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September 2001

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  • The reform of Russia’s electricity sector is going faster than that of other utilities. UES chief executive Anatoly Chubais talked to Ben Aris about the proposals and the timetable
  • Société Générale paid Eu1.2 billion for 60% of Komercni Banka as it moved into the Czech Republic in June. The move was criticized as too risky. Now, it appears that it was right on target.
  • Many bankers Euromoney has spoken to are fearful that anti-capitalist and anti-globalization protesters will severely disrupt this year's IMF/World Bank meetings - and some even refuse to discuss the issue on the record because they don't want to give the protesters the oxygen of publicity.
  • On August 13, the two-year versus 30-year US treasury yield curve gapped out to a seven-year high of 184 basis points. The two-year treasury was trading at its lowest ever yield in the 25 years since the two-year security was first introduced, and three-month Libor was even lower at 3.57%. Moreover, with the US economy showing no signs of recovery, short-end rates seem set to move even tighter. The extraordinary steepness of the US yield curve has provided mouthwatering swap opportunities for corporates that would not normally consider conversion of fixed-rate liabilities to floating rate. The greater than normal swap business has also put added downward pressure on swap spreads.
  • Dubai prepares for the IMF/World Bank meetings in 2003 by building five-star hotels, new roads and upgrading the transport system.
  • The Fed has dscovered the gift of the gab, and it doesn't seem to have done any harm. Not yet, anyway.
  • This summer the euro began to strengthen, the European Central Bank pleased markets and politicians with a long-awaited quarter-point rate cut and criticism of the policy conduct of the ECB receded. It may be time for a new assessment of how the bank has been doing. Clearly it has inherited flaws from the political compromises made to set it up. Is it in such a hopeless state that mistakes will happen again, or were past errors excusable gaffes in an otherwise reasonably successful performance?
  • The Paris Club of official bilateral creditors is promoting the view that holders of sovereign bonds should take their share of the burdens when borrowers need rescuing from default. Jerome Booth argues that this burden-sharing dogma flies in the face of insights that can be gleaned from history and conflates what is essentially politically-motivated lending with market-driven lending. It will, he argues, inevitably damage the debtors it is ostensibly designed to help
  • There are few bigger jobs in finance than US Treasury undersecretary for international affairs. So meet John Taylor, the former academic economist who finance ministers and central bank governors from around the world will be courting for the next few years. Taking time out from the negotiations over Argentina he delivers some tough messages on official sector financing packages: they should come with fewer conditions, but those conditions should be strictly monitored and enforced, before funds are disbursed. He offers to share useful experience with Japan, expresses confidence in the European single currency project and explains to James H Smalhout why the US current account deficit is sustainable
  • KBC demonstrates just what happens when deep pockets are used to address pressing commercial imperatives.
  • The swing of the political pendulum in the US has had an equal and opposite reaction in Europe. In the 1990s, under the post-cold war order of transatlantic relations, Bill Clinton's centre-left US administration promoted its own brand of caring capitalism. Inflation was banished, the world economy grew strongly and financial markets soared.
  • Under James Wolfensohn the World Bank has beaten off influential enemies through polished public relations, but there are still widespread doubts about the effectiveness of Bank policies. Projects continue to fail and adjustment lending has in many cases been granted without proper safeguards. Bank insiders claim that programmes are increasingly effective but critics point to the weakness of Bank models for measuring success.
  • Washington's battles with big budget deficits may seem like a distant memory, but a familiar refrain from those days has taken on new meaning for the IMF. "Less is more" has been a powerful, if unstated, theme running through many Fund-led packages, ever since the Mexican peso crisis of 1994-95.
  • Underperformance is still the norm in emerging markets.
  • A small group of western-minded business leaders have banded together to lobby for a Russia free from robber barons and fit for their children by the year 2015.
  • World Bank president James Wolfensohn responds to the many criticisms being thrown at the institution, points to some of its recent achievements and outlines a vision of how it might work in future.
  • Some banks are looking beyond central and eastern Europe’s emerging economies for ways to gain scale.
  • Erste Bank sets its sights on large local corporates, a less coveted market for regional expansion, but one that could prove to have greater potential.
  • Mexico has prospered through ever-closer links to the US, which has been the main market for its booming exports. Seven years on from its own crisis, Mexico now appears strong enough to shrug off any contagion from Argentina. The downside, though, is that Mexico will now suffer if the US economy goes into a deep and prolonged downturn. Faults in its economy may yet be revealed.
  • The tango effect is being felt in the international bond and currency markets and in the halls of the central bank in Brasilia, but so far it has had relatively little effect on the average Brazilian.
  • President Putin’s has pushed through a swathe of reforming laws, spearheading his drive to liberalization. But implementation will not be easy. Nor can it be assumed that the liberals will stay in the ascendancy. Business oligarchs and the conservatives are asserting themselves as Putin struggles to pick a way through conflicting interests.
  • Russia’s stock market has ended the first half of the year as the third best performing market in the world.
  • General Pervez Musharraf, Pakistan's head of state, talks about his country's economic programme, the Afghan Taliban and Islamic fundamentalism.
  • Saudi Arabia’s banks are bracing for a period of intense retail competition by preparing to launch new products, especially for Islamic and internet banking, and developing personal and mortgage lending.
  • Legislation is pending that should liberalize Saudi Arabia’s capital markets and attract foreign investment and returning Saudi capital. The extent of these reforms will show how far the country’s leaders intend to open up an economy that needs capital investment and job creation.
  • Turkish inspectors have discovered that the governmental abuse of the state banks continues and has remained unpunished.
  • The IMF has begun to stress prevention of crises rather than their cure and the new US administration agrees. But that raises numerous imponderables. Should the stress of prevention be on incentives to countries to behave responsibly or on building sound international financial architecture? And if the goal is to seek out better ways of forecasting impending crisis, does the IMF have the legitimacy to release market-moving information of this sort?
  • Hong Kong is facing a crisis - how to fund an increasing budget deficit at a time of almost unprecedented economic downturn.
  • Most of the prize assets have been snapped up as bank privatization draws to an end in Europe’s emerging markets. Those banks that remain on offer are getting more pricey. But impending European Union accession for several countries means this is still an appealing market and is driving strategic change among both veteran players and big-spending newcomers.
  • A law that was passed virtually unnoticed will come into effect this month and has prompted many strategic and financial investors to question whether any investment in Korea’s financial sector is wise.
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