000in 2011, and by almost 55,000 in 2012(+0.8 percentage points over both years).According to this criterion, the Dutchpoverty rate has been rising since 2008,and will affect more than 1.1 million per-sons (7.3% of the population) in 2012.The increase in 2011 and 2012 is expectedto be comparatively large among childrenand benefit claimants aged under 65 years.

7.7% living below the low-income threshold

THE NETHERLANDS POVERTY

UK|UTILITIES

Veolia to sell UK water companiesVeolia, the French utility giant, plans to sell €5billion of assets, including its three UK-regulatedwater companies and its 50% stake in publictransport company Transdev, The Telegraph re-ported. Veolia, which is the world's biggest waterutility, said it had no plans to divest any of itswaste, non-regulated water or energy services op-erations in the UK. Veolia announced its divest-ment plans last Tuesday as it sought to cut its netdebt from €15 billion to less than €12 billion bythe end of 2013. The company's UK water oper-ations – Veolia Water Central, Southeast andEast – together serve more than three millionpeople. Veolia has owned them since 1987 butthey remained known, until 2009, as Three Val-leys Water, Tendring Hundred and Folkestone &Dover. The companies have a combined turnoverof £269 million. Veolia said it had no plans to di-vest any of its waste, non-regulated water or en-ergy services operations in the UK. The sale ofits stake in Transdev will, however, bring to anend its involvement in UK public transport.Transdev owns London Sovereign, which oper-ates 12 London bus routes, Blazefield, which op-erates bus services in Lancashire and North andWest Yorkshire, and an 18% stake in NottinghamCity Transport, the largest municipal bus opera-tor in England. It also owns greentomatocars, theenvironmentally-friendly London private car hireservice. Transdev was formed last year by amerger of the transport arm of Veolia and that ofCaisse des Depots et Consignations (CDC), aFrench state bank. There was speculation thatCDC could be among potential buyers of Veo-lia's Transdev stake. He said that Transdev wouldhave competed for investment "with other activ-ities that we think are more important for the fu-ture" and added: "We are preparing the companyfor difficult times."

LUXEMBOURG|FINANCE

Luxembourg Stock Exchange lists Qatari bondOn 5 December 2011, the Luxembourg StockExchange admitted to trading a bond issued bythe State of Qatar, for a total amount issued of$5 billion. The international bond sale attractedinvestor orders in excess of $9 billion and is thebiggest deal from the Gulf this year. The netproceeds received by the State of Qatar from theissue of the bonds will be used for the generalfunding purposes of the State, including: fund-ing various infrastructure investments; fundingthe continued growth of Qatar’s hydrocarbonsector as well as potential investments in the in-ternational oil and gas industry; and providingfunds for entities that are owned or controlledby the State. The State of Qatar is a regular issuer of bondslisted on the Luxembourg Stock Exchange. Cur-rently, there are ten different bonds listed, thefirst listing dating back to 2000. In addition, theState of Qatar listed Trust Certificates issued byQatar Global Sukuk on the Luxembourg StockExchange in 2003. In 2010, Qatari Diar Fi-nance, the property agency of Qatar’s sovereignwealth fund listed 2 tranches of bonds, wherethe proceeds were used to finance real estateprojects in Qatar, as part of a shariah-complianttransaction (Murabaha type).

Unilever staff prepares to strike

UNITED KINGDOMLABOUR

For whom the tills toll.| NICOLAS MAETERLINCK

During its Analyst Meeting held in theU.S., Delhaize Group, the Belgian inter-national food retailer, announced its plansto open approximately 450 stores in itshigh growth newer operations in thethree year period 2012-2014 and toachieve Group annual revenue growth of5% to 7% within three years. Additionalcost savings will be generated and used toinvest in the many sales building initia-tives that will support acceleratinggrowth.

Speaking at the Analyst Meeting,

Pierre-Olivier Beckers, President andChief Executive Officer of DelhaizeGroup, commented: “Two years into theexecution of the New Game Plan,aimed at accelerating revenue and oper-ating profit growth, we are making a lotof progress in a difficult environment.We are strengthening our brands, step-ping up price investments at all our op-erating companies, further developingour formats and generating the meansto fund these initiatives through struc-tural changes in the way we operate.”

Delhaize Group’s newer operations,the combination of its new markets(Southeastern Europe and Asia) andnew formats (Bottom Dollar Food inthe U.S. and Red Market in Europe),have contributed significantly to theGroup’s revenue and operating profitgrowth during the first two years of theNew Game Plan. With the recent ac-quisition of Delta Maxi, the Group hasfurther strengthened its base in coun-tries that provide significant potentialfor growth.

Delhaize plans 450 new storesBELGIUMRETAIL

POLAND · HUNGARY · CZECH REPUBLIC

|New Europe THE EUROPEAN UNIONDecember 11 - 17, 2011

State-owned Hungarian railway com-pany MAV and Austrian peer OBBsigned a long-term strategic coopera-tion agreement in Budapest on 2 De-cember, Budapest Business Journalreported.

The agreement was signed byMAV chairman-CEO FerencSzarvas and OBB chairman-CEOChristian Kern.

The cooperation will improve the ef-ficiency of both companies, raise theirlevels of service and give them a betterposition on a market where competi-

tion is increasing, they said.Szarvas said the two companies

would establish a joint venture to carryout vehicle maintenance work OBBcontracts to MAV.

Kern said ownership in the JV wouldbe 49-51%, with OBB being the ma-jority owner. OBB wants the JV to re-pair 34,000 vehicles, he added.

MAV and OBB’s cooperation willextend to the traction segment too,he said. MAV and OBB will alsomake a joint effort to boost the effi-ciency of rail freight service, Szarvas

said. Both companies acknowledgetheir joint interest in strengtheningthe role of the Zahony region, nearHungary’s border with Ukraine, ineast-west rail freight deliveries, headded.

Kern said OBB’s freight unit inHungary, Rail Cargo Hungaria, hadreduced its losses this year but wasexpected to become profitable in thecoming years. OBB is not in concretetalks on the sale of Rail Cargo Hun-garia shares, but the company is opento all good proposals, he added.

MAV, OBB join forces

HUNGARYTRANSPORT HUNGARY|BUSINESS

ISD Dunaferr to cut white-collar jobsHungarian steelworks ISD Dunaferr Zrt as member ofDonbass Industrial Union, plans to lay off 15% of its white-collar employees who work in areas not directly connectedto management and production. The timing of the staffcut is not known, but the company’s CEO has already in-formed the heads of the trade unions, Portfolio Hungaryreported. The unions will be informed about the specificsize of the layoff, which was initiated by the owner, afterconsultation with the heads of the different divisions. White-collar employees may choose to leave on their ownaccord, which includes (under specific circumstances) earlyretirement next year and the company also offers the pos-sibility of preferential retirement for women. For the eco-nomic stability of the group the owner insists onrationalising the company’s costs, in scope of which Duna-ferr will need to optimise employee-related expenses andalso the ratio of workers in production and in productionsupport services.

POLAND|BUSINESS

KGHM acquiring Canadianmining companyThe Polish metal firm KGHM Polska Miedź S.A. intendsto acquire the mining company Quadra FNX, listed on theToronto, Canada stock exchange. As a result of enteringinto agreement on December 6, the process of friendly ac-quisition of this company has begun. KGHM will comeinto possession of world-class ore bodies and operatingcopper mines situated in Canada, the USA and Chile. Thevalue of this transaction amounts to $2.83 billion, and willbe financed by the cash resources of KGHM. The acqui-sition of Quadra FNX will increase production next year bythe KGHM Group by approx. 25%, i.e. 100 thousandtonnes of mined copper, and ultimately by nearly 50%.Total mineral resources will increase by more than 8 mil-lion tonnes of copper, i.e. by 28%, putting KGHM intofourth place globally. KGHM is also considering the pro-duction of other metals, such as nickel and molybdenum.There will also be a significant increase in the productionof gold and other precious metals. Thanks to the acquisi-tion of attractive mining projects, over several years theKGHM Group will substantially reduce its costs of pro-duction. This acquisition will strengthen the position ofKGHM on the copper market, and will enable the growthof the company, as foreseen by the Company's strategy, inthe mining sector. Conclusion of this transaction is ex-pected by the end of the first quarter of 2012, following re-quired administrative approval. KGHM has the right toalter the pricing terms should there arise a competing offer.Should Quadra FNX withdraw from the transaction,KGHM will be paid compensation in the amount of 75million Canadian dollars.

CZECH REPUBLIC|AVIATION

Czech Air groundedAfter announcing that 100 pilots were to lose their jobsbecause of restructuring, unions launched strike actionwhen it was discovered that a dozen planes were to be di-verted to a subsidiary company than mainly deals withcharter flights. "This is an unprecedented transfer of thelucrative aviation market outside the parent company,which is contrary to the restructuring plan and goes againstthe long-term interests of the company [and] preparationfor the sale of ČSA," Filip Gaspar, executive secretary ofthe Czech Airline Pilot Association (CZALPA) toldPrague Post, adding, "This step will significantly reduce thesize and thus the value of the national carrier."

Xanga group’s first building at cargo base in HungaryChina’s Xanga group on Wednesdaytopped out a 5,000 sq m building at aHUF 600 million cargo base it is estab-lishing at the Debrecen airport in east-ern Hungary, Budapest Business Journalreported.

The building is the first at the base,whose area will be 50,000 sq m whencompleted at the end of 2015.

Xanga group won a HUF 150 mil-lion grant for the investment.

Debrecen Deputy Mayor LaszloPapp noted that the group has been in-volved in the creation of thousands ofnew jobs by operating the local indus-trial park and plans further develop-ments on a similar scale near the airport.

Xanga group CEO Istvan Herdon

said SAIGO Port Kft, a member of thegroup, will put its logistic base currentlyunder construction into operation inDecember.

Herdon added that there are ongoingtalks with Chinese companies as a resultof which ten Chinese companies will es-tablish units in Debrecen in the first halfof 2012.

HUNGARYAVIATION

In 2012, the Polish energy firm ORLEN Group will importapproximately 90 million cubic metres of natural gas fromthe western direction. The gas will be delivered by RWE Sup-ply & Trading GmbH and Entrade Grupa Sp. z o.o. to PKNORLEN's plant in Płock and to Anwil in Włocławek, thiswas recently announced.

The contracts with the suppliers – RWE Supply & Trad-ing GmbH and Entrade Grupa Sp. z o.o – were concludedfor 12 months, with an extension option. Under the contractsPKN ORLEN may import approximately 90 million cubicmetres of natural gas, which accounts for 7–8% of its annualrequirement.

The ORLEN Group gained the possibility of purchas-ing gas from countries west of Poland after it was grantedtransmission capacity by OGP Gaz-System as part of the

Open Season procedure concerning transmission capaci-ties of the Lasów inter-connector. In order to transmit theimported gas, the 50 million cubic metres transmission ca-pacity granted to the ORLEN Group, and 40 million cubicmetres capacity available to Entrade (the second partner)will be utilised.

"Expansion of the transmission capacities in Lasów, on thePolish-German border, made it possible to diversify naturalgas supplies for PKN ORLEN. With the new transit capa-bilities, we can start building trade relationships with newsuppliers, which is of paramount importance given the cur-rent liberalisation of the natural gas market. It is also impor-tant in the context of our plans to develop gas-based powergeneration," said Jacek Krawiec, President of the Manage-ment Board of PKN ORLEN.

PKN ORLEN to import gas from Germany

POLANDENERGY

On the right track.| EPA/ZSOLT SZIGETVARY

SWEDEN · DENMARK · FINLAND· IRELANDTHE EUROPEAN UNION

New Europe |

December 11 - 17, 2011

Saab juggles Chinese suitors 'to please GM'Swedish Automobile, the owners of beleaguered Swedish car-maker Saab have revealed that they are in talks with a new con-figuration of Chinese partners in what has been described as abid to appease previous owner US General Motors, The Local re-ported on 5 December.

Saab's Dutch owner Swedish Automobile, or Swan, said in astatement it was in discussions with Chinese carmaker Youngman"and a bank in China about an equity interest in Swan."

Swan had previously agreed to sell 100% of Saab, which is cur-rently reorganising under bankruptcy protection, to Youngmanand Chinese car distribution company Pang Da, but GeneralMotors blocked the necessary transfer of technology licences tothe two Chinese firms.

According to Swedish media reports, Swan had agreed to sell19.9% of Saab to Youngman and 29.9% of the firm to state-owned Bank of China, thus ensuring that Chinese ownership re-main below the sensitive 50% threshold.

However, Swan's charismatic chief executive Victor Mullerdenied that the Chinese bank in question was the Bank of China.In its statement on 5 December, Swan simply said "the in dis-cussions include a short term solution to enable Saab Automo-bile to pay the November wages and continue reorganisation."

"The outcome of the discussions is still uncertain. Any possi-ble transaction would be subject to the approval of the relevantstakeholders," it added.

Saab was on the brink of bankruptcy when GM sold it toSwedish Automobile - at the time called Spyker - in early 2010for $400 million. It has been a rocky road since then. The car-maker was forced to halt production in April as suppliers stoppeddeliveries over mountains of unpaid bills and Saab's some 3,700people have seen salary payments delayed five months running.Employees have yet to receive the salaries due on 25 November,and unions threatened previous week to pursue bankruptcy pro-ceedings against the firm if wages were further delayed.

BUSINESS SWEDEN

FINLAND|BUSINESS

Trouble at Konstancin-Jeziorna millFinnish wood-processing group Metsaliitto said it wouldclose a tissue mill in Konstancin-Jeziorna in Poland nextApril with the loss of up to 140 jobs, News room Finlandreported. "As our Polish and other eastern and central Eu-ropean customers can be served by our other mills inPoland, Slovakia, Germany and the Nordic countries, afterweighing our options, this decision – though not easy –was the only sensible course of action," Hannu Kottonen,the head of Metsaliitto's tissue division, said in the state-ment. The company added that bringing the mill's obso-lete infrastructure up to date would have requiredunsustainably high levels of investment.

SWEDEN|BUSINESS

Ikea reports UK sales dropSwedish furniture giant Ikea became the latest retailer tofeel the pinch in the UK as battered consumer confidenceand a sluggish housing market hit sales, Breaking News re-ported. The chain, which has 18 stores in the UK, said like-for-like sales in the year to 31 August fell 3% to £1.15billion (€1.33 billion), as the consumer spending squeeze,driven by higher prices and lower wage growth, took hold.But the company, which has 280 stores in 26 countries,said it was still able to increase share of the home furnish-ings market in the UK from 6.1% to 6.3% and pledged toinvest £26.6 million (€30.9 million) over the next year inimproving its store environment. The company said strongkitchen sales - which were up 6% on a like-for-like basis- helped support the overall performance as more cus-tomers took up the kitchens service package that waslaunched in 2010. Elsewhere, Ikea said it lowered productprices by 5% across the home furnishings range comparedto the previous year, and added 800 more products for cus-tomers to buy online, where sales grew by over 25%. Ikeasaid a new delivery service, enabling the majority of cus-tomers to pay lower delivery costs, resulted in a 60% in-crease in uptake of the service. Ikea will add a further 1,500more products to its website offering and plans to launchmobile phone sites and additional mobile applications.The company, founded in Sweden in the forties, will cel-ebrate 25 years in the UK in 2012.

DENMARK|BREWING

Carlsberg to lay off 150Carlsberg has announced plans to lay off 150 staff acrossEurope - 95 of whom have already been notified in Den-mark, Switzerland and Poland, Copenhagen Post reportedon 6 December. 2011 has been a challenging year for theworld’s fourth largest brewery group, the company said ina statement, and it expects “difficult and uncertain marketconditions” in Europe over the coming years. “Our responseis to focus on fewer, but more important activities and ex-ecute them with greater impact,” said Carlsberg’s chief ex-ecutive Jorgen Buhl Rasmussen. “This also means thatthere will be activities that we choose not to do or becomea lesser priority.” The company said this means greater co-ordination between markets will be necessary, as well as anew supply chain organisation to oversee the Europeanmarket, which will be based in Switzerland and should beup and running by late 2012. Carlsberg has been expand-ing into newer markets in recent years, with Asia account-ing for 9 per cent of its operating profits. The company alsoowns one of Russia’s largest breweries, but the company’sprofits have been hit by sharp tax hikes and a poor harvest.Carlsberg employs more than 41,000 people worldwideand its headquarters are in Copenhagen.

The Finance Minister of Ireland hasannounced a 25% increase in the priceof cigarettes and an increase in motortax, RTE Ireland reported on 6 De-cember.

Finance Minister Michael Noonanhas said that to protect vulnerablepeople in society, he is proposing toprovide a waiver of the householdcharge of €100 per dwelling for thoseon mortgage interest supplement andthose in certain categories of unfin-ished housing estates. Provision willalso be made to allow payment of the€100 in instalments.

The household charge is set to raise€160 million a year and is an interimmeasure pending the design and im-plementation of a full property taxfrom 2014.

The Minister also said he is initiat-ing a consultation period with themotor industry and other interestedparties to start early next year to re-view options for the improvement inVRT and motor tax in future years.

Figures released with the Budgetshowed that motor tax for cars inband A will rise from €104 to €160

while band B goes up from € 156 to €225. These are the two biggest cate-gories of cars for motor tax.

He also said the Finance Depart-ment will engage in a consultationprocess with the car industry to put inplace an export refund scheme whichwould allow for a refund of VRT on a

vehicle on the permanent export ofthe vehicle to another member statein the European Union.

The Minister said that excise dutyon a package of cigarettes will rise by25%. He said the 2% VAT increasewill apply to alcohol but excise willnot be increased.

Excise hike on cigarettes, motor tax to go up

IRELANDTAX

IBM has agreed a deal to buy Irishcompany Curam Software as part ofits Smarter Cities initiative. Financialterms of the deal were not disclosed,RTE Ireland reported on 6 Decem-ber. Curam's software is used in morethan 80 government agency projectsaround the world. It was founded in1990 and is based in Dublin. It has

about 700 employees and also has of-fices in Toronto, Frankfurt, Canberraand Bangalore.

Through the Smarter Cities initia-tive, IBM helps cities and govern-ments serve citizens better byadopting more efficient ways toanalyse data, anticipate problems andco-ordinate resources.

After the deal is complete, Curamwill be integrated into IBM's Soft-ware group, which is a key driver ofgrowth and profitability for the com-pany. ''After 13 years of experienceworking with IBM, we know ourcompanies are an excellent fit,'' com-mented Curam Software's chief exec-utive John Hearne.

IBM buys Curam SoftwareIRELANDIT

Taxing times for Ireland’s smokers.| EPA/HAYDN WEST

LATVIA · LITHUANIA · ESTONIA · SLOVAKIA

| New Europe THE EUROPEAN UNIONDecember 11 - 17, 2011

SLOVAKIA|HEALTHGovernment ends state of emergency at hospitalsThe Government decided last Wednesday to end thestate of emergency at 16 Slovak hospitals, Slovak spec-tator reported on 8 December. Health Minister Ivan Uh-liarik (Christian Democratic Movement (KDH)) saidthat there was no need to maintain the state of emer-gency as the government had come to an agreement withthe hospital doctors’ union and its members were re-turning to work. The government declared the state ofemergency on 28 November in order to prevent healthcare in Slovakia collapsing after hundreds of hospitaldoctors submitted their resignations en masse. The Smedaily wrote on 8 December that it seems that the protestmight in the end increase the number of physicians atsome hospitals as directors, fearing the impact of masslayoffs, hired some new doctors. These will not be laidoff after the return of the protesting physicians. Alto-gether about 50 physicians have left: some for better of-fers, some for retirement, while others have gone abroad.The Health Ministry does not yet have final statistics,but Sme reported that the numbers provided by largehospitals indicate such a shift.

SLOVAKIA|JUDICIARYGasparovic again refuses to ink amended law on judgesOn 7 December, President Ivan Gasparovic refused fora second time to sign an amendment passed by parlia-ment to the law on judges and lay judges, based on whichelections to the Judicial Council should be changed in away proposed by Justice Minister Lucia Zitnanska (Slo-vak Democratic and Christian Union (SDKU)), Slovakspectator reported. The Slovak Parliament voted on 29November to override the president’s veto without ac-cepting any of his objections. The law change will nowtake effect on 1 January, 2012, even without the presi-dent's signature. In line with the amendment, judges willelect members of the Judicial Council based on a regionalprinciple, with judges in each region electing one mem-ber. The amendment further enacts compulsory evalua-tion of judges once every five years, something which wasabolished in the law that is currently in force. If deficien-cies are found in the work of a judge, he/she is assessedagain after one year. If it is proved that a judge has losthis/her professional capacity for acting as a judge, he/shecan be removed from office. The president also refused topass an amended bill on local taxes and fees. On 29 No-vember, MPs overrode his original veto but agreed topostpone its effects by one year to 1 December, 2012, inline with Gasparovic's recommendation.

SLOVAKIA|GLASSWORKSSlovglass Poltar files for bankruptcySlovglass Poltar company in Banska Bystrica Region hasfiled for bankruptcy after a failed restructuring attempt,Slovak spectator reported on 6 December. The com-pany’s bankruptcy proceeding was approved by the Dis-trict Court in Banska Bystrica in late November, TASRwrote. The plant began a restructuring plan in early 2011and was seeking a new investor, which according toEMEL Bratislava, the current owner, would have guar-anteed the company's ability to repay debts that report-edly reach €1 million. The town's residents appeared tobe unaware that the company, which employed 435 peo-ple, had filed for bankruptcy with the mayor of Poltar,Pavel Gavalec, telling that he had heard nothing fromthe company for three weeks.

Lithuania would push-on with its in-terest in buying Ukrainian power tofeed its grid but such a move must in-volve a tripartite agreement includingBelarus, Lithuanian Vice Ambassadorto Ukraine Marius Yanukonis said last

week. “We're still interested in acquir-ing Ukrainian electricity, but we shouldhave a trilateral agreement (with Be-larus), which we haven't yet signed," hewas quoted as having said in the localmedia. Yanukonis said that the sides

continue consultations on the issue andexpect to settle it. "We continue con-sultations and hope that we'll arrive ata decision, but unfortunately, there is nocertain progress in the issue," the offi-cial added.

Lithuania eyes electricity imports from Ukraine

LITHUANIAENERGY

The latest official data showed Latvian consumer pricessurged by 4.2% year-on-year in November. The break-downs showed tobacco products, alcoholic beverages andtransport related goods and services were the prime con-tributors to the upward pressure. However, prices of cloth-ing and footwear moved down, helping to somewhat easethe pressure.

The prices of tobacco products in November grew onaverage by 1.3% while the prices of alcoholic beverages in-creased on average by 0.5%. Main price rise was recordedfor spirits (+0.6%) and beer (+1.5%). The most significantprice increases in transport group were witnessed for diesel(+2.5%) and automotive gas (+0.5%), as well as mainte-nance and repair of transport vehicles (+0.7%).

In its turn, the airline ticket prices reduced by 1.8%. On

the other hand, footwear prices diminished by 3.4% in themonth, while clothing prices plummeted by 0.5% -- bothattributable to the season sales. Influenced by the specialoffers, the prices of individual care goods dropped by 2%.Also the prices of house maintenance services, non-durable household goods, textiles, sanatoriums, hotels andpackage holidays decreased. Due to sales, the price reduc-tion was recorded for dairy products, bread and cerealproducts, coffee and vegetable oil. Also the growth in veg-etable, fruit, fish and fish product, juice, and mineral waterprices was observed. The prices of data processing equip-ment rose, as well as the prices of sports and recreationalgoods, newspapers, books, insurance and catering services.The average price level for goods increased by 5.2%, butfor services – by 1.4%.

Inflation increases year-on-year

LATVIA ECONOMY

Estonia’s GDP increased by 8.5% year-on-year in the three months to Septem-ber, Statistics Estonia reported last week.The second estimate from the officialstatisticians showed the seasonally andworking-day adjusted GDP grew by1.2% compared to the preceding quarter.That confirmed that Estonia’s growthhas been continuing in line with the per-formances experienced in the previousquarters. In the first and second quarters,

Estonian GDP grew by 9.5% and 8.4%year-on-year. In the third quarter, theGDP was estimated at €4.12 billion atcurrent prices. Manufacturing continuedto be the prime contributor to Estonia’sGDP growth all through these threequarters.

However, in the third quarter thegrowth rate of the value added in thiseconomic activity decelerated and itscontribution to the GDP growth di-

minished. Deceleration of the growth ofthe value added of manufacture of com-puters, electronic and optical productsinfluenced manufacturing the most.The increase of value added tax and ex-cise taxes had a considerable influenceon the GDP growth. The economicgrowth was mostly hindered by the de-crease of value added of real estate ac-tivities and professional, scientific andtechnical activities.

ESTONIAECONOMY

GDP increases by 8.5% in Q3

An oil terminal at Muuga Port 5 kilometres away from Tallinn. Estonia’s GDP increased by 8.5% year-on-year in the three months to September. |EPA PHOTO/

EUROPEAN COMMISSION/NIPA

GREECE · CYPRUS

New Europe | THE EUROPEAN UNIONDecember 11 - 17, 2011

On 8 December, Greece launched a mas-sive tender to attract international in-vestors to one of Europe's biggest realestate projects at the old Athens airport ofHellenikon.

The Hellenic Republic Asset Develop-ment Fund, the recently established entityresponsible for managing Greece's pri-vatisation programme, announced an In-vitation for the Expression of Interest forthe acquisition of a majority shareholdingin Hellinikon S.A., the entity which willhold the rights to manage and develop thesite of the land plot of the former inter-national airport of Athens, Hellinikon.

Located within the greater Athensmetropolitan area, the site is close to theheart of Athens, with direct access to theAegean islands, and a short flight frommost major European and Middle Eastdestinations. As the majority shareholder,the Preferred Investor will be responsiblefor ensuring that Hellinikon S.A. carriesout the development of an area of morethan 6.2 million square metres of land andreal estate assets, the Fund said in a pressrelease.

The relevant site is more than threetimes the size of Monaco, more than twice

the size of Hyde Park in London andCentral Park in New York. Its develop-ment will constitute one of the largesturban regeneration and land developmentprojects in Europe.

On completion of the transaction, andin line with a business plan that will havebeen submitted by the Preferred Investor,Hellinikon S.A. intends to redevelop thesite into a mixed-use landmark location ofnational significance. It is intended thatthe redevelopment will enhance the at-tractiveness of the Athens area as a touristdestination and as a business and leisurecentre, whilst remaining integrated withthe greater area of Athens.

Commenting on today's announce-ment, Costas Mitropoulos, CEO of theHellenic Republic Asset DevelopmentFund, said: "We are delighted to belaunching the long awaited Process forsuch an attractive and strategically im-portant asset. This is a rare opportunityfor the successful investor to develop aworld class destination benefitingAthens, Greece and the EasternMediterranean. "We expect significantinvestor interest in this process, for atotal investment which will stimulate

growth in the Greek economy."The process is aimed to attract strategic

investors, with a vision for the transfor-mation of this prime piece of real estateinto a world class urban developmentproject. In this first phase of the process,interested parties will be requested to ex-press their interest and demonstrate theyfulfil the criteria outlined in the Invitationfor the Expression of Interest, for qualify-ing for the second phase. Expressions ofInterest are required to be submitted byno later than 17.00 Greece time on 30March 2012, the press release read. Pre-qualified investors will then be invited toparticipate in the more detailed secondphase of the Sale Process, at the end ofwhich they will be requested to submitbinding financial offers, together withfunding commitments, an underlyingbusiness plan and a bid bond. InterestedInvestors may participate alone or by wayof a consortium or joint venture. It is ex-pected that the Preferred Investor will beannounced by the end of 2012.

Citigroup Global Markets Ltd. and Pi-raeus Bank S.A. are acting as financial ad-visors to the Hellenic Republic AssetDevelopment Fund on this Process.

GREECEDEVELOPMENT

The unemployed persons, registered atthe District Labour Offices on the lastday of November 2011, reached 31.826persons. Based on the seasonally ad-justed data that shows the trend of un-employment, the number of registeredunemployed for November 2011 in-creased to 31.253 persons in compari-

son to 30.969 in the previous month,Statistical Service of Cyprus reportedon December 5. In comparison withNovember 2010, an increase of 6.805persons or 27,2% was recorded whichwas mainly observed in the sectors oftrade (an increase of 1.644 unemployedpersons), construction (an increase of

1.363), accommodation and food serv-ice activities (an increase of 1.261),manufacturing (an increase of 809),transportation and storage (an increaseof 420), education (an increase of 365),as well as to newcomers in the labourmarket where an increase of 462 unem-ployed persons was recorded.

Unemployment rises 27.2% year-on-year in November

CYPRUSLABOR

CYPRUS|DIVIDED ISLANDNicosia hails conclusions of Council about TurkeyCyprus’ government is satisfied with the content of theconclusions of the General Affairs Council that concernTurkey, said Government Spokesman Stefanos Stefanou,while commenting on the text of the Conclusions of theGeneral Affairs Council of the European Union, at thePresidential Palace on 7 December. In the conclusions,Turkey is urged to avoid any kind of threat or action di-rected against a member state and is called upon to com-mit itself to good neighbourly relations. It is evident thatthe EU indicates to Turkey to terminate the threats itlaunches against Cyprus in connection with the explo-rations that our country is conducting for hydrocarbons inthe Cyprus EEZ. In the conclusions there is an extensivereference to Turkey’s Cyprus-related obligations as theseare outlined in the Conclusions of December 2006 and inthe Declaration of September 2005, which unfortunatelyTurkey has not fulfilled, so far, thus causing the EU’s deepdissatisfaction. The Council underlines the need for fulland non-discriminatory implementation of the AdditionalProtocol towards all member states. In the conclusions, animportant reference is made on the fact that the non-dis-criminatory implementation would provide a significantboost to Turkey’s negotiation process. In the absence ofprogress, the Council has decided to maintain its measuresfrom 2006 which, as it is known, led to the freezing of eightaccession chapters for Turkey. According to the conclu-sions, the Council expects Turkey to actively support theongoing negotiations aimed at a fair, comprehensive andviable settlement of the Cyprus problem within the UNframework, in accordance with the relevant resolutions, andin line with the principles on which the Union is founded.

GREECE|ENVIRONMENTFor Greece, the roadmap points to green growthGreece's Environment, Energy and Climate ChangeMinister Giorgos Papaconstantinou said in the plenaryof the 17th United Nations Conference on ClimateChange in Durban, South Africa, that some globally arereluctant to sign binding commitments to reduce emis-sions and protect the environment. “Our problemslooked local and seemed to require a local solution. Theyproved systemic and widespread, affecting many others aswell, finally requiring multilateral action. The same holdsfor climate change which affects us all, will do more so inthe future, and requires involvement and contribution byall,” the minister said. “At this moment, Madame Presi-dent, in Greece, we are at a critical juncture. We need tomitigate our shortcomings now or pay a much higherprice later. To accelerate things we need to follow a plan,a roadmap, to show us the way. For Greece, the roadmappoints to green growth. Its milestones include amongothers: a determined push to change our energy mix; en-ergy conversation through renovation of housing stock;greening of our transport system including shipping ona global scale and a fair basis; an efficient but sustainableagriculture; legally binding coverage of 40% by 2020 andover 90% of electricity by 2050 from RES with corre-sponding reductions in emissions,” he said. “The mile-stones include cooperative projects to further developrenewable energy including Helios a 10GW solar pho-tovoltaic development to generate electricity in Greecefor export to northern Europe. In this climate changeprocess also, Madame President, we are at a critical pointand we need a roadmap, a roadmap for all, a roadmapthat is robust, that we can rely on, that would lead to alegally binding agreement, that will enable us to bridgethe gap, that will allow us to go faster,” Papaconstanti-nou said.

A general view of the former international airport of Hellinikon, in Athens, Greece. |EPA/PANTELIS SAITAS

Hellenic Asset Fund launchestender for old Athens airport

BULGARIA · ROMANIA

| New Europe THE EUROPEAN UNIONDecember 11 - 17, 2011

Bulgaria gave the planned Russian-backed South Stream gas pipeline thestatus of a national project and de-clared it an object of national impor-tance, providing opportunities for thespeedy construction of the project.

The fact that the South Streamproject has received an object of na-tional importance status in Bulgariameans that all legal, administrativeand tax formalities required for thesuccessful implementation of theproject, will be reduced, and Russiangas monopoly Gazprom will see ac-tive support from the government in-volved in the project.

The Bulgarian government said

that this comes in resonance with thenational and European policy on en-ergy diversification and deployingbetter energy infrastructure.

Bulgaria joined the South Streamin 2008. In 2009 the country heldparliamentary elections, and the newgovernment suspended all projectswith Russia. Last year the sides man-aged to overcome all difficulties andagreed to form a joint venture.

The South Stream is a gas pipelineto transport Russian natural gas viathe Black Sea to Southern Europe,bypassing Ukraine. One branch willrun through Greece to southern Italy,while the other is going to run via

Serbia and Hungary to Austria.Gazprom owns 50% of shares, whilethe rest is distributed between ItalianENI, French EDF and GermanWintershall. The first branch is dueto be commissioned by 2015. By 2018it is planned to be operated in full todeliver 63 billion cubic metres of gasper year. The project’s cost stands at€15.5 billion.

Last month, Gazprom ChaurmanAlexei Miller said that the final deci-sion on South Stream will be made inthe end of 2012, Bulgarian NationalRadio reported. He denied mediaspeculations that the pipeline couldgo round Bulgaria.

Sofia says South Stream of national importance

BULGARIAENERGY

French Bakery chain Paul recentlyopened its fourth unit in Romania, inthe University area of Bucharest. Thenew shop required a €500,000 invest-ment and it covers 140 square metres,Romania Insider reported on 7 De-cember. The company hopes to achieve

a turnover of €600,000 in the first yearof activity from this new store. Thebakery chain entered the Romanianmarket in 2008.

It has already opened three units inBucharest, in Piata Dorobanti, AFIPalace Cotroceni, and Baneasa Shop-

ping City. Moulin D’Or manages Paulbakeries in Romania and posted a€2.75 million turnover last year.Around 40% of its revenues came fromthe Dorobanti branch, which was alsothe first to be opened on the Roman-ian market.

Paul opens new downtown unit in Bucharest

ROMANIAFOOD

FMCG producer Unilever has invested €50 million in thepast two years in expanding the production capacity of itsdetergents factory in Ploiesti by 30%, the company an-nounced on 6 December, Business Review reported. The in-vestment has also allowed the company to reduce electricityconsumption said Marc Desefans, president of UnileverSouth Central Europe.

The FMCG producer has announced a global sustain-ability programme which will also impact its local business.The programme’s main objectives will be to halve the envi-ronmental footprint of its products by 2020 and source all itsagricultural raw materials sustainably. Unilever employs 600

people in Romania, 335 of which work in its factory inPloiesti where it produces detergents and other FMCGproducts such as mustard, instant soups and seasonings.Unilever is present in Romania with brands like Dero, Omo,Coccolino, Cif, Domestos, Dove, Rexona, Axe, Clear, Signal,Delma, Rama, Becel, Delikat, Knorr, Hellmann’s and Lip-ton. Its turnover in Romania last year was around €173mnwith a loss of approximately €1mn.

Headquartered in Bucharest, Unilever South Central Eu-rope coordinates the company’s business in Romania, Bul-garia, Serbia, Montenegro, Albania, Macedonia andRepublic of Moldova.

Unilever invests €50mn in expanding Ploiesti factory

ROMANIABUSINESS

BULGARIA|ECONOMY

October industrial output growth increasesBulgaria's industrial production increased at a fasterpace in October, data released by the National Sta-tistical Institute showed on 7 December. Industrialproduction increased a working-day adjusted 2.4%on an annual basis in October, slower than the 1.4%growth seen in September. In August, output in-creased 1.1% annually. Production in the mining andquarrying industry climbed 13% annually, whilemanufacturing output moved up 2.5% during themonth. Meanwhile, there was a 1.8% year-on-yeardecline in the production of electricity, gas, steamand air conditioning supply.

ROMANIA|AUTO INDUSTRY

Johnson Controls buys Spumotim divisionCar parts manufacturer Johnson Controls Automo-tive Experience has acquired the automotive divisionof its Romanian supplier Spumotim, a manufacturerof polyurethane foam for the automotive industry,Romania Insider reported on 7 December. Spumotimhas 300 employees and the deal includes the com-pany’s headquarters and plant in Timisoara, as well asits plant in Pitesti. “Romania is an important part ofthe growing Eastern European automotive market.The acquisition of Spumotim is intended to supportseveral of our customers - Dacia, Ford and Fiat - thatoperate production facilities in the region,” said BrianCooke, vice president and general manager of theglobal foam business unit at Johnson Controls Auto-motive Experience.

ROMANIA|RETAIL

New Metro Punct store opens in PitestiMetro Cash & Carry would open its fifth MetroPunct store last Wednesday, Business Review reportedon 6 December. The new unit is located in Ploiestiand has a total sales area of 2,100 square metres withover 4,000 products. According to company represen-tatives, the retailer plans to open another Metro Punctunit by year end in Turda. Smaller than the usualMetro Cash & Carry units, the Metro Punct concepttargets especially resellers. German Metro Cash &Carry has been present in Romania since 1996 whenit opened its first cash & carry outlet in Bucharest. Itnow has a national network of 31 stores.

ROMANIA|INTERNET

GreenLight Invest buys stake in Bunt StudioGreenLight Invest, the private investment fund con-trolled by businessman Ion Sturza, announced it hadtaken over the majority stake in online developmentagency Bunt Studio, Business Review reported on 6December. The fund is set to invest € 5 million by2015 for new online products and projects. Bunt Stu-dio was established in 2007 and its services portfoliocovers web hosting and design, programming and de-veloping applications for mobile platforms, onlineservices. The staff currently counts 30 people and itis estimated to reach 80 throughout next year, follow-ing the takeover. The announced investment offersthe needed capital for development and entering in-ternational markets.

NORWAY · ICELAND · SWITZERLANDNew Europe | PARTNERS

December 11 - 17, 2011

Credit Suisse expects 10-15% upside for Asian equities in 2012 Credit Suisse unveiled its Asian EquityStrategy report on the outlook for 2012,announcing a year-end target of 527 forthe MSCI Asia ex-Japan Index, whichrepresents an upside of 10-15%. TheBank’s Equity Strategists believe slow-ing inflation and monetary easing willbe catalysts for a “reflation rally” in 2012,while China, Korea, Hong Kong andAustralia are the preferred markets andBasic Materials, Financials, Energy andReal Estate are identified as the mostattractive sectors.

Credit Suisse’s Global EmergingMarkets and Asia Pacific StrategistSakthi Siva told reporters in Singa-pore and Hong Kong that Asianmarkets were already pricing in a re-cession in the developed Westerneconomies, but not a financial crisis.Ms. Siva said that the price to bookratio for Asia Pacific ex-Japan hadalready fallen to 1.52 times, close tothe 1.4 times level reached duringthe 2001 recession. She also notedthat Asian balance sheets werestrong, with the region’s gearing (netdebt to equity ratio) having fallen

from a high of 47% in 1998 to an ex-pected 23% for 2011.

Ms. Siva discussed the impact ofthe Eurozone debt crisis on Asia,noting that there has been a verystrong correlation between increasesin European banks’ cost of short

term funding and declines for Asianequities, and vice-versa. However,Ms. Siva also pointed out that mostof the seven double-dip recession in-dicators followed by her team pointtowards a soft landing for the globaleconomy.

SWITZERLANDENERGY

Actavis acquires Dutch company Iceland-based generic pharmaceuticalscompany, Actavis has recently acquired100% of the shares of the Dutch phar-maceutical packing manufacturerPharmaPack International BV, a spe-cialist in packaging pharmaceutical andbiotechnological products, The Com-pany reported.

This recent acquisition now givesActavis much greater flexibility in ten-der markets and also allows for mini-mum order quantities for smallermarkets.

CEO at Actavis, Claudio Albrechtexplained, “I have known this profes-

sional company for a long time and Iam very proud that the owners decidedto choose Actavis as their new partner.It is obvious that they had other oppor-tunities as well.”

One of the Dutch company’s futureroles will be the bulk packaging ofpharmaceuticals produced in the Ac-tavis facility in Alathur (India). Anotheradvantage of this packaging centre willbe a significant reduction in freightcosts.

Gerard Stevers, Director and ownerof PharmaPack International added,“PharmaPack will benefit from the

global organisation of Actavis and havegreat opportunities to grow within thisinternational group…Actavis has verydynamic growth plans for the futureand this expansion will have very posi-tive effects for PharmaPack.”

PharmaPack is based in Zoetermeer,the Netherlands, and is a specialist inpackaging pharmaceutical as well asbiotechnological products. The com-pany has extensive experience withproduct, organisational and country-specific packaging requirements andhas been involved in the pharmaceuti-cal service industry for almost 30 years.

ICELANDPHARMA

The world's second and third largest container shipping com-panies, Swiss-Italian MSC and France's CMA CGM, an-nounced a partnership on 2 December to share their fleets,The Local reported.

In a statement, the two family-owned companies said themove would "optimise" operations amid fears of a downturnin the global shipping industry due to global economic weak-ness. The statement said the partnership would affect thecompanies' Asia-Northern Europe, Asia-Southern Africaand South American routes.

"The agreement offers us new opportunities to optimisethe use of our respective fleets, improve our transit times andincrease our performance," MSC Vice President Diego

Aponte said in the statement."We have decided to step up our partnerships, which re-

flect a commitment to long-term cooperation and will enableus to offer customers improved solutions and services," CMACGM Group CEO Rodolphe Saade said.

The two groups will nonetheless remain commercial com-petitors and the partnership will not involve an exchange ofcapital. Sources connected with the deal said it would take ef-fect in two weeks.

CMA CGM has suffered from debt problems and in Sep-tember ratings agency Standard and Poor's revised its outlookon the shipping giant to negative, warning that it was at riskof breaching conditions on its debt.

Swiss-Italian shipping giant to partner with rivalSWITZERLANDCARGO

SWITZERLAND|FINANCE

Glencore chief vows to hold onto sharesGlencore CEO Ivan Glasenberg said he will not sell anyof his shares in the company as long as he works there,Swiss info reported. Glasenberg, who is the single largestshareholder of the canton Zug-based commodities trader,made the comment in an interview last Monday. Glasen-berg is said to hold nearly 16% of company stock. Glen-core started trading on the stock market in May, raisingnearly 9 billion Swiss Francs ($9.78 billion). Previous weekthe Swiss business journal, Bilanz, listed him as one ofSwitzerland’s richest residents, with his personal wealthestimated at between 6-7 billion Francs. "None of us hassold a single share. Neither before nor after the flotation.And I've often said that I'm not thinking about selling anyshares as long as I work here," Glasenberg added.

NORWAY|FISHING

New fisheries agreementbetween EU and NorwayFollowing a week of negotiations between Norway andthe EU, a new bi-lateral agreement for the management ofshared fish stocks in the North Sea has been signed by thetwo sides, Norway Post reported. The Norwegian Fish-eries Minister, Lisbeth Berg-Hansen, said she is pleasedthat the new agreement gives Norwegian fishermen anextra quota of cod. Scottish Fisheries Secretary RichardLochhead said "Following a week of intense negotiations,we now have a deal in place for 2012 which sees a wel-come rise in quotas for a number of key Scottish stocks. It'scritical that we stick to robust scientific advice when set-ting these quotas, which is the only way to support sus-tainable fisheries". Under catch quotas vessels can land,rather than be forced to discard, an extra amount equal to12 % of the TAC for cod. This is less than the amountfishermen are estimated to have discarded under the tra-ditional quota system.

ICELAND|RELATIONS

Iceland and Russia signagreements in MoscowForeign Minister Ossur Skarpheoinsson met previousTuesday with his Russian counterpart, Sergei Lavrov, inMoscow. At the meeting Ossur signed an agreementthat facilitates trade in dairy products from Iceland toRussia, Iceland Review reported on 2 December. Theministers spoke at length on the possibility of laying asubmarine communications cable from Russia to Ice-land. The Icelandic company Norline and the Russiancompany Polarnet are now developing joint plans to laythe cable. If an agreement is reached, a cable may beready as early as the end of 2013. The ministers also con-firmed an agreement on cooperation on Arctic affairs.Iceland and Russia will continue to monitor the devel-opment of sea and air traffic in the region, with specificfocus on trans-Arctic sailing routes and the developmentof port infrastructure.

SWITZERLAND|ECONOMY

National Consumer PriceIndex falls slightlyThe national consumer price index calculated by the Fed-eral Statistical Office (FSO) registered a decline of 0.2%in November 2011. It reached 99.4 points (December2010=100). Year-on-year inflation was -0.5%, comparedwith annualised rates of -0.1% in October 2011 and 0.2%in November 2010.

Brady W. Dougan, Chief Executive Officer (CEO) of Swiss Bank Credit Suisse, speaksduring a press conference.| EPA/ALESSANDRO DELLA BELLA

CROATIA · ALBANIA · SERBIA · BOSNIA|New Europe CANDIDATESDecember 11 - 17, 2011

CROATIA|INDUSTRY

Industrial production increasesData recently unveiled by the Croatian Bureau of Statisticsshowed that the country’s industrial production increasedfrom last year in October, after facing a decline in the previ-ous month, Javno reported. In October, industrial outputwent up by 0.6 % year-on-year to adjust working-day vari-ations. In September, it was a 2.3% decline and 4.4% declinein production in August. Output in the manufacturing in-dustry rose 1.8 % annually, while mining and quarrying pro-duction decreased 6.3 %. In the aforesaid month, there wasa 5.4 % annual decline in the production of electricity, gas,steam and air conditioning supply. On a monthly basis, in-dustrial output decreased a seasonally adjusted 0.6 % in Oc-tober, reversing the 4 % growth recorded in September. Inthe first 10 months of this year, total industrial output de-clined 1.5 % from the corresponding period last year.

ALBANIA|BUSINESS

“Buy Albanian” Fair opens in TiranaThe Municipality of Tirana recently organised “Buy Al-banian” Fair which displayed different domestic products,food products and handicrafts. The expo was attended byAlbanian Prime Minister Sali Berisha and his spouse LiriBerisha, AENews reported. The Premier stressed that theexpo is the best buy as no product has more taste than whatis produced in this land. He was also proud to see that thefair exhibit the greatest spiritual wealth of the Albanians aswell as the taste of the domestic products. Berisha said, “Itwas one of the best fairs I have visited with Albanian gas-tronomic delights and the best handicrafts like fancywork,carpets, statuettes, alabaster and filigree works. The fair alsoproudly displayed the greatest spiritual wealth of the Alba-nians, but even the taste of the domestic products.” He alsohailed the initiative of Municipality of Tirana to promotethe Albanian products by saying, “I would like to congratu-late Municipality of Tirana for adding the fair to the cele-bration events marking November 28. I take the opportunityto congratulate all Albanians on the Independence and Lib-eration Day.” On this occasion, he announced that about 4million Albanian citizens have moved in and out of Albaniacelebrating the remarkable achievement of visa-free travel.

SERBIA|BANKING

Serbs should prevent convertingeuro savings into other CurrenciesDejan Soskic, governor of Serbia’s central bank recentlywarned citizens of the country to not convert their euro sav-ings into other foreign currencies amidst growing debt cri-sis in Europe, Beta news agency reported. He said citizensshould not fall prey to incomplete and not sufficiently com-petent analyses of the developments in the Eurozone thatweaken confidence in the banking sector. Soskic assured thatthe local banks are solvent and savings of Serbians are safe.He mentioned that citizens show have deposited up to€50,000 are insured and additional guarantees come fromthe requirement for local banks to keep as mandatory re-serves with the central bank up to 30% of attracted deposits.Few weeks back, Soskic said in Vienna that Srbia is study-ing several options to support local banks if they face prob-lem stemming from continuing turbulence in the eurozone. Serbia’s Deputy Finance Minister Goran Radosavljevic saidlast month that Serbia has been evaluating four options andone of them involve €1 billion in new domestic debt for theindustry to offset potential contagion from the euro area.According to last month Fitch report, the banking sectors inCroatia, Bulgaria, Serbia and Romania have the strongestlinks with parent banks from Greece and Italy.

Strong tourism revenue supportCroatia's economic growth in Q3Croatia’s economy was supported bystrong tourism revenues in the thirdquarter of this year but the slide in do-mestic demand, fall in investments anddeepening crisis n the euro zone signalsa new recession, Javno reported. "Thegrowth was due ... primarily (to)tourism. But worrying underlyingtrends remain: shrinking domestic de-mand and a fall in investments, plus theslowdown and deleveraging in the eurozone," Hypo Bank analyst Hrvoje Sto-jic said. The new government will haveto face the recession ahead, according toanalysts. Preliminary figures released bythe National Bureau of Statisticsshowed that the country’s Croatia'sGross Domestic Product (GDP) rose bya real 0.6% year on year in the thirdquarter. It was the second quarterly riseso far this year but at a lower rate than inthe second quarter when the economyexpanded by 0.8% year on year. The in-crease followed stagnation in the firsthalf of this year which was preceded bycontraction in each of the previous twoyears. The boom in tourism revenuesincreased retail sales which in turnhelped the economy to grow. They ex-pect economic contraction to resume inthe fourth quarter due to the euro zonedebt crisis. Croatia's statistics office willrelease more detailed figures for thethird-quarter GDP on December 20.

Stojic expects the economic outlookof the country to be weak in 2012. Hesaid that the new government will haveto achieve a strong and fast fiscal con-solidation to avert a possible downgradein Croatia's credit ratings that could fur-ther depress domestic consumption andinvestment by making borrowing moreexpensive. In addition, the worsening ofthe debt situation in the euro zone, and

the fact that Italian and Austrian banks,which heavily dominate the bankingsector in Croatia, are under regulatorypressure in their home countries to trimlending to their subsidiaries in Centraland Eastern Europe. Last month, theEuropean Commission had said thatthe impending crisis in international fi-nancial markets may become a challengefor Croatia's foreign-owned banks.Zrinka Zivkovic Matijevic of Raiffeisenbank also retertarted that in the firstquarter of 2012 Croatia will face a newcontraction which means another reces-sion era.

The increased uncertainty ahead inthe fourth quarter, especially on the ex-port side, also singals downside risks interms of the Croatian economy's un-derperformance, Austria's Erste BankGroup said. Erste said in a statement,“With ongoing domestic demand

weakness and a gloomy export out-look, we see moderation, with risks ofa negative figure already in 4Q verymuch alive. The new governmentwould have to work hard to move to-wards fiscal consolidation, in order tosupport the rating outlook and exter-nal position stability," Erste said. Croa-tia has Baa3 long-term ratings withstable outlook from Moody's whichthe ratings agency has said reflect thecountry's relative wealth and the gov-ernment's affordable, albeit worseningdebt metrics. The country also hasBBB- ratings with a negative outlookfrom Fitch and Standard & Poor's.Fitch also has noted that Croatia re-mains a risky country for investors dueto its weak economic growth outlook.However upcoming EU membershipis expected to yield economic benefitsto the country.

CROATIATOURISM

Germany is bit reluctant over accepting Serbia from becom-ing a formal candidate member of the European Union,showing that Germany controls which Balkan nations get ac-cess to the cash and trade advantages that come with EUmembership, Beta news agency reported. Serbia was sched-uled to be approved for formal candidature by EU leaders on9 December, but Germany is threatening to block that.

“The path of Serbia into the EU can only lead through thenormalisation of its relations with Kosovo,” German Chan-cellor Angela Merkel said. He said, “I regret that Serbia has sofar not lived up to these expectations sufficiently and thereforethe conditions for being awarded the status of a candidate arenot yet in place.” “Serbia is moving away from a positive deci-sion with every day,” German Defense Minister Thomas deMaiziere said. After talks with European affairs ministers,Werner Hoyer, minister of state in the foreign ministry said,“We need to sort out what has been agreed between Kosovo

and Serbia these last few days. There is not sufficient clarityyet, we hope we'll get that today.”

He stressed that every country that wants to join the Euro-pean Union must clarify its relations with the neighbourhood.Belgrade refuses to recognise Pristina's three-year independ-ence but last March the two sides entered into EU-brokeredtalks to resolve everyday problems caused by Kosovo's break-away. A senior EU official said, “It looks like we have to getused to Germany doing things that other member states findhard to understand. It’s just the same on Serbia as with theeurozone.” An EU diplomat said Britain too, along with theNetherlands and Austria called on for more evidence of Ser-bia normalising relations with Kosovo. However France andSpain are in favour of Belgrade being approved the candidatestatus. "For Spain it is clear: we support Serbia as a candidateto integrate the EU," said Diego Lopez Garrido, Spain's sec-retary of state for the EU.

Germany, Britain oppose Serbia's EU bidSERBIA

EU

A young boy dressed in a medieval costume plays a game at the St. Mark's Festival on Ban Jelacic

square in Zagreb. The cultural and traditional festival is organized by Zagreb' authorities to boost

tourism and presents demonstrations of life, professions, food and beverage in Croatia during the

Middle Ages. |EPA/ANTONIO BAT

In collaboration with economists inLondon, HSBC chief economistMelis Metiner recently stated at apress meeting that economy ofTurkey will witness a soft landingnext year. She expected Turkey to ex-perience a soft landing with growthslowing from a projected 7% thisyear to 3% next year, Zaman re-ported.

The reason for Turkey’s sluggish ex-pansion in 2012 will be due to the weakeconomic performance in neighbouringEurope. Metiner said that 2012 will bea tough year for Europe and taking intoaccount the climate stagnation in Eu-rope, near zero, or slightly negativegrowth across the region is expected.However, she dismissed pessimistic pre-dictions of a disorderly default on sov-ereign debt, or the possibility of abreak-up of the euro. Analysts, such asStandard & Poor’s and Capital Eco-nomics expect Turkey’s economy to facehard landing after an impressive growththis year. Such a prediction was due tothe troubling outlook of Turkey’sbiggest trading partner, the EuropeanUnion, combined with a reliance onforeign funding to plug the country’swidening current account deficit(CAD). Metiner said in this regard that

Turkey hasno such qualms.As investorsare eyeing safe assets to park theirmoney, Turkey suffered a sell-off ofTurkish equities in July and again inOctober and November, leaving the Is-tanbul Stock Exchange (IMKB) morethan 25% off its May high, while theTurkish lira witnessed a slide against thedollar. However Turkey’s stable fiscalposition and over 10% growth in the

first half of this year coupled withbooming domestic demand, had man-aged to entice long-term investors, withforeign direct investment (FDI) alreadysurpassing 2010 levels, at $10.9 billionfor the first three quarters of 2011. Thepositive trend is expected next year tocontinue with Turkey to receive “FDIof over $12 billion” next year, saidMetiner.

TURKEY · FYROM · MONTENEGRO

New Europe |CANDIDATESDecember 11 - 17, 2011

MONTENEGRO|STATISTICSMontenegro takes part in IMF's data systemThe International Monetary Fund’s DisseminationStandards Bulletin Board now exhibits Comprehen-sive information on the statistical production and dis-semination practices of Montenegro, MontenegroTimes reported. It should be noted that on December5 Montenegro has started participating in IMF’s Gen-eral Data Dissemination System (GDDS). Such amove marks a major step for the country in the devel-opment of its statistical system. Gordana Radojevic,General Director of the Statistical Office of Mon-tenegro (MONSTAT) said that the country is com-mitted to using the IMF’s General DataDissemination System as a general framework to con-tinue developing the national statistical system in ac-cordance with best international practices. Theparticipation of Montenegro in the GDDS will alsolead to the production and dissemination of more re-liable and timely statistics. Adelheid Burgi-Schmelz,director of the IMF Statistics Department, welcomedMontenegrin participation in the GDDS. Stressingthat participation of Montenegro in the GDDS is amajor milestone in the country’s statistical develop-ment, she said that using the GDDS as a frameworkfor further development of its statistical system wouldbe beneficial for the country.

MONTENEGRO|TRADEWTO clears Montenegro to join trade bodyOn December 5, the World Trade Organization(WTO) announced that trade diplomats have ap-proved Montenegro’s accession to the global body. Infew weeks’ ministers from 153 member states of WTOplans to give a green signal to the south-eastern Euro-pean country's accession in Geneva, MontenegroTimes reported. It should be noted that countries whowish to join WTO have to agree to open up their mar-kets to foreign trade.

FYROM|DEFENCEMontenegro, FYROM discuss Euro-Atlantic integrationFYROM's Defence Minister Fatmir Besimi recentlypaid an official visit to Podgorica to meet his Mon-tenegrin counterpart Boro Vucinic, MRTOnline re-ported. The parties discussed issues of issues of mutualinterest related to defense and countries' Euro-Atlanticintegration. They agreed that regional cooperation isthe only way to achieve Euro-Atlantic goals. Joint useof disposable resources in the future was also a topic atthe talks. Minister Vucinic said that Montenegro ex-pects friends from FYROM to overcome the issueswith their southern neighbour and conditions to becreated for the country to join NATO and EU as soonas possible. He also took this meeting as an opportu-nity to thank FYROM for educating Montenegrincadets at the FYROM's Military Academy. Besimi alsoexpressed satisfaction with the training of threeFYROM's pilots at Montenegro's airbase. ReiteratingVucinic’s views, Beismi also considers Euro-Atlanticintegration as one of the best alternatives for countriesin the region. He stressed that NATO and EU mem-bership provide an opportunity and guarantee for sta-ble and long-term peace in the region as well ensurefurther development, more investments and creationof new jobs. He said that other initiatives in line withNATO's Smart Defence concept were reviewed.

Istanbul's Bosporus bridge in Istanbul, Turkey. Turkey will experience a soft landing withgrowth slowing from a projected 7% this year to 3% next year, analysts said. |EPA/TOLGA BOZOGLU

Turkey and Pakistan will finalise the Preferential TradeAgreement (PTA) next year to boost bilateral trade, MuratM. Onart, Consul General Republic of Turkey, said at ameeting with members of Karachi Chamber of Commerceand Industry (KCCI), Zaman reported. The consul generalsaid that the signing of agreement will help in boosting tradeup to $2 billion between the two countries. Although bothcountries have potential but it was noted that trade volumewas very low. The two countries have only $900 million worthof trade in which, Pakistan exports to Turkey were $750 mil-lion and imports were $150 million. The consul general saidthat Turkey inclines towards European market because itsbusinessmen have better opportunities in those countriescompared to regional markets. He also called on to improve

construction sector. In this regard he said that that politicalsupport must be involved and government-to-governmentlink is necessary to invest in this sector. On a request fromKCCI that Turkey should invest in mineral rich province ofBalochistan, the diplomat said that due to security concernsin the area, Turkish and other investors were shy to come tothis area. “Until restoration of complete peace it is difficult toconsider about investment,” he added. He, however, said thatthe recent ECO chambers conference had agenda for in-vesting in Balochistan. He said Turkey would like to fosterthe trade, as it is a confidence building measure betweencountries. Various sectors for investment were outlined dur-ing the meeting. Shipping and railway links were also beingconsidered between the two countries.

Turkey-Pakistan trade deal seen next year

TURKEYTRADE

Turkish Energy and Natural Re-sources Minister Taner Yildiz said thatTurkey and China are two countriesgarnering global attention mainly dueto their growing economies. He wasspeaking at a signing ceremony of theSalt Lake Underground Natural GasStorage Project held at Ankara's RixosHotel, Zaman reported. He noted that

both countries have great potential forcooperation in the energy sector."There was great potential for cooper-ation between our two countries in theenergy field. We need to increase co-operation with China. We need tohave five or six more projects similar toSalt Lake Underground Natural GasStorage. According to him, both coun-

tries need to strengthen theireconomies. China's Deputy TradeMinister Wang Zhiyuan also agreedthat Turkey and China need for moreinfluential cooperation. He said thatChina pays emphasis to Turkey's goalsfor 2023, adding that Turkey plans toinvest around $170 billion in energysector by 2023.

Ankara, Beijing to co-operate in energy field

TURKEYENERGY

HSBC: Soft landing forTurkish economy in 2012

TURKEYECONOMY

UKRAINE · MOLDOVA · BELARUS

|New Europe NEIGHBOURHOODDecember 11 - 17, 2011

MOLDOVA|EU AFFAIRS

EU to pursue free-trade area with Moldova, GeorgiaThe EU has launched negotiations on a deep and com-prehensive free trade area with Georgia and Moldova toboost the investment in the Eastern Partnership. Thenegotiations will also deal with a broad range of tradeand economic issues achieving a closer economic inte-gration of those two countries with the EU. TradeCommissioner Karel De Gucht underlined that the EUwanted to establish a “stable and solid framework forcloser economic ties” with Georgia and Moldova andadded that the “deep and comprehensive free trade areawill help Georgia and Moldova to become more com-petitive and enjoy the benefits of the EU Single Mar-ket." Enlargement and European NeighbourhoodPolicy Commissioner Štefan Füle underlined that "thiskind of economic integration is one of the cornerstonesof our relations with countries of Eastern Partnership."Füle emphasised that both countries have achieved suf-ficient progress with the necessary reforms and “havefulfilled a set of conditions to be able to proceed fur-ther in the gradual economic integration with the EUinternal market”. Free trade areas will be part of the As-sociation Agreement, which have been under negotia-tion with Georgia and Moldova since July 2010 andJanuary 2010 respectively. It is expected that these freetrade areas will diversify and strengthen Georgia andMoldova's export capacity effectively opening them theEU market. Both countries currently enjoy preferen-tial access to the EU market through autonomous lowerimport duties through the Generalised System of Pref-erences with further incentives for good governance forGeorgia and Autonomous Trade Preferences forMoldova.

BELARUS|HUMAN RIGHTS

Clinton calls for releaseof political prisonersOn 6 December, US Secretary of State Hillary Clintonhas demanded the unconditional release of all politicalprisoners in Belarus and denounced Minsk for perse-cuting democracy campaigners. “First, we recognise thatthis has been a brutally difficult year for the people ofBelarus. We know that every day there is a new arrest ora new restrictive law or further harassment against civilsociety and the media,” Clinton said, speaking beforethe Belarus Civil Society Roundtable in Lithuania. “Wecontinue to demand the unconditional release of all po-litical prisoners. By our count, there are more than 50individuals still in prison or under restrictive release, andI want to assure you that the United States will con-tinue working for their freedom,” Clinton said. “Sec-ond, we will continue, along with our partners in theEuropean Union and other democracies, to take actionsagainst the Lukashenko regime, including sanctions andtravel bans. Until the government takes concrete stepsto improve human rights and the conditions for democ-racy, they will not have improved relations with theUnited States,” the US Secretary of State said. “And fi-nally, although we cannot see Belarus 40 kilometresaway from here, I want you to know that we have greatconfidence in your being on the right side of history.And your commitment is not only important to yourcountry, but it is an inspiration to people fighting fortheir rights and for democracy around the world. In fact,I think your efforts are becoming quite well known.Groups, including Viasna 96, the Belarusian HelsinkiCommittee, the Belarusian Association of Journalists,and the Belarusian Assembly of Pro-DemocraticNGOs, are serving as beacons of courage far beyondyour country,” Clinton said.

On 5 December, Russian natural gasmonopoly Gazprom said it would letUkraine pay for natural gas usingRussian rubles. "Gazprom and [thecountry’s state- run energy company]Naftogaz have signed an appendix tothe current gas supply contract. Theappendix allows Naftogaz Ukrainyto make payments for supplies ofRussian gas also in rubles," the state-ment said. The National Bank ofUkraine in November suggestedswitching to ruble payments forRussian gas. The move would allowUkraine to ease mounting pressureon the hryvnia.

Ukrainian officials are pressingGazprom for a better gas arrange-ment. Ukraine's former Prime Min-ister Yulia Tymoshenko is serving aseven-year prison sentence oncharges she abused her authoritywhen she helped broker a 2009 gasdeal with Gazprom. The current

Ukrainian government faults the 10-year deal brokered in 2009 for dam-aging an economy already batteredby recession. Gazprom ChairmanAlexei Miller met with UkrainianEnergy Minister Yuri Boiko to dis-cuss possible relief for Kiev.

Ukrainian officials in Novembersuggested a new natural gas pricewould be roughly halved for Kiev."The parties discussed the issues ofbilateral cooperation and markedfruitfulness of the current dialogue,"Gazprom said in a statement. "Theparties were unanimous saying thatthe negotiations on the terms andconditions for Russian gas suppliesto Ukraine could obviously be fin-ished by the end of 2011."

Ukraine paid about $440 millionfor natural gas imported from Rus-sia in November and must pay an ad-ditional $562.2 million by 28December, Naftogaz said. The pay-

ment consisted of 7.2 billion rubles($230 million) and $210 million.The November bill is $972.2 million.Russia has agreed to extend thedeadline for monthly payments tothe 28th day of each month from the7th, according to the statement.Ukraine is paying about $400 per1,000 cubic meters of gas this quar-ter, according to Naftogaz.

Price disputes between Ukraineand Russia have disruptedGazprom’s supplies to Europe in thepast. However, following a meetingbetween Ukraine President ViktorYanukovich and his Russian coun-terpart Dmitry Medvedev in Sep-tember, progress was announced.“The sides have agreed to completethe drafting of agreements reachedby the two countries’ leadership onexpanding cooperation in the gassector before the end of December2011,” the Ukrainian ministry said.

Kiev can pay for Russian gas in rubles

UKRAINEENERGY

The European People's Party (EPP)has strongly condemned the Ukrainianauthorities, leading to uncertainty overEU-Ukraine co-operation followingthe latest developments in the case offormer prime minister Yulia Ty-moshenko.

During the EPP Congress on 7 De-cember, President Wilfried Martensannounced that the party would objectto the signing of the AssociationAgreement with Ukraine until YuliaTymoshenko is released. EPP Secre-tary-General Antonio López Istúrizslammed the Ukrainian authorities andthe regime of President ViktorYanukovych over its crackdown of thepolitical opponents.

The special guest speaker at the EPPCongress was the daughter of the for-mer Ukrainian prime minister Euge-nia Carr-Tymoshenko, who informeddelegates about the current situation ofthe ‘Orange Revolution’ leader.

Carr-Tymoshenko said that hermother's condition was rapidly deteri-orating and that she had not been al-lowed to be examined by her doctors.

“Ukraine is moving towards a KGBsociety,” Carr-Tymoshenko said, accus-ing Yanukovych of using Soviet meth-ods to fight political opponents. Sheadded that the opposition was a victimof "Yanukovych's political terror".

However, she added that her mother“behind three rows of prison bars hasbeen more free” than her captors.

In the latest exercise of a dubious jus-

tice, Tymoshenko was accused of othercounts of possible embezzlement andthe district court in Kiev ordered “de-tention as preventative measure”, with-out her leaving the prison cell.

In response to these developments,EPP Congress adopted an urgent res-olution condemning the actions of theregime in Kiev and fully supportingYulia Tymoshenko in her ordeal.

After the European Parliament ap-proved the signing of the agreementwith Ukraine, it remains to be seenhow the latest developments in the Ty-moshenko case will influence the Eu-ropean Council, or if EPP leaders willstay true to their pledge not to proceedwith the Association Agreement untilthe former prime minister is releasedfrom prison.

EU-Ukraine co-operation in doubt

UKRAINEEU AFFAIRS

A Gazprom employee is seen at the gas measuring station Sudzha, just 200 metres from the Ukrainian border, Kursk region, Russia.|EPA/MAXIM SHIPENKOV

By Ivan Delibasic

KAZAKHSTAN · TAJIKISTAN · TURKMENISTAN

New Europe | NEIGHBOURHOODDecember 11 - 17, 2011

Visiting World Bank Regional Strategyand Operations Director for Europeand Central Asia Theodore Ahlers waswelcomed by Tajik President EmomaliRahmon on 5 December, Asia-Pluslearned from the presidential press serv-ice. The talks covered financial and tech-nical support for socioeconomicdevelopment of Tajikistan as well as theprocess of conducting techno-economic,social, and environmental assessmentsfor the Roghun hydropower project.

For his part, Ahlers said that the Bankwould provide $60 million next year tosupport the development of the country,a $22mn increase from this year. On theissues related to conducting assessmentsfor the Roghun hydroelectric powerplant (HPP), the World Bank envoy as-sured the Tajik head of state that the as-sessment would be conducted inaccordance with international standardsand completed by the middle of the nextyear. It should be noted that for the past15 years of cooperation, the World Bank

has provided $640mn in assistance tothe country.

Meanwhile, the Ministry of Laborand Social Protection of Tajikistan andthe World Bank recently co-hosted a$3.2 million World Bank-funded SocialSafety Net Strengthening Project. Atthe launch of the project, ongoing socialprotection system reforms and improvedtargeting of social assistance to the poorwere discussed. The aim of the project isto improve the capacity of the govern-ment of Tajikistan to plan, monitor, andmanage social assistance for the poorthrough the development of a nationalregistry of social protection and the pro-vision of training, equipment and relateditems. The Project will support adoptionof a mechanism for poverty-targeting toincrease the percentage of the pooresthouseholds who receive social assistanceand to decrease leakages of social assis-tance to middle and upper-incomehouseholds.

“The financial crisis of two years ago,

which caused a decline in remittancesand household incomes, has shown howimportant it is to provide timely and ef-fective social protection to the popula-tion of the country. Therefore, thisinitiative would help strengthen thestate’s capacity in meeting the needs ofthe poorest portion of the population ina more effective and focused manner, es-pecially in the times of distress,” saidMarsha Olive, the World Bank Coun-try Manager for Tajikistan.

Around one million people in Tajik-istan will benefit from the project bysupporting delivery of social assistanceto the poorest households. The projectwould help offset grave effects of povertyand could contribute to addressing theimpact of shocks, such as financial crisesand droughts. The project is also ex-pected to benefit the broader public bysupporting mechanisms designed to im-prove targeting and reduce waste in theuse of scarce public funds for social as-sistance.

World Bank to provide $60million to nation

TAJIKISTANDEVELOPMENT

For past four and a half months, Kazakh and Russian expertshave been testing the KazSat-2 Communications Satellitewith so-called flight tests. The specialists have tested the air-craft’s navigation system, its orientation in space and all of itson-board electronics. A month later, final testing of the satel-lite was done to check the operation of its on-board transpon-der and the signal quality in different parts of Kazakhstan.Presently, the satellite is under Kazakhstan control. The space-craft from the centre is situated in the village of Akkol in theAkmola region, Gazeta.kz reported.

Recently the Kazakh National Space Agency reviewed theresults of testing the space system. A special commission alsosigned the act of transferring the ownership rights from thedeveloper to the customer, the Kazakh Centre for Space Com-munication.

A group of 36 experts, who completed a full course of train-ing in Russia and passed necessary examinations, will controlthe satellite directly. The spacecraft itself has been repeatedlyre-equipped to improve its reliability. The satellite has funda-mentally new components and a new control algorithm to en-sure uninterrupted operation of the device for at least 12 years.

Unlike its predecessor, KazSat-2 is more power-intensive.In order to improve the reliability of control, reserved control-ling will be performed at the Khrunichev Centre in Moscow.Viktor Lefter, President, Kazakh Centre for Space Commu-nication said the satellites are launched in order to provideservices for telecommunication operators. He added that al-most all operators provide services for Kazakhstan’s govern-ment agency. The company has also lowered the tariff levels tomake the services more attractive.

KazSat-2 handed over to Kazakhstan

KAZAKHSTAN INNOVATION

TAJIKISTAN | POLITICS

Tajik delegation attends 4thhigh-level forum in BusanA Tajik delegation led by Davlatali Saidov, Chairman of theState Committee on Investments and State-owned PropertyManagement, recently attended the fourth high-level Forumon Aid Effectiveness (HLF-4) in Busan, Korea, Asia-Plus re-ported. The forum was attended by more than 2,500 dele-gates from more than 150 countries, providing aninternational platform for developing and donor nations todiscuss how aid can be used more effectively to promote de-velopment. Delivering an opening speech at the forum, theADB President Haruhiko Kuroda spoke on inclusive growthat HLF-4. Kuroda said that greater accountability and betterfiscal management are needed to achieve more inclusivegrowth in developing Asia-Pacific nations, the Asian Devel-opment Bank (ADB)’s Tajikistan Resident Mission (TJRM)said in a statement.

TURKMENISTAN | BUSINESS

Ashgabat hosts Turkmen-German economic forumRepresentatives of some 90 German companies, heads ofgovernment agencies, experts from consulting companies andbanks of Germany recently visited Ashgabat to attend an eco-nomic forum titled the Day of German Economy in Turk-menistan. The event brought together over 350 guests at thebusiness center “Mizan” in Ashgabat. The forum was organ-ized by the Chamber of Commerce and Industry of Turk-menistan and the Representation of the German economy inCentral Asia. The Turkmen side was represented by mem-bers of the government, representatives of ministries and de-partments, the Union of Industrialists and Entrepreneurs ofTurkmenistan. The forum aimed to develop trace ad eco-nomic ties between the two countries and activate mutuallybeneficial contacts in business, Turkmenistan.ru reported.Prospects of Turkmen-German cooperation in the energysector and diversification of export routes for Turkmen en-ergy were the main topic at the forum. The Turkmen Head,Gurbanguly Berdimuhamedov, stressed amicable ties andconstructive dialogue with Germany, a leading European statein terms of economy. The priority areas of cooperation be-tween the two countries covered transport and communica-tions, science and education, construction, shipments ofadvanced equipment. Germany has business in Turkmen oiland textile industry, healthcare, transport and communica-tion, agriculture. Over 62 German companies are realisingprojects in the City of Turkmenbasha, including constructionof a compression station in Korpedzh.

KAZAKHSTAN | AVIATION

Ukraine and Kazakhstan to launchjoint production of An-140Dmitry Kiva, president of the Ukrainian Antonov aircraftcompany recently announced that a large number of outdatedAn-24 and An-26 aircrafts are in operation in Kazakhstan,Gazeta.kz reported. To replace the outdated planes, Ukraineneeds partner for production. The Ukrainian Antonov StateAircraft Building Concern and Kazakhstan’s AeroKZ aircraftmanufacturer have concluded an agreement on co-produc-tion and after-sale service of An-140-100 passenger aircrafts.The agreement envisages that an aircraft assembly plant willbe built in Kapchagai in the Almaty region, which would re-quire an investment of $150 million. The fund would be usedto construct a runway and test infrastructure. The distribu-tion of shares in the joint project is not disclosed yet. It is ex-pected that in 2012 the new venture will assemble threeaircrafts, eight in 2013, and 12 in 2014. The production rateat the Ukrainian-Kazakh plant is projected to reach 20 air-crafts annually.

Wet, wet, wet. World Bank is funding hydropower schemes.|Lee Hughes

Otunbayeva hands over power to new president

UZBEKISTAN · AZERBAIJAN · KYRGYZSTAN| New Europe

NEIGHBOURHOODDecember 11 - 17, 2011

Kyrgyzstan’s interim leader Roza Otun-bayeva handed over power to the newlyelected president, Almazbek Atambayev,at an inauguration ceremony of the pres-ident, news agencies reported.

Addressing an extraordinary session ofthe republic’s parliament, Otunbayevasaid, ‘It’s for the first time in Kyrgyzstan’shistory that the handover of power is apeaceful process.”

Otunbayeva urged lawmakers to workhard to prevent the return of authoritar-ian regime in the future. Otunbayeva waselected interim president following a ref-erendum in June 2010, three monthsafter the fall of Kurmanbek Bakiyev.

Atambayev’s inauguration as presidentwill help to ensure political continuitydespite the legislative discord. He wasexpected to charge parliament withforming a new coalition in the comingdays.

Kyrgyzstan’s fate is of interest to bothRussia and the United States.

The former Soviet republic hosts a USair base crucial to operations in nearbyAfghanistan. Russia also controls an air

base outside the capital.Kyrgyzstan adopted a new Constitu-

tion last year that boosted the influenceof the parliament and watered down theexecutive power of the president. Atam-

bayev hinted ahead of the election hewon convincingly in October that theConstitution may be amended yet again,leading some to speculate he may favoura return to a stronger presidency.

KYRGYZSTANPOLITICSKYRGYZSTAN|DIPLOMACY

Beijing, Bishkek boost tiesVisiting Ismail Tiliwaldi, vice chairman of the StandingCommittee of China's National People's Congress(NPC), recently had a meeting with Kyrgyz ParliamentSpeaker Akhmatbek Keldibekov in Bishkek, news agen-cies reported. As a special envoy of President Hu Jintao,the Chinese envoy was in Bishkek to attend the inaugu-ration of the newly elected Kyrgyz President AlmazbekAtambayev. In the course of talks, Tiliwaldi expressed thewillingness of China to expand ties with Kyrgyzstan. Hestressed that both countries share friendly and good tiesand have maintained this momentum since the establish-ment of diplomatic ties nearly 20 ago. To further enhanceties, the Chinese envoy said that China plans to work inclose collaboration with Kyrgyzstan to further consolidatemutual trust, strengthen cooperation of mutual benefit,and boost communications between the peoples of thetwo countries. He also hailed Kyrgyzstan's staunch sup-port of China on the Taiwan and Tibet issues and thecrackdown on the "three evil forces" of separatism, ex-tremism and terrorism, said Tiliwaldi. The Chinese envoyadded that under the government Kyrgyzstan will have apromising future. For his part, Keldibekov also said rela-tions with China have developed soundly since the es-tablishment of diplomatic ties. He expressed hope thatboth countries will achieve greater development in polit-ical, economic, humanistic fields in the future.

AZERBAIJAN|DIPLOMACYBaku, Budapest ink memoA Hungarian delegation headed by Chairman of theAzerbaijani State Social Protection Fund Salim Mus-lumov recently paid a visit to Hungary, news agenciesreported. The delegation had talks with General Di-rector of Hungarian Central Administration for Na-tional Pension Insurance Jozsef Meszaros, Director ofCentral Pension Accounting and Information OfficeMolnar Marta and Chief Consultant of the Hungar-ian Financial Supervisory Authority Jozsef Banyar. Thesides discussed pension and social systems of two coun-tries and also conducted an exchange of informationand opinions and negotiations of experts. The outcomeof the talks was a Memorandum of Understandinginked between the Azerbaijani State Social ProtectionFund and Hungarian Central Administration for Na-tional Pension Insurance. Both countries envoys alsoreached an initial agreement for the signing of an in-tergovernmental pact on cooperation in social insur-ance and pension sphere in the future.

UZBEKISTAN | FOODFood shortages emergingPoor irritation practices, growing population and climaticchange all signal a worrisome scenario on the food secu-rity front in Uzbekistan, according to a study conductedby Tashkent’s Centre for Economic Research, Uzbekre-port.com reported. The study was supported by the AsianDevelopment Bank and the United Nations Develop-ment Programme. ldus Kamilov, senior research coordi-nator on the project said, “Water resources are beingdepleted not only by global warming, but also by the in-efficient irrigation systems being used by Uzbekistan’sagricultural producers.” He claimed that half of the waterwhich could tapped for irrigation is lost and he suggestedchannels and pumping stations to alleviate the losses. Ac-cording to Kamilov, a significant proportion of cultivatedland in Uzbekistan is irrigated but research shows that70% of Uzbekistan’s land is not suitable for agriculturalproduction as the land is desert, steppe, or mountainousor soil salinity is too high.

Azerbaijan’s President Ilham Aliyev has ordered the composi-tion of a development concept of Azerbaijan until 2020, enti-tled "Azerbaijan-2020: a look to the future", news agenciesreported. According to the president, the state has entered anew development stage. The main goal of this phase is forma-tion of a diversified, efficient, innovation-oriented economy, so-cial development and n increase of the population's prosperityto the international standards, achievements in science, cultureand all spheres of life, Aliyev said.

Supervision of the work on the concept is carried out by thePresidential Administration. A project will be presented by the

end of 2012. State structures, science organisations and high-skilled specialists will be involved in preparing the document.International expertise will also used. There will be active co-operation with the UNDP and other international organisa-tions and participation of civil society institutions.

The administration is to take appropriate measures for pub-lic discussion of the Draft Concept and regularly brief the Pres-ident of Azerbaijan about preparation of the DraftDevelopment Concept. The cabinet and related state struc-tures were ordered to take all the necessary measures to fulfilcomposition of the development concept.

Baku prepares concept for development until 2020 AZERBAIJANDEVELOPMENT

The 3rd Forum of Economists of Uzbek-istan "Strategy of modernisation andlong-term sustainable economic growth"was recently organised in Tashkent by theInstitute of Forecasting and Macroeco-nomic Research under the Cabinet ofMinisters of the Republic of Uzbekistan(IFMR), in collaboration with the UNDevelopment Programme in Uzbekistanand the German Agency for InternationalDevelopment in Uzbekistan, Uzbekre-port.com reported.

The forum aimed at fostering dialoguebetween representatives of academic, ap-plied and higher economic sciences, pub-lic administration and economicmanagement, as well as the involvementof young scientists of the republic in the

process of conducting applied research.The event was attended by 200 econo-mists, experts, scholars and professionalsof national and regional scientific and ed-ucational centres, young scientists, re-searchers, interns, masters and graduatesof economic universities from all regionsof Uzbekistan, as international organiza-tions envoys. Topics at the forum coveredwere related to the effectiveness of eco-nomic policy (fiscal, tax, monetary, foreignexchange, competition, pricing, invest-ment), the role of macroeconomic fore-casting in economic policy, the model ofmodernization of national economy, in-teraction of real and financial sectors intransition economy, current problems ofmodernization of basic sectors of the

economy, improving the quality of humanpotential, quality of life; social develop-ment, the strategy of innovative develop-ment, problems of small business andentrepreneurship in the regions, evalua-tion of the socioeconomic potential of re-gions. It should be noted that the forumwas divided into a plenary session and asession which comprised of four sectionssuch as methodological approaches to as-sess the effectiveness of economic policyand forecasting; strategy of modernisationand economic development prospects inthe post-crisis period; strategy for socialdevelopment and improving quality ofhuman capacity; development and imple-mentation of strategies for socioeconomicdevelopment of Uzbekistan.

Tashkent hosts 3rd forum of economistsUZBEKISTANFORUM

Kyrgyzstan's president-Elect Almazbek Atambayev takes the oath during his inaugurationceremony in Bishkek, Kyrgyzstan, 1 December 2011. |EPA/STRINGER

RUSSIA · GEORGIA · ARMENIA

New Europe |NEIGHBOURHOODDecember 11 - 17, 2011

On 6 December, Secretary of StateHillary Clinton suggested that Rus-sia's elections were neither free norfair, and Germany urged Moscow tomake democratic improvements.Clinton cited "serious concerns"about the election on 4 December.Observers said the vote was marredby ballot-stuffing and other irregu-larities. "When authorities fail toprosecute those who attack peoplefor exercising their rights or expos-ing abuses, they subvert justice andundermine the people's confidencein their governments," Clinton saidin a speech at the meeting of the Or-ganisation of Security and Co-oper-ation in Europe (OSCE). "As wehave seen in many places, and mostrecently in the Duma elections inRussia, elections that are neither freenor fair have the same effect," sheadded.

Clinton repeated US concerns thatthe independent Russian politicalparty PARNAS was denied the rightto register for the Duma elections,and that observers such as the Golosnetwork suffered cyber attacks.

German Foreign Minister GuidoWesterwelle said his country hadnoted with concern the reports re-ceived from election observers sent bythe OSCE.

"They show that the Russian Fed-eration still has a way to go to fulfil allof the OSCE standards," he told themeeting. "We encourage the RussianFederation, also when considering thenext elections in Russia, to move inthat direction," he told the confer-ence, referring to March's presidentialvote.

Swedish Foreign Minister CarlBildt agreed. "It is hard to avoid theconclusion that this was not com-pletely the free and fair election that Ithink the people of Russia also de-serve," he told the meeting.

On 6 December, Russian PresidentDmitry Medvedev responded to thecriticism, saying that Russia’s politicalsystem is the country’s own affair andnot that of its foreign partners. “Ifthey observe elections, violations, it isone thing, but the issue of Russia’s po-litical system is not their business,”Medvedev said at the meeting withthe head of the Central ElectionCommission, Vladimir Churov.“Soon they will tell us how we shouldwrite our Constitution.”

Meanwhile, thousands of protestersconverged in Moscow rallying againstRussian Prime Minister VladimirPutin and his United Russia party. A

group of several hundred thenmarched toward the Central Elec-tions Commission near the Kremlin,but were stopped by riot police andtaken away in buses. Estimates of thenumber of protesters on 4 Decemberat night ranged from 5,000 to 10,000,news agencies reported. They chanted"Russia without Putin."

"The honeymoon is over," BorisNemtsov, one of the country's mainopposition leaders, told Ekho Moskvyradio. "Putin and his party have suf-fered a crushing defeat. Nobody willconsider this parliament legallyelected." Nemtsov’s PARNAS partywas banned from contesting the elec-tion on a technicality.

Putin and Medvedev said the elec-tions were entirely fair. "This willallow us to work calmly and smoothly,maintaining stability," Putin told agovernment meeting on 5 December.

Supporters of Russian ruling party United Russia celebrate the party victory in the parliamentaryelections at a rally in central Moscow, Russia, 6 December 2011. |EPA/YURI KOCHETKOV

RUSSIAPOLITICS GEORGIA|DEFENCE

Georgia halts CFE Treaty with RussiaGeorgia recently announced that it will halt sharing mili-tary information under the Treaty on Conventional ArmedForces in Europe (CFE) with Russia. The statement wasmade before the Joint Consultative Group, OSCE’s bodydealing with questions relating to compliance with the pro-visions of the CFE, Civil Georgia reported. Just lie otherNATO member states, Georgia also planned to halt its ob-ligations under the treaty only vis à vis Russia but would con-tinue sharing data with other nations in the treaty. Thismeans that Georgia will not provide military-related infor-mation to Moscow in the annual exchange as envisaged byCFE and Russian inspections of Georgian military facili-ties will also be unacceptable. The Georgian Foreign Min-istry said that Tbilisi was strictly adhering to the treaty inrespect of Russia.

ARMENIA|DIPLOMACYYerevan, Tbilisi to expand co-operationAn Armenian delegation headed by Armenia’s PresidentSerzh Sargsyan recently paid an official trip to Tbilisi to meetto meet with Georgia’s Armenian community representa-tives and visit the Armenian church in Tbilisi’s Havlabar dis-trict. The visit of the Armenian President is considered tobe serious stimulus for Armenian-Georgian business ties tobe developed. The guest had meetings with Georgian Pres-ident, Chairman of the Parliament Davit Baqradze and Pa-triarch of all Georgians Ilya the Second. In a joint meetingwith his Georgian counterpart, Armenian President said thatboth Armenia and Georgia establish their relations in thespirit of good neighbourhood and long-term mutually ben-eficial co-operation. “The most important component of ourco-operation is sincere dialogue, concrete and practical workfor security provision of our states, as well as resist the chal-lenges and threats”, Sargsyan’s said. He stressed that regionalco-operation will alleviate tension in the region and estab-lish more favourable conditions for regulation of conflicts.Sargsyan also noted that physical volumes of trade turnoverwhich exist between Armenia and Georgia are small forboth countries. “The indicator of trade turnover is too smalland I am confident that we have tasks to be performed inthis sphere,” he added. Saakashvili assessed the progress in bi-lateral economic-trade co-operation where over 20% growthwas registered this year. Both presidents agreed that growthof trade turnover, expansion of investments, economic andscientific-technological integration is important direction ofdevelopment and strengthening of economic-trade relationsbetween two countries. The Armenian President also out-lined co-operation with Georgia in energy, transport andculture spheres.

ARMENIA|INVESTMENTSForeign investments to Armenia up by 25 %The Armenian National Statistical Service recentlyclaimed that foreign investments made to Armenia’s realsector of economy constituted $ 586.7 million in the firstnine months of 2011, a 24.2% rise from the same time pe-riod last year, Armenia Liberty.org reported. The statisticsalso showed that direct investments comprised $462.5,which is a 32.6 % growth. Around 27% of investments aredirected to the production of base metals followed by thetelecommunication sector, with 17.4 % and energy with 12%. Russia is the leading investor in Armenia with $284million which is nearly half of the total investments fol-lowed by France, with $77 million. The US has becomeArmenia’s third largest investor with an investment of $40million so far.

Clinton, Westerwelle criticise Russian election

On 7 December, Russian natural gas export monopoly Gazpromsaid it finds it unacceptable to move away from the existing gaspricing formula that is dependent on oil prices. “Any form ofsplitting (gas prices) from oil prices is unacceptable for produc-ers,” the head of Gazprom Export’s contracts and pricing de-partment, Sergei Komlev, was quoted by the press as telling anindustry conference. Gazprom has been adhering to the pricingcode, under which the main part is played by long-term con-tracts, while spot prices are serving as compensatory factor, Kom-lev added.

European customers have sought lower gas prices while fac-ing oversupply in Europe and a gap between spot and long-termprices. Gas importers in Europe buy about two-thirds of theirfuel under long-term contracts. Gazprom indexes its prices to oilwith a lag of as long as nine months.

In June, Gazprom CEO Alexei Miller said the companyplanned to keep binding gas prices to oil prices.

Meanwhile on 7 December, Italy’s ENI CEO Paolo Scaroni

met with Miller in Moscow. The parties discussed the joint proj-ects in the energy sector, in particular, the progress with the proj-ect. It was stressed that the project was being implementedaccording to schedule. Scaroni expressed his contentment witha mutually beneficial partnership in the Russian market,Gazprom said in a press release.

The meeting participants focused on preparation of an agree-ment on delivery of natural gas produced by Arcticgaz from theSamburgsky licensed block.

Following the meeting results, Miller and Scaroni confirmedtheir intention to continue the constructive dialog in the key areasof bilateral co-operation as part of the joint projects betweenGazprom and ENI in the Russian and international energy mar-kets.

Italy is one of the major importers of Russian gas in Europe.Gazprom and ENI have established a long-standing partner-ship. In 2010 the amount of gas supplied by Gazprom to Italywas equal to 13.1 billion cubic metres.

RUSSIAENERGY

Gazprom to keep binding gas prices to oil prices

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