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Push comes to shove in EU-Dutch bank spat

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EU-INTEL/Push is coming to shove in a stand-off between the European Commission and the Dutch government over the future of state-rescued banks. The outcome has implications for the whole of Europe.

Markets should watch Brussels’ actions on ING, ABN AMRO and Fortis Bank Nederland carefully because they will set a precedent for forthcoming decisions about British, German or Irish banks that could reshape the European banking landscape. They may also determine whether, and when, taxpayers can expect to recover their investments in the banking sector.

EU competition czar Neelie Kroes this week withheld approval of a government guarantee for the bulk of a 28 billion euro portfolio of ING bad loans. The European regulator, whose job is to ensure state aid does not distort competition, said the guarantee required further investigation because the Dutch
government may have illegally subsidised the bank by overvaluing the assets.

Compounding the Dutch problems, Deutsche Bank has pulled out of a deal to buy some of the operations of ABN AMRO, the Dutch lender. Brussels had originally ordered the sale when it allowed Fortis to buy ABN AMRO’s Dutch retail banking operations in 2007. Though Fortis has since been broken up, the Dutch government still wants to merge the two retail banks, both of which are now under state control.

Orange squeezes the UK’s mobile competition

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Merging T-Mobile UK with Orange will bring 3.5 billion pounds of value to shareholders, and “substantial benefits to UK customers.” Goodness, why on earth didn’t they get together years ago? A merger that simultaneously enriches shareholders and customers is rare indeed, and one to be treasured – if this really is one of those seldom-seen beasts.

While the 3.5 billion pound figure is credible, the second claim, from Timotheus Hottges, the finance director of Deutsche Telecom, T-Mobile’s parent, is harder to believe. The immediate reaction from other shares in the sector rather gave the game away, with retailer Carphone Warehouse down on the prospect of fewer suppliers, and Vodafone up on the hope of less competition in Britain’s mobile phone market.

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