Dexia, the first European banking victim of the euro zone
debt crisis, said its continuation as a ‘going concern’ relied
on several factors – state guarantees of up to 90 billion euros
to allow it to borrow, its ability to pay for those guarantees
and European Commission approval of its restructuring plan.

“In the absence of additional corrective measures, the
non-realisation of one or several of the above mentioned
assumptions could impair the ‘going concern’ status of Dexia SA
and challenge the Group’s liquidity and solvency situation,” the
company said in a statement.

“These assumptions rely on certain external factors beyond
the control of Dexia,” it continued.

Belgium, France and Luxembourg agreed in October to provide
the 90 billion euros of guarantees for 10 years, but Dexia has
only to date received commitments for half that amount until the
end of May.

The European Commission gave temporary approval in December
for state guarantees of up to 45 billion euros, adding it had
doubts whether the guarantee mechanism was compatible with the
EU single market.

Dexia, which accepted a state-led break-up and the
nationalisation of its Belgian banking arm in October, said on
Thursday it would not pay a dividend and also did not plan to
pay a coupon on its hybrid debt.

Dexia, which is set to be stripped down to little more than
a holding of bonds, said it suffered a 4.0 billion euro loss due
to the disposal of Dexia Bank Belgium and a further 1.0 billion
hit from the sale of French lending arm Dexia Municipal Agency.

It also booked a 3.4 billion euro loss on its holding of
Greek sovereign bonds, while the cost of an accelerated sale of
low-grade U.S. assets, carried out in the first half of the
year, was 2.6 billion.

Dexia’s shares dropped 5 percent at the opening.

KBC Securities analyst Dirk Peeters said the size of the
loss was not a surprise, given the bank had already indicated a
loss of 10.5 billion euros at the nine-month mark.

“There are still a lot of questions to be answered, such as
on guarantees, the position of the European Commission,” he
said.

Dexia said core shareholder equity stood at 7.6 billion
euros at the end of December

In a rare piece of positive news, Dexia said its assets for
sale reserve was 800 million euros higher by mid-February from
the end of 2011 because of a more risk-hungry market, which
tightened spreads for certain sovereign issuers.

Dexia said its tier 1 and core tier 1 ratios were 7.6
percent and 6.4 percent respectively.

There are echoes of Fortis, once the largest bank in the
Benelux, which was carved up during the height of the financial
crisis in October 2008 and reported a 28 billion euro loss for
that year. Fortis lives on as Belgian insurer Ageas
($1 = 0.755 euro)

(Reporting By Philip Blenkinsop; Editing by Helen
Massy-Beresford)

CVC Capital Partners wants to sell its brewing assets in nine countries, including the Czech Republic, Hungary and Romania, that it bought from Anheuser-Busch InBev (ABI.BR: Quote, Profile, Research, Stock Buzz) in 2009, sources told Reuters late on Tuesday.

The firm has opened a data room and major brewers are said to be mulling bids.

AB InBev is in theory at the front of the queue, given it agreed with CVC in 2009 that it would have the right of first offer to reacquire the business should CVC decide to sell.

The debt challenges the brewer faced from InBev’s $52 billion takeover of Anheuser-Busch in 2008 are largely behind it and it had $4.8 billion of cash and equivalents at the end of June last year.

However although it clearly can buy again, it may not have the appetite.

Asked in November, Chief Executive Carlos Brito confirmed AB InBev’s commitment to Russia and Ukraine but showed little obvious interest in other eastern European areas.

“The other countries have nice margins with very little scale, not a lot of brand overlap, different brands everywhere, different languages, different route to markets, different regulatory framework, everything,” he said.

Even the margins may not be as good as before.

SABMiller (SAB.L: Quote, Profile, Research, Stock Buzz) showed in a presentation on Tuesday that its profit (EBITA) in the region fell from 2008 and 2009 levels in the past two years.

“That’s a strong company in the region. It’s hard to imagine that StarBev would have done any better,” said Bernstein Research analyst Trevor Stirling.

StarBev might be more appealing to rivals SABMiller and Heineken (HEIN.AS: Quote, Profile, Research, Stock Buzz), already heavily present in Eastern Europe and so in place to extract required synergies from a takeover.

However, antitrust challenges could rule them out.

SABMiller could face a regulatory hurdle if it wanted to add a 15 percent share of the Czech market to the 47 percent it already has.

Heineken, number one in Bulgaria, would be joining forces with the number two player.

In Hungary, SABMiller, Heineken and StarBev sell more than three-quarters of the beer consumed, with a fairly even three-way split.

SABMiller and Heineken would also need to ponder the trade-off between missing out on the benefits of a merger in the bigger Eastern European countries in exchange for gaining number one positions in smaller markets Croatia, Montenegro and Serbia.

AB InBev and Heineken both declined to comment, while SABMiller were not immediately available for comment.

Carlsberg (CARLb.CO: Quote, Profile, Research, Stock Buzz), the leader in Russia and Ukraine and other former Soviet republics, also declined to comment. It said on Monday its focus for acquisitions was China and other parts of Asia.

JAPANESE WILD CARDS

CVC could pass on its assets to another private equity firm, but one banker familiar with the situation said he believed the sale was essentially targeted at trade buyers.

A clue to possible other bidders was offered by CVC’s appointment of Japanese bank Nomura as an adviser, indicating the eventual buyer could be a Japanese brewer such as Asahi (2502.T: Quote, Profile, Research, Stock Buzz), which has completed a number of transactions in the past five years, albeit all in its Asia-Pacific zone.

The maker of Japan’s top-selling “Super Dry” lager and soft drinks aims to generate 20-30 percent of its sales overseas.

Rival Suntory SUNTH.UL is another Japanese brewer in the frame. It too is seeking growth outside its highly competitive and shrinking home market, raising its stake in a French wine estate over the past year.

Price will be a key issue, with reports suggesting CVC would be seeking $3 billion.

CVC bought the businesses for an enterprise value of $2.2 billion with a potential future payment of as much as $800 million contingent on CVC’s return on its investment.

It is not clear whether the latter would be included in any sale and whether indeed CVC would be selling at any level above its own acquisition price.

(Additional reporting by David Jones in London, Ole Mikkelsen in Copenhagen; Editing by David Cowell)

CVC Capital Partners wants to sell its brewing assets in
nine countries, including the Czech Republic, Hungary and
Romania, that it bought from Anheuser-Busch InBev (ABI.BR: Quote, Profile, Research) in
2009, sources told Reuters late on Tuesday. [ID:nL2E8DLGKQ]

The firm has opened a data room and major brewers are said
to be mulling bids.

AB InBev is in theory at the front of the queue, given it
agreed with CVC in 2009 that it would have the right of first
offer to reacquire the business should CVC decide to sell.

The debt challenges the brewer faced from InBev’s $52
billion takeover of Anheuser-Busch in 2008 are largely behind it
and it had $4.8 billion of cash and equivalents at the end of
June last year.

However although it clearly can buy again, it may not have
the appetite.

Asked in November, Chief Executive Carlos Brito confirmed AB
InBev’s commitment to Russia and Ukraine but showed little
obvious interest in other eastern European areas.

“The other countries have nice margins with very little
scale, not a lot of brand overlap, different brands everywhere,
different languages, different route to markets, different
regulatory framework, everything,” he said.

Even the margins may not be as good as before.

SABMiller (SAB.L: Quote, Profile, Research) showed in a presentation on Tuesday that
its profit (EBITA) in the region fell from 2008 and 2009 levels
in the past two years.

“That’s a strong company in the region. It’s hard to imagine
that StarBev would have done any better,” said Bernstein
Research analyst Trevor Stirling.

StarBev might be more appealing to rivals SABMiller and
Heineken (HEIN.AS: Quote, Profile, Research), already heavily present in Eastern Europe
and so in place to extract required synergies from a takeover.

However, antitrust challenges could rule them out.

SABMiller could face a regulatory hurdle if it wanted to add
a 15 percent share of the Czech market to the 47 percent it
already has.

Heineken, number one in Bulgaria, would be joining forces
with the number two player.

In Hungary, SABMiller, Heineken and StarBev sell more than
three-quarters of the beer consumed, with a fairly even
three-way split.

SABMiller and Heineken would also need to ponder the
trade-off between missing out on the benefits of a merger in the
bigger Eastern European countries in exchange for gaining number
one positions in smaller markets Croatia, Montenegro and Serbia.

AB InBev and Heineken both declined to comment, while
SABMiller were not immediately available for comment.
Carlsberg (CARLb.CO: Quote, Profile, Research), the leader in Russia and Ukraine and
other former Soviet republics, also declined to comment. It said
on Monday its focus for acquisitions was China and other parts
of Asia.

JAPANESE WILD CARDS

CVC could pass on its assets to another private equity firm,
but one banker familiar with the situation said he believed the
sale was essentially targeted at trade buyers.

A clue to possible other bidders was offered by CVC’s
appointment of Japanese bank Nomura as an adviser, indicating
the eventual buyer could be a Japanese brewer such as Asahi
(2502.T: Quote, Profile, Research), which has completed a number of transactions in the
past five years, albeit all in its Asia-Pacific zone.

The maker of Japan’s top-selling “Super Dry” lager and soft
drinks aims to generate 20-30 percent of its sales overseas.

Rival Suntory [SUNTH.UL] is another Japanese brewer in the
frame. It too is seeking growth outside its highly competitive
and shrinking home market, raising its stake in a French wine
estate over the past year.

Price will be a key issue, with reports suggesting CVC would
be seeking $3 billion.

CVC bought the businesses for an enterprise value of $2.2
billion with a potential future payment of as much as $800
million contingent on CVC’s return on its investment.

It is not clear whether the latter would be included in any
sale and whether indeed CVC would be selling at any level above
its own acquisition price.

(Additional reporting by David Jones in London, Ole Mikkelsen
in Copenhagen; Editing by David Cowell)

((philip.blenkinsop@thomsonreuters.com)(+32 2 287 6838)(Reuters
Messaging: philip.blenkinsop.thomsonreuters.com@reuters.net))
Keywords: STARBEV/

(C) Reuters 2012 All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing, or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.

Expelling Iranian banks from the Society for Worldwide
Interbank Financial Telecommunication would shut down Tehran’s
main avenue to doing business with the rest of the world – an
outcome the West believes is crucial to curbing Iran’s nuclear
ambitions.

SWIFT, which has never cut off a country before,
has been closely following efforts in the United States and
the European Union to develop new sanctions targeting Iran that
would directly affect EU-based financial institutions.

The United States and EU have already moved to sanction
Iran’s central bank.

“SWIFT stands ready to act and discontinue its
services to sanctioned Iranian financial institutions as soon as
it has clarity on EU legislation currently being drafted,”
the company said in an emailed statement.

The United States has been pushing the European Union
to force SWIFT to evict the Iranian firms but it was unclear
whether the EU would reach an agreement.

For one, SWIFT’s home country, Belgium, does not think
the global banking firm should be the only company of its kind
required to comply with sanctions.

The Obama administration said it welcomed SWIFT’s
intention to stop transactions involving designated Iranian
banks. “We will continue to be in contact with our EU partners
to urge action on this issue,” a U.S. Treasury official
said.

SWIFT, with headquarters just outside the Belgian
capital Brussels, is vital to international money flows,
exchanging an average 18 million payment messages per day
between banks and other financial institutions in 210 countries.

The United States and Europe accuse Iran of seeking to
develop nuclear weapons. Iran maintains its nuclear program is
for peaceful purposes.

The United States recently enacted sanctions that would
punish countries and institutions if they do not reduce their
purchases of Iranian oil by mid-year.

The National Iranian American Council, an advocacy
group, criticized efforts to expel Iranian firms from
SWIFT.

“Kicking Iran out of SWIFT is both unprecedented and
another dangerous step toward turning a financial war into a
military conflict,” said Reza Marashi, the council’s research
director.

Nineteen banks and 25 affiliated institutions from
Iran sent and received some 2 million messages in 2010. They
included banks the U.S. accuses of financing Iran’s nuclear
program or terrorism – Mellat, Post, Saderat and Sepah.

SWIFT, founded in 1973, said its decision reflected the
extraordinary circumstances of international support for the
intensification of sanctions against Iran.

The company said it had informed its regulators, the
world’s largest central banks, of its decision.

SWIFT’s general counsel is slated to visit Washington
next week to meet with lawmakers who have proposed new sanctions
targeting its services.

Heineken, which had forecast flat net profit, said its
earlier caution was driven by a poor summer particularly in
Europe, when it was unclear whether drinking was depressed just
by bad weather or by falling consumer confidence.

“If we look now, we had a very good fourth quarter and so
overall the business is doing better than we thought at that
moment in time,” Chief Executive Jean-Francois van Boxmeer told
a conference call.

The company gave no forecast for 2012, beyond saying it
expected to grow in emerging markets and boost revenue in
developed ones by pushing premium brands. Marketing costs would
be in line with last year, but input costs would rise, it said.

The maker of Europe’s top-selling Heineken lager and Amstel
said on Wednesday 2011 net profit before one-offs rose by 9.2
percent on a like-for-like basis to 1.58 billion euros, compared
with a Reuters poll forecast for 1.52 billion..

In addition, lower interest costs due to cashflow generation
and a slightly reduced tax rate helped the bottom line.

Heineken said it had launched a new 500 million euro ($657
million) cost savings plan.

The group, which saved 614 million euros under its previous
three-year plan, said fresh cuts would come by taking a global
approach to purchasing and technology. It added this would
require an upfront payment of 200 million euros.

MARKET PLEASED

Heineken shares hit a six-month high of 38.6350 euros, up
5.7 percent, shortly after the opening and were among the top
three strongest in FTSEurofirst 300 index of leading
European stocks.

“It’s a lot better than expected,” said Trevor Stirling,
analyst at Bernstein Securities, adding volume growth in France
and Italy and flat in Spain had been impressive. “On the new
cost savings plan, I think it is more than people were
expecting.”

Heineken, present in all the problematic euro zone periphery
nations including Greece, said beer volumes rose by 3.1 percent
last year and it expected to benefit this year from growth in
Africa, Latin America and Asia.

The company said it expected a 6 percent rise in input
costs, primarily reflecting higher prices for malted barley.

Brewers tend to hedge input costs a year in advance. So
Heineken, like its peers, is set to be hit by a sharp increase
in commodity prices in 2011 when future prices for malted barley
were 40 percent higher.

Heineken shares have gained 2.2 percent this year, in line
with the STOXX 600 European food and beverage index, but
underperforming peers Anheuser-Busch InBev, Carlsberg
and SABMiller.

Carlsberg reports full-year results on Feb. 20 and AB InBev
on March 8. SABMiller, whose year runs to end-March, has said
beer volumes rose 3 percent in the final three months of 2011,
helped by growth in Africa and Latin America.
($1 = 0.762 euro)

(Additional reporting by Ben Deighton; Editing by Jodie
Ginsberg)

Belgium-based SWIFT – the Society for Worldwide Interbank
Financial Telecommunication – is vital to international money
flows, exchanging an average 18 million payment messages per day
between banks and other financial institutions in 210 countries.

The member-owned cooperative has been described as the
‘glue’ of the global banking system with the value of daily
payments using SWIFT estimated at more than $6 trillion.

You would struggle to find any bank or financial institution
not connected to SWIFT. Non-financial users include General
Electric, Google, Microsoft, Danone
, Daimler and Sony.

The United States is seeking tougher scrutiny of banking
transactions and oil shipment financing with Iran, which it
accuses of seeking to develop nuclear weapons.

A U.S. Senate Bill, if it becomes law, would direct the
White House to press SWIFT to drop Iranian banks, and would give
the Treasury Department the power to sanction SWIFT and the
banks that own it.

Nineteen banks and 25 connected institutions from Iran sent
and received some 2 million messages in 2010. They included
banks the U.S. accuses of financing Iran’s nuclear programme or
terrorism – Mellat, Post, Saderat and Sepah.

Faced with outside pressure, SWIFT’s typical response has
been: don’t shoot the messenger. The Belgium-based body,
involved in 80 to 90 percent of all global payments, is keen to
point out that it does not carry out transactions and is only a
messaging system, more akin to a telephone service, which U.S.
lawmakers are not targeting. SWIFT does not hold accounts for
members and does not perform clearing or settlement.

“We are not a bank and do not hold funds. Our member banks
are responsible for the content of these messages and complying
with applicable financial sanctions; they are not monitored or
controlled by SWIFT,” the cooperative said in an email exchange.

However, it said last week that it was working with U.S. and
EU authorities to resolve the issue.

“This is a complex situation,” it said, adding the impact on
the global financial payments system and the flow of
humanitarian aid to Iran required careful thought.

SWIFT has faced tests of its independence before.

After the United States and European Union had imposed
sanctions on Myanmar in the 1990s over its human rights record,
SWIFT faced NGO pressure to shut out the country’s banks.

SWIFT’s response then as it is now was that it is just a
common carrier.

“At SWIFT I didn’t make the law. We just followed the law,”
said Leonard Schrank, who was chief executive from 1992 to 2007.

Over the years, SWIFT has faced various subpoenas to release
information, but typically resisted, convincing investigators to
target the responsible banks instead.

That changed after the Sept. 11 attacks in 2001.

“Within days I got a call from the Treasury,” said Schrank.

Within weeks, SWIFT set up an automated programme allowing
U.S. investigators to track the payments of suspected
terrorists. Few people knew of the Terrorist Finance Tracking
Program as it was subsequently called, until 2006 when The New
York Times revealed its existence. It led to a wave of criticism
from Europe about invasion of personal privacy.

Europe is starting to pay attention this time too. No formal
talks have begun, but EU governments have begun informal
discussions on whether to include SWIFT in its own package of
sanctions against Iran. Some are privately concerned that
Washington could go as far as threatening SWIFT itself if it
does not shut out Iran.

“We are forced to look at it when Congress does because of
the consequences,” said one senior EU diplomat, speaking on
condition of anonymity.

Some of those pushing for tougher measures against Iran
point out that SWIFT’s rules allow it to expel users if they
harm or threaten to harm the organisation’s reputation. It
therefore has the power to act, they reason.

The counter argument is that if SWIFT gives ground over
Iran, it may well face calls to shut out other countries. China,
for example, might want Taiwan excluded.

SWIFT, a cooperative of more than 10,000 users and with a
board including executives from Citi, UBS and
Deutsche Bank, says it is aware of the gravity of the
situation around Iran.

“SWIFT is clearly concerned about setting a precedent here,
but we’re looking at a Mideast war or worse. Hopefully they will
find a solution, some way of ensuring this is just a one-off,”
said Schrank. “Otherwise, SWIFT could get endlessly caught up in
financial disputes as well.”

(Additional reporting by Justyna Pawlak; editing by Janet
McBride)

The company, which makes around 7 percent of global steel,
said steel shipments would return to the level seen at the start
of last year and mining output would continue to grow.

Core profit (EBITDA) in the first six months would be lower
than a year earlier, but above the level in the second half of
2011.

“Looking ahead to 2012, the situation in Europe remains a
live concern,” Chief Executive Lakshmi Mittal said in a
statement. “Despite the continued uncertainty in this market,
however, we are seeing an improvement in sentiment compared with
the fourth quarter.”

In presentation slides accompanying its results, the company
said signs from North America were encouraging, with energy and
automotive sector demand strong and construction improving.

Question marks still hang over Europe, pulled down by the
euro zone debt crisis and expected to contract this year, and
China, where consumer sectors have felt the pressure of
tightening monetary policy.

Reflecting the regional split, the world’s largest
steelmaker has idled five of its 25 blast furnaces in Europe,
but none in North America.

The company said its core profit in the fourth quarter fell
29 percent to $1.71 billion, roughly in line with the average
foreast in a Reuters poll.

However, it did slip into an unexpected loss — of $1
billion — in the quarter, due to impairment and restructuring
charges for idling European operations and a big tax hit.

It paved the way for what is expected to be a very difficult

2012 for the 17-member bloc, both core economies and those in the debt-ridden periphery.

Gross domestic product (GDP) in Belgium, the bloc’s sixth largest economy, shrank by 0.2 percent in the fourth quarter, following a quarterly contraction of 0.1 percent in the July-Sept period.

Two consecutive quarters of contraction is generally accepted by economists as the minimum for an economy to be considered in a recession.

Belgium is often cited as a harbinger of things to come in Europe and many countries in the region are already sliding towards recession, hit by the euro zone debt crisis and a wave of austerity required to cure it.

Final quarter figures for the euro zone, which grew by 0.2 percent in the third quarter, will be published on February 15.

Germany, France, Italy and the Netherlands are also due to release their GDP estimates on that day. Spain said on Monday its economy had shrunk in the fourth quarter.

Greece and Portugal, which with Ireland are being bailed out by the European Union and others, are both struggling in recession.

A Reuters poll in January predicted that the euro zone as a whole will contract 0.3 percent in the coming year.

Economists said on Wednesday it had come as no surprise to see Belgium’s recession confirmed. Indeed the 0.2 percent contraction was slightly better than some had expected.

Few also expect any improvement in the first three months of 2012, notably after the new Belgian government imposed austerity measures in December designed to save 11.3 billion euros (9.3 billion pounds).

Private households in particular are downbeat, the consumer sentiment index falling to a two-and-a-half year low in January.

“In order to sell the measures our politicians have had to talk a different language … They have to say the situation is serious. Saying this makes people feel less comfortable,” said Etienne De Callatay, economist at Bank Degroof.

Economists broadly expected growth in the second quarter, the rate dependent on the health of trade partners. Belgium is among the most open economies in the world.

“There could be some upward potential coming from outside,” said Steven Vanneste of BNP Paribas Fortis. “Financial tensions are easing so I think the worst of the economic crisis should be behind us. We see stabilisation right now but its still in a very fragile state.”

Year-on-year on Belgium grew 0.9 percent in the fourth quarter for a 1.9 percent total growth in 2011.

(Reporting by Philip Blenkinsop, Robert-Jan Bartunek and Ben Deighton; Editing by Jeremy Gaunt)

Gross domestic product (GDP) in the bloc’s sixth largest
economy shrank by 0.2 percent in the fourth quarter, following a
quarterly contraction of 0.1 percent in the July-Sept period.

Two consecutive quarters of contraction is generally
accepted by economists as the minimum for an economy to be
considered in a recession.

Belgium is often cited as a harbinger of things to come in
Europe and many countries in the region are already sliding
towards recession, hit by the euro zone debt crisis and a wave
of austerity required to cure it.

Final quarter figures for the euro zone, which grew by 0.2
percent in the third quarter, will be published on Feb. 15.

Germany, France, Italy and the Netherlands are also due to
release their GDP estimates on that day. Spain said on Monday
its economy had shrunk in the fourth quarter.

A Reuters poll earlier predicted that the euro zone as a
whole will contract 0.3 percent in the coming year.

Economists said on Wednesday it had come as no surprise to
see Belgium’s recession confirmed. Indeed the 0.2 percent
contraction was slightly better than some had expected.

Few also expect any improvement in the first three months of
2012, notably after the new Belgian government imposed austerity
measures in December designed to save 11.3 billion euros ($14.8
billion).

Private households in particular are downbeat, the consumer
sentiment index falling to a two-and-a-half year low in January.

“In order to sell the measures our politicians have had to
talk a different language…. They have to say the situation is
serious. Saying this makes people feel less comfortable,” said
Etienne De Callatay, economist at Bank Degroof.

Economists broadly expected growth in the second quarter,
the rate dependent on the health of trade partners — Belgium is
among the most open economies in the world.

“There could be some upward potential coming from outside,”
Steven Vanneste of BNP Paribas Fortis. “Financial tensions are
easing so I think the worst of the economic crisis should be
behind us. We see stabilisation right now but its still in a
very fragile state.”

Year-on-year on Belgium grew 0.9 percent in the fourth
quarter for a 1.9 percent total growth in 2011.

Thomson Reuters data shows that German exports do not receive the boost of demand that do products from places such as Italy and Spain when the single currency is weaker.

It all comes down to what you are making – higher-end German products that cannot readily be substituted or more price-elastic lower value goods from the periphery nations.

Think precision tools versus olive oil.

The euro has fallen by 12 percent against the dollar in eight months since May 2011. Even with a modest recovery in recent weeks, it is still 7 percent lower than it was three months ago.

The broader trade-weighted exchange rate is down 4 percent in the past three months, according to ECB data.

So trade-driven Germany, which sells nearly 30 percent of the goods the European Union exports, would be the obvious winner.

Add to this the fact that Germany has a larger share of its customers outside the euro zone than many other bloc members.

It ships 60 percent of its exports to countries outside the currency zone, just behind Greece and Ireland on 61 percent, but ahead of Italy (57), Spain (45) and Portugal (36), according to Eurostat data from January 2010 to October 2011. The euro zone average is 51 percent.

Yet Germany’s export performance appears to be far less dependent on the euro’s fluctuations.

According to Thomson Reuters Datastream, there is a tight negative correlation between the balance of payments of periphery nations and the dollar/euro exchange rate.

In simple terms, this means a stronger euro tends to depress trade of these countries and a weaker currency boosts it.

The relationship is strongest for Spain and bailout recipient Ireland, followed by Greece, Portugal and Italy. France too has a strongly negative correlation and many other euro zone countries show similar, but weaker links between their trade balance and the exchange rate.

It is different in Germany, where the relationship is positive, meaning there is no trade boost from a weaker euro.

QUALITY CHECK

None of this detracts from the fact that German is far and away the most potent exporter in the bloc, putting all others in the shade. But it does suggest that getting a boost from a weaker currency is not as obvious as it might seem.

The difference appears to be due to how far a country’s products are up the value chain.

Consumers or businesses may still buy a special German drill bit or a Mercedes, even if the price in their currency rises by 10 percent. But lower value products from the periphery, such as textiles, may be competing more on price globally, with far more elastic demand.

This would also explain why the Netherlands and Austria have positive correlations.

A country also does not need to be exporting its goods outside the euro zone to benefit from the single currency’s weakness. It can simply be competing more effectively with imported products.

“For Italy, it has products more sensitive to exchange rates because they are more easily substituted – textiles, consumer goods, fashion items, clothing, shoes,” said Unicredit economist Marco Valli.

The oil price, denominated in dollars, may also play a role. It has clung to around $110 per barrel in recent months, so in euro terms has clearly risen.

France, which imports only about half of its energy needs, suffers less than its counterparts, which may explain in part why there is a close relationship between the euro’s strength and its current account balance.

The weaker euro, meanwhile, is already working its magic on some peripheral economies.

Italy posted its first trade surplus with non-EU countries for two years in December, according to data released on January 24.

And Greece registered a 43 percent jump in overall exports in the period January-October from a year earlier, although less than 5 percent of the total was to countries outside the European Union and it remained in overall deficit.

“Greece and some other countries are also seeing some internal devaluation, which would increase the cost advantage,” said ABN AMRO economist Nick Kounis.

Despite the potential gains, exports are still only a low share of the economies of peripheral euro zone members.

Exports as a percentage of gross domestic product in 2010 ranged from Greece’s 22 percent to Portugal’s 31 percent. Germany stood at 47 percent, according to World Bank data. Only Ireland, at 99 percent, bucked the peripheral trend.

(Editing by Jeremy Gaunt, Ron Askew.)