European telecoms will dial up more deals 15 Dec 2014 Investors have brightened as M&A has swept the sector. Thanks to BT, Britain is up next. More mergers could follow in France, Italy and Belgium. What’s not to like? Well, windfalls from big cross-border deals looks distant and valuations already price in most of the good news.
Hugo Dixon: Greece still several steps from chaos 15 Dec 2014 Athens has entered a period of political instability, which could lead to an election won by Syriza. This radical left group’s policies could prompt Greece’s exit from the euro if fully implemented. But this is unlikely, as Syriza will struggle to execute its plan.
Draghi’s blanks make sovereign bazooka inevitable 11 Dec 2014 Euro zone banks drew just 130 billion euros of four-year loans from the ECB. The modest take-up makes sovereign purchases more likely: the ECB will need to buy sovereign debt to reach its stated balance sheet target. While QE is increasingly priced in, the challenges aren’t.
Erste first to show risks in new bank hybrids 10 Dec 2014 The Austrian lender’s bonds have slumped after it cancelled coupons on its debt. It’s an oddity of local accounting, but shows the dangers in new bail-inable hybrid bonds where coupons can be stopped after one-off losses. The market is struggling to digest the risks.
Edward Hadas: Cultural gloom spawns economic decay 4 Dec 2014 Pope Francis says Europe is “fearful” and “self-absorbed.” That’s about right, but he could have been talking about almost any rich country. As social idealism fades away, so do jobs, justice and ambition. The cure? An economics that prioritises the give over the take.
UK "Google tax" needs other countries to play ball 3 Dec 2014 The new 25 pct levy on profits that multinationals divert from Britain will raise just 1 bln stg. But it might encourage companies to declare UK profits and pay the headline 21 pct rate. It might not, if the rules are sloppy or other jurisdictions don’t cooperate.
ECB could easily manage QE sovereign risk 2 Dec 2014 Critics say sovereign bond-buying could expose the ECB to risky countries and possibly trigger fiscal transfers. The argument is good in theory. Yet based on the ECB’s target, the exposure could be lower than in 2013 – when the central bank held more debt from the periphery.
Hugo Dixon: Cameron pulls back from EU brink 1 Dec 2014 A month ago, the UK prime minister was close to advocating quotas on EU migrants. That would have sharply increased the risk of a “Brexit.” But when Cameron actually made his speech, the focus was on stopping migrants getting access to benefits – a policy which looks deliverable.
EU bank ring-fencing plans need a reboot 27 Nov 2014 Splitting European lenders’ market-making from their other activities could cost 21 bln euros, research suggests. Yet global resolution reforms are reducing the need for structural separation. And the proposals, as drafted, could hinder the nascent capital markets union.
Juncker’s stimulus ambition far exceeds capability 26 Nov 2014 The EC president is pushing a 315 bln euro infrastructure project, using a sliver of taxpayer-funded equity. Europe’s economy needs the stimulus, but this one relies on old money and financial engineering. Investing the funds as quickly as the region needs will prove a challenge.
Hugo Dixon: What to do about populism? 24 Nov 2014 The spectre of populism is haunting Europe. While the established political order is largely to blame, the cure of populism is worse than the disease. The best way of combatting the phenomenon is to fix the economy and put integrity centre stage in politics.
Draghi’s anti-deflation war requires fiscal help 21 Nov 2014 The ECB president has gone further than ever before by pledging to raise inflation “as fast as possible.” His is a lonely fight and the central bank will soon reach the limits of what it can do. Draghi can only succeed if governments embark on more fiscal stimulus.
London gets closer to harsh bonus cap reality 20 Nov 2014 An adviser to the European Court of Justice has quashed UK legal arguments contesting EU pay limits. A ruling against Britain is now more likely next spring. Base salaries will rise, and industry pay could remain high. It’s a blow to the BoE, but the banks brought it on themselves.
EU needs more confidence for big investment push 18 Nov 2014 There is conceptual agreement on a 300 bln euro investment plan, but a spat on funding. The idea is to rally private investors around public seed money. Governments are willing to take first losses but outsiders will stay away unless politicians put on a better show.
Regulators wake up to banker salary problem 17 Nov 2014 BoE Governor Mark Carney says we may need global rules to “put fixed pay at risk.” The context is Europe’s bonus cap, which is pushing up bank salaries. Carney thinks a U.S. idea of paying partly in bonds could apply to base compensation. It’s logical – if tricky to implement.
Euro zone stuck between health and healing crisis 14 Nov 2014 The dreary 0.2 pct quarterly increase in GDP is a reminder of the region’s inability to shake off its long-standing malaise. But the news is nowhere near bad enough to spur any of the radical policy changes which might make a substantial difference.
Unrepentant Draghi rams message home 6 Nov 2014 The European Central Bank president has resisted hardliners’ efforts to rein him in and slow down monetary easing. His press conference comments were clear: other tools will be used if the euro zone economy needs them. The euro fell as soon as investors saw hawks in full retreat.
Rising ECB opposition could be Draghi’s albatross 5 Nov 2014 Some members of the ECB’s governing council are frustrated at Mario Draghi’s policies and personal style, Reuters has revealed. Divergences are normal within central banks, and the ECB president is still backed by a solid majority. But from now on he’ll have to be more careful.
EU bank salaries get an unlikely ally 15 Oct 2014 The European Banking Authority has come down hard on banks using allowances to retain pay flexibility in the face of the bonus cap. Its view isn’t binding on supervisors. But if it prevails, the sorry outcome will be stubbornly higher fixed pay.
EU securitisation tweaks miss the point 10 Oct 2014 The European Commission has outlined rules for high-quality securitisation. That should revive the market for the sort of debt the ECB wants to buy. But focusing on the least risky kind of deals will still make it hard for banks to free up capital – and get lending.