EMEA

Greek default wouldn’t mean quitting euro

12 Sep 2011

A default is both likely and desirable, provided it is orderly. Bringing back the Drachma is neither. Not only would it be bad for Greece, but it would signal a major row within the euro zone, and trigger a more virulent phase of its debt crisis.

French bank meltdown begs for government action

12 Sep 2011

SocGen’s plan to dump assets and staff to soothe investors’ concerns couldn’t prevent a meltdown of French banking shares. The government says talk of nationalisation is “premature”. But with another downgrade looming, it might have to step in to avoid a panic.

UK bank commission sticks to its guns

12 Sep 2011

Forcing lenders to ring-fence crucial operations and hold more capital should make the system safer - at a hefty cost to the industry. For banks, delaying implementation to 2019 is some consolation but sorting out the details of the new rules could leave them in limbo for years.

Stark resignation won’t alter ECB policy

9 Sep 2011

The unexpected departure of its chief economist is only the latest sign of ECB divisions on the debt crisis. His opposition to bond buying was already public. Stark’s decision will accelerate the changing of the guard in Frankfurt, but it won’t affect the ECB’s course.

Four crucial calls for the shape of UK banks

9 Sep 2011

Britain’s banking commission is expected to recommend “ring-fencing” vital operations in its final report. The current focus is on the timing of the changes. But the width, height and flexibility of the fence will be equally critical to deciding the industry’s future structure.

French banks’ funding flames fuelled by Basel

9 Sep 2011

SocGen and BNP are telling investors their funding is secure, despite the pull-back by U.S. money market funds. But tough Basel liquidity requirements would force them to issue stacks of pricier debt, shrinking returns. Unless the rules are relaxed, the banks’ woes will persist.

Interest in Spanish airports sale is deceptive

9 Sep 2011

The $7.5 bln privatisation of Madrid and Barcelona airports has attracted considerable attention. Six groups are lining up to bid for each. But the timetable is tight, the concessions short, and the prices steep. An auction will struggle to get off the ground.

Qatar can afford more $8 billion handouts

9 Sep 2011

Nationals employed in the public sector will get a salary rise of up to 120 pct. The inflation risk is limited - Qataris make up a fraction of the population. Handouts are unsustainable in many parts of the region, but Qatar can afford to maintain its peculiar “social-contract”.

Dexia sued for rare thing it can’t be blamed

8 Sep 2011

The Belgian-French bank is being sued by some French local authorities after loans pegged to the strong Swiss franc soared in cost. Dexia may escape the blame for what looks a case of caveat borrower. Its real problems are its messy funding, and sovereign debt exposure.

Only Drachmaization can save Greece and euro

8 Sep 2011

Regional comparisons suggest Greek living standards rose far beyond productivity, making austerity inadequate to rebalance the economy. Drachmaization would allow the market to set wage levels, induce other weak countries to reform without EU prodding and thus solidify the euro.

Ukraine-Russia gas spat likely to cost Gazprom

8 Sep 2011

Autumn is coming and Russia and Ukraine are again squabbling over gas. Neither has an interest in a rerun of the 2006 and 2008 supply disruptions. The likely outcome is that Russia lowers prices in return for political concessions. State-backed Gazprom would be the real loser.

Tony Hayward joins risky Kurdish oil rush

7 Sep 2011

The ex-BP boss’s M&A vehicle has landed its first target, a $4 bln merger with Kurdistan’s top oil producer. The deal is part regulatory arbitrage, and part a bet that Iraqi politics will turn good for oil firms. On conventional metrics, it’s a bargain. But it brings major risks.

German high court spares euro zone a major crisis

7 Sep 2011

The Karlsruhe constitutional court has thrown out complaints against the region’s bailout facility, and its ruling shouldn’t overly hurt the fund’s flexibility. Disaster may have been averted on the German front, but the euro crisis is still looking for a long-term solution.

Weakening UK growth creates tax cut Catch-22

7 Sep 2011

The UK chancellor is toning down hopes for UK growth. Tax cuts, as suggested by some economists, would help growth and are desirable. But the deficit reduction plan looks behind the curve, making it hard for Osborne to justify cuts. Faster spending cuts would have helped.

Abu Dhabi’s Mubadala humbled in Carlyle IPO

7 Sep 2011

The Abu Dhabi fund may have lost up to half the value of its $1.85 bln signature investment in the U.S. private equity firm. Mubadala looks to have clawed back some of its losses on its original 2007 punt in 2010, but it’s unlikely to be enough to spare the emirate’s blushes.

UK bank upstart seeks two-step path to Lloyds deal

6 Sep 2011

NBNK is mulling an offer for the UK assets of National Australia Bank. A successful deal could give the bid vehicle an advantage in acquiring the branches Lloyds is being forced to sell. But in tough markets, convincing investors to cough up the cash looks a challenge.

U.S. mortgage suits inflict super-damages on banks

6 Sep 2011

The latest U.S. regulatory assault for mis-selling mortgage securities has dragged down bank stocks. But damages previously sought from UBS, and the performance of the underlying loans, suggest the impact of this particular banking nasty is now more than priced in.

Swiss franc defence will work – at a price

6 Sep 2011

If the Swiss National Bank keeps its promise to buy “unlimited quantities” of foreign currency, its effort to peg the franc should succeed. Given the euro’s big risks, the central bank may lose money again. But the gamble is an attempt to prevent recession and deflation.

Nigeria deals the dollar another blow

6 Sep 2011

The oil-rich African state will invest about $3 billion of its foreign reserves into China’s currency. High inflation and closed markets make the yuan a poor choice. Nigeria’s goal may be to secure investment flows: still, it is another sign of the dollar’s weakening influence.

Libya should adopt oil-wealth transparency

5 Sep 2011

The country’s new leaders must decide how to manage Libya’s oil wealth after funding reconstruction. Opaque handouts might be a tempting way to win tribal loyalties. But it would be better to copy oil-rich Norway and create a transparent and accountable sovereign fund.