Retail giant Zara launches renewed image at flagship New York store
EL PAÍS
For Zara, a company that hardly spends any money on advertising, its stores have always served as the primary marketing tool. The Spanish clothing retailer is getting ready to open its flagship store on Fifth Avenue in New York, and will be presenting a new image, one that is “completely different and completely renewed compared to the image of Zara that we are used to seeing,” the president of parent group Inditex, Pablo Isla, said this week.
The new concept of the store is, in Isla’s words, one that is “much more focused on the boutique, with lots of different boutiques within the store — a very smart store, very transparent and very welcoming. It’s a very different concept, but it’s definitely Zara,” Isla said.
Zara presented its new image in New York on Tuesday, having invited a group of journalists from all over the world. The new concept of the flagship store, which is located at number 666 on Fifth Avenue, is going to be adopted throughout the entire chain, from new openings to refurbished existing stores. Some of the Zara stores that opened last year have already started adopting the concept, such as those in Sydney, Melbourne, London, Porto, Taiwan and China.
Breaking from its usual policy of renting, a year ago Inditex bought the Fifth Avenue real estate for $324 million (247 million euros), given that it was a “unique opportunity,” according to Isla. The new Zara store has a staff of 450 people, and is not far from the Museum of Modern Art. The store will be the signature of the brand on the most expensive shopping street in the world, in an area full of luxury boutiques and huge brands such as Versace, Tiffany and Apple. Millions of tourists visit every year.
What’s more, Zara is introducing a new payment method at the store, whereby customers can make their purchases using a cellphone. The scheme will soon be rolled out to other stores.
Inditex is going to make use of the Zara store it already had on Fifth Avenue to introduce its Massimo Dutti brand into the North American market. The plan is to open further stores in Washington as well as in Toronto. Until now, Inditex’s presence was limited to 50 Zara stores, seven of which are in New York.
At his meeting with journalists, Isla said that the company would not be using the crisis as an excuse, and that it must keep growing despite the negative economic climate. If Spain is to emerge from the crisis, he said, it will depend on reforms being introduced now to achieve greater growth in two or three years.
The prices at Zara, Isla explained, have remained more or less steady over the last 10 years. The company is not, he said, planning on responding to the announcement by rival chain Mango that it would be dropping its prices by 20 percent.
Inditex was founded by Galician businessman Amancio Ortega Gaona, who is one of the world’s richest men. The first Zara store was opened in 1975, on a street in A Coruña. In the 1980s and 1990s, the Inditex group began its expansion into markets all over the world, and it now boasts more than 5,000 stores in nearly 80 countries.
Spain Tests Europe's Resolve on Deficits
The Wall Street Journal
It hasn't taken long for the euro zone's new tough budget rules to face their first big test. Spain's stand-off with Brussels over the size of its 2012 budget deficit has presented officials in the city with a dilemma: How do they preserve the credibility of the tighter fiscal rules without triggering a Greece-style downward economic spiral by forcing Spain to slash its deficit too vigorously?
Spanish Prime Minister Mariano Rajoy formally opened the issue last week when he announced that Spain's new budget-deficit target would not be the 4.4% that his predecessor agreed last year with the European Commission in Brussels—but 5.8%.
The reason: last year's deficit turned out to be 8.5%-not the 6% target that this year's goal was based on. Hitting the agreed 2012 target would cut domestic demand by four percentage points, further squeezing Spain's already shrinking economy.
It wasn't only Mr. Rajoy's unilateral decision that upset the Brussels bureaucracy. It was the way he framed it, telling reporters: "This is a sovereign decision made by Spain that I am announcing now, to you."
Given that he had a short time before signed a new fiscal compact with 24 other European Union governments—the latest of a series of accords that explicitly cede budget sovereignty to Brussels—this undermined the very point of two years of German-inspired efforts to tighten euro-zone budgetary discipline.
For Germany and the European Central Bank, these budget agreements are central to the future of the euro zone. ECB president Mario Draghi described them Thursday as "pillars of trust" between countries.
"If Spain is given the leeway it seeks, it will effectively be driving a coach and horses through the euro zone's new German-inspired fiscal regime," says Nicholas Spiro of Spiro Sovereign Strategy in London.
In a possible signal that Mr. Rajoy should tread carefully, Spanish government bond yields have risen slightly over the last week, according to data from Tullett Prebon. Yields on Spanish 10-year bonds are now noticeably higher than Italy's: before Mr. Rajoy spoke they were lower.
Yet it's hard to find an economist who thinks slashing the deficit so sharply makes any sense. First, credibility is damaged in the event of a likely failure to meet the target; second, taking so much demand out of an economy already suffering 23% unemployment could seriously deepen the recession, which, among other things, will make it even tougher to reach the 3% deficit target that Mr. Rajoy still pledges to meet in 2013.
Alberto Alesina, a Harvard University economist who has extensively studied the impact of budget cuts on economies, says: "I think that way too much emphasis is placed by Brussels on the size, rather than on to the composition of the adjustment…By obsessing about the quantity rather than the quality of fiscal adjustments Europe is making big mistakes."
Mr. Alesina, whose views of the benefits of budget discipline have put him at odds with many Keynesian economists, says: "A deficit reduction in Spain obtained by raising taxes would be recessionary and would be a terrible idea now."
On this basis, Mr. Rajoy has already blotted his copybook by raising income taxes soon after he took office, leaving Spaniards, as the free-market Cato Institute said last week, paying among the highest income taxes in Europe.
Mr. Alesina says it's better for Spain to go for a smaller adjustment by cutting government spending than a larger one accomplished by raising taxes—particularly if the cuts are accompanied by further labor and other reforms to the structure of the economy. "If I were the prime minister of Spain, I would raise the deficit target but at the same time I would announce and commit to a credible plan of spending cuts relatively soon to come and push forward on structural reforms," he says.
But will Mr. Rajoy be given this leeway? European officials admit there's a divide within the European Commission on how hard to push back.
"The new rules put the European Commission in a very difficult position: While it has significantly reinforced its own powers in the context of the crisis, it recognizes that a strict interpretation of the new rules may actually undermine their credibility more than a more flexible one," says Mujtaba Rahman, a former EU official now with Eurasia Group in New York.
Some officials want to flex their new-found powers to show that, in contrast with the past, the reinforced budget rules really have teeth. They argue that there is more than Spain at stake here: the Netherlands and Hungary are also on track to miss their budget agreements this year and the officials don't want to give them more wiggle room.
Others argue that forcing Spain to meet its official target will backfire by provoking a further contraction of the recession-hit economy.
The outcome of this battle is as yet unclear. As they are now mandated to, officials in the Commission will be poring over Spain's numbers for last year, and studying the fine print of this year's plans.
One senior official says there may be room for compromise: Allow Mr. Rajoy some flexibility in his target this year in return for fundamental concessions that would credibly cut the deficit over many years. Among the issues to be examined, he says, is whether an agreement can be obtained to permanently rein in spending by Spain's autonomous regions and local governments. That would be a nasty nettle for any government in Madrid to grasp.
The night Depor ruined Real’s birthday party
El País
Not a match in the Riazor stadium goes by in which you’re not reminded of that triumph; in which fans don’t sing the song that recounts what happened that night, 10 years ago this week, when Deportivo de La Coruña won its second King’s Cup, dined at a popular asador on the menu Real Madrid had picked out and club president César Augusto Lendoiro danced boleros till dawn: “Go on Depor! / Go on De! / To the rhythm of the drum, / the centenary cup / at Madrid we won.”
It was March 6, 2002, a Wednesday. From the beginning of the season it had been known the Cup final would be played at the Bernabéu because Real had requested it to celebrate the 100th anniversary of the club’s founding. It was the era of the galácticos, but Real hadn’t reached a King’s Cup final in eight years and so turned doing so into a priority. And the final responded to the anticipated glitz by bringing the two most recent Liga champions face to face.
“Nevertheless, the idea that we would just be bystanders was fostered from Madrid,” remembers captain Fran, the first to lift the cup that night.
“They didn’t respect us before, during or after,” recalls Juan Carlos Valerón. “It was a great team, but they caught us at an optimal moment in terms of our game, confidence and soccer.”
A week before Deportivo had given a lesson to Juventus at the Riazor, beating it 2-0 in a Champions League match in which it could have scored many more. A week later it also sealed a 0-2 win away at Arsenal, perhaps the most comprehensive performance by that team coached by Javier Irureta.
“It was a sweet moment — incredible, atypical,” says midfielder Sergio. “In the locker room we knew we weren’t too far away from Real.”
“We had a great team that always went out to get the ball and dominate, but there was also a lot of David and Goliath,” says Mauro Silva. The sturdy Brazilian was the focal point from the beginning to the end. As soon as the game started, he was involved in an moment that announced the way things would go. Lionel Scaloni went in hard on Raúl who then stumbled into Mauro. They clashed and the Brazilian got involved in the only brawl of his near 20-year professional career. In the middle of the skirmish emerged José Molina, who had left the Depor goal to cover 40 meters and confront Raúl.
“That a person like José, so respectful and proper, reacted in this way made everyone realize we were serious,” says Mauro.
Sergio scored after six minutes to put Deportivo in front and Tristán got the second goal seven minutes before half time. “They turned their faces and you could clearly see that all the pressure was on Real,” says Valerón.
Two hours before the start, around the stadium everything was white and blue. Substitute Djalminha had looked out on to the pitch before his teammates went out to warm up and came into the dressing room with eyes like saucers: “Half of A Coruña is out there!” he cried. After Tristán’s strike, all those people started singing a smug Happy Birthday.
Raúl closed the gap 12 minutes after the break, but Irureta responded with a change that brought many observers’ hands to their heads because of the resignation it transmitted: defensive Aldo Duscher for the elfin Valerón. But the Galician team closed out the game for a 1-2 win.
“Madrid were destroyed. That’s why I will never forget the image of Raúl congratulating us one by one. He is a real example,” says Sergio. In the director’s box Lendoiro remembers how Real president Florentino Pérez, with whom he had a good relationship, took several minutes to congratulate him. “All that’s left is for us is to say sorry to our fans,” was all he managed to say.
“We won and… that’s it,” summed up then Galician regional premier Manuel Fraga.
The party was blue and white and it began on the pitch. There Scaloni gave everything before and after the final whistle: “I threw my shorts into the stand and hung from the crossbar with our fans in front of me.” In the background, the centenary fireworks. The Argentinean, who now plays for Lazio, sums up his feelings: “It’s the trophy I most enjoyed winning... I would pay anything to put that shirt on again and start the match once more.”
World’s Richest Lose $11.3B
By Bloomberg
The 20 richest people on Earth lost a combined $11.3 billion yesterday as global markets fell after European economic growth slowed and investors weighed Greece’s chances of getting bondholders to accept a debt swap.
Warren Buffett’s fortune fell $407.3 million, dropping his net worth to $43.9 billion. The chairman of Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/B), his investment holding company, ranks third on the Bloomberg Billionaires Index, a daily ranking of the world’s richest people.
“Warren Buffett has no reason to worry and neither does Carlos Slim,” Jeffrey Saut, chief investment strategist at Raymond James Financial Inc. in St. Petersburg, Florida, said in an interview. “It’s a buy. The world’s not going into recession.”
The Standard & Poor’s 500 index posted its worst drop of the year, sliding 1.5 percent as U.S. stocks declined for the third straight day. Europe’s economy shrank 0.3 percent last quarter, the European Union’s statistics office said, and the central bank’s balance sheet surged to a record 3.02 trillion euros ($3.96 trillion) last week amid crisis-fighting efforts.
Bernard Arnault and Amancio Ortega, two European retail magnates on the billionaires list, both lost about $1.2 billion. Arnault, 63, now ranks fifth on the index with a net worth of $41.2 billion after shares of his LVMH Moet Hennessy Louis Vuitton (MC) SA, the world’s largest luxury goods company, dropped 3.1 percent in Paris trading. Ortega, 75, who owns a 59 percent stake in fashion retailer Inditex SA (ITX), the world’s largest clothing retailer, ranks sixth with a $38.9 billion fortune. No billionaire on the index gained.
The world's billionaires: The Top 20
A list of those included in Bloomberg's new global index of billionaires
Carlos Slim, $68.4 billion, Mexico: Holdings in telecommunications, banking, mining and construction, as well as Philip Morris, Saks Fifth Avenue and The New York Times
Bill Gates, $62.1 billion, U.S.: Co-founder of Microsoft
Warren Buffett, $44.3 billion, U.S.: Chairman and CEO of Berkshire Hathaway Inc.
Ingvar Kamprad, $42.7 billion, Sweden: Controls Ikea Group.
Bernard Arnault, $42.5 billion, France: Owns about 46 percent of LVMH Moet Hennessy Louis Vuitton, the world's largest maker of luxury goods
Amancio Ortega, $38.9 billion, Spain: Owns 59 percent of Inditex, the world's largest clothing retailer, which includes the Zara chain
Larry Ellison, $38.2 billion , U.S.: Owns 22.5 percent stake in Oracle, the world's third-largest software company by sales
Charles Koch, $33.9 billion, U.S.: Co-owner, chairman and chief executive of Koch Industries in Wichita, Kan.; oil refining, gas pipelines, commodity trading, ranching and paper pulp
David Koch, $33.9 billion, U.S.: Co-owner and executive vice president of Koch Industries
Eike Batista, $29.7 billion, Brazil: Controls five publicly traded commodity and logistics companies
Mukesh Ambani, $26.5 billion, India: Owns 44 percent of Reliance Industries, operator of the world's largest oil refinery complex; also a director of Bank of America
Li Ka-shing, $25.6 billion, China: Runs Hong Kong's Hutchison Whampoa, a conglomerate with interests in ports, shipping, energy, construction and mobile phones
Sheldon Adelson, $25 billion, U.S.: Majority shareholder of Las Vegas Sands, the world's largest casino company
Christy Walton,$25 billion, U.S.: Widow of John Walton, the second son of Wal-Mart founder Sam Walton
Stefan Persson, $24.5 billion, Sweden: Single largest shareholder in Hennes & Mauritz (H&M), Europe's second-biggest clothing retailer
Jim Walton, $23.5 billion, U.S.: Youngest son of Sam Walton; heads the family's private businesses, including Arvest Bank and Community Publisher
Lakshmi Mittal, $23.2 billion, India: Owns 41 percent of ArcelorMittal, the world's biggest steelmaker; also a director of Goldman Sachs
Samuel Walton, $23 billion, U.S.: Oldest son of Sam Walton; has been chairman of the world's largest retailer since his father's death in 1992
Liliane Bettencourt, $22.8 billion, France: Owns 31 percent of French cosmetics company L'Oreal, which controls the Kiehl's, Lancome and Garnier brands
David Thomson, $22.6 billion, Canada: Controls media and technology giant Thomson Reuters.
Budget woes: Is Spain the next Greece?
These are dangerous days for Spain. The country is heading for recession.
BBC
The economy will shrink by 1.7% in 2012. Its unemployment rate - the highest in the EU - is heading towards 24%. Over 50% of young people cannot find work. Only last week the government in Madrid confirmed that its budget deficit for 2011 would be 8.5% of national output (GDP), so missing the target of 6%.
Worse was to come. The Spanish Prime Minister, Mariano Rajoy, said the target for cutting the budget in 2012 would be missed. The deficit would be 5.8% of GDP rather than 4.4%.
Then today the European Commission said there were "grave" and "serious" gaps in the figures for 2011. It is worth recalling that it was the Greek admission in 2009 that their accounts could not be trusted that sparked the eurozone debt crisis.
The gap in last year's figures amounts to tens of billions of euros. Possibly as much as 90bn euros (£75bn). And to put that in perspective - it's the size of the entire bailout for Portugal.
The government in Madrid is blaming the previous Socialist government, but it is also struggling to rein in the powerful regional governments which have run up sizeable debts.
"We need to shed full light on what went on in Spain in 2011," said the spokesman for EU Economics Commissioner Olli Rehn.
Despite the new pact for enforcing budgetary discipline - signed only last Friday - the Spanish government decided on its own that it would miss the targets for this year. The government in Madrid wanted to underline it was a "sovereign decision". It did not consult with other EU leaders.
The Spanish government believes that, like Greece, it could find itself trapped in a spiral of decline if it does what Brussels insists on and makes further spending cuts.
Its actions underline a simple truth. Governments can sign pacts, but in the end they are elected to act in the best interests of their voters, rather than officials in Brussels.
There were hints today that Spain could be at risk of fines and sanctions for a "grave" breach of budget limits.
But as austerity deepens and recession looms other countries too will baulk at meeting deficit targets set by Brussels. As Sony Kapoor from the Re-Define think tank said, "this could be the shape of conflicts to come". Governments locking horns over budgets with EU officials.
The mood in Brussels is stubborn. They are aware that if they start negotiating with Madrid the financial markets and others will question what all the summits and new regulations were for.
Some officials believe that the EU's credibility is on the line and want to move to infringement proceedings. How suspending EU grants would help Spain is hard to explain.
The expectation, however, must be for a fudge. Spain is too important a country to be in dispute over its budget, but if it is allowed to postpone some of its toughest cuts it sends out a clear signal that bilateral deals can be done.
Spanish town of Rasquera leases land for marijuana plantation
Town's mayor says scheme, which is legal, is chance to bring in money and create jobs
The Guardian
A tiny Spanish country town believes it has found a way to make unemployment, debt and economic crisis disappear in a puff of smoke – by leasing out its land for marijuana plantations.
The town hall of Rasquera in Catalonia on Wednesday voted to sign a €1.3m (£1.1m) agreement with a cannabis association in nearby Barcelona to plant marijuana for its 5,000 members.
It will allow the association to plant on a seven-hectare stretch of town hall land – roughly the size of 10 football pitches. "This is a chance to bring in money and create jobs," explained mayor Bernat Pellisa of the Catalan Republican Left party, as older townsfolk worried that he was turning Rasquera into a drugs mecca.
Pellisa said he had sought legal advice that the scheme, part of a set of "anticrisis" measures passed at a packed town hall meeting, did not break Spain's ambiguous cannabis laws.
"The produce will only go to members of the association and it won't all be cannabis," he added. "There will be crop rotation with cereal and sugarbeet."
The Barcelona Personal Use Cannabis Association (ABCDA), part of a mushrooming movement of private marijuana clubs in Spain, will pay the town €650,000 a year for the right to grow its annual supply there.
"Growing for oneself is not illegal, but this is a delicate issue," explained lawyer Oriol Casals.
Pellisa said the deal would create up to 40 jobs and allow the town hall to pay off its €1.3m debt in two years.
"There are five or six other projects in the wings," explained Pellisa. They included supplying seeds to Spain's so-called grow shops, which are allowed to sell them to people wishing to grow their own plants.
A second cannabis club with 7,000 members was due to meet Pellisa for talks on Thursday.
An alternative clinic for people with cancer was also being studied.
The deal will turn Rasquera, where local produce traditionally includes olives, almonds and goats, into one of the biggest legal suppliers of cannabis in Europe.
Not everyone in town, which lies 90 miles (140km) south of Barcelona, likes the idea. "This makes us the laughing stock of Catalonia," said secondary schoolteacher Joan Farnós.
"It will lead our grandchildren to perdition," one elderly woman told journalists.
But others saw a chance to beat Spain's 23% unemployment rate and its fall back into recession. "I haven't smoked since I did my military service, but I'd go and work planting marijuana because I haven't had a job for two years," local farm labourer Mario Amorós told El País.
Pellisa said he had informed the regional government of Catalonia, which runs the local police, about the project. The government had told him it would consult lawyers.
"We demand our own sovereignty on this," he added.
Spain's cannabis clubs argue that if growing and possessing marijuana for personal consumption is legal, then there is nothing illegal about forming a club to that end.
"Cannabis use is an established and increasingly accepted reality in our society," explained Martin Barriuso, of the Basque cannabis federation. "Instead of turning our backs on this reality we think the reasonable thing to do is to find a way to regulate it, encouraging responsible use and making it difficult for adolescents to obtain."
"Our associations work on this basis … paying taxes, creating jobs and stopping people going to the black market," he added.
Rasquera's town hall has agreed to set up a committee to draw up protocols on "security and risk control", according to a draft of the contract with ABCDA.
Spanish duke Inaki Urdangarin questioned over corruption
BBC
The son-in-law of Spain's king has been questioned by a judge in Mallorca over corruption allegations.
Inaki Urdangarin, the Duke of Palma, is being investigated over claims he misused public funds given to a foundation he ran.
The duke has denied any wrongdoing in the case, which has been a rare embarrassment for the popular Spanish royal family.
"I come to clarify the truth and defend my honour," he said as he arrived.
"I have carried out my responsibilities and taken decisions correctly and with total transparency."
Scores of anti-monarchy protesters demonstrated noisily nearby as the duke arrived for the closed-doors hearing.
Some waved signs reading "Inaki owes us money" and "Monarchy Corruption", the AFP news agency reports.
"We want justice to be the same for all Spaniards. He should be convicted," said protester Claudio Borilla.
'Harassment'
The duke has not been formally charged but is reportedly accused of misdirecting part of some 6m euros (£5m: $8m) sent to his not-for-profit Noos Institute by regional governments to organise sporting events.
It is alleged that some of the money ended up in companies that he ran. The events in question happened between 2004 and 2006, when the duke stepped down as head of the institute.
A court official said the investigating judge Jose Castro had questioned the duke over the workings of the companies involved in the case.
The official, who asked not to be named, told AFP the judge would decide whether to order a trial and bring charges, a process which could take several months.
The duke, a former Olympic handball player, is married to the king's second child, Princess Cristina. He was suspended from official royal engagements in December last year.
On Thursday the duke's family released a statement defending his innocence and attacking what they called a "campaign of harassment" against him, AFP reports.
In response to the scandal, the royal family announced in December that it will make its accounts publicly available.
In an apparent reference to the investigation into the duke, King Juan Carlos used his Christmas speech to say that "all are equal before the law".
"When untoward conduct arises which is not in keeping with the law and ethics, society naturally reacts. Fortunately we live by the rule of law and any unworthy act must be judged and penalised," he said.