"The proposed merger of BAE Systems and EAD, kaputt"

The Economist, Oct 13th 2012

THE challenge was always going to be getting the politics right. But when Britain’s BAE Systems, Europe’s biggest defence firm, and EADS, the Franco-German maker of Airbus civil jets and the owner of some smaller defence businesses, announced their intention to merge a month ago, managers of both firms were optimistic. They gushed about the encouragement they had been given by the French, German and British governments.

Their optimism was misplaced. The deal died on October 10th, the date set by London’s Takeover Panel for the two companies to declare their intentions. It had hit an immovable object in the shape of Germany’s chancellor, Angela Merkel.

That came as a complete surprise to EADS and its German boss, Tom Enders. Few people have more experience or better “fingertips”—his expression—for understanding the politics of Europe’s defence and aerospace industry. A former paratrooper, Mr Enders has moved seamlessly between academia, politics and business. He thought he could use those fingertips to find a way of getting the politics out of EADS and turning it into a “normal” business. No such luck.

Four years ago, Mr Enders helped set out a long-term strategy for EADS: to build up the defence side of the business, which had become overshadowed by Airbus; to outsource more of its operations; to make a bigger splash in America; and to reduce the stakes held by the meddlesome French and German governments. Merging with BAE would have helped EADS do all of the above: the British firm clocks up nearly 45% of its sales in America, selling such things as armoured vehicles to the Pentagon.

From BAE’s point of view, too, a merger made sense. With the winding down of the wars in Iraq and Afghanistan, it faces a future of shrinking defence budgets. Marrying EADS would have given it a way back into civil aviation and a titanium balance-sheet, thanks to Airbus’s €486 billion ($626 billion) order book.

The managers of the two companies knew each other and got on well. They rapidly agreed on a 60/40 split of shareholding in EADS’s favour. They also knew, however, that unless the three governments played ball, the game would quickly be over. For the deal to make sense, the French and the Germans had to be willing to surrender enough influence to convince the Pentagon and Congress that the special security agreement given to BAE’s American subsidiary would not be jeopardised. The French were expected to cause trouble, but with some quibbling, they and the British were keen for the deal to go ahead.

However, in the past few days it became clear that the opposition was coming from the Germans. According to someone close to the discussions, they initially assumed they could hide behind the French. When the French looked like supporting the deal, the German negotiators were taken aback. They first insisted on the German government having the same 9% direct stake as the French had agreed to. No problem, said the French and the British. The next demand was for the corporate headquarters to be in Munich rather than Toulouse (the defence business was to have been based in London). “We can work something out,” came the reply. Yet on October 9th Mrs Merkel rang the French president, François Hollande, to tell him that she intended to veto the deal.

Where does that leave the two firms? The blow for EADS is not quite as great as it is for BAE—its main Airbus business is still growing strongly. But Mr Enders’s strategy is now doomed. He has been reminded how hard it is to build a more rational European defence industry. The experience will have seared him.

Nowhere to go

BAE’s position is trickier. It is a well-managed firm with good long-term prospects thanks to its uniquely international portfolio. But the medium term looks bleak, with falling sales in its core markets. Its scope to diversify or make acquisitions is limited by a weak balance-sheet and a £5 billion ($8 billion) pension deficit. Guy Anderson of IHS Jane’s, a defence-research firm, says it is most likely that it will continue to sell non-core assets. However, because BAE is now regarded by some as a company in play, Mr Anderson says it may need to do something bigger.

A large American defence contractor could bid for BAE. However, the British government might use its special share to prevent a deal that would leave it with far less influence than the tie-up with EADS would have done. None of the choices open to BAE looks as good as the one that has just vanished in a puff of smoke.

Link : http://www.economist.com/node/21564569

Amazon selling more Kindle ebooks than print books by BBC New Technology

August 6, 2012    

The UK's biggest book retailer Amazon now sells more ebooks than hardbacks and paperbacks combined, the company has said.

For every 100 print books sold through the site, Amazon said it sold 114 titles for its Kindle e-reader device.

It added that the average Kindle owner bought up to four times more books than they did before owning the device.

The strong figures have been boosted by titles such as multi-million selling erotic novel Fifty Shades of Grey.

The book has sold more than 31 million copies worldwide, with two million ebooks of the title selling in less than four months.

The figures do not take into account ebook sales on other platforms, such as Apple's iBooks or the website for bookseller Waterstones.

Bestsellers

Amazon's figures have also been boosted by a surge in popularity for self-publishing.

The company said there had been a 400% increase in authors using Kindle Direct Publishing since summer 2011.

Among them were some of the site's bestsellers. British author Kerry Wilkinson is one of the world's most successful self-published authors.

He has sold more than 300,000 copies of his work in the past year.

Ian Clark, blogger and co-founder of a group promoting greater use of libraries, said the figures should not be seen as a sign that ebooks were dominating over physical sales.

He said that as Amazon was the only official vendor of books for Kindle - by far the most popular e-reader on the market - it had very little competition in selling titles for the platform.

With print sales, however, Amazon faces competition from many big, established retailers.

"To really judge the state of the ebook market, we need proper sales data so that we can compare across the board," he wrote .

Jonathan Ruppin, web editor for bookseller Foyles, said it is a trend the book industry must adapt to deal with.

"The proportion of sales that are taken up by ebooks will continue to increase," he told the BBC.

"At some point they will overtake printed sales across the whole market."

He said while online buying could put smaller businesses at risk, he was optimistic that more traditional bookshops still had an important role.

"There's an awful lot of doom-mongering about the retail book trade.

"But for every worrying story I've heard about an independent book shop struggling, I've heard about a good one flourishing."

No Fire

The figures were released as Amazon marked the two-year anniversary of the Kindle's release in the UK.

"Customers in the UK are now choosing Kindle books more often than print books, even as our print business continues to grow," said Jorrit Van der Meulen, vice-president of Kindle in Europe.

"As a result of the success of Kindle, we're selling more books than ever before on behalf of authors and publishers.

"And thanks to Kindle Direct Publishing, thousands of self-published authors have also been given an outlet to share their work with the millions of Kindle readers worldwide."

However, despite the e-reader's popularity, the company is still yet to announce plans to sell the Kindle Fire - a tablet computer - in the UK, despite it being on sale for over eight months.

http://www.bbc.co.uk/news/technology-19148146

Diaoyu dispute drags down global economy

13th October, 2012                                                                                                                             Author: Xinhua                                                                                                                                    Source: chinadaily.com

GUILIN - The Japanese government's attempt to "nationalize" the Diaoyu Islands has the potential to derail global economic recovery, according to academics.

Relations between China and Japan soured after Japan moved to "purchase" part of the Diaoyu Islands in September. China claims the islands are part of its territory.

"The world economy is quite unstable already and the world is turning its eye to east Asia for growth. But clearly, the dispute has had an adverse impact on global recovery," said Yang Mu, a senior researcher at the National University of Singapore.

"The global economy is already suffering from lower aggregate demand. This is particularly true in the US and the Eurozone. The global aggregate demand would go down if there is a further slowdown in the Chinese and Japanese economies," said Jesus P. Estanislao, former Philippines secretary of finance and chairman of the Institute of Corporate Directors.

Other east Asian economies will also be affected, as they have large trade relationships with both China and Japan, Estanislao said.

Under the circumstances of the global economic downturn, Asian countries are eager to strengthen regional cooperation. Many countries hope to offset negative effects from European and American markets through tariff-free barriers and cross-state logistics and cooperation.

Zhang Monan, a researcher with the State Information Center, a government think tank, said the dispute has put regional supply chains at risk.

Both China and Japan are important sources of semi-manufactured goods in Asia, Zhang said, adding that the ripple effect will spread and put pressure on the world economy.

The World Bank has lowered its growth expectations for the region, possibly in response to the dispute. On Monday, it slashed its 2012 growth forecast for developing countries in east Asia and the Pacific to 7.2 percent, down from 8.3 percent in 2011.

"In a fragile external environment, the economy in east Asia and that Pacific region is continuing to slow down," the bank said in its latest East Asia and Pacific Data Monitor.

The new forecast is down from its May prediction of 7.6 percent growth for the region.

"Should conditions in Europe deteriorate sharply, no developing region will be spared. With a major crisis, GDP growth could drop by more than 2 percent in 2013," the World Bank said.

"There will be a further scaling down of growth prospects if the China-Japan standoff lasts," Estanislao said.

The dispute has already taken an economic toll.

"Many Chinese travel agencies have cancelled trips to Japan, which has affected both countries. But it is Japan that is being hit harder, as tourism is an important source of income, especially in light of Japan's sluggish economy," said Song Haiyan, a professor at Hong Kong Polytechnic University.

The manufacturing sector will also be dealt a heavy blow.

China's manufacturers import raw materials from countries like Australia and export commodities back to developed countries. Therefore, if China's manufacturing industry suffers due to a prolonged territorial dispute, supplies of raw materials and the imports of developed countries will be affected, Song said.

"Eventually, the dispute will spell trouble for the world economy as a whole," Song said.

Four major state-owned banks in China -- the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China -- are absent from the International Monetary Fund (IMF) and World Bank annual meetings being held in Tokyo from October 9 to 14.

The IMF believes the absence of these banks, which have global influence in the financial sector, will affect the outcome of the meetings.

The shaky global economy needs Japan and China to be fully engaged, IMF managing director Christine Lagarde said.

"The absence shows that Japan's aggressive action has sent bilateral relations plummeting and is hurting the world economy," said Mei Xinyu, a researcher with the Ministry of Commerce.

As the world's second- and third-largest economies, respectively, China and Japan carry a lot of weight in the global arena. Economic interdependence is strong between the two.

"The demand for Japanese electronics and automobiles is still strong in China, while Japan, due to its small territorial mass, needs China for resources," said Liao Fan, a researcher at the Chinese Academy of Social Sciences.

The countries are such important economies that there will be pressure for them to tone down hostilities. Both economies are mature enough to look at their long-term interests, which call for greater cooperation and closer relations, including trade relations, Estanislao said.

"Thus, my expectation is that the leaders of both economies will handle these flare-ups in a manner that will safeguard their long-term economic interests," he added.

Health care,Election fever

Source&Date: The economist,Oct 6th 2012

Health care defined Barack Obama’s first term. It may determine whether he wins a second.

THE economy is the election’s main issue, but health care is its most incendiary. According to Democrats, Mitt Romney and Paul Ryan, his running-mate, want to disembowel Medicare, the elderly’s sacred public health programme, and slash Medicaid, its programme for the poor. According to Republicans, Mr Obama’s reforms of 2010 trample on states’ rights, steals billions from Medicare and will shove America off a fiscal cliff.

Despite the hyperbole, the fight over health care is vital. Nearly 18% of America’s GDP is spent on health. Millions of baby-boomers are retiring; the young are developing chronic disease as never before. It is unclear that America can care for them without going bankrupt. The future health of America’s economy and citizens depends on reforms made now.

The two candidates offer two very different choices. If Mr Obama is re-elected, he will implement his vast law in full, moving America significantly further towards universal health coverage. Mr Romney would transform Medicare and throw “Obamacare” in the bin. The fight over health helped oust Democrats from the House of Representatives in 2010. It may determine the presidential election, too.

Mr Obama’s law covers everything from menus to electronic health records, though its most prominent reforms will not come into effect until 2014. Controversy has centred on the law’s “individual mandate”, the requirement to buy health insurance or pay a fine. The mandate tries to end the free-riding that occurs when the uninsured receive free care at hospitals, which pass the costs to everyone else in the form of higher fees. It is also a tool to offset the cost of insuring the very ill. Mr Obama’s law requires insurers to cover those with pre-existing conditions from 2014, without unduly raising their rates. If cheap, healthy young people must have insurance, their premiums will help pay for the cost of insuring the ill.

Mr Obama also sought a big extension of Medicaid. Previously, states were required to cover only specific groups of the poor, such as pregnant women. Mr Obama’s law extended Medicaid to all those with incomes of up to 138% of the federal poverty level—$23,050 for a family of four. Washington would pay for all of the expansion in 2014, falling to 90% by 2020. Those who do not qualify for Medicaid but who cannot afford insurance—those with incomes between 100% and 400% of the federal poverty level—will get tapering subsidies to buy insurance on new health exchanges. Run by states, these markets will let individuals compare and buy insurance products. In all, the law was meant to expand coverage to 32m Americans who lacked it.

States challenged the reform within minutes of it being signed into law. They argued that Congress could not force Americans to buy insurance. But in June the Supreme Court upheld the law. The decision was not a complete victory for the Democrats. The court held that Congress must make the Medicaid expansion optional. Telling states to expand the programme or forgo all aid amounted to unconstitutional coercion.

The ruling was a huge relief for the White House, but it did not solve Mr Obama’s problems. Most important for his political survival, the law is still divisive. According to a Kaiser Family Foundation poll in late September, 45% of voters approved of the reform and 40% opposed it.

Then there is the thorny task of implementation. The Supreme Court’s decision on Medicaid is a headache. The very poor are particularly vulnerable—if states choose not to expand Medicaid, more than 11m uninsured would qualify for neither Medicaid nor the subsidies on the new health exchanges. The exchanges themselves are uncertain. Only 19 states and Washington, DC, have taken steps toward creating them. By far the biggest threat to the reforms, however, comes from the fact that Americans may choose to elect a president who wants to throw them out.

Mr Romney makes a very odd crusader against Obamacare. The reform is modelled after the one that he passed in Massachusetts. Nevertheless, he has vowed to “repeal and replace” the law. Whether he could actually do so is debatable. He would probably offer states waivers from the law (some would not accept), then try to repeal the law in its entirety. If he wins the presidency, there is a good chance that the Republicans will also take the Senate. It is highly unlikely, however, that they will win 60 seats or more, so Democrats would surely filibuster attempts at repeal. Mr Romney may try to scuttle parts of the law through “reconciliation”, a process usually reserved for budget measures, which requires a simple majority vote.

Even if Mr Romney were to repeal the law, it is unclear what he would replace it with—or if Congress would have the appetite to replace it at all. Mr Romney’s governing philosophy is that Washington’s role should shrink, with states and the private sector leading reform instead. He offers a few further sketches. Like congressional Republicans, he favours letting insurers sell products across state lines. He wants tax breaks for individuals who buy insurance on their own.

Turning his back on everything he did in Massachusetts, Mr Romney has few plans to expand coverage. He would gut Mr Obama’s Medicaid provisions, the state exchanges and their accompanying subsidies. Mr Romney would instead give states a set amount of money for their Medicaid patients, to contain spending. Confusingly, in September he said he would keep parts of Mr Obama’s law, such as guaranteed coverage for the sick. He did not explain that the guarantee would be only for those previously insured. Mr Romney’s plans are thus pretty muddy. More clear is his vision for one of America’s most popular programmes: Medicare.

Silver power

Medicare is beloved by America’s most powerful voting bloc. The elderly turn out in higher numbers than any other group. In Florida, the most important swing state, those 65 and older comprised 22% of voters in 2008. There is the pesky fact, however, that Medicare is blatantly unaffordable. America spent $549 billion on it in 2011. The cost of services continues to rise, and baby-boomers are now entering the programme en masse. The question is how to lower spending without committing political suicide. Messrs Obama and Romney offer two very different answers.

Mr Obama’s health law cuts Medicare costs in two main ways. First, it reduces federal payments to hospitals, doctors and insurers. Second, it creates an Independent Payment Advisory Board. The controversial, appointed board must suggest cuts to keep Medicare growth below that of nominal GDP plus one percent. These cuts would automatically become law unless Congress makes equal ones through another mechanism.

In addition to these two rather blunt tools, Mr Obama is using Medicare to test better ways to deliver and pay for care. To date, America has rewarded doctors for the quantity, rather than quality of their services. Companies are slowly trying new schemes; Mr Obama’s law accelerates this. New “accountable care organisations”, for example, reward those that provide good care to Medicare patients while keeping costs down.

Democrats declare that Republicans would “end Medicare as we know it”

Mr Romney presents a radically different vision. Mr Obama makes top-down cuts, while encouraging experimentation. Mr Romney says he trusts market competition to transform Medicare, praising the plan of his running-mate. Mr Ryan wants to give the elderly vouchers to spend on insurance. He initially suggested scrapping Medicare entirely. In a plan presented in December with Ron Wyden, a Democratic senator, he proposed letting the elderly put their subsidy toward either a private plan or traditional Medicare.

Beginning in 2022, beneficiaries could buy insurance on a new “Medicare Exchange”. They would keep the savings if a plan cost less than their voucher and pay the extra if a plan cost more. Competition would supposedly contain costs. If it did not, the Ryan-Wyden plan would cap growth at the rate of nominal GDP plus 1% (Mr Romney has yet to endorse this cap).

Ironically, Mr Ryan and Mr Obama each favour health exchanges, but Mr Obama hates the idea for the elderly and Mr Ryan would scrap the idea for the rest. Nevertheless, the candidates’ plans for health reveal a clear ideological gap. Mr Romney would shrink Washington’s role in health care, capping costs while leaving innovation to the states and the private sector. Mr Obama believes that a big package of reforms—expanding insurance, improving preventive care, testing new ways to deliver services and squeezing payments to hospitals—will improve America’s fiscal and physical health.

The debate is simplified on the trail. Republicans have attacked Mr Obama’s health policies for years. On Medicare, Democrats can now thrash Mr Romney and Mr Ryan with equal gusto. Republicans say that they will save Medicare and accuse Mr Obama of stealing $716 billion from the programme. Democrats declare that Republicans would “end Medicare as we know it”, forcing beneficiaries to pay for more health costs themselves. What is more, the $716 billion-worth of cuts is mostly for hospitals and insurers; the savings will extend Medicare’s solvency.

Interestingly, attacks on Obamacare seem to be increasingly ineffective. Polls in September showed voters still closely divided over the new health law, but they think Mr Obama is better equipped to improve American health care. On Medicare, in particular, voters favour the president. The issue that doomed Democrats in 2010 might even help them in 2012 after all.

The link of the online version:  http://www.economist.com/node/21563954

Graduates turn away from Wall St

By Tom Braithwaite

The Financial Times, 30^th September 2012

More graduates are opting for careers outside investment banking as the pull of big bonuses is replaced by job insecurity in an industry struggling to adapt to regulatory change.

MBA statistics show a steady decline in the number of graduates taking jobs at investment banks. The Wharton school at the University of Pennsylvania, which bankers consider the “conveyor belt of Wall Street”, sent 16.6 per cent of its class to investment banks in 2011 compared with more than one in four in 2008. The pattern is similar at other large business schools.

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“The number of students going into financial services has remained steady but what’s changed has been the types of roles,” said Maryellen Lamb, director of MBA career management at Wharton. “We’ve seen more opportunity for students in private equity and hedge fund roles.”

Goldman Sachs’ decision to end its two-year graduate training programme caused ripples on university campuses. The bank has decided to hire graduates on an open-ended basis partly due to worries that some were defecting to private equity firms after the two years were up.

“They’re out there on a limb by themselves now,” said one campus recruiter at a rival bank, whose company is considering following the practice. “It’s going to be interesting to see whether it’s positive or negative from a campus recruiting standpoint.”

A senior executive at Morgan Stanley said his bank was committed to its training programme and added that the industry had a duty to train people and not be “feeders like the hedge funds”.

In the UK, the financial services sector cut 9,000 jobs during the past three months as business volumes and profitability fell for the first time in more than three years, the CBI employers’ group and PwC reported. A further 3,000 job cuts are expected.

Banking suffered the deepest job cuts after a slowdown in investment banking revenues and a scandal over the Libor benchmark interest rate.

City of London recruiter Morgan McKinley, which reinforced the uncertain employment outlook, said new vacancies in the UK’s financial market fell 19 per cent last month compared with August and 43 per cent compared with a year ago.

For those who decide to stick with Wall Street, pay packages are down but not to penurious levels. Graduates who land a job at JPMorgan Chase, Goldman or Morgan Stanley can earn $60,000-$70,000 in their first year, with a potential bonus of one to two times that salary, according to recruiters. MBA graduates typically earn about $90,000-$100,000 in salary with a similar proportion of bonus on top.

There is also debate about the effect of broader anti-bank sentiment on students desire to choose a Wall Street career. John Studzinski, head of Blackstone Advisory Partners, who talks regularly to MBA students, said there had been a noticeable turn against a career in finance with more wanting to become entrepreneurs.

The campus recruiter at the rival bank said there was a noticeable spillover from the Occupy Wall Street events last year. “There was a lot of backlash and there were some protesters at some of the campus events,” he said, adding that at his bank there seemed to be as many students as ever willing to work long hours for the privilege and pay of being an investment banker. “We didn’t see a decrease in applicants.”

At Harvard Business School, the proportion of MBA graduates this year moving into investment banking fell from 10 to 7 per cent. But it was not clear that they are all doing something more entrepreneurial. The proportion going into consulting, at 29 per cent, was a nine-year high.

Additional reporting by Brian Groom in London

http://www.ft.com/intl/cms/s/2/fc5b323e-0b11-11e2-8de3-00144feabdc0.html#axzz28FEMtjf5

Fracking Great

Title & author: “FRACKING GREAT” from the print edition

Source & date: The Economist, Jun 2^nd 2012

THE story of America's shale-gas revolution offers hope in hard times. The ground was laid in the late 1990s, when a now-fabled Texan oilman, George Mitchell, developed an affordable way to extract natural gas locked up in shale rock and other geological formations. It involves blasting them with water, sand and chemicals—a technique known as hydraulic fracturing, or “fracking”. America's shale-gas industry has since drilled 20,000 wells, created hundreds of thousands of jobs, directly and indirectly, and provided lots of cheap gas. This is a huge advantage to American industry and a relief to those who fret about American energy security.

The revolution should continue, according to a report published this week by the International Energy Agency (IEA). At current production rates, America has over a century's supply of gas, half of it stored in shale and other “unconventional” formations. It should also spread, to China, Australia, Argentina and Europe. Global gas production could increase by 50% between 2010 and 2035, with unconventional sources supplying two-thirds of the growth (see article).

A number of things could prevent this, however. Many of the factors behind America's gas boom, including liberal regulation of pipelines (which encouraged wildcat exploration by small producers), a well-aimed subsidy and abundant drill-rigs, do not exist elsewhere. Its sheer rapidity is therefore unlikely to be matched. A greater threat stems from environmental protests, especially in some European countries, which could kill the shale-gas industry at birth. France and Bulgaria have banned fracking. Greens in America and Australia (see article) are also rallying against the industry.

The anti-frackers have reasonable grounds for worry. Producing shale gas uses lots of energy and water, and can cause pollution in several ways. One concern is possible contamination of aquifers by methane, fracking fluids or the radioactive gunk they dislodge. This is not known to have happened; but it probably has, where well-shafts passing through aquifers have been poorly sealed.

Another worry is that fracking fluids regurgitated up well-shafts might percolate into groundwater. A graver fear is that large amounts of methane, a powerful greenhouse-gas, could be emitted during the entire process of exploration and production. Some also fret that fracking might induce earthquakes—especially after it was linked to 50 tiny tremors in northern England last year.

But the risks from shale gas can be managed. Properly concreted well-shafts do not leak; regurgitants can be collected and made safe; preventing gas venting and flaring would limit methane emissions to acceptable levels; and the risk of tremors, which commonly occur as a result of conventional oil-and-gas activities, can be contained by careful monitoring. The IEA estimates that such measures would add 7% to the cost of the average shale-gas well. That is a small price to pay for environmental protection and the health of a promising industry.

For as well as posing environmental risks, a gas boom would bring an important environmental benefit. Burning gas emits half as much carbon dioxide as coal; so where gas substitutes for coal, emissions will fall. America's emissions have fallen by 450m tonnes in the past five years, more than any other country's. Ironically, given its far greater effort to tackle climate change, the European Union has seen its emissions rise, partly because of an increase in coal-fired power generation in response to Europe's high gas price.

Cleaner, but not clean enough

By itself, switching to gas will not reduce emissions to anything like the levels required to avoid a high risk of serious climate change. This will take much crunchier policies to boost renewable-energy sources and other clean technologies—starting with a strong price on carbon emissions, through a market-based mechanism or, preferably, a carbon tax. Governments are understandably unwilling to take these steps in straitened times. Yet they should plan to do so; and in the coming years cheap gas could help free cash for more investment in low-carbon technologies. Otherwise the bonanza would be squandered.

http://www.economist.com/node/21556249

Debate Highlights Oct 3rd

Romney takes debate to Obama over economy, health care

By Tom Cohen, CNN

October 4, 2012 -- Updated 0417 GMT (1217 HKT)

 (CNN) -- A forceful Mitt Romney went toe-to-toe with President Barack Obama on the dominant issues for voters, challenging the Democrat's policies on the economy, taxes and health care in the first of three debates ahead of the November election.

In exchanges full of policy proposals, facts and figures, the Republican challenger was more aggressive in the 90-minute encounter in criticizing Obama's record and depicting the president's vision as one of big government.

him out

The president firmly defended his achievements and challenged his rival's prescriptions as unworkable.

Neither candidate scored dramatic blows that will make future highlight reels, and neither veered from campaign themes and policies to date.

But Romney came off as the more energized candidate overall by repeatedly attacking Obama on red-meat issues for Republicans such as health care reform and higher taxes, while the president began with lengthy explanations and only later focused more on what his opponent was saying.

Moderator Jim Lehrer of PBS, at times, tried without success to keep the candidates within time limits for responses, especially Obama, who ended up speaking four minutes longer than Romney.

"A week ago, people were saying this was over. We've got a horse race," said CNN Senior Political Analyst David Gergen, who called the debate Romney's best so far after the 22 the former Massachusetts governor took part in during the GOP primary campaign.

Alex Castellanos, a Republican strategist and CNN contributor, expressed surprise at Romney's strong performance, saying he "rose to the moment" and seemed to benefit from the multiple primary debates.

"It looked like Romney wanted to be there and President Obama didn't want to be there," noted Democratic strategist and CNN contributor James Carville. "The president didn't bring his 'A' game."

A CNN/ORC International poll of 430 people who watched the debate showed 67% thought Romney won, compared to 25% for Obama.

Romney's strongest moments came in repeating his frequent criticism of Obama's record, saying the nation's high unemployment and sluggish economic recovery showed the president's policies haven't worked.

"There's no question in my mind if the president is re-elected, you'll continue to see a middle-class squeeze," Romney said, adding that another term for Obama also will mean the 2010 Affordable Care Act, known as Obamacare, "will be fully installed."

At another point, he noted how $90 billion spent on programs and policies to develop alternative energy sources could have been devoted to hiring teachers or other needs that would bring down unemployment.

Obama argued that his policies were working to bring America back from the financial and economic crisis he inherited, and that Romney refused to divulge specifics about his proposed tax plans and replacements for the health care reform act and Wall Street reform act that the Republican has pledged to repeal.

"At some point, the American people have to ask themselves if the reason that Governor Romney is keeping all these plans secret is because they're too good," Obama said.

What questions went unanswered? Share your thoughts with CNN iReport

On taxes, Obama said Romney's plan of tax cuts for the rich had failed before and would fail again now.

Describing the Romney tax plan as a $5 trillion cut, Obama echoed a line from former President Bill Clinton by saying the math doesn't add up without increasing tax revenue, which Romney rejects

"I think math, common sense and our history shows us that's not a recipe for job growth," Obama said.

Romney, however, said Obama still pushed the same policies as when he took office four years earlier, and those steps had failed to bring down high unemployment and get the economy surging again.

He rejected Obama's characterization of his tax plan, saying it won't add to the deficit, and criticized the president's call for allowing tax rates on income over $250,000 for families and $200,000 for individuals to return to the higher rates of the 1990s.

"The National Federation for Independent Businesses has said that will cost 700,000 jobs. I don't want to cost jobs," Romney said.

Obama responded that the revenue issue is "a major difference" he has with Romney, noting the former Massachusetts governor rejected the idea of cutting $10 in spending for every $1 in new revenue during the Republican primary campaign.

Complete coverage: CNN's election center

In his strongest line of the night, Obama said Romney lacked the important leadership quality of being able to say "no" when necessary.

"I've got to tell you, Governor Romney, when it comes to his own party during the course of this campaign, has not displayed that willingness to say no to some of the more extreme parts of his party," Obama said in reference to his challenger's swing to the right during the primaries to appeal to the GOP's conservative base.

Romney repeatedly went after Obama on the health care reform bill, at one point asking why the president focused so strongly on a measure that passed with no Republican support instead of devoting more attention to the high unemployment and creaking economy.

With polls narrowing less than five weeks before Election Day, Obama and Romney launched a new phase in a bitter race dominated so far by negative advertising as both camps try to frame the election to their advantage.

Whether it matters is itself a topic of debate. According to an analysis by Gallup, televised debates have affected the outcome of only two elections in the past half century -- Nixon-Kennedy in 1960 and Bush-Gore in 2000.

Debates by the numbers

Both candidates had their wives in the audience at the University of Denver in Colorado for the debate taking place on the 20th wedding anniversary of the president and first lady Michelle Obama.

Obama opened the debate by promising his wife they wouldn't be celebrating their anniversary next year in front of 40 million people, and Romney joked that Obama found the most romantic place possible for the anniversary.

Analysts say Obama needed a presidential performance rather than fireworks or haymakers in order to maintain and build on a narrow edge in polls that indicate a very close election on November 6.

Romney, who has been unable to catch the president in most of the polls to date, sought to generate enthusiasm for a change in the White House as the nation wrestles with seemingly chronic economic problems such as mounting federal deficits and debt.

5 things to watch in tonight's debate

Lehrer, moderating his 12th presidential debate, planned to break up the debate into 15-minute segments focusing on different aspects of the economy and other domestic issues. However, the exchanges by the candidates scrambled the format, with the opening discussion on taxes lasting more than 20 minutes.

Debate time: The candidates' version of the two-minute drill

The two candidates shook hands and shared a laugh after being introduced by Lehrer as the audience applauded before being asked to remain silent for the remainder of the debate. At one point, a loud bang off-stage seemed to surprise Romney in mid-sentence, and Obama looked behind him to try to see what happened.

The other presidential debates will occur on October 16 in New York and October 22 in Florida. Vice President Joe Biden and Rep. Paul Ryan of Wisconsin, Romney's running mate, will debate on October 11 in Kentucky.

Where they stand: The candidates and their positions