Europe flirts with deflation; WhatsApp boss moves from welfare to billionaire; Ukraine’s bloody day; Wal-Mart profit drops 22%




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1 Europe flirts with deflation (The New York Times) Some analysts and public officials say the beleaguered euro zone is finally on the road to recovery. Unemployment has decreased slightly, though it remains high at 12 percent, and the euro zone as a whole grew by 0.3 percent in the last quarter of 2013.

But theirs is an overly optimistic view. Recent data show that the economies of many European countries remain very weak, and the euro zone as a whole could soon experience deflation, a decline in the general level of prices, if government officials and central bankers do not take steps to bolster the economy. Last month, inflation in the 18 countries that use the euro was just 0.7 percent, down from 0.8 percent in December. That is far below the European Central Bank’s target for an inflation rate of just under 2 percent.

Deflation is a pernicious and self-reinforcing phenomenon that debilitates economies, as Japan experienced for much of the past 15 years. When prices fall broadly, consumers put off purchases and businesses see little value in investing for the future, creating a downward spiral. Deflation also makes it more difficult for governments and other borrowers to repay their debts.

Earlier this month, the central bank’s president, Mario Draghi, dismissed the fear of deflation, but his words were hardly reassuring. The central bank’s inaction is particularly disconcerting because it is the only public institution that could provide a boost to the weak euro-zone economy. Under pressure from Germany, governments across the euro zone have committed to cutting spending and raising taxes in a counterproductive effort to reduce their fiscal deficits.

2 WhatsApp’s boss moves from welfare to billionaire (Adam Satariano in San Francisco Chronicle) The $19 billion deal to sell WhatsApp to Facebook started at Yahoo! more than five years ago, when Jan Koum became disillusioned at the way Internet companies were fixated on advertising. He left Yahoo in 2007 with one of the company’s other engineers, Brian Acton, and started a company by 2009 that shuns advertising altogether. The strategy allowed them to concentrate on creating an easy-to-use messaging product instead of developing new ways to glean customer information for their marketing pitches, Koum said in a 2012 blog post.

Their approach paid off. WhatsApp amassed 450 million monthly users — twice as many as Twitter — who send billions of messages a day. Yesterday, Facebook Chief Executive Officer Mark Zuckerberg bought their five-year-old company in the largest Internet deal since Time Warner’s $124 billion merger with AOL in 2001, a deal that will almost certainly make Koum and Acton billionaires several times over.

For Koum, 38, the windfall would stand in stark contrast to his years as a teenager, when his family relied on food stamps after emigrating from Ukraine. The experience of living in a country where phone lines were often tapped, instilled the importance of privacy in him. WhatsApp doesn’t collect information like name, gender, address or age. Instead, users are approved after their phone numbers are authenticated.

The partners are old enough to remember the first dot-com bust. Acton, 42, grew up in Michigan and was employee No. 44 at Yahoo, working on advertising, shopping and travel services, according to Wired. He invested during the boom and lost millions of dollars when the market imploded, according to Forbes. He later hired Koum at Yahoo and served as his mentor, inviting him over to his house and taking him skiing, Forbes said. After exiting Yahoo, Acton said on Twitter that he was turned down for a job at Facebook in 2009.

Venture capital firm Sequoia Capital invested $8 million in WhatsApp in 2011, for a more than 15 percent stake that is now worth about $3.5 billion, according to people with knowledge of the deal. Koum’s aversion to advertising contrasts with Facebook’s efforts to make more money from people using its service on mobile devices. He said in a statement on the company’s website that WhatsApp will remain autonomous and operate independently.

3 Ukraine’s bloody day (Ian Traynor in The Guardian) The conflict over Ukraine’s future escalated on Thursday into the bloodiest day of violence since protests began, as the opposition routed thousands of riot police to regain control of central Kiev amid signs that the power base of embattled president Viktor Yanukovych was under threat. Dozens died and hundreds were injured in a day of dramatic violence that turned into a seesaw contest and saw thousands of riot police scuttling from territory they seized on Tuesday.

Guardian reporters saw 21 corpses on Independence Square, the crucible of the mass rebellion against Yanukovych, and in a nearby hotel converted into a makeshift field hospital. Oleh Musiy, head doctor for the opposition movement, said 70 protesters died on Thursday, bringing the death toll in 72 hours to about 100.

As Moscow encouraged Yanukovych to crack down harder on the unrest and threatened to withhold crucial financial aid unless he did, and the European Union announced limited sanctions on individual Ukrainian officials, three EU foreign ministers spent almost five hours with the president, desperately seeking a way back from the brink through a compromise between his increasingly hardline regime and opposition leaders.

Dependent on Russian money and gas supplies since he spurned trade and political pacts with Europe in November, the spark for the crisis, Yanukovych was told by Moscow to maintain a hard line and warned that the financial aid could be turned off if he did not. Dmitry Medvedev, the Russian prime minister, said that Yanukovych would have to restore order to qualify for the Russian help and that if he did not the opposition forces would use him as “a doormat”.

4 Wal-Mart profit drops 22% (BBC) The world’s largest retailer, Wal-Mart, has reported a 22% drop in quarterly profit and given a weaker-than-expected earnings forecast for the coming year. Net income for the three months to 31 January fell to $4.4bn from $5.6bn a year earlier. Wal-Mart said tough winter weather, cuts to government benefits and higher taxes contributed to the fall.

Wal-Mart said reduced food-stamp benefits had been partly behind its lower profits, along with competition from heavy discounting during the holiday season. Comparable sales at its US stores fell by 0.4% in the three-month period. Wal-Mart’s total revenue for the quarter rose by 1.4% to $129.7bn. Chief executive Doug McMillon said he would “innovate to improve productivity” to keep prices low.


About joesnewspicks

This blog captures interesting news items from around the world for those strained by information overload and yet need to stay updated on global events of significance. The news items displayed are not in order of merit. (The blog takes a weekly off — normally on Sundays — and does not appear when I am on vacation or busy.) I am a journalist for nearly three decades.
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