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Feb 13 Feb 6

per $ 0.877 0.882

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INTEREST RATES

price yield chg

US Gov 10 yr 102.09 2.01 0.02

UK Gov 10 yr 109.45 1.68 0.01

Ger Gov 10 yr 101.55 0.35 0.02

Jpn Gov 10 yr 98.90 0.42 0.02

US Gov 30 yr 108.02 2.61 0.04

Ger Gov 2 yr 100.59 -0.19 0.00

price prev chg

Fed Funds Eff 0.12 0.11 0.01

US 3m Bills 0.01 0.01 0.00

Euro Libor 3m 0.02 0.03 0.00

UK 3m 0.56 0.57 0.00

Prices are latest for edition Data provided by Morningstar

RICHARD WATERS SAN FRANCISCO

Asmanyas 100banksandother finan-cial institutions around theworldhavebeen hit by one of the most sophisti-cated cyber attacks to strike thefinance industry, according to a reportfrom Russian security companyKaspersky,duetobereleasedtoday.

The range and extent of the attacks isstill under investigation,with the groupputting a figure of $1bn on the lossesthat thebankshavesuffered.However, one representative for

Kaspersky admitted that, while thisreflected the amounts targeted in theattacks, the company had not yet beenable to confirm howmuch money hadactuallybestolen.Its not 100 per cent clear at this

point whether all the targets weresuccessful or not, this person said. Its

still an attack thats verymuch active.The massive potential losses stem

fromaseriesofattacksover thepast twoyears, Kaspersky said in a statementyesterday, which it said wasmade withthe backing of Interpol, Europol andagencies in a number of countries thatwere investigating.These attacks again underline the

fact that criminals will exploit any vul-nerability in any system, said SanjayVirmani, director of Interpols digitalcrimecentre.The attackswere all said tohavebeen

mounted by an international criminalgang referred to by the investigators asCarbanak and said to have representa-tives inRussia, Ukraine and other partsofEurope,aswellasChina.According to Kaspersky, the gang

penetrated banks systems by using atechnique called spear phishing in

which individual employees are tar-geted with emails that secretly releasemalware into a companys system oncetheyareopened.The malicious code then sought to

identify and study the activities of offi-cials with authority to transfer largeamountsofcash,usingtheknowledgetoshift amounts of up to $10m to specialaccounts that had been set up in banksin China and the US. Sometimes,instructions were sent at predeter-mined times to ATMs to instruct themto start dispensingmoney, according toKaspersky.Similar attacks on banks have been

reported by other security researchersin recent years, although the Carbanakgroup isnotable for both the rangeof itstargets and sophistication of its meth-ods, said Vincente Diaz, Kasperskysprincipal securityresearcher.

Up to 100bankshit by cyber attackthreateningpotential losses of $1bn

THE FINANCIAL TIMES LTD 2015No: 38,779

Printed in London, Liverpool, Dublin, Frankfurt,Brussels, Milan, Madrid, New York, Chicago, SanFrancisco, Washington DC, Tokyo, Hong Kong,Singapore, Seoul, Dubai

9 7 7 0 3 0 7 1 7 6 5 1 7

0 8

As eurozone finance ministers meet inBrussels today to tackle the new Greekgovernments refusal to abide by theterms of its 172bn bailout, Athens willreceive little sympathy from Ireland.Dublin seems insistent that Greececomplete every last yard of itsgruelling austerity programme just asthe Irish did. The stance, echoed inPortugal and Spain, puts the Irishgovernment firmly in Germanys campbut has drawn some criticism at home.Report i PAGE 5

Bailout-battered Irelandsides with Berlin on Greece

Briefing

i Fighting eases in easternUkraineInternationalmonitors have reported an easing ofthe fighting inUkraines breakaway east, with atenuous ceasefire holding despite reports of artilleryattacks by separatists. PAGE 6

iGreece gapwith creditorsYanis Varoufakis, Greeces financeminister, and hiseurozone counterpartsmeet in Brussels tonight butlook as far apart as ever over a deal to extend the172bn bailout. PAGE 5; WOLFGANG MNCHAU, PAGE 11

iBNPParibas chairwarns on complianceJean Lemierre, the chairman of BNPParibas, has said banks can no longerafford a too narrow, legalisticapproach to complyingwith rulesbecause theworld has changed. PAGE 17; INTERVIEW, PAGE 19

iTourist attractions gomandarinVisitBritain, the national tourism agency, is givingtheUKs 101most loved attractions a new set ofmandarin names as part of a campaign to luremorevisitors fromChina. PAGE 4

iHuawei turns to Browne for UKunitChinese technology groupHuawei has recruitedLord Browne, the former BP chief executive, tohead aUKboard of directors that will oversee itsBritish operations. PAGE 17

iPassengers having to keep trains on trackPassengers are now shouldering the greatest burdenof the 12.7bn needed to keep Britains trains ontrack, with the governments contribution havingshrunk over the lifetime of the coalition. PAGE 2

i Shire chief defends tax arrangementsThe chief executive of pharmaceuticals group Shirehas defended its tax arrangements after the groupwas identified as a beneficiary of alleged industrialscale avoidance. PAGE 17; MONDAY INTERVIEW, PAGE 14

Selected currenciesagainst the euro

Source: Thomson Reuters Datastream

% change in 2015-5 50

Swiss francNorwegian krone

British poundPolish zloty

Romanian leuTurkish lira

Russian roubleBulgarian lev

Swedish kronaUkrainian hryvnia -55-55

1212

Datawatch

MONDAY 16 FEBRUARY 2015 WORLDBUSINESSNEWSPAPER UK 2.50 Channel Islands 2.80; Republic of Ireland 3.00

Subscribe In print and onlinewww.ft.com/subscribenowTel: 0800 298 4708

Since the start of theyear the euro hasdepreciated againstthe currencies ofseveral Europeaneconomies due toeasing by the ECB.However, increasingrisks in emergingEuropean economieshave sparked itsappreciation againstothers

Not so slickHow BP became a potentialacquisition target PAGE 20

Quick fireTwitters value as a means ofdismissal LUCY KELLAWAY, PAGE 14

Wish you werent hereWhy US presidential candidates shouldstop visiting London EDWARD LUCE, PAGE 11

SAMANTHA PEARSON AND JOE LEAHY SO PAULO

Rolls-Royce has been accused ofinvolvement in a multibillion-dollarbribery and kickback scheme at Petro-bras, Brazils state-controlled oil pro-ducer, as more foreign companies aredraggedintothecorruptionscandal.The British engineering company,

whichmakes gas turbines for Petrobrasoil platforms, allegedly paid bribes viaan agent in exchange for a $100m con-tract as part of a scheme in operationduringmuchof thepastdecade, accord-ing to testimony from a former Petro-bras executive. It is the one of the big-gest international groups so far to beimplicated inthePetrobrasscandal.Pedro Barusco, a Petrobras veteran,

toldpolicethathepersonallyreceivedatleast $200,000 fromRolls-Royceonlypartof thebribesheallegedwerepaid toaringofpoliticiansandotherexecutivesat the oil company. The admission wasburied in more than 600 pages ofdocuments released by Brazils federalcourt system this month, detailing thetestimonies ofMrBaruscowho struck apleabargain inNovember.In response, Rolls-Royce said: We

want tomake it crystal clear thatwewillnot tolerate improper business conductof any sort and will take all necessaryactiontoensurecompliance.The accusations come as Rolls-Royce

faces a Serious Fraud Office investiga-tion in the UK over allegations ofcorruption inChinaandIndonesia.Rolls-Royce is the latest foreign com-

pany alleged to be involved in the scan-dal, which threatens the government ofPresident Dilma Rousseff and couldpushPetrobras intotechnicaldefault.Brazils authorities are already inves-

tigating allegations that Petrobras offi-cials accepted bribes from SBM Off-shore, a Netherlands-based supplier ofoffshore oil vessels. SBMhas said that itisco-operatingwiththe investigation.Units of two Singaporean companies,

Keppel Corporation and SembcorpMarine, and three Brazilian shipbuild-ers with Japanese shareholders, havealso been accused of involvement. Kep-pelandSembcorpdenyparticipating.The scandal emerged when the

formerheadofPetrobrass refiningunit,Paulo Roberto Costa, struck a plea bar-gain after being arrested for money

laundering inMarch.According to testi-mony from Mr Costa, Mr Barusco andothers, Petrobras contractors paidbribes to executives and politiciansfrom the ruling coalition led byMs Rousseffs PT party. Analysts esti-mate the scheme has cost Petrobrasmore than $20bn. The PT said the alle-gationsarewithoutproofandhasprom-isedtosuetheaccusers.Mr Barusco alleged that his friend

Luiz Eduardo Barbosa, a former execu-tive of Swiss engineering group ABB,was responsible for organising bribesfrom Rolls-Royce, SBM and Alusa, aBrazilian construction company. Alusa,whichhas changed itsname toAlumini,denied the accusations. Mr Barbosacouldnotbereachedforcomment.Guide to Brazilian corruption page 7

Rolls-Royce accusedof bribery toobtain $100mPetrobras contract3UK group named by informant as one of the contractors involved in Brazil scandal

DanishPMpays tribute toattackvictimsHelle Thorning-Schmidt, Denmarksprime minister, places flowers in frontof the synagogue in Krystalgade inCopenhagen yesterday following twinshootings in theDanish capital inwhicha JewishmanandaDanish filmdirectorwerekilled.The gunman suspected of carrying

out both attackswas shot dead by secu-rity forces early yesterday.Hewas borninCopenhagenandknowntothepolice.They said they were working on the

assumption that the double attack wasinspired by the murders by Islamistmilitants at the magazine CharlieHebdo and a kosher grocery store inParis lastmonth.Report page 6

Fabian Bimmer/Reuters

Wewill nottolerateimproperbusinessconduct ofany sortRolls-Royce

2 FINANCIAL TIMES Monday 16 February 2015

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GILL PLIMMER

The governments contribution to run-ning Britains railways has shrunk rap-idly over the lifetime of the coalition,with passengers now shouldering by farthe greatest burden of the 12.7bnneededtokeepthetrainsontrack.

Britainsrailwayswatchdogsaidtodayfares now contribute 61 per cent of thecosts, compared with 55.6 per cent in2010-2011. That equated to a real-termsdecrease of 28.3 per cent per passengerin the four years to March 2014, theOffice of Rail Regulation said in itsannualstudyof industryfinances.

Government funding fell to 3.8bn, or29 per cent of total expenditure. The

remainder came from train operatorsandother incomesuchascarparks.

The move to reduce taxpayer contri-butions began under Labour in 2007.The railways have seen a huge increasein the number of train journeys, whichsurged to 260m a year in 2014, the high-estsincetheendof thefirstworldwar.

The decline in the governments shareof fundingwill comeaswelcomenewstothe Treasury, which saw the 38bn spi-ralling debt of Network Rail, the infra-structure operator, transferred to thestate balance sheet after it was in effectrenationalised lastAugust.

But rising fares have added to thewider debate on the cost of living. Sea-son tickets and other regulated fareshave risen by more than 20 per cent inthe four years since 2010, while averagewageshavegoneupless than7percent.

Critics say passengers will be unableto cope with further fare increases.

Stephen Joseph, chief executive of theCampaign for Better Transport, saidmore fare rises were not politically oreconomically sustainable and the gov-ernment would have to move to a com-pletelydifferent farestructure.

Unions also hit out at the planned rep-rivatisation of the East Coast main linein March after the ORR revealed thatthe profitmaking, state-owned fran-chise paid 217m, up from 203m, tothe Department for Transport in theyeartoMarch2014.

The East Coast has now returned1bn to the Treasury in the last fiveyears, saidMickWhelan,general secre-tary of Aslef, the train drivers union.Thats 1bn which can be spent . . . onthe railway or on our schools and hospi-tals, rather than disappearing in divi-dendstoshareholders.

Train operators received more than2bninpublic subsidies in thepastyear,

among them First ScotRail, at 506m;Northern Rail at 346m; and Arriva at152m. That was offset by 1.9bn paidto the government from nine profit-making franchises including commuterservices such as Thameslink and SouthWest Trains. As a result, overall netfundingtotrainoperators fell to100m.

Operators said average margins werejust 3 per cent and their processes weretransparent and open. But the ORRfound a wide variation in subsidies. Thegovernment contributed on average1.88 per passenger journey in England,comparedwith9.18 inWales.

Although the costs of running the rail-way rose in real terms by 84m, or 0.7per cent, in the year to March 2014,overall industry expenditure rose just0.03percentduringthepast fouryears.

Richard Price, chief executive of theORR, said the report showed the indus-try had been successful in keeping costs

stable. Passengers are increasingly themain funder of the railways and must becentral to developing plans for futureservicesandinvestment,hesaid.

The regulator attributed the cost riseto the growth in journeys and to short-falls in performance by Network Rail,including restructuring, financial pen-alties and compensation payments. A9.2bn investment in schemes includ-ing a new station at Reading andimprovements to the London Thames-linkservicealsocontributed.

Network Rail has faced renewed criti-cism after delays to Christmas engineer-ing work caused chaos at Kings Crossand Paddington. Shortly before Christ-mas the ORR found punctuality at itsworst level infiveyearsandnearlyeveryperformance and financial target hadbeen missed in the first six months of afive-year funding period under MarkCarne,NetworkRailschiefexecutive.

Transport

Treasury shoulders lighter rail costs burdenPassenger fares now cover61% of the bill, comparedwith 56% four years earlier

MATTHEW ENGEL

Lesley Grahame was wheeling herbright green bicycle up the steep hillabove Norwich station. The bike hadhuge saddlebags offering as muchluggage space as a small saloon car. Shelookedabit likeadistrictnurse,which isexactlywhatshe is innormal times.

For the moment, though, she is theGreen candidate for Norwich South, thepartys number-one target (alongsideBristol West) to add to its single existingseat in Brighton. A normal operationmight have parachuted in a television-ready London smoothie. The Greenschose a district nurse, perhaps reason-ing that someone the voters actuallywanted to seewould have an advantageonthedoorsteps.

Ms Grahame was wearing a MichaelFoot-ish donkey jacket adorned by leftiebadges, beneath a Green party hi-viswaistcoat and a tote bag slung over hershoulders. The ensemble was toppedoff, though, by a fetching silk scarf.Charity shop special, she insisted. ShehasScarySpicehairandanicegiggle.

What are you passionate about? Iasked. Peace. Disarmament. The cli-mate, she said. And Norwich. Thatwas good, maybe a bit pre-packaged.Then she had second thoughts andasked me to delete peace. Can yousay a nuclear weapons conventioninstead? I protested that I knew whatpeace was but was a bit hazy on theother thing. No, she insisted. Peace istoovague.

Norwich South used to belong toCharles Clarke, perhaps the fiercest ofall the fierce law-and-order home secre-taries of the New Labour years. He lostin 2010 by 310 votes to the Liberal Dem-ocrat Simon Wright, who had the small-est percentage of the poll (29.4) of anyvictorious candidate. He now has thelongest odds against him winning againofanyMP:14-1.

In a party staging a strategic retreat tofortified strongholds, Mr Wright is thelonesoldiermaroonedinno-mans land,

surrounded by enemies, ammunitiondwindling, relatives to be informed indue course. He is 35 but looks younger, amaths teacher who will not starve ifforced to return to the classroom butrefuses, almost alone, to accept it as cer-tainty. No one expected me to win lasttime, he says brightly. Mostly, though,herecitesLibDembriefing lines.

Hes been like a rabbit in the head-lights, says his most likely successor,Labours Clive Lewis. Mr Lewis is amuch more natural communicator:Grenadian father, English mother,strong background in trade union andstudent politics, and a career as a BBCEast Anglia regional reporter, whichmakes his recognition factor in Norwichbroader but more shallow than that of adistrictnurse.

However, his CV has a couple of inter-

esting twists.First (andthis is rare in themodern Labour party), he is a Territo-rial Army officer, did a tour of Afghani-stan and knows war as something otherthan metaphor: I got into a firefight onmy 38th birthday. Second (and thismay be even rarer), his political hero isTony Benn. Im not afraid of using thewordsocialist,hesaid.

To win, the Greens will have to comefrom fourth behind the Tories. Oppo-nents say their surge came several yearsago in Norwich and they are now fallingback in local elections. Last year a pollsponsored by Lord Ashcroft had Labourin front with Greens, the Tories andthe UK Independence party jostling forsecond, and the poor sitting MP a badfifth.

But Norfolk people are full of sur-prises. And all the while the Greens

team kept asking, Wheres Spin? asthough that were the computer pro-gramme needed to fit the Greens hot-test hope into the constraints of a 21st-century election. Spins in the sand-wichshop,camethemessage.

The name lightly disguised Ms Gra-hames campaign manager, SpinozaPitman, a splendid young man. Spinozawas the 17th-century Dutch rationalistwhose philosophy was regarded as fore-shadowing enlightenment. On the baddays, it will be wonderful to think thatrationality and enlightenment haveevenasmall role inthiselection.

Dispatch. Norwich South

Electoral cycle turns againstGreensOpponents say the partys

surge came several years ago

in its number-one target seat

Lesley Grahame,Green candidatefor NorwichSouth, sayspeace is toovague to bepassionateabout. Thedistrict nursewould prefer anuclear weaponsconventionSi Barber

Last yeara poll hadLabour infrontwithGreens, theTories andUkip jostlingfor secondand the poorsittingMPa bad fifth

CLIVE COOKSON SAN JOSE, CALIFORNIA

The UK today launches what its propo-nents say will be the worlds most ambi-tious attempt to discover drugs fordementia.

The charity Alzheimers Research UKissettingupa30mtrioofnewdrugdis-covery institutes at Oxford and Cam-bridge universities and University Col-lege London, which will work with aca-demic and industrial partners in Europeandelsewhere.

Simon Lovestone, scientific leader ofthe Oxford institute, outlined the pro-gramme at the annual conference of theAmerican Association for the Advance-ment of Science. This is the single larg-est Alzheimers drug discovery effort inthe world, he said. I am confident thatwewillbesuccessful.

Professor Lovestone said the UKapproach, using new methods to under-stand the complex molecular processesthat destroy the brain as Alzheimerstakes hold, would be far more produc-tive than the failed drug trials under-taken by the pharmaceutical industryoverthepastdecade.

Companies have not come up withany product that stops the Alzheimersprocess, in which toxic tau and amyloidproteins accumulate in the brain,despite spending $2bn on drug develop-

ment, he said. The best current treat-mentsmaydelaysymptomsofcognitivedeterioration for six to eight months insome patients but do nothing for theunderlyingdisease.

The real problem with these [clini-cal] trials is not that the drugs failed butthat we learnt nothing new about thedisease,ProfLovestonesaid.It ismorethanatragedyitsascandal.

He said the UK initiative would usepersonalised or precision medicine tofind drugs tailored to individualpatients in early stages of the disease, incontrast to the industrys recent trialsthat he called a perfect example ofimprecision medicine. They used thewrong drugs, antibodies aimed at amy-loid proteins, which were aimed at thewrong patients at the wrong stage of thedisease,hesaid.

The Alzheimers symposium at theAAAS meeting was chaired by DameSally Davies, Englands chief medicalofficer, as part of an international cam-paign to promote the UK governmentstwo medical priorities: tackling demen-tiaandantimicrobialdrugresistance.

Another participant, Kristine Yaffe ofthe University of California, San Fran-cisco,agreedwithProfLovestoneschar-acterisation of the pharmaceuticalindustrys efforts so far. It is uncon-scionable that we have spent so muchmoneyandhavealmostnothing toshowfor it, she said. Great Britain hasignited this new worldwide effort, amulti-faceted approach with the patientat thecentre.

The dementia drug discovery insti-tutes are inspired partly by the successof similar initiatives by cancer charitiesthat are starting to deliver new treat-ments topatients.

Alzheimers Research UK

Charity pours30m intodementiadrug institutes

JANE CROFT

Anewonline court shouldbe setup forsmall claims of less than25,000 simi-lar tosystemsusedbyinternetretailerssuch as eBay to resolve disputes, areporthasrecommended.

The system, which could be operationalby 2017, should work alongside the tra-ditional court service but means thatlow-value disputes can be resolvedmore quickly with judges only called inata latestagebytelephoneorvideo link.

The plans would mark a radicaldeparture from the way Britain dealswith lowvalueclaims.

British courts have lagged behindother countries in embracing new tech-nology. Some joke that the slow pace ofhearings and trolley-loads of legaldocuments wheeled into court each daywould not be out of place in CharlesDickenssBleakHouse.

Professor Richard Susskind, the prin-cipal author of the report produced by aworking group of the independent CivilJustice Council, said the current systemwas too costly and complex for liti-gants particularly those who cannotafford lawyers.

We should consider not simplyimproving our court system or evensalvaging our traditional ways ofresolving low-value claims. We shouldbe prepared to rethink the way in whichsociety handles civil disputes and prob-lems,hesays.

The recommendations, which willnow go before government, have beenwelcomedbythe judiciary.

Lord Dyson, Master of the Rolls,calledthereportanexcitingmilestoneand said Britain had been very slow inadapting technology compared withcountries likeSingaporeandAustralia.

Lord Dyson added there was no rea-son to believe many litigants preferredcourt hearings, adding for some it was aterrifying experience and he sawhugedemandfor theonlineservice.

The court would have three separatetiers for those seeking redress. The firstwould focus on dispute avoidance helping people diagnose and resolveissues with the second using experi-enced facilitators to help parties reachagreement. Only at the third stagewould professional judges becomeinvolved, deciding cases online or withthe option of phone hearings. Decisions

would be as binding and enforceable asusualrulings.

The online court would reduce costsandtheneedforhearings insomecases.

At present small claims up to 10,000and personal injury claims of up to1,000 make up almost 70 per cent oftotal hearings in the civil courts.However, the number of small claimshearings has declined in recent years from51,046in2003to29,603in2013.

Professor Susskind pointed to otherways that disputes are resolved includ-ing the eBay system, which resolves

60m disagreements a year among trad-ersusingonlinedisputeresolution.

He also singled out the FinancialOmbudsman Service, which deals withcomplaints by consumers against banksand resolved 518,778 disputes in 2013-2014. Most are resolved by case han-dlers with less than 10 per cent goingbeforetheombudsmaneachyear.

He also examined the legal systems ofother countries including Canada,where a new online Civil ResolutionTribunal will be launched in BritishColumbia this year to resolve claimsunder C$25,000. In Holland, Rechtwi-jzer 2.0 is a service from the Nether-lands Ministry of Justice and Securitythat helps with matters such as matri-monialdisputes.

However, some observers fear onlinecourts could offer an economy classjustice system to those who cannotafford lawyers while courts dealing withbig ticket litigation would continue toofferabusinessclassservice.

There are also issues of open justiceand transparency. Court hearings even in small claims cases are held inthe presence of the media and publicandthismaynotbepossibleonline.

Civil cases

Online court backed to resolve small claimsdisputes

An online court could resolvelow-value disputes more speedily

Election in-depthFor more sketches fromkey constituencies go to

ft.com/vote2015

It is unconscionable thatwe have spent somuchmoney and have almostnothing to show for it

NATIONAL

30 global locations www.efginternational.com

EFGslogan - 112x50mm - Generic ad - Q - Publication : Financial Times advert 2014 (20.08.2014)

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FEBRUARY 16 2015 Section:World Time: 15/2/2015 - 20:58 User: summersj Page Name: UKNEWS1, Part,Page,Edition: LON, 2, 1

Monday 16 February 2015 FINANCIAL TIMES 3

VANESSA HOULDERAND HELEN WARRELL

The firestorm sparked by the release ofsecret files on HSBCs Swiss operationscontinued to rage over the weekend, asthe bank issued a public apology, itsformer chairman Lord Green resignedfromhis role at theCityUK lobbygroup,Labour drew up plans for a root andbranch inquiry and Ed Balls defendedthepartyagainstchargesofhypocrisy.In a letter published in several news-

papers, Stuart Gulliver, chief executive,said he wanted to reassure customersthat its Swiss private bank had beencompletelyoverhauled.The Labour leadership was forced to

dismiss reports that several of its owndonors had been involved in tax scamsshortly after Ed Miliband announced

plans to address concerns that the richandpowerful operatedunderdifferentrules totherestof thecountry.The scale of discomfort across the

political spectrumwas laid bare yester-daywhenMrBalls, the shadowchancel-lor, first appeared to justify tax avoid-ancebyhispartysdonors.When asked about Labours 2013

donation from the businessman JohnMills, who gave 1.6m in shares, thuscuttinghis tax liability,MrBalls told theBBC:Look, theLabourpartyalsoneedsall thetax,all thedonationswecanget.The shadow chancellor then argued

that unlike the Conservative party,which had received millions of poundsfromhedge funddonors,Labourdidnothavealong listofwealthybenefactorsandany taxavoidanceby itsdonorswassmallbeer incomparison.On Saturday, Mr Miliband had

accused the government of failing tostrengthen HM Revenue & Customs,tellingLaboursWelshpartyconference:Wecanonlybeonenationwith one setof rules if our tax authority applies thesame standards to everyone. He high-lighted the single prosecution achievedusing the Revenue data and said thepublic believed large-scale tax avoidersgotawaywithaslaponthewristwhile

suspected big multinationals wonsweetheart deals. He announced athree-month review if elected thatwould investigateHMRCsdealingswithtaxavoidersandevaders.TheRevenueissuedastronglyworded

statement defending its record and thatof the coalition, saying: Over the fiveyears between 2010 and 2015 we willhave brought in more than 100bn ofadditionalrevenuesfortheExchequer.The Association of Revenue & Cus-

toms, representing tax officials, calledforanyreviewtobeconductedwithoutpreconceptionsorapredeterminedcon-clusion, sayingmembershadbeensub-jected to unhelpful and unnecessarycriticisms. TonyWallace, its president,said: It almost seems toblamethemfortherebeingavoidanceandevasion.Richard Murphy, a tax campaigner,

said the review was a golden opportu-nity to reform theway inwhichwe runour tax authority in the UK and calledfor its having a wide scope that couldsuggest a complete overhaul of thestructure, governance, management,systemsandauditof theRevenue.Some tax experts said Labours plan

to complete its reviewby Julywasunre-alistic. But there was support for areviewfromthosewhothought theRev-enuehad lost toomanyskilledpeople inthe pursuit of efficiency after cost-cut-ting reduced staff by nearly 40 per centsince its formationinApril2005.Paul Aplin, a partner of A C Mole &

Sons, a Somerset-based tax firm, said:HMRChasbeen increasingly stretchedand consistently underfunded since theday itwas formedand the 10thanniver-saryof its formation is a sensible time totake stock. Any reviewmust, however,be comprehensive, impartial, inde-pendent and informed. Its conclusionsmust command confidence. That can-notbeachievedinacoupleofmonths.A recent report by the governments

spending watchdog said the Revenuehad shown an exemplary response toits recommendations on tax avoidance.The National Audit Office described itas among the strongest governmentdepartments as regards its managerialcompetence.But its reluctance to prosecute off-

shore evaders because of difficulty inobtaining admissible evidence, theexpense of trials and risks of losing incourt contrasts with the willingness toprosecute benefit fraudsters. Althoughthe policy of not prosecuting most taxevaders who made a full disclosuredates from 1923, the generosity ofamnesties involving Switzerland andLiechtensteinhavebeencontroversial.

HSBC files

Labour outlinesfull inquiry intotheRevenue astax stormragesDiscomfort across politicalspectrum as parties try toclarify stance on donations

GEORGE PARKER AND CAROLINE BINHAM

Some top bankers should have theirbonuses deferred for up to 10 years toraise standards in the industry andimprove long-term risk management,Andrew Tyrie, a Conservative MP, hassaid.MrTyriebelieves that in somecases it

can takeup toadecade for problems tocome home to roost in financial serv-ices and that bankersneed tohave theirpayalignedwithrisk.The proposal for maximum 10-year

bonusdeferralperiodswas firstmade inJune2013by thecross-partyparliamen-tary committee on banking standards,chairedbyMrTyrie, toadviseonhowtoclean up the sector. But Mr Tyriesrenewed call for the proposal to beadopted will be given new urgency bylastweeks revelationsof seriouswrong-doing at HSBCs Swiss private bankbetween2005-07: the full extentof theirdetailshaveonly justcometo light.City regulators have proposed a sev-

en-yearbonusdeferralperiod for seniormanagers and five years for other staff,but Mr Tyrie believes that regulators

should be able to demand longer peri-ods in certain cases. Rewards shouldmatch the maturity of risk, he said.Thereneedstobeskin inthegame.The UK has one of the toughest

regimes for bankers pay, with not onlythe seven-year deferral proposed butalso, since January, rules that clawbackbonuses for errant bankers up to sevenyearsafter theyarepaidout.The financial markets watchdog, the

Financial Conduct Authority, is also atthe early stages of considering whetherclawbacksofbasesalarycouldbe legallyfeasible, its chief executive last weektold theTreasury committee,whichMrTyrie chairs. Mr Tyrie said clawbacksshould be used only in the most egre-giouscircumstances.EdBalls, theshadowchancellor, saida

Labour government would legislate toensure that bankers were held toaccount forup to10years in theeventofserious wrongdoing. Labour wants tochange the culture in the banking sec-tor to hold those who abuse their posi-tiontoripoffcustomerstoaccount.Assetmanagers pay to overtakeinvestment bankers page 17

Treasury committee

Defer bankers bonuses foradecade, suggestsTyrie

HELEN WARRELLAND VANESSA HOULDER

Ed Miliband will commit his party tohelpingBritains small businesses todayas he outlines an industrial strategylinking bigger profits in the economyto the individual prosperity of entre-preneurs.In a speech to executives at Jaguar

LandRover inBirmingham, theLabourleader will attempt to show he has acredible plan for theUKeconomyamidconcern among business leaders at the

partys shift to the left.MrMilibandwillexplain thathis partys plan for creatingwealthdoesnot relyonjust a fewat thevery top but on boosting productivityineverybusinessandsector.Hewill alsomakeclear that industrial

success is about sectors such as socialcare and retail as well as larger export-ers, as he sets out plans to boost voca-tional trainingandapprenticeships.Ourplan isbasedonthe idea that it is

only when Britains working familiessucceed that Britain succeeds, he willsay. And it is only our plan that recog-nises that every person in every sectorof theeconomyisawealthcreator.While Labour has already pledged to

cut and then freeze business rates for1.5m small business properties with aratablevalueof less than50,000,partyofficials hinted that they would go fur-therbyputting suchenterprises first inline for tax cuts. Officials also stressedsmaller companies would be given thesupport they need to invest, inno-vateandraise theirproductivity.Business rates have become a source

of difficulty for companies across thecountry, which have seen bills risesharply as trading conditionsworsen.Apostponement of the five-yearly reviewof ratable values left thousands of smallbusinesses paying rates fixed on pre-downturnvalues in2008thathaveriseneveryyear in linewith inflation.The coalition has sought to address

that, with chancellor George Osborneannouncing in the Autumn Statementthat business rate relief would be dou-bled for another year and the inflation-linked increase in business rates wouldbe capped at 2 per cent. He also prom-isedafull reviewof theratestructure.The reliability and lackof volatility of

the revenues frombusiness ratesmakesit likely that the next government willwant to do little to erode the 27bn ayeartheycontributetotheexchequer.Responding to Mr Miliband, Katja

Hall, CBI deputy director-general, saidaddressing productivity was the keyto raising living standards and makinggrowthwork for everyone. But she alsowarned: Productivity is different inevery sector and the approach to eachneedstobetailored if it is towork.

Bigger profits

Milibandpledges toboost smallbusiness inwealth strategy

Ed Miliband sayshis plan recognisesevery person inevery sector ofthe economy isa wealth creator

1Number ofprosecutions fromstolen HSBC data

135mTax collected frompeople named inHSBC list

34bnGap betweentax collectedand tax owed

2bnTax collected since2010 mainly fromSwitzerland

HMRChas beenstretched and consistentlyunderfunded sincethe day it was formed

NATIONAL

Peter Macdiarmid/Getty Images

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4 FINANCIAL TIMES Monday 16 February 2015

ANDREW BOUNDS ENTERPRISE EDITOR

Britains banking regime has been tight-ened so much after the scandals of thefinancial crisis that foreign companiesare struggling to open accounts, threat-eningfuture investment.

The UK government has appointed aspecialist to help foreign investors aftera floodofcomplaints.

HSBC paid $1.9bn to settle moneylaundering allegations in the US inDecember 2012, prompting Britishbanks to tighten regulations. HSBC is

now accused of helping customers of itsSwissbranchtoavoidtax.

Foreign companies wanting to openUK subsidiaries face rigorous checks,with many directors required to visitbranches inpersontoverify identities.

Martin McDonagh of Hart Shawaccountants in Sheffield said one UScustomer had been asked by HSBC toprovide more information than he putsinhisreturnstotheUStaxauthorities.

They want to see as much financialandindividual informationaspossible.

He said the aerospace business hadinstead opted to form a company in thename of its UK representative. A yearlater it had 3m turnover and severalUK employees and was trying to estab-lishasubsidiaryagain.

They want the UK to be their baseinto Europe. But it is so difficult to getthe bank account. It has got much worseinthe last fewyears.

George Boukouris, of MCS BioMed,who works for a number of medicaldevice makers, said companies, espe-ciallysmallerones,weredeterred.

He set up a UK subsidiary for a USbusiness but found it too difficult toopen an account for it. He said: I wentto every bank on the high street. Youcannotgetabankaccount intheUK.It isjust too difficult. It is a shame. It is driv-ingbusinessesawayfromtheUK.

HSBC wanted every director andthose of the investor companies to visitits New York branch with theirpassports.

Mr Boukouris said the Netherlandsand Belgium had become popular alter-natives, even for companies withNationalHealthServicecontracts.

Brussels-based Healthlink Europeprovides inward investors with a fulfil-ment and accounting service fromwhich to work in the EU. It is workingwith70medicaldevicecompanies.

It is so much easier. I cannot see howthey can do it and not the UK, Mr Bouk-ouris said. Many US executives do nothavepassports,headded.

British American Business, whichpromotes trade between the countries,said it had raised the issue with UKTrade & Investment, the governmentarminchargeof tradepromotion.

A government spokesman said: We

are committed to ensuring our financialsystem is a hostile environment forillicit finances.

Today, the British Banking Associa-tion is publishing a guide for businessesabout what is required to open anaccount.

HSBC said: As part of our know yourcustomer due diligence procedures wemust obtain a full understanding of aprospective customers business, itsprincipal controllers and beneficialowners.

Last Wednesday UKTI launched acampaign to persuade US tech compa-nies to establish their internationalheadquarters intheUK.

The UK remains the most popularEuropeancountryforUSinvestment.

Due diligence

Banking rules frustrate foreign investorsGovernment appointsspecial adviser aftertorrent of complaints

TANYA POWLEY MANUFACTURING CORRESPONDENT

British companies are attempting toboldly go where no manufacturer hasgone before by enabling huge pieces ofhardware for satellites to be built inspace.

In-orbit manufacturing has thepotential to save large amounts of timeand money and enable longer and moresustainablespaceexplorations.

Last November, Nasa and US start-upMade in Space reached a milestone bymaking the first 3D-printed part inspace using a machine installed on theInternationalSpaceStation.

In the short term, in-orbit manufac-turing is likely to focus on making smallreplacement parts and components,such as spanners, by 3D printing insteadof waiting weeks or months for them toarrive fromEarth.

However, a Leicestershire-based eng-ineering company has taken space-based manufacturing one step furtherby developing a way to make largestructures such as antennas, booms andpanels. Such huge parts are currentlylimited in size and shape by the need todeliver themviaanexpensiverocket.

Magna Parvas technology would ena-ble much bigger hardware to be built byusing a technique called pultrusion, amixture of pulling and extrusion, whichenables the creation of long compositestruts or booms. Everyone wants bigstuff inspacebut theycanthave itat themoment. Our technology would enablethat to happen, says Andy Bowyer,co-founderofMagnaParva.

The company last year received about200,000infundingfromtheEuropeanSpace Agency (ESA) and hopes to workwith the UK Trade & Investment toexport its technology overseas.Funding is a key thing to making thishappen, says Mr Bowyer. A US-basedcompany, Tethers Unlimited, is alsoworking on a similar concept, dubbedSpiderFab, which it hopes to demon-stratewithinthenextcoupleofyears.

Robert Hoyt of Tethers believes thedevelopments will help the space indus-try to evolve beyond its current tenu-ous foothold in Earth orbit to establish arobust, sustainableoff-worldeconomy.

Other British companies have workedwith the ESA to show it is possible to 3Dprint a lunar base using the moons soil.The habitat was built using UK com-pany Monolites D-Shape 3D printer anddesigned by London-based architect

Foster + Partners. We are at the realbeginning of these kind of technologicaldevelopments, says Laurent Pam-baguian, an engineer at ESAs materialstechnology section. We have demon-strated that it is possible to build a lunarbase using a 3D printer and we believe itcould be transferred to other celestialbodiessuchasMars.

Nick Cox, head of technology at theUK Space Agency, says the use of 3Dprinting in space has big potential. Weare supporting ESAs lead with othermember states to get the ball rolling,and working closely with industry to tryandfocusonwhat theyseeas the impor-tantareas,hesays.

The government has already identi-fied the global space market as one ofeight great technologies that will helprebalancetheeconomy.

The UK agency aims to increase Brit-ains market share in the sector from6 per cent in 2008 to 10 per cent by2030, and triple employment to100,000. However, Britain is still morecautiouson its investment inspace, con-

tributing less to the ESA than countriessuchasGermany.

According to Mr Cox, the focus is oncreating the right environment foradopting 3D printing. While the US islargely focused on thermoplastics,Europeisseentobeinthe leadonmetal-based3Dprinting inspace.

In 2013, ESA launched the Amazeproject, which brings together 28 part-ners from European industry andacademia, including Astrium, Airbusand Cranfield University, and aims toput the first 3D metal printer on theInternational Space Station. One of itsultimate goals is to print a satellite in asinglepieceofmetal.

Bhavya Lal, a member of the US-based National Research Council com-mittee on space-based additive manu-facturing, which has published a reporton the sector, says she is optimistic forextensive use of 3D printing in spaceover the next 10 to 20 years. She says:There is enormous progress that needsto be made still . . . but it is important tonotethatmuchisbeingdone.

Engineering. In-orbit breakthrough

Toboldly gowherenomanufacturerhas gonebeforeMagna Parvas technologywill

enablemuch larger hardware

to be built aboard a spacecraft

A 3D printer is tested in a weightless environment: replacement parts in space are limited in scale by the need to deliver them via an expensive rocket Nasa

SARAH GORDON BUSINESS EDITOR

Honesty and integrity are the mostimportant values uponwhich to judgea company, according to some of theUKs top industrial and financial boardmembers.

Honest behaviour counts for evenmore than the quality of a companysproducts and services, said MatthewChatterton, director at Ipsos Mori, thepolling company that questioned morethan 100 directors and chairmen fromtop UK industrial and financial compa-nies.

In view of the various corporatescandals in recent years and the impactthey have had, its not surprising thatBritains business leaders continue tostress the importance of honesty andintegrity.

Four-fifths of the 108 captains ofindustry surveyed by Ipsos Mori from

thetop500industrial companies,meas-ured by turnover, and the 100 top finan-cial companies, measured by capitalemployed, said they viewed these two qualities as more important than man-agement or financial performance.Some 24 per cent said financial per-formance was extremely important,down from 35 per cent in 2008 at thepeakof thefinancialcrisis.

The findings are in line with broadersurveys of public perceptions of busi-ness.

A recent Ipsos Mori study found athird agreed that honesty and integritywere important when judging a com-panys performance, second only to cus-tomerservice.

The most admired British company,chosen by nearly one-fifth of those sur-veyed was John Lewis, followed byRolls-RoyceandVirgin.

John Lewis has been lauded by gov-

ernment as a model for caring capital-ism,aswellas for its success inretailing.

The John Lewis Partnership, whichincludes John Lewis department storesand Waitrose supermarkets, is ownedby its more than 90,000 staff, or part-nersas theyareknown.

Each year they receive an annualbonus, paid as a percentage of salary,which is decided by the board, based onthe surplus after investment is sub-tracted from the final profit for theyear.

Sir Richard Branson, Virgin Groupsfounder, was regarded as the mostimpressive business person in Britain,the third time he has topped the list infouryears.

Nearly a fifth of those surveyed nomi-nated Sir Richard, followed by Sir Mar-tin Sorrell with 13 per cent and Sir JamesDyson with 9 per cent. There were nowomeninthetop10.

Company values

Topdirectors praise honesty and integrity

Engineers at the ManufacturingTechnology Centre in Coventry arelooking at how 3D printing can helpbring materials back safely from Mars.The MTC, one of the seven research

centres that make up the government-backed High Value ManufacturingCatapult, has 3D printed a titaniumlattice structure to surround the earthreturn capsule for the 2025 Marsmission.There was an accident a few years

ago with a capsule that came back toearth and its parachutes failed so itcrashed and the container wasruptured, says AndrewTriantaphyllou, an engineer at MTC.The challenge was to build a

material strong enough to withstandfreefall impact on re-entry, crushable

enough to reduce impact shock for itscontents and sufficiently heat-proof tokeep the sample below a specifiedtemperature, according to DavidWimpenny, project leader at the MTC.Magna Parva developed the

material but sought MTCs help infinding the best way to make it. Theyplan to test the structure this year.The project is one of many looking

at how 3D printing, also known asadditive manufacturing, could be usedto improve space hardware and savecosts by reducing the amount ofmaterial, such as metal, wasted.Companies such as Airbus andAstrium in the UK are working on 3Dprinted metal components.Nick Cox, head of technology at the

UK Space Agency, says companies willonly use 3D printing to make parts forsatellites and spacecraft where itconfers benefits over othermanufacturing techniques.Tanya Powley

3D printingExperts face challenge tohelp Mars mission succeed

EMILY CADMAN

Council tax has overtaken credit cardsas the most common debt problem,highlighting the strain on family budg-ets fromyearsofstagnant incomes.

Citizens Advice, which has more than3,000 centres around the country, saidthere had been a notable shift in prob-lems away from consumer credit on dis-cretionary items and towards basichouseholdbills.

Itexpects todealwith191,400casesofcouncil tax debt in 2014-15, up 20 percent on the previous year. However,over the same period, debt problemswith credit cards are expected to fall by12 per cent to 155,700, with unsecuredloan, overdraft debts and mortgageproblemsalso falling.

The overall number of debt problemsis also falling as the economy recovers,but Gillian Guy, chief executive of the

charity, said the recovery in householdfinanceswillnothappenovernight.

There is a concerning shift in thekindofdebtproblemspeoplearegettinginto. The mainstream debt problems ofthe credit crunch, from credit cards toloans, are morphing into even moretroublingproblems,shesaid.

From April 1 2013 hundreds of thou-sands of people became liable for coun-cil taxforthefirst time,after thegovern-ment decided to cut by 10 per cent theamount available for relief and givelocal authorities the power to set theirowneligibilitycriteria.

The Local Government Associationwarned last month that rising numbersof low income families were likely toface bigger bills in the future as councilsstruggled to fund the discounts whenother budgets are being cut. It foundthatonly45outof326councilscontinueto provide the same level of discount

available under the old scheme. TheLGA said the reduction in centralgovernment funding had left councilswith an unpalatable choice betweencharging council tax to the working-agepoor, who in many cases may not havepaid council tax before, or findingadditional savings to spending on localservices on top of the cuts of 40 per centbeing made to council funding bygovernment.

Household debt as a share of incomehas fallen over this parliament asconsumers rebuilt their balance sheetsand banks tightened lending standards.However, the Office for BudgetaryResponsibility expects the ratio to startrising again this year as people take onmoredebt,particularly formortgages.

It expects households gross debt toreach 180 per cent of income by 2020,higher than the 170 per cent it reachedjustbeforethefinancialcrisis.

Household finances

Council taxbecomesbiggest debt problem

The Highland Games, or StrongmanSkirt party in Chinese

JAMES KYNGE

Londons Savile Row is the Tall, Rich,Handsome street, the soaring Shardbuilding is a Star Plucking tower andkilt-wearing Scotlands Highland GamesaretheStrongmanSkirtparty.

That is according to a new set of Chi-nese names for 101 British tourist desti-nations to be unveiled today. VisitBrit-ain, the national tourism agency, is giv-ing the UKs most loved attractions aMandarin makeover as part of a cam-paignto luremoreChinesevisitors.

The country has lagged behind inattracting Chinese tourists, partlybecause visitors must get a UK visaseparately from the common visa thatcovers members of the EUs Schengenarea allowing free movement aroundrival hotspots such as France, Italy andSpain.

VisitBritain aims to boost revenuefrom Chinese tourism to 1bn annuallyby 2020, up from 492m in 2013. Tour-ists from China spend an average of2,508 per visit, compared with theoverallaverageof640.

China is a different country with adifferent language and British namesdont mean anything to Chinese [peo-ple] necessarily, said Robin Johnson,head of overseas operations at VisitBrit-ain. This [campaign] creates namesthat actually bring to life what theattractions are. We need to bring out thewarmth and the welcome, which is soimportant toChinesevisitors.

The names were suggested bymillions of users of Chinese social mediaover the past 10 weeks, with a total of13,000 names suggested. In an outbreakof online democracy, these suggestionswere then whittled down to three lead-ing contenders for each of the 101attractions by a voting process onVisitBritainsChinesewebsite.

The outright winner of the namingballot, with 15,177 votes, was a sugges-tion by an internet user identified asQiaoChenforhisrendering intoChineseof Llanfairpwllgwyngyllgogerychwyrn-drobwllllantysiliogogogoch, the villagein Wales with the longest place name inEurope. His winning suggestion wasthat the village be called Jian Fei Cun, orHealthy Lung Village, because justsaying it requiresstrong lungs.

In the bucolic county of Dorset, tour-ism executives were scratching theirheadsover thethree leadingsuggestionsforrenamingtheCerneAbbasGiant, thehuge chalk figure with a full maleanatomy. Stylish Man With Strength,Giant Without a Stitch of Clothing andBig White Streaker are among thecandidates.

Down at the Royal Oak pub in CerneAbbas, one man reached by telephonesaid: There are plenty of names for theGiant here, but you might not want topublishthem.

China visitorsTouristattractionsgetMandarinmakeover

NATIONAL

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Monday 16 February 2015 FINANCIAL TIMES 5

INTERNATIONAL

VINCENT BOLAND DUBLIN

Irelands unofficial motto used to beCadmle filte, or a hundred thou-sand welcomes. Since the countryentered its financial crisis seven yearsago, those warm words have been dis-placed by something more strident WearenotGreece.As the commentator Fintan OToole

noted in a piece for the Open Democ-racy website recently: If governmentministers and technocrats woreT-shirts, this sloganwouldbe imprintedonthose inchargeofmanaging thecrisisthathit Irelandin2008.Yet as eurozone finance ministers

meet inBrussels today topressGreece toseek an extension of its 172bn bailout,Irishministers seem insistent that Ath-ens complete every last yardof its gruel-ling austerity programme just as theIrish did. Theyre saying, Weve doneour homework, it wasnt easy, and partof the homework is keeping Germanyhappy, and theGreeks are being unreal-istic, says Tom Healy, director of theNevinEconomicResearchInstitute.This lack of solidarity with Greece

from Dublin is notable. It echoes theposition of Spain and Portugal, whichalsoargue that theyhave taken thehardsteps needed to stabilise their econo-mies and fiscal positions, and that therecanbenospecial concessions foroneEUmember state. It chimes with the gov-ernments insistence argued mostforcefully in parliament this month byMichaelNoonan, the financeministerthat Irelands enormous sovereigndebt,which he said was 110 per cent of eco-nomicoutput lastyear, is sustainable.The governments stance has drawn

criticism from commentators, econo-mists and opposition politicians. Theyargue that Greece deserves more sup-port as a fellow eurozone economy indistress, and that the Irish position is acynicalmove to ensure that Greece getsnoconcessionsnotofferedtotheIrish.Wehavebeenquitedismissiveof the

Greeks and their predicament wehavedonenothing topositionourselvesto help them, says Michael McGrath,finance spokesman for the oppositionFiannaFilparty.StephenKinsella, an economist at the

University of Limerick, says the stancereflects not just the Irish desire to be intheGermancampbutanewfoundclose-nessbetween Irish andGermanofficialswho have worked together on Irelandsfinancial rescue. They have eachothersmobilenumbers; theyhavegoneouttodinnertogether,hesays.But he adds that should not prevent a

more accommodating approach to theplight of Greece, especially given therisk that it might be forced to leave theeurozone. If that is the threat, Irelandshouldbemakingmuchmoreconstruc-tivenoises,hesays.The Irishposition isnot illogical,how-

ever. More than a year after its bailoutexpired, the economy is growingstrongly, job creation is accelerating,and it has regained full access to inter-national capital markets. Officials saythey have no intention of allowing theGreekcrisis to threatenthatrecovery.Moreover, the Irishexperienceof aus-

terity and the bailout is different from

that of the Greeks. During the threeyears of Irelands 67bn bailout about28bn, or 15 per cent of gross domesticproduct,wassuckedoutof theeconomythrough spending cuts, tax rises andother measures. But Mr Kinsella sayssocial welfare spending, for example,did not fall dramatically, and whilethere was a rise in inequality, some oftheausteritymeasures, especially in taxrises,werefairlyprogressive.That helps explainwhy Irelandhas no

equivalent to Syriza, the radical newleftwingGreekgovernment,orPodemos,whose anti-establishment platform isbecoming so popular in Spain. Anti-austerity politics in Ireland is unfocusedandmarginal. Even Sinn Fin, the mosthardlineIrishpoliticalparty,has failedtocapture it and in any case the party isoneof theoldest inEurope.Theonce-loud Irishdemands fordebt

relief including, in its earlydays, fromthe current government have faded.Butwith a general electiondue in abouta year, a change of government couldreignite them. The risk in Irelandsunsympathetic stance on Greece, somepeople say, is thatDublinwill fail towinfriends for debt relief if it needs themagain.We should be supportive of a pan-

European debate on debt sustainabil-ity,MrMcGrathsays. Were still averyhighly indebtednation.WolfgangMnchau page 7

Europe. Bailout terms

Athensplea for special treatmentgiven cool receptionbyDublin

Ireland shows little sympathy

as eurozone partner struggles

to copewith austerity burden

Gross government debt

Source: Thomson Reuters Datastream

As a % of GDP

Forecast

IrelandGreece

Government expenditure oninterestAs a % of GDP

Forecast

IrelandGreece

CLIVE COOKSON SAN JOSE

Theworldmustnotdrop itsguard in thefight against Ebola in west Africa eventhough the death toll and infection rateare falling, leading scientists andhealthpractitionershavewarned.Speakersat theAmericanAssociation

for the Advancement of Science annualconference said at the weekend thevirus would remain a threat in theregion until it was completely eradi-cated.SuppressingEbola toavery low level

would not be a success, said AnthonyFauci, director of theUSNational Insti-tute of Allergy and Infectious Diseases.Weneed to suppress it to zero. It is notoveruntilwehaveseenthe lastcase.The latest figures from the World

Health Organisation show there havebeen 23,000 Ebola cases and 9,300deaths in Liberia, Sierra Leone andGuinea since the outbreak started earlylastyear.Although the trend is downward,

about 100new cases are being reportedevery week, said Iza Ciglenecki of

Mdecins Sans Frontires. We cannottake our eyes off the ball until we get tozero,addedKeijiFukuda,WHOheadofhealth security. He declined to forecasthowsoonthatcouldbeachieved.Health authorities are looking at the

lessons of the west African Ebola out-break to prepare for the worlds nextlethal epidemic. There are worse sce-

narios than Ebola out there, such as asevere respiratory disease transmittedbyarespiratoryroute,saidDrFukuda.One priority is strengthening the glo-

bal disease surveillancenetwork so thatinfectious outbreaks canbe spottedandsuppressed as soon as possible. Ebolawas already well advanced in westAfrica before it was clear there was anexplosiveoutbreak,saidDrFauci.Even when it became clear that west

Africa faced a health emergency, DrFukuda said, the complexities of theoutbreak, combined with fear, meantthat the international community didnotmovequicklyenough.The other big lesson is how easily an

epidemic can emerge in countries withhealth infrastructures asweakand frag-mented as those in west Africa. TheWHO is currently assessing the healthcapacities of countries across the conti-nent. In many cases those capacitiesare less robust than we had expected,Dr Fukuda said. This is an area wherewehavetopayattention.The three countries hit hardest by

Ebola will need particular help torebuild their healthcare systems,whichwere weak to start with and have beendevastated. About 500 doctors, nursesand other health workers have died intheepidemic.The issue isnot justhowwesnuff out

the last casesofEbolabuthowtheworldis going to rebuild health systemswhensomanydoctors andnurses have died,said Dame Sally Davies, Englands chiefmedicalofficer.

Epidemic

Ebola battle not over,warnhealth experts

67bnSize of Irish bailout

172bnSize of currentGreek bailout

Suppressing Ebola toa very low level wouldnot be a success.We needto suppress it to zero

ALEX BARKER AND KERIN HOPE ATHENSSTEFAN WAGSTYL BERLIN

Greece faces a reckoning in Brusselstoday that will bring into reliefprofound differences with its interna-tional creditors and test the mettle ofthe radical leftist government riding amoodofdefiance inAthens.

Weekend talks uncovered a bigger thanexpectedgapbetweenthe twosides, set-ting up a stand-off between Yanis Var-oufakis, theGreek financeminister, andhis eurozone counterparts when theymeet thisevening.People involved in the preparatory

discussions, which were intended todefine and compare respective posi-tions, saidAthens raised farmoreobjec-tions to the existing bailout conditionsthanthe30percentcitedpubliclybyMrVaroufakis inthepast.Such big differences make the likeli-

hoodofreachingadealonextending thecurrent 172bn bailout, which expiresat the end of February, even moreremote. Those involved in the talks saidtheywerebracedforadifficultweek.Wolfgang Schuble, Germanys

financeminister, is determined Athensshould stick to its rescue programmeasaconditionof furtherassistance.Dogged resistance to such demands

from Alexis Tsipras, Greeces primeminister, has seenhis poll standing soarat home, with thousands taking to thestreetsyesterdayinarallyofsupport.Over theweekendMrTsipras andhis

finance minister indicated they werewilling to see a compromise deal. MrTsipras toldGermanmagazine Sternhewantedawin-winsolution.MrVarou-fakis toldtheKathimerininewspaperhehad a significant degree of hope that amutually beneficial deal could beagreed, evenat the eleventhhour. ButPanagiotis Lafazanis, leader of Syrizasfar-left faction, was less emollient, say-ing he would not allow his partys eco-nomic plans to be chopped up, subdi-videdorsplit intogoodandbad.Germany wants Greece to stay in the

eurozone, but not at anyprice. Ifwe go

deeper into the [debt] discount debate,there will be no more reforms inEurope, a senior German official said.Therewill be joyful celebrations in theElyse and probably inRome, too, if wegodownthispath.Berlinwants Greece to open tonights

meetingby layingout its plans, explain-inghowthey fit theexistingprogrammeand what finance Athens will rely onfromMarch 1. A second senior Germanofficial saidAthenscouldsecureconces-sions and support but only in theframeworkof thecurrentagreement.There will be a compromise. I dont

reject that. Im rejecting someonethrowing a bomb into the EuropeanCommission [which plays a central role

in the rescue programme] and taking ithostage, theofficialadded.Berlin is open to easing the fiscal

straitjacket. Athens wants a cut in theproposed fiscal surplus from 4.5 percent to around 1.5 per cent. In Berlinsview,3percentmightbepossible.Although eurozone officials have

insisted today is the last chance forAth-ens to request an extension severalcountries would need the next twoweeks to approve it in their parliaments some have raised the possibility ofholdinganothermeetingthisweek.But that is contingent on both sides

making enoughprogress today tomakesuchasessionworthwhile.Vasileios Gkionakis, global foreign

exchange strategy chief at UniCreditbank, wrote to clients: I think it is fairto say that . . . the irresistible force willbemeetingthe immovableobject.If the bailout expires at the end of the

month, Athens would emerge withoutan EU financial backstop for the firsttime since the eurozone crisis began inMay 2010.Many eurozone officials fearmarket turmoilwouldensue.

Brussels talks

Gap still yawnsbetweenGreece and its creditors

Im rejecting someonethrowing a bomb into theEuropeanCommissionand taking it hostage

Chris Jackson; Milos Bicanski/Getty Images

FEBRUARY 16 2015 Section:World Time: 15/2/2015 - 20:57 User: summersj Page Name: WORLD1, Part,Page,Edition: LON, 5, 1

6 FINANCIAL TIMES Monday 16 February 2015

ident Goodluck Jonathans pledge toretake all the territory seized by thejihadis since last year, particularly inBorno state, where they are strongest.

At the weekend Mr Jonathan cameunder fresh verbal attack for allowingthe polls to be postponed. The accusa-tions were mounted by Olusegun Obas-anjo, the former army general and headof state who was instrumental in hisascent to the presidency but has sincebecomehis fiercestcritic.

Iraq, Syria and Afghanistan all heldelections while in the throes of insur-gencies, Mr Obasanjo said, accusing hisformer protg of using the battleagainst Boko Haram as a pretext toremain president by hook or crook.The military interference in the electionschedule was a sad day for democracyinNigeria,hesaid.

Mr Jonathan, who is at risk of beingunseated by challenger MuhammaduBuhari,a formermilitaryruler,hitback.Spokesman Reuben Abati said the pres-ident had no intention of subvertingthe electoral process and went on toaccuse Mr Obasanjo of scheming along-side others within and outside thecountrytoplungeNigeria intocrisis.

been launched in recent days. Westernofficials following the conflict said it wasrealistic that the army could build onrecent success in flushing out the insur-gents from Yobe and Adamawa, two ofthe three states where Boko Haram hasseizedterritoryoverthepastyear.

However, they said it was unlikely thegovernment would be able to fulfil Pres-

troversially postponed by the electoralcommission until March 28 after secu-ritychiefs saidtheywereunable toguar-antee safety at the polls while conduct-ingthecounter-offensive.

A government official said there werereasons to be hopeful that this time themilitary would be more effective inretaking territory seized by BokoHaram in its attempt to carve out anIslamic caliphate in Nigerias impover-ished northeast. He said the army hadnew equipment and an infusion of freshtroops and commanders, including spe-cial forces trained by the British, to rein-vigorate thecampaign.

Fresh military collaboration with theneighbouring states of Cameroon, Chadand Niger all three of which have beenattacked recently should prevent theinsurgents from slipping across bordersaseasilyas theyhavebeendoing.

The idea is to put them [BokoHaram] into a defensive position so wecan relieve military personnel to joinINEC [Independent National ElectoralCommission] to safeguard the polls,theofficial said.

A Nigerian security source confirmedthat fresh offensive operations have

WILLIAM WALLIS ABUJA

AsNigerianpolitical infighting intensi-fiesover thepostponementofageneralelection on security grounds, themili-tary has launched a significant coun-ter-offensiveagainst the Islamist insur-gentsofBokoHaram.

At the same time, hundreds of BokoHaram extremists launched their firstall-out assault on the city of Gombe,underscoring their continuing capacityto spring surprise attacks across a swathofnortheasternNigeria.

After hours of intense fighting on Sat-urday, the Nigerian army repelled theattack on Gombe, which lies outside thethree states at the centre of the conflict.Witnesses said that Boko Haram fight-ers scattered leaflets as they retreated,warning inhabitants that they would bekilled if they voted in the forthcomingpresidentialpoll.

A female suicide bomber blew herselfup at a crowded bus station in the city ofDamaturu, Yobe state, yesterday, killing10 people and wounding 30, Reutersreported.Nooneclaimedresponsibility.

The election was originally scheduledto take place on Saturday but was con-

Insurgency

Nigeriamilitarymoves to retake territory fromBokoHaram

ANigerian soldier stands guard ata festival in Maiduguri, Borno state

INTERNATIONAL

COURTNEY WEAVER DONETSKROMAN OLEARCHYK KIEV

A shaky ceasefire in Ukraines breaka-way east appeared to be taking hold yes-terday, with international monitorsreporting a significant easing of thefightingthathasragedformonths.

Ertugrul Apakan, chief of a monitor-ing mission from the Organisation forSecurity and Co-operation in Europe,said in Kiev: The ceasefire has beenholding in the first 12 hours, with someexceptions, notably in Debaltseve,RaihorodkaandLuganskcity.

But by the evening Ukrainian officialsclaimed the separatists had sharplystepped up artillery attacks after theceasefire came into effect at midnightonSaturday.

Anatoly Stelmakh, a Ukrainian armyspokesperson, said that between 3pmand 7pm Kiev time separatists had firedupon Ukrainian positions, mostly in theregion of Debaltseve, a strategic railhub, more than 30 times. That broughtthe total number of shelling and rocketattacks for thedaytomorethan60,hesaid.

There was no independent confirma-tion of the attacks yesterday evening.But with Russian-backed separatistshaving said earlier they reserved theright to continue attacking Debaltseve,where they claim to have surroundedthousands of Ukrainian soldiers, it wasuncertainwhethera lastingpeacewouldemerge from a conflict that has claimedmorethan5,300lives.

Of course we can open fire [onDebaltseve], it is our territory, EduardBasurin, a senior rebel commander, wasquoted by Reuters as saying by tele-phone. In separate comments, he said:Atanemergencymeetinganalysingthesituation in Debaltseve, it was foundthat the Ukrainians violated the cease-fire and continued its killing of the civil-ianpopulation.Kievdeniedtheclaims.

The stand-off at Debaltseve, where

fighting has been fierce in recent days,appeared to be developing into a stick-ingpoint thatmightseebroader fightingerupt once more. Just days after hesigned the Minsk ceasefire accords,which were brokered on Thursday byUkraine, Russia, France and Germany,the prime minister of the self-declaredDonetsk Peoples Republic claimed itdidnotapplyto fighting inDebaltseve.

The Minsk agreement doesnt say aword about Debaltseve, AlexanderZakharchenko was quoted by RussianagencyInterfaxassayingonSaturday.

Though the Minsk accord envisagesUkraine regaining control over the east-ern regions border with Russia afterlocalelectionsareheld intheenclaves in

accordance with Ukrainian law, MrZakharchenkowarned:Ifourdemandsfor de facto independence are not met,we will declare that the whole Donetskregion is ours. If it doesnt work out withpolitical means, we can use othermeans.

Mr Apakan accused the separatists ofviolating the Minsk agreement by deny-ingOSCEmonitorsaccess toDebaltseve.

Colonel Andriy Lysenko, a Ukrainianarmy spokesman, said governmentforces would be ready in two days tostart complying with the second of theMinskaccords13pointsapullbackbyboth sides of heavy weaponry from a100km buffer zone along the front line.But he said separatists were conductingprovocations in Debaltseve and otherregions to torpedo the second attemptsince September to achieve a lastingtruce. Another failed ceasefire pactmight lead to further western sanctionsonRussiasailingeconomy.

Russia-backed rebels

Tenuous ceasefire testedby eastUkraine shelling

BORZOU DARAGAHI CAIRO

Fighters affiliated with the Islamic Stateof Iraq and the Levant, or Isis, claimedyesterday to have killed up to 21 Egyp-tian Coptic Christians they were holdingin the central Libyan city of Sirte, thesecond urban centre they have seized inthe chaos that has raged since the 2011topplingofColonelMuammerGaddafi.

Video footage set to religious musicand posted to the internet purported toshow black-masked Isis fightersbeheading at least a dozen men at whatisdescribedastheSirtecoast.

The film, produced in the distinctivevisual style of execution videos by Isis inIraq and Syria, is the clearest sign yet that the group has expanded beyond itsbase intheMiddleEast tonorthAfrica.

The killings of the Egyptian guestlabourers, if verified, will add to risingregional concern at militant groups inLibya. President Abdel Fattah el-Sisi ofEgypt announced an urgent meeting ofsenior security officials and declaredsevendaysofmourning.

Earlier the jihadis claimed to havetaken control of municipal institutionsin the coastal city that was Gaddafishome town and have started to broad-

cast sermons by Isiss leader, Abu Bakral-Baghdadi, on radio stations. A mem-ber of the citys municipal council wasquoted by local media as saying jihadishad seized control of 70 per cent of thecityofsome60,000people.

Italy announced yesterday that it hadclosed its embassy in Tripoli, because ofdeterioratingsecurity.Theembassyhadbeen the last remaining significant dip-lomatic outpost in the capital. PaoloGentiloni, Italys foreign minister, lastweek reiterated Romes willingness tosend peacekeepers to Libya as part of aninternational mission. We cannotaccept the idea that theres an active ter-rorist threat only a few hours from Italybyboat,hetoldItalianmedia.

Oil-rich Libya is locked in a complexcivil war pitting a loose coalition ofarmed groups loyal to the electedgovernment established in the easterncity of Tubruq against Islamist fightersin Tripoli, backed by Libya Dawn, amilitia fromMisurata.

Taking advantage of the chaos, jihadigroups, including some affiliated withIsis, have also begun to expand fromtheir base in the eastern city of Dernaacross Libya, declaring Islamic prov-inces intheeast,westandsouth.

Libya

Isismilitants say 21Copts dead

If it doesnt work outwith politicalmeans,we can use othermeansDonetsk Peoples Republic premier

There has been a lot of attention onthe mosque, but it has been helpful instopping the flow of foreign fighters,said Magnus Ranstorp, the Swedishhead of the EUs anti-radicalisation pro-gramme who was recently appointed toleadCopenhagensExpertGrouponpre-ventingviolentextremism.

It is better to have open, sharp dia-logue, and if they break the law we canprosecute. You have two choices maintaincontactordonothing.

Oussama Mohammad El-Saad, presi-dent of Grimhojvej mosque, added hisvoice to those of other Danish Islamicleaders incondemningthegunman.

In the week before the attacks, imamsfrom some of Denmarks largestmosques warned of growing radicalisa-tion among Muslim youth. It easilytakes two to three years for us to get ayoung man raised to be a good Muslim,to accept western values . . . but it takesonly two to three months before he isbeen radicalised in this extreme envi-ronment, Radwan Mansour of thePeaceMosqueinAarhussaid.

Benjamin Netanyahu, Israels primeminister, said in response to the events:To the Jews of Europe and to the Jews ofthe world I say that Israel is waiting foryou with open arms. Denmarks chiefrabbi Jair Melchior responded thatterror isnotareasontomovetoIsrael.

Denmark is facing elections this yearand already some political experts havespeculated that the attacks could give aboost to Ms Thorning-Schmidt, the cen-tre-left leader who has been laggingbehindinthepolls.

The Danish Peoples party could alsotrytocapitaliseontheattacks.Additional reportingbyRichardMilne in

Oslo

tors for at-risk individuals, providingcounselling to reintegrate fightersreturning from Syria, and communitysupport for families.

The authorities also maintain a dia-logue with the radical Grimhojvejmosque in Aarhus, which has beenaccused of being a conduit for fighters.The approach was branded naive anddangerous by the rightwing DanishPeoples party, which wants the mosqueclosed, after its leaders spoke in favourof Isisandagainstdemocracywhilehail-ingaDanishsuicidebomberasahero.

tion that the suspect had been inspiredby the events in Paris last month. Therewere reports of further arrests yester-day evening with a large police opera-tion under way to find out if the killeroperatedaloneorwithothers.

Danish political leaders called forunity inthefaceof thetragedy.

This is not a battle between Muslimsand non-Muslims, it is a battle betweenfreedom of the individual and a darkideology, Helle Thorning-Schmidt,primeminister, said.

She later laid flowers outside the syn-agogue on Krystalgade where Dan Uzan,37,waskilledashestoodguard.BernardCazeneuve, French interior minister,travelled to Denmark to show solidarityinthewakeof thekillings.

Denmark has put enormous effortinto combating its domestic terrorthreat since 2006 when the newspaperJyllands Posten became a target for al-Qaeda after it was the first to publishcartoons of the Prophet Mohammed,sparking outrage across the Muslimworld. In the past decade Denmark hasbeen the target of six terror plots, allthwartedbytheDanishsecurityservice.

But the country has also experiencedgrowing radicalisation among a minor-ity of young Muslims, with more than100 Danes currently fighting alongsidethe Islamic State of Iraq and the Levant,known as Isis, in Iraq and Syria, accord-ingto intelligenceestimates.

Denmarks strong anti-terror legisla-tion combined with multi-agency inter-vention to combat radicalisation havebeen seen as a model in other Nordiccountries. But the Copenhagen murdersare likely to see renewed scrutiny of thecountrys methods of combatingextremism, which involve trained men-

DAVID CROUCH COPENHAGEN

Danish police say the man suspected oftwin shootings that left two dead andfive injured in Copenhagen on Saturdaywas a 22-year-old known to police andwith a record of criminal violence andlinks to gangs, but they had no indica-tion that he was a returned fighter fromSyriaor Iraq.

The man, born in Copenhagen, wasshot dead by police early yesterdaymorning following attacks on a freespeech event at a caf, attended by aSwedish cartoonist who had depictedthe Prophet Mohammed as a dog, andthemainsynagogue inCopenhagen.

Police declined to reveal the name ofthe dead man, who was tracked downafter a taxi-driver who drove him homeonSaturdaynightraisedthealarm.

Film director Finn Nrgaard, 55, diedin the attack on the Krudttnden cul-tural centre when the gunman openedfire on the meeting where the cartoonistLars Vilks and the French ambassadorto Denmark were speaking. Mr Vilks,who has survived previous attempts onhis life, hid in a cold store during theattack. Five police officers were injured.Fourremainedinhospital lastnight.

Since Islamist gunmen last month inParis attacked a kosher supermarketand the publisher of cartoons mockingthe Prophet Mohammed, Danish policehad been well aware that somethingsimilar could happen in Copenhagen,said Claus Oxfeldt, chief of the cityspoliceunion.

The presence of armed police at bothlocations thwarted the attacker. But wehave also been lucky . . . it could have beenmuchworse,MrOxfeldtsaid.

Police were working on the assump-

Danish shooting suspectwas22-year-oldknown topoliceAuthorities admit luck and presence of armed officers preventedmore deaths

NRREBRO

COPENHAGEN

1 km

Krudttndencultural centre

Synagogue

Suspect shot deadafter police raidapartment block

Bullet holes scar the window of the caf at which one person was killed. Below, a police handout picturing themain suspectHannibal Hanschke/Reuters; PA

FEBRUARY 16 2015 Section:World Time: 15/2/2015 - 23:57 User: summersj Page Name: WORLD2-LON-03, Part,Page,Edition: LON, 6, 3

Monday 16 February 2015 FINANCIAL TIMES 7

INTERNATIONAL

O n Valentines Day 10 years ago, a ball of fire indowntown Beiruts hotel district caused amassacre. A bomb attack on a convoy carry-ing Lebanons former prime minister, RafiqHariri, killed him, his former economy min-

ister Bassel Fleihan, and 20 others. The vast size of theexplosion made it more like a public execution than justone more of the political assassinations that had longplagued a country struggling to emerge from years of civilwarandsectariancarnage.

Popular outrage at the murders in effect a regicideagainst the man synonymous with the reconstruction ofpostwar Beirut unleashed the Cedar Revolution, forc-ing the involuntary withdrawal of Syrian troops after 29yearsofoccupation.

The UN-backed Special Tribunal for Lebanon (STL),now in session near The Hague after almost a decade ofinvestigation, is trying in absentia five members of Hizbol-lah, the Iran-backed Shia paramilitary group allied withSyria, for thecrime.

What has happened in that decade, after the sadlyinflated hopes of change brought by the Cedar Revolution?Fivedevelopmentsstandout.

First, Syrias withdrawal, paradoxically, ended by rein-forcing the power and influence of Hizbollah and Iran inLebanon. The self-styled Party of God not only has politi-cal and military power, financial might and welfarepatronage. Ithassotightagriponthe leversofstate, inpar-ticular Lebanons security services, it has become a state-above-the-state,creatinganinstitutionalwasteland.

Hizbollahs decisiveintervention in Syria in2013 broke the stalematein the civil war in favourof the then beleagueredregime of Bashar al-As-sad, and showcased thegroup as Irans spearheadintheLevant.

Lebanons own sectar-ian divisions have hardened and reconfigured: the Chris-tian-Muslim antagonism at the heart of its 1975-90 civilwar has given way to the Sunni-Shia struggle raging in theLevant,withLebaneseChristianssplitbetweenthetwo.

But second, what decisively transformed Hizbollahsfortunes were the events of 2006. The movements pres-tigesoaredas itheld itsgroundina34-daywarwithIsrael.

Condoleezza Rice, secretary of state, told the world itwas witnessing the birth pangs of a new Middle East. Infact, it was watching the death rattle of a recently resur-gent Lebanon, where the only democratically elected andwest-leaning government in the Arab world collapsed.Hizbollahbecameanon-statehyperpower intheregion.

From that point, third, the Hariri project to refloat Bei-rut into the capital market and services entrepot of theMiddle East all but died or rather moved south to Dubaiwhere, in a cruel irony, some of the architects of the emir-ates international finance centre were the original strate-gistsbehindtheBeirutproject.

Fourth, Mr Assad, initially the presumed culprit behindthe Hariri killing as well as facilitator of jihadi volunteersinto Iraq against the US-led occupation, was first shunnedas an international pariah, then rehabilitated in polite geo-political society. The pendulum has now swung back, notjust because of the Assad regimes savage war against itsown people, but because the STL is resurrecting evidenceSyria was implicated in that and other assassinations inLebanon.

A fifth and especially dispiriting thought, as Haririsfamily, friends and followers continue their wait for someform of justice, is that his absence highlights a deadlysymptom of the present crisis across the region: theabsence of mainstream and moderate Sunni Arab leaders.For all his many faults, this outsize figure was certainlythat. That is probably one reason why he was killed. Theother was that he was the only credible obstacle to Syriaand Irans designs on Lebanon, now part of the Sunni-Shiasectarian struggle playing out from Baghdad to Beirut.

david.gardner@ft.com

GLOBAL INSIGHT

BEIRUT

DavidGardner

Ten years on, Harirismurder has reshapedLebanons landscape

Hizbollah isa state-above-the-state, creatingan institutionalwasteland

ED CROOKS NEW YORK

Discoveries of new oil and gas reservesdropped to their lowest level in at leasttwo decades lastyear,pointing to tighterworld supplies as energy demandincreases inthefuture.

Preliminary figures suggest the vol-ume of oil and gas found last year,excluding shale and other reservesonshore in North America, was the low-est since at least 1995, according to pre-viously unpublished data from IHS, theresearchcompany.

Depending on later revisions, 2014may turn out to have been the worstyear for findingoilandgassince1952.

The slowdown in discoveries has been

particularly pronounced for oil, sug-gesting production from shale in the USand elsewhere, and from Opec, will playa more important role in meeting grow-ingglobaldemandinthenextdecade.

New finds of oil and gas are likely tohave been about 16bn barrels of oilequivalent in 2014, IHS estimates, mak-ing it the fourth consecutive year of fall-ing volumes. That is the longest sus-taineddeclinesince1950.

Because new oilfields generally takemany years to develop, recent discover-ies make no immediate difference to thecrude market, but give an indication ofsupplypotential inthe2020s.

Peter Jackson of IHS said: Thenumber of discoveries and the size ofthe discoveries has been declining atquite an alarming rate . . . When youlookatsupply in2020-25, itmightmaketheoutlookmorechallenging.

So far there has not been a single new

giant field, one with reserves of morethan 500m barrels of oil equivalent,reported to have been found last year,although subsequent revisions maychangethat.

The figures for declining discoveriesare particularly striking because explo-rationactivity in2014showedvery littleimpact fromthesharpfall inoilprices inthe second half of the year. The last timeoil and gas discoveries were around2014s level was in the mid-1990s, whenexploration activity was hit by a periodofweakprices.

Last year, the number of explorationand appraisal wells drilled worldwidewas only 1 per cent lower than in 2013.This year, exploration budgets are beingcut across the industry and the numberofwellsdrilled is likelyto fall further.

New discoveries are not the onlysources of future oil supply. Companiescan also add to their production poten-

tial with extensions of existing fieldsandthereare largeknownreserves.

The weakness of new discoveriesincreases the need for production fromthose sources to rise if, as expected, glo-bal demand for oil continues toincrease.

The shale boom has transformed theoutlook for oil in the US and played acritical role in creating the oversupplythat led to the collapse in prices, but it isstill relatively small on a global scale, MrJackson said, accounting for about 5 percentofworldoilproduction.

Shale is also a relatively high costsource of oil compared with reserves inthe Middle East and requires highercrudeprices tobecommerciallyviable.

MrJacksonsaid thatwithcrudepricesaround their present levels, it would bevery difficult to start up new shaleproductionprojects.Oil markets need reform page 11

JOE LEAHY SO PAULO

One October night in 2011 in Milan,Italy, a group of four Brazilian business-men linked to Petrobras, Brazils state-owned oil operator, sat down for dinnerwith the manager of a Swiss bank,BanqueCramer.

On the menu for the Brazilians wasallegedlya plantocreateoneof themostambitious corruption schemes theircountryhadseen.

The men were plotting to divertnearly 1 per cent of $22bn in contractsheld by Sete Brasil, one of the worldslargest drilling rig companies that wasbeing set up by Petrobras, into their ownaccounts and those of political contacts,allegesoneof theparticipantsat thedin-ner,PedroJosBaruscoFilho.Theyweremeeting the banker to discuss openingoffshore accounts for the money, theformer Petrobras and Sete Brasil execu-tive said. There was no suggestionBanque Cramer was party to thescheme.

The day after the dinner, everyoneopenedaccounts inthenameofoffshorecompanies, Mr Barusco, who hasagreed with Brazils federal police toprovide testimony in exchange for leni-ency, said in