Microsoft has joined Google's European rivals in a complaint that has triggered an antitrust investigation against the search engine giant. Image: CC Titanas/Flickr

European Union authorities launched an antitrust investigation against Google in November. Smaller European web companies, some owned by Microsoft, accused Google of shutting them out of search engine results and other anti-competitive practices. On Thursday Microsoft stood behind some of its subsidiaries and filed its own complaint against Google with the EU.

Microsoft’s antitrust complaint against Google

Alleging that Google is limiting its access to critical data it needs to compete using YouTube and other Google services to the detriment of European consumers, Microsoft filed a formal antitrust complaint in Europe against Google. Microsoft’s complaint against Google throws its weight behind an ongoing antitrust investigation by the European Union Competition Commission. Google controls about 95 percent of the Internet search market in Europe while Microsoft’s search engine, Bing, swims with the other minnows. Google, which has become Europe’s central online hub for advertisers, has also grown accustomed to European antitrust complaints about competition among search engines. After fighting antitrust investigations into Windows and billions in fines from the European Commission for years, Microsoft has reversed roles with its complaint against Google.

Has Bing drawn Google’s wrath?

Microsoft’s European antitrust complaint against Google is about background technologies such as “application programming interfaces” that unlock access to Google products and services. Microsoft alleges that Google fiddles with the application programming interfaces to interfere with access to YouTube by Bing and other competing search engines, thus herding their users toward Google. In particular, Microsoft said Google thwarts Windows Phones from working correctly with YouTube — problems Android and iPhone users don’t experience. Microsoft suspects that Windows Phones are getting the short shrift because of Bing because Apple does not compete with Google in the search engine market. Microsoft also alleges that Google blocks some advertisers from access to data they need to optimize advertising on rival platforms, allegations already being investigated by the EU antitrust probe.

Microsoft raises stakes in Google probe

An EU Commission spokesman said it will give Google an opportunity to tell its side of the story. Google has said the restraint on third-party software is to maintain the consistency of Google’s ad service and that advertisers are allowed unfettered access to data. But Microsoft’s involvement in Europe raises the stakes. Google could face a fine of up to 10 percent of annual global revenues, which exceeded $29 billion in 2010. It could also be forced to change the way it does business in Europe. Before Microsoft threw its hat into the ring, the EU commission said it would give Google a chance to avoid a fine or conviction of wrongdoing by changing the way it does business in Europe.

Sources

Associated Press

Los Angeles Times

New York Times

The Irish parliament must vote on the austerity measures proposed by the government, led by Prime Minister Brian Cowen, left. Image from Wikimedia Commons.

The Irish vote on the country’s austerity measures is being closely watched. The Republic of Ireland is receiving a bundle of bailout loans, similar to Greece, and austerity measures have to be implemented. The aim is to free up several billion euros.

Irish vote on cuts of billions of euros

The Irish budget vote is being closely watched, as the parliament of Ireland has taken on the grim task of voting on further austerity measures, according to the New York Times. Irish austerity measures have to be introduced for the Republic of Ireland to receive a direly needed financial aid package, though that isn’t an official condition. If the budget cuts are sufficient to meet standards, Ireland stands to receive an aid package of about 85 billion euros. The goal of the austerity measures is to cut 6 billion euros from next year’s budget, part of an overall goal of cutting 15 billion euros over 2011 to 2013. Having to cut government spending is not popular with the voting public, but doing nothing is often worse.

Successive years of austerity cuts

The ongoing Irish vote is the third year of austerity measures being introduced in the Emerald Isle, according to The Telegraph. To top it all off, Prime Minister Brian Cowen will have to call for a new election as soon as the budget is passed. Of the 85 billion euros to be cut, 67.5 billion is from the European Union and the International Monetary Fund. The Irish government has withdrawn 17.5 billion euros from its own pension fund, similar to the Social Security trust fund for the United States. Most of the cuts will be slashing the pay of public sector workers. The Prime Minister will be taking a pay cut of about 14,000 euros per year.

Austerity measures unpopular

Austerity measures rarely make a government popular with the people, and the huge bailouts the Irish government made, similar to those in the United States and elsewhere, created a lot of public resentment toward the government.

Sources

New York Times

The Telegraph

Some European financial experts believe the euro will collapse. (Photo Credit: CC BY/E. Robert Vicol/Flickr)

Much like the United States, the European Union has been living in an economic dream world where moral hazard does not exist, says Roger Cohen in a recent New York Times op-ed piece. A lack of financial oversight is in large part why countries such as Ireland, Greece, Portugal and Spain are on the precipice of financial disaster, and European Union bailouts have achieved the illusion of short-term stability. Like many Europeans, Cohen wonders where the next bailout will come from – and whether German Chancellor Angela Merkel is willing to put her money where her mouth is when it comes to propping up the euro.

Germany supports the euro, but aren’t doing enough to save it

Angela Merkel once said that “If the euro fails, then Europe fails.” When Germany re-unified, it gave up the Deutsche Mark for the euro as a condition (“a Faustian bargain,” writes Cohen), so Berlin would appear to be invested in the euro’s success. Of late, as the financial foundation of the European Union has begun to show cracks, Merkel has reportedly done more finger-pointing than taking responsibility for the European Union’s future. She says she wants a euro zone 2.0 by 2013, a fiscal union in which the individual European states and shareholders follow strict financial guidelines or face severe punishment. But when it comes to the real sacrifice needed in the short term, Merkel has had little or nothing to say, writes Cohen.

‘Will we have to pay for all of Europe?’

The German tabloid Bild has mocked what it refers to as Chancellor Merkel’s hollow pronouncements. Germany’s pledge to hold to the ideals of a unified Europe has given way to condemnation of “euro zone sinners” whose rampant, largely unrestrained speculation has led the European Union to the edge of a canyon. Unless Germany consumes more, complains less and brings creative invention to solving the European economic crisis, Cohen suggests that more euro zone defaults will occur, and the nations with the most financial trouble will be set adrift. Angela Merkel and Germany must honor commitments and stand by the kind of tough decisions all leaders in the European Union must now make.

Sources

New York Times

The European Union is ‘broken’

The European Union's vote to extend maternity leave puts parents first. (Photo Credit: CC BY/Carolyn Coles/Flickr)

The Guardian reports that after a prolonged political battle, the European Union has voted in favor of extending maternity leave benefits to 20 weeks with full pay for new mothers. While several EU member nations fought bitterly against the change – most notably Britain and Germany – a majority voted in favor of the legislation (390 to 192). The 20 weeks paid maternity leave provision is an amendment to the larger legislation, which passed by a mere seven votes (327 to 320).

Maternity leave ruling ‘a great day for new parents’

European parliament member Edite Estrela of Portugal told the Guardian that the new EU maternity leave policy signifies not only “a great day for new parents,” but it is “good news for (the EU’s) economic future.” The cost involved in enacting the legislation is considered minimal by Estrela, particularly if 1.4 percent more European women are able to join the workforce. The benefits of providing greater work-life balance – where the parent-child bond is a major step toward producing a happy, well-adjusted member of society – are priceless. The new maternity leave law also grants fathers two weeks of fully paid paternity leave.

Economic recession and maternity leave law recipe for disaster, says U.K.

Cuts in public spending have run rampant across the EU, and the same holds true in the U.K. The most recent round of budget cuts is reportedly the most dramatic since World War II. Thus, it comes as no surprise that the U.K. is concerned about the timing of setting aside even more cash for maternity leave. The current statutory maternity leave pay plan in Britain is stretched over one year, but the pay scale downgrades sharply. Ninety percent of average weekly salary is paid the first six weeks, then a flat weekly rate of approximately £125 ($198) is paid over the next 33 weeks. The final 13 weeks of the maternity leave year are unpaid, but state benefits still apply.

According to the British business lobby, the new EU maternity leave plan, full pay for 20 weeks, will “cost an extra £2.5 billion ($3.97 billion)” annually, which the lobby believes will hamstring small business and weaken the chances that women of traditional childbearing age will find jobs.

Sources

Guardian

96 weeks paid maternity leave in Sweden

Austerity measures aimed at deficit-financed social programs drew mobs of protesters in 12 European capitals Wednesday. Image: CC Teemu Mantynen/Flickr

Europe roiled with strikes and marches as citizens protested austerity measures — which cut government spending, benefits and public services and could increase taxes –  taken by governments trying to climb out of the European debt crisis. Europeans are upset that while governments spent billions to rescue banks, ordinary citizens were being forced to accept the consequences of austerity. Meanwhile, a top U.S. Treasury official warned European governments that economic recovery, not austerity, should be the priority.

Austerity draws a crowd

In a day of austerity protests on Wednesday, hundreds of thousands of people marched across Europe. Reuters reports that the protests were led by trade unions, which say austerity will slow economic recovery and punish the poorest citizens. Trade unions organized protests in 12 European capitals to demonstrate against spending cuts and pension and labor market reforms. In Brussels, Belgium, a crowd of about 60,000 gathered from across Europe, waving union flags and carrying banners saying “No to austerity” and “Priority to jobs and growth.”

Austerity targets social programs

The austerity protests in Brussels coincided with a proposal from the European Union Commission for new penalties that punish member states gripped by unemployment for running up deficits to fund social programs. As reported in the Huffington Post, the EU proposal, sponsored primarily by Germany, is receiving stiff resistance from France, which wants politicians to decide on sanctions, not a set of rules carved in stone. Elsewhere in Europe, Greek doctors and railway employees walked out. Spanish workers shut down trains and buses. In Ireland, a man blocked the Irish parliament with a cement truck in protest of the country’s massive bank bailouts.

U.S. urges Europe to go light on austerity measures

Amid all the austerity protests, a top U.S. Treasury official visiting Frankfurt implored European officials to exercise restraint. The Wall Street Journal reports that Americans and Europeans disagree about whether stimulus or austerity is the solution to a weak global recovery. The U.S. is urging more stimulus as Europe heads further toward tax increases and spending cuts. U.S. Treasury Undersecretary for International Affairs Lael Brainard said with weak global demand and low inflation, supporting a lasting recovery, not austerity, must continue as the primary objective.

WTO judges ruled Boeing is receiving government subsidies that give it an unfair competitive advantage over European rival Airbus. (Photo Credit: CC BY/Andrei Dimofte/Flickr)

Airline travel has taken a huge economic hit during the global recession, which in turn has decreased demand for new airliners to expand fleets. Thus, aircraft manufacturers are willing to resort to any means necessary in order to boost the bottom line, including accepting large – and perhaps questionable – government subsidies. Reuters reports that World Trade Organization (WTO) judges ruled Boeing, the storied American airline manufacturer, received government subsidies that granted the manufacturer an unfair competitive advantage over European competitor Airbus. The $20 billion in subsidies is being challenged by the European Union, according to sources.

The WTO has pointed at Boeing and Airbus

The WTO judge’s ruling against Boeing is currently confidential and will not be officially released until mid-2011. It has been released to United States and European Union officials, however. It is also known that both Boeing and Airbus have appealed various findings in the case already. Reuters indicates that if initial reports of the WTO ruling are accurate, a negotiated settlement between Boeing and Airbus may occur, as the current state of relations in transatlantic aerospace travel is cold at best. Airbus was previously condemned in June 2010 for taking a sizable cash advance in the form of a government subsidy from the EU.

Research contracts, tax breaks and sour grapes

This may be an example of one power crying foul because they were reprimanded for the very thing that the other power is currently attempting to get away with. According to European sources, Boeing took $17 billion in research contracts from NASA and the Pentagon, and enjoyed $4 billion in tax breaks from the corporation’s home state of Washington. WTO ruled that Boeing broke international trade laws by accepting the contracts and tax breaks, even though the government aid is not technically prohibited. The main point of contention on Boeing’s part is Airbus was essentially allowed to get away with a stern glance, they claim. Thus, Boeing felt their actions in accepting government subsidies were acceptable.

Calls for President Obama’s involvement

EU trade spokesman John Clancy told Reuters that “negotiations at the highest political level” will be the only action that will lead to a long term solution to the feud between Boeing and Airbus. However, U.S. officials have opposed coming to the table unless the EU stops subsidizing the production of the Airbus A350, which U.S. officials feel is very similar to support the WTO has ruled against. In a statement to the press, Boeing maintained its position that they have done nothing to distort the transatlantic aerospace market while continuing to point fingers at EU practices with Airbus.

Sources:

Airbus

Boeing

Reuters

WTO and Boeing have had better days

Something Jonathan Swift hadn't considered. (Photo: Flickr; Iain Winfield)

The global economic crisis was caused in no small part by the shenanigans of the banking and investment industries, so the European Parliament has voted 625-28 in favor of EU banker bonuses being capped as soon as possible. Excessive pension payouts will also fall under new guidelines. The Associated Press reports that any short-term cash bonuses from next year will be limited. It’s a move the European Union hopes the rest of the world will follow in kind.

EU bank rule will permit only partial bonuses in advance cash

From 2011 onward, EU banker bonuses will be limited to up to 30 percent of the annual bonus via advance loan cash. The remaining 70 percent will be held in reserve and paid to the banker if the company performs well. This may create sufficient incentive to lead European bankers away from the path of short-term personal gain rather than long-term customer satisfaction. “There will be no return to business as usual,” EU financial services commissioner Michel Barnier told the AP.

For extra-large bonuses, advance withdrawal is limited to 20 percent

For big banks where executives get bigger bonuses, they can have only 20 percent of their bonuses until company performance is taken into account. However, as the AP indicates, what constitutes a “large” bonus was not spelled out in detail by the European Parliament. The new cap on cash until payday bonuses for European bankers effectively creates rules for all 27 member countries of the European Union for how to deal with EU banker bonuses. Countries like Great Britain, France and Germany reportedly had effective banker bonus caps in place.

Banks must hold a minimum capital amount

By 2012, European Union banks will be required to maintain a minimum level of capital so as to cover risky products like mortgage-backed securities. The Associated Press speculates that European banks would have to hold three to four times the standard level of capital in order to cover such risks. However, banks bound by the new rules are concerned that they’ll end up having to set aside even more emergency cash and will lose out when it comes to profit. The ultimate equalizer – the prospect of another financial meltdown – is simply too horrifying to contemplate.

Sources:

Associated Press

Rethinking global financial reform – the European perspective:

The credit rating agency Fitch dropped the rating of Greece. Image from Flickr.

This morning, international credit rating agency Fitch downgraded the credit rating of Greece to BBB-. One of the lowest rating scores available, the opinion of Fitch is that Greece’s economy is quickly failing. The European Union has, in principle, agreed to give Greece emergency cash loans. The reality may be much more complicated, though.

What the Fitch Greece ruling means

When the ruling was made by Fitch, Greece was officially downgraded to a “bad investment.” Traditionally, large countries have been considered very good investments. Greece’s economy was at one point the twenty-seventh largest in the world. In 2004, the statistical arm of the European Commission found that the debt of Greece had been significantly under reported. In the first quarter of 2009, Greece’s budget deficit was 4.34 billion Euros, or 12.9% of the gross domestic product of Greece. When Fitch downgraded the credit rating of Greece, the agency was basically saying the buying any of Greece’s for-sale bonds would be a very dangerous investment. Basically, Fitch believes Greece won’t be able to pay up on its debt.

Why Fitch Greece rating was dropped

In February, Greece’s economy saw inflation jump to 3.9 percent while industrial output has fallen to 9.2 percent. In other words, without borrowing money, Greece’s economy is in very real danger of failing. However, just like loans for people with bad credit, loans for countries with bad credit can be very difficult.

Fitch Greece rating encourages EU action

Last month, in a summit of the European Union, a “financial safety net” was agreed upon by EU members.The European Union has said that they will step in with instant payday loans for Greece. When the EU will step in, and with how much help, though, is still under discussion. Angela Merkel, the German Chancellor, has insisted that Greece be loaned money at the market rate. With a low Fitch Greece rating, though, that may be a rate Greece simply cannot pay off.

The outlook for Greece

While the Fitch Greece downgrading is a very significant move, the likelihood that Greece’s economy will fail is very low. Greece is a member of the Eurozone, an economic zone headed by the European Union. While Greece will definitely have a difficult few years, there will be some solution. Greece is also looking for internal solutions to the Fitch Greece downgrading, including cutting wages and increasing taxes to decrease the deficit. The International Monetary Fund, a lender that usually specializes in third-world countries, is also considering lending a hand to the economy in Greece.

Sources:

Business Week
Guardian
Wikipedia