Summit Notebook

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.

Henry Kaufman “dismayed” by McCain’s economic flippancy

Republican presidential candidate John McCain didn’t leave the best impression on Dr. Doom.

“I was a little bit dismayed when Senator McCain said flippantly that he does not know too much about economics but carries Alan Greenspan’s book under his arm. That does not encourage me,” Henry Kaufman, president of financial consulting firm Henry Kaufman & Company told the Reuters Investment Outlook Summit.

For a sound clip, please click here.

Demoplicans or Repocrats? A look at stock market performance and politics

Compiled by Thomson Reuters Proprietary Research Group

• There have been five terms out of the last 16 where the last year of the term has a negative return on the DOW, and four of those terms have been during a Republican president’s term.
• When we look at the previous 90 day returns before the new term, we see that the markets are generally positive (only four negative in the last 16 terms).
• Elections are generally held in the first week of November. When we take the previous 60 day returns before the new term (from Nov. 20 – Jan. 20), we see that the DOW returns are even more positive, with only two terms out of 16 preceded by negative returns in the previous 60 days. This says that the lack of uncertainty after the elections usually give a boost to the market.
• Only three four year terms have had negative returns. 1973-1981 (Oil crisis) and 2001-2005 (Dubya’s first term).
• On average, the 90 days before the new term performs much better (3%) than the 90 days after the new term starts (1.1%).
• The last three terms have started with negative returns in the first 90 days.
• Since WW2, the Dems have had 7 terms and the Republicans have 8 (excluding the 2005-2009 Dubya term). The Dems have done slightly better (8.3% vs. 6.7%) in terms of average annualized returns over this period. However, these numbers are skewed in their favor because of the Clinton-Bubble era.