Economic Calendar

Monday, May 7, 2012

Greek Election Surprise Rejects ‘Barbarism’ of Bailout Austerity

By Natalie Weeks and Maria Petrakis - May 7, 2012 6:17 AM GMT+0700

Alexis Tsipras became the surprise package of the Greek election by telling Angela Merkel to get lost.

“The people of Europe can no longer be reconciled with the bailouts of barbarism,” Tsipras, 37, said on state-run NET TV late yesterday after his Syriza party unexpectedly came second in the country’s election. “European leaders, and especially Ms. Merkel, should realize that her policies have undergone a crushing defeat.”

Tsipras’s calls to tax the rich, delay debt repayments and cut defense spending struck a chord with voters angry at austerity measures imposed by the European Union and the International Monetary Fund in return for bailouts. As far as euro membership is concerned, Tsipras told voters that a Greek exit would put the currency itself in jeopardy and they shouldn’t feel “blackmailed” into more austerity.

The result put Syriza ahead of the Socialist Pasok party, potentially derailing efforts to implement the terms of the country’s financial lifeline. Syriza, which means Coalition of the Radical Left, won 16 percent of the vote, projections showed. That exceeded the 13 percent won by Pasok, one of the two pillars of the political establishment since 1974. New Democracy, led by Antonis Samaras, topped the poll with 20 percent.

The result, the best since the party was founded in 2004, puts Tsipras in a position to try and form a government should New Democracy fail to put a coalition together in the first round of talks.

Greek Rivalries

What may stop Tsipras from taking power are the traditional rivalries among the Greek left.

“They have already achieved what they could achieve,” said Wolfango Piccoli, an analyst at Eurasia Group in London. “They have become the second-largest party but nobody will strike a deal with them. They can only make their voice heard more by the Greek public thanks to a larger presence in parliament but not much more than that.”

Before yesterday’s election result, Tsipras had proposed joining forces with the Communist Party of Greece, the oldest parliamentary party in the country, and the Democratic Left, which won 6 percent of the vote, to form a coalition.

Both parties have rejected the overture, with Communist Party chief Aleka Papariga repeating her refusal last night.

Tsipras suggested such a combination would be able to draw some informal support from other anti-bailout parties, such as the Independent Greeks, led by former New Democracy lawmaker Panos Kammenos, which yesterday scored 10 percent.


“If we as the left, despite the differences, submit our proposal and get five votes of support or tolerance from Kammenos we won’t reject them,” Tsipras said in an interview on April 25. “We must stop the bailout memorandum,” he said.

Syriza garnered 4.6 percent of the vote in Greece’s last elections in 2009 and 13 seats. Polls during the election put their support between 7 percent and 13 percent.

Greek voters flocked to anti-bailout parties, official results showed yesterday, as the country balks at an unemployment rate of almost 22 percent. That’s throwing doubt on whether, New Democracy and Pasok, can form a coalition to implement spending cuts to ensure the flow of bailout funds.

Pasok party leader Evangelos Venizelos, the former finance minister who negotiated the second rescue packages, said the electorate had provided no clear mandate and called on a pro- European national unity government to be formed.

Austerity Rejection

The election was the first since the country helped trigger the European debt crisis and comes as voters across the region turn their backs on austerity measures backed by Merkel. In France, Francois Hollande defeated President Nicolas Sarkozy yesterday and in Germany Merkel’s party suffered its worst result in more than a half a century in the northern state of Schleswig-Holstein.

Bowing to German austerity, Greece agreed to impose pension and wage cuts in return for two international rescues worth 240 billion euros ($312 billion). Greece must continue spending cuts to keep disbursements flowing. Failure to do that may determine whether the country has a future in the euro area.

For Tsipras, a civil engineer by training, the question of Greece’s continuing membership of the euro is overstated because its exit could mean an end to the currency itself.

“The crisis isn’t just Greek, it’s European,” he said on April 22. “There will either be a collective, sustainable and fair European solution to the public debt issue or it will collectively fall apart. The Greek people should understand that this blackmail is false and they must stop blackmailing them with a supposed exit of just Greece without the destruction of the euro.”

To contact the reporters on this story: Maria Petrakis in Athens at; Natalie Weeks in Athens at

To contact the editor responsible for this story: John Fraher at


Buffett’s Son Hated Dealing With Irate Investors

By Andrew Frye and Noah Buhayar - May 7, 2012 4:31 AM GMT+0700

Howard Buffett, the Berkshire Hathaway Inc. (BRK/A) director and potential successor to his father Warren Buffett as chairman, said a previous job where he dealt with angry investors helped inform his advice for shareholders.

“If you don’t like Berkshire, don’t buy it,” Howard Buffett said today in Omaha, Nebraska, during an interview for Bloomberg Television’s “In the Loop” program with Betty Liu.

Howard Buffett, director of Berkshire Hathaway Inc. Photographer: Daniel Acker/Bloomberg

Howard Buffett, 57, was addressing investor concerns about his father’s political activism. Berkshire hasn’t been hurt, he said, by Warren Buffett’s support of President Barack Obama and his push for higher taxes on the wealthy. The younger Buffett cited his experience in the early 1990s as head of investor relations for Archer Daniels Midland Co. and his distaste for speaking with unhappy shareholders.

“I hated that, but it was part of my job,” he said. “You get these guys calling, they’re mad at you, they want answers and you know you can’t answer it.”

Berkshire, which Warren Buffett has led for 42 years, doesn’t have an investor-relations department and executives don’t court Wall Street analysts with quarterly conference calls and presentations. Shareholders rely on the annual meeting, which draws tens of thousands of people to Omaha each year, to express their views and get feedback from management.

At ADM, the world’s largest grain processor, Howard Buffett said he was troubled by repeat calls from critical investors.

‘Don’t Call Me Again’

After one investor called about 15 times over a year and a half, Buffett said he asked the man how many shares he owned. According to Buffett, whose father is the world’s third-richest person, the investor said he owned 20 shares.

“I’ll tell you what,” Buffett said, recalling what he told the investor. “Take the market price today, add 5 percent, and I’ll buy your shares, and don’t call me again.” The investor never called back.

Warren Buffett was asked repeatedly to explain his stance on different facets of tax policy during yesterday’s meeting. One investor posed the question of whether the billionaire, who has traded barbs with Republicans on taxes over the past year, might be discouraging investors who disagree with his personal views from buying Berkshire stock. The question drew applause.

Buffett, 81, replied that his responsibilities at Berkshire, which include chief executive officer and head of investments, don’t require him to put his “citizenship in a blind trust.”

Natural Disasters

Berkshire has underperformed the Standard & Poor’s 500 Index in six of the last seven quarters. The company has faced insurance claims tied to natural disasters and investor concerns about management succession. Berkshire has said it identified the next CEO without specifying who it is or setting a timeline for the transition. Warren Buffett has said his son would make a good non-executive chairman.

Buffett, the father, has attracted investors to Berkshire by expanding the company from textiles to industries spanning insurance, consumer goods and utilities. In addition to the meetings, Buffett communicates with investors through annual letters and a statement of principles he calls the Berkshire “owner’s manual.” In his 1999 letter, Buffett set out his leadership approach after welcoming new investors.

“We hope also that these new holders find that our owner’s manual and annual reports offer them more insights and information about Berkshire than they garner about other companies from the investor-relations departments that these corporations typically maintain,” Warren Buffett said. “But if it is ‘earnings guidance’ or the like that shareholders or analysts seek, we will simply guide them to our public documents.”

To contact the reporters on this story: Andrew Frye in New York at; Noah Buhayar in Omaha at

To contact the editor responsible for this story: Dan Kraut at


Hollande Vows to Fight Austerity After Beating Sarkozy

By Helene Fouquet - May 7, 2012 5:03 AM GMT+0700

Francois Hollande, who defeated French President Nicolas Sarkozy to become the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity and more growth in the region.

“Austerity is not inevitable,” he told supporters in Tulle, France, last night after he got about 52 percent against about 48 percent for Sarkozy.

French President-Elect Francois Hollande celebrates victory in the place de la Cathedrale on May 6, 2012 in Tulle, France. Photograph: Getty Images

May 7 (Bloomberg) -- Francois Hollande defeated French President Nicolas Sarkozy to become the first Socialist in 17 years to control Europe’s second-biggest economy. Hollande inherits an economy that is barely growing, with jobless claims at their highest in 12 years and a rising debt load that makes France vulnerable to the financial crisis that has rocked the euro region the past two years. Susan Li reports on Bloomberg Television's "First Up." (Source: Bloomberg)

A young supporter with a rose in her mouth waits with other supporters in front of the campaign headquarters of the Socialist Party in Paris. Photographer: Joel Saget/ AFP/Getty Images

Hollande inherits an economy that is barely growing, with jobless claims at their highest in 12 years and a rising debt load that makes France vulnerable to the financial crisis that has rocked the euro region the past two years. Sarkozy became the ninth euro leader to fall in that time and the first French president in more than 30 years to fail to win re-election.

“Hollande’s bet was that rejection of Nicolas Sarkozy was enough to get him elected,” Dominique Reynie, senior researcher at Paris’s Institute of Political Studies, said before the vote. “The message was that if you don’t like Sarkozy then I’m your best bet.”

Sarkozy’s departure may sharpen tensions with key allies as Hollande has advocated a more aggressive European Central Bank role in spurring growth -- a measure opposed by Germany -- and an accelerated withdrawal from Afghanistan.

Hollande’s comments were echoed in Greece, where voters flocked to anti-bailout groups, leaving the two main parties, New Democracy and Pasok, a seat short of a majority if they govern together, an Interior Ministry projection showed.

French Yields

In France, the campaign isn’t over. The country elects its lower house of parliament in five weeks, prompting calls from backers of both Hollande and Sarkozy to keep fighting.

While Socialists stand ready to dominate policy making for the first time since 1993 -- holding both the presidency and the Cabinet -- bond yields suggest Hollande may maintain market confidence. Ten-year French debt yields 124 basis points more than comparable German securities. That’s down from 145 basis points after he won the first round April 22 and lower than the 133 basis points at the start of the year.

Hollande supporters gathered yesterday to celebrate with music, tears of joy and impossibly clotted crowds. Paris’s Bastille square drew thousands of people. Hollande was in rainy Tulle, his home district in central France, where crowds were entertained by giant video screens and Stevie Wonder songs.

“It’s where presidents grow like mushrooms,” said 65- year-old retiree Andre Laurier, noting Tulle’s the region of Jacques Chirac and Georges Pompidou as well.

Hollande’s Task

Conceding defeat yesterday, Sarkozy said, “after 35 years of politics, after 10 years at the highest levels of government, after five years as head of state, I will become a Frenchman among the French.”

Hollande faces the task of increasing competitiveness, cutting the budget deficit and spurring growth while keeping the region’s financial woes at bay. Campaigning against the most unpopular president in postwar France, he avoided specifics.

“We expect resistance to change and proposals to preserve France’s social model to prevail once Parliament reconvenes after June 26,” Natacha Valla, a Paris-based economist at Goldman Sachs Group Inc., wrote on May 4.

Hollande sought to portray himself as the anti-Sarkozy leader, calling himself “normal” to contrast with the incumbent known in the media as “President bling-bling.”

Hollande is the second Socialist president of the Fifth Republic, established in 1958. Francois Mitterrand was first.

His path to power followed a traditional French route. He graduated from the Institute for Political Sciences in Paris and the National School of Administration, schools that trained all post-war presidents, except Sarkozy and Charles de Gaulle.

Fall Into Line

He was educated at HEC-Paris, a business school where he befriended some who were to become corporate leaders, such as Axa SA (CS) Chief Executive Officer Henri de Castries. His social circle includes Jean-Bernard Levy, CEO of Vivendi SA, and Jean- Louis Beffa, former CEO of Cie. de Saint-Gobain.

In the early 1980s, Hollande went to work for Mitterrand, helping him nationalize companies. A decade later, he helped Prime Minister Lionel Jospin sell them to help the Socialist government cut its debts to join the euro.

“The pressure to clarify the position after a change in government will be high and it will be immediate,” said Steven Major, head of fixed-income research at HSBC Holdings Plc in London. Investors are “looking through the election and reasoning that the government will fall into line.”

Hollande has proposed higher taxes for big companies and cuts for small and medium-sized businesses; a 75 percent levy on incomes above 1 million euros a year and special taxes on banks and oil companies.

More Spending

His platform would raise spending by 20 billion euros ($26.3 billion) over his five-year term and the retirement age for those who started working at 18 years old pushed back to 60 from 62. He said he would discuss with France’s banks the split of their retail and investment activities.

Tax increases and eliminating loopholes would seek to raise 29 billion euros. The budget plan aims to eliminate the deficit in 2017, one year later than under Sarkozy’s plan, with a 3 percent of gross domestic product deficit target for 2013.

Minutes after Hollande’s victory was announced, political leaders were already fighting over the legislative elections set for June 10 and June 17.

“We need a majority in parliament,” Jean-Marc Ayrault, who heads the Socialist Party in the National Assembly, said on France 2 television. Former Prime Minister Jean-Pierre Raffarin said, “What’s very important now is to put together a great opposition force.”

Against Austerity

Outside of France, Hollande has called for re-negotiating the German-inspired deficit rules that leaders agreed upon in December. At the same time, he reached out to France’s neighbor and biggest trade partner.

A German government spokesman said that diplomatic contacts had been made with the Hollande camp. Pierre Moscovici, his campaign chief and a possible key member of the future government, told Frankfurter Allgemeine Zeitung newspaper on May 5 that the new government would not create a “crisis” with its main partner.

German Finance Minister Wolfgang Schaeuble indicated May 4 enough flexibility to allow Hollande to “save face.”

“I’ve said that everybody who gets freshly elected into office must be able to save face,” Schaeuble said. “So we will discuss this with Hollande in a very friendly way. But we won’t change our principles.”

Concern of a Franco-German cleavage undermining economic policy making in the euro region is “exaggerated,” Morgan Stanley chief economist Joachim Fels wrote in a note yesterday.

A native of Rouen, the Norman city where Joan of Arc was burned at the stake by the English in the 15th century, Hollande has spent his career mainly behind the scenes and kept his position as party leader even after two humiliating Socialist losses under his watch -- in 2002 and 2007.

In 2007, Segolene Royal, the mother of his four children, lost to Sarkozy. In the subsequent months, she announced their separation. Hollande now lives with Valerie Trierweiler, a journalist for Paris Match magazine.

To contact the reporter on this story: Helene Fouquet in Paris at

To contact the editor responsible for this story: James Hertling at


‘The Avengers’ Has Record-Setting $200.3 Million in Sales

By Michael White - May 6, 2012 10:35 PM GMT+0700

“Marvel’s The Avengers” opened as the top film in U.S. and Canadian theaters, kicking off the summer movie season with a record $200.3 million in sales this weekend for Walt Disney Co. (DIS)

Revenue topped the previous best of $169.2 million set by “Harry Potter and the Deathly Hallows: Part 2” last year, researcher Box-Office said today in an e-mailed statement. Analysts had forecast sales of $150 million to $170 million for “The Avengers.”

Jeremy Renner, Chris Evans, Scarlett Johansson perform in "The Avengers," from Walt Disney Studios. Photographer: Zade Rosenthal/Marvel via Bloomberg

Summer ticket sales are expected to surpass the record of $4.4 billion set last year, according to Jeff Bock, box-office analyst at Exhibitor Relations Co. Other films scheduled in the coming weeks include Warner Bros.’ “The Dark Knight Rises,” directed by Christopher Nolan, and Sony Corp. (6758)’s “Men in Black 3,” a sequel that reunites Will Smith and Tommy Lee Jones as government agents managing Earth’s secret alien population.

“The Avengers” is the first Marvel movie Disney is distributing since buying the comic-book company for $4.2 billion in 2009. The movie provides Burbank, California-based Disney with a hit after the box-office failure of “John Carter,” the science-fiction film released in March that resulted in a $200 million loss for the company.

Rich Ross, the head of Disney’s film unit, resigned in April, and the company hasn’t yet hired a replacement. Disney is scheduled to report fiscal second-quarter results on May 8.

Marvel Heroes

“The Avengers” brings together several Marvel heroes, including Iron Man, Thor and Captain America, who were featured singly in previous films. They must overcome egos and discord to band together to fight an army led by Loki, the unscrupulous god of Norse mythology. The movie stars Robert Downey Jr., Chris Evans and Scarlett Johansson.

The film took in $80.5 million in first-day ticket sales on May 4, according to The revenue was the second- best single-day performance after “Deathly Hallows: Part 2,” which took in $91.1 million.

“The Avengers,” directed by Joss Whedon, was the only movie opening in wide release this weekend.

To contact the reporter on this story: Michael White in Los Angeles at

To contact the editor responsible for this story: Anthony Palazzo at