When it comes to contingency planning for a Eurozone break-up, it is typically a German company that has been ahead of the game. Industrial conglomerate Siemens acquired a banking licence in December 2010. That allowed it to access directly European Central Bank funds, so cutting its exposure to swings in jumpy currency markets. It also took to parking cash at the ECB, once depositing 500m euros after withdrawing them from riskier French lenders. Now, with just about everyone reckoning Greece is heading for the exit, the treasury operations of multinational companies have gone into overdrive. WPP, Reckitt Benckiser and Diageo, to name just three, have taken to a daily sweep of euros from their accounts to reduce the risk of any overnight devaluation, The Telegraph reports.
France may be forced to rescue one of its largest mortgage providers after the lender became the latest victim of the Eurozone crisis. Caisse Centrale du Crédit Immobilier de France (3CIF) — an influential institution that has advanced mortgages worth €33bn (£27bn), or 4% of the French market — could be nationalised. Another option is an emergency funding deal with a rival institution. HSBC has been asked to find a buyer quickly, but market sources think state support is the only option. A rescue would bring Europe’s debt crisis to the heart of the 17-nation single currency bloc and be a further sign that a new credit crisis may afflict the region’s banks. Last week, 16 Spanish lenders had their credit ratings downgraded, and the Bank of Spain warned that bad debts had reached a new high, The Times reports.
European taxpayers face having to bankroll a new wave of bailouts amid growing funding problems at state-backed borrowers across the region, according to senior bankers. Financiers are becoming increasingly concerned that many taxpayer-backed borrowers are losing their ability to access private funding markets. The development raises the prospect of already heavily indebted Eurozone national governments being forced to take on hundreds of billions of euros of additional debts. “Cracks are appearing in the funding markets for these institutions. If you don’t like the sovereign risk, why would you take the risk of buying the debt of the institutions they support,” said one credit banker, according to The Telegraph.
Germany’s largest industrial union has secured the biggest pay rise for members in two decades in what is being seen as a major breakthrough in dealing with the Eurozone’s chronic imbalances. The deal was hailed by economists as a watershed moment for Germany, which is under intense international pressure to let wages rise faster to stimulate domestic consumer spending and help the Eurozone’s less efficient producers become more competitive. IG Metall accepted a 4.3% offer from companies that will cover its 3.6m car and engineering workers for the next 12 months and end a series of disruptive strikes. It was the largest rise since a 5.4% deal stuck in 1992, The Telegraph says.
The multi-billion dollar losses that JPMorgan Chase has racked up underline the urgent need to better regulate credit default swaps, Sheila Bair, one of America’s most powerful financial regulators over the last five years, has warned. Rattled shareholders have wiped more than $20bn (£12.6bn) from JPMorgan’s market value since the bank disclosed ten days ago that it racked up $2bn of losses in six weeks betting on the creditworthiness of a slew of US companies. The losses stem from bets some of the bank’s London-based traders made on indices made up of credit-default swaps (CDS’s) on individual companies, The Telegraph writes.
Scotland´s struggling high streets have been dealt a fresh blow today as figures reveal that the numbers of shoppers north of the Border plunged in the run-up to Easter. Retailers reported a 12.6% drop in footfall in the three months to the end of April, outstripping the 2% fall posted for the UK as a whole. High streets were the worst area hit throughout the UK, with shopping centres posting a much smaller decline and out-of-town retail parks reporting a slight rise in footfall. Experts blamed Scotland’s poor performance on the over-reliance of its economy on the public sector, with cutbacks affecting consumer confidence. Ian Shearer, director of the Scottish Retail Consortium (SRC), which compiled the figures, blamed the heavy rain in April for adding to retailers’ woes, The Scotsman reports.