Thursday, 30 October 2008

Newspapers : 30th October (en)

Economic medicine . The Telegraph (en)
" ...the Government continues to claim that Britain is "better placed" than other countries to ride out the recession. This relies on it falsely claiming that national debt is equivalent to 43.3 per cent of GDP, a figure that excludes most of its liabilities. Adding the private finance initiative, public sector pensions, Network Rail and its banking interventions to the balance sheet would bring that up to 161.1 per cent ..."

That so many hedge funds have met their nemesis in Germany, the country which has always been most suspicious of their activities, is one. That the car manufacturer, Porsche, the traditional choice of high-flying financiers, should have been the vehicle of their ruin, is another ...
... But now the hedge funds which have taken an almighty pasting are crying foul. They are complaining of a lack of transparency in German stock markets, arguing that they could not see what was coming because Porsche had built up its stake in VW through derivative contracts, rather than straightforward share purchases.
The hypocrisy of this is immense. No players in financial markets are less transparent than hedge funds, which never reveal their holdings and which lobby against greater regulatory oversight with an almost religious zeal. But more importantly, what Porsche did is not illegal ...
... The crucial point about hedge funds is that their way of doing business is incredibly risky. They make colossal bets on movements in markets, often with borrowed money. If the bets pay off, they reap a fat profit. But if they go wrong, as was the case with their short-selling of Volkswagen's stock, it can be disastrous. Normally, this would be a case of caveat emptor. But the risk of hedge fund bets going wrong and the consequent need of the funds to dump assets is borne not only by their clients but the rest of us too ..."

Moscow agrees oligarch bail-out. Catherine Belton, The FT (en)
" ... Russia’s state development bank on Wednesday approved $10bn (£6bn, €8bn) in refinancing for the country’s cash-strapped oligarchs. This came as the first step of a $50bn government bail-out that could redraw Russia’s business landscape ..."

Comment: Brussels must issue sovereign debt. Daniel Gros and Stefano Micossi
" ... The euro has been falling because investors, in their scramble for safety and liquidity, are flocking to US – and to an extent also Japanese – government paper, driving their yields close to zero. US and Japanese paper is considered safer than other government-backed assets – including public debt instruments issued by European governments. In other words, the separate markets for sovereign debt paper of unequal quality issued by European governments cannot compete with the US market for financial flows in search of a safe harbour; and they will not be able to compete in times of turbulence until the European Union develops a unified market for bonds denominated in euros ..."

" ... The Socialist he beat for the presidency, Ségolène Royal, said Tuesday that “with a new plan practically every two days,” Mr. Sarkozy had “a credibility problem.” At the very least, she said, “we must pay attention that each plan announced should start before announcing the next." ...
... But they are also going to look for results, said Katinka Barysch, an economist and the deputy director of the Center for European Reform in London. “For Sarkozy, it’s a tricky strategy,” she said. “In a situation where confidence is in such short supply, having a politician leave the impression he’s in charge and can do things can be good. But if like Sarkozy, you convene one summit after another and present one idea after another, you raise expectations you can’t fulfill.”...
... Mr. Sarkozy — and not him alone — wants the European Commission to relax the rules because of the recession, and that will produce “a debate in difficult circumstances” between France and Germany, which supports the limits and does not want to see European institutions undermined. Mr. Sarkozy has worked politically without any real ideology in this crisis, promising safety to the French, appealing to nationalist instincts and trying to play an important role in Europe, and he has helped himself in the polls, said Pierre Rousselin, the foreign editor of Le Figaro. “Sarkozy is a bit a magician without clothes, but the important thing is the perception, and he’s doing pretty well,” Mr. Rousselin said. “The time will come when people ask, ‘Where’s the beef?’ But I’m not sure we’ve reached that point yet. To energize Europe itself is a pretty good thing.” ..."

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