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The Best Smartphones

PERSONAL JOURNAL 25

EUROPE EDITION

VOL. XXXII NO. 211

THURSDAY, NOVEMBER 27, 2014

$1.75 (C/V)

KES 250

NAI 375

£1.70

WSJ.com

EU Escalates

Online Clash

With Google

CHECHNER

RANCES

OBINSON

Europe’s privacy regula-

tors want the right to be for-

gotten to go global.

In a new set of guidelines

agreed upon in Brussels on

Wednesday, the body repre-

senting the European Union’s

28 national privacy regulators

said search engines should

apply the bloc’s new right to

be forgotten to all of their

websites—in particular .com

websites such as Google.com,

to which

Google

Inc. hadn’t

applied the new rule.

Representatives of the

body also said Google and

other search engines should

limit how they notify web-

sites that their Web pages

have been the subject of such

removals, saying there is “no

legal basis” to make such no-

tifications on a “routine”

basis.

The guidelines escalate a

disagreement between regula-

tors and the search giant over

how to implement a May de-

cision by Europe’s top court,

Hong Kong Police Clear Volatile Protest Site

ECB Steps

Closer to

Sovereign

Bond Buys

RIAN

LACKSTONE

AND

ODD

UELL

FRANKFURT—European

Central Bank Vice President

Vítor Constâncio on Wednes-

day sent the strongest signal

to date that the ECB is pre-

pared to buy government

bonds early next year if it de-

cides that more aggressive

stimulus

measures

are

needed.

In remarks made at a con-

ference in London, Mr. Con-

stâncio rebutted arguments

made by Bundesbank officials

and other critics of bond buy-

ing that central-bank pur-

chases of government debt

would be ineffective in the eu-

rozone and would undermine

efforts by governments to re-

form their economies.

His remarks provided

greater assurance that public-

debt buying is likely early

next year, although they ap-

peared to play down mount-

ing hopes in financial markets

Please turn to page 4

Reuters

which determined that indi-

viduals in Europe have an on-

line “right to be forgotten”

that applies to Internet

search engines. That battle is

only the latest that Google

faces with European authori-

ties: The company also re-

ceived a hefty French bill for

back taxes and a call from the

EU Parliament to “unbundle”

its search business from other

commercial businesses.

At issue in Wednesday’s

opinion is how broadly Google

must apply the court ruling,

under which people can de-

mand that Google and other

engines remove links to pages

that come up when one

searches for their names. Pri-

vacy advocates allege that

Google has been undermining

the new right by limiting its

application, while free-speech

advocates say the rule is a

gateway to Internet censor-

ship that would whitewash

the Web.

While Google moved

quickly to apply the ruling

over the summer, it has only

Please turn to page 16

Baton-wielding police cleared Mong Kok the most active of the pro-democracy protest sites in Hong

Kong and arrested several student leaders among almost 150 people who were held on Wednesday.

The aggressive operation signaled a new phase in the two-month long occupation.

Article on page 3

 German government bonds

rise on comments................... 22

 Heard on the Street: A

splinter movement................. 28

Inside

As U.S. buys up Ebola

gear, there’s little left

for Africa

World News ........... 8

Global investors are

ploughing more cash

into Asian stocks

Business News ....... 15

Remain focused on

Samsung’s endgame

Heard ................... 28

LONDON—Britain is taking

a lead in a battle with Inter-

net companies over how much

responsibility they should

have in helping combat ter-

rorist activity amid political

accusations that one U.S. firm

could have helped prevent a

deadly attack in London last

year.

Alexis Flynn,

Lisa Fleisher

and

Nicholas Winning

U.K. Presses Web Firms

To Ramp Up Terror Fight

nance. The most recent dis-

pute goes to the heart of an

issue of particular political

sensitivity: national security.

Britain appears to be going

further than other European

governments in enlisting

technology firms in antiterror

efforts by effectively pressing

the industry to proactively

police content posted on their

systems. In a parallel move,

Prime Minister David Cam-

eron’s government unveiled a

new

counterterror

bill

Wednesday that would re-

quire Internet service provid-

ers to retain records that

would help identify potential

terror suspects using a partic-

ular phone or computer.

The

draft

legislation

comes as the government is

Oracle

Cloud

Applications

HCM

Human Capital

Recruiting

Talent

The growing debate in the

U.K. is the latest face-off be-

tween European authorities

and U.S. Internet companies

over a wide range of issues,

from privacy concerns to alle-

gations that some firms are

abusing their market domi-

ratcheting up political pres-

sure on the industry. A report

published Tuesday by an in-

fluential panel of British law-

makers said an unnamed com-

pany—later identified as

Facebook Inc.—could have

helped stop the killing of a

British soldier on a London

street last year if it had better

systems for monitoring ex-

tremist content.

The report concluded that

intelligence services could

have prevented two men from

hacking to death the soldier,

Lee Rigby, in May 2013 if they

had been alerted by the com-

pany to an online exchange

between one of the attackers

and an overseas extremist.

The committee didn’t

Please turn to page 6

CRM

Sales

Service

Marketing

Financials

Procurement

Projects

Supply Chain

ERP

More Enterprise

SaaS

Applications

Than Any Other

Cloud

Services Provider

| Thursday, November 27, 2014

SW FR

IT SP

TK BR

THE WALL STREET JOURNAL.

PAGE TWO

What’s News—

Business & Finance

Thomas Cook panicked

in-

vestors by announcing the sur-

prise departure of Chief Execu-

tive Harriet Green after just

two years in the job.

Sberbank’s quarterly profit

fell 25% on rising provisions

for bad loans, as it felt the im-

pact of the crisis in Ukraine,

Russia’s economic stagnation

and a weaker ruble.

Zalando’s revenue rose

in the

third quarter, boosted by growth

in non-German speaking parts of

Europe and cost improvements

at the online retailer.

Samsung Electronics plans

to repurchase $2 billion of its

shares, as it deploys part of its

cash reserve to shore up its

flagging share price.

The U.S. is investigating

al-

legations that an employee of

HSBC Holdings leaked confi-

dential client information to a

major hedge fund.

Saudi Arabia’s oil minister

hinted he wouldn’t push for a

cut in OPEC’s oil-production

targets, breaking his silence on

the state of the market a day

before the cartel meets.

World-Wide

Germany’s Merkel accused

Russia of violating Europe’s

peaceful order, as NATO said it

wasn’t ruling out more support

for Ukraine, including potential

delivery of lethal weapons.

European Commission

Pres-

ident Juncker launched a plan

aimed at enticing large inves-

tors to finance infrastructure

projects across the EU.

Greece’s international

credi-

tors are looking at extending

the country’s bailout program

by as long as six months, two

eurozone officials said, after

negotiations failed to reach an

agreement over its budget.

Gunmen killed

four polio

workers, three of them women,

in southwestern Pakistan, the

latest setback to efforts to curb

the crippling disease.

China added

amendments

aimed at boosting penalties for

heavy polluters and giving local

governments greater responsi-

bilities to clean the skies.

The U.N.’s Ban Ki-moon said

humanitarian chief Valerie

Amos plans to step down after

more than four years.

Hagel’s Resignation

Capped Tense Tenure

Two months before he was

pushed out as defense secretary,

Chuck Hagel penned a private letter

to the White House, arguing for new

measures to rein in Russian Presi-

dent Vladimir Putin and greater ef-

forts to reassure anxious European

allies, according to officials briefed

on the matter.

Adam Entous,

Julian E. Barnes

and

Carol E. Lee

Shortly after the September let-

ter, he wrote another memo calling

for the administration to clarify its

approach to the conflict in Syria.

The two messages capped a year of

frustrations for Mr. Hagel, who re-

peatedly found fault with what he

saw as indecisiveness by the White

House National Security Council,

said current and former officials

close to him.

“One of the things that Hagel

values most is clarity,” said a confi-

dante of the defense secretary.

“That’s not something that this

White House has always done well.”

Mr. Hagel wasn’t alone in his

frustration. His upset over what he

saw as slow decision-making and

White House micromanagement of

the Defense Department was shared

by his two immediate predecessors

at the Pentagon.

Congressional officials who will

review President Barack Obama’s

choice to replace Mr. Hagel said it

would be a challenge finding a suc-

cessor who will be a suitable fit for

the White House’s current national-

security team. One of the leading

contenders to succeed Mr. Hagel as

defense secretary, Michele Flournoy,

dropped out of the running Tuesday.

White House officials defend their

deliberative approach, citing the

risk of rushing decisions without

fully thinking through all of the pos-

sible implications.

James Jeffrey, who served as Mr.

Obama’s ambassador in Turkey and

Iraq, said of Mr. Hagel: “His removal

won’t make things better because he

was not the source of the problem.

The problems seem to be closer to

the president.”

Other members of Mr. Obama’s

security cabinet privately have

voiced similar frustrations, com-

plaining to aides about months-long

discussions that lead to no decisions

and of having little input in the pro-

cess, which is tightly controlled by a

small number of top White House

aides, said officials who work for

these cabinet secretaries.

Current and former administra-

tion officials said Mr. Hagel simply

didn’t click with some top White

House advisers, chief among them

Susan Rice, the national security

adviser. Mr. Hagel and other top of-

ficials chafe at the way she runs

policy-making meetings, which the

officials contend focus too much on

tactical-level details rather than

larger strategic matters. Current

and former White House officials

defended Ms. Rice, saying she was

balancing multiple crises at once

that required hands-on attention.

In those meetings, Mr. Hagel

sometimes seemed out of place, ad-

ministration officials said, because

he was often uncomfortable speak-

ing out. That silence sowed doubts

about him in the West Wing, the of-

ficials said.

Mr. Hagel’s disaffection with the

Getty Images

Defense Secretary Chuck Hagel outside the Pentagon earlier this week.

White House started on Aug. 30,

2013, according to people close to

the defense secretary.

That’s when President Obama,

after a private walk with White

House Chief of Staff Denis Mc-

Donough in the Rose Garden, in-

formed the defense secretary he

was pulling the plug on plans to

bomb Syrian President Bashar al-

Assad over his alleged use of chemi-

cal weapons. The strikes were

slated to begin the next day, and

Mr. Hagel told aides he thought the

about-face would damage Washing-

ton’s standing in the world.

Mr. Hagel’s frustrations grew in

2014. First, the White House pub-

licly pledged support to Ukraine to

counter Russian aggression, but

then debated for months proposals

to supply Kiev with even nonlethal

assistance.

The danger, Mr. Hagel told aides,

was that Mr. Putin would interpret

U.S. inaction as indifference, and

conclude he can do to Ukraine

whatever he pleases. Moreover, he

thought over-promising and under-

delivering would undercut U.S.

credibility.

Mr. Hagel tried to move the ball

forward with Mr. Obama directly. In

a private meeting in late July, he

warned Mr. Obama that the U.S.

wasn’t focused enough on Russia,

and was lurching from crisis to cri-

sis without direction, according to a

senior defense official.

Moscow—not the Middle East—

posed the most serious long-term

threat to international security, Mr.

Hagel told the president. He said

the U.S. needed to find a way to de-

escalate tensions with Russia and

counter either the impression or re-

ality that Russia and China were

moving closer together.

“We have got to find a way off

this track,” Mr. Hagel told Mr. Obama,

said the senior defense official.

Mr. Hagel followed up with the

September letter, warning the

White House that decisions may

need to be taken soon on what offi-

cials called “creative” new options

to rein in Mr. Putin before the situ-

ation escalates.

The White House said Mr. Hagel

didn’t need to elevate Russia on Mr.

Obama’s list of priorities. “I can’t

imagine us focusing more on Rus-

sia,” an official said. “There are

very few issues that have consumed

more time here than Russia, and I

think that’s been evident publicly.”

While Mr. Hagel may have sent

memos concerning the administra-

tion’s Syria and Russia policies, he

didn’t advocate a position different

than the ones Mr. Obama was pur-

suing, the White House official said.

On Syria, in particular, Mr. Hagel

never pushed for the president to

adopt a policy of ousting Mr. Assad,

the official said.

His letter, instead, warned of the

consequences of leaving the U.S.

strategy on Mr. Assad unclear. In

that sense, the frustrations Mr. Ha-

gel had with the White House are

different than those of his prede-

cessors who openly disagreed with

positions Mr. Obama adopted.

A month before his resignation

was announced, Mr. Hagel brought

U.S. military chiefs to the White

House to make the case directly to

Mr. Obama that “you can’t keep ask-

ing us to do more things without

adequate resources,” according to a

senior defense official.

Some White House officials sent

word to the Pentagon that they

weren’t pleased because Mr. Hagel

and the chiefs went to the president

first, not aides, a White House offi-

cial said.

Mid-November, after Mr. Obama

and Mr. Hagel began discussing the

defense secretary’s future, Mr. Mc-

Donough, the White House chief of

staff, met one-on-one with Mr. Hagel

at the Pentagon. The meeting lasted

about 10 minutes.

TODAY

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THE WALL STREET JOURNAL.

Thursday, November 27, 2014 |

NEWS

HONG KONG—Police cleared the

most volatile of three areas occupied

by protesters in Hong Kong and ar-

rested several student protest lead-

ers in an aggressive 24-hour opera-

tion that marked a new phase in the

two-month-long demonstration.

Mia Lamar,

Fiona Law

and

Isabella Steger

Hong Kong Police Clear Protest Site

Police were quicker to use batons

and to arrest protesters than they

had been in the past as they opened

roads on Wednesday in the densely

populated neighborhood of Mong

Kok.

Two high-profile student leaders

were among the nearly 150 people

arrested in the operation, which

ended around 2 p.m. on Wednesday.

Some people praised the police

action. A middle-aged woman

flashed the thumbs-up sign to offic-

ers while others clapped loudly and

cheered as taxis and buses drove

down Mong Kok’s Nathan Road for

the first time in weeks. “This is a

public road,” said Terrence Kwan, a

50-year-old spectator at the scene.

“You [protesters] ask everybody to

like your idea but did you ask me

first?”

Protesters at the site expressed

anger and alarm at the strong force

used by police and said they stood

down due to a desire to protest

peacefully.

“Our force cannot match with the

police force so we are telling people

to step back slowly,” said Ivan Law,

a 22-year-old member of the Hong

Kong Federation of Students, one of

the main protest groups, at the

scene Wednesday.

Crowds of protesters grew in the

evening Wednesday and police used

batons to keep them from blocking

roads again.

Some more radical protest

groups called for activists to retake

the street during the night, as hap-

pened the last time police tried to

clear the site.

Student protesters are demand-

ing free elections for Hong Kong’s

top official in 2017. Beijing has

agreed to allow universal suffrage in

the vote, but will only allow preap-

proved candidates to run for office.

Students want candidates selected

by public nomination.

There are no talks planned be-

tween students and the government

Reuters

Demonstrators and onlookers face lines of police at the intersection of Dundas Street and a cleared Nathan Road in the Mong Kok neighborhood on Wednesday.

and neither side has been willing to

budge on its position. The govern-

ment has bet that public opinion

would eventually turn against the

students.

Police efforts to clear sites have

backfired over the past two months,

first when they used tear gas, which

led protesters to gather in spontane-

ous occupations around the city, and

later when seven police officers al-

legedly beat a handcuffed protester

after a confrontation.

A reminder of the alleged beating

came Wednesday when police an-

nounced they had arrested the offic-

ers on charges of assault. Video-

taped footage of the beating aired by

a local broadcaster drew outrage

and injected energy during a then-

weak period for the protesters. The

police didn't release the officers’

names and offered no details of the

case.

Public support for the police has

grown since the incident, but sup-

port for the city’s leaders remains

low.

While the vast majority of Hong

Kong residents want the protest

sites to be cleared, a poll released

this week by Hong Kong University

said just 24% of the people approve

of Chief Executive Leung Chun-ying,

while 60% disapprove of the city’s

leader.

The clearing effort drew more

protesters back to the streets. Ste-

ven Au, age 18, came to the protests

for the first time in nearly two

weeks Wednesday after seeing pho-

tos of Tuesday night’s confronta-

tions. “We are going to sit-in here so

the police can tell us why they used

serious violence,” Mr. Au said.

City officials have largely left the

site clearing to the police. Mr. Leung

and other top officials are in South

Korea this week.

A police officer involved in the

action said more than 3,000 officers

were deployed and decisions were

made by commanders on the scene.

He said police were determined to

clear the site after not taking any

action for weeks.

“We were all very happy when

traffic flowed onto Nathan Road

again,” he said, adding the force has

always been confident it could clear

the site, but was waiting for the best

time to move.

Among the arrested were two of

the demonstration’s best-known stu-

dent leaders, 18-year-old Joshua

Wong and 21-year-old Lester Shum.

Mr. Wong first rose to promi-

nence as a 14-year-old student activ-

ist and leads the teenage Scholarism

protest group. Mr. Shum is the sec-

ond-in-command of HKFS, an associ-

ation of university student leaders

that has been involved in political

activism in the city for decades.

The two men are likely to be

charged with contempt of court and

are likely to be held in custody until

they appear in court in the coming

days, according to their lawyer, Jon-

athan Man. The police wouldn't

comment on the arrests.

Other student leaders said they

had planned for some members to

be detained and others to remain on

the streets.

Next steps, including a possible

call to consolidate at the main pro-

test site in the Admiralty, are under

discussion, according to one student

leader.

—Chester Yung

contributed to this article.

Stem Cells Hold Promise for Treating Skin Diseases

AUTAM

AIK

Scientists have used stem cells to

make fresh, healthy human skin in a

laboratory dish, offering a new route

for treating a group of debilitating

skin diseases.

The latest research is another ad-

vance in the quest to harness the

power of master cells, known as

stem cells, to treat intractable ail-

ments. In October, U.S. researchers

said they had used stem cells from

human embryos to treat patients

suffering from severe vision loss.

The latest research was de-

scribed in three separate studies

published on Wednesday in the jour-

nal Science Translational Medicine.

The studies center on a group of ge-

netic disorders known as epidermol-

ysis bullosa, or EB.

Patients with EB are often born

with extensive blistering and

patches of missing skin, and con-

tinue to have fragile skin the rest of

their lives. The slightest friction can

cause the top layer of the skin to

slough off, resulting in open wounds

that don’t heal easily. Many patients

develop an aggressive skin cancer

and die within a few decades.

About 17,000 babies are born

with EB annually and roughly

500,000 people suffer from varying

forms of the disorder, including

cases that are mild. Current treat-

ments typically try to prevent or re-

pair the skin damage.

Patients with severe forms of the

disease require near-constant medi-

cal attention and “lead a really mis-

erable life,” said Marius Wernig, a

stem-cell biologist at Stanford Uni-

versity and a lead author on one of

the papers.

Though EB can be caused by er-

rors in at least 18 different genes,

many researchers have focused on a

type of EB caused by errors in a

gene that encodes for type-7 colla-

gen, a protein that helps anchor the

skin to underlying layers. The muta-

tions lead to a dearth of collagen-7.

As a result, the top layer of the skin

can’t anchor properly and the per-

son becomes susceptible to blister-

ing and patches of missing skin.

The group of genetic

disorders leaves patients

with fragile skin.

One possible fix is to make skin

that is genetically compatible with a

patient and which properly secretes

collagen-7. The long-term goal would

be to graft such skin to body parts

that patients tend to bang and

wound a lot, such as hands, feet and

elbows.

To tackle the problem, Dr. Wer-

nig and his colleagues first took skin

cells from three EB patients. Using

an established technique, they intro-

duced a set of genes that changed

the mature skin cells into a batch of

“pluripotent” stem cells—those ca-

pable of becoming all types of body

tissue.

A segment of the collagen-7 gene

in the pluripotent cells where the

mutations occurred was then re-

placed with the correct segment,

which made the pluripotent cells

healthy. Finally, certain chemicals

were added to the now pluripotent

cells, which transformed them into

fresh skin cells that properly se-

creted collagen-7.

After scientists grew several

sheets of the skin in lab dishes, they

grafted them onto the backs of mice,

in places that were devoid of skin.

The human skin grew properly and

healed the patches.

The team’s work was funded by

the California Institute for Regener-

ative Medicine, a state agency.

Dr. Wernig plans to seek further

funding to prepare a human trial of

the lab-made skin. To satisfy regula-

tors, his team needs to show that it

can grow large amounts of the skin

at a manufacturing facility, instead

of in a lab. If all goes well, the first

human trial could get under way in

2018, Dr. Wernig said.

A second experiment published

in the Science journal used mouse

cells and a somewhat different ap-

proach to create healthy pluripotent

cells, which could then be converted

into collagen-7 producing tissue.

“We’ve provided proof of princi-

ple” that the approach works in

mice, said Arabella Meixner, a ge-

neticist at the Institute of Molecular

Biotechnology in Vienna and a se-

nior author of the second study.

“The next step is to move to pa-

tients.”

A third study, led by scientists at

Columbia University, focused on cer-

tain cells in EB patients that sponta-

neously revert to a normal state.

| Thursday, November 27, 2014

THE WALL STREET JOURNAL.

EUROPE NEWS

EU Leader Launches Plan

For Infrastructure Projects

ATTHEW

ALTON

STRASBOURG, France—Jean-

Claude Juncker, the European Com-

mission’s new president, launched a

plan aimed at enticing pension

funds, insurance companies and

other large investors to finance in-

frastructure projects across the Eu-

ropean Union.

Mr. Juncker’s investment plan,

the centerpiece of his economic

agenda, represents an ambitious but

complicated bid to jolt the bloc’s

economy out of its doldrums. It is

perhaps the only stimulus option

that remains politically feasible

when national governments are still

tightening their belts and the Euro-

pean Central Bank has been slow to

unroll new monetary-stimulus pro-

grams.

“This is the greatest effort in Eu-

ropean history to mobilize the EU’s

budget to trigger additional invest-

ment—and without changing the

rules,” Mr. Juncker said.

The commission’s proposal is to

create a European Fund for Strate-

gic Investments.

The fund will be backed by €16

billion ($20 billion) in guarantees

from the EU budget and €5 billion

from the European Investment Bank,

the EU’s long-term lending agency.

It will be housed at and managed by

the EIB, but its operations won’t

threaten the EIB’s triple-A credit

rating, officials said.

The EU is hoping to leverage that

initial €21 billion to more than €300

billion, with cash coming from large

investors that have been investing

in low-risk assets because of Eu-

rope’s gloomy growth outlook.

Officials say the investments of-

fered by the fund—long-lived infra-

structure

projects—are

well

Agence France-Presse/Getty Images

German Chancellor Angela

Merkel accused Russia of violating

Europe’s peaceful order, as the

North Atlantic Treaty Organization

said it wasn’t ruling out increasing

its support to Ukraine, including po-

tential delivery of lethal weapons.

Andrea Thomas

in Berlin

and

Nick Shchetko

in Kiev, Ukraine

Merkel Says Russia

Violates Europe’s Order

peace order and is breaching inter-

national law,” said Ms. Merkel dur-

ing a lower house debate. “The situ-

ation in Luhansk and Donetsk

continues to be far away from a

cease-fire. That is why economic

sanctions are and remain unavoid-

able. We need patience and persis-

tence in our efforts to overcome the

crisis.”

Ms. Merkel reiterated there is no

military solution to the conflict and

diplomatic efforts along with sanc-

tions are needed to resolve the cri-

sis.

She has opposed supporting

Ukraine with lethal military aid.

Western military support for

Ukraine has been limited to nonle-

thal equipment.

The U.S. delivered three light-

weight, counter-mortar radar sys-

tems to Ukraine last week, accord-

ing to the Pentagon.

In Kiev, NATO’s top military com-

mander, Gen. Philip Breedlove, left

open the possibility of providing le-

thal military aid.

“We continue to look at the re-

quirements here in Ukraine. We con-

tinue to advise and offer our

German Chancellor Angela Merkel addresses the Bundestag, or lower house of parliament, in Berlin on Wednesday.

Western leaders have grown in-

creasingly frustrated as the conflict

in the separatist region of eastern

Ukraine appears stuck and Russia

continues to argue it has little or no

leverage over the rebels.

Ms. Merkel insisted on Wednes-

day that economic sanctions against

Russia will remain in place due to

its actions.

Her tough stance follows her

meeting with Russian President

Vladimir Putin on the sidelines of

the Group of 20 leading nations in

Brisbane this month, in which no

progress was made to resolve the

crisis.

“Russia’s course of action is call-

ing into question the European

thoughts on this, and nothing at this

time is off the table,” he told report-

ers.

U.S. Deputy National Security

Adviser Antony Blinken said last

week that Washington continues to

look at its aid policy, raising the

possibility of future U.S. lethal aid.

Gen. Breedlove’s visit is likely to

irritate the Kremlin, which has re-

peatedly criticized NATO’s relation-

ship with its neighbor and de-

manded that the government in Kiev

steer clear of any attempt to join

the alliance. Gen. Breedlove said

Russian forces were still present in

large numbers in eastern Ukraine

and on Ukraine’s eastern border. He

said they mainly provide training

and serve as a backbone for rebel

troops.

“It’s less about the exact number.

It’s more about the fact that there is

a great force that can be exerted if

it is required,” Gen. Breedlove said.

“There is a great capability there

should Russia choose to again bring

that force across the border.”

Russia has repeatedly denied

having regular military troops on

the ground in Ukraine.

matched to the longer-term liabili-

ties of pension funds and life-insur-

ance companies, the kind of inves-

tors that EU officials are hoping to

woo.

The fund will take on the riskiest

slice of these investments, to coun-

teract the risk aversion that officials

say has hamstrung the European

economy. That will provide certainty

to potential investors but also ex-

pose public funds to more risk.

“Risk-taking implies the possibil-

ity of going into losses,” said Wer-

ner Hoyer, head of the EIB. “This is

something nobody wants to hear.”

A panel of technical experts at

the new fund will now compile a list

of potential projects that lie in the

sweet spot of Mr. Juncker’s plan: Of-

ficials said they must be economi-

cally viable on their own terms but

not a project that would have hap-

pened anyway, without the plan.

The selected projects will get access

to financing at below-market rates,

officials say.

J.P. Morgan analysts in a note on

Wednesday questioned whether the

plan would be able to raise the tar-

geted amount of money and said the

process for selecting projects didn’t

appear to be far advanced.

“And third, there is a lingering

question as to whether these proj-

ects are truly incremental to those

that would have occurred other-

wise,” the analysts wrote.

The commission says the plan

will create one million to 1.3 million

new jobs over the next three years

and spark €307 billion of additional

investment. Subdued investment is

a glaring weakness of the European

economy, said Mr. Juncker.

The fund should be up and run-

ning in the middle of 2015, an EU of-

ficial said.

Jean-Claude Juncker addressed the European Parliament on Wednesday.

European Central Bank Closer to Buying Sovereign Bonds

Continued from first page

that the central bank would step up

its stimulus drive as soon as its pol-

icy meeting on Dec. 4, analysts said.

“During the first quarter of next

year,” he said, “we will be able to

gauge better” whether current pro-

grams will be sufficient to raise the

ECB’s balance sheet—the value of

assets it holds—by as much as €1

trillion ($1.24 trillion). The pro-

grams include cheap bank loans and

purchases of both covered bonds

and asset-backed securities.

If they don’t, he said, “we will

have to consider buying other as-

sets, including sovereign bonds in

the secondary market, the bulkier

and more-liquid market of securities

available.”

“The ECB is very well down the

road [of] preparing arguments for

sovereign [quantitative easing],”

said Ken Wattret, an economist at

BNP Paribas.

Quantitative easing

refers to broad-based purchases by

central banks of assets including

government bonds.

“It is now more a matter of when

rather than if” the ECB buys gov-

ernment bonds, said Nick Matthews,

an economist at Nomura.

The policy has been used exten-

sively by central banks in the U.S.,

U.K. and Japan, but the ECB has

largely resisted it, focusing its un-

conventional stimulus instead on

loans to banks and purchases of pri-

vate-debt securities.

Mr. Constâncio’s remarks came

days after ECB President Mario

Draghi put financial markets on

alert that the ECB was losing pa-

tience with the ultralow levels of in-

flation and was ready to do more.

Annual eurozone inflation was 0.4%

in October, far below the ECB’s tar-

get of just below 2%. Many econo-

mists expect inflation to weaken to

0.3% in November. Those figures are

due on Friday.

“It is essential to bring back in-

flation to target and without delay,”

Mr. Draghi said on Friday. And if in-

flation rates and expectations of fu-

ture consumer-price increases fail to

rise “as fast as possible,” he said,

then the central bank “would step

up the pressure and broaden even

more the channels through which

we intervene.”

The euro weakened slightly after

Mr. Constâncio’s comments, but the

decline wasn’t nearly as dramatic as

the fall prompted by Mr. Draghi’s

speech on Friday, an indication that

financial markets have largely

priced in the likelihood of stronger

ECB stimulus.

Still, the comments by Mr. Con-

stâncio on Wednesday were note-

worthy because they took aim at

some of the doubts expressed by

Germany’s central bank about the

effectiveness of buying government

bonds, given that bond yields are al-

ready superlow.

Bundesbank President Jens

Weidmann has also warned that the

policy would ease pressure on gov-

ernments to slash debt and reform

their economies.

Mr. Constâncio said buying gov-

ernment bonds would send an im-

portant signal on the willingness of

the central bank to meet its infla-

tion objective and could spur Euro-

pean banks to purchase foreign as-

sets, weakening the exchange rate.

“It is therefore not well-founded the

counter argument that the policy

would not be effective on account of

already low sovereign yields,” he

said.

Mr. Constâncio’s emphasis on

early 2015 may pre-empt the need

to act at next week’s meeting, when

the ECB will likely cut its already

low inflation forecasts for 2014 and

2015, analysts said.

Reuters

THE WALL STREET JOURNAL.

Thursday, November 27, 2014 |

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