Pluto in Cap, the USA, the future of the world

[Rad]

United Kingdom: 40 years after EU accession, there’s not so much to cheer about

2 January 2013
Presseurop
The Independent   

“Forty years ago today a Union Jack was raised on top of the Brussels headquarters of what was then known as the European Economic Community,” begins Dominic Lawson in The Independent.

    I may be missing something; but there do not seem to be any such celebrations, either in Brussels or Blighty, to mark the 40th anniversary of what must be accounted the most significant moment – at least symbolically – in post-war British history.” Contrasting Europe's relationship with the UK to the EU's relationship with Ireland – which joined the EEC at the same time and has now taken over the EU’s rotating national presidency, the conservative columnist concludes that most Britons are far removed from the mindset of those at the heart of the EU project. With pressure mounting on UK Prime Minister David Cameron to hold a clear “in-out” referendum on British membership of the EU, Lawson adds –

    I know that many think there is actually something uncivilised in not being a member of the EU. But I have never felt, when in Switzerland, that I am far from civilisation; nor that Switzerland’s international image is somehow diminished by its lack of membership of this particular political club. Forty years on, it is high time to reassess the terms of our own partnership: as with some marriages, amicable separation might be preferable to fractious co-habitation.

[Rad]

 SPIEGEL ONLINE
01/02/2013 05:03 PM

Prospects for 2013: German Economy Faces Year of Uncertainty

By David Böcking and Maria Marquart

Will 2013 be an "unlucky 13" for the German economy? Will the country face a recession, or will it succeed in defying the crisis? There is much to suggest that there won't be any major economic setback. The mood on the markets is currently one of cautious optimism.

2013 already has many official designations: For UNESCO, it is "World Water Year"; for the Vatican, the "Year of Faith"; for the European Union, "The Year of the Citizen." But can it also be a healthy year for the German economy, Europe's largest? Economists are cautious.

Both the general collapse brought on by the 2009 economic crisis and Germany's record-breaking recovery caught people here by surprise. The consensus among economists for 2013 is that Germany will face steep challenges -- though fewer than those expected in many other countries.

Most economists have already revised downwards their forecast for this year and are even presuming a contraction in economic growth for the final quarter of 2012. The prediction now is for a slight growth in performance in 2013 and -- most importantly -- that the country will avert a recession.

It's an outlook cautiously shared by most German business leaders. According to the Munich-based Institute for Economic Research (Ifo), the current business climate index is poor, but expectations for the next six months have improved significantly.

That sentiment is not rock solid, however. "We measure the uncertainty by determining how wide the variations between companies are in assessing the current situation," warns Ifo chief economist Kai Carstensen. "And that differential has recently increased considerably."

Such uncertainty may seem odd, since the situation is noticeably calmer than at the outset of the financial crisis. The collapse of the United States real estate market in 2008 sent tremors through the global economy, severely affecting German companies.

Yet that drama had the silver lining -- at least from a business perspective -- of having a clear cause and effect. Now, economic growth is dependent on several, much more amorphous factors, such as:

    The euro crisis
    The US and Chinese economies
    Domestic consumption and investment in Germany

The euro crisis is particularly complex and confusing, and thus threatening, to companies. A recent survey of chief executives conducted by the German news agency DPA found that, unanimously, their biggest wish for 2013 was an end to the crisis.

But when it comes to the stock markets, the crisis seems to have almost been calmed. The risk premiums on government bonds for the troubled Southern European members of the euro zone have fallen significantly from their 2012 highs. Even negative headlines like the downgrading of many euro-zone countries and the euro bailout fund itself left investors largely unmoved. This is unlike previous crises, such as Black Monday in 1987. At that time, Carstensen says, "the financial markets were completely unsettled, whereas companies expressed little interest." But now, he adds, "it is the other way around."

Such apparent calm on the financial markets is largely attributable to an Italian -- namely, Mario Draghi, the head of the European Central Bank, and his declaration in July that the ECB would do "whatever it takes" to defend the euro.

Those measures have included emergency loans of around a trillion euros ($1.3 tillion) for ailing banks and the promise of unlimited purchases of government bonds. The instant success was undeniable, with reduced borrowing costs for embattled economies such as Spain and Italy.

But that hasn't solved the underlying problems. "The crisis will only be over when the real economies in Greece, Spain the other problem countries pick up again," said Enzo Weber, director of forecasting at the Institute for Employment Research (IAB) in Nuremberg.

And the ongoing crisis in the southern EU states has hit key German industries, such as the automotive sector.

Daimler, MAN and Opel are all suffering from falling demand in the Mediterranean member states, and they have responded by announcing measures such as the Kurzarbeit system of shorter working hours or savings programs. For these companies, it is of little concern that Spain and Italy are paying less interest on their sovereign bonds. After all, the people of those countries themselves need more money, and more confidence, in order to buy German products.

Growth in China, Risks in the USA

If the situation in Southern Europe doesn't improve in 2013, the German economy will become even more dependent on consumers in the rest of the world -- particularly in the United States and China.

Concerns about a slump in Chinese growth have eased recently, with the World Bank revising its growth forecast upwards. And demand from emerging economies continues to be good.

But the situation in the US is more difficult. President Barack Obama's re-election has dispelled some uncertainty, but the country's political divide is deeper than ever before. The brinkmanship that saw a deal reached on Jan. 1 on the "fiscal cliff" may have averted disaster, but it hardly inspires confidence in the world's largest economy. And while there may have been a last-minute deal, it is difficult to predict what effect it will have. After the Democrats and Republicans reached an 11th-hour deal on the budget in 2011, rating agency Standard & Poor's responded to the deal by stripping the US of its highest rating.

The shakier the global economy, the more important domestic demand becomes. In Germany, companies have been wavering for some time, with investment in new equipment declining over the past year. Consumers, on the other hand, have been a driver of the German economy, a first in a country that has often been criticized for its heavily export-dependent economy.

"Even during the financial crisis, consumption was solid as a rock," said Ifo's Carstensen. "That was because the labor market was supported by measures such as shorter working hours."

However, at the end of 2012, that mood deteriorated, with the GfK consumer confidence index falling twice in a row, largely because of fears over employment prospects. According to a survey by insurer Allianz, the fear of job losses has increased significantly over the past year. Thus far, many German companies had continued to hire new staff, while existing workers benefited from salary increases secured through collective bargaining agreements. According to Weber, however, "that positive trend in the labor market is broken."

During the 2009 financial crisis, after the federal government introduced its short-time working program, many German companies sucessfully avoided layoffs. And Weber believes 2013 will not see any catastrophic plunge. "There will be no major downturn," he says, but rather "more of a long, drawn-out dampening."

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 SPIEGEL ONLINE
01/02/2013 01:37 PM

Squeezed Out: Rocketing Rents Become Election Issue in Germany

By Horand Knaup, Alexander Neubacher and Ann-Kathrin Nezik

The exploding costs and dwindling supply of urban housing are slowly pushing Germans of average means out of the cities. As September's national election approaches, politicians are jockeying to find viable solutions to a problem they helped create.

When Jacopo Mingazzini's customers step off the plane in Berlin, they like to mix business with pleasure. First, the real estate broker's employees chauffeur the Italians to the city's top tourist attractions. Then they take the visitors to Wedding, a residential area in Berlin that is central if not particularly chic.

The potential buyers are on a tight schedule. Mingazzini's employees sometimes show them up to five apartments a day. The negotiations are conducted in Italian, and demand is high. Of the 1,200 apartments Mingazzini has sold this year, 150 were bought by Italians seeking to invest their savings in German real estate, which is seen as crisis-proof. "They know full well that if they buy an apartment that's currently being rented for €5 ($6.60) a square meter (about $0.60 a square foot), they can charge a lot more on a new lease," Mingazzini says.

The method being used by Italian teachers and lawyers to protect themselves against the euro crisis is causing turmoil in Germany's capital. Berlin's housing market is going haywire as local rents explode. Since 2007, average rents in the western part of the city have gone up by 20 percent, and other major cities are now experiencing the same development. Even apartments in second-tier cities have become nearly unaffordable for people with average incomes. Those seeking a new apartment in Hamburg, Munich, Berlin, Frankfurt, Düsseldorf or Cologne can expect to pay at least 25 percent more than they are accustomed to paying for the same size and standard of apartment elsewhere.

This is bad news for anyone hoping to move to a different city for a job or to attend a university. People who want to move around have to be prepared to pay for it, and couples planning to have children are scaling back their space requirements. The German Renters' Association (DMB) estimates that there is a shortage of about 250,000 apartments nationwide, and the latest government report on the housing sector concludes that a growing number of cities and regions "are likely to experience bottlenecks."

Self-Made Problems

The fight against what has been dubbed "rent shock" is forcing its way onto the political agenda. Germany will hold national parliamentary elections in September 2013, and no party wants to be accused of not taking voters' concerns about housing seriously. About half of German voters rent their houses or apartments. And even those who own their homes have often heard stories from family members or friends about skyrocketing costs, brazen brokers and overpriced hovels.

Both the opposition and the government of Chancellor Angela Merkel -- made up of her center-right Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the business-friendly Free Democratic Party (FDP) -- have proposed competing solutions. Transport, Building and Urban Affairs Minister Peter Ramsauer (CSU) has talked about anchoring hotel ships in university cities to replace the student dormitories that should have been but weren't built in recent years. Peer Steinbrück, the center-left Social Democratic Party (SPD)'s chancellor candidate, has announced a "National Plan of Action for Habitation and Urban Development" and is calling for a "revival of low-income housing construction." The Greens are proposing that landlords rather than tenants should be forced to pay brokers' fees. And even parliamentarians with the FDP, which tends to back the interests of property owners, recently voted for a federal law designed to prevent excessive rent hikes.

The message the parties are trying to convey to voters is that they are taking a proactive approach. But, in reality, there is plenty of hypocrisy at play when politicians suddenly discover a soft spot for renters -- especially since they are largely responsible for the price explosion on the real estate market themselves. Indeed, more than anything else, the government is driving up costs in the rental market, and at all levels.

Since the European Central Bank (ECB) has pushed interest rates down to historic lows, money for development is cheaper than it ever has been. At the same time, Southern Europeans seeking a safe haven for their assets are moving them to Germany. Rising demand drives real estate prices up and leaves renters in Germany with the bitter realization that they are paying a significant share of the added costs resulting from the euro crisis.

Many municipalities are also pushing up property prices and development costs by limiting the amount of land zoned for residential purposes and allowing sluggish bureaucracies to slow down the permitting process. Likewise, almost all of Germany's 16 states have scaled back low-income housing construction and are adjusting the property transfer tax. In the western states of Baden-Württemberg and North Rhine-Westphalia, for example, the tax recently rose from 3.5 to 5 percent.

Footing the Bill for Renovations

More than anything, though, it is the federal government's shift away from nuclear power and toward green energy, also known as the Energiewende, that is driving up housing prices. To reduce heating costs, the government subsidizes the installation of heat pumps, geothermal systems and triple-glazed windows. It's a good idea, but it has one major drawback: The costs are passed on to renters.

Property owners normally have little latitude when it comes to raising rents. The only time they can set rents at their discretion is when units are rented to new tenants. By law, rents for existing tenants, excluding utility bills, cannot increase by more than 20 percent in three years.

But the conditions are different if property owners perform what is officially known as an "energy upgrade" on their buildings. In that case, the government relaxes restrictions on landlords with the justification that the upgrade will serve a good purpose.

An owner is permitted to pass on up to 11 percent of renovation costs to tenants each year. If a landlord spends €20,000 to insulate an apartment, for example, he or she can increase the rent by up to €183 a month. The reduction in the tenant's heating bill, on the other hand, is relatively small by comparison. What's more, the government's latest amendment to the tenancy law requires tenants to put up with months of construction noise if the work is being done in the interest of climate protection.

The consequences have been dramatic, as retiree Ursula Falk can confirm. She has lived in an eight-story, concrete apartment building in the Hallschlag neighborhood of the southwestern German city of Stuttgart for the last 30 years. Her children and grandchildren grew up there. Falk prefers to stay in the neighborhood even though there are nicer places to live in the city.

The exterior walls and windows of the buildings in her development were recently brought up to the latest energy standards. But residents are worried because the landlord, the Stuttgart Housing and Urban Development Association (SWSG), wants to pay for the renovations by adding a surcharge to rents.

Falk and the other 120 tenants received a letter from the SWSG a while back. It stated that once the renovations were complete, their rent, excluding utilities, would go up 60 percent, from €475 to €770.

The SWSG is now prepared to make concessions, but Falk says she still can't afford even the proposed 40 percent jump in rent. Either her grandchildren will have to help her, or she'll have to move out and find an apartment she can afford. However, even that will probably be challenging because rental prices on new leases have risen by some 20 percent over the last five years.

What's more, if politicians deeply involved in environmental policies have their way, this is only the beginning. In many cases, renovating older buildings to bring them up to the latest energy standards can end up being a money pit, as even the Federal Environment Agency recently learned. The agency's headquarters, located in the eastern city of Dessau, was built in accordance with the strictest environmental and energy-conservation standards. For example, it boasts a ground-source heat pump instead of a conventional heating system, and a solar-powered cooling device provides air-conditioning in the summer.

But then it turned out that the technology was more expensive than planned, and maintenance costs exceeded all estimates. As a result, the Federal Audit Office recently calculated that operating costs for the supposedly "green" building were about 50 percent higher than those of other government structures.

Luckily for the agency, taxpayers can be counted on to make up the difference. Ordinary renters, however, are victims or what lawmakers refer to as a "conflict of objectives." The faster the government pushes ahead with the Energiewende, the faster housing costs rise.

Declines in Subsidized Housing
New environmental regulations aren't the only thing making housing more expensive. For example, the government in the southwestern state of Baden-Württemberg, led by a coalition of the SPD and Green Party, unveiled its plans for an amendment to the state building code in early December. Under the proposed new rules, new developments would have to provide more space for bikes -- even on properties where there is no obvious need for such space.

Likewise, as the scope of building regulations is expanding, individual states are scaling back their own spending. Since 2006, states and municipalities have been jointly in charge of building low-income housing. Although the federal government provides them with annual subsidies totally €500 million, reforms in laws governing its interactions with state governments bar it from imposing any regulations.

But, for years, municipalities have been investing very little in low-income housing, preferring to spend the federal government's money on other things. The city-state of Berlin, for example, collects about €32 million a year for this purpose. But instead of spending the money on new low-income housing, it uses it to repay old loans.

Over the last decade, such practices have led to a decline in the number of subsidized housing units in Germany, from about 2.6 to 1.6 million. At the same time, municipal housing associations are the first to force green renovation and the corresponding rent hikes on their tenants.

For far too long, lawmakers believed that the housing shortage was an old problem that had already been solved. Given that the population is aging and no longer growing, they reasoned, why should they worry about a lack of housing? Instead, they believed it was necessary to demolish empty prefabricated concrete apartment buildings and abandoned villages.

For a long time, they were right: Except in a few booming regions, rents rose more slowly than other living expenses. But now the situation has fundamentally changed. Although Germany's total population is stagnating, more and more people are crowding into its urban areas. And since more and more people are living alone, the number of households nationwide is actually climbing. Likewise, people who commute to their jobs sometimes need two residences, and many Germans expect each new apartment or house they move into to be a little bigger than the last one. The average citizen now uses 43 square meters of living space, or eight more than they did 20 years ago.

Proposed Solutions

Local communities, however, have been far too slow in reacting to these developments. Ulrich Pfeiffer, a former Building Ministry department head who now serves as the supervisory board chairman of Empirica, a real estate appraisal and consulting firm, accuses city and town officials of hoarding land available for building and only selling it to investors at exorbitant prices. In fact, there has been a sharp decline in the number of residential building permits issued in recent years, from 639,000 in 1995 to 228,000 in 2011. In addition, Pfeiffer claims that local authorities are imposing unnecessary but costly conditions on developers. "In the end," he says, "all of this affects rents."

But what can policymakers do? Building Minister Ramsauer's proposal to house students in floating dormitories, for example, doesn't solve the problem and is more indicative of a general helplessness than anything else. By comparison, proposals by local politicians and tenant advocates to enact legislation to reduce costs ought to be taken more seriously.

Experts agree that such a radical approach can work, but the question is whether the risks and side effects of new market interventions won't actually make the patient even sicker.

The DMB renters' association, for example, has proposed a rule that would limit rents on new leases to no more than 10 percent above comparable local rents. At first glance, this seems like a good idea: At times when the demand for housing is artificially inflated by cheap money and capital from Southern European investors, the government has to find ways to prevent the development of real estate bubbles.

But the real question is how this concept should be structured. If the government sets a nationwide ceiling on price increases, as the DMB proposes, it will deter investors in regions where there are genuine housing shortages. But if the ceiling only applied in booming markets, the authorities would have to identify the cities in which price increases are excessive and those in which they are acceptable. Experience has shown that government agencies are rarely right when it comes to making such assessments.

A no less dubious plan is that of the local administration in Berlin's northern Pankow district, which entails imposing a ban on so-called "luxury modernizations." Starting in January, it will be prohibited in much of the district to install a second bathroom or radiant floor heating system. This is the local administration's way of preventing a sharp rise in housing prices after renovations.

The initiative is well intentioned, but experts doubt it will produce the desired results. A family with several children will not necessarily perceive a second bathroom as a luxury. On the other hand, speculators could hit upon the idea of upgrading their properties by installing platinum-plated fixtures. These examples illustrate why officials with property owner associations, among others, believe that such programs are mostly ineffective.

City planners are also hardly likely to be galvanized by SPD chancellor candidate Steinbrück's proposal to start building low-income housing again like it was done in the 1960s and '70s. They remember all too well how the government-subsidized bedroom communities of the day often deteriorated into ghettos for welfare recipients.

Needed Legislation

Indeed, it is worth noting that the construction of low-income housing no longer plays its traditional role in the Social Democrats' campaign platforms. The most recent plan stems from Achim Grossmann, a former senior official in the Building Ministry, developed with a small team of experts at the request of SPD Chairman Sigmar Gabriel. The document envisions a stronger social integration of redevelopment areas in large cities as well as the targeted promotion of housing cooperatives.

The SPD is also thinking about simplifying the so-called "Wohn-Riester" (a government-subsidized home loan and pension-savings plan), blocking the sale of public housing associations and strongly limiting the share of residential spaces that can be converted into vacation rentals or offices.

Granted, such measures can create a few more housing units. But they will not forcibly bring about a real shift in trends affecting the real estate market. Instead, fundamental reforms are needed in the areas of politics that caused the problem in the first place. If rent increases are to be limited, state and local governments will have to invest more money in the construction of residential housing, simplify their building codes and classify more property as residential. As Hamburg Mayor Olaf Scholz puts it: "The amount remains the deciding factor. Believing in other panaceas would be an illusion."

It would also be helpful to adjust the goals of the Energiewende to better conform to financial realities. For example, instead of insisting on complete renovations, which are hardly worthwhile for either landlords or tenants, it would be better for the environment if property owners insulated doors and windows at a minimum.

The most important thing, though, is to tackle the problem of real estate speculation, which many experts believe has taken hold in a considerable portion of German cities. This, of course, is the most difficult task for politicians, as it is based on no less of an assumption than that the euro crisis will someday end.

Until then, to the delight of Berlin brokers and their customers from Southern Europe, rents will continue to rise. Italian small investors remain very interested, says broker Mingazzini, adding that all of Berlin is in demand, and that the reputation of an individual district doesn't really matter. "If an apartment is only a few subway stations from Friedrichstrasse, it's perfect," he says, referring to a major culture and shopping street in downtown Berlin.

Translated from the German by Christopher Sultan

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 SPIEGEL ONLINE
01/03/2013 12:06 PM

Golden Arches and Broken Dreams: American Cities Drown in Debt

By Marc Hujer

San Bernardino, California, has gone from being the birthplace of McDonald's, one of the world's most successful companies, to a mound of unpaid debts. It's a sad example of what a lack of infrastructure investment and an almost religious aversion to higher taxes have done to cities across the United States.

Ketchup and mustard, always in exactly the same amounts -- this is the secret of the serving machine that Albert Okura keeps in the first display case at his museum. Here in San Bernardino, California, in the building that once housed the first McDonald's restaurant, Okura has collected nearly everything the fast-food chain has ever produced. There are paper cups, paper napkins, Happy Meal toys -- all the consumer detritus of America's golden years -- but nothing is more important to him than this small metal machine. "It was a brilliant idea," he says. "This way, every hamburger is the same."

Okura believes in that idea to this day. It reminds him of San Bernardino's heyday, here in this city where brothers Richard and Maurice McDonald opened their first fast-food restaurant.

Back then, in 1948, people came from all over the country to see the brothers' unusual hamburger stand. One of those people was Ray Kroc, then a traveling salesman for milkshake mixers, who later transformed the San Bernardino hamburger joint into a global corporation worth billions.

Couldn't the same thing happen again? Seventy years after the McDonald brothers, couldn't Albert Okura, son of a Japanese immigrant, one day be discovered in the same way, thanks to a bit of patience and a good idea?

Suspended Services and Pay

On August 1, 2012, San Bernardino filed for bankruptcy. Today this city, located an hour's drive east of Los Angeles, is one of the poorest, most violent cities in the United States. Once the setting for one of America's greatest success stories, the city can no longer even afford to pay its police officers and is rotting in its own waste.

The situation is a catastrophe for everyone who hasn't packed up and moved away. It is also representative of the bankruptcy of a country that failed to use its prosperous decades to sustain a functioning government. Funds are short at all levels, from Washington to the states to the cities and towns. The US is no longer investing in its infrastructure, weakening the foundation that gives all Americans a chance to have a piece of the American Dream.

San Bernardino was the third city in California to declare bankruptcy last year. First came Stockton, in June, followed by the ski town Mammoth Lakes. The majority of American cities are deep in debt, and unlike the federal government, they have limits to the amount of money they can borrow. Their residents are feeling the effects.

Analyst Meredith Whitney, who predicted the fates of Citigroup and Lehman Brothers, warned in late 2010 that the collapse of America's cities and towns was coming. Up to 100 cities were at risk of going broke, she said, and their potential losses could total several hundreds of billions of dollars. This city-level debt, which amounts to a total of $2 trillion (€1.5 trillion), is still less than the $16 trillion debt the federal government in Washington has amassed. But the crisis is leading to considerable reductions in services.

San Bernardino, for example, is no longer even able to pay city employees' salaries. To reduce costs, the city has cut about 20 percent of its employees, with those who remain taking a 10 percent pay cut. The mayor's staff has been reduced from nine to two, and three of four city libraries have closed, as have two centers dedicated to combating gang violence. The police may soon have to share the patrol vehicles of neighboring cities' forces -- which isn't particularly welcome news in a city that had over 32 murders in 2012 and that ranks among the 100 most dangerous in the US.

San Bernardino, population 213,000, is short $45 million for the current fiscal year and is already unable to fulfill even its most crucial obligations, including making pension payments to retired city employees, which were simply suspended.

Trying to Save the City from Abandonment

The financial crisis has significantly reduced the city's sources of income. This includes sales tax, but more crucially property tax on houses and real estate, which are now nearly worthless.

The number of house foreclosures here is three and a half times the national average, and the rate of decline is accelerating every day. Detroit sprays the front yards of abandoned houses with green paint so that it at least looks as if lawns still grew there. But San Bernardino doesn't even have the money for paint.

Beena Khakhria is a real estate agent in San Bernardino. She works for Neighborhood Housing Services of the Inland Empire (NHSIE), a nonprofit organization that tries to save abandoned structures. She bids on foreclosed houses, and if she wins the bid, she has the worst of the damages repaired, replacing rotten window frames and infested floors. Then she looks for buyers, who must prove they plan to live in the city.

It's an attempt to save something that is already beyond salvation. Take, for example, the house on Rose Street, directly across from Interstate 210. The highway is a behemoth of rock and concrete, loud and eight lanes wide. Khakhria would like to buy this three-bedroom, two-bath house. At $56,000, it costs a tenth the price of an apartment in the better areas of Los Angeles. But will anyone want to live in a house facing the highway?

However, Khakhria doesn't have the same worries that real estate agents in better cities do. "The location is perfect," she says. "For my clients, it's an advantage that the highway is so close. It makes them feel safer if the neighborhood doesn't seem completely dead."

The "Me" Culture

The US government's investment in its economy has declined steadily since the 1970s. Publicly held assets accounted for 72 percent of the country's gross domestic product in 1975; today, that amount is under 55 percent. The mayors of individual American cities have certainly initiated construction projects, such as stadiums or community centers, sometimes using borrowed funds, but there is no overarching plan. The federal government no longer undertakes large-scale projects as it did with the Hoover Dam in the 1930s or the interstate highway system in the 1950s.

Meanwhile, in many places, mayors, government employees and police officers have simply helped themselves to city funds, giving themselves higher and higher salaries and creating new privileges for themselves. San Bernardino has firefighters who earn $100,000 a year. At the same time, the city's retirement fund contributions have risen. Now they are three times what they were a decade ago, devouring 15 percent of the city's budget and leaving the city government with its hands tied.

But instead of addressing such problems, public debate has tended to focus on one thing: lower taxes. Property tax in San Bernardino is just 1 percent. It used to be much higher, but was reduced by a referendum, a decision that is now taking its toll. For example, the city lacks a modern transportation system that would connect its residents to the nearby metropolis of Los Angeles without requiring them to navigate the overburdened freeways.

This reliance on public infrastructure is surely what President Barack Obama meant when he declared during his election campaign that entrepreneurial success is not possible without a strong government, telling business owners: "You didn't build that."

Obama's comment was directed at the mistaken belief that each individual is completely and solely responsible for his or her own success or failure. Republican politicians stubbornly block most attempts to increase taxes in the US. Indeed, America is in crisis precisely because it has held this belief in an individual's complete and sole responsibility for far too long.

Dreams and Reality

Albert Okura, the man who owns the museum at the site of the original McDonald's restaurant, founded Juan Pollo, his own fast-food chain specializing in grilled chicken, in 1984. Okura says his success is based on the same principle as the one behind the McDonald's serving machine in his museum: He grills each chicken the same way, down to the second.

Juan Pollo now has 32 locations, making Okura one of San Bernardino's few modern-day success stories. He would like to open a restaurant in Los Angeles, but doesn't have the necessary funds -- a restaurant in Los Angeles would cost much more than all his restaurants in this city where no one wants to live.

Okura calls himself the "Chicken Man" and says his life goal is to sell more chicken legs than anyone else in the world. He's also trying to get his name in the newspaper to help advertise his company. For example, for a festival celebrating the anniversary of the founding of the first McDonald's, Okura rented a sports car and parked it in the museum's parking lot.

He was trying to appear like a successful businessman, but the car was unfortunately stolen from the museum parking lot. The next morning, Okura's name was indeed in the newspaper -- under a headline reading "Car Stolen."

Translated from the German by Ella Ornstein

[Rad]

 SPIEGEL ONLINE
01/03/2013 12:52 PM

Continent in Crisis: China Overtakes Sluggish Europe in Car Sales

While European consumers spent much of 2012 fretting about the economic crisis, China managed to surpass the Continent in automobile sales for the first time. Given China's growing middle class, the trend looks set to continue. China will probably outpace Europe in vehicle production this year, too.

It's no secret that Europe's automobile industry isn't exactly booming. Several carmakers on the Continent are struggling as demand has fallen off during the euro crisis, particularly in southern European countries, where austerity programs have taken a bite out of prosperity.

In China, however, more and more cars are flying off the lots. And in 2012, for the first time ever, Chinese consumers purchased more automobiles than did buyers in Europe, according to the daily Süddeutsche Zeitung, citing an unpublished report by Germany's VDA automobile industry association. The report indicates that whereas 13.2 million cars were registered in China in 2012, in Europe, the total fell from the previous year's 13.6 million to just 12.5 million.

The reasons, of course, are many. On the one hand, China's middle class continues to swell rapidly, even as the economy there grew more slowly last year than it had in previous years. For the increasing number of those who can afford them, cars offer both greater mobility and an important status symbol.

On the other hand, car sales in Europe have long been the canary in the economic coal mine. With several euro-zone member states in recession, and few countries enjoying anything more than modest growth, consumers appear to be waiting for better times before replacing aging vehicles. Indeed, despite a brief upturn in many EU member states in 2009, car sales in Europe have been falling steadily since 2007.

As Big as US and Europe Combined

These trends -- and particularly the ongoing expansion of the Chinese market -- are likely to continue. "It is just a question of time before China surpasses the US in car sales," Ferdinand Dudenhöffer, head of the Center Automotive Research at the University of Duisburg-Essen, told the Süddeutsche Zeitung. He predicts that, by 2030, the Chinese car market could be as big as that of Europe and the US combined.

The car sales boom in China, however, isn't just beneficial to Chinese automakers. German brands, for example, sold more new cars in China in 2012 than they did in Germany. Furthermore, many of the vehicles sold in China are the product of collaborations between European or American brands and a Chinese company. According to the Süddeutsche, only about a third of the cars produced in the country are the product of a purely Chinese company.

Nevertheless, many European brands are suffering as consumers on the Continent kept the hatches battened down in 2012 and are likely to continue doing so in 2013. Several companies, such as Ford Europe, Renault and Opel are struggling mightily. PSA Peugeot Citroën is currently slashing some 10,000 jobs, and its financing business is expecting a €7 billion ($9.2 billion) bailout from Paris.

In fact, according to a Financial Times projection published on Tuesday, China is also expected to leapfrog Europe in the total number of cars and light vehicles produced in 2013. The paper estimates that China will make 19.6 million cars and light trucks this year against 18.3 million in Europe, giving it a likely 23.8 percent share of the global car-manufacturing market. In 2000, China's share was just 3.5 percent. During roughly the same time period, Europe's share of the global market has dropped from 35 percent in 2001 to a projected 2013 share of just over 20 percent.

*************

 SPIEGEL ONLINE
01/02/2013 05:52 PM

Unknown But Unavoidable: The Secret Ways of Chinese Telecom Giant Huawei

By Hilmar Schmundt

Almost a third of the planet is thought to be using its products and yet few know much about the highly secretive Chinese telecommunication equipment company Huawei. Should customers be concerned about the company founder's military background or the security vulnerabilities of its products?

The first problem is just saying the company's name. Huawei is pronounced wah-way. It means something like "China acts!"

The second problem is its patriotic swagger. The telecommunications networking equipment and mobile phone supplier, based in the southeastern Chinese city of Shenzhen, is accused of secretly spreading high-tech spying devices around the world, having close ties with the Chinese military and supplying products to pariah states like Iran. A recent report by the Intelligence Committee of the United States House of Representatives warned against using the company's products for critical telecommunications infrastructure. The Australian government has also blocked the company from bidding for contracts related to the construction of its national broadband network.

It would appear that Huawei cannot be stopped, though. At the international consumer electronics show opening in Las Vegas on January 8, the company will present the first mobile phone that uses the Windows Phone 8 operating system as well as a massive, souped-up mobile phone with a six-inch-plus display screen that puts it in the category of phone-tablet hybrids known as "phablets."

In July, the company already introduced its "Ascend P1," a respectable Android-based smartphone that is thinner than many rival products and boasts better battery life than the iPhone 5.

The Chinese company has its sites set on being able to make better smartphones than both Samsung and Apple soon. Though this might sound overly ambitious, Huawei means business. Some estimates hold that roughly a third of the world's population already uses the company's technologies in some way, often without being aware of it. Many Internet connections run through servers made by Huawei, and many mobile-phone calls are transmitted through the company's base stations. In Germany, the first "surf sticks" using the ultra-fast LTE standard that were marketed by Deutsche Telekom, the country's telecommunications giant, were built by Huawei.

A Charm Offensive

The company has launched a charm offensive that is currently trying to dispel concerns about its goals. "It's a misconception that we are a Chinese company," says company spokesman Roland Sladek. "We've been international for some time now." The 39-year-old, who was born in the southwestern German city of Freiburg and has lectured on "intercultural communication" at Sciences Po, an elite university in Paris, is the company's European face.

Sladek said this at Huawei headquarters, a glass-encased palace in an industrial zone of Shenzhen, just a few kilometers from the Foxconn factories in which many Samsung and Apple products are assembled. The facilities are so huge that the thousands of young people who stream out of them and block intersections each day during shift changes seem like they are part of some major demonstration.

But in contrast to Foxconn, the campus-like grounds of Huawei's headquarters are devoted to developing rather than assembling products. The conference rooms are elegantly furnished, the espresso bars are first-rate, and the subtropical indoor plants are draped with glittering Christmas decorations. It might be winter outside, but there's a steamy warmth in the restaurants and among the palm trees inside. The gigantic campus is home to some 40,000 engineers, whose average age is 29, and most live in dormitory-like housing.

Huawei has some 150,000 employees in more than 140 countries, including over 1,600 in Germany. Despite its global presence, however, the company is decidedly Chinese. It was founded in 1987 by Ren Zhengfei, a former technology officer in the People's Liberation Army.

Shenzhen, near the former British colony of Hong Kong, used to be a backwater community with some 30,000 inhabitants. But in 1980, it was designated China's first "special economic zone," a laboratory for the country's experimentation with free-market policies. Today, the futuristic planned city is home to roughly 10 million people.

Rat-Proof Cables

When Ren launched the company, he had to import telephone switchboards from Hong Kong. Before long, though, the company was developing its own IT components. The rural parvenu then proceeded to conquer the domestic market in accordance with the Maoist doctrine: "Encircle the cities from the countryside."

Company spokesman Sladek cites the company's rat-proof cables as an example of how Huawei is particularly good at responding to customer needs. He explains how gnawing rats often destroyed telephone lines in rural areas. "Other companies shrugged their shoulders," he says. "But our engineers reinforced the cables to be more resistant to rat bites."

Huawei expanded abroad after the turn of the millennium. Since then, it has grown to become the world's second-largest supplier of telecommunications networking equipment, with annual sales of some €25 billion ($33 billion). Soon, it might even surpass the market leader, Sweden's Ericsson. What's more, rather than making low-cost knockoffs, Huawei channels over 11 percent of revenues back into research and development, and already holds more than 20,000 patents.

Company founder Ren has never given an interview, and other Chinese peculiarities only add to the company's reputation for opaqueness. For example, Huawei has its own in-house committee of the Communist Party of China. Sladek says people read too much into this, though, noting that every company with more than 50 employees in China has to have one, including the China-based subsidiaries of the German automakers Volkswagen and BMW. "The committees don't do anything more than hand out gift baskets of fruit to employees for Chinese New Year," he says. But China experts are skeptical of this interpretation.

An Unknown Brand

On the outside, Huawei seems harmless. With its palm-lined streets and neoclassical columns, the company's campus -- dubbed the "White House" -- would hardly look out of place in Silicon Valley. Here, prototypes are subjected to grueling tests in a climate laboratory as part of quality-control efforts.

In formal terms, the company is employee-owned. Its founder owns a 1.4 percent stake -- and seems dynastically inclined. His daughter is the company's CFO, and his brother sits on the advisory board.

A permanent exhibition housed on a basement floor of the headquarters shows the many ways in which the company's products have become part of our everyday digital lives. Huawei offers solar-powered mobile telephony stations, software for hospitals, interactive televisions, surveillance cameras and systems for telephone conferencing, traffic guidance and building automation. What's more, its products are usually about 30 percent cheaper than those of its competitors.

Huawei sells roughly 100 million mobile phones each year, though often under the names of individual mobile network operators. A fierce price war between no-name providers has prompted Huawei to follow the lead of other companies, such as Taiwan's HTC, in launching its own mobile phone brand.

"The good news is that we build good technologies," says Shao Yang, Huawei's chief marketing officer. "And now the bad news: Hardly anyone is familiar with our brands." Changing this is his job, he adds.

Security Issues

Two years ago, the company took a bold and radical step aimed at eliminating suspicions about its possible involvement in espionage. It set up the Cyber Security Evaluation Centre, a kind of quarantine station, in the small British city of Banbury, not far from Oxford. There, 20 employees look for security vulnerabilities in Huawei devices alongside counterparts from the Government Communications Headquarters (GSHQ), the British intelligence agency responsible for electronic intelligence gathering and cyber security. The company reportedly even gives the GSHQ access to its product source code, the holiest asset of any high-tech company.

The center is meant to banish all worries about the secretive company and its founder's military past, but not everyone is convinced. "That is probably supposed to sound reassuring," says Felix Linder, who dresses in black and goes by the name "FX" in industry circles. "But what good does it do German companies if the British intelligence service knows about Huawei's security vulnerabilities?" Linder is the head of Recurity Labs, a 10-person IT security firm based in Berlin's Kreuzberg district. "Intelligence agencies love security gaps," he adds, "just in case they need access at some point themselves."

Lindner caused a global stir in July when he pointed out backdoors in Huawei Systems at the Defcon hacker conference in Las Vegas. At the time, attackers could easily crack the security coding of Huawei routers by entering standard, preset passwords, such as "supperman" with two p's.

"I used to frequently criticize companies like Sun Microsystems," Lindner says dryly. "But comparatively speaking, Sun has seemed positively exemplary to me ever since I've gotten acquainted with Huawei. Its security reminds one of the level seen in the 1990s." In response, Huawei says that it cannot go into detail about security-related issues, but adds that it puts the highest value on quality.

Still, Lindner doesn't believe that the unsecured backdoors in Huawei routers were programmed with evil intentions. Instead, he suggests that they are the result of sloppy work by young, underpaid engineers.

Translated from the German by Josh Ward

[Rad]

January 2, 2013

Spain’s Chinese Immigrants Thrive in Tough Economy

By DAN BILEFSKY
IHT

BARCELONA, Spain — When Jiajia Wang’s parents first moved to Barcelona from China in the 1990s, they had no working papers and spoke no Spanish. The family ate eggs to survive. Her mother and father worked 12-hour days at a Chinese restaurant.

After five years, they bought a restaurant of their own with money borrowed from relatives, interest-free. She and her brother washed the dishes. Her parents slept on a mattress in the bathroom of their cramped apartment so that the children could study at night in the other room.

Today, while Spanish youth unemployment hovers around 50 percent, Ms. Wang, 24, who studied economics at Harvard on a one-year fellowship, juggles four jobs: teaching Mandarin, advising Chinese investors in Spain, running a publishing house and writing romantic novels. She sends home €1,000, or about $1,300, a month to support her parents, who retired last year.

Her family’s story is telling of the ways many of Spain’s 170,000 Chinese immigrants have managed not only to weather a tough economy but even to thrive, aided by intense labor and a strong Confucian model of family loyalty, while joblessness and cuts to government services have left other Spaniards struggling.

“The Chinese family is less dependent on the government because the family is the welfare state, the bank and social services, all wrapped in one,” Ms. Wang said.

“For Chinese people who lived through hardship back home,” she added, “working 16-hour days is nothing, and that has made us more resilient during the crisis.”

The Spanish government itself seems to have recognized the importance of this success. So determined is it to attract Chinese immigrants that in November it passed a law offering residency permits to foreigners who buy homes worth more than €160,000, with the specific aim of drawing Chinese and Russian investment, lawmakers said.

As hard-hit Spaniards struggle to keep both their jobs and their homes, Spain’s Chinese immigrants in Barcelona and Madrid are starting businesses and buying distressed properties from the bursting of Spain’s housing bubble.

Of the 8,613 foreigners who started businesses in the past 10 months, 30 percent, or 2,569 were Chinese, according to the National Federation of Self-Employed Workers.

InfoChina Gestión, a real estate company based in Madrid that focuses on Chinese investors, said the number of houses sold for €70,000 to €100,000 to Chinese nearly doubled last year, to 813. Mr. House, a real estate company in Madrid, said it was selling at least 10 houses a month to Chinese, a majority of whom paid at least 80 percent in cash.

The types of work many Chinese immigrants gravitate toward helps explain their success as much as their work ethic. In a time of economic crisis, ubiquitous low-margin Chinese-owned bazaars, hairdressers and supermarkets have become a lure for cost-conscious Spanish consumers.

“If it wasn’t for the Chinese shops, it would be harder to scrape by,” said Ester Maduerga, 30, a saleswoman at a sports shoe store, as she scanned the notepads, leather belts and plastic alligators at One Hundred and More, a Chinese-owned bazaar here.

Xi Li He, 26, the bazaar’s manager and cashier, said the business was flourishing, in part because he had reduced prices by importing inexpensive goods from China. When Mr. Xi, fresh from business school, tried to take a job at a large Spanish retailer, he said his mother doubled his salary.

That kind of success by Chinese immigrants has provided a beachhead of sorts for further investment from China that has pumped some life into an otherwise moribund Spanish economy.

Before Spain’s crisis exploded in 2008, Chinese foreign investment in Spain was negligible. By last year, it had grown to €70 million, according to ICEX, a government investment agency.

Ivana Casaburi, a professor of international marketing at Esade business school in Barcelona, said Chinese companies were being drawn to Spain because it offered a low-cost gateway to the European Union, the world’s biggest trading bloc.

Isla Ramos Chaves, an executive at the Chinese computer maker Lenovo, said that even with the crisis, Spain — the fourth-largest economy in the euro zone — remained a market that Chinese companies were eager to tap. She added that Chinese multinationals in Spain were proving robust, in part because they were anchored by a huge domestic market back home.

Executives at Haier, the Chinese-owned appliance maker, said the economic crisis, rather than being a deterrent, had provided an opportunity, as Spaniards were willing to consider competitively priced washing machines and air-conditioners, even if their brands were less well known.

“I am not sure we would have been as successful if the market was stable and growing,” said Santiago Belenguer, the general manager of Haier’s Spanish operations.

The success of Chinese newcomers to Spain has not spawned the kind of anti-immigrant backlash seen in some hard-pressed parts of Europe like Greece. Immigration experts said Spain’s relatively welcoming attitude reflected its new openness after the repression of the Franco years, when the country was a nation of emigration. Since the crisis, the return of thousands of Latin American immigrants to their home countries from Spain has also relieved pressure on the work force.

That does not mean everyone has championed the success of the Chinese, and some complain of stereotyping and being targeted by law enforcement.

In October, the police arrested 80 people in a nationwide crackdown on Chinese criminal gangs engaged in money-laundering and tax evasion. The police said the low price of Chinese products was being abetted by some importers not declaring shipments from China, thereby avoiding taxes.

Here in Barcelona, José Rodríguez, the owner of A Porta Galega, a traditional tapas cafe in the hip neighborhood of Eixample, said cut-rate prices for everything from beer to shampoo at Chinese-owned shops made it impossible for Spaniards to compete. At least a dozen Chinese-owned tapas bars are scattered along his block.

Still, he added, he would sell his own restaurant to Chinese buyers, “for the right price.”

Silvia Taulés contributed reporting.

[Rad]

January 2, 2013

A Swiss Region Where the Gold Comes in Solid and Liquid Forms

By JOHN TAGLIABUE
IHT

MENDRISIO, Switzerland — The Swiss like to think their country is to gold what Bordeaux, France, is to wine. Thanks to a dark red merlot produced in the hills surrounding this town in the south of Switzerland, it has both, the real gold and the wine.

The real gold is here because four of the world’s major gold refineries are on Swiss soil, three of them here in Mendrisio, turning roughly one-third of the world’s gold into bars and ingots. The wine is here because over the past several decades this Italian-speaking region has emerged as the largest wine-growing area in Switzerland, and the local merlot has carved a big place in the Swiss wine market.

Merlot, said Luigi Zanini Jr., 40, whose father began making wine here in the 1980s after importing Italian wines for decades, “is king, queen, prince and all of the nobility.” The company he and his father run, Vinattieri Ticinesi, is now Switzerland’s largest winemaker, producing about 500,000 bottles a year.

If Mr. Zanini deals in bottled gold, across town, at a sprawling factory with gray concrete walls seven feet high, Erhard Oberli handles the real thing, as the chief executive of Argor-Heraeus, a major refiner processing hundreds of tons of gold every year.

Gold refining flourished here, Mr. Oberli said, because of the proximity to Italy, where jewelry is a major industry and labor is cheap. “Italy, traditionally, was by far the biggest consumer of gold, taking about 800 tons a year, half legally and half illegally,” he said. The illegal part has largely been cleaned up, but Italy remains a big customer, as do makers of jewelry and watches in Swiss cities like Geneva.

The price of gold is now hovering at nearly $1,700 an ounce, compared with less than $300 a dozen years ago. That is not a direct benefit to Mr. Oberli, because his company is a processor of gold, not a trader. But the demand for melted-down gold and fresh ingots from raw gold has soared, so he now has a new $32 million enlargement of his factory to go along with the growth in the number of employees, to 229 from 152 five years ago.

Both the gold and the wine are feeding a prosperity here that contrasts sharply with the slump in surrounding regions, most notably northern Italy, long a powerhouse of the European economy.

Mendrisio, with its charming old downtown streets ringed by state-of-the-art factories, embedded in steep valleys ringed with vineyards, has long been a magnet for Italians in search of work. In recent years as Europe’s borders have grown increasingly porous, and Italy suffers the effects of a debt crisis, the numbers have soared.

Every day more than 7,500 Italians clog the roads, making the trek across the border in their Hyundais and Toyotas and the occasional Fiat, coming to jobs in Mendrisio, where the local population is only 11,600. About a decade ago, before Switzerland began joining various European agreements to eliminate border controls, most were unskilled workers in farming or construction, but they are now increasingly skilled people — engineers, chemists, accountants.

Meinrad Perler is the son of a farmer in western, French-speaking Switzerland who went into banking. When that career soured, he turned to his passion, winemaking, settling in Mendrisio in the 1980s. “It’s not the ideal location, too much rain in the wrong seasons, and hot, dry summers,” he said, steering his sport utility vehicle through steep vineyards.

Still, the climate has not prevented Mr. Perler, 75, from building an annual production of 210,000 bottles a year, mostly merlot. Of his 14 full-time employees, 8 are Italians, including his chief oenologist. When he recently advertised for an accountant, 132 letters came in, more than two-thirds from Italians.

“They’ll accept a job that is lower than their qualification,” he said, and for less money.

Over at the Zanini winery, of 72 employees, about half are cross-border Italians. “The tendency is to try and find people from Ticino,” the region Mendrisio lies in, Mr. Zanini said. “But maybe there’s more desire in Italy.”

At Argor-Heraeus, Mr. Oberli badly needs engineers, chemists and metallurgists, and cannot find them locally. “In Italy now it’s a catastrophe, and given the unemployment, you easily find young, well-trained people,” he said, turned out by schools like the Technical University in Milan. About two-thirds of his employees are Italians, who drive back to their homes in Italy when the workday is done.

Of course there are benefits to employing Italians, like lower pay. The Swiss federal statistical office released figures recently showing that while the average disposable income of a Swiss is roughly $55,000, that of cross-border workers like the Italians is about $48,000.

While this gap annoys Swiss employees, who see the foreigners as competitors, employers say the difference is justified. “Taxes are less in Italy than in Switzerland,” said Marco Nauer, 49, a metals expert at Argor-Heraeus who is responsible for hiring. The cost of living is lower in Italy as well, so earnings in Swiss francs go further.

Behind Mendrisio’s neo-Classical town hall, a large parking garage is being built. The dozen or so cars of the construction workers all have Italian plates. “With the crisis in Italy, there just isn’t any work,” said Davide Grassi, 33, a cement mason from Milan who in July began driving the 40 minutes to work here every day.

For some, it is more than money. Last September, Roberta Pellin, who lives in Olgiate Comasco, Italy, a 20-minute drive across the border, opened a little vaulted flower shop along Corso Bello, a pedestrian street in Mendrisio’s old town center, after working for 25 years in the flower business in Italy.

“I evaluated the situation in Italy and decided it’s far easier in Switzerland,” said Ms. Pellin, 44. The Italian bureaucracy is crushing, she said, and the professionalism is greater in Switzerland. Moreover, Swiss laws require stores to close Sundays, unlike in Italy, where they stay open seven days a week.

“I have two kids,” she said. “It’s about quality of life.”

[Rad]

 SPIEGEL ONLINE
01/02/2013 02:54 PM

The World from Berlin: Today's American Politics a 'Tiresome Farce'

Barack Obama's announcement that a deal to avert the "fiscal cliff" has been reached was hailed as a victory for the Democratic president. German editorialists, however, are less certain. They warn that the bitter political wrangling in Washingon is likely to damage the country in the long term.

Following a rancorous and protracted battle over fiscal policy, President Barack Obama announced late on Tuesday that the United States Congress had passed legislation to avoid the dreaded "fiscal cliff."

Had legislators in Washington failed to reach a deal, it would have meant big hikes in income taxes for the middle class and massive government spending cuts, likely sending the country into recession.

Some 24 hours after it was approved by the Senate, it was passed by the House of Representatives by a vote of 257 to 167, averting the automatic implementation of tax increases set to come into effect with the expiration of cuts enacted by former President George W. Bush. Voted for by a number of Republicans in the opposition, who were worried their stubborn refusals would be blamed for "fiscal cliff" fallout, it was seen as a victory for President Obama, who ran for re-election with calls for higher taxes for the wealthy.

"A central promise of my campaign for president was to change the tax code that was too skewed towards the wealthy at the expense of working middle-class Americans," Obama said in a short statement to the press. "Tonight we've done that."

Once Obama signs the bill, the country will no longer face the some $500 billion (€377 billion) in increased taxes and $109 billion in defense and domestic spending cuts that would have taken hold. Instead, it ensures that the existing tax cuts for most people remain in place, while the tax rate for incomes above $400,000 for individuals and $450,000 for couples will increase from a current 35 percent to 39.6 percent. Taxes will also increase for the wealthy on dividends, capital gains and inheritances.

Still, neither side of the aisle was particularly pleased with the deal, which is seen as a mere postponement of further budgetary negotiations in the coming two months after the new Congress convenes. While the Republicans were forced to accept higher income taxes for the wealthy and fewer spending cuts than they had demanded, the Democrats had hoped to increase taxes starting at an income level of $250,000.

On Wednesday, both Asian and European markets seemed to react positively to news of the deal, which lowered the risk of the world's largest economy falling into recession.

German editorialists were a bit less optimistic, however, writing that the political games in Washington are harming the country.

The conservative Frankfurter Allgemeine Zeitung writes:

"The annual ritual of expiring deadlines and compromises in the middle of the night has long since become a tiresome farce that no one is interested in seeing any longer. ... The political theater is damaging the country both domestically and abroad. Querulousness and anger are growing among the people because the national leadership in Washington isn't in a position to solve the country's biggest problems: the mountain of debt, the budget deficit, unemployment, the education crisis, aging infrastructure and the explosion of costs in the health care and pension systems."

"This political paralysis could stifle economic recovery. The national debt, which now exceeds the annual economic output of the country, also threatens national security. President Obama's first term was characterized by procrastination and retreat when it came to foreign and security policy -- from Iraq to Afghanistan to Libya and Syria. And without Washington's leadership, what is to become of the 'peace process' in the Middle East and the Arab Spring? Beyond the cliff the world faces more adversity than a world power taking a breather from geopolitics."

The conservative daily Die Welt writes:

"American politicians like drama. ... But this drama isn't soley the result of effective staging meant to show the voter base that they have tried everything and then only backed down to avert catastrophe. Indeed, America's fiscal problems are so complex, and the divide between Democrats and Republicans so deep, that a comprehensive agreement in the short time after the election was not even possible."

"The US budget can't actually be straightened out with tax increases for the rich alone. It will also require cuts to the biggest spending areas, which in addition to the military are mainly the galloping costs of the welfare state. In 2012, 44 percent of the US budget went towards paying for the welfare state, for health insurance for retirees (Medicare) and the poor (Medicaid). Given that the US population is graying and more and more people will be eligible for Medicare, this system can no longer be financed on the same scale as in the past. Essentially, America is more European than either Europeans or Americans think. Across the Atlantic, the economic crisis has opened up long-term structural deficits. And here too, the same phenomenon is emerging: In the postmodern Western democracies, the desire of citizens to receive social benefits is far more pronounced than their willingness to finance them with higher taxes."

"The recognition that things cannot go on without a curtailment in social spending has so far been eluded by Obama and as his party. Now the Democrats have two months to come clean to their constituents and get them used to a simple fact: Namely that the current level of spending is not financially feasible given what most people are willing to pay."

The left-leaning Die Tageszeitung writes:

"Precious little has been gained, particularly when it comes to implementing the platforms for which Barack Obama was re-elected in November -- even if the Republicans don't want to believe it. ... In Washington today, the main mission of politics is obstruction. All sides are acting as though the only conceivable form of politics is constantly relying on emergency measures in a panic."

"It will be a small political miracle if other means were used to resolve the next stage over the next two months, the deferred budget cuts and increase in the debt ceiling. Perhaps falling over the cliff could have helped matters there. But politicians knew to prevent that from happening."

The left-leaning Berliner Zeitung writes:

"Sure, Obama managed to save unemployment benefits for the long-term unemployed and avoided cuts to social and health benefits for the time being with the fiscal cliff compromise. But the ultimate decision over the cuts is far from being made. A year of endless negotiations over the debt ceiling and the unresolved budget issues awaits. The still fiscally conservative and resolute Republicans remain pitted against the still hesitant president, who remains hopeful of bipartisan cooperation. But even if Obama is now finally determined to fight their obsession with spending cuts, he'll still have to adjust to governing with less money soon."

-- Kristen Allen

[Rad]

The dictator acts ..........

January 2, 2013

Putin Orders Change in Election Rules

By DAVID M. HERSZENHORN
IHT

MOSCOW — President Vladimir V. Putin has ordered a major change in the rules for parliamentary elections, a move that could help solidify his power and influence toward the end of his current term and insulate him from dwindling public support for United Russia, the party that nominated him and currently holds a majority in Parliament.

At Mr. Putin’s direction, half of the 450 seats in the State Duma, the lower house of Parliament, would be filled using a proportional system based on votes for parties, with each party then filling its allotted seats. The other half would be filled by direct election of individual candidates, creating a potential opening for independent campaigns.

The new system, which the Central Election Commission is expected to unveil in the next several weeks, replaces a system of strict party-list voting. It would be the second major change to the parliamentary voting process in less than a decade and essentially amounts to a return to a system that had been in place through 2003. The proposal also comes just a year after allegations of widespread fraud in the parliamentary elections in December 2011 set off a wave of huge street protests in Moscow.

But while the prospect of individual candidacies suggests a liberalizing of a political system often criticized as heavily tilted in favor of Mr. Putin and the governing authorities, history shows that they can actually have the opposite effect.

This is because individual candidates endorsed by the majority party tend to have a huge advantage in name recognition and resources in local races, and because candidates who run locally as independents can often be enticed to join the majority party when the new Parliament is formed, using perks offered by the presidential administration.

In neighboring Ukraine, the adoption of a mixed electoral system like the one proposed by Mr. Putin helped President Viktor F. Yanukovich’s Party of Regions win more seats in elections this fall, despite public opinion polls — and even election results — that showed support for the party had dropped across the country.

In 2007, under a system of proportional voting for party lists, the Party of Regions won 175 seats with 34.4 percent of the vote. In 2012, the Party of Regions won only 30 percent in proportional voting but now holds 209 seats thanks to victories in individual districts by its own nominees or by independents who joined the faction later.

Under new laws that extended both the terms of Duma members and the president, Russia’s next parliamentary election is scheduled for December 2016, and would be followed by a presidential election in March 2018.

Mr. Putin, in a speech to the Russian Parliament last month, described the proposed change as a continuation of liberalization efforts that began last year with an easing of restrictions on creating political parties. Critics of that process say it is now too easy to form a party, effectively splintering the opposition like a shattered pane of glass.

“We had seven political parties at the beginning of this year, and now we have 48, if I am not mistaken, plus there are over 200 organizing committees working to establish their own political parties,” Mr. Putin said in the speech. “The authorities must strive to ensure that all of them enjoy equal rights.”

But election experts said there were reasons to be skeptical. Arkady Lyubarev, the director of a project on developing Russian election law for Golos, the country’s only independent election monitoring group, said the organization supported a mixed voting system but not the one proposed by Mr. Putin.

“We stand for a mixed linked system similar to the system of elections used for the German Bundestag,” Mr. Lyubarev said, meaning that each party would receive only as many seats as its proportion of the national vote. “But we are opposed to restoring the mixed unlinked system, which was in effect before, because it allows United Russia — and any party that has more than 30 percent support — to receive overrepresentation through victories in the single-member districts.”

Mr. Lyubarev said Golos was also concerned about the possibility that independent candidates would encounter obstacles to registering their candidacies.

Matthew Rojansky, the deputy director of the Russia and Eurasia program at the Carnegie Endowment for International Peace in Washington, suggested that Mr. Putin might have taken Ukraine as a model, particularly with the threat of the protest movement fresh in mind.

“Putin is not a man to take chances, and the last year has illustrated the potential for destabilizing forces to gain momentum quickly,” he said. “The value for the party of power of the single mandate system mixed with the party list is that it can dilute the impact of a nationwide protest vote.”

This article has been revised to reflect the following correction:

Correction: January 3, 2013

An earlier version of this article misspelled the surname of the director of a project on developing Russian election law. He is Arkady Lyubarev, not Lubaryev.

***********

Putin grants French actor Gerard Depardieu Russian citizenship

By Agence France-Presse
Thursday, January 3, 2013 7:37 EST

Russian President Vladimir Putin on Thursday granted fast-track citizenship to France’s Gerard Depardieu after the movie star complained about the French Socialist government’s proposed 75 percent tax on the rich.

The decision appears to give Depardieu — a frequent guest of the Moscow celebrity circuit who nonetheless never asked for a Russian passport — the right to pay the 13 percent tax levied in Russia on everyone from billionaires to the poor.

“Vladimir Putin has signed a decree granting Russian citizenship to France’s Gerard Depardieu,” the Kremlin said in a brief statement describing the seemingly unprecedented decision.

The decree cited an article of the 1993 constitution extending presidents the right to issue citizenship or to grant political asylum.

But the announcement looked more like a jab at the West by Putin — keen to show off Russia’s more business-friendly approach to taxes — than an actual effort to lure one of the world’s biggest celebrities to Moscow.

Depardieu said on Sunday that a decision by France’s highest court to strike down the proposed rate on millionaires changed nothing in his highly publicised and much debated decision to move out of France.

The French government has vowed to push ahead with the tax — applicable to anyone who makes more than one million euros ($1.3 million) a year — and propose a new measure that would conform with the constitution.

Putin at his end-of-year press conference in December said he was ready to offer the 64-year-old cinema veteran a Russian passport to resolve the row.

His comments initially generated snickers from reporters, but the Russian strongman quickly made clear that he was entirely serious.

“If Gerard really wants to have a residency permit in Russia or a Russian passport, we can consider this issue resolved positively,” Putin said at the time.

The 60-year-old Russian leader referred to Depardieu both as a successful businessman and a friend who loved his country and would therefore be unlikely to leave France for good.

Yet Putin also added that the French prime minister’s famous remark about Depardieu being “pathetic” for threatening to leave the country had hurt the star’s feelings and may eventually force him to move.

“An artist is easy to offend,” Putin remarked.

Depardieu had mentioned moving to Belgium — home of a 50-percent millionaires’ tax — and has purchased a new home near the French border for the specific purpose of avoiding the higher rate.

– Welcome in Chechnya —

The hulking actor has been a huge star in Russia since the Soviet era and still retains cult status among many movie buffs.

France was seen by the USSR as one of Europe’s friendlier countries with natural socialist tendencies — a status that made its movies a staple of Soviet silver screens.

Depardieu has since grown into a frequent jury member of the glitzy Moscow and Sochi film festivals whose final word on a movie is often treated as gospel.

His straw hair and rugged features have even featured in local television advertisements ranging from kitchen furniture from the central city of Saratov to a brand of ketchup called Baltimore.

Depardieu has even been the public face of a small Russian bank called Sovetsky (The Soviet).

The charismatic Frenchman was most recently granted the honour of being personally asked to emigrate to Russia by the iron-fisted leader of Chechnya — scene of two post-Soviet wars that killed tens of thousands.

“I do not plan to discuss his actions, but I can say for sure that we are ready to welcome the great artist,” Chechen leader Ramzan Kadyrov said a day before Putin’s first remarks on the subject.

A Chechen spokesman said on Thursday that Kadyrov’s invitation was still good.

“We confirm: if Depardieu wants to live in the Chechen Republic, this will be received as joyful news,” spokesman Alvi Karimov told Moscow Echo radio.

“He will receive all the conditions required for a good life and creative work,” the Chechen spokesman said.

Depardieu this year made a peculiar visit to Chechnya to attend the birthday of Kadyrov — a ruler accused of torture and other violent crimes by international rights groups.

A video of that celebration showed Depardieu at one stage shouting in Russian: “Glory to Grozny! Glory to Chechnya! Glory to Kadyrov!”

The PublicPost.ru website remarked after the incident that Depardieu seems to enjoy “a warm friendship with both Putin and Kadyrov.”

[Rad]

Argentina urges UK to hand back Falklands and 'end colonialism'

President Fernández uses letter to David Cameron in British press to say Britain should open sovereignty talks over islands   

Luke Harding and Uki Goni in Buenos Aires
The Guardian, Thursday 3 January 2013   
   
Fernández believes that by keeping the Falklands in the public eye she can embarrass London into eventual negotiations. Photograph: Daniel Garcia/AFP/Getty Images

Thirty years after Britain and Argentina went to war over the Falklands, Argentina's populist president, Cristina Fernández de Kirchner, has returned to the fray with a blistering attack on British "colonialism" and a demand to hand back "Las Malvinas".

In a stinging letter to David Cameron, Fernández urges the UK to abide by a 1960 United Nations resolution urging member states to "end colonialism in all its forms and manifestations".

Britain should begin negotiations over the sovereignty of the islands, which were "forcibly stripped" from Argentina exactly 180 years ago, on 3 January 1833, she tells the prime minister.

Her letter is published as an advert (pdf) inThursday's Guardian and other newspapers. Fernández acidly notes that the "Malvinas" are 8,700 miles away from London and claims, controversially, that the Royal Navy expelled the Argentinians who originally lived on the remote South Atlantic territory. Replacing them with British settlers was, she says, a "blatant exercise in nineteenth-century colonialism".

Fernández's diplomatic broadside follows the British government's decision last month to name a large frozen chunk of Antarctica after the Queen – a gesture viewed in Buenos Aires as provocative. Argentina also lays claim to what is now Queen Elizabeth Land, as well as to other South Atlantic dependencies including South Georgia and the uninhabited South Sandwich Islands.

The president and her advisers seem convinced that by keeping the issue of the Falklands in the public eye she can embarrass London into eventual negotiations. In her letter, Fernández claims not only Latin America but also the "vast majority of peoples and governments around the world" embrace Argentina's claim and "reject colonialism".

Critics suggest that Fernández, an unashamed populist and nationalist, is seeking to deflect attention from social disharmony at home. The president's approval rating is sagging ahead of mid-term legislative elections in October. Argentinians support the "Malvinas" cause, which is written into the constitution. But they are also worried about pressing economic problems such as inflation, rising crime and corruption.

The Foreign and Commonwealth Office (FCO) has categorically ruled out any new negotiations saying the future of the Falklands can only be decided by the islanders themselves in accordance with the UN principle of self-determination. The islanders are due to vote in a referendum later this year, which is expected to give overwhelming backing for the territory to remain British.

The FCO also disputes Fernández's claim that Britain kicked out the island's original Argentinian inhabitants. It says there was no civilian population on the island in 1833, with the Royal Navy expelling an Argentine military garrison that had arrived three months earlier. "We can't talk about sovereignty unless and until the Falkland islanders agree to it," the FCO said.

Robert Munks, deputy editor at Jane's Intelligence Review, said Fernández's latest PR offensive over the Falklands, which follows adverts last year on the anniversary of the war, was "not entirely surprising".

He said there had been a "significant slump" in UK-Argentinian relations since 2003, when Fernández's late husband, Néstor Kirchner, came to power.

"Relations are probably at their worst now than at any time since 1982 and the Falklands war. That's not to say there is any possibility of an armed conflict. There will not be another war. What the Argentinians have done is pull out of a number of bilateral agreements from the 1990s," Munks said.

Indeed, Buenos Aires has terminated practical co-operation with the UK over South Atlantic issues such as fishing and oil. Both sides had agreed to discuss the lucrative hydrocarbons discovered off the Falklands islands in 1998 separately from any territorial claims. The Fernández government has broken off talks and insists the sovereignty dispute must be resolved first.

The advert in Thursday's Guardian seems to have been prepared in absolute secrecy to ensure maximum impact. A source at Fernández's press office said that even they had been kept in the dark about it. "These kind of decisions are handled in strict secrecy at the highest level to maximise the surprise effect," said the source.

According to Munks, this latest row is replete with historical ironies. At one point, Spain, France, Britain and Argentina have all laid claim to the Falklands. "The colonial history of possession and dispossession is complex and disputed," he said.

He added: "The FCO in the 60s and 70s was looking for ways to divest itself of these islands.

"Were it not for the invasion, the likelihood is that Argentina by now would have some form of sovereignty over the Falklands."

**************

David Cameron rejects call to return Falkland Islands to Argentina

British prime minister says he will 'do everything to protect interests of islanders' following demand by Argentina's president

Luke Harding, Haroon Siddique and Uki Goni in Buenos Aires
guardian.co.uk, Thursday 3 January 2013 13.05 GMT      

David Cameron has said he will "do everything" to protect the interests of the Falkland islanders following a demand by Argentina's populist president, Cristina Fernández de Kirchner, to hand back the islands, 30 years after Britain and Argentina went to war over them.

In a stinging letter to Cameron, Fernández urges the UK to abide by a 1960 United Nations resolution urging member states to "end colonialism in all its forms and manifestations".

Britain should begin negotiations over the sovereignty of the islands, which were "forcibly stripped" from Argentina exactly 180 years ago, on 3 January 1833, she tells the prime minister.

But a spokesman for Cameron said that the people of the Falklands had shown "a clear desire to remain British" and the prime minister would "do everything to protect the interests of the Falklands islanders". The islanders are due to vote in a referendum in March that is expected to give overwhelming backing for the territory to remain British. The prime minister's spokesman said the Argentinian government should abide by the result.

The Foreign Office (FCO) also chimed in, rejecting Kirchner's demands in forceful terms on Twitter. It said: "The people of the Falklands are British and have chosen to be so. They remain free to choose their own futures and have a right to self-determination as enshrined in the UN charter. There are three parties to this debate, not just two as Argentina likes to pretend. There can be no negotiations on the sovereignty of the Falkland Islands unless and until such time as the islanders so wish."

Barry Elsby, a member of the islands' legislative assembly, dismissed Fernández's claim that the Falklands was a UK colony. "We understand that the Argentine government has put out a letter that both calls our home a colony and claims that the United Kingdom is ignoring United Nations general assembly resolutions," he said.

"We are not a colony. Our relationship with the United Kingdom is by choice," he said. "Unlike the government of Argentina, the United Kingdom respects the right of our people to determine our own affairs, a right that is enshrined in the UN charter and which is ignored by Argentina."

Fernández's letter is published as an advert (pdf) in Thursday's Guardian and other newspapers. Fernández acidly notes that the "Malvinas" are 8,700 miles away from London and claims, controversially, that the Royal Navy expelled the Argentinians who originally lived on the remote south Atlantic territory. Replacing them with British settlers was, she says, a "blatant exercise in 19th-century colonialism".

Fernández's diplomatic broadside follows the British government's decision last month to name a large frozen chunk of Antarctica after the Queen – a gesture viewed in Buenos Aires as provocative. Argentina also lays claim to what is now Queen Elizabeth Land, as well as to other south Atlantic territories including South Georgia and the uninhabited South Sandwich Islands.

The president and her advisers seem convinced that by keeping the issue of the Falklands in the public eye she can embarrass London into eventual negotiations. In her letter, Fernández claims not only Latin America but also the "vast majority of peoples and governments around the world" embrace Argentina's claim and "reject colonialism".

Critics suggest that Fernández, an unashamed populist and nationalist, is seeking to deflect attention from social disharmony at home. The president's approval rating is sagging ahead of mid-term legislative elections in October. Argentinians support the "Malvinas" cause, which is written into the constitution. But they are also worried about pressing economic problems such as inflation, rising crime and corruption.

The FCO disputes Fernández's claim that Britain kicked out the islands' original Argentinian inhabitants. It says there was no civilian population on the island in 1833, with the Royal Navy expelling an Argentinian military garrison that had arrived three months earlier.

[Rad]

Peru's indigenous people take battle over gas exploration to court

Campaigning groups say further expansion into Amazon territory could lead to 'extermination' of isolated tribes. 

Dan Collyns in Peru   
guardian.co.uk, Thursday 3 January 2013 10.45 GMT   

Peru's biggest indigenous federation, the Interethnic Association for the Development of the Peruvian Rainforest (Aidesep), intends to use the courts to halt the planned $70m (£43m) expansion of the country's largest natural gas reserve further into territory set aside for isolated Amazon tribes.

Aidesep said the plans by Peru's energy and mines ministry to increase exploration and drilling in Block 88, the largest gasfield leased by the Camisea consortium, risk the existence of nomadic groups living in "voluntary isolation" in the Nahua-Kupakagori indigenous reserve, 23% of which overlaps the gas block in the country's south-eastern jungle.

The expansion within the part of Block 88 has already been approved. It includes 18 new drilling sites and intensive seismic testing. Before Camisea became operational in 2004 – and ever since – indigenous and environmental groups have lobbied international lenders to prohibit further expansion within the reserve.

However, Ivan Lanegra, the ministry of culture's vice-minister for intercultural affairs, said the prohibition applies only to new projects. The Camisea consortium, led by Argentinian oil firm Pluspetrol and including Hunt Oil, a US firm, and Spain's Repsol, can continue to drill new wells in the part of the gas block that overlaps the reserve, subject to approval by his ministry.

Julio Ibanez, a lawyer for Aidesep, which serves as an umbrella group for 67 indigenous federations, said he will file a lawsuit against the Peruvian state in January because it has breached the "inviolability" of the reserve and threatened the "physical and cultural survival" of the "isolated peoples" who live in it. That could lead to their "extermination", he said.

The risks of "unwanted" contact are well-documented. Around 60% of the isolated Nahua people died during a series of epidemics after their first contact with outsiders soon after oil company Shell discovered the gasfields in 1984.

In November, Aidesep and three indigenous federations (Fenamad, Orau and Comaru) from the area around the gas reserve claimed the new drilling violated loan conditions between Peru and the Inter-American Development Bank (IDB), as well as campaign promises made by Ollanta Humala, Peru's president since July 2011.

But Lanegra said the Peruvian state has worked with the IDB to ensure that gas exploration by the mega project did not present a risk to the isolated people in the area. He said Block 88 had been marked out in 2000, before the creation of the Nahua-Kupakagori reserve in 2003 by supreme decree. But environmental groups argue that the indigenous reserve was created in 1990 and the 2003 decree simply upgraded its legal status.

As Peru gets to grips with the implications of new legislation requiring the prior consultation of indigenous groups about development plans affecting their lands (the International Labour Organisation's Convention 169), its plans to open other parts of the Amazon to oil and gas drilling have been put on hold.

But indigenous people living in what Peru's legislation calls "voluntary isolation" cannot be consulted about their territories. Given their status, says Conrad Feather, an anthropologist working with the Forest Peoples Programme, no activity should take place. "The problem with such plans is that they avoid the fundamental question that these peoples, and not the Peruvian government or an oil and gas company, should be determining their own future," he said.

"We are being asked to believe that a series of guidelines on paper, however well thought out, are sufficient to address the inherently unpredictable and potentially lethal nature of first contact, a Pandora's box that once opened, no one, not even a multinational oil and gas company, can control."

President Humala's government is relying heavily on Camisea to become the backbone of the country's energy matrix and to supply gas for low-cost domestic use. Peru is South America's fifth biggest natural gas producer, with proven and certified gas reserves of 8.8 trillion cubic feet, most of which is in Block 88. Production has increased by 37% since operations began in the Camisea gasfields in 2004.

Environmentalists say a new gas concession known as Lot Fitzcarrald is planned, which will encompass even remoter parts of the Nahua-Kupakagori reserve and the west of Manu national park, a Unesco world heritage site and biodiversity hotspot. Lanegra denied any knowledge of Lot Fitzcarrald.

A legal loophole means that concessions deemed to be in the national interest can bypass environmental impact assessments and other procedures. However, international law states that these can be granted only if they comply with other key safeguards to prevent human rights violations.

[Rad]

January 2, 2013

Central Africa on the Brink, Rebels Halt Their Advance

By SCOTT SAYARE
IHT

Rebel forces halted their advance on Bangui, the capital of the Central African Republic, on Wednesday and said they were prepared to enter into peace talks with the government.

The announcement, made by rebel spokesmen, heralded the possibility of a peaceful resolution to a conflict that has driven thousands of civilians from their homes and into the dense Central African forest, seeking refuge from the violence that has accompanied similar uprisings in recent years.

President François Bozizé has in recent days declared his willingness to negotiate, and peace talks are already being planned in nearby Gabon, though the government gave no official response to the rebels’ negotiation offer. In a separate development, Mr. Bozizé announced in a radio address on Wednesday that he had fired his son from his post as defense minister and would fill that position himself. Mr. Bozizé has criticized the army for failing to contain the rebel uprising.

As a precondition to talks, the rebels have demanded that government forces stop arresting members of the Gula tribe, from which many rebels hail, said Col. Djouma Narkoyo, a rebel spokesman. In negotiations, the rebels would insist upon the departure of Mr. Bozizé, another spokesman said.

The rebels were refusing peace talks just a few days ago. Their decision to change course may be linked to the arrival in the Central African Republic of additional troops from a coalition of neighboring countries, sent as reinforcements for Central African government forces.

The rebels of the Seleka Coalition, an alliance of several factions mostly from the country’s north, have overrun and occupied several northern cities in a drive toward Bangui, in the south, that gathered speed last month, seeking to depose Mr. Bozizé. A military officer who seized power in 2003, Mr. Bozizé has since been elected president twice; the rebels say he has not given the north a voice in government and has failed to live up to the terms of peace agreements signed with rebels beginning in 2007.

Confronted by a growing multinational African force outside Damara, the final strategic city on the road to the capital, the rebels halted their advance, according to news reports. A contingent of about 700 soldiers was deployed to the city on Wednesday, including soldiers from Chad, Gabon, Cameroon and Angola.

“I have asked our forces not to move their positions starting today because we want to enter talks in Libreville for a political solution,” said another rebel spokesman, Eric Neris-Massi, referring to the Gabonese capital, Reuters reported. He said the rebels continued to demand that President Bozizé step down “because we doubt his sincerity,” according to Agence France-Presse. He could not be reached for further comment.

Should the rebels press on with their offensive, they risk setting off a regional conflict, according to the commander of the multinational African force in the country, which operates under the aegis of the Economic Community of Central African States.

“If the rebels attack Damara, it’s a declaration of war” against the 10 member states, said Jean-Félix Akaga, the Gabonese general leading the coalition force. “Damara is the red line that the rebels cannot cross.”

Coalition forces are preventing Central African soldiers from advancing north of Damara as well, General Akaga told journalists.

In Bangui, residents have stockpiled food and water. Clusters of soldiers and police officers are stationed throughout the city, and a curfew is in effect from 7 p.m. to 5 a.m.

France, the former colonial power, has deployed about 600 French soldiers to Bangui to protect French assets and citizens in the Central African Republic. President François Hollande has insisted that France will not use its military to defend Mr. Bozizé’s government, as it has in the past.

Hippolyte Marboua contributed reporting from Bangui, Central African Republic.

[Rad]

January 2, 2013

Syrian Refugees Strain Resources in Jordan

By RANA F. SWEIS
IHT

MAFRAQ, JORDAN — Shaking with fear, Abu Abdel Hadi tripped and fell three times in the dark as he fled across the desolate desert from Syria into Jordan.

The 65-year-old was clutching his grandchildren, intent on shielding them from snipers who often lie in wait along the border. But that night the family — 19 members in all — made it safely through the danger zone.

Now all they dream about is going back. While they wait, they are housed in a tiny, freezing apartment with no windows, cracked walls and worn carpets piled on top of one other.

Their most recent threat: frigid winter weather. The temperatures are down to 0 degrees Celsius (32 Fahrenheit) at night, and prices of basic commodities, including gasoline and electricity, are rising.

“We suffer from the cold and we are poor here but we are safe,” said Abu Abdel Hadi, whose last name is being withheld for safety reasons. “When we came here we thought we would stay one week, maybe one month, but it’s been six months and now we learn to live with the uncertainty.”

About 80 percent of Syrian refugees across the region are not housed in camps, according to the U.N. refugee agency. Many of them live in grim apartments along narrow dirt roads, blending in with poor Jordanians.

Jordan has drawn waves of refugees in the past, but this one is particularly severe. The flood of refugees is straining the limited resources of the Jordanian government and aid agencies, though agencies say they are also trying to steer funds to poor Jordanians. Foreign assistance is only trickling in, leaving many in need.

It is challenging to distribute aid to refugees who are scattered across urban areas. While the total number of registered refugees or those awaiting registration with the U.N. agency in Jordan is more than 150,000, many others have not been counted.

“We are trying to expand the registration and roll out assistance to the urban refugees in the region, but of course a lot of the attention goes to the camps,” Panos Moumtzis, the U.N. regional coordinator for Syrian refugees, said in an interview.

An estimated 40,000 Syrians are living in the Zaatari camp in northern Jordan. The camp is not far from areas where most of the urban refugees are concentrated.

The United Nations has appealed for $1 billion as the refugee crisis has grown across the region. The appeal is based on estimates that as many as one million Syrian refugees will need help in the first half of 2013.

In countries like Lebanon, which is sheltering more than 90,000 Syrians, there are no camps for refugees; they live in villages and cities.

“We want to focus on the community outreach where we hire refugees who become community workers to identify problems and vulnerabilities,” Mr. Moumtzis said. “We need them to help us find the most vulnerable and tell them what kind of support they can find.”

The International Catholic Migration Commission, which works to help refugees and internally displaced people, has found that the vast majority of urban Syrian refugees in Jordon have no income and rely heavily on humanitarian aid.

The group says that one in three households of Syrian refugees has more than eight members. Children younger than 18 make up more than 50 percent of the refugee population.

Annika Hampson, a commission official, said: “A lot of the Syrian refugees living in urban areas have been evicted because they couldn’t pay rent anymore, so some have gone back to the refugee camp and others have gone back to Syria. They had no choice.”

When the conflict in Syria first started, many Syrians took shelter with relatives in Ramtha, a Jordanian border town, but with their own economic conditions increasingly tough, Jordanians are becoming wary of taking in yet another long-term wave of refugees.

For families, like Abu Abdel Hadi’s, who fled with only the light clothes they were wearing, the winter has been especially harsh.

When they first arrived, in scorching temperatures, there was no refugee camp or organized system of support. Like many other Syrians who arrived in Jordan in spring or summer, they lived in a makeshift holding facility for the Syrian refugee community in Ramtha before settling in their apartment.

“We received aid money for rent. That is why we are able to stay here in this apartment. But we make sure that any other costs are very low,” Abu Abdel Hadi said as his wife and family members sat across from him.

While he recalled the shelling they had left behind in the Syrian city of Homs, his grandchildren ran barefoot around the room. The large number of children living in one household and the lack of financial support put them in the category of extremely vulnerable families who are eligible for financial aid — in his case, the cost of rent is covered for the next few months.

“Now, we never use heat and we hardly use water or electricity, because I can’t afford it,” he said. “I just keep telling my family we are here because we need to be safe for now and that’s all.”

Despite plans by aid organizations to help at least 50,000 urban refugees, with monthly cash assistance for the most vulnerable families, a large number will be left out because of the rising numbers of Syrians fleeing across the border each day.

Other urban refugees said that they were not receiving any assistance and that rent was their single greatest expense.

The U.N. refugee agency plans to increase the provision of one-time emergency cash assistance grants to help cover urgent needs like clothing, fuel for heating and rental payments. The majority of those seeking such emergency assistance in Jordan say they have been threatened with eviction and need help paying the rent.

At the Zaatari camp, trailers have been set up to begin housing some of the families who are living in tents.

“The plan at the moment is to help over five million people by 2013. That’s a quarter of the Syrian population being uprooted,” Mr. Moumtzis said. “It is the largest humanitarian crisis in the world right now, so we need an urgent financial response.”

[Rad]

World Bank investor backs luxury hotels over poverty-reduction programs

By Pro Publica
Thursday, January 3, 2013 9:51 EST

By Cheryl Strauss Einhorn, Special to ProPublica
This story was co-published with Foreign Policy.

Accra is a city of choking red dust where almost no rain falls for three months at a time and clothes hung out on a line dry in 15 minutes. So the new five-star Mövenpick hotel affords a haven of sorts in Ghana’s crowded capital, with manicured lawns, amply watered vegetation, and uniformed waiters gliding poolside on roller skates to offer icy drinks to guests. A high concrete wall rings the grounds, keeping out the city’s overflowing poor who hawk goods in the street by day and the homeless who lie on the sidewalks by night.

The Mövenpick, which opened in 2011, fits the model of a modern international luxury hotel, with 260 rooms, seven floors, and 13,500 square feet of retail space displaying $2,000 Italian handbags and other wares. But it is exceptional in at least one respect: It was financed by a combination of two very different entities: a multibillion-dollar investment company largely controlled by a Saudi prince, and the poverty-fighting World Bank.

The investment company, Kingdom Holding Company, has a market value of $12 billion, and Forbes ranks its principal owner, Prince Alwaleed bin Talal, as the world’s 29th-richest person, estimating his net worth at $18 billion. The World Bank, meanwhile, contributed its part through its International Finance Corporation (IFC), set up back in 1956to muster cheap loans and other financial support for private businesses that contribute to its planet-improving mandate. “At the World Bank, we have made the world’s most pressing development issueu2014to reduce global povertyu2014our mission,” the bank proclaims.

Why, then, did the IFC give a Saudi prince’s company an attractively priced $26 million loan to help build the Mövenpick, a hotel the prince was fully capable of financing himself? The answer is that the IFC’s portfolio of billions of dollars in loans and investments is not in fact primarily targeted at helping the impoverished. At least as important is the goal of making a profit for the World Bank.

I reached this conclusion after traveling to Ghanau2014in many ways typical of the more than 100 countries where the IFC worksu2014to see firsthand the kinds of problems the World Bank’s lenders are supposed to tackle and whether their efforts are really working on the ground. I pored through thousands of pages of the bank’s publicly available reports and financial statements and talked to dozens of experts familiar with its performance in Ghana and many other countries.

In case after case, the verdict was the same: The IFC likes to work with huge corporations, funding projects these companies could finance themselves. Its partners are billionaires and massive multinationals, from oil giants like ExxonMobil to Grupo Arcor, the huge Argentine candy-maker. Its projects include not only glitzy hotels and high-end shopping malls, but also gritty gold and copper mines and oil pipelines, some of which end up benefiting the very corrupt, authoritarian regimes that the rest of the World Bank is urging to change. Nearly a quarter of the IFC’s paid-in capital from member governmentsu2014now standing at $2.4 billionu2014came from U.S. taxpayers, and every president in the World Bank’s 69-year history has been an American. But the United States has had little complaint with these practices, even when they have become a subject of public controversy.

Not long ago, the World Bank’s internal watchdog sharply criticized the IFC’s approach, saying it gives little more than lip service to the bank’s poverty-fighting mission. The report, a major 2011 review by the bank’s Independent Evaluation Group, found that fewer than half the IFC investments it studied involved fighting poverty. the] report’s lessons and recommendations” and conceded that the “IFC has not been consistent in stating u2026 the anticipated poverty reduction effects of a project.” The IFC notes that it several years ago began using a Development Outcome Tracking System (DOTS) to measure the effectiveness of its projects at spurring economic development and alleviating poverty. This system, however, has drawn snickers from a number of IFC clients. They note that the DOTS ratings rely heavily on self-reporting by the recipient companies and depend to some extent on financial data for the entire firm, often with multiple divisions around the world, rather than focusing on the specific area of the IFC-funded project. Still, Kaldany expresses enthusiasm for the effort, saying it is pathbreaking and getting better.

Meanwhile, there has been little evidence of change on the ground. Everywhere I lookedu2014in Ghana, in nearby West Africa, and globallyu2014the IFC still seems to be giving its mandate to fight poverty short shrift.

In finance, for example, R. Yofi Grant, executive director of Databank, one of Ghana’s largest banks, told me that the IFC’s practice of providing loans at attractive terms to multinational companies “crowds out local banks and private-equity firms by taking the juiciest investments and walking away with a healthy return.”

Grant says that the IFC recently organized a $115 million financing package for global telecom giantVodafone to expand its operations in Ghana, even though six telecom companies already operate in the country. Despite such robust private investment, the IFC’s loan package for Vodafone was its second in two years. “That is not poverty reduction, and these are not frontier investments,” Grant says, referring to the IFC’s refrain that it invests where other financiers might not. “The IFC says all the right things and does all the wrong things.”

* * *

A thousand miles east of Ghana are Cameroon and Chad, which exemplify a major and highly controversial domain of IFC investment, one where the stakes are often higher than with hotels and shopping malls. That domain is energy.

As of the end of 2011, the IFC reported a $2 billion oil-and-gas portfolio, investing with 30 companies in 23 countries and, the IFC boasted, achieving “Award Winning Recognition from the Market.” But critics, including environmentalists and nonprofit groups such as the Bretton Woods Project and Christian Aid, contend that the projects often exacerbate the poverty they are supposed to alleviate. The projects, they say, frequently escalate local conflict and corruption, displace communities, disrupt livelihoods, and contribute to the emission of greenhouse gases and other pollutants.

In 2003, an independent review panel within the World Bank even recommended that the bank, including the IFC, pull out of all oil, natural gas, and coal-mining projects by 2008, saying such loans do not benefit the poor who live where the natural resources are found. But the World Bank’s board overruled these recommendations. The bank ultimately agreed to an approach that is “business as usual with marginal changes,” Emil Salim, the Indonesian officialwho led the bank’s review, told Bloomberg News in 2004. In a conference call with reporters at the time, IFC executive Kaldany said, “There was very broad consensus that we should remain engaged; we do add value.”

The example of Chad and Cameroon, however, offers a more complicated picture. In 2000, the IFC invested roughly $200 million with ExxonMobil, Chevron, and others, along with the governments of Chad and Cameroon, to support the construction of a nearly $4 billion oil-pipeline project that experts estimate will generate more than $5 billion in revenue over the 25-year life of the project from wells mainly in landlocked Chad to a port in Cameroon.

The two countries are even poorer than Ghana to the west. Per capita income in Chad ranks 193rd in the world, compared with 185th place for Cameroon and 172nd for Ghana. Life expectancy at birth in Chad, at 48.7 years, is the world’s absolute worst, and the country has been ruled for the last two decades by heavy-handed dictator Idriss Déby.

“Conditions were and are a hardship and horrible,” says Peter Rosenblum, co-director of the Human Rights Institute at Columbia University, who argued that the pipeline project should demand protections for the civilian population. The bulk of the oil revenue was supposed to be set aside for food, education, health care, and infrastructure. But in the face of attacks from rebel groups supported by neighboring Sudan, and asserting a need to defend the pipeline, Déby instead channeled substantial chunks into arms purchases, bringing criticism not only from human rights groups but from the World Bank. As critics of the project had warned, the oil bonanza increased the stakes for control of the country and added to the civil strife.

What happened with Chad is not an isolated incident. Despite perennial controversies over energy and mining projects, often the subject of fierce disputes related to everything from their environmental impacts to the extent they boost authoritarian regimes, the IFC continues to invest in them extensively. Just in 2012, the IFC announced investments in mining projects for gold, copper, and diamonds in places like Mongolia, Liberia, and South Africa, as well as investments in oil and gas projects in Colombia, Ivory Coast, the Middle East, and North Africa.

Moreover, as with Chad’s Déby, the IFC continues to lend and invest in countries with heavy-handed rulers such as Syria (Bashar al-Assad) and Venezuela (Hugo Chávez). Kaldany told me there were about a dozen dictatorships, which he wouldn’t name, where the IFC would simply not do business. But then there is a second tier, where he is inclined to work. “It is a tradeoff. We can have a positive influence,” he said, referring to a recent IFC deal in now civil war-torn Syria to fund microfinance. He said the IFC is insisting on increasingly tight financial controls in such countries to ensure that the proceeds from the projects are targeted directly to the poor rather than to sustaining the dictators’ hold on power. He acknowledged that the controls in the Chad case were not nearly tight enough and that the IFC ultimately had to pull out.

The IFC’s critics see two obvious ways to fix it: dramatically overhaul its priorities or sharply reduce its funding and channel those resources toward the type of World Bank projects that more closely align with its anti-poverty mission.

Kaldany said that the IFC is seeking to increase its number of small projects, of under $5 million and tightly targeted on the poor, and to devote more attention to the poorest of the poor countries. In the most recent fiscal year, it generated 105 of the smaller projects, 20 percent of its total deals, although a much smaller percentage of its total dollar outlays. (IFC officials couldn’t immediately provide that number.)

But don’t count on a new direction. Although its new leadership has remained publicly mum, the IFC’s new chief, Cai, has told people he strongly supports its current strategy.

* * *

In Accra, not far from the new Mövenpick, the IFC’s posh officesu2014sporting a lawn, flowers, and private parkingu2014sit amid a slum, surrounded by an imposing concrete wall topped by coils of barbed wire. The only paved part of the road to the IFC is directly in front of the guarded complex, which has no sign announcing its identity. The rest of the road is a winding, dusty dirt path filled with potholes and surrounded by hovels erected out of battered metal or wood.

Barefoot children sit amid goats and roving chickens, on ground dotted by garbage and litter. Women cook tiny fish strung onto sticks over an open fire, ignoring the near-100-degree temperatures. I approached them one day in July, and some of them said they had lived there for 15 years. When asked whether they knew what the World Bank is, they said no. When told that it fights poverty, many of them laughed.

“We need help, and we know there are places that help,” said one woman who was cooking as two young boys clung to her legs. “But we have never heard of them.”

Cheryl Strauss Einhorn is a financial journalist and adjunct professor at Columbia Business School.

[Rad]

 SPIEGEL ONLINE
01/02/2013 04:00 PM

Monkey Business: Kidogo the Gorilla Amazes with Tightrope Act

Zoo gorillas have earned a reputation for doing a whole lot of nothing, often just sitting against a tree for hours at a time. But Kidogo, a silverback in the Krefeld Zoo, has earned sudden fame for his penchant for performing a number of tricks, including tightrope walking.

Expectations placed on Kidogo weren't particularly high. The 12-year-old silverback was brought to the Krefeld Zoo in April from his home in Denmark to serve as a male companion to Muna and Oya, two female gorillas. The hope is that the trio will expand, and that the zoo's lowland gorilla enclosure will soon be bustling with baby apes.

But King Kodo, as Kidogo has come to be known, appears to have developed a fondness for the spotlight as well. To the amazement of zoogoers, the gorilla has demonstrated an unusual degree of agility -- and has even taken up tightrope walking.

"He is unbelievably athletic and acrobatic," says Petra Schwinn, director of public relations at the zoo in western Germany. "He is still young and playful. He really demonstrates a strong degree of joie de vivre."

Schwinn says that Kidogo has performed his tightrope heroics a number of times, though certainly not every day. Indeed, news of the gorilla's special talent only began to spread in recent days because a professional photographer was able to capture Kidogo on the rope in mid-December. Schwinn then sent out the image as part of a holiday greetings email to friends of the zoo. Since then, she has been busy answering press inquiries from around the world.

She also says that Kidogo has performed a number of other tricks that make him rather unique. In the spring, despite exhibiting signs of homesickness after his move, he sprinted into the enclosure after a heavy rain and did a series of somersaults. He also jumped elegantly to the ground, arms calmly at his sides, from almost four meters (13 feet) up in a tree.

"For a gorilla, his behavior is really unusual," Schwinn says. "You can't say at all that he is a normal animal. We are very excited about it."

[Rad]

In the USA...

Hackers produce disturbing video evidence in Ohio gang rape case

By David Ferguson
RawStory
Thursday, January 3, 2013 9:10 EST

KnightSec, a hacking group affiliated with the “Anonymous” collective, has released a video of teenager Michael Nodianos glorying in the gang rape of a 16-year-old girl by his high school football player teammates. According to the Atlantic Wire, hackers are intervening, putting now-scrubbed evidence back online because other teenagers and citizens of football-crazed Steubenville, Ohio are proving to be reluctant to help authorities prosecute a rape case against the town’s teenage football stars.

“She is so raped right now,” said Nodianos to the camera. “There won’t be any foreplay for a dead girl. It ain’t wet now, to be honest. Trust me, I’m a doctor.”

He was referring to an incident in late August, when two players on Steubenville High School’s prestigious football team, The Big Red, reportedly drugged a 16-year-old girl and sexually assaulted her, carrying her unconscious body by the wrists and ankles from party to party, urinating on her and abandoning her at the end of the night at her parents’ house. The players, Trent Mays and Ma’lik Richmond, are currently on house arrest in Steubenville after being remanded from the county juvenile detention center.

The boys glorified their crime online, shooting Instagram photos of the assault, making lewd updates on Facebook and Twitter, and allowing their friends, like Nodianos, to shoot photos and make their own updates and videos about the incident. In spite of the abduction and attack’s high profile in social media, townspeople have been reluctant to aid the prosecution of the crime in any way, lest it jeopardize The Big Red’s chances at another state championship.

Nate Hubbard, 27, a volunteer Big Red coach, went so far as to accuse the victim of making the whole thing up to excuse a night of excessive partying, “The rape was just an excuse, I think,” he told the New York Times.

“What else are you going to tell your parents when you come home drunk like that and after a night like that?” Hubbard asked. “She had to make up something. Now people are trying to blow up our football program because of it.”

A juvenile judge and a Steubenville county prosecutor have both had to recuse themselves from the case because of ties to the football team. Steubenville is a small town, the judge told the Times, “Everybody knows everybody.”

With the investigation stymied, KnightSec created a WikiLeaks-style site called “Local Leaks,” where it put on display a dossier about the so-called Steubenville “Rape Crew,” including new information about team boosters and Big Red head coach Reno Saccoccia, as well as the video of Nodiano riffing on his friends’ crime.

Wearing an Ohio Buckeyes T-shirt, Nodianos said the victim was “deader than a doornail.”

“They pissed on her,” he said, before launching into a list of famous people the teenage victim was “deader than,” including “Caylee Anthony” and “OJ Simpson’s wife,” as well as “John F. Kennedy” and slain Florida teenager Trayvon Martin.

The dossier published by KnightSec also revealed the intricate web of association between top Big Red players and staff and Steubenville’s top brass. Coach Saccoccia regularly breakfasts with the county sheriff. One of the boys accused of suppressing the crime is the son of a county prosecutor.

Meanwhile, it will be difficult for the defense team to allege that no crime took place with Nodianos insisting in his video, “They raped her more than the Duke lacrosse team” and slapping his thigh and laughing when a teammate asks, “Is she going to feel it?” and responding, “No, she’s dead!”

Watch the video, embedded via YouTube, below:

http://www.youtube.com/watch?v=22UsHZXPi7Q&feature=player_embedded

*************

Did ‘Zero Dark Thirty’ filmmakers have secret links to CIA? U.S. Senate vows to find out

By Xan Brooks, The Guardian
Thursday, January 3, 2013 8:00 EST

US Senate Intelligence Committee to investigate whether film-makers Kathryn Bigelow and Mark Boal had access to classified material

The controversy surrounding the fact-based terrorist drama Zero Dark Thirty looks set to continue as the US senate intelligence committee launched an investigation into the relationship between the film’s makers and CIA officials. The committee will probe whether Zero Dark Thirty’s director and writer were granted “inappropriate access” to classified material.

Directed by Kathryn Bigelow and scripted by Mark Boal, Zero Dark Thirty charts the nine-year hunt for al-Qaida leader Osama bin Laden and climaxes in the successful raid on Bin Laden’s compound in May 2011. CIA officials have admitted briefing the film-makers on the project but insist that the finished picture is “a dramatisation” as opposed to a historical record.

Reuters reports that internal documents, released in response to a freedom-of-information request, already show that Michael Morell – the CIA’s then deputy director and now acting chief – met with the film-makers. A Pentagon email also claims that Mark Boal was briefed by the CIA “with the full knowledge and full approval/support” of Leon Panetta, the former CIA director and subsequently US secretary of defence.

The senate investigation will be headed by Democrat senator Dianne Feinstein who last month joined two other senators in lambasting Zero Dark Thirty’s depiction of torture. Feinstein, Carl Levin and John McCain claim that the film is “grossly inaccurate” in its suggestion that coercive interrogation tactics were instrumental in gathering information about Bin Laden’s whereabouts.

The CIA has yet to comment on the senate investigation. In a statement released last month, Morell insisted that Zero Dark Thirty was “a dramatisation, not a realistic portrayal of the facts”.

Morell did, however, appear to concede that the film implied that “enhanced interrogation techniques”, including waterboarding, played a role in gathering information ahead of the successful May 2011 raid. “Whether enhanced interrogation techniques were the only timely and effective way to obtain information from those detainees, as the film suggests, is a matter of debate that cannot and never will be definitively resolved,” he said.

© Guardian News and Media 2013

************

Maddow: Boehner speakership has devolved into defiance and derision

By Eric W. Dolan
RawStory
Thursday, January 3, 2013 0:04 EST

MSNBC host Rachel Maddow ripped House Speaker John Boehner (R-OH) on her show Wednesday night, framing him as an weak leader who was obstructing Congress with his incompetence.

“The speakership of John Boehner has been chaotic from the beginning, but it has now devolved into outright defiance of his leadership, outright derision against him from his own side,” she said. “His own plan to avert the fiscal cliff before Christmas went to the floor where it was quickly clear the bill wasn’t going to pass so it was humiliatingly pulled.”

“The White House eventually stopped negotiating with John Boehner went it became clear that there was no point, because it didn’t matter what he said Republicans would do. Republicans were not taking instruction from him, so he couldn’t promise anything about their behavior, so why would you talk to him about what Republicans are going to do?”

Maddow noted the current Republican-led House had passed less legislation than any House in American history, even failing to approve important bipartisan legislation like the farm bill. More recently, Boehner faced a sharp backlash from both Republicans and Democrats for failing to hold a vote on funding for Hurricane Sandy relief efforts.

*************

Cantor’s revolt exposes Republican rift in fight for party’s future

By Paul Harris, The Guardian
Wednesday, January 2, 2013 21:41 EST

A Republican civil war, which has simmered under the surface since the party’s defeat in last November’s presidential election, has now burst firmly into the open and pitted party leaders against each other.

Majority leader Eric Cantor’s extraordinary vote against House speaker John Boehner in Tuesday’s late-night vote in the House of Representatives may have prevented America from toppling over the so-called fiscal cliff, but it exposed the deep rifts that are destabilising a party once famed for its unity and discipline.

Cantor, 49, a self-styled “young gun” who hews relentlessly to rightwing conservative orthodoxy, is now pitted against Boehner, 63, a “country club” Republican whose pragmatic streak drives him to move the party to the centre in a bid to learn a lesson from President Barack Obama’s second-term victory.

“Clearly, Boehner and Cantor are not bosom buddies. They never have been,” said Professor David Cohen, a political scientist at the University of Akron.

That might be an understatement now. Just six hours before the crucial vote Cantor’s spokesman, Doug Heye, sent a message on his Twitter account playing down rumours of a split. “Majority Leader Cantor stands with @speakerBoehner. Speculation otherwise is silly, non-productive and untrue.”

However, Cantor then came out publicly against the bill, voting no, while Boehner himself – when tradition usually demands that a Speaker not vote – made a point of personally voting yes. “It is extraordinary for a speaker to vote,” said Republican pollster Steve Mitchell, head of Mitchell Research and Communications.

The two men could come to personify a growing ideological split in the party. Boehner, with his fondness for golf and his year-round tan, has a reputation for old-school deal-making. He is seen as a master of backroom politics who is willing to sacrifice policy principle in favour of pragmatic politicking that improves the position of the party as a whole. As the Republican party seeks to come to terms with a demographic future that is seen as more friendly to Democrats, Boehner is viewed as someone who might steer the party away from the rightwing extremes that deter emerging voting blocs such as Hispanics and women.

Cantor, however, is a darling of that rightwing; popular with the Tea Party-backed politicians who swept into the House in the 2010 mid-terms and who still wield enormous power. Together with Mitt Romney’s former running mate, Paul Ryan, and majority whip, Kevin McCarthy (who also voted no), Cantor co-wrote a 2010 book called Young Guns that sought to be a manifesto for an emerging generation of rightwing ideologues.

Cantor’s high-profile “no” vote in the fiscal cliff debate now propels him to the front of the conservative movement. It is a bloc that sees Mitt Romney’s failure to defeat Obama as an example of what happens when you run a moderate who has to espouse rightwing views he does not genuinely hold instead of a true conservative candidate.

It is a profound split in the party. While Boehner does not look immediately under threat when it comes to a fresh vote this week on his speakership, he does appear to now be in the minority in the House. Just 84 other Republicans joined Boehner in voting for the compromise bill to avoid the fiscal cliff, while 150 Republicans lined up behind Cantor in the no camp. “You have the whole notion of people who want to stand on principle and those who want to be more pragmatic,” said Professor Tim Hagle, an expert in Republican politics at the University of Iowa.

The fight is also causing problems among other major Republican figures. New Jersey governor Chris Christie, seen as a leading contender to run for president in 2016, fumed that the “toxic internal politics” of the Republicans in the House had been partly responsible for failing to pass a bill that would deliver billions of dollars of vital aid to areas in the north-east hit last year by Hurricane Sandy.

The split also represents different ways of looking at where the party’s focus should be. Boehner and the more pragmatic wing of the party see the Republicans’ 2012 defeat as a sign that the party is losing touch with a younger and more ethnically diverse national electorate that can deliver a candidate to the White House. The party’s conservatives, however, look to their own party’s still Tea Party-infused base and gerrymandered congressional districts that too often provide safe seats to extremists.

As the 2014 mid-term elections hove into view, some observers believe that those backing Boehner could be punished for their ‘yes’ vote and further undermine Boehner’s position. “Some of those Republicans who voted for this are going to lose their seats because of this one vote,” said Mitchell.

That means Cantor’s dissent could tie in with eventual ambitions to take Boehner’s job. If Republicans in the House emerge from 2014 even more in the grip of conservative ideologues, he will be well-placed to launch a bid for the speakership himself. “Cantor is a shrewd political animal. He is incredibly ambitious. He will do whatever he needs to do to take control of that speaker’s gavel,” said Professor Cohen.

That would defy a general consensus view that says Republicans should not repeat the sort of presidential primary that marred the 2012 race, when the Republican field was dominated by misfit candidates who courted the rightwing base at the expense of wooing centrist Americans. Cantor’s rise would see the party go even further right. It is a problem that Boehner is no doubt aware of.

“Boehner has a problem on his hands. He could only get a third of his party to vote for the fiscal cliff legislation. That is a sign of weakness,” Cohen said.

guardian.co.uk © Guardian News and Media 2013

****************

Fiscal Cliff: Obama signs American Taxpayer Relief Act of 2012 into law

By Agence France-Presse
Thursday, January 3, 2013 6:39 EST

President Barack Obama has signed into law the contentious compromise bill hammered out in Congress, narrowly averting the US ‘fiscal cliff’ of tax hikes and drastic, immediate cuts in spending, the White House said early Thursday.

In a statement, the White House said that Obama late on Wednesday signed the “American Taxpayer Relief Act of 2012,” raising taxes on households earning above $450,000 and delaying spending decisions for two months.

Officials said the US president, who is on vacation in Hawaii, signed the measure electronically by autopen.

The “fiscal cliff” crisis was finally averted on Tuesday as the House of Representatives, by a vote of 257 to 167, approved a stop-gap agreement passed one day earlier by the US Senate.

The measure dodged across-the-board tax hikes and automatic spending cuts that had threatened to unleash economic turmoil and perhaps drive America back into recession.

The hard-fought agreement, seen as a political victory for Obama, raised taxes on the very rich and delayed the threat of $109 billion in automatic spending cuts for two months.

The respite will prove temporary, however: The Democratic administration and the Republican-controlled House of Representatives face several clashes in the coming months on spending cuts and raising the government debt ceiling.

Had the deal fallen apart, all Americans would have been hit by tax increases and spending cuts would have kicked in across government — a combined $500 billion shock that could have rocked the fragile recovery.

Relief was felt internationally and markets surged, although China’s official news agency Xinhua warned: “People, or governments, can overspend for some time, but they simply cannot live on borrowed prosperity forever.”

Obama also signed into law a $633 billion US defense spending bill that funds the war in Afghanistan and boosts security at US missions worldwide.

“I have approved this annual defense authorization legislation, as I have in previous years, because it authorizes essential support for service members and their families, renews vital national security programs, and helps ensure that the United States will continue to have the strongest military in the world,” Obama said in a statement early Thursday after signing the measure.

Obama said that he signed the measure despite reservations.

“In a time when all public servants recognize the need to eliminate wasteful or duplicative spending, various sections in the Act limit the Defense Department’s ability to direct scarce resources towards the highest priorities for our national security,” the president said.

“Even though I support the vast majority of the provisions contained in this Act… I do not agree with them all,” he said in his statement, adding that he did not have the constitutional authority to approve piecemeal items within the sprawling bill.

“I am empowered either to sign the bill, or reject it, as a whole,” he said.

***********

January 2, 2013

Tax Deal Shows Possible Path Around House G.O.P. in Fiscal Fights to Come

By JONATHAN WEISMAN
NYT

WASHINGTON — With the contentious 112th Congress coming to a close, the talks between the White House, Senate Republicans and Senate Democrats that secured a path around a looming fiscal crisis on Tuesday may point the way forward for President Obama as he tries to navigate his second term around House Republicans intent on blocking his agenda in the 113th.

For two years, the president has seen House Republican leaders as the key to legislative progress, and he has pursued direct talks with Speaker John A. Boehner of Ohio and Representative Eric Cantor of Virginia, the majority leader. That avenue of negotiation proved fruitless, in large part because House Republicans were deeply divided about any compromise that Mr. Obama would accept. The failure led Mr. Boehner to tell his colleagues this week that he would not be engaging in any more one-on-one negotiations with the president.

But negotiations over the fiscal impasse pointed to a new and unlikely path as more fiscal deadlines approach. In this case, Senator Mitch McConnell of Kentucky, the Republican leader and a veteran legislative dealmaker, initiated negotiations with Vice President Joseph R. Biden Jr., which instigated talks between them and the Senate majority leader, Harry Reid of Nevada. That produced sweeping tax legislation that averted large tax increases for most Americans and across-the-board spending cuts.

Then both Senate leaders worked hard to deliver the votes of a vast majority of their reluctant members, isolating House Republican leaders, who found themselves with no way forward other than to put the bill before the House and let Democrats push it over the finish line.

“I think this is the fourth time that we’ve seen this play out, where Boehner finally relents and lets the House consider a measure, and Democrats provide the votes to pass it,” said Senator Richard J. Durbin of Illinois, the Senate’s second-ranking Democrat. “When they reach the point where their hand is forced, where there’s no other place to turn, they’ll do the right thing.”

That realization may lead to a more formalized process to begin bipartisan negotiations in the Senate to put pressure on the House. The deal that passed on Tuesday lifted the threat of tax increases that could have crippled the economy, but in other ways it compounded near-term fiscal threats. The government reached its statutory borrowing limit on Monday, giving Congress at best two to three months to raise the debt ceiling or risk a debilitating default on federal debt.

Around the same time, a two-month delay in the institution of across-the-board military and domestic spending cuts will lapse. Then, by the end of March, the current stopgap spending law financing the federal government will end, raising the specter of another government shutdown.

If House Republicans believe they can use those deadlines to extract concessions from the president on spending cuts, the White House may go elsewhere for a deal, Democrats say.

An official knowledgeable about the last negotiations said on Wednesday that the president would use such a strategy only if he was convinced that House Republican leaders would not or could not compromise. But in meeting with Senate Democrats on Monday and House Democrats on Tuesday, Mr. Biden labored to convince lawmakers that the White House had a way forward that would avoid last-minute theatrics and would not entail a stream of compromises on party principles, according to lawmakers who were there.

“One of the main concerns is, where do we go from here?” said Representative Elijah E. Cummings, Democrat of Maryland, adding that Democrats feared that compromises on tax increases for the rich in the deal approved on Tuesday would lead to cuts in Social Security and Medicare in the next round of talks. “He has a game plan for that.”

A senior Democrat said that game plan would start in the coming weeks, when Mr. Obama addresses his agenda in his State of the Union address and lays out his budget for the 2014 fiscal year, due in early February.

That opening bid should restart talks with Congress on an overarching agreement that would lock in deficit reduction through additional revenue, changes to entitlement programs and more spending cuts, to be worked out by the relevant committees in Congress. But this time, those talks might start in the Senate.

House Republican aides said the past few weeks were unique and not indicative of anything going forward. The president won re-election on a pledge to raise taxes on income over $250,000. His mandate does not extend beyond that, one aide said. Besides, officials in both parties warn, neither Mr. Reid nor Mr. McConnell will want to lead on the difficult issues now in view. Mr. Reid was reluctant, at best, about joining the Biden-McConnell talks.

And Mr. McConnell has made it clear that future deficit deals should be done through “regular order” — Congressional committees, Senate and House debates and open negotiations, not private talks. Officials in both parties worry that as his 2014 re-election campaign gets closer, Mr. McConnell will be increasingly reluctant to have his fingerprints on deals with the president.

Even if a Senate route can be institutionalized, Mr. Durbin said he doubted that it would smooth the passage of bipartisan deals, given the difficulties Mr. Boehner has getting his troops in line. “His anguish has a timetable. It goes through phases and places that I don’t understand,” Mr. Durbin said of the speaker. “And I am afraid every scary chapter has to play out every step of the way before anything is resolved.”

Michael Steel, a spokesman for Mr. Boehner, said the last-minute crunch that produced the tax accord was necessary only because the Senate refused to act earlier. The House passed legislation months ago to extend all the expiring Bush-era tax cuts and to stop automatic military cuts by shifting them to domestic programs.

***********

January 2, 2013

For Obama, a Victory That Also Holds Risks

By DAVID LEONHARDT
NYT

WASHINGTON —  The deal significantly raises taxes on the rich, with no expiration date. It extends tax credits for the poor and the middle class. It provides more jobless benefits. Largely overlooked, it extends an alternative-energy tax credit that has helped create a clean-energy boom.

And it includes almost no spending cuts.

For President Obama and his Democratic allies in Congress, the fiscal deal reached this week is full of small victories that further their largest policy aims. Above all, it takes another step toward Mr. Obama’s goal of orienting federal policy more toward the middle class and the poor, at the expense of the rich.

Yet the deal, which the Senate and the House have passed and Mr. Obama is expected to sign soon, also represents a substantial risk for the president.

Throughout the negotiations of the last two months, Mr. Obama pushed for a larger agreement, one that would have canceled other looming budget deadlines, starting with one on the debt ceiling. He and his aides saw the so-called fiscal cliff, with its trillions of dollars in scheduled tax increases that Republicans abhorred, as leverage to start fresh in a second term and avoid more deadline-driven partisan fights.

“I want a big deal. I want a comprehensive deal,” Mr. Obama said almost two months ago, at his first post-election news conference. “I want to see if we can, you know, at least for the foreseeable future provide certainty to businesses and the American people.”

When House Republicans made it clear that they opposed a big deal, however, Mr. Obama decided to take the smaller deal, bank a series of victories and wait to fight another day. The alternative — debated inside the White House, but not ultimately a close call — would have been to go over the cliff in the hope of forcing Republicans into a larger deal.

Without that larger agreement, Mr. Obama will be left to find solutions to future budget deadlines without the leverage that came with the prospect of automatic tax increases.

“The best world would have been a bigger agreement,” an administration official acknowledged. “This is a big win in a second-best world.”

Perhaps the best prism through which to see the Democrats’ gains is inequality. In the 2008 campaign, Mr. Obama said that his top priority as president would be to “create bottom-up economic growth” and reduce inequality.

He has governed as such. In the 2009 stimulus, he insisted on making tax credits “fully refundable,” so that even people who did not make enough to pay much federal tax would benefit. The 2010 health care law overhaul was probably the biggest attack on inequality since it began rising in the 1970s, increasing taxes on businesses and the rich to pay for health insurance largely for the middle class.

As part of this week’s deal, Mr. Obama did make several major compromises. He accepted much less in overall tax revenue than the government would have received absent any deal. He allowed a payroll-tax cut, which applied to most households, to expire. And he yielded both on aspects of the estate tax and on the level at which the top marginal income-tax rate would start, moving it to $450,000 for couples, from $250,000.

Still, using inequality as a yardstick, he won much of what he had wanted. By holding firm to a top rate of 39.6 percent — up from 35 percent — he locked in a substantial tax increase for the very richest, who have received the biggest pretax raises in recent years.

On average, the top 0.1 percent of earners — whose incomes start at $2.7 million and go much higher — will pay $444,000 more in taxes in 2013 than they otherwise would have, according to the Tax Policy Center. The increases stem from both the fiscal deal and the new taxes in the health care law.

In effect, the deal preserves the “compassionate conservative” part of President George W. Bush’s tax agenda — reducing federal income taxes on the working poor, sometimes to zero — while limiting the parts that most helped the affluent.

Even one of the chief architects of the Bush tax cuts, R. Glenn Hubbard, now dean of Columbia Business School, did not celebrate the enshrinement of most of them. He said in an interview that the deal would amplify the tax code’s distortions on the economy.

Former President Bill Clinton, by contrast, has told people that he considers the deal a good one, according to two people who have spoken to him.

Beyond income tax code, the deal continued jobless benefits for two million long-term unemployed who otherwise would have lost them immediately. And it extended, for one year, an energy tax credit that has reduced alternative-energy costs and increased use.

The question that hangs over the deal for Democrats is whether they will have to play defense on the budget for the rest of Mr. Obama’s presidency.

When Republicans stepped back from a larger deal last month, one that would have resolved the debt ceiling, Mr. Obama faced a choice. He could have worked toward a smaller deal, as he did, or insisted that the debt ceiling had to be part of any package.

White House officials took the path they did because they feared that a hardened stance on the debt ceiling would result in no deal at all: taxes would have risen on nearly everyone; automatic spending cuts would have begun; jobless benefits would have ended for many; and markets may have reacted badly.

In the chaos that could have followed, the officials believed, a grand bargain would have been unlikely. If anything, Democrats — worried they would be blamed for the economy’s troubles, as the party holding the White House — might have struggled to get a deal as good as this week’s. Having won this round, Democrats still have compromises to offer Republicans in the next one, like changes to Social Security.

But some of Mr. Obama’s allies wonder if he should have taken the risk of a confrontation now. A stalemate next time will bring no threat of higher taxes, and Republicans may stand firmer, demanding cuts that undo Mr. Obama’s recent gains.

“I now fear that we are heading toward a crisis that can dwarf what we’ve just been through,” said Robert Greenstein, president of the liberal-leaning Center on Budget and Policy Priorities. “We really won’t know how best to view the deal, and how well the White House has done, until the debt limit is done.”

The wait for a fuller answer will not last too long: The federal government is on pace to need a higher debt limit by March.

Jonathan Weisman contributed reporting.

***********

GOP obstruction kills 18-year-old Violence Against Women Act

By Eric W. Dolan
RawStory

Wednesday, January 2, 2013 17:22 EST

The current term of Congress ended on Wednesday without re-authorizing the Violence Against Women Act, a nearly two-decade-old measure to aid victims of domestic and sexual violence.

Though the Senate approved the VAWA last year with bipartisan support, Republicans in the U.S. House had opposed the legislation because it added new protections for illegal immigrants, LGBT individuals, and Native Americans.

“The House Republican leadership’s failure to take up and pass the Senate’s bipartisan and inclusive VAWA bill is inexcusable,” Sen. Patty Murray said in a statement to The Maddow Blog. “This is a bill that passed with 68 votes in the Senate and that extends the bill’s protections to 30 million more women. But this seems to be how House Republican leadership operates. No matter how broad the bipartisan support, no matter who gets hurt in the process, the politics of the right wing of their party always comes first.”

Rather than vote on the Senate version of the VAWA, House Republicans passed their own watered-down version of the bill that omitted the new provisions. The White House warned it would veto the House bill, which was opposed by groups like the National Network to End Domestic Violence, the National Coalition Against Domestic Violence, the National Alliance to End Sexual Violence, the American Bar Association, and others because it ignored vulnerable populations.

Vice President Joe Biden and Rep. Eric Cantor (R-VA) were reportedly in last-minute talks to resolve the differences between the House and Senate bills, but nothing materialized before the legislative session ended.

Sen. Patrick Leahy (D-VT), who co-authored the VAWA along with Sen. Mike Crapo (R-ID), said last month he would re-introduce the legislation in the next Congress.

“We will continue our discussions, and we will work tirelessly to have a good bill enacted into law. This is not the end of our efforts to renew and improve VAWA to more effectively help all victims of domestic and sexual violence,” Leahy said.

“We have seen enough violence. If we cannot get the Leahy-Crapo bill over the finish line this year, we will come back next year, and we will get it done.”

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Christie lambasts House Republicans over Sandy bill: 'Shame on Congress'

Republican New Jersey governor singles out 'failure' of John Boehner after Speaker delays vote on hurricane Sandy aid.

Ewen MacAskill in Washington
guardian.co.uk, Wednesday 2 January 2013 22.20 GMT   

The plain-speaking governor of New Jersey, Chris Christie, embarked on an extended tirade against his own party members in Congress on Wednesday, raging against what he described as the "toxic internal politics" of House Republicans.

Christie, a high-profile Republican who is among the potential candidates for a run at the presidency in 2016, used invective against his own party usually only heard in attacks from Democrats.

Although he was specifically angry over the House's failure to vote on a compensation package for victims of hurricane Sandy, he expanded his rant to criticise House Republicans in general and the House Republican Speaker John Boehner in particular.

In the face of heavy criticism from Christie and other Republicans, Boehner scheduled a vote on the aid package for Friday.

Christie, speaking at a 40-minute long press conference before that announcement, reflected widespread criticism, mainly on the left but also among independents and many Republicans, that the Tea Party-backed Republicans in the House are a disruptive influence, creating chaos in Washington.

"Americans are tired of the palace intrigue and political partisanship of this Congress, which places one-upmanship ahead of the lives of the citizens who sent these people to Washington DC in the first place," Christie said.

He added: "America deserves better than yet another example of a government that has forgotten who they are there to serve and why." Referring specifically to the failure to act on the hurricane Sandy package, he said: "Shame on you. Shame on Congress."

Christie said that, historically, lawmakers in Washington did not play politics with disaster relief, but in the present atmosphere, everything was the subject of gamesmanship. "They are so consumed with their internal politics, they've forgotten they have a job to do," Christie said. "Everything is the subject of one-upmanship. It is why the American people hate Congress."

His anger over hurricane Sandy was echoed by other governors and members of Congress from the north-east.

Even before Christie's remarks, the showdown over the fiscal cliff fully exposed the extent of the divisions within the Republican party. Republicans in the Senate, dominated by moderate members who have held their seats for a long time, voted as a largely cohesive unit on Tuesday in favour of the fiscal cliff deal.

There were only five rebels, two of them senators who are Tea Party favourites: Marco Rubio and Rand Paul.

In contrast with the Senate, the House, whose membership is backed to a greater extent by the Tea Party, was deeply divided. Only 85 Republicans voted for the fiscal cliff deal, with 151 against.

The divide was geographical as well as ideological, with a large bloc of those voting in favour predominantly from the more liberal north-east and those against from the more conservative south.

At the press conference, Christie said Republicans had failed in their duty by not passing the hurricane Sandy package. Republicans, conscious of keeping down federal spending, have questioned measures in the package that they regard as wasteful.

"Last night, the House of Representatives failed that most basic test of public service and they did so with callous indifference to the suffering of the people of my state," he said.

"There is only one group to blame for the continued suffering of these innocent victims: the House majority and their Speaker John Boehner," he added. He described Boehner's decision to cancel the vote on the aid package as disappointing and "disgusting".

Christie is a popular figure and his reputation grew over his handling of hurricane Sandy, in particular his bipartisan posture and his willingness to put aside politics to work with president Barack Obama, even though the White House election was looming.

He could struggle to win support among fellow Republicans in mid-west states such as Iowa, where the first of the caucuses are held, because his views on abortion, gun control and immigration are regarded as too liberal.

Rubio, who voted against the fiscal cliff deal, is among the present favourites.

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Obama signs sweeping U.S. defense spending bill

By Agence France-Presse
Thursday, January 3, 2013 7:23 EST

President Barack Obama has signed into law a $633 billion US defense spending bill that funds the war in Afghanistan and boosts security at US missions worldwide.

“I have approved this annual defense authorization legislation, as I have in previous years, because it authorizes essential support for service members and their families, renews vital national security programs, and helps ensure that the United States will continue to have the strongest military in the world,” Obama said in a statement early Thursday after signing the measure.

Obama, who is vacationing in Hawaii, said that he signed the measure despite reservations.

“In a time when all public servants recognize the need to eliminate wasteful or duplicative spending, various sections in the Act limit the Defense Department’s ability to direct scarce resources towards the highest priorities for our national security,” the president said.

“Even though I support the vast majority of the provisions contained in this Act… I do not agree with them all,” he said in his statement, adding that he did not have the constitutional authority to approve piecemeal items within the sprawling bill.

“I am empowered either to sign the bill, or reject it, as a whole,” he said.

The meaure was hammered out by House and Senate conferees last month after each chamber voted to approve separate versions of the bill.

It includes $527.4 billion for the base Pentagon budget; $88.5 billion for overseas contingency operations including the war in Afghanistan; and $17.8 billion for national security programs in the Energy Department and Defense Nuclear Facilities Safety Board.

The bill authorizes $9.8 billion for missile defense, including funds for a Pentagon feasibility study on three possible missile defense sites on the US East Coast.

It also extends for one year the restriction on use of US funds to transfer Guantanamo inmates to other countries, a limitation critics say marks a setback for Obama’s efforts to close the detention center.

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January 2, 2013

A Soaring Homicide Rate, a Divide in Chicago

By MONICA DAVEY
NYT

CHICAGO — This city’s 471st homicide of 2012 happened in the middle of the day, in the middle of a crowd, on the steps of the church where the victim of homicide 463 was being eulogized. Sherman Miller, who was 21, collapsed amid gunfire not far from the idling hearse that was there to carry away James Holman, 32, shot to death a week earlier.

The funeral shooting at St. Columbanus Catholic Church on the South Side left neighbors fretting that no place, not even a church, felt safe any longer. “It’s become the Wild Wild West,” said Charles Childs Jr., who had watched from across the street as mourners screamed and scattered.

The shooting, on Nov. 26, was one more jarring reminder of just how common killings seem to have grown on the streets of Chicago, the nation’s third-largest city, where 506 homicides were reported in 2012, a 16 percent increase over the year before, even as the number of killings remained relatively steady or dropped in some cities, including New York.

But the overall rise in killings here blurs another truth: the homicides, most of which the authorities described as gang-against-gang shootings, have not been spread evenly across this city. Instead, they have mostly taken place in neighborhoods west and south of Chicago’s gleaming downtown towers.

Already, 2013 began with three gun homicides on New Year’s Day, two of them on the South Side. Like other cities, Chicago has long been a segregated place, richer and whiter on the North Side, and the city’s troubling increase in killings has accentuated a longstanding divide.

“It’s two different Chicagos,” said the Rev. Corey B. Brooks Sr., the pastor of New Beginnings Church on the South Side, who had led the funeral service for Mr. Holman the day shots rang out, then found himself leading Mr. Miller’s funeral service a week later. The authorities here have described both shootings as gang related. “If something like that had happened at the big cathedral in downtown Chicago or up north at a predominantly white church, it would still be on the news right now, it would be such a major thing going on.”

More than 80 percent of the city’s homicides took place last year in only about half of Chicago’s 23 police districts, largely on the city’s South and West Sides. The police district that includes parts of the business district downtown reported no killings at all. And while at least one police district on the city’s northern edge saw a significant increase in the rate of killings, the total number there still was dwarfed by deaths in districts on the other sides of town, and particularly in certain neighborhoods.

Along the streets downtown and in neighborhoods on the North Side not far from Lake Michigan, some residents acknowledged that they had heard about a rise in the city’s homicide rate, but said it had not affected their own sense of safety. “This area is a bit of a Garden of Eden,” said Gwen Sylvain, as she walked dogs along a residential street not far from the Loop.

Others said they rarely had reason to go to the Chicago’s South or West Sides, only a few miles away, and some longtime residents said they had never once ventured to such neighborhoods. Police business on the North Side rarely seems to rise beyond an overly enthusiastic Cubs fan or a parking quibble, said Kyong Lee, who said that in the past he had, without consequence, forgotten to lock up his family’s shoe repair business.

In Back of the Yards, a South Side neighborhood near the city’s old meatpacking district, the tenor was far different. Mothers spoke of keeping their children inside from the moment school ended, and businessmen of decisions to lock the front doors of their shops during business hours. “I don’t go out at night,” said Jesse Martinez, who recalled the gun pressed to his head as he was robbed a few years ago inside the hat and boot store he has run for 32 years.

Over all, crime in Chicago dropped 9 percent in 2012 from the year before in what city officials say was the largest decrease in 30 years. Among crimes that saw dips last year: rape, robbery and car theft. With the city’s longtime gangs splintering into factions and increasing problems with retaliatory violence, homicides rose suddenly in the first three months of the year — running some 60 percent ahead of the year earlier — creating a pace that slowed significantly as the year went on.

City officials attributed the improvement to a broad anti-gang strategy that includes an elaborate police audit of gang members, removal of vacant buildings and efforts to involve neighbors. Some have called for increased gun control legislation; of 7,000 guns recovered by the Chicago police in recent months, handguns are most common, but 300 were assault weapons.

“A child shot is a child of the City of Chicago,” Mayor Rahm Emanuel, who lives on the North Side, said in an interview in which he addressed the long-held divisions in a city known for its endless array of distinct neighborhoods on the North, South and West Sides. “Don’t anybody think that it’s ‘over there,’ ” the mayor said. “It’s a tear on this city.”

No arrests have been made in the deaths of Mr. Holman or Mr. Miller, who died on the steps of the church that Al Capone’s mother once attended regularly and where Barack Obama distributed food to the needy just after he was elected president in 2008. The authorities say three guns were believed to be present when Mr. Miller died. The police say Mr. Miller was carrying a gun. And bullet casings from two other weapons were found on the steps.

At Mr. Miller’s funeral in December, a large contingent of Chicago police officers waited outside.

“It’s gotten to the point, unfortunately, where something as significant as a funeral is subject to gang violence, and I can’t even believe that we’re having this conversation,” Garry McCarthy, the police superintendent here, said in an interview. “I’m not willing to gamble that maybe they’re not going to bring their guns this time.”

Inside that funeral, at another church on the city’s South Side, Mr. Brooks stood near Mr. Miller’s coffin, recalling what had happened at the last funeral. “Ever since then,” Mr. Brooks told Mr. Miller’s mother, who sat before him, “my heart has been so torn.”

As friends of the deceased stepped past his framed photograph to stand at a microphone, Mr. Brooks called for peace in the church, read out his own cellphone number (in case, he said, anyone needed it), and stopped one young man from launching into a rap, for fear, Mr. Brooks said later, of what new trouble that might stir.

In a corner of the church, a friend of Mr. Miller revealed text messages he had sent to her during Mr. Holman’s funeral, minutes before he was shot: “dis preacher like he talkin straight to me,” one of the messages read. “He talkin bout hurts and pain. I cant run from the pain cause its gone hurt me worse if I’m by myself because I gotta think about everything.” In tears, she recalled how she had replied to the texts with questions, but Mr. Miller never responded.

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December 31, 2012 09:00 AM

Wright's Law: A Unique Teacher Imparts Real Life Lessons

By Diane Sweet

In a perfect world, all children would have at least one teacher this special. Jeffrey Wright uses wacky experiments to teach children about the universe, but it is his own personal story that teaches them the true meaning of life.

A now yearly tradition, Mr. Wright gives a lecture on his experiences as a parent of a special needs child. His son, Adam, now 12, has a rare disorder called Joubert syndrome, in which the part of the brain related to balance and movement fails to develop properly. Visually impaired and unable to control his movements, Adam breathes rapidly and doesn’t speak.

This annual lecture about Adam, and the meaning of life, love and family is what leaves the greatest impression on Jeffrey Wright's students.

NYT:

    “When you start talking about physics, you start to wonder, ‘What is the purpose of it all?’ ” he said in an interview. “Kids started coming to me and asking me those ultimate questions. I wanted them to look at their life in a little different way — as opposed to just through the laws of physics — and give themselves more purpose in life.”

    Mr. Wright starts his lecture by talking about the hopes and dreams he had for Adam and his daughter, Abbie, now 15. He recalls the day Adam was born, and the sadness he felt when he learned of his condition.

    “All those dreams about ever watching my son knock a home run over the fence went away,” he tells the class. “The whole thing about where the universe came from? I didn’t care. … I started asking myself, what was the point of it?”

    All that changed one day when Mr. Wright saw Abbie, about 4 at the time, playing with dolls on the floor next to Adam. At that moment he realized that his son could see and play — that the little boy had an inner life. He and his wife, Nancy, began teaching Adam simple sign language. One day, his son signed “I love you.”

    In the lecture, Mr. Wright signs it for the class: “Daddy, I love you.” “There is nothing more incredible than the day you see this,” he says, and continues: “There is something a lot greater than energy. There’s something a lot greater than entropy. What’s the greatest thing?”

    “Love,” his students whisper.

“Wright’s Law” recently won a gold medal in multimedia in the national College Photographer of the Year competition, run by the University of Missouri. The filmmaker, Zack Conkle, 22, a photojournalism graduate of Western Kentucky University is also a former student of Mr. Wright’s. He says that he made the film because he would get frustrated trying to describe Mr. Wright’s teaching style.

Click to watch: http://www.youtube.com/watch?v=9bSu_Snlbsw&feature=player_embedded#!