-Caveat Lector- from: http://www.aci.net/kalliste/ <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Single Currency Nosedive of Euro Tests Resolve of ECB Tietmeyer in a wringer FRANKFURT - The euro slipped to fresh lows Monday, and Hans Tietmeyer, president of the Bundesbank, expressed concern and vowed that the European Central Bank would pursue a ''lastingly strong and stable euro.'' ''The euro must try to gain the strength of its predecessors and, above all, must win confidence and a reputation of its own,'' Mr. Tietmeyer said Monday night in a speech in the Dutch city of Utrecht, according to an advance text of the remarks. The new currency, which the 11-nation euro bloc launched in January, has cascaded to a succession of new lows since its inception. At its weakest point Monday, it fell to $1.0680 from its previous record low Friday just above $1.0800. That is nearly 10 percent under its peak of $1.1837 on Jan. 4, its first day of trading. At 3 P.M. in New York, the euro was quoted at $1.0737 Some currency market experts note that the main constituent currencies of the euro - including the Deutsche mark and the French franc - are still above their levels against the dollar of about a year ago, and thus the euro itself is not weak by some measures. But others say they think the euro could be headed for a period of further declines and prolonged weakness. A further slump in the euro amounts to a test of nerves for the newly minted European Central Bank, economists concur. With the credibility of Europe's most ambitious integration project at stake, the ECB is certain to find a point where it must draw the line. ''The euro and its institutions are still too green and too short of credibility for the ECB to ignore such a development,'' said Adolf Rosenstock, economist in Frankfurt for Nomura International. Analysts predict the three-month-old currency will slip to $1.05 or lower, which translates to a dollar rate of 1.86 Deutsche marks - a level of weakness that the Bundesbank historically defended, said Gerhard Grebe, analyst in Frankfurt for Bank Julius Baer AG. Mr. Rosenstock sees the euro headed as low as $1.03 In his speech in Utrecht, Mr. Tietmeyer appeared resigned to the factors that inflate the dollar's value, such as the ''special international developments'' in Kosovo and the ''unexpectedly strong economic performance'' in the United States. But while he warned against panic, he vowed to monitor the euro's well-being. ''Composure is appropriate, but disregard is not,'' he said. ''We in the ECB do not pursue an exchange-rate target but we are of course interested in a lastingly strong and stable euro,'' he said. And while many say the euro's exchange rate reflects a strong dollar more than a weak euro, others note that the euro failed to make gains against the yen following the latest reductions in Japanese interest rates. ''It is somewhat surprising that the euro has not been stronger than the yen, given the easing of Japanese monetary policy,'' said Brendan Brown, economist in London for the Tokyo-Mitsubishi International PLC. ''You might have expected the euro to do better, but it has not.'' In the view of some economists, the euro's weakening reflects lost faith over European integration. Some investors bid the euro lower because of confusion in Europe over the appropriate combination of economic policies as politicians and central bankers clash over reasons for high unemployment and tepid commercial activity. Others note disparities in the economic cycles among the 11 euro-bloc economies, dashing the notion of economic cohesion. Germany, the traditional powerhouse economy of Europe, contracted in the fourth quarter last year while its closest economic partners like France register brisker growth. Other pressures on the euro emanate from far-reaching sources. Fears of an escalating and bloody conflict on Europe's fringe have prompted investors to channel funds into the dollar under an instinctive capital flight to a ''safe-haven'' currency. Markets, meanwhile, increasingly are betting that the ECB will need to lower interest rates just as the Federal Reserve might need to raise dollar-denominated lending rates in a move that favors the dollar at the euro's expense. And the dollar has also drawn strength as European growth rates slowed this year to a degree that alarms some politicians while robust U.S. growth rates confound economists with unexpected vigor. For many politicians and business executives across Europe, however, there is another side to the euro coin: Its slump bolsters European exports by making European products cheaper on the world market. This in turn provides a stronger, broader and faster economic elixir than any interest-rate easing, economists say. Knowing the exchange rates are a powerful economic tool, politicians have done little to impede the euro's decline. The French finance minister, Dominique Strauss-Kahn, said in a newspaper interview Monday, ''I am opposed to an undervalued euro, but the euro is currently not weak.'' Mr. Grebe said, ''The euro is a blessing for the economy.'' Mr. Rosenstock said, ''It is the equivalent of the arrival of the cavalry.'' The problem, according to analysts, is that the euro's slide threatens to get out of hand, leading to a potential overshoot of the dollar. The last time the Deutsche mark fell to the equivalent level of $1.05 to the euro, the Bundesbank raised interest rates, analysts noted. With the euro-bloc economy struggling, that option is virtually out of the question to the ECB, economists said. ''The ECB will be in a very difficult situation,'' Mr. Grebe said. ''The markets will want to test the ECB and find out where they are prepared to intervene.'' International Herald Tribune, March 30, 1999 French Banks & Yoghurt Ditching Le Fairplay BNP can proceed to devour two rival banks When Jean-Claude Trichet ran the French treasury in the 1980s, he used to serve very un-Parisian pots of yoghurt for his business breakfasts. French financial institutions lagged behind their Anglo-Saxon counterparts, he explained, partly because of their lower consumption of dairy products. Today, it would appear that French bankers have been eating rather too much yoghurt for Mr Trichet's liking. Now governor of the Bank of France, he has spent the last week trying to broker a deal that would end the unprecedented in-fighting between three of the country's largest financial institutions. Yesterday, Mr Trichet gave his formal consent to the unsolicited bids launched earlier this month by Banque Nationale de Paris for Soci�t� G�n�rale and Paribas, which were themselves planning to merge. But in an accompanying statement, Mr Trichet said he "hoped the establishments concerned would reflect and engage in a dialogue among themselves with a view to reaching a solution which would fully respect each house's moral and financial interests and preserve the best interests of the banking community." The statement betrays the depth of unease triggered by the BNP bids in the heart of the French establishment. Michel P�bereau, BNP's chairman, has broken the unwritten rules of the French way of doing business: his bids are hostile; they threaten to open the door to a foreign white knight; and he moved with only the most perfunctory of advance warnings to Mr Trichet and to Dominique Strauss-Kahn, the finance minister. "What the establishment reproaches is as much the fact that Michel P�bereau did not consult the governor of the Bank of France in advance, as the fact that the bids are hostile," one senior French financier says. Lack of consultation may not be unheard of in other countries. Paul Martin, Canada's finance minister, heard about Royal Bank of Canada's plans to merge with Bank of Montreal while shaving. He was so annoyed that he blocked the deal. But even in the US, home of the free market liberalism France is now embracing, Sandy Weill and John Reed took great care to brief the Treasury and the Federal Reserve about their plans to merge Travelers Group and Citibank. The breach of protocol is all the more shocking in France, where the world of high finance is very small indeed. The top bankers and bureaucrats went to the same schools, worked together in the same ministerial cabinets, gossiped together in the same d�ners en ville. A recent report from Korn/ Ferry, the executive search consultants, pointed out that two-thirds of the chairmen in the 40 largest listed companies are graduates of the same two schools: Polytechnique, the engineering institute, and Ecole Nationale d'Administration, or Ena, which grooms future high-ranking civil servants. Mr P�bereau attended both. The same graduates also comprise almost half of all company directors. "When executives of French companies meet to discuss a deal, it is not unusual to spend the first half hour going over who had better grades at Ena, to determine who is to speak first during the meeting," says a US investment banker based in Paris. The protagonists in the BNP-SG-Paribas drama are closer because they have spent the last three years discussing every possible permutation of mergers between their banks. Even their advisers are closely intertwined. The investment banks advising BNP, for example, are Lazard - where partner David Dautresme is a former chief executive of Cr�dit du Nord, now an SG subsidiary - and Goldman Sachs - where Jacques Mayoux is a former chairman of SG. On the other side, Paribas has brought in Rothschild, where Marc-Olivier Laurent used to be head of mergers and acquisitions at Cr�dit Commercial de France, where he worked for Mr P�bereau. But though �narques and polytechniciens may still have the right to call each by the familiar tu form, in other respects the force exerted by the old school ties is weakening - as Mr Trichet has found out. "The chief executives of 50 plus, unlike their predecessors, are all now running much more international businesses and have travelled widely. The next generation down has gone a step further and lived abroad. The politicians, on the other hand, have stayed at home. The gulf between them and the business elite is growing wider all the time," a senior French banker says. The result is not just a less deferential attitude to government authority, but something of the convert's zeal in espousing the free market in its ruthlessness. "This will be decided by the market, not by causeries de salon [drawing room chitchat]," says Baudouin Prot, BNP's chief operating officer. "In France, there has always been a conflict between the party of order and the party of movement. Well, this is very much movement." Yet the takeover battle itself is being fought out on familiar French terrain, where it is as important to win over the government and the trade unions as the shareholders. Despite the clearly hostile reaction of Daniel Bouton and Andr� L�vy-Lang, chairmen of SG and Paribas, Mr P�bereau continues to insist that his bids, though unsolicited, are friendly. His arguments for a three-way merger are peppered with promises not to cut jobs or close branches. Indeed, BNP has had to devote considerable effort to convincing investment analysts that its merger plans will not generate nearly such large cost savings as they think. Will French takeover battles be fought this way in years to come? Some Paris financiers believe Mr P�bereau may have opened the door to an upheaval in France's economic structure. "It has profound implications for French industry. Why not Elf/Total, or Renault/Peugeot?" asked one French investment banker. Even after yesterday's formal permission to proceed from the Bank of France, the battle is far from over. Its influence on French business mores will depend enormously on the result. As one senior banker warned: "If Michel P�bereau succeeds, it could change the rules of the game for ever." The Financial Times, March 30, 1999 Russian Follies The IMF Gets $4.8 Billion Ready for Russia The $800,000 from Saddam was just chump change The International Monetary Fund yesterday threw a lifeline to the Russian government by promising as much as $4.8bn (�2.9bn) in new loans to prevent the threat of national bankruptcy. The outline agreement was hailed in Moscow as a personal triumph for Yevgeny Primakov, the prime minister and possible presidential contender, who had spent many hours persuading Michel Camdessus, the IMF managing director, to help Russia overcome its devastating financial crisis. "We have agreed about co-operation. We have agreed that we will be granted a new credit and that next week a full-scale mission from the Fund will come to Moscow to complete work on this agreement," Mr Primakov said. Following meetings with Russian ministers, parliamentary leaders and even the head of the Russian Orthodox Church in Moscow in the past three days, Mr Camdessus said: "I understand there is a strong consensus in support of this government." However, many details of the new programme still have to be worked out by the forthcoming IMF mission and must then be approved by the Fund's board. Russian officials said the government was likely to receive $4.8bn in four tranches, starting at the end of April. The IMF, which had previously criticised the incoherence of the Russian government's economic policies, appeared to have softened its negotiating stance - dropping its insistence that the government target a primary budget surplus (before interest rates) of 3.5 per cent of gross domestic product this year. A joint communique stated: "The parties have agreed on a primary budget surplus of 2 per cent of GDP to be realised in 1999 and most of the measures needed to achieve it." Augusto Lopez-Claros, an economist at Lehman Brothers and former IMF resident representative in Moscow, said yesterday's agreement could not yet be considered a "done deal". But the dynamics of the negotiations had clearly changed in the past week - probably as a result of the conflict in Yugoslavia. "I think the Fund and the G7 must have made a calculation that it is much better to have Russia on board with a new IMF programme than for the discussions to drag on," he said. "The risk was that with the Kosovo crisis distracting people's attention the two sides would have diverged." Almost all of the promised IMF money will be used to repay Russia's debts to the Fund which fall due this year. However, the deal is critical for preserving Russia's reputation in the international financial markets and will unlock an additional $2bn to $2.5bn in cash from the World Bank, Japan and other international credit agencies. It will also enable Russia to start talks with the Paris Club of sovereign creditors and the London Club of commercial creditors about restructuring $150bn of external debts. Following his success in Moscow, the Russian prime minister is due to fly to Belgrade today on a peace mission to the Balkans. Mr Primakov's burst of activity is likely to boost his political prestige and further eclipse President Boris Yeltsin's, who is due to give his annual parliamentary address today. The Financial Times, March 30, 1999 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End Kris DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance�not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRL gives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credeence to Holocaust denial and nazi's need not apply. Let us please be civil and as always, Caveat Lector. ======================================================================== Archives Available at: http://home.ease.lsoft.com/archives/CTRL.html http:[EMAIL PROTECTED]/ ======================================================================== To subscribe to Conspiracy Theory Research List[CTRL] send email: SUBSCRIBE CTRL [to:] [EMAIL PROTECTED] To UNsubscribe to Conspiracy Theory Research List[CTRL] send email: SIGNOFF CTRL [to:] [EMAIL PROTECTED] Om
