After keeping a lower profile as its economy contracted, the actual sick man of Europe struck “la bella figura” at the WEF annual meeting. The youthful Renzi government’s disruptive style put a spring in the step of Italy’s business leaders. Real reform, however, is only beginning.
The Spanish telco will sell its O2 arm to Hutchison Whampoa for up to 10.3 bln pounds, or a solid 7.3 times 2015 EBITDA. That’s good for the debt-laden seller, left out when BT opted to buy the bigger EE instead. A stronger Hutchison and a bigger BT will shake up UK telecoms.
The left-wing coalition may win the elections in Greece on Jan. 25. Its plans for debt relief and the end of austerity would put Athens on a collision course with its euro zone lenders. No one has interest in a messy “Grexit” - and the risks of a mess are fairly priced.
The collapsing oil price turns the German engineer’s dash for shale into a costly blunder. Its $7.6 bln September bid for U.S. oilfield kit maker Dresser-Rand will stain CEO Joe Kaeser’s reputation. With shares of Dresser’s peers clobbered, a major impairment is looming.
Political and financial leaders attending the World Economic Forum’s 45th annual meeting are buzzing about rampant inequality, the ECB’s quantitative easing and Russia’s conflict with Ukraine. All that’s missing from the Alpine retreat are the three provocateurs of the debates.
UBS is to join Credit Suisse in paying bankers partly in high-risk bonds that implode if capital ratios weaken. Using debt is a spur to longer-term thinking, and is a check on recklessness. Those who still only pay in cash and stock – like Deutsche Bank – should follow suit.
Between Mario Draghi’s bond-buying plan and the Bank of Japan’s ongoing splurge, central banks are pumping out $1.5 trillion a year in cheap money. The surprise should boost emerging markets wary of rising rates. But fading growth and falling prices will overwhelm the stimulus.