Euro Watch

The European consumer expenditure that accounts to about 60 % of the financial system, declined for the first time in the fourth quarter restricting the economic growth of the region. Since 2001 the consumer expenditure in the European region fell down to 0.1 % for the first time since six years. This happened after developing 0.5 % in the last three months reported the statistics office of European Union in Luxembourg. The development in the sickening domestic products relieved from 0.7 % to 0.4 %, harmonizing the evaluation that was published on 14th February. The towering prices of gasoline, bread and milk were corroding household expenditure control in the European region even as the unemployment declined to the lowest level since 1993.

The economic slowdown of United States at the same time also reduced the demands of European products. Even the increase in the euros records against the US dollar made the exports less feasible, making the companies to reduce investments. Unicredit MIB economist Aurelio Maccario, in Milan, said that the consumer figures were even worse than they were expecting. As the current investments seem to be the best news, the predictions are less glowing and the tendency may soften in the coming months. At present the figures show that the investment growth of the company has slowed down from 1.2 % to 0.8 %, whereas the government expenditure has slipped down to 0.1 %. Even exports had enhanced to 0.5 % in comparison to the previous three months which was at 2.1 %.

Production Level

In a separate report it showed that the inflation of the production level increased in the month of January to the record in 17 months as the energy prices mounted high. The decline in the development of the European region could extend this year, as the nastiest housing downturn of US in 25 years restricted the development in the largest economy of the world. Even the progress of euro against the dollar warns the sales overseas. In the past one year the euro rose up to 16 % against the US dollar, reaching to a record high of 1.5275 dollars on 3rd March. In Brussels it slipped down to 1.5196 dollars by 0.1 % at 11.45 am on the next day.
After this report the European stocks completed its declines. The Stoxx 600 fell to 0.7 % and the Dow Jones Stoxx 600 slipped to 0.9 %. The government bonds climbed up overturning the previous decline. The 10 year bund yield of the Europe’s target slipped to 3.85 % by 1 basic point. From the previous year the economy of the European region grew up to 2.2 % in the fourth quarter, altering the first 2.3 % evaluation. In the third quarter the economy grew up to 2.6 %.

Inflation in the Production Prices

Present day figures show that the inflation in the production prices increased from 4.3 % in the month of December to 4.9 % in the month of January. The energy growth prices also increased to 11 % whereas the prices for durable consumer goods and intermediate goods even mounted high. The Chief European economist Howard Archer said that the report on the production prices will manage the ECB’s worries on increasing pressures which reduce the supplying sequence. In the third quarter Germany’s GDP climbed to 0.3 % when it improved 0.7 % expansion in Netherlands and France, whereas the economic development of Spain increased from 0.7 % to 0.8 % in the third quarter.

Tags: European Economy News, European Union News by Michael Greene
No Comments »

On 4th March, finance minister of Europe made clear that their main concern about the euro against the US dollar. They believed that they had not forced down to manage the intercessions of the central bank in the markets of foreign exchange. Finance ministers from the Eurozone’s 15 countries issued a report on 3rd March stating that in these situations they are very much concerned about the movements of the exchange rates and they believe that the present movements are shimmering economic essentials. As the euro mounted to 1.5275 dollars which was at the highest level since 1999, the finance ministers did began to react. During the previous year the euro had climbed by 6 % against the US dollar which is stronger than the Japanese Yen and Renminbi of China.
Some of the financial market analysts distinguished that the report of Eurozone was comparable in tone to which was utilized before the ECB mediated in September 2000 in support of the euro. On 3rd March financial ministers brought to notice the reality that ECB President Jean-Claude Trichet had stressed before having a conversation, which the authorities of United States had assumed that it was in the interest of US nationals to possess a strong dollar. In the financial market this was taken as a warning sign made by Trichet about the dollar.
However on 4th March, finance minister of Greece Mr. George Alogoskoufis said that there had been no debates between his colleagues on the common financial market intercessions by the US Federal Reserve and ECB. “There were no debates on that between us” said Alogoskoufis. He even added by saying that there was a minor increase of interest regarding the developments of currency market as the instability prolongs and this is what they do not prefer. However this instability does not mean to be drastic, it is a universal dilemma and not only the problem of Europe. He said that on their own they cannot do anything and so they need assistance from all the European countries.
The Eurozone finance ministers group chairman Mr. Jean-Claude Juncker did not even comment on the interventions of the central bank. He said that he believes this might be wise enough to provide goals to the financial markets. However, some of the Eurozone countries like Netherlands and Germany argued that there are benefits in the strength of their currency, which is serving to hold the inflation that is at present at a 14 year high. Moreover they observe modest impact on the export performance of Eurozone.
President of European Commission Jose Manuel Barroso said that the viewpoint was by no method miserable, even though in the last month European Commission had stopped Eurozone’s economic growth forecasts for the year 2008. He also said that they were facing financial headwinds which may have been strong enough during the previous years to sink them. However, at present Europe is beginning to develop and also produce more jobs. At present the employment rate in the region is at the highest level at 66 % and the unemployment rate is at the lowest level at 6.9 %.

Tags: ECB: European Central Bank News, European Economy News by Vanessa Clark
No Comments »

Tensions between the German and French leaders appear to have relieved as they have found solutions on the Mediterranean Union proposal. A freezing burst in the German-French relations might be melting at-least on the serious problem which had divided Paris and Berlin. On 3rd March, both Nicholas Sarkozy, French President and Angela Merkel, German Chancellor declared that they had come to a conclusion regarding the Mediterranean Union proposal made by Sarkozy. In the recent weeks, German Chancellor was constantly criticizing the project. However, on 3rd March both the leaders seemed to have counterfeited the agreement. Sarkozy said that both the leaders have compromised on the proposal that will not prohibit anyone. They have agreed on details and the principles said the French President.
Angelo Merkel the German Chancellor said that the following result should be known as Mediterranean Union and it also should be the joint venture for all the Members of the European Union. This was said in a press conference jointly held with Sarkozy at the CeBIT computer trade fair in which France was the official guest country. Merkel referred to the deal in order to create a union along with the Mediterranean States which border the countries of European Union. This deal should be agreed and well planned in combination with all the members of EU States and not just the Mediterranean states as the French President had proposed in the beginning.
However, both the leaders did not summarize any particular details. The French President said that they did not prefer to capture the spotlight of EU from Slovenia that at present holds the bloc’s revolving administration. France believes placement to be in the month of July and the French President had intended to make the organization of the Mediterranean Union the main attraction of the six months tenure of Paris.
Earlier, Merkel had blamed Sarkozy for avoiding the existing strategies of EU in an effort to boost diplomatic influence oversees of France and for offering expenditure finances from the bloc of 27-nation in order to assist the creation of a new union. Sarkozy hoped to utilize the idea of “Club Med” which was disapproved by the critics, after the holiday chain of France in order to strengthen relations with the nations of Middle East and North Africa including Turkey. However, diplomats from Germany observed it as an effort to set up a second-tier European Union dominated by France. Some of them accused Sarkozy for utilizing it to avoid the membership in the EU for Turkey.
Allgemeine Zeitung from Frankfurt noted on 4th March that the German Chancellor had at first rejected the plan proposed by Sarkozy not due to Germany but due to the interests of the European states. The main problem of France is that it wants to resolve the solution with its bordering states that are even alleged by the German Chancellor as common problems for the European Union such as environmental protection, climate, trade, illegal immigration and the peace process in the Middle East. The German Chancellor insists that this proposal should be included in the European Union’s Barcelona procedure that was established in the year 1995. He also aims at promoting talks between the ten bordering countries and European Union.

Tags: European Economy News, European Union News by James Gardner
No Comments »

Russian’s natural gas company Gazprom stopped its supply of gas to Ukraine after Ukraine failed to solve the disputes of debts which raised concerns over the European supplies. Sergei Kupriyanov said to the reporters in Moscow that Gazprom has cut down its supplies to Ukraine by almost 25 %. However, Gazprom is ready to supply in full to the European consumers he said. Russia has described this argument as a business dispute whereas Ukraine has blamed Russia for forcing energy to uphold its regional pressure. These arguments boom Gazproms discontinuation of gas supplies to Ukraine that disturbed the exports to EU.

Leader of research at the Renaissance Capital in Ukraine said that the gas stores in Ukraine are not enough to survive the cuts in particular during the present serene weather. Andris Piebalgs the energy commissioner of EU said that gas supplies in Europe are not at risk. As Russia will provide Ukraine will transfer. Viktor Yushchenko the Ukrainian President insisted on Yulia Timoshenko the Prime Minister and the head of Naftogaz, Oleh Dubyna to make sure that successful discussions with Russia will not arouse a dispute over the gas problem. Timoshenko had needed to refuse the gas deal with Russia that both the presidents has agreed on 12th of February, avoiding the stoppage of gas supplies by Gazprom.

As Dmitry Medvedev, the chairman of Gazprom won the presidential elections recently, he promised to carry on the policies of defending the interests of Russia being implemented by Putin by all possible measures. The relationship between Ukraine and Russia worsened since 2005 when Yushchenko took over the office as he promised to created good relations with NATO and EU. The gas prices have climbed up since then up to 179.50 dollars. On 7th February, Gazprom declared its first threat to cut down gas supplies to Ukraine after Ukraine had won the consent in the WTO two days before the declaration.

Ilya Savvin said that Naftogaz is revising a new proposal from Gazprom and is about to send an assignment to Russia. In the last week Gazprom demanded repayment of gas debt, consent to further gas supplies and sign a deal for the supply of fuel from Ukraine or else risk the cuts of gas supplies thereby. Chief strategist of UralSib Financial Corporation Chris Weafer said that Ukraine is in a better situation to possess a prolonged argument. Timoshenko is willing to transform the present situation of the agreement. Gas supplies to Ukraine were cut down by 35 % or 46 million cubic meters per day said Savvin.

Gazprom has demanded Ukraine to agree to the formation of these two companies in order to control the gas business by substituting RosUkrEnergo the only gas company that permitted to import gas to Ukraine. Naftogaz and Gazprom equally share the rights of the innovative companies. RosUkrEnergo is mainly owned by both Ukraine and Gazprom. As Gazprom stopped its gas supplies to Ukraine, Germany’s natural gas supplier E.ON has anticipated maintaining normal supplies to its customers in Ukraine. Astrid Zimmermann refused to remark on whether E.ON has observed any changes in its gas supplies. He said that the E.ON draws gas from a number of resources.

Tags: European Economy News by Michael Greene
No Comments »

HSBC has cautioned that the rotation of its business in US might capture until the end of next year, since it disclosed a 17.2 billion dollars strike from the loan provisions and bad debts. The HSBC group exclaimed its write-downs in relation to the non-payments in the last year which climbed up to 63 % more than what they had expected. However the group which is the leading bank is still managing to post a 10 % increase of 24.2 billion dollars in the pre-tax profits. The consumer banking business in US climbed by 80 % to 11.7 billion dollars, however the crisis of US housing has been experiencing a record of non-payments and recoveries as high threats fight back to gather loan repayments.

The bank is at present reliant on the general health of the economy in the US for a rotation said Douglas Flint the finance director of HSBC. A year ago they were expecting a turnaround in the year 2008, but now it looks like it would be at the end of 2009 which is also not sure, said Flint when asked about when the circumstances would mount. Majority of the customers were maintaining their loans in United States with customers having bad-credit are largely obliterated from its functions added Flint. He also said that if in case the unemployment issue stays for a longer period then it is possible they would see a turnaround in 18 months. And if it does not then it is likely to take a longer time as it depends on the common health in the United States.

The entire operation of HSBC in North America supplied 91 million dollars of total pre-tax profits that was maintained by extremely strong presentation in the upcoming markets like Asia. HSBC’s division in Asia Pacific and Hong Kong generated 13.3 billion dollars of profits with the European division adding another 8.6 billion dollars. Profits from the 1,500 branches in United Kingdom were down up to 740 pounds which is a decline of 16 %. HSBC said that this decline was due to the repayment overdraft of 115 pounds in the year 2007. In its financial records HSBC has cautioned that the entire budding repayment could be up to 600 million dollars due to the outcome of legal action.

However the profits from the commercial banking sector in UK topped the mark of 2 million dollars for the foremost time. The consumer business of HSBC in US which comprised of personal loans, credit cards and mortgages deteriorated during the middle of the year with the downfall of 7.9 billion dollars. This was after the strike of 3.8 billion dollars for the initial six months. Shareholders of HSBC said that they have implemented forceful actions in order to avoid further losses which include the shutting down of 400 branches, reduction in the quantity of products and tighter lending measures.

Douglas Flint even pointed out that the problem of bad debts were not to spread from its business of mortgage to its personal or credit card divisions. Stephen Green the chairman of HSBC cautioned that the credit outlook of United States might deteriorate before any signs of enhancement. He also said that the outlook for the concluding year of 2008 is doubtful as the credit outlook and the economic slowdown in United States might well get deteriorated before improving.

Tags: European Economy News by James Gardner
No Comments »

The European inflation remained at a record high of 3.2 % in the month of February. This will further enhance possibilities of the ECB’s rate of interest to be left tightly on hold at the council meeting on Thursday the 7th of March. The ECB overturned its representation as a sluggish business, through its quick response in the previous year due to the warning of financial markets grabbing up and leading an example in forcing emergency liquidity. However, the inflation information on Monday pressed on higher due to fuel and food prices which mean an extra watchful nature is possibly to overcome on the 7th of March.

ECB president Jean-Claude Trichet argued that the main task of the bank is to fight inflation, the task which is undoubtedly different from its responsibility to ensure the systematic implementation of the financial markets. The primary interest rate of ECB is unchanged at 4 % since the month of June last year despite clear signs which show European economic development has severe cuts and slowed down in borrowing incomes by the Federal reserve of United States. Trichet was very much worried about the interest of US in the strong dollar; however the main concern for ECB is about the flow in inflation. The prices for food and fuel seem to be the main concern for the bank.

As the European Central Bank expects to revise its predictions for the development in the present year significantly, it also predicts to revise the inflation to be upwards. Even in the coming year it could show an enhanced threat where the Eurozone inflation could be above the target which is below the normal 2 %. However, few of them are worried that the bank is taking the economic threat too lightly. Marco Annunziata said he feared that the ECB would fall in a trap while trying to avoid the considerable slowdown of growth. Development is slow due to higher inflation in the commodity prices whereas contraction in the credit is not yet been seen in the statistics added Annunziata.

Even as the improvement in the Eurozone was at a record high against the US dollar and also on the basis of trade-weighted controlling the development, it appears that this is even viewed as useful in dealing with the price demands. The vice president of ECB Lucas Papademos disagreed that the impact is not possibly to be significant on the economic activity of the financial market chaos. According to the ECB statistics the borrowing business in the Eurozone raised at the record high which approached 15 % in the month of January.

According to the indices of the purchasing manager, the main concern was in the manufacturing unit of Spain were its production fell for the first time in more than five years in the month of February. However, Netherlands and Germany seemed to be enduring the financial blizzard better. On the other hand ECB has changed its attitude on the possible course of the interest rates. Jean-Claude Trichet normally stressed on the curiously high altitude of insecurity that emerged to open the doors for these cuts.

Tags: ECB: European Central Bank News, European Economy News by Vanessa Clark
No Comments »

Europe’s leading bank HSBC Holdings Plc revealed its second half profits of the year 2007 which rose up to 18 % since budding market loans and an accounting gain alleviates the subprime losses of the United States. According to the estimate of thirteen analysts investigated by Bloomberg, HSBC’s net income most likely rose up to 8.3 billion dollars from 7.1 billion dollars in the previous year. The dreadful loan will most likely increase up to 9.3 billion dollars from 6.7 billion dollars according to five other analysts.

In the month of November last year, HSBC said that the losses of subprime mortgage was spreading to the unsecured loans and credit card as decreasing house prices grasped consumers in the United States. The bank also said that the 1.3 billion dollar gains from the income borrowed before the credit spreads extended in the previous year will assist their profits. The Chief Investment Officer at the Royal London Asset Management Mr. Robert Talbut said that they were looking for accuracy and practicality as much as possible with regard to the present situation and even their contacts to several financial mechanisms.

Royal Bank of Scotland which is based in Edinburgh posted its written note for the year 2007 of about 2.5 billion pounds which was related to the securities of the credit market. Even Barclays based in London posted its written note of about 1.64 billion pounds for the previous year. Stephen Green, the Chairman of HSBC set aside 3.4 billion dollars in the third quarter in order to cover the defaults by United States. The Company said that the division of investment banking has inadequate guaranteed debt responsibilities which are linked to dangerous credit.

The investment banking unit of HSBC which is led by Stuart Gulliver has supplied 29 % of profits in the first half and in the second half it was the leading sponsor of Asia Pacific link outside Japan. After the last weeks scaling down dangerous loans and exiled managers to manage bad debts HSBC appointed Brendan McDonagh as the chief executive officer of the unit in the US. It extended into subprime by its 15.5 billion dollars achievement of Prospect Heights at the household international based in Illinois.

The company prepares to enhance the pretax profit from budding markets and assigned Vincent Cheng as the Asian board director. Standard Chartered Bank posted its second half profits of 1.44 billion dollars, a rise of 23 % this week. It was motivated by the profits from the markets like India and Honk Kong which makes 90 % of the earnings.

In the recent year’s trades in London, HSBC has declined to 12 % in comparison to the 16 % drop in the European Banks index. The market value of HSBC is about 92.2 billion pounds. After HSBC posted 10.6 billion dollars of bad loans in the year 2006, Knight Vinke the investor of Asset Management has sought a self determining appraisal of the HSBC’s plan.

Tags: European Stocks & Shares News by Michael Greene
No Comments »

E.ON, Germany’s major energy service surprisingly made an announcement that it is likely to vend its transmission network, that might influence the European Commission’s future plan to ease up the energy sector. On Thursday the 28th of February, E.ON announced this breakup that could in fact influence the constant combat between the governments of the European Union over the European Commission’s future plan. Peter Hinze, the secretary of the state for the financial system in Germany said that this particular announcement was quite surprising. He even added that the timing of these proceedings is at present a doubtful fixture when the European Commission is about to force through an extremely sharp location against the minority.

Edf of France and Germany’s EnBW & RWE are other energy services in the European Continent which have reacted unemotionally to this development of the latest markets. A senior executive at one of the energy sectors in Europe said to the Financial Times that this surprising announcement made by E.ON is actually unbelievable and this has made everyone unhappy.

This particular announcement could not have approached at a bad time like this he said. E.ON Company’s surprising decision is probably to weaken severe opposition of Berlin to the idea of Brussels to straighten out the energy supply and production division of the company.
Along with countries such as Austria, France, Slovakia, Luxembourg, Latvia, Greece and Bulgaria, Germany has formed an overcrowding marginal group within 27 countries of the European Union. However, the European Commission has greeted the E.ON Company’s preposition by saying that if it has been approved then E.ON would constructively revolutionize the energy sector in the country. And this could generally stimulate opposition in the energy sector to the benefit of industrial and domestic customers of the country.

The energy commissioner of European Union Mr. Andris Piebalgs told the journalists that it would encourage them as the offer made is in fact a productive one and that would even not generate any problems for any of the energy sectors in the nation. He said this over the intention of Brussels to push back for the complete liberalization which is also known as possession unbundling. This plan recommends the splitting up of energy companies transmission and production divisions by means of forcing the main company E.ON to vend its transmission networks.

Over the predictions for his suggestions by getting the permission from the groups of European Union Mr. Andris Piebalgs said that all the member states would without doubt like to have a deal by the month of June. And this deal would be able to overpass the dissimilarities. However, he said, he cannot guarantee this but there is definitely a fair amount of chance to implement this deal in the near future.

Tags: European Economy News by James Gardner
No Comments »

The Russian leading gas producer Gazprom is expected to cut down shipments of natural gas to its neighboring country Ukraine on 3rd of March. Due to the price disputes which dented the gas supplies to Europe in the year 2006, both the countries confronted on their main energy supplies. At present the Russian gas dominant Gazprom has warned to cut down gas supplies to Ukraine by almost 25 %. This has been done in opposition to the non settlement of 1 billion dollars of gas bills for the previous & present year by Ukraine. It has even claimed that Ukraine has not agreed to sign a treaty for the gas supply for the present year.

On Sunday the 2nd of March spokesperson of Gazprom Mr. Sergei Kupriyanov said that it is still likely that the treaty can be signed by the cut-off date by 10 am in Moscow. However if not then the gas shipments to Ukraine will be cut down to around 25 % on 3rd of March. This disagreement started just three weeks after the Russian President Vladimir Putin and his counterpart Victor Yushchenko declared a last-minute declaration to avoid the reduction of gas supplies to Ukraine. Gazprom is one of the largest gas producers which possess several huge pipeline system transporting gas supplies to the whole of Europe.

The handshake treaty between both the countries predicted the elimination of notorious middlemen from the gas deal. This agreement was anticipated to avert the repetition of price disputes in the year 2006 which caused shortage of gas supplies in the European countries. Since then both Naftogaz Ukrainy and Gazprom have failed to sign an agreement subsequent to the presidential settlement. In the month of February, Gazprom newly warned Ukraine to cut down the gas supplies; however both the countries have persisted that the consumers in Europe would not be influenced by this.

On the 1st of March, the Prime Minister of Ukraine Ms. Yulia Tymoshenko expected that Gazprom would not cut down gas supplies in conflict that the obligations were not fulfilled by Ukraine. Yulia Tymoshenko repeated her previous promises to eliminate the murky middlemen businesses from the gas deal between Central Asia, Russia and Ukraine. She called these middlemen as fraud & dishonest and raised the spectrum that these middlemen might have avoided to make the payments to Gazprom. This remains doubtful when an ultimate agreement could be achieved and if it could include additional price rises of gas for Ukraine.

Managing the disagreement is observed as a litmus check for Yulia Tymoshenko who has returned as the prime minister last year subsequent to the strong presentation in the parliamentary elections. The agreement of cutting down gas supply is not observed as a big warning to Ukraine as the demand for gas has lowered since last winter due to the unusual weather. While addressing the journalists, Yulia Tymoshenko said that the government is looking to cut down the wastage of gas consumption in the country that consumes about 70 billion cubic meters of gas annually.

Tags: European Economy News by Vanessa Clark
No Comments »