NEWS,18.10.2012

Clashes erupt at Greek anti-austerity protests

Greek police clashed with anti-austerity protesters hurling stones and petrol bombs on the day of a general strike that brought much of the near-bankrupt country to a standstill.In the second major walkout in three weeks, almost 40,000 protesters marched in Athens in a bid to show EU leaders meeting in Brussels that new wage and pension cuts will only worsen their plight after five years of recession.Tensions mounted when a small group of protesters began throwing pieces of marble, bottles and petrol bombs at police barricading part of the square in front of parliament, prompting riot police to fire several rounds of teargas to disperse them.A 65-year old protester died of a heart attack, hospital sources. Another three people were injured. Police detained about 50 protesters suspected of attacking them.Most business and public sector activity ground to a halt at the start of the 24-hour strike called by the country's two biggest labour unions, ADEDY and GSEE."Enough is enough. They've dug our graves, shoved us in and we are waiting for the priest to read the last words," said Konstantinos Balomenos, a 58-year-old worker at a water utility whose wage has been halved to 900 euros and who has two unemployed sons.It was the third time since late September that tens of thousands of Greeks have taken to the streets holding banners and chanting slogans to show their anger at austerity policies imposed by EU and IMF lenders in exchange for aid.Some were carrying Greek, Spanish and Portuguese flags and shouted: "EU, IMF out"."Agreeing to catastrophic measures means driving society to despair and the consequences as well as the protests will then be indefinite," said Yannis Panagopoulos, head of the GSEE private sector union, one of two major unions that represent about 2 million people, or half of Greece's workforce.Greece is stuck in its worst downturn since World War Two and must make at least 11.5 billion euros of cuts to satisfy the "troika" of the European Commission, European Central Bank and IMF, and secure the next tranche of a 130-billion-euro bailout.Lenders demand austerity European Union leaders will try to bridge their differences over plans for a banking union at a two-day summit which starts on Thursday. No substantial decisions are expected, reviving concerns about complacency in tackling the debt crisis which exploded three years ago in Greece.The austerity policies being pursued in Europe's indebted Mediterranean countries at the behest of Germany and other rich euro zone members will drive the euro apart, protesters warned."This can't go on. We sure need measures but not as tough as the ones (German Chancellor Angela) Merkel is asking for," said Dimitris Mavronassos, a 40-year-old shipyard worker who has not been paid for six months.The strike emptied streets and offices in Athens. Ships stayed in port, Athens public transport was disrupted and hospitals were working with emergency staff, while public offices, ministries, bakeries and other shops were shut.Newspaper kiosk owners, lawyers, taxi drivers and air traffic controllers were among those protesting over the cuts, which include further drastic reductions in welfare and health spending.Opinion polls show rising anger with the terms of the bailout keeping the economy afloat, and Greeks becoming increasingly pessimistic about their country's future."The new, painful package should not be passed," the ADEDY public sector union said in a statement."The new demands will only finish off what's left of our labour, pension and social rights."During Hundreds of youths pelted riot police with fire bombs, bottles and chunks of marble Thursday as yet another Greek anti-austerity demonstration descended into violence, less than a month after more intense clashes broke out during a similar protest.Authorities said around 70,000 protesters took to the street in two separate demonstrations in Athens during the country's second general strike in a month as workers across the country walked off the job to protest new austerity measures the government is negotiating with Greece's international creditors.Thursday's strike was timed to coincide with a European Union summit in Brussels later in the day, at which Greece's economic fate will likely feature large.Riot police responded with volleys of tear gas and stun grenades in the capital's Syntagma Square outside Parliament as protesters scattered during the clashes, which continued on and off for about an hour. Another general strike in late September had also seen limited, but much more intense, clashes between protesters and police.A 65-year-old protester suffered a fatal heart attack during the demonstration but efforts to revive him failed. The organizers of the protest march he participated in said the man had fallen ill before any rioting had broken out.Four demonstrators were injured after being hit by police, volunteer paramedics said. The Health Ministry said two of the protesters were treated in hospital and that their injuries were not serious. Three policemen also required hospital treatment.Hundreds of police had been deployed in the Greek capital ahead of the demonstration. Police said seven people were arrested Thursday, out of more than 100 detained.The strike grounded flights, shut down public services, closed schools, hospitals and shops and hampered public transport in the capital. Taxi drivers joined in for nine hours, while a three-hour work stoppage by air traffic controllers led to flight cancellations. Islands were left cut off as ferries stayed in ports.Athens has seen hundreds of anti-austerity protests over the past three years, since Greece revealed it had been misreporting its public finance figures. The country has been surviving since then with the help of two massive international bailouts worth a total (EURO)240 billion ($315 billion). To secure them, it has committed to drastic spending cuts, tax hikes and reforms, all with the aim of getting the state coffers back under some sort of control.But while significantly reducing the country's annual borrowing, the measures have made the recession worse. By the end of next year, the Greek economy is expected to be around three quarters of the size it was in 2008. And with one in four workers out of a job, Greece has, along with Spain, the highest unemployment rate in the 27-nation European Union."We are sinking in a swamp of recession and it's getting worse," said Dimitris Asimakopoulos, head of the GSEVEE small business and industry association. "180,000 businesses are on the brink and 70,000 of them are expected to close in the next few months."The country's four-month-old coalition government is negotiating a new austerity package with debt inspectors from the EU, International Monetary Fund and European Central Bank. The idea is to save (EURO)11 billion ($14.4 billion) in spending largely on pensions and health care and raise an extra (EURO)2.5 billion ($3.3 billion) through taxes."In 2011, only 20 percent of businesses were profitable," Asimakopoulos said. "So these new tax measures present small businesses with a choice: Dodge taxes or close your shop."After more than a month and a half of arguing, a deal seems close. On Wednesday, representatives from the EU, International Monetary Fund and European Central Bank, said there was agreement on "most of the core measures needed to restore the momentum of reform" and that the rest of the issues should be resolved in coming days.

Why Spain's Economic Doldrums Could Be Good For Startups

 

Spain is having a rough month. Again.Standard & Poor's downgraded its rating on the country by two notches last week, which has brought Spain close to junk status. On Saturday, thousands of people marched through the streets of Madrid, where they protested the Spanish government's latest austerity cuts. And the country's hiring situation remains bleak, with unemployment hovering around 25 percent.But could this kind of sour environment ultimately turn out to be a sweet one for start-ups?"This landscape is perfect for entrepreneurship," says Josemaria de Churtichaga, associate dean for IE School of Architecture in Madrid. "I'm not defending the crisis but in some way the crisis is helping to change or should help to change the attitude within the young people, which I think is the mass that is suffering more -- and, at the same time, is the mass that has been living too well for the last decades, too protected from their parents, too protected by the state."Certain universities in Spain are more aggressively pushing for the creation of homegrown entrepreneurs who could launch and oversee new ventures and the Spaniards who might work there. One tactic, besides teaching courses on entrepreneurship: getting students from business schools as well as engineering or science departments to participate in startup or acceleration labs, and prepping recent grads to pitch their business plans in front of potential investors. But the academic efforts may also mean students both those wanting to launch a business, and others seeking a job at an existing organization need to be taught to become much more competitive as a way to survive in Spain's uncertain economy. "I sometimes wonder whether we should emphasize more some facets of managerial personality, like competition," says Santiago Iniguez de Onzono, dean of IE Business School in Madrid. "Should we make our graduates more fierce, more willing to compete in a really tough way as some others do?"Companies are also playing a nurturing role in the growth of new startups. Everis, a technology consultancy that is headquartered in Madrid, hosts speed dating-like meetings between entrepreneurs and investors, who boast more than 40 million euros in funds to help grow startups during the first stage of operation. The initiative could spur innovation and job creation in the country's tech sector, says David Garcia Hernandez, a director at Eversis.Creative minds have also carved out a space in an old garage near Madrid's CaixaForum Museum for entrepreneurs who want to start or nurture enterprises with a socially driven mission. Known as Hub Madrid, which launched three years ago, it is designed to be a shared working space where member entrepreneurs "are challenging you, provoking you, inspiring you to do what it is you're passionate about and also makes an impact," says Max Oliva, a Hub Madrid co-founder. Around 300 members have been paying between 15 to 300 euros a month to garner access to this shared space. It encourages collaboration through rounded desks, where there is no hierarchical "head" of the table, as well as non-ergonomic seats that regularly "encourage" people to get up and mingle near the kitchen or a library built of old wine cases. A second floor is being completed, where giant holes punched through the walls are supposed to encourage more discussion flow and better opportunities for eavesdropping, which could lead to new collaborations. "It's an ever-changing space to provoke sparks, to provoke accidents, to provoke failures that are positive failures," says Churtichaga, who helped design Hub Madrid.Other companies are working closely with local universities to provide additional training to students who are looking for a leg up in a tough hiring climate. Emzingo, for one, sends MBA candidates from Spain and other countries from around the world to South Africa and Peru, where students work with NGOs to improve and expand operations through mini-consulting projects. The for-profit social enterprise provides students with leadership development training as part of the experience and is a growing network of alumni (more than 75 so far), including some who have landed jobs at companies such as McKinsey, PwC, Bayer and Johnson & Johnson. "We're working now [on] placement after the MBA, so that's an extra benefit that you get for going through the program," says Pablo Esteves, who is based in Madrid and works as Emzingo's director of branding and partnerships.

Exhibition explores love, hate of money

New York - How does money make you feel? Fearful, stressed, happy?

US financial guru Suze Orman has teamed with the producer of the popular Body Worlds exhibits for a new traveling show to look at how we relate to and understand money.Orman, media star and author of best-selling books on personal finance, described the finance-themed exhibit as "an extension of my life's work as a financial educator, and an innovative way to teach people about money".The interactive, multi-media exhibit, "Economia: Money Matters," will begin a five-year, nationwide next year, starting in Chicago. The admission-charging show will move on to other venues that include science and natural history museums.Gail Vida Hamburg, who designed and developed the exhibition, said she hit on the idea several years ago."I found a study about worry, stress and depression and their links to money or rather the lack of money ... I realized that I could synthesize all of this information into a designed exhibition with multimedia and interactives (displays)," said Hamburg, who designed the Body Worlds traveling exhibition of preserved human corpses that has toured Europe, North America and Asia.The Money Matters exhibit spans 7 000 square feet with galleries on phases of life ranging from College Road to Third Phase, or retirement. It aims to meet national and state financial literacy goals for children and adults.Hamburg, who founded museum exhibit firm Rainworks Omnimedia in 2010, believes the show's appeal is universal because money is something that everyone has a relationship with throughout life.Orman has described the show as a walk through the life of money, and the effect it can have on you."It will be entertaining," she said in a statement, "and when you're having fun learning, the lessons stay with you."Hamburg said she addressed finance's fear factor by engaging people with various exhibits and displays."How do you make it easy for visitors to understand the power of compounding?" she asked, adding that it has traditionally been taught with graphs or charts or calculators.She decided to approach it differently using visitor prompts, and entry into a computer terminal and to show the results through the growth of actual physical objects."We should all be so smart with money and channel our inner Suze Orman. But we're not and we don't. Unless you're an MBA or an economist or a freak, you don't want to read about SEP-IRA or social security or student loan interest rates."The goal of the exhibition "is to give visitors the tools and resources for financial self actualization," she added.

NEWS,11.10.2012

Spain comfortable with waiting game on aid

Spain is comfortable putting off an international aid request for weeks or even months as it waits out German political obstacles, analysts and sources say.In the meantime, Spanish Prime Minister Mariano Rajoy is focusing on measures such as intensifying labour market reforms, as well as pushing for a European banking union that would help rebuild confidence in Spain's tarnished banking sector.Spain's borrowing costs spiked in July, the yield on the benchmark 10-year bond jumped over an unsustainable 7%, but tumbled after ECB head Mario Draghi unveiled a bond-buying scheme to lower Spanish borrowing costs.Spain must first sign up for a European rescue plan to trigger the bond buying. Given its debt position, the Spanish government still sees that step as inevitable but pressure has eased as investors are less willing to bet against Spain with the ECB waiting in the wings.Germany has sent Spain strong signals that it should hold off because German Chancellor Angela Merkel is wary of presenting a fresh aid request to her parliament, euro zone sources say.Sources familiar with Rajoy's thinking say he also wants the ECB to indicate exactly what it will achieve with the bond-buying. "We will end up there, with ECB action, but the ECB is still designing the instrument in more accurate terms," said a source close to the government. "The markets understand that we have the fire extinguisher. We'll see how it evolves in the coming weeks."Turmoil over Greece, a fresh spike in Spanish yields or a credit rating downgrade to junk status for Spanish government bonds could accelerate the process, but for now Madrid is comfortable taking it slow, the source said.Spanish officials see more risks to moving ahead quickly without assured German backing, than in delaying a request.Meanwhile, they think things are moving in the right direction. For example, criticism of Draghi's plan has died down after strident objections from European Central Bank Governing Council Member Jens Weidmann, who heads the German Bundesbank."We think that the current period of vacillation might last for several months if events don't intervene," Alex White, an economist with JP Morgan in London, wrote in a research note.White said he saw little on the horizon to change Germany's desire to avoid a Bundestag vote on Spain in the near-term.Then there is Rajoy's personality to consider."Rajoy has infinite patience to put up with tension where others would break down," said a senior banker in Spain.Although Rajoy has said he is studying conditions for seeking European aid, there is no mystery over what the European Commission would demand of Spain in terms of structural reforms and spending cuts.Euro zone sources have said conditions are likely to be largely in line with measures the country has already taken, since Spain would not be applying for a full rescue programme that would cover all of its financing needs.The International Monetary Fund has sent a strong message to European policymakers to focus on growth even as they try to correct deficits, a line Spain applauds.With the economy in a deep recession and unemployment close to 25 percent, Spanish officials point out that ECB intervention might bring liquidity, but won't revive economic growth."With or without liquidity we have a growth problem globally, that we must start discussing," said the source close to the government.Banking reform Rajoy has concentrated on moving forward with banking union - under which the ECB would supervise European banks and the region would set up a deposit guarantee fund - which he sees as key to improving Spanish banks' access to liquidity.After meeting French President Francois Hollande on Wednesday the two leaders called for rapid progress toward banking union at a European leaders' summit next week. However, Germany and others do not expect agreement even on cross-border supervision for a year or more.Originally, Spain was pushing for the banking union because it would have allowed the ESM rescue fund to directly recapitalise Spanish banks, keeping the cost of a financial sector rescue off the country's public accounts.However, Spain is less concerned about that impact now, since it estimates it will use only 40 billion euros of the 100 billion euros of bank rescue funds lined up, equivalent to only 4 points of gross domestic product.Treasury Minister Cristobal Montoro calculated the deficit would swell to 7.4% of GDP this year when taking the bank rescue into account, but he said the European Commission would not consider that as non-compliance with targets, since it is a one-off.But banking union is still paramount for Spain since it would foster some confidence in its financial sector, which was crippled by a decade-long building boom that collapsed four years ago leaving the banks with 184 billion euros of bad debt.Rajoy has announced 65 billion euros in budget savings by the end of 2014 to try to bring Spain's deficit down drastically, in line with European Union targets.But rising unemployment, falling tax revenue and the recession are undermining his efforts.The Spanish government is acutely aware that next door, Portugal's severe spending cuts have failed to revive the economy.In Madrid, the source close to the government said under European rules if the government misses is deficit target because of recession, the European Commission would not apply sanctions for a missed deficit.

S&P downgrades Spain two notches

Standard & Poor's cut Spain's sovereign debt rating on Wednesday by two notches to just above junk level, citing the deepening recession and strains from the country's troubled banks.S&P cut the rating to BBB- from BBB+, just one level above "speculative" or "junk" grade debt, which could have sent Madrid's borrowing costs skyrocketing to untenable levels."The downgrade reflects our view of mounting risks to Spain's public finances, due to rising economic and political pressures," S&P said."The deepening economic recession is limiting the Spanish government's policy options," it said, adding that rising joblessness and tighter spending will likely intensify social conflict and tensions between the country's regions and Madrid.Moreover, S&P expressed doubts that all of the eurozone governments will give their backing to the bloc's effort to recapitalize Spain's banks, leaving more of the burden at least on the Spanish government and forcing its debt burden to balloon."Against the backdrop of a deepening economic recession, we believe that the government's resolve will be repeatedly tested by domestic constituencies that are being adversely affected by its policies," S&P said."Accordingly, we think the government's room to maneuver to contain the crisis has diminished."The ratings agency also attached a "negative outlook" to the rating, a warning of a possible further downgrade over the medium term.Such a downgrade would come, S&P said, if political support for the government's reform agenda weakens, if eurozone support fails to prevent Spain's borrowing costs from jumping above sustainable levels, or if debt tops100 percent of economic output or debt payments surpass 10% of general government revenues.

Greece's biggest company flees

Greece's biggest company, Coca Cola Hellenic, is leaving the country, the drinks bottler announced today. The immediate material impact on Greece is limited - its Greek plants stay open and CCH said the small portion of it activity that the world's second-ranked Coke bottler has in Greece will be unaffected. But analysts quickly saw it as bad news for a nation struggling to compete inside the euro zone.CCH, which has said it fears the Greek crisis could disrupt its multinational business, said in a bourse filing in Athens that shareholders, most of whom are abroad, will exchange their stock for shares in Coca Cola HBC AG, based in Switzerland and effectively shorn of the Greek tag "Hellenic".That stock will be primarily quoted on London's LSE."A primary listing on Europe's biggest and most liquid stock exchange reflects better the international character of Coca Cola Hellenic's business activities and shareholder base," the company said in its regulatory statement.The firm, in which The Coca-Cola of the United States has a 23% stake, bottles Coke and other produce in 28 countries from Russia to Nigeria. About 95% of its shareholders and business activity are outside Greece."This transaction makes clear business sense," chief executive Dimitris Lois told analysts in a conference call. An overwhelming majority of shareholders have already accepted moving a company which has long complained about Greek taxes.Analyst Manos Hatzidakis of Beta Securities in Athens said that the move made sense for the firm, which follows Greek dairy group FAGE this month in seeking a low-tax, low-volatility haven for its corporate base - in FAGE's case Luxembourg."The Greek bourse is losing a very good company and the London Stock Exchange is gaining a very important group," said Hatzidakis. "It's very bad news for the Greek economy and bourse."For brokers on the stock exchange, losing a stock that made up 8% of daily turnover this year will be unwelcome - especially since total volumes are down by half since last year.For the Greek treasury, the loss of tax revenue is unclear. Though CCH officials did not detail tax savings from moving the registered office to Switzerland, it has complained of high - and increasingly unpredictable - taxation in crisis-hit Athens.But the move may further discourage investment in Greece.Trade unionists saw the corporate exodus as immoral and one, Stathis Anestis, spokesman for the biggest labour group GSEE, suggested a boycott of Coke: "This is unacceptable," he said."CCH and FAGE are speculating at the most crucial moment for the Greek economy and the Greek people. Consumers should use their power to punish these companies."Country risk One analyst said CCH, which rose to the top of corporate rankings as the values of Greek banks collapsed, was out to rid its share price of such risks associated with Greece; the country is mired in recession and facing mass discontent as its leaders slash budgets to meet international creditors' terms for loans intended to keep Athens inside Europe's single currency."This is a healthy company that does not want to suffer from Greece's high country risk," said the analyst, who spoke on condition of anonymity.Foreign investors have been steadily reducing their investment in the Athens Stock Exchange since the country was engulfed by the sovereign debt crisis in 2009. Greece's future in the 17-nation euro zone still remains in doubt.Aided by the fact that it is doing most of its business outside Greece, CCH consistently outperformed the general Athens stock market index, which has slumped to 20-year lows.CCH has become the country's biggest firm by market value with a capitalisation of around 6 billion euros, representing about a fifth of the Athens bourse's total.The company, which last year made net profit of 330 million euros on sales of 6.85 billion, has complained of taxes imposed under Greek government austerity measures.A US filing shows it paid about 20 million euros in both 2009 and 2010 for one-off "social responsibility" levies in Greece.Profits at operating units in other countries are generally taxed locally. The Greek parent company reported 32 million euros in Greek taxes in 2010 and none last year. New withholding tax on dividends in Greece might have affected CCH in future.In its US filing for 2011, the company said: "Greece, which accounted for approximately 6% of our unit case sales volume and approximately 8% of our net sales revenue in 2011, is currently facing a severe economic crisis resulting from significant government fiscal deficits and high levels of government borrowing.""The ... Greek government debt crisis may have impacts on our liquidity that currently cannot be predicted."CCH said it would delist from the Athens Stock Exchange and then seek to re-enter that bourse with a secondary listing.Coca Cola Hellenic shares closed down 4.9% at 15.66 euros in Athens. Analysts explained the drop by the low cash price of 13.58 euros the company is offering to those shareholders who refuse the offer of new Swiss shares.

NEWS,25.07.2012

Low Interest Rates Are Not Enough

 

Welcome to what could be called "GGIRC," the great global interest rate convergence -- whereby interest rates steadily converge to zero in many countries around the world, both advanced (other than the crisis European economies) and emerging (other than the persistent financial basket cases). In theory this is a good thing for a global economy.After all, major economic areas, particularly Europe and to a lesser extent the United States, are challenged by too little growth, too much debt and too high a joblessness rate (especially among the young and the long-term unemployed).Even more dynamic economies, from Brazil to China, are slowing.According to textbook economics, lower interest rates have beneficial flow and stock effects.They make it cheaper to fund investment and consumption; and they make it easier for companies, governments and individuals to carry a given stock of already-accumulated debt.In practice, however, the situation is much more complicated and not so benign. GGIRC is not happening for good reasons.As such, the effects are slow to materialize. And, unless quickly accompanied by other policy initiatives, the consequences will be at best mixed and, probably, net negative.Three major factors are behind GGIRC.First and foremost, hyper activist central banks that are using traditional (price) and unconventional (quantity) measures to force interest rates down.Just look at the series of actions by America's Federal Reserve -- from flooring policy rates at almost zero for an exceptionally long time (and also pre-committing to keeping them there until the end of December 2014) to purchasing an enormous amount of U.S. Treasury and mortgage securities in a further attempt to drive borrowing costs down.Second, individuals and institutions are piling into government securities to protect against principal loss in an increasingly uncertain and worrisome global economy and an ever-deepening European crisis.This is most pronounced for Germany, Switzerland and the United States, where inflows of capital have led to negative nominal rates for short-dated securities (i.e., investors willingly accepting marginally less money on maturity than they invest).Third, global investors are spreading GGIRC through "the global carry trade." This search for relatively safe yield is driving the flow of money into the local bond markets of countries such as Brazil, Mexico and South Africa.Yet GGIRC is not fueling an economic boom driven by labor hiring and investment in plant and equipment. Simply put, lower borrowing costs are not enough to convince companies to expand given the list of domestic, regional and global uncertainties; indeed, many of these companies are far from credit rationed as they sit on huge cash balances.And they only help at the margin the highly-indebted consumers.This limited scope for benefits comes with the growing reality of collateral damage and unintended consequences.Today's market-based economies, and the accompanying institutional setup, do not function well at such artificially repressed interest rates.Certain segments, from pension funds and life insurance companies to money market funds, are particularly challenged.They have no choice but to shrink the scale and scope of financial services they offer to individuals and institutions.Then there are some emerging countries that could well be de-stabilized by some of the activities encouraged by artificially-repressed interest rates.It is only a matter of time until they are challenged by asset market bubbles (including in housing) and irresponsible lending by institutions subject to weak market and regulatory supervision.This is not to say that GGIRC is a bad thing. It need not be.But it will be if not quickly accompanied by major policy actions that address the causes of today's global economic malaise.What the world economy needs today is a coordinated set of measures to promote growth, allocate financial losses, match healthy balance sheet with those that are challenged and reforming, and improve the functioning of the labor and housing markets.For this to materialize, highly polarized and dysfunctional politics needs to give way to more strategic and constructive interactions across party lines and social segments.There is little to suggest that this will happen any time soon absent yet another major financial crisis.In the meantime, GGIRC may well morph from being seen as part of the solution to inadvertently becoming part of the problem.

Interests vs. Values Is the Wrong Prism for Viewing the Reset with Russia

 

With their chilly meeting in sunny Los Cabos during the G20 summit fading into memory, the fate of the "reset" in U.S.-Russian relations is for the moment out of the hands of Presidents Putin and Obama. The future of the relationship is being fought on Capitol Hill over whether to extend Permanent Normal Trade Relations (PNTR) to Russia. Doing so would require removing the application of Cold War-era legislation called Jackson-Vanik from Russia, a law that was crafted to pressure the Soviet Union by linking free trade to the freedom of emigration.Jackson-Vanik has been an irritant for Russia for two decades, but the issue is pressing our Congress now because with Putin signing Russia's WTO ratification protocols on July 21, the clock is ticking down to Russia's entry to the WTO in August. Without PNTR in place before Congress goes into recess, American businesses will lose out on the various trade concessions fought for over the years by U.S. negotiators, giving our competitors an inside track to the world's 9th largest economy. PNTR for Russia was once perceived by Congress as a "gift" to Russians; now it is a necessity for American business and workers.At the same time, the issue of human rights has not disappeared as an area of serious concern for Russia, or as a core American value. Many in Congress want to replace Jackson-Vanik with the "Sergei Magnitsky Rule of Law and Accountability Act," which targets Russian officials implicated in the death in pretrial detention of a Russian lawyer and whistleblower. The House and Senate have different versions that have cleared committee--the House bill focuses on Russian officials, whereas the Senate bill would apply to violators from any country. As negotiators hammer out the differences in the two bills, they should keep in mind that the Jackson-Vanik legislation addressed a human rights principle and did not once mention the Soviet Union.The Obama administration prefers a clean extension of PNTR to Russia, arguing they have already taken steps against the Russian officials in question. The Russian government is threatening reprisals if the Magnitsky Act should come into force. But the overall impact of the Magnitsky Act, either in terms of provoking or constraining the Russians, is overestimated.The greatest constraint on Russian violations of human rights, and the greatest pressure towards liberalizing Russian society, has ultimately come from the Russians themselves as they seek to engage in regional and global institutions. Such accessions and agreements clearly have not prevented multiple Russian abuses and outrages against the human rights of its own people; but they have set Russian society on a path towards adopting certain core values on its own terms.In 1975, the year Jackson-Vanik went into force, Moscow signed the Helsinki Accords. Leaders in the Kremlin celebrated the cementing of post-war borders; but also committed the Soviet Union to certain human rights guarantees. It led to the formation of the Moscow Helsinki Group, which remains influential to this day, and, according to Cold War historian John Lewis Gaddis, gradually became a manifesto of the dissident and liberal movement. The contradictions between Soviet practice and the human rights values they pledged to protect played a key role in the erosion of the Soviet government's legitimacy with its own people.In the 1990s, a newly independent Russia pursued and gained entry into the Council of Europe. Russia wanted acceptance on the world stage as a European power. As a condition for membership, Russia also ratified the European Convention on Human Rights in 1998, subjecting itself to the jurisdiction of the European Court of Human Rights. Today, Russia holds the dubious distinction as the origin of over 35 thousand cases (about 24 percent) now pending before the Court - by far the most. Its track record with the court is mixed. Russian government lawyers dutifully participate in contesting the various cases, and Russia reliably pays the (usually nominal) judgments rendered against it. Critics rightly point out that the government rarely implements the underlying principles of the judgments, especially with regards to abuses in Chechnya. However, in other regions, a growing number of district courts are accepting the provisions of the Convention as a part of Russian law.In December 2011, Russia finally secured an invitation to join the WTO after 18 years of on-again, off-again negotiations. While industries and businesses around the world will welcome the various reductions in tariffs that accession will bring this summer, it is Russia's agreement to be bound by the stringent rules and dispute resolution mechanisms that will be the real game-changer over time. Corruption and the prevalence of political insiders at the helm of Russia's leading state enterprises will not end anytime soon, but international (and, with the passage of PNTR, American) companies will have unprecedented rights and remedies at their disposal. More importantly, in terms of Russia's development, new Russian companies and sectors, headed by Russia's emerging professional class, will greatly benefit from the expanding culture of commercial law and greater access to world markets.Russia is not the Soviet Union. Nor is it the liberal democracy many hoped to see emerge during the 1990s. It is a nation still in search of its own identity, wrestling with the historical legacy of Soviet power/terror and the more recent pain of devastating economic collapse in the 1990s. It is also a nation looking to engage with the global political and economic institutions of the world in order to help set the rules as well as follow them. Yet the more Russia opens itself this way, the less satisfied the Russian people become with the closed system of the power vertical.The United States has long taken an interest in how Russia conducts its internal affairs -- an interest that is not matched towards other nations, it must be noted. Today's debate over PNTR and the Magnitsky Act are simply the latest manifestation of that concern. But the community of policymakers, legislators, activists, and businesses who are interested in the fate of Russia's people should keep one idea in mind: No matter what gets signed in Washington, it is what Moscow signs on to that will ultimately shape the future for Russia and its people.