European Union

Hugo Dixon: UK Tories mishandle EU relationship

23 Jan 2014

A year after David Cameron promised a referendum on EU membership, the British PM and his party are alienating potential allies across the Channel. He needs to pitch reforms that benefit the whole bloc, not just pander to eurosceptics. Otherwise an “Out” vote looks more likely.

Ambitions exceed delivery in Europe market reform

15 Jan 2014

The aims of the revamp of regional market trading rules are laudable: more transparency and greater investor protection. Some of the changes are good. Others, notably caps on off-exchange share trading, may prove heavy-handed. But it’s not too late to refine the implementation.

UK election clouds have gilt-edged lining

10 Jan 2014

Politicians are already jostling before next year’s general election. On current form, the left-leaning opposition could oust the governing coalition. Any knee-jerk investor dismay may be tempered given the Labour Party is likely to cement Britain’s place in the European Union. 

Europe could live with Italian deficit heresy

7 Jan 2014

Matteo Renzi, Italy’s likely next leader, has suggested Rome could break euro zone fiscal rules. Higher deficits could be good economics and shrewd politics. But to keep markets and euro zone peers from panic, he has to offer lower public spending and faster privatisations.

Europe risks Volcker-Vickers banking fudge

7 Jan 2014

The latest thinking in the European Commission is for an outright ban on prop trading, emulating America’s Volcker rule, with ring-fencing for other trading, imitating the UK’s Vickers proposals. The compromise has the single market in mind. But it will need careful calibration.

Europe will court shutdown with new parliament

27 Dec 2013

Eurosceptics and fringe parties will make big gains in next year’s European Parliament elections. A U.S.-style deadlock is unlikely, but mainstream parties will have to compromise more, and passing laws will be harder. It will look more like the old-style Italian model.

Europe holds a key to Turkey’s crisis

24 Dec 2013

Prime Minister Erdogan has upped the conspiracy rhetoric to criticise a corruption probe engulfing government officials. Investors are edgy. The intra-government issues are domestic, but without a clear prospect of joining the EU, Turkey has less incentive to liberalise.

The wrongs and rights of the euro banking union

19 Dec 2013

The EU governments’ agreement on how to resolve failing lenders looks complex and hard to implement, and it could worsen the fragmentation of euro zone banks. But it is a start. And the final compromise lowers the political barriers to fixing the southern countries’ lending woes. 

Ukraine’s Russian lifeline means European pain

18 Dec 2013

Vladimir Putin has agreed to buy $15 billion worth of Ukrainian bonds and to sell gas to Kiev at a discount. The deal gives relief to Russia’s troubled neighbour but costs Moscow little and buys valuable influence. Pro-EU demonstrators in Kiev and other cites won’t go home soon.

Shale energy deficit will hit Europe hard

17 Dec 2013

American companies have a big advantage over European counterparts: abundant, cheap gas. Fracking is more difficult in Europe and requires a step-change in public perception. Cheaper energy could provide the old continent with the fillip it needs. But it’s a pipedream. 

Russian rock worse for Ukraine than EU hard place

12 Dec 2013

The Ukrainian president rejected a deal with the EU for fear harsh conditions would deprive him of victory in the 2015 elections. With no sign of an end to demonstrations against his turn to Russia, his days in power are numbered. He’d better stick with Europe.

EU hits bank creditors and hopes for the best

12 Dec 2013

European authorities have agreed to force losses on creditors of failed banks from 2016, in order to spare taxpayers the full cost of bailouts. It gives resolution authorities useful flexibility. The new regime isn’t without risks. At least banks and markets now know the rules.

Why the UK is growing and the euro zone isn’t

11 Dec 2013

They both have austerity in varying degrees but UK growth is now pushing ahead of the euro zone’s. The UK’s flexible labour market and weakened pound are advantages. A Germanically strong euro weighs heavily on a euro zone where monetary policy can’t solve the profound problems. 

Quality, not capacity, is key for European IPOs

10 Dec 2013

Europe’s new issues market is healthy for the first time in years. Investors have spare cash, the economic gloom is lifting and recent deals have traded up. That bodes well. But quality control is becoming paramount. A few shoddy or over-priced debuts could change everything.

Libor losers become EU cartel winners

4 Dec 2013

Barclays and UBS escaped $930 mln and $3.4 bln of trust-busting fines for exposing Libor cartels. It’s compensation for taking the reputational hit of settling early with other regulators. When the saga is done, the balance of financial pain may be in the whistleblowers’ favour.

Cameron’s fear of migrants will harm UK economy

27 Nov 2013

The British premier’s restrictions on visitors from Eastern Europe betray a fear of losing votes to the UK Independence Party. But clamping down on immigration is leading to policy inconsistency. It harms British business and risks reducing earnings from tourism and education.

Europe’s pay populism makes a useful distinction

27 Nov 2013

Swiss voters rejected broad salary limits for top executives. Yet the Dutch are plotting a banker bonus cap that makes existing EU curbs seem generous. The discrepancy is understandable. While pay shouldn’t be regulated, the taxpayer-rescued finance industry isn’t showing much restraint.

Settling is hard to refuse in EU rates probes

7 Nov 2013

Brussels is set to levy big antitrust fines on lenders it suspects of rigging interbank rates. Some banks will settle. Others think they have a stronger case, but face a tricky dilemma: buy peace now, or risk the ire of a powerful regulator and a potentially larger fine later. 

Mexico finally getting full benefit from NAFTA

21 Oct 2013

Investment in Mexican auto plants is surging, as is its share of the North American car market. Like Eastern Europe, the country is becoming a nexus of manufacturing for its richer neighbors’ markets. This, together with policy reforms, makes Mexico Latam’s brightest prospect.

Hugo Dixon: Brexit process would be messy

21 Oct 2013

The UK wouldn’t just be harmed if it lost full access to the EU’s single market after an “Out” vote in a referendum. The divorce process would cause further damage because it wouldn’t be clear what the people actually wanted and negotiations with the EU could turn acrimonious.