Foreign Press Alert: 28 Aug 2008

By Edward Harrison On Aug 28, 2008

Given the number of foreign articles I have translated recently, I thought it would be useful to start a foreign press alert which pulls together common themes in order to present a holistic view. Today, I will post on Argentina, Spain, Denmark and Sweden. Later, I hope to get to the Netherlands, Germany and France as well.

I am also posting links to the original foreign-language articles.

Argentina
The presidency of Cristina Fernandez de Kirchner is troubled. She had a big row with farmers over food tariffs and has recently come under fire for the nationalization of airline Aerolineas Argentinas. (The most terrifying flight I have ever had was on a Buenos Aires – Iguazu trip with them. This after the original flight was canceled due to airline staff strike.) Meanwhile, it seems that the government has tried to allay fears by pointing to the growth rate in Argentina. But, most people are not fooled. The inflation statistics are a sham that completely overstate growth prospects and worry the middle class. To top it off, a severe drought is making grain exports a worry. (Note that Lufthansa advertises flights to Europe on La Nacion’s website, but it uses a U.S. Dollar figure. No faith in the Argentine Peso?)

Worries now mount about Argentina’s financial stability, especially in Spain. There was also an interesting connection to France this past week: the French bank Nataxis, which is to finance Argentina’s high-speed rail project has run into financial trouble due to the U.S. and European banking crisis. They are looking for 3.7 billion Euros of capital, according to La Nacion newspaper.

See Label: Argentina

“La inflación no se cura con aspirinas”– La Nacion
Para España, la Argentina es una economía de “alto riesgo” – La Nacion
La entidad que financiará el tren bala, complicada por la crisis hipotecaria – La Nacion
El Banco de España advirtió que la Argentina le puede causar problemas – La Nacion
Uruguay limitaría la compra de tierras por parte de extranjeros – La Nacion
En Francia ven una crisis – La Nacion
Grave sequía en el norte bonaerense – La Nacion
Crece el pesimismo sobre la economía – La Nacion
La inflación debilita a la clase media – La Nacion

Spain
The economy in Spain is looking weak right now. But, it still registered year-on-year growth of 1.7%. Nevertheless, for growth monster Spain, that’s the lowest growth since 1996. Construction spending and tourism have both declined in Spain — the construction sector in Spain is the worst in Europe. Obviously, it is the housing market that is worrying Spain the most. Mortgage defaults have picked up considerably and mortgage debt is rising rapidly. Yet, there have been no reports of large losses by Spanish banks. Nevertheless, rumors have been circulating thatthe Spanish banks are addicted to ECB’s liquidity and are a main reason for Dutch National Bank head Wellink’s recent comments on withdrawing liquidity.

On the plus side of this is the moderation in Euribor rates. Spanish dailies had been talking a lot about it’s rise over the past few months.

See Label: Spain

La construcción cae un 16% en España, que sigue liderando el descenso del sector en la UE – El Mundo
La economía registra su peor crecimiento anual desde 1996 por el desplome del consumo – El Mundo
La llegada de turistas extranjeros cayó un 8% en julio – El Mundo
La tasa de morosidad alcanza su nivel más alto desde agosto de 1999 al llegar al 1,61% – El Mundo
La deuda hipotecaria de las familias creció un 8,2% en el primer semestre – ABC
El Euribor se modera, aunque acabará el año en torno al 5% – ABC
España se sitúa como el país europeo con mayor retroceso en la construcción, al caer un 16%

Denmark
The only real news there of interest has been the debacle surrounding Roskilde Bank, a smallish regional bank that went belly up last month. I’ve probably seen at least 20 articles about this story in Berlingske Tidene alone this past week. The bailout plan involves a collective bailout consortium by 100 other financial institutions, in effect spreading the loss thinly across the entire banking system rather than leaving the Danish taxpayer on the hook for the whole enchilada. In return for their taking on the Roskilde as shareholders,the other institutions will likely get a central bank backstop against some further losses — a moral hazard in my estimation. Moreover, some preferred and other debt from the legacy Roskilde will be subordinated to the equity interests of the consortium and made worthless with limited recovery. Old equity has been wiped out.

See Label: Denmark

Related articles in English
Is Denmark’s Roskilde Bailout a Harbinger of Deals to Come?, Deal Book
Danish Central Bank to Take Control of Roskilde Bank, Bloomberg

Related articles in Danish
Aktionærgruppe kæmper videre, Berlingske Tidene
Andre banker i farezonen for kollaps, Berlingske Tidene
Bank-kollaps kan koste skatteydere dyrt, Berlingske Tidene

Sweden< br />Prety dead news-wise. I do note that the Riksbank has been selling gold (yeah, let’s wait for prices to go down 20% and then sell. Buy high, sell low). Also, the Finance Minister Anders Borg expects 1.5% growth this year and 1.3% next year. The Swedes are worried about the Baltics because of bank exposure there. For example, Estonia will see a contraction in its GDP this year.

See Label: Sweden

Estlands BNP väntas krympa i år – Dagens Nyheter
Riksbanken säljer guld – Dagens Nyheter