Wired : PHONE NUMBERS WERE NEVER MEANT AS ID. NOW WE’RE ALL AT RISK

On Thursday, T-Mobile confirmed that some of its customer data was breached in an attack the company discovered on Monday. It's a snappy disclosure timeframe, and the carrier said that no financial data or Social Security numbers were compromised in the breach. A relief, right? The problem is the customer data that was potentially exposed: name, billing zip code, email address, some hashed passwords, account number, account type, and phone number. Pay close attention to that last one.

The cumulative danger of all of these data points becoming exposed—not just by T-Mobile but across countless breaches—is that it makes it easier for attackers to impersonate you and take control of your accounts. And while the passwords are bad news, perhaps no piece of standard personal information has more value than your phone number.

That's because phone numbers have become more than just a way to contact someone. In recent years, more and more companies and services have come to rely on smartphones to confirm—or "authenticate"—users. In theory, this makes sense; an attacker might get your passwords, but it's much harder for them to get physical access to your phone. In practice, it means that a single, often publicly available, piece of information gets used both as your identity and a means to verify that identity, a skeleton key into your entire online life. Hackers have known this, and profited from it, for years. Companies don't seem interested in catching up.

Identity management experts have warned for years about over-reliance on phone numbers. But the United States doesn't offer any type of universal ID, which means private institutions and even the federal government itself have had to improvise. As cell phones proliferated, and phone numbers became more reliably attached to individuals long term, it was an obvious choice to start collecting those numbers even more consistently as a type of ID. But over time, SMS messages, biometric scanners, encrypted apps, and other special functions of smartphones have evolved into forms of authentication as well.

"The bottom line is society needs identifiers," says Jeremy Grant, coordinator of the Better Identity Coalition, an industry collaboration that includes Visa, Bank of America, Aetna, and Symantec. "We just have to make sure that knowledge of an identifier can’t be used to somehow take over the authenticator. And a phone number is only an identifier; in most cases, it's public."

Think of your usernames and passwords. The former are generally public knowledge; it's how people know who you are. But you keep the latter guarded, because it's how you prove who you are.

The use of phone numbers as both lock and key has led to the rise, in recent years, of so-called SIM swapping attacks, in which an attacker steals your phone number. When you add two-factor authentication to an account and receive your codes through SMS texts, they go to the attacker instead, along with any calls and texts intended for the victim. Sometimes attackers even use inside sources at carriers who will transfer numbers for them.

"The issue being exposed with SIM swaps is that if you control the phone number you can take over the authenticator," Grant says. "A lot of it gets to the same issue we run into with Social Security numbers, which is leveraging the same number as both an identifier and authenticator. If it’s not a secret, then you can’t use it as an authenticator."

It's a tangle. But it doesn't have to be like this. Thomas Hardjono, a secure identities researcher at MIT's Trust and Data Consortium, points to credit card numbers, identifiers authenticated with a chip plus a PIN or a signature. The financial industry realized decades ago that the system wouldn't work if it wasn't relatively easy to change credit card info after it was exposed. You can get a new credit card as needed; changing your phone number can be incredibly inconvenient. As a result, they become more and more at-risk over time.

So if you're looking for an alternative to the phone number, start with something more easily replaceable. Hardjono suggests, for example, that smartphones could generate unique identifiers by combing a user's phone number and the IMEI device ID number assigned to every smartphone. That number would be valid for the life of the device, and would naturally change whenever you got a new phone. If you needed to change it for whatever reason, you could do so with relative ease. Under that system, you could continue to give out their phone number without worrying about what else it might affect.

"The people in the card payment space understood a long time ago that separating people’s accounts from static attributes is important, but this definitely hasn’t happened with mobile phone numbers," Hardjono says. "Plus SMS is a weak way to authenticate anyway, because the protocols are vulnerable. So if your phone could generate this short-term identifier that's a combination of your physical device identifier and your phone number, it would be replaceable as a safety precaution."

And that's just one possibility. The important thing is that it’s not necessarily bad for identifiers to be public; you just need a mechanism to change them if necessary, in a way that causes minimal headaches.

Numerous undertakings have explored these problems, but past projects have faced inertia in working to implement changes. Again, look to credit cards; the international community used chip and pin for decades before the US finally transitioned over in 2015. And the US still didn't adopt PINs, opting for less secure signatures instead.

Substantive change likely won't come unless the government mandates it. Managing identity schemes is a complicated; falling back on phone numbers and Social Security numbers makes life easier for companies. The Better Identity Coalition's Grant notes, though, that recent wakeup calls, like the devastating Equifax breach, have created some real motivation within private industry.

Understandably, you'll probably only believe it when you see it. Until that big change does, take all the precautions you can to protect your mobile account, and try to cut your phone number out of as many signups and logins as possible. It may not be the the ideal identifier, but it's the one you're stuck with.

FT : Federal Reserve wrestles with steering US policy ‘by the stars’

Federal Reserve wrestles with steering US policy ‘by the stars’
Jackson Hole admission points to gaps in understanding economy 10 years after crisis began

Central bankers typically like to project steadfast confidence. But when Jay Powell opened the annual Jackson Hole gathering, the Federal Reserve chair made a surprisingly frank confession.

He acknowledged to his peers that the US central bank has been steering towards higher interest rates with only a hazy sense of direction, and compared the challenges of US monetary policy to “navigating by the stars”.

It “can sound straightforward,” he said. But “guiding policy by the stars in practice . . . has been quite challenging of late because our best assessments of the location of the stars have been changing significantly”.

It was an acknowledgment that underscored the acute difficulties the Fed faces in gauging how far to tighten monetary policy. Mr Powell and his colleagues at the gathering on Friday and Saturday made it clear that the Fed will err firmly on the side of caution as they slowly edge rates higher, while watching for signs of overheating across a range of indicators.

But Mr Powell’s mistrust of central banking lodestars, such as the natural rate of unemployment or neutral rate of interest, speaks to deeper uncertainties running through the profession as officials struggle with basic gaps in their understanding of how the economy works 10 years from the start of the credit crisis.

Among the most stubborn questions is why wages and inflation have failed to ignite despite unemployment falling ever further below what bankers in the US and elsewhere thought was its natural rate.

The topic was at the heart of debate at the meeting organised by the Kansas City Fed, with economists including Princeton’s Alan Krueger, former chairman of Barack Obama’s Council of Economic Advisers, looking for answers outside central bankers’ comfort zones.

Mr Krueger urged officials to ditch models involving perfect competition in the jobs market and dwell instead on workers’ diminished bargaining power in the face of increasingly powerful companies and declining unionisation.

As an example, he said a quarter of American workers were bound by restrictions that prevent them working for their employers’ competitors, limiting their ability to defect to rivals in search of higher wages.

“If employers collude to hold wages to a fixed, below-market rate, or if monopsony power increases over time, then wages could remain stubbornly resistant to upward pressure from increased labour demand in a booming economy,” Mr Krueger said.

Other economists focused on the rise of highly successful, technologically advanced “superstar” companies, which are conquering markets and leaving rank-and-file groups — and their workers — in their wake. Some argued that the growing heft of giants such as Amazon and Google was a result of their mastery of technology, and that this did not necessarily point towards uncompetitive conditions that were hurting consumers.

Others were less optimistic.

“All the good wages are in some firms and not in the rest,” said Raghuram Rajan, a professor at University of Chicago Booth School of Business and a former governor of the Reserve Bank of India. People in firms that are struggling are going to be asking the same question: “how come the elite are making away with everything?”

Stephen Poloz, the Bank of Canada governor, suggested that a more benign reason for muted price data may be that potential economic output is higher than central bankers believe, because of under-appreciated rates of technological change.

He cited research from Northwestern University that suggested digitalisation has led statistical agencies to underestimate investment, particularly in intangibles such as software and intellectual property.

“Central banks are working with estimates of potential output today that may be revised up in the future,” Mr Poloz said during a debate on Saturday. “Positive revisions to the history of potential output could help explain the underperformance of inflation over the past five years.”

Agustín Carstens, general manager of the Bank for International Settlements, said it was high time central bankers delved into these kinds of questions. “In a way, our minds were more on the combat of the global financial crisis and these things were put on the backburner,” he said.

Yet that does not make it obvious how central bankers should be responding.

Mr Krueger said one way of breaking the collusive corporate practices that were depressing workers’ pay was to allow the labour market to heat up further. But Robert Kaplan, the Dallas Fed president, argued against putting too much weight on low rates, when other policies such as better education and training would be needed to help workers adapt to the technological disruption of the jobs market.

“You have to be careful in trying to solve this problem [that] you don’t create other imbalances and heighten the cyclical pressures which would cause the Fed to fall back behind the curve and have to move more quickly,” he said. To do so “would in the medium term actually hurt employment and make this issue worse”.

Mr Poloz’s suggestion that technology may be boosting the economy’s capacity more rapidly than central bankers have believed, muting inflationary risks, echoes arguments by former Fed chairman Alan Greenspan in the 1990s. Yet the Fed was arguably too relaxed then, given the excesses that were brewing in markets.

“It is a very narrow path to get it right,” said Mr Carstens. “It is not easy to engineer this normalisation process and at the same time to preserve financial stability. The central banks will have to be very careful.”

>>> DIA shareholder Mikhail Fridman sounding out other shareholders for possible

DIA shareholder Mikhail Fridman sounding out other shareholders for possible takover bid - report (translated)
26 AUG 2018
Russian businessman Mikhail Fridman, Distribuidora Internacional de Alimentacion (Grupo DIA)’s main shareholder with 25% of the capital through vehicle Letter One, has initiated contact with other shareholders to explore the launching of a takeover bid for the company, Expansion reported.

Its main partner in this venture is Goldman Sachs which, according to financial sources, acts on behalf of Fridman himself. The US bank currently holds an indirect stake of 14.534% in the group, the majority of which would be held by the Russian businessman, the item said.

The same sources assure that these derivatives will expire in October and that the shares could already pass directly into Fridman's hands. This would make it easier for him to reach a 30% stake in Dia - complemented by small purchases in the market (the free float is 30.80%) - and, therefore, he would be obliged to launch a takeover bid for 100% of the company. Goldman Sachs sources did not want to comment on the matter, the Spanish-language paper highlighted.

In the event that a takeover bid is finally submitted, a voluntary takeover bid would have a good chance of succeeding, given Fridman’s position on the board - where he placed two directors this year, Karl-Heinz Holland, former CEO of Lidl, and Stephan Du-Charme, CEO of Russian X5 group) – and his strength as a shareholder, Expansion reported.

Financial sources claim that contact with Societe Generale, which holds a 4.889% stake in the group, could already have taken place. Other shareholders include Edinburgh-based investment fund Baillie Gifford, which has a 10.48% stake, Canadian fund Black Creek Investment Management (4.9%) and Norwegian bank Norges Bank (4.6%), the item said.

Grupo DIA's market value is EUR 1.327bn. So far this year, however, the company has lost 50.43% of its value.The group's profits fell by 37% in 2017 and 88% in 1H18. In Spain, it has lost one point of market share, from 8.6% to 7.6% in one year, Expansion added.

>>> Chelsea FC owner Roman Abramovich considers sale after rejecting Silver Lake

Chelsea FC owner Roman Abramovich considers sale after rejecting Silver Lake minority stake bid; Raine Group advising - report
26 AUG 2018
Chelsea FC owner Roman Abramovich is thinking about selling the English Premier League football club after rejecting a bid by Silver Lake Partners for a minority stake, The Sunday Times reported. The newspaper did not cite a source for the information.

Chelsea’s board is believed to have appointed the investment bank Raine Group to advise on a strategic review following Silver Lake’s approach, the item said.

Raine and Silver Lake refused to comment, while Chelsea did not reply when asked for comment, the newspaper said.

Ineos Chairman Jim Radcliffe made a GBP 2bn (EUR 2.21bn) offer for Chelsea this year, as reported in June by The Daily Mail.

The Sunday Times report mentioned speculation that Abramovich had rejected Radcliffe’s bid as he was looking for a higher offer.

Chelsea’s plans for a new 60,000 capacity stadium, at a cost of GBP 1bn, were suspended in May after Abramovich was unable to secure a new work visa for the UK, the item noted.

Abramovich has loaned Chelsea close to GBP 1.1bn since acquiring the club in 2003, the report said. Abramovich said at the time that he was paying USD 233m for Chelsea.

Chelsea has posted a loss in every year other than 2013-2014 under Abramovich’s ownership, the report said.

The newspaper went on to cite the latest available accounts for Fordstam, the vehicle used by Abramovich to acquire Chelsea, which show total losses of GBP 871.4m in the years other than 2013-2014, in which the club posted a GBP 14.9m profit before tax.


WSJ : U.S., Mexico Close to Resolving Issues Holding Up Nafta Talks

U.S., Mexico Close to Resolving Issues Holding Up Nafta Talks
Proposals under consideration include exempting some industries from dispute settlement provisions, sources

The U.S. and Mexico are getting close to reaching a bilateral agreement on key issues holding back a renegotiation of the North American Free Trade Agreement, removing a hurdle to completing a deal that would eventually include Canada, according to people closely tracking the negotiations.

Trump administration officials and their Mexican counterparts are debating a proposal to exempt some industries from dispute-settlement provisions, which would remove one of the most difficult issues, the people said.

The negotiations have also included discussions over how much local content a car should have, and the cost of labor to produce a car, to qualify for tariff-free treatment under Nafta. The auto-related discussions are at an “advanced” stage, said one official familiar with the matter.

“Our relationship with Mexico is getting closer by the hour,” tweeted President Trump on Saturday morning, as negotiators continued their work. “A big Trade Agreement with Mexico could be happening soon!”

One of the sticking points throughout the last year of Nafta negotiations between the U.S., Mexico and Canada has been Washington’s desire to weaken or remove a provision in Nafta known as investor-state dispute settlement, or ISDS, in which companies can bring claims to an international tribunal when they believe their overseas investments were unfairly treated by an action from another Nafta government.

The U.S. has argued that the tribunals erode national sovereignty. But many U.S. companies have pressured the administration to preserve the dispute-settlement provisions, arguing that otherwise their international investments would be exposed and unprotected. Mexico and Canada have also favored keeping the provisions, believing they bolster the confidence of investors.

The Chamber of Commerce, Business Roundtable, National Association of Manufacturers, and American Petroleum Institute are among major industry groups that have fought to preserve the dispute-settlement provisions.

An idea to resolve the impasse is for only certain industries to remain covered by dispute settlement. Negotiators have floated the idea with different industries, according to three sources from industries closely tracking the negotiations. Mexico and the U.S. don’t appear to have reached an agreement on the idea to exempt some industries but not others.

While a compromise on dispute settlement may bring some industry groups along, it could spark further opposition from the exempted industries that believe they are losing meaningful protection of their international investments. The strategy could split the united front that many business groups have advanced, with some major industries potentially welcoming a resolution, leaving behind a smaller group with objections.

The U.S. Trade Representative’s office didn’t respond to a request to comment. Mexican officials, approached as they entered a negotiating venue in Washington, declined to comment.

One idea that has been discussed is to retain industries that bid for government concessions as a crucial part of their business, including energy, utilities, mining, telecoms and services under the dispute-settlement process. Other major industries, including manufacturing and agriculture, wouldn’t be covered by the dispute-settlement provisions in this version of the proposal.

Mexico and the U.S. have signaled in recent days that they are making significant progress in resolving their remaining disagreements. But they have stressed nothing is final. Talks are set to continue over the weekend.

One source of delay could be a rift emerging between the current Mexican negotiating team, and that of President-elect Andrés Manuel Lòpez Obrador, who wants Mexico’s newly opened energy sector to be exempt from dispute resolution.

Geoffrey Gertz, a fellow at the Brookings Institution who has studied dispute settlement, said that the system is more important for some industries than others.

“There is a logic to focusing on industries with high sunk costs and extensive regulation, as this is where investors are potentially most exposed to reversals in government policy,” he said.

But companies that aren’t covered might still be convinced to support the deal if it allows the Nafta negotiations to be resolved, he said.

“What I suspect matters most for firms considering investing in Mexico is stable, predictable, comprehensive access to the North American market, more so than the right to bring ISDS cases,” said Mr. Gertz.

Even if the U.S. and Mexico agreed to only retain dispute settlement for certain industries, Mexico and Canada could still agree bilaterally to keep the provisions for all their industries.

Mexico’s chief trade negotiator, Ildefonso Guajardo, said Friday that the U.S. and Mexico are “very far” down the list of issues needing to be worked out between the two countries, but said “even if you are extremely engaged, there is always a last-moment thing that can come between you and your goals.”

He said conclusion of the talks, including some of the most difficult remaining issues, would require the inclusion of the Canadians.

Asked about the U.S. position that Nafta should include a “sunset clause” which causes the deal to expire in five years, Mr. Guajardo responded that “it’s clear that there are trilateral issues that have to be solved in a trilateral context.”

FT : India approves $6bn military spend as Asian arms race escalates

India approves $6bn military spend as Asian arms race escalates
New Delhi to upgrade equipment with purchases including 111 naval helicopters

India’s government has given the go-ahead for the acquisition of $6.5bn in military hardware, including 111 naval helicopters, as New Delhi seeks to upgrade its ageing defence equipment, amid an escalating arms race in Asia.

The move comes as Prime Minister Narendra Modi’s government struggles to fulfil its promise of a $250bn military modernisation, with the purchase of new equipment slowed by strict bidding conditions and a series of scrapped tenders. 

Mr Modi’s decision three years ago to cancel an order of 126 Rafale fighter jets — which were to be partially made in India — and instead spend €8bn to buy 36 Rafale jets off the shelf from France has also been contentious, upending what had been a decade-long competitive bidding process.

Defence analysts said the purchase of a mere two squadrons — when India needed nearly four times that number — suggested Mr Modi was pursuing an ad hoc, piecemeal acquisition strategy that would hinder military preparedness.

Annual defence spending across Asia has more than doubled — to $450bn — since the start of the century, led by a sharp surge in military spending by China, which has allocated more than $200bn for its defence this year. 

India is on track to spend $62bn on its defence in the current financial year, up from $47bn five years ago. But more than two-thirds of Indian military spending goes towards the salaries of its 1.4m-strong armed forces and the pensions for 2m military retirees, leaving relatively little for equipment and new weapons systems. 

Over the weekend, India’s defence acquisition committee approved $3bn for the purchase of 111 utility helicopters for the navy, which will be provided under a new programme that allows foreign defence contractors to work with Indian private sector companies to make defence equipment. 

Previously, production of military hardware in India was restricted to public sector companies with foreign partners but Mr Modi has promised to open the sector to private participation. 

“This is the first tender being initiated under the strategic partner mode, where an Indian private sector vendor builds the platform in India with technology transfer from a foreign owner,” says Ajai Shukla, a defence analyst. “This unlocks the door for the entry of the private sector in defence production.” 

Russia’s Kamov is expected to offer its Ka-226 model, which it is producing with India’s state-owned Hindustan Aeronautics, for the naval helicopter tender, vying with companies such as Airbus, the European aerospace group, for the contract. 

Large Indian companies such as the Mahindra Group, Tata, Anil Ambani’s Reliance, Kalyani and Larsen & Toubro have all been awarded licences for defence production and could partner foreign defence technology companies to produce the helicopters. 

Mr Shulka said the approvals granted at the weekend were essentially the start of the acquisition process, where the government “accepts that it is necessary to induct this platform into service”. 

However, he said it was likely to be years before a deal was signed, given India’s painfully slow decision-making process when it came to acquiring military hardware, especially when it involved foreign companies. 

“The whole procurement lies ahead,” he said on Sunday. “The decision sanctioned yesterday will take at least five years for final decision-making — let alone production. Nobody wants to make a decision on procurement because they are all generalist bureaucrats, terribly afraid of signing on the dotted line.” 

In addition to the helicopters, the government also approved the acquisition of another $3.5bn worth of equipment, including 150 locally designed and developed advanced artillery guns — seen as a precursor to an order of up to 1,500 artillery guns, as the army replaces its outdated howitzers. 

India’s Defence Research and Development Organization has developed the new long-range Dhanush howitzer in collaboration with many public and private companies. The Dhanush recently completed testing and the army plans to induct the first batch this year. 

The government also gave the nod for the procurement of 24 anti-submarine helicopters and 14 vertically launched short-range missile systems.

WSJ : The Big Hedge-Fund Strategy That Isn’t Working

The Big Hedge-Fund Strategy That Isn’t Working
Despite terrible returns, so-called trend-following funds have attracted $300 billion in assets

Following trends in financial markets was once one of the most profitable investment strategies around. Now the approach is being battered as cheap replica funds crowd into the space.

Performance among the roughly $300 billion in hedge funds that largely use so-called trend-following strategies has been abysmal. An investor buying into these funds at the start of 2011, for instance, and holding through July this year would have lost 3.4% on average, according to HFR. Over the same period the S&P 500 is up 124%.

“It’s like a lot of industries,” said Matthew Beddall, founder of investment firm Havelock London. “As it’s been successful more people have got involved. Now you can buy a book on Amazon on how to code trend-following.”

Trend-following is a simple concept with complex execution. The underlying idea is relatively straightforward: If a security is going up—usually measured by a short-term moving average rising above a long-term moving average—then it’s time to buy. If it falls below, it’s time to sell. Funds employ armies of Ph.D. scientists to work out exactly when a price move becomes a trend.

Investors have followed trends for centuries. British economist David Ricardo, who amassed a fortune trading markets 200 years ago, was known for cutting his losing positions and running his winners. Trend-following took off as a hedge-fund strategy in the 1980s, when commodities brokers automated trading with computers to look for market patterns.

These funds chalked up double-digit gains during the 1990s and 2000s. And they were one of the few hedge-fund strategies to make money in 2008’s market slump. This performance led pensions and other hedge-fund investors to pour in money.

The strategy has failed to deliver in recent market falls. In January, many such funds made big gains as markets soared, only to lose them and more during February’s volatility-driven selloff.

It isn’t entirely clear why it has stopped working. Some point to the cash that has flooded into the sector, believing overcrowding has eroded returns. Assets have more than tripled over the past decade, according to HFR. Others say quantitative easing has suppressed the volatility these funds enjoy, or that the near-instantaneous distribution of news via the internet means investors react quicker and trends, therefore, don’t last as long.

The strategy, also known as managed futures or CTAs (commodity trading advisors), has helped turn traders such as John Henry, owner of the Boston Red Sox, and David Harding, head of hedge fund Winton Group, into billionaires.

The success has encouraged investment firms to offer lower-cost alternatives. Research Affiliates licenses out its strategies to other firms. AQR Capital Management LLC runs a $15.4 billion trend-following strategy and other, similar portfolios. Amundi Asset Management and GAM Holding AG produce their own low-cost versions—often called alternative risk premia.

“Eighty percent, maybe 90% of the characteristics of this strategy can be captured with a solid set of rules and a solid implementation,” said Leda Braga, founder of $8.5 billion trend-following hedge fund Systematica. Her flagship hedge fund has cut fees and the firm last year launched a lower-cost trend-following fund.

“There’s a fee compression in this space” driven by investors recognizing trend-following is becoming commoditized, said Ms. Braga. She said her firm has become a low-margin business.

Trend-following is one of the starkest examples of how strategies that once belonged exclusively to hedge funds and earned them huge profits are being copied and commoditized by low-cost replicators.

Winton’s flagship hedge fund once focused almost solely on trend-following, but its declining effectiveness has persuaded it to reduce that over time to around half of the portfolio. It plans to reduce that to around one-quarter by next year. Winton is instead launching a separate trend-following fund for clients who still want that.

Despite the patchy performance, investors are keeping the faith alive in trend-following. Surging interest in computer-driven investing has helped, as has demand for funds uncorrelated to stock markets, and strong returns in 2008 and 2014. Funds such as Winton have pulled in assets thanks to stronger-than-average performance.

Fund managers are going into more exotic realms to escape the overcrowding. Doug Greenig, a former chief risk officer at trend-follower AHL, overhauled his hedge fund, Florin Court, to focus solely on hard-to-access markets he sees as less crowded, such as onshore futures in China and cryptocurrencies.

Systematica’s Ms. Braga argues the strategy isn’t overcrowded but admits “I don’t know, I don’t know,” when asked why trends haven’t been present in markets in recent years.

FT : Anti-immigration mood drives fear of racist profiling on EU borders

Anti-immigration mood drives fear of racist profiling on EU borders
Europe’s passport-free area under pressure as calls grow for tougher migrant controls

Police spot checks have become a part of Fahad’s annual summer holiday when driving through the snow-topped mountains of southern Bavaria.

“This usually happens,” said the Kuwaiti father of three, when his silver people-carrier with his wife and children was stopped by German border officers in the idyllic Alpine town of Kiefersfelden.

Fahad and his family had to wait for more than half an hour at the border post, until they were given a pass to drive from Austria into Germany. During the FT’s three-hour stay at the checkpoint, non-white drivers made up about 70 per cent of cars selected for further checks. Fahad was one of a few drivers with beards, while others included women wearing headscarves and motorists who at first sight did not look like white Europeans. All were waved through once their IDs were checked, vehicle boots searched and luggage examined. 

Racial profiling at Europe’s internal borders is forbidden under EU law. But with a fresh wave of anti-immigrant governments calling for tougher controls on migrant movements, there are concerns that non-white people will come under increasing suspicion when travelling in the continent. 

Europe’s passport-free Schengen zone — an area made up of 26 European states that abolished passport control at their mutual borders — has buckled under twin pressures: Europe’s biggest influx of refugees since the second world war, and a growing number of anti-immigrant governments pushing to crack down on irregular migration flows. “There is such a fear that Schengen won’t survive that countries are being given the discretion to do whatever they can to keep it alive,” said Elizabeth Collett, director of the Migration Policy Institute Europe think-tank.

Although the number of migrants entering the EU has dropped dramatically since the height of the migration crisis in 2015, emergency powers still allow border controls across 20,000km inside the Schengen zone. Kiefersfelden, a popular skiing destination, has become one of Schengen’s pinch points: it is home to one of three emergency police controls along Germany’s 820km border with Austria.

Every car travelling on the A12 autobahn through Kiefersfelden must pass a police border stop where officers select vehicles for extra spot checks. The cars that are picked are sent to a tented zone, where drivers and passengers must show valid ID documents.

Border police said they are told to look for signs of undocumented migrants and people smugglers crossing into Germany from Austria. So far this year, an average of 900 illegal migrants per month have been detained on the Austro-German border, down from 1,120 per month in 2017.

As racial profiling is outlawed, it is the responsibility of European governments to ensure their police forces carry out checks at random. Rainer Schafer, spokesman for the federal police overseeing the Kiefersfelden controls, said race and ethnicity “can be among the indicators” officers look for when deciding to pull over a vehicle for extra checks. 

“But there are no rules that we just pick out the people who look like they are coming from Africa,” he said. Other factors include registration plates (Italian or eastern European plates draw officers’ attention), blacked-out windows, and the number of passengers, he said.

Police checks in Bavaria are expected to intensify after the region’s conservative local government last month requested tougher migration controls.

Horst Seehofer, Germany’s interior minister, has also called on the government to break two decades of EU-wide co-operation on migration and unilaterally send people away at Germany’s internal borders. Observers fear that other Schengen countries, like Austria, could in turn erect their own emergency border controls — and that the EU’s principle of free movement of people is at risk of becoming a privilege enjoyed only by white Europeans.

A report from La Cimade, a French non-governmental organisation, found French border police “systematically check the identity documents of people who do not have the right skin colour” on inbound trains from Italy. 

Inga Schwarz, a researcher at the University of Freiburg, said Europe’s internal border crossings are becoming “increasingly racialised spaces, constructed not only by border guards profiling according to race, but also by European citizens who witness these racialised control practices”.

In Kiefersfelden, the majority of the non-white drivers selected for checks were tourists in people-carriers and expensive cars — mostly from the Gulf — and were waved through in less than 15 minutes. Uruj, a 27-year-old teacher from Kuwait, her husband and young daughter waited for nearly an hour in their white Mercedes. 

Although they had valid visa documents, police took away their passports and only permitted the family to continue to their holiday destination in Austria once they had obtained a car seat for their three-and-a-half-year-old daughter, Wafah. Uruj, who was wearing a pink headscarf, said, “I don’t think they liked the look of us.”

FT : India approves $6bn military spend as Asian arms race escalates

India approves $6bn military spend as Asian arms race escalates
New Delhi to upgrade equipment with purchases including 111 naval helicopters


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India’s government has given the go-ahead for the acquisition of $6.5bn in military hardware, including 111 naval helicopters, as New Delhi seeks to upgrade its ageing defence equipment, amid an escalating arms race in Asia.

The move comes as Prime Minister Narendra Modi’s government struggles to fulfil its promise of a $250bn military modernisation, with the purchase of new equipment slowed by strict bidding conditions and a series of scrapped tenders. 

Mr Modi’s decision three years ago to cancel an order of 126 Rafale fighter jets — which were to be partially made in India — and instead spend €8bn to buy 36 Rafale jets off the shelf from France has also been contentious, upending what had been a decade-long competitive bidding process.

Defence analysts said the purchase of a mere two squadrons — when India needed nearly four times that number — suggested Mr Modi was pursuing an ad hoc, piecemeal acquisition strategy that would hinder military preparedness.

Annual defence spending across Asia has more than doubled — to $450bn — since the start of the century, led by a sharp surge in military spending by China, which has allocated more than $200bn for its defence this year. 

India is on track to spend $62bn on its defence in the current financial year, up from $47bn five years ago. But more than two-thirds of Indian military spending goes towards the salaries of its 1.4m-strong armed forces and the pensions for 2m military retirees, leaving relatively little for equipment and new weapons systems. 

Over the weekend, India’s defence acquisition committee approved $3bn for the purchase of 111 utility helicopters for the navy, which will be provided under a new programme that allows foreign defence contractors to work with Indian private sector companies to make defence equipment. 


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Previously, production of military hardware in India was restricted to public sector companies with foreign partners but Mr Modi has promised to open the sector to private participation. 

“This is the first tender being initiated under the strategic partner mode, where an Indian private sector vendor builds the platform in India with technology transfer from a foreign owner,” says Ajai Shukla, a defence analyst. “This unlocks the door for the entry of the private sector in defence production.” 

Russia’s Kamov is expected to offer its Ka-226 model, which it is producing with India’s state-owned Hindustan Aeronautics, for the naval helicopter tender, vying with companies such as Airbus, the European aerospace group, for the contract. 

Large Indian companies such as the Mahindra Group, Tata, Anil Ambani’s Reliance, Kalyani and Larsen & Toubro have all been awarded licences for defence production and could partner foreign defence technology companies to produce the helicopters. 

Mr Shulka said the approvals granted at the weekend were essentially the start of the acquisition process, where the government “accepts that it is necessary to induct this platform into service”. 

However, he said it was likely to be years before a deal was signed, given India’s painfully slow decision-making process when it came to acquiring military hardware, especially when it involved foreign companies. 

“The whole procurement lies ahead,” he said on Sunday. “The decision sanctioned yesterday will take at least five years for final decision-making — let alone production. Nobody wants to make a decision on procurement because they are all generalist bureaucrats, terribly afraid of signing on the dotted line.” 

In addition to the helicopters, the government also approved the acquisition of another $3.5bn worth of equipment, including 150 locally designed and developed advanced artillery guns — seen as a precursor to an order of up to 1,500 artillery guns, as the army replaces its outdated howitzers. 

India’s Defence Research and Development Organization has developed the new long-range Dhanush howitzer in collaboration with many public and private companies. The Dhanush recently completed testing and the army plans to induct the first batch this year. 

The government also gave the nod for the procurement of 24 anti-submarine helicopters and 14 vertically launched short-range missile systems.