Posts Tagged ‘eurozone’
[NEWS] Three link about transnational economic integration: Eurozone, TPP, NAFTA
- Paul Taylor at politico.eu describes the sort of integration that the Eurozone needs to function better, integration that may actually now come about after the French election.
- Bloomberg View’s editors wish the Trans-Pacific Partnership continued success, even after Trump’s United States withdrew.
- Aaron Hutchins at MacLean’s explores the huge, and largely negative, consequences for Canada if Trump ends NAFTA (and US-Canada free trade, too).
[URBAN NOTE] Four notes on changing cities from Germany, from Frankfurt to Hamburg to Berlin
- Bloomberg’s Steven Arons and Gavin Finch observe that Brexit may let Frankfurt emerge as a truly global financial centre.
- Der Spiegel‘s Alexander Smoltczyk describes how north German port Hamburg is starting to inch towards a bigger global role.
- Deutsche Welle reports on how, after the G20 meeting, far-left and anarchist groups in Berlin are facing a crackdown.
- Global News shares Joseph Nasr’s Reuters article reporting on the incomprehension of Arab refugees in Hamburg at that city’s G20 rioters. Why are they doing it?
[LINK] “London Could Lose Its Euro Trading If U.K. Leaves EU”
Bloomberg View’s Mark Gilbert notes that Brexit could endanger the City of London’s role as a critical financial centre for the Eurozone, especially if Eurozone integration proceeds apace. Paris and Frankfurt could be big winners.
It’s not the first time political and economic differences with the rest of Europe have threatened to diminish the City’s standing. Back in 1991, the talk was all about an artificial currency called the European currency unit, the forerunner of the euro, which was starting to gain traction in fixed-income and derivatives markets. So the Bank of England did a clever thing; It issued 2.75 billion Ecu of 10-year bonds at an interest rate of 9.125 percent (yes , back in the olden days government bonds had yields close to double digits rather than below zero).
It was the biggest security available in the currency, cementing London’s role as the center for Ecu trading and paving the way for it to be the dominant market for the euro (even though Britain wasn’t joining the common currency, much of the technical work about its introduction was done by the Bank of England prior to the ECB coming into existence). If Britain hadn’t been in the EU, though, that trick might have been a lot harder to pull off.
If Europe’s “coalition of the willing” is successful in introducing a Tobin Tax on securities trading, London may benefit, although the 10 countries still trying to introduce the levy have failed so far to reach an agreement. But if the EU succeeds in building a capital markets union, creating a seamless cross-border arena for small- and medium-sized enterprises to raise money by selling equities and bonds rather than relying on bank financing, then it’s hard to see how London could attract that market away from either Paris or Frankfurt.
Rather than remaining concentrated in London, Brexit may mean European trading splinters across several cities. Germany’s Deutsche Boerse is in the midst of trying to merge with London Stock Exchange Group; the combined entity would be the biggest equities exchange in Europe, so it’s not hard to envisage euro-denominated stock trading migrating to Frankfurt. It would also have the world’s largest clearing house for swaps, which could also spur more of that business to move to Frankfurt.
The biggest manager of new corporate bonds in Europe, meantime, is HSBC, a bank that’s already flirted with moving its headquarters out of London and which has said it might move 1,000 bankers to Paris if the EU splits. If you combine HSBC’s 35 billion euros of corporate bond underwriting with third-placed BNP Paribas’s 25 billion euros and fifth-placed Societe Generale’s 21 billion euros, you can just about see how almost a fifth of company fundraising could end up in France. And if a post-crisis market for complicated derivatives ever comes into vogue, the mathematical/engineering bent of much of the top-tier talent at French investment banks may well steer that renaissance.