Anthony Peters, SwissInvest Strategist
After the initial shock that he had a) been passed over and that b) this government evidently believes that there is nobody in this country capable of managing the Bank of England, I now hear commentators lining up to praise the qualities and suitability of Mark Carney, the governor of the Bank of Canada.
Whether he finds himself in the job because or despite being a Goldman Sachs alumnus will of course remain a secret forever. However, with the likes of Tim Geithner and Mario Draghi both sporting Goldie’s on their CV, he’s in good company – but that he was at the BOC anyhow.
As Mr Carney wrote his Masters and PhD at Oxford and also spent time working at Goldman in London, he sort of qualifies as being an honorary Brit as opposed to Sven Goran Eriksson and Fabio Capello with whom he has been compared and who both managed the England football team but they, by contrast, never played in the league here.
There is no way that I would wish to cast aspersions upon Mr Carney’s enormous experience and undoubted intellect and I would also not question his suitability for the job, but I do take issue with the plaudits which are being heaped upon him for the way he has steered Canada through the financial crisis.
The cautious and tight policies which prevented the Canadian banks from sailing into the rough waters were put in place on the back of an earlier all Canadian issue in a similar way in which the Scandinavians also missed the full force of the storm more by default than by design. Mark Carney inherited a healthy banking system in a commodity-driven economy and is now about to take on a broken and over-indebted one in what is now in effect a post-industrial wasteland. I wish him (and us) lots of luck but anyone who expects that he will bring a bottle of magic potion with him is surely due a rude awakening.
France and Lakshmi Mittal
A propos magic potion, where is Getafix when France needs him most? Asterix and his large friend Obelix did a cracking job in teaching the invading Romans a lesson or two about how not to mess around with the Gauls. Well, the “new” Roman happens to be Indian and goes under the name of Lakshmi Mittal.
The man who believes himself to be the son of Asterix is France’s Minister for Industrial Recovery, one Arnaud Montebourg who has said that steel maker ArcelorMittal is no longer welcome in his country, deepening a war of words following the company’s announcement to close two furnaces in eastern France.
Montebourg – with some reason – argues that Mittal has broken promises he made when he took over Arcelor in 2006 with respect to plant closures. That neither the French nor the global economy are what they were in 2006 might have escaped the man who has evidently had his nose stuck firmly in Das Kapital rather than using his time to look around and see what’s going on.
If France is going to be looking for FDI, it can probably now whistle until the end of the current Presidency – or until the President acknowledges that one can’t run a country and an economy on nonsensical demagoguery. Did I hear Montebourg utter the phrase “Ils sont fou, ces Indiens”?
The way in which PSA Peugeot Citroën was arm-twisted not to close the Peugeot plant at Aulnay near Paris at the cost of 6,500 jobs will have emboldened Montebourg but the frankness of his xenophobia is staggering by anyone’s standards. One might expect such outbursts from a Russian politician but this is France, the home of liberty, equality and fraternity. Mittal flies to Paris today to meet with President Hollande – wow, how would I like to be a fly on the wall at that one!
Finally – in more than one sense of the word – to the Greek solution. In my mind there was no question that they were going to find a way out of the labyrinth. However, whereas Theseus entered and exited the Minotaurian labyrinth by pulling a length of string with him and following it as he exited, the assembled eurozone ministers, the IMF and the ECB have simply reverted to the famed “big bazooka” and have blastered it to kingdom come. With all my thanks to Commerzbank’s excellent research team, here are the salient points of the package:
”♦ Elements: Deal involves 1) lowering of bilateral loans by 100bp, 2) lowering of EFSF fees by 10bp (€600m), 3) extensions of bilateral and EFSF loans by 15 years, 4) deferral on EFSF interest rates (€44bn) by 10 years, 5) transfer of amount equal to ECB SMP profits by member states from budget year 2013 and 6) a “possible debt buyback”.
♦ Buyback: Exchange prices are expected to be no higher than closing prices on Friday (around 28 for the strip). Greece is responsible for announcing and conducting the tender. It is our understanding that the announcement or the tender will have to take place before December 13, although some comments could also imply that the tender will have to take place by then. The financing shall take place “within the programme”. No further details about the modalities, volumes and, crucially, the EFSF financing of the buyback were given yet! The reference to “tender or exchange prices” in the statement suggest that the EFSF may pay at least part of the buyback in bills or bonds.
♦ Debt target has been relaxed to 124% of GDP by 2020 and 110% by 2022. Euro area member states will “consider further measures and assistance” when Greece reaches an annual primary surplus. Reading between the lines: a radical haircut could still happen at a later stage, ie. after the German elections.
♦ Disbursement: Formal decision on €43.7bn disbursement (€10.6bn for budget and €23.8bn via EFSF recapitalisation bonds) shall be made by December 13 following the completion of national procedures and a review of the outcome of the buyback. Money will be paid in three subtranches during Q1 depending milestones laid out in the MoU (including passing of tax reform). Schaeuble said the German Bundestag could start deliberations on Friday if documents are translated.”
You can’t say that there’s nothing going on – I wonder what markets will make of all of this … and for how long.