Opinion

Hugo Dixon

BSkyB directors should quiz James Murdoch

Hugo Dixon
Jul 26, 2011 14:37 UTC

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By Hugo Dixon

LONDON (Reuters Breakingviews) – Reverse ferret is a term coined by The Sun, one of the Murdochs’ UK newspapers, to refer to an abrupt U-turn in editorial line. This article is a reverse ferret, or at least a partial one.

Last week I wrote that James Murdoch should not be kicked out of his position as chairman of BSkyB. I admitted that he hadn’t covered himself with glory in dealing with the scandal at the News of the World, which he indirectly managed. But I argued that this was a separate business and his track record at BSkyB was good.

Since that article appeared, Murdoch has given evidence to a committee of the UK parliament about the hacking scandal. Subsequently, part of his testimony was challenged by two former senior employees. If what the former employees say is correct, Murdoch would appear to have given false evidence.

Although Murdoch is standing by his testimony, there are enough puzzles for BSkyB’s independent directors to quiz him before confirming him as chairman, as planned later this week. It could be argued that there are so many other probes going on that the directors hardly need to launch their own. But this whole saga has been bedeviled by people failing to ask tough questions when they had a chance.

Greek rescue bizarrely increases its debts

Hugo Dixon
Jul 25, 2011 15:43 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Listen to the politicians and one might think that Greece’s debts will fall as a result of last week’s provisional rescue by euro zone leaders and private-sector creditors. In fact, they go up. Athens’ borrowings will increase by 31 billion euros under the rescue scheme, according to an analysis by Reuters Breakingviews. This increase, equivalent to 14 percent of GDP, will push the country’s estimated peak debt/GDP ratio next year to 179 percent.

This bizarre result comes because of the way the different elements of the fearfully complex rescue plan interact. Greece will need to borrow extra funds to enhance the creditworthiness of the new bonds it will provide the private sector. It will also need to inject capital into its own banks. These extra borrowings amount to 55 billion euros and will more than outweigh the reduction in Greece’s debts that comes as a result of haircuts to be agreed by private-sector creditors and a planned buyback of debt at a discount to its face value.

James Murdoch shouldn’t be kicked out of BSkyB

Hugo Dixon
Jul 18, 2011 19:37 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

James Murdoch shouldn’t be kicked out of BSkyB. Some observers want to use the Murdoch clan’s troubles at News International, their UK newspapers company, to run them out of town completely. But BSkyB, the pay-television group, is a separate business. And Murdoch Jr has done a good job first as its chief executive and now as its chairman.

Admittedly, Murdoch Jr hasn’t covered himself in glory in handling the alleged phone hacking and police bribery scandal. As well as being chairman of BSkyB, he has indirect responsibility at News Corp for the UK newspaper arm. He was slow to grip the problems — not least by allowing Rebekah Brooks, who ran the papers and reported to him, to stay in her position for too long. There are now multiple probes into the saga which could embroil him further. But nothing has yet come out which should disqualify him from his BSkyB role.

Berlusconi really must go

Hugo Dixon
Jul 13, 2011 14:04 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Silvio Berlusconi really must go. It’s no longer about abuse of power and “bunga bunga” sex parties. His continuation as Italy’s prime minister could drive the country into a financial death spiral. His own supporters are shaken and the public is afraid. But the left-wing opposition is behaving responsibly, so there’s some hope.

Italy pulled back from the brink — slightly -– on July 12. After nudging above 6 percent, the yield on 10-year government bonds fell back to a still uncomfortable 5.6 percent. Part of the explanation is that the opposition agreed to a fast-track parliamentary vote on the government’s new austerity program. The multi-year fiscal squeeze of more than  40 billion euros should therefore be approved by the end of the week.

The way to end the Greek farce

Hugo Dixon
Jul 12, 2011 14:10 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Greek crisis is fast descending into farce. The position of Germany, the euro zone’s main lender, is increasingly absurd. It is adamant that there will be no restructuring of Greek debt — at least, until 2013. And yet it is equally insistent that Athens’ private-sector creditors should contribute up to 30 billion euros to a new, 120 billion euro bailout. That would effectively amount to a half-cocked restructuring.

German Chancellor Angela Merkel’s inconsistencies seem based on her view that a sovereign restructuring won’t happen before 2013 just because she said it won’t. But her conflicting demands are becoming virtually impossible to reconcile. The ratings agencies are threatening to say that Greece has defaulted if there’s so much as a whiff of arm-twisting in the supposed “voluntary” rollover.

The EU has only itself to blame for ratings mess

Hugo Dixon
Jul 7, 2011 12:53 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Europe has only itself to blame for the mess created by the ratings agencies. Luminaries including Jose Manuel Barroso, the president of the European Commission, and Wolfgang Schaeuble, Germany’s finance minister, have lambasted Moody’s for downgrading Portugal. But Europe has wasted many chances to neuter the power of credit ratings agencies. Instead they choose to fetishize them. An especially stark instance can be seen in the European Central Bank’s current approach to Greece.

For years it has been apparent that the financial world pays far too much attention to the three big ratings agencies — Moody’s, Standard & Poor’s and Fitch. They should be treated like any other opinion in the market. But their special position allows them to create havoc. It is not just that investors hang on their every word, they are also embedded in the system for regulating banks and other official mechanisms. Yet the agencies are often too slow to spot trouble, with the result that borrowers are able to run up excessive debts. And when they do change their minds, they can help provoke a stampede.

Letter to the Greeks

Hugo Dixon
Jun 29, 2011 13:38 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Dear Greeks,
The anger you feel about your plight is understandable. You are staring at several unpalatable alternatives, all of which will involve big cuts in living standards for years to come. But the options you face are not all equally bad. You must avoid an emotional reaction that leaves you in an even worse state — and you must ostracise those who resort to violence.

One option is to persuade your politicians to say “no” (or “ohi”) to the euro zone/International Monetary Fund austerity plan. The scheme is not perfect. But rejecting it out of hand would be childish. If there is no agreed plan, you will get no money. The consequence isn’t just that the government would default on the loans it took out on your behalf. There would be a run on your banks and an even deeper recession. You would probably also lose your remaining friends in Europe who would consider you spoiled brats.

Greek Plan B needs two elements

Hugo Dixon
Jun 28, 2011 21:06 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — The European Union is finally working on a plan B in the unlikely case that Greece’s parliament votes against austerity later this week. The priority in such a plan should be swift action by the European Central Bank to protect the rest of Europe’s banking system from mayhem. The EU should also try to give Athens a second chance to reflect on its folly.

The most dangerous immediate consequence of a No vote would be an acceleration of deposit flight from Greek banks. This could sow panic in banks in other peripheral nations. One way of stopping that would be for the ECB to immediately make clear that buckets of liquidity are available for non-Greek banks. Ideally, this shouldn’t just be short-term money, but medium-term money too. Euro zone governments should underwrite any losses the ECB incurred on such emergency support.

How the euro zone can save itself

Hugo Dixon
Jun 20, 2011 15:05 UTC

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Hugo Dixon

Greece is likely to receive another short-term sticking plaster after the euro zone’s leaders stared into the abyss. But a repeat of the drama of recent days is all too possible. The region can, and must, protect itself against Athenian delinquency.

Euro zone finance ministers have postponed a final decision on extending 12 billion euros of emergency loans to Greece. But the country should get the next tranche of its EU/IMF bailout program in early July. Around the same time, the authorities should agree to a new package of perhaps 120 billion euros that sees Greece through until end 2014 –- with private-sector creditors helping by rolling over their debts in some yet-to-be-determined quasi-voluntary manner. Athens still has the capacity to mess things up if it can’t get its parliament to approve the new austerity program. But following Friday’s cabinet reshuffle, the government looks like it will at least survive a no-confidence vote on June 21.

Greece mustn’t waste its second chance

Hugo Dixon
Jun 6, 2011 20:00 UTC

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON — Greece mustn’t waste its second chance. Athens looks like it will receive enough bailout cash to see it through to end-2013. But if it veers off track again, as is all too possible, any third chance might come with such extreme conditions that a messy default and a humiliating exit from the euro wouldn’t be far away.

The euro zone and International Monetary Fund are willing to provide more cash partly because the European Central Bank has scared Athens’ saviours into believing that a Greek default now would trigger a nightmarish set of domino collapses across the continent. In return, Greece has promised to raise the equivalent of 22 percent of GDP through privatisation by 2015, as well as squeezing another 10 percent of GDP from its fiscal deficit. There is also a plan to bail in private-sector creditors, albeit on a “voluntary” basis. That could cut the amount of new bailout money to perhaps 30 billion euros, out of a total funding hole of 65 billion euros.