| THE EU Europe’s prospects for 2007 look better than anticipated. According to the European Commission, the eurozone should experience GDP growth of 2.4% – 0.3% higher than forecast but still below the 2006 level of 2.7% – while inflation should be lower at 1.8% compared to 2.1%. Germany and Spain are among the faster-growing large economies, with Italy and France still experiencing sluggish growth. Interest rates within the eurozone are expected to rise from the current level of 3.5%, however. GERMANY National rail operator Deutsche Bahn (DB) has hinted that it is likely to press ahead with privatisation next year, with final details to be prepared in the autumn and presented to parliament. With DB valued at between €25bn and €30bn, the deal would be one of Europe’s largest ever asset sales, although under the German constitution – which defines the government as the legal owner of DB – only 49% can be sold into the private sector. Early rumours suggest the first tranche will be 25%, worth some €7bn, yielding a bonanza for banks and finance companies involved in the privatisation. POLAND Warsaw has announced controversial plans to sell stakes in the Warsaw Stock Exchange (WSE) to “national institutional investors”, thereby contravening EU regulations that declare such sales should be open to all EU companies and citizens. Although the government has yet to finalise details of the sale, it has said it wants to retain the stock exchange’s “basic Polish character”. The WSE is central-east Europe’s largest, most respected and historically best-performing bourse. UNITED KINGDOM Swiss Re concluded the UK’s biggest ever property deal, selling the distinctive Norman Foster-designed “gherkin” building in the City for €910m to a joint venture comprising Germany’s IVG Immobilien and Evans Randall, a London-based investment group. Swiss Re, which is estimated to have earned a profit of some €380m on the sale of a skyscraper once regarded as a white elephant, will remain a tenant alongside other well-known European names such as Allianz and Hypo Real Estate. ITALY Late February felt just like old times as Romano Prodi’s fractious coalition government resigned after losing a foreign policy vote over future involvement in Afghanistan – only to reassemble with exactly the same parties two days later on the request of President Giorgio Napolitano. In power for only nine months, Prodi’s government comprises a wide range of political opinion including socialist, green, communist and Christian democrat. Although all have now promised to toe the line on foreign policy, more upheavals are expected, with critics saying the coalition is too weak and interest-driven to be able to tackle Italy’s serious structural economic problems. BOSNIA-HERZEGOVINA State-owned Russian oil company Zarubezhneft bought BosniaHerzegovina’s only oil refinery – Bosanski Brod, in Republika Srpska – along with petrol retailer Petrol and lubricant producer Modrica in a deal worth €122m, as the country’s ongoing privatisation process continues. The company has said it will invest up to €1bn in the three companies in the coming years, including bringing Bosanski Brod up to modern standards and transforming run-down Petrol outlets. The refinery, which was largely inactive over the 1990s, has the capacity to meet up to 80% of Bosnia-Herzegovina’s energy needs. HUNGARY Budapest sold its debt-riven national airline Malév to Airbridge, a consortium backed by KrasAir, Russia’s fifth-largest airline, for just €794,000; the consortium also promised to inject some €50m in capital and to pay off around 40% of Malév’s €125m debt by the end of 2007. The privatisation represented the fourth attempt to sell the national airline, once considered one of central Europe’s best until a strategic alliance with Alitalia damaged its credibility and performance. KrasAir says it hopes to return Malév to profitability by 2009. Malév joins carriers such as BA, Qantas, Iberia and AA in the oneworld alliance from 1 April. RUSSIA Just one month after Russia interrupted oil deliveries to Europe during a dispute with Belarus, President Vladimir Putin further stoked European energy security concerns by admitting he was looking at setting up a cartel with other large gas producers and exporters and travelling to the Middle East to discuss the issue. Putin stressed the main aim would be to guarantee supply rather than fix prices. Other possible members of such a cartel could be the gas-producing nations of Central Asia, Algeria and Iran. SERBIA Despite growing violence in Kosovo raising concerns that the province’s future status must soon be agreed, talks remained deadlocked, with Serbia opposing any solution that would “undermine Serbia’s territorial integrity” and Russia saying it would reject anything unacceptable to the Serbs. The fact that, five weeks after parliamentary elections, there is still no government (the nationalist Serbian Radical Party won the largest share of the vote) has also slowed progress. UN chief negotiator Martti Ahtisaari, who is to present his proposals to the UN at the end of March, says the international community should have the courage to impose a solution. MACEDONIA Skopje’s hopes of getting an early accession date for the EU received a major setback when enlargement commissioner Olli Rehn strongly criticised it for slowing reforms and voiced concern at growing tensions between Macedonians and Albanians, who constitute some 40% of the population and are based mainly in the west. Macedonia – whose formal name is still the Former Yugoslav Republic of Macedonia, or FYRoM – was the poorest republic in Yugoslavia but has made aggressive efforts to attract large-scale Western foreign direct investment. TURKEY Geological surveys that have suggested there is offshore oil between Cyprus and Egypt are further aggravating relations between Nicosia and Turkey. Weeks after the Greek Cypriots said they would be searching for hydrocarbon deposits, the Turkish Petroleum Company announced it would be doing likewise in the same area; in mid-February the company declared its intention to offer an international tender for exploration work in the next few months. Staying true to form, both sides have declared the other’s intentions as unacceptable. CYPRUS The Greek Cypriot government has formally applied to the European Commission to join the euro at the next possible opportunity, January 2008, after the latest set of economic figures showed the southern part of the divided island was on course to meet the Maastricht criteria. The commission will consider Cyprus’s application in May; a decision will be taken by EU leaders in July, at which point the exchange rate between the Cyprus pound and the euro will be irrevocably set. Malta is also expected to lodge an application to join the single currency next year. |