On Fri, 17 Sep 1999, Doug Henwood wrote:
>> Germany and the other continental European countries with
>> bank-centered systems are evolving in the stock direction, and the
>> creation of the euro will almost certainly promote this.
>Are they, really? A few EU firms may be going public, but massive amounts
>of stock seems to be vanishing, the good old-fashioned way -- via
>humongous mergers. None of the Central European banks has divested
>themselves of their industrial holdings. And the bank mergers sweeping the
>EU have been powerfully orchestrated by Governments (to the point where
>rentiers routinely whine about the employment guarantees given by merging
>French banks, etc.). It all looks more like intra-EU consolidation and the
>creation of multinational financial-industrial groups, than the adoption
>of US-style Bubble madness.
>
>Can any of the bank/financial folks on this list confirm/deny this?
>-- Dennis
"Banks are my life"
Yes and no is the answer. Yes, there are a lot of mergers at the moment, but they are almost entirely paper-financed, meaning that the overall supply of stock in the EU is not being contracted by them. EU firms typically have high gearing anyway, so the option of borrowing a lot of money to buy a rival for cash is not exactly open to them.
I'm not aware of any of the European c-banks having industrial holdings -- I'm not saying there aren't any, but it's the sort of thing I would have thought I would have known about if there were. The German banks haven't been selling their industrial holdings because of a punitive tax treatment, but the French banks have been bleeding them into the market for the last few years. If anything, the more significant phenomenon was at the beginning of the 1990s, when a lot of European banks (and insurance companies -- don't forget them) announced that from this day on, they would treat their shareholdings as "financial investments" rather than strategic stakes. This was tantamount to an announcement that the management of these companies had got behind the Anglo-Saxon capitalist project.
I disagree that the EU financial mergers are really being orchestrated by governments -- something more interesting is happening. How it seems to me is that the European Commission has decided to interpret the Single European Act as something equivalent to the MAI -- as a prohibition on government interference in the affairs of "investors", whoever they may be. This means that Trichet et al have to treat carefully when trying to put together or block a merger, for fear of being sued. It's pretty well known that they didn't get their preferred solution in the SocGen/BNP takeover battle. Tessa's writing an article on this for the World Economic Forum (egad!) -- I'll post it when I get a draft.
The social guarantees given by merging banks in Europe are more there to pacify the unions than the regulators -- unions still have some power in France and Germany.
All in all, I rather fear that we are adopting US-style bubble madness. But at least we don't have a US$25bn trade deficit.
dd
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