Euroland isn’t working
WHO would have thought it. After all the dire warnings from the International Monetary Fund, Bank of England and others over the havoc to be visited on Britain’s economy by the uncertainty over the European Union referendum, the pro-Europe CBI has delivered a shard of light for the ‘Leave’ campaign.
In the three months to April, just as the referendum debate was gathering momentum, the CBI’s gauge of output from Britain’s factories moved up from minus two to plus one, its best reading since July.
In other words, the turbulence and uncertainty caused by the collapse of commodity prices and China’s economic slow down looks to have been a bigger cause of concern for industrialists than the fear engendered by the prospect of leaving the EU.
Indeed, the fall in the sterling exchange rate looks to have been helpful to manufacturers who report that ‘investment intentions are strong’. The CBI report goes on to argue that given the expected pick-up in exports it is likely that firms ‘will be seeking to increase capacity’.
Relying on any one survey is a mistake, but coming as it does from a pro-EU group par excellence it must be given credence.
One of the great untold stories of the referendum campaign is the appalling state of the euroland economy. It was an underlying theme at this month’s IMF meetings in Wash- ington. The Fund’s financial stability report drew attention to the €900bn (£700bn) of non-performing (a posh name for rotten) loans on the books of Europe’s banks. The problems are not confined to Italy, although they are worst there. Many of Germany’s regional savings banks also are stuffed with bad loans.
Moreover, Germany, the IMF and Greece are limbering up for the annual dust up over Greece’s debt overhang. At the core of the problem is the unwillingness of Germany to accept that the only way Athens will ever have the headroom to return to health is if Berlin recognises that the time has come for a debt relief that pushes repayment obligations so far into the future that they no longer impact on recovery.
Stagnation in the eurozone, forecast to grow by just 1.5pc this year, which is barely enough to deal with shocking unemployment levels, is one of the principle causes of the precarious state of the global economy.
And this has been going on since the euro crisis of 2009-10 – long before anyone started to worry about Brexit.
Hopefully the underlying fissures in the eurozone, which encompasses 19 of Europe’s 28 members and the larger part of its gross domestic product, will become more embedded in the referendum debate.
A soon to be published book called Europe Isn’t Working, under the Yale imprint, written by my former colleagues Larry Elliott and Dan Atkinson, clinically examines the faultlines in the eurozone and how lone voices of the Left who disapproved at the time have been proven correct.
The jobless rate in the UK is 5.1pc, in the United States it is 4.9pc and in Japan it is 3.3pc. In the eurozone countries it is 10.3pc. Project fear doesn’t say much about that.
Safari Bob
WE KnOW from the financial crisis how effective Bob Diamond can be at marshalling capital when it is needed.
Some of the Middle East sources of funds are the subject of a long-running Serious Fraud Office inquiry which Barclays has failed to shut down.
none of this has dented Safari Bob’s ambitions in Africa. His Atlas Mara group already has swallowed nigeria’s biggest bank and is considered respectable enough to receive a $25m (£17m) grant from America’s foreign aid arm, US Aid, for ‘loans for young entre- preneurs, financial training and leadership development’.
Diamond is reported to be working through his American vehicle Atlas Merchant Capital and private equity giants Carlyle Group on a bid for Barclays Africa, which operates in ten countries including South Africa.
A potential problem for Diamond and his partners is the insistence, up until now, that the government in Pretoria maintains a substantial stake in the South African bank Absa. That is among the main reasons that Barclays latest chief executive Jes Staley decided to sell. Tying up so much capital in a bank in which you can only extract a proportion of the profits does not make great economic sense.
Perhaps African bank supervisors will take a more lenient view of Atlas Merchant and Carlyle as they seek to pull off one of the biggest takeovers in the continent’s history.
Front page
IS TRIBUnE Publishing, owner of the Chicago Tribune and Los Angeles Times as well as big city newspapers in Baltimore and Orlando, finally going to find a safe harbour?
It has been in nowhere land since the company was bought for a whopping $13bn (£9bn) by real estate mogul Sam Zell almost a decade ago before going into Chapter 11.
now it is being bid for by US Today publisher Gannett, which already owns 100 titles across the US, for a relatively modest $815m (£563m) including debt.
How the mighty have fallen…