Riposte: Portuguese default shouldn’t be taboo 24 Mar 2011 The euro zone should make clear that there will be no bailout until Lisbon gets its act together. If the country can't do that in time and then defaults, the fallout should be containable and the lesson to Portugal and others would be powerful.
Canada’s political drama no match for Portugal’s 24 Mar 2011 Both nations' minority governments face snap elections after failing to secure support for budgets. Though Canada's economy is about five times as large, all eyes are on tiny Portugal. That's not surprising, but it's a reminder of how fiscal reserve can be a quiet defense.
Europe must stiffen spine against protectionism 23 Mar 2011 More than 50 years after Europe became a free trade zone, Italy is seeking to block foreign takeovers in retaliation for French protectionism. The episode highlights longstanding weaknesses: free crossborder M&A needs faster, more agile policing by Brussels.
U.S. bank watchdogs face leadership vacuum 23 Mar 2011 Just as the critical rulewriting and implementation of 2,000plus pages of financial reform is taking place, key bank regulators, including the FDIC and OCC, are without settled chieftains. Add vacancies at the housing and consumer finance agencies and it could spell trouble.
U.S. tax holiday idea not so different from QE2 23 Mar 2011 The White House is right that an amnesty for firms repatriating profit might distract from broader reform. But its economic objection is confused. Even if the cash goes to shareholders, that adds to the wealth effect hoped for from the Fed's bondbuying, which it supports.
Fed’s $82 bln windfall reveals policy dilemma 23 Mar 2011 That's how much the U.S. central bank made on its $2.4 trln book of assets in 2010 partly thanks to the carry trade created by its own ultralow interest rates. But with the next move inevitably upward, the Fed could find that fighting inflation dents its balance sheet.
Note to Australia: exchange nationalism is foolish 23 Mar 2011 Blocking Singapore's bid for the Sydney bourse on national grounds makes little sense. Stock exchanges have few employees, and as long as regulators have teeth, foreign ownership brings few risks. Politicians want thriving financial hubs. Protectionism would achieve the opposite.
UK budget deserves 6 out of 10 23 Mar 2011 George Osborne rightly emphasised deregulation and lower corporate taxes to revive Britain's stillsluggish economy. But populist fiddles, such as raiding oil companies to help cap fuel costs, tarnished the Chancellor's message. The benefits to growth will not register for years.
Japan quake reveals flaw in global supply chain 23 Mar 2011 Delays among carmakers expose a troubling defect in global manufacturing. Japan's auto giants perfected the distribution of production across a web of suppliers. Global sourcing and realtime delivery have made industry leaner, but more vulnerable to the loss of a single link.
Blocked BofA divi at least shows Fed using teeth 23 Mar 2011 The regulator was right to squash the bank's payout plan. BofA lost money last year, remains deep in recovery mode and has a history of paying too much though new boss Moynihan pledges prudence. However, the Fed should still reveal more about its rationale.
Bahrain takes aim at business-friendly credentials 23 Mar 2011 The government has revoked the licence of a telecom firm with links to the opposition, adding to the woes facing businesses on the island. The violent crackdown on protesters and sustained blows to its financial centre could drive away its most important international residents.
U.S. fiscal outlook may hinge on GOP tax fight 22 Mar 2011 Arguably since 1990 and certainly of late, the party has rejected any hint of higher taxes. But America's yawning budget shortfall is cracking that political unity. The outcome of this brewing Republican civil war may decide whether a fiscal fix is possible any time soon.
Apollo’s IPO discount looks too steep 22 Mar 2011 At $6.4 bln, Leon Black's buyout shop is getting a lower value than its larger rivals. One reason could be how Apollo now trades on an illiquid private market. But once the firm moves to the NYSE, it should more closely track KKR, which has narrowed a similar gap with Blackstone.
Flaky takeover bids enhance activists’ armory 22 Mar 2011 Cagerattling investors have taken to launching unsolicited buyout offers, or at least threatening them. Some are screwier than others. Nelson Peltz's vague bid for Family Dollar had neither debt nor equity financing in place. But they do get the attention of CEOs.
Egypt should let its currency fall 22 Mar 2011 Revolution at home and war in Libya have left the country on the brink of recession. If Cairo continues to fritter away reserves propping up the pound, it will also have a balance of payments crisis the last thing it needs as it tries to complete its transition to democracy.
N. Rock’s new securitisation offers reality check 22 Mar 2011 Excessive reliance on mortgagebacked securities toppled the UK lender, forcing it into state hands. At just 2 pct of the balance sheet, the latest bond issue is just a toe in the water. Even so, it's a reminder that the mortgage market can't be funded by deposits alone.
Shadow banks must be watched not outlawed 22 Mar 2011 Conduits and SIVs don't look very infectious right now. Hedge funds are mostly healthy, too. But tighter bank rules will push risktaking beyond the traditional reach of regulators. Avoiding a return to past excesses will require vigilance. Breakingviews unpicks the issues.
Policy must be brave as UK prices and debt soar 22 Mar 2011 On budget eve, data shows how bad the UK economy is. Inflation is 4.4 percent; February borrowing is the worst on record. But consumers are reeling. The government must stick to deficitcutting but toughness for the Bank of England means holding fire on interest rates.
Finland throws electoral wrench in euro debt pact 22 Mar 2011 The euro zone can't boost the capacity of its current bailout fund if Finland opposes larger guarantees from stronger members. Finance isn't the issue. But with a far right party threatening to upset Finnish politics, the country's leaders don't seem in the mood to compromise.
Medvedev takes on Putin over Libyan war 22 Mar 2011 The Russian president says Vladimir Putin likening the Libyan air strikes to the Crusades was unacceptable. This shows he seems ready to defend his proWestern agenda against conservatives linked to the prime minister, and raises the stakes of next year's presidential contest.
German cable proves rich seam for private equity 22 Mar 2011 Swedish buyout firm EQT has achieved a decent $4.5 bln exit from its boomtime Kabel BW deal, securing a high valuation multiple for the German media group on much stronger EBITDA. New owner Liberty is paying a full price. But synergies and growth mean Kabel BW can keep giving.
AT&T deal ironies may play for more than laughs 22 Mar 2011 The No. 2 U.S. mobile provider had sued to stop Verizon ads showing its network had better rural coverage. Now, AT&T is featuring the same map to sell its $39 bln TMobile bid to regulators. There's plenty more backtracking, too. It's rather amusing but also fodder for critics.
Parmalat assault could turn sour for Lactalis 22 Mar 2011 Activist investors in the Italian dairy group have sold their shares to French rival Lactalis for a premium, lifting its stake to 29 pct. It's easy to see why Lactalis thinks it's buying influence. But with Rome opposed, the benefits of this costly investment may prove elusive.
Big M&A may not survive quake, unrest 21 Mar 2011 A $12 bln bid for part of telecom firm Zain has fallen through. Bain's buyout of Japanese restaurant chain Skylark may be next. Japan's quake and Middle Eastern conflict have made some offers seem too generous, others inadequate. Financing, valuations and confidence are at risk.
Treasury offers test case for Fed’s exit strategy 21 Mar 2011 Tim Geithner's department is set to offload $142 bln of mortgage bonds it accumulated during the crisis. The Federal Reserve should take note. The gradual sale of Treasury's portfolio could hint at how markets will react when the Fed comes to sell its nearly $1 trln stash.
UK tax reform should come, and help justify cuts 21 Mar 2011 Wednesday's Budget may see income tax and national insurance merged. The Chancellor should go for it. The current system is too complex. Reform would show how heavily Britons are taxed and garner support for spending cuts. But relief for the low paid would also be needed.
AT&T/T-Mobile asks Uncle Sam $39 bln question 21 Mar 2011 The U.S. cellphone giant must think that it can get its massive deal to buy TMobile USA past antitrust and communications regulators. But before Deutsche Telekom, TMobile's owner, collects the money and breathes a sigh of relief, there's a lot of persuading to do.
Citi crafts a well-timed show of health 21 Mar 2011 The bank is slashing its share count by 90 pct. Reverse stock splits are often feeble attempts to mask problems. But Citi looks secure, the split would remove another crisis scar, and a surprise albeit token dividend rebirth may lure in more buyers than short sellers.
Europe will pay for shifting nuclear mood 21 Mar 2011 Many European governments are getting cold feet about nuclear energy after the Japanese disaster. At the very least, existing plans to invest in nuclear power will be subject to delay. Longer term, the EU's energy mix is likely to change and bring new costs.
Arab spring’s violent phase ratchets up risk 21 Mar 2011 Hopes that further dominoes would fall with minimal violence after Tunisia and Egypt have been dashed. Other regimes notably Libya, but also Bahrain, Syria, Yemen and even Saudi are tottering. But the prospect of bloody conflicts will push up alreadyheightened risk premia.