Archive | Politics RSS feed for this section

Before the Vote: What the Candidates are Proposing on the Subject of Immigration

21 Apr

translated from:

Right of asylum, immigration quotas, border controls.. a deep fracture has emerged between the candidates.

It’s a record in French history: France has recorded 85, 700 requests for asylum in 2016. Even if it’s small in relation to its neighbours Italy (121, 200) and Germany (722, 300), this influx of migrants, because of the war in Syria and historic conflicts or humanitarian situations (the Sudan, Afghanistan, Haiti), have forced the question of the welcome that France can or should reserve at the centre of the presidential campaign.

But if the questions about borders, integration or identity have gained an important place in the campaign, the responses that the candidates have raised in their programmes are sparse (a hundred proposals to more than three thousand in total) and very polarised. A France open or closed, here are the main promises of the 11 candidates for the presidential election.

Borders in and around Europe

According to the Schengen agreement, all citizens can move freely within the eponymous zone (26 states of which 22 are part of the European Union). And on the exterior, the agency Frontex tries to maintain surveillance faced with the influx of migrants.

The borders question is typically an embarrassing one for candidates, outside the extreme right, faced simultaneously with the humanitarian crisis of the migrants, but also by the high-stakes surveillance of terrorist movements.

On the extreme right, the positions have the merit of clarity: Nicolas Dupont-Aignan and Marine Le Pen think that control of immigration is no longer secured by Frontex and that they should exit Schengen to take back national borders, which would consequently be reinforced. They believe therefore six thousand customs posts should also be reinstated, according to the Front National candidate, which demands also the recall of the reservists.

Calling for a double layer of borders, Francois Fillon says he is in favour of staying in Schengen (and in tripling the budget of Frontex), but also to the “temporary reintroduction of controls on the interior borders” (an operation in reality already in place since the events of November 2015).

In opposition, there are those who think the actual borders of Schengen are already sufficient: Benoit Hamon, Emmanuel Macron and Jean-Luc Melenchon. But with certain nuances since Emmanuel Macron wanted to increase the powers of border guards and outposts in Europe, while Jean-Luc Melenchon wanted what he termed the “militarisation of the politics of controlling migration flows.”

The extreme left believes to want to abolish all borders, both on the interior and exterior of the European Union – say Nathalie Arthaud and Philippe Poutou, in a spirit which is “internationalist” and “in solidarity”.


The Right to Asylum

In the face of crowds of migrants, the practical application of the right to asylum, a principle enshrined in the preamble of the Constitution, is a question of debate among the political class. It is anyway on this question that ghost of the candidates’ previous promises looms largest: where Nathalie Arthaud and Philippe Poutou supported regularising all the sans-papiers, Marine Le Pen and Nicolas Dupon-Aignan want, in contrast, to make the conditions of asylum harder. The candidate from Debout la France is proposing a dozen measures to allocate a residence to asylum-seekers. The Front National candidate, le Pen, insists on the necessity of “making it impossible to regularise or naturalise foreigners in an illegal situation.”

Between these two opposing poles, two candidates declare they favour welcoming asylum-seekers, notably in instituting a humanitarian visa (Benoit Hamon) and in constructing welcome camps along international norms (Jean-Luc Melenchon). Three other candidates want to shorten the delay in the administrative response (Emmanuel Macron, Jacques Cheminade and Francois Fillon). It is therefore on the specific public services the refugees can access on which the majority of candidates have made promises.


On Quotas

In 2016, around 227 500 foreigners gained their first right to stay in France, an increase of 4.6% in relation to 2015. A rise which lies principally in admissions for humanitarian reasons. These permissions were not limited by quotas; France has never applied such a limitation, in contrast to the US for example. A majority of candidates are not in favour ( Nathalie Arthaud, Jacques Cheminade, Benoit Hamon, Emmanuel Macron, Jean-Luc Melenchon and Philippe Poutou).

Among them those who have no fixed position: Jean Lassalle and Francois Asselineau. This last is content to propose a referendum on the whole group of questions lying in various degrees in relation to the volumes of migrants – quotas, familial regroupment, right to own land…

Three candidates are in support of quotas. The most extreme position is, with no surprise, that of Marine Le Pen, who recommends “reducing legal immigration to an annual cap of 10 thousand (persons).” She is following on the platform of Francois Fillon, who wanted to inscribe it in the Constitution, and of Nicolas Dupont-Aignan, who wants “to vote annually in Parliament an immigration ceiling” related to the unemployment rate.

In 2006, Nicolas Sarkozy had already fostered support for establishing quotas, but this ambition faced opposition, risking the censure of the constitutional council, and was adjourned.


The Right of Soil

The right of earth consists of conferring French nationality on children born in France More precisely, a child born in France of foreign parents becomes automatically French on their 18th year, if they are in our country and have been more than five years; this has been true since 1515. Certain candidates propose to limit this opportunity (Nicolas Dupont-Aignan, Francois Fillon), or aim to remove it (Marine Le Pen).

For the Front National, this represents making a kind of “acquisition of French nationality (is) possible just through filiation or naturalisation, for which the conditions are elsewhere more demanding”… that which can in many more complex cases, looks impossible. Not only for the French whose ancestors came from abroad several generations ago, but also for a number of other cases – pieds-noirs, those from Alsace, whose families were German at the beginning of the last century…

On the other side, Jacques Cheminade, Emmanuel Macron and Jean-Luc Melenchon want to preserve the right of soil. Four candidates have no position on this prickly subject: Nathalie Arthaud, Benoit Hamon, Jean Lassale and Philippe Poutou.

The Austrian School in a Nutshell

8 Dec


The Austrian School’s theory of credit and capital has a reputation for being complicated, and some posit that the reason Keynes’ ‘General Theory of Employment, Interest and Money’ holds such weight with policymakers is that it draws on the psychology of lending. Keynes saw the amount of capital channelled into investment as being inherently uncertain, a product of employer confidence in demand for goods, which depended on wider factors like the level of employment, income distribution and wage levels.

Austrians have been caricatured as prophets of the ‘efficient markets’ hypothesis, which essentially holds that artificial credit injections mess with the natural pattern of investment. They believe investment should stem naturally out of normal saving behaviour, as this creates sustainable demand for the goods and services produced through borrowing; loans or debt instruments initiated by banks which are backed on margin and not fully offset by the bank’s stock of available capital represent ‘artificial’ credit whose long-term effect is to cause price increases.

Austrian School economists are sceptical about policymakers’ belief that they can engineer optimal market conditions, believing that artificial intervention causes market inefficiencies. Broadly speaking, the argument runs that inefficient loan allocation to companies which are not sufficiently equipped to use them, or for whose products there is not enough demand, may in the short-term stimulate ‘growth’ – employment and consumption.

But the consequence of this ‘growth’ – the increase in wages and concordantly prices – will be priced into existing and future loans. The unregulated growth of credit will eventually cause a systemic shock, as confidence fails and many of the riskier debt instruments shed as investors try to exit their positions en masse. The value of higher-risk instruments plummets further, as some of the underlying assets – e.g. homes in the case of sub-prime mortgages – undergo foreclosure and are sold at a discount at auctions. Sound familiar?…

Disciples of Haberler, who was more concerned with the structural allocation of credit across the ‘vertical’ chain of production – from commodity mining and production to equipment manufacture to the factories where this equipment is used – would focus more on the credit tied up in cap ex by companies investing in new technology or expansion.

The central bank is supposed to moderate growth, preventing unsustainable expansion and stimulating consumption and/ or investment. Setting a minimum interest rate is just one of many ways in which it does this. Asset purchase schemes, and quantitative easing, are two others. Note in support that the ‘inflation premium’ detailed by economist Irving Fisher is priced by default into interest rates by commercial issuers; the government traditionally just provided a benchmark.

These asset purchase and what we’re going to nickname ‘capital injection’ schemes (when the government creates bonds it then buys back from banks, creating liquidity but also increasing the public deficit) have the net result of more reserves ending up deposited with the central bank.  As more capital is circulating, some of it inevitably ends up in current accounts with the banks and they are required to hold a certain ratio of this capital as reserves with the central bank for security.

If and when the central bank decides to raise interest rates, in fairness it must apply the policy rate to its own reserves, effectively paying interest on its own debt at the taxpayer’s expense. If it does not, this will act as an ‘opportunity cost’ – effectively a tax – to banks who could have invested the money elsewhere at a profit. This trend has been analysed in more depth by those such as Claudio Borio, Head of the Monetary and Economic Department of the BIS. For a brief introduction to the argument, see the speech given by him and the Bank of Thailand’s Mr Piti Disyatat on ‘Helicopter Money’.

One of those historical Austrian economists, transported to the present day, might find that their essential doctrine that when tampered with interest rates can have a distorting effect on growth, still has relevance. Unquestionably, QE has boosted spending, and new, sometimes innovative investment. But the cost has fallen on those financial institutions that must take the new risks, as they are forced to chase ever higher yields; pension funds which are struggling to climb out of their own deficits, as former ‘safe-haven’ assets provide insufficient income to meet their liabilities.

The rise of alternative finance seemed for some time to provide another option to the legislation-hampered banks, whose rigorous screening tests and core capital obligations prevented them from extending loans to all comers. But the marketplace lenders’ models which were heavily reliant on ‘diversifying’ the risks they did not properly analyse, by aggressively seeking new loan applicants to replace the loans that had gone bad, are now looking likely themselves to face the price of over-expansion.

The USA’s Lending Club is a prime example, and has suffered losses of $36.5m in the third quarter of this year – though up from $81.4m in the second quarter – as it confronts the need to tighten up its due diligence operations and tackle non-performing loans.

Reversing the secular and government-sponsored decline in interest rates may not be a painless process, but the alternative is to enshrine a borrowing climate which is not profitable for the majority of lenders, or investor in the resulting securities. Can the market rely forever on the government to prop it up, even as the government’s own debt must increase to fund its stimulus measures? Does this rhetorical question even need a response?…


Ludwig von Mises

The ‘Austrian’ Theory of the Trade Cycle

Borrowed the capital theory developed by Carl Menger and elaborated by Eugen von Bohm-Bawerk. Mises attempted to prove that when, in an unsustainable credit expansion, interest rates are forced down, capital is allocated inefficiently. Because loans are granted in an indiscriminatory fashion, the production process ties down capital for too long a period in relation to ‘the temporal pattern of consumer demand’. In the end, the discrepancy means the market for both consumer and capital goods (loans) readjusts to counteract the misallocation.


Friedrich A. Hayek

Can We Still Avoid Inflation?

Plotted series of right-angled triangles to show the two factors of time and money, as capital flows through the production process. It is agreed to have been overly simplistic in imagining capital as ‘tied down’ in development loans when in reality it still circulates fairly freely. But Hayek pioneered the use of time as a vital factor in analysing the boom-and-bust sequence.





Why ‘Defined Benefit’ should become ‘Pre-Defined Benefit Re-Defined in Light of Changing Conditions’

4 Sep


A recent well-intentioned but technically inaccurate FT article laid out the pitfalls of employers continuing to offer Defined Benefit (DB) schemes, in light of the recent bout of QE and interest rate revisions. Briefly, in a separate article it reported that consultancy Hymans Robertson had conducted research analysis which hypothesised the BOE’s announcement of a £70bn QE programme would lead directly to another £70bn DB shortfall.

The BOE also announced it would cut interest rates by 0.25%, which will hit all fixed-income returns by reducing the value of gilts and ‘safe haven’ government securities, and correspondingly increase the demand for, and price of, riskier fixed-income products. Pension trustees had better make some shrewd investment choices.

The writer argued that in order to solve the deficit overhang, the government needed further legislation to prevent the proliferation and even the continuation of DB schemes. He stopped just short of saying they should be outright banned.

A Lighter Touch

What the government has done, under the 2014 Pensions Act, is more of a soft-touch approach which controls market incentives to withdraw money from schemes, and window-shop continually for better ones. This provides more security for scheme managers, in terms of the available capital for investment.

To issue a ban on Defined Benefit schemes would be a hostile move, which might be resisted by certain interest groups and create a conflict both sides are surely keen to avoid. When a legislator has a choice between prohibition measures and providing incentives for industry participants to behave a certain way, a collaborative approach is usually more effective.

Though that is not to say that the government hasn’t laid down some firm rules on scheme governance and providing Value for Money.

Can Members Leave a Scheme if they Want to?

Although members are technically free to leave the scheme at any time, there are a number of barriers which impede them from doing so. Many funds impose exit fees, to try and keep investments safely enclosed in the fund and prevent a deficit from occurring.

Another barrier is that administrative provisions for transfer of their pension pot might be insufficient or incomplete. Scheme member data storage and integrity has recently been the subject of widespread audits and reforms, because so much information was missing or compromised. For example, employees would be classed as ‘absent’ from the scheme and hence the records, when in fact they had a Personal Pension Plan that the employer made regular contributions to.

Pre-existing pension legislation held that if you had been in the scheme less than 2 years, and the scheme rules permitted it, you were entitled to a refund of the contributions already made. Though having received the refund you would not be entitled to any benefits for the period to which the refund relates. However, the Pensions Act 2014 made it harder to leave or withdraw money from a scheme in several new ways, one of which was the abolition of these ‘short service’ refunds, for people who leave a money purchase occupational pension scheme after the mandatory 30-day period, and within 2 years of entering the scheme.

Mandatory Disclosure

Money purchase schemes are simply Defined Contribution (DC) by another name, where an employee contributes an agreed percentage of their salary at set intervals, with no guaranteed level of return. Targets and benchmarks are shared with scheme members, and indeed it is a legal requirement that trustees provide members with an annual statutory money purchase illustration (SMP), which states the likely pension at retirement based on in-house assumptions about market conditions including inflation. Also with details of contributions credited (before deductions) to the member in the preceding scheme year.

So a major advantage of DC schemes is that the governing directors’ expectations and projections of expected returns are continually revised. In the current fixed-income investment climate, with the BOE still steering interest rates on a tight rein particularly in the uncertainty surrounding Brexit, to make the kind of gold-plated promise to employees which Defined Benefit schemes make does not seem… prudent.

This enhanced level of disclosure was also introduced in the recent reforms governing trustee accountability. Not that I’m biased, but the now fairly stringent requirements on trustees of money purchase schemes seem to make them the better option. Among the other provisions are that:

–              Investments made with each contribution should be documented, recording the date of each. Best practice is that every new contribution be invested within five working days; where a member’s contributions are invested in more than one fund, and “the total amount contributed in a period is recorded explicitly”, verify the sum of the individual transactions elements equals the total contribution.

–              To this end, there should be a record of every investment sold, date sold and amount realised. This does not have to be recorded separately for each contributor, but must be categorised by investment fund.

Reasons not to Shop Around

The 2014 Pensions Act contained a number of other measures relating to private pensions, many of which strengthen existing legislation. Many seem calculated to try and ring-fence the contributions to existing schemes. They include provision for:

  • a new power to make regulations to prohibit the offering of incentives to transfer pension scheme rights
  • the introduction of a new statutory objective for the Pensions Regulator, to minimise any adverse impact on the sustainable growth of sponsoring employers when exercising its functions relating to scheme funding
  • measures to restructure the Pension Protection Fund compensation cap to better protect long serving scheme members
  • an amendment to the Public Service Pensions Act 2013 to allow smaller public body pension schemes to transfer accrued rights into one of the larger public service schemes

So in conclusion, measures have been taken to make DB schemes vastly less attractive. But to outright ban them would itself be infringing on the rights of those existing DB scheme-holders whose right not to have their scheme fold due to insufficient funds these lobbyists are defending in the first place.

The important thing is for DB scheme managers to have the freedom to adjust their expectations and projected returns to a level which is compatible with their income stream and all their liabilities. Which I suppose would mean they were no longer ‘Defined Benefit’ but ‘Pre-Defined Benefit Re-Defined in Light of Changing Conditions’. If only someone would outline the circumstances in which this decision would be permissible.



Unanimous tribute to ‘Charlie Hebdo’: a ‘counter-sense’?

11 Jan

Translated from Le Monde (link to real article below)

On the day before the coordinated tributes to the victims of Charlie Hebdo, and as the French had already started to assemble throughout France, certain cartoonists and journalists of the weekly satirical expressed their surprised in the face of such a wave of emotion. Of demonstrations of support which can seem strange, towards a magazine which has always cultivated irreverence and the art of not doing the same as its friends.

“They sounded the bells of Notre-Dame for Charlie, I must be dreaming!” exclaimed on Friday Gérard Biard, editor in chief of Charlie Hebdo, to underline the irony of the situation for an anticlerical magazine to be universally celebrated, even in the most famous Parisian cathedral”.

A Magazine which has Suffered Criticism from all Quarters

Several members of the editorial team have received with a little bitterness these marks of solidarity towards a paper which in other days had little support. Among them, the writer/editor Zineb El Rhazoui, who explained to the Monde :

“I would have liked that those who died benefitted from so much support while they were living. And that was not at all the case. ‘Charlie Hebdo’ is a paper which has been criticised by almost everyone. And what has happened, you could have predicted. We received threats all the time and certain of us said that it was almost like we were looking for it…”

Others were bluntly not going to demonstrate, behind the image of Laurent Léger, investigative journalist at Charlie Hebdo:

“I am not going to the demonstration on Sunday but I think I am the only one on the team at ‘Charlie Hebdo’ to have made this choice. I do not like demonstrating in general, I think that ‘Charlie Hebdo’ could be absent from the procession where they would be all sorts of politics and on the subject of which there has been a controversy with the FN. However, I think that the wave of real support is formidable and I hope that there are lots of people at the Sunday demonstration.”

‘Charlie Hebdo’ has always remained apart. Now ‘Charlie Hebdo’ is becoming mainstream. We have become part of the establishment, for a week or two. It’s new. But this is a necessary transition, I am not against it. And I know that in a few weeks, a new story will drive out this one and we will be alone… We have been a bit superseded: it is for nothing more than ‘Charlie’ that people are marching for. That is clear.”


“We vomited on all these people who, suddenly, call themselves our friends”

Cartoonist Luz, survivor of the attack of the 7 January, told magazine ‘the Inrocks’ that he believed for his part that “the huge symbolic weight is all that Charlie has always worked against.” He added:

“It’s incredible that the people support us but it is in a counter-sense (contre-sens) to the drawings of ‘Charlie…. This unanimity is useful to Hollande to reunite the nation. It is useful to Marine Le Pen to demand the death penalty.

People speak of the memory of Charb, Tignous, Cabu, Honoré, Wolinski: they would have reflected this attitude.”

The Dutch cartoonist Willem, real name Bernard Holtrop, spoke the most condemnatory words to Le Point. Reacting to the support of the head of the Netherlands’ extreme right party, Geert Wilders, he exclaimed: “We vomited on all these people who, suddenly, call themselves our friends.”

And on the global support and sympathy for the paper:

“They had never read ‘Charlie Hebdo’. A few years ago, thousands of people descended into the streets of Pakistan to demonstrate against ‘Charlie Hebdo’. They didn’t know what it was.

Now, it’s the opposite, but if people are demonstrating to defend freedom of speech, obviously it’s a great thing.”


Runaway Online Success of ‘The Interview’ Prompts French Newspaper to Chronicle ‘Decline’ of US Box-office

30 Dec

Translation (link to original article)

The online showing of ‘The Interview’ returns $15million

Before the cyber attack and the threats it was subjected to, Sony Pictures intended to distribute its film ‘The Interview’ across 3,000 screens. After having cancelled its release, then going back on its decision and proposing its showing in just under 300 locations, the studio also placed it online from the 24 december. It was no surprise that early results of this simultaneous exploitation (exploitation simultanée), the “day and date” in the Hollywood jargon, were excellent.

Sony announced the statistic of $15million (€12,3million), sales and over-subscribed rentals, for the first four days. In all, the film – put forward at $14.99 (€12.30) to buy, and $5.99 (€4,90) to rent, both with high-definition versions, has been downloaded 2 million times. According to the authoritative site Deadline, more than half of the takings came from Google, where the film took the lead in sales from the day it was placed online. To add to that, $2.8million (€2,3million) of revenue came from screen showings.

>>Read the review of the film: We watched ‘The Interview’ and we were a bit disappointed<<

The declining ‘American box-office’

The online success of ‘The Interview’ could re-launch, in the US, the debate over the simultaneous release of films in cinemas and in Video On Demand (VOD) – a principle which is for the moment rejected by the big cinema franchises – while Hollywood assesses the year passed by. The ‘box-office’ lost 5% in relation to 2013, which represents the biggest annual fall in nine years, reveals the ‘Hollywood Reporter’. The statistic of $10.4 billion (€8,55 billion) is expected on the 31 december, compared to takings of $10.9billion in 2013.

The year saw some major success, with ‘The Guardians of the Galaxy’ and ‘Hunger Games: the revolt (la révolte), part 1, but also ‘The Big Lego Adventure’, ‘Captain America: the Winter Soldier’, ‘Gone Girl’, ‘Interstellar’, or even ‘The Hobbit 3: the Battle of Five Armies’ – films which have boosted a year marked by a very disappointing summer in terms of cinema attendance (down 15% compared to 2013).

With the release of a series of highly anticipated blockbusters, from ‘Star Wars: Episode VII – the Awakening of the Force’, to ‘Fifty Shades of Grey’, passing through ‘Fast and Furious 7’, ‘The Minions’, ‘Jurassic World’ or ‘Avengers: the Era of Ultron’, the studios expect in contrast a good year in 2015.

Tit for Tat Media Battle between Argentine Government and US Lobbyists

1 Aug

Tit for Tat Media Battle between Argentine Government and US Lobbyists

News Update


A proposal to settle the Argentina debt crisis collapsed after what the country’s economy minister Axel Kicillof described as the “vulture funds” – hedge funds to the rest of us – reportedly rejected it.

The offer entailed the Argentine banking association, backed by Citigroup, HSBC and JPMorgan, buying out the so-called ‘holdouts’ (those under US jurisdiction), offering a reduced $1.4billion for their $1.6billion claim on principal and interest accrued.

Despite a US Supreme Court order requiring it to honour its debt to the holdout investors, who took at civil lawsuit out to enforce their payments, Argentina seems to have effectively defaulted. It cannot pay the other bondholders who accepted a restructuring and reduced value package back in 2005, because the Rights Upon Future Offers (RUFO) clause in the contracts of the restructured bonds will not allow the government to make higher payments to other creditors.

When the Argentine government tried to make a separate payment to the restructured bondholders on July 30, it was barred by US judge Thomas Griesa. The RUFO clause expires at the end of 2014, when a settlement may become possible.

At the same time as fierce negotiations were taking place between financial stakeholders, the country’s administration paid for several high-profile ‘advertisements’ in the Financial Times, laying out its objections to the lawsuit brought by – the so-called ‘holdouts’.

The adverts’ message states that Argentina considers the judicial verdict enforcing its payment of full interest on the bonds to be disproportionate, and prejudicial to the interests of the majority bondholders who did accept restructuring. It also questions the limits of US jurisdiction on this matter.

In response, a US group, ‘American Task Force Argentina’, formed largely of farmers’ and agricultural associations, who I am too much of a diplomat to call ‘interfering hicks’, took out its own advert. It accused the Argentine administration of a campaign of misinformation; to prove its case, it has drawn on its own roster of slanders, half-truths and hearsay. The campaign even has its own dedicated website,, funded by the American Task Force Argentina.

Whose campaign of misinformation?

The American Task Force Argentina’s advert in the FT, just several pages across from Argentina’s latest dispatch, sets out three ‘myths’ the Argentine government is propagating. First is that ‘Holdout creditors and a judge in NY are forcing Argentina to default.’ To be exact, the initial Argentine advert claimed that paying the sum owed the holdouts – it said $15billion – would make it unable to pay the majority bondholders.

The second alleged ‘myth’ is this sum of $15billion, a figure which the Task Force claims has not been substantiated or broken down by the Argentine administration. It quotes CNN which quotes an emerging markets economist at Capital Economics, David Rees, who puts the sum at “about half what the government claims.” It does seem an exaggerated number, as Argentina has only been court ordered to pay the US-based holdouts; those residing in other jurisdictions would have to start their own costly legal proceedings to enforce their payments.

But the Task Force makes no attempt to calculate this figure for itself. Surely it would be a simple matter to work out the end value of the debated bonds, by looking at the price paid to acquire them: the projected present future value (PFV) of the instrument would be incorporated in the pricing model for its initial sale price. Interest payments on this, even if compounded, could easily be totalled and added to the principal returned when the bond matured.

What, do the Montana Cattlemen, Kansas Cattlemen’s Association and Nebraska Taxpayers for Freedom not have any among them who can do bond maths? I am not hugely surprised, though there are some heavyweights within the American Task Force Argentina, like the National Taxpayers’ Union and the National Black chamber of Commerce which mean you have to take their campaign seriously. Though what the taxpayers’ union see as support-worthy in spending taxpayers’ dollars on a chain of repeated verdicts as the case moved up the legal hierarchy to the Supreme Court, I don’t know.

Tit for Tat

Admittedly, Argentina’s refusal to negotiate an extension – which the Task Force quotes Reuters as saying the ‘Argentine holdouts say they would discuss… in good faith’ – makes it look intransigent, even stubborn. Ostensibly this is because it maintains that US legal verdicts cannot extend to financial instruments issued and governed by Argentine, and in the case of the Euro bondholders, of English and Welsh law. Reportedly the minority bondholders are prepared to accept a combination of cash and, you guessed it, more bonds.

This seems like a solution. The question is, who would determine the interest rate, benchmark and the maturity of these newly issued instruments? Surely they would be subject to a similarly vicious haggling process? The holdouts have shown themselves unable to accept a 20% reduction in their assets’ value. Do they have an alternative proposal?

Passing the Baton

The Argentine government’s payments on bonds to all its US bondholders is carried out by BNY Mellon which acts as trustee for the Argentine government for these specific instruments. In its own announcement, Argentina effectively delegates responsibility for payment of all the bonds to BNY Mellon. Unfortunately the American bank is not able to ignore a US court order in the way the Latin American government can…

Argentina states that it has paid interest due on the 2005 and 2010 sovereign exchange offers “as required under Argentine law and the laws of England and Wales,” into its trustee’s account and that if it does not distribute them as required, then the government is not responsible. This is what is popularly known as ‘passing the baton.’

It’s difficult not to compare these events to the case of the Greek and Portugese default, where the European Central Bank unilaterally forced sovereign debt-holders to accept a 50% write-down on the value of their securities, with no chance of receiving further payments long-term. There the interests of the ordinary people, who rely on the government to fund the services they pay tax to be entitled to, took priority and wealthy investors had to subjugate their demands. The current payment verdict has a similarly asymmetric bias imposed by an overarching institution, but in favour of the financial elite who were funding the legal process.

There is a silver lining for both Argentina and the US finance community, as reportedly some hedge funds have been moving in to buy up Argentine stocks, in the expectation that a default on payments will do nothing to hold back its economy; and that after a downgrade by ratings agencies, many of the country’s assets are undervalued. Guess it shows that no grudge can getin the way of the prospect of a healthy profit.

Le Monde on the Historic accord reached by the OECD on Combatting Tax Evasion

6 May

(link to original article, above)

History, or at least economic history, will remember vividly this date: Tuesday 6 May 2014, the day when Switzerland and Singapore both agreed to cooperate on a way of automatically exchanging banking information for tax purposes, from state to state, embraced by the G20 powers to combat fraud.

According to our information, this surprising announcement had to be made in Paris, at the revelation of a ministerial reunion of the Organisation of Economic Cooperation and Development (OECD), a forum for international debate and action.


After intense diplomatic wrangling, the two countries had to sign an official declaration committing them to make the automatic exchange, a measure supported by more than 40 countries of which 32 were OECD members, -vbut also G20 countries which were not OECD members, including China and Russia.

tax dodger

tax dodger

The announcement of the ‘surrender’ by Switzerland and Singapore, countries whose economy is build on the financial industry and inviolable secret banking, and which have for a long time resisted any change, must be seen as a major advance in the struggle against tax evasion and fraud internationally.

It is a strong political signal, signifying that these states no longer want undeclared accounts. In fact, the automatic exchange of banking customer information is considered the most effective weapon against the concealment of capital. And with the capitulation of Switzerland and Singapore, the two strongest bastions of secret banking will fall, and what is more, the five of the biggest financial centres on the planet (after London, New York and Hong Kong).

To put it simply, the official practice of exchanging data on demand will be substituted, from 2017 onward, for a system of exchanging what is actually demanded, not one which clams up in the face of inquiries by the tax authorities or the law, and works according to the will of the states being interrogated, – therefore very badly.


Within the designs of the OECD, in its single world standard presented to the directors of the G20 in February, the future accords on exchange of information are all-encompassing, in order that states will exchange all the information which appertains to the financial assets retained on their territory by an individual or a society: balance of bank accounts, interests and projected dividends or event financial products. All the financial institutions will have to comply with the new rules of disclosure.

In theory therefore – and on condition that this commitment to practising information exchange will be transformed into law and enforced to the letter, and on condition also that the information will be available on demand from the source – an act of fraud would no longer have anywhere to hide.

There would be no more possibility of interposing between you and the authorities kilometres, oceans, intermediary opaque structures. In practice, considering the ingeniousness of tax fraud perpetrators and of certain tax experts, we should say that the places to hide will become less and less numerous, indeed very rare.


In total, in the world, there are more than 40 countries which have committed to legislate on the automatic exchange of data, including all the major world financial centres, which are obliged to extend the measures to their offshore satellites: Jersey and Guernsey have said they will comply when the day comes, like the Canaans, the Isle of Man, Antigua, the Virgin Islands…

In addition to Switzerland and Singapore, other countries have joined the concert of nations, such as Austria, Malaysia and Saudi Arabia.

Inconceivable five years ago, much of the pressure for progress originated with the United States, resolved to recover fiscal revenue in a context of budgetary shortfall, and thanks to the determination of the OECD directors, determined to confront a subject that has been in their sights since the 1960s. The revelations of the Offshore Leaks in 2013, the great fraud scandals like the Cahuzac affair in France, did the rest.

The OECD has profited from the American law FATCA, intended to obtain from foreign countries data on Americans wherever in the world they are, in enforcing this international information exchange standard. Five European countries, the self-described G5, supported the measure from its launch: France, Germany, the UK, Spain and Italy.


Simultaneously symbolic and binding, Tuesday’s declaration must be followed closely by action to enforce it. Effective political accords must be signed between states, without doubt this autumn by France and its G5 partners, at the reunion from the 28-29 October, in Berlin, of the world forum on the transparency of information exchange for fiscal ends (according to an OECD directive)

Then, the technical panel, after having developed its famous world exchange directive, the OECD experts have to deliver the information standard which allows for the collection of proprietary info from the banks, then exchange it with foreign countries (encryption of information, documentation format). This could be carried out from June onwards, ready for a presentation to the directors of the great powers of the G20 in Brisbane the next 14-15 november.

Swiss HSBC bank’s master plan for evasion of European savings tax (translated, Le Monde)

28 Jan

There is not just one, but two HSBC affairs. After a long inquiry, Le Monde reveals, Monday 27 january, the underside of an incredible episode which has poisoned Franco-Swiss relations for five years, and gives cold sweats to the French establishment.

The 26th December 2008, the computer programmer Hervé Falciani  sent to French tax investigators four DVDs containing about ten giga-bytes of raw data, encrypted, analysed over the course of long nights of work in Geneva, and concerning two years: 2005 and 2006. This HSBC employee is in flight, suspected of having wanted to sell the data to Libyan banks. The Direction national des enquêtes fiscales (DNEF) – national head of tax inquiries – with the aid of the Direction générale de la sécurité extérieure (DGSE), re-transcribed and then reconstituted a listing containing, in total, 2,846 identities of tax evaders.

The 20th January 2009, the courts in their turn went into action. They seized the computers of Hervé Falciani, and they too processed the raw data. A second listing was established through police investigation, harbouring for its part 2,956 names of suspects. A preliminary inquiry was ordered, much to the annoyance of the Swiss. There would be traps, checks, attempts to obstruct the work of the inquirers, and even the ousting of the head of the DNEF, whose file is sensitive.

600 Prominent Figures in the Listings

Le Monde has also had access to these two lists. The identities are often the same, and, in cross-referencing the information, certain categories materialise. They are traders, chemists, lawyers, comedians, singers, antiques dealers, sportsmen. A precious resource for the investigators, letting them establish a typology documenting the French holders of Swiss accounts.

In the majority of cases, the taxpayers found at fault have already regularised their situation. On examining the listings, one thing is obvious: the different circumstances. Around 600 prominent figures feature there. We have contacted them and listed those who permitted it. The first category, is those incumbents whose affairs are perfectly in order. For example the French residents in Switzerland. Among them is the footballer Christian Karembeu, the brothers Christian and François Picart (founders of the restaurant chain Buffalo Grill), or even Alain Affelou. In contrast to their treatment, the investigators interrogated a former teammate of M. Karembeu in the French team, who was also a world champion in 1998, holder of 1.6million euros with HSBC, as well as two superstars of French cinema, a famous comedian, a popstar, a former Miss France. And finally, a senator (UDI?) They did not respond to our inquiries.

The film-maker Cédric Klapisch figures on the list. “The tax authority contacted me the same moment I had started to regularise my affairs,” he revealed. “My father lives in Switzerland, he had opened an account in Geneva, he did not have an enormous amount of money under it (247,000 euros according to our information). I did not know that it was illegal. I regularised everything in 2012, and I don’t have money over there any more.” Gérard Miller had a similar experience. His testimony echoes that of lawyer Michel Tubiana, or of Richard Prasquier, ex-president of the Conseil representative des institutions juives de France (CRIF). Paul Bocuse is not in the same class. The celebrated chef pleads a thoughtless mistake. He held an account well stocked with 2.2 million euros.

But besides the identity of the tax evaders, which will all be known by the police, the biggest impact of this inquiry will be when it moves onto leaning on the internal practices of HSBC. When contacted, the bank assured us it is combating tax evasion and adheres to the laws. The information confided by the judges Renaud Van Ruymbeke and Charlotte Bilger suggests the contrary.

The investigators have seized the visitors reports of account managers at HSBC, when advising their clients. First, a certainty. According to the public prosecutor in Paris, François Molins, contacted by Le Monde, “nothing leads us to think that the files have been manipulated to give a false impression.” Et donc voila the protests of the Swiss authorities, who maintain the files have been altered.

The police, in a report of the 1st August, want to “direct the investigation towards the system put in place by HSBC to bypass the ESD tax.” The ESD tax derives from a European directive on the taxing of savings, applied to bank accounts from 2005. According to the inquirers, in view of the reports on the visits of 239 French clients, “the bank proposed in systematic fashion diverse evasion tactics in order to avoid the levy. Even worse, the bank also offers its services for setting up a company.”

The judges have already prepared precise testimonials. Like those of Parisian lawyer Laurent Azoulai. He, who wanted to standardise his affairs in Switzerland, – almost a million euros – was faced with the opposition of HSBC. He cites in defence of his view the case of a manager, who “tried with insistence to dissuade me from standardising my accounts.” And explains, “He told me that there were these stolen documents and that to try and regularise my situation, I would have to go up against the wrath of the French tax authorities. In a word, he was trying to make me afraid.” The investigators have also obtained extracts indicating that the bank would have recommended to certain of its clients to destroy their files…

The magistrates now have to try and identify the people eligible for numerous offshore companies, but also the true beneficiaries of the accounts attributed on the listings, the “HSBC employees” without doubt to blame, who could not use anything but fake names. The French establishment has not yet stopped quivering.

(link to original article,

At Davos, the charm offensive of Iranian president Hassan Rohani (translated from Le Monde)

25 Jan

(link to original article in Le Monde)

Is it going to become a regular habit? Four times after his presentation in front of the UN General Assembly, the Iranian president Hassan Rohani has successively stolen the thunder from his adversary, the Israeli prime minister Benjamin Netanyahu, this Thursday 23 january at the world economic forum of Davos, mounting a charm operation aimed at western businessmen, who are invited to invest in Iran.

Loudly applauded by an auditorium which, visibly, was eager to hear this speech, M. Rohani confirmed that “constructive engagement” was “one of the pillars” of the politics of his government, and that he meant to put it to work at one ambition: integrating Iran into the group of emerging economies. “Iran has the potential to be one of the ten foremost world economies in the next three decades,” he said. “Its economy is promising and can meet the other emerging economies.”

Normalising relations with Iran with the EU

The Iranian president supports that they renew commercial relations with the countries of the region, notably Turkey and Russia. The initiation of a nuclear agreement with Iran, which his country negotiated with the international community and over which he has a “strong and serious intention” to, through it, allow Iran to “normalise its relations with the EU.” With the United States, Tehran “has also embarked on a new stage these last months.” All this, he summarised, constitutes “a major change since the Islamic revolution.”

Reaffirming that his country had no military nuclear ambition, but that the Iranians “were not ready to abandon the technology” that enabled them to produce civil nuclear energy, the Iranian president also declared himself ready to participate in the collective effort for global energy security. Very at ease in front of an auditorium of over a thousand attendees of the forum at Davos, who he invited – “all” – to come to Iran, smiling pleasantly, his well-groomed beard and lively expression behind his neat glasses, M. Rohani was inarguably embarked on a charm offensive to give the impression that his country was from now on open to business, with a view to the lifting of sanctions.

In a conversation with a small group of journalists, sometime later, he even chatted about his Twitter account and swore that he did not tweet himself: he left this task to “his friends”. On foreign affairs in the region, however, he did not reveal anything, in his responses to the questions of Prof. Schwab, founder of the Davos Forum. In Syria, he proposes to “stop the bloodbath”, then to drive out “the terrorists come from elsewhere”. As for Israel, nothing is giving: when Professor Schwab asked him if he wanted better relations with “all” the countries of the region, without exception, M. Rohani clarified, with a large smile, “With all those which recognise us.”


Proceed with Prudence

For Vali Nasr, dean of the international faculty of Johns Hopkins University in Washington and specialist on Iran, the performance of M. Rohani at Davos consisted of “bypassing the nuclear question and putting the emphasis on integration of his country into the regional and global economy, which is a new direction.” This president wants to give an alternative image, analysed another expert, Iranian, who wished to remain anonymous. “He does not mix any ideology or revolutionary rhetoric into his speech. He has decided to use all possible occasions to address the world, and in particular to the Americans and Europeans.”

And Davos has provided him with a brilliant forum. A little later, the US Secretary of the Treasury, Jacob Lew, did however temper the potential enthusiasm that the Iranian president had stirred up, putting American companies on their guard. In an interview with the BBC, he urged them to “proceed with prudence” and not to launch themselves into Iran while the majority of sanctions were still in place.

Speaking at the same forum a few hours later, Benjamin Netanyahou knew that it would be more difficult to counter Hassan Rohani than his predecessor, Mahmoud Ahmadinejad. The Israelian delegation to Davos was backed up by Shimon Peres and Tzipi Livni. The Israeli prime minister delivered a superb advertisement for Israel, “nation of technological innovation”, but his smile slipped when he was question on the performance of the Iranian president. “Yes, he has changed his speeches,” he said, “but has not changed in his actions. He denounces foreign interventions in Syria? But we know that all of Iran is intervening in Syria, with its revolutionary guards on the ground!”

Le Monde discusses potential downgrading by Moody’s, and Big Brother police watch in Nice

24 Jan

France once again under the watch of financial markets

(link to original article in Le Monde)

Six days after the social-democratic ‘turning point’ of Francois Holland, the economic decisions announced by the chief of state are undergoing a first test by the markets. American ratings agency Moody’s will publish on Friday 24 january its assessment on France. And this is overhung by the threat of a new declassification for the actual rating class of the French state, AA1, is accompanied by a negative outlook. Moody’s had degraded the rating of France on 19 November 2012, asserting itself worried by the weakness of economic forecasts and their budgetary consequences.

On 21 december 2013, in a report on France, the American agency judged “improbable” in the short term the elevation of France’s rating, and indicated that its future action on the grading of the French national debt – the raising or lowering of the actual credit ranking – would be “in part based on the progress of the government on tackling fiscal pressure, and on the structural faults of the economy, which would together determine the probability of seeing France stabilise or reduce its debt ratio over the course of the following years.” These comments, to which you must add the decision of Standard & Poor’s to reduce by one notch its rating on France, altering it from AA+ to AA, left the belief that Moody’s would again degrade France.

The government has won itself time

But the wind could have turned. On the strict economic plan, the picture, if not yet bright pink, is improving. France has been out of recession since last spring, it should post a growth in its **Produit Interieur Brut (PIB) i.e. GNP of 0.9% this year, according to the predictions of the government and the IMF.

More than the economic environment, it is the change in political tone which could influence the financial environment. With the pact of responsibility announced by Francois Holland, which envisages the suppression of employers’ contributions of over 30 billion euros from this 2017, and of economies on public spending of 50 billion euros.

“These announcements come from the belief in what is expected from the ratings agencies” believes Jean-Louis Mourier, economist with Aurel BGC. “The government has gained some time,” sums up M. Mourier. According to him, Moody’s should therefore leave its rating unchanged. The negative outlook will remain, it is time to evaluate the concrete reality of the changes announced. And from this point of view, the budgetary derailing France was accused of in 2013 has weakened the force of Francois Hollande’s message.

Adding credibility to France’s words

According to the statistics released by the government on the 16 january, the state deficit has to increase, to enable the disposal, of 74.9 billion euros, perhaps 2.7 billion euros more than previously  at the time of the collective budget of December 2013. This gap derives essentially from the disappointing fiscal cash flow.

Anxious to maintain the credibility of France’s words, Pierre Moscovici indicated Thursday 23 january, that the aim of reducing the public deficit of France under the level of 3% of GNP in 2015 would not be abandoned as a result of the provisions of the pace of responsibility. The Ministry of the Economy and of the Finances has recalled the trajectory on which it has committed the government: 4.1% of the public deficit for 2013, 3.6% for 2014 and to be below 3% for 2015.

For the markets, a further eventual degrading of France’s debt should not provoke significant reactions. However, reiterates M. Mourier, in two days, in the wait for the decision by Moody’s, the gap between the German 10-year rate and the French rate has increased, in favour of the former which has lowered. This gap – the spread – has grown from 65 to 73 basis points.

In Nice, smile you’re being filmed

(link to original article in Le Monde)

Here, in the centre of urban supervision, Christian Estrosi is in his own realm. The policemen toss a military salute while they cruise in the corridors/lanes and give him an “understood, Mr Mayor” when he requests something. It is him who created, in 2010, this first complex of “videoprotection” in France.

A building entirely dedicated to observation, to the collection, processing and archiving of images issued from 915 surveillance cameras disseminated through the town. Seventy municipal policemen are involved. They dissect the images in search of something abnormal, responding to the calls of citizens who flag certain incidents or alert them to suspect behaviour, they are linked to the national police and the courts.

In the control room, opposite his own portrait which adorns the wall, M. Estrosi mounts, on a giant screen, some of the feats achieved by his teams thanks to the surveillance cameras. Like in a film about gangsters, we are suddenly now in pursuit of two little hoodlums on scooters. The image is in colour and high definition. The passenger is stealing a bag containing hundreds of thousands of euros from a van in the forest whose window is left open. The scooter flees at high speed through the streets of the town.

We follow them from street to street, from camera to camera, over eight kilometres, without ever losing their trail. Several minutes later, the thieves, believing themselves in the clear, leave the lane rapidly doing zigzags of joy on the road. At the end, three police cars wait to arrest them. Christian Estrosi is more than a little proud of his presentation. To think, “the police have a discovery rate of 36% thanks to the cameras. Seven hundred and twenty blatant crimes were revealed last year. Without the videoprotection, we would not have captured them.”

It’s more sexy than culture

The snag, it’s that, if you believe the statistics of the Ministry of the Interior, the statistics for crime in Nice are worse. As regards the issue of security, the town holds three records: that of the highest number of surveillance cameras in France (one for every 360 inhabitants), that of the greatest strength of municipal police (380, one for 902 inhabitants) and… that of the most disappointing results. According to the ranking published by the Express at the end of November 2013, Nice has moved from number 401 to 408 in regard to attacks on property, and in 389th place in regards to violence against individuals.

In 2008, to the delight of the mayor Jacques Peyrat, M. Estrosi built his campaign on the theme of security. “To become elected here, it’s more sexy than culture” recognised his former assistant, now become his adversary, Olivier Bettati. On these questions, the candidate Estrosi had valuable arguments; akin to Nicolas Sarkozy, who used to specialise in these questions at the UMP, he had, moreover, helped financed the construction of a commissariat in the west of the city for 27 million euros, by the general council that he headed. Cherry on the cake, he assisted in the services of a professional, Benoit Kandel, former colonel in the gendarmerie, who has a strong reputation for fighting against delinquancy.

Once elected mayor, M. Estrosi made security one of his priority tasks. Under his mandate, the number of surveillance cameras tripled at a cost of 14million euros, and those of the municipal police increased by 100 in three years (53 million euros in operations). The municipal police were equipped with tasers and divided up into different brigades (parks and gardens, VTT, canine, automotive, anti-tags…). The municipality simultaneously put in place a network of ‘vigilant neighbours’, 520 persons whose reputation was verified and who received training by the municipal police, to locate suspected deviants and alert law enforcement via SMS. A network of shopkeepers was also organised so that each among them had a direct line to the heart of the municipal police…

Municipal arrests, anti-bivouac, curfew

To complete his arsenal, the mayor also took all sorts of municipal arrests (against selling groceries at night, against consumption of alcohol in the street, aggressive anti-begging, against large gatherings, anti-bivouac, curfew) ostensibly to combat delinquency. And with little concern if these were ineffective, and regularly lambasted by the administrative tribunal, he attempted to make the population believe that he took their concerns to heart.

“It is part of a strategy of visibility,” analyses Laurent Mucchielli, director of the regional Observatory of delinquency and its social origins in the PACA region. “He is targeting a population which demands a major presence in public view and he is searching for how to respond. He is taking above all a political stance. All these deployments have not induced any change, any qualitative leap, this much is obvious.

For M. Kandel, who has managed the dossier for the mayor over more than four years, before being supplanted by M. Berrati, the poor statistics from Nice are inevitable: “Nice will always rank low, it’s structural. If you compare the number of crimes and offences to the number of inhabitants in the inventory of the Insee (Institut National de la Statistique et des Etudes Economiques), here it includes every year between five and six million tourists. You need to take into account the real population and the true statistics.” Tourists are in essence captive targets. Another factor which explains the mediocre results: the strong social inequality between the problem areas and the very wealthy residents.