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Guide for a Great Holiday

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EUROPE EDITION

VOL. XXXII NO. 212

FRIDAY - SUNDAY, NOVEMBER 28 - 30, 2014

$1.75 (C/V)

KES 250

NAI 375

£1.70

WSJ.com

VIENNA—OPEC members

rejected calls for drastic ac-

tion to cut their oil output,

keeping their production ceil-

ing unchanged and suggesting

the cartel is bracing for lower

prices longer term.

The move sent crude

prices into a tailspin and

Benoît Faucon,

Summer Said, Sarah

Kent

and

Nicole Lundeen

Oil Prices Fall as OPEC Stands Pat

Another Plunge

Oil prices plummeted to a

four-year low after OPEC

decided to maintain production

targets. Brent crude-oil futures

prices, in dollars a barrel

$78 a barrel

Europe

Ups Ante

In Battle

Over Web

CHECHNER

Europe escalated its war

against U.S. technology super-

powers as the Continent’s two

largest economies and the Eu-

ropean Parliament on Thurs-

day backed fresh efforts to

rein in the influence of com-

panies such as

Apple

Inc.,

Facebook

Inc. and

Google

Inc.

France and Germany asked

the European Union to look

into new competition rules

and other regulations that

better target the business

practices of large technology

firms. At the same time, the

European Parliament over-

whelmingly approved a reso-

lution that calls for a possible

breakup of Google.

The moves came a day af-

ter privacy regulators asked

Google and others to extend

the EU’s new “right to be for-

gotten” to their websites out-

side Europe and follows a

push by U.K. lawmakers to

have social-media firms do

more to comb their services

for extremist content.

Apple, Facebook and

Google declined to comment.

The rapid-fire efforts by

Please turn to page 18

spilled into currency and Eu-

ropean equity markets. If

Thursday’s

market

rout

proves lasting, it will provide

more relief to consumers in

gasoline-guzzling countries

like the U.S. But it is hammer-

ing the finances of big oil pro-

ducers, from Russia to Vene-

zuela, and biting into profit at

oil companies big and small.

The 12-member Organiza-

tion of the Petroleum Export-

ing Countries, who collec-

tively pump around one-third

of the world’s oil, agreed to

stick to the group’s current

target of pumping 30 million

barrels a day. That would im-

ply a production cut of

around 300,000 barrels a

day, based on OPEC’s own

figures. Even if implemented,

that would be only a rela-

tively small cut in global oil

supply.

That was enough to send

oil prices tumbling, with the

a.m.

p.m

Source: WSJ Market Data Group

Saudi Arabia's oil minister Ali al-Naimi in Vienna on Thursday

nearing an all-time low

against the dollar. Share

prices of major European oil

companies dived, with Royal

Dutch Shell PLC down 4.3%,

Total SA off 4.1% and BP fall-

ing 2.7%.

OPEC Secretary-General

Abdalla Salem el-Badri said he

was sure OPEC members

would “abide by” the group’s

production target.

But faced with a gusher of

new oil supply—mainly from

the U.S. thanks to the shale

revolution—and weaker global

oil demand, OPEC’s muted re-

sponse caused some to ques-

tion the five-decade old car-

tel’s relevance.

Analysts had estimated

OPEC would need to take 1

million to 1.5 million barrels a

day off the market to support

oil prices, which have fallen

by more than 30% since the

summer.

“The outcome of today’s

Associated Press

West Texas Intermediate

benchmark falling below $70

a barrel for the first time in

over four years, down $4.58,

or 6.2%, at $69.13 a barrel on

the New York Mercantile Ex-

change. The global Brent con-

tract for January fell $4.93, or

6.3%, to $72.82 a barrel on the

ICE Futures Europe exchange.

Currencies of major oil

producing countries slid, with

the Russian ruble hitting a re-

cord low against the euro and

meeting marks a watershed for

the oil market,” oil analysts at

Barclays said. “OPEC is clearly

signaling that it will no longer

bear the burden of market ad-

justment alone and this deci-

sion puts the onus on other

producers, especially U.S. tight

oil, to adjust as well.”

The absence of stronger

Please turn to page 22



Heard on the Street:

OPEC’s

weapon of mass inaction.. 28

RIAN

LACKSTONE

ILSENRATH

Central Banks in Europe

Pressed to Embrace Gold

The Swiss National Bank

could be forced to more than

double its gold assets, and be

banned from selling them, if

the Alpine country’s voters on

Sunday back a populist initia-

tive the central bank vigor-

ously opposes.

The “Save Our Swiss Gold”

campaign would require the

SNB to hold a fifth of its as-

sets in gold within five years.

It would also prohibit it from

selling its gold and require

that Swiss gold held overseas

be repatriated.

Although polls suggest the

initiative will fail, the referen-

dum symbolizes the nostalgia

for gold in some corners at a

time when many European

economies face stagnation

and too-low inflation. Their

Inside

Pope’s Turkey Visit

Tests Stance on Islam

EBORAH

ALL

Two weeks after his elec-

tion, Pope Francis washed the

feet of 12 people at a juvenile

detention center in Rome for

the annual Holy Thursday rit-

ual. Among those chosen for

the rite was a Muslim girl.

The image of the kneeling

76-year-old pope washing and

kissing her feet sent an un-

equivocal message: After the

tensions that characterized

the reign of Pope Benedict

XVI—peaking with a 2006

speech that linked Islam to vi-

olence—the new pontiff in-

tended to reset Catholicism’s

relations with the Muslim

world.

Just over a year and a half

later, the limits of the Vati-

can’s efforts are being tested,

as the Holy See steps up its

The 2008 financial crisis

and its aftermath have re-

vived interest in a monetary

policy instrument of a bygone

era: gold.

This trend is especially

pronounced in Europe, where

central banks face public

pressure to buy more gold or

bring back home what they

hold in vaults overseas.

Gold hasn’t played a sig-

nificant role in global mone-

tary policy for decades and

central bankers hope it stays

that way, even though some

have used gold’s symbolic al-

lure to try building trust with

citizens frustrated by years of

easy-money policies.

central banks have responded

with controversial measures

loading their balance sheets

with financial assets that crit-

ics, particularly in Germany

but also in Switzerland, see as

too risky.

Germany’s central bank

made a public-relations splash

with its decision last year to

return home some of the

country’s gold from vaults in

the U.S. and Paris, which fol-

lowed a campaign led by the

mass-circulation Bild-Zeitung

called “Bring Our Gold Back

Home.”

The Bundesbank says its

decision was made autono-

Please turn to page 20

Three FIFA executives

targeted in World Cup

ethics probe

Sports ................... 26

Rocket race: EU gets

behind cheaper

versions of Ariane

Business ................ 15

A bike ride across

Alaska for fun

Personal Journal .. 25

 Eurozone bond yields hit

record lows................................. 15

call for Muslim leaders to do

more to denounce Islamic

State atrocities against reli-

gious minorities and guaran-

tee religious freedom to

Christians.

The pope’s visit this week-

end to Turkey—where once-

robust Christian communities

have dwindled and a Muslim

majority is staking a greater

claim to the public sphere—

provides a crucial example.

The trip is the pope’s

fourth to a Muslim-majority

country, but Turkey, where

99% of its 82 million citizens

are Muslim, is by far the big-

gest. During the three-day

trip, Pope Francis will visit

Ankara and Istanbul, meeting

Muslim and Orthodox Chris-

tian leaders, as well as top

Turkish politicians including

Please turn to page 3

| Friday - Sunday, November 28 - 30, 2014

AM IM UK SW FR IT SP TK BR PL IS AE GR

THE WALL STREET JOURNAL.

PAGE TWO

What’s News—

Business & Finance

U.K. takeover rules

known

as “Put Up or Shut Up” are

changing the way bankers run

deals and have thwarted sev-

eral large acquisitions.

Europe’s politicians

are

poised to approve a new gener-

ation of lower-cost versions of

its Ariane rockets.

E.ON has agreed

to sell its

Spanish assets to Australia’s

Macquarie Group and Kuwait’s

sovereign-wealth fund in a deal

worth $3.1 billion.

SABMiller and

Coca-Cola

plan to combine soft-drink bot-

tling operations in southern

and eastern Africa.

Portuguese

authorities

raided the Lisbon premises of

the Espírito Santo group and

its collapsed bank, Banco Es-

pírito Santo.

China’s stock market

booming, and brokerages are

emerging as among the biggest

winners.

Two companies

owned by

Carlos Slim will invest up to

$875.4 million in Fomento de

Construcciones y Contratas.

World-Wide

Ukraine’s parliament

voted

to keep pro-Western economist

Arseniy Yatsenyuk in his role

as prime minister, taking the

first step in forging a govern-

ment aimed at stabilizing the

battle-scarred country.

A bipartisan report

by U.K.

lawmakers called for Scotland

to be given new powers to

raise taxes.

British Prime Minister

Da-

vid Cameron’s efforts to curb

immigration suffered a blow as

statistics showed a spike in

immigration flows.

Consumer prices

fell in

Spain and Belgium while rising

in Germany at their slowest

annual pace in almost five

years in November.

The Obama

administration

last month secretly presented a

document to Tehran in a bid to

end the protracted dispute

over Iran’s nuclear program.

Israel said it

uncovered a

network of Hamas militants in

the West Bank, part of what

authorities say is a push by the

group to revive attacks beyond

the Gaza Strip.

In Brussels, Germany

Seen Calling the Shots

[ Brussels Beat ]

TEPHEN

IDLER

It is less than a

month since the

new European

Commission of

Jean-Claude

Juncker took

office. And here is the narrative

that has gathered force since: that

Germany has locked up the key

positions in Brussels and is

guiding the bloc’s policy agenda in

an unprecedented way.

Berlin has long held the whip

hand in European Union affairs—

but never, the new wisdom goes,

to the current extent. On the face

of it, the new order is run by a

Luxembourger—Mr. Juncker, who

easily survived a no-confidence

vote in the European Parliament

on Thursday—and former Polish

Prime Minister Donald Tusk. Mr.

Tusk takes over on Monday from

Herman Van Rompuy as president

of the European Council, a role

where he will set the agenda for

and preside over EU summit

meetings.

But German is the only

language they both speak well,

and they are surrounded by

Germans like Martin Schulz, the

president of the increasingly

powerful European Parliament,

and lesser-known figures such as

Klaus Welle, the chief of the

Parliament’s secretariat, and Uwe

Corsepius, Mr. Welle’s counterpart

at the council until at least next

year.

That is not to speak of Klaus

Regling, the head of the European

Stability Mechanism, the

eurozone’s bailout fund, and

Werner Hoyer, the head of the

European Investment Bank that is

at the center of the €300 billion

($375.18 billion) investment fund

Mr. Juncker launched this week.

As in most good conspiracy

theories, there is someone who

wields power from behind the

throne. In this case, it is Martin

Selmayr, Mr. Juncker’s German

chief of staff. His name is barely

known outside EU circles in

Brussels, but this tough,

hardworking and articulate lawyer,

is widely credited as the architect

of Mr. Juncker’s rise to head the

commission.

Whether or not there is

evidence for it, Mr. Selmayr’s hand

is seen everywhere from the

choice of commission personnel

and the commission’s emphasis on

message discipline and focus to its

legislative priorities.

There are 31 Germans in the

private offices of the 28 European

commissioners, according to the

weekly European Voice, which said

it had received information on

staffing from every one except

Günther Oettinger, Germany’s

digital commissioner. That

compares with just 21 from the

next most represented nation,

France.

With the soldiers in position,

according to the narrative, the

campaign is fought. On efforts to

spur the eurozone’s moribund

economy, Germany has insisted

that relaxing budget constraints

isn’t the way to do it. So, instead

of using fiscal policy, Mr. Juncker’s

Associated Press

Martin Schulz, left, with German-speaking Jean-Claude Juncker on Wednesday.

investment fund would largely

reshuffle the existing EU budget,

using financial engineering and

hoped-for funding from the

private sector to magnify the €21

billion EU institutions are putting

up by 15 times.

German influence is widely

perceived in areas where German

industry is involved. The country’s

publishing companies are seen

behind the intensification of

Google’s travails in Europe—the

latest of which was the

nonbinding resolution Thursday in

the Parliament calling for

consideration of an “unbundling”

of search engines from other

services. That resolution was put

forward by a German

parliamentarian, Andreas Schwab.

German media, the narrative

goes, strongly pressed this year

for Mr. Juncker’s appointment and

Mr. Selmayr once worked for the

publisher Bertelsmann SE.

Moreover, the man in charge of

this portfolio at the commission is

Germany’s Mr. Oettinger, the

digital commissioner.

Mr. Oettinger’s brief also gives

him sway over

telecommunications. There, the

new commission is embarking on

a substantial overhaul of proposed

telecoms legislation that was

unpopular with big players such as

Deutsche Telekom AG.

Elsewhere, strong opposition in

Germany to establishing a special

dispute-settlement procedure

inside the proposed trade

agreement between the U.S. and

EU appears to have secured a

pledge from Mr. Juncker to

exclude it from the pact. That isn’t

a position that was held by trade

commissioner Cecilia Malmström.

When she issued a statement to

the Parliament in September

saying that no such mechanism

would be part of the agreement,

tracking changes in the digital

version of the document showed it

was Mr. Selmayr who wrote it in.

Commission officials didn’t

want to respond on the record to

this. But they do privately resist

the narrative. In the first place

they argue, most of the Germans

are committed to European

institutions and act first according

to their European responsibilities.

Several people attest to witnessing

fights between Mr. Selmayr and

senior figures in Berlin.

They say German domination

over the economic debate isn’t

new. Germany, as the biggest

economy, holds the purse strings

and it isn’t surprising it gets to

call the tune.

They also say Mr. Oettinger’s

approach to Google, for example,

and the telecoms companies will

be balanced by the vice president

who oversees his brief, Andrus

Ansip, a former prime minister of

Estonia who has pushed for an

aggressive agenda favoring digital

innovation. In any case, many

changes favored by German

companies have widespread

support among other companies

elsewhere in the EU.

Mr. Juncker’s pledge to oppose

the dispute-settlement mechanism

was made largely to secure

support for his candidacy among

socialists in the Parliament, they

say. This was strongly favored by

Germany’s Social Democratic

Party—now members of the

governing coalition in Berlin—but

it wasn’t a priority for Chancellor

Angela Merkel.

Ultimately, the main reason

Germany is being outed as calling

the shots in Brussels may be that

it does. France, its traditional co-

leader in driving EU affairs, is

suffering chronic economic

weakness and its influence has

waned. Berlin has traditionally

preferred to wield its influence

behind the scenes. That may no

longer be possible.

TODAY

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THE WALL STREET JOURNAL.

Friday - Sunday, November 28 - 30, 2014 |

EUROPE NEWS

Ukraine’s parliament voted to

keep pro-Western economist Ar-

seniy Yatsenyuk in his role as prime

minister, taking the first step in

forging a government aimed at sta-

bilizing the battle-scarred country.

James Marson

in Moscow

and

Nick Shchetko

in Kiev, Ukraine

Ukraine Premier Wins Vote to Keep Job

The appointment of Mr. Yatse-

nyuk ends weeks of wrangling over

a new cabinet after pro-Europe par-

ties swept elections at the end of

last month. He was elected by a ma-

jority of more than two-thirds of the

parliament in a show of unity amid

continued pressure from Russia to

halt its westward course.

Mr. Yatsenyuk and his govern-

ment, which is set to be finalized at

the next sitting on Tuesday, will

face enormous challenges, from con-

tinuing fighting against Russia-

backed militants in its east to pre-

carious finances.

Ukraine—whose economy is fore-

cast to contract at least 7% this

year—is reliant on loans from the

International Monetary Fund. But

analysts warn that the Washington-

based lender’s loan program may be

insufficient to halt the slide in the

national currency, the hryvnia, as

central-bank reserves have plum-

meted to their lowest in nearly a de-

cade.

“We have a most heavy burden

on our shoulders—the burden of

historic responsibility to protect the

country and our independence. The

country is at war, people are in

need, and it depends on us to stop

the aggression,” Mr. Yatsenyuk said

in parliament.

Mr. Yatsenyuk sealed his new al-

liance with President Petro Porosh-

enko with an embrace, after raising

his hand and pledging to use it to

carry out measures the president

Premier Arseniy Yatsenyuk, left, with Prime Minister Petro Poroshenko after winning the parliament vote on Thursday.

had just outlined to overhaul

Ukraine’s corrupted state system

and moribund economy. “It’s our

joint responsibility,” he said.

Lawmakers from a broad coali-

tion of pro-Europe parties also

voted to appoint Volodymyr Groys-

man, an ally of the president and a

deputy prime minister, as parlia-

mentary speaker. Parliament elects

the prime minister, finance minister

and interior minister, among other

cabinet posts, while Mr. Poroshenko

chooses the foreign and defense

ministers, as well as the head of the

national bank, who are all expected

to remain in place.

Mr. Yatsenyuk became prime

minister in February after the previ-

ous government collapsed when

pro-Russia former President Viktor

Yanukovych fled amid street pro-

tests.

The chamber, where more than

half of the deputies were taking

seats for the first time, bristled

Thursday with defiant displays of

patriotism and unity.

Only 418 lawmakers in the 450-

seat parliament were sworn in,

since voting couldn’t take place in

eastern areas occupied by Russia-

backed militants, and in Crimea—

which Russia annexed in March.

But for the first time in its his-

tory, parliament has a clear majority

of pro-Western lawmakers. Mr.

Yatsenyuk, 40 years old, was elected

with 341 votes.

The newcomers include muckrak-

ing journalists connected with the

protests against Mr. Yanukovych

and commanders of volunteer bat-

talions fighting in the east, some of

whom turned up in fatigues. Also

present was Mr. Poroshenko’s son,

who was elected to parliament in a

single-mandate district. The presi-

dent said his son hadn’t consulted

him on his decision to take up poli-

tics.

One of the new deputies, Ukrai-

nian pilot Nadiya Savchenko, man-

aged to take her oath despite being

held in a Russian psychiatric clinic,

officials said. She was seized by

separatists and taken to Russia. The

rebels accuse her of involvement in

the death of two Russian journalists,

a charge she denies.

Mr. Poroshenko said that

Ukraine’s “shaky ideological bal-

ance” between East and West had

changed, pledging overhauls that

would allow the country to apply for

membership of the European Union

in five years—an ambitious goal,

given that only a few EU members

favor further eastward expansion.

In a surprise move, Mr. Porosh-

enko said a foreigner should head

the country’s new National Anti-

Corruption Bureau. “He’ll have an

advantage: an absence of links in

the Ukrainian political elite,” he

said, without elaborating whom he

would like to see in the post.

He also said parliament should

vote to cancel a law that declares

Ukraine a “nonaligned” state, saying

it hadn’t protected the country’s se-

curity. But, in a sign of the careful

balancing act he will have to play

between strident pro-Westerners in

his coalition and a prickly Russia, he

cautioned against calls to join the

North Atlantic Treaty Organization

immediately.

“We decided to return to the

course of integration in the Euro-At-

lantic security space,” he said. “But

at the same time, I call on everyone

to acknowledge that political specu-

lation around joining NATO as soon

as possible, even today, take the

time of Ukraine joining further

away, not closer.”

The Kremlin has repeatedly de-

manded that its neighbor abandon

any attempt to integrate with NATO,

saying that such a move would

threaten Russia’s security.

Still, Mr. Poroshenko said

Ukraine had no intention of becom-

ing a federal state, a demand often

raised by Russia, and would pre-

serve Ukrainian as the only state

language.

Continued from first page

President Recep Tayyip Erdogan.

He will also visit the 17th-cen-

tury Blue Mosque, Istanbul’s main

mosque, and the Hagia Sophia, an

iconic Istanbul landmark that is also

a clear symbol of the challenges he

faces. Now a museum, it was for

centuries an Eastern Orthodox ca-

thedral before being transformed

into a mosque. Some Muslim leaders

are calling for it to be turned back

into a mosque, a possibility that has

alarmed Turkish Christians.

Since his election, the pope has

extended regular gestures of good-

will to the Muslim world. He in-

cluded an imam in his personal en-

tourage during his Middle East trip.

He chose Albania, a Muslim-major-

ity country, for his first visit to a

European country outside Italy and

sent a message of esteem to Mus-

lims to mark the end of Ramadan. In

a lengthy manifesto for his papacy,

he wrote that “authentic Islam and

the proper reading of the Quran are

opposed to every form of violence.”

“Francis is a man of dialogue and

wants to open a new page with the

Islamic world,” says Mohammad

Sammak, secretary-general of the

National Committee for Christian-

Muslim Dialogue. “He has a very

positive image all over the Arab

world.”

While that image serves better

relations, it also puts the pope un-

der pressure to use the capital he

has earned. The plight of Christians

Pope Francis’ Reset of Relations With Islam Faces Test

“demands a clear and courageous

stance on the part of religious lead-

ers, especially Muslims,” said the

Vatican in August. Otherwise, “what

credibility would remain to the in-

terreligious dialogue patiently pur-

sued in recent years?”

Turkey, long a bridge between

East and West, has sought to bur-

nish its credentials as a model of

reconciliation amid sectarian strife

at its borders. It welcomed more

than 1.5 million refugees from Iraq

and Syria. And Mr. Erdogan, a pious

Muslim, has forged an Islamic-in-

fused democracy that he offers as a

model—one the pope may exalt.

The president’s party “is essen-

tially an Islamic party in power in

an Islamic country,” says Maurizio

Albahari, a professor at the Univer-

sity of Notre Dame, and the Church

could find common cause with a

government that is championing a

stronger role for religion in the pub-

lic sphere.

But within Turkey, Christians

complain that they are discrimi-

nated against, and some critics say

Mr. Erdogan has failed to condemn

atrocities against Christians by Is-

lamic State strongly enough.

The head of the Diyanet, the gov-

ernment’s religious affairs body, re-

jects that argument, saying Europe

hasn’t done enough to speak out

against anti-Muslim sentiment. In

September, Mehmet Gormez said

that resolution of tensions between

Christians and Muslims “doesn’t

happen through things like washing

a young girl’s feet or arranging in-

terfaith football games.”

Some say the pope may tread

lightly in raising the problems with

Muslim leaders. In 2011, Al-Azhar

University in Cairo, which is consid-

ered the leading center of Sunni Is-

lamic teaching, broke relations with

the Vatican, ending an important

source of Muslim-Christian dia-

logue, after Pope Benedict called for

greater protection of Christians in

Egypt following an attack on a Cop-

tic cathedral. Al-Azhar cited the

comments as “unacceptable inter-

ference in Egypt’s affairs.”

“Pushing leaders may create the

opposite result” from what the pope

wants, says Father Fadi Daou, head

of Adyan, a Beirut-based center for

interreligious studies. “Muslim lead-

ers won’t like to react under pres-

sure of a Christian leader.”

Pope Francis has championed di-

alogue with other Christian faiths.

Christian groups want him to ad-

dress the tensions Ankara has with

churches in Turkey, whose Christian

population dwindled in the early

20th century with the forced exodus

of Greek and Armenians and killings

of millions of Armenians.

Christian leaders say they face

discrimination and their churches

are falling into disrepair because au-

thorities deny them permission to

refurbish or reconstruct them. The

Associated Press

Pope Francis, shown on Thursday at the Vatican, leaves for Turkey on Friday.

Halki Seminary, Turkey’s only Greek

Orthodox seminary, was shut down

in 1971, a high-profile example of a

wave of government confiscation of

Christian buildings.

And Turkish law says the Ortho-

dox Patriarch of Constantinople, the

spiritual head of the Orthodox

Church, must be a Turkish citizen, a

rule viewed as harassment by Greek

Orthodox Christians, who lack a

seminary in Turkey to train priests.

In a 2010 television interview,

the current patriarch, Bartholomew,

said he felt “crucified” by discrimi-

natory Turkish laws.

“Turkish politics is a witches’

brew that has made it impossible

for minority religious communities

there,” said George Demacopoulos

of Fordham University. “It’s like the

Christians in Iraq. They’ve all left.”

Prof. Mehmet Paçaci, Turkey’s

ambassador to the Holy See, said

properties can now be returned

“with just a single petition” and the

reopening of Halki is in the works.

Still, some Orthodox leaders are

likely to push the pope on these top-

ics when they meet this weekend.

“There is a new Islamicization

happening in Turkey after a long

history of secularism,” says Habib

Ephrem, head of the Union of Leba-

nese Christian Leagues. “We are

now slowly going into an Islamic

state and Erdogan is the new sultan.

If the pope doesn’t talk about diver-

sity within Turkey, why does he go

at all? To back the regime?”

Associated Press

| Friday - Sunday, November 28 - 30, 2014

THE WALL STREET JOURNAL.

EUROPE NEWS

U.K. Proposes New Scotland Tax Powers

ASON

OUGLAS

LONDON—Scotland should gain

new powers to raise taxes, a panel

of U.K. lawmakers proposed on

Thursday in a further step toward

greater autonomy for the nation

that only narrowly voted to stay in

the U.K. in a September referendum

on independence.

The cross-party panel said in a

report that the Scottish Parliament

in Edinburgh should be given con-

trol to set and collect all income tax

raised in Scotland and gain a share

of value-added tax, a nationwide

sales tax, to help finance public

spending on education, health and

other public services.

U.K. Prime Minister David Cam-

eron and the leaders of Britain’s

other main political parties prom-

ised to hand Scotland more power

in an effort to woo citizens to vote

to stay in the U.K. in the referen-

dum. Scots rejected independence

by 55% to 45%.

The proposals should go some

way to appease Scottish people who

have demanded more say over their

affairs, though the pro-indepen-

dence Scottish National Party, said

the powers didn’t go far enough. It

also leaves Mr. Cameron with an-

other thorny problem on how to de-

liver on a parallel promise he made

to appease his own party to deliver

more say for English lawmakers

over English matters.

The panel, known as the Smith

Commission, was set up after the

referendum to bring together nego-

tiators from five political parties to

hammer out a deal on further devo-

lution to Scotland. The recommen-

dations are expected to be put into

draft legislation in the new year.

The proposals represent “the

biggest transfer of powers” since

the creation of the Edinburgh Par-

liament, said Robert Smith, chair-

man of the commission.

The Scottish Parliament was re-

established after a nearly 300-year

hiatus in 1999 and controls spending

in Scotland on almost three-quar-

ters of government business. U.K.-

wide matters such as foreign affairs,

defense and welfare remain the re-

sponsibility of the U.K. Parliament

at Westminster in London.

But Scotland’s spending powers

aren’t matched by the ability to

raise its own revenue, a fact that

has long rankled lawmakers favor-

ing greater autonomy. Instead, the

bulk of U.K. taxes, including corpo-

ration tax, income tax and North

Sea oil and gas receipts, is funneled

through London before being doled

back to Scotland and other regions

of the U.K. The central government

also issues U.K. debt.

Alongside its proposals on tax,

the commission recommended Scot-

land be handed new borrowing pow-

ers to finance investment in infra-

structure and plug unexpected gaps

in its budget.

The commission also recom-

mended the Scottish Parliament be

given limited new powers over wel-

fare spending, although major bene-

fits such as pensions and out-of-

work payments will continue to be

administered from London.

David Phillips, senior research

economist at the nonpartisan Insti-

tute for Fiscal Studies, calculated

that the proposals will mean the

Scottish government controls or ad-

ministers taxes equivalent to about

50% of annual spending, compared

with just 13% now. But he added

Home Rule?

Current powers

U.K. lawmakers propose giving Scotland’s semiautonomous parliament

new powers over tax and spending.

Proposed powers

Scottish parliament, local authorities

administer taxes equivalent to

roughly 50% of overall spending

New powers over some aspects of

welfare spending

Scotland will gain control of income

tax and a parcel of other lesser taxes

Scottish parliament will be handed a

chunk of VAT, a nationwide sales tax

Scottish parliament, local authorities

administer taxes equivalent to 13% of

overall spending

Foreign affairs, welfare spending and

defense are all controlled from

London

Limited ability to raise tax through local

property taxes and other minor levies

Controls spending in areas including

health, education and tourism

Sources: Scottish government, Smith Commission,

Institute for Fiscal Studies Photo: Reuters

The Wall Street Journal

Yes campaign placards on a fence

on the Isle of Lewis in the Outer

Hebrides days before Scotland’s

independence vote on Oct. 12

that working out the mechanics of

how the new fiscal arrangements

between Scotland and the rest of

the U.K. will work in practice will be

tricky.

Business groups and the U.K.’s

main political parties welcomed the

commission’s proposals. But the

Scottish National Party, the largest

party in the Edinburgh Parliament,

said they had wanted to see more.

Deputy Leader John Swinney said

the SNP will fight next year’s U.K.-

wide general election on a platform

of augmenting the Scottish Parlia-

ment’s powers still further.

“The Westminster parties have

now gone as far as they are ever

prepared to go in terms of powers

for Scotland and it is not as far as

they indicated during the referen-

dum,” he said.

The promise of further powers

for Scotland has reopened old argu-

ments in the U.K. over how its con-

stituent parts—England, Scotland,

Wales and Northern Ireland—are

governed.

In September, Mr. Cameron made

a parallel promise to give English

lawmakers a greater say over legis-

lation that affects England to bal-

ance devolution in Scotland, Wales

and Northern Ireland. That de-

lighted many in his Conservative

Party, which draws the bulk of its

support from England.

But it has proved awkward for

the main opposition Labour Party,

which relies on Scottish and Welsh

lawmakers to govern effectively

when it controls the U.K. Parliament

in London.

Andrew Tyrie, a senior Conser-

vative lawmaker and chairman of

Parliament’s influential treasury

committee, Thursday urged the gov-

ernment to act quickly to give Eng-

lish members of Parliament full con-

trol of English-only matters. “A

crucial step must be to address an-

other grievance—that Scottish MPs

vote on English laws.”

Mr. Cameron on Thursday

tweeted that he intends to publish

proposals on “English votes for Eng-

lish laws” before Christmas.

—Jon Sindreu

contributed to this article.

Rising Immigration Pressures Cameron

ICHOLAS

INNING

LONDON—Prime Minister David

Cameron’s efforts to curb immigra-

tion flows suffered a blow on Thurs-

day as official statistics showed that

more than a quarter of a million

more people came to Britain than

left in the year to June.

Immigration is shaping up to be

a big issue in the general election

scheduled for May. The rising num-

bers will be unwelcome for Mr.

Cameron, who had pledged to slash

net migration. The timing is particu-

larly uncomfortable as the prime

minister prepares to give a long-

awaited speech laying out his ideas

for further curbing immigration.

Behind the rise is a spike in the

numbers of people coming to the

U.K. from other European Union

countries. Mr. Cameron is under

pressure from many in his own Con-

servative Party to clamp down on

inflows from within Europe. But

that places the prime minister in a

difficult position as other EU lead-

ers have warned him against trying

to block the free movement of peo-

ple, which they see as a fundamen-

tal principle of the 28-country bloc.

Net long-term migration—the

number of people coming to the U.K.

minus those leaving—was an esti-

mated 260,000 in the 12 months to

June 2014, a 43% increase from the

year-earlier period, according to of-

ficial statistics released Thursday.

The number is at its highest for a

12-month period since 2011 and

above where it was when Mr. Cam-

eron took office in 2010.

More than half of the increase in

people coming to the U.K. was ac-

counted for by the immigration of

EU citizens: Inflows from within Eu-

rope rose by 45,000, while those

from elsewhere increased by 30,000,

according to the Office for National

Statistics, the government’s official

statistics agency.

Among countries with an in-

crease to the U.K. were Romania and

Bulgaria, which had been a focus of

the debate before Jan. 1, when tem-

porary restrictions on the inflow of

workers from the two countries

were lifted.

Mr. Cameron is expected to out-

line proposals aimed at curbing in-

flows from within Europe in his

speech on immigration, expected

soon. Some analysts say he may

look to limit the access of EU work-

ers to certain welfare support.

While such measures could go

some way toward appeasing those

on the right of his party who want

tougher controls, it is unlikely to go

far enough for those pushing for the

U.K.’s exit from the EU.

“The only way that we going to

able to properly control our borders

is to leave the European Union,”

said Conservative lawmaker Philip

Hollobone. He said he wanted to see

Mr. Cameron confirm in his forth-

coming speech that reducing immi-

gration from the EU will be a prior-

ity in any renegotiation of Britain’s

ties with the bloc.

The U.K. has seen an increasingly

vocal debate over immigration in re-

cent years. Many Conservatives and

other proponents of curbs argue the

sharp increases of immigrants are

placing an untenable strain on pub-

lic services, such as schools and

housing, particularly at a time when

the government is cutting spending.

Many businesses and others argue

that people from overseas help plug

crucial gaps in skills and that most

immigrants come to Britain to work

and pay taxes, or to study.

Mr. Cameron must tread a care-

ful path. He has found some sympa-

thy within the EU among member

states that would prefer the U.K. re-

main in the bloc. But several Euro-

pean leaders, including German

Chancellor Angela Merkel, having

suggested that the free movement

of people in the EU is sacrosanct.

—Jon Sindreu

contributed to this article.

Germany Benefits

From Immigrants

Funding Welfare

BERLIN—Germany is making a

“considerable” financial profit from

the surge in immigrants, with its 6.6

million foreigners helping to fund

the aging country’s costly welfare

system, a study published Thursday

showed.

Foreigners paid on average

€3,300 ($4,127) more in taxes and

social-security contributions in 2012

than they took out in benefits, gen-

erating a €22 billion surplus for the

public coffers that year, according to

a study by the nonpartisan ZEW

economic institute which was com-

missioned by the Bertelsmann

Foundation.

The study offers a strong rebut-

tal to the belief of many Germans

that fast-rising immigration is be-

coming too heavy a drain on the

country’s finances.

The government is preparing to

damp “benefit tourism,” the abuse

of welfare by foreigners who come

without intending to seek work.

“The foreigners who live in Ger-

many aren’t a burden for the Ger-

man social-welfare state, quite the

contrary,” said Holger Bonin, author

of the study.

Immigration to Germany reached

a 20-year high of 1,226,000 last

year. It is the second-most popular

destination for economic migrants

after the U.S., according to the Or-

ganization for Economic Cooperation

and Development.

—Andrea Thomas

Immigration Debate

The U.K. sees rising levels of immigration...

Annual net migration—the number of people coming to the

U.K. minus those leaving—including U.K. citizens

400,000

300,000

200,000

100,000

EU, 2014

Net Migrants, 2014

...and a growing share of inﬂows from the EU.

Number of migrants coming to the U.K. each year

Non-EU, 2014

260,000*

272,000*

228,000*

’94

’96

’98 ’00 ’02 ’04 ’06 ’08

’10

’12

’14

’94

’96

’98

’00

’02

’04

’06

’08

’10

’12

’14

*Figures for 2014 are based on the 12-month period through June 2014; all other ﬁgures are based on calendar years.

Source: U.K. Ofﬁce for National Statistics

The Wall Street Journal

THE WALL STREET JOURNAL.

Friday - Sunday, November 28 - 30, 2014 |

EUROPE NEWS

Inﬂation continues to weaken and bank lending is still shrinking

across the eurozone.

Inﬂation,

change from a year earlier in

the harmonized consumer-price indexes

–1

Subdued Pulse

Private-sector lending by eurozone

banks,

change from a year earlier

–0.5

–1.0

–1.5

–2.0

–2.5

Germany

Eurozone*

Spain

Spain’s Leader Presents

Anticorruption Bills

AND

ARCÍA

AVID

OMÁN

’13

’14

’13

’14

The Wall Street Journal

*Most recent data available, October 2014

Sources: Eurostat (inﬂation); European Central Bank (lending)

Weak Prices, Bank Lending

Put Pressure on ECB to Act

AUL

ANNON

ODD

UELL

Consumer prices fell in Spain

and Belgium while rising in Ger-

many at their slowest annual pace

in almost five years in November,

fueling expectations that the Euro-

pean Central Bank will soon commit

to more-aggressive stimulus mea-

sures.

In another challenge for policy

makers, separate figures released on

Thursday showed bank lending to

businesses continued to decline in

October, despite a series of mea-

sures launched since June designed

to increase the flow of credit.

Still, there are signs the euro-

zone economy will continue to grow

in the final quarter of a disappoint-

ing 2014—albeit at a very weak

pace—with German unemployment

falling and eurozone business confi-

dence on the rise.

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