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ance. That fudge was used two years
ago to recapitalize Ireland’s banks, and
Spain was toying with a variation on
the theme to shore up Bankia. But the
E.C.B. does not like it, not least because
emergency liquidity assistance is supposed
to be only temporary.
On the other hand, if neither side
blinks, some banks could collapse —
setting off runs even among solid ones.
Yet another weakness in the euro’s
defenses is what to do if investors refuse
to buy Spanish and Italian govern-
WITH
business
SUNDAY SALES DECLINING
AT MURDOCH’S PET PAPER
PAGE 14 | BUSINESS FRONT
The standoff
that could
kill the euro
Hugo
Dixon
POLITICAL ECONOMY
The euro zone crisis is a multidimensional
game of chicken. There is not just
a standoff between the zone’s core and
its periphery: There is also one between
the European Central Bank and the euro
zone governments over who should rescue
the single currency. In such games
somebody usually blinks. But if nobody
does, the consequences will be terrible.
The governmental brinkmanship is
over how much help the northerners,
led by Germany, should give the southerners.
The core is effectively threatening
the peripheral countries with bankruptcy
if they do not cut their deficits
and overhaul their economies. The
periphery is saying that if they collapse,
so will the entire single currency
that has been so beneficial to the German
economy. The game is being
played out transparently in Greece and
covertly in Spain.
But even if the core eventually decides
to help the periphery, there is a
struggle over whether the aid should
come from governments or from the
European Central Bank. Politicians
would like the central bank to do the
heavy lifting to avoid having to confront
taxpayers with an explicit bill.
But the E.C.B. does not think its job is
to help governments, arguing that such
support would violate the Maastricht
Treaty, which established the European
Union and underpinned the currency.
This standoff is making it hard to devise
a Plan B to cope with what is now
a clear and present danger: an explosion
in the euro zone.
Look at the most immediate problem:
what to do if the jog out of Greek
bank accounts accelerates into a run.
The E.C.B.’s exposure to Greek banks
YVES HERMAN/REUTERS
Mario Draghi of the European Central Bank, center left, has said that helping governments would violate the Maastricht Treaty.
is about ¤125 billion, or $155.16 billion,
through a combination of its normal liquidity
operations and emergency liquidity
assistance provided by
Greece’s central bank.
The Bundesbank, Germany’s hardline
central bank, says the euro system,
the collection of national central banks,
should not increase its risk level in
Greece. Instead, it wants governments
to guarantee any further liquidity injections.
But the politicians do not want to
face that issue, at least until Greek
voters have given a clear answer about
whether they want to stay in the euro.
The snag is that the June 17 election
may not provide a clear answer — and
that failure might provoke a bank run.
At the moment, there is no plan for how
to respond. Will the E.C.B. blink and
authorize extra liquidity assistance —
in which case it would look remarkably
silly if Greece then quit the euro and
the central bank faced big extra losses
on its exposure. Or will it shut off the
tap, in which case cash withdrawals
from Greek A.T.M.’s will have to be rationed,
quite possibly provoking panics
elsewhere.
The difficulty of coming up with contingency
plans goes beyond Greece.
What, for example, should be done if
bank runs do spread to other countries
like Spain and Italy? Last week, Mario
Draghi, the E.C.B.’s president, gave
what might seem like a reassuring
comment to the European Parliament,
saying: ‘‘We have all the means to cope
with this as far as solvent banks are
concerned.’’ What he did not spell out,
though, was how the E.C.B. would react
if there were runs on insolvent lenders.
The brinkmanship would probably
continue. The E.C.B. would argue that
it was the governments’ job to recapitalize
their banks. The politicians would
try to avoid injecting taxpayers’ money
into their lenders, not least because the
governments do not have the cash. The
E.C.B. would then probably say the
governments should borrow money
from the European Stability Mechanism,
the euro zone
The struggle
is over whether
aid should
come from
governments
or from
the E.C.B.
bailout fund.
The politicians
might come up with
inventive programs,
like giving their
banks i.o.u.’s that
could be swapped
with their own national
central banks
for liquidity assist-
ment debt. Madrid, for one, wants the
E.C.B. to step in with extensive purchases
of its bonds through what is
known as the securities markets program.
The central bank, though, thinks
that it should do this only to a limited
extent and that if a government needs
cash, the relief should come from the
other governments.
The snag is that the bailout fund does
not have enough money to rescue both
Madrid and Rome. That is why France
and other countries have argued that it
should be allowed to borrow money
from the E.C.B. — back to the central
bank again. But Mr. Draghi has rejected
that idea, saying that it would constitute
‘‘monetary financing’’ — or
bailing out governments by printing
cash — which is forbidden by the
Maastricht Treaty. Others argue that
the legal position is not so clear.
Either way, another potential standoff
is being set up. If Italy lost access to
the markets and the E.C.B. did not
blink, then Rome would have to turn to
extreme measures: Force its citizens
to buy bonds, suspend debt repayments
or something else. That might
spell the end of the single currency.
Of course, all hell might not break
loose. And if it does, some clever compromises
might be found. But a multidimensional
game of chicken certainly
heightens the risks.
Hugo Dixon is the founder and editor of
Reuters Breakingviews.
REUTERS BREAKINGVIEWS
Dutch phone giant considers a poison pill
The Dutch telecommunications group
KPN wants to dodge what it sees as a
takeover-on-the-cheap from Carlos
Slim Helú, the world’s richest man.
Mr. Slim is hoping to nab nearly a 28
percent stake of KPN at ¤8,or$9.95,a
share. KPN’s response is to wax lyrical
about its stand-alone potential, and drop
heavy hints about a possible German alliance
that has been talked about for a
decade. But its counterpart, Telefónica,
of Spain, does not seem ready to trade.
Sticklers for corporate governance,
look away now: KPN may buy time
with so-called poison pills.
Mr. Slim’s América Móvil has already
amasseda5percentstakeinKPNand
is offering to buy more shares until
June 27, up to a maximum 27.7 percent.
That has concentrated the minds at
KPN headquarters. The company decries
Mr. Slim’s opportunism and now
says it will explore ‘‘strategic options’’
for E-Plus — its biggest overseas operation
and the third-largest mobile operator
in Germany.
KPN says merging E-Plus with a rival
could yield valuable savings, synergies
that analysts hope would have a net
present value of ¤3.5 billion to ¤4 billion.
That only points in one direction: the
Telefónica unit O2 Germany. Antitrust
The problem with BP’s Russian solution
BP has had a lot of grief from its Russian
joint venture and may now sell its
stake in TNK-BP altogether. By doing
so, the British oil major would solve one
problem by creating another.
Awkward alliances are the norm for
Big Oil, assuming BP wants to stay in
the superleague. TNK-BP’s quality as a
production asset doesn’t mean the approaches
BP says it has received will
turn into a lucrative deal. The pool of
potential buyers is likely small, and
Russian.
Alfa Access Renova, BP’s joint venture
partner, may want to move to 100
percent at the right price. Alternatively,
the state-backed energy groups Rosneft
and Gazprom, or some new Kremlin-backed
entity, could take BP’s place
as A.A.R.’s partner. That makes for a
weak auction.
BP offered around $32 billion to buy
out A.A.R.’s share last year, according to
a person familiar with the situation. But
at the time it was part of a wider
strategy to explore new Russian fields
concerns could scuttle a deal with the
larger Deutsche Telekom or Vodafone.
Even a German merger between the
offspring of the Dutch and Spanish parent
companies might prompt some detailed
scrutiny from trustbusters.
The problem is, the debt-laden Telefónica
has other ideas. The Spanish
company is eager to conserve cash and
is thinking about a public offering of
part of O2 Germany. What’s more, it
denies talking to KPN about buying
E-Plus, although of course that does not
rule out other forms of collaboration. In
any event, any combination looks both
complex and some way off.
KPN says Mr. Slim is trying to obtain
significant control at a cut price. But if
its lobbying doesn’t keep investors on
board, something else might help keep
the investor at bay: an independent
‘‘preference shares foundation.’’ This
Dutch version of the poison pill can
block takeovers that would threaten the
firm’s ‘‘continuity, independence and
identity.’’ Foundations, in such cases,
can exercise an option setting off a
huge issue of preference shares. That
would dilute Mr. Slim’s influence and
buy KPN significantly more time, during
which it could thrash out deals in
Germany. Or elsewhere. QUENTIN WEBB
with Rosneft. TNK-BP’s listed shares
today value BP’s stake at $17.4 billion.
Analysts at Citi argue that the stake is
worth around $25 billion, or 20 percent
of BP’s market capitalization.
An all-cash deal would nearly wipe
out BP’s $29 billion of net debt. BP reckons
its optimal capital position is to have
10 to 15 percent gearing, so a special dividend
might then be possible. The snag
is that the BP rump would be much less
cash-generative: dividends from TNK-
BP funded 20 percent of BP’s $17 billion
in shareholder distributions in 2011.
In an ideal world, BP would rapidly
invest the proceeds in politically safer
long-term projects, but those don’t exist.
The fact is that BP has recouped its
original $8 billion investment in TNK-
BP more than twice over in dividends
received. Difficult partnerships are its
fate, and they’re worth it. CHRIS HUGHES
For more independent commentary and
analysis, visit www.breakingviews.com
Nongovernment funds bail out U.S. artists and writers in emergencies
Small sums prevent ruin
for self-employed people
with creative businesses
BY CAITLIN KELLY
Small, private rescue funds have been
lending a hand to writers, artists and
other creative people since times
turned hard in the United States.
Think of these funds as sort of a TARP
— Troubled Asset Relief Program — for
the arts crowd, only with much smaller
dollar figures, and with little or no help
from Washington.
Consider the story of George Handy, a
potter in Asheville, North Carolina. He
did not know how he would get by financially
after a Honda minivan barreled
into his wood-walled studio on an October
evening in 2008, about the time of
the Wall Street bailout. His work was
destroyed, his livelihood imperiled.
Fortunately, Mr. Handy, 57, who has
made his living as a potter since college,
had bought home insurance for the first
time a month earlier. But one claims
agent dismissed his lost work as ‘‘a
handful of clay,’’ Mr. Handy said, though
the insurer eventually gave him a bit
more than $37,000.
Friends and neighbors lent a hand, but
then more financial aid came from
CERF+, the Craft Emergency Relief
Fund, which helps artists in need with
grants and long-term interest-free loans.
CERF+ gave him $4,500 in all: a $3,150
loan and a $1,350 grant. That, in addition
to what he received from the insurance
claim, was enough to see him through.
Unlike financial companies and automakers,
which received a combined
$700 billion from Washington through
TARP, most artists do not qualify for any
government bailouts. Personal savings,
insurance, a generous relative or an
emergency grant is often all that stands
between them and financial ruin.
‘‘A lot of artists fall between the cracks,
between FEMA and the Small Business
Administration,’’ said Cornelia Carey, executive
director of CERF+. FEMA is the
U.S. agency that coordinates response to
large-scale disasters. The SBA assists
small businesses on a variety of fronts,
including loans and start-up advice.
CERF+ has been working since 2006
with state, regional and U.S. agencies and
foundations to help creative workers survive
personal financial crises and to plan
for possible disasters like hurricanes, tornadoes,
floods or medical emergencies.
Many cannot afford such preparations
themselves. ‘‘They’re both high-need
and very vulnerable,’’ Ms. Carey said.
Andy Nulman, president of Just for
Laughs, the annual comedy festival
based in Montreal, has worked with
comedians from around the world, including
Mike MacDonald, a Canadian
who is now living with his mother in Ottawa,
while awaiting a liver transplant.
Mr. MacDonald, 57, recently toured in
British Columbia, netting $5,000, a small
fraction of the income of his best years,
which was as much as $22,000 a month.
Now too sick to work, his retirement
savings gone and hoping to net $50,000
from the sale of his suburban Los
Angeles home, he has pleaded his case
on the Internet — on GoFundMe.com, a
donations site. Within three days, he
had raised more than $26,000.
‘‘It’s amazing. I’ve never seen this,’’
said Howard Lapides, his manager of 30
years.
Mr. MacDonald, at least, can live with
his mother and, because of Canada’s government-run
health care system, faces
no continuing medical bills. Chrystle
Fiedler, 54, a freelance writer in Greenport,
New York, is not so fortunate.
Ms. Fiedler, who is single and lives
alone, was injured in an accident in a
grocery in 2010. A distracted store employee
bumped her cheek so hard that
she almost fainted from the pain, she
said. Her condition was diagnosed as
atypical trigeminal neuralgia, a rare disorder
of a cranial nerve. She takes
powerful painkillers 10 times a day.
Earning a living has become extremely
difficult, she said.
MIKE BELLEME FOR THE NEW YORK TIMES
George Handy, a potter in Asheville, North Carolina, received emergency assistance
from a fund for artists, after a minivan crashed into his studio and destroyed his work.
Ms. Fielder applied to the Writers
Emergency Assistance Fund, which
gave her $4,250. (Disclosure: Caitlin
Kelly serves on the fund’s volunteer
board.) In October 2011, Ms. Fielder also
began receiving $1,800 a month for six
months from the Haven Foundation,
started in 2006 by Stephen King.
Mr. King was almost killed June 20,
1999, while walking near his summer
home in Lowell, Maine. A minivan hit
him, shattering his right hip, leg and
knee. After not working for 10 months,
he needed treatment for several years.
Charles Mayer, a spokesman for the
Haven Foundation, said by e-mail that
the group was a small, private foundation
that tries to disburse grants totaling
$50,000 to $75,000 a year. ‘‘We receive
hundreds of requests,’’ he adds,
‘‘and funds are quickly depleted.’’
The Authors League Fund, which is
affiliated with the Authors Guild, which
is based in New York, has been giving
grants to writers since 1917, with a vast
majority receiving ‘‘anywhere from a
few hundred dollars to several thousand,’’
said Isabel Howe, executive director
of the fund. It receives 100 to 200
applications a year, which is significantly
more than before 2007, she said.
Self-employed artists, whatever their
specific field or previous level of financial
success, cannot collect unemployment
benefits and often face restricted
access to traditional forms of capital,
like bank loans or lines of credit. And
their contributions to the nation’s economic
life are sometimes dismissed.
Yeta2008 study by the National Endowment
for the Arts, called ‘‘Artists in
the Workplace,’’ found that artists, athletes
and museums contributed $70.9
billion to the economy annually. Artists
are twice as likely as other American
workers to be college-educated and 3.5
timesaslikelytobe self-employed.
‘‘It’s the nature of the business,’’ said
Mr. Nulman at Just for Laughs. ‘‘No
performer ever wants to think they’re
finished. I see these cases and, like all of
us, say, ‘There but for the grace of God
go I.’ ’’
Traveler’s forecast
High/low temperatures, in degrees Celsius and
degrees Fahrenheit, and expected conditions.
C..................... Clouds Sh................. Showers
F .......................... Fog S .......................... Sun
H........................ Haze Sn...................... Snow
I.............................. Ice SS....... Snow showers
PC.......... Partly cloudy T ........ Thunderstorms
R......................... Rain W ...................... Windy
Monday Tuesday
˚C ˚F ˚C ˚F
39/29 102/84 41/31 106/88 Abu Dhabi S S
Almaty 27/14 81/57 S 28/16 82/61 PC
Athens 29/20 84/68 S 32/19 90/66 S
Bangkok 34/27 93/81 T 35/26 95/79 R
Barcelona 25/18 77/64 PC 24/18 75/64 PC
Beijing 31/20 88/68 S 34/22 93/72 S
Belgrade 31/18 88/64 S 22/12 72/54 R
Berlin 17/8 63/46 C 18/7 64/45 Sh
Boston 14/11 57/52 Sh 16/10 61/50 C
Brussels 14/5 57/41 R 16/10 61/50 C
Buenos Aires 13/6 55/43 PC 14/1 57/34 S
Cairo 35/20 95/68 S 34/22 93/72 S
Chicago 24/13 75/55 PC 23/13 73/55 T
Frankfurt 20/10 68/50 Sh 19/10 66/50 C
Geneva 20/11 68/52 R 21/11 70/52 PC
Hong Kong 31/26 88/79 PC 31/27 88/81 Sh
Istanbul 28/18 82/64 PC 29/20 84/68 S
Jakarta 32/26 90/79 T 32/25 90/77 R
Johannesburg 19/6 66/43 S 19/6 66/43 S
Karachi 32/28 90/82 S 33/28 91/82 S
Kiev 27/17 81/63 Sh 26/15 79/59 T
Lagos 29/23 84/73 T 30/23 86/73 T
Lisbon 26/16 79/61 S 26/17 79/63 PC
London 15/7 59/45 R 14/12 57/54 R
Los Angeles 21/15 70/59 PC 22/12 72/54 PC
Madrid 31/15 88/59 PC 32/18 90/64 S
Manila 31/26 88/79 T 30/26 86/79 R
Mexico City 25/13 77/55 T 26/12 79/54 T
Miami 33/24 91/75 PC 33/25 91/77 PC
Moscow 17/8 63/46 PC 20/10 68/50 C
Mumbai 33/28 91/82 PC 33/28 91/82 T
Nairobi 25/15 77/59 Sh 26/15 79/59 C
New Delhi 43/29 109/84 S 43/30 109/86 PC
New York 19/12 66/54 T 19/12 66/54 C
T-STORMS
SHOWERS
FLURRIES
SNOW
RAIN
ICE
HIGH
LOW
PORTUGAL
20-25
SPAIN
25-30
MOROCCO
IRELAND
5-10
10-15
15-20
25-30
ALGERIA
>35
10-15
TUNISIA
Nice 25/18 77/64 PC 24/17 75/63 PC
Osaka 26/17 79/63 PC 25/18 77/64 PC
Paris 17/7 63/45 Sh 17/13 63/55 C
Riyadh 40/27 104/81 S 40/26 104/79 S
Rome 23/14 73/57 R 25/15 77/59 PC
San Francisco 16/10 61/50 C 18/10 64/50 S
Sao Paulo 27/18 81/64 PC 24/18 75/64 T
Seoul 27/16 81/61 S 28/18 82/64 PC
Shanghai 26/20 79/68 PC 26/20 79/68 PC
Singapore 30/26 86/79 T 31/26 88/79 PC
5-10
10-15
30-35
ESTONIA
15-20
ALB.
LIBYA
LATVIA
LITH.
ROMANIA
25-30
BULGARIA
GREECE
5-10
RUSSIA
10-15
20-25
25-30
20-25
EGYPT
STATIONARY
COMPLEX
WARM
COLD
MOSTLY
CLOUDY
LEBANON
ISRAEL
Meteorology by
AccuWeather.
Weather shown
as expected
at noon on
Monday.
SYRIA
30-35
JORDAN
SAUDI
ARABIA
>35
Stockholm 16/8 61/46 Sh 17/9 63/48 Sh
Sydney 14/9 57/48 Sh 13/11 55/52 R
Taipei 28/24 82/75 Sh 28/24 82/75 PC
Tel Aviv 29/17 84/63 S 28/18 82/64 S
Tokyo 24/18 75/64 PC 24/19 75/66 PC
Toronto 19/10 66/50 PC 21/11 70/52 Sh
Tunis 31/17 88/63 C 29/17 84/63 S
Vienna 20/15 68/59 R 20/12 68/54 W
Warsaw 17/10 63/50 Sh 15/8 59/46 R
Washington 25/15 77/59 T 21/14 70/57 T
INTERNATIONAL TRAVELER
NEW YORK
NEW YORK
BOTANICAL GARDEN PAYS HOMAGE ENTERPRISE SPACE SHUTTLE
TO MONET’S FRENCH LANDSCAPES SLOWLY MAKES ITS WAY TO MUSEUM
Claude Monet’s beloved flower and water
gardens in the north of France are rived in New York City by air this
The prototype space shuttle that ar-
world-famous. But for those unable to spring is on the move again, this time
visit the artist’s iconic home, a trip to by sea.
the Bronx in New York City over the The Enterprise had been parked at
next several months will offer a taste of John F. Kennedy Airport since it flew
Monet’s indisputably radiant living from Washington to New York atop a
masterpiece — a riotous display of color,
plant variety and landscape design. day and was scheduled to be taken Sun-
747 jet. It was placed on a barge Satur-
‘‘Monet’s Garden’’ at the New York day across New York Harbor to Port
Botanical Garden evokes Monet’s lush Elizabeth, New Jersey.
garden at Giverny, the impressionist’s Then, on Tuesday, a tugboat is to
home from 1883 until his death in 1926. move the Enterprise to the Intrepid
The exhibition, which runs through Sea, Air and Space Museum, a decommissioned
aircraft carrier on the New
Oct. 21, will feature a seasonally changing
display of flora, currently a spring York side of the Hudson River. Plans
kaleidoscope of poppies, roses, foxgloves,
irises and delphiniums inside the spacecraft onto the carrier’s flight
are in place for a floating crane to lift
the Enid A. Haupt Conservancy at deck. (AP)
botanical garden.
It also includes two rarely seen HONG KONG
garden-inspired paintings, Monet’s
BEIJING HOTEL’S 24-HOUR GALLERY
wooden palette, rare photos of Monet in
his garden and 30 photographs of HOLDS CONTEMPORARY ART SHOW
Giverny by Elizabeth Murray, who has The Langham Place hotel at Beijing Capital
Airport, which has a 24-hour art gal-
recorded Monet’s flower oasis for 25
years. (AP)
lery, is holding an exhibit of contempor-
ary Chinese artists through the summer.
‘‘Childhood & Dialogue,’’ curated by
the 3+3 Art Space in Beijing, opened
last Friday and will show through Aug.
25. It includes works by Guo Tailai and
Tang Zhigang, two veteran artists who
have shown internationally, plus Shen
Shubin, Yang Tao and Xie Ke.
Aside from the pieces in the gallery,
there are 400 works of art on display
around the hotel.
HOLIDAYS THIS WEEK
Banking and government offices may
be closed or services curtailed in these
countries and their dependencies because
of national and religious holidays.
MONDAY Australia, Britain, British Virgin
Islands, Cayman Islands, Cyprus,
Gibraltar, Greece, Guernsey, Iran, Ireland,
New Zealand, Romania, Sri
Lanka, Thailand, Ukraine
TUESDAY Denmark, Gibraltar, Guernsey,
United Kingdom
WEDNESDAY South Korea, Sweden
THURSDAY Austria, Bolivia, Brazil,
Croatia, Dominican Republic, Liechtenstein,
Malta, Monaco, Poland, Portugal,
Seychelles
FRIDAY Isle of Man
(BLOOMBERG, REUTERS)