Quotes of the Day
Shakespeare wrote that "to sell a bargain well is as cunning as fast and loose," and it was precisely U.K. retailers' ability to sell that helped sustain the country's economy as much of Europe faltered. But last week brought troubling signs that the boom may be over, as electronics retailer Dixons warned that consumer confidence was "cracking" and joined several other stores in reporting dismal Christmas sales. Dixons' shares promptly plunged 20%; more worrying is that this may be a trend. New data by the British Retail Consortium show U.K. same-store sales growth flattening from 4% in October, to 2% in November, to only 1.7% in December, while the Confederation of British Industry says the number of shoppers last month fell over 7% from last year. Ian McCafferty, chief economist at the c.b.i., warns that it is too early to say the gloom is here to stay, but concludes: "The consumer boom actually finished several months ago." He suspects that job-market uncertainty, poor wage settlements and tax hikes slated for April may all be causing Brits to tighten their belts. So far that just means slowing sales growth, not falling sales. With E.U. figures showing a five-and-a-half-year low in consumer confidence across the euro zone, maybe U.K. retailers can console themselves with the idea that they're selling well just to be selling at all.
GERMAN LABOR
Fire Peter To Pay Paul
After months of unending bad news on the economy, the new year has given Chancellor Gerhard Schröder a reason to pop the champagne. Negotiators representing German federal, state and local governments reached a pay deal with the country's public sector union, Verdi. The settlement, which will provide a raise of 2.4% this year and two 1% raises next year, avoided a crippling strike by teachers, garbage men and airport workers just before crucial elections in Hesse and Lower Saxony on Feb. 2. But can the government afford it? The settlement will make it harder for Germany to get its budget deficit under the 3% mandated by the E.U. The European Commission gave Berlin four months to get its deficit under control or face sanctions, including large fines. The pay deal also will mean that cash-strapped municipalities will likely have to lay off workers to afford the higher wages. So Schröder's champagne could soon go flat.
EUROBLUES
Gone Courting
It was typical of Jean-Claude Trichet's stumbling journey to succeed Wim Duisenberg as head of the European Central Bank: the Crédit Lyonnais trial to clear his name or damn him finally began in Paris last week, time was of the essence ... then everything stopped, as red tape delayed the next court date until this week. Trichet's ills began in 1993, when he was accused of covering up troubles that almost collapsed the bank. Economists agree he's ideal for the E.C.B. job, but a guilty verdict would wreck his chances — yet no clear replacement has emerged. For political reasons, the next president will almost certainly be French; Jean Lemierre, president of the European Bank for Reconstruction and Development and Hervé Hannoun, of France's central bank, are potentials. But absent Trichet, the slot is really up in the air. Last week, Duisenberg even offered to stay until a successor was found — and if Trichet's trial doesn't start going more smoothly, it may be a long wait.
INDICATORS
Brussels Calling
The European Commission launched a formal investigation into whether France's 19 billion loan to France Telecom was illegal state aid. France says the loan, at just under 7% interest, is legitimate because it was made at market prices.
Cruising The Silk Road
DaimlerChrysler is working on a deal to assemble 20,000-30,000 Mercedes-Benz cars in China, to cater to growing demand for luxury cars in the world's fourth-largest auto market. Last year, car sales in China grew by 55%.
Don't Cry For Them
Argentina dropped most currency controls that it imposed after the country defaulted on $95 billion in debt last year, prompting optimism that the International Monetary Fund would reschedule a $1 billion payment due Jan. 17.
A Tax For What Ales You
France provoked Belgium's normally silent Trappist monks, who brew beers like Chimay, to complain to the E.U. about plans to slap additional taxes on beers with more than 8.5% alcohol. France says the tax is meant to curb alcoholism, but the monks say it is anticompetitive — French wines won't suffer — and will hit revenues by 32.5 million.
BOTTOM LINES
"Try to get animal facilities in a place like the U.K. — and be careful they don't burn your car."
PHILIP YEO,
chairman of Singapore's Agency for Science, Technology and Research, on why biomedical companies move to his country
"This is a pig that even a Republican python might not be able to swallow."
ROBERT REISCHAUER,
former U.S. Congressional Budget Office director, on Bush's $674
billion tax-cut plans
"It's like hiring Picasso and having him paint your house."
LARRY SHAPIRO,
executive vice president at Disney's Internet unit, on ordering employees to cut costs by ending flashy content
- BLAINE GRETEMAN and CHARLES P. WALLACE
- The post-Christmas blues hit as stores count the cost