British Airways Strike Begins, Threatening a Weak Economy

LONDON — A three-day strike by some employees of British Airways began Saturday, posing another possible blow to Britain’s battered economy.

A last effort by British Airways and the Unite trade union representing some of the airline’s employees had failed Friday when talks collapsed. A second walkout of four days is scheduled to start March 27.

“We are very disappointed that, despite lengthy negotiations, Unite has rejected the chance of a settlement and resolved that its strikes should go ahead,” Willie Walsh, the chief executive of British Airways, said in a statement.

Tony Woodley, general secretary of Unite, said in a statement that that he was “extremely disappointed” that the strike would go ahead but that British Airways’ offer was worse than one made last week. Mr. Woodley accused Mr. Walsh of wanting to “break the union.”

Mr. Walsh rejected the charge as “absolute nonsense.”

British Airways and Unite, Britain’s biggest trade union, had been negotiating changes to working conditions and pay. The talks collapsed Friday even as Prime Minister Gordon Brown urged the sides to settle.

The labor disruptions are occurring at a critical time for Britain and its fragile recovery. The country is already reeling from high unemployment, weak consumer spending and a shrinking financial services industry, and some economists fear that any disruption could easily send the economy into another downturn.

“You have to recognize there is some risk of a double dip, but that’s not the central forecast,” Andrew Sentence, a Bank of England policy maker, said in an interview with CNBC this week.

The weekend strike is expected to cause major disruptions to flights, but British Airways said earlier that contingency plans would allow 65 percent of its customers to fly. Still, the airline canceled 1,100 of the 1,950 flights scheduled for the next three days. To limit disruptions, British Airways plans to fly more larger planes during the strike period and cancel more short-haul than long-haul flights.

Separately, the trade union representing rail maintenance workers of Network Rail voted to strike in a dispute over job cuts and more weekend work. The union, the National Union of Rail, Maritime and Transport Workers, has yet to schedule dates for a strike to protest plans to cut 1,500 jobs. Network Rail runs and maintains rail tracks, tunnels and rail bridges in Britain.

In addition, some public-sector workers, including employees at job centers and tax offices, plan to strike on Wednesday to protest government proposals to reduce their compensation.

The labor strife is occurring as Alistair Darling, chancellor of the Exchequer, prepares to present proposals on Tuesday to reduce Britain’s record budget deficit. It will be the current Labour government’s last budget before general elections this spring.

Mr. Darling needs to present plans to reduce spending that are far-reaching enough to strengthen confidence among investors while avoiding deep cuts that could threaten to reverse Britain’s fragile economic recovery.

Trade unions called on the government this month to increase taxes on the highest earners and postpone spending cuts, while industry groups urged a reduction in public-sector spending.

Members of the opposition party said the recent strike announcements threatened to “drag us back to the 70s and the dying days of the last Labour government.” Strikes by public-sector workers left rubbish piling up on streets in the late 1970s in what became known as the “winter of discontent,” helping Margaret Thatcher and the Conservative Party into government.

“As the country struggles out of recession, the last thing we need is the unions holding the country to ransom,” the Conservative Party minister, Theresa Villiers, said Friday, according to the BBC.

Such fears of large-scale strikes remain unrealistic for now, but the strike plans by British Airways and Network Rail workers “do show a hardening of attitudes particularly in the transport industry,” Howard Wheeldon, strategist at BGC Partners in London, said. “It has to be seen as bad news for the government.”

The Department for Transport on Friday called on British Airways, Network Rail and the two unions to continue talks. Analysts estimated the two strikes would cost British Airways about £105 million, or $159 million, and hurt the airline’s brand as customers book flights with competitors.

In advertisements on Friday, British Airways said that “a significant” number of cabin crew members were opposed to the strike and would help minimize disruptions to customers’ travel plans.

The airline plans to use volunteer crews and rented planes, and to serve cold food or offer no choices of vegetarian or children’s menus during flights to fulfill its pledge to allow as many passengers to fly as possible.

All long-haul flights leaving Gatwick Airport in London and more than half of the short-haul flights from the airport are expected to operate as usual. The airline predicts more disruptions at Heathrow Airport, its main hub airport, where about 60 percent of long-haul flights are to operate but only a third of short-haul flights.

China Drawing High-Tech Research From U.S.

XI’AN, China — For years, many of China’s best and brightest left for the United States, where high-tech industry was more cutting-edge. But Mark R. Pinto is moving in the opposite direction

Mr. Pinto is the first chief technology officer of a major American tech company to move to China. The company, Applied Materials, is one of Silicon Valley’s most prominent firms. It supplied equipment used to perfect the first computer chips. Today, it is the world’s biggest supplier of the equipment used to make semiconductors, solar panels and flat-panel displays.

In addition to moving Mr. Pinto and his family to Beijing in January, Applied Materials, whose headquarters are in Santa Clara, Calif., has just built its newest and largest research labs here. Last week, it even held its annual shareholders’ meeting in Xi’an.

It is hardly alone. Companies — and their engineers — are being drawn here more and more as China develops a high-tech economy that increasingly competes directly with the United States.

A few American companies are even making deals with Chinese companies to license Chinese technology.

The Chinese market is surging for electricity, cars and much more, and companies are concluding that their researchers need to be close to factories and consumers alike. Applied Materials set up its latest solar research labs here after estimating that China would be producing two-thirds of the world’s solar panels by the end of this year.

“We’re obviously not giving up on the U.S.,” Mr. Pinto said. “China needs more electricity. It’s as simple as that.”

China has become the world’s largest auto market, and General Motors has a large and growing auto research center in Shanghai.

The country is also the biggest market for desktop computers and has the most Internet users. Intel has opened research labs in Beijing for semiconductors and server networks.

Not just drawn by China’s markets, Western companies are also attracted to China’s huge reservoirs of cheap, highly skilled engineers — and the subsidies offered by many Chinese cities and regions, particularly for green energy companies.

Now, Mr. Pinto said, researchers from the United States and Europe have to be ready to move to China if they want to do cutting-edge work on solar manufacturing because the new Applied Materials complex here is the only research center that can fit an entire solar panel assembly line.

“If you really want to have an impact on this field, this is just such a tremendous laboratory,” he said.

Xi’an — a city about 600 miles southwest of Beijing known for the discovery nearby of 2,200-year-old terra cotta warriors — has 47 universities and other institutions of higher learning, churning out engineers with master’s degrees who can be hired for $730 a month.

On the other side of Xi’an from Applied Materials sits Thermal Power Research Institute, China’s world-leading laboratory on cleaner coal. The company has just licensed its latest design to Future Fuels in the United States.

The American company plans to pay about $100 million to import from China a 130-foot-high maze of equipment that turns coal into a gas before burning it. This method reduces toxic pollution and makes it easier to capture and sequester gases like carbon dioxide under ground.

Future Fuels will ship the equipment to Pennsylvania and have Chinese engineers teach American workers how to assemble and operate it.

Small clean-energy companies are headed to China, too.

NatCore Technology of Red Bank, N.J., recently discovered a way to make solar panels much thinner, reducing the energy and toxic materials required to manufacture them. American companies did not even come look at the technology, so NatCore reached a deal with a consortium of Chinese companies to finish developing its invention and mass-produce it in Changsha, China.

“These other countries — China, Taiwan, Brazil — were all over us,” said Chuck Provini, the company’s chief executive.

President Obama has often spoken about creating clean-energy jobs in the United States. But China has shown the political will to do so, said Mr. Pinto, 49, who is also Applied Materials’ executive vice president for solar systems and flat-panel displays.

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I.M.F. Chief Calls for ‘Fire Brigade’ to Aid European Banks

PARIS — Europe should have a “fire brigade” backed by funds from governments and the private sector to deal with failures of large banks, the managing director of the International Monetary Fund said Friday.

“What I think is needed is a European Resolution Authority, armed with the mandate and the tools to deal cost-effectively with failing cross-border banks,” the monetary fund’s chief, Dominique Strauss-Kahn, said in the text of a speech delivered to a conference on banking supervision in Brussels.

“Fire damage can best be contained when the fire is detected and extinguished early,” Mr. Strauss-Kahn said. “But even the best fire prevention system needs a fire brigade.”

European Union members have agreed to the principle of burden-sharing for cross-border banking workouts, but they have yet to make it operational and binding.

In the United States, the Senate is also debating an overhaul of financial regulation aimed at, among other things, buffering the economy from systemic threats like those posed by companies like Lehman Brothers and the American International Group in 2008.

The recent financial crisis exposed several flaws in Europe’s financial regulations, including the lack of any well-defined mechanisms for dealing with larger lenders that operate across national borders.

Several European banks, like KBC of Belgium and Swedbank of Sweden, expanded aggressively in the countries of Central and Eastern Europe in the last decade, then ran into difficulties when the crisis hit.

Support for important lenders then was worked out in an ad hoc manner, by national supervisors acting with colleagues from other countries, and sometimes multilateral institutions like the European Bank for Reconstruction and Development, which is based in London.

This week, the Basel Committee of the Bank for International Settlements issued a series of recommendations, yet to be agreed nationally, intended to strengthen cross-border bank support tools.

The 44-page final report of the cross-border group called for “firm-specific contingency planning” that would help the most interconnected financial companies survive a crisis or, if necessary, be dismantled in an orderly fashion, without risking a global financial crisis.

Nout Wellink, the president of the Dutch central bank and the chairman of the Basel Committee, said its recommendations made “meaningful progress toward addressing systemic risk and the ‘too big to fail’ problem.”

In his speech, Mr. Strauss-Kahn said the new authority should be able to bail out “at least the major cross-border banking groups, as well as all banks running large-scale cross-border operations.”

A mechanism should be established to ensure that the losses “are borne in the first place by shareholders and holders of equitylike instruments, and in the second place by uninsured creditors,” he said.

“As much as possible, the system should be prefinanced by the industry — including through deposit insurance fees and any levies on the relevant financial institutions.”

But, Mr. Strauss-Kahn said, there would also have to be a role for government. “To be robust, such a system needs access to financing and a fiscal back-up mechanism for any net resolution costs,” he said.

Speaking at the same conference, the president of the European Central Bank, Jean-Claude Trichet, endorsed a proposal to limit the disruptive potential of credit-default swaps as a step toward preventing finance from spiraling “out of control.”

Mr. Trichet added his backing to proposals for default swaps to be traded on a central clearing platform, as is routine for other kinds of derivatives. Currently most default swaps, a form of insurance against default by bond issuers, are traded directly between issuers like investment banks and buyers like hedge funds. A clearinghouse would allow regulators to see who is buying and selling the swaps, which some politicians, including the leaders of Greece and Germany, have blamed for inflaming the Greek debt crisis.

Sewell Chan contributed reporting from Washington, and Jack Ewing from Frankfurt