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Rural activism
Working the system
At the lowest level, ordinary people find some scope to seek justice
Sep 29th 2012 | SHIBAIHU VILLAGE, HEBEI PROVINCE | from the print edition

WHEN township officials need to get into the locked government office of Shibaihu Village, they know to come to the home of Li Peng, sidestep his goats and dogs, and ask him (or his elderly mother) for the key. Mr Li is not an official nor a Communist Party member. He is an activist, and a rather effective one.

Mr Li and his family have been on the wrong side of officials in this windswept northern village (population 1,200) for half a century, including disputes over land and public finances. Their struggles demonstrate how power operates at the lowest rung of politics: the villages where half the country resides, and where a few officials can hold capricious sway over fellow villagers they’ve known all their lives, and to whom they may even be related. Researchers say there are tens of thousands of rural protests a year, often coming to naught.

But the Li family’s dogged insurgency demonstrates something else too: that there can be some give and take in China’s authoritarian system; that in local skirmishes there exist potential allies within that system (including official media); and that an activist can occasionally win. In recent years Mr Li, a divorced farmer with a laptop and internet access, has chalked up some stunning successes in resisting his village officials. Through shrewd activism, he has worked to have illegal mines and quarries shut down, to get seized farmland returned to villagers and even to have a few officials thrown out of office. Along the way he has made some powerful enemies in the village. Local thugs smashed his old computer (they didn’t know he had upgraded to a laptop) and have thrown rocks through his windows. “My relationship with the party committee is not good,” he says. But with help from journalists (and from a niece who taught him how to blog), he has charted a pragmatic path between the millions of farmers who file useless formal petitions about local abuses and the dissidents who go to prison for their advocacy of greater freedoms.

It’s a long story

The story of the Li family’s resistance began in 1962, when Mr Li’s father returned to the village, outside the city of Sanhe in rural Hebei province 70km (45 miles) east of Beijing, after serving in the People’s Liberation Army as a tank repairman. The elder Mr Li, his widow and son say, feuded for years with village leaders over how land had been distributed. He demanded that they open up the village’s books to inspection. In the family’s telling, the officials refused and took revenge: first, by not allowing him to build or renovate on his land; then, in the 1980s, by not granting more land to his sons (Li Peng and his brother) as they reached marrying age. In 1986, Mr Li says, his father placed bricks to mark the land he felt his family deserved and, in 1988, built a house on it. The next year, officials tore the house down.

Li Peng began to turn the tables in 2003, when village leaders teamed up with higher-level authorities to take 37 hectares (91 acres) of local farmland and convert it to forest. Villagers were almost unanimous in opposition, and alleged that local officials wanted to plant trees mostly to hide illegal (and profitable) rock quarries that were blighting the landscape. At this time Mr Li saw a report about corruption on a provincial television channel—state media routinely attack local corruption, a safe topic to criticise as long as it is not linked to more senior officials. He called the reporter, who referred him to a journalist working in Hebei for Xinhua, China’s official news service. The Xinhua journalist said the report would be more effective if it were filed not publicly but internally, within the party. The strategy seemed to work: by 2004, all the forest land was returned to farmers. But the Lis, more unpopular than ever with village officials, continued to be denied more land. (Mr Li senior died in 2006.)

In 2007 Li Peng took on the illegal mines and quarries which had continued to proliferate. He was detained for trying to file a formal complaint in Beijing, an approach he quickly abandoned. In 2008 he and other villagers switched to guerrilla tactics, guarding the main road and seeking “pollution fees” from lorries. And he turned again to state media, inviting a Hebei television reporter to investigate. But the reporter could not broadcast the story—local media are often prevented from reporting on problems within their own province. So Mr Li called Wang Keqin, a journalist famous for investigative reporting, and a colleague of Mr Wang’s came to cover the story. Xinhua followed up, and the authorities again took action. Eventually, some 150 illegal mining and quarrying companies in the area were shut down.

Mr Li bought a laptop and digital camera in 2008, and started posting to websites and then to microblogs. That was less important, though, than expanding his network of journalists. “They fear the media,” he says of local officials. In this, Mr Li was fortunate to succeed. Others protest and vent online for years with no result. Tales of local abuses are so commonplace that many people tune them out.

Rock the vote

The Li family’s most personal stand-off with officials was over village elections—nominally democratic in China but almost always rigged to keep favoured officials in power. Mr Li and others disputed the results of a 2009 election, claiming that officials had bribed villagers 50 yuan for each vote ($7 at the time). Mr Li’s mother occupied the office for weeks. Local officials often manage to suppress such troublemakers (if they can’t buy them off) with the help of higher officials. In this case authorities investigated and used it as an opportunity to act, disciplining several officials. There has not been an election since.

Now, the dynamic in Shibaihu has shifted. One of the officials disciplined as a result of Mr Li’s activism has sought Mr Li’s help in appealing against his treatment; they do not trust each other, but they are working together. Mr Li and another ousted official don’t speak when they pass on the road. Mr Li and his mother long ago locked the gate to the village office, and still have the key. The village’s financial books, though, are not there. The tales they contain remain a secret.

from the print edition | China

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China’s rich list
To get rich is not always glorious
Finding yourself on China’s rich list may not always be desirable
Sep 29th 2012 | BEIJING | from the print edition

EVERY year around this time, Hurun Report, a Shanghai-based luxury-publishing and events group, releases its compilation of China’s wealthiest people. The list not only satisfies the prurient interest of those fascinated with the lives of the rich and famous, but also reflects important trends in the Chinese economy.

The latest version, released on September 24th, was no exception. It revealed that Zong Qinghou, a drinks tycoon who heads the Wahaha Group, regained the top spot he had occupied in 2010. With a reported wealth of $12.6 billion, Mr Zong finished well ahead of his closest rival, Wang Jianlin of the Dalian Wanda Group, a property developer. Mr Wang, poor man, is worth a mere $10.3 billion.

With its elaborate cross-referencing of information, the list offers a wide range of intriguing titbits. Perhaps most significant is the fact that manufacturing has usurped property as the leading source of wealth for the 1,000 people listed. And for the first time since 2008 the number of dollar billionaires in China has declined, dropping by 20, to a total of 251.

Less significant, but no less interesting, is the fact that Yang Lan, a media entrepreneur and Pan Shiyi, a property developer, are the most popular microbloggers on the list, with more than 10m followers each. Or the fact that seven list members have been named as delegates to the upcoming 18th Communist Party Congress. Or that there were correlations between wealth and birth signs in the Chinese zodiac. Those born in the year of the rabbit accounted for 13% of list members. With only 6% of the representation, those born in the year of the ox finished last. Rabbits have dominated the list almost every year since it began in 1999.

Not everyone sees it as a blessing to have this kind of money. In his 2009 novel, “The Curse of Forbes”, Wang Gang described the problems likely to befall anyone in China who ends up on the Forbes Rich List, the international competitor to the Hurun Report list. These include added scrutiny from tax collectors, anti-corruption regulators and the public. “If you get onto the Forbes list, you’ll be dead meat in no time,” his protagonist predicts.

A new study provides a more methodological look at the same issue and comes—in more measured language—to a similar conclusion. In their report “The Price of Being a Billionaire in China: Evidence Based on Hurun Rich List”, Oliver Rui, Xianjie He and Xiao Tusheng found that among companies controlled by entrepreneurs who are on the list, market values dropped sharply within three years.

Basing their analysis on the 1999-2007 editions of the list, they observed that both the individuals and the companies they controlled came in for greater governmental scrutiny. “Investors in China,” the authors concluded, “regard entrepreneurs being included on the Rich List as bad news.”

One possible reason for that might worry entrepreneurs themselves. The proportion of those charged, investigated or arrested after being on the list was 17%, compared to 7% of other entrepreneurs in the same period.

from the print edition | China

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South Africa’s strikes
The fear of contagion
Strikes and soaring wages may both deter much-needed investors
Sep 29th 2012 | JOHANNESBURG | from the print edition

THINGS are looking grim for South Africa’s mining industry. On September 26th AngloGold Ashanti, the world’s third-largest gold producer, said it was closing its operations across the country in response to persistent strikes at its mines. Most of its 35,000 employees have stopped work. The company, which produces a third of its gold in South Africa, said the striking workers had not yet presented any formal demands. Calls for better working conditions and higher wages are likely.

Recently it looked as if tensions in the mining industry might be easing. The owners of Lonmin, a big platinum company, heaved heavy sighs of relief on September 18th, as workers at its mine at Marikana in South Africa signed a deal that ended a six-week wildcat strike that has left 46 people dead. Miners got a pay rise of between 11% and 22%, along with a one-off bonus of 2,000 rand ($240). Rock-drill operators, who were at the heart of the strike, got more than 11,000 rand a month: not quite the 12,500 they had been demanding, but close enough.

But the closure of AngloGold Ashanti’s mines has renewed fears of contagion. Strikes are quite common in South Africa but the violence at Marikana has rattled many in the industry. Looking at Lonmin, other miners may conclude that militancy is the only way to squeeze more money out of their employers. In recent weeks workers at mines owned by Anglo-American, Gold Fields and Gold One have also walked out. Anglo-American said it could start firing workers who fail to turn up.

Recent strikes at platinum and gold mines have cost South Africa 4.5 billion rand in lost production, says Jacob Zuma, the country’s president and leader of the ruling African National Congress (ANC). Along with the deal ending the strike, Lonmin said it would close a shaft at Marikana and lay off 1,200 contract workers.

The strikes have made South Africa’s leaders, especially its big trade unions, look feeble. The deal at Lonmin was brokered by a committee set up by miners, along with the South African Council of Churches and other civic leaders, not by the government or the unions. And the strike there was not only about pay; it was also a protest against the inadequacies of the miners’ official union, which is close to the ANC.

from the print edition | Middle East and Africa

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Auction houses
From Picasso to Qi Baishi
Christie’s and Sotheby’s are getting a smaller share of an expanding pie
Sep 29th 2012 | from the print edition

SLURRING is a method used by auctioneers to build excitement and anxiety among the bidding crowd. It uses carefully crafted phrases that create an illusion of rising intensity, such as “One dollar. Now two. Will you give me three? Do I hear four?” to put pressure on bidders and boost the final price.

Yet buyers in Hong Kong and the Chinese mainland have in recent years needed little encouragement. Sales in the region have soared from €691m ($859m) in 2004 to €9.8 billion last year (though the first half of this year was weak). Artprice, a research firm, reckons that Picasso, long the world’s most expensive artist, was knocked off the top spot in 2011 by two hitherto lesser-known Chinese painters, Zhang Daqian and Qi Baishi (one of whose pieces sold in Beijing last year for $65m).

Art auctions had long been dominated by two houses established in 18th-century London, Sotheby’s and Christie’s. But the surging demand from China’s new rich for art—increasingly, Chinese art—has led to the emergence of two Beijing-based giants, Poly and Guardian, whose combined sales of Chinese art are now near twice those of the London duo. Overall, art sales in China are now 30% of worldwide sales, up from 9% in 2008. Though the Chinese pair have only 26 years’ experience between them, compared with the four centuries the Western duo have amassed, they have been quick learners. Last year their combined revenues were $3.1 billion, up from $397m in 2008.

The two Chinese challengers have interesting pedigrees. Poly’s owner is China Poly Group Corporation, a state-owned defence manufacturer better known for artillery than art. Guardian was set up by Wang Yannan, daughter of Zhao Ziyang, the Chinese Communist Party leader until he was purged during the Tiananmen Square protests of 1989. Unlike Poly, it seeks to emulate its Western peers. “Guardian is far more transparent than Poly. I can get my head around this firm,” says Clare Mc Andrew of Arts Economics, a consultancy.

So far Western firms have been doing quite nicely running their Chinese art auctions from Hong Kong, though now Sotheby’s is seeking to enter the mainland, by means of a joint venture with Gehua, a smaller mainland auction house. The head of Christie’s in Asia, François Curiel, is sceptical of its rival’s move, arguing that to sell art to mainland Chinese buyers free of import taxes, Sotheby’s would need an auction licence from the government—which no Western firm has yet been given. Ms Mc Andrew also sees no sign of this changing, though of course Sotheby’s may be betting on the longer term.

The art market in China is not entirely a pretty picture. For a start, some local auction houses seem to be wildly exaggerating their sales to big themselves up. The Chinese Association of Auctioneers reckons that $885m-worth of 2010’s reported sales have not been paid for, and may thus not have taken place. Worse, the recent sharp downturn—ArtTactic reckons auction sales in China, including Hong Kong, fell 32% between autumn 2011 and spring of this year—may prove to be more than just a blip.

China’s auction market is much like other types of business in that country. Statistics are unreliable and the government gives local firms—often owned by the state itself or those with high-up connections—unfair advantages over foreigners. Even so, as with all sorts of other industries, from carmaking to consumer goods, Chinese consumers are splashing so much money about that it is too big an opportunity for Western firms to ignore.

from the print edition | Business

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The Big Four accounting firms
Shape shifters
With the audit market maturing, accounting firms become consultancies
Sep 29th 2012 | from the print edition

IT IS hardly news that the “Big Four” accounting firms get bigger nearly every year. But where they are growing says a lot about how they will look like in a decade, and the prospects worry some regulators and lawmakers. On September 19th Deloitte Touche Tohmatsu was the first to report revenues for its 2012 fiscal year, crowing of 8.6% growth, to $31.3 billion. Ernst & Young, PwC and KPMG will soon report their revenues (as private firms the Big Four choose not to report profits).

For all four, Asia is a bright region. Deloitte’s revenue in Asia grew by 16.3% in dollar terms, faster than anywhere else. This was despite long-running worries about dodgy audits of Chinese companies by Western firms. American and Chinese regulators have been rowing over whether America’s accounting watchdog may inspect Deloitte Shanghai’s work. The two sides recently announced that American regulators could visit and observe, but not perform their own inspections.

Yet more important, at all four firms consulting has been growing much faster than the audit business in recent years. In fiscal 2012 Deloitte increased its revenues from consulting by 13.5% and from financial advisory by 15%—compared with just 6.1% for audit and 3.9% for tax and legal services. Barry Salzberg, Deloitte’s boss, says he expects consulting to continue to grow by double digits, whereas the audit market is mature. Deloitte is adding consulting staff at twice the rate as employees for audits (at the end of May the firm had 193,000 people on its payroll).

If the two businesses continue to grow at the 2012 rate, the firm would do more consulting than auditing by 2017. Some lawmakers already fret that consulting and tax advisory (when the Big Four are explicitly helping companies make money) can be in conflict with auditing (where the firms should take a wary, outside view of the books, in the service of investors not management). Lynn Turner, a former chief accountant at America’s Securities and Exchange Commission, calls the audit firms a “public utility”, but worries that they do not see themselves that way.

In 2002 the Sarbanes-Oxley act limited what kind of non-audit services an American accounting firm can offer to an audit client. But contrary to what many people believe, it did not forbid all of them. In its last full proxy statement before being bought by JPMorgan, Bear Stearns reported paying Deloitte in 2006 not only $20.8m for audit, but $6.3m for other services. The perception that auditors and clients are hand-in-glove, fair or not, is a reason why shareholders of Bear Stearns sued Deloitte along with the defunct bank. (JPMorgan and Deloitte settled in June. Deloitte paid out $20m, denying any wrongdoing.)

The European Commission in Brussels recently proposed taking a meat-axe to the problem. A draft directive provides for the creation of audit-only firms in the European Union. But the legal-affairs committee of the European Parliament does not like the idea. With the EU’s legislative machinery slow and complex, it is impossible to predict the final outcome.

Asked what would happen if people perceived Deloitte as a consulting firm with an audit business rather than the other way round, Mr Salzberg replies: “we’re not going to take our eye off our professional responsibility with respect to either.” The future of the Big Four’s business model may depend on whether lawmakers in Europe and America are convinced that this is possible.

from the print edition | Finance and economics

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Buttonwood
The secrets of Buffett’s success
Beating the market with beta
Sep 29th 2012 | from the print edition

IF INVESTORS had access to a time machine and could take themselves back to 1976, which stock should they buy? For Americans, the answer is clear: the best risk-adjusted return came not from a technology stock, but from Berkshire Hathaway, the conglomerate run by Warren Buffett. Berkshire also has a better record than all the mutual funds that have survived over that long period.

Some academics have discounted Mr Buffett as a statistical outlier. Others have simply stood in awe of his stock-picking skills, which they view as unrepeatable. But a new paper* from researchers at New York University and AQR Capital Management, an investment manager, seems to have identified the main factors that have driven the extraordinary record of the sage of Omaha.

Understanding the success of Mr Buffett requires a brief detour into investment theory. Academics view stocks in terms of their sensitivity to market movements, or “beta”. Stocks that move more violently than the market (rising 10%, for instance, when the index increases by 5%) are described as having “high beta”, whereas stocks that move less violently are considered “low beta”. The model suggests that investors demand a higher return for owning more volatile—and thus higher-risk—stocks.

The problem with the model is that, over the long run, reality has turned out to be different. Low-beta stocks have performed better, on a risk-adjusted basis, than their high-beta counterparts. As a related paper† illustrates, it should in theory be possible to exploit this anomaly by buying low-beta stocks and enhancing their return by borrowing money (leveraging the portfolio, in the jargon).

But this anomaly may exist only because most investors cannot, or will not, use such a strategy. Pension schemes and mutual funds are constrained from borrowing money. So they take the alternative approach to juicing up their portfolios: buying high-beta stocks. As a result, the average mutual-fund portfolio is more volatile than the market. And the effect of ignoring low-beta stocks is that they become underpriced.

Mr Buffett has been able to exploit this anomaly. He is well-known for buying shares in high-quality companies when they are temporarily down on their luck (Coca-Cola in the 1980s after the New Coke debacle and General Electric during the financial crisis in 2008). “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” he once said. He has also steered largely clear of more volatile sectors, such as technology, where he cannot be sure that a company has a sustainable advantage.

Without leverage, however, Mr Buffett’s returns would have been unspectacular. The researchers estimate that Berkshire, on average, leveraged its capital by 60%, significantly boosting the company’s return. Better still, the firm has been able to borrow at a low cost; its debt was AAA-rated from 1989 to 2009.

Yet the underappreciated element of Berkshire’s leverage are its insurance and reinsurance operations, which provide more than a third of its funding. An insurance company takes in premiums upfront and pays out claims later on; it is, in effect, borrowing from its policyholders. This would be an expensive strategy if the company undercharged for the risks it was taking. But thanks to the profitability of its insurance operations, Berkshire’s borrowing costs from this source have averaged 2.2%, more than three percentage points below the average short-term financing cost of the American government over the same period.

A further advantage has been the stability of Berkshire’s funding. As many property developers have discovered in the past, relying on borrowed money to enhance returns can be fatal when lenders lose confidence. But the long-term nature of the insurance funding has protected Mr Buffett during periods (such as the late 1990s) when Berkshire shares have underperformed the market.

These two factors—the low-beta nature of the portfolio and leverage—pretty much explain all of Mr Buffett’s superior returns, the authors find. Of course, that is quite a different thing from saying that such a long-term performance could be easily replicated. As the authors admit, Mr Buffett recognised these principles, and started applying them, half a century before they wrote their paper.

* “Buffett’s Alpha”, by Andrea Frazzini, David Kabiller and Lasse Pedersen, August 2012
† “Betting Against Beta”, by Andrea Frazzini and Lasse Pedersen, October 2011

from the print edition | Finance and economics

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Elderly pets
Time to go, or perhaps not?
Sep 29th 2012 | from the print edition

The Last Walk: Reflections On Our Pets at the End of Their Lives. By Jessica Pierce. University of Chicago Press; 263 pages; $26 and £17

JESSICA PIERCE, a bio-ethicist with a particular interest in animal welfare, poses complex questions about our moral responsibilities towards our pets as they reach the end of their lives. What constitutes a “good death”? A bad death is relatively easy to define—a death in pain, fear or distress—but a good one is harder to pin down. For most pet owners a good death means painless euthanasia in either a veterinary surgery or at home. The author of “The Last Walk” is edgy about this.

“Why is it”, she writes, “that we have such a revulsion against euthanasia for human beings, yet when it comes to animals this good death comes to feel almost obligatory?” She goes on to ask whether for some animals a natural death is preferable to euthanasia and wonders at what point life for our pets becomes burdensome. More to the point she questions where that burden falls: on the pet itself or on ourselves, the pet owners who are challenged, frustrated, and often annoyed by the decline of a once vigorous animal.

Ms Pierce’s musings on the ethics and morals of how we, as humans, judge the quality of life of our animals is interspersed with the “Ody Journal”, which she began keeping in the autumn of 2009. The diary, about the physical and mental decline of Ody, her 13-year-old Vizsla who joined Ms Pierce’s family in 1996 as a “ten-week-old wriggling sack of loose red skin” pulls no punches. She writes honestly and movingly about how his ageing and health problems increasingly take centre stage. As with most pet owners, she is comfortable talking about uncomfortable facts: the shit and the bad breath, the weakened back legs and falls, the night-time barking, the vomiting and general confusion.

Underlining this is her own distress at Ody’s ageing: “changes are so gradual I almost don’t see them happening” but which add to her growing concern about what will happen to him when his time comes. “How do I judge the quality of his daily life, as he experiences it?” she asks. It is an uneasy question that millions of pet owners around the world will have to ask of their pet one day.

from the print edition | Books and arts

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The magic of good service
译文（详见80楼）已通过审核。。。有几个地方格式好像还有问题。。。为了不麻烦审核。。我就不改了

最后漏了一行字。。此处补上：(本文由我翻译，译文版权由我所有，欢迎交流、指正)

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Charlemagne
The other moral hazard
If the euro zone is to survive, Germany too must keep its promises to reform
Sep 29th 2012 | from the print edition

STITH[D1] by stitch, Germany is unravelling[D2] the carefully knitted[D3] deal that offered the euro zone the best chance yet of overcoming its crisis. Until this week European officials dared to imagine they had got ahead of the markets with two big moves. First, the ECB declared that it will act as a lender of last resort for troubled countries like Spain (if they agree to a reform programme). And second, the euro zone pledged to create a banking union to sever[D4] the death loop between weak banks and weak sovereigns. Now that the ECB had averted the threat of the euro breaking up, others have space and time to repair its design flaws.

If only it were so easy. Protests and strikes against austerity have restarted in debtor states, and secessionism[D5] is stirring in Spain. Just as worrying, creditor states are showing every sign of going slow, and even reneging[D6], on their promises to strengthen the euro zone. Rückfall, the German word for backsliding[D7], is one reason the euro zone is being pushed back into an acute phase[D8] of the crisis.

Start with the conditional promise of intervention[D9] by the ECB’s president, Mario Draghi. This is designed to hold down a country’s borrowing costs, especially for short-dated bonds, and dispel “unfounded[D10] fears” about the future of the euro. In his campaign to delegitimise[D11] the policy, Jens Weidmann, the Bundesbank chief, has resorted to[D12] drawing a parallel between Mr Draghi and Mephisto[D13] in Goethe’s[D14] “Faust[D15]”. The German government, though in favour of the ECB’s scheme, is uncomfortable. It has told Spain not to ask for more help—the essential first step that would allow the ECB to act.

Worse, the Rückfall over banking union seems almost designed to rekindle[D16] the crisis. At a summit in June euro-zone leaders declared that it was “imperative[D17] to break the vicious[D18] circle between banks and sovereigns”. To do so, they would create a single banking supervisor “as a matter of urgency”. And once established, euro-zone rescue funds could be used directly to recapitalise troubled banks. It is no secret that the plan was meant to help Spain, by shifting some of the burden of supporting crippled[D19] banks to the euro zone—retroactively[D20] if necessary. Ireland was told it could expect similar assistance.

This bargain was done on terms that Germany has always advocated: more central control in exchange for more solidarity. But even before the European Commission this month rushed out its proposals for a banking supervisor (an offshoot[D21] of the ECB), Germany was undermining the deal. Drafts of the commission’s plan included a commitment to complement the new supervisor with a euro-zone resolution authority to wind up[D22] failed banks (known as Edira), and a European bank-deposit guarantee scheme (aka, Edgar). Under German pressure, these were removed from the final version.

Many worry that, with the abortion of Edira and Edgar, the ECB will be responsible for overseeing banks but lack the means to deal with the bad ones. At the same time, Germany is fighting the commission’s plan for the ECB to have authority to supervise all 6,000-plus banks in the euro zone. Berlin wants to exclude smaller banks, including its own often-troubled regional lenders.

And Germany has tried to slow down the timetable for the supervisor to start work on January 1st 2013, on the grounds that such an important task should not be rushed. Thereafter[D23], direct bank recapitalisation should only take place once the system has shown itself to be effective. This week, Wolfgang Schäuble, the German finance minister, and his über-[D24]hawkish[D25] colleagues from the Netherlands and Finland, sought greatly to limit the scope of the commitment: direct bank recapitalisation should apply only to new problems, not “legacy assets” and should only be a “last resort”, after using private capital and then national funds.

Germany knows it has to look after its own banks, so it wants to limit its liability[D26] for those of other countries. Angela Merkel, the German chancellor[D27], has already staked much treasure on helping others. At some point, Germany may have to write off part of the loans it made to Greece. Mrs Merkel already lost her “chancellor’s majority” in this summer’s vote to lend Spain up to €100 billion ($129 billion) to restructure its banks. She is not rushing back to the Bundestag[D28] to ask for more money, not least because any debate would turn to the ECB and Mephisto.

Economics and morality

Mario Monti, Italy’s prime minister, quips[D29] that, for Germany, “economics is a branch of moral philosophy”. Countries must pay for sins of commission[D30] (budget deficits) and omission (poor bank supervision). Only then can there perhaps be more European integration to avert problems in the future.

Yet there is little point in worrying about tomorrow’s woes[D31] when today’s crisis is unresolved. Germany is right to fret[D32] that relieving market pressure on debtors could create moral hazard and slow down badly needed reforms. Equally, though, moral hazard applies to creditors. When the pressure is off, Germany shows too little urgency about repairing the euro.

There is a cost to delay and prevarication[D33]. It is harder for countries to reform without hope that their agony will end. Germany’s unwillingness to act except in the most dire moments condemns[D34] the euro zone to one acute crisis after another. In the short term Mrs Merkel may thus find herself fighting for re-election next year with the euro zone back in flames. In the longer term a chronic[D35] crisis is already creating permanent damage: prolonged economic stagnation and depression in deficit countries, loss of confidence in the credibility of governments and the future of the euro, and increasingly poisonous politics. Germany may fear the “legacy” costs of past mistakes. But it should also worry about the legacy of its hesitation and inaction.

from the print edition | Europe

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[D1]stitch noun [countable] a short of piece of thread that has been sewn into a piece of cloth, or the action of the thread going into and out of the cloth
[D2]unravel verb (past tense and past participle unravelled, present participle unravelling British English, unraveled, unraveling American English)
1 [transitive] to understand or explain something that is mysterious or complicated
2 [intransitive and transitive] if you unravel threads, string etc, or if they unravel, they stop being twisted together
[D3]knit verb [intransitive and transitive] (past tense and past participle knitted, present participle knitting) to make clothing out of wool, using two knitting needles
[D4]sever verb formal
1 [intransitive and transitive] to cut through something completely, separating it into two parts, or to become cut in this way [= cut off]
2 [transitive] to end a relationship with someone, or a connection with something , especially because of a disagreement [= break off]
[D5]secessionist noun [countable] someone who wants their country or state to be independent of another country
[D6]renege on an agreement / deal / promise etc to not do something you have promised or agreed to do [= go back on]
[D7]backslide verb [intransitive] to start doing the bad things that you used to do, after having improved your behaviour
[D8]phase noun [countable] one of the stages of a process of development or change
[D9]intervention noun [uncountable and countable] the act of becoming involved in an argument, fight, or other difficult situation in order to change what happens
[D10]unfounded adjective unfounded statements, feelings, opinions etc are wrong because they are not based on facts
[D11]delegitimize verb [transitive] to remove the legitimate or legal status of
[D12]resort to something phrasal verb to do something bad, exteeme, or difficult because you cannot think of any other way to deal with a problem
[D13]Mephisto The name is associated with the Faust legend of a scholar — based on the historical Johann Georg Faust — who wagers his soul against the Devil. The name appears in the late 16th century Faust chapbooks. In the 1725 version which was read by Goethe, Mephostophiles is a devil in the form of a greyfriar summoned by Faust in a wood outside Wittenberg. The name Mephistophiles already appears in the 1527 Praxis Magia Faustiana, printed in Passau, alongside pseudo-Hebrew text. It is best explained as a purposely obscure pseudo-Greek or pseudo-Hebrew formation of Renaissance magic. From the chapbook, the name enters Faustian literature and is also used by authors from Marlowe down to Goethe. In the 1616 edition of The Tragical History of Doctor Faustus, Mephostophiles became Mephistophilis. The word derives from the Hebrew mephitz, meaning "destroyer", and tophel, meaning "liar"; "tophel" is short for tophel shequer, the literal translation of which is "falsehood plasterer". The name can also be a combination of three Greek words: "me" as a negation, "phos" meaning light, and "philis" meaning loving, making it mean "not-light-loving", possibly parodying the Latin "Lucifer" or "light-bearer". Mephistopheles in later treatments of the Faust material frequently figures as a title character: in Meyer Lutz' Mephistopheles, or Faust and Marguerite (1855), Arrigo Boito's Mefistofele (1868), Klaus Mann's Mephisto, and Franz Liszt's Mephisto Waltzes.
[D14]Goethe (1749-1832) a German poet and scientist, and one of the best-known writers of plays and books of all time, known especially for his play Faust
[D15]Faust An important version of the legend is the play Faust, published in 1808 by the German author Johann Wolfgang von Goethe. Goethe's Faust complicates the simple Christian moral of the original legend. A hybrid between a play and an extended poem, Goethe's two-part "closet drama" is epic in scope. It gathers together references from Christian, medieval, Roman, eastern and Hellenic poetry, philosophy and literature. The composition and refinement of Goethe's own version of the legend occupied him for over 60 years (though not continuously). The final version, published after his death, is recognized as a great work of German literature. The story concerns the fate of Faust in his quest for the true essence of life ("was die Welt im Innersten zusammenhält"). Frustrated with learning and the limits to his knowledge, power, and enjoyment of life, he attracts the attention of the Devil (represented by Mephistopheles), who agrees to serve Faust until the moment he attains to the zenith of human happiness that he cries out to that moment to "stay, thou art so beautiful!" (Faust, I, l.1700) — at which point Mephistopheles may take his soul. Faust is pleased with the deal, as he believes this happy zenith will never come. In the first part, Mephistopheles leads Faust through experiences that culminate in a lustful relationship with Gretchen, an innocent young woman. Gretchen and her family are destroyed by Mephistopheles' deceptions and Faust's desires. Part one of the story ends in tragedy for Faust, as Gretchen is saved but Faust is left to grieve in shame. The second part begins with the spirits of the earth forgiving Faust (and the rest of mankind) and progresses into allegorical poetry. Faust and his Devil pass through and manipulate the world of politics and the world of the classical gods, and meet with Helen of Troy (the personification of beauty). Finally, having succeeded in taming the very forces of war and nature, Faust experiences a singular moment of happiness. Mephistopheles tries to seize Faust's soul when he dies after this moment of happiness, but is frustrated and enraged when angels intervene due to God's grace. Though this grace is truly 'gratuitous' and does not condone Faust's frequent errors perpetrated with Mephistopheles, the angels state that this grace can only occur because of Faust's unending striving and due to the intercession of the forgiving Gretchen. The final scene has Faust's soul carried to heaven in the presence of God as the "Holy Virgin, Mother, Queen, Goddess...The Eternal Feminine". The Goddess is thus victorious over Mephistopheles, who had insisted at Faust's death that he would be consigned to "The Eternal Empty".
[D16]rekindle verb [transitive] to make someone have a particular feeling, thought etc again [= reawaken]
[D17]imperative adjective extremely important and needing to be done or dealt with immediately
[D18]vicious adjective unpleasantly strong or severe [= violent]
[D19]cripple verb [transitive] to damage something badly so that it no longer works or is no longer effective
[D20]retroactive adjective formal a low or decision that is retroactive is effective from a particular date in the past [= retrospective]
[D21]offshoot noun [countable] something such as an organization which has developed from a larger or earlier one
[D22]wind up phrasal verb to bring an activity, meeting etc to an end
[D23]thereafter adverb formal after a particular event or time [= afterwards]
[D24]über- Über (sometimes romanized as ueber or uber) is a German language word meaning "above", "over" or "across." It is a cognate of both Latin super and Greek ὑπέρ (hyper). It is also sometimes used as a hyphenated prefix in informal English, usually for emphasis. It is properly spelled with an umlaut.
[D25]hawkish adjective supporting the use of military force in order to deal with political problems
[D26]liability noun [uncountable] legal responsibility for something, especially for paying money that is owed, or for damage or injury
[D27]chancellor noun [countable] the leader of the government or the main government minister of some countries
[D28]Bundestag The Bundestag (Federal Diet) is a legislative body in Germany.
[D29]quip verb [transitive] to say something clever and amusing
[D30]commission noun [uncountable and countable] an extra amount of money that is poaid to a person or organization according to the value of the goods they have sold or the services they have provided
[D31]woes [plural] formal the problems and troubles affecting someone
[D32]fret [intransitive] to worry about something, especially when there is no need
[D33]prevaricate verb [intransitive and transitive] formal to try to hide the truth by not answering questions directly
[D34]condemn verb [transitive] if a particular situation condemns someone to something, it forces them to live in an unpleasant way or to do something unpleasant
[D35]chronic adjective a chronic problem is one that continues for a long time and cannot easily be solved

!感-杠-问?

Charlemagne
The other moral hazard[D1] [D2]  
If the euro zone is to survive, Germany too must keep its promises to reform[D3]  
Sep 29th 2012 | from the print edition

STITCH by stitch[D4], Germany is unravelling the carefully knitted deal that offered the euro zone the best chance yet[D5] of overcoming its crisis. Until[D6] this week European officials dared to imagine they had got[D7] ahead of the markets with two big moves. First, the ECB declared that it will act as[D8] a lender of last resort for troubled[D9] countries like Spain (if they agree to a reform programme). And second, the euro zone pledged[D10] to create a banking union to sever the death loop between[D11] weak banks and weak sovereigns. Now that[D12] the ECB had averted the threat of[D13] the euro breaking up, others have space and time to[D14] repair its design flaws[D15].

If only[D16] it were so easy. Protests and strikes against austerity[D17] have restarted in debtor states, and secessionism is stirring[D18] in Spain. Just as worrying[D19], creditor states are showing every sign[D20] of going slow, and even reneging, on their promises[D21] to strengthen[D22] the euro zone. Rückfall, the German word for backsliding, is one reason the euro zone is being pushed back into an acute phase of the crisis.

Start with[D23] the conditional promise of intervention by the ECB’s president, Mario Draghi. This is designed to hold down a country’s borrowing costs, especially for short-dated bonds, and dispel “unfounded fears”[D24] about the future of the euro. In his campaign to delegitimise the policy, Jens Weidmann, the Bundesbank chief, has resorted to[D25] drawing a parallel between[D26] Mr Draghi and Mephisto in Goethe’s “Faust”. The German government, though in favour of the ECB’s scheme[D27], is uncomfortable. It has told Spain not to ask for more help—the essential first step[D28] that would allow the ECB to act.

Worse, the Rückfall over banking union seems[D29] almost designed to rekindle the crisis. At a summit in June euro-zone leaders declared that it was “imperative to[D30] break the vicious circle between[D31] banks and sovereigns”. To do so, they would create a single banking supervisor “as a matter of urgency”. And once established[D32], euro-zone rescue funds could be used directly to recapitalise troubled banks. It is no secret that[D33] the plan was meant to[D34] help Spain, by shifting[D35] some of the burden of supporting crippled banks to the euro zone—retroactively if necessary[D36]. Ireland was told it could expect similar assistance[D37].

This bargain was done on terms that[D38] Germany has always advocated[D39]: more central control[D40] in exchange for[D41] more solidarity[D42]. But even before the European Commission this month rushed out its proposals for a banking supervisor (an offshoot of the ECB), Germany was undermining[D43] the deal. Drafts of the commission’s plan included a commitment to complement the new supervisor with a euro-zone resolution authority to wind up failed banks (known as Edira), and a European bank-deposit guarantee scheme (aka, Edgar). Under German pressure[D44], these were removed[D45] from the final version.

Many worry that, with the abortion of[D46] Edira and Edgar, the ECB will be responsible for overseeing banks but lack[D47] the means to deal with the bad ones. At the same time, Germany is fighting the commission’s plan for the ECB to have authority to supervise all 6,000-plus banks in the euro zone. Berlin wants to exclude[D48] smaller banks, including its own often-troubled regional lenders.

And Germany has tried to slow down the timetable for the supervisor to start work on January 1st 2013, on the grounds that[D49] such an important task should not be rushed. Thereafter, direct bank recapitalisation should only take place once[D50] the system has shown itself to be effective. This week, Wolfgang Schäuble, the German finance minister, and his über-hawkish colleagues from the Netherlands and Finland, sought[D51] greatly to limit the scope of[D52] the commitment: direct bank recapitalisation should apply only to new problems, not “legacy assets” and should only be a “last resort”, after using private capital and then national funds.

Germany knows it has to look after its own banks, so it wants to limit its liability for those of other countries. Angela Merkel, the German chancellor, has already staked much treasure on helping others. At some point[D53], Germany may have to write off part of the loans it made to Greece. Mrs Merkel already lost her “chancellor’s majority” in this summer’s vote to lend Spain up to[D54] €100 billion ($129 billion) to restructure its banks. She is not rushing back to the Bundestag to ask for more money, not least[D55] because any debate would turn to the ECB and Mephisto.

Economics and morality

Mario Monti, Italy’s prime minister, quips that, for Germany, “economics is a branch of moral philosophy”. Countries must pay for sins of[D56] commission (budget deficits) and omission (poor bank supervision). Only then can there perhaps be[D57] more European integration to avert problems in the future.

Yet[D58] there is little point in[D59] worrying about tomorrow’s woes when today’s crisis is unresolved. Germany is right to fret[D60] that relieving market pressure on[D61] debtors could create moral hazard and slow down badly[D62] needed reforms. Equally, though[D63], moral hazard applies to creditors. When the pressure is off[D64], Germany shows too little urgency about repairing the euro.

There is a cost to[D65] delay and prevarication. It is harder for countries to reform without hope that their agony[D66] will end. Germany’s unwillingness to[D67] act except in the most dire moments[D68] condemns the euro zone to one acute crisis after another. In the short term[D69] Mrs Merkel may thus[D70] find herself fighting for[D71] re-election next year with the euro zone back in flames[D72]. In the longer term a chronic crisis is already creating permanent[D73] damage: prolonged[D74] economic stagnation and depression[D75] in deficit countries, loss of confidence in the credibility of governments and the future of the euro, and increasingly poisonous politics. Germany may fear the “legacy” costs of past mistakes. But it should also worry about the legacy of its hesitation and inaction[D76].

from the print edition | Europe

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[D1]hazard（有risk、danger、threat的意思）
[D2]moral hazard（固定搭配，别用moral risk）
[D3]If + S+ be to do + O, S + Model Verb + do + O.（这个条件句的结构十分常见，特征是从句be to主句情态动词）
[D4]X by X（这个结构一般作插入语、状语，或者独立成句。）
[D5]yet（有so far的意思，这里是后置副词修饰best）
[D6]until（同时有两个意思，1、时点之前动作发生，2、时点开始动作改变）
[D7]善用虚拟语气
[D8]act as
[D9]troubled（虽然很简单，但是个好词）
[D10]pledge + infinitive（相似还有implore、beg等）
[D11]sever the death loop between A and B（结束A与B之间的恶性循环）
[D12]Now that（表原因，一般置于句首）
[D13]avert the threat of（动宾搭配）
[D14]have space and time + infinitive（非常好的句式，space可以替换成room）
[D15]repair the flaws（动宾搭配，repair可用mend等替换）
[D16]If only + SVO.（一般虚拟，表示事实上not (only) ...）
[D17]austerity（注意与thrifty的区别和联系）
[D18]stir（相似的许多。另外强调进行时态的运用，一般表示带有强烈情感，这一时态几乎已经成为情态表达了）
[D19]Just as worrying（这一结构虽然不难，但是运用得却不多。很多时候，并不是从句越多越地道，适当地运用句首副词、伴随状语、as精短从句等结构反而比宾语从句、表语从句等更好）
[D20]show every sign of（有evidence show that的意思，这里有一个小窍门。如果要在of等介词后面加从句，其实很简单，在of后面加the fact that即可引导从句，fact可以换成其他名词，that引导的是同位语从句。但最后要强调的是，要锻炼自己用长长的名词词组代替从句的能力！英语中的名词比汉语多得多，要写出地道的英语作文，名词不可或缺，要把从句的第一反应逐渐转换到名词性短语、副词性短语等）
[D21]renege on one’s promise（第二次看到了，那就记一下吧，注意动宾搭配、介词搭配。又是进行时态哟）
[D22]strengthen（相似的词很多）
[D23]Start with（表示时间、因果上先后，同样的，如果要加从句with后加the fact that，fact可换成其他名词。但同样强调逐渐摆脱从句的第一反应，要向名词性短语过度）
[D24]dispel the fears about（动宾搭配、介词搭配）
[D25]resort to doing something（就这个动作来说，有take action、operate的意思。但是注意，to的介词宾语一定是negative的。因此这个结构在翻译时，经常译作“不得已而为之”。最后注意to后加动名词）
[D26]draw a parallel between A and B（这个结构蛮漂亮的，有compare A with B的意思）
[D27]though的插入语（要善用插入语。though作副词时，可放句中或句末，相当于yet的意思，但预期更强）
[D28]essential fist ...（这两个词经常一起搭配）
[D29]seem（系动词）
[D30]It is imperative + infinitive（有urgent的意思）
[D31]break the vicious circle between A and B（与之前的sever the death loop between A and B相似）
[D32]大多数的状语从句引导词（连词）都可以直接跟分词结，要大胆去运用这一结构，并多做练习，但要注意逻辑主语的问题。
[D33]It is no secret that...
[D34]be meant + infinitive（表目的）
[D35]shift A to B（相似的词很多）
[D36]if从句作插入语（这个插入语也比较常见，一般破折号置于句末）
[D37]assistance、assist（替换help、help）
[D38]on terms that ...
[D39]advocate (n./ v.)
[D40]central control（注意与centralization的区别和联系）
[D41]in exchange for
[D42]solidarity（这个词很和谐）
[D43]undermine（有gradually damage / weaken的意思）
[D44]under the pressure
[D45]remove A from B
[D46]with the abortion of
[D47]lack (v.)
[D48]exclude
[D49]on the grounds that（表原因）
[D50]once（表条件、时间）
[D51]seek + infinitive
[D52]limit the scope of（limit有decrease或keep to a low level的意思）
[D53]at some point（表将来）
[D54]up to + number
[D55]not least（表强调）
[D56]sin(s) of（sin这个单词是很具有基督文化色彩的词，七宗罪就是这个词）
[D57]善用倒装
[D58]yet（表转折）
[D59]there is little point in doing something
[D60]fret（不及物动词，但可接宾语从句）
[D61]relieve the pressure on something（动宾搭配、介词搭配）
[D62]badly（表强调，相当于very）
[D63]though（作副词）
[D64]the pressure is off（联想到on）
[D65]There is a cost + infinitive
[D66]agony（有trouble、annoyance的意思）
[D67](un)willing(ness) + infinitive
[D68]in the most dire moments
[D69]In the short(er) / long(er) term
[D70]thus（置于句中）
[D71]fight for ...
[D72]be in flames
[D73]permanent（前几天学到的perennial类似
[D74]prolonged（与前面的permanent类似）
[D75]stagnation and depression（同义复用）
[D76]hesitation and inaction（同义复用）