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REWIND: International Business News #26

Posted on June 1st, 2012 | Author: admin

  • The European Union’s executive branch has recommended that the 17 countries which use the Euro currency establish a bank union.  The recommendation to unify Europe’s banking system comes at a time where the Euro’s value has declined and borrowing costs have increased.  Such a recommendation has been met by opposition from the countries with the strongest economies such as Germany and the Netherlands, as these countries do not want to be more responsible for the financial troubles of the weaker members of the EU such as Spain and Greece.   Moreover, any move towards a bank union would require time and changes to the laws of the EU as well as the national laws of the countries which are members of the EU.
  • Japan is in the midst of a merger and acquisition boom in overseas foreign investment.  Bolstered by a strong Yen, Japanese companies have found themselves cash rich. So far this year it is estimated that Japanese companies have invested more than $34 billion in foreign investments.  As a result, Japan appears to be on pace to meet last year’s record which placed Japan as number 3 in global deal rankings.  Unlike the deal making of the 1980s and 1990s, Japanese companies are bargaining harder and making decisions faster which has contributed to this acquisition drive.
  • Spain’s stock market, amid concerns surrounding the strength of Spain’s financial institutions, fell to nine year lows.  Spain’s IBEX 35 declined 2.6%, its lowest drop since April 1, 2003.  Additionally, shares of troubled lender, Bankia, slid an additional 8.6%.  The declines came as the European Central Bank (“ECB”) refused to allow Spain to use the ECB’s lending facilities to further fund the bailout of Bankia.   Consequently, Spain announced that it would attempt to bail out Bankia through the sales of government bonds.  The failed bailout of Bankia is fueling concerns relating to Spain’s creditworthiness and further eroding confidence in the country’s banking system.
  • In the aftermath of the Arab Spring, private equity investors have played an instrumental role in the economic reconstruction of countries within the Middle East and North Africa. The economies of countries, such as Egypt, Tunisia, and Algeria, have faced economic challenges as these countries continue to transition to new governments.  Private equity funds have partnered with these governments to help rebuild the economies of these countries.  Private equity investors have concentrated their investments on small and medium-cap ventures which have helped generate job growth.
  • Irish voters today were asked to vote on an EU treaty designed to bring financial stability to Ireland’s troubled economy.  Ireland’s government is asking voters to vote in favor of the Fiscal Stability Treaty which would impose tight austerity controls on the country’s national debt. Those who are against the treaty find that additional austerity measures would lead to more years of hardship and insist that Ireland instead needs policies which grow the economy.   In 2007, Ireland’s economy was growing and the unemployment rate was about 4.5%.  As a result of the property bubble bursting, the country’s banks were bailed out by its government causing the country to go deep into debt. Today, the country’s unemployment rate has tripled to 14.3%.