Kiosko.net

E U R O P E Monday June 30 2008

A court of one
The top US justice who holds the balance COMMENT Page 13
Newspaper of the year

Lawrence Summers
We have more to fear from the credit crisis Page 13

Starry­eyed Astana
Kazakhstan’s president builds his own pyramid Page 3
World Business Newspaper

News Briefing
Baugur looks at move from Iceland to UK
Icelandic investment group Baugur could move to the UK after executive chairman Jon
Asgeir Johannesson was found guilty of book-keeping offences.
Page 19

Germans tackle deficit
German finance minister Peer Steinbrück will unveil a 2009 budget that should set
Germany on course to eradicate its federal deficit by 2011. Page 8

Royal raps Sarkozy
The battle for leadership of France’s divided Socialist party will intensify this
week. Ségolène Royal, who led an unsuccessful challenge for the presidency last
year against Nicolas Sarkozy, put anti-Sarkozyism at the heart of her programme.
Page 7

G8 heads put $25bn Africa aid in doubt
Target omitted from draft communiqué Further setback to Gleneagles pledges
By Hugh Williamson in Berlin Leaders of the Group of Eight rich nations are set to
backtrack on their landmark pledge at the Gleneagles summit in 2005 to increase development
aid to Africa to $25bn (€15.9bn) a year. A draft communiqué obtained by the Financial
Times, due to be issued at the group’s July summit in Hokkaido, Japan, shows leaders
will commit to fulfilling “our commitments on [development aid] made at Gleneagles”
– but fails to cite the target of $25bn annually by 2010. This goal, which was
repeated at last year’s G8 summit in Germany, was seen as an important boost for
Africa. The ambitious plan was a cornerstone of the G8 presidency of Tony Blair,
the former UK prime minister, and championed by Gordon Brown, his successor. The
dropping of the explicit target marks a further stage in the G8’s failure to honour
the commitments they made at Gleneagles in Scotland. Most of the G8 countries’
aid budgets have already fallen well behind their promises to increase overseas assistance.
The step could be awkward for Japan, which has made support for Africa a summit theme,
along with climate change. Yasuo Fukuda, the Japanese prime minister, used a meeting
last month in Japan with 40 African leaders to announce a doubling of aid to Africa
by 2013. Eight African leaders are due to attend the G8 summit on July 7. The draft
communiqué, dated June 25, might still change, diplomats insisted, especially if
pressure from African countries or from the public grew next week. In a further retreat,
the G8 is set to abandon its Gleneagles promise to provide universal access to Aids
treatment and prevention by 2010. The pledge has been a benchmark around which health
campaigners and others have been organising their work, especially in Africa. The
draft says the G8 will continue “working towards the goal of universal access to
HIV/ Aids prevention, treatment care” but it does not mention the 2010 deadline.
In addition, G8 leaders are divided on how to fulfil one of the headline commitments
at last year’s Heiligendamm summit in Germany to provide $60bn “over the coming
years” for tackling malaria, tuberculosis and Aids, and for strengthening healthcare
systems in developing countries. This promise remains in brackets in the draft, indicating
no agreement has been reached. Countries are divided on the time period for achieving
the target, with proposals ranging from three to eight years, said one person familiar
with the issue. Backtracking on these points would set back efforts to build momentum
behind the United Nations’ Millennium Development Goals, agreed in 2000 and aimed
at halving the number of people in poverty by 2015. The G8 acknowledges that goals,
for instance on reducing child mortality, are “seriously off-track”, according
to the draft. Non-government groups and African governments say rich nations need
to show more leadership in providing funds to meet the goals.

Power play Mugabe claims his victory

Mittal eyes joining Rio battle to secure ore supply
By Peter Marsh in London Lakshmi Mittal is looking at entering the takeover battle
for Rio Tinto, the mining group, according to people familiar with the matter. Mr
Mittal, the main shareholder in steelmaker ArcelorMittal as well as its chairman
and chief executive, is keen to secure larger supplies of iron ore. Rio, one of the
world’s biggest producers, is the subject of a contested bid by Australian mining
group BHP Billiton, worth about $160bn (€101bn) at current share prices. Mr Mittal’s
thinking emerged as Goldman Sachs, his adviser, announced that he had joined the
board of the Wall Street bank. The BHP-Rio deal is being scrutinised by antitrust
regulators, who fear that, should the bid be allowed to proceed, a combined group
would dominate the global supply of important materials such as iron ore and aluminium.
“Mr Mittal has considered some involvement in the takeover, such as the idea of
taking a stake in Rio through buying from existing shareholders,” said a banker.
“On the other hand, he could wait until later, when quite possibly some of the
iron ore assets [of Rio] go on sale as a result of demands by antitrust regulators.”
Bankers believe Rio’s iron ore assets are currently worth about $50bn. But this
figure could fall sharply in the next few months, particularly if the boom in steelmaking
starts to peter out. Experts believe ArcelorMittal could afford a stake on a par
with the 9 per cent stake, worth about $14bn, acquired in February by Aluminium Corporation
of China (Chinalco) in combination with Alcoa of the US. However, bankers say Mr
Mittal, who has kept out of the tussle so far, may be cooling to the idea of taking
this route. “It might be more sensible for him to wait until the antitrust authorities
have their say,” said one. ArcelorMittal declined to comment on market speculation.

Mexico drugs threat
A senior US counter-narcotics official has warned that Mexico’s democratic development
is at stake in the country’s battle against drugs cartels. Page 4

Sorrell chases quarry
Sir Martin Sorrell has admitted that there are problems building a business by acquisition
– even as his WPP marketing group chases its latest quarry. Page 19

Pakistan troops attack
Pakistani troops launched an offensive against militants near the north-western city
of Peshawar. Page 2;
Opium output, Page 4

$22.5bn BNY claim
Russian Customs is claiming $22.5bn (€12.2bn) damages from Bank of New York Mellon.
Page 8

Turkish party case
Turkey’s constitutional court will hear arguments this week in a case that seeks
to ban the governing Justice and Development party. Page 7

Suit fears fuel cuts
Fears that staff are more likely to sue for a bonus if they are fired in the second
half of the year helped fuel June’s spate of investment banking job cuts, say senior
bankers. Page 19

Fed inflation watch
US Fed policymakers are not planning to raise rates soon but will do so if they have
to stop oil prices fuelling wider inflation. Page 4;
Dangerous moment, Page 13; Tony Jackson, Page 24

Robert Mugabe is sworn in for another term as Zimbabwe’s president after 28 years
of rule at State House in Harare while his embattled rival, Morgan Tsvangirai, made
a last­ditch plea for African leaders to reject the outcome of the election. Invitations
to Mr Mugabe’s inauguration were issued well before publication of final results
showing the 84­year­old autocrat won almost 86 per cent of the vote as the lone
candidate in Friday’s presidential run­off. Report, Page 2 AP

Captive swap agreed
Israel backed a deal with Hizbollah that will see the release of several prisoners
in exchange for the return of two Israeli soldiers. Page 2

Kashagan delay

Citi set to reward co­operation with overhaul of bonus system
Move to harness the bank’s synergies
By Francesco Guerrera in New York Citigroup is planning to overhaul its bonus system
for hundreds of top managers in an effort to increase co-operation and minimise in-fighting
among the disparate parts of the sprawling financial services conglomerate. The move
is part of an ambitious plan by Vikram Pandit, chief executive, to restore Citi’s
battered fortunes by harnessing synergies between its investment banking, commercial
and wealth management divisions. Citi is the latest Wall Street bank to rethink its
bonus system in the wake of the credit crunch. However, while others such as Merrill
Lynch are trying to reduce incentives for bankers to take short-term risks and outsized
bets, Citi’s efforts are mainly aimed at getting the most out of its diverse business.
Since taking over from Chuck Prince in December, Mr Pandit has rebuffed calls to
break up Citi and vowed to eliminate barriers between the company’s businesses
to fully exploit its “universal banking” model. “The new compensation plan
is absolutely crucial to put teeth behind Vikram Pandit’s strategy,” a Citi executive
said. “We have to put a premium on partnership-like behaviour.” People close
to the situation said Mr Pandit wanted to change the way bonuses were calculated
to reward co-operation across different divisions and the performance of the company
as a whole. At present, bonuses at Citi, like those at most other banks, are largely
dependent on the results of a manager’s division and individual performance. People
familiar with the matter said the ultimate goal was to link bonuses of senior managers
and junior employees to Citi’s overall performance. But they said the first stage
was likely to involve skewing bonuses to take into account how much shared business
each manager generated. Citi employees already get paid for referrals when, for example,
a wealth management adviser helps a client open a credit card or a checking account.
But insiders say those sums are modest. A change to Citi’s compensation structure
could face internal resistance. Many senior managers may object to having their pay
tied to businesses outside their control, especially when they are as volatile and
cyclical as investment banking. Mr Pandit has told senior colleagues he wants a new
system in place by the end of the year, when annual bonuses are decided. John Donnelly,
head of human resources, has been asked to draft detailed plans in the next few weeks.
Citi declined to comment.

McCain trails Obama
Polls show Republican presidential candidate John McCain winning over a quarter of
former Clinton supporters in Ohio but trailing Democratic rival Barack Obama.
Page 4; www.ft.com/uselection

Bond bail­out expected
Investors in bonds hit by the credit crunch were led to believe that they would be
bailed out, according to research. Page 19; Nightmare on
Main Street, Page 23; www.ft.com/creditsqueeze

Separate sections
Hong Kong Patriotic rapture as red star rises Energy Industry in structural change
FTfm Weekly fund management review

Production at one of the world’s biggest oilfields, the Kashagan field in Kazakhstan,
has been postponed by two years until 2013. The Kazakh government warned that the
consortium developing the Caspian Sea project, led by Italy’s Eni, would suffer
severe financial penalties if any further setbacks delayed output. When Eni signed
the contract in 2000, it said production would begin in 2005. Report, Page 3

World Markets

Cover price
CURRENCIES INTEREST RATES
Jun 27 Jun 20 Û per $ £ per $ Û per £ ´ per Û £ index Û index 0.634 0.640
0.502 0.506 1.265 167.2 93.2 105.6 1.264 167.9 93.0 105.6 2.043 Fed Funds Eff US
3m Bills Euro Libor 3m UK 3m Prices as at close Friday Jun 27 2.05 1.62 4.95 5.91
Jun 20 1.94 1.82 4.96 5.89 US Gov 10 yr UK Gov 10 yr Ger Gov 10 yr Jap Gov 10 yr
US Gov 30 yr Ger Gov 2 yr 1.562 1.975 0.791 107.5 212.1 81.9 1.616 price 99.09 99.73
97.81 101.50 97.41 100.58 yield 3.99 5.04 4.53 1.63 4.53 4.43 Wk's chg -0.15 -0.11
-0.10 -0.13 -0.17 -0.17 Wk's chg +0.11 -0.20 -0.01 +0.02 Jun 20 11842.69 2406.09
1317.93 1222.51 3426.58 5620.8 2864.01 4509.27 6578.44 13942.08 22745.60 236.7 Wk's
%chg -4.19 -3.76 -3.00 -2.48 -2.52 -1.62 -1.80 -2.48 -2.38 -2.85 -3.09 -2.4 Oil Brent
$Aug Oil WTI $Aug Gold/$ Jun 27 Jun 20 $ per Û $ per £ £ per Û ´ per $ ´ per
£ $ index 1.576 1.994 0.791 106.2 211.4 81.2
Albania Austria Bahrain Belgium Bulgaria Croatia Cyprus Czech Rep Denmark Egypt Estonia
Finland France Germany Gibraltar Greece Hungary Iceland India Israel Italy Jordan
Kazakstan Kenya Kuwait Latvia Lebanon Lithuania Lek410 €3.20 Din1.5 €3.20 Lev6.60
Kn26 €3.20/C£1.87 Kc115 Dkr26 E£17 EKr60 €3.50 €3.20 €3.20 £1.75 €3.20
Ft750 IKr380 Rup85 ILS16 €3.00 JD3.00 US$4.90 Kshs300 KWD1.50 Lats2.99 LBP7000
Litas19 Luxembourg Macedonia Malta Mauritius Morocco Netherlands Nigeria Norway Oman
Pakistan Poland Portugal Qatar Romania Russia S. Arabia Serbia Slovak Rep Slovenia
South Africa Spain Sweden Switzerland Syria Tunisia Turkey UAE Ukraine €3.20 €3.20
€3.00 MRu90 Dh32 €3.20 Naira550 NKr27.00 OR1.50 Rupee90 Zl 13 €3.20 QR15 Ron13
€5.00 Rls15.00 NewD265 Sk130 €3.20 R18 €3.20 Skr27 SFr5.20 US$4.74 Din4.75
YTL5.00 Dh15.00 €5.00

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STOCK MARKETS
Jun 27 11346.51 2315.63 1278.38 1192.24 3340.27 5529.9 2812.59 4397.32 6421.91 13544.36
22042.35 231.1

Dow Jones Ind Nasdaq Comp S&P 500 FTSEurofirst 300 DJ Euro Stoxx 50 FTSE 100


FTSE All-Share UK CAC40 Xetra Dax Nikkei

SFr per Û 1.607

SFr per £ 2.031

COMMODITIES
Jun 27 140.31 140.21 925.15 Jun 20 134.39 134.62 905.60 Wk's chg +5.97 +6.03 +19.55


Hang Seng FTSE All World $

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