Euro Zone

Dutch election exposes fragility of mainstream

13 Mar 2017

This week’s vote is a test of Europe’s anti-elite mood. But the focus on right-wing firebrand Geert Wilders ignores a fragmentation in support for traditional parties. That is an obstacle to forming a stable government in the Netherlands - and for decision-making in the EU.

Europe’s “whatever it takes” becomes “what next?”

2 Feb 2017

Bond yields are rising as the end of money-printing looms. The return of a crisis like the one that prompted ECB President Mario Draghi's pledge to save the euro zone is unlikely. Yet as investors focus on political risk and debt, governments will face tougher choices.

Euro zone revival carries sting in tail

4 Jan 2017

After years in the doldrums, increased business activity and slightly rising prices are good news for the single currency area. Besides, inflation is still a long way below the European Central Bank target. But a sustained pickup would expose the euro zone's two-speed recovery.

More EU banks will be bailed out rather than in

4 Jan 2017

Monte dei Paschi's 9 bln euro recap using public funds seems at odds with reforms making creditors pay. Various loopholes make it just about kosher. Yet these fudges - plus the difficulty of nailing down when a bank is truly bust - imply more states will pay for lender follies.

Europe’s best antidote to populism is unpopularism

28 Dec 2016

Parties that promised to take on the elite had a roaring 2016. Even so, the withering of the moderate centre isn’t inevitable. In Greece the pendulum is swinging away from radical government. Liberals with sound economic policies can win – if they’re willing to make enemies.

Greece turns from Sisyphus into Hercules

6 Dec 2016

Euro zone lenders agreed to rejig some of its debt, which adds to the likelihood that future financial support isn’t just good money thrown after bad. Greece is no longer pushing a rock up a hill, but some pretty hefty tasks still stand between it and economic recovery.

Portugal delays day of reckoning for another year

19 Oct 2016

Further tax increases mean the troubled country should avoid a debt downgrade, keeping its bonds eligible for ECB money-printing. Yet Lisbon's high debt load and weak growth mean the risk of a restructuring hasn't gone away. It could kick in after next year's German elections.

Bond scarcity is least of Mario Draghi’s problems

7 Sep 2016

A shortage of eligible bonds may force the ECB boss to tweak self-imposed limits on asset purchases. The trick is to do so without upsetting sticklers for rules. It’s a minor test compared with how hard he’s finding it to push up inflation despite spending more than 1 trln euros.

SAF-Holland lacks firepower in truck bidding war

4 Aug 2016

The truck parts maker’s $490 million offer for Swedish peer Haldex was trumped by Germany’s ZF Friedrichshafen, which offered just 6 percent more. SAF is already stretching itself and will struggle to outbid a much bigger rival that has the target’s support.

EU’s Italy bailout more political than prudential

30 Jun 2016

The EU has approved Italy's request for funding guarantees to avoid a bank collapse. They won't be used, and don't fill banks' capital holes. But the aid may help Prime Minister Matteo Renzi show he can do deals in Brussels – thus boosting his chances in October's vital referendum.

Kuka shows bargaining power of China’s M&A targets

29 Jun 2016

Foreign companies with prized technology can demand much more than a fat premium from Chinese bidders. That is the message from Midea's extensive binding agreement to keep the robotics maker's headquarters, factories and jobs in Germany for the next seven and a half years.

Euro zone cracks show in QE plaster

27 Apr 2016

The ECB’s money printing has squashed interest rates for countries and companies, even in the south. Yet the difference in borrowing costs between riskier sovereigns and Germany is rising. Bond-buying has not made investors insensitive to risk. It may not prevent default either.

Time for banks to go cold turkey on sovereign fix

18 Apr 2016

Europe is considering tightening rules that make it easy for lenders to own government debt. Banks addicted to sovereign punts would suffer, and governments lose wiggle room. Yet reform could hasten euro area integration, while ECB bond-buying makes it a less scary prospect.

Schaeuble plays risky political games with ECB

13 Apr 2016

Low European rates fuel support for the far right, Germany’s finance minister says. Such sniping jars with Germany’s usual passion for central bank independence. Wolfgang Schaeuble may be aiming to attract disgruntled voters rather than slam the ECB. His strategy could backfire.

Draghi offers gift euro zone doesn’t need

11 Mar 2016

The ECB chief will soon buy corporate bonds. This should make borrowing cheaper for banks and small companies. But bond yields are already low and companies may use Mario Draghi’s largesse for M&A and share buybacks rather than useful investment. A small programme may be best.

ECB a month too late for euro zone shock and awe

8 Mar 2016

The central bank needs to boost the bloc’s flagging economy, but all options – from lowering rates to buying more bonds – are controversial. Acquiring more debt from risky countries is the most likely step to work. But with markets less jittery, the time to act may have passed. 

Portugal squall maps new territory in euro crisis

24 Feb 2016

The state’s left-wing government has reassured bond markets by passing an emergency budget and buying back debt. Yet the recent spike in bond yields shows Portugal remains vulnerable to high debt and low growth. And it shows that the calm from the ECB’s bond-buying can be broken.

Italy’s new bank giants hide elusive value

22 Feb 2016

A merger between Banco Popolare and BPM will begin a wave of dealmaking among Rome’s mutuals. It could create Italy’s third-biggest bank and add over 40 percent to the companies’ value. While cost cutting may be hard and merging disruptive, consolidation is long overdue. 

Bank valuations look unkind, but not irrational

15 Feb 2016

The one-fifth fall in European lenders’ share prices since New Year might make it seem the sector is hugely undervalued or about to implode. Conventional valuation metrics imply something more prosaic. Assume lower-for-longer rates hit returns, and low multiples may be merited.

Portugal’s crazy bail-in leaves CDS gurus stumped

15 Jan 2016

The International Swaps and Derivatives Association can’t decide if the bail-in of Novo Banco should trigger credit swaps. A “No” would undermine new contracts designed for bank resolution. But a “Yes” would be a bad precedent. It muddies the picture for future resolutions.