Opinion

Hugo Dixon

Is Greece losing its reform drive?

Hugo Dixon
Jun 23, 2014 08:34 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own. 

Is Greece losing its reform drive? Prime Minister Antonis Samaras has stuck to a harsh fitness programme for two years. But just as it is bearing fruit, he has sidelined some reformers in a reshuffle. There is only one viable path to redemption for Athens: stick to the straight and narrow.

The Greek economy is not out of the woods yet, although the measures taken to balance public finances and restore the country’s competitiveness are having their effect.

Athens partly regained access to the bond markets in April. Banks have been able to issue equity on the markets. The unemployment rate has fallen for four months in a row, albeit to a still terrible 27 percent. The economy has also either just stopped shrinking or will do soon.

Greece’s top industry, tourism, is set to reach new highs this summer following last year’s record. Meanwhile, foreign investors are looking to take advantage of cheap labour, cheap real estate and a better investment climate. Only last week, the Chinese prime minister was in Greece, signing $4 billion of commercial deals and declaring that the country could become China’s gateway to Europe.

Cameron’s cack-handedness risks Brexit

Hugo Dixon
Jun 16, 2014 08:57 UTC

David Cameron’s cack-handed European diplomacy risks leading Britain out of the European Union.

The latest example is the way the UK prime minister has mishandled his campaign against Jean-Claude Juncker becoming president of the European Commission, the EU’s executive arm. Cameron is right to try to block the former Luxembourg prime minister’s candidacy – both because Juncker is not the right person to reform the EU and because the way he is being promoted constitutes a power grab by the European Parliament. But the British prime minister’s tactics have actually made a Juncker presidency more likely.

If Cameron loses this particular battle, the chances of a Brexit – Britain’s exit from the EU – will shoot up. This is partly because Juncker himself will presumably not want to help the British prime minister with his plan to renegotiate the UK’s relationship with the EU. And if Cameron can’t secure many goodies from his renegotiation scheme, he won’t have much to show the electorate in a referendum he plans to hold on Britain’s membership in 2017. (This will only happen if he is still prime minister then, which is far from certain since there is a general election in 2015).

Six solutions for the UK housing crisis

Hugo Dixon
Jun 9, 2014 09:28 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

Britain’s main economic problem is that the supply of homes isn’t rising nearly as fast as demand. This doesn’t just create the risk of a new housing bubble; young people are finding it increasingly hard to find places to live, especially in crowded London and southeast England. So I make no apologies for returning to the topic after only three weeks.

The solution isn’t mainly to build new homes on greenfield sites. It is understandable that Brits don’t want to concrete over this green and pleasant land. Rather, the thrust of policy should be to use existing housing stock much more effectively, while building new homes in cities.

EU needs more non-bank finance

Hugo Dixon
Jun 2, 2014 08:40 UTC

The European Union needs more non-bank finance. Banks are on the back foot. On their own, they won’t be able to fund the jobs and growth the EU is desperate for. Non-bank finance needs to take up the slack.

The European Central Bank and Bank of England have made a good start by identifying the importance of reviving securitisation – the process of packaging loans into bond-like securities which can then be traded on the market. The two central banks have just published a joint paper describing blockages in the system which have all but killed EU securitisation since the financial crisis.

But securitisation is only one piece of the non-bank finance landscape. Similar leadership is needed to invigorate venture capital, equity investment, bond issues for small companies, shadow banking and so forth.

EU leaders need to kickstart reform

Hugo Dixon
May 26, 2014 08:32 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

When European Union leaders dine in Brussels on May 27, conversation is likely to revolve around three Ps: the poll, the priorities and the people.

Many of those sitting around the table, notably France’s François Hollande and Britain’s David Cameron, received a drubbing in the European Parliament elections. They will be reflecting on the rise of euroscepticism in many EU countries and the appropriate forms of response.

How to fix the UK’s housing mess

Hugo Dixon
May 19, 2014 09:56 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

The Achilles’ heel in Britain’s strong economic recovery is the mess in the housing market.

House prices are rising yet again – by 10.9 percent in the year to April, according to Nationwide. This raises the risk of yet another cycle of boom and bust, so much so that the Bank of England recently described rising house prices as the “brightest light” on its risk dashboard.

Scoxit could lead to Brexit

Hugo Dixon
May 12, 2014 08:55 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

If the Scots vote to leave the UK in September, that could trigger a chain reaction which leads to the rest of the UK quitting the European Union. This is a threat British pro-Europeans need to take seriously given that a Scottish independence vote is quite possible, though the chances are still less than 50 percent.

Were it not for the Scotland factor, the risk of a so-called Brexit – Britain’s exit from the EU – would be receding. A string of business leaders have in recent months come out and argued that the economy would be damaged if the UK lost full access to the EU’s single market.

Do national champions merit protection?

Hugo Dixon
May 5, 2014 06:28 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

The French always protect their national champions, while the British have a laissez-faire approach to foreign takeovers of their top companies, right? That is certainly the caricature. Witness how France deterred PepsiCo from bidding for Danone in 2005 on the grounds that yoghurt was a strategic industry, while the UK allowed U.S.-based Kraft to move ahead with its hostile bid for Cadbury, the confectioner, in 2010.

Recent events, though, show that the picture is somewhat more complex. When news first leaked that General Electric, the U.S. industrial giant, was negotiating to buy Alstom’s power generation business, the French government’s knee-jerk reaction was hostile. But by last week, Alstom had reached a deal to sell its power unit to GE for 11.4 billion euros and Paris had softened its opposition.

How Greece can turn vice to virtue

Hugo Dixon
Apr 14, 2014 09:27 UTC

Most Greeks know the expression vicious cycle – or favlos kyklos. But when you ask them the Greek for virtuous cycle, they often struggle to find the term, or even deny it exists.

After six years of recession that have shrunk the economy by a quarter and left Greece with an unemployment rate of 27 percent, it is not surprising that vicious cycles loom large in the national psyche. But there is a Greek expression for virtuous cycle – enaretos kyklos – and the country may be beginning to enjoy one.

Athens returned to the bond market last week with the issue of 3 billion euros of five-year paper. The country’s banks are also able to raise equity on the market.

Greek rebound is astonishing

Hugo Dixon
Apr 8, 2014 10:01 UTC

Greece is undergoing an astonishing financial rebound. Two years ago, the country looked like it was set for a messy default and exit from the euro. Now it is on the verge of returning to the bond market with the issue of 2 billion euros of five-year paper.

There are still political risks, and the real economy is only now starting to turn. But the financial recovery is impressive. The 10-year bond yield, which hit 30 percent after the debt restructuring of two years ago, is now 6.2 percent.

Two of the country’s big four banks – Piraeus and Alpha – have raised 3 billion euros of equity between them in recent weeks to reinforce their balance sheets after a stress test orchestrated by the central bank. Eurobank, another big lender, is planning to follow suit with a 3 billion euro issue later this month.