Euro Zone

Flat euro yield curve is unused windfall

26 Mar 2015

ECB polices have almost eliminated the extra yield that usually comes with longer-term debt. Euro zone member governments gain from cheaper financing. They could do more. Additional bond-financed investment would stimulate the economy cheaply. That probably won’t happen. 

BayernLB’s rekindled growth drive may backfire

25 Mar 2015

Germany’s No. 2 Landesbank is still haunted by the past, as shown by a 1.2 bln euro impairment on loans to Austrian lender Heta. BayernLB also has yet to repay 2.3 bln euros of state aid. With much cleaning up still to do, plans for national growth look too ambitious.

Spain’s ruling party in regional setback

23 Mar 2015

Andalusia’s socialist party maintained its hold on Spain’s largest region against insurgent Podemos, the new radical party. But it failed to secure a majority and may have to rely on centrist upstart Ciudadanos to pass policies. Spain’s ruling conservatives are the clear losers.

Tronchetti and China pitch Pirelli price cleverly

23 Mar 2015

China National Chemical Corporation, aligned with Chairman Marco Tronchetti Provera, wants to buy and delist Pirelli. The 15 euros a share offer isn’t generous, but the market price is only slightly higher and the bidders aren’t forced buyers. Holdouts may not get much more.

Poll rout could end Hollande’s French reform push

23 Mar 2015

The defeat of the president’s Socialist party and the strong showing of far-right National Front will weaken an already tentative commitment to economic change. Hollande may hope that a euro zone recovery and ECB help will pull France out of the doldrums. That gambit is risky.

ECB torn between two roles in Greek bank support

20 Mar 2015

The central bank’s monetary policy wing has delayed a plan by its supervisory arm to legally stop Greek banks increasing their stocks of illiquid assets. The stability-searching supervisors have the right idea. But the policy group has an even higher political responsibility. 

Euro merits more appreciation

16 Mar 2015

Diverging monetary policy has pushed the single currency down 13 percent against the dollar in 2015. But trade balances, inflation rates and fiscal positions all point to euro strength, not weakness. If euro zone GDP keeps picking up, the market’s focus may change.

Euro zone recovery may dampen reform drive

13 Mar 2015

Governments are slowing reform across the euro zone. Brighter economic prospects and loose monetary policy seem to lessen the urgency for tough political choices. Yet the opposite is true: better times should make reform easier and less costly.

U.S. issuers will find limit to cheap euro funding

9 Mar 2015

Berkshire Hathaway and Coca-Cola are among American companies saving money by borrowing in euros to take advantage of lower costs. But the “Reverse Yankee” bandwagon is filling up. The cost of swapping euros into dollars is rising. Arbitrages don’t last forever.

Hugo Dixon: Greece has no good Plan Bs

9 Mar 2015

Defaulting on its debts and quitting the euro would be a disaster. So would imposing capital controls, while defaulting and staying in the single currency. Athens has no rational course of action apart from working with its creditors to vigorously reform its economy.

Euro’s path towards dollar parity may be winding

6 Mar 2015

The drop below $1.10 can extend further. But ECB bond-buying expectations have probably hurt more than the programme will itself. Meanwhile, the dollar is increasingly at the mercy of U.S. data. The single currency could take longer to shed the next 10 cents than the last.

BPI twist makes breakup an option

6 Mar 2015

The Portuguese bank says it’s worth 2.26 euros a share to Caixa, way above its suitor’s pitch. That’s a punchy 40 pct premium to forward book value. BPI was recently trading at a 50 pct discount. The bluster makes a deal for the group harder, but not a sale of its Angola assets.

EU bonus policy becomes a comedy of errors

5 Mar 2015

Capping variable compensation makes scant sense for bankers; it makes even less sense for asset managers. Doing so, as European authorities are now proposing, will do little for stability but push up compliance costs. The final irony is EU lawmakers didn’t even want it. 

ECB’s clearing house defeat is good for Europe

4 Mar 2015

The European Court of Justice has nixed the central bank’s efforts to locate central counterparties in the euro zone. The ECB’s desire to closely monitor clearing is understandable. But undermining the EU single market would have been a practical and political mistake.  

Europe’s rebound poses new questions

4 Mar 2015

Jobs, growth, morale: the Old Continent is perking up. Policymakers and investors need to adapt. The threat of deflation may recede. Central bank bond-buying may prove unnecessary. And established politicians could regain ground. Yet investors might still cling to bonds.

Caixabank faces bigger price tag to secure BPI

3 Mar 2015

The Spanish bank has already bid 1.1 bln euros for its Portuguese peer, but fellow BPI investor Isabel dos Santos wants a merger with local rival BCP. That would create competition issues. But dos Santos’ blocking stake suggests Caixa may have to pay up – if it can afford it.

Greece’s U-turns have only just begun

2 Mar 2015

Last week the new government asked for an extension of the old bailout programme, despite pledging to rip it up. If Greece is to avoid going bust, it will have to make three more somersaults in coming months. The faster it does them the better.

Europe can afford to cut Greece some slack

27 Feb 2015

Athens wants to slice its primary fiscal surplus to one-third of the level agreed in its current bailout programme. That might leave debt too high for comfort – yet there is room for a compromise that Greece’s euro zone partners could afford.

Disinflation is steelier than German metalworkers

26 Feb 2015

A big pay deal in the sector is a small positive sign. Higher wages are the only sure way to reverse a global trend of lower prices. But it’s not enough. Germany’s ability to issue five-year debt with a negative yield shows the downward trend is stronger, nationally and globally.

Reforms helping Greece might hurt Syriza

24 Feb 2015

The reforms agreed by Athens are both ambitious and fuzzy. They tick some of the favoured boxes of hawks in Germany and elsewhere. But Syriza’s election pledges are in tatters. Europe may be better off - but the domestic situation in Greece has become more volatile.