Europe

Half of European Union countries are experiencing economic imbalances that differ widely, the EU Commission said on Wednesday, as the bloc discusses how to improve convergence among its 27 members after Britain leaves. In a regular check-up of EU governments’ economic policies and achievements, the Commission renewed its warning that gaps that are harmful to the whole bloc not being addressed in several states, while a growing number of them face shortfalls, Reuters reported.

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Troubled UK outsourcing company Interserve has agreed new terms for a debt-for-equity swap with its lenders as it tries to appease shareholders and avoid collapsing under its £631m debt mountain, Global Construction Review reported. The original plan would have cut existing investors’ holding to 2.5%, but it was rejected by New York hedge fund Coltrane and Dutch hedge fund Farringdon Capital Management, who together hold approximately one-third of Interserve’s shares. Coltrane had also called for the entire Interserve board to be removed apart from chief executive Debbie White.

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Grexit Lessons for Brexit

In the first half of this decade Greece almost crashed out of the eurozone, or faced having its membership suspended, in a process known as Grexit, the Financial Times reported. With the UK one month from its scheduled withdrawal from the EU, and no one sure what will actually happen, what lessons does Grexit hold for Brexit? George Papaconstantinou published an article on this subject last week on ING bank’s website. As Greece’s finance minister from October 2009 to June 2011, he was at the centre of events during the early phase of his nation’s sovereign debt crisis.

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The Time is Ripe for a European Safe Asset

While the eurozone has made progress in reform, it so far lacks the ambition necessary to promote growth and jobs, increase economic stability and strengthen the international role of the euro, the Financial Times reported. Results have been achieved on banking union, capital market unions and reform of the European stability mechanism. However, key elements are still missing, including the existence of a shared safe financial asset. The quest to create a genuine safe financial asset in the eurozone may have been going on a long time, but the need is real.

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Seadrill’s core earnings for the fourth quarter exceeded the company’s own guidance, boosted by lower costs and one-off items, while the market outlook for drilling rigs was improving, the Oslo and New York-listed firm said on Tuesday. The company, controlled by Norwegian-born billionaire John Fredriksen, reported $73 million in quarterly adjusted earnings before interest, tax, depreciation and amortisation (EBITDA), more than double the $35 million forecast it made in November, Reuters reported.

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Greece’s foot-dragging on some key economic reforms is raising creditor concern, putting at risk a planned debt relief measure next month and a rebound in its stock and bond markets, Bloomberg News reported. A report by the country’s creditors due on Wednesday will likely show that Greece has yet to fully comply with a list of 16 pending reforms, European Union officials said. Unless it rushes to complete them before a meeting of euro-area finance ministers on March 11, the cash disbursement will probably be delayed, according to the officials.

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European companies have been rushing to sell bonds as credit has become the apple of investors’ eyes. Yet there are risks that this new flood of supply onto the market could curtail the recent rally in corporate bonds over coming weeks, The Wall Street Journal reported. There has been a surprisingly strong comeback in the European credit market since January, and many European companies are taking advantage of this renewed surge in demand to issue better-quality investment-grade bonds.

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The Dutch government has taken a shareholding in Air France-KLM in an attempt to protect the country’s economic interests in the carrier, escalating tensions between Paris and The Hague, the Financial Times reported. Wopke Hoekstra, Netherlands’ finance minister, announced that his government had acquired a 12.68 per cent stake in the Air France-KLM holding group in recent weeks and will aim to build a shareholding equal to the French state at 14.3 per cent.

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The European Bank for Reconstruction and Development may start discussions with the International Bank of Azerbaijan (IBA) over its privatisation later this year, the EBRD’s manager in the South Caucasus country said. Azeri President Ilham Aliyev ordered in 2015 the privatisation of the oil-rich country’s biggest bank after a clean-up to get rid of distressed assets resulting from poor management, Reuters reported. Two years later the state-run IBA proposed a plan to restructure $3.3 billion of its debt, later receiving approval from creditors holding 93.9 percent of the affected debt.

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Bank of Ireland’s chief financial officer Andrew Keating expects Irish mortgage interest rates, which have fallen in the past five years, to start increasing again from here on – even though he believes the European Central Bank (ECB) may hold its main rate at zero until 2022, The Irish Times reported. Mr Keating said this was due to the increased amount of expensive shareholders’ money, or capital, that Irish banks have to hold in reserve against mortgages. This is required because of the scale of the mortgage arrears crisis in the Republic in the wake of the 2008 crash.

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