Rothschild’s sweet return
SOME 26 years ago the Mitterrand government in France nationalised Banque Rothschild. Now the tables have been turned.
Baron David de Rothschild who nursed the French bank back to health and now chairs Rothschild & Co, must be watching with admiration as his protege Emmanuel Macron marches on the Elysee Palace.
It is hard to imagine any banker winning high office in Britain or the US, where public opinion is still dead set against the financiers. But a hard-nosed banker in Paris may be just what France needs.
If, as he has promised, Macron slashes corporate taxes and introduces flexible labour markets, then potentially France’s high unemployment rate of 10pc of the workforce and 25pc of the young could finally be tackled. Certainly the financial markets are betting on wholesale reforms.
Relief that extremists from the Right have been vanquished by a neo-Conservative sent share prices across the Continent soaring. Most fascinating, the rally was led by bank shares. Europe’s biggest banks, including BNP Paribas and Deutsche Bank, climbed by almost 10pc. Even Italy’s badly damaged banks managed a rally.
Stronger equity prices help to put a safety net under Europe’s banks, but it is hard to put to one side the problems of overbanking, bad debts and poor profitability identified by the International Monetary Fund.
It is not clear what kind of magic Macron would need to conjure up to clear Europe’s banks of €1trillion of non-performing loans that have crushed lending across the region.
After the defeat of the far-Right in the Netherlands and the likely burst of the Marine Le Pen bubble, a relief rally is justified. There is a huge amount of work to be done for the cockerel to crow again.
Field work
AS MUCH as one admires Frank Field MP for tireless work on pensions and welfare reform, it is hard to support his continuing vendetta against Sir Philip Green. The retail tycoon went further than almost any other former owner in coughing up £363m of his own cash to make good the BHS pension fund. had the pensioners been dumped into the Pension Protection Fund they would have been considerably worse off.
A better target for Field’s attention at present would be the Tata Steel pension fund with its 130,000 members. It is terrific that Tata Steel wants to keep Port Talbot in production, having previously threatened to close it, and has plans to invest £1bn over five years. Britain needs steel production as part of our economic security.
The price for rescuing the company and the current workforce is that they are being moved into a less generous defined benefit scheme. The deal agreed with the workforce is that Tata Steel sheds the company covenant or guarantee to cover future shortfalls.
As pensions guru John Ralfe notes, walking away from pensions obligations, unless the UK company is insolvent, would be difficult. It does seem as if Tata is prepared to offer some funding promises so that the pension scheme could be transferred to the Pension Protection Fund.
But that is hardly a happy solution given that higher-paid pensioners would see income capped and those lower down the food chain would see them cut by 10pc.
Tata Steel is notionally an independent company with its own shareholders and board. But it is also part of one of the richest industrial and services empires in India and a family of enterprises which includes hugely successful Jaguar Land Rover.
In much the same way as Green, as the former owner of BHS, was threatened with court action if he didn’t cough up, so should the Tata group of companies step in.
Tata’s good name and reputation demands a generous settlement.
Kurd losers
WHAT could go wrong? With financier Nat Rothschild the biggest shareholder in Genel Energy, with 7.95pc of the equity, BP veteran Tony hayward as chief executive and subsequently chairman, and the backing of City bluebloods JP Morgan Cazenove and Goldman Sachs, the Kurdistan-based oil group looked like a winner when it was brought to the stock market. It soared to a peak value of £2.4bn in 2014.
But almost everything that could go awry did, with the Kurds having to divert funds to fight Islamic State, the oil price falling and some panicky exploration in Angola and the Ivory Coast that came up dry.
After huge losses the shares are worth less than one-tenth of their peak price and hayward is out on his ear.
Easy come, easy go.