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Wednesday, 14 August 2024
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European Business News (EBN), 97-06-19European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Thu, June 19 7:15 PM CETCONTENTS
[01] Germany's Ifo says country won't meet deficit criteria for currency unionGermany's independent Ifo economic research institute said that the German economy is ''doing somewhat better,'' and forecast that gross domestic product will expand to between 2% and 2.5% in this year.However, Germany's public deficit is likely to be about 120 billion Deutsch marks and thus total 3.2% of GDP, above the strict reading of the Maastricht Treaty's 3% limit for countries aiming to join Europe's planned currency union. That outlook is in line with figures published earlier this month by the Organization for Economic Cooperation and Development, which put 1997 GDP growth at 2.25% and the deficit at 3.2% of GDP. ''Without additional fiscal measures, the deficit criteria can't be met in 1997,'' the Ifo institute warned. The research institute added that the debate over the ''decimal point in this year's deficit'' should be stopped quickly, but wasn't clear in what it meant by that comment. Ifo's president Karl Heinrich Oppenlander said, however, that a deficit slightly over 3% this year shouldn't exclude Germany from currency union, since the Maastricht Treaty allows some room for interpretation. Speaking at a press conference in Munich, Oppenlander said ''I am of the opinion that (a 3.2%) deficit wouldn't lead to Germany being prevented from joining EMU, because the Maastricht Treaty certainly allows for certain deviations from the reference level if it can discern a continuing decline in the deficit.'' Ending the debate over the decimal point and clarifying whether slightly wider deficits would be acceptable would ''make fiscal emergency operations superfluous,'' he added. Regarding currency union, Oppenlander said European countries must continue to make convincing efforts to consolidate their fiscal budgets to allay fears that the euro will be a weak currency and thus prevent an appreciation of the Deutsche mark versus European currencies. Delaying the planned Jan. 1, 1999 introduction of the single currency would hold risks for Germany's economy, he added. The consequence would be turbulence on foreign exchange markets and a stronger mark, which in turn would have a negative impact on exports and employment. On the other hand, if efforts at fiscal consolidation aren't intensified and the single currency goes ahead on time but with sharp deviations from the Maastricht criteria, the future European Central Bank could be forced to raise interest rates to combat the risk of inflation, which would also hurt the German economy, he said. Meanwhile, the Ifo institute said uncertainty surrounding Germany's planned tax reform clouds its outlook for the country's 1998 GDP growth, which it put at 2.75%. Ifo also said that that modest acceleration in growth won't have a marked effect on German unemployment. The German research tank sees the average number of unemployed rising to 4.3 million this year, from 3.97 million in 1996. Joblessness will remain high in 1998, averaging 4.2 million for the year, although it could decline to around 4 million by the end of the year. [02] Northwest agrees $2 billion deal with AirbusNorthwest Airlines has agreed to buy 50 A319 passenger jets from European consortium Airbus Industrie, Airbus said, a deal that could be worth $1.95 billion.The U.S. airline also took an option to buy an additional 100 more 125-seat A319s, and is currently awaiting delivery of 20 150-seat A320's from Airbus. 'We are hopeful that this memorandum of understanding will result in a final agreement in the near future,' Airbus quoted John Dasburg, Northwest's chief executive officer, as saying. Airbus traditionally does not discuss the value of airplane sales, but the 125-seat A319 has a list price of $39 million, giving the firm order for the 50 planes a value of around $1.95 billion. Airbus Industrie, formed in 1970, is Europe's only builder of large commercial aircraft, ranking second in the world after Boeing. Its members are Aerospatiale of France (37.9%), Daimler-Benz Aerospace- Airbus of Germany (37.9%), British Aerospace (20%) and Construcciones Aeronauticas of Spain (4.2%). [03] German Finance Ministry and Central bank agree to revalue currency reservesGerman Finance Minister Theo Waigel and Deutsche Bundesbank President Hans Tietmeyer said they reached an agreement on the revaluation of Germany's currency reserves in 1997.According to a joint statement, the Bundesbank intends to use room existing in its current accounting rules to revalue its currency reserves nearer to market value for its 1997 annual report. The currency reserves, the majority of which are in U.S. dollars, are now accounted for at their lowest historic value. A finance ministry spokesman confirmed that any transfer of profit resulting from the revaluation to the government would happen after 1997. The Bundesbank had balked at Waigel's original proposal for a transfer in 1997, saying it would smack of creative accounting to meet the Maastricht Treaty criteria to qualify for currency union. The statement didn't specify how much money the Bundesbank will eventually transfer to the government from the currency revaluation. It also said the Bundesbank and legislators will work on steps toward changing the Bundesbank's accounting laws to put them in line with standards required for the third state of Europe's Economic and Monetary Union. [04] French Prime Minister proposes 4% rise in the minimum wage and a block on the selloff of public servicesOver angry shouts by conservative lawmakers, Socialist Premier Lionel Jospin proposed a 4% rise in the minimum wage and vowed to block the selloff of public services.In his first National Assembly speech since his leftist coalition came to power in a stunning June 1 parliamentary runoff victory, Jospin also promised to revamp the former right-wing government's tough immigration laws. 'The French made a choice full of hope but heavy with demands,' Jospin said. 'We want to give a precious thing back to the country ... a meaning.' Jospin had been under pressure from the Communists in his coalition to grant the rise in the minimum wage, currently at about 6,400 francs ($1, 100) a month. In proposing the 4% increase, Jospin called it 'the strongest rise in buying power over the past 15 years for that salary level.' Conservatives, shouting repeatedly during the speech, howled in their loudest protest. Jospin said he opposed privatising public sector industries 'without justification in the national interest.' Alluding to the phone company France Telecom, he mentioned telecommunications, electronics and 'other sectors.' But Jospin underlined that 'adaptation will be necessary to maintain our level among the most developed nations of the world.' Jospin proposed a plan to build 100,000 dwellings and renovate 1 million others to expand housing and fight record 12.8% unemployment. He also called for an increase in student aid but stopped short of other new programs pending a study of the state budget to be completed next month. The new premier, with whom conservative President Jacques Chirac must now share power, won the vote by blasting the conservatives' inability to cut the jobless rate with market-oriented policies of cutting spending and business taxes. Conservative leader Philippe Seguin responded to Jospin's speech, telling the National Assembly the proposals were unrealistic and incompatible with the rest of the 15-nation European Union. 'From now on you will have to convince our 14 partners of the pertinence of the national policies that you want to put in place,' he said. Jospin said he will propose a law on cutting the work week after holding a conference in September with labour and business representatives. During the campaign, he promised to eventually cut the week from 39 to 35 hours without a cut in pay. [05] US trade gap widens in April as consumer imports reach a record highThe United States' foreign trade deficit, trimmed to a four-month low in March by record exports, swelled 7.8% in April. Imports reached a record high for such consumer goods as clothing, toys and pharmaceutical products.The Commerce Department said the deficit in goods and services totalled $8.4 billion, up from a revised $7.8 billion in March. The March imbalance, initially estimated at $8.5 billion, narrowed with the help of surging sales of commercial aircraft to China. Exports in April continued to rise, edging up 0.2% to an all-time high of $78.4 billion. But imports rose even more, up 0.9% to $86.7 billion. The deficit is the difference between imports and exports. Many analysts had expected the April gap to widen by about $1 billion. In a separate report, the department said the deficit in the broadest measure of U.S. foreign trade totalled $41 billion in the January-March quarter, up from a revised $36.9 billion in the final three months of 1996. The fourth-quarter total originally was reported to be $41.4 billion. The revisions in last year's current account means the overall deficit in 1996 was $148.2 billion, rather than $165.1 billion in the initial estimate. Still, it was the second largest ever, behind $168.1 billion in 1987. The quarterly current account deficit is considered the most comprehensive gauge of the country's trade performance because it measures not only trade in goods and services, but also investment flows between nations as well as foreign aid. [06] Ex-Welsh Secretary, William Hague, becomes leader of the British Conservative PartyEx-Welsh Secretary William Hague, 36, on Thursday won the leadership of Britain's Conservative Party, becoming the party's youngest leader in 200 years.Hague, from the centre-right and an opponent of Britain ever joining a single European currency, defeated ex-Treasury chief Kenneth Clarke, the party's leading pro-European, by 92-70 votes. One MP abstained. The big defeat for Clarke in a third round ballot among the party's 164 members of Parliament surprised observers and pushed the party to the right. Hague, the youngest Tory leader since William Pitt in 1783, won with the blessing of ex-prime minister Margaret Thatcher - who Clarke helped unseat in 1990. 'I'm going to bring the party together. I'm going to take it back on the road to unity, to confidence and back to power,' Hague said, thronged by reporters outside the House of Commons after the vote. 'And the whole Conservative party is now going to work together to achieve that objective. Clarke, 56, had looked narrowly the favourite after making an astonishing deal yesterday with the third-running candidate, John Redwood, a right- winger who was previously his ideological enemy over Europe. Redwood backed Clarke in return for promise of a vote according to individual beliefs, not party direction, over whether Britain should join a single European currency. But many of the MP's who had supported Redwood in the second ballot evidently could not bring themselves to vote for a pro-European. The deal backfired with some of Clarke's supporters finding it incredible that a Clarke-Redwood deal would stick. Hague, who succeeds ex-Prime Minister John Major as leader of the opposition, faces a daunting task in trying to rebuild the party, traumatised by its landslide defeat by the Labour Party in May 1 elections after 18 years in power. [07] U.K. parliamentary panel finds 'black hole' in budgetThe U.K.'s National Audit Office, parliament's independent financial watchdog, is expected to report its findings later amid reports that it has identified a 'black hole' in the country's public finances arising from assumptions made in the last budget.The report, commissioned by Chancellor of the Exchequer Gordon Brown shortly after taking office last month, is expected to increase speculation over the contents of the new government's spending and tax plans to be revealed in Brown's budget presentation July 2. Analysts and media reports have suggested that Brown will use the report to justify tax increases by saying the claims by former Prime Minister John Major's Conservative government on the state of the economy were too optimistic and based on unrealistic assumptions. When Brown announced the audit during a debate in the House of Commons on the economy, he said 'in order to meet our rules for borrowing, the budget will seek to establish a sound and long term basis for the public finance and the basis for that is honesty. 'That's why we've invited the head of the national audit office to comment on some of the key assumptions and conventions that lie behind spending and borrowing estimates for a truly independent assessment of the state of public finances.' The Audit Office has focused on the assumptions made by the Treasury under the last Government about unemployment, economic growth and interest rates, which were used to forecast tax revenues and public spending, according to reports. They said it may cast doubt on former Chancellor Kenneth Clarke's upward revision of the growth rate from 2.25% a year to 2.5%, and challenge the savings the last government said could be made from a clampdown on fraud and tax evasion. The report is also expected to have wide implications for the government's borrowing needs. [08] Germany's Adam Opel reports drop in net profitAdam Opel, the German-based branch of General Motors, blamed 'significantly' higher tax charges for a 13% drop in net profit for 1996.Pretax profit rose to 477 million marks ($281 million) from 401 million in 1995, the firm reported, but net profit fell to 314 million marks from 363 million marks in 1995. Opel chairman David Herman said he expects 1997 group sales to reach a record 30 billion marks. In 1996, the company reported group sales rose 9.3% to 28.3 billion marks, marking the second- highest annual revenues in its history. He added that Opel is launching its strongest product offensive in its history, with 26 new models and model variations by the end of 2001. It will invest 2 billion marks in its products and German production facilities this year, 50% more than in 1995. For 1998 alone, six new vehicles will be launched, including a compact van called the 'Zafira,' to be unveiled at the Frankfurt Automobile Fair in September. Herman said Opel's goal for this year is to sustain its market share in Germany and western Europe. In 1996, Opel's market share in Germany was 16.2%, down from 17% in 1995, and it had 12% of the western European market, down from 12.5% a year earlier. However, in the first five months of 1997, Opel's German sales and market share fell. New registrations of Opel models in Germany declined 12% to 235,000 vehicles from 266,600 cars a year earlier. Overall, new car registrations in Germany fell 5% in the five- month period. [09] Vereinsbank buys Noris Verbraucherbank for undisclosed sumBayerische Vereinsbank said it bought Noris Verbraucherbank in the latest move by a big German bank to expand in the country's lucrative consumer market.Munich-based Vereinsbank, the fifth largest bank in Germany, already is active in the consumer business as a mortgage lender. But the purchase of Nuremberg-based Noris, with 4.1 billion Deutsche marks ($2.37 billion) in assets, gives it a niche in the bread-and-butter household lending areas of loans for cars and heavy appliances. Noris is also known for its emphasis on consumer service. In buying Noris from Germany's Schickedanz Group, Vereinsbank takes aim at the German unit of Citicorp. Citibank Deutschland is the biggest of the country's so-called consumer banks. With 16 billion marks in assets, it is four times bigger than No. 3 ranked Noris. 'German banks want to increase their efficiency in household banking,' said analyst Matthew Czepliewicz of Salomon Brothers in London. In recent years, partly in response to Citibank's success, German banks have begun to focus more on the consumer-banking business. Deutsche Bank, Dresdner Bank, Commerzbank are among those offering more investment and lending products for consumers. Deutsche Bank and others have also started what they call 'direct banks,' where all transactions are processed over the telephone from a central location instead of through branches. Vereinsbank declined to announce how much it paid for Noris. But analysts said the price was probably higher than the bank's book value of 168 million marks. Vereinsbank plans to merge Noris with its Franken WKV Bank banking unit. The combined bank will have 100 branches and 370,000 customers. Vereinsbank expects it can save 130 million marks a year by merging the two units. Together, the two banks have 1,373 employees. As a whole, Vereinsbank has 403 billion marks in assets and 22,000 employees. Analysts expect German banks to continue expanding in the consumer area, just like U.S. banks did a decade ago. 'If you want to know what will happen in European banking, look at what happened 10 years ago in the States,' Mr. Czepliewicz said. [10] E.U. first quarter industrial production rises 0.5%Industrial production in the European Union rose by 0.5% in the first quarter of 1997 compared with the fourth quarter of 1996, according to Eurostat, the E.U.'s statistical office.Eurostat said that the latest rise was not statistically significant. It said the trend was seen in all main industrial groups - intermediate, capital and consumer goods. Among member states, quarterly changes ranged from 2.3% in Sweden and 1.8% in Finland to -0.2% in the U.K., the only country to record a fall. The volume of industrial production adjusted for working days rose 0.9% in March compared with March 1996. In February, the rise was 2.7%. Over this period there were falls in production in the Netherlands, Denmark and the U.K. while the greatest growth was in Sweden, Finland and Belgium. Eurostat also estimated that E.U. producer prices rose by 0.7% in March compared to March 1996. [11] Lyonnaise and Suez complete mergerShareholders of French municipal services conglomerate Lyonnaise des Eaux approved the combined `between the company and Cie de Suez, effective immediately. Suez shareholders approved the merger June 11.Lyonnaise Chairman Jerome Monod, who now heads Suez-Lyonnaise des Eaux's supervisory board, repeated projections that the combined group will post a net profit of at least 3.5 billion francs ($598.5 million) in 1997 and 7 billion francs in 2001. Monod declined to comment on when, and if, the combined group's financial assets - such as Sofinco and Belgium's Fortis and Generale de Banque - would be sold. However, ''it is clear that a certain number of assets will leave the group, '' Monod told shareholders. The two companies announced their merger in April, after a few abortive attempts over the past few years. Suez Chairman Gerard Mestrallet will Thursday become president of the combined group's management board, which holds operational and executive authority. [12] Corporate and Economic BriefsThe European Union Commission will open a detailed four-month inquiry Friday into the $19 billion planned merger of Guinness and Grand Metropolitan, according to E.U. sources. 'We have serious (competition) doubts,' the sources, who asked not to be named, said. They declined to specify which sectors are of particular concern to the Commission, although the markets for Scotch whisky, gin, vodka and other spirits are believed to be areas where GMG Brands, the merged entity, could wield the most competitive clout. The U.S. Federal Trade Commission is also examining the merger.Nokia Telecommunications and Cosmote, a joint venture between the Greek PTT, OTE, and Telenor of Norway, signed a letter of intent for the supply of a complete GSM 1800 turn-key system in a contract valued at about 100m Europe Currency Units, or ECU's. Nokia Telecommunications is part of Nokia. In a press release, Nokia said the agreement covers deliveries for the next two years. Nokia is the sole GSM network supplier to Cosmote. This is a significant deal for Nokia, being the first GSM system deal in Greece, the company said. Finnish forest-products group Metsae-Serla said it is examining the possibility of listing its Tissue Group on the Helsinki Stock Exchange. Metsae-Serla would retain the majority holding and would continue to control its business, but a separate listing would strengthen the Tissue Group's position as an independent business and enhance its future development. The Tissue Group operates under the name of Metsae-Serla Tissue and manufactures toilet paper, hand and industrial paper towels, tissues and baking paper. The group is a market leader in all the Nordic countries, with an aggregated market share of 45%. The Czech Republic's gross domestic product grew 1.5% in the first quarter of 1997 in constant prices from the same period in 1996, the Czech Statistics Office reported. By comparison, Czech GDP grew 4.7% in the fourth quarter of 1996 year on year in constant prices. The data is higher than many analysts forecasted, who had predicted GDP would be flat or contract from the previous quarter. Italian energy giant ENI expects to turn in a higher consolidated pretax profit in 1997 from the 8.787 trillion lire ($5.2 billion) registered in 1996, according to a prospectus for the privatisation of a third tranche of ENI shares. The public offer for the third tranche is set to begin on Monday. Germany specialty chemicals and pharmaceuticals group Merck said its group sales for the first five months rose 13% to 3.22 billion Deutsche marks ($1.9 billion) from 2.85 billion marks a year ago. Merck also said it expects further 'positive business development' for 1997. The Darmstadt, Germany-based group reported increased sales in each of its three major product categories. Sales of generic pharmaceuticals rose 19% to 1.87 billion marks, while sales of fine chemicals rose 11% to 602 million marks. Laboratory product sales, meanwhile, rose only 4.7% to 728 million marks, based on Merck's exodus from its diagnostics business. [13] World News BriefsSixty-five convicted drug traffickers have been executed in China over the past two days in the run-up to the June 26 International Anti-Drug Day, state press reported. Beijing city police and government officials carried out death sentences on 14 convicted drug traffickers at a mass rally in the western suburbs, the Beijing Evening News reported. 'As Beijing is the capital, we certainly will not permit any drug dealers to carry out any form of illegal drug activity,' Beijing Vice Mayor Meng Xuenong was quoted as saying at the rally.At least two people were killed in Pakistan's volatile city of Karachi, where shops were forced to remain closed for the third day after an attack on an ethnic party's office, police said. They said an unidentified young man was kidnapped an strangled. His body, wrapped in a bag, was found at Mominabad in the city's District West. Bashir Sukhi, 50, was shot dead in his home at Korangi in District East. The deaths raised the toll to more than 100 in ethnic, sectarian and political violence in Karachi so far this year compared to 500 in 1996 and 2,000 in 1995. A month after a change of leadership in neighbouring Congo, Uganda will establish regular air, road and rail links with former Zaire as a first step in promoting regional cooperation. The minister of state for foreign affairs in charge of regional cooperation, Rebecca Kadaga, said Uganda will benefit both strategically and economically from the change of government, which she called a 'pleasant development' for the country. President Yoweri Museveni is considered the principal backer of Congolese President Laurent Kabila's drive to power. Kabila's forces ousted former dictator Mobutu Sese Seko from power in May after an eight-month rebellion. Multinational force soldiers killed an Albanian gunman and others rescued international observers being threatened by two armed gangs, international officials report. It was the first time that the multinational troops had used deadly force since being deployed in the chaos-torn country three months ago to help protect humanitarian aid shipments. Gentjan Ferracaku, the 23-year-old gunman, was shot and killed in Elbasan, 35 kilometres (20 miles) west of the capital Tirana. In another indication of the growing violence in the run-up to June 29 elections, more than a dozen armed men tried to rob 11 foreign election observers in Gjirokastra, 145 kilometres (90 miles) south of the capital. Violence in Cambodia, caused by a rift in the coalition government, is causing U.S. Secretary of State Madeleine Albright to have second thoughts about a planned visit next week. The State Department says Albright is deciding whether it makes sense to proceed with her trip. Cambodian expatriates living in the U.S. share her concern about the situation in their homeland and also regard reports of the capture of former dictator Pol Pot with scepticism. Many Cambodians fled to America in the seventies to escape his murderous Khmer Rouge regime. 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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