Entries from February 2010 ↓

WASHINGTON — “On the Internet, the First Amendment is a local ordinance,” said Fred H. Cate, a law professor at Indiana University. He was talking about last week’s ruling from an Italian court that Google executives had violated Italian privacy law by allowing users to post a video on one of its services.

In one sense, the ruling was a nice discussion starter about how much responsibility to place on services like Google for offensive content that they passively distribute.

But in a deeper sense, it called attention to the profound European commitment to privacy, one that threatens the American conception of free expression and could restrict the flow of information on the Internet to everyone.

“Americans to this day don’t fully appreciate how Europeans regard privacy,” said Jane Kirtley, who teaches media ethics and law at the University of Minnesota. “The reality is that they consider privacy a fundamental human right.”

Google understands.

“The framework in Europe is of privacy as a human-dignity right,” said Nicole Wong, a lawyer with the company. “As enforced in the U.S., it’s a consumer-protection right.”

But Ms. Wong said Google’s policies on invasion of privacy, like its policies on hate speech, pornography and extreme violence, were best applied uniformly around the world. Trying to meet all the differing local standards “will make you tear your hair out and be paralyzed.”

The three Google executives were sentenced to six months in prison for failing to block a video showing an autistic boy being bullied by other students. The video was on line for two months in 2006, and was promptly removed after Google received a formal complaint. The prison sentences were suspended.

Still, Judge Oscar Magi’s ruling, in effect, balanced privacy against free speech and ruled in favor of the former. And given the borderless quality of the Internet, that balance has the potential to affect nations that prefer to tilt toward the values protected by the First Amendment.

“For many purposes, the European Union is today the effective sovereign of global privacy law,” Jack Goldsmith and Tim Wu wrote in their book “Who Controls the Internet?” in 2006.

This may sound odd in America, where the First Amendment has pride of place in the Bill of Rights. In Europe, privacy comes first.

Article 8 of the European Convention on Human Rights says, “Everyone has the right to respect for his private and family life, his home and his correspondence.” The First Amendment’s distant cousin comes later, in Article 10.

Americans like privacy, too, but they think about it in a different way, as an aspect of liberty and a protection against government overreaching, particularly into the home. Continental privacy protections, by contrast, focus on protecting people from having their lives exposed to public view, especially in the mass media.

The title of a Yale Law Journal article by James Q. Whitman captured the tension: “The Two Western Cultures of Privacy: Dignity Versus Liberty.” And historical experience helps explain the differing priorities.

“The privacy protections we see reflected in modern European law are a response to the Gestapo and the Stasi,” Professor Cate said, referring to the reviled Nazi and East German secret police — totalitarian regimes that used informers, surveillance and blackmail to maintain their power, creating a web of anxiety and betrayal that permeated those societies. “We haven’t really lived through that in the United States,” he said.

American experience has been entirely different, said Lee Levine, a Washington lawyer who has taught media law in America and France. “So much of the revolution that created our legal system was a reaction to excesses of government in areas of press and speech,” he said.

It was not until 1890 that Samuel Warren and Louis D flexcheck cash advance. Brandeis wrote “The Right to Privacy,” their groundbreaking Harvard Law Review article. Influential though it was, it came awfully late in the life of the republic.

The word privacy does not appear in the Constitution, and, outside the context of government searches, the document has almost nothing to say about the concept. This was perhaps best demonstrated by how hard the Supreme Court had to work in Griswold v. Connecticut, the 1965 ruling that established a right to marital privacy.

That right, Justice William O. Douglas wrote, was suggested by the First, Third, Fourth, Fifth and Ninth Amendments. The “specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees,” he wrote, in a much-mocked passage.

European courts, by contrast, have Article 8.

In 2004, the European Court of Human Rights relied on it to rule that Princess Caroline of Monaco could block German magazines from publishing pictures of her — quite tame pictures — that had been taken in public. “I believe that the courts have to some extent and under American influence made a fetish of the freedom of the press,” Judge Bostjan M. Zupancic of Slovenia wrote in a concurrence. “It is time that the pendulum swung back to a different kind of balance between what is private and secluded and what is public and unshielded.”

The differing conceptions can have profound consequences. “Europeans are likely to privilege privacy protection over both economic efficiency and speech,” Susan P. Crawford, who teaches Internet law at the University of Michigan, wrote in an e-mail message. “They’re willing to risk huge economic losses and erect trade barriers in order to protect privacy.”

The Italian prosecution would be unimaginable in America. The Communications Decency Act of 1996 leaves online companies free of liability for transmitting most kinds of unlawful material supplied by others. Prosecutions for truthful speech on matters of public interest are almost certainly barred by the First Amendment.

Still, said Marc Rotenberg, executive director of the Electronic Privacy Information Center, there may be something to learn from the Italian episode. “This video was enormously controversial, widely seen and very upsetting,” he said. “Sometimes,” he added, “there are egregious acts and there should be some responsibility.”

But Professor Crawford cautioned against thinking about the problem in categorical terms. Privacy is a broad enough concept, and Europe and America are varied enough, that it is easy to find counterexamples. Britain, for one, is only slowly moving toward the Continental model.

And what Italian prosecutors labeled a battle over principle may well have had another goal.

“Italian media is full of naked women and embarrassing revelations about both celebrities and ordinary people,” Professor Crawford wrote. “Any concern for privacy in this case is a pious cover for an (also naked) assertion of power over online companies.”

In some ways the Italian video represents the easy case. Google was merely a conduit for other people’s information, and that may well be enough to protect it in most of Europe.

The harder cases arise when Google is more active in gathering and disseminating information, as in its StreetView service, which provides ground-level panoramas gathered by cars with cameras on them. The program has generated legal challenges in Switzerland and Germany.

“Google is digitizing the world and expecting the world to conform to Google’s norms and conduct,” said Siva Vaidhyanathan, who teaches media studies and law at the University of Virginia. “That’s a terribly naïve view of privacy and responsibility.”

When American and European Ideas of Privacy Collide

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In the financial turmoil of the past decade, mutual fund investing has gotten decidedly more complicated. After all, over the course of just 10 years, investors have looked on as two bear markets ravished the economy, as a pair of bull markets jolted stocks back to life, and as the Internet and housing bubbles inflated to their breaking points and then burst.

For investors, the search for the perfect mutual fund has always been something of a holy grail quest. But in the midst of the past decade's abrupt market cycles, investors have approached their fund-hunting efforts with newfound intensity. With that in mind, U.S. News has created a unique rankings system that is designed for long-term investors looking for broad access to information about funds. In the process, U.S. News has assigned scores to upwards of 4,500 distinct mutual funds.

[Use the U.S. News Mutual Fund Score and the rankings of trusted fund analysts to find the best mutual funds for you.]

Overall, the scores–which are based on data from Morningstar, Zacks, Lipper, TheStreet.com, and Standard & Poor's–take into account short- and long-term performance, risk, expenses, and future prospects.

[See our methodology.]

So what do the best mutual funds look like? To explore this, U.S. News has analyzed its top-ranked fund from each of the following 11 Morningstar categories: large growth, large value, large blend ("blend" funds have both growth and value characteristics), foreign large blend, diversified emerging markets, health, short-term bond, intermediate-term bond, intermediate government bond, world bond, and moderate allocation. Overall, the 11 category-topping funds have quite a bit in common. Here are some traits that they share:

[Slide Show: 11 category-topping funds]

High-conviction portfolios. Pat English, a comanager of FMI Large Cap (FMIHX), which is the top-scoring large-blend fund in the U.S. News rankings, likes to say that only his team's best ideas will make it into the fund's portfolio. And he means it: FMI Large Cap generally owns just 25 to 30 stocks at a time. "We're not big believers in sheer numbers of names," says English.

Neither is Don Yacktman, a comanager of the Yacktman Fund (YACKX), which tops the large-value category. At the end of 2009, the fund owned fewer than 50 securities. "Beyond a certain point," Yacktman says, "the more diversification, the more likely one will get mediocre returns."

Meanwhile, for its part, Fidelity Select Medical Equipment and Systems (FSMEX), the best-ranked health fund, finished 2009 with just under 60 stock holdings.

Broadly speaking, running a heavily concentrated fund is a risky proposition. If even one bet goes sour, the fund is certain to feel the blow. At the same time, though, concentrated portfolios allow managers to invest only in companies they know intimately. "Concentrated portfolios can be more volatile but aren't necessarily so," says Adam Bold, the founder of the Mutual Fund Store, an investment management firm with more than 65 U.S. locations.

Another measure of portfolio conviction is a fund's turnover ratio, which quantifies how frequently management trades. Funds with low ratios have buy-and-hold mentalities and tend to have high degrees of confidence in their picks. Overall, the 11 funds have turnover ratios that are an average of 78.7 percent lower than their category averages.

Low costs. It's one of the perennial mutual fund debates: Should investors focus primarily on costs or on returns? In a vindication of cost-based fund picking, the 11 mutual funds examined by U.S. News have expense ratios (a measure of annual fees) that are, on average, 0.32 percent less than their category averages.

[See Should You Deep-Six Your Mutual Fund?]

"Costs play a big role in fund returns. You tend not to see it if you look too close up. In other words, if you look at a single year, that advantage of, say, 50 basis points or whatever isn't that big, especially in years like '08 or '09 when you've got huge negative or positive returns," says Russel Kinnel, Morningstar's director of mutual fund research. "But over time, it adds up to quite a significant difference."

Overall, this phenomenon is somewhat circular in nature. "Good performance leads to more assets, and more assets generally drive down expenses," says Kinnel.

Still, costs are one of the most contentious issues in the fund industry. "There are some things in life that are worth paying more for. There's a reason that a Mercedes-Benz costs more than a Kia," says Bold. "To me, it doesn't matter how much you pay the mutual fund company. What counts is how much they pay you cash till payday advance."

Ultimately, though, this tension between costs and returns may be more imagined than it is real: The funds that top the U.S. News rankings provide superior returns, and they do so at low costs.

Talented and consistent management. Six of the 11 category leaders have at least one manager who has been on board since the fund's inception. Overall, this continuity of management seems to boost a fund's ability to consistently apply strategies that will pay off in the long term.

English, who has been a comanager of FMI Large Cap since it launched in 2001, says low manager turnover helps funds develop coherent cultures. "The main thing is the culture," he says. "You need continuity because it's hard to spread that culture if you have a lot of change."

For his part, Bold says that picking a good management team is one of the most important decisions an investor can make. "The name of the fund doesn't matter," he says. "What counts are the people who are every day making the buy, sell, and hold decisions."

Among the top-performing funds in the U.S. News rankings, the biggest question mark in the management arena pertains to TCW Total Return (TGLMX), the best-scoring fund in the intermediate-term bond category.

Late last year, TCW fired Jeffrey Gundlach, who had served as the company's chief investment officer and was a celebrated comanager of the flagship Total Return fund. In the aftermath of the firing, Philip Barach, the other Total Return manager, also left TCW, as did dozens of other employees.

[For more on Gundlach's ouster, see The Decade's 10 Worst Fund Disasters.]

With the fund's two managers out the door, TCW quickly turned control of Total Return over to Tad Rivelle of Metropolitan West Asset Management. Rivelle brings significant experience to the job, but it remains to be seen how the shake-up will affect the fund's long-term performance.

Another management theme is that all 11 category leaders have active managers. "Actively managed funds are going to have a wider dispersal of performance," says Kinnel. "Those are the ones that are always going to be at the top and bottom of the rankings." At its most basic level, this cuts to the core of the active-passive debate. A good index fund, Kinnel says, will consistently earn investors market performance, but that's as far as it will go–its mandate isn't to beat the market.

Downside protection. After two bear markets in the course of a single decade, investors have learned the hard way that high-quality funds not only will earn more than the competition during strong markets but will also lose less during downturns.

The 11 top performers' returns beat their category averages by an average of 7.4 percent in 2008, primarily thanks to some well-timed defensive positions. Some residual indicators of these funds' defensive stakes still linger, largely in their cash holdings. As recently as the end of last month, for example, Sextant International (SSIFX), the top-ranked foreign large blend fund, had roughly 40 percent of its portfolio stashed away in cash.

Many of the other top-ranked funds also have large cash stakes. "When we feel that we've filled up on the really good ideas … we'd just as soon sit on some cash. If the opportunities are there, we'll buy things. It's just a matter of if they aren't attractive enough, we'd rather just sit on some [cash]," says Yacktman, whose fund had upwards of 11 percent of its portfolio in cash at the end of last year.

The reason large cash positions helped during the downturn is that they shielded funds from losses in the stock and bond markets. "A lot of the funds with good cash stakes naturally lost less in 2008," says Kinnel. "I don't think there's anything inherently good or bad about running with a lot of cash. I think it's just what works for the manager."

Another way the 11 funds protect their investors during bear markets is through careful stock picking. "We spend a great deal of time protecting the downside by making sure we don't overpay for anything on the front end," says English.

Meanwhile, some of the top-ranked funds hold up decently during recessions because of the very nature of their mandates. Health funds, for example, are commonly considered to be among the most defensive of investments, and they tend to outperform their competitors during weak markets. In 2008, Fidelity Select Medical Equipment & Systems lost 23.4 percent. By comparison, the S&P 500 was down by 38.5 percent that year.

The Best Mutual Funds for 2010

SEOUL (AFP) – South Korea's top automaker Hyundai Motor said Wednesday it would recall its flagship Sonata sedan in the United States and the domestic market due to a door lock problem.

The firm said in a statement that 1,300 Sonata sedans already sold in the United States and another 46,000 cars in South Korea would be recalled.

Hyundai said the move was in response to reported defective front-door locks on some of its modified Sonatas launched last September high quality business cards. It said it ordered its US dealers on Tuesday to stop selling the model.

The recall was announced on the same day that Toyota's top US executive admitted that global recalls by the Japanese giant had "not totally" fixed dangerous safety flaws.

Hyundai to recall Sonata sedan in US and S.Korea

DETROIT — The chief executive of Toyota, Akio Toyoda, accepted an invitation on Thursday from the House Oversight and Government Affairs Committee to testify next week in Washington in the aftermath of the recall of millions of cars because of sudden unintended acceleration.

Mr. Toyoda’s decision to testify came in a brief statement released in late afternoon by the automaker, hours after the invitation was made by Representative Edolphus Towns, a Democrat of New York who chairs the committee.

“I have received Congressman Towns’ invitation to testify before the House Committee on Oversight and Government Reform on February 24 and I accept,” Mr. Toyoda said in the statement. “I look forward to speaking directly with Congress and the American people.”

In a letter earlier to Mr. Toyoda, Mr. Towns said it was important for Mr. Toyoda to appear to “help clarify the situation.”

Previously, the committee had invited the president of Toyota North America, Yoshimi Inaba, to appear at next Wednesday’s hearing, one of three scheduled in Congress in the next two weeks.

“We are pleased Mr. Toyoda accepted the invitation to testify before the committee,” Mr. Towns and the committee’s ranking Republican member, Darrell Issa of California, said in a statement. “We believe his testimony will be helpful in understanding the actions Toyota is taking to ensure the safety of American drivers.”

“As you know, there is widespread public concern regarding reports of sudden unintended acceleration in Toyota motor vehicles,” Mr. Towns wrote earlier in his letter. “Toyota has recalled millions of its vehicles and even halted production. In addition, there are reports that this problem may have been the direct cause of serious injury and even death.”

He continued, “There appears to be growing public confusion regarding which vehicles may be affected and how people should respond. In short, the public is unsure as to what exactly the problem is, whether it is safe to drive their cars, or what they should do about it.”

Mr. Towns said Mr. Toyoda could submit written testimony, but should be prepared to provide a five-minute opening statement and to answer questions.

The decision to testify now turns the spotlight on Toyota, where there has been debate inside the company in the United States and Japan over whether Mr. Toyoda should appear, or send company executives in his place. Until Thursday, neither of the two House or one Senate committees holding hearings on Toyota had invited him to attend.

Analysts and public relations experts say that it was in the company’s interest for Mr. Toyoda to appear.

“This is a moment when Toyota is going to be in the world’s eyes,” said Michael Useem, professor of management at the Wharton School at the University of Pennsylvania. “It’s going to be the most powerful and effective if the C.E.O. does appear.”

But there are enormous risks for any chief executive who testifies before Congress, as leaders from Wall Street and Detroit can attest, and that is causing concern within Toyota, people with knowledge of the company’s deliberations said Wednesday.

Just 14 months ago, the chief executives of the Detroit automakers endured hours of questions before Congressional committees, along with heated criticism over their use of corporate jets best humidifiers.

In 2000, Jacques Nasser, chief executive of Ford, and Masatoshi Ono, his counterpart at Japanese tire maker Bridgestone/Firestone, also were questioned by members of Congress after accidents involving exploding tires on the Ford Explorer. Both left their companies within about a year.

In the hearings next week, the role of N.H.T.S.A., the federal safety agency, is also expected to be addressed, including whether it acted promptly enough on information it received from consumers.

They are set for Tuesday, by the House Energy and Commerce Committee, and Wednesday, by the House Oversight and Government Reform Committee. (The energy panel moved up its hearing.)

The energy panel has invited James Lentz, the president of Toyota Motor Sales U.S.A., to testify at its hearing on Tuesday.

On Thursday, the Texas governor, Rick Perry, sent a letter to a member of the committee, reminding him of the importance of the company to the Texas economy. Toyota has a truck plant in San Antonio that employs 3,000 people, while the state’s 83 dealers employ another 7,500 people.

In the letter to Representative Joe L. Barton, a Republican of Texas, Mr. Perry said it appeared negative news about the company “is being encouraged by plaintiffs’ trial lawyers, union activists and those interested in cutting Toyota’s market share.”

Mr. Perry went on, “Toyota is a valued employer and corporate citizen and an integral part of the Texas economy. Many Texas families depend on Toyota not only for safe, reliable transportation but for a good paycheck.”

Mr. Perry is the latest governor to come to the company’s defense. The governors of Mississippi, Indiana, Kentucky and Alabama, which all have Toyota plants, also have written letters to members of Congress backing the automaker.

Mr. Toyoda would probably find a more hospitable audience if he were to appear on March 2 at a hearing by the Senate Commerce Committee. Its chairman, John D. Rockefeller IV, Democrat of West Virginia, has known the Toyoda family for decades and has a Toyota plant in his home state.

A spokeswoman for the Senate committee said no decision had been made on whether to invite Mr. Toyoda.

One complexity in inviting Mr. Toyoda is that he most likely would speak through a translator during the question-and-answer session, though he is conversant in English. Mr. Toyoda, who attended business school at Babson College and lived in New York and California, spoke in English to an industry conference held last August in northern Michigan, and uses it in interviews. But he has spoken primarily in Japanese during the recent series of news conferences that he has held in Japan.

Mr. Toyoda has traveled to Washington in the past, for meetings with dealers and members of Congress, and has met a number of representatives who have Toyota facilities in their districts. Company executives had planned for him to visit the United States in March and have been exploring ways he could meet with lawmakers outside of a formal Congressional setting.

Toyota Chief Agrees to Testify Before House Panel

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ATHENS, Greece – Greek drivers lined up for gas at the few stations still open Friday as a customs strike against government austerity measures left many pumps running dry.

The fuel shortage was the first serious consequence of growing labor protests against the Socialist government’s emergency spending cuts program, aimed at easing the debt crisis in Greece and shoring up market confidence.

Customs workers have extended their strike against salary freezes and bonus cuts through next Wednesday, when unions across Greece will hold a general strike that is set to bring the country to a standstill.

European finance ministers have told Athens it must demonstrate signs of fiscal improvement by March 16 or it will be ordered to impose even tougher budget cuts. Greece has promised to slash its deficit from an estimated 12.7 percent of gross domestic product to 8.7 percent this year.

Finance Ministry officials say they are under EU pressure to ax the public servants’ so-called “14th salary.” Greek workers get their annual salary divided into 14 payments, with two of them given as holiday bonuses, in a measure originally designed to alleviate those with low incomes.

“We would consider cutting the 14th (salary) to be an act of war,” said Yiannis Papagopoulos, leader of Greece’s trade union umbrella group, the GSEE.

“The measures must be socially just. And this is something that we have not seen so far. They are generally aimed at wage-earners and pensioners, while business remains immune sears kerosene heaters. It is finally time for those who for so many years gathered riches to pay up, invest, and help deal with the major problem at this time, which is unemployment.”

The customs walkout has hampered imports and exports, but the supply of fuel has been the most affected. Gas stations around greater Athens were rationing fuel while stocks lasted. Traffic policemen were posted at some gas stations in Athens as cars queued for hundreds of meters (yards).

“We’re out of regular unleaded, and now we’re only selling diesel,” said attendant Ioanna Antoniou at a gas station in the northern Athens suburb of Halandri. “There were a lot of cars lined up here earlier while we still had some unleaded left.”

Antoniou said the gas station had rationed fuel to limit sales to euro20 ($27) per customer so they could serve more people.

Taxis also held a 24-hour strike Friday, protesting parts of the austerity package that increased fuel tax and will force them to issue receipts. Taxi drivers chanting “The measures mean unemployment” staged a noisy protest in central Athens that choked traffic.

“These measures won’t do anything, all they will do is throw us out of work,” cab driver Anastasis Damianidis said. “We can’t become tax collectors — that’s what they’re trying to do. We will keep demonstrating.”

Fuel shortage hits Greece as strikes grow

LONDON – The British subsidiary of Reader’s Digest filed for administration, a form of bankruptcy protection, in a move intended to help its parent company complete restructuring under bankruptcy protection in the U.S.

The parent, the Reader’s Digest Association Inc., said the action to isolate the British unit would allow it “to emerge from Chapter 11 promptly.”

The British subsidiary’s filing follows its failure to gain regulatory approval for a plan for funding a pension deficit, the company said Wednesday. Without approval for its plan to deal with the British pension issue, the company said the U.K. unit was unable to meet its debts and sustain its operations, the company said.

Reader’s Digest had hoped to emerge from Chapter 11 protection — under which a company in financial trouble is allowed to shed debts and restructure — by the end of the January but was delayed by the pension problem in Britain.

The pension proposal had been accepted by the company, pension trustees and the U saving account pay day loan.K. Pension Protection Fund, but was rejected by the U.K. Pensions Regulator.

“The agreement, which contemplated a lump sum payment by parent company RDA plus an equity stake in RDA UK, was authorized by the U.S. bankruptcy judge overseeing RDA’s U.S. Chapter 11 proceedings, and would have relieved RDA UK of significant financial obligations associated with its underfunded UK pension plan,” the company said in a statement from its headquarters in Pleasantville, N.Y.

“Absent an agreement, RDA UK is financially unable to meet those obligations and sustain its operations.”

The British pension issue does not affect any other part of the company, Reader’s Digest said.

A U.S. judge has already approved the company’s Chapter 11 plan, which cuts its debt load to $555 million from $2.2 billion.

Reader’s Digest UK unit files for administration

LONDON – European stock markets won some respite Monday ahead of a meeting of eurozone finance ministers in Brussels, where the Greek debt crisis will likely top the agenda. However, public holidays in many Asian countries as well as the U.S. have reined in some of the volatility that gripped markets over the last couple of weeks.

The FTSE 100 index of leading British shares was up 34.48 points, or 0.7 percent, at 5,176.93 while Germany’s DAX rose 34.26 points, or 0.6 percent, at 5,534.65. The CAC-40 in France was 26.54 points, or 0.7 percent, higher at 3,625.61.

The main point of interest for Europe’s markets will continue to be the debt problems afflicting Greece, as finance ministers from the 16 euro countries gather in the wake of last Thursday’s meeting of EU leaders. On Tuesday, the finance ministers of the full 27-nation European Union meet.

Though EU leaders gave Greece some vocal support, no money or guarantee was offered, primarily because Germany was not willing to stump up any cash as it could undermine German bonds and put further pressure on the euro.

Instead, all agreed that Greece’s progress in bringing down its budget deficit will be closely monitored and it would not be allowed to threaten the eurozone. Markets interpreted the latter comment as an implicit guarantee that eurozone policymakers will help the country if its own efforts fail.

An ensuing narrowing in spreads between German and Greek bonds — a sign that the markets think a Greek default is becoming less likely — and a more steady tone to the euro have diminished expectations that anything substantially new will emerge later.

“Risk aversion remains in vogue, though the resilience of equity markets suggests we are seeing nervousness more than outright fear and I sense the dollar’s rally may therefore be losing momentum,” said Kit Juckes, chief economist at ECU Group.

By mid afternoon London time, the euro was unchanged at $1.3610. Last week, at the height of the Greek fiscal concerns, the euro had slid to a nine-month low of $1.3533.

Besides Greece, investors have fretted about the public finances in Spain, Portugal and Ireland easy fast payday loans.

Dubai is also a growing concern amid fears that the highly indebted emirate may repay creditors less than the amounts due — it was November’s debt postponement from Dubai World, a government investment company with around $59 billion in debts, that stoked the markets’ concerns about overborrowed countries.

Dubai’s stock market fell sharply while the cost of insuring against the emirate’s debts edged back up.

“The theme of sovereign debt risk is likely to remain on investors’ agenda as fresh rumblings in Dubai make clear,” said Neil Mackinnon, global macro strategist at VTB Capital.

Earlier, much of Asia was closed for the Lunar New Year holiday, including Hong Kong, Shanghai, Singapore and Seoul.

However, Japanese and Australian markets fell as investors reacted to China’s move late Friday to curtail bank lending to cool off strong growth there.

Better-than-expected Japanese fourth quarter economic growth figures failed to lift Tokyo’s benchmark Nikkei 225 index, which slid 78.89 points, or 0.8 percent, to close at 10,013.30. Analysts said that the monetary tightening in China — the second such move in a month — and uncertainty about the economic outlook in coming quarters weighed on sentiment.

Japan’s gross domestic product grew at an annual pace of 4.6 percent in the October-December period, keeping Japan just ahead of China as the world’s No. 2 economy. Japan’s nominal GDP for the 2009 calendar year came to about $5.1 trillion, ahead of China’s $4.9 trillion.

Australia’s benchmark S&P/ASX200 fell 16.6 points, or 0.4 percent, to 4,545.5.

Wall Street is closed for the Presidents Day holiday.

Elsewhere, oil prices were flat, with benchmark crude for March delivery down 1 cent to $74.12 a barrel.

____

Associated Press Writer Malcolm Foster in Tokyo contributed to this report.

European markets edge up despite Greek debt fears

In 1870, the French novelist Victor Hugo had a vision. Planting an oak tree in his yard, he predicted that by the time it matured, a “United States of Europe” would have sprung up, strengthened by a common currency that would one day make the Continent a force to be reckoned with.

One hundred and forty years later, the dream, like Hugo’s tree, is alive — if a little twisted.

Around Europe, 27 nations now fly the flag of the European Union next to their own. Sixteen have ditched the drachmas, marks and other bills that symbolized their sovereignty to embrace a single currency, the euro, lending new power to their economic and trade bloc.

All that is now being called into question, however, as European leaders struggle to prevent ruinous spending by Greece from spiraling into a wider crisis or even breaking up the euro union. How they handle this problem could either propel Europe to greater economic and political clout in the decades ahead, or downgrade it to a sideshow in a global economic theater directed by China and the United States.

For the moment, things don’t look comforting for the euro. As the troubles in Greece drove the currency ever lower against the dollar last week, Europe’s politicians did what everyone has by now come to expect: they talked about a bailout for Greece, then talked some more about the need to take “coordinated action.”

Yet details of a rescue plan were put off to a future date. No mention was made of how they would prevent Portugal, Spain or other deficit-saddled economies from falling like dominoes. And questions about who would pay for any future blowups were answered with silence.

“Now is the time when Europe needs to speak as one voice,” said Simon Tilford, chief economist at the Center for European Reform in London. “The crisis should lead to political unity, but it could just as easily lead to a divided Europe.”

What explains this inertia? Even as the euro was being conceived, Germany, Europe’s sturdiest economy, was fretting about Europe’s tendency to freeze during a crisis. The German chancellor at the time, Helmut Kohl, and Otmar Issing, a German who was then the chief economist for the European Central Bank, feared that unless they set strict rules on euro membership, the new currency union could stumble.

Germany and other wealthy northern European nations might one day even find themselves transferring taxpayer money to support their poorer kin in the south, among them Greece, Portugal, Spain and Italy cheap pay day loans. Britain, one of Europe’s wealthiest nations, saw the writing on the wall and never surrendered its pound.

The seeds of the current debacle were planted early. In 2003, four years after the euro’s birth, France touched off a firestorm by spending lavishly to tame a recession, declaring with a shrug that it had agreed only to “the principle of Europe.” Nations like Portugal, which made painful budget cuts to qualify for euro membership, asked why they should sacrifice if a heavyweight like France didn’t. Greece and Italy echoed similar views.

With more governments using the euro like a credit card, it was only a matter of time before investors questioned their ability repay debt. In January, when Greece tried to raise funds to pay down some of its 53 billion euro deficit, investors forced the government to pay an annual interest rate of more than 6 percent on bonds that will mature in five years.

Now governments in Spain, Portugal and Italy are also facing demands for higher rates, and fears that they might have to quit the euro club are mounting. On Friday, the French bank Société Générale became the latest to question whether a bailout of Greece simply postponed “the inevitable breakup of the euro zone.”

What this means for dreams of a more united Europe remains far from clear.

When the dust settles, Europe will probably still be a union with separate national parliaments and fiscal policies, says Thomas Mayer, the chief economist of Deutsche Bank. But he says he foresees economic policies that will be more tightly coordinated between countries, with a mechanism to resolve crises like the one brought on by Greece today. If that happens, the number of stable countries adopting the euro would probably grow, cementing Europe’s economic might as the decades pass.

But if the politicians fail, Hugo’s vision of a United States of Europe would become more clouded, and Europe’s economic weight in the world would decline.

Already, some of the small Baltic nations that had been clamoring to get into the euro club are having second thoughts. And if Britons were wary of adopting the euro before, they must surely be nursing a silent schadenfreude as they watch Germany and France scramble to clean up after Greece. Don’t expect them to change their minds any time soon.

Contemplating the Future of the European Union

BRUSSELS – European Union leaders on Thursday offered Greece moral support but no money to help it weather a debt crisis — vague assurances that didn’t calm the market fear that has shaken the entire EU and undermined the shared euro currency.

The 16 countries that use the euro said only that they “will take determined and coordinated action, if needed, to safeguard financial stability in the euro as a whole.”

But no money or loan guarantees were put on the table in the statement from a summit meeting in Brussels.

Markets appeared disappointed at not seeing a concrete backstop to ward off a potential default by Greece, which needs to borrow euro54 billion this year to cover its outsized budget deficit.

The Greek crisis is the leading edge of the debt troubles that have hit governments in the developed world during the world’s three years of economic turbulence, as they run up deficits bailing out banks and stimulating their economies.

A default would be a serious blow to Europe’s monetary union, and fears that Athens might not be able to pay its debts have already led markets demanding higher borrowing costs for Greece.

There are also concerns that the contagion could spread to other financially wobbly countries, such as Portugal and Spain, and that other governments will have to pay more to borrow.

The leaders said Greece had not requested financial support and called on Athens to push through “in a rigorous and determined manner” its budget cuts that have already triggered protests and strikes — and to prepare bigger cuts if needed.

Neil Mackinnon, global macro strategist at VTB Capital said, “it just looks like a pledge of solidarity, but no actual details of a program which is why the euro is still in the doldrums.”

“They have to stop this right now…they are firefighting at the moment but they need to put out this fire right now,” said Neil Mellor, currency strategist at Bank of New York Mellon. “It won’t appease those looking for a bona fide rescue plan.”

The euro hit a new nine-month low of $1.3635, having been as high as $1.38 earlier in the day on hopes of more substantive Greek bailout news. It was $1.51 in December. German and French stocks were down, while shares in Britain, which doesn’t use the euro, rose.

Markets see Greece at risk of defaulting on its massive borrowings because it faces several years of sluggish growth and mounting debt that current austerity plans may not be able to stem payday loans guaranteed no fax.

Those fiscal problems have also exposed the vulnerability of Europe’s monetary union in times of crisis. Euro members countries agree to limit their budget deficits to 3 percent of gross domestic output because overspending can undermine their shared currency. But those deficit rules have been broken repeatedly and have not been prevented Greece and other countries from trouble.

The leaders may make more comments on Greece later in the day.

Luxembourg government spokesman Guy Schuller said no firm bailout figures are on the table at this point, but many options are under discussion. “Paris and Berlin are at the head” of efforts that would be shared by all 16 eurozone nations, he said.

Among possibilities for Greece that have been floated in recent days are EU member countries guaranteeing Greece’s debt, a special credit line for the Greek government, and bilateral loans.

But German Chancellor Angela Merkel talked down a full financial bailout, but said other European governments would not leave Greece in the lurch.

“We won’t let Greece be alone but there are rules and they have to be respected and based on that we’ll issue a statement and an explanation,” she said.

Greece needs to borrow euro54 billion (nearly $75 billion) from bond markets this year to plug its budget gap. So far it has been able to borrow from markets but is facing increasing interest costs as markets price in higher risk of a possible default.

Greek Prime Minister George Papandreou has promised to reduce Greece’s deficit to 8.7 percent of gross domestic product this year, from 12.7 percent last year, the highest in the EU and four times above an EU limit.

But markets doubt Greece’s credibility after it admitted falsifying statistics for years to make the deficit look smaller. They also worry that Greece can’t carry out any cuts because it risks social unrest.

Greek workers shut down schools, grounded flights and walked out of hospitals Wednesday to protest austerity measures, and a much broader strike is planned for Feb. 24.

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Associated Press writers Pan Pylas, Angela Charlton and Leslie Patton in Brussels contributed to this report.

EU leaders offer Greece support, but no money

OSLO – Norwegian telecommunications group Telenor ASA on Wednesday reported a 25 percent jump in fourth-quarter profits, primarily thanks to growth in Asia, but said it may have to cut costs this year to strengthen its finances.

Net profit rose to 2.5 billion kroner ($425 million) in the October-December period, from just under 2 billion kroner a year earlier. Revenues slipped to 24.2 billion kroner during that time, from 25.9 billion kroner in the fourth quarter of 2008. That excludes pro forma figures from Telenor’s troubled Ukrainian holding Kyivstar that were also provided for comparative reasons.

Telenor shares dropped 3 percent, to 75.85 kroner ($12.84), in morning trading in Oslo.

A strong quarter for Telenor in the Pakistani, Thai and Bangladeshi markets, as well as in the company’s consistently strong Scandinavian operations, contributed to a sustained revenue stream.

New subscriptions in these markets offset slumping revenues from Telenor’s operations in Eastern Europe, where the global financial crunch has depressed the telecoms market. Telenor subscriptions grew by 2 million in the fourth quarter.

Carnegie analyst Espen Torgersen said the result was “substantially over market expectation free credit scores.” He attributed the negative market reaction to Telenor’s lower-than-expected outlook for 2010.

Telenor CEO Jon Fredrik Baksaas warned of potential cost-cutting measures in 2010 to cope with hits to the group’s finances in the wake of the financial crisis.

Telenor “will strive to secure our market positions, while capturing organic growth opportunities. We will continue to implement necessary efficiency measures and provide innovative and viable solutions to our customers,” Baksaas said.

Among its priorities in 2010 are the expansion of its Indian subsidiary, which launched on Dec. 22, and the end of a long and expensive legal battle with Russian conglomerate Alfa Group over joint operations in Russia and Ukraine.

Telenor employs more than 40,000 people in 14 countries and claims 174 million subscribers worldwide.

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On the Net:

http://www.telenor.com

Norway’s Telenor posts 25 pct rise in Q4 profits