The gloves are coming off in the European debate on financial regulation

 

Germany’s finance minister Peer Steinbruck yesterday accused the UK of footdragging over financial regulation, Der Spiegel reports. He says the British government was acting as a lobbyist for the City of London, attempting to secure a competitive advantage for their financial companies. He went on to accuse the British of trying to return to the pre-crisis mode and to continue as though nothing had happened.

 

Sweden angers Germany…

Mr Steinbruck will certainly not have liked the comments from Mats Odell, the Swedish finance minister, who has president of the council will play a crucial role in the negotiations over financial regulation. Odell is quoted by the Financial Times as saying that the EU’s focus on hedge funds and private equity groups is misguided and exaggerated, as neither is responsible for this crisis. In other words, the Swedish EU presidency, which began yesterday, is supporting the UK, not Germany. (It will be interesting to see how much real reform we are going to get in Europe. We suspect not much.)

 

…and France…

Sweden also caused some irritations in Paris. Sarkozy was supposed to meet prime minister Frederik Reinfeldt today, but according to Le Monde postponed the meeting over dissatisfaction over an interview he gave to Le Figaro, in which Reinfeldt called on member states to avoid stopping enlargement.  Other subjects of conflict with Paris are budget discipline. Reinfeldt announced that the time for stimulus packages is coming to an end.  Once the Lisbon Treaty is in place,  Reinfeldt also has a different vision for the Council president, who should better not have a “strong personality”.

 

… and this is what they actually want to do

The Swedish EU presidency is to concentrate on two topics only, climate change and the economic crisis. Sweden wants the US and China to engage more for climate change. But it will be difficult to pursue an ambitious agenda for climate change in time of a crisis, writes Le Monde, which says that after the disastrous Czech Presidency, this presidency can only be better. (see Jean Quatremer for another critical assessment with similar conclusions) Reinfeldt is politically comfortable at home and is considered as an honest broker among the EU leaders, especially by the small countries.

 

 

A tax evasion scam

There is a hilarious escalation in the German/Austrian tax evasion dispute. Austria has promised a new law for 2010 to notify any foreign saver who might be guilty of tax evasion, as a result of which hoards of German customers are withdrawing their funds. To facilitate the “legal” withdrawal and repatriation of the funds, Austria is printing special silver coins, with a nominal value of €1.5, but a much higher market value, given the recent increase in the silver price. Now, savers can legally repatriate €10,000 during each cross-border trip, but when you transport silver coins, it is the nominal value that matters. So you can legally very large euro sums across the border, FT Deutschland reports. The only problem now is that the Austrian cannot meet the massive demand for these coins.

 

Green shoot debunk watch

James Hamilton has the latest example of where the global green shoots are both a statistical and real illusion. Looking at US auto sales figures, he said the yoy improvement is due to the relative weakness of Jun 2008 to May 2008, while on monthly terms the current figures are truly dreadful. All categories of auto sales, including imports, are deteriorating.

 

They like him as he is…

 

Here is a quote from Silvio Berlusconi, as reported by Il Sole 24 ore, and other Italian newspapers: “I am the way I am, and I am not going to change. If they like me, that’s how they like me. And the Italian like me, 61% of them.  The like me because I am good, generous, sincere, loyal, and that I keep what I promise.”

 

…. and him too

Nicolas Sarkozy in an interview with the Nouvel Observateur, admits to have committed errors in the first two years of office.  Unprecedented, Sarkozy seems humble and modest, explaining that some time was needed to live up to the challenges of the presidency. He said that with age he become more tolerant, open and settled.

 

 

Fooled by an accounting trick. Why is the share price of Commerzbank rising?

Here is a news story that poses more questions than provides answers. The FT reports that the share price of Commerzbank increased yesterday by almost 20% on the back of hopes that the bank can get rid of its bad assets with the help of Germany’s bad bank scheme. But how is this possible? The article quotes an analyst as saying there is no risk transfer. Commerzbank is still responsible for its bad bank, and its future losses.

 

Interest rates are expected to go up soon

Financial markets are pricing in a rise in European interest rates as soon as March or April, Bank of Ireland economist Dan McLaughlin said, according to a report in the Irish Independent.  Dr McLaughlin, Bank of Ireland chief economist, said money markets were pricing in a rise in the first three months of next year. However, he said that his view was that the money markets were being premature and rates may not rise until later next year.

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