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Wednesday, 14 August 2024
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European Business News (EBN), 97-10-14European Business News (EBN) Directory - Previous Article - Next ArticleFrom: The European Business News Server at <http://www.ebn.co.uk/>Page last updated Tue, October 14 5:43 PM CETCONTENTS
[01] Italy parties strike budget deal for sake of EMUFive days after bringing down the government, Italy's hard-line Communists made peace with Premier Romano Prodi to keep the country on course for the European Monetary Union.President Oscar Luigi Scalfaro formally reinstalled Prodi as premier and told him to seek a vote of confidence in parliament. With Communist support, he now has the votes to win it. Communist Refoundation leader Fausto Bertinotti met with Prodi to set down details of the agreement. 'We've come up with an agreement for one year, maybe longer,' said Bertinotti after their hour-long talks. The far-left leader said that a new Prodi government would seek to pass legislation next January, which would set a 35-hour legal work week for 2001. Only firms with more than 15 employees will be affected. Bertinotti also said their agreement allows for 500 billion lire ($290 million) less in budget spending cuts next year. 'This agreement will permit us to overcome the crisis. We are pleased and the solution we have reached is an important step in bringing Italy and it's government in the right direction. The agreement is for all of 1998 but we hope that the accord can continue,' Bertinotti said. The original budget called for cuts of 15 trillion lire, and tax increases totalling 10 trillion lire. The 500 billion lire would instead be used for job programmes, and the government would try to make up that increase in spending by more vigorously chasing tax evaders, Bertinotti said. Prodi, in a statement, also said the 500 billion lire would be used for jobs. The statement said the centre-left government would seek 'common objectives' on social issues. Planned cuts in pension payments would proceed, according to early statements, but changes in how long-time blue collar workers' pensions are paid have been cancelled. [02] Franco-German finance meeting paves way for coordinated economic policiesGermany and France paved the way for co-ordination of economic policies among currency union participants at a joint meeting between German and French finance ministers and central bank heads.'I'm extremely happy to tell you today at Muenster that the German and the French agreed on the idea of this economic co-ordination forum, which will now be discussed with our European partners,' French Finance Minister Dominique Strauss-Kahn told reporters at a joint press conference following the meeting. The agreement was seen as a victory for the German standpoint that economic policy can best be coordinated informally on the fringes of future regular meetings between European finance ministers. France has long pushed for political co-ordination among currency union members, at first asking for a formal body and later reducing its demands to an informal body. Strauss-Kahn said that Italy, Austria, Spain, Belgium and Luxembourg are already on board the political co-ordination. The most resistance so far had come from the Germans, who have been concerned about central bank independence. Meanwhile, Bundesbank President Hans Tietmeyer expressed his satisfaction that such co-ordination won't encroach upon the sovereignty of the future European Central Bank. 'ECB independence hasn't been touched; it is fully preserved. There will be no interference in the ECB's authority,' Tietmeyer said. While German and French officials said they had resolved differences on the issue, both sides stressed that the idea of coordinating economic policy in this fashion will require approval by other European Union members. 'At the very least between us, we are in perfect agreement on the need for this forum and content of what will be discussed,' Strauss-Kahn said. German Finance Minister Theo Waigel said the content of such co-ordination will include the exchange of economic data and monitoring of data, budgetary efforts, economic growth and planning, tax reforms, wage costs, market adjustments and preparations for meetings of the Group of Seven industrialised countries, as well as an 'early warning' system for economic woes. Both sides said they didn't discuss methods for determining the bilateral convergence rates between euro-zone members to be preannounced simultaneously with currency participants in early May. However, Tietmeyer noted that the two sides had made progress in preparing for currency union. 'France and Germany took a large step toward the preparation of the functioning of the European single currency starting from Jan. 1, 1999,' Strauss-Kahn said. Waigel noted that the two sides 'acknowledged' the E.U. Commission's economic forecasts released earlier in the day. Asked after the meeting, Waigel said the commission's forecast that France's budget deficit will be 3.1% of gross domestic product in 1997 wasn't discussed at Tuesday's meeting. Regarding last Thursday's interest rate increases by several European central banks, notably the German and French rises, Tietmeyer said both sides deemed them 'appropriate.' Thursday, the German central bank raised its securities repurchase rate to 3.30% from 3.00%, a move that was followed minutes later by the Bank of France, raising its key intervention rate to 3.30% from 3.10%. Bank of France Governor Jean-Claude Trichet maintained that the French central bank's interest rate move was completely independent of the Bundesbank's decision. It was not, he said, done for the benefit of Spain, Portugal and Italy, whose higher rates must converge before the start to EMU, should they become participants. Uta Harnischfeger, Caroline Humer, and Monica Houston-Waesch, Dow Jones Newswires, Muenster, Germany [03] German retail sales slump is expected to continue until mid-1999German retail sales will continue slumping until mid-1999, industry association HDE said after news of one of the biggest monthly drops in sales this decade.Retail sales fell a real, or inflation-adjusted, 7.6% in August from a year earlier, the Federal Statistics Office said Tuesday. 'People simply have less money for consumer goods,' a spokesman at the HDE said. While higher taxes and state charges have eaten away at disposable income, consumers are also less likely to buy durable goods. 'In the decision for a new suit or a trip to Mallorca, the vacation usually wins,' the HDE spokesman said. For 1997, the HDE expects retail sales to fall a real 2%, and then to stagnate, at best, in 1998. Even the improvement expected in the middle of 1999 won't be significant, HDE's spokesman said, but only a return to 'normal' growth. To be sure, Juergen Pfister, head of economic research at Commerzbank AG in Frankfurt, said retail sales could turn up slightly as soon as 1998. 'We expect a slight improvement in 1998,' Pfister said, saying 'income will increase and there will more people employed.' Pfister added that the planned reduction in Germany's solidarity surcharge on income tax, to 5.5% from 7.5% in 1998, will boost retail sales. But even that will be partly offset by an increase in social security contributions, he said. HDE's spokesman agreed that a lower solidarity surcharge could support an increase in retail sales next year, but said the effect would be limited. The spokesman criticised the idea that higher wages could truly improve retail sales, saying that the solution has failed before and would likely only result in more German jobs being transferred abroad. The HDE expects a further 30,000 retail industry jobs to disappear in 1997. Meanwhile, Commerzbank's Pfister tempered his outlook for an improvement in retail sales in 1998 and 1999 with the forecast that any growth would be 'very limited.' As in 1998, a reshuffling of government taxes and charges will mean only small net relief for consumers in 1999. 'There's a good possibility that value-added sales tax, or oil taxes, or both, could go up (in 1999),' Pfister said, which would counteract lower welfare insurance payments. Sarah Sloat, Dow Jones Newswires, Frankfurt[04] Most EU countries are on course to join EMUThe European Union issued an upbeat assessment of efforts forge a common European currency, despite new figures showing core nations failing to meet key conditions for joining.Forecasts released by the European Commission, the Union's executive body, showed France failing to cut its 1997 budget deficit to the required level of 3% of gross domestic product while also showing Germany's public debt rising above the 60% of gross domestic product allowed under the single currency rules. The Commission said, however, that signs of a recovery in Europe's economy would keep the single currency, which will be called the euro, on track for launch on Jan. 1, 1999. 'Economic recovery is well established in Europe and growth is gathering speed,' said a Commission statement. 'Member states are making good progress with economic convergence required for participation' in the monetary union. The Commission's twice-yearly forecasts were bad news for France which has been struggling to reduce its budget gap in line with the currency plan. France is seen recording a deficit of 3.1% of GDP, joining Greece as the only EU members failing to hit the deficit target. German debt is seen rising to 61.8% of GDP, outside the qualification criteria where debt is supposed to be below 60% or falling towards that level. Although the figures will put pressure on France and Germany to make further belt-tightening efforts, it's unthinkable that the EU's two biggest economies will be kept out of the single currency. EU leaders will make the final decision on who qualifies for single currency at a summit meeting in April or May. The leaders will make their decision based on real figures for 1997 showing which of the nations meet targets of price and exchange rate stability, low interest rates and sound public finances. The treaty setting out the single currency rules allows for leeway to be granted in exceptional circumstances. The Commission's figures are considered an important indicator of who will get into the currency bloc. Apart from the French and German glitches, the forecasts show all 15 EU nations except Greece on course for the monetary union. Despite concerns generated by the current political crisis, the Commission said Italy should remain on target to qualify for the euro. Its deficit is predicted to drop to 3% this year, and if a strict budgetary plan is maintained, to 2.7% next year. Although on course for meeting the requirements, Denmark and Sweden have said they want to keep their own currencies. The British government says it is 'very unlikely' to give up the pound for the euro in 1999. After sluggish growth of just 1.8% last year, the forecasts show the EU economy expanding by 2.6% this year, followed by 3% 1998 growth. Despite the bright growth prospects, unemployment seems set to stay high with the jobless rate steady at just over 10% this year and next. French and German unemployment were seen as particularly stubborn. In Germany, the jobless rate was forecast at 10% this year, falling to 9.8% in 1998. French unemployment was shown at 12.5% for 1997, 12.3% next year. EU leaders have called a 'jobs summit' next month in Luxembourg to debate how to convert renewed economic growth into more jobs. [05] Airbus chairman Reuter to step down from post a year ahead of scheduleThe four partners of the European Airbus aircraft consortium said former Daimler-Benz head Edzard Reuter, plans to step down from his post a year ahead of schedule.The Airbus firms will at the same time appoint a new president for Airbus Industrie's management and a new supervisory board chairman, with the future chairman to be drawn from one of the Airbus partner presidents, the consortium said. Reuter's five-year term is slated to end in March 1999, but he told the consortium that he wants to resign in the early months of 1998. Such a move would coincide with the March 1998 end of Jean Pierson's term as Airbus managing director. Reuter's office couldn't immediately be reached for comment. According to people familiar with the matter, Reuter wants to leave early in order to allow a new top Airbus team to take over next year, in preparation for the plane maker's planned transformation from a loose consortium to a centralized company. There have been some indications, however, that he has felt excluded from the restructuring discussions, which may also have played a part in his decision, said people with knowledge of the situation. The four Airbus partners are Daimler-Benz Aerospace of Germany, Aerospatiale of France, British Aerospace and Construcciones Aeronauticas of Spain. [06] Alcatel plans more European partners after Thomson mergerAlcatel Alsthom chief executive Serge Tchuruk said the company will be looking for European partners to expand Alcatel's new partnership with Thomson-CSF, Dassault and Aerospatiale.He also said the defence and electronics group's purchase of part of the government's stake in Thomson-CSF would boost the defence and electronics group's sales by 17 billion French francs ($2.9 billion). 'All told, the operations that will be added to Thomson-CSF represent 17 billion francs in sales,' said the Alcatel CEO in an interview with the French daily Le Monde. 'This is the largest industrial restructuring ever accomplished in France.' Tchuruk said he would be looking towards Thomson-CSF, especially when reinforced, becoming an actor that has to be reckoned with in the restructuring of the European defence sector. Asked whether he would name a new president to head Thomson-CSF, Tchuruk said current Thomson-CSF chief executive Marcel Roulet would be allowed to serve until his contract expires. 'After that, we'll see,' Tchuruk said. Tchuruk denied the merger scheme unveiled yesterday by the government left other French defence companies on the sidelines. 'Discussions will certainly be initiated...with other industrial groups such as Sagem, the Compagnie des Signaux and others,' he said. Yesterday, the government announced it would sell no more than 23% of its 58% stake in Thomson-CSF to a partnership led by Alcatel and including electronics group Dassault Electronique and aerospace company Aerospatiale. The government's goal is to build a French consolidated defense-electronics company around Thomson-CSF. It chose Alcatel's bid over one presented by defence and publishing holding group Lagardere. [07] Greenspan warns against controls over global investmentStepping into a debate over the best way to handle future currency crises, Federal Reserve Chairman Alan Greenspan warned that it would be a mistake to impose controls on the billions of dollars of investments made daily by traders around the world.Greenspan's comments, prepared for a seminar on global investments, represented his most extensive review of the financial turmoil that has engulfed several Asian countries this year. Greenspan conceded that the speed at which investors can send money in and out of a country has been accelerated by computers and global communications networks, but he said it would be impossible to revert to a simpler time. 'We cannot turn back the clock on technology and we should not try to do so, ' he said in remarks to a day long seminar at the Cato Institute, a Washington think-tank. Greenspan said the increased flow of investment from one country to another has worked to the benefit of developing nations, providing them with needed money to build roads, ports and other infrastructure and raise the standard of living for their citizens. But Greenspan said the 1994-95 peso crisis in Mexico and more recently the severe currency turmoil that has struck several Southeast Asian nations, including Thailand, Malaysia and Indonesia, underscored the financial problems that can quickly strike when sentiment suddenly changes and investors stampede to remove their money from a particular country. Malaysian Prime Minister Mahathir Mohammad last month threatened to clamp controls on foreign currency trading and blamed his country's troubles on currency speculators such as George Soros. While he did not mention Mahathir by name, Greenspan said any efforts to impose restrictions or controls on financial flows would likely have 'adverse, unintended consequences.' He said the biggest danger would be that investors would be less likely to put up the money developing nations need to produce jobs. Rather, Greenspan urged that technology be used to contain the new stresses on financial market by enhancing the ability of a country's banks to detect bad loans and improve the quality of statistics government agencies release. Greenspan said that in the case of both Mexico and Thailand, not enough accurate economic information was released in a timely manner to head off a financial crisis. 'Such disclosure would help to avoid sudden and sharp reversals in the investment positions of investors once they become aware of the true status of a country's and a banking system's financial health,' he said. [08] China, EU claim progress over Beijing's entry to WTOChina and the European Union said they saw progress in bilateral negotiations on Beijing's accession to the World Trade Organization, with both sides saying that China's 10-year drive to enter the global trading body is entering the final stage.The progress came in talks between Leon Brittan, vice president of the EU's executive arm, the European Commission, and Wu Yi, China's minister of foreign trade and economic cooperation. 'Although a considerable distance remains between our positions on a number of points, we now have greater confidence that real and concrete progress can be made and we are now actively engaging in a crucial stage of these negotiations,' an agreed statement between the Brittan and Wu said. The statement said the EU and China agreed on a set of principles governing negotiations for China's WTO accession. China pledged to phase out all its quotas on imports according to a clear schedule leading to the elimination of its last remaining quotas, although a fixed date was not set, the statement said. Brittan said in the statement the agreement on WTO talks is a 'conceptual breakthrough which should reinvigorate the whole accession process.' 'I believe we can now enter the last lap of the negotiations for China's accession to the WTO,' he said. The two parties also agreed a tariff-cutting package should include the limitation of 'peak' tariffs in addition to the overall reduction of China's tariff average in order to facilitate market access for goods. On market access in services, Beijing agreed to improve its commitment so as to offer a real perspective of market opening on the basis of fair and transparent principles in which all non-Chinese services providers enjoy balanced and equitable access, according to the statement. The two sides would resume talks in Geneva in December on 'an agreed formula' for an overall reduction in China's tariffs, and on improved commitments by Beijing on market access for services, it said. [09] Endemol plans expansion into UK, Italy television marketsEndemol said it plans to start television production operations in Britain and Italy next year as part of an ambitious expansion.'We're planning further international growth in the large European television markets,' said company co-founder and chairman John de Mol. 'Our aim is to be among the top three in the countries where we are active.' Endemol is currently among the top three entertainment companies in the Netherlands and Germany. De Mol said the company is looking for acquisitions but that minority stakes in other companies are a more likely source of growth in the short term. 'We are actively looking and are in discussion with several (takeover) candidates,' he said, adding: 'In the beginning, acquisition growth will come mainly through minority participations.' A main focus of Endemol's growth is the expansion of its distribution activities. Financial director Aat Schouwenaar said those will contribute sales of 80 million Dutch guilders to 100 million guilders ($40 million to $50 million) in three to four years. 'We expect distribution sales to grow by tens of millions of guilders annually,' Schouwenaar said. [10] SEPI refuses to expand Endesa share sale in trancheSpain's state industrial holding agency, SEPI, said it won't expand its share sale in the privatization of the state-run electricity company Empresa Nacional de Electricidad, known as Endesa.SEPI told the Spanish securities exchange commission it has decided to not offer an additional 10% of Endesa for sale in this tranche. SEPI, Endesa's main shareholder, is privatizing a quarter of its 67% stake in the company. Of that quarter, about two-thirds of the shares are available for domestic investors, with 133.9 million shares available for private investors, 15.6 million shares for employees and 26 million shares for institutional investors. The remainder of the stake will be offered to international investors, with 26 million shares available for US and Canadian investors. The government hopes to raise about one trillion pesetas ($6.77 billion) from the sale. A spokesman for SEPI said that sometime after trading closed yesterday, the maximum price could be set for the shares being sold to private investors. The company is expected to set its final share price Oct. 20, with shares to be allocated Oct. 21. While the spokesman reaffirmed that Endesa is to be fully privatizated in 1998, he couldn't give a date for the likely final stage. Bidding for Endesa shares has set a Spanish record, according to industry officials. On Oct. 6, bids had topped 1.3 million petitions for a value of about 3.3 trillion pesetas. The previous record was set in February when the government received a total of 1.2 million bids for shares being offered at the Telefonica privatization. [11] Roche 9-month sales rise 19%Roche Holding posted a 19% increase in sales over the first nine months of this year compared with the same period last year.A statement from the pharmaceuticals group said sales rose to 14 billion Swiss francs ($9.6 billion) from 11.7 billion francs ($8 billion) last last year. Roche as usual gave no profit figures for the first nine months. It forecast a rise in full-year income before extraordinary provisions related to acquisitions. 'Roche anticipates another good result this year. Before extraordinary provisions related to acquisitions, Roche expects a further increase in income,' Roche said in its statement on nine-month sales results. The annual sales figure for 1996 was 16 billion francs (then $11.8 billion), with a net profit of some 3.9 billion francs (then $2.9 billion), the statement said. The group's four divisions - pharmaceuticals, vitamins and fine chemicals, fragrances and flavours, and diagnostics - each contributed to this year's sales increase. Fragrances and flavours provided the biggest rise, with sales jumping by 34%, the company said. The largest division, pharmaceuticals, managed an 1 rise. Drug sales rose strongly across the board, except in the United States, where revenue from the epilepsy drug Rivotril has declined since the patent expired. Roche highlighted the launches of its cardiovascular drug Posicor and Parkinson's disease product Tasmar as providing the 'groundwork for continued solid growth.' In March this year, it announced a human study for new flu treatment. The group has expanded steadily during the 1990s. In 1994 it completed a $5.3 billion takeover of Syntex, and last May 1997 it announced a $11 billion takeover of Bermuda-based Corange, owner of the diagnostics and pharmaceuticals business of Boehringer Mannheim Group of Germany and DePuy of the United States. The company said it expects US and European regulators 'several more months' to approve the takeover. From January 1, 1998, Franz Humer will take over as chief executive officer. Fritz Gerber, the current CEO, will retain his position as chairman. [12] BG accepts Ofgas' proposed price cuts for Transco armBG accepted gas industry regulator Ofgas' final proposal for price cuts for its Transco gas-distribution arm, ending a months-long dispute and taking pressure off BG's shares.Ofgas said Transco must cut its average transportation price by 'around' 25% in 1997-98. BG accepted that figure, which is more than the 21% one-time cut recommended by the Monopolies and Mergers Commission in June. Ofgas said it wanted a bigger cut than that recommended by the MMC because gas demand has since risen above the forecast levels Transco had provided to the MMC. To compensate, and to allow Transco to meet the increasing demand for gas, Ofgas will allow 50% of Transco's revenue to vary, based on the amount of gas it actually transports. 'Our task now is to get on and make a success of the business within the regulatory framework established,' said BG Chief Executive David Varney. Investors and analysts echoed Varney's sentiment. They said the news removes uncertainty hanging over BG's business and added the final price- cut package shouldn't greatly hinder Transco's profitability. 'After 18 months of basically civil war...peace has broken out,' said Nigel Hawkins, utility analyst at Yamaichi International (Europe). [13] Corporate and Economic BriefsItaly's industrial producer price index rose 0.3% in August from July and rose 1.7% over the August 1996, the state statistical institute ISTAT reported. ISTAT also reported the wholesale price index for August. The statistical agency added that wholesale prices had fallen for eight months running from the corresponding months the previous year.UK-based holiday company Airtours said it has bought a property called Baia Feliz in Gran Canaria for £11 million. The property will be developed by Airtours as a timeshare resort at a further cost of around £7 million over the next 9 months. The property will consist of 15 apartments, and it is anticipated that the first units will be available for sale in summer 1998. Spain's consumer price index rose 0.5% in September from August, raising the year-on-year rate to 2% from 1.8%, the national statistics institute said. Underlying inflation, a measure of consumer prices excluding fresh food and energy prices, increased 0.3% in September, raising the year-on- year underlying, or 'core,' rate to 2.1% from August. Ofgas, the UK gas industry regulator said that BG's distribution unit Transco must cut its average transportation price in 1997-98 'by around 25%.' The figure comes in above recommendations from the Monopolies and Mergers Commission of 21%. Ofgas said it has made the adjustment to account for the fact that demand for gas is currently running above Transco's 1997/98 forecasts. 'These extra volumes would increase Transco's revenues - and the costs to consumers - above the amount the MMC considered necessary.' Ofgas also said that to provide the company with a financial incentive to meet the increasing demand for gas, Ofgas is allowing 50% of Transco's income to vary with the amount of gas it transports, as recommended by the MMC. Ericsson said it has signed network expansion contracts worth $113 million with China's Shandong Posts & Telecommunications Administration. The contracts represent the fifth expansion of SDPTA's GSM network in the Shandong province and will increase its capacity to over 1 million subscribers, Ericsson said. GSM stands for global system for mobile communications and is the world's most widely deployed digital wireless communications standard. The expansion will be completed and put into service by the end of April 1998. Ericsson has undertaken all of SDPTA's expansions since it signed its first GSM network contract with the company in 1995. Japan's Posts and Telecommunications Ministry plans to abolish the approval system for telephone charges and liberalize rates as early as next summer. The deregulation, part of a series of steps by Prime Minister Ryutaro Hashimoto to revitalize the economy, is expected to prompt stiff price-cutting competition among telecommunications companies, a ministry official said. Netscape Communications and America Online are expected to announce a new alliance in messaging services, the first rapprochement between the companies since AOL jilted Netscape in a deal with Microsoft last year. The two companies will launch a jointly branded service that will tell users of Netscape's World Wide Web software when friends or associates are on line, and make it possible to start a dialogue with them by sending them messages that quickly pop up on their computer screens. The instant messaging capability is already available to AOL's nine million members, but the agreement will allow them set up the new connections with Netscape users and vice versa. UK Ramco Energy, a company focused on the Former Soviet Union and Eastern Europe, announced losses in its interim results for the six months ended June 30, 1997. Results for the six month period in comparison to the same period in 1996 were as follows respectively. Overall turnover was £3.1 million compared to £4.2 million. An operating loss of £1.5 million was recorded compared to an operating profit of £0.6 million in 1996. A pre-tax loss of £0.4 million was announced compared to pre-tax profits of £0.9 million in 1996. Dutch photocopier Oce-Van der Grinten said that third-quarter net profit rose 30% to 50.5 million guilders ($25.6 million). Results were boosted by a 21% increase in sales, acquisitions and exchange rates, while autonomous growth was 5%. All divisions contributed to the group's growth but Engineering Systems and Office Systems were the two most profitable units, Oce said. Swedish shipping and passenger ferry group Stena Line said it will sell its ferry Lion King to AS Hansatee of Estonia, making a capital gain of 75 million kronor ($10 million). The sale price for the multi-purpose ferry is 230 million kronor. The vessel, to be delivered in December, will be replaced on its current route, between Swedish Halmstad and Grenaa in Denmark, by the chartered ferry Stena Nautica. AS Hansatee intends to use the ferry on its Helsinki-Tallin route, Stena Line said. Spain's state industrial holding agency, SEPI, said it won't expand its share sale in the privatization of the state-run electricity company Empresa Nacional de Electricidad, known as Endesa. SEPI told the Spanish securities exchange commission it has decided to not offer an additional 10% of Endesa for sale in this tranche. SEPI, Endesa's main shareholder, is privatizing a quarter of its 67% stake in the company. Of that quarter, about two-thirds of the shares are available for domestic investors, with 133.9 million shares available for private investors, 15.6 million shares for employees and 26 million shares for institutional investors. The remainder of the stake will be offered to international investors, with 26 million shares available for US and Canadian investors. 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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