EMEA

Wall Street dealmakers get trampled by PIIGS

10 Oct 2011

The fear and uncertainty over Europe has sent the cost of U.S. credit skyward. By one closely watched gauge, junk bonds are yielding almost five percentage points more than they reasonably should. Given the bureaucratic dithering, bankers and buyout barons may be idle for a while.

Poland must cut now to cope with Crisis II

10 Oct 2011

The government’s re-election reflects Poland’s success in handling the 2008 crisis. But the euro zone sequel will be harder. Poland got by last time by letting its deficit and debt rise. Now it must cut them. The zloty, Swiss mortgages and foreign-owned banks are vulnerabilities.

Sarkozy’s short-termism driven by triple-A fears

10 Oct 2011

The French president’s stances on restructuring Dexia and recapitalising euro zone banks are driven by the obsessive fear of losing the nation’s top rating. The risk is that this might precipitate short-term fixes, which would make a downgrade even more likely.

Dexia rescue riskier than it looks for Belgium

10 Oct 2011

After a weekend of wrangling, Belgium is to nationalise the domestic arm of the Franco-Belgian bank. The direct cost will only be about 1 pct of GDP. But lots of loose ends remain around Dexia’s funding guarantees and solvency. The true cost may end up being a lot higher.

Bail-ins can’t always be postponed to next crisis

10 Oct 2011

After the 2008 crisis, regulators promised that bondholders would suffer haircuts when banks next needed recaps. But governments are so scared of contagion that EU taxpayers will have to pick up the tab again, witness Dexia, unless some key protections are put in place rapidly.

BAA sale removes yoke from Ferrovial’s neck

10 Oct 2011

The Spanish construction firm has sold a small stake in airport group BAA at a big price. The value put on BAA by the 325 mln euro deal is more than double consensus. And giving up majority ownership will deconsolidate 14 bln euros of debt. At last, BAA is no longer a drag.

UK should participate in EU bank recap exercise

7 Oct 2011

Britain may wish to wriggle out of bolstering its lenders, on the grounds that the euro crisis is on the other side of the English Channel. But there are good reasons for it to play ball. RBS is top of the list for a mega injection. Barclays may need one too.

Spain’s next leader keeps investors guessing

7 Oct 2011

The country’s probable next PM talks the right talk in focusing on jobs and the economy. His party, which may wield unprecedented power, seems to understand how serious the crisis is. But it’s still unclear whether they will opt for a swift and radical reform agenda once in power.

Trouble knocks for Korea’s indebted households

7 Oct 2011

Seoul has resumed crisis meetings over Europe’s debt drama. Banks and the government itself look sturdy enough, but households are deep in debt, and the foreign inflows that kept loans cheap are fleeing. Korea still has strong finances, but it may need them if defaults spike.

Good aim needed for ECB’s covered bond sortie

7 Oct 2011

The euro zone central bank will buy another 40 bln euros of covered bonds. The amount looks pitiful, far from enough to relieve the sovereign crisis or banks’ dire funding problems. But if the ECB focuses on Spanish and Italian banks, the programme may not be a total waste of time.

Prisa investors take one for the team

7 Oct 2011

The Spanish media group’s core shareholders have injected 150 million euros of capital after exercising warrants at a loss. Even this act of charity doesn’t solve Prisa’s debt problem. But it might sway Prisa’s lenders to be more flexible on the repayment of 3.2 bln euros of borrowings.

ECB tries to wriggle out of euro vortex

6 Oct 2011

Modest help for banks and stable rates will not free the central bank from the forces buffeting it: euro zone government inadequacies, market excesses and legal pressure. But the ECB is doing what it can in the group effort to muddle through the crisis. It might even work.

BoE’s QE2 is uncertain lifeboat in euro storm

6 Oct 2011

The Bank of England’s second round of quantitative easing comes sooner and in greater size than expected. The pre-emptive move is brave but may not save the UK from the euro’s turbulence. Gilt yields and sterling will fall but fiscal policy may ultimately need to shift too.

Credible EU bank tests need a higher pass mark

6 Oct 2011

Regulators are looking at ways to recapitalise Europe’s lenders. One quick fix is to re-run July’s stress tests with tougher assumptions. But imposing haircuts on sovereign debt will not be enough. Authorities should also raise the capital hurdle banks need to clear.

IMF joins euro zone in gaffe hell

6 Oct 2011

The head of the International Monetary Fund’s European department had to retract a suggestion that the IMF could participate in euro zone bond buying programmes. After divided governments and a split ECB, markets may have to get used to a bumbling IMF.

How Italy could cut its yields to 3.7 percent

6 Oct 2011

First-loss insurance from the euro zone’s bailout fund should do the trick, according to Breakingviews calculations. Even after adding an insurance fee, Rome’s all-in cost would be around 5 percent.

Dexia’s rescuers need to answer five questions

6 Oct 2011

The Franco-Belgian bank is facing dismemberment. Its French and Belgian state shareholders want to largely keep those operations in their own countries, sell non-core assets and wind down everything else. But to do so they will need to find answers to five thorny problems.

Sovereign funds could win big with M&A lending

6 Oct 2011

Abu Dhabi has money and appears willing to use it to grease the wheels of big deals - first Hynix Semiconductor and now EMI. As Warren Buffett has shown, it can be very profitable to lend when other won’t - as long as there are generous rewards for risk-taking in fearful markets.

Hungary needs fair way to share mortgage pain

6 Oct 2011

A new law gives relief to Hungarian borrowers who took out mortgages in foreign currencies. The banks are outraged, but they should suffer for their reckless selling. Still, more burden-sharing is called for. After all, regulators were negligent and borrowers unwise.

Essar’s better prepared for a second UK IPO

6 Oct 2011

India’s Essar is considering a UK listing for its infrastructure assets. With one London IPO under its belt, and lessons on governance from that experience still fresh, it should be better prepared this time around. Now there’s the small issue of timing.