Summit Notebook

from Global News Journal:

Waiting for Europe’s “appropriate response”

Will the euro zone finally act decisively?

Investors are hoping for something big from European leaders at the EU summit on Oct. 23 and of the Group of 20 on Nov. 3. But they also know the 17 nations of the euro have a habit of offering delayed, half-hearted rescues that have cost them credibility.

So there's been a lot of "urging" and "warning" in Brussels lately -- politicians and central bankers have all been demanding Europe act as international alarm grows that its sovereign debt problems may drag the world into recession. "Further delays are only aggravating the situation," said European Central Bank President Jean-Claude Trichet on Tuesday in his last appearance at the European Parliament, before he hands over the post to Mario Draghi on Nov. 1.

A day earlier, Germany's Deputy Finance Minister, Joerg Asmussen, at the parliament to promote his candidacy to join the ECB's board, made his call, saying "cooperation has to be increased," across the euro members, divided as to who should pay to rescue the heavily indebted nations of southern Europe. "I want to see a solution for debt sustainability for Greece," Asmussen said. So do so many others, especially Greek Prime Minister George Papandreou, who in Brussels on Thursday said it was a "crucial element to make the necessary decisions concerning Greece."

The European Roundtable of Industrialists, a business lobby of multinationals ranging from French car maker Renault to Spain's Telefonica, has also come through Brussels to make its point. The group's head, Leif Johansson, who is also chairman of Swedish phone maker Ericsson, warned that if European leaders fail to act, businesses could see a repeat of the liquidity freeze that followed the collapse of U.S. investment bank Lehman Brothers.

"The worst element of the 2008/2009 crisis was when liquidity froze," he said. "The worst scenario we have right now is that that could happen again ... and there is a real downside risk." 

The Oct. 23 summit is being billed as a make-or-break event where Germany and France, the main powers in the euro zone, must come up with the solutions investors want. A meeting last Sunday between German Chancellor Angela Merkel and French President Nicholas Sarkozy, and their promise of a comprehensive strategy, suggests there will be a serious attempt to put forward a framework to try to resolve the crisis.

More or less fun in a recession? It’s a tough call

Still unsure whether economic recession is good or bad for video-games sales, more than a year in? If so, you’re in good company — neither does the world’s biggest games publisher. Electronic Arts’ head of European publishing says the company still hasn’t figured out whether people cut spending on big items like housing and cars first, or whether those kinds of decisions are just too hard.

“We really wonder, hmm, in economically difficult times would people in order to have SOME fun actually play more games or less games, and then, would they spend more or less?  It’s really, it’s impossible to say,” Jens-Uwe Intat told the Reuters Global Technology Summit in Paris.

(more…)

Recession’s perfect storm speeds up change in ad industry

Why is it that the United States’ advertising as a proportion of marketing services is at its lowest point since 1977, maybe even lower than since the Second World War?

You may have guessed it it’s the recession.

But it will get better, Martin Sorrell, CEO of advertising giant WPP, said.

“The recession is less worse,” Sorrell said, repeating a favourite phrase of late, and while it’s the biggest recession since 1929 it is also “a perfect storm” that has brought forward change. 

“The recession has accelerated structural changes that were already happening,” Sorrell said at the Reuters Global Media Summit.

Will advertising ever go back to where it was? Yes, if you are looking at new media advertising on Kindles and mobile.

Will the United States rebound? Western Europe? Yes, to both.

Lamenting the good ol’ days

    The sprouting of privately-held alternative trading venues has seriously mucked up the trading landscapes in the United States and elsewhere, or so says Thomas Caldwell, chairman and chief executive of Caldwell Financial.     Caldwell, founder of a major exchange investment firm, sees a world that has quickly evolved into one of nimble, electronic players coupled with more and more trading venues with the proliferation of alternative trading systems, or ATSs.     (They’re also called electronic communications networks (ECNs) in the United States and multilateral trading facilities (MTFs) in Europe).     These new venues, which can include the ominously-named dark pools, or alternative venues, where they can secretly match buy and sell orders, leads to, among other things, “deeply flawed” pricing for market participants, in Caldwell’s view.     The idea of bank-backed stock trading venues is also suspect, says Caldwell.     “Publicly-owned exchanges, open and visible trading, an auction market environment,” he said during the Reuters Exchanges and Trading Summit in New York.     “These are centerpieces if you really want an economy to grow and you want to encourage entrepreneurs with access to capital. The more we get into gamesmanship and side products and all this other stuff it depletes from this.”     (Posted by Jennifer Kwan)

NYSE if Grasso were in charge? Bankrupt, says Liquidnet CEO

The emergence of off exchange stock trading in the United States in the past 10 years has eaten away at the market share of the New York Stock Exchange and Nasdaq by breaking their duopoly.

But those two U.S.-based exchanges have had strong management to help them weather the storm, Liquidnet CEO Seth Merrin said at the Reuters Global Exchanges and Trading Summit.

Europe only last year began to allow competition for stock trading with the introduction of new European Union rules known as MiFID, which have forced the London Stock Exchange to slash prices.

But Merrin said that exchange CEO’s used to operating in a monopoly or duopoly are ill equipped to help navigate their businesses in a more competitive environment.

Merrin recalled telling Clara Furse, head of the London Stock Exchange, two years ago to get ready for competition.

“Even two years ago, they didn’t believe us- thought we were a fad,: Merrin said. “That’s why you see a Clara Furse go,” he said of the LSE head, who said in November she would step down. 

And Merrin lavished praise on the current management of the New York Stock Excahange, especially compared to a earlier head of the exchange:

Central Europeans frown at state bank ownership

Talk in western Europe of possibly nationalising private banks to save them from the credit crisis is sending shivers down the spine of policymakers in ex-communist central Europe.

They remember how their government controlled financial systems completely collapsed in the 1990s and threatened to take the countries’ economies along with them due to pouring money into firms with little prospect of returning it.

“There are very strong attempts to nationalise banks, which, in my opinion, is a very short sighted approach,” Slovak central bank Vice-Governor Martin Barto told the Reuters Central European Investment Summit in Vienna this week.

He pointed to what he said was “very extensive experience with state owned banks” in Slovakia.

The Slovaks bought non-performing assets from state-controlled banks for over 100 billion Slovak crowns ($4.13 billion), or roughly around 12 percent of GDP, prior to their sale to western investors early this decade.

Polish Deputy Finance Minister was also unimpressed when asked about government ownership. “This is a very delicate issue particularly for countries in our region because 20 years ago banks were not private but public,” she said at the summit.

The central Europeans may shrug off the notion of nationalisation at least for now. Their banks, after being cleaned up and sold, have fed on domestic financial services growth in the past decade and have largely avoided the scraping for profit that forced western banks invest into highly leveraged assets that have turned sour.

Carbon fails to capture EU cash

The EU boasts of its global leadership in fighting climate change but some in the energy industry wonder whether the bloc will put money to work to cut greenhouse gas emissions.

EU governments have been reluctant to back clean technologies — such as carbon capture and storage (CCS) that could sharply reduce pollution from coal — with cash, potentially killing their future, Czech power utility CEZ told the Reuters Central European Investment Summit this week.

“I see a very big gap between the rhetoric of the EU representatives, saying it’s a number one priority of the EU and on the the hand zero commitment to put any funding behind (it),” CEZ sales chief Alan Svoboda said.

“There are billions of euros channelled into agriculture a year and zero goes to fighting CO2 on the R&D and technology side,” he said. “Without public money CCS will not be born.”

Perhaps after years of food piles and wine lakes, the EU doesn’t want to face a carbon mountain or a CO2 reservoir.

Will environment be forgotten in crisis? OMV says no.

There are some who say the economic downturn means ambitious plans to fight global warming should be put on ice.

But Wolfgang Ruttenstorfer, the head of Austrian oil and gas group OMV, reckons cutting carbon emissions is inevitable in the long run, despite the financial crisis and its impact. 

“I think the price signals of the last two years will not be forgotten by consumers and politicians and therefore the thrust towards renewables will continue, maybe at a slightly slower pace,” he told the Reuters Central European Investment Summit. 

For some, going green is a luxury in harder economic times: Poland and Italy aren’t too happy about European Union legislation to fight climate change and say it could hurt their economies at a time of slower growth.

The EU has stressed that climate plans will be affordable but as the worst financial crisis in 80 years continues to unfold there are doubts over whether there will be enough money or willpower to invest in cleaner energies.

“We stay committed,” Ruttenstorfer says. “We have our future energy fund and we will continue to work on this and definitely not put it on the shelf.”

OMV has been aiming to make its refining more environmentally-sound, to cut down on carbon dioxide emissions and is participating in pilot carbon capture projects. Cleaner gas-fired power plants are also seen as a good option by the company.

AUDIO – Gazprom: “We are mutually dependent”

A quarter of the gas that heats European homes and powers European industry is piped in thousands of kilometres from the Russian tundra. By 2015, Russia’s share of European gas supplies will rise to at least one third. That powerful lever of influence over Europe’s economy raises the stakes in its confrontation with Russia over its invasion of Georgia.

But Alexander Medvedev, deputy chief executive of Russia’s state gas export monopoly Gazprom, opened the Reuters Russia Investment Summit on Monday with a reminder that even the mighty Gazprom is not invulnerable to Europe and the West, relying as it does on foreign revenue and capital.

No mangoes, no cappuccinos without packaging

If you think that packaging produces loads of unnecessary waste, think again, says head of ice-cream and fast-food packaging maker Huhtamaki.

Chief Executive Jukka Moisio told a Reuters Paper Industry Summit in Helsinki that packaging a product actually reduces the amount of waste used rather than creating it.

“If you think about the food chain all the way from where you grow the food to the ultimate consumer, if you don’t have a packaging, the waste rate all the way from the field to you or me will be huge. If you look at the end situation of any cup of coffee, you see that the carbon footprint used by the packaging of any cup of coffee is insignificant compared to what the cow does,” Moisio said, explaining that adding milk is more damaging to environment than the rest of the product.

In most cases, packaging is actually beneficial to the environment, he said. “If you do it the other way round, you take the packaging away, you take the carbon footprint of the packaging away, but you create a significant waste along the way before the product meets you.”

For the green-minded among us Moisio had the least polluting solution: “Our alternative in that case is that, if we don’t want to use packaging, then we need to dismantle the big cities and go back to the fields. And we don’t have waste if we pick up the potatoes and eat them in the village we live in.”

But there is a risk the products might never reach you at all.

“If you grow mangoes in India, if you don’t have any protection or packaging for mangoes, you won’t get them out of India. And you will not even get them from the fields in India to the people in Mumbai. That would be the biggest waste.”