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European Business News (EBN), 97-06-18European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Wed, June 18 6:35 PM CETCONTENTS
[01] EU Summit ends with diluted Treaty of AmsterdamThe European Union closed a tumultuous summit early today, faltering in an ambitious overhaul of its basic treaty but salvaging enough to pave the way for an eastward expansion.The revision was necessary to allow the EU to function efficiently after it begins increasing its membership by as many as a dozen countries, perhaps as early as 2003. But the summit ended with the 15 leaders seriously diluting grander plans for a complete rewriting of the fundamental document, forcing another round of treaty revisions in the future. The partial deal will give G-7 leaders meeting this weekend plenty to discuss (See story below). It was announced after leaders gave up on efforts to let the EU take on a defence role, as favoured by France and Germany. Opposition by several countries, led by Britain, forced the leaders to drop the initiative. Other issues that split the leaders were plans to vote on foreign policy issues instead of requiring unanimity, as is now the case, and a proposal that would prevent groups of smaller countries from diluting the votes of larger members. They did agree on proposals to end all border controls, while allowing Britain, Ireland and Denmark to opt out. ''Having solved the technical issues, it is now easier to go ahead with the enlargement,'' British Prime Minister Tony Blair said. ''It is important that these emerging countries of Eastern Europe are brought into the European Union. It is always possible to say there could have been more progress made, but the progress that has been made is very, very substantial indeed." ''We can start now at least with the process of enlargement (negotiations) in six months,'' said Bob Hiensch, spokesman for Dutch Foreign Minister Hans van Mierlo. They negotiated into the early hours in Amsterdam on the issue of allowing some countries to move toward closer co-operation more quickly than others, if they so choose. On defence, some countries favoured extending the role of the Western European Union, a military organization founded in 1954 but which has been largely moribund for most of the past four decades. The French, backed by the Germans, are interested in transforming it into a real military arm of the EU. But opposition from Britain, Denmark, Ireland, Sweden, Finland and Austria meant no decision was made to that effect. The Amsterdam negotiations were an effort to revise the 1992 Maastricht Treaty, which itself was an update to the 1957 Treaty of Rome, the EU's fundamental charter. Enlargement negotiations are to begin in 1998 but only if a reform package is adopted by the leaders and ratified by the legislatures of the current EU members or face referendums there. This could take as long as two years. U.S. Investors Unimpressed with E.U. summit's outcome [02] Tietmeyer says Germany still lacks fiscal policy to meet EMU criteriaHans Tietmeyer, the president of the Deutsche Bundesbank, said Germany still requires a big effort to pull together a fiscal policy that will bring its budget and deficit under control. He was speaking after the release of the central bank's monthly report for June.The Bundesbank saw German economic growth as more robust than first-quarter gross domestic product data would make it appear at first sight. Germany's economy returned to growth in the first months of 1997 after an 'interruption' in the Autumn of 1996, the central bank said. But it also noted that continued structural problems are 'braking the cyclical upswing.' 'Considerable efforts are necessary to bring public finances into a sustainably tolerable situation,' Tietmeyer said. He said unification with the former East Germany at the beginning of the decade constitutes a 'special element' impacting the government's high debt level. 'The public finances in Germany were burdened in a special way by unification and the takeover of debt associated with that,' Tietmeyer said. 'If you look at the debt you have to take that into consideration, but I'm not saying that public finances are in a sustainably tolerable condition.' The president of the Bundesbank also said that a detailed explanation on how Germany's assets will be revalued will be released soon. He confirmed that he would meet sometime this week with German Finance Minister Theo Waigel, but didn't specify when. Tietmeyer said they were already very close to an agreement and soon there would be 'a broad and final explanation.' Tietmeyer emphasized that there was no question of the central bank's independence in the decision to revalue any German assets, which must be reconsidered ahead of Europe's planned single currency. [03] Strong UK retail sales prompts further interest rate rise fearsBritish retail sales grew at their strongest rate in nearly nine years in May, prompting economists to conclude that interest-rate rises will have to exceed market expectations to control inflation. The Office for National Statistics said that retail sales rose a seasonally adjusted 5.3% year-on- year in May, accelerating from 4.9% annual growth in April and the strongest rise since November 1988. Retail sales rose 1.1% on the month in May after remaining unchanged in April, whereas economists had expected monthly growth of 0.3% and an annual rise of 4.6%. The rise took financial markets by surprise after the Confederation of British Industry said last week that sales rose in May at their slowest rate since October 1995.Comments from Bank of England Governor Eddie George that strong consumer demand poses an inflation threat, spurred on fears that rates could rise a further 0.25 percentage points at the Bank of England's monetary policy committee meeting on July 10. At the May meeting, George said domestic demand was growing sufficiently strongly to put upward pressure on retail prices eventually. As such, he said there was a case for raising base rates a half-point at once in May. As it turned out, quarter-point rate rises were pushed through in May and June, taking base rates to 6.5%. [04] BSkyB may be forced to drop digital terrestial television stakeShares in British Sky Broadcasting Group fell after newspaper reports that it may be forced by the U.K.'s Independent Television Commission to drop its equity stake in one of the companies bidding to launch digital terrestrial television in the U.K.Shares in BSkyB had opened 5.3% lower, in a continued reaction to the year- end departure of the company's two top executives, announced Tuesday. Media reports that the Independent Television Commission has doubts about BSkyB keeping a one-third stake in a consortium bidding for digital terrestrial broadcasting frequencies are further undercutting the stock, traders said. The consortium called British Digital Broadcasting - made up of BSkyB, Granada Group and Carlton Communications - could be ruled out of the bidding because it concentrates too much power in too few hands. The commission's decision on digital terrestrial television licences has been delayed, due to what the paper reports as significant unresolved technical and regulatory questions. On Tuesday, BSkyB said chief executive Sam Chisholm would quit at the year- end. Later it emerged that deputy managing director David Chance will abandon his day-to-day responsibilities at the same time. [05] Japan's May trade surplus more than triplesJapan's merchandise trade surplus more than tripled in May, its second straight month of steep increase, undermining attempts by Japanese government officials to play down the nation's widening trade imbalance ahead of a world leaders' summit this weekend.The May surplus soared to 738.27 billion yen ($6.53 billion) from 229.01 billion yen a year earlier, the Ministry of Finance reported. Exports surged 21% to 4.105 trillion yen in the month, up from 3.406 trillion yen a year earlier. Imports, meanwhile, edged up 6% to 3.367 trillion yen, up from 3.177 trillion yen. Japanese officials have gone to great lengths recently to argue that the rising trade imbalance will not be a source of tension. After months of insisting that the trade surplus wasn't actually rising, government officials, such as Trade Minister Shinji Sato, have recently changed their tune, and now say that the rise in the surplus is only temporary, caused by 'seasonal factors' and 'not sustainable.' Many economists are suspicious of such claims, pointing out that underlying trends in the trade data suggest that the surplus is likely to keep rising for at least the next six to nine months. One such leading indicator measures the flow of trade in terms of the volume of goods traded, such as barrels of oil or automobiles. Japan's exports rose 13% in May in volume terms, while imports fell 2% - the fourth decline in six months. Government officials are understandably nervous now that Japan's trade surplus is once again rocketing upward. The U.S. government, among others, has publicly expressed concern that the weak yen, coupled with Prime Minister Ryutaro Hashimoto's plan to cut government spending and recent tax hikes, could stifle domestic Japanese demand. Weak domestic demand, in turn, would damp Japan's appetite for imports and push the trade surplus up. The politically sensitive surplus with the U.S. rose 93% in May, its eighth straight month of increase, to 322.9 billion yen. Japan's surplus with Europe more than tripled, to 206.6 billion yen, while its imbalance with Asia rose 73% to 578 billion yen. Fuelling Japan's export surge are resurgent shipments of automobiles, steel and semiconductors, which rose 43%, 32% and 12% during the month, respectively. Meanwhile, declining shipments of foreign autos, telecommunications equipment, and textiles, and some agricultural products held down import growth. [06] BG must slash its prices for next five yearsU.K. gas supplier BG's TransCo distribution unit must cut its prices by 21% this year and then by Retail Price Inflation minus 2% for the next four years, industry regulator Ofgas said, after accepting a recommendation from the Monopolies and Mergers Commission.''This is a tough settlement, but provided we continue to improve our efficiency, one which we believe will enable us to manage and finance our business effectively,'' said David Varney, BG chief executive. Varney said BG welcomes the MMC's recommendation, adding that the formula gives the company freedom to act in both shareholders and customers interests. The decision comes after the MMC was forced to step in and arbitrate an argument between BG and its regulator Ofgas on what prices that TransCo should be allowed to charge. BG said the effect of the proposals is that in the first year of regulation under the new controls, April 1997 to April 1998, TransCo's revenues will be cut by 5%. In the next year, revenues will be cut by a further 7%. However, the company was hopeful that for the remainder of the price control period, revenue will rise by between 1% and 2%. 'The MMC's recommendations provide more resources and a better regulatory framework, enabling us to strive for two goals - providing high standards of service for Transco's customers, and meeting the expectations of our shareholders,' said Varney. He said a disappointing featute of the MMC report was the decision to use an asset base of £11.6 billion, against TransCo's replacement cost of assets measure of 17 billion. BG said now it has a firm price controls for the next five years it is in a position to review its dividend strategy. [07] Arch Euro-sceptic Redwood endorses arch-europhile Clarke for Tory leadershipIn a hasty marriage of political opposites, defeated right-winger John Redwood endorsed former Treasury chief Kenneth Clarke in the Conservative Party leadership battle.Former Prime Minister Margaret Thatcher jumped into the fray, endorsing Clarke's opponent, former Welsh Secretory William Hague. Clarke, 56, is running against Hague, 36, in the third, and probably last, round of voting on Thursday. Hague 'stands for the things I believe in - above all, he offers a clear vision of Britain as a free sovereign nation with control over its own affairs,' Lady Thatcher said in a statement. 'The Conservative Party must ... not try to seek refuge in an incredible alliance of opposites, which can only lead to further grief.' Lady Thatcher had not endorsed anyone in the first two ballots. G-7 leaders will meet at Denver Summit [08] G-7 will have serious EMU discussionThe Group of Seven leading industrial nations will have plenty to think about when their discussions in Denver this weekend turn to the European Union's single currency project.An E.U. summit meeting this week didn't provide any more reasons to trust that the planned launch of the euro on Jan. 1, 1999, will be either timely or successful. That means the leaders heading to Denver from E.U. member states Britain, France, Italy, and Germany have a lot of explaining to do when they sit down at the table with their U.S., Japanese and Canadian colleagues. U.S. Treasury Secretary Robert Rubin said Monday the euro is likely to come up, though no G-7 position will emerge on the topic. The single currency ''is an issue that the Europeans will have to work through themselves,'' he said. What's clear after the two-day E.U. meeting in Amsterdam is that France and Germany - the stalwarts of the E.U. and essential members of any future monetary union - are on different political wavelengths as far as the euro goes. For the moment, it appears that France's more politically oriented approach is gaining the upper hand, while Germany's preference for fiscal orthodoxy and monetary rigour has been discredited by Germany's own fiscal woes. As a result, financial markets are concerned about continued bickering over single currency policy priorities, and the prospect that the euro will emerge as a relatively ''soft'' currency subject to political manipulation. The E.U.'s G-7 partners, particularly the U.S., aren't blind to the fact that a messy euro launch - as well as uncertainties leading up it - could wreak havoc with markets as well as with global economic prospects. [09] Telecoms losses set to keep Olivetti in the red for 1997Italy's Olivetti is set to stay in the red for 1997, the group has reported, as improvements in its information technology companies fail to offset losses from its telecoms operations. And in a related development Giorgio Garuzzo, the vice chairman has resigned.Garuzzo said that personal commitments outside Italy made him unable to continue in the position. 'I regret this decision because I've been very close to Olivetti since I started to work here in 1962,' Garuzzo said. Group chief executive Roberto Colaninno told Olivetti's annual shareholders meeting in its home town of Ivrea, near Turin in north-west Italy, that 1997 would see a recovery in profitability in its information technology interests. This would see positive results in 1997 for Olsy (Olivetti Solutions) producing computer systems for banking and retailers, Lexikon which makes printers, copiers and fax machines and its 48% owned specialist information systems group Tecnost. But Olivetti's telecoms interests, Telemedia and its 35.5% stake in mobile phone consortium Omnitel, would stay in loss for 1997. However, these losses were in line with the company's internal budget. 'The positive effects from the results in information technology will not be sufficient to completely cover the losses of the telecoms companies and the costs of the holding company,' Colaninno told shareholders. [10] Norway's Sparesbankgruppen drops bid for Fokus BankNorway's Sparebankgruppen, a group of 16 savings banks, is withdrawing its takeover bid for Fokus Bank.The group said it was dropping the 73 crowns ($10.11) per share bid for Fokus formally when the deadline to shareholders expires on July 18. 'For legal reasons the bid cannot be withdrawn during the bid period,' Sparebankgruppen said in a statement 'Shareholders who have accepted the bid of 73 crowns per share are however free to dispose of their shares as they wish from today,' it said. Sparebankgruppen had been widely expected to give up the attempt to acquire Fokus after it was asked on Tuesday by the Norwegian Banking, Insurance and Securities Commission to consider withdrawing the bid. [11] British Aerospace joins Lockheed Martin in $200 billion US fighter project bidBritish Aerospace is to join Lockheed Martin in a planned bid for a $200 billion order for combat aircraft from the U.S. government.According to a statement from British Aerospace, it will become part of the Joint Strike Fighter team, and work ''in all phases'' of the Lockheed Martin program. The announcement follows Sunday's newspaper reports that such a deal was pending. According to the stories, the decision was taken after months of negotiations during which British Aerospace also considered joining up with another bidder, Boeing. It is believed, although was unconfirmed by British Aerospace, that the British company would get as much as a 15% stake of the order to supply 3, 000 joint strike fighter aircraft. The joint strike fighter in being developed for the U.S. Air Force, Navy and Marine Corps and the British Navy to replace several types of aircraft including the F-16, F-18, AV-8B and C Harrier. BAe Chief Executive Richard Evans said in the statement that 'with a requirement for over 3,000 aircraft, JSF is the most significant transatlantic military programme of the 21st century'. BAe and U.S. group Northrop Grumman will be working with Lockheed, whose bid competes with an offer from Boeing. Click here for more on the Paris Air Show [12] Tabacalera to buy 20% stake in AldeasaSpain's tobacco company Tabacalera has informed the Spanish securities exchange commission it intends to buy 20% of the capital in Aldeasa for 11.344 billion pesetas ($777.7 million), a press release from the commission said.According to Tabacalera, an agreement has been signed with Aena, a Spanish public airport group, which would allow the tobacco company to obtain 20% control of Aldeasa. 'Aldeasa is the leader in exploitation of commercial space in airports in both duty-free and specialised shops,' said Tabacalera. Aldeasa has 100 shops in Spanish airports in which it has the exclusive right to operate duty-free shops until 2006. Aldeasa also operates in Peru, Venezuela, Chile, Portugal and Morocco, said Tabacalera. Tabacalera added Aldeasa has 40 other shops in the principal Spanish museums. [13] Israeli Finance Minister resigns over foreign currency liberalisationThe Israeli finance minister, Dan Meridor, has resigned in anger and accused Prime Minister Benjamin Netanyahu of having created an artificial crisis over foreign currency liberalization to push him out of the government.Commentators accused the prime minister of acting recklessly. 'Netanyahu allowed a sensitive economic issue to degenerate into another personal struggle,' wrote The Jerusalem Post daily. The opposition Labour Party said it would submit a motion of no confidence in the government next week, and urged the finance minister, Dan Meridor, to vote against Netanyahu and bring down his government. Netanyahu's coalition controls 66 seats in the 120-member parliament. The prime minister has alienated many senior figures of the ruling Likud Party in the past, but appeared unlikely Meridor or his supporters would want to see the opposition Labour Party return to power. [14] Corporate and Economic BriefsSpanish telecommunications company Telefonica de Espana has signed a commercial agreement with Airtel Movil, Telefonica said in a press release. Telefonica said the agreement is for three years and resolves Airtel's case before the European Union Commission. The European Union Commission asked Spain to resolve the situation whereby Airtel was expected to pay 85 billion pesetas ($578 million) as a market entrance fee, while Telefonica, the first license-holder, paid nothing. A spokesman for Telefonica said the trade agreement effectively wipes out the problem of the entrance fee demand. As a result of the agreement, Airtel will become Telefonica's largest client. Both companies have also agreed to update their available telephone frequencies from analog to digital, the release said.The state-owned Bulgarian Telecommunications Company will be privatized within a year, the company's president said, according to the official news agency BTA. Marian Dragostinov said the company will be sold for between $4 billion and $6 billion. Dragostinov said it would be better to sell the company to a consortium of foreign telecommunications operators, rather than to a single company such as South Korea's Daewoo Group, which is one of the largest foreign investors in Bulgaria, and owns the Sheraton Hotel and the Interpred World Trade Center. Dragostinov said the company had begun to restructure to prepare for privatization, and would reduce its regional units to 11 from 27. The company had revenue of 84 billion leva and expenditure of 48 billion leva for the four months of January to April, 1997. Loral Space & Communications Ltd. and Cie. Generale d'Electricite Alcatel Alsthom formed a strategic partnership to jointly develop, deploy and operate high-speed multimedia satellite networks that will provide high- bandwidth services. The agreement includes cross investments in Loral's geostationary satellite-based CyberStar project and Alcatel's low-earth- orbit satellite-based SkyBridge project. Each company will participate in the development of the two projects, initially committing to invest $30 million in the other company's respective project. German chemicals group Hoechst reiterated that its operating profit in 1997 will be higher than in 1996 if calculated on a comparable basis. 'We expect group sales of 42 billion marks ($24.3 billion) and, calculated on a comparable basis, an increasing operating profit,' a spokesman for the company. Registered unemployment in the Netherlands dropped by 60,000 job seekers in the three months ended May 31, compared to the like period of 1996, the Dutch Central Bureau for Statistics (CBS) reported. This brings the unemployment rate to 5.7% of the Dutch labor force, down 0.9% from 6.6% in the same three months in 1996. In the three months ending March 31, 1996, registered unemployment stood at 6.0%. The total number of unemployed stood at 381,000 in the three months ended May 31, 1997, compared to 441,000 a year earlier, the CBS reported. Adjusted for seasonal influences, the total number of unemployed was slightly higher at 385,000, compared to 446,000 in 1996. Sweden's current account showed a surplus of 5.1 billion kronor in April, up from a surplus of 4.2 billion kronor in April 1996, according to figures released by Sveriges Riksbank, the central bank of Sweden. The market had on average been expecting a slightly higher surplus of 6.0 billion kronor, according to SIX AB market estimates. The April surplus brought the annualized current account surplus for the past 12 months to 40.6 billion kronor, down from a 44.4 billion krona surplus for the previous 12-month period, the Riksbank said. Figures for the latest month in the chart below are preliminary, while the year-earlier figures have been revised. Swedish industrial and medical gas producer AGA AB said it will form an alliance with Germany's Linde AG for the design and construction of cryogenic air separation plants. Linde will supply AGA with core services and equipment related to cryogenic air separation technology, according to the Swedish company. 'The parties will also look for other synergies in cryogenic air separation technology in order to increase their competitiveness,' AGA said. 'The co-operation will increase AGA's competitive edge in selling on-site solutions to large customers and secure AGA's access to the most modern technology,' said Lennart Selander, AGA's chief executive officer. French engineering, electronics and telecommunications group _Alcatel Alsthom_ said it had won a contract to supply the long distance network to a joint venture between a unit of Generale des Eaux and the French national railway. In a statement, Alcatel said the contract covers the 1997 to 2002 period and that it will supply switching and transmissions systems under turnkey terms, energy and shelter and will be responsible for project management and systems integration. Alcatel said it will also supply 10 transit switches, intelligent network platforms and services. Installation of the above will begin in Paris and Lyon. [15] Washington refuses to be drawn into intervening in the tobacco settlement talksThe Clinton administration took pains to show no intentions to intervene in talks being held by state attorney generals who are trying to negotiate a deal with the tobacco industry.Yesterday, Michael Moore, the Mississippi attorney general, set a deadline of early in July to wrap up the talks, saying that he has a tobacco lawsuit that starts on July 7 and he won't delay it. 'We well understand the attorney general's thinking,' White House Spokesman Mike McCurry said. Moore also indicated the talks have reached a critical point where the two sides are deadlocked on at least three key points. Despite this, the White House maintained that its role in the matter is nothing more than 'monitoring' the talks. 'It is up to the parties to reach an understanding,' McCurry said. Asked if President Clinton, who strongly wants to see a deal struck if it meets his criteria, would intervene at some point in the talks to get them moving toward a settlement, McCurry said no. 'I see nothing that would suggest to me that that would happen,' McCurry said. Moore said the two sides are deadlocked on the issues of establishing punitive damages against the tobacco industry, maintaining the industry's liability to future lawsuits and regulating nicotine as a drug. Arizona Attorney General Grant Woods has suggested the reason the regulation of nicotine has become such an issue is because the government may seek to force cigarette makers to purge it from tobacco products at some future date. The state attorney generals are briefing the White House on a daily basis over progress in the tobacco talks. [16] Handover WatchThe Securities and Futures Commission is launching formal investigations into possible share price manipulation involving red chips - Hong Kong- traded shares of mainland linked companies, according to the the Far Eastern Economic Review. In recent weeks, the share prices of some red chips have jumped 60% or even 100% in a single day. Authorities are suspicious that there may have been market manipulation with the possible involvement of brokerage houses, controlling shareholders, officers and directors of the companies involved. The Review quotes Laura Cha, head of corporate finance for the SFC, as saying that 'players agree that recently the markets have been neither orderly nor fair.' The investigations may involve mainland authorities, as the possible ultimate shareholders could be Chinese banks and ministries, the Hong Kong-based weekly reported.[17] World News BriefsIn the Colombian capital of Bogota, eight police officers were killed and 10 were injured when a bomb, apparently triggered by remote control, exploded in a truck at a police station. Body parts were strewn across the station's car park where the truck was being searched at the time of the blast. The truck's driver was detained by police, said Bogota police chief Gen. Teodoro Ocampo. The blast occurred as officers were searching the back of a truck that had been seized earlier in the day in Mosquera, 10 miles west of the capital, Ocampo said.The two partners in Cambodia's fragile coalition government blamed each other for alleged assassination plots they said sparked a gunfight that left at least two dead and three wounded. The two-hour shoot-out in the capital, Phnom Penh, erupted late yesterday between bodyguards loyal to rival co-premiers Norodom Ranariddh and Hun Sen. The violence followed months of mounting tensions between the former battlefield enemies, and the ensuing accusations signalled the bitter rivalry would continue. Violence continued in Hebron for a fifth day as Palestinians threw stones and fire bombs at Israeli troops this morning, inadvertently setting ablaze an Arab-owned butcher shop in the centre of the city. The two sides stood back temporarily as Israeli fire fighters extinguished the blaze. Clashes resumed after the fire was put out, with Palestinians throwing stones and Israelis shooting rubber bullets. Hebron has been the scene of stone- throwing clashes every day since Saturday. The U.S. ambassador flew out of Republic of Congo's 'fragile and tense' capital today, among the last foreigners to leave since civil war broke out here. A cease-fire agreed the day before was holding this morning, but battles were expected to erupt as soon as the three-day truce expires. 'The cease-fire remains fragile,' U.S. Ambassador Aubrey Hooks said before boarding a private charter plane. 'We are talking now about an accord so that both parties control the airport. We hope that they are successful, but the situation remains fragile and tense.' Hooks and 11 other members of the U.S. embassy staff, including six Marines, headed to Kinshasa in neighbouring Congo, formerly known as Zaire. [18] Paris Air Show BriefsAero-engines manufacturer Rolls-Royce announced at the Paris air show that it has won a further batch order from Gulfstream for Tay engines to power Gulfstream IV-SP corporate jets. A company spokesman said the order extends a term supply contract and will cover deliveries over the next six years.European aircraft consortium Airbus Industrie said that Brazilian airline TAM has agreed to buy up to 10 of its A330-200 widebody twin-engined jets in a deal valued at around $1 billion. Airbus made the announcement at the Paris air show, making it the first big prestige order of the week in the event's traditional marketing battle between industry giants Airbus and Boeing. From the European Business News (EBN) Server at http://www.ebn.co.uk/European Business News (EBN) Directory - Previous Article - Next Article |
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